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X-50?3 l. FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO,; THE FEDERAL RESERVE BOARD February 8, ~928. SUBJECT: Deduction of Balances due from American BranChes of Foreign Batiks in Co~uting Reserves. Dear Sir: The Federal Reserve Board was recently requested to rule upon the question whether dollar balances carried by member banks in American branches of foreign banks may be considered balances due from banks Within the meaning of Section 19 of the Feaeral Reserve Act and accordingly deducted from the amount of balances due to banks in computing reserves. The Federal Reserve Board's Regulation D provides that balances due from foreign batiks may not be deducted from due to bank balances in computing reserves of member banks. This ~rovis ion is based on the fact, however, that balances due from foreign banks are payable ih foreign currency and the Board believes that .t}te pl;lrase "the,net difference of amounts due to and from other 'bankt 11 contai11ea 1n Seedoh 19 of the Act has refel'ence oniy to balances payable in dollars and does not include balances p~able in foreign currency. The Board has also ruled that while balances payable in foreign currency due from a foreign branCh of a domestic bank may not be deducted from due to bank balances by a member bank in co~uting its reserves, when such balances are payable in dollars the contrary is true the deduction from due to bank balances being permitted. (1925 Federal Reserve Bulletin, page 483). In the case under consideration the amounts due from American branches of foreign banks were payable in dollars rather than in foreign currency, and accordingly the Federal Reserve Board ruled that suCh balances payable in dollars due from branChes located in this country of foreign banks may be deducted from amounts due to other banks by a member bank in computing its reserves under Section 19 of the· Federal Reserve Act. By order of the Federal Reser~e Board. Walter L. Eddy, Secretary. TO .ALL GOVERNORS AND FEDERAL RESERVE AGENTS.
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