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FED ER AL RESERVE BANK
O F NEW YORK
r
L
C ircular No. 8 7 8 0 T
M arch 37, 1980
J
REGULATIONS IMPLEMENTING INTERNATIONAL BANKING ACT OF 1978
— Reserve Requirements; Interest Rate Ceilings; Access to Services
— Effective September 4. 1980
To A ll Member Banks,, U S . Branches and Agencies of Foreign Banks, Edge and
Agreement Corporations, and Others Concerned, in the Second Federal Reserve District:
The Board of Governors of the Federal Reserve System has adopted changes in its regulations
that will implement, effective September 4, 1980, provisions of the International Banking Act of
1978 (IBA).
The following' is quoted from the Board’s statement announcing the changes:
Pursuant to the Act the Board’s regulations placed reserve requirements and interest rate limitations on
U.S. branches and agencies of foreign banks whose parent banks have total worldwide consolidated bank assets
in excess of $1 billion.
A t the same time, the Board implemented provisions of the IBA that grant branches and agencies of
such foreign banks access to Federal Reserve services, and permit them to borrow from the Federal Reserve
Banks.
The regulations will become effective on September 4, 1980, with a two-year phase-in period after the
effective date for reserve requirements. This is consistent with the reserve requirement phase-in for nonmember
banks joining the Federal Reserve System. The final regulations follow consideration of comment received
on proposed regulations published in July 1979.
The rules affecting reserve requirements for branches and agencies of foreign banks amend the Board’s
Regulation D (Reserves of Member B anks). The provisions imposing interest rate ceilings amend Regulation
Q (Interest on Deposits). The Board also amended Regulation D and Regulation K (International Banking
Operations) to conform in certain respects the reserve requirements of Edge and Agreement Corporations to
those applicable to the branches and agencies of foreign banks.
In general, but with numerous special provisions, the Board’s regulations:
1.
Apply all the provisions of Regulation D to U.S. branches and agencies of foreign banks.
2. T reat credit balances at banking offices of foreign banks as deposits subject to the same interest rate
limitations and to the same reserve requirements as apply to member banks, with the applicable reserve
ratio determined by the m aturity of the balance.
3. Subject net borrowings of the agencies and branches from their foreign bank and its foreign offices
to the same reserve ratios that apply to similar Eurodollar borrowings of member banks, after deducting a
capital equivalency allowance.
4. Establish a system of statewide aggregation of reservable liabilities for purposes of computing reserve
requirements. This differs from the proposed rule, which would have included an additional tier of national
aggregation.
5. Perm it a branch or agency maintaining a required reserve balance with a Reserve Bank to be eligible
to borrow at the discount window of that Bank.
6. Make Federal Reserve services (including check collection, currency and coin supply, securities
safekeeping and wire transfer services) available to the branches and agencies on the effective date of the final
regulations, through the Reserve Bank for the District in which the foreign branch or agency is located.
7.
Apply all the provisions of Regulation Q to the branches and agencies.
Enclosed— for member banks, branches and agencies of foreign banks, and Edge and Agree
ment Corporations in this District— is the text of the regulatory provisions. It will be published in
(
over
)
the Federal Register and will also be sent to you upon request directed to our Circulars Division.
Questions on the changes in the regulations may be directed to our Regulations Division
(Tel. No. 212-791-5914).
This Bank plans to schedule meetings with branches and agencies of foreign banks over the
coming months. In the meantime any questions of a general nature regarding the implementation
of the IBA may be directed to our Bank Relations Office (Tel. Nos. 212-791-6600 through 6606).
M. T i m l e n ,
First Vice President.
T homas
I
TITLE 12 —
CHAPTER II —
SUBCHAPTER A —
BANKS AND BANKING
FEDERAL RESERVE SYSTEM
BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM
[Regulations A, D, K, and Q]
(Docket No. R-0238)
Part 201 —
Extensions of Credit by Federal Reserve Banks
Part 204 — Reserves of Member Banks
Part 211 — International Banking Operations
Part 217 — Interest on Deposits
Reserve Requirements, Interest Rate Limitations on Deposits,
and Advances of Federal Reserve Credit
for U. S. Branches and Agencies of
Foreign Banks; Reserve Requirements of Edge Corporations
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final rules.
SUMMARY: Section 7 of the International Banking Act of 1978 ("IBA")
(12 U.S.C. § 3105) imposes Federal reserve requirements and deposit
interest rate limitations on Federal branches and agencies of parent
foreign banks with total worldwide consolidated bank assets in excess
6f $1 billion and authorizes the Board to impose such requirements on
State branches and agencies of parent foreign banks with total worldwide
consolidated bank assets in excess of $1 billion.
In order to implement
the provisions of the IBA, the Board of Governors has amended Regulation
D (Reserves of Member Banks) and Regulation Q (Interest on Deposits)
to apply Federal reserve requirements and interest rate limitations
currently applicable to member banks to such branches and agencies.
Modifications to these regulations have been made to reflect certain
operational and structural differences between branches and agencies
and member banks. Reserve requirements will be phased-in for branches
and agencies over a two-year period. Reserve requirements will be com
puted by aggregating the deposits of a foreign bank's branches and agencies
operating in the same State. However, deposits of branches and agencies
located in the same State but in different Federal Reserve Districts
will not be aggregated. Regulation Q is being applied to Federal branches
and agencies and State uninsured branches and agencies of foreign parent
banks with total worldwide consolidated bank assets in excess of $1
billion. Under section 18(g) of the Federal Deposit Insurance Act (12
U.S.C. § 1828(g)), all insured State branches and those insured Federal
branches whose parents do not have total worldwide consolidated bank
assets in excess of $1 billion will be subject to deposit interest rate
limitations (12 CFR Part 329).
(Enc. Cir. No. 8780)
J
2
In addition, the IBA authorizes the Federal Reserve Banks
to provide access to Federal Reserve credit, clearing, and settlement
facilities to branches and agencies to the same extent as to member
banks, subject to limitations, restrictions or regulations promulgated
by the Board. Under the Board's action, branches and agencies subject
to reserve requirements will be granted access to Federal Reserve services
and credit in each Federal Reserve District in which they operate.
Regulation A (Extensions of Credit by Federal Reserve Banks) has been
amended to facilitate branch and agency borrowing from the Federal Re
serve discount window.
The Board also has determined to apply to offices of Edge
Corporations the same general rules with respect to maintenance of re
serves, aggregation of deposits, and access to Federal Reserve services
that are applicable to branches and agencies.
The Board believes that its actions to implement the provisions
of the IBA will facilitate the conduct of monetary policy and will promote
vigorous and fair competition between branches and agencies and domestic
depository institutions to the fullest extent possible.
EFFECTIVE DATE: September 4, 1980. On that date, branch and agency
reserve requirements will commence based upon deposits held during the
seven-day computation period ending on Wednesday, August 27, 1980.
FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), Paul S. Pilecki, Attorney (202/452-3281), James
S. Keller, Attorney (202/452-3582), or Sydney J. Key, Economist (202/4523697), Board of Governors of the Federal Reserve System, Washington,
D. C. 20551.
SUPPLEMENTARY INFORMATION: On July 23, 1979, the Board requested public
comment (44 Fed. Reg. 44876) on a proposal to apply Federal reserve
requirements and deposit interest rate limitations to U. S. branches
and agencies of foreign banks ("branches and agencies") with total world
wide consolidated bank assets in excess of $1 billion pursuant to section
7(a) of the International Banking Act of 1978 ("IBA") (12 U.S.C. § 3105).
The IBA imposes Federal reserve requirements and deposit interest rate
limitations on Federal branches and agencies of such foreign banks.
The IBA authorizes the Board, after consultation and in cooperation
with State bank supervisory authorities, to apply the reserve require
ments and deposit interest rate limitations made applicable to Federal
branches and agencies to State branches or agencies of such foreign
banks.— ' The period for public comment expired on November 23, 1979.
1/
Federal Reserve staff undertook extensive consultations with each
of the State bank supervisory authorities that have responsibility for
State branches or agencies of foreign banks. On March 16, 1979, the
Board submitted a report to Congress, as required by the IBA, concerning
the steps taken to consult with State bank supervisory authorities.
Additional consultations with State supervisory authorities on the Board's
proposal have taken place. A copy of the report is available from the
Board's Office of Public Affairs (202/452-3215).
3
After consideration of more than 40 comments received from the public
(primarily from foreign banking institutions), the Board has adopted
the proposal substantially as published, but with certain modifications
as discussed below.
The primary objectives of the IBA are to facilitate the imple
mentation of monetary policy and to promote competitive equality among
depository institutions. To further these purposes, the Board of Governors
has amended its regulations concerning extensions of credit by Reserve
Banks (Regulation A; 12 CFR Part 201), reserves of member banks (Regula
tion D? 12 CFR Part 204) , and interest on deposits (Regulation Q? 12
CFR Part 217) to apply these provisions to U. S. branches and agencies
of foreign banks. The Board also has determined the manner in which
branches and agencies may have access to Federal Reserve services.
Application of Regulation D
The scope of the activities and the balance sheet structure
of branches and agencies suggest that they compete primarily with domestic
money center banks, most of which are members of the Federal Reserve
System. In order to facilitate the implementation of monetary policy
and to promote competitive equality, the Board, after consideration
of the character of business conducted by branches and agencies, has
determined to apply the provisions of Regulation D (12 CFR Part 204)
to branches and agencies, effective September 4, 1980, so that they
generally will be .computing and maintaining reserves in the same manner
as member banks.—/ Regulation D has been modified to reflect certain
operational and structural differences between member banks and branches
and agencies.
Under Regulation D, required reserves are computed on the
basis of daily average net deposit balances during a seven-day period
ending each Wednesday (the "computation period"). Required reserves
are satisfied by the maintenance of balances at a Federal Reserve Bank
during the seven-day period that begins the second Thursday following
the end of the computation period (the "maintenance period") and by
the average daily U. S. currency and coin held during the computation
period. Current Federal reserve requirement ratios are listed in Table 1.
2/ The
Federal
section
imposed
Board has been advised by its Legal Division that, in its view,
reserve requirements imposed on branches and agencies under
7 of the IBA (12 U.S.C. § 3105) preempt reserve requirements
on these institutions pursuant to State law.
4
Table 1
Federal Reserve Requirement Ratios
Type of deposit and deposit interval
in millions of dollars
Ratios (per cent) in
effect March 1, 1980
Net demand
$0-2
Over
Over
Over
Over
$2-10
$10-100
$100-400
$400
Savings
7
9-1/2
11-3/4
12-3/4
16-1/4
3
Time*-By initial maturity
30- 179 days
- $0-5
- over $5
180 days
to4years
4years or more
Marginal reserve requirement
(on managed liabilities in excess
of the institution's managed
liabilities base)
*
3
6
2-1/2
1
8
A supplementary reserve requirement of 2 per cent is applied to time deposits
of $100,000 or more.
Aggregation for Reserve Requirement Calculation. The Board has determined
to adopt a procedure of statewide aggregation for purposes of calculating
reserve requirements for branches and agencies. Under this procedure,
reserve requirements will be computed by aggregating the deposits of
a foreign bank's branches and agencies operating in the same State.
However, deposits of branches and agencies located in the same State
but in different Federal Reserve Districts will not be aggregated.
This represents a simplification of the Board's July 23 proposal, which
contemplated that deposits at all branches and agencies of a foreign
bank and of its foreign subsidiary banks would be aggregated nationally
for purposes of calculating reserve requirements. The Board's determina
tion to adopt a system of statewide aggregation is based principally
on comments received indicating that national aggregation for calculating
reserves would be complex and costly and on estimates suggesting that
it would have had very little effect on the reserves required of branches
and agencies.
5
Under Regulation D, as amended, a foreign bank's branches
and agencies operating in the same State will submit an aggregated re
port of deposits to, and maintain reserves with, the Federal Reserve
Bank in whose District they operate. However, a foreign bank's branches
and agencies operating in the same State but in different Federal Reserve
Districts will report deposits and maintain reserves separately with
their respective Reserve Banks. For example, if a foreign bank has
a branch in Philadelphia and a branch in Pittsburgh, the former would
submit reports to, and maintain reserves with, the Federal Reserve Bank
of Philadelphia. Pittsburgh, however, is located in the Cleveland Federal
Reserve District, and a branch located in that city would report deposits
to, and maintain reserves with, the Pittsburgh Branch of the Federal
Reserve Bank of Cleveland.
Under the Board's action, in reporting deposits for purposes
of calculating reserve requirements, U. S. branches and agencies will
exclude transactions with other U. S. branches and agencies of the same
foreign bank.
In other words, balances due to U. S. branches and agencies,
wherever located, of the same foreign bank will not be treated as deposits
due to banks, and balances due from U. S. branches and agencies, wherever
located, of the same foreign bank will not be deductible from gross
demand deposits as balances due from other banks.
The Board's action with regard to basic reserve requirements
for branches and agencies does not affect procedures currently in place
for the marginal reserve requirement program imposed on October 6, 1979
(12 CFR 204.5(f) (2); 44 Fed. Reg. 60071), which is intended as a temporary
measure. Under that program, all reports on total managed liabilities
of U.S. branches and agencies of the same "family" must be filed on
a nationally consolidated basis by one office (the reporting office)
at the Federal Reserve Bank of the District in which that office is
located. The reporting office also is required to maintain the marginal
reserves of the "family" in a reserve account at the Reserve Bank to
which it reports. Under the marginal reserve program, "family" will
continue to refer to the U. S. branches and agencies of a foreign bank
and of its majority-owned foreign banking subsidiaries.
Credit Balances
Most States that permit the establishment of agencies provide
that credit balances may be maintained for agency customers only in
connection with the exercise of other lawful banking powers. Commentators
stated that credit balances should not be reservable, since they do
not serve the same purposes as deposits and they may not be used for
ordinary transactions purposes. Credit balances arise primarily from
crediting proceeds of loans extended by the agencies, from collections
of foreign trade related paper, and from compensating balance require
ments for agency services. There are, however, close parallels between
credit balances at agencies and deposits at Edge Corporations, which
6
are subject by statute to member bank reserve requirements and interest
rate limitations. Moreover, if credit balances were maintained at a
member bank, they would be regarded as reservable deposits.
The Board has determined that credit balances at agencies
should be regarded as ''deposits" for purposes of interest rate limita
tions and reserve requirements. The maturity of credit balances will
determine the applicable reserve ratios and interest rate limitations,
consistent with the treatment of deposits at member banks and Edge Corpora
tions. Credit balances with a minimum maturity of 30 days or more,
as specified in the agency's agreement with its customer, will be subject
to time deposit reserve ratios and to the applicable time deposit in
terest rate ceilings under Regulation Q. Credit balances with shorter
maturities will be treated as demand deposits, and the prohibition against
payment of interest on demand deposits will be applied to such funds.
Officers' Checks
The Board believes that it is appropriate to treat officers'
checks issued by or drawn by branches and agencies as demand deposits,
since officers' checks of member banks are regarded as demand deposits.
Accordingly, the Board has amended section 204.1(g) of Regulation D
(12 CFR 204.1(g)) to treat officers' checks issued by a branch or agency,
including those drawn as agent for its foreign bank (including its foreign
offices), as demand deposits for reserve requirement purposes. Branches
and agencies will be required to conform their accounting practices
with respect to officers' checks to those required of member banks under
Regulation D.
Eurodollar Borrowings
Since 1969, deposits in the form of borrowings by domestic
offices of member banks from foreign banks, foreign national governments,
certain international organizations, and the bank's own foreign branches
have been subject to Eurodollar reserve requirements.
(See § 204.5(c)
and (d) of Regulation D (12 CFR 204.5(c) and (d).) The applicable basic
Eurodollar reserve ratio has been as high as 20 per cent, but has been
zero since August 24, 1978.
(Eurodollar borrowings have been subject
to marginal reserve requirements since October 6, 1979.) To provide
treatment comparable to that of member banks, Eurodollar borrowings
of branches and agencies will be subject to the same reserve ratios
that apply to Eurodollar borrowings of member banks.
Net borrowings by a branch or agency from its foreign bank
(including its foreign offices), except to the extent of the capital
equivalency allowance described below, will be reservable at the Euro
dollar reserve ratio even if the funds borrowed represent the proceeds
of commercial paper issued in the United States by the foreign bank.
Funds raised in the United States by a branch or agency directly, however,
will be subject to basic domestic reserve requirements unless raised
in a form specifically exempted by Regulation D, such as interbank borrow
ings or repurchase agreements on United States government or agency
securities.
Much of the funding for branches and agencies is provided
by advances from their foreign banks. Since a branch or an agency is
part of its foreign bank’s corporate entity, it has no separate capital
account in the domestic banking sense. However, a portion of advances
from the foreign bank serves purposes similar to that of capital of
domestic banks, which is not subject to reserve requirements. Conse
quently, the Board has provided that, in determining reserve require
ments, a branch or agency will be permitted to deduct a capital equivalency
allowance equal to 8 per cent of certain assets from the net advances
from its foreign bank (including its foreign offices). However, the
capital equivalency allowance that may be deducted may not exceed net
advances. The asset base to which the 8 per cent figure will be applied
will be total branch or agency assets less United States coin and currency,
cash items in process of collection and unposted debits, balances due
from domestic banks and other foreign banks, balances due from foreign
central banks, and net balances due from its foreign bank and the foreign
bank's United States and foreign offices. Balances held at the Federal
Reserve will not be deducted from total assets in computing the asset
base for the 8 per cent capital equivalency allowance. This capital
equivalency allowance should contribute both to competitive equity and
to the safety and soundness of branches and agencies. The capital equiv
alency allowance for basic reserve requirements differs from that used
in connection with the managed liabilities program. However, if the
marginal reserve program is in effect on September 4, 1980, the effective
date, the capital equivalency allowance for managed liabilities will
be eliminated.
Asset Sales
A domestic bank can fund its operations from deposits or borrow
ings in the money markets or from affiliates.
It can also obtain funds
by selling a portion of its assets. In each instance, the domestic
bank obtains additional funds to lend in its banking business. Funds
obtained by a member bank from the sale of domestic assets (such as
loans to U. S. residents) to its foreign branches are subject to Euro
dollar reserve requirements (§ 204.5(d) of Regulation D; 12 CFR 204.5(d)).
In order to provide similar treatment for branches and agencies, the
Board has determined that the proceeds of the sale of any domestic asset
by a branch or agency to its foreign bank (including its non-U. S. offices)
or foreign parent bank holding company will be subject to Eurodollar
reserve requirements. However, domestic assets that are required to
be sold for Federal or State supervisory purposes will not be subject
to Eurodollar reserve requirements.
8
Regulation 0
Regulation Q (12 CFR Part 217) prescribes rules governing
the payment of interest on deposits, including limitations on the rates
of interest that may be paid by member banks on time and savings de
posits. Regulation Q also includes provisions that (1) prohibit the
payment of interest on deposits that are payable on demand or that have
a maturity of less than 30 days; (2) specify the terms and conditions
under which member banks may pay savings and time deposits before maturity;
and (3) prescribe rules governing the advertisement of interest paid
on deposits. The Federal Deposit Insurance Corporation has established
substantially similar regulations (12 CFR Part 329) that apply to non
member banks.
Effective September 4, 1980, the Board is applying Regula
tion Q to the following offices of parent foreign banks having total
worldwide consolidated bank assets in excess of $1 billion:
insured
and uninsured Federal branches, uninsured State branches, and Federal
and State agencies. Under section 18(g) of the Federal Deposit Insurance
Act (12 U.S.C. § 1828(g)), Part 329 will apply to all insured State
branches and to insured Federal branches of foreign banks with total
worldwide consolidated bank assets of $1 billion or less.
Access to Federal Reserve Services
The IBA states that, subject to restrictions, limitations,
and regulations of the Board, each Federal Reserve Bank may provide
services to a branch or agency in the same manner and to the same extent
as to a member bank if such branch or agency is maintaining Federal
reserves. The IBA also states that, in providing services to a branch
or agency, each Federal Reserve Bank shall give due regard to account
balances being maintained with it by the branch or agency and the pro
portion of the assets of such branch or agency being held as reserves
(12 U.S.C. § 347d).
Under the Board's procedure of statewide aggregation for cal
culating reserve requirements for branches and agencies, reserve ac
counts will be maintained at Federal Reserve Banks in each District
in which a foreign bank operates. Federal Reserve services will be
made available to branches and agencies locally through the Reserve
Banks with which they maintain accounts. The Board believes that access
to Federal Reserve services on a local basis is appropriate in order
to further the IBA's goal of promoting competitive equality between
branches and agencies and domestic depository institutions. Federal
Reserve services will be available to branches and agencies beginning
September 4, 1980, the effective date of the reserve requirement regula
tion. As authorized by the IBA, Federal Reserve Banks may require branches
and agencies to maintain a level of clearing balances consistent with
the level of services being provided.
9
A branch or agency may make mutually agreeable arrangements
with the Reserve Bank at which it maintains an account to hold a portion
of its reserve balance in a nontransactional account that would be avail
able to State or Federal supervisory authorities pursuant to various
asset pledge requirements. Such an account could not be used for clear
ing purposes and could not be used to meet any clearing balance require
ment established by a Reserve Bank.
Access to discount window
In accord with the IBA's policy of national treatment, ex
tensions of credit from the Federal Reserve discount window generally
will be made available to branches and agencies under the same policies
applicable to domestic money center banks, their primary competitors.
However, these policies will be modified somewhat in recognition of
the operational and structural differences between branches and agencies
and domestic money center banks. A branch or agency will be expected
to draw upon other reasonable sources of funds, including its foreign
bank and domestic and foreign money markets, before turning to the dis
count window for short-term adjustment credit. Moreover, adjustment
credit will not normally be available to a branch or agency if it were
funding or intended to fund other related institutions, foreign or domestic.
As is the case with money center banks, a branch or agency will not
normally be eligible for the Seasonal Borrowing Program. Emergency
credit will be extended to a branch or agency only with prior Board
approval.
The appropriateness of borrowing by a branch or agency will
be determined by the needs of the individual office. Each branch or
agency will be permitted to borrow from the Reserve Bank of the District
in which the branch or agency is located. However, Reserve Bank lending
to all U. S. offices of a foreign bank will be coordinated and monitored
on a nationwide basis to assure compliance with the policies for borrow
ing from the Federal Reserve.
Implementation of reserve requirements
The Board recognizes that substantial revisions in the ac
counting procedures of branches and agencies may be required as a result
of its action. On September 4, 1980, branch and agency basic reserve
requirements will commence based on deposits held during the seven-day
computation period ending on Wednesday, August 27, 1980. Federal branches
and agencies will not be subject to basic reserve requirements until
September 4, 1980 .— ' At that time, branches and agencies will be required
3/ Under § 7 of the IBA, a Federal branch or agency accepting deposits
would be required to maintain Federal reserves in the same manner as
a member bank. However, since State branches and agencies will not
be subject to basic reserve requirements until September 4, 1980, the
Board is waiving basic reserve requirements for Federal branches and
agencies until that date.
10
to report data necessary for the administration of reserve requirements,
including data for the categories listed in Table 2. Data for these
categories are required to be maintained on a daily basis for each computa
tion period and filed with the appropriate Federal Reserve Bank once
each week. These data and filing requirements are similar to those
of member banks.
Current Board policy permits nonmember banks that become member
banks to assume their reserve requirements gradually over a two-year
period. The Board has determined that it is appropriate to phase-in
reserve requirements for branches and agencies over a similar two-year
period. Therefore, reserve requirements will be applied to these institutions
on a graduated basis over a 24-month period in accordance with the following
schedule:
Succeeding 3-month periods
following application
of basic reserve
_______ requirements_______
1
2
3
4
5
6
7
8
9
Percentage of
reserve requirement
to be maintained
September? 4-December 3, 1980
December 4, 1980-March 4, 1981
March 5-June 3, 1981
June 4-September 2, 1981
September 3-December 2, 1981
December 3,1981-March 3, 1982
March 4-June 2, 1982
June 3-September 1, 1982
September 2, 1982 forward
0
5
15
25
40
55
75
95
100
For purposes of the phase-in of reserve requirements, marginal reserve
requirements on managed liabilities will not be taken into account,
since a branch or agency already is required to maintain such reserves.
Table 2
Reporting Categories for Branches and Agencies for Reserve Requirement Purposes*
*
1.
Demand deposits due to banks.
2.
Demand deposits due to the U. S. Government.
3.
Other demand deposits (including officers' checks).
4.
Demand deposits due from banks.
5.
Cash items in process of collection.
6.
Savings deposits.
7.
Time deposits with original maturities of 30 to 179 days.
"Deposits" includes credit balances.
11 -
8.
Time deposits with original maturities of 180 days but
less than 4 years.
9.
Time deposits with original maturities of 4 years or more.
10.
U. S. currency and coin owned and held.
11.
Time deposits of $100,000 or more.
12.
Borrowings from foreign banks, foreign national
governments, and international institutions.
13.
Gross claims on the foreign bank (including its offices
located outside the States of the United States and the
District of Columbia).
14.
Gross liabilities to the foreign bank (including its offices
located outside the States of the United States
and the District of Columbia).
15.
Assets sold by a branch or agency to its foreign
bank (including its offices located outside the
States of the United States and the District of Columbia)
or its foreign parent bank holding company.
16.
Assets sold by the branch or agency to nonbanking affiliates.
17.
Funds received from the sale of ineligible bankers acceptances
that have remaining maturities of less than 30 days.
18.
Funds received from the sale of ineligible bankers acceptances
that have remaining maturities of 30 days or more but
less than 180 days.
19.
Funds received from the sale of ineligible bankers acceptances
that have remaining maturities of 180 days or more but
less than 4 years.
20.
Funds received from the sale of ineligible bankers acceptances
that have remaining maturities of 4 years or more.
21.
Total assets less United States coin and currency,
cash items in process of collection and unposted debits,
balances due from domestic banks and other foreign banks,
balances due from foreign central banks and net balances
due from the foreign bank and the foreign bank's U. S.
and foreign offices.
- 12 -
Edge Corporations
Under section 25(a) of the Federal Reserve Act (12 U.S.C.
§ 615), Edge Corporations are required to maintain reserves in such
amounts as the Board may prescribe for member banks.
In addition, Congress
has expressed the view in the IBA that Edge Corporations should have
powers sufficiently broad to enable them to compete effectively with
foreign-owned banking institutions in the United States and abroad.
The Board has amended Regulations D and K in order to treat Edge Corpora
tions and their branches for reserve purposes in generally the same
manner as the agencies and branches of foreign banks. Under the Board's
action, any two or more offices of an Edge Corporation operating in
the same State will submit aggregated reports of deposits to, and main
tain reserves with, the Federal Reserve Bank in whose District they
operate. However, Edge Corporation offices located in the same State
but in different Federal Reserve Districts will report deposits and
maintain reserves separately with their Reserve Banks. In reporting
deposits for purposes of calculating reserve requirements, Edge Corpora
tion offices will exclude transactions with other offices of the same
Edge Corporation. Federal Reserve services will be made available to
Edge Corporation offices through the Reserve Banks with which they main
tain their accounts. The Federal Reserve discount window, however,
is unavailable to Edge Corporations.
If a foreign bank established an Edge Corpration, as permitted
for the first time by the IBA, the deposits of the offices of the Edge
Corporation would not be aggregated with those of the branches and agencies
of that foreign bank for purposes of calculating reserve requirements.
This treatment parallels the treatment of Edge Corporations owned by
domestic banks, since, at present, deposits of Edge Corporations owned
by U. S. banks are not aggregated with those of their parent bank for
purposes of calculating reserve requirements. The capital equivalency
allowance, however, will not be available to Edge Corporations.
These actions are taken pursuant to the Board's authority
under section 7 of the International Banking Act of 1978 (12 U.S.C.
§ 3105), section 13 of the Federal Reserve Act (12 U.S.C. § 347d), section
19 of the Federal Reserve Act (12 U.S.C. §§ 371a, 371b, 461 et seg.),
and section 25(a) of the Federal Reserve Act (12 U.S.C. §§ 611 et seg.).
Effective September 4, 1980, Regulation A (12 CFR Part 201),
Regulation D (12 CFR Part 204) , Regulation K (12 CFR Part 211), and
Regulation Q (12 CFR Part 217) are amended as follows:
1.
to read as follows:
Section 201.1 of Regulation A (12 CFR 201.1) is amended
13
§ 201.1
AUTHORITY AND SCOPE
This Part is issued under the authority of section 13 (12
U.S.C. §§ 343 et seg.) and other provisions of the Federal Reserve Act
and relates to extensions of credit by Federal Reserve Banks. Except
as may be otherwise provided, this Part shall be applicable to United
States branches and agencies of foreign banks subject to reserve require
ments under 12 CFR Part 204 in the same manner and to the same extent
as to member banks.
2.
Regulation D (12 CFR Part 204) is amended by adding a
new section 204.0 as follows:
§ 204.0
AUTHORITY AND SCOPE
(a) This Part is issued under the authority of section 19
(12 U.S.C. §§ 461 et seg.) and other provisions of the Federal Reserve
Act and of section 7 of the International Banking Act of 1978 (12 U.S.C.
§ 3105).
(b) This Part relates to the reserves that member banks
are required to maintain against deposits. A foreign bank's branch
or agency located in the States of the United States or the District
of Columbia is required to comply with the provisions of this Part in
the same manner and to the same extent as if the branch or agency were
a member bank, except as may be otherwise provided by the Board, if
(i) its parent foreign bank has total worldwide consolidated bank assets
in excess of $1 billion? (ii) its parent foreign bank is controlled
by a foreign company which owns or controls foreign banks that in the
aggregate have total worldwide consolidated bank assets in excess of
$1 billion? or (iii) its parent foreign bank is controlled by a group
of foreign companies that own or control foreign banks that in the aggregate
have total worldwide consolidated bank assets in excess of $1 billion.
(c) The provisions of this Part do not apply to any
deposit that is payable only at an office located outside the States
of the United States and the District of Columbia.
3.
to read as follows:
§ 204.1
Section 204.1 of Regulation D (12 CFR 204.1) is amended
DEFINITIONS
*
*
*
*
*
(b) Time deposits. *** "Time deposits" does not include
the liability of a United States branch or agency of a foreign bank
to another United States branch or agency of the same foreign bank,
or the liability of a United States office of an Edge Corporation to
another United States office of the same Edge Corporation.
*
*
*
*
«
*
*
14
(g)
Gross demand deposits. *** "Gross demand deposi
also includes officers' checks issued by or drawn by a United States
branch or agency of a foreign bank, including checks drawn as agent
for or on behalf of its foreign bank or offices thereof located outside
the States of the United States and the District of Columbia. "Gross
demand deposits" does not include the liability of a United States branch
or agency to another United States branch or agency of the same foreign
bank, or the liability of a United States office of an Edge Corporation
to another United States office of the same Edge Corporation.
*
*
*
*
*
(k) Credit balances. For purposes of this Part, the
term "deposits" also includes the credit balances of a United States
branch or agency of a foreign bank.
(l) Foreign bank. "Foreign bank" means any bank organized
under the laws of any country other than the United States (including
its States and the District of Columbia), or organized under the laws
of Puerto Rico, Guam, American Samoa, the Virgin Islands, or a territory
or possession of the United States.
4.
to read as follows:
§ 204.2
Section 204.2 of Regulation D (12 CFR 204.2) is revised
COMPUTATION OF RESERVES
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*
*
*
*
(b) Deductions allowed in computing reserves. In deter
mining the reserve balances required under the terms of this Part, the
amounts of balances subject to immediate withdrawal due from other banks,
including such amounts due from United States branches and agencies
of foreign banks, and cash items in process of collection as defined
in § 204.1(h) may be deducted from the amount of gross demand deposits.
However, United States branches and agencies of a foreign bank may not
deduct balances due from another United States branch or agency of the
same foreign bank, and United States offices of an Edge Corporation
may not deduct balances due from another United States office of the
same Edge Corporation. Balances "due from other banks" do not include
balances due from Federal Reserve Banks, or balances (payable in dollars
or otherwise) due from banking offices located outside the States of
the United States and the District of Columbia.— ■
*
10/
■k
*
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*
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*
5.
to read as follows:
§ 204.3
Section 204.3 of Regulation D (12 CFR 204.3) is amended
DEFICIENCIES IN RESERVES
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*
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*
*
(e) United States branches and agencies of foreign banks.
A foreign bank's United States branches and agencies operating within
the same State and within the same Federal Reserve District shall prepare
and file a Report of Deposits on an aggregated basis, shall maintain
required reserves with the Federal Reserve Bank of their District, and
shall be assessed penalties in accordance with the provisions of paragraphs
(a) through (d) of this section.
(f) Edge Corporations. An Edge Corporation's offices
operating within the same State and within the same Federal Reserve
District shall prepare and file a Report of Deposits on an aggregated
basis, shall maintain required reserves with the Federal Reserve Bank
of their District, and shall be assessed penalties in accordance with
the provisions of paragraphs (a) through (d) of this section.
6. Section 204.5 of Regulation D (12 CFR 204.5) is amended
to read as follows:
§ 204.5
RESERVE REQUIREMENTS
(a)
Reserve Percentages. * * * in determining the
deposits of United States branches and agencies of foreign banks against
which reserve balances are required to be maintained, the deposits of
United States branches and agencies of a foreign bank shall be aggregated
for all offices operating within the same State and within the same
Federal Reserve District.
In determining the deposits of United States
offices of Edge Corporations against which reserve balances are required
to be maintained, the deposits of United States offices of an Edge Corpora
tion shall be aggregated for all offices operating within the same State
and within the same Federal Reserve District.
*
(d)
*
*
*
*
Foreign branch transactions with parent bank.
(1) Member banks. During each week of the four-week
period beginning May 22, 1975, 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 zero per cent of the daily average total of —
16
(i)
such branches, and
net balances due from its domestic offices to
(ii)
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 computation period
ending on the Wednesday fifteen days before the beginning of
the maintenance period.
(2) United States branches and agencies of foreign banks.
During each reserve maintenance period, a United States branch or agency
of a foreign bank shall maintain a reserve against its deposits equal
to a daily average balance of zero per cent of the daily average total
of —
(i)
net balances due to its foreign bank (including
offices thereof located outside the States of the United States
and the District of Columbia) after deducting an amount equal
to 8 per cent of the United States branch's or agency's total
assets less United States coin and currency, cash items in
the process of collection and unposted debits, balances due
from domestic banks and other foreign banks, balances due
from foreign central banks, and net balances due from its
foreign bank and its United States and non-United States offices,
however, the amount that may be deducted may not exceed net
balances due to the foreign bank (including offices thereof
located outside the States of the United States and the District
of Columbia), and
(ii)
assets (including participations) held by its
foreign bank (including offices of the foreign bank located
outside the States of the United States and the District of
Coluabia or its parent holding company that were acquired
from the United States branch or agency (other than assets
required to be sold by Federal or State supervisory authorities
or assets representinq.credit extended to persons not residents
of the United States^-') during the computation period ending
on the Wednesday eight days before the beginning of the maintenance
period. Reserves that may be required against assets sold
to nonbanking affiliates under § 204.1(f) of this section
shall be maintained in accordance with § 204.5(a) of this
section.
(e )
Foreign branch credit extended to United States residents.
This paragraph does not apply to United States branches and agencies
of foreign banks.
*
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*
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17
13/ A United States resident is;
(a) Any individual residing (at the
time the credit is extended) in any State of the United States or the
District of Columbia; (b) any corporation, partnership, association
or other entity organized therein ("domestic corporation"); and (c)
any branch or office located therein of any other entity wherever organized.
Credit extended to a foreign branch, office, subsidiary, affiliate or
other foreign establishment ("foreign affiliate") controlled by one
or more such domestic corporations will not be deemed to be credit extended
to a United States resident if the proceeds will be used in its foreign
business or that of other foreign affiliates of the controlling domestic
corporation(s).
7. Section 211.4(d) of Regulation K (12 CFR 211.4(d)) is
revised as follows:
(d)
Reserve requirements and interest rate limitations.
The deposits of an Edge Corporation are subject to the reserve require
ments of Part 204 (Regulation D) and the interest rate limitations of
Part 217 (Regulation Q) in the same manner and to the same extent as
if the Edge Corporation were a member bank, except as may be otherwise
provided by the Board.
8.
as follows;
Section 217.0 of Regulation Q (12 CFR 217.0) is amended
§ 217.0
AUTHORITY AND SCOPE
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*
*
*
*
(c) Under authority of the provisions of section 7 of
the International Banking Act of 1978 (12 U.S.C. § 3105), the provisions
of this Part apply to a Federal branch or agency of a foreign bank and
to a State uninsured branch or agency of a foreign bank in the same
manner and to the same extent as if the branch or agency were a member
bank, except as may be otherwise provided by the Board, if (i) its parent
foreign bank has total worldwide consolidated bank assets in excess
of $1 billion; (ii) its parent foreign bank is controlled by a foreign
company which owns or controls foreign banks that in the aggregate have
total worldwide consolidated bank assets in excess of $1 billion; or
(iii) its parent foreign bank is controlled by a group of foreign companies
that own or control foreign banks that in the aggregate have total worldwide
consolidated bank assets in excess of $1 billion.
(d) The provisions of this Part do not apply to any
deposit that is payable only at an office located outside of the States
of the United States and the District of Columbia of a member bank or
of a foreign bank.
- 18 -
9.
Section 217.1 of Regulation Q (12 CFR 217.1) is amended
by adding the following:
§ 217.1
DEFINITIONS
*
*
*
*
*
(i) Credit balances. For purposes of this Part, the
term "deposits" also includes the credit balances of a United States
branch or agency of a foreign bank.
(j) Foreign bank. "Foreign bank" means any bank organized
under the laws of any country other than the United States (including
its States and the District of Columbia), or organized under the laws
of Puerto Rico, Guam, American Samoa, the Virgin Islands, or a territory
of the United States.
By order of the Board of Governors, March 19, 1980.
(signed)
Griffith L. Garwood
Griffith L. Garwood
Deputy Secretary of the Board
[SEAL]
@FedFRASER