Readings in Money and Banking Part 94

(2) Whether the nature of the powers exercised by the said bank or trust company and its charter provisions are consistent with the proper conduct of the business of banking and with membership in the federal reserve bank.

(3) Whether the laws of the State or district in which the applying bank or trust company is located contain provisions likely to interfere with the proper regulation and supervision of member banks.

If, in the judgment of the Federal Reserve Board, an applying bank or trust company conforms to all the requirements of the Federal Reserve Act and these regulations, and is otherwise qualified for membership, the board will issue a certificate of approval. Whenever the board may deem it necessary, it will impose such conditions as will insure compliance with the act and these regulations. When the certificate of approval and any conditions contained therein have been accepted by the applying bank or trust company, stock in the federal reserve bank of the district in which the applying bank or trust company is located shall be issued and paid for under the regulations of the Federal Reserve Act provided for national banks which become stockholders in the federal reserve banks.

V

POWERS AND RESTRICTIONS

Every State bank or trust company while a member of the federal reserve system:

(1) Shall retain its full charter and statutory rights as a State bank or trust company, and may continue to exercise the same functions as before admission, except as provided in the Federal Reserve Act and the regulations of the Federal Reserve Board, including any conditions embodied in the certificate of approval.

(2) Shall invest only in loans on real estate or mortgages of a character and to an extent which, considering the nature of its liabilities, will not impair its liquid condition.

(3) Shall adjust, to conform with the requirements of the Federal Reserve Act and these regulations, within such reasonable time as may be determined by the board in each case, any loans it may have at the time of its admission to membership which are secured by its own stock, or any loans to one person, firm, or corporation aggregating more than 10 per cent. of its capital and surplus or more than 30 per cent. of its capital, or any real estate loans which, in the judgment of the Federal Reserve board, impair its liquid condition.

(4) Shall maintain such improvements and changes in its banking practice as may have been specifically required of it by the Federal Reserve Board as a condition of its admission, and shall not lower the standard of banking then required of it: and

(5) Shall enjoy all the privileges an observe all those requirements of the Federal Reserve Act and of the regulations of the Federal Reserve Board applicable to State banks and trust companies which have become member banks.

VI

WITHDRAWALS

Any State bank or trust company desiring to withdraw from membership in a federal reserve bank may do so twelve months after written notice of its intention to withdraw shall have been filed with the Federal Reserve Board. The board will immediately notify the federal reserve bank of the receipt of such notice. At the expiration of said twelve months, such bank or trust company shall surrender all of its holdings of capital stock in the federal reserve bank, which stock shall then be cancelled and the withdrawing bank or trust company shall thereupon be released from its stock subscription not previously called. Such bank or trust company shall, immediately upon the cancellation of its stock, cease to be a member of the federal reserve bank, and the federal reserve bank shall then refund to such bank or trust company a sum equal to the cash-paid subscription on the shares surrendered, with interest at the rate of one-half of one per centum per month computed from the last dividend, if earned, not to exceed the book value thereof, and the reserve deposits, less any liability of such member to the federal reserve bank: _Provided_, That no federal reserve bank shall, except by the specific authority of the Federal Reserve Board, cancel within the same calendar year more than 10 per cent. of its capital stock for the purpose of effecting voluntary withdrawals during that year. All applications, including therein any on which action may have been deferred because in excess of the aforesaid 10 per cent. limitation, will be dealt with in the order in which they were originally filed with the board.

Any State bank or trust company desiring to withdraw from membership at the expiration of the twelve months' notice, notwithstanding the fact that the federal reserve bank has previously cancelled 10 per cent. of its stock during the same calendar year, may do so. In such case, however, the federal reserve bank shall not be required to repay to the withdrawing bank or trust company the sums due as above, until such time as its stock would have been cancelled had it not exercised this option.

The federal reserve bank shall, however, give a receipt for the stock surrendered.

VII

EXAMINATIONS

Every State bank or trust company, while a member of the Federal Reserve system, shall be subject to such examinations as may be prescribed by the Federal Reserve Board in pursuance to the provisions of the Federal Reserve Act.

In order to avoid duplication, the board will exercise the broad discretion vested in it by the act in accepting examinations of State banks and trust companies made by State authorities wherever these are satisfactory to the board and are found to be of the same standard of thoroughness as national bank examinations, and where in addition satisfactory arrangements for co-operation in the matter of examination between the designated examiners of the Board and those of the States already exist or can be effected with State authorities. Examiners from the staff of the board or of the federal reserve banks will, whenever desirable, be designated by the board to act with the examination staff of the State in order that uniformity in the standard of examination may be a.s.sured.

VIII

FUTURE REGULATIONS

The Federal Reserve Board reserves the right to make such amendments and adopt and issue, from time to time, such further regulations authorised by the act as it may deem necessary, but no amendment of section VI of these regulations, relating to voluntary withdrawals, shall take effect until six months after its adoption and issue by the board.

CHARLES S. HAMLIN, Governor.

H. PARKER WILLIS, Secretary.

FOOTNOTES:

[327] Drafts and bills of exchange eligible for rediscount under section 13, other than "bankers'" acceptances, have been dealt with by Regulation B, series of 1915.

[328] Three per cent. has already been called from national and other member banks, but the remainder of the subscription or any part of it shall be subject to call if deemed necessary by the Federal Reserve Board.