of substantial delay between the time of filing of the application and notification of such applicant's admission to membership provided the applicant has furnished all information required and complied with applicable laws and the regulations of the Board, such applicant may be allowed to make its second payment upon admission and succeeding .payments as above provided. All cther subscriptions to a Bank's stock shall be paid in full not later than the time the stock cert.ficates therefor are issued.

§ 123.9 Transfer or hypothecation of stock. A member desiring to dispose of or transfer its stock shall make application for Board approval through the Bank of which it is a member.

REPORTS

$123.15 Reports. Each member shall make an annual report of its affairs as of the end of its fiscal year, or as of a date which may be mutually agreed upon by the Bank and such member, upon forms approved by the Board. Two copies of such annual report shall be forwarded to the member's Bank within 30 days after the end of such reporting year (unless the Bank shall establish a longer period not exceeding sixty days). One copy of such report shall be transmitted by the Bank to the Board.

EXAMINATIONS

§ 123.20 Examinations of members. Examinations of members, when required on account of the inadequacy of State examinations for the purposes of the Banks, shall be made at least annually, as prescribed by the Board, and the cost of any such examination, as determined by the Board, shall be paid by the member.

§ 123.25 Official membership insignia. Each member is authorized to display the approved design of insignia of membership on its letterheads, share accounts books, advertising, and similar material and to display the insignia on its windows or the exterior of its quarters. Members are likewise authorized to use the words "Member Federal Home Loan Bank System" in plain lettering in similar instances.

Neither a

§ 124.1 Banks quarters. Bank nor the Fiscal Agent of the Banks shall enter into any contract for the lease of quarters until such proposed contract shall have been approved by the Board. [Correction noted at 14 F. R. 123]

§ 124.2 Investments. (a) Ordinarily purchases and/or sales of obligations of the United States or other securities shall originate with the Banks. Each proposed purchase and/or sale of obligations of the United States or other securities by a Bank shall be authorized in advance by a majority of the members of the Bank's board of directors, executive committee, or an investment committee consisting of not less than three members, at least a majority of whom shall be directors of the Bank: Provided, however, That no such authorization shall be required for the purchase and/or sale by a Bank of any obligation of the United State ma

819590-49- -4

No

turing within 12 months from the date of its purchase by such Bank. purchase and/or sale of such obligations of the United States or other securities shall be made by or for the account of any Bank without the prior approval of the Board. The foregoing provisions of this section shall not apply to special series United States Treasury Notes, and authority is hereby given by the Board for any purchase or purchases of or other action or actions with respect to special series United States Treasury notes by or for the account of any Bank where approved by such person or persons as may be designated by the Board.

(b) The principal amount of obligations of the United States shall be used as the basis in determining compliance with the provisions of sections 11 and 16 of the act.

(c) Advances to members maturing within 1 year on the security of home mortgages or obligations of the United States may be deemed investments in compliance with section 11 (g) of the act.

(d) The temporary holding of cash awaiting a propitious opportunity for the investment of reserves under the provisions of section 16 of the act is held to be not a violation thereof.

§ 124.3 Transfer of funds between banks. Interbank borrowing shall be through the medium of unsecured deposits. Such deposits shall bear interest at rates established by the Board.

§ 124.4 Deposits from members. (a) Banks may accept demand deposits from members, but no interest shall be paid thereon.

(b) Banks may accept time deposits from members but shall reserve the right to require, in writing, at least 30 days' notice of intention to withdraw such deposits or any part thereof. The rates of interest to be paid on such deposits as remain unwithdrawn for periods of 30 days or more may be established by the board of directors of each Bank, within the range established by the Board.

those which are created or which arise for the benefit of the institution as such or for the benefit of its savers, investors or borrowers and/or are in the interest of the promotion of sound and economical home financing: And provided further, That Banks shall cease to act as trustees in the case of applicants if the application is withdrawn or rejected. The Banks are authorized to make reasonable charges for services rendered in connection with such trusts.

§ 124.6 Budgets. Each Bank shall prepare and submit to the Board for its approval a budget of operations in the manner and according to the procedure prescribed in its bylaws. Each Bank shall submit to the Board with its budget a certificate signed by its president as to the compliance by each of its officers, legal counsel and employees with the provisions of § 122.70 of this subchapter and a properly certified copy of the resolutions of its board of directors electing officers and appointing legal counsel. The Board will either approve the budget as submitted by each Bank or approve such budget with such adjustments therein as to it appear proper. A Bank may at any time adopt and request the Board's approval of an amendment to its approved budget; and upon approval of any such amendment by the Board, such Bank shall be operated within such amended budget.

or

§ 124.7 Surety bonds. Each Bank shall maintain adequate surety bonds covering all officers, employees, attorneys, agents having control over or access to monies or securities owned by each Bank or in its possession, in companies approved by the Board. The form and amount of such bonds shall be subject to the approval of the Board. All such bonds and evidence of their continuation shall be held in the custody of the Board.

§ 124.8 Insurance. Each Bank shall comply with all provisions of law as to the maintenance of liability, compensation or other insurance, and may maintain such additional forms and amount of insurance as in the opinion of its board of directors is necessary to protect the interests of the Bank.

§ 124.9 Safe-keeping accounts. All securities owned by each Bank shall be held in either the Federal Reserve Bank of New York or the Federal Reserve Bank of Chicago, subject to the order of the Secretary of the Treasury, who will

promptly transmit to the Federal Reserve Bank concerned all orders affecting such safe-keeping accounts which have been delivered to him by the Board: Provided, however, Any Bank may make arrangements with a Federal Reserve Bank or with one of its depositary commercial banks to hold in safe-keeping United States Treasury bills and/or certificates of indebtedness owned by it subject only to its order. Without regard to the provisions of this section, any special series United States Treasury notes held by or for the account of any Bank may be held with the Treasurer of the United States or with such depositary or depositaries as may be designated by the Board.

§ 124.10 Securities held in trust or as collateral. Bonds and negotiable securities held by a Bank as collateral or in trust shall be placed in the custody of a Federal Reserve Bank or branch thereof, a financial institution which is a member of the Federal Reserve System or of the Federal Deposit Insurance Corporation, or under such other arrangement as may be approved by the Board: Provided, however, That this section shall not apply to bonds and negotiable securities held in custody pursuant to the plan for the handling of security transactions of member institutions approved August 13, 1943.

§ 124.11 Depositaries. Each Bank shall maintain a checking account with the Treasurer of the United States. The board of directors of a Bank shall designate such further depositaries as the convenient operation of the Bank shall require, provided that such depositaries shall, unless otherwise authorized, be members of the Federal Reserve System or of the Federal Deposit Insurance Corporation and that the amount carried in depositaries other than the Treasurer of the United States, shall not exceed the deposits of members and the amount paid in by members on account of subscriptions to capital stock.

124.12 Donations. Since a Bank is not a local institution, but is concerned with the affairs of all communities in its district and since it would be impracticable to make donations to charitable organizations without exercising a preference in favor of some communities as against others, and in the complete absence of any authority at law for Banks to make contributions to charitable or

125.33 125.34

Lines of credit.

Eligible institutions. 125.35 Rates of interest. 125.36 Applications for advances.

AUTHORITY: §§ 125.1 to 125.36 issued under sec. 17, 47 Stat. 736; 12 U. S. C. 1437.

SOURCE: §§ 125.1 to 125.36 contained in Resolution 1285, 13 F. R. 8271.

GENERAL PROVISIONS RESPECTING ADVANCES § 125.1 Borrowing capacity of members. The borrowing capacity for each member shall be the amount for which the member can legally obligate itself, 50 percent of its net assets or 50 percent of its liability for shares and deposits, whichever is less, unless otherwise directed by the Board.

§ 125.2 Lines of credit. The board of directors or executive committee of each Bank may establish a line of credit for each member not in excess of the

Within

member's borrowing capacity. the lines of credit so established, the executive officers of each Bank may make advances to such members (subject to compliance by the member with all legal requirements), but a report of advances so made shall, insofar as practicable, be submitted at the next meeting of the board of directors or executive committee of the Bank, whichever meets first: Provided, however, That advances authorized under § 125.32 shall be made only in accordance with the specific limitations set forth in such section. Lines of credit shall be reviewed at least every 15 months by the board of directors or executive committee of each Bank, and shall be revised when necessary. Lines of credit shall lapse at the end of 15 months from the date authorized if current information regarding the condition of the member is not available, and thereafter no advances shall be made except upon the specific approval of the board of directors or executive committee of the Bank. In establishing a line of credit for a member, the board of directors or executive committee of the Bank may indicate the amount thereof that may be advanced without pledge of collateral. Reviews of lines of credit shall be comprehensive enough to determine the current condition of a member.

§ 125.3 Interest rates. The rates of intcrest on advances to members shall be established by the board of directors of each Bank, within the range established by the Board.

§ 125.4 Bank stock collateral. The Bank's actual possession of fully paid certificates of stock is not necessary under the provisions of section 10 (c) of the act before making an advance to a member. However, the assignment of such stock should be in the note or other form of obligation used.

ADVANCES SECURED BY HOME MORTGAGES OR OBLIGATIONS OF THE UNITED STATES

§ 125.10 Terms of advances. The Banks may make advances to members on the security of home mortgages and/ or obligations of the United States, as provided in section 10 of the act, for periods of not to exceed 10 years, on a monthly or quarterly amortization basis, with interest thereon payable monthly or quarterly, except that advances for periods not exceeding 1 year need not be amortized.

§ 125.11 Determination of value of mortgage collateral. Subject to the limitations prescribed by the act, each Bank shall exercise its judgment in determining the collateral value of each mortgage.

§ 125.12 Joint home and business property. A first mortgage on real estate upon which is located a dwelling or dwellings for not more than four families, if otherwise eligible, does not become ineligible because the real estate also has other improvements thereon, as in the case of what is commonly termed "joint home and business" property.

§ 125.13 Mortgages exceeding $20,000. A home mortgage which was originally written for more than $20,000 but which has been reduced to $20,000, or less, may be accepted as collateral, if otherwise eligible.

$ 125.14 Past due mortgages. A home mortgage is held to be "past due more than 6 months when presented" if, (a) that date is more than 6 months after its final maturity date, or (b) if at that date, 6 months or more have elapsed since the holder has declared a default of the home mortgage, or (c) if at that date a sum has accrued and remains unpaid equivalent to the required contract payments for a period of 6 months beyond the time when the holder of the mortgage has an option to declare the whole of the debt due and collectible.

§ 125.15 Curing of delinquencies on past due mortgages. A mere waiver by the holder of a mortgage of contracted amortization payments shall not constitute a cancellation of such delinquency, but the parties thereto may enter into a written contract modifying the terms of repayment, the effect of which may be to make the mortgage eligible as collateral.

§ 125.16 Mortgage moratoria laws. The Banks may give full faith and credit to acts of State legislatures in reference to extending home mortgage indebted

ness.

§ 125.17 Mortgage collateral becoming past due. A home mortgage which becomes more than 6 months past due while held by a Bank as collateral, may be retained, but the Bank in such cases shall call for such additional collateral as to the Bank may appear to be appropriate for the full and adequate security of its loan.

§ 125.18 Mortgages subject to prior tax liens. The Banks are authorized to accept and retain as collateral, home mortgages on property on which there exists a prior tax lien, provided there is not reasonable danger that such property will be sold for taxes. Full consideration shall be given to such unpaid taxes, if any, when fixing the collateral value of such mortgages.

§ 125.19 Reports on mortgage collateral. At least annually, each borrowing member shall be required to furnish its Bank with a report of the current status of each home mortgage pledged to said Bank as collateral. The form of the report shall be subject to the approval of the Board.

Split

§ 125.20 mortgages. In the case of a so-called "split mortgage", where two or more mortgages are written upon identical property but where the contract or contracts provide that a portion of such indebtedness shall be carried as a straight mortgage and a portion as an amortized mortgage, then, if the mortgage is otherwise eligible, that portion which is amortized may be accepted as collateral under the provisions of section 10 (a) (2) or (3) of the act, as the Bank may elect, but that portion which is not amortized may be accepted only under the provisions of section 10 (a) (3) of the act. However, no "split mortgage" shall be accepted as collateral unless the entire mortgage debt is pledged.

collateral.

§ 125.21 Additional during the time an advance is outstanding, a deficiency of eligible collateral should develop, and a satisfactory, corresponding reduction in the amount of the advance cannot be obtained, a Bank may protect its interests by obtaining any collateral which will strengthen its position.

§ 125.25 Advances secured by other securities. Advances to members, secured by securities other than obligations of the United States may be made by each Bank for periods not to exceed 1 year, under the provisions of section 11 (g) (3) of the act: Provided, (a) That the securities so held as collateral constitute an investment in which the member is legally authorized to invest its funds; (b) that such securities have a readily ascertainable market value; and (c) that such securities are not in default with respect to payments of inter

est or principal. Advances under this section shall not be made in an amount in excess of 80 percent of the market value or principal amount of such securities, whichever is less, provided that advances in amounts not in excess of face value may be made upon the security of consolidated Federal Home Loan Bank obligations.

§ 125.26 Advances secured by members' deposits. Advances for periods not exceeding 1 year may be made to a member under the provisions of section 11 (g) (3) of the act, on the security of time deposits of such member, in an amount not exceeding the total amount of said deposits.

UNSECURED ADVANCES

§ 125.30 Acceleration of maturity. Unless otherwise authorized by the Board, each note representing an advance under the provisions of section 11 (g) (4) of the act shall provide that in the event the creditor liabilities of the borrower, excepting its liabilities to the Bank, are increased in any manner to an amount exceeding 5 percent of its net assets, the Bank shall have the option of declaring the note immediately due and payable.

§ 125.31 Advances to pay debts. Advances under section 11 (g) (4) of the act may be made to a member whose creditor liabilities (not including advances from the Bank) are in excess of 5 percent of its net assets, provided the Bank shall determine that as a result of any such advance the creditor liabilities (not including advances from the Bank) of such member will be reduced to an amount not in excess of 5 percent of its net assets.

§ 125.32 Thirty-day advances. In addition to unsecured or secured advances with a maturity of not to exceed 1 year which may be made under the provisions of section 11 (g) (4) of the act, advances for not more than 30 days, on an unsecured basis or on any kind of security that may be readily available, may be made to members under the provisions of section 11 (g) (3) of the act, provided the same have been unanimously approved by the executive committee of a Bank or by a majority of the directors or by two officers of the Bank. Such advances shall either be paid at maturity or refunded with eligible collateral.