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S-119 Reg. H-13 BOARD OF GOVERNORS OF' THE 344 FEDERAL RESERVE SYSTEM WASHINGTON ADDRESS DF"F"ICIAL CORRESPONDENCE TO THE BOARD October 14, 1938. Dear Sir: There is inclosed for your information copy of a letter which is today beir~ sent to Mr. Fleming, President of the Federal Reserve Bank of Cleveland, advising him that a State member bank which desires to engage in the small loan business will not be required to obtain the permission of the Board under the general condition of membership. Very truly yours, Chester Morrill, Secretary. Inclosure. TO 'l'liE PRESIDENTS OF ALL IfEDERAL RESERVE BANKS 345 S-119-a Reg. H-13 October 14, 1938. Mr. M. J. Fleming, President, Federal Reserve Bank of Cleveland, Cleveland, Ohio. Dear Mr. Fleming: Reference is made to Mr.. 's letter of September 30, l9j8, advising that The Savings & Trust Company, , , :proposes to amend its articles of incorporation so as to perrr1it the bank to engage in "special plan banking" and recommending that the Board approve the proposal under the provisions of the general condition of membership to which the bank is subject, which provides that, except with the permission of the Board, the bank shall not cause or permit any change to be made in the general character of its business or in the scope of the corporate powers exorcised by it at the time of admission to membership. According to Mr. 's letter "special plan banking" is the term used by the (State) Statutes for small loan business and it is noted that the banking laws of that State permit banks upon suitable amendments to their articles of incorporation to establish departments for the transaction of business of this type. The Banking Act of 1933 made Morris Plan banks and other incorporated banking institutions engaged in similar businuss eligible for membership in the Syst~m and during recent years commercial banks to a noticeable extent have broadened their activities to include the making of small or personal type loans, and have established separate departments to facilitate the functioning of such business. While m1ch ~x tension of activities may to some extent constitute a change in the general character of the bank's business and in some cases, at least, involve a change in the scope of the corporate powers exercised by the baclt, the change is not felt to be such as would come within the intent of the genera~ condition of membership. Accordingly, banks desiring to engage in flUCh activity· ·will not. be required to obtain the permission of the Board under the general condition of membership. It is assumed, of course, that in such cases any necessary approval of tho State authorities will be obtained and that the business 'V'dll be conducted in strict accordance with the applicable State laws. Very truly yours, (Signed) Chester Morrill Chester Morrill, Secreta~J.