include a foreign bank and since, as a practical matter, balances due from foreign banks are not readily convertible, but must be sold on the market like any other commodity before becoming available as a cash asset. 1919 Bulletin, p. 963.

XIX, 305. Deposits of trust funds by bank acting as fiduciary are individual and not bank deposits.-Where a national bank or a State member bank or trust company deposits trust funds in another bank, the depositary bank may not include such deposit among the amounts due to banks from which the amounts due from banks may be deducted in computing its reserve requirements. Such a deposit constitutes a liability to the depositing bank in its fiduciary capacity and not an item due to banks generally. 1922 Bulletin, p. 572. 1922 Bulletin, p. 572. (See XIX, 507.)

Deficiency in Reserves.

XIX, 400. Reduction below required balance.-A Federal reserve bank has no right to refuse payment of a member bank's checks on account of the reduction of such member bank's balances below the required amount, but it may assess penalties therefor. 1915 Bulletin, p. 12.

XIX, 401. Shipment of currency to cover reserves.-The cost of shipments must be sustained by the member bank making the shipment. Federal reserve banks are not authorized to pay the expense of shipment unless the shipment of currency is made to cover a deficiency which has arisen because the member bank has failed to provide funds to offset checks received from or for the account of its Federal reserve bank. 1917 Bulletin, p. 615.

Reserves Against Particular Classes of Deposits.

XIX, 500. Deposit of postal savings funds.-Member banks must maintain reserves against deposits of postal savings funds in the same way as against other deposit liabilities. 1915 Bulletin, p. 409.

XIX, 501. Reserves against Government deposits.-Under the provisions of section 7 of the act approved April 24, 1917, known as the first Liberty bond act, national banks and member banks are not required to maintain reserves against deposits of public moneys by the United States, regardless of the source of the funds deposited. This section, however, does not apply to Federal reserve banks. 1917 Bulletin, p. 458. (See XIX, 508.)

XIX, 502. Deposits with a Federal reserve bank from the savings department of a trust-company member bank.-A member bank which operates both a savings department and a commercial banking department may properly deposit funds out of its savings department with the Federal reserve bank to count as reserve against its savings deposits, even though under the terms of the State law such a deposit with the Federal reserve bank is not subject to any claim by the Fed

eral reserve bank against the member bank itself as distinct from the savings department. Federal reserve banks should not, however, receive and count as reserve an amount of such savings deposits in excess of the reserve requirements against them. 1919 Bulletin, p. 654.

XIX, 503. Deposits by the United States Shipping Board and the Emergency Fleet Corporation. Member banks must maintain appropriate reserves against all such deposits, since they are not "deposits of public moneys by the United States" which are exempted from reserve requirements by certain provisions in the Liberty Bond Acts. 1919 Bulletin, p. 1054. (See XIX, 508.

XIX, 504. Balances due to foreign branch.-A member bank is not required to maintain reserves against balances due from it to one of its foreign branches. 1921 Bulletin, p. 815. (See XXV, 100.)

XIX, 505. Deposits by customer in anticipation of maturity of acceptances. Whether or not funds deposited in a bank to meet maturing acceptances constitute deposit liabilities depends upon the relationship between the bank and its customer. If the funds are credited to the customer's general deposit account, subject to check or to withdrawal by the customer, such deposit would be subject to reserve requirements. If, however, the money deposited is not subject to check or withdrawal, but is received in full or part payment of the customer's obligation to meet the acceptance at maturity, or if it is a special deposit for the purpose of meeting the acceptance and its disposition is limited to that purpose, it would seem that the deposit does not constitute a deposit liability against which reserves must be required. 1921 Bulletin, p. 815. (See XIX, 506, 507.)

XIX, 506. Funds deposited with trustee bank to meet depositor's maturing obligations.-A State member bank acts as trustee under a corporate bond issue, the trust deed requiring the corporation to put the bank in funds to meet maturing principal and interest obligations. The funds thus turned over to the bank are not credited to the corporation's account, are not subject to withdrawal or other disposition by the corporation, but can be used only to meet the bonded indebtedness. Such deposits do not constitute a deposit liability against which reserves must be carried. Discussion of similar situations in which deposits might be subject to reserve requirements. 1921 Bulletin, p. 1435. (See XI(k), 704.)

XIX, 507. Reserves against liabilities resulting from receipt and use of trust funds.-A national bank need not carry reserves against trust funds which it keeps segregated and apart from its general assets. If it mingles such funds with its general assets under authority of section 11(k), a deposit liability thereby arises which is subject to reserve requirements. If the funds are deposited in another institu

tion, the latter must carry reserves against such deposit, which must be classed as an individual rather than a bank deposit in computing its reserve requirements.

All funds received by a national bank, including funds deposited by a corporate debtor to meet maturing obligations, give rise to deposit liabilities against which reserves must be carried, unless the funds are received as trust funds and are kept segregated from the general assets of the bank.

These principles are equally applicable to State member banks and trust companies receiving and using funds under like circumstances. 1922 Bulletin, p. 572. (See XI (k), 704, 705; XIX, 305.)

66

XIX, 508. Reserves against Government deposits.-Deposits made by United States postmasters of Government funds, other than postal savings deposits, received by them in their official capacity, constitute deposits of public moneys by the United States," within the meaning of section 7 of the first Liberty bond act, and, when made in designated depositaries, are exempt the from reserve requirements of section 19. The following classes of deposits, however, are not "deposits of public moneys by the United States" within such meaning and are not exempt from reserve requirements:

(1) Deposits of Philippine funds made by the Philippine government and carried under the title "Treasurer of the Philippine Islands currency reserve fund account."

(2) Deposits of Porto Rican funds made by the Porto Rican gov

ernment.

(3) Deposits of Indian funds under the control of the Department of the Interior.

(4) Deposits of States, counties, or municipalities.

(5) Deposits of the United States Shipping Board and deposits of the Emergency Fleet Corporation. 1923 Bulletin, p. 559. (See XIX, 501, 503.)

Member Bank Deposits with Nonmember Banks.

XIX, 600. Deposits with nonmember banks by national banks as "loans."-Deposits by national banks with nonmember banks should not be considered as "loans" to the nonmember banks, although the Comptroller of the Currency has instructed national banks to report deposits with nonmember banks in excess of 10 per cent as "excessive loans." 1915 Bulletin, p. 126.

XIX, 601. A State bank becoming a member of the Federal reserve system is subject to the provisions of section 19, which prohibit a member bank from keeping on deposit with any nonmember State bank or trust company a sum in excess of 10 per cent of its paid-up capital and surplus. 1917 Bulletin, p. 951.

XIX, 602. Deposits of member banks in foreign banks. The provisions of section 19 as to deposits by member banks in nonmember State banks or trust companies do not prohibit a member bank from keeping on deposit with a foreign bank a sum in excess of 10 per cent of the member bank's capital and surplus. 1919 Bulletin, p. 1054.

XIX, 603. National banks and State member banks may carry deposits with nonmember banks subject, however, to the 10 per cent limitation in section 19. If the nonmember bank becomes a member bank, the amount which the depositing member bank, whether State or national, may keep on deposit is not limited, although such deposits can not be counted as part of the depositing bank's legal reserves. 1919 Bulletin, p. 1156.

XIX, 604. Cash items forwarded to nonmember bank and still uncollected as sum on deposit with nonmember bank.-Cash items, indorsed without restriction and forwarded by a member bank to a nonmember bank for collection and credit, under an agreement whereby the member bank receives immediate credit, but may not check against this credit until the items have actually been collected, constitute sums on deposit with the nonmember bank even prior to collection, and are subject to the 10 per cent limitation on nonmember bank balances contained in section 19. 1923 Bulletin, p. 428. (See XIX, 302.)

Member Bank as Agent for Nonmember in Receiving Discounts.

XIX, 700. Where a member bank offers for rediscount notes discounted for a nonmember bank, the Federal reserve bank must determine whether money so obtained will be used to relend to the nonmember bank, and if so, such notes should not be rediscounted, except with the board's approval. On the other hand, if the notes are acquired in good faith by the member bank and held as part of the general assets of that bank, they may be rediscounted if otherwise eligible. (NOTE. This ruling is rescinded by XIX, 702.) 1915 Bulletin, p. 213. (See XIII-C, 327; XIII-D, 301.)

XIX, 701. Permission granted to member banks to apply for discount of eligible paper acquired from nonmember banks.-The Federal Reserve Board gives general authority to member banks to apply to their respective Federal reserve banks for the discount of eligible paper acquired from nonmember banks, such authority to be effective until withdrawn. Federal reserve banks may exercise their own discretion with regard to the extent to which they may entertain such applications. (NOTE.-This ruling is rescinded by XIX, 702.) 1921 Bulletin, p. 963. (See XIII-C, 327; XIII-D, 301.)

XIX, 702. Rediscounts for nonmember banks. The board revokes the permission granted to member banks to act as the media or

agents of nonmember banks in rediscounting paper with Federal reserve banks. That privilege was granted as a temporary emergency measure and was withdrawn when the emergency passed. Rulings XIX, 700, and XIX, 701, are rescinded in toto, and rulings XIII-C, 327, and XIII-D, 301, are rescinded in so far as they apply to the rediscount by member banks of nonmember bank paper. The following rules are also announced:

(1) No Federal reserve bank shall, without the board's permission, discount any paper acquired by a member bank from a nonmember bank or bearing the signature or indorsement of a nonmember bank, except bankers' acceptances and other eligible paper purchased by the offering bank in good faith on the open market from some party other than the nonmember bank.

(2) Application for permission to rediscount nonmember bank paper shall be made by the offering member bank and shall state in full the facts and reasons giving rise to the application.

(3) Except in emergencies and for temporary periods the board will not grant permission to member banks to rediscount paper of nonmember banks which are eligible for membership. 1923 Bulletin, p. 891.

Construction of Penal Provisions.

SECTION 22.

XXII, 100. The board has consistently refrained from making rulings on specific cases arising under section 22. Since this section is penal in nature, no ruling by the board would afford any protection to a person subsequently indicted for a violation of its provisions. 1917 Bulletin, p. 30.

XXII, 101. Any violation of the provisions of section 22 by officers, directors, or employees of a member bank constitutes a crime, punishable by fine or imprisonment. No ruling or interpretation by the Federal Reserve Board would afford any protection to a person subsequently indicted by a Federal grand jury for any such violation, it not being within the province of the Federal Reserve Board to make an official ruling on the provisions of this section. Whether or not a contemplated transaction comes within the prohibited part of this section is a question which should be determined by the counsel for the bank in each case. The board, however, may properly suggest ways in which member banks and their officers and directors may make a matter of record the affirmative action required by law as a condition precedent to certain transactions authorized by the act. 1915 Bulletin, p. 16; 1917 Bulletin, p. 694.

XXII, 102. Receipt of commission by an officer of a national bank for his services.-The officer of a national bank is not prohibited by