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F ederal Reserve Bank
DALLAS. TEXAS
of
Dallas
7S222
Circular No. 80-229
December 4, 1980
A M E N D M E N T TO R E G U L A T IO N
D
C a lc u la tio n o f E u ro cu rren cy L ia b ilitie s
T O A L L U .S . B A N K S
BRANCHES AND
A G E N C IE S O F
ELEVENTH
W IT H F O R E I G N
ALL BRANCH ES AND
F O R E I G N B A N K S IN T H E
F E D E R A L R E SE R V E D IST R IC T :
P r in te d on t h e fo llo w in g p a g e is th e t e x t o f a p r e ss r e le a s e issu e d on
N o v e m b e r 26, 1 9 8 0 , by th e Board o f G o v ern o rs o f th e F ed er a l R e se r v e S y ste m
a n n o u n c in g a r e v is io n o f R e g u la tio n D , R e s e r v e R e q u ir e m e n ts o f D e p o s ito r y
In stitu tio n s, a f f e c t in g th e c a lc u la tio n o f E u ro cu rren cy lia b ilitie s by d o m e s tic
d e p o s it o r y in s t it u t io n s an d b y U .S . b r a n c h e s an d a g e n c i e s o f f o r e ig n b an k s.
T h e r e v is e d r e g u la tio n p e r m its an in stitu tio n t o u se lo a n s
o f f i c e s n o t o n ly t o o f f s e t b o r r o w in g s fro m fo r e ig n o f f i c e s b u t a ls o t o
a m o u n t o f a s s e t s s o l d t o f o r e i g n o f f i c e s a n d , in t h e c a s e o f d o m e s t i c
in s t it u t io n s , lo a n s b y f o r e ig n b r a n c h e s t o U .S . r e s id e n t s . T h is c h a n g e
t o a v o id im p o sin g r e s e r v e r e q u ir e m e n ts on th e s a m e fu n d s t w i c e .
to fo re ig n
o ffs e t the
d e p o sito r y
is in te n d e d
A c o p y o f t h e r e v i s e d a m e n d m e n t w i l l b e p r o v i d e d in t h e n e a r f u t u r e
f o r i n s e r t i o n in t h e R e g u l a t i o n s B i n d e r f u r n i s h e d b y t h i s B a n k .
In t h e i n t e r i m ,
y o u sh o u ld r e f e r t o t h e e n c l o s e d F e d e r a l R e g is t e r d o c u m e n t fo r t h e fu ll t e x t o f
th e r e v isio n to R e g u la tio n D.
S in c e r e ly
yours,
R o b e r t H . B o y k in
F ir st V ice
P r e sid e n t
E n clo su r e
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
FE D E R A L
R E S E R V E
p re s s r e le a s e
For immediate release
November 26, 1980
The Federal Reserve Board today announced a revision of its
Regulation D -- Reserve Requirements of Depository Institutions -- affecting
the calculation of Eurocurrency liabilities by domestic depository
institutions and by U.S. branches and agencies of foreign banks. These
liabilities are being phased in to a 3 percent reserve requirement under
Regulation D.
At present,
in calculating Eurocurrency reserve requirements,
loans of a financial institution in the United States to its offices
abroad may be used only to offset funds received by the
institution
from its offices abroad.
As revised, the regulation permits an institution to use loans
to foreign offices not only to offset borrowings from foreign offices
but also to offset the amount of assets sold to foreign offices and, in
the case of domestic depository institutions, loans by foreign branches
to U.S. residents.
The change is intended to avoid imposing reserve requirements
on the same funds twice:
once, when the funds advanced to the foreign
branch are raised in this country, and again when they are used by a
foreign office to purchase assets from a domestic office or when they
are lent by a foreign branch of a domestic depository institution to a
resident of the United States.
The Board's notice of this action is attached.
Attachment
# # # # # # # # #
TITLE 12 —
CHAPTER II —
BANKS AND BANKING
FEDERAL RESERVE SYSTEM
SUBCHAPTER A — BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
[Regulation D]
(Docket No. R-0332)
Part 204 —
RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
Eurocurrency Liabilities
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final rule.
SUMMARY: The Board has amended Regulation D— Reserve Requirements of
Depository Institutions (12 CFR Part 204) to permit a U. S. depository
institution or Edge or Agreement Corporation to use net balances ad
vanced to its foreign branches to offset the amount of credit extended
by its foreign branches to United States residents and the amount of
assets sold to its foreign branches or to foreign offices of an affil
iated Edge or Agreement Corporation. In addition, a United States branch
or agency of a foreign bank will be permitted to use net balances ad
vanced to its foreign bank (including its branches located outside the
United States) to offset the amount of assets sold to its foreign bank
(including its branches located outside the United States), its parent
holding company, and non-United States offices of an affiliated Edge
or Agreement Corporation. This action will result in more equitable
application of reserve requirements on Eurocurrency liabilities by elim
inating the possibility that institutions would hold double reserves
as a result of certain Eurocurrency transactions.
EFFECTIVE DATE: The maintenance period beginning December 11, 1980,
for transactions occurring during the reserve computation period be
ginning November 27, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), or Paul S. Pilecki, Attorney (202/452-3281),
Legal Division; Sydney J. Key, Economist, Division of International
Finance (202/452-3697), Board of Governors of the Federal Reserve System,
Washington, D. C. 20551.
SUPPLEMENTARY INFORMATION: The Board of Governors has adopted amendments
to Regulation D— Reserve Requirements of Depository Institutions (12
CFR Part 204) to permit a depository institution to reduce, by the amount
of its net advances to its foreign branches, the amount of its Eurocurrency
- 2 liabilities representing credit extended to United States residents
by its foreign branches and assets held by its foreign branches or by
foreign offices of an affiliated Edge or Agreement Corporation that
were acquired from its United States offices. This amendment affects
the amount of required reserves on Eurocurrency liabilities for depos
itory institutions organized under the laws of the United States and
its States and for Edge and Agreement Corporations ("domestic institu
tions") .
In addition, the Board has amended Regulation D to permit
a United States branch or agency of a foreign bank ("branch or agency")
to reduce the amount of its Eurocurrency liabilities representing assets
acquired from the United States branch or agency that are held by its
foreign bank (including offices thereof located outside the United States)
by its parent holding company, or by foreign offices of an affiliated
Edge or Agreement Corporation by the amount of its net advances to its
foreign bank (including offices thereof located outside the United States)
Branches and agencies are not subject to reserve requirements on the
amount of credit extended to U. S. residents by their overseas offices.
Under Regulation D, at present, Eurocurrency liabilities of
a domestic institution include the sum of (1) positive net balances
due to its non-United States offices from its United States offices;
(2) assets held by its non-United States offices that were acquired
after October 6 , 1979, from its United States offices ("assets sold");
and (3) credit outstanding from non-United States offices of a depos
itory institution to United States residents with certain exceptions
("loans to U. S. residents”). Thus, the amount of assets sold to for
eign branches and the amount of branch loans to U. S. residents cannot
be offset by any negative net balances due to its foreign offices by
a domestic depository institution. However, if an institution were
a net lender of funds to its foreign branches, funds that were advanced
to the foreign branches and used to purchase assets from the U. S. office
or for a loan to a U. S. resident might be counted twice for reserve
purposes, since the funds advanced to the foreign branches already may
have been subject to reserve requirements as a domestic transaction.
Therefore, the Board has amended the definition of "Eurocurrency liabil
ities" so that net balances of a domestic institution advanced to its
foreign branches may be used to offset the amount of its foreign branch
loans to u. S. residents and the amount of assets sold to its foreign
branches.
With regard to branches and agencies, Eurocurrency liabilities
include the sum of (1) positive net balances due to its foreign bank
(including offices thereof located outside the United States) after
deducting a capital equivalency allowance, and (2) assets held by its
foreign bank (including offices thereof located outside the United States)
- 3 -
by its parent holding company, or by non-United States offices of an
affiliated Edge or Agreement Corporation ("assets sold by branches and
agencies") that were acquired from the branch or agency after October 6 ,
1979. Since similar considerations that apply to the offsetting of
assets sold by domestic institutions apply in the case of assets sold
by branches and agencies, a branch or agency will be permitted to offset
the amount of its assets sold by the amount of any net advances to its
foreign bank, including offices thereof located outside the United States.
A branch or agency also will be permitted to apply its capital equiv
alency allowance to offset assets sold in computing the amount of Euro
currency liabilities.
These amendments are effective for reserves required to be
maintained during the seven-day period beginning December 11, 1980,
against Eurocurrency liabilities outstanding during the reserve computa
tion period beginning November 27, 1980. The Board believes that these
modifications will provide more equitable treatment to depository in
stitutions and branches and agencies consistent with the needs of mon
etary policy. Consequently, the Board, for good cause finds that the
notice, public procedure, and deferral of effective date provisions
of 5 U.S.C. § 553(b) with regard to this action are impracticable and
contrary to the public interest.
Effective December 11, 1980, pursuant to the Board's authority
under sections 19, 25 and 25(a) of the Federal Reserve Act (12 U.S.C.
S§ 461 et seq., 601 et seq., 611 et seq.) and section 7 of the Inter
national Banking Act of 1978 (12 U.S.C. $ 3105), Regulation D (12 CFR
Part 204) is amended as follows:
In section 204.2, paragraph (h) is revised to read as follows:
SECTION 204.2— DEFINITIONS
*
(h)
*
*
*
*
"Eurocurrency liabilities" means:
(1) For a depository institution or an Edge or Agreement
Corporation organized under the laws of the United States, the sum,
if positive, of the following:
(i)
from its United States offices,
net balances due to its non-United States offices
(ii)
assets (including participations) held by its non
United States offices or by non-United States offices of an affiliated
Edge or Agreement Corporation that were acquired after October 6 , 1979,
from its United States offices, and
- 4 (iii)
credit outstanding from its non-United States offices
to United States residents (other than assets acquired and net balances
due from its United States offices), except credit extended (i) in the
aggregate amount of $100,000 or less to any United States resident,
(ii) by a non-United States office that at no time during the computa
tion period had credit outstanding to United States residents exceeding
$ 1 million, or (iii) to an institution that will be maintaining reserves
on such credit pursuant to this Part. Credit extended to a foreign
branch, office, subsidiary, affiliate or other foreign establishment
("foreign affiliate”) controlled by one or more domestic corporations
is not regarded as credit extended to a United States resident if the
proceeds will be used in its foreign business or that of other foreign
affiliates of the controlling domestic corporation(s).
(2)
For a United States branch or agency of a foreign bank,
the sum, if positive, of the following:
(i)
net balances due to its foreign bank (including offi
thereof located outside the United States) after deducting an amount
equal to 8 per cent of the following: the United States branch's or
agency's total assets less the sum of United States currency and coin,
cash items in process of collection, unposted debits, balances due from
depository institutions organized under the laws of the United States,
balances due from other foreign banks, balances due from foreign central
banks, and net balances due from its foreign bank and the foreign bank's
United States and non-United States offices, and
(ii)
assets (including participations) held by its foreign
bank (including offices thereof located outside the United States),
by its parent holding company, or by non-United States offices of an
affiliated Edge or Agreement Corporation that were acquired after October 6 ,
1979, from the United States branch or agency (other than assets required
to be sold by Federal or State supervisory authorities).
*
*
*
*
*
By order of the Board of Governors, November 26, 1980.
(signed)
Theodore E. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
@FedFRASER