Community Bank v. Federal Reserve Bank of San Francisco, and Board of Governors of the Federalreserve System

On June 21, 1972, the Board of Governors of the Federal Reserve System unanimously approved changes in Regulation J, 12 C.F.R. § 210 , which governs the collection of checks and other items by Federal Reserve Banks. Appellant State Banks, who are neither members of nor affiliated with the Federal Reserve System, object to the amendments to Regulation J insofar as they affect nonmember and non-affiliated payor banks.

Briefly stated, the changes in Regulation J affect both the time and manner in which payor banks must settle for demand items presented for collection by Reserve Banks. Prior to the amendments, payor banks became accountable if they failed to settle for demand items before midnight of the banking day of receipt, and settlements made earlier could be revoked prior to the midnight deadline. The amendments to Regulation J advance the settlement time to the clos.e of the banking day of receipt, and only if settlement is made prior to this time may it be revoked before midnight of the banking day of receipt. The amendments also affect the manner in which settlement may be made by eliminating drafts drawn on other banks as permissible forms of…