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1 FED ER AL RESERVE BANK O F N EW YORK A [ Circular No. 8 8 8 5 July 28, 1980 ] SCHEDULE FOR IMPLEMENTATION OF MONETARY CONTROL ACT To All D epository Institutions, and Others Concerned, tn the Second Federal Reserve District: T h e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m h a s a n n o u n c e d a t e n t a t iv e s c h e d u le t o b e f o llo w e d in c a r r y in g o u t t h e p r o v is io n s o f t h e M o n e ta r y C o n tr o l A c t o f 1 9 8 0 . T h e f o llo w in g is q u o t e d fro m t h e te x t o f t h e B o a r d ’s a n n o u n c e m e n t: In clu d ed in th e sch ed u le is a 60-day grace p eriod for th e p o stin g o f reserve req u irem en ts b y n onm em ber institutions. E n a cted last M arch 31, th e A ct is d esig n ed to im prove th e effectiv en ess of m onetary p o licy b y ap p ly in g n e w reserve req u irem en ts set b y th e F ed era l R eserve for com m ercial banks, savings banks, savings and loan associations, and cred it unions that offer transactions accounts or n on personal tim e d ep osits. T h e act also p rovid es access to F ed era l R eserve services for all in stitu tion s su b ject to reserve requirem ents, and requires th e Board to p u b lish a set o f p ricin g p rin cip les and a prop osed sch ed u le o f fees for services b y S ep tem b er 1, 1980. T h e Board is required to b eg in actual p ricin g of services b y S eptem ber 1, 1981. T hree proposals — on reserve requirem ents, th e d isco u n t w in d o w , an d p ass-th rou gh arrangem ents for reserve m ain ten an ce — h ave alread y b een issu ed b y th e Board. H o w ev er, substantial effort w ill still b e req u ired to co m p lete and d istrib u te rep ortin g form s, prepare operations m anuals, an d fa m ili arize a large num ber of d ep ository in stitu tion s w ith the n e w requirem ents and procedures. C on seq u en tly, in stead of th e origin ally p la n n ed S ep tem b er 1 start for im p lem en tin g th e n ew reserve requirem ents, an alternative tim eta b le h as b een a d o p ted w h ic h p rovid es for large nonm em ber in stitu tion s to b eg in p ostin g req u ired reserves b y early N ovem b er. M em ber banks [and Edge Act and Agreement Corporations] w o u ld con tin u e to p o st reserves u n d er existin g rules until th a t tim e. R eserves for m em b er banks — w h ich w ill b e red u ced under th e program — w ill b e ad ju sted later to ensure that reserves p o sted over th e first year w ill b e th e sam e as if th e red u ction h a d started in Septem ber. [The Federal Reserve anticipates delaying reserve maintenance by depository institutions toith less than $1 million in assets until late Decendaer. The delay until early November does not apply to branches and agencies of foreign banks required to keep reserves pursuant to the International Banking Act, but a similar delay may be considered by the Board of Governors.] F o llo w in g is th e overall ten ta tiv e sch ed u le for im p lem en tin g th e Act: July 29 Board considers a p o licy on p ricin g services, p ricin g sch ed u les, access and related clearin g b a la n ce p o licies. July 31 C om m en t p eriod ends on “p ass-th rou gh ” proposal. (T h e com m en t p erio d on proposals for p h a sin g in th e n e w reserve requirem ent and on th e u se o f d isco u n t w in d o w en d e d July 15.) W eek of A u gu st 4 Board con sid ers th e final form o f R eg u la tio n D m e n ts) and R egu lation A (d isc o u n t w in d o w ). ( reserve req u ire Week of August 11 Formal publication of Regulations A and D. Final guidelines on pass-through of reserves will be announced shortly thereafter. Week of September 1 Publication for comment of pricing principles and preliminary sched ule of prices. Week of September 8 Reserve Banks send reporting forms, manuals and other materials to all depository institutions. September 15 and beyond Reserve Bank meetings with depository institutions to familiarize them with the new regulations and procedures. October 30 Reporting procedures begin. October 31 Deadline for comments on pricing proposals. November 13 Posting of reserves by large nonmember institutions begins. January 5 Publication of final regulations on pricing. January 19 Phased implementation of pricing begins with wire transfer and settlement services. P rin ted on the follow ing page is the text of a letter on the subject sent by Paul A. Volcker, C hairm an, B oard of G overnors of the F ed eral Reserve System, to the C hairm en of the Senate and H ouse Banking C om m ittees. Q uestions regarding these m atters m ay be d irected to one of the follow ing officers of this Bank: Richard J. Gelson, Assistant Vice President (Tel. No. 212-791-6312), for questions on reserve reporting procedures. Thomas J. Campbell, Accounting Officer (Tel. No. 212-791-7769), for questions on reserve requirements and reserve account maintenance. Eugene P. Emond, Manager, Credit and Discount Departm ent (Tel. No. 212-791-6146), for questions on the discount window. Bradley K. Sabel, Assistant Counsel and Assistant Secretary (Tel. No. 212-791-5033), for questions on reserve requirements — interpretative and technical issues. A nthony M. Solomon , President. 2 Text of Letter Sent by Chairman Volcker to the Chairmen of the Senate and House Banking Committees D u r in g th e p a s t f e w d a y s, m y sta ff h a s h a d d is c u s s io n s w it h y o u r C o m m itte e sta ff a b o u t o u r p r o g r a m s o n th e im p le m e n ta tio n o f th e M o n e ta r y C o n tr o l A c t. O v e r a ll, t h e e ffo rt is c o m in g a lo n g q u it e w e ll. T h r e e p r o p o s e d r e g u la tio n s o n r e se r v e r e q u ir e m e n ts , th e d is c o u n t w in d o w , a n d p a s s th r o u g h a r r a n g e m e n ts fo r r e s e r v e m a in te n a n c e h a v e b e e n p u t o u t fo r p u b lic c o m m e n t , g o o d p r o g r e ss is b e in g m a d e o n th e d e v e lo p m e n t o f in te r n a l o p e r a tin g p r o c e d u r e s , a n d w o r k o n t h e p r ic in g o f se r v ic e s is e a s ily w it h in t h e s c h e d u le . P u b lic c o m m e n t o n th e p r o p o s e d r e g u la tio n s w ill b e r e c e iv e d th is m o n th a n d w e w ill t h e n h a v e t h e ta sk o f a n a ly z in g th e c o m m e n ts a n d a d o p t in g fin a l r e g u la tio n s . H o w e v e r , s u b s ta n tia l effo r t w ill still b e r e q u ir e d to c o m p le t e a n d d is tr ib u te r e p o r tin g fo r m s, p r e p a r e o p e r a tio n s m a n u a ls, a n d fa m ilia r iz e a la r g e n u m b e r o f d e p o s ito r y in s titu tio n s o f v a r io u s ty p e s w it h t h e n e w r e q u ir e m e n ts a n d p r o c e d u r e s. I t is c le a r to u s th a t t h e sm o o th a n d o r d e r ly im p le m e n ta tio n o f th e M o n e ta r y C o n tr o l A c t c o u ld b e a t s o m e risk if w e a tte m p t to c o m p le t e a ll o f t h e s e effo r ts — p a r tic u la r ly t h e e d u c a t io n a l n e e d s — b y S e p te m b e r 1. C o n s e q u e n tly , a n a lte r n a tiv e tim e t a b le th a t w e b e lie v e is r e a lis tic h a s b e e n d is c u s s e d w it h y o u r staff. W e f e e l th a t it is v e r y im p o r ta n t th a t th e in s titu tio n s a ffe c te d b y t h e M o n e ta r y C o n tr o l A c t u n d e r s ta n d f u lly a ll o f th e n e w r e q u ir e m e n ts a n d p r o c e d u r e s . C o n s e q u e n t ly , as s o o n as th e r e p o r t in g fo r m s a n d in s tr u c tio n a l m a n u a ls are c o m p le t e d , w e p la n to h o ld m e e t in g s w it h a ll o f t h e a ffe c te d in s titu tio n s . T h is w ill b e d o n e in tw o s ta g e s . T h e first s e t o f m e e t in g s w ill b e h e ld w it h in s titu tio n s w it h $1 m illio n or m o r e in a sse ts, w it h t h e o b j e c t iv e th a t t h e n e w r e se r v e r e q u ir e m e n ts fo r t h e s e m e m b e r a n d n o n m e m b e r in s titu tio n s w ill b e in p la c e b y e a r ly N o v e m b e r . I n o rd er to c o n fo r m to t h e p r o v is io n s o f t h e A c t, m e m b e r b a n k r e se r v e s w o u ld b e a d ju s te d so th a t r e se r v e s fo r t h e f u ll y e a r w o u ld b e th e sa m e as if th e r e d u c tio n o f r e se r v e s h a d sta r te d in S e p te m b e r . In th e c a s e o f v e r y sm a ll d e p o s ito r y in s titu tio n s — in s titu tio n s o f le s s th a n $1 m illio n in a sse ts — w e are c o n t e m p la t in g a b it m o r e tim e s in c e it is u n lik e ly th a t a n y o f th e s e in s titu tio n s w o u ld h a v e to p o s t r e se r v e s a t th e F e d in th e tim e fr a m e o f th e n e x t f e w m o n th s . S p e c ific a lly , w e p la n to m e e t w it h th e m la te r in th e y e a r so th a t r e p o r tin g c a n b e g in in la te D e c e m b e r p rio r to th e a u th o r iz a tio n fo r n a t io n w id e N O W a c c o u n ts . T h e s e r e la t iv e ly m in o r a c c o m m o d a tio n s in th e im p le m e n t a t io n s c h e d u le w o u ld g r e a tly e a s e t h e a d ju s tm e n t fo r a ll o f th e a ffe c te d in s titu tio n s ( in c lu d in g th e F e d e r a l R e s e r v e ) , a n d I u n d e r s ta n d th a t y o u r sta ff w a s g e n e r a lly r e c e p t iv e to th is s c h e d u le . I n c lo s in g , le t m e a d d th a t w e are p r o g r e s s in g v e r y w e ll in th e p r ic in g fo r s e r v ic e s a rea . W e e x p e c t to p u b lis h fo r p u b lic c o m m e n t a s e t o f p r ic in g p r in c ip le s a n d a p r o p o s e d s c h e d u le o f f e e s fo r F e d e r a l R e s e r v e s e r v ic e s b y S e p te m b e r , a n d o u r c u r r e n t p la n is to b e g in th e p h a s e -in o f a c tu a l p r ic in g b y J a n u a r y 1 9 8 1 , a h e a d o f th e d a te r e q u ir e d b y th e le g is la tio n . I n d e e d , I a m r e a s o n a b ly c o n fid e n t th a t w e w ill b e w e ll a lo n g th e p a th to fu ll im p le m e n t a t io n b y S e p te m b e r 1, 1 9 8 1 , th e d a te w h e n t h e A c t d ir e c ts u s to b e g in th e p r o c e s s o f p u t t in g in to e ffe c t a s c h e d u le o f f e e s fo r s e r v ic e s . 3
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