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FEDERAL RESERVE BANK
OF DALLAS

Dallas, Texas, February 1, 1940

INTERLO CKIN G BAN K D IR E C TO R ATE S

To the Member Banks of the
Eleventh Federal Reserve District:

Effective February 1, 1940, the Board of Governors o f the Federal
Reserve System has amended its Regulation L governing interlocking bank
directorates under the Clayton Act. The changes made by the amendment
are indicated on the enclosed leaflet. Please insert it at the proper place in
your ring binder containing the current regulations of the Board o f Gov­
ernors and the current bulletins o f this bank.
The effect o f the amendment is to extend until June 1, 1940, the time
during which certain persons who, since August 23, 1935, have been law­
fully and continuously serving at the same time as an officer, director or
employee of a member bank and as an officer, director or employee of one
other bank in the same town or city, may continue their dual relationships.

Yours very truly,
R. R. GILBERT,
President

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

AMENDMENT OF REGULATION L

Effective February 1, 1940
On February 1, 1940, the Board of Governors of the Federal Reserve
System announced that it had amended its Regulation L by substituting the
date June 1, 1940, for the date February 1, 1940, wherever it appears in sub­
sections 3(a) and 3(e) thereof.

INQUIRIES REGARDING THIS REGULATION

Any inquiry relating to this regulation should be ad­
dressed to the Federal Reserye bank of the district in
which the inquiry arises.

CONTENTS
P age
S ta tu to ry
Sec. 1.

P rovision s

...............................................................................................................

Prohibitions

5
5

D irecto rs, officers, and em ployees o f m em ber b a n k s......

5

(b )
Sec. 2.

............................................................................................................

(a )

P riv a te ban kers

.......................................................................................

5

................................................................................................................

5

E xceptions
(a )

P erson s oth er th an p riv ate ban kers or d irectors, offi­

(b )

B a n k s not organ ized under N a tio n a l B a n k A c t , S tate
law , or law s o f D istric t o f C o lu m bia.............................

6

(c )

R elation sh ip s la w fu lly e x istin g on A u g u s t 2 3, 1 9 3 5 ......

6

(d )

E xcep tio n s

cers, or em ployees o f m em ber b a n k s...............................

applicable

to

d irectors, officers, and

5

em ­

ployees o f m em ber b a n k s............................................................

6

E xcep tio n s applicable to p riv ate ba n k ers.............................

7

Relationships permitted by Board ..................................................................

8

(e )
Sec. 3.

00 00

(a )

M o rr is P la n ban k or sim ila r in stitu tion ..........

(b )

P en d in g consolidation or m e rg e r.........................

(c )

T r u s t com p an y h a v in g no d eposit accoun ts........................

9

(d )

E xcep tio n s applicable

to ap riv ate ban ker...........................

9

(e )

R e lation sh ip s la w fu lly e x istin g on A u g u s t 2 3, 1 9 3 5 .......

10

Sec. 4.

E nforcem ent ................................................................

10

Sec. 5.

Am endm ents ..............................................................................................................

10

A p p e n d ix ..........................................................................................................................................

11

3

REGULATION L
As amended effective February 1, 1940

INTERLOCKING BANK DIRECTORATES
UNDER THE CLAYTON ACT
S T A T U T O R Y P R O V IS O N S

This regulation is based upon and issued pursuant to the pro­
visions of section 8 of the Clayton Act, the pertinent parts o f
which are published in the Appendix hereto.1
S E C T IO N

1. P R O H I B I T I O N S

Under section 8 of the Clayton Act, except as hereinafter
stated in section 2:
(a) No person who is a director, officer, or employee of a mem­
ber bank of the Federal Reserve System can legally be at the
same time a director, officer, or employee of any other bank,
banking association, savings bank, or trust company organized
under the National Bank Act or organized under the laws of any
State or of the District of Columbia;
(b) No private banker2 can legally be at the same time a
director, officer, or employee of any bank, banking association,
savings bank, or trust company organized under the National
Bank Act or organized under the laws of any State or of the
District of Columbia.
S E C T IO N 2. E X C E P T I O N S

The provisions of section 8 o f the Clayton A c t :
(a)
Do not apply to a person who is neither a private banker
nor a director, officer, or employee o f a member bank o f the Fed­
eral Reserve System;
1 Section 32 of the Banking Act of 1933 is applicable in certain circumstances to
interlocking relationships between member banks and underwriters and dealers in
securities. See Regulation R of the Board of Governors of the Federal Reserve
System.
Section 17 (c) of the Public Utility Act of 1935 is applicable in certain circum­
stances to interlocking relationships between banks and public utility companies and
public utility holding companies. Inquiries regarding this section should be addres­
sed to the Securities and Exchange Commission and not to the Board of Governors
of the Federal Reserve System.
Secton 305 (b) of the Federal Power Act is applicable in certain circumstances to
interlocking relationships between public utility companies and banks which are
authorized by law to underwrite or participate in the marketing of securities of a
public utility. Inquiries regarding this section should be addressed to the Federal
Power Commission and not to the Board of Governors of the Federal Reserve System.
- The term “ private banker” means an unincorporated individual engaged in the
banking business or a member of an unincorporated firm engaged in such business.
5

6

R E G U L A T IO N

L

(6 )
Do not prohibit a private banker or a director, officer, or
employee of a member bank of the Federal Reserve System from
being at the same time a director, officer, or employee of any
number of other banking institutions not organized under the
National Bank Act or under the laws of any State or of the Dis­
trict o f Columbia ’ ;
(c) Do not prohibit, until February 1, 1939, any interlocking
relationship involving a member bank, which was in existence on
August 23, 1935, the date of the enactment of the Banking Act of
1935, and which, at that time, was lawful under the Clayton Act,
either (a) because it was authorized by a permit* then in effect5
4
*
or (b) because it was otherwise not subject to the prohibitions
of the Clayton A ct5;
( d) Do not prohibit a director, officer, or employee of a mem­
ber bank of the Federal Reserve System from being at the same
time a director, officer, or employee of any number of the follow ­
ing:
(1) Banks, banking associations, savings banks, or trust
companies, more than 90 per cent o f the stock o f which is
owned directly or indirectly, by the United States or by any
corporation of which the United States directly or indirectly
owns more than 90 per cent of the stock ;
(2) Banks, banking associations, savings banks, or trust
companies which have been placed formally in liquidation or
:! In other words, the provisions of section 8 of the Clayton Act do not prohibit a
private banker or a director, officer, or employee of a member bank of the Federal
Reserve System from being at the same time a director, officer, or employee of any
number of the following:
(a) Joint Stock Land banks. Federal Land banks. Federal Reserve banks, Federal
Intermediate Credit banks. The Central Bank for Cooperatives, Federal Home Loan
banks, foreign banking corporations organized under section 25(a) of the Federal
Reserve Act, and other institutions organized under laws of the United States other
than the National Bank Act;
(b) Banking institutions organized under the laws of territories, dependencies, or
insular possessions of the United States, such as the Philippine Islands, Puerto Rico,
Hawaii, or the Canal Zone, and not organized under the National Bank Act; and
(e) Banking institutions organized under the laws of foreign countries.
Federal Savings and Loan Associations and Federal Credit Unions are not organ­
ized under the National Bank Act or under the laws of any State or of the District
of Columbia, and therefore are excepted on that ground irrespective of whether, they
are “ banks” or “ banking associations” within the meaning of the statute.
4 Relationships which were lawful on August 23, 1935, because authorized by a
permit then in effect were lawful within the meaning of this exception irrespective
of whether the permittee was then also serving in other relationships which were
within the prohibitions of the Clayton Act but which were not authorized by such
permit.
3 It is immaterial whether or not such permit contained a provision limiting its
duration, provided it was in effect on August 23, 1935.
GThe provisions of the Clayton Act regarding interlocking bank directorates in
effect prior to August 23, 1935. are analyzed in Regulation L, Series of 1933, which
was published in the Federal Reserve Bulletin for November, 1933, page 711.

R E G U L A T IO N

L

7

which are in the hands of receivers, conservators, or other
officials exercising similar functions;
(3) Corporations principally engaged in international or
foreign banking or banking in a dependency or insular pos­
session of the United States which have entered into agree­
ments with the Board of Governors o f the Federal Reserve
System pursuant to section 25 of the Federal Reserve A c t ;
(4) Banks, banking associations, savings banks, or trust
companies, more than 50 per cent of the common stock of
which is owned directly or indirectly7 by persons who own
directly or indirectly7 more than 50 per cent of the common
stock of such member bank;
(5) Banks, banking associations, savings banks, or
trust companies not located and having no branch in the
same city, town, or village as that in which such member
bank or any branch thereof is located, or in any city, town,
or village contiguous or adjacent thereto8;
(6) Banks, banking associations, savings banks, or trust
companies not engaged in a class or classes of business9 in
which such member bank is engaged;
(7) Mutual savings banks having no capital stock;
(e)
Do not prohibit a private banker from being at the same
time a member of any number of firms o f private bankers, or
from being at the same time a director, officer, or employee of
any number of the follow ing:
(1)
Banks, banking associations, savings banks, or trust
companies, more than 90 per cent of the stock of which is
owned directly or indirectly by the United States or by any
7 The following are clear illustrations of indirect ownership: (1) where more than
50 per cent of the stock of one bank is owned by the other bank; (2) where more
than 50 per cent of the stock of one bank is held in trust for the shareholders of the
other bank; and (3) where more than 50 per cent of the stock of one bank is owned
by a corporation all the stock of which is owned by the shareholders of the other
bank.
* The Board has interpreted the term “ contiguous” as referring to cities, towns,
and villages whose corporate limits touch or coincide at some point, and has inter­
preted the word “ adjacent” as referring to cities, towns, and villages which, al­
though not actually “ contiguous” within the above interpretation of that word, are
located in such close proximity and are so readily accessible to each other as to be
in practical effect a single city, town, or village, as for example, cities, towns, or
villages separated only by a water-course' or a suburb of a city separated from that
city by an intervening suburb.
9 The phrase “ class or classes of business” refers to the various types of business
engaged in by such institutions involving relationships with customers, such as (1)
receiving commercial deposits, (2) receiving savings deposits, (3) carrying checking
accounts, (4) making commercial loans, (5) making real estate loans, (6) making
loans on stock or bond collateral, (7) making “ personal” loans of the character
usually made by Morris Plan or Industrial banks, (8) engaging in corporate trust
business, and (9) engaging in individual trust business.

8

R E G U L A T IO N

L

corporation of which the United States directly or indirectly
owns more than 90 per cent of the stock;
(2) Banks, banking associations, savings banks, or trust
companies which have been placed formally in liquidation or
which are in the hands of receivers, conservators, or other
officials exercising similar functions;
(3) Corporations principally engaged in international or
foreign banking or banking in a dependency or insular pos­
session of the United States which have entered into agree­
ments with the Board of Governors of the Federal Reserve
System pursuant to section 25 of the Federal Reserve A c t ;
(4) Mutual savings banks having no capital stock.
S E C T IO N

3. R E L A T I O N S H I P S

P E R M IT T E D

BY

BOARD

In addition to any relationships covered by the foregoing ex­
ceptions, not more than one o f the following relationships is here­
by permitted1 by the Board of Governors of the Federal Reserve
0
System in the case of any one individual:
(a) Any private banker or any director, officer, or employee
of a member bank of the Federal Reserve System may be at the
same time a director, officer, or employee o f not more than one
cooperative bank, credit union or other similar institution; arid
any private banker or any director, officer, or employee of a
member bank o f the Federal Reserve System who is lawfully
serving as a director, officer, or employee of a Morris Plan bank
or similar institution on January 31, 1939 may continue such
service until June 1, 1940;
(b) Any director, officer, or employee of a member bank of the
Federal Reserve System may be at the same time a director,
officer, or employee of not more than one other bank, banking
association, savings bank, or trust company if the records of both
institutions show that active consideration is being given to the
consolidation or merger of such member bank and such other
bank, banking association, savings bank, or trust company, or
that active consideration is being given to the purchase of a sub­
stantial portion of the assets and the assumption o f a substantial
portion of the liabilities of one such institution by the other; pro­
vided that no interlocking relationship permitted pursuant to this
1
0 The provisions formerly contained in section 8 of the Clayton Act authorizing the
issuance of individual permits by the Board were repealed by section 329 of the
Banking Act of 1935. and the Act now provides that the Board “ may by regulation
permit such service as a director, officer, or employee of not more than one other
such institution or branch thereof * *
(See first paragraph of section 8, quoted
in the Appendix to this regulation.) Accordingly, individual permits will no longer
be issued.

R E G U L A T IO N

L

9

paragraph shall continue fo r a period or periods aggregating
more than six months11;
(c ) Any director, officer, or employee of a member bank of
the Federal Reserve System which does not exercise trust powers
may be at the same time a director, officer, or employee of not
more than one trust company which does not receive or hold de­
posits12; and any director, officer, or employee of a trust com­
pany which is a member o f the Federal Reserve System and
which does not receive or hold deposits1 may be at the same time
2
a director, officer, or employee o f not more than one bank, bank­
ing association, or savings bank which does not exercise trust
pow ers;
(d ) Any private banker may be at the same time a director,
officer, or employee of not more than one o f the follow in g:
(1) A bank, banking association, savings bank, or trust
company organized under the laws of any State or of the
District of Columbia which is not a member bank of the
Federal Reserve System;
(2) A member bank more than 50 per cent of the com­
mon stock o f which is owned directly or indirectly by such
private banker or by a firm of private bankers of which he
is a m em ber;
(B) A member bank not located and having no branch in
the same city, town, or village as that in which such private
banker or a firm of private bankers of which he is a member
maintains a place of business, or in any city, town, or village
contiguous or adjacent thereto13;
(4) A member bank* not engaged in a class or classes of
business1 in which such private banker or a firm of private
4
bankers o f which he is a member is engaged;
(5) A bank, banking association, savings bank, or trust
company within the prohibitions of section 8 of the Clayton
Act, which was included in an application under the Clayton
Act filed by such private banker, which had been received at
the offices o f the Board in Washington, D. C., or at the o f­
fices of a Federal Reserve Agent on or before August 23,
1935, and on which the Board had not taken adverse action
prior to that date; provided, that the provisions of this par­
1 In the case of any relationship existing on the date this regulation becomes
1
effective, such six months period shall begin to run on the effective date of this
regulation.
1 For the purpose of this paragraph, the term “ deposits” shall not include funds
2
received and held in a fiduciary capacity.

3 See footnote 8, page 7.
3
3 See footnote 9, page 7.
4

10

R E G U L A T IO N

L

agraph (5 ) shall be effective only until the next annual elec­
tion of directors of such institution or until March 1, 1936,
whichever is the earlier;
( e)
Any director, officer, or employee of any member bank
o f the Federal Reserve System who, on August 23, 1935, was
lawfully serving at the same time as a private banker or as a
director, officer, or employee o f any other bank, banking associa­
tion, savings bank, or trust company and whose services in such
capacities have been continuous since such date, may continue,
until June 1, 1940, to serve such member bank and not more than
one other such bank, banking association, savings bank, trust
company or private banker.
S E C T IO N 4. E N F O R C E M E N T

(a ) Action by Federal Reserve A gen t.— Each Federal Reserve
Agent shall cause the information contained in reports o f ex­
amination of member banks and other information available to
him from other sources to be analyzed in the light of the pro­
visions of section 8 o f the Clayton A ct relating to interlocking
relationships involving banks; and, in the case o f any apparent
violation of that section, shall communicate with the banking
institutions and with the director, officer or employee involved,
with a view o f ascertaining whether the relationships involved
are in conformity with the law, and if not, obtaining compliance
with the law.
(b ) Reports to Board.— In each case in which, after taking
the steps outlined above, the Federal Reserve Agent finds that the
relationships involved are in violation of the law and have not
been brought into conformity with the law within a reasonable
time after the matter was brought to the attention o f the bank­
ing institutions and the officer, director or employee involved,
the h’ederal Reserve Agent shall report the facts to the Board of
Governors of the Federal Reserve System with a recommenda­
tion as to the action to be taken.
S E C T IO N

5. A M E N D M E N T S

This regulation is subject to amendment or repeal, in whole or
in part, in the discretion of the Board o f Governors of the Fed­
eral Reserve System.

APPENDIX
S T A T U T O R Y P R O V IS IO N S

Section 8 of the Clayton Act (U. S. C., title 15, sec. 19), as
amended by the Banking Act of 1935, reads in part as follow s:
Sec . 8. N o private banker or director, officer, or employee
of any member bank of the Federal Reserve System or any
branch thereof shall be at the same time a director, officer,
or employee o f any other bank, banking association, savings
bank, or trust company organized under the National Bank
Act or organized under the laws of any State or of the Dis­
trict o f Columbia, or any branch thereof, except that the
Board o f Governors of the Federal Reserve System may by
regulation permit such service as a director, officer, or em­
ployee of not more than one other such institution or branch
th ereof; but the foregoing prohibition shall not apply in the
case of any one or more o f the following or any branch
th ereof:
(1) A bank, banking association, savings bank, or trust
company, more than 90 per centum of the stock of which is
owned directly or indirectly by the United States or by any
corporation of which the United States directly or indirectly
owns more than 90 per centum of the stock.
(2) A bank, banking association, savings bank, or trust
company which has been placed formally in liquidation or
which is in the hands of a receiver, conservator, or other
official exercising similar functions.
(3) A corporation principally engaged in international
or foreign banking or banking in a dependency or insular
possession of the United States which has entered into an
agreement with the Board of Governors of the Federal Re­
serve System pursuant to section 25 of the Federal Reserve
Act.
(4) A bank, banking association, savings bank, or trust
company, more than 50 per centum of the common stock of
which is owned directly or indirectly by persons who own
directly or indirectly more than 50 per centum o f the com­
mon stock of such member h>ank.
(5) A bank, banking association, savings bank, or trust
company not located and having no branch in the same city,
town, or village as that in which such member bank or any
branch thereof is located, or in any city, town, or village
contiguous or adjacent thereto.
11


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102