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federal

Reserve

bank of

DALLAS. TEXAS

Dallas

75222

Circular No. 70-308
December 18, 1970

REPRINT OF REGULATION S
BANK SERVICE ARRANGEMENTS

To All State Member Banks in the
Eleventh Federal Reserve District:

Enclosed is the new larger size reprint
of Regulation S, as adopted effective April 3> 19&3*
No amendments to the Regulation have heen issued
subsequent to its adoption.
The small size Regulation S should be
destroyed.
Yours very truly,
P. E. Coldwell
President

Enclosure (l)

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

BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM

BANK SERVICE ARRANGEMENTS

R E G U L A T IO N S
(12 CFR 219)
As adopted effective April 3, 1963

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Bank of the Federal Reserve district in which the inquiry arises.

REGULATION S
(12 CFR 219)

As adopted effective April 3, 1963

BANK SERVICE ARRANGEMENTS*

SECTION 219.1— AUTHORITY
AN D SCOPE
This Part implements the provisions of section
5 of the Bank Service Corporation Act, Public
Law 87-856, approved October 23, 1962 (sec. 5,
76 Stat. 1132; 12 U.S.C. 1865), in the application
thereof to arrangements for the performance of
bank services for State banks that are members
of the Federal Reserve System. Under that section
of the Act, no State member bank may cause to
be performed, by contract or otherwise, any bank
services for itself, whether on or off its premises,
unless assurances satisfactory to the Board of
Governors of the Federal Reserve System are fur­
nished to the Board by both the bank and the
party performing such services that the perform­
ance thereof will be subject to regulation and
examination by the Board to the same extent as
if such services were being performed by the
bank itself on its own premises. Such assurances
are required by the Act whether the bank services
are performed by bank service corporations in
which the Act authorizes banks to invest, or by
others. Under section 1(b) of the Act, the term
“bank services” means services such as check and
deposit sorting and posting, computation and post­
ing of interest and other credits and charges,
preparation and mailing of checks, statements,
notices, and similar items, or other clerical, book* T his text correspo n ds to the C od e o f F ed eral R egula­
tions, T itle 12, C h a p te r II, P a rt 219, cited as 12 C F R
219. T he w ords “this P a r t”, as used herein, m ean R eg u la­
tio n S.

keeping, accounting, statistical, or similar func­
tions performed for a bank.
SECTION 219.2— FORM OF ASSURANCES
Unless additional or different assurances are
considered necessary by the Board in specific
cases, the assurances referred to in § 219.1 of this
Part may be submitted in the form of a letter (or
separate letters) signed by a duly authorized offi­
cer of the State member bank and by the party
(or a duly authorized officer or representative of
such party) that will perform the bank services for
the bank, stating, in substance, that the bank and
the party performing such services have entered
into an agreement that the performance of the
services will be subject to regulation and examina­
tion by the Board to the same extent as if such
services were being performed by the bank itself
on its own premises. All such letters of assurances
shall be addressed to the Board of Governors of
the Federal Reserve System in care of the Federal
Reserve Bank of the district in which the State
member bank has its main office.
SECTION 219.3— TIM E FOR FURNISHING
ASSURANCES
As to any arrangement for the performance of
bank services entered into or renewed after the
effective date of this Part, assurances complying
with § 219.2 shall be furnished prior to the per­
formance of any service for the bank under the
bank service arrangement. With respect to any

§ § 2 1 9 .3 -2 1 9 .4

REGULATION S

cause of emergency conditions or situations or are
required for short periods of time due to unusually
heavy work demands, if the State member bank
promptly advises the Federal Reserve Bank of its
district of the circumstances involved and of the
length of time during which any of the bank’s
books or records or any banking media will be
removed from the bank’s premises and of the
location thereof, and unless the bank is advised
by the Federal Reserve Bank that such assurances
must be furnished. Unless specifically requested
by the Board, assurances complying with § 219.2
need not be furnished in connection with any
arrangement by a State member bank for the per­
formance of legal, advisory, and administrative
services, such as transportation or guard services.

bank service arrangement entered into prior to
the effective date of this Part, such assurances
shall be furnished within 30 days after the effec­
tive date of this Part, unless a letter of assurances
covering such bank service arrangement has been
furnished previously pursuant to the Board’s
“Statement for State Member Banks on the ‘Bank
Service Corporation Act’ ” issued October 23,
1962 (Federal Reserve Bulletin, November 1962,
page 1428).
SECTION 219.4— SPECIAL SITUATIONS
Assurances complying with § 219.2 need not
be furnished in connection with arrangements for
bank services which are immediately necessary be­

3

REGULATION S

STATUTORY APPENDIX

STATUTORY APPENDIX

Act of October 23, 1962
F or the purposes of this Act—
Sec . 1. (a) The term “Federal supervisory
agency” means the Comptroller of the Currency,
the Board of Governors of the Federal Reserve
System, or the Board of Directors of the Federal
Deposit Insurance Corporation.
(b) The term “bank services” means services
such as check and deposit sorting and posting,
computation and posting of interest and other
credits and charges, preparation and mailing of
checks, statements, notices, and similar items, or
any other clerical, bookkeeping, accounting, sta­
tistical, or similar functions performed for a bank.
(c) The term “bank service corporation” means
a corporation organized to perform bank services
for two or more banks, each of which owns part
of the capital stock of such corporation, and at
least one of which is subject to examination by a
Federal supervisory agency.
(d) The term “invest” includes any advance of
funds to a bank service corporation, whether by
the purchase of stock, the making of a loan, or
otherwise, except a payment for rent earned, goods
sold and delivered, or services rendered prior to
the making of such payment.
Sec . 2. (a) No limitation or prohibition other­
wise imposed by any provision of Federal law
exclusively relating to banks shall prevent any
two or more banks from investing not more than
10 per centum of the paid-in and unimpaired
capital and unimpaired surplus of each of them
in a bank service corporation.
(b) If stock in a bank service corporation has
been held by two banks, and one of such banks
ceases to utilize the services of the corporation
and ceases to hold stock in it, and leaves the other
as the sole stockholding bank, the corporation
may nevertheless continue to function as such and
the other bank may continue to hold stock in it.
Sec . 3. Whenever a bank (referred to in this
section as an “applying bank” ) subject to ex­
amination by a Federal supervisory agency applies
for a type of bank services for itself from a bank
service corporation which supplies the same type
of bank services to another bank, and the applying
bank is competitive with any bank (referred to in
this section as a “stockholding bank” ) which holds

stock in such corporation, the corporation must
offer to supply such services by either—
(1) issuing stock to the applying bank and
furnishing bank services to it on the same basis
as to the other banks holding stock in the
corporation, or
(2) furnishing bank services to the applying
bank at rates no higher than necessary to fairly
reflect the cost of such services, including the
reasonable cost of the capital provided to the
corporation by its stockholders,
at the corporation’s option, unless comparable
services at competitive overall cost are available
to the applying bank from another source, or
unless the furnishing of the services sought by the
applying bank would be beyond the practical
capacity of the corporation. In any action or pro­
ceeding to enforce the duty imposed by this sec­
tion, or for damages for the breach thereof, the
burden shall be upon the bank service corporation
to show such availability.
Sec . 4. No bank service corporation may en­
gage in any activity other than the performance
of bank services for banks.
S ec . 5. (a) No bank subject to examination
by a Federal supervisory agency may cause to be
performed, by contract or otherwise, any bank
services for itself, whether on or off its premises,
unless assurances satisfactory to the agency pre­
scribed in subsection (b) of this section are fur­
nished to such agency by both the bank and the
party performing such services that the perform­
ance thereof will be subject to regulation and
examination by such agency to the same extent
as if such services were being performed by the
bank itself on its own premises.
(b) The assurances required by subsection (a)
of this section shall be given, in the case of—
(1) a national banking association or a
bank operating under the code of laws for the
District of Columbia, to the Comptroller of the
Currency;
(2) a bank (other than a bank described in
paragraph ( 1) ) which is a member of the Fed­
eral Reserve System, to the Board of Gover­
nors of the Federal Reserve System; and
(3) a bank (other than a bank described in
paragraph (1) or ( 2 ) ) whose deposits are in­
sured by the Federal Deposit Insurance Cor­
poration, to the Board of Directors of the Fed­
eral Deposit Insurance Corporation.
[U.S.C. title 12, 1861-1865.]