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F ederal R eserve Bank OF DALLAS March 11, 1985 W ILLIAM H. W ALLACE DALLAS, TEXAS 75222 F IR S T V IC E P R E S ID E N T Circular 85-33 TO: All depository institutions and others concerned in the Eleventh Federal Reserve District SUBJECT Establishment of a rate for a temporary seasonal program DETAILS Reserve Reserve be used program Effective March 8, 1985, the Board of Governors of the Federal System approved action by the Board of Directors of the Federal Bank of Dallas to set a rate for a temporary seasonal program. It may as an alternative to credit made available under the regular seasonal which has been in place for many years ATTACHMENTS A copy of the Board's press release announcing the temporary seasonal program is attached. Printed on the reverse side of this circular is a copy of Supplement A to Bulletin 2 which contains the current rate schedule in effect at this Bank. This supplement should be inserted in volume 1 of the Regulations binders and the supplement dated December 21, 1984, should be removed. MORE INFORMATION For further information, please contact the Bank's Loan Department at (214) 651-6241. Sincerely yours, For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800) 527-9200 (interstate). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BULLETIN 2 FEDERAL RESERVE BANK OF DALLAS Supplement A RATES FOR DISCOUNTS AND ADVANCES The following rates with respect to discounts and advances under the Federal Reserve Act and Regulation A are now in effect at this Bank: Rates on Discounts and Advances Per Annum Effective from Basic rate: short-term adjustment credit under 201.3(a) and regular seasonal credit under 201.3(b) (1) of Regulation A 1 ......................................................................... 8% December 24, 1984 Temporary seasonal credit under 201.3(b) ( 1) of Regulation A .............................................................................. 8 V2 % March 8 , 1985 First 60 d a y s ...................................... .................................. 8% December 24, 1984 Next 90 d a y s ...................................... .................................. 9% December 24, 1984 T h ere a fte r.......................................... ................................. 10% December 24, 1984 Other extended credit under 201.3(b) (2 ) of Regulation A (special circum stances credit and credit for institutions under sustained liquidity pressures )2 1 This is also the discount rate for 90-day commercial paper and other paper eligible for discount. 2 At the discretion of the Federal Reserve Bank of Dallas, in cases w here credit is anticipated to be outstanding for prolonged periods and in relatively large amounts, the time period for each rate in the extended credit rate structure may be shortened. This Bank also may apply a flexible rate that takes into account rates on market sources of funds. The flexible rate will not be lower than the basic rate plus one percentage point. 3-11-85 A-l FEDERAL RESERVE press release For irrmediate release March 8, 1985 The Federal Reserve Board today announced a two-part modification in its seasonal credit program. The changes are designed to provide further assuranoe that small- and medium-sized agricultural banks can meet temporary liquidity requirements that might arise in accommodating the needs of their farm borrowers over the forthcoming planting and production cycle. While the great bulk of farm banks appear to have adequate liquidity, the modifications are designed to ensure that liquidity strains do not hamper the necessary flow of credit in various local areas. The modified program to meet seasonal liquidity needs complements loan guarantee actions taken by the administration to help assure a necessary flow of credit to agriculture. The seasonal credit program, which has been in place for many years, provides access to discount window borrowing for institutions that demonstrate recurring financing needs related to seasonal fluctua tions in their deposit flows and loan demands. The program has been modified by (a) certain changes that liberalize amounts available under the regular program and (b) addition of a temporary, simplified program which may be used as an alternative. Modification of Regular Program The regular seasonal program requires an institution to fund a portion of the seasonal swing in its net need for funds (computed fran past and projected patterns of deposit and loan variations) fran its own resources before it can borrow fran the Federal Reserve. The Board has reduoed the amount that a bank must fund fran its own liquidity. - 2- The formula for canputing this deductible has been changed frcm 4 to 2 percent of the first $100 million in deposits, fran 7 to 6 percent of the second $100 million in deposits, while remaining at 10 percent of deposits over $200 million. This change will allow a borrowing institu tion, especially a smaller one, to obtain a greater portion of its sea sonal needs for funds frcm the Federal Reserve. In addition, discount officers will be taking a more flexible approach to the administration of the seasonal credit program, particularly in judging whether there are special factors under current circumstances in the farm econcmy that would modify evaluation of seasonal swings based on historical data. Reserve banks will be making special efforts to acquaint depository institutions with both the regular and temporary seasonal credit facilities. Temporary Simplified Program The temporary simplified program will be available through September as an alternative to smaller banks actively engaged in agricul tural lending and with no or limited access to the national money market. Such banks generally would have less than $200 million in deposits and would have a ratio of loans to farmers or for farm real estate to total leans greater than 17 percent (the average for the banking system of the ratio at each bank of farm loans to total loans). Banks with loan-to- deposit ratios of 60 percent or more would be eligible. For banks that qualify for the program, credit at the discount window would be available to fund half of their total lean growth in ex cess of 2 percent frcm a base level, either the average for February or for the two weeks just prior to submission of an application. Credit under this program may not exceed 5 percent of a bank's deposits. It is - 3- expected that credit will be used primarily to fund loans for agricultural or agricultural-related purposes. Exceptions under the program may be made at the discretion of a Reserve Bank for banks particularly affected by agricultural credit conditions and that lack ready access to national money markets. As a matter of policy, borrowing under this program would be repaid as the seasonal credit needs abate, in no case should such borrow ing, including renewals, be outstanding beyond February 1986. Interest on credit advanced under the special seasonal borrow ing program will be set at a rate that will remain fixed during the time that the credit is outstanding. The rate was initially set at 8-1/2 per cent, a rate between the basic discount rate and the rate on extended credit that is outstanding for more than 60 days. The rate for new loans may be changed as the basic discount rate and extended credit rates are changed. Banks may borrow under either the regular or the temporary seasonal program. They may shift between programs, but may not borrow under both at the same time. The Board also stressed that the discount window would be available on a regular adjustment or extended credit basis where unusual demands developed in local areas as a result of the agricultural credit situation.
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