Full text of Federal Reserve Bank of New York Circulars : 7550. Expiration of Reserve-Free Bases on Eurodollar Borrowings

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FED ER AL RESERVE BANK
OF NEW YORK
I” Circular No. 7 5 5 0 " 1
L January 15, 1975 J

Expiration of Reserve-Free Bases on Eurodollar Borrowings
T o A ll M em b er B a n ks, and O th ers Concerned,
in the Second Federal R eserve D istric t:

The Board of Governors of the Federal Reserve System has amended its Regulation D,
“ Reserves of Member B anks,” and Regulation M, “Foreign Activities of National B anks,” to
reflect the expiration of reserve-free bases on member banks’ Eurodollar borrowings.
In subm itting the amendments for publication in the Federal R egister, the Board of Governors
made the following statem ent:
The Board of Governors has approved technical amendments to its Regulation D, Reserves of Member
Banks, and Regulation M, Foreign Activities of National Banks, in order to delete certain provisos pertain­
ing to the gradual elimination of reserve-free bases on member banks’ Eurodollar borrowings, since these
reserve-free bases have expired.
On May 16, 1973 (effective date June 21, 1973), the Board reduced the reserve requirements on Euro­
dollar borrowings by member banks from 20 per cent to 8 per cent and provided for the gradual elimination
of the reserve-free bases that exempted from reserve requirements some portion of member banks’ Eurodollar
borrowings. Member banks were to begin phasing out this base in the computation period which commenced
on July 5, 1973. This elimination process was completed in the computation period ending on April 10, 1974.
Section 204.5(c) of Regulation D and section 213.7(a) of Regulation M contain provisos explaining how
the reserve-free base was to be reduced. Since the process of reducing member banks’ reserve-free bases has
been completed and such bases have thus been eliminated entirely from member banks’ Eurodollar reserve
computations, the Board has approved the deletion of the explanatory provisos from the regulations.

Enclosed is a copy of the amendment to R egulation M. The Supplement (section 204.5), effec­
tive November 28, 1974, to Regulation D, which was sent to you with our Circular No. 7507,
dated November 19, 1974, already reflects the deletion of the reserve-free-bases provisions of
Regulation D.
Additional copies of the enclosure will be furnished upon request.




A

lfr ed

H

ayes,

President.




Board of Governors of the Federal Reserve System
FOREIGN ACTIVITIES OF
NATIONAL BANKS
AMENDMENT TO REGULATION M
Effective November 22, 1974, paragraph (a)
of section 213.7 is amended to read as follows:
SECTION 213.7—RESERVES AGAINST
FOREIGN BRANCH DEPOSITS
(a)
Transactions with parent bank. During
each week of the four-week period beginning
June 21, 1973, and during each week of each
successive four-week ( “maintenance” ) period,
a member bank having one or more foreign
branches shall maintain with the Reserve Bank
of its district, as a reserve against its foreign
branch deposits, a daily average balance equal
to 8 per cent of the daily average total of
( 1) net balances due from its domestic of­
fices to such branches, and
( 2 ) assets (including participations) held by
such branches which were acquired from its
domestic offices (other than assets representing
credit extended to persons not residents of the
United States), during the four-week compu­
tation period ending on the Wednesday fifteen
days before the beginning of the maintenance
period.

P R IN T E D IN N EW YORK