[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR250.163]

[Page 667-668]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 250--MISCELLANEOUS INTERPRETATIONS--Table of Contents
 
Sec. 250.163  Inapplicability of amount limitations to ``ineligible acceptances.''

    (a) Since 1923, the Board has been of the view that ``the acceptance 
power of State member banks is not necessarily confined to the 
provisions of section 13 (of the Federal Reserve Act), inasmuch as the 
laws of many States confer broader acceptance powers upon their State 
banks, and certain State member banks may, therefore, legally make 
acceptances of kinds which are not eligible for rediscount, but which 
may be eligible for purchase by Federal reserve banks under section 
14.'' 1923 FR bulletin 316, 317.
    (b) In 1963, the Comptroller of the Currency ruled that ``[n]ational 
banks are not limited in the character of acceptances which they may 
make in financing credit transactions, and bankers' acceptances may be 
used for such purpose, since the making of acceptances is an essential 
part of banking authorized by 12 U.S.C. 24.'' Comptroller's manual 
7.7420. Therefore, national banks are authorized by the Comptroller to 
make acceptances under 12 U.S.C. 24, although the acceptances are not 
the type described in section 13 of the Federal Reserve Act.
    (c) A review of the legislative history surrounding the enactment of 
the acceptance provisions of section 13, reveals that Congress believed 
in 1913, that it was granting to national banks

[[Page 668]]

a power which they would not otherwise possess and had not previously 
possessed. See remarks of Congressmen Phelan, Helvering, Saunders, and 
Glass, 51 Cong. Rec. 4676, 4798, 4885, and 5064 (September 10, 12, 13, 
and 17 of 1913). Nevertheless, the courts have long recognized the 
evolutionary nature of banking and of the scope of the ``incidental 
powers'' clause of 12 U.S.C. 24. See Merchants Bank v. State Bank, 77 
U.S. 604 (1870) (upholding the power of a national bank to certify a 
check under the ``incidental powers'' clause of 12 U.S.C. 24).
    (d) It now appears that, based on the Board's 1923 ruling, and the 
Comptroller's 1963 ruling, both State member banks and national banks 
may make acceptances which are not of the type described in section 13 
of the Federal Reserve Act. Yet, this appears to be a development that 
Congress did not contemplate when it drafted the acceptance provisions 
of section 13.
    (e) The question is presented whether the amount limitations of 
section 13 should apply to acceptances made by a member bank that are 
not of the type described in section 13. (The amount limitations are of 
two kinds:
    (1) A limitation on the amount that may be accepted for any one 
customer, and
    (2) A limitation on the aggregate amount of acceptances that a 
member bank may make.)


In interpreting any Federal statutory provision, the primary guide is 
the intent of Congress, yet, as noted earlier, Congress did not 
contemplate in 1913, the development of so-called ``ineligible 
acceptances.'' (Although there is some indication that Congress did 
contemplate State member banks' making acceptances of a type not 
described in section 13 [remarks of Congressman Glass, 51 Cong. Rec. 
5064], the primary focus of congressional attention was on the 
acceptance powers of national banks.) In the absence of an indication of 
congressional intent, we are left to reach an interpretation that is in 
harmony with the language of the statutory provisions and with the 
purposes of the Federal Reserve Act.
    (f) Section 13 authorizes acceptances of two types. The seventh 
paragraph of section 13 (12 U.S.C. 372) authorizes certain acceptances 
that arise out of specific transactions in goods. (These acceptances are 
sometimes referred to as ``commercial acceptances.'') The 12th paragraph 
of section 13 authorizes member banks to make acceptances ``for the 
purpose of furnishing dollar exchange as required by the usages of 
trade'' in foreign transactions. (Such acceptances are referred to as 
``dollar exchange acceptances.'') In the 12th paragraph, there is a 10 
percent limit on the amount of dollar exchange acceptances that may be 
accepted for any one customer (unless adequately secured) and a 
limitation on the aggregate amount of dollar exchange acceptances that a 
member bank may make. (The 12th paragraph, in imposing these 
limitations, refers to the acceptance of ``such drafts or bills of 
exchange referred to (in) this paragraph.'') Similarly, the seventh 
paragraph imposes on commercial acceptances a parallel 10 percent per-
customer limitation, and limitations on the aggregate amount of 
commercial acceptances. (In the case of the aggregate limitations, the 
seventh paragraph states that ``no bank shall accept such bills to an 
amount'' in excess of the aggregate limit; the reference to ``such 
bills'' makes clear that the limitation is only in respect of drafts or 
bills of exchange of the specific type described in the seventh 
paragraph.)
    (g) Based on the language and parallel structure of the 7th and 12th 
paragraphs of section 13, and in the absence of a statement of 
congressional intent in the legislative history, the Board concludes 
that the per-customer and aggregate limitations of the 12th paragraph 
apply only to acceptances of the type described in that paragraph 
(dollar exchange acceptances), and the per-customer and aggregate 
limitations of the 7th paragraph (12 U.S.C. 372) apply only to 
acceptances of the type described in that paragraph.

(Interprets and applies 12 U.S.C. 372 and the 12th paragraph of sec. 13 
of the Federal Reserve Act, which paragraph is omitted from the United 
States Code)

[38 FR 13728, May 25, 1973]