A national bank may, with the consent of the Comptroller of the Currency and of the Federal Reserve Board, and on the favorable vote of shareholders owning not less than two-thirds of the shares, reduce its capitalization to any sum not below the minimum amount required by law. Any bank contemplating such reduction should correspond with the Comptroller and the federal reserve bank before it submits the question formally to the stockholders. The application to reduce the capital should be accompanied by a letter from the federal reserve bank giving its views relative to the proposed reduction. Before passing upon the request the Comptroller may order a special examination of the bank. If the bank has sustained any losses they must be charged off, and if it has any loans which are excessive or will become excessive by reason of the reduction of the capital, they must be reduced to conform with the limitations. If any other conditions should appear unsatisfactory, the Comptroller would require their correction.

If the Comptroller approves the application, a special meeting of the stockholders is held to vote upon the question. If the vote is favorable, the reduction becomes operative upon issuance of the Comptroller's approval. Prior to that time the circulation of the bank must be reduced if it exceeds the amount of capital after reduction; this is accomplished by depositing lawful money with the United States Treasury and withdrawing an equal amount, of bonds. Each shareholder has the right to participate in the reduction in proportion to his holdings and to receive cash for the stock surrendered, unless it was understood that the reduction was to be used to charge off losses. No part of the capital set free can be carried to surplus or to undivided profits without the unanimous consent of the shareholders. New stock certificates are issued in exchange for the old.