View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

F ed er a l Reser ve Ba n k

DALLAS, TEXAS

of

Dallas

75222

Circular No. 68-85
April 2,1968

PRESS RELEASE CONCERNING AN INTERPRETATION
REGARDING REGULATION U AND THE
NEW REGULATION G

To All Banks, Nonbank Lenders, and Others Concerned
in the Eleventh Federal Reserve District:
There is enclosed for your information a copy of a press
release concerning an interpretation issued by the Board of
Governors of the Federal Reserve System regarding the appro­
priate date as of which collateral m ust be valued by a bank
subject to Regulation U or by a lender subject to Regulation G
in order to calculate the amount of the required deposit of
cash or securities in the case of a purpose credit made prior to
March 11, 1968, that m ust be brought to full margin by April 10,
1968.
Yours very truly,
P. E. Coldwell
President

Enclosure (1)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

k
5
?

R E S E R V E

F E D E R A L
press

release

For immediate release.

March 27, 1968

In response to questions, the Board of Governors today
issued an interpretation regarding the date to be used by a bank
(subject to Regulation U) or other lender (subject to Regulation
G) in valuing collateral (including convertible bonds) posted to
meet margin requirements set by recent amendments to the Board's
regulations governing stock market credit.

These amendments

specified that additional collateral, as required, must be de­
posited by April 10 in connection with certain loans made prior
to March 11.
In order to determine the amount of the additional deposit
required, it is necessary to value the collateral

originally secur­

ing the loan.

collateral should

The Board has determined that such

be valued as of the date the loan was originally made, or as of
March 11, whichever gives the higher figure.
The effect

of the Board's interpretation is to limit the

amount of

additional margin

a borrower

will have to put up to the

amount he

would have had to

deposit in

connection with a fully

margined loan on the

date the loan was

made.

However, where a

security has increased in value since the time the loan was made,
the borrower may take advantage of the added value in determining
the amount of additional deposit which he must make to comply with
the requirements of the regulations.

-2-

If made against stocks, loans subject to the requirement
must be brought up to a 70 per cent margin ($70 down for each $100
worth of securities purchased) and if against convertible bonds,
such loans must be brought up to a 50 per cent margin ($50 down
for each $100 worth of convertible bonds purchased).
Valuation will be required, and loans must be brought into
conformity with margin requirements by April 10, in the following
situations:
1.

Where a loan was made by a bank, subject to Regulation

U, after October 20, 1967, and prior to March 11, 1968, for the
purpose of purchasing or carrying a debt security convertible into
registered stock, if the loan is secured by any stock or by a
security convertible into stock.
2.

Where a loan was made after February 1, 1968, and prior

to March 11, 1968, by a lender subject to Regulation G, and the loan
was (i) for the purpose of purchasing or carrying a registered equity
security (including a bond convertible into such a security), and
(ii) the loan was secured by such a security.

-

0 -


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102