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FEDERAL RESERVE BANK OF NEW YORK r Circular No. 7 4 6 7 1 September 26, 1974 J AMENDMENT TO REGULATION A Special Discount Rate for Long-Term Assistance to Member Banks To All Member Banks, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued September 25 by the Board of Governors of the Federal Reserve System: T he B oard of G overnors o f the Federal R eserve System today established a new category o f “ discount” borrow in g under which a special discount rate may be applied to member banks requiring exceptionally large assistance over a prolonged period o f time. T he amendment to the B oard’s regulation governing member bank borrow in g states that the special rate w ould in no case exceed the rate established fo r em ergency loans to nonm em ber banks. T h e basic dis count rate is now 8 per cent while the rate fo r em ergency loans to nonm em ber banks is 1 0 per cent. T he purpose o f the special rate is to limit any rate preference for long-term assistance to an individual bank when a wide gap exists between the basic discount rate and m oney market rates as it does presently. T he special rate w ould also encourage the borrow in g bank to make the necessary adjustm ents in its opera tions to permit repayment o f the loan in a reasonable period. U nder the regulatory amendment, the special rate will apply to mem ber bank b orrow in g fo r prolonged periods (su ch as for m ore than eight w eeks) and in significant amounts (su ch as when the loan has exceeded on average the amount o f the borrow in g bank’s required reserves). T h e amendment is substantially the same as that proposed by the B oard for com m ent on A ugu st 21. Enclosed is a copy of the amendment to Regulation A . Additional copies of the enclosure will be furnished upon request. A lfred H ayes , President. Board of Governors of the Federal Reserve System EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS A M E N D M E N T T O R E G U L A T IO N A E ffective September 25, 1974, section 2 0 1 .2 (e ) is amended to read as fo llo w s: S E C T I O N 201.2— G E N E R A L P R IN C IP L E S * * * ( e ) O ther cred it to m em b er banks. ( 1 ) In the event o f unusual or em ergency circum stances resulting from national, regional, or local difficulties, Federal R eserve credit be yon d that contemplated under section 2 0 1 .2 ( c ) is available. ( 2 ) Federal R eserve credit is also available for protracted assistance where there are e x ceptional circumstances or practices involving only a particular member bank. A special rate apart from rates charged for lending to m em ber banks under other provisions of this Part may be established by Federal R eserve Banks subject to review and determination by the B oard of G overn ors and applied to such credit. T h e special rate may apply to mem ber banks b orrow in g fo r prolonged periods (su ch as for m ore than eight w eeks) and in significant amounts (su ch as when the loan has exceeded on average the amount o f the borrow in g bank’ s required reserves) because o f financial strains arising from particular circumstances or prac tices affecting the individual bank— including sustained deposit drains, im paired access to m oney market funds, or sudden deterioration in loan repayment perform ance. In no case should the special loan rate to member banks exceed the rate established for loans to nonmembers under 12 U .S .C . 3 4 7 (c ) . PR IN T E D IN N EW YORK
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