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F ed er a l R eser ve Ba n k o f D a llas DALLAS. TEXAS 75222 Circular No. 70-305 December 31, 1970 To the Member Banks in the Eleventh Federal Reserve District: The Board of Governors of the Federal Reserve System amended Sections 201.2(c) and 201.4(a) of Regulation A, which related to advances and discounts by Federal Reserve Banks. The amendments are effective immediately; however, the new procedures will not be operational until February 4, 1971. The purpose of these amendments is to facilitate a simplifi cation of procedures with respect to extensions of Reserve Bank credit by elimination of regulatory language that implies that a formal written application must be submitted by a member bank in connection with each borrowing from a Reserve Bank and that a promissory note must be executed in connection with each such borrowing. The amendments are essentially of a procedural and technical nature and reflect no change in the Federal Reserve System's general credit and monetary policies. We will no longer require the execution of a promissory note (LD-90) by a member bank in connection with an advance from us. In lieu of the promissory note, one copy of the enclosed continuing lending agreement (Form LD-I7 6 ) should be executed by an officer authorized to borrow and returned to us. Also, we will no longer require that a request for an advance be accompanied by a written application (LD-77). However, we reserve the right in any case to require the execution by a member bank of a promissory note and a written application. An authorized officer of a member bank may make a request for an advance by telephone or letter. Each request for an advance must specify the amount and maturity of the requested advance, and the col lateral offered as security. Interest on advances and discounts will no longer be deducted from the face amount borrowed, but will be payable at the time of re payment. This means your reserve account will be credited for the full amount borrowed and when paid, your reserve account will be charged for the amount of borrowing plus accrued interest. These changes have been incorporated in the enclosed new Bulletin 2, "Loans". This new bulletin, to be effective February 4, 1971, should on that date be placed in the ring binder which has been previously furnished for keeping the new, larger size reprints of the Federal Reserve Regulations and Bulletins of this Bank. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - On the same date - February U, 1971 - the following bulletins of this Bank, together with any amendments, will be superseded by new Bulletin 2 , and should be removed from the binder: Bulletin No. 1, Rates for Discounts and Advances, December 1, 1970 Bulletin No. 2, Bankers' Acceptances, September 15, 1939 Bulletin No. 3? Discount or Purchase of Sight and Demand Drafts, September 15, 1939 Bulletin No. 12, Advances to and Discounts for Member Banks, July lU, 1966 The matter contained in superseded Bulletins 1, 2, and 12 is incorporated in the new Bulletin 2, "Loans". The material in superseded Bulletin No. 3? "Discount or Purchase of Sight and Demand Drafts", is felt to be obsolete, and is not being carried forward. You have previously received, under our Circular 70-307? dated December 22, 1970, a new Bulletin 1, General Provisions, which should also be inserted in your ring binder on February U, 1971? ajid which will be effective as of that date. The amendment to Regulation A forwarded with this circular should be inserted in your ring binder immediately, as it is presently in effect. Your cooperation in completing and returning the continuing lending agreement at your earliest convenience will enable us to start making advances under the new procedure on the effective date. If you have questions concerning the new procedure or desire ad ditional copies of the enclosures, please contact an officer at our head office or appropriate branch who is shown by our Directory to have responsi bility for the loan function. Yours very truly, P. E. Coldwell President Enclosures (U) 1 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ADVANCES AND DISCOUNTS BY FEDERAL RESERVE BANKS A M EN D M EN T TO REGULATION A Effective November 23, 1970, sections 201.2(c) and 201.4(a) are amended to read as follows: SECTION 201.2— ADVANCES TO MEMBER BANKS (c) Advances on other security under section 10(b) of the Federal Reserve Act. Any Federal Reserve Bank may make advances, under author ity of section 10(b) of the Federal Reserve Act, to any of its member banks if secured to the satis faction of such Federal Reserve Bank regardless of whether the collateral offered as security con forms to eligibility requirements under other provisions of this part. The rate on advances made under the provisions of this paragraph shall in no event be less than one-half of 1 percent per annum higher than the highest rate applicable to dis counts for member banks under the provisions of sections 13 and 13a of the Federal Reserve Act in effect at such Federal Reserve Bank. Such an advance must be repayable either (1) on a definite date not more than four months after the date of such advance, or (2) at the option of the Reserve Bank on or before a definite date not more than four months after the date of such advance. S E C T IO N 2 0 1 .4 — G E N E R A L R E Q U I R E MENTS AS TO ADVANCES AND DIS COUNTS (a) Representations by member banks. A mem ber bank requesting Reserve Bank credit shall be deemed to represent and guarantee (1) that it is not acting as the medium or agent of a nonmem ber bank in receiving credit from a Reserve Bank except in accordance with the provisions of this part, and (2) that, except as to credit granted under section 201.2(c), as long as the credit is outstanding no obligor on paper tendered as col lateral or for discount will be indebted to it in an amount exceeding the limitations in section 5200 of the Revised Statutes, which for this purpose shall be deemed to apply to State member as well as national banks. CONTINUING LENDING AGREEMENT REGARDING ADVANCES BY FEDERAL RESERVE BANK OF DALLAS 1. The undersigned member bank (hereafter called “ the member bank” ) promises to pay to the Federal Reserve Bank of Dallas (hereafter called “ the Reserve Bank” ) the amount of each advance made pursuant to this Agreement by the Reserve Bank to the member bank at the maturity date thereof, as such amount and maturity date are specified in an advice o f credit prepared and transmitted by the Reserve Bank to the member bank at the time of such advance, subject to all provi sions of this Agreement and to all applicable terms and conditions set forth in the Reserve Bank’ s Operating Bulletins, Regulation A o f the Board o f Governors of the Federal Reserve System, and the Federal Reserve Act. The member bank further promises to pay interest on each such advance at the rate and in the manner provided in the Reserve Bank’ s Operating Bulletins and Supplements thereto. 2. The member bank authorizes the Reserve Bank to charge the member bank’ s reserve account with the amount o f each advance and interest thereon at or after its maturity. 3. As security for the payment of each advance when due, the member bank pledges to the Reserve Bank the col lateral agreed upon by the member bank and the Reserve Bank. Such collateral is also pledged by the member bank as security for all other liabilities of such bank due or to become due to the Reserve Bank or which may be acquired by the Reserve Bank. 4. As further security for the payment of each advance, the Reserve Bank shall have a lien upon, or security in terest in, all property (tangible and intangible) of the member bank in the possession or under the control of the Reserve Bank, including but not limited to items in process o f collection and the proceeds thereof and any balance to the credit o f the member bank with the Reserve Bank. 5. Upon the request o f the Reserve Bank, the member bank w ill substitute collateral or pledge such additional collateral as the Reserve Bank may deem necessary for its protection. 6. In the event of nonpayment of any advance when due or upon failure of the member bank to comply with a re quest by the Reserve Bank for substitute or additional collateral, the Reserve Bank shall have all the rights of a secured creditor, including the right to sell all or any part of the collateral at public or private sale [without demand upon or no tice to the member bank (except such notice as may be required by applicable statute and may not be waived) and to become the purchaser o f the whole or any part of such collateral, free from any equity of redemption and from all other claims to the extent permitted by applicable statute. After deduction of all expenses, the proceeds o f such collateral may be applied by the Reserve Bank to the payment of such advance and of all other liabilities of the member bank to the Reserve Bank, and any surplus then remaining shall be paid to the member bank. 7. Any advance made pursuant to this Agreement shall become immediately due and payable, without demand or notice, upon (a) the failure of the member bank to perform any agreement hereunder or to pay any liability o f the member bank to the Reserve Bank when due; or (b) the insolvency of, or the appointment o f a receiver for, the member bank; or (c) the suspension or closing of the member bank, or the taking possession of its business, by any governmental authority. 8. Upon the happening o f any event described in paragraph 7 of this Agreement, the Reserve Bank shall have the right to set off against the amount of any advance any indebtness of the Reserve Bank to the member bank, whether or not due. (Name of member bank) (Address) By (Authorized officer) Date: L.D-176 12-70 BULLETIN 2 Loans FEDERAL RESERVE BANK OF DALLAS SCOPE T his bulletin sets forth the general term s and conditions under w h ic h w e m a y extend credit accom m od ation s to m em ber banks and the procedures to be fo llo w e d in connection w ith e x te n sio n s o f such accom m odations. A dditional inform ation, including statem ents concerning the p olicy b y w h ic h the “discount w in d o w ” is adm inistered, m ay be fou n d in R egulation A and the Federal R eserve A c t [see references in section 2 of this bulletin). Our current discount rate and our current rates on section 10(b) a d van ces and a d van ces to in dividuals, partnerships and corporations under the last paragraph o f sectio n 13 of the Fed eral R eserve A c t are fo u n d in S u pplem ent A to this bulletin. I FEDERAL RESERVE BANK OF DALLAS -------------------------------------------------------------- BULLETIN 2 TABLE OF CONTENTS S ec tio n 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 S ectio n 6, SECTIO N 10(b) A D V A N C E S 6.00 D escription 6.05 Collateral types 6.10 Procedure A cce p ta b le and acceptability A ct A d v a n ce B orrow and borrow ing Collateral D iscou n t D iscou n t rate Eligible and eligibility S ectio n 10(b) advance Sectio n 13 advance Officer authorized to borrow Paper R eference to Bulletin 1 S ectio n 7, D ISC O U N TS 7.00 D escription 7.05 Procedure S ectio n 8, SECURITIES A S COLLATERAL 8.00 8.05 8.10 8.15 B ook-entry T reasury securities R egistered securities Securities h eld else w h e re Securities h eld b y an approved custodian bank 8.20 Sim plified d escription in certain c ases Section 2, REFERENCES Section 3, GENERAL S ec tio n 9, PAPER 3.00 Kinds o f credit accom m odations 3.05 D isbursem ent o f funds and com putation o f interest 3.10 Inform ation required b y la w 3.15 Paym ent at m aturity and pre-paym ent 3.20 P aym en ts re c eiv e d on collateral by bor row ing banks 3.25 R en ew al 9.00 9.05 9.10 9.15 9.20 9.25 9.30 Section 4, PREREQUISITES FOR BORROWING 9.35 9.40 9.45 9.50 9.55 4.00 Borrow ing resolution 4.05 Filing of signatures 4.10 C ontinuing lending agreem ent Section 5, SECTION 13 ADVANCES 5.00 5.05 5.10 5.15 5.20 5.25 S ec tio n 10, CONTRACT D escription Borrow ing request C ollateral security Collateral m ust h ave adequate maturity R elease o f collateral A d v a n c e s due on Saturdays, S u ndays or holid ays S u p p lem en t A, R ATES FOR D ISC O U N T S A N D ADVANCES S u p p lem en t B, ELIGIBILITY OF SECURITIES S u p p lem en t C, APPR O V ED C U ST O D IA N BA N K S i 2-4-71 A p proval required B ankers’ a ccep tan ces C ollection o f paper D em and paper Financial statem ents Financial statem ents — originals or copies Form of financial statem ents, form s available E ndorsem ent Insurance Secured paper Security form s available W arehouse receipts FEDERAL RESERVE BANK OF DALLAS Section 1, DEFINITIONS 1.00 A ccep ta b le and a ccep tab ility “A c c e p ta b le ” and “accep tab ility” refer to the c r e d it q u a lit y o f p a p e r a n d o th e r c o lla t e r a l. A ccep ta b ility d ep en d s on the financial resp o n si bility o f makers, endorsers or guarantors, or on the security behind the obligation, or on all of these, as appropriate. W e determ ine to our o w n satisfaction the acceptability of paper and cer tain other collateral. 1.05 A ct “A c t ” m eans the Federal R eserve A ct. 1.10 A d v a n ce “A d v a n c e ” m ean s a borrow ing other than by d is count under section 13 or 10[b) of the A ct. A d va n c es are generally m ade under the Continuing Lending A greem ent Regarding A d v a n c e s by F ed eral R eserve Bank o f Dallas (Form LD-176). 1.15 B orrow and borrow ing “B orrow ” and “borrow in g” refer to a m em ber bank receiving an e x te n sio n of credit from this bank, w h eth er b y ad van ce or discount. 1.20 C ollateral “Collateral” refers to obligations in the form of securities or paper w h ic h a b orrow ing bank pled g es to secure an advance. and Regulation A for u se in co n n ectio n w ith a sectio n 13 advance or, in the case o f paper, for discount. 1.40 S ec tio n 10(b) a d va n ce “S ection 10(b) a d v a n c e” m eans an advance under sectio n 10(b) of the A c t at a rate not less than V 2 of 1 % over the discount rate. S uch an a d v an ce n eed not h a v e eligible collateral, but the collateral m ust n e v e rth e le ss be acceptable. 1.45 S ectio n 13 ad van ce “ S ection 13 a d v a n ce ” m eans an advan ce at the d iscou n t rate under sec tio n 13 of the A c t and secured by eligible collateral. 1.50 Officer authorized to borrow “Officer authorized to b or ro w ” m eans an officer of a m em ber bank currently holding one of the o f f i c e s w h i c h th e m e m b e r b a n k ’s b o r r o w in g resolution authorizes to borrow from this bank. R e fe re n c e : 4.05 o f this bulletin. 1.55 Paper “Paper” refers to n otes and sim ilar obligations of various obligors, u su ally custom ers of b o rrow ing banks. 1.60 R eferen ce to B ulletin 1 R eference: sec tio n s 5 an d 6 o f this bulletin. Several definitions, rules o f construction, and other p rovision s applicable to this bulletin are fou n d in our Bulletin 1, “General P r o v isio n s”, and are incorporated herein b y reference. 1.25 D isco u n t Section 2, REFERENCES “D isc o u n t” m eans an ex ten sio n of credit in w h ic h a m em ber bank d iscou n ts eligible paper. In a d d it io n to th e s p e c i f i c r e f e r e n c e s f o u n d throughout this bulletin, the fo llo w in g general referen ces are im portant to an understanding of b orrow ing transactions w ith this bank: 1.30 D iscou n t rate “D iscou n t rate” refers to the lo w e s t rate charged for borrowing. It is fixed b y our Board o f D irec tors subject to r e v ie w and determ ination of the B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e System . R eference: S u p p le m e n t A to this bulletin fo r the current discount rate. 1 BULLETIN 2 S ectio n 201.0 of R egulation A, containing general principles concerning the u se of Federal R eserve credit. Section 201.3 (j) of R egulation A , lim iting the am ount o f paper of one obligor w h ic h can be u sed in borrowing. 1.35 Eligible and elig ib ility Section 201.4 o f R egulation A, containing general requirem ents for a d v a n c e s and discounts. “E ligible” and “eligib ility” refer to obligations satisfyin g the applicable requirem ents o f the A c t Section 201.5 of R egulation A , im p osin g restric tions on the use o f paper acquired from a n o n FEDERAL RESERVE BANK OF DALLAS m em ber bank in co n n ectio n w ith borrow ing, e x c ep t w ith the p erm ission o f the Board o f G o v ernors (w h ich h as b een granted w ith resp ect to e lig i b l e p a p e r a c q u ir e d fr o m F e d e r a l I n t e r m ediate Credit Banks). The f o llo w in g portions o f the Act: se ctio n 4(8), section 9(13), sectio n 10(b), sectio n 12(2, 4, 5, 6, 7, 8, 10, 12 and 13), se c tio n 1 3 a (l, 2, and 4), sectio n 19(d), section 24(3). RS 5200, containing the in d e b te d n e ss lim it for one b orrow er from national banks, a lim it m ade applicable to borrow ing from this bank by s e c tion 201.3(j) o f R egulation A . (Note: for p u rposes of this statute, as applied to borrow ing from us, u n divided profits, capital n o te s and debentures do not con stitu te capital or surplus.) Section 3, GENERAL 3.00 K inds o f credit acco m m od a tio n s U n d e r p r o v i s i o n s o f th e A c t a n d s u b j e c t to R egulation A , and in the light of the general principles se t forth in the forew ord to that regu lation, w e are authorized to make credit a vail able to m em ber banks b y the fo llo w in g m eans: section 13 advan ces (see sectio n 5); se c tio n 10(b) a d van ces (see sectio n 6); and d iscou n tin g eligible paper (see sectio n 7). 3.05 D isb u rsem en t o f fu n d s and com putation of in terest If a request for credit is r ec eiv ed b y u s befo re 2:00 p.m. and the request is approved, the bor r ow in g m em ber bank w ill be given im m ediate credit in its reserve accou n t u nless the m em ber bank requests that credit be given on a sub seq u en t day. A t the tim e o f the advance, w e credit the full am ount of the advance to the reserve accou n t of the b orrow ing bank. Interest on an advan ce w ill be paya b le to u s at the tim e of rep aym en t of the ad van ce at the applicable rate indicated in Su p p lem en t A to this bulletin at the tim e the advance w a s m ade, e x c e p t that, if the rate is changed w h ile the advance is ou t standing, the n e w rate shall apply fo r the period after the date of su ch change. Interest w ill be com puted on a basis o f 365 d ays to the year. In com puting interest, w e include the date o f bor r ow ing and exclu d e the date o f paym ent. The sam e procedure w ill apply to the d isc o u n t o f BULLETIN 2 eligible paper, e x c e p t no consideration is given to unpaid in terest on d iscou n ted eligible paper. 3.10 Inform ation required b y la w W e are required b y la w to keep in form ed of the general character and am ount o f the loans and i n v e s t m e n t s o f m e m b e r b a n k s to a s c e r t a in w h eth er undue u se is being m ade o f bank credit for the sp ecu la tiv e carrying o f or trading in securities, real estate, or com m odities, or for any other purpose in c o n siste n t w ith the m aintenance of sound credit conditions. In con n ection w ith any advance or discount, w e reserve the right to require a current condition report of the b o r ro w ing m em ber bank, a recent balance sh e et and profit and lo ss statem en t of any obligor on paper offered as collateral for an ad van ce or for d is count, and such other reports and statem en ts as w e m ay d eem desirable. R e ference: se c tio n 201.0 of Regulation A ; 9.25, 9.30, a n d 9.35 o f th is bulletin. 3.15 P aym ent at m aturity and prepaym ent A b o r r o w in g p lu s a c c r u e d i n t e r e s t w i l l b e charged to the borrow ing b an k ’s reserve accou n t at maturity. The borrow ing bank, at its option, m ay prepay all or part o f any borrowing, and in such cases, the am ount paid p lu s accrued inter est w ill b e charged to the borrow ing b an k ’s reserve account. 3.20 P aym ents r eceiv ed on collateral by borrow ing b a n k s If a m em ber bank that has pledged or d is counted paper w ith us, or h as o th erw ise trans ferred collateral to us, rec eiv es any fu n d s in paym en t for such paper or other collateral w h ile it is so pledged, d iscounted, or transferred, the m em ber bank m u st im m ed iately advise us o f all such p aym ents. W h en there is an e x c e s s of collateral equal to or greater than the am ount o f such paym ent, w e w ill reduce the collateral value by the am ount o f the paym ent. In other c a s e s , w e w i l l c h a r g e th e b o r r o w in g b a n k ’s reserve accou n t in the am ount o f the p aym ent plus accrued interest thereon. Until w e take either of the ab o v e actions, as appropriate, such paym ent w ill be con sid ered as having b e en re c eived in trust for us. FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 3.25 Renewal Section 5, SECTION 13 ADVANCES A borrowing bank wishing to renew an advance should follow the same procedure necessary to obtain an original advance (see section 5 and section 6). 5.00 Description 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 obliga tions 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). Section 4, PREREQUISITES FOR BORROWING 4.00 Borrowing 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 cancelled or superseded by a new resolution. 5.05 Borrowing 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 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. 4.05 Filing of signatures 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 agreement Reference: 4.05 of this bulletin. 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 particular ad vances pursuant to such agreem ent will be evidenced by an advice of credit, transmitted to the member bank at the time of the particular 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 continu ing lending agreement remains in effect until cancelled by either party by notice in writing to the other; however, cancellation does not affect loan transactions made previously. 5.10 Collateral 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. Reference: 1.00 and sections 8 and 9 of this bulletin. *It is expected, however, that advances for adjustment purposes normally will be for shorter periods com mensurate with the period of time Federal Reserve credit is actually needed. Reference: 1.50 and 4.05 of this bulletin. 3 2- 4-71 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 5.15 C ollateral m u st h a v e adequate m aturity L o n g -te r m g e n e r a l o b lig a t io n bonds, revenue bonds, n o te s and w arrants o f any state or p oliti cal su b d ivision th ereof (other than those referred to in S u pplem ent B). Collateral sh o u ld n o t m ature earlier than the date on w h ic h the b orrow ing m atures (except collateral w h ic h is to be exch an ged for similar collateral, w ith our ad van ce agreem ent, before the m aturity o f the borrow ing). In addition, w h e n in our judgm ent circum stances m ake it advisable, w e m ay a ccep t as security for a section 10(b) advance any asse ts other than th o se set forth ab ove w h ic h w e find acceptable. 5.20 R elease o f collateral U n le ss the borrow ing bank requests otherw ise, w e release collateral im m ed iately fo llo w in g p a y m ent of the related borrow ing. A ll paper h eld as collateral w ill be returned to the borrow ing bank and securities w ill be h eld by us in s a fe keeping subject to the order of the borrow ing bank. 6.10 Procedure Procedure for obtaining a sectio n 10(b) advance is identical to that for other advan ces (see se c tion 5). In addition, Form BD-29 should be su b m itted w h e n the collateral is paper, secured or unsecured. 5.25 A d v a n c e s due o n Saturdays, S u n d ays or h o lid a y s Section 7, DISCOUNTS 7.00 D escrip tion If an a d van ce is agreed to fall due on one of our n onbankin g days, the due date w ill be changed so that the ad van ce w ill m ature on our n ex t banking day. W e m ay d iscou n t c u sto m er s’ paper o f a m em ber bank pursuant to sectio n 13 and 13(a) of the A ct, that m ee ts the “eligib ility” requirem ents set forth in sectio n 201.3 o f R egulation A (eligible paper). Banks h a v e generally fo und it more co n v en ien t to u se eligible paper as collateral fo r a section 13 advance, rather than h av e it d is counted. R eference: S u pplem ent A to Bulletin 1, con tain ing our n o n b a n k in g d a ys. Section 6, SECTION 10(b) ADVANCES 6.00 D escrip tio n 7.05 P rocedure W e m a y m ake adva n ces to a m em ber bank, pursuant to section 10(b) o f the A ct, for periods not to e x c e e d four m onths,* secured to our sa tis faction, w h e th er or n ot the collateral m eets the requirem ents o f 5.00 above. H ow ever, the rate on such a d van ces m ust be at le a st on e-h alf of 1 per cent higher than the h ig h est rate applicable to d iscou n ts of or a d van ces on eligible paper. A n y m em ber bank desiring to d iscou n t paper w ith us, as indicated in 7.00 above, should co n sult us regarding the procedure to be fo llo w e d . Reference: se c tio n 9 for o pe ra tin g deta ils w i th r e s p e c t to eligible paper. Section 8, SECURITIES AS COLLATERAL 6:05 C ollateral ty p es A m on g the typ es o f collateral w h ic h m a y be acceptable for a sectio n 10(b) advance are th o se listed b elo w : 8.00 B ook-entry Treasury secu rities In accordance w ith subpart O of Treasury D e partm ent Circular No. 300, this bank, as F iscal A gen t o f the U n ited States, m aintains as “bookentry T reasury se cu r ities” transferable T reasury securities d ep o sited as collateral for a d v a n c es Paper w h ic h w o u ld be eligible ex ce p t for its maturity, at the unpaid principal amount. Paper secured by sto c k and com plying w ith Regulation U, at the u npaid principal am ount. O bligations insured under Title I or Title II of the N ational H o u sin g A ct, at the unpaid principal amount. *It is expected, however, that advances normally will be for shorter periods commensurate with the period of time Federal Reserve credit is actually needed. 4 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 by this bank. T ransferable Treasury securities n o w on d eposit or hereafter d ep o sited for such purpose w ill be co n verted into book-entry form and d ep osited in a book-entry collateral account in accordance w ith the provision s of our cur r e n t b u lle t in e n t i t l e d “ B o o k - e n t r y T r e a s u r y S ecu rities”, and in such e v e n t such securities w ill be handled pursuant to the terms and co n ditions of that bulletin n otw ith stan d in g any in c o n sisten t p r o v isio n s herein. ish ed us in order that w e m ay confirm that the securities are h eld as collateral. T he borrow ing bank should e x e c u te a Pledge A greem en t Form (LD-168X], though w h e n n ec essa ry the agree m ent m ay be obtained after the fu n d s are ad v a n c e d . W h e n th e s e c u r i t i e s are n o lo n g e r pledged, w e w ill instruct the cu stod ian bank to release them and h o ld them in free safekeeping. 8.20 Sim plified d escrip tio n in certain c a se s W h e n o b li g a t i o n s p l e d g e d a s c o l l a t e r a l are regular bearer securities held in c u sto d y w ith us, or book-entry Treasury securities on our books, the borrow ing bank n e e d only ad v ise us of the d escription of the securities and the num ber of the cu sto d y receipt or advice of deposit. 8.05 R egistered secu rities R egistered U.S. securities should be a cc o m p anied by the appropriate Treasury D epartm ent form s properly execu ted . In this connection, reference should be m ade to Treasury Depart m ent Form PD1004 (pow er o f attorney], and Treasury D epartm ent Form PD1010 (authorizing resolution], and the instructions thereon. (The authorizing resolution on Form PD1010 m u st be in addition to the borrow ing resolution referred to in paragraph 4.00 of this bulletin.] Section 9, PAPER 9.00 A p p roval required Paper subm itted for d iscou n t or to secure an advan ce should be listed on our Form BD-29 and m u st be p ro c essed and approved b y our D is count Com m ittee b efore credit can be granted. H o w ever, credit for approved paper w ill be granted as of the date the paper w a s received, u n less w e are o th er w ise instructed. M any banks find it co n v en ien t to subm it paper for approval in advance, w ith instructions for the approved paper to b e held in ab eyan ce p en d in g p ossib le u se for borrow ing. 8.10 S ecu rities h eld elsew h ere U nder certain conditions, securities offered as collateral m ay be h eld else w h e re than at this bank and should b e handled in the fo llo w in g manner: (1] If h eld by an approved cu stodian bank, arrangem ents m ay be m ade for us to accep t a c u sto d y receipt (see 8.15 for procedure]. 9.05 B ankers’ acc e p ta n c e s (2] If held in a correspondent bank in a Federal R eserve office city ou tside this district, th ey may be d elivered to the Federal R eserve office in that city. The procedure for this w ill be supplied on request and should be initiated early in the m orning on the day the advance is n eeded. If a ban k er’s accep tan ce as draw n d o e s not clearly d isc lo se the character of the underlying transaction on its face, e v id e n ce of eligibility m ay c o n sist of a stam p or certificate affixed by the acceptor in one o f the fo llo w in g standard certificate forms: (3] In all other cases, the securities sh ou ld be d elivered to us. DOM ESTIC SHIPM ENTS A t tim e of acceptance, this bill w a s accom panied by shipping d ocu m en ts evid en cin g the d om estic shipm ent o f (name of com m odity] from (point of shipm ent] to (place o f destination). 8.15 S ecu rities h e ld b y an approved cu sto d ia n bank S u pplem ent C to this bulletin lists custodian banks that h a v e agreed to hold collateral for us. The borrow ing bank should telep h on e and in struct the cu stod ian bank to hold the securities subject to our order and for the accou n t o f the borrow ing bank. The nam e o f the individual contacted at the custodian bank should be furn (N am e o f A cceptor) IM PORT A N D EXPORT T R A N SA C T IO N S The transaction w h ic h g iv es rise to this instru m ent is the (im portation or exportation) of 5 2-4-71 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS (name o f com m odity) from (point o f shipm ent) to (place of destination). offered as collateral for an ad va n ce or for d is count, and su ch other reports and statem ents as w e m a y d eem desirable. (Nam e of A cceptor) 9.25 Financial statem en ts — originals or co p ies Financial statem en ts sh ou ld be originals or copies o f originals held in the files of the bor row ing bank. Financial statem ents becom e the property of this bank and are n ot returned; th e r e f o r e , w h e n a b o r r o w in g b a n k s u b m it s original financial statem ents, it should retain c opies for its files. If c o p ies (other than p h o to copies) are furnished, th ey should bear the f o l lo w in g certification signed by an officer author ized to borrow : W A R EH O U SE SECURED CREDIT This bill w a s secured at the tim e of accep tan ce by in d ep en d en t w areh ou se, terminal, or other similar receipt co n v e y in g secu rity title to (name of readily m arketable staple) stored in (country w h ere stored). (Nam e of A cceptor) 9.10 C ollectio n o f paper T his is a true copy o f the original signed 1 financial statem ent held in our files. J Paper w h ic h has b een d isco u n ted or pled ged as collateral w ill be fu rnished to the borrow ing bank, in trust, ten days in advance of maturity to p e r m it c o l l e c t i o n ( s e e a ls o 3 .2 0 o f t h is bulletin). 9.30 Form o f financial sta tem en ts, form s available Financial statem en ts n eed not be in any special form but should con sist of a com plete and r easonably detailed balance sheet, profit and lo ss statem ent, and reconciliation o f net worth. W e m ay req u est additional inform ation w h e n d eem ed desirable for a better understanding of the financial co n d itio n and operation of the o b lig o r . W e h a v e p r e p a r e d t h r e e f o r m s fo r optional u se b y m em ber banks in this co n n e c tion, and w e supply them free o f charge to m em ber banks. T h ey are; 9.15 D em and paper Eligible paper in the form o f dem and n o te s is acceptable for d iscou n t or to secure ad vances. H ow ever, dem and paper can n ot be accep ted if offered m ore than a reasonable time after issue, if d ish o n ored after dem and for paym ent, or if oth erw ise overdue. Subject to the a b ove restric tions, or u n le ss lim ited b y fa cts w h ic h establish an earlier p aym en t date: (1) Com m ercial or industrial dem and paper m ay be accep ted for periods up to 90 days from the date of pledge or discount. Form C-5, financial statem ent for farm ers and ranchers. (2) A g r ic u lt u r a l d e m a n d p a p e r m a y b e d i s counted for periods up to 9 m onths, or accepted as collateral to a b orrow ing bank’s n ote having a m aturity not in e x c e s s of 90 days. Form C-6, financial statem ent for com m ercial borrowers. 9.20 F inancial sta tem en ts 9.35 E ndorsem ent In co n n ectio n w ith any ad van ce or discount, financial statem ents, including com plete sc h e d ules of im portant item s, m u st be subm itted w ith all com m ercial or industrial paper regardless of am ount and sh ou ld be subm itted w ith agricul tural paper in the am ount of $1,000 or over. Financial statem ents of endorsers or guarantors, if any, should also b e subm itted. W e reserve the right to require a recent b alance sh eet and profit and lo ss statem ent o f any obligor on paper Paper m a y be endorsed b y the u se of an allonge so firmly affixed as to b e co m e a part o f the instrum ent. A ffixing the allonge b y glue w ill m e e t t h is t e s t ; h o w e v e r , t h e u s e o f p in s , staples, paper clips, or various form s of tape w ill not com ply. Form C-7, for com parative p ostin g of five years of financial data on the borrower. 9.40 Insurance W hen applicable, insurance p o licies covering collateral sh ou ld accom pany paper and should 6 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 the w a reh o u se receipts m eet the fo llo w in g re quirem ents: h ave riders attached m aking lo ss payable to the m em ber bank as its interest m ay appear. 9.45 Secu red paper (1) T h e y m u s t b e n e g o t i a b l e a n d e n d o r s e d w h e n e v e r en d orsem ent is n e ce ssa r y to pass title. The borrow ing bank should see that c o p ies of secu rity agreem ents or sim ilar instrum ents ac com p an y secured paper. E vid en ce of com pliance w ith the appropriate statutes covering the crea tion and p erfection of security interests and other lien s should also be provided, (2) T h e w a r e h o u s e m a n i s s u i n g th e r e c e ip t should be entirely in d ep en d en t of the custom er pledging such receipt, and the w areh ou sem an m ust n ot have any financial interest in the goods d escribed in the receipt excep t to the e x te n t of the usual lien for storage charges, etc. 9.50 S ecu rity form s available U pon the request o f a m em ber bank, w e will supply w ith o u t charge our security agreem ent (Form C-9) for banks in U niform Com m ercial Code states, and our chattel mortgage (Form C-2) for banks in Louisiana. Section 10, CONTRACT Each m em ber bank applying to us for an ad van ce or d iscou n t shall be d eem ed b y such action to have agreed to all of the term s and co n d itio n s set forth in this bulletin and in R egu lation A. 9.55 W areh ou se receip ts If paper is secured by w a reh o u se receipts, the paper w ill n ot be acceptable as collateral unless 7 2-4-71 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 Supplement A RATES FOR DISCOUNTS AND ADVANCES T he fo llo w in g rates w ith respect to d iscou n ts and a d va n ces under the Federal R eserve A c t are n o w in effect at this bank: D isco u n ts for and a d v a n c e s to m em ber banks: Per A n n u m E ffective from : (a) S ection 13 a d van ces and d iscou n ts under sectio n 13 and 1 3 a .......................................................................................... 5V2% D ecem b er 1 , 1970 6 Jo D ecem b er 1 , 1970 7 Jo D ecem b er 1 ,1 9 7 0 (b) Section 10(b) a d v a n c e s ................................................................................ A d v a n c e s (up to 90 days) to in d ivid u als, partnerships and corporations: A d v a n c e s under the last paragraph of sectio n 13 secured by direct obligations of the U nited S t a t e s ........................................................ A -l 12-1-70 I BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS an obligation eligible. For exam ple, mortgage loans insured b y the Federal H ousing A d m in is tration are not eligible sin ce the insurance con tract is n ot equivalent to an u n conditional guar antee and d oes n ot fu lly cover interest payable on the loan. O bligations of international institu tions, such as the Inter-A m erican D ev e lo p m e n t Bank and the International Bank for R econstruc tion and D ev elop m en t are also not eligible, since such in stitu tion s are n ot agen cies o f the U nited States. Supplement B ELIGIBILITY OF SECURITIES B-1.00 Eligible U .S. agen cy secu rities Direct obligations of, and obligations fu lly guar anteed as to principal and interest by, agencies of the U nited S tates G overnm ent, are eligible to secure a d van ces at the d iscou n t rate. The fo llo w in g are the principal agency obligations n o w eligible as collateral for such advances: Federal Interm ediate Credit Bank debentures B-2.00 Eligible short-term m u n icip al w arrants and sim ilar secu rities Federal H om e Loan Bank n o te s and b onds Federal Land Bank bonds Securities o f the fo llo w in g types m ay be u sed as collateral for a section 13 advance at the dis count rate: Bank for C ooperatives debentures Federal N ational M ortgage A sso c ia tio n notes, debentures and guaranteed certificates o f par ticipation Bills, n otes, revenue bonds, and w arrants w ith a m aturity from date of purchase of n ot ex ce ed in g six m onths, issu e d in anticipation o f the c o lle c tion o f ta x e s or in anticipation o f the receipt of a ssured r even u es by any state, county, district, political subdivision, or m unicipality in the con tinental U nited States, including irrigation, drainage and reclam ation districts. O bligations o f or fu lly guaranteed b y the G ov ernm ent N ational M ortgage A sso cia tio n M erchant M arine bonds Export-Im port Bank n otes Export-Im port Bank guaranteed participation certificates* Farmers H om e A dm inistration insured notes* In determ ining the eligibility of such obligations as collateral, com p lian ce w ith the requirem ents o f R egulation E is not necessary; but this bank w ill sa tisfy itself that sufficient tax or other assured reven u es earm arked for paym en t of su ch obligations w ill be available for that pur p o se at maturity, or w ith in six m on th s from the date o f the advance if no m aturity is stated. Paym ents due from federal, state, or other go v ernm ental units may, in our discretion, b e re garded as “other assured r e v e n u e s” ; but neither the p roceed s of a p rosp ective issu e o f securities nor future tolls, rents or sim ilar co llec tio n s for the voluntary u se of governm ent property for n on-governm ental p u rposes w ill norm ally b e so regarded. Obligations w ith original m aturity e x ceeding one year w o u ld n ot ordinarily be selfliquidating as contem plated by the statute, un le ss at the time o f issu e provision is m ade for a redem ption or sinking fund that w ill be suffi cient to pay such obligations at maturity. N o te s fu lly guaranteed as to principal and inter e st by the Sm all B u sin ess Adm inistration* Federal H o u sin g A d m in istration debentures District of Colum bia A rm ory Board b onds T e n n e sse e V alley A u th ority bonds and n o te s G overnm ent N ational M ortgage A sso cia tio n , m odified pass-through arrangement Bonds and n o te s o f lo ca l urban renew al or public h o u sin g agencies fu lly supported as to principal and interest by the full faith and credit o f the U n ited States pursuant to sectio n 302 of the H ou sin g A c t of 1961 (42 U.S.C. 1421 (a) (c), and 1452(c)). C om m odity Credit Corporation certificates of in terest in a price-support loan p ool conform ing w ith , and assign ed in conform ity w ith , agree m ents, instructions, and regulations o f the C om m o d ity Credit Corporation as to form and se c u rity. NOTE: N oth in g le ss than a full gu arantee of principal and interest b y a federal agency m akes ‘Form BD-29 is required with these obligations. B -l 2-4-71 ! I BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS Supplement C APPROVED CUSTODIAN BANKS First City N ational Bank o f H ouston, H ouston, T exas H o u sto n N ational Bank, H ouston, T exas T he fo llo w in g cu sto d ian banks h av e agreed to h o ld collateral for a borrow ing bank in this district: T exas Com m erce Bank, N. A., H ouston, T ex a s First N ational Bank o f A m arillo, A m arillo, T ex a s Bankers Trust Com pany, N e w York, N e w York Continental Illinois N ational Bank and Trust Com pany, Chicago, Illinois The Chase M anhattan Bank, N. A., N e w York, N e w York The First N a tion al Bank o f Chicago, Chicago, Illinois C hem ical Bank, N e w York, N e w York The Bank o f N e w York, N e w York, N e w York First N ation al City Bank, N e w York, N e w York First N ational Bank in Dallas, Dallas, T exas Franklin N ational Bank, N e w York, N e w York M ercantile T exas N ation al Bank at Dallas, Dallas, Irving Trust Company, N e w York, N e w York M anufacturers H an over Trust C om pany, N e w York, N e w York R epublic N ational Bank of D allas, D allas, T ex a s El Paso N ational Bank, El Paso, T ex as M organ Guaranty Trust Company, N e w York, N e w York The State N ation al Bank o f El Paso, El Paso, T exas T exas C om m erce Bank, N. A,, H ouston, T ex a s [N ew York Office) The First N ation al Bank o f Fort W orth, Fort W orth, T exas Frost N ational Bank, San A n tonio, T exas Fort W orth N ation al Bank, Fort W orth, T exas N ational Bank of Com m erce o f San A ntonio, San A n ton io, T exas Bank o f the S o u th w est, N. A., H ouston, T ex a s C-l 2-4-71
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