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FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-8082 October 17, 1934, SUBJECT: Interpretation of Standard Condition of Membership Numbered 8 Regarding Investment i n Bank Premises. Dear Sir: Standard condition of membership numbered 8 which has been prescribed for some time reads as follows: "Such bank shall not permit any investment in a bank building or i n a s i t e for a bank building to assume such proportions as, in the judgment of the Federal Reserve Board, would endanger the bank's solvency or l i q u i d i t y or would otherwise be unduly large or improper, and before any investment i s made in a bank building or a s i t e for a bank building the bank shall refer the matter to the Federal Reserve Board for consideration." Recently the question has been raised as t o whether i t i s desired that a l l requests of banks subject to such condition for permission to make a l t e r a t i o n s and renovations in banking quarters, regardless of the proposed expenditures, be submitted to the Board or whether the Board would prefer t o authorize the Federal reserve agents to approve such expenditures within certain l i m i t s . The purpose of the condition i s t o prevent excessive investments in bank premises and the condition was meant t o apply primarily to purchases of land or buildings, the construction of new buildings, and major a l t e r a t i o n s . In order t o expedite the handling of requests cover- ing alterations and improvements, the Board authorizes the Federal 365 -2- X-8082 reserve agents, without referring the matter to the Board, t o grant permission to banks which are subject to condition numbered 8 referred to above to make alterations and improvements to t h e i r banking quarters when the cost of such alterations and improvements i s not i n excess of 10 per cent of the bank* s capital stock and w i l l not increase the bank's investment in bank premises to an amount i n excess of 100 per cent of the bank's capital stock. Federal reserve agents are requested, however, to forward t o the Board advice of a l l permissions granted i n accordance with t h i s l e t t e r . In case a Federal reserve agent i s i n doubt as to whether the expenditure involved in the proposed a l t e r a tions or improvements would be in contravention of the s p i r i t of the condition of membership, the request should be referred to the Board in the regular manner with his recommendation# I t was not contemplated that the terms of the condition would include minor a l t e r a t i o n s which are charged to expense and not c a p i t a l ized. Very t r u l y yours, L. P. Bethea Assistant Secretary. TO ALL FEDERAL RESERVE AGENTS.
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