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Each depositor insured to at least $250,000 per insured bank

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7500 - FRB Regulations


FEDERAL RESERVE ACT

To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.

REPORTS OF ASSETS AND LIABILITIES

SEC. 11 (a)(1)  To examine at its discretion the accounts, books and affairs of each Federal reserve bank and of each member bank and to require such statements and reports as it may deem necessary. The said board shall publish once each week a statement showing the condition of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such statements shall show in detail the assets and liabilities of the Federal reserve banks, single and combined, and shall furnish full information regarding the character of the money held as reserve and the amount, nature and maturities of the paper and other investments owned or held by Federal reserve banks.

(2)  To require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such reports of its liabilities and assets as the Board may determine to be necessary or desirable to enable the Board to discharge its responsibility to monitor and control monetary and credit aggregates. Such reports shall be made (A) directly to the Board in the case of member banks and in the case of other depository institutions whose reserve requirements under section 19 of this Act exceed zero, and (B) for all other reports to the Board through the (i) Federal Deposit Insurance Corporation in the case of insured State savings associations that are insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act), State nonmember banks, savings banks, and mutual savings banks, (ii) National Credit Union Administration Board in the case of insured credit unions, (iii) the Comptroller of the Currency in the case of any Federal savings association which is an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act) or which is a member as defined in section 2 of the Federal Home Loan Bank Act, and (iv) such State officer or agency as the Board may designate in the case of any other type of bank, savings association, or credit union. The Board shall endeavor to avoid the imposition of unnecessary burdens on reporting institutions and the duplication of other reporting requirements. Except as otherwise required by law, any data provided to any department, agency, or instrumentality of the United States pursuant to other reporting requirements shall be made available to the Board. The Board may classify depository institutions for the purposes of this paragraph and may impose different requirements on each such class.

(o)  AUTHORITY TO APPOINT CONSERVATOR OR RECEIVER.--The Board may appoint the Federal Deposit Insurance Corporation as conservator or receiver for a State member bank under section 11(c)(9) of the Federal Deposit Insurance Act.

[Codified to 12 U.S.C. 248]

[Source:  Section 11 of the Act of December 23, 1913, as amended by section 102 of title I of the Act of March 31, 1980 (Pub. L. No. 96--221; 94 Stat. 132); section 744(i) of title VII of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 439), effective August 9, 1989; section 133(f) of title I of the Act of December 19, 1991 (Pub. L. No. 102--242; 105 Stat. 2273) effective December 19, 1992; section 1603(d)(9) of title XVI of the Act of October 28, 1992 (Pub. L. No. 102--550; 106 Stat. 4080), effective December 19, 1991; section 366(1) of title III of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1556), effective July 21, 2010]

PRICING OF SERVICES

SEC. 11A.  (a)  Not later than the first day of the sixth month after the date of enactment of the Monetary Control Act of 1980, the Board shall publish for public comment a set of pricing principles in accordance with this section and a proposed schedule of fees based upon those principles for Federal Reserve bank services to depository institutions, and not later than the first day of the eighteenth month after the date of enactment of the Monetary Control Act of 1980, the Board shall begin to put into effect a schedule of fees for such services which is based on those principles.

(b)  The services which shall be covered by the schedule of fees under subsection (a) are--

(1)  currency and coin services;

(2)  check clearing and collection services;

(3)  wire transfer services;

(4)  automated clearinghouse services;

(5)  settlement services;

(6)  securities safekeeping services;

(7)  Federal Reserve float; and

(8)  any new services which the Federal Reserve System offers, including but not limited to payment services to effectuate the electronic transfer of funds.

(c)  The schedule of fees prescribed pursuant to this section shall be based on the following principles:

(1)  All Federal Reserve bank services covered by the fee schedule shall be priced explicitly.

(2)  All Federal Reserve bank services covered by the fee schedule shall be available to nonmember depository institutions and such services shall be priced at the same fee schedule applicable to member banks, except that nonmembers shall be subject to any other terms, including a requirement of balances sufficient for clearing purposes, that the Board may determine are applicable to member banks.

(3)  Over the long run, fees shall be established on the basis of all direct and indirect costs actually incurred in providing the Federal Reserve services priced, including interest on items credited prior to actual collection, overhead, and an allocation of imputed costs which takes into account the taxes that would have been paid and the return on capital that would have been provided had the services been furnished by a private business firm, except that the pricing principles shall give due regard to competitive factors and the provision of an adequate level of such services nationwide.

(4)  Interest on items credited prior to collection shall be charged at the current rate applicable in the market for Federal funds.

(d)  The Board shall require reductions in the operating budgets of the Federal Reserve banks commensurate with any actual or projected decline in the volume of services to be provided by such banks. The full amount of any savings so realized shall be paid into the United States Treasury.

(e)  All depository institutions, as defined in section 19(b)(1) (12 U.S.C. 461(b)(1)), may receive for deposit and as deposits any evidences of transaction accounts, as defined by section 19(b)(1) (12 U.S.C. 461(b)(1)) from other depository institutions, as defined in section 19(b)(1) (12 U.S.C. 461(b)(1)) or from any office of any Federal Reserve bank without regard to any Federal or State law restricting the number or the physical location or locations of such depository institutions.

[Codified to 12 U.S.C. 248a]

[Source:  Section 11A of the Act of December 23, 1913, as added by section 107 of title I of the Act of March 31, 1980 (Pub. L. No. 96--221; 94 Stat. 140-141), and as amended by section 612(a) of title VI of the Act of August 10, 1987 (Pub. L. No. 100--86; 101 Stat. 652), effective August 10, 1987]

RESERVE REQUIREMENTS

SEC. 19(b)   RESERVE REQUIREMENTS.--

(a)  Establishment of applicable definitions, payment of interest, obligations as deposits, and regulations.--

The Board is authorized for the purposes of this section to define the terms used in this section, to determine what shall be deemed a payment of interest, to determine what types of obligations, whether issued directly by a member bank or indirectly by an affiliate of a member bank or by other means, and, regardless of the use of the proceeds, shall be deemed a deposit, and to prescribe such regulations as it may deem necessary to effectuate the purposes of this section and to prevent evasions thereof.

(b)  Additional definitions; required amounts of reserves maintained against transaction accounts; waiver of ratio limits in extraordinary circumstances; supplemental reserves; reserves related to foreign obligations or assets; exemption for certain deposits; discount and borrowing; transitional adjustments; additional exemptions and waivers; earnings on balances.--

(1)  The following definitions and rules apply to this subsection, subsection (c), section 11A, the first paragraph of section 13, and the second, thirteenth, and fourteenth paragraphs of section 16:

(A)  The term "depository institution" means--

(i)  any insured bank as defined in section 3 of the Federal Deposit Insurance Act or any bank which is eligible to make application to become an insured bank under section 5 of such Act;

(ii)  any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act or any bank which is eligible to make application to become an insured bank under section 5 of such Act;

(iii)  any savings bank as defined in section 3 of the Federal Deposit Insurance Act or any bank which is eligible to make application to become an insured bank under section 5 of such Act;

(iv)  any insured credit union as defined in section 101 of the Federal Credit Union Act or any credit union which is eligible to make application to become an insured credit union pursuant to section 201 of such Act;

(v)  any member as defined in section 2 of the Federal Home Loan Bank Act;

(vi)  any savings association (as defined in section 3 of the Federal Deposit Insurance Act) which is an insured depository institution (as defined in such Act) or is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act; and

(vii)  for the purpose of section 13 and the fourteenth paragraph of section 16, any association or entity which is wholly owned by or which consists only of institutions referred to in clauses (i) through (vi).

(B)  The term "bank" means any insured or noninsured bank, as defined in section 3 of the Federal Deposit Insurance Act, other than a mutual savings bank or a savings bank as defined in such section.

(C)  The term "transaction account" means a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others. Such term includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts.

(D)  The term "nonpersonal time deposits" means a transferable time deposit or account or a time deposit or account representing funds deposited to the credit of, or in which any beneficial interest is held by, a depositor who is not a natural person.

(E)  The term "reservable liabilities" means transaction accounts, nonpersonal time deposits, and all net balances, loans, assets, and obligations which are, or may be, subject to reserve requirements under paragraph (5).

(F)  In order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with the Board of Directors of the Federal Deposit Insurance Corporation, Comptroller of the Currency, and the National Credit Union Administration Board, the Board of Governors of the Federal Reserve System is authorized to determine, by regulation or order, that an account or deposit is a transaction account if such account or deposit may be used to provide funds directly or indirectly for the purpose of making payments or transfers to third persons or others.

(2)   RESERVE REQUIREMENTS.--(A)  Each depository institution shall maintain reserves against its transaction accounts as the Board may prescribe by regulation solely for the purpose of implementing monetary policy--

(i)  a ratio of not greater than 3 percent (and which may be zero) in for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); and

(ii)  in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum (which may be zero), for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C).

(B)  Each depository institution shall maintain reserves against its nonpersonal time deposits in the ratio of 3 per centum, or in such other ratio not greater than 9 per centum and not less than zero per centum as the Board may prescribe by regulation solely for the purpose of implementing monetary policy.

(C)  Beginning in 1981, not later than December 31 of each year the Board shall issue a regulation increasing for the next succeeding calendar year the dollar amount which is contained in subparagraph (A) or which was last determined pursuant to this subparagraph for the purpose of such subparagraph, by an amount obtained by multiplying such dollar amount by 80 per centum of the percentage increase in the total transaction accounts of all depository institutions. The increase in such transaction accounts shall be determined by subtracting the amount of such accounts on June 30 of the preceding calendar year from the amount of such accounts on June 30 of the calendar year involved. In the case of any such 12-month period in which there has been a decrease in the total transaction accounts of all depository institutions, the Board shall issue such a regulation decreasing for the next succeeding calendar year such dollar amount by an amount obtained by multiplying such dollar amount by 80 per centum of the percentage decrease in the total transaction accounts of all depository institutions. The decrease in such transaction accounts shall be determined by subtracting the amount of such accounts on June 30 of the calendar year involved from the amount of such accounts on June 30 of the previous calendar year.

(D)  Any reserve requirement imposed under this subsection shall be uniformly applied to all transaction accounts at all depository institutions. Reserve requirements imposed under this subsection shall be uniformly applied to nonpersonal time deposits at all depository institutions, except that such requirements may vary by the maturity of such deposits.

(3)   WAIVER OF RATIO LIMITS IN EXTRAORDINARY CIRCUMSTANCES.--Upon a finding by at least 5 members of the Board that extraordinary circumstances require such action, the Board, after consultation with the appropriate committees of the Congress, may impose, with respect to any liability of depository institutions, reserve requirements outside the limitations as to ratios and as to types of liabilities otherwise prescribed by paragraph (2) for a period not exceeding 180 days, and for further periods not exceeding 180 days each by affirmative action by at least 5 members of the Board in each instance. The Board shall promptly transmit to the Congress a report of any exercise of its authority under this paragraph and the reasons for such exercise of authority.

(4)(A)   SUPPLEMENTAL RESERVES.--The Board may, upon the affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution of not more than 4 per centum of its total transaction accounts. Such supplemental reserve requirement may be imposed only if--

(i)  the sole purpose of such requirement is to increase the amount of reserves maintained to a level essential for the conduct of monetary policy;

(ii)  such requirement is not imposed for the purpose of reducing the cost burdens resulting from the imposition of the reserve requirements pursuant to paragraph (2);

(iii)  such requirement is not imposed for the purpose of increasing the amount of balances needed for clearing purposes; and

(iv)  on the date on which the supplemental reserve requirement is imposed, except as provided in paragraph (11) the total amount of reserves required pursuant to paragraph (2) is not less than the amount of reserves that would be required if the initial ratios specified in paragraph (2) were in effect.

(B)  The Board may require the supplemental reserve authorized under subparagraph (A) only after consultation with the Board of Directors of the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the National Credit Union Administration Board. The Board shall promptly transmit to the Congress a report with respect to any exercise of its authority to require supplemental reserves under subparagraph (A) and such report shall state the basis for the determination to exercise such authority.

(C)  If a supplemental reserve under subparagraph (A) has been required of depository institutions for a period of one year or more, the Board shall review and determine the need for continued maintenance of supplemental reserves and shall transmit annual reports to the Congress regarding the need, if any, for continuing the supplemental reserve.

(D)  Any supplemental reserve imposed under subparagraph (A) shall terminate at the close of the first 90-day period after such requirement is imposed during which the average amount of reserves required under paragraph (2) are less than the amount of reserves which would be required during such period if the initial ratios specified in paragraph (2) were in effect.

(5)   RESERVES RELATED TO FOREIGN OBLIGATIONS OR ASSETS.--Foreign branches, subsidiaries, and international banking facilities of nonmember depository institutions shall maintain reserves to the same extent required by the Board of foreign branches, subsidiaries, and international banking facilities of member banks. In addition to any reserves otherwise required to be maintained pursuant to this subsection, any depository institution shall maintain reserves in such ratios as the Board may prescribe against--

(A)  net balances owed by domestic offices of such depository institution in the United States to its directly related foreign offices and to foreign offices of nonrelated depository institutions;

(B)  loans to United States residents made by overseas offices of such depository institution if such depository institution has one or more offices in the United States; and

(C)  assets (including participations) held by foreign offices of a depository institution in the United States which were acquired from its domestic offices.

(6)   EXEMPTION FOR CERTAIN DEPOSITS.--The requirements imposed under paragraph (2) shall not apply to deposits payable only outside the States of the United States and the District of Columbia, except that nothing in this subsection limits the authority of the Board to impose conditions and requirements on member banks under section 25 of this Act or the authority of the Board under section 7 of the International Banking Act of 1978 (12 U.S.C. 3105).

(7)   DISCOUNT AND BORROWING.--Any depository institution in which transaction accounts or nonpersonal time deposits are held shall be entitled to the same discount and borrowing privileges as member banks. In the administration of discount and borrowing privileges, the Board and the Federal Reserve banks shall take into consideration the special needs of savings and other depository institutions for access to discount and borrowing facilities consistent with their long-term asset portfolios and the sensitivity of such institutions to trends in the national money markets.

(8)(A)   TRANSITIONAL ADJUSTMENTS.--Any depository institution required to maintain reserves under this subsection which was engaged in business on July 1, 1979, but was not a member of the Federal Reserve System on or after that date, shall maintain reserves against its deposits during the first twelve-month period following the effective date of this paragraph in amounts equal to one-eighth of those otherwise required by this subsection, during the second such twelve-month period in amounts equal to one-fourth of those otherwise required, during the third such twelve-month period in amounts equal to three-eighths of those otherwise required, during the fourth twelve-month period in amounts equal to one-half of those otherwise required, and during the fifth twelve-month period in amounts equal to five-eighths of those otherwise required, during the sixth twelve-month period in amounts equal to three-fourths of those otherwise required, and during the seventh twelve-month period in amounts equal to seven-eighths of those otherwise required. This subparagraph does not apply to any category of deposits or accounts which are first authorized pursuant to Federal law in any State after April 1, 1980.

(B)  With respect to any bank which was a member of the Federal Reserve System during the entire period beginning on July 1, 1979, and ending on the effective date of the Monetary Control Act of 1980, the amount of required reserves imposed pursuant to this subsection on and after the effective date of such Act that exceeds the amount of reserves which would have been required of such bank if the reserve ratios in effect during the reserve computation period immediately preceding such effective date were applied may, at the discretion of the Board and in accordance with such rules and regulations as it may adopt, be reduced by 75 per centum during the first year which begins after such effective date, 50 per centum during the second year, and 25 per centum during the third year.

(C)(i)  With respect to any bank which is a member of the Federal Reserve System on the effective date of the Monetary Control Act of 1980, the amount of reserves which would have been required of such bank if the reserve ratios in effect during the reserve computation period immediately preceding such effective date were applied that exceeds the amount of required reserves imposed pursuant to this subsection shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective date, 50 per centum during the second year, and 75 per centum during the third year.

(ii)  If a bank becomes a member bank during the four-year period beginning on the effective date of the Monetary Control Act of 1980, and if the amount of reserves which would have been required of such bank, determined as if the reserve ratios in effect during the reserve computation period immediately preceding such effective date were applied, and as if such bank had been a member during such period, exceeds the amount of reserves required pursuant to this subsection, the amount of reserves required to be maintained by such bank beginning on the date on which such bank becomes a member of the Federal Reserve System shall be the amount of reserves which would have been required of such bank if it had been a member on the day before such effective date, except that the amount of such excess shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective date, 50 per centum during the second year, and 75 per centum during the third year.

(D)(i)  Any bank which was a member bank on July 1, 1979, and which withdrew from membership in the Federal Reserve System during the period beginning July 1, 1979, and ending on March 31, 1980, shall maintain reserves during the first twelve-month period beginning on the date of enactment of this clause in amounts equal to one-half of those otherwise required by this subsection, during the second such twelve-month period in amounts equal to two-thirds of those otherwise required, and during the third such twelve-month period in amounts equal to five-sixths of those otherwise required.

(ii)  Any bank which withdraws from membership in the Federal Reserve System after the date of enactment of the Depository Institutions Deregulation and Monetary Control Act of 1980 shall maintain reserves in the same amount as member banks are required to maintain under this subsection, pursuant to subparagraphs (B) and (C)(i).

(E)  This subparagraph applies to any depository institution that, on August 1, 1978, (i) was engaged in business as a depository institution in a State outside the continental limits of the United States, and (ii) was not a member of the Federal Reserve System at any time on or after such date. Such a depository institution shall not be required to maintain reserves against its deposits held or maintained at its offices located in a State outside the continental limits of the United States until the first day of the sixth calendar year which begins after the effective date of the Monetary Control Act of 1980. Such a depository institution shall maintain reserves against such deposits during the sixth calendar year which begins after such effective date in an amount equal to one-eighth of that otherwise required by paragraph (2), during the seventh such year in an amount equal to one-fourth of that otherwise required, during the eighth such year in an amount equal to three-eighths of that otherwise required, during the ninth such year in an amount equal to one-half of that otherwise required, during the tenth such year in an amount equal to five-eighths of that otherwise required, during the eleventh such year in an amount equal to three-fourths of that otherwise required, and during the twelfth such year in an amount equal to seven-eighths of that otherwise required.

(9)   EXEMPTION.--This subsection shall not apply with respect to any financial institution which--

(A)  is organized solely to do business with other financial institutions;

(B)  is owned primarily by the financial institutions with which it does business; and

(C)  does not do business with the general public.

(10)   WAIVERS.--In individual cases, where a Federal supervisory authority waives a liquidity requirement, or waives the penalty for failing to satisfy a liquidity requirement, the Board shall waive the reserve requirement, or waive the penalty for failing to satisfy a reserve requirement, imposed pursuant to this subsection for the depository institution involved when requested by the Federal supervisory authority involved.

(11)   ADDITIONAL EXEMPTIONS.--(A)(i)  Notwithstanding the reserve requirement ratios established under paragraphs (2) and (5) of this subsection, a reserve ratio of zero per centum shall apply to any combination of reservable liabilities, which do not exceed $2,000,000 (as adjusted under subparagraph (B)), of each depository institution.

(ii)  Each depository institution may designate, in accordance with such rules and regulations as the Board shall prescribe, the types and amounts of reservable liabilities to which the reserve ratio of zero per centum shall apply, except that transaction accounts which are designated to be subject to a reserve ratio of zero per centum shall be accounts which would otherwise be subject to a reserve ratio of 3 per centum under paragraph (2).

(iii)  The Board shall minimize the reporting necessary to determine whether depository institutions have total reservable liabilities of less than $2,000,000 (as adjusted under subparagraph (B)). Consistent with the Board's responsibility to monitor and control monetary and credit aggregates, depository institutions which have reserve requirements under this subsection equal to zero per centum shall be subject to less overall reporting requirements than depository institutions which have a reserve requirement under this subsection that exceeds zero per centum.

(B)(i)  Beginning in 1982, not later than December 31 of each year, the Board shall issue a regulation increasing for the next succeeding calendar year the dollar amount specified in subparagraph (A), as previously adjusted under this subparagraph, by an amount obtained by multiplying such dollar amount by 80 per centum of the percentage increase in the total reservable liabilities of all depository institutions.

(ii)  The increase in total reservable liabilities shall be determined by subtracting the amount of total reservable liabilities on June 30 of the preceding calendar year from the amount of total reservable liabilities on June 30 of the calendar year involved. In the case of any such twelve-month period in which there has been a decrease in the total reservable liabilities of all depository institutions, no adjustment shall be made. A decrease in total reservable liabilities shall be determined by subtracting the amount of total reservable liabilities on June 30 of the calendar year involved from the amount of total reservable liabilities on June 30 of the previous calendar year.

(12)  EARNINGS ON BALANCES.--

(A)  IN GENERAL.--Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates.

(B)  REGULATIONS RELATING TO PAYMENTS AND DISTRIBUTIONS.--The Board may prescribe regulations concerning--

(i)  the payment of earnings in accordance with this paragraph;

(ii)  the distribution of such earnings to the depository institutions which maintain balances at such banks, or on whose behalf such balances are maintained; and

(iii)  the responsibilities of depository institutions, Federal Home Loan Banks, and the National Credit Union Administration Central Liquidity Facility with respect to the crediting and distribution of earnings attributable to balances maintained, in accordance with subsection (c)(1)(A), in a Federal Reserve bank by any such entity on behalf of depository institutions.

(C)  DEPOSITORY INSTITUTIONS DEFINED.--For purposes of this paragraph, the term "depository institution", in addition to the institutions described in paragraph (1)(A), includes any trust company, corporation organized under section 25A or having an agreement with the Board under section 25, or any branch or agency of a foreign bank (as defined in section 1(b) of the International Banking Act of 1978).

[Codified to 12 U.S.C. 461b]

[Source:  Section 19(b) of the Act of December 23, 1913; as amended by the Act of June 21, 1917 (Pub. L. No. 26; 40 Stat. 239); the Act of September 26, 1918 (Pub. L. No. 218; 40 Stat. 970); the Act of May 12, 1933 (Pub. L. No. 10; 48 Stat. 54); the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 706); the Act of July 7, 1942 (Pub. L. No. 656; 56 Stat. 648); the Act of August 16, 1948 (Pub. L. No. 905; 62 Stat. 1291); the Act of July 28, 1959 (Pub. L. No. 86--114; 73 Stat. 264); the Act of September 21, 1966 (Pub. L. No. 89--597; 80 Stat. 823); the Act of September 21, 1967 (Pub. L. No. 90--87; 81 Stat. 226); the Act of September 21, 1968 (Pub. L. No. 90--505; 82 Stat. 856); the Act of December 23, 1969 (Pub. L. No. 91--151; 83 Stat. 375); section 103 of title I of the Act of March 31, 1980 (Pub. L. No. 96--221; 94 Stat. 133--138); section 385 of title III of the Act of August 13, 1981 (Pub. L. No. 97--35; 95 Stat. 433); and section 411 of title IV and section 708 of title VII of the Act of October 15, 1982 (Pub. L. No. 97--320; 96 Stat. 1520--1521 and 1540), effective October 15, 1982; section 744(i)(2) and (3) of title VII of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 439), effective August 9, 1989; section 201(a), 201(b)(1), and 202 of title II of the Act of October 13, 2006 (Pub.L. No. 109--351; 120 Stat. 1968 and 1969; section 366(2) of title III of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1556), effective July 21, 2010]


FORM OF RESERVES

SEC. 19(c)(1)  Reserves held by a depository institution to meet the requirements imposed pursuant to subsection (b) shall, subject to such rules and regulations as the Board shall prescribe, be in the form of--

(A)  balances maintained for such purposes by such depository institution in the Federal Reserve bank of which it is a member or at which it maintains an account, except that (i) the Board may, by regulation or order, permit depository institutions to maintain all or a portion of their required reserves in the form of vault cash, except that any portion so permitted shall be identical for all depository institutions, and (ii) vault cash may be used to satisfy any supplemental reserve requirement imposed pursuant to subsection (b)(4), except that all such vault cash shall be excluded from any computation of earnings pursuant to subsection (b); and

(B)  balances maintained by a depository institution in a depository institution which maintains required reserve balances at a Federal Reserve bank, in a Federal Home Loan Bank, or in the National Credit Union Administration Central Liquidity Facility, if such depository institution, Federal Home Loan Bank, or National Credit Union Administration Central Liquidity Facility maintains such funds in the form of balances in a Federal Reserve bank of which it is a member or at which it maintains an account. Balances received by a depository institution from a second depository institution and used to satisfy the reserve requirement imposed on such second depository institution by this section shall not be subject to the reserve requirements of this section imposed on such first depository institution, and shall not be subject to assessments or reserves imposed on such first depository institution pursuant to section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817), section 404 of the National Housing Act (12 U.S.C. 1727), or section 202 of the Federal Credit Union Act (12 U.S.C. 1782).

(2)  The balances maintained to meet the reserve requirements of subsection (b) by a depository institution in a Federal Reserve bank or passed through a Federal Home Loan Bank or the National Credit Union Administration Central Liquidity Facility or another depository institution to a Federal Reserve bank may be used to satisfy liquidity requirements which may be imposed under other provisions of Federal or State law.

[Codified to 12 U.S.C. 461c]

[Source:  Section 19(c) of the Act of December 23, 1913, as amended by the Act of August 15, 1914 (Pub. L. No. 171; 38 Stat. 691); the Act of June 21, 1917 (Pub. L. No. 26; 40 Stat. 239); the Act of September 21, 1966 (Pub. L. No. 89--597; 80 Stat. 823); the Act of September 21, 1967 (Pub. L. No. 90--87; 81 Stat. 226); the Act of September 21, 1968 (Pub. L. No. 90--505; 82 Stat. 856); and section 104 of title I of the Act of March 31, 1980 (Pub. L. No. 96--221; 94 Stat. 138); sections 201(b)(2) of title II and 203 of title VI of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 1969 and 1980), effective October 13, 2006 ]


OFFENSES OF EXAMINERS, MEMBER BANKS, OFFICERS, AND
DIRECTORS

SEC. 22

(d)  [Reserved]

(g)  LOANS TO EXECUTIVE OFFICERS OF BANKS.--

(1)  GENERAL PROHIBITION: AUTHORIZATION FOR EXTENSION OF CREDIT; CONDITIONS FOR CREDIT--Except as authorized under this section, no member bank may extend credit in any manner to any of its own executive officers. No executive officer of any member bank may become indebted to that member bank except by means of an extension of credit which the bank is authorized to make under this section. Any extension of credit under this section shall be promptly reported to the board of directors of the bank, and may be made only if--

(A)  the bank would be authorized to make it to borrowers other than its officers;

(B)  it is on terms not more favorable than those afforded other borrowers;

(C)  the officer has submitted a detailed current financial statement; and

(D)  it is on condition that it shall become due and payable on demand of the bank at any time when the officer is indebted to any other bank or banks on account of extensions of credit of any one of the three categories respectively referred to in paragraphs (2), (3), and (4) in any aggregate amount greater than the amount of credit of the same category that could be extended to him by the bank of which he is an officer.

(2)  MORTGAGE LOANS--A member bank may make a loan to any executive officer of the bank if, at the time the loan is made--

(A)  it is secured by a first lien on a dwelling which is expected, after the making of the loan, to be owned by the officer and used by him as his residence, and

(B)  no other loan by the bank to the officer under authority of this paragraph is outstanding.

(3)  EDUCATIONAL LOANS--A member bank may make extensions of credit to any executive officer of the bank to finance the education of the children of the officer.

(4)  GENERAL LIMITATION ON AMOUNT OF CREDIT--A member bank may make extensions of credit not otherwise specifically authorized under this section to any executive officer of the bank, in an amount prescribed in a regulation of the member bank's appropriate Federal banking agency.

(5)  PARTNERSHIP LOANS-- Except to the extent permitted under paragraph (4), a member bank may not extend credit to a partnership in which one or more of its executive officers are partners having either individually or together a majority interest. For the purposes of paragraph (4), the full amount of any credit so extended shall be considered to have been extended to each officer of the bank who is a member of the partnership.

(6)  ENDORSEMENT OR GUARANTEE OF LOANS OR ASSETS; PROTECTIVE INDEBTEDNESS--This section does not prohibit any executive officer of a member bank from endorsing or guaranteeing for the protection of the bank any loan or other asset previously acquired by the bank in good faith or from incurring any indebtedness to the bank for the purpose of protecting the bank against loss or giving financial assistance to it.

(7)  CONTINUATION OF VIOLATION--Each day that any extension of credit in violation of this section exists is a continuation of the violation for the purposes of section 1818 of this title.

(8)  RULES AND REGULATIONS; DEFINITIONS--The Board of Governors of the Federal Reserve System may prescribe such rules and regulations, including definitions of terms, as it deems necessary to effectuate the purposes and to prevent evasions of this section.

[Codified to 12 U.S.C. 375a]

[Source:  Section 22(g) of the Act of December 23, 1913; as added by section 12 of the Act of June 16, 1933 (48 Stat. 182); as amended by the Act of June 14, 1935 (49 Stat. 375); section 326(c) of the Act of August 23, 1935 (49 Stat. 716); the Act of April 25, 1938 (52 Stat. 223); section 1 of the Act of June 20, 1939 (53 Stat. 842); section 1 of the Act of July 3, 1967 (Pub. L. No. 90--44; 81 Stat. 109); section 110 of title 1 of the Act of November 10, 1978 (Pub. L. No. 95--630; 92 Stat. 3665); section 421 of title IV of the Act of October 15, 1982 (Pub. L. No. 97--320; (96 Stat. 1522); section 334(a) of title III of the Act of September 23, 1994 (Pub. L. No. 103--325; 108 Stat. 2233), effective September 23, 1994; section 601(a) of title VI of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 1978), effective October 13, 2006]

(h)  EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS.--

(1)  IN GENERAL.--No member bank may extend credit to any of its executive officers, directors, or principal shareholders, or to any related interest of such a person, except to the extent permitted under paragraphs (2), (3), (4), (5), and (6).

(2)  PREFERENTIAL TERMS PROHIBITED.--

(A)  IN GENERAL.--A member bank may extend credit to its executive officers, directors, or principal shareholders, or to any related interest of such a person, only if the extension of credit--

(i)  is made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the bank with persons who are not executive officers, directors, principal shareholders, or employees of the bank;

(ii)  does not involve more than the normal risk of repayment or present other unfavorable features; and

(iii)  the bank follows credit underwriting procedures that are not less stringent than those applicable to comparable transactions by the bank with persons who are not executive officers, directors, principal shareholders, or employees of the bank.

(B)  EXCEPTION.--Nothing in this paragraph shall prohibit any extension of credit made pursuant to a benefit or compensation program--

(i)  that is widely available to employees of the member bank; and

(ii)  that does not give preference to any officer, director, or principal shareholder of the member bank, or to any related interest of such person, over other employees of the member bank.

(3)  PRIOR APPROVAL REQUIRED.--A member bank may extend credit to a person described in paragraph (1) in an amount that, when aggregated with the amount of all other outstanding extensions of credit by that bank to each such person and that person's related interests, would exceed an amount prescribed by regulation of the appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act) only if--

(A)  the extension of credit has been approved in advance by a majority vote of that bank's entire board of directors; and

(B)  the interested party has abstained from participating, directly or indirectly, in the deliberations or voting on the extension of credit.

(4)  AGGREGATE LIMIT ON EXTENSIONS OF CREDIT TO ANY EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDER.--A member bank may extend credit to any executive officer, director, or principal shareholder, or to any related interest of such a person, only if the extension of credit is in an amount that, when aggregated with the amount of all outstanding extensions of credit by that bank to that person and that person's related interests, would not exceed the limits on loans to a single borrower established by section 5200 of the Revised Statutes. For purposes of this paragraph, section 5200 of the Revised Statutes shall be deemed to apply to a State member bank as if the State member bank were a national banking association.

(5)  AGGREGATE LIMIT ON EXTENSIONS OF CREDIT TO ALL EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS.--

(A)  IN GENERAL.--A member bank may extend credit to any executive officer, director, or principal shareholder, or to any related interest of such a person, if the extension of credit is in an amount that, when aggregated with the amount of all outstanding extensions of credit by that bank to its executive officers, directors, principal shareholders, and those persons' related interests would not exceed the bank's unimpaired capital and unimpaired surplus.

(B)  MORE STRINGENT LIMIT AUTHORIZED.--The Board may, by regulation, prescribe a limit that is more stringent than that contained in subparagraph (A).

(C)  BOARD MAY MAKE EXCEPTIONS FOR CERTAIN BANKS.--The Board may, by regulation, make exceptions to subparagraph (A) for member banks with less than $100,000,000 in deposits if the Board determines that the exceptions are important to avoid constricting the availability of credit in small communities or to attract directors to such banks. In no case may the aggregate amount of all outstanding extensions of credit to a bank's executive officers, directors, principal shareholders, and those persons' related interests be more than 2 times the bank's unimpaired capital and unimpaired surplus.

(6)  OVERDRAFTS BY EXECUTIVE OFFICERS AND DIRECTORS PROHIBITED.--

(A)  IN GENERAL.--If any executive officer or director has an account at the member bank, the bank may not pay on behalf of that person an amount exceeding the funds on deposit in the account.

(B)  EXCEPTIONS.--Subparagraph (A) does not prohibit a member bank from paying funds in accordance with--

(i)  a written preauthorized, interest-bearing extension of credit specifying a method of repayment; or

(ii)  a written preauthorized transfer of funds from another account of the executive officer or director at that bank.

(7)  PROHIBITION ON KNOWINGLY RECEIVING UNAUTHORIZED EXTENSION OF CREDIT.--No executive officer, director, or principal shareholder shall knowingly receive (or knowingly permit any of that person's related interests to receive) from a member bank, directly or indirectly, any extension of credit not authorized under this subsection.

(8)  EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDER OF CERTAIN AFFILIATES TREATED AS EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDER OF MEMBER BANK.--

(A)  IN GENERAL.--For purposes of this subsection, any executive officer, director, or principal shareholder (as the case may be) of any company of which the member bank is a subsidiary, or of any other subsidiary of that company, shall be deemed to be an executive officer, director, or principal shareholder (as the case may be) of the member bank.

(B)  EXCEPTION.--The Board may, by regulation, make exceptions to subparagraph (A) for any executive officer or director of a subsidiary of a company that controls the member bank if--

(i)  the executive officer or director does not have authority to participate, and does not participate, in major policymaking functions of the member bank; and

(ii)  the assets of such subsidiary do not exceed 10 percent of the consolidated assets of a company that controls the member bank and such subsidiary (and is not controlled by any other company).

(9)  DEFINITIONS.--For purposes of this subsection:

(A)  COMPANY.--

(i)  IN GENERAL.--Except as provided in clause (ii), the term "company" means any corporation, partnership, business or other trust, association, joint venture, pool syndicate, sole proprietorship, unincorporated organization, or other business entity.

(ii)  EXCEPTIONS.--The term "company" does not include--

(I)  an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act); or

(II)  a corporation the majority of the shares of which are owned by the United States or by any State.

(B)  CONTROL.--A person controls a company or bank if that person, directly or indirectly, or acting through or in concert with 1 or more persons--

(i)  owns, controls, or has the power to vote 25 percent or more of any class of the company's voting securities;

(ii) controls in any manner the election of a majority of the company's directors; or

(iii) has the power to exercise a controlling influence over the company's management or policies.

(C)  EXECUTIVE OFFICER.--A person is an "executive officer" of a company or bank if that person participates or has authority to participate (other than as a director) in major policymaking functions of the company or bank.

(D)  EXTENSION OF CREDIT.--

(i)  IN GENERAL.--A member bank extends credit to a person by--

(I)  making or renewing any loan, granting a line of credit, or entering into any similar transaction as a result of which the person becomes obligated (directly or indirectly, or by any means whatsoever) to pay money or its equivalent to the bank; or

(II)  having credit exposure to the person arising from a derivative transaction (as defined in section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b)), repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the member bank and the person.

(ii)  EXCEPTIONS.--The Board may, by regulation, make exceptions to clause (i) for transactions that the Board determines pose minimal risk.

(E)  MEMBER BANK.--The term "member bank" includes any subsidiary of a member bank.

(F)  PRINCIPAL SHAREHOLDER.--The term "principal shareholder"--

(i)  means any person that directly or indirectly, or acting through or in concert with one or more persons, owns, controls, or has the power to vote more than 10 percent of any class of voting securities of a member bank or company; and

(ii)  does not include a company of which a member bank is a subsidiary.

(G)  RELATED INTEREST.--A "related interest" of a person is--

(i)  any company controlled by that person; and

(ii)  any political or campaign committee that is controlled by that person or the funds or services of which will benefit that person.

(H)  SUBSIDIARY.--The term "subsidiary" has the same meaning as in section 2 of the Bank Holding Company Act of 1956.

(10)  BOARD'S RULEMAKING AUTHORITY.--The Board of Governors of the Federal Reserve System may prescribe such regulations, including definitions of terms, as it determines to be necessary to effectuate the purposes and prevent evasions of this subsection.

[Codified to 12 U.S.C. 375b]

[Source:  Section 22(h) of the Act of December 23, 1913; as added by section 104 of the Act of November 10, 1978 (Pub. L. No. 95--630; 92 Stat. 3644); as amended by sections 410(e) and 422 of title IV of the Act of October 15, 1982 (Pub. L. No. 97--320; 96 Stat. 1520 and 1522), effective October 15, 1982; section 306 of title III of the Act of December 19, 1991 (Pub. L. No. 102--242; 105 Stat. 2355), effective upon the earlier of the date on which final implementing regulations become effective, or 150 days after the date of enactment of this Act; section 955 of title IX of the Act of October 28, 1992 (Pub. L. No. 102--550; 106 Stat. 3895), effective October 28, 1992; section 1605(a)(10) of title XVI of the Act of October 28, 1992 (Pub. L. No. 102--550; 106 Stat. 4086), effective December 19, 1991; section 334(b) of title III of the Act of September 23, 1994 (Pub. L. No. 103--325; 108 Stat. 2233), effective September 23, 1994; section 2211 of title II of the Act of September 30, 1996 (Pub. L. No. 104--208; 110 Stat. 3009--410 and 411), effective September 30, 1996; section 614(a) of title VI of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1614), effective July 21, 2012]

BANKING AFFILIATES ACT OF 1982

Sec. 23A.  (a)   RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES.--

(1)  A member bank and its subsidiaries may engage in a covered transaction with an affiliate only if--

(A)  in the case of any affiliate, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 10 per centum of the capital stock and surplus of the member bank; and

(B)  in the case of all affiliates, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 20 per centum of the capital stock and surplus of the member bank.

(2)  For the purpose of this section, any transaction by a member bank with any person shall be deemed to be a transaction with an affiliate to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that affiliate.

(3)  A member bank and its subsidiaries may not purchase a low-quality asset from an affiliate unless the bank or such subsidiary, pursuant to an independent credit evaluation, committed itself to purchase such asset prior to the time such asset was acquired by the affiliate.

(4)  Any covered transactions and any transactions exempt under subsection (d) between a member bank and an affiliate shall be on terms and conditions that are consistent with safe and sound banking practices.

(b)   DEFINITIONS.--For the purpose of this section--

(1)  the term "affiliate" with respect to a member bank means--

(A)  any company that controls the member bank and any other company that is controlled by the company that controls the member bank;

(B)  a bank subsidiary of the member bank;

(C)  any company--

(i)  that is controlled directly or indirectly, by a trust or otherwise, by or for the benefit of shareholders who beneficially or otherwise control, directly or indirectly, by trust or otherwise, the member bank or any company that controls the member bank; or

(ii)  in which a majority of its directors or trustees constitute a majority of the persons holding any such office with the member bank or any company that controls the member bank;

(D)(i)  any company, including a real estate investment trust, that is sponsored and advised on a contractual basis by the member bank or any subsidiary or affiliate of the member bank; or

(ii)  any investment company with respect to which a member bank or any affiliate thereof is an investment advisor as defined in section 2(a)(20) of the Investment Company Act of 1940; and

(E)  any company that the Board determines by regulation or order to have a relationship with the member bank or any subsidiary or affiliate of the member bank, such that covered transactions by the member bank or its subsidiary with that company may be affected by the relationship to the detriment of the member bank or its subsidiary; and

(2)  the following shall not be considered to be an affiliate:

(A)  any company, other than a bank, that is a subsidiary of a member bank, unless a determination is made under paragraph (1)(E) not to exclude such subsidiary company from the definition of affiliate;

(B)  any company engaged solely in holding the premises of the member bank;

(C)  any company engaged solely in conducting a safe deposit business;

(D)  any company engaged solely in holding obligations of the United States or its agencies or obligations fully guaranteed by the United States or its agencies as to principal and interest; and

(E)  any company where control results from the exercise of rights arising out of a bona fide debt previously contracted, but only for the period of time specifically authorized under applicable State or Federal law or regulation or, in the absence of such law or regulation, for a period of two years from the date of the exercise of such rights or the effective date of this Act, whichever date is later, subject, upon application, to authorization by the Board for good cause shown of extensions of time for not more than one year at a time, but such extensions in the aggregate shall not exceed three years;

(3)(A)  a company or shareholder shall be deemed to have control over another company if--

(i)  such company or shareholder, directly or indirectly, or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the other company;

(ii)  such company or shareholder controls in any manner the election of a majority of the directors or trustees of the other company; or

(iii)  the Board determines, after notice and opportunity for hearing, that such company or shareholder, directly or indirectly, exercises a controlling influence over the management or policies of the other company; and

(B)  notwithstanding any other provision of this section, no company shall be deemed to own or control another company by virtue of its ownership or control of shares in a fiduciary capacity, except as provided in paragraph (1)(C) of this subsection or if the company owning or controlling such shares is a business trust;

(4)  the term "subsidiary" with respect to a specified company means a company that is controlled by such specified company;

(5)  the term "bank" includes a State bank, national bank, banking association, and trust company;

(6)  the term "company" means a corporation, partnership, business trust, association, or similar organization and, unless specifically excluded, the term "company" includes a "member bank" and a "bank";

(7)  the term "covered transaction" means with respect to an affiliate of a member bank--

(A)  a loan or extension of credit to the affiliate, including a purchase of assets subject to an agreement to repurchase;

(B)  a purchase of or an investment in securities issued by the affiliate;

(C)  a purchase of assets from the affiliate, except such purchase of real and personal property as may be specifically exempted by the Board by order or regulation;

(D)  the acceptance of securities or other debt obligations issued by the affiliate as collateral security for a loan or extension of credit to any person or company;

(E)  the issuance of a guarantee, acceptance, or letter of credit, including an endorsement or standby letter of credit, on behalf of an affiliate;

(F)  a transaction with an affiliate that involves the borrowing or lending of securities, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate; or

(G)  a derivative transaction, as defined in paragraph (3) of section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b)), with an affiliate, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate;

(8)  the term "aggregate amount of covered transactions" means the amount of the covered transactions about to be engaged in added to the current amount of all outstanding covered transactions;

(9)  the term "securities" means stocks, bonds, debentures, notes, or other similar obligations; and

(10)  the term "low-quality asset" means an asset that falls in any one or more of the following categories:

(A)  an asset classified as "substandard", "doubtful", or "loss" or treated as "other loans especially mentioned" in the most recent report of examination or inspection of an affiliate prepared by either a Federal or State supervisory agency;

(B)  an asset in a nonaccrual status;

(C)  an asset on which principal or interest payments are more than thirty days past due; or

(D)  an asset whose terms have been renegotiated or compromised due to the deteriorating financial condition of the obligor.

(11)  REBUTTABLE PRESUMPTION OF CONTROL OF PORTFOLIO COMPANIES.--In addition to paragraph (3), a company or shareholder shall be presumed to control any other company if the company or shareholder, directly or indirectly, or acting through 1 or more other persons, owns or controls 15 percent or more of the equity capital of the other company pursuant to subparagraph (H) or (I) of section 4(k)(4) of the Bank Holding Company Act of 1956 or rules adopted under section 122 of the Gramm-Leach-Bliley Act, if any, unless the company or shareholder provides information acceptable to the Board to rebut this presumption of control.

(c)  COLLATERAL FOR CERTAIN TRANSACTIONS WITH AFFILIATES.--

(1)  Each loan or extension of credit to, or guarantee, acceptance, or letter of credit issued on behalf of, an affiliate by a member bank or its subsidiary, and any credit exposure of a member bank or a subsidiary to an affiliate resulting from a securities borrowing or lending transaction, or a derivative transaction, shall be secured at all times by collateral having a market value equal to--

(A)  100 per centum of the amount of such loan or extension of credit, guarantee, acceptance, letter of credit, or credit exposure if the collateral is composed of--

(i)  obligations of the United States or its agencies;

(ii)  obligations fully guaranteed by the United States or its agencies as to principal and interest;

(iii)  notes, drafts, bills of exchange or bankers acceptances that are eligible for rediscount or purchase by a Federal Reserve Bank; or

(iv)  a segregated, earmarked deposit account with the member bank;

(B)  110 per centum of the amount of such loan or extension of credit, guarantee, acceptance, letter of credit, or credit exposure if the collateral is composed of obligations of any State or political subdivision of any State;

(C) 120 per centum of the amount of such loan or extension of credit, guarantee, acceptance, letter of credit, or credit exposure if the collateral is composed of other debt instruments, including receivables; or

(D)  130 per centum of the amount of such loan or extension of credit, guarantee, acceptance, letter of credit, or credit exposure if the collateral is composed of stock, leases, or other real or personal property.

(2)  A low-quality asset shall not be acceptable as collateral for a loan or extension of credit to, or guarantee, acceptance, or letter of credit issued on behalf of, an affiliate, or credit exposure to an affiliate resulting from a securities borrowing or lending transaction, or derivative transaction.

(3)  The securities or other debt obligations issued by an affiliate of the member bank shall not be acceptable as collateral for a loan or extension of credit to, guarantee, acceptance, or letter of credit issued on behalf of, or credit exposure from a securities borrowing or lending transaction, or derivative transaction to, that affiliate or any other affiliate of the member bank.

(4)  The collateral requirements of this paragraph shall not be applicable to an acceptance that is already fully secured either by attached documents or by other property having an ascertainable market value that is involved in the transaction.

(d)  EXEMPTIONS.--The provisions of this section, except paragraph (a)(4), shall not be applicable to--

(1)  any transaction, subject to the prohibition contained in subsection (a)(3), with a bank--

(A)  which controls 80 per centum or more of the voting shares of the member bank;

(B)  in which the member bank controls 80 per centum or more of the voting shares; or

(C)  in which 80 per centum or more of the voting shares are controlled by the company that controls 80 per centum or more of the voting shares of the member bank;

(2)  making deposits in an affiliated bank or affiliated foreign bank in the ordinary course of correspondent business, subject to any restrictions that the Board may prescribe by regulation or order;

(3)  giving immediate credit to an affiliate for uncollected items received in the ordinary course of business;

(4)  making a loan or extension of credit to, issuing a guarantee, acceptance, or letter of credit on behalf of, or having credit exposure resulting from a securities borrowing or lending transaction or derivative transaction to, an affiliate that is fully secured by--

(A)  obligations of the United States or its agencies;

(B)  obligations fully guaranteed by the United States or its agencies as to principal and interest; or

(C)  a segregated, earmarked deposit account with the member bank;

(5)  purchasing securities issued by any company of the kinds described in section 4(c)(1) of the Bank Holding Company Act of 1956;

(6)  purchasing assets having a readily identifiable and publicly available market quotation and purchased at that market quotation or, subject to the prohibition contained in subsection (a)(3), purchasing loans on a nonrecourse basis from affiliated banks; and

(7)  purchasing from an affiliate a loan or extension of credit that was originated by the member bank and sold to the affiliate subject to a repurchase agreement or with recourse.

(e)  RULES RELATING TO BANKS WITH FINANCIAL SUBSIDIARIES.--

(1)  FINANCIAL SUBSIDIARY DEFINED.--For purposes of this section and section 23B, the term financial subsidiary' means any company that is a subsidiary of a bank that would be a financial subsidiary of a national bank under section 5136A of the Revised Statutes of the United States.

(2)  FINANCIAL SUBSIDIARY TREATED AS AN AFFILIATE.--For purposes of applying this section and section 23B, and notwithstanding subsection (b)(2) of this section or section 23B(d)(1), a financial subsidiary of a bank--

(A)  shall be deemed to be an affiliate of the bank; and

(B)  shall not be deemed to be a subsidiary of the bank.

(3)  ANTI-EVASION PROVISION.--For purposes of this section and section 23B--

(A)  any purchase of, or investment in, the securities of a financial subsidiary of a bank by an affiliate of the bank shall be considered to be a purchase of or investment in such securities by the bank; and

(B)  any extension of credit by an affiliate of a bank to a financial subsidiary of the bank shall be considered to be an extension of credit by the bank to the financial subsidiary if the Board determines that such treatment is necessary or appropriate to prevent evasions of this Act and the Gramm-Leach-Bliley Act.

(f)  RULEMAKING AND ADDITIONAL EXEMPTIONS.--

(1)  The Board may issue such further regulations and orders, including definitions consistent with this section, as may be necessary to administer and carry out the purposes of this section and to prevent evasions thereof.

(2)(A)  IN GENERAL.--The Board may, at its discretion, by regulation exempt transactions or relationships from the requirements of this section if--

(i)  the Board finds the exemption to be in the public interest and consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding; and

(ii)  before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under clause (i), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.

(B)  ADDITIONAL EXEMPTIONS.--

(i)  NATIONAL BANKS.--The Comptroller of the Currency may, by order, exempt a transaction of a national bank from the requirements of this section if--

(I)  the Board and the Office of the Comptroller of the Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and

(II)  before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subclause (I), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.

(ii)  STATE BANKS.--The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a State nonmember bank, and the Board may, by order, exempt a transaction of a State member bank, from the requirements of this section if--

(I)  the Board and the Federal Deposit Insurance Corporation jointly find that the exemption is in the public interest and consistent with the purposes of this section; and

(II)  the Federal Deposit Insurance Corporation finds that the exemption does not present an unacceptable risk to the Deposit Insurance Fund.

(3)  RULEMAKING REQUIRED CONCERNING DERIVATIVE TRANSACTIONS AND INTRADAY CREDIT.--

(A)  IN GENERAL.--Not later than 18 months after the date of the enactment of the Gramm-Leach-Bliley Act, the Board shall adopt final rules under this section to address as covered transactions credit exposure arising out of derivative transactions between member banks and their affiliates and intraday extensions of credit by member banks to their affiliates.

(B)  EFFECTIVE DATE.--The effective date of any final rule adopted by the Board pursuant to subparagraph (A) shall be delayed for such period as the Board deems necessary or appropriate to permit banks to conform their activities to the requirements of the final rule without undue hardship.

(4)  AMOUNTS OF COVERED TRANSACTIONS.--The Board may issue such regulations or interpretations as the Board determines are necessary or appropriate with respect to the manner in which a netting agreement may be taken into account in determining the amount of a covered transaction between a member bank or a subsidiary and an affiliate, including the extent to which netting agreements between a member bank or a subsidiary and an affiliate may be taken into account in determining whether a covered transaction is fully secured for purposes of subsection (d)(4). An interpretation under this paragraph with respect to a specific member bank, subsidiary, or affiliate shall be issued jointly with the appropriate Federal banking agency for such member bank, subsidiary, or affiliate.

[Codified to 12 U.S.C. 371c]

[Source:  Section 23A of the Act of December 23, 1913, as added by section 13 of the Act of June 16, 1933 (Pub. L. No. 66; 48 Stat. 183); as amended by section 327 of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 717); section 1 of the Act of June 30, 1954 (Pub. L. No. 460; 68 Stat. 358); section 1(b) of the Act of September 8, 1959 (Pub. L. No. 86--230; 73 Stat. 457); sections 12(a) and 13(h) of the Act of July 1, 1966 (Pub. L. No. 89--485; 80 Stat. 241 and 243); sections 410(a), (b) and (c) of title IV of the Act of October 15, 1982 (Pub. L. No. 97--320; 96 Stat. 1515--1520), effective October 15, 1982; and section 22 of the Act of January 12, 1983 (Pub. L. No. 97--457; 96 Stat. 2509), effective January 12, 1983; section 121(b) of title I of the Act of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1378--1380), effective March 12, 2000; sections 608(a) and 609(a) of title VI of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1608--1611), effective July 21, 2012]

Note

(b)  PROSPECTIVE APPLICATION OF AMENDMENT.--The amendments made by this section shall apply with respect to any covered transaction between a bank and a subsidiary of the bank, as those terms are defined in section 23A of the Federal Reserve Act (12 U.S.C. 371c), that is entered into on or after the date of enactment of this Act.

[Codified to 12 U.S.C. 371c Note]

[Section 609(b) of title VI of the Act of July 21, 2011 (Pub. L. No. 111--203; 124 Stat. 1611), effective July 21, 2010]

RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

SEC. 23B. (a)  SEC. --

(1)   TERMS.--A member bank and its subsidiaries may engage in any of the transactions described in paragraph (2) only--

(A)  on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to such bank or its subsidiary, as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies, or

(B)  in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies.

(2)   TRANSACTIONS COVERED.--Paragraph (1) applies to the following:

(A)  Any covered transaction with an affiliate.

(B)  The sale of securities or other assets to an affiliate, including assets subject to an agreement to repurchase.

(C)  The payment of money or the furnishing of services to an affiliate under contract, lease, or otherwise.

(D)  Any transaction in which an affiliate acts as an agent or broker or receives a fee for its services to the bank or to any other person.

(E)  Any transaction or series of transactions with a third party--

(i)  if an affiliate has a financial interest in the third party, or

(ii)  if an affiliate is a participant in such transaction or series of transactions.

(3)   TRANSACTIONS THAT BENEFIT AN AFFILIATE.--For the purpose of this subsection, any transaction by a member bank or its subsidiary with any person shall be deemed to be a transaction with an affiliate of such bank if any of the proceeds of the transaction are used for the benefit of, or transferred to, such affiliate.

(b)   PROHIBITED TRANSACTIONS.—

(1)   IN GENERAL.--A member bank or its subsidiary--

A)  shall not purchase as fiduciary any securities or other assets from any affiliate unless such purchase is permitted--

(i)  under the instrument creating the fiduciary relationship,

(ii)  by court order, or

(iii)  by law of the jurisdiction governing the fiduciary relationship; and

(B)  whether acting as principal or fiduciary, shall not knowingly purchase or otherwise acquire, during the existence of any underwriting or selling syndicate, any security if a principal underwriter of that security is an affiliate of such bank.

Subparagraph (B) of paragraph (1) shall not apply if the purchase or acquisition of such securities has been approved, before such securities are initially offered for sale to the public, by a majority of the directors of the bank based on a determination that the purchase is a sound investment for the bank irrespective of the fact that an affiliate of the bank is a principal underwriter of the securities.

(3)   DEFINITIONS.--For the purpose of this subsection--

(A)  the term "security" has the meaning given to such term in section 3(a)(10) of the Securities Exchange Act of 1934; and

(B)  the term "principal underwriter" means any underwriter who, in connection with a primary distribution of securities--

(i)  is in privity of contract with the issuer or an affiliated person of the issuer;

(ii)  acting alone or in concert with one or more other persons, initiates or directs the formation of an underwriting syndicate; or

(iii)  is allowed a rate of gross commission, spread, or other profit greater than the rate allowed another underwriter participating in the distribution.

(c)   ADVERTISING RESTRICTION.--A member bank or any subsidiary or affiliate of a member bank shall not publish any advertisement or enter into any agreement stating or suggesting that the bank shall in any way be responsible for the obligations of its affiliates.

(d)   DEFINITIONS.--For the purpose of this section--

(1)  the term "affiliate" has the meaning given to such term in section 23A (but does not include any company described in section (b)(2) of such section or any bank);

(2)  the terms "bank", "subsidiary", "person", and "security" (other than security as used in subsection (b)) have the meanings given to such terms in section 23A; and

(3)  the term "covered transaction" has the meaning given to such term in section 23A (but does not include any transaction which is exempt from such definition under subsection (d) of such section).

(e)   REGULATIONS.--(1) REGULATIONS..--The Board may prescribe regulations to administer and carry out the purposes of this section, including--

(A)  regulations to further define terms used in this section; and

(B)  subject to paragraph (2), if the Board finds that an exemption or exclusion is in the public interest and is consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding, regulations to--

(i)  exempt transactions or relationships from the requirements of this section; and

(ii)  exclude any subsidiary of a bank holding company from the definition of affiliate for purposes of this section.

(2)  EXCEPTION.--The Board may grant an exemption or exclusion under this subsection only if, during the 60-day period beginning on the date of receipt of notice of the finding from the Board under paragraph (1)(B), the Federal Deposit Insurance Corporation does not object, in writing, to such exemption or exclusion, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.

[Codified to 12 U.S.C. 371c--1]

[Source:  Section 23B of the Act of December 23, 1913, as added by section 102(a) of title I of the Act of August 10, 1987 (Pub. L. No. 100--86; 101 Stat. 564 to 566), effective August 10, 1987; section 738 of title VII of the Act of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1481), effective November 12, 1999; section 608(b) of title IV of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1610), effective July 21, 2012]


BANKING CORPORATIONS AUTHORIZED TO DO
FOREIGN BANKING BUSINESS

SEC. 25A1   Corporations to be organized for the purpose of engaging in international or foreign banking or other international or foreign financial operations, or in banking or other financial operations in a dependency or insular possession of the United States, either directly or through the agency, ownership, or control of local institutions in foreign countries, or in such dependencies or insular possessions as provided by this section, and to act when required by the Secretary of the Treasury as fiscal agents of the United States, may be formed by any number of natural persons, not less in any case than five: Provided, That nothing in this section shall be construed to deny the right of the Secretary of the Treasury to use any corporation organized under this section as depositaries in Panama and the Panama Canal Zone, or in the Philippine Islands and other insular possessions and dependencies of the United States.2

[Codified to 12 U.S.C. 611]

[Source:  Section 25A of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 378), as amended by the Act of February 27, 1921 (Pub. L. No. 329; 41 Stat. 1145); by section 3 of the Act of September 17, 1978 (Pub. L. No. 95--369; 92 Stat. 608]

Such persons shall enter into articles of association which shall specify in general terms the objects for which the association is formed and may contain any other provisions not inconsistent with law which the association may see fit to adopt for the regulation of its business and the conduct of its affairs.

[Codified to 12 U.S.C. 612]

[Source:  Section 25A of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 378)]

Such articles of association shall be signed by all of the persons intending to participate in the organization of the corporation and, thereafter, shall be forwarded to the Board of Governors of the Federal Reserve System and shall be filed and preserved in its office. The persons signing the said articles of association shall, under their hands, make an organization certificate which shall specifically state:

First.  The name assumed by such corporation, which shall be subject to the approval of the Board of Governors of the Federal Reserve System.

Second.  The place or places where its operations are to be carried on.

Third.  The place in the United States where its home office is to be located.

Fourth.  The amount of its capital stock and the number of shares into which the same shall be divided.

Fifth.  The names and places of business or residence of the persons executing the certificate and the number of shares to which each has subscribed.

Sixth.  The fact that the certificate is made to enable the persons subscribing the same, and all other persons, firms, companies, and corporations, who or which may thereafter subscribe to or purchase shares of the capital stock of such corporation, thereafter subscribe to or purchase shares of the capital stock of such corporation, to avail themselves of the advantages of this section.

[Codified to 12 U.S.C. 613]

[Source:  Section 25A of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 379), and as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

The persons signing the organization certificate shall duly acknowledge the execution thereof before a judge of some court of record or notary public, who shall certify thereto under the seal of such court or notary, and thereafter the certificate shall be forwarded to the Board of Governors of the Federal Reserve System to be filed and preserved in its office. Upon duly making and filing articles of association and an organization certificate, and after the Board of Governors of the Federal Reserve System has approved the same and issued a permit to begin business, the association shall become and be a body corporate, and as such and in the name designated therein shall have power to adopt and use a corporate seal, which may be changed at the pleasure of its board of directors; to have succession for a period of twenty years unless sooner dissolved by the act of the shareholders owning two-thirds of the stock or by an Act of Congress or unless its franchises become forfeited by some violation of law; to make contracts; to sue and be sued, complain, and defend in any court of law or equity; to elect or appoint directors; and, by its board of directors, to appoint such officers and employees as may be deemed proper, define their authority and duties, require bonds of them, and fix the penalty thereof, dismiss such officers or employees, or any thereof, at pleasure and appoint others to fill their places; to prescribe, by its board of directors, by-laws not inconsistent with law or with the regulations of the Board of Governors of the Federal Reserve System regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers and employees appointed, its property transferred, and the privileges granted to it by law exercised and enjoyed.

[Codified to 12 U.S.C. 614]

[Source:  Section 25A of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 379), as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704) and by section 3 of the Act of September 17, 1978 (Pub. L. No. 95--369; 92 Stat. 609)]

Each corporation so organized shall have power, under such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe:

(a)  To purchase, sell, discount, and negotiate, with or without its indorsement or guaranty, notes, drafts, checks, bills of exchange, acceptances, including bankers' acceptances, cable transfers, and other evidences of indebtedness; to purchase and sell with or without its indorsement or guaranty, securities, including the obligations of the UnitedStates or of any State thereof but not including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restrictions as the Board of Governors of the Federal Reserve System may impose; to issue letters of credit; to purchase and sell coin, bullion, and exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the Board of Governors of the Federal Reserve System may prescribe; to receive deposits outside of the United States and to receive only such deposits within the United States as may be incidental to or for the purpose of carrying out transactions in foreign countries or dependencies or insular possessions of the United States; and generally to exercise such powers as are incidental to the powers conferred by this Act or as may be usual, in the determination of the Board of Governors of the Federal Reserve System, in connection with the transaction of the business of banking or other financial operations in the countries, colonies, dependencies, or possessions in which it shall transact business and not inconsistent with the powers specifically granted herein. Nothing contained in this section shall be construed to prohibit the Board of Governors of the Federal Reserve System, under its power to prescribe rules and regulations, from limiting the aggregate amount of liabilities of any or all classes incurred by the corporation and outstanding at any one time. Whenever a corporation organized under this section receives deposits in the United States authorized by this section it shall carry reserves in such amounts as the Board of Governors of the Federal Reserve System may prescribe, for member banks of the Federal Reserve System.

(b)  To establish and maintain for the transaction of its business branches or agencies in foreign countries, their dependencies or colonies, and in the dependencies or insular possessions of the United States, at such places as may be approved by the Board of Governors of the Federal Reserve System and under such rules and regulations as it may prescribe, including countries or dependencies not specified in the original organization certificate.

(c)  With the consent of the Board of Governors of the Federal Reserve System to purchase and hold stock or other certificates of ownership in any other corporation organized under the provisions of this section, or under the laws of any foreign country or a colony or dependency thereof, or under the laws of any State, dependency, or insular possession of the United States but not engaged in the general business of buying or selling goods, wares, merchandise or commodities in the United States, and not transacting any business in the United States except such as in the judgment of the Board of Governors of the Federal Reserve System may be incidental to its international or foreign business: Provided, however, That, except with the approval of the Board of Governors of the Federal Reserve System, no corporation organized hereunder shall invest in any one corporation an amount in excess of 10 per centum of its own capital and surplus, except in a corporation engaged in the business of banking, when 15 per centum of its capital and surplus may be so invested: Provided further, That no corporation organized hereunder shall purchase, own, or hold stock or certificates of ownership in any other corporation organized hereunder or under the laws of any State which is in substantial competition therewith, or which holds stock or certificates of ownership in corporations which are in substantial competition with the purchasing corporation.

Nothing contained herein shall prevent corporations organized hereunder from purchasing and holding stock in any corporation where such purchase shall be necessary to prevent a loss upon a debt previously contracted in good faith; and stock so purchased or acquired in corporations organized under this section shall within six months from such purchase be sold or disposed of at public or private sale unless the time to so dispose of same is extended by the Board of Governors of the Federal Reserve System.

[Codified to 12 U.S.C. 615]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 379), as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704); and section 3 of the Act of September 17, 1978 (Pub. Law No. 95-369; 92 Stat. 609)]

No corporation organized under this section shall carry on any part of its business in the United States except such as, in the judgment of the Board of Governors of the Federal Reserve System, shall be incidental to its international or foreign business: And provided further, That except such as is incidental and preliminary to its organization no such corporation shall exercise any of the powers conferred by this section until it has been duly authorized by the Board of Governors of the Federal Reserve System to commence business as a corporation organized under the provisions of this section.

[Codified to 12 U.S.C. 616]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 381), and as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

No corporation organized under this section shall engage in commerce or trade in commodities except as specifically provided in this section, nor shall it either directly or indirectly control or fix or attempt to control or fix the price of any such commodities. The charter of any corporation violating this provision shall be subject to forfeiture in the manner hereinafter provided in this section. It shall be unlawful for any director, officer, agent, or employee of any such corporation to use or to conspire to use the credit; the funds, or the power of the corporation to fix or control the price of any such commodities, and any such person violating this provision shall be liable to a fine of not less than $1,000 and not exceeding $5,000 or imprisonment not less than one year and not exceeding five years, or both, in the discretion of the court.

[Codified to 12 U.S.C. 617]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 381)]

No corporation shall be organized under the provisions of this section with a capital stock of less than $2,000,000, one-quarter of which must be paid in before the corporation may be authorized to begin business, and the remainder of the capital stock of such corporation shall be paid in installments of at least 10 per centum on the whole amount to which the corporation shall be limited as frequently as one installment at the end of each succeeding two months from the time of the commencement of its business operations until the whole of the capital stock shall be paid in: Provided, however, That whenever $2,000,000 of the capital stock of any corporation is paid in the remainder of the corporation's capital stock or any unpaid part of such remainder may, with the consent of the Board of Governors of the Federal Reserve System and subject to such regulations and conditions as it may prescribe, be paid in upon call from the board of directors; such unpaid subscriptions, however, to be included in the maximum of 10 per centum of the national bank's capital and surplus which a national bank is permitted under the provisions of this Act to hold in stock of corporations engaged in business of the kind described in this section and in section 25 of the Federal Reserve Act as amended. The capital stock of any such corporation may be increased at any time, with the approval of the Board of Governors of the Federal Reserve System, by a vote of two-thirds of its shareholders or by unanimous consent in writing of the shareholders without a meeting and without a formal vote, but any such increase of capital shall be fully paid in within ninety days after such approval; and may be reduced in like manner, provided that in no event shall it be less than $2,000,000. No corporation, except as herein provided, shall during the time it shall continue its operations, withdraw or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. Any national banking association may invest in the stock of any corporation organized under the provisions of this section, but the aggregate amount of stock held in all corporations engaged in business of the kind described in this section and in section 25 of the Federal Reserve Act as amended shall not exceed 10 per centum of the subscribing bank's capital and surplus.

[Codified to 12 U.S.C. 618]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 381), as amended by the Act of June 14, 1921 (Pub. L. No. 17; 42 Stat. 28)]

Except as otherwise provided in this section, a majority of the shares of the capital stock of any such corporation shall at all times be held and owned by citizens of the United States, by corporations the controlling interest in which is owned by citizens of the United States, chartered under the laws of the United States or of a State of the United States, or by firms or companies, the controlling interest in which is owned by citizens of the United States. Notwithstanding any other provisions of this section, one or more foreign banks, institutions organized under the laws of foreign countries which own or control foreign banks, or banks organized under the laws of the United States, the States of the United States, or the District of Columbia, the controlling interests in which are owned by any such foreign banks or institutions, may, with the prior approval of the Board of Governors of the Federal Reserve System and upon such terms and conditions and subject to such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe, own and hold 50 per centum or more of the shares of the capital stock of any corporation organized under this section, and any such corporation shall be subject to the same provisions of law as any other corporation organized under this section, and the terms "controls" and "controlling interest" shall be construed consistently with the definition of "control" in section 2 of the Bank Holding Company Act of 1956. For the purposes of the preceding sentence of this paragraph the term "foreign bank" shall have the meaning assigned to it in the International Banking Act of 1978. Any company, other than a bank as defined in section 2 of the Bank Holding Company Act of 1956, that after March 5, 1987, directly or indirectly acquires control of a corporation organized or operating under the provisions of this section or section 25 shall be subject to the provisions of the bank Bank Holding Company Act of 1956 in the same manner and to the same extent that bank holding companies are subject thereto, except that such company shall not by reason of this paragraph be deemed a bank holding company for the purpose of section 3 of the Bank Holding Company Act of 1956.

[Codified to 12 U.S.C. 619]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 381), as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704); section 3 of the Act of September 17, 1978 (Pub. L. No. 95-369; 92 Stat. 609); section 102(c) of title I of the Act of August 10, 1987 (Pub. L. No. 100-86; 101 Stat. 566), effective August 10, 1987]

No member of the Board of Governors of the Federal Reserve System shall be an officer or director of any corporation organized under the provisions of this section, or of any corporation engaged in similar business organized under the laws of any State, nor hold stock in any such corporation, and before entering upon his duties as a member of the Board of Governors of the Federal Reserve System he shall certify under oath to the Secretary of the Treasury that he has complied with this requirement.

[Codified to 12 U.S.C. 620]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 381); as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

Shareholders in any corporation organized under the provision of this section shall be liable for the amount of their unpaid stock subscriptions. No such corporation shall become a member of any Federal reserve bank.

[Codified to 12 U.S.C. 621]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 382)]

Should any corporation organized hereunder violate or fail to comply with any of the provisions of this section, all of its rights, privileges, and franchises derived herefrom may thereby be forfeited. Before any such corporation shall be declared dissolved, or its rights, privileges, and franchises forfeited, any noncompliance with, or violation of such laws shall, however, be determined and adjudged by a court of the United States of competent jurisdiction, in a suit brought for that purpose in the district or territory in which the home office of such corporation is located, which suit shall be brought by the United States at the instance of the Board of Governors of the Federal Reserve System or the Attorney General. Upon adjudication of such noncompliance or violation, each director and officer who participated in, or assented to, the illegal act or acts, shall be liable in his personal or individual capacity for all damages which the said corporation shall have sustained in consequence thereof. No dissolution shall take away or impair any remedy against the corporation, its stockholders, or officers for any liability or penalty previously incurred.

[Codified to 12 U.S.C. 622]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 382), and as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704]

Any such corporation may go into voluntary liquidation and be closed by a vote of its shareholders owning two-thirds of its stock.

[Codified to 12 U.S.C. 623]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 382)]

Whenever the Board of Governors of the Federal Reserve System shall become satisfied of the insolvency of any such corporation, it may appoint a receiver who shall take possession of all the property and assets of the corporation and exercise the same rights, privileges, powers, and authority with respect thereto as are now exercised by receivers of national banks appointed by the Comptroller of the Currency of the United States. Provided, however, That the assets of the corporation subject to the laws of other countries or jurisdictions shall be dealt with in accordance with the terms of such laws.

[Codified to 12 U.S.C. 624]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 382); as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

Every corporation organized under the provisions of this section shall hold a meeting of its stockholders annually upon a date fixed in its bylaws, such meeting to be held at its home office in the United States. Every such corporation shall keep at its home office books containing the names of all stockholders thereof, and the names and addresses of the members of its board of directors, together with copies of all reports made by it to the Board of Governors of the Federal Reserve System. Every such corporation shall make reports to the Board of Governors of the Federal Reserve System at such times and in such form as it may require; and shall be subject to examination once a year and at such other times as may be deemed necessary by the Board of Governors of the Federal Reserve System by examiners appointed by the Board of Governors of the Federal Reserve System, the cost of such examinations, including the compensation of the examiners, to be fixed by the Board of Governors of the Federal Reserve System and to be paid by the corporation examined.

[Codified to 12 U.S.C. 625]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 382); as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

The directors of any corporation organized under the provisions of this section may, semiannually, declare a dividend of so much of the net profits of the corporation as they shall judge expedient; but each corporation shall, before the declaration of a dividend, carry one-tenth of its net profits of the preceding half year to its surplus fund until the same shall amount to 20 per centum of its capital stock.

[Codified to 12 U.S.C. 626]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 383)]

Any corporation organized under the provisions of this section shall be subjected to tax by the State within which its home office is located in the same manner and to the same extent as other corporations organized under the laws of that State which are transacting a similar character of business. The shares of stock in such corporation shall alsobe subject to tax as the personal property of the owners or holders thereof in the same manner and to the same extent as the shares of stock in similar State corporations.

[Codified to 12 U.S.C. 627]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 383)]

Any corporation organized under the provisions of this section may at any time within the two years next previous to the date of the expiration of its corporate existence, by a vote of the shareholders owning two-thirds of its stock, apply to the Board of Governors of the Federal Reserve System for its approval to extend the period of its corporate existence for a term of not more than twenty years, and upon certified approval of the Board of Governors of the Federal Reserve System such corporation shall have its corporate existence for such extended period unless sooner dissolved by the act of the shareholders owning two-thirds of its stock, or by an Act of Congress or unless its franchise becomes forfeited by some violation of law.

[Codified to 12 U.S.C. 628]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 383); as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

Any bank or banking institution, principally engaged in foreign business, incorporated by special law of any State or of the United States or organized under the general laws of any State or of the United States and having an unimpaired capital sufficient to entitle it to become a corporation under the provisions of this section may, by the vote of the shareholder owning not less than two-thirds of the capital stock of such bank or banking association, with the approval of the Board of Governors of the Federal Reserve System, be converted into a Federal corporation of the kind authorized by this section with any name approved by the Board of Governors of the Federal Reserve System: Provided, however, That said conversion shall not be in contravention of the State law. In such case the articles of association and organization certificate may be executed by a majority of the directors of the bank or banking institution, and the certificate shall declare that the owners of at least two-thirds of the capital stock have authorized the directors to make such certificate and to change or convert the bank or banking institution into a Federal corporation. A majority of the directors, after executing the articles of association and the organization certificate shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a Federal corporation. The shares of any such corporation may continue to be for the same amount each as they were before the conversion, and the directors may continue to be directors of the corporation until others are elected or appointed in accordance with the provisions of this section. When the Board of Governors of the Federal Reserve System has given to such corporation a certificate that the provisions of this section have been complied with, such corporation and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be subject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed by this section for corporations originally organized hereunder.

[Codified to 12 U.S.C. 629]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 383) and as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)]

Every officer, director, clerk, employee, or agent of any corporation organized under this section who embezzles, abstracts, or willfully misapplies any of the moneys, funds, credits, securities, evidences of indebtedness or assets of any character of such corporation; or who, without authority from the directors, issues or puts forth any certiciate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, debenture, draft, bill of exchange, mortgage, judgment, or decree; or who makes any false entry in any book, report, or statement of such corporation with intent, in either case, to injure or defraud such corporation or any other company, body politic or corporate, or any individual person, or to deceive any officer of such corporation, the Board of Governors of the Federal Reserve System, or any agent or examiner appointed to examine the affairs of any such corporation; and every receiver of any such corporation and every clerk or employee of such receiver who shall embezzle, abstract, or willfully misapply or wrongfully convert to his own use any moneys, funds, credits, or assets of any character which may come into his possession or under his control on the execution of his trust or the performance of the duties of his employment; and every such receiver or clerk or employee of such receiver who shall, with intent to injure or defraud any person, body politic or corporate, or to deceive or mislead the Board of Governors of the Federal Reserve System, or any agent or examiner appointed to examine the affairs of such receiver, shall make any false entry in any book, report, or record of any matter connected with the duties of such receiver; and every person who with like intent aids or abets any officer, director, clerk employee, or agent of any corporation organized under this section, or receiver or clerk or employee of such receiver as aforesaid in any violation of this section, shall upon conviction thereof be imprisoned for not less than two years nor more than ten years, and may also be fined not more than $5,000, in the discretion of the court.

[Codified to 12 U.S.C. 630]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub. L. No. 106; 41 Stat. 384), and as amended by section 203(a) of the Act of August 23, 1935 (Pub. L. No. 305; 49 Stat. 704)] 25(a)(17)

Whoever being connected in any capacity with any corporation organized under this section represents in any way that the United States is liable for the payment of any bond or other obligation, or the interest thereon, issued or incurred by any corporation organized hereunder, or that the United States incurs any liability in respect of any act or omission of the corporation, shall be punished by a fine of not more than $10,000 and by imprisonment for not more than five years.

[Codified to 12 U.S.C. 631]

[Source:  Section 25(a) of the Act of December 23, 1913, as added by the Act of December 24, 1919 (Pub.L. No. 106; 41 Stat. 384)]

1 Section 142(e)(2) of title I of the Act of December 19, 1991 (Pub. L. 102--242; 105 Stat. 2281), effective December 19, 1991, redesignated section 25(a) as 25A. Go back to Text

2 Presidential Proclamation No. 2695 of July 4, 1946 (60 Stat. 1352; U.S.C., title 12, sec. 1394 note) recognizes the independence of the Philippine Islands. Therefore, the words "in the Philippine Islands and" have been omitted from the U.S. Code. Go back to Text


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