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BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM
H O LD IN G C O M P A N Y AFFILIATES—
V O T IN G PERM ITS
REGULATION P
This Regulation as printed herewith is in the form
as revised, effective January 1, 1936.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
INQUIRIES REGARDING THIS REGULATION
Any inquiry relating to this regulation should
be addressed to the Federal Reserve hank of
the district in which the inquiry arises.
CONTENTS
Page
Statutory P rovisions
Sec .
Sec .
................................................................................................................
1
1. D e f i n i t i o n s ..................................................................................................................
1
(a) Holding company affiliate......................................................................
1
(b) A ffilia te ............................................................................................................
1
( c) Subsidiary........................................................................................................
1
(d) A ffiliated ..........................................................................................................
2
(e) M em ber b a n k ...............................................................................................
2
(f) Nonm em ber ban k ........................................................................................
2
(g) General voting p erm it.............................................................................
2
(h) Lim ited voting p erm it.............................................................................
3
(i)
3
2. O rganizations N ot E ngaged as a B u s in e s s in H olding S tock of,
or
S ec .
B o a r d ................................................................................................................
3. State
M anaging or C ontrolling ,B a n k s ..
M ember
Ba n k s
M u st
O btain
and
3
F ile
A greements
by
H olding C o m p a n y A ffiliates .......................................................................
4
Sec .
4. N ecessity
O btain in g V oting P e r m it s ...................................................
4
S ec .
5. G ranting of V oting P e r m it s ...........................................................................
5
S ec .
6. P rocedure R elating to A pplications forV oting P e r m it s ......................
5
Sec .
7. R eserve R e q u ir e m e n t s ..........................................................................................
6
Sec .
8. R evocation of P e r m it ............................................................................................
7
Sec .
for
9. P articipation by S ubsidiary M ember B a n k s
in
N o m in a t io n
or
E lection of D irectors of F ederalR eserve B a n k s ...........................
7
S ec . 10. F o r m s ..................................................................................................................................
7
A p p e n d ix .............................................................................................................................................
8
R E G U L A T IO N P
Revised, Effective January 1, 1936
(Superseding Regulation P, Series of 1933)
H O LD IN G C O M P A N Y AFFILIATES—
V O T IN G PERM ITS
STATUTORY PROVISIONS
This regulation is based upon and issued pursuant to various pro
visions of section 5144 of the Revised Statutes of the United States
and of the Federal Reserve Act, the most important of which, together
with related provisions of law, are published in the Appendix hereto.
SECTION 1. DEFINITIONS
For the purposes of this regulation—
(a) Holding company affiliate.— The term “ holding company affil
iate” shall have the meaning given to it by section 2(c) of the Bank
ing Act of 1933.1 (See Appendix, page 8.)
(b) Affiliate.— The term “ affiliate” shall have the meaning given
to it by section 2(b) of the Banking Act of 1933. (See Appendix,
page 8 .)1
2
(c) Subsidiary.— The term “ subsidiary” means any corporation,
business trust, association, or other similar organization engaged in
any kind of business whatsoever (including any member or non
member bank)—
( 1) Of which any corporation, business trust, association, or
other similar organization owns or controls, directly or indirectly,
a majority of the shares of capital stock; or
( 2 ) Of which any corporation, business trust, association, or
other similar organization owns or controls, directly or indirectly,
more than 50 per centum of the number of shares voted for the
election of the directors, trustees, or other persons exercising
similar functions at the preceding election; or
1 An organization is not a holding company affiliate of a bank (national or State) unless the
bank is a member of the Federal Reserve System.
2 For the purposes of certain provisions of sections 9 and 23A of the Federal Reserve Act
and section 5211 of the Revised Statutes of the United States, the term “ affiliate” also includes
any “ holding company affiliate.”
1
2
REGULATION I>
(3) Of which any corporation, business trust, association, or
other similar organization controls in any manner the election of
a majority of the directors, trustees, or other persons exercising
similar functions; or
(4) Of which all or substantially all the capital stock is held
by trustees for the benefit of the shareholders or members of any
corporation, business trust, association, or other similar organ
ization.
(d) Affiliated.-—-Any corporation, business trust, association, or
other similar organization (including any member or nonmember
bank) shall be deemed to be “ affiliated” with another such organ
ization:
(1) If either organization owns or controls, directly or indi
rectly, a majority of the shares or of the voting shares of the
other or more than 50 per centum of the number of shares of
the other voted for the election of directors, trustees, or other
persons exercising similar functions at the preceding election; or
(2) If either controls in any manner the election of a majority
of the other’s directors, trustees, or other persons exercising
similar functions; or
(3) If control of either is held, directly or indirectly, through
stock ownership or in any other manner, by shareholders of the
other who also owTn or control a majority of the shares of the
latter or more than 50 per centum of the number of shares of
the latter voted for the election of directors, trustees, or other
persons exercising similar functions at the preceding election; or
(4) If control of either is held, directly or indirectly, through
stock ownership or in any other manner, by trustees for the
benefit of the shareholders of the other; or
(5) If a majority of the directors, trustees, or other persons
exercising similar functions of either have similar connections
with the other.
(e) Member bank.— The term “ member bank” means any national
bank, State bank, savings bank, trust company, Morris Plan bank,
mutual savings bank, or other banking institution which is a member
of the Federal Reserve System.
(/) Nonmember bank.— The term “ nonmember bank” means any
banking institution which is not a member of the Federal Reserve
System.
(g) General voting permit.— The term “ general voting permit”
means any voting permit entitling a holding company affiliate to vote
REGULATION P
3
the stock which it owns or controls of a subsidiary member bank at
all meetings of the shareholders of such bank and for all purposes.
{h) Limited voting permit.— The term “ limited voting permit”
means any voting permit authorizing a holding company affiliate to
vote the stock which it owns or controls of a subsidiary member bank
only at a designated meeting or meetings of the shareholders of
such bank or at a meeting or meetings held within a designated period
of time and for only such purposes as are stated in the permit.
(i) Board.— The term “ Board” means the Board of Governors of
the Federal Reserve System.
SECTION 2. ORGANIZATIONS NOT ENGAGED AS A BUSINESS IN HOLDING
STOCK OF, OR MANAGING OR CONTROLLING, BANKS
The term “ holding company affiliate” does not include (except for
the purposes of Sec. 23A of the Federal Reserve Act) any organiza
tion which is determined by the Board not to be engaged, directly
or indirectly, as a business in holding the stock of, or managing or
controlling, banks, banking associations, savings banks, or trust com
panies. The Board will consider this matter in acting upon applica
tions for voting permits and if, on the basis of the available informa
tion, it determines that an applicant is not so engaged within the
meaning of the law, it will advise such applicant accordingly.
If any organization which does not have a voting permit applica
tion pending before the Board desires that the Board determine that
it is not engaged, directly or indirectly, as a business in holding the
stock of, or managing or controlling, banks, banking associations, sav
ings banks, or trust companies, it shall file a request for such
determination.
Any such request shall be accompanied by full information con
cerning all matters having a bearing on the question, including the
purpose for which the organization filing the request was organized,
the nature and purpose of its present activities, the description and
value of its various classes of assets, its relationships with affiliated
organizations (including name and address of each such organization,
the character of its business or other activities, and the nature of the
relationship), and the bank stocks which it directly or indirectly
owns or controls (including the number and value of the shares owned
or controlled of each bank, the total number of outstanding shares
of each bank, and the manner in and purpose for which such stock,
or control thereof, was acquired and is held) .3
3 If the organization filing the request has previously been granted a general voting permit,
it need only file such information as is necessary to supplement and bring up to date the
information contained in its application for such permit.
4
REGULATION P
Any such request and the supporting information shall be in writing
and shall be filed in duplicate with the Federal Reserve agent at the
Federal Reserve bank of the district in which the principal office of
such organization is located. The Federal Reserve agent shall for
ward to the Board the original thereof together with his recommenda
tions and the opinion of counsel for the Federal Reserve bank of such
district.
SECTION 3. STATE MEMBER BANKS MUST OBTAIN AND FILE AGREEMENTS BY
HOLDING COMPANY AFFILIATES
Each State member bank which is or hereafter becomes a subsidiary
of a holding company affiliate shall obtain from such holding company
affiliate an agreement (Form P-5) that such holding company affiliate
will be subject to the same conditions and limitations as are applic
able to holding company affiliates of national banks under the pro
visions of section 5144 of the Revised Statutes. Such agreement shall
be obtained within 90 days after such member bank shall have become
a subsidiary of the holding company affiliate.
Upon the failure of a State member bank which is now or here
after becomes a subsidiary of a holding company affiliate to obtain
the requisite agreement within the time prescribed, the law makes
it the duty of the Board to require such bank to surrender its stock
of the Federal Reserve bank and to forfeit all rights and privileges
of membership in the Federal Reserve System.
The original and one copy of such agreement must be filed promptly
with the Federal Reserve agent at the Federal Reserve bank of the
district in which the holding company affiliate’s principal office is
located, and the original of such agreement shall be sent by such
Federal Reserve agent to the Board.
Any State banking institution applying for membership in the
Federal Reserve System will be required to obtain and file a similar
agreement (Form P - 6) by any corporation, business trust, associa
tion, or other similar organization which will become a holding com
pany affiliate of such banking institution upon the latter’s admission
to membership in the Federal Reserve System.
SECTION 4. NECESSITY FOR OBTAINING VOTING PERMITS
No holding company affiliate of a national bank or of a State
member bank which has executed the agreement required by section
3 of this regulation may lawfully vote any share of stock of such
bank for any purpose, other than to place such bank in voluntary
liquidation or to take any other action pertaining to the voluntary
liquidation of such bank, unless such holding company affiliate shall
have first obtained a voting permit, pursuant to the provisions of
REGULATION P
5
section 5144 of the Revised Statutes and of this regulation, and unless
such voting permit shall be in force at the time such shares are voted.
No State banking institution will be admitted to membership in
the Federal Reserve System until each corporation, business trust,
association, or other similar organization which will become a holding
company affiliate of such banking institution upon the latter’s ad
mission to membership in the Federal Reserve System has filed an
application for a voting permit. At its discretion, the Board will
either (a) require that each such applicant for a voting permit comply
with all conditions to the granting of a general voting permit prior
to the admission of the bank to membership, or (b) admit the bank
to membership subject to the condition that each such applicant
obtain a general voting permit within a reasonable time.
SECTION 5. GRANTING OF VOTING PERMITS
Any holding company affiliate of a member bank, and any such
organization of which a nonmember bank applying for membership
in the Federal Reserve System is a subsidiary, may make application
to the Board for a voting permit entitling it to vote the shares owned
or controlled by it at any or all meetings of shareholders of each of
its subsidiary member banks or entitling the trustee or trustees hold
ing the shares for its benefit or the benefit of its shareholders or
members so to vote such shares.
In acting upon an application for a voting permit, the Board is
required to consider the financial condition of the applicant, the gen
eral character of its management, and the probable effect of the
granting of such permit upon the affairs of each of its subsidiary
member banks. The Board is vested with discretionary authority to
grant or withhold any voting permit applied for as the public interest
may require, provided, however, that no voting permit shall be
granted except upon certain conditions prescribed by law. Accord
ingly, each applicant for a voting permit will be required to execute
certain agreements which are contained in Form P-1 (the application
form) and the Board, in granting voting permits, will prescribe such
additional conditions as it may, in the circumstances, deem reasonable
and proper and in the public interest.
SECTION 6. PROCEDURE RELATING TO APPLICATIONS FOR VOTING PERMITS
An applicant for a voting permit need file only one application,
notwithstanding the fact that it may desire permission to vote shares
of more than one bank. The application shall be submitted on Form
P-1 and the applicant shall furnish the exhibits referred to therein
as a part of its application. Exhibits C, L, N, P, and Q shall be
6
REGULATION P
furnished on Forms P-2, P-3, P-4, P-5, and P - 6, respectively. All
forms (except signatures of persons executing same) should be filled
out by typewriter. Instructions concerning the preparation of the
other exhibits should be obtained from the Federal Reserve agent.
The application and the exhibits referred to in the application
blank shall be executed and filed in duplicate with the Federal R e
serve agent at the Federal Reserve bank of the district in which the
applicant’s principal office is located and a copy thereof shall be filed
with the Federal Reserve agent at the Federal Reserve bank of each
other district in which a subsidiary member bank or subsidiary non
member bank applying for membership is located.
The Federal Reserve agent at the Federal Reserve bank of the
district in which the applicant’s principal office is located will forward
the original application to the Board, with his recommendation and
that of the executive committee of the Federal Reserve bank of his
district. The Federal Reserve agent at the Federal Reserve bank
of any other district in wdiich a subsidiary member bank or a sub
sidiary nonmember bank applying for membership is located will
forward to the Board his recommendation and that of the executive
committee of the Federal Reserve bank of such district.
If a holding company affiliate, which has filed an application for
a voting permit, desires to vote shares of a subsidiary member bank
at any meeting of the bank’s shareholders before the Board grants
it a general voting permit, such holding company affiliate may request
the Board to grant a limited permit entitling it to vote the shares at
such meeting. The request shall be in writing and shall be signed
by a duly authorized officer of the applicant. It shall state the
approximate date of the meeting and shall contain full information
concerning the matters to be acted upon at such meeting. It shall
be filed in duplicate with the Federal Reserve agent with whom the
application for a voting permit has been filed and the Federal Reserve
agent shall forward the original of such request to the Board with his
recommendation.
SECTION 7. RESERVE REQUIREMENTS
Beginning June 16, 1938, every holding company affiliate must, dur
ing the life of any voting permit granted to it, comply with the pro
visions of section 5144 of the Revised Statutes relating to reserves of
readily marketable assets other than bank stock (see Appendix,
page 10). The assets required to be maintained as reserves may be
used by the holding company affiliate for replacement of capital in
banks affiliated with it and for the elimination of losses incurred in
such banks; but any deficiency in such assets resulting from such
REGULATION P
7
use must be made up within a period of two years after the date
such assets are so depleted, unless the Board, in its discretion, extends
such period for cause.
SECTION 8. REVOCATION OF PERMIT
If it appears to the Board that any holding company affiliate has
violated any of the provisions of the Banking Act of 1933 or of any
agreement made pursuant to section 5144 of the Revised Statutes, the
Board may, in its discretion, revoke any voting permit theretofore
granted to such holding company affiliate after giving 60 days’ notice
by registered mail of its intention to the holding company affiliate
and affording it an opportunity to be heard.
SECTION 9. PARTICIPATION BY SUBSIDIARY MEMBER BANKS IN NOMINATION
OR ELECTION OF DIRECTORS OF FEDERAL RESERVE BANKS
Whenever two or more member banks within the same Federal
Reserve district are subsidiaries of the same holding company affiliate,
only one such bank may participate in any nomination or election of
directors of the Federal Reserve bank for such district, and the hold
ing company affiliate of such subsidiary member banks may designate
the particular subsidiary member bank which is to participate in
such nomination or election. A holding company affiliate may desig
nate one of its subsidiary member banks in each of the three groups
into which member banks of each Federal Reserve district are divided
for electoral purposes to participate in the nomination and election of
each director chosen by the group of which such bank is a member.
SECTION 10. FORMS
All forms referred to in this regulation and all such forms as they
may be amended from time to time shall be a part of this regulation.
APPENDIX
Section 2, Banking Act of 1933— Section 2 of the Banking Act
of 1933 (as amended by section 301 of the Banking Act of 1935)
reads in part as follows:
Definition of “ affiliate.” —4
(b) Except where otherwise specifically provided, the term “ affili
ate” shall include any corporation, business trust, association, or other
similar organization—
( 1) Of which a member bank, directly or indirectly, owns or con
trols either a majority of the voting shares or more than 50 per centum
of the number of shares voted for the election of its directors, trustees,
or other persons exercising similar functions at the preceding election,
or controls in any manner the election of a majority of its directors,
trustees, or other persons exercising similar functions; or
(2 ) Of which control is held, directly or indirectly, through stock
ownership or in any other manner, by the shareholders of a member
bank who own or control either a majority of the shares of such bank
or more than 50 per centum of the number of shares voted for the
election of directors of such bank at the preceding election, or by
trustees for the benefit of the shareholders of any such bank; or
(3) Of which a majority of its directors, trustees, or other persons
exercising similar functions are directors of any one member bank.
Definition of “ holding company affiliate.” —
(c) The term “ holding company affiliate” shall include any corpora
tion, business trust, association, or other similar organization—
(1) Which owns or controls, directly or indirectly, either a majority
of the shares of capital stock of a member bank or more than 50 per
centum of the number of shares voted for the election of directors of
any one bank at the preceding election, or controls in any manner the
election of a majority of the directors of any one bank; or
(2) For the benefit of whose shareholders or members all or sub
stantially all the capital stock of a member bank is held by trustees.
Notwithstanding the foregoing, the term “ holding company affiliate”
shall not include (except for the purposes of section 23A of the Fed
eral Reserve Act, as amended) any corporation all of the stock of
which is owned by the United States, or any organization which is
determined by the Board of Governors of the Federal Reserve System
4 This and subsequent catchlines are not a part of the law.
8
REGULATION P
9
not to be engaged, directly or indirectly, as a business in holding the
stock of, or managing or controlling, banks, banking associations,
savings banks, or trust companies.
Section 5144, Revised Statutes.— Section 5144 of the Revised
Statutes of the United States reads in part as follows:
Voting of shares of national hank controlled by holding company
affiliate.—
S e c . 5144. In all elections of directors, each shareholder shall have
the right to vote the number of shares owned by him for as many
persons as there are directors to be elected, or to cumulate such shares
and give one candidate as many votes as the number of directors
multiplied by the number of his shares shall equal, or to distribute
them on the same principle among as many candidates as he shall
think fit; and in deciding all other questions at meetings of share
holders, each shareholder shall be entitled to one vote on each share
of stock held by him; except that * * * shares controlled by any hold
ing company affiliate of a national bank 5 shall not be voted unless
such holding company affiliate shall have first obtained a voting per
mit as hereinafter provided, which permit is in force at the time such
shares are voted, but such holding company affiliate may, without
obtaining such permit, vote in favor of placing the association in
voluntary liquidation or taking any other action pertaining to the
voluntary liquidation of such association. * * *
Shares deemed to he controlled.—
For the purposes of this section shares shall be deemed to be con
trolled by a holding company affiliate if they are owned or controlled
directly or indirectly by such holding company affiliate, or held by
any trustee for the benefit of the shareholders or members thereof.
Application for and granting of voting permits.—
Any such holding company affiliate may make application to the
Board of Governors of the Federal Reserve System for a voting permit
entitling it to vote the stock controlled by it at any or all meetings
of shareholders of such bank or authorizing the trustee or trustees
holding the stock for its benefit or for the benefit of its shareholders
so to vote the same. The Board of Governors of the Federal Reserve
System may, in its discretion, grant or withhold such permit as the
public interest may require. In acting upon such application, the
Board shall consider the financial condition of the applicant, the gen
eral character of its management, and the probable effect of the grant
ing of such permit upon the affairs of such bank, but no such permit
shall be granted except upon the following conditions:
5 Under section 9 of the Federal Reserve Act holding company affiliates of State member
banks must agree to be subject to the same conditions and limitations as are applicable to
holding company affiliates of national banks under this section of the Revised Statutes.
10
REGULATION P
Examinations; publication of statements.—
(a)
Every such holding company affiliate shall, in making the ap
plication for such permit, agree ( 1) to receive, on dates identical
with those fixed for the examination of banks with which it is affili
ated, examiners duly authorized to examine such banks, who shall
make such examinations of such holding company affiliate as shall be
necessary to disclose fully the relations between such banks and such
holding company affiliate and the effect of such relations upon the
affairs of such banks, such examinations to be at the expense of the
holding company affiliate so examined; (2 ) that the reports of such
examiners shall contain such information as shall be necessary to
disclose fully the relations between such affiliate and such banks and
the effect of such relations upon the affairs of such banks; (3) that
such examiners may examine each bank owned or controlled by the
holding company affiliate, both individually and in conjunction with
other banks owned or controlled by such holding company affiliate;
and (4) that publication of individual or consolidated statements of
condition of such banks may be required;
Reserve requirements.—
(b) After five years after the enactment of the Banking Act of
1933, every such holding company affiliate (1) shall possess, and shall
continue to possess during the life of such permit, free and clear of
any lien, pledge, or hypothecation of any nature, readily marketable
assets other than bank stock in an amount not less than 12 per
centum of the aggregate par value of all bank stocks controlled by
such holding company affiliate, which amount shall be increased by
not less than 2 per centum per annum of such aggregate par value
until such assets shall amount to 25 per centum of the aggregate par
value of such bank stocks; and (2 ) shall reinvest in readily market
able assets other than bank stock all net earnings over and above 6
per centum per annum on the book value of its own shares outstand
ing until such assets shall amount to such 25 per centum of the aggre
gate par value of all bank stocks controlled by i t ;
(c) Notwithstanding the foregoing provisions of this section, after
five years after the enactment of the Banking Act of 1933, (1) any
such holding company affiliate the shareholders or members of which
shall be individually and severally liable in proportion to the number
of shares of such holding company affiliate held by them respectively,
in addition to amounts invested therein, for all statutory liability
imposed on such holding company affiliate by reason of its control
of shares of stock of banks, shall be required only to establish and
maintain out of net earnings over and above 6 per centum per annum
on the book value of its own shares outstanding a reserve of readily
marketable assets in an amount of not less than 12 per centum of the
aggregate par value of bank stocks controlled by it, and ( 2) the
assets required by this section to be possessed by such holding com
pany affiliate may be used by it for replacement of capital in banks
affiliated with it and for losses incurred in such banks, but any
REGULATION P
11
deficiency in such assets resulting from such use shall be made up
within such period as the Board of Governors of the Federal Reserve
System may by regulation prescribe and the provisions of this sub
section, instead of subsection (b ), shall apply to all holding company
affiliates with respect to any shares of bank stock owned or controlled
by them as to which there is no statutory liability imposed upon the
holders of such bank stock;
Penalties for false entries.—
(d) Every officer, director, agent, and employee of every such
holding company affiliate shall be subject to the same penalties for
false entries in any book, report, or statement of such holding com
pany affiliate as are applicable to officers, directors, agents, and em
ployees of member banks under section 5209 of the Revised Statutes,
as amended (U. S. C., title 12, sec. 592); and
Relationships with “securities companies” ; payment of dividends.—
(e) Every such holding company affiliate shall, in its application
for such voting permit, ( 1) show that it does not own, control, or
have any interest in, and is not participating in the management or
direction of, any corporation, business trust, association, or other
similar organization formed for the purpose of, or engaged principally
in, th issue, flotation, underwriting, public sale, or distribution, at
wholesale or retail or through syndicate participation, of stocks, bonds,
debentures, notes, or other securities of any sort (hereinafter referred
to as “ securities company” ) ; (2) agree that during the period that the
permit remains in force it will not acquire any ownership, control,
or interest in any such securities company or participate in the man
agement or direction thereof; (3) agree that if, at the time of filing
the application for such permit, it owns, controls, or has an interest
in, or is participating in the management or direction of, any such
securities company, it will, within five years after the filing of such
application, divest itself of its ownership, control, and interest in such
securities company and will cease participating in the management
or direction thereof, and will not thereafter, during the period that
the permit remains in force, acquire any further ownership, control,
or interest in any such securities company or participate in the man
agement or direction thereof; and (4) agree that thenceforth it will
declare dividends only out of actual net earnings.
Revocation of voting permits; effect of revocation.—*
If at any time it shall appear to the Board of Governors of the
Federal Reserve System that any holding company affiliate has vio
lated any of the provisions of the Banking Act of 1933 or of any
agreement made pursuant to this section, the Board of Governors of
the Federal Reserve System may, in its discretion, revoke any such
voting permit after giving sixty days’ notice by registered mail of its
intention to the holding company affiliate and affording it an oppor-
@FedFRASER