12 U.S.C. § 287 — Value of shares of stock; increase and decrease of stock; member banks as shareholders; surrender of shares

submitted 113 years ago by ch. 6 to r/title-12-BANKS-AND-BANKING · 390 words · no verdicts yet

in plain englishAI-generated · not legal advice

Each Federal Reserve bank's capital stock is divided into $100 shares, and the total rises or falls as member banks change their own capital or as banks join or leave. When a member bank increases its capital or surplus, it must buy more Federal Reserve stock equal to 6% of that increase, half paid immediately and half payable on call. A bank leaving voluntarily must surrender all its Federal Reserve stock and gets repaid its paid-in amount plus limited interest, minus any debts it owes the Reserve bank.

The capital stock of each Federal Reserve bank is divided into shares of $100 each. The total outstanding stock goes up as member banks increase their own capital and surplus, or as new banks join as members. It goes down as member banks reduce their capital or surplus, or stop being members. Member banks cannot transfer or pledge (hypothecate) their shares of Federal Reserve bank stock to anyone else. When a member bank increases its capital stock or surplus, it must subscribe for more Federal Reserve bank stock — an amount equal to 6 percent of that increase. Half of this new subscription is paid the same way as the bank's original subscription; the other half is paid only when the Board of Governors calls for it. A bank applying to become a member after the Federal Reserve bank is already organized must subscribe for stock equal to 6 percent of its own paid-up capital and surplus. It pays the stock's par value, plus one-half of one percent for each month since the last dividend period. When a member bank reduces its capital or surplus, it must surrender a matching share of its Federal Reserve bank stock. Any member bank holding more Federal Reserve stock than the 6-percent formula requires must surrender the excess. When a member bank voluntarily liquidates, it must surrender all its Federal Reserve bank stock and is released from any stock subscription not yet called. In that case, the Board of Governors' regulations govern how the bank is repaid: it receives its cash-paid subscription on the surrendered shares, plus one-half of one percent per month since the last dividend period — but never more than the stock's book value — minus any debt the member bank owes the Federal Reserve bank.

the actual law source: uscode.house.gov ↗public domain

The capital stock of each Federal reserve bank shall be divided into shares of $100 each. The outstanding capital stock shall be increased from time to time as member banks increase their capital stock and surplus or as additional banks become members, and may be decreased as member banks reduce their capital stock or surplus or cease to be members. Shares of the capital stock of Federal reserve banks owned by member banks shall not be transferred or hypothecated. When a member bank increases its capital stock or surplus, it shall thereupon subscribe for an additional amount of capital stock of the Federal reserve bank of its district equal to 6 per centum of the said increase, one-half of said subscription to be paid in the manner hereinbefore provided for original subscription, and one-half subject to call of the Board of Governors of the Federal Reserve System. A bank applying for stock in a Federal reserve bank at any time after the organization thereof must subscribe for an amount of the capital stock of the Federal reserve bank equal to 6 per centum of the paid-up capital stock and surplus of said applicant bank, paying therefor its par value plus one-half of 1 per centum a month from the period of the last dividend. When a member bank reduces its capital stock or surplus it shall surrender a proportionate amount of its holdings in the capital stock of said Federal Reserve bank. Any member bank which holds capital stock of a Federal Reserve bank in excess of the amount required on the basis of 6 per centum of its paid-up capital stock and surplus shall surrender such excess stock. When a member bank voluntarily liquidates it shall surrender all of its holdings of the capital stock of said Federal Reserve bank and be released from its stock subscription not previously called. In any such case the shares surrendered shall be canceled and the member bank shall receive in payment therefor, under regulations to be prescribed by the Board of Governors of the Federal Reserve System, a sum equal to its cash-paid subscriptions on the shares surrendered and one-half of 1 per centum a month from the period of the last dividend not to exceed the book value thereof, less any liability of such member bank to the Federal Reserve bank.

Source credit: (Dec. 23, 1913, ch. 6, § 5, 38 Stat. 257; Aug. 23, 1935, ch. 614, title II, § 203(a), title III, § 319(a), 49 Stat. 704, 713.)

history & why it existsrecord from the source credit

1913Enacted · Act of Dec. 23, 1913, ch. 6 · 38 Stat. 257
1935Amended · Act of Aug. 23, 1935, ch. 614 · 49 Stat. 704, 713

A history note hasn’t been published yet. The record shows enactment by ch. 6 on 1913-12-23.

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