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F e d e r a l R e s e r v e Ba n k DALLAS, TEXAS of Dallas 75222 Circular No. 73-127 May 2k, 1973 CHANGES TO REGULATIONS D, M, AND Q To All Member Banks in the Eleventh Federal Reserve District: On May l6 , 1973? the Board announced several changes in Regulations D, M, and Q,. 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. The changes announced by the Board will: 1. Impose an 8 per cent marginal reserve requirement (the regular 5 per cent plus a supplemental 3 per cent) on further increases in the total of (a) outstanding certificates of deposit of $100,00 0 and over issued by member banks, and on (b) outstanding funds obtained by a bank through is suance by an affiliate of obligations subject to the existing reserve re quirement on time deposits. The 8 per cent marginal reserve would not apply to banks whose obligations of these types aggregate less than $10 million. 2. Reduce from 20 per cent to 8 per cent the reserve requirement on certain foreign borrowings of U.S. banks, primarily Euro-dollars, thus affording roughly parallel treatment at present with the marginal reserve requirement on large-denomination certificates of deposit and bank-related commercial paper. The Board also acted to eliminate gradually the reservefree bases still held by some banks subject to this measure. 3. Suspend the ceilings that apply to the rate of interest commercial banks may pay on certificates of deposit of $ 100,000 and over (large CDs) that mature in 90 days or more, effective immediately. There are attached the following materials regarding the changes to Regulations D, M, and Q,. A. Supplement to Regulation D as ammended effective June 21, 1973* B. Amendment to Regulation M effective June 21, 1973* C. Supplement to Regulation Q, effective May l6 , 1973. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) -2- At the appropriate time, the member bank should include these supplements and amendment in the ring binder of bulletins and regulations furnished by this Bank. Yours very truly, P. E. Coldwell, President Attachments (3 ) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION D As amended effective June 21, 1973 SE C T IO N 2 0 4 .5 — R E S E R V E R E Q U IR E M E N T S (a) Reserve percentages. Pursuant to the provi sions of section 19 of the Federal Reserve Act and § 204.2(a) and subject to paragraph (c) of this section, the Board of Governors of the Federal Reserve System hereby prescribes the following reserve balances which each member bank of the Federal Reserve System is required to maintain on deposit with the Federal Reserve Bank of its district: (1) If not in a reserve city— (i) 3 per cent of (A ) its savings deposits and (B) its time deposits, open account, that constitute deposits of individuals, such as Christmas club ac counts and vacation club accounts, that are made under written contracts providing that no with drawal shall be made until a certain number of periodic deposits have been made during a period of not less than 3 months; and (ii) 3 per cent of its other time deposits up to $5 million, plus 5 per cent of such deposits in excess of $5 million: Provided, however, That a member bank shall maintain a reserve balance equal to 8 per cent of the amount by which the daily average amount of time deposits of the types hereinafter specified exceeds either the daily aver age amount of such time deposits outstanding during the computation period ending May 16, 1973, or $10 million, whichever is greater, and such 8 per cent reserve percentage shall apply with respect to time deposits of the following types: (a) single maturity time deposits of $100,000 or more; and (b) any other time deposits exempt from the rate limitations of Regulation Q, other than a deposit due to ( i ) a foreign banking office of a bank, or (ii) an institution the time deposits of which are described in § 217.3(g) thereof, and (iii) (a) 8 per cent of its net demand deposits if its aggregate net demand deposits are $2 million or less, ( b ) $160,000 plus 10 per cent of its net demand deposits in excess of $2 million if its aggregate net demand deposits are in excess of $2 million but less than $10 million, (c) $960,000 plus 12 per cent of its net demand deposits in ex cess of $10 million if its aggregate net demand deposits are in excess of $10 million but less than $100 million, or ( d ) $11,760,000 plus 13 per cent of its net demand deposits in excess of $100 million. (2) If in a reserve city (except as to any bank located in such a city that is permitted by the Board of Governors of the Federal Reserve Sys tem, pursuant to § 2 0 4 .2 (a ) (2 ) , to maintain the reserves specified in subparagraph (1) of this paragraph) — (i) 3 per cent of (A ) its savings deposits and (B) its time deposits, open account, that constitute deposits of individuals, such as Christmas club accounts and vacation club accounts, that are made under written contracts providing that no with drawal shall be made until a certain number of periodic deposits have been made during a period of not less than 3 months; and (ii) 3 per cent of its other time deposits up to $5 million, plus 5 per cent of such deposits in excess of $5 million: Provided, however, That a member bank shall maintain a reserve balance equal to 8 per cent of the amount by which the daily average amount of time deposits of the types hereinafter specified exceeds either the daily aver age amount of such time deposits outstanding during the computation period ending May 16, 1973, or $10 million, whichever is greater, and such 8 per cent reserve percentage shall apply with respect to time deposits of the following types: (a) single maturity time deposits of $100,000 or more; and ( b ) any other time deposits exempt from the rate limitations of Regulation Q, other than a deposit due to (/) a foreign banking office of a bank, or (//) an institution the time deposits of which are described in § 217.3(g) thereof, and (iii) $50,760,000 plus \lV z per cent of its net computed under § 2 0 4 .3 (a ) (2 ) , and deficiencies u n d er th is p a r a g r a p h s h a ll be s u b j e c t e d to demand deposits in excess of $400 million. § 2 0 4 .3 (b ):9 (b) Currency and coin. The amount of a mem Provided, That any bank that, under the terms of ber bank’s currency and coin shall be counted as § 204.5(c) of Regulation D as in effect prior to reserves in determining compliance with the re June 21, 1973,10 was deducting for the com serve requirements of paragraph (a) of this section. putation period ending on May 9, 1973, an earlier (c) Reserve percentages against certain deposits period’s corresponding daily average total of such by foreign banking offices. Deposits represented deposits (hereinafter called “reserve-free base” ) by promissory notes, acknowledgments of ad in calculating its reserve requirements shall con vance, due bills, or similar obligations described tinue to be entitled to do so in accordance with in § 2 0 4 .1 (f) to foreign offices of other banks,8 or the terms of such former section, but such reserveto institutions the time deposits of which are free base shall not exceed progressively lower ceil exempt from the rate limitations of Regulation Q ings established hereunder by reducing the amount pursuant to § 217.3(g) thereof, shall not be sub of its reserve-free base for the computation period ject to paragraph (a ) o f this section or to ending on May 9, 1973, in ten increments, each § 2 0 4 .3 (a ) (1 ) and (2 ); but during each week of equal to 10 per cent of its base in such computa the four-week period beginning June 21, 1973, tion period ending on May 9, 1973, applied con and during each successive four-week ( “main secutively in each succeeding computation period tenance” ) period, a member bank shall maintain beginning with the period ending on August 1, with the Reserve Bank of its district a daily aver 1973, until such reserve-free base is exhausted. age balance equal to 8 per cent of the daily aver age amount of such deposits during the four-week computation period ending on the Wednesday 8 Any banking office located outside the States of the United States and the District of Columbia of a b ank organized under fifteen days before the beginning of the main domestic or foreign law. tenance period. An excess or deficiency in reserves 0 The term “ computation period” in § 2 0 4 .3 (a )(3 ) and (b) shall, for this purpose, be deemed to refer to each week in any week of a maintenance period under this of a maintenance period under this paragraph. paragraph shall be subject to § 2 0 4 .3 (a ) (3 ) , as if 10 35 Federal Register 18658. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FO REIG N A C TIVITIES OF N A TIO N A L B A N K S A M E N D M E N T TO REGULATION Mi- Effective June 21, 1973, § 213.7 is amended to read as follows: SECTION 2 1 3 .7 — RESERVES A G A IN ST FOREIGN BRANCH DEPOSITS tion period ending on May 9, 1973, applied con secutively in each succeeding computation period beginning with the period ending on August 1, 1973, until such reserve-free base is exhausted. (b) Credit extended to United States residents. During each week of the four-week period be (a) Transactions with parent bank. During each ginning June 21, 1973, and during each week of week of the four-week period beginning June 21, each successive four-week maintenance period, a 1973, and during each week of each successive member bank having one or more foreign branches four-week ( “maintenance”) period, a member shall maintain with the Reserve Bank of its dis bank having one or more foreign branches shall trict, as a reserve against its foreign branch de maintain with the Reserve Bank of its district, as posits, a daily average balance equal to 8 per cent a reserve against its foreign branch deposits, a of the daily average credit outstanding from such daily average balance equal to 8 per cent of the branches to United States residents8 (other than daily average total of assets acquired and net balances due from its domestic offices) during the four-week computa (1) net balances due from its domestic offices tion period ending on the Wednesday fifteen days to such branches, and before the beginning of the maintenance period: Provided, That this paragraph does not apply to (2) assets (including participations) held by credit extended (1) to enable the borrower to such branches which were acquired from its comply with the requirements of the Office of domestic offices (other than assets representing Foreign Direct Investments, Department of Com credit extended to persons not residents of the merce,9 or (2 ) under binding commitments en United States), during the four-week computation tered into before May 17, 1973. period ending on the Wednesday fifteen days be fore the beginning of the maintenance period: Provided, That any bank that, under the terms 7 36 Federal Register 1040; 6826. of § 213.7(a) of Regulation M as in effect prior 8 (a) Any individual residing (at the time the credit to June 21, 19737, was deducting for the computa is extended) in any State of the United States or the tion period ending on May 9, 1973, an earlier District of Columbia; (b) any corporation, partner period’s corresponding daily average total of such ship, association or other entity organized therein “net balances due” or “assets held” (hereinafter (“domestic corporation”); and (c) any branch or office located therein of any other entity wherever called “reserve-free base”) in calculating its re organized. Credit extended to a foreign branch, office, serve requirements hereunder shall continue to be subsidiary, affiliate or other foreign establishment entitled to do so in accordance with the terms of (“foreign affiliate”) controlled by one or more such such former section, but such reserve-free base domestic corporations will not be deemed to be credit extended to a United States resident if the proceeds shall not exceed progressively lower ceilings will be used in its foreign business or that of other established hereunder by reducing the amount of foreign affiliates of the controlling domestic its reserve-free base for the computation period corporation (s). ending on May 9, 1973, in ten increments, each 9 The branch may in good faith rely on the bor equal to 10 per cent of its base in such computa rower’s certification that the funds will be so used. t For this Regulation to be complete as amended effective June 21, 1973, retain: 1) Printed Regulation pamphlet as amended effective January 7, 1971. 2) This slip sheet. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION Q Effective May 16, 1973 SECTION 217.7 — MAXIMUM RATES OF INTEREST PAYABLE BY MEMBER BANKS ON TIME AND SAVINGS DEPOSITS Pursuant to the provisions of section 19 of the Federal Reserve Act and § 217.3, the Board of Governors of the Federal Reserve System hereby prescribes the following maximum rates1 of inter est per annum payable by member banks of the Federal Reserve System on time and savings deposits: Maturity Maximum per cent 30 days or more but less than 1 year 5 1 year or more but less than 2 years 5 Vi 2 years or more 5 3A (a) Single maturity time deposits. (1) Deposits of $100,000 or more. There is no maximum rate of interest presently prescribed on any single maturity time deposit of $100,000 or more. (2) Deposits of less than $100,000. N o member bank shall pay interest on any single maturity time deposit or less than $100,000 at a rate in excess of the applicable rate under the following schedule: (b) Multiple maturity time deposits. N o mem ber bank shall pay interest on a multiple maturity time deposit at a rate in excess of the applicable rate under the following schedule: Maturity Intervals Maximum per cent 30 days or more but less than 90 days AVi 90 days or more but less than 1 year 5 1 year or more but less 1 The limitations on rates of interest payable by than 2 years 516 member banks of the Federal Reserve System on 2 years or more 5% time and savings deposits, as prescribed herein, are not applicable to any deposit which is payable (c) Savings deposits. N o member bank shall only at an office of a member bank located outside pay interest at a rate in excess of AVi per cent on the States of the United States and the District of any savings deposit. Columbia.
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