frsbog_mim_v18_0459.pdf
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(Ten ta t ive D r a f t Only) REGULATION J .
Ser i e s of 1923*
(Superseding Regulation J o f 1920.)
CHECK CLEARING
AND
COLLECTION.
SECTION I . STATUTORY PROVISIONS,
Sect ion l 6 o f the Federal Reserve A c t a u t h o r i z e s t h e Federal Reserve
Board t o r eq ui re each Federal Reserv e Bank t o exe r c i s e t h e f u n c t i o n s of a
clear ing house
f o r i t s
member banks,
and
s e c t i o n
13 of t h e
Federal Reserve
A c t , a s
amended
b y t h e a c t
approved June
2 1 , 1 9 1 7 ,
author izes each
F e d -
eral Reserve Bank t o receive f rom a n y non-member hank o r trust company,
s o l e l y f o r t h e purposes of exchange or of c o l l e c t i o n , d e p o s i t s of current
funds i n la.wful money, na tio na l-b an k no te s, Fe dera l Reserve no te s, checks
and d r a f t s payab l e upon p r es en t a t i on , o r matur ing notes and b i l l s , pr ov i ded
such non-member bank
o r
t r u s t company mai nta ins wit h
i t s
Federal Reserve
Bank
a
b a la n ce s u f f i c i e n t
t o
o f f s e t
t h e
items
i n
t r a n s i t h e l d
f o r i t s a c -
count
b y t h e
Federal Reserve Bank.
SECTION I I . GENERAL REQUIREMENTS.
I n pursuance o f the a u t h or i t y ves t ed i n i t under these prov i s io ns of
l a w , t h e Federal Reserve Board, des i r ing t o a f f o r d bo t h t o t h e p u b l i c and
t o t h e various banks o f the country a. d i r e c t , e x p e d i t i o u s , and economical
system of check co l l ec t i on a n a s e t t l emen t of ba l ances , h a s a r r anged t o
have each Federal Reserve Bank exercise
t h e
f u n c t i o n s
of a
c lear ing house
f o r such o f i t s member banks as d e s i r e t o avai l themselves of i t s p r i v i -
l eges f o r such non-member State banks an d trust companies as may main-
tain wi th t h e Fe dera l Reserve Bank balances su f f i c i e n t t o q u a l i f y them under
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t h e
p r ov i s i ons
o f
s e c t i o n
} t o
send items
t o
Federal Reserve Banks
f o r
purposes
o f
exchange
o r o f
c ol le ct io n . Such non-member St at e ta nk s
and
t r us t companies wi l l her e i na f t er
"be
r e f e r r e d
to a.s
non-member clearing banks.
Each Federal Reserve Bank shall exercise t h e f unc t i ons of a c l ea r i ng
house under
t h e
general terms
and
c o n d i t i o n s h e r e i n a f t e r
s e t
f o r t h .
SECTION
I I I .
CHECKS RECEIVED
FOR
COLLECTION.
( )
Each Fe de ral Reserve Bank w i l l rece iv e
a t p a r
from
i t s
member
banks
and
f rom non-member cl e a ri n g banks
i n i t s
d i s t r i c t , checks'* drawn
o n a l l
member
and
non-member clearing banks
a n d o n a l l
other non-member
banks which agree
t o
remit
a t p a r i n
acc ept abl e fund s through
t h e
Federal
Reserve Bank of t h e i r d i s t r i c t .
( 2 )
Each Fe de ra l Reserve Bank wi ll re ce iv e
a t p a r
fro m ot he r Fed eral
Reserve Banks, and f rom a l l member and non-member clearing banks i n other
Federa l Reserve Dis t r i c t s ,
f o r ' t h e
c r e d i t
of
thei r accounts wi th thei r
re sp ec ti ve F ed era l Reserve Banks, checks drawn upon
a l l
member
a n d n o n -
member clearing banks of i t s d i s t r i c t an d upon a l l other non-member banks
o f i t s
d i s t r i c t which agree
t o
remi t
a t p a r i n
accepta ble fun ds .
( 3 )
Under th is pl an each Fe de ral Reserve Bank w il l re ce iv e
a t p a r
from i t s member an d non-member clearing banks checks on a l l member and tion-
member clearing banks
a n d o n a l l
other non-member banks which agree
t o
remit
a t p a r i n
ac ce pt ab le fu nd s. Member
an d
non-member clearing banks will
'•
1
A
check
i s
gener a l l y de f i ned
a s a
d r a f t
o r
order upon
a
bank
c<r
banking
hous e , pu r por t i ng
t o b e
drawn upon
a
depos i t
of
f u n d s ,
f o r t h e
payment
a t
a l l svents o f a c e r t a i n sum of money t o a cer tain person therein named, o r
t o h i m o r h i s
o r d e r ,
o r t o
b e a r e r ,
and
payable
on
demand.
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b e r e q u i r e d t o prov ide funds t o cover a t p a r a l l checks re ce iv ed from o r
f o r t h e
account
o f
t h e i r Federa l Reserve Banks.
(4 ) No Fed era l Reserve Bank s h a l l re ce iv e o n d e p o s i t o r f o r c o l l e c t i o n
a n y
check drawn
o n a n y
non-member bank which refuses
t o
r e m i t
a t p a r i n a c -
cep tab le funds .
5 Whenever
a
Federal Reserve Bank receives
on
d e p o s i t
o r f o r c o l -
l e c t i o n a check drawn b y , endorsed b y , o r emanating from, a n y nonmember bank
which re fuses
t o
r e m i t
a t p a r i n
a c c e p t a b l e f u n i s ,
i t
sha l l charge
f o r t h e
s e r v i c e
o f
co l lec t ing such check
a
co l lec t ion charge equa l
t o t h e
exchange
charged
b y
such nonmember bank
f o r
r e m i t t i n g
f o r
checks drawn
o n i t .
SECTION
IV .
TIME SCHEDULE
AND
AVAILABILITY
OF
CREDITS.
Ea.ch Fe de ra l Reser ve Bank w i l l p ub l is h a time schedule showing t h e time
a t
which
a n y
i tem sent
t o i t
w i l l
b e
counted
a s
p a r t
o f t h e
sending bank 's
r e s e r v e
a n d
become available
t o
meet checks drawn
b y
such bank.
F o r a l l
checks rece ived , t h e sending bank wil l be given immediate credi t , o r d e -
f e r r e d c r e d i t ,
i n
accordance with such publ ish ed t ime sche dul e ,
a n d a s p r o -
vided below.
F o r a l l checks a s t o which t h e sen din g bank i s e n t i t l e d t o immediate
c r e d i t , s uc h c r e d i t
i n t h e
rese rve account
o r
c lea r ing account upon
d ay o f
r e c e i p t , s u b j e c t t o f ina l payment , wi l l be given,upon t h e books o f t h e
Federal Reserve Bank
a t
f u l l f a c e v a l u e ,
a n d t h e
proceeds wi l l
a t
once
b e counted a.s p a r t o f t h e mimimum reserve a n d b e a v a i l a b l e t o meet checks
drawn.
F o r a l l checks a s t c which t h e sending bank i s e n t i t l e d t o a e f e r r e d
c r e d i t , s uc h c r e d i t , s u b j e c t
t o
f ina l payment , wi l l
b e
give n upon
t h e
books
o f t h e
Federal Reserve Bank
a t
f u l l f a c e v a l u e ,
a n d t h e
proceeds wi l l
n o t
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be
counted
a s
p a r t
o f t h e
minimum reserve
n o r
become available
t o
meet checks
time
drawn u n t i l such time as may be s p e c i f i e d i n t h e appropria te / schedule r ef er re
t o
h e r e i n ,
a t
which time credit will
b e
t ransfe r red f rom
t h e
aeferred account
t o t h e
reserve account
o r
clearing account
an d
will t ien
b e
counted
a s
par t
of the
minimum reserve
and he
a v a i l a b l e
t o
meet checks drawn-
SECTION V. mmER OF COLLECTION.
Checks received b y a Federal Reserve Ba'ik o n i t s member o r nonmember
clear ing banks wil l
b e
forwarded direct
t o
such banks,
and
such banks will
b e
requ i red
t o
remi t the re for
i n
funds acceptable
t o t h e
Federal Reserve
Bank o r t o a u th o r i z e t h e Federal Reserve Bank t o charge their reserve a c -
counts
o r
c le ar in g accounts ; provi ded, however , tha t
i n
case such
r e -
mit tance
o r
a u t h o r i z a t i o n
i s n o t
received
b y t h e
Federal Reserve Bank from
any such bank, t h e Federal Reserve Bank reserves t h e r i g h t t o charge such
items
t o t h e
reserve account
o r
clear ing account
o f
such bank
a t t h e e x -
p i r a t i o n
o f t h e
agreed transit t ime between
t h e
Federal Reserve Bank
and
such bank.
I n handling items f o r member a n d nonmember clearing banks, a Federal
Reserve Bank will a c t a s agent only. The Federal Reserve Board hereby
a u t h o r i z e s ,
an d
each member
an d
nonmember clearing bank shall authorize,
t h e
Federal Reserve Bank
t o
send checks received
f o r
c o l l e c t i o n
t o t h e
banks on which such checks a r e drawn o r a t which they a r e payab le , or to
a n y
o ther su i ta b ly se lec te d sub-agen t ,
an d to
r ec ei ve from drawee banks
acceptable exchange draf ts i n se t t l e me n t f o r a n y c o l l e c t i o n . The Federal
Reserve Bank shall assume no l i a b i l i t y ex ce pt f o r i t s own neg l igence and
i t s guaranty of prior endorsements.
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SECTION V I . PENAlfi'IgS FOB DEFICIENCIES IN RESERVES-
)
1 . S ta tu to ry Prov is io ns . Sec t ion 15 o f the Federal Reserve Act
prov ides tha t -
"The . requ i red ba lance c a r r ied b y a member bank with a
Federal Reserve Bank
may ,
•under
t h e
r e g u l a t i o n s
and
su b je c t
t o su c h p e n a l t i e s as may be p re sc r ib e d b y t h e Federal Reserve
Board, b e checked against and withdrawn b y such member bank*
f o r t h e purpose of m ee ti ng e x i s t i n g l i a b i l i t i e s : P r o v i de d .
however, That
no
bank shall
a t a n y
time make
new
lo a n s
o r
s h a l l
p a y a n y
dividends unless
and
u n t i l
t h e
t o t a l b a l a n c e
r e -
qui red
b y l a w i s
f u l l y r e s t o r e d .
2 . Computation o f Reserv es. I tems c a n n o t b e counted a s p a r t of
t h e minimum reserve balance to be c a r r i e d b y a member bank with i t s
Fed er al Reserve Bank u n t i l such time a s may be s p e c i f i e d i n t h e appro-
pr ia te t ime schedu le re fe r r ed
t o i n
Sec t ion
I V .
There fore , should
a
member bank draw against items before such time,
t h e
dra f t would
b e
charged against i t s rese rve ba lance i f such ba lance were s u f f i c i e n t i n
amount t o p a y i t ; b u t a n y resul t ing impairment o f reserve balances would
b e
su b je c t
t o a l l t h e
pena l t ies p rov ided
b y t h e A c t .
Bach In de ra l Reserve Bank w i l l deter mine b y a n a l y s i s t h e amounts of
uncollected funds appearing
o n i t s
books
t o t h e
c r e d i t
of
each member bank.
Such analysis will show t h e t ru e s t a tu s o f t h e r e se rv e h e ld b y t h e Federal
Reserve Bank f o r each member bank a n d wi l l enab le i t t o app ly t h e penal ty
f o r
impairment
o f
r e se rv e .
3 . Bas ic Pe na lt y. Inasmuch a s i t i s e s s e n t i a l t h a t t h e l a w i n
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r e s p e c t t o t h e maintenance b y member banks o f t h e re qu ir ed minimum re se rv e
b a l a n c e s h a l l
b e
s t r i c t l y co mp li ed w i t h ,
t h e
Federal Reserve Board, under
a u t h o r i t y v e s t e d i n i t b y S e c t i o n 1 9 o f t h e Federa l Reserve A c t , hereby
p r e s c r i b e s a b a s i c p e n a l t y f o r d e f i c i e n c i e s i n r e s e r v e s , a c c o r d i n g t o t h e
fo l l o w i n g ru l e s :
( a ) D e f i c i e n c i e s i n rese rve ba lances o f member banks i n c e n t r a l r e -
se rve
and
r e s e r v e c i t i e s w i l l
b e
computed
o n t h e
b a s i s
o f
average da i ly
n e t depos i t ba l ances cover ing a weekly period of 7 d a ys . D e f i c i e n c i e s i n
r e s e rv e b a l a n c e s o f ot he r member ban ks w i l l be computed o n t h e b a s i s o f
average da i ly n e t depos i t ba l ances cover ing a
semi
-monthly per iod .
( b )
P e n a l t i e s
f o r
d e f i c i e n c i e s
i n
r e s e rv e s w i l l
b e
assessed monthly
o n t h e b a s i s o f average da i ly de f i c i enc ies du r ing each o f t h e r e s e r v e com -
pu ta t ion pe r iods end ing i n t h e preceding month. '
( c ) A
b a s i c r a t e
o f 2 p e r
cen t
p e r
annum above
t h e
Federal Reserve
Bank d is cou nt r a te on 90-day commercial paper will b e a s s e s s e d as a
p e n a l t y on d e f i c i e n c i e s i n r e s e rv e s o f member banks.
4 . P ro g re s s i v e P e n a l t y . The Federa l Reserve Board wi l l a l so p r e -
s c r i b e f o r a n y Federa l Rese rve D i s t r i c t , upon t h e a p p l i c a t i o n o f t he
Federal Reserve Bank
o f
t ha t d i s t r i c t ,
a n
a d d i t i o n a l p ro g re s s i v e p e n a l t y
f o r c o n t i n ue d d e f i c i e n c i e s i n r e s e r v e s , i n accordance wi th t h e fo l lowing
r u l e s :
( a )
When
a
member bank
i n a
c e n t r a l r e s e r v e
o r
r e s e r v e c i t y
h a s
h a d a n a v e r a g e d e f i c i e n c y i n r e s e r v e s f o r s i x consecu t ive week ly pe r iods ,
a p r o g r e s s i v e p e n a l t y , i n c r e a s i n g a t t h e r a t e o f l / 4 o f 1 p e r c e n t f o r
each week thereaf ter during which t h e average re se rv e ba lance i s d e f i c i e n t ,
w i l l
b e
a s s e s s e d
o n
we ek ly d e f i c i e n c i e s u n t i l
t h e
r e q u i r e d r e s e rv e
h a s
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been res to red and. main ta ined f o r fo ur conse cut iv e weekly pe r i od s ,
provided that
t h e
maximum pe na lt y char ged s h a l l
n o t
exceed
1 0 p e r
cent .
Ob) When a member bank n o t l o c a t e d i n a c e n t r a l r e s e r v e o r rese rve
c i t y
h a s h a d a n
a v e ra g e d e f i c i e n c y
i n
r e s e rv e s
f o r
th ree consecu t ive
semi-monthly per iods ,
a
p ro g re s s i v e p e n a l t y , i n c re a s i n g
a t t h e
r a t e
o f
l / 2 o f 1 p e r
cent
f o r
each ha l f month th er ea f t er du ring which
t h e
average
rese rve ba lance
i s
d e f i c i e n t , w i l l
b e
assessed
o n
semi-monthly
d e -
f i c i e n c i e s u n t i l t h e r e q u i r e d r e s e rv e h a s been res to red a n d mainta ined
f o r t w o consecut ive semi-monthly pe r i od s , provided th a t t h e maximum
penal ty charged wi l l
n o t
exceed
1 0 p e r
cent .
SECTION V I I . OTHER RULES AMD REGULATIONS.
Any
fu r t h e r r e q u ir e m e n ts t h a t
t h e
Board
may
deem necessary wi l l
b e
s e t
f o r t h
b y t h e
Federal Reserve Banks
i n
t h e i r l e t t e r s
o f
i n s t r u c t i o n
t o
their member
a n d
nonmember c l e a r i n g ba nks . Each Fed er al Res erv e Bank
wil l a l so promulgate ru les a n d r e g u l a t i o n s g o v ern i ng t h e d e t a i l s o f i t s
o p e ra t i o n s
a s a
c l ea r i ng house , such ru l e s
a n d
r e g u l a t i o n s
t o b e
b ind ing
upon a l l mamber a n d nonmember banks> which a r e c l ea r ing th rough t h e
Federal Reserve Bank.
JUNE 2 7 , 1 9 2 3 -
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