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F ederal R eserve Bank o f Dallas
DALLAS, T E X A S

75222

Circular Wo. 73-12^4
May 21, 1973

TO THE CHIEF EXECUTIVE OFFICER
OF THE MEMBER B M K ADDRESSED:
On May 16, 1973? the Board announced several changes in
Regulations D, Q, and M and one proposed change in Regulation D.
These changes were designed to curb the rapid expansion in bank credit
and help moderate inflationary pressures, and at the same time to
assure the availability of credit on a reasonable scale. I have
enclosed, for your information, a summary of these actions, as well as
a copy of the Board's press release and orders relating to these
actions.
You will also find enclosed a form ("Member Bank Report for
Calculating the Base for Marginal Reserve Requirements"--FRUlUy) to
provide the Reserve Bank with the necessary information to implement
the changes in Regulation D. Would you please return the completed
form to this Bank or appropriate branch as soon as possible but no
later than May 29, 1973. The second panel of this form will permit you
to determine your base for the new marginal reserve requirements.
If your base is larger than $10 million, it will be necessary
for you to attach to your Report of Deposits each week (starting with
the reserve computation period beginning June 7) a new Report ("Member
Bank Special Reservable Liabilities Report"— FR^lUa) for the calculation
of your reserve requirements. Similarly, if the outstanding amount
of the obligations in the base during the statement week
ended May 16
was less than $10 million, but then rises to $10 million
in any future
reserve computation week, it will become necessary for you to attach
the FRUl^-a form to your Report of Deposits each week, starting with
the week that the total of such obligations rises to $10 million. In
addition, if in any statement week, your bank obtains any funds from the
issuance of obligations from affiliates or subsidiaries, it will be
necessary for you to file an FR^lUa for that week.
A copy of the FRUlUa form is enclosed at this time for your
information. Additional copies of this form will be forwarded to you
shortly.
If, as proposed, the Board amends Regulation D
to make funds
obtained by a bank through its use of finance bills (ineligible acceptances
subject to reserve requirements, this form will be revised to include

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

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information on the outstanding amount of such obligations.
If this
amendment does occur, it -will be necessary for you. to file this revised
FR-i+lUa in any reserve computation week in which such finance bills
(ineligible acceptances) were outstanding at your bank, even if the
total covered obligations are less than $10 million.
Reflecting these changes, you are requested to no longer
report funds obtained by the bank from the issuance of obligations from
affiliates or subsidiaries ("commercial paper") on the Report of
Deposits.
Such data will now be collected on the FRUlUa form.
Eurodollar borrowing, however, will still be collected on the same form,
although reserve requirements will be assessed differently in reflection
of the most recent changes in Regulations D and M.
If you now have a
reserve free base, will you please contact the accounting officer of
this Bank or appropriate branch for a more detailed discussion of the
phasing out of reserve free bases.
As you have no doubt heard, the Board has urged all banks to
observe the spirit, as well as the letter, of the Board’s actions in
a concerted effort to curb bank credit expansion and to moderate in­
flationary pressures. Reflecting this request, Chairman Burns has
written a letter to the largest nonmember banks seeking their assistance
and cooperation in ensuring the effectiveness of this program.
Cooperating nonmember banks will establish a base essentially
identical to member banks and will be asked to deposit with a member
bank of their choice an additional 3 percent marginal reserve on any
increase in money market obligations in excess of that base.
The member
bank depository will be asked to re-deposit such reserves with its
Federal Reserve Bank.
If a nonmember bank contacts your bank asking
your bank to become its special depository, please call the accounting
officer of this Bank or appropriate branch, who will give your more
details on how this program will operate.
If any non-member bank con­
tacts this Bank first, and selects your bank as its depository, we will
be in contact with your staff.
If you have any questions on any facet of the Board’s recent
actions, please call the accounting officer of this Bank or appropriate
branch.
On behalf of the Federal Reserve System, please accept my
appreciation for your cooperation.
Yours very truly,
P. E. Coldwell
President
Enclosures

DETAILS OF MAY l6 ACTIONS
BY THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Effective immediately, Regulation Q interest ceilings were suspended
,
for all single maturity time certificates of deposits (negotiable
and non-negotiable) in denominations of $100,000 or more.
Effective June 7> Regulation D was amended to impose a marginal
reserve requirement of 8 per cent (the regular 5 per cent plus a
supplemental 3 per cent) on the amount by which the daily average
sum of certain deposits and liabilities exceeds the daily average
amount of such obligations outstanding in the reserve computation
week ending May l6, or $10 million, whichever is larger.
(a )

The obligations involved are:
1.

2.

(b)

the outstanding amount of single maturity time certificates
of deposit (negotiable and non-negotiable)--including pro­
missory notes, acknowledgements of advance, due bills, or
similar obligations with a maturity of 30 days or more
issued by the bank--in denominations of $100,000 or
more, and
the amount outstanding of funds obtained by member banks,
for use in their banking business, through issuance of obli­
gations by affiliates and subsidiaries with a maturity of
more than 30 days but less than 7 years.

The daily average total amount of these obligations outstanding
during the statement week ending May l6--or $10 million, whichever
is larger--becomes the base for the calculation of the supplemental
reserve requirement.

(c)

Effective with the reserve computation period beginning June 7?
the supplemental reserve requirement of 3 per cent will be
assessed on the amount by which the daily average total amount
of the two obligations mentioned above exceeds the base.

(d)

If the sum of the two obligations during the week of May l6 is
less than the $10 million minimum base, the supplemental reserve
requirement will not be applied to the sum of the two obligations.
The supplemental reserve requirement becomes applicable whenever
the sum of such obligations exceeds $10 million.
If, subsequently,
the aggregate amount of such obligations declines below $10 mil­
lion, supplemental reserve requirements cease and will not be ap­
plied again unless and until the aggregate amount of such out­
standing obligations again exceeds $10 million.

(e)

If the established base is larger than $10 million, and subse­
quently the aggregate amount outstanding of these obligations de­
clines below the base, supplemental reserve requirements will not
be applied during such period.
If, thereafter, the aggregate

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amount of such liabilites again exceeds the original base (based
on the daily average outstanding for the week ended May l6),
supplemental reserve requirements on the amount by which the
aggregate amount of such obligations exceeds the original base
will once again become applicable. The size of the base can be
changed only by Board action.
C.

The Board has published for comment in the Federal Register an
amendment to Regulation D that would apply reserve requirements to the
outstanding funds obtained by member banks from their use of finance
bills (ineligible acceptances).
(a)

comments are due at the Board's offices by June

(b)

k, 1973.

if the Board does so amend Regulation D:
1.

Regular reserve requirements will be applied as follows:
a.

the time deposit reserve requirement (currently 5 per
cent for time deposits over $5 million) will be applied
to the outstanding amount of finance bills (ineligible
acceptances), the proceeds of which were used by a
member bank in its banking business, with a maturity of
30 days or more at the time the proceeds were supplied
to the member bank, and

b.

demand deposit reserve requirement (with the applicable
ratio depending on the total amount of deposits subject
to the demand deposit reserve ratio) will be applied to
the outstanding amount of finance bills (ineligible
acceptances), the proceeds of which were used by a member
bank in its banking business, with a maturity of less
than 30 days at the time the proceeds were supplied to
the member bank.

2.

At the effective date of the amendment, if it is enacted,
the base will increase by the daily average amount outstanding
of such finance bills (ineligible acceptances) in the reserve
computation period ending May l6.

3.

At the effective date of this amendment, if it is enacted, the
supplemental reserve requirement of 3 per cent will be applied
to the amount by which the total of:
a.

outstanding funds obtained by the bank through obligations
issued by affiliates and subsidiaries with a maturity of
30 days or more,

b.

outstanding single maturity time certificates of deposits
in denominations of $100,000 or more (including promissory
notes, acknowledgements of advance, due bills, or similar
obligations with a maturity of 30 days or more issued by
the bank), and

c.

outstanding funds obtained by the bank from its use of
finance bills (ineligible acceptances) exceeds the new
higher base.

D.

The Board amended Regulations D and M to reduce from 20 to 8 per cent
the reserve requirement applicable to certain borrowings of U.S. banks,
to the extent that they exceed the reserve free-base of each bank. The
rate of 8 per cent applies to reservable transactions in the current
computation period (May 10 - June 6, 1973)> with reserves to be main­
tained at the lower rate in the four-week period beginning June 21, 1973

E.

Beginning with the four week computation period starting July 5? the
reserve-free bases available for borrowning by U.S. banks from own
foreign branches and from foreign banks will be reduced each four
week period by 10 per cent of the base outstanding during the com­
putation period ending May 9* This schedule will result in elimination
of reserve-free bases in the computation period beginning March l4, 197^
During the phase out period for the reserve-free bases, the so called
"automatic downward adjustment" feature will remain. Thus, if in any
computation period the daily average outstanding foreign borrowing of
a U.S. bank with a reserve-free base declines by more than 10 per cent,
its reserve-free base will decline by the full amount of the reduction
in such borrowings.

F.

Effective May l6, 1973? all reserve-free bases for foreign branch loans
to U.S. residents are eliminated. However, loans made to enable the
borrower to comply with the requirements of the Office of Foreign
Direct Investments, or made under binding commitments entered into
before May l6, 1973? are exempt. Hence, all foreign branch loans to
U.S. residents either committed or outstanding on May l6, 1973} are
reserve-free--but as those loans mature, any renewals or new loans
would be subject to the reserve requirement. In all cases, loans
made to enable borrowers to comply with the requirements of the OFDI
are reserve-free.

1/

Net balances due to own foreign branches, domestic assets sold to
own foreign branches, lending of own foreign branches to U.S.
residents, and borrowings from other foreign banks.

MEMBER BANK REPORT FOR CALCULATING THE BASE FOR
M ARG INAL RESERVE REQUIREMENTS
FROM:

,u F ,4'4
R v
(May 1973)

TO:
Federal Reserve Bank of
( N a m e of B an k)
(S t r e e t Address)
( C i t y , S ta te , Z i p C ode )

Report all balances as of the close of business each day fo r the seven days May 1 0 - 16, 1973,
to the nearest thousand dollars. Please read the instructions prior to completion of this report.
A m o u n t outstanding of
funds obtained by the
bank through issuance
of obligations by
affiliates or subsid­
iaries m aturing in
30 days to 7 years

Date
Day
of
Week

Month

Day

Col. 1
Mils.

THURS.

May
May
May
May
May
May
May

Mils.

Thous.

Mils.

Thous.

15

WED.

Thous.

14

TUES.

Mils.

Col. 5

Col. 4

Col. 3
Thous.

13

MON.

Mils.

12

SUN.

Col. 2
Thous.

Total
(Cols. 3 and 4)

11

SAT.

Subtotal
(Cols. 1 and 2)

A m o u n t Outstanding of
funds obtained by the
bank through its use of
ineligible acceptances
maturing in 30 days or
more.

10

FRI.

A m o u n t outstanding
o f single m atu rity
tim e c e rtifi­
cates of deposit
in denominations
o f $100,000 or more

16

TOTALS

C A L C U L A T IO N TO D ET ER M IN E BASE:
Line 1. T O T A L OF CO LUM N 3
................................$
This is the reporting bank's BASE (or $10 m illio n , whichever is larger), fo r the
^ reserve com putation period beginning June 7, 1973.

/

Line 2. D IV ID E T O T A L OF CO LUM N 3 BY SEVEN

Line 3. T O T A L OF CO LUM N 5

................................$_

i This w ill become the BASE (or $10 m illio n , whichever is larger), I F the Board
\ of Governors amends Regulation D to make funds obtained by the Bank
{ th ro u g h its use o f ineligible acceptances subject to reserve requirements.

Line 4. D IV ID E T O T A L OF CO LU M N 5 BY SEVEN

I ce rtify th a t the reported closing balances are correct fo r the above dates.

( A u t h o r i z e d Sig natu re)

( T i t le )

(Tear here before mailing)

INSTRUCTIONS
A ll figures should be reported as of the close of business each day May 10-16,
1973 to the nearest thousand dollars. A ll balances must reflect the consolida­
tio n of all branches located in the states of the United States and the District
of Columbia. Zeros should be entered in any column fo r any day fo r which
the reporting bank has nothing to report. For any day on which the reporting
bank was closed, report the closing balance of the preceding business day.

In a reserve com putation week in which the appropriate daily average total
deposits and liabilities equal or fall below the appropriate base, no supplement­
al reserve requirement w ill be applied. Subsequently, if the daily average total
o f such deposits and liabilities in any reserve com putation week exceeds the
appropriate base, a supplemental reserve requirement w ill again be applied.
The base can be changed on ly by action of the Board o f Governors of the
Federal Reserve System.

PURPOSE OF THE REPORT
The Member Bank Report fo r Calculating the Base fo r Marginal Reserve Re­
quirements w ill be used to establish each member bank's marginal reserve base.
The base fo r the reserve com putation week beginning June 7, 1973, is that in­
dicated in line 2 of the second panel of the Report (or $10 m illio n , whichever
is larger). For the reserve com putation week beginning June 7, 1973, and each
week thereafter, a supplemental reserve requirement o f 3 percentage points
w ill be applied to the am ount by which the aggregate daily average total of
column 3 fo r that week exceeds the base (or $10 m illio n , whichever is larger).
These additional reserve requirements must be carried, on daily average, during
the reserve maintenance week beginning June 21, 1973.
Should the Board apply reserve requirements to the outstanding amount of
funds obtained by the bank through its use o f ineligible acceptances, the base
will rise to that shown in line 4 of the second panel of the Report (or $10
m illio n , whichever is larger). Subsequently, a supplemental reserve require­
ment o f 3 percentage points w ill be applied to the am ount by which the aggre­
gate daily average total of column 5 in any week exceeds this new base.

Column 1.

Amount Outstanding of Funds Obtained by the Bank Through
Issuance of Obligations by Affiliates or Subsidiaries Maturing in
30 days to 7 years.

Report in column 1 the dollar am ount outstanding o f the proceeds of obliga­
tions issued by the reporting bank's affiliates or subsidiaries (see Section 2 of
the Banking A ct o f 1933) in the fo rm of promissory notes, acknowledgements
o f advance, due bills, or similar obligations (w ritte n or oral) th a t are:
(1) supplied to the reporting bank fo r the latter's use in its banking business,
or to maintain the availability to the reporting bank of such funds, where
(2) such obligations have a remaining m a tu rity at the tim e the proceeds are
supplied to the reporting bank o f 30 days or more b u t less than 7 years.
There are, however, tw o broad categories of such funds supplied to the report­
ing bank th a t are to be EX C LU D ED fro m the numbers reported in column 1:

(1) funds obtained by the reporting bank through those obligations issued
by affiliates or subsidiaries th a t are supplied to the reporting bank by the
affiliates or subsidiaries in the fo rm of deposits in the reporting bank. Pro­
ceeds supplied to the reporting bank in the fo rm of deposits are to be re­
ported in the appropriate demand and time deposit columns of the Report
of Deposits and do n o t enter the base unless they represent single m aturity
tim e certificates of deposit in denominations of $100,000 or more. The o u t­
standing amount o f the latter deposits of the reporting bank's affiliates and
subsidiaries in the reporting bank are to be included in the total of column
2 of this Report;
(2) funds obtained by the reporting bank through issuance of any obliga­
tions by affiliates or subsidiaries that if issued by the bank would be ex­
empted fro m classification as deposits subject to reserve requirements as
specified in Section 204.1 (f) of Regulation D as amended. The criteria fo r
the exclusion of such obligations fro m reserve requirements under this
Section of Regulation D are summarized in the box at the end of the
instructions.

Column 2.

Amount Outstanding of Single Maturity Time Certificates of
Deposit in Denominations of $100,000 or more.

THE NUMBERS REPORTED IN COLUM N 2 ARE ALSO IN C L U D E D -B U T
NOT SHOWN S E P A R A T E L Y —IN THE CO LUM N "O T H E R T IM E DEPOSITS"
IN T H E REPORT OF DEPOSITS.
Report in column 2 the dollar am ount outstanding of single m a tu rity tim e
certificates of deposit (whether negotiable or non-negotiable) in denomina­
tions o f $100,000 or more, regardless of to whom issued. A single m atu rity
tim e certificate of deposit is a tim e deposit evidenced by a negotiable or nonnegotiable instrument that provides on its face th a t the amount o f such
deposit is payable to bearer, or to any specified person, or to his order—
(1) on a single certain date, specified in the instrument, not less than 30
days after the date of the deposit, or
(2) at the expiration of a single certain specified tim e not less than 30 days
after the date of the instrument, and

reserve requirements, and these obligations should n o t k5e reported in column 2
of this Report. The criteria fo r the exclusion of such obligations fro m reserve
requirements under this Section of Regulation D are summarized in the box at
the end of the instructions.
Exclude fro m column 2 all tim e certificates of deposit and those promissory
notes, acknowledgements of advance, due bills, or similar obligations issued by
the bank subject to reserve requirements, that have matured, even if they
have not been presented and surrendered fo r payment, excluding them as of
the day of m aturity.
Column 3.

Subtotal

Column 3 is the sum o f columns 1 and 2.
THE D A IL Y A V E R A G E A M O U N T OF THIS C O LU M N , AS C A L C U L A T E D
ON LIN E 2 OF THE SECOND P A N E L OF THIS REPORT, OR $10 M IL L IO N ,
WHICHEVER IS L A R G E R , IS THE REPORTING B A N K ’S M A R G IN A L RE­
SERVE BASE FOR THE S T A T E M E N T WEEK BE G INNING JUNE 7, 1973.
Column 4.

Amount Outstanding of Funds Obtained by the Bank Through
Its Use of Ineligible Acceptances Maturing in 30 days or more.

Report in column 4 the dollar amount outstanding of funds obtained by the
reporting bank through its use of any ineligible acceptances (acceptances not
eligible fo r discount by Federal Reserve Banks—see Section 2 01.3(c) of Regu­
lation A) when:
(1) the obligation is issued or undertaken by the reporting bank as a means
of obtaining funds fo r use in its banking business (regardless o f the nature
of the buyer), and
(2) the remaining m atu rity o f the acceptance at the tim e the proceeds were
received by the bank was 30 days or more.
Ineligible acceptances are sometimes referred to as finance bills.
The amount to be reported is the funds received and not the face amount of
the ineligible acceptances issued or undertaken; therefore, the am ount o u t­
standing reported in column 4 may d iffe r from the face am ount o f outstanding
ineligible acceptances.

(3) in all cases only upon presentation and surrender of the instrument.
Column 5.
For purposes o f Regulation D, tim e certificates of deposit include (as speci­
fied in Section 204.1(f) of Regulation D, as amended) promissory notes,
acknowledgements of advance, due bills, or similar obligations w ith a m atu rity
of 30 days or more issued by the bank. Thus, any such obligations (as op ­
posed to those issued by affiliates or subsidiaries) w ith a single m a tu rity of
30 days or more, in denominations of $100,000 or more, should be included
in the total reported in column 2 of this Report. However, certain promissory
notes, acknowledgements o f advance, due bills, or similar obligations, as
specified in Section 204.1 (f) o f Regulation D (as amended) are exempt fro m

The fo llo w in g criteria can be used to exclude from reserve requirement cal­
culations promissory notes, acknowledgements of advance, due bills or similar
obligations issued either by a bank or by its affiliates and channeled to
the bank:
(1) such obligations arise fro m the transfer of direct obligations of, or
obligations that are fu lly guaranteed as to principal and interest by,
the United States or any agency thereof that the bank is obligated to
repurchase; or
(2) such obligations have an original m atu rity o f more than seven years,
are unsecured, and state expressly that they are subordinated to the
claims o f depositors; or
(3) such obligations arise fro m a borrowing fro m a dealer in securities,
for one business day, of proceeds of a transfer of deposit credit in a
Federal Reserve Bank (or other immediately available funds), com m only
referred to as "Federal fu n d s", received by such dealer on the date
of the loan in connection w ith clearance of securities transactions; or
(4) such obligations are issued to and held fo r the account o f any
agency of the United States or the Government Development Bank for
Puerto Rico; or

Total

Column 5 is the sum of columns 3 and 4.
THE D A IL Y A V E R A G E A M O U N T OF CO LUM N 5, AS C A L C U L A T E D ON
L IN E 4 OF THE SECOND PA N EL OF T H IS REPORT, OR $10 M IL L IO N ,
W HICHEVER IS LA R G E R , W lL L BECOME THE REPORTING BANK'S
M A R G IN A L RESERVE BASE IF THE BOARD OF G O VERNORS OF THE
F E D E R A L RESERVE SYSTEM AM END S R E G U L A T IO N D TO M A K E
FUNDS O B T A IN E D BY THE B A N K TH R O U G H ITS USE OF IN E L IG IB L E
ACCEPTANCES SUBJECT TO RESERVE REQ UIREM ENTS.

or other legal en tity, chartered by the Federal Government or one
of the 50 states as a commercial bank or chartered by one of the
50 states as a trust company empowered to accept, and/or accept­
ing demand deposits.
— A n y foreign bank located in the states o f the United States, the
District o f Columbia, Puerto Rico, or territories and posses­
sions of the U.S.
— Agencies and branches of foreign banks located in the states of
the United States, the District o f Columbia, Puerto Rico, or
territories and possessions of the U.S.
— New Y o rk State chartered investment companies engaged in banking
and m ajority owned by foreign banks.
— Banks, branches of U.S. banks other than o f the reporting
bank, and branches of foreign banks operating in Puerto Rico and
territories and possessions of the U.S.
— Those Morris Plan, Hood Plan, or Industrial Banks that are em­
powered to accept, and/or accepting demand deposits.
— Stock Savings or Mutual Savings Banks.

(5) such obligations are issued to and held fo r the account of a
domestic banking office of another bank, w ith ''b a n k'' referring to any
of the fo llo w in g institutions:

— Building and Loan and Savings and Loan Associations.
— E x p o rt-lm p o rt Bank of the United States.

—

Head offices and branches in the states of the United States and the
District of Columbia o f any individual, partnership, or corporation.

MEMBER BANK SPECIAL RESERVABLE LJABSUTSES REPORT

^973)

(Submit along w ith Report of Deposits)

FROM:

TO:
Federal Reserve Bank o f ___________________
Closing Balances fo r the Reserve C om putation
Period Ending Wednesday

( N a m e of B an k)
(S t r ee t address)

(M onth, day, year)

( C i t y , St a t e , Z i p C ode )

Report all balances as o f the close o f business each day to the nearest thousand
dollars. Please read the instructions p rio r to com pletion of this report.

A m o u n t outstanding
of funds obtained by the bank
through issuance
of obligations
by affiliates or
subsidiaries maturing
in 30 days to 7 years

Date

Day
of
Week

M onth

A m o u n t o u t­
standing of single
m a tu rity tim e certificates
of deposit
in denominations
of $100,000 or more

Col. 1

Day
Mils.

Total
(Cols. 1 and 2)

Mils.

Col. 4

Col. 3

Col. 2
Thous.

A m o u n t o u t­
standing o f funds
obtained by the bank
through issuance of
obligations by
affiliates or
subsidiaries maturing
in less than 30 days

Thous.

Mils.

Thous.

Mils.

Thous.

THURS.
FRI.
SAT.
SUN.
MON.
TUES.
WED.
TOTALS

I c e rtify that the reported closing balances are correct fo r the above dates.

( A u t h o r i z e d Sig na tu re)

( T i t le )

(Tear here before mailing)

INSTRUCTIONS
A ll figures should be reported as of the close of business each day to the near­
est thousand dollars. A ll balances must reflect the consolidation of all branches
located in the states of the United States and the D istrict of Columbia. Zeros
should be entered in any column fo r any day fo r which the reporting bank has
nothing to report. For any day on which the reporting bank was closed, report
the closing balance of the preceding business day.
The Special Reservable Liabilities Report should be attached to the R eport of
Deposits at the tim e the R eport of Deposits is sent to the Federal Reserve
Bank.
WHICH MEMBER BANKS SH O U LD F IL E THE SPECIAL R E S E R V A B L E
L IA B IL IT IE S REPORT?
The Special Reservable Liabilities Report should be file d by any member bank
meeting any one of the fo llo w in g conditions:
(1) During the base week ended May 16, 1973, the daily average amount
outstanding o f columns 1 and 2 combined was $10 m illio n or more; OR
(2) During the reserve com putation period covered by this Report the
member bank had outstanding any one of the fo llo w in g :
.

M

i

(a) any funds obtained by the reporting bank through issuance of obli
gations by affiliates or subsidiaries; OR
(b) single m a tu rity tim e certificates of deposit—including any prom is­
sory notes, acknowledgements of advance, due bills or sim ilar obliga­
tions—issued by the bank w ith m aturities o f 30 days or more, in de­
nominations o f $100,000 or more, A G G R E G A T IN G $10 m illio n or
more.
If a member bank meets none o f the foregoing conditions, it need not file a
Special Reservable Liabilities Report. However, if in any subsequent reserve
com putation period, it meets C o n d itio n 2(a) or 2(b), it must file a report fo r
that week.
PURPOSE OF T H E SPECIAL R E S E R V A B L E L IA B IL IT IE S REPORT
The Special Reservable Liabilities R eport w ill be used to assess reserve re­
quirements. The outstanding daily average am ount indicated in colum n 1 of
the report w ill be subject to such reserve requirements as the Board o f Gov­
ernors of the Federal Reserve System may, fro m tim e to tim e, establish fo r
tim e deposits; the reserve ratio applicable to the total am ount of column 1
w ill be that set fo r tim e deposits in excess of $5 m illio n . The outstanding

i

•tu .fj iT io / ,

■

-,M • o r u f j m o n c i

■

■

’

%

reserve ratio for column 4 for each bank w ill depend on the total amount of
its outstanding deposits subject to the demand deposit reserve ratio.

(1) on a single certain date, specified in the instrum ent, not less than 30
days after the date of the deposit, or

In addition, the amount by which the outstanding daily average am ount re­
ported in column 3 of the report exceeds a base established fo r each individual
member bank or $10 m illio n , whichever is larger, w ill be subject to an addi­
tional, or supplemental, reserve requirement. The size of the supplemental
reserve requirement is that set, fro m tim e to tim e, by the Board of Governors
of the Federal Reserve System.

(2) at the expiration o f a single certain specified tim e not less than 30
days after the date of the instrum ent, and

Column 1.

A m o u n t Outstanding of Funds Obtained by the Bank Through
Issuance o f Obligations by A ffilia te s or Subsidiaries Maturing
in 30 days to 7 years.

Report in column 1 the dollar am ount outstanding of the proceeds of obliga­
tions issued by the reporting bank's affiliates or subsidiaries (see Section 2 of
the Banking A c t of 1933) in the fo rm of promissory notes, acknowledgements
of advance, due bills, or similar obligations (w ritten or oral) th a t are:
(1) supplied to the reporting bank fo r the latter's use in its banking busi­
ness or to maintain the availability to the reporting bank of such funds,
where
(2) such obligations have a remaining m a tu rity at the tim e the proceeds are
supplied to the reporting bank o f 30 days or more but less than 7 years.
There are, however, tw o broad categories of such funas supplied to the report­
ing banks that are to be E X C L U D E D fro m the numbers reported in column 1:
(1) funds obtained by the reporting bank through those obligations issued
by affiliates or subsidiaries that are supplied to the reporting bank by the
affiliates or subsidiaries in the fo rm of deposits in the reporting bank. Pro­
ceeds supplied to the bank in the fo rm of deposits are to be reported in the
appropriate demand or tim e deposits columns of the Report o f Deposits
and (if applicable) colum n 2 o f the Special Reservable Liabilities Report;
(2) funds obtained by the reporting bank through issuance of any obliga­
tion issued by affiliates or subsidiaries that, if issued by the bank, w ould be
exempted fro m classification as deposits subject to reserve requirements as
specified in Section 204.1 (f) of Regulation D as amended. The criteria fo r
the exclusion of such obligations fro m reserve requirements under this Sec­
tion of Regulation D are summarized in the box at the end of the instruc­
tions.
THE D A IL Y A V E R A G E A M O U N T REPORTED IN CO LUM N 1 OF THIS
REPORT IS SUBJECT TO THE RESERVE R E Q U IR E M E N T AP P LIC A B LE
TO T IM E DEPOSITS IN EXCESS OF $5 M IL L IO N . TO A V O ID THE IM ­
POSITION OF E X T R A RESERVE R EQ U IR E M E N TS , THESE NUMBERS
SHO ULD N O T E E REPORTED IN THE REPORT OF DEPOSITS.
Column 2.

A m o u n t Outstanding of Singie M a tu rity Tim e Certificates o f De­
posit in Denominations of $100,000 or more.

THE NUMBERS REPORTED IN CO LUM N 2 SHO ULD ALSO BE IN C L U D E D
- B U T NO T SHOWN S E P A R A T E L Y —IN THE CO LUM N "O T H E R T IM E DE­
POSITS'' IN THE REPORT OF DEPOSITS. CO LUM N 2 OF T H IS SPECIAL
RE S E R V A B LE L IA B IL IT IE S REPORT W IL L N O T BE USED FOR THE
C A L C U L A T IO N OF R E G U L A R RESERVE R E Q U IR E M E N TS , B U T A L O N G WITH CO LUM N 1 - W I L L BE USED TO C A L C U L A T E A N Y SUP­
P L E M E N T A L RESERVE R E Q U IR E M E N T T H A T M IG H T BE AP P L IC A B L E .
Report in column 2 the dollar amount outstanding of single m a tu rity tim e cer­
tificates of deposit (whether negotiable or non-negotiable) in denominations
of $100,000 or more, regardless of to whom issued. A single m a tu rity tim e
certificate of deposit is a tim e deposit evidenced by a negotiable or non-nego-

(3) in all cases only upon presentation and surrender of the instrument.
For purposes of Regulation D, tim e certificates of deposit include (as speci­
fied in Section 204.1 (f) of Regulation D as amended) promissory notes, ac­
knowledgements of advance, due bills, or similar obligations issued by the
bank w ith a m a tu rity of 30 days or more. Thus, any such obligations (as op­
posed to those issued by affiliates or subsidiaries) w ith a single m a tu rity of 30
days or more, in denominations of $100,000 or more, should be reported as
tim e deposits in the Report of Deposits and also should be reported in column
2 of the Special Reservable Liabilities Report. However, certain promissory
notes, acknowledgements of advance, due bills, or similar obligations, as speci­
fied in Section 204.1 (f) of Regulation D (as amended), are exempt fro m re­
serve requirements and those obligations shoudl n o t be reported in either
Report. The criteria fo r the exclusion o f such obligations fro m reserve require­
ments under this Section of Regulation D are summarized in the box at the
end of the instructions.
Exclude fro m column 2 all tim e certificates of deposit (and those promissory
notes, acknowledgements of advance, due bills, or similar obligations issued by
the bank subject to reserve requirements) th a t have matured, even if they have
not been presented and surrendered fo r payment, excluding them as of the
day o f m atu rity . Such matured, b ut unpaid instruments, should be reported
under the appropriate demand deposit columns of the Report of Deposits.
Column 3.

Column 3 is the sum of columns 1 and 2.
THE A M O U N T BY WHICH THE D A IL Y A V E R A G E OF C O LUM N 3 E X ­
CEEDS EITHER $10 M IL L IO N OR THE D A IL Y A V E R A G E OF THIS
T O T A L FOR THE RESERVE CO M PU T AT IO N PERIO D ENDED M A Y 16,
1973, W HICHE VER IS L A R G E R , W IL L BE SUBJECT TO A SUPPLEM EN T­
A L RESERVE R E Q U IR E M E N T AS SPECIFIED BY THE BO A R D OF G O V ­
ERNORS OF THE F E D E R A L RESERVE SYSTEM.
Column 4.

(2) such obligations have an original m a tu rity of more than seven years,
are unsecured, and state expressly that they are subordinated to the
claims of depositors; or
(3) such obligations arise fro m a borrowing fro m a dealer in securities,
fo r one business day, of proceeds o f a transfer o f deposit credit in a
Federal Reserve Bank (or other im mediately available funds), com m only
referred to as "Federal fu n ds” , received by such dealer on the date
of the loan in connection w ith clearance of securities transactions; or
(4) such obligations are issued to and held fo r the account of any
agency o f the United States or the Government Development Bank for
Puerto Rico; or

(1) supplied to the reporting bank fo r the la tte r’s use in its banking busi­
ness, or to maintain the availability to the reporting bank o f such funds,
where
(2) such obligations have a remaining m a tu rity at the tim e the proceeds are
supplied to the reporting bank of less than 30 days.
The categories fo r EXCLUSIO N fro m column 4 are the same as those noted
in the instructions to colum n 1 o f this report.
THE D A IL Y A V E R A G E A M O U N T REPO RTED IN CO LU M N 4 OF THIS
REPORT IS SUBJECT TO THE RESERVE R E Q U IR E M E N T A P P L IC A B L E
TO DEPOSITS SUBJECT TO THE D E M A N D DEPOSIT RESERVE R A T IO
FOR THE REPO RTING B A N K . TO A V O ID THE IM POSITION OF E X T R A
RESERVE R E Q U IR E M E N TS , THESE NUMBERS S H O U LD N O T BE RE­
PORTED IN THE REPORT OF DEPOSITS.

or other legal e n tity , chartered by the Federal Government or one
of the 50 states as a commercial bank or chartered by one of the
50 states as a trust company empowered to accept, and/or accept­
ing demand deposits.
— A n y foreign bank located in the states of the United States, the
District o f Columbia, Puerto Rico, or territories and posses­
sions of the U.S.
— Agencies and branches o f foreign banks located in the states of
the United States, the District o f Columbia, Puerto Rico, or
territories and possessions of the U.S.
— New Y o rk State chartered investment companies engaged in banking
and m ajority owned by foreign banks.
— Banks, branches of U.S. banks other than of the reporting
bank, and branches o f foreign banks operating in Puerto Rico and
territories and possessions of the U.S.
— Those Morris Plan, Hood Plan, or Industrial Banks that are em ­
powered to accept, and/or accepting demand deposits.
--

(5) such obligations aro issued to and held for ihft account of a
domestic banking office of another bank, w ith "b a n k ” referring to any
of the follo w in g institutions:

A m o u n t Outstanding of Funds Obtained by the Bank Through
Issuance o f Obligations by Affilia te s or Subsidiaries Maturing in
Less Than 30 Days.

Report in column 4 the dollar am ount outstanding of the proceeds of obliga­
tions issued by the reporting bank's affiliates or subsidiaries (see Section 2 of
the Banking A c t of 1933) in the fo rm o f promissory notes, acknowledgements
of advance, due bills, or similar obligations (w ritten or oral) that are:

The fo llo w in g criteria can be used to exclude fro m reserve requirement cal­
culations promissory notes, acknowledgements of advance, due bills or similar
obligations issued either by a bank or by its affiliates and channeled to
the bank:
(1) such obligations arise fro m the transfer of direct obligations o f, or
obligations that are fu lly guaranteed as to principal and interest by,
the United States or any agency thereof that the bank is obligated to
repurchase; or

Total

S to c k r.iiviniia in M iilt in l linvintjti ilnnko

— Building and Loan and Savings and Loan Associations.
— E x p o rt-lm p o rt Bank of the United States.

—

*

Head offices and branchos in the states of the United States and tho
District of Columbia of any individual, partnership, or corporation,

.

FEDERAL RESERVE

j,
9

press

release

F o r im m e d ia te r e l e a s e

May 1 6 , 1973

The B o ard o f G o v e r n o rs o f t h e F e d e r a l R e s e r v e S y ste m a n n o u n c e d to d a y
a s e r i e s o f a c t i o n s d e s i g n e d t o c u r b t h e r a p i d e x p a n s i o n i n b a n k c r e d i t and
h e l p m o d e r a te i n f l a t i o n a r y p r e s s u r e s , a nd a t t h e same t i m e t o a s s u r e t h e
a v a i l a b i l i t y o f c r e d i t on a r e a s o n a b l e s c a l e .
The m e a s u r e s w i l l : #
1.

Im pose an S p e r c e r .t m a r g i n a l r e s e r v e r e q u i r e m e n t ( t h e r e g u l a r

5 p e r c e n t p l u s a s u p p l e m e n t a l 3 p e r c e n t ) on f u r t h e r i n c r e a s e s i n t h e t o t a l
o f ( a ) o u t s t a n d i n g c e r t i f i c a t e s o f d e p o s i t o f $ 1 0 0 ,0 0 0 a nd o v e r i s s u e d by
member b a n k s , and on (b ) o u t s t a n d i n g f u n d s o b t a i n e d by a b a n k t h r o u g h i s ­
s u a n c e by a n a f f i l i a t e o f o b l i g a t i o n s s u b j e c t t o t h e e x i s t i n g r e s e r v e r e ­
q u i r e m e n t on t im e d e p o s i t s .

The 8 p e r c e n t m a r g i n a l r e s e r v e w o u ld n o t

a p p l y t o b a n k s w hose o b l i g a t i o n s o f t h e s e t y p e s a g g r e g a t e l e s s t h a n $10
m illio n .
2.

R educe fro m 20 p e r c e n t t o 8 p e r c e n t t h e r e s e r v e r e q u i r e m e n t

on c e r t a i n f o r e i g n b o r r o w i n g s o f U .S . b a n k s , p r i m a r i l y E u r o - d o l l a r s , t h u s
a f f o r d in g ro u g h ly p a r a l l e l tre a tm e n t a t p r e s e n t w ith

th e m a rg in a l r e s e r v e

r e q u i r e m e n t on l a r g e - d e n o m i n a t i o n c e r t i f i c a t e s o f d e p o s i t and b a n k - r e l a t e d
c o m m e rc ia l p a p e r .

The B oard a l s o a c t e d t o e l i m i n a t e g r a d u a l l y t h e r e s e r v e -

f r e e b a s e s s t i l l h e l d b y some b a n k s s u b j e c t t o t h i s m e a s u r e .
3.

S u sp en d t h e c e i l i n g s t h a t a p p l y t o t h e r a t e o f i n t e r e s t

c o m m e rc ia l b a n k s may pay on c e r t i f i c a t e s o f d e p o s i t o f $ 1 0 0 ,0 0 0 a n d o v e r
( l a r g e CDs) t h a t m a t u r e i n 90 d a y s o r m o re , e f f e c t i v e i m m e d i a t e l y .

-

A.

2 -

At t h e same t i m e , t h e B oard p r o p o s e d a r e g u l a t o r y amendment

t h a t w o u ld a p p l y r e s e r v e r e q u i r e m e n t s t o f u n d s r a i s e d b y b a n k s t h r o u g h
s a le s o f fin a n c e b i l l s

( s o m e tim e s c a l l e d w o r k in g c a p i t a l a c c e p t a n c e s ) .

I f a d o p t e d , t h e amendment w o u ld s u b j e c t t h e am ount o f f i n a n c e b i l l s
c u r r e n tly o u ts ta n d in g to a 5 p e r c e n t r e s e r v e re q u ire m e n t.
p r e s e n t l y no r e s e r v e r e q u i r e m e n t on f i n a n c e b i l l s . )

(T h ere i s

I n a d d i t i o n , tm d e r t h i s

p r o p o s a l , f i n a n c e b i l l s w o u ld b e p a r t o f t h e t o t a l o b l i g a t i o n s s u b j e c t t o
th e 8 p e r c e n t m a rg in a l r e s e r v e re q u ire m e n t.
Comment on t h e f i n a n c e b i l l s p r o p o s a l w i l l b e r e c e i v e d by t h e
B o ard t h r o u g h J u n e 4 .
*

*

*

F o r p u r p o s e s o f c o m p u tin g t h e 8 p e r c e n t r e s e r v e r e q u i r e m e n t ,
a b a n k w o u ld com pare i t s d a i l y a v e r a g e o u t s t a n d i n g am ount o f f i n a n c e
b ills ,

l a r g e CDs and b a n k - r e l a t e d c o m m e rc ia l p a p e r t o t h e d a i l y a v e r a g e

am ount o u t s t a n d i n g on t h e b a s e d a t e — t h e week e n d e d Hay 1 6 , 1 9 7 3 , o r t o
$10 m i l l i o n , w h i c h e v e r i s l a r g e r .

U nder t h e p r e s e n t r e g u l a t i o n a s amended

t o d a y , h o w e v e r , m a r g i n a l r e s e r v e r e q u i r e m e n t s w i l l b e b a s e d on t h e t o t a l
am ount o f l a r g e CDs and b a n k - r e l a t e d c o m m e rc ia l p a p e r .
The m a r g i n a l r e s e r v e r e q u i r e m e n t on l a r g e tim e d e p o s i t s and c o v e r e d
c o m m e rc ia l p a p e r i s s u e d by a f f i l i a t e s w i l l a p p ly t o t h e e x c e s s o f d e p o s i t s
o v e r t h e b a s e p e r i o d b e g i n n i n g i n t h e s t a t e m e n t w eek s t a r t i n g J u n e 7 .
T h e s e r e s e r v e s w i l l h a v e t o b e h e l d i n t h e w eek s t a r t i n g J u n e 2 1 .
The a c t i o n s w e r e t a k e n a g a i n s t t h e b a c k g ro u n d o f a n u n u s u a l l y
s tr o n g e x p a n sio n in bank c r e d i t , s ti m u la t e d t o a c o n s id e r a b le e x te n t
by i n c r e a s e d b u s i n e s s s p e n d i n g f o r c a p i t a l i n v e s t m e n t a nd i n v e n t o r y

1

- 3 a c cu m u latio n .

The a c t i o n s w i l l h e l p t h e p r e s e n t p o l i c y o f m o n e ta r y r e s t r a i n t

t o m o d e r a te t h i s e x p a n s i o n .

R e c e n t g ro w th i n b a n k c r e d i t t o m a jo r b u s i n e s s

c o r p o r a t i o n s h a s b e e n f i n a n c e d i n l a r g e p a r t by i n c r e a s e s i n t h e i s s u a n c e
o f money m a r k e t - t y p e i n s t r u m e n t s o f t h e k i n d s c o v e r e d by t h e a c t i o n t a k e n
to d a y by t h e B o a rd .
B u s i n e s s b o r r o w in g fro m c o m m e rc ia l b a n k s i n c r e a s e d by a b o u t $15
b i l l i o n d u r i n g t h e f i r s t f o u r m onths o f t h i s y e a r .

T h i s i n c r e a s e was o n l y

p a r t i a l l y o f f s e t by t h e r e d u c e d u s e o f c o m m e rc ia l p a p e r by b u s i n e s s e s t o
o b ta in fu n d s.

C o m m ercial b a n k s o b t a i n e d f u n d s t o m ee t t h e demand f o r a

r i s i n g volum e o f b u s i n e s s l o a n s l a r g e l y t h r o u g h t h e s a l e o f l a r g e n e g o ­
t i a b l e CDs, w h ic h a l s o i n c r e a s e d by a b o u t $15 b i l l i o n o v e r t h i s p e r i o d .
M a r g i n a l R e s e r v e on L a r g e D e n o m in a tio n CDs
The new 8 p e r c e n t m a r g i n a l r e s e r v e r e q u i r e m e n t w i l l a p p l y t o t h e
t o t a l o f s i n g l e - m a t u r i t y , l a r g e - d e n o m i n a t i o n CDs and b a n k - r e l a t e d com­
m e r c i a l p a p e r i s s u e d by a member b a n k b e g i n n i n g T h u r s d a y , J u n e 7 , t o t h e
e x t e n t t h a t t h i s volum e e x c e e d s t h e a v e r a g e am ount o u t s t a n d i n g i n t h e
s t a t e m e n t week e n d in g W ednesday, May 1 6 .

I n no c a s e w i l l t h e m a r g i n a l

r e s e r v e a p p ly t o a n am ount o u t s t a n d i n g o f l e s s t h a n $10 m i l l i o n .
F o r e x a m p le , i f a member b a n k h a d o u t s t a n d i n g a t o t a l o f $20
m i l l i o n o f l a r g e CDs a nd b a n k - r e l a t e d c o m m e rc ia l p a p e r on a v e r a g e d u r i n g
t h e w eek e n d e d May 1 6 , 1 9 7 3 , an d i n c r e a s e d t h a t am ount t o $25 m i l l i o n
by t h e w eek e n d e d W ednesday, J u n e 1 3 , t h e b a n k w o u ld b e s u b j e c t t o a n
8 p e r c e n t r e s e r v e r e q u i r e m e n t o n t h e a d d i t i o n a l $5 m i l l i o n — o r a $ 4 0 0 ,0 0 0
reserv e.

W ith o u t t h i s c h a n g e i n t h e r e g u l a t i o n , t h e r e s e r v e r e q u i r e m e n t

on t h e a d d i t i o n a l $5 m i l l i o n w ould b e 5 p e r c e n t — o r $ 2 5 0 ,0 0 0 .

- 4 The b a s e f o r c o m p u tin g t h e m a r g i n a l r e s e r v e r e q u i r e m e n t w i l l
r e m a in t h e same f o r e a c h i n d i v i d u a l b a n k — t h e w eek en d e d May 1 6 , 1973 o r
$10 m i l l i o n , w h i c h e v e r i s g r e a t e r — r e g a r d l e s s o f t h e l e v e l o f i t s

CD a nd

c o m m e rc ia l p a p e r h o l d i n g s i n t h e f u t u r e .
U nder t h e l a g g e d r e s e r v e s y s te m now i n e f f e c t , a member b a n k i s
r e q u i r e d t o h o l d r e s e r v e s d u r i n g any g i v e n w eek b a s e d on t h e l e v e l o f i t s
d e p o s i t s two w eeks e a r l i e r .

T hus, a bank in t h i s

in s ta n c e w i l l be re q u ire d

t o h o l d t h e 8 p e r c e n t m a r g i n a l r e s e r v e d u r i n g t h e w eek o f J u n e 2 1 - 2 7 ,
b a s e d on t h e l e v e l o f i t s

d e p o s i t s d u r i n g t h e w eek o f J u n e 7 - 1 3 .

h o ld th e 8 p e r c e n t m a rg in a l r e s e r v e o n ly to th e e x te n t t h a t i t s

I t w ill
a g g re g a te

t o t a l o f l a r g e CDs an d b a n k - r e l a t e d c o m m e rc ia l p a p e r e x c e e d s t h e t o t a l am­
o u n t o u t s t a n d i n g d u r i n g t h e w eek e n d in g t o d a y , May 1 6 , 1 9 7 3 .
E u r o - d o l l a r R e s e r v e R e q u ire m e n t *
L a s t S e p te m b e r 7 , t h e B oard p r o p o s e d t o r e d u c e i t s m a r g i n a l r e s e r v e
r e q u i r e m e n t on c e r t a i n f o r e i g n b o r r o w in g s o f U .S . b a n k s , p r i m a r i l y E u ro ­
d o l l a r s , fro m 20 p e r c e n t t o 10 p e r c e n t and t o e l i m i n a t e t h e r e s e r v e f r e e b a s e s a v a i l a b l e to banks s u b je c t to t h i s r e s e r v e re q u ire m e n t.

A

r e s e r v e r e q u i r e m e n t on E u r o - d o l l a r t r a n s a c t i o n s was f i r s t im p o sed i n
1969 t o m o d e r a te s h o r t - t e r m d o l l a r f lo w s b e tw e e n t h e U n i t e d S t a t e s and
o th e r c o u n trie s .
R e d u c tio n o f t h i s r e s e r v e re q u ire m e n t to 8 p e r c e n t w i l l p ro v id e
ro u g h ly p a r a l l e l tre a tm e n t a t th e p r e s e n t tim e — so f a r as r e s e r v e
r e q u i r e m e n t s a r e c o n c e r n e d — among E u r o - d o l l a r s , l a r g e CDs and b a n k r e l a t e d c o m m e rc ia l p a p e r .

A t some f u t u r e t i m e , o f c o u r s e , i t may b e

d e s i r a b l e t o d e p a r t fro m s u c h p a r a l l e l t r e a t m e n t .

- 5 -

The E o a rd a l s o d e c i d e d t o p h a s e o u t t h e r e s e r v e - f r e e b a s e s a v a i l a b l e
t o t& nks s u b j e c t t o t h i s m a r g i n a l r e s e r v e r e q u i r e m e n t .

B ases w i l l b e r e ­

d u c e d by 10 p e r c e n t i n e a c h f o u r - w e e k c o m p u t a t i o n p e r i o d b e g i n n i n g v rith
th e p e rio d s t a r t i n g J u ly 5.

T h is s c h e d u le w i l l r e s u l t i n e li m in a t io n

o f t h e b a s e s i n t h e c o m p u t a t i o n p e r i o d b e g i n n i n g tfa r c h 1 4 , 1 9 7 4 .
S u s p e n s i o n o f L a r g e CD C e i l i n g s
The B oard s u s p e n d e d i n t e r e s t r a t e c e i l i n g s on l a r g e CDs m a t u r i n g
i n 90 d a y s o r m o re , i n o r d e r t o p e r m i t member c o m m e rc ia l b a n k s t o m a i n t a i n
a b a la n c e d s t r u c t u r e o f d e p o s i t s .

C e ilin g s p r e v io u s ly had b een suspended

on CDs i s s u e d f o r 3 0 -8 9 d a y s , and h a d r a n g e d fro m 6 3 / 4 p e r c e n t t o 7 1 / 2
p e r c e n t on l o n g e r - m a t u r i t y d e p o s i t s o f $ 1 0 0 ,0 0 0 a n d o v e r .

B ecause o f r e ­

c e n t a d v a n c e s i n m a r k e t r a t e s , t h e c e i l i n g r a t e s on l o n g e r m a t u r i t y d e p o s i t s
now p r a c t i c a l l y p r e c l u d e b a n k s fro m u s i n g l o n g - t e r m CDs and t h e g r e a t b u l k
o f l a r g e CDs b e i n g i s s u e d m a t u r e i n l e s s t h a n 90 d a y s .

C e i l i n g s on l a r g e

Cds w i t h m a t u r i t i e s o f l e s s t h a n 9C d a y s w e r e s u s p e n d e d i n J u n e o f 1 9 7 0 .
I n t e r e s t r a t e c e i l i n g s w i l l r e m a in i n p l a c e o n a l l o t h e r t y p e s o f
b a n k d e p o s i t s , i n c l u d i n g p a s s b o o k a c c o u n t s and c o n s u m e r - t y p e c e r t i f i c a t e s
o f d e p o s i t ( t h o s e o f l e s s t h a n $ 1 0 0 ,0 0 0 ) .
P r o p o s e d Amendment on F i n a n c e B i l l s
The p r o p o s e d amendment w ould a p p l y r e s e r v e r e q u i r e m e n t s a g a i n s t
f u n d s o b t a i n e d by t h e b a n k f o r u s e i n i t s b a n k i n g b u s i n e s s t h r o u g h s a l e
o f bank

a c ce p ta n ce s t h a t a re n o t e l i g i b l e f o r d isc o u n t a t a F e d e ra l

R e s e r v e Bank.

The t r a d i t i o n a l t y p e o f b a n k a c c e p t a n c e s w h ic h a p p l y t o

s p e c i f i c t r a n s a c t i o n s i n g o o d s w ould c o n t i n u e t o b e exem pt fro m r e s e r v e
r e q u i r e m e n t s and e l i g i b l e f o r d i s c o u n t by a F e d e r a l R e s e r v e Bank.

- 6 -

U nder t h e p r o p o s a l , t h e B oard w o u ld t r e a t t h e s a l e o f f i n a n c e b i l l s
as e q u iv a le n t to d e p o s it s s u b je c t to r e s e r v e r e q u ir e m e n ts .
a b o u t $ 1 .1 b i l l i o n

i n such b i l l s

a re o u tsta n d in g .

At p r e s e n t ,

U nder t h e p r o p o s a l , f u n d s

r e c e i v e d by a b a n k w o u ld b e t r e a t e d a s a d e p o s i t i f t h e member b a n k (1)
m akes an a c c e p t a n c e t h a t i s n o t e l i g i b l e f o r d i s c o u n t a t a F e d e r a l R e s e r v e
B an k ,

(2) t h e n s e l l s

t h e a c c e p t a n c e , a nd (3 ) u s e s t h e p r o c e e d s i n i t s

b a n k in g b u s i n e s s .
In a r e l a te d m a tte r ,

t h e B oard s a i d o n l y a c c e p t a n c e s e l i g i b l e

f o r d i s c o u n t a t a F e d e r a l R e s e r v e Bank w ould b e s u b j e c t t o l i m i t a t i o n s on
a m ounts o u t s t a n d i n g s e t f o r t h i n S e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t .
*

*

*

The B oard u r g e d a l l b a n k s t o o b s e r v e t h e s p i r i t ,
le tte r,

as w e ll as th e

o f t h e B o a r d 's a c t i o n s i n a c o n c e r t e d e f f o r t t o c u r b b a n k c r e d i t

e x p a n s i o n and t o m o d e r a te i n f l a t i o n a r y p r e s s u r e s .

In t h i s c o n n e c tio n ,

t h e a t t a c h e d l e t t e r i s b e i n g s e n t t o a b o u t 190 o f t h e l a r g e s t non-m em ber
b a n k s s e e k i n g t h e i r a s s i s t a n c e and c o o p e r a t i o n i n e n s u r i n g t h e e f f e c t i v e ­
n e s s o f t h i s p r o g ra m .
A copy o f t h e B o a r d 's o r d e r s r e l a t i n g t o t h e s e a c t i o n s i s a t t a c h e d .
- 0 -

TITLE 12 — BANKS AND BANKING
CHAPTER II--FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[R e g . DJ
PART 204-RESERVES OF MEMBER BANKS
R eserv e P e rc e n ta g e s

The B oard o f G o v e r n o r s , p u r s u a n t t o i t s a u t h o r i t y u n d e r
s e c t i o n 19 o f t h e F e d e r a l R e s e r v e A c t t o s e t r e s e r v e r a t i o s

(12

U .S .C . § 4 6 1 ) , h a s am ended i t s R e g u l a t i o n D (12 CFR 204) s o a s t o
e s t a b l i s h a m a rg in a l r e s e r v e re q u ire m e n t of 8 p er c e n t a g a in s t
c e r t a i n t im e d e p o s i t s .

T here h as r e c e n t l y been a s h a rp i n c r e a s e

i n t h e am ount o f l a r g e - d e n o m i n a t i o n c e r t i f i c a t e s o f d e p o s i t s , w h ic h
have been f in a n c in g th e r a p id e x p a n sio n of bank c r e d i t .

A c c o rd in g ly ,

t h e B oard d e c i d e d t h a t i t w ould b e i n t h e p u b l i c i n t e r e s t t o im p o se
t h e h i g h e r m a r g i n a l r e s e r v e r e q u i r e m e n t on s u c h d e p o s i t s i n a n
e f f o r t t o r e d u c e t h e i n c e n t i v e s o f b a n k s t o ex p a n d c r e d i t o n t h e b a s i s
of t h i s so u rc e of fu n d s.

The B oard a l s o d e c i d e d t o s u b j e c t t o t h e

8 p e r c e n t m a r g i n a l r e s e r v e r e q u i r e m e n t c e r t a i n d e p o s i t s e x em p t
fro m t h e r a t e l i m i t a t i o n s o f t h e B o a r d 's R e g u l a t i o n Q.
T h e r e was no n o t i c e and p u b l i c p a r t i c i p a t i o n w i t h r e s p e c t
t o t h i s amendment b e c a u s e s u c h p r o c e d u r e w ould r e s u l t i n d e l a y t h a t
w ould b e c o n t r a r y t o t h e p u b l i c I n t e r e s t and s e r v e no u s e f u l p u r ­
pose.

-2 -

The e f f e c t i v e d a t e was d e f e r r e d f o r l e s s t h a n t h e 3 0 - d a y
p e rio d r e f e r r e d to i n s e c t i o n 5 5 3(d) of T i t l e 5 , U n ite d S t a t e s
C o d e , b e c a u s e t h e B oard f o u n d t h a t t h e g e n e r a l c r e d i t s i t u a t i o n
an d t h e p u b l i c i n t e r e s t c o m p e lle d i t t o make t h e a c t i o n e f f e c t i v e
no l a t e r th a n th e d a t e a d o p te d .
E ffe c tiv e
(2 )(ii)
§ 2 0 4 .5

J u n e 2 1 . 1973 . S e c t i o n 2 0 4 . 5 ( a ) ( 1 ) ( i i )

and

i s amended t o r e a d a s f o l l o w s :
R e se rv e R e q u ire m e n ts.
(a)

R eserv e p e r c e n ta g e s .

P u rsu an t to th e p ro v is io n s of

s e c t i o n 19 o f t h e F e d e r a l R e s e r v e A c t a nd § 2 0 4 . 2 ( a ) a n d s u b j e c t t o
p a r a g r a p h ( c ) o f t h i s s e c t i o n , t h e B oard o f G o v e r n o r s o f t h e F e d e r a l
R e s e r v e S y stem h e r e b y p r e s c r i b e s t h e f o l l o w i n g r e s e r v e b a l a n c e s t h a t
e a c h member b a n k o f t h e F e d e r a l R e s e r v e S y stem i s r e q u i r e d t o m a in ­
t a i n on d e p o s i t w i t h t h e Federal Reserve Bank o f i t s d i s t r i c t :
(1)

I f n ot in a re se rv e c it y —

*

*

(ii)

*

3 per cent of i t s

o t h e r t im e d e p o s i t s up t o $5 m i l ­

l i o n , p l u s 5 p e r c e n t o f s u c h d e p o s i t s i n e x c e s s o f $5 m i l l i o n :
P r o v i d e d . h o w e v e r . T h a t a member b a n k s h a l l m a i n t a i n a r e s e r v e
b a l a n c e e q u a l t o 8 p e r c e n t o f t h e am ount by w h ic h t h e d a i l y a v e r ­
a g e am ount o f tim e d e p o s i t s o f t h e t y p e s h e r e i n a f t e r s p e c i f i e d e x ­
c e e d s e i t h e r t h e d a i l y a v e r a g e am ount o f s u c h t im e d e p o s i t s o u t s t a n d i n g
d u r i n g t h e c o m p u t a t i o n p e r i o d e n d in g

Mav 1 6 . 1973

. o r $10 m i l l i o n ,

-3 -

w h i c h e v e r i s g r e a t e r , and s u c h 8 p e r c e n t r e s e r v e p e r c e n t a g e s h a l l
a p p l y w i t h r e s p e c t t o tim e d e p o s i t s o f t h e f o l l o w i n g t y p e s :
(a)

s i n g l e m a t u r it y tim e d e p o s i t s o f

$ 1 0 0 ,0 0 0 o r m o re ; and
(b )

a n y o t h e r t im e d e p o s i t s exem pt fro m

t h e r a t e l i m i t a t i o n s o f R e g u l a t i o n Q, o t h e r
t h a n a d e p o s i t d u e t o ( i ) a f o r e i g n b a n k in g
o ffic e of a bank, or ( i i )

an i n s t i t u t i o n th e

t im e d e p o s i t s o f w h ic h a r e d e s c r i b e d i n
§ 2 1 7 .3 ( g ) t h e r e o f ,

*

*

*

(2 )

I f in a reserv e c ity

(e x c e p t a s to any bank lo c a te d

i n s u c h a c i t y t h a t i s p e r m i t t e d by t h e B oard o f G o v e r n o rs o f t h e
F e d e r a l R e s e r v e S y s te m , p u r s u a n t t o § 2 0 4 . 2 ( a ) ( 2 ) , t o m a i n t a i n t h e
r e s e r v e s s p e c i f i e d i n s u b p a ra g ra p h (1 ) o f t h i s p a r a g r a p h ) —
*

(ii)

*

*

3 p e r c e n t o f i t s o t h e r t im e d e p o s i t s up t o $5 m i l ­

l i o n , p l u s 5 p e r c e n t o f s u c h d e p o s i t s i n e x c e s s o f $5 m i l l i o n :
P r o v i d e d , h o w e v e r . T h a t a member b a n k s h a l l m a i n t a i n a r e s e r v e b a l ­
a n c e e q u a l t o 8 p e r c e n t o f t h e am ount b y w h ic h t h e d a i l y a v e r a g e
am ount o f t im e d e p o s i t s o f t h e t y p e s h e r e i n a f t e r s p e c i f i e d e x c e e d s
e i t h e r t h e d a i l y a v e r a g e am ount o f s u c h t im e d e p o s i t s o u t s t a n d i n g
d u r i n g t h e c o m p u t a t i o n p e r i o d e n d in g

May 1 6 , 1973

. o r $10

m i l l i o n , w h ich ev er i s g r e a t e r , and su ch 8 p e r c e n t r e s e r v e p e rc e n ta g e
s h a l l a p p ly w ith r e s p e c t t o tim e d e p o s it s o f t h e f o llo w in g ty p e s :

-4 -

(a)

s i n g l e m a t u r i t y t i m e d e p o s i t s o f $ 1 0 0 ,0 0 0

o r m o re ; a nd
(b)

a n y o t h e r t im e d e p o s i t s ex em p t fro m t h e

r a t e l i m i t a t i o n s o f R e g u l a t i o n Q, o t h e r t h a n a
d e p o s i t d u e t o (jL) a f o r e i g n b a n k i n g o f f i c e o f a
bank, o r ( i i )

a n i n s t i t u t i o n t h e t im e d e p o s i t s o f

w h ic h a r e d e s c r i b e d i n § 2 1 7 . 3 ( g ) t h e r e o f ,
and
*

*

*

By o r d e r o f t h e B oard o f G o v e r n o r s ,

Hay 1 6 , 1973

( S i g n e d ) C h e s t e r B. F e l d b e r g

C h e s t e r B. F e l d b e r g
A s s i s t a n t S e c r e t a r y o f t h e B oard

[ SEAL]

TITLE 1 2 - -BANKS AND BANKING
CHAPTER I I — FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[ R e g s . D, M]
PART 204— RESERVES OF MEMBER BANKS
PART 213— FOREIGN ACTIVITIES OF NATIONAL BANKS
R e s e r v e s A g a i n s t E u r o d o l l a r B o r r o w in g s

By n o t i c e o f p r o p o s e d r u l e m ak in g p u b l i s h e d i n t h e F e d e r a l
R e g i s t e r on S e p te m b e r 2 0 , 1972 (3 7 F e d e r a l R e g i s t e r 1 9 3 8 6 ) , t h e B o a rd
o f G o v e r n o r s p r o p o s e d t o amend s e c t i o n s 2 0 4 . 5 ( c ) o f R e g u l a t i o n D an d
2 1 3 .7 o f R e g u l a t i o n M t o r e d u c e t h e r e s e r v e r e q u i r e m e n t on member
b a n k s 1 E u r o d o l l a r b o r r o w in g s a n d f o r e i g n b r a n c h l o a n s t o U n i t e d S t a t e s
r e s i d e n t s £rom 20 t o 10 p e r c e n t a n d t o e l i m i n a t e r e s e r v e - f r e e b a s e s
p r e s e n t l y e x e m p tin g from r e s e r v e r e q u i r e m e n t s some p o r t i o n o f t h o s e
b o r r o w in g s o r l o a n s .
F o l l o w i n g c o n s i d e r a t i o n o f t h e comm ents r e c e i v e d , t h e B o a rd
h a s d e t e r m i n e d t o amend t h o s e r e g u l a t i o n s t o r e d u c e t h e r e s e r v e r e ­
q u i r e m e n t s on member b a n k s 1 E u r o d o l l a r b o r r o w i n g s a nd f o r e i g n b r a n c h
l o a n s t o U .S . r e s i d e n t s fro m 20 t o 8 p e r c e n t , t o e l i m i n a t e t h e
r e s e r v e - f r e e b a s e s p r e s e n t l y e x e m p tin g fro m r e s e r v e r e q u i r e m e n t s some
p o r t i o n o f member b a n k s ' f o r e i g n b r a n c h l o a n s t o U .S . r e s i d e n t s , a nd
t o p h a s e o u t o v e r a p e r i o d o f a p p r o x i m a t e l y e i g h t m o n th s t h e r e s e r v e f r e e b a s e s p r e s e n t l y e x e m p t in g from r e s e r v e r e q u i r e m e n t s some p o r t i o n
o f member b a n k s ' E u r o d o l l a r b o r r o w i n g s .

U n d e r t h e a m e n d m e n ts, t h e r e d u c e d r a t e o f r e s e r v e r e q u i r e m e n t s
w i l l a p p ly i n th e c a s e o f r e s e r v e s t h a t m ust be m a in ta in e d d u r in g th e
m a i n t e n a n c e p e r i o d b e g i n n i n g o n J u n e 2 1 , 1 9 7 3 , b a s e d on t h e c o m p u t a t i o n
p e r i o d e x t e n d i n g from May 1 0 , 1 9 7 3 , t o J u n e 6 , 1 9 7 3 , a n d t h e r e s e r v e - f r e e
b a s e s r e l a t i n g t o member b a n k s ' f o r e i g n b r a n c h l o a n s t o U .S . r e s i d e n t s
w i l l be e l i m i n a t e d fro m c a l c u l a t i o n s o f t h i s p e r i o d a nd t h e r e a f t e r .

The

r e s e r v e - f r e e b a s e s r e l a t i n g t o member b a n k s ' E u r o d o l l a r b o r r o w i n g s w i l l
be p h a s e d o u t by r e d u c i n g t h e b a s e s e x i s t i n g i n t h e c o m p u t a t i o n p e r i o d
e n d i n g on May 9 , 1 9 7 3 , i n g r a d u a t e d s t e p s , e a c h i n t h e amount o f 10 p e r
c e n t o f a b a n k 's b a s e f o r s u c h c o m p u t a t i o n p e r i o d e n d i n g on May 9 , 1 9 7 3 ,
com m encing w i t h t h e c o m p u t a t i o n p e r i o d e x t e n d i n g from J u l y 5 , 1973 t o
A u g u s t 1 , 1 9 7 3 , a nd c o n t i n u i n g f o r t h e n e x t n i n e c o m p u t a t i o n p e r i o d s .
T h u s , u n l e s s e l i m i n a t e d t h r o u g h d i s u s e u n d e r t h e a u t o m a t i c downward a d ­
j u s t m e n t p r o v i s i o n s o f t h e r e g u l a t i o n s b e i n g am ended, w h ic h p r o v i s i o n s
w i l l c o n t i n u e i n e f f e c t , t h e r e s e r v e - f r e e b a s e s r e l a t i n g t o member b a n k s '
E u r o d o l l a r b o r r o w in g s w i l l b e e l i m i n a t e d e n t i r e l y i n t h e c o m p u t a t i o n
p e r i o d e n d i n g on A p r i l 1 0 , 19 7 4 .
The B o a rd h a s amended s e c t i o n 2 0 4 . 5 ( c ) o f R e g u l a t i o n D and
s e c t i o n 2 1 3 .7 o f R e g u l a t i o n M t o r e a d a s f o l l o w s :
§ 2 0 4 .5

R e s e r v e r e - a u ir e m e n ts
*

(c)
b a n k in g o f f i c e s .

*

*

*

*

R e s e r v e p e r c e n t a g e s a g a i n s t c e r t a i n d e p o s i t s by f o r e i g n
D e p o s i t s r e p r e s e n t e d by p r o m i s s o r y n o t e s , a c k n o w le d g e ­

ments of advance, due bills, or similar obligations described in

-3 -

8/
§ 2 0 4 .1 (f) to f o re ig n o f f i c e s o f o th e r b an k s,

or to i n s t i t u t i o n s th e

t i m e d e p o s i t s o f w h ic h a r e e x e m p t fro m t h e r a t e l i m i t a t i o n s o f R e g u l a ­
t i o n Q p u r s u a n t t o § 2 1 7 . 3 ( g ) t h e r e o f , s h a l l n o t be s u b j e c t t o p a r a ­
g rap h ( a ) o f t h i s s e c t i o n o r t o § 2 0 4 .3 ( a ) ( 1 ) and ( 2 ) ; b u t d u r in g e a ch
w eek o f t h e f o u r - w e e k p e r i o d b e g i n n i n g J u n e 2 1 , 1 9 7 3 , a n d d u r i n g e a c h
s u c c e s s i v e f o u r - w e e k ( " m a i n t e n a n c e " ) p e r i o d , a member b a n k s h a l l m a i n t a i n
w i t h t h e R e s e r v e Bank o f i t s d i s t r i c t a d a i l y a v e r a g e b a l a n c e e q u a l t o
8 p e r c e n t o f t h e d a i l y a v e r a g e am ount o f s u c h d e p o s i t s d u r i n g t h e f o u r w eek c o m p u t a t i o n p e r i o d e n d i n g on t h e W ednesday f i f t e e n d a y s b e f o r e t h e
b e g in n in g o f th e m ain ten a n c e p e r io d .

An e x c e s s o r d e f i c i e n c y i n r e s e r v e s

i n a n y w eek o f a m a i n t e n a n c e p e r i o d u n d e r t h i s p a r a g r a p h s h a l l b e s u b j e c t
t o § 2 0 4 . 3 ( a ) ( 3 ) , a s i f c o m p u te d u n d e r § 2 0 4 . 3 ( a ) ( 2 ) , an d d e f i c i e n c i e s

£/
u n d er t h i s p a ra g ra p h s h a l l be s u b je c t to § 2 0 4 .3 (b ):
P r o v i d e d , T h a t a n y b a n k t h a t , u n d e r t h e te r m s o f § 2 0 4 . 5 ( c ) o f

10 /
R e g u la tio n D a s in e f f e c t p r i o r t o Ju n e 21, 1973,

was d e d u c t i n g f o r t h e

c o m p u t a t i o n p e r i o d e n d i n g on May 9 , 1 9 7 3 , a n e a r l i e r p e r i o d ' s c o r r e s p o n d ­
in g d a i l y a v e r a g e t o t a l o f s u c h d e p o s i t s ( h e r e i n a f t e r c a l l e d " r e s e r v e f r e e b a s e " ) i n c a l c u l a t i n g i t s r e s e r v e r e q u ir e m e n ts s h a l l c o n tin u e t o be

8 / Any b a n k i n g o f f i c e l o c a t e d o u t s i d e t h e S t a t e s o f t h e U n i t e d S t a t e s
a nd t h e D i s t r i c t o f C o lu m b ia o f a b a n k o r g a n i z e d u n d e r d o m e s t ic o r
f o r e i g n la w .

9 / The t e r m " c o m p u t a t i o n p e r i o d " i n § 2 0 4 . 3 ( a ) ( 3 ) a nd ( b ) s h a l l , f o r
t h i s p u r p o s e , b e deemed t o r e f e r t o e a c h w eek o f a m a i n t e n a n c e p e r i o d
under t h i s p a ra g ra p h .
1 0 / 35 F e d e r a l R e g i s t e r 1 8 6 5 8 .

-4 -

e n t i t l e d t o do s o I n a c c o r d a n c e w i t h t h e t e r m s o f s u c h f o r m e r s e c t i o n ,
b u t s u c h r e s e r v e - f r e e b a s e s h a l l n o t e x c e e d p r o g r e s s i v e l y lo w e r c e i l i n g s
e s t a b l i s h e d h e r e u n d e r by r e d u c i n g t h e am ount o f i t s r e s e r v e - f r e e b a s e f o r
t h e c o m p u t a t i o n p e r i o d e n d i n g on May 9 , 1 9 7 3 , i n t e n i n c r e m e n t s , e a c h
e q u a l t o 10 p e r c e n t o f i t s b a s e i n s u c h c o m p u t a t i o n p e r i o d e n d i n g on
May 9 , 1 9 7 3 , a p p l i e d c o n s e c u t i v e l y i n e a c h s u c c e e d i n g c o m p u t a t i o n p e r i o d
b e g i n n i n g w i t h t h e p e r i o d e n d i n g on A u g u s t 1 , 1 9 7 3 , u n t i l s u c h r e s e r v e f re e base i s e x h a u ste d .

§ 2 1 3 .7

R eserv es a g a in s t f o re ig n b ran ch d e p o s i t s .
(a)

T ra n sa c tio n s w ith p a re n t b ank.

D u r in g e a c h w eek o f t h e

f o u r - w e e k p e r i o d b e g i n n i n g J u n e 2 1 , 1 9 7 3 , a n d d u r i n g e a c h week o f e a c h
s u c c e s s i v e f o u r - w e e k ( " m a i n t e n a n c e 1 ) p e r i o d , a member b a n k h a v i n g one
1
o r m ore f o r e i g n b r a n c h e s s h a l l m a i n t a i n w i t h t h e R e s e r v e Bank o f i t s
d i s t r i c t , as a re se rv e a g a in s t i t s

fo re ig n b ranch d e p o s its , a d a ily

a v erag e b a la n c e e q u a l to 8 p e r c e n t o f th e d a il y av erag e t o t a l o f
(1)

n e t b a l a n c e s d ue fro m i t s d o m e s t i c o f f i c e s t o s u c h

b r a n c h e s , and
(2 )

a s s e t s ( i n c l u d i n g p a r t i c i p a t i o n s ) h e l d by s u c h b r a n c h e s

w h ic h w e re a c q u i r e d from i t s d o m e s t i c o f f i c e s ( o t h e r t h a n a s s e t s r e p r e ­
s e n ti n g c r e d i t e x te n d e d t o p e rs o n s n o t r e s i d e n t s o f t h e U n ite d S t a t e s ) ,
d u r i n g t h e f o u r - w e e k c o m p u t a t i o n p e r i o d e n d i n g on t h e W ednesday f i f t e e n
days b e f o r e th e b e g in n in g o f t h e m ain ten a n c e p e r io d :

-5 -

F ro v id e d . T h at any bank t h a t , u n d e r th e term s o f § 2 1 3 .7 (a ) o f
7/
R e g u l a t i o n M a s i n e f f e c t p r i o r t o J u n e 2 1 , 1 9 7 3 , w as d e d u c t i n g
f o r t h e c o m p u t a t i o n p e r i o d e n d i n g o n Hay 9 , 1 9 7 3 , a n e a r l i e r p e r i o d ' s
c o rre s p o n d in g d a i l y a v e ra g e t o t a l o f such " n e t b a la n c e s d u e" o r " a s s e t s
h e ld " ( h e r e in a f te r c a lle d " r e s e r v e - f r e e b a se")

in c a lc u la tin g i t s re se rv e

r e q u i r e m e n t s h e r e u n d e r s h a l l c o n t i n u e t o b e e n t i t l e d t o do s o i n a c c o r d ­
ance w i t h th e term s o f su ch fo rm er s e c t i o n , b u t su c h r e s e r v e - f r e e b a se
s h a l l n o t e x c e e d p r o g r e s s i v e l y lo w e r c e i l i n g s e s t a b l i s h e d h e r e u n d e r by
r e d u c i n g t h e am ount o f i t s r e s e r v e - f r e e b a s e f o r t h e c o m p u t a t i o n p e r i o d
e n d i n g on May 9 , 1 9 7 3 , i n t e n i n c r e m e n t s , e a c h e q u a l t o 10 p e r c e n t o f
i t s b a s e i n s u c h c o m p u t a t i o n p e r i o d e n d i n g on May 9 , 1 9 7 3 , a p p l i e d
c o n s e c u t iv e l y i n e a c h su c c e e d in g c o m p u ta tio n p e r io d b e g in n in g w ith th e
p e r i o d e n d i n g on A u g u s t 1 , 1 9 7 3 , u n t i l s u c h r e s e r v e - f r e e b a s e i s e x h a u s t e d .
(b )

C r e d it e x te n d e d t o U n ite d S t a t e s r e s i d e n t s .

D u r in g e a c h

w eek o f t h e f o u r - w e e k p e r i o d b e g i n n i n g J u n e 2 1 , 1 9 7 3 , a n d d u r i n g e a c h
w eek o f e a c h s u c c e s s i v e f o u r - w e e k m a i n t e n a n c e p e r i o d , a member b a n k h a v i n g
one o r m ore f o r e i g n b r a n c h e s s h a l l m a i n t a i n w i t h t h e R e s e r v e Bank o f i t s
d i s t r i c t , as a re se rv e a g a in s t i t s

fo re ig n branch d e p o s its , a d a ily

av e ra g e b a la n c e e q u a l t o 8 p e r c e n t o f t h e d a i l y a v e ra g e c r e d i t o u ts ta n d -

8/
i n g fro m s u c h b r a n c h e s t o U n i t e d S t a t e s r e s i d e n t s

7/

36 F e d e r a l R e g i s t e r

( o th e r th a n a s s e t s

1040; 6826.

8 / ( a ) Any i n d i v i d u a l
r e s i d i n g ( a t t h e tim e t h e e r e d i t i s
e x te n d e d )i n
any S t a t e o f th e U n ite d
S t a t e s o r t h e D i s t r i c t o f C o lu m b ia ; ( b ) a n y c o r ­
p o r a tio n , p a r tn e r s h ip , a s s o c ia tio n or o th e r e n t i t y o rg an iz e d t h e r e in
( " d o m e s t i c c o r p o r a t i o n " ) ; a nd ( c ) a n y b r a n c h o r o f f i c e l o c a t e d t h e r e i n o f
( c o n t i n u e d on p a g e 6)

*6-

a c q u i r e d a n d n e t b a l a n c e s d ue from i t s d o m e s t i c o f f i c e s ) d u r i n g t h e
f o u r - w e e k c o m p u t a t i o n p e r i o d e n d i n g on t h e W ednesday f i f t e e n d a y s b e f o r e
th e b e g in n in g o f th e m ain ten a n c e p e r io d :
P ro v id e d . T h at t h i s p a ra g ra p h does n o t a p p ly t o c r e d i t e x te n d e d (1 ) t o
e n a b l e t h e b o r r o w e r t o com ply w i t h t h e r e q u i r e m e n t s o f t h e O f f i c e o f
9/
F o r e i g n D i r e c t I n v e s t m e n t s , D e p a r tm e n t o f Commerce,
o r (2 ) u n d e r b in d ­
i n g com m itm en ts e n t e r e d i n t o b e f o r e H ay 1 7 , 1 9 7 3 .

E ffe c tiv e d a te :

Ju n e 21 , 1973.

By o r d e r o f t h e B o a rd o f G o v e r n o r s , May 1 6 , 1 9 7 3 .

( S ig n e d ) Tynan S m ith

T ynan S m ith
S e c r e t a r y o f t h e B oard
[SEAL]

8/
( c o n t i n u e d from p a g e 5)
any o th e r e n t i t y w h e re v er o r g a n iz e d . C r e d it e x te n d e d t o a f o r e ig n b ra n c h ,
o f f i c e , s u b s id ia ry , a f f i l i a t e or o th e r fo re ig n e s ta b lis h m e n t ( " f o re ig n
a f f i l i a t e " ) c o n t r o l l e d by one o r m ore s u c h d o m e s t i c c o r p o r a t i o n s w i l l n o t
b e deemed t o b e c r e d i t e x t e n d e d t o a U n i t e d S t a t e s r e s i d e n t i f t h e p r o c e e d s
w i l l be u s e d i n i t s f o r e i g n b u s i n e s s o r t h a t o f o t h e r f o r e i g n a f f i l i a t e s
o f th e c o n t r o l l i n g d o m e stic c o r p o r a t i o n ( s ) .
9 / The b r a n c h may i n good f a i t h r e l y on t h e b o r r o w e r 's c e r t i f i c a t i o n
t h a t t h e f u n d s w i l l b e so u s e d .

TITLE 1 2 — BANKS AND BANKING
CHAPTER I I — FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[R e g . Q]
PART 217— INTEREST ON DEPOSITS
L a rg e -d e n o m ln a tio n C e r t i f i c a t e s o f D e p o s it

The B oard o f G o v e r n o r s , p u r s u a n t t o i t s a u t h o r i t y u n d e r
s e c t i o n 19 o f t h e F e d e r a l R e s e r v e A c t t o p r e s c r i b e r u l e s g o v e r n i n g
t h e pay m en t o f i n t e r e s t on d e p o s i t s , h a s am ended i t s R e g u l a t i o n Q
(12 CFR 217) s o a s t o s u s p e n d , f o r t h e t im e b e i n g , t h e l i m i t a t i o n s
on t h e r a t e s o f i n t e r e s t w h ic h may b e p a i d b y a member b a n k on a
s i n g l e m a t u r i t y tim e d e p o s i t o f $ 1 0 0 ,0 0 0 o r m o r e , r e g a r d l e s s o f t h e
m a t u r i t y o f s u c h t im e d e p o s i t . T h e r e i s p r e s e n t l y

od

maximum r a t e o f

i n t e r e s t p r e s c r i b e d f o r a s i n g l e m a t u r i t y t i m e - d e p o s i t o f $ 1 0 0 ,0 0 6 o r
p o r e w ith a m a t u r i t y o f 30-89 d a y s .
T h e r e was no n o t i c e and p u b l i c p a r t i c i p a t i o n w i t h r e s p e c t
t o t h i s amendment b e c a u s e s u c h p r o c e d u r e w o u ld r e s u l t i n d e l a y t h a t
w ould b e c o n t r a r y t o t h e p u b l i c i n t e r e s t an d s e r v e no u s e f u l p u r ­
pose.

S ee § 2 6 2 . 2 ( e ) o f t h e B o a r d ’ s R u l e s o f P r o c e d u r e , 12 CFR

§ 2 6 2 .2 (e ).

The e f f e c t i v e d a t e w as d e f e r r e d f o r l e s s t h a n t h e 3 0 -

day p e rio d r e f e r r e d

to i n s e c t i o n 55 3 (d ) o f T i t l e 5 , U n ite d S t a t e s

C o d e, b e c a u s e t h i s amendm ent r e l i e v e s a r e s t r i c t i o n .

-2 -

E ffe c tiv e

im m e d ia te ly

, S e c tio n 2 1 7 .7 (a )(1 ) i s

amended t o r e a d a s f o l l o w s :
§ 2 1 7 .7 —Maximum r a t e s o f i n t e r e s t p a y a b l e b y member b a n k s
on t im e and s a v i n g s d e p o s i t s .
*

*

*

(a)

S i n g l e m a t u r i t y tim e d e p o s i t s .

(1)

D e p o s i t s o f $ 1 0 0 .0 0 0 o r m o r e .

*

T h e r e i s no maximum

r a t e o f i n t e r e s t p r e s e n t l y p r e s c r i b e d on a n y s i n g l e
m a t u r i t y t im e d e p o s i t o f $ 1 0 0 ,0 0 0 o r m o re .
*

*

*

By o r d e r o f t h e B oard o f G o v e r n o r s ,

*

May 1 6 . 1973

( S ig n e d ) C h e s t e r B. F e l d b e r g
C h e s ter B. F e ld b erg
A s s is ta n t S e c re ta ry o f th e Board

[SEAL]

FEDERAL RESERVE SYSTEM

[12 CFR P a r t 204]

RESERVES OF MEMBER BANKS

D e p o s i t S t a t u s o f A c c e p ta n c e P r o c e e d s

The B oard o f G o v e r n o r s p r o p o s e s t o a p p l y r e s e r v e r e q u i r e ­
m e n ts a g a i n s t t h e p r o c e e d s o f t h e s a l e by a member b a n k o f I t s own
bank a c c e p ta n c e .

A t t h e same t i m e , t h e B oard p r o p o s e s n o t t o a p p l y

r e s e r v e r e q u i r e m e n t s a g a i n s t t h e p r o c e e d s o f t h e s a l e b y a member
bank of bank a c c e p ta n c e s t h a t a r e e l i g i b l e f o r d is c o u n t by a F e d e ra l
R e s e r v e Bank u n d e r t h e p r o v i s i o n s o f t h e B o a r d 's R e g u l a t i o n A (12
CFR P a r t 2 0 1 ) , commonly r e f e r r e d t o a s " e l i g i b l e " a c c e p t a n c e s .
F o r e x a m p le , u n d e r t h e p r o p o s a l , i f a member b a n k ( a ) m akes
a c c e p t a n c e t h a t i s n o t e l i g i b l e f o r d i s c o u n t a t a F e d e r a l R e s e r v e Bank
(b )

p u r c h a s e s t h a t a c c e p t a n c e , a nd ( c ) i n t u r n s e l l s t h e a c c e p t a n c e ,

t h e o v e r a l l t r a n s a c t i o n w ould b e r e g a r d e d a s a m eans o f o b t a i n i n g
f u n d s f o r u s e i n t h e member b a n k 's b a n k in g b u s i n e s s , and t h e f u n d s
r e c e i v e d u p o n t h e s a l e w ould b e t r e a t e d a s a " d e p o s i t " a g a i n s t w h ic h
r e s e r v e s m u st b e m a i n t a i n e d .
Funds r e c e i v e d fro m t h e s a l e o f a n " e l i g i b l e " a c c e p t a n c e
w ould b e exem pt fro m r e s e r v e r e q u i r e m e n t s f o r two r e a s o n s .

F irst,

-2 -

a member b a n k , i n c r e a t i n g s u c h a c c e p t a n c e s , i s s u b j e c t t o am ount
l i m i t a t i o n s s e t f o r t h i n s e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t ,
w h ic h i s n o t t r u e i n t h e c a s e o f o t h e r t y p e s o f a c c e p t a n c e s .

S e­

c o n d , " e l i g i b l e " a c c e p ta n c e s of th e ty p e d e s c r ib e d i n th e s e v e n th
p a r a g r a p h o f s e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t (12 U .S .C . § 372)
a r e lim ite d to s p e c i f ic tr a n s a c tio n s in g oods, w h ile o th e r a c c e p t­
ances a re n o t so lim ite d .

B o th t h e s e r e a s o n s a r e d i r e c t l y r e l a t e d

t o t h e p u r p o s e s o f r e s e r v e r e q u i r e m e n t s , w h ic h i n c l u d e t h e p r e v e n ­
t i o n of th e u n lim ite d ex p a n sio n of bank c r e d i t .
To a i d i n t h e c o n s i d e r a t i o n o f t h i s m a t t e r by t h e B o a r d ,
i n t e r e s t e d p e rs o n s a r e i n v i t e d to su b m it r e l e v a n t d a t a , v iew s o f
a rg u m e n ts .

Any s u c h m a t e r i a l s h o u l d b e s u b m i t t e d i n w r i t i n g t o t h e

S e c r e t a r y , B oard o f G o v e r n o rs o f t h e F e d e r a l R e s e r v e S y s te m , Wash­
i n g t o n , D. C .

20551, to be re c e iv e d n o t l a t e r th a n Ju n e 4 , 1973.

Such

m a t e r i a l w i l l b e made a v a i l a b l e f o r i n s p e c t i o n and c o p y in g upon
r e q u e s t , e x c e p t a s p r o v i d e d i n § 2 6 1 . 6 ( a ) o f t h e B o a r d 's R u l e s Re­
g a rd in g A v a i l a b i l i t y of In fo rm a tio n .
To im p le m e n t i t s p r o p o s a l , t h e B oard p r o p o s e s t o amend
s e c t i o n 2 0 4 . 1 ( f ) o f i t s R e g u l a t i o n D (12 CFR P a r t 204) a s f o l l o w s :
§ 2 0 4 .1 D e f i n i t i o n s
*

*

(f)
o th e r o b lig a tio n s .

*

D e p o s i t s a s i n c l u d i n g c e r t a i n p r o m i s s o r y n o t e s and
F o r t h e p u r p o s e o f t h i s P a r t , t h e te r m " d e p o s i t s "

-3 -

a l s o i n c l u d e s a member b a n k ' s l i a b i l i t y on a n y p r o m i s s o r y n o t e ,
a c k n o w le d g m e n t o f a d v a n c e , d u e b i l l , b a n k a c c e p t a n c e o r s i m i l a r
o b l i g a t i o n ( w h e th e r w r i t t e n

or o ra l) th a t

by a

of o b ta in in g fu n d s

member b a n k a s a m eans

i s issu e d

oru n d e rta k e n

to be used

in

its

b a n k in g b u s i n e s s , e x c e p t a n y s u c h o b l i g a t i o n t h a t :
*

*

*

(A)

*

*

*;

or

(5)

a r i s e s fro m t h e c r e a t i o n o f a b a n k a c c e p t a n c e o f t h e

t y p e d e s c r i b e d i n s e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t a n d e l i g i b l e
f o r d is c o u n t by th e F e d e r a l R e se rv e B anks.
*

*

*

By o r d e r o f t h e B oard o f G o v e r n o r s .

May 1 6 . 1973

( S ig n e d ) C h e s t e r B. F e l d b e r g
C h e s ter B. F e ld b e rg
A s s is ta n t S e c re ta ry o f th e Board

[SEAL]

TITLE 12— BANKS AND BANKING
CHAPTER I I — FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 250—MISCELLANEOUS INTERPRETATIONS

§ 2 5 0 .1 6 3

I n a p p l i c a b i l i t y o f am ount l i m i t a t i o n s t o " i n e l i g i b l e a c c e p t ­

a n c e s .'1
(a)

S i n c e 1 9 2 3 , t h e B oard h a s b e e n o f t h e v i e w t h a t " t h e

a c c e p t a n c e pow er o f S t a t e member b a n k s i s n o t n e c e s s a r i l y c o n f i n e d t o
t h e p r o v i s i o n s o f s e c t i o n 13 [ o f t h e F e d e r a l R e s e r v e A c t ] , in a s m u c h a s
t h e la w s o f many S t a t e s c o n f e r b r o a d e r a c c e p t a n c e p o w e rs u p o n t h e i r
S t a t e b a n k s > and c e r t a i n S t a t e member b a n k s m ay, t h e r e f o r e , l e g a l l y make
a c c e p t a n c e s o f k i n d s w h ic h a r e n o t e l i g i b l e f o r r e d i s c o u n t , b u t w h ic h may
b e e l i g i b l e f o r p u r c h a s e b y F e d e r a l r e s e r v e b a n k s u n d e r s e c t i o n 1 4 . " 1923
F . R . Bu l l e t i n 3 1 6 , 3 1 7 .
(b )

In 1963, th e C o m p tro lle r of th e C u rren cy r u le d t h a t " [ n a ­

t i o n a l b a n k s a r e n o t l i m i t e d i n t h e c h a r a c t e r o f a c c e p t a n c e s w h ic h t h e y
may make i n f i n a n c i n g c r e d i t t r a n s a c t i o n s , and b a n k e r s ’ a c c e p t a n c e s may
b e u s e d f o r s u c h p u r p o s e , s i n c e t h e m ak in g o f a c c e p t a n c e s i s a n e s s e n t i a l
p a r t o f b a n k in g a u t h o r i z e d by 12 U .S .C . 2 4 . "

C o m p t r o l l e r *s M anual 7 . 7 4 2 0 .

T h e r e f o r e , n a t i o n a l b a n k s a r e a u t h o r i z e d b y t h e C o m p t r o l l e r t o make a c c e p t ­
a n c e s u n d e r 12 U .S .C . § 2 4 , a l t h o u g h t h e a c c e p t a n c e s a r e n o t o f t h e t y p e
d e s c r i b e d i n s e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t .
(c)

A re v ie w of th e l e g i s l a t i v e h i s t o r y su rro u n d in g th e e n a c t­

m en t o f t h e a c c e p t a n c e p r o v i s i o n s o f s e c t i o n 13 r e v e a l s t h a t C o n g r e s s b e ­
l i e v e d i n 1913 t h a t i t w as g r a n t i n g t o n a t i o n a l b a n k s a pow er w h ic h t h e y

-2 -

w ould n o t o t h e r w i s e p o s s e s s and h ad n o t p r e v i o u s l y p o s s e s s e d .

S ee r e m a r k s

o f C o n g re ssm e n P h e l a n , H e l v e r i n g , S a u n d e r s and G l a s s , 51 C o n g . R e c . 4 6 7 6 ,
4 7 9 8 , 4 8 8 5 , and 5064 (S e p te m b e r 1 0 , 1 2 , 13 and 17 o f 1 9 1 3 ) .

N e v e rth e le s s ,

t h e C o u r t s h a v e l o n g r e c o g n i z e d t h e e v o l u t i o n a r y n a t u r e o f b a n k in g an d o f
t h e s c o p e o f t h e " i n c i d e n t a l p o w e rs " c l a u s e o f 12 U .S .C . § 2 4 .
c h a n t s Bank v . S t a t e B a n k . 77 U .S . 604 (1 8 7 0 )

S ee Mer­

( u p h o l d i n g t h e pow er o f a

n a t i o n a l b a n k t o c e r t i f y a c h e c k u n d e r t h e " i n c i d e n t a l p o w e rs " c l a u s e o f
12 U .S .C . § 2 4 ) .
(d )

I t now a p p e a r s t h a t , b a s e d on t h e B o a r d ’ s 1923 r u l i n g a nd

t h e C o m p t r o l l e r 's 1963 r u l i n g , b o t h S t a t e member b a n k s and n a t i o n a l b a n k s
may make a c c e p t a n c e s w h ic h a r e n o t o f t h e t y p e d e s c r i b e d i n s e c t i o n 13 o f
th e F e d e r a l R eserv e A c t.

Y e t , t h i s a p p e a r s t o b e a d e v e lo p m e n t t h a t C o n g r e s s

d i d n o t c o n t e m p l a t e when i t d r a f t e d t h e a c c e p t a n c e p r o v i s i o n s o f s e c t i o n 1 3 .
(e)

The q u e s t i o n i s p r e s e n t e d w h e t h e r t h e am ount l i m i t a t i o n s o f

s e c t i o n 13 s h o u ld a p p l y t o a c c e p t a n c e s made by a member b a n k t h a t a r e n o t
o f th e ty p e d e s c r ib e d in s e c t i o n 13.
k in d s:

(a)

(The am ount l i m i t a t i o n s a r e o f two

a l i m i t a t i o n on t h e am ount t h a t may b e a c c e p t e d f o r a n y one

c u s to m e r . a nd (b )

a l i m i t a t i o n on t h e a g g r e g a t e am ount o f a c c e p t a n c e s t h a t

a member b a n k may m a k e .)

I n i n t e r p r e t i n g any F e d e r a l s t a t u t o r y p r o v i s i o n ,

th e p rim a ry g u id e i s th e i n t e n t of C o n g re ss, y e t , a s n o ted e a r l i e r , C o n g ress
d i d n o t c o n t e m p l a t e i n 1913 t h e d e v e lo p m e n t o f s o - c a l l e d
a n c e s .1
'

" in e lig ib le a c c e p t­

( A lth o u g h t h e r e i s some i n d i c a t i o n t h a t C o n g r e s s d i d c o n t e m p l a t e

S t a t e member b a n k s 1 m ak in g a c c e p t a n c e s o f a t y p e n o t d e s c r i b e d i n s e c t i o n 13
[r e m a r k s o f C o n g re ssm a n G l a s s , 51 C o n g . R e c . 5 0 6 4 ] , t h e p r i m a r y f o c u s o f

-3 -

C o n g r e s s i o n a l a t t e n t i o n was on t h e a c c e p t a n c e p o w e rs o f n a t i o n a l b a n k s . )

In

t h e a b s e n c e o f a n i n d i c a t i o n o f C o n g r e s s i o n a l i n t e n t , we a r e l e f t t o r e a c h
a n i n t e r p r e t a t i o n t h a t i s i n harm ony w i t h t h e l a n g u a g e o f t h e s t a t u t o r y p r o ­
v i s i o n s an d w i t h t h e p u r p o s e s o f t h e F e d e r a l R e s e r v e A c t .
(f)

S e c t i o n 13 a u t h o r i z e s a c c e p t a n c e s o f two t y p e s .

The s e v e n t h

p a r a g r a p h o f s e c t i o n 13 (12 U .S .C . § 372) a u t h o r i z e s c e r t a i n a c c e p t a n c e s t h a t
a r i s e o u t of s p e c if ic tra n s a c tio n s in goods.

(T h e s e a c c e p t a n c e s a r e some­

t i m e s r e f e r r e d t o a s ' ‘c o m m e rc ia l a c c e p t a n c e s . ” )

The t w e l f t h p a r a g r a p h o f

s e c t i o n 13 a u t h o r i z e s member b a n k s t o make a c c e p t a n c e s " f o r t h e p u r p o s e o f
f u r n i s h i n g d o l l a r e x c h a n g e a s r e q u i r e d by t h e u s a g e s o f t r a d e " i n f o r e i g n
tra n sa c tio n s.
a c c e p ta n c e s ." )

(S uch a c c e p t a n c e s a r e r e f e r r e d

to a s " d o ll a r exchange

I n t h e t w e l f t h p a r a g r a p h , t h e r e i s a 10 p e r c e n t l i m i t on

t h e am ount o f d o l l a r e x c h a n g e a c c e p t a n c e s t h a t may be a c c e p t e d f o r a n y
o ne c u s to m e r ( u n l e s s a d e q u a t e l y s e c u r e d ) and a l i m i t a t i o n on t h e a g g r e g a t e
am ount o f d o l l a r e x c h a n g e a c c e p t a n c e s t h a t a member b a n k may m ak e .

(The

t w e l f t h p a r a g r a p h , i n im p o s in g t h e s e l i m i t a t i o n s , r e f e r s t o t h e a c c e p t a n c e
of "su ch d r a f t s or b i l l s of exchange r e f e r r e d

to

[in ]

t h i s p a ra g ra p h ." )

S i m i l a r l y , t h e s e v e n t h p a r a g r a p h im p o s e s on c o m m e rc ia l a c c e p t a n c e s a p a r a l l e l
10 p e r c e n t p e r - c u s t o m e r l i m i t a t i o n , and l i m i t a t i o n s on t h e a g g r e g a t e
am ount o f c o m m e rc ia l a c c e p t a n c e s .

(In th e ca se of th e a g g re g a te l i m i t a t i o n s ,

t h e s e v e n t h p a r a g r a p h s t a t e s t h a t "n o b a n k s h a l l a c c e p t s u c h b i l l s
am ount" i n e x c e s s o f t h e a g g r e g a t e l i m i t ;

to an

th e re f e re n c e to "such b i l l s "

m akes c l e a r t h a t t h e l i m i t a t i o n i s o n l y i n r e s p e c t o f d r a f t s o r b i l l s o f
exchange o f th e s p e c i f i c ty p e d e s c r ib e d i n th e s e v e n th p a ra g r a p h .)

-4 -

(g )

B ased on t h e l a n g u a g e and p a r a l l e l s t r u c t u r e o f t h e s e v e n t h

and t w e l f t h p a r a g r a p h s o f s e c t i o n 1 3 , a n d i n t h e a b s e n c e o f a s t a t e m e n t o f
t

C o n g r e s s i o n a l i n t e n t i n t h e l e g i s l a t i v e h i s t o r y , t h e B o ard c o n c l u d e s t h a t
t h e p e r - c u s t o m e r a nd a g g r e g a t e l i m i t a t i o n s o f t h e t w e l f t h p a r a g r a p h a p p l y
o n ly to a c c e p ta n c e s of th e ty p e d e s c r ib e d i n t h a t p a ra g ra p h ( d o l l a r ex ­
c h a n g e a c c e p t a n c e s ) , and t h e p e r - c u s t o m e r and a g g r e g a t e l i m i t a t i o n s o f t h e
s e v e n t h p a r a g r a p h (12 U .S .C . § 372) a p p l y o n l y t o a c c e p t a n c e s o f t h e t y p e
d e sc rib e d in th a t p arag rap h .
( I n t e r p r e t s and a p p l i e s 12 U .S .C . § 372 a nd t h e t w e l f t h p a r a g r a p h
o f s e c t i o n 13 o f t h e F e d e r a l R e s e r v e A c t , w h ic h p a r a g r a p h i s o m i t t e d from
t h e U .S . C o d e .)
By o r d e r o f t h e B oard o f G o v e r n o r s , Kay 1 6 , 19 7 3 .

( S ig n e d ) C h e s t e r B. F e l d b e r g
C h ester B. F e ld b erg
A s s is ta n t S e c re ta ry o f th e Board

[ SEAL]

C H A IR M A N O F T H E B O A R D O F G O V E R N O R S
FEDERAL R ESERVE SYSTEM
W ASHINGTO N , D. C. 2 0 5 5 1

Chief Executive Officer
Nonmember Bank

Dear Sir:
I earnestly seek your assistance and cooperation in
ensuring that actions taken by the Federal Reserve System today
in the interest of a healthy national economy can effectively
accomplish this objective.
The Board of Governors of the Federal Reserve System
has taken two actions that affect large time certificates of
deposit issued by member banks.
One action is to suspend maximum
interest rate ceilings on such deposits with maturities of more
than 89 days; the ceiling rate on deposits of 30-89 day maturity
had been suspended since June 27, 1970.
The Federal Deposit
Insurance Corporation has taken a similar action with respect
to insured banks that are not members of the Federal Reserve
System.
With market interest rates relatively high, the sus­
pension of ceilings across the board will enable banks to
compete in all maturity sectors of the short-term market and
thereby permit them to establish a balanced maturity structure
for outstanding large certificates of deposit.
The other action taken by the Federal Reserve Board
has been to impose a marginal reserve requirement on the total
of funds raised from the issuance of (1) single-maturity time
deposits of $100,000 or more, (2) deposits represented by certain
commercial paper obligations such as promissory notes, acknowledge­
ments of advances, and due bills, and (3) funds obtained by the
bank from obligations issued by affiliates and subsidiaries of
the bank.
The Board has also published for comment a proposal
to establish reserve requirements, including marginal reserve
requirements, on funds obtained from the sale of finance bills
(also termed ineligible acceptances), the proceeds of which are
used by the bank.

The m a rg in a l r e s e r v e r e q u i re m e n t a c t i o n means t h a t
member banks must m a i n t a i n a d d i t i o n a l r e s e r v e s eq u a l to 3 p e r
c e n t of any growth in th e t o t a l of d e p o s i t s and l i a b i l i t i e s
s p e c i f i e d above i n e x c e ss of a b a s e amount. The b a s e f o r com­
p u t i n g th e m a r g in a l r e s e r v e w i l l be t h e amount o u t s t a n d i n g in
t h e week ended May 16, 1973, o r $10 m i l l i o n , w h ich ev e r i s
g r e a t e r . Thus, f o r a member bank th e r e s e r v e re q u ire m e n t
a p p l i c a b l e t o t h e ex ce ss of such d e p o s i t s above th e b a s e l e v e l
would g e n e r a l l y be 8 p e r c e n t - - t h e c o n t i n u i n g 5 p e r c e n t r e ­
q u ire m en t on l a r g e d en o m in atio n tim e d e p o s i t s and o t h e r s i m i l a r
d o m e stic money m arket i n s t r u m e n t s , p lu s t h e m a r g in a l 3 p e r c e n t
requirem ent.
The r e s e r v e r e q u i r e m e n t a c t i o n was ta k e n by t h e Board
i n an e f f o r t t o r e s t r a i n bank c r e d i t growth as p a r t of th e
n a t i o n ' s a n t i - i n f l a t i o n a r y program. The e f f e c t i v e n e s s o f t h i s
p r o p o s a l i n t h e e s s e n t i a l t a s k o f com bating i n f l a t i o n would be
enhanced i f i t a p p l i e d g e n e r a l l y th r o u g h o u t t h e b a n k in g community.
A c c o r d in g ly , I v e r y much hope you w i l l s e e f i t t o conform to t h e
a d d i t i o n a l 3 p e r c e n t m a r g in a l re q u i r e m e n t as d e s c r i b e d above.
A copy o f t h e F e d e r a l R e g i s t e r n o t i c e im plem enting th e m a r g in a l
r e s e r v e i s a t ta c h e d , f o r your i n f o r m a t i o n and g u id a n c e .
For a nonmember bank, th e a d d i t i o n a l m a r g in a l r e s e r v e
sh o u ld be m a in ta in e d w i t h a member of t h e F e d e r a l R eserve System
of y our c h o o s in g . The member bank r e c e i v i n g t h e d e p o s i t w i l l be
e x p e c te d t o r e d e p o s i t t h e s e b a l a n c e s w ith i t s F e d e r a l Reserve
Bank. O p e r a tin g p r o c e d u r e s w i l l be p r o v id e d by t h e F e d e r a l
R eserve Bank and your d e s i g n a t e d c o r r e s p o n d e n t .
I a s s u r e you t h a t t h e r e q u e s t I am now making o f you
w i l l be w ithdraw n a t th e e a r l i e s t p o s s i b l e tim e c o n s i s t e n t w i t h
t h e n a t i o n a l i n t e r e s t . Your c o o p e r a t i o n can p l a y a s i g n i f i c a n t
r o l e i n r e s t r a i n i n g i n f l a t i o n and i n r e t u r n i n g t h e economy t o a
more normal c o u r s e .
I lo o k forw ard t o r e c e i v i n g your r e s p o n s e .
S in ce rely yours,

A r t h u r F. B urns

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