§347a Advances to member bank groups; inadequate amounts of eligible and acceptable assets; 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 advances

Summary

A Federal Reserve Bank can lend money to a group of five or more member banks in its district if at least five members of the Federal Reserve Board agree. The group must have a majority of banks that are independently owned. The Fed bank’s board picks how much to lend. These loans are made on time or demand promissory notes when the banks do not have enough eligible assets to get credit from the Fed by rediscounts or other advances (except under section 347b). Each bank in the group is only liable for its share of the loan equal to its share of the group’s total deposits. The Fed may lend to fewer banks if those banks together hold at least 10 percent of all member-bank deposits in the district. The banks can divide the loan among themselves, but any bank that gets money must give its note to a trustee for the whole group and provide agreed collateral. The Fed must charge at least 1 percent more than its current discount rate. Notes used for these advances cannot be put up as collateral for Federal Reserve notes, and foreign obligations cannot be used as collateral for these advances. Member banks may agree to these obligations under these rules.