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F ederal Reserve b a n k of Dallas


C i r c u l a r No. 78-83
J u n e 22, 1978

New Booklet on "A G uide to F e d e ra l R e s e r v e Regulations"


A new booklet e x p la in in g F e d e ra l R e s e r v e re g u la tio n s in " la y m a n 's "
la n g u a g e is now a v a ila b le w itho ut c h a r g e from the F e d e ra l R e s e r v e Bank of
T h e en clo se d booklet, e n title d "A Guide to Federal R e s e r v e R e g u l a ti o n s ,"
is d e s i g n e d to g iv e th e r e a d e r a g e n e r a l o v e rv ie w of th e r e g u la tio n s is s u e d b y th e
Board of G o v e rn o rs of the F e d e ra l R e s e r v e System a n d is not in te n d e d to c ov er
e a c h re g u la tio n in detail o r to e x p la in all of th e v a r io u s p r o v i s i o n s .
Copies of th e n e w booklet may b e o b ta in e d from th e Bank a n d Public
Information D epartm en t of th is B a n k , Ext. 6267.
S in c e r e ly y o u r s ,
E r n e s t T . Baughman

E n c lo s u re

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-8 00 -492 -440 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus
the extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (

A Guide to

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o r

W A S H I N G T O N , D.C. 20551
(April 1978)
Te xt prepared by the Federal Reserve Bank of New Y ork

P refa ce
The Board o f Governors o f the Federal Reserve System and
the Federal Reserve Banks administer more than tw o dozen
regulations affecting a wide variety o f financial activities.
In broad terms, these regulations deal w ith the functions
o f the central bank and its relationships w ith financial insti­
tu tio n s ,th e activities o f commercial banks and bank holding
companies, and consumer credit transactions.
These regulations are the Federal Reserve System's means
of carrying ou t Congressional policies embodied in various
banking laws and assigned to the System. For example, Con­
gress passed laws during the 1930's to restrain the type of
credit-financed speculation th a t contributed to the stock
market crash o f 1929. This legislation assigned to the Sys­
tem the task o f controlling stock market credit. Regulations
T and U were established to implement the law. Regulations
G and X were implemented to deal w ith diffe re nt aspects of
the same problem.
A Guide to Federal Reserve Regulations, as its name
implies, provides a general understanding o f the goals and
scope o f the regulations. This booklet is neither a substitute
fo r the regulations, a comprehensive summary, nor a substi­
tu te fo r interpretations of the regulations. For definitive
answers to specific questions the regulations themselves
should be consulted. Individual copies o f the regulations
can be obtained fro m the Board o f Governors or from
Federal Reserve Banks and their Branches. Pamphlets
explaining consumer and margin regulations in more detail
are also available.

Table of C ontents

Regulations by Subject Matter


A — Loans to Member Banks
B — Equal Credit O p p o rtu nity
C — Home Mortgage Disclosure


D — Reserve Requirements
E — Purchase o f Warrants
F — Securities o f Member Banks
G — Margin Credit Extended by Parties
Other than Banks, Brokers, and Dealers
H — Membership Requirements fo r StateChartered Banks

1 — Member Stock in Federal Reserve Banks
J — Check Collection and Funds Transfer
K — International Banking Corporations
("Edge A c t Corporations” )
0 —

Interlocking Bank Relationships
Foreign Activities o f Member Banks
Relationships w ith Foreign Banks
Loans to Executive Officers o f Member Banks

P — Member Bank Protection Standards
Q — Interest on Deposits
R — Interlocking Relationships Between Securities
Dealers and Member Banks
S — Banking Services Performed fo r StateChartered Members
T — Margin Credit Extended by Brokers and Dealers
U — Margin Credit Extended by Banks
V — Guarantee o f Loans fo r National Defense Work
W — Extensions o f Consumer Credit (revoked)
X — Borrowers Who Obtain Margin Credit
Y — Bank Holding Companies
Z — T ru th in Lending
A A — Consumer Complaint Procedures





R e g u la tio n s b y Subject M atter
Bank Holding Companies
Federal Reserve Banks
Foreign Banking Business
Interlocking Directorates
Other Member Bank Requirements

■Regulation Y
Regulations A , E, I, J,
N ,a n d V
■Regulations K, M,
and N
■Regulations L and R
Regulations D, F, H,
O, P, O, S, and U


-Regulations B, C,
W (revoked), Z,
and A A


-Regulations A , D,
and Q


-Regulations G, T, U,
and X



R e g u l a t i o n Regulation A establishes the conditions and


means by which Reserve Banks lend funds to
member banks and others.

The regulation permits Reserve Banks to extend short-term
adjustment, seasonal, and emergency credit to member
banks and others. Credit extended to member banks usually
takes the fo rm o f an advance on the bank's promissory note
secured by U.S. Government and Federal agency securities,
“ eligible" commercial, agricultural or construction paper, or
bankers' acceptances. Credit also may be extended to
member banks secured by any other acceptable collateral at
a higher rate of interest. Under certain circumstances,
Reserve Banks may discount eligible notes or drafts endorsed
by member banks. The regulation also permits Reserve
Banks to make loans (collateralized by U.S. Government or
agency securities), in emergency circumstances, to ind ivid ­
uals, partnerships, and corporations fo r up to 90 days.
Regulation A requires Reserve Banks to make certain that
credit they extend is not used fo r speculative purposes and
that any paper offered as collateral is acceptable fo r dis­
count or purchase under criteria specified in the regulation.
Moreover, unless it has Board approval, a member bank can­
not channel Federal Reserve credit to nonmember banks.

R e g u l a t i o n Regulation B prohibits creditors fro m dis­


criminating against credit applicants, estab­
lishes guidelines fo r gathering and evaluating
credit inform ation, and requires w ritte n n o ti­
fication when credit is denied.

The regulation prohibits creditors fro m discrim inating
against applicants on the basis of age, race, color, religion,
national origin, sex, marital status, or receipt of income
from public assistance programs. As a general rule, creditors

may not ask on applications the race, color, religion, national
origin, or sex of applicants. In addition, if the application is
fo r individual, unsecured credit, the creditor may not ask
the applicant's marital status. Exceptions apply in the case
of residential mortgage applications, as noted below. Credi­
tors also may not discriminate against applicants who exer­
cise their rights under the Federal consumer credit laws.
Model credit application forms are provided in the regu­
lation to facilitate compliance. By properly using these
forms, creditors can be assured o f being in compliance w ith
the application requirements o f the regulation. Creditors
may use credit-scoring systems that allocate points or weights
to key applicant characteristics. Creditors also may rely on
their own judgment o f an applicant's creditworthiness.
The regulation also requires creditors to give applicants
a w ritte n notification o f rejection o f an application, a state­
ment o f the applicant's rights under the Equal Credit
O pp o rtu n ity A ct, and a statement either o f the reasons for
the rejection or of the applicant's right to request the rea­
sons. Creditors who furnish credit inform ation must, when
reporting inform ation on married borrowers, report in fo r­
mation in the names o f each spouse.
The regulation establishes a special residential mortgage
credit m onitoring system fo r regulatory agencies by requir­
ing th a t lenders ask residential mortgage applicants their
race/national origin, sex, marital status, and age.

R e g u l a t i o n Regulation C requires depositary institutions


making Federally related mortgage loans to
make annual public disclosure o f the loca­
tions o f certain residential loans.

The regulation carries ou t the Home Mortgage Disclosure
A c t of 1975, which seeks to provide citizens and public
officials w ith enough inform ation to determine whether

depositary institutions are fu lfillin g their obligations to meet
the housing credit needs o f their local communities.
The regulation applies to most commercial banks, savings
banks, savings and loan associations, building and loan asso­
ciations, homestead associations, and credit unions which
make Federally related mortgage loans. These institutions
must disclose annually the number and total principal
amount o f (a) residential first mortgage loans originated or
purchased and (b) home improvement loans originated or
purchased during the most recent fiscal year.
The Board o f Governors is charged w ith w ritin g regula­
tions to carry out the A c t, while enforcement is left to the
appropriate Federal financial regulatory agencies. The Board
may exempt from Regulation C any institutions complying
w ith substantially similar State or municipal laws or regula­
tions which have adequate provision fo r enforcement.

R e g u la tio n


Regulation D defines the term deposit, speci­
fies the amount o f reserves member banks
must maintain against deposits, establishes
the method fo r computing reserve require­
ments and imposes penalties for reserve

Required reserves are expressed as a percentage of balances
a member bank has in each category o f deposit. The highest
percentage o f reserves must be maintained against funds in
depositors'checking accounts. Reserves are "lagged" so that
they must be maintained fo r the current statement week
(Thursday through Wednesday) against deposits held by the
bank tw o weeks previously.
A member bank meets its reserve requirement prim arily
w ith a balance held at its Federal Reserve Bank, but may also
use currency and coin held in its own vault fo r this purpose.
A member bank may carry an excess or deficiency of
reserves o f not more than 2 per cent o f the required amount


into the fo llo w ing statement week. Further deficiencies are
subject to a penalty.

R e g u l a t i o n Regulation E authorizes Reserve Banks to buy


“ acceptable" short-term obligations o f State,
county, and municipal governments, includ­
ing those o f drainage and reclamation dis­
tricts. The regulation establishes "accepta­
b il i t y " criteria and limits the total amount of
obligations Reserve Banks may purchase.

Reserve Banks may purchase bills, notes, revenue bonds, and
warrants (all defined in the regulation as "w arrants") issued
by States, counties, political subdivisions, and municipalities
in anticipation o f taxes or revenues. The securities must be
the issuer's general obligations and must mature in six months
or less. The issuer must have been in existence fo r at least ten
years and not have defaulted on the interest or principal of
its debts during the previous ten years.
Unless permitted by the Board o f Governors, Reserve
Banks may not purchase and hold more than 25 per cent of
the total outstanding warrants o f a single issuer, or invest
amounts exceeding ten per cent o f its member banks'
deposits in the warrants o f all issuers. In addition, limits
are placed upon the maximum amount o f warrants that can
be purchased by Reserve Banks depending upon the popula­
tion o f the issuing m unicipality.

R e g u la tio n


Regulation F requires certain State-chartered
member banks to register and file financial
statements w ith the Board o f Governors.

The regulation applies to State-chartered member banks that
have 500 or more stockholders and at least $1 m illion in

assets, or whose securities are registered on a national secu­
rities exchange. Generally, it does not apply to banks whose
shares are owned by holding companies since these usually
have fewer than 500 stockholders.
In general, these State-chartered member banks must file
registration statements, periodic financial statements, proxy
statements, statements o f election contests, and various other
disclosures o f interest to investors. Officers, directors, and
principal stockholders also must file reports on their ho ld ­
ings in the bank.
The regulation also prohibits tender offers fo r the stock
o f a bank subject to the regulation unless certain inform a­
tion is filed w ith the Board at the same time.
Regulations issued by the Board o f Governors in this
area are substantially similar to those issued by the Secu­
rities and Exchange Commission. Inform ation filed under
the provisions o f Regulation F is available to the public at
the offices of the Board o f Governors in Washington, D.C.

R e g u l a t i o n Regulation G is one o f fo ur regulations con­


cerning credit extended to finance securities
transactions (see also Regulations T, U, and
X). Regulation G governs credit secured by
margin securities extended or arranged by
parties other than banks, brokers, and dealers.

The regulation applies, w ith the exceptions noted, to any
party who normally extends or arranges credit secured by
margin securities of $100,000 or more in a calendar quarter,
or who has credit outstanding to $500,000 or more during a
quarter. These lenders must register w ith the Board o f Gov­
ernors w ith in 30 days after the quarter ends.
Margin securities are .those listed on national exchanges,
securities convertible into margin securities, most mutual
funds, and over-the-counter securities identified by the
Board o f Governors' Over-the-Counter (OTC) list. (The OTC

list published periodically by the Board is available fro m the
Board or at Federal Reserve Banks.) The amount o f credit a
registered lender can extend or arrange fo r a securities trans­
action based on margin securities may not exceed the “ m axi­
mum loan value" o f the stock securing the credit. The m axi­
mum loan value of stock is a percentage o f current market
value fixed by the Board from tim e to time.
The regulation also includes special provisions covering
loans to finance purchases of securities under stock option
R e g u l a t i o n Regulation H defines the membership require­


ments and conditions fo r State-chartered
banks, describes membership privileges and
conditions imposed on these banks, explains
financial reporting requirements, and sets out
procedures fo r requesting approval to estab­
lish branches and fo r requesting voluntary
w ithdrawal from membership.

State member banks are prohibited under the regulation from
engaging in practices that are unsafe or unsound or that
result in a violation o f law, rule, or regulation.
The regulation also prohibits State-chartered member
banks fro m making or renewing loans secured by improved
real estate or mobile homes located or to be located in flood
hazard areas not covered by the National Flood Insurance
The regulation subjects State member banks issuing or
renewing standby "letters o f c re d it" or "ineligible accep­
tances" or other similar credit extensions to the ceilings the
chartering State imposes on individual or total credit exten­
sions and to the ceiling on loans to affiliates contained in
Section 23A o f the Federal Reserve Act.
Regulation H also requires State-chartered member banks
acting as securities transfer agents to register w ith the Board
o f Governors.

R e g u la tio n


Regulation I requires each bank joining the
Federal Reserve System to subscribe to the
stock o f its D istrict Reserve Bank in an
amount equal to six per cent o f the member
bank's capital and surplus. Half the total must
be paid on approval. The remainder is subject
to call by the Board o f Governors.

A six per cent dividend is paid on paid-in portions o f Reserve
Bank stock. The stock is not transferable and cannot be used
as security.
Whenever a member bank increases or decreases its perma­
nent capitalization, it must adjust its ownership o f Reserve
Bank stock to maintain a six per cent proportion. Payment
fo r additional shares o f Reserve Bank stock, cancellation of
sjiares, as well as semi-annual dividend payments, are made
through the member bank's reserve account.
A member bank's ownership o f Federal Reserve stock is
subject to cancellation on discontinuance o f operations,
insolvency, or voluntary liquidation, conversion to nonmem­
ber status through merger or acquisition, or voluntary or
involuntary term ination o f membership.

R e g u l a t i o n Regulation J establishes procedures, duties


and responsibilities among Federal Reserve
Banks and (1) the senders and payors of
checks and other cash items and noncash
items, and (2) the originators and recipients
o f transfers o f funds.

Regulation J provides fo r an orderly inter-bank system of
collecting checks and other items and settling balances. It
specifies terms and conditions under which Reserve Banks
w ill receive items fo r collection fro m member banks and
other depositors and under which Reserve Banks w ill pre­
sent items to payors. The regulation also provides fo r an
orderly inter-bank system of transferring funds on the

Federal Reserve Communications System. To this purpose,
it specifies terms and conditions under which Reserve Banks
w ill receive and deliver transfer o f funds fro m and to mem­
ber banks.
The Reserve Banks issue operating circulars, detailing the
specific terms and conditions under which they w ill handle
checks, cash and noncash items, and transfers o f funds.

R e g u l a t i o n Regulation K governs the organization, capi­


talization, and operations of domestic corpo­
rations involved in international banking or

Corporations organized to engage in international banking
or other financial operations are chartered by the Board of
Governors under Section 25(a) o f the Federal Reserve Act.
This section o f the A c t was introduced as an amendment in
1919 by Senator Walter E. Edge o f New Jersey. Thus these
corporations are known as "Edge A c t Corporations."
The regulation permits Edge A ct Corporations to engage
in a broad range o f international banking and financial activ­
ities, subject to supervision, while lim iting transactions
w ithin the U.S. to those clearly international in character. It
also imposes reserve requirements on certain deposits o f
these corporations.

R e g u l a t i o n Regulation


L seeks to avoid restraints on
com petition between member banks and
other banking institutions by restricting the
relationships a director, officer, or employee
of a member bank can have w ith other bank­
ing institutions.

The regulation prohibits directors, officers, and employees
of member banks fro m being simultaneously a director, o ff i8

cer, or employee o f another bank, banking association, sav­
ings bank or trust company organized under the National
Banking A c t or under the laws of any State or of the Dis­
tric t of Columbia.
Exceptions are provided fo r situations where the in stitu ­
tions do not appear to be in com petition. For example, a
director, officer, or employee o f a member bank can serve
as a director, officer, or employee o f an institution which is
not located in the same, adjacent, or contiguous city , tow n,
or village.
The regulation provides exceptions fo r certain other inter­
locking relationships, including those w ith banks in low
income or economically depressed areas and banks controlled
by m in o rity groups.
R e g u l a t i o n Regulation M governs the foreign activities o f


member banks, including foreign branching,
reserve requirements, and permissible foreign
banking activities.

Member banks w ith capital stock and surplus of at least
$1 m illio n may establish a foreign branch w ith approval o f
the Board o f Governors. A fte r 30 days notice to the Board,
additional branches may be established in foreign countries
where a member bank has a branch. Operations of foreign
branches are governed by the regulation.
W ith Board approval, a member bank may acquire and
hold stock in foreign banks, providing the member bank has
capital stock and surplus o f at least $1 m illion and th at the
total investment in stocks o f foreign banks and certain other
subsidiaries does not exceed 25 per cent o f capital and sur­
plus. Certain other lim itations are also imposed on invest­
ments in foreign bank stocks.
The regulation imposes reserve requirements on transac­
tions undertaken by foreign branches w ith member banks
and other U.S. residents.

R e g u l a t i o n Regulation N governs relationships and trans­


actions among Reserve Banks and foreign
banks, bankers, and governments and
describes the role of the Board o f Governors
in these relationships and transactions.

The regulation gives to the Board the responsibility for
approving in advance negotiations or agreements by
Reserve Banks w ith any foreign banks, bankers, or govern­
ments. Reserve Banks must keep the Board fu lly advised o f
all foreign relationships, transactions, and agreements.
W ith Board approval, any Reserve Bank may open and
maintain accounts fo r foreign banks or governments, or par­
ticipate in accounts maintained by other Reserve Banks fo r
foreign banks or governments. Accounts payable in foreign
currencies maybe opened and maintained by Reserve Banks
on the books o f Board-designated foreign banks.
Under direction o f the Federal Open Market Committee,
a Reserve Bank maintaining accounts w ith a foreign bank
may undertake negotiations, agreements, or contracts to
facilitate open market transactions. Reserve Banks must
report to the Board at least quarterly on accounts they main­
tain w ith foreign banks.

R e g u l a t i o n Regulation 0 prohibits member banks from

extending credit to their own executive o f f i­
cers, except as specified.

A member bank's loans to any one o f its executive officers
are limited to $45,000 allocated as follows:
• a maximum of $30,000 fo r the officer's
• a maximum o f $10,000 outstanding at any
one time to finance the education of the
officer's children; and

• an additional maximum o f $5,000 fo r pu r­
poses not specified in the regulation.
A ll loans must be reported p ro m p tly to the member
bank's board o f directors. Loans must conform w ith the
type the bank is authorized to make to all borrowers, and
cannot have terms more favorable than those given other
borrowers. The borrowing o ffice r must submit a detailed
financial statement to the member bank. In addition, the
loans, at the option o f the bank, become due and payable
if the officer's outside bank borrowings exceed the limits
on borrowings fro m the member bank.
A member bank officer must report to the bank's board
o f directors w ith in 10 days after outside total bank b o rro w ­
ings in any of the three categories above exceed the amount
that could be borrowed at the member bank.

R e g u l a t i o n Regulation P sets m inim um standards for


security devices and procedures Statechartered member banks must establish to
discourage robberies, burglaries, and larce­
nies and to assist in identifying and appre­
hending persons who c o m m it such acts.

A member bank must appoint a security o fficer to develop
and administer a security program at least equal to the
requirements of the regulation. The program must be in
w riting and approved by the bank's directors.
Each State-chartered member bank must annually file
w ith its D istrict Reserve Bank a signed statement certifying
its compliance w ith the regulation.



R e g u la tio n

Regulation Q defines the term deposit, estab­
lishes rules governing the withdrawal o f sav­
ings deposits and the payment o f time
deposits before m atu rity, and establishes ceil­
ings on the interest rates member banks pay
on savings and time deposits.

Generally, the longer a depositor agrees to leave funds on
deposit, the higher the rate o f interest the bank is permitted
to pay. Should a member bank allow withdrawal fro m a time
deposit before the agreed-upon m a turity o f the deposit, the
bank must impose an interest fo rfe itu re penalty on the
funds w ithdraw n as specified in the regulation.
The regulation also restates the statutory p roh ib itio n
against the payment o f interest on demand deposits con­
tained in Section 19 o f the Federal Reserve A c t and pre­
scribes rules governing the advertising o f interest on deposits.

R e g u l a t i o n Regulation R aims at avoiding interlocking


relationships between securities dealers and
member banks, and, thus, any potential con­
flic t o f interest, collusion, or undue influence
on member bank investment policies or
investment advice to customers.

The regulation restates the general statutory p roh ib itio n on
individuals involved in various phases o f securities activities
(including issuance, flo ta tio n , underwriting, public sale, or
distribution) as either a director, officer, partner, or
employee from serving simultaneously as a director, officer,
or employee o f a member bank.
However, the regulation permits member bank directors,
officers, and employees to serve simultaneously as directors,
officers, partners, or employees o f organizations involved
only in "governm ent" securities transactions. These securi­
ties generally include, fo r example, those o f the United
States, the International Bank for Reconstruction and Devel12

opment, the Tennessee Valley A u th o rity , and the general
obligations of States and municipalities.


R e g u l a t i o n Regulation S provides the means fo r the

Board o f Governors to regulate and examine
banking services performed fo r State-char­
tered member banks by outsiders.

The regulation provides that both the State-chartered mem­
ber bank and the outside party must make w ritten assurances
that services w ill be subject to regulation and examination
just as if they were being performed at the bank.
Among the bank services performed under the regulation
are check and deposit sorting and posting, and preparing
and mailing checks, statements, and notes.

R e g u l a t i o n Regulation T governs credit extensions made


in the course o f business by securities brokers
and dealers, including all members o f national
securities exchanges.

The regulation limits the amount o f credit that may be
extended to customers fo r purchasing or carrying securities
based on the amount o f cash and margin securities contained
in the accounts. Generally, margin securities are those listed
on national exchanges or identified as subject to margin
requirements by the Board o f Governors' Over-the-Counter
stock list.
The maximum credit that may be extended to cover a
purchase o f margin securities—the "loan value"—is the per­
centage of their market value fixed fro m time to time by the
Board. When securities on which credit has been extended
are w ithdrawn fro m an account, cash or securities o f an
equivalent loan value usually must be deposited or a por13

tion o f the account liquidated to the extent necessary to
assure that the loan value o f the account is not exceeded.
The regulation also prescribes rules governing cash trans­
actions among brokers, dealers, their customers, and other
brokers and dealers. It limits the concerns fro m which lend­
ing brokers and dealers may borrow in the ordinary course
o f their business.

R e g u l a t i o n Regulation U limits the amount o f credit a


bank may extend fo r purchasing and carry­
ing margin securities if the credit is secured
directly or indirectly by stock.

I f a loan is to be secured, directly or indirectly, by any stock,
a bank must obtain a properly completed Form U-1 in which
the borrower must state the purpose o f the loan. If the pu r­
pose is to purchase or carry any margin stock, the loan is a
"purpose c re d it." Generally, if purpose credit is stocksecured, it is subject to the credit lim itations and other
restrictions of Regulation U.
Margin stocks include stocks listed on national exchanges,
securities convertible into margin stocks, most mutual funds,

and over-the-counter stocks listed on the Board o f Gover­
nors' OTC list of securities subject to credit regulations.
A t the time a purpose credit subject to Regulation U is
extended, the amount o f the loan may not exceed the
"m a xim u m loan value" o f the securing stock. The maximum
loan value o f stock is a percentage o f current market value
fixed by the Board fro m tim e to time.


R e g u l a t i o n Regulation V facilitates and expedites the


financing o f contractors, subcontractors, and
others involved in national defense w ork.

The Defense Production A c t o f 1950 and Executive Order
10480, as amended, authorize several Federal departments
and agencies to guarantee loans by private financing in stitu ­
tions to contractors, subcontractors, and others involved in
national defense w ork. Regulation V spells o u t the author­
ity granted to Reserve Banks, as fiscal agents o f the United
States, to assist Federal departments and agencies in making
and administering these guarantees. The regulation estab­
lishes procedures fo r processing these loan guarantees and
sets maximum rates o f interest, guarantee fees, and c o m m it­
ment fees.

R e g u l a t ;o!, Regulation W was revoked in 1952.


Regulation W prescribed m inim um downpayments, m axi­
mum maturities and other terms applicable to extensions o f
consumer credit. Such action was authorized by Executive
Order during World War II, and by Congressional legislation
in 1947-1948 and again during the Korean conflict. W ith the
repeal o f authorizing legislation in 1952, Regulation W was


R e g u l a t i o n Regulation X extends the provisions o f Regu­


lations G, T, and U (governing extensions of
credit fo r purchasing or carrying securities in
the United States) to certain borrowers and to
certain types o f credit extensions not specifi­
cally covered by those regulations.

The regulation applies to borrowers who, fo r purposes of
purchasing or carrying securities, obtain credit in the United
States and to borrowers who are "U n ite d States persons" or
foreign persons controlled by, acting in behalf o f or in con­
junction w ith U.S. persons.
Regulation X requires th at subject borrowers obtaining
credit w ith in the U.S. com ply w ith Regulations G, T, or U—
whichever applies to the lenders in the transaction. When
credit is obtained outside the U.S., subject borrowers must
comply as if the foreign lender were subject to Regulations
G, T, or U.
Certain records must be kept by borrowers subject to
Regulation X who obtain credit outside the U.S. that is
secured in any manner by any security. These records must
be substantially similar to those required by Federal Reserve
Form X -1 , and must be kept fo r six years after the credit is
A iding or abetting someone to violate the regulation is
itself a violation.

R e g u l a t i o n Regulation Y relates to the bank and nonbank


expansion o f bank holding companies and to
the divestiture o f impermissible nonbank

Under the Bank Holding Company A ct o f 1956, as amended,
a bank holding company is a company which directly or indi­
rectly owns or controls a bank. The regulation contains pre­
sumptions and procedures the Board uses to determine

whether a company controls a bank. The regulation also
explains the procedures fo r obtaining Board approval to
become a bank holding company and procedures to be f o l­
lowed by bank holding companies acquiring voting shares in
banks or nonbank companies. The Board has specified in the
regulation those nonbank activities th at are closely related
to banking and therefore permissible fo r bank holding com­
panies. The regulation applies a separate test to activities
that are permissible fo r foreign bank holding companies.



Regulation Z prescribes uniform methods of
computing the cost o f credit, disclosure of
credit terms and lease terms, and procedures
fo r resolving billing errors on certain credit

The credit provisions o f the regulation apply to all persons
w ho, in the ordinary course of business, regularly extend or
o ffer to extend, arrange or offer to arrange consumer credit.
Consumer credit is generally defined as credit offered or
extended to individuals fo r personal, fam ily, household, or
agricultural purposes.
The major provisions o f the regulation require lenders to :
• provide borrowers w ith meaningful, w ritten
inform ation on the cost o f credit in terms o f both the
finance charge and the annual percentage rate.
• respond to consumer complaints o f billing
errors on certain credit accounts w ith in a specific period.
• identify credit transactions on periodic state­
ments o f open end credit accounts.
• make sufficient disclosure o f personal prop­
erty leasing terms to enable consumers to compare leasing
and purchasing costs,' and lim it end-term liab ility on cer­
tain leases.
• provide certain rights regarding credit cards.
• inform customers o f the right to rescind cer17

tain real property transactions w ithin a specified period.
advertising credit.



w ith



Regulation A A establishes consumer com ­
plaint procedures.

Under the regulation, any consumer complaint about an
alleged unfair or deceptive a c to r practice by a State member
bank, or an alleged violation o f law or regulation, w ill be
investigated. Complaints should be submitted, preferably in
w riting, to the D irector o f the Division o f Consumer A ffairs
at the Board o f Governors o f the Federal Reserve System,
Washington, D.C. 20551, or to the Reserve Bank fo r the
District in which the institution is located.
The complaint should describe the practice or action
objected to and should give the names and addresses o f the
bank concerned and the person complaining.
The Board w ill attem pt to give a substantive reply w ithin
15 business days, or, if that is not possible, w ill acknowledge
the complaint w ith in 15 business days and set a reasonable
time fo r a substantive reply.
The Board w ill also receive complaints regarding institu­
tions other than State member banks. Complaints about
State-chartered member banks are handled by the Federal
Reserve, and complaints about other institutions w ill be
referred to the appropriate Federal agencies.
A person filing a complaint does not have to be a cus­
tom er o f the institution in question, and the acts or prac­
tices complained o f do not have to be subject to Federal
regulation. Consumers may complain about acts or prac­
tices that may, in fact, be expressly authorized, or not
prohibited, by a current Federal or State law or regulation.