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FED ER A L RESERVE BANK OF NEW YORK I" Circular No. 7 3 4 2 ~l u February 11, 1974 -J EURODOLLAR RESERVE REQUIREMENTS UNDER REGULATION M Termination of Exemption for OFDI-Related Foreign Branch Loans to U.S. Residents To A ll M em b er Banks, and O thers Concerned, in the Second Federal R eserve D istrict: Following is the text of a statement by the Board of Governors of the Federal Reserve Sys tem regarding the application of Eurodollar reserve requirements under Regulation M, “ Foreign Activities of National Banks/’ to certain types of credit extended to United States residents: W ith the term ination on January 29, 1974 of the capital restraint program of the Office o f F oreign D i rect Investments ( “ O F D I ” ) , Department of C om m erce, the exem ption from E urodollar reserve requirements under the B oard ’s R egulation M (S ection 2 1 3 .7 ( b ) ) for O F D I-rela ted foreign branch loans to U .S . residents is no longer applicable. E ffective January 29, 1974, all new loans by foreign branches of mem ber banks to U .S . residents who are direct investors will be subject to the 8 per cent reserve requirement applicable under R egulation M . O utstanding loans made pursuant to the O F D I exem ption are not subject to reserve requirements. W ith respect to revolving credit agreements or other loan agreements that are renewable after January 29, 1974, any credits extended after the first date on which the foreign branch could cancel the loan would be subject to the 8 per cent reserve requirement. A renewal o f a revolving credit or other loan agreement shall be deemed to have occurred when the foreign branch has the right to demand repayment o f the loan and does not exercise that right. It should be noted that any extension o f credit after January 29, 1974, under an existing comm itment by a foreign branch w ould be subject to the Regulation M reserve requirements unless the com m itm ent binds the branch to lend a specified amount at a specified rate of interest and the branch did not retain the option to change the terms if the O F D I requirements or R egulation M were changed. Additional copies of this circular will be furnished upon request. A lfred H a y e s , President.
@FedFRASER