port their trading account securities on the same basis as is used for tax purposes. If either the reporting value of securities or income therefrom meets the test of materiality, the trading account and trading account income should be reported separately. The income account should include coupon interest, profit and losses, revaluation adjustments and any other incidental revenue or expenses related to the purchase and sale of such securities, but salaries, commissions and other expenses should be excluded. If materiality is not met, unless management wishes to report separately, trading account securities should be included with portfolio securities in the respective classifications. In the statement of earnings coupon interest should then be reported with interest on securities and other income with other operating income.

(d) Securities profits and losses. Securities gains and losses should be reported after applicable income tax has been deducted from income. Net security gains and losses should be reflected in income in the period such results are realized and booked.

[32 F.R. 7071, May 10, 1967, as amended at 34 F.R. 20044, Dec. 23, 1969. Redesignated, 34 F.R. 20044, Dec. 23, 1969]

§ 18.7

Reconcilation of capital accounts and valuation reserves.

(a) Banks shall report a comparative reconciliation of capital accounts for the latest fiscal year and the preceding fiscal year, in the format illustrated in Appendix C.

(b) Banks shall report a comparative reconciliation of valuation reserves and contingency reserves for the latest fiscal year and the preceding fiscal year in the format illustrated in Appendix D. [32 F.R. 7071, May 10, 1967. Redesignated, [34 F.R. 20044, Dec. 23, 1969]

§ 18.8 Rules of general application.

(a) One-bank holding companies. The financial statements, other than the statement of earnings, of a bank owned by a one-bank holding company should be presented separately. The statement of earnings may be presented on a consolidated basis with the other units of the holding company. Appropriate disclosure of this consolidation should be made.

(b) Earnings. All banks subject to the jurisdiction of the Office of the Comptroller of the Currency shall be required to report: (1) A loan loss factor in its operating expenses; (2) net income, total and per share, which was transferred to the capital accounts.

(c) Additional information. The information required with respect to any financial statement shall be furnished as a minimum requirement to which shall be added such further material information as is necessary to make the required statements not misleading. For example, information on nonsubsidiary organizations or trusteeships operated for the benefit of bank stockholders should be disclosed. The reporting bank may add any additional information it deems desirable.

(d) Changes in accounting principles and practices and retroactive adjustments initiated by the bank. (1) Any changes in accounting principles or practices or in the method of applying any accounting principles or practices, made during any period for which financial statements are filed which affects comparability of such financial statements with those of prior or future annual periods, and the effect thereof upon the net operating earnings for each period for which financial statements are filed, should be disclosed in a note to the appropriate financial statement where significant.

(2) Any significant retroactive adjustment made during any period for which financial statements are filed, and the effect thereof upon net operating earnings and nonoperating additions and deductions of prior periods shall be disclosed in a note to the appropriate financial statement.

(e) Balance sheet and statement of earnings. (1) Banks shall report a balance sheet and a statement of earnings. The format illustrated in Appendices A and B represents the minimum disclosure consistent with this part.

(2) If a cash basis of accounting has been used, it should be so stated.

(3) All fixed assets acquired subsequent to June 30, 1967, shall be stated at cost less accumulated depreciation or amortization.

§ 19.1

Scope.

The rules and procedures set forth in this part are applicable to proceedings by the Comptroler of the Currency to determine whether to order a national bank or a District bank to cease and desist from practices and violations described in section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), as amended, and enumerated in § 19.2. The procedures for issuing such orders prescribed in section 8 of such Act will be followed and hearings required thereunder will be conducted in accordance with the rules and procedures set forth in this part.

§ 19.2 Grounds for cease-and-desist

orders.

If, in the opinion of the Comptroller of the Currency, any national bank or District bank is engaging in or has engaged, or the Comptroller of the Currency has reasonable cause to believe that the bank is about to engage, in an unsafe or unsound practice in conducting the business of such bank, or is violating or has violated, or the Comptroller has reasonable cause to believe that the bank is about to violate, a law, rule, or regulation, or any condition imposed in writing by the Comptroller in connection with the granting of an application or other request by the bank, or any written agreement entered into with the Comptroller, the Comptroller may issue and serve upon the bank a notice of charges in respect thereof.

50-026-71-11

§ 19.3 Notice of charges and hearing.

The notice referred to in § 19.2 shall contain a statement of the facts constituting the alleged violation or violations or the unsafe or unsound practice or practices, and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist therefrom should issue against the bank. Such hearing shall be set for a date not earlier than 30 days nor later than 60 days after service of such notice unless an earlier or a later date is set by the Comptroller at the request of the bank. Unless the bank appears at the hearing by a duly authorized representative, it shall be deemed to have consented to the issuance of the cease-and-desist order.

In the event of the consent described in § 19.3, or if upon the record made at any such hearing, the Comptroller finds that any violation or unsafe or unsound practice specified in the notice of charges has been established, the Comptroller may issue and serve upon the bank an order to cease and desist from any such violation or practice. Such order may, by provisions which may be mandatory or otherwise, require the bank and its directors, officers, employees, and agents to cease and desist from the same and to take affirmative action to correct the conditions resulting from any such violation or practice.

A cease-and-desist order shall become effective at the expiration of 30 days after the service of such order upon the bank (except in the case of a cease-anddesist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided therein, except to such extent as it is stayed, modified, terminated, or set aside by action of the Comptroller or a reviewing court. § 19.6 Temporary cease-and-desist orders.

Whenever the Comptroller determines that the violation or threatened violation or the unsafe or unsound practice or practices, specified in the notice of charges served upon the bank and referred to in § 19.3, or the continuation thereof, is likely to cause insolvency or substantial dissipation of assets or earnings of the bank, or is likely to otherwise

seriously prejudice the interests of its depositors, the Comptroller may issue a temporary order requiring the bank to cease and desist from any such violation or practice.

§ 19.7 Effective date of temporary order.

Such order referred to in § 19.6 shall become effective upon service upon the bank and, unless set aside, limited, or suspended by a court in proceedings authorized under section 8 of the Federal Deposit Insurance Act, as amended, shall remain effective and enforceable pending the completion of the administrative proceedings held pursuant to such notice and until such time as the Comptroller shall dismiss the charges specified in such notice, or if a cease-and-desist order is issued against the bank pursuant to § 19.4, until the effective date of any such order.

§ 19.8

Representation and suspension.

(a) Appearance before a hearing examiner. Any person who is a member in good standing of the bar of the highest court of any State, possession, territory, Commonwealth, or the District of Columbia, may represent others with respect to a cease-and-desist proceeding upon filing with the Administrative Assistant to the Comptroller a written declaration that he is currently qualified as provided by this paragraph and is authorized to represent the particular party on whose behalf he acts. Any other person desiring to represent others before a hearing examiner may be required to file with the Administrative Assistant a power of attorney showing his authority to act in such capacity, and he may be required to show to the satisfaction of such examiner that he has the requisite qualifications. Attorneys or other representatives of parties to any proceeding provided for in this part shall file a written notice of appearance with the Adminstrative Assistant.

(b) Summary suspension. Contemptuous conduct at any hearing before the Comptroller or a hearing examiner shall be grounds for exclusion from any such hearing and suspension for the duration thereof.