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NewRulemaking Procedures Adopted
The quality and understandability of Federal Reserve regulations
are expected to be enhanced by a series of new procedures recently
announced by the Federal Reserve Board.
The procedures will include earlier involvement in regulation preparation by the public and by designated Board members. A regulatory
analysis will also be prepared, prior to proposals for rulemaking, to describe the actual need for and purposes of the proposed new regulation
or revision, and indicate why the chosen course of action is the best of
possible alternatives. The analysis will also spell out potential economic
impact and compliance burdens, as well as any new records or reporting
that would be required.
Each Board rule will be reviewed at least once every five years
under the new procedure. The Board also plans to publish every six
months a descriptive agenda of regulations under development or review, and of the status of regulatory development projects already announced.
The Board will adopt expedited procedures where delays resulting
from the new lengthier rulemaking process would not be necessary or in
the public interest.
The new procedures do not apply to the formulation of monetary
policy or to amendments of regulations required to implement monetary policy decisions of the Board or the Federal Open Market Committee. They represent the latest step in a comprehensive review by the
Fed of all of its rules and regulations and the procedures through which
the regulations are prepared and amended.

~~Anthony Dollar" TODebut 111 July
A new $1 coin bearing the likeness of Susan B. Anthony, noted
suffragette, will be placed in circulation through the Federal Reserve
Banks starting the first week in July.
More than a half-billion of the new copper-and-nickel coins will be
struck at mints in Philadelphia, Denver, and San Francisco, succeeding
the Eisenhower dollar which was first struck in 1971. The reverse of the
Anthony dollar bears an American eagle, and both sides are framed by
an I I -sided, raised inner border to aid recognition by the blind.
The new coins are expected to result in substantial savings to the
Treasury and the Federal Reserve because coined dollars remain in circulation for about 15 years while paper dollars last only 18 months.
Federal Reserve Bank of St. Louis

Certain Ma age

nt In erlocks Prohihite

Certain interlocking relationships of management officials among
non-affiliated depository institutions, including bank holding companies
and savings-and-loan companies, are now prohibited under the new Depository Institution Management Interlocks Act (Title II of the Financial Institutions Regulatory & Interest Rate Control Act of 1978).
The Act, which became effective March 10, is identical (except for
technical variations) for all five i uing agencies which supervise federally insured depository institutions. It also specifies four exemptions
which may be made by the regulators where competition is not present
and where public benefits would outweigh competitive factors.
Under the provisions of the Act, except for institutions with
assets of less than $20 million, a management official of a depository
institution or depository holding company is prohibited from serving
as a managment official of a nonaffiliated depository institution or
holding company with an office in the same standard metropolitan
statistical area. Regardless of the size of the institutions, a management
official may not serve two unaffiliated institutions if they have offices
in the same town or contiguous or adjacent towns. Interlocking management is prohibited, regardless of geographical location, if one depository institution or holding company has assets exceeding $1 billion
and the unaffiliated institution has assets exceeding $5 00 million .
Exemptions from the Act may be made in instances where experienced management is required on a temporary basis to aid financial
institutions in low-income areas and to broaden management opportunities available to minorities and women, as well as to new institutions
and to existing institutions in a deteriorating condition . The agencies
would also be able to grant exceptions to credit unions sponsored by
depository institutions or depository holding companies primarily to
serve the employees of the sponsoring institution or its affiliates on the
basis that no competition would exist in these circumstances.

New Money-Market Certificate Rules
Federal Reserve Bank of St. Louis

The compounding of interest during the 26-week term of nonnegotiable time deposits of $10,000 or more is now prohibited by an
amendment to Regulation Q which became effective March 15.
The action was taken in connection with a joint announcement by
the Federal regulators of banks and thrift institutions of a change in the
rules under which financial institutions issue the six-month "MoneyMarket Certificates" (MMCs).
Advertising for the 26-week Money-Market Certificates must now
include a clear and conspicuous notice that Federal regulations prohibit
compounding of interest during the term of the deposit. Institutions
may advertise an annual effective rate of interest for MMCs based upon
reinvestment after six months of both principal and interest, if the ads
fully comply with previously issued guidelines.
In addition, the one-quarter-point differential on Money-Market
Certificates between thrift institutions and commercial banks has been
eliminated when the weekly "ceiling" rate is 9 percent or higher. The
full differential will be in effect when the ceiling rate is 8-3 /4 percent or
less. When the six-month bill rate is between 8-3/4 and 9 percent, thrift

institutions may pay a maximum 9 percent while commercial banks
may pay up to the actual discount rate for six-month bills.
The amendments do not impose a maximum interest rate on
MMCs. The weekly rate is still tied to the yield o f six-month Treasury
bills .

cpial Credit Opportunity Non-Compliance
Improved examination techniques and additional staff training
were cited as key reasons for a substantial increase in the discovery of
non-compliance with the Equal Credit Opportunity Act among financial
institutions in 1978. Federal agencies responsible for the Act's enforcement received relatively few direct consumer complaints , however.
In its annual report to Congress on the ECOA , the Federal Reserve
noted that preliminary National Credit Union Administration results
showed that 63% of the examined CUs were not in compliance - more
than double the 1977 figure - while FDIC examinations showed an increase in apparent bank violations to 51.3 % from 26.6%. The Comptroller of the Currency found violations in 89 percent of the national
banks it examined, while the Fed found 78 percent of state banks in
its system were not in full compliance. The Federal Home Loan Bank
Board reported that 53% of the S&Ls it examined had violations.
The areas that produced the most violations concerned noncomplying application forms, the taking of prohibited information, and the
requiring of prohibited cosigners.
The Federal Reserve estimated that it cost the federal agencies
(excluding the Securities & Exchange Commission and Interstate Commerce Commission) a total of $7 .6 million last year alone to enforce
the ECOA and the Fair Housing Act.

Shorter Flood Insurance Waiting Period
Federal Reserve Bank of St. Louis

The waiting period between application for flood insurance under
the National Flood Insurance Program and the actual effective date of
that insurance has been amended through a Federal Insurance Administration regulation.
Before the new ruling's October 30 , 1978 , implementation , there
was a 15-day waiting period between application and effective coverage
after the initial 30 days of community eligibility for flood insurance in
both emergency and regular programs. Because the former rule tended
to delay and disrupt conventional, VA, and FHA mortgage closings by
lenders trying to comply with the program's legal requirements, the
new ruling stipulates:
- During the initial 30-day period , where there is no waiting period
or change of ownership to insurable property involved, the effective
date and time of new, added , or increased flood insurance .coverage is
12:01 a.m. the day after application and premium payment. Where
there is a waiting period , the application date is counted as the first day
in that waiting period.
- After the initial 30-day eligibility period , the effective date and
time for new insurance is 12:01 a.m. the fifth calendar day after application and premium payment. Changes to existing policies, however,
are effective the day after application and premium payment.


P 0. BOX 44 2


The Fed Letter is published bi-monthly by the Federal Reserve Bank of St. Louis to help Eighth Federal Reserve District bankers keep informed on topics of importance to the banking industry . The Federal Reserve
Bank of St. Louis is solely responsible for the contents of The Fed Letter. The publication does not necessarily
represent the official or unofficial views of the Board of Governors of the Federal Reserve System. Please
address all correspondence regarding items in this publication to: The Fed Letter, Bank Relations and Public
lnformati?n Department, Federal Reserve Bank of St. Louis, P. 0. Box 442, St. Louis, Missouri 63166 .

Reg. Y Amended To Implement New Bank Act
Federal Reserve Bank of St. Louis

Regulation Y has been amended and re-titled by the Federal Reserve Board to implement the Change in Bank Control Act of 1978
(Title VI of the Financial Institutions Regulatory & Interest Rate Control Act of 1978). The amendments formalize principal parts of a
policy statement issued by the Board and also specify changes in the
Rules Regarding Delegation of Authority.
The changes took effect on March 10 (the effective date of the
Change in Bank Control Act), but the Board has invited public comment through April 6 for possible use in preparing future amendments.
Now titled "Bank Holding Companies and Change in Bank Control," Regulation Y has been amended to specify transactions that
come within coverage of the Act. It outlines general compliance procedures, summarizes the principal Act provisions and exemptions, and
defines the procedures the Board will follow in carrying out the Act .
The new Act requires persons acquLing control of a State member
bank or a bank holding company to file 60 days' advance written notice
with the Board, which can disapprove such proposed control changes.
Changes in control due to acquisitions by bank holding companies and
changes in control of insured banks resulting from mergers, consolidations, or similar transactions are not covered by the Act, because
they are already subject to regulatory approval under other laws.
The regulation delegates authority to the Federal Reserve Banks
to permit proposed acquisitions where there has been no objection, to
extend the time (normally 60 days) the Board may take to consider
proposals, to determine whether notices provide all necessary infor-:
mation, and to settle disputes regarding the need to file advance notice
by a person proposing to acquire less than 25 percent of a bank holding
company or State member bank .
The regulation does not exempt from notice requirements proposed
acquisitions of control of foreign-based bank holding companies whose
assets and revenues are primarily in the United States: The Board particularly requests comment on this aspect of the regulation.