Issue and Cancellation of Federal Reserve Bank Capital Stock

FEDERAL RESERVE SYSTEM

12 CFR Part 209

[Regulation I; Docket No. R-0966]

Issue and Cancellation of Federal Reserve Bank Capital Stock

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Board of Governors of the Federal Reserve System is

proposing to amend its Regulation I regarding the issue and

cancellation of Federal Reserve Bank Capital Stock in order to reduce

regulatory burden and simplify and update requirements. This proposal

to modernize Regulation I is in accordance with the Board's policy of

regular review of its regulations and the Board's review of its

regulations pursuant to section 303 of the Riegle Community Development

and Regulatory Improvement Act of 1994.

DATES: Comments must be received by May 30, 1997.

ADDRESSES: Comments, which should refer to Docket No. R-0966, may be

mailed to Mr. William W. Wiles, Secretary, Board of Governors of the

Federal Reserve System, 20th Street and Constitution Avenue, N.W.,

Washington, DC 20551. Comments addressed to Mr. Wiles may also be

delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m., and

to the security control room outside of those hours. Both the mail room

and the security control room are accessible from the courtyard

entrance on 20th Street between Constitution Avenue and C Street N.W.

Comments may be inspected in Room MP-500 between 9:00 a.m. and 5:00

p.m. weekdays, except as provided in Sec. 261.8 of the Board's Rules

Regarding the Availability of Information, 12 CFR 261.8.

he security control room outside of those hours. Both the mail room

and the security control room are accessible from the courtyard

entrance on 20th Street between Constitution Avenue and C Street N.W.

Comments may be inspected in Room MP-500 between 9:00 a.m. and 5:00

p.m. weekdays, except as provided in Sec. 261.8 of the Board's Rules

Regarding the Availability of Information, 12 CFR 261.8.

FOR FURTHER INFORMATION CONTACT: Rick Heyke, Staff Attorney (202/452-

3688), Legal Division, Board of Governors; Elizabeth Tacik, Accountant

(202/452-2303), Division of Reserve Bank Operations and Payment

Systems, Board of Governors; or Anthony Scafide, Manager (215/574-

6546), Wholesale Payments Division, Federal Reserve Bank of

Philadelphia. For the hearing impaired only, Telecommunications Device

for the Deaf (TDD), Dorothea Thompson (202/452-3544).

SUPPLEMENTARY INFORMATION:

Background

As part of its policy of regular review of its regulations, and

consistent with section 303 of the Riegle Community Development and

Regulatory Improvement Act of 1994 (Riegle Act), the Board of Governors

of the Federal Reserve System (Board) is proposing to amend its

Regulation I regarding issue and cancellation of Federal Reserve Bank

capital stock (12 CFR part 209). Section 303 of the Riegle Act requires

each federal banking agency to review and streamline its regulations

and written policies to improve efficiency, reduce unnecessary costs,

and remove inconsistencies and outmoded and duplicative requirements.

The proposed amendments are designed to reduce regulatory burden and

simplify and update the Regulation.

The principal amendments being proposed are described below. In

general, the amendments simplify, modernize, and condense the

Regulation, and reflect the replacement of share certificates by a

book-entry system. The amendments also codify Board and staff

interpretations. Finally, the amendments delete the many references to

specific forms

atory burden and

simplify and update the Regulation.

The principal amendments being proposed are described below. In

general, the amendments simplify, modernize, and condense the

Regulation, and reflect the replacement of share certificates by a

book-entry system. The amendments also codify Board and staff

interpretations. Finally, the amendments delete the many references to

specific forms. Many of these references are incorrect because the

forms no longer exist or no longer have the same identification

numbers.

Banks Desiring To Become Member Banks

Proposed Sec. 209.2 combines and condenses existing Secs. 209.1 and

209.2 regarding national and state bank applications. Existing

Sec. 209.1 also specifies the amount of Reserve Bank stock for which

national banks should apply, but the proposal combines all references

to amount in proposed Sec. 209.4 and deletes repetitive explanations.

Proposed Sec. 209.2 also includes a subsection (c) that will specify

the Reserve Bank of which a bank may become a member and that is the

subject of a separate request for comment. See 62 FR 11117.

Cessation of Membership

Proposed Sec. 209.3 combines and simplifies existing Secs. 209.5(b)

(merger of a member bank into a state nonmember bank), 209.6

(conversion of a national bank into a state nonmember bank), 209.7

(insolvency), 209.8 (voluntary liquidation), 209.9(b) (national bank in

the hands of a conservator to be liquidated), 209.10 (closed state

member banks not in liquidation), 209.11 (voluntary withdrawal from

membership by state bank), and 209.12 (involuntary termination of state

bank membership)

n, if the Comptroller deems it advisable. The existing

regulation includes in Sec. 209.9(a) a provision for the appropriate

Reserve Bank to notify the Office of the Comptroller of the Currency in

the event a national bank has ceased business for 60 days but has not

gone into liquidation, together with a statement of reasons why a

receiver should be appointed. The proposal omits this provision. The

appropriate procedures for communication among the Board, the Reserve

Bank, and the Comptroller's office in such a case would depend on the

facts and circumstances of the particular case.

Amounts and Payments

Proposed Sec. 209.4(a) combines in one section the requirement for

amount of total subscription for Reserve Bank stock (other than for a

mutual savings bank) on becoming a member or on a change in capital

stock and surplus. The Federal Reserve Act (the Act) requires member

banks (other than mutual savings banks) to subscribe for Reserve Bank

capital stock in an amount equal to 6 percent of their capital stock

and surplus. Member banks are required to pay in half this amount and

half is subject to call by the Reserve Bank.

Proposed Sec. 209.4(b) defines member bank capital stock and

surplus as capital stock and paid-in surplus. Retained earnings

continue to be generally excluded from this definition, thereby

minimizing member banks' adjustments in their Reserve Bank stock

holdings. The Federal Reserve System experienced approximately 1500

adjustments in Reserve Bank capital stock as a result of changes in

member bank capital stock and surplus in 1992.

capital stock and

surplus as capital stock and paid-in surplus. Retained earnings

continue to be generally excluded from this definition, thereby

minimizing member banks' adjustments in their Reserve Bank stock

holdings. The Federal Reserve System experienced approximately 1500

adjustments in Reserve Bank capital stock as a result of changes in

member bank capital stock and surplus in 1992.

The Board estimates that this number would increase substantially if it

were necessary to adjust for changes in retained earnings of member

banks. Although retained earnings are generally excluded from the

definition, the regulation incorporates previous guidance requiring a

deficit in retained earnings to be subtracted from capital stock and

surplus unless the deficit is relatively small and the appropriate

Reserve Bank is satisfied that it will be extinguished by accumulation

of earnings or formal reduction of surplus, in which case the

adjustment of Reserve Bank stock may be deferred until the end of the

quarter in which the deficit arises.

Section 5 of the Act provides that Federal Reserve Bank stock shall

be adjusted from time to time as member banks increase or decrease

capital stock and surplus. The Act does not specify whether this

adjustment must be done immediately or can be done periodically after a

number of changes in a member bank's capital stock and surplus have

occurred or when such changes become in the aggregate significant.

There is a burden associated with adjusting banks' Reserve Stock

positions to reflect small changes in the banks' capital accounts. The

Board seeks comment on how frequently, or after how much cumulative

dollar or percentage change, member banks should be required to adjust

their Reserve Bank capital stock holdings.

Proposed Sec. 209.4(c) is a condensed version of existing

Sec

significant.

There is a burden associated with adjusting banks' Reserve Stock

positions to reflect small changes in the banks' capital accounts. The

Board seeks comment on how frequently, or after how much cumulative

dollar or percentage change, member banks should be required to adjust

their Reserve Bank capital stock holdings.

Proposed Sec. 209.4(c) is a condensed version of existing

Sec. 209.4 specifying that mutual savings banks are required to

subscribe for Reserve Bank stock in an amount equal to 0.6 percent of

total deposits rather than 6 percent of capital and surplus. Mutual

savings banks not permitted to hold Reserve Bank stock are required to

maintain a deposit at the Reserve Bank in the same amount pending a

change in state law to permit purchase of the stock.

Proposed Secs. 209.4 (d) and (e) specify that transactions in

Reserve Bank capital stock between member banks and the Reserve Bank

take place at the subscription price plus accrued dividends at the rate

of one-half of one percent per month (provided that the total price

paid on redemption of Reserve Bank stock does not exceed the book value

of such stock). Under section 5 of the Act (12 U.S.C. 287), banks

applying for Reserve Bank capital stock are required to pay the

subscription price plus accrued dividends for such stock. Under

sections 5, 6, and 9(10) of the Act (12 U.S.C. 287, 288 and 328),

Reserve Banks redeeming their capital stock from member banks which are

in voluntary liquidation or which have been declared insolvent and for

which a receiver has been appointed, or from state member banks on

voluntary withdrawal from or involuntary termination of membership, are

required to pay a price equal to the cash subscription price originally

paid plus accrued dividends, but may not pay a price exceeding the book

value of the Reserve Bank stock. The Act is silent on whether accrued

dividends are payable by Reserve Banks in other cases such as merger

into nonmember banks

te member banks on

voluntary withdrawal from or involuntary termination of membership, are

required to pay a price equal to the cash subscription price originally

paid plus accrued dividends, but may not pay a price exceeding the book

value of the Reserve Bank stock. The Act is silent on whether accrued

dividends are payable by Reserve Banks in other cases such as merger

into nonmember banks. In cases where the Act requires accrued

dividends, it specifies that they shall accrue at one-half percent per

completed month but is silent on whether dividends should be prorated

to accrue within a month.

In practice, Reserve Banks have included accrued dividends in both

purchases and redemptions, including intra-month accrued dividends, and

the proposal applies the concept of accrued dividends to all

transactions in Reserve Bank capital stock.1 The proposal also

continues the Board's practice of accruing dividends within a month.

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\1\ Under sections 6 and 9(10) of the Act, the Board is under no

obligation to pay unearned accrued dividends on redemption of

Reserve Bank capital stock from insolvent member banks for which a

receiver has been appointed or from state member banks on voluntary

withdrawal from or involuntary termination of membership. See, e.g.,

Board Interpretation of April 17, 1925, X-4322, and related note,

published in Federal Reserve Regulatory Service at 3-500.

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Bank capital stock from insolvent member banks for which a

receiver has been appointed or from state member banks on voluntary

withdrawal from or involuntary termination of membership. See, e.g.,

Board Interpretation of April 17, 1925, X-4322, and related note,

published in Federal Reserve Regulatory Service at 3-500.

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The Board seeks comment on the appropriate method of computing

accrued dividends. Generally the Reserve Banks have accrued intra-month

dividends on the basis of the actual number of days elapsed within a

month divided by the number of actual days in the month. This method

results in different daily accruals depending on the number of days in

the month for which intra-month accrued dividends are calculated. The

Board requests comment on whether adopting another method, such as use

of a standard 30-day month, would simplify the computation.

Proposed Sec. 209.4(e)(2) specifies that in the case of any

cancellation of Reserve Bank stock under Regulation I, the Reserve Bank

may first apply the proceeds to any liability of the member bank to the

Reserve Bank, and pay over the remainder to the bank or receiver as

appropriate. This replaces a similar requirement in existing

Sec. 209.5(b), and clarifies that the principle may apply to partial as

well as total cancellations.

The Share Register

Proposed Sec. 209.5 revises the share register provision of the

Regulation to reflect the modern book-entry and electronic records

systems the Reserve Banks have implemented. This change permits

eliminating the numerous and confusing provisions of the existing

Regulation that deal with the circumstances under which share

certificates may be retained or must be submitted for reissue. For

example, existing Sec. 209.13(a) requires a member bank to surrender

its certificate in the event of a change in name for the Reserve Bank

to issue a new certificate in the new name. Existing Sec

its

eliminating the numerous and confusing provisions of the existing

Regulation that deal with the circumstances under which share

certificates may be retained or must be submitted for reissue. For

example, existing Sec. 209.13(a) requires a member bank to surrender

its certificate in the event of a change in name for the Reserve Bank

to issue a new certificate in the new name. Existing Sec. 209.5(a)

includes a lengthy footnote explaining the difference between transfer

of Reserve Bank stock certificates by purchase and by operation of law,

because a new certificate is not required in the case of transfer by

operation of law. Under the proposal, the Reserve Bank in each case

need merely change the name of the stockholder in its records.

Initial Regulatory Flexibility Analysis

The Regulatory Flexibility Act (5 U.S.C. 601-612) requires an

agency to publish an initial regulatory flexibility analysis with any

notice of proposed rulemaking. Two of the requirements of an initial

regulatory flexibility analysis (5 U.S.C. 603(b))--a description of the

reasons why action by the agency is being considered and a statement of

the objectives of, and legal basis for, the proposed rule--are

contained in ``Background'' above. The proposed rules do not overlap

with other federal rules.

Another requirement for the initial regulatory flexibility analysis

is a description of and, where feasible, an estimate of the number of

small entities to which the proposed rule will apply. The proposal will

apply to all member banks regardless of size.

The amendments are burden-reducing. Therefore, the Board believes

that the amendments will not have a significant adverse economic impact

on a substantial number of small entities.

Paperwork Reduction Act

is a description of and, where feasible, an estimate of the number of

small entities to which the proposed rule will apply. The proposal will

apply to all member banks regardless of size.

The amendments are burden-reducing. Therefore, the Board believes

that the amendments will not have a significant adverse economic impact

on a substantial number of small entities.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act notice of 1995 (44

U.S.C. Ch. 3506; 5 CFR Part 1320, Appendix A.1), the Board has reviewed

the rule under the authority delegated to the Board by the Office of

Management and Budget. No collections of information pursuant to the

Paperwork Reduction Act are contained in the proposed rule.

List of Subjects in 12 CFR Part 209

Banks and banking, Federal Reserve System, Reporting and

recordkeeping requirements, Securities.

Authority and Issuance

For the reasons set forth in the preamble, the Board proposes to

revise part 209 of chapter II of title 12 to read as follows:

PART 209--ISSUE AND CANCELLATION OF FEDERAL RESERVE BANK CAPITAL

STOCK (REGULATION I)

Sec.

209.1 Authority, purpose, and scope.

209.2 Banks desiring to become member banks.

209.3 Cessation of membership.

209.4 Amounts and payments.

209.5 The share register.

Authority: 12 U.S.C. 248, 321-338, 466, 486.

Sec. 209.1 Authority, purpose, and scope.

(a) Authority. This part is issued pursuant to 12 U.S.C. 248, 321-

338, 466, and 486.

(b) Purpose. The purpose of this part is to implement the

provisions of the Federal Reserve Act relating to the issuance and

cancellation of Federal Reserve Bank stock upon becoming or ceasing to

be a member bank, or upon changes in the capital and surplus of a

member bank, of the Federal Reserve System.

.

(a) Authority. This part is issued pursuant to 12 U.S.C. 248, 321-

338, 466, and 486.

(b) Purpose. The purpose of this part is to implement the

provisions of the Federal Reserve Act relating to the issuance and

cancellation of Federal Reserve Bank stock upon becoming or ceasing to

be a member bank, or upon changes in the capital and surplus of a

member bank, of the Federal Reserve System.

(c) Scope. This part applies to member banks of the Federal Reserve

System, to national banks in process of organization, and to state

banks applying for membership. National banks and locally-incorporated

banks located in United States dependencies and possessions are

eligible (with the consent of the Board) but not required to apply for

membership under section 19(h) of the Federal Reserve Act, 12 U.S.C.

466.1

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\1\ If such a bank desires to become a member bank under the

provisions of section 19(h) of the Federal Reserve Act, it should

communicate with the Federal Reserve Bank with which it desires to

do business.

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Sec. 209.2 Banks desiring to become member banks.

(a) Application for stock or deposit. Each national bank in process

of organization, 2 each nonmember state bank converting into a

national bank, and each nonmember state bank applying for membership in

the Federal Reserve System under Regulation H, 12 CFR part 208, shall

file with the Federal Reserve Bank in whose district it is located an

application for stock (or deposit in the case of mutual savings banks

not authorized to purchase Reserve Bank stock 3) in the Reserve

Bank. The bank shall pay for the stock (or deposit) in accordance with

Sec. 209.4.

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lation H, 12 CFR part 208, shall

file with the Federal Reserve Bank in whose district it is located an

application for stock (or deposit in the case of mutual savings banks

not authorized to purchase Reserve Bank stock 3) in the Reserve

Bank. The bank shall pay for the stock (or deposit) in accordance with

Sec. 209.4.

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\2\ A new national bank organized by the Federal Deposit

Insurance Corporation under section 11(n) of the Federal Deposit

Insurance Act (12 U.S.C. 1821(n)) should not apply until in the

process of issuing stock pursuant to section 11(n)(15) of that act.

Reserve Bank approval of such an application shall not be effective

until the issuance of a certificate by the Comptroller of the

Currency pursuant to section 11(n)(16)of that act.

\3\ A mutual savings bank not authorized to purchase Federal

Reserve Bank stock may apply for membership evidenced initially by a

deposit. [See Sec. 208.4(c) of Regulation H, 12 CFR 208.4(c), and

Secs. 208.3(a)(2) and 208.3(b) of Regulation H as proposed to be

amended and published elsewhere in today's Federal Register.] The

membership of the savings bank shall be terminated if the laws under

which it is organized are not amended to authorize such purchase at

the first session of the legislature after its admission, or if it

fails to purchase such stock within six months after such an

amendment.

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elsewhere in today's Federal Register.] The

membership of the savings bank shall be terminated if the laws under

which it is organized are not amended to authorize such purchase at

the first session of the legislature after its admission, or if it

fails to purchase such stock within six months after such an

amendment.

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(b) Issuance of stock; acceptance of deposit. Upon authorization to

commence business by the Comptroller of the Currency in the case of a

national bank in organization or upon approval of conversion by the

Comptroller of the Currency in the case of a state nonmember bank

converting to a national bank, and when all applicable requirements

have been complied with in the case of a state bank approved for

membership, the Reserve Bank shall issue the appropriate number of

shares by crediting the bank with the appropriate number of shares on

its books. In the case of a mutual savings bank not authorized to

purchase Reserve Bank shares, the Reserve Bank shall accept the deposit

in place of issuing shares. The bank's membership shall become

effective on the date of such issuance or acceptance.

(c) Location of bank. Placeholder for location of bank.

Sec. 209.3 Cessation of membership.

(a) Application for cancellation. Any bank that desires to withdraw

from membership in a Federal Reserve Bank, voluntarily liquidates or

ceases business, is merged or consolidated into a nonmember bank, or is

involuntarily liquidated by a receiver or conservator or otherwise,

shall promptly file with its Reserve Bank an application for

cancellation of all its Reserve Bank stock (or withdrawal of its

deposit, as the case may be) and payment therefor in accordance with

Sec. 209.4.

Federal Reserve Bank, voluntarily liquidates or

ceases business, is merged or consolidated into a nonmember bank, or is

involuntarily liquidated by a receiver or conservator or otherwise,

shall promptly file with its Reserve Bank an application for

cancellation of all its Reserve Bank stock (or withdrawal of its

deposit, as the case may be) and payment therefor in accordance with

Sec. 209.4.

(b) Involuntary termination of membership. If an application is not

filed promptly after a cessation of business by a state member bank, a

vote to place a member bank in voluntary liquidation, or the

appointment of a receiver for (or a determination to liquidate the bank

by a conservator of) a member bank, the Board may, after notice and an

opportunity for hearing where required under Section 9(9) of the

Federal Reserve Act (12 U.S.C. 327), order the membership of the bank

terminated and all of its Reserve Bank stock canceled.

(c) Effective date of cancellation. Cancellation in whole of a

bank's Reserve Bank capital stock shall be effective, in the case of:

(1) Voluntary withdrawal from membership by a state bank, as of the

date of such withdrawal;

(2) Merger into, consolidation with, or (for a national bank)

conversion into, a State nonmember bank, as of the effective date of

the merger, consolidation, or conversion; and

(3) Involuntary termination of membership, as of the date the Board

issues the order of termination.

(d) Merger of member banks. Upon a merger or consolidation of

member banks, the surviving bank shall instruct the relevant Reserve

Bank to cancel all the shares previously held by any nonsurviving bank.

To the extent appropriate, proceeds payable under Sec. 209.4 may be

applied to purchase additional shares in the name of the surviving

bank.

e date the Board

issues the order of termination.

(d) Merger of member banks. Upon a merger or consolidation of

member banks, the surviving bank shall instruct the relevant Reserve

Bank to cancel all the shares previously held by any nonsurviving bank.

To the extent appropriate, proceeds payable under Sec. 209.4 may be

applied to purchase additional shares in the name of the surviving

bank.

(e) Voluntary withdrawal. Any bank withdrawing voluntarily from

membership shall give 6 months written notice, and shall not cause the

withdrawal of more than 25 percent of any Reserve Bank's capital stock

in any calendar year, without waivers of these requirements from the

Board of Governors.

Sec. 209.4 Amounts and payments.

(a) Amount of subscription. The total subscription of a member bank

(other than a mutual savings bank) shall equal six percent of its

capital and surplus. Whenever any member bank (other than a mutual

savings bank) experiences an increase or decrease in capital and

surplus, it shall file with the appropriate Reserve Bank an application

for issue or cancellation of Reserve Bank capital stock in order to

adjust its Reserve Bank capital stock subscription to equal six percent

of the member bank's capital and surplus.

(b) Capital Stock and Surplus defined. Capital stock and surplus of

a member bank at the end of a quarter means the paid-up capital stock

and surplus of the bank, less any deficit in its retained earnings

account, all as shown on the bank's call report as of the end of the

quarter. A Reserve Bank may permit a member bank to disregard a

relatively small deficit in its retained earnings account until the end

of the quarter in which the deficit arises if the Reserve Bank is

satisfied that the deficit will be extinguished by accumulation of

earnings or by a formal reduction of surplus.

d earnings

account, all as shown on the bank's call report as of the end of the

quarter. A Reserve Bank may permit a member bank to disregard a

relatively small deficit in its retained earnings account until the end

of the quarter in which the deficit arises if the Reserve Bank is

satisfied that the deficit will be extinguished by accumulation of

earnings or by a formal reduction of surplus.

(c) Mutual savings banks. The total subscription of a member bank

that is a mutual savings bank shall equal six-tenths of 1 percent of

its total deposit liabilities as shown on its most recent report of

condition. Whenever any member bank that is a mutual savings bank

experiences an increase or decrease in total deposit liabilities as

shown on its most recent report of condition, it shall file with the

appropriate Reserve Bank an application for issue or cancellation of

Reserve Bank capital stock in order to adjust its Reserve Bank capital

stock subscription to equal six-tenths of one percent of its total

deposit liabilities. A mutual savings bank that is applying for or has

a deposit with the appropriate Reserve Bank in lieu of Reserve Bank

capital stock shall file for acceptance or adjustment of its deposit in

a like manner.

(d) Payment for subscriptions. Upon approval by the Reserve Bank of

an application for capital stock (or for a deposit in lieu thereof),

the applying bank shall pay the Reserve Bank one-half of the

subscription amount plus accrued dividends at the rate of one half of

one percent per month. Upon payment (and in the case of a national

banks in organization or state nonmember bank converting into a

national bank, upon authorization or approval by the Comptroller of the

Currency), the Reserve Bank shall issue the appropriate number of

shares by crediting the bank with the appropriate number of shares on

its books

accrued dividends at the rate of one half of

one percent per month. Upon payment (and in the case of a national

banks in organization or state nonmember bank converting into a

national bank, upon authorization or approval by the Comptroller of the

Currency), the Reserve Bank shall issue the appropriate number of

shares by crediting the bank with the appropriate number of shares on

its books. In the case of a mutual savings bank not authorized to

purchase Reserve Bank stock, the Reserve Bank will accept the deposit

or addition to the deposit in place of issuing shares. The remaining

half of the subscription or additional subscription (including

subscriptions for deposits or additions to deposits) shall be subject

to call by the Board.

(e) Payment for cancellations. (1) Upon approval of an application

for cancellation of Reserve Bank capital stock, the Reserve Bank shall

reduce the bank's shareholding on the Reserve Bank's books by the

number of shares required to be canceled and shall pay therefor a sum

equal to the cash subscription paid on the canceled stock plus accrued

dividends at the rate of one half of one percent per month, such sum

not to exceed the book value of the stock. 4

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\4\ Under sections 6 and 9(10) of the Act, the Board is under

no obligation to pay unearned accrued dividends on redemption of

Reserve Bank capital stock from insolvent member banks for which a

receiver has been appointed or from state member banks on voluntary

withdrawal from or involuntary termination of membership.

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(2) In the case of any cancellation of Reserve Bank stock under

this Part, the Reserve Bank may first apply such sum to any liability

of the bank to the Reserve Bank and pay over the remainder to the bank

(or receiver or conservator, as appropriate).

Sec. 209.5 The share register.

voluntary termination of membership.

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(2) In the case of any cancellation of Reserve Bank stock under

this Part, the Reserve Bank may first apply such sum to any liability

of the bank to the Reserve Bank and pay over the remainder to the bank

(or receiver or conservator, as appropriate).

Sec. 209.5 The share register.

(a) Electronic or written record. A member bank's holding of

Reserve Bank capital stock shall be represented by one (or at the

option of the Reserve Bank, more than one) notation on the Reserve

Bank's books. Such books may be electronic or in writing. Upon any

issue or cancellation of Reserve Bank capital stock, the Reserve Bank

shall record the member bank's new share position in its books (or

eliminate the bank's share position from its books, as the case may

be).

(b) Certification. A Reserve Bank may certify on request as to the

number of shares held by a member bank and purchased before March 28,

1942, or as to the purchase and cancellation dates and prices of shares

cancelled, as the case may be.

By order of the Board of Governors of the Federal Reserve

System, March 20, 1997.

William W. Wiles,

Secretary of the Board.

[FR Doc. 97-7587 Filed 3-28-97; 8:45 am]

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