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\ \ t \ QTX b ^ 7 F ederal \ R eserve Bank o f New Y o rk December 17,1970 ADVANCES AND DISCOUNTS Changes in Member Bank Borrowing Procedures To the Chief Executive Officers of the Member Banks of the Second Federal Reserve District: In our Circular No. 6648, dated December 1, 1970, we advised you of certain changes that would become effective early next year in the procedures under which our member banks obtain advances from this Bank. These changes have been developed to simplify and modernize existing practices. As indicated in that circular, they do not reflect any change in the Federal Reserve’s general credit and monetary policies and are not related to the proposals made in the fundamental reappraisal of the discount mechanism which the System still has under consideration. The changes in the procedures under which our member banks obtain advances from this Bank are set forth in the proposed revision of our Operating Circular No. 12, a copy of which is enclosed. The revised circular will be issued subsequently in final form, effective February 4, 1971. These changes will also entail the use of a new “ continuing lending agreement,” copies of which are also enclosed. Under the new procedure the continuing lending agreement, after its execution by a member bank, will remain in force until such time as it is expressly terminated, thereby eliminating the need for the submission of an application and promissory note at the time of each advance. Use of the continuing lending agreement will, accordingly, help to reduce the administrative requirements that have been in effect in order to obtain advances. The continuing lending agreement will constitute an unconditional obligation on the part of the borrowing member bank to pay at m aturity advances obtained pursuant to the continuing lending agreement. The lending agreement contains only the most essential provisions regarding collateral pledged as security for such advances. These provisions are similar to those now found in our form of promissory note. Each advance under the agreement will be evidenced by an advice of credit that specifies the amount of the advance and its m aturity date. Under the continuing lending agreement interest will be charged at the time an advance is repaid instead of being deducted at the time the advance is obtained. Changes in the discount rate will be applicable to outstanding advances from and after the effective date of change in the discount rate. The Board of Governors of the Federal Reserve System has revised its Regulation A on Advances and Discounts to conform the provisions of the regulation to the foregoing changes in procedure. A copy of the amendments to Regulation A was sent to you with our Circular No. 6648. Since a member bank will not be able to take advantage of these new procedures unless the bank has returned to us an executed copy of the continuing lending agreement, we have enclosed two copies of the form of such agreement for execution, one to be returned to us and one to be retained in your own files. The agreement should be executed by the officer or officers authorized to act under the borrowing resolution of your bank’s board of directors that is on file with us. Please return the signed copy of the continuing lending agreement to our Discount Division at your earliest convenience, but, in any event, no later than January 15, 1971. If you have any questions with respect to the new procedure or the material enclosed herewith, please contact Herbert IT. Ruess, Manager of our Credit and Discount Department (212-732-5700, Extension 8091) or Henry T. Christensen, Chief, Discount Division (Extension 609), at our Head Office, or Gerald II. Greene, Assistant Cashier (716-853-1700) at our Buffalo Branch. A lfeed H ayes, President. r P roposed revision o f this B a n k ’s O perating Circular N o. 12 on L advances and discounts to be issu ed effective F ebruary 4, 1971 . Federal reserve of New Bank York A D V A N C ES A N D D ISC O U N TS To the M em ber BanTcs o f the Second F ederal R eserve D istrict: T his c irc u la r sets fo rth th e g en eral te rm s and conditions u n d e r w hich we m ay extend cre d it accom m odations to m em ber banks and th e p ro ced u res to be follow ed in connection w ith extensions of such ac com m odations. A ll references in th is c irc u la r to us a p p ly equally to o u r Buffalo B ran ch , a n d it is sug g ested th a t m em ber banks located in th e B uffalo B ra n c h te r r ito r y re q u e st c re d it accom m odations from th e B ran ch . K in d s of c re d it acco m m o d atio n s 1. U n d e r provisions of th e F e d e ra l R eserve A ct (h e re a fte r called “ th e A c t” ), an d su b ject to R eg u latio n A of th e B o a rd of G overnors of the F e d e ra l R eserve System (12 C F R P a r t 201) an d in the lig h t of th e g en eral p rin c ip le s set fo rth in th e fo rew o rd to th a t R egulation, we are au th o rized to m ake cre d it available to m em ber banks by the follow ing m e a n s : (a ) W e m ay m ake advances to a m em ber bank, p u rs u a n t to section 13 of th e A ct, fo r p eriods not exceeding 90 days,* on the s e c u rity of obligations of, or fu lly g u a ra n te e d by, th e U nited S tates or an y agency of th e U n ite d States. (b) W e m ay m ake advances to a m em ber bank, p u rs u a n t to section 13 of th e A ct, fo r p eriods n o t exceeding 90 days,* on the se c u rity of an y p a p e r eligible fo r discount or fo r purch ase by th e R eserve B anks u n d e r provisions of th e A ct. (c) W e m ay m ake advances to a m em ber bank, p u rs u a n t to section 1 0 (b ) of th e A ct, fo r p eriods n o t to exceed fo u r m onths,* secured to o u r satisfactio n , w h eth er or n o t th e co llateral m eets the * I t is expected, however, that advances normally will be for shorter periods commensurate with the period of time Federal Reserve credit is actually needed. req u irem en ts of p a ra g ra p h s (a ) o r (b ) above. H ow ever, th e ra te on such advances m u st be a t le a st one h a lf of 1 p e rc e n t h ig h e r th a n th e hig h est ra te ap p licab le to d iscounts of o r advances on eligible p a p e r. (d ) W e m ay d isco u n t cu sto m e rs’ p a p e r of a m em ber bank, p u rs u a n t to sections 13 a n d 13a o f th e A ct, th a t m eets th e “ eligi b ility ” req u ire m e n ts set fo rth in section 201.3 of R eg u latio n A. C ontinuing lending agreem ent 2. I n g eneral, we w ill m ake advances to a m em ber bank p u rs u a n t to a co n tin u in g le n d in g a g reem en t (o u r F o rm No. CR. 66) to be executed b y a d u ly au th o rized officer of th e m em ber b a n k ; a n d p a r tic u la r advances p u rs u a n t to such agreem ent w ill be evidenced by an advice of credit, tra n s m itte d to th e m em ber b ank a t th e tim e of th e p a r tic u la r advance, specify in g th e am o u n t a n d m a tu rity of th e a d vance. H ow ever, we reserve th e rig h t in a n y case to req u ire th e execu tio n b y a m em ber b ank of a p rom issory note w ith resp ect to a p a r tic u la r advance. G ranting of credit accom m odations 3. (a ) I n general, we do n o t re q u ire th a t a re q u est fo r an ad vance be accom panied by a w ritte n ap p licatio n , a n d an y such req u est m ay be m ade b y telephone, le tte r, o r w ire b y an au th o rized officer of a m em ber bank. H ow ever, we reserve th e rig h t to re q u ire th e sub m ission of a w ritte n a p p licatio n . E a c h req u est fo r an advance m ust specify th e am o u n t an d m a tu rity of th e req u ested advance, th e col la te ra l offered as secu rity , a n d in th e event such co llateral is n o t alre a d y held by us, th e m a n n e r in w hich such co llateral w ill be placed in o u r possession or u n d e r o u r control. A n y m em ber b an k desirin g to d iscount p a p e r w ith us, as in d ic a te d in p a ra g ra p h 1 (d ) above, should consult us re g a rd in g th e p ro c e d u re to be followed. (b ) I f a req u est fo r cre d it is received by us before 3 p.m . an d th e req u est is ap proved, th e borro w in g m em ber b ank w ill be given im m ediate cred it in its reserve acco u n t unless th e m em ber b an k re quests th a t c re d it be given on a su b seq u en t day. C ollateral security 4. (a ) C o llateral offered as secu rity fo r a n y advance, in a d d itio n to m eeting re q u ire m e n ts of th e c o n tin u in g len d in g agreem ent, m u st be 2 acceptable to us; m u st be endorsed or assigned by th e m em ber b an k (except in th e case of b e a re r p a p e r) ; an d m ust be in such form , or accom panied by such docum ents, th a t it m ay be re a d ily tra n s fe rre d to us w ith o u t f u r th e r action b y th e m em ber bank. (b ) U n d er c e rta in conditions, co llateral offered as sec u rity fo r an advance by u s m ay be held by a n o th e r m em ber ban k or F e d e ra l R eserve B a n k in lieu of a c tu a l deliv ery of th e co llateral to us. I n f o r m atio n w ith resp ect to such a rra n g e m en ts w ill be fu rn ish e d on request. (c) I f a m em ber b ank th a t has pledged or discounted p a p e r w ith us, or has otherw ise tra n s fe rre d co llateral to us, receives any fu n d s in p a y m e n t fo r such p a p e r or o th e r co llateral so pledged, d is counted, or tra n s fe rre d , th e m em ber b ank m u st im m ediately re m it th e fu n d s to us, an d u n til so re m itte d th e p ay m en t w ill be considered as h av in g been received in tr u s t fo r us. (d ) I n accordance w ith S u b p a rt 0 of T re a su ry D e p a rtm e n t C irc u la r No. 300, th is B ank, as fiscal ag en t of th e U n ite d S tates, m a in ta in s as “ book-entry T re a su ry se c u ritie s ” tra n sfe ra b le T re a su ry se cu rities deposited as co llateral fo r advances by th is B ank. T ra n s fe r able T re a s u ry secu rities now on d eposit or h e re a fte r deposited fo r such pu rp o se w ill be converted in to book-entry fo rm a n d deposited in a book-entry co llateral account in accordance w ith th e provisions of our c u rre n t O p e ra tin g C irc u la r No. 21, “ B o o k -E n try T re a su ry S ec u ri tie s ,” a n d in such event such secu rities w ill be h a n d led p u rs u a n t to th e term s an d conditions of th a t c irc u la r, n o tw ith sta n d in g a n y incon sisten t provisions herein. Rates 5. In te re s t on an advance w ill be payab le to us a t th e tim e of re p ay m e n t of th e advance a t th e applicab le ra te in d ic ated in o u r c u r re n t O p e ra tin g C irc u la r No. 13 a t th e tim e th e advance w as m ade, except th a t, if th e ra te is changed w hile th e advance is o u tsta n d in g , th e new ra te shall a p p ly from a n d a f te r the effective d ate of such change. In te re s t w ill be com puted on a basis of 365 days to th e year. Statem ents and reports 6. I n connection w ith an y advance or discount, we reserve th e rig h t to re q u ire a c u rre n t cond itio n re p o rt of th e borrow ing m em ber bank, a recen t b alance sheet a n d profit-and-loss state m e n t of an y 3 obligor on p a p e r offered as co llateral fo r a n advance or fo r discount, a n d such o th e r re p o rts a n d statem en ts as we m ay deem desirable. A uthorization of officers to borrow 7. A certified copy of a reso lu tio n ad o p ted by a m em ber b a n k ’s b o ard of d irecto rs au th o riz in g d esig n ated officers to execute ag ree m ents w ith us an d to borrow on its b eh alf fro m u s m ust be on file w ith us in o rd er fo r an y m em ber b an k to o b tain c re d it accom m oda tions. O u r F o rm No. CR. 65 should be u sed fo r th is purpose. A greem ent to this circular 8. E a c h m em ber b an k a p p ly in g to us fo r an advance or d iscount sh all be deem ed by such action to have ag reed to all of th e te rm s a n d conditions set fo rth in th is c irc u la r a n d in R e g u latio n A of th e B o ard of G overnors of th e F e d e ra l R eserve System . R ight to am end 9. W e reserve th e rig h t to w ith d raw , a d d to, or am end a n y of th e provisions of th is c irc u la r a t an y tim e. Effect of this circular on previous circulars 10. T his c irc u la r supersedes o u r O p e ra tin g C irc u la r No. 12, R e vised D ecem ber 28, 1964, a n d th e F ir s t an d Second S u p p lem en ts th e re to d a te d A u g u st 16, 1966 a n d D ecem ber 27, 1967. A lfred H ayes, President. 4 F. R. B. N. Y. FORM NO. CR. SB AGREEMENT Regarding Advances by Federal Reserve Bank of New York 1. The undersigned member bank (hereafter called "the member bank”) promises to pay to the Federal Reserve Bank of New York (hereafter called “the Reserve Bank”) the amount of each advance made pursuant to this Agreement by the Reserve Bank to the member bank at the maturity date thereof, as such amount and maturity date are specified in an advice of credit prepared and transmitted by the Reserve Bank to the member bank at the time of such advance, subject to all provisions of this Agreement and to all applicable terms and conditions set forth in the Reserve Banks Operating Circulars, Regulation A of the Board of Governors of the Federal Reserve System, and the Federal Reserve Act. The member bank further promises to pay interest on each such advance at the rate and in the manner provided in the Reserve Bank’s Operating Circulars and Supplements thereto. 2. The member bank authorizes the Reserve Bank to charge the member bank’s reserve account with the amount of each advance and interest thereon at or after its maturity. 3. As security for the payment of each advance when due, the member bank pledges to the Reserve Bank the collateral agreed upon by the member bank and the Reserve Bank. Such collateral is also pledged by the member bank as security for all other liabilities of such bank due or to become due to the Reserve Bank or which may be acquired by the Reserve Bank. 4. As further security for the payment of each advance, the Reserve Bank shall have a lien upon, or security interest in, all property (tangible and intangible) of the member bank in the possession or under the control of the Reserve Bank, including but not limited to items in process of collection and the proceeds thereof and any balance to the credit of the member bank with the Reserve Bank. 5. Upon the request of the Reserve Bank, the member bank will substitute collateral or pledge such additional collateral as the Reserve Bank may deem necessary for its protection. 6. In the event of nonpayment of any advance when due or upon failure of the member bank to comply with a request by the Reserve Bank for substitute or additional collateral, the Reserve Bank shall have all the rights of a secured creditor, including the right to sell all or any part of the collateral at public or private sale without demand upon or notice to the member bank ( except such notice as may be required by applicable statute and may not be waived) and to become the purchaser of the whole or any part of such collateral, free from any equity of redemption and from all other claims to the extent permitted by applicable statute. After deduction of all expenses, the proceeds of such collateral may be applied by the Reserve Bank to the payment of such advance and of all other liabilities of the member bank to the Reserve Bank, and any surplus then remaining shall be paid to the member bank. 7. Any advance made pursuant to this Agreement shall become immediately due and payable, without demand or notice, upon (a) the failure of the member bank to perform any agreement hereunder or to pay any liability of the member bank to the Reserve Bank when due; or (b ) the insolvency of, or the appointment of a receiver for, the member bank; or (c ) the suspension or closing of the member bank, or the taking possession of its business, by any governmental authority. 8. Upon the happening of any event described in paragraph 7 of this Agreement, the Reserve Bank shall have the right to set off against the amount of any advance any indebtedness of the Reserve Bank to the member bank, whether or not due. (N am e o f member bank) (A ddress) By (D a te ) (Authorized officer)
@FedFRASER