voting at the shareholders' meeting, and a standard form of resolution for voluntary liquidation to be adopted by the shareholders, which recites the date on which the bank will commerce voluntary liquidation and provides for the designation of a liquiding agent or committee. Form 1985 provides for listing the name of each shareholder voting for or against the resolution personally or by proxy and the names of shareholders not represented at the meeting. Form 1989, the form of affidavit of publication of notice of liquidation, must be signed and sworn to by the publisher of the newspaper in which such notice appears. If the national bank contemplates selling its assets to a non-insured state bank which will assume the liabilities of the national bank, the consent of the Federal Deposit Insurance Corporation is required by sec. 8, 48 Stat. 168, as amended; 12 U. S. C. 264 (v) (4).

(b) Upon receipt of a certified copy of the resolution of the shareholders (Form 1985), the Comptroller informs interested governmental agencies that the bank is in voluntary liquidation.

(c) The bank is also instructed covering the preparation of Form 2056-A, which is a report of the condition of the bank as of the date of actual discontinuance of business or the date its business was taken over by another banking association, and of Form 2056-P. F., covering the condition of the trust department, if the bank had fiduciary powers.

(d) Thereafter the liquidating agent or committee is required by law to furnish the Comptroller with an annual report of the progress of the liquidation. Instructions for the preparation of such report are forwarded to the liquidating agent or committee. Form 2056 is furnished for the commercial department report, and Form 2056-F for the trust department, if any. These reports must be continued annually until the liquidation is completed.

(e) There may be variations in the above procedure where the bank going into voluntary liquidation has preferred stock which is owned by the Reconstruction Finance Corporation or in which the Reconstruction Finance Corporation has a financial interest.

§ 4.13 Supervision of liquidation of insolvent financial institutions.

(a) Procedure for closing banks. When the Comptroller is satisfied that a bank under his supervision is unable to

meet the demands of its depositors, the bank is closed either by action of its own board of directors or by order of the Comptroller, acting through his examining staff in the field. The Comptroller appoints the receiver by a formal instrument which can be recorded.

(b) Banks for which Federal Deposit Insurance Corporation acts as receiver. (1) Since by statute the Comptroller is now required to appoint the Federal Deposit Insurance Corporation as receiver for any insured national bank, or any insured state bank in the District of Columbia, which is closed on account of inability to meet the demands of its depositors, the details of liquidation of such institutions are left to that Corporation as receiver, and the forms used by the creditors of the bank in filing their claims and the certificates given by the receiver to such creditors to evidence the established claims are determined by the corporate receiver. The Comptroller publishes notice to all creditors calling upon them to present their claims to the receiver, but he accepts the determination of the Corporation as to the validity of claims and their classification. Certain matters are submitted by the corporate receiver to the Comptroller for approval, such as sales of assets and compromise settlements, attorneys' fees, and certain administration expenses. When the corporate receiver has funds, representing the proceeds of liquidation, which it deems sufficient for the payment of a dividend, it recommends payment of a dividend of a certain percentage. If the Comptroller approves, dividend checks are drawn by the corporate receiver upon its own receiver's account but are submitted to the Comptroller for audit and initialing prior to delivery by the Corporation to the creditors who have established their claims. In the event that the shareholders of the bank are subject to an assessment and such an assessment is deemed necessary in order to pay the liabilities of the bank, the Comptroller makes a formal assessment upon the shareholders (Form 2428), as prescribed by R. S. 5151; sec. 23, 38 Stat. 273, R. S. 5234, as amended; 12 U. S. C. 63, 64, and 192, in a specified dollar amount not in excess of the aggregate par value of the stock outstanding.

(2) If and when all of the creditors of the bank who have established their claims have been paid in full with interest, there remain some assets in the hands of the receiver, the Comptroller

calls a meeting of the shareholders for the purpose of electing an agent to whom the assets of the bank will be transferred and delivered in accordance with statutory requirements or for the purpose of deciding to continue the receivership as permitted by said statute. If an agent is elected by the shareholders the assets are transferred and delivered to him by the Comptroller by a "Release of Assets to Agent of Shareholders" (Form 2402). The shareholders' agent is required to execute a bond as principal with satisfactory surety, which bond is directed to the Comptroller of the Currency (Form 2438).

(c) Insolvent banks for which Federal Deposit Insurance Corporation is not receiver. In receiverships where the Federal Deposit Insurance Corporation is not receiver, a standard form of proof of claim is prescribed by the Comptroller, which requires the claimant to execute in affidavit form a statement of the amount claimed to be due and the nature thereof. A standard form of receiver's certificate of proof of claim is issued to all claimants who prove their claims to the satisfaction of the Comptroller or establish their claims by litigation. § 4.14 Conservatorships.

Under the Bank Conservation Act of 1933 (48 Stat. 2, as amended; 12 U.S.C. 201 et seq.), the Comptroller has authority to appoint a conservator for any bank under his supervision when he deems this action necessary to conserve the assets of such bank. This power was broadly exercised following the passage of the above-mentioned act, but since all conservatorships have been terminated for more than nine years and no immediate application of the conservatorship authority is in comptemplation, a recital of the procedures followed and forms used is omitted.

§ 4.15 Remedial actions.

(a) Forfeiture of charter. R.S. 5239, as amended; sec. 2, 38 Stat. 251, as amended; 12 U.S.C. 93 and 501a, authorize the Comptroller to sue for the forfeiture of the charter of any national bank for violation of certain of the laws applicable to national banks.

(b) Removal of director or officer. Under sec. 30, 48 Stat. 193, as amended; 12 U. S. C. 77, in the event any director or officer of a national bank or a bank or trust company doing business in the Dis

trict of Columbia shall have continued to violate any law relating to such bank or trust company or shall have continued unsafe or unsound practices in conducting the business of such bank or trust company after having been warned by the Comptroller, he may certify the facts to the Board of Governors of the Federal Reserve System and the offending director or officer may be removed by the Board after a hearing.

(c) Impairment of capital. R. S. 5205, as amended; 12 U. S. C. 55 provides that in the event of an impairment of the capital stock of a national bank the Comptroller may give notice to the bank of the amount of the impairment and require that the bank levy an assessment upon its shareholders for the amount of impairment specified, on a pro rata basis. Unless the impairment is restored or the bank goes into voluntary liquidation within three months after receiving such notice, the Comptroller may appoint a receiver for the bank. At the time the formal notice of the impairment is sent to the bank, it is instructed to call a meeting of the shareholders to pass a resolution (Form 1444) levying the assessment upon the shareholders necessary to make up the impairment. If and when the impairment is restored the cashier of the bank is required to execute a formal certificate to that effect which is sent to the Comptroller.

(d) Publication of reports of examination. R. S. 5240, as amended; 12 U. S. C. 481, authorizes the Comptroller to publish the report of examination of any national bank or affiliate thereof which shall not, within 120 days after notification of the recommendations or suggestions of the Comptroller, based on such examination, have complied with the same to his satisfaction.

upon

(e) Appointment of receiver termination of insurance. Under sec. 8, 48 Stat. 168, as amended; 12 U. S. C. 264 (i) (2), the Comptroller is required to appoint a receiver for a national bank whenever its insured status is terminated.

of the Federal Reserve System, which notifies the Comptroller, who in turn advises the Bureau of Engraving and Printing. When the notes are printed they are held in vault subject to the order of the Comptroller. Requests

for notes are sent to the Board of Governors of the Federal Reserve System for approval and are then forwarded to the Comptroller. The Federal Reserve Agents at the respective Federal Reserve banks arrange for the deposit with them of the required collateral to support the notes ordered. The Comptroller then requisitions the notes from the Custodian of the Vault, for shipment to the designated Federal Reserve Agents. The Comptroller's Issue and Redemption Division maintains records of orders received, money shipped, stock on hand, and money outstanding.

(b) Redemption. Federal Reserve notes unfit for circulation are returned by the Federal Reserve banks to Washington for verification and credit. The lower halves of such notes are shipped to the Currency Redemption Division of the Treasurer of the United States, and the upper halves go to the Comptroller's Issue and Redemption Division. After counting and reconciliation of differences, both halves are delivered to the Treasury Department Destruction Committee, which destroys them.

PART 5-LOANS MADE BY NATIONAL BANKS SECURED BY LIENS UPON LEASEHOLDS

Sec.

5.1 Scope and application.

5.2

5.3

5.4

General authorization.

Appraisals.

Covenants and restrictions. 5.5 Insured loans.

AUTHORITY: §§ 5.1 to 5.5 issued under sec. 24, 38 Stat. 273, as amended; 12 U.S.C. 371. SOURCE: §§ 5.1 to 5.5 appear at 25 F.R. 2158, Mar. 16, 1960.

§ 5.1 Scope and application.

This part is issued by the Comptroller of the Currency under authority of section 24 of the Federal Reserve Act, as amended (12 U.S.C. 371). It applies to real estate loans made by national banks secured by liens on leaseholds. § 5.2 General authorization.

Any national bank may make or acquire a loan, in accordance with this

regulation, secured by a first lien on a leasehold under a lease which does not expire for at least ten years beyond the maturity date of the loan.

§ 5.3 Appraisals.

The "appraised value" of a leasehold, for the purposes of section 24 of the Federal Reserve Act, shall be the full appraised value of the fee simple estate of the land and improvements, less the greater of:

(a) The value of the land without improvements;

(b) The average annual rental due under the lease from the date the loan is made or acquired by the bank to the maturity of the loan, multiplied by twenty (in other words, capitalized at 5 percent);

and less 3 percent of the net figure thus reached for each full year less than thirty that the lease has to run from the time of making the loan.

§ 5.4

Covenants and restrictions.

In order to qualify as an acceptable leasehold for security for a real estate loan made by a national bank, the covenants and restrictions contained in the lease which provide for forfeiture or reversion in the event of a breach must not be more onerous or burdensome than those contained in leases in general use in the area in which such bank is located, and the lease should permit acquisition of the leasehold by the lending bank by voluntary conveyance or assignment by the lessee, and acquisition and sale under judicial process, without being subject to such restrictions as would jeopardize recovery of the security value of such leasehold.

The provisions of §§ 5.3 and 5.4 do not apply to loans which are insured under the provisions of title II, title VI, title VIII, Section 8 of title I, or title IX of the National Housing Act or which are insured by the Secretary of Agriculture pursuant to title I of the Bankhead-Jones Farm Tenant Act, or an Act entitled "An Act to promote conservation in the arid and semiarid areas of the United States by aiding in the development of facilities for water storage and utilization, and for other purposes," approved August 28, 1937, as amended, or loans which are fully guaranteed or insured by a State or

87122 O-63-3

§ 6.1

Scope and application.

(a) This part is issued by the Comptroller of the Currency with the approval of the Secretary of the Treasury under authority of paragraph (8) of section 5200 of the Revised Statutes, as amended (12 U.S.C. 84), and sec. 321(b) of the act of August 23, 1935 (49 Stat. 713);

(b) This part applies to loans made by national banks secured by direct obligations of the United States which will mature in not exceeding 18 months. [22 F.R. 5628, July 17, 1957]

agents.

The Comptroller of the Currency has interpreted R.S. 5136, as amended (12 U.S.C. 24), as indicated in the following letter addressed to counsel for the American Society of Travel Agents: Dear Mr.

Reference is made to our recent conference concerning the question of national banks acting as travel agents which has been the subject to prior correspondence and conferences with you over the past several months.

As you know, we have had this matter under study for a period of some months. It appears clear that national banks may, as an incidental power, provide travel services for their customers, as they have been doing for many years, and that they may have the reasonable rights and benefits that flow therefrom. We believe that you concede that national banks may as an incidental power furnish such services, but you take the position that they may not participate in the carriers' conference system which establishes uniform rates of compensation, and uniform obligations to perform, on all participating travel agents.

Whether national banks may so participate and whether they can or should enter into agreements in this connection would appear to be a matter to be determined by the banks concerned and their respective counsel, based upon the facts and circumstances of each particular case. As you know, some national banks have been doing so.

It is anticipated that the above position will be made public at an early date.

§ 7.2 National banks; service charges.

The Comptroller of the Currency has issued formal instructions concerning the service charges of banks as indicated in the following letter addressed to the presidents of all national banks: To the presidents of all national banks:

So that there may be no misunderstanding with respect to the policy of this Office concerning the service charges of banks, I am issuing these formal instructions to all national banks.

Agreements, arrangements, undertakings, understandings, etc., among banks, through clearing houses or otherwise, concerning service charges are not permissible in any form. It is the responsibility of the Board of Directors of each national bank to terminate promptly any of these practices which it may now be following.

Wherever a national bank has been involved in any of the practices cited, it should now review its scale of service charges independently of any other bank, and take appropriate corporate action to re-establish a scale of service charges independent of any relationships with any other bank. In taking this action, it is appropriate to make such changes in the scale of service charges as are deemed necessary or desirable in the light of the individual bank's costs and competitive position. This review and re-establishment of the scale of service charges should be undertaken, even though there may have been no overt or implicit agreement, wherever there have been discussions of such charges among banks or their officers, either independently or in group meetings, or where the scale of service charges was adopted with knowledge of prospective adoption of similar charges by competitor banks.

It is recognized that identical charges for identical services may occur where there are no agreements or understandings among banks. Nevertheless, wherever this occurs, each national bank must be prepared to demonstrate conclusively that its scale of service charges was decided unilaterally, and not on the basis of any agreement or understanding, or even of discussion, among banks or their officers.

Our examiners have been instructed to explore, regularly and in detail, the methods by which the existing scale of service charges was determined by each national bank. At the time of the next examination of your bank, inquiry shall be made to determine whether appropriate action has been taken, where necessary, to conform to these instructions.

(R.S. 5240; 12 U.S.C. 1, 481) [27 F.R. 2278, Mar. 9, 1962]

§ 7.3

National banks; investment in mortgage loans guaranteed by Administrator of Veterans Affairs.

The Comptroller of the Currency has interpreted section 24 of the Federal Reserve Act (12 U.S.C. 371), 38 U.S.C. 1802 (f) and 38 CFR 36.4600, 27 F.R. 2686 as indicated in the following letter addressed to counsel for a national bank:

We have your letter of April 9, 1962, requesting our opinion as to whether or not your client, a national bank, may properly under the provisions of section 24 of the Federal Reserve Act purchase from the Veterans' Administration (VA) residential mortgage loans which will shortly be offered for sale by the VA pursuant to section 36.4600 of the VA regulations.

The loans in question arise in the following manner: The VA has accumulated various residential properties by foreclosure or assignment as a result of defaults on mortgages guaranteed by the VA for veterans. The VA disposes of these houses on the best

terms and conditions it can obtain in the market without reference to whether or not the purchaser is a veteran. In order to dispose of these properties, the VA has taken purchase money mortgages. It is these purchase money mortgages which the VA now proposes under its new regulation, section 36.4600, to sell to national banks and other financial institutions with the 100 percent guarantee of the Veterans' Administration.

The guarantee will take the form of an agreement by the VA to repurchase the loan from the national bank in the event of default which continues for a designated period of time and in certain other events of default, all of which are set forth in detail in section 36.4600 of the VA regulations.

The regulations of the VA authorizing the Administrator to make these guarantees have been issued pursuant to the authority granted to the Administrator in section 1820, Chapter 37 of Title 38 of the United States Code. Section 1820 confers the power on the Administrator to purchase and sell "upon such terms and for such prices as he deems to be reasonable" any real or personal property which has come into his possession pursuant to the operation of the Veterans' Administration. It would appear that the undertaking of the Administrator to guarantee the mortgages in question would be within his authority to dispose of such mortgages on such terms as he deems to be reasonable.

Section 1802 (f) of Chapter 37, Title 38 provides as follows:

"(f) Any loan at least 20 per centum of which is guaranteed under this chapter may be made by any national bank or Federal savings and loan association, or by any bank, trust company, building and loan association, or insurance company, organized or authorized to do business in the District of Columbia. Any such loan may be so made without regard to the limitations and restrictions of any other law relating to

(1) ratio of amount of loan to the value of the property;

(2) maturity of loan;

(3) requirement for mortgage or other security;

(4) dignity of lien; or

(5) percentage of assets which may be invested in real estate loans."

The five restrictions listed in section 1802 (f) Title 38 just quoted, refer to section 24, Federal Reserve Act (12 U.S.C. 371). Since it appears that section 36.4600 of the VA regulations has been issued pursuant to authority granted in Chapter 37 of Title 38, United States Code, and since under section 1802(f) any loan which is guaranteed in an amount over 20 percent by the Administrator pursuant to Chapter 37 of Title 38 may be held by a national bank without regard to the limitations and restrictions numbered 1 through 5, as listed in section 1802 (f), we are of the opinion that a national bank may purchase these guaranteed residential mort