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F E D E R A L R E S E R V E B A N K OF D A L L A S
DALLAS, TEXAS

February 1, 1961

R E P R IN T S OF REG U LA TIO N S H, N, P, AN D Y

To All Banks and Others Concerned
in the Eleventh Federal R eserve D istrict:

Enclosed are copies o f Regulations H, N, P, and, Y, issued
by the Board o f Governors o f the Federal Reserve System. The
R e g u la tio n s h a v e been re p r in te d to in c o rp o r a te o u tsta n d in g
amendments and to conform w ith the style o f the Code o f the
Federal Regulations.
Member banks are requested to rem ove the old copies o f the
Regulations and amendments fro m their ring binders containing
the Regulations o f the Board o f Governors and insert the enclosed
copies in lieu thereof.
Y ours very truly,
W atrous H. Irons
President

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

MEMBERSHIP OF STATE BANKING INSTI­
TUTIONS IN THE FEDERAL
RESERVE SYSTEM
▼
REGULATION H
(1 2 CFR 2 0 8 )
As amended, effective August 21, 1959

P rin t o f N o v e m b e r 1 9 6 0

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

CONTENTS
A uthority

for

R egulation...................................................................

Page
1

Sec.

208.1. D efinitions ............................................................................................
( a) State bank .......................................................................................
( b) Mutual savings bank....................................................................
( c) Board ...............................................................................................
(d) Board of directors.........................................................................
( e) Federal Reserve Bank stock ........................................................
( j ) Capita] and capital stock..............................................................

1
1
1
2
2
2
2

Sec.

208.2. E ligibility R equirements .................................................................

2

Sec.

208.3. I nsurance

D eposits.........................................................................

3

Sec.

208.4. A pplication for M embership ..............................................................
(a) State bank, other than a mutual savings bank.....................
( b) Mutual savings bank....................................................................
( cj Mutual savings bank which is not authorized to purchase
stock of Federal Reserve Bank at time of adm ission.. . .
( d) Execution and filing of application..........................................

3
3
4

208.5. A pproval of A pplication.........................................................................
( a) Matters given special consideration by Board.......................
( b) Procedure for admission to membership after approval of
application .................................................................................

4
4

Sec.

Sec.

208.6. P rivileges

Sec.

208.7. C onditions

Sec.

of

4
4

5

and

R equirements o M embership ...............................
f

5

of

M emberships .............................................................

6

208.8. E stablishment or M aintenance of B ranches .............................
(a) In general .......................................................................................
( b) Branches in the United States..................................................
( c) Application for approval of branches in United States. . . .
( d) Foreign branches .........................................................................
( e ) Application for approval of foreign branches .......................

7
7
8
9
9
9

S ec. 208.9. P ublication of R eports of M ember B anks and T heir
A ffiliates ................................................................................................... 10
( a) Reports of member banks............................................................ 10
( b) Reports of affiliates............................................................................ 11
S ec.

208.10. V oluntary W ithdrawal fromF ederal R eserve S ystem .............
(a) General ...........................................................................................
( b) Notice of intention of withdrawal.............................................
( c ) Tim e and method of effecting actual withdrawal...............
(d) Withdrawal of n otice....................................................................

12
12
12
13
13

Sec.

208.11. B oard F orms ...........................................................................................

13

REGULATION H
(12 CFR 208)
As amended, effective August 21, 1959

MEMBERSHIP OF STATE BANKING INSTITUTIONS
IN THE FEDERAL RESERVE SYSTEM*
AUTHORITY FOR REGULATION

This regulation is based upon and issued pursuant to provisions of section 9 of
the Federal Reserve Act and related provisions of law.
SECTION 208.1—DEFINITIONS

For the purposes of this part:
(a) The term “ State bank” means any bank or trust company
incorporated under a special or general law of a State or under
a general law for the District of Columbia, any mutual savings
bank (unless otherwise indicated), and any Morris Plan bank
or other incorporated banking institution engaged in similar
business.1
(b ) The term “ mutual savings bank” means a bank without
capital stock transacting a savings bank business, the net earn­
ings of which inure wholly to the benefit of its depositors after
payment of obligations for any advances by its organizers, and
in addition thereto includes any other banking institution the cap­
ital of which consists of weekly or other time deposits which are
segregated from all other deposits and are regarded as capital stock
for the purposes of taxation and the declaration of dividends.
* The text corresponds to the Code o f Federal Regulations, Title 12, Chapter II, Part 208;
cited as 12 CFR 208.
1 Under the provisions of section 19 o f the Federal Reserve Act, national banks and banks
organized under local laws, located' in a dependency or insular possession or any part of the
United States outside the States of the United States and the District of Columbia are not
required to become members o f the Federal Reserve System but may, with the consent- of the
Board, become members of the System. However, this Part 208 is applicable only to the
admission o f banks eligible for admission to membership under section 9 of the Federal Re­
serve Act and does not cover the admission of banks eligible under section 19 of the Act.
Any bank desiring to be admitted to the System under the provisions of section 19 should
communicate with the Federal Reserve Bank with which it desires to do business.

1

2

REGULATION H

S ecs . 208.1-208.2

(c) The term “ Board” means the Board of Governors of the
Federal Reserve System.
(d) The term “ board of directors” means the governing board
of any institution performing the usual functions of a board of
directors.
(e) The term “ Federal Reserve Bank stock” includes the deposit
which may be made with a Federal Reserve Bank in lieu of a sub­
scription for stock by a mutual savings bank which is not permitted
to purchase stock in a Federal Reserve Bank, unless otherwise
indicated.
(/) The terms “ capital” and “ capital stock” means common stock,
preferred stock and legally issued capital notes and debentures pur­
chased by the Reconstruction Finance Corporation which may be
considered capital and capital stock for purposes of membership in
the Federal Reserve System under the provisions of section 9 of the
Federal Reserve Act.

SECTION 208.2—ELIGIBILITY REQUIREMENTS

(a) Under the terms of section 9 of the Federal Reserve Act, as
amended, to be eligible for admission to membership in the Federal
Reserve System:
(1) A State bank, other than a mutual savings bank, must
possess capital stock and surplus which, in the judgment of the
Board, are adequate in relation to the character and condition of
its assets and to its existing and prospective deposit liabilities
and other corporate responsibilities: Provided, That no bank en­
gaged in the business of receiving deposits other than trust funds,
which does not possess capital stock and surplus in an amount
equal to that which would be required for the establishment of
a national banking association in the place in which it is located,
shall be admitted to membership unless it is, or has been, approved
for deposit insurance under the Federal Deposit Insurance Act.
(2) A mutual savings bank must possess surplus and undivided
profits not less than the amount of capital required for the or­
ganization of a national bank in the place where it is situated.
(b) The minimum capital required for the organization of a na­
tional bank, referred to hereinbefore in connection with the capital

S ecs . 208.2-208.4

REGULATION H

3

required for admission to membership in the Federal Reserve System,
is as follows:
If located in a city or town with a population:

^Capita™

Not exceeding 6,000 inhabitants................................................... $ 50,000
Exceeding 6,000 but not exceeding 50,000 inhabitants.............. 100,000
Exceeding 50,000 inhabitants (except as stated below )............ 200,000
In an outlying district of a city with a population exceeding
50,000 inhabitants; provided State law permits organization
of State banks in such location with a capital of $100,000
or less........................................................................................... 100,000
With certain exceptions not here applicable, a national bank must
have surplus equal to 20 per cent of its capital in order to commence
business.
SECTION 208.3—INSURANCE OF DEPOSITS

Any State bank becoming a member of the Federal Reserve Sys­
tem which is engaged in the business of receiving deposits other than
trust funds and which is not at the time an insured bank under the
provisions of the Federal Deposit Insurance Act, will become an in­
sured bank under the provisions of that Act on the date upon which
it becomes a member of the Federal Reserve System.2 In the case of
an insured bank which is admitted to membership in the Federal Re­
serve System, the bank will continue to be an insured bank.
SECTION 208.4—APPLICATION FOR MEMBERSHIP

(a)
State bank, other than a mutual savings bank.— A State
bank, other than a mutual savings bank, applying for membership,
shall make application on Form F.R. 83A to the Board for an amount
of capital stock in the Federal Reserve Bank of its district equal to
six per cent of the paid-up capital stock and surplus of the applying
institution.
2 In the case of a State bank which is engaged in the business of receiving deposits other
than trust funds and which at the time of its admission to membership in the Federal Reserve
System is not an insured bank, the Board is required under the provisions of sections 4 and 6
of the Federal Deposit Insurance Act to issue a certificate to the Federal Deposit Insurance
Corporation to the effect that the bank is a member of the Federal Reserve System and that
consideration has been given to the financial history and condition of the bank, the adequacy
of its capital structure, its future earnings prospects, the general character of its manage­
ment, the convenience and needs of the community to be served by the bank, and whether
or not its corporate powers are consistent with the purposes o f the Federal Deposit Insurance
Act.

4

REGULATION H

S ecs . 208.4-208.5

(6) Mutual savings banks.— A mutual savings bank applying for
membership shall make application on Form F.R. 83B to the Board
for an amount of capital stock in the Federal Reserve Bank of its
district equal to six-tenths of one per cent of its total deposit liabili­
ties as shown by the most recent report of examination of such insti­
tution preceding its admission to membership, or, if such institution
be not permitted by the laws under which it was organized to pur­
chase stock in a Federal Reserve Bank, on Form F.R. 83C, for per­
mission to deposit with the Federal Reserve Bank an amount equal
to the amount which it would have been required to pay in on account
of a subscription to capital stock.
(c) Mutual savings bank which is not authorized to purchase
stock of Federal Reserve Bank at time of admission.— If a mutual
savings bank be admitted to membership on the basis of a deposit
of the required amount with the Federal Reserve Bank in lieu of
payment upon capital stock because the laws under which such bank
was organized do not at that time authorize it to purchase stock in
the Federal Reserve Bank, it shall subscribe on Form F.R. 83D for
the appropriate amount of stock in the Federal Reserve Bank when­
ever such laws are amended so as to authorize it to purchase stock
in a Federal Reserve Bank.3
(d) Execution and filing of application.— Each application madeunder the provisions of this section and the exhibits referred to in the
application blank shall be executed and filed, in duplicate with the
Federal Reserve Bank of the district in which the applying bank is
located.
SECTION 208.5—APPROVAL OF APPLICATION

(a)
Matters given special consideration by Board.— In passing
upon an application, the following matters will be given special con­
sideration :
(1)
The financial history and condition of the applying bank
and the general character of its management;
8 The Federal Reserve Act provides that, if the laws under which any such savings bank
was organized be not amended at the first session o f the legislature following the admission
of the savings bank to membership so as to authorize mutual savings banks to purchase
Federal Reserve Bank stock, or if such laws be so amended and the bank fail within six
months thereafter to purchase such stock, all of its rights and privileges as a member bank
shall be forfeited and its membership in the Federal Reserve System shall be terminated
in the manner prescribed in section 9 o f the Federal Reserve Act.

S ecs . 208.5-208.6

REGULATION H

5

(2) The adequacy of its capital structure in relation to the
character and condition of its assets and to its existing and
prospective deposit liabilities and other corporate responsibilities;
and its future earnings prospects;
(3) The convenience and needs of the community to be served
by the bank; and
(4) Whether its corporate powers are consistent with the pur­
poses of the Federal Reserve Act.
(6)
Procedure for admission to membership after approval of
application.— If an applying bank conforms to all the requirements
of the Federal Reserve Act and this part and is otherwise qualified
for membership, its application will be approved subject to such con­
ditions as may be prescribed pursuant to the provisions of the Fed­
eral Reserve Act. When the conditions prescribed have been accepted
by the applying bank, it should pay to the Federal Reserve Bank of
its district one-half of the amount of its subscription and, upon re­
ceipt of advice from the Federal Reserve Bank as to the required
amount, one-half of one per cent of its paid-up subscription for each
month from the period of the last dividend.4 The remaining half of
the bank’s subscription shall be subject to call when deemed neces­
sary by the Board. The bank’s membership in the Federal Reserve
System shall become effective on the date as of which a certificate
of stock of the Federal Reserve Bank is issued to it pursuant to its
application for membership or, in the case of a mutual savings bank
which is not authorized to subscribe for stock, on the date as of which
a certificate representing the acceptance of a deposit with the Federal
Reserve Bank in place of a payment on account of a subscription
to stock is issued to it pursuant to its application for membership.

SECTION 208.6—PRIVILEGES AND REQUIREMENTS OF MEMBERSHIP

Every State bank while a member of the Federal Reserve System—
(a) Shall retain its full charter and statutory rights subject to the
provisions of the Federal Reserve Act and other Acts of Congress
applicable to member State banks, to the regulations of the Board
made pursuant to law, and to the conditions prescribed by the Board
and agreed to by such bank prior to its admission;
4 In the case of a mutual savings bank which is not permitted by the laws under which it
was organized to purchase stock in a Federal Reserve Bank, it shall deposit with the Federal
Reserve Bank an amount equal to the amount which it would have been required to pay in
on account of a subscription to capital stock.

6

REGULATION H

S ecs . 208.6-208.7

(b ) Shall enjoy all the privileges and observe all the requirements
of the Federal Reserve Act and other Acts of Congress applicable to
member State banks and of the regulations of the Board made pur­
suant to law which are applicable to member State banks;
(c) Shall comply at all times with any and all conditions of mem­
bership prescribed by the Board in connection with the admission of
such bank to membership in the Federal Reserve System; and
(d) Shall not reduce its capital stock except with the prior con­
sent of the Board.5
SECTION 208.7—CONDITIONS OF MEMBERSHIP

(a) Pursuant to the authority contained in the first paragraph ofsection 9 of the Federal Reserve Act, which authorizes the Board
to permit applying State banks to become members of the Federal
Reserve System “ subject to the provisions of this Act and to such
conditions as it may prescribe pursuant thereto,” the Board, except
as hereinafter stated, will prescribe the following conditions of mem­
bership for each State bank hereafter applying for admission to the
Federal Reserve System, and, in addition, such other conditions as
may be considered necessary or advisable in the particular case:
(1) Such bank at all times shall conduct its business and
exercise its powers with due regard to the safety of its depositors,
and, except with the permission of the Board of Governors of the
Federal Reserve System, such bank shall not cause or permit
any change to be made in the general character of its business
or in the scope of the corporate powers exercised by it at the
time of admission to membership.6
(2) The net capital and surplus funds of such bank shall be
adequate in relation to the character and condition of its assets
and to its deposit liabilities and other corporate responsibilities.
5 This applies to capital stock o f all classes and to capital notes and debentures legally
issued and purchased by the Reconstruction Finance Corporation which, under the Federal
Reserve Act, are considered as capitaJ stock for purposes of membership.
6 For many years, the Board prescribed, as standard conditions of membership, a condition
which, in general, prohibited banks from engaging as a business in the sale of real estate
loans to the public and certain conditions relating to the exercise of trust powers, including
one which prohibited self-dealing in the investment o f trust funds. The elimination of these
conditions as standard conditions of membership does not reflect any change in the Board’s
position as to the undesirability o f the practices formerly prohibited by such conditions; and
attention is called to the fact that engaging as a business in the sale of real estate loans to
the public or failing to conduct trust business in accordance with the applicable State laws
and sound principles of trust administration may constitute unsafe or unsound practices and
violate the condition set forth in this subparagraph.

S ecs . 208.7-208.8

REGULATION H

7

(b ) The acquisition by a member State bank of the assets of an­
other institution through merger, consolidation, or purchase may result
in a change in the general character of its business or in the scope of
its corporate powers within the meaning of the condition set forth in
paragraph (a )(1 ) of this section, and if at any time a bank subject
to such condition anticipates making any such acquisition a detailed
report setting forth all the facts in connection with the transaction
shall be made promptly to the Federal Reserve Bank of the district
in which such bank is located.
(c) If at any time, in the light of all the circumstances, the aggre­
gate amount of a member State bank’s net capital and surplus funds
appears to be inadequate, the bank, within such period as shall be
deemed by the Board to be reasonable for this purpose, shall increase
the amount thereof to an amount which in the judgment of the Board
shall be adequate in relation to the character and condition of its
assets and to its deposit liabilities and other corporate responsibilities.

SECTION 208.8—ESTABLISHMENT OR MAINTENANCE OF BRANCHES

(a) In general.— Every state bank which is or hereafter becomes
a member of the Federal Reserve System is subject to the provisions
of section 9 of the Federal Reserve Act relating to the establishment
and maintenance of branches 7 in the United States or in a dependency
or insular possession-thereof or in a foreign country. Under the pro­
visions of section 9, member State banks establishing and operating
branches in the United States beyond the corporate limits of the city,
town, or village in which the parent bank is situated must conform to
the same terms, conditions, limitations, and restrictions as are appli­
cable to the establishment of branches by national banks under the
provisions of section 5155 of the Revised Statutes of the United States
relating to the establishment of branches in the United States, except
that the approval of any such branches must be obtained from the
Board rather than from the Comptroller of the Currency. The approval
of the Board must likewise be obtained before any member State bank
establishes any branch after July 15, 1952, within the corporate limits
of the city, town, or village in which the parent bank is situated
(except within the District of Columbia). Under the provisions of
section 9, member State banks establishing and operating branches in
7
Section 5155 o f the Revised Statutes o f the United States provides that: “ (f ) The term
‘branch* as used in this section shall be held to include any branch bank, branch office, branch
agency, additional office, or any branch place o f business located in any State or territory
of the United States or in the District of Columbia at which deposits are received, or checks
paid, or money lent.”

8

REGULATION H

S ec. 208.8

a dependency or insular possession of the United States or in a foreign
country must conform to the terms, conditions, limitations, and restric­
tions contained in section 25 of the Federal Reserve Act relating to the
establishment by national banks of branches in such places.
(6) Branches in the United States.—
(1) Before a member State bank establishes a branch (except
within the District of Columbia), it must obtain the approval of
the Board.
(2) Before any nonmember State bank having a branch or
branches established after February 25, 1927, beyond the corpo­
rate limits of the city, town, or village in which the bank is situ­
ated is admitted to membership in the Federal Reserve System,
it must obtain the approval of the Board for the retention of such
branches.
(3) A member State bank located in a State which by statute
law permits the maintenance of branches within county or greater
limits may, with the approval of the Board, establish and operate,
without regard to the capital requirements of section 5155 of the
Revised Statutes, a seasonal agency in any resort community
within the limits of the county in which the main office of such
bank is located for the purpose of receiving and paying out de­
posits, issuing and cashing checks and drafts, and doing business
incident thereto, if no bank is located and doing business in the
place where the proposed agency is to be located; and any permit
issued for the establishment of such an agency shall be revoked
upon the opening of a State or national bank in the community
where the agency is located.
(4) Except as stated in paragraph (6) (3) of this section, in
order for a member State bank to establish a branch beyond the
corporate limits of the city, town, or village in which it is situ­
ated, the aggregate capital stock of the member State bank and
its branches shall at no time be less than the aggregate mini­
mum capital stock required by law for the establishment of an
equal number of national banking associations situated in the
various places where such member State bank and its branches
are situated.8
8
The requirement o f this paragraph is met if the aggregate capital stock of a member
State bank having branches is not less than the total amount of capital stock which would
be required for the establishment o f one national bank in each of the places in which the
head office and branches of the member State bank are located, irrespective of the number of
offices which the bank may have in any such place. There are no additional capital require­
ments for additional branches within the city, town, or village in which the head office is
located.

Sec. 208.8

REGULATION H

9

(5) A member State bank may not establish a branch beyond
the corporate limits of the city, town, or village in which it is
situated unless such establishment and operation are at the time
authorized to State banks by the statute law of the State in
question by language specifically granting such authority affirm­
atively and not merely by implication or recognition.
(6) Any member State bank which, on February 25, 1927, had
established and was actually operating a branch or branches in
conformity with the State law is permitted to retain and operate
the same while remaining a member of the Federal Reserve Sys­
tem, regardless of the location of such branch or branches.
(7) The removal of a branch of a member State bank from one
town to another town constitutes the establishment of a branch
in such other town and, accordingly, requires the approval of the
Board. The removal of a branch of a member State bank from
one location in a town to another location in the same town will
require the approval of the Board if the circumstances of the
removal are such that the effect thereof is to constitute the estab­
lishment of a new branch as distinguished from the mere reloca­
tion of an existing branch in the immediate neighborhood without
affecting the nature of its business or customers served.
(c) Application for approval of branches in United States.—
Any member State bank desiring to establish a branch should submit
a request for the approval by the Board of any such branch to the
Federal Reserve Bank of the district in which the bank is located.
Any nonmember State bank applying for membership and desiring to
retain any branch established after February 25, 1927, beyond the
corporate limits of the city, town, or village in which the bank is
situated should submit a similar request. Any such request should
be accompanied by advice as to the scope of the functions and the
character of the business which are or will be performed by the branch
and detailed information regarding the policy followed or proposed to
be followed with reference to supervision of the branch by the head
office; and the bank may be required in any case to furnish additional
information wffiich will be helpful to the Board in determining whether
to approve such request.
(d) Foreign branches.— Before a member State bank establishes
a branch in a foreign country, or dependency or insular possession of
the United States, it must have a capital and surplus of $1,000,000 or
more and obtain the approval of the Board.
(e) Application for approval of foreign branches.— Any mem­

10

REGULATION H

S ecs . 208.8-208.9

ber State bank desiring to establish such a branch and any nonmember
State bank applying for membership and desiring to retain any such
branch established after February 25, 1927, should submit a request
for the approval by the Board of any such branch to the Federal
Reserve Bank of the district in which the bank is located. Any such
request should be accompanied by advice as to the scope of the func­
tions and the character of the business which are or will be performed
by the branch and detailed information regarding the policy followed
or proposed to be followed with reference to supervision of the branch
by the head office; and the bank may be required in any case to fur­
nish additional information which will be helpful to the Board in
determining whether to approve such request.
SECTION 208.9—PUBLICATION OF REPORTS OF MEMBER BANKS
AND THEIR AFFILIATESB

(a) Reports of member banks.— (1) Each report of condition
made by a member State bank, which is required to be made to the
Federal Reserve Bank of its district as of call dates fixed by the Board
of Governors of the Federal Reserve System, shall be published by such
member bank within twenty days from the date the call therefor is
issued.
(2) The report shall be printed in a newspaper published in the
place where the bank is located or, if there be no newspaper published
in the place where the bank is located, then in a newspaper published
in the same or in an adjoining county and in general circulation in
the place where the bank is located. The term “ newspaper” , for the
purpose of this part, means a publication with a general circula­
tion published not less frequently than once a week, one of the primary
functions of which is the dissemination of news of general interest.
(3) The copy of the report for the use of the printer for publication
should be prepared on the form supplied or authorized for the purpose
by the Federal Reserve Bank. The published information shall agree
9
Under the provisions o f section 9 o f the Federal Reserve Act, reports of condition of
member State banks which, under that section, must be made to the respective Federal
Reserve Banks on call dates fixed by the Board of Governors of the Federal Reserve System
“ shall be published by the reporting banks in such manner and in accordance with such
regulations as the said Board may prescribe".
Section 9 also provides that the reports of affiliates of a member State bank which are
required by that section to be furnished to the respective Federal Reserve Banks “ shall be
published by the bank under the same conditions as govern its own condition reports” . The
term "affiliates” , as used in this provision o f section 9, under the express terms of that
section, includes “ holding company affiliates as well as other affiliates” , but a member state
bank is not required to furnish to a Federal Reserve Bank the report of an affiliated member
bank.

S ec. 208.9

REGULATION H

11

in every respect with that shown on the face of the condition report
rendered to the Federal Reserve Bank, except that any item for which
no amount is reported may be omitted in the published statement.
All signatures shall be the same in the published statement as in
the original report submitted to the Federal Reserve Bank, but the
signatures may be typewritten or otherwise copied on the report for
publication.
(4)
A copy of the printed report shall be submitted to the Federal
Reserve Bank attached to the certificate on the form supplied or
authorized for the purpose by the Federal Reserve Bank.
(b ) Reports of affiliates.1 — (1) Each report of an affiliate of a
0
member State bank, including a holding company affiliate, shall be
published at the same time and in the same newspaper as the affiliated
bank’s own condition report submitted to the Federal Reserve Bank,
unless an extension of time for submission of the report of the affil­
iate has been granted under authority of the Board of Governors of
the Federal Reserve System. When such extension of time has been
granted, the report of the affiliate must be submitted and published
before the expiration of such extended period in the same newspaper
as the condition report of the bank was published.
(2) The copy of the report for the use of the printer for publica­
tion should be prepared on Form F.R. 220a. The published informa­
tion shall agree in every respect with that shown on the face of the
report of the affiliate furnished to the Federal Reserve Bank by the
affiliated member bank, except that any item appearing under the
caption “ Financial relations with bank” against which the word
“ none” appears on the report furnished to the Federal Reserve Bank
may be omitted in the published statement of the affiliate: Provided,
That if the word “ none” is shown against all of the items appearing
under such caption in the report furnished to the Federal Reserve
Bank the caption “ Financial relations with bank” shall appear in the
published statement followed by the word “ none.” All signatures shall
be the same in the published statement as in the original report sub1
0 Section 21 o f the Federal Reserve Act, among other things, provides as follows: “ When­
ever member banks are required to obtain reports from affiliates, or whenever affiliates of
member banks are required to submit to examination, the Board of Governors of the Federal
Reserve System or the Comptroller of the Currency, as the case may be, may waive such
requirements with respect to any such report or examination of any affiliate if in the judg­
ment of the said Board or Comptroller, respectively, such report or examination is not
necessary to disclose fully the relations between such affiliate and such bank and the effect
thereof upon the affairs of such bank.” Therefore, o f course, in any case where the Board
of Governors waives the filing of a report of an affiliate of a member State bank, no publi­
cation of a report of such affiliate is required.

12

REGULATION H

Secs . 208.9-208.10

mitted to the Federal Reserve Bank, but the signatures may be type­
written or otherwise copied on the report for publication.
(3)
A copy of the printed report shall be submitted to the Federal
Reserve Bank attached to the certificate on Form F.R. 220a.
SECTION 208.10—VOLUNTARY W ITHDRAW AL FROM FEDERAL
RESERVE SYSTEM

(а) General.— Any state bank desiring to withdraw from member­
ship in a Federal Reserve Bank may do so after six months’ written
notice has been filed with the Board;11 and the Board, in its discre­
tion, may waive such six months’ notice in any individual case and
may permit such bank to withdraw from membership in a Federal
Reserve Bank, subject to such conditions as the Board may prescribe,
prior to the expiration of six months from the date of the written
notice of its intention to withdraw.
(б) Notice of intention of withdrawal.— (1) Any State bank de­
siring to withdraw from membership in a Federal Reserve Bank should
signify its intention to do so, with the reasons therefor, in a letter
addressed to the Board and mailed to the Federal Reserve Bank of
which such bank is a member. Any such bank desiring to withdraw
from membership prior to the expiration of six months from the date
of written notice of its intention to withdraw should so state in the
letter signifying its intention to withdraw and should state the reason
for its desire to withdraw prior to the expiration of six months.
(2) Every notice of intention of a bank to withdraw from member­
ship in the Federal Reserve System and every application for the
waiver of such notice should be accompanied by a certified copy of
a resolution duly adopted by the board of directors of such bank
authorizing the withdrawal of such bank from membership in the
Federal Reserve System and authorizing a certain officer or certain
officers of such bank to file such notice or application, to surrender
for cancellation the Federal Reserve Bank stock held by such bank,
to receive and receipt for any moneys or other property due to such
bank from the Federal Reserve Bank and to do such other things as
may be necessary to effect the withdrawal of such bank from mem­
bership in the Federal Reserve System.
11 Under specific provisions of section 9 o f the Federal Reserve Act, however, no Federal
Reserve Bank shall, except upon express authority of the Board, cancel within the same
calendar year more than twenty-five per cent of its capital stock for the purpose of effecting
voluntary withdrawals during that year. All applications for voluntary withdrawals are
required by the law to be dealt with in the order in which they are filed with the Board.

Secs . 208.10-208.11

REGULATION H

13

(3) Notice of intention to withdraw or application for waiver of <
six months’ notice of intention to withdraw by any bank which is in
the hands of a conservator or other State official acting in a capacity
similar to that of a conservator should be accompanied by advice
from the conservator or other such State official that he joins in such
notice or application.
(c) Time and method of effecting actual withdrawal.— Upon the
expiration of six months after notice of intention to withdraw or upon
the waiving of such six months’ notice by the Board, such bank may
surrender its stock and its certificate of membership to the Federal
Reserve Bank and request that same be canceled and that all amounts
due to it from the Federal Reserve Bank be refunded.12 Unless with­
drawal is thus effected within eight months after notice of intention
to withdraw is first given, or unless the bank requests and the Board
grants an extension of time, such bank will be presumed to have
abandoned its intention of withdrawing from membership and will
not be permitted to withdraw without again giving six months’ written
notice or obtaining the waiver of such notice.
(d) Withdrawal of notice.—Any bank which has given notice of
its intention to withdraw from membership in a Federal Reserve Bank
may withdraw such notice at any time before its stock has been can­
celed and upon doing so may remain a member of the Federal Reserve
System. The notice rescinding the former notice should be accom­
panied by a certified copy of an appropriate resolution duly adopted
by the board of directors of the bank.
SECTION 208.11—BOARD FORMS

All forms referred to in this part and all such forms as they may
be amended from time to time shall be a part of the regulations in
this part.
1 A bank’s withdrawal from membership in the Federal Reserve System is effective on the
5
date on which the Federal Reserve Bank stock held by it is duly canceled. Until such stock
has been canceled, such bank remains a member o f the Federal Reserve System, is entitled
to all the privileges of membership, and is required to comply with all provisions of law
and all regulations of the Board pertaining to member banks and with all conditions of
membership applicable to it. Upon the cancellation of such stock, all rights and privileges of
such bank as a member bank shall terminate.
Upon the cancellation of such stock, and after due provision has been made for any
indebtedness due or to become due to the Federal Reserve Bank, such bank shall be entitled
to a refund o f its cash paid subscription with interest at the rate of one-half of one per cent
per month from the date of last dividend, the amount refunded in no event to exceed the
book value of the stock at that time, and shall likewise be entitled to the repayment of
deposits and o f any other balance due from the Federal Reserve Bank.

BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM

RELATIONS WITH FOREIGN BANKS
AND BANKERS

T
REGULATION N
(1 2 C F R 2 1 4 )

As revised effective January 1, 1944

Print o f O c to b e r 1960

REGULATION N
(12CFR 214)
Revised effective January 1, 1944

RELATIONS WITH FOREIGN BANKS AND BANKERS *
SECTION 214.1—SCOPE OF PART

Pursuant to the authority conferred upon it by section 14 of the
Federal Reserve Act, as amended (40 Stat. 235, 48 Stat. 181; 12 U.S.C.
358, 348a), and by other provisions of law, the Board of Governors of
the Federal Reserve System prescribes the following regulations gov­
erning relationships and transactions between Federal Reserve Banks
and foreign banks or bankers or groups of foreign banks or bankers or
a foreign State as defined in section 25(b) of the Federal Reserve Act
(55 Stat. 131; 12 U.S.C. 632).
SECTION 214.2—INFORMATION TO BE FURNISHED TO THE BOARD

In order that the Board of Governors of the Federal Reserve System
may perform its statutory duty of exercising special supervision over
all relationships and transactions of any kind entered into by any
Federal Reserve Bank with any foreign bank or banker or with any
group of foreign banks or bankers or with any foreign State, each Fed­
eral Reserve Bank shall promptly submit to the Board of Governors
of the Federal Reserve System in writing full information concerning
all existing relationships and transactions of any kind heretofore en­
tered into by such Federal Reserve Bank with any foreign bank or
banker or with any group of foreign banks or bankers or with any
foreign State and copies of all written agreements between it and any
foreign bank or banker or any group of foreign banks or bankers or
any foreign State which are now in force, unless copies have heretofore
been furnished to the Board. Each Federal Reserve Bank shall also
keep the Board of Governors of the Federal Reserve System promptly
and fully advised of all transactions with any foreign bank or banker
or with any group of foreign banks or bankers or with any foreign
State, except transactions of a routine character.
♦The text corresponds to the Code of Federal Regulations, Part 212, Chapter II, Part 214*
cited as 12 CFR 214.

Secs . 214.3-214.4

REGULATION N

2

SECTION 214.3—CONFERENCES AND NEGOTIATIONS WITH
FOREIGN BANKS, BANKERS OR STATES

(а) Without first obtaining the permission of the Board of Govern­
ors of the Federal Reserve System, no officer or other representative of
any Federal Reserve Bank shall conduct negotiations of any kind with
the officers or representatives of any foreign bank or banker or any
group of foreign banks or bankers of any foreign State, except com­
munications in the ordinary course of business in connection with
transactions pursuant to agreements previously approved by the Board
of Governors of the Federal Reserve System. Any request for the
Board’s permission to conduct any such negotiations shall be submitted
in writing and shall include a full statement of the occasion and objects
of the proposed negotiations.
(б) The Board of Governors of the Federal Reserve System reserves
the right, in its discretion, to be represented by such representatives as
it may designate in any negotiations between any officer or other repre­
sentative of any Federal Reserve Bank and any officers or representa­
tives of any foreign bank or banker or any group of foreign banks or
bankers or any foreign State; and the Board shall be given reasonable
notice in advance of the time and place of any such negotiations; and
may itself designate the time and place of any such negotiations.
(c) A full report of all such conferences or negotiations and all
understandings or agreements arrived at or transactions agreed upon
and all other material facts appertaining to such conferences or nego­
tiations shall be filed with the Board of Governors of the Federal
Reserve System in writing by a duly authorized officer of each Fed­
eral Reserve Bank which shall have participated in such conferences
or negotiations, including copies of all correspondence appertaining
thereto.
SECTION 214.4—AGREEMENTS WITH FOREIGN BANKS, BANKERS,
OR STATES, AND PARTICIPATION IN FOREIGN ACCOUNTS

(a) No Federal Reserve Bank shall enter into any agreement, con­
tract, or understanding with any foreign bank or banker or with any
group of foreign banks or bankers or with any foreign State without
first obtaining the permission of the Board of Governors of the Federal
Reserve System.
(b) When any Federal Reserve Bank, with the approval of the
Board of Governors of the Federal Reserve System, has opened an

3

REGULATION N

S ecs . 214.4-214.5

account for any foreign bank or banker or group of foreign banks
or bankers or for any foreign State, or has entered into any agree­
ment, contract, or understanding with reference to opening or main­
taining such an account, or with reference to any other matter or
matters, any other Federal Reserve Bank may participate in such
account, or in such agreement, contract, or understanding, and in
operations and transactions performed therein or pursuant thereto,
with the approval of the Board of Governors of the Federal Reserve
System.
SECTION 214.5—AMENDMENTS

The Board of Governors of the Federal Reserve System reserves the
right, in its discretion, to alter, amend or repeal these regulations and
to prescribe such additional regulations, conditions, and limitations as
it may deem desirable, respecting relationships and transactions of any
kind entered into by any Federal Reserve Bank with any foreign bank
or banker or with any group of foreign banks or bankers or with any
foreign State.

BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM

HOLDING COMPANY AFFILIATES—
VOTING PERMITS

T
REGULATION P
(1 2 C F R 2 1 6 )
As amended, effective January 9, 1959

P rin t o f N o ve m b e r 1 9 6 0

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

CONTENTS
Statutory P rovision s ....................................................................................................

Page
1

Sec. 216.1. D efinitions ...............................................................................................
(a) Holding company affiliate............................................................
( b) A ffiliate.............................................................................................
( c) Subsidiary .......................................................................................
(d) Affiliated .........................................................................................
( e) Member bank.................................................................................
( j ) Nonmember bank...........................................................................
( g) General voting perm it....................................................................
(h) Limited voting perm it..................................................................
(i) Board ...............................................................................................

1
1
1
1
2
2
2
2
2.’
3

Sec. 216.2. Organizations not E ngaged as a B usiness in H olding Stock
of, or M anaging or C ontrolling, B a n k s ......................................

3

Sec. 216.3. State M ember B anks M ust Obtain and F ile A greements by
H olding C ompany A ffiliates............................................................

4

Sec. 216.4. N ecessity

for

O btaining V oting P ermits ........................................

4

Sec. 216.5. G ranting

of

V oting P ermits ................................................................

5

Sec. 216.6. P rocedure R elating

V oting P ermits ..............

5

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

6

P ermit ...............................................................................

7

to

Sec. 216.7. R eserve R equirements
Sec. 216.8. R evocation

of

A pplications

for

Sec. 216.9. P articipation by Subsidiary M ember B anks in N omination or
E lection of D irectors ofF ederal R eserve B anks .....................

7

S ec. 216.10. F orms

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

7

A ppendix—Statuatory P rovisions.............................................................................

8

REGULATION P
(12 CFR 216)
As amended, effective January 9, 1959

HOLDING COMPANY AFFILIATES—
VOTING PERMITS*
STATUTORY PROVISIONS

This regulation is based upon and issued pursuant to various provisions 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 216.1—DEFINITIONS

For the purposes of this part:
(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 (48 Stat. 163; 49 Stat. 707; 12 U.S.C. 221a).1
(b) Affiliate.— The term “ affiliate” shall have the meaning given to
it by section 2 (b) of the Banking Act of 1933 (48 Stat. 162; 12 U.S.C.
221a).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 nonmember
ban k ):
(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
* The text corresponds to the Code o f Federal Regulations, Title 12, Chapter II, Part 216;
cited as 12 CFR 216.
1 An organization is not a holding company affiliate o f a bank (national or State) unless
the bank is a member o f the Federal Reserve System.
2 For the purposes of certain provisions of sections 9 and 23A of the Federal Reserve Act
and section 5211 o f the Revised Statutes of the United States (48 Stat. 165, 49 Stat. 717,
48 Stat. 191; 12 U.S.C. 334, 12 U.S.C. 371c, 12 U.S.C. 161), the term “ affiliate” also includes
any “ holding company affiliate.”

1

2

REGULATION P

S ec. 216.1

(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, direbtly or indirectly, through
stock ownership or in any other manner, by trustees for the
benefit of the shareholders of the other; or
(4) 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.
(f) 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
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

S ecs . 216.1-216.2

REGULATION P

3

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 216.2—ORGANIZATIONS NOT ENGAGED AS A BUSINESS IN
HOLDING STOCK OF, OR MANAGING OR CONTROLLING, BANKS

(a) The term “ holding company affiliate” does not include (except
for the purposes of Sec. 23A of the Federal Reserve Act (48 Stat. 183,
49 Stat. 717; 12 U.S.C. 371c)) any organization which is determined
by the Board not be engaged, directly or indirectly, as a business in
holding the stock of, or managing or controlling, banks, banking asso­
ciations, savings banks, or trust companies. The Board will consider
this matter in acting upon applications for voting permits and if, on
the basis of the available information, it determines that an applicant
is not so engaged within the meaning of the law, it will advise such
applicant accordingly.
(b) If any organization which does not have a voting permit appli­
cation 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,
savings banks, or trust companies, it shall file a request for such
determination.
(1) Any such request shall be accompanied by full information
concerning all matters having a bearing on the question, including
the purpose for which the organization filing the request was or­
ganized, the nature and purpose of its present activities, the de­
scription 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
(2) Any such request and the supporting information shall be
in writing and shall be filed in duplicate with the Federal Reserve
3
If the organization filing the request has previously been granted a general voting permit,
it need only file such information
is necessary to supplement and bring up to date the
information contained in its application for such permit.

4

REGULATION P

S ecs . 216.2-216.4

agent at the Federal Reserve bank of the district in which the
principal office of such organization is located. The Federal Re­
serve agent shall forward to the Board the original thereof together
with his recommendations and the opinion of counsel for the Fed­
eral Reserve bank of such district.
SECTION 216.3—STATE M EMBER BANKS MUST OBTAIN AND FILE
AGREEMENTS BY HOLDING COMPANY AFFILIATES

(a) Each State member bank which is or hereafter becomes a sub­
sidiary of a holding company affiliate shall obtain from such holding
company affiliate an agreement (Form P-5) that such holding com­
pany affiliate will be subject to the same conditions and limitations as
are applicable to holding company affiliates of national banks under
the provisions of section 5144 of the Revised Statutes (48 Stat. 186, 49
Stat. 710; 12 U.S.C. 61). Such agreement shall be obtained within 90
days after such member bank shall have become a subsidiary of the
holding company affiliate.
(b) 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.
( c) The original and one copy of such agreement must be
promptly with the Federal Reserve agent at the Federal Reserve
of the district in which the holding company affiliate’s principal
is located, and the original of such agreement shall be sent by
Federal Reserve agent to the Board.

filed
bank
office
such

(d) 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 216.4—NECESSITY FOR OBTAINING VOTING PERMITS

(a) No holding company affiliate of a national bank or of a State
member bank which has executed the agreement required by § 216.3
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 vot­

S ecs . 216.4-216.6

REGULATION P

5

ing permit, pursuant to the provisions of section 5144 of the Revised
Statutes (48 Stat. 186, 49 Stat. 710; 12 U.S.C. 61) and of this part
and unless such voting permit shall be in force at the time such shares
are voted.
(b) 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
(1) 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 (2) admit the bank
to membership subject to the condition that each such applicant
obtain a general voting permit within a reasonable time.
SECTION 216.5—GRANTING OF VOTING PERMITS

(a) 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.
( b) 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

216.6—PROCEDURE RELATING TO
VOTING PERMITS

APPLICATIONS

FOR

(a) An applicant for a voting permit need file only one application,

6

REGULATION P

Secs . 216.6-216.7

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
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.
( b) The application and the exhibits referred to in the application
blank shall be executed and filed in duplicate with the Federal Re­
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.
(c) 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 which 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.
(d) 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 216.7—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

S ecs . 216.7-216.10

REGULATION P

7

visions of section 5144 of the Revised Statutes relating to reserves of
readily marketable assets other than bank stock (58 Stat. 187; 12
U.S.C. 61). 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
use must be made up within a period of 2 years after the date
such assets are so depleted, unless the Board, in its discretion, extends
such period for cause.
SECTION 216.8—REVOCATION OF PERM IT

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 (48
Stat. 186, 49 Stat. 710; 12 U.S.C. 61), the Board may, in its discretion,
revoke any voting permit theretofore granted to such holding com­
pany affiliate after giving 60 days’ notice by registered mail of its
intention to the holding company affiliate and affording it an oppor­
tunity to be heard.
SECTION 216.9—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 216.10—FORMS

All forms referred to in this part and all such forms as they may be
amended from time to time shall be a part of the regulation in this part.

APPENDIX
STATUTORY PROVISIONS

Section 2, Banking Act of 1933— Section 2 of the Banking Act of
1933 (12 U.S.C. 221a) 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 maj ority 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 (12 U.S.C. 61) reads in part as follows:
Voting of shares of national bank controlled by holding com*
pany affiliate.—■
Sec . 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 bank5 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 be 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
5 Under section 9 o f the Federal Reserve A ct 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 o f national banks under this section of the Revised Statutes.

10

REGULATION P

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:
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 hold­
ing 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 marketable assets
other than bank stock all net earnings over and above 6 per centum
per annum on the book value of its own shares outstanding until such
assets shall amount to such 25 per centum of the aggregate par value
of all bank stocks controlled by it;

REGULATION P

11

(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
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. In any case in which there is more than
one holding company affiliate with respect to the same bank or group
of banks the establishment and maintenance of the reserve of readily
marketable assets required by this paragraph by only one of such
holding company affiliates, designated by the Board under such condi­
tions as the Board may prescribe, shall constitute compliance with
such reserve requirement: Provided, That all of the stock of the
banks affiliated with such holding company affiliates which is directly
or indirectly owned or controlled by them shall be owned or con­
trolled directly or indirectly, by the one so designated by the Board.
This proviso shall not be interpreted as authorizing the Board to
require any such designated company to own such stock directly;
Penalties for false entries.—
(d) Every officer, director, agent, and employee of every such hold­
ing company affiliate shall be subject to the same penalties for false
entries in any book, report, or statement of such holding company
affiliate as are applicable to officers, directors, agents, and employees
of member banks under section 1005 of Title 18, United States
Code; and

12

REGULATION P

Relationships with “ securities companies” ; payment of divi­
dends.—
(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 simi­
lar organization formed for the purpose of, or engaged principally in,
the issue, flotation, underwriting, public sale, or distribution, at whole­
sale 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
tunity to be heard. Whenever the Board of Governors of the Federal
Reserve System shall have revoked any such voting permit, no na­
tional bank whose stock is controlled by the holding company affiliate
whose permit is so revoked shall receive deposits of public moneys of
the United States, nor shall any such national bank pay any further
dividend to such holding company affiliate upon any shares of such
bank controlled by such holding company affiliate.
Whenever the Board of Governors of the Federal Reserve System

REGULATION P

13

shall have revoked any voting permit as hereinbefore provided, the
rights, privileges, and franchises of any or all national banks the
stock of which is controlled by such holding company affiliate shall,
in the discretion of the Board of Governors of the Federal Reserve
System, be subject to forfeiture in accordance with section 2 of the
Federal Reserve Act, as amended.
Section 9, Federal Reserve Act. Holding company affiliates of
State member banks.— Section 9 of the Federal Reserve Act (12
U.S.C. 337) reads in part as follows:
Each State member bank affiliated with a holding company affiliate
shall obtain from such holding company affiliate, within such time
as the Board of Governors of the Federal Reserve System shall pre­
scribe, an agreement that such holding company affiliate shall be sub­
ject to the same conditions and limitations as are applicable under
section 5144 of the Revised Statutes, as amended, in the case of holding
company affiliates of national banks. A copy of each such agreement
shall be filed with the Board of Governors of the Federal Reserve
System. Upon the failure of a State member bank affiliated with a
holding company affiliate to obtain such an agreement within the time
so prescribed, the Board of Governors of the Federal Reserve System
shall require such bank to surrender its stock in the Federal Reserve
bank and to forfeit all rights and privileges of membership in the
Federal Reserve System as provided in this section. Whenever the
Board of Governors of the Federal Reserve System shall have revoked
the voting permit of any such holding company affiliate, the Board of
Governors of the Federal Reserve System may, in its discretion, re­
quire any or all State member banks affiliated with such holding
company affiliate to surrender their stock in the Federal Reserve bank
and to forfeit all rights and privileges of membership in the Federal
Reserve System as provided in this section.
Section 4, Federal Reserve Act. Election of Federal Reserve
bank directors.— The provisions of section 4 of the Federal Reserve
Act (12 U.S.C. 304) relating to the nomination and election of Class
A and Class B directors of the Federal Reserve banks include the
following proviso:
Provided, That whenever any two or more member banks within
the same Federal Reserve district are affiliated with the same holding
company affiliate, participation by such member banks in any such
nomination or election shall be confined to one of such banks, which
may be designated for the purpose by such holding company affiliate.

BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM

BANK HOLDING COMPANIES

▼

REGULATION Y
(1 2 CFR 2 2 2 )
As amended, effective July 1, 1960

P r in t o f D e c e m b e r 1 9 6 0

INQUIRIES REGARDING THIS REGULATION
Any inquiry relating to this regulation should be addressed to the
Federal Reserve Bank of the Federal Reserve district in which the
inquiry arises. Forms necessary for the preparation of registration
statements, applications, requests and reports may be obtained
from any Federal Reserve Bank.

CONTENTS
Page
Sec. 222.1. A uthority

Scope................................................................................

1

Sec. 222.2. D efinitions ...............
(a) Bank holding com pany..................................................................
( b) Exceptions from definition o f “ Bank holding company” . . . .
( c) Company .........................................................................................
(d) Bank .................................................................................................
( e) State member bank........................................................................
( f ) District bank...................................................................................
(g) Subsidiary .......................................................................................
(h) Successor .........................................................................................
(i) Board ...............................................................................................
( j ) The A c t .............................................................................................
( k) Federal Reserve Bank....................................................................

1
1
1
2
2
2
2
3
3
3
3
3

and

Sec. 222.3. R egistration ..............................................................................................

3

( a) Registration statement..................................................................
( b) Date of registration..................................

3
3

Sec. 222.4 A cquisition
(a)
( b)
( c)
(d)
(e)
( j)
( g)
(h)

A ssets ................................................

4

Transactions requiring Board approval.....................................
Excepted transactions ..................................................................
Applications which will not be approved.................................
Submission of applications............................................................
Procedure on applications............................................................
Hearings on applications ..............................................................
Action on applications...................................
Factors affecting action................................................................

4
4
4
5
5
6
6
6

Sec. 222.5 I nterests

of

B ank S hares

or

N onbanking Organizations.............................................

7

(a) Period allowed for divestment....................................................
( b) Shares of financial, fiduciary, or insurance companies..........
( c) Tax certifications............................................................................

7
7
7

in

Sec. 222.6. B orrowing

S ubsidiaries.........

8

P roceedings.....................................................................

8

( a) Hearings ...........................................................................................
( b) Record o f Proceedings..................................................................
( c) Parties ...............................................................................................

8
8
9

Sec. 222.7. H earings

Sec. 222.8. R eports

B ank H olding C ompany

by

and

or its

E xaminations ...................................................................

9

Sec. 222.9. Statutory P enalties................................................................................

9

and

A p p e n d ix — St a tu to r y

P r o v is io n s

10

REGULATION Y
(12 CFR 222)
As amended, effective July 1, 1960

BANK HOLDING COMPANIES*
SECTION 222.1—AUTHORITY AND SCOPE

This part is issued pursuant to the Bank Holding Company Act of
1956.1 Provisions relating to holding company affiliates, as defined in
section 2 (c ) of the Banking Act of 1933, are contained in Part 216 of
this Chapter (Reg. P ).2
SECTION 222.2—DEFINITIONS

(a) Bank holding company.— Subject to the exceptions stated in
paragraph (b) of this section, the term “ bank holding company” means
any company:
(1) Which directly or indirectly owns, controls, or holds with
power to vote either:
(i) 25 per centum or more of the voting shares of each of two
or more banks, or
(ii) 25 per centum or more of the voting shares of any other
company which is or becomes a bank holding company;
(2) Which controls in any manner the election of a majority of
the directors of each of two or more banks;
(3) For the benefit of whose shareholders or members 25 per
centum or more of the voting shares of each of two or more banks
or of a bank holding company is held by trustees; or
(4) Which is a successor to any company that falls within sub­
paragraphs (1), (2), or (3) of this paragraph, and any such succes­
sor shall be deemed to be a bank holding company from the date as
of which its predecessor company became a bank holding company.
(b) Exceptions from definition of “ bank holding company” .—
No company shall be considered a bank holding company:
(1)
If it is a bank and it would otherwise be a bank holding
company only by virtue of its ownership or control of shares in a
fiduciary capacity, provided such shares are not held for the benefit
of the shareholders of such bank;
* The text corresponds to the Code o f Federal Regulations, Title 12, Chapter II, Part 222;
cited as 12 CFR 222.
1 The record keeping and reporting requirements contained herein have been approved by
the Bureau o f the Budget in accordance with the Federal Reports Act of 1942.
2 The Bank Holding Company Act of 1956 and this part are in addition to, and do not take
the place of, provisions o f other laws, such as section 5144 of the Revised Statutes, and Part
216 of this chapter (Reg. P ) thereunder, which relate to holding company affiliates as dis­
tinguished from bank holding companies.

1

2

REGULATION Y

S ec. 222.2

(2) If (i) it is registered under the Investment Company Act of
1940 and was so registered prior to M ay 15, 1955, or is affiliated
with any such registered company in such manner as to constitute
it an affiliated company within the meaning of that act, and (ii) it
does not directly own 25 per centum or more of the voting shares of
each of two or more banks;
(3) If it would otherwise be a bank holding company only by
virtue of its ownership or control of shares acquired by it in con­
nection with its underwriting of securities and if such shares are held
only for such period of time as will permit the sale thereof upon a
reasonable basis;
(4) If it was formed for the sole purpose of participating in a
proxy solicitation and would otherwise be a bank holding company
pnly by virtue of its control of voting rights of shares acquired in
the course of such solicitation; or
(5) If at least 80 per centum of its total assets are composed of
holdings in the field of agriculture, and for this purpose the term
“ agriculture” includes farming in all its branches, including fruit­
growing, dairying, the raising of livestock, bees, fur-bearing animals,
or poultry, forestry or lumbering operations, and the production of
naval stores, and operations directly related thereto.
(c) Company.— The term “ company” means any corporation (in­
cluding a bank), business trust, association, or similar organization,
except:
(1) Any corporation the majority of the shares of which are
owned by the United States or by any State;
(2) Any corporation or community chest, fund, or foundation,
organized and operated exclusively for religious, charitable, or edu­
cational purposes, no part of the net earnings of which inures to the
benefit of any private shareholder or individual, and no substantial
part of the activities of which is carrying on propaganda, or other­
wise attempting to influence legislation; and
(3) Any partnership.
(d) Bank.— The term “ bank” means any national banking asso­
ciation or any State bank, savings bank, or trust company, but shall
not include any organization operating under section 25 (a) of the
Federal Reserve Act, or any organization which does not do any
business within the United States.
(e ) State member bank.— The term “ State member bank” means
any State bank which is a member of the Federal Reserve System.
( f ) District bank.— The term “ District bank” means any State
bank organized or operating under the Code of Law for the District
of Columbia.

S bcs . 222.2-222.3

REGULATION Y

3

( g) Subsidiary.— The term “ subsidiary” , as used with respect to
a specified bank holding company, means:
(1) Any company 25 per centum or more of whose voting shares
(excluding shares owned by the United States or by any company
wholly owned by the United States) is owned or controlled by such
bank holding company;
(2) Any company the election of a majority of whose directors
is controlled in any manner by such bank holding company; or
(3) Any company 25 per centum or more of whose voting shares
is held by trustees for the benefit of the shareholders or members
of such bank holding company.
(h) Successor.— The term “ successor” includes any company which
acquires directly or indirectly from a bank holding company shares
of any bank, when and if the relationship between such company and
such bank holding company is such that the transaction effects no
substantial change in the control of such bank or beneficial ownership
of such shares of such bank.
(i) Board.— The term “ Board” means the Board of Governors of
the Federal Reserve System.
( j) The act.— The term “ the act” means the Bank Holding Com­
pany Act of 1956.
(k ) Federal Reserve Bank.— The term “ Federal Reserve Bank”
as used in this part with respect to the filing of registration statements,
applications, requests, or reports by a bank holding company or other
company shall mean the Federal Reserve Bank of the Federal Reserve
district in which such company has its principal office.
SECTION 222.3—REGISTRATION

(a) Registration statement.— On or before November 5, 1956, or
within 180 days after it becomes a bank holding company, whichever
is later, each bank holding company shall register with the Board by
filing with the Federal Reserve Bank a registration statement, in
duplicate, on forms prescribed by the Board. Upon timely application
by any bank holding company and upon a satisfactory showing as
to the need therefor, the Board in its discretion may extend the time
prescribed herein for the filing of a registration statement by such
bank holding company.
(b) Date of registration.— The date of registration of a bank
holding company shall be the date on which its registration statement
is received by the Federal Reserve Bank with which such statement
is required to be filed.

4

REGULATION Y

Sec. 222.4

SECTION 222.4— ACQUISITION OF BANK SHARES OR ASSETS

(a) Transactions requiring Board approval.— Except with the
prior approval of the Board or except as provided in paragraph (b)
of this section:
(1) No action shall be taken which will result in any company
becoming a bank holding company;
(2) No bank holding company shall acquire direct or indirect
ownership or control of any voting shares of any bank;
(3) No bank holding company which is not a bank and no non­
banking subsidiary of a bank holding company shall acquire all or
substantially all of the assets of a bank; and
(4) No bank holding company shall merge or consolidate with
any other bank holding company.
(b ) Excepted transactions.— Prior approval by the Board is not
required with respect to any of the following transactions:
(1) The acquisition by a bank holding company of direct or in­
direct ownership or control of any voting shares of any bank if
after such acquisition, such company will not directly or indirectly
own or control more than 5 per centum’ of the voting shares of such
bank;
(2) The acquisition by a bank holding company of additional
shares in a bank in which such bank holding company owned or
controlled a majority of the voting shares immediately prior to such
acquisition; or
(3) The acquisition by a bank (including a bank which is a bank
holding company or a subsidiary of a bank holding company) of
the voting shares of any bank, if:
(i) Such shares are acquired in good faith in a fiduciary capac­
ity and are not held for the benefit of the shareholders of the
acquiring bank, or
(ii) Such shares are acquired in the regular course of securing
or collecting a debt previously contracted in good faith: Provided,
That any shares acquired after the date of the act in securing or
collecting any such previously contracted debt shall be disposed
of within a period of two years from the date on which they were
acquired.
( c) Applications which will not be approved.— No application
will be approved by the Board if such approval would permit a bank
holding company or any subsidiary thereof to acquire, directly or
indirectly, any voting shares of, interest in, or all or substantially all
of the assets of any bank which was not a subsidiary of the bank
holding company on the date of enactment of the act and which is

S ec . 222.4

REGULATION Y

5

located outside the State in which such bank holding company main­
tains its principal office and place of business or in which it conducts
its principal operations, unless the acquisition of such shares or assets
of a State bank by an out-of-State bank holding company is specifi­
cally authorized by the statute laws of the State in which such bank
is located, by language to that effect and not merely by implication.
(d) Submission of applications.— An application for approval by
the Board of any transaction requiring such approval under paragraph
(a) of this section shall be filed with the Federal Reserve Bank.2*
Three copies of such application shall be filed except where, pursuant
to the provisions of paragraph (e ) of this section, copies of the appli­
cation are required to be transmitted to both the Comptroller of the
Currency and the appropriate State supervisory authority, in which
circumstances four copies of the application shall be filed. The appli­
cation shall be filed not less than 60 days before the date on which it
is proposed that the transaction requiring approval be consummated.3
However, the Board in its discretion may, upon good cause shown,
accept an application although submitted within such period of 60
days. A separate application shall be filed with respect to each bank
the voting shares or assets of which are sought to be acquired by an
existing bank holding company or nonbanking subsidiary thereof.
( e) Procedure on applications.— (1) A Federal Reserve Bank
receiving an application under this section will retain one copy thereof
and will forward all other copies to the Board. If either the applicant
or the bank the voting shares or assets of which are sought to be
acquired is a national bank or a District bank, the Board will transmit
a copy of the application to the Comptroller of the Currency. If either
the applicant or the bank the voting shares or assets of which are
sought to be acquired is a State bank, the Board will transmit a copy
of the application to the bank supervisory authority of the State in
which such bank is located.
(2)
Following the receipt of an application under this section, the
Board will publish in the Federal Register a notice of such receipt,
stating the names and addresses of the applicant and the bank or
banks involved, indicating the general nature of the proposed trans­
action, and allowing 30 days (or a shorter period in exceptional cir­
cumstances) for the submission of written comments or views. Such
comments or views shall be submitted to the Board or to the Federal
Reserve Bank for transmission to the Board.
-a The term “ Federal Reserve Bank” , as used herein, means the Federal Reserve Bank of
the Federal Reserve district in which the applicant has its principal office.
3
In some cases it may not be possible for the Board to act upon an application within
such period o f 60 days and this requirement should not be regarded as suggesting that the
Board will act upon all applications within that period o f time, although every effort will be
made to expedite such action.

6

REGULATION Y

S ecs. 222.4

( f ) Hearings on applications.— In any case in which the Board
receives written advice of disapproval of the application from the
Comptroller of the Currency or the appropriate State supervisory
authority, as the case may be, within 30 days from the date of receipt
of the application by the notified authority, the Board will so notify
the applicant in writing, directing the applicant’s attention to the
provisions of section 3 (b) of the act. Within three days after the
date of the sending of such notice to the applicant, the Board will
notify in writing the applicant and the Comptroller of the Currency
or the appropriate State supervisory authority, as the case may be,
of the date fixed by the Board for the commencement of a hearing on
the application and of the place and time at which such hearing will
be held. Any such hearing will be commenced not less than ten days
nor more than thirty days after the date on which the Board sent the
applicant notice of the disapproval of the Comptroller of the Currency
or the appropriate State supervisory authority.
(g) Action on applications.— In any case in which a hearing is
held in accordance with paragraph (f) of this section, the Board,
after the conclusion of such hearing, will by order grant or deny the
application on the basis of the record made at such hearing. In all
other cases, the Board will by order grant or deny the application
after receipt by it of advice that the Comptroller of the Currency
or the appropriate State supervisory authority, as the case may be,
does not disapprove the application, or, if no such advice is received,
after the expiration of thirty days from the date of receipt of the
copy of the application by the Comptroller of the Currency or such
State authority.
(h) Factors affecting action.— In acting upon any application the
Board, as required by the act, will consider the following factors:
(1) The financial history and condition of the applicant and the
bank or banks concerned;
(2) The prospects of the applicant and the bank or banks con­
cerned ;
(3) The character of the management of the applicant and the
bank or banks concerned;
(4) The convenience, needs, and welfare of the communities and
the area concerned; and
(5) Whether or not the effect of the proposed transaction for
which approval is desired would be to expand the size or extent
of the bank holding company system involved beyond limits con­
sistent with adequate and sound banking, the public interest, and
the preservation of competition in the field of banking.

S ec. 222.5

REGULATION Y

7

SECTION 222.5—INTERESTS IN NONBANKING ORGANIZATIONS

(a) Period allowed for divestment.— No bank holding company,
except as provided in section 4 (c ) of the act, shall (1) after the date
of enactment of the act acquire direct or indirect ownership or control
of any voting shares of any company which is not a bank, or (2) after
two years from the date of enactment of the act or from the date as
of which it becomes a bank holding company, whichever is later, retain
direct or indirect ownership or control of any voting shares of any
company which is not a bank or a bank holding company, or engage
in any business other than that of banking or of managing or con­
trolling banks or of furnishing services to or performing services for
any bank of which it owns or controls 25 per centum or more of the
voting shares. Upon timely request and upon a satisfactory showing
of the need therefor, the Board in its discretion may extend the twoyear period referred to in the preceding sentence, except that, as
provided by the act, no such extension of time may be approved by
the Board for more than one year at a time or for any period beyond
a date five years after the date of enactment of the act or five years
after the date as of which the company became a bank holding
company, whichever is later.
(b) Shares of financial, fiduciary, or insurance companies.—
Any bank holding company which is of the opinion that a company
all the activities of which are of a financial, fiduciary, or insurance
nature is so closely related to the business of banking or of managing
or controlling banks, as conducted by such bank holding company or
its banking subsidiaries, as to be a proper incident thereto and as to
make it unnecessary for the prohibitions of section 4 of the act to
apply in order to carry out the purposes of the act, may request the
Board for such a determination pursuant to section 4 (c) (6) of the
act. Any such request shall be filed in duplicate with the Federal
Reserve Bank. After receipt of any such request, the Board will
notify the bank holding company of the place and time fixed for a
hearing on the requested determination; and, after the conclusion of
such hearing and on the basis of the record made at the hearing,
the Board will by order make or decline to make the requested
determination.
( c) Tax certifications.— Any bank holding company desiring a
certification by the Board for purposes of the provisions of Part VIII
of Subchapter O of Chapter 1 of the Internal Revenue Code of 1954,
as amended by the act, may file an application in duplicate for such
certification with the Federal Reserve Bank; and any such applica­
tion will be forwarded by the Federal Reserve Bank to the Board.
Any application for a certification under subsections (a), (b ), or ( c)

8

REGULATION Y

S ecs . 222.5-222.7

of section 1101 of said Part V III shall be filed not less than sixty days
in advance of the distribution, or exchange and distribution, with re­
spect to which such certification is desired.4 Upon timely request by
any bank holding company and upon a satisfactory showing as to the
need therefor, the Board in its discretion may accept an application
for any such certification although submitted within such 60-day
period. On the basis of an application under this paragraph, the
Board will either issue a certification or by order deny the applica­
tion. A duplicate original of each certification will be transmitted to
the Internal Revenue Service of the Treasury Department.
SECTION 222.6—BORROWING BY BANK HOLDING COMPANY
OR ITS SUBSIDIARIES

It is unlawful under the act, with certain exceptions, for any bank
which is a subsidiary of a bank holding company to invest in the
capital stock, bonds, debentures, or other obligations of such company
or of any other subsidiary of such company; to accept as collateral
for an advance to any person the capital stock, bonds, debentures, or
other obligations of such company or any such other subsidiary; to
purchase securities, other assets, or obligations under repurchase agree­
ment from such company or any such other subsidiary; or to make
any loan, discount or extension of credit to such company or any such
other subsidiary. For statutory provisions on this subject, see section
6 of the Act.
SECTION 222.7—HEARINGS AND PROCEEDINGS

(a) Hearings.— In addition to hearings required by the Act (see
§ 222.4 ( j ) and § 222.5 ( b ) ) , a hearing may be ordered by the Board
in its discretion with respect to any application or request under this
part, either upon its own motion or upon the request of any party in
interest, if the Board deems such hearing to be in the interests of the
parties or the public interest. Notice of any hearing required by the
act will be published in the Federal Register a reasonable time in
advance of the date fixed for the hearing; and any hearings so re­
quired will ordinarily be held before trial examiners appointed in
accordance with the provisions of the Administrative Procedure Act.
All hearings under this part will be conducted in accordance with
Part 263 of this chapter (Rules of Practice for Formal Hearings).
(b) Record of proceedings.— The record in any proceeding under
this part upon which an order of the Board is based shall consist of
the application or request filed with the Board in connection with
4
In some cases it may not be possible for the Board to act upon an application within
such period of 60 days and this requirement should not be regarded as suggesting that the
Board will act upon all applications within that period of time, although every effort will be
made to expedite such action.

S ecs . 222.7-222.9

REGULATION Y

9

such proceeding; any views and recommendations received by the
Board from the Comptroller of the Currency or the appropriate State
supervisory authority pursuant to section 3 (b) of the act; the tran­
script of any hearing held with respect to such application or request
and any report and recommendation made by the trial examiner or
hearing officer before whom such hearing was held; any other docu­
ment or writing relied upon by the Board in making disposition of
the matter; and any order of the Board granting or denying the
application or request.
(c ) Parties.— A party to any proceeding under this part shall
include any person or agency named or admitted as a party or any
person who has filed a request in writing to be admitted as a party
and who is entitled as of right to be admitted.
SECTION 222.8—RliT’ORTS AND EXAMINATIONS

Each bank holding company shall furnish to the Board in a form
to be prescribed by the Board a report of its operations for its fiscal
year ending in 1956 or the fiscal year in which it became a bank
holding company, whichever is later, and for each fiscal year there­
after until it ceases to be a bank holding company. Each such annual
report shall be filed, in duplicate, with the Federal Reserve Bank.
Each bank holding company shall furnish to the Board such addi­
tional information at such times as the Board may require. The Board
may examine any bank holding company or any of its subsidiaries and
the cost of any such examination shall be assessed against and paid
by such bank holding company. As far as possible the Board will use
reports of examinations made by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, or the appropriate State
bank supervisory authority for the purposes of this section.
SECTION 222.9—STATUTORY PENALTIES

Under the act, any company which willfully violates any provision
of the act or any regulation or order issued by the Board pursuant
thereto shall upon conviction be fined not more than $1,000 for each
day during which the violation continues; and any individual who
willfully participates in a violation of any provision of the act shall
upon conviction be fined not more than $10,000 or imprisoned not
more than one year, or both. Every officer, director, agent, and em­
ployee of a bank holding company is subject under the act to the
same penalties for false entries in any book, report, or statement of
such bank holding company as are applicable to officers, directors,
agents, and employees of member banks of the Federal Reserve Sys­
tem for false entries in any books, reports, or statements of member
banks under section 1005 of Title 18, U. S. Code.

APPENDIX
STATUTORY PROVISIONS

Bank Holding Company Act of 1956
Act of M ay 9,1956 (70 Stat. 133)
AN ACT
To define bank holding: companies, control their future expansion, and require divestment of
their nonbankingr interests.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may
be cited as the “Bank Holding Company Act of 1956”
DEFINITIONS
S ec . 2. (a) “ Bank holding company” means any company (1) which

directly or indirectly owns, controls, or holds with power to vote, 25
per centum or more of the voting shares of each of two or more banks
or of a company which is or becomes a bank holding company by
virtue of this Act, or (2) which controls in any manner the election
of a majority of the directors of each of two or more banks, or (3) for
the benefit of whose shareholders or members 25 per centum or more
of the voting shares of each of two or more banks or a bank holding
company is held by trustees; and for the purposes of this Act, any
successor to any such company shall be deemed to be a bank holding
company from the date as of which such predecessor company became
a bank holding company. Notwithstanding the foregoing (A) no bank
shall be a bank holding company by virtue of its ownership or control
of shares in a fiduciary capacity, except where such shares are held
for the benefit of the shareholders of such bank, (B) no company
shall be a bank holding company which is registered under the Invest­
ment Company Act of 1940, and was so registered prior to M ay 15,
1955 (or which is affiliated with any such company in such manner as
to constitute an affiliated company within the meaning of such A ct),
unless such company (or such affiliated company), as the case may
be, directly owns 25 per centum or more of the voting shares of each of
two or more banks, (C) no company shall be a bank holding company
by virtue of its ownership or control of shares acquired by it in con­
nection with its underwriting of securities and which are held only for
such period of time as will permit the sale thereof upon a reasonable
basis, (D ) no company formed for the sole purpose of participating
in a proxy solicitation shall be a bank holding company by virtue of
its control of voting rights of shares acquired in the course of such
solicitation, and (E) no company shall be a bank holding company
10

REGULATION Y

11

if at least 80 per centum of its total assets are composed of holdings
in the field of agriculture.
(b) “ Company” means any corporation, business trust, association,
or similar organization, but shall not include (1) any corporation the
majority of the shares of which are owned by the United States or by
any State, or (2) any corporation or community chest, fund, or foun­
dation, organized and operated exclusively for religious, charitable, or
educational purposes, no part of the net earnings of which inures to
the benefit of any private shareholder or individual, and no substantial
part of the activities of which is carrying on propaganda, or otherwise
attempting to influence legislation, or (3) any partnership.
(c ) “ Bank” means any national banking association or any State
bank, savings bank, or trust company, but shall not include any or­
ganization operating under section 25 (a) of the Federal Reserve Act,
or any organization which does not do business within the United
States. “ State member bank” means any State bank which is a mem­
ber of the Federal Reserve System. “ District bank” means any State
bank organized or operating under the Code of Law for the District
of Columbia.
(d) “ Subsidiary” , with respect to a specified bank holding company,
means (1) any company 25 per centum or more of whose voting shares
(excluding shares owned by the United States or by any company
wholly owned by the United States) is owned or controlled by such
bank holding company; or (2) any company the election of a majority
of whose directors is controlled in any manner by such bank holding
company; or (3) any company 25 per centum or more of whose vot­
ing shares are held by trustees for the benefit of the shareholders or
members of such bank holding company.
( e) The term “ successor” shall include any company which acquires
directly or indirectly from a bank holding company shares of any
bank, when and if the relationship between such company and the
bank holding company is such that the transaction effects no sub­
stantial change in the control of the bank or beneficial ownership of
such shares of such bank. The Board may, by regulation, further
define the term “ successor” to the extent necessary to prevent evasion
of the purposes of this Act.
( f ) “ Board” means the Board of Governors of the Federal Reserve
System.
(g) “ Agriculture” , as used in section 2 (a), includes farming in all
its branches including fruitgrowing, dairying, the raising of livestock,
bees, fur-bearing animals, or poultry, forestry or lumbering opera­
tions, and the production of naval stores, and operations directly
related thereto.
[12 U.S.C. 1841.]

12

REGULATION Y

ACQUISITION OF BANK SHARES OR ASSETS

Sec. 3. (a) It shall be unlawful except with the prior approval of
the Board (1) for any action to be taken which results in a company
becoming a bank holding company under section 2 (a) of this Act;
(2) for any bank holding company to acquire direct or indirect owner­
ship or control of any voting shares of any bank if, after such acqui­
sition, such company will directly or indirectly own or control more
than 5 per centum of the voting shares of such bank; (3) for any
bank holding company or subsidiary thereof, other than a bank, to
acquire all or substantially all of the assets of a bank; or (4) for any
bank holding company to merge or consolidate with any other bank
holding company. Notwithstanding the foregoing this prohibition
shall not apply to (A) shares acquired by a bank, (i) in good faith
in a fiduciary capacity, except where such shares are held for the
benefit of the shareholders of such bank, or (ii) in the regular course
of securing or collecting a debt previously contracted in good faith,
but any shares acquired after the date of enactment of this Act in
securing or collecting any such previously contracted debt shall be
disposed of within a period of two years from the date on which they
were acquired; or (B) additional shares acquired by a bank holding
company in a bank in which such bank holding company owned or
controlled a majority of the voting shares prior to such acquisition.
(b )
Upon receiving from a company any application for approval
under this section, the Board shall give notice to the Comptroller of
the Currency, if the applicant company or any bank the voting shares
or assets of which are sought to be acquired is a national banking asso­
ciation or a District bank, or to the appropriate supervisory authority
of the interested State, if the applicant company or any bank the vot­
ing shares or assets of which are sought to be acquired is a State bank,
and shall allow thirty days within which the views and recommenda­
tions of the Comptroller of the Currency or the State supervisory
authority, as the case may be, may be submitted. If the Comptroller
of the Currency or the State supervisory authority so notified by the
Board disapproves the application in writing within said thirty days,
the Board shall forthwith give written notice of that fact to the appli­
cant. Within three days after giving such notice to the applicant,
the Board shall notify in writing the applicant and the disapproving
authority of the date for commencement of a hearing by it on such
application. Any such hearing shall be commenced not less than ten
nor more than thirty days after the Board has given written notice
to the applicant of the action of the disapproving authority. The
length of any such hearing shall be determined by the Board, but it
shall afford all interested parties a reasonable opportunity to testify

REGULATION Y

13

at such hearing. At the conclusion thereof, the Board shall by order
grant or deny the application on the basis of the record made at such
hearing.
(c) In determining whether or not to approve any acquisition or
merger or consolidation under this section, the Board shall take into
consideration the following factors: (1) the financial history and
condition of the company or companies and the banks concerned;
(2) their prospects; (3) the character of their management; (4) the
convenience, needs, and welfare of the communities and the area
concerned; and (5) whether or not the effect of such acquisition or
merger or consolidation would be to expand the size or extent of the
bank holding company system involved beyond limits consistent with
adequate and sound banking, the public interest, and the preservation
of competition in the field of banking.
(d) Notwithstanding any other provision of this section, no appli­
cation shall be approved under this section which will permit any
bank holding company or any subsidiary thereof to acquire, directly
or indirectly, any voting shares of, interest in, or all or substantially
all of the assets of any additional bank located outside of the State
in which such bank holding company maintains its principal office
and place of business or in which it conducts its principal operations
unless the acquisition of such shares or assets of a State bank by an
out-of-State bank holding company is specifically authorized by the
statute laws of the State in which such bank is located, by language
to that effect and not merely by implication.
[12 U.S.C. 1842.]
INTERESTS IN NONBANKING ORGANIZATIONS
Sec . 4. fa) Except as otherwise provided in this Act, no bank holding

company shall—
(1) after the date of enactment of this Act acquire direct or
indirect ownership or control of any voting shares of any company
which is not a bank, or
(2) after twro years from the date of enactment of this Act or
from the date as of vffiich it becomes a bank holding company,
whichever is later, retain direct or indirect ownership or control of
any voting shares of any company which is not a bank or a bank
holding company or engage in any business other than that of bank­
ing or of managing or controlling banks or of furnishing services to
or performing services for any bank of which it owns or controls 25
per centum or more of the voting shares.
The Board is authorized, upon application by a bank holding com­
pany, to extend the period referred to in paragraph (2) above from
time to time as to such bank holding company for not more than one

14

REGULATION Y

year at a time if, in its judgment, such an extension would not be
detrimental to the public interest, but no such extensions shall extend
beyond a date five years after the date of enactment of this Act or five
years after the date as of which a company becomes a bank holding
company, whichever is later.
( b) After two years from the date of enactment of this Act, no
certificate evidencing shares of any bank holding company shall bear
any statement purporting to represent shares of any other company
except a bank or a bank holding company, nor shall the ownership,
sale, or transfer of shares of any bank holding company be condi­
tioned in any manner whatsoever upon the ownership, sale, or transfer
of shares of any other company except a bank or a bank holding
company.
( c) The prohibitions in this section shall not apply—
(1) to shares owned or acquired by a bank holding company in
any company engaged solely in holding or operating properties used
wholly or substantially by any bank with respect to which it is a
bank holding company in its operations or acquired for such future
use or engaged solely in conducting a safe deposit business, or solely
in the business of furnishing services to or performing services for
such holding company and banks with respect to which it is a bank
holding company, or in liquidating assets acquired from such bank
holding company and such banks;
(2) to shares acquired by a bank holding company which is a
bank, or by any banking subsidiary of a bank holding company, in
satisfaction of a debt previously contracted in good faith, but such
bank holding company or such subsidiaries shall dispose of such
shares within a period of two years from the date on which they
were acquired or from the date of enactment of this Act, whichever
is later;
(3) to shares acquired by a bank holding company from any of
its subsidiaries which subsidiary has been requested to dispose of
such shares by any Federal or State authority having statutory
power to examine such subsidiary, but such bank holding company
shall dispose of such shares within a period of two years from the
date on which they were acquired or from the date of enactment
of this Act, whichever is later;
(4) to shares which are held or acquired by a bank holding com­
pany which is a bank or by any banking subsidiary of a bank hold­
ing company, in good faith in a fiduciary capacity, except where
such shares are held for the benefit of the shareholders of such
bank holding company or any of its subsidiaries, or to shares which
are of the kinds and amounts eligible for investment by National

REGULATION Y

15

banking associations under the provisions of section 5136 of the
Revised Statutes, or to shares lawfully acquired and owned prior
to the date of enactment of this Act by a bank which is a bank
holding company, or by any of its wholly owned subsidiaries;
(5) to shares of any company which are held or acquired by a
bank holding company which do not include more than 5 per
centum of the outstanding voting securities of such company, and
do not have a value greater than 5 per centum of the value of the
total assets of the bank holding company, or to the ownership by
a bank holding company of shares, securities, or obligations of an
investment company which is not a bank holding company and
which is not engaged in any business other than investing in secu­
rities, which securities do not include more than 5 per centum of
the outstanding voting securities of any company and do not include
any single asset having a value greater than 5 per centum of the
value of the total assets of the bank holding company;
(6) to shares of any company all the activities of which are of
a financial, fiduciary, or insurance nature and which the Board after
due notice and hearing, and on the basis of the record made at such
hearing, by order has determined to be so closely related to the
business of banking or of managing or controlling banks as to be a
proper incident thereto and as to make it unnecessary for the pro­
hibitions of this section to apply in order to carry out the purposes
of this Act;
(7) to any bank holding company which is a labor, agricultural,
or horticultural organization and which is exempt from taxation
under section 501 of the Internal Revenue Code of 1954; or
(8) to shares held or acquired by a bank holding company in any
company which is organized under the laws of a foreign country
and which is engaged principally in the banking business outside
the United States.
[12 U.S.C. 1843.]
ADMINISTRATION
S ec . 5. fa) Within one hundred and eighty days after the date of
enactment of this Act, or within one hundred and eighty days after
becoming a bank holding company, whichever is later, each bank
holding company shall register with the Board on forms prescribed
by the Board, which shall include such information with respect to
the financial condition and operations, management, and intercom­
pany relationships of the bank holding company and its subsidiaries,
and related matters, as the Board may deem necessary or appropriate
to carry out the purposes of this Act. The Board may, in its dis-

16

REGULATION Y

cretion, extend the time within which a bank holding company shall
register and file the requisite information.
(b) The Board is authorized to issue such regulations and orders as
may be necessary to enable it to administer and carry out the purposes
of this Act and prevent evasions thereof.
(c) The Board from time to time may require reports under oath
to keep it informed as to whether the provisions of this Act and such
regulations and orders issued thereunder have been complied with;
and the Board may make examinations of each bank holding com­
pany and each subsidiary thereof, the cost of which shall be assessed
against, and paid by, such holding company. The Board shall, as far
as possible, use the reports of examinations made by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, or the
appropriate State bank supervisory authority for the purposes of this
section.
(d) Before the expiration of two years following the date of enact­
ment of this Act, and each year thereafter in the Board’s annual
report to the Congress, the Board shall report to the Congress the
results of the administration of this Act, stating what, if any, substan­
tial difficulties have been encountered in carrying out the purposes
of this Act, and any recommendations as to changes in the law which
in the opinion of the Board would be desirable.
[12 U.S.C. 1844.]
BORROWING BY BANK HOLDING COMPANY OR ITS SUBSIDIARIES
S ec . 6. (a) From and after the date of enactment of this Act, it
shall be unlawful for a bank—

(1) to invest any of its funds in the capital stock, bonds, deben­
tures, or other obligations of a bank holding company of which
it is a subsidiary, or of any other subsidiary of such bank holding .
com pany;
(2) to accept the capital stock, bonds, debentures, or other obli­
gations of a bank holding company of which it is a subsidiary or
any other subsidiary of such bank holding company, as collateral
security for advances made to any person or company: Provided,
however, That any bank may accept such capital stock, bonds,
debentures, Or other obligations as security for debts previously
contracted, but such collateral shall not be held for a period of
over two years;
(3) to purchase securities, other assets or obligations under re­
purchase agreement from a bank holding company of which it is
a subsidiary or any other subsidiary of such bank holding com pany;
and

REGULATION Y

17

(4)
to make any loan, discount or extension of credit to a bank
holding company of which it is a subsidiary or to any other sub­
sidiary of such bank holding company.
Non-interest-bearing deposits to the credit of a bank shall not be
deemed to be a loan or advance to the bank of deposit, nor shall the
giving of immediate credit to a bank upon uncollected items received
in the ordinary course of business be deemed to be a loan or advance
to the depositing bank.
(b) The provisions of this section shall not apply (1) to the capi­
tal stock, bonds, debentures, or other obligations of any company
described in section 4 (c) (1) of this Act, or (2) to any company
whose subsidiary status has arisen out of a bona fide debt to the bank
contracted prior to the date of the creation of such status, or (3) to
any company whose subsidiary status exists by reason of the owner­
ship or control of voting shares thereof by the bank as executor,
administrator, trustee, receiver, agent, or depositary, or in any other
fiduciary capacity, except where such shares are held for the benefit
of all or a majority of the stockholders of such bank.
[12 U.S.C. 1845.]
RESERVATION OF RIGHTS TO STATES
Sec . 7. The enactment by the Congress of the Bank Holding
Company Act of 1956 shall not be construed as preventing any State
from exercising such powers and jurisdiction which it now has or may
hereafter have with respect to banks, bank holding companies, and
subsidiaries thereof.

[12 U.S.C. 1846.]

'
PENALTIES

S ec . 8. Any company which willfully violates any provision of this
Act, or any regulation or order issued by the Board pursuant thereto,
shall upon conviction be fined not more than $1,000 for each day dur­
ing which the violation continues. Any individual who willfully par­
ticipates in a violation of any provision of this Act shall upon con­
viction be fined not more than $10,000 or imprisoned not more than
one year, or both. Every officer, director, agent, and employee of a
bank holding company shall be subject to the same penalties for false
entries in any book, report, or statement of such bank holding com­
pany as are applicable to officers, directors, agents, and employees
of member banks for false entries in any books, reports, or statements
of member banks under section 1005 of title 18, United States Code.

[12 U.S.C. 1847.]

18

REGULATION Y

JUDICIAL REVIEW
S ec . 9. Any party aggrieved by an order of the Board under this
Act may obtain a review of such order in the United States Court of
Appeals within any circuit wherein such party has its principal place
of business, or in the Court of Appeals in the District of Columbia,
by filing in the court, within sixty days after the entry of the Board’s
order, a petition praying that the order of the Board be set aside. A
copy of such petition shall be forthwith transmitted to the Board by the
clerk of the court, and thereupon the Board shall file in the court the
record made before the Board, as provided in section 2112 of title 28,
United States Code. Upon the filing of such petition the court shall
have jurisdiction to affirm, set aside, or modify the order of the Board
and to require the Board to take such action with regard to the matter
under review as the court deems proper. The findings of the Board
as to the facts, if supported by substantial evidence, shall be conclusive.
[12 U.S.C. 1848.]
AMENDMENTS TO INTERNAL REVENUE CODE OF 1954
Sec . 10. (a) Subchapter 0 of chapter 1 of the Internal Revenue
Code of 1954 is amended by adding at the end thereof the following
new part:

“ PART V III— DISTRIBUTIONS PURSUANT TO BANK
HOLDING COM PANY A C T OF 1956
“Sec. 1101. Distributions pursuant to Bank Holding Company Act of
1956.
“ Sec. 1102. Special rules.
“Sec. 1103. Definitions.
“ SEC. 1101. DISTRIBUTIONS PURSUANT TO BANK HOLDING
COMPANY ACT OF 1956.

“ (a) D istributions of C ertain N on -B anking P roperty.—
“ (1) D istributions of prohibited property.— If—
“ (A) a qualified bank holding corporation distributes pro­
hibited property (other than stock received in an exchange to
which subsection (c) (2) applies) —
“ (i) to a shareholder (with respect to its stock held by
such shareholder), without the surrender by such share­
holder of stock in such corporation; or
“ (ii) to a shareholder, in exchange for its preferred
stock; or
“ (iii) to a security holder, in exchange for its secu­
rities; and
“ (B) the Board has, before the distribution, certified that
the distribution of such prohibited property is necessary

REGULATION Y

19

or appropriate to effectuate section 4 of the Bank Holding
Company Act of 1956,
then no gain to the shareholder or security holder from the receipt
of such property shall be recognized.
“ (2) D istributions of stock and securities received i n a n
EXCH AN G E TO W H IC H SUBSECTION (c) (2) APPLIES.— If--“ (A) a qualified bank holding corporation distributes—
“ (i) common stock received in an exchange to which
subsection (c) (2) applies to a shareholder (with respect
to its stock held by such shareholder), without the
surrender by such shareholder of stock in such corpora­
tion; or
“ (ii) common stock recived in an exchange to which
subsection (c) (2) applies to a shareholder, in exchange
for its common stock; or
“ (iii) preferred stock or common stock received in an
exchange to which subsection (c) (2) applies to a share­
holder,. in exchange for its preferred stock; or
“ (iv) securities or preferred or common stock received
in an exchange to which subsection (c) (2) applies to a
security holder, in exchange for its securities; and
“ (B) any preferred stock received has substantially the
same terms as the preferred stock exchange, and any securi­
ties received have substantially the same terms as the securi­
ties exchanged,
then, except as provided in subsection ( f ) , no gain to the share­
holder or security holder from the receipt of such stock or such
securities or such stock and securities shall be recognized. _
“ (3) N on pro rata distributions .— Paragraphs (1) and (2)
shall apply to a distribution whether or not the distribution is
pro rata with respect to all of the shareholders of the distributing
qualified bank holding corporation.
“ (4) E xception .— This subsection shall not apply to any dis­
tribution by a corporation which has made any distribution pur­
suant to subsection (b).
“ (5) D istributions

involving gift or compensation .—

“ In the case o f a distribution to which paragraph ( 1 ) or ( 2 )
applies, but which
“ ( A ) results in a gift, see section 2501, and following, or
“ ( B ) has the effect o f the payment o f compensation, see section
61 ( a ) ( 1 ) .

“ (b) C orporation C easing
“ (1) D istributions

to

Be

a

B an k H olding C ompany .—

of property w h ich cause a corporation

to be a bank holding company .— If—

“ (A) a qualified

bank holding corporation distributes

REGULATION Y

20

property (other than stock received in an exchange to which
subsection (c) (3) applies)—
“ (i) to a shareholder (with respect to its stock held
by such shareholder), without the surrender by such
shareholder of stock in such corporation; or
“ (ii) to a shareholder, in exchange for its preferred
stock; or
“ (iii) to a security holder, in exchange for its securi­
ties; and
“ (B) the Board has, before the distribution, certified that—
“ (i) such property is all or part of the property by
reason of which such corporation controls (within the
meaning of section 2 (a) of the Bank Holding Company
Act of 1956) a bank or bank holding company, or such
property is part of the property by reason of which such
corporation did control a bank or a bank holding com­
pany before any property of the same kind was distrib­
uted under this subsection or exchanged under subsection
(c) (3); and
“ (ii) the distribution is necessary or appropriate to
effectuate the policies of such Act,
then no gain to the shareholder or security holder from the receipt
of such property shall be recognized.
“ (2) D istributions

of stock and securities received in an

EXCHANGE TO WHICH SUBSECTION

(c) (3)

APPLIES.---- If---

“ (A) a qualified bank holding corporation distributes—
_
“ (i) common stock received in an exchange to which
subsection (c) (3) applies to a shareholder (with respect
to its stock held by such shareholder), without the sur­
render by such shareholder of stock in such corporation;
or
“ (ii) common stock received in an exchange to which
subsection (c) (3) applies to a shareholder, in exchange
for its common stock; or
“ (iii) preferred stock or common stock received in
an exchange to which subsection (c) (3) applies to a
shareholder, in exchange for its preferred stock; or
“ (iv) securities or preferred or common stock received
in an exchange to which subsection (c) (3) applies to a
security holder, in exchange for its securities; and
“ (B) any preferred stock received has substantially the
same terms as the preferred stock exchanged, and any se-

REGULATION Y

21

curities received have substantially the same terms as the
securities exchanged,
then, except as provided in subsection (f), no gain to the share­
holder or security holder from the receipt of such stock or such
securities or such stock and securities shall be recognized.
“ (3) N on pro rata distributions .— Paragraphs (1) and (2)
shall apply to a distribution whether or not the distribution is
pro rata with respect to all of the shareholders of the distributing
qualified bank holding corporation.
“ (4) E xception .— This subsection shall not apply to any dis­
tribution by a corporation which has made any distribution pur­
suant to subsection ( a ) .
“ (5) D istribution

involving gift or compensation .—

“ In the case o f a distribution to which paragraph ( 1 ) or ( 2 )
applies, but which
“ ( A ) results in a gift, see section 2501, and following, or
“ ( B ) has the effect o f the payment o f compensation, see section
61 ( a ) ( 1 ) .

“ (c) P roperty A cquired A fter M ay 15, 1955.—
“ (1) I n general .— Except as provided in paragraphs (2) and
(3), subsection (a) or (b) shall not apply to—
“ (A) any property acquired by the distributing corpora­
tion after M ay 15, 1955, unless (i) gain to such corporation
with respect to the receipt of such property was not recog­
nized by reason of subsection (a) or ( b ) , or (ii) such prop­
erty was received by it in exchange for all of its stock in
an exchange to which paragraph (2) or (3) applies, or (iii)
such property was acquired by the distributing corporation
in a transaction in which gain was not recognized under
section 305 (a) or section 332, or under section 354 with
respect to a reorganization described in section 368 (a) (1)
(E) or (F), or
“ (B) any property which was acquired by the distributing
corporation in a distribution with respect to stock acquired
by such corporation after M ay 15,1955, unless such stock was
acquired by such corporation (i) in a distribution (with
respect to stock held by it on May 15, 1955, or with respect
to stock in respect of which all previous applications of this
clause are satisfied) with respect to which gain to it was not
recognized by reason of subsection (a) or (b), or (ii) in
exchange for all of its stock in an exchange to which para­
graph (2) or (3) applies, or (iii) in a transaction in which
gain was not recognized under section 305 (a) or section 332,
or under section 354 with respect to a reorganization described
in section 368 (a) (1) (E) or ( F ) , or

22

REGULATION Y

“ (C) any property acquired by the distributing corpora­
tion in a transaction in which gain was not recognized under
section 332, unless such property was acquired from a corpo­
ration which, if it had been a qualified bank holding corpora­
tion, could have distributed such property under subsection
(a) (1) or (b) (1).
“ (2) E xchanges involving prohibited property.— If—
“ (A) Any qualified bank holding corporation exchanges
(i) property, which, under subsection (a) (1), such corpo­
ration could distribute directly to its shareholders or se­
curity holders without the recognition of gain to such share­
holders or security holders, and other property (except prop­
erty described in subsection (b) (1) (B) ( i ) ), for (ii) all of
the stock of a second corporation created and availed of solely
for the purpose of receiving such property;
“ (B) immediately after the exchange, the qualified bank
holding corporation distributes all of such stock in a manner
prescribed in subsection (a) (2) ( A ) ; and
“ (C) before such exchange, the Board has certified (with
respect to the property exchanged which consists of property
which, under subsection (a) (I), such corporation could dis­
tribute directly to its shareholders or security holders with­
out the recognition of gain) that the exchange and distribu­
tion are necessary or appropriate to effectuate section 4 of the
Bank Holding Company Act of 1956,
then paragraph (1) shall not apply with respect to such distribu­
tion.
“ (3) E xchanges involving interests in b a n k s .— If—
“ (A) any qualified bank holding corporation exchanges (i)
property which, under subsection (b) (1), such corporation
could distribute directly to its shareholders or security holders
without the recognition of gain to such shareholders or secur­
ity holders, and other property (except prohibited property),
for (ii) all of the stock of a second corporation created and
availed of solely for the purpose of receiving such property;
“ (B) immediately after the exchange, the qualified bank
holding corporation distributes all of such stock in a manner
prescribed in subsection (b) (2) ( A ) ; and
“ (C) before such exchange, the Board has certified (with
respect to the property exchanged which consists of property
which, under subsection (b) (1), such corporation could
distribute directly to its shareholders or security holders
without the recognition of gain) that—

REGULATION Y

23

“ (i) such property is all or part of the property by
reason of which such corporation controls (within the
meaning of section 2 (a) of the Bank Holding Com­
pany Act of 1956) a bank or bank holding company,
or such property is part of the property by reason of
which such corporation did control a bank or a bank
holding company before any property of the same kind
was distributed under subsection (b) (1) or exchanged
under this paragraph; and
“ (ii) the exchange and distribution are necessary or
appropriate to effectuate the policies of such Act,
then paragraph (1) shall not apply with respect to such distri­
bution.
(d) D istributions T o A void F ederal I ncome T a x .—
“ (1) P rohibited property.— Subsection (a) shall not apply
to a distribution if, in connection with such distribution, the dis­
tributing corporation retains, or transfers after May 15, 1955,
to any corporation, property (other than prohibited property)
as part of a plan one of the principal purposes of which is the
distribution of the earnings and profits of any corporation.
“ (2) B anking property.— Subsection (b) shall not apply to
a distribution if, in connection with such distribution, the -dis­
tributing corporation retains, or transfers after May 15, 1955,
to any corporation, property (other than property described in
subsection (b) (1) (B) ( i ) ) as part of a plan one of the principal
purposes of which is the distribution of the earnings and profits
of any corporation.
“ (3) C ertain contributions to capital .— In the case of a dis­
tribution a portion of which is attributable to a transfer which
is a contribution to the capital of a corporation, made after May
15, 1955, and prior to the date of the enactment of this part, if
subsection (a) or (b) would apply to such distribution but for
the fact that, under paragraph (1) or (2) (as the case may be)
of this subsection, such contribution to capital is part of a plan
one of the prinicpal purposes of which is to distribute the earnings
and profits of any corporation, then, notwithstanding paragraph
(1) or (2), subsection (a) or (b) (as the case may be) shall apply
to that portion of such distribution not attributable to such con­
tribution to capital, and shall not apply to that portion of such
distribution attributable to such contribution to capital.
(e) F inal C ertification .—
“ (1) F or subsection (a).— Subsection

(a) shall not apply
with respect to any distribution by a corporation unless the Board

24

REGULATION Y

certifies that, before the expiration of the period permitted under
section 4 (a) of the Bank Holding Company Act of 1956 (includ­
ing any extensions thereof granted to such corporation under
such section 4 (a) ), the corporation has disposed of all the
property the disposition of which is necessary or appropriate to
effectuate section 4 of such Act (or would have been so necessary
or appropriate if the corporation had continued to be a bank hold­
ing com pany).
“ (2) F or subsection (b).—
“ (A) Subsection (b) shall not apply with respect to any
distribution by any corporation unless the Board certifies
that before the expiration of the period specified in subpara­
graph (B), the corporation has ceased to be a bank holding
company.
“ (B) The period referred to in subparagraph (A) is the
period which expires 2 years after the date of the enactment
of this part or 2 years after the date on which the corporation
becomes a bank holding company, whichever date is later.
The Board is authorized, on application by any corporation,
to extend such period from time to time with respect to
such corporation for not more than one year at a time if, in
its judgment, such an extension would not be detrimental
to the public interest; except that such period may not in
any case be extended beyond the date 5 years after the date
of the enactment of this part or 5 years after the date on
which the corporation becomes a bank holding company,
whichever date is later.
“ (f) C ertain E xchanges of Securities .— In the case of an ex­
changed described in subsection (a) (2) (A) (iv) or subsection (b)
(2) (A) (iv), subsection (a) or subsection (b) (as the case may be)
shall apply only to the extent that the principal amount of the securi­
ties received does not exceed the principal amount of the securities
exchanged.
[26 U.S.C. 1101.]
“ SEC. 1102. SPECIAL RULES.

“ (a) B asis of P roperty A cquired in D istributions .— If, by reason
of section 1101, gain is not recognized with respect to the receipt of any
property, then, under regulations prescribed by the Secretary or his
delegate—
“ (1) if the property is received by a shareholder with respect
to stock, without the surrender by such shareholder of stock, the
basis of the property received and of the stock with respect to
which it is distributed shall, in the distributee’s hands, be deter-

REGULATION Y

25

mined by allocating between such property and such stock the
adjusted basis of such stock; or
“ (2) if the property is received by a shareholder in exchange
for stock or by a security holder in exchange for securities, the
basis of the property received shall, in the distributee’s hands, be
the same as the adjusted basis of the stock or securities exchanged,
increased by—
“ (A) the amount of the property received which was
treated as a dividend, and
“ (B) the amount of gain to the taxpayer recognized on
the property received (not including any portion of such gain
which was treated as a dividend).
“ (b) P eriods of L im itation .— The periods of limitation provided
in section 6501 (relating to limitations on assessment and collection)
shall not expire, with respect to any deficiency (including interest and
additions to the tax) resulting solely from the receipt of property
by shareholders in a distribution which is certified by the Board
under subsection (a), (b), or (c) of section 1101, until five years after
the distributing corporation notifies the Secretary or his delegate
(in such manner and with such accompanying information as the
Secretary or his delegate may by regulations prescribe) that the
period (including extensions thereof) prescribed in section 4 (a) of
the Bank Holding Company Act of 1956, or section 1101 (e) (2) (B ),
whichever is applicable, has expired; and such assessment may be
made notwithstanding any provision of law or rule of law which
would otherwise prevent such assessment.
“ (c) A llocation

of

E arnings

“ (1) D istribution

and

P rofits .—

of stock in a controlled corporation.—

In the case of a distribution by a qualified bank holding corpora­
tion under section 1101 (a) (1) or (b) (1) of stock in a controlled
corporation, proper allocation with respect to the earnings and
profits of the distributing corporation and the controlled corpora­
tion shall be made under regulations prescribed by the Secretary
or his delegate.
“ (2) E xchanges described in section 1101 (c) (2) or (3).— In
the case of any exchange described in section 1101 (c) (2) or (3),
proper allocation with respect to the earnings and profits of the
corporation transferring the property and the corporation receiv­
ing such property shall be made under regulations prescribed by
the Secretary or his delegate.
“ (3) D efinition of controlled corporation.— For purposes
of paragraph (1), the term ‘controlled corporation’ means a
corporation with respect to which at least 80 per cent of the

26

REGULATION Y

total combined voting power of all classes of stock entitled to
vote and at least 80 per cent of the total number of shares of all
other classes of stock is owned by the distributing qualified bank
holding corporation.
“ (d) I temization of P roperty.— In any certification under this
part, the Board shall make such specification and itemization of prop­
erty as may be necessary to carry out the provisions of this part.
[26 U.S.C. 1102.]
“ SEC. 1103. DEFINITIONS.

“ (a) B an k H olding C ompany .— For purposes of this part, the
term ‘bank holding company’ has the meaning assigned to such term
by section 2 of the Bank Holding Company Act of 1956.
“ (b) Q ualified B an k H olding C orporation.—
“ (1) I n general.— Except as provided in paragraph (2 ), for
purposes of this part the term ‘qualified bank holding corpora­
tion’ means any corporation (as defined in section 7701 (a) (3 ))
which is a bank holding company and which holds prohibited
property acquired by it—

“ (A) on or before M ay 15, 1955,
“ (B) in a distribution in which gain to such corporation
with respect to the receipt of such property was not recog­
nized by reason of subsection (a) or (b) of section 1101, or
“ (C) in exchange for all of its stock in an exchange de­
scribed in section 1101 (c) (2) or (c) (3).
“ (2) L imitations .—
“ (A) A bank holding company shall not be a qualified
bank holding corporation, unless it would have been a bank
holding company on M ay 15, 1955, if the Bank Holding Com­
pany Act of 1956 had been in effect on such date, or unless
it is a bank holding company determined solely by reference
to—
“ (i) property acquired by it on or before M ay 15,
1955,
“ (ii) property acquired by it in a distribution in
which gain to such corporation with respect to the re­
ceipt of such property was not recognized by reason of
subsection (a) or (b) of section 1101, and
“ (iii) property acquired by it in exchange for all of
its stock in an exchange described in section 1101 (c)
(2) or (3).
“ (B) A bank holding company shall not be a qualified
bank holding corporation by reason of property described
in subparagraph (B) of paragraph (1) or clause (ii) of

REGULATION Y

27

subparagraph (A) of this paragraph, unless such property
was acquired in a distribution with respect to stock, which
stock was acquired by such bank holding company—
“ (i) on or before M ay 15, 1955,
“ (ii) in a distribution (with respect to stock held by
it on M ay 15, 1955, or with respect to stock in respect
of which all previous applications of this clause are
satisfied) with respect to which gain to it was not
recognized by reason of subsection (a) or (b) of section
1101, or
“ (iii) in exchange for all of its stock in an exchange
described in section 1101 (c) (2) or (3).
“ (C) A corporation shall be treated as a qualified bank
holding corporation only if the Board certifies that it satisfies
the foregoing requirements of this subsection.
“ (c) P rohibited P roperty.— For purposes of this part, the term
‘prohibited property’ means, in the case of any bank holding com­
pany, property (other than nonexempt property) the disposition of
which would be necessary or appropriate to effectuate section 4 of
the Bank Holding Company Act of 1956 if such company continued
to be a bank holding company beyond the period (including any exten­
sions thereof) specified in subsection (a) of such section or in section
1101 (e) (2) (B) of this part, as the case may be. The term ‘pro­
hibited property’ does not include shares of any company held by a
bank holding company to the extent that the prohibitions of section 4
of the Bank Holding Company Act of 1956 do not apply to the owner­
ship by such bank holding company of such property by reason of
subsection (c) (5) of such section.
“ (d) N onexempt P roperty.— For purposes of this part, the term
‘nonexempt property’ means—
“ (1) obligations (including notes, drafts, bills of exchange,
and bankers’ acceptances) having a maturity at the time of
issuance of not exceeding 24 months, exclusive of days of grace;
“ (2) securities issued by or guaranteed as to principal or in­
terest by a government or subdivision thereof or by any instru­
mentality of a government or subdivision; or
“ (3) money, and the right to receive money not evidenced by
a security or obligation (other than a security or obligation de­
scribed in paragraph (1) or (2)).
“ (e) B oard.— For purposes of this part, the term ‘Board’ means
the Board of Governors of the Federal Reserve System.”
(b) The table of parts for subchapter 0 of chapter 1 of the Internal

REGULATION Y

28

Revenue Code of 1954 is amended by adding at the end thereof the
following:
“ Part V III. Distributions pursuant to Bank Holding Company
Act of 1956.”
(c)
The amendments made by this section shall apply with respect
to taxable years ending after the date of the enactment of this Act.
[26 U.S.C. 1103.]
SAVING PROVISION
Sec . 11. Nothing herein contained shall be interpreted or construed
as approving any act, action, or conduct which is or has been or may
be in violation of existing law, nor shall anything herein contained
constitute a defense to any action, suit, or proceeding pending or here­
after instituted on account of any prohibited antitrust or monopolistic
act, action, or conduct.

[12 U.S.C. 1841 (note).]
SEPARABILITY OF PROVISIONS
Sec . 12. If any provision of this Act, or the application of such
provision to any person or circumstance, shall be held invalid, the
remainder of the Act, and the application of such provision to persons
or circumstances other than those to which it is held invalid, shall
not be affected thereby.
[12 U.S.C. 1841 (note).]