Full text of Federal Reserve Bank of New York Circulars : 6671. Amendment to Regulation M

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F ederal Reserve Bank
o f N ew York

rCircular No. 6 6 7 1 "I
u January 15., 1971 J

AMENDMENT TO REGULATION M
Reserves Against Eurodollar Borrowings

To the Member Banks o f the Second Federal Reserve District;

Following- is the text of a statement issued today by the Board of Governors of
the Federal Reserve System:
The Board of Governors of the Federal Reserve System today amended its regulations to
permit U. S. banks to count toward maintenance of their reserve-free Eurodollar bases any
funds invested by their overseas branches in Export-Import Bank securities offered under the
program announced today by the Export-Import Bank.
The amendment.is a further step resulting from the Board’s continuing review of measures
needed to temper the adverse impact of Eurodollar outflows on the U. S. balance of payments.
Eurodollar borrowings b}r a member bank are subject to a 20 per cent reserve requirement to
the extent that they exceed a bank’s reserve-free base.
For those banks that have had a minimum (3 per cent of deposits) reserve-free base, the Board
postponed for four weeks, through the computation period ending February 17, 1971, the applica­
tion of the automatic downward adjustment of their bases.

Enclosed is a copy of the amendment, effective today, to Regulation M, “ Foreign Activ­
ities of National Banks,” referred to above. Additional copies of the enclosure will be
furnished upon request.




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F ederal R eserve S y s t e m

FO R EIG N A C TIVITIES OF N A T IO N A L BANKS
AMENDMENT TO REGULATION M

Effective January 15, 1971, § 213.7 (a) of
Regulation M is amended to read as follow s:
SECTION 213.7 — RE SE R V E S AGAINST
FOREIGN BRANCH DEPOSITS
(a)
Transactions with parent bank. Dur­
ing each week of the four-week period be­
ginning October 16, 1969, and during each
week of each successive four-week (“ main­
tenance” ) period, a member bank having one
or more foreign branches shall maintain with
the Reserve Bank of its district, as a reserve
against its foreign branch deposits, a daily
average balance equal to 20 per cent of the
amount by which the daily average total of
(1) net balances due from its domestic of­
fices to such branches, and
(2) assets (including participations) held
by such branches which were acquired from
its domestic offices,7
7 Excluding (1) assets so held on June 26, 1969, repre­
senting credit extended to persons not residents of the
United States and (2) credit extended or renewed by a
domestic office after June 26, 1969, to persons not resi­
dents of the United States to the extent such credit was
not extended in order to replace credit outstanding on that
date which was paid prior to its original maturity (see
definition of United States resident in footnote 9).




during the four-week ( “ computation” ) pe­
riod ending on the Wednesday fifteen days
before the beginning of the maintenance pe­
riod, exceeds the greater of
(i) the lowest corresponding daily average
total8 for any computation period ending af­
ter November 25, 1970, or
(ii) 3 per cent of the member bank’s daily
average deposits subject to § 204.5(a) of this
chapter (Regulation D) during the current
computation period, or the lowest correspond­
ing daily average total8 for any computation
period beginning on or after January 21,
1971 and after the bank has had a foreign
branch in operation for more than 90 days,
whichever amount is the lesser:
Provided, That the applicable base computed
under (i) or (ii) shall be reduced by the
daily average amount of any deposits of the
member bank subject to § 204.5(c) of this
chapter (Regulation D) during the computa­
tion period.
8 Including the principal amount paid by a foreign branch
of the member bank for obligations held by such branch
that were purchased by it from the Export-Import Bank of
the United States pursuant to its program announced on
January 15, 1971, and excluding assets representing credit
extended to persons not residents of the United States.

P R IN T E D I N N E W Y O R K