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2: FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE T O THE FEDERAL RESERVE B O A R D X-368S A p r i l 7, 1 9 2 ) . SUBJECT: Rules governing examinations of S t a t e member b a n k s . Dear S i r : I t appears t h a t sons of the Federal Reserve Banks a r e making examinations of S t a t e member banks without a s s e s s i n g t h e c o s t s t h e r e o f a g a i n s t the banks examined, as r e q u i r e d by the tsrms of Sections 9 and 21 of t h e Federal Reserve Act, and the Federal Reserve Board f e e l s t h a t t h i s p r a c t i c e should be d i s c o n t i n u e d . After caref u l c o n s i d e r a t i o n of the q u e s t i o n s of p o l i c y and law involved, and t h e v a r y i n g p r a c t i c e s of the d i f f e r e n t Federal Reserve Banks, the Board h a s adopt 2d the f o l l o w i n g r u l e s to govern t h e examination of S t a t e member banks by a l l Federal Reserve Banks, e f f e c t i v e on and a f t e r May 1 , 1 9 2 3 : 1. Whenever the d i r e c t o r s cf a F e d e r a l Reserve Bank s h a l l approve the examinations made by the S t a t e a u t h o r i t i e s , such examinat i o n s and the r e p o r t s thereof may be accepted by the F e d e r a l Reserve Bank in l i e u of t h e i r own examinations; and i n such cases no c o s t s may be a s s e s s e d a g a i n s t the member bank by the F e d e r a l Reserve Bank. 2F e d e r a l Reserve Banks may make t h e i r own examinations of S t a t e member banks vAienever they consider i t n e c e s s a r y to do s o , and the expenses of a l l such examinations must be a s s e s s e d a g a i n s t the banks examined3Whenever i t i s n e c e s s a r y , a Federal Reserve Bank may, if convenient,on r e q u e s t of the S t a t e tanking a u t h o r i t i e s , f u r n i s h examiners and a s s i s t a n t s t o a s s i s t them in t h e conduct of t h e i r examination of a member S t a t e bank and s h a l l r e q u i r e reimbursement by t h e S t a t e a u t h o r i t i e s f o r the s e r v i c e s ana expenses of a l l examiners and a s s i s t a n t s so furnished. 4. There a r e c e r t a i n k i n d s of independent i n v e s t i g a t i o n s or i n q u i r i e s which a Federal Reserve Bank may u s e f u l l y and p r o p e r l y make of member banks which would not c o n s t i t u t e examinations w i t h i n the meaning of t h e Federal Reserve Act and t h e c o s t s of which, t h e r e f o r e , need n o t be a s s e s s e d against, the bank examined; t o - w i t : i n v e s t i g a t i o n s of member banks with branches f o r the purpose of f i n d i n g out the n a t u r e of the o r g a n i z a t i o n and the e x t e n t of c o o r d i n a t i o n between the head o f f i c e and b r a n c h e s , and i n q u i r i e s with r e s p e c t to " d i s c o u n t s , advancements ana accommodations" which have been extended » ' X-363S - 2 - O f r, r-Uv to or a p p l i e d f o r by any member bank. 5« On the other hand, any general i n v e s t i g a t i o n of a member bank by a Federal Reserve Bank f o r the purpose of d e t e r m i n i n g : ( l ) the solvency of the member bank, or (2) the general l i n e s of c r e d i t which a r e b e i n g extended by i t , should be deemed to c o n s t i t u t e an examination w i t h i n the meaning of the F e d e r a l Reserve Act and the c o s t s t h e r e o f must be a s s e s s e d a g a i n s t t h e member bank. The Board w i l l expect t h e Federal Reserve Agents to see t h a t these r u l e s a r e s t r i c t l y complied with by t h e i r r e s p e c t i v e Federal Reserve Banks, both in l e t t e r and in s p i r i t . # By order of the Federal Reserve Board. Very t r u l y y o u r s , Win. W. Hoxton, Secretary., TO ALL FEDERAL RESERVE AGENTS.
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