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EX ..OFFICIO MEMBERS • CARTER GLASS · SECR,ARY ./}F THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS COMPTROLLER OF THE CURRENCY .·, FEDERAL RESERVE BOARD WASHINGTON W. P. G. HARDING, GOVERNOR ALBERT STRAUSS, VICE GoVERNOR ADOLPH C. MILLER CHARLES S. HAMLIN J. A. BRODERICK, SECRETARY W. T. CHAPMAN, ASSISTANT SECRETARY W. M. IMLAY, FISCAL AGENT ADDRESS REPLY TO FEDERAL RESERVE BOARD X-1590 SUBJECT ~Form of agreement required by the Federal Reserve ]oard of Foreign J3d.nking Corporations as a condition precedent to the I'urcba.se of their stock by National banks under the provisions of Section 25, of the Fed~ eral Reserve Act. Dear Sir:. The Boi;U'd desires t.o fJ:ptess to yQu its apptecia.tion of your pr~t compliance with "''req~st to ba•e a representative attend the conference held in 1raahington on June 1.8th for the purpost of discussing genera..~ the terms of thll aueement with the various foreign banki~g ¢orporations• The conference proved t.o be a most interesting one, and as a result the B~rd has formulated the enclosed draft of agreement. to be gnerally uniform with res}lect to all such corporations. It will be noted that the modifications are of a minor character. It is req\lested that you submit the. revised form of agreement to your officers and directors at your -rlti convenience. and if satisfactory to them, advise the ]oard of ·yo-Jr: forna.l acceptance thereof • which you will signif1' by executing and forwarding to the Boa.rd an agreement in the form herewith tra.n$1llitted. Upon receipt. of the new agreement it will be substituted for the one now on file with the :Board. Very truly 10urs,: .GOvernor. SERT TO BANKS & CORPORlTlONS DOING BUSINESS IN FOREIGB COUBTRIES mrnm THE SUPIRVISl em OF THE FE.DI!lU.I. RESERVE BOJ.Rl). X-1590 a • • Fonn of .Agreement required by the Feder,;~.l Reserve Board of Foreign Banking CorporQtions as a Condition Precedent to the Purc.h~se of their Stock by National Bsnks uu:i.er the Provisions of Section 25 of the Federal Reserve Act. In order to enable you ~ other corpor~tions of the same character to coW.Pete eff~ctively in foreign countries, it is necess~ry t~t latitude be given in the developruent of bus~ness abroad, ~nd the Bo~rd believes thatJ for the present at leastl restrictions should not be rigid or too much in detail) and that it is desirable to pr~s~ribe only general rules for your guidance. AS occasion required, the B~rd will ~Odify its regu.lcl.tions in such manner as experience r.r:ay prove to be necess..u-;y.. B. POWERS:- l. ln the United states: a. DeEosits: It is clea.r t:tat in order to avoid CO!lipetition in the matter of receiving deposits with national banks and st~te banks. which do not enJOY the wide powers which you n.ust necessarily possess in order to coupete successfully in foreign . countries .. ycu should not be perwitted in the United. States to receive individual deposit accounts or domestic bQnk exch:i-nge or collect ion accounts. You will be permitted, however • to receive any deposit which is incidental to, or for the purpose of~ carrying out transactions in £oreign countries or dependencies of the United Stat as, where you. haYe established agencies. branches, or business connections. Deposits of this character may be made by individuals, firms, corporations or banks, whether foreign or domestic, an9. may be time deposits or on deiDdnd~ 'Reserves: It wi 11 be requi.red thdot, against all such deposits received in the .United States, you ID::l.intain a reserve in the amount required by law against such deposits of ruerober b~ located in central reserve cities. The Federal Reserve Banks are authorized, for purposes of clearing or collection, to receive deposits from non-mei.Uber banks, and yo~ reserve agaim~t domestic deposits nay be maintained by opening a. cle~ring d.Ccount with the Federal Reserve :Bank of your district, where an adequate balance ~Y be carried by you. b. Acceptances: In the wa.ttur of acceptance of drafts and bills of exchange, the Board bd.s concluded that you should be authori.~ed. to a.cce.Pt for all transactions permissible to men.ber b<itnke Ullder the provisions of the Federal Reserve Act • provided that you nake no ' .. -2- X-1590 a acceptance for account of any one drawer in an amount aggregating at any time in excess of ten per centuru of your· subscribed capital and surplus. unless the transaction be fully securedr or represents an exportation or ~portation of merchandise and is guaranteed by a bank or banKer of undoubted solvency; Qnd provided that whenever the ~ggregate of your acceptances outstanding at any t:ilne (a) exceeds the aruount of your subscribed capital and surplus, fifty per centum of all acceptances in excess of such amount shall be fully secured. or (b) exceeds twice the amount of your subscribed capital ~d surplus, all accept~nces outstanding in excess of such amount shall be fully secured, whichever of said two requireruents slall call for the muller amount of secured acceptances; i::.lnd provided further that in no event shall the a~grega.te of all your acceptances outstanding, plus the t.;)tal of all deposits held by you, whether foreign or domestic, exceed six·times the amount of yo~ subscribed capital and surplus, except with the approval of the Federal Reserve :Board. Reserves: It must be underetood, furthermore, that a~inst all acceptances outstanding you will ~intain a reserve of at least fifteen per centum in liquid assets, which shall consist of: ' l. Cash; 2 .. with other banks; Bankers ' acceptances; and / or Such securities as the Board way, time to time, permit. 3. 4. 2. ~~ces fr~ In foreign countries. You are authorbed to accept deposits of any kind from banks, individuals and carporations in foreign countries, and generally to exercise such powers and to do such things as are incidental to banking conducted in the countries and dependencies in which you way transact business. The Board assumes however that in the aatter of receiving deposits, making loans, and in all other business conducted in foreign yOuntries. you will be guided primarily by the laws of those countries and by sound business judgment and banking principles. While the Board will not require you to carry abroad cash reserves against deposits abroad, should it appear at any time tb;;tt your business methods are such a.s to afford insufficient protection, the Board will formulate such restricting regulations as way be proper in the circumstances. C.. REPORTS AND EXAMINATIONS: 1. You will be required to make two reports annually to the Feder~l Reserve Board, covering such details as IDGY be prescribed. 2. You will also be subJect to such e.xawina.tiona as the Board uay order these examinations to be made either by employees or agents of the Boa~d or of the Federal Reserve Bdnk of yo~r district.
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