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Circular No, 14 Series of 1920 FEDERAL RESERVE BAM OF DALLAS D a lla s, Texas, A p ril 26, 1920, FEDERAL RESERVE SERVICE TO NON-MEMBER BAMS TO THE NON-MEMBER STATE BAM OR TRUST COMPANY ADDRESSED: Under the authority of Section 13 of the Federal Reserve Act, and Regulation J of the Federal Reserve Board, the Federal Reserve Bank of D allas i s now prepared to extend c erta in f a c i l i t i e s to non-member banks without any o b lig a tio n on the part of such banks to become member banks. In view of the agreement entered into with the non-member banks of th is Federal Reserve D is t r i c t for par remittances to the Federal Reserve Bank, and with a view to compensating the non-member banks for th eir co-operation in extending the c o l le c tio n f a c i l i t i e s of the Federal Reserve System, the f a c i l i t i e s b r ie f ly r e ferred to below are offered to those non-member banks which may desire to become clearing members, (1) CURRENCY SHIPMENTS: Postage and insurance on currency shipped by registered mail to and from the Federal Reserve Bank of D allas or i t s Branches w ill be paid by the Federal Reserve Bank of D e lla s, when prepared end forwarded under the method provided, (if in te r e ste d , ask for C ircular Ho, 50, Series of 1 9 1 8 ,R e v ise d ,) (2) TRUST DEPARTMENT FACILITIES; Liberty Bonds, Victory Notes, c e r t i f ic a t e s of indebtedness or other s e c u r itie s v d ll be received fo r the account of the clea rin g member and a tr u s t receip t issued, containing the follow ing clau se; "The Federal Reserve Bank of Dallas w i l l give to property l e f t in it s custody the same care that it gives i t s own property, but beyond th at w ill not assume r e s p o n s ib ility . S e cu ritie s herein named w ill be d elivered , or the proceeds c red ited , only upon the return of th is receip t to the Federal Reserve Bonk of D a lla s, with appropriate in s t r u c t io n s ," In terest coupons w i l l be clipped and proceeds disposed of by the Federal Reserve Ban!.: of D allas or i t s Branches in accordance with in stru ction s of the d epositing bank, ( I f in te r e ste d , address Federal Reserve Bonk of D allas, Trust Deportment, for further inform ation.) (S) WIRE TRANSFERS: Immediate cred it at par w i l l be given for tra n sfers made to the Federal Reserve Bank by w ire; lik ew ise wire tra n sfe rs w i l l be mads by the Federal Reserve Bank to banks located in other Federal Reserve or Branch Federal Fieserve c i t i e s , without cost to clearing member banks. Telegrams advising wire tr a n sfe rs made for the cred it of th e Federal Reserve Bank, as w e ll as telegrams requesting wire tr a n sfe rs to be made may be sent charges c o l l e c t . ( I f in terested , ask for Circular No, 2 , S eries of 19 2 0 .) (4) TRANSIT FACILITIES: The c o lle c tio n without deduction fo r exchange of a l l checks on a l l banks in the follow ing Federal Reserve D i s t r ic t s : Boston ( F i r s t ) , New York (Second), Philadelphia (T hird). Cleveland (Fourth), Chicago (Seventh), Minneapolis (N inth), Kansas City (Tenth), and Dallas (E leventh), and a l l checks on a l l banks appearing on the Federal Reserve par l i s t in the follow ing This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 2 d istr ic ts.* Richmond ( F i f t h ) , Atlanta (S ix th ), S t. Louis (E ig h th ), San Francisco (T w elfth ). Arrangements for par remittances cn a l l banks in the le s t four men tioned d is t r i c t s are not quite complete but the following percentages of banks in those d is t r ic t s are c o lle c t ib le at par: R i c h m o n d - 5 A t l a n t a - 2 7 ,8^., S t. L o u is -9 3 . 6 San Francisco-90/^. ( I f in terested , ask for Circular Ho. 3, Series of 1 9 2 0 .) %, The c o lle c tio n of a l l items for remittance a fte r payment (C o llectio n items) without charge by the Federal Reserve Bank. ( I f interested ask for C irculars Nos. 56, Series of 1917, 7 and 8, Series of 1 9 2 0 .) (5 ) WILL ACT AS A RESERVE AGENT: The respective Commissioners of Banking of Texas and Oklahoma, and the resp ective State Bank Examiners of Arizona and New Mexico, have advised the Federal Reserve Bank of Dallas that they w i l l , upon a p p lica tio n by sta te banks, approve the Federal Reserve Bank of D allas or i t s E l Paso or Houston Branches as reserve agent for s ta te banks under th e ir respective supervision , and the banking laws of the sta tes mentioned permit of t h is action on the part of th eir banking a u th o ritie s. By an amendment to the S tate Ban!:ing lev; in Louisiana, a sta te bank in that sta te is permitted to count any part of i t s funds carried with the Federal Reserve Bank as a part of i t s lawful reserve required by the State Banking law to be carried in i t s v a u lts . Therefore, i t is not necessary for the State Bank Examiner in that state to approve the Federal Reserve Bank as reserve agent for s ta te banks under his sup ervision. The entire sta te of Texas and parts of the other four sta te s mentioned, above comprise the Eleventh Federal Reserve D i s t r ic t . I t is therefore obvious that a state bank located w ithin the Eleventh Federal Reserve D is tr ic t which be comes a clearing member of the Federal Reserve Bank of D allas under the terms of t h i s circu la r can, upon ap p lication to and approval of the banking authority of i t s s t a t e , designate the Federal Reserve Eank of Dallas or either one of it 3 branches, as reserve agent and in that event, e l l balances maintained by i t with the Federal Reserve Bank or one of i t s Branches, w il l count as a part of the clearin g member's le g a l reserve under the banking laws of i t s state in the same manner as balances carried with any other reserve agent. The above f a c i l i t i e s are offered to incorporated non-member banks which become clearing members for the same b en efits and under the same methods as to member banks. However, a clearin g member bank, as a condition precedent to the a v a i la b ilit y of such f a c i l i t i e s to i t , w ill be required to maintain a balance with the Federal Reserve Bank of Dallas or i t s Branches, equal to only one-half of the balance which i s required of e member bank. The lower balance required from a clearin g member is by v irtu e of the fact th a t a l l of the f a c i l i t i e s a v a il able to member banks cannot, under the law, be made availab le to non-member banks. The balance which w ill be required from a clearing member bank in order to make the f a c i l i t i e s enumerated a v ailab le t o i t w ill be upon the follow ing b a s is : Banks not in reserve c i t i e s 3-§yo of net demand d eposits and 1-JjS of time d e p o sits, and from banks in reserve c it i e s 5 of not demand d ep osits and of time d e p o sits. The Federal Reserve Act requires that a clearin g member bank must maintain a balance with the F'ederai Reserve Bank s u ffic ie n t to o ffs e t items in the % process of c o lle c tio n ; but inasmuch as the Federal Reserve Bank of D allas has no clea rin g members at the present tim e, the basis suggested above is te n ta tiv e and may, a fte r experience, be revised . A p plications to become a clearing member should be made by ordinary l e t t e r to the Federal Reserve Bank of D allas, and the clearing membership of banks in the t e r r i t o r y of e ith e r the Houston or El Paso Branches v ;i l l be assigned to the Branch in the te r r ito r y of which the applicant bank i s lo c a te d . A non-member bank d esirin g to withdraw i t s clearing membership may do so, a fte r t h ir t y days w ritten notice s h e ll have been file d with the Federal Reserve Bank of D allas, or with the Branch to which assigned, and "die adjustment cf e l l outstanding item s. Non-member banks which become clearing members of the Federal Reserve Bank of Dallas w i l l , by sending a l l of th e ir m iscellaneous cash items to the Federal Reserve Baric, save at le a s t one day in obtaining the use of converted proceeds, over the present method of sending such m iscellaneous items to c ity correspondents for c r e d it and w il l receive a correspondingly increased amount of in te re st on th e ir balance with th e ir reserve c ity correspondents by reason of the proceeds being immediately a v a ila b le to the c i t y correspondent on an in te r e st b a sis when tran sferred by the Federal Reserve Bank. In expressing t h is thought, due regard is had for the in te r e st of reserve c it y banks. By sending miscellaneous items d irect to th e Federal Reserve Bank, the reserve c ity correspondent o f the clea rin g member bank would be relieved of a large proportion of the overhead expense in conducting such account, as it would not be required to handle the items but would receive the c o lle c te d proceeds in one tran saction by tr a n sfe r from the Federal Reserve Bank, The use of such f a c i l i t i e s would, in our judgment, reduce the " f l o a t " (the amount of items in the process of c o lle c tio n a fte r credit to the sending bank*s account) f u lly 25 Inquiries for more d etailed information are invited and w ill be answered f u l l y . R esp ectfu lly, (Signed) R. It. Van Zendt Governor.
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