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212
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
x-4019
April 7, 1924.
SUBJECT:
Amended Regulation "H", S e r i e s of l y 2 4 .
Dear S i r : The Board's Regulation "H", S e r i e s of 1924, which
was adopted and made e f f e c t i v e March 27, 1924, has todaybeen amended as per the enclosed copy.
P l e a s e have prepared copies of the amended r e g u l a t i o n and d i s t r i b u t e them to t h e member banks of your d i s t r i c t .
By d i r e c t i o n of t h e Federal Reserve Board.
Very t r u l y y o u r s ,
(Enclosure)
Walter L. Eddy,
Secretary,
TO ALL F. B. AGENTS, 60PY TO THE GO VERMS-
X-4oig|~3. ,
(Superseding X-Uoil) r<>X3
REGULATION H
S e r i e s of 1924 (As amended April 7, 1924)
(Superseding Regulation E of 1 9 2 3 )
MEMBERSHIP OF STATE BANKS AND TRUST COMPANIES.
SECTION I . BANKS ELIGIBLE FOR MEMBERSHIP.
1*
I n c o r p o r a t i o n . - In order to be e l i g i b l e f o r membership in a
Federal Reserve Bank, a State bank or t r u s t company mast have been i n corporated under a special or general law of the S t a t e or d i s t r i c t in
which i t i s l o c a t e d .
2
%
Capital stock- - Under the terms of s e c t i o n 9 of the Federal
Reserve Act as amended , no applying bank, can he admitted to membership
in a Federal Reserve Bank u n l e s s (§•) I t possesses a p a i d - u p , unimpaired c a p i t a l s u f f i c i e n t to ent i t l e i t to become a national banking a s s o c i a t i o n in the place where i t
i s s i t u a t e d , under the provisions of the National Bank Act> or
(k) I t possesses a paid-up, unimpaired c a p i t a l of a t l e a s t 60 per
cent of such amount, and , under p e n a l t y of l o s s of membership, complies
with the r u l e s a.nd r e g u l a t i o n s h e r e i n prescribed by the Federal Reserve
BoaJpd f i x i n g the time w i t h i n wnich and the method by which the unimpaired
capital of such bank s h a l l be increased out of n e t income t o equal the
c a p i t a l required under (a) ,
In order to become a member of the Federal Reserve System, t h e r e f o r e , any S t a t e bank or t r u s t company must have a minimum paid-up c a p i t a l
stock a t the time i t becomes a member, as follows:
X-uoi£K5
£ 1 4
Minimum capi- Minimum capiIf located in a c i t y or town with a population of- t a l if admitted t a l 'if admitted
under clause(a) under clause ( \ )
Not exceeding 3,000 inhabitants
Exceeding 3,000 but not exceeding 6,000 inhabitants.
Exceeding 6,000 but not exceeding $0,000 inhabitants
Exceeding 50,000 inhabitants
$25,000
50,000
100,000
200,000
$15,000
30,000
60,000
120,000
Any bank admitted to membership under clause ( \ ) mast also, as a condition of membership, the violation of which w i l l subject i t to expulsion
from the Federal Reserve System, increase i t s paid-up and unimpaired capital
within f i v e years after the approval of i t s application by the Federal Reserve Board to the amount required under { ^ .
For the purpose of providing
for such increase, every such bank shall set aside each year in a fund exclusively applicable to such capital increase not l e s s than 50 per cent of
i t s net .earnings for the preceding year prior to the payment of dividends,
and if such net earnings exdeed 12 per cent of the paid-up capital of such
bank, then a l l net earnings in excess of 6 per cent of the paid-up capital
shall be carried
to such fund, u n t i l such fund i s large enough to provide
for the necessary increase in capital.
'Whenever such fund shall be large
enough to provide for the necessary increase in capital, or
at such other
time as the Federal Reserve Board may require, such fund or as much thereof
as may be necessary shall be converted into capital by a stock dividend or
used in any othef manner permitted by State law to increase the capital of
such bank to the amount required under (a):
Provided, however, That such
bank may be excused in whole or in part from compliance with the terms of
t h i s paragraph i f i t increases i t s capital through the sale of additional
stock:
Provided, further, That nothing herein contained shall be construed
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X-401#-a
as requiring any such bank to v i o l a t e any provision of State law, and in
any case in which the requirements of t h i s paragraph are inconsistent with
the requirements of State law the requirements of t h i s paragraph may be
waived and the subject covered by a special condition of membership to be
prescribed by the Federal Reserve Board..
SECTION I I .
AFPLIC/TI01T FOB MEMBERSHIP.
Any e l i g i b l e State bank or trust company may make a p p l i c a t i o n on
F. R. E. Form 83a, made a part of t h i s regulation, to the Federal Reserve
Board for an amount of capital stock in the Federal Reserve Bank of i t s
d i s t r i c t equal to 6 per cent of the paid-up capital stock and surplus of
such State bank or trust company.
This application mast be forwarded
direct to the Federal Rsserve Agent of the d i s t r i c t in which the applying bank or trust company i s located and must be accompanied by Exhibits
I, II, and I I I , referred to on page 1 of the application blank,
SECTION I I I .
APPROVAL OF APPLICATION,
In passing.upon an application the Federal Reserve Board w i l l consider e s p e c i a l l y 1.
The f i n a n c i a l condition of the applying bank or trust company and
the general character of i t s management;
2.
Whether the corporate powers exercised by the applying bank or
trust company are consistent with the purposes of the Federal Reserve Act;
and
3.
TThether the laws of the State or d i s t r i c t in which the applying
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X-U01S-a. 3 1 6
bank or trust company i s located contain provisions l i k e l y to prevent
proper compliance with the provisions of the Federal Reserve Act and the
regulations of the Federal Reserve Board made, in conformity therewith.
I f , , in the judgment of the Federal Reserve Board, an ppplying bank
or trust company conforms to a l l the requirements of the Federal Reserve'
Act and these, r e g u l a t i o n s , and i s other,vise q u a l i f i e d f o r membership, the
Board w i l l i s s u e a c e r t i f i c a t e of approval subject to such conditions as
i t may deem necessary.
"fnen the conditions imposed by the Board have
been accepted by the applying bank or trust compary the Board w i l l issue
a c e r t i f i c a t e of approval, whereupon the applying bank or t r u s t company
s h a l l make a payment t o the Federal Reserve Bank of i t s d i s t r i c t of onehalf of the amount of i t s subscription, i . e . , 3 per cent of the amount
of i t s paid-up c a p i t a l and surplus, and upon
receipt of t h i s payment
the appropriate c e r t i f i c a t e of stock w i l l be issued by the Federal Reserve
Bank.
The renaining h a l f of i t s subscription s h a l l be subject to c a l l
when deemed necessary by the Federal Reserve Board.
SECTIOr IV.
CONDITIONS OF MEMBERSHIP^/
Pursuant to the authority contained in the f i r s t paragraph of Section 9
of the Federal Reserve Act, which provides that the Federal Reserve Board may
permit applying banks t o become members of the Federal Reserve System"sub.iect
to such conditions as i t may prescribe", the Federal Reserve Board w i l l prescribe the f o l l o w i n g conditions of membership f o r each bank or t r u s t company
h e r e a f t e r applying f o r admission t o the Federal Reserve System, in a d d i t i o n
to such other conditions as the Board may consider necessary or advisable i n
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x-Wig-f
2 1 7
the particular case 1»
Except with the permission of the Federal Reserve Board, such bank or
company &hsll not cause or permit aoy change to be ins.de in the general
character of i t s assets or in the scope of the functions exercised by i t at
the time of admission to membership, such as w i l l tend to a f f e c t materially the
standard maintained at the time of i t s admission to the Federal Reserve System
and required as a condition of membership.
2»
Such batik or trust company shall at a l l times conduct i t s business
and exercise i t s powers with due regard to the s a f e t y of i t s customers.
3«
Such bank or trust company shall not reduce i t s capital stock except
with the permission of the Federal Reserve Board.
4-
Such bank or trust company shall not, except after applying for and
receiving the permission of the Federal Reserve Board, e s t a b l i s h any branch,
agency or additional o f f i c e .
5-
Such bank or trust company,except after applying for and receiving
the permission of the Federal Reserve Board , shall hot cons olid ate with or
absorb or purchase the assets of any other bank or branch bank for the purpose
of Operating such batik or branch bank as a branch of the applying bank;
nor
directly or i n d i r e c t l y , through a f f i l i a t e d corporations or otherwise, acquire
an interest in another bank in
such other bank;
excess of 20 per cent of the capital stock of
nor d i r e c t l y or indirectly promote the establishment
new bank for the purpose of acquiring such an i n t e r e s t i n i t ;
of any
nor make any
arrangement to acquire such an i n t e r e s t .
6.
Such bank or trust company shall reduce t o , and maintain within, the
l i m i t s prescribed by the laws of the State in which i t i s located, any loan
which may be in excess of such l i m i t s .
7.
Such bank or trust company shall reduce to an amount equal to 10 per
cent of i t s capital and surplus a l l balances in excess thereof, i f a.ny, which
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I-U01|-a
818
a r e carried, with banks or t r u s t companies which a r e not members of the Federal
Reserve System, and s h a l l at a l l times maintain such balances within such
limits.
o.
Such Dank or t r u s t company may accept d r a f t s and b i l l s of exchange
drawn upon i t of any c h a r a c t e r permitted by the laws of the S t a t e of i t s i n corporation;
but the aggregate amount of a l l acceptances outstanding a t any
one time s h a l l not exceed the l i m i t a t i o n s imposed oy Section 13 of t h e
Federal Reserve Act, that i s , the aggregate amount of acceptances outstanding
a t any one time which are drawn for the purpose of f u r n i s h i n g d o l l a r exchange.
in countries s p e c i f i e d by the Federal Reserve Board s h a l l n e t exceed 50 per
cent of i t s c a p i t a l and s u r p l u s , and the aggregate amount of a l l other acceptances, whether domestic .or f o r e i g n , outstanding at any one time s h a l l not
exceed 50 per cent, of i t s c a p i t a l and s u r p l u s , except t h a t the Federal Reserve Board, upon the a p p l i c a t i o n of such bank or t r u s t company, nay i n c r e a s e
t h i s l i m i t from 50 per cent t o 100 per cent of i t s c a p i t a l and s u r p l u s :
Provided, however, that in no event s h a l l t h e aggregate amount of domestic
acceptances outstanding a t any one time exceed 56 per cent of the c a p i t a l and
surplus of such bank or t r u s t company.
9. The Board of d i r e c t o r s of s a i d bank or t r u s t company s h a l l adopt a
r e s o l u t i o n a u t h o r i z i n g the interchange of r e p o r t s and information between t h e
Federal Reserve Bank of the d i s t r i c t in which such bank or t r u s t company i s
located and the banking a u t h o r i t i e s of the S t a t e in which such bank i s located..
Each bank or t r u s t company applying f o r membership her s o f t e r w i l l b-e r e quired to agree to tne above c o n d i t i o n s and any other c o n d i t i o n s which the
Board may p r e s c r i b e , p r i o r to tne admission of such bank or t r u s t coup any t o
tne FecWfal Reserve System-
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V '
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.
) SECTION V.
FERMI SSI ON NECESSARY PRIOR TO MAKINGCHANGES IN ASSETS O SCOPE OF FUNCTIONS R
Each bank or trust company hereafter admitted to the Federal Reserve System
and each bank or trust company which has heretofore been &##mittad subject to Con. No.
u i t i o n / 1 of Section IV or subject to aziy similar condition, shall through the Federal Reserve Agent, request the permission of the Federal Reserve Board prior to
taking any action which may result i n a change in the general character of i t s
assets or in the scope of the
functions exercised by i t at the time of admission
to membership, such as w i l l tend to a f f e c t materially the standard maintained at
the time of i t s admission to the Federal Reserve System and required as a condition
of membership.
The Board considers that among the actions which may r e s u l t in changes of the
kind referred to in t h i s Section are the
establishment of branches, agencies or
additional o f f i c e s and consolidations or mergers with, or purchases of the assets
of other banks or branch banks.
SECTION VI. PRINCIPLES GOVERNING ESTABLISHMENT OF BRANCHES.
In passing upon applications by State banks a.nd trust companies for permission
to establish branches, agencies or additional o f f i c e s , urjder Condition No. 4 of
Section IV, or unoar any similar condition which may have been prescribed by .the
Federal Reserve Board and agreed to by any bank or trust company heretofore admitted
to the Federal Reserve System, the Federal Reserve Board w i l l observe the following
principles 1-
The Federal Reserve Board w i l l as a general principle r e s t r i c t the
establishment of branches, agencies or additional o f f i c e s by such barks or
X
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x.Ucv,-»
220
trust companies to the c i t y of l o c a t i o n of the parent bank and the
t e r r i t o r i a l area within the state contiguous thereto, as said t e r r i t o r y
(1)
has been defined in the Board's resolution of November 7, 1923, excepting
in instances where the State banking authorities have c e r t i f i e d and the
Board finds that public necessity and advantage render a departure from
the principle necessary or desirable.
.2.
The Federal Reserve Board as a ggneral principle w i l l not consider
an application by such bank or trust company f o r a permit to e s t a b l i s h %
•
branch, agency, or additional o f f i c e , unless the a u t h o r i t i e s of the State
in which such bank i s located regularly make simultaneous examinations of
the head o f f i c e and a l l branches, agencies or additional o f f i c e s of such
bank, nor unless the examinations made by the State authorities are, in the
judgment of the Federal Reserve Board, of such character in every respect
as to furnish the Federal Reserve Board with s u f f i c i e n t information a s to
the condition of such bank and the character of i t s management t o enable the
Federal Reserve Board f u l l y to protect the i n t e r e s t s of the public.
3.
.
The Federal Reserve Board as a general principle w i l l require each
bank or trust company which e s t a b l i s h e s or maintains tranches, agencies or
additional o f f i c e s to maintain for i t s e l f and such branches, agencies or additional o f f i c e s an adequate ratio of capital to t o t a l l i a b i l i t i e s and an
adequate percentage of i t s t o t a l investments in the form of paper or sec u r i t i e s e l i g i b l e for discount or purchase by Federal Reserve Banks.
( l ) The teym "contiguous territory" is defined in the Board's resolution of
November J, 1923, t o mean' "The territory of a c i t y or town whose corporate
l i m i t s at some point coincide with the corporate l i m i t s of the city or tewn
in which the parent bank i s located."
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F
-94.
221
X-4019-3
The Federal Reserve Board w i l l not consider any application
to e s t a b l i s h a branch, agency or additional o f f i c e u n t i l the State
banking a u t h o r i t i e s have appr^ed the establishment of such branch,
agency or additional o f f i c e , and the Directors or Executive Committee
and the Federal Reserve Agent of the Federal Reserve Bank of the d i s t r i c t in which such bank or trust company i s located have made a
report upon the f i n a n c i a l condition of the applying bank or trust
company, the general character of i t s management, what e f f e c t the
establishment of such branch, agency or additional o f f i c e would have
upon other banks or branches in the l o c a l i t y in which i t i s to be
established, and whether, in their opinion, i t would be in the i n t e r e s t of the public in such l o c a l i t y , together with t h e i r recommendation as to whether or not the application should be granted.
5-
^hen permission i s granted for the establishment of such
branch, agency or additional o f f i c e same shall be established and
opened for business within s i x months a f t e r such permission i s granted.
If such branch, agency, or additional o f f i c e i s not established within
such time the permit s h a l l become void, unless the time i s extended
by the Board fo% good cause.
J 222
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6.
..
X-U01^-a
The Federal Reserve Board reserves the right to cancel
any permit which i t may grant t h e r e a f t e r to e s t a b l i s h any branch,
agency or additional o f f i c e whenever i t shall appear, a f t e r hearing,
that such branch, agency or additional o f f i c e , i s being operated in
a manner contrary to the i n t e r e s t of the public in the l o c a l i t y in
which i t i s established.
SECTION VII.
POWRfe AND RESTRICTIONS.
Every State bank or trust company while a member of the Federal R e serve System 1.
Shall retain i t s f u l l charter and statutory r i g h t s as a State bank
or trust company, subject to the provisions of the Federal Reserve Jict, to
the regulations of the Federal Reserve Board, and to the conditions prescribed by the Federal Reserve Board and agreed to by such State bank or
trust company prior to i t s admission.
2«
Shall maintain such improvements and changes in i t s banking practice
as may have been s p e c i f i c a l l y required of i t by the Federal Reserve Board
as a condition of i t s admission and shall not lower the standard of banking
then required of i t ;
3-
Shall enjoy a l l the p r i v i l e g e s and observe a l l those requirements
of the Federal Reserve Act and of the regulations of the Federal Reserve
Board made in conformity therewith which are applicable t o State banks and
trust companies which have become member banks; and
Shall comply a t a l l times with any and a l l conditions of membership
prescribed by the Federal Reserve Board at the time of the admission of such
member bank t o the Federal Reserve System.
F
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1—
SECT I Oil VIII.
223
X—401^1-a
EXAMINATIONS AND RJPORTS,
Every State bank or trust company, while a member of the Federal Reserve
System, shall be subject to examinations made by direction of the Federal Reserve Board or of the Federal Reserve Bank, by examiners s e l e c t e d or approved
by the Federal Reserve Board.
.In order to avoid duplication, examinations of State bamcs and trust com#
panies cade by State authorities will be accepted in l i e u of examinations by
examiners s e l e c t e d or approved by the Board wherever these are satisfactory to
the directors of the Federal Reserve ?aak, and examiners from the s t a f f of the
Board or of the Federal Reserve Banks w i l l , whenever d e s i r a b l e , be designated
by the Board to act with the examination s t a f f of the State in order that uniformity in the standard of examination may be assured.
Every State bank or trust company, while a member of the Federal Reserve
System, s h a l l be required to make in each year not les» than three reports of
condition ©£ F, R, B, Form 105.
Such reports shall be made to the Federal Re-
serve Bank of i t s d i s t r i c t on c a l l of such bank, on dates to be f i x e d by the
Federal Reserve Board.
They shall also make semiannual reports of earnings
and dividends on F. R. B. Form 107,
As • dividends nay be declared from time to
time, each State bank or trust company member s h a l l also furnish to the
Fed-
eral Reserve Bank of i t s d i s t r i c t a special n o t i f i c a t i o n of dividend declared
on F. R. B. Form 107a.
this regulation.
F. R> P. Forms IO5, 107, and 107a are made a part of
@FedFRASER