View PDF

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

FEDERAL RESERVE BANK
OF DALLAS

April 26, 1928

NEW CLAYTON ACT REGULATION

To the Member Bank Addressed:

There is enclosed for your information a copy of the Act of March 9,
1928, amending Section 8 of the Clayton Anti-trust Act so as to broaden
the powers of the Federal Reserve Board in the m atter of granting per­
mits for interlocking bank directorates.

Yours very truly,

Federal Reserve Agent

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

INTERLOCKING BANK DIRECTORATES
UNDER THE CLAYTON ACT
REGULATIONS
OF THE FEDERAL RESERVE BOARD
AND

TEXT OF SECTION 8 OF
CLAYTON ACT

MARCH, 1928

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON
1928

FEDERAL RESERVE BOARD
REGULATION L, SECOND SERIES OF 1928
(Superseding Regulation L of 1928)

INTERLOCKING BANK DIRECTORATES UNDER THE
CLAYTON ACT
SECTION I. DEFINITIONS

Within the meaning of this regulation—
The term “ bank ” shall include any bank, banking association, or
trust company organized or operating under the laws of the United
States or of any State thereof.
The term “ national bank ” shall be construed to apply not only to
national banking associations but also to banks, banking associations,
and trust companies organized or operating under the laws of the
United States, including all banks and trust companies doing business
in the District of Columbia, regardless of the sources of their charters.
The term “ resources ” shall be construed to mean an amount equal
to the sum of the deposits, capital, surplus, and undivided profits.
The term “ State bank ” shall include any bank, banking associa­
tion, or trust company incorporated under State law.
The term “ private banker ” shall apply to any unincorporated
individual engaging in one or more phases of the banking business
as that term is generally understood and to any member of an
unincorporated firm engaging in such business.
The term “ Edge corporation ” shall mean any corporation organ­
ized under the provisions of section 25 (a) of the Federal reserve act,
as amended.
The term “ city of over 200,000 inhabitants ” includes any city,
incorporated town, or village of more than 200,000 inhabitants, as
shown by the last preceding decennial census of the United States.
Any bank located anywhere within the corporate limits of such city
is located in a city of over 200,000 inhabitants within the meaning of
the Clayton Act, even though it is located in a suburb or an outlying
district at some distance from the principal part of the city.
96585°— 28

( 2)

3
SECTION n . PRO H IBITIO NS OF C LA YTO N ACT

Under section 8 of the Clayton Antitrust Act—
(1) No person who is a director or other officer or employee of
a national bank having resources aggregating more than
$5,000,000 can legally serve at the same time as director, officer,
or employee of any other national bank, regardless of its location.
(2) No person who is a director in a State bank or trust com­
pany having resources aggregating more than $5,000,000 or who
is a private banker having resources aggregating more than
$5,000,000 can legally serve at the same time as director of any
national bank, regardless of its location.
(3) No person can legally be a director, officer, or employee of
a national bank located in a city of more than 200,000 inhabit­
ants who is at the same time a private banker in the same city
or a director, officer, or employee of any other bank (State
or national) located in the same city, regardless of the size of
such bank.
The eligibility of a director, officer, or employee under the fore­
going provisions is determined by the average amount of deposits,
capital, surplus, and undivided profits as shown in the official state­
ments of such bank, banking association, or trust company filed as
provided by law during the fiscal year next preceding the date set
for the annual election of directors, and when a director, officer, or
employee has been elected or selected in accordance with the pro­
visions of the Clayton Act it is lawful for him to continue as such
for one year thereafter under said election or employment.
When any person elected or chosen as a director, officer, or em­
ployee of any bank is eligible at the time of his election or selection
to act for such bank in such capacity his eligibility to act in such
capacity is not affected by reason of any change in the affairs of
such bank from whatsoever cause until the expiration of one year
from the date of his election or employment.
SECTION III. EXCEPTIONS

The provisions of section 8 of the Clayton Act—
(1) Do not apply to mutual savings banks not having a
capital stock represented by shares.
(2) Do not prohibit a person from being at the same time a
director, officer, or employee of a national bank and not more
than one other national bank, State bank, or trust company,
where the entire capital stock of one is owned by the stock­
holders of the other.

4

(3) Do not prohibit a person from being at the same time a
class A director of a Federal reserve bank and also an officer or
director, or both an officer and a director, in one member bank.
(4) Do not prohibit a person who is serving as director, officer,
or employee of a national bank, even though it has resources
aggregating over $5,000,000, from serving at the same time as
director, officer, or employee of any number of State banks and
trust companies, provided such State institutions are not located
in the same city of over 200,000 inhabitants as the national bank
and do not have resources aggregating in the case of any one
bank more than $5,000,000.
(5) Do not prohibit a person from serving at the same time
as director, officer, or employee of any number of national banks,
provided no two of them are located in the same city of over
200.000 inhabitants and no one of them has resources aggregat­
ing over $5,000,000.
(6) Do not prohibit a person who is not a director, officer, or
employee of any national bank from serving at the same time
as officer, director, or employee of any number of State banks
or trust companies, regardless of their locations and resources.
(7) Do not prohibit a person who is an officer or employee
but not a director of a State bank from serving as director,
officer, or employee of a national bank, even though either or
both of such banks have resources aggregating over $5,000,000,
provided both banks are not located in the same city of over
200.000 inhabitants.
(8) Do not prohibit a person who is an officer or employee
but not a director of a national bank from serving at the same
time as director, officer, or employee of a State bank, even though
either or both of such banks have resources aggregating over
$5,000,000, provided both banks are not located in the same city
of over 200,000 inhabitants.
(9) Do not prohibit a private banker or an officer, director,
or employee of any bank or a class A director of a Federal
reserve bank from being at the same time an officer, director,
or employee of not more than two other banks within the pro­
hibitions of the Clayton Act, if there is in force a permit there­
for issued by the Federal Reserve Board.
Exceptions cumulative.—The above exceptions are cumulative.
SECTION IV. PERMISSION OF THE FEDERAL RESERVE BOARD

{a) In general.—Section 8 of the Clayton Antitrust Act, as amended
by the acts of May 15, 1916, May 26, 1920, and March 9, 1928,
authorizes the Federal Reserve Board to permit any private banker
or any officer, director, or employee of any bank, banking association,

5

or trust company, or any class A director of a Federal reserve bank
to serve as director, officer, or employee of not more than two other
banks, banking associations, or trust companies coming within the
prohibitions of the Clayton Act, if in the judgment of the Federal
Reserve Board it is not incompatible with the public interest.
(b) When obtained.—Inasmuch as this exception to the prohibitions
of the Clayton Act applies only when “ there is in force a permit
therefor issued by the Federal Reserve Board,” it is a violation of
the law to serve two or more banks in the prohibited classes before
such a permit has been obtained. A permit should be obtained,
therefore, before becoming an officer, director, or employee of more
than one bank in the prohibited classes. It may be procured before
the person applying therefor has been elected as director or appointed
an officer or employee of any bank in the prohibited classes.
( o)
Applications for permission.—A person wishing to obtain a per­
mit from the Federal Reserve Board to serve banks coming within the
prohibitions of the Clayton Act should—
(1) Make formal application on F. R. B. Form 94, or, if a
private banker, on F. R. B. Form 94d. Each of these forms is
made a part of this regulation.
(2) Obtain from each of the banks involved a statement on
F. R. B. Form 94a, which is made a part of this regulation, show­
ing the character of its business, together with a copy of its last
published statement of condition, and, if a private banker, make
a statement on F. R. B. Form 94e showing the character of his
or his firm’s business.
(3) Forward all these papers to the Federal reserve agent of
his district, who will attach his recommendation on F. R. B.
Form 94b, which is made a part of this regulation, and forward
them in due course to the Federal Reserve Board.
(d) Compatibility with the public interest.—In determining whether
the issuance of such a permit would be compatible with the public
interest, the Federal Reserve Board will consider—
(1) Whether the banks involved are natural competitors;
(2) Whether their having the same directors, officers, or em­
ployees would tend to lessen competition or to restrict credit;
and
(3) Any other facts having a bearing upon the interest of the
public in such banks as affected by their having the same
directors, officers, or employees.
(e) Approval or disapproval.—As soon as an application is acted
upon by the board, the applicant will be advised of the action taken.
If the board approves the application, a formal permit to serve on
the banks involved will be issued to the applicant.
(/) Hearing.—If it appears to the board that it would be incompati­
ble with the public interest to grant such permit, the board will so

8

where the entire capital stock of one is owned by stockholders in
the other: And 'provided further, That nothing contained in this
section shall forbid a director of class A of a Federal reserve bank,
as defined in the Federal Reserve Act, from being an officer or
director, or both an officer and director, in one member bank: And
provided further, That nothing in this Act shall prohibit any private
banker from being an’officer, director, or employee of not more than
two banks, banking associations, or trust companies, or prohibit any
officer, director, or employee of any bank, banking association, or
trust company, or any class A director of a Federal reserve bank,
from being an officer, director, or employee of not more than two
other banks, banking associations, or trust companies, whether or­
ganized under the laws of the United States or any State, if in any
such case there is in force a permit therefor issued by the Federal
Reserve Board; and the Federal Reserve Board is authorized to
issue such permit if in its judgment it is not incompatible with the
public interest, and to revoke any such permit whenever it finds,
after reasonable notice and opportunity to be heard, that the public
interest requires its revocation.
The consent of the Federal Reserve Board may be procured be­
fore the person applying therefor has been elected as a class A direc­
tor of a Federal reserve bank or as a director of any member bank.
*
*
*
*
*
*
*
When any person elected or chosen as a director or officer or
selected as an employee of any bank or other corporation subject to
the provisions of this Act is eligible at the time of his election or
selection to act for such bank or other corporation in such capacity
his elegibility to act in such capacity shall not be affected and he shall
not become or be deemed amenable to any of the provisions hereof
by reason of any change in the affairs of such bank or other cor­
poration from whatsoever cause, whether specifically excepted by
any of the provisions hereof or not, until the expiration of one year
from the date of his election or employment.

o

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