12 U.S.C. § 347a — Advances to member bank groups; inad-

Page 126 TITLE 12—BANKS AND BANKING § 347a 1 See References in Text note below. reserve bank may make advances for periods not exceeding ninety days to its member banks on their promissory notes secured by such notes, drafts, bills of exchange, or bankers’ accept- ances as are eligible for rediscount or for pur- chase by Federal reserve banks under the provi- sions of this chapter, or secured by such obliga- tions as are eligible for purchase under section 355 of this title. All such advances shall be made at rates to be established by such Federal re- serve banks, such rates to be subject to the re- view and determination of the Board of Gov- ernors of the Federal Reserve System. If any member bank to which any such advance has been made shall, during the life or continuance of such advance, and despite an official warning of the reserve bank of the district or of the Board of Governors of the Federal Reserve Sys- tem to the contrary, increase its outstanding loans secured by collateral in the form of stocks, bonds, debentures, or other such obliga- tions, or loans made to members of any orga- nized stock exchange, investment house, or deal- er in securities, upon any obligation, note, or bill, secured or unsecured, for the purpose of purchasing and/or carrying stocks, bonds, or other investment securities (except obligations of the United States) such advance shall be deemed immediately due and payable, and such member bank shall be ineligible as a borrower at the reserve bank of the district under the provi- sions of this section for such period as the Board of Governors of the Federal Reserve System shall determine: Provided, That no temporary carrying or clearance loans made solely for the purpose of facilitating the purchase or delivery of securities offered for public subscription shall be included in the loans referred to in this sec- tion. (Dec. 23, 1913, ch. 6, § 13 (par.), as added Sept. 7, 1916, ch. 461, 39 Stat. 753; amended May 19, 1932, ch. 191, § 6, 47 Stat. 160; May 12, 1933, ch. 25, title II, § 28, 48 Stat. 46; June 16, 1933, ch. 89, § 9, 48 Stat. 180; Jan. 31, 1934, ch. 7, § 16(a), 48 Stat. 348; Apr. 27, 1934, ch. 168, § 7(a), 48 Stat. 646; Aug. 23, 1935, ch. 614, title II, § 203(a), 49 Stat. 704; Pub. L. 87–353, § 3(c), Oct. 4, 1961, 75 Stat. 773; Pub. L. 90–505, § 3(a), Sept. 21, 1968, 82 Stat. 856.) Editorial Notes REFERENCES IN TEXT Section 1463 of this title, referred to in text, was re- pealed by Pub. L. 89–554, § 8(a), Sept. 6, 1966, 80 Stat. 648. This chapter, referred to in text, was in the original ‘‘this Act’’, meaning act Dec. 23, 1913, ch. 6, 38 Stat. 251, known as the Federal Reserve Act. For complete classi- fication of this Act to the Code, see References in Text note set out under section 226 of this title and Tables. CODIFICATION Section is comprised of the eighth par. of section 13 of act Dec. 23, 1913, as amended. The eighth par. con- stituted the sixth par. of section 13 in 1916 (39 Stat. 752, 753), became the seventh par. in 1923 (42 Stat. 1478), and became the eighth par. in 1932 (47 Stat. 715). For further details, see Codification notes under sections 343 and 344 of this title. For classification to this title of other pars. of section 13, see Codification note set out under section 342 of this title. AMENDMENTS 1968—Pub. L. 90–505 added promissory notes of mem- bers banks secured by such obligations as are eligible for purchase under section 355 of this title to the list of types of promissory notes of member banks on which the Federal reserve bank may make advances for peri- ods not exceeding 90 days. 1961—Pub. L. 87–353 struck out provision authorizing any Federal reserve bank to make advances to its member banks on their promissory notes secured by the deposit or pledge of Federal Farm Mortgage Cor- poration bonds issued under the Federal Farm Mort- gage Corporation Act. 1934—Act Apr. 27, 1934, inserted first phrase preceding the semicolon in first sentence. Act Jan. 31, 1934, inserted second phrase preceding the semicolon in first sentence. 1933—Act June 16, 1933, amended section generally. Act May 12, 1933, added Federal farm-loan bonds as security for advances. 1932—Act May 19, 1932, inserted clause in first sen- tence which begins ‘‘or by the deposit or pledge of de- bentures’’. Statutory Notes and Related Subsidiaries CHANGE OF NAME Section 203(a) of act Aug. 23, 1935, changed name of Federal Reserve Board to Board of Governors of the Federal Reserve System. § 347a. Advances to member bank groups; inad- equate amounts of eligible and acceptable as- sets; liability of individual banks in group; distribution of loans among banks of group; rate of interest; notes accepted for advances as collateral security for Federal reserve notes; foreign obligations as security for ad- vances Upon receiving the consent of not less than five members of the Board of Governors of the Federal Reserve System, any Federal reserve bank may make advances, in such amount as the board of directors of such Federal reserve bank may determine, to groups of five or more member banks within its district, a majority of them independently owned and controlled, upon their time or demand promissory notes, pro- vided the bank or banks which receive the pro- ceeds of such advances as herein provided have no adequate amounts of eligible and acceptable assets available to enable such bank or banks to obtain sufficient credit accommodations from the Federal reserve bank through rediscounts or advances other than as provided in section 347b 1 of this title. The liability of the individual banks in each group must be limited to such proportion of the total amount advanced to such group as the deposit liability of the respective banks bears to the aggregate deposit liability of all banks in such group, but such advances may be made to a lesser number of such member banks if the aggregate amount of their deposit liability constitutes at least 10 per centum of the entire deposit liability of the member banks within such district. Such banks shall be au- thorized to distribute the proceeds of such loans to such of their number and in such amount as they may agree upon, but before so doing they shall require such recipient banks to deposit with a suitable trustee, representing the entire group, their individual notes made in favor of the group protected by such collateral security as may be agreed upon. Any Federal reserve Page 127 TITLE 12—BANKS AND BANKING § 347b bank making such advance shall charge interest or discount thereon at a rate not less than 1 per centum above its discount rate in effect at the time of making such advance. No such note upon which advances are made by a Federal re- serve bank under this section shall be eligible under section 412 of this title as collateral secu- rity for Federal reserve notes. No obligations of any foreign government, in- dividual, partnership, association, or corpora- tion organized under the laws thereof shall be eligible as collateral security for advances under this section. Member banks are authorized to obligate themselves in accordance with the provisions of this section. (Dec. 23, 1913, ch. 6, § 10A, formerly § 10(a), as added Feb. 27, 1932, ch. 58, § 1, 47 Stat. 56; amend- ed Aug. 23, 1935, ch. 614, title II, § 203(a), 49 Stat. 704; renumbered § 10A, Pub. L. 102–242, title I, § 142(a)(1), Dec. 19, 1991, 105 Stat. 2279.) Editorial Notes REFERENCES IN TEXT Section 347b of this title, referred to in first par., was in the original a reference to section 10(b), meaning section 10(b) of the Federal Reserve Act. Section 10(b) of that Act was renumbered section 10B by Pub. L. 102–242, title I, § 142(a)(2), Dec. 19, 1991, 105 Stat. 2279, without a corresponding amendment to this section. Statutory Notes and Related Subsidiaries CHANGE OF NAME Section 203(a) of act Aug. 23, 1935, changed name of Federal Reserve Board to Board of Governors of the Federal Reserve System. § 347b. Advances to individual member banks on time or demand notes; maturities; time notes secured by mortgage loans covering one-to- four family residences (a) In general Any Federal Reserve bank, under rules and regulations prescribed by the Board of Gov- ernors of the Federal Reserve System, may make advances to any member bank on its time or demand notes having maturities of not more than four months and which are secured to the satisfaction of such Federal Reserve bank. Notwithstanding the foregoing, any Federal Reserve bank, under rules and regulations pre- scribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time notes having such ma- turities as the Board may prescribe and which are secured by mortgage loans covering a one- to-four family residence. Such advances shall bear interest at a rate equal to the lowest dis- count rate in effect at such Federal Reserve bank on the date of such note. (b) Limitations on advances (1) Limitation on extended periods Except as provided in paragraph (2), no ad- vances to any undercapitalized depository in- stitution by any Federal Reserve bank under this section may be outstanding for more than 60 days in any 120-day period. (2) Viability exception (A) In general If— (i) the head of the appropriate Federal banking agency certifies in advance in writing to the Federal Reserve bank that any depository institution is viable; or (ii) the Board conducts an examination of any depository institution and the Chairman of the Board certifies in writing to the Federal Reserve bank that the insti- tution is viable, the limitation contained in paragraph (1) shall not apply during the 60-day period be- ginning on the date such certification is re- ceived. (B) Extensions of period The 60-day period may be extended for ad- ditional 60-day periods upon receipt by the Federal Reserve bank of additional written certifications under subparagraph (A) with respect to each such additional period. (C) Authority to issue a certificate of viabil- ity may not be delegated The authority of the head of any agency to issue a written certification of viability under this paragraph may not be delegated to any other person. (D) Extended advances subject to paragraph (3) Notwithstanding paragraph (1), an under- capitalized depository institution which does not have a certificate of viability in ef- fect under this paragraph may have ad- vances outstanding for more than 60 days in any 120-day period if the Board elects to treat— (i) such institution as critically under- capitalized under paragraph (3); and (ii) any such advance as an advance de- scribed in subparagraph (A)(i) of paragraph (3). (3) Advances to critically undercapitalized de- pository institutions (A) Liability for increased loss Notwithstanding any other provision of this section, if— (i) in the case of any critically under- capitalized depository institution— (I) any advance under this section to such institution is outstanding without payment having been demanded as of the end of the 5-day period beginning on the date the institution becomes a critically undercapitalized depository institution; or (II) any new advance is made to such institution under this section after the end of such period; and (ii) after the end of that 5-day period, the Deposit Insurance Fund of the Federal De- posit Insurance Corporation incurs a loss exceeding the loss that the Corporation would have incurred if it had liquidated that institution as of the end of that pe- riod, the Board shall, subject to the limitations in subparagraph (B), be liable to the Federal Deposit Insurance Corporation for the excess loss, without regard to the terms of the ad-