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federal Reserve ban k of Dallas DALLAS, TEXAS March 30, 1962 T o All Banks in the Eleventh Federal Reserve District: The uniform paragraph entitled “ Telegraphic advice” in the noncash oper ating bulletins o f the Federal Reserve banks has been amended effective April 1, 1962. The paragraph referred to is identified as paragraph 21 in this bank’s Bulletin No. 9. The primary purpose o f the amendment is to provide for a service charge o f $1.50 against the forwarding bank’s account for each telegram transmitted over the leased wire facilities o f the Federal Reserve banks pertaining to pay ment, nonpayment, or tracing o f noncash items, and in connection with receiving or transmitting any other information or instructions. The uniform paragraph specifies that charges for telegrams transmitted over commercial wire facilities will be made against the forwarding bank at commercial wire rates and that telegrams to such banks will be sent collect. The enclosed revised copy o f Bulletin No. 9, dated and effective April 1, 1962, has been reprinted in its entirety, not only to substitute the new wording fo r paragraph 21, but also for the purpose o f making appropriate changes in the bulletin wherever reference is made to sections or paragraphs o f Regula tion G, “ Collection o f Noncash Items,” o f the Board o f Governors o f the Federal Reserve System. (A copy o f Regulation G, as reprinted in November 1960 to conform with the style o f the Code o f Federal Regulations, was furn ished all banks in the Eleventh Federal Reserve District under date o f February 6,1961.) Member banks are requested to file the revised Bulletin No. 9 in the ring binder o f bulletins o f this bank and regulations o f the Board o f Gover nors, and nonmember banks are asked to file it in the red ring binder previously furnished containing emergency bulletins o f the Federal Reserve Bank o f Dallas. Please remove and destroy the copy o f Bulletin No. 9 dated August 23, 1960. It will be appreciated if you will sign and return promptly the attached postal card, acknowledging receipt o f the enclosed Bulletin No. 9. Yours very truly, Watrous H. Irons President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE BANK OF DALLAS BULLETIN No. 9 APRIL 1, 1962 (Superseding Bulletin N o. 9, dated August 23, 1960) COLLECTION OF NONCASH ITEMS T o the Member and Nonmember Clearing Banks o f the Eleventh Federal Reserve District:1 Regulation G o f the Board of Governors of the Federal Reserve System (hereinafter referred to as Regulation G ) and this bulletin prescribe the terms and conditions upon which we will receive and handle noncash items for col lection. Section 207.4 o f Regulation G provides that each Federal Reserve bank may promulgate rules not inconsistent with the terms o f the law or of Regula tion G, governing the details o f its noncash collection operations, and that such rules shall be binding upon any member or nonmember clearing bank which sends any noncash items to such Federal Reserve bank for collection or to any other Federal Reserve bank for the account o f such Federal Reserve bank for collection. This bulletin is issued pursuant to this provision o f Regulation G. Unless otherwise stated, all references to the Federal Reserve Bank o f Dal las will include the head office and all o f its branches. DEFINITION OF NONCASH ITEMS 1. As used in Regulation G and in this bulletin, the term “ noncash items” means any items o f the following classes when payable in any Federal Reserve district2: (1 ) Maturing notes, acceptances, bankers’ acceptances, certificates o f deposit, bills o f exchange, and drafts with or without securities, bills o f lading, or other documents attached; (2 ) Drafts and orders on savings deposits with passbooks attached; (3 ) Checks, drafts, and other cash items which have previously been dishonored or on which special advice o f payment or dishonor is required. (A n y check, draft, or other item which is normally handled as a cash item will not be handled as a noncash item unless special conditions require that this be done, and the Federal Reserve bank will decide whether such special conditions exist) ; (4 ) Maturing bonds and coupons (other than obligations of the United States and its agencies which are redeemed by Federal Reserve banks as fiscal agents) ; 1T he provisions o f paragraphs 25 through 29, and paragraph 33, as well as those o f paragraph 8 with respect to remittance drafts, are applicable not only to member and non member clearing banks but also to other nonmember banks to which w e send noncash collec tion letters. This bulletin is accordingly sent to all member and nonmember banks in the Eleventh Federal Reserve District. 2F or the purposes o f this bulletin, any dependency, insular possession or part o f the United States outside the States o f the United States and the District o f Columbia shall be deemed to be in or o f such Federal Reserve district as the Board o f Governors may designate. —2— BULLETIN No. 9 (5 ) State and municipal warrants, including both orders to payaddressed to officers o f States and political subdivisions thereof and any special or general obligations o f States and political subdivisions th ereof; (6 ) A ll other evidences o f indebtedness and orders to pay, except checks and bank drafts handled under the provisions o f Regulation J and checks and bank drafts drawn on or payable by a nonmember bank which cannot be collected at par in funds acceptable to the Federal Reserve bank o f the district in which such nonmember bank is located. (Checks and bank drafts drawn on or payable by a nonmember bank which cannot be collected at par in funds acceptable to the Federal Reserve bank o f the district in which such nonmember bank is located, and which may not be received under the terms o f Regulation J, like wise may not be received as noncash items under the terms o f Regu lation G and this bulletin.) 2. This bank will not accept noncash items payable in the same city in which the sending bank is located. 3. Since definite advice o f payment cannot be obtained for checks drawn on the Treasurer o f the United States or for postal money orders, such items should be sent to this bank only as cash items and not as noncash items. TERMS OF COLLECTION 4. Every bank sending noncash items to us or to another Federal Reserve bank direct for our account by such act shall be understood to have agreed to the terms and conditions o f this bulletin and o f Regulation G in effect at the time such noncash items are received by the Federal Reserve bank. 5. Noncash items payable in other Federal Reserve districts and forwarded for collection to the Federal Reserve banks o f such other districts either by us or by our member and nonmember clearing banks for our account will be handled by such other Federal Reserve banks subject to the terms and condi tions o f Regulation G and o f the respective bulletins o f such other Federal Reserve banks, and to the rules o f law applicable to such banks; but we will give credit to the sending banks for such items in accordance with the pro visions o f this bulletin. 6. A ny noncash item, or check received in remittance therefor, may be pre sented through a clearing house or a clearing house association subject to the rules and practices thereof. 7. A n y noncash item, or check received in remittance therefor, may be pre sented by delivery to a bank or representative thereof, pursuant to an agree ment or arrangement permitting such bank at any time during the same day to pay or remit for such noncash item or check or to return it as dishonored and entitling such bank, if it has previously made conditional payment or remittance fo r the noncash item or check so returned, to receive credit or refund therefor. The specific authorization o f the above methods o f present ment shall not be construed to exclude any other method o f forwarding or presentment which may be authorized or would constitute ordinary care under existing rules o f law or under any other provision o f Regulation G or o f this bulletin. — 3— BULLETIN No. 9 8. Section 207.3 o f Regulation G on the date o f this bulletin prescribes the following terms and conditions under which all Federal Reserve banks will handle noncash items for member and nonmember clearing banks: “ (a ) Agreement o f sending bank.— Each member and nonmem ber clearing bank which sends noncash items to any Federal Reserve bank for collection shall by such action be deem ed: (1 ) to authorize the Federal Reserve banks to handle such items subject to the terms and conditions of this part; (2 ) to warrant its own authority to give the Federal Reserve banks such authority; (3 ) to agree to indemnify any Federal Reserve bank for any loss or expense sustained (includ ing but not limited to attorneys’ fees and expenses o f litigation) re sulting from the failure o f such sending bank to have such authority, or resulting from such Federal Reserve bank’s guaranty o f prior en dorsements, or resulting from any action taken by the Federal Reserve bank within the scope o f its authority for the purpose o f collecting such noncash item s; and (4 ) to guarantee all prior endorsements on such items whether or not a specific guaranty is incorporated in an endorsement o f the sending bank. “ ( b) Federal Reserve bank as agent.— A Federal Reserve bank will act only as agent o f the bank from which it receives such noncash items and will assume no liability except for its own negligence and its guaranty o f prior endorsements. “ ( c ) Presentation of items by Federal Reserve bank.— A Fed eral Reserve bank may present such noncash items with any accompany ing documents for payment direct to the person, firm, or corporation on which they are drawn or by or through which they are payable or collectible, or may present them for payment or forward them for col lection direct to the bank on which they are drawn, at which they are payable, or through which they are payable or collectible; or, in its discretion, may forward them to another agent with similar authority to present them for payment or forward them for collection. The bank upon which any such noncash item may be drawn, or at which the same may be payable or through which the same may be payable or collectible shall be deemed to be a proper agent fo r collection within the meaning o f this part. “ ( d) Items payable in other districts.— Noncash items received by a Federal Reserve bank payable in other districts will be forwarded for collection to the Federal Reserve bank o f the district in which such items are payable; except that, when in the judgment o f the Federal Reserve bank the size or character o f the items or other special cir cumstances justify such action, any such items, in the discretion o f the Federal Reserve bank, may be forwarded for collection direct to the bank on which they are drawn, at which they are payable, or through which they are payable or collectible, or may be forwarded for collection to another agent with authority to present them for payment direct to the person, firm, or corporation on which they are drawn or by or through which they are payable or collectible or to present them for payment direct to the bank on which they are drawn, at which they are payable, or through which they are payable or collectible. — 4— BULLETIN No. 9 “ ( e ) Forms o f payment accepted by Federal Reserve bank.— A Federal Reserve bank may, in its discretion and at its option, accept from any bank in payment o f or from any collecting agent in remit tance for such noncash items, cash, checks, bank drafts, transfers o f funds or bank credits, or other forms o f payment or remittance, accept able to the collecting Federal Reserve bank. The Federal Reserve bank shall not be liable for the failure o f any bank or any agent to collect, or to pay, or to remit for, such noncash items, nor for any loss result ing from the acceptance from any bank or any agent, in lieu o f cash, o f any other form of payment or remittance authorized herein, nor for the nonpayment o f, or failure to realize upon, any bank draft or other medium o f payment or remittance which may be accepted from any bank or any collecting agent. “ ( / ) Collection o f remittances for noncash items.— Bank drafts and other forms o f payment or remittance received by a Federal R e serve bank in payment o f or in remittance for noncash items handled under the terms o f this part will be collected, at the option o f the Fed eral Reserve bank, either under the terms and conditions o f this part or under the terms and conditions o f Part 210 o f this chapter. “ ( g) Suspension or closing o f paying or remitting bank.— -No draft, authorization to charge, or other order, upon any reserve balance, clearing account, deposit account, or other funds o f a paying, remit ting, or collecting bank in the possession o f a Federal Reserve bank, issued fo r the purpose o f settling items handled under the terms o f this part will be paid, acted upon, or honored after receipt by such Federal Reserve bank o f notice o f suspension or closing of such pay ing, remitting, or collecting bank. “ ( h) Items sent direct to Federal Reserve bank in another dis trict.— W ith respect to any noncash items sent direct by a member or nonmember clearing bank in one district to a Federal Reserve bank in another district, the relationships and the rights and liabilities existing between the member or nonmember clearing bank, the Federal R e serve bank o f its district, and the Federal Reserve bank to which the noncash item is sent will be the same, and the relevant provisions o f this part will apply, as though the member or nonmember clearing bank had sent such noncash item to the Federal Reserve bank o f its district with its endorsement and guaranty o f prior endorsements and such Federal Reserve bank had sent the noncash item to the other Federal Reserve bank with its endorsement and guaranty o f prior endorsements.” PROCEDURE TO BE FOLLOWED BY SENDING BANKS 9. Items forwarded for collection and credit when paid should be listed on a letter different in form from that in which cash items are listed. It is desir able that collection letters include a description o f each item listed, showing the name o f the payer, place o f payment, maturity, amount, whether or not subject to protest, and any special instructions such as request fo r telegraphic advice o f payment or nonpayment. I f documents are attached, they must be clearly and adequately identified in the accompanying letter. The collection letter should also show the collection number assigned to each item by the forwarding bank. I f documents consist o f bills o f lading and are attached to — 5— BULLETIN No. 9 sight or demand drafts, the collection letter should carry instructions to “ Hold for arrival” ; that is, if the draft is to be held for payment until that time. Inasmuch as neither the Federal Reserve Bank o f Dallas nor its collecting agencies have any means of knowing when shipments arrive, the Federal Reserve Bank o f Dallas will not be responsible in any event for delay in demand or presentment where drafts are accompanied by instructions to hold for arrival of shipments or other similar instructions. 10. A n y special instructions as to handling should be incorporated in the letter o f transmittal. Special instructions noted on or attached to the items themselves and not supported by like instructions in the letter o f transmittal will be ignored. 11. This bank will receive, handle, and forward noncash items subject to the following instruction: D o not hold after maturity or for convenience o f payer. Any contrary instruction in the collection letter or otherwise will be dis regarded ; and this bank reserves the right, without prior notice to the sending bank, to recall any noncash item and to return it to the sending bank whenever, in the judgment o f this bank, such item is being held contrary to such instruction. 12. Time items should not be forwarded to us or sent direct to another Federal Reserve bank for our account more than 30 days prior to their maturity. 13. W e do not undertake to present time items on the day o f maturity unless such items are received by us sufficiently in advance o f the day o f maturity to permit presentment to the payer utilizing the means which we normally utilize for that purpose. 14. Maturing bonds and coupons (except obligations o f the United States and o f Governmental agencies which are redeemed by the Federal Reserve banks as fiscal agents) should be listed separately as to each class and maturity, and only coupons o f one class and maturity should be enclosed in the same envelope. Coupons or other securities should not be listed in a letter with checks, notes, bills, or other items. All securities or documents, other than maturing bonds and coupons, should have drafts attached drawn upon the payers for the exact amounts to be collected. 15. F or their own protection and to insure safety, member and nonmember clearing banks should forward bonds, coupons and other valuable securities by insured, registered mail or by express. I f desired, registered mail shipments may be insured under this bank’s insurance policy at the expense o f the sending bank, but in this event a separate advice stating the value o f the shipment must be sent to us by open mail on the same day the shipment is made. 16. Each noncash collection letter covering valuable securities should con tain instructions specifying the value for which the securities should be insured; otherwise, if forwarded by mail for collection, they will be insured at a value to be determined by this bank. PROTEST PRACTICE IN ABSENCE OF INSTRUCTIONS 17. In the absence o f specific instructions in the sending bank’s collection letter, this bank will receive, handle, and forward noncash items subject to the following protest instructions: — 6— BULLETIN No. 9 (1 ) D O N O T P R O T E S T items o f less than $1,000. (2 ) P R O T E S T dishonored items o f $1,000 or over, except bonds, debentures, coupons, and other similar securities. COLLECTION CHARGES 18. Except as provided in paragraph 20, the Federal Reserve banks make no charge for their services in collecting noncash item s; however, it is recog nized that any other bank acting as agent to collect any such item renders a serv ice in presenting, collecting and remitting, for which a reasonable charge may be made if it cares to do so, and when such a charge is made, it will be deducted and credit given to the forwarding bank for the net proceeds. 19. No charge may be made by a collecting bank in connection with the collection or payment o f any check that may be handled as a noncash item. 20. Items sent to the Federal Reserve banks for collection are subject to the following charges: (1 ) Charges made by collecting banks or agents, referred to above; (2 ) Charges made in the discretion o f the Federal Reserve banks for handling or collecting securities; (3 ) A service charge o f S0j# per item on all collection items returned unpaid and unprotested; (4 ) Expenses incurred for postage and insurance or express in for warding items by registered mail or express ; (5 ) A ll telephone and telegraph charges. (See paragraph below, “ Telegraphic Advice.” ) TELEGRAPHIC ADVICE 21. W hen instructed to do so by forwarding banks, this bank will request telegraphic advice of payment or nonpayment o f noncash items and will trans mit by telegraph any information received. A service charge o f $1.50 will be made against the forwarding bank’s account for each telegram transmitted over the leased wire pertaining to payment, nonpayment or tracing o f items, and in connection with receiving or transmitting any other information or instructions. Charges for telegrams transmitted over commercial wire facilities will be made at commercial wire rates against the forwarding bank’s account; telegrams to such banks will be sent “ collect.” INTERPRETATION OF TERMS REQUESTING TELEGRAPHIC ADVICE 22. The terms listed below, when used in advices or communications in connection with noncash items, will be understood to have the meanings indi cated, as follow s: (a ) “ W IR E P A Y M E N T ” when it is desired that the collecting agent furnish telegraphic advice that payment has been made by the drawee or payer. It will be understood that banks requesting “ wire payment” wish to be advised when payment has been made to the col lecting agent, rather than when the proceeds are credited to the reserve or — 7— BULLETIN N o. 9 nonmember clearing account with the Federal Reserve bank. W hen a Federal Reserve bank gives such advice o f payment, it does not neces sarily imply that actually and finally collected funds are in its possession. ( b ) “ W IR E N O N P A Y M E N T ” when a telegraphic advice o f dis honor only is desired. ( c ) “ W IR E F A T E ” or “ W IR E P A Y M E N T O R N O N P A Y M E N T ” when a prompt advice o f payment or nonpayment by drawee or payer is desired. (d ) “ W IR E C R E D IT ” when a telegraphic advice o f final payment and o f credit to the reserve or nonmember clearing account o f the send ing bank is desired. AVAILABILITY OF PROCEEDS OF NONCASH ITEMS 23. Except as hereinafter provided in this paragraph with respect to bonds, coupons, and bankers’ acceptances, credit for the proceeds o f noncash items, with the usual advice, will be given in the reserve account o f member banks, or the clearing account o f nonmember banks, upon receipt by this bank o f payment in actually and finally collected funds or on receipt o f advice from other Federal Reserve banks o f such payment. In the case of bonds, coupons, and bankers’ acceptances forwarded to other Federal Reserve banks for which credit is given subject to final payment, corresponding credit subject to final payment will be given by this bank. 24. Analysis adjustments in the computed average reserve balances o f member banks will be made on noncash items o f $1,000 or more payable in other Federal Reserve districts, making it possible for member banks to receive the benefit for reserve purposes o f the proceeds o f such items as o f the day the collecting Federal Reserve bank receives payment in actually and finally col lected funds. INSTRUCTIONS TO COLLECTING BANKS 25. Collecting banks should not remit for items until they are actually and finally paid. Remittance should be accompanied by the remittance form which is sent with each item. I f remittance is not accompanied by this form , the col lection number, name o f payer and the amount should be furnished so the item can be identified. 26. Collecting banks should follow carefully the instructions contained in collection letters regarding presentation, protest, telegraphic instructions, special instructions, etc. Instructions regarding the handling o f items should not be accepted direct from drawers or preceding endorsers but only from this bank. Deliver securities or documents only on payment o f drafts unless otherwise instructed by us. 27. A ll items should be paid or returned promptly on their due dates and not held for any reason, except upon authorization by this bank. W hen items are returned, give reason for nonpayment. 28. W hen communicating with us about any item, collecting banks should always give the collection number and the amount o f the item so it can be identified. BULLETIN No. 9 — 8— 29. N o collection charge may be made by a collecting bank in connection with the collection or payment o f any check that may be presented to or handled by it as a noncash item. (See paragraph 19.) DALLAS, EL PASO, HOUSTON AND SAN ANTONIO ITEMS 30. Items payable in the cities o f Dallas, El Paso, Houston or San Antonio will be presented when payable within the city collection districts respectively established by the banking customs o f those cities. Items payable outside o f such districts will not be presented, but payers will be requested by mail or telephone to give such items attention. The Federal Reserve Bank o f Dallas assumes no liability for failure to present such items. W hen time will permit, notice o f maturity will be sent by mail to payers of notes and bills having a fixed maturity. DIRECT ROUTING TO OTHER FEDERAL RESERVE DISTRICTS 31. Member and nonmember clearing banks are authorized to send, for our account, noncash items payable in other Federal Reserve districts direct to the Federal Reserve banks and branches o f the districts in which the items are payable. Since direct sending o f such items expedites handling by Federal Reserve offices and also is o f advantage to member and nonmember clearing banks, banks are urged to send such items direct whenever feasible. 32. W hen in our judgment the number or nature o f noncash items payable in other Federal Reserve districts usually received from a bank justifies such action, we reserve the right to decline to accept such items for collection unless they are routed direct to the Federal Reserve banks or branches o f the districts in which they are payable. RIGHT TO AMEND 33. The right is reserved to withdraw, add to, or amend, at any time, any o f the provisions o f this bulletin. Yours very truly, W atrous H. Irons President