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Minutes for
To:
Members of the Board
From:
Office Of the Secretary
August 29, 1963
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
you were not present, your initials will indicate
only that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
2951
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, August 29, 1963.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Mr. Kenyon, Assistant Secretary
Mr. Fauver, Assistant to the Board
Mr. Farrell, Director, Division of
Bank Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Furth, Adviser, Division of
International Finance
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Young, Senior Attorney, Legal Division
Mr. Doyle, Attorney, Legal Division
Circulated or distributed items.
of
The following items, copies
which are attached to these minutes under the respective item
rluzbers indicated, were approved unanimously:
Item No.
utter to Manufacturers Hanover International Banking
t°rPoration, New York, New York, granting permission
r° Purchase shares of the National Investment Bank
Or Industrial Development, Athens, Greece.
1
Lett-er to The North Jersey Trust Company, Ridgewood,
2
, Jersey, approving the establishment of a branch
a
15 West Ridgewood Avenue.
t
8/29/63
-2Item No.
Letter to Gary-Wheaton Bank, Wheaton, Illinois,
interposing no objection to an investment in
bank premises.
3
Letter to Southern Commercial and Savings Bank,
'Louis, Missouri, granting an extension of
'Ime to accomplish withdrawal from membership
in the Federal Reserve System.
4
Letter to the Comptroller of the Currency with
regard to the recently adopted revision of
Regulation M, Foreign Branches of National Banks.
5
Report on competitive factors (Birmingham, Alabama).
There
bad been distributed a draft of report to the Comptroller of the Currency on the competitive factors involved in the proposed consolidation
the Bank for Savings and Trusts with the Birmingham Trust National
13411k, both of Birmingham, Alabama.
After discussion, which resulted in agreement on a minor change
ln the conclusion, the report was approved unanimously for transmittal
to the Comptroller in a form in which the conclusion read as follows:
A consolidation of Birmingham Trust National Bank and
Bank for Savings and Trusts, both of Birmingham, Alabama,
would eliminate substantial existing and potential competition.
Furthermore, this consolidation of the second and fourth
largest banks in Birmingham would add significantly to an
in
already high degree of concentration of banking resources
now
city,
the
combined,
in
banks
largest
the area. The two
hold 81 per cent of IPC deposits and 74 per cent of banking
Offices in the Birmingham trade area which would be increased
to 88 per cent and 76 per cent, respectively, following the
consolidation. Following the transaction the third largest
bank in Birmingham, and the only other sizable commercial
bank in Birmingham, would be exposed to intensified competition. On balance, the effect of the proposed consolidation
on competition would be substantially adverse.
2953
8/29/63
-3Reclassification of member banks in Second District (Item No. 6).
In a letter dated August 2, 1963, the Federal Reserve Bank of New York
recommended a reclassification of member banks in the Second District
for the purpose of electing Class A and Class B directors.
The existing
classification had been established by the Board on June 24, 1960;
8ince then the number of banks in the District had declined 11 per
cent while the total capitalization had increased 15 per cent.
The
Ilew York Reserve Bank noted that with the continuing trend toward
Increased capitalization, a number of banks outside New York City
had moved into the Group 1 classification and the New York City banks
4°14 constituted less than a majority of this group.
that if the Group 1 banks continued to elect as a
It was maintained
Class A director
all officer of one of the large New York City banks, as had been the
e4se in the past, a number of highly qualified officers of banks
°Iltside New York City would be deprived of an opportunity to serve
48 directors of the Reserve Bank.
The proposed reclassification would
ril°11e seven banks from Group 1 to Group 2, and 31 banks from Group 2 to
Gl'°1113 3.
In recommending a reclassification this year, the Reserve
tahl,
--A. was following a policy of making such recommendations in the year
he4 the Group 3 banks of the District vote, in order to insure to all
tileraber banks the privilege of voting for directors once in three years.
It the reclassification was not established prior to the election by
tlie Group 3 banks this year, the Reserve Bank would not wish to recommend
1-.e.zsification until 1966.
2954
-4-
8/29/63
The letter had been circulated to the Board with a memorandum
from the Division of Bank Operations dated August 12, 1963, to which
vaS attached a draft of a letter that might be used if the Board
ndation of the Reserve Bank.
ciecided to act in accordance with the recomme
commented that the recommendaIn discussion, Governor Robertson
fact that the Group 1
tion appeared to have been brought about by the
City.
category now included 10 banks outside New York
Whereas heretofore
a New York City bank has always been assured a directorship in the
Reserve Bank, this was no longer the case.
The proposed reclassification,
however, meant that the New York City banks almost certainly would always
be represented on the Board of Directors.
In his opinion, this would
riot be in accord with the intent of the statute.
Vas
The statute admittedly
in need of revision, and the formula used by the Board of Governors
r°r the classification of member banks reflected the need for revision
or the statute.
a reclassification
However, he could not sanction
current proposal.
having the apparent motivation of the
Further, the
Classification would reduce the number of Group 2 banks from 34.7
1)er cent to less than 30 per cent, and this would seem to run counter
ce.
to the principle of the formula that was now in existen
interpretation made by Governor
Mr. Farrell observed that the
Rob
l of the New York Reserve Bank.
ertson could be Placed on the proposa
put the matter the other way
04 the other hand, the Reserve Bank had
2955
a/29/63
-5-
around; that is, that under an unwritten rule the Group 1 banks
traditionally elect a representative of the money market banks and
that banks outside New York City were disenfranchised, so to speak,
if they were included in that group.
Mr. Farrell also pointed out
that within the System the largest movement of banks was from Group 3
to Group 2.
If it were assumed that over a three-year cycle the per-
centage of Group 2 banks in the New York District would move upward
about
6 percentage points, it would adhere more closely to the Board's
formula if the beginning percentage of Group 2 banks were 30 rather
than 34.
Governor Mills inquired whether, as a practical matter, the
Changing of seven member banks located outside New York City from
would then have an effective
Group 1 to Group 2 did not mean that they
vote, while if they remained in Group 1 they would be less likely to
have a representative from among them on the Board of Directors.
only because of the
Governor Robertson replied that this was
e istence of an unwritten rule, which he did not favor, designed to
hold one directorship open for New York City banks.
One could not
he sure whether there would be continued adherence to this rule.
ation
Mr. Daniels brought out that the proposed reclassific
1(31-11id restore the approximate percentage relationship of Group 1, 2,
3 banks that obtained upon the establishment of the existing
6
"
classification.
295“
-6-
8/29/63
Governor Balderston inquired whether it was felt that the
Federal Reserve System would be an effectively organized central
bank without a representative of the New York City banks on the New
York Reserve Bank's Board of Directors, in view of the City's position as the financial capital of the country, to which Governor
Robertson replied that he thought it might be better not always to
have a representative of the money market banks on the Board of
Directors.
He saw potential dangers in such a practice.
Following additional discussion along these lines, Governor
Mills indicated that he would be inclined to adopt the proposed
reclassification.
Governor Balderston said he was not sure that much would be
gained for the System by turning down the recommendation.
It seemed
tO him that the Reserve Bank might have deferred its recommendation
for three years without great harm to anyone, but he was not impressed
that the recommendation, having been made, should be turned down.
Governor Balderston made the further comment that he followed a basic
Premise different from that of Governor Robertson; in his opinion,
the Federal Reserve System benefited from having an effective avenue
by
or communication with the money market banks such as was provided
the presence of a New York City banker on the New York Board of Directors.
the proposed reclasChairman Martin expressed the view that
s •
ification could be defended without too much difficulty.
1
'
95
8/29/63
-7After further discussion, the recommended reclassification
of member banks in the Second District was adopted, Governor Robertson
dissenting for the reasons he had indicated.
A copy of the letter
sent to the Federal Reserve Bank of New York pursuant to this action
is attached as Item No.
6.
Proposal to acquire Canadian bank and trust company (Item No. 7).
International Banking Corporation, New York, New York, an "agreement"
corporation, had requested the Board's consent to purchase the outstandillig stock of The Mercantile Bank of Canada and Mercantile Trust Company,
13°th of Montreal, Canada; and in this connection First National City
for permission to pur1244k, New York, New York, had made application
ohase additional stock of International Banking Corporation to the extent
Or $5 million.
There had been distributed to the Board a memorandum from the
Ili-vision of Examinations dated August 23,
44i recommending favorably.
1963, discussing the proposal
The Mercantile Bank of Canada was presently
°lined by Dutch interests and was the smallest of the eight chartered
84ks in Canada.
Interests.
Mercantile Trust Company was owned by the same Dutch
1953 and had been operating
Mercantile Bank was chartered in
nal business.
llticier a policy emphasizing internatio
It had its head
Montreal, and Vancouver,
Orrice in Montreal and branches in Toronto,
provide First National City
SO that the contemplated purchase would
Canadian cities.
--A with banking facilities in three major
The
2958
-8-
8/29/63
Proposal had engendered some opposition among Governmental authorities
U). Canada, as distinguished from the banking community.
However,
agencies of Canadian banks had operated actively in the United States
for many years, and enjoyed substantial advantages in the New York
market where the restrictions on member banks were in large measure
not applicable to them.
There were presently no American-owned banks
or branches in Canada, whereas the five largest Canadian banks operated
28 offices in the United States.
There had also been distributed copies of a letter from an
°fficer of First National City Bank dated August 27, 1963, indicating,
e41°ng other things, that about 85 per cent of the operations of Mercantile Bank of Canada were conducted in Euro-dollars, and that the items
(lescribed as foreign deposit liabilities on a condensed balance sheet
°r
Mercantile Bank as of May 31, 1963, were all U. S. dollars.
There had likewise been distributed a memorandum from Mr. Furth
cl4ted August 23, 1963, which noted that the proposed transaction might
tell affect the U. S. balance of payments more seriously than other
recent foreign investments of Edge Act and agreement corporations
t en together.
The transaction would mean the transfer of $6.6 million
t° the Netherlands.
Also, the decision of First National City Bank to
€(3 into Canada was presumably caused not merely by a desire to foster
to foster U. S. finanU' S. commerce with Canada but also by a desire
lal investments in CanFada and especially to participate more fully in
2959
_9_
8/29/63
Canadian operations in the Euro-dollar market. Further, the takeover of a Canadian bank by U. S. capital at a time when the U. S.
Government had proposed legislation to curb the acquisition of Cana'ma
shares by private U. S. citizens would seem inconsistent
Would hardly contribute to easing the recent strain on financial
relationships between the two countries.
the
Following comments by Mr. Goodman based principally on
Division memorandum that had been distributed, Mr. Furth amplified
the points mentioned in his memorandum. On the one hand, it would
Undoubtedly be in furtherance of the international monetary prestige
Of this country if a U. S. bank were permitted to do business in Canada.
Canadian banks, through agencies, were doing a lot of business in the
s
d
United States, while U. S. banks were exclude from doing busines
in Canada.
difficult problems involved
However, there were a number of
of payments.
trom the standpoint of the U. S. balance
/101ald be the transfer of
First, there
$6.6 million to the Netherlands. Second,
be of a kind that would be subject
although the transaction would not
tion
to the proposed interest equalization tax, a similar transac
of the Cana/roilld be subject to the tax if it did not confer control
dian bank and the trust company.
The more important question, however,
transaction that would encourage
'448 whether the Board should approve a
market. The recent increase
the flow of U. S. funds into the Euro-dollar
11 short-term U. S. interest rates reflected a policy having as a major
296g.)
8/29/63
-10-
Purpose the discouraging of flows of U. S. funds into that market.
As
Mercantile Bank was now constituted, loans and investments in the U. S.
seemed to be relatively large in relation to U. S. deposits with the
bank.
From an economic point of view, therefore, there might be perhaps
even an actual advantage from the standpoint of the balance of payments
in the operations of Mercantile Bank. The question was whether it could
be assumed that this would continue.
If First National City Bank so
4aired, it could discourage U. S. deposits with this bank; on the other
hand) it could encourage them.
There were no doubt many Americans who
vould be hesitant to put dollar deposits in the British market.
There
blight also be some Americans who were hesitant to put dollars in Canabanks that had no connection with U. S. banks, if for no other
l'eason than the unlikelihood of being able to use the credit facilities
or those banks.
However, if there was a Canadian bank that proclaimed
t° be affiliated with a large U. S. bank, many American corporations
41011t feel that this was an ideal situation for the purpose of getting
a connection with
4 higher rate of return on their money without losing
time they wanted credit.
4 hank that might be of use to them, if at some
'therefore, unless specific assurance was received from First National
CitY Bank to the contrary, the proposed acquisition almost certainly
110111d facilitate the flow of U. S. funds into the Euro-dollar market.
4113°, for legal reasons, it was necessary to see that Mercantile Bank,
2961._
-11-
8/29/63
as a subsidiary of International Banking Corporation, would be restricted in its business done in the United States; this would make it almost
a certainty that the funds would not flow back directly to the United
States.
Therefore, there would be not only a statistical deterioration
in the balance of payments but also an actual deterioration.
Whether
such relatively vague indications of future possibilities were sufficient
grounds for rejection of the application was something on which Mr. Furth
had no firm opinion.
to decide.
This was obviously something for the Board itself
There was, of course, nothing illegal about doing business
In the Euro-dollar market.
The only question was whether the Board
should approve a proposal that seemed likely to encourage the flow of
kerican dollars to the Euro-dollar market.
After further staff comments on the proposal, Governor Mills
aatd that he would approve the proposed transaction, although with
great reluctance and only because the majority of the Board had adopted
the revised Regulation M and Regulation K. He felt that Mr. Furth's
eoutnents were soundly based and that this operation would encourage
the outflow of gold and dollars from the United States at a time when
the Federal Reserve System had been held out as the agency within the
with this sort of thing.
G°vernment that was intended to deal
He also
believed that approval of this transaction would not be fully consistent
th the statement of national purpose in Regulation K, which indicates
that undertakings pursuant to the Regulation are supposed to abet the
2962
-12-
8/29/63
financing of U. S. international trade.
If the difficult balance
Of payments problem continued, and if it should be aggravated by
Operations conducted by Mercantile Bank, this would hasten the time
When it would be necessary for the Federal Government to assume a
Posture that would be contradictory to a free flow of foreign trade.
Governor Mills also noted that the proposed letter to First
National City Bank would state that International Banking Corporation,
When required by the Board of Governors, would cause Mercantile Bank
to permit examiners selected or auditors approved by the Board of
Governors to examine the bank and furnish the Board such reports as
it might require from time to time.
He was not sure but that this
Was a delegation of authority contrary to paragraph
Of the Federal Reserve Act.
6
of section 25
He gathered that it had been the intent
ed by examiners commisOf Congress that examinations would be conduct
ants.
sioned by the supervisory agency, not by a firm of account
When
ed to the
Mr- Shay commented that the language in the letter conform
er 1, 1963,
language of Regulation K, as revised effective Septemb
defect of the revised
Governor Mills replied that this was just another
Ile gulation that had escaped his scrutiny.
He noted that when First
establish a branch in Geneva,
N4t1onal city Bank recently proposed to
provision that would permit
the Swiss authorities had objected to a
eXaMination of the branch by a U. S. Federal supervisory agency.
The
ile Bank of any
le'llgUage of the proposed letter would relieve Mercant
296
8/29/63
-13-
Possibility of a supervisory examination if the Federal Reserve at any
time wished to exact that discipline.
Governor Robertson stated that he would oppose the proposed
transaction.
He felt that Mr. Furth's views were sound.
If the
Federal Reserve intended to do anything about the U. S. balance of
Payments, insofar as it had the power to permit or deny operations of
this kind, this case could be a benchmark. Denial might do more good,
in his opinion, than any of the other things the Federal Reserve had
liOne to correct the balance of payments situation, even though the
amount of the proposed investment would be relatively small.
Governor Balderston said he had great concern about the potentialities to which Mr. Furth had referred.
On balance, however, he
re4 that the proposal ought to be approved.
As a national policy,
the U. S. was not prohibiting direct investments abroad, and this
101.11d be a direct investment.
Canadian banks had facilities in this
e°141try that American banks had not been able to secure in Canada,
44a
this would impress most people as a matter of inequity that ought
tc) be redressed.
Whether First National City Bank would use this
4Ntlisition to help the U. S. balance of payments or to injure it,
°/71e could not be sure, but he was impressed that the outflow of capital,
hort
as well as long term, was proceeding through a great many channels,
vhich this would be just one.
Money was flowing to London through
brEthohes of New York City banks; it was going out from Canada through
2964
8/29/63
The Bank of Nova Scotia and others.
He doubted whether this particular
Proposal ought to be singled out and an example made of it.
Therefore,
he would approve the proposal.
Chairman Martin also stated that he would approve.
Much stress
as a basic
should be placed on multilateral nondiscriminatory trade
Principle.
to go into Canada
To say that someone who had a chance
e of payments
could not do so because this might aggravate the balanc
situation, when the operation would only be a drop in the bucket, would
involve a vitiation of that basic principle.
He hoped sincerely that
to this principle.
the U. S. was going to have the courage to adhere
to whether it would be
There followed a brief discussion as
desirable to incorporate in the letter to First National City Bank
restrictions on the extent
language calling attention specifically to
the United States.
to Which Mercantile Bank might do business in
It
of Regulation K,
Ilas agreed that in view of the pertinent provisions
the letter to First National
ellch language would not be necessary in
eltY Bank.
the letter to First National
Thereupon, approval was given to
Item No. 71 Governor Robertson
ettY Bank of which a copy is attached as
tlissenting for the reasons he had stated.
The meeting then adjourned.
to recommendaSecretary's Note: Pursuant
from appropriate
nda
memora
tions contained in
or Balderston,
Govern
ned,
individuals concer
or Shepardson,
Govern
of
e
absenc
acting in the
Board acceptance
the
of
behalf
today approved on
t"
29(
ik '
8/29/63
-15of the resignations of the following
persons on the Board's staff, effective
at the close of business on the dates
indicated:
441
Jared J. Enzler, Summer Research Assistant, Division of Research
Statistics, August 30, 1963.
Myron A. Grove, Economist, Division of Research and Statistics,
September 4, 1963.
Seymour Golodner, Technical Assistant, Division of Bank Operations,
SePtember 71 1963.
'Assistant Secretary
2961;
BOARD OF GOVERNORS
Item No. 1
8/29/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE
OAR°
August 29, 1963.
Manufacturers Hanover International T?anking Corporation,
Street,
York 15, New- York.
44 Wall
Gentlemen:
In accordance with the request contained in your letter
?,f July 12, 1963, transmitted through the Federal Reserve Bank of
'Iew York, and on the basis of the information furnished, the Board
Governors grants consent for Manufacturers Hanover International
Icing Corporation (HMHIBC") to purchase and hold 3,000 shares, par
'tva3-ue Drachmae 3,000 each, of National Investment Bank for Industrial
evelopment S.A. ("NIBID"), Athens, Greece, at a cost of Drachmae
9
s,0o0,000 or approximately US$3001000 (equivalent), provided such
'Jock is acquired within one year from the date of this letter.
r
The Board's consent is granted upon condition that MHIBC
*1411 dispose of its holding of stock of NIBID, as promptly as practicable in the event NIBID should at any time (1) engae in issuing,
clerwriting, selling or distributinv, securities in the United States;
‘)
te engage in the general business of buying or selling goods, wares,
rierchandise, or comnodities in the United States or transact any busi02s in the United States except such as is incidental to its international
foreign business; or (3) otherwise conduct its operations in a manner
Governors, causes the continued
ho ch, in the judgment of the Board of
inappropriate
under the provisions
'
of ding of its stock by MHIDC to be
or
Act
regulations
Reserve
thereunder.
Th Section 25(a) of the Federal
Section
25(a)
of
the
Federal
under
}tee Board also grants its approval
Regulation
K
to
the
purchase
and
of
eerve Act and Section 211.9(d)(2)
Lica
&I-lig of such shares.
4
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
2967
Item No. 2
8/29/63
BOARD OF GOVERNORS
,oitttOo
t444°.
*
OF THE
4AiA
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS orriciAL CORIPICIPONOENCe
TO THE BOARD
August 29, 1963
Board of Directors,
The North Jersey Trust Company,
Ridgewood, New Jersey.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by The North Jersey Trust
at 15 West RidgeCompany, Ridgewood, New Jersey, of a branch
the branch is
provided
Wood Avenue, Ridgewood, New Jersey,
of
this letter.
the date
established within six months from
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board also
had approved a six-month extension of the period allowed to
establish the branch; and that if an extension should be
requested, the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846),shou3d be followed.)
29W-?,
BOARD OF GOVERNORS
Item No.
*ft,.
3
8/29/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
*StRts
.......
August 29, 1963
Board of Directors,
Gary-Wheaton Bank,
Wheaton, Illinois.
Gentlemen:
Federal Reserve System
The Board of Governors of the
has received the request of your bank for approval of a recent
of the Federal
expenditure for bank premises. Section 24A
obtain the approval
to
bank
Reserve Act requires a State member
bank premises
in
investment
of the Board of Governors for an
present
investments
of
Which, when added to the carrying value
of the
excess
in
in such premises, will aggregate an amount
this
case has
in
expenditure
bank's capital stock. Since the
contemplated
by
the
already been made, the prior approval
statute cannot be given.
been made for the
However, if a timely request had
of information
basis
.required approval, it appears, on the
been granted.
have
would
before the Board, that such approval
expenditure
the
to
objection
Accordingly, the Board offers no
Of $258,673.75 for new banking quarters.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
)(3.3
Item No?ii
BOARD OF GOVERNORS
8/29/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOAR°
•S.REst.•.
August 29, 1963
Board of Directors,
Southern Commercial and Savings Bank,
St. Louis, Missouri.
Gentlemen:
The Board of Governors of the Federal Reserve
System extends to November 16, 1963, the time within
which Southern Commercial and Savings Bank, St. Louis,
Missouri, may withdraw from membership in the Federal
Reserve System.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
2970
if•
Cl
-
BOARD OF GOVERNORS
OF THE
k5
FEDERAL RESERVE SYSTEM
Item No.
5
8/29/63
WASHINGTON
OFFICE OF THE CHAIRMAN
August 29, 1963
The Honorable James J. Saxon,
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Dear Jim:
concerned the Board's Regulation M
Your letter of August 15
in implementation of
as revised August 1, 1963, principally
Public Law 87-588.
88 was the result of efforts,
Enactment of Public Law 87-5
to secure the enactment of legislainitiated by the Board in 1956,
ss of foreign branches of national
tion that would improve the usefulne
dations and its continuing
mmen
reco
banks. The Board's legislative
and House
mentioned by both the Senate
interest in the matter were
S.
on
1771, the
rts
repo
r
ency in thei
Committees on Banking and Curr
st 15,
Augu
738,
No.
rt
Repo
bill that became Public Law 87-588 (S.
1961; H. Report No. 2047, July 27, 1962).
the matter covered by Public Law 87-588
The Board's interest in
authority that Congress has centralized
arises, of course, from the broad
operations of United States banks.
ln the Board with respect to foreign
Reserve Act have made
For many years sections 9 and 25 of the Federal
banks to obtain the
er
State memb
lt necessary for national banks and
or investing in
ches
bran
foreign
Board's approval before establishing
ions
operating
orat
corp
the stock of State-chartered foreign banking
in accordns
atio
oper
r
thei
restrict
under agreements with the Board to
onal
banks
Nati
e.
crib
pres
Board may
ance with such limitations as the
d
alle
Edge
of
so-c
k
stoc
the
and State member banks also may invest in
d pursuant to seecorporations chartered and regulated by the Boar
foreign banking or
on
y
On 25(a) of the Federal Reserve Act to carr
a broad study by the
of
nces
eque
financial operations. One of the cons
in it by Congress
ed
vest
onsibility
Board in this entire area of resp
legislation such
for
need
of the
was the Board's conclusion in 1956
as that provided by Public Law 87-588.
Law 87-588 makes it abundantly clear
The language of Public
ing powers contemplated by the
that the exercise of any of the bank
The Honorable James J. Saxon
-2-
ions as the Board, in its
statute must be authorized by such regulat
to such conditions and requirediscretion, may issue and be subject
indicated in the Senate
ments as the regulations may prescribe. As
additional banking powers are
Committee report previously mentioned,
only "if the Board feels that
87-588
to be permitted under Public Law
ce, and would be consistent
commer
n
foreig
to do so would further U. S.
basis on which the Board
the
is
This
with sound banking Practices".
M.
ion
acted in promulgating its Regulat
views of United States banks
Before issuing the Regulation,
as to the matters they felt
ed
solicit
operating foreign branches were
of the Regulation was
draft
A
tion.
should be covered in the Regula
by all interested
s
comment
for
Published in the Federal Register
the particular attento
brought
Persons and copies of the draft were
n branches and the
foreig
ng
operati
tion of the United States banks
. Thereafter the
Office
your
ng
includi
sliterested Government agencies,
for
s
further
agencie
and
persons
8°ard distributed to interested
tion
All
informa
tion.
Regula
comments a redraft of the proposed
were
you,
from
d
receive
s
received by the Board, including comment
d.
adopte
was
ion
carefully considered before the Regulat
Sincerely yours,
(Signed) Bill
Wm. McC. Martin, Jr.
2972
BOARD OF GOVERNORS
Item No.
6
8/29/63
OF THE
.....
Of Cop;
FEDERAL RESERVE SYSTEM
"ep•
WASHINGTON 25, D. C.
ADORERS OFFICIAL CORRICISPONOLNCIC
TO THE BOARD
S-Rtst
August 29, 1963.
Mr. Alfred Hayes, President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mk. Hayes:
As recommended in your letter of
August 2, 1963, the Board has changed the
classification of member banks in the Second
District, for the purpose of electing Class A
and Class B Directors, to the following:
Croup
1
2
3
Banks with CEpital and Surplus of:
More than $40,000,000
$1,500,000 to $40,000,000, inclusive
Less than $1,500,000
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
2973
Item No.
BOARD OF GOVERNORS
7
8/29/63
OF THE
.....
v,OE Goviie...
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
a
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
`vifte4kts
August 29, 1963.
First National City Bank,
399 Park Avenue, '
New York 22, New York.
Gentlemen:
on the basis of the
In accordance with the request and
25, 1963, transmitted
July
of
letter
your
information furnished in
the Board of Governors
York,
New
of
Bank
through the Federal Reserve
Bank,
pursuant to the proCity
l
Nationa
grants permission to First
to increase from
Act,
Reserve
Federal
the
visions of Section 25 of
in the stock of
invest
may
it
amount
the
$7,000,000 to $12,000,000
York,
New York.
New
,
("IBC")
tion
Corpora
International Banking
consent for IBC to
The Board of Governors also grants
purchase and hold:
(1)
(2)
The Mercantile Bank
All of the outstanding shares of
for approximately
Canada,
l,
Montrea
of Canada ("MB"),
4,000 equivalent);
US$5,99
imately
(approx
Can.$6,470,000
and
of Mercantile Trust
All of the outstanding shares
for approximately
Canada,
l,
Montrea
Company ("MT"),
740 equivalent),
US$595,
imately
(approx
Can.$643,000
within one year from the date of
Provided such shares are acquired
this letter.
the purchase and holding of shares
The Board also approves
consent in excess of 15 per cent
above
the
of MB within the terms of
of IBC's capital and surplus.
proposed purchase and holding
The Board's consent to the
to the following conditions:
subject
granted
of shares of MB by IBC is
(1)
shares of stock in MB if
That IBC shall not hold any
t its activities to
restric
to
MB at any time fails
in which a corporation
corpora
a
to
those permissible
of the Federal
25(a)
Section
under
tion organized
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
First National City Bank
2974
-2-
Reserve Act could, with the consent of the Board of
Governors, purchase and hold stock, or if MB establishes any branch or agency or takes any action or
undertakes any operation in Canada or elsewhere, in
any manner, which at the time would not be permissible if MB were a corporation organized under said
Section 25(a);
(2)
That, when required by the Board of Governors, IBC
will c4Lise MB to permit examiners selected or auditors
approved by the Board of Governors to examine MB and
to furnish the Board of Governors with such reports
as it may require from time to time;
(3)
That IBC shall dispose of any shares of stock in MB
as promptly as practicable if MB should engage in the
business of underwriting, selling, or distributing
securities in the United States or if IBC is advised
by the Board that their holding is otherwise inappropriate under Sections 25 or 25(a) of the Federal Reserve Act or under Regulation K;
(4)
That IBC shall not carry on its books the shares of
MB at a net amount in excess of the book capital accounts of MB, after giving effect to the elimination
of all known losses; and
(5)
That any share acquisitions or dispositions by MB be
reported under Section 211.8(d) of Regulation K in
the same manner as if MB were a corporation organized
under Section 25(a) of the Federal Reserve Act.
The Board's consent to the proposed purchase and holding of
shares of MT by IBC is granted subject to the same conditions prescribed
ln the next above paragraph with respect to the shares of MB, except
for the substitution of "MT" for "MB" where it appears.
The Board's consent is given with the additional condition
that neither MB nor MT nor any subsidiary bank or other subsidiary
s::111pany will maintain any branch, agency, office, or representative
111 the United States.
Please advise the Board of Governors through the Federal
Reserve Bank of New York when the acquisitions of shares have been made.
Section 211.9(b) of Regulation K which relates to "Liabilities of one borrower" provides, in part:
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
First National City Bank
2., I
-3-
"Except as the Board may otherwise specify, the total
liabilities to a Corporation of any person shall at no
time exceed 50 per cent of the Corporation's capital and
surplus, or 10 per cent thereof if it is ,engaged in banking.
In this paragraph 'liabilities includes: any obligations
for money borrowed and shares of stock; . . ."
Subject to continuing observation and review, the Board suspends,
until further notice, (1) the provisions of the above-quoted portion
of Section 211.9(b) to the extent that the investment by IBC in the
stock of MB would cause "liabilities" to exceed the percentage limitations stated therein; and (2) the provisions of subparagraph (1) of
the fourth paragraph of this letter so far as they relate to restrictions on loans granted by MB or MT in Canada in the currency of that
country.
Very truly yours,
(signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
a
@FedFRASER