Rev. Rul. 65-314

Losses incurred by a bank with respect to deposits made by it in another bank may be deducted only under the specific charge-off method provided by section 166(a) of the Internal Revenue Code of 1954 and the regulations thereunder. These losses are rare and unpredictable in nature and do not arise in the normal course of the depositing bank's business of making loans and providing banking services. For these and other reasons the reserve method of accounting for bad debts under section 166(c) of the Code is not appropriate and may not be used with respect to losses on these deposits.