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federal

R e s e r v e Ba n k

of

Dallas

DALLAS, TEXAS 7 5 2 2 2

Circular N o. 68-133
June 7, 1968

To All Banks, Brokers/D ealers, Nonbank Lenders
and Others Concerned in the Eleventh Federal Reserve District:

The Board of Governors of the Federal Reserve System has am
ended
the supplements to Regulations T, U, and G to increase m
argin require­
ments, effective June 8, 1968. The press statement issued today in con­
nection with this action is quoted below:
The Board of Governors of the Federal Reserve System
today am
ended its Regulations relating to stock m
arket credit to
increase the margin requirem from 70 to 80 percent on loans
ent
m on stocks, effective tomorrow, June 8.
ade
The Board also increased the margin requirem on loans
ent
made on convertible bonds from 50 to 60 per cent, effective
tomorrow.
The requirements apply to new extensions of credit by
brokers (governed bv the Board’s Regulation T), by banks
(Regulation U), and by other lenders (Regulation G) for
the purpose of purchasing or carrying stocks, or bonds con­
vertible into such stocks, listed on a national securities exchange.
The margin increases were m pursuant to authority
ade
granted in the Securities Exchange Act of 1934 to prevent ex­
cessive use of credit to finance transactions in securities. The
Board noted, in this connection, that m
argin credit of brokerage
customers had increased $200 million in April alone, bringing
the total of margin credit outstanding at brokerage houses to
$6.4 billion. Also, there were indications of a further rise in
M The recent increases in stock m
ay.
arket credit m a re­
ark
sumption of the upward trend observed during 1967 when such
credit rose 29 per cent at brokerage houses and 19 per cent at
com
mercial banks.
The Board’s action applies to initial margin requirem
ents.
No change was made in the 70 per cent retention requirem
ent
applicable to undermargined accounts. The “retention require­
ment” relates to that portion of the proceeds of a sale of securi­
ties from an account that must be retained if that account does
not comply with the new 80 per cent margin requirem
ent.
This action was taken by unanim vote of the five Board
ous
members present: Chairm M
an artin and Governors Robertson,
Daane, Brimmer, and Sherrill.
A copy of the appropriate amended supplement is enclosed for your
files.
Yours very truly,
P. E. Coldwell
President

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

SUPPLEMENT TO REGULATION T
Section 2 2 0 .8 — SU PPLEM ENT

I ssu e d by t h e B oard of G overnors of t h e F ed er a l R eserv e S y s t e m

Effective June 8, 1968

( а) Maximum loan value for general accounts.— The maximum
loan value of securities in a general account subject to § 220.3
shall be:
(1) of a registered non-equity security held in the account
on March 11, 1968, and continuously thereafter and of a regis­
tered equity security (except as provided in § 220.3(c) and
§ 220.8 (b ) and ( c ) ) , 20 per cent of the current market value
of such securities.
(2) of an exempted security held in the account on March
11, 1968, and continuously thereafter the maximum loan value
of the security, as determined by the creditor in good faith.
( б ) Maximum loan value for a special bond account.— The
maximum loan value of an exempt security and of a registered
non-equity security pursuant to § 220.4 (i ) shall be the maximum
loan value of the security as determined by the creditor in good
faith.
(c) Maximum loan value for special convertible debt security
account.— The maximum loan value of a registered equity
security eligible for a special convertible security account pur­
suant to § 220.4 ( j) shall be 40 per cent of the current market
value of the security.
(d ) Margin required for short sales.— The amount to be in­
cluded in the adjusted debit balance of a general account, pur­
suant to § 220.3 (d ) (3), as margin required for short sales of
securities (other than exempted securities) shall be 80 per cent
of the current market value of each such security.
(e) Retention requirement.— In the case of an account which
would have an excess of the adjusted debit balance of the account
over the maximum loan value of the securities in the account
follow ing a withdrawal of cash or securities from the account,
pursuant to § 220.3(6) (2) :
(1)
The “retention requirement” o f an exempted security
held in the general account on March 11, 1968, and continuously
thereafter shall be equal to its maximum loan value as determined
by the creditor in good faith, and the “retention requirement” of
a registered non-equity security held in such account on March
11, 1968, and continuously thereafter and of a registered equity
security shall be 70 per cent of the current market value of the
security.

REGULATION T SUPPLEMENT

(2) In the case o f a sp ecia l bond accou n t su b je c t to
§ 220.4 ( i) , the retention requirement of an exempted secu rity
and of a registered non-equity security shall be equal to th e
maximum loan value of the security.
(3) In the case of a special convertible security account su b ­
ject to § 220.4 0 ) which would have an excess of the adjusted
debit balance of the account over the maximum loan value of
the securities in the account follow ing a withdrawal of cash or
securities from the account, the retention requirement of a secu r­
ity having a loan value in the account shall be 70 per cent o f the
current market value of the security.
(4) For the purpose of effecting a transfer from a general
account to a special convertible security account subject to
§ 220.4 0 ’), the retention requirement of a security described in
§220.4 O’) shall be 70 per cent o f its current m arket value.
( /) Securities having no loan value in general account.— N o
securities other than an exempted security or a registered non­
equity security held in the account on March 11, 1968, and con­
tinuously thereafter, and a registered equity security shall h ave
any loan value in a general account except that a registered
equity security eligible for the special convertible security ac­
count pursuant to § 220.4 ( j) shall have loan value only if held
in the account on March 11, 1968, and continuously thereafter.

SUPPLEMENT TO REGULATION U
Section 2 2 1 .4 — SUPPLEM EN T

I s su e d b y t h e B oard o f G o vernors o f t h e F ed er a l R e se r v e S y s t e m

Effective June 8, 1968

(a ) Maximum loan value of stocks.— For the purpose of
§ 221.1, the maximum loan value of any stock, whether or not
registered on a national securities exchange, shall be 20 per cent
of its current market value, as determined by any reasonable
method.
(b ) Maximum loan value of convertible debt securities subject
to § 2 2 1 .3 ( 0 .— For the purpose of § 221.3 (t ), the maximum loan
value of any security against which credit is extended pursuant
to § 221.3 ( t) shall be 40 per cent of its current market value, as
determined by any reasonable method.
(c) Retention requirement.— For the purpose of § 221.1, in
the case of a loan which would exceed the maximum loan value
of the collateral following a withdrawal o f collateral, the “reten­
tion requirement” of a stock, whether or not registered on a
national securities exchange, and of a convertible debt security
subject to § 221.3 (£), shall be 70 per cent of its current market
value, as determined by any reasonable method.

SUPPLEMENT TO REGULATION G
S E C T IO N 207.5— S U P P L E M E N T

I ssu e d by t h e B oard of G overnors o f t h e F ed er a l R eserv e S y s t e m

Effective June 8, 1968

( а ) Maximum loan value of registered equity securities.— For
the purpose of section 207.1, the maximum loan value of any
registered equity security, except convertible securities subject
to section 207 .1 (d ), shall be 20 per cent of its current market
value, as determined by any reasonable method.
( б ) Maximum loan value of convertible debt securities subject
to section 207.1 ( d ).— For the purpose of section 207.1, the m axi­
mum loan value of any security against which credit is extended
pursuant to section 207.1 (d ) shall be 40 per cent of its current
m arket value, as determined by any reasonable method.
(c)
Retention requirement.— For the purpose of section 207.1,
in the case of a loan which would exceed the maximum loan value
of the collateral follow ing a withdrawal of collateral, the “reten­
tion requirement” of a registered equity security and of a
security against which credit is extended pursuant to section
207.1 (d ) shall be 70 per cent of its current market value, as
determined by any reasonable method.