Full text of Federal Reserve Bank of New York Circulars : 6648. Advances and Discounts

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FE D E R A L R E S E R V E BANK
O F N E W YORK
rCircular No. 6 6 4 8 ' 1
L Decem ber 1, 1 970 -J

ADVANCES AND DISCOUNTS
Amendments to Regulation A

To the Member BanTcs of the
Second Federal Reserve District;

The following statement was issued today by the Board of Governors of the Federal
Reserve System :
T he B o a rd of G overnors of th e F e d e ra l R eserve System an n o unced to d ay its ap p ro v a l of several
changes in p ro ced u res u n d e r w hich m em ber banks borrow fu n d s fro m th e System .
These changes, to be p u t in to effect e arly n e x t y ear, are of a tech n ical a n d p ro c e d u ra l n a tu re a n d
are designed to sim p lify an d u p d a te p re se n t practices. T hey reflect no change in th e F e d e ra l R e se rv e ’s
g en eral c re d it a n d m o n e ta ry policies a n d are n o t re la te d to th e fu n d a m e n ta l re a p p ra isa l of the
d isco u n t m echanism w hich th e System still has u n d e r consideration. The changes w ill:
1. E lim in a te re g u la to ry lan g u ag e th a t im plies th a t a fo rm a l w ritte n a p p licatio n m u st be
su b m itte d a n d a pro m isso ry note m u st be executed in connection w ith each bo rro w in g b y a
m em ber b an k fro m a F e d e ra l R eserve B ank. A tta c h e d is a copy of an am endm ent to R eg u latio n
A (A dvances a n d D iscounts b y F e d e ra l R eserve B an k s) to effect th is change.
2. P e rm it th e use of “ c o n tin u in g le n d in g a g re e m e n ts” as a su b stitu te fo r th e fo rm a l a p p li­
cation a n d prom isso ry note. A m em ber b an k w ould be obliged u n co n d itio n ally to re p a y all
advances m ade p u rs u a n t to th e ag reem ent w ith o u t th e necessity of filing th e w ritte n a p p lica tio n
a n d p ro m isso ry note in each ease.
3. P e rm it th e R eserve B an ks to collect in te re st on borrow ings by m em ber banks a t th e tim e
of re p a y m e n t — th e acc ru a l m ethod — in stea d of d e d u c tin g in te re st a t th e tim e the b o rrow ing
is m ade.
4.

M ake an y change in th e d iscount ra te applicable to all o u tsta n d in g borrow ings.

Enclosed is a copy of the amendments to Regulation A. Our Operating Circular No. 12,
on advances and discounts, is being revised to implement the changes in procedure described
above and to reflect other recent amendments to Regulation A not now reflected in the operating
circular. Copies of the form of the revised operating circular and of the “ continuing lending
agreement” as well as any other documentation necessary to effect the foregoing changes will
be sent to you in the near future.




A

lfred

H

ayes,

President.

B

oard

of

G overnors

of

the

F ederal R eser v e S y st e m

ADVANCES AND DISCOUNTS BY
FEDERAL RESERVE BANKS

AMENDMENTS TO REGULATION A
Elimination of References to Notes and Applications
E ffective N ovem ber 23, 1970, P a r t 201 is
am en d ed in th e follow ing r e s p e c ts :
P a r a g r a p h (c) of § 201.2 is am ended to
re a d as fo llow s:
“ (c) A dvances o n o th e r se c u rity u n d e r
section 1 0 (h ) o f th e F e d e ra l R eserve Act.
A n y F e d e ra l R eserve B a n k m ay m ake
advances, u n d e r a u th o rity of section 1 0 (b )
of th e F e d e ra l R eserve A ct, to a n y of its
m em ber b anks if secu red to th e satisfa ctio n
of such F e d e ra l R eserve B a n k re g a rd le ss of
w h eth er th e co llateral offered as sec u rity
conform s to elig ib ility re q u ire m e n ts u n d e r
o th e r p rovisions of th is P a r t. T he ra te on
advances m ade u n d e r th e p rovisions of th is
p a ra g ra p h sh all in no ev en t be less th a n oneh a lf of 1 p e r cen t p e r a n n u m h ig h e r th a n th e
h ig h e st ra te ap p licab le to d iscounts fo r
m em ber b anks u n d e r th e provisions of sections
13 a n d 13a of th e F e d e ra l R eserve A ct in
effect a t such F e d e ra l R eserve B ank. Such
an advance m u st be rep a y a b le e ith e r (1) on




a definite d a te n o t m ore th a n fo u r m onths
a fte r th e d ate of such advance, or (2) a t th e
o p tion of th e R eserve B an k on o r before a
definite d a te n o t m ore th a n fo u r m onths a fte r
th e date of such a d v an c e.’’
P a ra g r a p h (a )
re a d as follow s:

of § 201.4 is am ended to

“ (a ) R e p re se n ta tio n s by m e m b e r banks.
A m em ber b an k re q u estin g R eserve B ank
c re d it sh all be deem ed to re p re se n t an d
g u a ra n te e (1) th a t it is n o t a c tin g as the
m edium or ag en t of a nonm em ber b an k in
receiving c red it fro m a R eserve B an k except
in accordance w ith the provisions of th is P a r t,
a n d (2) th a t, except as to c re d it g ra n te d
u n d e r § 2 0 1 .2 (c), as long as th e c re d it is o u t­
sta n d in g no obligor on p a p e r te n d e re d as
co llateral or fo r d iscount w ill be in d eb ted to
it in an am o u n t exceeding th e lim ita tio n s in
section 5200 of the R evised S ta tu te s, w hich
fo r th is p u rp o se sh all be deem ed to ap p ly
to S ta te m em ber as well as n a tio n a l b a n k s.”

P R IN T E D IN N E W YORK