View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

F ederal

reserve

Ba n k

D ALLAS, TE X A S

of

Dallas

75222

Circu lar No. 79-154
September 10, 1979

OFF-PREMISES COLLATERAL ARRANGEMENT
AND BULLETIN 2, "LOANS"

TO ALL MEMBER BANKS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
During 1978, the Federal Reserve System undertook a broad scale review of discount window collateral with a view to modernizing
existing policies and p r o c e d u r e s . Some member b a n k s , particula rl y the
la r g e r b a n k s , had ex per ienced difficulty finding adequate collateral to
s ecure their borrowing needs. Th e objective of the study was to r e ­
evaluate and ex pand the scope of collateral acceptable for discount window
borrowings an d also to free other collateral for use in the TT&L program.
As a r esu lt of the s tu d y , a number of major policy and procedural
changes a r e being implemented. Under the new r u le s , Reserve Banks can
now accept foreign pa per and loan participations as collateral to secu re
bo rro wings. Also, member banks located in Oklahoma, New Mexico, and
Texas may be permitted to hold in their possession certain types of collateral
unde r off-premises custody arra n g e m e n ts . (Louisiana law prec ludes
use of off-premises collateral a r r a n g e m e n t s . ) The liberalization will p e r ­
mit member banks with a need for additional collateral to use one-to-four
family residential mortgages held in their own possession to s ecure discount
window borrowing u n d e r the off-premises custody arra n g e m e n t. Borrow­
ings secu red by these type mortgages will be made at the basic discount
rate. The off-premises custody pro ced u re may also be used in the case of
commercial and ag ricu ltural pa p e r (including loan p a r t i c ip a ti o n s ) , and
Croup I municipal se cu rities.
To take account of these pr ocedural changes and to make other
needed minor rev isions, our Bulletin 2, "Loans" has been updated and a
copy is enclosed for filing in your Regulations and Bulletins Binder . The
bulletin dated March 10, 1977, should be removed from your b in d e r and
destroyed.

B a n k s a nd o th e rs are e n c o u ra g e d to use th e fo llo w in g in c o m in g W A TS n u m b e rs in c o n ta c tin g th is Bank:
1-800-442-7140 (in tra s ta te ) and 1-800-527-9200 (in te rs ta te ). F o r c a lls p la ce d lo c a lly , p le a se use 651 p lu s th e
e x te n s io n re fe rre d to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

- 2 -

If your bank has an interest in the new collateral ar ran gements
or any question with res pec t to the types of cr ed it available at the discount
window, you may contact J e s s e D. S anders or Billy J . Hayden in the Loan
Department at this Bank, Ext. 6240. Interested member banks located in
the te r r i to r y s e rv e d by a Branch of this Bank should contact the individual
at the appropri ate Branch as indicated below:
El Paso Branch
Robert W. Schultz, (915) 544-4730, Ext. 41;
Houston Branch
C. O. Holt, J r . , (713) 659-4433, Ext. 44;
San Antonio Branch
Thomas C. Cole, (512) 224-2141, Ext. 13;
or you may call on the incoming WATS number
1 -8 0 0-2 92 -5 81 0, Ext. 13.
The above named individuals will be pleased to provide fu rthe r
information concerning the offering of collateral u n d e r the off-premises
ar ra ngem en t and to f urn is h the n e c e s s a r y forms for use in handling this
type tr ansaction.
Sincerely y o u r s ,
Robert H . Boykin
F ir st Vice President
Enclosure

BULLETIN 2

Loans

FEDERAL RESERVE BANK OF DALLAS

SCOPE
This bulletin sets forth the general terms and conditions under which we may extend
credit accommodations to member banks and the procedures to be followed in connection
with extensions of such accommodations. Additional information, including statements
concerning the policy by which the “discount window” is administered, may be found in
Regulation A and the Federal Reserve A ct (see references in section 2 of this bulletin). Our
current discount rate and our current rates on section 10(b) advances and advances to in­
dividuals, partnerships, and corporations under the last paragraph of section 13 of the Fed­
eral Reserve A ct are found in Supplement A to this bulletin.

FEDERAL RESERVE B A N K OF DALLAS

BULLETIN 2

TABLE OF CONTENTS
Section 1, DEFINITIONS

1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60

Acceptable and acceptability
Act
Advance
Borrow and borrowing
Collateral
Discount
Discount rate
Eligible and eligibility
Section 10(b) advance
Section 13 advance
Officer authorized to borrow
Paper
Reference to Bulletin 1

Section 2, REFERENCES

Section 6, SECTION 10(b) ADVANCES

6.00 Description
6.05 Collateral types
6.10 Procedure
Section 7, DISCOUNTS

7.00 Description
7.05 Procedure
Section 8, SECURITIES AS COLLATERAL

8.00 Book-entry Treasury securities
8.05 Securities held elsewhere
8.10 Securities held by an approved custodian
bank
8.15 Simplified description in certain cases

Section 3, GENERAL

3.00 Kinds of credit accommodations
3.05 Disbursement of funds and computation
of interest
3.10 Information required by law
3.15 Payment at maturity and pre-payment
3.20 Payments received on collateral by bor­
rowing banks
3.25 Renewal
3.30 Selling Federal funds while borrowing
3.35 Off-premises collateral arrangements

Section 9, PAPER

9.00
9.01
9.05
9.10
9.15
9.20
9.25
9.30

Section 4, PREREQUISITES FOR BORROWING

4.00 Borrowing resolution
4.05 Filing of signatures
4.10 Continuing lending agreement
Section 5, SECTION 13 ADVANCES

5.00
5.05
5.10
5.15
5.20
5.25

Description
Borrowing request
Collateral security
Collateral must have adequate maturity
Release of collateral
Advances due on Saturdays, Sundays, or
holidays

9.35
9.40
9.45
9.50

Approval required
Loan participations
Bankers’ acceptances
Collection of paper
Demand paper
Financial statements
Financial statements — originals or
copies
Form of financial statements, forms
available
Endorsement
Insurance
Secured paper
Warehouse receipts

Section 10, CONTRACT
Supplement A, RATES FOR DISCOUNTS AND
ADVANCES
Supplement B, ELIGIBILITY OF SECURITIES
Supplement C, APPROVED CUSTODIAN
BANKS

FEDERAL RESERVE B A N K OF DALLAS

BULLETIN 2

Section 1, DEFINITIONS

1.40 Section 10(b) advance

1.00 Acceptable and acceptability

“Section 10(b) advance” means an advance
under section 10(b) of the A ct at a rate not less
than Vs of 1 percent over the discount rate. Such
an advance need not have eligible collateral, but
the collateral must nevertheless be acceptable.

“Acceptable” and “acceptability” refer to the
credit quality of paper and other collateral.
Acceptability depends on the financial responsi­
bility of makers, endorsers, or guarantors, or on
the security behind the obligation, or on all of
these, as appropriate. We determine to our own
satisfaction the acceptability of paper and cer­
tain other collateral.
1.05 Act

“A ct” means the Federal Reserve Act.
1.10 Advance

“Advance” means a borrowing other than by
discount under section 13 or 10(b) of the Act.
Advances are generally made under the Continu­
ing Lending Agreement Regarding Advances by
Federal Reserve Bank of Dallas (Form LD-176).
1.15 Borrow and borrowing

“Borrow” and “borrowing” refer to a member
bank receiving an extension of credit from this
Bank, whether by advance or discount.
1.20 Collateral

1.45 Section 13 advance

“Section 13 advance” means an advance at the
discount rate under section 13 of the A ct and
secured by eligible collateral.
1.50 Officer authorized to borrow

“Officer authorized to borrow” means an officer
of a member bank currently holding one of the
offices which the member bank’s borrowing
resolution authorizes to borrow from this Bank.
R e f e r e n c e : 4.05 of this bulletin.
1.55 Paper

“Paper” refers to notes and similar obligations of
various obligors, usually customers of borrow­
ing banks.
1.60 Reference to Bulletin 1

“Collateral” refers to obligations in the form of
securities or paper which a borrowing bank
pledges to secure an advance.

Several definitions, rules of construction, and
other provisions applicable to this bulletin are
found in our Bulletin 1, “General Provisions,”
and are incorporated herein by reference.

R eference: sections 5 and 6 of this bulletin.

Section 2, REFERENCES

1.25 Discount

“Discount” means an extension of credit in
which a member bank discounts eligible paper.
1.30 Discount rate

“Discount rate” refers to the lowest rate charged
for borrowing. It is fixed by our Board of Direc­
tors subject to review and determination of the
Board of Governors of the Federal Reserve
System.

In addition to the specific references found
throughout this bulletin, the following general
references are important to an understanding of
borrowing transactions with this Bank:
(1) Section 201.2 of Regulation A, containing
general principles concerning the use of Federal
Reserve credit.
(2) Section 201.3 of Regulation A, covering ad­
vances to member banks.

R e fe r e n c e : Supplement A to this bulletin for the
current discount rate.

(3) Section 201.4 of Regulation A, covering dis­
counts for member banks.

1.35 Eligible and eligibility

(4) Section 201.5 of Regulation A, containing
general requirements.

“Eligible” and “eligibility” refer to obligations
satisfying the applicable requirements of the Act
and Regulation A for use in connection with a
section 13 advance or, in the case of paper, for
discount.

(5) The following portions of the A ct: sections
4.8, 9.13, 10(b), 12.2, 13.2, 13.3, 13.4, 13.5, 13.6,
13.7, 13.8, 13.10, 13.12, 13.13, 13a.l, 13a.2, 13a,4,
19(d), and 24.3.

BULLETIN 2

FEDERAL RESERVE B A N K OF DALLAS

(6) RS 5200, containing the indebtedness limit
for one borrower from national banks, a limit
made applicable to borrowing from this Bank by
section 201.5(d] of Regulation A. (Note: For pur­
poses of this statute, as applied to borrowing
from us, undivided profits may be included as
part of capital stock and surplus.)
R e fe r e n c e : Paragraph 2309 of Published Inter­
pretations of the Board of Governors of the
Federal Reserve System.

Section 3, GENERAL
3.00 Kinds of cred it accom m odations

U nder p ro v isio n s of the A ct and su b je c t to
Regulation A, and in the light of the general
principles set forth in that regulation, we are
authorized to make credit available to member
banks by the following means: section 13 ad­
vances (see section 5); section 10(b) advances
(see section 6); and discounting eligible paper
(see section 7). Credit accommodations to mem­
ber banks are divided into the following types:
(1) short-term adjustment credit; (2) seasonal
credit; (3) emergency credit; and (4) prolonged
credit.
R e fe r e n c e : s e c t i o n s 2 0 1 .2 ( c ) , 2 0 1 .2 ( d ) , and
201.2(e) of Regulation A.
3.05 D isbursem ent of funds and com putation
of in terest

If a request for credit is received by us before
2:00 p.m. (3:00 p.m. Central Time in unusual
cases and when the collateral is held at this Bank
or approved collateral is being held in abeyance)
and the request is approved, the borrowing
member bank will be given immediate credit in
its reserve account unless the member bank re­
quests that credit be given on a subsequent day.
At the time of the advance, we credit the full
amount of the advance to the reserve account of
the borrowing bank. Interest on an advance will
be payable to us at the time of repayment of the
advan ce at the ap p licab le rate in d icated in
Supplement A to this bulletin at the time the
advance was made, except that, if the rate is
changed while the advance is outstanding, the
new rate shall apply for the period after the date
of such change. Interest will be computed on a
basis of 365 days to the year. In computing in­
terest, we include the date of borrowing and
exclude the date of payment. The same pro­

cedure will apply to the discount of eligible
paper, except no consideration will be given to
unpaid interest on discounted eligible paper.
3.10 Inform ation required by law

We are required by law to keep informed of the
general character and amount of the loans and
in v estm en ts of m em ber ban ks to a scerta in
whether undue use is being made of bank credit
for the speculative carrying of or trading in
securities, real es tate, or commodities, or for any
other purpose inconsistent with the maintenance
of sound credit conditions. In connection with
any advance or discount, we reserve the right to
require a current condition report of the borrow­
ing member bank, a recent balance sheet and
profit and loss statement of any obligor on paper
offered as collateral for an advance or for dis­
count, and such other reports and statements as
we may deem desirable.
R e fe re n c e : section 201.2(h) of Regulation A ; and
section 9.25, 9.30, and 9.35 of this bulletin.
3.15 Paym ent at m aturity and prepaym ent

A borrow ing plus accru ed in te re st w ill be
charged to the borrowing bank’s reserve account
at maturity. The borrowing bank, at its option,
may prepay all or part of any borrowing, and in
such cases, the amount paid plus accrued inter­
est will be charged to the borrowing bank’s
reserve account.
3.20 Paym ents received on collateral by
borrow ing banks

If a member bank that has pledged or dis­
counted paper with us, or has otherwise trans­
ferred collateral to us, receives any funds in
payment for such paper or other collateral while
it is so pledged, discounted, or transferred, the
member bank must immediately advise us of all
such payments. When there is an excess of
collateral equal to or greater than the amount of
such payment, we will reduce the collateral
value by the amount of the payment. In other
c a ses, we w ill charge the borrow in g b a n k ’s
reserve account in the amount of the payment
plus accrued interest thereon. Until we take
either of the above actions, as appropriate, such
payment will be considered as having been re­
ceived in trust for us.
3.25 Renew al

A borrowing bank wishing to renew an advance

FEDERAL RESERVE B A N K OF DALLAS

should follow the same procedure necessary to
obtain an original advance (see section 5 and
section 6).
3.30 Selling Fed eral funds w hile borrow ing

Net sales of Federal funds will not be regarded
as inappropriate while using seasonal credit as
long as such transactions are representative of
the bank’s normal operating pattern.
However, in utilizing other types of Reserve
Bank credit, the member bank should not be a
net seller of Federal funds in the same reserve
week in which it is borrowing. Excess funds
should be applied as a payment to the loan as
opposed to placing them in the funds market.
3.35 O ff-prem ises collateral arrangem ents

If approved by us, member banks located in
New Mexico, Oklahoma, and Texas may retain
collateral consisting of paper (including loan par­
ticipations and one-to-four family residential
mortgages] and Group I municipal securities in
their possession rather than transmit such col­
lateral to us or a custodian bank.* To participate
in such an arrangement the member bank should
execute form BD-59, “Application to Act as OffPremises Custodian of Collateral and Security
Agreement”. Collateral under an off-premises
arrangement can secure an advance for up to 21
calendar days. It can secure subsequent ad­
vances if before each there is a period of at
least 7 calendar days in which it is released from
the Security Agreement or in which no credit is
outstanding to the borrowing bank.

Section 4, PREREQUISITES FOR
BORROWING
4.00 Borrow ing resolution

A certified copy of a resolution adopted by a
member bank’s board of directors authorizing
designated officers to execute agreements with
us and to borrow on its behalf from us must be
on file with us in order for any member bank to
obtain credit accommodations. Our Form BD-1
Rev. should be used for this purpose. Borrowing
resolutions filed with us remain in effect until
canceled or superseded by a new resolution.
4.05 Filing of signatures

BULLETIN 2

An officer authorized to borrow must have his
signature filed with this Bank on a signature
card, Form AC-150, before he is authorized to
sign any documents in connection with borrow­
ing.
4.10 Continuing lending agreem ent

In general, we will make advances to a member
bank pursuant to a continuing lending agree­
ment (our Form LD-176) to be executed by an
officer authorized to borrow, and such advances
pursuant to such agreement will be evidenced
by an advice of credit transmitted to the member
bank at the time of the advance, specifying the
amount and maturity of the advance. However,
we reserve the right in any case to require the
execution by a member bank of a promissory
note with respect to a particular advance. Such
a note must be signed by an officer authorized to
borrow. The continuing lending agreement re­
mains in effect until canceled by either party by
notice in writing to the other; however, can­
cellation does not affect loan transactions made
previously.
Reference: 1.50 and 4.05 of this bulletin.

Section 5, SECTION 13 ADVANCES
5.00 D escription

We may make advances to a member bank,
pursuant to section 13 of the Act, for periods
not exceeding 90 days,** on the security of obli­
gations of, or fully guaranteed by, the United
States or any agency of the United States (see
Supplement B). Also, we may make advances to
a member bank, pursuant to section 13 of the
Act, for periods not exceeding 90 days,** on the
security of any paper eligible for discount or for
purchase by the Reserve Banks under provisions
of the Act (eligible paper).
5.05 Borrow ing request

In general, we do not require that a request for
an advance be accompanied by a written appli­
cation, and any such request may be made by
letter, wire, or telephone by an officer authorized
to borrow. However, we reserve the right to re­
quire the submission of a written application.
Each request for an advance must specify the
amount and maturity of the requested advance

‘ Louisiana law precludes use of off-premises collateral arrangements.
**It is expected, however, that advances normally will be for shorter periods unless made for seasonal or emergency
reasons.

BULLETIN 2

FEDERAL RESERVE B A N K OF DALLAS

and the collateral offered as security, and in the
event such collateral is not already held by us,
the manner in which such collateral will be
placed in our possession or under our control.
R e fe re n c e : 4.05 of this bulletin.
5.13 C ollateral security

Collateral offered as security for any advance,
in addition to meeting requirements of the con­
tinuing lending agreement, must be acceptable
to us; must be endorsed or assigned by the mem­
ber bank (except in the case of bearer paper);
and must be in such form, or accompanied by
such documents, that it may be readily trans­
ferred to us without further action by the mem­
ber bank.
R e fe re n c e : 1.00 and sections 8 and 9 of this
bulletin.
5.15 C ollateral m ust have adequate m aturity

Collateral should not mature earlier than the
date on which the borrowing matures (except
collateral which is to be exchanged for similar
collateral, with our advance agreement, before
the maturity of the borrowing).
5.20 R elease of collateral

Unless the borrowing bank requests otherwise,
we release collateral immediately following pay­
ment of the related borrowing. All paper held as
collateral will be returned to the borrowing bank
and securities will be held by us in safekeeping
subject to the order of the borrowing bank.
5.25 A dvances due on Saturdays, Sundays, or
holidays

If an advance is agreed to fall due on one of
our nonbanking days, the due date will be
changed so that the advance will mature on our
next banking day.
R e f e r e n c e : Supplem ent A to Bulletin 1, contain­
ing our nonbanking days.

Section 6, SECTION 10[b) ADVANCES
6.00 D escription

We may make advances to a member bank,
pursuant to section 10(b) of the Act, for periods
not to exceed four months,* secured to our satis­
faction, whether or not the collateral meets the

requirements of 5.00 above. However, the rate
on such advances must be at least V 2 of 1 per­
cent higher than the highest rate applicable to
discounts of or advances on eligible paper. Pro­
vided, however, advances under this section,
when secured by mortgages on one-to-four fam­
ily residential property, shall be at a rate equal
to the lowest rate charged for borrowing.
6.05 C ollateral types

Among the types of collateral which may be
acceptable for a section 10(b) advance are those
listed below:
(1) Paper which would be eligible, except for its
maturity, at the unpaid principal amount.
(2) Paper secured by stock and complying with
Regulation U at the unpaid principal amount.
(3) Obligations insured under Title I or Title II
of the National Housing Act at the unpaid prin­
cipal amount.
(4) Long-term general obligation bonds, revenue
bonds, notes, and warrants of any state or politi­
cal subdivision thereof (other than those re­
ferred to in Supplement B).
In addition, when in our judgment circumstances
make it advisable, we may accept as security for
a section 10(b) advance any assets other than
those set forth above which we find acceptable.
6.10 Procedure

The procedure for obtaining a section 10(b) ad­
vance is identical to that for other advances (see
section 5). In addition, form BD-29 should be sub­
mitted when the collateral is paper to be held
by us, and form BD-59 should be submitted
when the collateral is paper or municipal se­
curities to be held under an off-premises ar­
rangement (see 3.35).

Section 7, DISCOUNTS
7.00 D escription

We may discount custom ers’ paper of a member
bank pursuant to sections 13 and 13(a) of the
Act, that meets the “eligibility” requirements set
forth in section 201.4 of Regulation A (eligible
paper). Banks have generally found it more con­
venient to use eligible paper as collateral for a
section 13 advance, rather than have it dis­
counted.

*It is expected, however, that advances normally will be for shorter periods unless made for seasonal or emergency
reasons.

FEDERAL RESERVE B A N K OF DALLAS

7.05 Procedure

Any member bank desiring to discount paper
with us, as indicated in 7.00 above, should con­
sult us regarding the procedure to be followed.
R e fe r e n c e : section 9 for operating details with
respect to eligible paper.

Section 3, SECURITIES AS
COLLATERAL
8.00 B ook -entry T reasury secu rities

In a cco rd a n ce w ith S e ctio n 306 .1 1 7 (a ) of
S u b p art 0 o f T reasu ry D epartm ent C ircu lar
No. 300 and the corresponding section of Agency
regulations, this Bank, as fiscal agent of the
United States, maintains as “book-entry securi­
ties,” transferable Treasury or Agency securities
deposited as collateral for advances by this
Bank. Notwithstanding the application of the
book-entry procedures, this Bank in its indi­
vidual capacity shall continue to maintain ap­
propriate accounts evidencing such deposits.
Transferable Treasury or Agency securities on
deposit or hereafter deposited for such purpose
will be converted into book-entry form and
maintained in a book-entry collateral account in
accordance with the provisions of our current
Bulletin 14, “Book-Entry Securites,” and in such
event such securities will be handled pursuant
to the terms and conditions of that circular,
n otw ith stan d in g any in c o n sis te n t p ro v isio n s
herein.
8.05 Secu rities held elsew here

Under certain conditions, securities offered as
collateral may be held elsewhere than at this
Bank and should be handled in the following
manner:
(1) If held by an approved custodian bank, ar­
rangements may be made for us to accept a
custody receipt (see 8.10 for procedure).
(2) If held in a correspondent bank in a Federal
Reserve office city outside this district, they may
be delivered to the Federal Reserve office in that
city. The procedure for this will be supplied on
request and should be initiated early in the
morning on the day the advance is needed.
(3) If the borrowing bank is approved to hold
collateral under an off-premises arrangement
(see 3.35), securities consisting of Group I mu­
nicipal securities may be retained by the bor­
rowing bank pursuant to that arrangement. Form
BD-59 must be executed in connection with such
offering.

BULLETIN 2

(4) In all other cases the securities should be
delivered to us.
8.10 Secu rities held by an approved custodian
b ank

Supplement C to this bulletin lists custodian
banks that have agreed to hold collateral for us.
The borrowing bank should telephone and in­
struct the custodian bank to hold the securities
subject to our order and for the account of the
borrowing bank. The name of the individual
contacted at the custodian bank should be fur­
nished us in order that we may confirm that the
securities are held as collateral. The borrowing
bank should execute a Pledge Agreement Form
(LD-168X), though when necessary the agree­
ment may be obtained after the funds are ad­
van ced . W hen the se cu ritie s are no longer
pledged, we will instruct the custodian bank to
release them and hold them in free safekeeping.
8.15 Sim plified description in certain cases

W hen o b lig atio n s pledged as co lla te ra l are
regular bearer securites held in custody with us
or book-entry Treasury securities on our books,
the borrowing bank need only advise us of
the description of the securities and the number
of the custody receipt or advice of deposit.

Section 9, PAPER
9.00 A pproval o f paper

Paper offered to secure an advance should be
submitted prior to actual need to allow time for
processing and approval by our Discount Com­
mittee. Paper which has been so approved will
be accepted at face value and held in abeyance
pending a request for credit. The offering should
be listed on one of the following forms:
(1) Form BD-29, to be used when the paper is
to be held by us. (In certain cases subcollateral
supporting the paper may continue to be held
by the offering bank.)
(2) Form BD-59, to be used when the paper is
to be held by the offering bank (see 3.35).
If paper is not submitted in advance of actual
need, we have the option of assigning a collateral
value of less than 100 percent pending its ap­
proval. If such paper is ultimately approved by
the Discount Committee, it can thereafter be
utilized at 100 percent of its face value; but if
it is not so approved, the assigned collateral
value will be charged to the borrowing bank’s

BULLETIN 2

FEDERAL RESERVE B A N K OF DALLAS

reserve account unless acceptable substitute col­
lateral is promptly provided.
R e fe re n c e : T h e reverse side of form BD-29 for
detailed information as to the preparation and
submission of an offering.
9.01 Loan participations

Loan participations which clearly reflect the pur­
chase of a portion of an obligation by a member
bank from the original lender may be used as
collateral if we find them acceptable. Loan par­
ticipations containing the following provisions
will not be acceptable:
— Payment of the participation (or the
underlying loan) is guaranteed by the
lender.
— The participation is to be repaid on
a schedule different from that of the
underlying loan.
— Interest rates on the participation are
substantially different from the rates
applicable to the underlying loan.
— The original lender is obligated to re­
purchase the participation, (a right of
the lender to repurchase, which is com­
mon in participations, is not such an
obligation.)
If the underlying obligation of the borrower to
the original lender is eligible, a participation in
that obligation will be eligible. Loan participa­
tions offered should be listed on form BD-29 if
they are to be held by us, or on form BD-59 if
they are to be held by the offering bank under
an off-premises collateral arrangement (see 3.35).
9.05 Bankers’ accep tan ces
If a banker’s acceptance as drawn does not
clearly disclose the character of the underlying
transaction on its face, evidence of eligibility
may consist of a stamp or certificate affixed by
the acceptor in one of the following standard
certificate forms:
DOMESTIC SHIPMENTS
At time of acceptance, this bill was ac­
companied by shipping documents evi­
d encing the d o m estic shipm ent of
(name of commodity) from (point of
shipment) to (place of destination).
(Name of Acceptor)

IM P O R T AND E X P O R T TR A N SA C T IO N S

The transaction which gives rise to this
instrument is the (importation or expor­
tation) of (name of commodity] from
(point of shipment) to (place of desti­
nation).
(Name of Acceptor)
W A R EH O U SE SECU RED CRED IT

This bill was secured at the time of
acceptance by independent warehouse,
terminal, or other similar receipt con­
veying security title to (name of readily
marketable staple) stored in (country
where stored).
(Name of Acceptor)
9.10 C ollection of paper

Paper which has been discounted or pledged as
collateral will be furnished to the borrowing
bank, in trust, in advance of maturity to permit
collection (see also section 3.20 of this bulletin).
9.15 Demand paper

Eligible paper in the form of demand notes is
acceptable for discount or to secure advances.
However, demand paper cannot be accepted if
offered more than a reasonable time after issue,
if dishonored after demand for payment, or if
otherwise overdue. Subject to the above restric­
tions, or unless limited by facts which establish
an earlier payment date:
(1) Commercial or industrial demand paper may
be accepted for periods up to 90 days from the
date of pledge or discount.
(2) Agricultural demand paper may be dis­
counted for periods up to 9 months, or accepted
as collateral to a borrowing bank’s note having
a maturity not in excess of 90 days.
9.20 Fin an cial statem ents

In connection with any advance or discount,
financial statements, including complete sched­
ules of important items, should be submitted
with all commercial or industrial paper regard­
less of amount and should be submitted with
agricultural paper in the amount of $1,000 or
over. Financial statements of endorsers or guar­
antors, if any, should also be submitted. We
reserve the right to require a recent balance
sheet and profit and loss statement of any obli­

BULLETIN 2

FEDERAL RESERVE B A N K OF DALLAS

gor on paper offered as collateral for an advance
or for discount, and such other reports and
statements as we may deem desirable.*
If more current financial statements or other
pertinent data should come into the possession
of the member bank during the time approved
paper remains in our custody or remains sub­
ject to an off-premises custody arrangement (see
3.35), we request that such information be sup­
plied to us promptly. We will return or other­
wise remove from collateral status all paper not
supported by a current financial statement; for
this purpose, a financial statement will be con­
sidered noncurrent 18 months after its date, but
in appropriate circumstances it may be consid­
ered noncurrent earlier than that.
9.25 Fin an cial statem ents — originals or copies

Financial statements should be originals or
copies of originals held in the files of the bor­
rowing bank. Financial statements become the
property of this Bank and are not returned;
th e re fo re , w hen a borrow ing ban k subm its
original financial statements, it should retain
copies for its files. If copies (other than photo­
copies) are furnished, they should bear the fol­
lowing certification signed by an officer autho­
rized to borrow:
This is a true copy of the original signed
financial statement held in our files.
9.30 Form of financial statem ents, form s
available

Financial statements need not be in any special
form but should consist of a complete and
reasonably detailed balance sheet, profit and
loss statement, and reconciliation of net worth.
W e may request additional information when
deemed desirable for a better understanding of
the financial condition and operation of the
obligor. W e have prepared th ree form s fo r
optional use by member banks in this connec­
tion, and we supply them free of charge to
member banks. They are:
(1) Form C-5, financial statement for farmers
and ranchers.
(2) Form C-6, financial statement for commercial

borrowers.
(3) Form C-7, for comparative posting of five
years of financial data on the borrower.
9.35 Endorsem ent

Paper must be endorsed, by or on behalf of the
holder, on the back of the instrument. The en­
dorsement should read:
Pay to the order of Federal Reserve Bank of
Dallas
(Name of borrowing bank and location)
(Manually signed by an officer authorized to
borrow)
9.40 Insurance

When applicable, insurance policies covering
collateral should accompany paper and should
have riders attached making loss payable to the
member bank as its interest may appear.
9.45 Secured paper

The borrowing bank should see that copies of
security agreements or similar instruments ac­
company secured paper. Evidence of compliance
with the appropriate statutes covering the crea­
tion and perfection of security interests and
other liens should also be provided.
9.50 W arehou se receipts

If paper is secured by warehouse receipts, the
paper will not be acceptable as collateral unless
the warehouse receipts meet the following re­
quirements:
(1) They must be negotiable and endorsed when­
ever endorsement is necessary to pass title.
(2) T h e w arehou sem an issu in g the rece ip t
should be entirely independent of the customer
pledging such receipt, and the warehouseman
must not have any financial interest in the goods
described in the receipt, except to the extent of
the usual lien for storage charges, etc.

Section 10, CONTRACT
Each member bank applying to us for an ad­
vance or discount shall be deemed by such
action to have agreed to all of the terms and
conditions set forth in this bulletin and in Regu­
lation A.

‘ Under certain conditions, the requirement for a financialstatement may be waived.

FEDERAL RESERVE B A N K OF DALLAS

BULLETIN 2

Supplement B
ELIGIBILITY OF SECURITIES
B -1 .00 Eligible U .S. agency secu rities

Direct obligations of, and obligations fully guar­
anteed as to principal and interest by, agencies
of the United States Government, are eligible
to secure advances at the discount rate. The
following are the principal agency obligations
now eligible as collateral for such advances:
(1) Federal Intermediate Credit Bank deben­
tures.
(2) Federal Home Loan Bank notes and bonds.
(3) Federal Land Bank bonds.
(4) Bank for Cooperatives debentures.
(5) F e d e ra l N atio n al M ortgage A sso cia tio n
notes, debentures, and guaranteed certificates of
participation.
(6) Obligations of or fully guaranteed by the
Government National Mortgage Association.
(7) M erchant Marine bonds.
(8) Export-Import Bank notes and guaranteed
participation certificates.*
(9) F arm ers
notes.*

Home A d m in istratio n insu red

(10) Notes fully guaranteed as to principal and
interest by the Small Business Administration.*
(11) Federal
tures.

Housing Administration

deben­

(12) District of Columbia Armory Board bonds.
(13) Tennessee Valley Authority bonds and
notes.
(14) Bonds and notes of local urban renewal or
public housing agencies fully supported as to
principal and interest by the full faith and credit
of the United States pursuant to section 302 of
the Housing Act of 1961 (42 U.S.C. 1421(a)(c),
and 1452(c)).
(15) Commodity Credit Corporation certificates
of interest in a price-support loan pool conform­
ing with, and assigned in conformity with, agree­
‘ Form BD-29 is required with these obligations.

m ents, in stru ctio n s, and reg u latio n s o f the
Commodity Credit Corporation as to form and
security.
(16) Federal Home Loan Mortgage Corporation
notes, debentures, and guaranteed certificates of
participation.
(17) United States Postal Service obligations.
(18) Participation certificates evidencing undi­
vided interests in purchase contracts entered
into by the General Services Administration.
(19) Obligations entered into by the Secretary
of Health, Education, and W elfare under the
Public Health Service Act, as amended by the
Medical Facilities Construction and Moderniza­
tion Amendments of 1970.
(20) Obligations guaranteed by the Overseas
Private Investment Corporation pursuant to the
provisions of the Foreign Assistance A ct of
1961, as amended.
(21) Federal Financing Bank bills.
NOTE: Nothing less than a full guarantee of
principal and interest by a federal agency makes
an obligation eligible. For example, mortgage
loans insured by the Federal Housing Adminis­
tration are not eligible since the insurance con­
tract is not equivalent to an unconditional guar­
antee and does not fully cover interest payable
on the loan. Obligations of international institu­
tions, such as the Inter-American Development
Bank and the International Bank for Reconstruc­
tion and Development also are not eligible, since
such institutions are not agencies of the United
States.
B -2.00 Eligible short-term m unicipal w arran ts
and sim ilar secu rities

Securities of the following types may be used as
collateral for a section 13 advance at the dis­
count rate:
Bills, notes, revenue bonds, and warrants with a
maturity from date of purchase of not exceeding
six months, issued in anticipation of the collec­
tion of taxes or in anticipation of the receipt of
assured revenues by any state, county, district,
political subdivision, or municipality in the
continental United States, including irrigation,
drainage, and reclamation districts.

FEDERAL RESERVE B A N K OF DALLAS

In determining the eligibilty of such obligations
as collateral, compliance with the requirements
of Regulation E is not necessary; but this Bank
will satisfy itself that sufficient tax or other
assured revenues earmarked for payment of
such obligations will be available for that pur­
pose at maturity, or within six months from the
date of the advance if no maturity is stated.
Payments due from federal, state, or other gov­
ernmental units, in our discretion, may be re­
garded as “other assured revenues” ; but neither

BULLETIN 2

the proceeds of a prospective issue of securities
nor future tolls, rents, or similar collections for
the voluntary use of government property for
non-governmental purposes will normally be so
regarded. Obligations with original maturity ex­
ceeding one year would not ordinarily be selfliquidating as contemplated by the statute, un­
less at the time of issue provision is made for
a redemption or sinking fund that will be suffi­
cient to pay such obligations at maturity.

FEDERAL RESERVE B A N K OF DALLAS

Supplement C
APPROVED CUSTODIAN BANKS
The following custodian banks have agreed to
hold collateral for a borrowing bank in this
district:
First National Bank, Albuquerque, New Mexico
First National Bank of Amarillo, Amarillo, Texas
Austin National Bank, Austin, Texas
City National Bank of Austin, Austin, Texas
Continental Illinois National Bank and Trust
Company, Chicago, Illinois
The First National Bank of Chicago, Chicago,
Illinois
Corpus Christi National Bank, Corpus Christi,
Texas
Citizens National Bank, Dallas, Texas
First City Bank, Dallas, Texas
First National Bank in Dallas, Dallas, Texas
Mercantile National Bank at Dallas, Dallas,
Texas
National Bank of Commerce, Dallas, Texas
Republic National Bank of Dallas, Dallas, Texas

BULLETIN 2

Houston National Bank, Houston, Texas
Texas Commerce Bank, N A ., Houston, Texas
First National Bank in Little Rock, Little Rock,
Arkansas
First National Bank at Lubbock, Lubbock, Texas
The First National Bank of Midland, Midland,
Texas
Whitney National Bank, New Orleans, Louisiana
The Bank of New York, New York, New York
Bankers Trust Company, New York, New York
The Chase Manhattan Bank, N.A., New York,
New York
Chemical Bank, New York, New York
First National City Bank, New York, New York
Manufacturers Hanover Trust Company, New
York, New York
Morgan Guaranty Trust Company, New York,
New York
Texas Commerce Bank, N.A., Houston, Texas
(New York Office)
San Angelo National Bank, San Angelo, Texas
First National Bank, St. Louis, Missouri

El Paso National Bank, El Paso, Texas

The Alamo National Bank of San Antonio, San
Antonio, Texas

The State National Bank of El Paso, El Paso,
Texas

Bexar County National Bank, San Antonio,
Texas

Continental National Bank of Fort Worth, Fort
Worth, Texas

Frost National Bank, San Antonio, Texas

The First National Bank of Fort Worth, Fort
Worth, Texas
Fort Worth National Bank, Fort Worth, Texas
Bank of the Southwest, N.A., Houston, Texas
First City National Bank of Houston, Houston,
Texas

National Bank of Commerce of San Antonio,
San Antonio, Texas
Wells Fargo Bank, N.A., San Francisco, Cali­
fornia
First National Bank & Trust Company, Tulsa,
Oklahoma
The First National Bank of Waco, Waco, Texas


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102