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F ederal Reser ve Bank
O F DALLAS

Dallas, Texas, July 26,1965

REVISIO N OF G U IDELINE 5 FOR COMMERCIAL B A N K S U N D E R THE
VO LUNTARY FOREIGN CREDIT R E STR A IN T PROGRAM

To A ll B anks in th e
E leventh Federal R eserve D istrict:

As initially issued under the President’s Balance of Paym ents Program, guide­
line 5 provided that a bank’s base should be reduced by an amount equal to any sales
to U. S. residents of foreign securities or loans which were owned on the base date
of December 31, 1964. However, this guideline has been revised to permit banks to
sell foreign securities owned on December 31, 1964, to U. S. residents without an
equivalent reduction. Sales to U. S. residents of foreign loans (or loan participations)
will continue to require a reduction in the bank’s base by a like amount.
Revised guideline 5 follows:
(5) B A N K SA L E S O F F O R E IG N A SSET S TO U . S. R E S ID E N T S

In general, banks should not expand their lending abroad by selling
to U. S. residents (including U. S. banks) claims on foreigners (except
foreign securities) existing on the base date and replacing such assets with
other loans to foreigners. Sales to U. S. residents of foreign loans or loan
participations could assist a bank to stay within the 5 per cent target, but
clearly would not benefit the U. S. payments position. Therefore, in the
event of any such sales the bank’s base should be reduced by an amount
equivalent thereto.
Yours very truly,
Watrous H. Irons
President

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