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F ederal Reser ve Ban k o f D allas DALLAS, TEX A S 75222 Circular No. 77-39 March 15,1977 B U L L E T IN 2 T O A L L MEMBER BANKS IN T H E E LE V E N TH FEDERAL RESERVE D IS T R IC T : Enclosed is a copy of r e v is e d o p e ra tin g B u lle tin 2 , " L o a n s ," w ith attached S up p lem e n t B, " E l ig ib i l i t y of S e c u r it ie s , 11 and S upplem ent C , " A p p ro v e d C ustodian B a n k s ." Section 3 .3 0 now p ro v id e s that net sales of F e d era l funds w ill not be r e g a r d e d as in a p p r o p r ia te w h ile using seasonal c r e d it as long as such transactions a r e re p re s e n ta tiv e of the b a n k 's normal o p eratio nal p a tte r n . Section 9 .2 0 r e g a r d in g the re q u ire m e n t that fin a n c ia l statements be subm itted w ith a ll c o m m erc ial, in d u s t r i a l , and a g r ic u lt u r a l p a p e r , has been re w o rd e d to p r o v id e that u n d e r c e rta in conditions this re q u ire m e n t may be w a iv e d . T h e section in the b u lle tin r e g a r d in g the a v a ila b ilit y of our suggested form of s e c u r ity a g re e m e n t has been d e le te d since our b ank has discontinued fu r n is h in g copies of th e fo rm . S up p lem e n t C has been updated to includ e the c u r r e n t lis tin g of cus todian banks that have a g re e d to hold c o lla te ra l fo r a b o r r o w in g b a n k in this D is tr ic t . M em ber banks and others who m aintain Regulations B in d e rs should file B u lle tin 2 and Supplem ents B and C in t h e ir b in d e r s . T h e c o rre s p o n d in g b u lle tin and supplem ents should be rem oved and d e s tro y e d . S up p lem e n t A , "Rates fo r Discounts and A d v a n c e s ," should be re ta in e d . Q uestions r e g a r d in g the r e v is e d b u lle tin o r any questions p e rta in in g to the c r e d it fa c ilitie s of this R e s e rv e B ank should be d ire c te d to the o fficers h a v ing r e s p o n s ib ility fo r loan operations at the office of th is B ank w h ich s e rv e s you . Banks and others are encouraged to use the follo w in g to ll-fr e e incoming WATS numbers in contacting th is Bank: 1-8 0 0-492-4403 (intra s ta te ) and 1 -8 0 0 -52 7 -4 97 0 (in te rs ta te ). For c a lls placed loc a lly , please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 0 - 2 - A d d itio n a l copies of B u lle tin 2 and S u pplem ents B and C w i ll be fu r n is h e d upon re q u e s t to the S e c r e ta r y 's O ffice o f this B a n k , E x t . 6267. S in c e r e ly y o u r s , R o b e rt H . B o y k in F ir s t V ic e P re s id e n t E nclosu re BULLETIN 2 Loans FEDERAL RESERVE BANK OF DALLAS SCOPE T his bulletin sets forth the general term s and condition s under w h ic h w e m ay ex te n d credit a cco m m o d a tio n s to m em b er banks and the procedures to be fo llo w e d in co n n ection w ith e x te n s io n s o f such acco m m o d a tio n s. A d d itio n a l inform ation, inclu d in g statem ents concerning the p o lic y by w h ic h the “d isc o u n t w i n d o w ” is adm inistered, m ay be found in R egulation A and the Federal R eserve A c t [see referen ces in se c tio n 2 o f this bulletin). Our current d iscou n t rate and our current rates on se c tio n 10(b) a d v a n ces and adv an ces to in dividuals, partnerships, and corporations under the last paragraph of se ctio n 13 o f the F ed eral R eserve A c t are fou nd in S u pplem ent A to this bulletin. FEDERAL RESERVE BANK OF DALLAS B U LLETIN 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 S ectio n 6, SEC TION 10(b) A D V A N C E S A c c e p ta b le and accep tability Act A dvance Borrow and borrow ing Collateral D iscou n t D isc o u n t rate Eligible and eligibility S ectio n 10(b) advance S ectio n 13 advan ce Officer authorized to b orrow Paper R eferen ce to Bulletin 1 6.00 D escrip tio n 6.05 C ollateral types 6.10 Procedure S e c tio n 7, D ISC O U N T S 7.00 D escription 7.05 P rocedure S ectio n 8, SECURITIES A S COLLATERAL 8.00 8.05 8.10 8.15 B o ok -en try Treasury securities R egistered secu rities Secu rities h e ld e lse w h e r e S e cu rities h e ld b y an ap proved custodian bank 8.20 Sim plified descrip tion in certain c ases S e c tio n 2, REFERENCES S e c tio n 3, GENERAL 3.00 Kinds o f credit a cc o m m o d a tio n s 3.05 D isb u rsem en t o f fu n d s and co m putation o f interest 3.10 Inform ation required b y la w 3.15 P a ym en t at m aturity and p re-paym ent 3.20 P ay m en ts re c e iv e d on collateral b y bor r o w in g b anks 3.25 R e n e w a l 3.30 Sellin g Federal fu n d s w h ile borrow ing S e c tio n 9, PAPER 9.00 9.05 9.10 9.15 9.20 9.25 9.30 S e c tio n 4, PREREQUISITES FOR BO R R O W IN G 9.35 9.40 9.45 9.50 4.00 B orrow ing resolu tio n 4.05 Filing of signatures 4.10 C ontinuing len d in g agreem ent S e c tio n 5, SEC TIO N 13 A D V A N C E S 5.00 5.05 5.10 5.15 5.20 5.25 S e c tio n 10, C O N TR A C T D escrip tion B orrow ing request Collateral security Collateral m u st h a v e a dequate m aturity R e le a se o f collateral A d v a n c e s due on Saturdays, Sundays, or h o lid a y s S u p p lem en t A , R A T ES 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 BANKS i 3 - 10-77 A p p rov a l required B a n k ers’ a cc e p ta n c e s C o llectio n o f paper D em a n d paper F inancial sta tem en ts F inancial sta te m e n ts — originals or co p ies Form o f financial statem en ts, form s available E n d o rsem en t Insurance S ecu red paper W a r eh o u se receipts FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 Section 1, DEFINITIONS and R egulation A for u s e in co n n e c tio n w ith a se c tio n 13 adva n ce or, in the c a se o f paper, for discount. 1.00 A c c e p ta b le and accep ta b ility “A c c e p ta b le ” and “a c c e p ta b ility ” refer to the credit quality of paper and other collateral. A c c e p ta b ility d e p e n d s on the financial r e sp o n s i bility o f m akers, endorsers, or guarantors, or on the security b e h in d the obligation, or on all of these, as appropriate. W e determ ine to our o w n satisfa c tio n the a ccep ta b ility o f paper and cer tain other collateral. 1.40 S e c tio n 10(b) a d va n ce “S e c tio n 10(b) a d v a n c e ” m ean s an adva n ce under se c tio n 10(b) o f the A c t at a rate n o t le ss than V2 of 1 p ercent over the d isc o u n t rate. S u ch an adva n ce n e e d n o t h a v e eligible collateral, but the collateral m ust n e v e r th e le ss be acceptable. 1.45 S e c tio n 13 a d v a n ce 1.05 A c t “ S e c tio n 13 a d v a n c e ” m e a n s an a d v an ce at the d isc o u n t rate under se c tio n 13 o f the A c t and secu red b y eligible collateral. “A c t ” m e a n s the Federal R eserve A ct. 1.10 A d v a n c e “A d v a n c e ” m e a n s a borro w in g other than by d isc o u n t u nder se c tio n 13 or 10(b) o f the A ct. A d v a n c e s are g enerally m ade u n der the C ontinu ing L ending A g r e e m e n t Regarding A d v a n c e s by Federal R e se r v e Bank o f D allas (Form LD-176). 1 .50 Officer authorized to b o rro w “Officer authorized to b o r r o w ” m e a n s an officer o f a m em b er bank currently h o ld in g o ne o f the offices w h ic h the m em ber b a n k ’s borrow ing r esolution authorizes to b orrow from this Bank. 1.15 B orrow and borrow in g R e f e r e n c e : 4.05 o f this bu lletin . “B o rrow ” and “b o r r o w in g ” refer to a m em ber bank r eceiv in g an e x te n s io n o f credit from this Bank, w h e th e r b y advance or discount. 1.55 Paper “P aper” refers to n o te s and similar ob ligations of various obligors, u su a lly cu stom ers o f b o rrow ing banks. 1.20 C ollateral “ C ollateral” refers to oblig atio ns in the form of secu rities or paper w h ic h a borro w in g bank p le d g e s to secure an advance. 1.60 R eferen ce to B ulletin 1 1.25 D isco u n t S e v eral definitions, rules of constru ction, and other p r o v isio n s applicable to this bu lletin are fo u n d in our Bulletin 1, “ G eneral P r o v isio n s,” and are in corporated herein by reference. “D is c o u n t ” m e a n s an e x te n sio n of credit in w h ic h a m em ber bank d isc o u n ts eligible paper. Section 2, REFERENCES R e f e r e n c e : s e c tio n s 5 a n d 6 o f th is b u lle tin . 1.30 D isc o u n t rate In addition to the specific refe r e n c es foun d throughout this bulletin, the f o llo w in g general r efe r e n c es are im portant to an understan d in g of b o rrow ing transa ction s w ith this Bank: “D isc o u n t rate” refers to the lo w e s t rate charged for borrow ing. It is fixed b y our Board o f D irec tors subject to r e v ie w and determ ination of the Board of G overnors of the Federal R eserv e S ystem . (1) S e c tio n 201.2 of R egu lation A , containing general princip les concern in g the u se o f Federal R eserve credit. R eference: S u p p l e m e n t A to this bulletin f o r th e current d isc o u n t rate. 1.35 Eligible and eligib ility (2) S e c tio n 201.3 o f R egulation A , coverin g ad v a n c e s to m em ber banks. “E lig ib le” and “ e ligib ility” refer to obligations sa tisfy in g the applicable requirem en ts of the A c t (3) S e c tio n 201.4 o f R egulation A , cov erin g d is co u n ts for m em ber banks. 1 3 -10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS the borro w in g bank. Interest on an a d v an ce w ill be p a ya b le to us at the tim e of rep a y m en t o f the a d v a n c e a t th e a p p l i c a b l e r a te i n d i c a t e d in S u p p lem en t A to this bulletin at the tim e the a d v a n c e w a s m ade, e x c e p t that, if the rate is chan ged w h ile the adva n ce is outstanding, the n e w rate shall apply for the p eriod after the date o f su ch change. Interest w ill be co m p u ted on a b asis o f 365 d ays to the year. In com puting in terest, w e in clu d e the date o f borro w in g and e x c lu d e the date o f paym en t. The sam e pro cedure w ill apply to the d isc o u n t o f eligible paper, e x c e p t no consid eration w ill be given to unpaid interest on d isc o u n te d eligible paper. (4) S e c tio n 201.5 o f R egulation A , containing general requirem ents. (5) T he f o llo w in g portio n s of the A ct: se c tio n s 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, 1 3 a .l, 13a.2, 13a.4, 19(d), and 24.3. (6) RS 5200, containing the in d e b te d n e ss lim it fo r o ne b orrow er from n ation al banks, a lim it m a d e applicable to b orrow ing from this Bank by se c tio n 201.5(d) of R egulation A . (Note: For pur p o s e s o f this statute, as applied to borrow ing fro m us, u n d iv id e d profits m ay be in c lu d ed as part o f capital stock and surplus.) 3.10 In form ation required b y la w R eferen ce: P aragraph 2309 o f P u b l i s h e d I n te r p r e t a t i o n s o f th e B o a rd o f G o v e r n o r s o f th e Federal R e s e r v e S y s t e m . W e are required b y la w to keep inform ed o f the general character and am ount o f the loa n s 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 i n w h e th e r und u e u se is b eing m ade o f bank credit for the sp e c u la tiv e carrying o f or trading in securities, real estate, or co m m o d ities, or for any other p u rp ose in c o n s iste n t w ith the m ain ten an ce o f s o u n d credit conditio n s. In c o n n e c tio n w ith any a d v an ce or discount, w e reserve the right to require a current con d itio n report o f the b o r r o w ing m em ber bank, a recent balance s h e e t and profit and lo s s statem en t o f an y obligor on paper offered as collateral for an a d v a n c e or for d is count, and su ch other reports and sta te m e n ts as w e m ay deem desirable. Section 3, GENERAL 3.00 K inds o f credit a cco m m o d 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 o f the general principles set forth in that regulation, w e are a uthorized to m ak e credit available to m em ber b anks b y the fo llo w in g m eans: s e c tio n 13 ad v a n c e s (see se c tio n 5); se c tio n 10(b) a d v a n ces (see se c tio n 6); and d isc o u n tin g eligible paper (see se c tio n 7). Credit a c c o m m o d a tio n s to m e m ber b a n k s are d ivid ed into the fo llo w in g types: (1) short-term adjustm ent credit; (2) se a so n a l credit; (3) em ergen cy credit; and (4) prolonged credit. R e fe r e n c e : s e c tio n 201.2(h) o f R e g u la tio n A ; a n d se c tio n 9.25, 9.30, an d 9.35 o f th is bu lle tin . 3.15 P a y m en t at m aturity and prep aym en t R e f e r e n c e : s e c t i o n s 201.2(c), 20 1 .2 (d ), a n d 201.2(e). A b o rro w in g p lu s a ccru ed in te r e st w ill be charged to the b orrow ing b a n k ’s reserve acco u n t at m aturity. T he b o rrow in g bank, at its option, m a y p repay all or part o f any borrow ing, and in such c ases, the am ount paid p lu s accrued inter est w ill be charged to the borrow in g b an k ’s reserve account. 3.05 D isb u rsem en t o f fu n d s and co m p u ta tion o f in terest If a r eq u est for credit is re c e iv e d b y u s before 2:00 p.m. (3:00 p.m. Central T im e in u n usual c a se s and w h e n the collateral is h e ld at this Bank or a p p ro ved collateral is b ein g held in abeyance) and the requ est is approved, the borrow ing m em ber bank w ill b e g iv e n im m ed iate credit in its r e serv e a c cou n t u n le s s the m em ber bank re q u e sts that credit be giv en on a su b se q u e n t day. A t the tim e o f the adva n ce, w e credit the full am ount o f the adv an ce to the reserve a cco u n t of 3.20 P a y m en ts re c e iv e d on co llateral b y borrow in g ban k s If a m em b er bank that ha s p led ged or d is c o u n ted paper w ith us, or ha s o th e r w ise trans ferred collateral to us, r e c e iv e s any fu n d s in p ay m en t for such paper or other collateral w h ile 2 3 - 10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS it is so pledged, d isco u n ted , or transferred, the m em ber bank m u st im m e d ia te ly ad v ise u s o f all such p a ym en ts. W h e n there is an e x c e s s of collateral equal to or greater than the a m o unt of su c h pay m en t, w e w ill reduce the collateral v a lu e by the am ou n t 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 i n g b a n k ’s reserve a cco u n t in the am oun t of the p a y m e n t p lus accrued in terest thereon. U n til w e take either o f the a b o v e actions, as appropriate, such p a y m e n t w ill be c o n sid ered as h av in g b e e n re c e iv e d in trust fo r us. card, Form AC -150, b e fo re h e is authorized to sign a n y d o c u m en ts in c o n n e c tio n w ith b o r r o w ing. 4.10 C ontinuing len d in g agreem ent In general, w e w ill m ake a d v a n c e s to a m em ber bank pursuant to a contin u in g le n d in g agree m ent (our Form LD-176) to be e x e c u te d b y an officer authorized to borrow , and su ch a d v a n c e s pursuant to su ch agreem ent w ill b e e v id e n c e d by an advice o f credit transm itted to the m em ber bank at the tim e o f the adva n ce, s p e c ify in g the am ount and m aturity of the ad vance. H o w e v e r , w e reserve the right in any c a se to require the e x e c u tio n b y a m em ber bank o f a p rom issory no te w ith re sp e c t to a particular advance. S uch a n o te m u st be sign ed by an officer authorized to borrow. The con tinuing len d in g agreem en t re m ains in effect until c a n c e le d by either party by n o tice in w ritin g to the other; h o w e v e r , ca n cella tio n d o e s not affect lo an transactio n s m ade p reviously. 3.25 R e n e w a l A borro w in g bank w ish in g to r e n e w an adv an ce sh o u ld f o llo w the sam e proced ure n e c e ss a r y to obtain an original a d v a n ce (see s e c tio n 5 and se c tio n 6). 3.30 S ellin g Federal fu n d s w h ile b orrow in g N e t sa le s of Federal fu n d s w ill n o t be regarded as inappropriate w h ile usin g se a so n a l credit as long as su ch transactions are rep resentative of the b a n k ’s norm al operating pattern. H o w e v e r , in utilizing other ty p e s o f R eserve Bank credit, the m em ber bank sh o u ld n o t be a n e t seller o f Federal fu n d s in the sam e reserve w e e k in w h ic h it is borrow ing. E x c e ss funds sh o u ld be applied as a p a y m e n t to the lo an as o p p o se d to placing them in the funds market. R e f e r e n c e : 1.50 a n d 4.05 o f th is bu lle tin . Section 5, SECTION 13 ADVANCES 5.00 D escrip tion W e m a y m ak e a d v a n c e s to a m em ber bank, pursuant to se ction 13 of the A ct, fo r periods not e x c e e d in g 90 days,* on the secu rity o f obli gations of, or fu lly guaranteed by, the U nited S ta tes or any a g en cy o f the U n ite d States (see Supp lem en t B). A lso, w e m ay m ake a d v an ces to a m em ber bank, pursuant to se c tio n 13 o f the A ct, for periods n o t e x c e e d in g 90 days,* on the security of an y paper eligible for d isc o u n t or for purchase b y the R eserv e B anks u n der p ro v isio n s o f the A c t (eligible paper). Section 4, PREREQUISITES FOR BORROWING 4.00 B orrow ing reso lu tion A certified cop y of a r e solu tio n a dopted by a m em ber b a n k ’s board o f directors authorizing d e sig n a te d officers to e x e c u te agreem ents w ith u s and to b o rrow on its b e h a lf from u s m u st be on file w ith u s in order for any m em ber b a n k to obtain credit acc o m m o d a tio n s. Our Form BD-1 R ev. sh o u ld be u se d for this purpose. Borrow ing r e solu tio n s filed w ith us rem ain in effect until c a n c e le d or su p e r se d e d by a n e w resolution. 5.05 B orrow ing requ est In general, w e do n o t require that a req u est for an a d v a n c e be acco m p an ied by a w ritten appli cation, and any su ch request m ay be m ade by letter, w ire, or te le p h o n e b y an officer authorized to borrow . H o w e v e r , w e reserve the right to re quire the su b m issio n of a w ritten application. Each request for an a d v an ce m u st sp e c ify the 4.05 Filing o f signatures A n officer authorized to b o rrow m u st h a v e his signature filed w ith this Bank on a signature *It is expected, how ever, that advances norm ally w ill be for sh o rter periods unless m ade for seasonal or em ergency reasons. 3 3 - 10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS Section 6, SECTION 10(b) ADVANCES am ount and m aturity o f the req u e ste d ad vance and the collateral offered as security, and in the ev e n t su ch collateral is n o t already h e ld b y us, the m an n er in w h ic h such collateral w ill be p laced in our p o s s e s s io n or under our control. 6.00 D escrip tion W e m ay m ake a d v a n c e s to a m em ber bank, pursuant to se c tio n 10(b) o f the A ct, for periods not to e x c e e d four m onths,* se c u r e d to our sa tis faction, w h e th e r or n o t the collateral m e e ts the requirem ents of 5.00 above. H o w e v e r , the rate on su c h a d v a n c e s m ust be at le a st V 2 o f 1 per cent higher than the h ig h e st rate applicable to d isc o u n ts o f or a d v a n c e s on eligible paper. Pro v ided, h o w e v e r , a d v a n c e s u nder this section, w h e n secu red by m ortgages o n one-to -fo ur fa m ily residential property, shall be at a rate equal to the lo w e s t rate charged for borrow ing. R eference: 4.05 o f th is b u lle tin . 5.10 C ollateral secu rity Collateral offered as security for any advance, in addition to m e e tin g requirem ents of the co n tinuing le n d in g agreem ent, m ust be acceptable to us; m u st be e n d o rsed or a ssig n ed by the m e m ber bank (e x c e p t in the c a se o f bearer paper); and m u st be in su ch form , or a c c o m p a n ied by su ch d o cu m en ts, that it m a y b e readily trans ferred to us w ith o u t further action by the m e m ber bank. 6.05 C ollateral ty p es A m o n g the ty p e s o f collateral w h ic h m a y be accep ta b le for a se c tio n 10(b) a d v a n ce are th ose liste d below : R e f e r e n c e : 1.00 a n d s e c t i o n s 8 a n d 9 o f th is bu lletin . (1) Paper w h ic h w o u ld be eligible, e x c e p t for its m aturity, at the u npaid principal am ount. 5.15 C ollateral m ust h a v e adequate m aturity (2) Paper secu red b y sto c k and c o m p lyin g w ith R egulation U at the u npaid principal am ount. C ollateral sh o u ld n o t m ature earlier than the date on w h ic h the b orro w in g m atures (except collateral w h ic h is to be e x c h a n g e d for similar collateral, w ith our a d v a n c e agreem ent, before the m aturity o f the borrow ing). (3) O bligations in sured under Title I or T itle II of the N a tio n a l H o u sin g A c t at the unpaid prin cipal amount. (4) Long-term general obligation bonds, revenue bonds, n otes, and w arrants o f a n y state or p o liti cal su b d iv isio n th e r e o f (other than th o se r e ferred to in Supp lem en t B). 5.20 R elea se o f collateral U n le ss the borro w in g bank req uests o therw ise, w e r e lea se collateral im m e d ia te ly fo llo w in g p a y m en t of the related borrow ing. A ll paper h e ld as collateral w ill be returned to the b orrow ing bank and securities w ill b e h eld b y us in safek eep in g sub ject to the order o f the borro w in g hank. In addition, w h e n in our judgm ent circu m stan ces m ake it advisable, w e m a y a c cep t as secu rity for a se c tio n 10(b) a d va n ce any a ss e ts other than th o se set forth a b o ve w h ic h w e find acceptable. 6.10 P rocedure The procedure for obtaining a se c tio n 10(b) a d v a n c e is identical to that for other a d v a n c e s (see se c tio n 5J. In addition, Form BD-29 sh o u ld be su bm itted w h e n the collateral is paper, secured or unsecured. 5.25 A d v a n c e s due on Saturdays, S u n d a y s, or h o lid a y s If an a d v a n ce is agreed to fall due on one o f our non ban k in g days, the due date w ill be changed so that the a d v an ce w ill m ature on our n e x t banking day. Section 7, DISCOUNTS 7.00 D escrip tion R eferen ce: S u p p l e m e n t A to B u lle tin 1, c o n t a i n in g our n o nbankin g days. W e m ay d iscou n t c u sto m e r s’ paper of a m em ber bank pursuant to se c tio n s 13 and 13(a) o f the *It is expected, how ever, th a t advances norm ally will be for sh o rter periods unless m ade for seasonal or em ergency reasons. 4 3 - 10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS resolu tio n on Form PD 1010 m u st be in addition to the borrow in g r e so lu tio n referred to in para graph 4.00 o f this bulletin.) A ct, that m e e ts the “e lig ib ility ” requirem ents set forth in se c tio n 201.4 of R egulation A (eligible paper). Banks h a v e generally fo u n d it m ore c o n v e n ie n t to u se eligible paper as collateral for a se c tio n 13 advan ce, rather than h a v e it d is counted. 8.10 S ecu r itie s h e ld e lse w h e r e U nder certain conditions, securities offered as collateral m a y be h e ld e ls e w h e r e than at this Bank and sh o u ld be ha n d led in the fo llo w in g manner: 7.05 P rocedure A n y m em ber bank desiring to d isc o u n t paper w ith us, as ind ica ted in 7.00 above, sh o u ld c o n sult us regarding the proced ure to be f o llo w e d . (1) If h e ld by an approved c u stod ia n bank, arrangem ents m a y be m ade for u s to a c cep t a c u s to d y receipt (see 8.15 for procedure). R e f e r e n c e : se c tio n 9 f o r o p e r a tin g details w i t h r e s p e c t to eligib le pap er. (2) If h e ld in a c orresp o n d en t bank in a Federal R eserv e office c ity o u tsid e this district, th e y m a y be d e liv ered to the Federal R eserv e office in that city. T he procedure for this w ill be supp lied on req uest and sh o u ld h e initiated early in the m orning on the day the a d v an ce is n eed ed . Section 8, SECURITIES AS COLLATERAL 8.00 B oo k -en try T reasury secu rities In a c c o r d a n c e w i t h S e c t i o n 3 0 6 .1 1 7 ( a ) o f S u b p a r t 0 o f T r e a s u r y D e p a r t m e n t C ir c u la r N o. 300 and the co rrespond ing se c tio n o f A g e n c y regulations, this Bank, as fiscal agent o f the U n ited States, m ain ta in s as “book -en try secu ri t ie s ,” transferable Treasury or A g e n c y secu rities d e p o site d as collateral for a d v a n c e s by this Bank. N o tw ith sta n d in g the a p plication o f the b o o k -en try procedures, this Bank in its in d i vid u a l capacity shall co n tin u e to m aintain ap propriate a c c o u n ts e v id e n c in g su c h d eposits. T ransferable Treasury or A g e n c y secu rities on d ep osit or h ereafter d e p o site d for su ch purpose w ill be c o n v e r te d into b o o k -en try form and m aintained in a b o o k -en try collateral a cco u n t in accordan ce w ith the p r o v isio n s of our current Bulletin 14, “B ook-Entry S e c u r ite s,” and in such e v e n t su ch secu rities w ill be han d led pursuant to the term s and c on d itio n s of that circular, n o tw ith sta n d in g any in c o n sis te n t p r o v isio n s herein. (3) In all other ca se s, the secu rities sh ou ld be deliv ered to us. 8.15 S ecu rities h eld b y an a p p rov ed cu stod ia n bank S u p p le m e n t C to this b u lletin lists c u sto d ia n banks that h a v e agreed to h o ld collateral for us. The borrow in g ban k sh ou ld te le p h o n e and in struct th e cu sto d ia n bank to h o ld the securities su bject to our order and for the a c cou n t of the b orrow ing bank. T he n am e o f the individual c o n tacted at the custo d ian bank sh ou ld b e fur n ish e d us in order that w e m ay confirm that the secu rities are held as collateral. T he borrow ing bank should e x e c u te a P ledge A g r e e m e n t Form (LD-168X), though w h e n n e c e s s a r y the agree m en t m a y be obta in ed 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 a re n o lo n g e r pledged, w e w ill instruct the c u sto d ian bank to release them and h old them in free safek eep in g . 8.05 R eg istered secu rities 8.20 Sim plified d escrip tio n in certain c a s e s R egistered U .S. securities m u st be acco m p an ied by th e appropriate Treasury D epartm en t form s properly exe c u te d . In this c o n n ectio n , reference m u st be m ade to Treasury D epartm ent Form P D1004 (pow er o f attorney), and T reasury D e partm ent Form PD1010 (authorizing resolution), and the instru ctio n s thereon. (The authorizing W h e n o b l i 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 secu rites h e ld in c u sto d y w it h u s or boo k -en try Treasury securities on our books, the borro w in g bank n e e d o n ly a d v ise u s o f the descrip tio n o f the secu rities and the num ber o f the c u sto d y receip t or adv ice o f d eposit. 5 3 - 10-77 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 Section 9, PAPER 9.10 C o llectio n o f paper 9.00 A p p ro va l required Paper w h ic h has b e e n d isc o u n te d or p le d g e d as collateral w ill be furn ish ed to the borrow ing bank, in trust, 10 d a ys in adv an ce o f m aturity to perm it co lle c tio n (see also se c tio n 3.20 of this bulletin). P aper sub m itted for d isc o u n t or to secure an a d v a n c e sh o u ld be liste d o n our Form BD-29 and m u st be p r o c e s se d and ap p ro ved b y our D is co u n t C om m ittee before credit can be granted. H o w e v e r , credit for approved paper w ill be granted as o f the date the paper w a s received , u n le ss w e are o th e r w ise instructed. M any banks find it c o n v e n ie n t to subm it paper for approval in advance, w it h in stru ctio n s for the approved paper to be h e ld in a b e y a n c e p ending p o ssib le u se for borrow ing. 9.15 D em and paper Eligible paper in the form of dem an d n o te s is a cceptable for d isc o u n t or to secu re advances. H o w e v e r , d em and paper cann ot be a c cep ted if offered m ore than a rea son a b le tim e after issue, if d ish o n o red after dem and for p a ym ent, or if o th e r w ise overdue. S u bject to the abov e restric tions, or u n le s s lim ited b y fa c ts w h ic h establish an earlier p a y m e n t date: 9.05 B ankers’ a ccep ta n ces If a ban k er’s a c c ep ta n ce as draw n d o e s not clearly d is c lo s e the character o f the underlying transaction on its face, e v id e n c e of eligibility m ay c o n sist of a stam p or certificate affixed by the a cceptor in o ne of the fo llo w in g standard certificate forms: (1) C om m ercial or industrial dem a n d paper m ay be ac c e p te d for perio d s up to 90 d a y s from the date o f p ledge or discount. (2) A gricultural d em and paper m a y be d is c o u n ted for periods up to 9 m on ths, or a c cep ted as collateral to a borrow in g b a n k ’s n o te havin g a m aturity not in e x c e s s o f 90 days. DOMESTIC SHIPMENTS A t tim e o f accep ta n ce, this bill w a s ac com p a n ied by sh ipping d o c u m e n ts e v i d e n c i n g th e d o m e s t i c s h i p m e n t o f (nam e of com m odity] from (point of shipm ent) to (place o f destination). 9.20 F inancial sta tem en ts In c o n n e c tio n w ith a n y a d v an ce or discount, financial statem ents, in clu d in g co m p lete sc h e d ules of im portant item s, sh o u ld be sub m itted w ith all com m ercial or industrial paper regardless of am ount and sh o u ld be subm itted w ith agricul tural paper in the am ount o f $1,000 or over. Financial statem ents of endorsers or guarantors, if any, sh ou ld also be subm itted. W e r e serv e the right to require a recent b alance sh e e t and profit and lo s s statem en t o f any obligor on paper offered as collateral for an a d v a n c e or for d is count, and such other reports and statem en ts as w e m ay d eem desirable.* (Nam e o f A ccep tor) IMPORT AND EXPORT TRANSACTIONS The transa ction w h ic h g iv e s rise to this in strum ent is the (im portation or ex p o r tation) o f (name of com m odity) from (point o f shipm ent) to (place of d e sti nation). (Nam e o f A ccep tor) 9.25 F inancial sta tem en ts — originals or c o p ie s WAREHOUSE SECURED CREDIT Financial sta tem en ts sh ou ld h e originals or co p ies o f originals h e ld in the files o f th e bor row ing bank. Financial statem en ts b e c o m e the property o f this Bank and are n o t returned; th e r e fo r e , w h e n a b o r r o w in g b a n k su b m its original financial statem ents, it sh o u ld retain co p ies for its files. If co p ies (other than p h o to copies) are furnished, th e y sh o u ld bear the fol- This bill w a s secu red at the tim e of a c cep ta n ce b y in d e p e n d e n t w a reh o u se, terminal, or other sim ilar receipt c o n v e y in g secu rity title to (name o f readily m arketable staple) stored in (country w h e r e stored). (N am e o f A cceptor) *Under certain conditions, the requirem ent for a financial statem ent may be waived. 6 3 - 10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS lo w in g certification sign ed b y an officer au th o rized to borrow : 9.40 Insurance W h e n applicable, insurance p o lic ie s cov erin g collateral sh ou ld a c c o m p a n y paper and should h a v e riders attached m aking lo s s payab le to the m em ber bank as its in terest m a y appear. This is a true c o p y o f the original signed financial sta tem en t held in our files. 9.30 Form o f financial sta tem en ts, form s a vailable 9.45 S ecu red paper T he b orrow ing b a n k sh o u ld see that c o p ie s of secu rity a greem ents or similar in strum en ts a c c o m p a n y secu red paper. E v id en ce of com pliance w ith the appropriate sta tu tes covering the crea tion and p er fe c tio n o f security in te r e sts and other lie n s sh o u ld also be provided. Financial sta tem en ts n e e d n o t be in a n y specia l form but sh o u ld c o n sist o f a c o m p lete and rea so n a b ly detailed b alance sheet, profit and lo s s statem ent, and r eco n cilia tio n o f n e t w orth. W e m a y req u est a d ditional in form ation w h e n d e e m e d desirable for a better u n d erstand ing of the financial c o n d ition and operation o f 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 f o r op tio n a l u s e b y m em ber b a n k s in this c o n n e c tion, and w e su p p ly them free o f charge to m em b er banks. T h e y are: 9.50 W areh ou se receip ts If paper is secu red b y w a r e h o u se receipts, the paper w ill n o t be a c c ep tab le as collateral u n le ss the w a r e h o u se r e ceip ts m e e t the fo llo w in g re quirem ents: (1) Form C-5, financial statem en t for farmers and ranchers. (1) T h e y m u st b e n eg o tiab le and e n d orsed w h e n ev er en d o r se m e n t is n e c e s sa r y to p a ss title. (2) Form C-6, financial statem en t for com m ercial borrow ers. (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 i p t sh o u ld be en tirely in d e p e n d e n t o f the custom er pled gin g su ch receipt, and the w a r e h o u se m a n m u st n ot h a v e any financial interest in the go o d s d escrib ed in the receipt, e x c e p t to the ex te n t of the u su a l lien fo r storage charges, etc. (3) Form C-7, for com parative p o stin g o f five yea rs o f financial data on the borrow er. 9.35 E n d orsem en t Section 10, CONTRACT Paper m a y be e n d o rsed b y the u se o f an allonge so firmly affixed as to b e c o m e a part o f the instrum ent. A ffixing the allonge b y glue w ill m e e t this test; h o w e v e r , the u se of pins, staples, paper clips, or v ario u s form s o f tape w ill not com ply. Each m em b er bank applying to u s for an ad v a n c e or d isco u n t shall be d e e m e d by such a ction to h a v e agreed to all o f the term s and c o n d itio n s set forth in this bu lletin and in Regu lation A. 7 3 - 10 -7 7 FEDERAL RESERVE BANK OF DALLAS BULLETIN 2 Supplement B m e n ts, in s tr u c tio n s , and r e g u la tio n s o f th e C om m od ity Credit Corporation as to form and security. ELIGIBILITY OF SECURITIES (16) F ederal H om e Loan M ortgage C orporation n o te s, debentures, and guaranteed certificates o f participation. B -1.00 E ligible U .S. a g en cy secu rities D irect oblig a tion s of, and oblig ations fu lly guar an teed as to principal and interest by, a gen cies o f the U nited States G overnm ent, are eligible to secu re a d v a n c e s at the d iscou n t rate. The fo llo w in g are the principal a g en cy ob ligations n o w eligible as collateral for su ch a d vances: (17) U n ited States P o sta l Service obligations. (18) Participation certificates e v id e n c in g u n d i v id e d in terests in pu rch a se contracts entered in to by the G eneral S e r v ic e s A dm inistration. (19) O bligations en tered into b y the Secretary o f H ealth, E ducation, and W e lfa r e u nder the Public H ealth S e r v ic e A ct, as a m en d ed by the M ed ica l F acilities C on struction and M od ern iza tion A m e n d m e n ts of 1970. (1) Federal Interm ediate Credit Bank d e b e n tures. (2) Federal H o m e Loan Bank n o te s and bonds. (3) Federal Land Bank bonds. (20) O bligations guaranteed b y the O versea s Private In v e stm e n t C orporation pursuant to the p r o v isio n s of the Foreign A s s is t a n c e A c t of 1961, as am ended. (4) Bank for C oopera tiv es debentures. (5) F e d e r a l N a t i o n a l M o r t g a g e A s s o c i a t i o n n o te s, debentures, and guaranteed certificates of participation. (21) Federal Financing Bank hills. (6) O bligations o f or fu lly guaranteed by the G o vern m en t N ation a l M ortgage A sso c ia tio n . NOTE: N o th in g le s s than a fu ll guarantee of principal and in terest b y a federal a gen cy m akes an obligation eligible. For exam ple, m ortgage lo a n s in su red b y the Federal H o u sin g A d m in is tration are n o t eligible sin ce the in suran ce c o n tract is n o t e q u iva len t to an u n c o n d itio n a l guar antee and d o e s n o t fu lly c o ver in te r e st paya b le on the loan. O bligations o f international in stitu tions, su ch as the Inter-A m erican D e v e lo p m e n t Bank and the International Bank for R e c on stru c tion and D e v e lo p m e n t also are n ot eligible, sin ce such in stitu tio n s are n o t a g en cies of the U n ited States. (7) M erchant M arine b ond s. (8) Export-Im port Bank n o te s and guaranteed participation certificates.* (9) F a r m e r s notes.* H om e A d m in istr a tio n in su red (10) N o te s fu lly guaranteed as to principal and interest b y the Sm all B u sin e ss A dm inistration.* (11) Federal tures. H o u sin g A d m in istration deben (12) D istrict o f C olum bia A rm ory Board b onds. (13) T e n n e s s e e no tes. V alley A u th o r ity bonds B-2.00 E ligible short-term m u n icip al w arrants and sim ilar se cu rities and Secu rities o f the fo llo w in g ty p e s m a y be u s e d as collateral for a se c tio n 13 ad va n ce at the d is count rate: (14) B on d s and n o te s o f lo ca l urban r e n e w a l or public h o u sin g a gen cies fu lly supported as to principal and in terest by the full faith and credit o f the U n ite d S ta tes pursuant to se c tio n 302 of the H o u sin g A c t o f 1961 (42 U.S.C. 1421(a)(c), and 1452(c)). Bills, n o te s, rev e n u e b onds, and w arrants w ith a m aturity from date of purchase o f n o t e x c e e d in g six m onths, is s u e d in a nticipation o f the c o lle c tion o f ta x e s or in anticip ation o f the receipt of a ssured r e v e n u e s b y any state, county, district, p olitica l su b d iv isio n , or m unicip ality in the contin en tal U n ited States, in clu d in g irrigation, drainage, and reclam ation districts. (15) C om m od ity Credit Corporation certificates o f interest in a price-support loan p o o l co n fo rm ing w ith, and assig n e d in c o n form ity w ith , agree *Form BD-29 is required w ith these obligations. B -l 3 - 10-77 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS the p ro c e e d s o f a p r o sp e c tiv e is su e o f securities nor future tolls, rents, or sim ilar co lle c tio n s for the volu n ta ry u se o f g o v ern m en t property for n o n -g ov ern m en tal p u rp oses w ill n orm ally be so regarded. O bligations w ith original m aturity e x c eed in g one year w o u ld not ordinarily b e selfliquidating as c on tem p lated by the statute, u n le s s at the time o f is su e p r o v isio n is m ade for a redem ption or sinking fund that w ill be suffi cient to p a y su ch oblig ations at m aturity. In determ ining the eligib ilty o f su ch obligations as collateral, co m p lia n ce w it h the requirem ents o f R egulation E is n ot n ecessary; but this Bank w ill s a tis fy it s e lf that sufficient ta x or other assu red r e v e n u e s earm arked for p a y m e n t of su c h o b liga tio n s w ill b e availab le for that pur p o s e at m aturity, or w ith in six m o n th s from the date o f the a d v an ce if no m aturity is stated. P a y m e n ts due from federal, state, or other g o v ernm en tal units, in our discretion, m a y be re garded as “other assu red r e v e n u e s ” ; but n either B-2 3 - 10 -7 7 BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS Supplement C T ex a s C om m erce Bank, N .A ., H ouston, T e x a s APPROVED CUSTODIAN BANKS First N a tio n a l Bank in Little Rock, Little Rock, A rk an sa s First N a tio n a l Bank at Lubbock, Lubbock, T e x a s T he fo llo w in g cu stod ian banks h a v e agreed to h old collateral for a b o rrow ing bank in this district: T he First N a tio n a l B ank o f M idland, M idland, Texas First N a tion a l Bank o f A m arillo, A m arillo, T e x a s W h itn e y N a tio n a l Bank, N e w O rleans, Louisiana C ity N a tio n a l Bank o f A u stin , A u stin , T e x a s The Bank of N e w York, N e w York, N e w York C ontinental Illinois N a tio n a l Bank and Trust C om pany, Chicago, Illinois Bankers Trust C om pany, N e w York, N e w York T he First N a tion al Bank o f C hicago, Chicago, Illinois T he C hase M anhattan Bank, N.A ., N e w York, N e w York First N a tion a l B ank in D allas, D allas, T e x a s C hem ical Bank, N e w York, N e w York M e r c a n t i l e N a t i o n a l B a n k at D a l la s , D a lla s , T exas First N ation a l C ity Bank, N e w York, N e w York M anufacturers H a n o v er Trust C om pany, N e w York, N e w York N a tio n a l Bank o f C om m erce, D allas, T e x a s R epublic N a tio n a l Bank o f D allas, D allas, T e x a s M organ Guaranty Trust Com pany, N e w York, N e w York T e x a s Bank & T rust Com pany, D allas, T e x a s El Paso N ation a l Bank, El Paso, T e x a s T e x a s C om m erce Bank, N .A ., H ouston, T e x a s (N e w York Office) T he State N a tio n a l Bank o f El Paso, El Paso, T exas First N a tio n al Bank, St. Louis, M issouri The A la m o N a tio n a l Bank o f San A n to n io , San A n to n io, T e x a s C ontinental N a tio n a l Bank of Fort W orth, Fort W orth, T e x a s Frost N ation al Bank, San A n ton io, T ex as T he First N a tio n a l Bank o f Fort W orth, Fort W orth, T e x a s N a tion a l Bank o f C om m erce of San A nto n io , San A n ton io, T ex as Fort W orth N a tio n a l Bank, Fort W orth, T e x a s Bank o f the S o u th w e st, N .A ., H o u ston , T e x a s W e lls Fargo Bank, N .A ., San F rancisco, Cali fornia First City N a tion al Bank o f H ouston, H ouston, T exas First N a tio n a l B ank & Trust C om pany, Tulsa, O klahom a H o u s to n N a tio n a l Bank, H o u sto n , T e x a s T he First N a tion a l Bank o f W aco, W aco, T e x a s C -l 3 - 10-77
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