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F ederal Reserve



Dallas, Texas, July 15,1964


To All Member Banks in the
Eleventh Federal Reserve District:
There follows the text of a statement released by the Board of Governors of the
Federal Reserve System regarding investments by member banks in stock of foreign
Question has arisen whether member banks may directly acquire and
hold stock of foreign banks as a means of conducting their overseas operation.
In the opinion of the Board, it is clear th at such direct acquisition and
holding by member banks of stock of foreign banks is not permissible under
present law. State member banks are made subject by Section 9 of the Federal
Reserve Act (12 U.S.C. 335) to the same limitations and conditions with respect
to the purchasing and holding of stock as are applicable in the case of national
banks under Section 5136 of the Revised Statutes (12 U.S.C. 24). Under the lastmentioned section, a national bank is prohibited from purchasing for its own
account any shares of stock of any corporation except as provided in th at section
or “otherwise permitted by law.” There is no provision in Section 5136 or any
other provision of law permitting the purchase by national banks of stock of
foreign banks.
It may be noted that, under Section 25 of the Federal Reserve Act (12
U.S.C. 601) and the provision of Section 9 of the Act previously mentioned,
member banks are permitted, subject to approval of the Board of Governors and
regulations prescribed by the Board, to acquire stock of corporations chartered
under Federal or State law th a t are principally engaged in international or
foreign banking. Through such intermediate subsidiaries, a member bank may
indirectly acquire and hold the stock of foreign banks.
Yours very truly,

Watrous H. Irons

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