FEDERAL RESERVE BOARD WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X~6789

January 6, 1931.

SUBJECT: Expi ra t ion of Charters of S ta te Member Banks.

Pear S i r :

A number of ins tances have come to the Board's a t -t e n t i o n i n which the cha r t e r s of S t a t e member hanks have expired and they have continued to t r an sac t "business without obta in ing new c h a r t e r s or extending t h e i r corporate ex is tence or have t r a n s f e r r e d t h e i r business to new banks organized f o r the purpose of succeeding them and the Federal r e se rve bank has not discovered these f a c t s u n t i l some time a f t e r such t r ansac t i ons have taken p l a c e . In order to prevent- l ega l i r r e g u l a r i t i e s and poss ib le l e g a l d i f f i c u l t i e s a r i s i n g from such s i t u a t i o n s , i t i s suggested tha t the Federal reserve • banks mainta in a record showing the dates upon which the c h a r t e r s of a l l S ta te member banks w i l l expire and devise so/ne means whereby the s i t u a t i o n w i l l be c a l l e d to the a t t e n t i o n of the o f f i c e r s of the Federal reserve banks s ix months i n ad-vance of such da tes . Upon being advised tha t the cha r t e r of a S t a t e member bank i s about to expi re , i t wolild a l so seem advisable f o r the Federal reserve bank to communicate with such S ta te member bank and a s c e r t a i n what s teps i t proposes to . take with r e fe rence to the s i t u a t i o n .

I f the S t a t e laws author ize the renewal of the b a r k ' s c h a r t e r , or the extension of i t s corporate exis tence , i t w i l l not be necessary f o r the Federal reserve bank to take any s t eps except to reques t t ha t i t be fu rn i shed with copies of the docu-ments necessary to show t h a t the cha r t e r has been renewed or t h a t the corporate ex is tence has been extended.

I f , however, the S ta te law contains no p rov i s ion f o r the renewal of cha r t e r s of S ta te banks or the extension of t h e i r corporate ex is tence , or i f f o r any other reason i t i s planned to organize a new bank to tAce over the t u s i h e s s of the bank whose cha r t e r i s about to expire , i t would seem advisable f o r the Federal reserve bank to suggest t h a t a p p l i c a t i o n f o r member-ship be made on behalf of the new bank s u f f i c i e n t l y i n advance of the date of the e x p i r a t i o n of the char te r of the o ld bank to

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enable the new "bank to become a member of the Federal Reserve System simultaneously with I t s o rganiza t ion . This, of course, may "be done by having an app l i ca t ion f o r membership made upon behalf of the new bank by i t s organizers and by submit t ing i t to the Federal Reserve Board with a recommendation t h a t i t be approved e f f e c t i v e i f and when the new hank i s organized and i t s d i r e c t o r s r a t i f y the app l i ca t i on f o r membership made i n i t s behalf and accept the condit ions of membership p resc r ibed by the Federal Reserve Board.

, If the condi t ion of the old bank i s u n s a t i s f a c t o r y , the Federal reserve bank could suggest in advance such ad-justments as would be necessary to make i t s successor a des i rab le member. If the new bank does not des i re to be a member, or i f the Federal reserve bank i s unwil l ing to have i t a s a member, s teps should be taken to have any indebtedness of the o ld bank to the Federal reserve bank r e t i r e d before the e x p i r a t i o n of i t s c h a r t e r .

By Order of the Federal Reserve Board.

Very t r u l y yours,

E. M. McClelland, Ass is tan t Secre ta ry .

TO GOVERNORS AND CHAIRMEN OF ALL FEDERAL RESERVE BANKS.

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