Full text of Federal Reserve Bulletin : January 1969

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.


















































































28

FEDERAL RESERVE BULLETIN • JANUARY

complete these discussions and study the
information gained very carefully before I
make any recommendations to the Board as
to whether the program should be continued
in its present form or modified in some
way.
•

APPENDIX
A Progress Report on the Federal Reserve
Foreign Credit Restraint Programs
THE PROGRAM FOR BANKS, 1965-69

In February 1965 the President requested the voluntary cooperation of U.S. financial institutions and
nonfinancial corporations in solving the problem of
the persistent deficit in the U.S. balance of payments. The Board of Governors was asked to administer a program for financial institutions, and on
March 3, 1965, issued guidelines for banks and
nonbank financial institutions.
The major objective of the program for banks
was to reduce, but not to eliminate, the banks'
foreign lending. This was to be done without endangering other important national objectives, such
as the financing of exports of U.S. goods and services, and meeting the credit needs of the developing countries.
The guidelines issued on March 3, 1965, requested the banks to hold loans and other foreign
assets covered by the program to 105 per cent of
the amount of credits outstanding on the base date
of December 31, 1964. Since the amount of
"covered" assets approximated $10 billion, this formula would have permitted an increase of about
$500 million in 1965.
While the program applied to all banks, only
banks with total foreign assets of $500,000 or more
were requested to report to the Federal Reserve
Banks. The number of reporting banks has varied
closely around 150 since the beginning of the program.
During 1965 the reporting banks increased their
holdings of covered assets by $168 million, as
compared with an increase in total foreign assets
of $2.5 billion in 1964. At the end of the year, the




1969

banks were $321 million below the target ceiling
effective on that date.
In December 1965 the Board announced revised
guidelines for banks for 1966 that increased the
target ceiling to 109 per cent of the end of 1964
base, or by about $430 million. The room for additional expansion, the Board said, was allowed because the Board believed that the additional leeway
would be used only to meet priority credit requirements and because it wished to make certain that
such requirements could be met. Because the additional leeway was added to an existing leeway of
more than $300 million, the Board requested that
the banks use the additional ceiling provided at a
rate of not more than 1 per cent of the base figures
per quarter during 1966; that is, the target ceiling
was set at 106, 107, 108, and 109 per cent by
quarters.
The guidelines for 1966 also contained the first
provisions to reduce the inequities inherent in a
program that is based upon a particular point in
time. Banks with bases between $500,000 and $5
million were permitted to adopt ceilings of base
plus $450,000 ($225,000 in each calendar halfyear) even though in most cases that amount exceeded 109 per cent of their end of 1964 base.
Bank holdings of covered assets declined by $156
million during 1966, bringing the total down to
about the amount outstanding on the base date.
The leeway available on December 31, 1966, was
$911 million.
The bank program for 1967, announced in December 1966, was essentially unchanged from the
1966 program. The ceiling remained at 109 per
cent of the December 1964 base. Since the banks
had a large leeway available at the time the program was announced ($1.2 billion as of October
31, 1966), the banks again were asked to phase any
increase in their foreign lending during 1967, this
time at a rate of not more than 20 per cent of the
leeway on October 31, 1967, in each quarter, cumulative, beginning with the fourth quarter of 1966.
The provision for banks with small bases was
modified by raising the maximum base for these
"special" ceilings to $10 million, and the amount
of the ceiling to base plus $900,000.
The first step in the direction of a geographical
focus, other than the priority for developing countries, was taken in 1967 when the banks were asked
to use no more than 10 per cent of their available
leeway to increase nonexport credits to developed

STATEMENT TO CONGRESS

countries. The related reporting requirement was
dropped on February 2, 1967, because the banks
found it difficult to identify export credits, particularly in the short maturities. However, the banks
were asked to continue to conform as closely as
possible to the spirit of the request.
Bank foreign assets covered by the program increased by $370 million in 1967, but the banks
ended the year with a net leeway for further expansion of $1.2 billion, half of which reflected an
increase in the ceiling under the revised guidelines
for 1968 described below.
Revised guidelines for banks for 1968 were issued by the Board in November 1967, to be effective as of the date of issue. The ceiling was in
general retained at 109 per cent of the end of 1964
base. However, in a major move to overcome the
inequitable effects of the program already referred
to, the guidelines provided that banks whose foreign
assets on October 31, 1967, were $500,000 or more
could take as a ceiling for 1968 their 1967 ceilings
or 2 per cent of total assets as of December 31,
1966, whichever figure was larger. The amount by
which the ceiling calculated on this basis exceeded
the 1967 ceiling was to be used only for priority
credits.
This provision added about $600 million to the
aggregate ceiling. Again, the size of the leeway
available led to a request by the Board that any
expansion of foreign lending during the last quarter
of 1967 and in 1968 be limited to not more than
20 per cent of the leeway, cumulative, in each
calendar quarter, beginning with the fourth quarter
of 1967.
The geographical emphasis introduced into the
1967 program was given sharper focus by a provision in the guidelines which requested that banks
not increase nonexport credits to developed countries of continental Western Europe above the
amount outstanding on October 31, 1967. These
countries were singled out because to a large extent
their balance of payments surpluses corresponded
to our deficit, and because they were in the best
position to meet their own credit needs.
A reappraisal of the U.S. balance of payments
results for 1967 in December of that year led to
the announcement by the President on January 1,
1968, of a more restrictive balance of payments
program. The bank program announced in November 1967 was replaced by revised guidelines
which for the first time requested an outright re-




29
duction in the level of foreign assets outstanding
(in the amount of $400 million) as compared with
the earlier objective of restraining the rate of increase in such assets. The reduction was accomplished by reducing the ceiling to 103 per cent of
the end of 1964 base or, for banks electing the "2
per cent" calculation, to the 1967 ceiling plus onethird of the difference between that amount and
2 per cent of total assets as of December 31, 1966.
As was true in the earlier guidelines for 1968, any
amount over the 1967 ceiling was to be used only
for priority credits. These measures immediately
reduced the ceiling for 1968 by $960 million.
The guidelines provided that the ceiling would be
further reduced during 1968 by measures relating
to bank foreign lending to developed countries of
continental Western Europe. The banks were requested to make no new term loans to those countries (including renewals of term loans outstanding)
except to finance U.S. exports, and to reduce their
ceilings on each reporting date by the amount of
repayments received during the preceding month
of such loans outstanding on December 31, 1967.
The banks also were asked to reduce their ceilings
over the year by 40 per cent of the amount of
short-term credits to developed countries of continental Western Europe outstanding on December
31, 1967. The reduction in the ceiling was to take
place at 10 percentage points in each quarter; the
banks were expected to reduce their short-term
credits outstanding to those countries at about the
same rate.
There was one major change in the January 1,
1968, guidelines during the year. On March 1,
1968, because of a difficult financial situation that
had developed in that country early in the year,
Canada was exempted from all of the U.S. balance
of payments programs. Changes in foreign assets
held by financial institutions in Canada after February 29, 1968, were excluded from the target
ceilings.
There are data on the performance of the reporting banks under the January 1, 1968, guidelines
only through November 30, 1968. On that date the
banks had reduced their holdings of covered assets
by $673 million below the level outstanding on
December 31, 1967, or by $273 million more than
the objective for the year. The banks on November
30, 1968, actually were $300 million below the
1964 base figure and had a net leeway for further
expansion of $581 million.











































44

FEDERAL RESERVE BULLETIN • JANUARY 1969

of March 14 was that with the Bank of Italy, for which negotiations looking toward an increase of up to $250 million equivalent
had been authorized. Recently these negotiations had been successfully completed, and on the day of this meeting Chairman
Martin determined that an increase in the swap arrangement with
the Bank of Italy from $750 million to $1 billion equivalent was
in the national interest. Accordingly, the corresponding amendment to paragraph 2 of the authorization for System foreign currency operations became effective on October 8, 1968.




Law Department
Administrative interpretations, new regulations, and similar material

REGULATION P: MINIMUM SECURITY DEVICES
AND PROCEDURES FOR FEDERAL RESERVE
BANKS AND STATE MEMBER BANKS

Pursuant to authority conferred by the Bank
Protection Act of 1968 (82 Stat. 294), the Board
of Governors has issued a new Regulation P, effective January 13, 1969. The regulation implements
the Act with respect to Federal Reserve Banks and
State-chartered banks that are members of the Federal Reserve System. It (1) provides minimum

standards for security devices and procedures both
to discourage robberies, burglaries and larcenies
involving financial institutions and to facilitate the
identification and apprehension of persons who
commit such crimes; (2) establishes time limits for
compliance and procedures for reporting on compliance; and (3) assures flexibility in application of
such standards to accommodate differing circumstances of individual banking offices. The text of
the regulation is as follows:

MINIMUM SECURITY DEVICES AND PROCEDURES
FOR FEDERAL RESERVE BANKS AND STATE MEMBER BANKS*
SECTION 216.0—SCOPE OF PART
Pursuant to the authority conferred upon the
Board of Governors of the Federal Reserve System
by section 3 of the Bank Protection Act of 1968
(82 Stat. 295) with respect to State banks which
are members of the Federal Reserve System and
to Federal Reserve Banks * the rules contained in
this Part—
(a) establish minimum standards for the installation, maintenance, and operation of security devices and procedures to discourage robberies,
burglaries, and larcenies and to assist in the identification and apprehension of persons who commit
such acts;
(b) establish time limits for compliance; and
(c) require the submission of reports.
SECTION 216.1—DEFINITIONS
For the purposes of this Part—
(a) The term "State member bank" means any
bank that is a member of the Federal Reserve System (other than a national bank or a District of
Columbia bank).
(b) The term "banking hours" means the time
during which a banking office is open for the normal transaction of business with the banking
public.
* This text corresponds to the Code of Federal Regulations, Title 12, Chapter II, Part 216, cited as 12 CFR 216.
The words "this Part," as used herein, mean Regulation P.
1
See section 216.7 regarding the applicability of this
Part to Federal Reserve Banks.




(c) The term "banking office" includes the main
office of any State member bank and any branch
thereof.
(d) The term "branch" includes any branch
bank, branch office, branch agency, additional office, or any branch place of business located in any
State of the United States or in any Territory of
the United States, Puerto Rico, Guam, or the Virgin Islands at which deposits are received or checks
paid or money lent.
(e) The term "Board" means the Board of
Governors of the Federal Reserve System.
(f) The term "teller's station or window" means
a location in a banking office at which bank customers routinely conduct transactions with the
bank which involve the exchange of funds, including a walk-up or drive-in teller's station or window.
SECTION 216.2—DESIGNATION OF
SECURITY OFFICER
On or before February 15, 1969 (or within
thirty days after a State bank becomes a member
of the Federal Reserve System, whichever is later),
the board of directors of each State member bank
shall designate an officer or other employee of the
bank who shall be charged, subject to supervision
by the bank's board of directors, with responsibility
for the installation, maintenance, and operation of
security devices and for the development and administration of a security program which equal or
exceed the standards prescribed by this Part.

45








































59

LAW DEPARTMENT

cept that a bank may establish a branch in any
town that has no banking office. The possibility is
remote that competition between Applicant's present subsidiaries and Bank would occur as a result
of either Applicant's present subsidiaries establishing a branch in Aroostook County, since all towns
in the County sufficiently populous to support a
banking office have such an office.
The proposed transaction would not result in a
monopoly or be in furtherance of any combination,
conspiracy or attempt to monopolize the business
of banking in any relevant area. Approval of the
application and consummation of the proposal
would not substantially lessen competition, tend to
create a monopoly, or restrain trade in any section
of the country.
Financial and managerial resources and future
prospects. The financial condition of Applicant and
its subsidiary banks is satisfactory, and the prospects of each appear favorable. Applicant's management is regarded as experienced and competent,
as is that of its subsidiary banks.
Bank's condition is also regarded as satisfactory,
as is its management, and its prospects are favorable; thus, considerations relating to the banking
factors are consistent with approval of the application.
Convenience and needs of the communities involved. Consummation of the proposed transaction
would have no effect on customers of Applicant's
present subsidiaries. Nor does it appear that any
major banking service in the area served by Bank
is not being provided by the banks located in and
near that area. However, Applicant has indicated
that it intends to make Bank a more convenient alternative source for a complete line of banking
services by providing investment management and
data processing services, improving the lending
ability of Bank through loan participations with
Applicant's other subsidiaries, and providing specialized advice with regard to trust services.
Considerations under this factor lend some
weight toward approval of the application.
Summary and conclusion. On the basis of all
relevant facts contained in the record, and in light
of the factors set forth in section 3(c) of the Act,
it is the Board's judgment that the proposed transaction would be in the public interest and that the
application should be approved.




CHARTER BANKSHARES CORPORATION,
JACKSONVILLE, FLORIDA
In the matter of the application of Charter
Bankshares Corporation, Jacksonville, Florida, for
approval of acquisition of 80 per cent or more of
the voting shares of First National Bank in Milton,
Milton, Florida.
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT

There has come before the Board of Governors,
pursuant to section 3(a) (3) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(a)(3)),
and section 222.3 (a) of Federal Reserve Regulation Y (12 CFR 222.3(a)), an application by
Charter Bankshares Corporation, Jacksonville, Florida, a registered bank holding company, for the
Board's prior approval of the acquisition of 80 per
cent or more of the voting shares of the First National Bank in Milton, Milton, Florida.
As required by section 3(b) of the Act, the
Board notified the Comptroller of the Currency of
the application and requested his views and recommendation. The Comptroller recommended approval of the application.
The present application was originally filed under
the name of Commercial Associates, Inc. As part of
a corporate reorganization which occurred during
the pendency of the application, the name of the
applicant was changed to Charter Bankshares Corporation. Notice of receipt of the application was
published in the Federal Register on August 1,
1967 (32 Federal Register 11185), providing an
opportunity for interested persons to submit comments and views with respect to the proposed
transaction. A copy of the application was forwarded to the United States Department of Justice
for its consideration. Time for filing comments and
views has expired and all those received have been
considered by the Board.
IT IS HEREBY ORDERED, for the reasons set forth
in the Board's Statement of this date, that said application be and hereby is approved, provided that
the application so approved shall not be consummated (a) before the thirtieth calendar day following the date of this Order or (b) later than
three months after the date of this Order unless
such period is extended for good cause by the
Board or by the Federal Reserve Bank of Atlanta
pursuant to delegated authority.

FEDERAL RESERVE BULLETIN n JANUARY

60

Dated at Washington, D.C., this 18th day of
December, 1968.
By order of the Board of Governors.
Voting for this action: Chairman Martin and Governors Robertson, Mitchell, Maisel, and Sherrill. Absent
and not voting: Governors Daane and Brimmer.
(Signed) ROBERT P. FORRESTAL,

Assistant Secretary.
[SEAL]
STATEMENT

Charter Bankshares Corporation, Jacksonville,
Florida ("Applicant"), a registered bank holding
company, has applied to the Board of Governors,
pursuant to section 3 ( a ) ( 3 ) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1 8 4 2 ( a ) ( 3 ) ) ,
for prior approval of the acquisition of 80 per cent
or more of the voting shares of First National Bank
in Milton, Milton, Florida ("Milton Bank").
Views and recommendation of supervisory authority. As required by section 3(b) of the Act,
the Board notified the Comptroller of the Currency
of receipt of the application and requested his
views and recommendation thereon. The Comptroller recommended approval of the application.
Statutory considerations. Section 3(c) of the Act
provides that the Board shall not approve an acquisition that would result in a monopoly or would
be in furtherance of any combination or conspiracy
to monopolize the business of banking in any part
of the United States. Nor may the Board approve
a proposed acquisition the effect of which, in any
section of the country, may be substantially to lessen competition, or to tend to create a monopoly,
or which in any other manner would be in restraint
of trade, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable
effect of the transaction in meeting the convenience
and needs of the community to be served. Tn each
case, the Board is required to take into consideration the financial and managerial resources and future prospects of the bank holding company and
the banks concerned, and the convenience and
needs of the community to be served.
Competitive effect of the proposed transaction.
Applicant, the smallest bank holding company in
Florida, controls deposits of about $17 million,
representing .18 per cent of the total deposits in
the State.1 Upon completion of the acquisition
1
Unless otherwise noted, all banking data are as of
December 30, 1967.




1969

proposed, Applicant would control .27 per cent of
the total deposits in the State and would remain
the smallest bank holding company in Florida.
Consummation of the proposal would not significantly affect the present degree of State-wide concentration.
Milton Bank, which has deposits of $9.5 million,
is located in Milton, Santa Rosa County, and primarily serves that city. Santa Rosa State Bank,
with deposits of $7 million, is the only other bank
in Milton, and is a capable competitor of Milton
Bank.
Applicant's present subsidiary banks, Commercial National Bank of Pensacola, Escambia County
($13.3 million deposits), and Bank of Gulf Breeze,
Santa Rosa County ($3.6 million deposits), are
located 24 miles and 30 miles, respectively, from
Milton Bank. Although consummation of the proposed acquisition will give Applicant a second subsidiary bank in Santa Rosa County and will result
in its controlling a large percentage of commercial
bank deposits in the County, that circumstance is
of limited significance in view of the locational factors which separate the trade areas served by Bank
of Gulf Breeze and Milton Bank. The most convenient route between Gulf Breeze and Milton is
through Pensacola, and the Pensacola Bay, which
separates Gulf Breeze from Pensacola, serves as an
additional barrier to travel between the two sections of the County. In the Pensacola Standard
Metropolitan Statistical Area, which encompasses
the areas served by all three banks, Applicant's
share of deposits held by 13 banks would increase
from 10.3 per cent to 16.1 per cent.
It does not appear that any significant competition exists between Milton Bank and either of
the subsidiary banks, due to their respective sizes
and the distances and natural barriers which separate them. These same considerations, plus a State
law prohibition of branching, similarly limit the
possibility that such competition might develop in
the future. Finally, it is reasonably foreseen that
the acquisition proposed will increase the competitive ability of the acquired bank, without adversely
affecting the viability or competitive effectiveness
of competing banks.
In the light of these facts, the Board concludes
that consummation of the proposed acquisition
would not result in a monopoly or be in furtherance of any combination, conspiracy, or attempt to
monopolize the business of banking in any area.

LAW DEPARTMENT

It does not appear that consummation of the proposal would have the effect of substantially lessening
competition or tending to create a monopoly in any
section of the country, or would in any manner be
in restraint of trade.
Financial and managerial resources and future
prospects. The management and prospects of Applicant, its present subsidiaries, and Milton Bank
are considered satisfactory. Capital of both Milton
Bank and Commercial National Bank of Pensacola
is somewhat low in relation to the deposits of the
banks, and Applicant proposes to increase the capital of both by amounts which appear sufficient to
meet present needs. Based on that proposal, the
Board finds the financial condition of Applicant,
its present subsidiaries, and Milton Bank to be reasonably satisfactory.
Considerations under this factor are consistent
with approval of the application, and, insofar as
the proposed acquisition is a step in strengthening
the resources and overall operations of both Milton
Bank and Applicant, lend some weight in favor
thereof.
Convenience and needs of the communities involved. Consummation of Applicant's proposal
would not affect the convenience or needs of the
communities served by its present subsidiaries.
The banking needs of the Milton community
appear to be reasonably well served by the two
commercial banks located there, except with respect
to trust services. Milton Bank has an inactive trust
department and Santa Rosa State Bank has none.
Applicant plans to provide fiduciary services as they
are needed by employing a trust officer whose services would be shared by the subsidiary banks as
required. The proposed affiliation could also facilitate loan participations between Milton Bank and
Applicant's present subsidiaries, thus enhancing
Milton Bank's ability to serve the credit needs of
its locality.
These considerations are consistent with, and
provide some additional weight in favor of, approval of the application.
Summary and conclusion. On the basis of all
relevant facts contained in the record, and in the
light of the factors set forth in section 3(c) of the
Act, it is the Board's judgment that the proposed
transaction would be in the public interest and that
the application should be approved.




61
FIRST BANK SYSTEM, INC., MINNEAPOLIS,
MINNESOTA
In the matter of the application of First Bank
System, Inc., Minneapolis, Minnesota, for approval
of acquisition of all of the voting shares (less directors' qualifying shares) of First Plymouth National Bank, Minneapolis, Minnesota, a proposed
new bank.
ORDER APPROVING APPLICATION UNDER BANK
HOLDING COMPANY ACT

There has come before the Board of Governors,
pursuant to section 3(a)(3) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(a)(3))
and section 222.3(a) of Federal Reserve Regulation Y (12 CFR 222.3(a)), an application by First
Bank System, Inc., Minneapolis, Minnesota, for
the Board's prior approval of the acquisition of all
of the voting shares (less directors' qualifying
shares) of First Plymouth National Bank, Minneapolis, Minnesota, a proposed new bank.
As required by section 3(b) of the Act, the
Board gave written notice of receipt of the application to the Comptroller of the Currency and
requested his views and recommendations. The
Acting Comptroller recommended approval of the
application.
Notice of receipt of the application was published in the Federal Register on May 21, 1968
(33 Federal Register 7505), providing an opportunity for interested persons to submit comments
and views with respect to the proposed acquisition.
A copy of the application was forwarded to the
United States Department of Justice for its consideration. Time for filing comments and views has
expired and all those received have been considered
by the Board.
IT IS HEREBY ORDERED, for the reasons set forth
in the Board's Statement of this date, that said
application be and hereby is approved, provided
that the action so approved shall not be consummated (a) before the thirtieth calendar day following the date of this Order or (b) later than
three months after the date of this Order unless
such time shall be extended by the Board, or by
the Federal Reserve Bank of Minnapolis pursuant
to delegated authority; and provided further that
the First Plymouth National Bank shall be opened
for business not later than six months after the
date of this Order.