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F ederal Reserve b a n k o f D allas



Circular No. 77-128
November 22, 1977

(Reserves Against Euro-dollar Borrowings)

The Board of Governors of the Federal Reserve System has
proposed for comment amendments to its Regulation D (Reserves of Member
Banks) and Regulation M (Foreign Activities of National Banks). This
proposed rule would shorten from four weeks to one week the periods for
which reserve requirements that relate to Euro-dollar borrowings of
member banks are computed and maintained.
Printed on the following pages is the text of the proposal
as published in the FEDERAL REGISTER, November 11, 1977Comments on the proposed amendments should be directed to the
Secretary, Board of Governors of the Federal Reserve System, Washington,
D. C. 20551, to be received not later than December 6, 1977. All materials
should include reference to Docket No. R-0128.
Sincerely yours,
Robert H. Boykin
First Vice President

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

W ashington, D.C. 20551. All m aterial
subm itted should include th e Docket
Number R-0128.
R obert F. Gemmill. Associate Director,
Division of In tern atio n al Finance,
Board of Governors of th e Federal
Reserve System, W ashington, D.C.
20551, 202-452-3733.

Extract From
VOL. 1 2 No. 218
Friday, November 11, 1977
p p . 5 8 7 6 0 - 58761

[6210-01 ]
[ 12 CFR Parts 204 and 213 ]
[Reg. D; Beg. M; Docket No. R-0128]

Reserves Against Eurodollar Borrowings

AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
SUMMARY: n i l s proposed rule would
shorten from four weeks to one week the
periods for which reserve requirem ents
th a t relate to Eurodollar borrowings of
member banks are computed and m ain­
tained. This proposed revision deals with
th e tim ing of th e com putation and
m aintenance of certain internationally
related reserve requirem ents.
DATE: Comments m ust be received be­
fore December 6, 1977.
ADDRESS: Secretary, Board of Gover­
nors of the Federal Reserve System,

(1) Under section 204.5(c) of Regulation
D and 213.7 of Regulation M, member
banks now m aintain reserves computed
on th e basis of th eir Eurodollar borrow­
ings and foreign branch loans to United
States residents. A member bank com­
putes its reserve obligation under these
sections on th e basis of th e daily average
to tal of these specified assets and lia­
bilities averaged over a four-week period.
Fifteen days a fter th a t period ends, the,
bank m ust m eet its reserve obligation for
the period by m aintaining a t its Reserve
Bank, over th e next four weeks, daily
average balances sufficient to satisfy the
requirem ent.
The Board is publishing for comment
a proposed revision of section 204.5(c) of
Regulation D and section 213.7 of Regu­
lation M th a t would shorten the period
during which th e reserves required by
those sections are computed from four
weeks to one week and similarly shorten
th e period during which the reserve re ­
quirem ent m ust be satisfied to one week.
The four-week period was originally es­
tablished to perm it member banks to
adjust any large erratic increases in their
gross liability positions resulting from
m ajor swings in international tran sac­
tions, a t a tim e when policy restrictions
made such adjustm ents difficult. Those
policy restrictions are no longer in effect,
and it appears th a t a long reserve com­
putation period m ay n ot be necessary. A
one-week com putation period would
make th e reporting and m aintenance of
these reserves against Eurodollar bor­
rowings more consistent w ith those of
domestic reserves under Regulation D. I t
would also provide th e Board more timely
inform ation on foreign branch lending
to U.S. residents and other domestic uses
of Eurodollars th a n it now obtains.
Under th e proposed revision, a mem­
ber bank would compute its reserve reiiw rem ent on th e basis of its daily aver­
age outstanding Eurodollar borrowings
and foreign branch loans to U.S. resi­
dents during each week and would sa t­
isfy th e requirem ent for th a t week d u r­
ing a week beginning eight days later.
To phase in this revision, which entails
shortening by four weeks th e period be­
tween th e tim e a reserve obligation 'on
1 T his proposed revision d eals w ith th e
tim in g of th e com putation and m aintenance
o f certain intern ation ally relkted reserve re­
quirem ents. It does n ot alter th e rate of those
requirem ents or th e item s to w hich th ey are
applied, and It does n o t affect Che general
dom estic reserve requirem ents o f Regula­
tion D.

Eurodollar transactions Is incurred and
the tim e It Is satisfied, during a tran si­
tional four-week period, reserves would
be required to be m aintained against
Eurodollar transactions under the pres­
en t as well as the proposed method for
computing reserve requirements. There
would be no n et increase in required re­
serves of member banks as a result of
this proposed change. The dates used in
the proposed am endm ent are for illustra­
tive purposes only.
(2) To aid in the consideration of this
m atter by the Board, interested persons
are Invited to submit relevant data,
views, or comments. Any such m aterial
should be subm itted In writing to the
Secretary, Board of Governors of the
Federal Reserve System, W ashington,
D.C. 20551, to be received not later th an
December 6, 1977. All m aterial submitted
should Include the docket number
R-0128. Such m aterial will be made avail­
able for inspection and copying upon re­
quest except as provided in section 261.6
(a) of the B oard’s Rules Regarding
Availability of Inform ation (12 C .PR.
§ 261.6(a)).
(3) This action is proposed pursuant
to th e Board’s authority under sections
19 and 25 of the Federal Reserve Act.
1. E ffe c tiv e -------------- - $ 204.5(c) of
Regulation D is revised to read as fol­
§ R e se rv e re q u ire m e n ts .






R e s e r v e p e r c e n ta g e s a g a in s t c e r ­
t a i n d e p o s i t s b y f o r e i g n b a n k i n g o f f ic e s .

Deposits represented by promissory
notes, acknowledgments of advance, due
bills, or sim ilar obligations described ln>
3 204.1(f) to foreign offices of other
banks,' or to institutions the time de­
posits of which are exempt from the rate
lim itations of Regulation Q pursuant to
§ 217.3(g) thereof, shall not be subject
to paragraph (a) of this section or to
I 204.3(a) (1) and (2); but a member
bank shall m aintain with the Reserve
Bank of its district a balance equal to 4
percent of such deposits, computed in
th e m anner specified in § 213.7(c). An
excess or deficiency in reserves under
th is paragraph shall be subject to § 204.3
(a) (2), and deficiencies under this p ara­
graph shall be subject to S204.3(b)*
2. Effective________ , 5 213.7 of Regu­
lation M is revised to read as follows:
§ 2 1 3 .7 R e se rv es a g a in st fo re ig n b ra n c h
d e p o sits.

( a ) ) T r a n s a c tio n s w ith p a r e n t b a n k .
A member bank having one or more for­
eign branches shall m aintain w ith the
Reserve Bank of its district, as a reserve
against its foreign branch deposits, a
balance of 4 percent of the total of:
7 Any banking office located outside the
States of th e U n ited States and th e D istrict
of Columbia of a bank organized under
dom estic or foreign law.

t e r m “c o m p u ta tio n p e rio d ” 1 I 204.3

(a )(8 ) and (b) shall, for this purpose, be
deem ed to refer to each m aintenance week
■m otfieti In M U .7 <c )l

(1) Net balances due from Its domestic
offices to such branches, and
(2) Assets (including participations)
held by such hraoches which were ac­
quired from its domestic offices (other
th a n assets representing credit extended
to persons not residents of the United
S ta te s), computed in the m anner pre­
scribed in i 213.7(c).
(b) C r e d i t e x t e n d e d t o U n i t e d S t a t e s
r e s i d e n t s . A member bank having one or
more foreign branches shall m aintain
w ith th e Reserve Bank of its district, as
a reserve against its foreign branch de­
posits, a balance equal to one per cent of
the credit outstanding from such
branches to U nited States residents ’
(other th a n assets acquired and net bal­
ances due from its domestic offices),
computed in th e m anner prescribed in
§ 213.7(c); P r o v i d e d , T h at this p ara­
graph does n ot apply to credit extended
(1) in th e aggregate am ount of $100,000
or less to any U nited States resident, (2)
by a foreign branch which a t no tim e
during th e com putation period had credit
outstanding to U nited States residents
exceeding $1 million, (3) to enable the
borrower to comply w ith the require­
m ents of th e Office of Foreign Direct In ­
vestments, D epartm ent of Commerce,*
(4) under binding com mitm ents entered
into before May 17, 1973, or (5) to an in­
stitu tio n th a t will be m aintaining re­
serves on such credit under § 204.5(c) of
Regulation D or § 211.7(c) of Regulation
K or to a foreign-owned banking institu­
tion th a t wiU voluntarily be m aintaining
member bank reserves on such credit.
(c) C o m p u t a t i o n o f r e s e r v e s ; t r a n s i ­
t i o n p r o v i s i o n s . D uring the week begin­
ning Jan u ary 26, 1978, and during each
successive week (“m aintenance weeks”) ,
a m em ber bank shall m aintain with the
Reserve B ank o t its district a daily aver­
age balance to satisfy the reserve require­
m ents a t S§ 204.5(c) and 213.7 (a) and
(b ). T his balance shall equal the reserve
percentage specified In those sections
applied to th e daily average total of the
deposits and other items to which the
percentage pertains computed during the
week ending th e Wednesday eight days
before th e beginning of th e m aintenance
week. D aring th e four-week period be­
ginning Jan u ary 26,1978, a member bank
sh all also m aintain w ith the Reserve
Bank of Its d istrict a dally average bal­
ance equal to th e reserve percentage spe-

riflad. in those sections appllad to the
dally average total of the deposits and
other item s to which the percentage per­
tains computed during the four-week pe­
riod beginning December 15, 1977.
By order of the Board a t Garaa&Hs
of the Federal Reserre System, Mcrmnber
3, 1977.
T H isso n E . ALLisoir,

(a) Any Individual residing (at the tim e
th e credit Is extended) In any State of the
U nited States or th e D istrict of Columbia;
(b) any corporation, partnership, association
or otber en tity organized therein (“dom estic
corporation”); and (c) any branch or office
located th erein o f any other en tity wherever
organized. Credit extended to a foreign
branch, office, subsidiary, affiliate or other
foreign establishm ent (“foreign affiliate”)
controlled by one or more such dom estic cor­
poration* w ill n o t be deem ed to be credit ex­
tended to a U nited S tates resident if the pro­
ceeds w ill be uaed in its foreign business or
th a t o f other foreign affiliates of the c o n ­
trollin g dom estic corporation ( s ) .
*Tfe» branch m ay in good fa ith rely on tn e
certification th a t th e fun ds w ill
be so used.

Secretary of the Board.
[PR Doc.77-32775 P iled 11-10-77:8:46 am]

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