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X-9533 ,. I; BOARD ot GbVERN0RS OF THE FEDERAL RESERVE SYSTEM For the Press For release in morning newspapers of Thursday, March 26, 1936. March 25, 1936. REGULATION U LOANS BY BANKS FOR THE PURPOSE OF PURCHASING OR CARRYING STOCKS REGISTERED ON A NATIONAL SECURITIES EXCHANGE Pursuant to the provisions of section 7 of the Securities Exchange Act of 1934, the Board of Governors of the Federal Reserve System today issued Regulation U relating to loans made by banks on or after May 1, 1936, for the purpose of purchasing or carrying stocks registered on a national securities exchange. The regulation is not retroactive. It does not restrict the right of a bank to extend credit, whether on securities or otherwise, for any commercial, agricultural, or industrial purpose, or for any other purpose except the purchasing or carrying of stocks registered on a national securities exchange. The regulation does not prevent a bank from taking for any loan collateral in addition to that required by the regulation, nor does it require a bank to reduce any loan, to obtain additional collateral for any outstanding loan, or to call any outstanding loan because of insufficient collateral. At the same time, Regulation T, which applies to loans by brokers; dealers and members of national securities exchanges, has been modified 34-4 34'5 X-9533 - 2- so a.s to make applicable to brokers a.nd dealers the same margin requirements that have been determined for loans by banks on equity securities. The maximum loan value applying to registered stocks has been fixed at 45% of current market value· which is the percentage now applicable, under Regulation T, to three-fourths of the trading on the exchanges at the present time. Attached is a copy of Regulation U and the supplement thereto, both effective May 1, 1936, and also a copy of the revised supplement to Regulation T effective April 1, 1936. 346 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION T Effective April l, 1936 Maximum loan values of re istered securities (other than exempted securities for purposes of Regulation T. Pursuant to the provisions of section 7 of the s~curities Exchange Act of 1934 and section 3 of its Regulation T, as amended, the Board of Governors of the Federal Reserve System hereby prescribes the following maximum loan values of registered securities (other than ex• empted securities) for the purposes of Regulation T: (l) General rule. - Except as provided in paragraphs (2) and (3) of this supplement; the maximum loan value of a registered security (other than an exempted security) shall be 45 per cent of the current market value of the security. (2) Extension of credit to other members, brokers and dealers. - The maximum loan value of a registered security (other than an exempted security) in a special account with another member, broker or dealer, which special account complies with subsection (b) of section 3 of Regulation T, as amended, shall be 60 per cent of the current market value of the security. (3) Extension of credit to distributors, syndicates, etc - The maximum loan value of u registered security (other than an ~xempted security) in a special account with a distributor, syadicate, etc, wnich special account complies with subsection (c) of section 3 of Regulation T,as amended, shall be 80 per cent of the current market value ef the security.
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