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F ederal Reserve

bank

DALLAS, T E X A S

of

Dallas

75222

C i r c u l a r No. 78-29
March 14, 1978

RESERVE BANK DIRECTORS—ACTIONS AND RESPONSIBILITIES
New R egulation a n d G uide to C onduct

TO ALL MEMBER BANKS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
U n d er th e F ed eral R e s e r v e Reform Act of 1977, th e d i r e c t o r s of Federal
R e s e r v e B an k s a r e p ro h ib i te d from p a r t ic ip a tin g in m a tte rs in w hich th e y , o r re la te d
p e r s o n s or o r g a n iz a t io n s , h a v e a financial in t e r e s t , e x c e p t w h e r e , a fte r full d i s ­
c l o s u r e by a d i r e c t o r or p u r s u a n t to g e n e r a l r u l e s p u b lis h e d by th e B oard of G o v e r­
n o r s of th e F ederal R e s e rv e S y s te m , th e financial i n t e r e s t h a s been ex em p ted by the
Board of G o v e rn o rs as too rem ote o r in c o n se q u e n tia l to affect the in te g rity of the
d ire c to r's serv ice s.
A c c o rd in g ly , the B oard of G o v e rn o rs has a d o p te d , effective F e b r u a r y 17,
1978, a new re g u la tio n en title d " R e s e r v e B ank D ir e c to r s —A ctions a n d R e s p o n s i­
b ilitie s " a n d a "G uide to C o n d u ct fo r D ire c to rs of F ederal R e s e rv e Banks a n d
B ra n c h e s of Federal R e s e r v e B a n k s . " While th e re g u la tio n has b e en a d o p te d as a
final r u l e in view of th e s ta t u t e 's c u r r e n t a p p lic a tio n to d i r e c t o r s a n d the d e s i r a b i l ­
ity of p ro v id in g d i r e c t o r s both g u id a n c e a n d p ro te c tio n from lia b ility , as a p ra c tic al
m a tte r, th e re g u la tio n will b e t r e a te d as interim in n a t u r e p e n d in g re c e ip t by the
Board of G o v e rn o rs of com ments a n d v ie w s from d i r e c t o r s . R e s e rv e B a n k s , and
o th e r in te r e s te d p e r s o n s .
P r in te d on the e n clo se d p a g e s is th e text of th e re g u la tio n a n d g u i d e as
s u b m itte d to th e FEDERAL REGISTER. T h e Board h a s in v ited th e d i r e c t o r s . Re­
s e r v e B a n k s , a n d o th e r in te r e s te d p e r s o n s to s u b m it comments a n d view s in w r i t ­
ing to th e S e c r e t a r y , B oard of G o v e rn o rs of the F ed eral R e s e r v e System ,
W ash in g ton , D .C . 20551, not later than A p ril 14, 1978. All m a te ria ls su bm itted
s h o u ld in c lu d e th e docket n u m b e r R-0144. After c o n s id e ra tio n of all comments r e ­
c e iv e d , the B oard of G o v e rn o rs is p r e p a r e d to a d o p t p ro m p tly n e c e s s a r y a n d a p p r o ­
p r i a t e a m e n d m en ts to the re g u la tio n .
Sincerely yo u rs,
E r n e s t T . Baughman
President
E n c lo s u re

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

E x tra c t From
FEDERAL REGISTER,
VOL. 43, NO. 38,
F r id a y , F e b r u a r y 24, 1978,
p p . 7610 - 7613 a n d 7706
[6210-01 ]
Till* 12— B a n k s a n d B a n k in g
CHAPTER II— FEDERAL RESERVE SYSTEM
SUtCHAPTER A— BOARD O f GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

[D o c k e t N o. R -0 1 4 4 ]
PART 2 6 4 a — RESERVE BANK DIRECTORS—
A CTIO N S A N D RESPONSIBILITIES

AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
SUMMARY: As a result of enactm ent
of th e Federal Reserve Reform Act of
1977, provisions of the U.S. Code relat­
ing to acts affecting a personal finan­
cial interest were amended to apply to
directors of Federal Reserve Banks.
Under th e amended statute, a director
of a Federal Reserve Bank is prohibit­
ed from participating personally and
substantially in any particular matter
in which th e director, th e director’s
spouse or minor child, or other indi­
viduals or organizations identified in
the statute, have a financial interest.
However, such prohibition shall not
apply, if th e director has first advised
the Board of Governors of th e Federal
Reserve System of th e nature and cir­
cumstances of th e particular matter,
has made full disclosure of th e finan­
cial interest involved, and has received
in advance a written determination by
th e Board of Governors that the fi­
nancial interest “is not so substantial
as to be deemed likely to affect the in­
tegrity of th e services” which th e Fed­
eral Reserve System may expect from
such director. The statute further pro­
vides that such prohibition shall not
apply if, by general rule or regulation
published in the F e d e r a l R e g i s t e r ,
th e financial interest has been
exem pted by th e Board of Governors
as being “too remote or too inconse­
quential” to affect the integrity of di­
rectors’ services.
This rule is promulgated by the
Board of Governors for the purpose of
Implementing and providing guidance
concerning th e recently amended stat­
ute. Specifically, th e rule contains pro­
hibitions against director participation
in particular matters, sets forth pro­
posed procedures under which a direc­
tor may obtain an ad hoc exemption
pursuant to th e statute, and identifies
certain financial interests of directors
that th e Board has exempted from
coverage by th e statute as being too
remote or too inconsequential to
affect the integrity of directors’ ser­
vices.

EFFECTIVE DATE: February 11,
1978; comments due, April 14, 1978.
ADDRESS: Interested persons are in­
vited to review th e rule and to submit
comments (indicating docket No. R 0144) to Secretary, Board of Gover­
nors of th e Federal Reserve System,
W ashington, D.C. 20551.
FOR FURTHER INFORMATION
CONTACT:
Thomas J. O’Connell, Counsel to the
Chairman, Board of Governors of
the Federal Reserve System , Wash­
ington, D.C. 20551, 202-452-2791.
SUPPLEMENTARY INFORMATION:
The Board believes that th e follow­
ing additional information with re­
spect to the rule is in th e public inter­
est. Directors of Federal Reserve
Banks are charged by law with the re­
sponsibility for supervising and con­
trolling th e operations of the Federal
Reserve "Banks, under th e general su­
pervision of the Board of Governors of
th e Federal Reserve System, and for
assuring that the affairs of th e Banks
are administered fairly and impartial­
ly. The Federal Reserve Act provides
that Reserve Bank directors will be se­
lected with due consideration to the
interests of various segments of the
population and economy, thus assur­
ing that the Federal Reserve System
will receive the benefit of the experi­
enced judgment of individuals from a
broad spectrum of th e communities
that will be affected by actions of the
System. For example, the Federal Re­
serve Act provides that each head
office of a Reserve Bank will have
nine directors. Three are designated
class A directors and are required to
be “chosen by and representative of”
member banks of the Board of Gover­
nors System . Three are designated
class B directors and are to be elected
by the member banks; three are desig­
nated class C directors and are ap­
pointed by the Board of Governors.
Both class B and C directors are to
represent the public with “due but not
exclusive consideration to the inter­
ests of agriculture, commerce, indus­
try, services, labor, and consumers.”
All directors are to be chosen “without
discrimination on the basis of race,
creed, color, sex, or national origin.”
The Federal Reserve Act contem­
plates that directors will be gainfully
employed in several designated areas
of endeavor, but will devote a portion
of their time to Federal Reserve Bank
functions. The amended 18 U.S.C. 208
makes applicable to Reserve Bank di­
rectors a standard of conduct formu­
lated primarily for application to indi­
viduals serving th e Federal govern­
m ent full time and generally with no
other substantial occupation or call­
ing. W hile it is the judgment of the
Board of Governors that the ethical
standards historically adhered to by
th e boards of directors of Federal R e­

serve B a n k s have been in accord w ith
th e spirit of 18 U.S.C. 208, th e unique
position of Federal Reserve Bank di­
rectors was felt to warrant formula­
tion by th e Board of Governors of
principal standards, as set forth in this
rule, under which any potential con­
flicts could be resolved In a manner
consistent with th e interests of th e
public, the Federal Reserve System,
and th e directors Involved.
Pursuant to the authority contained
in 5 U.S.C. 553(b)(B), this rule is being
published as a final rule without prior
general notice of proposed rulemak­
ing, but with opportunity after receipt
of comments for later amendments.
The Board has for good cause found
that this rule must be adopted imme­
diately in view of the present applica­
bility of 18 U.S.C. 208 to directors of
Reserve Banks and the desirability of
promulgating an immediately applica­
ble rule for th e guidance of such direc­
tors at this date. Interested persons
are invited to review the rule and to
submit relevant data, views, com­
ments, or arguments in writing to the
Secretary, Board of Governors of the
Federal Reserve System, Washington,
D.C. 20551 to be received not later
than April 14, 1978. All material sub­
m itted should include th e docket
number R-0144. Copies of any com­
ments received will be made available
for inspection and copying upon re­
quest, except as provided in § 261.6(a)
of the Board’s Rules Regarding Avail­
ability of Information (12 CFR
261.6(a)). Consideration will be given
to any comments received and the
Board will amend th e rule as deter­
mined necessary or desirable.
Title 12, CFR is amended by adding
Part 264a to read as follows:
PART 2 6 4 a — RESERVE BANK DIRECTORS—
A CTIONS A N D RESPONSIBILITIES

S ec.
264a. 1 P u rp o s e .
264a.2 D e f in itio n s .
264a.3 P r o h ib itio n a g a in s t D ir e c to r p a r ti c i ­
p a t i o n in p a r t ic u la r m a tte r s .
264a.4 G r a n t in g o f a d h o c e x e m p tio n s .
264a.5 E x e m p tio n o f r e m o te o r In c o n se ­
q u e n tia l f in a n c ia l in te r e s ts .
A u t h o r i t y : 18 U .S .C . 208, a s a m e n d e d b y
t h e F e d e r a l R e s e rv e R e f o r m A c t o f 1977,
P u b . L. N o. 95-188, sec. 205, 91 S t a t . 1387; 12
U .S .C . 248.301.

S 264a. 1 Purpose.
Directors of Federal Reserve Banks
are charged by law with th e responsi­
bility of supervising and controlling
th e operations of th e Reserve Banks,
under the general supervision of th e
Board of Governors, and-for assuring
that the affairs of th e Banks are ad­
ministered fairly and impartially. The
Federal Reserve Act provides that R e­
serve Bank directors will be selected
with due consideration to th e interests
of various segm ents of the population
and the economy, thus assuring that

the Federal Reserve System will re­
ceive th e benefit of th e experienced
judgment of individuals from a broad
spectrum of th e communities what
will be affected by actions of th e
System. For example, th e provisions of
section 4 of th e Federal Reserve Act,
as am ended by- th e Federal Reserve
Reform Act of 1977, provide that both
class B and C directors shall be chosen
to represent th e public and with “due
but not exclusive consideration to the
interests of agriculture, commerce, in­
dustry, services, labor, and consum­
ers.” Section 4 further provides that
class A directors “shall be chosen by
and be representative of th e stock­
holding banks” of the Federal Reserve
System. Recognizing that Reserve
Bank directors may have, in their pri­
vate capacities, business, consumer, or
other interests to which legitim ate at­
tention is to be given; but recognizing
also that these same individuals have
fiduciary responsibilities as directors
of Reserve Banks, this regulation is
promulgated for the purpose of assur­
ing preservation of and adherence to
th e intent of both the Federal Reserve
Act and section 208 of Title 18, United
States Code.

rector’s knowledge, th e director, th e
director’s spouse or minor child, or re­
lated persons have a financial interest
unless such action is otherwise permit­
ted by 18 U.S.C. 208(b) and §§264a.4 or
264a.5 of this part.
(b) Except as provided by 18 U.S.C.
208(b) and §§264a.4 or 264a.5 of this
part, no director shall participate in
deliberations or decisions of a Reserve
Bank board when the question pre­
sented is whether the board should ap­
prove or ratify an extension of credit
by a Reserve Bank to a bank which is,
in the opinion of the President of the
Reserve Bank, in a hazardous financial
condition, and
(1)
Where the director has knowl­
edge that he, his spouse, or minor
child has a financial interest in the
proposed transaction as a result of:
(1) Being a borrower or applicant for
credit from th e borrowing bank, other
than consumer credit as defined in
Regulation Z (12 CFR 226.2 (p));
(ii) M aintaining a depositary rela­
tionship with th e borrowing bank in
an amount exceeding that covered by
federal deposit insurance; or
(iii) Owning stock, stock options,
bonds, notes or other forms of indebt­
edness issued by the borrowing bank,
§ 264a.2 D e f in itio n s .
the market value of which exceeds
For purposes of this part, th e follow­ $100,000 or represents more than 1
ing definitions shall apply:
percent of the value of that class of
(a) The term “director,” unless oth ­ stock, stock option, bond, note, or
erwise indicated, means a head office other form of indebtedness issued by
or branch director of a Federal R e­ the borrowing bank.
serve Bank.
(2) Where the director has a finan­
(b) T he term “Board of Governors” cial interest in the proposed transac­
means the Board of Governors of the
tion as a result of:
Federal Reserve System.
(i) Service by the director as an offi­
(c) The term “board” means the
cer or director of the borrowing bank;
board of directors of a Federal R e­
(ii) Service by the director as an offi­
serve Bank.
cer or director of another bank that is
(d) The term "related person” means known by the director to be located in
( l ) a partner of a director, (2) any or­ the same geographic market for local
ganization in which the director is banking services as the borrowing
serving as an officer, director, trustee, bank and is known by the director to
partner or employee, or (3) any person be in direct and substantial competi­
or organization with whom the direc­ tion with th e borrowing bank;
tor is negotiating or has any arrange­
(iii) Service by the director as an of­
m ent concerning prospective employ­ ficer or director of another bank that
ment.
is known by the director:
(e) The term “participate” means to
(A) To have outstanding or to be ne­
act through decision, approval, disap­ gotiating an extension of credit from,
proval, recommendation, th e render­ or to, the borrowing bank, other than
ing of advice, investigation, or as is federal funds or foreign exchange
otherwise w ithin the meaning of th e transactions; or
provisions of 18 U.S.C. 208.
(B) To maintain a correspondent or
(f) The term “particular m atter” depositary relationship with th e bor­
means a judicial or other proceeding, rowing bank in an amount exceeding
application, request for a ruling or that covered by federal deposit insur­
other determination, contract, claim, ance; or
controversy, charge, accusation, arrest
(iv) Service by th e director as one of
or other subject within th e meaning of the principal officers of any business
th e provisions of 18 U.S.C. 208.
enterprise that constitutes the direc­
tor’s primary business or professional
§264a.3 Prohibition against Director par­
occupation where such business enter­
ticipation in particular matters.
prise is known by the director:
(a) Pursuant to th e provisions of 18 (A) To have outstanding or to be ne­
U.S.C. 208(a), no director may partici­ gotiating a direct extension of credit
pate personally and substantially in a or direct line of credit from the bor­
particular m atter in which, to th e di­ rowing bank;

(B) To maintain a prinicpal deposi­
tary relationship w ith th e borrowing
bank in an amount exceeding that cov­
ered by federal deposit insurance; or
(C) To own stock, stock options,
bonds, notes or other forms of indebt­
edness issued by th e borrowing bank,
the market value of which exceeds
$100,000 or represents more than 1 per
cent of the value of that class of stock,
stock options, bonds, notes or other
form of indebtedness issued.
(3) Where th e director has knowl­
edge that a partner of the director has
a financial interest in the proposed
transaction; or
(4) Where- the director has a finan­
cial interest in the proposed transac­
tion as a result of the director’s par­
ticipation in current negotiations or
arrangements concerning prospective
employm ent with the borrowing bank.
(c)
It is recognized that a Reserve
Bank board can, within the spirit and
letter of its responsibilities, delegate to
appropriate officials of the Reserve
Bank authority to act w ith respect to
extensions of credit to individual
banks determined to be in hazardous
financial condition, thus avoiding both
ratification by the Board and applica­
bility to th e directors of th e prohibi­
tions of this section. Such delegation
would not preclude continued advice
to th e board of appropriate informa­
tion regarding bank conditions in the
district so as to enable the board fully
to perform its general oversight re­
sponsibilities.
§ 264a.4

Granting o f ad hoc exemptions.

(a) T he prohibitions of 18 U.S.C.-208
and § 264a.3 of this part shall not
apply if th e director first advises the
Board of Governors of th e nature and
circumstances of th e particular matter
before th e board and makes full disclo­
sure of the financial interest involved
and receives in advance a written de­
term ination made by th e Board of
Governors, or its designee, pursuant to
18 U.S.C. 208(b)(1), that th e interest is
not so substantial as to be deemed
likely to affect the integrity of th e ser­
vices which th e Federal Reserve
System may expect from such direc­
tor.
(b) Telegraphic communications
from th e President, First Vice Presi­
dent, Secretary or General Counsel of
a Reserve Bank to the Board of Gover­
nors on behalf of a director and set­
ting forth the precise nature of both
th e particular matter before the board
and the financial interest involved
shall be considered to m eet th e direc­
tor’s duty of full disclosure set forth in
paragraph 264a.4(a). Telegraphic re­
sponse to the same identified officials
of the Reserve Bank by th e Board of
Governors, or its designee, shall be
deemed to m eet th e requirement of a
written determination by the Board of
Governors set forth in paragraph
264a.4.

S 264a.5 Exemption o f remote or inconse­
quential financial interests.

(a) Pursuant to th e provisions of 18
U.S.C. 208(b)(2), certain actions of di­
rectors of Federal Reserve Banks may
be exem pted from the prohibitions of
18 U.S.C. 208(a) and §264a.3 of this
part, if by general rule or regulation
published in the F e d e r a l R e g i s t e r ,
the financial interest involved has
been determined to be too remote or
too inconsequential to affect th e integ­
rity of directors’ services. Financial in­
terests will be viewed as too remote or
too inconsequential:.
(1) In circumstances in which a di­
rector’s action on a matter will not di­
rectly, substantially, and predictably
affect the financial interest; or
(2) In circumstances in which a di­
rector’s independence of judgment will
not be affected by the financial inter­
est.
(b) The Board of Governors has de­
termined that th e financial interests
of a director, th e director’s spouse or
minor child, or related persons in the
following m atters are too remote or
too inconsequential to affect th e integ­
rity of directors’ services and, accord­
ingly, th e prohibitions of 18 U.S.C.
208(a) and §264a.3 of this part shall
not apply to a director’s participation
in such matters:
(1) Deliberations concerning and
ratification of ordinary and routine
extensions of credit to a member bank
that have previously been made by of­
ficials of th e Reserve Bank under ap­
propriate provisions of the Federal Re­
serve Act, regulations and policies of
the Board of Governors and th e Fed­
eral Reserve Banks, and th e estab­
lished operating procedures at the di­
rector’s Reserve Bank;
(2) Deliberations concerning or af­
fecting a financial institution, to the
extent the financial interest in such
matters results from:
(i) M aintenance at th e financial in­
stitution of a checking or other depos­
it account covered by federal insur­
ance;
(ii) A fiduciary relationship involv­
ing the utilization of th e financial in­
stitution’s trust or investm ent adviso­
ry services;
(iii) The receipt frdm th e financial
institution of consumer credit, as that
term is defined in Regulation Z (12
CFR 226.2(p)); or
(iv) Participation in federal funds or
foreign exchange transactions with
th e financial institution;
(3) Deliberations concerning or af­
fecting a financial institution or other
enterprise to the extent th e financial
interest results from ownership of
stock, stock options, bonds, notes, or
other forms of indebtedness, the
market value of which is less than
$100,000 and represents less than 1 per
cent of the value of that class of stock,
stock option, bond, note or other form

of indebtedness issued by the financial
institution or other enterprise.
(c) Section 264a.3(b) of this part spe­
cifically identifies certain financial in­
terests, the Existence and knowledge
of which will preclude a director from
participating in deliberations or deci­
sions of a Reserve Bank board (except
through recourse to the procedures set
forth in § 264a. 4) when the question
presented is whether the board should
approve or ratify an extension of
credit by a Reserve Bank to a bank
which is, in the opinion of the Presi­
dent of the Reserve Bank, in hazard­
ous financial condition. Financial in­
terests identified in § 264a.3(b) are
viewed by the Board as offering a
clear potential for conflict. The Board
has determined that any other finan­
cial interest that a director, the direc­
tor’s spouse or minor child, or related
persons may have in such extensions
of credit to banks in hazardous condi­
tion are too remote or too inconse­
quential to affect the integrity of di­
rectors’ services and, accordingly, the
prohibitions of 18 U.S.C. 208(a) and
§ 264a.3 of this part shall not apply to
a director’s participation in such mat­
ters. These would include, for exam­
ple, financial interests that might
result from:
( 1) A director’s ownership of stock of
a bank or business that may have an
interest in the condition of the bor­
rowing bank; or
(2) A director’s service as a director
or trustee of a business or other orga­
nization, other than a bank, that may,
itself or through a subsidiary, have an
interest in the condition of the bor­
rowing bank.
(d) The functions of directors often
include their participation in discus­
sions concerning (1) international, na­
tional, and regional economic and fi­
nancial conditions, (2) monetary
policy, (3) general conditions, trends
or issues with respect to bank credit,
(4) establishm ent of rates to be
charged for all advances and discounts
by Federal Reserve banks, subject to
review and determination of th e Board
of Governors pursuant to the Federal
Reserve Act, and (5) statutes and pro­
posed or pending legislation in which
the Federal Reserve System has a le­
gitimate interest. The foregoing m at­
ters are not particular m atters of the
type described in 18 U.S.C. 208 and,
therefore, that statute is not applica­
ble to participation in such matters.
However, even if the statute were held
to be applicable to participation in
such matters, the Board of Governors
has determined that the financial in­
terests of a director, the director’s
spouse or minor child, or related per­
sons in such matters are too remote or
too inconsequential to affect the integ­
rity of directors’ services and, accord­
ingly, the prohibitions of 18 U.S.C.
208(a) and § 264a.3 of this part shall

not apply to a director's participation
in such matters.
(e) Nothing in this section shall pre­
clude a director from refraining, to the
extent consistent with responsibilities
imposed upon the directors by the
Federal Reserve Act, from participa­
tion in a particular matter. The Board
hereby gives notice of its intention to
undertake a continuing review of the
experience of Reserve Bank boards
under this regulation with a view to
assuring preservation of and adher­
ence to the intent of both the Federal
Reserve Act and 18 U.S.C. 208, as
amended. In the course of such review,
particular attention will be given to
the provisions of this section.
N o t e . — A G u id e to C o n d u c t f o r D ir e c to rs
o f F e d e r a l R e s e rv e B a n k s a n d B r a n c h e s o f
F e d e r a l R e s e r v e B a n k s a p p e a r s in t h e N o ­
tic e s s e c tio n o f t h i s iss u e o f t h e F e d e r a l
R e g is te r.

Board of Governors of the Federal
Reserve System, February 17, 1978.
T h e o d o r e E. A l l i s o n ,

Secretary.
[ F R D o c. 78-4999 F ile d 2-2 3 -7 8 ; 8:45 a m ]

[6210- 01]
DIRECTORS OF FEDERAL RESERVE BANKS AND
BRANCHES OF FEDERAL RESERVE BANKS
G u id a lo C o n d u ct

Directors of Federal Reserve Banks
have a special obligation to maintain
the integrity and reputation of the
Federal Reserve System. In their ca­
pacity as directors, these individuals
are changed by law with the responsi­
bility of supervising and controlling
the operations of the Reserve Banks,
under the general supervision of the
Board of Governors, and for assuring
that the affairs of the Banks are ad­
ministered fairly and impartially.
Chosen, as they are, from diverse seg­
ments of the community at large, di­
rectors are expected to bring to their
deliberations the benefit of experi­
enced judgment and advice on specific
matters within their respective dis­
tricts and on other general issues con­
fronting the System as a whole. To
assure the proper performance of
System business and the maintenance
of public confidence in the System, it
is essential that directors, through ad­
herence to high ethical standards of
conduct, avoid actions that might
impair the effectiveness of System op­
erations or in any way tend to discred­
it the System. Therefore, Federal Re­

serve directors should be guided by
the following principles.
(1) Directors of Federal Reserve
Banks, in carrying out their System
responsibilities, should avoid any
action which m ight result in or create
the appearance of:
(a) Using their position as director
for private gain,
(b) Giving unwarranted preferential
treatm ent to any organization or
person,
(c) Impeding System efficiency or
economy,
(d) Losing complete independence or
impartiality of action,
(e) Making a decision as a director
outside of official System channels, or
(f) Affecting adversely- the confi­
dence of the public in the integrity of
the Federal Reserve System.
(2) Directors should strictly preserve
th e confidentiality of System informa­
tion that, if revealed, could inure to
th e private benefit of any person or
organization or could impair or com­
promise the effectiveness of System
operations and policies. In public
speeches and communications, direc­
tors should avoid statem ents that sug­
gest th e nature of any monetary
policy action that has not been offi­
cially disclosed.
(3) Class C directors are prohibited
by the Federal Reserve Act (12 U.S.C.
303) from owning stock of any bank.
In furtherance of the intended pur­
pose of this prohibition, as a matter of
System policy, class C directors ap­
pointed or reappointed following adop­
tion by the Board of Governors of this
Guide should also refrain from owner­
ship of stock of a bank holding compa­
ny. Directors should consider the
stock ownerships of a spouse or minor
child living at home to be their owner­
ships. Interests held or acquired by a
class C director in a bank holding com­
pany, and interests held or acquired
by the director’s spouse or minor child
in a bank or bank holding company
should be promptly disposed of unless,
after full disclosure to th e Board of
Governors or its designee, it is deter­
mined that retention of such stock
would not, in the circumstances pre­
sented, significantly conflict with the
underlying philosophy of the Act.
Nothing set forth in this paragraph
should be viewed as precluding a class
C director from investing or partici­
pating in a diversified mutual fund, in­
vestm ent company, or other form of
investment plan whose management
may from time to time direct the pur­
chase of stock, ownership of which is
otherwise precluded by this para­
graph, provided that the class C direc­
tor’s role is that of a passive investor
and the director does not contribute in
any manner to the investment deci­
sions.
N o t e . —A r e g u la tio n r e la tin g t o d ir e c to rs
o f F e d e r a l R e s e rv e B a n k s h a s b e e n a d o p te d

b y t h e B o a rd o f G o v e r n o rs p u r s u a n t t o IB
D .S .C . § 208 a n d a p p e a r s in t h e R u le s a n d
R e g u la tio n s s e c tio n o f t h i s is s u e o f t h e F ed ­
e r a l R e g is te r.

Board of Governors of the Federal
Reserve System, February 17,1978.
T h e o d o re E . A llis o n ,

Secretary.
[ F R D oc. 78-5000 F ile d 2-2 3 -7 8 ; 8:45 a m ]