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F E D E R A L R ESER VE BAN K OF N E W YOR K rC ircular No. 6 6 0 5 1 L. September 17, 1970 J Change in Guidelines for Banks Under the President’s Balance of Payments Program Effective September 1, 1970 T o A ll B anks in the Second F ederal R eserve D is tr ic t: The following statement was made public yesterday by the Board of Governors of the Federal Reserve System : The B o ard of G overnors of th e F e d e ra l Reserve System to d ay am ended an ex p o rt loan definition in th e g uidelines u n d e r w hich U.S. banks lim it th e ir len d in g to foreigners. B anks m ay now count e x p o rt te rm loans of a n y size ag a in st th e ir ex port term -loan ceilings u n d e r th e V o lu n ta ry F o reig n C re d it R e s tra in t guidelines. H ereto fo re, only such loans a m o u n tin g to $250,000 or more each were to be co unted u n d e r those ceilings. G overnor A n d rew F . B rim m er, the m em ber of the B o ard who has resp o n sib ility for a d m in isterin g th e g uidelines, ex p lain ed th a t the $250,000 floor h ad been c arrie d over, along w ith o th er c rite ria , from a T re a su ry D e p a rtm e n t re p o rtin g req u irem en t. The la tte r re q u irem e n t h ad been ado p ted because it w as a lre a d y in w ide use am ong banks w hen the ex p o rt term -loan ceilings w ere created in December 1969 as a su p p le m e n t to g en eral ceilings. E xp erien ce since th a t date indicates th a t the d o llar floor fo r ex p o rt te rm loans can be d ro p p e d w ith o u t a d m in istra tiv e difficulty an d w ith some benefit, p a r tic u la rly fo r sm aller banks, as well as fo r sm aller e x p o rte rs who seek to a rra n g e cred its fo r th e ir fo re ig n custom ers. Use of th e ex p o rt term -lo an ceilings, G overnor B rim m er added, has grow n m odestly. P resen tly , these ceilings in the a g g reg ate are $1.4 billion (com pared to an ag g reg ate of $10 billion of general ceilin g s), a n d o u tsta n d in g loans on ex p o rts sh ip p ed since D ecem ber 1, 1969 have only recen tly s u r passed $100 m illion. Some ex p o rt te rm loans, he p o in ted out. are exem pt from the guidelines u iid er o th er p ro v isio n s; fo r exam ple, loans to C anadians, loans g u a ra n te e d by the E x p o rt-Im p o rt B ank, and loans covered by F C IA in su ran ce. The am en d m en t anno u n ced to d a y is effective s ta rtin g w ith the c u rre n t m onthly re p o rtin g period. T his m eans th a t ex p o rt te rm loans, re g a rd le ss of size, g ra n te d a fte r A u g u st 31, 1970, m ay be charged to a b a n k ’s ex p o rt term -loan ceiling ra th e r th a n to its g eneral ceiling. The text of the change in the guidelines is printed below. Additional copies of this circular will be furnished upon request. A lfr ed H ay es, President. CHANGE IN GUIDELINES FOR BANKS Effective September 1, 1970 II. G. BA N K S D efinitions * * * 3. A n “ ex p o rt te rm lo a n ” is a claim on a fo r eig n er h a v in g an o rig in a l m a tu rity of m ore th a n 1 y e a r a n d fo r th e d em o n strab le financing of one or inore specific ex p o rt tra n sa c tio n s in volving th e sh ip m ent of U.S. goods to a fo reig n d e stin a tio n or the p erfo rm an ce of U.S. services abroad. The loans m ay be m ade d ire c tly by a b an k or m ay be m ade in d ire c tly by a b ank th ro u g h its p u rch ase of docum ented loan p ap er. F o r th e p u rp o se of th e p re se n t guidelines, such loans th a t are to be counted ag ain st an ex port term -loan ceiling are confined to cred its financing U.S. ex p o rts sh ip p ed a fte r N ovem ber 30, 1969, or services perfo rm ed abroad by U.S. ind iv id u als or U.S. firm s a fte r N ovem ber 30, 1969. Such loans exclude debt obligations acq u ired by a bank a n d h av in g not m ore th a n a y e a r of rem ain in g term u n til m a tu rity (reg ard less of o rig in al len g th of m a tu rity ) . The loans also exclude E x p o rt-Im p o rt B ank certificates of p a r tic ip atio n in a pool of loans. (P a rtic ip a tio n s w ith the E x p o rt-Im p o rt B ank in p a rtic u la r loans and loan p a p e r p u rch ased from the E x p o rt-Im p o rt B ank of fo reig n obligors are exem pted u n d e r section II-B -2, above.)
@FedFRASER