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F ederal

reserve

Ba n k

DALLAS, TEXAS

of

Dallas

75222

Circular No. 70-13&
June 5, 1970

PROPOSED AMENDMENT TO REGULATION D
"RESERVES OF MEMBER BANKS"

To All Member Banks
in the Eleventh Federal Reserve District:

There are attached a copy of a press release and a copy of a
proposed amendment to Regulation D, section 20^.1 (j), as submitted
for publication in the Federal Register.
To aid in the consideration of this matter by the Board,
interested persons are invited to submit relevant data, views, or
arguments.

Any such material should be submitted in -writing to the

Secretary, Board of Governors of the Federal Reserve System, Washington,
D. C. 20551, to be received not later than July 13? 1970.
Requests for additional copies of the circular and any questions
relative thereto should be addressed to the Accounting Department of this
Bank.
Yours very truly,
P. E. Coldwell
President
Attachments (2)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERAL

For immediate release.

RESERVE

June 3 f 1970

The Board of Governors of the Federal Reserve System
today issued for comment a proposed regulatory amendment to
prevent member banks from counting as part of their required
reserves any silver coin they hold for its bullion or numismatic
value.

The deadline for receipt of comments is July 13.
The proposal would amend the Board's regulation governing

the reserves of member banks

(Regulation D) by adding a qualifying

clause to the definition of currency and coin.

A copy of the pro­

posal is attached.
Congress in 1959 amended the Federal Reserve Act to
permit member banks to count currency and coin as part of their
reserves.

The main purpose of that amendment was to accommodate

banks which, because of geographic location or business need, find
it necessary to maintain relatively large amounts of cash on hand.
The 1959 legislation was not designed to apply to coin held by a
member bank to enable either the

bank

in silver.

-0 -

or its customers to speculate

FEDERAL RESERVE SYSTEM
[12 CFR Part 204]
RESERVES OF MEMBER BANKS

Counting Silver Coin as Reserves

The Board of Governors is considering changing the present
definition of "currency and coin" in this part (Regulation D) to
exclude from the scope of that term any coin that is being held
principally for its bullion value

(or numismatic value).

Under the

new definition such coin could no longer be counted as reserves by
member banks, whether held by the bank for its own account or for
the account of a customer.
The proposal being considered is to amend § 204.l(j) to read
as follows:
(j) Currency and c o i n . The term "currency and coin"
means United States currency and coin owned and held by
a member bank, including currency and coin in transit to
or from a Federal Reserve Bank, but not including coin
held principally for its bullion value or numismatic value.
It appears that some member

banks have been holding United

States silver coin under an arrangement contemplating that such coin
may

beacquired from the bank by a customer at less than its bullion

value,

which is now greater than face value with respect to most

outstanding silver coin.

In light of the overall monetary policy

objectives of reserve requirements under section 19 of the Federal
Reserve Act (12 U.S.C. 461) and Regulation D, the Board of Governors
is considering whether it is advisable to continue to permit silver

-2

coin held for this purpose to be counted as reserves by member banks,
since that policy in effect subsidizes, and therefore encourages,
speculation in silver bullion.
To aid in the consideration of this matter by the Board,
interested persons are invited to submit relevant data, views, or
arguments.

Any such material should be submitted in writing to the

Secretary, Board of Governors of the Federal Reserve System,
Washington, D. C. 20551, to be received not later than July 13, 1970.
Under the Board*s rules regarding availability of information (12 CFR
Part 261), such materials will be made available for inspection and
copying upon request unless the person submitting the material asks
that it be considered confidential.
By order of the Board of Governors, June 2, 1970.

(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Deputy Secretary.
(SEAL)

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