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Title 12, Banks and BankingRelease 119-102

§301 Powers and Duties of Board of Directors; Suspension of Member Bank for Undue Use of Bank Credit

Title 12 › CHAPTER 3 — FEDERAL RESERVE SYSTEM › SUBCHAPTER VII — DIRECTORS OF FEDERAL RESERVE BANKS; RESERVE AGENTS AND ASSISTANTS › § 301

Last updated Aug 21, 2026|Official source

Summary

Each Federal Reserve bank must be run by a board of directors. The board must do normal director duties and operate the bank fairly, not favoring or hurting any member bank. Under the law and orders from the Board of Governors, the board may give member banks discounts, advances, and other credit help when it is safe, fair to other banks, and supports sound credit and the needs of business and farming. The Board of Governors can make rules about these credit actions. Federal Reserve banks must watch member banks’ loans and investments for excessive use of credit for risky speculation in stocks, real estate, or commodities, or for other unsafe purposes. The bank’s chair must report any such misuse with a recommendation to the Board of Governors. If the Board of Governors finds misuse, it may suspend a member bank’s access to Federal Reserve credit after reasonable notice and a chance for a hearing, and it may end or renew that suspension.

Full Legal Text

Title 12, §301

Banks and Banking, Source: USLM XML via OLRC

Every Federal reserve bank shall be conducted under the supervision and control of a board of directors. The board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed by law. Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other member banks, the maintenance of sound credit conditions, and the accommodation of commerce, industry, and agriculture. The Board of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this chapter the conditions under which discounts, advancements, and the accommodations may be extended to member banks. Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

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 classification 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 pars. 6 to 8 of section 4 of act Dec. 23, 1913. Pars. 1 to 3 and 25 of section 4 were omitted from the code as executed. Pars. 4 and 5, 9 to 12, 13 to 15, 16 to 21, 22, 24, and 26 of section 4, and par. 23 of section 4 as added June 21, 1917, ch. 32, § 2, 40, Stat. 232, are classified to section 341, 302, 303, 304, 305, 307, 308, and 306, respectively, of this title.

Amendments

1933—Act June 16, 1933, among other changes, added all after first sentence in third par.

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.

Reference

Citations & Metadata

Citation

12 U.S.C. § 301

Title 12, Banks and Banking

Last Updated

Aug 21, 2026

Release point: 119-102