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98. Tentativj regulation .o . * *. % F E D E R A L R E S E R V E . • BOARD, V/ashington, D. C, December 22, 1914. Subject: - Bankers’ Acceptances. Section 14 - Federal Reserve Act* The Federal Reserve Board on November 10, 1914, promulgated Regu lations Nos* 2 and 6, governing the conditions upon which Federal reserve banks night discount bank acceptances. The Board hereby revokes Regulation No- 6 and substitutes therefor Regulation No.6a, hereto attached. Under Section 14 of the Act, the Federal Reserve Board is authorized to prescribe rules and regulations under vhich any Federal reserve bank ray "purchase and sell in the open rarket, at hope or abroad, either from or to dorestic or foreign banks, firns, corporations or individuals, cable transfers and bankers’ acceptances and bills of exchange of the kin«ls and maturities by this Act r.ade eligible for rediscount with or v/ithout the endorserent of a r.ermber bank." Following the analogy of the Internal Revenue Act of October 22, 1914, which defines the word "banker", the tirm "bankers’ acceptances" whenever used in regulations or circulars of the Federal Reserve Board shall be con strued so as to include the acceptances of ner.ber banks, non-rermber banks, trust companies, private banking firr,s, persons or companies engaged in the business of accepting and discounting. Under the said Section 14, the Federal reserve banks are given power "to establish fror time to tire, subject to review and determination of • * * 2 - the Federal Reserve Board, rates of discbunt to be charged by the Federal reserve banks- for each class of paper, which shall be fixed with a view of aceomnodating^comirerce and business." Transactions in ^bankers' acceptances" at rates substantially lower than those for commercial paper have already reached considerable proportions in the open market and it is necessary for the Federal re serve banks to- establish discount rates covering such paper. Acceptances covering the importsiipr- n- exportation of goods have to compete with foreign acceptances in world markets, aild the rates for these bankers1 acceptances in the tfaited States must be such as to eriable the American banker to meet successfully his foreign competitbfU In order to meet these conditions the Board realizes that Federal reserve banks must be allowed some latitude in dealing with such acceptances. The Federal Reserve Board, has, therefore, determined that in establishing rates for bankers1 acceptances Federal reserve banks nay from time to time submit to the Federal Reserve Board a maximum and a minimum rate, varying not more than 1 per centum, xvithin the limits of which they may ask to be authorized to purchase bankers1 acceptances. Within these limits the Federal reserve banks will be permitted to determine the rates at which they will deal in bankers1 acceptances. The Board, however, reserves the right to modify or withdraw this privilege* Federal reserve banks are requested to furnish to their Federal reserve agents copies of the resolutions authorizing the purchase of bankers acceptances and the limit fixed for the aggregate amount to A\ ILOO be purchased of each acceptor's paper; and, in addition, a daily state ment giving the total amount of all bankers' acceptances purchased, the rates at which purchased, and the names of the acceptor, drawer and en dorser of every bill* The Federal Reserve Agent shall forward such copies and statements to the Federal Reserve Board. In deciding what acceptances shall be considered satisfactory, the Federal Reserve Board must necessarily depend chiefly On the judgment of the officers and directors Of the various reserve banks who are inactive daily touch with the business situation of the entire district. C. S. HAL'LIN Governor. H. PARKER WILLIS Secretary. 12-22*14.
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