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F ederal Reserve b a n k o f D allas DALLAS, TEXAS 75222 Circular No. 77-128 November 22, 1977 PROPOSED AMENDMENTS TO REGULATIONS D AND M (Reserves Against Euro-dollar Borrowings) TO ALL MEMBER BAUKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors of the Federal Reserve System has proposed for comment amendments to its Regulation D (Reserves of Member Banks) and Regulation M (Foreign Activities of National Banks). This proposed rule would shorten from four weeks to one week the periods for which reserve requirements that relate to Euro-dollar borrowings of member banks are computed and maintained. Printed on the following pages is the text of the proposal as published in the FEDERAL REGISTER, November 11, 1977Comments on the proposed amendments should be directed to the Secretary, Board of Governors of the Federal Reserve System, Washington, D. C. 20551, to be received not later than December 6, 1977. All materials should include reference to Docket No. R-0128. Sincerely yours, Robert H. Boykin First Vice President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) W ashington, D.C. 20551. All m aterial subm itted should include th e Docket Number R-0128. FOR FURTHER INFORMATION CON TACT: R obert F. Gemmill. Associate Director, Division of In tern atio n al Finance, Board of Governors of th e Federal Reserve System, W ashington, D.C. 20551, 202-452-3733. Extract From FEDERAL REGISTER VOL. 1*2, No. 218 Friday, November 11, 1977 p p . 5 8 7 6 0 - 58761 [6210-01 ] FEDERAL RESERVE SYSTEM [ 12 CFR Parts 204 and 213 ] [Reg. D; Beg. M; Docket No. R-0128] RESERVES OF MEMBER BANKS AND FOR EIGN ACTIVITIES OF NATIONAL BANKS Reserves Against Eurodollar Borrowings AGENCY: Board of Governors of the Federal Reserve System. ACTION: Proposed rule. SUMMARY: n i l s proposed rule would shorten from four weeks to one week the periods for which reserve requirem ents th a t relate to Eurodollar borrowings of member banks are computed and m ain tained. This proposed revision deals with th e tim ing of th e com putation and m aintenance of certain internationally related reserve requirem ents. DATE: Comments m ust be received be fore December 6, 1977. ADDRESS: Secretary, Board of Gover nors of the Federal Reserve System, SUPPLEMENTARY INFORMATION: (1) Under section 204.5(c) of Regulation D and 213.7 of Regulation M, member banks now m aintain reserves computed on th e basis of th eir Eurodollar borrow ings and foreign branch loans to United States residents. A member bank com putes its reserve obligation under these sections on th e basis of th e daily average to tal of these specified assets and lia bilities averaged over a four-week period. Fifteen days a fter th a t period ends, the, bank m ust m eet its reserve obligation for the period by m aintaining a t its Reserve Bank, over th e next four weeks, daily average balances sufficient to satisfy the requirem ent. The Board is publishing for comment a proposed revision of section 204.5(c) of Regulation D and section 213.7 of Regu lation M th a t would shorten the period during which th e reserves required by those sections are computed from four weeks to one week and similarly shorten th e period during which the reserve re quirem ent m ust be satisfied to one week. The four-week period was originally es tablished to perm it member banks to adjust any large erratic increases in their gross liability positions resulting from m ajor swings in international tran sac tions, a t a tim e when policy restrictions made such adjustm ents difficult. Those policy restrictions are no longer in effect, and it appears th a t a long reserve com putation period m ay n ot be necessary. A one-week com putation period would make th e reporting and m aintenance of these reserves against Eurodollar bor rowings more consistent w ith those of domestic reserves under Regulation D. I t would also provide th e Board more timely inform ation on foreign branch lending to U.S. residents and other domestic uses of Eurodollars th a n it now obtains. Under th e proposed revision, a mem ber bank would compute its reserve reiiw rem ent on th e basis of its daily aver age outstanding Eurodollar borrowings and foreign branch loans to U.S. resi dents during each week and would sa t isfy th e requirem ent for th a t week d u r ing a week beginning eight days later. To phase in this revision, which entails shortening by four weeks th e period be tween th e tim e a reserve obligation 'on 1 T his proposed revision d eals w ith th e tim in g of th e com putation and m aintenance o f certain intern ation ally relkted reserve re quirem ents. It does n ot alter th e rate of those requirem ents or th e item s to w hich th ey are applied, and It does n o t affect Che general dom estic reserve requirem ents o f Regula tion D. Eurodollar transactions Is incurred and the tim e It Is satisfied, during a tran si tional four-week period, reserves would be required to be m aintained against Eurodollar transactions under the pres en t as well as the proposed method for computing reserve requirements. There would be no n et increase in required re serves of member banks as a result of this proposed change. The dates used in the proposed am endm ent are for illustra tive purposes only. (2) To aid in the consideration of this m atter by the Board, interested persons are Invited to submit relevant data, views, or comments. Any such m aterial should be subm itted In writing to the Secretary, Board of Governors of the Federal Reserve System, W ashington, D.C. 20551, to be received not later th an December 6, 1977. All m aterial submitted should Include the docket number R-0128. Such m aterial will be made avail able for inspection and copying upon re quest except as provided in section 261.6 (a) of the B oard’s Rules Regarding Availability of Inform ation (12 C .PR. § 261.6(a)). (3) This action is proposed pursuant to th e Board’s authority under sections 19 and 25 of the Federal Reserve Act. 1. E ffe c tiv e -------------- - $ 204.5(c) of Regulation D is revised to read as fol lows: § R e se rv e re q u ire m e n ts . * * * * * (c) R e s e r v e p e r c e n ta g e s a g a in s t c e r t a i n d e p o s i t s b y f o r e i g n b a n k i n g o f f ic e s . Deposits represented by promissory notes, acknowledgments of advance, due bills, or sim ilar obligations described ln> 3 204.1(f) to foreign offices of other banks,' or to institutions the time de posits of which are exempt from the rate lim itations of Regulation Q pursuant to § 217.3(g) thereof, shall not be subject to paragraph (a) of this section or to I 204.3(a) (1) and (2); but a member bank shall m aintain with the Reserve Bank of its district a balance equal to 4 percent of such deposits, computed in th e m anner specified in § 213.7(c). An excess or deficiency in reserves under th is paragraph shall be subject to § 204.3 (a) (2), and deficiencies under this p ara graph shall be subject to S204.3(b)* 2. Effective________ , 5 213.7 of Regu lation M is revised to read as follows: § 2 1 3 .7 R e se rv es a g a in st fo re ig n b ra n c h d e p o sits. ( a ) ) T r a n s a c tio n s w ith p a r e n t b a n k . A member bank having one or more for eign branches shall m aintain w ith the Reserve Bank of its district, as a reserve against its foreign branch deposits, a balance of 4 percent of the total of: 7 Any banking office located outside the States of th e U n ited States and th e D istrict of Columbia of a bank organized under dom estic or foreign law. * t e r m “c o m p u ta tio n p e rio d ” 1m I 204.3 (a )(8 ) and (b) shall, for this purpose, be deem ed to refer to each m aintenance week ■m otfieti In M U .7 <c )l (1) Net balances due from Its domestic offices to such branches, and (2) Assets (including participations) held by such hraoches which were ac quired from its domestic offices (other th a n assets representing credit extended to persons not residents of the United S ta te s), computed in the m anner pre scribed in i 213.7(c). (b) C r e d i t e x t e n d e d t o U n i t e d S t a t e s r e s i d e n t s . A member bank having one or more foreign branches shall m aintain w ith th e Reserve Bank of its district, as a reserve against its foreign branch de posits, a balance equal to one per cent of the credit outstanding from such branches to U nited States residents ’ (other th a n assets acquired and net bal ances due from its domestic offices), computed in th e m anner prescribed in § 213.7(c); P r o v i d e d , T h at this p ara graph does n ot apply to credit extended (1) in th e aggregate am ount of $100,000 or less to any U nited States resident, (2) by a foreign branch which a t no tim e during th e com putation period had credit outstanding to U nited States residents exceeding $1 million, (3) to enable the borrower to comply w ith the require m ents of th e Office of Foreign Direct In vestments, D epartm ent of Commerce,* (4) under binding com mitm ents entered into before May 17, 1973, or (5) to an in stitu tio n th a t will be m aintaining re serves on such credit under § 204.5(c) of Regulation D or § 211.7(c) of Regulation K or to a foreign-owned banking institu tion th a t wiU voluntarily be m aintaining member bank reserves on such credit. (c) C o m p u t a t i o n o f r e s e r v e s ; t r a n s i t i o n p r o v i s i o n s . D uring the week begin ning Jan u ary 26, 1978, and during each successive week (“m aintenance weeks”) , a m em ber bank shall m aintain with the Reserve B ank o t its district a daily aver age balance to satisfy the reserve require m ents a t S§ 204.5(c) and 213.7 (a) and (b ). T his balance shall equal the reserve percentage specified In those sections applied to th e daily average total of the deposits and other items to which the percentage pertains computed during the week ending th e Wednesday eight days before th e beginning of th e m aintenance week. D aring th e four-week period be ginning Jan u ary 26,1978, a member bank sh all also m aintain w ith the Reserve Bank of Its d istrict a dally average bal ance equal to th e reserve percentage spe- riflad. in those sections appllad to the dally average total of the deposits and other item s to which the percentage per tains computed during the four-week pe riod beginning December 15, 1977. By order of the Board a t Garaa&Hs of the Federal Reserre System, Mcrmnber 3, 1977. T H isso n E . ALLisoir, 7 (a) Any Individual residing (at the tim e th e credit Is extended) In any State of the U nited States or th e D istrict of Columbia; (b) any corporation, partnership, association or otber en tity organized therein (“dom estic corporation”); and (c) any branch or office located th erein o f any other en tity wherever organized. Credit extended to a foreign branch, office, subsidiary, affiliate or other foreign establishm ent (“foreign affiliate”) controlled by one or more such dom estic cor poration* w ill n o t be deem ed to be credit ex tended to a U nited S tates resident if the pro ceeds w ill be uaed in its foreign business or th a t o f other foreign affiliates of the c o n trollin g dom estic corporation ( s ) . *Tfe» branch m ay in good fa ith rely on tn e certification th a t th e fun ds w ill be so used. Secretary of the Board. [PR Doc.77-32775 P iled 11-10-77:8:46 am]
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