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CURRENCY, DEPARTMENT OF THE TREASURY

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Investment securities regulation
Disposition of credit life insurance income
Minimum capital ratios; issuance of directives
Description of office, procedures, public informa-

tion ........
Rules, policies, and procedures for corporate ac-

tivities ....
Prompt Corrective Action
Interpretive rulings
Assessment of fees; national banks; District of Co-

lumbia banks ........
Fiduciary powers of national banks and collective

investment funds ......
Municipal securities dealers
Securities Exchange Act disclosure rules
Recordkeeping and confirmation requirements for

securities transactions
[Reserved)
Securities offering disclosure rules ....
Disclosure of financial and other information by

national banks
Rules of practice and procedure
International operations regulation
Minimum security devices and procedures, reports

of crimes and suspected crimes and bank secrecy

compliance
Loans in areas having special flood hazards
Leasing
Community development corporation and project

investments
Community Reinvestment Act regulations
Management official interlocks ......
Fair housing home loan data system
Federal branches and agencies of foreign banks
(Reserved]
Extensions of credit to national bank insiders

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Part

Page 32 Lending limits .........

240 33 [Reserved] 34 Real estate lending and appraisals ....

253 35 Agricultural loan loss amortization

278 36-199 [Reserved)

NOTE: Other regulations issued by the Department of the Treasury appear in title 19, chapter I, title 26, chapter I, title 27, chapter I, title 31, title 48, chapter 10.

(28 FR 9916, Sept. 12, 1963)

PART 1-INVESTMENT SECURITIES

REGULATION

Sec. 1.1 Authority. 1.2 Scope and application. 1.3 Definitions. 1.4 Type I securities; standards for author

ized transactions. 1.5 Types II and III securities; purchase

standards. 1.6 Type II securities; authority to deal in

and underwrite. 1.1 Types II and III securities; limitations

on holdings. 1.8 Prudent banking judgment; credit infor

mation required. 1.9 Convertible securities. 1.20 Amortization of premiums. 1.11 Exceptions. 1.100 Eligibility of securities for purchase,

dealing in, and underwriting by national

banks; general guidelines. 1.110 Obligations of the United States; gen

eral guidelines. 1.120 Indirect general obligations; general

guidelines. 1.130 Taxing powers of a State or a political

subdivision thereof; general guidelines. 1.140 Type II securities; general guidelines.

AUTHORITY: 12 U.S.C. 1 et seq., 24 (Seventh), 33a.

$1.2 Scope and application.

This part applies to the purchase, sale, dealing in, underwriting, and holding of investment securities by national banks, banks located in the District of Columbia, and by state banks which are members of the Federal Reserve System. It may also apply to a limited extent to others engaged in the banking business. The Comptroller of the Currency is charged by various provisions contained in chapter 1 of title 26 of the District of Columbia Code with the supervision of banks located in the District of Columbia. State banks which are members of the Federal Reserve System are, under 12 U.S.C. 335, subject to the same limitations and conditions with respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under paragraph Seventh of 12 U.S.C. 24. Dealers in securities are prohibited by 12 U.S.C. 378 from engaging in banking business. Section 378 specifically provides, however, that it does not prohibit national banks or state banks or trust companies (whether or not members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing and selling investment securities to the extent permitted to national banking associations by the provisions of 12 U.S.C. 24.

[28 FR 9916, Sept. 12, 1963)

11.1 Authority.

This part is issued by the Comptroller of the Currency under the general authority of the national banking laws, 12 U.S.C. 1 et seq., and under specific authority contained in paragraph Seventh of 12 U.S.C. 24. The Comptroller of the Currency is charged by the national banking laws with the execution of all laws of the United States relating to the organization, operation, reg. ulation and supervision of national banks and in particular with the execution of 12 U.S.C. 24 which sets forth the corporate powers of national banks. This part interprets and applies paragraph Seventh of 12 U.S.C. 24 to provide for its due execution and for the proper regulation and supervision of the operations of national banks. Paragraph Seventh of 12 U.S.C. 24 also specifically provides for the Comptroller of the Currency to prescribe by regulation

(a) Limitations and restrictions on the purchase of investment securities by a national bank for its own account and

(b) Further definition of the term "investment securities.”

81.3 Definitions.

(a) The term bank includes national banks, banks located in the District of Columbia, and State banks which are members of the Federal Reserve System.

(b) The term investment security means a marketable obligation in the form of a bond, note, or debenture which is commonly regarded as an investment security. It does not include investments which are predominantly speculative in nature.

(c) The term Type I security means a security which a bank may deal in, underwrite, purchase and sell for its own account without limitation. These include obligations of the United States,

$ 1.4 Type I securities; standards for

authorized transactions. Type I securities are not subject to the limitations and restrictions contained in 12 U.S.C. 24 or in this part other than $$1.3(c), 1.3(g), 1.4, 1.8, and 1.10. Consequently, a bank may deal in, underwrite, purchase, and sell for its own account a security of Type I subject only to the exercise of prudent banking judgment. Prudence will require such determinations as are appropriate for the type of transaction involved. For the purpose of underwriting or investment, prudence will also require a consideration of the resources and obligations of the obligor and a determination that the obligor possesses resources sufficient to provide for all required payments in connection with the obligations. (54 FR 1335, Jan. 13, 1989)

general obligations of any State of the United States or any political subdivision thereof and other obligations listed in paragraph Seventh of 12 U.S.C. 24.

(d) The term Type II security means a security that a bank may deal in, underwrite, purchase, and sell for its own account, subject to a 10-percent limitation. These include obligations of the International Bank for Reconstruction and Development, Inter-American Development Bank, the Asian Develop ment Bank, the African Development Bank, Inter-American Investment Corporation, and the Tennessee Valley Authority, obligations issued by any State or political subdivision or any agency of a State or a political subdivision for housing, university, or dormitory purposes, and other obligations listed in paragraph Seventh of 12 U.S.C. 24.

(e) The term Type III security means a security which a bank may purchase and sell for its own account, subject to a 10-percent limitation, but may neither deal in nor underwrite.

(f) The term political subdivision of any State includes a county, city, town, or other municipal corporation, a public authority, and generally any publicly owned entity which is an instrumentality of the State or of a municipal corporation.

(8) The phrase general obligation of any State of any political subdivision thereof means an obligation supported by the full faith and credit of an obligor possessing general powers of taxation, including property taxation. It includes an obligation payable from a special fund or by an obligor not possessing general powers of taxation when an obligor possessing general powers of taxation, including property taxation, has unconditionally promised to make payments into the fund or otherwise available for the payment of the obligation of amounts which (together with any other funds available for the purpose) will be sufficient to provide for all required payments in connection with the obligation. (36 FR 6737, Apr. 8, 1971, as amended at 54 FR 1335, Jan. 13, 1989)

$ 1.5 Types I and III securities; pur

chase standards. (a) Evidence of obligor's ability to perform and of marketability. A bank may purchase a security of Type II or III for its own account when in its prudent banking judgment (which may be based in part upon estimates which it believes to be reliable), it determines that there is adequate evidence that the obligor will be able to perform all that it undertakes to perform in connection with the security, including all debt service requirements, and that the security is marketable, that is, that it may be sold with reasonable promptness at a price which corresponds reasonably to its fair value.

(b) Judgment based predominantly upon reliable estimates. A bank may, subject to limitations set forth in $1.7(b), purchase a security of Type II or III for its own account although its judgment with respect to the obligor's ability to perform is based predominantly upon estimates which it believes to be reliable. Although the appraisal of the prospects of any obligor will usually be based in part upon estimates, it is the purpose of this paragraph to permit a bank to exercise a somewhat broader range of judgment with respect to a more restricted portion of its investment portfolio. It is expected that this authority may be exercised not only in

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