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NOTE: Other regulations issued by the Department of the Treasury appear in Title 19,

Chapter I, Title 26, Chapter I, Title 27, Chapter I, Title 31, Title 41, Chapter 10 .

SUPPLEMENTAL PUBLICATIONS: Digest of decisions relating to national banks, Comptroller of the

Currency. Irregular. Vol. 14, 1864–1912. Vol. 2, 1913–1926. Vol. 3—, 1927–1931. Vol.
4-, 1932–1934. Vol. 54, 1933–1936. Federal laws affecting national banks as of January 1,
1950, compiled by Comptroller of the Currency.

PART 1-INVESTMENT SECURITIES

REGULATION

Sec.

1.1 Authority.

1.2 Scope and application.

1.3 Definitions.

1.4 Limitations and restrictions on pur-

chase and sale of a public security.
1.5 Limitations and restrictions on pur-

chase of an investment security.
1.6 Limitations and restrictions on hold-

ing investment securities.
1.7 Limitations and restrictions on pur-

chase, sale and holding of specified

obligations.
1.8 Prudent banking judgment; credit in-

formation required.

1.9 Requests for rulings.

1.10 Convertible securities.

1.11 Amortization of premiums.

1.12 Exceptions.

ELIGIBILITY OF SPECIFIC BOND ISSUES

FOR

PURCHASE BY NATIONAL BANKS

1.105 Miscellaneous rulings.

1.106 Texas Turnpike Authority.
1.109 Commonwealth of Kentucky, Depart-

ment of Parks.
1.110 City of Kansas City, Missouri.
1.111 Georgia State Authorities.
1.112 New Jersey Highway Authority.
1.113 The Music Center Lease Company, Los

Angeles, California.

1.114 Federal National Mortgage Association.

1.115 Dormitory authority of the State of

New York.

1.116 Massachusetts Turnpike Authority.
1.117 City of London, Kentucky.
1.118 Inter-American Development Bank.
1.119 Savings Banks Trust Company, New

York, New York.
1.121 City of Opelika, Alabama.
1.122 Public Building Commission of Chicago.
1.123 Alaska State Development Corporation.
1.124 Virginia Public School Authority.
1.125 General State Authority of the Com-

monwealth of Pennsylvania.

1.126 Wanapum Hydroelectric Refunding

Revenue Bonds.

1.127 Washington State Public School Plant

Facility Bonds and Public Building

Bonds.

1.128 Commonwealth of Pennsylvania Tax

Anticipation Notes.

1.129 State Highway and Bridge Authority of

the Commonwealth of Pennsylvania

Bonds.

1.130 California Bond Anticipation Notes.
1.131 District of Columbia Redevelopment

Land Agency Urban Renewal Bonds.
1.132 General State Authority of the Com-

monwealth of Pennsylvania Serial

Bonds, 19th Series.

1.133 State of Israel Bonds.

1.134 Jacksonville Expressway Revenue

Bonds.

Sec.
1.135 Bond anticipation notes issued by the

New York State Housing Finance

Agency.

1.136 State Public School Building Author-

ity of the Commonwealth of

Pennsylvania Series N Bonds.

1.137 Delaware River and Bay Authority

Revenue Bonds.
1.138 Sabine River Authority, State of

Louisiana, General Obligation

Bonds, Series 1964.
1.139 State of Israel Bonds, third develop-

ment issue.
1.140 Richmond-Petersburg Turnpike

Bonds.
1.141 School Refunding Bonds, Broward

County, Florida.

1.142 City of Atlanta and Fulton County

Recreation Authority (Georgia)

Revenue Bonds, Series 1964.

1.143 Revised ruling on the Music Center

Lease Company, Los Angeles,

California.

1.144 Fresno City-County Community and

Convention Center Authority Rev-

enue Bonds.
1.145 Columbia Storage Power Exchange

Revenue Bonds.
1.146 School Building Revenue Bonds

Series of 1964, of the Corry Area
Schools Authority, Erie and Warren

Counties, Pennsylvania.
1.147 Merced River Development Revenue

Bonds.

1.148 Oklahoma City Airport Trustees

Bonds.

1.149 Bonds of the Woods Hole, Martha's

Vineyard, and Nantucket Steamship

Authority.
1.150 Dormitory Bonds of 1962 of the Wis-

consin University Building Corpo-

ration.
1.151 Wisconsin State Agencies Building

Corporation.
1.152 Chicago Transit Authority Equip-

ment Trust Certificates.
1.153 Hospital authority of Cobb County,

Georgia.

1.154 New York State Housing Finance

Agency.

1.155 Federal National Mortgage Association

Participation Certificates.

1.156 Water Revenue Bonds of the City of

Wheeling, Missouri.
1.157 Elkhart High School Building Corpo-

ration.

1.158 Mobile County, Alabama, Board of

School Commissioners Capital Out-

lay School Warrants.

1.159 Bonds of the Dormitory Authority

of the State of New York.
1.160 Export-Import Bank Portfolio Fund

Participation Certificate.
1.161 City of Anaheim (California)

Stadium, Inc. Lease-Rental Bonds.

1.162 Massachusetts Port Authority Reve-

nue Refunding and Improvement

Bonds.

Sec.

Sec. 1.163 State of Kansas Board of Regents

1.193 Revenue Bonds.

Los Angeles County-West Covina Civic 1.164 Federal National Mortgage Association

Center Authority, Citrus District

Courthouse Revenue Bonds. Participation Certificates. 1.165 Illinois Building Authority Bonds.

1.194 City of Downey Community Hospital 1.166 New York State Housing Finance

Authority.
Agency General Housing Loan

1.195 Cudahy Civic Center Authority RevBonds.

enue Bonds. 1.167 The Port of New York Authority, Con

1.196 Campbell County Utilities and Service solidated Bonds.

Authority. 1.168 Commodity Credit Corporation cer

1.197 Urban Redevelopment Authority of tificates of interest in pools of price

Pittsburgh, Residential Land Resupport loans.

serve Fund Bonds. 1.169 San Diego Stadium Authority Bonds.

1.198 Visalia Area Hospital Authority Rev1.170 City of Santa Monica Parking Au

enue Bonds (California). thority Bonds.

1.199 Upland Civic Center Building Au1.171 State of Israel Bonds, Development

thority Revenue Bonds (California). Investment Issue.

1.200 Parking Authority of the City of Up1.172 Federal National Mortgage Associa

land (California) Parking Revenue tion Participation Certificates.

Bonds. 1.173 Alaska State Housing Authority Reve

1.201 Bergen County Sewer Authority (New nue Bonds.

Jersey). 1.174 Louisiana Capital Construction and

1.202 Carlsbad Building Authority Revenue Improvement Commission Public

Bonds (California).
Improvement Bonds.

1.203 Water and Sewer Improvement Bonds, 1.175 Florida State Board of Education

Series 1967, of the Northwest HousHigher Education Bonds.

ton Water Supply Corp. 1.176 Export-Import Bank Portfolio Fund

1.204 Wisconsin University Building CorpoParticipation Certificates.

ration and the Wisconsin State 1.177 State of Ohio Highway Improvement

Agencies Building Corporation. Bonds.

1.205 Los Angeles Convention and Exhibi1.178 Memphis TVA Lease Rental Revenue

tion Center Authority. Bonds.

1.206 Louisiana State Bond and Building 1.779 General State Authority of the Com

Commission. monwealth of Pennsylvania; State

1.207 Duval County Hospital Authority, Fla. Highway and Bridge Authority of

1.208 Parking Authority, Beverly Hills, Calif. the Commonwealth of Pennsylvania.

1.209 Port Authority of Allegheny County, 1.180 Orange County Juvenile Hall Lease

Pa.
Corporation Leasehold Mortgage

1.210 Export-Import Bank promissory notes. Bonds.

1.211 County of Palm Beach, Fla., Court1.181 New York State Housing Finance

house and Jail Certificates of InAgency.

debtedness. 1.182 Orange County-Westminster Civic 1.212 Los Angeles County Southeast GenCenter Authority City Building Fa

eral Hospital Authority. cilities Revenue Bonds.

1.213 Los Angeles County-San Dimas Civic 1.183 Indiana School Building Corporations.

Center Authority. 1.184 Tennessee State School Bond Author- 1.214 Virginia Public School Authority. ity Higher Educational Facilities

1.215 San Diego City-County Camp AuthorBonds.

ity. 1.185 Salamanca Hospital District Author- 1.216 Hillsborough County Aviation Auity (New York) Hospital Construc

thority, Florida (Post Office Faciltion Bonds.

ity). 1.186 Desert Hospital Authority Revenue

1.217 Fountain Valley Improvement AuBonds.

thority Revenue Bonds. 1.187 Santa Clara County Building Author

1.218 San Bernardino Public Safety Auity 1967 Revenue Bonds, Series A.

thority Revenue Bonds. 1.188 Alaska State Housing Authority State

1.219 Merced County-Atwater Civic Center Lease Revenue Bonds.

Authority, City Building Facilities 1.189 Los Angeles County-West Covina Civic

1968, Revenue Bonds. Center Authority, West Covina Ad

1.220 Santa Barbara County Public Safety ministrative and Police Buildings

Authority Revenue Bonds.
Revenue Bonds.

1.221 Redevelopment Agency of the City of 1.190 Redevelopment Agency of the City of

Vallejo Library Lease Revenue
Vallejo Marina Vista Project Area

Bonds.
Parking Lease Revenue Bonds.

1.222 Los Angeles County-Lawndale Build1.191 Thomaston-Upson County Office

ing Authority. Building Revenue Bonds.

1.223 Southeastern Pennsylvania Trans1.192 San Carlos Civic Center Authority

portation Authority, Rental RevLease Revenue Bonds.

enue 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. 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)

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) $ 1.3 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 investments 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

$ 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

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 on

purchase and sale of a public secu

rity. 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]

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)

on

on

$ 1.5 Limitations and restrictions

purchase of an investment security. (a) Evidence of obligor's ability to perform. A bank may purchase an investment 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

§ 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.

(b) Obligations purchased predominantly on the basis of reliable estimates. A bank may not hold at any time investment securities which would not be eligible for purchase pursuant to paragraph

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