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FE D ERAL R E SE R V E BANK
OF N E W YORK

r Circular No. 5 5 1 8 ~1
L
July 15, 1964
J

Investments By Member Banks in Stock of Foreign Banks

To the Member Banks of the Second Federal Reserve District:

The following statement was made public today by the Board of Governors of the
Federal Reserve System:
Question has arisen whether member banks may directly acquire and hold stock of foreign
banks as a means of conducting their overseas operations.
In the opinion of the Board, it is clear that such direct acquisition and holding by member
banks of stock of foreign banks is not permissible under present law. State member banks are
made subject by Section 9 of the Federal Reserve Act (12 U.S.C. 335) to the same limitations and
conditions with respect to the purchasing and holding of stock as are applicable in the case of
national banks under Section 5136 of the Revised Statutes (12 U.S.C. 24).

Under the last-

mentioned section, a national bank is prohibited from purchasing for its own account any shares
of stock of any corporation except as provided in that section or “ otherwise permitted by law.”
There is no provision in Section 5136 or any other provision of law permitting the purchase by
national banks of stock of foreign banks.
It may be noted that, under Section 25 of the Federal Reserve A ct (12 U.S.C. 601) and
the provision of Section 9 of the Act, previously mentioned, member banks are permitted, subject
to approval of the Board of Governors and regulations prescribed by the Board, to acquire stock
of corporations chartered under Federal or State law that are principally engaged in interna­
tional or foreign banking. Through such intermediate subsidiaries, a member bank may
indirectly acquire and hold the stock of foreign banks.


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A

lfred

H

ayes,

President.

FIFTIETH

ANNIVERSARY

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