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125 federal reserve board WASHINGTON address official correspondence t o the federal reserve board „ — a — i d ± t January 29, 1926. SUBJECT; financial Statements of Subsidiaries, Dear Sir: It has been p o i n t e d out by one of the Federal reserve banks that the r u l i n g contained in the Board's l e t t e r of December 30, 1925 (X-4484), w i t h r e s p e c t to the e l i g i b i l i t y for rediscount of notes of corporations r e p r e s e n t i n g borrowings to be advanced to s u b s i d i a r i e s , apnears to abrogate the requirement contained in the Board's R e g u l a t i o n A that - "Whenever the borrower has c l o s e l y a f f i l i a t e d or s u b s i d i a r y corporations or firms, the borrower's f i n a n c i a l statement s h a l l be accompanied by separate f i n a n c i a l statements of such a f f i l i a t e d or subs i d i a r y corporations or firms,***". The r u l i n g made by the B o a r d and e x p r e s s e d i n i t s l e t t e r o f December 30, 1925, was not intended to q u a l i f y or aaend in any way this p r o v i s i o n of i t s r e g u l a t i o n . The r u l i n g h a d r e f e r e n c e o n l y t o the l e g a l e l i g i b i l i t y for rediscount of notes of the kind d e s c r i b e d and there was no i n t e n t i o n to a f f e c t the e x i s t i n g requirement in the r e g u l a t i o n as to separate f i n a n c i a l statements of corporations or firms c l o s e l y a f f i l i a t e d with the borrower. This requirement was added to the Board's R e g u l a t i o n A in order that Federal r e s e r v e banks might have more complete information regarding the c o n d i t i o n of borrowers having c l o s e l y a f f i l i a t e d or s u b s i d i a r y corporations or firms, and also that they might determine whether the paper of such borrowers i s d e s i r a b l e and e l i g i b l e for rediscount. As p r o v i d e d in the Board's regulation, i f the statement of the borrower c l e a r l y i n d i c a t e s that the note is both e l i g i b l e from a l e g a l standpoint and a c c e p t a b l e from a c r e d i t standpoint, separate statements of a f f i l i a t e d or s u b s i d i a r y corporations or firms are not required. The r e g u l a t i o n s of the Board on this subject have been in n o tray m o d i f i e d b y t h e B o a r d ' s r u l i n g o f D e c e m b e r 3 0 , 1 9 2 5 , a n d i t i s r e q u e s t e d that you endeavor to correct any misunderstanding which may have a r i s e n as to the 'oroper i n t e r p r e t a t i o n to be p l a c e d upon t h i s ruling. Very TO GOVS. OF ALL F . S . BASICS. t r u l y yours, Ednmnd P i a t t , Vice Governor.
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