frsbog_mim_v20_0297.pdf

7/17/2019 frsbog_mim_v20_0297.pdf

http://slidepdf.com/reader/full/frsbogmimv200297pdf 1/4

X-4051

REGULATION J .

Series of 1924

Superseding Regulation J of l^dC)

CHECK CLEARING

AND

COLLECTION

SEC T im I- STATUTORY PROVISIONS.

Section

16 of the

Federal Reserve

Act

authorizes

t h e

Federal

Re-

serve Board

to

require each Federal Reserve Bank

to

exercise

th e

functions

of a clearing house f o r i t s member barus.5, and Section 13 of the Federal

Reserve

Act, as

amended

by the ac t

approved June

21 , 191 ,

authorizes each

Federal Reserve Bank

to

receive from

an y

nonmember bank

or

trust company

y

sole ly

f or t h e

purposes

of

exchange

or of

col lect ion, deposits

of

current

funds in lawful money, nat ional-bank no te s, Federal Reserve no te s, checks

an d drafts payable upon presentation, or maturing notes and b i l l s , provided

such nonmember bank or trus t company maintains wit h i t s Federal Reserve

Bank a balance sufficient to o f f se t t i e items in transit held f o r i t s a c -

count by the Federal Reserve Bank.

SECTION I I . GENERAL REQUIREMENTS.

In pursuance of t-.e authority vested i n i t under these provisions of

law, the Federal Reserve Board, desiring to afford both to the public and

to the

various banks

of tne

country

a

dir ect , expeditious,

and

economical

system of check collection an d settlement of balances, has arranged t o

have each FederCL Reserve Bank exercise

the

functions

of a

clearing house

and

co ll ec t checks

f o r

such

o f i t s

member banks

a s

desire

t o

avail them-

selves o f i t s pr iv i l eges and for such nonmember State banks and trust

companies as may maintain with t h e Federal Reserve Bank balances sufficient

to qu al if y them under the provisions of section 13 to send items to Federal

Reserve Banks f o r purposes of excnange or of co l lect ion. Such nonmember

State ban^s and trust companies will hereinafter be referred to as nonmember

clearing banks.

Each Federal Reserve Bank shall exercise th e functions of a clearing

house

and

c ol le c t cnecks under

the

general terms

and

conditions herein-

a f ter s e t forth.

SECTION I I I . CHECKS RECEIVED FOR COLLECTION.

(1 )

Each Federal Reserve Bank wi l l rec ei ve

at par

from

i t s

member

banks and from nonmember clearing banks i n i t s district, checks drawn

*A

c.ieck

i s

generally defined

a s a

draft

or

order upon

a

bank

or

banking

house, purporting to be drawn upon a deposit of funds, f o r t h e payment

a t a l l events of a certain sum of money to the order of a certain person

tnerein named, or t o him or h is order, or to bearer, and payable on demand.

7/17/2019 frsbog_mim_v20_0297.pdf


X - 4 0 5 1

on a l l member and 11 on member clea ri ng banks, and checks drawn o n a l l ether non-

member banks which a r e col lectable at par in funds acceptable to the, Federal Re-

serve Bank of the d i s t r i c t i n which ?uch nonmeriber banks are located.

(2) Each Federal Reserve Bank will receive at par from other Federal tie-

serve Banks, and from a l l member and nonmember clearing banks i n other Federal

Reserve Districts which are authorized to route direct f or t h e credit of tneir

respective Federal Reserve Banks, checks drawn o n a l l member and nonmeraber^clear-

in g banks of i t s d i s t r i c t , and checks drawn on a l l other nonmember banks of i t s d i s -

trict wnich a r e col lectable at par in funds acceptable t o t h e collecting Federal

Reserve Bank.

(3) No

Federal Reserve

Ban^:

shal l receive

on

deposit

or f or

col lect ion

any

check drawn

on any

nonmember bank which cannot

be.

col lected

at par in

funds

a c -

ceptable to the Federal Reserve Bank of the d i s t r i c t in which such nonmember bank

i s

located,

SECTION IV . TIME SC15DUIE AND AVAILABILITY OF CREDITS.

(1)

Each Federal Reserve Bank wi l l pub li sh

a

time schedule showing

the

time a t which an y item sent t o i t will be counted a s reserve an d become avail-

able f o r withdrawal or other u se by the sending bank. F or a l l cnecks received,

the sending; bank wi l l be ^iven immediate credit, or deferred credit, in accord-

ance with such time schedule,

and as

provided below.

(2) For a l l such checks as are received f o r immediate credit i n accordance

with such time schedule , immediate cr ed it , subject t o final payment, will be

given upon t h e books of the Federal Reserve Bank a t full face value in the re -

serve account or clearing account upon day of receipt , and th e proceeds will

a t once be counted a s reserve an d become available f o r withdrawal or other u s e

by the sending bank,

( 3 ) F or a l l such checks as are received f o r deferred credit in accordance

with such time schedule, defer red cr ed it , sub jec t

t o

final payment, will

be en-

tered upon

th e

books

of the


a t

full face value

^ out tn e

proceeds will

n ot b e

counted

a s

reserve

n or

become available

f o r

witndxawa

other use by the sending bank u nt i l sucn time as nay be spec i f i ed in sucn time

schedule, at which time credit will be transferred from th e deferred account t o

the

reserve account

or

clearing account suoject

t o

final payment

an wi n

be

counted

as

reserve

and

become available

f o r

withdrawal

ojr

other

use by the

sending bank.

SECTION V. TEEMS OF COLLECTION.

The

Federal Reserve Board hereby authorizes

th e

Federal Reserve Banks

t o

uthority.

7/17/2019 frsbog_mim_v20_0297.pdf


- 3 -

X-14051

(1) A

Federa l Reserve Bank wi l l

a c t

only

a s

agent

of the

bank from which

i t

receives such checks

and

will assume

no

liabi l i ty except

fo r i t s own

negl igence

a n d i t s

guaranty

of

prior indorsements.

(2) A Federa l Reserve Bank may present such checks f o r payment or send such

checks

f o r

collection direct

to the

bank

on

which they

a r e

drawn

or a t

which they

a r e

payable,

o r i n i t s

discretion

m y

forward them

to

another agent with author-

i t y t o

present them

f o r

payment

or

send them

f o r

collection direct

to the

bank

on which they a r e dravai or at which they a r e payable.

(3) A

Federa l Reserve Bank

may in i ts

discre t ion

an d a t i t s

option, either

d i -

rec t ly

or

through

an

agent, accept either cash

o r

bank drafts

i n

payment

of

or in

remittance

f o r

such cneck»

and

shal l

ne t be

held liable

for any

loss

r e -

sulting from t h e acceptance of bank drafts i n lieu of cash, n o r f o r t h e f a i l -

ure of the drawee bank or any agent to remit f o r such checks, nor f o r the non-

payment

of any

bank draft accepted

in

payment

or as a

remittance from

th e

drawee

bank

or 'any

agent.

(4 )

Checks received

by a


o n i t s

member

or

nonmember

clearing banks will ordinarily be forwarded or presented direct t o such banks,

and

such banks will

b e

required

to

remit

or pay

therefor

a t pa r in

cash

or

bank

draft acceptable

to the

collecting Federal Reserve Bank,

or a t the

option

of

such

Federal Reserve Bank to authorize such Federal Reserve Bank to charge their r e -

serve accounts

o r

clearing accounts; provided, however, that

any

Federal Reserve

Bank cay reserve th e righ t i n i t o check coll ect ion ci rcu lar to charge such items

to the

reserve account

or

clearing account

of any

such bank

at any

time when

i n

any

par tic ula r case

the

Federal Reserve Bank deems

i t

necessary

to do so,

(5)

Checks received

by a

Federal Reserve Bank payable

i n

other dis tr icts

wil l

be

forwarded

f o r

collection upon

th e

terms

and

conditions herein provided

to the

Federal' Reserve Bank

of the

d i s t r i c t

in

which such checks

a r e

payable,

(6) The amount of any check f o r which payment in actually and final ly

collected funds

i s n o t

received snail

be

charged back

t o t h e

forwarding bank,

regardless of whether or no t t he check itself can be returned.

SECTION, V I. PENALTIES FOR DEFICIENCIES IN RESERVES.

(a )

Statut ory provi sions . Section

15 of the

Federal Reserve

Act

provides that-

The

required balance carried

by a

member bank with

a


may,

under

t h e

regulations

and

subject

to

such penalties

a s may be

prescribed

by the Federal Reserve Board, be checked against and withdrawn by such member

bank

f o r the

purpose

of

meeting existing liabilities; Provided, however, that

no bank shall at any time make new loans or shall pay any dividends unless and

u n t i l t h e total balance required by law is fully restored.

(b ) CotQpusfcstlcn of reserves . - I t ems c a n no t be counted a s par t of the min-

imum rese rve bala c-e to be carr ied by a member bank with i t s Federal Reserve Bank

until such time

as aay be

specif ied

i n t h e

appr opri ate time schedule re fe rr ed

to in Section IV. If member bank draw ag ai ns t items be fore such time, the

draft wil l

be

charged against

i t s

reserve balance

i f

such balance

be

suff ic ien t

in amount to pay i t ; but any resulting impairment of reserve balances will b e

subject

t o a l l t h e

penalties provided

by the Act .

7/17/2019 frsbog_mim_v20_0297.pdf


J-4051

( c ) Basic penalty* - Inasmuch a s i t i s essen t i a l tha

4

t t h e law i n

respect t o t h e maintenance by member banks of the required minimum r e -

serve Dala nee sha l l be strictly complied with, t h e Federal Reserve Board, •

under authority vested i n i t b y sect ion 19 of the Federal Reserve Act*

hereby prescribes a basic penalty f o r def i c i enc i e s i n reserves according

to the

following rules:

1*

Deficiencies

i n

re ser ve balances

of

member banks

i n

central

reserve and reser ve ci t i es wil l b e computed on the basis of average daily

n e t deposit balances covering a weekly period of seven day s. Def ici enci es

i n reserve balances of other member banks will b e computed o n t h e basis

of average daily n e t deposit balances covering a semi-monthly period *

.2 * Penal t ies f o r def ic ienc ies i n reserves wil l b e assessed monthly

on the basis of average daily deficiencies during each of th e reserve

con fut at ion peri ods ending i n t h e preceding month*

3* A basic ra te of 2 pe r cent p e r annum above t h e Federal Reserve

lank discount rate

on

90-day commercial paper will

b e

assessed

as a

penalty

on

def i c i enc i e s

i n

reserves

of

member banks*

(d)

Progr essiv e penalty*

- The

Federal Reserve Board will also

p r e -

scribe

for any

Federal Reserve District, upon

t h e

appl ica t ion

of the


of

t h a t d i s t r i c t ,

a n

additional progressive penalty

t o r continued deficiencies i n reserves , i n accordance with t h e following

ru les ,

1 * When a member bank i n a central rese rve o r reserve ci ty has had

an

average deficiency

i n

reserves

f o r s i x

consecutive weekly

periods,

a

progressiv e.penal ty , increasing

a t t h e

r a t e

of

one-fourth

of 1 pe r

cent

f o r

each week thereafter during which

t h e

average reserve balance

i s d e -

f ic ien t , wi l l

b e

assessed

on

weekly deficiencies until

t h e

required

r e -

serve

h a s

been restored

and

maintained

f o r

four consecutive weekly periods,

provided that

t h e

maximum pen al ty charged wi l l

n o t

exceed.

10 per

cent

*

2 . VZhen a member bank outside of a central reserve or reserve city

has had an

average deficiency

i n

reserves

f o r

three consecutive semi-

monthly periods,

a

progressive penalt y, inc reasi ng

a t t h e

r a t e

of

one-half

of 1 per

cent

f o r

each ha lf month t he rea f te r dur ing which

t h e

average

r e -

serve balance

i s

def i c i en t , w i l l

be

assessed

on

semi-monthly deficiencies

u n t i l

t h e

required reserve

h a s

been restored

and

maintained

f o r two con -

secutive semi-monthly periods, provided that

t h e

maximum penalty charged

will

n o t

exceed

10 per

cent.

SECTION V I I . OTHER RULES AND REGULATIONS.

Each Fede ral Reserve Bank s ha l l a lso promulgate ru l e s

an d

regulat ions

n o t

inconsistent with

t h e

terms

of t he law or of

thi s re gu la ti on , governing

th e

d e t a i l s

o f i t s

check cl ea ri ng

and

co ll ec ti on operations * Such ru le s

and

regulat ions shal l

b e s e t

f o r t h

b y t h e

Federal Reserve Banks

i n

their

l e t t e r s

of

ins t ruc t ion

to

their member

and

nonmember clearing banks

and

shal l be binding upon any member or nonmember clearing bank which sends

any

check

t o

such Federal Reserve Bank

f o r

col l ec t i on

or to any

other


f o r t h e

account

of

such Federal Reserve

^ hk for

collection*

u J '

frsbog_mim_v20_0297.pdf

Documents

t s federal reserve

federal reserve bank

t s d i s t r i c t

t s member banks

t s pr

federal reserve bank

federal reserve notes

federal reserve bank