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FEDERAL RESERVE BOARD
WASHINGTON
X-3323
Fe.bruary 14, 19.22.
Mernl: e r 'Bank Su:pervis ion.
SUBJECT:
Dear Sir:
There is transmitted herewith, for your information,
copy of letter addressed to one of the Federal Reserve Banks
in response to a re 1_uest that the Federal Reserve Board otaline and define the :r;:owers and duties of the 'Federal Reserve
Banks reg;:-rding the TDatter of rreml:er bank surervision.
Very truly yours,
G o v e r n o r.
Enclosure.
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February 14 1 1522.
X-332Sa
Dear Sir:
F.eceint is acKr.owledgod of your letter, in which you request the Federal Reserve Board to outl ir:e and define the powers
and dutiss of the Federal Reserve Banks regnrding the matter of
member bank supervision.
So 'far as the lav; is concerned, it is sufficient to refer
to the provision in Sect:i.on 21 of the Federal Reserve Act that "In
addition to the e.l(aruiae!'th>{lS made 2-nd conducted oy the Comptroller
of the Currency, every E\Jderal Reserve Bank may, v:ith the approval
of the Federal Reser-ve Ar;ent or the Feder.:.l Reserve Board., provide
for special examination of member banks within its district". This
provision gives to each Federal .Reserve Eanh. the legal rjgi1t,
subject to approval by the Federal Reserve Agent or the Federal Reserve Board_, to examiue any of its member banks, including national
banks and State member banks.
It is difficult to lay down any hard and fast' rule of
policy for Federal Reser':re Banks to follow in e.l(ercising their power
to examine member banks. The Board is of the opinion that unnecessary
duplication of examinations sho1~ld be avoided~ and that independent
examinations need not be made by Federal Reserve Bani-:s unless for
some reason the reports of examinations made by e.wm.iners of the
Comptroller of the Currency and of the State Ban!Cin? Departments
fail to give the Federal Reserve Bank the idormatiorl .-1hich i t feel·s
it should have.
The Board believes that the practice of having·
Federal Reserve Bank examiners participate in examinations conducted
by the State Banking Departments is a very desirable one and it misht
be possible for the Reserve Bank E.<aminers to participate also in
national bank examinations on some basis satisfactory to all concerned.
There may, of course) be special circumstances which make it desirable
for a Federal Reserve Bank to undertake an independent exrunination of
a member bank and whenever such arl occasion arises the Federal Reserve
Bank should not hesitate to eAercise this discretionary po-;ier which
it has} subject to the approval of the Federal Reserve Agent or the
Federal Reserve Board.
Generally: 3TJ8aking, it is true that the authority to take
corrective measures r-ests with the Comotro~.ler of the Currency vvith
respect to national banks, and with th~ 2tate ba:'lking au.tlwrities
vvith respect to State member banks. You. are aware, ho>ieverJ that
under the authority of Section 19 of the Feder2~ Reserve Act the
Board has prescribed penalties for failure on the part of member banks
X-3326a
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to maintain ·the required reserve balances; and the Board also has
au"chority to require 'a State member bank to v<ithdravv from the
Federal Reserve System upon proof triat it has failed to comply
vvith the la:iv or the regulations of the E'ederal Rsse~·ve Board.
Furthemore., Section 2 of tLe Federal Rese:cve .Act provides for the
forfeiture of t:ne rights,, privileges and franchises of any national
baJ:tk whose failure to comply with the Feder<ll Reserve .4ct has been
determlned and adjudged by a United States Court of competent
jurisdiction in a suit b:~oui-:ht for that purpose "under the direction
of the Federal Reserve Board 1 by the Comptroller of the Currency
in his ovin name."
The Federal Reserve Board takes the viev; that cases of
noncompliance ·with Federal laiv and cases of objectionable practices
on the part of member banks should f j.rst be brought to the a.ttention of the particular member banks Vlith courteous requests for
remedial action. If this fails to brine, satisfactory results 1 the
matter should be reported to the State bankint authorities in the
case of State member banks and to the office of the Comptroller of
the Currency in the case of national banks 1 and whenever such reports are made to either of these authorities, the Federal Reserve
Board should be so advised.
Very truly ycursj
(Sibned) ''· P. G. P....ARDING
G o v e r n o r.
@FedFRASER