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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


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


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


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


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


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 -

frsbog_mim_v18_0459.pdf

Documents

n s i t

t s d i s t r i c t

d e s i r e t o

e c t i o n ana s e

r e c e

d i r e c t

reserve d i s t r i

f t e r s e t f o r