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BOARD OF GOVERNORS OF' THE FEDERAL RESERVE SYSTEM WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD X-9480 February 6, 1956. SUBJECT: Rclduction of Cc.pitnl of St:::.te Member Banks. Dear Sir: Standard condition of membership numbered 2 c:.s printed in the Board's Regult<-tion H, effective January 1, 1936, provides in part that the capitvl of a bank subject to such condition "shall not be reduced oxcept with the pormis.sion of the Boc:::rci of Governors of tho Federal Reserve System. 11 Footnote 9 in tho Rvgulc:.tion, however, provides: "A reduction in capital, bowover, shall not be doomed to be contrary to this provision if, at the same time, uho capital is correspondingly incrouscd or a specific reserve in an amount not loss than the amount of the c~<.pi tal reduction is sot aside to provide for an increase in capi b:cl und can bo used for no other purpose; provided, of course, the transaction docs not violate any provision ·Jf [~pplica.ble laws. 11 0 The interpretation incorporo.ted in the above footnote is hereby made applicu,ble in all cnses wherl'J :"< ba.nk has boon admitted to membership in the past subj oct to u condi Uon of membership thLl t the bank 1 s capital shall not be reduced except with the permission of the Board. guided accordingly. TO ALL FEDERAL Very truly ycurs, Chestor Morrill, Secretary. RESERVE AGENTS. Please be