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FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-4S27 June 29, 1926. SUBJECT: B i g h t of F e d e r a l R e s e r v e Bank t o remove non-member bank from par l i s t . Dear S i r : The F e d e r a l R e s e r v e B o a r d h a s b e e n r e q u e s t e d t o r u l e u p o n t h e q u e s t i o n w h e t h e r a F e d e r a l r e s e r v e b a n k may, of i t s own v o l i t i o n , s t r i k e f r o m t h e p a r l i s t t h e name o f a nonmember S t a t e • bank which has a g r e e d to r e m i t a t p a r , b u t r e p e a t e d l y f a i l s to comply w i t h s p e c i a l i n s t r u c t i o n s t o t e l e g r a p h nonpayment o f c h e c k s drawn on s u c h b a n k a n d f o r w a r d e d d i r e c t t o i t f o r p a y m e n t , a n d w h i c h i n some i n s t a n c e s r e t u r n s c h e c k s drawn u p o n i t u n p a i d w i t h out p r o t e s t i n g such checks. Under t h e t e r m s o f t h e F e d e r a l R e s e r v e Act F e d e r a l r e s e r v e b a n k s m a s t r e c e i v e on d e p o s i t a t p a r a n d p r o c e e d t o c o l l e c t , a l l c h e c k s on member b a n k s w h i c h a r e p r e s e n t e d t o them b y member b a n k s ; b a t t h e y a r e n o t r e q u i r e d t o h a n d l e c h e c k s on nonm'otaber Banks. S e c t i o n I I I of t h e B o a r d ' s R e g u l a t i o n J p r o v i d e s t h a t : "Each F e d e r a l r e s e r v e b a n k w i l l r e c e i v e a t p a r f r o m i t s member b a n k s and f r o m nonmember c l e a r i n g b a n k s i n i t s d i s t r i c t , c h e c k s d r a w n on a l l member a n d n o n member c l e a r i n g b a n k s , a n d c h e c k s d r a w n on a l l o t h e r nonmember b a n k s w h i c h a r e c o l l e c t a b l e a t p a r i n f u n d s a c c e p t a b l e to the F e d e r a l r e s e r v e b a n k o f t h e d i s t r i c t i n w h i c h s u c h nonmember b a n k s a r e l o c a t e d . " I t i s t h e g e n e r a l p o l i c y of t h i s p r o v i s i o n of t h e r e g u l a t i o n to r e q u i r e a l l F e d e r a l r e s e r v e banks t o h a n d l e a l l checks drawn on nonmember b a n k s w h i c h c a n i n f a c t b e c o l l e c t e d a t p a r i n a c c e p t a b l e f u n d s w i t h o u t employing a s p e c i a l a g e n t o t h e r t h a n a bank to p r e s e n t such checks f o r c o l l e c t i o n a c r o s s the counter; a n d c o n s t r u e d s t r i c t l y according t o i t s l e t t e r the r e g u l a t i o n might be X-4627 -2 c o n s i d e r e d by i m p l i c a t i o n to f o r b i d a f e d e r a l r e s e r v e bank to s t r i k e f r o m t h e p a r l i s t a n y nonmenber bank on w h i c h chocks c a n i n f a c t be C o l l e c t e d a t par# A r e a s o n a b l e c o n s t r u c t i o n of t h i s r e g u l a t i o n , h o w e v e r , does n o t r e q u i r e a F e d e r a l r e s e r v e b a n k t o h a n d l e c h e c k s drawn on a nonmenber bank when s u c h c h e c k s c a n n o t be c o l l e c t e d w i t h o u t u n d u e r i s k t o t h e F e d e r a l r e s e r v e bank. 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 p r e s e n t e d , t h e Board h a s r u l e d t h a t F e d e r a l r e s e r v e banks may, of t h e i r own v o l i t i o n # remove from t h e p a r l i s t t h e name o f a n y nonmember bank which r e p e a t e d l y f a i l s t o r e m i t p r o m p t l y f o r c a s h l e t t e r s s e n t t o i t , to p r o t e s t u n p a i d c a s h i t e m s s e n t t o i t , t o comply w i t h i n s t r u c t i o n s t o w i r e a d v i c e of nonpayment, t o comply w i t h any o t h e r p r o v i s i o n s of R e g u l a t i o n J of t h e F e d e r a l R e s e r v e B o a r d , or of t h e F e d e r a l r e s e r v e b a n k 1 s check c o l l e c t i o n c i r c u l a r , o r w h i c h f o r any o t h e r r e a s o n a b l e c a u s e may b e deemed by t h e F e d e r a l r e s e r v e b a n k t o b e a n u n f i t or u n s a f e a g e n t f o r c o l l e c t i o n ; u n l e s s c h e c k s on s u c h bank can s a f e l y be c o l l e c t e d a t p a r i n a c c e p t a b l e f u n d s t h r o u g h a n o t h e r bank i n t h e same c i t y or town* By o r d e r o f t h e F e d e r a l R e s e r v e Board# Very t r u l y yours f W a l t e r L* Eddy, Secretary. TO GOVERNORS AMD FEDERAL RESERVE AGENTS OF ALL F . B. BANKS.