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Federal Reserve Bank
of Dallas

ROBERT D. McTEER, JR.
PRESIDENT
AND CHIEF EXECUTIVE OFFICER

June 4, 1999

DALLAS, TEXAS
75265-5906

Notice 99-39
TO:

The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Proposed Amendment to Regulation A
(Extensions of Credit by Federal Reserve Banks)
DETAILS
The Board of Governors of the Federal Reserve System has requested public comment on a
proposed amendment to Regulation A (Extensions of Credit by Federal Reserve Banks). The amendment
establishes a special lending program under which Federal Reserve Banks will extend credit at a rate
above the Federal Open Market Committee’s targeted federal funds rate to eligible institutions to accommodate liquidity needs during the century date change period.
Unlike with adjustment credit, borrowers would not be required to seek credit elsewhere first,
uses of funds would not be limited, and the loans could be outstanding for a considerable period.
The Board must receive comments by July 2, 1999. Please address comments to Jennifer J.
Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W.,
Washington, DC 20551. All comments should refer to Docket No. R-1038.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 28768–70, Vol. 64, No. 102 of the
Federal Register dated May 27, 1999, is attached.
MORE INFORMATION
For more information, please contact Michael Turner at (214) 922-5573. For additional
copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254.
Sincerely yours,

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

28768

Federal Register / Vol. 64, No. 102 / Thursday, May 27, 1999 / Proposed Rules

replace the card. If the State agency
intends to collect the fee by reducing
the monthly allotment, it must follow
FNS reporting procedures for collecting
program income. States agencies
currently operating EBT systems must
inform FNS of their proposed collection
operations. States in the process of
developing an EBT system must include
the procedure for collection of the fee in
their system design document. All plans
must specify how the State agency
intends to account for card replacement
fees and include identification of the
replacement threshold, frequency and
circumstances in which the fee shall be
applicable.
*
*
*
*
*
(i) * * *
(6) * * *
(iv) State agencies may require the use
of a photograph of one or more
household members on the card. If the
State agency does require the EBT cards
to contain a photo, it must establish
procedures to ensure that all
appropriate household members or
authorized representatives are able to
access benefits from the account as
necessary.
*
*
*
*
*
Dated: May 17, 1999.
Shirley R. Watkins,
Under Secretary for Food, Nutrition, and
Consumer Services.
[FR Doc. 99–13554 Filed 5–26–99; 8:45 am]
BILLING CODE 3410–30–U

FEDERAL RESERVE SYSTEM
12 CFR Part 201
[Regulation A; Docket R–1038]

Extensions of Credit by Federal
Reserve Banks
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

SUMMARY: The Board is proposing to
amend its Regulation A to establish a
special lending program under which
Federal Reserve Banks will extend
credit at a rate above the Federal Open
Market Committee’s targeted federal
funds rate to eligible institutions to
accommodate liquidity needs during the
century date change period. Unlike
adjustment credit, borrowers would not
be required to seek credit elsewhere
first, uses of funds would not be limited,
and the loans could be outstanding for
a considerable period.
DATES: Comments must be submitted on
or before July 2, 1999.

Comments, which should
refer to Docket No. R–1038, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th and C
Streets, NW, Washington, D.C. 20551.
Comments addressed to Ms. Johnson
also may be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m. and to the security control room
outside of those hours. Both the mail
room and the security control room are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, NW. Comments
may be inspected in Room MP–500
between 9:00 a.m. and 5:00 p.m.
FOR FURTHER INFORMATION CONTACT:
James A. Clouse, Chief, Monetary and
Financial Market Analysis Section (202/
452–3922), or William R. Nelson,
Economist (202/452–3579), Division of
Monetary Affairs; Oliver I. Ireland,
Associate General Counsel (202/452–
3625), or Stephanie Martin, Senior
Counsel (202/452–3198), Legal Division.
For the hearing impaired only, contact
Diane Jenkins, Telecommunications
Device for the Deaf (TDD) (202/452–
3544), Board of Governors of the Federal
Reserve System, 20th and C Streets,
NW, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The Board
is requesting comment on proposed
amendments to its Regulation A (12 CFR
part 201), Extensions of Credit by
Federal Reserve Banks, to provide an
additional mechanism under which
Federal Reserve Banks will make
discount window credit available to
depository institutions in the months
surrounding the century date change.
The Board expects that, with advance
planning, depository institutions will be
able to meet their liquidity needs during
the century date change period relying
on their usual sources of funds,
including adjustment credit at the
discount window. The Board
recognizes, however, that uncertainty
surrounds potential developments over
the period. The proposed Special
Liquidity Facility is intended to provide
that an assured source of funds is
available to relieve unusual liquidity
pressures that depository institutions
may experience.
ADDRESSES:

Background
Depository institutions and their
customers are now making plans to
meet possible credit needs in the period
surrounding the century date change.
Uncertainty exists, however, as to the
extent of demands and the cost and
availability of credit in the market
during the year-end period.
Furthermore, banks are handicapped in

playing their traditional role as lenders
to non-banks by the possibility that the
banks themselves will be under some
liquidity pressure at that time. Liquidity
pressure could come from conversion of
deposits to currency and shifting of
credit demands to banks from markets.
Moreover, the incidence of credit
demands is extremely difficult to
predict and could involve pressures on
small or medium-sized depository
institutions that are customarily
suppliers of funds to larger institutions
and markets and hence would not have
well-established borrowing
relationships.
To a considerable extent, Federal
Reserve open market operations can
meet liquidity demands in reserve
markets, such as the large seasonal
increase in demand for currency in
November and December of each year.
During the century date change period,
however, demands for and supplies of
reserves will be very difficult to predict.
The unusual funding situations of
institutions and uncertainty about the
status of potential borrowers may
disrupt the normal distribution of
reserves and liquidity through markets.
Volatility in the demand for reserves
could be compounded by a drop in
required reserve balances at the Reserve
Banks as depository institutions
increase vault cash holdings to meet
potential customer demands.
Banking supervisors have urged
depository institutions to make firm
contingency plans for meeting
unexpected liquidity demands during
the century date change period.
Supervisors have encouraged depository
institutions to make the Federal
Reserve’s discount window part of those
plans. Although borrowing through the
usual adjustment credit facility of the
discount window should be adequate to
meet most unusual needs and alleviate
possible pressures on money markets, in
practice depository institutions have
been reluctant in the past to take
advantage of such credit. Moreover,
adjustment credit requires borrowers to
seek funds elsewhere first, limits uses of
such credit, and is usually limited in
duration.
Special Liquidity Facility
The proposed Special Liquidity
Facility would make collateralized
Federal Reserve Bank credit more freely
available, albeit at an interest rate
somewhat above depository institutions’
normal cost of funds. By assuring the
availability of Reserve Bank credit, the
Facility should enable depository
institutions and their customers to
commit to meeting possible credit needs
with greater confidence. The Facility

Federal Register / Vol. 64, No. 102 / Thursday, May 27, 1999 / Proposed Rules
should also help to damp any tendency
for money markets to tighten owing to
transitory imbalances in the supply and
demand of reserves.
Rate and Duration
Credit under the Special Liquidity
Facility would be available from
November 1, 1999, to April 7, 2000, at
a spread over the Federal Open Market
Committee’s targeted federal funds rate.
The Board tentatively proposes that the
spread be set at 1.5 percentage points,
but the Board specifically requests
comment on whether the size of the
proposed spread is appropriate. The
Board would like the spread to be high
enough to encourage institutions to
continue to make private-sector
arrangements to meet potential funding
needs, but low enough to provide a
reasonable backstop should, contrary to
the Board’s expectations, concerns
about the century date change or the
change itself begin to put strains on
funding and credit markets. The Board
also requests comment on how long the
facility should be open, in particular
whether it should begin earlier so that
loans under the facility would be
available as one means to fund the
build-up in the vault cash inventories
expected to occur in the early fall.
Depository institutions will not be
expected to make portfolio adjustments
to repay loans promptly. Special
Liquidity Facility loans may be
outstanding for a considerable period—
until the program expires. This is in
contrast to adjustment credit, which is
generally expected to be repaid
expeditiously. Institutions that
anticipate a very short-term need for
Federal Reserve credit (such as meeting
reserve requirements on the last day of
a maintenance period), including
institutions that have loans outstanding
under the Special Liquidity Facility,
could continue to obtain regular
adjustment credit at the basic discount
rate.
Collateral
The collateral requirements for
Special Liquidity Facility credit would
be identical to those for other discount
window loans, all of which must be
fully collateralized to the satisfaction of
the Reserve Bank. Borrowing
institutions must have pre-positioned
collateral (as well as have the necessary
authorizations signed) to have access to
credit the day it is requested. Reserve
Banks accept a wide range of loans and
securities as collateral, but unless the
collateral is traded in active markets,
such as a Treasury or Agency security,
Reserve Banks must have time to
determine the lendable value.

Eligible Borrowers
Although many normal discount
window conditions would not apply,
credit under the Special Liquidity
Facility would remain discretionary.
The Special Liquidity Facility would be
available only to depository institutions
in sound financial condition. For
example, it would not be available to
depository institutions that are
undercapitalized or critically
undercapitalized. Reserve Bank
discounts for and advances to such
institutions are limited by § 201.4 of
Regulation A. That section implements
amendments to section 10B of the
Federal Reserve Act,1 which discourages
the Reserve Banks from making
relatively long-term loans to
inadequately capitalized institutions.
Similarly, in the case of credit unions,
credit under the Special Liquidity
Facility would be available only to
institutions with a net worth ratio (as
defined in section 216 of the Federal
Credit Union Act) 2 of at least six
percent, which qualifies a credit union
as adequately capitalized under that
Act.3 With respect to branches and
agencies of foreign banks, credit under
the Special Liquidity Facility would be
available only to a branch or agency that
is subject to reserve requirements under
Regulation D and where the borrowing
bank meets the equivalent of the Basle
Capital Accord’s minimum standards
for capital and is otherwise considered
to be in sound financial condition.
Even where an institution meets these
minimum requirements, a Reserve Bank
may determine that the institution is not
in sound financial condition and
therefore is ineligible to borrow under
the Special Liquidity Facility. As a part
of making such determinations, the
Board or Reserve Bank may discuss an
institution’s financial condition or other
matters related to the loan with its U.S.
supervisor or, in the case of a foreign
bank, its home country supervisor or
central bank.
Exhaustion of Alternative Liquidity
Sources
Although lending under the Special
Liquidity Facility would continue to be
discretionary, credit under the Facility
would not be subject to the Regulation
A requirement, applicable to adjustment
1 12

U.S.C. 347b(b).
U.S.C. 1790d(o)(3).
3 Section 216 of the Federal Credit Union Act will
take effect on August 7, 2000, except for special
provisions regarding risk-based net worth
requirements, which take effect on January 1, 2001.
The National Credit Union Administration has
initiated rule-making procedures to adopt rules to
implement the Act, but no final rules are yet in
place. See 64 FR 27090, May 18, 1999.
2 12

28769

credit, that the borrower exhaust
alternative liquidity sources before
coming to the discount window. This
requirement is intended to assure that
Reserve Banks are the lenders of last
resort and that discount window
adjustment credit, available at a subsidy
to the market, does not substitute for or
interfere with market mechanisms for
distributing liquidity. In the case of
Special Liquidity Facility credit, the
elevated rate is expected to be sufficient
to discourage most use except when
market mechanisms are under stress.
Permissible Uses of Funds
Similarly, credit under the Special
Liquidity Facility is not subject to
restrictions on use as is adjustment
credit, which is intended to be used for
temporary shortfalls of funds.
Depository institutions could use
Special Liquidity Facility credit to meet
funding shortfalls caused, for example,
by customers drawing down deposits to
obtain currency, but they could also use
such credit to make loans or
investments.
Monitoring
To assure compliance with the
conditions for adjustment credit,
Reserve Banks monitor the activities of
borrowing institutions, especially when
adjustment credit is outstanding longer
than overnight or when the institution
has become a relatively frequent
borrower. Depository institutions
supply balance sheet data to discount
window officers to facilitate this
process. Such monitoring and reporting
usually would not occur under the
Special Liquidity Facility. Supervisory
authorities may need to assess the
condition of the borrowing institution if
the reliance on Reserve Bank credit is
accompanied by signs of financial
trouble. Borrowing by itself, however,
will not be taken as an indication of
underlying problems and will not
trigger intensified oversight.
Regulatory Flexibility Act Certification
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C.
605(b)), the Board certifies that
proposed amendments to Regulation A
will not have a significant adverse
economic impact on a substantial
number of small entities. The rule
would not impose any additional
requirements on entities affected by the
regulation but rather would make an
additional lending facility available to
meet depository institutions’ liquidity
needs related to the century date
change.

28770

Federal Register / Vol. 64, No. 102 / Thursday, May 27, 1999 / Proposed Rules

List of Subjects in 12 CFR Part 201
Banks, banking, Credit, Federal
Reserve System.
For the reasons set out in the
preamble, 12 CFR part 201 is proposed
to be amended as set forth below:
PART 201—EXTENSIONS OF CREDIT
BY FEDERAL RESERVE BANKS
(REGULATION A)
1. The authority citation for 12 CFR
part 201 continues to read as follows:
Authority: 12 U.S.C. 343 et seq., 347a,
347b, 347c, 347d, 348 et seq., 357, 374, 374a
and 461.

2. In § 201.2, new paragraphs (j) and
(k) are added to read as follows:
§ 201.2

Definitions.

the same manner and to the same extent
as an eligible institution if the foreign
bank is in sound financial condition and
holds capital equivalent to the
minimum levels that would be required
under the Capital Accord of the Basle
Committee on Banking Supervision.
5. In § 201.52, a new paragraph (c) is
added to read as follows:

DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration

Background

*

*
*
*
*
(c) Special liquidity facility. The rate
for credit extended to eligible
institutions under the special liquidity
facility provisions in § 201.3(e) is equal
to the targeted federal funds rate plus
1.5 percentage points on each day the
credit is outstanding.
By order of the Board of Governors of the
Federal Reserve System, May 21, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–13551 Filed 5–26–99; 8:45 am]

§ 201.3

This document announces the
availability of and requests comments
on a revised proposed Technical
Standard Order (TSO) C151, Terrain
Awareness and Warning System
(TAWS). The proposed TSO prescribes
the minimum operational performance
standards that TAWS must meet to be
identified with the applicable TSO
marking.
DATES: Comments submitted must be
received on or before July 9, 1999.
ADDRESSES: Send all comments on the
proposed technical standard order to:
Federal Aviation Administration (FAA),
Aircraft Certification Service, Aircraft
Engineering Division, Avionic Systems
Branch, AIR–130, 800 Independence
Avenue, SW., Washington, DC 20591.
Or deliver comments to: Federal
Aviation Administration, Room 815,
800 Independence Avenue, SW.,
Washington, DC 20591.
FOR FURTHER INFORMATION CONTACT:
Michelle Swearingen, Federal Aviation
Administration (FAA), Aircraft
Certification Service, Aircraft

Availability and terms.

*

*
*
*
*
(e) Special liquidity facility for
century date change. Federal Reserve
Banks may extend credit between and
including November 1, 1999, and April
7, 2000, under a special liquidity facility
to ease liquidity pressures during the
century date change period. This type of
credit is available only to eligible
institutions. This type of credit is
granted at a special rate above the basic
discount rate and other market rates for
funds, is available for the entire length
of the period, and is not subject to the
conditions regarding specific use or
exhaustion of other liquidity sources as
is adjustment credit under paragraph (a)
of this section.
4. In § 201.7, the introductory text is
designated as paragraph (a), and a new
paragraph (b) is added to read as
follows:
§ 201.7

*

Branches and agencies.

*
*
*
*
(b) This part applies to a United States
branch or agency of a foreign bank in

Comments Invited
Interested persons are invited to
comment on the proposed TSO listed in
this document by submitting such
written data, views, or arguments, as
they desire, to the aforementioned
specified address. Comments must be
marked ‘‘Comments to TSO C151.’’
Comments received on the proposed
technical standard order may be
examined, both before and after the
closing date, in Room 815, FAA
Headquarters Building (FOB–10A), 800
Independence Avenue, SW.,
Washington, DC 20591, weekdays
except Federal holidays, between 8:30
a.m. and 4:30 p.m. All communications
received on or before the closing date
for comments specified will be
considered by the Director of the
Aircraft Certification Service before
issuing the final TSO.

§ 201.52 Extended credit for depository
institutions.

*
*
*
*
(j) Eligible institution means—
(1) A depository institution as defined
in paragraphs (c)(1) (i) through (iii), (v),
or (vi) of this section that is in sound
financial condition and is not subject to
the borrowing limitations in § 201.4(a)
and (b); or
(2) A depository institution that is a
credit union defined in paragraph
(c)(1)(iv) of this section that is in sound
financial condition and has a net worth
ratio as defined in section 216 of the
Federal Credit Union Act (12 U.S.C.
1790d(o)(3)) of not less than 6 percent.
(k) Targeted federal funds rate means
the federal funds rate targeted by the
Federal Open Market Committee.
3. In § 201.3, new paragraph (e) is
added to read as follows:

*

Engineering Division, Avionic Systems
Branch, AIR–130, 800 Independence
Avenue, SW., Washington, DC 20591,
Telephone: (202) 267–3817, FAX: 267–
5340.
SUPPLEMENTARY INFORMATION:

BILLING CODE 6210–01–P

14 CFR Parts 91, 121, and 135
Terrain Awareness and Warning
System
Federal Aviation
Administration (DOT).
ACTION: Notice of availability for public
comment.
AGENCY:

SUMMARY:

The FAA is developing a new
technical standard order, TSO–C151,
Terrain Awareness and Warning
System. This TSO will prescribe the
minimum operational performance
standards that TAWS equipment must
meet to be identified with the TSO–
C151 Class A or Class B marking. This
is the second opportunity for the public
and the industry to review and
comment upon the proposed TSO before
the FAA publishes it as a final
document. The FAA is giving this
second opportunity for the following
two reasons.
First, the FAA has revised
significantly the proposed TSO as a
result of public comments. On
November 4, 1998, the FAA published
in the Federal Register (63 FR 59494,
November 4, 1998) a notice of
availability for public comment that
announced the availability of and
requested comments on proposed TSO–
C151, Terrain Awareness and Warning
System. In response to the TSO notice
of availability, commenters submitted a
large number of suggested changes,
approximately 300, to the proposed
TSO. In trying to be as flexible and as
accommodating as technically feasible,
the FAA accepted and included most of
the suggested changes. As a result, the
current proposed version is significantly
different than what was originally
proposed with the initial notice of
availability.

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