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FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
X-6830
T H E FEDERAL RESERVE BOARD
March 2 , 1931
SUBJECT:
Amended Regulation G, Series of 1931.
Dear S i r :
There i s enclosed for your information a
copy-of the Board's Regulation G, governing the r e discount of notes secured "by adjusted s e r v i c e c e r t i f i c a t e s , as amended today to conform to the Act of
February 27, 1931.
The Regulation i s "being printed
and a supply w i l l "be furnished t o you as soon as
possible.
Please advise how many copies of the printed
Regulation you d e s i r e .
By d i r e c t i o n of the Federal, Reserve Board.
Very t r u l y yours,
E. M. McClelland,
Assistant Secretary.
Enclosure.
TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.
COPY
X-6829
REGULATION G, SERIES OF 1931
(Superseding Regulation G of 1928)
REDISCOUNT OF NOTES SECURED BY ADJUSTED SERVICE
CERTIFICATES
SECTION I .
STATUTORY PROVISIONS
Under the terms of the World War adjusted compensation act
as amended, loans may lawfully "be made to veterans upon their
adjusted service c e r t i f i c a t e s only i n accordance with the prov i s i o n s of s e c t i o n 502 thereof.
Any national hank, or any bank or trust company incorporated under the laws of any State, Territory, possession* or the
D i s t r i c t of Columbia i s authorized, a f t e r the expiration of two
years a f t e r the date of the c e r t i f i c a t e , to loan to any veteran
upon his promissory note secured by h i s adjusted service cert i f i c a t e any amount not i n excess of the loan value of the
c e r t i f i c a t e , which i s (A) 50 PER CENT OF THE FACE VALUE OF THE
CERTIFICATE, OR (B) THE LOAN VALUE stated on the face of the
c e r t i f i c a t e , WHICHEVER IS THE GREATER AMOUNT. The law provides
that the rate of i n t e r e s t charged upon the loan by the lending
bank s h a l l not exceed by more than 2 per cent per annum the rate
charged at the date of the loan for the discount of 90-day commercial paper by the Federal reserve bank of the Federal reserve
d i s t r i c t i n which the lending bank i s located AND, AS TO LOANS
MADE ON OR AFTER FEBRUARY 27, 1931, SHALL IN NO EVENT EXCEED 4&
PER CENT PER ANNUM COMPOUNDED ANNUALLY.
Upon the indorsement of 'any bank, which shall be deemed a
waiver of demand, notice and protest by such bank as to i t s own
indorsement e x c l u s i v e l y , and subject to regulations to be prescribed by the Federal Reserve Board, any such note secured by
an adjusted service c e r t i f i c a t e and held by a bank i s made e l i gible for rediscount with the Federal reserve bank of the Federal
reserve d i s t r i c t Jn which such bank i s located, whether or not the
bank o f f e r i n g the note for rediscount i s a member of the Federal
reserve system and whether or not i t acquired the note i n the f i r s t
instance from the veteran or acquired i t by transfer upon the i n dorsement of any other bank; provided that at the time of r e d i s count such note has a maturity not i n excess of nine months, exclusive of days of grace, and complies i n a l l other respects with
the provisions of the law, the regulations of the United States
Veterans' Bureau, and the regulations of the Federal Reserve Board,
SECTION I I .
DEFINITIONS
Within the meaning of t h i s regulation (a) The term "the act" shall mean the World War adjusted
compensation act as amended;
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oof)
("b) The term "director' 1 s h a l l mean the ADMINISTRATOR
OF VETERANS1 AFFAIRS, WHO HAS BEEN VESTED BY LAW WITH THE
POWER AH) DUTIES FORMERLY VESTED IN THE Director of the
United States Veteran's 1 Bureau;
(c) The term " c e r t i f i c a t e " shall mean an adjusted service
c e r t i f i c a t e issued under the provisions of section 501 of the
World War adjusted compensation act as amended;
(d) The term "veteran" shall mean any person to whom an
adjusted service c e r t i f i c a t e has been issued "by the director
under the provisions of the World War adjusted compensation
act as amended;
( e ) The term "bank"shall mean any national "bank or any
"bank or trust company incorporated under the laws of any State,
Territory, possession, or the D i s t r i c t of Columbia;
( f ) The term "note" shall mean a promissory note secured
by an adjusted service c e r t i f i c a t e and evidencing a loan made
by a bank on the security of such c e r t i f i c a t e i n f u l l compliance
with the provisions of the World War adjusted compensation act
as amended and the regulations of th6 Administrator of Veterans 1
Affairs.
SECTION I I I . ELIGIBILITY
In order to be e l i g i b l e for rediscount at a Federal reserve
bank, any such note must (a) Arise out of a loan made by a bank t ° a veteran i n f u l l
compliance with the provisions of the act and of any regulation
which the director may prescribe;
(b) Be secured by the c e r t i f i c a t e issued to the maker, which
c e r t i f i c a t e mast accompany the note;
(c) Be held by the offering bank i n i t s own right a.t the time
i t i s offered for rediscount;
(d) Be i n the form approved by the director;
(e) Have a maturity at the time of rediscount not i n excess
of nine months, exclusive of days of grace; PROVIDED, HOWEVER,
THAT WHEN SUCH NOTE CONTAINS, IN THE FORM APPROVED BY THE
DIRECTOR, A PROVISION FOR THE EXTENSION OF THE MATURITY THEREOF
FROM YEAR TO YEAR, AT THE OPTION OF THE HOLDER EVIDENCED BY HIS
ENDORSEMENT THEREON, THE MATURITY OF SAID NOTE (AFTER THE FIRST
MATURITY STATED THEREON) SHALL, FOR THE PURPOSE OF DETERMINING
ITS ELIGIBILITY FOR REDISCOUNT, BE DEEMED TO BE THAT STATED IN
THE LAT3ST EXTENSION INDORSED THEREON BY THE HOLDER.
( f ) Evidence a loan the amount of which does not exceed (A)
50 PER CENT OF THE FACE VALUE OF THE CERTIFICATE OR (B) the loan
value STATED ON THE FAC1 of the c e r t i f i c a t e f o r the year i n which
such loan was made, WHICHEVER AMOUNT IS GREATER;
(g) Be payable with interest accruing a f t e r the date of the
note at a rate stated in the face of the note, which ratfe must
not exceed by more than 2 per cent per annum the rate charged at
the date of the loan f o r the discount of 90-day commercial paper
by the Federal reserve bank of the F e d e r a l / d i s t r i c t i n which the
reserve
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lending bank i s located; PROVIDED, HOWEVER. THAT, IF THE BOM
HAS MADE ON OR AFTER FEBRUARY 27, 1931, THE RATE MOST NOT IN
AMY EVENT EXCEED 4& EKR CENT PER ANNUM, COMPOUNDED ANNUALLY.
(h) Bear the indorsement of the "bank o f f e r i n g i t f o r r e discount , which indorsement shall "be deemed a waiver of demand,
n o t i c e , and protest by such bank as to i t s own indorsement
exclusively;
( i ) Be accompanied by the evidence of e l i g i b i l i t y required
by t h i s regulation and such other evidence of e l i g i b i l i t y as
may be required by the Federal reserve bank to which i t i s
offered f o r rediscount; and
( j ) Comply i n a l l other respects with the requirements of
the law and of t h i s regulation.
SECTION IV. EVIDENCE OF ELIGIBILITY
(a) General. - The Federal reserve bank to which a note i s
offered f o r rediscount must be s a t i s f i e d either by reference to
the note i t s e l f or otherwise that the loan evidenced by the note
or any s a l e , discount, or rediscount thereof complies i n a l l
respects with the provisions of section 502 of the act and that
the note i s e l i g i b l e f o r rediscount by a Federal reserve bank
under the terms of the law and the provisions of t h i s regulation.
(b) A f f i d a v i t of lending bank. - Any note offered to a Federal reserve bank f o r rediscount must be accompanied by* the a f f i davit required by section 502(h) of the act and the regulations
of the director, i n form approved by the director, made by an
o f f i c e r of the bank which made the loan, before a notary public
or other o f f i c e r designated for the purpose by regulation of the
director, s t a t i n g that (1) Such bank has not charged or c o l l e c t e d , or
attempted t o charge or c o l l e c t , d i r e c t l y or i n d i r e c t l y ,
any f e e or other compensation in respect of any loan,
made by such bank to any veteran under section 502 of
the a c t , except the interest authorized by such section;
(2) The person who obtained the loan evidenced by
such note i s known to be the veteran named i n the cert i f i c a t e securing such note;
(3) Such bank has n o t i f i e d the director that i t has
made a loan to the veteran named i n the c e r t i f i c a t e , as
required by the regulations of the director; and
(4) Such bank has n o t i f i e d the veteran by mail at h i s
l a s t known p o s t - o f f i c e address of any s a l e , discount, or
rediscount of such note by such bank, as required by
s e c t i o n 502(b) of the a c t .
(c) A f f i d a v i t of other banks. - If such note i s offered for
rediscount by a bank other than the bank which made the loan thereon, i t must a l s o be accompanied by an a f f i d a v i t of an o f f i c e r of
the o f f e r i n g bank and an a f f i d a v i t of an o f f i c e r of each other bank
which has sold, discounted, or rediscounted such note, which a f f i -
X-6829
-4davit s h a l l be i n form approved "by the director and s h a l l s t a t e
that the bank of which the a f f i a n t i s an o f f i c e r has promptly
n o t i f i e d the veteran by mail at h i s l a s t known p o s t - o f f i c e address of the s a l e , discount, or rediscount of such note by
such bank, as required by section 502(b) of the a c t .
SECTION V.
APPLICATION FOB REDISCOUNT
Every application for the rediscount of such notes shall
be made on a form approved by the Federal reserve bank to which
such note i s offered and shall contain a c e r t i f i c a t e of the
o f f e r i n g bank to the e f f e c t that, to the best of i t s knowledge
and b e l i e f , such note arose out of a loan made i n f u l l compliance with the provisions of the act and the regulations of the
director and i s e l i g i b l e for rediscount under the provisions
of s e c t i o n 502 of the act and of this regulation.
SECTION VI. PROPER BANK FOB REDISCOUNT
No such note s h a l l be rediscounted by any Federal reserve
bank f o r any bank not located i n i t s own Federal reserve d i s t r i c t , except that such notes may be redis counted by any Federal reserve bank for any other Federal reserve bank.
SECTION VII. RATE OF REDISCOUNT
The rate of i n t e r e s t charged by any Federal reserve bank
on any such note rediscounted by i t shall be the same as that
charged by i t f o r the rediscount of 90-day notes drawn for a
commercial purpose, except that when such notes are rediscounted
for another Federal reserve bank the rate shall be that f i x e d by
the Federal Reserve Board.
SECTION VIII. REDISCOUNTS FOR NONMEMBER BANKS
No Federal reserve bank shall rediscount such notes for any
nonnember bank u n t i l such bank has furnished to the Federal reserve bank such information as i t may request i n order to s a t i s f y i t s e l f as to the condition of such bank and the a d v i s a b i l i t y
of making the rediscount for i t .
@FedFRASER