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FEDERAL RESERVE BANK
OF NEW YORK

f Circular No. 1638 "1
L January 30, 1936 J

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
REGULATION H, EFFECTIVE JANUARY 1, 1936

To all Member Banks in the
Second Federal Reserve District and others concerned:

Enclosed herewith is a printed copy of the following revised
regulation of the Board of Governors of the Federal Reserve System:
MEMBERSHIP OF STATE BANKING INSTITUTIONS IN
THE FEDERAL RESERVE SYSTEM, REGULATION H, as revised effective January 1, 1936 (superseding Regulation H of 1930).
Additional copies of the above mentioned regulation will be furnished upon request.




J. H. CASE,

Federal Reserve Agent.

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM

MEMBERSHIP OF STATE BANKING INSTI
TUTIONS IN THE FEDERAL
RESERVE SYSTEM

REGULATION H
This Regulation as printed herewith is in the form
as revised, effective January 1, 1936




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
AUTHORITY FOR REGULATION
SEC.

1. DEFINITIONS

(a)
(b)
(c)
(d)
(e)
(/)
SEC.

State bank
Mutual savings bank
Board
Board of directors
Federal Reserve bank stock.
Capital and capital stock

2. ELIGIBILITY REQUIREMENTS

(a) Capital requirements
(6) Waiver of eligibility requirements
SEC

3. INSURANCE OF DEPOSITS

SEC.

4. APPLICATION FOR MEMBERSHIP

(a) State bank, other than a mutual savings bank
(b) Mutual savings bank
(c) Mutual savings bank not authorized to purchase stock of
Federal Reserve bank at time of admission
(d) Execution and filing of application
SEC.

5. APPROVAL OF APPLICATION

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

G. CONDITIONS OF MEMBERSHIP

(a) Conditions applicable to all institutions applying for membership
(6) Conditions applicable to institutions exercising trust powers..
SEC.

7. POWERS AND RESTRICTIONS

SEC.

8. ESTABLISHMENT OR MAINTENANCE OF BRANCHES

(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
SEC.

9. PUBLICATION OF REPORTS OF MEMBER BANKS AND THEIR AFFILIATES

(a) Reports of member banks
(6) Reports of affiliates
SEC. 10. VOLUNTARY WITHDRAWAL FROM FEDERAL RESERVE SYSTEM

(a)
(6)
(c)
id)

General
Notice of intention of withdrawal
Time and method of effecting actual withdrawal
Withdrawal of notice

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SEC. 11. BOARD FORMS

15

APPENDIX

16




REGULATION H
Revised, Effective January 1, 1936
(Superseding Regulation H of 1930)

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 9 of the Federal Reserve Act is printed in the Appendix.)
SECTION 1. DEFINITIONS

For the purposes of this regulation—
(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 earnings 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 capital 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.
(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.
1
Under the provisions of section 19 of the Federal Reserve Act, national banks, or banks
organized under local laws, located in Alaska or in a dependency or insular possession or any
part of the United States outside the continental United States are not required to become
members of the Federal Reserve System but may, with the consent of the Board, become
members of the System. However, this Regulation H is applicable only to the admission
of banks eligible for admission to membership under section 9 of the Federal Reserve 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.




2

REGULATION H

(e) The term "Federal Reserve bank stock" includes the deposit
which may be made with a Federal Reserve bank in lieu of a subscription 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" mean common stock,
preferred stock, and legally issued capital notes and debentures purchased 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 2. ELIGIBILITY REQUIREMENTS

(a) Capital requirements.—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 a paid-up, unimpaired 2 capital sufficient to entitle it to
become a national banking association in the place where it is
situated under the provisions of the National Bank Act, except
in the following circumstances, in which case such a bank may
be admitted to membership with a lesser capital as indicated:
(A) Any such institution organized prior to June 16, 1933
(the date of the approval of the Banking Act of 1933)
situated in a place the population of which does not exceed
3,000 inhabitants and at the time of admission having a
capital of not less than $25,000;
(B) Any such institution (whether or not organized prior
to June 16, 1933) situated in a place the population of which
does not exceed 3,000 inhabitants and which at the time of
admission is entitled to the benefits of insurance under section 12B of the Federal Reserve Act and has a capital of
not less than $25,000;
2
Section 345 of the Banking Act of 1935 provides in part that: "If any part of the
capital of a national bank, State member bank, or bank applying for membership in the
Federal Reserve System consists of preferred stock, the determination of whether or not
the capital of such bank is impaired and the amount of such impairment shall be based
upon the par value of its stock even though the amount which the holders of such preferred
stock shall be entitled to receive in the event of retirement or liquidation shall be in excess
of the par value of such preferred stock. If any such bank or trust company shall have
outstanding any capital notes or debentures of the type which the Reconstruction Finance
Corporation is authorized to purchase pursuant to the provisions of section 304 of the
Emergency Banking and Bank Conservation Act, approved March 9, 1933, as amended, the
capital of such bank may be deemed to be unimpaired if the sound value of its assets Js
not less than its total liabilities, including capital stock, but excluding such capital notes
or debentures and any obligations of the bank expressly subordinated thereto."




REGULATION H

6

(0) Any such institution which is required under the
provisions of subsection (y) of section 12B of the Federal
Reserve Act to become a member of the Federal Reserve
System in order to be an insured bank or continue to have
any part of its deposits insured under the provisions of
section 12B of the Federal Reserve Act 3 and for which the
Board, pursuant to subsection (b) of this section of this
regulation, waives in whole or in part compliance with the
capital requirements of section 9 of the Federal Reserve Act
relating to the admission of banks to membership in the
Federal Reserve System.
(2) A mutual savings bank must possess surplus and undivided profits not less than the amount of capital required for
the organization of a national bank in the place where it is
situated.
(3) The minimum capital required for the organization of a
national bank, referred to hereinbefore in connection with the
capital required for admission to membership in the Federal
Reserve System, is as follows:

If located in a city or town with a population—

Minimum
Capital

Not exceeding 6,000 inhabitants
Exceeding 6,000 but not exceeding 50,000 inhabitants
Exceeding 50,000 inhabitants (except as stated below)
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

$ 50,000
100,000
200,000

100,000

(b) Waiver of eligibility requirements.—The Board is authorized
to waive requirements relating to the admission of State banks to
3
The first paragraph of subsection (y) of section 12B of the Federal Reserve Act provides
that: "No State bank which during the calendar year 1941 or any succeeding calendar year
shall have average deposits of $1,000,000 or more shall be an insured bank or continue to
have any part of its deposits insured after July 1 of the year following any such calendar
year during which it shall have had such amount of average deposits, unless such bank
shall be a member of the Federal Reserve System: Provided, That for the purposes of this
paragraph the term 'State bank' shall not include a savings bank, a mutual savings bani:,
a Morris Plan bank or other incorporated banking institution engaged only in a business
similar to that transacted by Morris Plan banks, a State trust company doing no commercial banking business, or a bank located in Hawaii, Alaska, Puerto Rico, or the Virgin
Islands."




4

REGULATION H

membership in the Federal Reserve System for any State bank which
is required to become a member of the System in order to be an
insured bank or continue to have any part of its deposits insured.
However, under applicable provisions of law (see footnote 3 on page
3 of this regulation), it cannot be determined before the end of the
year 1941 what banks will be required to become members of the
System in order to be insured banks or continue to have any part
of their deposits insured, and, therefore, the Board cannot exercise
its authority to waive eligibility requirements before the end of the
year 1941.
SECTION 3. INSURANCE OF DEPOSITS

Any State bank becoming a member of the Federal Reserve System
after the date of the enactment of the Banking Act of 1935 (August
23, 1935) and which is not at the time an insured bank under the
provisions of section 12B of the Federal Reserve Act, will become
an insured bank under the provisions of that section on the date upon
which it becomes a member of the Federal Reserve System.4 In the
case of an insured bank which is admitted to membership in the
Federal Reserve System, the bank will continue to be an insured bank.
SECTION 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 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.
(b) Mutual savings bank.—A mutual savings bank applying for
membership shall make application on Form 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 liabilities as
shown by the most recent report of examination of such institution
preceding its admission to membership, or, if such institution be not
permitted by the laws under which it was organized to purchase stock
in a Federal Reserve bank, on Form 83C, for permission to deposit
with the Federal Reserve bank an amount equal to the amount which
4
In the case of a State bank 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 subsections (e) and (g) of section 12B of the Federal Reserve 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 management, 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 of section 12B of the Federal Reserve Act.




REGULATION H

5

it would have been required to pay in on account of a subscription
to capital stock.
(c) Mutual savings bank 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 83D for the appropriate
amount of stock in the Federal Reserve bank whenever such laws
are amended so as to authorize it to purchase stock in a Federal
Reserve bank.5
(d) Execution and filing of application.—Each application made
under 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 Agent at the Federal Reserve bank of the district
in which the applying bank is located.
SECTION 5. APPROVAL OF APPLICATION

(a) Matters given special consideration by Board.-—In passing
upon an application, the following matters will be given special
consideration:
(1) The financial history and condition of the applying bank
and the general character of its management;
(2) The adequacy of its capital structure 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 purposes of the Federal Reserve Act.
{b) 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 regulation and is otherwise qualified
for membership, its application will be approved subject to such conditions as may be prescribed pursuant to the provisions of the Federal
Reserve Act. When the conditions prescribed have been accepted by
s
The Federal Reserve Act provides that, if the laws under which any such savings bankwas organized be not amended at the first session of 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 ii<
the manner prescribed in section 9 of the Federal Reserve Act.




6

REGULATION H

the applying bank, it should pay to the Federal Reserve bank of
its district one-half of the amount of its subscription and, upon receipt
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.6 The remaining half of the
bank's subscription shall be subject to call when deemed necessary
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 6. CONDITIONS OF MEMBERSHIP

(a) Conditions applicable to all institutions applying for membership.—
Pursuant to the authority contained in the first paragraph of section
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 membership 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.7
8
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.
7
If, after admission of any bank to membership, it should desire to make any change in
the general character of its business or in the scope of its corporate powers exercised at
the time of admission, it will be necessary for it to obtain the permission of the Board
before making any such change.
The acquisition by a bank of the assets of another institution through merger, consolidation, or purchase may result in a change in the character of its assets or the scope
of its functions within the meaning of condition numbered 1, and if at any time a member
State bank subject to such condition anticipates making any such acquisition a detailed
report setting forth all of the facts in connection with the transaction should be made
promptly to the Federal Reserve bank of the district in which such bank is located.




REGULATION H

7

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,8
and its capital 9 shall not be reduced except with the permission
of the Board of Governors of the Federal Reserve System.10
3. Such bank shall not engage as a business in issuing or selling
either directly or indirectly (through affiliated corporations or
otherwise) notes, bonds, mortgages, certificates, or other evidences
of indebtedness representing real estate loans or participations
therein, either with or without a guarantee, indorsement, or other
obligation of such bank or an affiliated corporation.11
(b) Conditions applicable to institutions exercising trust powers.—
The Board will also prescribe for each trust company or State bank
exercising trust powers at the time of its admission to membership
the following conditions of membership which are appropriate for
institutions exercising trust powers:
4. Such bank shall not invest funds held by it as fiduciary in
obligations of or property acquired from the bank or its directors,
officers, employees, members of their families, or their interests,
or in obligations of or property acquired from affiliates of the
bank.12
5. Such bank shall not invest funds held by the bank as fiduciary in participations in pools of mortgage bonds or other
securities, and the securities and investments of each trust shall
8
If at any time, in the light of all the circumstances, the aggregate amount of the
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 bank's aggregate deposit liabilities and other corporate responsibilities.
9
This applies to capital stock of 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 capital for purposes of membership.
A reduction in capital, however, shall not be deemed to be contrary to this provision if,
at the same time, the capital is correspondingly increased or a specific reserve in an amount
not less than the amount of the capital reduction is set aside to provide for an increase in
capital and can be used for no other purpose; provided, of course, the transaction does not
violate any provision of applicable laws.
10
This condition will not be prescribed in connection with the admission of mutual
savings banks to membership in the Federal Reserve System.
11
This condition does not apply to the sale of mortgages covered by insurance under
the provisions of the National Housing Act.
13
Under established principles regarding the handling of trust funds, a trustee or other
fiduciary should not have any interest in the funds of a trust except as a fiduciary, and
the condition contemplates that a trust institution will not invest trust funds in the obligations of any organization in which officers, directors, or employees of the trust institution
or their families have such an interest as might affect the exercise of the best judgment
of the management of the trust institution in investing trust funds.
This condition shall not be deemed to prevent investments which are expressly required
by the trust instrument creating the trust or by court order.




8

REGULATION H

be kept separate from those of all other trusts and separate also
from the properties of the bank itself; 13 provided, however, that
the Board of Governors of the Federal Reserve System will not
object to the collective investment of trust funds where the cash
balances to the credit of certain trust estates are too small to
be invested separately to advantage, if the bank owns no participation in the securities in which such collective investments are
made and has no interest in them except as trustee or other
fiduciary, and if such collective investment is not prohibited by
State law or the instrument creating the trust.
6. If funds held by such bank as fiduciary are deposited in
its commercial or savings department or otherwise used in the
conduct of its business, it shall deposit with its trust department
security in the same manner and to the same extent as is required
of national banks exercising fiduciary powers.14
SECTION 7. POWERS AND RESTRICTIONS

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;
(6) 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 madepursuant to law which are applicable to member State banks; and
(c) Shall comply at all times with any and all conditions of membership prescribed by the Board in connection with the admission of
such bank to membership in the Federal Reserve System.
SECTION 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
13
This does not prevent a bank from investing the funds of several trusts in a single
real estate loan of the kind which could be made by a national bank under the provisions
of section 24 of the Federal Reserve Act, as amended, if the bank owns no participation in
the ioan and has no interest therein except as trustee or other fiduciary.
14
Such requirements applicable to national banks are contained in section 11 (k) of the
Federal Reserve Act and the Board's Regulation F issued pursuant to section 11 (k).
In cases where trust funds are fully protected by a statutory preference in all of the
assets of the bank over its general creditors, the Board may waive compliance with this
condition. However, if compliance be waived in any case, the Board expressly reserves the
right to require compliance with the condition if, at any time, it feels that such trust
funds are not adequately protected.




REGULATION H

y

and maintenance of branches in the United States or in a dependency
or insular possession thereof or in a foreign country. Under the provisions 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
applicable 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. Under
the provisions of section 9, member State banks establishing and
operating branches in a dependency or insular possession of the United
States or in a foreign country must conform to the terms, conditions,
limitations, and restrictions contained in section 25 of the Federal
Reserve Act relating to the establishment by national banks of
branches in such places. The principal applicable provisions of law
have been interpreted as follows:
(b) Branches in the United States.—
1. Branches established within the corporate limits of the city,
town, or village in which the parent bank is situated do not
require the approval of the Board.
2. Before a member State bank establishes a branch beyond
the corporate limits of the city, town, or village in which it is
situated, it must obtain the approval of the Board.
3. Before any nonmember State bank having a branch or
branches established after February 25, 1927, beyond the corporate limits of the city, town, or village in which the bank is
situated is admitted to membership in the Federal Reserve System, it must obtain the approval of the Board for the retention
of such branches; and any provisions contained in this section
of this regulation which by their terms relate to the establishment or retention of branches by member State banks are equally
applicable to the retention by a nonmember State bank applying
for membership and having any branches previously established.
4. 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




10

REGULATION H

deposits, 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.
5. Except as stated in the immediately preceding paragraph,
a member State bank which establishes a branch beyond the corporate limits of the city, town, or village in which it is situated
must have a paid-in and unimpaired capital stock of not less
than $500,000, except that, in a State with a population of less
than 1,000,000, and which has no city located therein with a
population exceeding 100,000, the capital stock shall be not less
than $250,000, and except that, in a State with a population of
less than 500,000, and which has no city located therein with a
population exceeding 50,000, the capital stock shall be not less
than $100,000. In any such case, the aggregate capital stock of
the member State bank and its branches shall at no time be less
than the aggregate minimum 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.
6. 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 affirmatively
and not merely by implication or recognition, and subject to the
restrictions as to location imposed by the law of the State on
State banks.
7. 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 System, regardless of the location of such branch or branches.
8. In order to remain a member of the Federal Reserve System, every member State bank must relinquish any branch or
branches established after February 25, 1927, beyond the corporate limits of the city, town, or village in which the parent
bank is situated, unless such branch or branches are in conformity
with or are brought into conformity with the same terms, conditions, limitations, and restrictions as would be applicable in the
case of the establishment of such branches.



REGULATION H

11

9. The removal of a branch from one town to another town
constitutes the establishment of a branch in such other town
within the meaning of the provisions of the Federal Reserve Act.
(c) Application for approval of branches in United States.—
Any member State bank desiring to establish a branch beyond the
corporate limits of the city, town, or village in which it is located
and 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 request for the approval by the Board of
any such branch to the Federal Reserve Agent at 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 functions and
the character of the business which are or wTill 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 which 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 member
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 Agent at 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 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 which will be helpful to the Board in determining whether to
approve such request.




12

REGULATION H
SECTION 9. PUBLICATION OF REPORTS OF MEMBER BANKS
AND THEIR AFFILIATES «•

(«) Reports of member banks.—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.
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 regulation, means a publication with a general circulation published not less frequently than once a week, one of the
primary functions of which is the dissemination of news of general
interest.
The copy of the report for the use of the printer for publication
should be prepared on Form 105e. The published information shall
agree 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.
A copy of the printed report shall be submitted to the Federal
Reserve bank attached to the publisher's certificate on Form 105e.
(b) Reports of affiliates.16—Each report of an affiliate of a mem15
Under the provisions of section 9 of 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 bo
published by the bank under the same conditions as govern its own condition reports".
The term "affiliates", as used in this provision of 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.
ll!
Section 21 of the Federal Reserve Act, among other things, provides as follows: "Whenever 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 waivo
such requirements with respect to any such report or examination of any affiliate if in the
judgment 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, of course, in any case where the
Board of Governors waives the filing of a report of an affiliate of a member State bank,
no publication of a report of such affiliate is required.




REGULATION H

13

ber 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
affiliate 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.
The copy of the report for the use of the printer for publication
should be prepared on Form 220a. The published information 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 submitted
to the Federal Reserve bank, but the signatures may be typewritten
or otherwise copied on the report for publication.
A copy of the printed report shall be submitted to the Federal
Reserve bank attached to the publisher's certificate on Form 220a.
SECTION 10. VOLUNTARY WITHDRAWAL FROM FEDERAL RESERVE SYSTEM

(a) General.—Any State bank desiring to withdraw from membership in a Federal Reserve bank may do so after six months' written
notice has been filed with the Board; 17 and the Board, in its discretion, 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.
(6) Notice of intention of withdrawal.—Any State bank desiring
to withdraw from membership in a Federal Reserve bank should
ir
Under specific provisions of section 9 of 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.




14

REGULATION H

signify its intention to do so in a letter addressed to the Board and
mailed to the Federal Reserve Agent at the Federal Reserve bank of
which such bank is a member. Such letter should state clearly the
reason for the bank's desire to withdraw. 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.
Every notice of intention of a bank to withdraw from membership
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 membership in the Federal
Reserve System.
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 1S
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

18
The six months' period begins to run on the date when the notice of intention to
withdraw is received by the Federal Reserve Agent, the Board's official representative at
the Federal Reserve bank.




REGULATION H

15

all amounts due to it from the Federal Reserve bank be refunded.19
Unless this is done within two months after the expiration of sucli
six months' notice or after the waiver of such notice by the Board,
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
canceled and upon doing so may remain a member of the Federal
Reserve System. The notice rescinding the former notice should be
accompanied by a certified copy of an appropriate resolution duly
adopted by the board of directors of the bank.
SECTION 11. BOARD FORMS

All forms referred to in this regulation and all such forms as they
may be amended from time to time shall be a part of this regulation.
19
A bank's withdrawal from membership in the Federal Reserve System is effective on
the 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 of 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 of 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 of any other balance due from the Federal Reserve bank.




APPENDIX
Statutory Provisions
Section 9 of the Federal Reserve Act provides as follows:
Applications for membership by State banks *
Any bank incorporated by special law of any State, or organized
under the general laws of any State or of the United States, including
Morris Plan banks and other incorporated banking institutions engaged in similar business, desiring to become a member of the Federal
Reserve System, may make application to the Board of Governors of
the Federal Reserve System, under such rules and regulations as it
may prescribe, for the right to subscribe to the stock of the Federal
reserve bank organized within the district in which the applying bank
is located. Such application shall be for the same amount of stock
that the applying bank would be required to subscribe to as a national
bank. For the purposes of membership of any such bank the terms
"capital" and "capital stock" shall include the amount of outstanding
capital notes and debentures legally issued by the applying bank and
purchased by the Reconstruction Finance Corporation. The Board
of Governors of the Federal Reserve System, subject to the provisions
of this Act and to such conditions as it may prescribe pursuant thereto
may permit the applying bank to become a stockholder of such
Federal reserve bank.
Branches of State member banks
Any such State bank which, at the date of the approval of this
Act, has established and is operating a branch or branches in conformity with the State law, may retain and operate the same while
remaining or upon becoming a stockholder of such Federal reserve
bank; but no such State bank may retain or acquire stock in a Federai
reserve bank except upon relinquishment of any branch or branches
established after the date of the approval of this Act beyond the
limits of the city, town, or village in which the parent bank is situated.
Provided, however, That nothing herein contained shall prevent any
State member bank from establishing and operating branches in the
United States or any dependency or insular possession thereof or in
any foreign country, on the same terms and conditions and subject
to the same limitations and restrictions as are applicable to the establishment of branches by national banks except that the approval of
the Board of Governors of the Federal Reserve System, instead of
the Comptroller of the Currency, shall be obtained before any State
member bank may hereafter establish any branch and before any
State bank hereafter admitted to membership may retain any branch
established after February 25, 1927, beyond the limits of the city,
town, or village in which the parent bank is situated.
1

This and subsequent catchlines are not a part of the law.

16



REGULATION H

17

Financial condition, management and powers
In acting upon such application the Board of Governors of the
Federal Reserve System shall consider the financial condition of the
applying bank, the general character of its management, and whether
or not the corporate powers exercised are consistent with the purposes
of this act.
Payment of subscription
Whenever the Board of Governors of the Federal Reserve System
shall permit the applying bank to become a stockholder in the Federal
reserve bank of the district its stock subscription shall be payable
on call of the Board of Governors of the Federal Reserve System, and
stock issued to it shall be held subject to the provisions of this act.
Provisions of law to be complied with; reports of condition
All banks admitted to membership under authority of this section
shall be required to comply with the reserve and capital requirements
of this act and to conform to those provisions of law imposed on
national banks which prohibit such banks from lending on or purchasing their own stock, which relate to the withdrawal or impairment
of their capital stock, and which relate to the payment of unearned
dividends. Such banks and the officers, agents, and employees thereof
shall also be subject to the provisions of and to the penalties prescribed by section fifty-two hundred and nine of the Revised Statutes,
and shall be required to make reports of condition and of the payment of dividends to the Federal reserve bank of which they become
a member. Not less than three of such reports shall be made annually
on call of the Federal reserve bank on dates to be fixed by the Board
of Governors of the Federal Reserve System. Failure to make such
reports within ten days after the date they are called for shall subject
the offending bank to a penalty of $100 a day for each day that it
fails to transmit such report; such penalty to be collected by the
Federal reserve bank by suit or otherwise. Such reports of condition
shall be in such form and shall contain such information as the
Board of Governors of the Federal Reserve System may require and
shall be published by the reporting banks in such manner and in
accordance with such regulations as the said Board may prescribe.
Examinations
As a condition of membership such banks shall likewise be subject
to examinations made by direction of the Board of Governors of the
Federal Reserve System or of the Federal reserve bank by examiners
selected or approved by the Board of Governors of the Federal Reserve System.
Acceptance of State examinations; expenses; reports of examinations
Whenever the directors of the Federal reserve bank shall approve
the examinations made by the State authorities, such examinations
and the reports thereof may be accepted in lieu of examinations made




18

REGULATION H

by examiners selected or approved by the Board of Governors of the
Federal Reserve System: Provided, however, That when it deems
it necessary the board may order special examinations by examiners
of its own selection and shall in all cases approve the form of the
report. The expenses of all examinations, other than those made by
State authorities, may, in the discretion of the Board of Governors
of the Federal Reserve System, be assessed against the banks examined and, when so assessed, shall be paid by the banks examined.
Copies of the reports of such examinations may, in the discretion of
the Board of Governors of the Federal Reserve System, be furnished
to the State authorities having supervision of such banks, to officers,
directors, or receivers of such banks, and to any other proper persons.
Forfeiture of membership
If at any time it shall appear to the Board of Governors of the
Federal Reserve System that a member bank has failed to comply
with the provisions of this section or the regulations of the Board of
Governors of the Federal Reserve System made pursuant thereto,
or has ceased to exercise banking functions without a receiver or
liquidating agent having been appointed therefor, it shall be within
the power of the board after hearing to require such bank to surrender
its stock in the Federal reserve bank and to forfeit all rights and
privileges of membership. The Board of Governors of the Federal
Reserve System may restore membership upon due proof of compliance with the conditions imposed by this section.
Voluntary withdrawal from membership
Any State bank or trust company desiring to withdraw from membership in a Federal reserve bank may do so, after six months' written
notice shall have been filed with the Board of Governors of the Federal Reserve System, upon the surrender and cancellation of all of its
holdings of capital stock in the Federal reserve bank: Provided, That
the Board of Governors of the Federal Reserve System, in its discretion and subject to such conditions as it may prescribe, may waive
such six months' notice in individual cases and may permit any such
State bank or trust company to withdraw from membership in a
Federal reserve bank prior to the expiration of six months from the
date of the written notice of its intention to withdraw: Provided,
however, That no Federal reserve bank shall, except under express
authority of the Board of Governors of the Federal Reserve System,
cancel within the same calendar year more than twenty-five per
centum of its capital stock for the purpose of effecting voluntary
withdrawals during that year. All such applications shall be dealt
with in the order in which they are filed with the board. Whenever
a member bank shall surrender its stock holdings in a Federal reserve
bank, or shall be ordered to do so by the Board of Governors of the
Federal Reserve System, under authority of law, all of its rights and
privileges as a member bank shall thereupon cease and determine,
and after due provision has been made for any indebtedness due or
to become due to the Federal reserve bank it shall be entitled to a




REGULATION H

19

refund of its cash paid subscription with interest at the rate of onehalf of one per centum per month from date of last dividend, if
earned, the amount refunded in no event to exceed the book value
of the stock at that time, and shall likewise be entitled to repayment
of deposits and of any other balance due from the Federal reserve
bank.
Capital required for membership
No applying bank shall be admitted to membership in a Federal
reserve bank unless it possesses a paid-up unimpaired capital sufficient to entitle it to become a national banking association in the
place where it is situated under the provisions of the National Bank
Act, as amended: Provided, That this paragraph shall not apply to
State banks and trust companies organized prior to the date this
paragraph as amended takes effect and situated in a place the population of which does not exceed three thousand inhabitants and having
a capital of not less than $25,000, nor to any State bank or trust
company which is so situated and which, while it is entitled to the
benefits of insurance under section 12B of this Act, increases its capital
to not less than $25,000.
Waiver of membership requirements as to insured banks
In order to facilitate the admission to membership in the Federal
Reserve System of any State bank which is required under subsection
(y) of section 12B of this Act to become a member of the Federal
Reserve System in order to be an insured bank or continue to have
any part of its deposits insured under such section 12B, the Board of
Governors of the Federal Reserve System may waive in whole or in
part the requirements of this section relating to the admission of
such bank to membership: Provided, That, if such bank is admitted
with a capital less than that required for the organization of a national
bank in the same place and its capital and surplus are not, in the
judgment of the Board of Governors of the Federal Reserve System,
adequate in relation to its liabilities to depositors and other creditors,
the said Board may, in its discretion, require such bank to increase
its capital and surplus to such amount as the Board may deem necessary within such period prescribed by the Board as in its judgment
shall be reasonable in view of all the circumstances: Provided, however, That no such bank shall be required to increase its capital to
an amount in excess of that required for the organization of a national
bank in the same place.
Laws to which subject
Banks becoming members of the Federal Reserve System under
authority of this section shall be subject to the provisions of this
section and to those of this act which relate specifically to member
banks, but shall not be subject to examination under the provisions
of the first two paragraphs of section fifty-two hundred and forty of
the Revised Statutes as amended by section twenty-one of this act.
Subject to the provisions of this act and to the regulations of the




20

REGULATION H

board made pursuant thereto, any bank becoming a member of the
Federal Reserve System shall retain its full charter and statutory
rights as a State bank or trust company, and may continue to exercise
all corporate powers granted it by the State in which it was created,
and shall be entitled to all privileges of member banks: Provided,
however, That no Federal reserve bank shall be permitted to discount
for any State bank or trust company notes, drafts, or bills of exchange
of any one borrower who is liable for borrowed money to such State
bank or trust company in an amount greater than that which could
be borrowed lawfully from such State bank or trust company were
it a national banking association. The Federal reserve bank, as a
condition of the discount of notes, drafts, and bill of exchange for
such State bank or trust company, shall require a certificate or
guaranty to the effect that the borrower is not liable to such bank
in excess of the amount provided by this section, and will not be permitted to become liable in excess of this amount while such notes,
drafts, or bills of exchange are under discount with the Federal
reserve bank.
False certification of checks
It shall be unlawful for any officer, clerk, or agent of any bank
admitted to membership under authority of this section to certify
any check drawn upon such bank unless the person or company drawing the check has on deposit therewith at the time such check is
certified an amount of money equal to the amount specified in such
check. Any check so certified by duly authorized officers shall be a
good and valid obligation against such bank, but the act of any such
officer, clerk, or agent in violation of this section may subject such
bank to a forfeiture of its membership in the Federal Reserve System
upon hearing by the Board of Governors of the Federal Reserve
System.
Government depositaries and financial agents
All banks or trust companies incorporated by special law or organized under the general laws of any State, which are members of the
Federal reserve system, when designated for that purpose by the
Secretary of the Treasury, shall be depositaries of public money, under
such regulations as may be prescribed by the Secretary; and they
may also be employed as financial agents of the Government; and
they shall perform all such reasonable duties, as depositaries of
public money and financial agents of the Government, as may be
required of them. The Secretary of the Treasury shall require of
the banks and trust companies thus designated satisfactory security,
by the deposit of United States bonds or otherwise, for the safe
keeping and prompt payment of the public money deposited with
them and for the faithful performance of their duties as financial
agents of the Government.




REGULATION H

21

Admission to membership of mutual savings banks
Any mutual savings bank having no capital stock (including any
other banking institution the capital 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), but having surplus and undivided profits
not less than the amount of capital required for the organization of
a national bank in the same place, may apply for and be admitted to
membership in the Federal Reserve System in the same manner and
subject to the same provisions of law as State banks and trust companies, except that any such savings bank shall subscribe for capital
stock of the Federal reserve bank in an amount equal to six-tenths
of 1 per centum of its total deposit liabilities as shown by the most
recent report of examination of such savings bank preceding its admission to membership. Thereafter such subscription shall be adjusted
semiannually on the same percentage basis in accordance with rules
and regulations prescribed by the Board of Governors of the Federal
Reserve System. If any such mutual savings bank applying for
membership is not permitted by the laws under which it was organized
to purchase stock in a Federal reserve bank, it shall, upon admission
to the system, 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. Thereafter such deposit
shall be adjusted semiannually in the same manner as subscriptions
for stock. Such deposits shall be subject to the same conditions with
respect to repayment as amounts paid upon subscriptions to capital
stock by other member banks and the Federal reserve bank shall pay
interest thereon at the same rate as dividends are actually paid on
outstanding shares of stock of such Federal reserve bank. If the laws
under which any such savings bank was organized be amended so as
to authorize mutual savings banks to subscribe for Federal reserve
bank stock, such savings bank shall thereupon subscribe for the
appropriate amount of stock in the Federal reserve bank, and the
deposit hereinbefore provided for in lieu of payment upon capital
stock shall be applied upon such subscription. If the laws under
which any such savings bank was organized be not amended at the
next session of the legislature following the admission of such 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 such 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 elsewhere in this section with
respect to State member banks and trust companies. Each such
mutual savings bank shall comply with all the provisions of law
applicable to State member banks and trust companies, with the
regulations of the Board of Governors of the Federal Reserve System
and with the conditions of membership prescribed for such savings
bank at the time of admission to membership, except as otherwise
hereinbefore provided with respect to capital stock.




22

REGULATION II

Reports of affiliates
Each bank admitted to membership under this section shall obtain
from each of its affiliates other than member banks and furnish to
the Federal reserve bank of its district and to the Board of Governors
of the Federal Reserve System not less than three reports during each
year. Such reports shall be in such form as the Board of Governors
of the Federal Reserve System may prescribe, shall be verified by
the oath or affirmation of the president or such other officer as may
be designated by the board of directors of such affiliate to verify
such reports, and shall disclose the information hereinafter provided
for as of dates identical with those fixed by the Board of Governors
of the Federal Reserve System for reports of the condition of the
affiliated member bank. Each such report of an affiliate shall be
transmitted as herein provided at the same time as the corresponding
report of the affiliated member bank, except that the Board of Governors of the Federal Reserve System may, in its discretion, extend
such time for good cause shown. Each such report shall contain such
information as in the judgment of the Board of Governors of the
Federal Reserve System shall be necessary to disclose fully the relations between such affiliate and such bank and to enable the Board
to inform itself as to the effect of such relations upon the affairs of
such bank. The reports of such affiliates shall be published by the
bank under the same conditions as govern its own condition reports.
Additional reports of affiliates
Any such affiliated member bank may be required to obtain from
any such affiliate such additional reports as in the opinion of its
Federal reserve bank or the Board of Governors of the Federal Reserve System may be necessary in order to obtain a full and complete
knowledge of the condition of the affiliated member bank. Such additional reports shall be transmitted to the Federal reserve bank and
the Board of Governors of the Federal Reserve System and shall be
in such form as the Board of Governors of the Federal Reserve System may prescribe.
Failure to obtain reports of affiliates
Any such affiliated member bank which fails to obtain from any
of its affiliates and furnish any report provided for by the two preceding paragraphs of this section shall be subject to a penalty of
$100 for each day during which such failure continues, which, by
direction of the Board of Governors of the Federal Reserve System,
may be collected, by suit or otherwise, by the Federal reserve bank
of the district in which such member bank is located. For the purposes of this paragraph and the two preceding paragraphs of this
section, the term "affiliate" shall include holding company affiliates
as well as other affiliates.



REGULATION H

23

Dealings in investment securities and stock
State member banks shall be subject to the same limitations and
conditions with respect to the purchasing, selling, underwriting, and
holding of investment securities and stock as are applicable in the
case of national banks under paragraph "Seventh" of section 5136 of
the Revised Statutes, as amended.
Divorce of stock from stock of other corporations
After the date of the enactment of the Banking Act of 1935, no
certificate evidencing the stock of any State member bank shall bear
any statement purporting to represent the stock of any other corporation, except a member bank or a corporation engaged on June 16, 1934
in holding the bank premises of such member bank, nor shall the
ownership, sale, or transfer of any certificate representing the stock
of any State member bank be conditioned in any manner whatsoever
upon the ownership, sale, or transfer of a certificate representing the
stock of any other corporation, except a member bank or a corporation engaged on June 16, 1934 in holding the bank premises of such
member bank: Provided, That this section shall not operate to prevent the ownership, sale, or transfer of stock of any other corporation,
being conditioned upon the ownership, sale, or transfer of a certificate
representing stock of a State member bank.
Holding company affiliates
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 prescribe,
an agreement that such holding company affiliate shall be subject 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, require 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.
Examination of affiliates
In connection with examinations of State member banks, examiners
selected or approved by the Board of Governors of the Federal Reserve System shall make such examinations of the affairs of all




24

REGULATION H

affiliates of such banks as shall be necessary to disclose fully the
relations between such banks and their affiliates and the effect of
such relations upon the affairs of such banks. The expense of examination of affiliates of any State member bank may, in the discretion
of the Board of Governors of the Federal Reserve System, be assessed
against such bank and, when so assessed, shall be paid by such bank.
In the event of the refusal to give any information requested in the
course of the examination of any such affiliate, or in the event of the
refusal to permit such examination, or in the event of the refusal
to pay any expense so assessed, the Board of Governors of the Federal
Reserve System may, in its discretion, require any or all State member banks affiliated with such 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.
NOTE: The provisions of law specifically referred to in section 9 and
other provisions to which a State bank which is a member of the
Federal Reserve System is subject are printed in the Federal Reserve Act or the Appendix thereto as compiled under the direction
of the Board of Governors of the Federal Reserve System.




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