The Federal Reserve Board adopted a rule Wednesday outlining how institutions that branch across state lines should decide which reserve bank to join.

The rules require officials to look first at the bank's charter. If it specifies a home city, then the bank must join the district that encompasses that area. If a city is not specified in the charter, then officials will require a bank to join the reserve district where its headquarters is located.

The Fed said it would make exceptions if application of the rule would violate a state law. For example, Massachusetts requires state banks to join the Federal Reserve Bank of Boston.

Repeatedly switching reserve districts would not be permitted, the Fed warned. The changes to Regulation D and Regulation I are effective Oct. 1.

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