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FEDERAL RESERVE BOARD WASHINGTON ^ X-6067 ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD 7 June 12, 1928. SUBJECT: N e c e s s i t y f o r new a p p l i c a t i o n f o r membership i n c o n s o l i d a t i o n s of member banks w i t h nonmember banks. Dear S i r : The F e d e r a l Reserve Board r e c e n t l y c o n s i d e r e d the q u e s t i o n whether a new a p p l i c a t i o n f o r membership should be r e q u i r e d of a bank formed as a r e s u l t of a c o n s o l i d a t i o n of a member bank w i t h a nonmember bank. The case to which the Board gave c o n s i d e r a t i o n a r o s e under a s t a t u t e of P e n n s y l v a n i a which p r o v i d e s t h a t a l l the r i g h t s , f r a n c h i s e s and i n t e r e s t s of the c o n s t i t u e n t i n s t i t u t i o n s s h a l l be t r a n s f e r r e d to and v e s t e d i n .the c o n s o l i d a t e d bank and which contemp l a t e s t n a t the c o n s o l i d a t e d bank s h a l l be a new i n s t i t u t i o n . The c o n s o l i d a t e d bank d e s i r e d to be a member of the F e d e r a l Reserve System. A f t e r a c a r e f u l c o n s i d e r a t i o n of t h e q u e s t i o n the Board decided t h a t an a p p l i c a t i o n f o r membership should be r e q u i r e d of the new c o n s o l i d a t e d bank. This i s i n accordance w i t h the p o s i t i o n which the Board has taken i n s e v e r a l cases where t h i s q u e s t i o n has a r i s e n h e r e t o f o r e . This i n f o r m a t i o n i s submitted to you f o r your guidance i n f u t u r e cases of a s i m i l a r c h a r a c t e r which may a r i s e i n your d i s t r i c t # In such cases an a p p l i c a t i o n f o r membership should be f i l e d , b u t u n l e s s e x p r e s s l y o t h e r w i s e r e q u i r e d by the Board or u n l e s s the F e d e r a l reserve agent thinks a d d i t i o n a l information d e s i r a b l e in a p a r t i c u l a r case i t w i l l be s u f f i c i e n t to f i l e the formal a p p l i c a t i o n i t s e l f on Form 8 3 ( a ) , accompanied by copies of the c o n s o l i d a t i o n "papers, but w i t h o u t the o t h e r customary e x h i b i t s and supplemental i n f o r m a t i o n . I t i s to be n o t e d , however, t h a t the Board*s a c t i o n a p p l i e s only i n t h o s e c a s e s of c o n s o l i d a t i o n s of member banks w i t h nonmember banks under a S t a t e s t a t u t e which p r o v i d e s t h a t a l l the r i g h t s , f r a n c h i s e s and i n t e r e s t s of the c o n s t i t u e n t banks p a s s t o the c o n s o l i d a t e d bank and which contemplates t h a t the c o n s o l i d a t e d bank s h a l l be a new i n s t i t u t i o n and not merely a c o n t i n u a t i o n of the c o r p o r a t e e n t i t y of one of t h e c o n s t i t u e n t banks. The s i t u a t i o n i s d i f f e r e n t i n c a s e s where t h e r e i s a c o n s o l i d a t i o n of a member bank w i t h a nonmember bank under a s t a t u t e which p r o v i d e s f o r the merger of the c o r p o r a t e e x i s t ence of one of the c o n s t i t u e n t banks i n t o t h e o t h e r and t h e c o n t i n u a t i o n of the c o r p o r a t e e x i s t e n c e of the l a t t e r w i t h o u t i n t e r r u p t i o n and u n a f f e c t e d by the c o n s o l i d a t i o n . In such cases i f the c o n s o l i d a t i o n t a k e s p l a c e under the c h a r t e r of the member bank i t w i l l r e t a i n i t s membership as a c o n s o l i d a t e d i n s t i t u t i o n w i t h o u t a new a p p l i c a t i o n f o r membership, b u t i f the c o n s o l i d a t i o n t ak es p l a c e under the c h a r t e r X-6067 -2- of t h e nonmember "bank the c o n s o l i d a t e d i n s t i t u t i o n mast f i l e an a p p l i c a t i o n i f i t d e s i r e s to become a member of the F e d e r a l Res e r v e System. By o r d e r of the F e d e r a l Reserve Board; Walter L. Eddy, Secretary. TO AGENTS OF ALL FEDERAL RESERVE BAMS.
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