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246 FEDERAL RESERVE BOARD WASHINGTON X-4454 ADDRESS OFFICIAl. CORRESPONDENCE TO THE FEDERAl. RESERVE BOARD Uovember 18, 1925. SUBJECT: Termination of .Membership by Withdrawing Uember Bank . Dear Sir: The Federal Reserve Board }...a.s been requested to rule upon the question whether a State member bank which has given si.x: r:wnths 1 notice of its intention to withdraw from the System, but fails to withdraw immediately at the end of the si.x: months' period is onti tled to interest at tho rate of one-half of 1% per month from tho date of tho last dividend to the date upon which its Federal reserve bank stock is actually surrendered or 1nercly up to the date on Which the six months• period CA~ired. As the Board has stated in connection with other rulings on similar questions, notice of intention to withdraw is a prerequisite of withdrawal from the System but is not any part of the actual withdrawal itself. At the tetmination of the six months 1 period following notice of withdrawal a State member ba.nk does not automtitically cease to be a member of the Federal ReserV'e System. A bank which has given such notice but has not acted pursuant thereto, continues to be a member of the Federal Reserve System for all purposes and is entitled to the privileges and is subject to the obligations of membership in the System. A state member bank, therefore, which has given notice of its intention to withdraw but does not consummate the withdrawal at the termination of the six months' period by surrendering its Federal reserve bank stock must continue to maintain the reserves regularly raq_uired by the Federal Reserve Act, and when it does withdraw fror:1 the System by surrendering its Federal reserve bank stock it is entitled to interest at the rate of one-half of 1% per month from the date of the last dividend, if earned, to the date on which the stock is surrendered and membership is terminated. In order to be entirely accurate it should also be stated that the amount refunded is in no event to exceed the book value of the stock at tho time, but ·this requirement is of little practical importance under present conditions • . As explained in tho Board's letter of September 20, 1923, X-3841, a notice of withdrawal does not rer!lain effective indefinitely but only for a reasonable time after the e:>..'})iro.tion of the six months 1 X-4454 -2- 24:7 period. In all cases of this kind arising hereafter the Board will consider two r..onths as a reasonable time for the consummation of withdrawal after the six months' period has expired; so that if the stock is not surrendered within eight months from the date upon which notice of intention to withdraw is received, the notice becomes void and a new notice will be required before a voluntary wi thd.rawal will be permitted. If the circumst~~ces are unusual and seem to require a longer period for tho withdrawal, the :Soard will consider a~ extension of time provided that application for such extension is received by the :Soard within the two months' limit. You are requested to bring this matter to the attention of all bnnks which have notices of withdrawal now pending and in the futuro to advise any ba:nk from which a notice of withdrawal is received of the Board's ruling as to the time permitted for withdrawal. By order of the Federal Reserve :Soard. Very truly yours, Walter L. Eddy, Secretary. LETTER TO ALL FEDERAL RESERVE AGENTS.
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