frsbog_mim_v40_0369.pdf

FEDERAL RESERVE BOARD WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d

X-7936

Juno 26, 1934

SUBJECT: Examinations and Reports Under Section 21 of the Banking Act of 1933.

Dear Sir:

Section 21 of the Banking Act of 1933, which "by its

terms became effective June 16, 1934, reads in part as follows

"Sec. 21(a) After the expiration of one year after the date of the enactment of this Act it shall be unlawful -

* * * * * * * * * * * *

(2) For any person, firm, corporation, associa-tion, "business trust, or other similar organ-ization, other than a financial institution or private banker subject to examination and regu-lation under State or Federal law, to engage to any extent whatever in the business of receiving deposits subject to check or to repayment upon presentation of a passbook, certificate of deposit, or other evidence of debt, or upon request of the depositor, unless such person, firm, corporation, association, business trust, or other similar organization shall submit to periodic examination by the Comptroller of the Currency or by the Federal reserve bank of the district and shall make and pub-lish periodic reports of its condition, exhibiting in detail its resources and liabilities, such exam-ination and reports to be made and published at the same times and in the same manner and with like effect and penalties as are now provided by law in respect of national banking associations transact-ing business in the same locality."

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

S-7936^ V t>

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The Federal Reserve Board has given consideration to

a number of questions arising under this section and presents

its views herein for your information.

In any case in which a person, firm, corporation,

association, business trust or other similar organization shall

submit or offer to submit to examination in accordance with the

provisions of the statute, such submission or offer should be in

writing and signed by such person or by a duly authorized repre-

sentative of such firm, corporation, association, business trust or

other similar organization and his authority to execute such writing

should be properly evidenced. The costs of such examinations should

be paid by the respective persons or organizations examined and the

Federal Reserve Board suggests that, prior to the making of an examin-

ation under the provisions of Section 21, an agreement in writing to

pay the costs of such examination be obtained from the person or or-

ganization to be examined. Such agreement, of course, may be so word-

ed as to be applicable to all examinations which may be made subse-

quently under the authority of that section. In view of the provi-

sions of the section, examinations of such persons or organizations I

should be made at least twice i|n each calendar year and of toner if t

considered necessary. "

In order that the fees charged for examinations made

under the provisions of Section 21 may be uniform, it is believed that

the Federal reserve banks should make charges for examinations under

the section on substantially the same basis as that which will be


used "by the Comptroller of the Currency; and it is suggested, ac-

cordingly, that Federal reserve "banks charge for each examination

made under the provisions of Section 21 the actual expenses there-

of, including salaries, subsistence and transportation costs of the

examiners, together with a charge of $10 per day for each day of the

examination to cover overhead expenses and the cost of typing the

report of examination.

It is the view of the Board, that, in a case in which

a person, firm, corporation, association, "business trust, or other

similar organization of the kind described in the statute submits

or offers to submit to periodic examination by the Federal reserve

bank of the district and does not submit or offer to submit to such

examination by the Comptroller of the Currency, the Federal reserve

bank should make the examinations prescribed by the statute.

On the other hand, if any such person or organization sub-

mits or offers to submit to examination by the Comptroller of the

Currency and does not submit or offer to submit to examination by

the Federal reserve bank of the district, the Federal reserve bank

is under no responsibility to make examinations of such person or

organization.

If a Federal reserve bank is notified that a person or

organization submits or offers to submit to periodic examination

either by the Comptroller of the Currency or by the Federal reserve


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X-TO38

8

Ka-nV of the district, a letter should be addressed by the bank

to such person or organization acknowledging receipt of such

notification and requesting that such person or organization

indicate a preference as to whether examinations should be made

by the Comptroller or by tho Federal reserve bank. It is under-

stood that the Comptroller of the Currency is following a similar

practice when he is notified that a person or organization submits

or offers to submit to examination either by the Comptroller or by

the Federal reserve bank of the district. If such person or organr*

ization, pursuant to such a request from the Federal reserve bank

or from the Comptroller of the Currency, indicates a preference as

to tho authority to make the examination, the examination should be

made by the authority thus indicated as preferred. With respect to

such persons or organizations, if any, which shall not indicate a

preference as requested, it is the view of the Board and it is

understood that the Comptroller of the Currency concurs, that the

work of examining such persons or organizations should be divided

in an equitable manner between the Federal reserve bank and the

Comptroller of the Currency on such basis as may be agreed upon by

representatives of the bank and the Chief National Bank Examiner of

the district in accordance with the practical considerations involved

and their mutual convenience. All examinations of any one person or

organization should be made from time to time by the sane authority,

i. e., either by the Federal reserve bank or by the Comptroller of


the Currency, and it would seen undesirable, except where it is

necessary for special reasons, when one or more examinations of

a person or organization have been made "by the Federal reserve

bank to change the practice so that the Comptroller of the Cur-

rency in lieu of the Federal reserve bank wi 11 then make the

examinations of such person or organization, or vice versa.

It will be observed that, under the terms of the sec-

tion, reports of condition of persons and organizations to which

the statute is applicable are to bo made and published at the

same times and in the same manner and with like effect and penal-

ties as are now provided by law in respect of national banking

associations transacting business in the same locality; and,

accordingly, such reports of condition, in all cases and without

regard to the authority which may make the examinations referred

to in Section 21, should be made to the Comptroller of the Cur-

rency and published in the same manner as reports of condition of

national banks. It is requested that each Federal reserve bank

advise the Comptroller of the Currency of the names and addresses

of all persons and organizations which submit or offer to submit

to examination by the Federal reserve bank or either by the Federal

reserve bank or by the Comptroller of the Currency, in order that

he may notify such persons and organizations of calls for reports

of condition and may furnish them forms for the rendering of such

reports. It is understood that the office of the Comptroller of


the Currency will furnish to each Federal reserve "bank a copy of

each such report of condition of each person and organization

which has submitted to examination by such Federal reserve hank.

Inasmuch as examinations required under the provisions

of Section 21 of the Banking Act of 1933 are to be made by the

Federal reserve bank or by the Comptroller of the Currency and no

duties are placed upon the Federal Reservo Board in this connection

by the statute, for the present, at least, it will not be necessary

to submit to the Federal Reserve Board copies of reports of such

examinations or analyses thereof. However, the Board requests that

you report to it promptly the names of all persons or organizations

which submit or offer to submit to examinations by your Federal re-

serve bank or either by your bank or by the Comptroller of the Cur-

rency, when examinations are made of such persons or organizations,

and any other information in this connection which you feel should

be furnished to the Board.

While the Federal Reserve Board does not feel that it is

necessary under the law that Federal reserve banks or the Federal

Reserve Agents make an investigation in order to determine what

persons or organizations in their respective districts may be sub-

ject to the provisions of Section 21 of the Banking Act of 1933, the

Board suggests that each Federal reserve bank take such steps as it

may consider best adapted to the purpose to bring the provisions of

Section 21 to the attention of persons and organizations in its

district which there is reason to believe may be affected by the


X-7936 o

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section. A statement released to the press or a circular trans-

mitted. directly to such persons and organizations, or both if

considered advisable, may be used for this purpose. If such a

circular is transmitted to any person or organization, it should

be stated that the Federal reserve bank is not thereby undertaking

to express an opinion as to the applicability of the section to

such person or organization but is merely inviting attention to

the matter for consideration. There is inclosed herewith for your

information a copy of the Board's statement for the press on this 4

subject and you Trill note stated thereon the date and time for

release of this statement. If you decide to issue a statement to

the press in this connection, it is suggested that, in order to avoid

the possibility of confusion in the matter, you use the Board's form

of release inclosed herewith, and that you issue such statement on the

date and at the time of release indicated on the Board's statement.

With regard to questions which may arise as to whether

persons or organizations or stated transactions fall within the scope

of Section 21 or are affected by its provisions, attention is invited

to the Board's letter of Dec cobor 16, 1933 (X-7729), in which it is

stated that the section does not give to the Federal Reserve Board

any jurisdiction or discretion regarding the matters with which it

deals and that the Board does not feel that it would be appropriate

for it to undertake to express opinions upon questions of this kind.

As indicated in that letter, the section provides a penalty of fine


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or imprisonment for any violation of its provisions and the

determination of the question whether a person or organization

should be prosecuted for such violation is a matter entirely

within the jurisdiction of the Department of Justice. The

section does not give to the Comptroller of the Currency, the

Federal reserve "bank or the Federal Reserve Board any discretion

or power to require a person or organization to submit to

examination or to determine what persons or organizations should

submit to examination.

Very truly yours,

W)crv^ Chester Morrill

Secretary.

Inclosure

TO CHAIRMEN OF ALL F. R. BAMS.


frsbog_mim_v40_0369.pdf

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