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National banks acting as insurance agents and as brokers or agents in mak-
International operations regulation.
NOTE: Other regulations issued by the Department of the Treasury appear in Title 19,
SUPPLEMENTAL PUBLICATIONS: Digest of decisions relating to national banks, Comptroller of
the Currency. Irregular. Vol. 1, 1864–1912. Vol. 2, 1913–1926. Vol. 3— 1927–1931. Voi.
PART INVESTMENT SECURITIES
chase and sale of a public security.
chase of an investment security.
ing investment securities.
chase, sale and holding of specified
1.110 City of Kansas City, Missouri.
1.123 Alaska State Development Corpora-
monwealth of Pennsylvania.
1.129 State Highway and Bridge Authority
of the Commonwealth of Pennsyl-
Land Agency Urban Renewal Bonds.
monwealth of Pennsylvania Serial
Bonds, 19th Series.
New York State Housing Finance
ity of the Commonwealth of Penn-
sylvania Series N Bonds.
isiana, General Obligation Bonds,
1.146 School Building Revenue Bonds Series
of 1964, of the Corry Area Schools,
1.152 Chicago Transit Authority Equipment
1.158 Mobile County, Alabama, Board of
School Commissioners Capital Out-
lay School Warrants.
the State of New York.
dium, Inc. Lease-Rental Bonds.
1.162 Massachusetts Port Authority Reve-
nue Refunding and Improvement
Revenue Bonds. 1.164 Federal National Mortgage Association
Participation Certificates. 1.165 Illinois Building Authority Bonds. 1.166 New York State Housing Finance
Agency General Housing Loan
Bonds. 1.167 The Port of New York Authority, Con
solidated Bonds. 1.168 Commodity Credit Corporation cer
tificates of interest in pools of price
support loans. 1.169 San Diego Stadium Authority Bonds. 1.170 City of Santa Monica Parking Au
thority Bonds. 1.171 State of Israel Bonds, Development
Investment Issue. 1.172 Federal National Mortgage Associa
tion Participation Certificates. 1.173 Alaska State Housing Authority Reve
nue Bonds. 1.174 Louisiana Capital Construction and
Improvement Commission Public
Improvement Bonds. 1.175 Florida State Board of Education
Higher Education Bonds. 1.176 Export-Import Bank Portfolio Fund
Participation Certificates. 1.177 State of Ohio Highway Improvement
Bonds. 1.178 Memphis TVA Lease Rental Revenue
Bonds. 1.179 General State Authority of the Com
monwealth of Pennsylvania; State Highway and Bridge Authority of
the Commonwealth of Pennsylvania. 1.180 Orange County Juvenile Hall Lease
Corporation Leasehold Mortgage
Bonds. 1.181 New York State Housing Finance
Agency. 1.182 Orange County-Westminster Civic
Center Authority City Building Fa
cilities Revenue Bonds. 1.183 Indiana School Building Corporations. 1.184 Tennessee State School Bond Author
ity Higher Educational Facilities
Bonds. 1.185 Salamanca Hospital District Authority
(New York) Hospital Construction
Bonds. 1.186 Desert Hospital Authority Revenue
Bonds. 1.187 Santa Clara County Building Author
ity 1967 Revenue Bonds, Series A. 1.188 Alaska State Housing Authority State
Lease Revenue Bonds. 1.189 Los Angeles County-West Covina Civic
Center Authority, West Covina Administrative and Police Buildings
Revenue Bonds. 1.190 Redevelopment Agency of the City of
Vallejo Marina Vista Project Area
Parking Lease Revenue Bonds. 1.191 Thomaston-Upson County Office
Building Revenue Bonds. 1.192 San Carlos Civic Center Authority
Lease Revenue Bonds.
Sec. 1.193 Los Angeles County-West Covina Civic
Center Authority, Citrus District
Courthouse Revenue Bonds. 1.194 City of Downey Community Hospital
Authority. 1.195 Cudahy Civic Center Authority Rev
enue Bonds. 1.196 Campbell County Utilities and Service
Authority. 1.197 Urban Redevelopment Authority of
Pittsburgh, Residential Land Re
serve Fund Bonds. 1.198 Visalia Area Hospital Authority Rev
enue Bonds (California). 1.199 Upland Civic Center Building Au
thority Revenue Bonds (California). 1.200 Parking Authority of the City of Up
land (California) Parking Revenue
Bonds. 1.201 Bergen County Sewer Authority (New
Jersey). 1.202 Carlsbad Building Authority Revenue
Bonds (California). 1.203 Water and Sewer Improvement Bonds,
Series 1967, of the Northwest Hous
ton Water Supply Corp. 1.204 Wisconsin University Building Corpo
ration and the Wisconsin State
Agencies Building Corporation. 1.205 Los Angeles Convention and Exhibi
tion Center Authority. 1.206 Louisiana State Bond and Building
Commission. 1.207 Duval County Hospital Authority, Fla. 1.208 Parking Authority, Beverly Hills, Calif. 1.209 Port Authority of Allegheny County,
Pa. 1.210 Export-Import Bank promissory notes. 1.211 County of Palm Beach, Fla., Court
house and Jail Certificates of In
debtedness. 1.212 Los Angeles County Southeast Gen
eral Hospital Authority. 1.213 Los Angeles County-San Dimas Civic
Center Authority. 1.214 Virginia Public School Authority. 1.215 San Diego City-County Camp Author
ity. 1.216 Hillsborough County Aviation Au
thority, Florida (Post Office Facil
ity). 1.217 Fountain Valley Improvement Au
thority Revenue Bonds. 1.218 San Bernardino Public Safety Au
thority Revenue Bonds. 1.219 Merced County-Atwater Civic Center
Authority, City Building Facilities
1968, Revenue Bonds. 1.220 Santa Barbara County Public Safety
Authority Revenue Bonds. 1.221 Redevelopment Agency of the City of
Vallejo Library Lease Revenue
Bonds. 1.222 Los Angeles County-Lawndale Build
ing Authority. 1.223 Southeastern Pennsylvania Trans
portation Authority, Rental Revenue Bonds (Philadelphia lease).
Sec. 1.224 Export-Import Bank debentures. 1.225 Merced County-Los Banos Public
Safety Authority. 1.226 Seal Beach Administration Building
Authority. SECURITIES ELIGIBLE FOR UNDERWRITING AND
UNLIMITED HOLDING 1.227 Orange County-La Palma Civic Center
Authority (California). 1.228 Parking Authority, Huntington Beach,
Calif. 1.229 Montclair Fire Authority. 1.230 Los Angeles Convention and Exhibi
tion Center Authority. 1.231 Kansas State Board of Regents, Sta
dium Addition Revenue Bonds,
Wichita State University. 1.232 San Bernardino Public Safety Au
thority. 1.233 Alaska State Housing Authority State
Lease Revenue Bonds. 1.234 San Jose Civic Improvement Au
thority. 1.235 Northwest Bergen County Sewer
Authority. 1.236 Los Angeles County-La Mirada Public
Facilities Authority. 1.237 Lake Texarkana Water Supply Cor
poration. 1.238 Riverside General Hospital Authority. 1.239 Parking Authority, Carlsbad, Calif. 1.240 Parking Authority, Oakdale, Calif. 1.241 Ventura County Airport Authority
(California). 1.242 Riverside County Law Library (Call
fornia). 1.243 Commonwealth of Pennsylvania Tax
Anticipation Notes (General Fund). 1.244 Orange County-Westminster Civic
Center Authority Courthouse Reve
nue Bonds (California). 1.245 City of Long Beach-Los Angeles
County Civic Center Authority. AUTHORITY: The provisions of this part 1 Issued under R.S. 324 et seq., as amended, Paragraph Seventh of R.S. 5136 as amended; 12 U.S.C. 1 et seq., 24, unless otherwise noted. $ 1.1
Authority. This part is issued by the Comptroller of the Currency under the general authority of the national banking laws, 12 U.S.C. 1 et seq., and under specific authority contained in paragraph Seventh of 12 U.S.C. 24. The Comptroller of the Currency is charged by the national banking laws with the execution of all laws of the United States relating to the organization, operation, regulation and supervision of national banks and in particular with the execution of 12 U.S.C. 24 which sets forth the corporate powers of national banks. This part interprets and applies paragraph Seventh of 12
U.S.C. 24 to provide for its due execution and for the proper regulation and supervision of the operations of national banks. Paragraph Seventh of 12 U.S.C. 24 also specifically provides for the Comptroller of the Currency to prescribe by regulation (a) limitations and restrictions on the purchase of investment securities by a national bank for its own account and (b) further definition of the term "investment securities." (28 F.R. 9916, Sept. 12, 1963) § 1.2 Scope and application.
This part applies to the purchase, sale, dealing in, underwriting, and holding of investment securities by national banks, banks located in the District of Columbia, and by state banks which are members of the Federal Reserve System. It may also apply to a limited extent to others engaged in the banking business. The Comptroller of the Currency is charged by various provisions contained in Chapter 1 of Title 26 of the District of Columbia Code with the supervision of banks located in the District of Columbia. State banks which are members of the Federal Reserve System are, under 12 U.S.C. 335, subject to the same limitations and conditions with respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under paragraph Seventh of 12 U.S.C. 24. Dealers in securities are prohibited by 12 U.S.C. 378 from engaging in banking business. Section 378 specifically provides, however, that it does not prohibit national banks or state banks or trust companies (whether or not members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing and selling investment securities to the extent permitted to national banking associations by the provisions of 12 U.S.C. 24. [28 F.R. 9916, Sept. 12, 1963)
Definitions. (a) The term “bank” includes national banks, banks located in the District of Columbia, and state banks which are members of the Federal Reserve System.
(b) The term "investment security” means a marketable obligation in the form of a bond, note or debenture which is commonly regarded as an investment security. It does not include invest
ments which are predominantly speculative in nature.
(c) The term "public security" means an obligation described in 12 U.S.C. 24 as not subject to the limitations and restrictions contained therein "as to dealing in, underwriting and purchasing for its own account, investment securities”. Public securities include:
(1) Obligations of the United States;
(2) General obligations of any State of the United States or of any political subdivision thereof;
(3) Other obligations listed in paragraph Seventh of 12 U.S.C. 24.
(d) The term “political subdivision of any state" includes a county, city, town or other municipal corporation, a public authority, and generally any publicly owned entity which is an instrumentality of the State or of a municipal corporation.
(e) The phrase "general obligation of any State or of any political subdivision thereof” means an obligation supported by the full faith and credit of the obligor. It includes an obligation payable from a special fund when the full faith and credit of a State or any political subdivision thereof is obligated for payments into the fund of amounts which will be sufficient to provide for all required payments in connection with the obligation. It implies an obligor possessing resources sufficient to justify faith and credit. [28 F.R. 9916, Sept. 12, 1963) $ 1.4 Limitations and restrictions
purchase and sale of a public
security. A bank may deal in, underwrite, purchase and sell for its own account a public security subject only to the exercise of prudent banking judgment. Prudence will require such determinations as are appropriate for the type of transaction involved. For the purpose of underwriting or investment, prudence will also require a consideration of the resources and obligations of the obligor and a determination that the obligor possesses resources sufficient to provide for all required payments in connection with the obligation. (28 F.R. 9916, Sept. 12, 1963) $ 1.5 Limitations and restrictions
purchase of an investment security. (a) Evidence of obligor's ability to perform. A bank may purchase an in
vestment security for its own account when in its prudent banking judgment (which may be based in part upon estimates which it believes to be reliable), it determines that there is adequate evidence that the obligor will be able to perform all that it undertakes to perform in connection with the security, including all debt service requirements, and that the security may be sold with reasonable promptness at a price which corresponds reasonably to its fair value.
(b) Judgment based predominantly upon reliable estimates. A bank may, subject to limitations set forth in § 1.6 (b), purchase an investment security for its own account although its judgment with respect to the obligor's ability to perform is based predominantly upon estimates which it believes to be reliable. Although the appraisal of the prospects of any obligor will usually be based in part upon estimates, it is the purpose of this paragraph to permit a bank to exercise a somewhat broader range of judgment with respect to a more restricted portion of its investment portfolio. It is expected that this authority may be exercised not only in the absence of a record of performance but also when there are prospects for improved performance. It is also expected that an investment security purchased pursuant to this paragraph may by the establishment of a satisfactory financial record become eligible for purchase under paragraph (a) of this section.
(c) Securities ruled eligible by the Comptroller of the Currency. A bank may consider as a factor in reaching its prudent banking judgment with respect to an investment security a ruling published by the Comptroller of the Currency on the eligibility of such security for purchase. Consideration must also be given, however, to the possibility that circumstances on which the ruling was based may have changed since the time of the ruling. [28 F.R. 9916, Sept. 12, 1963) $ 1.6 Limitations and restrictions
holding investment securities. (a) Obligations of any one obligor. A bank may not hold at any time investment securities of any one obligor in a total amount in excess of 10 percent of the bank's capital and surplus. For this purpose the amount of an investment security is to be determined on the basis of the par or face value of the security.