Federal Reserve Bank unless accompanied and secured by approved warehouse receipts, bills of lading, or other such documents covering readily marketable goods. IV. DOMESTIC BILLS CONDITIONS OF PURCHASE a) Before purchasing domestic bills of exchange, the Federal Reserve Bank must secure statements concerning the condition and standing of the drawer of the paper, and, if possible, also of the acceptor of the bill, sufficient to satisfy the bank as to the nature and quality of the paper to be purchased. b) No Federal Reserve Bank will be permitted to purchase bills of any one drawer, or issued upon any one maker, to an amount to exceed in the aggregate a percentage of its capital, to be fixed from time to time by the Federal Reserve Board, except when secured by approved warehouse receipts, bills of lading, or other such documents covering readily marketable goods. The aggregate amount drawn on any one acceptor, purchased by Federal Reserve Banks, shall not exceed a reasonable percentage of the stated net worth of the parties whose names appear upon the paper. V. RATES Federal Reserve Banks desiring to engage in open-market transactions in domestic bills of exchange shall communicate to the Federal Reserve Board the rate they desire to establish, for review and determination. 157. TIME DEPOSITS AND SAVINGS ACCOUNTS1 The Federal Reserve Board deems it advisable to define under the following headings those deposits against which the Federal Reserve Act requires a reserve of only 5 per cent to be maintained: 1. Time deposits, open accounts. 2. Savings accounts. 3. Certificates of deposit. It was clearly not the intention of the Act to permit a reduction of reserves to 5 per cent upon deposits which may be ordinarily checked upon, but in respect to which a bank, by a blanket provision in its by-laws, may at any time require a withdrawal notice of not less than 30 days to be given. The reduction of the reserve to be carried against time deposits is intended to apply only to deposits under written agreement not to be withdrawn within 30 days from the date as of which the reserve calculation is made. Therefore, on the date Circular No. 6 and Regulation E of Federal Reserve Board, January 15, 1915. (Published in Monthly Letter of National City Bank, New York, February, of calculating reserve, under the definitions contained in the accompanying regulation, no deposit may be deemed a time deposit, whether on open account or on certificate— a) If it is payable within 30 days, because of the approaching end of the specified period for which it was deposited or because of receipt of notice of the date on which withdrawal will be made. b) If it may be withdrawn by check within 30 days, although the bank may have the right, by written contract or otherwise, to require a withdrawal notice of not less than 30 days. Nor may any certificate of deposit be considered a time certificate if any part of the amount represented by it is subject to check or may be withdrawn without the presentation of the certificate for proper indorsement. While savings accounts may at any time, by the action of the bank, be converted into time deposits, they are, nevertheless, ordinarily withdrawable on demand. In the absence of any statutory limitation upon the sum which may be received by a bank from any one individual as a savings account, the Board has no authority, for the purpose of calculating reserves, to impose any such limitation, but it feels strongly that in the interest of both the member banks and the Federal Reserve System, the broad provisions of the Act in respect to time deposits, savings accounts, and certificates of deposit, should not be made the means of any large general reduction of reserves by a transfer to those forms of deposits which are in substance demand deposits; and it is the purpose of the Board to countenance or permit a reduction of reserves to 5 per cent only on deposits which are, in fact as well as in form, entitled to such reduction within the spirit of the Act. Banks carrying savings accounts must record them in separate ledgers which do not contain ordinary checking accounts or other items. Open time accounts and time certificates of deposit should also be carried in separate ledgers, but if carried in the same ledger with current checking accounts they must be grouped together so as to be readily distinguished from the latter. The Board desires to make it clear that the Act requires the full reserve, at the rate prescribed for demand deposits, to be carried. against all savings accounts and all time deposits whether on open account or certificate, which are subject to check or which the bank has been notified are to be withdrawn within 30 days. REGULATION GOVERNING TIME AND SAVINGS DEPOSITS Section 19 of the Federal Reserve Act provides, in part, as follows: Demand deposits, within the meaning of this Act, shall comprise all deposits payable within 30 days, and time deposits shall comprise all deposits payable after 30 days, and all savings accounts and certificates of deposit which are subject to not less than 30 days' notice before payment. TIME DEPOSITS, OPEN ACCOUNTS The term "time deposits, open accounts" shall be held to include all accounts, not evidenced by certificates of deposit or savings passbooks, in respect to which a written contract is entered into with the depositor at the time the deposit is made that neither the whole nor any part of such deposit may be withdrawn by check or otherwise. SAVINGS ACCOUNTS The term "savings accounts" shall be held to include those accounts of the bank in respect to which, by its printed regulations, accepted by the depositor at the time the account is opened a) The passbook, certificate, or other similar form of receipt must be presented to the bank whenever a deposit or withdrawal is made. b) The depositor may at any time be required by the bank to give notice of an intended withdrawal not less than 30 days before a withdrawal is made. TIME CERTIFICATES OF DEPOSIT A "time certificate of deposit" is defined as an instrument evidencing the deposit with a bank, either with or without interest, of a certain sum specified on the face of the certificate, payable in whole or in part to the depositor or to his order a) On a certain date, specified on the certificate, not less than 30 days after the date of the deposit, or b) After the lapse of a certain specified time subsequent to the date of the certificate, in no case less than 30 days, or c) Upon written notice given a certain specified number of days, not less than 30 days before the date of repayment, and d) In all cases only upon presentation of the certificate at each withdrawal for proper indorsement or surrender. 159. CLEARINGS UNDER THE NEW SYSTEM1 The provisions of the Federal Reserve Act with respect to the introduction of a system of clearings are found in section 16, where it is provided that Every Federal Reserve Bank shall receive on deposit at par from member banks or from Federal Reserve Banks checks and drafts drawn upon any of its depositors, and when remitted by a Federal Reserve Bank, checks and drafts drawn by any depositor in any other Federal Reserve Bank or member bank upon funds to the credit of said depositor in said Reserve Bank or member bank. Nothing herein contained shall be construed as prohibiting a member bank from charging its actual expense incurred in collecting and remitting funds, or for exchange sold to its patrons. The Federal Reserve Bank shall, by rule, fix the charges to be collected by the member bank from its patrons whose checks are cleared through the Federal Reserve Bank and the charge which may be imposed for the service of clearing or collection rendered by the Federal Reserve Bank. The Federal Reserve Board shall make and promulgate from time to time regulations governing the transfer of funds and charges therefor among Federal Reserve Banks and their branches, and may at its discretion exercise the functions of a clearing-house for such Federal Reserve Banks, or may designate a Federal Reserve Bank to exercise such functions, and may also require each such bank to exercise the functions of a clearing-house for its member banks. It is evident that this provision distinctly contemplates two classes of work: a) A clearing system providing for the clearing of items among member banks which are stockholders and depositors in any Federal Reserve Bank. b) A clearing system which shall provide for clearing the transactions of Federal Reserve Banks among themselves. 160. GOLD CLEARANCE FUND AT WASHINGTON Provision has been made by the Federal Reserve Board for the establishment of a gold clearance fund at Washington for the purpose of effecting with as little delay and cost as possible settlements between Federal Reserve Banks. This proposed plan of interbank settlement is intended to complete and be adjusted to an intradistrict clearance system, but its operations will be independent of the latter. From First Annual Report of the Federal Reserve Board, p. 135. |