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F ederal

reserve

Ba nk

DALLAS, TEXAS

of

Dallas

75222

Circular No. 73-331
December 28, 1973

PROPOSED AMENDMENTS TO REGULATIONS D AND Q
,
(Uncollateralized Due Bills)

To All Member Banks and Others Concerned
in the Eleventh Federal Reserve District:

The Board of Governors of the Federal Reserve System has
proposed amendments to Regulation D, "Reserves of Member Banks," and
Regulation Q, "Interest on Deposits," which would extend reserve re­
quirements and interest rate limitations to funds received by member
banks through the issuance of uncollateralized due bills in connection
with sales of securities, where the securities are not delivered to the
purchaser at the time of payment. The text of the proposed amendments
and explanatory material can be found in the Federal Register notice,
a copy of which is attached.
To assist the Board in considering this matter, any member
bank in the Eleventh Federal Reserve District which during 1973 has
issued uncollateralized due bills of this type is requested to advise
the Federal Reserve Bank of Dallas of such fact and to furnish this
Bank the dollar volume of such due bills outstanding at month-end for
each month of calendar 1973* Please transmit this information to the
Regulations Department, Federal Reserve Bank of Dallas, for receipt no
later than January 15, 197^-.
Additionally, your attention is called to the fact that com­
ments concerning these proposals may be submitted in writing to the
Secretary of the Board of Governors of the Federal Reserve System,
Washington, D. C. 20551? to be received not later than January 18, 197^*
Yours very truly,
P. E. Coldwell,
President

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

FEDERAL RESERVE SYSTEM
[12 CFR PARTS 204, 217]
[REGS. D, Q]
RESERVES OF MEMBER BANKS, PAYMENT OF INTEREST ON DEPOSITS
Due B i l l s a s D e p o s its

The B oard o f G o v e rn o rs p r o p o s e s t o amend R e g u l a ti o n s D and Q
t o c l a s s i f y a s " d e p o s i t s ” , and th e r e b y e x te n d r e s e r v e r e q u ir e m e n ts and
i n t e r e s t r a t e l i m i t a t i o n s to f u n d s r e c e i v e d b y member b a n k s th ro u g h
th e is s u a n c e o f d u e b i l l s
w o u ld a p p ly t o d u e b i l l s

th a t a re u n c o lla te r a liz e d .

Such t r e a tm e n t

i s s u e d i n c o n n e c tio n w ith s a l e s o f s e c u r i t i e s

w h e re t h e s e c u r i t i e s p u r c h a s e d a r e n o t d e l i v e r e d t o th e p u r c h a s e r a t t h e
tim e o f p a y m e n t, w h e th e r s u c h fu n d s a r e r e c e i v e d fro m a n o th e r b a n k o r
o t h e r c u s to m e rs a n d r e g a r d l e s s o f t h e m ethod by w h ic h s u c h t r a n s a c t i o n
i s e v id e n c e d o r r e c o r d e d — w h e th e r by i s s u a n c e o f a n i n s t r u m e n t , o r a l
u n d e r t a k in g o r u n d e r s t a n d i n g , r e c o r d n o t a t i o n o r o t h e r m a n n e r.
am endm ents to R e g u l a ti o n s D and Q in c lu d e d d u e b i l l s

The 1966

i s s u e d by a member

b a n k p r i n c i p a l l y a s a m eans o f o b t a i n i n g fu n d s t o b e u s e d i n i t s b a n k in g
b u s in e s s w i t h i n t h e d e f i n i t i o n o f " d e p o s i t s " .
f o r due b i l l s

F unds r e c e i v e d i n e x c h a n g e

i s s u e d i n c o n n e c t i o n w ith a " g e n u in e ” s e c u r i t i e s t r a n s a c t i o n

w i t h r e s p e c t t o w h ic h t h e b a n k i s n o t i n a p o s i t i o n t o m ake sa m e -d a y
d e l i v e r y a g a i n s t p a y m e n t, h o w e v e r, a r e n o t now c l a s s i f i e d a s a d e p o s i t
u n d e r R e g u l a ti o n s D and Q.

The s u b s t a n t i a l i n c r e a s e i n t h e u s e o f d u e

b i l l s s i n c e a d o p ti o n o f t h e 1966 am endm ents e v id e n c e s a n a p p a r e n t n e e d t o

-2-

a p p ly a c l e a r e r s ta n d a r d t o d u e b i l l t r a n s a c t i o n s and t o I n s u r e t h a t
w hen u s e d a s a m eans o f o b t a i n i n g f u n d s , fu n d s s o o b t a i n e d a r e s u b j e c t
t o t h e r e s e r v e an d I n t e r e s t r a t e p r o v i s i o n s o f R e g u l a ti o n s D and Q.
The p ro p o s e d am endm ents w ould n o t a p p ly r e s e r v e r e q u i r e m e n ts and
i n t e r e s t r a t e l i m it a ti o n s to due b i l l tr a n s a c tio n s t h a t a r e f u l l y se c u re d
by s e c u r i t i e s s i m i l a r t o t h o s e t h a t a r e t h e s u b j e c t o f t h e d u e b i l l t r a n s ­
a c t i o n and t h e r e b y w ould e s t a b l i s h a p r e s u m p tio n i n R e g u l a ti o n s D and Q
t h a t u n c o ll a te r a li z e d due b i l l s a r e is s u e d p r i n c i p a l l y f o r th e p u rp o se
o f o b t a i n i n g fu n d s f o r t h e i s s u i n g b a n k .
To a id i n t h e c o n s i d e r a t i o n o f t h e m a t t e r by th e B o a rd , i n t e r e s t e d
p e rso n s a r e in v ite d

t o s u b m it r e l e v a n t d a t a , v i e w s , and a r g u m e n ts .

Any

s u c h m a t e r i a l s h o u ld b e s u b m itte d i n w r i t i n g t o t h e S e c r e t a r y o f t h e B oard
o f G o v e rn o rs o f t h e F e d e r a l R e s e rv e S y s te m , W a s h in g to n , D. C . 2 0 5 5 1 , t o b e
r e c e i v e d n o t l a t e r th a n J a n u a r y 1 8 , 1 9 7 4 .

S uch m a t e r i a l w i l l b e m ade 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 u p o n r e q u e s t , e x c e p t a s p r o v id 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 r e g a r d i n g a v a i l a b i l i t y o f i n f o r m a t i o 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 s
2 0 4 .1 ( f ) o f R e g u l a ti o n D (1 2 CFR p a r t 204) and 2 1 7 .1 ( f ) o f R e g u l a ti o n Q
(12 CFR 217) b y a d d in g a new s e n te n c e a t t h e end t h e r e o f to r e a d a s f o l l o w s :
201*-. 1— D e f i n i t i o n s
2 1 7 .1 — D e f i n i t i o n s
*

(f)
o b lig a tio n s .

*

*

D e p o s i ts a s i n c l u d i n g c e r t a i n p r o m is s o r y n o t e s an d o t h e r

-3 -

*

*

*

N o tw ith s ta n d in g t h e f o r e g o i n g , t h e te rm
any l i a b i l i t y

’d e p o s i t ' i n c l u d e s

o r u n d e r t a k in g on th e p a r t o f a member b a n k t o s e l l o r

d e l i v e r s e c u r i t i e s to o r p u r c h a s e s e c u r i t i e s f o r t h e a c c o u n t o f any
c u s to m e r , i n v o lv i n g t h e r e c e i p t o f f u n d s by t h e member b a n k o r a d e b i t
to a n a c c o u n t o f s u c h c u s to m e r b e f o r e t h e s e c u r i t i e s a r e d e l i v e r e d , u n l e s s
su ch l i a b i l i t y

o r u n d e r t a k in g i s f u l l y s e c u r e d by c o l l a t e r a l c o n s i s t i n g o f

s e c u r i t i e s s i m i l a r t o and w ith a n a g g r e g a t e m a r k e t v a l u e a t l e a s t e q u a l
to t h a t o f t h e s e c u r i t i e s w h ic h a r e t h e s u b j e c t o f t h e member b a n k 's
lia b ility

o r u n d e rta k in g .
By o r d e r o f t h e B oard o f G o v e r n o rs , D ecem ber 1 3 , 1 9 7 3 .

( S ig n e d )

C h e s te r B. F e ld b e r g

C h e s te r B.
S e c re ta ry o f

[SEAL]

F e ld b e rg
t h e B o a rd

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