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FED ER AL RESERVE BANK OF NEW YORK rC irc u la r No. 8 7 8 4 "| M arch 27, 1980 J L CREDIT RESTRAINT PROGRAM Additional Questions and Answers To A ll Member Banks, and Others Concerned, in the Second Federal Reserve District: P rinted on the following pages is a second series of questions and answers, representing the views of the legal staffs of the Federal Reserve Bank of New Y ork and of the Board of Governors of the Federal Reserve System, regarding the special credit and consumer credit restraint program s. The first series of questions and answers was sent to you yesterday (C ircular No. 8781). Any questions concerning the Credit R estraint P rogram may be directed to the persons listed in that circular. http://fraser.stlouisfed.org/ _ _______ _ Federal Reserve Bank of St. Louis_ T homas M. T im l e n , F i r s t V ic e P r e s id e n t. 1 Su b p a r t A of Part 229 — A - 2 6 • Q: Special deposits on consumer credit Can a special d e p o s i t be pledged? A: W ith the approval of the Reserve Bank, a d e p o s i t o r y institution m a y p l e d g e a special d e p osit for Federal, State and local g o v e r n m e n t a l purposes. Q: In answering some p r e v i o u s questions, it has been indicated that a creditor m ay use a repres e n t a t i v e sample in computing its base. W h ere it is imprac tical to use sampling techniques, m a y a creditor make a good faith estimate? A: Yes, pro v i d e d the creditor d o c u ments the procedures used in m a king the estimates. In the future, h o w ever, a creditor m u s t m a i n t a i n records in a manner that a d e q u a t e l y indicates the nature and purpose of the loan. Q: If a creditor d i s c o v e r s a sign i f i c a n t error after it has filed the base report or m o n t h l y report, should it file a revised report? A: Yes. A credito r m a y be required to review its p r o c e dures for d e t e r m i n i n g its o u t s tanding covered credit if it appears that a s i g n i f i c a n t error has been made in its report. For example, if an estimate m ade for a base report were d i s c o v e r e d later to be s i g n i f i c a n t l y i n c o r r e c t — in light of the amount of covered credit in new loans m a d e or improved estimating p r o c e d u r e s — the creditor should discuss filing a revised report with its R e s erve Bank. A - 27• A - 28• A - 2 9 . Q: If a cre d i t o r ' s covered credit falls b e low $2 m i l lion on an a v erage basis for the reporting period, will it have to m a i n t a i n a special deposit? A: A - 30. No. A l t h o u g h the creditor will still have to file m o n t h l y reports, it will have to m a i n t a i n a special de p o s i t o nly if it s u b s e q u e n t l y exceeds $2 m i l l i o n on average in a reporting period. Q: How does a bank holding c o m p a n y c a l culate its base if each of its s u b s i d i a r i e s has less than $2 m i l l i o n in covered credit? For example, wha t is the base -2- for a holding c o m pany that has 10 s u b s i d i a r i e s each with $1 m i l l i o n of c r edit o u t s t a n d i n g on March 14? A: The base for a holding c o m p a n y is d e r ived from c o m bining the covered credit of all of its subsidiaries. The base for the holding c o m p a n y in the example above is $10 million. A - 3 1 . Q: If a banking s u b s i d i a r y of a bank holding co m p a n y m a i n t a i n s a special d e p o s i t on behalf of the entire holding company, including nonbank s ubsidiaries, does Section 23A of the Federal R e s erve Act relating to loans to affi l i a t e s apply? A: Q: Is Puerto Rico cons i d e r e d outside the United States for all p u r p o s e s under the consumer credit restraint p r o g r a m (subpart A)? A: A-32. Such a d e p o s i t is not regarded as giving rise to the type of t r a n s a c t i o n that was intended to be covered by Section 23A, and Section 23A w o uld not apply. Yes. A - 33. Q: A covered creditor has m a i n t a i n e d records on the p r o p o r t i o n of its m u l t i - p u r p o s e loans m a d e after M a rch 14 that is covered credit. W h e n pa y m e n t s are received, is it n e c e s s a r y to m a i n t a i n records on a loan by loan basis in c o m p uting the reduction in the amount of covered credit? A: No. During the month, a covered creditor m a y allocate payments on m u l t i - p u r p o s e loans to reduction in covered credit in p r o p o r t i o n to the share of covered credit in total m u l t i - p u r p o s e loans reflected in the p r e ceding months' report. Al t e r n a t i v e l y , a covered creditor m a y m a i n t a i n records on a loan by loan basis and allocate the p a y m e n t on the basis of the ratio of covered credit to the total amount of the loan. A - 34 . Q: As a number of institutions do not secure small home improvement loans wit h a m o r t g a g e on the home, are such loans to be treated as covered credit? A: Yes. Uns e c u r e d home i m p r o vement loans and home improve m e n t loans secured by c o l l ateral other than the home (or a savings deposit) are treated as covered credit. -5- A: S - 7 . Q: Data as of the last b u s iness day are en t i r e l y a c c e ptable e s p e c i a l l y if this reduces the reporting burden on respondents• Should the statistical information on loan c ommitments o utstanding include lines or just c ommitments? Total amounts or just the unused portions? A: S-8. The figures reported for loan comm i t m e n t s should be unused c o n firmed lines plus unused commitments, to both n o n f i n a n c i a l and nonbank financial business customers. Q: Will the reporting forms be revised to add, to the statistical i n f o rmation requested of banking o r g a n i z a tions, a m e m o item for loans to foreigners? A: It has been d e c i d e d not to revise the forms for the a d d i tional item. Instead, w hen a r e s p ondent has a special situation regarding loans to foreigners (e.g., a large increase in total loans that m o s t l y reflects loans to foreigners) , this fact should be called to Reserve Banks' a t t e n t i o n by noting it in the space provided for e x p l a n a t i o n s (Section D ) .
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