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FEDERAL RESERVE BANK OF NEW YORK f Circular N o. 5 3 2 8 '"1 L April 24, 1963 R E G U LATIO N S Bank Service Arrangements To All State Member Banks in the Second Federal Reserve D istrict: Enclosed is a copy of Regulation S, Bank Service Arrangements, of the Board of Governors of the Federal Reserve System, effective April 3, 1963. This new regulation implements the provisions of the Bank Service Corporation Act, approved October 23, 1962, a copy of which we sent you with our letter of October 24, 1962. The Regulation does not differ in any essential respect from the proposed draft of regulation, a copy of which we sent you with our letter of December 7, 1962. Additional copies of the Regulation will he furnished upon request. A lfred H ayes, President. J B O A R D OF G O V E R N O R S of the FEDERAL RESERVE SYSTEM BANK SERVICE ARRANGEMENTS 'W R E G U L A T IO N S ( 1 2 CFR P A R T 2 1 9 ) A d o p te d E ffectiv e A p ril 3, 19 6 3 ♦ * * * 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. REGULATION S (12 C FR P A R T 219) Adopted Effective April 3, 1963 BANK SERVICE ARRANGEMENTS * SECTION 219.1— A U T H O R IT Y AN D SCOPE This part implements the provisions of section 5 of the Bank Service Corporation Act, Public Law 87-856, approved October 23, 1962 (sec. 5, 76 Stat. 1132; 12 U.S.C. 1865)f , in the application thereof to ar rangements for the performance of bank services for State banks that are members of the Federal Reserve System. Under that section of the A ct, no State member bank may cause to be performed, by contract or otherwise, any bank services for itself, whether on or off its premises, unless assurances satisfactory to the Board of Governors of the Federal Reserve System are furnished to the Board by both the bank and the party performing such services that the performance thereof will be subject to regulation and examination by the Board to the same extent as if such services were being performed by the bank itself on its owrn premises. Such assurances are required by the A ct whether the bank services are performed by bank service corporations in which the A ct authorizes banks to invest, or by others. Under section 1 (b) of the Act, the term “ bank services” means services such as check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or other clerical, bookkeeping, accounting, statistical, or similar functions performed for a bank. SECTION 219.2— FORM OF ASSURANCES Unless additional or different assurances are considered necessary by the Board in specific cases, the assurances referred to in section * (This text corresponds to the Code of Federal Regulations, Title 12, Chapter II, Part 219; cited as 12 C F R Part 219.) tText of the Act is set forth in the Appendix to this Regulation. 1 REGULATION 2 S 219.1 of this part m ay be submitted in the form of a letter (or separate letters) signed by a duly authorized officer of the State member bank and by the party (or a duly authorized officer or representative of such party) that will perform the bank services for the bank, stating, in substance, that the bank and the party performing such services have entered into an agreement that the performance of the services will be subject to regulation and examination by the Board to the same extent as if such services were being performed by the bank itself on its own premises. All such letters of assurances shall be addressed to the Board of Governors of the Federal Reserve System in care of the Federal Reserve Bank of the district in which the State member bank has its main office. SECTIO N 219.3— T IM E FOR FU R N ISH IN G ASSURANCES As to any arrangement for the performance of bank services entered into or renewed after the effective date of this part, assurances com plying with section 219.2 shall be furnished prior to the performance of any service for the bank under the bank service arrangement. W ith respect to any bank service arrangement entered into prior to the effective date of this part, such assurances shall be furnished within 30 days after the effective date of this part, unless a letter of assur ances covering such bank service arrangement has been furnished previously pursuant to the B oard’s “ Statement for State Member Banks on the ‘Bank Service Corporation A ct’ ” issued October 23, 1962 (Federal Reserve Bulletin, N ovem ber 1962, page 1428). SECTION 219.4— SPECIAL SITUATIONS Assurances com plying with section 219.2 need not be furnished in connection with arrangements for bank services which are immediately necessary because of emergency conditions or situations or are re quired for short periods of time due to unusually heavy work demands, if the State member bank prom ptly advises the Federal Reserve Bank of its district of the circumstances involved and of the length of time during which any of the bank’s books or records or any banking media will be removed from the bank’s premises and of the location thereof, and unless the bank is advised by the Federal Reserve Bank that such assurances must be furnished. Unless specifically requested by the Board, assurances com plying with section 219.2 need not be furnished in connection with any arrangement by a State member bank for the performance of legal, advisory, and administrative services, such as transportation or guard services. APPENDIX ST A TU TO R Y PROVISIONS Public Law 87-856 87th Congress, H. R. 8874 October 23, 1962 AN ACT To authorize certain banks to invest in corporations whose purpose is to provide clerical services for them, and for other purposes. Be it enacted by the Senate and House of R epresentatives of the United States of America in Congress assembled, That for the pur poses of this Act— (a) The term “ Federal supervisory agency” means the Comptroller of the Currency, the Board of Governors of the Federal Reserve Sys tem, or the Board of Directors of the Federal D eposit Insurance Corporation. (b) The term “ bank services” means services such as check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, state ments, notices, and similar items, or any other clerical, bookkeeping, accounting, statistical, or similar functions performed for a bank. (c) The term “ bank service corporation” means a corporation or ganized to perform bank services for two or more banks, each of which owns part of the capital stock of such corporation, and at least one of which is subject to examination by a Federal supervisory agency. (d) The term “ invest” includes any advance of funds to a bank service corporation, whether by the purchase of stock, the making of a loan, or otherwise, except a payment for rent earned, goods sold and delivered, or services rendered prior to the making of such payment. S e c . 2. (a) N o limitation or prohibition otherwise imposed by any provision of Federal law exclusively relating to banks shall prevent any two or more banks from investing not more than 10 per centum of the paid-in and unimpaired capital and unimpaired surplus of each of them in a bank service corporation. (b) If stock in a bank service corporation has been held by two banks, and one of such banks ceases to utilize the services of the corpo ration and ceases to hold stock in it, and leaves the other as the sole stockholding bank, the corporation may nevertheless continue to func tion as such and the other bank may continue to hold stock in it. S e c . 3. Whenever a bank (referred to in this section as an “ applying bank” ) subject to examination by a Federal supervisory agency applies for a type of bank services for itself from a bank service corporation 3 STATUTORY PROVISIONS 4 which supplies the same type of bank services to another bank, and the applying bank is com petitive with any bank (referred to in this section as a “ stockholding bank” ) which holds stock in such corpora tion, the corporation must offer to supply such services by either— (1) issuing stock to the applying bank and furnishing bank services to it on the same basis as to the other banks holding stock in the corporation, or (2) furnishing bank services to the applying bank at rates no higher than necessary to fairly reflect the cost of such services, including the reasonable cost of the capital provided to the corpo ration by its stockholders, at the corporation’s option, unless comparable services at competitive overall cost are available to the applying bank from another source, or unless the furnishing of the services sought by the applying bank would be beyond the practical capacity of the corporation. In any action or proceeding to enforce the duty imposed by this section, or for damages for the breach thereof, the burden shall be upon the bank service corporation to show such availability. S e c . 4. N o bank service corporation may engage in any activity other than the performance of bank services for banks. S e c . 5. (a) N o bank subject to examination by a Federal supervisory agency may cause to be performed, by contract or otherwise, any bank services for itself, whether on or off its premises, unless assurances satisfactory to the agency prescribed in subsection (b) of this section are furnished to such agency by both the bank and the party perform ing such services that the performance thereof will be subject to regu lation and examination by such agency to the same extent as if such services were being performed by the bank itself on its own premises. (b) The assurances required by subsection (a) of this section shall be given, in the case of— (1) a national banking association or a bank operating under the code of laws for the District of Columbia, to the Comptroller of the Currency; (2) a bank (other than a bank described in paragraph (1 )) which is a member of the Federal Reserve System, to the Board of Governors of the Federal Reserve System; and (3) a bank other than a bank described in paragraph (1) or (2) ) whose deposits are insured by the Federal Deposit Insurance Corporation, to the Board of Directors of the Federal Deposit Insurance Corporation. Approved October 23, 1962.
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