Full text of Federal Reserve Bank of New York Circulars : Regulation H, Membership of State Banking Institutions in the Federal Reserve System

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April 26, 1988

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To All Depository Institutions in the Second
Federal Reserve District and Others Maintaining
Sets of Board Regulations:

Enclosed is a copy of Regulation H, "Membership of State Banking
Institutions in the Federal Reserve System," as amended effective January 1,
1988.

The revised pamphlet supersedes the April, 1982 printing of that

regulation, together with all amendments thereto.
Questions regarding this regulation may be directed to our Compliance
Examinations Department (Tel. No. 212-720-5914).

Circulars Division
FEDERAL RESERVE BANK OF NEW YORK

2227C

Board of Governors of the Federal Reserve System

Regulation H
Membership of State Banking
Institutions in the Federal Reserve
System
12 CFR 208; as amended effective January 1, 1988

Any inquiry relating to Regulation H should be addressed to the Federal Reserve Bank of the
Federal Reserve District in which the inquiry arises.
February 1988

Contents

Page
Section 208.1—Definitions........................ 1
(a) State bank........................................ 1
(b) Mutual savings bank...................... 1
(c) Board.............................................. 1
(d) Board of directors.......................... 1
(e) Federal Reserve Bank stock.......... 1
(f) Capital; capital stock...................... 1
Section 208.2—Eligibility requirements. . . 1
Section 208.3—Insurance of deposits........ 2
Section 208.4— Application for
membership............................................ 2
(a) State bank other than a mutual
savings bank.................................... 2
(b) Mutual savings bank...................... 2
(c) Mutual savings bank which is not
authorized to purchase stock of
Federal Reserve Bank at time of
admission.........................
2
(d) Execution and filing of application 3
Section 208.5—Approval of application .. 3
(a) Matters given special consideration
by Board.......................................... 3
(b) Procedure for admission to
membership after approval of
application...................................... 3
Section 208.6—Privileges and
requirements of membership.................. 3
Section 208.7—Conditions of membership 3
Section 208.8—Banking practices ............ 4
(a) S co p e.............................................. 4
(b) W aiver............................................ 4
(c) Effect on other banking practices .. 4
(d) Letters of credit and acceptances .. 5
(e) Loans by state member banks in
identified flood hazard areas.......... 5
(f) State member banks as transfer
agents.............................................. 6
(g) State member banks as registered
clearing agencies............................ 7
(h) Applications for stays of
disciplinary sanctions or summary
suspensions by a registered clearing
agency.............................................. 9
(i) Application for review of final
disciplinary sanctions, denials of
participation or prohibitions or

Page
limitations of access to services
imposed by registered clearing
agencies.......................................... 9
(j) State member banks, and
subsidiaries, departments, and
divisions thereof, which are
municipal securities dealers..........10
(k)
Recordkeeping and confirmation of
certain securities transactions
effected by state member banks . . . 11
Section 208.9—Establishment or
maintenance of branches.......................... 15
(a) In general.......................................... 15
(b) Branches in the United States........15
(c) Application for approval of
branches in the United States........ 16
(d) Foreign branches.............................. 16
(e) Application for approval of foreign
branches............................................ 16
Section 108.10—Publication of reports of
member banks and their affiliates..........16
(a) Reports of member banks................ 16
(b) Reports of affiliates.......................... 17
(c) Waiver of reports of affiliates........18
Section 208.11—Voluntary withdrawal
from Federal Reserve System.................. 18
(a) General.............................................. 18
(b) Notice of intention of withdrawal . 18
(c) Time and method of effecting
actual withdrawal............................ 18
(d) Withdrawal of notice........................ 19
Section 208.12—Board forms...................... 19
Section 208.13—Capital adequacy............ 19
Section 208.14— Procedures of monitoring
Bank Secrecy Act compliance.................. 19
(a) Purpose ............................................ 19
(b) Establishment of compliance
program............................................ 19
(c) Contents of compliance program .. 19
Section 208.15—Agricultural loan loss
amortization.............................................. 19
(a) Definitions........................................ 19
(b) Loss amortization and reappraisal. 20
(c) Accounting for amortization........ 20
(d) Eligibility.......................................... 20
(e) Conditions on acceptance................ 21

i

Contents
Page

(f) Submission of proposals.................. 21
(g) Revocation of eligibility.................. 21
Section 208.16—Reporting
requirements for state member
banks subject to the Securities
Exchange Act of 1934 ............................ 22
(a) Filing requirements.........................22

n

Page

(b)

Elections permitted of state
member banks with total assets of
$150 million or le s s .......................... 22
(c) Filing instructions, inspection of
documents, and nondisclosure of
certain information filed.................. 22
Appendix—Sample notices........................ 23

Regulation H
Membership of State Banking Institutions
in the Federal Reserve System
12 CFR 208; as amended effective January 1, 1988

SECTION 208.1— Definitions
For the purpose of this part*:
(a) The term “state bank ” means any bank
or trust company incorporated under a special
or general law of a state or under a general
law for the District of Columbia, any mutual
savings bank (unless otherwise indicated),
and any Morris Plan bank or other incorpo­
rated banking institution engaged in similar
business.1
(b) The term “mutual savings bank ” means a
bank without capital stock transacting a sav­
ings 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 in­
cludes any other banking institution the capi­
tal 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 o f directors” means the
governing board of any institution performing
the usual functions of a board of directors.
(e) The term “Federal Reserve Bank stock”
includes the deposit which may be made with
a Federal Reserve Bank in lieu of a subscrip­
tion for stock by a mutual savings bank which
is not permitted to purchase stock in a Feder­
al Reserve Bank, unless otherwise indicated.
( 0 The terms “capital” and “capital stock”
mean common stock, preferred stock and le­
gally issued capital notes and debentures pur­
chased by the Reconstruction Finance Corpo­
* The words “this p art” as used herein, mean Regulation
H (Code of Federal Regulations, title 12, chapter II, part
208). The Board of Governors of the Federal Reserve Sys­
tem has delegated authority to exercise certain functions
contained in this part. See the Board’s “Rules Regarding
Delegation of A uthority” (12 C FR 265).

ration which may be considered capital and
capital stock for purposes of membership in
the Federal Reserve System under the provi­
sions of section 9 of the Federal Reserve Act.

SECTION 208.2— Eligibility
Requirements
(a) Under the terms of section 9 of the Fed­
eral Reserve Act, as amended, to be eligible
for admission to membership in the Federal
Reserve System:
(1) A state bank, other than a mutual sav­
ings bank, must possess capital stock and
surplus which, in the judgment of the
Board, are adequate in relation to the char­
acter and condition of its assets and to its
existing and prospective deposit liabilities
and other corporate responsibilities: Provid­
ed, That no bank engaged in the business of
receiving deposits other than trust funds,
which does not possess capital stock and
surplus in an amount equal to that which
would be required for the establishment of a
n a tio n a l b a n k in g a ss o c ia tio n in th e p la ce in

which it is located, shall be admitted to
membership unless it is, or has been, ap­
proved for deposit insurance under the Fed­
eral Deposit Insurance Act.
(2) A mutual savings bank must possess
surplus and undivided profits not less than
the amount of capital required for the orga­
nization of a national bank in the place
where it is situated.
1 U nder the provisions of section 19 of the Federal R e­
serve Act, national banks and banks organized under local
laws, located in a dependency or insular possession or any
part of the U nited States outside the states of the United
States and the District of Columbia 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 part 208 is applicable only to the
admission of banks eligible for admission to membership
under section 9 of the Federal Reserve A ct and does not
cover the admission of banks eligible under section 19 of
the act. Any bank desiring to be admitted to the System
under the provisions of section 19 should communicate
with the Federal Reserve Bank with which it desires to do
business.

1

§ 208.2

Regulation H

(b) The minimum capital required for the or­
ganization of a national bank, referred to
hereinbefore in connection with the capital re­
quired for admission to membership in the
Federal Reserve System, is as follows:
Minimum
capital
I f located in a city or town with a
population:
N o t exceeding 6,000 in h a b ita n ts............ $ 50,000
Exceeding 6,000 but not exceeding
50,000 inhabitants..................................
100,000
Exceeding 50,000 inhabitants (except as
stated b e lo w ) ...........................................
200,000
In an outlying district o f a city with a
population exceeding 50,000 inhabi­
tants; provided state law permits orga­
nization o f state banks in such location
with a capital o f$ 100,000 or l e s s .........
100,000

With certain exceptions not here applicable, a
national bank must have surplus equal to 20
percent of its capital in order to commence
business.

SECTION 208.3— Insurance of Deposits
Any state bank becoming a member of the
Federal Reserve System which is engaged in
the business of receiving deposits other than
trust funds and which is not at the time an
insured bank under the provisions of the Fed­
eral Deposit Insurance Act, will become an
insured bank under the provisions of that act
on the date upon which it becomes a member
of the Federal Reserve System.2 In the case of
an insured bank which is admitted to mem­
bership in the Federal Reserve System, the
bank will continue to be an insured bank.
2
In the case of a state bank which is engaged in
business o f receiving deposits other than trust funds and
which at the time of its admission to membership in the
Federal Reserve System is not an insured bank, the Board
is required under the provisions of sections 4 and 6 of the
Federal Deposit Insurance A ct to issue a certificate to the
Federal Deposit Insurance Corporation to the effect that
the bank is a member o f the Federal Reserve System and
that consideration has been given to the financial history
and condition of the bank, the adequacy of its capital struc­
ture, its future earnings prospects, the general character of
its management, the convenience and needs of the commu­
nity to be served by the bank, and w hether or not its corpo­
rate powers are consistent with the purposes o f the Federal
Deposit Insurance Act.

2

SECTION 208.4— Application for
Membership
(a) State bank, other than a mutual savings
bank. A state bank, other than a mutual sav­
ings bank, applying for membership, shall
make application on Form F.R. 83A to the
Board for an amount of capital stock in the
Federal Reserve Bank of its district equal to 6
percent of the paid-up capital stock and sur­
plus of the applying institution.
(b) Mutual savings bank A mutual savings
bank applying for membership shall make ap­
plication on Form F.R. 83B to the Board for
an amount of capital stock in the Federal Re­
serve Bank of its District equal to six-tenths of
1 percent of its total deposit liabilities as
shown by the most recent report of examina­
tion of such institution preceding its admis­
sion to membership, or, if such institution be
not permitted by the laws under which it was
organized to purchase stock in a Federal Re­
serve Bank, on Form F.R. 83C, for permis­
sion to deposit with the Federal Reserve Bank
an amount equal to the amount which it
would have been required to pay in on ac­
count of a subscription to capital stock.
(c) Mutual savings bank which is not autho­
rized to purchase stock o f Federal Reserve
Bank at time o f admission. If a mutual savings
bank be admitted to membership on the basis
of a deposit of the required amount with the
Federal Reserve Bank in lieu of payment upon
capital stock because the laws under which
such bank was organized do not at that time
authorize it to purchase stock in the Federal
Reserve Bank, it shall subscribe on Form F.R.
83D for the appropriate amount of stock in
the Federal Reserve Bank whenever such laws
are amended so as to authorize it to purchase
the
stock in a Federal Reserve Bank.3
3 The Federal Reserve A ct provides that, if the laws un­
der which any such savings bank was organized be not
amended at the first session of the legislature following the
admission of the savings bank to membership so as to au­
thorize mutual savings banks to purchase Federal Reserve
Bank stock, or if such laws be so amended and the bank fail
within six months thereafter to purchase such stock, all of
its rights and privileges as a member bank shall be forfeited
and its membership in the Federal Reserve System shall be
terminated in the manner prescribed in section 9 of the
Federal Reserve Act.

§ 208.7

Regulation H

(d) Execution and filing o f application. Each
application made under the provisions of this
section and the exhibits referred to in the ap­
plication blank shall be executed and filed, in
duplicate, with the Federal Reserve Bank of
the District in which the applying bank is
located.

SECTION 208.5—Approval of
Application
(a) Matters given special consideration by
Board. In passing upon an application, the
following matters will be given special
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 in
relation to the character and condition of
its assets and to its existing and prospective
deposit liabilities and other corporate re­
sponsibilities; and its future earnings
prospects;
(3) The convenience and needs of the com­
munity to be served by the bank; and
(4) Whether its corporate powers are con­
sistent with the purposes of the Federal Re­
serve Act.
(b) Procedure for admission to membership
after approval o f application. If an applying
bank conforms to all the requirements of the
Federal Reserve Act and this part and is oth­
erwise qualified for membership, its applica­
tion will be approved subject to such condi­
tions as may be prescribed pursuant to the
provisions of the Federal Reserve Act. When
the conditions prescribed have been accepted
by the applying bank, it should pay to the
Federal Reserve Bank of its District one-half
of the amount of its subscription and, upon
receipt of advice from the Federal Reserve
Bank as to the required amount, one-half of 1
percent of its paid-up subscription for each
month from the period of the last dividend.4
The remaining half of the bank’s subscription
shall be subject to call when deemed 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 pursu­
ant 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 ac­
ceptance of a deposit with the Federal Reserve
Bank in place of a payment on account of a
subscription to stock is issued to it pursuant to
its application for membership.

SECTION 208.6—Privileges and
Requirements of Membership
Every state bank while a member of the Fed­
eral 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 appli­
cable to member state banks, to the regula­
tions 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;
(b) Shall enjoy all the privileges and observe
all the requirements of the Federal Reserve
Act and other acts of Congress applicable to
member state banks and of the regulations of
the Board m a d e p u rsu a n t to la w which are
applicable to member state banks;
(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 Re­
serve System; and
(d) Shall not reduce its capital stock except
with the prior consent of the Board.5

SECTION 208.7—Conditions of
Membership
(a) Pursuant to the authority contained in
the first paragraph of section 9 of the Federal
Reserve Act, which authorizes the Board to

4
In the case of a mutual savings bank which is not per­
mitted by the laws under which it was organized to pur­
5 This applies to capital stock of all classes and to capital
chase stock in a Federal Reserve Bank, it shall deposit with
notes and debentures legally issued and purchased by the
the Federal Reserve Bank an am ount equal to the amount
Reconstruction Finance Corporation which, under the
which it would have been required to pay in on account of
Federal Reserve Act, are considered as capital stock for
a subscription to capital stock.
purposes of membership.

3

§ 208.7

permit applying state banks to become mem­
bers of the Federal Reserve System “subject to
the provisions of this Act and to such condi­
tions as it may prescribe pursuant thereto,”
the Board, except as hereinafter stated, will
prescribe the following conditions of member­
ship 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 corpo­
rate powers exercised by it at the time of
admission to membership.6
(2) The net capital and surplus funds of
such bank shall be adequate in relation to
the character and condition of its assets and
to its deposit liabilities and other corporate
responsibilities.
(b) The acquisition by a member state bank
of the assets of another institution through
merger, consolidation, or purchase may result
in a change in the general character of its
business or in the scope of its corporate pow­
ers within the meaning of the condition set
forth in paragraph (a) (1) of this section, and
if at any time a bank subject to such condition
anticipates making any such acquisition a de­
tailed report setting forth all the facts in con­
nection with the transaction shall be made
promptly to the Federal Reserve Bank of the
District in which such bank is located.
6 F o r many years, the Board prescribed, as standard con­
ditions of membership, a condition which, in general, pro­
hibited banks from engaging as a business in the sale of real
estate loans to the public and certain conditions relating to
the exercise o f trust powers, including one which prohibit­
ed self-dealing in the investment of trust funds. The elimi­
nation o f these conditions as standard conditions of mem­
bership does not reflect any change in the Board’s position
as to the undesirability of the practices formerly prohibited
by such conditions; and attention is called to the fact that
engaging as a business in the sale of real estate loans to the
public o r failing to conduct trust business in accordance
with the applicable state laws and sound principles of trust
administration may constitute unsafe or unsound practices
and violate the condition set forth in this subparagraph.

4

Regulation H

(c) If at any time, in the light of all the cir­
cumstances, the aggregate amount of a mem­
ber state bank’s net capital and surplus funds
appears to be inadequate, the bank, within
such period as shall be deemed by the Board
to be reasonable for this purpose, shall in­
crease the amount thereof to an amount
which in the judgment of the Board shall be
adequate in relation to the character and con­
dition of its assets and to its deposit liabilities
and other corporate responsibilities.

SECTION 208.8— Banking Practices
(a) Scope. No state member bank shall en­
gage in practices which are unsafe or unsound
or which result in a violation of law, rule, or
regulation, or which violate any condition im­
posed by or agreements entered into with the
Board. This section outlines certain of the
practices in which state member banks should
not engage.
(b) Waiver. A state member bank has the
right to petition the Board to waive the condi­
tions of section 208.8. A waiver may be grant­
ed upon a showing of good cause. The Board
in its discretion may choose to limit, among
other items, the scope, duration, and timing of
the waiver.
(c) Effect on other banking practices. Noth­
ing in this section shall be construed as re­
stricting in any manner the Board’s authority
to deal with any banking practice which is
deemed to be unsafe or unsound or otherwise
not in accordance with law, rule, or regulation
or which violates any condition imposed in
writing by the Board in connection with the
granting of any application or other request
by a state member bank, or any written agree­
ment entered into by such bank with the
Board. Compliance with the provisions of this
section shall neither relieve a state member
bank of its duty to conduct all operations in a
safe and sound manner nor prevent the Board
from taking whatever action it deems neces­
sary and desirable to deal with general or spe­
cific acts or practices which, although perhaps
not violating the provisions of this section, are
considered nevertheless to be an unsafe or un­
sound banking practice.

Regulation H

(d) Letters o f credit and acceptances.
(1) Definitions. For the purpose of this
paragraph, “standby letters of credit” in­
clude every letter of credit (or similar ar­
rangement however named or designated)
which represents an obligation to the bene­
ficiary on the part of the issuer (1) to repay
money borrowed by or advanced to or for
the account of the account party or (2) to
make payment on account of any evidence
of indebtedness undertaken by the account
party, or (3) to make payment on account
of any default by the account party in the
performance of an obligation.621An “ineligi­
ble acceptance” is a time draft accepted by
a bank, which does not meet the require­
ments for discount with a Federal Reserve
Bank.
(2) Restrictions.
(i) A state member bank shall not issue,
renew, extend, or amend a standby letter
of credit (or other similar arrangement,
however named or described) or make an
ineligible acceptance or grant any other
extension of credit if, in the aggregate,
the amount of all standby letters of credit
and ineligible acceptances issued, re­
newed, extended, or amended on or after
the effective date of this amendment,
when combined with other extensions of
credit issued by the bank would exceed
the legal limitations on loans imposed by
the state (including limitations to any
one customer or on aggregate extensions
of credit) or exceed legal limits pertain­
ing to loans to affiliates under federal law
(12 USC 371(c)); provided that, if any
state has a separate limitation on the issu­
ance of letters of credit or acceptances
which apply to a standby letter of credit
or to ineligible acceptances respectively,
then the separate limitation shall apply in
lieu of the standard loan limitation.
(ii) No state member bank shall issue a
standby letter of credit or ineligible ac­
ceptance unless the credit standing of the
6a As defined, “standby letter of credit” would not include (1)
commercial letters of credit and similar instruments where the
issuing bank expects the beneficiary to draw upon the issuer and
which do not “guaranty” payment of a money obligation or (2) a
guaranty or similar obligation issued by a foreign branch in ac­
cordance with and subject to the limitations of Regulation K.

§ 208.8

account party under any letter of credit,
and the customer of an ineligible accept­
ance, is the subject of credit analysis
equivalent to that applicable to a poten­
tial borrower in an ordinary loan
situation.
(iii) If several banks participate in the
issuance of a standby letter of credit or
ineligible acceptance under a bona fide
binding agreement which provides that,
regardless of any event, each participant
shall be liable only up to a certain per­
centage or certain amount of the total
amount of the standby letter of credit or
ineligible acceptance issued, a state mem­
ber bank need only include the amount of
its participation for purposes of this sec­
tion; otherwise, the entire amount of the
letter of credit or acceptance must be
included.
(3) Disclosure; recordkeeping. The amount
of all outstanding standby letters of credit
and ineligible acceptances, regardless of
when issued, shall be adequately disclosed
in the bank’s published financial statements.
Each state member bank shall maintain
adequate control and subsidiary records of
its standby letters of credit comparable to
the records maintained in connection with
the bank’s direct loans so that at all times
the bank’s potential liability thereunder and
the bank’s compliance with this section (d)
may be readily determined.
(4) Exceptions. A standby letter of credit is
not subject to the restrictions set forth
above in the following situations:
(i) prior to or at the time of issuance of
the credit, the issuing bank is paid an
amount equal to the bank’s maximum li­
ability under the standby letter of credit
or
(ii) prior to or at the time of issuance,
the bank has set aside sufficient funds in a
segregated, clearly earmarked deposit ac­
count to cover the bank’s maximum lia­
bility under the standby letter of credit.
(e) Loans by state member banks in identified
flood hazard areas. (1) Property securing loan
must be insured against flood. No state
member bank shall make, increase, extend
or renew any loan secured by improved real
5

§ 208.8

estate or a mobile home located or to be
located in an area that has been identified
by the secretary of Housing and Urban De­
velopment as an area having special flood
hazards and in which flood insurance has
been made available under the National
Flood Insurance Act of 1968, unless the
building or mobile home and any personal
property securing such loan is covered for
the term of the loan by flood insurance in
an amount at least equal to the outstanding
principal balance of the loan or to the maxi­
mum limit of coverage made available with
respect to the particular type of property
under the act, whichever is less. Notwith­
standing the foregoing provision, flood in­
surance shall not be required on any stateowned property that is covered under an
adequate policy of self-insurance satisfacto­
ry to the secretary of Housing and Urban
Development who shall publish and period­
ically revise the list of states falling within
the exemption provided in this paragraph.
(2) Records of compliance. Each state
member bank shall maintain, in connection
with all loans secured by improved real es­
tate or a mobile home, sufficient records to
indicate the method used by the bank to
determine whether or not such loans fall
within the provisions of this section
208.8(e).
(3) (i) Notice of special flood hazards
and availability of federal disaster relief
assistance. Each state member bank
shall, as a condition of making, increas­
ing, extending or renewing any loan se­
cured by improved real estate or a mobile
home located or to be located in an area
that has been identified by the secretary
of Housing and Urban Development as
an area having special flood hazards,
mail or deliver as soon as feasible but not
less than 10 days in advance of closing of
the transaction (or not later than the
bank’s commitment, if any, if the period
between commitment and closing is less
than 10 days) a written notice to the bor­
rower stating: (a) That the property se­
curing the loan is or will be located in an
area so identified, or in lieu of such notifi­
cation a state member bank may obtain
satisfactory written assurances from a

6

Regulation H

seller or lessor stating that such seller or
lessor has notified the borrower, prior to
the execution of any agreement for sale
or lease, that the property securing the
loan is or will be located in an area so
identified; and (b) whether, in the event
of damage to the property caused by
flooding in a federally declared disaster,
federal disaster relief assistance will be
available for such property. Each state
member bank shall require the borrower,
prior to closing, to provide the bank with
a written acknowledgment that the prop­
erty securing the loan is or will be located
in an area so identified and that the bor­
rower has received the above-required
notice regarding federal disaster relief
assistance.
(ii) Sample notices. A state member
bank providing written notice containing
the language presented in appendix A
within the time limits prescribed in para­
graph (a) of this section will be consid­
ered to be in compliance with the notice
requirements of paragraph (a) of this
section.
(f) State member banks as transfer agents.
(1) On or after December 1, 1975, no state
member bank or any of its subsidiaries shall
act as transfer agent, as defined in section
3(a) (25) of the Securities Exchange Act of
1934 (“act”), with respect to any security
registered under section 12 of the act or
which would be required to be registered
except for the exemption from registration
provided by subsection (g)(2)(B ) or
(g )(2)(G ) of that section, unless it shall
have filed a registration statement with the
Board in conformity with the requirements
of Form TA-1, which registration state­
ment shall have become effective as herein­
after provided. Any registration statement
filed by a state member bank or its subsidi­
ary shall become effective on the thirtieth
day after filing with the Board unless the
Board takes affirmative action to accelerate,
deny or postpone such registration in ac­
cordance with the provisions of section
17A(c) of the act. Such filings with the
Board will constitute filings with the Securi­

Regulation H

ties and Exchange Commission for purpos­
es of section 17(c)(1) of the act.
(2) If the information contained in Form
TA-1 becomes inaccurate, misleading or in­
complete for any reason, the bank or its
subsidiary shall, within 60 calendar days
thereafter, file an amendment to Form TA1 correcting the inaccurate, misleading or
incomplete information.
(3) Each registration statement on Form
TA-1 or amendment thereto shall consti­
tute a “report” or “application” within the
meaning of section 17, 17A(c) and 32(a)
of the act.
(g) State member banks as registered clearing
agencies.
(1) Requirement o f notice. Any state mem­
ber bank or any of its subsidiaries that is a
registered clearing agency pursuant to sec­
tion 17A(b) of the Securities Exchange Act
of 1934 (the “act”), which imposes any fi­
nal disciplinary sanction on any participant
therein, denies participation to any appli­
cant or prohibits or limits any person in re­
spect to access to services offered by such
registered clearing agency, shall file with
the Board and the appropriate regulatory
agency (if other than the Board) for a par­
ticipant or applicant notice thereof in the
manner prescribed herein.
(2) Notice o f final disciplinary action. Any
registered clearing agency for which the
Board is the appropriate regulatory agency
that takes any final disciplinary action with
respect to any participant shall promptly
file a notice thereof with the Board in ac­
cordance with paragraph (g)(3) of this
section. For the purposes of this paragraph
“final disciplinary action” shall mean the
imposition of any disciplinary sanction pur­
suant to section 17A(b)(3)(G ) of the act
or other action of a registered clearing
agency which, after notice and opportunity
for hearing, results in any final disposition
of charges of:
(i) one or more violations of the rules of
such registered clearing agency; or
(ii) acts or practices constituting a stat­
utory disqualification of a type defined in
subparagraph (iv) or (v) (except prior

§ 208.8

convictions) of section 3(a) (39) of the
act.
However, if a registered clearing agency fee
schedule specifies certain charges for errors
made by its participants in giving instruc­
tions to the registered clearing agency
which are de minimis on a per error basis
and whose purpose is in part to provide rev­
enues to the registered clearing agency to
compensate it for effort expended in begin­
ning to process an erroneous instruction,
such error charges shall not be considered a
“final disciplinary action” for purposes of
this paragraph.
(3) Content o f notice required by paragraph
(g)(2). Any notice filed pursuant to para­
graph (g)(2) of this section shall consist of
the following, as appropriate:
(i) the name of the respondent con­
cerned together with the respondent’s
last known address as reflected on the
records of the registered clearing agency
and the name of the person, committee,
or other organizational unit that brought
the charges involved; except that, as to
any respondent who has been found not
to have violated a provision covered by a
charge, identifying information with re­
spect to such person may be deleted inso­
far as the notice reports the disposition of
that charge and, prior to the filing of the
notice, the respondent does not request
that identifying information be included
in the notice.
(ii) a statement describing the investiga­
tive or other origin of the action;
(iii) as charged in the proceeding, the
specific provision or provisions of the
rules of the registered clearing agency vi­
olated by such person or the statutory
disqualification referred to in paragraph
(g) (2) (ii) of this section and a state­
ment describing the answer of the re­
spondent to the charges;
(iv) a statement setting forth findings of
fact with respect to any act or practice in
which such respondent was charged with
having engaged in or omitted; the conclu­
sion of the registered clearing agency as
to whether such respondent violated any
rule or was subject to a statutory disqual­
ification as charged; and a statement of
7

§ 208.8

the registered clearing agency in support
of its resolution of the principal issues
raised in the proceedings;
(v) a statement describing any sanction
imposed, the reasons therefor, and the
date upon which such sanction has or
will become effective; and
(vi) such other matters as the registered
clearing agency may deem relevant.
(4) Notice o f final denial, prohibition, ter­
mination or limitation based on qualification
or administrative rules. Any registered
clearing agency for which the Board is the
appropriate regulatory agency that takes
any final action which denies participation
to, or conditions the participation of, any
person or prohibits or limits any person
with respect to access to services offered by
the clearing agency based on an alleged fail­
ure of such person to—
(i) comply with the qualification stan­
dards prescribed by the rules of such reg­
istered clearing agency pursuant to sec­
tion 17A(b) (4) (B) of the act; or
(ii) comply with any administrative re­
quirements of such registered clearing
agency (including failure to pay entry or
other dues or fees or to file prescribed
forms or reports) not involving charges
of violations which may lead to a discipli­
nary sanction
shall not be considered a “final disciplinary
action” for purposes of paragraph (g)(2)
of this section, but notice thereof shall be
promptly filed with the Board and the ap­
propriate regulatory agency (if other than
the Board) for the affected person in ac­
cordance with paragraph (g)(5) of this
section; provided however, that no such ac­
tion shall be considered “final” pursuant to
this subparagraph that results merely from
a notice of such failure to the person affect­
ed, if such person has not sought an adjudi­
cation of the matter, including a hearing, or
otherwise exhausted his administrative
remedies within the registered clearing
agency with respect to such a matter.
(5) Content o f notice required by paragraph
(g)(4). Any notice filed pursuant to para­
graph (g) (4) of this section shall consist of
the following, as appropriate:
(i) the name of each person concerned
8

Regulation H

together with each such person’s last
known address as reflected in the records
of the registered clearing agency;
(ii) the specific grounds upon which the
action of the registered clearing agency
was based, and a statement describing the
answer of the person concerned;
(iii) a statement setting forth findings of
fact and conclusions as to each alleged
failure of the person to comply with qual­
ification standards, or comply with ad­
ministrative obligations, and a statement
of the registered clearing agency in sup­
port of the resolution of the principal is­
sues raised in the proceeding;
(iv) the date upon which such action
has or will become effective; and
(v) such other matters as the registered
clearing agency deems relevant.
(6) Notice o f final action based upon prior
adjudicated statutory disqualifications. Any
registered clearing agency for which the
Board is the appropriate regulatory agency
that takes any final action with respect to
any person that:
( i ) d e n ie s o r c o n d itio n s p a r ticip a tio n to

any person or prohibits or limits access to
service offered by such registered clearing
agency; and
(ii) is based upon a statutory disqualifi­
cation of a type defined in subparagraph
(A), (B) or (C) of section 3(a) (39) of
the act of consisting of a prior conviction
as described in subparagraph (E) of said
section 3 (a) (39) shall promptly file no­
tice thereof with the Board and the ap­
propriate regulatory agency (if other
than the Board) for the affected person
in accordance with paragraph (g) (7) of
this section; provided, however, that no
such action shall be considered “final”
pursuant to this subparagraph which re­
sults merely from a notice of such failure
to the person affected, if such person has
not sought an adjudication of the matter,
including a hearing, or otherwise ex­
hausted his administrative remedies with­
in the registered clearing agency with re­
spect to such a matter.
(7) Content o f notice required by paragraph
(g)(6). Any notice filed pursuant to para­

Regulation H

graph (g)(6) of this section shall consist of
the following, as appropriate:
(i) the name of the person concerned,
together with each such person’s last
known address as reflected in the records
of the registered clearing agency;
(ii) a statement setting forth the princi­
pal issues raised, the answer of any per­
son concerned, and a statement of the
registered clearing agency in support of
its resolution of the principal issues
raised in the proceeding;
(iii) any description furnished by or on
behalf of the person concerned of the ac­
tivities engaged in by the person since the
adjudication upon which the disqualifica­
tion is based;
(iv) a copy of the order or decision of
the court, the appropriate regulatory
agency or the self-regulatory organiza­
tion which adjudicated the matter giving
rise to such statutory disqualification;
(v) the nature of the action taken and
the date upon which such action is to be
made effective; and
(vi) such other matters as the registered
clearing agency deems relevant.
(8) Notice o f summary suspension ofpartic­
ipation. Any registered clearing agency for
which the Board is the appropriate regula­
tory agency that summarily suspends or
closes the accounts of a participant pursu­
ant to the provisions of section 17A
(b) (5) (C) of the act shall within one busi­
ness day after the effectiveness of such ac­
tion file notice thereof with the Board and
the appropriate regulatory agency for the
participant (if other than the Board) of
such action in accordance with paragraph
(g) (9) of this section.
(9) Content o f notice o f summary suspen­
sion o f participation. Any notice pursuant to
paragraph (g) (8) of this section shall con­
tain at least the following information, as
appropriate:
(i) the name of the participant con­
cerned together with the participant’s
last known address as reflected in the rec­
ords of the registered clearing agency;
(ii) the date upon which such summary
action has or will become effective;
(iii) if such summary action is based

§ 208.8

upon the provisions of section 17A
(b )(5 )(C )(i) of the act, a copy of the
relevant order or decision of the self-reg­
ulatory organization if available to the
registered clearing agency;
(iv) if such summary action is based
upon the provisions of section 17A
(b) (5) (C) (ii) of the act, a statement de­
scribing the default of any delivery of
funds or securities to the registered clear­
ing agency;
(v) if such summary action is based
upon the provisions
of section
17A (b)(5)(C )(iii) of the act, a state­
ment describing the financial or operat­
ing difficulty of the participant based
upon which the registered clearing agen­
cy determined that such suspension and
closing of accounts was necessary for the
protection of the clearing agency, its par­
ticipants, creditors or investors;
(vi) the nature and effective date of the
suspension; and
(vii) such other matters as the registered
clearing agency deems relevant.
(h) Applications for stays o f disciplinary sanc­
tions or summary suspensions by a registered
clearing agency. If a registered clearing agency
for which the Securities and Exchange Com­
mission is not the appropriate regulatory
agency imposes any final disciplinary sanction
pursuant to section 17A (b)(3)(G ) of the act,
or summarily suspends or limits or prohibits
access pursuant to section 17A(b)(5)(C) of
the act, any participant aggrieved thereby for
which the Board is the appropriate regulatory
agency may file with the Board, by telegram
or otherwise, a request for a stay of imposition
of such action. Such request shall be in writ­
ing and shall include a statement as to why
such stay should be granted.
(i) Application for review o f final disciplinary
sanctions, denials o f participation or prohibi­
tions or limitations o f access to services imposed
by registered clearing agencies.
(1) Scope. Proceedings on an application
to the Board under section 19(d) (2) of the
act by a person that is subject to the
Board’s jurisdiction for review of any action
by a registered clearing agency for which
9

§ 208.8

Regulation H

clearing agency unless it is shown to the
the Securities and Exchange Commission is
satisfaction of the Board that such addi­
not the appropriate regulatory agency shall
tional evidence is material and that there
be governed by this paragraph.
were reasonable grounds for failure to
(2) Procedure.
present such evidence in the proceedings
(i) An application for review pursuant
before the registered clearing agency.
to section 19(d)(2) of the act shall be
Any request for leave to adduce addition­
filed with the Board within 30 days after
al evidence shall be filed promptly so
notice is filed by the registered clearing
as not to delay the disposition of the
agency pursuant to section 19(d)(1) of
proceeding.
the act and received by the aggrieved per­
son applying for review, or within such
(v) Oral argument before the Board
may be requested by the applicant or the
longer period as the Board may deter­
registered clearing agency as follows:
mine. The secretary of the Board shall
(A) by the applicant with his brief or
serve a copy of the application on the
statement or within 10 days after re­
registered clearing agency, which shall,
within 10 days after receipt of the appli­
ceipt of the registered clearing agency’s
answer, or
cation, certify and file with the Board one
(B) by the registered clearing agency
copy of the record upon which the action
with its answer.
complained was taken, together with
The Board, in its discretion, may grant or
three copies of an index to such record.
deny any request for oral argument and,
The secretary shall serve upon the parties
copies of such index and any papers sub­
where it deems it appropriate to do so,
the Board will consider an application on
sequently filed.
the basis of the papers filed by the parties,
(ii) Within 20 days after receipt of a
without oral argument.
copy of the index, the applicant shall file
(vi) The Board’s Rules of Practice for
a brief or other statement in support of
Formal Hearings shall apply to review
his application which shall state the spe­
cific grounds on which the application is
proceedings under this rule to the extent
that they are not inconsistent with this
based, the particular findings of the regis­
rule. Attention is directed particularly to
tered clearing agency to which objection
section 263.21 of the Rules of Practice
is taken, the relief sought. Any applica­
relating to formal requirements as to the
tion not perfected by such timely brief
papers filed.
or statement may be dismissed as
abandoned.
(iii) Within 20 days after receipt of the (j) State member banks, and subsidiaries, de­
applicant’s brief or statement the regis­ partments, and divisions thereof, which are
tered clearing agency may file an answer municipal securities dealers.
(1) For purposes of this paragraph, the
thereto, and within 10 days of receipt of
terms herein have the meanings given them
any such answer the applicant may file a
in section 3(a) of the Securities Exchange
reply. Any such papers not filed within
Act of 1934 (15 USC 78c(a)) and the rules
the time provided by items (A ), (B), or
of the Municipal Securities Rulemaking
(C) will not be received except upon spe­
Board. The term “act” shall mean the Secu­
cial permission of the Board.
rities Exchange Act of 1934 (15 USC 78a et
(iv) On its own motion, the Board may
seq.).
direct that the record under review be
(2) On and after October 31, 1977, a state
supplemented with such additional evi­
member bank of the Federal Reserve Sys­
dence as it may deem relevant. Neverthe­
tem, or a subsidiary or a department of a
less, the registered clearing agency and
division thereof, that is a municipal securi­
persons who may be aggrieved by such
ties dealer shall not permit a person to be
clearing agency’s action shall not be enti­
associated with it as a municipal securities
tled to adduce evidence not presented in
principal or municipal securities representathe proceedings before the registered
10

Regulation H

tive unless it has filed with the Board an
original and two copies of Form MSD-4,
“Uniform Application for Municipal Secu­
rities Principal or Municipal Securities
Representative Associated with a Bank
Municipal Securities Dealer,” completed in
accordance with the instructions contained
therein, for that person. Form MSD-4 is
prescribed by the Board for purposes of
paragraph (b) of Municipal Securities
Rulemaking Board Rule G-7, “Information
Concerning Associated Persons.”
(3) Whenever a municipal securities dealer
receives a statement pursuant to paragraph
(c) of Municipal Securities Rulemaking
Board Rule G-7, “Information Concerning
Associated Persons,” from a person for
whom it has filed a Form MSD-4 with the
Board pursuant to paragraph(j) (2) of this
paragraph, such dealer shall, within ten
days thereafter, file three copies of that
statement with the Board accompanied by
an original and two copies of a transmittal
letter which includes the name of the dealer
and a reference to the material transmitted
identifying the person involved and is
signed by a municipal securities principal
associated with the dealer.
(4) Within 30 days after the termination of
the association of a municipal securities
principal or municipal securities representa­
tive with a municipal dealer that has filed a
Form MSD-4 with the Board for that per­
son pursuant to paragraph^) (2) of this
section, such dealer shall file an original
and two copies of a notification of termina­
tion with the Board on Form MSD-5,
“Uniform Termination Notice for Munici­
pal Securities Principal or Municipal Secu­
rities Representative Associated with a
Bank Municipal Securities Dealer,” com­
pleted in accordance with instructions con­
tained therein.
(5) A municipal securities dealer that files
a Form MSD-4, Form MSD-5, or state­
ment with the Board under this paragraph
shall retain a copy of each such Form
MSD-4, Form MSD-5, or statement until at
least three years after the termination of the
employment or other association with such
dealer of the municipal securities principal

§ 208.8

or municipal securities representative to
whom the form or statement relates.
(6) The date that the Board receives a
Form MSD-4, Form MSD-5, or statement
filed with the Board under this paragraph
shall be the date of filing. Such a Form
MSD-4, Form MSD-5, or statement which
is not prepared and executed in accordance
with the applicable requirements may be re­
turned as unacceptable for filing. Accept­
ance for filing shall not constitute any find­
ing that a Form MSD-4, Form MSD-5, or
statement has been completed in accord­
ance with the applicable requirements or
that any information reported therein is
true, current, complete, or not misleading.
Every Form MSD-4, Form MSD-5, or
statement filed with the Board under this
paragraph shall constitute a filing with the
Securities and Exchange Commission for
purposes of section 17(c)(1) of the act (15
USC 7 8 q (c)(l)) and a “report,” “applica­
tion,” or “document” within the meaning
of section 32(a) of the act (15 USC §
78ff(a)).
(k) Recordkeeping and confirmation o f cer­
tain securities transactions effected by state
member banks.
(1) Definitions. For purposes of this para­
graph (k): (i) “customer” shall mean
any person or account, including any
agency, trust, estate, guardianship, com­
mittee or other fiduciary account, for
which a state member bank effects or
participates in effecting the purchase or
sale of securities, but shall not include a
broker, dealer, dealer bank or issuer of
the securities which are the subject of the
transactions;
(ii) “collective investment fund” means
funds held by a state member bank as fi­
duciary and, consistent with local law,
invested collectively (A) in a common
trust fund maintained by such bank ex­
clusively for the collective investment
and reinvestment of monies contributed
thereto by the bank in its capacity as
trustee, executor, administrator, guardi­
an, or custodian under the Uniform Gifts
to Minors Act, or (B) in a fund consist­
ing solely of assets of retirement, pension,
11

§ 208.8

profit sharing, stock bonus or similar
trusts which are exempt from federal in­
come taxation under the Internal Reve­
nue Code;
(iii) a bank shall be deemed to exercise
“investment discretion” with respect to
an account if, directly or indirectly, the
bank (A) is authorized to determine
what securities or other property shall be
purchased or sold by or for the account,
or (B) make decisions as to what securi­
ties or other property shall be purchased
or sold by or for the account even though
some other person may have responsibili­
ty for such investment decisions.
(iv) “periodic plan” (including dividend
reinvestment plans, automatic invest­
ment plans and employee stock purchase
plans) means any written authorization
for a state member bank acting as agent
to purchase or sell for a customer a spe­
cific security or securities, in specific
amounts (calculated in security units or
dollars) or to the extent of dividends and
funds available, at specific time intervals
and setting forth the commission or
charges to be paid by the customer in
connection therewith or the manner of
calculating them;
(v) “security” means any interest or
instrument commonly known as a “secu­
rity” whether in the nature of debt or eq­
uity, including any stock, bond, note, de­
benture, evidence of indebtedness or any
participation in or right to subscribe to or
purchase any of the foregoing. The term
“security” does not include (A) a deposit
or share account in a federally or state-in­
sured depository institution, (B) a loan
participation, (C) a letter of credit or
other form of bank indebtedness incurred
in the ordinary course of business, (D)
currency, (E) any note, draft, bill of ex­
change, or bankers acceptance which has
a maturity at the time of issuance of not
exceeding nine months, exclusive of days
of grace, or any renewal thereof the matu­
rity of which is likewise limited, (F) units
of a collective investment fund, (G) in­
terests in a variable amount (master)
note of a borrower of prime credit, or
(H) U.S. Savings Bonds.
12

Regulation H

(2) Recordkeeping. Every state member
bank effecting securities transactions for
customers shall maintain the following rec­
ords with respect to such transactions for at
least three years:
(i) chronological records of original en­
try containing an itemized daily record of
all purchases and sales of securities. The
records of original entry shall show the
account or customer for which each such
transaction was effected, the description
of the securities, the unit and aggregate
purchase or sale price (if any), the trade
date and the name or other designation
of the broker-dealer or other person from
whom purchased or to whom sold;
(ii) account records for each customer
which shall reflect all purchases and sales
of securities, all receipts and deliveries of
securities, and all receipts and disburse­
ments of cash with respect to transac­
tions in securities for such account and
all other debits and credits pertaining to
transactions in securities.
(iii) a separate memorandum (order
ticket) of each order to purchase or sell
securities (whether executed or can­
celled), which shall include:
(A) the account(s) for which the
transaction was effected;
(B) whether the transaction was a
market order, limit order, or subject to
special instructions;
(C) the time the order was received
by the trader or other bank em­
ployee responsible for effecting the
transaction;
(D) the time the order was placed
with the broker-dealer, or if there was
no broker-dealer, the time the order
was executed or cancelled;
(E) the price at which the order was
executed; and
(F) the broker-dealer utilized;
(iv) a record of all broker-dealers select­
ed by the bank to effect securities trans­
actions and the amount of commissions
paid or allocated to each such broker
during the calendar year.
Nothing contained in this subpara­
graph shall require a bank to maintain
the records required by this rule in any

Regulation H

given manner, provided that the informa­
tion required to be shown is clearly and
accurately reflected and provides an ade­
quate basis for the audit of such
information.
(3) Form o f notification. Every state mem­
ber bank effecting a securities transaction
for a customer shall maintain for at least
three years and, except as provided in subparagraph (4), shall mail or otherwise fur­
nish to such customer either of the follow­
ing types of notifications:
(i) (A) a copy of the confirmation of a
broker-dealer relating to the securities
transaction; and (B) if the bank is to re­
ceive remuneration from the customer or
any other source in connection with the
transaction, and the remuneration is not
determined pursuant to a prior written
agreement between the bank and the cus­
tomer, a statement of the source and the
amount of any remuneration to be re­
ceived; or
(ii) a written notification disclosing:
(A) the name of the bank;
(B) the name of the customer;
(C) whether the bank is acting as
agent for such customer, as agent for
both such customer and some other
person, as principal for its own ac­
count, or in any other capacity;
(D ) the date of execution and a state­
ment that the time of execution will be
furnished within a reasonable time
upon written request of such customer,
and the identity, price and number of
shares or units (or principal amount in
the case of debt securities) of such se­
curity purchased or sold by such a
customer;
(E) the amount of any remuneration
received or to be received, directly or
indirectly, by any broker-dealer from
such customer in connection with the
transaction;
(F) the amount of any remuneration
received or to be received by the bank
from the customer and the source and
amount of any other remuneration to
be received by the bank in connection
with the transaction, unless remunera­
tion is determined pursuant to a writ­

§ 208.8

ten agreement between the bank and
the customer, provided, however, in
the case of U.S. government securities,
federal agency obligations and munici­
pal obligations, this subparagraph (F)
shall apply only with respect to remu­
neration received by the bank in an
agency transaction; and
(G) the name of the broker-dealer
utilized; or, where there is no brokerdealer, the name of the person from
whom the security was purchased or to
whom it was sold, or the fact that such
information will be furnished within a
reasonable time upon written request.
(4) Time o f notification. The time for mail­
ing or otherwise furnishing the written noti­
fication described in paragraph (k)(3) of
this section shall be five business days from
the date of the transaction, or if a brokerdealer is utilized, within five business days
from the receipt by the bank of the brokerdealer’s confirmation, but the bank may
elect to use the following alternative proce­
dures if the transaction is effected for:
(i) accounts (except periodic plans)
where the bank does not exercise invest­
ment discretion and the bank and the
customer agree in writing to a different
arrangement as to the time and content
of the notification; provided, however,
that such agreement makes clear the cus­
tomer’s right to receive the written notifi­
cation within the above-prescribed time
period at no additional cost to the
customer;
(ii) accounts (except collective invest­
ment funds) where the bank exercises in­
vestment discretion in other than an
agency capacity, in which instance the
bank shall, upon request of the person
having the power to terminate the ac­
count or, if there is no such person, upon
the request of any person holding a vest­
ed beneficial interest in such account,
mail or otherwise furnish to such person
the written notification within a reason­
able time. The bank may charge such
person a reasonable fee for providing this
information.
(iii) accounts, where the bank exercises
investment discretion in an agency capac13

§ 208.8

ity, in which instance (A) the bank shall
mail or otherwise furnish to each custom­
er not less frequently than once every
three months an itemized statement
which shall specify the funds and securi­
ties in the custody or possession of the
bank at the end of such period and all
debits, credits and transactions in the
customer’s accounts during such period,
and (B) if requested by the customer, the
bank shall mail or otherwise furnish to
each such customer within a reasonable
time the written notification described in
paragraph (k )(3) of this section. The
bank may charge a reasonable fee for
providing the information described in
paragraph (k)(3) of this section.
(iv) a collective investment fund, in
which instance the bank shall at least an­
nually furnish a copy of a financial report
of the fund, or provide notice that a copy
of such report is available and will be fur­
nished upon request, to each person to
whom a regular periodic accounting
would ordinarily be rendered with re­
spect to each participating account. This
report shall be based upon an audit made
by independent public accountants or in­
ternal auditors responsible only to the
board of directors of the bank.
(v) a periodic plan, in which instance
the bank shall mail or otherwise furnish
to the customer as promptly as possible
after each transaction a written statement
showing the funds and securities in the
custody or possession of the bank, all
service charges and commissions paid by
the customer in connection with the
transaction, and all other debits and
credits of the customer’s account in­
volved in the transaction; provided that
upon the written request of the customer
the bank shall furnish the information
described in subparagraph (3), except
that any such information relating to re­
muneration paid in connection with the
transaction need not be provided to the
customer when paid by a source other
than the customer. The bank may charge
a reasonable fee for providing the infor­
mation described in subparagraph (3).
14

Regulation H

(5) Securities trading policies and proce­
dures. Every state member bank effecting
securities transactions for customers shall
establish written policies and procedures
providing:
(i) assignment of responsibility for su­
pervision of all officers or employees who
(A) transmit orders to or place orders
with broker-dealers, or (B) execute
transactions in securities for customers;
(ii) for the fair and equitable allocation
of securities and prices to accounts when
orders for the same security are received
at approximately the same time and are
placed for execution either individually
or in combination;
(iii) where applicable and where permis­
sible under local law, for the crossing of
buy and sell orders on a fair and equita­
ble basis to the parties to the transaction;
and
(iv) that bank officers and employees
who make investment recommendations
or decisions for the accounts of custom­
ers, who participate in the determination
of such recommendations or decisions, or
w h o , in c o n n e c tio n w ith th eir d u ties, ob­
tain information concerning which secu­
rities are being purchased or sold or rec­
ommended for such action, must report
to the bank, within 10 days after the end
of the calendar quarter, all transactions
in securities made by them or on their
behalf, either at the bank or elsewhere in
which they have a beneficial interest. The
report shall identify the securities pur­
chased or sold and indicate the dates of
the transactions and whether the transac­
tions were purchases or sales. Excluded
from this requirement are transactions
for the benefit of the officer or employee
over which the officer or employee has no
direct or indirect influence or control,
transactions in mutual fund shares, and
all transactions involving in the aggregate
$10,000 or less during the calendar quar­
ter. For purposes of this paragraph
(k)(iv), the term “securities” does not
include U.S. government or federal agen­
cy obligations.
(6) Exceptions. The following exceptions
to paragraph (k) shall apply:

Regulation H

(i) the requirements of subparagraph
paragraph (k )(5 )(i) through (k)(5)
(iii) shall not apply to banks having an
average of less than 200 securities trans­
actions per year for customers over the
prior three-calendar-year period, exclu­
sive of transactions in U.S. government
and federal agency obligations;
(ii) activities of a state member bank
that are subject to regulations promulgat­
ed by the Municipal Securities Rulemak­
ing Board shall not be subject to the re­
quirements of this paragraph (k); and
(iii) activities of foreign branches of a
state member bank shall not be subject to
the requirements of this paragraph (k).

SECTION 208.9—Establishment or
Maintenance of Branches
(a) In general. Every state bank which is or
hereafter becomes a member of the Federal
Reserve System is subject to the provisions of
section 9 of the Federal Reserve Act relating
to the establishment and maintenance of
branches 7 in the United States or in a depen­
dency or insular possession thereof or in a for­
eign country. Under the provisions of section
9, member state banks establishing and oper­
ating branches in the United States beyond
the corporate limits of the city, town, or vil­
lage in which the parent bank is situated must
conform to the same terms, conditions, limita­
tions, 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 Cur­
rency. The approval of the Board must like­
wise be obtained before any member state
bank establishes any branch after July 15,
1952, within the corporate limits of the city,
town, or village in which the parent bank is
7 Section 5155 of the Revised Statutes o f the United
States provides that: “ (f) The term ‘branch’ as used in this
section shall be held to include any branch bank, branch
office, branch agency, additional office, or any branch place
o f business located in any State or territory of the United
States or in the D istrict of Columbia at which deposits are
received, or checks paid, or money lent.”

§ 208.9

situated (except within the District of Colum­
bia) . Under the provisions of section 9, mem­
ber state banks establishing and operating
branches in a dependency or insular posses­
sion of the United States or in a foreign coun­
try must conform to the terms, conditions,
limitations, and restrictions contained in sec­
tion 25 of the Federal Reserve Act relating to
the establishment by national banks of
branches in such places.
(b) Branches in the United States. (1) Before
a member state bank establishes a branch
(except within the District of Columbia), it
must obtain the approval of the Board.
(2) Before any nonmember state bank hav­
ing 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 member­
ship in the Federal Reserve System, it must
obtain the approval of the Board for the re­
tention of such branches.
(3) A member state bank located in a state
which by statute law permits the mainte­
nance 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 deposits, issuing and cash­
ing checks and drafts, and doing business
incident thereto, if no bank is located and
doing business in the place where the pro­
posed agency is to be located; and any per­
mit issued for the establishment of such an
agency shall be revoked upon the opening
of a state or national bank in the communi­
ty where the agency is located.
(4) Except as stated in paragraph (b)(3)
of this section, in order for a member state
bank to establish a branch beyond the cor­
porate limits of the city, town, or village in
which it is situated, 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 sit­
uated in the various places where such
15

§ 208.9

member state bank and its branches are
situated.8
(5) A member state bank may not estab­
lish a branch beyond the corporate limits of
the city, town, or village in which it is situ­
ated unless such establishment and opera­
tion 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.
(6) Any member state bank which, on
February 25, 1927, had established and was
actually operating a branch or branches in
conformity with the state law is permitted
to retain and operate the same while re­
maining a member of the Federal Reserve
System, regardless of the location of such
branch or branches.
(7) The removal of a branch of a member
state bank from one town to another town
constitutes the establishment of a branch in
such other town and, accordingly, requires
the approval of the Board. The removal of a
branch of a member state bank from one
location in a town to another location in the
same town will require the approval of the
Board if the circumstances of the removal
are such that the effect thereof is to consti­
tute the establishment of a new branch as
distinguished from the mere relocation of
an existing branch in the immediate neigh­
borhood without affecting the nature of its
business or customers served.
(c) Application for approval o f branches in
United States. Any member state bank desir­
ing to establish a branch should submit a re­
quest for the approval by the Board of any
such branch to the Federal Reserve Bank of
the district in which the bank is located. Any
nonmember state bank applying for member­
ship and desiring to retain any branch estab­
lished after February 25, 1927, beyond the
corporate limits of the city, town, or village in

Regulation H

which the bank is situated should submit a
similar request. Any such request should be
accompanied by advice as to the scope of the
functions and the character of the business
which are or will be performed by the branch
and detailed information regarding the policy
followed or proposed to be followed with ref­
erence 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 deter­
mining whether to approve such request.
(d) Foreign branches. With prior Board ap­
proval, a member state bank having capital
and surplus of $1,000,000 or more may estab­
lish branches in “foreign countries”, as de­
fined in section 211.2(f) of Regulation K (12
CFR 211.2(f)). If a member state bank has
established a branch in such a country, it may,
unless otherwise advised by the Board, estab­
lish other branches therein after 30 days’ no­
tice to the Board with respect to each such
branch.
(e) Application for approval o f foreign
branches. Any member state bank desiring to
establish such a branch and any nonmember
state bank applying for membership and desir­
ing to retain any such branch established after
February 25, 1927, should submit a request
for the approval by the Board of any such
branch to the Federal Reserve Bank of the
District in which the bank is located. Any
such request should be accompanied by advice
as to the scope of the functions and the char­
acter of the business which are or will be per­
formed by the branch and detailed informa­
tion 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 addi­
tional information which will be helpful to the
Board in determining whether to approve
such request.

8
The requirement of this paragraph is met if the aggre­SECTION 208.10—Publication of
gate capital stock of a member state bank having branches
Reports of Member Banks and Their
is not less than the total amount of capital stock which
Affiliates 9
would be required for the establishment of one national
bank in each of the places in which the head office and
(a) Reports o f member banks. (1) Each rebranches of the member state bank are located, irrespective
of the number of offices which the bank may have in any
such place. There are no additional capital requirements for
9 U nder the provisions of section 9 of the Federal Re­
additional branches within the city, town, or village in
serve Act, reports of condition of member state banks
which the head office is located.
Continued

16

Regulation H

port of condition made by a member state
bank to its Federal Reserve Bank pursuant
to a call therefor by the Board shall be pub­
lished by such member bank within 20 days
from the date the call is issued, unless such
time is extended by the Reserve Bank as
provided in section 265.2(f) (16) of this
chapter (Rules Regarding Delegation of
Authority).
(2) The report shall be printed in a news­
paper published in the place where the bank
is located or, if there be no newspaper pub­
lished in the place where the bank is locat­
ed, then in a newspaper published in the
same or in an adjoining county and in gen­
eral circulation in the place where the bank
is located. The term “newspaper”, for the
purpose of this Part, means a publication
with a general circulation published not less
frequently than once a week, one of the pri­
mary functions of which is the dissemina­
tion of news of general interest.
(3) The copy of the report for the use of
the printer for publication should be pre­
pared on the form supplied or authorized
for the purpose by the Federal Reserve
Bank. Except as permitted in the Instruc­
tions for preparation of reports of condition
(Form F.R. 105a), the published informa­
tion shall agree in every respect with that
shown on the face of the report of condition
submitted to the Federal Reserve Bank. All
signatures shall be the same in the pub­
lished statement as in the original report
submitted to the Federal Reserve Bank, but
the signatures may be typewritten or other­
wise copied on the report for publication.
(4) A copy of the printed report shall be
Continued
which, under that section, must be made to the respective
Federal Reserve Banks on call dates fixed by the Board of
G overnors o f the Federal Reserve System “shall be pub­
lished by the reporting banks in such manner and in ac­
cordance with such regulations as the said Board may
prescribe.”
Section 9 also provides that the reports o f affiliates of a
member state bank which are required by th at section to be
furnished to the respective Federal Reserve Banks “shall be
published by the bank under the same conditions as govern
its own condition reports” . The term “affiliates,” as used in
this provision of section 9, under the express term s of that
section, includes “holding company affiliates as well as oth­
er affiliates,” but a member state bank is not required to
furnish to a Federal Reserve Bank the report of an affiliated
member bank.

§208.10

submitted to the Federal Reserve Bank at­
tached to the certificate on the form sup­
plied or authorized for the purpose by the
Federal Reserve Bank.
(b) Report o f affiliates.10 (1) If reports of af­
filiates are requested by the Board of Gov­
ernors of the Federal Reserve System, each
report of an affiliate of a member state
bank, including a holding company affiliate,
shall be published at the same time and in
the same newspaper as the affiliated bank’s
own condition report submitted to the Fed­
eral Reserve Bank, unless an extension of
time for submission of the report of the af­
filiate has been granted under authority of
the Board of Governors of the Federal Re­
serve System. When such extension of time
has been granted, the report of the affiliate
must be submitted and published before the
expiration of such extended period in the
same newspaper as the condition report of
the bank was published.
(2) The copy of the report for the use of
the printer for publication should be pre­
pared on Form F.R. 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 Re­
serve 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 state­
ment 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

10 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 affili­
ates of member banks are required to submit to examina­
tion, the Board of Governors of the Federal Reserve Sys­
tem or the Comptroller of the Currency, as the case may
be, may waive such requirements with respect to any such
report or examination of any affiliate if in the judgm ent 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.” In any case where the
Board has waived the filing of a report of an affiliate, no
publication of a report of an affiliate is required.

17

§ 208.10

bank” shall appear in the published state­
ment followed by the word “none.” All sig­
natures shall be the same in the published
statement as in the original report submit­
ted to the Federal Reserve Bank, but the
signatures may be typewritten or otherwise
copied on the report for publication.
(3) A copy of the printed report shall be
submitted to the Federal Reserve Bank at­
tached to the certificate on Form F.R. 220a.
(c) Waiver o f reports o f affiliates. Pursuant to
section 21 of the Federal Reserve Act (12
USC 486), the Board of Governors of the
Federal Reserve System waives the require­
ment for the submission of reports of affiliates
of state bank members of the Federal Reserve
System, unless such reports are specifically re­
quested by the Board of Governors. The
Board of Governors of the Federal Reserve
System may require the submission of reports
which are necessary to disclose fully relations
between member banks and their affiliates and
the effect thereof upon the affairs of member
banks.

SECTION 208.11—Voluntary
Withdrawal from Federal Reserve
System
(a) General. Any state bank desiring to with­
draw from membership in a Federal Reserve
Bank may do so after six months’ written no­
tice has been filed with the Board;11 and the
Board, in its discretion, may waive such six
months’ notice in any individual case and may
permit such bank to withdraw from member­
ship 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.
(b) Notice o f intention o f withdrawal. (1)
Any state bank desiring to withdraw from
11 U nder specific provisions of section 9 o f the Federal
Reserve Act, however, no Federal Reserve Bank shall, ex­
cept upon express authority of the Board, cancel within the
same calendar year more than 25 percent of its capital
stock for the purpose o f effecting voluntary withdrawals
during th at year. All applications for voluntary withdraw ­
als are required by the law to be dealt with in the order in
which they are filed with the Board.

18

Regulation H

membership in a Federal Reserve Bank
should signify its intention to do so, with
the reasons therefor, in a letter addressed to
the Board and mailed to the Federal Re­
serve Bank of which such bank is a mem­
ber. 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 with­
draw and should state the reason for its de­
sire to withdraw prior to the expiration of
six months.
(2) 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 accom­
panied 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 re­
ceipt 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 Re­
serve System.
(3) Notice of intention to withdraw or ap­
plication 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 o f effecting actual with­
drawal. Upon the expiration of six months af­
ter notice of intention to withdraw or upon
the waiving of such six months’ notice by the
Board, such bank may surrender its stock and
its certificate of membership to the Federal
Reserve Bank and request that same be can­
celed and that all amounts due to it from the

Regulation H

Federal Reserve Bank be refunded.12 Unless
withdrawal is thus affected within eight
months after notice of intention to withdraw
is first given, or unless the bank requests and
the Board grants an extension of time, such
bank will be presumed to have abandoned its
intention of withdrawing from membership
and will not be permitted to withdraw without
again giving six months’ written notice or ob­
taining the waiver of such notice.
(d) Withdrawal o f 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 no­
tice should be accompanied by a certified copy
of an appropriate resolution duly adopted by
the board of directors of the bank.

SECTION 208.12— Board Forms
All forms referred to in this part and all such
forms as they may be amended from time to
time shall be a part of the regulations in this
part.

SECTION 208.13— Capital Adequacy
The standards and guidelines by which the
capital adequacy of state member banks will
be evaluated by the Board are set forth in ap­
pendix A to the Board’s Regulation Y, 12
CFR 225.
12 A bank’s w ithdrawal from membership in the Federal
Reserve System is effective on the date on which the Feder­
al 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 privi­
leges of membership, and is required to comply with all
provisions o f law and all regulations of the Board pertain­
ing to member banks and with all conditions of member­
ship applicable to it. Upon the cancellation o f such stock,
all rights and privileges of such bank as a member bank
shall terminate.
Upon the cancellation of such stock, and after due provi­
sion has been made for any indebtedness due or to become
due to the Federal Reserve Bank, such bank shall be enti­
tled to a refund of its cash paid subscription with interest at
the rate of one-half of 1 percent per m onth from the date of
last dividend, the am ount 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.

§208.15

SECTION 208.14— Procedures for
Monitoring Bank Secrecy Act
Compliance
(a) Purpose. This section in issued to ensure
that all state member banks establish and main­
tain procedures reasonably designed to ensure
and monitor their compliance with the provi­
sions of subchapter II of chapter 53 of title 31,
United States Code, the Bank Secrecy Act, and
the implementing regulations promulgated
thereunder by the Department of Treasury at
31 CFR part 103, requiring recordkeeping and
reporting of currency transactions.13*
(b) Establishment o f compliance program.
On or before April 27, 1987, each bank shall
develop and provide for the continued admin­
istration of a program reasonably designed to
ensure and monitor compliance with the rec­
ordkeeping and reporting requirements set
forth in subchapter II of chapter 53 of title 31,
United States Code, the Bank Secrecy Act,
and the implementing regulations promulgat­
ed thereunder by the Department of Treasury
at 31 CFR part 103. The compliance program
shall be reduced to writing, approved by the
board of directors, and noted in the minutes.
(c) Contents o f compliance program. The
compliance program shall, at a minimum—
(1) provide for a system of internal con­
trols to ensure ongoing compliance;
(2) provide for independent testing for
compliance to be conducted by bank per­
sonnel or by an outside party;
(3) designate an individual or individuals
responsible for coordinating and monitor­
ing day-to-day compliance; and
(4) provide training for appropriate
personnel.

SECTION 208.15— Agricultural Loan
Loss Amortization *
(a) Definitions. For purposes of this sec­
tion—
(1) “Agricultural bank” means a bank—
13 Recordkeeping requirements contained in this section
have been approved by the Board under delegated authori­
ty from the Office of M anagement and Budget under the
provisions of chapter 35 of title 44, United States Code, and
have been assigned OMB No. 7100-0196.
* Federal Deposit Insurance A ct section 13(j)(12 USC
1823( j ) ) is the statutory authority for this section.

19

§ 208.15

(i) the deposits of which are insured
by the Federal Deposit Insurance
Corporation;
(ii) which is located in an area of the
country the economy of which is depen­
dent on agriculture;
(iii) which has total
assets
of
$100,000,000 or less as of the most recent
Report of Condition; and
(iv) which has—
(A) at least 25 percent of its total
loans in qualified agricultural loans; or
(B) less than 25 percent of its total
loans in qualified agricultural loans,
but which bank the Board or the Re­
serve Bank in whose District the bank is
located or its primary state regulator has
recommended to the Federal Deposit In­
surance Corporation for eligibility under
this part.
(2) “Qualified agricultural loan” means—
(i) loans qualifying as “loans to finance
agricultural production and other loans
to farmers” or as “loans secured by farm
land” for purposes of Schedule RC-C of
the FFIEC Consolidated Report of
Condition;
(ii) other loans or leases that a bank
proves to be sufficiently related to agri­
culture for classification as an agricultur­
al loan by the Board or the Reserve Bank
in whose District the bank is located; and
(iii) the remaining unpaid balance of
any loans, as described in (i) and (ii),
that have been charged off since January
1, 1984, and that qualify for deferral un­
der this regulation.
(3) “Accepting official” means—
(i) the Reserve Bank in whose District
the bank is located; or
(ii) the director of the Division of Bank­
ing Supervision and Regulation in cases
in which the Reserve Bank cannot deter­
mine that the bank qualifies under the
regulation.
(b) Loss amortization and reappraisal.
(1) Provided that there is no evidence that
the loss resulted from fraud or criminal
abuse on the part of the bank, its officers,
directors, or principal shareholders, a bank
that has been accepted under this section

20

Regulation H

may, in the manner described below, amor­
tize in its Reports of Condition and In­
come—
(i) any loss on any qualified agricultural
loan that the bank reflected in its annual
financial statements for any year between
and including 1984 and 1991; and
(ii) any loss reflected in its financial
statements resulting from a reappraisal
or sale of currently owned property, real
or personal, that it acquired in connec­
tion with a qualified agricultural loan and
that it owned on January 1, 1983, and
any such additional property that it ac­
quires on or before December 31, 1991.
(2) Amortization under this section shall
be computed over a period not to exceed
seven years on a quarterly straight-line ba­
sis commencing in the first quarter after the
loan was or is charged off so as to be fully
amortized not later than December 31,
1998.
(c) Accounting for amortization. Any bank
which is permitted to amortize losses in ac­
cordance with paragraph (b), above, may re­
state its capital and other relevant accounts
and account for future authorized deferrals
and amortizations in accordance with the in­
structions to the FFIEC Consolidated Re­
ports of Condition and Income. Any resulting
increase in the capital account shall be includ­
ed in primary capital as per section 208.13 of
this part.
(d) Eligibility. A proposal submitted in ac­
cord with paragraph (f) shall be accepted,
subject to the conditions described in para­
graph (e), if the accepting official finds—
(1) the proposing bank is an agricultural
bank;
(2) the proposing bank’s current capital is
in need of restoration, but the bank remains
an economically viable, fundamentally
sound institution;
(3) there is no evidence that fraud or crim­
inal abuse by the bank or its officers, direc­
tors, or principal shareholders led to signifi­
cant losses on qualified agricultural loans
and related assets; and
(4) the proposing bank has submitted a
capital plan approved by the accepting offi­

Regulation H

cial that will restore its capital to an accept­
able level.
(e) Conditions on acceptance. All acceptances
of proposals shall be subject to the following
conditions:
(1) the bank shall fully adhere to the ap­
proved capital plan and shall obtain the pri­
or approval of the accepting official for any
modifications to the plan;
(2) with respect to each asset subject to
loss deferral under the program, the bank
shall maintain accounting records adequate
to document the amount and timing of the
deferrals, repayments and amortizations;
(3) the financial condition of the bank
shall not deteriorate to the point where it is
no longer a viable, fundamentally sound
institution;
(4) the bank agrees to make a reasonable
effort, consistent with safe and sound bank­
ing practices, to maintain in its loan portfo­
lio a percentage of agricultural loans not
lower than the percentage of such loans in
its loan portfolio on January 1, 1986; and
(5) the bank shall agree to provide the ac­
cepting official, upon request, with such in­
formation as the accepting official deems
necessary to monitor the bank’s amortiza­
tion, its compliance with conditions, and its
continued eligibility.
(f) Submission o f proposals.
(1) A bank wishing to amortize losses on
qualified agricultural loans or other related
assets shall submit a proposal to the appro­
priate accepting official.
(2) The proposal shall contain the follow­
ing information:
(i) name and address of the bank;
(ii) information establishing that the
bank is located in an area the economy of
which is dependent on agriculture; the in­
formation could consist of a description
of the bank’s location, dominant lines of
commerce in its service area, and any
other information the bank believes will
support the contention that it is located
in such an area.
(iii) a copy of the bank’s most recent
Report of Condition and Income;

§208.15

(iv) if the Report of Condition and In­
come fails to show that at least 25 per­
cent of the bank’s total loans are qualified
agricultural loans, the basis upon which
the bank believes that it should be de­
clared eligible to amortize losses;
(v) a capital plan demonstrating that
the bank will achieve an acceptable capi­
tal level not later than the end of the
bank’s amortization period. The plan
should provide for a realistic improve­
ment in the bank’s capital, over the
course of the amortization period, from
earnings retention, capital injections, or
other sources; and include specific infor­
mation regarding dividend levels, com­
pensation to directors, executive officers
and individuals who have a controlling
interest and in turn to their related inter­
ests, and payments for services or prod­
ucts furnished by affiliated companies.
(vi) a list of the loans and reappraised
property upon which the bank proposes
to defer loss, including for each such loan
or property the following information:
(A) the name of the borrower, the
amount of the loan that resulted in the
loss, and the amount of the loss;
(B) the date on which the loss was
declared;
(C) the basis upon which the loss re­
sulted from a qualified agricultural
loan;
(vii) a certification by the bank’s chief
executive officer that there is no evidence
that the losses resulted from fraud or
criminal abuse by the bank, its officers,
directors, or principal shareholders;
(viii) a copy of a resolution by the
bank’s Board of Directors authorizing
submission of the proposal; and
(ix) such other information as the ac­
cepting official may require.
(g) Revocation o f eligibility. The failure to
comply with any condition in an acceptance
or with the capital restoration plan is grounds
for revocation of acceptance for loss amortiza­
tion and for an administrative action against
the bank under 12 USC 1818(b). Additional­
ly, acceptance of a bank for loss amortization
will not foreclose any administrative action
21

§208.15

gainst the bank that the Board may deem
appropriate.

S E C T IO N 208.16— Reporting
Requirements for State Member Banks
Subject to the Securities Exchange A ct of
1934

(a) Filing requirements. Except as otherwise
provided in this section, a state member bank
the securities of which are subject to registra­
tion pursuant to section 12(b) or section
12(g) of the Securities Exchange Act of 1934
(the “1934 act”) (15 USC 787(b) and (g))
shall comply with the rules, regulations and
forms adopted by the Securities and Exchange
Commission (“Commission”) pursuant to
sections 12, 13, 14(a), 14(c), 14(d), 14(f)
and 16 of the 1934 Act (15 USC 78/, 78m,
78n(a), (c), (d), (f) and 78p). The term
“Commission” as used in those rules and reg­
ulations shall with respect to securities issued
by state member banks be deemed to refer to
the Board unless the context otherwise
requires.
(b) Elections permitted o f state member
banks with total assets o f $150 million or less.
(1) Notwithstanding paragraph (a) of this
section or the rules and regulations promul­
gated by the Commission pursuant to the
1934 act, a state member bank that has to­
tal assets of $150 million or less as of the
end of its most recent fiscal year and no
foreign offices may elect to substitute for
the financial statements required by the
Commission’s Form 10-Q the balance sheet
and income statement from the quarterly
report of condition required to be filed by
such bank with the Board under section 9
of the Federal Reserve Act (12 USC 324)
(Federal Financial Institutions Examina­
tion Council Forms 033 or 034).
(2) A state member bank may not elect to
file financial statements from its quarterly
report of condition pursuant to paragraph
(1) if the amounts reported for net income,
total assets or total equity capital in those
statements, which are prepared on the basis
of federal bank regulatory reporting stan­
dards, would differ materially from such
amounts reported in financial statements

22

Regulation H

prepared in accordance with generally ac­
cepted accounting principles (GAAP).
( 3) A state member bank qualifying for and
electing to file financial statements from its
quarterly report of condition pursuant to par­
agraph (1) in its Form 10-Q shall include
earnings per share or net loss per share data
prepared in accordance with GAAP and dis­
close any material contingencies as required
by article 10 of the Commission’s Regulation
S-X (15 CFR 210.10-01), in the Manage­
ment’s Discussion and Analysis of Financial
Condition and Results of Operations section
of Form 10-Q.
(c) Filing instructions, inspection o f docu­
ments, and nondisclosure o f certain informa­
tion filed.
(1) All papers required to be filed with the
Board pursuant to the 1934 act or regulations
thereunder shall be submitted to the Division
of Banking Supervision and Regulation,
Board of Governors of the Federal Reserve
System, 20th Street and Constitution Ave­
nue, N.W., Washington, D.C. 20551. Mate­
rial may be filed by delivery to the Board,
through the mails, or otherwise. The date on
which papers are actually received by the
Board shall be the date of filing thereof if all
of the requirements with respect to the filing
have been complied with.
(2) No filing fees specified by the Commis­
sion’s rules shall be paid to the Board.
(3) Copies of the registration statement,
definitive proxy solicitation materials, re­
ports and annual reports to shareholders re­
quired by this section (exclusive of exhib­
its) will be available for public inspection at
the Board’s offices in Washington, D.C., as
well as at the Federal Reserve Banks of
New York, Chicago, and San Francisco and
at the Reserve Bank in the District in which
the reporting bank is located.
(4) Any person filing any statement, re­
port, or document under the 1934 act may
make written objection to the public disclo­
sure of any information contained therein
in accordance with the procedure set forth
below:
(i) The person shall omit from the state­
ment, report, or document, when it is
filed, the portion thereof that the person

Regulation H

desires to keep undisclosed (hereinafter
called the confidential portion). The per­
son shall indicate at the appropriate place
in the statement, report, or document
that the confidential portion has been so
omitted and filed separately with the
Board.
(ii) The person shall file with the copies
of the statement, report, or document
filed with the Board—
(A) as many copies of the confidential
portion, each clearly marked “CON­
FIDENTIAL TREATMENT”, as
there are copies of the statement, re­
port, or document filed with the
Board. Each copy of the confidential
portion shall contain the complete text
of the item and, notwithstanding that
the confidential portion does not con­
stitute the whole of the answer, the en­
tire answer thereto; except that in case
the confidential portion is part of a fi­
nancial statement or schedule, only the
particular financial statement or sched­
ule need be included. All copies of the
confidential portion shall be in the
same form as the remainder of the
statement, report, or document; and
(B) an application making objection
to the disclosure of the confidential
portion. Such application shall be on a
sheet or sheets separate from the confi­
dential portion, and shall (1) identify
the portion of the statement, report, or
document that has been omitted, (2)
include a statement of the grounds of
objection, and (3) include the name of
each exchange, if any, with which the
statement, report, or document is filed.
The copies of the confidential portion
and the application filed in accordance
with this subparagraph shall be en­
closed in a separate envelope marked
“CONFIDENTIAL TREATMENT”
and addressed to Secretary, Board of
Governors of the Federal Reserve Sys­
tem, Washington, D.C. 20551.
(iii) Pending the determination by the
Board on the objection filed in accord­
ance with this paragraph, the confidential
portion will not be disclosed by the
Board.

Appendix A

(iv) If the Board determines that the ob­
jection shall be sustained, a notation to
that effect will be made at the appropri­
ate place in the statement, report, or
document.
(v) If the Board determines that the ob­
jection shall not be sustained because dis­
closure of the confidential portion is in
the public interest, a finding and determi­
nation to that effect will be entered and
notice of the finding and determination
will be sent by registered or certified mail
to the person.
(vi) If the Board determines that the ob­
jection shall not be sustained pursuant to
paragraph (c)(4 )(v ), the confidential
portion shall be made available to the
public—
(A) 15 days after notice of the
Board’s determination not to sustain
the objection has been given as re­
quired by paragraph (c) (4) (v) of this
section, provided that the person filing
the objection has not previously filed
with the Board a written statement
that he intends in good faith to seek
judicial review of the finding and
determination;
(B) 60 days after notice of the
Board’s determination not to sustain
the objection has been given as re­
quired by paragraph (c) (4) (v) of this
section and the person filing the objec­
tion has filed with the Board a written
statement that he intends to seek judi­
cial review of the finding and determi­
nation but has failed to file a petition
for judicial review of the Board’s deter­
mination; or
(C) upon final judicial determination,
if adverse to the party filing the
objection.
(vii) If the confidential portion is made
available to the public, a copy thereof
shall be attached to each copy of the
statement, report, or document filed with
the Board.

A P P E N D IX A — Sample Notices

(1) Notice to borrower o f special flood haz­
ards. Notice is hereby given t o _______ that
23

Appendix A

the improved real estate or mobile home de­
scribed in the attached instrument is or will be
located in an area designated by the secretary
of the Department of Housing and Urban De­
velopment as an area having special flood haz­
ards. This area is delineated on _______ ’s
Flood Insurance Rate Map ( “FIRM”) or, if
the FIRM is unavailable, on the community’s
Flood Hazard Boundary Map (“FHBM”).
This area has a 1 percent chance of being
flooded within any given year. The risk of ex­
ceeding the 1 percent chance increases with
time periods longer than 1 year. For example,
during the life of a 30-year mortgage, a struc­
ture located in a special flood-hazardous area
has a 26 percent chance of being flooded.
(2) Notice to borrower about federal disaster
relief assistance, (a) Notice in participating
communities. The improved real estate or
mobile home securing your loan is or will
be located in a community that is now par­
ticipating in the National Flood Insurance
program. In the event such property is
damaged by flooding in a federally declared
disaster, federal disaster relief assistance
may be available. However, such assistance
will be unavailable if your community has

24

Regulation H

been identified as a special flood-hazardous
area for one year or longer and is not par­
ticipating in the National Flood Insurance
program at the time assistance would be ap­
proved. This assistance, usually in the form
of a loan with a favorable interest rate, may
be available for damages incurred in excess
of your flood insurance.
(b) Notice in nonparticipating communi­
ties. The improved real estate or mobile
home securing your loan is or will be locat­
ed in a community that is not participating
in the National Flood Insurance program.
This means that such property is not eligi­
ble for federal flood insurance. In the event
such property is damaged by flooding in a
federally declared disaster, federal disaster
relief assistance will be unavailable if your
community has been identified as a special
flood-hazardous area for one year or longer.
Such assistance may be available only if at
the time assistance would be approved your
community is participating in the National
Flood Insurance program or has been iden­
tified as a special flood-hazardous area for
less than one year.