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Minutes for
To:
Members of the Board
Prom:
Office of the Secretary
June 14, 1965
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.
Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
ASO
Minutes of the Board of Governors of the Federal Reserve
System on Monday, June 14, 1965.
The Board met in the Board Room at
10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Acting Chairman
Shepardson
Mitchell
Daane
Maisel
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Noyes, Adviser to the Board
Molony, Assistant to the Board
Solomon, Director, Division of Examinations
Spencer, General Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Consultant
Furth,
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Messrs. Brill, Holland, Koch, Garfield, Partee,
Solomon, Williams, Dembitz, Altmann, Axilrod,
Eckert, Ettin, Fisher, Keir, Osborne, Peret,
and Wernick and Mrs. Ulrey of the Division
of Research and Statistics
Messrs. Hersey, Katz, Sammons, Irvine, Reynolds,
Wood, Dahl, Hayes, Maroni, and Mills of the
Division of International Finance
Mr. Kareken, Economic Consultant, Federal Reserve
Bank of Minneapolis
Economic review.
The Division of International Finance reported
On i
nternational financial conditions, following which the Division of
Research and Statistics presented information relating to the domestic
economy •
Mr. Kareken, Mr. Furth, and all members of the Board's staff
110 had been present except Messrs. Sherman, Kenyon, Noyes, Molony,
6/14/65
-2-
Brill, Solomon (Division of Examinations), Partee, Sammons, and Spencer
then withdrew from the meeting and the following entered the room:
Hackley, General Counsel
Shay, Assistant General Counsel
Goodman, Assistant Director, Division of Examinations
Leavitt, Assistant Director, Division of Examinations
Sanders, Senior Attorney, Legal Division
McClintock, Supervisory Review Examiner, Division of
Examinations
Mr. Veenstra, Chief, Financial Statistics Section, Division of
Data Processing
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Circulated items.
The following items, copies of which are
a ttached to these minutes under the respective item numbers indicated,
were a
roved unanimously:
Item No.
Letter to State Bank of Albany, Albany, New York,
"Proving the establishment of a branch in the
lonie Shopping Center, Town of Colonie.
1
Letter to Wells Fargo Bank, San Francisco, California,
aPProving the establishment of a branch in Arcata.
2
Letter to the Federal Reserve Bank of San Francisco
1-egarding the question whether a Federal Reserve Bank
sh°111d assume full responsibility for securities of
Member banks held in safekeeping.
3
Report on competitive factors (Greenville-Leland, Mississippi).
Ullanimous approval was given to the transmittal of a report to the
Comptroller of the Currency on the competitive factors involved in the
Pr°Posed merger of First National Bank of Leland, Leland, Mississippi,
into The Commercial National Bank of Greenville, Greenville, Mississippi.
The
conclusion read as follows:
The proposed merger would not eliminate any significant
competition between First National Bank of Leland and Commercial
National Bank of Greenville, and the overall effect of the
Proposal on competition would not be adverse.
6/14/65
-3Application of Commercial and Savings Bank of St. Clair County
Items 4-6 .
Pursuant to the decision at the meeting on May 28, 1965,
there had been distributed drafts of an order and statement reflecting
approval of the application by The Commercial and Savings Bank of St.
Clair County, St. Clair, Michigan, to consolidate with Yale State Bank,
Yale, Michigan.
Also distributed was a dissenting statement by Governor
R
obertson.
Following discussion, the issuance of the order and statement
1
Was authorized, with the understanding that a change in the statement
would be made at one point, pursuant to a suggestion by Governor Daane,
to emphasize the potential benefits to the Yale community from the
Proposed consolidation.
as Items 4 and 5.
Copies of the documents, as issued, are attached
A copy of Governor Robertson's dissenting statement
18 attached as Item No. 6.
Messrs. Shay and McClintock then withdrew from the meeting.
Condition report procedures (Items 7 and 8).
There had been
dis tributed a memorandum from Messrs. Partee and Veenstra dated June 10,
1965, submitting drafts of letters (1) to the Federal Reserve Banks that
'
7(3111-d transmit report forms for use by State member banks and their
affiliates in submitting reports of condition at the June call date and
advise that it would be necessary to collect a reconciliation statement
ftc'm national banks, and (2) to the Bureau of the Budget requesting
clearance of
the reconciliation statement.
6/14/65
-4The memorandum outlined a chronology of recent events regarding
negotiations among the Federal bank regulatory agencies to effect a uniform condition report format.
As pointed out, the Federal Reserve and
the Federal Deposit Insurance Corporation planned again to use the 1961
report form for all State banks for the forthcoming call.
The Office
f the Comptroller of the Currency had advised that since there would
not be sufficient time to reach agreement on a uniform report form prior
to the
June call, it seemed premature to modify the national bank form
now being used.
Mr. Veenstra noted that arrangements recently had been completed
for the State and Federal bank regulatory agencies to meet on June 23,
1965, to discuss proposals for a uniform report form to be used for the
fall or December 1965 call.
It seemed likely, in his opinion, that the
illeeting might lead to a uniform or at least a compatible report form.
Unanimous approval then was given to the letter to the Bureau
of the
Budget, a copy of which is attached as Item No. 7.
Item m
to
Attached as
. a copy of the letter approved unanimously for transmittal
is
the Federal Reserve Banks.
Voluntary restraint on foreIgn lending and investing (Item No. 91.
As
a Part of the President's program designed to improve the international
bai
ance of payments position of the United States, the Board issued on
ar
ch 3, 1965, tentative guidelines on foreign lending and investing by
11°41) nk financial institutions.
form
The guidelines had been issued in ten-
ith a view to collecting benchmark statistics from the
6/14/65
affected institutions, the analysis of which was expected to be helpful
in determining whether the guidelines should be modified.
There now
had been distributed, under date of June 10, 1965, a draft of revised
guidelines.
Commenting on the proposed revisions, Governor Robertson said
that the purpose was to strengthen the original guidelines, particularly
to prevent the substitution of nonbank credit for bank credit.
He went
On to point out that the revisions had been discussed with the bankers
who provided technical advice on the commercial bank guidelines and that
the Presidents of the Federal Reserve Banks had been requested to discuss
them with representatives of the various categories of nonbank financial
institutions.
In addition, the proposed changes had been taken up at
he staff level with the Treasury, Commerce, and State Departments, and
an effort had been made to accommodate the suggestions received.
this
Process the proposed guidelines had been weakened.
In
They were not
as strong as he would like to see them, but he felt they would be more
effective than the ones issued in March.
Governor Robertson concluded by saying that the current draft
revised guidelines had been submitted to the Secretary of the Treasury
for
Ilggestions.
It was anticipated that further comments might be
'ived from the Treasury or from the State Department.
the Board
However, if
approved, he believed the revised guidelines could be put into
final form
and issued by the end of the week.
6/14/65
-6During summarization of the proposed changes and an explanation
of them by Mr. Partee, certain suggestions for changes -- principally
of an editorial nature -- were presented.
Issuance of the revised guidelines, in a form reflecting cons ideration of the suggestions made as this meeting and incorporation of
further changes submitted by other interested Government departments
that might be acceptable to Governor Robertson, was then authorized.
Secretary's Note: The revised guidelines
applicable to nonbank financial institutions
were issued effective June 21, 1965. A copy
is attached as Item No. 9.
Protest of branch application.
Mr. Leavitt reported receipt
by the Division of Examinations of a telegram from President Regan of
the Flushing Savings Bank, Flushing, New York, protesting on behalf of
that bank, Flushing National Bank, and College Point Savings Bank,
Plushing, the proposed establishment by Manufacturers Hanover Trust
Company, New York, New York, of a branch at 156-20 Northern Boulevard,
Plushing.
Mr. Regan requested that he be permitted to appear before
he examiner preparing the file on this matter or before the Board.
Following discussion, it was understood that Mr. Regan would
e informed that if there was additional information that he wished to
Present, he should feel free to discuss the matter with the Division
Of 4aminations.
If Mr. Regan evidenced a strong desire to appear
before the Board, however, an opportunity should be afforded him to
do so.
6/14/65
-7National bank matter.
Mr. Solomon reported on certain informa-
tion that had come to the attention of the Division of Examinations
through the staff of the Federal Deposit Insurance Corporation with
regard to a line of credit extended by Western Pennsylvania National
Bank, Pittsburgh, Pennsylvania.
After discussion of this information and certain other matters
bearing upon the situation of the national bank in question, it was
understood that the Division of Examinations would ascertain whether
the Federal Deposit Insurance Corporation had furnished the information
to the Comptroller of the Currency.
Secretary's Note: Inquiry of the Federal
Deposit Insurance Corporation revealed that
the information referred to in this morning's
meeting concerning Western Pennsylvania National
Bank had been furnished to and discussed with
the Office of the Comptroller of the Currency.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
,
Letter to the Federal Reserve Bank of Chicago (attached Item
approving the reappointment of C. Andrew Lawrence as assistant
Xaminer.
Memoranda recommending the following actions relating to the Board's
staff:
A
intment
st .Madelene G. Donaldson as Clerk-Typist, Division of Research and
that
the lstics, with basic annual salary at the rate of $3,680, effective
date of entrance upon duty.
6/14/65
-8-
Frederick R. Dahl, Chief, Special Studies and Operations Section,
Division of International Finance, from $16,130 to $17,030 per annum,
effective June 20, 1965.
Robert F. Gemmill, Economist, Division of International Finance,
from $15,640 to $16,460 per annum, with a change in title to Senior
Economist, effective June 20, 1965.
!.ft•A:,
BOARD OF GOVERNORS
Item No. 1
6/14/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS °maim. OORRICISPONDENDE
TO THE •OARD
June 14, 1965
Board of Directors,
State Bank of Albany,
Albany, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by State Bank of
Albany, Albany, New York, of a branch in the Colonie
Shopping Center, approximately 1,500 feet northeast of .
the intersection of Wolf Road and Central Avenue (Route 5)
Town of Colonie (unincorporated area), Albany County,
New York, provided the branch is established within one
Year from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
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), should be followed.)
Item No. 2
6/14/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
June 14, 1965
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
l
The Board of Governors of the Federa
by
ishment
Reserve System approves the establ
rnia, of
Califo
sco,
Franci
San
Wells Fargo Bank,
corner of the
a branch either at the northwest
at the
intersection of 13th and G Streets or
and G Streets,
corner of the intersection of 7th
provided the
Arcata, Humboldt County, California,
year from the
branch is established within one
date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
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), should be followed.)
Item No. 3
6/14/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 14, 1965
Eliot J. Swan, President,
rederal Reserve Bank of San Francisco,
San Francisco, California. 94120
I3ear Mr.
Swan:
This refers to your letter of April 16, 1965, enclosing
of a letter from Ralph V. Arnold, President of the First
Nati
m, °nal Bank & Trust Company of Ontario, California. In his letter,
hi. Arnold requested you to present, "through the proper channels",
41 8 suggestion that "because of the nature of the relationship of the
:
a tither banks with the Federal Reserve Bank . . . Lthe latter/ should
sume full responsibility for the safekeeping for securities for
-Lenter
banks".
a C
oPy
As you have indicated to Mr. Arnold, a Reserve Bank,
1411
be
subese it wished to act in the capacity of an insurer, would not
sject to absolute liability for loss of securities held by it for
1,11elkeeping. Whether the Reserve Banks should, by contract or otherher' accept absolute responsibility for securities of member banks
op
.
d bY them for safekeeping is a matter of policy affecting the
'
ap Isstions of the Reserve Banks that the Board does not consider
013riate for it to explore without having had the benefit of
:
ice and recommendations from the Conference of Presidents.
Accordingly, if you believe that Mr. Arnold's suggestion
has
erits You may wish to propose that it be considered at a future
laleej
4-ng of the Conference.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
2001
Item No. 4
6/14/65
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of '
IRE COMMERCIAL AND SAVINGS BANK OF '
ST. CLAIR COUNTY
fot
approval of consolidation with '
Lai-a State Bank
ORDER APPROVING CONSOLIDATION OF BANKS
There has come before the Board of Governors, pursuant to the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by The
Commercial and Savings Bank of St. Clair County, St. Clair, Michigan,
4 State member bank of the Federal Reserve System, for the Board's
Prior approval of the consolidation of that bank and Yale State Bank,
Michigan, under the charter and title of the former.
As an
incident to the consolidation, the sole office of Yale State Bank
14°uld be operated as a branch of The Commercial and Savings Bank of
St. Clair County.
Notice of the proposed consolidation, in form
1111roved by the Board, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Corn
Corporation,
Ptroller of the Currency, the Federal Deposit Insurance
-2-
and the Attorney General on the competitive factors involved in
the proposed consolidation,
forth in the
IT IS HEREBY ORDERED, for the reasons set
cation be and hereby
Board's Statement of this date, that said appli
shall not be consummated
18 approved, provided that said consolidation
this Order or
(a) within seven calendar days after the date of
(b) later than three months after said date.
of June, 1965.
Dated at Washington, D. C., this 14th day
By order of the Board of Governors.
n, and
Voting for this action: Chairman Marti
Daane,
ell,
Governors Balderston, Shepardson, Mitch
and Maisel.
tson.
Voting against this action: Governor Rober
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
21))3
Item No. 5
6/14/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY THE COMMERCIAL AND SAVINGS BANK OF ST. CLAIR COUNTY
FOR APPROVAL OF CONSOLIDATION WITH YALE STATE BANK
STATEMENT
The Commercial and Savings Bank of St. Clair County, St. Clair,
hichi
gan ("Commercial and Savings Bank"), with total deposits of about
47 zillion, has applied, pursuant to the Bank Merger Act of 1960
(12
§ 1828(c)), for the Board's prior approval of the consolida0
4 4 Of that bank and Yale State Bank, Yale, Michigan ("Yale Bank"),
1/
has total deposits of about $5 million.
The banks would
torin
olidate under the charter and name of the Applicant, a State member
'
bath
of
t the Federal Reserve System. As an incident to the consolidation,
the
"le office of Yale Bank would become a branch of Commercial and
4%1
Ilga Bank, increasing the number of its offices to three.
Under the law, the Board is required to consider, as to each
°f the
banks involved, (1) its financial history and condition, (2) the
acY of its capital structure, (3) its future earnings prospects,
(4) th
e general character of its management, (5) whether its corporate
Dover
8 are consistent with the purposes of 12 U.S.C., Chapter 16 (the
Nier
41 Deposit Insurance Act), (6) the convenience and needs of the
13"it figures are as of December 31, 1964.
2004
-2community to be served, and (7) the effect of the transaction on
competition (including any tendency toward monopoly).
The Board may
not approve the transaction unless, after considering all of these
factors, it finds the transaction to be in the public interest.
Banking factors. - The financial histories of Commercial and
Savings Bank and Yale Bank are satisfactory, and each bank has a sound
asset condition and an adequate capital structure.
Each bank has a
good earnings record and satisfactory future earnings prospects. The
slanegement of each bank is satisfactory and, in addition to capable
management, the resulting bank would have a sound asset condition, an
adequate capital structure, and good future earnings prospects.
There is no indication that the corporate powers of the banks
are, or would be, inconsistent with the purposes of 12 U.S.C., Chapter 16.
Convenience and needs of the communities. - Yale has a population of about 1,600 and is located in north-central St. Clair County,
°13°11.t 31 miles northwest of St. Clair and about 27 miles northwest of
port Huron, the county seat.
The economy of Yale is based principally
°II agriculture, especially dairy farming.
Yale is encircled by a
number of small independent banks situated at distances ranging from
ab°ut 12 to 20 miles, and the branch office of Commercial and Savings
sank is located at Emmet (population about 280),some 10 miles to the
SO
Utheast.
Although it appears that no pressing need exists for the
services of a larger bank in the Yale community, the bank resulting
fclin the proposed consolidation could more readily - and generally more
21)05
-3-
Bank
economically - make available services not offered by Yale
that would both facilitate the economic growth of the area and
afford improved convenience for banking customers.
and
Competition. - Following the consolidation, Commercial
Savings Bank would hold about 12 per cent of total deposits held
by the 20 offices of the 9 banks competing to some degree in the
combined area served by its 3 offices.
There is no evidence that the
consolidation would foreclose any meaningful competition between the
Proponent banks or that it would adversely affect other banks.
proposed
Summary and conclusion. - It does not appear that the
co nsolidation would have any adverse consequences for banking competitian.
make
At the same time, Commercial and Savings Bank would
available for the area now served by Yale Bank improved and expanded
nce
banking services which would, in addition to benefiting the convenie
Of banking customers, serve to enhance the community's economic prospects.
Accordingly, the Board finds that the proposed transaction
1/ould be in the public interest.
June 14, 1965.
2006
Item No. 6
6/14/65
DISSENTING STATEMENT OF GOVERNOR ROBERTSON
that
I am unable to conclude from the record in this case
olIsummation of the proposed consolidation would be in the public
illt.erest within the meaning of the Bank Merger Act of 1960.
As I understand the statute and its legislative history,
eellarees intended to make approval of a bank consolidation or merger
4pendent on a positive showing by its proponents that the public
illterest would thereby be benefited and rejected the philosophy that
1/
In this case,
4Qubts be resolved in favor of such transactions.
here is a showing neither of an advantage for the public nor a
44sonab1e probability thereof.
The majority, while essentially concedio3
*kat the banking needs and convenience of the community are being satisthe
4ct°rilY met, nevertheless bases its decision on the hope that
144koved and expanded (but unneeded) banking services to be offered
by
the resulting bank will somehow enhance the economic prospects of
the Yale area. A mere hope, however fervently held, is not evidence;
e
444 it is not, in my judgment, a sufficient basis under the applicabl
uPon which to rest a finding of public benefit.
Accordingly, I would deny the application.
e
discussion on this point in my Dissenting Statement at
ederal Reserve Bulletin 16, 17 (1963).
4141e 14, 1965.
Item No. 7
6/14/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
ADORERS OFFICIAL CORREBPONDENCE
TO THE BOARD
June 14, 1965.
Mr, Edward T. Crowder, Jr.,
Clearance Officer,
Office of Statistical Standards,
8ureau of the Budget,
Washington, D. C.
20503
bear Mr. Crowder:
Enclosed for your consideration are four copies of Form 83
teguesting clearance by your agency of a reconciliation statement to
,c_calect supplementary condition report statistics from all national
:anks at the forthcoming midyear call date. This reconciliation
tatement is substantively identical to the form used for the same
!
,
11rP0se at the June 30 and December 31, 1964 call dates. Copies of
:Ine form used for the December 31, 1964 call date are enclosed for
/
1117ur information. The supporting statement and the Board's transttal letter of June 19, 1964 requesting clearance of the June 1964
°rm are still valid.
The Federal Deposit Insurance Corporation and the Federal
s
erve will again use the 1961 report form for all State banks for
7
1
forthcoming call. The Office of the Comptroller of the Currency
now advised the Board that since there will not be sufficient time
s
:
t
it reach agreement on a uniform report form prior to the June call,
us would seem premature to modify the national bank form now being
d. The Comptroller states that to change for the June call would
en
!
two successive changes in the national bank form and has sugtasted that no further changes should be made until a uniform format
agreed upon.
Arrangements have now been completed for a meeting of
resentatives from the State and Federal banking agencies to review
10 uniform report of condition format. This meeting will convene at
ti 4'ms, Wednesday, June 23 at the Federal Deposit Insurance CorporabaZ b uilding. Informal staff discussions among the three Federal
unif supervisory agencies indicate the likelihood that agreement on a
'etrm report for future calls will be reached at this meeting.
Z
'
rtit0
Mr. Edward T. Crowder
-2-
The Board strongly urges collection of this supplementary
information
formation for the June 1965 call date, in order to obtain
'rft national banks vital to the derivation and tabulation of con!istent June 30 bank condition data for all Federal Reserve member
!anks and all insured commercial banks. As mentioned in the previous
rres pondence on this subject, these summary tabulations are the
unlY source of universe commercial bank balance sheet data and are
sed extensively by economists, financial analysts, and others in
,
conduct
yernment and elsewhere. They are required by the Board in the
data
mark
bench
as
it8 responsibility for monetary policy and serve
t
consisten
a
for
need
the
to
8°r many related current series. In addition
inof
classes
all
for
on
,Tamary series, consistent condition informati
du
44vidual banks is also required for economic, legal, and banking market
conditions.
linlYses comparing banks in the same location or under similar
r
r
uncertainties with
reThe severe time pressures arising from
report for this
uniform
a
ukTect to the outcome of efforts to achieve
J n
feasible of
as
soon
as
yo
call date require that we request advice
may be
forms
the
that
„ur agency's determination in this matter, so
ion to
distribut
for
nted and shipped to the Federal Reserve Banks
reporting national banks before the call date.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Ene"aure.
Item No. 8
6/14/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
CE
CORRESPONDEN
ADDRESS OFFICIAL.
TO THE BOARD
June 15, 1965.
Dear Sir:
the following forms are
The indicated number of copies of
be4
r for use of State
cove
4.11g forwarded to your Bank under separate
ng reports as of the
ember banks and their affiliates in submitti
!
.
ched
"ext call date. A copy of each form is atta
Nutriber of
rt of Condition of State
Form FR 105 (Call No. 176), Repo
member banks.
1961), Publisher's copy of
Form FR 105e (Revised February
er banks.
report of condition of State memb
1961), Publisher's copy of
Form FR 105e-1 (Revised February
er banks.
report of condition of State memb
Report of affiliate or
Form FR 220 (Revised March 1952),
holding company affiliate.
1952), Publisher's copy of
Form FR 220a (Revised March
company affiliate.
report of affiliate or holding
e used for the December 31,
he forms are identical to thos
dules on the reverse, which
6 repport, Fo
19a°1.4
Form FR 105 includes the sche
The same form is being
,,.. been eliminated for the spring call.
ion for distribution
inted by the Federal Deposit Insurance Corporat
of the Currency
ler
The Comptrol
;:e.insured nonmember State banks.
used by that
been
has
alla use the same form for national banks as
s.
date
mber call
8encY for the most recent June and Dece
c
-2n be necessary to collect
In these circumstances it will agai
s to compile
suPPlementary information directly from national bank
banks for the
red
insu
all
and
st
er
atistical information for all memb
iation statement for
rsidyear call date. Three copies of a reconcil
the most recent June
at
each national bank similar to the one used
as Budget Bureau
soon
as
arded
and December call dates will be forw
edures followed
proc
g
atin
learance for this form is received. Oper
the reconciliaand
rts
repo
editing and tabulating national bank
should be
s
call
1964
40n statements for the June and December
:
°110wed for handling this call.
'
I
Very truly yours,
—1
Merritt Shetmani
Secretary.
Enclosures.
BANKS
10 THE PRESIDENTS OF ALL FEDERAL RESERVE
- 11
Item No. 9
6/14/65
Revised Guidelines on Foreign Lending and Investing
for U.S. Nonbank Financial Institutions
(Issued pursuant to the President's balance of payments program
by the Federal Reserve System, June 21, 1965)
As an important part of the President's program to improve the
beLa
nee of payments position of the United States, announced in February
1965
American businesses and financial institutions have been asked to
4°hIce voluntarily their foreign lending and investment activities.
In
furtherance
of this program, the guidelines on foreign lending and investfor financial institutions other than commercial banks are hereby
revised.
Included among the types of financial institutions to which the
-nes are applicable are life, fire and casualty insurance companies;
c01.Por-ate
Nthn,
noninsured pension funds and State-local retirement systems;
savings banks, mutual funds and investment companies; consumer,
448
and commercial finance companies; college endowment funds and charii4
.
to:11
e foundations. Trust companies and trust departments of commercial
banks
are expected to observe the guidelines wherever possible in the invest0f funds entrusted to them or for which they serve as investment advisor.
st
. ment underwriting firma, security brokers and dealers and investment
couria
"'in& firma, although they may not directly hold assets subject to the
htdelinee, are
requested to inform customers of the program and enlist their
Q4131)°rt -n following the guidelines recommended.
Any nonbank financial institution holding $500,000 or more in
.n
'
fore
& loans, investments or other foreign financial assets is requested
J
to file a statistical report at the close of each calendar quarter with
the Federal Reserve Bank in its District.
Such reports are to be filed
covering assets held as of June 30, and for any subsequent quarter in
which holdings exceed $500,000.
Lending institutions not receiving copies
Of the reporting form by June 30 may obtain them from the Federal Reserve
aenks.
SPECIFIC GUIDELINES
1.
Investment of liquid funds abroad should not be
increased; if holdings as of the ends of 1963 or 1964 are
currently exceeded, such investment should be reduced in a
gradual and orderly manner to the lesser of these totals.
This category includes all deposits held with foreign banks
or foreign branches of U.S. banks, whether denominated in
U.S. dollars or a foreign currency and regardless of maturity.
It also includes all liquid money market claims on foreign
obligors written with an original maturity of 1 year or less,
whether such claims are denominated in U.S. dollars or a
foreign currency.
The term "liquid money market claims"
.18 interpreted broadly to include the securities of Governments and their instrumentalities, commercial paper, finance
company paper, bankers' acceptances and other readily marketable paper.
This guideline is not intended to restrict the
holdings of working balances needed in the ordinary conduct
4
Al
of business abroad.
3
Neither is it applicable to short-term
b usiness credits that are not readily marketable (covered
under guideline #2).
2.
Investments and credits maturing in 10 years
aLless at date of assuisition including short-term credits
that are not "liquid money market claims" classified under
guideline #1 above, should not be increased by more than 5
Per cent during 1965 from end-of-1964 levels.
This category
includes all bonds, notes, mortgages, loans and other credits
eartYing maturities at date of acquisition of 10 years or less,
lbs date of final maturity is to be taken in classifying indiVidual credit transactions, except that a credit transaction
should not be classified as. "long-term" (and hence subject to
guideline #3 below) unless 10 per cent or more of the amount to
be repaid is scheduled to be repaid after 10 years.
Loans
guaranteed or arranged by the Export-Import Bank or insured
by
the Foreign Credit Insurance Association are not to be
considered foreign credits for purposes of this program.
Net financial investment in foreign branches, finanlind affiliates, if any, should be included
441°4 the assets subject to the 5 per cent expansion ceiling
"dat guideline #2.
Such financial investment includes pay-
tilents into equity and other permanent capital accounts of,
3 net loans and advances to, foreign corporations engaged
'
44
-4
Principally in financial or real estate activities, in which
the institution has an ownership interest of 10
per cent or
more.
Earnings of a foreign affiliate that are reinvested
in the business are not to be included under the guideline
target, although institutions are requested to repatriate
such earnings to the fullest extent feasible.
In administering restraint in foreign lending and
investing, institutions are requeste
d to observe the follow-
ing priorities or guides:
1) credits and investments that
represent bona fide U.S. export financin should
g
receive
absolute priority; 2) non-export credits and
investments
in the less developed countries are
to be given priority
consideration second only to bona fide export financin
g;
3) the flow of investme
nt funds to Canada and Japan, which
are heavily dependent on U.S. capital markets, need
be ree tticted only to the extent necessary to remain under
the
guideline
target; 4) unduly restrictive policies should
be avoided with regard to credits and investments in the
Unit d
Kingdom, which has balance of payments problems;
S)
"0n-export credits and investments in other developed
enuntries (see list below) should ordinarily not be made
until acceptable investments under the first 4 priorities
hay
been accommodated, and then only within the 5 per
cent
"ilin8 for overall expansion under this guideline.
It is recognized that some individual institutions may temporarily exceed the guideline target, because
Of investments made under the first 2 priorities above, or
the taking down of firm prior commitments to lend or invest,
or normal seasonal fluctuations.
In any case
an institution
that exceeds its target should consult with the Federal Reserve
sank in its District regarding a program for moving beck
vithin the ceiling in a reasonable period of time.
3.
Long term credits
exceedin.& 10 years in matu-
titYj and stock investments in foreign companies,. are not subject to
40tes
10
an aggregate target.
This category includes bonds,
mortgages, loans and other credits maturing more than
Years after date of acquisition, as well as preferred and
tom..
-..on stocks.
(Loans and investment in subsidiaries and
ef.filiates, however, are covered by guideline #2).
8
Term
and serial-payment notes and bonds are to be included
in this category if 10 per cent or more of the total amount
Of. the credit is scheduled for repayment to the lender after
10
Years beyond date of acquisition.
No percentage ceiling is suggested on long-term
it
and investments in the
priority categories relat-
inD to
export financing, to less developed countries, and
to
Canada Japan, and the United Kingdom described under
gu
ideline #2 above.
On credits and investments in the
-6 -
fifth priority category, however, lending institutions
are requested to exercise substantial restraint, and
normally would be expected to avoid any increase in the
total of such holdings.
The attention of lending institutions is directed to the need
to refrain from making loans and investments inconsistent with the President's balance of payments program.
Among these are the following:
1) l
ong-term credits covered by guideline #3 which substitute for loans
that commercial banks would have made in the absence of the voluntary
f°reign credit restraint effort administered by the Federal Reserve System;
2) credits to U.S. borrowers which would aid in making new foreign loans
Q1' investments inconsistent with the voluntary restraint program administered by the Department of Commerce; 3) credits to U.S. subsidiaries
and branches of foreign companies which otherwise might have been made
t° the foreign parent, or which would substitute for funds normally obtained
f°1r11 foreign sources; 4) credits to U.S. companies with foreign activities
hieh would take the place of funds normally obtained abroad.
Reasonable
efforts should be made to avoid accommodating credit requests of these
tYPea, regardless of specific guideline targets detailed in this circular.
Notes - None of the guidelines in this circular are intended to
to the reinvestment of reserves on insurance policies sold abroad in
r eta within the country involved, in amounts up to 110 per cent of such
.
-serves.
:TY
Developed countries other than Canada, Japan, and the United
d om
laare:
Australia, Austria, the Bahamas, Belgium, Bermuda, Denmark,
421", Germany (Federal Republic), Hong Kong, Ireland, Italy, Kuwait,
po;chtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway,
Switzerland.
tugal, Republic of South Africa, San Marino, Spain, Sweden and
ad7
Also to be considered "developed" are the following countries
n
the
Sino-Soviet bloc* Albania, Bulgaria, any part of China which is
mow.
tat noted or controlled by International Communism, Cuba, Czechoslovakia,
4,(41ins Hungary, any part of Kota which is dominated or controlled by
4 ,e
rnational Communism, Latvia, Lithuania, Outer Mongolia, Poland (including
42 4reo under its provisional administration), Rumania, Soviet Zone of Germany
the Soviet sector of Berlin, Tibet, Union of Soviet Socialist Republics
the Kurile Islands, Southern Sakhalin, and areas in East Prussia which
under the provisional administration of the Union of Soviet Socialist
'471!)ublics, and any part of Viet-Nam which i dominated or controlled by Interqnnal Communism.
A
r
BOARD OF GOVERNORS
Item No. 10
6/14/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORREOPON0CNCC
TO THE BOARD
June 14, 1965
Mr. Leland M. Ross, Vice President,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Ht. Ross:
In accordance with the request contained in
your letter of June 8, 1965, the Board approves the
reappointment of C. Andrew Lawrence as an assistant
examiner for the Federal Reserve Bank of Chicago.
Please advise the effective date of the reappointment.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER