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SECURITY MEASURES FOR BANKS AND OTHER

FINANCIAL INSTITUTIONS

TUESDAY, APRIL 23, 1968

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C.

The committee met, pursuant to adjournment, at 10:10 a.m., in room 2128, Rayburn Office Building, Hon. Leonor K. Sullivan, presiding. Present: Representatives Patman, Sullivan, Reuss, St Germain, Gonzalez, Hanna, Gettys, Rees, Bevill, Wolff, Griffin, Widnall, Dwyer, Halpern, Clawson, Johnson, Stanton, Mize, Brown, and Wylie.

Mrs. SULLIVAN. The Committee on Banking and Currency will come to order.

Today the full committee meets to consider H.R. 15345, a bill to provide security measures for banks and other financial institutions.

The bill is to direct the Federal agencies which have responsibilities over banks and savings and loan institutions to issue rules and regulations requiring the installation, maintenance, and operation of necessary security devices and procedures to discourage robberies and burglaries and to assist the law enforcing agencies in the identification and apprehension of persons who commit such crimes.

(H.R. 15345 follows:)

[H.R. 15345, 90th Cong., first sess.]

A BILL To provide security measures for banks and other financial institutions

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Bank Protection Act of 1968".

SEC. 2. As used in this Act the term "Federal supervisory agency" means

(1) The Comptroller of the Currency with respect to national banks and district banks,

(2) The Board of Governors of the Federal Reserve System with respect to Federal Reserve banks and State banks which are members of the Federal Reserve System,

(3) The Federal Deposit Insurance Corporation with respect to State banks which are not members of the Federal Reserve System but the deposits of which are insured by the Federal Deposit Insurance Corporation, and

(4) The Federal Home Loan Bank Board with respect to Federal savings and loan associations, and institutions the accounts of which are insured by the Federal Savings and Loan Insurance Corporation.

SEC. 3. (a) Within six months from the date of this Act, each Federal supervisory agency shall promulgate rules establishing minimum standards with which each bank or savings and loan association must comply with respect to the installation, maintenance, and operation of security devices and procedures to discourage robberies, burglaries, and larcenies and to assist in the identification and apprehension of persons who commit such acts.

(b) The rules shall establish the time limits within which banks and savings and loan associations shall comply with the standards and shall require the submission of periodic reports with respect to the installation, maintenance, and operation of security devices and procedures.

SEC. 4. A bank or savings and loan association which violates a rule promulgated pursuant to this Act shall be subject to a civil penalty which shall not exceed $100 for each day of the violation.

Mrs. SULLIVAN. Our chief witness today is the Assistant Attorney General, Fred M. Vinson, Jr., who will represent the administration. It is my understanding that the Federal banks and savings and loans and regulatory agencies are not opposed to this legislation, and I will include letters from the FDIC, the Comptroller of the Currency, the Federal Reserve Board, and the Federal Home Loan Bank Board at this point in the record.

(The letters referred to follow :)

Hon. WRIGHT PATMAN,

FEDERAL DEPOSIT INSURANCE CORPORATION,
Washington, April 8, 1968.

Chairman, Committee on Banking and Currency, House of Representatives, Rayburn House Office Building, Washington, D.C.

DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Corporation with respect to H.R. 15345, 90th Congress, a bill "To provide security measures for banks and other financial institutions."

The bill would require the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board to promulgate, within six months of the effective date of the proposed "Bank Protection Act of 1968," rules establishing minimum standards with which banks or savings and loan associations subject to supervision by them must comply "with respect to the installation maintenance, and operation of security devices and procedures to discourage robberies, burglaries, and larcenies and to assist in the identification and apprehension of persons who commit such acts." The bill would direct the supervisory agencies to include within the rules promulgated (1) time limits within which banks and savings and loan associations would be required to comply with such standards and (2) a requirement for the submission by banks and savings and loan associations of periodic reports with respect to the installation, maintenance, and operation of security devices and procedures. Violators of rules promulgated pursuant to the proposed Act would be subject to a civil penalty not to exceed $100 for each day of the violation.

In our opinion, the primary responsibility for properly conducting a bank's affairs, for safeguarding its assets, and for providing adequate security arrangements and controls against external crimes rests with bank management. Accordingly, the Corporation for several years has emphasized to bank management, through the examination and supervision processes, its responsibility for the installation and operation of adequate security arrangements and controls against external crimes. Although the Corporation's efforts have met with some degree of success, a steady increase in the number of external crimes against financial institutions indicates that even more affirmative actions need to be taken to encourage banks and savings and loan associations to protect themselves against robberies, burglaries, and larcenies. The Corporation therefore favors the enactment of the bill.

The promulgation of such rules as are contemplated by the bill-even those prescribing only minimum standards-will be difficult because the rules will have to make proper allowance for such diverse factors as location, existing physical plant, size, and condition of particular institutions and yet be applicable, equitably and realistically, to all banks and savings and loan associations. Moreover, the Corporation is a bank supervisory and insuring agency. Our concern with bank protection against external crimes is part of our overall concern with the continued viability of the nation's banks.

In order to develop some degree of uniformity in our approach to the problem of external crimes against financial institutions and to take advantage of the most expert advice available on the subject, we will work with the other Federal

supervisory agencies and the Department of Justice to promulgate regulations that will make a practicable contribution to our common objective of reducing and preventing crimes against financial institutions.

The Bureau of the Budget has advised that it has no objection to the submission of this letter and that enactment of H.R. 15345 is in accord with the Presi

dent's program.

Sincerely yours,

K. A. RANDALL,

Chairman.

Hon. WRIGHT PATMAN,

Chairman, Banking and Currency Committee,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in reply to your letter of February 26, 1968, requesting our views on H.R. 15345, to provide security measures for banks and other financial institutions.

This agency, of course, supports the purposes sought to be achieved by this legislation. However, we do not feel that we have the expertise at this time to write regulations on this subject. In the event the legislation becomes effective, we will do our best in cooperation with the other banking agencies and the FBI to obtain the necessary information on which to base the required regulation. Sincerely,

WILLIAM B. CAMP, Comptroller of the Currency.

FEDERAL RESERVE SYSTEM,

OFFICE OF THE CHAIRMAN,

Washington, D.C., March 27, 1968.

Hon. WRIGHT PATMAN,

Chairman, Committee on Banking and Currency,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your letter of February 26, 1968, requesting the views of the Board of Governors regarding H.R. 15345, a bill "To provide security measures for banks and other financial institutions". In essence of this bill would require the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board to promulgate rules establishing minimum standards for the financial institutions under their respective jurisdictions with respect to the installation, maintenance, and operation of security devices and procedures (1) to discourage robberies, burglaries, and larcenies, and (2) to assist in the identification and apprehension of persons committing such acts.

The Board believes that every reasonable effort should be made to thwart the rising tide of crimes against financial institutions. The Board has been particularly concerned about this problem and has taken steps to cope with it. For example, our examiners have been instructed to discuss the matter with the management of banks and, jointly with the Federal Deposit Insurance Corporation, we have developed a questionnaire as a means of calling the attention of banks to existing inadequacies in security controls and protective devices. The Board expects to continue to emphasize this approach and to provide banks under its supervision with literature on the subject, including a brochure prepared in the Department of Justice:

The Board believes that appropriate security measures for any individual bank must depend upon such factors as the incidence of crime in the community in which the bank is situated, the bank's location within the community, and the physical characteristics of the bank's quarters. In addition, what a bank might reasonably be required to adopt in the way of security measures is related to the costs of such measures and the bank's financial resources. Consequently, the formulation of regulatory standards with respect to security devices and procedures that would be both workable and equitable would involve considerable difficulties. Nevertheless, the Board believes that it is possible to establish practicable minimum standards for this purpose.

Accordingly, the Board favors the proposed legislation.

Sincerely yours,

Wм. MCC. MARTIN, Jr.

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