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FEDERAL RESERVE BANK OF NEW YORK [ Circular No. 8 5 0 4 1 January 25, 1979 J NEW PROCEDURES IN DEVELOPING NEW OR REVISED FEDERAL RESERVE REGULATIONS To A ll Member Banks, and Others Concerned, in the Second Federal Reserve District: Following is the text o f a statement issued by the Board o f Governors o f the Federal Reserve System announcing a change in its rulemaking procedures: The Federal Reserve Board today [January 15 ] issued a policy statement expanding its rulemaking procedures to improve the quality and public understanding of its regulations. The principal elements of the procedures the Board will follow — with some exceptions — in developing new or revised Federal Reserve regulations include: — Early involvement of the public, by such means as advance notice of rulemaking; identifi cation of areas in which the Board would particularly like com m ent; open conferences or informal public hearings; and direct solicitation of the views of interested persons or groups, with attention given to getting views from differing sources. — Early involvement of designated members of the Board. — Staff preparation of a regulatory analysis, prior to proposals for rulemaking, that will describe the need for and purposes of a new or revised regulation; examine available alternative courses of action; estimate the possible economic impact and the burdens of compliance, record keeping, and reporting that would be involved, and indicate the reasons for the particular course of action selected. — Staff presentation of a regulatory proposal to the Board only after the designated Board members are satisfied that the issues have been adequately considered at the staff level, that the proposal is understandable, and that it will impose no unnecessary burdens. — Board consideration of regulatory proposals, ordinarily at meetings open to public observation. — Allowance of at least 60 days for public comment. — Staff analysis of comment received and presentation of the analysis to designated Board members. The Board will consider a proposal for action only after the designated Board members are satisfied that public comment has received full’ consideration. — Final Board action, ordinarily at an open meeting. The Board’s announcement of its action will discuss reasons for the action and the Board’s reasons for accepting or rejecting suggestions re ceived from the public. — Board publication of a descriptive semi-annual agenda of regulations under development or review, and of the status of regulatory development projects already announced. — Board review of each of its regulations at least once each five years. Where delays occasioned by the new lengthier rulemaking procedures would not be necessary or in the public interest, the Board will adopt expedited procedures. Section 1 of the policy state ment provides a number of examples of regulatory actions for which expedited procedures are appropriate. 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. Printed on the following pages is the text o f the Board’s policy statement. Ques tions regarding this matter may be directed to our Regulations Division (Tel. No. 212791-5914). Paul A. V olcker, President. Title 12— Banks and Banking CHAPTER II— FEDERAL RESERVE SYSTEM S U B C H A P TE R A — B O A R D OF G O VER NOR S OF TH E FEDERAL RESERVE SYSTEM PART 262— RULES OF PROCEDURE (D ocket No. R -0196) Statement of Policy A G E N C Y : Board of Governors of the Federal R e sible and understandable to those who must comply. T o date, this review has been completed for two regulations (Regulations C and E ; see 43 Fed. Reg. 53708 and Board release of Nov. 9, 1978), and substantial staff work has been done on others. Deadlines have been set to assure that the review of remaining regulations will be completed as soon as possible. The Board also has decided to improve access to all Federal Reserve regulatory materials by authorizing issuance of a new, publicly distributed regulatory service that will include regulations, published and previously unpublished Board interpretations, previously uncircu lated Board and staff rulings and opinions, relevant policy statements and other materials that affect the public. The Board plans to introduce this service in early 1980 and will update it periodically. The Board believes that ready access to the full range of regulatory materials will enable those regulated to operate with a far greater degree of certainty, and understanding of and compliance with Board rules will be enhanced. A s a further effort to improve its regulations and the regulatory process, the Board as a matter of policy also will apply expanded procedures to the development of new regulations. These procedures are more elabo rate than those prescribed in the Board’s Rules of P ro cedure for Rulemaking (12 C FR 262.2). A t the same time, the Board is aware that a lengthier, more involved rulemaking procedure may result in de lays detrimental to those making plans or seeking im mediate relief from undue burdens. Therefore, when the Board believes that more expedited procedures are fair, necessary, or desirable, it will follow such proced ures and inform the public of the reasons for its deci sion. Ordinarily, consideration of a regulation in a new area of the law will involve greater time and public participation than an amendment to an existing regula tion in an established area of the law. serve System. A C T IO N : Statement of policy regarding expanded rulemaking procedures. S U M M A R Y : The Board of Governors of the Fed eral Reserve System desires to improve the quality of its regulations through greater public participation in the development of its regulations and early involve ment by Board members in the process to assure that regulations are not unduly burdensome and complex. The Board also wishes to improve public understanding of the considerations underlying the regulations it adopts. T o accomplish these objectives, the Board is adopting a general policy of following rulemaking pro cedures that will be more elaborate than those pre scribed in the Board’s Rules of Procedure for Rulemaking (12 C F R 262.2). When the Board has good cause to follow more expedited procedures, such as those set forth in its regulations, it will state the reasons in the Federal Register notice accompanying the action. The new procedures do not apply to the formulation of monetary policy or to amendments of regulations re quired to implement monetary policy decisions. The Board believes that this approach fully complies with the spirit of Executive Order No. 12044 ( “ Im proving Government Regulations” ) and contributes sig nificantly to furthering the President’s goals of reducing regulatory burdens and improving regulations. The Board is implementing this policy immediately and welcomes suggestions for improving the policy. Comments should be submitted in writing during the next 60 days to the Secretary to the Board, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. The comments received will be made avail able for inspection and copying. FO R F U R TH E R IN F O R M A T IO N C O N T A C T : Examples of regulatory actions for which expedited procedures may be appropriate are the following: Jerauld C. Kluckman, Associate Director, Division of Consumer Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Telephone: (202) 452-3401. (1 ) The regulation is a technical amendment (e.g., reflecting a name change) or a clarifying change ; (2 ) The regulation requires prompt action in the public interest (e.g., changes in reserve require ments, stock market margin requirements, or the discount rate, or actions designed to eliminate a loophole) ; S U P P L E M E N T A R Y I N F O R M A T I O N : The Board, with participation by the Federal Reserve Banks, is engaged in a Regulatory Improvement Project in volving a zero-base review of all Federal Reserve regu lations that affect the public. Each regulation is being analyzed to determine: the fundamental objectives of the regulation; whether the regulation is obsolete or a different approach would be appropriate; the costs and benefits of the regulation; whether it can be made less burdensome or nonregulatory alternatives adopted with out reducing its effectiveness to achieve present-day goa ls; and whether the regulation is as simple as pos (3 ) The regulation reduces a burden where further delay would cause unnecessary harm ; (4 ) The regulation is a reformulation of a proposal previously issued for public comment; and (5 ) The regulation must be adopted within a statu tory deadline. The Board believes its policy will result in improved 2 Board regulations and fully complies with the spirit of Executive Order No. 12044, dated March 23, 1978, ( “ Improving Government Regulations” ) (43 Fed. Reg. 12661). In several ways, it goes beyond that Order. For example, the policy generally will be followed for all new proposals, whether or not they are regarded as “ significant,” and a regulatory analysis will be made in all cases. T o implement this approach the Board has adopted the following policy statement: S T A T E M E N T OF PO LIC Y R E G A R D IN G E X P A N D E D S E C T IO N 1 tions implementing new areas of law or major revisions of existing regulations, the Board will endeavor to ob tain preliminary views of interested persons prior to the development of a proposed regulation. For this pur pose, the Board will utilize such procedures as it deems appropriate, including publication of an advance notice of proposed rulemaking, which may suggest specific issues on which comments should be focused; schedul ing of an open conference or informal public hearing; and direct solicitation of views from interested persons or groups, selected so as to assure that conflict ing interests and appropriate public bodies are fairly represented. Policy. It is the policy of the Board of Governors of the Federal Reserve System to improve the quality and minimize the burdens of its regulations by carefully con sidering an analysis of proposed regulations before they are published for comment, encouraging maximum pub lic participation in the development of the regulations, and informing the public of the reasons for the Board’s regulatory actions. T o achieve these objectives and to comply with the spirit of Executive Order 12044, the Board is setting forth in this statement expanded rulemaking procedures that it intends to follow in developing regulations. If the Board finds it necessary or beneficial in the public interest to avoid delay by following more expedited procedures, such as those set forth in the Board’s Rules of Procedure for Rulemaking (12 C FR 262.2), the Board will state its reasons in a notice accompanying its actions. The new procedures do not apply to the formulation of monetary policy or to amendments of regulations required to implement monetary policy decisions. S E C T IO N 4 Initial analysis of proposals. Before presenting any proposals regarding a regulation to the Board for formal action, the staff will prepare a regulatory analysis of the proposal. The extent of the regulatory analysis at this stage will vary, depending upon the nature of the regulation. In every case, at a minimum, the regulatory analysis will discuss the need for and purposes of the regulation, set forth the various options available, dis cuss, where appropriate, their possible economic impli cations, evaluate their compliance, record keeping and reporting burdens, and recommend the best course of action based on an evaluation of the alternatives. If the regulation concerns an area where considerable infor mation is available, a correspondingly more exhaustive regulatory analysis will be expected. Examples of regulatory actions for which expedited procedures may be appropriate are the following: (1 ) The regulation is a technical amendment (e.g., reflecting a name change) or a clarifying change; (2 ) The regulation requires prompt action in the public interest (e.g., changes in reserve require ments, stock market margin requirements, or the discount rate, or actions designed to eliminate a loophole) ; W hen the designated Board members involved are satisfied that the issues have been adequately treated by the staff, that the proposals are as simple as possible and understandable to those who must comply, and that no unnecessary burdens would be imposed, the staff will present the proposals to the Board for action. (3 ) The regulation reduces a burden where further delay would cause unnecessary harm ; (4 ) The regulation is a reformulation of a proposal previously issued for public comment; and (5 ) The regulation must be adopted within a statu tory deadline. S E C T IO N 5 Preliminary action by the Board. Consideration of the proposals by the Board ordinarily will take place at a meeting open to public observation. The Board ordi narily will authorize publication of a proposed regula tion for comment. A t that time, the regulatory analysis of the proposals will be made available to the public. S E C T IO N 2 Development of regulatory plan. Designated mem bers of the Board will become involved at an early stage in the development of regulations and will meet with staff to review the issues to be considered, the alterna tive approaches to be explored, a tentative plan to obtain public comment, and target dates for completion of steps in the development of the regulation. S E C T IO N 6 General public participation. The Board generally will allow at least 60 days for public comment on a pro posed regulation. The notice accompanying the proposal will contain a summary analysis of the regulation and inform the public that copies of the regulatory analysis are available through the Freedom of Information Office. When deemed appropriate, the Board may also schedule an informal public hearing. S E C T IO N 3 Public involvement in the development of pro posals. The Board believes that the public can make valuable contributions in identifying issues that should be addressed in its regulations. W ith respect to regula R U LE M AK IN G PROCEDURES 3 eral Register a schedule showing the times during the next twelve months when it will publish a semiannual agenda of regulations under development or review. The agenda shall describe the regulations that the Board anticipates will be considered, the need and legal basis for the action being taken, and the status of regulations previously listed on the agenda. Each item on the agenda will include the name and telephone number of a knowledgeable member of the Board’s staff. Supple ments to the agenda may be published at other times during the year as appropriate. S E C T IO N 7 Staff analysis following public comments. The staff will prepare a summary of comments received, and this document, as well as the written comments, will be made available to the public. After taking account of the public comments, the staff will prepare recommenda tions for consideration by the designated Board mem bers. W hen these members are satisfied that the public comments have received full and appropriate attention, the staff’s analysis and recommendations will be pre sented to the Board for action. S E C T IO N 10 S E C T IO N 8 S E C T IO N 9 Periodic review of regulations. The Board will re view each of its existing regulations at least once every five years. Each regulation is to be re-examined with a view toward eliminating or simplifying it and easing burdens imposed by it. In selecting regulations to be reviewed, the Board will consider such factors as the length of time since the last evaluation of the regulation, the continued need for it, the type and number of com plaints and suggestions received, the direct and indirect burdens imposed by the regulation, and the need to simplify or clarify the regulation and eliminate duplica tion. Essentially the same procedures described in this policy statement will be followed in the periodic review of regulations. Semiannual agenda of regulations. On the first Monday in October, the Board will publish in the Fed Board of Governors of the Federal Reserve System, January 15, ip /p . Final action by the Board and announcement of its decision. Final action on the proposals by the Board ordinarily will take place at a meeting open to public observation. The Board will announce the reasons for whatever action it takes regarding a proposed regula tion. The announcement will discuss the Board’s ra tionale for accepting or rejecting arguments regarding the significant issues raised by the public. If the earlier regulatory analysis made available to the public is changed materially, a revised regulatory analysis will be made available. 4
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