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• .. F B D E R A L B'l S l . . R V B X»6414 '• f B 0 A.R.JD s m m m m for the press For immediate release, Friday, November 8, 1929, The Federal Reserve Board has had under consideration the question whether d r a f t s drawn i n accordance with the following f a c t s are e l i g i b l e for acceptance "by member "banks under the provisions of Section 13 of the Federal Reserve Act: A firm in New York City purchases certain staples from a s e l l e r i n a western c i t y who ships the same and draws a sight d r a f t on the purchaser i n Hew York with h i l l of lading attached. This d r a f t and b i l l of lading attached are serib in the customary way to a tank in New York, Bank A, designated by the purchaser. The l a t t e r then draws a 90 day "bill on Bank A, which i s accepted by the hank, having at the time in i t s possession the t i l l of lading covering the staples in process of shipment. The acceptance i s then discounted "by the purchaser and the proceeds used to pay the sight d r a f t and to obtain the release of the b i l l of lading. I t does not require 90 days for the completion of the shipment of goods, only a r e l a t i v e l y short time being necessary for this purpose. I t was recommended to the Federal Reserve Board that the b i l l drawn by the purchaser be considered eligible for acceptance by Bank A when i t has a mat u r i t y consi stent with the usual and customary credit time prevailing in the p a r t i c u l a r business. After a careful consideration of this question the Federal Reserve Board has ruled that a draft drawn by the purchaser of goods i n accordance with the f a c t s above stated i s e l i g i b l e for acceptance by a member bank when i t has a maturity consistent with the usual and customary credit time prevailing in the part i c u l a r business, provided that a l l other relevant requirements of the law and of the Board's regulations are complied with. Under the f a c t s stated the accepting bank has possession of the b i l l of lading at the time of the acceptance of the d r a f t drawn upon i t , and t h i s i s believed to be a substantial compliance with the requirement of the law that Shipping documents conveying or securing t i t l e be attached at the time of acceptance. The ruling of the Federal Reserve Board set forth above may be i n some respects inconsistent with previous rulings of the Board to the e f f e c t that bankers' acceptance credits should not be used f o r the purpose of furnishing working capital (See for example, 1920 Federal Reserve Bulletin, page 1301; 1923 Federal Reserve Bulletin, page 158.) Such previous rulings of* the Board with regard to working capital may accordingly be regarded aa superseded or qualified by the ruling contained herein to the extent of any such inconsistencies, but no f u r t h e r . W J
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