Full text of Federal Reserve Bulletin : June 1998
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VOLUME 84 • NUMBER 6 • JUNE 1998
FEDERAL RESERVE
BULLETIN
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C.
Table of Contents
391 PROFITS AND BALANCE SHEET
DEVELOPMENTS AT U.S. COMMERCIAL
BANKS IN 1997
U.S. commercial banks had another excellent
year in 1997. Their return on equity remained in
the elevated range that it has occupied for five
consecutive years, and their return on assets
reached a new high. Banks maintained their
profitability while also adding significantly to
assets. The year's strong economic growth
increased the demand for credit; banks more
than met that demand, gaining market share. In
addition, banks departed from the pattern of
recent years by sharply increasing their holdings
of securities. Compared with 1996, banks earned
a somewhat lower average rate on their interestearning assets and paid a bit more on their
liabilities, but these developments were more
than offset by higher fee income and increased
efficiency. Loan losses remained low relative to
loans.
420 U.S. TREASURY AND FEDERAL RESERVE
FOREIGN EXCHANGE OPERATIONS
During the first quarter of 1998, the dollar appreciated 2.8 percent against the German mark and
2.2 percent against the Japanese yen. On a tradeweighted basis against Group of Ten currencies,
the dollar appreciated 1.9 percent. Although
the dollar was little changed on net over the
period, other asset prices experienced significant
appreciation. Global bond and equity markets
reached record highs, and many Asian markets rebounded from earlier weakness. The U.S.
monetary authorities did not intervene in the
foreign exchange markets during the quarter.
426 INDUSTRIAL PRODUCTION AND CAPACITY
UTILIZATION FOR APRIL 1998
Industrial production rose 0.1 percent in April,
to 127.8 percent of its 1992 average, after a
revised 0.3 percent increase in March and
declines in February and January. The rate of
industrial capacity utilization decreased 0.3 percentage point in April, to 81.9 percent.
429 STATEMENTS TO THE CONGRESS
Alan Greenspan, Chairman, Board of Governors, discusses adapting Medicare to meet our
long-run needs and says that the consensus
among economists is that technology is a driving force behind rising medical costs and that a
structure that provides appropriate incentives for
the development and application of technology
is key to a well-functioning health care system,
before the National Bipartisan Commission on
the Future of Medicare, April 20, 1998.
433 Edward W. Kelley, Jr., member, Board of Governors, discusses the Year 2000 computer systems issue and the Federal Reserve's efforts to
address it and says that the Federal Reserve
completed assessment of its applications in
1997, has renovated its most significant applications, and is testing internally using dedicated
Year 2000 computer systems; also, this project
is being closely coordinated among the Reserve
Banks, the Board, numerous vendors and service providers, and approximately 13,000 customers and government agencies, before the
Senate Committee on Commerce, Science and
Transportation, April 28, 1998.
438 Laurence H. Meyer, member, Board of Governors, discusses issues related to mergers among
U.S. banking organizations and other financial
services firms and says that the increased pace
of bank mergers since the early 1980s has
greatly reduced the number of U.S. banking
organizations and resulted in a substantially
higher nationwide concentration of banking
assets; however, concentration in local banking
markets has remained virtually unchanged, and
there continues to be substantial new bank entry;
also the ongoing and rapid pace of change in the
banking and financial services industry reinforces the need for financial modernization legislation, before the House Committee on Banking and Financial Services, April 29, 1998.
451 Edward M. Gramlich, member, Board of Governors, discusses improving the consumer price
index (CPI) and says that the Bureau of Labor
Statistics has made laudable progress in improv-
ing the accuracy of the CPI but that the hard
work must continue if the CPI is to keep up with
an ever-changing economy; in particular, some
of the concerns involve how prices are adjusted
to account for quality change and the introduction of new goods and also the consensus that a
price index that tracks the cost of purchasing a
fixed market basket of goods and services, as
the CPI now does, represents an upper bound on
changes in the true cost of living, before the
Subcommittee on Human Resources of the
House Committee on Government Reform and
Oversight, April 29, 1998.
For the intermeeting period ahead, the Committee adopted a directive that called for maintaining conditions in reserve markets that were
consistent with an unchanged federal funds rate
of about 5V2 percent and that did not include a
presumption about the direction of a change, if
any, in the stance of policy during the intermeeting period.
469 LEGAL DEVELOPMENTS
Various bank holding company, bank service
corporation, and bank merger orders; and pending cases.
454 ANNOUNCEMENTS
Resignation of Susan M. Phillips as a member
of the Board of Governors.
AI FINANCIAL AND BUSINESS STATISTICS
These tables reflect data available as of
April 28, 1998.
Amendments to Regulation B.
Amendment to the Basle Accord and proposal
for principles governing on-balance-sheet
netting.
Availability of revised lists of over-the-counter
stocks and of foreign stocks subject to margin
regulations.
Publication of the 84th Annual Report, 1997 and
of the Annual Report: Budget Review, 1998-99.
A3 GUIDE TO TABULAR PRESENTATION
A4 Domestic Financial Statistics
A42 Domestic Nonfinancial Statistics
A50 International Statistics
A63 GUIDE TO STATISTICAL RELEASES
AND SPECIAL TABLES
A64 INDEX TO STATISTICAL TABLES
Changes in Board staff.
A66 BOARD OF GOVERNORS AND STAFF
457 MINUTES OF THE FEDERAL OPEN MARKET
COMMITTEE MEETING HELD ON
FEBRUARY 3-4, 1998
At its meeting on February 3-4, 1998, the Committee approved without change the tentative
ranges for 1998 that it had established in July of
last year. In keeping with its usual procedures
under the Humphrey-Hawkins Act, the Committee would review its ranges at midyear, or
sooner if interim conditions warranted, in
light of the growth and velocity behavior of the
aggregates and ongoing economic and financial
developments.
A68 FEDERAL OPEN MARKET COMMITTEE AND
STAFF; ADVISORY COUNCILS
A70 SCHEDULE OF RELEASE DATES FOR
PERIODIC RELEASES
A72 FEDERAL RESERVE BOARD PUBLICATIONS
A74 MAPS OF THE FEDERAL RESERVE SYSTEM
A76 FEDERAL RESERVE BANKS, BRANCHES,
AND OFFICES
PUBLICATIONS COMMITTEE
Lynn S. Fox, Chairman • S. David Frost • Donald L. Kohn • J. Virgil Mattingly, Jr.
I. Michael J, Prell D Dolores S. Smith LJ Richard Spillenkothen J\ Edwin M. Truman
The Federal Reserve Bulletin is issued monthly under the direciion of the staff publications committee. This committee is responsible for opinions expressed
exct'pi in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Multimedia Technologies Center
under (he dircciion of Christine S. Griffith, and Publications Services supervised by Linda C. Kyles.
Profits and Balance Sheet Developments
at U.S. Commercial Banks in 1997
William B. English and William R. Nelson, of the
Board's Division of Monetary Affairs, prepared this
article. Thomas C. Allard assisted in the preparation
of the data, and Lisa X. Chen provided research
assistance.
U.S. commercial banks had another excellent year in
1997. Their return on equity remained in the elevated
range that it has occupied for five consecutive years,
and their return on assets reached a new high
(chart 1). Banks maintained their profitability while
also adding significantly to assets. The year's strong
economic growth increased demand for credit, and
banks more than met that demand, gaining market
share. In addition, banks departed from the pattern of
recent years by sharply increasing their holdings of
securities. Compared with 1996, banks earned a
slightly lower average rate on their interest-earning
assets and paid a bit more on their liabilities, but
these developments were more than offset by higher
fee income and increased efficiency. Loan losses
remained low relative to loans.1
The advance in bank profits helped boost bank
holding company stock prices substantially last year.
With banks retaining a slightly larger fraction of
income, dividend growth slowed relative to the large
increases of recent years. The resulting increase in
retained income helped boost bank capital, which
I. Except where otherwise indicated, data in this article are from
the quarterly Reports of Condition and Income (Call Reports) for
insured domestic commercial banks and nondeposit trust companies
(hereafter, banks). The data consolidate information from foreign and
domestic offices and have been adjusted to take account of mergers
(see appendix). Size categories, based on assets at the start of each
quarter, are as follows: (he 10 largest banks, large banks (those ranked
11 through 100 by size), medium-sized banks (those ranked 101
through 1,000 by size), and small banks (those not among the largest
1,000 banks). At the start of the fourth quarter of 1997, the approximate asset size of the banks in those groups were as follows: the
10 largest banks, more than $70 billion; large banks, $6 billion to
$70 billion; medium-sized banks, $300 million to $6 billion; small
banks, less than $300 million. Many of the data series reported here
begin in 1985 because the Call Reports were significantly revised at
the start of that year. Data from before 1985 are taken from Federal
Deposit Insurance Corporation, Statistics on Banking (FDIC, 1997).
The dala are also available on the World Wide Web site of the FDIC
(http://www.fdic.gov/databank/sob/). Data shown may not match data
published in earlier years because of revisions and corrections. In the
tables, components may not sum to totals because of rounding.
\ [ L \ I V , ; I I > . u i t H I I I I I I L ' K ' N I I k i n k [ l r i i t i u h i l i n ' . I 1 .' ' ( ) - ' > ?
I
Percent
y»
Return on equity
Ill
M l
1 II
—- 1
5
f
V
— 10
II M II
M 1 II 11 II II
*
i.o
JJ
1970
1975
1980
1985
1990
1995
grew about in line with assets. As has been true for
several years, virtually all bank assets were at institutions classified as "well-capitalized" at the end of
1997. Only one bank—a small one—failed last year.
Consolidation continued in 1997. In June, most of
the remaining legal restrictions on interstate mergers
were removed, and several bank holding companies
combined subsidiary banks that had been operating
in separate regions. Partly as a result, the number of
banks declined to 9,217, down from 9,575 at the end
of 1996 and far below the peak, reached in 1984, of
about 14,500 (chart 2). At year-end 1997, the largest
100 banks accounted for two-thirds of bank assets, up
from about half in 1991.
Il\i..\\( /' SHI FT I)IM:Iomit
\T\
Bank assets grew 9lA percent in 1997, the fastest
growth in more than a decade (table 1). Demand for
credit was strong, and banks were generally willing
lenders. As a result, loans increased 8V4 percent, a bit
faster than in 1996.2 In addition, securities, which
2. The growth rates have been adjusted to remove the effects of an
accounting change that lowered measured growth in loans and
increased measured growth in federal funds sold. Before 1997, sales
of federal funds by foreign offices were classified as loans. Starting in
1997, they are classified as federal funds sold.
392
2.
Federal Reserve Bulletin • June 1998
Nuinhfi
<>l coiiiiiK'ivJLiI
b a n k s , a n d p n \ v i ! l a i ; c ol
asscis
al the largest 100 hanks. lL)7O-47
Thousands
Number
I I I I I 11I I I 1I I t I I I I I I I I I I I
Ftrosni
70
Percentage of assets
at largest 100
'—
—
I I I I I I I 1I I I I I I I I I I i I
I970
I975
1985
60
.10
I I I I I II
1990
1995
had been about unchanged for the past few years,
expanded nearly 9 percent. Non-interest-earning
assets, which make up about 13 percent of total
assets, expanded 11 [A percent, in large part because
of growth in the gross positive fair value of derivatives. Core deposit growth picked up, but not enough
to keep pace with assets; managed liabilities and
equity made up the difference.
to Businesses
The value of commercial and industrial (C&I) loans
on bank balance sheets expanded nearly \2]A percent, the second largest annual increase in seventeen
.v.
FinaiK'iii^ tiiip ami net cuuily n.-liii"iiiciil al u o i i t j u u
lumtinuiiL'tal c o r p o r a t i o n s , ivyo- 1 -)?
years. C&I loans increased in part because inventory
accumulation and fixed investment by businesses
apparently outstripped their internally generated
funds last year; at nonfinancial corporations, the
excess of capital expenditures over internal funds
rose to $45 billion, up from $6'/2 billion in 1996
(chart 3). The borrowing needs of nonfinancial corporations were further increased because, as has been
true for several years, they retired a large volume of
equity, on net, via stock buybacks and during corporate acquisitions.
Banks expanded their share of outstanding nonmortgage business credit to its highest level since
1989 (chart 4). In part, this expansion reflected a
substantial rise in the number of mergers and acquisitions among middle-market firms, which are more
likely to be financed by bank loans than are the
combinations of large corporations. Those respondents that reported stronger demand for business
loans on the Federal Reserve's quarterly Senior Loan
Officer Opinion Survey on Bank Lending Practices
(BLPS) last year most commonly attributed the
increased demand to mergers and acquisitions; in
addition, banks cited financing for inventories and for
plant and equipment.
Banks also expanded their market share by competing more vigorously for business loans. Although
only small fractions of the respondents to the BLPS
said they had eased standards on business loans in
1997, large fractions indicated they had eased loan
terms, particularly the spreads of loan rates over their
bank's cost of funds (chart 5). These results are
somewhat at odds with the Federal Reserve's quarterly Survey of Terms of Business Lending (STBL),
which showed a slight widening of the average spread
Blllkminf dollars
Hunk
i i i a i kL-l
l o a n s a s a ^It
ik'hi.
HoMhtiaikial
!')"/()
i):
— 100
Percent
Net equity retirement
75
— 40
— 35
1993
1995
— 25
1997
NOTK The data are four-quarter moving averages. The financing gap is (he
difference between capital expenditures and internally generated funds. Net
equity retirement is funds used to repurchase equity less funds raised in equity
markets.
SOURCE. Federal Reserve Board. Statistical Release Z.I. "Flow of Funds
Accounts of the United States." table F. 102.
L±
1970
I I I 1I I I I
1975
19S0
1985
I I I I I I I 1 1
1990
1995
SOURCE. Federal Reserve Board, Statistical Release Z.I, "Flow of Funds
Accounts of the United States." table L. 101.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
\ I ! I M I ; I I i n k ' s r i | jj
393
h o l h;il;nii.
Percent
MEMO:
Item
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Dec.
1997
level
(billions
or
dollans)
Assets
Interest-earning assets
Loans and leasts (net)
Commercial and industrial
Real estate
Booked in domestic offices
One- to four-family
residential
Other
Booked In foreign offices
Consumer
Other loans and leases
Loan lossreservesand
unearned income
Securities
Investment account
US. Treasury
US. government agency and
corporation obligations
Other
Trading account
Other
Non-imcresl-earning assets
Liabilities
Core deposits
Transaction deposits
Savings and small time deposits ..
Managed liabilities'
Deposits booked in foreign
offices
Large time
Subordinated notes and
debentures
Other managed liabilities
Other
Equity capital
4.33
4.04
5.93
1.84
12.43
11.99
5.35
5.61
6.24
2.97
12.69
13.02
2.64
2.23
2.37
-.67
8.79
855
1.33
1.98
-2.65
-9.10
2,73
2.W
2.19
2.53
-1.04
-4.10
1.94
2.57
5.68
6.56
6.05
.52
6.13
6.17
8.06
5.77
9.83
9.33
7.90
7.64
7.61
7.76
10.63
12,26
8.33
8.48
6.03
5.60
8.02
7.24
5.44
5,50
9.22
8.88
8.38
12.15
9.20
9.42
4,971
4.281
2,885
791
1,135
1.207
14.60
9.84
27.03
7.64
-3.09
16.13
10.34
2.99
6.18
-.94
14.00
3.62
16.64
.38
-5.68
7.76
-1.93
-2.35
-2.55
-4.01
7.53
-2.86
-17.80
-1.66
11.08
.22
4^67
9.06
9.97
10,09
4.35
18.35
16.01
5.29
10.06
6.25
2.81
9.98
14.23
4.65
6,75
3.18
4.44
22.28
9.69
9.04
.34
-117
13.78
713
494
28
544
372
-4.20
3.27
2.93
-5.80
10.29
5.08
4.04
-13.79
.35
8.46
8.19
3.50
-3.78
16.23
14.42
32.01
-4.85
12.29
11.44
23.95
-5.82
12.26
8.11
7.24
-2.22
-161
-1.73
-8.46
.47
.59
-1.55
-19.21
.06
.82
-1.14
-14.30
-.69
8.85
8.66
-8.88
58
1.006
861
151
22.54
-2.46
8.58
-5.82
6.45
33.41
-5.35
20.62
2.49
3.50
24.02
-6.70
11,87
-11.70
5.51
15.88
-2.56
38.88
2.82
-3.10
12.77
-5.20
21.01
1.57
-.32
9.62
6.09
51.84
-7.90
-.86
.87
149
-20.46
3.25
25.65
6.43
4.33
18.51
7.64
6.63
3.62
1.71
14.44
-.90
8.89
14.19
11.20
9.97
12.81
11.35
500
210
145
390
690
4.05
5.48
165
7.29
2.27
5.43
5.75
.93
8.71
5.13
2J7
738
2.43
10.51
-6.15
101
5.25
3.38
6.24
-6.19
1.35
5.09
14.62
.18
-6.07
5.12
1.49
5,47
-.85
12.30
8.31
-.17
-.33
-.08
17,57
7.23
3.97
-3.09
8.37
10.61
589
4.12
-3.45
8.34
9.48
9.12
4.52
-4.58
9.05
13.83
4,557
2.494
757
1.737
1.720
-7.77
9.22
-1.07
5.00
-5.8S
-5.68
3,81
-19.73
-5.85
-26.20
15.06
30.89
8.72
5.13
19.61
4.27
21.16
11.13
2O.J3
526
379
-4.25
5.45
-.06
16.98
9.86
3.29
20.99
-8.06
4.43
4.69
-1.39
-4.18
34.90
6.94
-1.02
10.82
22.18
15.30
9.23
1191
79.17
6.61
11.63
20.50
17.74
7.83
2.57
21.00
12.22
23.77
62
753
344
8.76
4.18
6.64
5.98
13.75
12.58
5.24
12.07
7.66
10.34
414
n.a.
19.06
n.a.
41.00
n.a.
34.39
-154
19.27
-4.03
10.37
-.60
9.66
4.00
-3.12
6.35
.67
7.66
2.03
9.85
14.18
496
380
MEMO
Commercial real estate loons2
Mortgage backed securities ...
NOTE. Data are from year-end to year-end.
n.a. Not available.
1. Measured as the sum of deposits in foreign offices, large time deposits in
domestic offices, federal funds purchased and securities sold under agreements
to resell, demand notes issued to the U.S. Treasury, subordinated notes and
debentures, and other borrowed money.
2. Measured as the sum of construction and land development loans secured
by real estate; real estate loans secured by nonfarm nonresidential properties;
real estate loans secured by multifamily residential properties; and loans to
finance commercial real estate, construction, and land development activities
not secured by real estate.
on business loans last year (chart 6). Nevertheless,
the average of measured spreads reported in the
STBL narrowed over the preceding several years, so
results from both surveys are broadly indicative of
aggressive pricing of business loans.
Spreads on the largest loans are the narrowest
relative to historical norms. Partly as a result, several
large banks established programs last year to package
and sell "collateralized loan obligations" (CLOs)—
securities backed by large commercial and industrial
loans. Respondents to the November 1997 BLPS
attributed the recent interest in CLOs to a desire by
banks to deploy their capital more efficiently by
moving relatively high quality loans (which have the
same regulatory capital requirement as riskier loans)
off their balance sheets.3 With these loans off the
books, the measured growth in business loans last
year understates the expansion of bank-originated
credit. However, the understatement was small
3. This explanation presumes that the increase in the expected
return on equity that occurs when capital is allocated to riskier assets
increases the value of the bank's stock, but this need not be true. Just
as selling $100 of safe stock and buying $100 of risky stock leaves
one's net worth unchanged, replacing low-risk assets with high-risk
assets should leave the value of the bank's stock essentially unaffected
so long as the bank must pay appropriately higher rates on its liabilities. However, the rates banks pay on insured deposits are insensitive to a broad range of riskiness in bank assets, and the sensitivity
of many other bank liabilities at the largest banks may be muted by
the perception that regulators might be unwilling to allow such institutions to fail because of the damage to the financial system that could
result.
394
Federal Reserve Bulletin • June 1998
Spread of C'«SLI liKtn rate w i IMU-IKIL-IJ I'alcial j'umls
In- -,uc ul luatt. 1<>,S7-'J7
;UKI
[')')()-•>•,'
Net percentage of selected large banks
that tightened standards
All loans
75
—
—
2.S
—
50
—
—
2.0
—
Large and medium
—
25
—
—
1.5
Four-quarter moving average
— 1.0
I
I
_|
I
More than $1,000,000
Net percentage of selected large banks that
increased spreads over their cosl of funds
— 2.5
— 2.0
—
—
50
1.5
—
25
1.0
I
1991
1993
1993
1997
NOTE. Net percentage is the percentage of banks reporting a tightening of
standards or an increase in spreads less the percentage reporting an easing or
decrease. The definition for firm size suggested for, and generally used by,
survey respondents is that medium firms are those with sales of between
$50 million and $250 million.
SOURCE. Federal Reserve Board, Senior Loan Officer Opinion Survey on
Bank Lending Practices.
because the bulk of the CLO activity involved loans
by foreign rather than U.S. banks. Nonetheless, the
survey results suggest that CLOs have the potential to
shift significant amounts of C&l loans off the books
of domestic banks over time.
Banks' holdings of commercial real estate loans
increased more than 93A percent last year. The growth
of these loans has been picking up for the past four
years following a sharp pullback in the early 1990s.
A variety of indicators show continued improvement
in the condition of the commercial real estate industry, including falling vacancy rates and rising prices
for properties. Commercial real estate loans have
grown much more rapidly in recent years at smaller
banks; after adjusting for the effect of mergers, these
loans at the largest 100 banks increased 4!/a percent
last year, whereas growth at the remaining banks was
15'/2 percent. The losses on such loans in the early
1990s were concentrated at large banks, which may
therefore remain relatively more cautious. Growth at
large banks may also have been held down somewhat
by the issuance of commercial mortgage-backed
securities (CMBSs); many of the respondents to the
August 1997 BLPS—particularly the largest banks—
reported that they had issued CMBSs. These securities were virtually nonexistent ten years ago. In 1997,
however, the increase in the outstanding dollar
amount of CMBSs exceeded the increase in the com
$100,000 lo $1,000,000
Less than SI00,000
—
—
1991
1993
1995
4.0
—
1989
4.5
—
1987
5.0
3.5
1997
NOTE. The data are weighted by loan volume.
SOURCE. Federal Reserve Board, Statistical Release E.2, "Survey of Terms
of Business Lending."
mercial mortgage loans on the books of commercial
banks; by this measure, CMBSs and bank loans were
the two leading sources of finance for commercial
real estate activities.
I .onus lo Households
In contrast to business loans, consumer loans on
banks' books contracted 2'A percent last year. Several factors contributed to the decline, including reduced demand for such loans by households, which
in turn partly reflected a substitution toward home
equity loans; a tightening of terms and standards on
consumer loans by some banks; and the increased
securitization of consumer loans. Consumer credit
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997 395
from all sources grew 4V? percent last year, down
from 8 percent in 1996 and 14 percent in the two
preceding years.
As is typical over an economic expansion, the
deceleration has been more pronounced for consumer
credit than for spending on consumer durables; the
growth of the latter slowed from 9VA percent in 1994
to 4 percent last year. In the early stages of an expansion, net increases in consumer debt tend to be large
because an upturn in spending for consumer durables
boosts loan originations, while past low levels of
originations keep debt repayments low. But as the
economy continues to expand, the growth of repayments provides more of an offset to new originations,
resulting in smaller net additions to the stock of debt.
As discussed below, the average repayment performance of consumer loans deteriorated significantly in
1995-96 and remained poor last year. In response, for
the past two years a large percentage of banks tightened their standards on consumer loans, according to
responses to the BLPS (chart 7). But the percentages
reporting tightening were lower in the second half of
1997, suggesting that many banks felt that they had
altered their standards sufficiently. Some banks also
reported imposing lower credit limits on credit cards
and raising finance charges on outstanding balances.
While these adjustments may have made credit card
lines harder to acquire for less creditworthy customers, banks apparently remained eager to attract
more creditworthy borrowers. Reportedly, credit card
solicitations continued at a record pace, and the value
of credit card lines grew 1 PA percent. By the end of
1997 the aggregate credit card utilization rate—credit
drawn on credit card lines relative to the total size of
such lines—had fallen to less than one-third.
Despite the decline in consumer loans on the books
of banks, outstanding consumer loans originated by
banks grew nearly 4 percent last year. The decline in
loans on the books resulted from an increase of more
than 20 percent in the volume of loans originated by
banks and then securitized; at the end of the year,
these off-balance-sheet amounts accounted for nearly
30 percent of consumer loans originated by banks
(chart 8). Given the marked deterioration in the performance of consumer loans in recent years, banks
may be inclined to reduce the amount of such loans
appearing on their balance sheets. In addition, banks
evidently find securitization frequently to be a less
expensive way of funding consumer loans than funding them on their balance sheets.4
Net pcrcemaL.'c of selected commercial bunk*- ih;il
tightened standards tor credit cards and other
consumer loans. I'W6 ')7
Percent
Credit cuds
— 40
— 20
1996
1997
NOTf. Net percentage is the percentage of banks reporting a tightening of
standards less the percentage reporting an easing.
SOURCE. Federal Reserve Board, Senior Loan Officer Opinion Survey on
Bank Lending Practices.
Consumer loans were likely also depressed last
year because many households refinanced them with
loans backed by real estate, which typically have
lower interest rates and for which interest payments
are generally tax deductable. Borrowing under home
equity lines of credit at banks increased 15 percent
in 1997, and closed-end residential real estate loans
secured by junior liens increased 103/4 percent. Realestate-secured borrowing from nonbanks, particularly
finance companies, was also strong. When asked in
the February 1997 BLPS to account for the strength
in home equity loans, most banks cited increased
demand from households or specific encouragement
by the banks to consolidate unsecured consumer
credit with such loans.
S.
Secunli/ed shaiv of oiiislandin;; consumer loans
origin.ileii hv kinks. 19NN 47
Percent
— 30
—
J
4. For information on [he securitization of credit card loans, see
William R. Nelson and Brian K. Reid, "Profits and Balance Sheet
Developments at U.S. Commercial Banks in 1995," Federal Reserve
Bulletin, vol. 82 (June 1996), p. 488.
1989
1991
1993
1995
tO
I
1997
SouRCh. Federal Reserve Board. Statistical Releases H.8, "Assets and Liabilities of Commercial Banks in the United States." and C.19, "Consumer
Credit."
396
').
Federal Reserve Bulletin L: June 1998
Secnritii's
AYLTULV r:iLo un n e w . I'KcJ rale i l i i n \ - \ v a r moriiMLVs.
ami ihe m o n t a g e ivImaiKiny index', I W H l )7
Percent
Mortgage rate
Index. 1990.Q1 = I
Refinancing index
—
1991
1993
1993
15
1997
SOURC(-:. The mortgage rate is from the Federal Home Loan Mortgage
Corporation; the refinancing index is from the Mortgage Bankers Association.
Home mortgages secured by first liens also accelerated in 1997, expanding SVA percent. Some of the
strength in mortgages reflected the high level of
residential construction activity last year, although
increased construction activity generally raises the
level of mortgages only gradually. Toward the end of
the year, the low level of mortgage interest rates
induced large numbers of borrowers to refinance
existing mortgages (chart 9). The resulting increase
in refinancing activity likely contributed to the expansion of banks' holdings of mortgages because some
households increase their mortgage size and take
cash out when refinancing. The added cash may be
used to pay down other debts, so the heightened level
of refinancing probably contributed a bit to the weakness in consumer loans discussed above. The high
level of refinancing activity may also have boosted
mortgage loans on banks' books temporarily, as previously securitized loans were replaced by new loans
that appear on the balance sheets of the refinancing
institution, at least for a while.
As has been true for several years, real estate loans
at banks were also boosted somewhat by banks'
acquisition of savings institutions; last year such
acquisitions added about 2 percentage points to the
growth of real estate loans at banks. Banks have been
absorbing savings institutions since the savings and
loan crisis in the late 1980s. Partly as a result, banks
have become bigger players in the mortgage business, which had previously been dominated by thrift
institutions. At the end of the fourth quarter, single
family mortgages accounted for nearly as large a
share of bank assets (14'/2 percent) as did C&I loans
(15% percent).
Banks' holdings of securities increased more than
83/4 percent last year after declining in 1994 and
changing little in 1995 and 1996. Securities also
expanded sharply earlier in the 1990s, but that
increase occurred during a period of weak loan
demand and strong inflows of core deposits; it may
also have reflected banks' efforts to comply with new
regulatory standards that imposed larger capital
requirements on loans than on securities.5 The
strength in securities last year, by contrast, coincided
with substantial loan growth and thus does not seem
to indicate any diminution in the demand for loans or
in the willingness of banks to provide them. Indeed,
responses to the May 1998 BLPS indicated that the
growth in securities was due in part to an increased
willingness on the part of some banks to boost
leverage in an effort to raise return on equity. Many
responses also attributed the growth to mergers:
Some banks were expanding their balance sheets in
line with capital accumulated because their holding
companies had recently participated in pooling-ofinterest mergers and therefore were constrained from
buying back stock.
Securities in investment accounts at banks
expanded S3A percent last year. Within investment
accounts, mortgage-backed securities, which account
for about half of the securities in such accounts,
increased much more rapidly than the remaining
types of securities. The 10 percent growth in interestearning trading account securities was concentrated
in securities booked at domestic offices; foreign
office trading accounts declined somewhat. The
decline in trading account securities booked in foreign offices was largely in the fourth quarter, when
the turmoil in East Asia probably induced banks to
sell some securities and reduced the value of some
that they kept.
Non-interest-earning trading account assets were
boosted by a $42Vi billion rise in the gross positive
fair value of derivatives written on interest rates,
exchange rates, and equity, commodity, and other
prices (see box "Off-Balance-Sheet Activity"). Much
of this gain was probably the result of an increase in
the value of exchange-rate contracts in the fourth
quarter, most likely because of the large depreciations
of several East Asian currencies at that time. Banks
typically hold offsetting positions in such contracts,
so large movements in exchange rates generally
5. Core deposits consist of demand deposits, NOW accounts, savings and money market deposit accounts, and small (that is, less than
$100,000) time deposits.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
397
increase bank assets and liabilities without greatly
affecting net worth. Exchange-rate-based derivative
contracts in a negative position, which are recorded
as liabilities on the balance sheet, also increased
substantially in the fourth quarter.
the most common form of retail sweep program—but
they accelerated the creation of programs that sweep
funds from household demand deposits; on net,
the amount moved by the initiation of new sweep
programs—$84 billion—was about 25 percent lower
than in 1996.
With core deposits growing more slowly than
assets, banks funded their robust growth last year
l.iubililic*
largely with managed liabilities, which increased
Bank core deposits grew 4'/a percent last year, about
13% percent. Large time deposits, deposits in foreign
the same rate as in 1996 and only half as fast as the
offices, and subordinated debt all expanded at doublerise in bank assets. Core deposit growth was reladigit rates last year. During the past five years of
tively slow, in part because banks set deposit rates
substantial growth of bank assets, the share funded
low in comparison to market rates, as they have done
by managed liabilities rose from 28[A percent to
for several years. For example, the average rate paid
nearly 34 percent, a level just below that in the late
by banks on their interest-bearing core deposits was
1980s.
1 VA percentage points below the yield on six-month
Historically, banks have increased their reliance on
Treasury bills last year. By contrast, the average
managed liabilities during periods of rapid asset
difference was only V* percentage point from 1987 to growth (chart 11), perhaps because they cannot prof1993 (chart 10). Yields available on core deposits
itably attract new core deposits quickly enough to
were especially low relative to the returns on bond
keep up with rapidly growing assets. Managed liabiliand stock mutual funds last year, and households'
ties can generally be raised in large amounts with
substitution toward such funds likely continued to
little or no change in the rates paid for the funds. The
depress the growth of core deposits.
public's demand for core deposits, however, is much
less sensitive to rates, so banks would have to
Within core deposits, savings accounts expanded
increase deposit rates substantially to induce large
rapidly, mainly because of the ongoing introduction
inflows over relatively short periods of time. Thus,
of "sweep" programs. These programs automatically
even though core deposits on average are less expenmove funds out of transactions deposits, against
sive than managed liabilities, the latter may still be
which banks must hold non-interest-bearing reserves,
the more profitable means for banks to finance rapid
into savings accounts, against which banks do not
growth in assets, with reliance on those liabilities
have to hold reserves. Sweep programs thus release
declining when asset growth is weak.
funds that banks can invest in interest-earning assets.
In 1997, banks slowed the initiation of programs that
Bank borrowing from the Federal Home Loan
sweep funds out of NOW accounts—until last year
Bank System (FHLB) grew significantly last year,
rising by more than a half and reaching about 1 percent of bank assets by year-end. Membership in the
It'll mk'ivsl I ;ik
FHLB was limited to thrift institutions until 1989,
BCIMM
11.
Money market mutual funds
A n n u a l d i a n g u in the ralio nl' inaiuiycd
asM'lv aikl iirnvvlh of assets, 1 y K d - 9 7
liabilities to
renxni
1987
1989
1991
1993
1995
1997
NOTE. The rale for core deposils is Ihe average for NOW accounts, savings
and money market deposit accounts, and small time deposils, and il excludes
demand deposits, which do not bear interest; see also text note 5.
SOURCE. Federal Reserve Board, Statistical Release H.I5, "Selected Interest
Rates"; and IBC's Money Fund Report.
1*187
1989
1991
1993
1995
1997
398
Federal Reserve Bulletin • June 1998
OfT-Balance-Sheet Activity
Off-balance-sheet activities are of three general types. The
first involves a promise by the bank to provide funds on
demand (for example, a loan commitment) or as a guarantee
(as with certain letters of credit). The obligation does not
appear on the balance sheet because the funds have not been
extended. The meaning of "off-balance-sheet" is somewhat
more obscure when applied to the second type of activity,
derivatives, because the value of most derivatives is
reported on the balance sheet—as an asset if the value is
positive or as a liability if the value is negative. Derivatives
are assets whose payments are derived from the performance of other assets; it is the underlying assets that are off
the balance sheet. The third type of activity, loan securitization, is generally spoken of as an off-balance-sheet activity
because the securitized loans typically are moved off of
banks' balance sheets. The table provides the year-end
amounts of selected off-balance-sheet items in dollars and
as a percentage of assets.
Commitments
Unused commitments equaled $3 trillion at the end of 1997,
nearly two-thirds of assets. The rise in unused lines as a
share of assets since 1990 is almost entirely attributable to
the growth of credit card lines, which tripled as a percentage of assets over the period and accounted for more than
half of unused commitments last year. Unused residential
and commercial real estate lines and unused lines for securities underwriting summed to less than 10 percent of unused
commitments last year, other unused lines, primarily commercial and industrial, accounted for the remainder.
Letters of Credit
Banks issue commercial and standby letters of credit. Commercial letters of credit are issued specifically to facilitate
payment for goods. They are arranged by the buyer to
guarantee payment to the seller of the goods, who receives
funds from the bank only when the terms of the purchase
are fulfilled. Commercial letters of credit equaled less than
1 percent of bank assets last year.
A standby letter of credit is a promise by the issuing bank
to pay a specific sum to a third party if the issuing bank's
customer fails to fulfill specific commitments; the customer
when the Financial Institutions Reform, Recovery,
and Enforcement Act allowed qualifying commercial
banks to join; more than half of all commercial banks
had become members by the end of 1997.
Capini!
Bank equity grew 10'A percent last year, a bit faster
than assets. More than one-third of the growth in
is then obligated to repay the funds to the bank. If the
customer's commitments are financial, such as repaying
holders of commercial paper, the letter is called a financial
standby letter of credit. If the commitments are not financial, such as the delivery of merchandise or the completion
of a construction project, the letter is called a performance
standby letter of credit. Banks' potential obligations under
financial standby letters equaled 3% percent of their assets
last year; potential obligations under performance standby
letters totaled about 1 percent of assets.
Derivatives
Derivatives can be roughly classified into two types: forwards and options. Forwards are agreements to buy or sell
Selected off-balance-sheet items, year-end
Item
Unused commitments
Letters of credit
Commercial
Standby
Financial
Performance
Derivatives (excluding
credit derivatives)
Interest rate
Notional amount
Fair value
Positive
Negative
Exchange rate
Notional amount
Fair value
Positive
Negative
Other
Notional amount
Fair value
Positive
Negative
Credit derivatives
(notional amount)
Guarantor
Beneficiary
Assets transferred
with recourse
1997
(billions of
dollars)
3,040.7
Percentage of assets
1990
1997
33.0
61.2
29.2
.9
.6
185.9
44.4
3.7
1.7
3.7
.9
17,176.1
98.1
345.5
162.8
161.3
7,832.5
192.2
185.5
493.7
n.a.
n.a.
104.3
n.a.
n.a.
2.4
3.3
3.2
157.6
3.9
3.7
9.9
22.9
27.7
n.a.
n.a.
.5
.6
33.4
63.7
n.a.
n.a.
.7
1.3
230.6
n.a.
4.6
n.a. Not available.
capital arose from a 30 percent increase in retained
income. Retained income increased so much partly
because net income was strong, but also because the
proportion of income retained by banks rose, from
24VA percent in 1996 to 2VA percent last year. With
the increased rate of retention, dividends rose just
8 percent, well below the 29 percent annual rate
posted between 1993 and 1996. About one-fourth of
the increase in capital was new capital, acquired
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
399
Off-Balance-Sheet Activity—Continued
something for a specific price at a designated future date;
options give the holder the opportunity, but not the obligation, to buy or sell something at a specific price, typically
during an agreed-upon interval.1 Swaps, in which the
income streams from two assets are exchanged at specified
future dates, are essentially a combination of several forward contracts. Most derivatives contracts held by banks
are based on interest rates or exchange rates. At banks, the
most common forms of interest rate contracts are swaps;
exchange-rate contracts are most commonly forwards; and
other derivatives are most often options.
Derivatives contracts are reported for accounting purposes in terms of their fair value, which is the price at which
the contract could be replaced, and their notional value,
which is generally the value of the underlying asset used in
the computation of the payment streams. For example, an
interest rate swap is commonly written so that its initial fair
value is zero, that is, so that the present values of the bank's
obligation to its counterparty and the counterparty's obligation to the bank are equal, even if the notional value—the
reference amount used for calculating the income stream
being swapped—is in the millions of dollars.
The difference between notional and fair values given in
the example is reflected in the aggregate values: The total
notional amount of banks' holdings of derivatives (excluding credit derivatives, which are discussed below) at the end
of last year equaled $25 Vi trillion, while the gross fair value
of the derivatives (positive and negative) was about
$750 billion. Notional amounts can be useful as one indicator of the change in the amount of derivatives activity over
time. However, because notional amounts are so far
removed from the actual value of derivatives, they vastly
overstate the exposure of the institutions.
Derivatives holdings are concentrated at the largest
banks. At the end of last year, more than 99 percent of
derivatives, measured either by notional amount or gross
fair value, were held at the top 100 banks. Furthermore,
about 90 percent of derivatives (again by either measure)
were held at the top 10 banks.
I. For additional information on the use and holdings of derivatives by
banks, see "Derivatives Disclosures by Major US. Banks, 1995," Federal
Reserve Bulletin, vol. 82 (September 1996), pp. 791-805.
generally from the issuance of stock or the injection
of funds from parent holding companies. Most of the
remaining growth in capital arose from two sources:
the increase in goodwill arising from bank mergers
and the increase in net unrealized gains on investment account securities available for sale.6
6. Goodwill is ihe difference between the acquisition price and the
net fair value of the identifiable assets and liabilities acquired. Unrealized gains on available-for-sale investment account securities are the
difference between the fair value of the securities and their amortized
cost.
More than 90 percent of derivatives (by notional amount)
were held in trading accounts last year. Such holdings
frequently arise either as financial institutions trade among
themselves or when a nonbank customer wishes to purchase
a derivative and the bank acts as a counterparty. Given the
volatility of these assets, banks rarely allow a position to be
unmatched for very long. As a result, at any given time, the
positive and negative fair values of banks' derivatives holdings tend to be about equal.
Another type of derivative contract, an option, is a
"credit derivative," which allows parties to transfer the
credit risk of an underlying asset. Generally, the derivatives
are structured so that the seller (guarantor) will pay the
buyer (beneficiary) if an asset held by the beneficiary defaults, thus allowing the beneficiary to hold the asset without being exposed to some or all of the credit risk of the
asset. At the end of last year, the notional value of credit
derivatives on which banks were the guarantors equaled
% percent of bank assets, and the notional value of credit
derivatives on which banks were the beneficiary equaled
1 V* percent of assets.
Securitization
Although loan securitization is often spoken of as an offbalance-sheet activity, securitized assets are reported as an
off-balance-sheet item only if the assets have been transferred with recourse; that is, if the bank has removed the
asset from its balance sheet but remains exposed to some of
the risk of loss posed by the asset. When residential mortgages are securitized through one of the federal housing
agencies, for example, the originating bank has no responsibility for the repayment of the loan (although it may service
the mortgages for a fee), and thus the loan is not an
off-balance-sheet item. In contrast, credit card securitizations are typically structured so that if the repayment performance of the underlying accounts deteriorates sufficiently,
the originating bank is obliged to repurchase the remaining
securitized loans over a fairly short period. Most of the
loans that are reported as off-balance-sheet items on the
Call Report, which equaled 4Vi percent of bank assets last
year, were credit card loans.
Capital for regulatory purposes, which excludes
both goodwill and net unrealized gains on investment
account securities, increased only TA percent, a bit
less than assets; hence, the average leverage ratio
edged down over the year (chart 12). Industryaverage risk-weighted capital ratios (total and tier 1)
also declined slightly over the year.7 Even though
7. The tier 1 ratio is the ratio of tier 1 capital lo risk-weighted
assets, and the total ratio is the ratio of the sum of tier 1 and tier 2
{Footnote continues on next page)
400
Federal Reserve Bulletin • June 1998
ally all banks remained well capitalized: At the end
of the year, 97l/2 percent of bank assets were at
well-capitalized banks.8
Kcuukitory capital rulios and sluice i>! industry
ii.ssL'ls ui vidl-eapiuiliA'1.1 hunks. I 1 ) 1 )I-47
Regulatory capital ratios
Total (fier I + tier 2) ratio
—
13
— 10
J
I
I I
Share of industry assets
at well-capitalized banks
— 100
— 80
— 60
—
1991
1992
1993
1994
1995
1996
40
1997
NOTE. For definition of capital ratios, see text note 7.
securities, which generally have low risk weights,
increased a bit more rapidly than loans, which generally carry high risk weights, risk-weighted assets
increased more rapidly than total assets because of
rapid growth in the selected off-balance-sheet items
that are included in risk-weighted assets on a creditequivalent basis. The risk-weighted credit-equivalent
amount of these items increased 30 percent from
year-end 1996 to year-end 1997, raising their share of
risk-weighted assets to nearly 20 percent. Despite the
slight declines, average capital ratios remain high
relative to regulatory standards. Furthermore, virtu-
capital to risk-weighted assets. Tier I capital consists mainly of
common equity (excluding intangible assets such as goodwill and
excluding net unrealized gains on investment account securities classified as available for sale) and certain perpetual preferred stock. Tier 2
capital consists primarily of subordinated debt, non-tier-1 preferred
slock, and loan-loss reserves. Risk-weighted assets are calculated by
multiplying the amount of assets and the credit-equivalent amount of
off-balance-sheet items (an estimate of the potential credit exposure
posed by the item) by the risk weight for each category, where the risk
weights rise from zero to I as the credit risk of the assets increases.
The leverage ratio is the ratio of tier 1 capital to average tangible
assets. Tangible assets are equal to total assets less assets excluded
from common equity in the calculation of tier 1 capital.
TRENDS IS PROFITABILITY
The 1997 rise of 123/4 percent in the net income of
U.S. commercial banks boosted the industry's return
on assets to 1.25 percent, a new record, and its return
on equity to more than 14% percent (table 2). With
profits strong, bank holding company stock prices
advanced rapidly over the first three quarters of the
year (chart 13). In the fourth quarter, however, bank
holding company stocks, especially those of money
center banks, were buffeted by concerns that economic problems in Asia would depress earnings.
Nonetheless, for the year as a whole, stock prices
of the money center companies about matched the
broader market, while those of regional banking companies easily surpassed both.
Rates of commercial bank profitability averaged
over the past five years are higher than in the previous five-year period and significantly exceed longerterm averages. For example, the industry's [43A percent average return on equity over the past five years
was about 5l/i percentage points higher than the
average over the previous five years and 4 percentage points higher than the average for the forty
years from 1948 to 1987.9 The improvement in the
1993-97 returns over the 1988-92 returns is primarily the result of a much-reduced level of loss provisioning relative to loans. The decline in provisioning
in turn resulted from the vastly improved quality
of assets: Troubled sovereign and commercial real
estate credits extended in the 1970s and 1980s were
worked out, and the sustained economic expansion
contributed to a low level of losses on more recent
lending. The high level of profits also reflects banks'
8. Well-capitalized banks are those with a total capital ratio greater
than 10, a tier 1 ratio greater than 6, a leverage ratio greater than 5,
and a composite CAMELS rating of I or 2.
9. Over the past two five-year periods, the return on assets
improved even more than the return on equity. The increasing importance of off-balance-sheet activities in recent years, however, makes
comparisons of return on assets over long periods of time potentially
misleading. Nevertheless, a large fraction of banking is still tied to
traditional on-balance-sheet items, and in interpreting changes in net
income over shorter periods, assets remain a useful scaling factor for
separating the effects of growth from those of improved profitability.
By contrast, return on equity should not be affected by changes in the
relative importance of off-balance-sheet activity because investors
expect to receive an appropriate return on their investment regardless
of whether activities are on or off the balance sheet. Returns on equity
may, however, have been affected at least temporarily by the substantial increases in capital-to-asset ratios in recent years, which have in
part been a response to regulatory changes.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
401
Selected income and expense items as a proportion ol asscis. 1941 97
Percent
1991
Taxes and extraordinary items ..
Net income (itturn on Sssew) .
1993
1994
1995
1996
1997
3.89
1.95
3.86
.8
7
3.90
2.13
3,94
3.72
2.02
3.64
.1
1
.9
0
1.70
18
.1
3.73
2.18
3.71
.7
3
.3
0
1.85
3.67
2.23
3.61
1.32
3.78
2.00
3.75
.8
2
-.01
1.73
.2
2
.1
5
Net inlerest income
,
Nonimcrcst Income
Noninterestexpense
,
Loss provisioning . . .
Realized gttiiu on invcsuncnl account securities .
Income before taxes and cxlramtllnary items .
1992
3.62
1.81
3.75
1.03
.9
0
.3
7
Item
.1
4
.1
9
JO
J8
1,20
1.15
.3
6
1.18
.5
6
1,20
.8
6
1.25
.7
4
.1
3
.1
0
M
.4
0
1.93
Dividends
.45
.41
.62
.73
.75
.91
.90
Retained income
.07
.49
.58
.42
.43
.30
.3S
7.71
1X64
15.32
14.63
14.69
14.53
14.87
MEMO
Return on equity
efforts to limit costs, which have helped lower
the share of revenue needed to cover noninterest
expenses. Over a longer period, noninterest income
has accounted for an increasing share of bank revenue as banks have shifted away from traditional
intermediation and toward such fee-based activities
as servicing loans funded by others and selling and
servicing mutual funds and annuities.
Interest Income and Expense
Net interest income as a percentage of average assets
declined 6 basis points last year because of a decline
in banks' net interest margin (net interest income as a
percentage of interest-earning assets, chart 14). The
narrowing of the net interest margin was produced
by a slight decline in the average rate received on
interest-earning assets and an increase in the average
rate paid on interest-bearing liabilities. Although
shorter-term market rates on balance changed little
over the year, the average rate earned on assets edged
slightly lower as the distribution of bank assets
shifted toward those that carry lower interest rates.
On the liability side, the net interest margin has been
squeezed by the need to fund rapid asset growth with
managed liabilities, on which the average rate paid
substantially exceeds that paid on core deposits.
The net interest margin has been drifting lower
since 1993 but remains high relative to the levels of
the late 1980s. Some reports in the financial press in
the early 1990s attributed the rise in bank net interest
margins at that time to the concurrent rapid decline in
short-term market interest rates and to the steepening
of the yield curve that accompanied that decline.
Underlying this explanation is the assumption that
rates on liabilities adjust more frequently than rates
on assets at many banks. The validity of the assumption is hard to assess directly because of the difficulty
N c l MIILTV'SI
I .v
Stock price indexes.
I'W7 -Apiil
i i K i 'i.Tlll ill III lilt.' s l o p e Ot lh»J \ lL-kl C'LH \ L\
1 976-97
I'WS
Percent
fades, January I. IW?= KM
Net interest margin
— 175
Regional
bank holding
companies
3.8
—
150
I I I 1 I I I I I I
125
Money center
bank holding
companies
J
1997
100
I
1998
NoTt. The holding company indexes are for seven money center companies
and forry-two regional companies as defined by Dow Jones.
SOURCE. DOW Jones and Standard and Poor's.
Yield carve
I I 1 i I
1977
I I 1I I I I i I I
1981
1985
1989
1993
1997
NOTE. Net interest margin is net interest income divided by interest-earning
assets. The slope of the yield curve is the yield on the ten-year Treasury note
less the coupon-equivalent yield on the three-month Treasury bill.
402
Federal Reserve Bulletin • June 1998
of measuring the repricing frequency of many bank
assets and liabilities. However, this assumption is not
consistent with past movements in the net interest
margin and the slope of the yield curve, which do not
suggest a tight link between them; nor is such a link
evident between net interest margins and changes in
the slope of the yield curve. For example, since the
early 1990s the yield curve has flattened considerably, but the net interest margin, while trending
lower, has remained fairly wide. Similarly, during
periods of very steep (or steepening) yield curves in
the 1980s, the net interest margin showed little if any
response.
liabilities. Finally, compared with the early 1990s,
banks have been funding a significantly larger fraction of assets with capital, and the returns paid on
capital are not included in interest expense. More
broadly, to the extent that banks must pay higher
returns on equity than on borrowed money, the rise in
capital ratios gives banks a strong incentive to boost
net interest margins to raise the return on assets and
thereby keep the return on equity from deteriorating.
j\i»)inli'rcsi
Income
Rather than being a response to a very steep yield
curve, the sharp widening of the net interest margin
in the early 1990s likely reflected two other factors.
First, margins had been compressed in the late 1980s
by competition among banks for loans and funding
sources as well as by the elevated rates that some
troubled banks and thrift institutions were paying for
funds. Second, a number of banks may not have had
the capital levels they needed to meet the risk-based
capital rules phased in between 1990 and 1992. With
bank equity prices depressed at that time, capital was
expensive to raise, and so these banks were under
pressure to limit balance sheet expansion and boost
profits. Their consequently less aggressive efforts to
bid for deposits and make loans likely led to a widening of spreads between loan and deposit rates. During
this time, competitive pressures on margins may also
have eased as troubled institutions were recapitalized
or closed.
Noninterest income increased 5 basis points as a
percentage of assets last year. The types of noninterest income that expanded most were earnings from
fiduciary activities and the "other fee income" component of the broad category "other noninterest
income," which includes, among other things, credit
card fees, mortgage servicing fees, fees from the sale
and servicing of mutual funds and annuities, ATM
surcharges, and fee income from securitized loans. In
particular, fee income from securitized credit card
loans likely increased last year because of the high
volume of securitization noted earlier. Through the
first three quarters of 1997, higher trading revenue
also buoyed noninterest income, but trading results
were depressed in the fourth quarter by the effects of
the economic problems in Asia (discussed below).
On balance, trading revenues over the year were
about unchanged as a share of assets.
Since 1993, banks' increasingly competitive stance
in loan markets has contributed to some narrowing
of the net interest margin. However, the resulting
squeeze on banks' margins has been mitigated by
three other factors. First, margins were supported
until last year by the shift of bank assets away
from securities, which generally yield relatively low
returns, toward loans, especially loans to households.
In addition, respondents to the November 1997 BLPS
indicated that the average rate earned on business
loans had been boosted over the previous year by an
increase in their average risk, which in turn primarily
reflected an increase in loans used to finance mergers
and acquisitions.
A second factor supporting the net interest margin
has been the relatively low level of rates paid on
retail deposits as gauged by the difference between
deposit rates and market interest rates in earlier years.
Although the lower level of rates has increased
banks' reliance on relatively expensive managed liabilities, it has kept down the cost of core deposits,
which continue to account for more than half of bank
Taking a longer perspective, a shift by banks away
from traditional intermediation and toward fee-based
income sources has been enlarging the share of noninterest income in bank revenue for more than a
decade. Since the mid-1980s, noninterest income has
increased from about 26 percent to about 38 percent
of total bank revenue (defined as net interest income
plus noninterest income, chart 15). Since the early
1990s, the buLk of the increase has come from "other
fee income," which has risen from about 12 percent
to more than 15 percent of revenue since 1991. The
second largest contributor to the rise is the nonfee
component of other noninterest income, which
includes revenue from the provision of data processing services, income from unconsolidated subsidiaries, and gains from sales of assets other than securities and trading assets (including bank premises, other
real estate owned by banks, and loans). Before 1991,
data on these two income components were not
reported separately; the share of revenue contributed
by the two combined increased roughly 4'/> percentage points between 1985 and 1990.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997 403
15.
NunmUTCM i n c o m e a n d i i \ ci'inpnuL'
as a share o l l o l a l rcYCMlk1. l l 'SS- L J7
Tbial noninterest income
— 35
II
1 I
I
I
1 I
I
I
I
Other nonraierest in
1985
19S9
1993
1997
NOTE. Components of "other noninteresl income" were first included in the
March 1991 Call Reports.
increased 6% percent, the largest rise since 1986.
Industry employment expanded 2 percent, after several years of essentially no growth, and labor costs
per employee continued to rise at about the same rate
seen in recent years. Similarly, occupancy costs
increased roughly 53A percent, just below the yearearlier pace but considerably faster than over the
previous several years. The number of bank offices
rose 23/4 percent last year, the largest advance since
1994 and the third largest since 1981.
Despite the pickup in these expense categories last
year, the banking industry has restrained the growth
in labor and occupancy costs since the mid-1980s.
Since 1985, after adjusting for inflation, consolidated
assets increased nearly 30 percent and revenues
expanded about 60 percent. By contrast, employment
declined 2 percent and the number of bank offices
increased less than 20 percent. Thus, average revenue generated per employee increased more than
60 percent, while revenue per office rose more than
30 percent. Furthermore, over the same period, the
inflation-adjusted occupancy cost per bank office fell
3 percent, a decline influenced perhaps by a shift of
some banks toward smaller branches in supermarkets
and other nontraditional locations.
By contrast, other noninterest expense increased
substantially as a share of revenue in the late 1980s
and early 1990s, and only a part of that rise has been
reversed since 1991. The earlier rise likely resulted,
1<>.
Noiiinteit-si e x p e n s e and its o > n i p i m t n l s
as a pervemajie of total r e v e n u e . I 9 S 5 - ' J 7
Noninterest Expense
Percent
Banks also benefited last year from a reduction
in noninterest expense relative to both assets and
revenues (chart 16). The bulk of the improvement
was produced by a decline in "other noninterest
expense," a broad category that accounts for nearly
half of noninterest expense and includes deposit
insurance premiums, losses on the sale of assets other
than securities and trading assets, amortization of
intangible assets, expenditures for information processing services provided by others, advertising, and
merger restructuring charges. In part, last year's
improvement reflected a temporary rise in expenses
in 1996 owing to a large special charge for mergerrelated costs and a one-time assessment to recapitalize the Savings Association Insurance Fund, which
was paid by banks that had acquired the deposits of
thrift institutions.
Labor costs and occupancy costs, the other components of noninterest expense, grew more slowly
than industry revenue last year but expanded rapidly
in comparison with earlier in the decade. Labor costs
Total
I
I
I
I
I
I
I
Components
Salaries and bendta
Other
—
Premises and fixed assets
i
1985
i i i i I i ii
1989
1993
i i
1997
2
0
404
Federal Reserve Bulletin D June 1998
at least in part, from collection costs and legal
expenses generated by the high level of problem
loans at that time. With these expenses presumably
down considerably since then, noninterest expense
has probably been supported more recently by
increases in servicing and administrative costs generated by the rapid growth in consumer loans, particularly credit card loans, as well as by the costs associated with the growing volume of off-balance-sheet
and fee-based activities.
oss pmvisiitnini; and IKT diarac-olls
:i pcrccnlagt; nl loans. I'Mil v)7
Percenl
Loss provisioning
— 2,0
- ^ 1,5
— L0
Loss Provisioning and Loan Quality
Provisioning for loan and lease losses as a percentage
of assets edged higher last year. Nonetheless, with
charge-offs remaining relatively low, provisioning as
a share of loans has risen only a little from its 1994
trough (chart 17). The low level of charge-offs, in
turn, reflects the excellent overall performance of
bank loan portfolios thus far in this expansion. This
overall outcome, however, masks substantial differences between the results for loans to businesses
and those for loans to households. Delinquency and
charge-off rates on loans to businesses declined
sharply earlier in the decade and have remained very
low (chart 18, top panels), whereas those on loans to
households, and especially on credit card loans, have
increased substantially since late 1994 (chart 18, bottom panels). Consumer delinquency rates flattened
out early last year, however, and by late in the year,
charge-offs showed signs of stabilizing.
The flattening of loss rates on loans to households
last year was reflected in the results for credit card
banks.10 Profitability at these institutions has been
much higher than for the industry as a whole for
several years, as strong noninterest income and the
high spread on credit card loans have more than
compensated for the relatively high level of noninterest expense and loan losses. However, credit card
banks' earnings deteriorated considerably between
mid-1995 and early 1997 before rebounding in the
second half of last year. For the year as a whole, the
return on equity for credit card banks averaged nearly
18 percent, considerably below the 25 percent to
30 percent returns posted between 1988 and 1995 but
only about 1 Vi percentage points lower than in 1996.
10. Credit card banks are defined as banks among the top 1,000 for
which credit card loans are more than half of assets. Primarily as a
result of consolidation in this market segment, the number of credit
card banks dropped from more than 40 at the end of 1995 to just 29 at
the end of last year. See William R. Nelson and Ann L. Owen,
"Profits and Balance Sheet Developments at U.S. Commercial Banks
in 1996," Federal Reserve Bulletin, vol. 83 (June 1997), pp. 476-77.
for a discussion of the profitability of credit card banks.
Mill
1981
1985
I t 1
1989
1903
1997
NOTE. Nei charge-offs are charge-offs net of recoveries.
The apparent stabilization in measures of consumer loan quality was mirrored in a flattening of the
trajectory of household bankruptcy filings in the second half of last year after two years of double-digit
annual increases. Two factors have likely contributed
importantly to the plateauing of these measures of
financial distress. First, as noted above, some banks
have selectively tightened lending standards in an
effort to reduce loan losses. Second, the household
debt burden (interest payments and required principal
payments as a percentage of disposable income) has
changed little recently after increasing steadily
between 1994 and 1996 (chart 19). This stability
reflects the slowing of consumer loan growth and the
lower interest rates paid by households, which in turn
resulted from mortgage refinancing and the substitution of mortgage credit for consumer loans.
In contrast, the low and declining burden of business debts likely contributed to the low delinquency
and charge-off rates on loans to businesses in recent
years. The business debt burden (nonfinancial corporate interest payments as a percentage of cash flow)
has declined since its peak in 1990 for three reasons:
the reduction in the general level of interest rates,
significant declines in corporate leverage in the early
1990s, and strong growth in profits. However, the
debt burden of the nonfinancial business sector leveled out recently as profit growth moderated while
debt growth remained strong.
With total charge-offs about matching loss provisioning in each of the past several years, banks'
reserves have been about flat, and the rapid pace of
loan growth has unwound about half of the 1980s
increase in the ratio of reserves to loans (chart 20).
Although reserves have been declining relative to
charge-offs since 1994, they remain relatively high
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997 405
Dclinc|iicnt\ and dwrjie-oi't rates, hy is pc of loan, I'WI-1)'?
I«S.
Percent
Delinquency rues for loans to businesses
Charge-off rates for loans to businesses
12
/ \
/
\
Coninieirml real estate
—
Delinquency rates for loans to households
1
Charge-off rates for loans to households
Residential real estate
Other consumer
Residential real estate
J
J
1991
I
1995
1993
1997
1991
1993
1995
NOTE. The data are seasonally adjusted. Delinquent loans are loans that
are nol accruing interest and those that are accruing interest but are more than
thirty days past due. The delinquency rate is the end-of-period level of
delinquent loans divided by the end-of-period level of outstanding loans. The
charge-off rate is the annualized amount of charge-offs over the period, net of
recoveries, divided by the average level of outstanding loans over the period.
by historical standards, as one would expect with
aggregate loan losses near their cyclical lows as a
percentage of loans and the economy performing
exceptionally well.
liffects of lite Economic Difficulties in A.sia
Dchi burden
;inJ hous
. 1 'JS5—*J7
Percent
Profits at several large U.S. banks were reduced by
the effects of economic problems in some of the
industrializing economies in Asia. These problems
emerged last summer when the Thai baht dropped
sharply following a decision by the Thai authorities
to no longer defend the baht's peg. Subsequently,
Businesses
20.
MoLisutL's ol
w s tor loan und ICLIM" IUSM".. 197(1—47
Perctnl
I
I
Reserves as a percentage
of loans
1 I I
Households
I I 1I I I I I ! I I I I II
Ratio of reserves to charge-offs
1985
1987
1989
1991
1993
1995
1997
NOTE, For businesses (nonnnancial corporations only), the debt burden is
calculated as interest payments as a percentage of cash flow; for households, it is
an estimate of interest payments and required principal payments as a percentage of disposable income.
SOURCE. National income and product accounts and the Federal Reserve
System.
I 1I [ I I .11
1977
1981
I I ] I I I I I I I 1 I
1985
1989
1993
1997
406
Federal Reserve Bulletin • June 1998
International Operations of U.S. Banks
The share of U.S. bank assets that were booked at foreign
offices increased about one-fourth, from 12 percent to
15 percent, between the end of 1993 and the end of 1997
(table).1 The share of bank profits earned at foreign offices
peaked at more than 16 percent in 1993 and was roughly
12 percent over the 1994 to 1996 period; the share dipped
further in 1997 because foreign office results suffered in the
second half of the year from the economic problems in
Asia.
Responses to the Federal Reserve's Quarterly Report of
Assets and Liabilities of Large Foreign Offices of U.S.
Banks provide data on the geographical distribution of the
assets and liabilities of major foreign branches and subsidiaries of U.S. banks. As has been the case for some time,
about half of the assets reported on the survey at the end of
1997 were booked in European branches and subsidiaries.
The bulk of the European assets were booked in the United
Kingdom, a share reflecting, at least in part, the importance
of London's financial markets. Nearly one-fourth of the
reported assets were booked in Asian branches and subsidiaries, with the largest volumes in Hong Kong and Singapore. Large shares were also booked in the Caribbean
(primarily the Cayman Islands and the Bahamas), with
considerably smaller volumes in Latin America and elsewhere. The location in which an asset is booked is often a
strong indicator of the nationality of the customer or the
nature of the asset, but the interactions between U.S. and
foreign regulations or tax laws can also influence the booking site.
fourths of their income, at foreign offices. On the other
hand, at one of the banks, a "super regional" institution,
foreign operations accounted for less than 4 percent of
assets and an even smaller share of income.
Share of U.S. bank assets and net income booked
at foreign offices, 1993-97
Percent
Year
1993
1994
1995
1996
1997
Ql
Q2
Q3
Q4
Assets
Net income
12.2
13.2
13.6
14.8
15.f
14.9
15.2
15.5
15.1
16.3
11.9
11.6
12.0
10.2
16.2
14.6
84
2.3
NOTE. For definition of foreign offices, see box note I.
Share of U.S. bank assets booked at foreign offices,
by bank size, year-end 1997
Percent
— 60
Not surprisingly, banks with by far the largest share of
assets and earnings at foreign offices were the largest banks
(those with assets of more than $150 billion) (chart). Among
these five banks, however, the scope of international operations varied considerably. Two of the banks held roughly
three-fourths of their assets, and booked more than three— 15
I. Foreign offices include Edge Act and agreement subsidiaries and international banking facilities (IBFs). Edge Act and agreement subsidiaries are
federally or state-chartered corporations, respectively, that are domiciled in
the United States but engage in international banking activities. An IBF is a
set of asset and liability accounts that cover selected international transactions of the U.S. offices of the bank. For more detail on the structure of
foreign operations of U.S. banks, see James V. Houpt, International Trends
for U.S. Banks and Banking Markets, Staff Studies 156 (Board of Governors
of the Federal Reserve System, 1988).
other East Asian economies experienced downward
pressure on their currencies and equity prices and
upward pressure on interest rates. The turbulence
spread to Taiwan and Hong Kong in the fall. In
Taiwan, the authorities allowed some downward
adjustment of the Taiwan dollar, whereas in Hong
Kong the peg to the dollar has been maintained at the
cost of somewhat elevated interest rate levels. Near
the end of the year, the crisis spread to Korea, where
More than 50-100 10-50 1-10 0.25-1 Less than
150
0.25
Assets (billions of dollars)
NOTE. For definition of foreign offices, see be* note 1. Banks that are
subsidiaries of other banks are not separately included because their assets
are already accounted for in the consolidated assets of their parent banks.
the condition of the financial system had been
strained by bankruptcies of a number of major industrial conglomerates in 1997.
In response, authorities in Thailand, Indonesia, and
Korea negotiated international support packages with
the International Monetary Fund and other international financial institutions, as well as bilateral assistance programs with other countries. Markets in these
countries were kept turbulent into 1998, however, by
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
i.
l:\p(>Nui'e ol I .S. bankin;j oreani Alliiillv
10 H"ollbli_-i A s i a n L'COMI )|]HCv
relative to capital \car-aid
407
IW
Percent
MEMO:
Country
All reporting
Money center
Super regional
Other
total exposure
(billions of dollars)
2.6
7.4
2.7
6.2
17 2
6.8
1.4
30
.6
.3
14
.4
9.0
253
9.4
Total
1Z7
30.2
5.0
2.1
43.6
Selected other economies'
19.9
50.1
6.7
1.4
68.1
Indonesia
Korea
Thailand
NOTE. Exposures include the institutions' lending and derivatives
exposures for cross-border as well as local-office operations. Respondents
may file information on one bank or on the bank holding company as a
whole. Capital is defined as equity, subordinated debt, and loan loss reserves.
I. Mainland China, Hong Kong, Taiwan, Malaysia, the Philippines, and
Singapore.
SOURCE. Federal Financial Institutions Examination Council, Country Exposure Report.
concerns about the magnitude of the countries' financial problems and in some cases about the willingness or ability of their governments to undertake
difficult reforms. On balance, the currencies of these
countries depreciated significantly relative to the U.S.
dollar in 1997, with the Indonesian rupiah dropping
the most (about 58 percent), followed by the Korean
won (44 percent) and the Thai baht (42 percent).
The effects of the financial crisis in Asia on the
earnings of U.S. banking organizations were concentrated on a fairly small number of large institutions
with relatively large exposures to the region (see box
"International Operations of U.S. Banks"). For the
three most troubled Asian economies (Indonesia,
Korea, and Thailand), the total exposure of reporting
banking organizations amounted to roughly 13 percent of capital (table 3). Most of this exposure was at
six large money center organizations (which include
five of the largest ten banks either directly or through
a parent bank holding company), which had exposures totaling about 30 percent of capital.
either from wider spreads on Asian currency contracts or an increased volume of trades in such contracts. By contrast, gains on interest rate positions
fell more than half, and substantial losses on equity,
commodity, and other exposures reversed all of the
gains attained on such contracts over the first three
quarters of the year. Reportedly, these losses reflected
those on positions not only in Asia but also in other
emerging markets, including those in Latin America
and Eastern Europe, that suffered from the Asian
downdraft.
Despite the Asia-related troubles in the fourth quarter, however, net trading revenues for the year as a
whole were nearly 6 percent higher than in 1996
because of the strong results in the first three quarters
of the year. Also, the largest U.S. banks continued
to report strong total earnings in the fourth quarter,
thanks to extraordinarily robust domestic earnings
and higher-than-usual realized gains on investment
account securities.
The effect of the problems in Asia showed up
primarily in the trading income of the top ten banks,
which averaged $1.9 billion per quarter over the first
three quarters of the year but fell to just $810 million
in the fourth quarter (table 4). Trading income related
to foreign exchange positions was strong in the fourth
quarter, suggesting that some U.S. banks benefited
4.
Trailing r e \ e n u e M llu- Ion I.IILICM L'.S. Iv.mkv
In lypii ot L'xpo.iiitf. l'W;i- c )7
Millions of dollars
Interest
rate
Foreign
exchange
Equity and
other
2,632
3,621
3,549
1.772
1373
3,039
1,221
1,081
505
698
813
426
618
-18
326
Q3
4,830
6,213
6,570
2,052
1,609
2,099
04
810
425
1.023
Year
Total
1995
1996 , . . , . .
1MB . . . . . .
m .......
Q2 . . . . .
822
88
205
-637
Dr:vu.ot'Mi:.\Ts i,\ / w v
During the first quarter of 1998, assets at the domestic offices of U.S. commercial banks expanded somewhat more rapidly than they did last year. Growth in
commercial and industrial loans picked up a bit further from its already robust 1997 pace, and the surge
in refinancing activity that followed the decline in
interest rates late last year and early this year supported growth in real estate loans. By contrast, the
value of consumer loans on banks' books declined
over the quarter, as a moderate increase in bankoriginated loans outstanding was more than offset by
increased securitization. The pace of securities acquisitions slowed a bit from its rapid pace late last year
but remained quite strong.
Stock prices of the largest banking companies
have, on balance, increased sharply this year,
408
Federal Reserve Bulletin H June 1998
although they have remained volatile. In part, the rise
likely reflected the market's belief that the economic
situation in Asia might be stabilizing and the consequent fading of concerns about the effects of the
Asian crisis on future earnings. In addition, the effects
of both anticipated and announced mergers involving
large banking organizations substantially boosted
the stock prices of some of the affected companies, at
least for a time. Finally, investors pushed the broader
equity markets sharply higher, as incoming economic
data were seen by the markets as increasing the
likelihood of continued healthy growth with low
inflation. Over the first four months of 1998, stocks
of money center banks advanced 18'/2 percent, and
regional bank stocks rose 12 percent. By contrast, the
broader market, as measured by the S&P 500, rose
143/i percent.
Initial reports of first-quarter profits of bank holding companies generally showed a continuation of
last year's trends, with gains in noninterest income
about offsetting weaker net interest income. A few
large banks reported costs relating to problems in
Asia, but trading income rebounded from the poor
results posted in the fourth quarter of 1997.
M'i'i-\ni\: M>jrs!\n:xrs i
nir: Ri-:ijoRTi:n
B.\.\K l.XCUMI: 1 >M.\
Income and expense items are reported on quarterly
Call Reports on a year-to-date basis. Complete industry income for a given year cannot, however, be
collected from the year-end Call Reports because a
number of factors can lead to dicrepancies between
income in a year and income reported at year-end.
The data used in this article have been adjusted to
eliminate, as far as possible, such discrepancies.
The most common problem is bank mergers
handled under "purchase accounting." Under that
method, the balance sheet items of the acquired bank
are marked to market and then combined with those
of the acquiring bank; the difference between the
purchase price of the bank and the balance sheet
value of identifiable assets and liabilities is reported
as the intangible asset item "goodwill." The year-todate flow of income and expense of the acquired bank
as of the date of the merger goes unreported by the
acquiring institution subsequent to the merger.
In contrast, "pooling of interest accounting" combines the balance sheets and income statements of the
merging banks; the income statement of the successor institution for the year of the merger includes the
income earned by each entity before the merger.
Beginning in 1995, data exist on the accounting
method used for each bank merger. To calculate the
adjustment required for mergers before 1995, we use
the income data reported by the individual banks
involved in the transaction to evaluate which of the
accounting methods was the more likely to have been
employed.
The income data in this article include an estimate
of the income earned by banks acquired under
purchase-accounting rules during the part of the year
preceding the date of the merger. The estimate is
based on the income reported by the acquired bank
for those quarters preceding the merger and includes
an estimate of the income earned in the quarter of the
merger.
Two other situations that lead to discrepancies
between actual industry income for a year and that
reported on the fourth-quarter Call Reports are bank
closures and the adoption by banks of "push down"
accounting during the year." Methods similar to
those used for purchase mergers are used to estimate
the income earned by such banks that is not reported
at year-end.
In recent years the cumulative effects of the adjustments made to reported data have boosted industry
net income about Vi percent relative to the aggregate
income reported on fourth-quarter Call Reports. This
increase in net income raised the average return on
assets about Vi basis point. The effects were considerably larger in some earlier years.
11. When the ownership of a bank changes substantially (for
example, when it is bought by a holding company but retains its
separate corporate existence), its assets and liabilities may be revalued
according to the price paid by the acquiring firm for some or all of its
shares. (In most cases revaluation is required.) Income items subsequently reported on the Call Report include earnings only since the
date of the revaluation. This change in accounting basis is called
push-down accounting because the revaluation adjustments made in
the purchase by the acquiring firm are "pushed down" to the books of
the acquired firm. Data on the banks applying push-down accounting
are available only since 1995.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997 409
A. 1.
Kt'purt ol mourn.'. ..{
is
Millions of dollars
Item
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Gross interest income
,
Taxable equivalent
Loans
Securities
Gross federal funds sold and reverie
repurchase agreements
Other
274,271
279.842
202.943
42,202
317,046
321.251
237,815
46,713
320.404
324,054
238.829
51,031
290,657
293,844
214,999
52,766
256,415
259.394
185.938
51.825
244,739
247,617
178,422
48,677
257.064
259,821
48,299
302,423
305,058
227,296
51.005
313,516
315.974
239,719
50395
338,160
340395
255,442
52,658
10.671
18,455
13,059
19.461
12,571
17.971
9.146
13,747
5.913
12.739
4.796
12,843
6.415
12,587
9.743
14,382
9,251
13,950
13,654
16,406
Gross interest expense
Deposiis
Gross federal funds purchased and
repurchase agreements
Other
166,430
130,387
205,078
157.466
204,949
161,483
168,469
139,413
122,517
98,809
105.613
79,501
110,849
79.106
147.965
105,285
150.187
107,492
164.471
117332
18.965
17.078
24,898
22,713
22,778
20,687
14.436
14,622
9,263
14,441
8,442
17,669
12,476
19.269
18,422
24.258
16,779
25,914
20,435
26,705
Net interest income
Taxable equivalent .
107,841
113.412
111,968
116,173
115.455
119,105
122,188
125,375
133,898
136,877
139.126
142,004
146,215
148,972
154,458
157,093
163,329
165,787
173,689
176,124
Loss provisioning'
19,812
31,297
32,282
34.866
26,813
16,841
10,993
12.663
16.302
19,066
Noninierest income
Service charges on deposits . . . .
Income from fiduciary activities
Trading income
Other
45.737
9.536
7,5M
3,691
24,980
51,599
10,270
61.089
12.883
9,499
5,954
32.750
67.044
14,126
10,452
6.273
36,193
75,847
14.898
11.199
9,238
40.513
77.223
15.281
12.124
6,249
43,572
83,844
16.052
12,890
6,337
4S.564
95.278
17,042
14,260
7,527
56,449
105,761
4,051
28,965
55,684
11,446
8,886
4,854
30,497
103,095
47,148
16,007
39.939
108,993
49,412
16,697
42,885
116,606
52,111
17,547
46.948
124643
53.801
17,982
54,859
132.815
55,484
18.152
59,181
140321
58,506
18,577
63.438
144.905
60,904
18,978
65.023
151,096
63.994
19.750
67,351
162.504
67,811
20,889
73,802
170.981
72,342
22,079
76359
57358
57,394
60.922
65354
65,771
64,674
67.682
67,252
67.226
65,220
Noninteresl expense
Salaries, wages, and employee benefits .
Expenses of premises and fixed assets .
Otter
Net noninterest expense
8,313
189,762
18353
16,605
8.037
62.567
Realized gains on investment account
securities
277
800
474
2.898
3,957
3,054
-560
480
1,118
1,827
income before taxes and extraordinary
items
Twees.
Extraordinary Items
30.948
10,002
812
24.079
9.547
312
22.725
7,749
650
24.665
8,285
995
45,273
14,450
401
60,663
19.861
2,085
66,989
22,430
-17
75,023
26,239
28
80,920
28.451
91.229
32.009
26
Ntt Income
Cash dividends declared .
Retained income .
...
21,757
13,288
8,469
14,843
15,626
13,965
1,661
17375
15.088
2,288
31,224
14,226
16,997
42,886
22.068
20,817
44,542
28,164
16377
48,811
31,105
17,707
52,558
39,620
12,939
59,246
42,830
16,417
14,127
716
1. Includes provisions for loan and lease losses and for allocated transfer risk.
410
Federal Reserve Bulletin • June 1998
.V...
.iiul
IIL'IHIIL'
;iik1
W.
L'
all I.'..S. bailk^,
A. All banks
1988
Item
1990
1989
1991
1992
1993
1994
1995
1996
1997
86.80
59.89
15:60
13.07
2.53
1Z21
4.87
7,34
25.06
24.43
1.63
86.5$
58.70
1S.78
13.18
2.60
11.44
Balance sheet items as a percentage of average net consolidated assets
Interest-earning assets
Loans and levies, net
Commercial and industrial
US.
FOK_
Consumer
Credit card
Installment and other .,
Real estate
,
In domestic offices
Construction and land development
Farmland
One- to four-family residential
Hone equity
Other
Multifamily residential
Nonfarm nonresidential
In foreign offices
Depository institutions
Foreign governments
Agricultural production
Other
fc»as.......,....,
,
l^e-rmanetag receivables .
,
LESS Unearned income on loans
LESS: Lois reserves'
Securities
Investment account
Debt
US. Treasury
US. government agency and
corporation obligations
Government-backed Mortgage pools ..
Coltateralized mortgage obligations . . .
Other
State and local government
Private mortgage-backed securities
Other
Equity'
,
Trading account
....
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositaries
Non-interest-emning assets
Revaluation gains on off-balance-sheet items3 ..
Other
Liabilities
Interest-bearing liabilities
Deposits
,
,,
In foreign offices
In domestic offices
Other checkable deposit's
Savings (including MMDAs)
Small-denomination time deposits
Large-denomination time deposits
Gross federal funds purchased and RPs
Other
-,
Non-interest-bearinf liabilities
Demand deposits in domestic offices
Revaluation losses on off-balance-sheet items1
Other
Capital account
87.82
60.53
18.50
15.99
2.51
11.77
3.78
7.99
23.86
23.10
4.00
.51
11.21
1.67
9.54
.62
6.76
.76
1.60
.78
.96
3.93
1.12
-.42
-1.57
19.09
17.63
17.37
4.57
88.04
59.55
17.33
15.00
2.33
11.45
3.88
7.57
24.87
24.11
3.41
4.52
1.06
-.50
-1.61
18.45
17.17
17.17
5.60
87.94
60.64
19.09
16.54
2.55
11.89
3.69
8.20
22.50
21.78
4.16
.51
10.15
1.42
8.73
.60
6.36
.72
1.76
1.03
.96
4.31
1.10
-.48
-1.52
18.39
17.14
16.84
4.98
4.88
2.59
n.a.
2.29
3.69
n.a.
2.99
n.a.
1.28
4.55
5.21
12.00
n.a.
12.00
6.04
3.27
n.a.
2.77
3.15
n.n.
2.68
.30
1.25
4.33
4.58
12.06
n.a.
12.06
7.56
4.08
1.25
2.22
2.64
n.a.
2.59
1.46
4.46
3.75
12.18
n.a.
12.18
8.75
4.51
2.07
2.16
2.28
.94
1.59
.31
1.77
4.58
3.21
11.96
n.a.
11.96
2.34
4.54
2.97
11.67
n.a.
11.67
93.84
75.40
62.06
10.41
51.66
6.25
17.60
16.25
11.55
8.02
5.31
18.45
14.25
n.a.
4.20
93.64
76.02
62.58
9.68
52.90
6.12
16.28
18.38
12.13
8.22
5.22
17.62
13.49
n.a.
4.13
93.60
76.53
63.44
9.26
54.18
6.19
16.59
19.96
11.44
8.03
5.07
17.07
12.79
n.a.
4.27
93.33
76.58
64.45
8.55
55.90
6.72
18.00
21.30
9.89
7.09
5.03
16.75
12.59
n.a.
4.16
6.16
6.36
6.40
.39
35.83
n.a.
.39
35.78
n.a.
.50
34.31
3,048
3,187
3,338
88.00
59.80
19.50
16.55
2.95
11.72
3.47
8.25
20.86
20.18
4.06
.49
9.21
1.14
8.07
.59
5.83
.68
2.04
1.22
.98
.27
88.33
57.30
15.78
13.54
2.24
11.00
3.80
7.20
24,87
24,18
2.64
88.50
56.25
14.88
12.72
2.16
11.00
3.88
7.11
24.80
24.18
1.99
.S3
M
12.27
1.95
10.32
12.91
2.09
10.83
.73
7.32
.69
1.24
13.49
2.07
11.42
.79
7.33
.62
1.08
.73
.67
.99
.66
7.23
.76
1.42
.75
1.01
3.60
1.09
-.36
-1.62
20.70
18.93
18.62
5.06
.57
1.02
3.50
1.03
-.28
-1.60
23.52
21.18
20.82
6.49
3.56
.9S»
-.21
-1.51
25.37
2Z50
22.12
7.08
9.86
4.52
3.12
2.21
2.08
10.73
4.74
3.72
2,27
2.06
86.55
56.07
14.51
12.35
2.16
11.43
4.21
7.22
24.43
23.80
1.65
.56
13.74
1.91
11.84
.79
7.07
.63
1.42
.41
1.00
3:34
1,03
-.16
-1.36
24.27
21.60
21.21
6.77
86.48
58.39
15.20
12.87
2.33
I2.lt
4.72
7.39
25.00
24.36
1.59
.56
14.41
1.88
12.54
.81
36
14.43
1.85
1237
.85
435
6.89
JS.Ol
24.40
1,73
.55
144a
1.94
12.48
.83
fr.97
.65
1.88
2.29
1.90
.30
.96
.26
.92
,18
.90
3.15
1.19
-.14
-1.27
2154
19.38
18.97
5.25
6.96
.63
3.3<§
1.51
-42
6.88
.61
ite
1.8?
^.09
ma
18.20
-m
20.41
17*23
17.75
IS73
«0
im
9.75
4.80
2.11
434
2.S3
1.68
186
-131
2.87
4.27
2.62
11.50
n.a.
11.50
10.24
4.67
3.24
2,33
2,02
.64
1.54
.39
2.67
3.82
2.40
13,45
2.61
10.84
13iS2
2,90
10.62
1330
10.95
10.82
92.82
75.32
62.94
8.37
54.56
7.65
20.28
19.21
7.42
7.02
5.36
17.50
13.24
n.a.
4.27
92.15
73.92
60.26
8.32
51.94
8.24
20.91
16.98
5.81
7.47
6.19
18.23
13.86
n.a.
4.37
92.12
71.86
57.34
9,39
47.96
7,80
19.60
15.33
5.23
7.60
6.92
20.26
13.49
2.32
4.45
9159
71.87
56.28
10.27
46.01
6.63
17.47
1414
5.77
7.70
7.88
20.12
12.68
2.88
4<57
91.73
71.62
55.87
10.Q1
45,86
4.73
18.71
15.97
6.42
7.18
8.57
20.1.1
12,82
2.14
5.14
91.58
71.37
55.01
10.02
44.99
3:62
19.13
15.17
7.08
8.13
8,22
20.21
12.16
2u54
5.41
6,67
7.18
7.85
7.88
8.01
8.27
8.42
12.02
10.63
.63
28.28
9.94
9.83
9.91
9.98
31.05
11.34
.82
28.70
.36
.19
.14
.11
29.61
32.10
3Z73
34,09
3,379
3,442
3.566
3,863
4,149
4,376
4,733
.82
1.58
.37
.73
1.52
.38
9.8 <
4.46
2J7
&®
1.80
.62
1.49
.41
2.55
3,93
2^3
.61
9i74
im
1,59
.50
Mi
im
2,81
3.82
5,18
AS
.50
%m t£ft2
am
Z59
MEMO
Commercial real estate loans
Other real estate owned
Managed liabilities
Average net consolidated assets
(billions of dollars)
n.a.
.75
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
A.I
41',
I iiiiiinui\l
A. All banks
lion
1988
1989
1990
1991
1992
1993
1994
Effective interest rate (percent)
Rales tamed
Interest-earning assets
Taxable equivalent
Loans and leases, gross
Net or loss provisions
Securities
",
Taxable equivalent
Investment account
US. government and other debt
Stale and local
Equity*
Trading account
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositories ..
Rales paid
Inlercst-bearin^ liabilities
Interest-bearingdeposits
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAs)
Large-denomination time deposits5 ..
Small-denomination time deposits' ..
dross federal funds purchased and RPs ..
Other interest-bearing liabilities
1995
1996
1997
4
10.06
10.27
10.87
9.81
8.38
9.07
8.07
8.25
7.39
n.a.
12.63
7.54
8.71
11.13
11.29
12.02
10.44
8.73
9.25
8.55
8.83
7.45
7.70
11.11
9.17
10.59
10.67
10.80
11.49
9.94
8.79
9.21
8.67
8.92
7.39
7.34
10.15
8.08
9.96
9.57
9.69
10.40
8.72
8.18
8.56
8.25
8.43
7.25
6.20
7.53
5.69
8.44
8.27
8.37
9.20
7.87
7.04
7.34
7.11
7.18
6.81
5-32
6.40
3.58
7.31
7.61
7.71
8.69
7.87
6.08
6.36
6.07
6.07
6.25
4.79
6.16
3.04
6.61
7.61
7.70
8.62
8.12
5.96
6.20
5.79
5.80
5.87
4.79
7.41
4.26
5.71
8.33
8.40
9.25
8.73
6.50
6.73
6.34
6.42
5.81
5.50
7.73
5.63
6.84
8.15
8.23
9.0]
8.40
6.42
6.66
6.35
6.47
5.56
5.23
6.87
5.20
6.21
8.14
8.21
9.01
8.34
6.50
6.74
6.45
6.60
5.41
5.15
6.76
5.45
6.26
7.28
6.86
8.91
6.45
4.77
5.55
7.49
7.34
7.43
10.61
8.53
7.87
10.87
7.32
4.83
6.18
8.66
8.29
9.20
13.76
8.04
7.57
10.71
7.02
4.79
5.99
8.03
7.97
7.97
12.26
6.54
6.34
8.54
6.00
4.34
5.11
6.69
6.93
5.75
8.65
4.75
4.51
7.32
4.07
2.70
3.25
4.90
5.15
3.64
7.87
4.01
3.65
6.82
3.14
1.99
2.50
4.00
4.19
3.07
8.02
4.01
3.53
5.59
3.14
1.85
2.58
4.09
4.17
4.18
7.25
4.99
4.47
6.12
4.11
2.06
3.19
5.46
5.44
5.64
7.45
4.82
4.34
5.55
4.07
2.04
2.99
5.40
5.40
5.12
6.95
4.92
4.39
5.44
4.16
2.25
2.93
5.44
5.54
5.17
6.94
Income and expense as a percentage of average net consolidated assets
9.00
9.18
6.66
1.38
.35
.61
9.95
10.08
7.46
1.47
.41
.61
9.60
9.71
7.15
1.53
.38
.54
8.60
8.70
6.36
1.56
.27
.41
7.45
7.54
5.40
1.51
.17
.37
6.86
6.94
5.00
1.37
.13
.36
6.65
6.73
4.91
1.25
.17
.33
7.29
7.35
5.48
1.23
.23
.35
7.16
7.22
5.48
1.16
.21
.32
7.14
7.20
5.40
1.11
.29
.35
5.46
4.28
.62
.56
6,44
4.94
.78
.71
6.14
4.84
.68
.62
3.56
2.87
.27
.42
2.96
2.23
.24
.50
2.87
2.05
.32
.50
3.57
2.54
.44
.58
3.43
2.46
.38
.59
3.47
X48
.43
.56
Net interest income
Taxable equivalent ,
Lost provisioning"
3.54
3.72
3.51
3.65
3.89
3.98
3.72
3.79
3.73
3.79
.98
1.03
.78
3.90
3.98
.47
3.78
3.86
.65
3.46
3.57
.97
4.99
4.13
.43
,43
3.62
3.71
.28
.31
.37
3.67
3.72
.40
Noninterest income
Service charges on deposits
Income fromfiduciaryactivities
Trading income
Interest rale exposures
Foreign exchange exposures
Equity, commodity, and other exposures
Other
1.50
.31
.25
.12
n.a.
n.a.
n.a.
.82
1.62
.32
.26
.13
n.a.
n.a.
n.a.
.91
1.67
.34
.27
.15
n.a.
n.a.
n.a.
.91
1.81
.38
.28
.18
n.a.
n.a.
n.a.
.97
3.38
1.55
.53
1.31
3.42
1.55
.52
1.35
1.80
3.49
1.56
.53
1.41
3.71
1.55
.48
1.69
1.32
3.61
1.53
.47
1.62
1.91
1.62
1.54
1.38
Realized gains on investment account securities
.01
1.02
.33
.03
.03
.01
.09
.11
1.81
.09
2.00
.40
.31
.16
n.a.
n.a.
n.a.
1.13
3.75
1.58
.49
1.68
1.75
2.02
.39
.31
.15
n.a.
n.a.
n.a.
1.17
3.64
1.54
.48
1.62
1.83
3.75
1.59
.53
1.62
1.94
2.13
.42
Jl
.26
n.a.
n.a.
n.a.
1.14
3.94
1.64
.52
1.78
2.18.
.39
.33
.17
.09
.06
.02
1.29
Noninlercst expense
Salaries, wages, and employee benefits .
Expense* of premises and fixed assets .
Oilier
Net noninterest expense
1.95
.41
.30
.iS
n.a.
n.a.
n.a.
1.05
3.86
1.61
.53
1.72
-.01
.01
.03
.04
.76
.30
.01
.68
.23
.02
.73
.25
.03
1.32
.42
.01
1.70
.56
.06
1.73
.58
*
1.81
.63
1.85
.65
.71
.44
.28
.47
.44
.02
.47
.42
.05
.51
.45
.07
.91
.41
.49
1.20
.62
.58
1.15
.73
.42
1.18
.75
.43
1.20
.91
.30
1.93
.68
*
1.25
.90
.35
11.60
7.33
7.31
7.71
12.64
15.32
14.63
14.69
14.53
14.87
Gross interest income
Taxable equivalent
Loans
Securities
Gross Federal funds sold and reverse RPs
Other
Gross interest expense
Deposits
Gross federal funds purchased and RPs
Other
Income before taxes and extraordinary items ...
Taxes
Extraordinary items
Net income (return on assets)
Cash dividends declared
Retained income
MEMO: Return on equity
1.88
2.23
.39
.35
.17
.08
* In absolute value, less than 0.005 percent.
n.a. Not available.
MMDA Money markei deposit accouni.
RP Repurchase agreemeni.
CD Certificate of deposit.
1. Includes Ihe allowance for loan and lease losses and ihe allocated transfer risk reserve.
2. As in the Call Reports, equity securities are combined with "other debt securities" before 1989.
3. Before 1994, the nelted value of off-balance-sheet ilems appeared in "trading account securities" if a gain and "other non-interest bearing liabilities" if a loss.
4. When possible, based on the average of quarterly balance sheel data reported on schedule RC-K of the quarterly Call Reports.
5. Before 1997, data for large time open accounts are included in small-denomination time deposits.
6. Includes provisions for loan and lease losses and lor allocated transfer risk.
412
Federal Reserve Bulletin • June 1998
A._\
I'm Iliiliv) o m i i K i M l i u n , i n k ' i c s l r;:k'v
iiid i n a m i e
:
and
.S. hunk-..
B. Ten largest banks by assets
Item
1988
1989
1990
1991
1992
1993
1994
1996
1995
1997
81.61
50.90
16.90
10.24
6.65
6.40
134
5.06
17.42
15.69
.68
.09
11.02
1.70
9J1
.39
352
1.73
4.14
.45
31
42!
234
-.07
-1.09
20.00
10.97
1055
156
Balance sheet items as a percentage of average net consolidated assets
Interest-earning assets
Loans and leases, net
Commercial and industrial
US. addressees
Foreign addressees
Consumer
Credit card
,
Installment and other
Real estate
In domestic offices
Construction and land development
Farmland
One- to four-family residential
Home equity
Other
Multifamily residential
Nonfarm nonresidential
In foreign offices
Depository institutions
Foreign governments
Agricultural production
Other Joans
Lease-financing receivables
Less: Unearned income on loans
LESS: LOSS reserves'
' Securities
Investment account
Debt
US. Treasury
US. government agency and
corporation obligations
Government-backed mortgage pools ..
Collateralized mortgage obligations -..
Other
State and local government
Private mortgage-backed securities
Other
Equity2
Trading account
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositories
Non-interest-earning assets
Revaluation gains on off-balance-sheet items' ..
Other
Liabilities
Interest-bearing liabilities
Deposits
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAs)
Small-denomination time deposits
Large-denomination time deposits
Gross federal funds purchased and RPs
Other
Non-interest-bearing liabilities
Demand deposits in domestic offices
Revaluation losses on off-balance-sheet items1
Other
Capital account
76.97
49.91
1643
9.16
121
659
2.28
22.74
12.45
12.08
2.39
6.44
1.14
-.16
-1.63
20.43
11.68
11.30
2.17
5.85
1.14
-.14
-1.45
19.53
lti.65
10.27
2.03
79.94
5351
17.17
959
7.59
6.22
1.23
4.99
1653
14.44
51
.06
10.43
153
8.90
.38
3.05
2.09
6.06
.69
23
6.42
159
-.11
-1.31
19.83
10.60
10.22
1.93
8.43
3.23
4.45
14.84
n.a.
14.84
6.14
3.30
2.76
.08
.59
.38
2.59
.36
10.30
2.71
3.76
15.21
n.a.
15.21
5.16
2.79
2.31
.06
.60
.43
2.94
.38
8.74
2.68
3.95
23.03
9.89
13.14
4.46
2.89
1.50
.08
.49
.32
2.97
.38
8.88
3.20
4.25
22.98
10.77
12.21
459
358
.95
.06
.39
.30
3.01
.38
9.23
3.10
3.50
20.06
7.63
12.43
5.34
4.26
.93
.15
51
.32
2.81
Al
9.03
756
3.15
18.39
7.37
11.02
94.97
74.62
57.67
28.47
29.19
3.00
13.50
6.55
614
6.80
10.15
20.35
10.36
n.a.
9.99
94.44
73.08
55.73
27.16
28.56
3.38
14.91
5.72
4.56
6.19
11.16
21.36
11.05
n.a.
10.30
93.24
71.56
52.91
25.51
27.41
3.45
15.33
5.09
3.53
6.70
11.94
21.68
11.27
n.a.
10.41
93.42
64.33
48.20
26.10
22.10
2.91
12.70
3.98
2.51
5.83
10.29
29.09
10.15
8.7S
10.20
93.59
63.37
47.49
28.36
19.12
2.30
10.56
4.04
2.23
6.17
9.71
30.22
8.88
10.68
10.66
93.04
64.45
47.87
26.41
21.46
1.61
12.31
4.68
2.86
5.88
10.69
2859
9.73
7.27
11.59
92.61
65.82
47.36
22.18
25.18
1.21
14.26
S.82
3.89
10.26
8.20
26.79
4.71
5.03
5.56
6.76
658
6.41
656
739
n.a.
.42
54.79
9.05
.78
53.23
8.01
1.13
56.41
n.a.
.23
56.13
50.82
6.46
1.02
49.23
4.65
58
46,21
4.40
.27
47.94
4.65
.18
47.39
5.44
.13
46.02
685
693
725
717
775
818
949
1,051
1,189
1515
85.22
58.69
23.36
13.01
10.36
6.19
2.08
4.10
15.46
12.80
3.48
.06
5.83
.76
5.07
.65
2.78
2.66
5.21
3.63
.33
6.23
1.44
-.43
-2.74
12.96
8.67
8.67
1.41
85.16
59.66
22.61
13.18
9.43
6.21
1.99
4.22
18.02
15.05
3.60
.08
7.45
1.04
6.41
.68
3.23
2.97
4.56
3.34
.31
6.36
1.49
-.45
-2.77
13.13
9.05
8.83
1.29
84.85
61.69
22.91
13.39
9.53
6.87
2.20
4.67
20.56
17.36
3.79
.08
9.31
1.31
8.00
.68
3.51
3.20
3.64
2.76
.31
6.05
1.60
-.39
-2.63
14.03
9.22
8.98
1.09
85.41
62.14
22.42
13.44
8.97
7.20
2.53
4.67
21.68
18.37
3.42
.08
10.34
1.63
8.71
.57
3.95
3.32
3.05
2.88
.31
5.61
1.68
-.35
-2.34
15.58
9.38
9.08
135
85.16
58.34
20.32
12.00
8.32
7.31
2.61
4.70
19.93
17.07
2.48
.07
10.08
1.63
8.46
.58
3.86
2.85
2.56
2.75
.28
6.05
LSI
-.27
-2.08
19.13
10>70
10.36
2.30
84.79
55.57
18.65
10.75
7.90
7.33
2.50
4.83
1834
15.99
1.59
.07
10.29
1.60
8.68
.53
3.51
2.55
2.35
1.94
1.84
n.a.
.10
1.80
n.a.
3.52
n.a.
4.29
4.61
8.97
14.78
n.a.
14.78
2.29
2.07
n.a.
.22
1.58
n.a.
3.68
.22
4.08
4.12
8.26
14.84
n.a.
14.84
2.91
2.24
.54
.14
1.08
n.a.
3.90
.24
4.81
2.88
6.25
15.15
n.a.
15.15
3.46
2.26
1.12
.08
.77
.48
3.01
.30
6.19
2.96
4.74
14.59
n.a.
14.59
4.45
2.43
1.97
.05
95.41
73.76
57.67
31.49
26.18
2.68
11.42
5,03
7.05
6.40
9.69
21.65
11.93
n.a.
9.71
95.11
74.17
57.56
30.08
27.49
2.70
11.32
5.64
7.82
6.72
9.89
20.94
11.60
n.a.
9.34
95.29
73.97
57.95
29.66
28.28
2.74
12.05
6.16
7.33
6.90
9.13
21.32
10.93
n.a.
10.39
4.59
4.89
n.a.
.66
.33
2.62
.33
2.46
.27
6.82
1.30
-.21
-1.94
4.31
16.21
13.80
.84
.06
9.69
1.40
8.29
.41
2.79
2.41
3.37
1.27
.25
77.02
50.05
16.16
8.66
7.50
6.60
1.96
4.65
15.82
13.48
.58
.06
9.62
1.40
8.22
.38
2.83
2.35
4.95
.90
.21
8.98
753
10.27
MEMO
Commercial real estate loans
Other real estate owned
Managed liabilities
Average net consolidated assets
(billions of dollars)
.22
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997 413
A 1. — ( nuliiukxl
B. Ten largest banks by assets
Hem
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
8.15
8.18
8.89
8.38
7.09
7.19
6.57
6.70
635
3.27
7.79
4.52
7.27
8.20
»32
8.84
862
7.4t
7.47
7.06
7.22
6JB
4.03
7.83
5.20
7.15
7.7J
7.74
832
8.11
6.80
6.85
MX
6.86
5.73
3.84
6.90
4.92
6.71
8i25
7.93
6.70
6.85
6.61
6.80
5.55
3147
6.81
5i45
6.91
5.41
432
6.04
235
1.10
135
3.12
180
4J08
10.87
5.88
4.99
6.07
3.42
1.29
3.U
3.73
5.08
5.22
9.80
5.44
4J7
5.62
3.32
1.32
176
4.62
4J8
•4.93
8.86
SAI
4.54
S;S2
349
L97
168
5.17
SAi
5.02
9.13
Effective interest rule (percent)
Rates tamed
Interest-earning assets
Taxable equivalent
Loom and leases, gross
Net of loss provisions
Securities
Taxable equivalent
Investment account
US. government and other debt
Stale and local
1231
1231
13.19
10:87
10.11
10.08
Trading account
,
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositories
10.76
10.88
1135
10.70
10.54
11.05
8.70
8.9S
7.74
n.a.
14.33
731
9.13
Rata paid
Interest-bearing liabilities
Interest-bearing deposits
in foreign offices
In domestic offices
Other checkable deposits
,
Savings (including MMDAs)
Large-denomination time deposits'
Small-denomination time deposits*
Gross federal funds purchased and RPs
Other interest-bearing liabilities
8,75
7.77
9.00
6.28
<U3
5,55
7,75
7.11
7.43
14.02
10.74
94?
10.96
7.28
4*40
<W»
8.87
8.26
9.27
9.20
9.60
7.69
7.03
1113
8,98
10.88
1931
11.65
11.70
12.29
11.10
9.85
10.00
934
9.68
754
5.82
lO;7S
8.01
11.06
10.18
9.03
11.11
6.81
435
6.21
7.9$
7.76
7.75
17.2?
9,92
9.95
10.46
8.58
8.52
8.63
$.99
9.29
7.6?
4.22
734
5.60
10JJ5
8.67
fc72
936
731
738
734
7.96
9,13
7.40
4M
<fc6*
3.65
9J
6J0
m
834
3.60
4i50
7.71
7.09
8.76
*47
3.93
5#
8.20
9.07
7.95
6.69
6.77
6.90
6.99
6.99
3:72
645
mi
m
1L20
236
1,28
2,1*
3.55
3M
326
iLliS
4
Income and expense u a pemeowge of avenge net consolidated aisets
Cross interest income
Taxable equivalent
Loans
Securities
Grosx federal funds sold and reverse RPs
Other
932
9.63
6.93
.75
.40
1.44
1032
10.83
823
.83
37
139
Gross interest expense
Deposits
Gross federal funds purchased and RPs
Other
6JJ
4J6
.58
1.37
m
Net interest income
Taxable equivalent
Loss provisioning*
3.01
3.12
Noninlercst income
Service charges on deposits
Income from fiduciary activities . . . . ,
Trading income
Inieresi rate exposures
Foreign exchange exposures
Equity, commodity, and other exposures.
Other
2.07
.19
.23
.41
.40
5.37
.72
1.92
182
2,82
1.45
119
32
m
At
na.
aa.
aa.
1J9
Non
Salaries, wages, and employee benefits
Expense* of premises and fixed i
1,24
3.29
1.63
.60
1.05
Net noninterest expense
1.21
3.43
1.66
.62
1.15
Realized gains on investment account securities
.03
1.24
Income before taxes and extraordinary items . . .
Taxes
Extraordinary items
Net income (return on assets)
Cash dividends declared
Retained income
1.43
.44
.08
.03
.16
38
.03
-.19
37
-SI
MEMO: Return on equity
1.07
.38
69
23.30
-3.92
10.37
10.43
756
-86
35
130
7.6S
5.41
.64
1.60
181
4,23
.43
1.15
552
.86
.11
1.04
4.06
2.48
M
135
2:72
177
296
2.99
3.16
3.19
140
•36
33
•64
199
30
39
.91
8.77
8.80
«,77
I
.64
.77
127
31
.52
n.a.
its.
iat
335
1.74
.65
1.16
1.28
.02
.69
X>
.06
.48
•26
.21
10.13
tWL
DA
TU-
rua.
138
4.13
IM
.66
IJ9
1.16
3.83
1.79
.66
138
1.44
.04
34
.17
.03
.21
.21
*
4.23
1.14
.13
I JO
.53
.16
1.13
.28
.85
10.91
16.75
«.37
6.40
4.49
.77
.15
.97
6.42
6.43
4.44
.75
.21
t.00
6X1
4.48
.71
.18
.88
3452
115
.24
1.13
3.74
2.43
35
.95
2.68
170
332
2M
31
.95
173
ITS
186
188
.26
6.31
633
431
n
A5
.82
3J5
126
.75
176
17*
.11
•16
31
112
.32
34
.43
133
.26
1.18
3.56
wo
.02
139
AS
k
33
13.86
f
L34
1.16
T03
1.44
J55
•
.88
J7
31
13.78
•17
*5
US
isi
137
-50
1.23
.04
1104
33*
1.45
.47
133
1.12
.08
1.44
1^56
J58
.92
.70
51
13.21
,98
82
1321
* In absolute value, less than 0.005 percent.
n.a. Not available.
MMDA Money market deposit account.
RP Repurchase agreement.
CD Certificate of deposit.
1. Includes the allowance for loan and lea.se losses and the allocated transfer risk reserve.
2. As in the Call Reports, equity securities are combined with "other debt securities" before 1989.
3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest bearing liabilities" if a loss.
4. When possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Reports.
5. Before 1997, data for large time open accounts are included in small-denomination time deposits.
6. Includes provisions for loan and lease losses and for allocated transfer risk.
414
A
\
Federal Reserve Bulletin • June 1998
I 'i il I 11 I i >. i il M ] K v,| I h l|!
'Hkl'.-.l
;,lk'N
.11 M. I
.,(1 I. S k m k v
![H
I'JSS '»?
C. Banks ranked 1 lih through 100th by assets
[am
1988
1989
1990
1991
1992
1993
1994
1996
1997
87.75
64.24
18.95
17.71
1.24
15.67
8.26
7.40
23.26
23.10
1.55
.13
14.15
2.08
12.07
.89
6.37
.16
1.50
.20
.28
3.30
2.41
-.06
-127
16.87
16.06
15.62
3.34
86.95
63.85
19.00
17.77
1.22
15.63
8.52
7.11
22.97
22.82
1.69
.14
13.87
2.22
11.65
.93
6.19
.15
1.27
.09
.28
3,21
2.69
-.05
-1.24
15.82
15.08
14.59
2.82
1995
Balance sheet items as a percentage of average net consolidated assets
Interest-earning assets
,
Loans and leases, net , , . , . . . . . . , . , . . . . . . . . , .
Commercial and industrial
US, addressees
Foreign addressees . , ,
,
Consumer
Credit card
,
Installment and other
,,.,
Real estate
,
.,
In domestic offices
Construction and land development . . ,
Farmland . . . . .
-.
.......
One- to four-family residwsiaj
Home equity
Other
Multifamily residential
Nonfarm nonresidential
In foreign offices
................
Depository institutions .,
,
Foreign governments
T
Agricultural production
Other loans
,...,
Lease-financing receivables
LESS: Unearned income on loans
LESS Loss reserves1
Securities
,
,,
Investment account
,
Debt
U.S. Treasury
U.S. government agency and
corporation obligations
Government-backed mortgage pools
Collaleralized mortgage obligations .
Other
State and local government
Private mortgage-backed securities . . . .
Other
Equity2
Trading account
Gross federal funds sold and reverse RPs
Inlerest-bearing balances at depositories
Non-interest-earning assets
Revaluation gains on off-balance-sheet items3.
Other
87,23
61.99
23.45
21.43
2.02
12.20
4.85
7.35
17.94
17.65
5.27
.11
6.85
1.17
5.68
.43
4.99
.29
1,84
1.22
.29
5.54
1.69
-37
-1.80
15.54
14,73
14,73
4.89
86,91
62.61
22.75
21.23
1.53
12.97
5.82
7.16
19.09
18.85
5.25
,12
7.54
1.41
6.13
.45
5.49
.24
1.55
.88
.29
5.17
1.73
-.34
-L4S
15.21
14.38
14,15
4.10
86.81
61.22
21.76
20.44
1.33
12.25
5.48
6.76
20.21
20.04
4.91
.12
8.53
1.67
6.S6
.46
6,01
.18
1.57
.52
.28
4.82
1.67
-.26
-1,60
16.19
15.32
15.14
3,42
86.88
60.08
20.53
19.30
1.24
11.66
5.04
6.62
21.51
21.37
4.00
.12
10.17
2.07
S.10
.54
6.53
.14
1.58
.39
.31
4.55
1.53
-22
-1.76
17.38
16.25
16.02
3.78
3.58
2.96
n.a,
.61
3,32
n,a.
2.94
n.a.
.82
3.68
6.01
12.77
12.77
5.01
4.03
n,a.
.98
2.70
n.a.
2.34
.23
.83
3.71
5.38
13.09
n.a.
13.09
7.42
5.32
1.56
.54
2.03
n.a.
2,27
.18
.88
4.41
4.98
13.19
n.a.
13.19
Liabilities
Interest-bearing liabilities
,
Deposits
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAs)
Small-denomination time deposits
Large-denomination time deposits . . . . . .
Gross federal funds purchased aad RPs
Other
Non-interest-bearing liabilities
Demand deposits in domestic offices
Revaluation losses on off-baiance-sheet items*
Other
94.77
75.34
55.02
9.68
45.34
4,68
15.67
11.05
13.95
13,72
6.59
19,44
15.04
n.a,
4.40
94.45
76.23
56.45
8.63
47.82
4.67
14.58
13.49
15.08
13.22
6,57
18.22
13.86
n.a.
4.36
S.23
Capital account
87.97
58.30
18.83
17.78
1.05
11.72
5.16
6.56
21.89
21.78
3.02
.14
11.36
2.50
8.83
.66
6.61
8836
4.28
1.49
-.17
-1.79
20.38
19.24
18.99
5.88
18.03
17.05
.98
11.47
5.23
6.24
22.11
2X01
2,08
.13
12.30
X54
9.76
.71
6.79
.10
1.30
,30
.29
4,05
1.47
-.11
-1.60
21.97
20.60
20.34
7.05
10.65
.71
6.72
.09
1.49
.28
29
3.47
1.60
-.07
-1.41
21.19
19.82
19.50
6.85
8831
62.68
19.26
18.10
1.16
14.23
7.34
6.89
23.25
23.10
1.50
.13
14.16
2.19
11.97
.77
6.54
.15
1.59
.20
.26
332
1.96
-.07
-1.32
18.64
17.88
17.51
4.82
8.43
5.38
2.48
.57
1.63
1.09
1.10
.22
1.13
4.90
4.51
13.12
na.
13.12
9.26
5.22
3.54
.50
1.46
1.05
1.34
,25
1.14
4.78
4.52
12.03
n.a,
12.03
9.55
5.21
3.71
.63
131
1.06
137
.26
1.37
4.98
4.08
11.64
n.a.
11.64
9.28
5.30
3.07
.91
1.21
.93
1.22
32
1.37
5.11
3.30
11.84
.57
11.28
9.40
5.06
2.82
1.51
1.11
1.02
1.16
37
.76
4.52
2.47
11.69
JO
11.18
9.12
5.42
2.16
1.54
.99
.96
1.21
.44
.80
4.26
2.38
12.25
.51
11.75
8.9$
5.(7
2.13
1.69
.88
.73
1.18
.49
.73
4.39
2.89
13.05
.69
1236
94.35
77.02
57.46
7.84
49.62
4.75
15.50
15.59
13,78
13.03
6.S3
17.33
13.23
n.a.
4.10
93.93
76.07
59.24
6.69
52.54
5.36
17.62
17.99
11.56
10.94
5.89
17.87
13.76
n.a.
4.10
93.13
74.66
56.99
6.20
50,79
6.26
20.21
15.98
8.34
11.43
6.22
18.47
n.a.
3.95
92.56
73.38
54.22
6.78
47.43
7.21
20.60
14.19
5.44
11.93
7.23
19.18
15.38
n.a.
3.80
92.47
72.86
53.03
8,05
44.98
6.91
20.13
13.26
4.68
11,48
834
19.62
15.27
.53
3.82
92.23
74.05
52.32
8,12
44.20
5.62
18.78
14.24
5.55
1137
1036
18.18
14.26
.49
3,43
92.02
73.14
51.81
7.52
44.30
3.06
20.76
14.09
6.39
10.00
1132
18.89
14.47
.49
3.93
91.84
7163
51.46
7.84
43,62
1.94
21.08
13.43
7.17
9.35
11.81
19.21
14.16
.68
4.37
5,55
5.65
6,07
B.S7
7.44
7J3
7:77
7.M
n.a,
.31
44.37
n.a.
.30
43.90
n.a.
.46
41.59
11.83
.76
35.49
11.09
.70
32.59
10.29'
.47
31.76
9.69
.25
32.89
9,42
.13
35,68
«8
.08
MM
870
940
995
1,006
1,003
1,082
1,204
1,338
1,450 1,664
tt.a.
.11
1.43
.33
.31
5733
88.16
58.56
18.03
16.99
1,04
1X62
5.99
6.63
2126
22.17
i.63
.14
12.98
233
MEMO
Commercial real estate loans ,..
Other real estate owned
Managed liabilities
Average net consolidated assets
(billions of dollars)
ft.42
.06
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
415
A. 2.—Conlinuuii
C. Banks ranked I llh through 100th by assets
Item
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
4
Effective interest rate (percent)
Roles earned
Interest-earning assets
Taxable equivalent
Loans and leases, gross
Nel of loss provisions
Securities
Taxable equivalent
Investment account
VS. government and other debt
Slate and local
Equity1
Trading account
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositories ..
9.89
10.10
10.50
9.21
8.22
8.93
8.25
8.53
7.29
n.a.
7.68
7.76
8.88
11.10
11.27
11.74
9.87
8.76
936
8.77
9.09
7.41
8.73
8.66
9.35
11.35
10.46
10.55
11.09
9.08
8.86
9.18
8.92
9.18
7.32
8.09
8.01
8.15
9.72
9.30
9.39
9.96
7.98
8.23
8.57
8.37
8.51
7.23
7.36
6.46
5.80
8.15
7.97
8.07
8.75
7.45
7.00
7.30
7.12
7.16
6.80
6.71
4.73
3.70
6.76
7.35
7.45
8.25
7.46
6.05
6.32
6.14
6.14
6.30
5.20
4.74
3.11
6.50
7.29
7.37
8.22
7.68
5.70
5.92
5.70
5,69
6.04
5.00
5.75
4.31
4.69
8.31
8.37
9.10
8.49
6.38
6.56
6.34
6.38
6.05
5.68
7.27
5.91
6.78
8.17
8.24
8.89
8.06
6.42
6.66
6.42
6.50
5.85
4.84
6.57
5.31
5.84
831
836
9.02
8.11
6.50
6.69
6.52
6.63
5.S8
5.06
6.05
145
5.76
Raits paid
Interest-bearing liabilities
InteresMwaring deposits
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAs)
Large-denomination time deposits5 ..
Small-denomination time deposits' ..
Gross federal funds purchased and RPs ..
Other interest-bearing liabilities
7.36
7.02
8.92
6.62
4.54
5.64
7.71
7.58
7,50
8.62
8.66
8.14
1J.08
7.6!
4.57
6.42
8.75
8.72
935
10.23
7.96
7.55
10.08
7.15
4.67
6.07
8.11
8.09
8.12
9.27
6.41
6.27
8.39
6.01
4.21
5.04
6.77
6.96
5.75
6.55
4.43
4.30
7.26
3.96
2.43
3.07
5.10
5.07
3.57
5.77
3.76
3,51
7.37
2.98
1.70
2.33
4.30
4.06
3,04
5.97
3.72
3.25
4.60
3.03
1.62
2.46
4.21
4.18
4.28
5.24
4.94
4.35
6.30
4.01
1.89
3.11
5.70
5.35
5.86
6.43
4.71
4.16
5.31
3.97
1.79
2.91
5.50
5.27
5.20
5.95
4.79
4.22
5.23
4.05
2.00
2.84
5.46
5.43
530
5.84
Income and expense as a percentage of average net consolidated assets
Gross interest income
TMtblc equivalent
Loans
Securities
Gross federal funds sold and reverse RPs
8.74
8.92
6.70
.26
SI
9.77
9.91
7.51
1.26
.36
.65
9.31
9.39
7.01
1.37
.38
.56
8.24
8.31
6.15
1.36
.28
.45
7.12
7.19
5.23
1.37
.18
.34
6.58
6.64
4.84
1.26
.15
.32
6.46
6.51
4.91
1.13
.21
.21
7.40
7.46
5.79
1.13
.27
.21
7.25
7.29
5.81
1.03
.23
.18
7.26
7.30
5.87
.98
.22
.19
Gross interest expense
Deposits
Grass federal funds purchased and RPs
Other
5.47
3.87
1.03
.56
6.50
4.59
1.24
.66
6.08
4.36
1.12
4.80
3.75
.67
.38
3.26
2.48
.43
.35
2.74
1.93
.38
.43
2.67
1.73
.51
.43
3.62
2.29
.67
.66
3.40
2.19
.55
.67
341
2.23
.51
.68
Net'nuewstineome
Taxable equivalent .
Loss provisioning 6
3.27
3.46
3.27
3.41
33
3.31
3.43
3.51
3.86
3.93
3.84
3.91
3.79
3.85
3.78
3.84
3.85
3.89
3.85
3.89
1.20
.78
.47
.32
.39
.54
.60
1.62
.31
.35
.07
n.a.
n.a.
n.a.
.89
3.30
1.48
.50
1.32
1.86
.31
.35
.08
2.05
.41
.36
.10
n.a.
n.a.
n.a.
1.19
3.77
1.52
.51
1.74
2.25
.44
.38
.09
n.a.
n.a.
n.a.
1.33
3.98
1.53
.49
1.95
2.29
.46
38
.14
n.a.
n.a.
n.a.
1.32
3.95
1.52
.47
1.95
2.25
.45
.39
.08
n.a.
n.a.
n.a.
1.33
3.86
1.50
Al
1.89
2.38
.44
.40
.09
n.a.
n.a.
n.a.
1.45
2.61
.44
.43
.08
m
2.76
.44
.44
.08
.02
.05
3.M
1.47
JO
1.37
1.27
1.84
.34
.33
.08
n.a.
n.a.
n.a.
1.09
3.44
1.47
.50
1.48
1.22
Noninterest income
Service charges on deposits
Income fromfiduciaryactivities
Trading income
Interest rate exposure*
Foreign exchange exposures
Equity, commodity, and other exposures.
3.79
1.47
.47
1.85
1.47
.04
1.60
.03
1.73
.14
1.73
1.61
1.41
1.80
3.85
1.51
.46
1.88
1.09
.15
1.65
.09
.04
.01
1.67
3.86
1.51
.48
1.87
-.01
.02
.77
.28
.02
.51
.42
.99
.65
.18
.38
.15
.01
.62
.19
.03
1.50
.48
.03
1.81
.56
*
1.85
.63
*
2.01
.70
.47
.40
J36
.24
.38
-.14
.47
.47
1.04
.46
.58
1.25
.76
.49
1.31
.85
.46
9.67
8.41
4.18
7.71
15.16
16.86
1.22
.86
.36
16.27
.02
2.09
.75
*
1.34
1.09
,25
16.84
16.79
Otter
Noninterest expense
Salaries, wages, and employee benefits .
Expenses of premises and fixed assets .
Ofci
1.21
1.68
ReaBwd gains on investment account securities
Income before taxes and extraordinary items , . .
Net income (return on assets)
C»»hdrvidendsdeclared ...
Retained income
MBMOi Return on equity
na.
n.a.
n.a.
1.12
.60
1.24
.02
2.19
.77
1.42
.94
.48
17.37
* In absolute value, less than 0.005 percent.
n.a. Not available,
MMDA Money market deposit account.
RP Repurchase agreement.
CD Certificate of deposit.
1. Includes the allowance for loan and lease losses and ihe allocated transfer risk reserve.
2. As in the Call Reports, equity securities are combined with "other debt securities" before 1989.
3. Before 1994. the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest bearing liabilities" if a loss.
4. When possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Reports.
5. Before 1997, data for large lime open accounts are included in small-denomination time deposits.
6. Includes provisions for loan and lease losses and for allocated transfer risk.
416
A 2.
Federal Reserve Bulletin • June 1998
I ' l i i i l i ' l i n I ' l i i n p i i M l H M i . m l c r c M i . i l r v ; i t i d I I I L D I D L 1 LLIU] C \ ! i c n s c . j \ \ I S
banks.
D. B a n k s r a n k e d 101st through 1,000lh b y assets
Item
1988
198?
1990
1991
1992
1993
1W*
1996
1997
90.13
62.62
12,79
12.61
.18
15.S8
6,66
9.22
31.37
90 31
62.28
12.46
ms
Balance sheet itfms ,u a pcrcentagp. of average net consolirtutBd assets
Interest-earning assets
Loans and leases, net
Commercial and industrial
U.S. addressees
Foreign addressees
Consumer
Credit card
Installment and other
Real estale
In domestic offices
Construction and land development . . .
Mainland
88.88
63.03
17.83
17.67
.16
15.91
10.70
24.28
24.27
4.73
.27
88.98
63.62
17.68
17.53
.15
15.49
4.83
10.66
25.97
25.95
4.82
.27
.18
14.18
5.37
8.80
28.11
28.07
1.90
93.28
76.42
63.74
2.09
61.65
7.14
1942
22.08
12.91
9.21
3.47
16;85
14,86
n.a.
1.99
93.07
•77.04
65.05
1.65
63.40
7.31
19.69
24.09
12.31
8.43
3.56
16.03
14.07
n.a.
1.96
6.66
6.72
n.a.
.42
27.63
839
4.81
2.33
n.a.
2.48
4.10
n.a.
2.82
n.a.
.28
4.45
2.87
11.12
n.a.
11.12
6.07
3.03
n.a.
3.04
3.50
n.a.
2.55
.35
.38
4.11
2.49
11.02
n.a.
11.02
93.34
75.59
63.00
Capital account
27.48
3.67
.28
13.33
13.16
11.16
-1.07
18.52
18.25
18.25
6.52
Uabttities
Interest-bearing liabilities
Deposits
(n foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAsi
Small-denomination time deposits
Large-denomination time deposits
Cross federal funds purchased and RPs
Other
Non-interest-bcaring liabilities
Demand deposits in domestic offices
Revaluation losses on off-balance-sheet i t e m s ' .
Other
15.05
14.89
.16
15.10
5.71
9.40
27.53
89.02
58.49
9.35
4.51
2.74
2.11
2.65
1.16
1.23
.37
.37
4.71
1.90
11.09
n.a.
11.09
LESS: LOSS reserves'
2.08
9.48
.70
8.61
.01
.92
.16
.45
3.77
.82
-.56
-1.07
18.75
18.38
18.02
5.91
U.S. Treasury
U.S. government agency and
corporation obligations
Govemmenl-backed mortgage pools
CoIIateralized mortgage obligations . . . .
Other
Stale and local government
Private mortgage-backed .securities . . . .
Other
7
Equity 2
Trading account
Gross federal funds sold and reverse RPs . . . .
Interest-bearing balances at depositories
Mon-interest-earning assets
Revaluation gains on off-balance-sheet items 3
Other
61.03
20.92
20.55
6.16
11.56
10.64
1.73
8.91
Debt
88.91
2.86
.32
14.26
2.56
11.69
.96
9.69
.04
.80
.05
.54
2.47
.78
-.30
-1.49
24.13
23.78
23.32
7.75
One- to four-family residential
Home equity
Othei
Multifacnily residential
Nonfarm nonresidenlial
In foreign offices
Depository institutions
Foreign governments
Agricultural production
Other loans
Lease-financing receivables
Lass: Unearned income on loans
Securities
Investment account
88.84
63.09
16.69
16.56
.13
15.48
5.22
10.26
27.01
26.99
4.37
.28
12.49
2.31
10.18
.73
9.11
.03
1.05
.09
.47
3.16
.83
-.50
-1.20
19.34
18.87
18.54
5.44
.67
7.97
.01
1.01
.20
.47
4.23
.78
-.60
2.04
50.97
7.39
21.27
19.34
12.96
8.63
.1.96
17.74
15.84
n.a.
13.23
2.53
10.70
.80
9.50
.05
.93
.07
.49
2.81
.85
-.40
-1.42
21.28
89.55
57.94
12.19
12.03
.16
14.83
5.63
9.20
28.61
28.59
2.26
.34
15.17
2.50
12.67
90.09
59.75
12.07
11.90
.16
15.85
6.06
9.79
29.42
29.39
Z08
.36
9.75
.02
,43
.03
16.24
2.33
13.91
1.13
9.57
.03
.40
.02
.56
.62
2.16
.77
-.21
-1.44
25.92
23.64
25.16
1.07
90.13
62.23
12.68
12.52
.16
16.38
6.45
9.94
30.77
30.75
2.2)
.40
17.47
2.36
15.11
1.21
1.29
2.0!
.83
.90
-.15
-1.30
-1.23
2S.71
23.06
25.40
24.95
22.86'
9.87
.02
.48
.02
.71
1.70
1.01
-.10
~r.22
22.68
22.56
22.04
5.61
-.12
22.39
8.26
6.47
11.08
4.74
3.95
2.39
2,27
1.01
1.21
.46
.35
4.92
1.47
10.98
n.a.
10.98
12.32
12.67
4.97
4.82
2^3
5.57
*.39
2,71
12.21
5.42
3.55
3.25
2.26
2.29
2.13
.84
.75
.99
.44
10.45
9.90
.68
.89
.47
.20
3.91
.93
9.87
.05
9.83
92.89
77.25
66.33
1.76
64.58
7.83
20.79
25.23
10.73
7.46
3.45
15.64
13.57
n.a.
2.07
92,47
75.98
65.66
(.56
64.10
91.85
74.42
63.03
1.43
61.62
9.94
24-06
20.77
6.85
7.43
3.93
17.43
15.07
n.a.
236
91.62
74.77
60.38
1,69
58.69
9,70
22.92
19.29
6.78
6.93
7.-11
7.53
n.a.
A3
27.73
n.a.
.52
26.00
14.64
.77
23.46
13.91
.80
20.00
13.37
.57
19.69
892
937
961
968
977
3.11
n.a.
2.25
.32
.4«
4.51
1,90
11.16
n.a.
9.14
23.34
23.56
8.06
7.17
3.15
16.49
14.39
n.a.
2.10
1.10
.48
.28
4.48
1.20
10.45
n.a.
.46
17.34
2.31
15.03
9.46
.02
.35
.02
.69
1.80
8.64
7.75
3.83
1.72
2.19
31.34
2.38
.31
3.64
.98
9.91
.02
91.36
75.02
59.39
1.71
57.87
8.53
20.72
21.08
7.55
8.30
12.66
5.69
3.12
3.85
2.24
.76
.77
.52
.12
3.87
.96
9.87
.02
12.23
33
13.98
5.45
8.53
33.25
33.23
2.69
.53
(8.16
2.31
15.86
1.29
Ifl.56
.02
.60
.02
.74
L51
1,00
-.10
-US
13.45
23.34
22.73
4.95
13.96
6.23
3,02
4.72
2.45
.59
.78
.61
.10
3.59
.99
9.69
9.85
9.69
91.06
75.06
59.99
90.7?
75.18
61.50
1.24
6026
4.99
1.33
58.66
6.21
22.50
21.61
834
8.19
23.60
7.14
6.88
14.58
.02
2.25
16.34
14.05
.05
2.24
13.84
.02
2.14
22.04
9.65
7.09
6.59
1S.62
13.17
.01
2.44
8.38
8,64
8.94
921
13.05
15.83
.13
24.78
1479
.11
22.89
1S.17
47
W.72
24,61
1,032
1,094
1,076
968
8.4S
5.94
16.85
16.00
MEMO
Commercial real estate loans . . .
Olhsr reaj estate owned
Managed liabilities
Average net consolidated assets
(billions of dollars)
.28
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
All
A.2.—Cuniiniit-'il
D. Banks ranked 101st through l.OOOch by assets
Item
1988
1989
1990
1991
1992
1993
1994
1995
1996
M3
8J2
1997
8.40
8.49
9M
8J9
6.30
Effective interest rate (percent)-*
Interest-earning assets
"fiotable equivalent
Loans and leases, gross
Net of loss provisions
Securities
Taxable equivalent
Investment account
,
US. government and other debt
Stale and local
Equity2
Trading account
Gross federal funds sold and reverse RPs ..
Interest-bearing balances at depositories
Rota paid
Interest-bearing liabilities
Interest-bearingdeposits
In foreign offices
In domestic offices
•••--.
Other checkable deposits
Savings (including MMDAs)
Large-denominmion time deposits5
Sroil-denominaiioo time deposits5
Gross federal funds purchased and RPs
Otter interest-bearing [labilities
9.91
10.15
10.76
9.61
7.83
8,57
7.84
8.04
7.16
n.a.
6.96
7.44
7:82
10.75
10.96
11.61
10.45
8.34
8.97
8.35
8.64
7.28
7.00
7.61
9.05
9.21
10.42
10.57
11.21
9.48
8.52
9.00
8.49
8.76
6.71
6.49
7.65
6.45
4.77
5.53
7.42
7.45
7.40
7.43
7.72
7.36
8.98
731
4.S8
6.13
8.70
831
9.01
908
6.94
9.92
7.99
8.52
9.55
9.69
10.42
8.71
8.10
8.54
8.12
8.30
7.25
6.02
6.86
5.64
6.81
8.14
&Z3
9.11
7,83
6.88
7.19
6.90
6.95
6.83
5D8
5.61
347
4.61
7.43
7,55
8.57
7.76
5.78
6.10
5.79
5.76
6.30
4.95
4.74
3.02
3.51
7.58
7.68
8.64
8.11
5.69
5.93
5.®
3.61
5.92
5.30
5.29
4.06
4.28
7.26
7.05
8.12
7.02
4.75
5.98
8.04
8.03
7.86
8.28
6.10
6.05
6.38
6.04
4M
113
662
7.08
5.61
6.80
4.19
4.17
4.25
4,17
2.67
3,33
4.76
5.35
3.46
5.28
3.33
3.26
3.35
3.25
2.02
2,58
3,90
4,4ft
195
4.44
337
73
331
431
3.28
W
2.64
4.23
4.40
4.12
4.92
9.44
8.76
6.22
6.49
6.23
6.28
5.81
60S
155
5,44
6.09
4.64
4.23:
5J4
4.20
2.02
S.23
Ul
533
5161
6.28
64?
6.30
6.40
sM
00
5.94
S.24
5.54
4.57
4.26
5.43
4,23
1.96
3.11
5.47
5;S7
S.J6
5.89
4.66
433
5.43
*3>
XV
im
$m
537
5.M
6.09
Income and expense as a percentage of average net consolidated assets
Groat interest income
Taxable equivalent
Loans
Securities
Grots federal funds sold and reverse RPs
Other
8.87
9.09
6.89
1.43
.32
.24
9.68
9.86
7.52
1.54
38
.25
9.38
9.51
7.21
1.60
.36
:20
8,63
8.75
6.51
1.70
27
.15
C m s interest expense
Deposits
Grots federal funds purchased and RPs
Other
5.02
4.09
.64
.29
5:54
4.58
.67
.29
4.67
4.02
.42
.23
Net interest income
Taxable equivalent
Loss provisioning6
3.85
4.07
5.84
4.69
.83
.31
3.84
4.02
3.83
3.97
3.96
4.08
.74
.75
1.12
1.07
.77
Noninterest income
Service charges on deposits
Income from fiduciary activities
Trading income
Interest rate exposures
Foreign exchange exposures
Equity, commodity, and other exposures
Other
Nonlmereu expense
Salaries, wages, and employee benefits .
Cxpeages of premises and fixed assets
Other
Net noninterest expense
1.36
.34
.25
.03
n.a.
n.a.
n.a.
.74
1.38
.36
IS
.04
n.a.
1.50
.37
.26
.02
n.a.
n.a.
n.a.
.84
3.50
1.47
.4?
1.55
1.65
.40
.27
.04
1.69
.44
.28
3.50
1.49
.50
1.51
2.14
M8M0: Return on equity
n.a.
.74
3.45
1.48
.49
1.49
2.07
n.a.
n.a.
.94
3.7&
1.48
.49
1.79
.01
2.01
.01
.98
.32
.01
1.02
.32
.72
.21
.67
.48
.18
.71
.48
.23
.51
.53
-.02
.09
.86
.29
.03
.60
.58
.02
10.00
10.54
7.37
8.45
Realized gains on investment account securities .
Income before taxes and extraordinary items
Taxes
Extraordinary items
Net income (return on assets)
Cash dividends declared
Retained income
n.a.
n.a.
2.11
736
7,46
SM
l&
.17
.08
3.16
2.75
45
,17
419
4.30
m
n.u.
n.a.
iua.
.95
3.87
1.51
.49
1.87
2,18
.10
1.35
.44
6.75
6.84
5.07
1.49
6.90
6.99
5.26
IMS
.14
.06
7;®
7.77
539
1.42
7J7
7.75
198
1.42
.20
7.75
7M
6.01
isa
2.46
2.07
.22
.17
2.65
2.01
.35
3M
£35
•29
•45
M
,19
.06
3A1
Z7Q
37
.40
4.28
4J8
4.25
4.34
4,23
432
4.27
435
439
4.36
.47
31
1.86
.42
.28
.02
n.a.
•Uti
n,a.
1.14
3.78
1.49
.46
1.83
.43
(.84
SO
1.84
1.88
Si
2.07
.40
.14
.06
.45
.29
.03
n.a.
n.a.
n.s.
1.08
3,92
UJ
.48
1.93
2.08
,06
m
.46
21
.03
n.a.
Nfc
HA
1,12
3.68
xm
M
in
L.92
-.05
184
1.78
.61
.04
1.96
.67
.91
.48
.43
1.22
.79
.43
1.29
.81
.48
1.96
.68
*
1.28
.87
.41
12.13
14.93
15.40
14.83
.06
,$#>•
4J
28
m
M
.01
.01
•
.0)
.01
•
1.16
. 3.68
1.43
.45
1,8ft
1,81
.02
1.98
2,10
1.29
1.04
137.
1.10
M
14.45
133
1.66
m
.28
14.91
* In absolute value, less than 0.005 percent.
n.a. Not available.
MMDA Money market deposit account.
RP Repurchase agreement.
CD Certificate of deposit.
1. Includes the allowance for loan and lease losses and Ihc allocated transfer risk reserve.
2. As in the Call Reports, equity securities are combined with "other debt securities" before 1989.
3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest bearing liabilities" if a loss.
4. When possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Reports.
6. Includes provisions for loan and lease losses and for allocated transfer risk.
5. Before 1997, data for large time open accounts are included in small-denomination time deposits.
6. Includes provisions for loan and lease losses and for allocated transfer risk.
418
A,2
Federal Reserve Bulletin H June 1998
PiiiUiilii. Lt'iiipuMliiiri. m t o i c M
M'. ,ill 1. .S. h;inkv !'.JS<S 9 7
i ; i k ' - . ,-iiul i m m i k 1 a n d
t\. B a n k s not ranked a m o n g the 1,000 largest by assets
Item
1988
1989
1990
1991
1993
1994
1996
1995
1:997
Balance sheet items as a poranuge of average net consolidated asaels
Interest-earning assets
Loans and leases, net
Commercial and industrial
U S addressees
Foreign flddressees
Consumer
Credit card
Installment and other
Real estate
In domestic office)
Construction and land development
Farmland
.,
One- to four-family residential
Home equity
Other
Mullifainily rettdeittial
Nonfann nofliesidential
In foreign offices
Depository institutions
Foreign governments
Agricultural production
Outer loan*
Lease-financing receivables
Less: Unearned income on loans
Lass: Loss reserves'
Securities
Investment account
Debt
US. Treasury
U S . government agency and
corporation obligations
Government-backed mortgage pools ..
Coiiateralized mortgage obligations
Other
State and local government
Private mortgage-backed securities
Other
Bqtiity*
Trading account
Gross federal funds sold and reverse RPs
interest-bearing balances at depositories
NoD-iitferest-eaming assets
Revaluation gains on orT-balance-aheei Item*3 ..
Other
90.81
53.88
IZ34
12.32
.02
1148
.86
10.62
26.02
2602
2.22
1.74
14.06
.73
13.32
.61
7.40
*
.31
.02
3.25
1.75
19
liabilities
Interest-bearing liabilities
Docouls
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAi)
Small-denomination time deposit)!
Large-denomination time deposits
Gross federal funds purchased and KPx
Other
Non-interest-bearing Liabilities
Demand deposits in domestic offices
Revaluation losses on off-balance-sheet hems 1
Other
91.61
76.94
74.84
.04
74.81
10.64
21.92
3055
11.27
1.35
.75
14.67
13.58
n.a.
Capital account
-.61
-.88
27.9S
27.93
27.93
9.73
9.80
322
n.a.
6.58
5.65
IU.
172
ma.
.OS
5.76
3.19
9.19
n.a.
9.19
90.90
54.84
1X10
12.07
,03
U,46
.93
10.53
27.36
27.36
Z29
1.82
1481
.94
13.86
.62
7.82
,26
.01
3.2S
1.67
.19
-.60
-.88
27.92
27.85
27.45
S.84
11.37
3.76
D.a-
7.61
4.94
n.a.
2.29
40
.07
5.74
2,40
9.10
n.a.
9.10
9L44
77.13
75.00
.06
74.93
10.38
1931
3346
11.38
135
.7,8
14.31
13.09
91.06
54.74
11.53
11.49
.04
1.00
10.20
28.35
28.35
237
1.86
1537
1.16
14.21
.66
8.09
*
.23
.01
3.30
I.4J
.18
-789
28.38
23.28
27.92
S.77
12.43
438
,90
6.93
4,56
1UU
2.15
.36
.10
6.13
1.81
8.94
nju
8.94
91.40
77.83
75.79
.07
75.72
10.45
18.73
35.37
11.17
136
,67
91.24
54.05
10.59
10.55
.04
10.49
1.08
9.41
29.31
29.31
2.18
IS3
15.99
1.29
14.69
.71
830
*
.20
.01
3/48
1.24
.17
-.51
-.93
29.98
29.92
29.55
9.24
13.81
539
1,53
6.67
4,26
.89
t.35.
.38
.06
5.M
1.57
8.76
n.a.
8.76
9138
7S.4Q!
76:41
.08
76.34
10.98
1935
35,86
tats
m
9139
33.0*
».?4
9,70
.04
9,69
1.00
8.68
30.15
30.15
1.98
2,06
16.44
1.34
15.10
.77
SM
.13'
JM
335/
.99
.17
-.4a
3iO4
31.60
10.25
15.CM
a
6.85
8.25
31.09
31.09
J.93
2.20
16.82
137
1534:
M
930
.12
3.58
J8
-36
-.97
33.06
33.00
.05
^37
*96
841
32.19
32.19
2.14
2.34
1&95
1.21
I5V73
.93
m
B35
75§
w
136
.61
13.29
11,74
66
12.22
.6*
1037
654
662
681
695
«97
3335
33.55
238
2.48
1*46
130
1&25
.95
*
.16
*'
37.M>
957
m
9.46
1*
8.38
34.09
34.08
2*1,
SIM
10.J7
t0t09
.08
'i)iO7
8.15
3534
3534
m
.ass.
VIM
S .68
18.16
1034
' «:
10.92
124
u\$ ny»
J$2
.17
*
.17
3.95
3.92
4<0S
76
"M
.70
55
.22'
-30
,23:
-ax
-.95
3JM»
32.86
3X42
10.81
-.93
3030
30.47
30.02
9.19
1535
4.81
3.11
7.43
.04
15,12
4.19
2.76
8.18
4.69
.20
8t
.45
03
8.16
90.43
76.19
13: M
09
90.03
75.74
72.70
,11
7239
12.37
20.41
30.92
8.89
1.78
1.25
1430
13.23
-,24
-.88
.67
8.30
89.81
.44
U89
.73
,63
13.59
m
833
«
.13
.01
73.05
1331
23.23
2s«r
1.10
65
13.41
J06
934
10.28
Ml
.20
-31
l
9.90
9,83
3.89
'9j*o4t
830
75.74
8.60
9:65
2931
29.48
28.99
IS37
4.68
.aim.
8.61
B.56
Mm
56.61
.77
8^8
15.80
•3a§
3.33
7.09
4.70
1.16
839
L2I
•M:
1
91.74
54.64
9.11
9.26
'1
.68
O-98
11.8*
rua.
1.14
8.62
1.09
32.94
9.24
9.20
U.#
1425
1334
123J
it*.
1.01
.10
7233
n.is
1138
19,01
••»
,90
L07
1.10
8^93
937
9.97
M»l»
1030
134)2
.35
10.83
13.72
.25
12,05
M
13.03
46
14.07
679
686
661
647
MEMO
Commercial real estate loans
Other real estate owned
Managed liabilities
Average net consolidated assets
(billions of dollars)
10,09
Profits and Balance Sheet Developments at U.S. Commercial Banks in 1997
•\
419
I—
E. Banks noi ranked among the 1,000 largest by assets
Item
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
8.37
8.52
9.80
9.38
6.08
6.48
6.08
6.16
5.63
6.26
6.12
5.95
5.89
8.40
8.55
9.82
8.64
9.81
937
937
4.46
451
4.61
438
4.44
11.43
4.43
454
150
141
354
Effective interest rale (percent)4
Rates earned
Inleresl-carning assets
Taxable equivalent
Loans and leases, gross
Net of loss provisions
Securities
Taxable equivalent
Investment account
US. government and other debt
Stale and local
Equity2
Trading account
Gross federal funds sold and reverse RPs
Interest-bearing balances at depositories .
Kates paid
Interest-bearing liabilities
Interest-bearing deposits
In foreign offices
In domestic offices
Other checkable deposits
Savings (including MMDAs)
Large-denomination time deposits* .
Small-denomination time deposits' .
Gross federal funds purchased and RPs .
Other interest-bearing liabilities
9.76
10.01
11.03
10.00
7.93
8.64
7.92
8.01
7.57
n.a.
14.88
7.68
8.07
10.50
10.72
11.76
10.87
8.37
9.01
8.36
8.53
7.57
8.12
14.84
9.25
9.11
10.31
10.52
11.60
10.65
8.42
8.99
8.41
8.59
7.46
8.30
12.13
8.12
8.55
9.64
9.82
11.02
10.09
8.04
8.53
8.04
8.19
7.17
7.13
8.41
5.66
7.35
8.43
8.59
9.83
9.05
6.99
7.40
6.99
7.06
6.70
5.64
7.14
3.51
5.59
7.62
7.78
9.13
8.62
5.92
6.33
5.92
5.91
6.09
5.16
4.83
2.95
4.53
7.57
7.72
9.00
8.65
5.61
5.99
5.61
5.59
5.69
6.42
6.36
7.62
6.36
5.00
5.48
7.13
7.18
6.81
7.63
7.16
7.10
9.35
7.10
5.09
5.82
8.35
8.03
8.52
8.31
7.02
6.96
7.57
6.96
5.02
5.73
7.92
7.88
8.03
7.84
6.18
6.15
5.95
6.15
4.61
5.18
6.74
6.98
5.72
6.94
4.44
4.44
3.97
4.44
3.14
3.62
4.90
5.36
3.74
5.00
3.54
353
2.91
3.53
2.42
2.91
3.96
4.39
3.17
4.64
3.49
3.44
3.92
3.44
2.29
2.83
4.12
4.28
4.12
4.98
552
6.03
4.08
4.64
5.73
4.38
3.32
5.55
5.51
5.61
6.45
6.10
6.52
6.10
6.23
5.44
6.06
6.48
5.34
6.10
850
6.25
6.65
6.25
6.43
533
6.45
7.70
553
5.72
4.17
454
246
3.36
5.49
5.60
5.07
6.74
553
5.67
5.22
6.18
ncome and expense as a percentage of average net consolidated assets
Gross interest income
Taxable equivalent
Loans
Securities
Gross federal funds sold and reverse RPs ...
Other
8.96
9.18
6,02
2.21
.47
.26
9.65
9.85
6.53
2.33
.57
.23
9.51
9.68
6.44
2.38
.53
.17
8.92
9.07
6.05
2.40
.34
.12
7.79
7.94
5.30
2.24
.18
.07
7,05
7.19
4.91
1.95
.14
.05
7.01
7.15
4.98
1.84
7,77
7.90
5.63
1.85
7.79
7.92
5.72
1.80
7.90
8.02
5.86
1.76
.15
.04
.25
.04
.24
.04
Gross interest expense
4.92
4.76
.10
.06
5.50
5.32
.12
.06
5.44
5.28
.11
.05
4.83
4.71
.07
.05
3.45
3.36
.05
.04
2.72
2.63
.04
.04
2.65
3.37
3.19
.24
.04
347
Net interest income
Taxable equivalent
Loss provisioning0
4.04
4.26
4.15
4.35
4.07
4.24
4.09
4.24
4.34
4.49
4.33
4.48
4.40
4.53
.56
.50
.53
.51
.42
.27
4.36
4.50
.19
2A
452
Jfi
.08
.11
442
454
.26
Noninterest income
Service charges on deposits
Income from fiduciary activities
Trading income
Interest rate exposures
Foreign exchange exposures
Equity, commodity, and other exposures.,.
Olher
.92
.41
.12
•
n.a.
n.a.
n.a.
1.00
.41
.14
.01
n.a.
n.a.
n.a.
1.08
.44
.14
.01
n.a.
n.a.
n.a.
1.16
.45
.16
.01
n.a.
n.a.
n.a.
1.25
.45
.16
1.42
1.45
.44
.22
.01
.44
.19
•
.44
.20
*
*
*
.44
.49
.55
Noniniercsi expense
,
Salaries, wages, and employee benefits
Expenses of premises and fixed assets
Olher
3.44
1.62
.51
1.32
3.49
1.64
.49
1.36
3.60
1.65
.49
1.47
3.67
1.69
.49
1.49
n.a.
n.a.
n.a.
.64
3.74
1.72
.48
1.53
1.30
.44
.17
*
n.a.
n.a.
n.a.
.69
1.38
.39
1.01
.42
.14
.01
n.a.
n.a.
n.a.
.44
Nel noninterest expense
2.48
*
2.53
2.51
2.48
3.78
1.75
.49
1.55
2.48
.06
.09
.07
1.50
.47
.02
Deposits
Gross federal funds purchased and RPs
Olher
2.53
3.49
1.65
.51
1.33
2.49
Realized gains on investment account securities
.01
.01
Income before taxes and extraordinary items ...
Taxes
Extraordinary items
Net income (return on assets)
Cash dividends declared
Retained income
.96
.29
.02
1.17
.37
.02
1.06
.68
.46
.22
.83
.52
.30
.74
.49
.25
1.10
.35
.01
.77
.47
.30
8.11
9.66
8.61
8.95
MEMO: Return on equity
.34
.02
.01
252
.07
.06
.10
.08
n.a.
n.a.
n.a.
3.40
352
.08
.10
4.40
9
*
*
3.28
.71
.78
.80
3.80
1.79
3.70
1.77
3.72
1.80
.50
.49
.49
1.51
1.45
1.42
242
*
2.29
2.27
-.03
.01
1.66
1.75
1.85
.01
150
.51
*
.55
•
59
*
1.04
.51
53
1.64
.51
.05
1.19
.56
.63
1.15
1.20
1.26
.57
.58
62
58
.64
.62
131
.73
58
11.64
12.65
12.05
12.04
1236
1Z7O
•
* In absolute value, less than 0.005 percent.
n.a. Not available.
MMDA Money market deposit account.
RP Repurchase agreement.
CD Certificate of deposit.
1. Includes the allowance for loan and lease iosses and the allocated transfer risk reserve.
2. As in the Call Reports, equity securities are combined with "other debt securities" before 1989.
3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest bearing liabilities" if a loss.
4. When possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Reports.
5. Before 1997, data for large lime open accounts are included in small-denomination time deposits.
6. Includes provisions for loan and lease losses and for allocated transfer risk.
420
Treasury and Federal Reserve
Foreign Exchange Operations
This quarterly report describes U.S. Treasury and
System foreign exchange operations for the period
from January through March 1998. It was presented
by Peter R. Fisher, Executive Vice President, Federal
Reserve Bank of New York, and Manager, System
Open Market Account. Daniel Osborne was primarily responsible for preparation of the report.
During the first quarter of 1998, the dollar appreciated 2.8 percent against the German mark and
2.2 percent against the Japanese yen. On a tradeweighted basis against Group of Ten (G-10) currencies, the dollar appreciated 1.9 percent.1 Against the
mark, the dollar traded in a relatively narrow range
through most of the period. This range reflected market expectations of stable monetary policy in both the
United States and Germany as well as reduced volatility in European currencies, as expectations for a
smooth progression toward the European Economic
and Monetary Union (EMU) solidified. Against the
yen, the dollar retreated from five-year highs reached
early in the period, as it was pressured lower by the
possibility of official intervention to support the yen
and by comments from Japanese politicians calling
for measures to stimulate Japan's economy. The dollar later rebounded as expectations for additional
Japanese stimulus waned and as market participants
refocused on the diverging economic outlooks for
the United States and Japan. Although the dollar was
little changed on net over the period, other asset
prices experienced significant appreciation. Global
bond and equity markets reached record highs, and
many Asian markets rebounded from earlier weakness. The U.S. monetary authorities did not intervene
in the foreign exchange markets during the quarter.
SlRONG PERFORMANCE OF U.S. AND
El -ROPEAN STOCKS AND BONDS
1. The dollar's movements on a trade-weighted basis against ten
major currencies are measured using an index developed by staff
members of the Board of Governors of the Federal Reserve System.
Expectations of steady U.S. monetary policy solidified over the period as market participants focused on
the countervailing effects of a drag from the slowdown of Asian economies and the continued signs of
strong domestic demand in the United States. Comments by Chairman Greenspan and Governor Meyer
in early January were interpreted as suggesting
concern over the potential deflationary effect of an
Asian economic slowdown on the U.S. economy. As
a result, there was some speculation that the next
1.
2.
Spot exchange rale ol the. dollar against the Japanese yen
and volatility implied by option prices, I 1 M7:(>I- [WS:QI
Japucw >«a per US, dollar
Spot exchange rate ol the dollar ayainst the German mark
and volatility implied hy option prices. I<-)97:Q-I— |WN:QI
Percent per year
One-month volatilities
n
nmafteptrlUkMbr
,
Spot cirfaoge rate
K
UW
134 -
14
—r t4
1JM
12
m/v
126 -
V
112 f XJkk/\J
W
S|*u cxdmigt rate
1
Oct.
1
Nov.
1997
1
Dec.
Feb.
1998
1.76 '
»^k
.
m
1.72
— g
1
i
Jan.
NOTE. Data are daily.
SOURCE. Federal Reserve Bank of New York; Reulers.
— 10
12
1^0
1
Mar.
One-month volatilities
^ »
I.6K
1
1
Oct.
1
Nov.
1997
1
Dec.
1
An.
1
Feb.
1998
NOTE. Data are daily.
SOURCE. Federal Reserve Bank of New York; Reuters.
1
M*r.
B
421
move by the Federal Open Market Committee
(FOMC) could be an ease. The yield implied by the
April 1998 contract on federal funds futures declined
to levels below the 5.50 percent funds target—
reaching a low of 5.31 percent on January 9—and the
benchmark thirty-year Treasury bond yield fell to an
all-time low of 5.69 percent on January 12.
Expectations for FOMC policy shifted to a
more balanced view after Chairman Greenspan's
Humphrey-Hawkins testimony on February 24. Market participants interpreted the testimony as emphasizing a domestic environment of tight labor markets
and strong domestic demand, while depicting less
concern over the potential effect of the Asian slowdown. After the testimony, the implied yield on the
contract on April federal funds futures rebounded to
levels higher than 5.50 percent, while the benchmark
bond yield reached a high for the quarter of 6.07 percent on March 3. Expectations for steady policy
solidified despite subsequent evidence of tight labor
markets and strong domestic demand, and the thirtyyear benchmark yield fell 13 basis points from its
peak, to end the period at 5.94 percent. Low inflation
and anticipation of diminished issuance of Treasury
securities supported this decline.
In Germany, expectations for steady monetary policy also solidified amid a benign inflationary outlook,
concern over high unemployment levels, and the
ongoing belief that official European interest rates
would converge to German levels ahead of the EMU.
Also contributing to the steady policy outlook was
continued concern over the potential deflationary
effect of an Asian economic slowdown on German
growth. The yield implied by three-month German
mark forward rate agreements three months hence
i.
!.
l\S. mid [European cquih markets.
Indca.Jin.2-IM)
t:to
— 100
Jan.
Feb.
1998
M«r.
NOTE. Data are daily.
SOURCE. Bloomberg L.P.
fell 10 basis points, to 3.73 percent, while the yield
on ten-year government bonds declined 51 basis
points to close at an all-time low of 4.86 percent on
March 24. Also underpinning the rally were expectations that continued fiscal consolidation in Europe
would further diminish bond issuance.
Against this background of stable monetary policy,
reduced volatility, low inflation, and falling yields,
investor risk appetites appeared to be on the rise.
Equity markets in the United States and Europe
reached record highs, with the Dow Jones Industrial
Average rising 11.3 percent during the quarter and
both German and French benchmark indexes rising
20.7 and 29.2 percent respectively. Southern European stock markets performed even better, as prospects for lower interest rates ahead of the EMU and
cross-border corporate consolidation fueled gains of
more than 40 percent in Portugal, Italy, and Spain.
I '.S. ;jnil < iermaii lxf> l'nrw;ird r;ik" Lij!iwnu.'nt
Percent
German
3.6
Jin.
Feb.
Mat.
1998
Nori;. A 3 x 6 forward rale agreement (FRA) refers to the yield on a threemonth deposit with a value dale three months hence and a maturity date six
months hence.
SOURCE. Reuters.
RELATIVELY NARROW TRADING RANGE OE THE
DOLLAR AGAINST THE MARK
The dollar traded in a DM 1.78-1.85 range against
the mark through most of the period. Implied volatility on one-month dollar-mark options declined
4 percentage points to reach an eight-month low of
7.95 percent on March 25, while longer-dated risk
reversals remained largely neutral, apparently reflecting expectations that the dollar would continue to
trade within a narrow range. In addition, the expectations of relatively steady policy in both countries,
the concurrent rallies in both U.S. and European
equity markets, and perceptions of a smooth progression toward the EMU all contributed to the limited
422
Federal Reserve Bulletin n June 1998
l ; .S. and Kuro|)L-an Icii-year bond yields, I
D o l l a r \ u u iine-niiMHli a n d i v . e l w - m n n l
I')OS:Q1
risk w\ L-rsals.
Perceia
Percent
Germany
Ftb,
.5
4 8
-
Mar.
im
Mar.
Jan.
NOTE. Dala are daily.
SOURCE. Bloomberg L.P.
NOTL. Dala arc daily.
SOURCE. J.P. Morgan
volatility of the dollar-mark exchange rate. Late in
the period, the dollar traded to highs near DM 1.85,
as sales of the mark against the British pound and the
steady widening of U.S.-German interest rate differentials weighed on the German currency. The spread
of U.S. ten-year bonds over comparable German
instruments increased 57 basis points to close the
period at 82 basis points.
REBOUND OI- rut DOLLAR FROM PERIOD
LOWS AGAINST THE YEN AMI!) INCREASING
UNCERTAINTY RECARDING THE JAPANESE
ECONOMIC OUTLOOK
After having reached five-year highs against the yen
early in the period, the dollar declined more than
8 percent by mid-February then rebounded to end the
period slightly stronger than at the end of 1997. The
dollar traded to a five-year high of ¥134.30 on January 6, as market participants continued to focus on
the diverging economic outlooks in the United States
and Japan, but reversed its upward trend in subsequent weeks. Early in the quarter, signs of stabilization in other Asian markets diminished the dollar's
perceived "safe-haven" status. Moreover, market
uncertainty regarding potential intervention by the
Japanese monetary authorities in support of the yen
also contributed to the dollar's weakness, with Japanese Vice Finance Minister Sakakibara warning on
numerous occasions that excessive yen weakness was
not desirable. Various comments from Japanese politicians suggesting that significant economic stimulus
measures would be forthcoming also contributed to
uncertainty regarding the direction of the dollar-yen
exchange rate. In an address to the Japanese parliament on January 12, Prime Minister Hashimoto spoke
of the need for a ¥30 trillion plan to support the
banking sector, focusing attention on potential banking reform measures. The yen was further supported
by gains in the Nikkei index, triggered by a government proposal to change land valuation accounting
methods and alter capital requirements of Japanese
banks. These factors contributed to an unwinding of
long dollar positions by market participants, and the
dollar reached a low of ¥123.17 on February 10.
In subsequent weeks, the dollar began to reverse its
downward trend as market participants increasingly
adopted the view that the proposed stimulus measures would not provide a significant boost to the
Japanese economy. Market participants' expectations
for the Japanese economy deteriorated amid continued signs of domestic weakness, as evidenced by
record unemployment, weak private consumption
data, and high inventory levels. The release of the
- IHTK hniaik hnrul \k'kl.
'WK Mar. 27, I'WS
Jan.
Percent
—
18
.
1.6
Jan.
NOTE. Dala are daily.
SOURCE. Bloomberg L.P.
Feb.
1998
Mar.
Treasury and Federal Reserve Foreign Exchange Operations 423
February 20 package did little to alter market sentiment toward Japan's economic prospects, and the
dollar continued to strengthen, rising nearly two yen
on the day of the release to close at ¥127.82. Treasury Secretary Rubin's reiteration that a strong dollar
was in the United States' best interest also contributed to yen weakness. Reports of widening scandals
involving Japanese monetary officials helped lift the
dollar above ¥130 by mid-March. However, further
gains were restrained by expectations that both the
yen and Japanese assets might be supported through
fiscal year-end. Despite the uncertain outlook for the
dollar against the yen in the near term, the options
market suggested more positive dollar sentiment
in the longer term. Twelve-month risk reversals
remained skewed toward dollar calls, reflecting a
higher cost of protection against a sharp appreciation
of the dollar against the yen. Further reflecting market uncertainty over the Japanese economic outlook,
the benchmark Japanese bond yield declined from a
high of 1.82 percent on January 29, to a new low of
1.49 percent on March 25.
A RELATIVELY MUTED PERFORMANCE FOR
I HE DOLLAR AMID A REBOUND IN ASIAN
MARKETS AND A DECLINE IN VOLATILITY
Against the backdrop of steady Group of Three
monetary policies, strengthening bond and equity
markets in the United States and Europe, and declining volatility in key asset prices, several emerging
markets recovered some of the losses posted in previous months. Efforts by international organizations to
stabilize the region also lent support to these markets.
The steps taken by the governments of Korea and
Bciii/hmavk Asian horn! yield spivack over
I'.S. Treasury s L vurilios. 19l->7".<,)4 [99S:OI
Basis poinli
i Indonesia
—
—
n
—
hA
Korea i
Thailand
— 400
— 200
i
i
Oct.
i
Nov.
1997
1
i
Dec.
Jan.
1998
NOTE. Dala are daily.
SOURCE. Bloomberg,
Feb.
L.P.; HSBC Markets. Inc.
Mar.
Asian ;»ul I..iiin AmmcLin equity markets.
Index. Od. 1 =
n
Indonesia
too
100
90
A
\M
¥ ^J
1
Oct.
KoresL
I
1
Nov.
1997
VV
Dec.
1
A/
r
Jan.
80
70
HonK Kon* _
1
Ijfeh.
1998
60
T
1
Mir.
NOIL. Dala are daily
SOURCE. Bloombere L.P.
Thailand to adhere to measures agreed upon with the
International Monetary Fund (IMF) and the arrangements by international creditors to restructure Korean
short-term external debt payments also encouraged a
reallocation of investor funds back into these markets. As local demand for dollars to repay dollardenominated debt subsided, and as international
investor inflows resumed, the currencies of many
Asian countries rebounded, led by a 17.6 percent
appreciation of the Thai baht against the U.S. dollar.
Asian equities responded positively to the return of
capital inflows, with the Korean KOSPI index rising
nearly 53 percent by early March, before retracing
to post a gain on the quarter of 27.8 percent. The
improved sentiment in Asia helped Latin American
and Eastern European equity markets rebound as
well, with Brazilian stocks posting a 17.2 percent
gain during the period. As global equity markets
rebounded, emerging market bond yields fell, with
yield spreads of dollar-denominated Korean and Thai
debt issues over U.S. Treasury securities declining
nearly 200 basis points. Similarly, a decline in risk
premiums in Asia contributed to declines in yield
spreads of Latin American and Eastern European
Brady bonds over U.S. Treasury securities.
800
W - 600
V
In
9.
While sentiment toward most emerging markets
improved, sentiment toward Indonesia remained
cautious, given its government's perceived unwillingness to move ahead with reforms that had previously been agreed upon with the IMF. Yield spreads
of dollar-denominated Indonesian debt issues over
U.S. Treasury securities widened 25 basis points over
the period. However, uncertainty in Indonesia had
a limited effect on regional markets as investors
appeared increasingly willing to differentiate between
countries.
424
Federal Reserve Bulletin • June 1998
government securities held directly or under repurchase agreement. As of March 31, outright holdings
of government securities by U.S. monetary authorities totaled $7.0 billion.
Japanese and German government securities held
under repurchase agreement are arranged either
through transactions executed directly in the market
or through agreements with official institutions. Government securities held under repurchase agreement
by the U.S. monetary authorities totaled $10.7 billion
at the end of the quarter. Foreign currency reserves
are also invested in deposits at the Bank for International Settlements and in facilities at other official
institutions.
•
TREASURY AND FEDERAL RESERVE FOREIGN
EXCHANGE RESER\I:S
The U.S. monetary authorities did not undertake any
intervention operations during this quarter. At the end
of the quarter, the current values of the German mark
and Japanese yen reserve holdings totaled $16.6 billion for the Federal Reserve System and $13.6 billion
for the Exchange Stabilization Fund. The U.S. monetary authorities invest all of their foreign currency
balances in a variety of instruments that yield marketrelated rates of return and have a high degree of
liquidity and credit quality. A significant portion of
these balances is invested in German and Japanese
1.
Foreign
exchange
hokliiiL's of I .S. m o n c l i i r y
Liulhorilie.s
kiscd
on cunviil
exi'luniuc
mlus,
l')lJX:OI
Millions of dollars
Quarterly changes in balances by source
Item
Balance.
Dec. 31.1997
Net purchases
and tales1
Investment
income
Quieney
valuation
adjustments'
96.9
1.8
Impact of
sales3
-317.7
-113.8
Interest accrual
(net) and other
Balance,
Mar. 31. 1«9
FEDERAL RESERVE
Deutsche marks
Japanese yen
Interestreceivuble*4
Other cash flow from investments' .
11486.7
5.473.4
82.9
3.2
izam.%
Total
.0
.0
1U6S.9
5.361.4
-9.9
7.5
,0
.0
73.0
10.7
98.7
-431.5
~ZA
16,711.0
48.3
1.S
-160.8
-165.7
.0
.0
5.703.1
7,860.4
-1.8
12.3
36.7
18.2
M.5
13,618.4
U.S. TltEASUtY
EXCHANGE STABILIZATION FUND
Deutsche marks
Japanese yen
Interest receivables*
Other cash flow from investments1.
Total
5.815.6
8,024.6
.0
.0
38.S
5.9
13,884.6
1. Purchases and sales include foreign currency sales and purchases related lo
official activity, swap drawings and repayments, and warehousing.
2. Calculated using marked-to-markei exchange rales; represents the difference between the sale exchange rate and the most recent revaluation exchange
rate. Realized profits and losses on sales of foreign currencies computed as the
difference between the historic cost-of-acquisition exchange rate and the sale
exchange rate are shown in table 2.
49.8
3. Foreign currency balances are marked to market monthly at month-end
exchange rates.
4. Interest receivables for the ESF are revalued at month-end exchange rales.
Interest receivables for the Federal Reserve System are carried at average cost
of acquisition and are not marked to market until interest is paid.
5. Cash flow differences from payment and collection of funds between
quarters.
Treasury and Federal Reserve Foreign Exchange Operations
1.
Net prolits or losses (-> on I .S. Treasury
anil Federal Reserve foreign e x c h a n g e operations
based on historical cost ol acquisition exchange rates.
425
( ' u r r i ' n c y a r r a n g e m e n t s , M a r c h 3 1 , l<-t L W
Millions of dollars
Amount of
facility
[nsiiluiion
Outstanding.
Mar. 31. 1998
Millions of dollars
Period and Item
Federal
Reserve
US. Treasury
Exchange
Stabilization
Fund
ir&Mdtffof^jnt/fcf awrf tosses on
fnr^fwtmtnrffrTTri" OltO ttaOHUW,
6&3
291J.
-375.3
434.6
38741
S93
Xt
.0
.0
.0
.«
.o
JtQjtfjpQftuttt ctbft'ctuy sales,
£s4c»iI4V t&ftf~misK 31, lyyo
Valuation profits and lasses on
ourstiutdSng assets and liabilities,
Mttr.3l.im
-251.4
17*5
-536.1
263.1
Federal Reserve
Reciprocal Currency
Arrangements
Austrian National Baak
National Bon* of Belgium
Bank of Canada
Nmional Bank of Dennwfc
Baiik of England
BankirfFmnce
Deulschc Bundesbaitk . . .
,
Bsakoritaly.
Baaleori«tBa
Bai& Of Mexico
N«hcrlandf Bank ..
Bank of Norway
Bank of Sweden
Swiw National Bunk
•
•
.,
Bant for International Statements
Dollars against Swiss francs
Dollars against other autiwrized
European currencies . . . . . . . . . . .
"fitful
250
1,000
2,000
250
3,000
2,000
6,000
tt
3.000
5,000
3,000
500
390
300
4,000
600
1,250
32,400
C
U.S. Treajury
EMtaige Stabilization Fund
Currency AirangcnKnts
Deutsche Bundesbank . . . . . . . . . .
Bank of Mexico
1,000
3,000
0
0
426
Industrial Production and Capacity Utilization
for April 1998
Released for publication May 15
Industrial production rose 0.1 percent in April after a
revised 0.3 percent increase in March and declines in
February and January. In manufacturing, production
rose 0.3 percent after two months of declines; manufacturing output was still below its December level.
The output of mines decreased 0.2 percent, and the
output of utilities decreased 1.9 percent. At 127.8 percent of its 1992 average, total industrial production
in April was 3.8 percent higher than it was in
April 1997. The rate of industrial capacity utilization decreased 0.3 percentage point in April, to
81.9 percent.
Industrial production indexes
Ratio scale, 1992= 100
_
Consumer goods
130
V
Durable
Ratio scale, 1992= 100
r—'
_
Intermediate products
130
120
120
Construction supplies
/
^
—
J
^
110
Nondurable
-
110
Business supplies —
100
90
90
1
i
Equipment
150
100
_
i
i
1
i
1
1
1
Materials
150
Business
-
130
130
110
Defense and space
1
1990
1992
Capacity utilization
" ~ \ .
1
1
1994
_
Durable goods
90
-
1998
1990
1 10
Nondurable goods
and energy
1
I
1996
s^
1
1
1
1
1994
1992
Percent of capacity
1
1
—
-
90
1
1996
1998
Percent of capacity
-
85
-
85
-
75
-
75
1984
1986
1988
1990
1992
1994
1996
1998
1984
1986
1988
All series are seasonally adjusted. Latest series, April. Capacity is an index of potential industrial production.
1990
1992
1994
1996
1998
427
Industrial production and capacity utilization, April 1998
Industrial production, index, 1992=100
Percentage change
Category
1998
1998'
Apr. 1997
to
Apr. 1998
r
Apr.!"
Jan.'
Feb.'
Mar.'
Apr.P
.1
3.8
Jan.'
Feb.'
Mar.
Total
127.8
127.4
127.7
127.8
-.1
-.3
.3
Previous estimate
127.7
127.5
127.7
...
-.2
-.2
.2
121.3
116.6
147.3
125.2
138.2
120.6
115.2
146.7
125.9
138.2
121.0
115.5
147.8
125.1
138.5
121.2
115.5
149.2
124.9
138.5
.3
.6
-.9
1.6
-.5
-.6
-1.2
-.4
.6
.0
.3
.2
.8
-.7
.2
.2
.0
1.0
-.1
.0
3.4
1.8
8.2
2.5
4.5
131.1
148.3
113 6
108.4
108.7
130.7
147.8
113.1
107.8
108.5
130.5
148.1
112.4
107.4
115.1
130.8
148.7
112.6
107.2
112,8
.2
-.2
.6
2.6
-4.9
-.4
-.3
-.4
-.5
-.2
-.2
.2
-.6
-.4
6.0
.3
.4
.2
-.2
-1.9
4.3
6.6
1.6
1.6
.3
Major market groups
Products, total2
Consumer goods
Business equipment
Construction supplies
Major industry1 groups
Manufacturing
Durable
Mining
Utilities
MEMO
Capacity utilization, percent
Apr.
Jan.r
Feb.'
Mar.'
Apr.P
Capacity,
percentage
change,
Apr. 1997
to
Apr. 1998
82.9
82.3
82.2
81.9
4.7
82.8
82.3
82.2
82.1
80.3
86.1
91.6
85.4
81.5
79.6
85.6
91.1
85.2
81.0
79.1
85.1
90.7
90.2
80.8
79.1
84.8
90.5
88.4
5.4
6.3
3.4
.6
1.2
1998
1997
Average,
1967-97
Low,
1982
High,
1988-89
82.1
Total
71.1
85.4
82.6
81.1
80.5
82.4
87.5
87.3
69.0
70.4
66.2
80.3
75.9
85.7
84.2
88.9
88.0
92.6
81.6
79.6
86.2
89.5
89.2
Previous estimate
Advanced processing
Primary processing
Utilities
NOTE. Data seasonally adjusted or calculated from seasonally adjusted
monthly data.
I. Change from preceding month.
MARKET
GROUPS
The production of consumer goods remained flat
in April: The output of durable goods rose 0.9 percent, and the output of non-energy nondurable goods
edged up, but these increases were offset by a
] .7 percent decline in the production of energy
goods, most notably in residential sales of electricity and gas. The production increase within
the durable consumer goods category was widespread. The output of automotive products advanced
0.8 percent but remained well below the high at
the end of last year. Home computing equipment,
appliances, and carpeting also posted significant
gains. Within the non-energy nondurable consumer
goods category, the strength in food products was
nearly offset by declines in the production of
cigarettes, clothing, consumer chemicals, and paper
products.
The output of business equipment increased
1.0 percent; a second month of strong gains after
2. Contains components in addition to those shown,
r Revised,
p Preliminary.
having slowed earlier in the year. Although the output of computers accelerated in the first quarter, the
output of most other types of equipment slowed. The
April increase resulted from gains in most groups
other than industrial equipment, in which output
declined 0.7 percent.
The production of construction supplies declined
for a second consecutive month. However, its April
level remained well above its level at the end of
last year. The output of materials stayed unchanged
continuing its sluggish behavior of recent months.
While the production of durable materials edged up
in April, the output of nondurable and energy materials decreased. Among durable goods materials, the
output of parts for consumer goods, which had spiked
up in the fourth quarter, decreased 0.3 percent after a
substantial decline in the first quarter. The output of
equipment parts grew once more at a moderate rate;
semiconductors and parts for computers and electronic communication equipment posted the most
significant gains.
428
Federal Reserve Bulletin • June 1998
INDUSTRY GROUPS
Durable goods production increased 0.4 percent after
having posted a small gain in March and declines
earlier in the year. Increases in lumber, furniture and
fixtures, computer and office equipment, semiconductors, motor vehicles and parts, and instruments were
just partially offset by weakness elsewhere. In particular, the output of primary and fabricated metals
and of aircraft and parts declined once more. Nondurable goods production increased 0.2 percent and
is just 1.6 percent above its level in April 1997.
Continuing weaknesses in the production of tobacco,
textiles, apparel, paper, and chemicals were more
than offset by strength in other industries; the largest
gain came in rubber and plastics products.
The operating rate in manufacturing declined,
to 80.8 percent. The utilization rate in advancedprocessing industries remained flat at a low level,
while the rate for primary-processing industries fell
for the fourth consecutive month. The operating rate
in advanced-processing industries was 1.4 percentage
points below its long-run average, whereas the utilization rate in primary-processing industries was still
significantly above its long-run average.
•
429
Statements to the Congress
Statement by Alan Greenspan, Chairman, Board of
Governors of the Federal Reserve System, before the
National Bipartisan Commission on the Future of
Medicare, April 20, 1998
I am pleased to be here today and encouraged that the
President and the Congress are undertaking a fundamental reassessment of the Medicare program. Since
Medicare was established more than thirty years ago,
it has provided the elderly with access to medical
care. But the growth of Medicare outlays has continued to outstrip the growth of the rest of the federal
budget, and we have been able to avert a full-blown
financing crisis only through a series of marginal
adjustments to the program. As you well know, the
pressures will become increasingly intense as the
baby boomers start to retire around the end of the
next decade.
The challenge of adapting Medicare to meet our
long-run needs is formidable and will require difficult
choices. Delay could be costly. Action now would
give all parties greater opportunity to adjust to a
revamped program and would limit the severity of
the possible dislocations that could result.
You will be hearing from health experts who will
offer detailed information on Medicare options. You
will also be considering how the burden of financing
the elderly's medical care should be split between the
government—and thus funded by taxpayers—and the
elderly themselves. But, at a more fundamental level,
you must address the basic question of how much our
nation is willing to expend for the ever-increasing
capabilities of medicine and, in the process, how we
allocate the economy's scarce resources between
Medicare and our many other competing needs.
These latter issues will be the subject of my remarks
today.
In some ways, health care is like any other good or
service; and, in the absence of regulation, the share
of consumer income going to medical care would
reflect the tradeoff of choices against other consumer
desires. That share will vary from individual to individual depending on their incomes and their need
for medical care. There is no predetermined share of
income that should, in any abstract sense, be devoted
to health care—either for an individual or for an
economy as a whole—and an increasing share, or for
that matter, a decreasing share, in itself need not
indicate a problem.
For most goods or services, prices reflect both the
cost of the resources used to produce that good or
service and the value of that good or service to
consumers. Thus, prices are vital in the allocation
of resources to their highest value uses. That is the
process that maximizes standards of living. Households purchase most products directly from their
income and assets. But some outlays, such as those to
repair or replace a home damaged by fire, are potentially too large and uncertain to easily budget. Under
such circumstances, individuals can gain from pooling their risks through private insurance.
Medical care has increasingly fallen into that category as costs have swelled. Clearly, individuals benefit from having insurance because it relieves them of
concern about the possibility of devastating medical
expenses. But, as is its purpose, insurance reduces
individuals' sensitivity to the total underlying economic cost of care. Because individuals do not pay
the full incremental cost of services covered by insurance, they have less incentive to restrain the use of
medical care and the adoption of technologies that
divert resources from other highly valued nonmedical
goods and services. Indeed, there is a tendency for
the insured to seek any medical service expected to
offer at least some benefit, regardless of its cost in
real resources. It also is probable that this system
supports the development of more new technology
and greater diffusion of existing technology than
would be the case if all medical care were purchased
directly from family resources. Such behavior is a
manifestation of so-called "moral hazard," which is a
characteristic of virtually all insurance markets. Of
course, the private insurance system, reflecting the
supply and demand for medical services, will adjust
prices, that is, premiums, to cover costs.
But as medical costs have risen, they have exerted
pressure on profit margins of businesses and indirectly on real wages of workers. Presumably in
response, we have witnessed considerable innovation
in recent years in private markets for medical insurance in an endeavor to contain inefficiencies and
excess costs. The rapid expansion of managed care,
in its many forms, is the clearest evidence of these
efforts.
430
Federal Reserve Bulletin • June 1998
In the public sector, Medicare was initially designed to supply the elderly with insurance coverage
similar in structure and scope to that enjoyed by the
non-elderly population. Clearly, it remains an exceptionally popular program, but it has not kept pace
with changes in the private health care system.
Unlike the market-driven private insurance system,
cost pressures in Medicare are reflected mainly in the
federal budget. There are no automatic signals such
as those that balance supply and demand for medical
care in the private sector. Hence, in managing Medicare, we must be particularly sensitive to the fact that,
like any product, medical care is produced ultimately
by the work of individuals, and the more human
effort that is expended to provide medical care, the
less effort that is available for making other highly
valued products.
Thus, a key question confronting this commission is whether the current stance of public policy,
lacking a market test, is altering medical demand in a
way that distorts economic choices and lowers overall productivity and standards of living. If Medicare
is to be sustained as a viable program, it is important that this question ultimately be answered in the
negative.
If the answer is ambiguous, or in the affirmative,
the commission may wish to recommend that the
Medicare program be reshaped in a way that would
encourage beneficiaries and medical providers to
make more cost-effective decisions than many do
now. If successful, this approach would reduce the
resources used per unit of health care produced, presumably lower overall health care expenditure growth
from an unsustainable trajectory, and help ensure
continued access to affordable care for Medicare
beneficiaries.
As I noted, the private medical marketplace has
been moving rapidly in this direction in recent years.
The adjustments have not always gone smoothly,
but institutions, acting on behalf of individuals, are
increasingly confronting the tradeoffs between the
consumption of health care and the consumption of
other goods and services. That process may have
received a push in 1989 when the Financial Accounting Standards Board circulated a draft rule to require
companies to record future contingent medical costs
for retirees on their balance sheets and make appropriate charges against current income. That rule was
subsequently adopted and, perhaps by happenstance,
roughly coincided with the onset of a major effort by
American businesses to contain medical costs for all
workers.
In any event, much of the working-age population
now belongs to health plans that actively manage
care in order to hold down costs. In part, this is
accomplished by offering incentives to providers to
practice cost-effective medicine. For example, we are
seeing a closer scrutinizing of services delivered by
highly paid medical specialists, some of whom have
experienced a decline in compensation in recent
years.
It is regrettable, but probably inevitable, that moving from an unconstrained fee-for-service system to a
more cost-effective one is perceived by some patients
as a major reduction in the quality of care. While the
extent is arguable, any shift away from nearly unlimited use of even only marginally beneficial procedures will be seen as a reduction in quality, irrespective of the size of the savings of real resources
devoted to that marginal increment of care. There is
always one more test that will reduce the risk, however infinitesimal, of a misdiagnosis.
Businesses' efforts to rein in payments for health
insurance are also forcing employees to think more
about the tradeoffs between additional companyfinanced medical insurance and higher wages.
These developments have helped stem the uptrend
in the share of gross domestic product going to health
care, which caused so much concern just a few years
ago. Nonetheless, Americans still devote a far higher
share of GDP to medical care than do inhabitants
of any other major industrial country. In the past
few years, medical costs have amounted to about
13'/2 percent of our GDP, compared, for example,
with about 10 percent for Germany and France and
about 7 percent for Japan, Sweden, and the United
Kingdom.
From an accounting perspective, the difference
between the percentage of GDP that we devote to
health care and the percentage in Germany or France
appears to reflect mainly our higher pay for doctors
and other medical practitioners relative to the average wage in the economy and our measured higher
administrative costs. It is difficult to obtain comparable net administrative cost estimates because our
system includes a closer monitoring of costs by private insurers, which presumably reduces other costs.
Among the industrial countries that devote the lower
shares of GDP to health spending, the health share
in the United Kingdom, for example, is further
depressed relative to ours by fewer doctors per capita
and less high tech equipment. Almost certainly, our
system produces the most sophisticated, and perhaps
the highest quality, medical care in the world. But we
have little evidence that, as a result, our population is
any healthier, on average, than those populations that
devote fewer resources to health care, recognizing, of
course, that health outcomes depend on a host of
Statements to the Congress
other influences in addition to the level of medical
expenditures.
Whether the share of our GDP going to medical
care will remain flat over the next few years—or
whether it will start rising again—is uncertain. But it
almost surely will increase as the baby boomers
move into the age brackets in which medical costs
tend to accelerate. Indeed, on average, medical outlays for persons aged sixty-five and older are nearly
four times the size of those for persons aged nineteen
to sixty-four and roughly seven times those for persons younger than age nineteen. Currently, 121/2 percent of the U.S. population is age sixty-five or older.
This share is not much greater than it was twenty
years ago, indicating that aging alone has played a
relatively minor role in explaining the growth in
aggregate health spending over the past two decades.
But by 2030, shortly after the last of the baby
boomers has turned sixty-five, the elderly are
expected to account for about a fifth of the population. A simple calculation suggests that, all else being
equal, the projected change in the age distribution of the population over the next thirty years will
add nearly 20 percent to the level of health care
spending.
Demographics aside, the trajectory of health spending in coming years will depend importantly on the
course of technology, which has been a key driver of
per person health costs. To be sure, technological
innovation improves the quality of medical care, but
its effects on overall costs are not always clear cut.
Technological innovation can decrease the cost of a
given course of treatment and thus has the potential
to reduce overall costs. But it also can expand the
range of treatment options, with the potential of
adding to overall costs. Advances in arthroscopic
surgery, for example, have greatly reduced the cost
and difficulty of repairing many kinds of knee damage, but the new techniques doubtless have contributed to the enormous increase in the number of knee
surgeries that are performed each year.
The future path of medical, indeed all, technology
is exceptionally difficult to forecast. Many effective
new technologies result from synergies of two or
more previously developed technologies. Remarkably, when the laser was invented about forty years
ago, lawyers at Bell Labs reportedly did not rush to
seek patents because they thought it had little bearing
on Bell System interests. In fact, its full potential
could not be realized until the development of fiber
optics, and the synergy of the two is one of the most
powerful and versatile advances in telecommunications technology in the twentieth century. Examples
in medicine abound as well. For instance, organ
431
transplantation was a huge technological advance
whose effectiveness was greatly enhanced by
improvements in immunosuppressant drugs.
Despite the consensus among economists that technology is a driving force behind rising medical costs,
the empirical evidence in this area has been limited.
Fortunately, that situation is beginning to change.
Some recent studies that focus on specific medical
conditions provide useful insights into both the costdecreasing and cost-increasing aspects of technology.
For example, analysts have documented a sizable
saving in the cost of treating cataracts, which thirty
years ago required a long operation and extended
hospital stay but is now routinely done on an outpatient basis.1 In contrast, a separate study exhibited
the potential for technology to raise costs.2 This study
examined the appreciable increase in Medicare outlays to treat heart attacks between 1984 and 1991,
which the authors attributed entirely to the dramatic
expansion of intensive cardiac surgeries.
The new technologies also carried other significant
benefits, contributing both to enormous improvements in the postoperative vision of cataract patients
and to longer life expectancies and higher quality of
life among heart attack survivors. Parenthetically,
this is the same measurement issue that chronically
bedevils economists who try to allocate changes
in dollar outlays on medical procedures between
changes in price and changes in real output. The
problem arises for any good or service for which
changing technology is greatly affecting the characteristics and quality of the output.
Measurement issues aside, the fundamental point
here is that a structure that provides appropriate
incentives for the development and application of
technology is key to a well-functioning health care
system. In this case, an appropriate incentive is one
that encourages technologies whose benefits are at
least equal to their economic costs, while discouraging those that do not meet that standard. It is still too
soon to know how the evolving incentive structure
in private insurance markets will affect the pace of
medical technology.3 However, a recent analysis provides some preliminary evidence that managed care
may be fostering a more efficient use of technology.
If the results continue to be borne out in the market1. Matthew D. Shapiro and David W. Wilcox, "Mistneasurement
in the Consumer Price Index: An Evaluation," Macroeconomics
Annual (National Bureau of Economic Research, 1996).
2. David M. Cutler and Mark McClellan, "The Determinants of
Technological Change in Heart Attack Treatment," Working Paper
5751 (National Bureau of Economic Research, September 1996).
3. David M. Cutler and Louise Sheiner, "Managed Care and the
Growth of Medical Expenditures," Working Paper 6140 (National
Bureau of Economic Research, August 1997).
432
Federal Reserve Bulletin • June 1998
place, we may be seeing the beginning of a significant restraining effect on the growth of health costs
over the long run.
Clearly, the jury is still out on many of the changes
in private health insurance markets, and some may
turn out to be unsuitable for Medicare. But some of
these ideas, especially those that improve efficiency
or foster greater cost-consciousness among users and
providers of health care, are worthy of study. In that
regard, some Medicare beneficiaries, attracted by
the rich benefits packages offered by some health
maintenance organizations and frustrated by high
Medigap premiums, have enrolled in these plans,
and the Balanced Budget Act of 1997 expanded
the range of options available to participants. Nonetheless, Medicare remains largely a fee-for-service
program. Unless its disparities with the private sector
are addressed, political support for Medicare may
well begin to wane, especially if escalating Medicare
costs force tax increases or reductions in other government programs that serve important functions.
Regardless of what changes are eventually put into
place, the nation should be prepared to revisit the
issue of Medicare reform—perhaps many times—as
unanticipated technological changes alter medical
practice and private insurance markets evolve. Other
broad economic and social trends—for example, unforeseen changes in labor market activity among the
elderly—may also make adjustments in the structure
of Medicare desirable.
Perhaps the hardest issue with which you will have
to grapple is the very real possibility that the projected demands by Medicare recipients exceed a realistic estimate of our budgetary capabilities. Medical
rationing is anathema to the American psyche, though
it often appears in subtle forms. We know, for example, that we can never offer all new technologies or
medical procedures immediately to all patients who
would benefit. In practice, new technologies are allocated by physicians who use their own criteria to
choose the recipients. In this case, the system likely
works largely because an innovation that was not
previously available does not seem to be missed
except by the most knowledgeable. That might not be
perceived as fair, but the thought of our political
system attempting to improve the process gives me
great concern.
Medical decisions have always raised difficult ethical considerations. We expend vast resources to prolong life a few weeks or a few months whereas some
other democracies rely more on hospice care and
restrict the use of scarce equipment, especially among
older persons. We practice super high tech medicine
although, as I suggested earlier, it is not clear how
much it raises average life expectancy or reduces
morbidity.
It is difficult to discern a consistent American
standard in these matters. When it comes to medical
care, we seem to hold life as an unequivocal value
with pressures to fend off death by any means,
regardless of the costs in real resources. Yet we
tolerate more than 40,000 motor-vehicle-related
fatalities a year when modest restrictions on car use
could lower the casualty rate. The value of travel
freedom and convenience clearly outweighs life as
an inviolate value. People demonstrate through
their behavior a willingness to risk life for other
values. Indeed, risk is inherent in life and can be
contained but never eliminated. Given the disparity
between the way we deal with risks in health and the
way we deal with risks in other aspects of our lives,
one might expect a more calibrated real cost-benefit
analysis to emerge eventually as health care policy
matures.
Before concluding, I would like to offer a few
points about the experience of the Social Security
Commission of 1982 that may be relevant to your
deliberations. First, I believe that the commission,
which I chaired, succeeded, if that is the word,
because, from the start, it was integrated with the
political system. I kept President Reagan's Chief of
Staff James Baker informed of our deliberations on
an ongoing basis. Robert Ball, the former Social
Security Commissioner and social insurance professional, kept the Speaker informed. Many members of
the Congress also were members of the commission:
Senators Dole, Heinz, and Moynihan and Congressmen Archer, Conable, and Pepper. The interplay
between the deliberations of the commission and
parallel policy discussions in the White House and
the Congress was continuous, ensuring political support for the final product. Had we not done that, the
report would have ended up on the dust-filled shelves
along with the many fruitless commission reports of
the past.
In the end, the large majority of the commissioners, the President, and much of the congressional
leadership signed onto the principal recommendations in the commission's final report. Tactically, we
chose to do something unusual to help ensure that our
recommendations would be implemented. As with all
tightly crafted compromises, pulling one provision
might have caused the whole structure to unravel.
Therefore, Robert Ball and I, the designated presenters of the commission's findings to the Congress,
agreed to defend the report in total. The internal
debates within the commission were behind us, and
we exhibited a unified front to the Congress. In the
Statements to the Congress
433
end, the legislation that passed differed little from the
commission's recommendations.
In conclusion, programs to support a rapidly
expanding aged population threaten budget balance
in the early decades of the next century. Preemptive
action could avoid wrenching disruptions to our federal medical programs and our economy. The longer
we wait, the more difficult the adjustments. Moreover, I have no doubt that the budget discipline of
recent years has been instrumental in lowering longterm interest rates—a key factor in our current economic vitality. Unless this discipline can be sustained, our overall economic performance will be
seriously jeopardized. If this commission can assist
in expediting the seemingly necessary adjustments to
Medicare, the nation will owe you an enormous debt
of gratitude.
Statement by Edward W. Kelley, Jr., Member, Board
of Governors of the Federal Reserve System, before
the Committee on Commerce, Science and Transportation, US. Senate, April 28, 1998
A few economists already are suggesting that Y2Krelated disruptions will induce a deep recession in
the year 2000. That is probably a stretch, but I do not
think that we shall escape unaffected. Some of the
more frightening scenarios are not without a certain
plausibility if this challenge were being ignored. But
it is not being ignored. While it is probable that
preparations may in some instances prove to be
inadequate or ineffective, an enormous amount of
work is being done in anticipation of the rollover of
the millennium. It is impossible today to forecast the
impact of this event, and the range of possibilities
runs from minimal to extremely serious. In that spirit,
let me review with you some of the ways in which
the millennium bug already is influencing the U.S.
economy and discuss some of the possible outcomes
for economic activity early in the next century.
I am pleased to appear before the committee today to
discuss the Year 2000 computer systems issue and
the Federal Reserve's efforts to address it. The stakes
are enormous, nothing less than the preservation of a
safe and sound financial system that can continue to
operate in an orderly manner when the clock rolls
over at midnight on New Year's Eve and the millennium arrives. So much has been written about the
difficulties ascribed to the Year 2000 challenge that
by now almost everyone is familiar with the basic
issue—specifically, that information generated by
computers may be inaccurate or that programs may
be terminated because they cannot process Year 2000
dates. The Federal Reserve System has developed
and is executing a comprehensive plan to ensure its
own Year 2000 readiness, and the bank supervision
function is well along in a cooperative, interagency
effort to promote timely remediation and testing by
the banking industry. This morning I shall first focus
on the potential macroeconomic consequences of the
Year 2000 issue. Then I shall discuss actions being
taken by the Federal Reserve System to address its
internal systems, including Reserve Bank testing with
depository institutions, and its bank supervision
efforts.
THE MACROECONOMIC EFFECTS OF THE
MILLENNIUM BUG
The Year 2000 (Y2K) problem will touch much more
than just our financial system and could temporarily
have adverse effects on the performance of the overall U.S. economy as well as the economies of many,
or all, other nations if it is not corrected. The spectrum of possible outcomes is broad, for the truth of
the matter is that this episode is unique. We have no
previous experiences to give us adequate guideposts.
Corporate business is spending vast amounts of
money to tackle the Y2K problem. To try to get a
handle on the magnitude of these Y2K expenditures,
we have reviewed the most recent 10-K reports filed
with the Securities and Exchange Commission by
approximately 95 percent of the firms in the Fortune
500. These are the largest businesses in our economy,
with revenues of about $5!/2 trillion annually, and are
likely to be on the cutting edge of efforts to deal with
the millennium bug. Before the end of the decade,
these firms report that they expect to spend about
$11 billion in dealing with the Y2K problem. (Of this
total, financial corporations are planning expenditures of $3'/2 billion, while companies in the nonfinancial sector have budgeted funds of around
$7'/2 billion.)
These estimates undoubtably understate the magnitude of the Y2K reprogramming efforts. In culling
through the 10-K reports, we found that many companies reported incurring no additional costs associated
with Y2K remediation efforts. I doubt that such firms
are unaware of the problem. Rather, I suspect that
some firms did not view their Y2K spending as
having a "material" effect on their bottom line, and
some companies probably have funded Y2K programs with monies already budgeted to their informa-
434
Federal Reserve Bulletin • June 1998
tion technology functions. Making an allowance for
all costs—whether explicitly stated or not—and recognizing that these Fortune 500 firms are only part
of the picture, an educated guess of the sunk cost
of Y2K remedial efforts in the U.S. private sector
might be roughly $50 billion. To put this number
into perspective, the Gartner Group has estimated
that Y2K remediation efforts will total $300 billion to
$600 billion on a worldwide basis. The U.S. economy
accounts for about one-fifth of world output, and thus
our estimate seems broadly consistent with the lower
end of their range. Given the experience of our own
Y2K efforts to date, I would expect to see costs rise
further once all these Y2K programs are fully under
way—ultimately pushing costs up within the Gartner
Group range.
Corporate efforts to deal with the Y2K problem are
affecting economic activity in a variety of ways. On
the positive side, an important element in some Y2K
programs is the replacement of aging computer systems with modern, state-of-the-art hardware and software. Such capital expenditures—which I should note
are not included in the $50 billion cost estimate—will
raise the level of productivity in those enterprises,
and, in general, the need to address the Y2K problem
has increased the awareness on the part of senior
executives of the complexity and importance of managing corporate information technology resources.
The increased replacement demand also has contributed to the spectacular growth recently in this country's computer hardware and software industries—a
process that I would expect to continue for a while
longer. But, ultimately, we are largely shifting the
timing of these investment expenditures: Today's
added growth is likely "borrowed" from spending at
some time in the future. And as if analyzing the
dynamics of this situation were not already complicated enough, some firms may "freeze" their systems in the middle of 1999—effectively forgoing the
installation of new hardware and software systems
just before the millennium. This, too, could influence
spending on computer equipment—shifting some of
it from 1999 into 2000.
While Year 2000 remediation efforts may give a
temporary boost to economic activity in some sectors, the net effect probably is negative. I suspect that
the majority of Y2K expenditures should be viewed
as increased outlays for maintenance of existing systems, which are additional costs on businesses. Other
than the very valuable ability to maintain its operations into the year 2000, few quantifiable benefits
accrue to the firm, and overall productivity gains are
reduced by the extra hours devoted to reprogramming
and testing. Conservative estimates suggest that the
net effect of Y2K remediation efforts might shave a
tenth or two a year off the growth of our nation's
overall labor productivity, and a more substantial
effect is possible if some of the larger estimates of
Y2K costs are used in these calculations. The effects
on real gross domestic product are likely to be somewhat smaller than this but could still total a tenth of a
percentage point or so a year over the next two years.
The United States is not alone in working to deal
with the millennium bug. Efforts by our major trading partners also are under way, although in many
cases they probably are not yet at so advanced a stage
as in this country. In Europe, the need to reprogram
computer systems to handle the conversion to the
euro seems to have taken precedence over Y2K
efforts, although there may be efficiencies in dealing
with the two problems at once. The financial difficulties of Japan and other Asian economies certainly
have diverted attention and resources in those countries from the Y2K problem, increasing the risk of a
Y2K shock from one or more of these countries. But,
on the positive side, large multinational corporations
are acutely aware of the Y2K problem, and their
remediation efforts are independent of national
boundaries. There are also anecdotal reports that
many of these companies are extending their influence by demanding that their extensive networks of
smaller suppliers prepare themselves as a condition
of maintaining their business relationship.
Obviously, a great deal of work either is planned or
is under way to deal with the Year 2000 problem. But
what if something slips through the cracks and we
experience the failure of some "mission critical"
systems? How will a computer failure in one industry
affect the ability of other industries to continue to
operate smoothly? The number of possible scenarios
of this type is endless, and today no one can say with
any confidence how severe any Y2K disruptions
could be or how a failure in one sector would influence activity in others.
We have many examples of how economic activity
was affected by disruptions to the physical infrastructure of this country. Although the Y2K problem
clearly is unique, some of these disruptions to our
physical infrastructure may be useful in organizing
our thinking about the consequences of short-lived
interruptions in our information infrastructure. In
early 1996, a major winter storm paralyzed large
portions of the country. Commerce ground to a halt
for up to a week in some areas, but activity bounced
back rapidly once the roads were cleared again.
Although individual firms and households were
adversely affected by these disruptions, in the aggregate the economy quickly recovered most of the
Statements to the Congress
output lost due to the storm. In this instance, the
shock to our physical infrastructure was transitory in
nature, and, critically, the recovery process was under
way before any adverse "feedback" effects were
produced. Last summer's strike by workers at the
United Parcel Service is a second example. UPS is a
major player in the package delivery industry in this
country, and the strike disrupted the shipping patterns
of many businesses. Some sales were lost, but in
many instances alternative shipping services were
found for high-priority packages. Some businesses
were hurt by the strike, but its effect on economic
activity was small in the aggregate. We hope that any
Y2K shock to our information infrastructure would
also be transitory and would share the characteristics
of these shocks to our physical infrastructure.
What can monetary policy do to offset any macroeconomic effects? The truthful answer is "not much."
Just as we were not able to plow the streets in 1996 or
deliver packages in 1997, the central bank will be
unable to reprogram the nation's computers for the
year 2000. The Y2K problem is primarily an issue
affecting the aggregate "supply" side of the economy, whereas the Federal Reserve's monetary policy
works mainly on aggregate "demand." We all understand how creating more money and lowering the
level of short-term interest rates give a boost to
interest-sensitive sectors (such as homebuilding), but
these tools are unlikely to be very effective in generating more Y2K remediation efforts or accelerating
the recovery process if a company experiences some
type of Year 2000 disruption. We will, of course, be
ready if people want to hold more cash on New
Year's Eve 1999, and we will be prepared to lend
to financial institutions through the discount window
under appropriate circumstances or to provide needed
reserves to the banking system. But there is nothing
monetary policy can do to offset the direct effects of
a severe Y2K disruption. As a result, our Year 2000
focus has been in areas in which we can make a
difference: conforming our own systems, overseeing
the preparations of the banking industry, preparing
the payments system, and contingency planning.
Additionally, we are doing all we can to increase
awareness of this problem and to energize preparations both here at home and in other parts of the
world.
BACKGROUND ON FEDERAL RESERVE
YEAR 2000 PREPARATIONS
The Federal Reserve operates several payments applications that process and settle payments and securi
435
ties transactions between depository institutions in
the United States. These systems are critical national
utility services, moving funds much as the national
power grid moves electricity. Fedwire is a largevalue payments mechanism for U.S. dollar interbank
funds transfers and U.S. government securities transfers primarily used by depository institutions and
government agencies. These applications, as well as
the supporting accounting systems and other payment
applications such as the automated clearinghouse
(ACH), run on mainframe computer systems operated by Federal Reserve Automation Services, the
internal organizational unit that processes applications on behalf of the Federal Reserve Banks and
operates the Federal Reserve's national communications network.
The Reserve Banks also operate check processing
systems that provide check services to depository
institutions and the U.S. government. In addition
to centralized applications on the mainframe, the
Reserve Banks operate a range of applications in a
distributed computing environment, supporting business functions such as currency distribution, banking
supervision and regulation, research, public information, and human resources. The scope of the Federal
Reserve's Year 2000 activities includes remediation of all of these processing environments and
the supporting telecommunications network, called
FEDNET. Our Year 2000 preparations also address
our computerized environmental and facilities management systems, such as power, heating and cooling, voice communications, elevators, and vaults.
YEAR 2000 READINESS OE INTERNAL SYSTEMS
The Federal Reserve is giving the Year 2000 its
highest priority, consistent with our goal of maintaining the stability of the nation's financial markets and
payments systems, preserving public confidence, and
supporting reliable government operations. The Federal Reserve completed assessment of its applications
in 1997; our most significant applications have been
renovated; and internal testing is under way using
dedicated Y2K computer systems and datesimulation tools. Changes to mission critical computer programs, as well as system and useracceptance testing, are on schedule to be completed
by year-end 1998. Further, systems supporting the
delivery of critical financial services that interface
with the depository institutions will be Year 2000
ready by this July and a depository institution test
program will be in place at that time. This schedule
will permit approximately eighteen months for cus-
436
Federal Reserve Bulletin • June 1998
tomer testing, to which we are dedicating considerable support resources.
Our Y2K project is being closely coordinated
among the Reserve Banks, the Board of Governors,
numerous vendors and service providers, approximately 13,000 customers, and government agencies.
We are stressing effective, consistent, and timely
communication, both internal and external, to promote awareness and commitment at all levels of our
own organization and the financial services industry,
more generally.
A significant challenge in meeting our Y2K readiness objectives is our reliance on commercial hardware and software products and services. Much of
our information processing and communications
infrastructure, as well as our administrative functions
and other operations, is composed of hardware and
software products from third-party vendors. As a
result, we must coordinate with numerous vendors
and manufacturers to ensure that all of our hardware,
software, and services are Year 2000 ready. In many
cases, compliance requires upgrading, or, in some
cases, replacing, equipment and software. We have a
complete inventory of vendor components used in
our mainframe, telecommunications, and distributed
computing environments, and vendor coordination
and system change are progressing well. We are
particularly sensitive to telecommunications, an
essential infrastructure element in our ability to maintain a satisfactorily high level of financial and business services. We have been working with our financial institutions and our telecommunications servicers
to find ways to facilitate preparations and testing
programs that will ensure Y2K readiness. Nonetheless, this is an area that many financial institutions
regard as needing attention. We strongly support the
Federal Communications Commission's (FCC's) program to draw increased attention to the Y2K issue
and the progress of the telecommunications companies in the United States.
OVERSIGHT OF BANKING INDUSTRY
PREPARATIONS
Ultimately, the boards of directors and senior management of banks and other financial institutions
must shoulder the responsibility for ensuring that the
institutions they manage are able to provide high
quality and continuous services beginning on the first
business day in January of the Year 2000 and beyond.
This critical obligation must be among the very highest of priorities for bank management and boards of
directors. Nevertheless, bank supervisors can provide
guidance, encouragement, and strong incentives to
the banking industry to address this challenge.
Accordingly, the Federal Reserve and the other banking supervisors that make up the Federal Financial
Institutions Examination Council have been working
closely to orchestrate a uniform supervisory approach
to supervising the banking industry's efforts to ensure
its readiness. Detailed information about our supervisory program is attached as an addendum to this
testimony and is readily available on a web site
maintained by the Federal Reserve on behalf of these
agencies.1
PREPARING THE PAYMENTS SYSTEMS
In order to ensure the readiness of the payments
system, the Federal Reserve has prepared a special
central environment for the testing of high-risk dates,
such as the rollover to the Year 2000 and leap year.
Testing will be conducted through a combination of
future-dating our computer systems to verify the
readiness of our infrastructure and testing critical
future dates within interfaces to other institutions.
Internal testing is expected to be completed by July,
and external testing with customers and other counterparties will then commence and continue throughout 1999. Network communications components are
also being tested and certified in a special test lab
environment. We have published a detailed schedule
of testing opportunities for Fedwire, ACH transactions, and other services provided by the Federal
Reserve. Our test environments have been configured
to provide flexible and nearly continuous access by
customers. The Reserve Banks are implementing processes to identify which depositories have tested with
us, so that we may follow up on any laggards.
We are also researching, in conjunction with our
counterparties, the benefits of Y2K testing that would
span the entire business process. As part of this effort,
the Federal Reserve is coordinating with the Clearing
House for Interbank Payment Systems and the Society for Worldwide Interbank Financial Telecommunication to provide a common test day for customers
of all three systems on September 26, 1998. The
New York Clearing House is coordinating an effort
to establish common global test dates among major
funds transfer systems during April and May 1999.
We are also coordinating with the international
community of financial regulators to help mobilize
global preparations more generally. These efforts are
1. The attachment to this statement is available from Publications
Services, Mail Stop 127, Board of Governors of the Federal Reserve
System, Washington, DC 20551, and also on the Board's site on the
World Wide Web (http://www.bog.frb.fed.US).
Statements to the Congress
discussed more fully in the addendum. In particular,
through the auspices of the Bank for International
Settlements, international regulators for banking,
securities, and insurance along with global payments
specialists recently jointly hosted a Year 2000 roundtable, which was attended by more than fifty countries. A joint council was formed that will promote
readiness and serve as a global clearing house on
Year 2000 issues. In the final analysis, however, the
regulatory community recognizes that it cannot solve
the problem for the financial industry. Every financial
institution must complete its own program and thoroughly test its applications with counterparties and
customers if problems are to be avoided.
CONTINGENCY PLANNING
Despite our intensive efforts to prepare our computer
systems, we must also make plans for dealing with
problems that might occur at the Year 2000 rollover.
As you know, the Federal Reserve has been involved
in contingency planning and has dealt with various
types of emergencies for many years. In response to
past disasters, we worked closely with the affected
financial institutions to ensure that adequate supplies
of cash were available to the community and that
backup systems supported our operations without
interruption during the crisis period. These efforts
primarily focused on the orderly resumption of business operations resulting from hardware failures or
processing-site problems. In addition to disruptions
to hardware or processing sites, Y2K contingency
planning must be directed at potential software failures and interdependency problems with financial
and nonfinancial counterparties. Within this context,
business resumption is made more difficult because
we cannot fall back to an earlier version of a software
package because this version itself may not have
been readied for the Year 2000. Y2K disruptions to
utility services or depository institutions can also
directly affect the Federal Reserve's ability to conduct business. So, in order to plan for the continuity
of services, it may be necessary to consider available
alternate ways to provide services if a Year 2000
problem is identified.
The Federal Reserve has formed a task force to
address the contingency readiness of our payments
applications. Although we have no grounds for anticipating that specific failures could occur and we cannot act as an operational backstop for the nation's
financial industry, we view it as our responsibility to
take action to ensure that we are as well positioned as
possible to address major failures should they occur.
437
We are currently focusing on contingency planning
for external Y2K-related disruptions, such as those
affecting utility companies, telecommunications providers, large banks, and difficulties abroad that affect
U.S. markets or institutions. The Federal Reserve has
established higher standards for testing institutions
that serve as the backbone for the transactions that
support domestic and international financial markets
and whose failure could pose a systemic risk to the
payments system.
We recognize that, despite their best efforts, some
depository institutions may experience operating difficulties, either as a result of their own computer
problems or those of their customers, counterparties,
or others. These problems could be manifested in a
number of ways and could involve temporary funding difficulties. The Federal Reserve plans to be
prepared to provide information to depository institutions on the balances in their accounts with us
throughout the day so that they can identify shortfalls
and seek funding in the market. The System will also
be prepared to lend in appropriate circumstances and
with adequate collateral to depository institutions
when market sources of funding are not reasonably
available.
Our preparations for possible liquidity difficulties
extend as well to the foreign bank branches and
agencies in the United States that may be adversely
affected directly by their own computer systems or
through difficulties caused by the linkage and dependence on their parent bank. Such circumstances
would necessitate coordination with the home country supervisor. Moreover, consistent with current policy, foreign central banks will be expected to provide
liquidity support to any of their banking organizations that experience a funding shortfall.
CLOSING REMARKS
To sum up, the macroeconomic effects of Year 2000
preparations are quite complex. As I have discussed,
some industries may benefit in the near term from
increased sales associated with the accelerated pace
of replacement of obsolete computer systems, and
their customers presumably will have more productive systems in place sooner than might otherwise
have been the case. But, in the aggregate, preparing
for the Y2K problem is likely exerting a slight drag
on the U.S. economy. The Y2K problem, in effect,
raises the rate of depreciation of the nation's stock of
plant and equipment. It forces businesses to devote
additional programming resources simply to maintain
the existing flow of services from its computers.
438
Federal Reserve Bulletin • June 1998
As a provider of financial services to the economy,
we are on schedule with our own internal remediation efforts and will shortly begin testing our interfaces with financial institutions. While we have made
significant progress in our Year 2000 preparations,
our challenge now is to ensure that our efforts remain
on schedule and that problems are addressed in a
timely fashion. In particular, we shall be paying
special attention to the testing needs of depository
institutions and the financial industry and are prepared to adjust our support for them as required by
experience.
As a bank supervisor, the Federal Reserve will
continue to address the financial services industry's
preparedness, monitor progress, and target for special
supervisory attention those institutions that are most
in need of assistance. In addition, we shall track the
Y2K progress of external vendors and critical infrastructure suppliers, such as telecommunications and
electrical power utilities.
The problems presented to the world by the potential for computer failures as the millennium arrives
are real and serious. Because these problems are
unique to our experience in many ways, and because
the impact of computer-driven systems has become
so ubiquitous, the event is unlikely to be trouble free.
While we cannot predict with any certainty, there
clearly is the potential for problems to develop, but
these need not be traumatic if we all do our part in
preparation. As the world's largest economy, the
heaviest burden of preparation falls on the United
States. But it is truly a worldwide issue, and, to the
extent that some are not adequately prepared and
experience breakdowns of unforeseeable dimension,
we shall all be affected accordingly. There is much
work to be done. We intend to do our utmost and
hope and trust that others will do likewise.
In this spirit, I want to commend the committee for
inviting this panel to testify together on Y2K issues.
This is the first time that the Board has testified next
to representatives of the Departments of Commerce
and Transportation, and the FCC. This is wholly
appropriate because our success in preparing for the
millennium will ultimately depend very much on one
another's efforts.
Statement by Laurence H. Meyer, Member, Board of
Governors of the Federal Reserve System, before the
Committee on Banking and Financial Services, U.S.
House of Representatives, April 29, 1998
financial services, meet the convenience and needs of
local communities, and allow U.S. financial services
firms to evolve with the needs of the marketplace.
My statement today will discuss how, within the
context of existing law, the Federal Reserve is pursuing these goals and will review the potential economic effects of bank mergers. I will also argue that
the consolidation of the U.S. financial services industry reinforces the need for legislation to modernize
our banking and financial systems.
One of the reasons we are here today is the recent
announcements of several large and interesting mergers. My statement purposely does not include any
substantive discussion of specific mergers and acquisitions that have been proposed recently. Several of
the recently announced proposals will require that a
company obtain the Board's approval under the Bank
Holding Company Act. Each proposal subject to the
Bank Holding Company Act will be thoroughly
reviewed by the Board on a case-by-case basis in
conformance with current law and under the Board's
well-established policies and procedures. It is important to note, however, that the Bank Holding Company Act does not give the Board unfettered discretion in acting on such proposals. Instead, the Bank
Holding Company Act specifies the factors that the
Board must review in these cases, and the Board's
power to approve or deny a proposal is significantly
limited by these factors.
I am pleased to appear before this committee on
behalf of the Federal Reserve Board to discuss issues
related to mergers among U.S. banking organizations
and other financial services firms. The past two
decades have seen a steady and sometimes breathtaking consolidation of our banking system, a process
that will likely continue for quite some time. This
ongoing consolidation is in many ways a natural
response to our rapidly changing banking environment. However, the very large mergers and acquisitions of recent years, and those approved or
announced in the past few weeks, have raised a
number of public policy questions and concerns in
the minds of many observers.
As the committee knows well, this is not the first
time the Board has testified on the subject of bank
mergers. The Board continues to believe that the
primary objectives of public policy in this area should
be to ensure a safe and sound banking system, preserve the benefits of competition for consumers of
NOTE. The attachments to this statement are available from Publications Services, Mail Stop 127, Board of Governors of the Federal
Reserve System, Washington, DC 20551, and on the Board's site on
the World Wide Web (http://www.bog.frb.fed.US).
Statements to the Congress
These factors include the competitive effects of the
proposal, the financial and managerial resources and
future prospects of the companies and banks involved
in the proposal, and the effects of the proposal on the
convenience and needs of the community to be
served, including the performance record of the
depository institutions involved under the Community Reinvestment Act. In addition, the Board may
enforce compliance with the requirements of the
Bank Holding Company Act and must be assured of
access to information needed to enforce compliance.
The Bank Holding Company Act also establishes
nationwide and individual state deposit limits for
interstate bank acquisitions and consolidated home
country supervision standards for foreign banks. In
proposals involving the acquisition of a nonbanking
company, the Board must consider whether performance of the activity by a bank holding company
affiliate can reasonably be expected to produce
benefits to the public, such as greater convenience,
increased competition, or gains in efficiency that outweigh possible adverse effects such as undue concentration of resources, decreased or unfair competition,
conflicts of interests or unsound banking practices.
The Board is not granted authority under the Bank
Holding Company Act to disapprove a proposal that
meets all of these statutory factors. Thus the Board
could not deny a proposal because, for example, the
Board does not like this particular combination of
firms or because it believes that a different combination of companies would be more profitable, efficient,
or desirable. The Board must consider the proposal
that is presented to the Board and whether the particular companies involved in the application before the
Board meet the statutory factors. Similarly, the Board
cannot deny a proposal simply because the companies involved are large unless the effect of the proposal may be to substantially lessen competition in
violation of the standards in the federal antitrust laws
or to contravene one of the other factors in the Bank
Holding Company Act. Later in my statement, I will
discuss the methodology the Board uses in assessing
each of these aspects of a proposed merger. As an
initial matter, I can assure you on behalf of the Board
that none of the applicants or potential applicants has
been given any prior indication of the Board's views
on their proposals or whether their proposals will be
approved or disapproved by the Board.
TRENDS IN MERGERS AND BANKING
STRUCTURE
It is useful to begin a discussion of the public policy
and other implications of bank mergers with a brief
439
description of recent trends in merger activity and
overall U.S. banking structure. The statistical tables
at the end of my statement provide some detail that
may be of interest to the committee.
Bank Mergers
There have been more than 7,000 bank mergers since
1980. The pace accelerated from 190 mergers with
$10.2 billion in acquired assets in 1980, to 649 with
$123.3 billion in acquired assets in 1987. In the
1990s, the pace of both the number and dollar volume of bank mergers has remained high. Through
March of this year, the rapid pace of merger activity
has continued. For example, if only the five largest
mergers or acquisitions approved or announced since
December are completed, a total of more than
$500 billion in banking assets would have been
acquired.
The incidence of "mega-mergers," or mergers
among very large banking organizations, is a truly
remarkable aspect of current bank merger activity.
But it is useful to recall that very large mergers began
to occur with growing frequency after 1980. In 1980,
there were no mergers or acquisitions of commercial
banking organizations in which both parties had more
than $1.0 billion in total assets. The years 1987
through 1996 brought growing numbers of such
acquisitions and, reflecting changes in state and federal laws, an increasing number of these involved
interstate acquisitions by bank holding companies.
The largest mergers in U.S. banking history took
place or were approved during the 1990s—including
Chase-Chemical, Wells Fargo-First Interstate,
NationsBank-Barnett, and First Union-CoreStates.
And while these mergers set size precedents, the
recently proposed mergers of Citicorp and Travelers,
and NationsBank and BankAmerica, if consummated,
would set a new standard for sheer size in U.S.
banking organizations.
National Banking Structure
The high level of merger activity since 1980, along
with a large number of bank failures, is reflected in a
steady decline in the number of U.S. banking organizations from 1980 through 1997. In 1980, there were
more than 12,000 banking organizations, defined as
bank holding companies plus independent banks;
banks numbered nearly 14,500. By 1997, the number
of organizations had fallen to about 7,100 and the
number of banks to just more than 9,000. The number
440
Federal Reserve Bulletin • June 1998
of organizations had declined more than 40 percent
and the number of banks by more than one-third.
The trends I have just described must be placed in
perspective because taken by themselves they hide
some of the key dynamics of the banking industry.
There are some other important characteristics of
U.S. banking. While there were about 1,450 commercial bank failures and more than 7,000 bank acquisitions between 1980 and 1997, some 3,600 new banks
were formed. Similarly, while more than 18,000 bank
branches were closed, the same period saw the opening of nearly 35,000 new branches. Perhaps even
more important, the total number of banking offices
increased sharply from about 53,000 in 1980 to
more than 71,000 in 1997, a 35 percent rise, and the
population per banking office declined. This includes
former thrift offices that were acquired by banking
organizations. Fewer banking organizations clearly
has not meant fewer banking offices serving the
public.
These trends have been accompanied by a substantial increase in the share of total banking assets
controlled by the largest banking organizations. For
example, the proportion of domestic banking assets
accounted for by the 100 largest banking organizations went from just more than one-half in 1980, to
nearly three-quarters in 1997. The increase in nationwide concentration reflects, to a large degree, a
response by the larger banking organizations to the
removal of state and federal restrictions on geographic expansion both within and across states. The
industry is moving from many separate state banking
structures toward a nationwide banking structure that
would have existed already had legal restrictions not
stood in the way. The increased opportunities for
interstate banking are allowing many banking organizations to reach for the twin goals of geographic risk
diversification and new sources of "core" deposits.
As I will discuss shortly, it may well be that the
retail banking industry is moving toward a structure
more like that of some other local market industries
such as clothing and department store retailing. As in
banking, clothing and department store customers
tend to rely on stores located near their home or
workplace. These stores may be entirely local or may
be part of regional or national organizations. Thus, it
should perhaps not be surprising that banks, now
freed of barriers to geographic expansion, are taking
advantage of the opportunity to operate throughout
the country as have firms in other retail industries.
But, it would be a mistake to think that adjustment
to a new statutory environment—and the increased
opportunities for geographic diversification—were
the only reasons for the current volume of bank
merger activity. Each merger is somewhat unique and
likely reflects more than one motivation. For example, a recent study of scale economies in banking
suggests that efficiencies associated with larger size
are likely to be exhausted after about $10 billion to
$25 billion in assets. In addition, some lines of business, such as securities underwriting and market making, require quite large levels of activity to be viable.
Increased competitive pressures caused by rapid
technological change and the resulting blurring of
distinctions between banks and other types of financial firms, lower barriers to entry due to deregulation,
and increased globalization also contribute to merger
activity. Global competition appears to be especially
important for banks that specialize in corporate customers and wholesale services, especially among the
very largest institutions. Today, for example, almost
40 percent of the U.S. domestic commercial and
industrial bank loan market is accounted for by
foreign-owned banks.
More generally, greater competition has forced
inefficient banks to become more efficient, accept
lower profits, close up shop, or—in order to exit a
market in which they cannot survive—merge with
another bank. Other possible motives for mergers
include the simple desire to achieve market power or
the desire by management to build empires and enhance compensation. Some mergers probably occur
as an effort to prevent the acquiring bank from itself
being acquired, or, alternatively, to enhance a bank's
attractiveness to other buyers.
Many of these factors are also motivating mergers
between bank and nonbank financial firms. However,
in these cases, a key causal factor is the ongoing
blurring of distinctions between what were, not very
long ago, quite different financial services. Today,
as the Board has testified on many occasions, it is
increasingly difficult to differentiate between many
products and services offered by commercial banks,
investment banks, and insurance companies. Thus,
we should not find it surprising that firms in each of
these industries should seek partners in the others.
Local Market Banking Structure
Given the Board's statutory responsibility to apply
the antitrust laws so as to ensure competitive banking
markets, it is critical to understand that nationwide
concentration statistics are generally not the appropriate metric for assessing the competitive effects of
mergers. Moreover, the extent to which mergers can
increase national concentration is limited by the provisions in the Riegle-Neal Act of 1994 that amended
Statements to the Congress
the Bank Holding Company Act and established
national (10 percent) and state-by-state (30 percent)
deposit concentration limits for interstate bank acquisitions. States may establish a higher or lower limit,
and initial entry into a state by acquisition is not
subject to the Riegle-Neal statewide 30 percent limit.
Beyond this, the Board has a statutory responsibility to apply the antitrust laws so as to ensure competitive local banking markets. Evidence indicates that
in the vast majority of cases the relevant concern
for competition analysis is competition in local banking markets. While one can identify specific local
markets that have experienced increases in concentration, from 1980 through 1997, in both urban
and rural markets, the average percentage of bank
deposits accounted for by the three largest firms
has remained steady or actually declined slightly,
even as nationwide concentration has increased
substantially. Essentially similar trends are apparent
when local market bank concentration is measured
by the Herfindahl-Hirschman Index (HHI) the
sum of the squares of the market shares. Because
of the importance of local banking markets, I
would like to provide somewhat more detail on
the implications of bank mergers for local market
concentration.
Metropolitan Statistical Areas (MSAs) and nonMSA counties are often used as proxies for urban and
rural banking markets. The average three-firm deposit concentration ratio for urban markets decreased
3 percentage points between 1980 and 1997. Average
concentration in rural counties declined 1.7 percentage points. Similarly, the average bank-depositbased HHI for both urban and rural markets fell
between 1980 and 1997. When thrift deposits are
given a 50 percent weight in these calculations, average HHIs are sharply lower than the bank-only HHIs
in a given year, but the HHIs trend slightly upward
since 1984. On balance, the three-firm concentration ratios and the HHI data strongly suggest
that, despite the fact that there were more than
7,000 bank mergers between 1980 and 1996, local
banking market concentration has remained about
the same.
Why haven't all of these mergers increased average local market concentration? There are a number
of reasons. First, many mergers are between firms
operating primarily in different local banking markets. While these mergers may increase national or
state concentration, they do not tend to increase concentration in local banking markets and thus do not
reduce competition.
Second, as I have already pointed out, there is new
entry into banking markets. In most markets, new
441
banks can be formed fairly easily, and some key
regulatory barriers, such as restrictions on interstate
banking, have been all but eliminated.
Third, the evidence overwhelmingly shows that
banks from outside a market usually do not increase
their market share after entering a new market by
acquisition. Studies indicate that, when a local bank
is acquired by a large out-of-market bank, there is
normally some loss of market share. The new owners
are not able to retain all of the customers of the
acquired bank. Anecdotal evidence suggests that
some other banks in the market mount aggressive
campaigns to lure away customers of the bank being
acquired.
Fourth, it is important to emphasize that small
banks have been, and continue to be, able to retain
their market share and profitability in competition
with larger banks. Our staff has done repeated studies
of small banks; all these studies indicate that small
banks continue to perform as well as, or better than,
their large counterparts, even in the banking markets
dominated by the major banks. This may be due, in
part, to more personalized service. But whatever the
reason, based on this experience, we expect that there
will continue to be a large number of banks remaining in the future.
Despite a continued high level of merger activity,
studies based on historical experience suggest that in
about a decade there may be about 3,000 to 4,000
banking organizations, down from about 7,000 today.
Although the top ten or so banking organizations will
almost certainly account for a larger share of banking
assets than they do today, the basic size distribution
of the industry will probably remain about the same.
That is, there will be a few very large organizations
and an increasing number of smaller organizations as
we move down the size scale. It seems reasonable
to expect that a large number of small, locally oriented banking organizations will remain. Moreover,
size does not appear to be an important determining
factor even for international competition. Only very
recently have U.S. banks begun to appear, once again,
among the world's twenty largest in terms of assets.
Yet those U.S. banks that compete in world markets
are consistently among the most profitable and best
capitalized in the world, as well as being ranked as
the most innovative.
Finally, administration of the antitrust laws has
almost surely played a role in restricting local market
concentration. At a minimum, banking organizations
have been deterred from proposing seriously anticompetitive mergers. And in some cases, to obtain
merger approval, applicants have divested banking
assets and deposits in certain local markets where the
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Federal Reserve Bulletin • June 1998
merger would have otherwise resulted in excessive
concentration.
Overall, then, the picture that emerges is that of
a dynamic U.S. banking structure adjusting to the
removal of long-standing legal restrictions on geographic expansion, technological change, and greatly
increased domestic and international competition.
Even as the number of banking organizations has
declined, the number of banking offices has continued to increase in response to the demands of consumers, and measures of local banking concentration
have remained quite stable. In such an environment,
it is potentially very misleading to make broad generalizations without looking more deeply into what lies
below the surface. In part for the same reasons that
make generalizations difficult, the Federal Reserve
devotes considerable care and substantial resources
to analyzing individual merger applications.
FEDERAL RESERVE METHODOLOGY FOR
ANALYZING PROPOSED BANK MERGERS
This section of my statement discusses in some detail
the Board's policies and procedures for evaluating
proposed bank mergers and acquisitions.
Competitive Criteria Reviewed in Mergers
While competition in the banking industry is, and
likely will remain, robust despite bank merger activity, some individual bank mergers affect individual
local markets. When considering the competitive
effects of a proposed bank acquisition, the Board is
required to apply the competitive standards contained
in the Sherman and Clayton Antitrust Acts.
The Board's analysis of competition begins with
defining the geographic areas that are likely to be
affected by a merger. Evidence suggests that small
businesses and households tend to obtain their financial services in their local area. With this basic local
market orientation of households and small businesses in mind, the staff calculates bank market
shares and a local market index of concentration, the
HHI, which is widely accepted as a sensitive measure
of market concentration. The resulting market share
and both the level and change in the HHI are also key
elements of the Department of Justice merger guidelines. The Board relies on these guidelines as a preliminary screen of proposed mergers. If the resulting
market share and the level and change in the HHI are
within Justice Department guidelines, there is a
presumption that the merger is acceptable on competitive grounds, but if they are not, a more thorough
economic analysis is required. These guidelines are
not applied mechanistically, because there are other
factors that may influence competition. These factors
may vary from case to case and market to market.
Some of these factors are described below.
• Potential competition, or the possibility that
other firms may enter the market, may be regarded as
a significant procompetitive factor.
• Thrift institution deposits are now typically
accorded 50 percent weight in calculating market
shares and HHIs. A higher percentage may be applied
if thrift institutions in the relevant market look very
much like banks, as indicated by the substantial exercise of their transactions account, commercial lending, and consumer lending powers.
• Competition from other depository and nonbank
financial institutions may also be given weight
beyond that already given within the framework of
the merger guidelines. Added weight is appropriate if
such entities are particularly important in providing
substitutes for the basic banking services used by
most households and small businesses.
• If the bank being acquired is not a reasonably
active competitor in a market, its market share might
be given a smaller weight in the analysis of competition than otherwise.
• If the firm to be acquired is located in a declining
market, this may be viewed as mitigating adverse
structural effects.
• Competitive issues may be reduced in importance if the bank to be acquired has failed or is about
to fail. In such a case, it may be desirable to allow
some adverse competitive effects if this means that
banking services will continue to be available to local
customers rather than be severely restricted or perhaps eliminated.
• A very high level of the HHI could raise questions about the competitive effects of a merger even if
the change in the HHI is less than the Justice Department criterion.
• Economies of scale are considered to be a positive factor in appropriate cases unless the economies
could be achieved in a less anticompetitive manner.
• Finally, other factors unique to a market or firm
would be considered if they are relevant to the analysis of competition.
When a merger cannot be justified using any of the
criteria I have just outlined, some applications are
approved only after the applicant proposes divestiture
of offices to remedy competition problems.
Statements to the Congress
Safety and Soundness
Criteria
In acting upon merger applications, the Board is
required to consider financial and managerial
resources and the future prospects of the firm. In
doing so, the Board's goal is to promote and protect
the safety and soundness of the banking system, and
to encourage prudent acquisition behavior. Indeed,
except in very special circumstances, usually involving failing banks, the Board will not approve a
merger or acquisition unless the resulting organization is expected to be strong and viable.
The Board expects that holding company parents
will be a source of strength to their bank subsidiaries.
In doing so, the Board generally requires that the
holding company applicant and its subsidiaries be in
at least satisfactory overall condition, and that any
weaknesses be addressed before Board action on a
proposal. The holding company applicant must be
able to demonstrate the ability to make the proposed
acquisition without unduly diverting financial and
managerial resources from the needs of its existing
subsidiary banks.
These general principles apply regardless of the
size or type of acquisition—banking or nonbanking.
The financial and managerial analysis of an application includes an evaluation of the existing organization, including bank and nonbank subsidiaries, the
parent company, and the consolidated organization,
as well as an evaluation of the entity to be acquired.
Also included in this analysis are the financial and
accounting effects of the transaction, that is, the purchase price, the funding and sources thereof, and any
purchase accounting adjustments. Numerous factors
are analyzed for strengths and weaknesses, including
earnings, asset quality, cash flow, capital, risk management, internal controls, and compliance with law
and regulation.
Community Reinvestment Act Criteria
The Community Reinvestment Act (CRA) requires
that supervisory agencies assess each insured depository institution's record of safely and soundly meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. The
CRA performance of banking organizations that seek
the Board's approval to acquire a bank or thrift is an
important part of the "convenience and needs" criteria that must be considered by the Board.
In making its judgment, the Board pays particular
attention to CRA examination findings. In recent
years, these examinations have focused more on hard
measures of performance, rather than just efforts, and
443
they provide a key source of information about the
institution's record. The law now requires that these
examinations reflect a state-by-state and MSA-byMSA evaluation, and this will be particularly helpful
in judging the performance of large organizations. In
addition, the public may comment during the processing of the application, and this is often an important
additional source of insight. Besides analyzing these
comments, our staff prepares extensive documentation concerning the institutions involved, including
analysis of projected branch closings, the record of
service as reflected in Home Mortgage Disclosure
Act data, and other material.
The Board expects that banking organizations that
apply for mergers and acquisitions will have policies
and procedures that are working well to address their
CRA responsibilities. This is commonly understood
by prospective applicants, and large organizations
have typically committed substantial resources
toward building an acceptable record. Nevertheless,
we scrutinize all the data available to us very carefully, as reflected in the Board's orders, which often
focus in large part on CRA and related matters. In
short, ensuring that CRA records are consistent with
approval is a very significant part of the Board's
consideration of these cases.
THE SUPERVISION OF LARGE, COMPLEX
BANKING ORGANIZATIONS
It is clear that mergers of very large financial institutions and future, unknown combinations of large U.S.
banking and financial institutions raise questions
about how such giant organizations can or will be
supervised. To be sure, supervising large or diversified institutions presents challenges to the Federal
Reserve in its oversight of bank holding companies.
More coordination, for instance, has been and will
be needed throughout the Federal Reserve System
to ensure that such diverse, nationwide institutions
receive effective and efficient oversight. In some
cases, we must also do more to coordinate with other
supervisory authorities, both banking and nonbanking, domestically and abroad. These challenges are
not unexpected and, indeed, were recognized with the
advent of full interstate banking and the continued
trend of consolidation within the U.S. and international banking systems. We have, for example, had in
place for some time formal efforts to coordinate state
and federal supervisory activities to provide more
effective oversight of state-chartered banks with
interstate activities and to do so with minimum burden to the supervised institutions.
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Federal Reserve Bulletin • June 1998
The emergence of very large, nationwide and multiproduct financial firms also requires that we review
and revise our staffing requirements to ensure that
personnel are properly located and sufficiently
trained. Developing and maintaining sufficient numbers of examiners and supervisory personnel with
expertise in understanding and evaluating derivatives, trading, and other capital market activities, for
example, has been and remains a challenge. These
activities can be complex and are becoming ever
more important elements of large U.S. banking organizations. Individuals familiar with them are in wide
demand.
To the extent possible, the Federal Reserve will
continue to rely on the supervisory and regulatory
activities of other agencies, as we do now with the
evolving, yet more traditionally structured, bank
holding companies of today. But the rapidly changing
nature of the U.S. banking and financial system
requires that administrative and managerial considerations receive prompt and perhaps heightened attention. The Board believes that both the existing supervisory structure and the provisions of H.R. 10 would
accommodate an adequate supervisory and regulatory process in the environment that is taking shape.
As this committee knows, the supervisory practices
of the Federal Reserve, and of the other U.S. banking
agencies as well, have evolved in recent years toward
a "risk focused" approach: one that emphasizes
the importance of an institution's risk-management
policies and procedures, its risk-measurement and
information systems, and its internal controls. While
reviewing asset quality clearly remains important,
less emphasis than before is placed on the current
condition of an institution's balance sheet, particularly in the case of large, internationally active organizations. It places increased reliance and supervisory
focus on the role of senior management and boards of
directors—that is, on the adequacy of corporate governance and the management and control process.
Indeed, that is properly where the primary responsibility and focus must reside. Moreover, for many of
the new instruments, such as derivatives, we have
increasingly relied on market discipline and disclosure and have been impressed with their effectiveness. This approach has become necessary, we
believe, in response to technological and financial
innovations and to the growing complexity, transaction volume, and increased pace in world financial
markets today.
As the Federal Reserve has found in revamping its
own supervisory policies and practices, many of the
fundamental principles of sound risk management
that apply to traditional activities of banks also apply
to those of securities firms and to the activities of
many other financial and nonfinancial firms. Joint
statements on sound practices issued in recent years
by the Basle Committee on Bank Supervision and the
International Organization of Securities Commissions help to underscore that point. Similarly, many
of the oversight and capital adequacy concerns of the
Federal Reserve and other bank regulators are shared
by regulators of other financial institutions. Through
efforts of the Joint Forum on Financial Conglomerates, which includes regulators for banking, securities, and insurance industries worldwide, we are
working to develop frameworks for adequate supervision and regulation of complex internationally
active financial institutions. By emphasizing critical
aspects of risk management through our supervisory
process and working with other agencies as well, the
Federal Reserve is, and can remain, sufficiently positioned, we believe, to provide continued "umbrella"
oversight to the consolidated activities of banking
organizations.
Importantly, H.R. 10 recognizes the need for consolidated supervision in effectively supervising financial conglomerates. H.R. 10 also recognizes the effectiveness of the holding company framework in
helping to insulate depository institutions and the
federal safety net from the risks of new activities, and
that the holding company framework better accommodates effective functional regulation of activities
that are already heavily regulated.
H.R. 10 preserves the Board's authority, as the
consolidated supervisor, to obtain information from
and to examine financial holding companies and their
subsidiaries, and to establish capital standards on
financial holding companies as appropriate. The bill
also retains the Board's authority to take administrative actions to preserve the safety and soundness of
depository institutions in a financial conglomerate
and to enforce compliance with the Bank Holding
Company Act.
H.R. 10 does place some limitations on the Board's
current authority under the Bank Holding Company
Act. These changes, often grouped under the term
"Fed -light," are primarily in two areas. The first
changes recognize that insurance companies and
securities brokers and dealers are already extensively
regulated. Accordingly, H.R. 10 includes sensible
provisions that enhance functional regulation, require
the Board to use examination reports of other functional regulators, improve coordination and information sharing among supervisors, and resolve potential
conflicts between regulatory schemes. The bill would
retain the Board's authority to take administrative
actions, including examining a functionally regulated
Statements to the Congress
affiliate, where the Board has reasonable cause to
believe that an affiliate is engaged in activities that
pose a material risk to an affiliated depository institution. These provisions in H.R. 10, we believe,
strengthen the overall supervisory framework of the
new financial services companies permitted under
H.R. 10.
H.R. 10 also reduces somewhat the Board's authority in supervising companies that own only uninsured
wholesale financial institutions. These provisions are
based on the premise that reduced supervision of the
holding company is appropriate when none of the
depository institution subsidiaries of the holding
company are federally insured. Importantly, the
Board's supervisory authority is only adjusted and is
not eliminated over this type of holding company,
and the Board has full authority to examine and
supervise the wholesale financial institution itself in
the same manner as any other bank with access to the
Board's discount window and payment system.
There are other important provisions of H.R. 10
that affect supervision. For example, H.R. 10
expressly grants the Board authority to establish prudential controls on transactions and relationships
between a depository institution and any affiliate
(other than a subsidiary of a depository institution) in
which the prudential control may be in the public
interest to avoid significant risk to the depository
institution, to enhance financial stability, to enhance
customer privacy, to avoid conflicts of interest, or
to promote national treatment among foreign and
domestic institutions. The Board believes that this is
a key provision that would enhance the separation
afforded by the holding company structure and better
limit the expansion of the federal safety net to new
nonbank affiliates.
It is the strong belief that the benefits of the federal
safety net and the obligation of the taxpayer should
not be extended to new activities that motivates the
Board to oppose expanding the new affiliation authority to subsidiaries of depository institutions. Problems experienced at an affiliate of a depository institution are more readily addressed by prudential
controls than problems that arise at a subsidiary of
the depository institution.
A holding company subsidiary is not part of a
depository institution. A subsidiary of a depository
institution, on the other hand, has always been considered to be a department of the bank and, more
important, under generally accepted accounting principles (GAAP) is consolidated into the financial statements of the parent depository institution. This may
seem like a technical point, but it is a very significant
difference. No matter what accounting regime may
445
be included in H.R. 10, generally accepted accounting principles will govern all public reports of depository institutions that seek funding in the market.
Under GAAP, the financial statements and the capital
of a parent depository institution must fully reflect
the financial condition, capital and losses of its
subsidiaries.
Prudential controls, even if supplemented by capital deductions for purposes of regulatory reporting
requirements, are not sufficient to limit the impact of
losses at a subsidiary because the capital of the
depository institution parent is directly exposed to,
and must reflect, the losses experienced by its subsidiaries. Thus, losses experienced by a subsidiary
directly jeopardize the financial condition of the parent depository institution.
Moreover, subsidiaries of depository institutions
directly benefit from and place at risk the federal
deposit insurance funds and the guarantee of the
taxpayer. The Board believes that it would be a
mistake to consider that a subsidiary of a depository
institution can be effectively insulated from its parent
depository institution in the same way that an affiliate
can be separated from the depository institution. For
these reasons, the Board strongly opposes provisions
that would broaden the authority of subsidiaries of
depository institutions.
Aside from the issue that bank operating subsidiaries raise with respect to expansion of the nation's
sovereign credit, and on which the Board feels
strongly, an issue is emerging with respect to our
ability to supervise the complex institutions that
would arise if the current trend in bank mergers and
acquisitions continues and if the operating subsidiary
authority is expanded. In particular, if in the future
the central bank did not have the understanding and
adequate supervisory authority to engage giant financial institutions during a systemic crisis, the Federal
Reserve would be seriously impaired in its ability to
meet its statutory responsibility to maintain the stability of the financial system. Put differently, while the
economic desirability and efficiency of large financial
institutions is primarily up to their shareholders and
customers, the effect of such institutions on systemic
stability is very much a public policy concern. And
when it comes to controlling systemic risk, the central bank must be able to play a substantive role.
More generally, a critical question raised by the
creation of very large and diverse banking organizations relates to the potential effect of future banking
problems on systemic risk and the federal safety net.
Research supports the view that more geographically
diversified firms exhibit, other things equal, less risk.
Geographically diversified firms are less dependent
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Federal Reserve Bulletin • June 1998
upon the economic fortunes of any one locality,
region, industry, or group of industries. In addition,
such firms are not dependent upon a limited area for
their core deposits, thereby helping to ensure a more
stable source of funds. But the issue of systemic risk
clearly highlights the importance of developing and
maintaining adequate laws, regulations, and supervisory structures that are sufficiently compatible with
the banking and financial system we have. It seems
important to emphasize, at this point, that "bailouts"
and concepts of "too big to fail" can be easily
misunderstood and misconstrued.
The point, it seems, relates to one's view of bank
failures and bailouts. Whom should the safety net
protect? Certainly not shareholders or responsible
directors or senior managements. These individuals
should clearly lose their investments or jobs when
banks fail. And, over time, pieces of any organization, no matter how large, can be sold and the total
firm reduced in size. The public policy objectives are
to protect the financial system and insured depositors,
and to resolve banking problems in an orderly way.
Moreover, with passage of the Federal Deposit Insurance Corporation Improvement Act of 1991, the Federal Reserve and the FDIC are strictly limited in their
abilities to provide liquidity or financial assistance to
weak banks and potential acquirers, no matter what
their size. By enacting this legislation, the Congress
made clear its intent to ensure that discount window
lending extends only to solvent institutions or to
weak banks only for relatively short periods of time.
For its part, the FDIC must resolve bank failures
using the "least cost" approach. And the circumstances under which the least cost approach can be
relaxed are rather severe. In sum, we believe the
structure currently in place in the United States to
address weak or failing banking institutions provides
an adequate balance of discipline and flexibility to
resolve future problems.
by locally owned institutions. The prospect of loss of
these local ties is troubling to many. Moreover, this is
occurring at the same time as banks are unbundling
and explicitly pricing individual services that were
not previously priced separately. The combination
of new fees and the specter of more impersonal
service has, quite understandably, raised widespread
concerns.
We do not wish to minimize these concerns. However, there are two reasons to hope the impact will be
modest: (1) many mergers have not been between
banks operating primarily in the same local banking
markets and (2) the effects of intramarket mergers
can be, and thus far have been, limited by both
market forces and antitrust constraints on such mergers. As a consequence, customers should still enjoy
the benefits of competition.
Competition
Even in those places in which in-market mergers
have occurred, evidence to date suggests that the
effect on competition has on average not been substantial. This, of course, does not mean that users of
bank services will never be harmed by mergers. No
policy can guarantee that result. But the trends in
local market concentration I discussed earlier indicate that market forces and the Board's application of
antitrust standards to within-market merger applications generally have preserved competition. In addition, the Board's policies have almost certainly discouraged some potential bank mergers before an
application was ever filed. Moreover, many urban
markets could see a relatively large number of
in-market mergers before antitrust guidelines would
be violated.
Branch Closings
POTENTIAL IMPLICATIONS OF BANK MERGERS
The rapid rate of bank mergers has raised a number
of questions regarding the potential effects of
banking consolidation on those consumers whose
demands for banking services are primarily local in
nature and on the performance of the merged banks.
Effects of Mergers on Locally Limited
Customers
Historically, banking in the United States has had a
distinctly local flavor with many communities served
In-market bank mergers often lead to some branch
closings, raising concerns that consumer convenience
may be harmed. Indeed, the possibility of branch
closings is often one of the more controversial
aspects of a proposed merger. Branch closings and
their impact on the convenience and needs of the
local community are, of course, one of the key factors
reviewed in a bank's CRA examination, and thus are
carefully considered by the Board in our evaluation
of a proposed merger. In particular, we review very
carefully the impact on low- and moderate-income
communities. In addition, Board staff have recently
been examining the effect of bank mergers on office
Statements to the Congress
447
closings more generally, and I would like to summarize some of the key preliminary findings.
Board staff investigated relationships between bank
mergers and changes in the number of banking
offices, looking separately at rural and urban markets.
This research indicates that mergers between institutions operating in the same local market have tended
to be associated with reductions in the number of
banking offices in neighborhoods served by the
bank being acquired. The strongest relationships are
observed in neighborhoods in which the merging
institutions both had offices. However, these effects
were partially offset by office openings by competitors, either de novo or through the acquisition of
divested offices of the merged firms. Moreover, looking at the nationwide data, the observed relationships
between mergers and office closings do not appear
to be systematically different between low- and
moderate-income areas and other localities.
These results suggest that the issue of office closings is more complex than is frequently portrayed.
Offices in markets served by both of the merging
firms tend to be reduced, perhaps in an effort by the
merged firms to achieve operational efficiencies.
Low- and moderate-income neighborhoods do not
appear to be disproportionately affected by such closings. Importantly, new entrants tend to partially offset
the merger-induced reduction in banking offices, suggesting that, as new profit opportunities arise, other
firms will come in. Moreover, the exploitation of
such opportunities is much easier today than even
two years ago before the full implementation of interstate banking. Put differently, if consumers demand
locational convenience, banks of all sizes will need
to, and are now able to, respond if they expect to
remain viable competitors for retail customers.
way. For example, a study that examined the reactions of other banks in markets in which mergers
occurred found that increases in the supply of small
business lending by these other banks tend to offset
much, if not all, of any initial negative effects of
mergers on small business lending. Indeed, when
mergers of large banks are announced, it is quite
common to read press reports of other in-market
banks' expectations of taking business away from the
newly formed entity.
New profit opportunities in small business lending
may also encourage the creation of other new banks.
In fact, it is not uncommon for some of the loan
officers of an acquired bank to leave and form their
own bank. Further studies suggest that new banks,
regardless of why they were formed, tend to lend
larger portions of their assets to small businesses than
do even other small banks of comparable size.
Over the long term, at least two factors are likely to
improve the prospects for small business finance.
First, rapid technological changes applied to the process of loan evaluation will, in all probability, continue to lower the cost of assessing the creditworthiness of small businesses. Indeed, we see this process
at work today in the increasing use of credit scoring
techniques in evaluating the extension of relatively
small loans to small businesses. Significantly, credit
scoring technology has the potential to allow banks
located outside local markets to compete against
within-market institutions for small business lending.
A second important factor is the role of nonbank
lenders in small business finance. Such lenders have
traditionally played an important role in small business finance, and in the future, such firms are likely
to be an increasingly important source of funds for
small businesses.
Small Business Lending
Community Lending
An often-expressed concern with bank mergers, and
especially with mergers involving very large banks,
is that small business lending will be impaired. This
concern springs in part from some research that indicates that, on average, large banks devote relatively
modest portions of their portfolios to small business
loans and that consolidations involving large banking
organizations tend to result in reduced small business
lending.
Such results, however, likely provide a misleading
picture of the effects of mergers on small business
lending. A deeper evaluation suggests that it is far
from clear that small business lending is, on net and
after a transition period, harmed in any significant
As yet, there are no studies of the effects of mergers
on community lending comparable to the studies
done for small business lending. However, I suspect
that mergers—large or small—do not have negative
effects on community lending. Given prior commitments often made by acquirers, mergers may even
have a positive effect, and the merger application
process provides an opportunity for discussion of
community needs. In addition, if there are profitable
opportunities—as I believe there are in community
lending—it seems reasonable to expect that those
same market forces that provide for small business
loans (and new bank offices) would also operate in
the market for community lending after mergers.
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Federal Reserve Bulletin • June 1998
Moreover, large institutions have the experience,
expertise, and resources that enable them to be quite
active and innovative in the community development
process. Larger institutions are often at the forefront
of efforts to develop affordable home mortgage
programs and small business and microenterprise
financing programs, and they provide considerable
resources to support both local and national nonprofit
intermediaries that focus on lower income areas. In
addition, the core of a bank's CRA evaluation is the
adequacy of its community-based lending programs,
the record of which is reviewed frequently and especially whenever a bank is involved in a merger.
Bank Fees
The level and variety of bank fees is another concern
frequently voiced over bank mergers. We are not
aware of any studies that have looked specifically at
the effects of mergers on the level of fees that banks
charge their customers. A few findings, however,
have some relevance to the question of how mergers
might affect fees. There is evidence that larger banks
charge higher fees than smaller banks, but a study
that investigated this issue in more detail found that
this differential appeared to be due to the disproportionate presence of larger banks in large urban areas,
in which costs tend to be higher. There is substantial
evidence that banks that are part of multistate organizations tend to charge higher fees in general than
do banks that are not, and this difference cannot be
explained by locational factors.
Effects of Mergers on Bank Performance
Federal Reserve System staff and others have conducted numerous studies over many years on the
effects of bank mergers and acquisitions on bank
performance. Some of these studies have focused on
the effect of mergers on bank profits and prices, while
others have looked at the potential for cost savings
and efficiencies derived from mergers.
Of those studies concerned with profits and prices,
some have examined the effects of mergers directly,
although most studies have approached this issue
more indirectly by considering how bank profits and
prices differ across banking markets. Each type of
study is relevant to an assessment of the impact of
bank mergers on performance.
Studies of differences in bank profitability across
markets with varying degrees of concentration represent the oldest type of study relevant to the issue.
Typically, such studies have found that banks operating in more concentrated markets exhibit somewhat
higher profits than do banks in less concentrated
markets. These higher profits may reflect the lesser
degree of competition in more concentrated markets.
Other studies have looked across banking markets
for differences in the prices that banks charge or pay
their loan and deposit customers. For the most part,
such studies have found that banks located in relatively concentrated markets tend to charge higher
rates for certain types of loans, particularly small
business loans, and tend to offer lower interest rates
on certain types of deposits, particularly transactions
accounts, than do banks in less concentrated markets.
In general, these studies support the need to maintain
antitrust constraints if locally limited bank customers
are to continue to receive competitively priced banking services.
A related issue is whether mergers lead to greater
bank efficiency and thus a healthier, more competitive banking firm. Studies that are relevant to the
effect of mergers on bank efficiency may be divided
into those that do and those that do not look directly
at the effects of mergers.
A large number of studies have sought to determine whether larger banking organizations exhibit
lower average costs than do small organizations.
Although most earlier studies found weak evidence
of scale economies, recent research using data from
the 1990s finds that cost advantages of large firms
exist for banks up to about $10 billion to $25 billion
in assets. In one study, significant scale economies
existed within each of several size classes of banks,
from less than $50 million in assets to more than
$10 billion. Thus, simply by achieving larger size,
many bank mergers may have the potential to yield
greater efficiency.
In addition to scale economies, there is some evidence that, after mergers, banks may reallocate their
internal resources to more profitable activities than
smaller banks. As I indicated earlier, there is also
some evidence that geographic diversification by
banks is associated with a reduced level of risk, and
thus there is the potential for improved safety and
soundness.
Another strand of research has attempted to discover whether there are important differences in the
efficiency with which banks use inputs to produce a
given level of services. These studies, which essentially focus on the efficiency effects of management
skills, suggest that some banks, both large and small,
are just a lot better than others at using their inputs,
such as labor and capital, in a productive way. In
addition, they suggest the potential for substantial
Statements to the Congress
efficiency gains from mergers if management would
move toward best industry practices, although this
could presumably be achieved without a merger.
In the past several years, numerous researchers
have sought to determine whether past mergers have
resulted in cost savings. If so, this could be good for
bank customers as well. Many such studies examine
expenses before and after the merger and, in some
cases, compare them to the same changes observed
concurrently in banks that did not participate in mergers. Other research has examined how the stock market reacted to merger announcements. Most of these
studies have not found evidence of efficiency gains
from mergers. Evidence on the relative efficiency
of acquiring and acquired firms is mixed. Let me
emphasize that most of these studies are based on
many mergers and thus provide the basis for statistically valid generalizations.
A fairly recent set of case studies by Board staff
examined nine bank mergers that were selected for
study because they were of the type that seemed most
likely to yield efficiency gains. These involved large
banks generally with substantial market overlap, and
most occurred during the early 1990s, a time when
efficiency was receiving a lot of attention in banking.
The studies found clear evidence of efficiency gains
in only four of the nine mergers but significant cost
cutting in all nine. Finally, on the issue of efficiency,
in the evolving world of high technology and global
markets for corporate banking, there is greater
emphasis on efficiency in order to survive. This
factor has probably played a role in the efficiency
gains realized in some of the individual recent large
mergers.
THE AFFILIATION OF BANKS AND NONBANKS
AND THE NEED FOR LEGISLATIVE REFORM
The Bank Holding Company Act also applies to the
acquisition of nonbanking companies by bank holding companies. These provisions have been the focus
of much speculation in recent weeks, so I think it is
important to take a moment to discuss what these
provisions say. As an initial matter, the Bank Holding
Company Act contemplates that companies that are
not now bank holding companies and that have made
investments that are not permissible for bank holding
companies will decide to acquire a bank and thereby
become a bank holding company. To address this
situation, the Bank Holding Company Act specifically provides that a company may retain, for a
period of two years, any investment that the company
has on the day before it becomes a bank holding
449
company. The Bank Holding Company Act states
that the Board may extend this two-year period for up
to three one-year periods if, at the time of each
extension, the Board finds that an extension "would
not be detrimental to the public interest."
This provision was more commonly relied on in
the past, when larger numbers of companies were
registering as bank holding companies subsequent to
passage of the 1970 amendments to the Bank Holding Company Act. Nonetheless, it is still the law
today.
Nonbanking provisions of the Bank Holding
Company Act highlight one of the key reasons
why H.R. 10 is important legislation. As recently
announced proposals are demonstrating, the marketplace believes that consumers and shareholders
would benefit from the combination of firms that
provide financial services beyond those permitted
under the current Bank Holding Company Act.
Indeed, the Board has long supported legislative
change that would allow all types of financial service
providers to exist under one roof within the holding
company framework.
To be sure, current law permits a wide range of
mergers among financial service providers. The combining of securities and brokerage firms with banks is
a prime example. In this regard, it is noteworthy that
since early last year bank holding companies have
either purchased or announced their intention to purchase at least twenty-four securities firms.
The fact remains, however, that current law does
not permit the combination of all types of financial
services providers, and even those deals that have
already been announced cannot reach their full potential without legislation that broadens the ability of
depository institutions to affiliate with insurance companies, securities firms, and other financial services
suppliers. Thus, the Board remains a strong supporter
of financial modernization legislation and urges the
Congress to pass H.R. 10.
H.R. 10 effectively addresses the need for financial
modernization by allowing the affiliation of depository institutions, insurance companies, securities
firms, and other financial services providers. Critically, H.R. 10 allows broader affiliations within a
framework that provides the best insulation of
insured depository institutions from the risks of
broader affiliations, restrains the expansion of the
federal safety net to these new affiliates, and assures a
level playing field for companies affiliated with
depository institutions and companies that are independent of depository institutions.
As I discussed at some length earlier in my statement, H.R. 10 also includes key measures that pro-
450
Federal Reserve Bulletin • June 1998
vide for meaningful but controlled umbrella supervision of financial holding companies and that
preserve and enhance the functional regulation of
insurance companies, securities firms, depository
institutions, and other regulated companies within
the financial holding company. In addition, H.R. 10
includes provisions designed to enhance consumer
protection and to improve disclosure of the distinction between insured deposits and uninsured investment products.
H.R. 10 provides effective limits on the mixing of
banking and commerce, all of which should be
retained. Indeed, we would prefer smaller limits for
now. The mixing of commerce and banking has the
potential of spreading the federal safety net subsidy
over a wide range of activities, and of undermining
the safety and soundness of insured banks. With the
prospect of financial services holding companies with
greater than $1 trillion in assets on the horizon, the
Board continues to urge caution in addressing the
removal of the current legal barriers between commerce and banking. Restricting large financial conglomerates to generating only 5 percent of their revenues from nonfinancial businesses would still allow
such conglomerates the possibility to purchase any
one of all but the top 250 nonfinancial companies
from the current universe of nonfinancial firms. A
large financial conglomerate could own literally hundreds of nonfinancial entities without hitting the percentage restrictions incorporated in H.R. 10 because
such restrictions are simply not very meaningful in a
world of giant financial institutions. Thus, it is critical
that H.R. 10 retain its ongoing $500 million cap on
the dollar amount of revenues that can be generated
by nonfinancial businesses. The Board strongly
believes that now is not the time to modify such a
fundamental structural rule as the separation of banking and commerce. There will be ample opportunity
to revisit this issue in the future once the market has
adjusted to financial modernization legislation and
there has been some assessment of its value.
CONCLUSION
The recent wave of large bank mergers and merger
announcements reflects to a large degree a natural
response to new opportunities for geographic expansion and diversification as legal restrictions are
removed. The industry is moving away from a legally
fragmented banking structure toward a nationwide
banking structure. The search for cost economies,
pressures brought by increased domestic and international competition, and efforts to respond to the ongo
ing blurring of distinctions between different types of
financial services are other important motivating factors for the current merger movement.
The increased pace of bank mergers since the early
1980s has greatly reduced the number of U.S. banking organizations and resulted in a substantially
higher nationwide concentration of banking assets.
However, concentration in local banking markets,
which is normally considered most important for the
analysis of possible competitive effects, has remained
virtually unchanged. In addition, there continues to
be substantial new bank entry. In short, the U.S.
banking structure is highly dynamic, and sweeping
generalizations are extremely difficult to make.
The dynamic nature of U.S. banking means that
analysis of the potential competitive, safety and
soundness, convenience and needs, and CRA effects
of individual bank merger proposals must be done on
a case-by-case, market-by-market basis. The Federal
Reserve devotes considerable resources to this end
and has well-developed policies and procedures
within the context of existing law. However, the rapid
pace of change in the American banking and financial
systems, and particularly the large size of some institutions, create a number of major challenges. These
challenges are particularly complex in the supervisory area. In recent years, the Federal Reserve has
moved to put increased focus on an institution's risk
management and corporate governance practices, as
well as discipline imposed by counterparts themselves, and has sought to move supervisory practice
forward in the international arena. While we believe
that the current mechanisms for addressing weak or
failing banking organizations of any size are adequate, this is clearly an area that will receive continued intense attention.
To date, the available evidence suggests that recent
mergers have not resulted in substantial adverse
effects on the vast majority of consumers of banking
services. It is certainly possible that some customers
have been disadvantaged by some mergers. And
mergers can no doubt be very disruptive to bank
employees as functions are consolidated and reorganized. But research on the effects of mergers on
branch closings and small business loans suggests
that, while mergers may initially result in some
branch closings and possibly some reduction in small
business loans, market responses tend to offset much,
and sometimes all, of these effects.
It seems clear that substantial harm to consumers
would occur if mergers were allowed to decrease
competitive pressures significantly. However, market
developments and the removal of geographic restrictions on bank entry into new markets have signifi-
Statements to the Congress
451
cantly lessened the chances for anticompetitive
effects. In addition, the antitrust standards enforced
by the bank regulatory agencies and the Department
of Justice have helped to ensure the maintenance of
competition.
The evidence on whether bank mergers result in
performance and efficiency gains is mixed. Greater
geographic diversification appears to result in
improved performance, including the potential for
greater safety and soundness. And recent evidence on
economies of scale indicates that such economies
may be achieved by banks of up to moderate but
certainly not giant size. Some mergers lead to
improved efficiency, but others do not. Research does
suggest that the potential for substantial efficiency
gains is there if well-managed firms take over and
change the management practices of inefficient banks.
Given the continuing pressures for cost minimization
in banking, it seems plausible to argue that some of
this potential will be realized in the future.
The ongoing and rapid pace of change in the
banking and financial services industry reinforces the
need for financial modernization legislation. The
Board believes that H.R. 10 provides a sound framework for achieving such modernization and urges the
Congress to move expeditiously on this matter.
Statement by Edward M. Gramlich, Member, Board
of Governors of the Federal Reserve System, before
the Subcommittee on Human Resources of the Committee on Government Reform and Oversight, U.S.
House of Representatives, April 29, 1998
rapid innovation. But while these steps are impressive, the hard work must continue if the CPI is to
keep up with an ever-changing economy.
The hearings that this subcommittee held last year
on the CPI provided a very clear summary of the
arguments surrounding some of the difficult measurement problems confronting the BLS and the range of
professional opinions concerning the quantitative significance of those problems. A useful categorization
divides these issues into two parts. The first relates to
the formula used by the BLS for building up the
overall CPI from the individual prices collected by
field representatives. Although these issues are quite
technical, they are fairly well understood by the
BLS and by economists outside the statistical agencies. The second set of issues concerns the individual prices themselves and, in particular, how
these prices are adjusted to account for quality
change and the introduction of new goods. These
issues are extremely difficult—both conceptually and
practically—and there is much less consensus about
the quantitative significance of the bias associated
with new goods and quality change. Research into all
of these questions has continued over the past year,
but, to my knowledge, there have been few major
developments that would alter significantly the opinions voiced by the witnesses at last April's hearing.
I am pleased to appear before you to discuss improving the consumer price index (CPI). I begin by thanking this subcommittee for holding today's hearing
and for its past work in examining the issue of bias in
the CPI. Although these issues are difficult and complex, your demonstrated interest has helped keep the
focus on ways to improve the index further.
The consumer price index plays a central role in
many aspects of private and public decisionmaking:
The CPI is the key price measure for indexation of
federal spending and tax programs, and many contracts in the private sector are linked to the CPI. In
addition, the CPI is used for inflation-adjusting the
Treasury's indexed bonds, which help to provide a
reading on expectations of future inflation and on real
interest rates. The CPI is also among the inflation
measures examined in the conduct of monetary policy. Thus, it is essential that the nation strive for as
accurate a measure as possible.
In that regard, the Bureau of Labor Statistics (BLS)
has made laudable progress in the past several years.
Sample rotation problems that were uncovered by
BLS researchers have largely been eliminated. The
measurement in the categories of rent, computers,
Pharmaceuticals, and health care services has been
improved. Looking ahead, the recently announced
decision to apply the geometric-mean aggregation
procedure should largely rectify so-called lower-level
substitution bias. The shift in emphasis from geography to product categories for sample rotation provides an opportunity for the BLS to ameliorate some
of the bias associated with new goods, provided that
it actively rotates the sample for products undergoing
IMPROVING THE CPI
Rather than rehash arguments surrounding the difficult and controversial aspects of price measurement
related to new goods and quality change, a more
useful approach might be to seek common ground
among the participants in this discussion. This means
pushing forward where there is greater agreement on
the set of issues related to the aggregation formulas
used to build up the CPI. As some have put it, we
452
Federal Reserve Bulletin • June 1998
should first go after the "low-hanging fruit" on our
statistical trees. In that regard, a striking aspect of the
hearings that the subcommittee held last year was the
virtual unanimity that a price index that tracks the
cost of purchasing a fixed market basket of goods and
services, such as the CPI now does, represents an
upper bound on changes in the true cost of living. I
doubt there exists a professor teaching microeconomics who does not routinely demonstrate this characteristic of fixed-weight price indexes to his or her
classes. The reason is that consumers respond to
changes in relative prices by altering the composition
of their purchases, and this response lowers the cost
to them of the price changes.
Consider a couple of examples. If chicken goes on
sale, some consumers would buy more chicken and
less beef or pork. Also, as computer prices have
fallen dramatically in recent years, consumers have
increased their purchases of computers. At present,
however, the market basket used in constructing the
CPI changes only once every ten years. Although the
BLS has just updated this market basket, the current
methodology for the CPI will lock this market basket
in place for the next decade, implying that consumers
are assumed not to do any substitution at all over this
period. Under these procedures, the CPI will fail to
capture the ways in which consumers adjust their
spending patterns to take advantage of changes in
relative prices.
We should distinguish between two levels of substitution bias. In the discussion here, I am focusing on
what has been termed "upper-level" substitution
bias. Based on surveys of what consumers buy, the
BLS has a list of 211 items in the typical consumer's
market basket. Upper-level substitution bias arises
from substitution among these items that is not
captured by the CPI, such as between chicken and
beef or between breakfast cereal and other breakfast
items. In addition, consumers also make substitutions
among different varieties of the same item in their
market baskets, such as when consumers switch
between different brands of breakfast cereal. By early
1999, the BLS will have largely accounted for this
"lower-level" substitution when it implements a
geometric-means formula to combine individual
prices at the lowest level in the index.
Although the CPI as currently constructed does not
account for the upper-level substitution possibilities
available to consumers, indexes that do take account
of such substitutions can be calculated; economists
refer to them as superlative indexes because of their
desirable properties. Indeed, on an experimental
basis, the BLS already produces superlative indexes,
but these indexes are available only with a consider
able lag. In any case, using data from recent decades,
several studies have constructed indexes that take full
account of consumer substitution and have used these
indexes as benchmarks to compare with the actual
CPI. Through such comparisons, it is possible to
assess the amount of bias in the CPI arising from
upper-level consumer substitution. Although estimates depend on the time period considered and
other particulars of these studies, this research
broadly suggests that correcting upper-level substitution bias could be expected to reduce the rate of
change in the CPI about 0.2 percentage point per
year; for example, if the current CPI showed an
increase of 2.0 percent over a year, then after having
corrected for this type of substitution bias, the CPI
could be expected to show an increase of about
1.8 percent. Although this might not sound large, a
bias of this size compounded over many years would
have marked implications for any program or contract that is linked to the CPI.
REDUCING UPPER-LEVEL SUBSTITUTION BIAS
To correct fully for upper-level substitution bias it
would be necessary to know how market baskets
change on a regular basis in order to capture the
substitution among different items. The expenditure
data required for such calculations are obtained from
the Consumer Expenditure Survey. And because of
collection and processing time, these data are available only with a lag, so that the figures for 1997 are
not expected to be available until later this year.
Thus, the data from the Consumer Expenditure Survey cannot be used to construct a "real time" price
index that fully captures consumers' substitution
among items. This lag is the reason BLS's experimental superlative index is produced only with a
delay. But the important question should not be
whether it is possible to construct a perfect index, but
rather whether techniques are available for creating a
monthly cost-of-living index that would represent an
improvement over the CPI as currently constructed.
The answer is "yes." The Boskin Commission,
which included my distinguished colleague Robert
Gordon, suggested as a possible solution the use of a
"trailing Tornqvist" price index. This index would
use the Tornqvist index formula—which can capture substitution among items—and would update
weights each year. To be operational in real time,
this index would need to use lagged, or trailing,
weights. For example, average weights from 1994-95
could be used for calculating 1997 changes in the
cost of living. Another approach has been sug-
Statements to the Congress
gested by Matthew Shapiro and David Wilcox. They
have devised a so-called constant elasticity of
substitution—or CES—index that appears to largely
eliminate upper-level substitution bias. In contrast to
the current setup that assumes no substitution among
items, the class of CES indexes imposes a positive
degree of substitution among all items, and alternative CES indexes would impose different degrees of
substitutability. These authors searched to find the
degree of substitutability that provided the closest
approximation to a benchmark "superlative" index
but that can be implemented on a monthly basis
in real time. There may well be other approaches
worthy of serious consideration to rectify the problem of upper-level substitution bias.
MOVING FORWARD
To spur progress on this issue, about which there
appears to be considerable agreement, one approach
that this subcommittee could consider would be to
commission a study of substitution bias to be undertaken by the staff of the BLS. The BLS could be
asked to compare their current procedures with those
that have been proposed by other researchers. Specifically, I would suggest that they determine which of
these alternative approaches provides the most timely
and accurate approximation to the "superlative"
indexes published by the BLS, recalling that while
these superlative indexes may be the "best," they are
available only with a considerable lag. In evaluating
the alternatives, the objective should not be to establish a "perfect" measure—such a goal is unattainable. Rather, the objective should be to produce the
best measure of the cost of living that can be constructed in real time from existing knowledge and
data.
At the same time, the subcommittee could recommend the establishment of a formal panel of outside
experts to review the BLS's evaluation of the alternatives and to provide an independent assessment of the
BLS study to the committee. The panel could also
consult with the research staff of the BLS on the
design of the study and the interpretation of the
results. If differences remained after completion of
the study, the panel of experts would provide a
mechanism for independent assessment of alternative
approaches that could be helpful to this subcommittee's oversight responsibilities.
453
A TWO-TRACK APPROACH
Let me raise one further issue that would inevitably
arise from such a study. Even the best real-time
approximation to a superlative index would not match
the superlative index that ultimately could be constructed once expenditure share data ultimately
became available. To deal with this problem, the
Boskin Commission suggested pursuing a two-track
approach. For the first track, the BLS could continue
to publish a monthly index in real time that would
never be revised. This index would be much like the
current CPI except that—going forward—it could be
based on an aggregation formula that minimizes
upper-level substitution bias. For the second track,
the BLS could publish, with a lag, a superlative index
that incorporated full information on changing expenditure shares and could be revised subsequently to
incorporate other improvements to the CPI as well.
This two-track approach has advantages and disadvantages. On the positive side, the two-track
approach would provide indexes for users with
diverse needs: a never-revised index for those for
whom revisions would impose operational difficulties
and a second revisable index that would be the best
possible measure of changes in the cost of living. On
the negative side, I am concerned that the publication
of two different price indexes as part of the CPI
program might generate some confusion. If this confusion were judged to be a serious problem, the BLS
could alternatively produce a single measure that was
revised and, ultimately, incorporated all information
on spending patterns in the best possible way. For
example, the CPI for April could be initially constructed using one of the approximations to a superlative index that I described above, but when full data
on consumer expenditure shares became available
some months later, the level of the CPI for April
could be revised to be an exact superlative index
rather than a close approximation. Were this to be
done, government and private contracts that are
linked to the CPI would have to alter their indexation
procedures.
Returning to my primary message, a study of substitution bias and an outside review panel hold the
promise of forming the basis of a reasonable professional consensus on limited technical changes that
would correct substitution bias and make the CPI a
more accurate measure of the cost of living. Such a
consensus is critical for maintaining public support
and confidence in our statistical programs. That confidence can only be enhanced when the government
is striving to develop the most accurate measures
possible.
•
454
Announcements
SUSAN M. PHILLLIPS: RESIGNATION AS A
MEMBER OF THE BOARD OF GOVERNORS
Susan M. Phillips on May 4, 1998, announced her
resignation as a member of the Board of Governors
of the Federal Reserve System, effective June 30,
1998. Governor Phillips will join George Washington
University as Dean of the School of Business and
Public Management. A copy of her letter of resignation follows:
May 1, 1998
The Honorable William Jefferson Clinton
The President of the United States
The White House
Washington, DC 20500
Dear Mr. President:
1 hereby submit my resignation as a Member of the
Board of Governors of the Federal Reserve System, effective June 30, 1998.
It has been my honor to serve as a Member of the Board
and the Federal Open Market Committee during a period
of impressive growth for broad segments of the United
States economy. Indeed the current expansion is remarkable for both its sustained length and the accompanying
decline in the rate of inflation.
I have been privileged to work with distinguished
colleagues on the Board and the FOMC under the outstanding leadership of Chairman Alan Greenspan. We have all
worked diligently to accommodate significant changes to
the nation's financial institutions in a manner which will
not only reduce unnecessary regulatory burden but also
facilitate sustainable economic growth in an increasingly
complex, global and technological environment. In order
for U.S. financial institutions to continue to finance economic growth, they must be able to compete both domestically and internationally. Given the significant changes and
integration of the world's financial markets and of market
participants, I believe that significant revisions in this
country's banking laws are now required. As that process
moves forward, continued involvement by the Federal
Reserve as the nation's central bank in the supervision of
financial institutions and the payments system will ensure
that the Board is best able to contribute not only to the
nation's sustained economic growth but also to financial
stability.
Sincerely,
Susan M. Phillips
REGULATION B: AMENDMENTS
The Federal Reserve Board on April 1, 1998,
amended some model forms in its Regulation B
(Equal Credit Opportunity) to reflect changes to disclosures required by recent amendments to the Fair
Credit Reporting Act.
Statutory changes require that additional disclosures be given to a consumer who is denied credit
based on information from an affiliate or from a
consumer reporting agency. The new model forms
went into effect on April 30.
BASLE ACCORD: AMENDMENT AND PROPOSAL
FOR PRINCIPLES GOVERNING
ON-BALANCE-SHEET NETTING
The Basle Committee on Banking Supervision on
April 8, 1998, issued two announcements relating to
the Basle Accord, which is an international agreement setting minimum capital requirements for
banks.
One announcement is an amendment to the Accord
reducing the risk weight for claims on (and claims
guaranteed by) certain securities firms incorporated
in countries of the Organization for Economic Cooperation and Development from 100 percent to 20 percent. To qualify for the preferential risk weight,
securities firms must be subject to supervisory and
regulatory arrangements and, in particular, capital
requirements that are comparable to those applied to
banks under the Basle Accord.
In the United States this amendment, in general,
would provide a reduced capital charge for claims on
or guaranteed by broker-dealers registered with the
Securities and Exchange Commission (SEC) and
their direct subsidiaries that are subject to supervision
and capital requirements. The capital requirements
generally would be the SEC's net capital rule or, for
securities firms operating in Europe, the European
Union's Capital Adequacy Directive. Claims on the
holding companies and affiliates of such brokerdealers or securities firms not subject to capital
requirements generally would retain their 100 percent
risk weighting. The Federal Reserve intends to
455
initiate a rulemaking to propose this revision to its
risk-based capital rules for state member banks and
bank holding companies.
The second announcement sets forth principles
governing on-balance-sheet netting for capital purposes. The statement solicits industry comment by
June 30, 1998.
The announcements are accessible on the Internet
at the Bank for International Settlements Web site
(http://www.bis.org). Comments on the netting proposal may be submitted to the Basle Supervisors
Committee by fax at Oil 41 61 280 9100.
AVAILABILITY OF REVISED LISTS OF
OVER-THE-COUNTER STOCKS AND OF FOREIGN
STOCKS SUBJECT TO MARGIN REGULATIONS
The Federal Reserve Board published on April 24,
1998, a revised list of over-the-counter (OTC) stocks
that meet the margin criteria in Regulation T (Credit
by Brokers and Dealers). Also published was a
revised list of foreign equity securities that meet the
margin criteria in Regulation T. The lists were effective May 11, 1998, and supersede the previous lists
that were effective February 9, 1998.
The changes that have been made to the revised
OTC List, which now contains 4,852 OTC stocks, are
as follows:
• One hundred sixty stocks have been included for
the first time, 120 under National Market System
(NMS) designation
• Fifty-three stocks previously on the list have
been removed for substantially failing to meet the
requirements for continued listing
• One hundred five stocks have been removed for
reasons such as listing on a national securities
exchange or involvement in an acquisition.
Lenders subject to Regulation T and borrowers
subject to Regulation X (Borrowers of Securities
Credit) who are required under Section 224.3(a) to
conform credit they obtain to Regulation T must
continue to use the OTC list until publication of the
next OTC list, anticipated for August 1998. An
amendment to Regulation T that will make all stocks
trading in the NASDAQ Stock Market marginable at
brokers and dealers will be effective January 1, 1999.
The Board will cease publication of the OTC list at
that time.
The foreign list is composed of foreign equity
securities that are eligible for margin treatment at
broker-dealers. Effective July 1, 1996, foreign stocks
that have a "ready market" for purposes of the net
capital rule of the Securities and Exchange Commission (SEC) may be included on the foreign list. The
SEC effectively treats all stocks included on the
Financial Times/Standard & Poor's Actuaries World
Indices (FT/S&P-AW Indices) as having a "ready
market" for capital purposes. The Board is adding
seventy-three foreign stocks and deleting sixty-one,
based on changes to the FT/S&P-AW Indices. The
revised foreign list now contains 1,942 securities
displayed in order of country.
It is unlawful for any person to cause any representation to be made that inclusion of a stock on the
OTC list or the foreign list indicates that the Board or
the SEC has in any way passed upon the merits of
any such stock or transaction therein. Any references
to the Board in connection with these lists or any
stocks thereon in any advertisement or similar communication is unlawful.
ANNUAL REPORT: PUBLICATION
The 84th Annual Report, 1997, of the Board of Governors of the Federal Reserve System, covering
operations for the calendar year 1997 is available for
distribution. Copies may be obtained on request to
Publications Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington,
DC 20551. Also available from Publications Services
is a separately printed companion document, Annual
Report: Budget Review, 1998-99, which describes
the budgeted expenses of the Federal Reserve
System for 1998, the Board's two-year budget for
1998-99, and income and expenses for 1996 and
1997. Both reports are also available at http://
www.bog.frb.fed.us/—the Board's World Wide Web
site.
CHANGES IN BOARD STAFF
The Federal Reserve Board on May 4, 1998,
announced the appointment of Lynn S. Fox as Assistant to the Board for public affairs, effective June 1.
She will succeed Joseph R. Coyne, Assistant to the
Board, who is retiring at the end of May. At the same
time, the Board announced the appointments of
Jennifer J. Johnson as Secretary of the Board to
succeed William W. Wiles, who is retiring at the end
of May, and Robert de V. Frierson as Associate
Secretary, also effective June 1.
Before joining the Board staff in 1986, Ms. Fox,
currently Deputy Congressional Liaison, worked on
456
Federal Reserve Bulletin • June 1998
banking issues for Congressman John LaFalce of
New York and for the House Banking Subcommittee
on Economic Stabilization. She joined the Board's
staff in 1986 as Congressional Liaison Assistant, a
position in which she served until 1988.
In 1990 she became Director of Corporate Relations for Harvey Mudd College in Claremont, California but returned to the Board in 1992 as Special
Assistant for Congressional Liaison. She was named
to her current position in 1994. She holds a B.A. in
American Studies from Smith College and an M.B.A
from George Washington University.
Ms. Johnson joined the Board's staff in 1975 as an
attorney in the Legal Division and progressed to
Senior Counsel in 1982. She left the Board in 1986 to
become Vice President at Shawmut Bank, where she
was later promoted to General Counsel and Secretary. She rejoined the Board in 1989 as Associate
Secretary and was promoted to Deputy Secretary in
1994. She holds an A.B. in economics and sociology
from Mount Holyoke College and a J.D. from the
University of Pennsylvania.
Mr. Frierson joined the Legal Division as an attorney in 1987, was promoted to Senior Attorney in
1988, Managing Senior Counsel in 1991, and Assistant General Counsel in 1994. He holds a B.A. in
English and a J.D. from the University of Virginia.
The Federal Reserve Board on April 7, 1998,
announced major changes in the management structure of its Division of Consumer and Community
Affairs, including the appointment of a new Division
Director. Effective June 1 is the appointment of
Dolores S. Smith as Division Director to succeed
Griffith L. Garwood, who is retiring on May 31.
Ms. Smith had been serving as an Associate Director
of the Division.
At the same time, the Board promoted Glenn E.
Loney to Deputy Director from Associate Director
and named Adrienne D. Hurt and Sandra F. Braunstein to the official staff as Assistant Directors. They
join Maureen P. English and Irene Shawn McNulty as
Assistant Directors.
Ms. Smith joined the Board in 1975 and has been
responsible for all of the regulatory work within the
division since 1992 and for the Consumer Advisory
Council since 1980. As Director, she will oversee the
division's work in administering federal consumer
protection, fair lending, and community reinvestment
statutes and regulations; overseeing the examination
of state member banks for compliance; participating
in the bank holding company application process;
directing the System's Community Affairs program;
and overseeing the consumer complaint process.
Ms. Smith is a graduate of the University of Texas,
the Georgetown University Law Center, and the
Stonier Graduate School of Banking.
Mr. Loney began his Board career in 1975 and had
been Associate Director with responsibility for compliance examinations, applications processing, community affairs, and fair lending enforcement. As
Deputy Director, Mr. Loney will provide operational
oversight of designated functional areas (Compliance, Fair Lending Enforcement, Community Affairs,
and Consumer Advisory Council) and will assist the
director in overseeing all other division functions
(Regulations, Consumer Complaints, Consumer Policies, Information Resources, and Administration).
Mr. Loney is a graduate of Michigan State University, the University of Michigan Law School, and the
Stonier Graduate School of Banking.
Ms. Hurt joined the Board in 1983 and had been
serving as Managing Counsel, directing one of two
units of regulatory attorneys. She has responsibility
for several regulations, including Truth in Lending,
Electronic Fund Transfers, and Consumer Leasing.
As Assistant Director, Ms. Hurt will supervise the
division's regulatory work. She holds undergraduate
and law degrees from the American University.
Ms. Braunstein joined the Board in 1987. She had
been serving as the Manager of the Community
Affairs program. In her new position as Assistant
Director, Ms. Braunstein will continue to oversee the
Consumer Affairs program as Community Affairs
Officer and will serve as the liaison between the
Board and the Consumer Advisory Council. She is a
graduate of the American University.
Ms. English will continue to have oversight
responsibility for the Consumer Complaints, Consumer Policies, Information Resources, and Administration functions. Ms. McNulty will supervise the
Reserve Bank Oversight, Applications, and Fair
Lending Enforcement functions.
Other recent retirees from the official staff are the
following:
In the Division of International Finance, Larry
Promisel, Senior Associate Director, and Charles J.
Siegman, Senior Adviser
In the Division of Research and Statistics, Martha
Bethea, Associate Director
In the Office of Staff Director for Management,
George E. Livingston, Senior Adviser, David L.
Shannon, Senior Adviser, and Fred Horowitz,
Adviser
In the Office of Inspector General, Brent L. Bowen,
Inspector General.
•
457
Minutes of the
Federal Open Market Committee Meeting
Held on February 3-4, 1998
A meeting of the Federal Open Market Committee
was held in the offices of the Board of Governors of
the Federal Reserve System in Washington, D.C., on
Tuesday, February 3, 1998, at 2:30 p.m. and continued on Wednesday, February 4, 1998, at 9:00 a.m.
Present:
Mr. Greenspan, Chairman
Mr. McDonough, Vice Chairman
Mr. Ferguson
Mr. Gramlich
Mr. Hoenig
Mr. Jordan
Mr. Kelley
Mr. Meyer
Ms. Minehan
Ms. Phillips
Ms. Rivlin
Messrs. Boehne, McTeer, Moskow, and Stern,
Alternate Members of the Federal Open Market
Committee
Messrs. Broaddus, Guynn, and Parry, Presidents of
the Federal Reserve Banks of Richmond,
Atlanta, and San Francisco respectively
Mr. Kohn, Secretary and Economist
Mr. Bernard, Deputy Secretary
Mr. Coyne, Assistant Secretary
Mr. Gillum, Assistant Secretary
Mr. Mattingly, General Counsel
Mr. Baxter, Deputy General Counsel
Mr. Prell, Economist
Mr. Truman, Economist
Ms. Browne, Messrs. Cecchetti, Dewald, Hakkio,
Lindsey, Promisel, Simpson, Sniderman, and
Stockton, Associate Economists
Mr. Fisher, Manager, System Open Market Account
Mr. Ettin, Deputy Director, Division of Research
and Statistics, Board of Governors
Mr. Slifman, Associate Director, Division of
Research and Statistics, Board of Governors
Messrs. Alexander, Hooper, and Ms. Johnson,
Associate Directors, Division of International
Finance, Board of Governors
Mr. Reinhart, Assistant Director, Division of
Monetary Affairs, Board of Governors
Messrs. Brayton1 and Rosine,1 Senior Economists,
Division of Research and Statistics,
Board of Governors
Ms. Garrett and Mr. Nelson,1 Economists, Division of
Monetary Affairs, Board of Governors
Ms. Low, Open Market Secretariat Assistant,
Division of Monetary Affairs, Board of
Governors
Mr. Rives, First Vice President, Federal Reserve
Bank of St. Louis
Messrs. Beebe, Eisenbeis, Hunter, Ms. Krieger,
Messrs. Lang, Rolnick, and Rosenblum, Senior
Vice Presidents, Federal Reserve Banks of
San Francisco, Atlanta, Chicago, New York,
Philadelphia, Minneapolis, and Dallas
respectively
Mr. Hetzel, Vice President, Federal Reserve Bank of
Richmond
In the agenda for this meeting, it was reported that
advices of the election of the following members and
alternate members of the Federal Open Market Committee for the period commencing January 1, 1998,
and ending December 31, 1998, had been received
and that these individuals had executed their oaths of
office.
The elected members and alternate members were
as follows:
William J. McDonough, President of the Federal Reserve
Bank of New York, with Ernest T. Patrikis, First Vice
President of the Federal Reserve Bank of New York,
as alternate;
1. Attended portions of meeting relating to the Committee's review
of the economic outlook and establishment of its monetary and debt
ranges for 1998.
458
Federal Reserve Bulletin • June 1998
Cathy E. Minehan, President of the Federal Reserve Bank
of Boston, with Edward G. Boehne, President of the
Federal Reserve Bank of Philadelphia, as alternate;
Jerry L. Jordan, President of the Federal Reserve Bank of
Cleveland, with Michael H. Moskow, President of the
Federal Reserve Bank of Chicago, as alternate;
Robert D. McTeer, Jr., President of the Federal Reserve
Bank of Dallas, as voting alternate pending the
election of a President of the Federal Reserve Bank
of St. Louis;
Thomas M. Hoenig, President of the Federal Reserve Bank
of Kansas City, with Gary H. Stern, President of the
Federal Reserve Bank of Minneapolis, as alternate.
By unanimous vote, the following officers of the
Federal Open Market Committee were elected to
serve until the election of their successors at the first
meeting of the Committee after December 31, 1998,
with the understanding that in the event of the discontinuance of their official connection with the Board of
Governors or with a Federal Reserve Bank, they
would cease to have any official connection with the
Federal Open Market Committee:
Alan Greenspan
William J. McDonough
Donald L. Kohn
Normand R.V. Bernard
Joseph R. Coyne
Gary P. Gillum
J. Virgil Mattingly, Jr.
Thomas C. Baxter, Jr.
Michael J. Prell
Edwin M. Truman
Chairman
Vice Chairman
Secretary and Economist
Deputy Secretary
Assistant Secretary
Assistant Secretary
General Counsel
Deputy General Counsel
Economist
Economist
Lynn E. Browne, Stephen G. Cecchetti,
William G. Dewald, Craig S. Hakkio,
David E. Lindsey, Larry J. Promisel,
Thomas D. Simpson, Mark S. Sniderman,
and David J. Stockton, Associate Economists
By unanimous vote, the Federal Reserve Bank of
New York was selected to execute transactions for
the System Open Market Account until the adjournment of the first meeting of the Committee after
December 31, 1998.
By unanimous vote, Peter R. Fisher was selected to
serve at the pleasure of the Committee as Manager,
System Open Market Account, on the understanding
that his selection was subject to being satisfactory to
the Federal Reserve Bank of New York.
Secretary's note: Advice subsequently was received that
the selection of Mr. Fisher as Manager was satisfactory to
the board of directors of the Federal Reserve Bank of
New York.
On the recommendation of the Manager, the Committee at this meeting unanimously approved two
changes in the Authorization for Domestic Open
Market Operations.
First, the Committee amended paragraph l(a) of
the Authorization to raise from $8 billion to $12 billion the limit on intermeeting changes in System
account holdings of U.S. government and federal
agency securities. The increase was the first permanent change in the limit since February 1990, when it
was raised from $6 billion to $8 billion. The Manager
indicated that the Committee had approved temporary increases several times during the past year and
that the existence of a permanent $12 billion limit
would have obviated the need for most of the
increases. A permanent increase to $12 billion would
reduce the number of occasions requiring special
Committee action, while still calling the need for
particularly large changes to the Committee's attention. The Committee concurred in the Manager's
view that a $4 billion increase was appropriate.
Second, the Committee terminated the Manager's
authority to conduct transactions in bankers acceptances. This involved the deletion of paragraph l(b),
which authorized purchases or sales of prime bankers
acceptances in the open market, and also the deletion
of the reference in paragraph l(c), which authorized
repurchase agreements in such market instruments.
The Manager indicate that operations in bankers
acceptances were not a practical means of affecting
reserves under current circumstances, given the
ample availability of U.S. Treasury obligations in the
market. Indeed, the Committee previously had decided in 1977 to suspend transactions on an outright
basis in bankers acceptances and had completed the
System's disengagement from this market in 1984 by
instructing the Manager to discontinue the use of
repurchase agreements involving bankers acceptances. While those decisions had left open the possibility of resuming transactions in bankers acceptances and no changes had been made in the
Authorization, the Committee agreed that the existing
authority no longer served a practical purpose.
Accordingly, the amended Authorization for Domestic Open Market Operations was unanimously
approved in the form shown below.
AUTHORIZATION FOR DOMESTIC
OPEN MARKET OPERATIONS
Amended February 3, 1998
1. The Federal Open Market Committee authorizes and
directs the Federal Reserve Bank of New York, to the
Minutes of the Federal Open Market Committee
extent necessary to carry out the most recent domestic
policy directive adopted at a meeting of the Committee:
(a) To buy or sell U.S. Government securities, including securities of the Federal Financing Bank, and securities
that are direct obligations of, or fully guaranteed as to
principal and interest by, any agency of the United States in
the open market, from or to securities dealers and foreign
and international accounts maintained at the Federal
Reserve Bank of New York, on a cash, regular, or deferred
delivery basis, for the System Open Market Account at
market prices, and, for such Account, to exchange maturing U.S. Government and Federal agency securities with
the Treasury or the individual agencies or to allow them to
mature without replacement; provided that the aggregate
amount of U.S. Government and Federal agency securities
held in such Account (including forward commitments)
at the close of business on the day of a meeting of
the Committee at which action is taken with respect to a
domestic policy directive shall not be increased or
decreased by more than $12.0 billion during the period
commencing with the opening of business on the day
following such meeting and ending with the close of business on the day of the next such meeting;
(b) To buy U.S. Government securities and securities
that are direct obligations of, or fully guaranteed as to
principal and interest by, any agency of the United States,
from dealers for the account of the Federal Reserve Bank
of New York under agreements for repurchase of such
securities or obligations in 15 calendar days or less, at rates
that, unless otherwise expressly authorized by the Committee, shall be determined by competitive bidding, after
applying reasonable limitations on the volume of agreements with individual dealers; provided that in the event
Government securities or agency issues covered by any
such agreement are not repurchased by the dealer pursuant
to the agreement or a renewal thereof, they shall be sold in
the market or transferred to the System Open Market
Account.
2. In order to ensure the effective conduct of open
market operations, the Federal Open Market Committee
authorizes and directs the Federal Reserve Banks to lend
U.S. Government securities held in the System Open Market Account to Government securities dealers and to banks
participating in Government securities clearing arrangements conducted through a Federal Reserve Bank, under
such instructions as the Committee may specify from time
to time.
3. In order to ensure the effective conduct of open
market operations, while assisting in the provision of shortterm investments for foreign and international accounts
maintained at the Federal Reserve Bank of New York, the
Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York (a) for System Open
Market Account, to sell U.S. Government securities to such
foreign and international accounts on the bases set forth in
paragraph l(a) under agreements providing for the resale
by such accounts of those securities within 15 calendar
days on terms comparable to those available on such
transactions in the market; and (b) for New York Bank
account, when appropriate, to undertake with dealers, subject to the conditions imposed on purchases and sales of
securities in paragraph l(b), repurchase agreements in U.S.
Government and agency securities, and to arrange corresponding sale and repurchase agreements between its own
459
account and foreign and international accounts maintained
at the Bank. Transactions undertaken with such accounts
under the provisions of this paragraph may provide for a
service fee when appropriate.
With Mr. Jordan dissenting, the Authorization for
Foreign Currency Operations shown below was
reaffirmed.
AUTHORIZATION FOR FOREIGN CURRENCY
OPERATIONS
Reaffirmed February 3, 1998
1. The Federal Open Market Committee authorizes and
directs the Federal Reserve Bank of New York, for System
Open Market Account, to the extent necessary to carry out
the Committee's foreign currency directive and express
authorizations by the Committee pursuant thereto, and in
conformity with such procedural instructions as the Committee may issue from time to time:
A. To purchase and sell the following foreign currencies in the form of cable transfers through spot or forward
transactions on the open market at home and abroad,
including transactions with the U.S. Treasury, with the U.S.
Exchange Stabilization Fund established by Section 10 of
the Gold Reserve Act of 1934, with foreign monetary
authorities, with the Bank for International Settlements,
and with other international financial institutions:
Austrian schillings
Belgian francs
Canadian dollars
Danish kroner
Pounds sterling
French francs
German marks
Italian lire
Japanese yen
Mexican pesos
Netherlands guilders
Norwegian kroner
Swedish kronor
Swiss francs
B. To hold balances of, and to have outstanding forward contracts to receive or to deliver, the foreign currencies listed in paragraph A above.
C. To draw foreign currencies and to permit foreign
banks to draw dollars under the reciprocal currency
arrangements listed in paragraph 2 below, provided that
drawings by either party to any such arrangement shall be
fully liquidated within 12 months after any amount outstanding at that time was first drawn, unless the Committee, because of exceptional circumstances, specifically
authorizes a delay.
D. To maintain an overall open position in all foreign
currencies not exceeding $25.0 billion. For this purpose,
the overall open position in all foreign currencies is defined
as the sum (disregarding signs) of net positions in individual currencies. The net position in a single foreign
currency is defined as holdings of balances in that currency, plus outstanding contracts for future receipt, minus
outstanding contracts for future delivery of that currency,
i.e., as the sum of these elements with due regard to sign.
2. The Federal Open Market Committee directs the Federal Reserve Bank of New York to maintain reciprocal
currency arrangements ("swap" arrangements) for the System Open Market Account for periods up to a maximum of
460
Federal Reserve Bulletin • June 1998
12 months with the following foreign banks, which are
among those designated by the Board of Governors of the
Federal Reserve System under Section 214.5 of Regulation
N, Relations with Foreign Banks and Bankers, and with the
approval of the Committee to renew such arrangements on
maturity:
Foreign bank
Austrian National Bank
National Bank of Belgium
Bank of Canada
National Bank of Denmark
Bank of England
Bank of France
German Federal Bank
Bank of Italy
Bank of Japan
Bank of Mexico
Netherlands Bank
Bank of Norway
Bank of Sweden
Swiss National Bank
Bank for International Settlements:
Dollars against Swiss francs
Dollars against authorized European
currencies other than Swiss francs
Amount of arrangement
(millions of dollars
equivalent)
250
1,000
2.000
250
3,000
2.000
6,000
3,000
5,000
3,000
500
250
300
4.000
600
1,250
Any changes in the terms of existing swap arrangements, and the proposed terms of any new arrangements
that may be authorized, shall be referred for review and
approval to the Committee.
3. All transactions in foreign currencies undertaken
under paragraph l.A. above shall, unless otherwise
expressly authorized by the Committee, be at prevailing
market rates. For the purpose of providing an investment
return on System holdings of foreign currencies, or for the
purpose of adjusting interest rates paid or received in
connection with swap drawings, transactions with foreign
central banks may be undertaken at non-market exchange
rates.
4. It shall be the normal practice to arrange with foreign
central banks for the coordination of foreign currency
transactions. In making operating arrangements with foreign central banks on System holdings of foreign currencies, the Federal Reserve Bank of New York shall not
commit itself to maintain any specific balance, unless
authorized by the Federal Open Market Committee. Any
agreements or understandings concerning the administration of the accounts maintained by the Federal Reserve
Bank of New York with the foreign banks designated by
the Board of Governors under Section 214.5 of Regulation
N shall be referred for review and approval to the
Committee.
5. Foreign currency holdings shall be invested to ensure
that adequate liquidity is maintained to meet anticipated
needs and so that each currency portfolio shall generally
have an average duration of no more than 18 months
(calculated as Macaulay duration). When appropriate in
connection with arrangements to provide investment facilities for foreign currency holdings, U.S. Government
securities may be purchased from foreign central banks
under agreements for repurchase of such securities within
30 calendar days.
6. All operations undertaken pursuant to the preceding
paragraphs shall be reported promptly to the Foreign
Currency Subcommittee and the Committee. The Foreign
Currency Subcommittee consists of the Chairman and Vice
Chairman of the Committee, the Vice Chairman of the
Board of Governors, and such other member of the Board
as the Chairman may designate (or in the absence of
members of the Board serving on the Subcommittee, other
Board members designated by the Chairman as alternates,
and in the absence of the Vice Chairman of the Committee,
his alternate). Meetings of the Subcommittee shall be
called at the request of any member, or at the request of the
Manager, System Open Market Account ("Manager"), for
the purposes of reviewing recent or contemplated operations and of consulting with the Manager on other matters
relating to his responsibilities. At the request of any member of the Subcommittee, questions arising from such
reviews and consultations shall be referred for determination to the Federal Open Market Committee.
7. The Chairman is authorized:
A. With the approval of the Committee, to enter into
any needed agreement or understanding with the Secretary
of the Treasury about the division of responsibility for
foreign currency operations between the System and the
Treasury;
B. To keep the Secretary of the Treasury fully advised
concerning System foreign currency operations, and to
consult with the Secretary on policy matters relating to
foreign currency operations;
C. From time to time, to transmit appropriate reports
and information to the National Advisory Council on International Monetary and Financial Policies.
8. Staff officers of the Committee are authorized to
transmit pertinent information on System foreign currency
operations to appropriate officials of the Treasury
Department.
9. All Federal Reserve Banks shall participate in the
foreign currency operations for System Account in accordance with paragraph 3 G(l) of the Board of Governors'
Statement of Procedure with Respect to Foreign Relationships of Federal Reserve Banks dated January 1, 1944.
With Mr. Jordan dissenting, the Foreign Currency
Directive shown below was reaffirmed.
FOREIGN CURRENCY DIRECTIVE
Reaffirmed February 3, 1998
1. System operations in foreign currencies shall generally be directed at countering disorderly market conditions, provided that market exchange rates for the U.S.
dollar reflect actions and behavior consistent with the IMF
Article IV, Section 1.
2. To achieve this end the System shall:
A. Undertake spot and forward purchases and sales
of foreign exchange.
B. Maintain reciprocal currency ("swap") arrangements with selected foreign central banks and with the
Bank for International Settlements.
C. Cooperate in other respects with central banks
of other countries and with international monetary
institutions.
3. Transactions may also be undertaken:
A. To adjust System balances in light of probable
future needs for currencies.
Minutes of the Federal Open Market Committee
B. To provide means for meeting System and Treasury commitments in particular currencies, and to facilitate
operations of the Exchange Stabilization Fund.
C. For such other purposes as may be expressly
authorized by the Committee.
4. System foreign currency operations shall be
conducted:
A. In close and continuous consultation and cooperation with the United States Treasury;
B. In cooperation, as appropriate, with foreign monetary authorities; and
C. In a manner consistent with the obligations of the
United States in the International Monetary Fund regarding
exchange arrangements under the IMF Article IV.
Mr. Jordan dissented in the votes on the Foreign
Currency Authorization and the Foreign Currency
Directive because these policy instruments provide
the basis for foreign exchange market transactions.
He believes that the primary mission of the Federal
Reserve is to achieve and maintain a stable purchasing power of the U.S. dollar. That objective is
best achieved when open market transactions are
restricted to purchases and sales of U.S. government
securities. When compatible with the System's primary objective, foreign exchange transactions are
redundant to open market operations. Often, however, foreign exchange transactions conflict with the
System's primary objective, requiring opposite
adjustments in System holdings of U.S. Treasury
obligations. Moreover, holdings of foreign securities
expose the Reserve Banks to foreign exchange translation losses resulting from the depreciation of foreign currencies relative to a strong and stable U.S.
dollar.
By unanimous vote, the Procedural Instructions
with Respect to Foreign Currency Operations shown
below were reaffirmed.
PROCEDURAL INSTRUCTIONS WITH RESPECT TO
FOREIGN CURRENCY OPERATIONS
Reaffirmed February 3, 1998
In conducting operations pursuant to the authorization and
direction of the Federal Open Market Committee as set
forth in the Authorization for Foreign Currency Operations
and the Foreign Currency Directive, the Federal Reserve
Bank of New York, through the Manager, System Open
Market Account ("Manager"), shall be guided by the
following procedural understandings with respect to consultations and clearances with the Committee, the Foreign
Currency Subcommittee, and the Chairman of the Committee. All operations undertaken pursuant to such clearances
shall be reported promptly to the Committee.
1. The Manager shall clear with the Subcommittee (or
with the Chairman, if the Chairman believes that consulta
461
tion with the Subcommittee is not feasible in the time
available):
A. Any operation that would result in a change in the
System's overall open position in foreign currencies
exceeding $300 million on any day or $600 million since
the most recent regular meeting of the Committee.
B. Any operation that would result in a change on
any day in the System's net position in a single foreign
currency exceeding $150 million, or $300 million when the
operation is associated with repayment of swap drawings.
C. Any operation that might generate a substantial
volume of trading in a particular currency by the System,
even though the change in the System's net position in that
currency might be less than the limits specified in l.B.
D. Any swap drawing proposed by a foreign bank not
exceeding the larger of (i) $200 million or (ii) 15 percent of
the size of the swap arrangement.
2. The Manager shall clear with the Committee (or with
the Subcommittee, if the Subcommittee believes that consultation with the full Committee is not feasible in the time
available, or with the Chairman, if the Chairman believes
that consultation with the Subcommittee is not feasible in
the time available):
A. Any operation that would result in a change in the
System's overall open position in foreign currencies
exceeding $ 1.5 billion since the most recent regular meeting of the Committee.
B. Any swap drawing proposed by a foreign bank
exceeding the larger of (i) $200 million or (ii) 15 percent of
the size of the swap arrangement.
3. The Manager shall also consult with the Subcommittee or the Chairman about proposed swap drawings by the
System and about any operations that are not of a routine
character.
On January 16, 1998, the continuing rules, regulations, authorizations, and other instructions of the
Committee were distributed with the advice that, in
accordance with procedures approved by the Committee, they were being called to the Committee's
attention before the February 3-4 organization meeting to give members an opportunity to raise any
questions they might have concerning them. Members were asked to indicate if they wished to have
any of the instruments in question placed on the
agenda for consideration at this meeting, and no
requests for consideration were received.
By unanimous vote, the minutes of the meeting of
the Federal Open Market Committee held on December 16, 1997, were approved.
The Manager of the System Open Market Account
reported on developments in foreign exchange and
international financial markets in the period since the
previous meeting on December 16, 1997. There were
no System open market transactions in foreign currencies during this period, and thus no vote was
required of the Committee.
The Manager of the System Open Market Account
also reported on developments in domestic financial
462
Federal Reserve Bulletin • June 1998
markets and on System open market transactions in
government securities and federal agency obligations
during the period from December 17, 1997, through
February 3, 1998. By unanimous vote, the Committee ratified these transactions.
The Committee then turned to a discussion of the
economic and financial outlook, the ranges for the
growth of money and debt in 1998, and the implementation of monetary policy over the intermeeting
period ahead. A summary of the economic and financial information available at the time of the meeting
and of the Committee's discussion is provided below,
followed by the domestic policy directive that was
approved by the Committee and issued to the Federal
Reserve Bank of New York.
The information reviewed at this meeting suggested that the economy continued to expand at a
robust pace during the closing months of 1997. Both
employment and industrial output recorded substantial increases in the fourth quarter. While spending
for final goods and services by U.S. residents decelerated noticeably, inventory investment strengthened
and the deficit in international trade in goods and
services appeared to have narrowed. Tighter labor
markets brought some acceleration in wages, but
falling import and energy prices helped to hold down
price inflation over the closing months of the year.
Labor demand expanded rapidly in the fourth quarter; a sharp increase in nonfarm payroll employment
in December followed large advances in October and
November, and the average workweek edged up on
balance over the three-month period. Job gains were
widely spread across industries. In the fourth quarter,
new hires in manufacturing accounted for more than
half of that sector's total for the year, and construction employment also registered an unusually large
rise compared with earlier in 1997. Job growth surged
in retail trade and persisted at a rapid pace in serviceproducing industries. The civilian unemployment
rate, at 4.7 percent in December, was near its low for
the current economic expansion.
Industrial production continued to advance at a
brisk pace in the fourth quarter. Growth in the manufacturing of durable goods remained strong despite
sharply slower, though still substantial, expansion in
the output of computing and office equipment. The
production of nondurable goods picked up after having been sluggish earlier in the year. Capacity utilization in manufacturing was at a relatively high rate in
the fourth quarter, but available information suggested few bottlenecks.
Consumer spending, in real terms, rose at a slower
though still appreciable rate in the fourth quarter.
Purchases of durable goods increased moderately
after having surged in the third quarter, and spending
on nondurables edged down. By contrast, expenditures for consumer services grew at a somewhat
faster rate. Recent surveys indicated that consumer
confidence remained at a very high level.
Housing demand continued to exhibit considerable
strength at year-end in the context of sharp declines
in fixed mortgage rates in recent months, further
sizable gains in employment and household income,
and very positive consumer assessments of homebuying conditions. Applications for mortgages to purchase homes increased to a new monthly high in
December; the pace of sales of existing homes rose
further in the fourth quarter; and sales of new homes
in November (latest available monthly data) were at
their highest monthly pace in more than ten years.
Housing starts edged lower in December but
remained close to the highs of the current expansion.
After unusually strong increases earlier in the year,
real business fixed investment declined slightly in the
fourth quarter. However, the outlook for further
growth remained positive, with corporate cash flow
still healthy and the user cost of capital still low. Data
on shipments of nondefense capital goods in December indicated a rebound in business spending on
capital goods, notably for office, computing, and
communications equipment, after sizable declines in
the October-November period. Business spending on
nonresidential structures declined slightly in the
fourth quarter despite rising real estate prices and
falling vacancy rates.
The pace of business inventory investment evidently picked up somewhat in the fourth quarter. In
manufacturing, inventories climbed further in
November (latest monthly data available), and the
stock-shipments ratio was at the top of its narrow
range for the past twelve months. The accumulation
of wholesale stocks continued its strong upward
trend, and by November the inventory-sales ratio for
the wholesale sector had reversed its 1996 decline. In
the retail sector, inventories declined slightly in
November after having changed little in October; the
inventory-sales ratio for this sector was near -the
bottom of its range for the last twelve months.
The nominal deficit on U.S. trade in goods and
services narrowed substantially on average in October and November from its level in the third quarter.
The value of exports rose appreciably in the OctoberNovember period, with the largest increases occurring in automotive and agricultural products. The
average value of imports for October and November
changed little from the third-quarter rate. Imports of
consumer goods and machinery rose, but they were
about offset by declines in automotive products, com-
Minutes of the Federal Open Market Committee
puters, and, to a lesser extent, a wide variety of other
products. The available information indicated that
economic expansion remained healthy in most of the
foreign G-7 countries, although slowing somewhat
from the third quarter. In Asia, weakness in economic
activity in Japan continued into the fourth quarter,
and persisting financial turmoil was having strong
adverse effects on the economies of a number of
developing countries.
Consumer price inflation remained low in December, damped by a sizable further drop in energy prices
and a small decline in food prices. Excluding food
and energy items, an acceleration in the costs of
services, notably medical care and shelter, provided a
slight boost to core consumer price inflation in
December. For the year as a whole, prices of core
consumer items rose considerably less than in 1996,
in part reflecting the effect of declining import prices.
At the producer level, prices of all finished goods and
of the core finished goods component declined further in December. For the year 1997, the core producer price index was little changed after a relatively
small rise the previous year; the total index, weighed
down by falling prices of finished food and energy
items, partially reversed its 1996 increase. Prices also
remained subdued at earlier stages of processing in
1997, with prices of crude materials falling substantially. Labor costs, as measured by the hourly compensation of private industry workers, increased at
appreciably faster rates in the fourth quarter and for
the year.
At its meeting on December 16, 1997, the Committee adopted a directive that called for maintaining
conditions in reserve markets that were consistent
with an unchanged federal funds rate averaging
around 5Vi percent. In light of the increased uncertainties in the outlook and the possibility that the next
change in policy might be in either direction, the
Committee adopted a directive that did not include a
presumption about the likely direction of any adjustment to policy during the intermeeting period.
Reserve market conditions associated with this directive were expected to be consistent with some moderation in the growth of M2 and M3 over coming
months.
Open market operations were directed throughout
the intermeeting period toward maintaining reserve
conditions consistent with the intended federal funds
rate average of around 5 Vz percent, and the effective
rate averaged close to that level despite some largely
anticipated upward pressures in reserve markets
around year-end. Most other domestic market interest
rates moved down on balance during the intermeeting
period, apparently as a result of increased concerns
463
over the turbulence in Asia and its potential implications for the U.S. economy. Share prices in U.S.
equity markets moved up slightly on net, perhaps
partly in response to the bond market rally, while
equity markets in some other countries, notably in
Asia, remained unsettled.
In foreign exchange markets, the dollar appreciated
on balance over the intermeeting period. The dollar
rose considerably further against the currencies of
many of the emerging market economies in Asia
amid continuing market concerns about the adequacy
of reforms that would be undertaken in the affected
countries and the magnitude and availability of international financial assistance that would be needed to
support those efforts. The dollar also gained slightly
on average in relation to the currencies of the other
G-10 currencies. A sizable advance by the dollar
relative to the German mark was largely reversed late
in the intermeeting period; incoming information suggesting greater strength in the German economy lifted
the value of the mark and tended to offset growing
concern about the likely effect of the Asian crisis on
Germany. The dollar declined somewhat on balance
against the yen as heightened prospects for domestic
fiscal stimulus in Japan fostered hopes of a less weak
performance of the Japanese economy.
M2 and M3 continued to grow at relatively rapid
rates in December and apparently also in January.
Recent gains in nominal income evidently underpinned much of the greater-than-expected strength in
M2 in January; also contributing were a pickup in
mortgage refinancing activity and, perhaps, depositor
transfers of funds from market instruments whose
yields had declined relative to those on M2 assets.
Large increases in repurchase agreements contributed
to rapid growth of M3 in January; the rise in M3
helped to finance further solid expansion of bank
credit. From the fourth quarter of 1996 to the fourth
quarter of 1997, M2 increased at a rate somewhat
above the upper bound of its range for the year and
M3 at a rate substantially above the upper bound of
its range. Total domestic nonfinancial debt expanded
in 1997 at a pace somewhat below the middle of its
range, reflecting the slow rise in the federal debt.
The staff forecast prepared for this meeting indicated that the expansion of economic activity would
slow appreciably during the next few quarters and
remain moderate in 1999. The staff analysis suggested that slower growth abroad and the considerable rise that already had occurred in the foreign
exchange value of the dollar would exert substantial
restraint on the demand for U.S. exports and subject
domestic producers to even stiffer competition from
imports. An anticipated reduction in the desired rate
464
Federal Reserve Bulletin • June 1998
of inventory accumulation would add to the restraint
on the expansion. As output growth slowed, pressures on resources would be expected to diminish
somewhat. Nonetheless, it was expected that, consistently measured, inflation would increase to some
degree over the ensuing period through 1999, owing
in part to an abatement of restraining forces from
foreign exchange and oil markets.
In the Committee's discussion of current and prospective economic conditions, members commented
that the performance of the economy continued to be
quite favorable. They noted that the economy had
entered the new year with considerable momentum
and very few indications that growth was moderating
from what appeared to be an unsustainable rate.
Nonetheless, their assessments of the various factors
bearing on the outlook led them to conclude that
appreciably slower economic growth was in the offing for the year ahead, possibly to a pace in the
vicinity of current estimates of the economy's longrun growth potential. Many emphasized that the prospects for declining net exports as a consequence of
the dollar's appreciation and the crises in a number of
Asian economies were a key factor in the outlook for
some slowing in the expansion. In addition, a moderating rate of inventory accumulation appeared likely
after the rapid buildup during 1997. At the same time,
high levels of confidence and generally accommodative financial conditions supported expectations of
persisting, though likely diminishing, strength in consumer spending and business fixed investment. The
members acknowledged that their forecasts were subject to a great deal of uncertainty because there was
little precedent to guide them in their evaluation of
the extent and likely effect of Asian market turmoil.
In the circumstances, the risks of a considerable
deviation on the upside or the downside of their
current forecasts were unusually high. Partly as a
consequence, the outlook for inflation was quite tentative as well. Moreover, questions persisted about
the level and growth of sustainable output. Members
observed that price inflation had remained subdued,
and by some measures had declined, in recent months
despite very tight labor markets and indications of
somewhat faster increases in labor compensation.
In keeping with the practice at meetings just before
the Federal Reserve's semiannual monetary policy
report to the Congress and the Chairman's associated
testimony, the members of the Committee and the
Federal Reserve Bank presidents not currently serving as members had provided individual projections
of the growth in real and nominal GDP, the rate of
unemployment, and the rate of inflation for the year
ahead. Based on developments over the second half
of 1997, the central tendency of the projections for
1998 now pointed to slightly more strength in real
GDP and appreciably less inflation than the forecasts
prepared at the time of the July 1997 meeting. The
forecasts of the rate of expansion in real GDP in 1998
had a central tendency of 2 to 23A percent and a full
range of PA to 3 percent. Such growth was expected
to be associated with a civilian unemployment rate in
a range of 4'/2 to 5 percent in the fourth quarter of
this year, implying little or no change from the current level. With regard to nominal GDP growth in
1998, the forecasts were mainly in a range of 33A to
4'/2 percent, with an overall range of 3'/2 to 5 percent.
Projections of the rate of inflation, as measured by
the consumer price index, had a central tendency of
PA to 2'/t percent, on the high side of the outcome
for 1997 when the rise in the index was held down by
damped increases in food prices and declines in
energy prices. These forecasts took account of likely
further technical improvements in the CPI by the
Bureau of Labor Statistics that would trim the
reported rate. The projections were based on individual views concerning what would be an appropriate policy over the projection horizon to foster the
Committee's longer-term goals.
The members stressed that the potential extent of
the negative effects of developments in Asia on the
nation's trade balance represented a key uncertainty
in the economic outlook. On the whole, those effects
had been quite limited thus far. Anecdotal reports
indicated that a number of domestic producers, notably of agricultural, lumber, and wood products, had
experienced some cancellations or postponements of
orders from Asian customers and there was some
evidence of increased imports from those nations.
Exports to affected Asian nations were likely to be
held back by declining incomes and rising prices of
U.S. products in local currencies, and reportedly also
by difficulties that importing firms in Asia were
encountering in securing financing. The eventual
effects of the Asian financial turmoil on the U.S. trade
balance and the overall economy were unknown—in
part because in some key countries needed reforms
had yet to be implemented and markets to stabilize—
but they clearly seemed likely to become more pronounced in coming months. Net exports also would
be held down by the appreciation of the dollar against
the currencies of the industrial countries that had
occurred earlier in 1997 before the Asian crisis
intensified.
Another factor viewed as likely to exert a moderating effect on the growth of economic activity was the
expectation of some slowing in inventory investment.
In the past year, businesses had added to inventories
Minutes of the Federal Open Market Committee
at a rate that exceeded the rise in final sales, and
somewhat reduced accumulation to a pace more in
line with that of final sales was seen as a reasonable
expectation. Some members expressed reservations,
however, about the extent of any weakening in inventory accumulation in light of the relatively favorable
economic conditions that they believed were likely to
persist over the year ahead.
Members viewed further growth in consumer
spending as likely to remain the major factor in
sustaining the expansion in overall economic activity.
Consumer sentiment was at or close to historically
high levels according to recent surveys, evidently
reflecting the strong uptrend in employment and
income and to some extent the very large cumulative
increase in stock market wealth over the course of
recent years. Some also noted that consumer debt
burdens, while large, were manageable and that such
burdens would be lessened for many consumers by
their refinancing of home mortgages at the lower
mortgage rates now prevailing. Evidence of strength
in the consumer sector was supported by upbeat
anecdotal reports of retail sales during the holiday
season and more recently. While the growth in personal expenditures was likely to moderate somewhat
from its recent pace, members did not rule out a more
ebullient consumer sector in the context of substantial further growth in disposable incomes, favorable
financing conditions for purchases of homes, automobiles, and other consumer durables, and the high level
of stock market prices.
Business fixed investment also was expected to
provide substantial support to continued economic
expansion, though some moderation in purchases of
business equipment seemed likely after the exceptionally rapid rates of growth in such investments in
recent years. Business sentiment remained generally
optimistic, and both debt and equity financing continued to be readily available on attractive terms to most
business borrowers. However, early signs of faltering
profit trends in some industries, in part related to
developments in Asia, appeared to have introduced
a cautionary note among some business planners.
Members also referred to emerging signs of speculative overbuilding in some areas, especially of
commercial structures. Even so, in the absence of
unanticipated weakness in consumer expenditures,
a variety of favorable factors seemed likely to sustain relatively robust spending on business structures
and equipment over the year ahead. The latter
included increased opportunities to cut costs and
enhance efficiency by investing in relatively inexpensive high tech equipment in a period characterized
by strong competition in many markets and rising
465
labor compensation associated with tight labor
markets.
Residential construction activity had remained
relatively robust in recent months and was expected
to be well maintained over coming quarters. Positive
indications for the housing outlook included relatively low mortgage interest rates, very favorable
measures of cash flow affordability, and quite positive homebuying attitudes as expressed in recent
surveys. While these factors were expected to help
sustain the housing sector over coming months, members noted that housing construction had been high
for some time and some cited anecdotal evidence of
softening activity in some parts of the country. On
balance, only modest, if any, slippage from current
levels of home construction activity seemed likely
over the year ahead.
With regard to the outlook for inflation, members
referred to widespread indications of increasingly
tight labor markets and to statistical and anecdotal
reports of faster increases in labor compensation.
Labor cost increases in recent quarters had been
especially rapid in a large segment of the service
sector, where foreign competition was not a factor.
Some members commented, however, that there were
reasons to discount the sharp fourth-quarter increase
in the employment cost index because to a large
extent it was the result of nonrecurring developments
in a limited number of industries. Despite the upward
trend in labor compensation, gains in productivity
clearly had kept increases in unit labor costs at a very
modest level; and with unit nonlabor costs continuing
to decline, overall unit cost increases had remained
not far above zero. In these circumstances—and in
the context of highly competitive conditions in many
markets, declines in input prices and in the prices of
many commodities, including oil—rising labor costs
seemed to pose little risk of an upward impetus to
inflation in coming months.
The longer-run outlook for inflation was more
clouded and under some scenarios less promising.
Inflation expectations had been moving down according to recent surveys, and in the context of relatively
modest increases in consumer prices expected over
coming months such expectations could continue to
move lower, thereby constraining increases in compensation and prices. Nonetheless, some of the factors that had helped to moderate price increases—
including declining oil prices, the appreciation of the
dollar, and restrained increases in health insurance
costs—were not likely to continue to exert benign
effects on inflation as time went on. More fundamentally, the productivity improvement that had held
down producer costs could not necessarily be counted
466
Federal Reserve Bulletin • June 1998
on to continue to offset such costs, especially if the
economic expansion remained sufficiently rapid to
put additional pressures on available labor resources.
In keeping with the requirements of the Full
Employment and Balanced Growth Act of 1978 (the
Humphrey-Hawkins Act), the Committee reviewed
the ranges for growth of the monetary and debt
aggregates in 1998 that it had established on a tentative basis at its meeting in July 1997. Those ranges
included expansion of 1 to 5 percent for M2 and 2 to
6 percent for M3, measured from the fourth quarter
of 1997 to the fourth quarter of 1998. The associated
range for growth of total domestic nonfinancial debt
was provisionally set at 3 to 7 percent for 1998. The
tentative ranges for 1998 were unchanged from the
ranges that had been adopted initially for 1995 (in
July of that year for M3).
In reviewing the tentative ranges, the members
took note of a staff projection indicating that, given
the members' expectations for the performance of the
economy and prices and assuming no major changes
in interest rates, M2 likely would grow in 1998 in the
upper half of its tentative range, and M3 somewhat
above the top of its range. The staff analysis anticipated that the velocity of M2 would continue its
recent pattern of relatively stable behavior that was
more in line with historical experience than had been
the case in the early 1990s. The velocity of M3 was
projected to continue to decline at a somewhat faster
rate than historical experience would indicate, reflecting the greater use by business firms of institutiononly money market funds as a cash management tool
and the needs of depository institutions for appreciable non-M2 funding to finance brisk loan growth.
The staff projected that the debt of the domestic
nonfinancial sectors would grow around or perhaps
slightly above the middle of its tentative range, reflecting the credit needs of businesses facing a weaker
earnings outlook and larger merger-related retirements of equity.
In their discussion of the ranges for M2 and M3,
the members noted that the apparently greater predictability of velocity in recent years could not be
counted on to persist, given changes in financial
markets that had made investment alternatives more
readily available. As a consequence, substantial
uncertainty still surrounded projections of money
growth consistent with the Committee's basic objectives for monetary policy. In this environment, the
members did not see any firm basis for deviating
from their recent practice of setting ranges that,
assuming velocity behavior in line with historical
patterns, would serve as benchmarks for monetary
expansion consistent with longer-run price stability
and a sustainable rate of real economic growth. The
tentative ranges for 1998 had been derived in this
way, and Committee members saw no reason to
change those ranges at this time. Indeed, adjusting
the ranges to center them more closely on growth
rates deemed likely to be more consistent with the
Committee's expectations for economic activity and
prices could foster the misinterpretation that the
Committee had become much more confident of the
stability and predictability of velocity and was placing greater emphasis on M2 and M3 as gauges of the
thrust of monetary policy. Several members commented, however, that the adoption of ranges centered on the Committee's expectations for growth of
the monetary aggregates should be reconsidered in
the future if the members were to become more
confident about the relationship between the growth
of the money and measures of aggregate economic
performance. The Committee also agreed that the
range for nonfinancial debt for 1998 should be left
unchanged. The tentative range readily encompassed
the pace seen as likely to be associated with the
members' forecasts for economic activity and prices.
Accordingly, the following statement of longer-run
policy for 1998 was approved for inclusion in the
domestic policy directive:
The Federal Open Market Committee seeks monetary
and financial conditions that will foster price stability and
promote sustainable growth in output. In furtherance of
these objectives, the Committee at this meeting established
ranges for growth of M2 and M3 of 1 to 5 percent and 2 to
6 percent respectively, measured from the fourth quarter of
1997 to the fourth quarter of 1998. The range for growth of
total domestic nonfinancial debt was set at 3 to 7 percent
for the year. The behavior of the monetary aggregates will
continue to be evaluated in the light of progress toward
price level stability, movements in their velocities, and
developments in the economy and financial markets.
Votes for this action: Messrs. Greenspan, McDonough,
Ferguson, Gramlich, Hoenig, Jordan, Kelley, McTeer,
Meyer, and Mses. Minehan, Phillips, and Rivlin. Votes
against this action: None.
In the Committee's discussion of policy for the
intermeeting period ahead, all the members endorsed
a proposal to maintain an unchanged policy stance.
The economy currently was performing very well
and the outlook over the near term was for subdued
inflation and continued solid economic growth. Over
a longer horizon, the range of possible outcomes was
unusually wide, and the direction that policy would
need to move to promote sustained expansion and
damped inflation was unclear. At this point, the extent
to which the still largely anticipated external drag
from events in Asia would offset the strong upward
Minutes of the Federal Open Market Committee
momentum in domestic demand was a source of
major uncertainty. In addition, it was impossible to
predict whether or when the tightness in labor
markets would exert a more pronounced effect on
labor costs and ultimately on price inflation. Even the
thrust of the current stance of monetary policy as it
was transmitted through financial markets was open
to some question. On the one hand, a real federal
funds rate that was on the high side of historical
experience and a substantially stronger dollar suggested some restraint. From a different perspective,
however, financial conditions seemed to be quite
stimulative as evidenced by lower nominal and perhaps real intermediate and long-term interest rates,
rising equity prices, ready credit availability, and
rapid growth of the broad measures of money and
credit. While the members differed to some extent in
their forecasts of major trends in the economy and in
the risks of alternative outcomes, they agreed that,
under foreseeable circumstances, needed adjustments
to policy probably could be made on a timely basis
once the balance of underlying forces became more
evident. Accordingly, a steady policy would not incur
an unacceptable risk of a seriously deteriorating economic performance. In the interim, the greater risk
would be to make a preemptive policy move on the
basis of inadequate evidence regarding underlying
economic trends.
In the Committee's discussion of possible intermeeting adjustments to policy, all the members
agreed that prevailing uncertainties indicated the
desirability of retaining a symmetric instruction in
the directive. While a number of members expressed
the view that the next policy move was likely to be a
tightening action and one member saw a greater
probability of an easing action, the uncertainties were
sufficiently great to warrant remaining sensitive to
the need for a policy change in either direction.
Accordingly, a symmetric directive would signal the
Committee's readiness to respond promptly to developments that might threaten the economy's satisfactory performance.
At the conclusion of the Committee's discussion,
all the members indicated their support of a directive
that called for maintaining conditions in reserve markets that were consistent with an unchanged federal
funds rate of about 5Vi percent, and all also favored a
directive that did not include a presumption about the
direction of a change, if any, in the stance of policy
during the intermeeting period. Accordingly, in the
context of the Committee's long-run objectives for
price stability and sustainable economic growth, and
giving careful consideration to economic, financial,
and monetary developments, the members decided
461
that a slightly higher or a slightly lower federal funds
rate might be acceptable during the intermeeting
period. The reserve conditions contemplated at this
meeting were expected to be consistent with some
moderation in the growth of M2 and M3 over coming
months.
The Federal Reserve Bank of New York was authorized and directed, until instructed otherwise by the
Committee, to execute transactions in the System
Account in accordance with the following domestic
policy directive:
The information reviewed at this meeting suggests that
economic activity continued to grow rapidly during the
closing months of 1997. Nonfarm payroll employment
increased sharply further in December after posting very
large gains in other recent months; the civilian unemployment rate, at 4.7 percent, remained near its low for the
current economic expansion. Industrial production continued to advance at a brisk pace in the fourth quarter.
Consumer spending rose appreciably in the quarter, and
housing starts remained close to the highs of the current
expansion. Business fixed investment weakened following
exceptionally strong increases in the second and third
quarters; nonfarm inventory accumulation appears to have
picked up somewhat. The nominal deficit on U.S. trade in
goods and services narrowed significantly on average in
October and November from its level in the third quarter.
Price inflation has remained subdued despite appreciably
faster increases in worker compensation in recent months.
Most interest rates have declined on balance since the
day before the Committee meeting on December 16, 1997.
Share prices in U.S. equity markets have moved up somewhat over the period; equity markets in some other countries, notably in Asia, have remained volatile. In foreign
exchange markets, the value of the dollar has risen over the
intermeeting period relative to the currencies of several
Asian developing countries, but it has registered only a
small increase on average in relation to the currencies of
major industrial nations.
M2 and M3 continued to grow at relatively rapid rates in
December and apparently also in January. From the fourth
quarter of 1996 to the fourth quarter of 1997, M2 expanded
at a rate somewhat above the upper bound of its range for
the year and M3 at a rate substantially above the upper
bound of its range. Total domestic nonfinancial debt
expanded in 1997 at a pace somewhat below the middle of
its range.
The Federal Open Market Committee seeks monetary
and financial conditions that will foster price stability and
promote sustainable growth in output. In furtherance of
these objectives, the Committee at this meeting established
ranges for growth of M2 and M3 of 1 to 5 percent and 2 to
6 percent respectively, measured from the fourth quarter of
1997 to the fourth quarter of 1998. The range for growth of
total domestic nonfinancial debt was set at 3 to 7 percent
for the year. The behavior of the monetary aggregates will
continue to be evaluated in the light of progress toward
price level stability, movements in their velocities, and
developments in the economy andfinancialmarkets.
In the implementation of policy for the immediate future,
the Committee seeks conditions in reserve markets consis-
468
Federal Reserve Bulletin • June 1998
tent with maintaining the federal funds rate at an average
of around 5'/2 percent. In the context of the Committee's
long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, a slightly
higher federal funds rate or a slightly lower federal funds
rate might be acceptable in the intermeeting period. The
contemplated reserve conditions are expected to be consistent with some moderation in the growth in M2 and M3
over coming months.
Votes for this action: Messrs. Greenspan, McDonough,
Ferguson, Gramlich, Hoenig, Jordan, Kelley, Meyer,
McTeer, Mses. Minehan, Phillips, and Rivlin. Votes
against this action: None
It was agreed that the next meeting of the Committee would be held on Tuesday, March 31, 1998.
The meeting adjourned at 10:50 a.m.
Donald L. Kohn
Secretary
469
Legal Developments
FINAL RULE—AMENDMENTS
TO REGULATIONS T AND X
The Board of Governors is amending 12 C.F.R. Parts 220
and 224, its Regulations T and X (Securities Credit Transactions; List of Marginable OTC Stocks; List of Foreign
Margin Stocks). The List of Marginable OTC Stocks
(OTC List) is composed of stocks traded over-the-counter
(OTC) in the United States that qualify as margin securities under Regulation T, Credit by Brokers and Dealers.
The List of Foreign Margin Stocks (Foreign List) is composed of foreign equity securities that qualify as margin
securities under Regulation T. The OTC List and the
Foreign List are published four times a year by the Board.
This document sets forth additions to and deletions from
the previous OTC List and the previous Foreign List.
Effective May 11, 1998, 12 C.F.R. Parts 220 and 224 are
amended as set forth below. Accordingly, pursuant to the
authority of sections 7 and 23 of the Securities Exchange
Act of 1934, as amended (15 U.S.C. 78g and 78w), and in
accordance with 12 C.F.R. 220.2 and 220.11, there is set
forth below a listing of deletions from and additions to the
OTC List and the Foreign List.
Deletions
Stocks
From The List Of Marginable
OTC
Stocks Removed For Failing Continued Listing
Requirements
4Health, Inc.: Warrants (expire 01-15-1998)
Accumed International, Inc.: No par common
Aegis Consumer Funding Group, The: $.01 par common
American United Global, Inc.: $.01 par common; Warrants
(expire 07-31-1998)
Amtrust Capital Corporation: $.01 par common
Aps Holding Corporation: Class A, $.01 par common
Arnold Palmer Golf Company: $.50 par common
Bane One Corporation (Ohio): Series C, no par convertible
preferred
BankUnited Financial Corporation (Florida): Series 1993, $.01
par non-cumulative convertible preferred; $.01 par noncumulative perpetual preferred
Bird Corporation: $1.00 par common
Boyds Wheels, Inc.: No par common
Cam Designs, Inc.: Warrants (expire 07-24-2000)
Campo Electronics, Appliances and Computers, Inc.: $.10
par common
Chantal Pharmaceutical Corporation: $.01 par common
Cityscape Financial Corporation: $.01 par common
Computer Language Research, Inc.: $.01 par common
Consolidated Stainless, Inc.: $.01 par common
Consumers Financial Corporation: 8.5% Series A, convertible preferred
Country Star Restaurants, Inc.: $.001 par common
Datamarine International, Inc.: $.01 par common
Deflecta-Shield Corporation: $.01 par common
Deswell Industries, Inc.: Warrants (expire 07-17-2000)
Equitex, Inc.: $.001 par common
First Enterprise Financial Group, Inc.: $.01 par common
First Robinson Financial Corporation: $.01 par common
General Acceptance Corporation: No par common
Helisys, Inc.: $.001 par common
Hemasure, Inc.: $.01 par common
Intel Corporation: Warrants (expire 03-14-1998)
Kaman Corporation: Depositary Shares
KWG Resources, Inc.: No par common
Manhattan Bagel Company, Inc.: No par common
Molten Metal Technology, Inc.: $.01 par common
North Coast Energy, Inc.: Series B, $.01 par cumulative
convertible preferred
Northwest Teleproductions, Inc.: $.01 par common
Omnis Technology Corporation: $.01 par common
Photran Corporation: No par common
Precision Standard, Inc.: $.0001 par common
Procept, Inc.: $.01 par common
Quality Dino Entertainment, Ltd.: No par common
Reliance Acceptance Group, Inc.: $.01 par common
Rheometric Scientific, Inc.: No par common
Rose's Holdings, Inc.: No par common; Warrants
(expire 04-28-2002)
SI Diamond Technology, Inc.: $.001 par common
Telegen Corporation: No par common
TLII Liquidating Corporation: $.01 par common
Universal Hospital Services, Inc.: $.01 par common
Universal Seismic Associates, Inc.: $.0001 par common
470
Federal Reserve Bulletin • June 1998
VDC Corporation. Ltd.: $.10 par common
Videolan Technologies, Inc.: $.01 par common
Stocks Removed For Listing On A National
Securities Exchange Or Being Involved In An
Acquisition
Aaron Rents, Inc.: $.50 par common: $1.00 par common
Advantage Bancorp, Inc. (Wisconsin): $.01 par common
Allied Holdings, Inc.: No par common
Amti Communications Corporation: $.20 par common
America First Participating/Preferred Equity Mortgage LP:
Exchangeable units of limited partnership
American Greetings Corporation: Class A, $1.00 par common
American Vanguard Corporation: $.10 par common
Amerus Life Holdings, Inc.: Class A, no par common
Arbor Drugs, Inc.: $.01 par common
ATC Group Services, Inc.: $.01 par common: Class C,
Warrants (expire 04-30-1998)
Autobond Acceptance Corporation: No par common
Bally Total Fitness Holding Corporation: $.01 par common
Bally's Grand, Inc.: $.01 par common: Warrants
(expire 08-19-2000)
BGS Systems, Inc.: $.10 par common
Blimpie International, Inc.: $.01 par common
Brooks Fiber Properties, Inc.: $.01 par common
Cannon Express, Inc.: $.01 par common
Chartwell Leisure, Inc.: $.01 par common
Chips and Technologies, Inc.: $.01 par common
Chittenden Corporation: $1.00 par common
Comrnnet Cellular, Inc.: $.001 par common
Communications Central, Inc.: $.01 par common
CompuServe Corporation: $.01 par common
Continental Circuits Corporation: $.01 par common
Cotelligent Group, Inc.: $.01 par common
Covenant Bancorp, Inc.: $5.00 par common
Cypros Pharmaceutical Corporation: No par common
DBA Systems, Inc.: $.10 par common
El Chico Restaurants, Inc.: $.10 par common
Emerald Isle Bancorp, Inc. (Massachusetts): $1.00
par common
FFVA Financial Corporation: $.10 par common
First Alert, Inc.: $.01 par common
First State Corporation: $1.00 par common
First United Bancorporation (South Carolina): $1.67
par common
Fort Wayne National Corporation: No par common
Fulcrum Technologies, Inc.: No par common
George Mason Bankshares, Inc. (Virginia): $1.66 par common
Grante Financial, Inc.: $.001 par common
Great Financial Corporation: $.01 par common
Gulf South Medical Supply, Inc.: $.01 par common
Heartstream, Inc.: $.001 par common
Hector Communications Corporation: $.01 par common
Holmes Protection Group, Inc.: $.01 par common
Homecorp, Inc.: $.01 par common
Hugoton Energy Corporation: No par common
ILC Technology, Inc.: No par common
Impact Systems, Inc.: No par common
Individual, Inc.: $.01 par common
International Petroleum Corporation: No par common
Kapson Senior Quarters Corporation: $.01 par common
Key Florida Bancorp, Inc.: $.01 par common
Laser Industries Limited: Ordinary shares; (par NIS 0.0001)
Lexford, Inc.: No par common
Life Bancorp, Inc. (Virginia): $.01 par common
Lin Television Corporation: $.01 par common
MacDermid, Incorporated: No par common
MAS Technology Limited: American Depositary Receipts
Mid Continent Bancshares, Inc. (Kansas): $. 10 par common
Midwest Federal Financial Corporation: $.01 par common
ML Bancorp, Inc. (Pennsylvania): $.01 par common
Mobile Gas Service Corporation: $2.50 par common
Moovies, Inc.: $.001 par common
Netcom On-Line Communication Services, Inc.: $.01
par common
New Jersey Steel Corporation: $.01 par common
Norwich Financial Corp.: $1.00 par common
Omni Insurance Group, Inc.: $.01 par common
Onbancorp, Inc. (New York): $1.00 par common
Oregon Metallurgical Corporation: $1.00 par common
Orion Network Systems, Inc.: $.01 par common
Pembridge. Inc.: No par common
Perpetual Bank, A Federal Savings Bank (South Carolina):
$ 1.00 par common
Perseptive Biosystems, Inc.: $.01 par common
Plasti-Line, Inc.: $.001 par common
Proxima Corporation: $.001 par common
Puretec Corporation: $.01 par common
Raptor Systems, Inc.: $1.00 par common
Redwood Trust, Inc.: $.01 par common; 9.74% Class B, $.01
par cumulative convertible preferred
Reeds Jewelers, Inc.: $.10 par common
Rottlund Company, Inc., The: $.01 par common
Sagebrush, Inc.: No par common
Sanco Corporation: $.01 par common
Shared Technologies Fairchild, Inc.: $.001 par common
Shorewood Packaging Corporation: $.01 par common
Signature Brands USA, Inc.: $.01 par common
Software Artistry, Inc.: No par common
Spine-Tech, Inc.: $.01 par common
Spinnaker Industries, Inc.: No par common; Class A, no
par common
Legal Developments
Stage Stores, Inc.: $.01 par common
State of the Art, Inc.: No par common
Steck-Vaughn Publishing Corporation: $.01 par common
Stokely USA, Inc.: $.05 par common
Suburban Ostomy Supply Co., Inc.: No par common
Symetrics Industries, Inc.: $.25 par common
Technology Modeling Associates, Inc.: No par common
Tysons Financial Corporation: $5.00 par common
Universal Outdoor Holdings, Inc.: $.01 par common
Video Services Corporation: $.01 par common
Visigenic Software, Inc.: $.001 par common
Wausau Paper Mills Corporation: $.50 par common
Xpedite Systems, Inc.: $.01 par common
Additions to The List of Marginable OTC Stocks
ACSYS, Inc.: No par common
Advance Financial Bancorp.: $.10 par common
Allergan Specialty Therapeutics, Inc.: Class A, $.01
par common
Altair International, Inc.: No par common
Ambassador Bank of the Commonwealth: $4.00 par common
American Champion Entertainment, Inc.: $.0001 par common
American Dental Partners, Inc.: $.01 par common
American Safety Insurance Group, Ltd.: $.01 par common
Annapolis National Bancorp, Inc.: $.01 par common
Annuity and Life re Holdings, Ltd.: $1.00 par common
Artisan Components, Inc.: $.001 par common
Asha Corporation: $.0001 par common
Associated Materials Incorporated: $.0025 par common
Astropower, Inc.: $.01 par common
Atlantic Gulf Communities Corporation: Warrants Series A,
(expire 06-23-2004); Warrants Series B, (expire
06-23-2004); Warrants Series C, (expire 06-23-2004)
Atlantic Pharmaceuticals, Inc.: $.001 par common
Atlantic Realty Trust: Shares of beneficial interest
Aviation Group, Inc.: $.01 par common
Bank Rhode Island: $1.00 par common
Big Buck Brewery & Steakhouse, Inc.: $.01 par common
Birner Dental Management Services, Inc.: No par common
BMJ Medical Management, Inc.: $.001 par common
BNC Mortgage, Inc.: $.001 par common
Bolle, Inc.: $.01 par common
Brokline Bancorp, Inc.: $.01 par common
C & F Financial Corporation: $1.00 par common
Capital Automotive Reit: Shares of beneficial interest
Career Education Corporation: $.01 par common
Cavalry Bancorp, Inc.: No par common
CCA Companies, Inc.: $.001 par common
Century Bancshares, Inc.: $1.00 par common
Coast Federal Litigation Contingent Payment Rights Trust:
Contingent Payment Rights
All
Colony Bankcorp, Inc.: $10.00 par common
Columbia Financial of Kentucky, Inc.: No par common
Columbia Sportswear Company: No par common
Commnet Cellular, Inc.: $.001 par common
Compass International Services Corporation: $.01
par common
Complete Business Solutions, Inc.: No par common
Condor Technology Solutions, Inc.: $.01 par common
Cowlitz Bancorporation: No par common
Culturalaccess Worldwide, Inc.: $.01 par common
Curagen Corporation: $.01 par common
Cytoclonal Pharmaceutics, Inc.: $.01 par common
Decoma International, Inc.: Class A, common shares
Dispatch Management Services Corporation: $.01
par common
Docucorp International, Inc.: $.01 par common
Doubleclick, Inc.: $.001 par common
Drypers Corporation: $.001 par common
Dura Automotive Systems, Inc.: Convertible Trust Preferred
E-Net, Inc.: $.01 par common
Earthshell Corporation: $.01 par common
EDAC Technologies Corporation: $.0025 par common
Elcotel, Inc.: Redeemable warrants
Elder-Beerman Stores Corporation, The: No par common
EnergySouth, Inc.: $2.50 par common
Esquire Communications, Ltd.: $.01 par common
Exodus Communications: $.001 par common
Extended Systems Incorporated: $.001 par common
Fidelity Bankshares, Inc.: Trust preferred securities
First Consulting Group, Inc.: $.001 par common
First South Africa Corporation: $.01 par common
Flagstar Bancorp, Inc.: Class A, preferred
Florafax International, Inc.: $.01 par common
Forsoft, Ltd.: Ordinary shares (ISL .001)
Frontier Financial Corporation: No par common
Gaston Federal Bancorp, Inc.: $1.00 par common
GB Foods Corporation: $.08 par common
Genesis Microchip, Inc.: No par common
Getty Images, Inc.: $.01 par common
Global Telesystems Group, Inc.: $.10 par common
Grand Court Lifestyles, Inc.: $.01 par common
GST Telecommunications, Inc.: No par common
Gulf West Banks, Inc.: No par common
Hawker Pacific Aerospace: No par common
Headlands Mortgage Company. No par common
Henley Healthcare, Inc.: $.01 par common
Herbalife International, Inc.: DECS Trust III
Heritage Bancorp, Inc. (South Carolina): $.01 par common
Hollis-Eden Pharmaceuticals: $.01 par common
Home Loan Financial Corporation: No par common
Hopfed Bancorp, Inc. (Kentucky): $.01 par common
Horizon Medical Products, Inc.: $.001 par common
Horizon Offshore, Inc.: $1.00 par common
472
Federal Reserve Bulletin • June 1998
Icon CMT Corporation: $.001 par common
Independence Community Bank Corporation: $.01
par common
Indigo Aviation Akiebolag: American Depositary Shares
Industrial Holdings, Inc.: Series D, warrants
(expire 01-14-2000)
Information Analysis Incorporated: $.01 par common
International Bancshares Corporation: $1.00 par common
International Fibercom, Inc.: No par common
Investors Real Estate Trust: No par shares of beneficial
interest
Isomet Corporation: $ 1.00 par common
ISS Group, Inc.: $.001 par common
Jameson Inns. Inc.: Series A, preferred
JPS Textile Group: $.01 par common
Ladish Co., Inc.: $.01 par common
Level 3 Communications, Inc.: $.01 par common
LJL Biosystems, Inc.: $.001 par common
Lundin Oil AB: Global Depositary Receipts (.50 SEK)
Market Financial Corporation: No par common
Mercury Computer Systems: $.01 par common
Micromuse, Inc.: $.01 par common
Midwest Bane Holdings, Inc.: $.01 par common
Millenium Sports Management, Inc.: Warrants
(expire 06-30-1998)
Miller Exploration Company: $.01 par common
MTI Technology Corporation: $.001 par common
Multimedia Games, Inc.: Class A warrants
(expire 11-12-2001)
Nanogen, Inc.: $.001 par common
Nara Bank National Association: $3.00 par common
National City Bancshares, Inc. (Indiana): Cumulative
Trust Preferred
NET.BNK, Inc.: S.01 par common
North American Scientific, Inc.: $.01 par common
North Valley Bancorp: No par common
Northern Bank of Commerce: $1.00 par common
Norwood Financial Corporation: $. 10 par common
Nutmeg Federal Savings & Loan Association: $.005
par common
Nutraceutical International Corporation: $.01 par common
Queen Sand Resources, Inc.: $.0015 par common
Republic Banking Corporation of Florida: $.01 par common
Richmond County Financial Corporation: $.01 par common
Royal Olympic Cruise Lines, Inc.: $.01 par common
Second National Financial Corporation: $2.50 par common
Shire Pharmaceuticals Group, PLC: American Depositary
Shares
Shoe Pavilion, Inc.: $.001 par common
SI Technologies, Inc.: $.01 par common
Smed International, Inc.: No par common
Smith Corona Corporation: $.001 par common
Sonosight, Inc.: $.01 par common
South Umpqua State Bank: $.833 par common
Southbank Shares, Inc.: $.01 par common
Sportsman's Guide, Inc., The: $.01 par common
Sterling Financial Corporation (Pennsylvania): $5.00
par common
Steven Myers & Associates, Inc.: No par common
Sunpharm Corporation: $.0001 par common
Surmodics, Inc.: $.05 par common
Symphonix Devices, Inc.: $.001 par common
Transgene S.A.: American Depositary Receipts
United Investors Realty Trust: No par common
Universal Display Corporation: $.10 par common
USN Communications, Inc.: $.01 par common
Verisign, Inc.: $.001 par common
Viagrafix Corporation: $.01 par common
Visual Networks, Inc.: $.01 par common
Vysis, Inc.: $.001 par common
Webster Financial Corporation: Series B, 8.625% cumulative
redeemable preferred
Williams Industries, Inc.: $.01 par common
Wilshire Real Estate Investment Trust, Inc.: $.001
par common
Deletions From the Foreign Margin List
Australia
AAPC Limited: Ordinary shares, par A$0.50
ICI Australia Limited: Ordinary shares, par A$1.00
Omega Worldwide, Inc.: $.10 par common
On Stage Entertainment, Inc.: $.01 par common
Online System Services, Inc.: No par common
Optelecom, Inc.: $.03 par common
Brazil
Paulson Capital Corporation: No par common
PC Connection, Inc.: $.01 par common
Penn Octane Corporation: $.01 par common
Pennsylvania Manufacturers Corporation: $5.00 par common
Pittsburgh Home Financial Corporation: 8.56% cumulative
trust preferred
Pizza Inn, Inc.: $.01 par common
Province Healthcare Company: $.01 par common
Brasmotor S.A.: No par preferred
Companhia Siderurgica Belgo Mineir: No par common
Companhia Siderurgica Belgo Mineir: No par non-voting,
preferred
Companhia Siderurgica Tubarao: No par non-voting,
Preferred B
Companhia Vidraria Santa Marina on: No par common
Light Servicios de Electricidade S.A.: No par common
Legal Developments
Canada
South Africa
Dominion Textile Inc.: No par common
All
Kloof Gold Mining Company Limited: Ordinary shares,
par 0.25 South
Norcen Energy Resources Limited: No par Subordinate-voting
France
Bertrand Faure SA: Ordinaryshares, par 5 French
Cetelem SA: Ordinary shares, par 45 French
Compagnie Bancaire SA: Ordinary shares, par 100 French
Germany
Adidas AG: Bearer shares par DM 50
Victori Holding AG: Registered shares, par DM 50
Japan
Amada Metrecs Co., Ltd.: ¥50 par common
Aoki International Co., Ltd.: ¥50 par common
Asahi Diamond Industrial Co., Ltd.: ¥50 par common
Cosmo Securities Co., Ltd.: ¥50 par common
Daiichi Corp.:: ¥50 par common
Daiken Corp.: ¥50 par common
Green Cross Corporation: ¥50 par common
Heiwado Co., Ltd.: ¥50 par common
Hokkaido Bank, Ltd.: ¥50 par common
Hokkoku Bank, Ltd.: ¥50 par common
Izumi Co., Ltd.: ¥50 par common
Kankaku Securities Co., Ltd: ¥50 par common
Kayaba Industry Co., Ltd.: ¥50 par common
Kenwood Corp.: ¥50 par common
Koa Oil Co., Ltd.: ¥50 par common
Kyodo Printing Co., Ltd.: ¥50 par common
Maruetsu Inc.: ¥50 par common
Mitsubishi Cable Industries, Ltd.: ¥50 par common
Mitsui Real Estate Sales Co., Ltd.: ¥50 par common
Noritz Corp.: ¥50 par common
Okamoto Industries, Inc.: ¥50 par common
Okasan Securities Co., Ltd.: ¥50 par common
Rengo Co., Ltd.: ¥50 par common
SXL Corp.: ¥50 par common
Sankyo Aluminium Industry Co., Ltd.: ¥50 par common
Shinmaywa Industries, Ltd.: ¥50 par common
SS Pharmaceutical Co., Ltd.: ¥50 par common
Tadano, Ltd.: ¥50 par common
Toagosei Co., Ltd.: ¥50 par common
Tokyotokeiba Co., Ltd.: ¥50 par common
Toyo Communication Equipment Co.: ¥50 par common
Toyo Engineering Corp.: ¥50 par common
Toyo Exterior Co., Ltd.: ¥50 par common
Toyota Auto Body Co., Ltd.: ¥50 par common
Uniden Corp. ¥50 par common
Wako Securities Co., Ltd.: ¥50 par common
Norway
Storli ASA: B Ordinary Common, par 10 Norwegian
Storli ASA: A Ordinary Common, par 10 Norwegian
Spain
Sociedad Espannola de Carburos: Bearer shares, par
1000 pesetas
United Kingdom
Allied Colloids Group PLC: Ordinary shares, par 10 p
Burton Group PLC, The: Ordinary shares, par 10 p
Kwik Save Group PLC: Ordinary shares, par 10 p
Reuters Holdings PLC: B Ordinary, par 2.5 p
T&N PLC: Ordinary shares, par LI
Vendome Luxury Group PLC: Ordinary shares, par 10 p
Additions to the Foreign Margin List
Australia
Orica Limited: Ordinary shares, par A$1.00
Brazil
Companhia Siderurgica Tubarao On: B preferred shares
Companhia Siderurgica Tubarao PN: Preferred B Shares
Light Servicios de Electricidade: No par common
Denmark
Ratin A/S: Series B, par 1 Danish krone
Ratin A/S: Series A, par 1 Danish krone
Germany
Adidas-Salomon AG: Bearer shares, par DM 50
Ergo Versicherumgs Gruppe: Ordinary shares, par DM 5
Greece
Alpha Credit Bank, S.A.: Common registered, par Greek
Aluminium Co. of Greece, S.A.: Common registered,
par US$27.50
Aluminium Co. of Greece, S.A.: Preference, par Greek drachmas 700
Aspis Pronia General Insurances: Common registered,
par Greek
Athens Medical Center, S.A.: Common registered, par Greek
Attica Enterprises, S.A.: Common, par Greek drachmas 200
Bank of Piraeus, S.A.: Common registered, par Greek
Chipita International, S.A.: Common bearer, par Greek drachmas
Commercial Bank of Greece: Common registered, par Greek
Delta Dairy, S.A.: Common, par Greek drachmas 200
Delta Dairy, S.A.: Preference, par Greek drachmas 200
474
Federal Reserve Bulletin • June 1998
Elais Oleaginous Production, S.A.: Common, par Greek drachmas 575
Elval Aluminum Process Co., S.A.: Commonbearer, par Greek
drachmas
Ergo Bank, S.A.: Common registered, par Greek
Ethniki General Insurance co., S.A.: Common registered,
par Greek
Goodys, S.A.: Common bearer, par Greek drachmas
Halkor, S.A.: Common bearer, par Greek drachmas
Hellas Can-Packaging Manufacturers: Common, par Greek
drachmas 300
Hellenic Bottling Co., S.A.: Common bearer, par Greek drachmas
Hellenic Sugar Industry, S.A.: Common bearer, par Greek
drachmas
Hellenic Telecom Organization, S.A.: Common registered,
par Greek
Heracles General Cement Co.: Common registered, par Greek
Intracom, S.A.: Preference registered, par Greek
Intracom, S.A.: Common registered, par Greek
Intrasoft, S.A.: Common registered, par Greek
Ionian & Popular Bank of Greece: Common registered,
par Greek
Michaniki, S.A.: Common registered, par Greek
Michaniki, S.A.: Preference registered, par Greek
Mytilineos Holdings, S.A.: Common bearer, par Greek drachmas
N.I.B.I.D. (National Investment Bank): Common registered,
par Greek
N.I.B.I.D. (National Investment Bank): Preference registered,
par Greek
National Bank of Greece: Common registered, par Greek
National Mortgage Bank, S.A.: Common registered, par Greek
Papastratos Cigarette Co., S.A.: Common, par Greek drachmas 200
Silver & Baryte Ores Mining Co.: Common bearer, par Greek
drachmas
Titan Cement Co.: Preference registered, par Greek
Titan Cement Co.: Common registered, par Greek
Banco Mello, S.A.: Registered, par ESC 1,000
Banco Totta & Acores, S.A.: Registered, par ESC 1,000
BCP (Banco Comercial Portugues): Registered, par ESC 1,000
BPI-SGPS (Banco Portugeues de): Registered, par ESC 1,000
Brisa (Auto-Estradas de Portugal): Registered, par ESC 1,000
Cimpor (Cimentos de Portugal): Registered, par ESC 1,000
Companhia de Seguros Tranquilidade: Registered, par
ESC 1,000
Credito Predial Portuguese, S.A.: Registered, par ESC 1,000
EDP (Electricidade de Portugal), Registered, par ESC 1,000
Inparsa (Industrial Participacoes): Ordinary, par ESC 1,000
Jeronimo Martins (Estabelecimentos): Ordinary, par
ESC 1,000
Portucei Industrial, S.A.: Registered, par ESC 1,000
Portugal Telecom, S.A., Registered, par ESC 1,000
Semapa, S.A.: Ordinary, par ESC 1,000
Sonae Industria, S.A.: Ordinary, par ESC 1,000
Sonae Investimentos (Societe): Ordinary, par ESC 1,000
Telecel Communicacoes Pessoais: Ordinary, par ESC 1,000
Singapore
Inchcape Motors, Ltd.: Ordinary shares, par S$.50
South Africa
Gold Fields, Limited: Ordinary shares, par .01 South
United Kingdom
Debenhams PLC: Ordinary shares, par 10 p
Reuters Group PLC: Ordinary shares, par 25 p
ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT
Orders Issued Under Section 3 of the Bank Holding
Company Act
Italy
PAB Bankshares, Inc.
Valdosta, Georgia
Banca di Roma, SPA: Ordinary shares, par 500 lira
Order Approving Merger of Bank Holding Companies
Mexico
PAB Bankshares, Inc. ("PAB"), a bank holding company
within the meaning of the Bank Holding Company Act
("BHC Act"), has requested the Board's approval under
section 3 of the BHC Act to merge with Investors Financial
Corporation ("Investors"), and thereby acquire Bainbridge
National Bank, both in Bainbridge, Georgia.
Notice of the proposal, affording interested persons an
opportunity to submit comments, has been published
(63 Federal Register 11,446 (1998)). The time for filing
comments has expired, and the Board has considered the
proposal and all comments received in light of the factors
set forth in section 3 of the BHC Act.
PAB owns three depository institutions in Georgia and is
the 28th largest depository institution in the state, controlling approximately $247.3 million in deposits, representing
Grupo Modelo S.A.: Class C, No par common
Television Azteca S.A. (CPO): No par common
Tubos de Acero Mexico S.A.: No par common
Norway
Odfjell ASA: B Ordinary shares, par 10 Norwegian
Odfjell ASA: A Ordinary shares, par 10 Norwegian
Portugal
Banco Espinto Santo e Comercial de: Registered, par
ESC 1,000
Legal Developments
less than 1 percent of total deposits in depository institutions in Georgia.1 Investors is the 130th largest depository
institution in Georgia, controlling approximately $64.3 million in deposits, representing less than 1 percent of total
deposits in depository institutions in the state. On consummation of the proposal, PAB would become the 20th largest depository institution, controlling deposits of $311.6
million, representing less than 1 percent of total deposits in
depository institutions in Georgia.
Competitive Considerations
The BHC Act prohibits the Board from approving a proposal if it would result in a monopoly or if the effect of the
proposal may be substantially to lessen competition in any
relevant market, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of
the transaction in meeting the convenience and needs of
the community to be served.2
PAB and Investors compete in the Bainbridge banking
market, which is defined by the Federal Reserve Bank of
Atlanta ("Reserve Bank") as an area approximated by
Decatur and Seminole Counties in Georgia.3 PAB contends
that the area delineated by the Reserve Bank should be
expanded to include adjacent areas that encompass Tallahassee, Florida ("Tallahassee"); Dothan, Alabama ("Dothan'"); and Albany and Cairo, Georgia.
The Board concludes, however, that the appropriate market for analyzing the competitive effects of the proposal is
the Bainbridge banking market as previously defined.4 The
Board bases its conclusion on an analysis of employment
opportunities, commuting data, shopping patterns, check
clearing and deposit data, interviews with local bankers,
and other facts of record indicating that there is substantial
commuting, travel, and commercial interaction between
Decatur and Seminole Counties.
Decatur County has a significantly larger population
than Seminole County,5 and some of the area's largest
employers are in Bainbridge, which is in Decatur County.6
1. State deposit data are as of June 30, 1997. In this context,
depository institutions include commercial banks, savings banks, and
savings associations.
2. 12U.S.C. § l842(c)(l)(B).
3. Decatur and Seminole Counties are adjacent rural counties in the
southwestern corner of Georgia. Both counties border Florida, and
Seminole County also borders Alabama.
4. The Board and the courts have found that the relevant banking
market for analyzing the competitive effects of a proposal must reflect
commercial and banking realities and should consist of the local area
where local customers can practicably turn for alternatives. See
St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673. 674 (1982).
See also United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 374
(1963); United States v. Phillipsburg Nat'l Bank, 399 U.S. 350 (1969).
5. Data from the United States Census Bureau for 1990 show that
Decatur County has a population of approximately 26,500 and Seminole County has a population of approximately 9,250.
6. Bainbridge has a population of 11,231 and is the largest town in
the two counties. Employers in Bainbridge include one manufacturer
that employs more than 1000 workers and four organizations that each
employ 400 workers.
475
Commuting data from the Census Bureau for 1990 show
that more than 20 percent of Seminole County residents
commute to Decatur County for employment. Decatur
County also offers area residents the opportunity to purchase products and services at six shopping centers, several
major department stores, and a number of restaurants. Data
from the Georgia Highway Department for 1996 show that
approximately 22 percent of Seminole County's residents
travel daily to Decatur County. Residents of Decatur and
Seminole Counties also have access to the same newspapers and radio stations.7
Check clearing data for a two-day period from the subsidiary banks of PAB and Investors in Decatur County also
show that approximately 10 percent of the checks processed were drawn on banks in Seminole County. In addition, deposit data from PAB's subsidiary bank in Decatur
County show that the bank has a deposit relationship with
approximately 8 percent of the households in Seminole
County. Interviews with senior managers of banks in Decatur County and in Seminole County, moreover, indicated
that the banks in each county substantially compete for
customers in the other county and that the banks have
significant customer bases in the other county.
The facts of record, however, do not support expanding
the banking market as suggested by PAB. Bainbridge is
approximately 42 miles northwest of Tallahassee; 52 miles
southeast of Dothan; and 57 miles southwest of Albany.
Commuting data indicate that approximately 4 percent of
the employees in the Bainbridge area commute to jobs in
the Tallahassee Metropolitan Statistical Area ("MSA"),
and data from the Georgia Highway Department indicate
that less than 3.5 percent of residents in the Bainbridge
area travel daily to Tallahassee. Neither the Tallahassee
MSA nor the Tallahassee Ranally Metropolitan Area
("RMA") include either Decatur or Seminole Counties,
confirming that there is insufficient economic integration to
warrant considering these counties to be within the same
banking market as Tallahassee.8 Commuting data also indicate that a de minimis percentage of Bainbridge area residents commute to the Dothan MSA, the Albany MSA, or
Cairo, Georgia, and there are no other indications of economic integration to support including these areas within
the Bainbridge banking market.9
In light of these, and all facts of record, the Board
concludes that the Bainbridge banking market reflects com-
7. A free weekly newspaper published in Bainbridge circulates to a
significant percentage of households in Seminole County. In addition,
two radio stations in Decatur County broadcast to surrounding areas,
including Seminole County. Decatur and Seminole Counties also are
in the same local telephone calling area.
8. An MSA designation is made by the Office of Management and
Budget on the basis of an area's population and includes surrounding
counties with strong economic and social ties to a central county. An
RMA is a privately defined compact geographic area with relatively
high population density that is linked by commuting, retail, and
wholesale trade patterns.
9. The MSA designations for Albany and Dothan do not include
Decatur or Seminole Counties. The RMA designations that include
these cities also do not include Decatur or Seminole Counties.
476
Federal Reserve Bulletin • June 1998
mercial and banking realities and represents an area where
local customers can practicably turn for alternatives. Accordingly, the relevant banking market for considering the
competitive effects of the proposal is the Bainbridge banking market as denned above.
Consummation of the proposal would exceed the Department of Justice Merger Guidelines ("DOJ Guidelines") in
the Bainbridge banking market.10 In the Bainbridge banking market, PAB is the third largest depository institution,
controlling $52.9 million in deposits, representing
15.1 percent of total deposits in depository institutions in
the market ("market deposits")." Investors is the largest
depository institution in the market, controlling $64.3 million in deposits, representing 18.4 percent of market deposits. On consummation of the proposal, PAB would become
the largest depository institution in the market, controlling
$117.2 million in deposits, representing 33.6 percent of
market deposits. The HHI would increase by 557 points to
2036.
The Bainbridge banking market presents unique considerations in analyzing the competitive effects of the proposal. Although it is a small rural banking market with
total market deposits of approximately $350 million, seven
competitors would remain in the market after consummation of the proposal. Five competitors each would control
significant shares of market deposits after consummation
of the proposal that range from approximately 10 percent
to approximately 18 percent of market deposits. Given the
size of the market, the number of competitors and the
relative size of the remaining competitors are significant
and unique factors that substantially mitigate the potential
competitive effects of the transaction.
The Bainbridge banking market also has some characteristics that make it attractive for entry. Data for 1997 show
that deposits per office in the Bainbridge banking market
are greater than the averages for other non-MSA counties
in Georgia. In the Bainbridge banking market, total banking deposits have increased by 39.6 percent between 1993
and 1997, compared to 20.9 percent in other non-MSA
counties in Georgia. Since 1995, three bank holding companies, including PAB, have entered the banking market by
acquiring banks that only operated in the Bainbridge banking market.
The Board concludes that the potential adverse competitive effects of the proposal would be substantially mitigated by these considerations. The Justice Department
reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Bainbridge banking market or any other relevant banking market. Based on
all the facts of record, and for the reasons discussed above,
the Board concludes that consummation of the proposal is
not likely to result in any significantly adverse effects on
competition or on the concentration of banking resources
in the Bainbridge banking market or any other relevant
banking market.
Other Considerations
The BHC Act requires the Board, in acting on an application, to consider the financial and managerial resources and
future prospects of the companies and banks involved, the
convenience and needs of the communities to be served,
and certain supervisory factors. The Board has reviewed
these factors in light of the record, including supervisory
reports of examination assessing the financial and managerial resources of the organizations. Based on all the facts of
record, the Board concludes that the financial and managerial resources and the future prospects of PAB, Investors,
and their respective subsidiary banks are consistent with
approval, as are the other supervisory factors the Board
must consider under section 3 of the BHC Act. In addition,
considerations related to the convenience and needs of the
communities to be served, including the records of performance of the institutions under the Community Reinvestment Act, are consistent with approval of the proposal.
Conclusion
10. Under the revised DOJ Guidelines, 49 Federal Register 26,823
(June 29, 1984), a market in which the post-merger HerfindahlHirschman Index ("HHI") exceeds 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank
merger or acquisition generally will not be challenged (in the absence
of other factors indicating anticompetitive effects) unless the postmerger HHI is at least 1800 and the merger increases the HHI by more
than 200 points. The Department of Justice has stated that the higher
than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limitedpurpose lenders and other non-depository financial entities.
11. Market share data used to analyze the competitive effects of the
proposal are as of June 30, 1997. These data are based on calculations
in which the deposits of thrift institutions are included at 50 percent.
The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of
commercial banks. See Midwest Financial Group, 75 Federal Reserve
Bulletin 386 (1989); National City Corporation, 70 Federal Reserve
Bulletin 743 (1984). Thus, the Board has regularly included thrift
deposits in the calculation of market share on a 50-percent weighted
basis. See, e.g., First Hawaiian. Inc., 77 Federal Reserve Bulletin 52
(1991).
Based on the foregoing, and in light of all the facts of
record, the Board has determined that the application
should be, and hereby is, approved. The Board's approval
is specifically conditioned on compliance by PAB with all
the commitments made in connection with the application.
For the purposes of this action, the commitments and
conditions relied on by the Board in reaching its decision
are deemed to be conditions imposed in writing by the
Board in connection with its findings and decision and, as
such, may be enforced in proceedings under applicable
law.
The acquisition of the banks shall not be consummated
before the fifteenth calendar day following the effective
date of this order, or later than three months after the
effective date of this order, unless such period is extended
for good cause by the Board or by the Reserve Bank,
acting pursuant to delegated authority.
Legal Developments
By order of the Board of Governors, effective April 27,
1998.
Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and
Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich.
JENNIFER J. JOHNSON
Deputy Secretary of the Board
Orders Issued Under Section 4 of the Bank Holding
Company Act
North Fork Bancorporation, Inc.
Melville, New York
Order Approving Notice to Acquire Shares of a Savings
Association
North Fork Bancorporation, Inc. ("North Fork"), a bank
holding company within the meaning of the Bank Holding
Company Act ("BHC Act"), has requested the Board's
approval under section 4(c)(8) of the BHC Act
(12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's
Regulation Y (12 C.F.R. 225.24) to acquire up to
9.9 percent of the voting shares of Long Island Bancorp,
Inc. ("Bancorp"), and thereby acquire an interest in Bancorp's wholly owned subsidiary, The Long Island Savings
Bank, FSB ("Savings Bank"), both in Melville, New
York.1
Notice of the proposal, affording interested persons an
opportunity to submit comments, has been published
(63 Federal Register 11,446 (1998)). The time for filing
comments has expired, and the Board has considered the
notice and all comments received in light of the factors set
forth in section 4(c)(8) of the BHC Act.
North Fork, with total consolidated assets of approximately $6.8 billion, owns North Fork Bank, Melville,
New York ("NFB"). North Fork is the 14th largest banking organization in New York, controlling deposits of
approximately $6 billion, representing approximately
1.5 percent of total deposits in depository institutions in the
state.2 Bancorp, with total consolidated assets of approximately $6 billion, is the 18th largest depository institution
in New York, controlling deposits of approximately
$3.7 billion, representing less than 1 percent of total deposits in depository institutions in the state.
The Board previously has determined by regulation that
the operation of a savings association by a bank holding
company is closely related to banking for purposes of
1. After North Fork filed notice with the Board to make the
proposed investment in Bancorp, Bancorp entered into an agreement
with Astoria Financial Corporation, Lake Success, New York
("Astoria"), under which Astoria would purchase, subject to regulatory approval, all the voting shares of Bancorp, including those held or
acquired by North Fork.
2. Asset data are as of December 31, 1997, state deposit data are as
of June 30, 1997, and incorporate North Fork's acquisitions through
February 1998. In this context, depository institutions include commercial banks, savings banks, and savings associations.
All
section 4(c)(8) of the BHC Act.3 The Board requires that
savings associations acquired by bank holding companies
conform their direct and indirect activities to those that are
permissible for bank holding companies under section 4 of
the BHC Act. North Fork has committed to cease or
otherwise address the activities of Bancorp that are not
permissible for a bank holding company under section 4(c)(8) of the BHC Act and Regulation Y.4
In order to approve the proposal, the Board also is
required by section 4(c)(8) of the BHC Act to determine
that the acquisition by North Fork of the proposed interest
in Bancorp "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound banking practices."5 As part of its consideration of these factors, the Board has carefully considered comments submitted by Bancorp and Inner City Press/Community on the
Move ("ICP") opposing the proposal.
Bancorp contends that North Fork's minority investment
would adversely affect its ability to compete and to pursue
long-term business opportunities, retain employees and
customers, and focus on its strategic business plans. ICP
contends that North Fork's proposed investment would not
support or stabilize Bancorp and would disrupt the local
banking market.
North Fork has not applied to control Bancorp and has
made a number of commitments that the Board has relied
on in other cases to determine that an investing bank
holding company would not be able to exercise a controlling influence over another depository institution for purposes of the BHC Act.6 The commitments include a commitment not to exercise or seek to exercise a controlling
influence over the management or policies of Bancorp or
its subsidiaries; not to seek or accept any representation on
the board of directors of Bancorp or any of its subsidiaries;
not to attempt to influence the dividend policies, loan
decisions, or operations of Bancorp or any of its subsidiar-
3. 12 C.F.R. 225.28(b)(4). Bancorp contends that, because North
Fork has in the past made similar minority investments in other
depository institution holding companies, North Fork's notice should
be construed as a request to engage in the activity of making minority
investments in depository institutions. The BHC Act and the Board's
Regulation Y include a specific requirement that a bank holding
company receive Board approval prior to acquiring more than
5 percent of the voting shares of a bank or a savings association. North
Fork has filed the required notice under section 4(c)(8) of the BHC
Act to acquire more than 5 percent of the shares of Bancorp and
Savings Bank, which are engaged in activities that the Board has
determined to be closely related to banking.
4. Savings Bank engages in certain real estate development and
insurance sales activities that are impermissible for bank holding
companies. North Fork has committed that within two years of increasing its interest in the voting shares of Bancorp to 5 percent or
more it will either acquire control of Bancorp and cause Bancorp to
cease all impermissible activities or reduce its interest in the voting
shares of Bancorp to below 5 percent.
5. 12 U.S.C. § 1843(c)(8).
6. These commitments are set forth in the Appendix.
478
Federal Reserve Bulletin • June 1998
ies.7 Under the BHC Act, North Fork is prohibited from
acquiring more than 9.9 percent of Bancorp's voting stock,
or otherwise exercising a controlling influence over Bancorp, without further Board approval. North Fork, therefore, may not participate in the deliberations or decision
making of the board of directors of Bancorp or any of its
subsidiaries without prior Board approval.8 The Board has
adequate supervisory authority to monitor and enforce
North Fork's compliance with its commitments, including
the authority to initiate a control proceeding against North
Fork if facts come to the Board's attention that North Fork
or any of its subsidiaries or affiliates in fact controls
Bancorp for purposes of the BHC Act. The Board believes
that the commitments provided by Bancorp substantially
mitigate the potential that consummation of the proposal
would result in the adverse effects alleged by Bancorp and
ICP.
Although the proposal involves a minority investment,
section 4(c)(8) of the BHC Act requires that the Board
consider the competitive effects of the proposal. The Board
has noted that one company need not acquire control of
another company in order substantially to lessen competition between them and that the specific facts of each case
will determine whether a minority investment would have
significantly anticompetitive effects.9 North Fork and Bancorp compete in the Metropolitan New York/New Jersey
7. Bancorp and ICP allege that North Fork violated the passivity
commitments provided in connection with previous minority investments made by North Fork in Suffolk Bancorp, Inc., Riverhead, New
York ("Suffolk"), and Sunrise Bancorp, Inc., Farmingdale, New York
("Sunrise"), and took actions inconsistent with the passivity commitments initially offered to the Board in connection with North Fork's
proposed acquisition of more than 5 percent of the voting shares of
Haven Bancorp, Woodside, New York ("Haven"). The Board considered similar allegations regarding the commitments that North Fork
made in connection with its passive investment in Suffolk and determined that no violations occurred. See North Fork Bancorporation,
Inc., 82 Federal Reserve Bulletin 338. 339 (1996). The Board also has
considered commenters' allegations regarding the commitments made
by North Fork in connection with its application to acquire up to
9.9 percent of Sunrise. On the basis of all the facts of record, including
confidential supervisory information, the Board concludes that commenters' allegations do not reflect adversely on the managerial resources of North Fork or warrant enforcement action by the Board.
The Board notes that North Fork did not acquire more than 5 percent
of the voting shares of Haven and did not make any binding passivity
commitments to the Board with respect to Haven.
8. Bancorp maintains that North Fork intends to control Bancorp
because North Fork has discussed potential business combinations
with Bancorp's management. The Board previously has noted that
general expressions of interest in negotiating a business combination
with an institution do not violate the passivity commitments or the
BHC Act's prohibition against exercising a controlling influence over
the management or policies of a banking organization. See GB Bancorporation, 83 Federal Reserve Bulletin 115 (1997).
9. See Emigrant Bancorp Inc., 82 Federal Reserve Bulletin 555
(1996), Mansura Bancshares, Inc., 79 Federal Reserve Bulletin 37
(1993) ("Mansura"); and SunTrust Banks, Inc., 76 Federal Reserve
Bulletin 542 (1990). It is possible, for example, that the acquisition of
a substantial ownership interest in a competitor or a potential competitor of the acquiring firm might alter the market behavior of both firms
in such a way as to weaken or eliminate independent action at each
organization and increase the likelihood of cooperative operations.
See Mansura at 38.
banking market.10 If North Fork and Bancorp are considered as a combined entity, the Herfindahl-Hirschman Index ("HHI") would not increase in the relevant banking
market and numerous competitors would remain in the
market.11 Thus, any potential elimination of competition
between the two entities is not expected to substantially
lessen competition in the Metropolitan New York/New
Jersey banking market or in any relevant banking market.
As part of the Board's evaluation of the public interest
factors in this case, the Board has carefully reviewed the
financial and managerial resources of North Fork, Bancorp,
and their respective subsidiaries, and the effect the transaction would have on such resources in light of all the facts
of record.12 These facts include confidential financial information from North Fork and reports of examination and
other supervisory information received from the appropriate federal and state supervisors of the affected organizations assessing the financial and managerial resources of
the organizations.13 Based on all the facts of record, the
10. The Metropolitan New York/New Jersey banking market includes New York City; Nassau, Orange, Putnam, Rockland, Suffolk,
Sullivan, and Westchester Counties in New York; Bergen, Essex,
Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic,
Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in
New Jersey; Pike County in Pennsylvania; and portions of Fairfield
and Litchfield Counties in Connecticut.
11. If North Fork was deemed to control Bancorp, the HHI for the
Metropolitan New York/New Jersey banking market would decrease
from 796 to 786 on consummation of the proposal. Market share data
are as of June 30. 1996, and are based on calculations in which the
deposits of thrift institutions, other than Savings Bank, are included at
50 percent. The Board previously has indicated that thrift institutions
have become, or have the potential to become, significant competitors
of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin
788 (1990); National City Corporation, 70 Federal Reserve Bulletin
742 (1984). Because the Board has analyzed the competitive factors in
this case as if North Fork and Savings Bank were a combined entity,
the deposits of Savings Bank are included at 100 percent in the
calculation of pro forma market share. See Norwest Corporation, 78
Federal Reserve Bulletin 452 (1992); First Banks, Inc. 76 Federal
Reserve Bulletin 669 (1990).
12. Bancorp contends that the proposal would adversely affect its
financial condition because Bancorp would be forced to redeem the
shares held by North Fork at a premium. The Board has considered
Bancorp's comments in light of confidential examination and supervisory reports assessing the financial condition of Bancorp. Bancorp
also maintains that Suffolk's financial condition was adversely affected by its redemption of the shares acquired by North Fork. The
Board notes that Suffolk remained well capitalized after the transaction.
13. ICP argues that allegations regarding the activities of a senior
executive of NFB and North Fork contained in two lawsuits raise
adverse managerial considerations. Documents filed in connection
with these lawsuits asserted that certain business transactions between
NFB and acquaintances of the senior executive were not handled in
accordance with the bank's normal procedures. The Board notes that
these lawsuits were resolved in favor of NFB and that no findings of
improper activities were made against NFB or its management. The
Board also has considered ICP's contentions in light of confidential
reports of examination and other supervisory information from NFB's
appropriate federal supervisor, the Federal Deposit Insurance Corporation ("FDIC"), and the New York State Banking Department
("NYSBD"), regarding the managerial resources of NFB. The Board
notes that ICP submitted similar comments to the FDIC in connection
with NFB's application to merge with North Side Savings Bank, New
Legal Developments
Board concludes that the financial and managerial resources of the organizations involved in the proposal are
consistent with approval.
In acting on applications to acquire a savings association, the Board also reviews the records of performance of
the relevant depository institutions under the Community
Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). 14
As provided in the CRA, the Board evaluates the record of
performance of an institution in light of examinations by
the appropriate federal supervisors of the CRA records of
performance of the relevant institutions. An institution's
most recent CRA performance evaluation is a particularly
important consideration in the application process because
it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its
appropriate federal regulator.15
NFB received an overall rating of "satisfactory" from
the FDIC at its most recent evaluation for CRA performance, as of March 1997 ("1997 Examination"). In addition, the NYSBD rated NFB's CRA performance "satisfactory" as of the same date.16 Savings Bank also received an
overall rating of "outstanding" from its appropriate federal
regulator, the Office of Thrift Supervision, as of February
1996.
ICP contends, based primarily on data filed under the
Home Mortgage Disclosure Act (12 U.S.C. § 2901 et seq.)
("HMDA"), that North Fork's lending activities, including
loans secured by 1-4 family dwellings ("owner-occupied
housing"), in low- to moderate-income ("LMI") communities and communities with predominantly minority populations are inadequate.17 The Board recently reviewed
North Fork's record of CRA performance in light of similar comments submitted by ICP in connection with approving North Fork's application to acquire New York Bancorp, Inc., Douglaston, New York.18
In the N. Y. Bancorp Order, the Board carefully reviewed
a number of aspects of North Fork's CRA performance,
including NFB's lending programs designed to assist in
meeting the housing-related credit needs of LMI individuals and communities, small business lending activities,
York, New York, in 1996, and that the FDIC found that the managerial resources of NFB were consistent with approved of that transaction under the Bank Merger Act (12 U.S.C. § 1828(c)).
14. See Bane One Corporation, 83 Federal Reserve Bulletin 602
(1997).
15. The Statement of the Federal Financial Supervisory Agencies
Regarding the Community Reinvestment Act provides that a CRA
examination is an important and often controlling factor in the consideration of an institution's CRA record and reports of these examinations will be given great weight in the applications process. See 54
Federal Register 13,742 and 13,745 (1989).
16. See N.Y. Banking Law § 28-b.
17. ICP also maintains that North Fork charges higher fees for
banking services and pays lower interest rates on deposits than other
depository institutions in New York. There are no facts in the record
indicating that North Fork's pricing for bank services is based on any
factor that would be prohibited under law. The Board previously has
concluded, moreover, that the CRA does not impose any limitation on
the ability of a depository institution to price its products and services.
18. See North Fork Bancorporation, Inc., 84 Federal Reserve
Bulletin 290 (1998) ("N.Y. Bancorp Order").
479
NFB's record of ascertaining the credit needs of its entire
service community, NFB's branch locations and branch
closing policies, and NFB's compliance with fair lending
laws. The Board also carefully reviewed North Fork's
record of lending in light of 1995 and 1996 HMDA data
filed by North Fork. For the reasons set forth in detail in
that order, and incorporated herein by reference, the Board
concluded that the CRA performance record of North Fork
was consistent with approval under the BHC Act.
The Board also has carefully reviewed North Fork's
final HMDA data for 1997 that became available after the
N.Y. Bancorp Order. These data show that the number of
loans made by North Fork in census tracts with predominantly minority populations decreased slightly in 1997
compared to 1996. The data also show that North Fork
increased the number of loans it made to LMI individuals
and in LMI census tracts in 1997 compared to 1996. The
data also reflect some disparities in the rate of loan originations, denials, and applications by racial group and income
level in certain areas.
The Board is concerned when an institution's record
indicates such disparities and believes that all banks are
obligated to ensure that their lending practices are based on
criteria that assure not only safe and sound banking, but
also equal access to credit by creditworthy applicants regardless of race. The Board recognizes, however, that
HMDA data alone provide an incomplete measure of an
institution's lending in its community and have limitations
that make the data an inadequate basis, absent other information, for concluding that an institution has engaged in
illegal discrimination in making lending decisions.19
Because of the limitations of HMDA data, the Board has
carefully reviewed other information, particularly examination reports that provide an on-site evaluation of compliance by NFB with the fair lending laws. In the 1997
Examination, FDIC examiners found no evidence of prohibited discriminatory practices or of any practices intended to discourage applications for the types of credit set
forth in the bank's CRA statement.20 NYSBD examiners
also found no evidence of any prohibited discriminatory or
illegal credit practices in their 1997 evaluation of NFB.
FDIC examiners also concluded that NFB's management
had demonstrated a commitment to making loans in LMI
census tracts and to LMI individuals and favorably noted
that the bank had a formal review process for all denied
loan applications. Based on a review of the entire record in
this case, including the Board's previous review in the N.Y.
Bancorp Order, the Board concludes that the CRA perfor-
19. The data, for example, do not provide a basis for an independent
assessment of whether an applicant who was denied credit was. in
fact, creditworthy. Credit history problems and excessive debt levels
relative to income (reasons most frequently cited for a credit denial)
are not available from HMDA data.
20. As noted in the N.Y. Bancorp Order, FDIC examiners noted
certain technical violations of the fair lending laws during the 1997
Examination, but stated that these matters were addressed by the
bank's management during the examination.
480 Federal Reserve Bulletin D June 1998
mance records of NFB and Savings Bank are consistent
with approval of the proposal.21
The Board also has considered the commenters' contentions that the proposal would not result in any public
benefits. The requirement under section 4 of the BHC Act
that the Board must determine that public benefits from a
proposal can reasonably be expected to outweigh potential
adverse effects necessarily involves a balancing process
that takes into account the extent of the potential for
adverse effects.
The Board believes that there is a public benefit to be
derived from permitting capital markets to operate and
from permitting bank holding companies to make potentially profitable passive investments in financial institutions, when these investments are consistent, as in this
case, with the relevant considerations under the BHC Act.22
Based on all the facts of record, and for the reasons
previously discussed in this order, the Board concludes that
the proposal is not likely to result in the adverse effects
alleged by Bancorp and ICP or other adverse effects, such
as undue concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices. Accordingly, based on all the facts of record, the
Board has determined that consummation of the proposal
can reasonably be expected to produce public benefits that
would outweigh any likely adverse effects under the proper
incident to banking standard of section 4(c)(8) of the BHC
Act.
Based on the foregoing and all the facts of record, the
Board has determined that the notice should be, and hereby
is, approved.23 The Board's approval of the proposal is
specifically conditioned on compliance by North Fork with
the commitments made in connection with this notice and
21. The Board continues to expect NFB to address the areas for
improvement in its lending performance discussed in the NX Bancorp
Order, and will consider North Fork's progress in this regard in
connection with future applications by North Fork to acquire deposittaking facilities.
22. See, e.g., Mercantile Bancorporation Inc., 83 Federal Reserve
Bulletin 683, 688 (1997); South Central Texas Bancshares, Inc., 83
Federal Reserve Bulletin 47, 51 n. 20 (1997).
23. ICP requests that the Board hold a public hearing or meeting to
investigate and resolve disputed issues of fact involving the allegations contained in the lawsuits against NFB and its senior management. The Board's rules provide for a hearing on notices under section 4 of the BHC Act to acquire a savings association only if there are
disputed issues of material fact that cannot be resolved in some other
manner. See 12 C.F.R. 225.25(a)(2). After a careful review of all the
facts of record, the Board has concluded that ICP's contentions
amount to a dispute concerning the weight that should be accorded to,
and the conclusions that the Board should draw from, the facts of
record, but do not identify disputed issues of fact that are material to
the Board's decision. The Board also notes that interested parties have
had an ample opportunity to present their views, and ICP has submitted substantial written comments that have been considered by the
Board. ICP's request fails to demonstrate why a written presentation
would not suffice and to summarize the evidence that would be
presented at a hearing or meeting. For these reasons, and based on all
the facts of record, the Board has determined that a public meeting or
hearing is not necessary to clarify the factual record on the notice and
is not warranted in this case. Accordingly, ICP's request for a public
hearing or meeting on this notice is hereby denied.
conditions referred to in this order. The Board's determination is also subject to all the conditions in Regulation Y,
including those in sections 225.7 and 225.25(c) (12 C.F.R.
225.7 and 225.25(c)), and to the Board's authority to
require such modification or termination of the activities of
a holding company or any of its subsidiaries as the Board
finds necessary to assure compliance with, or to prevent
evasion of, the provisions and purposes of the BHC Act
and the Board's regulations and orders issued thereunder.
The commitments and conditions relied on by the Board in
reaching this decision shall be deemed to be conditions
imposed in writing by the Board in connection with its
findings and decision, and, as such, may be enforced in
proceedings under applicable law.
This transaction shall not be consummated later than
three months after the effective date of this order, unless
such period is extended for good cause by the Board or the
Federal Reserve Bank of New York, acting pursuant to
delegated authority.
By order of the Board of Governors, effective April 13,
1998.
Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and
Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich.
JENNIFER J. JOHNSON
Deputy Secretary of the Board
Appendix
As part of this proposal, North Fork has committed that
it will not, without the Board's prior approval:
(1) Exercise or attempt to exercise a controlling influence
over the management or policies of Long Island Bancorp
("Bancorp") or any of its subsidiaries;
(2) Have or seek to have any employees or representatives
serve as an officer, agent, or employee of Bancorp or any of
its subsidiaries;
(3) Take any action causing Bancorp or any of its subsidiaries to become a subsidiary of North Fork or any of its
subsidiaries;
(4) Acquire or retain shares that would cause the combined
interests of North Fork or any of its subsidiaries and its
officers, directors, and affiliates to exceed 9.9 percent of the
outstanding voting shares of Bancorp or any of its subsidiaries;
(5) Propose a director or slate of directors in opposition to
a nominee or slate of nominees proposed by the management or board of directors of Bancorp or any of its subsidiaries;
(6) Attempt to influence the dividend policies or practices
of Bancorp or any of its subsidiaries;
(7) Solicit or participate in soliciting proxies with respect
to any matter presented to the shareholders of Bancorp or
any of its subsidiaries;
(8) Attempt to influence the loan and credit decisions or
policies of Bancorp or its bank subsidiary, the pricing of
Legal Developments 481
services, any personnel decision, the location of any offices, branching, the hours of operation, or similar activities of Bancorp or any of its subsidiaries;
(9) Dispose or threaten to dispose of shares of Bancorp or
any of its subsidiaries in any manner as a condition of
specific action or nonaction by Bancorp or any of its
subsidiaries;
(10) Enter into any banking or nonbanking transactions
with Bancorp or any of its subsidiaries, except that North
Fork and each of North Fork's directors, senior executive
officers, related parties, and affiliates may establish and
maintain deposit accounts with any bank subsidiaries of
Bancorp, provided that the aggregate balance of all such
accounts do not exceed $500,000 and that the accounts are
maintained on substantially the same terms as those prevailing for comparable accounts of persons unaffiliated
with Bancorp or any of its subsidiaries; or
(11) Seek or accept representations on the board of directors of Bancorp or any of its subsidiaries. North Fork also
has committed that it will:
(12) No later than two years following the date of increasing its interest in the voting shares of Bancorp to more than
5 percent, either:
(i) Acquire control of Bancorp and cause Bancorp and
its subsidiaries to cease all activities impermissible for
a bank holding company, or
(ii) Reduce its interest in the voting shares of Bancorp
to 5 percent or less.
Popular, Inc.
Hato Rey, Puerto Rico
and all comments received in light of the factors set forth
in section 4(c)(8) of the BHC Act.
Notificant, with total assets of approximately $19.9 billion, is the largest banking organization in Puerto Rico, and
the 42nd largest banking organization in the United States.2
Notificant controls approximately $10.1 billion in deposits
in the United States, and operates branches in New Jersey,
Florida, Illinois, Texas, and California. Notificant also engages in a number of nonbanking activities in the United
States.
The Board has determined by regulation3 that the following proposed activities are closely related to banking and
permissible for bank holding companies under section 4(c)(8) of the BHC Act:
(i) Credit and credit related activities;
(ii) Leasing activities;
(iii) Financial and investment advisory services;
(iv) Transactional services;
(v) Investment and trading services;
(vi) Insurance activities related to extensions of credit;
and
(vii) Issuing and selling consumer payment instruments.4
The Board also has determined by order that (i) check
cashing and wire transmission services,5 and (ii) bill payment services6 are closely related to banking. Notificant
has committed to conduct each of these activities in accordance with Regulation Y and the relevant Board interpretations and orders.
Order Approving Notice to Engage in Nonbanking
Activities
Popular, Inc. ("Notificant"), a bank holding company
within the meaning of the Bank Holding Company Act
("BHC Act"), has requested the Board's approval under
section 4(c)(8) of the BHC Act (12U.S.C. § 1843(c)(8))
and section 225.24(a) of the Board's Regulation Y
(12 C.F.R. 225.24(a)) to acquire through its wholly owned
subsidiary, Popular Cash Express, Orlando, Florida ("Cash
Express"), certain assets of Florida Exchange, Ltd. and
Mirando-J., Inc., both in Oak Park, Illinois (together
"Companies"). 1 Cash Express would engage in the nonbanking activities discussed below.
Notice of the proposal, affording interested persons an
opportunity to submit comments, has been published (62
Federal Register 61,127 (1997)). The time for filing comments has expired, and the Board has considered the notice
1. Cash Express is a third-tier subsidiary of Notificant and a direct
subsidiary of Popular North America, Inc., a bank holding company
registered under the BHC Act. Popular North America, a second-tier
subsidiary of Notificant is a direct subsidiary of Popular International
Bank, Inc., also a registered bank holding company under the BHC
Act. Popular International Bank, Inc. is a wholly owned direct subsidiary of Notificant.
2. Asset data are as September 30, 1997. Ranking data are as of
December 31, 1996.
3. See 12 C.F.R. 225.28(b)(l), (b)(3), (b)(6), (b)(7), (b)(8)(ii),
4. These activities include selling prepaid telephone cards and
prepaid cellular phone time, and receiving payments for additional
time from cellular phone customers. Notificant would not, however,
sell or rent cellular phones.
5. See Midland Bank, PLC, 76 Federal Reserve Bulletin 860 (1990);
Norwest Corporation, 81 Federal Reserve Bulletin 974 (1995), and 81
Federal Reserve Bulletin 1130 (1995). Notificant has committed that
its check cashing and wire transfer services would be conducted in the
same manner regardless of whether the transaction involved an affiliated or non-affiliated depository institution. Notificant also states that
a customer would not be permitted to wire transfer funds to an account
maintained by the customer in an affiliated depository institution or
open an account at an affiliated depository institution through Cash
Express. Cash Express and Notificant also would not generally crossmarket products and services. Cash Express would make loans from
affiliates available in a manner similar to a loan production office and
in compliance with applicable branching laws.
6. Notificant's bill payment services would include the transfer of
funds to the payee by the following means:
(i) By wire transfer or money order from Cash Express,
(ii) By transfer of funds using a third party provider, or
(iii) By transfer of funds using hardware and software provided by a
payee under an agreement with Cash Express. See Bane One
Corporation, 80 Federal Reserve Bulletin 139 (1994), and see, e.g.,
Norwest Corporation, 81 Federal Reserve Bulletin 91A (1995), and
81 Federal Reserve Bulletin 1130 (1995).
482
Federal Reserve Bulletin • June 1998
Notificant also proposes to provide the following government services at Cash Express offices:
(i) Postage stamps and postage-paid envelopes;
(ii) Vehicle registration services, including the sale,
distribution and renewal of license plates and license
tags for motor vehicles;
(iii) Public transportation tickets and tokens; and
(iv) Notary public services.7
Section 4(c)(8) of the BHC Act provides that a bank
holding company may, with the Board's approval, engage
in any activity that the Board determines to be closely
related to banking.8 An activity may be deemed to be
closely related to banking if it is demonstrated that:
(i) Banks generally provide the proposed services;
(ii) Banks generally provide services that are operationally or functionally so similar to the proposed
services as to equip them particularly well to provide
the proposed services; or
(iii) Banks generally provide services that are so integrally related to the proposed services as to require
their provision in a specialized form.9
Banks generally are permitted to provide customers access to the type of government services involved in the
proposal. Banks are permitted to:
(i) Sell postage stamps;
(ii) Provide vehicle registration and licensing services
as agent for state departments of motor vehicles;
(iii) Provide notary public services; and
(iv) Dispense public transportation tickets from automated teller machines ("ATMs"). 10
The proposed services, moreover, further the public policy
objective of providing easier access to government services. Based on all the facts of record, the Board concludes
7. Cash Express also would provide services that are incidental to
the proposed activities, such as providing mailboxes and related
services, photocopying, and sending facsimiles. Revenue from the
incidental activities would not exceed 10 percent of the total annual
revenues earned by Cash Express.
8. 12U.S.C. § 1843(c)(8).
9. See National Courier Association v. Board of Governors of the
Federal Reserve System, 516 F.2d 1229, 1237 (D.C. Cir. 1975). In
addition, the Board may consider any other basis that may demonstrate that the proposed activity has a reasonable or close connection
or relationship to banking or managing or controlling banks. See
Board Statement Regarding Regulation Y, 49 Federal Register 806
(1984); Securities Industry Association v. Board of Governors of the
Federal Reserve System, 468 U.S. 207, 210-211 n.5 (1984).
10. See, e.g., 12 C.F.R. 7.1010 and OCC Interpretive Letter No. 718
(March 14, 1996) (postage stamps, act as agent for the state in selling
and renewing license plates and license tags, and public transportation
tickets from ATMs); and OCC Conditional Approval Letter No. 267
(January 12, 1998) (notary services). See. e.g., Corbet v. Devon Bank
299 N.E.2d 521, 529 (111. App. Ct. 1988); and Legal Interpretation § 1.3 of Title 3 of the New York Compilation of Rules and
Regulation (January 31, 1969) (New York trust companies can, under
the New York Banking Law, provide vehicle registration and licensing services as agent of the New York State Department of Motor
Vehicles).
that the proposed activities involving government services
are closely related to banking.
In order to approve the proposal, the Board also must
find that the performance of the proposed activities by
Notificant "can reasonably be expected to produce benefits
to the public . . . that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8). As part of its evaluation of these factors, the Board considers the financial
resources of the Notificant and its subsidiaries and the
effect of the transaction on those resources." Based on all
the facts of record, the Board has concluded that financial
and managerial considerations are consistent with approval
of the proposal.
The Board also has carefully considered the competitive
effects of the proposed acquisition of the assets of Companies. The record reflects that there are few overlaps in the
services provided by Companies and Notificant. To the
extent that Notificant and Companies offer different types
of products, the proposed acquisition would result in no
loss of competition. In those markets in which the product
offerings of Notificant and Companies overlap, there are
numerous existing and potential competitors. Consummation of the proposal, therefore, would have a de minimis
effect on competition, and the Board has determined that
the proposal would not result in any significantly adverse
competitive effects in any relevant market.
The Board expects that the proposed transaction would
give Notificant an increased ability to serve the needs of its
customers and would allow Notificant to provide existing
and new customers with a broader range of products and
services. Public benefits also would be derived from providing government services at locations that are convenient
for customers. Additionally, there are public benefits to be
derived from permitting capital markets to operate so thai
bank holding companies may make potentially profitable
investments in nonbanking companies when those investments are consistent, as in this case, with the relevant
considerations under the BHC Act, and from permitting
banking organizations to allocate their resources in the
manner they believe is most efficient.
Based on the foregoing and all the other facts of record,
including the commitments made by Notificant, the Board
has determined that the performance of the proposed activities by Notificant can reasonably be expected to produce
benefits to the public that would outweigh any possible
adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.
Conclusion
Based on all the facts of record, including all the commitments and representations made by Notificant, and subject
11. See 12 C.F.R. 225.26; The Fuji Bank, Limited, 75 Federal
Reserve Bulletin 94 (1989); Bayerishe Vereinbank AG, 73 Federal
Reserve Bulletin 155 (1987).
Legal Developments
to all the terms and conditions set forth in this order, the
Board has determined that the notice should be, and hereby
is, approved.12 This determination is subject to all the
conditions set forth in the Board's Regulation Y, including
those in sections 225.7 and 225.25(g) (12 C.F.R. 225.7 and
225.25(g)), and to the Board's authority to require modification or termination of the activities of a bank holding
company or any of its subsidiaries as the Board finds
necessary to assure compliance with, or to prevent evasion
of, the provisions and purposes of the BHC Act and the
Board's regulations and orders issued thereunder. The
Board's decision is specifically conditioned on compliance
with all the commitments and representations made in the
notice, including the commitments and conditions discussed in this order. The commitments, representations,
and conditions relied on in reaching this decision shall be
deemed to be conditions imposed in writing by the Board
in connection with its findings and decision, and, as such,
may be enforced in proceedings under applicable law.
This proposal shall not be consummated later than three
months after the effective date of this order, unless such
period is extended for good cause by the Board or the
Federal Reserve Bank of New York, acting pursuant to
delegated authority.
By order of the Board of Governors, effective April 2,
1998.
Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and
Governors Kelley, Phillips, Ferguson, and Gramlich. Absent and not
voting: Governor Meyer.
WILLIAM W. WILES
Secretary of the Board
U.S. Bancorp
Minneapolis, Minnesota
Order Approving Notice to Engage in Nonbanking
Activities
U.S. Bancorp, Minneapolis, Minnesota ("USB"), a bank
holding company within the meaning of the Bank Holding
Company Act ("BHC Act"), has requested the Board's
approval under section 4(c)(8) of the BHC Act
(12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's
Regulation Y (12 C.F.R. 225.24) to acquire all the voting
securities of Piper Jaffray Companies, Inc. ("Piper Jaffray"), and thereby acquire control of its subsidiaries,
including Piper Jaffray, Inc. ("Company"), all in Minneapolis, Minnesota. USB would thereby engage in the following nonbanking activities:
12. Notificant indicates that it may provide the proposed services in
the future by using technologies that are not described in the notice or
discussed in the order. Notificant must consult with the Federal
Reserve System before commencing any new activity that is not
described in this order to ensure that the activity will satisfy the
criteria in the BHC Act and Regulation Y, and to allow the Federal
Reserve System an opportunity to consider whether a separate notice
should be reviewed in any particular case.
483
(1) Extending credit and servicing loans, pursuant to
section 225.28(b)(l) of Regulation Y (12 C.F.R.
225.28(b)(l));
(2) Engaging in activities related to extending credit,
pursuant to section 225.28(b)(2)(ii), (vi) and (vii) of
Regulation Y (12 C.F.R. 225.28(b)(2)(2)(ii), (vi) and
(vii));
(3) Providing leasing services, pursuant to section 225.28(b)(3) of Regulation Y (12 C.F.R.
225.28(b)(3));
(4) Performing functions or activities that may be
performed by a trust company, pursuant to section 225.28(b)(5) of Regulation Y (12 C.F.R.
225.28(b)(5));
(5) Providing financial and investment advisory services, pursuant to section 225.28(b)(6) of Regulation Y
(12 C.F.R. 225.28(b)(6));
(6) Providing securities brokerage, riskless principal,
private placement, futures commission merchant, and
other agency transactional services, pursuant to section
225.28(b)(7) of Regulation Y (12 C.F.R. 225.28(b)(7));
(7) Underwriting and dealing in government obligations
and money market instruments in which state member
banks may underwrite and deal under 12 U.S.C. §§ 335
and 24(7) ("bank-eligible securities"), and engaging in
investing and trading activities, and buying and selling
bullion and related activities, pursuant to section
225.28(b)(8) of Regulation Y (12 C.F.R. 225.28(b)(8));
(8) Providing management consulting and employee
benefit consulting services, pursuant to section
225.28(b)(9) of Regulation Y (12 C.F.R. 225.28(b)(9));
(9) Engaging in general insurance agency activities,
pursuant to section 225.28(b)(l l)(vii) of Regulation Y
(12 C.F.R. 225.28(b)(ll)(vii)); 1
(10) Underwriting and dealing in, to a limited extent, all
types of debt and equity securities other than interests in
open-end investment companies ("bank-ineligible securities");
(11) Providing administrative and other services to openend investment companies ("mutual funds"); 2 and
(12) Acting as the general partner of private investment
limited partnerships that invest in assets in which a bank
holding company is permitted to invest.
Notice of the proposal, affording interested persons an
opportunity to submit comments, has been published
(63 Federal Register 11,682 (1998)). The time for filing
comments has expired, and the Board has considered the
notice and all comments received in light of the factors set
forth in section 4(c)(8) of the BHC Act.
1. USB is authorized to engage in insurance agency activities
pursuant to section 4(c)(8)(G) of the BHC Act, which authorizes those
bank holding companies that engaged in insurance agency activities
prior to 1971 with Board approval to engage in insurance agency
activities.
2. A list of the administrative services that USB would provide is
included in the Appendix.
484
Federal Reserve Bulletin • June 1998
USB, with total consolidated assets of approximately
$71.3 billion, is the 15th largest banking organization in
the United States.3 USB operates subsidiary banks in
17 states, and engages through other subsidiaries in a broad
range of permissible nonbanking activities. Company is,
and following consummation of the proposal will continue
to be, registered as a broker-dealer with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), a member of
the National Association of Securities Dealers, Inc.
("NASD"), and registered as a futures commission merchant with the Commodity Futures Trading Commission
("CFTC") under the Commodity Exchange Act (7 U.S.C.
§ 2 et seq.). Accordingly, Company is, and will continue to
be, subject to the record-keeping and reporting obligations,
fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the Commodity Exchange Act,
the SEC, CFTC, and NASD.
USB recently received Board approval to establish U.S.
Bancorp Investments, Minneapolis, Minnesota ("USBInvestments"), and thereby engage in underwriting and
dealing, to a limited extent, in certain types of bankineligible securities and other permissible nonbanking activities.4 USB intends to merge USB-Investments into
Company by March 31, 1999, with Company surviving the
merger.
USB has committed that Company will conduct its underwriting and dealing activities using the methods and
procedures and subject to the prudential limitations established by the Board in the Section 20 Orders. USB also has
committed that Company will conduct its bank-ineligible
securities underwriting and dealing activities subject to the
Board's revenue restriction.7 As a condition of this order,
USB is required to conduct its bank-ineligible securities
activities subject to the revenue restrictions and Operating
Standards established for section 20 subsidiaries ("Operating Standards"). 8
Other Activities Approved by Regulation or Order
The Board previously has determined that the proposed
credit and credit-related activities; leasing activities; trust
company activities; financial and investment advisory activities; securities brokerage, riskless principal, private
placement, futures commission merchant, and other agency
transactional activities; bank-eligible securities underwriting and dealing, investment and trading, and buying and
selling bullion and related activities; management and employee benefits consulting services; and insurance agency
activities to be conducted by USB after consummation of
the proposal are closely related to banking within the
meaning of section 4(c)(8) of the BHC Act.9 In addition,
the Board previously has determined by order that the
Underwriting and Dealing in Bank-Ineligible Securities
The Board has determined that—subject to the framework
of prudential limitations established in previous decisions
to address the potential for conflicts of interests, unsound
banking practices, or other adverse effects—underwriting
and dealing in bank-ineligible securities is so closely related to banking as to be a proper incident thereto within
the meaning of section 4(c)(8) of the BHC Act.5 The Board
also has determined that underwriting and dealing in bankineligible securities is consistent with section 20 of the
Glass-Steagall Act (12 U.S.C. § 377), provided that the
company engaged in the activity derives no more than
25 percent of its gross revenues from underwriting and
dealing in bank-ineligible securities.6
3. Asset and ranking data are as of December 31, 1997.
4. See U.S. Bancorp, 84 Federal Reserve Bulletin 62 (1998).
5. See J.P. Morgan & Co. Inc., et. ai, 75 Federal Reserve Bulletin
192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of
Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir.
1990); Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub
nom. Securities Industry Ass 'n v. Board of Governors of the Federal
Reserve System, 839 F.2d 47 (2d Cir.), cert, denied, 486 U.S. 1059
(1988), as modified by Review of Restrictions on Director, Officer and
Employee Interlocks, Cross-Marketing Activities, and the Purchase
and Sale of Financial Assets Between a Section 20 Subsidiary and an
Affiliated Bank or Thrift. 61 Federal Register 57,679 (1996). Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal
Register 45,295 (1997); and Clarification to the Board's Section 20
Orders, 63 Federal Register 14,803 (1998) (collectively, "Section 20
Orders").
6. Compliance with the revenue limitation shall be calculated in
accordance with the method stated in the Section 20 Orders, as
modified by the Order Approving Modifications to the Section 20
Orders, 75 Federal Resen'e Bulletin 751 (1989); 10 Percent Revenue
Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding
Companies Engaged in Underwriting and Dealing in Securities, 61
Federal Register 48,953 (1996); and Revenue Limit on Bank-Ineligible
Activities of Subsidiaries of Bank Holding Companies Engaged in
Underwriting and Dealing in Securities, 61 Federal Register 68,750
(1996) (collectively, "Modification Orders"). In light of the fact that
USB proposes to acquire a going concern, the Board believes that
allowing Company to calculate compliance with the revenue limitation on an annualized basis during the first year after consummation of
the acquisition and thereafter on a rolling quarterly average basis
would be consistent with the Section 20 Orders. See Dauphin Deposit
Corporation, 11 Federal Reserve Bulletin 672 (1991). The Board also
believes that, in light of the fact that USB-Investments recently began
operations, permitting USB-Investments to calculate compliance with
the revenue limitation on an annualized basis during the first year of
its operations and thereafter on a rolling quarterly average basis is
consistent with the Section 20 Orders.
7. As noted above, USB intends to merge USB-Investments into
Company by March 31, 1999. Until such merger occurs, USB will
operate Company as a separate corporate entity and both USBInvestments and Company will be independently subject to the
25-percent revenue limitation on underwriting and dealing in bankineligible securities. See Citicorp, 73 Federal Reserve Bulletin 473,
486 n. 45 (1987). aff'd sub nom. Securities Industry Ass'n v. Board of
Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert,
denied, 486 U.S. 1059 (1988).
8. 12C.F.R. 225.200. Company may provide services that are
necessary incidents to the proposed underwriting and dealing activities. Unless Company receives specific approval under section 4(c)(8)
of the BHC Act to conduct the activities independently, any revenues
from the incidental activities must be treated as ineligible revenues
subject to the Board's revenue limitation.
9. See I2C.F.R. 225.28(b)(l), (2), (3), (5). (6), (7), (8), (9), and
Legal Developments
proposed mutual fund administration services and private
investment limited partnership activities are permissible
for bank holding companies. 10 USB has committed that it
will conduct these activities in accordance with the limitations set forth in Regulation Y and the Board's orders and
interpretations relating to each of the activities."
Other Considerations
In order to approve this notice, the Board also must determine that the proposed activities "can reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency,
that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices." 12 As
part of its review of these factors, the Board considers the
financial and managerial resources of the notificant and its
subsidiaries and the effect the transaction would have on
such resources.13
In considering the financial resources of the notificant,
the Board has reviewed the capitalization of USB and
Company in accordance with the standards set forth in the
Section 20 Orders and finds the capitalization of each to be
consistent with approval. This determination is based on all
the facts of record, including USB's projections of the
volume of Company's underwriting and dealing activities
in bank-ineligible securities.
The Board also has reviewed the managerial resources
of each of the entities involved in this proposal in light of
examination reports and other supervisory information. In
connection with the proposal, the Federal Reserve Bank of
Minneapolis ("Reserve Bank") has reviewed the policies
and procedures of Company to ensure compliance with this
order and the Section 20 Orders, including Company's
operational and managerial infrastructure, computer, audit,
and accounting systems and internal risk management pro-
10. See Mellon Bank Corporation, 79 Federal Reserve Bulletin 626
(1993); Commerzbank AG, 83 Federal Reserve Bulletin 678 (1997)
("Commerzbank"); Bankers Trust New York Corporation, 83 Federal
Reserve Bulletin 780 (1997) ("Bankers Trust"); Meridian Bancorp,
Inc., 80 Federal Reserve Bulletin 736 (1994). Company also would
provide transfer agency services to the funds that are provided advisory or administrative services by Company or an affiliate. See
12 C.F.R. 225.1250).
11. USB has committed that it will engage in the proposed mutual
fund advisory and administrative activities in a manner consistent
with previous orders, and has committed that Company will cease its
mutual fund distribution activities prior to consummation. See Commerzbank; Bankers Trust. USB does not propose to have any officer or
director interlocks with the mutual funds to which Company or its
affiliates provide advisory or administrative services. USB also has
provided the commitments previously relied on by the Board to
address the potential adverse effects that could arise from USB's
proposal to serve as general partner of private investment limited
partnerships that invest in assets in which a bank holding company
may invest, and to assure that such activities are conducted in accordance with applicable law. See Dresdner Bank AG, 84 Federal Reserve Bulletin 361 (1998).
12. 12U.S.C. § 1843(c)(8).
13. See 12 C.F.R. 225.26.
485
cedures and controls. On the basis of the Reserve Bank's
review and all other facts of record, including the commitments provided in this case and the proposed managerial
and risk management systems of Company, the Board has
concluded that financial and managerial considerations are
consistent with approval of the notice.
The Board has carefully considered the competitive effects of the proposal. USB represents that USBInvestments and Company offer largely complementary
services with few significant overlaps. USB has indicated
that USB-Investments has focused on bank-eligible securities underwriting, private placement, and fixed-income debt
trading activities, and has not developed the type of merger
and acquisition advisory and equity underwriting, dealing,
research, and distribution services offered by Company. To
the extent that USB-Investments and Company offer different types of products and services, the proposed acquisition
would result in no loss of competition. In those markets
where the product offerings of USB's nonbanking subsidiaries and Piper Jaffray overlap, such as securities brokerage, investment advisory, trust and insurance agency activities, there are numerous existing and potential competitors.
Consummation of the proposal, therefore, would have a
de minimis effect on competition in the market for these
services, and the Board has concluded that the proposal
would not have any significantly adverse competitive effects in any relevant market.
In order to approve the proposal, the Board also must
find that the performance of the proposed activities by
Applicant can reasonably be expected to produce benefits that would outweigh possible adverse effects under
the proper incident to banking standard of section
4(c)(8) of the BHC Act. Under the framework established in this and prior decisions, consummation of the
proposal is not likely to result in any significantly adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or
unsound banking practices.
The Board expects that consummation of the proposal
would provide added convenience to the customers of USB
and Piper Jaffray. USB has indicated that consummation of
the proposal would expand the range of products and
services available to its customers and those of Piper
Jaffray. USB also has stated that the acquisition would
permit it to further diversify its nonbanking operations,
thereby making it less vulnerable to economic fluctuations
in individual business lines.
Based on all the facts of record, the Board has determined that performance of the proposed activities by USB
can reasonably be expected to produce public benefits that
outweigh any adverse effects of the proposal. Accordingly,
the Board has determined that the performance of the
proposed activities by USB is a proper incident to banking
for purposes of section 4(c)(8) of the BHC Act.
Conclusion
On the basis of all the facts of record, the Board has
determined that the notice should be, and hereby is, ap-
486
Federal Reserve Bulletin • June 1998
proved, subject to all the terms and conditions described in
this order. The Board's approval of the proposal extends
only to activities conducted within the limitations of this
order, including the Board's reservation of authority to
establish additional limitations to ensure that Company's
activities are consistent with safety and soundness, avoidance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in
any manner other than as approved in this order is not
within the scope of the Board's approval and is not authorized for Company.
The Board's determination is subject to all the terms and
conditions set forth in Regulation Y, including those in
sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and
225.25(c)), and to the Board's authority to require modification or termination of the activities of a bank holding
company or any of its subsidiaries as the Board finds
necessary to ensure compliance with, or to prevent evasion
of, the provisions and purposes of the BHC Act and the
Board's regulations and orders issued thereunder. The
Board's decision is specifically conditioned on compliance
with all the commitments made in connection with this
notice, including the commitments discussed in this order
and the conditions set forth in this order and the Board
regulations and orders noted above. The commitments and
conditions are deemed to be conditions imposed in writing
by the Board in connection with its findings and decision,
and, as such, may be enforced in proceedings under applicable law.
This proposal shall not be consummated later than three
months after the effective date of this order, unless such
period is extended for good cause by the Board or the
Reserve Bank, acting pursuant to delegated authority.
By order of the Board of Governors, eifective April 20,
1998.
Voting for this action: Chairman Greenspan. Vice Chair Rivlin, and
Governors Kelley, Phillips, Meyer, and Ferguson. Absent and not
voting: Governor Gramlich.
JENNIFER J. JOHNSON
Deputy Secretary of the Board
Appendix
List of Administrative Services
(1) Maintaining and preserving certain records of the
Funds, including financial and corporate records;
(2) Computing dividends, performance data and financial
information regarding the Funds;
(3) Furnishing statistical and research data;
(4) Preparing and filing with the SEC and state securities
regulators registration statements, notices, reports and other
materials required to be filed under applicable laws;
(5) Preparing reports and other informational materials
regarding the Funds including proxies and other shareholder communications;
(6) Providing legal and other regulatory advice to the
Funds in connection with their other administrative functions;
(7) Providing office facilities and clerical support for the
Funds;
(8) Developing and implementing procedures for monitoring compliance with regulatory requirements and compliance with the Funds' investment objectives, policies, and
restrictions as established by the Funds' boards;
(9) Providing routine fund accounting services and liaison
with outside auditors;
(10) Preparing and filing tax returns, and monitoring tax
compliance;
(11) Reviewing and arranging for payment of Fund expenses;
(12) Providing communication and coordination services
with regard to the Funds' investment adviser, transfer
agent, custodian, distributor and other service organizations that render recordkeeping or shareholder communication services;
(13) Reviewing and providing advice to the distributor, the
Funds and the investment adviser regarding sales literature
and marketing plans for the Funds;
(14) Providing information to the distributor's personnel
concerning fund performance and administration;
(15) Providing marketing support with respect to sales of
the Funds through financial intermediaries, including participating in seminars, meetings and conferences designed
to present information concerning the operations of the
Funds;
(16) Providing reports to the Funds' board with regard to
the activities of the Funds; and
(17) Providing telephone shareholder services through a
toll-free number.
Orders Issued Under Sections 3 and 4 of the Bank
Holding Company Act
First Midwest Bancorp, Inc.
Itasca, Illinois
Order Approving the Acquisition of a Bank Holding
Company
First Midwest Bancorp, Inc. ("First Midwest"), a bank
holding company within the meaning of the Bank Holding
Company Act ("BHC Act"), has requested the Board's
approval under section 3 of the BHC Act
(12 U.S.C. § 1842) to acquire Heritage Financial Services,
Inc., Tinley Park, Illinois ("Heritage"), and Heritage Bank,
Blue Island, Illinois.1 First Midwest also has requested the
Board's approval under section 4(c)(8) of the BHC Act
1. First Midwest would merge Heritage with and into a wholly
owned subsidiary, First Midwest Acquisition Corporation ("Acquisition Corp."), that would be formed solely for the purpose of effecting
the acquisition. In connection with the proposal, Acquisition Corp. has
applied to become a bank holding company. First Midwest also has
requested approval of an option to purchase up to 19.9 percent of the
Legal Developments
(12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's
Regulation Y (12C.F.R. 225.24) to acquire Heritage's
nonbanking subsidiaries, Heritage Trust Company, Tinley
Park, Illinois ("Heritage Trust"), and First National Bank
of Lockport, Lockport, Illinois ("Lockport"), and thereby
engage in trust company activities.
Notice of the proposal, affording interested persons an
opportunity to submit comments, has been published
(63 Federal Register 9233 and 16,815 (1998)). The time
for filing comments has expired, and the Board has considered the proposal and all comments received in light of the
factors set forth in sections 3 and 4 of the BHC Act.
First Midwest is the 12th largest depository institution in
Illinois, controlling $2.2 billion in deposits, representing
approximately 1 percent of total deposits in insured depository institutions in the state ("state deposits"). 2 Heritage is
the 26th largest depository institution in Illinois, controlling $1.1 billion in deposits, representing less than 1 percent of state deposits. On consummation of the proposal,
First Midwest would become the ninth largest depository
institution in Illinois, controlling $3.3 billion in deposits,
representing approximately 1.6 percent of state deposits.
Competitive
Considerations
The BHC Act prohibits the Board from approving an
application under section 3 of the BHC Act if the proposal
would result in a monopoly or if the proposal would
substantially lessen competition in any relevant banking
market and the Board has not found that the anticompetitive effects of the proposal are clearly outweighed in the
public interest by the probable effect of the proposal in
meeting the convenience and needs of the community to be
served.
First Midwest and Heritage compete directly in the Illinois banking markets of Joliet and Chicago.3 After consummation of the proposal, First Midwest would become
the largest depository institution in the Joliet banking market, controlling deposits of approximately $758.6 million,
representing approximately 20.8 percent of total deposits
in depository institutions in the market ("market deposits"). 4 The Herfindahl-Hirschman Index ("HHI") for the
voting stock of Heritage if certain events occur. The option would
expire on consummation of the proposal.
2. State deposit and ranking data are as of June 30, 1997.
3. The Joliet banking market is defined as Will County, except the
townships of Florence, Wilmington, Reed, Custer, and Wesley; the
township of Aux Sable in Grundy County; and the townships of
Neausay and Seward in Kendall County, all in Illinois. The Chicago
banking market is defined as all of Cook, DuPage, and Lake Counties
in Illinois.
4. Market share data are as of June 30, 1996. In this context,
depository institutions include commercial banks, savings banks, and
savings associations. Market share data are based on calculations in
which the deposits of thrift institutions are included at 50 percent. The
Board previously has indicated that thrift institutions have become, or
have the potential to become, significant competitors of commercial
banks. See WM Bancorp, 76 Federal Resenv Bulletin 788 (1990);
National City Corporation, 70 Federal Resen'e Bulletin 743 (1984).
487
banking market would increase by 126 points to 1273.5 In
the Chicago banking market, First Midwest would become
the 11th largest depository institution, controlling deposits
of approximately $ 1.7 billion, representing approximately
1.3 percent of market deposits. The HHI for the banking
market would increase by 1 point to 834. Based on all the
facts of record, including the small increases in concentration as measured by the HHI numbers and the number of
competitors that would remain in each banking market, the
Board concludes that consummation of the proposal would
not have a significantly adverse effect on competition or on
the concentration of banking resources in the Joliet or
Chicago banking markets or any other relevant banking
market.
Financial, Managerial, and Other Supervisory Factors
The Board also has carefully considered the financial and
managerial resources and future prospects of First Midwest, Heritage, and their respective subsidiary banks in
light of all the facts of record, including supervisory reports of examination assessing the financial and managerial
resources of the organizations and financial information
provided by First Midwest. Based on all the facts of record,
including relevant reports of examinations of the companies and banks involved in the proposal, the Board concludes that the financial and managerial resources and
future prospects of First Midwest, Heritage, and their subsidiary banks are consistent with approval, as are the other
supervisory factors the Board must consider under section 3 of the BHC Act.
Convenience and Needs Considerations
The Board also has carefully considered the effect of the
proposal on the convenience and needs of the communities
to be served in light of all the facts of record, including
comments received on the effect the proposal would have
on the communities to be served by the combined organizations. Commenters contended that First Midwest's subsidiary bank, First Midwest Bank, N.A., Moline, Illinois
("First Midwest Bank"), does not provide adequate lending and banking services to low-and moderate-income
("LMI") and minority communities, particularly the
African-American community in Lake County, Illinois,
5. Under the revised Department of Justice Merger Guidelines, 49
Federal Register 26,823 (1984), a market in which the post-merger
HHI is between 1000 and 1800 is considered moderately concentrated, and a market in which the post-merger HHI is below 1000 is
considered unconcentrated. The Justice Department has informed the
Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive
effects) unless the post-merger HHI is at least 1800 and the merger or
acquisition increases the HHI by at least 200 points. The Justice
Department has stated that the higher than normal threshold for an
increase in the HHI when screening bank mergers and acquisitions for
anticompetitive effects implicitly recognizes the competitive effect of
limited-purpose lenders and other nondepository financial entities.
488
Federal Reserve Bulletin a June 1998
one of three counties that comprise the Chicago banking
market.6
CRA Performance Examinations. The Board has long
held that consideration of the convenience and needs factor
includes a review of the records of the relevant depository
institutions under the Community Reinvestment Act
(12 U.S.C. § 2901 et seq.) ("CRA"). As provided in the
CRA, the Board evaluates the convenience and needs
factor in light of examinations of the CRA performance
records of the relevant institutions by their appropriate
federal supervisors. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a
detailed, on-site evaluation of the institution's overall
record of performance under the CRA by its appropriate
federal supervisor.7
First Midwest Bank received a "satisfactory" CRA performance rating from the Office of the Comptroller of the
Currency ("OCC") at its most recent examination, as of
August 29, 1996. Heritage Bank received a "satisfactory"
rating from its appropriate federal supervisor, the Federal
Deposit Insurance Corporation, at its most recent examination for CRA performance, as of February 10, 1997.
Examiners found no evidence of prohibited discrimination or other illegal credit practices at First Midwest Bank
or Heritage Bank and found no violations of fair lending
laws. Examiners also found that First Midwest Bank's
delineation of its local community was reasonable and did
not arbitrarily exclude LMI areas, and that the bank's
services reasonably penetrated all markets in its assessment
area. In addition, examiners determined that First Midwest
Bank effectively made loans throughout its service areas,
including in LMI areas and to LMI individuals.
In reviewing the convenience and needs factor, the Board
notes that First Midwest Bank offers a range of financial
products to assist in meeting the credit and banking needs
of its communities. The bank offers several programs to
assist in meeting the credit needs of LMI borrowers, including affordable home mortgage products designed specifically for LMI borrowers and residences in LMI census
tracts. The programs feature flexible underwriting guidelines and low down payments. First Midwest also offers the
"Believer Loan" program, which is designed to help individuals establish or rebuild credit. In addition, First Midwest Bank has designed several basic banking accounts for
its LMI customers. Its "Thrifty Checking Account" has a
small minimum balance requirement and a reduced
6. Some commenters alleged that First Midwest Bank illegally
discriminated against them in specific banking transactions. These
comments and First Midwest Bank's response, based on a review of
the available loan or account files, were forwarded to the bank's
appropriate federal supervisor, the Office of the Comptroller of the
Currency, for consideration.
7. The Statement of the Federal Financial Supervisory Agencies
Regarding the Community Reinvestment Act provides that a CRA
examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these
examinations will be given great weight in the applications process.
See 54 Federal Register {"i.lAl and 13,745 (1989).
monthly maintenance fee. Its "Small Business Checking
Account" and "Not-for-Profit Checking Account" are
low-fee accounts available to small businesses and not-forprofit organizations.8
First Midwest Bank makes available a variety of credit
products to small businesses operating in LMI census
tracts.9 The bank also participates in federal and state
government-sponsored small business and small farm loan
programs, including programs offered by the Small Business Administration, the Farmers Home Administration,
and the Illinois Farm Development Authority.
First Midwest Bank participates in numerous community
development organizations that serve LMI communities
throughout its assessment area. The bank's community
development efforts in Lake County have included participating in several micro-loan pools, providing operating
support to several affordable housing organizations, investing in the Chicago Equity Fund, which funds the development of low-income housing in the six-county Chicago
Metropolitan area, and providing loan commitments for
construction of several low-income housing projects.
Conclusion on Convenience and Needs Considerations.
The Board has carefully considered all the facts of record,
including the public comments received, responses to the
comments, and the CRA performance records of the subsidiary banks of First Midwest and Heritage, including
relevant reports of examination. Based on a review of the
entire record, and for the reasons discussed in this order,
the Board has concluded that convenience and needs considerations, including the CRA performance records of the
subsidiary banks of First Midwest and Heritage, are consistent with approval.
Nonbanking Activities
First Midwest also has filed notice under section 4(c)(8) of
the BHC Act to acquire Heritage Trust and Lockport and
thereby engage in trust company activities. The Board
previously has determined by regulation that trust company
8. A commenter contended that there are no full service banks in the
LMI areas of Lake County, Illinois. First Midwest indicates that it
operates 12 full service banking offices in Lake County, three of which
are in LMI census tracts. The commenter also alleged that First
Midwest Bank does not have a commercial loan officer or ATM at its
North Chicago branch. First Midwest has stated that it intends to
install an ATM at this branch in the near future and that loan officers
from any First Midwest branch are available to meet with individuals
and companies in the North Chicago area.
9. Several commenters alleged that First Midwest's small business
lending practices were inflexible and discriminated against African
Americans. As noted, examiners found no evidence of illegal discrimination. First Midwest Bank's CRA performance examination, moreover, commented favorably on the bank's small business lending
activities. In 1996, the bank originated approximately 14 percent of
the total dollar amount of its small business loans to businesses in
LMI census tracts. First Midwest Bank also originated 27 percent of
the total dollar amount of its small business loans in Lake County to
businesses in LMI census tracts.
Legal Developments
activities are closely related to banking for purposes of
section 4(c)(8) of the BHC Act, and First Midwest has
committed to conduct these activities in accordance with
Regulation Y and relevant Board interpretations and orders.10
In order to approve the proposal, the Board also must
determine that the performance of the proposed activities is
a proper incident to banking, that is, that the proposed
transaction "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound banking practices."11 As part of the Board's evaluation of these
factors, the Board considers the financial and managerial
resources of the notificant and its subsidiaries, including
any company to be acquired, and the effect the transaction
would have on such resources.12 Based on all the facts of
record, the Board has concluded that financial and managerial considerations are consistent with approval of the
notice under section 4 of the BHC Act for the reasons
discussed above.
The Board also has carefully considered the competitive
effects of the proposed acquisition of Heritage Trust and
Lockport. First Midwest operates a trust company subsidiary that competes with Heritage Trust and Lockport; however, the relevant markets for trust company services are
unconcentrated, and there are numerous providers of such
services. As a result, the Board has concluded that consummation of the proposal would not have a significantly
adverse effect on competition for trust company services.
The Board expects, moreover, that the acquisition of
Heritage by First Midwest would provide added convenience to customers of Heritage and First Midwest. Consummation of the proposal also is likely to result in increased operating efficiencies for the combined
organization. Additionally, there are public benefits to be
derived from permitting capital markets to operate so that
bank holding companies may make potentially profitable
investments in nonbanking companies when, as in this
case, those investments are consistent with the relevant
considerations under the BHC Act, and from permitting
banking organizations to allocate their resources in the
manner they believe is most efficient. Based on all the facts
of record, the Board has determined that consummation of
the proposal can reasonably be expected to produce public
benefits that would outweigh any likely adverse effects
under the proper incident to banking standard of section 4(c)(8) of the BHC Act.
Conclusion
Based on the foregoing and all the other facts of record, the
Board has determined that this transaction should be, and
hereby is, approved subject to all the terms and conditions
10. See 12 C.F.R. 225.28(b)(5).
11. 12 U.S.C. § 1843(c)(8).
12. See 12 C.F.R. 225.26.
489
in this order. The Board's approval is specifically conditioned on compliance by First Midwest with all the commitments made in connection with the proposal.
The Board's determination on the nonbanking activities
also is subject to all the terms and conditions set forth in
Regulation Y, including those in sections 225.7 and
225.25(c) of Regulation Y (12 C.F.R. 225.7 and
225.25(c)), and to the Board's authority to require such
modification or termination of the activities of a bank
holding company or any of its subsidiaries as the Board
finds necessary to ensure compliance with, and to prevent
evasion of, the provisions of the BHC Act and the Board's
regulations and orders issued thereunder. The commitments and conditions relied on by the Board in reaching
this decision are deemed to be conditions imposed in
writing by the Board in connection with its findings and
decision and, as such, may be enforced in proceedings
under applicable law.
The acquisition of Heritage Bank shall not be consummated before the fifteenth calendar day following the effective date of this order, and the proposal shall not be
consummated later than three months after the effective
date of this order, unless such period is extended for good
cause by the Board or by the Federal Reserve Bank of
Chicago, acting pursuant to delegated authority.
By order of the Board of Governors, effective April 13,
1998.
Voting for this action: Chairman Greenspan, Vice Chair Rivlin. and
Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich.
JENNIFER J. JOHNSON
Deputy Secretary of the Board
First Union Corporation
Charlotte, North Carolina
Order Approving the Merger of Bank Holding
Companies
First Union Corporation ("First Union"), a bank holding
company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842)
to merge with CoreStates Financial Corp ("CoreStates")
and thereby acquire CoreStates Bank, N.A., Philadelphia,
Pennsylvania ("CoreStates Bank"), and CoreStates Bank
of Delaware, N.A., Wilmington, Delaware ("CoreStates
Delaware"). 1 First Union also has requested the Board's
approval under section 4(c)(8) of the BHC Act
1. First Union also has requested approval to acquire interests
currently held by CoreStates in less than 25 percent of the voting
shares of each of First Commercial Bank of Philadelphia and United
Bank, both of Philadelphia, Pennsylvania. First Union has committed
to observe certain commitments previously made by CoreStates that
are designed to assure that First Union will not exercise a controlling
influence over the management and policies of these institutions. See
CoreStates Financial Corp, 82 Federal Reserve Bulletin 430, 431 n.l
(1996).
490
Federal Reserve Bulletin • June 1998
(12 U.S.C. § 1843(c)(8» to acquire the nonbanking subsidiaries of CoreStates and, under section 25 of the Federal
Reserve Act (12 U.S.C. § 601), to acquire CoreStates
Bank's foreign branches. See Appendix A.2
First Union has total consolidated assets of approximately $157.3 billion, and is the sixth largest commercial
banking organization in the United States, controlling approximately 3.2 percent of the total banking assets of
insured commercial banks in the United States.3 First
Union National Bank, Charlotte, North Carolina
("FUNB"), which is a wholly owned subsidiary of First
Union, operates in North Carolina, Florida, Georgia, South
Carolina, Tennessee, Virginia, Maryland, Pennsylvania,
New Jersey, New York, Connecticut, and the District of
Columbia. First Union also owns First Union Bank of
Delaware, Wilmington, Delaware ("Delaware Bank"),
which operates in Delaware. First Union also engages in a
number of permissible nonbanking activities nationwide.
CoreStates has total consolidated assets of approximately $48.5 billion, and is the 23rd largest commercial
banking organization in the United States, controlling approximately 1 percent of total nationwide banking assets.
CoreStates operates in Pennsylvania, New Jersey, and
Delaware, and engages through subsidiaries in a variety of
permissible nonbanking activities. On consummation of
the proposal, and accounting for the proposed divestitures,
First Union would remain the sixth largest commercial
banking organization in the United States, with total consolidated assets of approximately $205.8 billion, representing approximately 4.2 percent of total nationwide banking
assets.
First Union is the fifth largest commercial banking organization in Pennsylvania, controlling deposits of approximately $5.6 billion, representing approximately 3.3 percent
of all deposits held by depository institutions in the state.4
CoreStates is the second largest commercial banking organization in Pennsylvania, controlling deposits of approximately $25.1 billion, representing approximately 14.6 percent of deposits held by depository institutions in
Pennsylvania. On consummation of the proposal, and accounting for the proposed divestitures, First Union would
become the largest depository institution in Pennsylvania,
controlling deposits of approximately $29.7 billion, representing approximately 17.3 percent of deposits in the state.
First Union also would control approximately 15.2 percent and 2.1 percent of state deposits in New Jersey and
Delaware, respectively. State deposit and ranking data for
First Union and CoreStates in these states are described in
Appendix B.
2. In addition, First Union has requested the Board's approval to
hold and exercise an option to purchase up to 19.9 percent of the
voting shares of CoreStates if certain events occur. The option would
expire on consummation of the proposal.
3. Asset and ranking data are as of December 31, 1997, and reflect
First Union's acquisition of Signet Banking Corporation, Richmond.
Virginia.
4. For this purpose, depository institutions include commercial
banks, savings banks, and savings associations.
Factors Governing Board Review of Transaction
The Board is charged with considering a number of specific factors when reviewing the acquisition of a bank or
bank holding company under the BHC Act. These factors
are the competitive effects of the proposal in the relevant
geographic markets; the financial and managerial resources
and future prospects of the companies and banks involved
in the transaction; the convenience and needs of the community to be served, including the records of performance
under the Community Reinvestment Act (12 U.S.C. § 2901
et seq.) ("CRA") of the insured depository institutions
involved in the transaction; and the availability of information needed to determine and enforce compliance with the
BHC Act.5
In order to permit interested members of the public an
opportunity to submit comments to the Board on these
factors, the Board published notice of the proposal and
provided a period for public comment. The Board extended
the public comment period to allow the public to comment
on a CRA plan proposed by First Union for the
Philadelphia/New Jersey/Delaware region. In total, the
public comment period provided interested persons approximately 57 days to submit written comments on the proposal.6
Because of the significant public interest in this proposal, particularly in the Philadelphia area, the Board also
held a public meeting to allow interested persons to present
direct testimony regarding the various factors that the
Board is charged with reviewing under the BHC Act. More
than 80 commenters appeared and testified at the public
meeting, and many of the commenters who testified also
submitted written comments. Testimony was presented at
the meeting by representatives of community and nonprofit organizations, members of the United States Congress, small business owners, customers of First Union and
CoreStates, CoreStates employees, local and state government officials, and other interested individuals. Through
the public comment period and the public meeting, the
Board received more than 235 comments on the proposal.
Commenters submitted information and expressed views
supporting and opposing the proposed acquisition. Commenters in support of the proposal commended First Union
for its lending and other financial support of specific community development projects, including its funding of affordable mortgage and home improvement loan programs
directly and through intermediaries, and its leadership in
developing and funding loan pools in several states. Commenters also commended First Union's small business
lending activities, including its participation in micro-
5. In cases involving a foreign bank, the Board also is charged with
considering whether the foreign bank is subject to comprehensive
supervision or regulation on a consolidated basis by appropriate
authorities in the foreign bank's home country.
6. Notice of the proposal was published in the Federal Register
(63 Federal Register 4266 (1998)) and in local newspapers in accordance with the Board's Rules of Procedure. See also Press Release
dated February 25. 1998.
Legal Developments
lending programs. Many commenters praised First Union's
five-year, $13 billion community reinvestment plan for
Pennsylvania, New Jersey, and Delaware ("CRA Plan").
Other commenters noted favorably First Union's commitment to maintain the current level of charitable contributions of CoreStates and First Union in the three-state area,
and to establish a $100 million charitable foundation to
support community needs within the region. Commenters
in support included customers and community organizations from throughout the areas currently served by First
Union as well as from the Philadelphia/New Jersey/
Delaware area.
Commenters opposed to the merger expressed concerns
regarding the loss of a large financial institution with
headquarters in Philadelphia and the effect the merger
would have on competition, branch closings, and local
civic leadership, particularly in low- and moderate-income
("LMI") and inner city neighborhoods in the City of
Philadelphia. A number of commenters believed that a
large out-of-state banking organization like First Union
would not serve their communities as well as a local
organization like CoreStates. Other commenters cited
weaknesses they perceived in the performance record of
First Union under the CRA, particularly in the communities served by CoreStates. Commenters also discussed potential adverse effects of the proposal on individuals and on
communities, including the effects of layoffs, the potential
reduction in the availability and quality of banking services, and other concerns.
In evaluating the statutory factors under the BHC Act,
the Board carefully considered the information and views
presented by all commenters. The Board also considered
all of the information presented in the application and in
supplemental filings by First Union and reports filed by the
relevant companies and publicly available information and
other reports. In addition, the Board reviewed confidential
supervisory information, including examination reports regarding the companies and depository institutions involved,
and information provided by the other federal banking
agencies and the Department of Justice. For the reasons
discussed below, and after a careful review of all the facts
of record, the Board concludes that the statutory factors it
is required to consider under the BHC Act are consistent
with approval of the proposal.
Competitive Factor
The BHC Act prohibits the Board from approving an
application under section 3 of the BHC Act if the proposal
would result in a monopoly or if the effect of the proposal
may be substantially to lessen competition in any relevant
market, unless the Board finds that the anticompetitive
effects of the proposal are clearly outweighed in the public
interest by the probable effect of the proposal in meeting
the convenience and needs of the community to be served.7
7. 12U.S.C. § 1842(c)(l)(B).
491
The Board received a number of comments from individuals and organizations regarding the competitive aspects of
the proposal. A substantial majority of the commenters
discussing this factor believed that the acquisition would
have significantly adverse anticompetitive effects such as
increased fees, reduced customer convenience, and reduced availability and quality of banking and nonbanking
products in the banking markets where First Union and
CoreStates compete. Many commenters focused on the
City of Philadelphia and argued that the level of concentration resulting from the proposal would significantly exceed
the Department of Justice Merger Guidelines ("DOJ
Guidelines") in Philadelphia. These commenters estimated
that the post-merger concentration in Philadelphia, as measured by the Herfindahl-Hirschman Index ("HHI") under
the DOJ Guidelines, would increase by 628 points to 3429,
and that First Union would control more than 50 percent of
the total deposits in depository institutions in Philadelphia.8 Several commenters contended that the level of
increases in market share and concentration in Philadelphia
violated the Supreme Court's decision regarding another
Philadelphia-based bank merger in United States v. Philadelphia National Bank, 31A U.S. 321, 357 (1963) {"Philadelphia National').
Product Market. In order to determine the effect of a
particular transaction on competition, it is necessary to
designate the area of effective competition between the
parties. The courts have held that the area of effective
competition is decided by reference to the "line of commerce," or product market, and a geographic market. The
Board and the courts traditionally have recognized that the
appropriate product market for evaluating bank mergers
and acquisitions is the cluster of products (various kinds of
credit) and services (such as checking accounts and trust
administration) offered by banking institutions.9
Geographic Market. Once the relevant product market
has been defined, it is necessary to identify the appropriate
geographic market in which competition for the supply of,
and demand for, this line of commerce occurs. In defining
the relevant geographic market in the case of bank acquisitions, the Board and the courts consistently have held that
the geographic market for the cluster of banking services is
8. See 49 Federal Register 26,823 (June 29, 1984). Under the DOJ
Guidelines, a market in which the post-merger HHI is more than 1800
is considered to be highly concentrated. The Department of Justice has
informed the Board that a bank merger or acquisition generally will
not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the
merger increases the HHI by more than 200 points. The Department
of Justice has stated that the higher than normal threshold for an
increase in HHI when screening bank mergers and acquisitions for
anticompetitive effects implicitly recognizes the competitive effects of
limited-purpose and other nondepository financial entities.
9. See Chemical Banking Corporation, 82 Federal Reserve Bulletin
239 (1996) ("Chemical Order") and studies cited therein. The
Supreme Court has emphasized that it is the cluster of products and
services that, as a matter of trade reality, makes banking a distinct line
of commerce. See Philadelphia National, 374 U.S. at 357. Accord
United States v. Connecticut National Bank, 418 U.S. 656 (1974);
United States v. Phillipsburg National Bank, 399 U.S. 350 (1969).
492
Federal Reserve Bulletin • June 1998
local in nature.10 The geographic scope of the local market
is defined by the area in which competition between depository institutions can reasonably be expected to have a
direct effect on the price and supply of the cluster of
banking products and services.11
In determining the relevant geographic market, the
Board reviews a number of factors that identify the geographic area over which competitive forces act to affect the
pricing and availability of banking products and services.
These include data regarding worker commuting patterns,
as indicated by census data; population density; degree of
economic integration; the availability and geographic reach
of various modes of advertising; the presence of shopping,
employment, health care, and other necessities; the availability of transportation systems and routes; branch banking patterns; deposit and loan activity; and other similar
factors that indicate the geographic scope of competition.12
First Union and CoreStates operate and compete in several areas in Pennsylvania, New Jersey, and Delaware. As
noted above, several commenters questioned the appropriate definition of the banking market for the Philadelphia
area. The definition of the appropriate market was not
contested in the other markets in which First Union and
CoreStates compete. The Board has, therefore, paid special
attention to defining the relevant geographic banking market in the Philadelphia area.
A. Relevant Geographic Banking Market for the
Philadelphia Area
Philadelphia is the fifth largest city in the United States,
with a population of approximately 1.5 million people.13
Philadelphia serves as a hub for financial, commercial,
health, recreational, and other services throughout the metropolitan area that surrounds the city. There is substantial
and continuous economic development and integration between the City of Philadelphia and the surrounding nine
counties, in particular Bucks, Chester, Delaware, and
Montgomery Counties in Pennsylvania; and Burlington,
Camden, Gloucester, and Salem Counties and the southwestern portion of Mercer County, in New Jersey. Commuting data for 1990 from the U.S. Bureau of the Census
indicate that the City of Philadelphia is one of the largest
net importers of labor in eastern Pennsylvania and southern
10. See Chemical Order at 241; see also Sunwest Financial Services, Inc., 73 Federal Reserve Bulletin 463 (1987); Pikeville National
Corporation, 71 Federal Resen•£• Bulletin 240 (1985); Wyoming Bancorporation, 68 Federal Reserve Bulletin 313 (1982), aff'd. 729 E2d
687 (10th Cir. 1984). See also Connecticut National, 418 U.S. at
667-68.
11. Philadelphia National, 374 U.S. at 359, quoting Tampa Electric
Co. v. Nashville Coal Co., 365 U.S. 320. 327 (1961).
12. See Crestar Bank, 81 Federal Reserve Bulletin 200, 201 n.5
(1995); Pennbancorp, 69 Federal Reserve Bulletin 548 (1983);
St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 (1982);
U.S. Bancorp, 67 Federal Reserve Bulletin 60, 61 n.2 (1981).
13. Population data are from the 1990 decennial census by the
U.S. Bureau of the Census.
and central New Jersey.14 Approximately 33 percent of
Philadelphia's work force resides outside the city. More
than 10 percent of the residents in the Pennsylvania counties of Bucks, Delaware, and Montgomery commute to
jobs in the City of Philadelphia.15 In addition, approximately 16 percent of the residents in Camden County, New
Jersey, commute to Philadelphia, and 14 percent and
20 percent of the residents in the New Jersey counties of
Burlington and Gloucester, respectively, commute to Camden County.16
The four counties closest to Philadelphia—Camden
County in New Jersey and Bucks, Delaware, and Montgomery Counties in Pennsylvania—have direct and substantial links to the city. The Southeastern Pennsylvania
Transportation Authority ("SEPTA") operates nine regional rail lines to central Philadelphia and three light rail
lines to its terminal at 69th Street, where they connect with
the subway-elevated line to the rest of the city. These lines
operate in Bucks, Delaware, Chester, and Montgomery
Counties in Pennsylvania, and Mercer County in New
Jersey.17 Eight major highways, including three interstate
highways, and ten secondary roads provide access from
Burlington, Camden, and Gloucester Counties in New Jersey to the Pennsylvania counties in the Philadelphia banking market. Ten bridges cross the Delaware River, which
separates Philadelphia from New Jersey, and more than
350,000 vehicles use these bridges daily.
Newspapers and other media serve an area that includes
these Pennsylvania and New Jersey counties. Philadelphia's principal newspaper, The Philadelphia Inquirer, is
14. A county is a net importer of labor when its payroll employment
(the number of workers employed in the county regardless of where
they live) exceeds its resident employment (the number of workers
who live in the county regardless of where they work) by at least
10 percent.
15. Approximately 11 percent of Bucks County's residents, approximately 23 percent of Delaware County's residents, and approximately 16 percent of Montgomery County's residents commute to
Philadelphia. In addition, approximately 13 percent of Chester County's residents commute to Montgomery County, which is contiguous
to Philadelphia.
16. Commuting data for Salem County, New Jersey, show that it is
also part of a multi-county market. Overall, 40 percent of Salem
County's residents work outside the county and commute to other
counties in the following percentages: Gloucester County, New Jersey
(10.4 percent); Philadelphia Primary Metropolitan Statistical Area (an
area smaller than the Philadelphia MSA) (7.3 percent); New Castle
County, Delaware (10.6 percent); Cumberland County, New Jersey
(8.8 percent); and other areas (approximately 3 percent). Since
17.7 percent of Salem County's residents commute to jobs within the
Philadelphia banking market, Salem County has been included within
its delineation.
17. The New Jersey Transit agency operates trains between Philadelphia and Atlantic City, New Jersey, that have a number of stations
in Camden and Burlington Counties, New Jersey, and operates at least
20 bus lines between central Philadelphia and locations in Burlington,
Camden, and Gloucester Counties. These bus lines also connect
directly with nine stations in Camden County that serve the Delaware
River Port Authority's high-speed rail system between central Philadelphia and Lindenwold in Camden County, New Jersey ("PATCO").
PATCO runs every 5-8 minutes during rush hour and every 10-15
minutes at other times and averages approximately 39,000 riders
daily.
Legal Developments
the largest newspaper in the area and has a significant
circulation in the New Jersey counties of Burlington, Camden, and Gloucester.18 Philadelphia television and radio
stations also are predominant in the Pennsylvania counties
and these New Jersey counties. In addition, Philadelphia
provides area residents with a number of financial, transportation, cultural, educational, medical, retail, and recreational services that are not available in the outlying counties.
A number of commercial banks and thrift institutions in
Philadelphia also have substantial presences in New Jersey.
For example, a number of depository institutions in the
Philadelphia banking market, including the six largest depository institutions in the market, maintain branches in
New Jersey and Pennsylvania. First Union and CoreStates,
moreover, each use a single system for pricing products
and services in Pennsylvania and New Jersey, and office
hours for each organization's subsidiary banks are almost
identical throughout this region.
Lending data filed under the Home Mortgage Disclosure
Act (12 U.S.C. § 2801 et seq.) ("HMDA") and small business lending data submitted under the CRA regulations of
the federal supervisory agencies indicate that depository
institutions compete throughout Philadelphia and the surrounding nine counties. In particular, these data show that
banks originate loans throughout the area.
The area that includes the City of Philadelphia and the
surrounding nine counties closely approximates the area
designated as a Ranally Metropolitan Area ('"RMA"). An
RMA is a privately defined compact geographic area with
relatively high population density that is linked by commuting, retail, and wholesale trade patterns.19 The banking
market also closely approximates the area designated as
the Philadelphia Metropolitan Statistical Area ("MSA") by
the Office of Management and Budget.20 MSA designations are made on the basis of an area's population and
include surrounding counties with strong economic and
social ties to a central county.
Several commenters argued that the Philadelphia metropolitan area consists of smaller banking markets that are
relevant in considering the competitive effects of the transaction, such as the City of Philadelphia or certain neighborhoods within the city. Commenters supported these market
definitions by arguing that these smaller areas are where
the vast majority of local residents can practicably and
conveniently turn for banking alternatives.
18. Circulation data for The Philadelphia Inquirer indicate that the
penetration level in these New Jersey counties is approximately
75 percent of the penetration level for the newspaper in Philadelphia
County.
19. The RMA differs from the Philadelphia banking market adopted
by the Board in that the RMA excludes some outlying areas in
Gloucester, Burlington, and Salem Counties, New Jersey, and some
outlying areas in Bucks, Montgomery, and Chester Counties, Pennsylvania, and includes part of Monmouth County and more of Mercer
County, New Jersey, and part of New Castle County, Delaware.
20. The Philadelphia MSA differs from the Philadelphia banking
market adopted by the Board in that the Philadelphia MSA excludes
all of Mercer County, New Jersey.
493
The Board believes that the suggested market definitions
are too narrow and do not adequately reflect the degree to
which competition among banking institutions is transmitted throughout the broader Philadelphia area.21 As explained above, there are significant commuting, advertising, overlap of banking activities and offices, economic
integration, and other factors that transmit competition
within the multi-county Philadelphia area. These data indicate that, although an individual customer may not have
easy access to all bank competitors in the market, the flow
of a significant number of customers, of economic activity,
and of information regarding the price and availability of
banking products and services in the banking market is an
effective check on the price and supply of the cluster of
banking products and services throughout the broader Philadelphia banking market. Accordingly, based on all the
facts of record, and for the reasons discussed above, the
Board believes that the relevant banking market for considering the competitive effects of the proposal in the Philadelphia area is comprised of Philadelphia, Bucks, Chester,
Delaware, and Montgomery Counties in Pennsylvania; and
Burlington, Camden, Gloucester, and Salem Counties and
the southwestern portion of Mercer County, in New Jersey.
B. Competitive Analysis in the Philadelphia
Banking Market
First Union is the fourth largest of 118 depository institutions in the Philadelphia banking market, and controls
deposits of approximately $5.5 billion, representing approximately 7.9 percent of market deposits. CoreStates is
the largest depository institution in the market, and controls deposits of approximately $22 billion, representing
approximately 31.5 percent of market deposits. On a combined basis, First Union and CoreStates would control
approximately 39.4 percent of market deposits,22 and the
21. Other commenters argued that the Board is bound in this case by
the definition of the Philadelphia banking market set out by the
Supreme Court in 1963 in its opinion analyzing the merger of Philadelphia National Bank and Girard Trust Corn Exchange Bank. See
Philadelphia National, 374 U.S. at 357-62. In Philadelphia National,
the Supreme Court determined that the appropriate market for analyzing the competitive effects of that merger was the area defined by the
City of Philadelphia (which comprises Philadelphia County) and
Bucks, Montgomery, and Delaware Counties in Pennsylvania.
The Court has consistently recognized that competitive analysis
must reflect the competitive and economic realities of the marketplace. See United States v. Marine Bancorporation, 418 U.S. 602.
630-31 (1974); Brown Shoe Co. v. United States, 370 U.S. 294,
322 n.38 (1962). The Board believes that current data, which reflect
significant developments in population density, commuting patterns,
transportation systems, advertising and media coverage, and other
commercial and economic activity, in addition to significant broadening of the branching and other powers of banks and thrifts in the
35 years since the Court considered Philadelphia National, support a
broader geographic market today, and are consistent with the legal
framework established by the Court for defining the relevant geographic market.
22. Market share deposit data are as of June 30, 1997. Market share
data before consummation are based on calculations in which the
deposits of thrift institutions are included at 50 percent, except as
discussed in the order. The Board previously has indicated that thrift
494
Federal Reserve Bulletin • June 1998
HHI would increase approximately 496 points to 1958, an
amount that would exceed the DOJ Guidelines in a highly
concentrated market.
In order to address the potential anticompetitive effects
of the proposal in the Philadelphia banking market, First
Union has committed to divest 23 branches. Fourteen of
the divested branches would be located in the City of
Philadelphia, and the nine remaining branches would be
located in the adjoining Pennsylvania counties of Delaware
and Montgomery. 23 The branches proposed to be divested
account for approximately $866.9 million in deposits, and
would either bring a new competitor into the market or
enhance the competitive presence of a current competitor.24
In addition, three savings associations that operate in the
market are significant commercial lenders and provide a
range of consumer, mortgage, and other banking products
and services. Competition from these savings associations
more closely approximates competition from commercial
banks, and the Board concludes that deposits controlled by
these organizations should be weighted at 100 percent.25 In
this light, and accounting for the proposed divestitures, the
HHI would increase by not more than 410 points to 1872,
and First Union would have a post-merger market share of
approximately 38.1 percent.26
institutions have become, or have the potential to become, significant
competitors of commercial banks. See Midwest Financial Group, 75
Federal Reserve Bulletin 386 (1989); National City Corporation, 70
Federal Resen'e Bulletin 743 (1984). Thus, the Board has regularly
included thrift deposits in the calculation of market share on a
50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal
Reserve Bulletin 52 (1991).
23. With respect to each market in which First Union has committed
to divest offices to mitigate the anticompetitive effects of the proposal,
First Union has committed to execute sales agreements for the proposed divestitures with a purchaser determined by the Board to be
competitively suitable prior to consummation of the proposal, and to
complete the divestitures within 180 days of consummation. First
Union also has committed that, in the event it is unsuccessful in
completing any divestiture within 180 days of consummation, it will
transfer the unsold branch(es) to an independent trustee that is acceptable to the Board and that will be instructed to sell the branches
promptly. BankAmerica Corporation, 78 Federal Resen'e Bulletin
338 (1992); United New Mexico Financial Corporation, 77 Federal
Reserve Bulletin 484 (1991).
24. Deposit amounts for all divestitures by First Union are based on
summary of deposit data reported to the Federal Deposit Insurance
Corporation by all market competitors, as of June 30, 1997. Based on
data reported by First Union as of April 7, 1998, the offices proposed
to be divested would control approximately $936 million of deposits.
25. The Board previously has indicated that, when analyzing the
competitive effects of a proposal, it may consider the competitiveness
of savings associations at a level greater than 50 percent of the savings
association's deposits if appropriate. See Banknorth Group, Inc., 75
Federal Resen'e Bulletin 703 (1989). In the Philadelphia banking
market, Firstrust Savings Bank, Peoples Bancorp MHC, and Progress
Financial Corp. each maintain a significantly greater percentage of
their assets in commercial loans than the national average for thrifts of
1.7 percent. The record also indicates that these thrifts have separate
commercial lending departments with commercial lending officers,
and that the thrifts plan to continue to increase their commercial
lending in the Philadelphia banking market.
26. Another savings association in the market. Sovereign Bancorp
Inc., has recently increased its commercial loan portfolio and commercial lending activities in the Philadelphia banking market. Although
As the Board has indicated in previous cases, in a market
in which the competitive effects of a proposal as measured
by market indexes and market share exceed the DOJ
Guidelines, the Board will consider whether other factors
tend to mitigate the competitive effects of the proposal.
The number and strength of factors necessary to mitigate
the competitive effects of a proposal depend on the level of
market concentration and size of the increase in market
concentration.27
In this case, the Board believes that a number of factors
help mitigate the competitive effects of the proposal in the
Philadelphia banking market.28 For example, the Board has
taken account of the significant number of competitors that
would remain in the market following this transaction and
the structure and size of other competitors. The Philadelphia banking market would have more than 50 commercial
banks and 65 thrifts remaining as competitors of First
Union. Five competing bank holding companies each have
more than $25 billion of total assets, and at least an
additional seven bank holding companies and at least four
thrifts or thrift holding companies each have more than
$1 billion of total assets. Numerous branches of depository
institutions would remain in the banking market after consummation.29
the level of commercial lending activity of this institution does not yet
approximate the level of commercial lending activities of banks or the
savings associations noted above, il does exceed the national average
for savings associations. If deposits controlled by Sovereign were
weighted at 75 percent, Ihe HHI would increase 404 points to 1847
and First Union would control 37.8 percent of market deposits.
27. See NationsBank Corporation, 84 Federal Reserve Bulletin 129
(1998); First of Waverh Corporation, 84 Federal Reserve Bulletin
111(1998).
28. Several commenters argued that the Philadelphia National case
precludes the approval of a merger where the resulting bank has a
post-merger market share greater than 30 percent. The Board notes
that the Court in Philadelphia National and other cases found that
"[no] particular percentage share was deemed critical." 374 U.S. at
365. Instead, the proposed merger in Philadelphia National was
enjoined because "[t]here is nothing in the record of this case to rebut
the inherently anticompetitive tendency manifested by these percentages." 374 U.S. at 366. Accordingly, Philadelphia National and
modern antitrust analysis confirm that market share must be considered in light of all the facts of record, including factors that tend to
mitigate the potential anticompetitive effects of market concentration.
See United States v. Marine Bancorporation, 418 U.S. 602, 631
(1974); United States v. Citizens & Southern Nat'l Bank, 422 U.S. 86,
120 (1975); United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C.
Cir. 1990); Hospital Corp. of America v. Federal Trade Commission,
807 F.2d 1381 (7th Cir. 1986), cert, denied, 481 U.S. 1038 (1987).
This methodology has been adopted in the DOJ Guidelines and
repeatedly confirmed by the courts. See, e.g., United States v. International Harvester Co., 564 F.2d 769 (7th Cir. 1977) (court considered
the number and power of competitors in the market, the background
of growth and resources of the companies involved, the relationship of
their lines of commerce, and the physical, economic, and legal barriers
to entry); FTC v. National Tea Co., 603 F.2d 694 (8th Cir. 1979) (court
considered the weakness of the acquiring firm as a competitor, the
status of the market as "relatively competitive," and the likelihood
that the acquiring firm would fail without the merger); and Kennecott
Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195 (2d Cir. 1978)
(court considered ease of entry and concentration trends).
29. If market indexes were measured in terms of the number of
branch offices of depository institutions, the Philadelphia banking
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Two large Pennsylvania-based commercial banking organizations also would remain as competitors. PNC Bank
Corporation, the second largest competitor in the Philadelphia banking market, is the 13th largest commercial banking organization in the nation by total assets,30 and would
continue to control approximately 15 percent of market
deposits and operate 171 branches in the market. Mellon
Bank Corporation, the third largest competitor in the market, is the 25th largest commercial banking organization in
the nation by total assets,31 and would continue to control
approximately 12 percent of market deposits and operate
132 branches in the banking market.
The Philadelphia banking market is attractive for entry
to out-of-market competitors and has experienced significant entry recently.32 Philadelphia is the fourth largest
metropolitan area in the country.33 The Philadelphia banking market exceeds the national average for total deposits
per banking office and median household income. 34 Data
show that median household income, deposits per banking
office, population per banking office, and increases in total
deposits in the Philadelphia banking market are greater
than the averages for other Pennsylvania MSAs. Entry into
the Philadelphia banking market, moreover, is not subject
to substantial legal restrictions.35
The attractiveness of this market for entry has been
demonstrated by recent entry by new competitors. Since
June 1995, five depository institutions have entered the
Philadelphia banking market de novo, and five other depository institutions have entered the banking market by acquisition.
Based on all the facts of record, the Board concludes that
the considerations discussed above, including the proposed
market would be moderately concentrated after consummation of the
proposal, and the HHI would increase 310 points to 1068. First Union
would control approximately 26.7 percent of the total number of
branches in the banking market.
30. PNC Bank Corporation has total assets of approximately
$75.1 billion, as of December 31, 1997.
31. Mellon Bank Corporation has total assets of approximately
$44.9 billion, as of December 31, 1997.
32. A commenter asserted that job losses and branch closings
resulting from the proposal could adversely affect the attractiveness of
the market to out-of-market competitors. These matters are discussed
later in the order.
33. Research suggests that substantially more entry takes place in
large banking markets than in small banking markets. See Amel, Dean
and Liang, J. Nellie, "Determinants of Entry and Profits in Local
Banking Markets," Review of Industrial Organization, February 12,
1997, at 59-78.
34. The national average for total deposits per banking office in an
MSA is $46.4 million, and the national median family income is
$35,056. In the Philadelphia banking market, total deposits per banking office average $48.9 million, and the median family income is
$35,684.
35. New Jersey and Pennsylvania expressly permit banks from the
other state to acquire all, or any portion of the branch network of, an
in-state bank. See N.J. Stat. Ann. § 9A-133.1 (1997); Pa. Stat. Ann. tit.
7, § 1602 (1997). New Jersey and Pennsylvania also permit unrestricted in-state branching. Section 3(d) of the BHC Act allows the
Board to approve an application by a bank holding company to
acquire a bank located in a state other than the home state of such
bank holding company. 12 U.S.C. § 1842(d).
495
divestitures, the number and strength of competitors in the
market, the attractiveness of the market for entry by out-ofmarket competitors, the number of recent entries into the
market, and other factors mitigate the potentially adverse
competitive effects of the proposal in the Philadelphia
banking market.36
C. Competitive Analysis of Other Relevant Banking
Markets
First Union and CoreStates also compete in six other
banking markets: Metropolitan New York-New Jersey;
Atlantic City, New Jersey; Vineland, New Jersey; Lehigh
Valley, Pennsylvania; Scranton/Wiikes Barre, Pennsylvania; and Wilmington, Delaware.37 First Union proposes to
divest nine branches in the Lehigh Valley, Pennsylvania,
banking market that control approximately $223 million in
deposits. Consummation of the proposal would be consistent with the DOJ Guidelines.38 In this light, the Board
concludes that the proposed divestiture, the number of
competitors that would remain in each market, the characteristics of each market, the projected increase in concentration in market deposits as measured by the HHI under
the DOJ Guidelines, and the resulting market shares would
mitigate the competitive effects of the proposal in these six
banking markets.
D. Views of Other Agencies and Conclusion
The Department of Justice reviewed the proposal and advised the Board that, in light of the proposed divestitures in
the Philadelphia and Lehigh Valley banking markets, consummation of the proposal would not likely have a significantly adverse effect on competition in any relevant banking market. The Office of the Comptroller of the Currency
("OCC") and the Federal Deposit Insurance Corporation
("FDIC") also have not objected to consummation of the
proposal.
Based on all the facts of record, and for the reasons
discussed above, the Board has determined that consummation of the proposal would not be likely to result in a
significantly adverse effect on competition or on the con-
36. A commenter proposed that the Board establish absolute limits
on bank mergers and acquisitions. This methodology was reviewed by
the Board in NationsBank Corporation, 84 Federal Reserve Bulletin
129, 131 n.13 (1998). For the reasons discussed more fully in the
NationsBank order, the Board concluded that its current approach,
which takes into account the principles suggested by the commenter
while at the same time permitting consideration of a variety of other
factors that may affect competition in a particular banking market,
provides a more complete economic analysis of the competitive
effects in a local banking market.
37. These banking markets are delineated in Appendix B. Market
data for the markets after consummation of the proposal, except for
the Lehigh Valley banking market, are set forth in Appendix C.
38. Accounting for the proposed divestitures, First Union would
control 31.6 percent of market deposits and would become the largest
of 37 depository institutions in the Lehigh Valley banking market. The
HHI would increase 389 points to 1383. See also the banking markets
discussed in Appendix C.
496
Federal Reserve Bulletin • June 1998
centration of banking resources in the Philadelphia banking
market, the six remaining banking markets, or in any other
relevant banking market.39 Accordingly, subject to completion of the proposed divestitures, the Board has determined
that competitive factors are consistent with approval of the
proposal.
Convenience and Needs Factor
The BHC Act requires the Board to consider the convenience and needs of the communities, in connection with
its review of the acquisition of a bank. The CRA requires
that the Board take into account, as part of its review of a
proposal to acquire a depository institution, the record of
performance of each relevant depository institution in helping to meet the credit needs of the institution's entire
community, including LMI neighborhoods, consistent with
the safe and sound operation of the institution.40
A. Public Comments Regarding Convenience and
Needs Factor
In order to aid the Board in collecting information regarding the effect of the proposal on the convenience and needs
of affected communities and regarding the performance
records of the relevant depository institutions under the
CRA, the Board provided an extended period for public
comment on the proposal and convened a public meeting
regarding the proposal in Philadelphia. As noted above,
more than 235 interested members of the public either
submitted written remarks or provided testimony at the
public meeting.
Summary of Comments. More than 130 commenters
supported the proposal or commented favorably about First
Union's CRA-related activities.41 Many of these comment39. A number of commenters urged the Board to consider the
competitive effect of First Union's proposed acquisition of The Money
Store in the Philadelphia banking market. The Board notes that the
effect on competition of First Union's acquisition of The Money Store
will be subject to review either by the Board under the BHC Act or (he
OCC under its regulations, and that First Union has not sought
approval of this transaction from the Board at this time. In the event
approval of the acquisition of The Money Store is sought from the
Board, the Board will analyze that transaction in light of the combination of First Union and CoreStates in the relevant markets.
40. 12U.S.C. §2903.
41. These commenters included:
(1) the mayors of Philadelphia, Pennsylvania, Charleston, South
Carolina, and Atlanta, Georgia;
(2) Eastern Philadelphia Organizing Project, Philadelphia, Pennsylvania;
(3) Philadelphia Association of Community Development Corporations, Philadelphia, Pennsylvania;
(4) Pennsylvania Low Income Housing Coalition, Glenside, Pennsylvania;
(5) Community Action Committee of the Lehigh Valley, Inc.,
Bethlehem, Pennsylvania;
(6) Delaware County Legal Assistance Association, Inc., Chester,
Pennsylvania;
(7) Mayor's Commission on Puerto Rican/Latin Affairs, Philadelphia, Pennsylvania;
(8) Save Our Waterfront. Camden, New Jersey;
ers commended First Union for providing small business
credit and support, sponsoring community development
activities directly and through intermediaries, participating
in programs that provided affordable housing and mortgage
financing for LMI individuals, and providing support for
non-profit organizations. Other commenters related their
favorable experiences with specific programs or services
offered by First Union. A number of commenters commended First Union's CRA plan for Pennsylvania, New
Jersey, and Delaware.
More than 100 commenters either opposed the proposal,
requested that the Board approve the merger subject to
conditions suggested by the commenter, or expressed concerns about the CRA performance record of First Union.42
A number of these commenters contended that First Union
has an inadequate record of lending to LMI and minority
borrowers and in census tracts with predominately LMI
and minority residents, particularly in the Philadelphia
MSA, the Bronx, and Delaware. Other commenters maintained that CoreStates's record in Pennsylvania of making
housing-related loans to LMI and minority borrowers and
small business loans in LMI and minority census tracts was
significantly better than First Union's record. A number of
commenters expressed concern about the effects of proposals by First Union to close branches in Pennsylvania, New
Jersey, and Delaware. Particular concern was expressed
that branch closings would reduce the availability of banking services generally, and would have a disproportionate
adverse effect on LMI customers, LMI neighborhoods, and
elderly individuals, particularly in the greater Philadelphia
area. Other commenters noted that First Union's representations regarding branch closures in LMI census tracts
expired after two years. 43
Commenters also maintained that First Union's banking
products and services did not meet the needs of lowincome, elderly, or other customers with special needs in
(9) members of the U.S. House of Representatives and the U.S.
Senate; and
(10) representatives of community and non-profit organizations in
North Carolina, Florida, Georgia, Virginia, Maryland, and Tennessee.
42. These commenters included:
(1) members of the U.S. House of Representatives and the U.S.
Senate;
(2) Community Legal Services, Inc.;
(3) Philadelphia branch of the NAACP;
(4) Philadelphia Welfare Rights Organization;
(5) Philadelphia Legal Assistance;
(6) Inner City Press/Community on the Move, Bronx, New York;
(7) Philadelphia Unemployment Project;
(8) Action Alliance of Senior Citizens of Greater Philadelphia;
(9) Consumer Education & Protection Association;
(10) Delaware Community Reinvestment Action Council, Inc.,
Wilmington, Delaware; and
(11) state and local government officials, including two Philadelphia councilmen, three Pennsylvania representatives, and the Treasurer of Pennsylvania. All organizations are located in Philadelphia,
Pennsylvania, unless otherwise indicated.
43. One commenter criticized First Union as unresponsive to concerns expressed by community groups when it closed a branch in
Baltimore, Maryland.
Legal Developments
Philadelphia. Other commenters considered the basic banking accounts offered by First Union to be inadequate,
particularly for customers who receive benefit payments
from Pennsylvania by electronic benefits transfer ("EBT")
because these customers cannot qualify for First Union's
direct-deposit, no-fee banking account.44 Some commenters claimed that First Union does not have enough safe and
accessible automated teller machines ("ATMs") in LMI
and minority census tracts. Commenters also asserted that
First Union should increase its hours of operation, improve
its customer service, cash checks for non-customers without requiring a thumbprint, and offer more banking products in LMI and minority census tracts.
Several commenters criticized First Union's level of
participation in particular affordable housing programs and
its level of charitable contributions. Many of these commenters compared First Union's performance in community redevelopment and charitable activities in Pennsylvania unfavorably to CoreStates's efforts, which were
characterized as exemplary. Other commenters expressed
concern that First Union would reduce or terminate financial support for specific programs currently provided by
CoreStates.
Commenters also expressed concern about the economic
effects that job reductions by First Union would have on
individuals and on the Philadelphia area. Several commenters argued that First Union's job assistance programs for
most employees who would be displaced as a result of the
acquisition would not address adequately the effects of job
losses and criticized the bonus packages awarded to senior
employees leaving CoreStates.
B. CRA Performance Evaluations
As provided in the CRA, the Board has evaluated the
convenience and needs factor in light of examinations of
the CRA performance records of the relevant institutions
conducted by the primary federal supervisor. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process
because it represents a detailed on-site evaluation of the
institution's overall record of performance under the CRA
by its primary federal supervisor.45
First Union has consolidated its subsidiary banks, except
Delaware Bank, into its lead bank, FUNB. Before the
consolidation, banks representing more than 88 percent of
the total banking assets of First Union received "outstanding" ratings from their primary federal supervisors at their
most recent CRA performance examinations.46 First Union
44. Pennsylvania makes all EBTs through direct deposit in one
depository institution that is under contract with the state.
45. The Statement of the Federal Financial Supervisory Agencies
Regarding the Community Reinvestment Act provides that a CRA
examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these
examinations will be given great weight in the applications process.
54 Federal Register 13.742 and 13,745 (1989).
46. First Union's other banks were all rated "satisfactory" for CRA
performance by their primary federal supervisors. Appendix D con
497
National Bank of North Carolina, Charlotte, North Carolina ("FUNB-NC"), which primarily served communities
in North Carolina before the consolidation, received an
"outstanding" CRA performance rating from the OCC, as
of May 1997. First Union National Bank, Summit, New
Jersey ("FUNB-Summit"), which served communities in
Pennsylvania, New Jersey, and New York before the consolidation, also received an "outstanding" CRA performance rating from the OCC, as of May 1997.47 In addition,
Delaware Bank received a "satisfactory" rating for CRA
performance from its primary federal supervisor, the FDIC,
at its most recent CRA performance examination, as of
October 1995.
CoreStates Bank received an "outstanding" CRA performance rating from the OCC, as of September 1997. CoreStates Delaware received a "satisfactory" CRA performance rating from the OCC, as of August 1997.
Examiners found no evidence of prohibited discrimination or other illegal credit practices at the subsidiary banks
of First Union or CoreStates. The examinations also concluded that the banks' delineations of the local communities they served were reasonable and did not arbitrarily
exclude LMI communities. In addition, the banks solicited
and accepted credit applications from all segments of their
delineated communities. Examiners also determined that
loans made by the banks were reasonably distributed
throughout the local communities they served, including
LMI communities, and served all members of the communities, including LMI individuals.
First Union's presence in the Pennsylvania/New Jersey/
Delaware region is smaller than CoreStates's presence,
and, after consummation of the proposal. First Union
would have a significantly expanded service community in
Pennsylvania. To meet its increased responsibilities under
the CRA, First Union indicates that it will implement the
CRA-related policies and programs developed in its home
state operations and in other states it serves, and may retain
some aspects of the CRA policies and programs of CoreStates, including community development policies that
have been successful for CoreStates. Consequently, the
Board has taken into account First Union's CRA performance record in its home state and in other states it serves
as well as its performance in the region currently served by CoreStates.
C. First Union's Lending Record Generally and in
the Region
First Union offers a variety of programs through its subsidiaries that assist LMI borrowers to obtain affordable housing. The First Union Affordable Home Mortgage Program
features reduced down payment requirements, flexible
tains the most recent CRA performance ratings for First Union's
banks.
47. Some commenters questioned the thoroughness of the examinations and ratings conferred on certain national bank subsidiaries of
First Union. The Board has provided these comments to the OCC for
consideration.
498
Federal Reserve Bulletin • June 1998
funding of closing costs, increased debt-to-income ratios, a
waiver of mortgage insurance, and flexible underwriting
criteria. The Neighborhood Development Mortgage Program, offered to LMI borrowers purchasing homes in LMI
census tracts, features reduced down payment requirements, increased debt-to-income ratios, and below-market
interest rates. The Community Partnership Mortgage Program, which involves home ownership counseling provided by a participating non-profit community organization, features funding for up to 100 percent of the purchase
price, reduced closing costs, increased debt-to-income ratios, and a waiver of mortgage insurance. The Agency
Mortgage Program is available for home buyers with limited funds for a down payment, and features financing for
up to 97 percent of the value of the property, flexible
funding for closing costs, a higher permissible debt-toincome ratio, and financial counseling. Home mortgage
loans also are offered through programs sponsored by the
Federal Housing Administration ("FHA") and other
government-sponsored mortgage programs.
First Union originates approximately $400 million of
affordable home purchase mortgage loans annually. Its
portfolio of these loans increased from 13,839 loans in
1995, totalling $685 million, to 23,926 loans in 1996,
totalling $1.5 billion. First Union also offers special home
improvement loans to LMI borrowers, which feature repayment periods of up to 15 years and an annual 2 percent
interest rebate for timely payments. As of November 1997,
more than 4,600 loans, totalling $33.2 million, were outstanding under this program.
First Union has sponsored grant applications under the
Federal Home Loan Bank of Atlanta's Affordable Housing
Program for 49 projects that have resulted in $17.6 million
of subsidies for affordable housing for LMI individuals and
households, making First Union the second largest program participant in the nation. Through its Capital Markets
Affordable Housing Unit, First Union has invested more
than $500 million in housing projects providing low income housing tax credits, and has been senior manager for
more than $100 million of bonds issued to finance multifamily housing developments. During 1996 and 1997, First
Union provided more than $800 million in financing to
approximately 700 for-profit and non-profit affordable
housing developments.
First Union has established a Small Business Banking
Division ("SBBD") to respond to loan requests by small
business owners within 24 hours of the request. First
Union's SBBD originated $643 million in small business
loans in 1995 and $1.1 billion in small business loans in
1996. Overall, First Union originated a total of approximately $4.7 billion in small business loans during 1996.
First Union has committed more than $4.5 million to fund
more than 21 micro-loan pools for business loans up to
$25,000 that are administered by local community development corporations. First Union invested approximately
$5.8 million during 1995 and 1996 in minority-owned
banks, credit unions, community development financial
institutions, and community development corporations.
As discussed below, First Union has developed and
implemented a number of specific programs at individual
First Union banks. Although First Union has recently
merged these banks into a single bank, it has retained the
programs discussed below in addition to others tailored to
the needs of specific communities.
CRA Performance in Home State. As noted, First
Union's lead subsidiary bank in North Carolina,
FUNB-NC, received an "outstanding" rating for its CRA
performance record. Examiners commended the bank for
effectively determining credit needs in North Carolina and
for responding to those needs in a constructive manner.
The 1997 examination found that the CRA was an integral
part of the planning and philosophy of the bank's board of
directors and that the board and senior management, at the
bank and the holding company level, were actively involved in the bank's CRA program. The bank's lending
patterns showed a reasonable distribution of loans throughout all its communities, including LMI neighborhoods.
FUNB-NC offered a wide range of products and services
to meet the identified credit needs of its communities. The
bank determined that affordable housing loans were the
primary credit need in its delineated community, and originated affordable home mortgage purchase loans through
several programs, including the First Union Affordable
Home Mortgage Program, the Neighborhood Development
Mortgage Program, and the Community Partnership Mortgage Program, to meet this need. From October 1995 to
October 1996, the bank originated 16 percent of all its
mortgage loans, totalling $102 million, to borrowers in
LMI census tracts. FUNB-NC also participated in
government-sponsored affordable housing programs. From
January 1995 through October 1996, the bank made loans
totalling $52.6 million through programs sponsored by the
FHA, the Veterans Administration ("VA"), and the Federal
National Mortgage Administration.
In addition, FUNB-NC engaged in small business lending, including loans to businesses in LMI census tracts. As
of October 1996, FUNB-NC had originated 18 percent of
its small business loans, totalling $42 million, in LMI
census tracts. From January 1995 through October 1996,
the bank also made approximately $7 million in loans
through programs sponsored by the Small Business Administration ("SBA").
Community development activities during the period
covered by the 1997 examination totalled 78 projects,
supporting affordable housing efforts, small business loan
pools, and economic rehabilitation programs for depressed
urban areas, that generated approximately $31 million in
loans. These activities included a $2.6 million loan to the
East Carolina Community Development Corporation to
construct a 44-unit apartment complex for the elderly in
Morehead, North Carolina; and a $5 million commitment
to the Charlotte-Mecklenburg Housing Partnership for development of affordable housing for LMI households in the
City of Charlotte and throughout Mecklenburg County.
CRA Record of FUNB-Summit. Examiners found that
FUNB-Summit showed a high level of responsiveness to
the credit needs of communities in Pennsylvania, New
Jersey, and New York, and had introduced several new
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credit products since the prior CRA performance examination to help address the credit needs of LMI individuals
and neighborhoods. For example, FUNB-Summit introduced First Union's affordable home purchase mortgage
loan programs and originated 263 loans under these programs in 1996, totalling $20 million. First Union also
retained the bank's Coalition Mortgage Program, which
featured a below-market interest rate, reduced fees, no
points, increased debt-to-income ratios, and flexible underwriting terms. FUNB-Summit made 748 loans under the
program in 1996, totalling approximately $77 million.48
Examiners favorably commented that a majority of the
loans in Pennsylvania were originated in concentrated LMI
areas, notably in the Philadelphia MSA.49 FUNB-Summit
also increased its emphasis on lending under FHA and VA
affordable housing programs. FHA loan originations increased 39 percent from 1995 to 1996, and VA loan originations increased from 20 loans to 90 loans during this
period.50
The 1997 CRA performance examination indicated that
HMDA data for 1995 showed that, in the Philadelphia
MSA, FUNB-Summit was the fifth largest originator of
residential mortgage loans made in LMI census tracts and
the fourth largest originator to LMI borrowers. These data
also showed that the bank was the largest originator of
residential mortgage loans made in LMI census tracts and
to LMI borrowers in New Jersey. The 1997 examination
noted that FUNB-Summit significantly reduced its overall
housing-related lending from 1995 to 1996, but HMDA
data indicate that it did not reduce the percentage of
housing-related loans it made to LMI and minority borrowers and to borrowers in LMI and minority census tracts.
Instead, such loans increased or remained constant as a
percentage of all housing-related loans the bank made in a
large majority of the areas served by the bank.51 Overall,
the percentage of the bank's total loan originations in LMI
census tracts nearly doubled, from 9 percent to 17 percent.
The 1997 examination also commended the bank's substantial increase in small business lending from $3 million
in 1995 to $85 million in 1996. In addition, loans made by
48. The bank made 204 loans under this program in Pennsylvania,
totalling approximately $9.5 million, and 400 loans under this program in New Jersey, totalling approximately $44.8 million.
49. The bank also was a participating lender in other programs
designed to assist LMI borrowers in obtaining home purchase and
home improvement financing, including the New Jersey Citizens
Action Home Improvement Loan Plan, Trenton Mortgage Plan,
Lehigh Valley Mortgage Loan Pool, and Philadelphia Home Improvement Loan program.
50. FHA loans in Pennsylvania increased from 18 loans, totalling
$1.5 million in 1995, to 35 loans, totalling $3.1 million in 1996. In
New Jersey, FHA loans increased from 28 loans, totalling $3 million
in 1995, to 38 loans, totalling $4.2 million in 1996.
51. The percentage of loan originations to African Americans
increased from 3.9 percent to 7.2 percent in the Pennsylvania assessment area, from 5.3 percent to 11.1 percent in the Philadelphia MSA,
and from 3.3 percent to 8.4 percent in New Jersey. The percentage of
loan originations to Hispanics in these areas also increased.
499
FUNB-Summit under programs sponsored by the SBA
doubled from $4 million in 1995 to $8 million in 1996.52
The Board also has reviewed FUNB-Summit's lending
record in New York, particularly in the Bronx.53 In 1996,
the bank made 144 Coalition Mortgage Program loans in
New York, totalling approximately $22.3 million.54 Examiners considered FUNB-Summit's lending penetration to
be strong in all census tract income levels, and commented
that a majority of the loans were originated in concentrated
LMI areas, notably the Bronx. FUNB-Summit also participated as a limited partner in three projects designed to
provide affordable housing in the Bronx during the period
covered by the 1997 examination.55
The 1997 CRA performance examination of FUNBSummit noted that FUNB-Summit was responsive to community economic development needs, and that its participation in community development projects was significant.
During 1996, FUNB-Summit, through its subsidiary community development corporation ("CDC"), funded
22 projects and an additional 20 loans from loan pools
within its delineated communities, for a total of $13.6
million in loan commitments. The bank and the CDC
together made more than $50 million in qualifying community development loans.56 These loans were made to
projects to provide alfordable housing and to support small
business development, redevelopment of LMI areas, community non-profit organizations, and businesses owned by
minorities or women.
CRA Record of Delaware Bank. Delaware Bank has total
assets of $114 million, representing less than 1 percent of
First Union's total banking assets, and operates primarily
as a small commercial lender. The most recent publicly
available CRA performance examination found that the
bank participated in a local community investment corporation and made several loans to private developers to acquire and rehabilitate government-subsidized rental housing for low-income households, and that the bank's
housing-related loans demonstrated a reasonable distribution throughout the community it serves. The Board also
has reviewed information regarding the bank's CRArelated activities since this examination, including its community development activities, and supervisory information from the FDIC.
52. In 1996, SBA loans by FUNB-Summit totalled $1.6 million in
Pennsylvania and $5.3 million in New Jersey.
53. The bank's delineated community in New York includes the
entire counties of Westchester, Rockland, Putnam, Orange, Dutchess,
and Ulster and 155 census tracts in Bronx County, New York.
54. HMDA data for 1995 reviewed in the 1997 examination showed
that, in New York, FUNB-Summit was the tenth largest originator of
residential mortgage loans in LMI census tracts and the fifth largest
originator to LMI borrowers.
55. These projects were designed to provide housing for LMI or
elderly residents in the Bronx. First Union committed construction
financing and equity investments qualifying for tax credits totalling
approximately $20.5 million for the three projects.
56. First Union's community development lending from January
1995 to February 1997 was allocated approximately as follows: New
Jersey—$25.8 million, Philadelphia MSA—$13 million. Northeastern
Pennsylvania—$8.9 million, and New York—$3.2 million.
500
Federal Reserve Bulletin • June 1998
HMDA Data. The Board also has considered First
Union's lending record in light of comments regarding the
HMDA data of its subsidiaries. The data generally show
that First Union provided a significant volume of housingrelated credit to minority borrowers and to borrowers in
LMI areas. For example, FUNB-Summit originated nearly
23,000 residential housing-related loans in 1996, totalling
approximately $1.1 billion, and was the largest originator
of home mortgage refinance loans and home improvement
loans in its delineated community.57
The data also reflect certain disparities in the rates of
loan originations and denials among members of different
racial groups and persons at different income levels.58 The
Board is concerned when the record of an institution indicates such disparities in lending, and believes that all banks
are obligated to ensure that their lending practices are
based on criteria that ensure not only safe and sound
lending but also equal access to credit by creditworthy
applicants regardless of their race or income level. The
Board recognizes, however, that HMDA data alone provide
an incomplete measure of an institution's lending in its
community because these data cover only a few categories
of housing-related lending. HMDA data, moreover, provide only limited information about the covered loans.59
HMDA data, therefore, have limitations that make them an
inadequate basis, absent other information, for concluding
that an institution has not adequately assisted in meeting its
communities' credit needs or has engaged in illegal lending discrimination. Because of the limitations of HMDA
data, the Board has considered those data carefully in light
of other information.
As noted, OCC examiners found no evidence of prohibited discrimination or other illegal credit practices at First
Union's banks. Examiners reviewed the banks' policies
and procedures for complying with fair lending laws and
regulations, conducted comparative file analyses for racial
and gender discrimination, and did not find any violations.
The Board also has considered the HMDA data in light of
57. One commenter contended that First Union's HMDA data are
questionable and must be closely scrutinized because of alleged
HMDA reporting violations by First Union Home Equity Bank, N.A.,
Charlotte, North Carolina ("FUHEB"). FUHEB accounts for less
than 1 percent of the banking assets of First Union. First Union has
begun a systematic evaluation of FUHEB's HMDA reporting and
committed to the OCC, the bank's primary federal supervisor, to take
prompt action to address any deficiencies. The OCC will monitor
FUHEB's compliance through its supervisory process. See Decision
of the OCC approving First Union's merger with Signet Bank, Richmond, Virginia (Corporate Decision No. 97-96, at 14 n.21, dated
November 9. 1997).
58. Commenters alleged that the dollar amount of First Union's
HMDA-related lending in eastern Philadelphia is inadequate when
compared to its share of market deposits in the area.
59. The data, for example, do not account for the possibility that an
institution's outreach efforts may attract a larger proportion of marginally qualified applicants than other institutions attract and do not
provide a basis for an independent assessment of whether an applicant
who was denied credit was, in fact, creditworthy. Credit history
problems and excessive debt levels relative to income (reasons most
frequently cited for a credit denial) are not available from HMDA
data.
First Union's lending record, which shows that First
Union's banks assist significantly in helping to meet the
credit needs of their local communities, including LMI
neighborhoods.60
CRA Plan. In connection with the proposal, First Union
has announced a five-year, $13 billion CRA Plan for Pennsylvania, New Jersey and Delaware.61 This program reflects an increase of 5 to 10 percent above the lending
currently done by First Union and CoreStates on a combined basis in these same communities. Implementation of
the CRA plan would have significant public benefits in the
Pennsylvania/New Jersey/Delaware region, including in
particular in LMI areas.
Private CRA Agreements. First Union has entered into a
number of agreements with various community organizations, including organizations representing specific Pennsylvania and New Jersey communities served by the CoreStates and First Union banks. The Board recognizes that
communications by depository institutions with community groups provide a valuable method of assessing and
determining how an institution can best address the credit
needs of the community. Neither the CRA nor the agencies' CRA regulations, however, require depository institutions to enter into agreements with any organization. The
Board, therefore, has viewed such agreements and their
enforceability as private contractual matters between the
parties and has focused on the existing record of performance by the applicant and the programs that the applicant
has in place to serve the credit needs of its communities.
Several commenters have criticized provisions in these
agreements that they believe severely restrict the ability of
community organizations and their members to protest
60. Several commenters contended that the lending activities of
First Union's nonbanking subsidiaries and First Union's proposed
purchase of The Money Store raise fair lending law issues. They
alleged that The Money Store has a history of abusive lending
practices and maintained that First Union would "steer" customers
illegally to The Money Store, where they would be charged higher
interest rates on loans. The Board notes that primary authority for
enforcement of the fair lending laws for nonbanking companies is
conferred by statute on the Federal Trade Commission and the Department of Housing and Urban Development. First Union's subsidiary
banks—which account for a substantial majority of First Union's total
assets and total revenues—have satisfactory records of compliance
with fair lending laws. In addition, commenters' contentions against
First Union's nonbanking subsidiaries rely in large measure on
HMDA data that, as noted above, are inadequate to show illegal
discrimination. Commenters also presented no facts to show that
customers would be illegally "steered" by First Union to The Money
Store. The acquisition of The Money Store, moreover, is subject to
review by a federal banking agency under a proceeding that is
separate from this application, and issues related to the acquisition of
The Money Store will be reviewed at that time.
61. The major elements of the CRA Plan include: (1) $875 million
in mortgage loans for LMI communities; (2) $10 billion in small
business/small farm loans; and (3) $750 million in community development loans.
First Union also pledges to continue CoreStates's corporate contributions, which total approximately $17 million annually, for five
years. In addition, First Union intends to fund a $100 million charitable foundation to serve Pennsylvania, New Jersey, and Delaware that
would focus on community revitalization. First Union estimates that
the foundation would begin operations by mid-year 1998.
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applications by First Union. The Board believes it is important that the federal and state banking agencies have access
to complete information regarding the performance records
of depository institutions and the credit needs of the community. Although some community organizations have argued that no restriction should be allowed on their ability
to comment to the agencies, other community organizations believe that an organization has a valuable right to
negotiate with a depository institution regarding the organization's support of a depository institution that provides
funding to the community.
First Union has responded that it does not view its
agreements as limiting the ability of any party to comment
in any way to the federal banking agencies, in the application process or otherwise, regarding a proposal involving
the acquisition of a bank or branch in the party's home
state.62 First Union also represents that, even outside the
party's home state, the agreements do not limit a party's
ability to comment to a federal banking agency in the
examination process, as part of a CRA evaluation, or in
any other context outside the application process. In addition, the agreements do not restrict the ability of an organization to include comments at any time and in any manner
in First Union's public CRA file, or to comment at any
time on the credit or banking needs of any community, or
to protest any application by First Union if First Union is
not in substantial compliance with the agreement. Moreover, First Union represents that no agreement restricts the
ability of any party at any time, including in any application, to criticize First Union's failure to abide by its agreement.
In light of the above, the Board does not believe that it
should interfere with these agreements. The Board is not a
party to agreements between a depository institution and
any organization and believes these agreements are private
matters between the parties.63 The Board also notes that
First Union continues to have a responsibility to help serve
the credit needs of its entire community, including LMI
neighborhoods, with or without private CRA agreements.
Comments Regarding Job Losses. A number of commenters expressed substantial concern about the effect of
62. First Union has submitted portions of an agreement with a
Pennsylvania community organization as representative of the provision governing protests by organizations with an agreement with First
Union. First Union has stated that any agreement it has made is
governed by the representations discussed above.
63. One commenter alleged that First Union attempted to intimidate
a community organization into refraining from providing adverse
information to the Board by threatening to reduce the bank's support
of the group's fund-raising efforts and, more generally, the bank's
lending in the community. First Union denies that it did or would
threaten retaliation against a community, and the community organization in question has indicated that it has reached an agreement with
First Union that would result in an increase in First Union's lending in
the area. The Board notes that First Union's record of assisting in
serving the credit needs of the community is subject to regular
examination under the CRA and that diminished or discontinued
CRA-related activities in a community will be carefully scrutinized in
evaluating an institution's record of CRA performance without regard
to the status of privately-negotiated CRA agreements.
501
the proposal on CoreStates employees and on employment
in the areas currently served by CoreStates.64 First Union
has indicated that it will take a number of steps to minimize any adverse effects of the proposal on employment or
the economy.65 First Union proposes to minimize the number of jobs lost in the greater Philadelphia area by adding
approximately 3000 new jobs in the area and by reducing
jobs through attrition. First Union projects that, after accounting for new jobs and attrition, approximately 1330
employees will be displaced as a result of the proposal.
First Union also intends to provide at least $39 million for
a job training and assistance program in order to reduce the
impact of the proposal on affected employees, including
providing outplacement services for unemployed CoreStates employees for a period of one year and making First
Union's $16 million fund for job retraining available to
CoreStates employees for up to two and one-half years
after their notice of termination.
D. Branch Closings
First Union and CoreStates together operate 378 branches
in the Philadelphia banking market, including 64 branches
in LMI census tracts. First Union has preliminarily identified 74 branches that may be consolidated into a nearby
branch or closed, and approximately 23 branches, including five branches in LMI areas, that would be divested to
address the competitive effects of the proposal in the Philadelphia banking market. First Union has committed that it
will not, for at least two years and with two exceptions,
close any branch in an LMI census tract or a census tract
with a 40 percent or higher minority population in Pennsylvania, New Jersey, or Delaware unless another First Union
or CoreStates branch that would remain open is within
one-third of a mile from the closed branch.66 On this basis,
First Union projects that it will close no more than eight
branches in LMI census tracts in the Philadelphia banking
market. After consummation of the proposal, taking into
account the divestiture of branches to mitigate competitive
effects and branches that are under consideration for con64. Several commenters expressed concern that First Union would
conduct its layoffs in a discriminatory manner. These commenters
noted First Union's recent settlement of a lawsuit in the District of
Columbia that alleged employment discrimination in layoffs after an
acquisition by First Union. The settlement does not support this
allegation. There was no finding or admission of wrongdoing on the
part of First Union in connection with the settlement. In addition, the
Equal Employment Opportunity Commission has jurisdiction to determine whether companies are in compliance with equal employment
opportunity statutes under the regulations of the Department of Labor.
See 41 C.F.R. 60-1.7(a) and 60-1.40.
65. The effect of a proposed acquisition on employment in a
community is not among the factors included in the BHC Act, and the
convenience and needs factor has been interpreted consistently by the
federal banking agencies, the courts, and Congress to relate to the
effect of a proposal on the availability and quality of banking services
in the community. See Wells Fargo & Company, 82 Federal Reserve
Bulletin 445, 457 (1996).
66. The two exceptions are not in Philadelphia County. The Board
has considered additional confidential information provided by First
Union regarding these exceptions.
502
Federal Reserve Bulletin • June 1998
solidation or closure. First Union would continue to operate a total of approximately 281 branches in the market,
including 51 branches in LMI areas. This network of
blanches would be the most extensive in the Philadelphia
banking market, including LMI areas in that market.
Before First Union closes a branch, it requires its CRA
coordinator for the state in which the branch is located to
arrange for meetings with community organizations to
discuss the proposed closing and provides these organizations a period of not less than 30 days in which to respond.
All responses are documented by the CRA coordinator
and, along with reports reviewing the other factors considered, are presented to the state branch closing coordinator
for a recommendation. If the recommendation is closure, it
must be approved by the bank's senior management, including the board of directors. After a final decision is
made, contacts with community organizations are continued to assist in addressing concerns about the closing. The
branch closing policies of all First Union's banks have
been reviewed by the OCC and the FDIC in connection
with their most recent CRA performance examinations and
found to be satisfactory.
Several commenters complained that FU-Summit had a
poor record of closing branches, particularly in LMI areas
in New Jersey and Philadelphia. In the 1997 CRA performance
examination,
OCC
examiners
reviewed
FU-Summit's record of closing branches, including a review of sample branch closing files, and concluded that the
branch closings were reasonable. Examiners also concluded that the bank's branch network following the closings provided reasonable access to the services of the bank
to all segments of the delineated community. The examiners noted that, after the branch closings, a majority of the
bank's branches served LMI census tracts. Many branches
offered extended weekday operating hours and were open
on Saturdays. OCC examiners also found the bank's branch
closing policy to be comprehensive and consistent with
regulatory guidelines.
In addition to these factors, the Board has considered
that federal banking law provides a specific mechanism for
addressing branch closings. Federal law requires an insured depository institution to provide notice to the public
and to the appropriate regulatory agency at least 30 days
before closing any branch. The requirement applies any
time a branch is closed, whether in connection with an
acquisition or at any time after completion of an acquisition. This requirement for public notice cannot be limited
by any commitment to the Board or to any community
organization. The law does not authorize federal regulators
to prevent the closing of any branch.67
67. Section 42 of the Federal Deposit Insurance Act (12US.C.
§ 1831 r-1), as implemented by the Joint Policy Statement Regarding
Branch Closings (58 Federal Register 49,083 (1993)), requires that a
bank provide the public with at least 30 days notice and the primary
federal supervisor with at least 90 days notice before the date of the
proposed branch closing. The bank also is required to provide reasons
and other supporting data for the closure, consistent with the institu
The Board expects that First Union will apply its branch
closing policies in determining whether to close branches
in connection with the proposal. First Union's record of
closing branches as a result of this proposal will be subject
to review by the OCC in connection with its next CRA
performance evaluation, and to review by the Board in
connection with future applications to establish a deposit
facility. First Union must submit in writing to the Federal
Reserve Bank of Richmond any changes to its preliminary
plans for closing branches in LMI census tracts prior to
modifying these plans during the two years after consummation of the proposal.
E. Conclusion on Convenience and Needs
Considerations
The Board recognizes that this proposal represents a major
transaction that will particularly affect communities in the
Philadelphia area. Consideration of the effects of the proposal on the convenience and needs of these communities
and other communities served by CoreStates is an important component of the Board's review of the proposal.
Some commenters have expressed concern about specific aspects of First Union's record in certain geographical
areas and about whether First Union, with its base in North
Carolina, will be responsive to the needs of communities in
the Pennsylvania/New Jersey/Delaware area. As explained
above, the information in this case demonstrates that First
Union has a strong overall record of helping to meet the
convenience and needs of communities that it serves. This
record has been demonstrated over time and through the
course of several CRA performance examinations. The
record also reflects that First Union has shown a commitment to address the credit needs of new communities into
which it expands.
The Board also has considered carefully the concerns
expressed by commenters about First Union's lending
record, its branch closing plans, the availability of various
banking products and services to LMI customers and customers with special needs, and other comments. 68 The
Board has weighed these concerns in light of all the facts
of record, including the overall CRA record of First Union,
tion's written branch closing policy. First Union's branch closing
policy follows these procedures.
68. As discussed above, several commenters criticized the basic
banking accounts offered by First Union and, in particular, questioned
their availability to customers who receive benefits electronically. The
Board has considered the full range of credit products and banking
services provided by First Union, which include products and services
that assist in meeting the credit and banking needs of LMI individuals,
such as its two basic banking accounts. The Board also has considered
revisions proposed by First Union to make its basic banking products
more accessible to customers who receive benefits electronically from
Pennsylvania. There is no evidence in the record that the fees charged
by First Union are based on a factor that would be prohibited under
law. Although the Board has recognized that banks help serve the
banking needs of their communities by making banking services
available at nominal or no charge, neither the CRA nor the primary
regulators of the banks involved in this transaction require an institution to limit the fees charged for its services.
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reports of examinations for CRA performance, information
provided by First Union, and information from other commenters regarding the record of First Union in meeting the
credit and banking needs of its communities. The Board
also has considered the location of branches that First
Union proposes to maintain and its efforts to assure that its
products and services are widely available throughout the
entire community it serves. In addition, the Board has
taken account of the plans announced by First Union to
strengthen its record of CRA performance in the communities served by CoreStates after consummation of the proposal. The Board concludes, after considering all of these
facts of record, that the convenience and needs factor,
including the CRA performance records of the subsidiary
banks of First Union and CoreStates, is consistent with
approval.
Financial, Managerial, Supervisory, and Interstate
Factors
The Board has carefully considered the financial and managerial resources and future prospects of First Union,
CoreStates, and their respective subsidiary banks, and other
supervisory factors in light of all the facts of record,
including the public comments. 69 The Board notes that the
bank holding companies and their subsidiary banks are
currently well capitalized and are expected to remain so
after consummation of the proposal.
The Board also has considered other aspects of the
financial condition and resources of the two organizations,
the structure of the proposal, and the managerial resources
of each of the entities and the combined organization. In
connection with the Board's assessment of the financial
and managerial resources of First Union and CoreStates,
the Board has considered its supervisory experience with
the two companies and that of other federal supervisory
authorities, including assessments of the organizations'
efforts to ensure Year 2000 readiness. The Board also has
considered the financial and other terms in the proposed
merger agreement between First Union and CoreStates.
Based on these and other facts of record, the Board concludes that considerations relating to the financial and
managerial resources and future prospects of First Union,
CoreStates, and their respective subsidiaries are consistent
with approval of the proposal, as are the other supervisory
factors that the Board must consider under section 3 of the
BHC Act.
69. These comments included allegations of improper conduct by
officials at a bank acquired by CoreStates, which are the subject of a
pending lawsuit, and comments regarding First Union's recent settlement of an administrative proceeding with the State of Florida involving allegations of inadequate disclosures in the sale of nondepository
investment products and of unlicensed securities brokerage activities.
The Board has considered the comments in light of supervisory
reports of examination assessing the managerial resources of the
institutions involved and the financial resources of First Union in the
event that damages are awarded to the commenter in the individual
lawsuit.
503
Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire
a bank located in a state other than the home state of such
bank holding company if certain conditions are met. For
purposes of the BHC Act, the home state of First Union is
North Carolina, and CoreStates operates in Pennsylvania,
New Jersey, and Delaware.70 All of the conditions for an
interstate acquisition enumerated in section 3(d) of the
BHC Act are met in this case.71 In view of all the facts of
record, the Board is legally permitted under section 3(d) of
the BHC Act to approve the acquisition.
Nonbanking Activities
First Union also has filed notice, pursuant to section 4(c)(8)
of the BHC Act, to acquire the nonbanking subsidiaries of
CoreStates and thereby engage in commercial lending,
trust company functions, financial and investment advisory
services, agency transactional services (other than acting as
a futures commission merchant), investing and trading
activities as a principal, underwriting and dealing in, to a
limited extent, certain bank-ineligible securities, creditrelated insurance underwriting, community development
activities, and data processing activities through an ATM
and point-of-sale network. The Board previously has determined by regulation or order that each of these activities is
closely related to banking within the meaning of section 4(c)(8) of the BHC Act.72 First Union proposes to
conduct these activities in accordance with Regulation Y
and all relevant Board interpretations and orders.
In order to approve the proposal, the Board also must
determine that the performance of the proposed activities is
a proper incident to banking, that is, that the proposed
transaction "can reasonably be expected to produce benefits to the public . .. that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound banking practices." 73 As part of its evaluation of these factors,
the Board considers the financial and managerial resources
70. A bank holding company's home state is the state in which the
operations of the bank holding company's banking subsidiaries were
principally conducted on July 1, 1966, or the date on which the
company became a bank holding company, whichever is later.
12U.S.C. § 1841(o)(4)(C).
71. 12 U.S.C. §§ 1842(d)(l)(A) and (B) and 1842(d)(2)(A) and (B).
First Union is adequately capitalized and adequately managed, as
defined by applicable law. Neither New Jersey nor Pennsylvania state
law imposes age requirements on interstate bank acquisitions, and
CoreStates's subsidiary bank in Delaware has been in existence for
the minimum period of time necessary to satisfy age requirements
established by applicable Delaware state law. See Del. Code Ann.
tit. 5, § 795 (1997) (5 years). On consummation of the proposal, First
Union and its affiliates would control less than 10 percent of the total
amount of deposits of insured depository institutions in the United
States, and less than 30 percent of the total amount of deposits of
insured depository institutions in each of Pennsylvania, New Jersey,
and Delaware.
72. See 12 C.F.R. 225.28(b)(l), (5), (6), (7), (8)(ii), (1 l)(i), (12), and
(14); CoreSiates Financial Corporation, 83 Federal Reserve Bulletin
838(1997).
73. See 12 U.S.C. § 1843(c)(8).
504
Federal Reserve Bulletin D June 1998
of the notificant, its subsidiaries, and any company to be
acquired; the effect the transaction would have on such
resources; and the management expertise, internal control
and risk management systems, and capital of the entity
conducting the activity.74 For the reasons discussed above,
and based on all the facts of record, the Board has concluded that financial and managerial considerations are
consistent with approval of these notices.
The Board also has considered carefully the competitive
effects of the proposed acquisition of CoreStates's nonbanking subsidiaries. The Board notes that the market for
each of the nonbanking services is unconcentrated, and that
there are numerous providers of the services. Consummation of the proposal, therefore, would have a de minimis
effect on competition, and the Board has determined that
the proposal would not have a significantly adverse effect
on competition in any relevant market.
First Union has indicated that the proposal would provide added convenience to CoreStates's customers, to First
Union's customers, and to the public by improving convenience and expanding services available to customers of
both institutions.75 Additionally, there are public benefits to
be derived from permitting capital markets to operate so
that bank holding companies can make potentially profitable investments in nonbanking companies when those
investments are consistent, as in this case, with the relevant
considerations under the BHC Act, and from permitting
banking organizations to allocate their resources in the
manner they consider to be most efficient. The Board also
believes that the conduct of the proposed activities within
the framework established in this order, prior orders, and
Regulation Y is not likely to result in adverse effects, such
as undue concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices, that would not be outweighed by the public
benefits of the proposal, such as increased consumer convenience and gains in efficiency. Accordingly, based on all
the facts of record, the Board has determined that the
balance of public benefits that the Board must consider
under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent
with approval of the proposal. The Board also concludes
that all the factors required to be considered under section 25 of the Federal Reserve Act and the Board's Regulation K are consistent with approval of the acquisition by
First Union of the foreign branches of CoreStates Bank.
Conclusion
Based on the foregoing and all the facts of record, the
Board has determined that the proposal should be, and
74. See 12 C.F.R. 225.26.
75. Several commenters questioned whether any public benefits
would result from the proposal on account of the anticipated loss of
banking alternatives and increase in fees and maintained that any
public benefits would accrue only to shareholders and senior officers
of CoreStates.
hereby is, approved.76 In reaching its conclusion, the Board
has considered all the issues raised in public comments
filed in connection with the proposal in light of the factors
that the Board is required to consider under the BHC Act
and concludes that the comments do not warrant a delay or
denial of the proposal.77
The Board's approval of the proposal is specifically
conditioned on compliance by First Union with all the
commitments made in connection with the proposal and
the conditions in this order, including First Union's divestiture commitments. The Board's determination on the pro-
76. Some commenters requested that formal hearing procedures be
followed in this case in order to allow commenters to question
witnesses and to compel disclosure of information. Section 3(b) of the
BHC Act does not require the Board to hold a public hearing on an
application unless the appropriate supervisory authority for the bank
to be acquired makes a timely written recommendation of denial. The
Board did not receive such a recommendation in this case. Under its
rules, the Board may, in its discretion, hold a public hearing or
meeting on an application to acquire a bank if a hearing is necessary
or appropriate to clarify factual issues related to the application and to
provide an opportunity for testimony, if appropriate. 12 C.F.R.
225.16(e). The Board used its discretion in this case to hold a public
meeting and, as discussed in detail throughout this order, the public
meeting provided information to clarify factual issues and appropriately provided individuals the opportunity to testify. Based on all the
facts of record, the Board has concluded that a formal public hearing
as advocated by some commenters is not required or warranted in this
case.
77. Commenters requested that the Board delay action on the
proposal until the Board could conduct on-site surveys to determine
the proposal's effects on competition and the convenience and needs
of local communities. Some commenters believed that the Board
should not act until the specific locations of the branches to be closed
were disclosed to the public and subjected to public comment. Other
commenters requested additional time to respond to information provided to them in the applications process or to negotiate agreements
with First Union.
The requests for delay do not warrant postponement of the Board's
consideration of the case. Although the BHC Act does not require it,
the Board provides a public comment period of at least 30 days in
every case involving a bank acquisition in order to allow interested
persons an opportunity to provide information, analyses, and arguments regarding all aspects of the proposal, including the CRA
performance record of an applicant and other relevant companies. In
this case, the Board extended the public comment period to permit
commenters approximately 57 days in which to comment. The Board
also held a public meeting at which more than 80 commenters
presented their views through direct testimony. These commenters
were granted an additional seven days after the public meeting to
submit supplemental information. In the Board's view, commenters
have had ample opportunity to submit their views, and, in fact, have
provided substantial written submissions and oral testimony that has
been considered carefully by the Board in acting on the application.
The Board's Rules of Procedure do not guarantee commenters an
opportunity to continue the process of submitting additional comments in rebuttal to an applicant's response after the close of the
period for submitting public comments. These rules permit a meaningful opportunity for the public to comment on a proposal within the
time constraints of the BHC Act, and comments and responses in this
case were submitted in accordance with the Board's rules. For these
reasons, and based on a review of all the facts of record, the Board
concludes that the record in this case is sufficient to warrant Board
consideration and action on the proposal at this time, and that further
delay of consideration of the proposal or denial of the proposal on the
grounds discussed above or on the basis of informational insufficiency
is not warranted.
Legal Developments
posed nonbanking activities also is subject to all the conditions set forth in Regulation Y, including those in sections
225.7 and 225.25(c) (12C.F.R. 225.7 and 225.25(c)), and
to the Board's authority to require modification or termination of the activities of a bank holding company or any of
its subsidiaries as the Board finds necessary to assure
compliance with, or to prevent evasion of, the provisions
and purposes of the BHC Act and the Board's regulations
and orders issued thereunder. For purposes of this action,
the commitments and conditions relied on in reaching this
decision shall be deemed to be conditions imposed in
writing by the Board in connection with its findings and
decision, and, as such, may be enforced in proceedings
under applicable law.
The acquisition of CoreStates's banks may not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal may not be consummated later than three months after the effective date of
this order, unless such period is extended for good cause by
the Board or the Federal Reserve Bank of Richmond,
acting pursuant to delegated authority.
By order of the Board of Governors, effective April 13,
1998.
Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and
Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich.
JENNIFER J. JOHNSON
Deputy Secretary of the Board
Appendix A
A. Nonbanking Subsidiaries of CoreStates Financial
Corp1
(1) Congress Financial Corporation, New York, New York,
and thereby engage in factoring services, asset based lending, and commercial finance, pursuant to section
225.28(b)(l) of Regulation Y (12 C.F.R. 225.28(b)(l)).
(2) Meridian Asset Management, Inc., Valley Forge, and
thereby engage in non-fiduciary custodian and agency services and trust services, pursuant to section 225.28(b)(5) of
Regulation Y (12 C.F.R. 225.28(b)(5)), and, through subsidiaries of Meridian Asset Management, Inc., investment
advisory services, pursuant to section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)).
(3) McGlinn Capital Management, Inc., Reading, and
thereby engage in investment advisory services, pursuant
to section 225.28(b)(6) of Regulation Y (12 C.F.R.
225.28(b)(6)).
(4) CoreStates Securities Corporation, Philadelphia, and
thereby engage in financial and investment advisory activities, securities brokerage activities, riskless-principal transactions, providing private placement services and other
transactional services, and investing and trading activities
as a principal, pursuant to sections 225.28(b)(6), (7)(i)-(iii),
(7)(v), and (8)(ii) of Regulation Y (12 C.F.R. 225.28(b)(6),
(7)(i)-(iii), (7)(v), and (8)(ii)), and underwriting and dealing in, to a limited extent, certain municipal revenue bonds,
1 4 family mortgage-related securities, consumer
—
receivable-related securities, and commercial paper, as previously approved by the Board in CoreStates Financial
Corporation, 83 Federal Reserve Bulletin 838 (1997).
(5) Meridian Securities, Inc., Reading, and thereby engage
in securities brokerage activities, pursuant to section
225.28(b)(7) of Regulation Y (12 C.F.R. 225.28(b)(7)).
(6) Pennco Life Insurance Company, Phoenix, Arizona,
and thereby engage in underwriting credit-related insurance for loans made by affiliates, pursuant to section
225.28(b)(ll) of Regulation Y (12 C.F.R. 225.28(b)(l 1)).
(7) Meridian Life Insurance Company, Reading, and
thereby engage in underwriting credit-related insurance for
loans made by affiliates, pursuant to section 225.28(b)(ll)
of Regulation Y (12 C.F.R. 225.28(b)(l 1)).
(8) Princeton Life Insurance Company, Lancaster, and
thereby engage in underwriting credit-related insurance for
loans made by affiliates, pursuant to section 225.28(b)(ll)
of Regulation Y (12 C.F.R. 225.28(b)(ll)).
(9) CoreStates Community Development Corporation, Inc.,
Philadelphia, and thereby engage in investments to promote community welfare, including acquiring, rehabilitating, and selling real estate to provide affordable housing,
pursuant to section 225.28(b)(12) of Regulation Y
(12 C.F.R. 225.28(b)(12)).
(10) Electronic Payment Services, Inc., Wilmington, Delaware, and thereby engage in processing and transmitting
banking, financial, or economic data through the operation
of a point-of-sale network and automated teller machine
network, pursuant to section 225.28(b)(14) of Regulation
Y (12 C.F.R. 225.28(b)(14)).
B. Foreign Branches of CoreStates Bank, N.A.
(1) Hong Kong:
(2) London:
(3) Nassau:
(4) Taipei:
1. All subsidiaries are in Pennsylvania unless otherwise indicated.
Subsidiaries also include their majority owned companies.
505
(5) Tokyo:
12/F Asia Pacific, Finance Tower,
3 Garden Road, Hong Kong, Peoples
Republic of China.
Centurion House, 24 Monument Street,
London, England.
P.O. Box 6313, Nassau, Bahamas.
17th Floor, 44 Ching Shan, North Road,
Sec. 2, Taipei, Taiwan.
Yamato International Building, 8F,
Nihonbashi, ChuoKu, Tokyo, Japan.
506
Federal Reserve Bulletin • June 1998
Appendix B
A. State Deposit and Ranking Data for New Jersey
and Delaware
New Jersey
First Union is the second largest commercial banking organization in New Jersey, controlling deposits of approximately $13.2 billion, representing 10.3 percent of all deposits held by depository institutions in the state ("state
deposits"). CoreStates is the sixth largest commercial
banking organization in New Jersey, controlling deposits
of approximately $6.2 billion, representing 4.9 percent of
state deposits. On consummation of the proposal, First
Union would remain the second largest commercial banking organization in the state, controlling deposits of approximately $19.4 billion, representing 15.2 percent of
state deposits in New Jersey.
son, Hunterdon, Middlesex, Monmouth, Morris, Ocean,
Passaic, Somerset, Sussex, Union, Warren, and a portion of
Mercer Counties in New Jersey; Pike County in Pennsylvania; and portions of Fairfield and Litchfield Counties in
Connecticut.
(4) Philadelphia: Philadelphia, Bucks, Chester, Delaware,
and Montgomery Counties in Pennsylvania; Burlington,
Camden, Gloucester, and Salem Counties in New Jersey;
and the City of Trenton and the townships of Ewing,
Hamilton, and Lawrence in Mercer County in New Jersey.
(5) Scranton/Wilkes-Barre: Columbia, Lackawanna, Luzerne, Wayne, and Wyoming Counties and the townships
of Ararat, Auburn, Brooklyn, Clifford, Dimock, Gibson,
Harford, Herrick, Lathrop, Lenox, and Springville in Susquehanna County in Pennsylvania.
(6) Vineland: Cumberland County in New Jersey.
(7) Wilmington: New Castle County in Delaware and Cecil
County in Maryland.
Appendix C
Delaware
First Union is the 29th largest commercial banking organization in Delaware, controlling deposits of approximately
$57.9 million, representing less than 1 percent of all state
deposits. CoreStates is the tenth largest commercial banking organization in Delaware, controlling deposits of approximately $828.8 million, representing approximately
2 percent of state deposits. On consummation of the proposal, First Union would become the tenth largest depository institution in the state, controlling deposits of approximately $886.7 million, representing 2.1 percent of state
deposits in Delaware.
B. Banking Markets Where First Union and
CoreStates Compete
(1) Atlantic City: Atlantic and Cape May Counties in New
Jersey.
(2) Lehigh Valley: Carbon, Lehigh, and Northhampton
Counties in Pennsylvania.
(3) Metropolitan New York-New Jersey: New York City,
Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, and
Westchester Counties in New York; Bergen, Essex, Hud-
Market data for banking markets, except Philadelphia
and Lehigh Valley.
(1) Atlantic City: First Union would control 15.1 percent of
market deposits and would become the second largest of
15 depository institutions in the market. The HHI would
increase 43 points to 1667.
(2) Metropolitan New York-New Jersey: First Union would
control 4.8 percent of market deposits and would become
thefifthlargest of 303 depository institutions in the market.
The HHI would increase 7 points to 758.
(3) Scranton/Wilkes-Barre: First Union would control 8.2
percent of market deposits and would become the third
largest of 35 depository institutions in the market. The HHI
would increase 34 points to 996.
(4) Vineland: First Union would control 10.8 percent of
market deposits and would become the fourth largest of
13 depository institutions in the market. The HHI would
increase 42 points to 1471.
(5) Wilmington: First Union would control 10.6 percent of
market deposits and would become the third largest of
20 depository institutions in the market. The HHI would
increase 15 points to 2338.
Legal Developments
507
Appendix D
Most Recent CRA Performance Ratings of Banks Before the Consolidation of First Union National Bank
Bank
Agency
Rating
Date
First Union National Bank.
Charlotte, North Carolina
First Union National Bank,
Jacksonville, Florida
First Union National Bank,
Atlanta, Georgia
First Union National Bank,
Rockville, Maryland
First Union National Bank,
Greenville, South Carolina
First Union National Bank,
Nashville, Tennessee
First Union National Bank,
Roanoke, Virginia
First Union National Bank,
Washington, D.C.
First Union National Bank,
North Summit, New Jersey
First Union Bank of
Connecticut,
Stamford, Connecticut
First Union Bank of
Delaware,
Wilmington, Delaware
Signet Bank,
Richmond, Virginia
Signet Bank, N.A.
Washington, D.C.
First Union Home Equity
Bank, N.A.,
Charlotte, North Carolina
Boca Raton First National
Bank,
Boca Raton, Florida
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
occ
Outstanding
5/31/97
FDIC
Satisfactory
1/21/97
FDIC
Satisfactory
10/31/95
FRB
Satisfactory
1/15/96
OCC
Satisfactory
12/21/92
OCC
Satisfactory
5/31/97
OCC
Satisfactory
10/26/95
APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT
By the Secretary of the Board
Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to
the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System,
Washington, D.C. 20551.
Section 3
Applicant(s)
Bank(s)
Effective Date
Community Trust Bancorp, Inc..
Pikeville, Kentucky
Community Trust Bank of West Virginia,
N.A.,
Williamson, West Virginia
April 20, 1998
508
Federal Reserve Bulletin • June 1998
Section 3—Continued
Applicant(s)
Bank(s)
Effective Date
Cullen/Frost Bankers, Inc..
San Antonio, Texas
Overton Bancshares, Inc,
Fort Worth, Texas
Overton Bancorporation,
Fort Worth, Texas
Overton Bank and Trust, N.A.,
Fort Worth, Texas
Overton Bancorporation,
Fort Worth, Texas
Overton Bank and Trust,
N.A.,
Fort Worth, Texas
First Bank,
Katy, Texas
First Bank of Grants,
Grants, New Mexico
Peoples First Corporation,
Paducah, Kentucky
The Peoples First National Bank and Trust
Company,
Paducah, Kentucky
Peoples First Corporation,
Paducah, Kentucky
The Peoples First National Bank and Trust
Company,
Paducah, Kentucky
April 10, 1998
Applicant(s)
Bank(s)
Effective Date
First Chicago NBD Corporation,
Chicago, Illinois
National City Corporation,
Cleveland, Ohio
Roney & Co., L.L.C.
Detroit, Michigan
Sterling Ltd. Co.,
Pepper Pike, Ohio
Sterling Management Co.,
Pepper Pike, Ohio
SLC Capital, Inc.,
Pepper Pike, Ohio
Forecast Home Mortgage LLC,
Los Angeles, California
WMC Mortgage Corporation,
Woodland Hills, California
Spring Mountain Escrow Company,
Woodland Hills, California
Hunt, Dupree, Rhine & Associates, Inc.,
Greenville, South Carolina
Retirement Plan Securities, Inc.,
Greenville, South Carolina
April 9, 1998
The New Galveston Company,
San Antonio, Texas
Norwest Corporation,
Minneapolis, Minnesota
Norwest Corporation,
Minneapolis, Minnesota
Union Planters Corporation,
Memphis, Tennessee
Union Planters Holding Corporation,
Memphis, Tennessee
April 10, 1998
April 16, 1998
April 27, 1998
April 1, 1998
April I, 1998
Section 4
Norwest Corporation,
Minneapolis, Minnesota
Norwest Corporation,
Minneapolis, Minnesota
Wachovia Corporation,
Winston-Salem, North Carolina
April 2, 1998
April 7, 1998
April 2, 1998
April 28, 1998
Legal Developments
509
Sections 3 and 4
Applicant(s)
Bank(s)
Effective Date
Mercantile Bancorporation Inc.,
St. Louis, Missouri
Ameribanc, Inc.,
St. Louis, Missouri
CBT Corporation,
Paducah, Kentucky
Citizens Bank and Trust Company of
Paducah,
Paducah, Kentucky
Bank of Marshall County,
Benton, Kentucky
Pennyrile Citizens Bank and Trust Company,
Hopkinsville, Kentucky
Graves County Bank, Inc.,
Mayfield, Kentucky
United Commonwealth Bank, FSB,
Murray, Kentucky
April 13, 1998
By Federal Reserve Banks
Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to
the Reserve Banks.
Section 3
Applicant(s)
Bank(s)
Reserve Bank
Effective Date
America's First Bancorp, Inc.,
Washington, D.C.
America's First Bank, National
Association,
Washington, D.C.
Franklin Bancorporation, Inc.,
Washington, D.C.
Richmond
April 8, 1998
Richmond
April 23, 1998
Gallatin/New Hampton Bancshares,
Inc.,
Albany, Missouri
Bank of the Carolinas,
Landis, North Carolina
Landis Savings Bank, SSB,
Landis, Carolina
Biltmore Community Bank,
Phoenix, Arizona
Kansas City
April 1, 1998
Richmond
April 9, 1998
Chicago
April 22, 1998
Southern Arizona Community Bank,
Tucson, Arizona
Chicago
April 22, 1998
Conrad Bancorporation,
Conrad, Iowa
Bank of North Georgia,
Alpharetta, Georgia
Chicago
April 2, 1998
Atlanta
April 1, 1998
BB&T Corporation,
Winston-Salem, North Carolina
BB&T Financial Corporation of
Virginia,
Winston-Salem, North Carolina
Bethany Bankshares, Inc.,
Bethany, Missouri
BOC Financial Corp.,
Landis, North Carolina
Capitol Bancorp Limited,
Lansing, Michigan
Sun Community Bancorp Limited,
Phoenix, Arizona
Capitol Bancorp Limited,
Lansing, Michigan
Sun Community Bancorp Limited,
Phoenix, Arizona
Central Iowa Bancorporation,
Iowa City, Iowa
Community Bank Capital
Corporation,
Alpharetta, Georgia
510
Federal Reserve Bulletin • June 1998
Section 3—Continued
Applicant(s)
Bank(s)
Reserve Bank
Effective Date
Community Banks of Florida, Inc.,
Naples. Florida
Cumberland Bancorp, Inc.,
Carthage, Tennessee
Farmers State Corporation,
Mountain Lake, Minnesota
Firstand Company,
Hordville, Nebraska
First Citizens Bane Corp,
Sandusky, Ohio
Community Bank of Naples, N.A.,
Naples, Florida
The Bank of Mason,
Mason, Tennessee
Community Bank New Ulm,
New Ulm, Minnesota
First State Bank,
Hordville, Nebraska
The Farmers State Bank of New
Washington, Ohio,
New Washington, Ohio
First Neighborhood Bancshares Inc.,
Toledo, Illinois
The First National Bank of Toledo,
Toledo, Illinois
The First State Bank of Newman,
Newman, Illinois
Greenup National Corp.,
Greenup, Illinois
The Greenup National Bank,
Greenup, Illinois
NebraskaLand National Bank,
North Platte, Nebraska
Three Rivers Bancshares, Inc.,
Milan, Georgia
Bank of Milan,
Milan, Georgia
Founders Trust Personal Bank,
Grand Rapids, Michigan
Gainesville Bank & Trust,
Gainesville, Georgia
Pacific Rim Bancorporation,
San Francisco, California
Golden Gate Bank,
San Francisco, California
New Mexico Bank & Trust,
Albuquerque, New Mexico
Heritage Bank of Ashland, Inc.,
Ashland, Kentucky
The Jersey Bank for Savings,
Montvale, New Jersey
Atlanta
April 7, 1998
Atlanta
April 7, 1998
Minneapolis
April 3, 1998
Kansas City
April 7, 1998
Cleveland
April 7, 1998
Chicago
April 16, 1998
Kansas City
April 17, 1998
Atlanta
April 22, 1998
Chicago
April 21, 1998
Atlanta
April 2, 1998
San Francisco
April 22, 1998
Chicago
April 14, 1998
Cleveland
April 20, 1998
New York
April 21, 1998
Chicago
April 2. 1998
Kansas City
April 1, 1998
Chicago
April 2, 1998
Kansas City
April 10, 1998
First Neighborhood Bancshares,
Inc., Employee Stock Ownership
Plan,
Toledo, Illinois
First York Ban Corp.,
York, Nebraska
Flag Financial Corporation,
LaGrange, Georgia
Founders Financial Corporation,
Grand Rapid, Michigan
GB&T Bancshares, Inc.,
Gainesville, Georgia
Greater Bay Bancorp,
Palo Alto, California
Heartland Financial USA, Inc..
Dubuque, Iowa
Heritage Capital Corporation,
Ashland, Kentucky
Interchange Financial Services
Corporation,
Saddle Brook, New Jersey
ISB Financial Corp.,
Iowa City, Iowa
Kanbanc, Inc.,
Kansas City, Missouri
LB Bancorp, Inc.,
Milwaukee, Wisconsin
Mid-America Bancorp, Inc.,
Jewell, Kansas
Conrad Bancorporation,
Conrad, Iowa
First State Bank,
Conrad, Iowa
State Bank of Colony,
Colony. Kansas
Liberty Bank,
Milwaukee, Wisconsin
Heartland Bank,
Jewell, Kansas
Legal Developments
Section 3—Continued
Applicant(s)
Bank(s)
Reserve Bank
Effective Date
NATCOM Bancshares, Inc.,
Superior, Wisconsin
National Bank of Commerce in
Superior,
Superior, Wisconsin
Trustbank Financial Corporation,
Denver, Colorado
Trust Bank of Colorado,
Denver, Colorado
Elmore County Bancshares, Inc.,
Tallassee, Alabama
Bank of Tallassee,
Tallassee, Alabama
South Central Texas BancsharesDelaware, Inc.,
Wilmington, Delaware
Family Security Bank,
Brookings, Oregon
Minneapolis
April 15, 1998
Chicago
April 17, 1998
Atlanta
April 15, 1998
Dallas
April 9, 1998
San Francisco
April 15, 1998
Shorebank Detroit Corporation,
Detroit, Michigan
Shorebank,
Detroit, Michigan
ShoreBank,
Detroit, Michigan
OmniBank,
River Rouge, Michigan
Bank South, N.A.,
Tulsa, Oklahoma
State of Franklin Savings Bank,
Johnson City, Tennessee
Premier Bancshares, Inc.,
La Grange, Texas
South Central Texas Bancshares, Inc..
Flatonia, Texas
Traditional Bank of Kentucky, Inc.,
Lexington, Kentucky
Farmers State Bank of McNabb,
McNabb, Illinois
Chicago
April 9, 1998
Chicago
April 9, 1998
Kansas City
April 20, 1998
Atlanta
April 23, 1998
Dallas
April 9, 1998
Cleveland
March 23, 1998
Chicago
April 15, 1998
Applicant(s)
Nonbanking Activity/Company
Reserve Bank
Effective Date
Bancshares of Missouri, Inc.,
Kearney, Missouri
Bankers Trust New York
Corporation,
New York, New York
Jesse James Festival Grounds, L.L.C.,
Kearney, Missouri
BT Alex. Brown Incorporated,
New York, New York
NatWest Securities Corporation,
New York, New York
Resource Processing Group, Inc.,
Columbia, South Carolina
Kansas City
April 2, 1998
New York
April 6, 1998
Richmond
April 15, 1998
Northern Trust Corporation,
Chicago, Illinois
The Peoples BancTrust Company,
Inc.,
Selma, Alabama
Premier Holdings-Nevada, Inc.,
Carson City, Nevada
Security Bank Holding Company,
Coos Bay, Oregon
Security Bank Holding Company
ESOP,
Coos Bay, Oregon
Shorebank Corporation,
Chicago, Illinois
Shorebank Detroit Corporation,
Detroit, Michigan
South Tulsa Financial Corporation,
Tulsa, Oklahoma
State of Franklin Bancshares, Inc.,
Johnson City, Tennessee
Texas United Bancshares, Inc.,
La Grange, Texas
Traditional Bancorporation, Inc.,
Mt. Sterling, Kentucky
Tri-County Financial Group, Inc.,
Mendota, Illinois
Section 4
Carolina First Corporation,
Greenville, South Carolina
511
512 Federal Reserve Bulletin • June 1998
Section A—Continued
Applicant(s)
Nonbanking Activity/Company
Reserve Bank
Effective Date
Citizens & Northern,
Wellsboro, Pennsylvania
Davis Bancorporation, Inc.,
Davis, Oklahoma
Deutsche Bank AG,
Frankfurt am Main, Federal
Republic of Germany
First National Bank of Canton,
Canton, Pennsylvania
FBC Financial Corporation,
Claremore, Oklahoma
Roland Berger & Partner Holding
GmbH,
Munich, Federal Republic of
Germany
FBC Financial Corporation,
Claremore, Oklahoma
First Home Financial,
Grand Rapids, Michigan
Johnson Mortgage Company LLC,
Newport News, Virginia
Philadelphia
April 10, 1998
Kansas City
March 24, 1998
New York
April 3, 1998
Kansas City
March 24, 1998
Chicago
March 31, 1998
Richmond
March 30, 1998
Kansas City
March 24, 1998
Kansas City
March 24, 1998
San Francisco
April 10, 1998
St. Louis
March 30, 1998
Kansas City
March 24, 1998
New York
March 27, 1998
Chicago
April 10, 1998
First Centralia Bancshares, Inc.,
Centralia, Kansas
Independent Bank Corporation,
Ionia, Michigan
Mid-Atlantic Community
BankGroup, Inc.,
Gloucester, Virginia
Morrill & Janes Bancshares, Inc.,
Hiawatha, Kansas
Morrill Bancshares, Inc.,
Sabetha, Kansas
Neighborhood Bancorp,
San Diego, California
New Independent Bancshares, Inc.,
New Washington, Indiana
Onaga Bancshares, Inc.,
Onaga, Kansas
Royal Bank of Canada,
Montreal, Quebec, Canada
Integrion Financial Network, LLC,
Atlanta, Georgia
Stichting Prioriteit ABN AMRO
Holding,
Amsterdam, The Netherlands
Stichting Administratiekantoor ABN
AMRO Holding,
Amsterdam, The Netherlands
ABN AMRO Holding N.V.,
Amsterdam, The Netherlands
ABN AMRO North America, Inc.,
Chicago, Illinois
Integrion Financial Network, LLC,
Atlanta, Georgia
Stichting Prioriteit ABN AMRO
Holding,
Amsterdam, The Netherlands
Stichting Administratiekantoor ABN
AMRO Holding,
Amsterdam, The Netherlands
FBC Financial Corporation,
Claremore, Oklahoma
FBC Financial Corporation,
Claremore, Oklahoma
Neighborhood Housing Development
Corporation,
San Diego, California
New Washington Reinsurance
Company, Ltd.,
New Washington, Indiana
FBC Financial Corporation,
Claremore, Oklahoma
CheckFree Corporation,
Norcross, Georgia
CheckFree Corporation,
Norcross, Georgia
Legal Developments
513
Section 4—Continued
Applicant(s)
Nonbanking Activity/Company
Reserve Bank
Effective Date
ABN AMRO Holding N.V.,
Amsterdam, The Netherlands
ABN AMRO Bank N.V.,
Amsterdam, The Netherlands
ABN AMRO Incorporated,
Chicago, Illinois
Union Planters Corporation,
Memphis, Tennessee
Union Planters Holding Corporation,
Memphis, Tennessee
Westdeutsche Landesbank
Girozentrale,
Dusseldorf, Germany
Sage Clearing Limited Partnership,
San Francisco, California
Sage Clearing Corporation,
San Francisco, California
Chicago
April 3, 1998
Capital Savings Bancorp, Inc.,
Jefferson City, Missouri
Capital Savings Bank, FSB,
Jefferson City, Missouri
Thomas Cook Inc.,
New York, New York
Interpayment Services Limited,
London, England
St. Louis
April 16, 1998
New York
March 31, 1998
APPLICATIONS APPROVED UNDER BANK MERGER ACT
By Federal Reserve Banks
Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to
the Reserve Banks.
Applicant(s)
Bank(s)
Reserve Bank
Effective Date
American Bank of Montana,
Bozeman, Montana
Bank of Commerce,
San Diego, California
Colonial Bank,
Montgomery, Alabama
F&M Bank-Northern Virginia,
Fairfax, Virginia
Fifth Third Bank of Central
Kentucky, Inc.,
Paris, Kentucky
The Jersey Bank for Savings,
Montvale, New Jersey
The Richwood Banking Company,
Richwood, Ohio
ShoreBank,
Detroit, Michigan
American Bank,
Whitefish, Montana
Rancho Vista National Bank,
Vista, California
Premier Bank,
Atlanta, Georgia
The Bank of Alexandria,
Alexandria, Virginia
The Fifth Third Bank of Kentucky,
Louisville, Kentucky
Minneapolis
April 10, 1998
San Francisco
April 17, 1998
Atlanta
April 15, 1998
Richmond
April 21, 1998
Cleveland
April 9, 1998
Interchange Bank,
Saddle Brook, New Jersey
National City Bank of Columbus,
Columbus, Ohio
OmniBank,
River Rouge, Michigan
New York
April 21, 1998
Cleveland
March 25, 1998
Chicago
April 9, 1998
514
Federal Reserve Bulletin • June 1998
PENDING CASES INVOLVING THE BOARD OF GOVERNORS
This list of pending cases does not include suits against the
Federal Reserve Banks in which the Board of Governors is not
named a party.
Research Triangle Institute v. Board of Governors, No. 971719 (U.S. Supreme Court, filed April 28, 1998). Petition
for writ of certiorari to review dismissal by the United
States Court of Appeals for the Fourth Circuit of a contract
claim against the Board.
Inner City Press/Community on the Move v. Board of Governors, No. 97-1514 (U.S. Supreme Court, filed March 12,
1998). Petition for writ of certiorari to review dismissal by
the United States Court of Appeals for the District of
Columbia Circuit of a petition for review of a Board order
dated May 14, 1997, approving the application of Bane One
Corporation, Inc., Columbus, Ohio, to merge with First
USA, Inc., Dallas, Texas.
Logan v. Greenspan, No. l:98CV00049 (D.D.C., filed January 9, 1998). Employment discrimination complaint.
Goldman v. Department of the Treasury, No. 1-97-CV-3798
(N.D. Ga., filed December 23, 1997). Declaratory judgment
action challenging Federal Reserve notes as lawful money.
On March 2, 1998, the Board filed a motion to dismiss the
action.
Kerr v. Department of the Treasury, No. CV-S-97-01877DWH (S.D. Nev., filed December 22, 1997). Challenge to
income taxation and Federal Reserve notes.
Allen v. Indiana Western Mortgage Corp., No. 97-7744 RJK
(CD. Cal., filed November 12, 1997). Customer dispute
with a bank.
Patrick v. United States, No. 97-75564 (E.D. Mich., filed
November 7, 1997). Action for damages arising out of tax
dispute.
Leulhe v. Office of Financial Institution Adjudication, No.
97-1826 (3d Cir., filed October 22, 1997). Appeal of district
court dismissal of action against the Board and other Federal banking agencies challenging the constitutionality of
the Office of Financial Institution Adjudication. Oral argument is scheduled for May 23, 1998.
Patrick v. United States, No. 97-75017 (E.D. Mich., filed
September 30, 1997). Action for damages arising out of tax
dispute.
Artis v. Greenspan, No. 97-5235 (D.C. Cir., filed September 19, 1997). Appeal of district court order dismissing
employment discrimination class action.
Towe v. Board of Governors, No. 97-71143 (9th Cir., filed
September 15, 1997). Petition for review of a Board order
dated August 18, 1997, prohibiting Edward Towe and
Thomas E. Towe from further participation in the banking
industry.
Branch v. Board of Governors, No. 97-5229 (D.C. Cir., filed
September 12, 1997). Appeal of district court order denying
motion to compel production of pre-decisional supervisory
documents and testimony sought in connection with an
action by Bank of New England Corporation's trustee in
bankruptcy against the Federal Deposit Insurance Corporation. On November 10, 1997, the court denied appellant's
request for expedited consideration of the appeal. Oral
argument is scheduled for May 4, 1998.
Clarkson v. Greenspan, No. 97-CV-2035 (D.D.C., filed September 5, 1997). Freedom of Information Act case. On
January 20, 1998, the Board filed a motion to dismiss the
action.
Bettersworth v. Board of Governors, No. 97-CA-624 (W.D.
Tex., filed August 21, 1997). Privacy Act case.
Wilkins v. Warren, No. 98-1320 (4th Cir. 1998). Appeal of
District Court dismissal of action involving customer dispute with a bank.
Greeff v. Board of Governors, No. 97-1976 (4th Cir., filed
June 17, 1997). Petition for review of a Board order dated
May 19, 1997, approving the application of by Allied Irish
Banks, pic, Dublin, Ireland, and First Maryland Bancorp,
Baltimore, Maryland, to acquire Dauphin Deposit Corporation, Harrisburg, Pennsylvania, and thereby acquire Dauphin's banking and nonbanking subsidiaries.
Maunsell v. Greenspan, No. 97-6131 (2d Cir., filed May 22,
1997). Appeal of district court dismissal of action for compensatory and punitive damages for alleged violations of
civil rights by federal savings bank.
Vickery v. Board of Governors, No. 97-1344 (D.C. Cir., filed
May 9, 1997). Petition for review of a Board order dated
April 14, 1997, prohibiting Charles R. Vickery, Jr., from
further participation in the banking industry. Oral argument
was heard on February 24, 1998, and on March 3, 1998, the
court of appeals affirmed the Board's order.
Pharaon v. Board of Governors, No. 97-1114 (D.C. Cir., filed
February 28, 1997). Petition for review of a Board order
dated January 31, 1997, imposing civil money penalties and
an order of prohibition for violations of the Bank Holding
Company Act. Oral argument was held on December 8,
1997, and on February 10, 1998, the court of appeals
affirmed the Board's order. On March 26, 1998, petitioner
filed a motion for rehearing and rehearing en bane.
The New Mexico Alliance v. Board of Governors, No. 981049 (D.C. Cir., transferred as of January 21, 1998). Petition for review of a Board order dated December 16, 1996,
approving the acquisition by NationsBank Corporation and
NB Holdings Corporation, both of Charlotte, North Carolina, of Boatmen's Bancshares, Inc., St. Louis, Missouri. On
January 21, 1998, the United States Court of Appeals for
the Tenth Circuit ordered the petition transferred to the
United States Court of Appeals for the District of Columbia
Circuit. On March 23, 1998, the Board moved to dismiss
the petition.
American Bankers Insurance Group, Inc. v. Board of Governors, No. 96-CV-2383-EGS (D.D.C., filed October 16,
1996). Action seeking declaratory and injunctive relief invalidating a new regulation issued by the Board under the
Truth in Lending Act relating to treatment of fees for debt
Legal Developments
cancellation agreements. On October 18, 1996, the district
court denied plaintiffs' motion for a temporary restraining
order. On April 13, 1998, the district court granted the
Board's motion for summary judgment.
Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New
York, filed September 17, 1991). Action to freeze assets of
515
individual pending administrative adjudication of civil
money penalty assessment by the Board. On September 17,
1991, the court issued an order temporarily restraining the
transfer or disposition of the individual's assets. On March
16, 1998, the district court granted in part and denied in part
the Board's motion for summary judgment.
Al
Financial and Business Statistics
A3
GUIDE TO TABULAR
DOMESTIC
FINANCIAL
STATISTICS
Money Stock and Bank Credit
A4
A5
A6
Reserves, money stock, liquid assets, and debt
measures
Reserves of depository institutions and Reserve Bank
credit
Reserves and borrowings—Depository
institutions
Policy Instruments
A7
A8
A9
Federal Finance—Continued
PRESENTATION
Federal Reserve Bank interest rates
Reserve requirements of depository institutions
Federal Reserve open market transactions
Federal Reserve Banks
A10 Condition and Federal Reserve note statements
A l l Maturity distribution of loan and security
holding
A27 Gross public debt of U.S. Treasury—
Types and ownership
A28 U.S. government securities
dealers—Transactions
A29 U.S. government securities dealers—
Positions and financing
A30 Federal and federally sponsored credit
agencies—Debt outstanding
Securities Markets and Corporate Finance
A31 New security issues—Tax-exempt state and local
governments and corporations
A32 Open-end investment companies—Net sales
and assets
A32 Corporate profits and their distribution
A32 Domestic finance companies—Assets and
liabilities
A33 Domestic finance companies—Owned and managed
receivables
Real Estate
Monetary and Credit Aggregates
A12 Aggregate reserves of depository institutions
and monetary base
A13 Money stock, liquid assets, and debt measures
Commercial Banking Institutions—
Assets and Liabilities
A15
A16
A17
A19
A20
All commercial banks in the United States
Domestically chartered commercial banks
Large domestically chartered commercial banks
Small domestically chartered commercial banks
Foreign-related institutions
A34 Mortgage markets—New homes
A35 Mortgage debt outstanding
Consumer Credit
A36 Total outstanding
A36 Terms
Flow of Funds
A37
A39
A40
A41
Funds raised in U.S. credit markets
Summary of financial transactions
Summary of credit market debt outstanding
Summary of financial assets and liabilities
Financial Markets
A22 Commercial paper and bankers dollar
acceptances outstanding
A22 Prime rate charged by banks on short-term
business loans
A23 Interest rates—Money and capital markets
A24 Stock market—Selected statistics
Federal Finance
A25 Federal fiscal and financing operations
A26 U.S. budget receipts and outlays
A27 Federal debt subject to statutory limitation
DOMESTIC NONFINANCIAL STATISTICS
Selected
A42
A42
A43
A44
A46
A47
A48
A49
Measures
Nonfinancial business activity
Labor force, employment, and unemployment
Output, capacity, and capacity utilization
Industrial production—Indexes and gross value
Housing and construction
Consumer and producer prices
Gross domestic product and income
Personal income and saving
A2
Federal Reserve Bulletin • June 1998
INTERNATIONAL STATISTICS
Summary
Statistics
A50
A51
A51
A51
U.S. international transactions
U.S. foreign trade
U.S. reserve assets
Foreign official assets held at Federal Reserve
Banks
A52 Selected U.S. liabilities to foreign official
institutions
Reported by Banks in the United States
A52
A53
A55
A56
Liabilities to, and claims on, foreigners
Liabilities to foreigners
Banks' own claims on foreigners
Banks' own and domestic customers' claims on
foreigners
A56 Banks' own claims on unaffiliated foreigners
A57 Claims on foreign countries—Combined
domestic offices and foreign branches
Reported by Nonbanking Business
Enterprises in the United States
A58 Liabilities to unaffiliated foreigners
A59 Claims on unaffiliated foreigners
Securities Holdings and Transactions
A60 Foreign transactions in securities
A61 Marketable U.S. Treasury bonds and
notes—Foreign transactions
Interest and Exchange Rates
A61 Discount rates of foreign central banks
A61 Foreign short-term interest rates
A62 Foreign exchange rates
A63 GUIDE TO STATISTICAL RELEASES AND
SPECIAL TABLES
A64 INDEX TO STATISTICAL TABLES
A3
Guide to Tabular Presentation
SYMBOLS AND ABBREVIATIONS
c
e
n.a.
P
r
*
0
ATS
BIF
CD
CMO
FFB
FHA
FHLBB
FHLMC
FmHA
FNMA
FSLIC
G-7
Corrected
Estimated
Not available
Preliminary
Revised (Notation appears on column heading
when about half of the figures in that column
are changed.)
Amounts insignificant in terms of the last decimal
place shown in the table (for example, less than
500,000 when the smallest unit given is millions)
Calculated to be zero
Cell not applicable
Automatic transfer service
Bank insurance fund
Certificate of deposit
Collateralized mortgage obligation
Federal Financing Bank
Federal Housing Administration
Federal Home Loan Bank Board
Federal Home Loan Mortgage Corporation
Farmers Home Administration
Federal National Mortgage Association
Federal Savings and Loan Insurance Corporation
Group of Seven
G-10
GNMA
GDP
HUD
IMF
IO
IPCs
IRA
MMDA
MSA
NOW
OCD
OPEC
OTS
PO
RE1T
REMIC
RP
RTC
SCO
SDR
SIC
VA
Group of Ten
Government National Mortgage Association
Gross domestic product
Department of Housing and Urban
Development
International Monetary Fund
Interest only
Individuals, partnerships, and corporations
Individual retirement account
Money market deposit account
Metropolitan statistical area
Negotiable order of withdrawal
Other checkable deposit
Organization of Petroleum Exporting Countries
Office of Thrift Supervision
Principal only
Real estate investment trust
Real estate mortgage investment eonduic
Repurchase agreement
Resolution Trust Corporation
Securitized credit obligation
Special drawing right
Standard Industrial Classification
Department of Veterans Affairs
GENERAL INFORMATION
In many of the tables, components do not sum to totals because of
rounding.
Minus signs are used to indicate (1) a decrease, (2) a negative
figure, or (3) an outflow.
"U.S. government securities" may include guaranteed issues
of U.S. government agencies (the flow of funds figures also
include not fully guaranteed issues) as well as direct obligations of the Treasury.
"State and local government" also includes municipalities,
special districts, and other political subdivisions.
A4
1.10
Domestic Financial Statistics • June 1998
RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES
Percent annual rate of change, seasonally adjusted'
1997
Monetary or credit aggregate
Q3
1
2
3
4
Reserves of depository institutions^
Total
Required
Nonborrowed
Monetary base3
04
Ql
-14.3
-15.0
-16.0
3.7
-1.8
-2.4
-3.4
6.3
-1.3
-4.1
.7
8.1
-6.1
-6.1
-4.5
4.4
7.7
8.4
5.0
.3
5.4
8.1
7.1
4.2
6.8
10.2'
9.6'
5.7'
7.9
18.9
7.3
16.9
11.0
5.6
24.1
-14.1'
-7.8'
-10.2'
3.5
9.5
15.4
10.0
4.0
-3.0
7.2
10.6'
13.4'
5.9
2.8
9.3
8.4'
-81.9
6.4
4.8
8.1
13.8
n.a.
n.a.
6.5
28.3'
10.9
20.7'
11.6
5.6'
9.3
30.6
11.9
5.6
22.6
13.6
1.0
19.9
14.5'
.2
8.5'
13.0'
12.3
-.2
30.8'
37.5
7.6
-.9
13.6
-.6
-9.0
11.5
5.4'
.0
11.4
6.4'
4.2
29.6
13.6'
-2.8
2.7
11.6
-5.9
-6.9
15.6
22.0
19.2
18.9
14.4
7.6
4.8
34.5
22.9
14.7
28.0
12.3
21.0
22.5
38.3
32.4
14.6
77.9
34.2'
9.3
81.01
52.6
21.6'
-25.9
-40.0'
.3
8.6
2.2
7.6
.0
7.9
8.8
10.6
5.1
13.7
10.9
8.5
7.0
4.1
9.9
2.8
7.8
11.1
8.2
7.3
12.4'
13.7'
6.5
7.6
6.8
12.0'
12.7'
6.2
9.0
20.8'
9.6
21.3
7.0
28.3'
9.6
7.1
17.2
16.3
3.1
14.0
13.6
.8
21.1
6.0
-2.9
4.3
1.0
-5.2
9.8
1.4'
-3.5
5.3
Money market mutual funds
18 Retail
19 Institution-only
13.5
18.0
16.0
19.7
Repurchase agreements and Eurodollars
20 Repurchase agreements10
21 Eurodollars10
6.8
32.2
13.4
18.6'
23.4'
.4
6.6
-.6
5.9
.9
7.4
Concepts of money, liquid assets, and debt
SMI
6 M2
7 M3
8 L
9 Debt
Nontransaction components
10 InM2 5
11 In M3 only6
Time and savings deposits
Commercial banks
Savings, including MMDAs
Small lime7
Large t i m e "
Thrift institutions
15 Savings, including MMDAs
16 Small time7
17 Large lime
12
13
14
Debt components4
22 Federal
23 Nonfederal
1. Unless otherwise noted, rates of change are calculated from average amounts outstanding during preceding month or quarter.
2. Figures incorporate adjustments for discontinuities, or "breaks." associated with
regulatory changes in reserve requirements. (See also table 1.20.)
3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally
adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency
component of the money stock, plus (3) (for all quarterly reporters on the "Report of
Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose
vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference
between current vault cash and the amount applied to satisfy current reserve requirements.
4. Composition of the money stock measures and debt is as follows:
Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of
depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at ail
commercial banks other than those owed to depository institutions, the U.S. government, and
foreign banks and official institutions, less cash items in the process of collection and Federal
Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of
withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions,
credit union share draft accounts, and demand deposits at thrift institutions. Seasonally
adjusted Ml is computed by summing currency, travelers checks, demand deposits, and
OCDs, each seasonally adjusted separately.
M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time
deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail
money market mutual funds (money funds with minimum initial investments of less than
$50,000). Excludes individual retirement accounts (IRAs) and Keogh balances at depository
institutions and money market funds. Seasonally adjusted M2 is calculated by summing
savings deposits, small-denomination time deposits, and retail money fund balances, each
seasonally adjusted separately, and adding this result to seasonally adjusted Ml.
M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more), (2)
balances in institutional money funds (money funds with minimum initial investments of
$50,000 or more). (3) RP liabilities (overnight and term) issued by all depository institutions,
and (4) Eurodollars (overnight and term) held by U.S. residents at foreign branches of US.
banks worldwide and al all banking offices in the United Kingdom and Canada. Excludes
-4.9
6.6
-21.2
-24.5
-18.4
5.8
-.6
87.6
-42.2
amounts held by depository institutions, the U.S. government, money market funds, and
foreign banks and official institutions. Seasonally adjusted M3 is calculated by summing large
time deposits, institutional money fund balances, RP liabilities, and Eurodollars, each
seasonally adjusted separately, and adding this result to seasonally adjusted M2.
L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury
securities, commercial paper, and bankers acceptances, net of money market fund holdings of
these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term
Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted
separately, and then adding this result to M3.
Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial
sectors—the federal sector (U.S. government, not including government-sponsored enterprises or federally related mortgage pools) and the nonfederal sectors (state and local
governments, households and nonprofit organizations, nonfinancial corporate and nonfarm
noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and
corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data,
which are derived from the Federal Reserve Board's flow of funds accounts, are breakadjusted (that is, discontinuities in the data have been smoothed into the series) and
month-averaged (that is, the data have been derived by averaging adjacent month-end levels).
5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail
money fund balances, each seasonally adjusted separately.
6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities
(overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and
term) of US. addressees, each seasonally adjusted separately.
7. Small time deposits—including retail RPs—are those issued in amounts of less than
$100,000. All IRA and Keogh account balances at commercial banks and thrift institutions
are subtracted from small lime deposits.
8. Large lime deposils are those issued in amounts of $100,000 or more, excluding those
booked at international banking facilities.
9. Large time deposits at commercial banks less those held by money market funds,
depository institutions, the U.S. government, and foreign banks and official institutions.
10. Includes both overnight and term.
Money Stock and Bank Credit A5
1.11
RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT'
Millions of dollars
Average of
dally figures
Average of daily figures for week ending on date indicated
1998
Jan.
Mar.
Feb. 11
Feb. 18
Feb. 25
Mar. 4
464,620
466,130
Mar. 11
466,322
Mar. 18
Mar. 25
SUPPLYING RESERVE FUNDS
Reserve Bank credit outstanding
U.S. government securities2
Bought outright—System account3. ..
Held under repurchase agreements ..
Federal agency obligations
Bought outright
Held under repurchase agreements . .
Acceptances
Loans to depository institutions
Adjustment credit
Seasonal credit
Extended credit
Float
Other Federal Reserve assets
468,720
463,965
429,845
4,155
427,988
2,720
431.767
2,313
427,093
274
428,138
2,799
428,618
5,743
428,922
4,000
685
833
0
678
573
0
641
1,245
0
682
163
0
675
617
0
675
442
0
675
2,008
0
51
11
0
25
9
0
937
32,087
78
12
0
368
31.934
15
13
0
134
30,489
0
78
30,625
3
19
0
558
30,638
2
20
0
532
30,945
455
31,201
468.358
466,500
432,541
2,216
432,887
1,113
667
625
2.415
0
1,478
0
625
174
0
430,335
2,850
18
0
1,228
31,769
12 Gold stock
13 Special drawing rights certificate account . .
14 Treasury currency outstanding
440
31,505
6
22
0
464
31,026
11,046
9,200
25,544
11,047
9,200
25,703
11,049
9,200
25,761
11,046
9,200
25,690
11.047
9,200
25,704
11,049
9,200
25,718
11,050
9,200
25,732
11,049
9,200
25,746
11,049
9,200
25,760
11,049
9,200
25.774
474,085
224
471,834
227
473,771
254
470.576
223
473,053
227
472,853
229
472,861
241
473,893
245
474,061
256
473,754
260
6,507
4,969
178
5,455
5,062
163
7.117
422
16,140
7,501
4,969
164
7,030
404
16,154
8,571
4,400
172
6,953
5,447
216
4,867
159
6,294
6,990
370
16,197
9,981
7,126
376
10.055
5,181
164
7,003
357
16,089
9,716
Mar. 18
Mar. 25
19
26
0
ABSORBING RESERVE FUNDS
15 Currency in circulation
16 Treasury cash holdings
Deposits, other than reserve balances, with
Federal Reserve Banks
17 Treasury
18 Foreign
19 Service-related balances and adjustments . . .
20 Other
21 Other Federal Reserve liabilities and capital . .
22 Reserve balances with Federal Reserve Banks4
188
7,198
421
16,016
9.971
7.063'
174
6,993
395
16.114
9.135'
369
16,176
10,302
371
16,139
10,979
16.409
10,402
176
6,976
372
16,178
Wednesday figures
End-of-month figures
Feb. 18
Feb. 25
Mar. 4
Mar.
SUPPLYING RESERVE FUNDS
1 Reserve Bank credit outstanding
U.S. government securities
2
Bought outright—System account'
3
Held under repurchase agreements
Federal agency obligations
4
Bought outright
5
Held under repurchase agreements
6
Acceptances
Loans to depository institutions
7
Adjustment credit
8
Seasonal credit
9
Extended credit
10 Float
11 Other Federal Reserve assets
463,567
....
....
12 Gold stock
13 Special drawing rights certincate account . . . .
14 Treasury currency outstanding
465,614
475,593
466,801
467,625
476.128
465,074
469,283
472.764
428,043
800
428.619
3,645
433,182
6.846
429,481
1.915
428.001
4,302
429.189
12,080
429,091
3,098
432,521
6,940
432,708
3,001
434.119
5,735
685
1,268
0
675
2,107
0
625
1,450
0
675
1,140
0
675
1,070
0
675
675
1,415
0
625
1.610
0
3,419
0
625
1,220
0
1,045
0
0
671
32.077
0
12
0
-202
30,757
2
27
0
1,503
31,959
2
14
0
1.053
32,522
3
12
0
3,379
30.184
4
13
0
1,116
31.442
2
16
0
353
30,424
16
0
386
31,084
2
23
0
539
31,165
30
0
-532
31.735
11,046
9.200
25,676
11.050
9,200
25,732
11.049
9,200
25,788
11,047
9,200
25,690
11,048
9,200
25,704
11,050
9.200
25,718
11,049
9,200
25,732
11,050
9,200
25,746
11,049
9,200
25,760
11.049
9,200
25,774
468.337
220
472,029
241
475,091
265
472.372
227
474,118
227
473.257
241
474,356
243
475,059
255
474,719
259
474,518
265
5,552
215
7,276
343
15,969
11,576
5.037
243
5,490
4.699
170
7,030
405
15,933
10,995
4,778
242
6,990
4,556
159
6,847
354
15,708
17.708
4.401
152
7,117
402
15,972
12,095
4.398
194
6.990 1
349
4,819
159
7.003
380
15,908
8,157
379
16,031
17,424
5,745
156
6,976
357
15,879
11,203
625
ABSORBING RESERVE FUNDS
15 Currency in circulation
16 Treasury cash holdings
Deposits, other than reserve balances, with
Federal Reserve Banks
17 Treasury
18 Foreign
19 Service-related balances and adjustments ..
20 Other
21 Other Federal Reserve liabilities and capital .
22 Reserve balances with Federal Reserve Banks4
16,256
10,449'
167
1. Amounts of cash held as reserves are shown in table 1.12, line 2.
2. Includes securities loaned—fully guaranteed by U.S. government securities pledged
with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back
under matched sale-purchase transactions.
6,953
374
15,931
20,749
7,126
364
15,914
15,745
3. Includes compensation that adjusts for the effects of inflation on the principal of
inflation-indexed securities.
4. Excludes required clearing balances and adjustments to compensate for float.
A6
Domestic Financial Statistics • June 1998
1.12
RESERVES AND BORROWINGS
Depository Institutions1
Millions of dollars
Prorated monthly averages of biweekly averages
Reserve classification
1997
Reserve balances with Reserve Banks2
Total vault cash
Applied vault cash4
Surplus vault cash5
Total reserves6
Required reserves
Excess reserve balances at Reserve Banks7
Total borrowings at Reserve Banks8
Seasonal borrowings
Extended credit9
1996
Dec.
1
2
3
4
5
6
7
8
9
10
1995
Dec.
Dec.
Sept.
Oct.
Nov.
Dec.
20,440
42,094
37.460
4,634
57.900
56,622
1,278
257
40
0
13,395
44,379
37,848
6,532
51,243
49,819
1,424
155
68
0
10,673
43,970
37,206
6,763
47,880
46,196
1,683
324
79
0
9,742
43,056
36,314
6,742
46,056
44,761
1,295
438
368
0
9,990
41,730
35,631
6,099
45,621
44,225
1,396
270
227
0
10,559
42,114
35,892
6,222
46,451
44,834
1,617
153
115
0
10,673
43,970
37,206
6,763
47,880
46,196
1,683
324
79
0
Feb.'
9,733
46,672
37,762
8,910
47,495
45,714
1,780
210
18
0
Mar.
9.394
42,562
35,580
6,982
44,974
43,450
1,524
58
12
0
10,140
40,993
35,369
5,623
45,509
44,191
1,319
41
22
0
Biweekly averages of daily figures for two week periods ending on dates indicated
Feb. 11
1
2
3
4
5
6
7
8
9
10
Reserve balances with Reserve Banks
Total vault cash3
Applied vault cash4
Surplus vault cash5
Total reserves6
Required reserves
Excess reserve balances at Reserve Banks7
Total borrowings at Reserve Banks
Seasonal borrowings
Extended credit9
11.022
42,175
36,068
6,108
47,090
45,357
1.733
119
95
0
9,678
44,267
36,965
7,302
46.643
45.170
1.473
240
85
0
11,595
44,058
37,692
6,366
49,286
47,403
1,883
454
71
0
1. Data in this table also appear in the Board's H.3 (502) weekly statistical release. For
ordering address, see inside front cover. Data are not break-adjusted or seasonally adjusted.
2. Excludes required clearing balances and adjustments to compensate for float and
includes other off-balance-sheet "as-of" adjustments.
3. Total "lagged" vault cash held by depository institutions subject to reserve
requirements. Dates refer to the maintenance periods dunng which the vault cash may be used
to satisfy reserve requirements. The maintenance period for weekly reporters ends sixteen
days after the lagged computation period during which the vault cash is held. Before Nov. 25,
1992, the maintenance period ended thirty days after the lagged computation period.
4. All vault cash held during the lagged computation period by "bound" institutions (that
is, those whose required reserves exceed their vault cash) plus the amount of vault cash
applied during Ihe maintenance period by "nonbound" institutions (that is, those whose vault
cash exceeds their required reserves) to satisfy current reserve requirements.
11,500
44,958
37,976
6,982
49,476
47,659
1,817
209
22
0
8,176
48,839
37,827
11,012
46,003
44,213
1,790
242
16
0
Feb. 25
Mar. 11'
Mar. 25
Apr. 8
8,750
44,560
36,462
8,098
45,212
43.648
1,563
67
9
0
9,726
41,199
34,892
6.307
44,618
43,132
1,485
59
13
0
10,210
41,597
35,555
6,042
45,765
44,209
1.556
19
17
0
9,878
40,594
35,154
5,441
45,031
43,893
1,138
34
23
0
10,625
40,815
35,532
5,283
46,157
44,854
1,302
101
30
0
5. Total vault cash (line 2) less applied vault cash (line 3).
6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash
(line 3).
7. Total reserves (line 5) less required reserves (line 6).
8. Also includes adjustment credit.
9. Consists of borrowing at the discount window under the terms and conditions established for the extended credit program to help depository institutions deal with sustained
liquidity pressures. Because there is not the same need to repay such borrowing promptly as
with traditional short-term adjustment credit, the money market effect of extended credit is
similar to that of nonbonowed reserves.
Policy Instruments A7
1.14 FEDERAL RESERVE BANK INTEREST RATES
Percent per year
Current and previous levels
Seasonal credit
Adjustment credit
:ral Reserve
Bank
On
5/8/98
Previous rate
Boston
New York
Philadelphia..
Cleveland
Richmond. . . .
Atlanta
2/1/96
2/5/96
1/31/96
2/1/96
1/31/96
1/31/96
On
5/8/98
On
5/8/98
2/1/96
1/31/96
1/31/96
1/31/96
2/1/96
1/31/96
Chicago
St. Louis
Minneapolis ..
Kansas City .
Dallas
San Francisco
Extended credit
Previous rate
Effective date
6.00
5.50
5.25
Range of rates for adjustment credit in recent years4
Range (or
level)—All
F.R. Banks
F.R. Bank
of
N.Y.
9.
20 .
May 11 .
12 .
July 3 .
10 .
Aug. 21 .
Sept. 22 .
Oct. 16 .
20 .
Nov. 1 .
3.
6-6.5
6.5
6.5-7
7
7-7.25
7.25
7.75
8
8-8.5
8.5
8.5-9.5
9.5
6.5
6.5
7
7
7.25
7.25
7.75
8
8.5
8.5
9.5
9.5
1979—July 20 .
Aug. 17 .
20 .
Sept. 19 .
21 .
Oct. 8 .
10 .
10
10-10.5
10.5
10.5-11
11
11-12
12
1980—Feb. 15 .
19 .
May 29 .
30 .
June 13 .
16 .
July 28 .
29 .
Sept. 26 .
Nov. 17 .
Dec. 5 .
8 .
1981—May 5
12-13
13
12-13
12
11-12
11
10-11
10
11
12
12-13
13
13-14
14
Effective date
In effect Dec. 31, 1977
1978—Jan.
10
10.5
10.5
11
11
12
12
13
13
13
12
11
11
10
10
11
12
13
13
14
14
Range (or
level)—All
F.R. Banks
1981—Nov. 2
6
Dec. 4
13-14
13
12
1982—July 20
23
Aug. 2
3
16
27
30
Oct. 12
13
Nov. 22
26
Dec. 14
15
17
11.5-12
11.5
11-11.5
11
10.5
1O-10.5
10
9.5-10
9.5
9-9.5
9
8.5-9
8.5-9
8.5
11.5
11.5
11
11
10.5
10
10
9.5
9.5
9
9
9
8.5
8.5
1984— Apr. 9
13
Nov. 21
26
Dec. 24
8.5-9
9
8.5-9
8.5
9
9
8.5
8.5
1985—May 20
24
7.5-8
7.5
7.5
7.5
1986—Mar. 7
10
Apr. 21
23.
July 11
Aug. 21
22
7-7.5
7
6.5-7
6.5
6
5.5-6
5.5
7
7
6.5
6.5
6
5.5
5.5
1987—Sept. 4
5.5-6
6
Effective date
Range (or
level)—All
F.R. Banks
F.R. Bank
of
N.Y.
6-6.5
6.5
6.5
6.5
6.5-7
7
7
6
6
13
13
12
18—Aug. 9 .
1989—Feb. 24
27
1990—Dec. 19 .
1991—Feb.
1
4
30
2
13
17
6
7
20
24
7
6.5
6.5
6
6
5.5
5.5
5
5
4.5
4.5
3.5
3.5
2
7
6-6.5
6
5.5-6
5.5
5-5.5
5
4.5-5
4.5
3.5^1.5
3.5
3-3.5
3
1994—May 17
18
Aug. 16
18
Nov. 15
17
3-3.5
3.5
3.5-4
4
4-4.75
4.75
3.5
3.5
4
4
4.75
4.75
1
4.75-5.25
5.25
5.25
5.25
1996—Jan. 31
Feb. 5
5.00-5.25
5.00
5.00
5.00
Apr.
May
Sept.
Nov.
Dec.
1992—July
1995—Feb.
3
3
In effect May 8, 1998
1. Available on a short-term basis to help depository institutions meet temporary needs for
funds that cannot be met through reasonable alternative sources. The highest rate established
for loans to depository institutions may be charged on adjustment credit loans of unusual size
that result from a major operating problem at the borrower's facility.
2. Available to help relatively small depository institutions meet regular seasonal needs for
funds that arise from a clear pattern of intrayearly movements in their deposits and loans and
that cannot be met through special industry lenders. The discount rate on seasonal credit takes
into account rates charged by market sources of funds and ordinarily is reestablished on the
first business day of each two-week reserve maintenance period; however, it is never less than
the discount rate applicable to adjustment credit.
3. May be made available to depository institutions when similar assistance is not
reasonably available from other sources, including special industry lenders. Such credit may
be provided when exceptional circumstances (including sustained deposit drains, impaired
access to money market funds, or sudden deterioration in loan repayment performance) or
practices involve only a particular institution, or to meet the needs of institutions experiencing
difficulties adjusting to changing market conditions over a longer period (particularly at times
of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is
charged on extended-credit loans outstanding less than thirty days; however, at the discretion
F.R. Bank
of
N.Y.
of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a
flexible rate somewhat above rates charged on market sources of funds is charged. The rate
ordinarily is reestablished on the first business day of each two-week reserve maintenance
period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis
points.
4. For earlier data, see the following publications of the Board of Governors: Banking and
Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 19701979.
In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit
borrowings by institutions with deposits of $500 million or more that had borrowed in
successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was
in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed
on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to
4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981,
and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the
surcharge was changed from a calendar quarter to a moving thirteen-week period. The
surcharge was eliminated on Nov. 17, 1981.
A8
Domestic Financial Statistics • June 1998
1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1
Requirement
Type of deposit
Percentage of
deposits
Net transaction accounts2
1 $0 million-$47.8 million3
2 More than $47 8 million4
3
10
0
0
1. Required reserves must be held in the form of deposits with Federal Reserve Banks
or vault cash. Nonmember institutions may maintain reserve balances with a Federal
Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For
previous reserve requirements, see earlier editions of the Annual Report or the Federal
Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions
include commercial banks, mutual savings banks, savings and loan associations, credit
unions, agencies and branches of foreign banks, and Edge Act corporations.
2. Transaction accounts include all deposits against which the account holder is permitted
to make withdrawals by negotiable or transferable instruments, payment orders of withdrawal, or telephone or preauthorized transfers for the purpose of making payments to third
persons or others. However, accounts subject to the rules that permit no more than six
preauthorized, automatic, or other transfers per month (of which no more than three may be
by check, draft, debit card, or similar order payable directly to third parties) are savings
deposiis, not transaction accounts.
3. The Monetary Control Act of 1980 requires that the amount of transaction accounts
against which the 3 percent reserve requirement applies be modified annually by 80 percent of
the percentage change in transaction accounts held by all depository institutions, determined
as of June 30 of each year. Effective with the reserve maintenance period beginning January 1,
1998, for depository institutions that report weekly, and with the period beginning January 15,
1998, for institutions that report quarterly, the amount was decreased from $49.3 million to
$47.8 million.
Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the
amount of reservable liabilities subject to a zero percent reserve requirement each year for the
Effective date
1/1/98
1/1/98
12/27/90
12/27/90
succeeding calendar year by 80 percent of the percentage increase in the total reservable
liabilities of all depository institutions, measured on an annual basis as of June 30. No
corresponding adjustment is made in the event of a decrease. The exemption applies only to
accounts that would be subject to a 3 percent reserve requirement. Effective with the reserve
maintenance period beginning January 1, 1998, for depository institutions that report weekly,
and with the period beginning January 15, 1998, for institutions that report quarterly, the
exemption was raised from $4.4 million to $4.7 million.
4. The reserve requirement was reduced from 12 percent to 10 percent on
Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that
report quarterly.
5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits
with an original maturity of less than 11/2 years was reduced from 3 percent to 1 l/l percent for
the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that
began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on
nonpersonal time deposits with an original maturity of less than 1 l/i years was reduced from 3
percent to zero on Jan. 17, 1991.
The reserve requirement on nonpersonal time deposits with an original maturity of V/z
years or more has been zero since Oct. 6, 1983.
6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero
in the same manner and on the same dates as the reserve requirement on nonpersonal time
deposits with an original maturity of less than 1 l/i years (see note 5).
Policy Instruments A9
1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1
Millions of dollars
1997
Type of transaction
and maturity
Aug.
Sept.
U.S. TREASURY SECURITIES 2
Outright transactions (excluding matched
transactions)
Treasury bills
1 Gross purchases
2 Gross sales
3
Exchanges
4
For new bills
5
Redemptions
Others within one year
6
Gross purchases
7
Gross sales
8
Maturity shifts
9
Exchanges
10 Redemptions
One to five years
11 Gross purchases
12 Gross sales
13 Maturity shifts
14
Exchanges . . . .
Five to ten years
15 Gross purchases
16 Gross sales
17 Maturity shifts
18 Exchanges
More than ten years
19 Gross purchases
20 Gross sales
21
Maturity shifts
22
Exchanges .
All maturities
Gross purchases
Gross sales . ..
Redemptions . . .
Matched transactions
26 Gross purchases
27 Gross sales
Repurchase agreements
28 Gross purchases
29 Gross sales
30 Net change in U.S. Treasury securities
10,932
0
405,296
405,296
900
9,901
0
426,928
426,928
0
9,147
0
419,347
418,997
0
0
0
35,666
35.666
0
0
0
28,328
28,328
0
0
0
39,313
39.313
0
0
0
33,485
33,485
0
4,545
0
26,905
26,905
0
0
0
41,731
41,731
2.000
0
0
29,290
29,290
0
390
0
43,574
-35,407
1.776
524
0
30,512
-41,394
2,015
5.748
0
43,473
-27,499
0
0
0
7,487
-2,780
0
644
0
1,596
-2,382
0
0
0
3,193
-1,267
416
1,462
0
5,231
-4,126
0
1,947
0
1,748
-2,329
0
0
0
3.447
-400
478
0
0
6,098
-6,128
0
5,366
0
-34,646
26,387
3,898
0
-25,022
31,459
20,299
0
-39,744
20,274
0
0
-5,247
1,170
2,697
0
-1,596
2,382
0
0
-3,193
1,267
3,323
0
-4,883
1,651
4,471
0
-1,748
2,329
0
0
-3,447
0
0
0
-3,213
3,383
1,432
0
-3,093
7,220
1,116
0
-5,469
6,666
3,101
0
-1,954
5,215
0
0
-2,240
0
0
0
0
770
0
0
0
485
0
31
1,295
613
0
0
0
0
0
0
400
0
0
-2,884
1,420
2,529
0
-2,253
1,800
1,655
0
-20
3,270
5,827
0
-1,775
2,360
0
0
0
730
0
0
0
0
648
0
0
0
954
0
-379
1,180
1,214
0
0
0
0
0
0
0
0
0
0
1,325
20,649
0
2,676
17,094
0
2,015
44,122
0
1,996
0
0
0
3,341
0
0
1,418
0
416
6.224
0
0
12,790
0
0
0
0
2,478
0
0
0
2,197,736
2,202,030
3,092,399
3,094,769
3,586,584
3,588,905
317,008
315.439
311,153
312,083
316,425
318,485
272,474
269,586
353,726
355,668
332,581
332.795
326,812
326,245
331,694
328,497
457,568
450,359
810,485
809,268
54,561
50,340
77.109
74,960
75,323
78,157
73,618
73,064
97,932
87,160
45.543
65,932
33,428
30,583
16,875
19.919
41,022
5,790
4,560
-3,893
9,666
21,620
-23,080
3,412
0
0
1,003
0
0
409
0
0
1,540
0
0
179
0
0
105
0
0
215
0
0
26
36,851
36,776
75,354
74,842
160,409
159,369
13,131
11,252
9,796
11,196
15,639
15,157
23,054
20,976
20,056
21,186
FEDERAL AGENCY OBLIGATIONS
Outright transactions
31 Gross purchases
32 Gross sales
33 Redemptions
Repurchase agreements
34 Gross purchases
35 Gross sales
36 Net change in federal agency obligations
37 Total net change in System Open Market Account.
13,107
13,232
9,615
8,776
-928
103
-500
1,700
-1,505
267
2,052
-1,130
-125
829
15,948
20,021
40,522
7,490
3,055
-3,626
11,718
20,490
-23,204
4J41
1. Sales, redemptions, and negative figures reduce holdings of the System Open Market
Account; all odier figures increase such holdings.
0
0
10
2. Transactions exclude changes in compensation for the effects of inflation on the principal
of inflation-indexed securities.
A10
1.18
Domestic Financial Statistics • June 1998
FEDERAL RESERVE BANKS
Condition and Federal Reserve Note Statements'
Millions of dollars
Wednesday
1998
Account
Feb. 25
Mar. 4
End of month
1998
Mar. 11
Mar. 18
Mar. 25
Jan. 31
Feb. 28
Mar. 31
Consolidated condition statement
ASSFTS
1 Gold certificate account
2 Special drawing rights certificate account
3 Coin
//win i
4 To depository institutions
5 Other . . . . ' . . .
6 Acceptances held under repurchase agreements
Federal agency obligations
1 Bought outright
8 Held under repurchase agreements
11.050
9,200
569
11,049
9,200
565
11,050
9,200
551
11,049
9,200
536
11.049
9,200
538
11,046
9,200
556
11,050
9.200
588
11.049
9.200
527
17
0
0
18
0
0
18
0
0
26
0
0
38
0
0
24
0
0
13
0
0
29
0
0
675
1.610
675
1.415
625
3,419
625
1,220
625
1.045
685
1,268
675
2.107
625
1.450
441,269
432,189
439,461
435,709
439.854
428,843
432,264
440,028
10 Bought outright'1
11
Rills
12 Notes
13 Bonds
14 Held under repurchase agreements
429.189
196,057
172,400
60,732
12,080
429,091
195,959
172,400
60,732
3.098
432,521
195,626
176,164
60,732
6.940
432,708
195,812
176,165
60,732
3.001
434,119
196,196
176,435
61,488
5,735
428,043
194.909
173.727
59.407
800
428,619
195,488
172,400
60,732
3,645
433.182
195,258
176,436
61,488
6,846
15 Total loans and securities
443,571
434,297
443,523
437,579
441,561
430,820
435,058
442,131
7,199
1.276
8,130
1,276
7.155
1.279
7,193
1,280
6,490
1.280
5.185
1.273
4,488
1.275
9,691
1,279
17,048
13,006
17,208
11,860
17.216
12.536
17,224
12,632
17,232
13.191
17,019
13.693
17.203
12.327
16.711
13.930
502,918
493,586
502,510
496,692
500,541
488,792
491,188
504,519
9 Total U.S. Treasury securities
16 Items in process of collection
17 Bank premises
Other assets
18 Denominated in foreign currencies'
19 All other4 .
..
20 Total assets
I.IARII ITIHS
21 Federal Reserve notes
448.349
449.433
450.119
449,753
449.546
443,438
447.126
450.095
23 Tntal deposits
32.440
20,747
29,922
24,224
28,933
24,937
23,155
30,456
23
24
25
26
27.475
4,398
194
374
15.346
4,778
242
380
24,828
4,556
159
379
17,967
5,745
156
357
23.590
4.819
159
364
18,826
5,552
215
343
17,525
5,037
243
349
24,445
5.490
167
354
6,198
4,716
7,498
4.558
6,439
4,840
6,836
4,692
6.148
4.693
4.449
4.635
4.652
4,696
8,260
4,601
491,704
482,236
491,320
485.505
489,320
477,458
479,628
493,412
5 478
5.220
517
5.479
5.220
650
5,428
5.220
542
5,430
5,220
536
5,454
5.220
547
5,477
5,220
636
5,478
5,220
861
5,471
5,202
434
502,918
493386
502,510
496,692
500,541
488,792
491,188
504,519
606.419
609.177
610,249
613,342
611,157
607,873
605,360
613,236
Depository institutions
U.S. Treasury—General account
Foreign—Official accounts
Other
27 Deterred credit items
28 Other liabilities and accrued dividends^
29 Total liabilities
30 Capital paid in
31 Surplus
33 Total liabilities and capital accounts
MEMO
34 Marketable U.S. Treasury securities held in custody for
foreign and international accounts
Federal Reserve note statement
35 Federal Reserve notes outstanding (issued to Banks)
36
1 PSS: Held by Federal Reserve Banks
37
Federal Reserve notes, net
38
39
40
41
Collateral held against notes, net
Gold certificate account
Special drawing rights certificate account
Other eligible assets
U.S. Treasury and agency securities
42 Total collateral
548,745
100,395
448,349
549,622
100,189
449,433
550,756
100,637
450,119
551,759
102,006
449,753
552,573
103,027
449,546
547,998
104.561
443.438
549.260
102,133
447,126
553,090
102.995
450,095
11,050
9,200
0
428.099
11,049
9,200
0
429,183
11,050
9,200
0
429,869
11.049
9.200
0
429,504
11,049
9,200
0
429.297
11,046
9.200
0
423.192
11,050
9,200
0
426.876
11,049
9.200
0
429.846
448,349
449,433
450,119
449,753
449,546
443,438
447,126
450,095
1. Some of the data in this lable also appear in the Board's H.4.1 (503) weekly statistical
release. For ordering address, see inside front cover.
2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged with
Federal Reserve Banks—and includes compensation that adjusts for the effects of inflation on
the principal of inflation-indexed securities. Excludes securities sold and scheduled to be
bought back under matched sale-purchase transactions.
3. Valued monthly at market exchange rates.
4. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury
bills maturing within ninety days.
5. Includes exchange-translation account reflecting the monthly revaluation at market
exchange rates of foreign exchange commitments.
Federal Reserve Banks A11
1.19
FEDERAL RESERVE BANKS
Maturity Distribution of Loan and Security Holding
Millions of dollars
Wednesday
1998
Type of holding and maturity
End nf month
1998
Feb. 25
Mar. 4
Mar. 11
Mar. 18
Mar. 25
Jan. 31
Feb. 28
Mar. 31
1 Total loans
17
18
18
26
38
24
62
29
2 Within fifteen days'
3. Sixteen days to ninety days
12
5
2
16
2
16
26
38
n.a.
21
2
56
6
17
12
441,269
432,189
439,461
435,709
439,855
428,843
432,264
440,028
26.410
91,811
139.269
94,305
39,841
49,633
17,394
97.786
132,552
94,983
39,841
49,633
14,600
98.503
139.638
97.245
39.841
49.633
15,517
93,598
139,873
97,245
39.842
49.633
18,845
93,078
140,183
97,246
40,125
50,376
9.133
104.808
131.151
94.136
41.106
48.308
12.674
103.213
132.599
94.305
39.841
49.633
20,423
94.170
I37.R3R
97.095
40,126
50,376
11 Total federal agency obligations
2,285
2,090
4,044
1,845
1,670
1,953
2,782
2,075
12
13
14
15
16
17
1,660
44
150
151
255
25
1,465
44
150
151
255
25
3,419
74
175
126
225
25
1.220
74
175
126
225
25
1,045
74
175
126
225
25
1.278
94
150
151
255
25
2.157
J4
150
151
255
25
1.510
14
175
126
225
25
4 Total US. Treasury securities2
5
6
7
8
9
10
Within fifteen days'
Sixteen days to ninety days
Ninety one days to one year
One year to five years
Five years to ten years
More than ten years
Within fifteen days'
Sixteen days lo ninety days
Ninety-one days lo one year
One year to five years
Five years lo ten years
More than ten years
1 Holdings under repurchase agreements are classified as maturing within fifteen days in
accordance with maximum maturity of the agreements.
n.a
2, Includes compensation that adjusts for the effects of inflation on the principal of
inflation-indexed securities.
A12
1.20
Domestic Financial Statistics D June 1998
AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1
Billions of dollars, averages of daily figures
1994
Dec.
1995
Dec.
1996
Dec.
1997
Dec.
Aug.
Seasonally adjusted
ADJUSTED FOR
CHANGES IN RESERVE REQUIREMENTS 1
1
2
3
4
5
Total reserves3
Nonborrowed reserves4
Nonborrowed reserves plus extended credit 5 ....
Required reserves
Monetary base6
Sept.
59.40
59.20
59.20
58.24
418.18
56.39
56.13
56.13
55.11
434.23
50.06
49.91
49.91
48.64
452.47
47.20
46.87
46.87
45.51
480.58
47.41
46.82
46.82
46.16
467.02
46.67
46.23
46.23
45.37
469.68
46.45
46.18
46.18
45.06
472.35
46.87
46.71
46.71
45.25
476.64
47.20
46.87
46.87
45.51
480.58
46.36
46.15
46.15
44.58
482.91
45.82
45.76
45.76
44.29'
484.32
46.18
46.14
46.14
44.86
485.95
Not seasonally adjusted
6
7
8
9
10
Total reserves7
Nonborrowed reserves
Nonborrowed reserves plus extended credit1. ..
Required reserves8
Monetary base
61.13
60.92
60.92
59.96
422.51
58.02
57.76
57.76
56.74
439.03
51.52
51.37
51.37
50.10
456.72
48.56
48.23
48.23
46.87
485.47
47.09
46.49
46.49
45.83
467.24
46.55
46.11
46.11
45.25
468.63
46.16
45.89
45.89
44.77
470.70
47.05
46.90
46.90
45.44
476.94
48.56
48.23
48.23
46.87
485.47
47.50
47.29
47.29
45.72
484.42
45.00
44.94
44.94
43.47'
481.37'
45.56
45.51
45.51
44.24
484.04
61.34
61.13
61.13
60.17
427.25
1.17
.21
57.90
57.64
57.64
56.62
444.45
1.28
.26
51.24
51.09
51.09
49.82
463.49
1.42
.16
47.88
47.56
47.56
46.20
491.92
1.68
.32
46.65
46.05
46.05
45.39
474.01
1.25
.60
46.06
45.62
45.62
44.76
475.32
1.30
.44
45.62
45.35
45.35
44.23
477.28
1.40
.27
46.45
46.30
46.30
44.83
483.50
1.62
.15
47.88
47.56
47.56
46.20
491.92
1.68
.32
47.50
47.29
47.29
45.71
491.62
1.78
.21
44.97
44.92'
44.92'
43.45
488.43
1.52
.06
45.51
45.47
45.47
44.19
491.00
1.32
.04
NOT ADJUSTED FOR
CHANGES IN RESERVE REQUIREMENTS
11
12
13
14
15
16
17
Total reserves"
Nonborrowed reserves
Nonborrowed reserves plus extended credit5. ..
Required reserves
Monetary base12
Excess reserves13
Borrowings from the Federal Reserve
1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly
statistical release. Historical data starting in 1959 and estimates of the effect on required
reserves of changes in reserve requirements are available from the Money and Reserves
Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve
System. Washington, DC 20551.
2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory
changes in reserve requirements. (See also table 1.10.)
3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, breakadjusted required reserves (line 4) plus excess reserves (line 16).
4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted,
break-adjusted total reserves (line 1) less total borrowings of depository institutions from the
Federal Reserve (line 17).
5. Extended credit consists of borrowing at the discount window under the terms and
conditions established for the extended credit program to help depository institutions deal
with sustained liquidity pressures. Because there is not the same need to repay such
borrowing promptly as with traditional short-term adjustment credit, the money market effect
of extended credit is similar to that of nonborrowed reserves.
6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally
adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency
component of the money stock, plus (3) (for all quarterly reporters on the "Report of
Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters
whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted
difference between current vault cash and the amount applied to satisfy current reserve
requirements.
7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess
reserves (line 16).
8. To adjust required reserves for discontinuities that are due to regulatory changes in
reserve requirements, a multiplicative procedure is used to estimate what required reserves
would have been in past periods had current reserve requirements been in effect. Breakadjusted required reserves include required reserves against transactions deposits and nonpersonal time and savings deposits (but not reservable nondeposit liabilities).
9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus
(2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly
reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all
those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted
difference between current vault cash and the amount applied to satisfy current reserve
requirements.
10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no
adjustments to eliminate the effects of discontinuities associated with regulatory changes in
reserve requirements.
11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve
requirements.
12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total
reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float
at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for
all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault
Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the
difference between current vault cash and the amount applied to satisfy current reserve
requirements. Since the introduction of contemporaneous reserve requirements in February
1984, currency and vault cash figures have been measured over the computation periods
ending on Mondays.
13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14).
Monetary and Credit Aggregates A13
1.21
MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES'
Billions of dollars, averages of daily figures
1998
1996
Dec.
1997
Dec.
Mar.
Jan.
Seasonally adjusted
1
2
3
4
5
Measures
Ml
M2
M3
L
Debt
6
7
8
9
Ml components
Currency3
Travelers checks4
Demand deposits5
Other checkable deposits6
1,150.7
3,503.0
4,333.6
5,315.8
12.998.7
1.128.7
3.651.2
4.595.6
5,702.2
13,699.2
1,082.8
3,826.1
4,935.5
6,088.3
14,419.9
354.3
8.5
384.0
403.9
372.4
8.9
391.0
356.4
394.9
8.6
425.5
8.2
403.6
397.1
275.9
2,352.3
830.6
2,522.6
944.4
Commercial banks
12 Savings deposits, including MMDAs. . .
13 Small time deposits9
14 Large time deposits10 "
752.6
503.2
298.7
Thrift institutions
15 Savings deposits, including MMDAs .. .
16 Small time deposits9
17 Large time deposits10
1,076.0
4,040.2
5,382.6'
6,625.8'
15,152.7'
1.076.0
4.040.2
5.382.6'
6,625.8'
15,152.7'
1,073.3
4,064.6
5,430.2'
6,700.0'
15,227.2'
1,075.8
4,096.1
5,468.2'
6,243.0
15,308.9
1,080.1
4,123.8
5,530.9
n.a.
245.1
425 5
8.2
397.1
245.1
427.5
8.2
392.7
244.9
431.0
8.1
391.8
245.0
432.4
8.1
390.9
248.7
2,743.2
1,109.4
2,964.3'
1.342.4'
2,964.3'
1,342.4'
2,991.3'
1.365.6'
3,020.3'
1,372.0'
3,043.7
1,407.0
775.0
575.8
345.4
904.8
594.5
413.2
1,020.9
621.6
495.8
1,020.9
621.6
495.8
1,033.2'
621.7
499.3'
1,044.4
621.6
512.1'
1,055.1
621.3
528.1
397.3
314.2
64.7
359.7
357.2
74.2
366.9
354.3
78.0
376.6'
343.6
376.6'
343.6
85.2
378.6
344.8
87.3
382.9'
344.0
87.5
386.6
342.3
87.0
Money market mutual funds
18 Retail
19 Institution-only
385.0
203.1
454.9
253.9
522.8
310.3
601.6
376.2
601.6
376.2
613.1
380.8
627.4
384.7
638.4
391.9
Repurchase agreements and Eurodollars
20 Repurchase agreements12
21 Eurodollars'2
183.3
80.8
194.2
113.7
234.8
150.3'
234.8
150.3'
245.1
153.0'
239.8
147.9'
257.3
142.7
3,780.0
10,639.9
3,797.3
11,355.4'
3,797.3
11,355.4'
3,797.4
11,429.8'
3,794.9
11,514.0
1.078.1
4,066.5'
5,434.3'
6,701.8'
15,207.0'
1,063.3
4,082.8'
5,466.0'
6,238.9
15,268.8
1.073.6
4,135.0
5,549.6
n.a.
396.2
248.2
428.9
7.8
382.9
243.6
431.5
7.9
385.1
Nontransaaion components
10 In M27
11 In M3 only8
Debt components
22 Federal debt
23 Nonfederal debt
3,491.9
9.506.7
3,638.5
10.060.7
85.2
n.a.
Not seasonally adjusted
24
25
26
27
28
Measures
Ml
M2
M3
L
Debt
29
30
31
32
Ml components
Currency
Travelers checks4
Demand deposits
Other checkable deposits6
1,152.4
3,672.0
4,615.2
5,732.7
13,699.8
1.104.9
3,845.4
4,953.4
6,116.4'
14,419.3
1,097 5
4.059.2'
5,399.9'
6,651.7'
15,151.9'
1,097.5
4,059.2'
5,399.9'
6,651.7'
15,151.9'
376.2
408.6
8.5
407.2
360.5
397.9
8.3
419.9
278.8
429.0
7.9
412.9'
247.6
429.0
7.9
412.9'
247.6
2,349.0
829.7
2,519.6
943.2
2,740.5
1,108.0
2,961.7'
1,340.7'
2,961.7'
1,340.7'
2,987.8'
1,367.8'
3,019.5
1,383.2'
3,061.3
1,414.6
Commercial banks
35 Savings deposits, ncluding MMDAs
36 Small time deposi t 9
37 Large time deposi
751.7
501.5
298.9
774.1
573.8
345.8
903 3
592.7
413.6
1,019.0
620.0
496.3
1,019.0
620.0
496.3
1,028.9
621.3'
491.8'
1.039.9
621.9'
508.6'
1,060.1
621.7
526.7
Thrift institutions
38 Savings deposits, including MMDAs.
39 Small time deposi
40 Large time deposi
396.8
313.2
64.8
359.2
355.9
74.3
366.4
353.2
78.1
375.9'
342.7
85.3
375.9'
342.7
85.3
377.(1
344.6
86.0
381.2
344.1'
86.9
388.4
342.5
86.8
Money market mutual funds
41 Retail
42 Institution-only
385.9
204.6
456.4
255.8
524.8
312.7
604.1
378.9
604.1
378.9
616.0
389.8
632.4
397.7
648.6
400.2
Repurchase agreements and Eurodollars
43 Repurchase agreements12
44 Eurodollars12
179.6
81.8
178.0
89.4
188.8
114.7
228.2
152.0'
228.2
152.0'
243.9
156.3'
239.8
150.3'
256.2
144.7
3,499.0
9,501.6
3.645.9
10,053.9
3,787.9
10,631.3
3,805.8
11,346.1'
3,805.8
11,346.1'
3,792.5
11,414.5'
3.795.3
11,473.5
Nontransaciion components
33 In M27
34 In M3 only8
Debt components
45 Federal debt
46 Nonfederal debt. .
Footnotes appear on following page.
1,174.4
3,523.4
4,353.2
5,344.6
13,000.6
357.5
8.1
400.3
426.4
7.9
249.2
A14
Domestic Financial Statistics • June 1998
NOTES TO TABLE 1.21
1. Latest monthly and weekly figures are available from the Board's H.6 (508) weekly
statistical release. Historical data starting in 1959 are available from the Money and Reserves
Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
2. Composition of the money stock measures and debt is as follows:
Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of
depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all
commercial banks other than those owed to depository institutions, the U.S. government, and
foreign banks and official institutions, less cash items in the process of collection and Federal
Reserve floai. and (4) other checkable deposits (OCDs), consisting of negotiable order of
withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions,
credit union share draft accounts, and demand deposits at dirift institutions. Seasonally
adjusted Ml is computed by summing currency, travelers checks, demand deposits, and
OCDs, each seasonally adjusted separately.
M2: Ml plus (1) savings deposits (including MMDAs), (2) small-denomination time
deposits (time deposits—including retail RPs—in amounts of less than $100,000), and (3)
balances in retail money market mutual funds (money funds with minimum initial investments of less than $50,000). Excludes individual retirement accounts (IRAs) and Keogh
balances ai depository institutions and money market funds. Seasonally adjusted M2 is
calculated by summing savings deposits, small-denomination time deposits, and retail money
fund balances, each seasonally adjusled separately, and adding this result to seasonally
adjtisled MI.
M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more)
issued by all depository institutions, (2) balances in institutional money funds (money funds
with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term)
issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S.
residents at foreign branches of U.S. banks worldwide and at all banking offices in the United
Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. government, money market funds, and foreign banks and official institutions. Seasonally adjusted
M3 is calculated by summing large time deposits, institutional money fund balances, RP
liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to
seasonally adjusted M2.
L; M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury
securities, commercial paper, and bankers acceptances, net of money market fund holdings of
these assets. Seasonally adjusled L is computed by summing U.S. savings bonds, short-term
Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted
separately, and then adding this result to M3.
Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial
sectors—the federal sector (US. government, not including government-sponsored enterprises or federally related mortgage pools) and the nonfederal sectors (state and local
governments, households and nonprofit organizations, nonfinancial corporate and nonfarm
noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and
corporate bonds, consumer credit, bank loans, commercial paper, and other Loans. The data,
which are derived from the Federal Reserve Board's flow of funds accounts, are breakadjusled (that is, discontinuities in the data have been smoothed into the series) and
month-averaged (dial is, the data have been derived by averaging adjacent month-end levels).
3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository
institutions.
4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers.
Travelers checks issued by depository institutions are included in demand deposits.
5. Demand deposits at commercial banks and foreign-related institutions other than those
owed to depository institutions, the U.S. government, and foreign banks and official institutions, less cash items in the process of collection and Federal Reserve float.
6. Consists of NOW and ATS account balances at all depository institutions, credit union
share draft account balances, and demand deposits at thrift institutions.
7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail
money fund balances.
8. Sum of (1) large time deposits. (2) institutional money fund balances, (3) RP liabilities
(overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and
term) of U.S. addressees.
9. Small time deposits—including retail RPs—are those issued in amounts of less than
$100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are
subtracted from small time deposits.
10. Large time deposits are those issued in amounts of $100,000 or more, excluding those
booked at international banking facilities.
11. Large time deposits at commercial banks less those held by money market funds,
depository institutions, the U.S. government, and foreign banks and official institutions.
12. Includes both overnight and term.
Commercial Banking Institutions—Assets and Liabilities A15
1.26
COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'
A. All commercial banks
Billions of dollars
Monthly averages
Account
1997
Mar.'
Wednesday figures
1997'
Sept.
Oct.
1998'
Nov.
Dec.
Jan.
Feb.
1998
Mar.
Mar. 4
Mar. 11
Mar. 18
Mar. 25
Seasonally adjusted
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Assets
Bank credit
Securities in bank credit
U.S. government securities
Other securities
Loans and leases in bank credit . . .
Commercial and industrial
Real estate . .
Revolving home equity
Other
Consumer
Security1
Other loans and leases
Interbank loans
Cash assets4
Other assets'
16 Total assets'
17
18
19
20
21
22
23
24
25
26
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the U S
From others
Net due to related foreign offices
Other liabilities
27 Total liabilities
28 Residual (assets less liabilities)7
3,851.7
1,007.8
704.1
303.7
2,843.9
799.7
1,155.3
87.4
1 067 9
516.0
86.9
286.0
217.5
240.3
271.4
4,004.1
1,037.0
724.3
312.7
2,967.1
837.5
1,214.1
95.8
1,118.3
515.1
96.1
304.3
199.8
258.0
288.0
4,026.2
1,045.4
731.1
314.3
2,980.7
841.5
1,217.2
96.4
1,120.8
508.0
104.2
309.7
200.9
265.9
288.8
4,068.9
1,077.0
742.2
334.9
2.991.9
844.4
1,225.3
97.4
1.128.0
507.7
99.3
315.2
206.0
277.4
294.0
4,089.9
1,083.8
746.6
337.2
3.0O6.O
852.2
1,228.9
98.4
1 1304
507.7
96.8
320.6
214.2
267.3
294.6
4,143.9
1.102.7
758.0
344.7
3,041.2
862.5
12326
98.9
1,133.7
504.8
116.4
324.9
204.0
268.7
296.4
4,175.7
1,107.8
766.0
341.8
3,067.9
870.1
1,246.2
99.4
1 1468
503^5
118.0
330.1
199.0
268.8
297.7
4.217.1
1,125.9
777.4
348.5
3,091.2
871.0
1,258.7
99.2
1 1595
5(&8
116.9
341.8
212.9
279.9
293.6
4,206.4
1,123.9
788.7
335.2
3,082.5
877.6
1,255.1
99.2
1 155 9
505.4
110.7
333.7
204.2
271.8
295.1
4,217.2
1,123.9
778.9
345.0
3,093.3
875.8
1,258.8
99.1
1,159.6
502.7
116.6
339.4
200.3
279.3
295.4
4,206.8
1,121.4
773.2
348.2
3,085.4
870.4
1257 3
99.1
1 158 1
503^9
114.0
339.7
206.2
274.8
291.8
4,211.9
1,121.3
771.5
349.8
3,090.6
867.9
1,258.6
98.9
1 159 7
5034
117.7
343.1
223.7
284.6
2S7.9
4324.9
4,693.3
4,7253
4,789*
4*09.2
4*56.5
4*84.4
4,946.6
4,920.5
4,9354
4,9218
4,951.3
2,915.8
700.0
2,215.8
551.9
1,663.9
736.7
308.3
428.4
220.2
274.0
3,048.0
687.6
2,360.4
612.2
1,748.2
771.0
295.3
475.6
204.7
270.8
3,065.7
685.5
2,380.2
619.8
1,760.4
800.2
292.9
507.3
196.4
282.8
3,105.3
693.0
2,412.3
633.1
1,779.2
814.0
300.3
513.7
192.3
293.6
3,111.6
686.8
2,424.8
636.8
1,788.0
818.8
304.2
514.6
202.4
293.8
3,112.9
678.2
2.434.7
642.2
1,792.5
824.9
290.9
534.0
231.7
306.2
3.149.5
6846
2,4*4.8
658.6
1,806.3
3,189.0
6954
2.493.5
672.9
1 820 7
856.9
307.0
549.9
200.4
292.9
3,181.3
6896
2,491.8
664.4
1,827.3
848.2
299.6
548.6
204.1
299.5
3,173.5
686.4
2,487.2
669.7
1,817.4
846.2
302.3
543.9
222.2
299.7
3,165.7
684.8
2,480.9
670.5
1,810.3
854.6
292.1
562.5
206.1
285.1
3,188.4
7040
2.484.3
675.0
1,809.3
861.0
313.1
547.9
190.0
283.7
4,146.7
4,294.4
4345.1
4,405.2
4,426.6
4475.7
4499.1
4339.2
4333.1
4341.6
43113
4323.1
378.2
398.9
380.2
384.6
382.6
380.8
385.3
407.3
387.4
393.9
411.3
428.3
292.1
534.0
222.8
300.7
Not seasonally adjusted
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Assets
Bank credit
Securities in bank credit
U.S. government securities
Other securities
Loans and leases in bank credit2 . . .
Commercial and industrial
Real estate
Revolving home equity
Other
Consumer
Security3
Other loans and leases
Interbank loans
Cash assets4
Other assets5
44 Total assets6
45
46
47
48
49
50
51
52
53
54
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
. .
From banks in the U S
From others
Net due to related foreign offices . . . .
Other liabilities
55 Total liabilities
56 Residual (assets less liabilities)7
3,842.4
1,009.2
706.5
302.8
2,833.2
803.0
1,149.3
86.6
1,062.7
509.6
87.6
283.8
216.4
231.0
271.1
3,996.7
1,028.8
720.3
308.4
2,967.9
832.5
1,218.7
96.5
1,122.2
517.9
93.9
304.9
195.2
256.0
289.0
4.031.0
1,043.7
729.6
314.0
2,987.4
839.4
1,223.4
97.2
1.126.2
509.9
104.4
310.3
196.9
270.0
288.0
4,076.6
1,076.6
743.7
332.9
3,000.0
843.1
1.231.5
98.1
1,133.4
510.3
100.1
315.0
211.4
287.5
295.1
4,099.5
1,078.9
744.6
334.4
3.020.6
850.4
1,232.3
98.7
1,133.6
514.0
99.3
324.5
223.7
286.8
294.9
4,151.2
1,103.3
754.7
348.5
3,048.0
860.2
1,232.7
99.1
1,133.5
511.6
116.6
326.9
211.0
280.0
294.8
4,173.1
1,111.3
765.0
346.3
3,061.8
869.9
1.240.9
99.0
1,141.9
503.0
119.5
328.4
202.0
268.9
298.8
4,207.5
1,127.2
780.7
346.5
3,080.3
874.5
1,252.1
98.1
1,154.0
496.3
117.8
339.6
212.5
268.3
293.4
4,208.4
1,129.6
790.5
339.1
3,078.8
880.5
1,249.0
98.5
1,150.5
500.7
114.9
333.7
210.8
265.3
298.1
4.206.9
1,128.4
781.6
346.9
3,078.5
875.3
1.253.6
98.3
1,155.3
496.3
117.1
336.2
202.5
266.1
296.4
4,197.5
1,121.7
776.6
345 1
3,075.8
874.7
1,250.5
98.1
1.152.4
497.2
116.0
337.3
205.5
265.2
290.6
4,190.8
1,115.7
773.6
342.0
3,075.2
871.6
1,250.8
97.7
1,153.0
496.4
117.6
338.8
213.1
262.2
285.9
4305.1
4,680.0
4,7293
4*13*
4,848.2
4*80.7
4*86.2
4,925.0
4,925.7
4,915.1
4,902.1
4*95.4
2,9064
687.8
2,218.6
550.3
1,668.2
729.3
305.5
423.8
219.0
274.2
3,050.5
682.8
2,367.7
613.9
1,753.8
773.1
294.2
478.9
204.3
270.6
3,068.6
681.8
2,386.8
623.6
1,763.3
796.3
289.5
506.8
193.7
282.5
3,123.4
703.8
2,419.6
638.8
1,780.8
811.5
300.6
510.9
188.4
295.2
3,144.0
721.0
2,422.9
641.3
1,781.6
816.8
307 9
508.8
200.3
294.7
3,119 0
6902
2,428.8
640.5
1,788.3
831.3
294.4
536.9
231.8
306.2
3,136.7
677.9
2,458.8
657.5
1,801.3
826.6
293.0
533.6
2209
301.9
3,179.8
683.1
2,496.6
670.3
1.826.3
848.9
304.6
544.3
198.8
293.1
3,181.8
687.4
2.494.4
664.1
1,830.4
842.6
2987
543.8
197.4
300.8
3,168.1
673.8
2,494.4
668.0
1,826.3
829.7
297.5
532.2
213.5
300.5
3,156.1
672.0
2.484.1
667.6
1,816.5
852.5
291.3
561.2
203.3
2S5.2
3.153.6
670.3
2,483.3
672.5
1,810.8
855.3
311.0
544.4
198.1
283.7
4,128.9
4,2983
4341.1
4.418.5
4,455.8
4,4883
4,486.2
43203
4322.6
4311.8
4,497.1
4,490*
376.1
381.5
388.4
395.4
392.4
392.4
400.0
404.4
403.1
403.3
405.0
404.7
91.4
80.8
79.8
84.3
82.7
92.8
87.8
87.5
82.8
89.8
86.8
84.1
87.3
81.8
81.4
85.6
86.0
95.6
90.1
89.6
84.4
91.7
89.2
85.7
MEMO
57 Revaluation gains on off-balance-sheet
items^
58 Revaluation losses on off-balancesheet items8
Footnotes appear on p. A21.
A16
1.26
Domestic Financial Statistics • June 1998
COMMERCIAL BANKS IN THE UNITED STATES
B. Domestically chartered commercial banks
Assets and Liabilities'—Continued
Billions of dollars
Monthly averages
Account
1997
Marl
Wednesd. y figures
1998'
1997'
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
1998
Mar.
Mar. 4
Mar. 11
Mar. 18
Mar. 25
Seasonally adjusted
]
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Assets
Bank credit
Securities in bank credit
U.S. government securities
Other securities
Loans and leases in bank creditCommercial and industrial
Real estate
Revolving home equity
Other
Consumer
Security3
Other loans and leases
Interbank loans
Cash assets4
Other assets^
16 Total assets6
17
18
19
20
21
22
23
24
25
26
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the US
From others
Net due to related foreign offices
Other liabilities
27 Total liabilities
28 Residual (assets less liabilities)7
3,329.0
840.0
625.0
215.0
2,489.0
581.9
1.123.4
87.4
1,036.0
516.0
47.2
220.6
194.5
207.3
231.1
3.466.8
857.4
641.8
215.6
2,609.4
615.3
1,186.1
95.8
1,090.3
515.1
52.5
240.5
181.4
223.8
245.2
3,486 9
868.9
650.5
218.5
2,617.9
619.0
1.189.8
96.4
1,093.3
508.0
57.5
243.6
180.4
231.6
246.5
3,519.5
883.9
662.9
221.0
2,635.6
622.9
1,198.7
97.4
1,101.3
507.7
57.6
248.7
182.4
242.5
249.3
3.545.1
896.1
670.4
225.7
2,649.0
630.8
1.202.9
98.4
1,104.5
507.7
53.0
254.6
183.0
233.8
252.6
3,577.4
911.6
678.6
232.9
2,665.8
638.9
1.206.1
98.9
1,107.2
504.8
61.5
254.6
176.2
236.5
255.2
3 608 1
916.1
683.6
232.4
2,692.0
646.9
1,220.2
99.4
1,120.8
503.5
63.2
258.2
174.4
236.8
256.0
3 652 1
929.8
691.3
238.5
2,722.4
650.0
1,234.0
99.2
1,134.8
502.8
68.0
267.6
192.3
246.4
251.5
3,632 9
924.8
694.2
230.6
2,708.1
650.4
1,229.6
99.2
1,130.4
505.4
61.2
261.5
188.0
239.7
254.0
3,644.6
927.6
692.5
235.1
2,717.0
648.4
1,233.3
99.1
1,134.2
502.7
67.7
264.9
183.8
246.3
251.7
3 653.7
935.4
697.1
238.3
2,718.3
649.3
1,232.6
99.1
1,133.4
TO3.9
66.5
266.0
182.7
241.9
250.4
3,651.5
926.4
687.5
238.9
2,725.1
650.3
1,234.5
98.9
1,135.6
503.4
69.1
267.7
200.0
250.2
246.4
3,906.1
4,060.8
4,089.1
4,137.4
4,158.1
4,189.0
4,218.8
4,285.7
4,257.9
4,269.8
4,272.3
4,291.6
2,674.1
689.7
1,984.4
324.6
1,659.8
602.2
274.8
327.4
72.9
181.2
2,784.8
676.5
2,108.2
360.7
1.747.6
626.3
260.4
365.9
79.1
176.6
2,798.0
675.0
2,123.0
365.7
1,757.3
644.3
259.1
385.2
77.9
191.2
2,832.4
682.7
2,149.7
373.9
1 775.8
657.7
271.3
386.3
75.2
197.6
2,839.1
677.0
2,162.1
376.9
1.785.2
669.3
278.3
391.0
80.8
198.2
2,841.1
668.2
2,173.0
382.3
1,790.7
676.0
267.5
408 5
91.2
209.7
2,866.4
674.6
2,191.8
387.1
1,804.7
682.0
269.5
412.5
87.7
203.2
2,901.6
685.0
2,216.7
397.7
1.819.0
703.6
281.2
422.4
81.7
198.9
2,896.1
679.4
2,216.7
391.2
1,825.5
695.6
274.4
421 2
73.5
204.6
2,888.4
675.8
2,212.7
397.2
1,815.4
700.4
279.7
420.7
85.3
201.5
2,881.9
675.1
2.206.8
398.0
1,808.8
710.3
272.4
437 9
80.6
193.2
2,901.3
693.8
2.207.5
399.5
1,808.0
705.5
286.3
419.2
84.0
193.5
3,530.4
3,66«.8
3,711.5
3,762.9
3,787.4
3,818.1
3,839.3
3,885.9
3.869.8
3,875.6
3,865.9
3,884.3
375.7
394.1
377.5
374.5
370.7
370.8
379.5
399.8
388.1
394.2
406.3
407.2
Not seasons lly adjusted
Assets
Bank credit
Securities in bank credit
U.S. government securities
Other securities
Loans and leases in bank credit2
Commercial and industrial
Real estate
Revolving home equity
Other
Consumer
Security'
Other loans and leases
Interbank loans
Cash assets4
Other assets'
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44 Total assets'
45
46
47
48
49
50
51
52
53
54
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the US
From others
Net due to related foreign offices
Other liabilities
55 Total liabilities
3,319.6
842.8
626.7
216.2
2,476.8
584.5
1,117.3
86.6
1,030.8
509.6
47.3
218.1
193.4
198.9
230.9
3,462.3
850.5
637.7
212.8
2,611.8
611.3
1.190.7
96.5
1,094.2
517.9
50.6
241.3
176 7
221.7
246.2
3,491.9
866.4
648.5
217.8
2,625.5
617.2
1,195.7
97.2
1,098.4
509.9
57.6
245.1
176.4
235.4
246.7
3.532.4
887.1
663.3
223.8
2,645.3
621.9
1,204.6
98.1
1,106.5
510.3
58.6
249.9
187.7
251.8
249.8
3,555.7
895.1
668.6
226.4
2.660.7
628.2
1,206.3
98.7
1.107.6
514.0
54.3
257.9
192.5
251.7
252.2
3.587.8
917.4
677.3
240.1
2,670.3
635.7
1,206.1
99.1
1,107.0
511.6
61.6
255.4
183 1
247.8
253.3
3,606.1
922.6
683.3
239.3
2,683.5
645.7
1.214.7
99.0
1,115.8
503.0
64.5
255.5
177.4
237.5
255.7
3.642.9
933.1
693.8
239.2
2,709.8
652.9
1.227.4
98.1
1,129.3
496.3
68.2
265.1
191 9
236.0
251.3
3.631.8
931.0
695.4
235.6
2,700.8
652.5
1,223.2
98.5
1,124.7
500.7
64.2
260.3
194 7
234.1
255.0
3,636.2
933.7
694.1
239.6
2,702.4
648.8
1,228.0
98.3
1,129.7
496.3
68.0
261.4
186.0
234.3
250.9
3,643.8
936.8
698.5
238.4
2,707.0
652.8
1,225.7
98.1
1,127.6
497.2
67.8
263.4
182.1
233.5
249.4
3,633.4
925.5
689.5
236.1
2,707.8
653.2
1,226.8
97.7
1,129.0
496.4
68.1
263.4
189.4
229.0
245.6
3,887.1
4,050.3
4,094.2
4,165.2
4,195.6
4,215.9
4,220.3
4,265.5
4,258.8
4,250.7
4,252.3
4,240.9
2,664.0
677.5
1,986.4
321.6
1,664.8
594.9
272.1
322.8
72.5
181.2
2,786.0
671.3
2,114.7
363.4
1,751.3
628.5
259.4
369.1
80.2
176.6
2,801.2
671.3
2,129.8
368.7
1 761 2
640.5
255.7
384.8
76.0
191.2
2,851.1
693.6
2,157.5
378.3
1,779.2
655.2
271.6
383.5
70.6
197.6
2,868.3
710.7
2,157.6
377.2
1,780.4
667.3
282.1
385.2
73.8
198.2
2,849.2
680.2
2,168.9
381.6
1,787.4
682.4
271.0
411.5
86.5
209.7
2,855.9
668.2
2,187.7
387.4
1,800.3
682.6
270.4
412.2
84.5
203.2
2,891.2
672.8
2,218.4
393.1
1,825.3
695.5
278.8
416.8
80.9
198.9
2,897.4
677.5
2,220.0
390.6
1.829.4
690.0
273.5
416.5
69.5
204.6
2,883.3
663.4
2,219.9
394.6
1.825.4
684.0
274.9
409.0
83.3
201.5
2,871.1
662.4
2 208 7
393.2
1,815.5
708.2
271.6
436.6
79.8
193.2
2,863.0
660.1
2 202 9
'393.0
1 809 8
699.9
284.2
415.7
86.1
193.5
3,512,6
3,671.3
3,708.9
3,774.5
3,807,6
3,827.8
3,826.2
3,866.6
3,861.5
3,852.1
3,852.3
3,842.5
56 Residual (assets less liabilities)7
374.6
379.0
385.3
390.7
388.0
388.0
394.1
399.0
397.3
398.6
400.0
398.4
MEMO
57 Revaluation gains on off-balance-sheet
items 8 .
58 Revaluation losses on off-balancesheet items*
59 Mortgage-backed securities9
49.0
37.5
38.2
41.5
41.3
50.1
47.3
47.5
43.9
48.9
47.3
45.7
43.2
248.8
40.0
259.3
41.3
265.9
43.6
275.3
44.2
281.2
52.9
289.8
49.5
294.1
49.8
299.6
46 2
298.5
51.4
296.9
50.0
302.1
47.7
300.1
Footnotes appear on p. A21.
Commercial Banking Institutions—Assets and Liabilities A17
1.26
COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued
C. Large domestically chartered commercial banks
Billions of dollars
Monthly averages
Account
1997
Mar.'
Wednesday figures
1998r
1997'
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
1998
Mar.
Mar. 4
Mar. 11
Mar. 18
Mar. 25
Season* lly adjusted
Assets
1 Bank credit
2
Securities in bank credit
3
U.S. government securities
4
Trading account
5
Investment account
6
Other securities
7
Trading account
8
Investment account
9
State and local government. .
10
Other
11 Loans and leases in bank credit2 . ..
12
Commercial and industrial
13
Bankers acceptances
14
Other
15
Real estate
16
Revolving home equity
17
Other
18
Consumer
19
Security*
20
Federal funds sold to and
repurchase agreements
with broker-dealers
21
Other
22
State and local government
23
Agricultural
24
Federal funds sold to and
repurchase agreements
with others
25
All other loans
Lease-financing receivables
26
27 Interbank loans
28
Federal funds sold to and
repurchase agreements with
commercial banks
29
Other
30 Cash assets4
31 Other assets-^
32 Total assets 6
33
34
35
36
37
38
39
40
41
42
Liabilities
Deposits
Transaction
Nontrans action
Large time
Other
Borrowings
From banks in the U S
From others
Net due to related foreign offices
Other liabilities
43 Total liabilities
44 Residual (assets less liabilities)7
Footnotes appear on p. A21.
2,001.5
444.7
310.5
18.7
291.8
134.2
68.9
65.3
21.0
44.3
1,556.8
413.1
1.8
411.3
635.0
62.2
572.8
308.0
42.4
2,063.1
454.0
320.8
23.4
297.3
133.2
61.7
71.5
22.2
49.3
1,609.1
434.3
1.5
432.8
649.6
67.3
582.3
303.2
47.7
2,076.6
462.7
327.0
25.0
302.0
135.7
63.6
72.1
22.3
49.8
1,613.9
436.9
1.3
435.6
649.4
67.7
581.7
298.9
52.4
2,091.9
473.9
337.5
26.7
310.9
136.3
63.7
72.6
22.3
50.3
1,618.0
438.9
1.3
437.6
6506
68.2
582.4
296.6
52.1
2,105.8
482.9
342.8
27.3
315.4
140.1
63.7
76.5
22.1
543
1,622.9
445.7
1.2
444.5
649.6
68.8
580.8
295.2
47.3
2,134.8
500.9
353.4
29.1
324.3
147.5
69.9
77.7
22.5
55.1
1,633.9
451.8
1.2
450.6
647.2
69.4
577.8
294.0
55.9
2,159.9
506.9
360.0
28.0
332.1
146.8
67.9
79.0
22.7
56.2
1,653.0
458.3
1.2
457.0
6564
69.8
586.6
293.0
57.4
2,199.5
518.7
368.3
27.5
340.8
150.5
71.2
79.2
22.8
564
1,680.8
461.1
1.3
459.9
668.2
69.7
598.5
294.4
61.8
2.176.8
510.4
367.0
27.9
339.0
143.5
66.1
77.4
22.7
54.7
1,666.3
4619
1.2
461.9
664.5
69.7
594.8
295.2
54.9
2,190.9
514.6
367.2
27.8
339.4
147.4
70.4
77.0
22.6
544
1,676.3
460.1
1.2
460.2
6677
69.7
598.0
293.8
61.5
2,203.5
525.8
375.2
28.6
346.6
150.6
71.3
79.3
22.8
565
1,677.6
460.7
1.2
460.7
667.4
69.7
597.7
295.1
60.4
2,201.4
517.9
367.0
27.6
339.4
150.9
71.1
79.8
22.9
57.0
1,683.5
461.1
1.2
461.0
668.3
69.4
598.9
295.1
63.1
25.9
16.5
11.4
9.2
30.8
16.9
11.3
9.2
35.3
17.1
11.1
9.3
35.7
16.4
11.0
9.6
30.9
16.4
10.9
9.6
39.5
16.4
10.8
9.5
All
16.2
10.8
9.5
43.7
18.1
10.6
9.6
39.1
15.9
10.6
9.5
42.7
18.8
10.6
9.6
42.5
17.9
10.6
9.6
44.8
183
10.5
9.6
6.4
63.8
67.6
145.3
7.4
69.2
77.2
127.5
8.9
68.6
78.4
124.0
8.9
71.2
79.2
126.6
11.1
72.3
81.1
127.0
7.7
73.2
83.7
119.8
6.1
76.7
84.8
1171
7.1
81.3
86.7
127.2
6.5
77.6
85.6
126.2
6.0
80.9
86.0
122.7
7.5
79.8
86.5
118.0
7.2
81.5
87.0
132.2
95.6
49.7
142.5
177.2
80.7
46.8
153.2
182.7
77.7
46.3
160.9
184.6
81.9
44.7
169.8
184.6
82.2
44.8
162.1
189.6
76.3
43.4
164.5
191.3
68.9
48.2
163.9
190.7
80.3
46.9
172.7
186.5
75.5
50.7
167.1
190.0
76.3
46.4
172.7
186.1
73.2
44.8
170.4
186.3
87.3
449
176.6
182.3
2,4293
2,489.8
2,509.4
2^47.8
2^73.6
2394^
2,649.0
2,623.1
2,635.6
2,641.4
2,655.7
1,498.5
396.4
1,102.1
171.4
930.7
457.3
200.4
256.9
68.9
156.0
1,524.6
377.2
1,147.4
197.3
950.2
471.8
185.4
286.3
74.2
149.3
1,531.7
376.0
1 155 7
200.5
955.2
490.7
187.9
302.9
72.8
163.4
1,554.1
382.4
1 171.7
206.5
965.2
503.5
200.6
302.9
70.2
168.8
1,555.4
378.4
1,176.9
209.1
967.8
511.3
205.7
305.6
76.5
169.1
1,554.0
370.9
1,183.1
213.7
969.4
517.8
195.1
322.7
87.0
180.9
1,573.0
375.1
1,197.8
216.3
981.5
522.8
196.9
325.9
81.6
173.8
1,600.7
382.7
1,218.0
226.5
991.5
542.2
208.8
333.3
77.6
168.5
1,594.8
378.6
1,216.2
220.1
996.1
534.7
202.2
332.6
69.3
174.4
1,591.6
377.3
1,214.3
226.2
988.2
537.2
207.1
330.1
80.7
171.3
1,587.4
375.9
1,211.5
2274
9841
549.2
200.4
348.8
76.2
162.7
1,602.0
387.5
1,214.5
228.6
985.9
544.8
213.8
331.1
80.5
162.8
2^58.6
2^96.7
23123
2339.7
2351.2
2389.0
23733
2380.9
23754
239O.I
250.8
239.6
235.5
233.9
243.6
259.9
249.8
254.7
265.9
265.6
2,180.7
248.6
269.9
A18
1.26
Domestic Financial Statistics • June 1998
COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued
C. Large domestically chartered commercial banks—Continued
Wednesd ly figures
Monthly averages
Account
1997
Mar.'
1998'
1997'
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
1998
Mar.
Mar. 4
2,166.4
515.5
361.8
28.4
333.4
222.6
110.8
28.5
51.6
30.7
153.7
74.6
79.1
22.7
56.4
1,651.0
457.4
1.2
456.2
6547
69.4
361.4
223 9
292.7
58.7
2,193.9
520.6
369.7
2S.3
341.3
227.3
114.1
29.2
51.6
33.3
1510
71.7
79.3
22.7
56.5
1,673.3
463.0
1.2
461.8
6639
68.8
370.9
224.3
289.9
61.9
Mar. 11
Mar. 18
Mar. 25
2,184.3
518.9
370.6
30.6
339.9
225.7
114.3
29.6
51.7
32.9
148.3
70.7
77.7
22.7
55.0
1,665.4
463.7
1.2
462.5
661.4
69.0
367.9
2245
292.1
57.9
2,189.0
521.0
369.2
29.9
339.3
224.1
115.3
30.8
51.5
32.9
151.8
74.5
77.3
22.6
54.8
1,668.0
460.1
1.2
458.9
665.1
68.9
372.5
223.7
289.4
61.8
2,197.4
526.0
375.4
29.8
345.6
229.4
116.2
29.8
52.5
33.9
150.6
71.2
79.4
22.7
56.7
1,671.4
463.1
1.2
461.9
663.1
68.8
370.1
224.2
290.3
61.7
2,184.6
513.8
366.0
26.5
339.5
227.7
111.8
28.2
50.3
33.4
147 7
68.0
79.7
22.8
57.0
1,670.8
462.5
1.2
461.3
662.6
68.4
369.6
224.6
290.3
62.1
41.7
16.2
10.6
9.1
43.6
18.3
10.6
92
43.9
17.7
10.6
9.2
43.6
18.5
10.5
9.2
Not seasonally adjusted
Assets
45 Bank credit
46
Securities in bank credit
47
U.S. government securities
48
Trading account
49
Investment account
50
Mortgage-backed securities.
51
Other
52
One year or less
53
Between one and five years
54
More than five years
55
Other securities
56
Trading account
57
Investment account
58
State and local government ..
59
Other
60 Loans and leases in bank credit2 ..
61
Commercial and industrial
62
Bankers acceptances
63
Other
64
Real estate
65
Revolving home equity
66
Other
67
Commercial
68
Consumer
69
Security'
70
Federal funds sold to and
repurchase agreements
with broker-dealers
71
Other
72
State and local government
73
Agricultural
74
Federal funds sold to and
repurchase agreements
with others
75
All other loans
76
Lease-financing receivables
77 Interbank loans
78
Federal funds sold to and
repurchase agreements
with commercial banks
79
Other
80 Cash assets4
81 Other assets5
1,995.8
446.1
311.0
19.2
291.7
187.8
103.9
27.8
59.0
17.2
135.1
69.8
65.3
20.9
44.4
1,549.8
414.7
1.7
413.1
631.3
61.4
352.0
217.9
303.7
42.5
2,056.0
447.6
316.9
23.4
293.5
192.7
100.8
27.9
50.1
22.9
130.7
59.4
71.3
22.3
49.0
1,608.5
431.7
1.5
430.2
652.5
67.8
362.4
222.3
305.0
45.8
2,081.6
462.9
327.2
26.1
301.1
198.3
102.8
26.5
53.1
23.3
135.7
63.3
72.3
22.4
50.0
1,618.8
436.6
1.4
435.2
653 0
68.3
360.6
224 1
299.9
52.5
2 105.3
480.1
340.7
28.0
312.7
206.9
105.8
29.1
53.9
22.9
139.4
65.9
73.5
22.3
51.2
1,625.2
439.0
1.4
437.7
6545
68.8
360.6
225 1
297.5
53.1
2,115.8
483.7
342.6
26.9
315.6
211.7
104.0
27.7
53.6
22.6
1412
63.9
77.2
22.2
55.1
1.632.0
443.7
1.3
442.4
652.1
69.2
357.9
2250
299.1
48.6
2,150.4
508.3
353.4
28.2
325.3
219.8
105.5
26.6
52.5
26.4
154.9
76.6
78.3
22.5
55.8
1,642.0
449.4
26.0
16.5
11.4
8.9
29.3
16.5
11.3
35.5
17.0
11.2
9.5
36.6
16.5
11.1
31.3
17.3
11.0
9.6
39.6
16.4
10.8
9.4
42.5
16.3
10.8
9.1
43.9
18.0
10.6
9.2
9.5
9.6
1.2
448.2
650.3
69.8
357.5
223 1
299.0
56.0
6.4
62.8
68.1
140.9
7.4
8.9
8.9
68.8
76.4
126.1
69.1
78.0
120.8
72.3
79.2
128.6
11.1
75.5
81.3
132.4
77
73.9
85.5
125.3
61
75.3
86.1
116.1
71
80.4
87.3
123.0
65
77.4
86.6
124.7
6.0
78.9
86.8
117.9
75
78.9
87.1
114.5
7.2
78.9
87.5
122.9
92.2
48.7
135.9
177.2
79.8
46.3
151.8
182.7
74.8
46.1
164.8
184.6
83.6
45.0
176.6
184.6
86.3
46.1
176.4
189.6
80.3
45.0
174.6
191.3
68.1
48.0
164.8
190.7
76.9
46.0
164.0
186.5
75.2
49.5
161.7
190.0
72.3
45.6
162.5
186.1
69.9
44.5
164.0
186.3
79.3
43.6
159.4
182.3
2,412.8
2/179.5
2^15.1
2,5583
2,577.4
2,605.1
2,6013
2,630J
2,623.7
2,618.7
2.625.4
2,612J
89
F r o m banks in the U S
90
From nonbanks in the U.S
91 Net due to related foreign offices . . . .
92 Other liabilities
1 487 6
387.7
1,099.9
168.4
931.6
453.2
199.0
254.2
68.6
156.0
1,529.3
374.2
1,155.1
200.0
955.1
470.9
183.3
287.6
75.3
149.3
I 5368
373.9
1,162.8
203.4
959.4
486.4
1849
30L6
70.8
163.4
15663
388.9
1,177.4
2110
966.4
501.4
201.8
299.6
65.6
168.8
1,576.8
401.6
1.175.2
209.4
965.9
508.6
209.4
299.2
69.5
169.1
1,563.4
380.5
1,182.8
2130
969.8
523.3
198.1
325.2
82.3
180.9
1,565.5
372.0
1,193 4
216.7
976.7
525 3
1986
326.6
78.4
173.8
1,588.7
373.6
1,215.1
221.9
993.2
537.3
207.6
329.8
76.8
168.5
1,592.4
376.3
1,216.1
2195
996.6
533.0
202.9
330.1
65.3
174.4
1,583.0
366.7
1,216.2
223.5
992.7
526.7
204.7
322.0
78.8
171.3
1376.9
367.5
1.209.5
222.7
986.8
550.0
200.6
349.4
75.4
162.7
I 569 8
363.6
1.206.2
222.1
984.1
540.6
211.9
328.7
82.6
162.8
93 Total liabilities
2,1653
2J24.8
2,257.4
2302.1
2324.0
2349.9
2342.9
2371.4
2365.2
2^359.8
2365.0
2355.7
247.5
254.7
257.7
256.2
253.4
255.2
258.4
259.1
258.5
258.9
260.4
256.8
82 Total assets6
83
84
85
86
87
88
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
94 Residua! (assets less liabilities)
7
MEMO
95 Revaluation gains on off-balancesheet items8
96 Revaluation losses on off-balancesheet items8
97 Mortgage-backed securities9
98
Pass-through securities
99
CMOS, REMICs, and other
mortgage-backed securities. . .
100 Net unrealized gains (losses) on
available-for-sale securities10 . . .
101 Offshore credit to U.S. residents" ..
Footnotes appear on p. A21.
49.0
37.5
382
41.5
41.3
50.1
47.3
47.5
43.9
48.9
47.3
45.7
43.2
208.0
140.8
40.0
211.2
145.0
41.3
216.9
149.6
43.6
225.4
154.5
44.2
230.2
157.5
52.9
238.7
162.5
49.5
242.6
165.0
49.8
247.7
169.4
46.2
246.2
167.2
51.4
244.5
165.3
50.0
250.0
171.9
47.7
247.8
170.7
67.3
66.3
67.3
70.9
72.7
76.1
77.6
78.3
79.0
79.2
78.1
77.2
0.6
32.9
1.8
34.1
2.5
34.2
2.4
34.4
2.2
34.2
3.0
35.5
3.3
36.2
3.0
35.2
2.9
35.1
3.0
3.0
35.5
3.0
35.0
34.8
Commercial Banking Institutions—Assets and Liabilities A19
1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued
D. Small domestically chartered commercial banks
Billions of dollars
Monthly averages
Wednesday figures
1998'
Mar.r
Sept.
Oct.
Jan.
Mar.
Mar. 4
Mar. 11
Mar. 18
1,453.7
413.0
325.3
87.7
1,450.2
409.6
3219
87.6
1,040.7
188.3
1,040.7
Seasonally adjusted
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Assets
Bank credit
Securities in bank credit
U.S. government securities . .
Other securities
Loans and leases in bank credit 2 ..
Commercial and industrial ..
Real estate
Revolving home equity .. .
Other
Consumer
Security3
Other loans and leases
Interbank loans
Cash assets4
Other assets5
16 Total assets 6
17
18
19
20
21
22
23
24
25
26
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the US
From others
Net due to related foreign offices.
Other liabilities
27 Total liabilities
28 Residual (assets less liabilities)'..
1,327.5
395.3
314.5
80.9
932.2
168.8
488.4
25.2
1,403.7
403.4
321.0
82.4
1.000.3
181.0
536.5
28.5
508.0
211.9
4.7
1,410.2
406.2
323.5
82.7
1.004.0
182.1
540.4
28.7
1,427.6
410.1
325.4
84.7
1,017.5
184.1
548.2
29.2
519.0
211.0
5.5
55.8
72.7
64.7
1,439.2
413.2
327.6
85.6
1,026.0
185.1
553.4
29.6
523.8
212.4
5.7
69.4
56.1
71.7
63.0
1,442.6
410.7
325.3
85.4
1,031.9
187.1
559.0
29.5
529.5
210.7
5.6
69.5
56.4
72.1
63.9
409.2
323.6
85.6
1,039.0
188.6
564.0
29.6
534.4
210.4
5.8
70.1
57.3
72.9
65.2
1.452.6
411.0
323.0
88.0
1,041.5
188.9
565.9
29.5
536.5
208.2
6.2
72.2
65.1
73.7
64.9
1,456.1
414.3
327.2
87.1
1,041.7
188.5
565.2
29.5
535.7
210.1
6.3
71.7
61.8
72.6
63.9
1,448.2
565.8
29.5
536.3
208.8
6.1
71.6
61.1
73.6
65.4
188.6
565.3
29.4
535.9
208.8
6.1
71.8
64.8
71.5
70.5
62.5
511.7
209.1
5.2
67.2
56.4
70.6
61.9
1,476*
1,571.0
1,579.6
1,601.1
1.6103
1,6153
1.6240
1,636.6
1*34.7
1,634.1
1,630.8
1.175.5
293.3
882.2
153.2
729.0
144.9
74.4
70.5
3.9
25.3
1060.2
299.3
960.8
163.4
797.4
154.6
75.0
79.6
4.9
27.3
1,266.3
299.0
967.3
165.3
1,278.3
300.3
978.0
167.4
810.6
154.2
70.7
5.0
28.8
1,287.2
297.3
989.9
168.6
821.4
158.2
72.4
85.8
4.2
28.8
1,293.4
299.5
993.9
170.7
823.2
159.2
72.6
86.6
6.1
29.4
1,300.9
302.3
998.7
171.2
827.5
161.4
72.4
89.1
4.1
30.4
1,301.3
300.8
1.000.5
171.1
829.4
160.9
72.3
88.6
4.1
30.2
1,296.8
298.4
5.2
27.8
1,283.7
298.6
985.2
167.8
817.4
157.9
72.5
85.4
4.3
29.1
827.3
163.2
72.6
90.6
4.5
30.2
1094.5
299.2
995.3
170.6
824.7
161.1
72.1
89.0
4.4
30.5
1349.7
1.446.9
1,452,9
1/1663
1,475.1
1,478.5
1,488.1
1,49&8
1,4963
1,494.7
1,490.5
136.8
135.8
139.8
138.2
139.4
140.3
1,439.6
407.1
321.5
85.6
1,032.5
188.2
560.3
29.5
530.7
1,448.9
412.4
324.2
206.3
5.8
6.2
70.4
68.9
72.0
1,447.1
412.7
324.9
87.8
1,034.4
188.7
563.0
29.4
533.6
206.8
6.1
69.7
68.1
71.8
64.7
1,446.4
210.3
1,447.5
412.1
324.9
87.2
1,035.4
188.8
562.0
29.5
532.5
208.5
6.3
69.9
70.0
72.3
64.9
1,634.9
1,635.0
1,631.9
1,626.8
1,300.4
296.7
1,003.7
171.0
832.6
1,294.1
294.9
999.3
170.6
828.7
158.2
71.0
87.1
4.4
463.1
208.0
4.8
62.2
49.2
64.8
53.8
127.1
66.1
53.8
124.2
802.0
153.6
71.2
82.4
126.7
68.8
83.4
134.8
135.2
998.3
171.0
64.0
Not seasonally adjusted
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Assets
Bank credit
Securities in bank credit . . . .
U.S. government securities .
Other securities
Loans and leases in bank credit2.
Commercial and industrial .
Real estate
Revolving home equity ..
Other
Consumer
Security'
Other loans and leases
Interbank loans
Cash assets4
Other assets5
44 Total assets6
45
46
47
48
49
50
51
52
53
54
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the U.S
From others
Net due to related foreign offices
Other liabilities
55 Total liabilities
56 Residua! (assets less liabilities)7.
1,323.7
396.7
315.7
81.0
927.0
169.7
486.0
25.1
460.9
205.9
4.8
60.5
52.5
62.9
53.7
1,406.2
402.9
320.8
82.1
1,003.3
179.6
538.2
28.7
509.5
212.9
4.7
67.9
50.7
69.9
63.5
1,4743
1,410.3
403.5
321.3
82.2
1,006.7
180.6
1,427.0
407.0
322.6
844
1,020.0
1,439.9
411.3
326.1
85.3
1.028.6
184.6
554.3
29.5
524.8
214.8
5.7
69.2
1,437.3
409.1
323.8
85.3
1.028.2
186.3
556.0
29.4
526.6
212.5
5.6
68.0
57.9
73.2
88.3
1,036.5
189.9
563.6
542.7
28.9
513.8
182.9
550.1
29.3
520.8
210.0
212.7
5.2
70.6
5.5
68.8
59.2
75.2
62.1
65.2
75.3
62.5
1,570.8
1379.1
1,606.9
1,618.1
1.610.8
1,176.4
289.9
886.5
153.2
733.3
141.6
73.0
68.6
3.9
25.3
1,256.7
297.1
959.6
163.4
1,284.8
304.6
980.2
167.4
812.8
153.8
69.8
83.9
5.0
28.8
1,291.5
309.2
982.3
167.8
814.5
158.7
72.7
86.0
4.3
29.1
1,285.8
299.7
986.2
168.6
817.6
159.1
72.8
86.3
4.2
28.8
1,290.4
296.1
994.3
170.7
823.6
157.4
71.8
85.6
6.1
29.4
1,302.5
299.2
1,003.3
171.2
832.1
158.2
71.2
87.0
1,305.0
301.2
1,003.8
171.1
157.6
76.1
81.5
4.9
27.3
1,264.4
297.4
967.0
165.3
801.7
154.0
70.8
83.2
5.2
27.8
4.1
30.4
4.1
30.2
87.0
4.5
30.2
1347.2
1,4463
1,451.4
1,4714
1,483.6
1,478.0
1,4833
1,495.2
1,4963
1,492.4
127.1
124 3
127.6
134.5
134.5
132.7
135.6
139.7
138.7
139.6
50.1
51.3
51.5
796.2
68.3
55.6
60.1
61.9
67.9
61.3
72.7
64.9
29.4
534.3
832.8
157.0
70.6
86.4
157.3
70.2
410.8
323.0
87.8
1,035.6
189.8
562.8
29.3
533.4
206.9
6.1
70.0
67.6
69.5
63.0
30.5
1,487.2
139.6
MEMO
57 Mortgage-backed securities9 . . . .
Footnotes appear on p. A21.
48.1
52.1
Mar. 25
A20
1.26
Domestic Financial Statistics • June 1998
COMMERCIAL BANKS IN THE UNITED STATES
E. Foreign-related institutions
Assets and Liabilities'—Continued
Billions of dollars
Wednesday figures
Monthly averages
1997
Account
Mar.'
1998'
1997'
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
1998
Mar.
Mar. 4
Mar. 11
Mar. 18
Mar. 25
Seasonally adjusted
1
2
3
4
5
6
7
8
9
10
11
12
Assets
Bank credit
Securities in bank credit
U.S. government securities
Other securities
Loans and leases in bank credit2 . ..
Commercial and industrial
Real estate
Security3
Other loans and leases
Interbank loans
..
Cash assets4
Other assets5
14
15
16
17
18
19
20
21
22
23
Liabilities
Deposits
Transaction
Nontransaction
Large time
Other
Borrowings
From banks in the US
From others
Net due to related foreign offices
Other liabilities
..
24 Total liabilities
25 Residual (assets less liabilities)7
537.3
179.6
82.5
97.1
357.7
222.3
28.0
43.6
63.8
18.4
34.2
42.8
539.3
176.5
80.6
95.9
362.8
222.5
27.5
46.7
66.1
205
34.4
42.3
549.4
193.1
79.2
113.8
356.3
221.4
26.6
41.7
66.5
236
34.9
44.7
544.7
187.7
76.3
111.5
357.0
221.3
25.9
43.8
66.0
31.1
33.5
42.0
566.5
191.1
79.4
111.8
375.4
223.7
26.5
54.9
70.3
27 8
32.2
41.2
567.6
191.7
82.4
109.3
375.9
223.1
26.0
54.9
71.9
24.6
32.0
41.6
565.0
196.2
86.1
110.0
368.8
221.0
24.7
48.9
74.2
20.6
33.4
42.1
573.5
199.1
94.5
104.6
374.4
227.2
25.5
49.5
72.2
16.2
32.0
41.1
572.6
196.3
86.4
109.9
376.2
227.4
25.4
48.9
74.5
16.5
33.0
43.8
553.1
186.0
76.1
109.9
367.0
221.1
24.7
47.5
73.8
23.4
32.9
41.3
560.4
194.9
84.0
110.9
365.5
217.5
24.1
48.5
75.4
23.7
34.4
41.5
618.8
13 Total assets 6
522.7
167.8
79.1
88.7
354.9
217.9
31.9
39.7
65.5
230
33.1
40.3
632.4
636.2
6523
651.1
6673
665.6
660.9
662.6
665.6
6503
659.8
241.7
10.3
231.4
227.3
4.1
134.5
33.4
101.1
147.3
92.7
263.2
110
252.1
251.5
272.8
103
262.6
259.3
33
156.3
29.0
127.3
117.1
96.0
272.5
9.8
262.7
259.9
2.8
149.5
25.9
123.6
121.7
95.5
271.7
10.0
261.7
259.9
1.8
148.9
23.4
125.4
140.5
96.5
283.1
100
273.1
271.5
1.6
144.0
22.6
121.4
135.2
97.5
287.3
10.4
276.9
275.2
144.6
34.9
109.7
125.6
94.2
267.7
10.4
257.2
254.1
3.1
155.8
33.8
122.0
118.5
91.6
153.3
25.8
127.5
118.7
94.0
285.2
10.1
275.1
273.2
1.9
152.6
25.2
127.4
130.7
94.8
2851
10.6
274.5
272.5
2.0
145.7
22.6
123.2
136.9
98.2
283.8
9.7
274.1
272.5
1.6
144.3
19.7
124.6
125.5
91.9
287.1
10.2
276.9
275.6
1.3
155.5
26.8
128.7
106.0
90.2
6163
627.7
633.5
64Z2
639.2
6573
659.8
6533
6633
666.0
6453
638.7
2.5
4.8
2.7
10.1
11.9
10.0
5.8
7.5
-0.7
-0.4
5.0
21.1
570.8
194.7
87.4
16.0
71.4
107.3
60.5
46.8
376.1
226.5
25.6
49.1
74.8
16.5
31.8
45.5
553.6
184.9
78.1
10.5
67.7
106.8
58.4
48.3
368.8
221.9
24.8
48.2
74.0
23.4
31.7
41.2
557.5
190.1
84.2
17.1
67.0
106.0
58.6
47.3
367.4
218.4
24.0
49.5
75.5
23 7
33^2
40.3
0.6
1.7
Not seasonally adjusted
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Assets
Bank credit
Securities in bank credit
U.S. government securities
Trading account
..
Investment account
Other securities
Trading account
Investment account
Loans and leases in bank credit- . . .
Commercial and industrial . . . . . .
Real estate
Security3
Other loans and leases
Interbank loans
Cash assets4
Other assets5
42 Total assets 6
43
44
45
46
47
48
49
50
51
52
Liabilities
Deposits
Transaction
Nontransaction
Large tirne
Other
Borrowings
From banks in the US
From others
Net due to related foreign offices
Other liabilities
53 Total liabilities
54 Residual (assets less liabilities)7
522.9
166.4
79.8
17.8
62.0
86.6
52.3
34.3
356.5
218.5
31.9
40.3
65.7
23.0
32.1
40.2
534.4
178.3
82.7
170
65.7
95.6
55.1
40.5
356.1
221.2
28.0
43.3
63.6
18.4
34.3
42.8
539.1
177.3
81.1
14.3
66.7
96.2
55.6
40.6
361.9
222.2
27.8
46.7
65.2
20.5
34.6
41.3
544.2
189.5
80.3
16.0
64.3
109.1
60.9
48.3
354.7
221.2
26.9
41.6
65.1
23.6
35.7
45.3
543.8
183.9
75.9
13.7
62.2
107.9
60.0
47.9
359.9
222.2
26.0
45.0
66.7
31 1
35J
42.7
563.4
185.8
77.5
13.4
62.4
108.4
61.5
48.1
377.6
224.5
26.5
55.0
71.6
27.8
32.2
41.6
567.0
188.7
81.7
14.0
67.6
107.1
61.4
45.7
378.3
224.3
26.2
55.0
72.9
24.6
31.4
43.1
564.6
194.1
86.9
17.6
69.7
107.3
59.8
47.0
370.5
221.6
24.7
49.6
74.5
32.3
42.1
576.5
198.6
95.0
23.8
71.2
103.5
57.7
45.8
378.0
228.0
25.7
50.7
73.5
16.2
31.2
43.2
617.9
629.7
6353
648.6
6523
664.8
665.9
659.4
666.9
664.4
649.8
6543
242.4
10.2
232.2
228.8
3.4
134 5
33.4
101.1
146.5
93.0
264.5
11.5
253.0
250.5
2.4
144 6
34.9
109.7
124.1
94.0
267.5
10.5
257.0
254.9
2.1
155.8
33.8
122.0
117.7
91.3
272.3
10.2
262.1
260.5
1.6
156.3
29.0
127.3
117.8
97.6
275.6
10.3
265.3
2642
\2
1495
25.9
123.6
126.5
96.5
269.8
10.0
259.9
258.9
1.0
148.9
23.4
125.4
145.3
96.5
280.9
9.8
271.1
270.1
1.0
144.0
22.6
121.4
136.5
98.7
288.5
10.4
278.2
277.2
1.0
153 3
25.8
127.5
117.9
94.2
284.3
9.9
274.5
273.5
1.0
152 6
25.2
127.4
128.0
96.2
284.8
10.4
274.4
2734
1.0
145.7
22.6
123.2
130.2
99.0
285.0
9.6
275.4
274.4
1.0
144.3
19.7
124.6
123.5
92.1
290.6
10.2
280.4
279.5
1.0
155 5
2&8
128.7
112.0
90.1
6163
627J
632.2
6440
648.2
6603
660.0
654.0
661.0
659.6
644.8
6483
1.6
2.5
3.1
4.6
4.4
4.3
5.9
5.5
5.8
4.8
4.9
6.2
42.4
43.3
41.6
42.8
41.4
42.6
40.5
40.0
38.9
40.9
39.5
38.4
44.1
41.8
40.2
42.0
41.8
42.7
40.6
39.8
38.2
40.3
39.2
38.0
206
MEMO
55 Revaluation gains on off-balance-sheet
items^
56 Revaluation losses on off-balancesheet items8
Footnotes appear on p. A21.
Commercial Banking Institutions—Assets and Liabilities A21
NOTES TO TABLE 1.26
NOTE Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8
statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table
1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks." and table 1.28,
"Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer
being published in the Bulletin. Instead, abbreviated balance sheets for both large and small
domestically chartered banks have been included in table 1.26. parts C and D. Data are both
merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S.
branches and agencies of foreign banks have been replaced by balance sheet estimates of all
foreign-related institutions and are included in table 1.26. part E. These data are breakadjusted.
The not-seasonally-adjusted data for all tables now contain additional balance sheet items,
which were available as of October 2. 1996.
1. Covers the following types of institutions in the fifty stales and the District of
Columbia: domestically chartered commercial banks that submit a weekly report of condition
(large domestic); other domestically chartered commercial banks (small domestic); branches
and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related
institutions). Excludes International Banking Facilities. Data are Wednesday values or pro
rata averages of Wednesday values. Large domestic banks constitute a universe; data for
small domestic banks and foreign-related institutions are estimates based on weekly samples
and on quarter-end condition reports. Data are adjusted for breaks caused by ^classifications
of assets and liabilities.
The data for large and small domestic banks presented on pp. A17-19 are adjusted to
remove the estimated effects of mergers between these two groups. The adjustment for
mergers changes past levels to make them comparable with current levels. Estimated
quantities of balance sheet items acquired in mergers are removed from past data for the bank
group that contained the acquired bank and put into past data for the group containing the
acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a
ratio procedure is used to adjust past levels.
2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks
in the United States, all of which are included in "Interbank loans."
3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry
securities.
4. Includes vault cash, cash items in process of collection, balances due from depository
institutions, and balances due from Federal Reserve Banks.
5. Excludes the due-from position with related foreign offices, which is included in "Net
due to related foreign offices."
6. Excludes unearned income, reserves for losses on loans and leases, and reserves for
transfer risk. Loans are reported gross of these items.
7. This balancing item is not intended as a measure of equity capital for use in capital
adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the
seasonal patterns estimated for total assets and total liabilities.
8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and
equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39.
9. Includes mortgage-hacked securities issued by U.S. government agencies, U.S.
government-sponsored enterprises, and private entities.
10. Difference between fair value and historical cost for securities classified as availablefor-sale under FASB Statement ND. 115. Data are reported net of tax effects. Data shown are
restated to include an estimate of these tax effects.
] 1. Mainly commercial and industrial loans but also includes an unknown amount of credit
extended to other than nonfinancial businesses.
A22
1.32
Domestic Financial Statistics • June 1998
COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING
Millions of dollars, end of period
1997
Year ending December
1998
Item
1993
Dec.
1994
Dec.
1996
Dec.
1995
Dec.
1997
Dec.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Commercial paper (seasonally adjusted unless noted otherwise)
1 AH issuers
555,075
59532
674,904
775,371
966,699
908,640
921,769
940,524
966,699
973,761
1.004,662
Financial companies1
2 Dealer-placed paper2, total
3
Directly placed paper , total
218,947
180,389
223,038
207,701
275,815
210.829
361,147
229,662
513,307
252,536
475,792
235.030
483,489
237,544
483,475
249,781
513,307
252,536
509,950
254,926
520,940
268,001
4 Nonfinancial companies
155,739
164,643
188,260
184,563
200.857
197,818
200,736
207,268
200,857
208,886
215,721
n a.
n a.
n a.
Bankers dollar acceptances (not seasonally adjusted)5
5 Total
32,348
29,835
12,421
10,707
1,714
11,783
10,462
1,321
725
19,202
410
17.642
10,217
7,293
14,838
25, 754
10,062
6,355
13.417
By holder
6 Accepting banks
7
Own bills
8
Bills bought from other banks
Federal Reserve Banks6
9
Foreign correspondents
10 Others
By basis
11 Imports into United States
12 Exports from United States
13 All other
29, 142
1 1
n
\
a.
n a.
1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales,
personal, and mortgage financing; factoring, finance leasing, and other business lending;
insurance underwriting; and other investment activities.
2. Includes all financial-company paper sold by dealers in the open market.
3. As reported by financial companies that place their paper directly with investors.
4. Includes public utilities and firms engaged primarily in such activities as communications, construction, manufacturing, mining, wholesale and retail trade, transportation, and
services.
1.33
PRIME RATE CHARGED BY BANKS
Percent per year
Dale 0] change
1995—Jan. 1
Feb. 1
July 7
Dec. 20
8.50
9.00
8.75
8.50
1996—Feb.
1
8.25
1997—Mar. 26
8.50
n a.
n a.
5. Data on bankers dollar acceptances are gathered from approximately 100 institutions.
The reporting group is revised every January. Beginning January 1995, data for Bankers
dollar acceptances are reported annually in September.
6. In 1977 the Federal Reserve discontinued operations in bankers dollar acceptances for
its own account.
Average
rate
1995
1996
1997
8.83
8.27
8.44
1995 Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
8.50
9.00
9.00
9.00
9.00
9.00
8.80
8.75
8.75
8.75
8.75
8.65
1. The prime rate is one of several base rates that banks use to price short-term business
loans. The table shows the date on which a new rate came to be the predominant one quoted
by a majority of the twenty-five largest banks by asset size, based on the most recent Call
n a.
Short-Term Business Loans'
Period
Rate
n a.
Period
1996—Jan
Feb
Mar
Apr.
May
June
July
Aug
Sept
Oct
Nov
Dec
Average
rate
8.50
8.25
8.25
8.25
8.25
8.25
8.25
8.25
8.25
8.25
8.25
8.25
Period
Average
rate
1997—Jan
Feb
Mar.
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
8.25
8.25
8.30
8.50
8.50
8.50
8.50
8.50
8.50
8.50
8.50
8.50
1998—Jan
Feb
Mar
Apr
8.50
8.50
8.50
8.50
Report. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415)
monthly statistical releases. For ordering address, see inside front cover.
Financial Markets A23
1.35
INTEREST RATES
Money and Capital Markets
Percent per year; figures are averages of business day data unless otherwise noted
1997
1995
Item
1996
1998
1998. week ending
1997
Dec.
Jan.
Feb.
Mar.
Feb. 27
Mar. 6
Mar. 13
Mar. 20
Mar. 27
M O N E Y M A R K E T INSTRUMENTS
1 Federal funds 12 ' 3
2 Discount window borrowing 2 ' 4
5.83
5.21
5.30
5.02
5.46
5.00
5.50
5.00
5.56
5.00
5.51
5.00
5.49
5.00
5.51
5.00
5.60
5.00
5.45
5.00
5.47
5.00
5.43
5.00
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5.57
5.57
5.56
5.78
5.71
5.67
5.46
5.44
5.42
5.47
5.44
5.42
5.51
5.49
5.46
5.49
5.47
5.44
5.50
5.48
5.46
5.51
5.49
5.47
5.50
5.50
5.46
5.52
5.48
5.46
n.a.
n.a.
n.a.
n.a.
5.59
5.59
5 60
5.80
5.72
5 70
5.48
5.46
5 44
5.49
5.47
5 45
5.53
5.51
5 49
5.50
5.50
5 47
5.54
5.51
5 50
5.52
5.50
5 49
5.51
5.50
5 48
5.53
5.51
5 49
5.93
5.93
5 93
5.43
5.41
5 49
5.54
5.58
5 6">
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5.81
5.78
5 68
5.31
5.29
5 21
5.44
5.48
5 48
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5.81
5.80
5.31
5.31
5.54
5.57
5.75
5.68
5.48
5.45
5.46
5.41
5.50
5.46
5.48
5.44
5.51
5.47
5.51
5.46
5.50
5.46
5.50
5.46
5.87
5.92
5 98
5.35
5.39
5 47
5.54
5.62
5 73
5.88
5.80
5 82
5.53
5.54
5 56
5.53
5.54
5 55
5.58
5.58
5 61
5.55
5.56
5 58
5.58
5.59
5 61
5.57
5.58
5 60
5.58
5.58
5 59
5.58
5.59
5 61
5 93
5 38
5 61
5 79
5 53
5 53
5 56
5 54
5 56
5 56
5 55
5 56
5.49
5.56
5.60
5.01
5.08
5.22
5.06
5.18
5.32
5.16
5.24
5.24
5.04
5.03
4.98
5.09
5.07
5.04
5.03
5.04
5.11
5.16
5.11
5.14
5.08
5.08
5.15
4.97
5.02
5.09
5.02
5.05
5.08
5.05
5.02
5.12
5.51
5.59
5.69
5.02
5.09
5.23
5.07
5.18
5.36
5.16
5.24
5.18
5.09
5.07
5.07
5.11
5.07
4.97
5.03
5.04
5.13
5.14
5.04
n.a.
5.12
5.13
5.13
4.97
5.01
n.a.
4.99
5.03
n.a.
5.03
4.99
n.a.
5.94
6.15
6.25
6.38
6.50
6.57
6.95
5.52
5.84
5.99
6.18
6.34
6.44
6.83
6 71
5.63
5.99
6.10
6.22
6.33
6.35
6.69
661
5.53
5.72
5.74
5.77
5.83
5.81
6.07
5 99
5.24
5.36
5.38
5.42
5.53
5.54
5.88
5 81
5.31
5.42
5.43
5.49
5.60
5.57
5.96
5 89
5.39
5.56
5.57
5.61
5.71
5.65
6.01
5 95
5.42
5.54
5.55
5.60
5.69
5.63
6.00
5 94
5.43
5.61
5.62
5.69
5.80
5.75
6.11
6 05
5.37
5.53
5.53
5.57
5.69
5.62
5.99
5 93
5.36
5.51
5.50
5.54
5.63
5.57
5.95
5 89
5.39
5.57
5.59
5.62
5.69
5.63
5.99
5 92
6 93
6 80
6 67
6 06
5 87
5 94
600
5 99
6 10
5 98
5 94
5 97
5.80
6.10
5.95
5.52
5.79
5.76
5.32
5.50
5.52
5.03
5.17
5.19
4.88
5.04
5.06
4.92
5.09
5.10
5.03
5.25
5.21
4.95
5.16
5.14
5.04
5.26
5.25
5.02
5.25
5.20
5.06
5.28
5.19
4.99
5.21
5.20
39 Seasoned issues, all industries 16
7.83
7.66
7.54
7.03
6.89
6.95
7.00
6.99
7.09
6.99
6.95
6.98
Rating group
40 Aaa
41 Aa
42 A
43 Baa
44 A-rated, recently offered utility bonds
7.59
7.72
7.83
8.20
7.86
7.37
7.55
7.69
8.05
7.77
7.27
7.48
7.54
7.87
7.71
6.76
6.99
7.05
7.32
7.10
6.61
6.82
6.93
7.19
6.97
6.67
6.88
7.01
7.25
7.02
6.72
6.93
7.05
7.32
7.11
6.71
6.93
7.04
7.28
7.08
6.81
7.02
7.13
7.40
7.17
6.70
6.93
7.04
7.30
7.06
6.66
6.89
7.00
7.27
7.06
6.69
6.90
7.03
7.30
7.14
2.56
2.19
1.77
1.62
1.62
1.55
1.48
1.53
1.52
1.49
1.46
1.44
Commercial paper' ~ 'b
Nonnnancial
4
5
2-month
3-month
6
Financial
1-month
8
3-month
9
10
Commercial paper (historical)3-5-6-7
1-month
3-month
(historical)3t5"7'8
Finance paper, directly placed
13
3-month
Bankers
16
acceptances*^
6-month
17
18
Certificates of deposit, secondary marker' °
1-month
3-month
21
22
13
US. Treasury bills
Secondary market •
3-month
6-month
1-vear
Auction average ••
3-month
24
26
1-year
U.S. TREASURY N O T E S AND BONDS
27
28
29
30
31
32
33
34
Constant maturities
1-year
2-year
3-year
5-year
7-year
10-year .
20-year
30-year
..
Composite
STATE AND LOCAL NOTES AND BONDS
Moody's series1*
*b Aaa
37 Baa
38 Bond Buyer series 15
CORPORATE BONDS
MEMO
Dividend-price ratio
45 Common stocks
1. The daily effective federal funds rate is a weighted average of rates on trades through
New York brokers.
2. Weekly figures are aveiages of seven calendar days ending on Wednesday of the
current week; monthly figures include each calendar day in the month.
3. Annualized using a 360-day year for bank interest.
4. Rate for the Federal Reserve Bank of New York.
5. Quoted on a discount basis.
6. An average of offering rales on commercial paper placed by several leading dealers for
firms whose bond rating is AA or the equivalent.
7. Series ended August 29, 1997.
8. An average of offering rates on paper directly placed by finance companies.
9. Representative closing yields for acceptances of the highest-rated money center banks.
10. An average of dealer offering rates on nationally traded certificates or" deposit.
11. Bid rates for Eurodollar deposits ai approximately 11:00 a.m. London time. Data are
for indication purposes
only.
12. Auction date for daily data; weekly and monthly averages computed on an issue-date
http://fraser.stlouisfed.org/
basis.
Federal Reserve Bank of St. Louis
13. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Department of the Treasury.
14. General obligation bonds based on Thursday figures; Moody's Investors Service.
15. State and local government general obligation bonds maturing in twenty years are used
in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys'
Al rating. Based on Thursday figures.
[6. Daily figures from Moody's Investors Service. Based on yields to maturity on selected
long-term bonds.
17. Compilation of the Federal Reserve. This series is an estimate of the yield on recently
offered, A-rated utility bonds with a thirty-year maturity and five years of call protection.
Weekly data are based on Friday quotations.
18. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in
the price index.
NOTE. Some of the data in this table also appear in the Board's H.I5 tS19> weekly and
G.13 (415) monthly statistical releases. For ordering address, see inside front cover.
A24
1.36
Domestic Financial Statistics • June 1998
STOCK MARKET
Selected Statistics
1997
Indicator
1995
1996
1998
1997
July
Sept.
Aug.
Oct
Nov.
Dec.
Jan.
Feb.
Mar.
Prices and trading volume averages of daily figures)
Common stock prices (indexes)
1 New York Stock Exchange
(Dec. 31, 1965 = 50)
2
Industrial
3
Transportation
4
Utility
5
Finance
291.18
367.40
270.14
110.64
238.48
357.98
453.57
327.30
126.36
303.94
456.99
574.97
415.08
143.87
424.84
480.94
610.42
433.75
144.25
441.59
482.39
609.54
439.71
143.82
446.93
489.74
617.94
451.63
145.96
459.86
499.25
625.22
466.04
157.83
476.70
492.14
615.65
453.56
153.53
465.35
504.66
623.57
461.04
165.74
490.30
504.13
624.61
458.49
146.25
479.81
532.15
660.91
485.73
170.96
508.97
560.70
693.13
508.06
191.67
539.47
6 Standard & Poor's Corporation
(1941-43 = 10)2
541.72
670.49
873.43
925.29
927.74
937.02
951.16
938.92
962.37
963.36
1,023.74
1,076.83
7 American Stock Exchange
(Aug. 31, 1973 = 5O)3
498.13
570.86
628.34
635.28
645.59
678.05
702.43
674.37
667.89
665.72
685.73
722.37
345.729
20,387
409.740
22.567
523,254
n.a.
543.006
25.562
506.205
24,095
541,204
28,252
606,513
32,873
531.449
27,741
541,134
27.624
632.895
28,199
610.958
26,808
619.366
28,943
Volume of trading (thousands of shares)
8 New York Stock Exchange
9 American Stock Exchange
Customer financing (millions of dollars, end-of-period balances)
10 Margin credit at broker-dealers4
76,680
97,400
126,090
116,190
119,810
126,050
128,190
127,330
126,090
127,790
135,590
140,340
Free credit balances at brokers
11 Margin accounts
12 Cash accounts
16,250
34,340
22,540
40,430
31,410
52,160
24,290
43,985
23,375
42,960
23,630
43,770
26,950
47,465
26,735
45,470
31,410
52,160
29,480
48.620
27,450
48,640
27,430
51.340
Margin requirements (percent of market value and effective date)7
Mar. 11, 1968
13 Margin stocks
14 Convertible bonds
15 Short sales
June 8, 1968
May 6, 1970
Dec. 6, 1971
Nov. 24, 1972
70
50
70
80
60
80
65
50
65
55
50
55
65
50
65
1. Daily data on prices are available upon request to the Board of Governors. For ordering
address, see inside front cover.
2. In July 1976 a financial group, composed of banks and insurance companies, was added
to the group of stocks on which the index is based. The index is now based on 400 industrial
stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and
40 financial.
3. On July 5. 1983, the American Slock Exchange rebased its index, effectively cutting
previous readings in half.
4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has
included credit extended against stocks, convertible bonds, stocks acquired through the
exercise of subscription rights, corporate bonds, and government securities. Separate reporting of data for margin stocks, convertible bonds, and subscription issues was discontinued in
April 1984.
5. Free credit balances are amounts in accounts with no unfulfilled commitments to
brokers and are subject to withdrawal by customers on demand.
Jan. 3, 1974
50
50
50
6. Series initiated in June 1984.
7. Margin requirements, stated in regulations adopted by the Board of Governors pursuant
to the Securities Exchange Act of 1934. limit the amount of credit that can be used to
purchase and carry "margin securities" (as defined in the regulations) when such credit is
collateralized by securities. Margin requirements on securities are the difference between the
market value (100 percent) and the maximum loan value of collateral as prescribed by the
Board. Regulation T was adopted effective Oct. 15, 1934: Regulation U, effective May 1,
1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971.
On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the
initial margin required for writing options on securities, setting it al 30 percent of the current
market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the
required initial margin, allowing it to be the same as the option maintenance margin required
by the appropriate exchange or self-regulatory organization; such maintenance margin rules
must be approved by the Securities and Exchange Commission.
Federal Finance A25
1.38
FEDERAL FISCAL AND FINANCING OPERATIONS
Millions of dollars
Fiscal year
Calendar year
Type of account or operation
1998
1997
Oct.
US. budget'
1 Receipts, total
2 On-budget
3
Off-budget
4 Outlays, total
5
On-budget
6
Off-budget
7 Surplus or deficit ( - ) , total
8
On-budget
9
Off-budget
Source of financing (total)
10 Borrowing from the public
11 Operating cash (decrease, or increase (-)). . .
12 Other 2
1,351,830
1.000,751
351,079
1,515,729
1,227,065
288,664
-163,899
-226,314
62,415
1,453,062
1,085,570
367,492
1,560,512
1,259,608
300,904
-107,450
-174,038
66,588
1,579,292
1,187,302
391,990
1,601,235
1,290,609
310,626
-21,943
-103.307
171,288
-2,007
-5,382
37,949
8,620
29,329
13.639
-11.307
24,946
137,231
108,843
28.388
25.379
14,524
10.855
97,952
65,051
32.901
139,701
109.393
30,309
-41.750
-44.342
2.592
117,930
80,647
37,283
131,743
101,967
29,775
-13,813
29,108
483
-12,242
-1,771
-12,107
239
-24,807
-8,422
7,850
30,565
24.027
-12.842
20,137
-11,352
5,028
19,778
5,127
14,651
31,885
5,444
26,441
40,307
5,552
34,756
16,280
5,037
11,243
27,632
5,490
22,141
81,364
114,898
87,083
27,815
150,866
123,863
26,999
-35,964
-36,780
816
103,481
73,690
29,791
120,830
91,327
29,504
-17,349
-17,637
287
129,712
-6,276
-15,986
38,171
604
-16,832
6,315
23,360
6,289
44,225
7,700
36,525
43,621
7,692
35,930
20,261
4,616
15,645
167,998
135,340
32,658
154,359
146,647
7,712
162.610
123,367
39,243
-21,320
7,508
MEMO
13 Treasury operating balance (level, end of
period)
14 Federal Reserve Banks
15 Tax and loan accounts
1. Since 1990, off-budget items have been the social security trust funds (federal old-age
survivors insurance and federal disability insurance) and the U.S. Postal Service.
2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the
International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets;
accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous
liability (including checks outstanding) and asset accounts; seigniorage; increment on gold;
net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loanvaluation adjustment; and profit on sale of gold.
SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of
Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management
and Budget, Budget of the U.S. Government.
A26
1.39
Domestic Financial Statistics • June 1998
U.S. BUDGET RECEIPTS AND OUTLAYS1
Millions of dollars
Calendar year
Fiscal year
1996
Source or type
1996
H2
Feb.
1,453,062
1 All sources
2 Individual income taxes, net
3
Withheld
4
Nonwithheld
5
Refunds
Corporation income taxes
6
Gross receipts
7
Refunds
8 Social insurance taxes and contributions, net .
9
Employment taxes and contributions2
10 Unemployment insurance
11
Other net receipts"
12
13
14
15
H2
Excise taxes
Customs deposits
Estate and gift taxes
Miscellaneous receipts
1,579,292
767,099
707,551
845,527
773,810
162,610
97,952
117,930
656,417
533,080
212,168
88,897
737,466
580,207
250,753
93,560
347,285
264,177
162,782
79,735
323,884
279,988
53,491
9,604
400,436'
292,252
191.050
82,926
354,072
306,865
58,069
10,869
95,798
56,628
40,039
870
42,209
54,225
2.914
14,941
39,662
55,290
7,332
22,973
189,055
17,231
509,414
476,361
28,584
4.469
204,493
22,198
539,371
506,751
28,202
4,418
96,480
9,704
277,767
257.446
18,068
2,254
95,364
10,053
240,326
227,777
10,302
2,245
106,451
9.635
288,251
268.357
17,709
2,184
104,659
10,135
260,795
247,794
10,724
2,280
6,888
2,481
23,153
50,395
1,036
333
3,598
2,769
44,749
41,825
2,589
335
54,014
18,670
17,189
25,534
56,924
17,928
19,845
25,465
25.682
8.731
8,775
12,087
27,016
9,294
8,835
12,888
28,084
8,619
10,477
12,866
31,132
9,679
10.262
13.347
4,679
1,387
1,808
2,768
4,791
1,454
1,500
2,420
4,499
1,412
1,845
2,994
51,765
3,661
48,027
47,389
301
337
OUTLAYS
16 All types
1,560,512
1,601,235
785,368
800,176
797,418
824,360
137,231
139,701
131,743
17
18
19
20
21
22
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture
265.748
13,496
16,709
2,844
21,614
9,159
270,473
15,228
17,174
139,402
8,532
8,260
695
10,307
11,037
132,725
5.740
8,939
803
9,627
1,465
140,873
9,420
10,040
411
11,106
10,590
20,927
740
1,498
291
1,636
1,967
20,492
364
21,369
9,032
132,599
8,076
8,897
1,356
10.254
73
1,746
329
20,326
979
1,617
40
1,556
283
23
24
25
26
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and
social services
-10,472
39,565
10,685
-14,624
40,767
11,005
-6,885
18,290
5,245
-5,899
21,512
5,498
-7,575
16.847
5,675'
-3,526
20,414
5,749
-403
2,574
783
-1,065
2,504
669
-972
2,734
503
1,483
1,404
-43
6,535
52,001
53,008
25.979
27,524
25,080
27 Health
28 Social security and Medicare
29 Income security
119,378
523,901
225,989
123,843
555,273
230,886
59,989
264,647
121.186
61,595
269,412
107,631
61,809'
278,863'
124,034
63,552
283,109
106,353
11,162
46,929
20,133
9,735
46,810
28,194
10,876
45,815
22.853
30
31
32
33
34
36,985
17,548
11,892
241.090
-37,620
39,313
20,197
12,768
244,013
-49,973
18,140
9.015
4,641
120,576
-16,716
21,109
9,583
6,546
122,573
-25.142
17,696
10,643
6,623
122,654
-24.235'
22,077
10.212
7,302
122,620
-22,795
3,331
1,718
836
20,570
-2,504
3,386
1,883
1,764
1,012
20,651
-3,064
Veterans benefits and services
Administration of justice
General government
Net interest5
Undistributed offsetting receipts6
1. Functional details do not sum to total outlays for calendar year data because revisions to
monthly totals have not been distributed among functions. Fiscal year total for receipts and
outlays do not correspond to calendar year data because revisions from the Budget have not
been fully distributed across months.
2. Old-age, disability, and hospital insurance, and railroad retirement accounts.
3. Federal employee retirement contributions and civil service retirement and
disability fund.
2,026
108
19,901
-3,394
4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts.
5. Includes interest received by trust funds.
6. Rents and royalties for the outer continental shelf, U.S. government contributions for
employee retirement, and certain asset sales.
SOURCE. Fiscal year totals: U.S. Office of Management and Budget. Budget of the U.S.
Government, Fiscal Year 1999; monthly and half-year totals: U.S. Department of the Treasury. Monthly Treasury Statement of Receipts and Outlays of the U.S. Government.
Federal Finance A27
1.40
FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION
Billions of dollars, end of month
1996
Mar. 31
June 30
Sept. 30
Dec. 31
Mar. 31
June 30
Sept. 30
Dec. 31
1 Federal debt outstanding
5,153
5,197
5,260
5,357
5,415
5,410
5,446
5,536
2 Public debt securities
3 Held by public
4
Held by agencies
5,118
3,764
1,354
5,161
3,739
1,422
5,225
3,778
1,447
5,323
3,826
1,497
5,381
3,874
1,507
5,376
3,805
1,572
5,413
3,815
1,599
5,502
3,847
1,656
36
28
36
28
35
27
34
27
34
26
34
26
7
33
26
7
34
27
7
5,030
5,073
5,137
5,237
5,294
5,290
5,328
5,417
5,457
5,030
0
5,073
0
5,137
0
5,237
0
5,294
0
5,290
0
5,328
0
5,416
0
5,456
0
5,500
5,500
5,500
5,500
5,500
5,500
5,950
5,950
5,950
5 Agency securities
6
Held by public
7
Held by agencies
8 Debt subject to statutory limit
9 Public debt securities
10 Other debt1
5,542
n.a.
n.a.
MEMO
11 Statutory debt limit
1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified
participation certificates, notes to international lending organizations, and District of Columbia stadium bonds.
1.41
GROSS PUBLIC DEBT OF U.S. TREASURY
SOURCE. U.S. Department of the Treasury, Monthly Statement of the Public Debt of the
United States and Treasury Bulletin.
Types and Ownership
Billions of dollars, end of period
Type and holder
Q2
1 Total gross public debt
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
By type
Interest-bearing
Marketable
Bills
Notes
Bonds
Inflation-indexed notes
Nonmarketable2
State and local government series
Foreign issues
Government
Public
Savings bonds and notes
Government account series4
Non-interest-bearing
By holder5
U.S. Treasury and other federal agencies and trust funds
Federal Reserve Banks
Private investors
Commercial banks
Money market funds
Insurance companies
Other companies
State and local treasuries6-7
Individuals
Savings bonds
Other securities
Foreign and international8
Other miscellaneous investors7'9
Q4
Ql
4,800.2
4,988.7
5,323.2
5,502.4
5,376.2
5,413.2
5,502.4
5,542.4
4,769.2
3,126.0
733.8
1,867.0
510.3
n.a.
1,643.1
132.6
42.5
42.5
.0
177.8
1,259.8
31.0
4,964.4
3,307.2
5,494.9
3,456.8
715.4
2,106.1
587.3
33.0
2,038.1
124.1
36.2
36.2
.0
181.2
1,666.7
7.5
5,370.5
3,433.1
704.1
2,132.6
565.4
15.9
1,937.4
107.9
35.4
35.4
.0
182.7
1,581.5
5.7
5,407.5
3,439.6
701.9
2,122.2
576.2
24.4
1,967.9
111.9
34.9
34.9
.0
182.7
1,608.5
5,494.9
3,456.8
2,010.3
521.2
n.a.
1,657.2
104.5
40.8
40.8
.0
181.9
1,299.6
24.3
5,317.2
3,459.7
777.4
2,112.3
555.0
n.a.
1,857.5
101.3
37.4
47.4
.0
182.4
1,505.9
6.0
5.6
2,106.1
587.3
33.0
2,038.1
124.1
36.2
36.2
.0
181.2
1,666.7
7.5
5,535.3
3,467.1
720.1
2,091.9
598.7
1,257.1
374.1
3,168.0
290.4
67.6
240.1
224.5
540.2
1,304.5
391.0
3,294.9
278.7
71.5
241.5
228.8
421.5
1,497.2
410.9
3,411.2
261.7
91.6
214.1
258.5
363.7
1,655.7
451.9
3,393.4
260.0
87.8
214.0
265.0
334.0
1,571.6
426.4
3,361.7
265.7
77.4
216.0
261.0
345.3
1,598.5
436.5
3,388.9
261.6
75.8
214.4
266.5
336.4
1,655.7
451.9
3,393.4
260.0
87.8
214.0
265.0
334.0
180.5
150.7
688.6
785.5
185.0
162.7
862.2
843.0
187.0
169.6
1,131.8
733.2
186.5
168.4
1,278.2
599.4
186.3
169.1
1,221.7
619.2
186.2
168.6
1,266.8
612.6
186.5
168.4
1,278.2
599.4
1. The U.S. Treasury first issued inflation-indexed notes during the first quarter of 1997.
2. Includes (not shown separately) securities issued to the Rural Electrification Administration, depository bonds, retirement plan bonds, and individual retirement bonds.
3. Nonmarketable series denominated in dollars, and series denominated in foreign currency held by foreigners.
4. Held almost entirely by U.S. Treasury and other federal agencies and trust funds.
5. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual
holdings; data for other groups are Treasury estimates.
6. Includes state and local pension funds.
7. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable
federal securities was removed from "Other miscellaneous investors" and added to "State and
local treasuries." The data shown here have been revised accordingly.
Q3
760.7
715.4
41.5
2,068.2
139.1
35.4
36.4
.0
181.2
1,681.5
7.2
8. Consists of investments of foreign balances and international accounts in the United
States.
9. Includes savings and loan associations, nonprofit institutions, credit unions, mutual
savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury
deposit accounts, and federally sponsored agencies.
SOURCE. U.S. Treasury Department, data by type of security, Monthly Statement of the
Public Debt of the United States; data by holder, Treasury Bulletin.
A28
1.42
Domestic Financial Statistics • June 1998
US. GOVERNMENT SECURITIES DEALERS
Transactions1
Millions of dollars, daily averages
1998, week ending
Feb. 25
Mar. 18
Mar. 25
OUTRIGHT TRANSACTIONS2
By type of security
1 U.S. Treasury bills
Coupon securities, by maturity
2
Five years or less
3
More than five years
4 Inflation-indexed
Federal agency
5 Discount notes
Coupon securities, by maturity
6
One year or less
7
More than one year, but less than
or equal to five years
8
More than five years
9 Mortgage-backed
10
11
12
13
14
15
By type of counterparty
With interdealer broker
U.S. Treasury
Federal agency
Mortgage-backed
With other
U.S. Treasury
Federal agency
Mortgage-backed
38,244
26,208
41,042
38,845
42,516
95,901
54,749
89,024
51,980
122,614
83,227
142,424
73,818
119,673
84,007
52,010
40,062
115,005
85,646
475
96,774
81,756
254
144,026
80,096
787
31,824
38,475
38,211
144,196
86,775
29,466
114,812
63,331
570
267
41,752
35,848
1,559
5,714
2,556
54,896
1,362
4,516
2,615
59,363
493
554
298
36,835
33,716
37,428
1,738
2,363
3,479
1,941
71,237
1,736
2,451
4,035
64,142
1,294
1,900
2,126
3,019
2,725
76,390
2,284
1,730
60,202
3,618
1,996
92,600
111,392
61,967
312
36,799
1,355
3,531
3,067
58,456
126,020
58,701
336
36,241
3,195
4,149
1,593
48,003
45,285
49,482
3,452
2,676
64,305
107,366
1,143
13,748
94,063
1,224
16,441
140,336
1,987
21,100
149,055
1,510
24,645
141,253
1,710
21,494
137,698
2,125
24,869
121,505
1,653
20,000
150,835
2,205
19,274
156,972
2,179
17,854
122,352
2,227
27,155
119,449
2,047
19,820
126,289
1,519
17,348
81,528
41,873
31,538
73,148
30,169
33,042
107,038
42,715
43,204
106,587
39,989
46,592
105,241
43,941
42,647
102,181
36,737
51,520
97,340
42,737
40,203
112,916
45,264
40,089
126,579
49,402
37,041
90,301
40,598
65,445
83,689
42,704
38,636
92,376
43,659
30,655
404
165
262
120
258
401
77
4,049
18,522
0
4,383
21.785
2,204
16.104
3,099
16,901
0
0
0
1,503
14,111
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,885
8,496
3,467
6,425
0
0
2,674
6,807
0
1,703
4,239
0
0
0
0
0
FUTURES TRANSACTIONS3
By type of deliverable security
16 U.S. Treasury bills
Coupon securities, by maturity
17 Five years or less
18 More than five years
19 Inflation-indexed
Federal agency
20 Discount notes
Coupon securities, by maturity
21
One year or less
22
More than one year, but less than
or equal to five years
23 More than five years
24 Mortgage-backed
2,318
17,318
1,946
15,655
1,400
13,897
1,662
15,610
0
0
0
0
0
0
0
0
0
0
0
0
0
2,107
11,345
2,552
16,583
0
2,534
13,394
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,652
6,194
0
2,099
6,588
0
2,856
5,091
0
2,588
5,288
0
1,878
5,160
0
381
0
0
549
OPTIONS TRANSACTIONS 4
By type of underlying security
25 US. Treasury bills
Coupon securities, by maturity
26
Five years or less
27
More than five years
28 Inflation-indexed
Federal agency
29 Discount notes
Coupon securities, by maturity
30
One year or less
31
More than one year, but less than
or equal to five years
32
More than five years
33 Mortgage-backed
0
0
1,831
4,487
t
2,173
3,742
t
0
n.a.
0
632
0
428
0
0
636
0
0
600
1. Transactions are market purchases and sales of securities as reported to the Federal
Reserve Bank of New York by the U.S. government securities dealers on its published list of
primary dealers. Monthly averages are based on the number of trading days in the month.
Transactions are assumed to be evenly distributed among the trading days of the report week.
Immediate, forward, and futures transactions are reported at principal value, which does not
include accrued interest; options transactions are reported at the face value of the underlying
securities.
Dealers report cumulative transactions for each week ending Wednesday.
2. Outright transactions include immediate and forward transactions. Immediate delivery
refers to purchases or sales of securities (other than mortgage-backed federal agency securities) for which delivery is scheduled in five business days or less and "when-issued"
securities that settle on the issue date of offering. Transactions for immediate delivery of mortgagebacked agency securities include purchases and sales for which delivery is scheduled in thirty business
days or less. Stripped securities are reported at market value by maturity of coupon or corpus.
2,282
5,129
0
0
0
0
0
0
0
0
754
417
646
0
602
Forward transactions are agreements made in the over-the-counter market that specify
delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt
securities are included when the time to delivery is more than five business days. Forward
contracts for mortgage-backed agency securities are included when the time to delivery is
more than thirty business days.
3. Futures transactions are standardized agreements arranged on an exchange. All futures
transactions are included regardless of time to delivery.
4. Options transactions are purchases or sales of put and call options, whether arranged on
an organized exchange or in the over-the-counter market, and include options on futures
contracts on U.S. Treasury and federal agency securities.
NOTE, "n.a." indicates that data are not published because of insufficient activity.
Major changes in the report form filed by primary dealers induced a break in the dealer data
series as of the week ending January 28, 1998.
0
0
622
0
0
380
0
0
739
0
881
Federal Finance
A29
Positions and Financing1
1.43 U.S. GOVERNMENT SECURITIES DEALERS
Millions of dollars
1997
1998
1998, week ending
Jan. 28
Feb. 4
Feb. 11
Feb. 18
Feb. 25
Mar. 4
Mar. 11
Mar. 18
NET OUTRIGHT POSITIONS 3
1
2
3
4
5
6
7
8
9
By type of security
U.S. Treasury bills
Coupon securities, by maturity
Five years or less
More than five years
Inflation-indexed
Federal agency
Discount notes
Coupon securities, by maturity
One year or less
More than one year, but less than
or equal to five years
More than five years
Mortgage-backed
18,205
12,567
8,517
5,154
7.900
4,244
14,147
4,839
14,758
-21,352
-16,759
-12,119
-17,495
-7,847
-21,431
-7,108
-20,561
-9,565
-15,096
-6,557
-20,445
1,792
1,639
-6,581
-25,823
1,457
-15,232
-22,004
1.422
-6,257
-21,399
1,506
18,759
20,133
1,579
6,251
9,624
42,751
3,001
3,123
1.359
14,677
22,402
1,924
4,932
8,636
57,244
3,811
5,541
9,281
52,185
5,667
9,312
43,055
-13,544
-22,672
1,004
958
1,164
16,681
22,161
15,785
3,449
3,971
7,118
9,507
54.641
3,453
7,763
10,037
53,106
46,961
5,753
8,898
50,013
-2,635
-3,588
-4,872
-4,165
-4,027
-4,904
-4,891
-5,300
-4,878
-4,374
-3,218
3,578
-27,114
-1,082
-25,767
-752
-18,954
-410
-20,159
-2,909
-21,845
-2,667
-20,163
-1,554
-22,654
1,041
-15,126
4,283
-12,575
3,834
-12.165
0
0
0
0
0
0
0
0
762
-18,719
0
0
0
0
0
0
0
0
0
44,132
NET FUTURES POSITIONS4
Bv type of deliverable security
10 U.S. Treasury bills
Coupon securities, by maturity
11 Five years or less
12 More than five years
13 Inflation-indexed
Federal agency
14 Discount notes
Coupon securities, by maturity
15 One year or less
16 More than one year, but less than
or equal to five years
17 More than five years
18 Mortgage-backed
20,376
3,013
19,303
16,613
-16,412
-26,879
6,118
8,128
47,110
7,880
8,680
48,178
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-1,366
2,729
-653
2,132
n.a.
-1,253
3,202
n.a.
-1,027
2,169
n.a.
-1,246
3,356
n.a.
-2,157
2,563
-743
2,328
n.a.
641
3,500
2,782
3,258
n.a.
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
907
n.a.
860
n.a.
-50
n.a.
234
n.a.
690
n.a.
1,813
n.a.
2,148
n.a.
1,253
0
n.a.
1,098
0
0
0
NET OPTIONS POSITIONS
19
20
21
22
23
24
25
26
27
By type of deliverable security
U.S. Treasury bills
Coupon securities, by maturity
Five years or less
More than five years
Inflation-indexed
Federal agency
Discount notes
Coupon securities, by maturity
One year or less
More than one year, but less than
or equal to five years
More than five years
Mortgage-backed
-757
3,226
-667
3,022
i.a.
Financing
Reverse repurchase agreements
28 Overnight and continuing
29 Term
304,385
654,600
Securities borrowed
30 Overnight and continuing
31 Term
200,401
92.672
Securities received as pledge
32 Overnight and continuing
33 Term
324,675
746,499
352,684
722,028
314,422
806,323
350,352
786,654
329,281
848.506
374,844
626,731
341,612
667,730
384,527
689,804
364,022
736,348
355,137
786,546
214,345
80.881
209,166
89,298
212,450
84,324
213,321
82,349
218,106
76,158
211,427
80,410
217,293
84,980
220,176
86,934
210,707
90,597
5.939
286
5,127
152
4,208
237
4,435
166
4,502
165
4,445
261
4,357
267
4,144
231
3,063
224
2,893
258
2,674
174
Repurchase agreements
34 Overnight and continuing
35 Term
648,786
586,741
715,197
686,432
735,160
639,985
706,615
718,382
733,169
701.852
728,930
744,488
768,739
550,147
703,572
602,252
747,707
611,323
739,482
647,681
758,664
698,755
Securities loaned
36 Overnight and continuing
37 Term
7,927
4,591
8,157
4,645
8,531
3,880
7,794
4,471
8,446
4,430
8,573
4,113
8,593
3,481
8,087
3,510
9,436
4,393
9,332
4,137
9,502
4,851
Securities pledged
38 Overnight and continuing
39 Term
53,643
3,566
52,182
5,019
55,551
3,111
50.907
6,057
51,715
5,235
54,489
4,703
59,232
1.087
55,989
2,185
53,529
3,451
54,320
3,587
55,238
6,311
Collateralized loans
40 Total
13,891
14,467
9,536
11,896
10,541
7.304
8,416
11,863
11,895
12,454
1. Data for positions and financing are obtained from reports submitted to the Federal
Reserve Bank of New York by the U.S. government securities dealers on its published list of
primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar
days of the report week are assumed to be constant. Monthly averages are based on the
number of calendar days in the month.
2. Securities positions are reported at market value.
3. Net outright positions include immediate and forward positions. Net immediate positions include securities purchased or sold (other than mortgage-backed agency securities) that
have been delivered or are scheduled to be delivered in five business days or less and
"when-issued" securities that settle on the issue date of offering. Net immediate positions for
mortgage-backed agency securities include securities purchased or sold that have been
delivered or are scheduled to be delivered in thirty business days or less.
Forward positions reflect agreements made in the over-the-counter market that specify
delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt
securities are included when the time to delivery is more than five business days. Forward
contracts for mortgage-backed agency securities are included when the time to delivery is
more than thirty business days.
4. Futures positions reflect standardized agreements arranged on an exchange. All futures
positions are included regardless of time to delivery.
5. Overnight financing refers to agreements made on one business day that mature on the
next business day; continuing contracts are agreements that remain in effect for more than one
business day but have no specific maturity and can be terminated without advance notice by
either party; term agreements have a fixed maturity of more than one business day. Financing
data are reported in terms of actual funds paid or received, including accrued interest.
NOTE, "n.a." indicates that data are not published because of insufficient activity.
Major changes in the report form filed by primary dealers induced a break in the dealer data
series as of the week ending January 28, 1998.
A30
1.44
Domestic Financial Statistics • June 1998
FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES
Debt Outstanding
Millions of dollars, end of period
1998
1997
Agency
Sept.
1 Federal and federally sponsored agencies.
2 Federal agencies.
3 Defense Department
4
Export-Import Bank2"
5
Federal Housing Administration4
6
Government National Mortgage Association certificates of
participation
7
Postal Service6
Tennessee Valley Authority
United States Railway Association6
10 Federally sponsored agencies7
11 Federal Home Loan Banks .
12 Federal Home Loan Mortgage Corporation .. .
13 Federal National Mortgage Association
14 Farm Credit Banks8
15 Student Loan Marketing Association
16 Financing Corporation10
17 Farm Credit Financial Assistance Corporation"
IS Resolution Funding Corporation
738,928
844,611
925,823
1,022,609
983,599
1,003,177
1,014,907
1,022,609
1,032,486
39,186
6
3,455
116
37,347
6
2,050
97
29,380
6
1,447
84
27,792
6
552
102
27,392
6
1,326
27.356
6
1,295
68
27,500
6
1,295
93
27,792
6
552
102
27,110
6
682
133
n.a.
8,073
27,536
n.a.
5,765
29,429
n.a.
n.a.
27,853
n.a.
n.a.
n.a.
27,786
n.a.
n.a.
27,386
n.a.
n.a.
n.a.
27,350
n.a.
n.a.
n.a.
27,494
n.a.
n.a.
n.a.
27.786
n.a.
n.a.
27,104
n.a.
699,742
205,817
93,279
257,230
53,175
50,335
8,170
1,261
29,996
807,264
243,194
119,961
299,174
57,379
47,529
8,170
1,261
29,996
896,443
263,404
156,980
331,270
60,053
44,763
8,170
1,261
29,996
994,817
313,919
169,200
369,774
63,517
37,717
8,170
1,261
29,996
956,207
295,212
160,050
358,003
61,612
40,531
8,170
1,261
29,996
975,821
302,310
172,433
356,149
61,093
43,000
8,170
1,261
29,996
987.407
308.745
174.900
361.602
61,093
40,321
8,170
1,261
29,996
994.817
313.919
169,200
369,774
63,517
37,717
8,170
1,261
29,996
1,005,376
311,385
181,948
370,524
61,317
39,375
8,170
1,261
29,996
103,817
78,681
58,172
49,090
49,944
48,698
32,523
49,090
48321
3,449
8,073
n.a.
3,200
n.a.
2.044
5,765
1,431
n.a.
n.a.
n.a.
1,295
n.a.
n.a.
n.a.
n.a.
1,295
n.a.
n.a.
3,200
n.a.
1,326
n.a.
n.a.
n.a.
n.a.
33,719
17,392
37,984
21.015
17,144
29.513
18,325
16,702
21,714
13,895
14,917
19,716
13,530
14,819
19,054
13,530
14.819
2,879
MEMO
19 Federal Financing Bank debt13
20
21
22
23
24
Lending to federal and federally sponsored agencies
Export-Import Bank
Postal Service6
Student Loan Marketing Association
Tennessee Valley Authority
United States Railway Association6
Other lending^
25 Farmers Home Administration
26 Rural Electrification Administration
27 Other
1. Consists of mortgages assumed by the Defense Department between 1957 and 1963
under family housing and homeowners assistance programs.
2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976.
3. On-budget since Sept. 30, 1976.
4. Consists of debentures issued in payment of Federal Housing Administration insurance
claims. Once issued, these securities may be sold privately on the securities market.
5. Certificates of participation issued before fiscal year 1969 by the Government National
Mortgage Association acting as trustee for the Farmers Home Administration, the Department
of Health, Education, and Welfare, the Department of Housing and Urban Development, the
Small Business Administration, and the Veterans Administration.
6. Off-budget.
7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes
Federal Agricultural Mortgage Corporation, therefore details do not sum to total. Some data
are estimated.
8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is
shown on line 17.
9. Before late 1982, the association obtained financing through the Federal Financing Bank
(FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22.
n.a.
n.a.
13,530
14,898
20,110
n.a.
n.a.
13,530
14,898
20,110
13,530
14.841
19,950
10. The Financing Corporation, established in August 1987 to recapitalize the Federal
Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987.
11. The Farm Credit Financial Assistance Corporation, established in January 1988 to
provide assistance to the Farm Credit System, undertook its first borrowing in July 1988.
12. The Resolution Funding Corporation, established by the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989.
13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations
issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the
purpose of lending to other agencies, its debt is not included in the main portion of the table to
avoid double counting.
14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans
guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally
being small. The Farmers Home Administration entry consists exclusively of agency assets,
whereas the Rural Electrification Administration entry consists of both agency assets and
guaranteed loans.
Securities Markets and Corporate Finance A31
1.45
NEW SECURITY ISSUES
Tax-Exempt State and Local Governments
Millions of dollars
1998
Type of issue or issuer,
or use
Aug.
1 All issues, new and refunding
Sept.
Oct.
Nov.
Dec.
Feb.
Mar.
145,657
171,222
214,693
17,401
21,499
21,898
20,207
21^42
16,770
21,306
27,858
By type of issue
2 General obligation
3 Revenue
56.980
88,677
60,409
110,813
69,934
134,989
5,062
11,518
3,590
17,909
7,837
14,061
5,713
14,494
8,005
13,337
5,608
11,162
9,893
11,413
9,597
18,261
By type of issuer
4 State
5 Special district or statutory authority2
6 Municipality, county, or township
14,665
93,500
37,492
13,651
113,228
44,343
18,237
134,919
70,558
1,352
10,480
4,803
1,278
14,890
16,592
2,392
13,195
13,920
509
13,586
5,920
1,702
15,600
4,098
1,268
11,794
3,708
2,420
14,228
4,658
2,375
19,624
5,859
102,390
112,298
127,928
8,915
10.158
12,981
12,979
13,487
9,696
12,538
15,134
23,964
11,890
9,618
19,566
6,581
30,771
26,851
12,324
9,791
24,583
6,287
32,462
31,860
13,951
12,219
27,794
6,667
35,095
2.781
1,276
576
1,481
799
2,024
1,943
2,654
907
2,305
441
1,908
2,647
1,215
1,402
2,341
729
4,642
2,973
1,420
1,217
4,090
574
2,705
2,981
1,144
683
2,940
897
4,842
2,338
1,521
598
1,540
448
3,251
3,525
1,760
687
2,903
581
3,082
4,297
771
1,866
3,104
1,236
3,860
7 Issues for new capital
8
9
10
11
12
13
By use of proceeds
Education
Transportation
Utilities and conservation
Social welfare
Industrial aid
Other purposes
SOURCE. Securities Data Company beginning January 1990; Investment
Digest before then.
1. Par amounts of long-term issues based on date of sale.
2. Includes school districts.
1.46
NEW SECURITY ISSUES
Dealer's
U.S. Corporations
Millions of dollars
1998
Type of issue, offering,
or issuer
1995
Sept.
July
1 All issues1
673,779
2 Bonds2
573,206
By type of offering
3 Public, domestic
4 Private placement, domestic3 .
5 Sold abroad
408,804
87,492
76,910
flv industry group
Manufacturing
Commercial and miscellaneous
Transportation
Public utility
Communication
Real estate and financial
61,070
50,689
8,430
13.751
22,999
416,269
6
7
8
9
10
11
12 Stocks2
By type of offering
13 Public preferred
14 Common
15 Private placement3
16
17
18
19
20
21
By industry group
Manufacturing
Commercial and miscellaneous
Transportation
Public utility
Communication
Real estate and financial
Dec.
Jan.
Feb.
67,305
85,001
71,219
58,350
63,992
74,008r
76,720
n.a.
57,886
46,576
75,166
58,166
46.543
55,973
66492'
65,575
465,489
n.a.
83,433
537,778
n.a.
103,118
46,415
n.a.
11,471
40,840
n.a.
5,736
60,226
n.a.
14,941
46,967'
n.a.
11,199
42,969
n.a.
3,574
54,443
n.a.
1,530
55,944'
n.a.
10,648
53,159
n.a.
12,416
49,476
40,544
5,722
9,498
14,525
429,157
47,064
42,480
11,352
16,660
12,055
511,285
8,480
4.466
544
3,674
1,304
39,419
5,087
3,196
406
1,407
278
36,202
3,534
4,330
296
1,357
1.829
63.820
4,668
7,982
1,322
1,664
342
42,189
2,152
1,166
299
1,590
1,586
39,750
2,976
1,978
448
1,372
923
48,276
10,059'
5,497'
2,233
[MCf
2,360'
44,803'
4,455
3,320
1,410
953
2,509
52,928
9,419
5,541
9,835
13,053
11,807
8,019
7,416
11,145
678
8,741
645
4,895
1,878
7,957
n.a.
1,824
11,229
1,060
10,747
3.578
4,441
3,607
3,809
3,861
7,284
1,056
2.804
563
483
120
3,875
836
1.673
139
48
52
2,371
1,294
3,714
472
405
235
3,885
6,583
5,449
5,257
5,675
5,585
33,208
83,052
29,814
82,392
21,545
27.844
804
1.936
1,077
47,367
I Figures represent gross proceeds of issues maturing in more than one year; they are the
principal amount or number of units calculated by multiplying by the offering price. Figures
exclude secondary offerings, employee stock plans, investment companies other than closedend, intracorporate transactions, equities sold abroad, and Yankee bonds. Stock data include
ownership securities issued by limited partnerships.
Nov.
n.a.
100,573
10,917
57,556
32,100
Oct.
2. Monthly data cover only public offerings.
3. Monthly data are not available.
SOURCE. Beginning July 1993, Securities Data Company and the Board of Governors of
the Federal Reserve System.
A32
1.47
Domestic Financial Statistics • June 1998
OPEN-END INVESTMENT COMPANIES
Net Sales and Assets1
Millions of dollars
1998'
1997'
Item
1996'
1997
98,496
101,503
115,343
94,478
110,452
119,488
114,219
128,448
702,711
231.885
918,728
272,172
77,637
20,859
72,279
29,224
91,654
23,689
66,135
28,343
89,982
20,471
92,621
26,867
81,688
32,532
96,889
31,558
4 Assets4
2,624,463
3,409,315
3,182,253
3,368,362
3,284,252
3,356,347
3,409,315
3,459354
3,675,392
3,844,616
5 Cash5
6 Other
138,559
2,485,904
174,154
3,235,161
173,299
3,008,954
178,786
3,189,576
179,909
3,104,343
186,582
3,169,765
174,154
3,235,161
183,648
3,275,706
180,415
3,494,977
177,291
3,667,324
4. Market value at end of period, less current liabilities.
5. Includes all U.S. Treasury securities and other short-term debt securities.
SOURCE. Investment Company Institute. Data based on reports of membership, which
comprises substantially all open-end investment companies registered with the Securities and
Exchange Commission. Data reflect underwritings of newly formed companies after their
initial offering of securities.
1. Data on sales and redemptions exclude money market mutual funds but include
limited-maturity municipal bond funds. Data on asset positions exclude both money market
mutual funds and limited-maturity municipal bond funds.
2. Includes reinvestment of net income dividends. Excludes reinvestment of capital gains
distributions and share issue of conversions from one fund to another in the same group.
3. Excludes sales and redemptions resulting from transfers of shares into or out of money
market mutual funds within the same fund family.
1.48
Dec.
Mar.
1,190,900
2 Redemptions of own shares
3 Net sales3
Nov.
Feb.
Sept.
934,595
Oct.
Jan.
Aug.
CORPORATE PROFITS AND THEIR DISTRIBUTION
Billions of dollars; quarterly data at seasonally adjusted annual rates
Ql
Q2
Q3
Q4
01
Q2
Q3
Q4
1 Profits with inventory valuation and
capital consumption adjustment
2 Profits before taxes
3 Profits-tax liability
4 Profits after taxes
5 Dividends
6 Undistributed profits
650.0
622.6
213.2
409.4
264.4
145.0
735.9
676.6
229.0
447.6
304.8
142.8
805.0
729.8
249.4
480.3
336.1
144.2
717.7
664.9
226.2
438.7
300.7
138.0
738.5
682.2
232.2
450.0
303.7
146.4
739.6
679.1
231.6
447.5
305.7
141.8
747.8
680.0
226.0
454.0
309.1
144.9
779.6
708.4
241.2
467.2
326.8
140.3
795.1
719.8
244.5
475.3
333.0
142.3
827.3
753.4
258.2
495.2
339.1
156.1
818.1
737.3
253.6
483.7
345.6
138.1
7 Inventory valuation
8 Capital consumption adjustment .
-24.3
51.6
-2.5
61.8
5.5
69.7
-5.1
57.9
-5.4
61.6
-2.7
63.2
3.3
64.4
3.5
67.7
5.9
69.4
3.6
70.3
9.2
71.6
SOURCE. U.S. Department of Commerce, Survey of Current Business.
DOMESTIC FINANCE COMPANIES Assets and Liabilities1
Billions of dollars, end of period; not seasonally adjusted
1.51
1997
1996
Account
1995
1997
1996
Q2
Q3
Q4
Ql
Q2
Q3
Q4
ASSETS
607.0
233.0
301.6
72 4
637.1
244.9
309.5
82 7
663.5
256.8
318.8
87 9
626.7
240.6
305.7
80 4
628.1
244.4
301.4
82 2
637.1
244.9
309.5
82 7
648.0
249.4
315.2
83 4
651.6
255.1
311.7
84 8
660.5
254.5
319.5
86 4
663.5
256.8
318.8
87 9
60.7
12.8
55.6
13.1
52.7
13.0
57.2
12.7
54.8
12.9
55.6
13.1
51.3
12.8
57.2
133
54.6
127
52.7
13 0
533.5
250 9
568.3
2900
597.8
3124
556.7
258 7
560.5
268 7
568.3
290 0
583.9
289 6
581.2
306 8
593.1
289 1
597.8
3124
784.4
858.3
910.2
815.4
829.2
858.3
873.4
887.9
882 3
910 2
15.3
168.6
19.7
177.6
24.1
201.5
17.7
169.6
18.3
173.1
19.7
177.6
18.4
185.3
18.8
193.7
20.4
189.6
24.1
201.5
14 All other liabilities
51.1
300.0
163.6
85.9
60.3
332.5
174.7
93 5
64.7
328.9
189.6
101.3
56.3
319.0
163.2
89.7
57.9
322.3
164.8
92 8
60.3
332.5
174.7
93 5
61.0
324.6
189.2
94 9
60.0
345.3
171.4
98 7
61.6
322.8
190.1
97 9
64.7
328.9
189.6
101 1
16 Total liabilities and capital
784.4
858.3
910.1
815.4
829.2
858.3
873.4
887.9
882.3
910.1
2
Consumer
5 LESS: Reserves for unearned income
8 All other
9 Total assets
LIABILITIES AND CAPITAL
11 Commercial paper
Debt
1. Includes finance company subsidiaries of bank holding companies but not of retailers
and banks. Data are amounts carried on the balance sheets of finance companies; securitized
pools are not shown, as they are not on the books.
2. Before deduction for unearned income and losses.
Securities Market and Corporate Finance A3 3
1.52
DOMESTIC FINANCE COMPANIES
Owned and Managed Receivables'
Billions of dollars, amounts outstanding
1998
Type of credit
1995
1996
1997
Sept.
Seasonally adjusted
1 Total
682.4
762.4
810.4'
799.0
802.7
805.7
810.4r
811.8'
821.6
2
3
4
281.9
72.4
328.1
306.6
111.9
326.9
121.1
362.4'
322.6
120.7
355.8
324.4
121.5
356.8
323.7
121.7
360.3
326.9
121.1
362.4'
325.6
122.1
364.1'
328.0
124.1
369.5
806.9
818.1r
813.0r
820.1
Consumer
Real estate
Business
343.8
Not seasonally adjusted
5 Total
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Consumer
Motor vehicles loans
Motor vehicle leases
Revolving2
Other3
Securitized assets
Motor vehicle loans
Motor vehicle leases
Revolving
Other
Real estate
One- to four-family
Other
Securitized real estate assets4
One- to four-family
Other
Business
Motor vehicles
Retail loans
Wholesale loans5
Leases
Equipment
Loans
Leases
Other business receivables6
Securitized assets4
Motor vehicles
Retail loans
Wholesale loans
Leases
Equipment
Loans
Leases
Other business receivables6
689.5
769.7
818.1'
795.3
285.8
81.1
80.8
28.5
42.6
310.6
86.7
92.5
32.5
33.2
330.9
87.0
96.8
38.6
34.4
323.3
88.5
96.1
34.9
35.0
324.2
86.8
95.9
34.7
35.3
325.4
86.0
96.4
34.8
35.5
330.9
87.0
96.8
38.6
34.4
327.0
87.4
94.6
37.6
35.2
326.5
84.7
94.9
37.0
35.5
34.8
3.5
n.a.
14.7
72.4
n.a.
n.a.
36.8
8.7
0.0
20.1
111.9
52.1
30.5
44.3
10.8
0.0
19.0
121.1
59.0
28.9
39.7
10.0
0.0
19.0
120.7
56.6
29.8
42.6
9.9
0.0
18.9
121.5
58.5
29.3
42.5
11.0
0.0
19.2
121.7
59.4
44.3
10.8
0.0
19.0
121.1
59.0
28.9
42.8
10.7
0.0
18.7
122.1
59.8
29.3
45.3
10.6
0.0
18.5
124.1
62.2
29.4
n.a.
n.a.
331.2
28.9
0.4
347.2
67.1
21.8
36.6
8.0
8.0
8.0
8.0
8.0
25.1
33.0
9.0
9.0
9.0
9.0
9.0
34.0
0.3
351.4
67.4
26.0
31.8
9.6
199.0
51.9
147.1
53.1
33.5
0.3
355.1
66.5
33.0
0.2
366.1'
63.5
25.6
27.7
10.2
10.2
10.2
10.2
10.2
25.0
9.7
198.5
50.3
148.2
54.7
33.0
0.2
359.8
62.0
26.3
25.8
9.8
198.9
49.6
149.4
54.0
33.0
0.2
366.1'
63.5
25.6
111
10.2
203.9'
51.5'
152.3
5i.r
32.8
0.2
363.9'
61.8
26.1
25.7
10.1
204.1'
50.7'
153.4
52.0'
32.3
0.2
369.5
64.8
26.4
28.2
10.2
203.2
49.7
153.5
55.5
8.0
8.0
8.0
8.0
8.0
8.0
8.0
8.0
9.0
9.0
9.0
9.0
9.0
9.0
9.0
9.0
10.2
10.2
10.2
10.2
10.2
10.2
10.2
10.2
19.6
2.2
17.4
0.0
9.6
3.6
6.0
2.6
28.4
2.1
26.3
0.0
9.7
3.8
5.8
2.7
32.4
2.5
29.8
0.0
9.9
4.1
5.8
2.6
33.0
2.4
30.5
0.0
10.7
4.2
6.5
4.0
31.5
2.3
29.2
0.0
10.4
3.9
6.5
4.0
31.2
2.2
29.0
0.0
10.8
4.3
6.5
4.0
NOTE. This table has been revised to incorporate several changes resulting from the
benchmarking of finance company receivables to the June 1996 Survey of Finance Companies. In that benchmark survey, and in the monthly surveys that have followed, more detailed
breakdowns have been obtained for some components. In addition, previously unavailable
data on securitized real estate loans are now included in this table. The new information has
resulted in some reclassification of receivables among the three major categories (consumer,
real estate, and business) and in discontinuities in some component series between May and
June 1996.
Includes finance company subsidiaries of bank holding companies but not of retailers and
banks. Data in this table also appear in the Board's G.20 (422) monthly statistical release. For
ordering address, see inside front cover.
1. Owned receivables are those carried on the balance sheet of the institution. Managed
receivables are outstanding balances of pools upon which securities have been issued; these
balances are no longer carried on the balance sheets of the loan originator. Data are shown
61.2
26.5
29.0
before deductions for unearned income and losses. Components may not sum to totals
because of rounding.
2. Excludes revolving credit reported as held by depository institutions that are subsidiaries of finance companies.
3. Includes personal cash loans, mobile home loans, and loans to purchase other types of
consumer goods such as appliances, apparel, boats, and recreation vehicles.
4. Outstanding balances of pools upon which securities have been issued; these balances
are no longer carried on the balance sheets of the loan originator.
5. Credit arising from transactions between manufacturers and dealers, that is, floor plan
financing.
6. Includes loans on commercial accounts receivable, factored commercial accounts, and
receivable dealer capital; small loans used primarily for business or farm purposes; and
wholesale and lease paper for mobile homes, campers, and travel trailers.
A34
1.53
Domestic Financial Statistics • June 1998
MORTGAGE MARKETS
Mortgages on New Homes
Millions of dollars except as noted
1997
Item
1995
1998
1997
1996
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Terms and yields in primary and secondary markets
PRIMARY MARKETS
Terms'
2 Amount of loan (thousands of dollars)
5 Fees and charges (percent of loan amount)2
175.8
134.5
78.6
27.7
1.21
182.4
139.2
78.2
27.2
1.21
180.1
140.3
80.4
28.2
1.02
190.6
147.0
79.3
28.3
1.12
183.4
142.4
80.1
28.1
0.94
184.0
143.5
80.8
28.6
0.95
190.7
149.8
81.0
28.2
0.96
184.1
142.3
80.5
28.5
0.91
195.3
148.5
78.6
28.0
0.99
191.7
149.5
81.0
28.3
0.95
7.65
7.85
8.05
7.56
7.77
8.03
7.57
7.73
7.76
7.43
7.61
7.51
7.39
7.54
7.48
7.26
7.40
7.38
7.25
7.40
7.25
7.13
7.27
7.16
7.09
7.24
7.22
7.03
7.17
n.a.
8.18
7.57
8.19
7.48
7.89
7.26
7.52
7.10
7.53
6.90
7.51
6.84
7.17
6.74
7.08
6.56
7.06
6.63
n.a.
6.66
Yield (percent per year)
7 Effective rate1'3
8 Contract rate (HUD series)4
SECONDARY MARKETS
Yield (percent per year)
9 FHA mortgages (Section 203)5
10 GNMA securities6
Activity in secondary markets
FEDERAL NATIONAL MORTGAGE ASSOCIATION
Mortgage holdings (end of period)
11 Total
12 FHA/VA insured
253,511
28,762
224,749
287,052
30,592
256,460
316,678
31,925
284,753
307,256
31,847
275,409
310,421
32,080
278,341
314,627
31,878
282,749
316,678
31,925
284,753
320,062
31,621
288,441
322,957
31,650
291,307
327,025
31,965
295,060
14 Mortgage transactions purchased (during period)
56,598
68,618
70,465
6,544
7,619
8,166
6,692
7,647
8,630
12,095
Mortgage commitments (during period)
15 Issued7
16 To sell8
56,092
360
65,859
130
69,965
1,298
7,573
215
9,190
300
5,123
139
6,275
140
12,199
60
10,587
0
14,057
92
107,424
267
107,157
137,755
220
137,535
164,421
177'
164,244'
157,165
186
156,979
159,801
183
159,618
160,974
180
160,794
164,421
177'
164.244'
169,142
173'
168,969'
175,770
185,928
170
185,758
98,470
85,877
125,103
119,702
117,401'
114,258'
10,362
9,727
12,175
11,712'
11,152
10,832
15,979'
14,587
13,120
12,702
118,659
128,995
120,089
10,877
11,986
12,047
15,805
15,638
FEDERAL HOME LOAN MORTGAGE CORPORATION
Mortgage holdings (end of period)^
17 Total
18 FHA/VA insured
19 Conventional
Mortgage transactions (during period)
21 Sales .
22 Mortgage commitments contracted (during period)9
175,600'
1. Weighted averages based on sample surveys of mortgages originated by major institutional lender groups for purchase of newly built homes; compiled by the Federal Housing
Finance Board in cooperation with the Federal Deposit Insurance Corporation.
2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or the
seller) to obtain a loan.
3. Average effective interest rate on loans closed for purchase of newly built homes,
assuming prepayment at the end of ten years.
4. Average contract rate on new commitments for conventional first mortgages; from U.S.
Department of Housing and Urban Development (HUD). Based on transactions on the first
day of the subsequent month.
5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured
by the Federal Housing Administration (FHA) for immediate delivery in the private
secondary market. Based on transactions on first day of subsequent month.
nff
12,481
13,610
17,397
21,011
19,085
23,060
6. Average net yields to investors on fully modified pass-through securities backed by
mortgages and guaranteed by the Government National Mortgage Association (GNMA),
assuming prepayment in twelve years on pools of thirty-year mortgages insured by the
Federal Housing Administration or guaranteed by the Department of Veterans Affairs.
7. Does not include standby commitments issued, but includes standby commitments
converted.
8. Includes participation loans as well as whole loans.
9. Includes conventional and government-underwritten loans. The Federal Home Loan
Mortgage Corporation's mortgage commitments and mortgage transactions include activity
under mortgage securities swap programs, whereas die corresponding data for FNMA
exclude swap activity.
Real Estate
1.54
A35
MORTGAGE DEBT OUTSTANDING1
Millions of dollars, end of period
Type of holder and property
Q4
! All holders.
2
3
4
5
fly type of property
One- to four-family residences . . .
Multifamily residences
Nonfarm, nonresidential
Farm
By type of holder
6 Major financial institution!;
Commercial banks
One- to four-family
Multifamily
Nonfarm. nonresidential
Farm
Savings institutions
One- to four-family
Multifamily
Nonfarm, nonresidential
Farm
Life insurance companies
One- to four-family
Multifamily
Nonfarm, nonresidential
Farm
22 Federal and related agencies . .
23 Government National Mortgage Association
24
One- to four-family
25
Multifamily
26
Farmers Home Administration4
27
One- to four-family
28
Mullifamily
29
Nonfarm, nonresidential
30
Farm
31 Federal Housing and Veterans' Administrations .. .
32
One- to four-family
33
Multifamily
34 Resolution Trust Corporation
35
One- to four-family
.
36
Multifamily
37
Nonfarm, nonresidential
38
Farm
39 Federal Deposit Insurance Corporation
40
One- to four-family
41
Multifamily
42
Nonfarm. nonresidential
43
Farm
44
Federal National Mortgage Association
45
One- to four-family
46
Multifamily
47
Federal Land Banks
48
One- to four-family
,
,, .
49
Farm
50
Federal Home Loan Mortgage Corporation
51
One- to four-family
52
Multifamily
53 Mortgage pools or trusts5
54 Government National Mortgage Association
55
One- to four-family
56
Multifamily
57
Federal Home Loan Mortgage Corporation
58
One- to four-family
59
Multifamily
60
Federal National Mortgage Association
61
One- to four-family
62
Multifamily
6.) Farmers Home Administration4
64
One- to four-family
65
Multifamily
66
Nonfarm, nonresidential
67
Farm .
68
Private mortgage conduits .
69
One- to four-family6
Multifamily.
Nonfarm, nonresidential. .
Farm
73 Individuals and others
74
One- lo four-family
75
Mullifamily
76
Nonfarm, nonresidential
77
Farm
Q2
Q4">
4,392,093
4,606,303
4,929,430
4,929,430
4,986,602
5,076,193
5,176,094
5,277,185
3,357,475
274,625
677,022
82,971
3,533,295
287,297
701,150
84,561
3,761,711
312,558
768,027
87,134
3,761,711
312,558
768,027
87,134
3,806,572
316,582
775,795
87,653
3,870,145
323,069
794,301
88,678
3,946,690
327,991
811,657
89.755
4,019,228
338.135
829,476
90,346
1,819,806
1,012,711
615,861
39,346
334,953
22,551
596,191
477,626
64,343
53,933
289
210,904
7,018
23,902
170,421
9,563
1,894.420
1,090,189
669,434
43.837
353.088
23,830
596,763
482,353
61,987
52,135
288
207,468
7,316
23,435
167,095
9,622
1,979,114
1,145.389
698,508
46,675
375,322
24,883
628,335
513,712
61,570
52.723
331
205,390
6,772
23,197
165,399
10,022
1,979,114
1,145,389
698,508
46,675
375,322
24,883
628,335
513,712
61,570
52,723
331
205,390
6,772
23,197
165,399
10,022
1,993,046
1,160,136
708,802
47,618
378,474
25,242
626.381
513,393
60,645
52,007
336
206,529
6,799
23,320
166,277
10,133
2,033.655
1,196,517
733.670
49,124
387,661
26,061
629,062
516,521
60,070
52,132
338
208,077
6,842
23,499
167,548
10,188
2,066,259
1.227,076
752,011
49,648
398,619
26,798
629,757
518,199
60,335
50,878
344
209.426
7,080
23,615
168,374
10,358
2.084,728
1,244,210
762,421
51,100
403,712
26,977
629,726
518,976
59,527
50,870
353
210,792
7,186
23,755
169,377
10,473
315,580
6
6
0
41,781
18,098
11,319
5,670
6,694
10,964
4,753
6,211
10,428
5,200
2,859
2,369
0
7,821
1,049
1,595
5,177
0
174,312
158,766
15,546
28,555
1,671
26,885
41,712
38,882
2,830
306,774
2
2
0
41,791
17,705
11,617
6,248
6,221
9,809
5,180
4,629
1,864
691
647
525
0
4,303
492
428
3,383
0
176,824
161,665
15,159
28,428
1,673
26.755
43.753
39,901
3.852
300,935
2
2
0
41.596
17,303
11,685
6,841
5,768
6.244
3,524
2.719
0
0
0
0
0
2,431
365
413
1,653
0
174,556
160,751
13,805
29,602
1,742
27,860
46,504
41,758
4.746
300,935
2
2
0
41,596
17,303
11,685
6,841
5,768
6,244
3,524
2,719
0
0
0
0
0
2,431
365
413
1,653
0
174,556
160.751
13,805
29,602
1.742
27,860
46.504
41,758
4,746
295,203
6
6
0
41,485
17,175
11,692
6,969
5,649
4,330
2,335
1,995
0
0
0
0
0
2,217
333
377
1,508
0
172,829
159,634
13,195
29,668
1,746
27,922
44,668
39,640
5,028
292,966
7
7
0
41,400
17,239
11,706
7,135
5.321
4,200
2,299
1,900
0
0
0
0
0
1.816
272
309
1,235
0
170,386
157,729
12,657
29,963
1,763
28,200
45,194
40,092
5,102
291,410
7
7
0
41,332
17,458
11,713
7,246
4,916
3,462
2,810
652
0
0
0
0
0
1.476
221
251
1.004
0
168,458
156,363
12,095
30,346
1,786
28,560
46,329
40,953
5,376
292,522
1,732,347
450,934
441,198
9,736
490.851
487,725
3,126
530,343
520,763
9,580
19
3
0
9
7
260,200
208,500
14,925
36,774
0
1,866,763
472,283
461,438
10,845
515,051
512,238
2,813
582,959
569,724
13,235
11
2
0
5
4
296,459
227,800
21.279
47,380
0
2.070,436
506,340
494.158
12,182
554,260
551.513
2,747
650.780
633,210
17,570
3
0
0
0
3
359.053
261,900
33,689
63,464
0
2,070,436
506.340
494,158
12,182
554,260
551,513
2,747
650,780
633,210
17,570
3
0
0
0
3
359,053
261,900
33,689
63,464
0
2,113,770
513,471
500,591
12,880
562,894
560,369
2,525
663,668
645,324
18,344
3
0
0
0
3
373,734
271,100
35,607
67,027
0
2,153,812
520,938
507,618
13.320
567,187
564.445
2,742
673,931
654,826
19,105
2
0
0
0
2
391,753
279,450
38,992
73,312
0
2,210.930
529.867
516,217
13,650
569,920
567,340
2,580
690,919
670,677
20,242
2
0
0
0
2
420,222
299,400
41,973
78,849
0
2.282.566
536,810
523,156
13,654
579,385
576,846
2,539
709,582
687,981
21,601
2
0
0
0
2
456,787
318,000
48,261
90,526
0
524,360
370,356
69,306
67,715
16,983
538,347
375.682
73.533
71,291
17,841
578,945
376,493
81,560
102,625
18,268
578,945
376,493
81,560
102,625
584,583
379,327
83.354
103,533
18,368
595,761
387,372
84.543
105.279
607,495
396,169
85,861
106,689
18,567
18,776
617,369
403.526
87,823
107,129
18,891
1. Multifamily debt refers to loans on structures of five or more units.
2. Includes loans held by nondeposit trust companies but not loans held by bank trust
departments.
3. Includes savings banks and savings and loan associations.
4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from
FmHA mortgage pools to FmHA mortgage holdings in 1986:O4 because of accounting
changes by the Farmers Home Administration.
5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by
the agency indicated.
01
18,268
0
41,195
17,253
11,720
7,370
4.852
3.821
3,091
730
0
0
0
0
0
724
109
123
492
0
167,722
156,245
11,477
30,598
1,800
28,798
48,454
42.629
5,825
6. Includes securitized home equity loans.
7. Other holders include mortgage companies, real estate investment trusts, state and local
credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and
finance companies.
SOURCE. Based on data from various institutional and government sources. Separation of
nonfarm mortgage debt by type of property, if not reported directly, and interpolations and
extrapolations, when required for some quarters, are estimated in part by the Federal Reserve.
Line 69 from Inside Mortgage Securities and other sources.
A36
1.55
Domestic Financial Statistics • June 1998
CONSUMER CREDIT1
Millions of dollars, amounts outstanding, end of period
1996
Holder and type of credit
1997
Nov.
Oct.
Sept.
Dec.
Feb.
Seasonally adjusted
1,094,197
2 Automobile .
3 Revolving.. .
4 Other2
1,179,892
l,231,970r
1,224,466
l,233,908r
l,228,050r
l,231,970r
1,236360
1,243,626
364,231
442,994
286,972
1 Total
392,370
499,209
288,313
415,335'
530,811
285,824'
406,219
526,377
291,870
410,431
530,748
292,729'
408,646'
529,810
289,594'
415,335'
530,811
285,824'
417,607
532,857
286,096
418,929
536,751
287,946
Not seasonally adjusted
1,122,828
1,211,590
l,265,384r
1,227,314
1,233,408'
1,235,598'
1,265,384'
1,246,594
1,238.380
By major holder
Commercial banks
Finance companies
Credit unions
Savings institutions
Nonfinancial business
Pools of securitized assets4
501,963
152,123
131,939
40,106
85,061
211,636
526,769
152,391
144,148
44,711
77,745
265,826
512,539'
160,022
153,667
47,172
78,927
313,057'
507,549
158,428
150,669
48,487
68,658
293,523
506,291'
156,867
151,486
48,049
68,547
302,168
506,497'
156,375
151,770
47,611
70,464
302,881'
512,539'
160,022
153,667
47,172
78,927
313,057'
500,847
160,167
152,346
46,733
75,355
311,146
495,572
157,227
151,172
46,295
72,776
315,338
By major type of credit
12 Automobile
13 Commercial banks
14 Finance companies
15 Pools of securitized assets4
367,069
151,437
81,073
44,635
395,609
157,047
86,690
51,719
418,859'
155,254
87,015
64,950*
409,812
157,234
88,545
55,991
414,950
157,857
86,805
60,648
412,869'
156,232
86,046
60,378'
418,859'
155,254
87,015
64.9501
415,840
154,413
87,379
63,066
414,613
152,747
84,677
65,957
16 Revolving
17 Commercial banks
18 Finance companies
19 Nonfinancial business3
464,134
210,298
28,460
53,525
522,860
228,615
32,493
44,901
555,869
219,826
38,608
44,966
524,281
209,269
34,925
37,685
527,479
209,544
34,717
37,479
532,907
212,726
34,789
38,865
555,869
219,826
38,608
44,966
541,379
208,750
37,585
42,689
536,095
204,564
37,020
40,976
20
Pools of securitized assets
21 Other
22
Commercial banks
23 Finance companies
24 Nonfinancial business3
25
Pools of securitized assets4
147,934
291,625
140,228
42,590
31,536
19,067
188,712
293,121
141,107
33,208
32,844
25,395
221,465
290,656'
137,459'
34,399
33,961
26,642
212,403
293,221
141,046
34,958
30,973
25,129
215,674
290,979'
138,890'
35,345
31,068
25,846
216,411
289,822'
137,539'
35,540
31,599
26,092
221,465
290,656'
137,459'
34,399
33,961
26,642
221,805
289,375
137,684
35,203
32,666
26,275
223,400
287,672
138,261
35,530
31,800
25,981
5 Total
6
7
8
9
10
11
1. The Board's series on amounts of credit covers most short- and intermediate-term credit
extended to individuals. Data in this table also appear in the Board's G.I9 (421) monthly
statistical release. For ordering address, see inside front cover.
2. Comprises mobile home loans and all other loans that are not included in automobile or
revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be
secured or unsecured.
1.56
3. Includes retailers and gasoline companies.
4. Outstanding balances of pools upon which securities have been issued; these balances
are no longer carried on the balance sheets of the loan originator.
5. Totals include estimates for certain holders for which only consumer credit totals are
available.
TERMS OF CONSUMER CREDIT1
Percent per year except as noted
1997
Item
1995
1996
1998
1997
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
8.96
14.50
n.a.
n.a.
8 87
14.01
ImBREST RATES
Commercial banks
Credit card plan
3 All accounts
9.57
13.94
9.05
13.54
9.02
13.90
8.99
13.84
n.a.
n.a.
16.02
15.79
15.63
15.50
15.77
15.57'
15.78
15.81'
n.a.
n.a.
15.65
15.62'
n.a.
n.a.
15.65
15 33
11 19
14.48
2 24-month personal
9.84
13.53
7 12
13.27
5 93
13.38
6 12
13.29
7 27
13 22
6 85
13 14
5 93
13 16
6 12
12 77
6 98
12 87
54.1
52 2
51.6
51.4
54.1
51 0
55.5
51 2
55.4
50 8
54.4
50 6
53.7
50 5
53.5
50 5
52.8
52 2
52.6
52 5
92
99
91
100
92
99
93
99
93
99
92
101
91
99
92
99
92
98
92
97
16,210
11,590
16,987
12,182
18,077
12,281
18,329
12,204
18,520
12,190
18,779
12,287
18,923
12,389
19,121
12,547
18,944
12,391
18,825
12,356
Auto finance companies
OTHER TERMS 3
Maturity (months)
7 New car
8 Used car
Loan-tovalue ratio
10 Used car
Amount financed (dollars)
11 New car
12 Used car
1. The Board's series on amounts of credit covers most short- and intermediate-term credit
extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly
statistical release. For ordering address, see inside front cover.
2. Data are available for only the second month of each quarter.
3. At auto finance companies.
Flow of Funds A3 7
1.57
FUNDS RAISED IN U.S. CREDIT MARKETS1
Billions of dollars; quarterly data at seasonally adjusted annual rates
Transaction category or sector
Q2
Q3
Q4
Ql
Q2
03
Q4
Nonfinancial sectors
575.2
By sector and instrument
2 Federal government
3 Treasury securities
4 Budget agency securities and mortgages
256.1
248.3
7.8
5 Nonfederai
704.2
719.7
758.8
694.9
686.8
638.7
724.2
612.6
722.3
155.9
155.7
2
144.4
142.9
1.5
145.0
146.6
-1.6
23.1
23.2
-.1
62.7
60.5
2.2
163.2
166.3
-3.1
126.9
130.2
-3.3
81.2
82.6
-1.4
-97.1
-97.3
•2
40.9
41.9
-.9
67.4
65.6
1.7
419.4
1 Total net borrowing by domestic nonfinancial sectors.
559.7
574.6
735.7
632.2
523.6
511.8
643.0
709.6
681.4
908.8
18.1
-48.2
73.3
102.0
67.2
208.4
175.8
10.7
20.2
1.6
138.9
-.9
2.6
72.5
66.3
33.8
311.7
262.1
17.8
29.2
2.6
88.8
13.7
70.2
90.7
107.7
65.9
333.8
257.5
21.0
52.1
3.2
53.8
9.2
32.8
71.5
49.8
47.3
306.9
248.5
17.6
35.9
4.9
114.7
-14.2
-64.7
67.8
136.6
63.0
253.3
238.5
12.0
.7
2.2
81.9
-24.1
41.6
89.9
31.9
3.9
330.0
249.6
27.6
51.2
1.6
38.6
7.2
43.7
79.4
147.5
31.2
263.1
229.9
10.8
20.4
2.1
70.8
20.3
95.9
86.1
110.5
20.3
316.6
226.5
21.3
64.6
4.1
60.0
14.5
51.8
122.9
24.7
73.5
340.9
261.5
15.1
60.0
4.3
53.0
12.8
89.3
74.4
147.9
138.3
414.4
312.2
36.6
63.2
2.4
31.5
6
7
8
9
10
11
12
13
14
15
16
By instrument
Commercial paper
Municipal securities and loans
Corporate bonds
Bank loans n.e.c
Other loans and advances
Mortgages
Home
Multifamily residential
Commercial
Farm
Consumer credit
-6.6
-25.9
1.0
60.7
21.4
-35.9
23.3
75.2
34.0
176.5
179.0
2.0
-6.8
2.2
124.9
17
18
19
20
21
22
By borrowing sector
Household
Nonfinancial business
Corporate
Nonfarm noncorporate
Farm
State and local government
218.7
52.3
46.5
3.2
2.6
62.3
322.8
141.9
134.3
3.3
4.4
-45.3
363.0
245.7
216.7
26.0
2.9
-49.0
383.0
190.3
144.1
41.5
4.8
1.3
364.1
311.7
244.7
60.7
6.3
59.9
406.0
204.9
159.9
37.1
7.9
21.2
363.5
220.4
192.0
27.9
.6
-60.3
312.1
159.9
92.6
58.2
9.2
39.8
357.9
244.5
193.6
46.6
4.3
40.6
350.4
279.1
205.7
66.8
6.7
80.0
322.2
317.3
250.2
64.0
3.1
41.8
425.8
405.9
329.3
65.5
11.1
77.0
69.8
-9.6
82.9
.7
-4.2
-14.0
-26.1
12.2
1.4
-1.5
71.1
13.5
49.7
8.5
-.5
70.5
11.3
49.4
9.1
.8
51.5
3.7
41.3
8.5
-2.0
36.1
9.6
11.2
15.1
.1
105.7
37.5
60.2
4.7
3.4
87.9
4.4
78.5
7.8
-2.7
26.3
15.5
11.0
-.7
.5
56.4
10.4
34.3
11.5
2
87.8
-11.6
94.6
7.3
-2.5
35.5
.7
25.3
15.7
-6.1
659.2
561.2
775.2
790.2
810.3
731.0
792.5
726.6
750.5
668.9
810.1
1,011.7
23 Foreign net borrowing in United States
24 Commercial paper
25 Bonds
26 Bank loans n.e.c
27 Other loans and advances
28 Total domestic plus foreign
10.0
74.8
75.2
6.4
-18.9
125.1
156.6
Financial sectors
29 Total net borrowing by financial sectors. ..
293.6
464.3
448.4
536.3
614.3
721.7
436.8
644.8
325.9
661.0
536.7
By instrument
Federal government-related
Government-sponsored enterprise securities
Mortgage pool securities
Loans from U.S. government
165.3
80.6
84.7
.0
287.5
176.9
115.4
-4.8
204.1
105.9
98.2
.0
231.5
90.4
141.1
.0
213.4
99.0
114.4
.0
301.4
126.9
174.5
.0
222.9
80.0
142.9
.0
252.8
123.3
129.6
.0
105.7
-8.9
114.6
.0
286.2
198.1
88.1
.0
161.0
46.4
114.6
.0
300.6
160.4
140.3
.0
128.3
-5.5
176.8
40.5
117.6
-13.7
22.6
9.8
244.3
42.7
188.2
4.2
3.4
5.9
304.9
92.2
156.5
16.8
27.9
11.4
400.9
166.7
170.8
13.6
36.0
14.0
420.3
105.4
230.9
20.6
52.7
10.8
213.9
84.4
80.7
2.6
33.3
12.9
392.0
162.0
164.0
20.4
31.2
14.3
220.2
175.9
41.4
7.0
-20.1
16.0
374.8
77.8
215.1
4.9
63.0
14.0
375.6
168.2
139.3
16.7
37.5
14.0
633.1
20.1
12.8
2
22.5
2.6
-.1
13.0
25.5
.1
46.5
19.8
.1
2
99.0
114.4
168.2
48.7
4.8
23.8
8.0
80.7
44.5
42.1
2
14.7
25.8
.3
-.4
80.0
142.9
88.0
30.7
1.7
13.7
5.7
33.7
26.8
23.0
.3
13.7
-16.8
-.2
79.7
31.9
.2
32.0
22.3
2
2
46.4
114.6
169.6
-2.9
3.6
26.9
-6.9
130.7
60.7
41.7
.3
-.3
160.4
30
31
32
33
34 Private
35 Open market paper
36 Corporate bonds
37 Bank loans n.e.c
38 Other loans and advances
39 Mortgages
40
41
42
43
44
45
46
47
48
49
50
51
By borrowing sector
Commercial banking
Savings institutions
Credit unions
Life insurance companies
Government-sponsored enterprises
Federally related mortgage pools
Issuers of asset-backed securities (ABSs)
Finance companies
Mortgage companies
Real estate investment trusts (REITs)
Brokers and dealers
Funding corporations
122.2
-14.4
22.4
3.6
13.4
11.3
.2
.2
80.6
84.7
82.8
-1.4
.0
3.4
12.0
6.3
'.3
172.1
111.4
68.8
48.7
-11.5
13.7
.5
23.1
-.1
105.9
98.2
132.9
50.2
.4
6.0
-5.0
34,9
1.1
90.4
141.1
132.0
45.9
12.4
12.8
-2.0
64.1
.3
126.9
174.5
162.5
67.8
16.0
11.5
13.2
62.7
2.0
.8
.1
123.3
129.6
138.6
43.8
12.1
17.7
4.9
123.0
-8.9
114.6
62.9
7.2
5.9
20.2
-2.9
129.4
198.1
88.1
95.0
123.8
5.0
20.3
34.9
-16.1
244.6
287.4
25.7
63.3
12.0
140.3
345.5
66.6
4.9
27.9
7.0
78.8
A3 8 Domestic Financial Statistics • June 1998
1.57
FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued
1996
Transaction category or sector
Q2
Q3
Q4
Ql
Q2
Q3
Q4
All sectors
52 Total net borrowing, all sectors
952.7
1,025.5
1,223.7
1,326.5
1,424.6
1,452.7
1,229.3
1,371.5
1,076.4
1,329.9
1,346.7
1,945.5
53
54
55
56
57
58
59
60
-5.1
421.4
74.8
280.3
-7.2
-.8
128.7
60.7
35.7
448.1
-35.9
153.2
62.9
50.3
186.2
124.9
74.3
348.5
-48.2
311.1
114.7
70.1
214.2
138.9
102.6
376.5
2.6
278.4
92.1
62.5
323.1
88.8
184.1
236.5
70.2
302.8
129.7
99.8
347.8
53.8
124.2
364.1
32.8
313.6
85.5
100.1
317.7
114.7
107.7
386.1
-64.7
208.7
143.8
99.7
266.1
81.9
142.3
379.7
41.6
332.4
60.1
32.4
344.4
38.6
198.6
186.9
43.7
131.8
153.8
11.7
279.1
70.8
108.5
189.1
95.9
335.5
126.8
83.6
330.6
60.0
171.1
201.9
51.8
356.8
48.7
108.5
354.9
53.0
258.1
368.0
89.3
387.1
189.4
195.6
426.4
31.5
Open market paper
U.S. government securities
Municipal securities
Corporate and foreign bonds
Bank loans n.e.c
Other loans and advances
Mortgages
Consumer credit
Funds raised through mutual funds and corporate equities
61 Total net Issues
429.7
125.2
143.9
230.5
217.8
380.4
71.9
156.0
197.7
183.0
313.9
176.6
62 Corporate equities
63 Nonfinancial corporations
64 Foreign shares purchased by U.S. residents
65 Financial corporations
66 Mutual fund shares
137.7
21.3
63.4
53.0
292.0
24.6
-44.9
48.1
21.4
100.6
-3.5
-58.3
50.4
4.4
147.4
-7.0
-64.2
58.8
-1.6
237.6
-41.2
-79.9
38.0
.7
259.0
75.9
.4
70.1
5.4
304.5
-100.1
-127.6
32.7
-5.1
171.9
-20.3
-56.0
42.3
-6.7
176.3
-55.7
-78.8
47.0
-23.9
253.4
-57.9
-90.4
53.0
-20.6
240.9
10.2
-60.4
62.2
8.4
303.7
-61.5
-90.0
-10.4
38.8
238.2
1. Data in this table also appear in the Board's Z.I (780) quarterly statistical release, tables
F.2 through F.4. For ordering address, see inside front cover.
Flow of Funds
1.58
SUMMARY OF FINANCIAL TRANSACTIONS1
Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates
1996
19%
Transaction category or sector
Q2
NET LENDING IN CREDIT MARKETS
1 Total net lending in credit markets
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
Domestic nonfederal nonfinancial sectors
Household
Nonfinancial corporate business
Nonfarm noncorporate business
State and local governments
Federal government
Rest of the world
Financial sectors
Monetary authority
Commercial banking
U.S.-chartered banks
Foreign banking offices in United States
Bank holding companies
Banks in U.S.-affiliated areas
Savings institutions
Credit unions
Bank personal trusts and estates
Life insurance companies
Other insurance companies
Private pension funds
State and local government retirement funds
Money market mutual funds
Mutual funds
Closed-end funds
Government-sponsored enterprises
Federally related mortgage pools
Asset-backed securities issuers (ABSs)
Finance companies
Mortgage companies
Real estate investment trusts (REITs)
Brokers and dealers
Funding corporations
Q3
Q4
Ql
Q2
03
2
952.7
1,025.5
1,223.7
1326.5
1,424.6
1,452.7
1429.3
1,371.5
1,076.4
1,329.9
1346.7
43.0
2.4
9.1
-1.1
32.6
-18.4
129.3
798.8
36.2
142.2
149.6
-9.8
.0
2.4
-23.3
21.7
9.5
100.9
27.7
49.5
22.7
20.4
159.5
20.0
87.8
84.7
80.2
-20.9
.0
.6
14.8
-35.3
241.8
278.5
17.7
.6
-55.0
-27.5
132.3
678.9
31.5
163.4
148.1
11.2
.9
3.3
6.7
28.1
7.1
66.7
24.9
45.5
22.3
30.0
-7.1
-3.7
117.8
115.4
61.7
48.3
-24.0
4.7
-44.2
-16.2
-85.7
-1.8
-2.4
.3
-81.8
-.2
273.9
1,035.7
12.7
265.9
186.5
75.4
-.3
4.2
-7.6
16.2
-18.8
99.2
21.5
61.4
27.5
86.5
52.5
10.5
84.7
98.2
111.1
49.9
-3.4
2.2
90.1
-24.6
-17.9
5.1
13.5
.4
-37.0
-7.7
409.3
942.9
12.3
187.5
119.6
63.3
3.9
.7
19.9
25.5
3.9
72.5
22.5
46.5
45.9
88.8
48.9
2.2
92.0
141.1
101.8
18.4
8.2
3.5
-15.7
17.2
-115.2
-101.7
5.3
.7
-19.6
4.9
316.4
1,218.5
38.3
324.3
275.0
39.6
5.4
4.2
-7.7
15.7
9.2
121.1
23.3
66.9
48.3
84.5
74.7
.8
95.0
114.4
129.8
22.2
6.7
5.0
15.9
30.4
311.1
274.9
37.4
.4
-1.7
-.1
268.9
872.8
11.7
179.7
121.9
50.7
5.4
1.7
43.8
33.0
4.2
.9
30.5
46.9
60.4
27.0
54.3
2.2
114.7
174.5
135.7
36.3
-26.8
3.4
-72.0
12.3
-222.3
-81.9
-9.1
.4
-131.7
-7.1
485.3
973.4
11.5
196.1
119.5
71.1
4.8
.7
49.7
21.1
7.8
123.2
14.2
41.3
45.5
83.0
27.5
2.2
81.4
142.9
62.0
13.2
3.4
3.4
35.5
8.6
-158.5
-22.8
-5.9
.4
-130.2
-4.1
532.2
1.001.9
8.4
248.3
158.9
80.5
10.5
-1.6
-47.9
24.3
7.2
118.1
27.7
31.0
41.9
81.3
25.3
2.2
137.9
129.6
89.6
-6.2
4.1
3.9
82.7
-7.6
-205.8
-204.2
58.0
.5
-60.2
1.9
367.3
913.0
37.4
308.1
195.9
1O4.0
2.2
6.1
-5.3
18.5
8.2
94.3
-.1
52.4
3.6
65.2
61.9
2.7
45.1
114.6
39.3
44.9
-.3
5.0
-14.5
31.9
-66.3
-30.0
-51.5
.7
14.5
5.6
303.0
1,087.5
47.2
309.2
301.1
1.1
5.1
1.8
23.8
25.7
8.9
175.0
27.9
58.5
39.2
19.7
91.6
1.3
119.2
88.1
80.2
1.9
10.0
5.0
-11.7
-33.1
-175.8
-121.5
20.0
.8
-75.1
3.0
402.7
1,116.8
14.3
209.8
209.5
-.6
-5.0
5.8
-42.1
15.7
9.4
107.0
32.4
66.2
90.6
123.6
103.6
.3
55.5
114.6
107.0
65.2
7.2
5.0
15.8
15.6
952.7
1,025.5
1,223.7
1324.5
1,424.6
1,229.3
U71.5
1,076.4
1^29.9
1346.7
.0
.4
-18.5
50.5
117.3
-70.3
-23.5
20.2
71.3
137.7
292.0
52.0
61.4
36.0
255.6
11.4
.9
24.6
345.6
-5.8
.0
.7
52.9
89.8
-9.7
-39.9
19.6
43.3
78.2
24.6
100.6
93.7
-.1
34.5
246.1
2.6
17.8
59.0
250.8
2.2
.6
35.3
9.9
-12.7
96.6
65.6
142.3
110.5
-3.5
147.4
105.2
26.7
44.9
233.9
4.6
-49.7
39.5
462.9
-6.3
-.5
.0
82.0
-51.6
15.8
97.2
114.0
145.8
40.3
-7.0
237.6
68.1
52.4
43.6
227.2
14.0
12.5
22.6
490.7
.7
-.5
.0
89.0
-40.2
41.1
98.5
120.5
157.6
114.0
-41.2
259.0
75.7
103.8
57.0
298.6
20.1
26.4
15.8
544.1
1.6
.0
.0
3.0
-50.8
3.9
-3.2
83.1
23.1
98.4
75.9
304.5
116.9
-34.8
31.4
195.6
7.6
11.8
19.6
415.3
-26.6
-1.8
2.3
119.7
-97.2
105.9
94.2
180.2
145.1
-15.9
-100.1
171.9
-15.9
5.3
59.2
221.6
12.5
19.2
44.5
413.4
.7
.0
-2.3
104.5
17.6
-53.3
90.1
135.4
187.5
83.3
-20.3
176.3
97.2
125.2
66.7
277.0
16.6
19.8
5.9
656.5
-17.6
-2.1
.4
188.6
-88.8
85.3
157.9
49.9
182.4
32.8
-55.7
253.4
66.8
117.1
39.8
243.3
30.4
23.5
22.6
587.8
.4
.0
.2
18.8
-43.7
64.2
24.5
176.3
58.5
193.7
-57.9
240.9
63.4
137.4
77.5
337.3
1.8
26.3
19.7
633.3
2.4
.0
1.3
105.4
-42.7
-49.2
46.6
194.1
243.6
115.9
10.2
303.7
131.9
79.7
62.8
311.8
29.9
28.9
19.7
406.6
2,318.0
2,084.3
2,694.7
2,925.1
3.364.6
2,755.4
2,566.9
3355.8
2,994.4
3302.3
3349.2
-.2
-5.7
4.2
46.4
15.8
-190.1
43.0
-2.7
69.4
16.6
-145.6
-.5
25.7
-3.1
36.1
17.8
-110.6
-1.0
55.8
-3.3
31.9
16.3
-120.7
-.6
68.3
-16.0
52.1
20.5
-283.0
-1.0
26.6
-22.5
100.1
23.2
-123.2
1.3
86.3
-4.4
-90.6
20.3
-240.1
-3.1
37.3
4.2
132.6
21.6
19.0
-.3
178.0
26.9
-104.6
12.2
-189.3
-.5
-10.2
-24.4
178.6
28.3
-321.4
78.1
-51.6
6.2
11.2
-281.7
-1.5
-1.3
-4.3
-4.8
-2.8
.3
-6.0
-3.8
-29.1
.5
-4.0
-33.9
-2.7
-3.9
-33.4
27.1
-4.7
-103.5
-21.4
-3.7
-42.7
-9.4
-2.6
15.2
16.1
-4.8
-73.1
2.1
-3.4
-17.2
2,454.5
2,111.1
2,768.2
2,983.6
3,563.4
2,875.4
3,212.0
3,068.4
3413.7
3,604.6
RELATION OF LIABILITIES
TO FINANCIAL ASSETS
34 Net flows through credit markets
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
Other financial sources
Official foreign exchange
Special drawing rights certificates
Treasury currency
Foreign deposits
Net interbank transactions
Checkable deposits and currency
Small time and savings deposits
Large time deposits
Money market fund shares
Security repurchase agreements
Corporate equities
Mutual fund shares
Trade payables
Security credit
Life insurance reserves
Pension fund reserves
Taxes payable
Investment in bank personal trusts
Noncorporate proprietors' equity
Miscellaneous
55 Total financial sources
56
57
58
59
60
61
Liabilities not identified as assets (—)
Treasury currency
Foreign deposits
Net interbank liabilities
Security repurchase agreements
Taxes payable
Miscellaneous
Floats not included in assets (—)
62 Federal government checkable deposits
63 Other checkable deposits
64 Trade credit
65 Total identified to sectors as assets
1. Data in this table also appear in the Board's Z.1 (780) quarterly statistical release, tables
F. 1 and F.5. For ordering address, see inside front cover.
2,763.6
2. Excludes corporate equities and mutual fund shares.
A39
A40
1.59
Domestic Financial Statistics • June 1998
SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1
Billions of dollars, end of period
1996
Transaction category or sector
1996
Q2
Q4
Q3
Ql
Q2
Q3
Q4
Nonfinancial sectors
1 Total credit market debt owed by
domestic nonfinancial sectors
13,013.0
13.717.2
14,436.9
15,194.1
14,065.4
14.241.9
14,436.9
14,602.1
14,727.9
14.913.9
15,194.1
By sector and instrument
2 Federal government
3
Treasury securities
4
Budget agency securities and mortgages . . .
3.492.3
3,465.6
3,636.7
3,608.5
28.2
3,781.8
3,755.1
26.6
3,804.9
3,778.3
26.5
3,693.8
3,665.5
28.2
3,733.1
3,705.7
27.4
3,781.8
3,755.1
26.6
3,829.8
3,803.5
26.3
3,760.6
3,734.3
26.3
3,771.2
3,745.1
26.1
3.804.9
3,778.3
26.5
5 Nonfederal
9,520.7
10,371.6
10,508.8
10,655.1
10,772.3
10,967.3
181.7
173.0
1,281.7
1,376.4
168.7
1,305.2
1,418.7
963.8
782.9
4,946.6
3,806.6
303.4
749.0
87.7
1,186.4
179.3
1.326.7
168.6
1.366 2
1,489.5
1,035.8
836.5
5,227.2
4,019.2
308.7
765.2
88.7
1.205.0
176.6
1,338.9
1,470.9
998.5
801.3
5,129.1
3,946.7
312.5
780.2
89.8
1,227.3
6
7
8
9
10
11
12
13
14
15
16
By instrument
Commercial paper
Municipal securities and loans
Corporate bonds
Bank loans o.e.c
Other loans and advances
Mortgages
Home
Multifamily residential
Commercial
Farm
Consumer credit
17
18
19
20
21
22
By borrowing sector
Household..'
Nonfinancial business
Corporate
Nonfarm noncorporate
Farm
State and local government
26.7
139.2
1,341.7
1,253.0
759.9
669.6
4,373.4
3,357.5
889.2
919.2
769.4
4,815.7
3,704.1
293.8
731.1
90.3
1,265 4
757.3
4,741.6
3,633.7
290.8
731.0
86.2
1,144.5
1,173.5
156.4
1 296.0
1,398.8
928.2
770.6
4,893.4
3,761.7
300.7
743.9
87.1
1,211.6
5,204.6
4.381.7
3,042.4
1.189.3
149.9
1.068.9
5.571.5
4.689.0
3,282.8
1.250.1
156.2
1,128.7
4,991.3
4.309.6
2.993.7
1,167.8
148.2
1,070.7
5,101.0
4.352.1
3,028.4
1,174.1
149.5
1,055.7
5,204.6
4,381.7
3,042.4
1,189.3
149.9
1,068.9
5,240.0
4,454.2
3,104.9
1,200.9
148.3
1,078.1
5,340.5
4.531.4
3,160.4
1,217.6
153.4
1,095.4
5,439.4
4,598.0
3,209.7
1,233.0
155.4
1,105.2
5,571.5
4.689.0
3,282.8
1,250.1
156.2
1,128.7
442.9
513.4
558.8
462.6
490,2
513.4
517.8
531.6
548.7
558.8
56.2
291.9
34.6
60.2
67.5
341.3
43.7
61.0
65.1
382.6
52.1
59.0
54.5
306.7
40.5
60.9
65.8
321.7
41.7
61.0
67.5
341.3
43.7
61.0
69.3
344.1
435
60.9
71.3
352.7
46.4
61.2
64.3
376.3
48.2
59.9
65.1
382.6
52.1
59.0
14,160.1
14,950.3
15,752.9
14,528.0
14,732.1
14,950.3
15,119.8
15,259.5
15,462.6
15,752.9
157.4
1.293.5
1,326.3
861.9
736.9
4,581.7
3,533.3
279.2
684.7
168.6
1,366.2
1.489.5
1,035.8
836.5
5.227.2
4,019.2
321.6
983.9
84.6
1.122.8
156.4
1,296.0
1,398.8
928.2
770.6
4,893.4
3.761.7
300.7
743.9
87.1
1,211.6
4.482.5
3.921.7
2.657.7
1,121.8
142.2
1,116.5
4,850.7
4.162.2
2,869.2
1,147.9
145.1
1,067.6
23 Foreign credit market debt held in
United States
371.8
24
25
26
27
42.7
242.3
26.1
60.8
13,384.9
Commercial paper
Bonds
Bank loans n.e.c
Other loans and advances
28 Total credit market debt owed by nonfinancial
sectors, domestic and foreign
268.4
664.5
83.0
796.0
1,297.9
1,359.4
86.7
1,440.2
996.5
786.9
5,032.7
3,870.1
321.6
796.0
90.3
1,265.4
Financial sectors
29 Total credit market debt owed by
financial sectors
30
31
32
33
34
35
36
37
38
39
By instrument
Federal government-related
Government-sponsored enterprise securities
Mortgage pool securities
Loans from US. government
Private
Open market paper
Coiporate bonds
Bank loans n.e.c
Other loans and advances
Mortgages
40
41
42
43
44
45
46
47
48
49
50
51
52
By borrowing sector
Commercial banks
Bank holding companies
Savings institutions
Credit unions
Life insurance companies
Government-sponsored enteiprises
Federally related mortgage pools
Issuers of asset-backed securities (ABSs)
Broken; and dealers
Finance companies
Mortgage companies
Real estate investment trusts (REfTs)
Funding corporations
3,797.3
4,248.4
4,784.7
5,366.0
4,511.9
4,624.1
4,784.7
4,861.4
5,029.4
5,133.7
5,366.0
2,172.7
2,376.8
806.5
1,570.3
.0
1.871.5
486.9
1,172.0
53.1
135.0
24.6
2,608.3
2,821.7
995.9
1,825.8
.0
2.544.3
745 7
1,466.3
834
198.9
50.0
2,489.4
2,545.1
866.1
1,679.0
.0
2,079.0
538.6
1,288.8
2,634.7
2,706.2
944.2
2,323.2
642.5
1.390.7
72.9
173.7
43.5
2,746.5
955.8
1,790.7
.0
2,387.2
684.7
1,396.0
76.5
183.0
47.0
2,821.7
155.1
32.4
2,608.3
896.9
1,711.4
.0
2,176.4
579.1
1,328.5
69.8
162.9
36.0
102.6
141.0
168.6
160.3
312.7
107.7
149.1
134.8
.4
1.1
866.1
1.679.0
781.2
26.1
5137
28.5
45.4
291.0
113.6
150.0
140.5
.4
1.6
896.9
1,711.4
819.1
27.3
529.8
31.5
49.9
312.7
125.7
161.1
144.3
.4
1.8
944.2
1,762.1
852.5
35.3
557.8
34.3
60.0
350.0
130.0
164.6
149.8
.5
1.9
955.8
1,790.7
908.8
33.6
532.7
35.2
66.7
363.4
141.0
168.6
160.3
.6
1.8
995.9
1,825.8
998.4
35.3
554.5
36.4
Til
248.6
104.6
148.4
128.3
.3
1.2
846.1
1,643.3
756.6
24.6
506.3
28.1
42.0
282.0
115.3
151.6
136.3
.4
1.8
894.7
1,740.0
829.8
37.1
113.6
150.0
140.5
.4
1.6
896.9
1,711.4
819.1
27.3
529.8
31.5
49.9
700.6
1.472.1
.0
1,624.6
441.6
983.9
48.9
131.6
18.7
94.5
133.6
112.4
.5
.6
700.6
1,472.1
554.1
34.3
433.7
18.7
31.1
211.0
148.0
115.0
.4
.5
806.5
1.570.3
687.0
29.3
483.9
19.1
896.9
1,711.4
.0
2,176.4
579.1
1,328.5
69.8
162.9
36.0
.6
1.8
995.9
1.825.8
998.4
35.3
554.5
36.4
73.7
373.8
846.1
1,643.3
.0
2,022.5
517.3
1,265.2
63.9
146.8
29.2
64.2
894.7
1.740.0
.0
2,226.7
623.0
1,334.4
71.3
157.9
40.0
26.6
528.4
33.0
54.9
348.6
1,762.1
.0
995.9
1,825.8
.0
2.544.3
745.7
1.466.3
83.4
198.9
50.0
373.8
All sector,
53 Total credit market debt, domestic and foreign
54
55
56
57
58
59
60
61
Open market paper
U.S. government securities
Municipal securities
Corporate and foreign bonds
Bank loans n.e.c
Other loans and advances
Mortgages
Consumer credit
17,182.2
18,408.5
19,735.0
21,118.9
19,039.9
19,356.2
19,735.0
19,981.2
20,288.9
20,596.3
21,118.9
623.5
5,665.0
1,341.7
2,479.1
834.9
862.0
4.392.1
983.9
700.4
6,013.6
1,293.5
2,790.3
949.6
803.0
6,390.0
1,296.0
3,068.7
1,041.7
994.5
4,929.4
1,211.6
979.4
6.626.5
1,366.2
3,338.4
1.171.3
1.094.4
5,277.2
1,265.4
753.6
6,183.1
1,297.9
2,931.3
993.7
965.0
4,770.8
1,144.5
777.4
6,278.2
1,281 7
2,986.8
1,025.0
985.4
4,848.1
1,173.5
803.0
6,390.0
1,296.0
3,068.7
1,041.7
994.5
4,929.4
1,211.6
861.1
6,464.5
1,305.2
3,097.2
1.078.6
1,001.7
4.986.6
1,186.4
893.1
6,466.8
1,326.7
3.183.6
1,115.7
1.021.8
5.076.2
1.205.0
925.7
6.517.7
1,338.9
3,243.2
1.123.1
1,044.2
5,176.1
1,227.3
979.4
6,626.5
1,366.2
3,338.4
1.171.3
1.094.4
5.277.2
1,265.4
932.1
4.606.3
1,122.8
1. Data in this table also appear in the Board's 2.1 (780) quarterly statistical release, tables
L.2 through L.4. For ordering address, see inside front cover.
Flow of Funds
A41
1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1
Billions of dollars except as noted, end of period
Transaction category or sector
Q2
Q3
Q4
Ql
Q2
Q3
Q4
CREDIT MARKET DEBT OUTSTANDING 2
1 Total credit market assets
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
Domestic nonfederal nonfinancial sectors
Household
Nonfinancial corporate business
Nonfarm noncorporate business
State and local governments
Federal government
Rest of the world
Financial sectors
Monetary authority
Commercial banking
U.S.-chartered banks
Foreign banking offices in United States . ..
Bank holding companies
Banks in U.S.-affiliated areas
Savings institutions
Credit unions
Bank personal trusts and estates
Life insurance companies
Other insurance companies
Private pension funds
State and local government retirement funds
Money market mutual funds
Mutual funds
Closed-end funds
Government-sponsored enterprises
Federally related mortgage pools
Asset-backed securities issuers (ABSs)
Finance companies
Mortgage companies
Real estate investment trusts (REITs)
Brokers and dealers
Funding corporations
17,182.2
18,408.5
19,735.0
21,118.9
19,039.9
19,356.2
19,735.0
19,981.2
20,288.9
20,596.3
21,118.9
2,998.6
1,941.9
289.2
2,905.0
1,964.5
291.0
38.3
611.1
196.5
1,953.6
14,679.9
393.1
3,707.7
3,175.8
475.8
22.0
2,896.5
1,941.3
273.8
38.2
2,905.0
1,964.5
291.0
38.3
611.1
196.5
1,953.6
14,679.9
393.1
3,707.7
3,175.8
475.8
22.0
2,825.6
2,785.6
1,873.7
272.3
38.6
600.9
198.3
2,125.3
15,179.7
412.4
3,856.8
3,295.2
501.8
23.8
36.1
937.8
299.2
237.4
1,724.1
498.1
792.5
542.7
656.5
860.6
99.7
854.8
1,762.1
753.5
553.1
2,725.9
1,829.4
288.5
233.1
1,654.3
491.2
764.8
529.2
634.3
820.2
98.7
813.6
1,711.4
729.7
544.5
41.2
19.0
167.7
104.5
2,753.7
1,826.9
296.3
39.0
591.5
201.4
2,270.0
15,893.8
431.4
4,031.9
3,450.8
515.4
27.4
38.3
925.5
304.2
242.3
1,775.4
514.4
831.7
577.5
718.8
894.8
99.5
908.6
1,825.8
859.5
566.7
47.9
24.0
183.6
130.3
2,936.2
1,934.5
285.7
38.1
36.5
13.3
93.3
109.3
2,877.8
1,904.9
286.8
37.9
648.1
204.2
1,563.1
13,763.4
380.8
3,520.1
3,056.1
412.6
18.0
33.4
913.3
263.0
229.2
1,581.8
468.7
718.3
483.3
545.5
771.3
96.4
748.0
1,570.3
627.9
526.2
33.0
15.5
183.4
87.3
21.5
161.2
112.0
783.1
564.4
45 4
22.8
165.1
112.3
2,753.7
1.826.9
296.3
39.0
591.5
201.4
2,270.0
15.893.8
431.4
4,031.9
3,450.8
515.4
27.4
38.3
925.5
304.2
242.3
1,775.4
514.4
831.7
577.5
718.8
894.8
99.5
908.6
1,825.8
859.5
566.7
47.9
24.0
183.6
130.3
17,182.2
18,408.5
19,735.0
21,118.9
53.2
8.0
17.6
63.7
10.2
18.2
359.2
290.7
1,229.3
2,279.7
476.9
745.3
660.0
1,852.8
305.7
550.2
5,600.5
1,246.7
106.0
53.7
9.7
18.2
438.1
37.6
729.9
204.4
1,254 8
12,724.3
368.2
3,254.3
2,869.6
337.1
18.4
29.2
920.8
246.8
248.0
1,482.6
446.4
656.9
455.8
459.0
718.8
86.0
663.3
1,472.1
516.8
476.2
34.1
933.2
677.8
643.2
199.2
1,722.2
14,182.3
386.3
3,590.8
3,101.3
437.1
18.1
34.3
932.7
276.9
229.4
1.596.7
197.5
1,844.8
14,417.4
386.2
3,643.3
3,135.3
454.2
19.3
34.5
945.2
34.1
1,911.7
281.8
38.5
593.6
196.9
2,051.1
14,907.6
397.1
3,775.7
3.218.1
499.5
22.5
35.6
931.9
291.2
235.2
1,680.2
491.2
777.9
277.1
38.8
580.5
199.1
2,227.3
15,443.9
412.7
3,912.9
3,351.9
501.0
22.5
37.5
113.9
933.2
288.5
233.1
1,654.3
491.2
764.8
529.2
634.3
820.2
98.7
813.6
1.711.4
729.7
544.5
41.2
19.0
167.7
104.5
19,039.9
19,356.2
19,735.0
19,981.2
20,288.9
20,596.3
21,118.9
61.4
10.2
18.2
385.2
250.0
1,212.3
2,340.2
511.1
809.5
692.0
2.129.9
318.6
562.3
5,901.1
1.269.7
113.4
811.7
5,943.3
54.3
9.7
18.8
415.1
225.8
1,220.8
2,357.9
557.2
838.1
687.6
2,211.6
53.7
9.7
18.2
438.1
240.8
1,245.1
2,377.0
590.9
891.1
700.3
2,342.4
358.1
593.8
6,313.8
1,314.8
120.0
46.3
9.2
46.7
9.2
18.3
485.2
210.2
46.1
9.2
18.7
516.2
186.9
1,234.2
2,437.0
696.1
1,005.1
792.5
2,977.0
432.2
638.8
7,325.1
1,351.3
137.5
1,035.2
6,394.0
48.9
9.2
18.2
527.0
198.9
1,286.2
2,475.5
711.4
1,048.7
814.3
3,013.5
461.9
650.8
7,453.9
1.390.5
140.1
1.050.7
6,441.0
480.7
746.7
509.8
594.7
809.0
97.6
758.9
1,643.3
686.0
539.9
39.3
17.2
138.2
108.1
282.6
231.3
1,627.0
484.2
757.1
517.7
606.6
818.3
98.1
779.3
1,679.0
704.1
538.3
40.2
18.0
147.1
531.6
659.0
838.3
99.3
824.3
1,740.0
734.5
552.4
41.1
20.3
164.1
122.5
43.6
927.3
303.6
239.7
1,750.4
506.2
809.1
562.0
678.7
889.2
99.7
868.7
1,790.7
RELATION OF LIABILITIES
TO FINANCIAL ASSETS
34 Total credit market debt
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
Other liabilities
Official foreign exchange
Special drawing rights certificates
Treasury currency
Foreign deposits
Net interbank liabilities
Checkable deposits and currency
Small time and savings deposits
Large time deposits
Money market fund shares
Security repurchase agreements
Mutual fund shares
Security credit
Life insurance reserves
Pension fund reserves
Trade payables
Taxes payable
Investment in bank personal trusts
Miscellaneous
767.4
120.0
872.0
5,792.0
6,163.8
48.9
9.2
18.2
527.0
198.9
1,286.2
2,475.5
711.4
1.048.7
814.3
3.013.5
461.9
650.8
7,453.9
1,390.5
140.1
1,050.7
6,441.0
37,341.4
40,762.9
44,378.5
48,859.7
21.1
6,237.9
3,419.1
22.1
8,331.3
3,625.4
21.4
10,061.1
3,836.5
Liabilities not identified as assets (—)
Treasury currency
Foreign deposits
Net interbank transactions
Security repurchase agreements
Taxes payable
Miscellaneous
-5.4
276.2
-6.5
67.8
48.8
-977.7
-5.8
301.2
-9.0
103.9
60.8
-1.092.2
-6.8
354.1
Floats not included in assets ( - )
63 Federal government checkable deposits . .
64 Other checkable deposits
65 Trade credit
3.4
38.0
-245.8
47,820.7
53 Total liabilities
Financial assets not included in liabilities (+)
54 Gold and special drawing rights
55 Corporate equities
56 Household equity in noncorporate business
57
58
59
60
61
62
66 Total identified to sectors as assets
324.6
280.1
1,242.0
2,183.2
411.2
602.9
549.5
1,477.3
279.0
505.3
4,880.1
1,141.5
101.4
699.4
5,402.7
872.0
890.4
6,031.6
6,163.8
6,344.1
18.3
489.9
197.1
1,265.3
2,432.3
646.7
952.4
765.1
2,719.6
414.8
623.1
6,940.1
1,322.2
128.9
969.7
6,276.2
42,379.7
43,120.4
44,378.5
45,146.0
46,506.6
47,829.3
48,859.7
21.1
12,958.6
4,087.6
22.0
9,105.0
3,727.1
21.2
9,340.5
3,792.1
21.4
10,061.1
3,836.5
20.9
10,072.3
3,914.9
21.1
11.719.8
4,052.3
21.0
12,804.6
4,111.8
21.1
12,958.6
4,087.6
-6.3
326.1
-8.0
125.5
61.0
-1,222.4
-6.0
347.7
-11.6
113.4
67.7
-1,300.4
-6.8
135.8
73.2
-1,414.2
-7.4
422.4
-28.3
187.9
93.2
-1,631.2
-10.6
135.8
73.2
-1.414.2
-6.9
398.6
-1.6
110.9
70.6
-1,382.7
-7.0
396.0
-8.1
153.4
72.5
-1,439.6
-6.8
415.6
-22.1
164.8
82.3
-1,448.0
-7.4
422.4
-28.3
187.9
3.1
34.2
-274.9
-1.6
30.1
-308.7
-8.1
26.2
-353.2
-3.4
31.8
-338.5
-6.8
27.9
-390.0
-8.1
-308.7
-9.7
25.6
-363.8
-7.8
23.1
-377.8
19.5
-419.9
26.2
-353.2
53,620.4
S9.446.2
67,225.5
56,268.0
57,419.8
59,446.2
60313.1
63301.4
65,989.1
67,225.5
240.8
1,245.1
2,377.0
590.9
891.1
700.3
2,342.4
358.1
593.8
6,313.8
1,314.8
-10.6
1. Data in this table also appear in the Board's Z.I (780) quarterly statistical release, tables
L. I and L.5. For ordering address, see inside front cover.
317.8
577.1
6,030.9
1,263.0
117.9
829.0
-1.7
354.1
-1.6
30.1
1,220.0
2,427.1
606.0
950.8
713.3
2,411.5
380.0
603.7
6,414.7
1,300.6
133.2
2. Excludes corporate equities and mutual fund shares.
93.2
-1,631.2
A42
2,10
Domestic Nonfinancial Statistics • June 1998
NONFINANCIAL BUSINESS ACTIVITY
Selected Measures
Monthly data seasonally adjusted, and indexes 1992=100, except as noted
1997
1995
July
Aug.
Sept.
124.5
125.2
125.6
118.5
119.6
114.4
128.8
115.1
134.1
118 I
119.2
113.9
128.6
114.6
134.9
119.2
120.5
114.6
130.9
115.3
134.9
119.1
120.3
114.5
130.6
115.2
136.1
127.0
126.9
127.9
128.0
1 Industrial production1
2
3
4
5
6
7
Market groupings
Products, total
Final, total
Consumer goods
Equipment
Intermediate
Materials
110.6
111.3
109.9
113.8
108.3
120.8
127.9
121.2
122.5
116.7
132.8
117.3
137.7
127.5
121.0'
122.2'
115.9'
133.4'
117.4'
138.9'
121.2
122.6
116.6
133.2
117.0
138.1
120.9
121.9
115.6
133.2
117.6
138.0
120.9
121.9
115.7
133.2
117.5
138.7
130.9
120.2
121.5
115.9
131.3
116.3
136.7
81.9
113.7
114.6
111.8
119.6
110.8
126.2
127.7
131.0
130.7
130.4
82.0
81.5
80.9
82.3
Industry groupings
116.0
8 Manufacturing
9 Capacity utilization, manufacturing (percent)
10 Construction contracts
81.4
2
3
11 Nonagricultural employment, total1
12 Goods-producing, total
13
Manufacturing, total
14
Manufacturing, production workers . . . .
15 Service-producing
16 Personal income, total
17 Wages and salary disbursements
18
Manufacturing
19 Disposable personal income
20 Retail sales5
Prices'1
21 Consumer (1982-84=100)
22 Producer finished goods (1982= 100)
122.0
130.8
140.3'
140.0
139.0
140.0'
140.0'
140.0
140.0
140.0
138.0
131.0
114.9
98.3
97.5
99.0
120.2
158.2
150.9
130.4
158.7
151.2
117.2
99.0
97.2
98.4
123.0
167.0
159.8
135.7
166.2
158.6
119.9
100.3
97.6
98.9
126.2
176.8
170.6
142.0
174.4
165.6
120.1
100.2
97.5
98.8
126.5
176.7
170.3
141.1
174.3
166.5
120.1
100.4
97.7
98.9
126.5
177.8
171.7
142.1
175.2
167.2
120.4
100.4
97.7
99.0
126.8
178.3
172.3
142.8
175.8
166.7
120.7
100.6
97.9
99.2
127.2
179.2'
173.5
144.4
176.6
166.5
121.1
100.9
98.1
99.5
127.6
180.5'
175.6
145.7
177.7
166.8
121.5
101.3
98.3
99.7
127.9
181.3
176.4'
146.4
178.4'
167.6
121.9
101.9
98.5
99.9
128.3
182.4
177.7
146.5
179.8
169.3
122.1
102.0
98.6
100.0
128.6
183.5
179.2
146.8
180.8
170.5
122.1
101.7
98.6
99.9
128.6
n.a.
152.4
127.9
156.9
131.3
160.5
131.8
160.5
131.3
160.8
131.7
161.2
131.8
161.6
132.3
161.5
131.7'
161.3
131.1
161.6
130.2
161.9
130.1
162.2
129.7
1. Data in this table also appear in the Board's G.17 C419) monthly statistical release. For
the ordering address, see the inside front cover. The latest historical revision of the industrial
production index and the capacity utilization rates was released in December 1997. The recent
annual revision is described in an article in the February 1998 issue of the Bulletin. For a
description of the aggregation methods for industrial production and capacity utilization, see
"Industrial Production and Capacity Utilization: Historical Revision and Recent Developments." Federal Reserve Bulletin, vol. 83 (February 1997). pp. 67-92. For details about the
construction of individual industrial production series, see "Industrial Production: 1989
Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990). pp.
187-204.
2. Ratio of index of production to index of capacity Based on data from the Federal
Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources.
3. Index of dollar value of total construction contracts, including residential, nonresidential, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge
Division.
2.11
n.a.
170.3
4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers
employees only, excluding personnel in the armed forces.
5. Based on data from U.S. Department of Commerce, Survey of Current Business.
6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price
indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics.
Monthly Labor Review.
NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for senes
mentioned in notes 3 and 6, can also be found in the Survey of Current Business.
Figures for industrial production for the latest month are preliminary, and many figures for
the three months preceding the latest month have been revised. See "Recent Developments in
Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp.
411-35. See also "Industrial Production Capacity and Capacity Utilization since 1987,"
Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605.
LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
Thousands of persons; monthly data seasonally adjusted
1997
Category
1995
1996
1998'
1997
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
HOUSEHOLD SURVEY DATA1
1 Civilian labor force2
Employment
2
Nonagricultural industries3
3
Agriculture
Unemployment
4
Number
5
Rate (percent of civilian labor force)
132,304
133,943
126.297
136,404
136,439
136,406
136,864
137,169
137,493
137,557
137,523
121,460
3,440
123,264
3,443
126,159
3,399
126,368
3.379
126,339
3,422
126.583
3,327
127,191
3,384
127,392
3,385
127,764
3,319
127,829
3,335
127,862
3,132
7,404
5.6
7,236
5.4
6,739
4.9
6,657
4.9
6,678
4.9
6,496
4.8
6,289
4.6
6,392
4.7
6,409
4.7
6,393
4.6
6,529
4.7
117,191
119,523
122,257
122,492
122,792
123,083
123,512
123,866
124,265
124,517
124,481
18,524
581
5,160
6,132
27,565
6,806
33 117
19,305
18,457
574
5,400
6,261
28.108
6.899
34,377
19,447
18,538
573
5,627
6,426
28,788
7,053
35,597
19,655
18,555
573
5,637
6.289
28.864
7.068
35,702
19.804
18,553
576
5,642
6.473
28.902
7.082
35.850
19.714
18,590
574
5,650
6.497
28,970
7,108
35.945
19,749
18.634
572
5,682
6.495
29,132
7,132
36,102
19,763
18,674
574
5,747
6.478
29,196
7,151
36,276
19.770
18,722
574
5,843
6,516
29,242
7,170
36,417
19,781
18,723
572
5,877
6,542
29,269
7,190
36,532
19,812
18,726
571
5,789
6.564
29,226
7,221
36,577
19,807
ESTABLISHMENT SURVEY DATA
6 Nonagricultural payroll employment4
9 Contract construction
10 Transportation and public utilities
11 Trade
14 Government
1. Beginning January 1994, reflects redesign of current population survey and population
controls from the 1990 census.
2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly
figures are based on sample data collected during the calendar week that contains the twelfth
day; annual data are averages of monthly figures. By definition, seasonally does not exist in
population figures.
3. Includes self-employed, unpaid family, and domestic service workers.
4. Includes all full- and part-time employees who worked during, or received pay for, the
pay period that includes the twelfth day of the month; excludes proprietors, self-employed
persons, household and unpaid family workers, and members of the armed forces. Data are
adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this
time.
SOURCE. Based on data from U.S. Department of Labor. Employment and Earnings.
Selected Measures A43
2.12
OUTPUT, CAPACITY. AND CAPACITY UTILIZATION1
Seasonally adjusted
1998
Series
Q2
Q3
Q4'
Ql
Q2
Output (1992=100)
1 Total industry
123.3
2 Manufacturing
Q3
Q4
Ql
Capacity (percent of 1992 output)
Q2
Q3
Q4'
Ql
Capacity utilization rate (percent)2
125.7
125.1
127.3
127.6
149.6
1513
153.0
82.4
82.7
83.2
Primary processing3
Advanced processing4
117.7
129.7
118.5
132.1
119.8
135.3
120.3
135.9
136.9
163.2
138.0
165.7
139.2
168.1
140.4
170.7
86.0
79.5
85.8
79.8
86.0
80.4
85.6
79.6
5
6
7
8
9
10
11
12
13
Durable goods
Lumber and products
Primary metals
Iron and sieel
Nonferrous
Industrial machinery and equipment.
Electrical machinery
Motor vehicles and parts
Aerospace and miscellaneous
transportation equipment
140.2
116.4
123.8
122.6
125.3
168.2
226.6
130.5
143.7
114.9
125.5
122.8
128.8
173.9
236.6
136.7
147.2
114.7
127.8
126.5
129.4
177.6
246.0
144.0
148.1
115.7
126.9
125.7
128.4
179.8
253.8
137.6
173.8
138.6
136.0
135.4
136.4
199.0
276.7
182.6
177.2
140.0
137.2
136.6
137.7
204.4
289.1
184.7
180.6
141.3
138.5
137.9
138.9
210.0
301.9
186.7
184.2
142.2
140.1
139.4
140.7
215.9
315.6
188.8
80.7
84.0
91.0
90.6
91.8
84.5
81.9
71.4
81.1
82.1
91.5
89.9
93.5
85.1
81.9
74.0
81.5
81.2
92.3
91.8
93.2
84.6
81.5
77.1
80.4
81.3
90.6
90.2
91.3
83.3
80.4
72.9
95.6
98.6
101.6
123.4
124.1
124.8
125.4
75.2
77.1
79.0
81.0
14
15
16
17
18
19
Nondurable goods
Textile mill products . ..
Paper and products
Chemicals and products.
Plastics materials
Petroleum products
110.7
108.5
112.2
114.8
127.6
111.0
III I
110.9
114.1
114.8
130.6
109.5
112.6
111.5
113.5
117.1
131.4
109.8
112.9
110.2
113.4
118.7
135.0
131.7
126.0
146.3
140.0
115.2
135.7
132.3
126.7
147.5
141.9
115.7
136.5
132.9
127.4
148.7
116.2
82.4
82.8
89.4
79.1
92.4
96.8
82.3
84.3
90.5
78.5
93.3
95.1
82.9
84.3
89.6
79.4
92.6
94.9
82.7
82.9
89.0
79.9
11L0
134.3
131.1
125.5
145.1
138.1
114.7
106.0
111.7
111.3
106.4
114.0
114.2
107.4
111.8
112.4
117.9
126.3
124.6
118.1
126.7
125.0
118.2
127.1
125.4
118.4
127.4
125.7
89.9
88.5
89.3
90.1
90.0
91.4
89.6
90.9
92.3
90.7
87.7
89.4
1973
1975
Previous cycle5
High
Low
High
3
4
92.8
20 Mining
21 Utilities
22
Electric
105.9
115.5
115.7
Low
Latest cycle
High
Low
1997
Mar.
95.5
1998
Dec.1
Oct
Jan."
Feb.
Mar.p
82.2
Capacity utilization rate (percent)
1 Total industry
89.2
72.6
87.3
71.1
85.4
78.1
82.5
83.0
83.3
83.3
82.8
82.3
2 Manufacturing
88.5
70.5
86.9
69.0
85.7
76.6
81.6
81.9
82.3
82.3
82.0
81.5
91.2
87.2
68.2
71.8
88.1
86.7
66.2
70.4
88.9
84.2
77.7
76.1
86.1
79.7
85.7
80.2
86.2
80.6
86.3
80.5
86.0
80.2
85.7
79.5
85.2
79.1
88.7
100.2
105.8
90.8
68.9
61.2
65.9
66.6
59.8
87.7
87.9
94.2
95.8
91 1
63.9
60.8
45.1
37.0
60.1
84.6
93.6
92.7
95.2
89.3
73.1
75.5
73.7
71.8
74.2
80.9
83.5
90.2
88.9
91.8
81.)
80.1
92.3
91.9
92.8
81.8
82.8
93.1
92.1
94.4
81.7
80.7
91.6
91.2
92.3
81.0
80.8
91.9
91.6
92.4
80.4
81.8
90.8
91.0
90.9
79.8
81.4
89.1
88.0
90.5
96.0
89.2
93.4
74.3
64.7
51.3
93.2
89.4
95.0
64.0
71.6
45.5
85.4
84.0
89.1
72.3
75.0
55.9
84.6
82.3
73.9
84.8
80.9
75.0
84.6
82.0
78.1
84.3
81.6
78.2
83.9
81.4
73.5
83.1
80.6
72.9
82.8
79.3
72.3
78.4
67.6
81.9
66.6
87.3
79.2
74.0
78.2
78.5
80.5
81.1
81.2
80.7
87.8
91.4
97.1
87.6
102.0
96.7
71.7
60.0
69.2
697
50.6
81.1
87.5
91.2
96.1
84.6
90.9
90.0
76.4
72.3
80.6
699
63.4
66.8
87.3
90.4
93.5
86.2
97.0
88.5
80.7
77.7
85.0
79.3
74.8
85.1
82.6
82.6
89.8
78.7
92.9
94.5
82.8
84.5
89.2
79.3
91.2
96.2
83.0
85.1
89.7
78.9
93.0
93.8
83.0
83.4
89.9
79.9
93.7
94.6
83.2
84.2
88.7
80.1
93.9
95.9
82.7
82.4
8<).3
79.8
82.3
82.1
89.0
79.6
94.9
95.7
94.3
96.2
99.0
88.2
82.9
82.7
96.0
89.1
88.2
80.3
75.9
78.9
88.0
92.6
95.0
87.0
83.4
87.1
90.6
87.0
89.0
89.6
92.0
94.3
89.7
90.7
91.5
89.4
89.9
91.0
90.8
86.4
87.7
90.6
86.4
88.4
90.8
90.5
92.1
3
4
5
6
7
8
9
10
11
12
13
14
15
Primary processing3
Advanced processing4
Durable goods
Lumber and products
Primary metals
Iron and steel
Nonferrous
Industrial machinery and
equipment
Electrical machinery
Motor vehicles and parts
Aerospace and miscellaneous
transportarjon equipment
Nondurable goods
Textile mill products
16
Paper and products . . .
17
18
19
Chemicals and products.
Plastics materials
Petroleum products
.
20 Mining
21 Utilities
22 Electric
1. Data in this table also appear in the Board's G. 17 (419) monthly statistical release. For
the ordering address, see the inside front cover. The latest historical revision of the industrial
production index and the capacity utilization rales was released in December 1997. The recent
annual revision is described in an article in the February 1998 issue of the Bulletin. For a
description of the aggregation methods for industrial production and capacity utilization, see
"Industrial Production and Capacity Utilization: Historical Revision and Recent Developments." Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. For details about the
construction of individual industrial production series, see "Industrial Production: 1989
Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp.
187-204.
2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted
index of industrial production to the corresponding index of capacity.
3. Primary processing includes textiles,* lumber; paper; industrial chemicals; synthetic
materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass;
primary metals; and fabricated metals.
4. Advanced processing includes foods: tobacco; apparel; furniture and fixtures; printing
and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather
and products; machinery: transportation equipment; instruments; and miscellaneous manufactures.
5. Monthly highs, 1978-80; monthly lows, 1982.
6. Monthly highs, 1988-89; monthly lows, 1990-91.
A44
2.13
Domestic Nonfinancial Statistics • June 1998
INDUSTRIAL PRODUCTION
Indexes and Gross Value'
Monthly data seasonally adjusted
Group
1992
proportion
1997
avg.
Apr.
May
June
July
Aug.
Jan.'
Sept.
Feb.
Mar.p
Index (1992 = 100)
MAJOR MARKETS
100.0
124.5
122.5
123.1
123.3
123.5
124.5
125.2
125.6
126.5
127.5
127.9
127.7
127.5
127.7
2 Products
3
Final products
4
Consumer goods, total
5
Durable consumer goods
6
Automotive products
7
Autos and trucks
8
Autos, consumer
9
Trucks, consumer
10
Auto parts and allied goods
11
Other
12
Appliances, televisions, and air
conditioners
13
Carpeting and furniture
14
Miscellaneous home goods
15
Nondurable consumer goods
16
Foods and tobacco
17
Clothing
18
Chemical products
19
Paper products
20
Energy
21
Fuels
22
Residential utilities
60.5
118.5
119.6
114.4
131.3
129.9
136.5
115.2
159.1
119.3
132.3
116.9
117.9
113.4
130.7
129.0
135.6
117.6
158.5
118.4
132.0
117.2
118.0
113.4
127.4
122.3
124.4
110.7
142.7
118.2
131.4
117.7
118.6
113.9
128.8
124.6
127.6
112.4
147.3
119.1
132.1
117.6
118.6
113.5
129.8
126.7
130.3
110.8
154.2
120.3
132.3
118.1
119.2
113.9
128.1
120.3
120.2
113.0
131.9
119.3
134.4
119.2
120.5
114.6
132.1
131.6
137.6
118.6
161.2
121.8
132.5
119.1
120.3
114.5
131.9
132.8
140.9
119.9
166.5
120.1
131.1
120.2
121.5
115.9
131.4
131.2
139.7
115.2
168.6
117.9
131.5
121.2
122.5
116.7
136.5
138.4
147.8
120.3
179.8
123.8
135.0
121.0
122.2
115.9
134.7
133.8
142.7
113.9
175.7
120.1
135.3
121.2
122.6
116.6
135.8
133.0
139.9
116.0
168.2
121.9
138.0
120.9
121.9
115.6
134.6
130.8
136.7
105.7
171.6
121.3
137.6
120.9
121.9
115.7
134.2
129.9
135.0
105.1
168.7
121.6
137.6
168.6
117.0
120.0
110.2
109.3
95.9
119.1
109.3
111.3
109.3
112.0
166.9
116.7
120.3
109.1
110.0
96.1
115.9
107.8
107.3
108.2
106.4
164.2
116.7
120.3
109.9
109.1
96.5
118.4
108.2
111.9
109.6
112.6
166.5
117.7
120.2
110.1
108.9
95.8
119.3
108.9
112.8
111.3
113.0
165.4
119.0
120.3
109.4
108.1
95.4
119.1
109.8
109.7
111.5
108.3
174.8
116.4
122.1
110.3
109.6
95.8
117.3
110.8
112.4
108.8
113.7
169.8
117.7
119.8
110.3
108.9
96.0
119.4
109.8
112.8
111.0
113.2
166.0
116.2
119.4
110.2
108.6
96.0
119.4
110.1
112.4
110.8
112.8
169.4
116.5
118.6
112.1
109.7
96.4
123.0
111.3
116.2
112.0
117.8
177.2
122.1
119.2
111.8
110.7
95.1
121.3
111.7
113.9
106.7
117.1
178.7
116.8
122.1
111.3
110.0
95.1
121.8
110.1
113.5
109.3
115.1
186.1
122.9
121.0
111.9
112.0
94.7
123.4
110.2
109.5
110.5
108.6
189.5
119.2
120.8
110.9
111.0
93.3
122.6
107.6
110.0
110.9
109.1
189.2
118.8
121.2
111.1
110.7
92.0
123.0
106.3
113.6
110.8
114.5
23
24
25
26
27
28
29
30
31
32
33
Equipment
Business equipment
Information processing and related
Computer and office equipment
Industrial
Transit
Autos and trucks
Other
Defense and space equipment
Oil and gas well drilling
Manufactured homes
17.2
13.2
5.4
1.1
4.0
2.5
1.2
1.3
3.3
.6
128.8
141.9
168.1
385.6
133.3
111.2
119.7
135.0
75.2
149.7
139.1
125.8
137.5
161.0
348.8
130.6
107.7
121.4
132.6
75.7
154.8
139.4
126.0
137.9
163.0
358.4
131.6
104.6
112.5
134.4
75.4
151.4
142.9
126.8
139.0
164.4
365.3
131.5
106.7
114.6
135.2
75.6
150.7
141.9
127.7
140.2
166.8
375.8
131.7
107.3
113.6
136.3
76.0
150.9
139.1
128.6
141.6
169.3
391.6
133.7
106.9
111.5
136.3
74.9
152.1
143.5
130.9
144.6
171.1
407.1
135.8
113.3
120.3
137.9
75.0
153.2
139.5
130.6
144.4
172.9
414.6
133.8
114.2
120.2
135.1
74.7
153.1
137,2
131.3
145.5
174.3
420.3
135.9
113.0
117.0
137.5
74.7
149.1
136.9
132.8
147.5
174.7
427.3
136.3
119.9
128.2
137.3
74.5
150.0
138.1
133.4
148.6
176.0
440.1
137.8
121.2
124.6
136.2
74.5
145.9
132.4
133.2
147.6
176.6
454.4
136.0
119.8
121.1
133.5
75.3
154.0
144.0
133.2
147.0
176.4
464.8
134.7
119.6
120.3
133.3
76.1
158.9
148.6
133.2
146.8
176.4
475.1
134.9
118.6
118.8
133.8
76.3
158.6
34
35
36
Intermediate products, total .
Construction supplies
Business supplies
14.2
5.3
8.9
115.1
121.8
111.1
114.1
122.3
109.2
114.7
121.8
110.6
114.9
122.2
110.6
114.7
122.2
110.2
114.6
121.2
110.6
115.3
122.7
111.0
115.2
120.4
112.2
116.3
121.3
113.4
117.3
123.6
113.5
117.4
123.2
113.9
117.0
124.0
112.9
117.6
125.3
113.0
117.5
124.0
113.7
37 Materials .
38
Durable goods materials....
39
Durable consumer parts ..
40
Equipment parts
41
Other
42
Basic metal materials . .
43
Nondurable goods materials.
44
Textile materials
45
Paper materials
46
Chemical materials
47
Other
48
Energy materials
49
Primary energy
50
Converted fuel materials. .
39.5
20.8
4.0
7.6
9.2
3.1
8.9
1.1
1.8
3.9
2.1
9.7
6.3
3.3
134.1
158.2
139.2
221.9
125.5
120.6
113.0
109.3
112.6
115.2
110.3
103.9
101.7
108.3
131.3
153.0
135.9
210.0
123.2
118.2
112.5
106.3
112.5
114.8
110.4
103.4
101.9
106.2
132.5
155.1
137.1
213.4
124.7
118.8
113.0
109.4
112.6
115.4
109.7
103.7
101.7
107.6
132.4
155.4
134.7
216.7
124.5
119.9
111.8
106.1
112.6
113.8
109.5
103.7
102.1
106.8
133.0
156.9
136.2
220.0
125.0
121.2
111.9
108.1
110.9
113.8
110.8
103.2
101.0
107.3
134.9
159.3
139.2
224.6
125.9
121.1
113.5
112.3
113.8
115.1
110.1
104.6
102.3
109.0
134.9
160.3
140.3
227.6
126.0
121.8
112.3
108.4
114.3
113.9
108.6
103.9
102.4
106.8
136.1
161.3
140.7
229.6
126.6
121.7
113.3
111.4
112.7
115.6
109.5
105.5
102.2
111.8
136.7
163.2
141.8
233.3
127.8
122.5
113.1
111.9
113.4
115.0
109.0
104.7
101.7
110.6
137.7
165.0
142.3
237.9
128.8
124.9
114.4
111.0
112.2
116.5
113.7
103.9
101.4
108.6
138.9
166.5
146.9
240.9
128.3
122.2
116.0
112.5
113.7
119.1
113.3
104.2
100.7
110.9
138.1
166.1
138.7
245.3
128.6
124.2
114.5
108.1
112.6
119.1
109.5
103.2
101.9
105.7
138.0
166.1
139.5
246.1
127.9
123.4
115.4
108.5
112.4
120.0
111.6
102.3
101.0
104.9
138.7
165.9
139.2
247.1
127.3
122.0
115.2
108.7
112.8
119.6
111.1
105.1
102.8
109.4
97.1
95.1
124.3
123.8
122.3
121.9
123.2
122.7
123.4
123.0
123.6
123.1
124.8
124.3
125.1
124.6
125.4
124.8
126.5
125.9
127.2
126.6
127.7
127.0
127.6
127.2
127.4
126.9
127.7
127.2
98.2
27.4
26.2
121.9
113.2
114.8
120.2
112.1
114.2
120.7
112.8
113.6
120.9
113.1
114.0
121.1
112.5
114.0
122.0
113.5
114.1
122.6
113.4
114.9
122.9
113.0
114.7
123.8
114.6
115.9
124.8
115.0
117.0
125.1
114.4
116.2
124.8
115.3
117.5
124.5
114.4
116.3
124.7
114.6
115.9
139.5
141.0
141.9
143.4
145.2
147.5
147.3
149.0
149.7
151.5
150.7
150.1
12.1
29.8
129.1
143.7
126.0
140.1
126.0
141.6
126.9
141.4
127.7
142.5
128.6
144.6
131.2
144.8
130.8
145.8
131.8
147.0
133.5
148.6
134.4
150.2
133.0
149.4
132.)
149.7
1 Total index.
46.3
29.1
6.1
2.6
1.7
.9
.7
.9
3.5
1.0
.8
1.6
23.0
10.3
2.4
4.5
2.9
2.9
.8
2.1
SPECIAL AGGREGATES
51 Total excluding autos and trucks
52 Total excluding motor vehicles and parts
53 Total excluding computer and office
equipment
54 Consumer goods excluding autos and trucks
55 Consumer goods excluding energy
56 Business equipment excluding autos and
trucks
57 Business equipment excluding computer and
office equipment
58 Materials excluding energy
131.7
149.5
Selected Measures A45
2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued
1992
proportion
SIC
code
Group
1997
avg.
Apr.
May
July
Aug.
Jan.7
Sept.
Feb.
Mar.
Index (1992= 100)
MAJOR INDUSTRIES
59 Total index..
100.0
124.5
122.5
123.1
123.3
123.5
124.5
125.2
125.6
126.5
127.5
127.9
127.7
127.5
127.7
85.4
26.5
58.9
127.0
118.1
131.4
124.9
117.2
128.6
125.4
117.7
129.2
125.7
117.7
129.6
126.1
117.7
130.2
126.9
118.3
131.2
127.9
118.5
132.5
128.0
118.6
132.7
129.1
118.9
134.1
130.4
120.0
135.5
130.9
120.5
136.1
131.0
120.5
136.2
130.7
120.4
135.8
130.4
119.9
135.7
24
25
45.0
2.0
1.4
142.3
114.9
122.5
138.7
114.9
120.7
139.5
115.9
123.5
140.1
116.4
123.3
141.2
117.0
123.5
142.4
116.1
124.2
144.3
115.4
121.1
144.4
113.3
122.0
145.5
112.9
123.0
147.7
117.0
124.1
148.6
114.4
124.4
148.2
114.9
122.7
148.2
116.3
121.7
147.9
115.9
121.2
32
33
331,2
331PT
333-6,9
34
2.1
3.1
1.7
.1
1.4
5.0
120.5
124.5
122.8
115.9
126.4
122.9
119.5
121.8
119.6
114.0
124.5
122.1
121.1
122.3
121.2
115.1
123.5
122.5
119.4
124.2
123.9
115.4
124.6
122.7
120.0
124.9
122.6
114.9
127.7
121.9
120.9
125.2
122.2
115.5
128.8
122.4
120.5
125.5
121.8
116.1
129.9
122.8
121.2
125.9
124.5
119.2
127.7
122.7
121.0
127.4
126.4
117.7
128.6
124.4
122.1
128.9
127.0
120.9
131.1
124.7
123.4
127.2
126.1
119.2
128.5
126.7
122.4
128.1
127.2
122.8
129.2
125.8
122.9
127.3
126.8
123.7
127.9
125.1
121.7
125.5
123.3
120.6
128.1
124.7
171.4
165.1
167.8
168.0
168.8
172.2
175.9
173.7
176.5
177.7
178.6
179.5
179.4
180.4
357
36
37
371
371PT
1.8
7.3
9.5
4.9
26
382.3
231.5
115.6
137.2
128.3
344.2
220.8
112.3
134.0
127.8
354.1
223.7
110.7
129.7
117.8
361.4
226.3
110.8
129.2
120.6
372.3
229.7
113.0
132.5
122.4
388.5
235.5
112.2
130.0
115.0
403.9
236.8
117.0
138.9
129.5
412.0
237.5
118.8
141.2
132.3
418.0
240.8
118.3
139.6
130.4
425.7
247.4
121.6
145.9
137.7
438.3
249.9
123.4
146.6
132.5
452.7
253.0
119.8
138.3
130.8
463.6
254.3
119.7
137.7
126.2
473.5
254.1
119.1
136.9
124.8
372-6,9
38
39
4.6
5.4
1.3
94.4
108.0
125 9
91.0
106.5
124.7
92.0
106.6
125.1
92.7
107.6
125.5
93.8
107.9
126.0
94.6
108.0
127.0
95.5
109.2
126.7
96.8
108.9
126.1
97.3
109.7
126.5
97.9
109.5
126.2
100.6
109.0
128.5
101.5
110.0
128.0
101.9
109.5
128.4
101.4
110.0
129.3
40.4
9.4
1.6
1.8
2.2
3.6
6.7
9.9
1.4
3.5
.3
111.1
109.6
112.7
109.6
99.6
112.9
104.9
115.3
109.4
126.4
73.7
110.5
110.0
114.2
108.0
100.1
112.4
103.6
113.6
108.0
125.5
76.6
110.8
109.2
113.0
109.2
99.8
112.4
104.4
115.2
110.1
124.4
75.9
110.7
109.2
111.5
107.2
99.8
112.6
104.5
114.5
111.4
125.4
75.3
110.5
108.8
109.0
109.1
99.6
111.7
104.1
114.6
111.3
125.6
74.0
110.9
110.0
110.5
110.7
99.7
114.2
104.1
114.3
108.9
126.0
74.0
111.0
108.9
112.5
110.7
99.1
114.4
104.4
114.5
109.7
127.9
71.2
111.3
108.6
112.0
111.4
99.1
113.7
105.1
115.6
110.1
127.6
70.9
112.2
109.2
118.8
111.6
99.3
112.8
106.7
116.7
111.2
127.4
72.4
112.6
110.9
115.9
112.5
98.6
113.6
107.4
116.5
108.6
129.6
71.0
112.9
110.9
110.1
110.4
99.3
114.1
107.1
118.2
109.7
129.3
71.3
113.3
112.4
112.3
111.8
98.9
112.7
106.3
118.8
111.3
129.5
69.4
112.8
111.7
111.7
109.4
97.6
113.8
105.5
118.7
110.3
129.3
70.8
112.5
111.6
110.3
109.3
96.7
113.6
104.6
118.7
111.3
129.2
69.1
6.9
.5
1.0
4.8
.6
106.0
106.9
109.9
103.2
118.8
106.7
106.4
107.0
104.3
123.6
105.5
105.3
105.4
103.8
116.8
106.7
105.9
115.9
103.4
118.2
105.7
109.9
107.4
102.9
120.9
106.5
105.2
112.1
103.9
117.8
106.3
106.0
107.7
104.1
119.9
106.5
105.3
109.5
104.3
117.7
105.9
111.1
109.6
103.1
116.2
106.1
113.2
111.2
102.6
119.2
105.7
103.8
117.4
101.7
120.2
107.4
106.2
116.0
103.9
122.6
107.3
108.6
108.4
104.5
124.6
107.5
107.9
109.4
105.2
120.5
7.7
6.2
1.6
112.5
113.1
It 1.0
109.6
110.6
105.4
112.5
112.7
111.5
111.8
110.4
117.1
110.9
110.7
111.9
113.8
113.8
113.5
113.0
113.1
112.5
115.1
115.7
112.7
116.9
118.1
111.9
115.3
114.7
117.8
114.3
114.2
115.0
110.0
110.2
109.2
110.1
111.1
106.2
115.4
115.9
113.2
80.5
126.4
124.3
125.2
125.5
125.7
126.7
127.2
127.3
128.4
129.4
130.0
130.5
130.3
130.0
83.6
124.1
122.2
122.7
122.9
123.2
123.9
124.8
124.9
125.9
127.2
127.6
127.6
127.3
126.9
60 Manufacturing
61 Primary processing
62 Advanced processing
63
64
65
66
79
80
Durable goods
Lumber and products
Furniture and fixtures
Stone, clay, and glass
products
Primary metals
Iron and steel
Raw steel
Nonferrous
Fabricated metal products. . .
Industrial machinery and
equipment
Computer and office
equipment
Electrical machinery
Transportation equipment. . .
Motor vehicles and parts .
Autos and light trucks .
Aerospace and
miscellaneous
transportation
equipment
Instruments
Miscellaneous
81
82
83
84
85
86
87
88
89
90
91
Nondurable goods
Foods
Tobacco products
Textile mill products
Apparel products
Paper and products
Printing and publishing
Chemicals and products . . . .
Petroleum products
Rubber and plastic products .
Leather and products
67
68
69
70
71
72
73
74
75
76
77
78
35
92 Mining
93 Metal
94 Coal
95 Oil and gas extraction
96 Stone and earth minerals
97 Utilities
98 Electric
99 Gas
491.493PT
491.493PT
SPECIAL AGGREGATES
100 Manufacturing excluding motor
vehicles and pans
101 Manufacturing excluding office
and computing machines . . .
Gross value (billions of 1992 dollars, annual rates)
MAJOR MARKETS
102 Products, total
2,001.9 2373.2 2.355.4 2,353.4 2365.8 2365.3 2368.4 2,402.0 2,396.9 2,416.1 2,442.2 2,435.3 2,441.0 2,433.9 2.433.2
103 Final
104 Consumer goods .
105 Equipment
106 Intermediate
1,552.1 1,855.8 1.838.7 1,832.9 1.844.4
1,849.1
1.049.6 1,195.5 1.191.4 1,187.7 1,194.1 1,190.2 1,191.0 1,205.2 1,203.3 1,215.9 1,224.1
674.5
686.9
502.5
660.0
646.8
644.8
654.1
657.8
674.0
672.3
649.8
520.6
526.5
532.3
449.9
518.1
517.2
521.0
519.9
523.7
522.2
521.7
1. Data in unstable also appear in the Board'sG. 17 (419) monthly statistical release. For
the ordering address, see the inside front cover. The latest historical revision of the industrial
production index and the capacity utilization rates was released in December 1997. The recent
annual revision is described in an article in the February 1998 issue of the Bulletin. For a
description of the aggregation methods for industrial production and capacity utilization, see
"•Industrial Production and Capacity Utilization: Historical Revision and Recent Develop-
1,904.9 1,912.1 1,902.2 1.901.2
1,215.7 1,224.8 1,215.0 1,214.4
689.4
687.4
687.4
687.0
531.4
532.4
530.1
532.6
ments." Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. For details about the
construction of individual industrial production series, see "Industrial Production: 1989
Developments and Historical Revision," Federal Reserve Bulletin, vol. 76, (April 1990), pp.
187-204.
2. Standard industrial classification.
A46
2.14
Domestic Nonfinancial Statistics • June 1998
HOUSING AND CONSTRUCTION
Monthly figures at seasonally adjusted annual rates except as noted
1997
Item
1995
1996
1998
1997
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.'
Feb.
Private residential real estate activity (thousands of units except is noted)
N E W UNITS
1,333
997
335
1,354
1,076
278
776
554
222
1,319
1,073
247
341
1,426
1,070
356
1,477
1,161
316
820
584
235
1,405
1,123
283
361
1,442
1,056
387
1,474
1,134
340
834
570
264
1.407
1,122
285
354
1,432
1,053
379
1,404
1,095
309
815
565
250
1,387
1,098
289
354
1,402
1,049
353
1,502
1,132
370
828
566
262
1,307
1,097
210
153
1,414
1,030
384
1,461
1,144
317
836
570
266
1,331
1.074
257
356
1,397
1,027
370
1,383
1,076
307
834
567
267
1,335
1,062
273
154
1,460
1,065
395
1,501
1,174
327
843
571
272
1,433
1.133
300
351
1,487
1,087
400
1,529
1,124
405
853
574
279
1,384
1,063
321
349
1,440
1,061
379
1,523
1,167
356
862
575
287
1,432
1,145
287
352
1,482
1,071
411
1,540
1,130
410
870
578
292
1,410
1,093
317
353
1,526
1,133
393
1,545
1,225
320
885
589
296
1,288
999
289
362
1,625
1,163
462
1,635
1.269
366
667
374
757
326
803
286
764
289
810
288
808
288
799
286
809
284
805
284
875'
280
810'
281
852
282
893
282
133.9
158.7
140.0
166.4
145.9
175.8
141.0
170.7
145.0
179.4
145.9
175.5
144.0
170.7
146.3
177.5
141.5
172.9
145.0
175.4'
145.0'
174.8'
145.0
178.3
153.4
179.3
18 Number sold
3,812
4,087
4,215
4,190
4,120
4,180
4,280
4,300
4,380
4,390
4,370
4,370
4,770
Price of units sold {thousands
of dollars)1
19 Median
20 Average
113.1
139.1
118.2
145.5
124.1
154.2
123.1
153.1
127.2
158.4
126.5
157.6
127.5
159.1
125.8
155.4
124.4
154.7
124.3
155.0
125.9
157.5
126.1
156.8
124.5
153.9
3
Two-family or more
4 Started
6
Two-family or more
7 Under construction at end of period1
9
Two-family or more
10 Completed
12
Two-family or more
Merchant builder activity in
one-familv units
14 Number sold
15 Number for sale at end of period1
n.a.
1
377
Price of units sold {thousands
of dollars)1
17 Average
EXISTING UNITS (one-family)
Value of new construction (millions of dollars)1
CONSTRUCTION
21 Total put in place
534,463
567,179
600,116r
595,763
594,195
603,002
603,684
605,748
611,742'
610,933'
616,027'
620,390
621,987
22 Private
23
Residential
407,370
231,230
176,140
32,505
68,223
27,089
48.323
435,929
246,659
189,271
31,997
74,593
30,525
52 156
461,401'
259,575'
201.826'
30,707'
80,823'
36,998'
53 298'
459,882
259,662
200,220
30,501
78,670
37,738
53 311
456.927
257.277
199.650
31,046
79,009
35,775
51820
464,326
258,803
205,523
31,796
82,346
36,672
54 709
465,236
259,958
205,278
31,480
81,552
37.274
54 972
468,822
263,799
205.023
30,675
80,551
38,729
55 068
469,560'
265.422'
204,138'
30,048'
81,489'
37,707'
54 894'
470,041'
267,207'
202,834'
29,352'
81,511'
37.681'
54 290'
475,262'
270,822'
204,440'
29,697'
82,104'
38,345'
54 294'
481,726
275,725
206,001
30,385
82,425
37,990
55 201
481,999
278,788
203,211
28,694
80.951
38,069
55 497
127,092
2,983
36,319
6,391
81,399
131,250
2,541
37,898
5,807
85,005
138,715'
2,553'
41,148'
5,467'
89,547'
135,882
2,548
40,694
5,242
87,398
137,268
2,580
41.531
4,952
88,205
138,676
2,738
41,087
5,002
89,849
138,448
2,767
41,715
5,469
88,497
136,926
2,451
40,126
6,177
88,172
142,182'
2,827'
39,484'
4,859'
95,012'
140.893'
2,740'
44,271
5,209'
88,673'
140.765'
2.234'
42,114'
5.910'
90.507'
138,663
2,486
42,480
5,088
88,609
139,988
2,979
44,698
6,379
85,932
25
26
27
Industrial buildings
Commercial buildings
Other buildings
29 Public
30
Military
31
Highway
32 Conservation and development
33 Other
1. Not at annual rates.
2. Not seasonally adjusted.
3. Recent data on value of new construction may not be strictly comparable with data for
previous periods because of changes by the Bureau of the Census in its estimating techniques.
For a description of these changes, see Construction Reports (C-30-76-5), issued by the
Census Bureau in July 1976.
SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are
private, domestic shipments as reported by the Manufactured Housing Institute and seasonally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are
published by the National Association of Realtors. Alt back and current figures are available
from the originating agency. Permit authorizations are those reported to the Census Bureau
from 19,000 jurisdictions beginning in 1994.
Selected Measures
2.15
A47
CONSUMER AND PRODUCER PRICES
Percentage changes based on seasonally adjusted data except as noted
Change from 12
months earlier
Change from 3 months earlier
(annual rate)
Change from 1 month earlier
1997
Mar.
Index
level,
Mar.
1998 '
1997
1997
1998
Mar.
June
Sept.
Dec
Nov.
Mar.
Dec.
CONSUMER PRICES"
(1982-84=100)
162.2
.2
2J
1 All items
2.8
2 Food
3 Energy items
4 All items less food and energy.
5
Commodities
6
Services
3.3
4.8
2.5
.8
3.2
2.0
-8.6
2.1
-11.8
2.6
.6
3.1
2.8
8.3
1.7
-.3
2.6
1.5
-7.7
2.4
.6
3.3
1.3
-21.1
2.4
.8
3.0
1.5
2.4
3.6
.9
.4
-1.8
-1.4
-10.4
.3
-.6
-3.0
-3.5
-13.0
-.6
-.9
1.2
-1.5
6.0
1.7
.6
-1.2
.9
-6.1
.0
-1.7
-4.2
-1.5
-25.9
.3
-.6
- 2r
-.3'
-.4'
-.1
-.6
.0
-4.4
-1.2
.1'
.1
3.3
1.0
-7.9
-12.7
-52.6
-15.0
-.1'
4.6'
-.4'
.0
-1.8
.3
-2.4
-.1
-.7'
.0
-.7
-.4
-3.7
-.1
-.1
.0
-2.2
.3
.0
-1.2
.1
-.1
.2
159.7
101.6
172.6
143.1
189.4
.4
-1.8
.1
-.1
-.4
-1.9
.1
.0
129.7
133.3
74.4
145.8
137.9
-.4
-.1
123.6
134.0
.7
-4.3
-1.9
106.6
69.2
148.7
PRODUCER PRICES
(1982=100)
7 Finished goods
8
Consumer foods
9
Consumer energy
10 Other consumer goods
11 Capital equipment
Intermediate materials
12 Excluding foods and feeds .
13 Excluding energy
Crude materials
14 Foods
15 Energy
16 Other
-1.6
.3
-1.8
-4.3
.3
-6.6
-10.2
-6.8
-10.8
11.3
-3.7
-5.0
21.8
.3
1. Not seasonally adjusted.
2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence
measure of homeownership.
-r
-.2'
.a
-.5
-.1
-i4.r
-1.5'
-3.3
-7.3
-2.2
-.7
-6.5
.1
SOURCE. U.S. Department of Labor, Bureau of Labor Statistics.
A48
Domestic Nonfinancial Statistics • June 1998
2.16
GROSS DOMESTIC PRODUCT AND INCOME
Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates
1997
1996
1995
Account
1996
1997'
Q4
Ql
Q2
03
04'
GROSS DOMESTIC PRODUCT
1 Total
7,265.4
7,636.0
8,079.9
7,792.9
7,933.6
8,034.3
8,124.3
8,227.4
Bv source
Personal consumption expenditures
Durable goods
Nondurable goods
Services
4.957.7
608.5
1,475.8
2.873.4
5.207.6
634.5
1.534.7
3,038.4
5,485.8
659.3
1.592.0
3,234.5
5,308.1
638.2
1.560.1
3.109.8
5,405.7
658.4
1,587.4
3,159.9
5,432.1
644.5
1,578.9
3,208.7
5,527.4
667.3
1,600.8
3,259.3
5.577.8
666.8
1,600.9
3,310.0
6 Gross private domestic investment
7
Fixed investment
8
Nonresidential
9
Structures
10
Producers' durable equipment
11
Residential structures
1,038.2
1,008.1
723.0
200.6
522.4
285.1
1,116.5
1.090.7
781.4
215.2
566.2
309.2
1,242.5
1,174.1
846.9
230.2
616.7
327.2
1,151.1
1,119.2
807.2
227.0
580.2
312.0
1,193.6
1.127.5
811.3
227.4
583.9
316.2
1,242.0
1.160.8
836.3
226.8
609.5
324.6
1,250.2
1,201.3
872.0
232.9
639.1
329.3
1,284.1
1,206.8
868.0
233.9
634.2
338.8
30.1
38.1
25.9
23.0
68.4
61.7
31.9
28.7
66.1
62.2
81.1
74.9
48.9
40.9
77.2
68.7
-86.0
818.4
904.5
-94.8
870.9
965.7
-101.1
957.1
1,058.1
-88.6
904.6
993.2
-98.8
922.2
1.021.0
-88.7
960.3
1,049.0
-111.3
965.8
1,077.1
-105.3
980.0
1,085.4
17 Government consumption expenditures and gross investment
18
Federal
19
State and local
1,355.5
509.6
846.0
1,406 7
5200
886.7
1,452.7
523.8
928.9
1,422.3
517.6
904.7
1.433.1
516.1
917.0
1,449.0
526.1
923.0
1,457.9
525.7
932.3
1,470.9
527.3
943.6
fly major type of product
20 Final sales total
21
Goods
22
Durable
23
Nondurable
24
Services
25
Structures
7,235.3
2,637.9
1,133.9
1,503.9
3,980.7
616.8
7,610.2
2,759.3
1,212.0
1,547.3
4,187.3
663.6
8,011.5
2.876.7
1,284.0
1,592.8
4.430.4
704.4
7.761.0
2.795.0
1,233.5
1,561.5
4.282.7
683.3
7,867.4
2,838.4
1,248.0
1,590.4
4,338.2
690.8
7.953.2
2,854.9
1,275.3
1,579.6
4,400.1
698.2
8,075.3
2,903.2
1,305.3
1,597.9
4,462.3
709.8
8.150.2
2,910.4
1,307.3
1.603.1
4,521.0
718.8
30.1
29.1
I.I
25.9
16.9
9.0
68.4
33.0
35.4
31.9
-1.1
33.0
66.1
31.8
34.3
81.1
46.8
34.4
48.9
18.6
30.3
77.2
34.8
42.4
6.742.1
6,928.4
7,188.8
7,017.4
7,101.6
7,159.6
7,214.0
7,280.0
30 Total
5,912.3
6,254.5
6,649.7
6,376.5
6,510.0
6,599.0
6,699.6
6,790.1
31 Compensation of employees
32 Wages and salaries
33
Government and government enterprises
34
Other
35
Supplement to wages and salaries
36
Employer contributions for social insurance
37
Other labor income
4,215.4
3.442.6
623.0
2,819.6
772.9
366.0
406.8
4,426.9
3,633.6
642.6
2,991 0
793.3
385.7
407.6
4,703.6
3,878.6
665.3
3,213.3
825.0
408.4
416.6
4,520.7
3,718.0
648.9
3.069.0
802.7
393.6
409.1
4,606.3
3,792.7
657.8
3,134.9
813.6
401.3
412.3
4,663.4
3,842.7
662.0
3,180.8
820.7
405.6
415.1
4,725.2
3,897.3
667.7
3,229.6
827.9
410.2
417.7
4,819.6
3,981.6
673.7
3,307.9
837.9
416.6
421.4
489.0
465.5
23.4
520.3
483.1
37.2
544.5
503.8
40.7
528.3
487.9
40.4
534.6
494.4
40.2
543.6
500.0
43.6
547.2
506.3
40.9
552.5
514.3
38.2
2
3
4
5
12
13
Change in business inventories
Nonfarm
14 Net exports of ° o o d s and services
15
Exports
16
Imports
. . . .
26 Change in business inventories
27
Durable goods
28
Nondurable goods
MEMO
29 Total GDP in chained 1992 dollars
NATIONAL INCOME
38 Proprietors' income1
39
Business and professional1
40
Farm1
41 Rental income of persons
132.8
146.3
147.9
149.2
149.0
148.7
148.0
145.7
42 Corporate profits'
43
Profits before tax3
44
Inventory valuation adjustment
45
Capital consumption adjustment
650.0
622.6
-24.3
51.6
735.9
676.6
-2.5
61.8
805.0
729.8
5.5
69.7
747.8
680 0
33
64.4
779.6
708.4
3.5
67.7
795.1
719.8
5.9
69.4
827.3
753.4
3.6
70.3
818.1
737.3
92
71.6
46 Net interest
425.1
425.1
448.7
430.6
440.5
448.1
451.8
454.2
1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustment
3. For after-tax profits, dividends, and the like, see table 1.48.
SOURCE. U.S. Department of Commerce, Survey of Current Business.
Selected Measures A49
2.17
PERSONAL INCOME AND SAVING
Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates
1996
1995
1996
1997
Q4
Ql
Q2
03
04'
PERSONAL INCOME AND SAVING
Total personal income
6,150.8
6,495.2
6,873.9'
6,618.4
6,746.2
6,829.1
6,906.9
7,013.5
Wage and salary disbursements
Commodity-producing industries
Manufacturing
Distributive industries
Service industries
Government and government enterprises
3,429.5
864.4
648.4
783.1
1,159.0
623.0
3,632.5
909.1
674.7
823.3
3,877.4'
960.3'
706.0'
876.3'
1.375.5
665.3
3,716.9
927.8
685.6
840.6
1.299.5
648.9
3,791.5
942.9
694.1
856.8
1,334.1
657.8
3.841.6
952.8
700.3
867.0
1.359.8
662.0
3,896.1
961.4
706.0
880.8
3.980.4
984.1
723.4
900.6
1.386.3
667.7
1,422.0
673.7
416.6
544.5
503.8'
40.7
147.9'
321.5
768.6'
1,121.1
566.7
409.1
528.3
487.9
40.4
149.2
295.2
749.8
1,081.5
412.3
534.6
494 4
40.2
149.0
312.5
757.2
1,107.2
415.1
543.6
500.0
43.6
148.7
318.3
766.1
1,117.0
564.4
417.7
547.2
506.3
40.9
148.0
324.5
772.6
1,125.7
569.4
421A
552.5
514.3
38.2
145.7
330.7
778.4
1,134.8
321.3
324.8
6,829.1
6,906.9
Other labor income
Proprietors' income'
Business and professional1
Farm
Rental income of persons2
Dividends
Personal interest income
Transfer payments
Old-age survivors, disability, and health insurance benefits
406.8
489.0
1.257.5
642.6
407.6
520.3
483.1
37.2
465.5
23.4
132.8
251.9
718.9
1,015.0
291.2
735.7
1,068.0
146.3
EQUALS: Personal income
LESS: Personal tax and nontax payments
EQUALS: Disposable personal income
507.8
537.6
293.1
306.3
6,150.8
LESS: Personal contributions for social insurance
6,495.2
795.1
886.9
5,608.3
5,101.1
LESS: Personal outlays
EQUALS: Personal saving
5.355.7
5,368.8
254.6
239.6
25,615.7
17,459.2
18,861.0
26,085.8
17,748.7
19,116.0
323.7
6,873.9'
988.7
5.885.2'
5.658.5'
226.7'
545.6
558.9
311.5
318.2
6,618.4
6,746.2
922.6
955.7
5,695.8
5,790.5
5,475.4
5,574.6
220.4
215.9
26,331.6
17,847.8
19.152.0
26,597.8
18,045.2
19,331.0
979.2
998.0
5.849.9
5,908.9
5,602.8
5,700.8
247.0
208.2
26,765.0
18.053.9
19,439.0
26.897.9
18.255.7
19,518.0
574.2
330.4
7,013.5
1,022.1
5,991.4
5,755.6
235.8
MEMO
Per capita (chained 1992 dollars)
Gross domestic product
Personal consumption expenditures .
Disposable personal income
Saving rate (percent)
26,834.0'
18.168.9'
19.493.0'
27,073.3
18.319.6
19,681.0
3.9
3.9'
GROSS SAVING
Gross saving
1,165.5
1,267.8
1,394.3
1303.0
1,332.9
1,396.9
1,411.6
1,435.8
Gross private saving
1,093.1
1,125.5
1,164.2
1,131.4
1,134.0
1,178.1
1,159.6
1,185.2
Personal saving
Undistributed corporate profits'
Corporate inventory valuation adjustment
254.6
172.4
-24.3
239.6
202.1
-2.5
226.7'
219.5
5.5'
220.4
212.6
3.3
215.9
211.5
3.5
247.0
217.6
5.9
208.2
230.0
3.6
235.8
218.9
9.2
Capital consumption allowances
Corporate
Noncorporate
428.9
224.1
452.3
230.5
475.6
241.2
462.0
235.2
467.4
238.0
472.6
239.7
478.0
242.4
484.5
244.9
72.4
-103.6
142.3
-39.3
71.2
-110.5
181.5
171.6
-5.9
71.3
-77.1
177.5
198.9
251.9
60.8
71.6
-10.8
191.1
79.7
111.4
250.6
59.7
71.8
-12.1
190.9
80.8
110.1
Gross government saving
Federal
Consumption of fixed capital
Current surplus or deficit ( —), national accounts
State and local
Consumption of fixed capital
Current surplus or deficit ( - ) , national accounts
105.3
2.10.1
42.8
71.6
-28.8
187.3
79.5
107.8
104.7
218.8
34.7
71.5
-36.8
184.1
79.2
104.9
41 Gross investment
1,137.2
1,207.9
138.3
1,243.5
1,268.6
1,323.4
1,308.4
1,332.7
42 Gross private domestic investment
43 Gross government investment
44 Net foreign investment
1.038.2
1.242.5'
-160.2
1.151.1
225.3
-132.9
1,193.6
223.3
-148.4
1.242.0
227.4
-114.4
1,116.5
224.3
-132.9
1.250.2
227.1
-168.9
1,284.1
226.1
-177.4
-28.2
-59.9
-86.0
-103.2
-103.1
45 Statistical discrepancy
1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustment.
70.9
-174.4
176.0
72.9
103.1
213.4
76.2
226.0
77 2
100.4
15.9
71.4
-55.5
182.9
78.2
-146.0
SOURCE. U.S. Department of Commerce, Sun'ey of Current Business.
A50
3.10
International Statistics • June 1998
U.S. INTERNATIONAL TRANSACTIONS
Summary
Millions of dollars; quarterly data seasonally adjusted except as noted'
1997
1996
Item credits or debits
1995
1997
1996
Q4
1 Balance on current account
2
Merchandise trade balance2
5
6
7
8
9
10
Military transactions, net
Olher service transactions, net
Investment income, net
U.S. government grants
U.S. government pensions and other transfers
Private remittances and other transfers
11 Change in U.S. government assets other than official
reserve assets, net (increase, - >
-129,095
-173,560
575.871
-749,431
3,866
67,837
6,808
-11,096
-3,420
-19,530
-148,184
-191,170
612,069
-803,239
3,786
76,344
2,824
-14,933
-4,331
-20,704
-166,446
-198,934
678,348
-877,282
3,830
81,462
-14,277
-11,688
-4,075
-22,763
Ql
Q2
Q3
Q4»
-36,874
-48,190
157,846
-206,036
1,295
20,697
1,250
-5,499
-1,050
-5,377
-39,916
-49,844
162,341
-212,185
437
20.083
-2,015
-2,109
-988
-5,480
-37,795
-47,188
171.227
-218,415
1,048
20,470
-3,270
-2,245
-1,033
-5,577
-43,114
-52,001
170,255
-222,256
1,398
20,696
-4,137
-2,231
-1,031
-5,808
-45,619
-49,901
174,525
-224.426
947
20,215
-4,856
-5,103
-1,023
-5,898
-549
-690
177
-284
-21
-268
461
5
-9,742
0
-808
-2,466
-6.468
6,668
0
370
-1,280
7,578
-1,010
0
-350
-3,575
2,915
-315
0
-146
-28
-141
4,480
0
72
1,055
3,353
-236
0
-133
54
-157
-730
0
-139
-463
-128
-4.524
0
-150
-4,221
-153
-296,916
-75,108
-34,997
-100,074
-86,737
-358,422
-98,186
-64,234
-108,189
-87,813
-426,105
-151,076
-76,298
-79,287
-119,444
-153,837
-66,657
-26,115
-30,200
-30,865
-132,756
-62,026
-29,466
-14,510
-26,754
-90,760
-27,947
-3.984
-21,841
-36.988
-110,427
-30.602
-17,848
-39,214
-22,763
-92,159
-30.501
22 Change in foreign official assets in United States (increase, -t-)
23
U.S. Treasury securities
24
Other U.S. government obligations
25
Other U.S. government liabilities4
26
Other U.S. liabilities reported by U.S. banks3
110,729
68.977
3,735
744
34,008
3 265
122,354
111,253
4,381
720
4,722
I 278
18,157
-7,019
4,048
539
21,274
685
33,097
33.564
1.854
160
-4,270
I 789
28,891
23,289
651
478
7,698
- 3 225
-5.374
-12,108
644
654
4,536
900
21,867
6,686
2,667
-510
12,391
633
-27,227
-24,886
86
-83
-3,351
I 007
28 Change in foreign private assets in United States (increase, +)
29
US bank-reported liabilities
30 U.S. nonbank-reported liabilities
31
Foreign private purchases of U.S. Treasury securities, net
340,505
30.176
34,588
111,848
96,367
67,526
425,201
9,784
31,786
172,878
133,798
76,955
672,340
142,545
44,740
161,482
38,960
-2,912
75,326
32.447
17.661
153,391
17,387
15,210
51,289
38,820
30,685
148,433
28,100
-7,916
49,915
51.682
26,652
161,425
10,102
22,046
42,919
60,409
25,949
209,090
86,956
0
-14,931
0
-46,927
0
-97,113
-14,931
-46.926
-97,113
0
-3,269
2,669
-5,938
0
-14,069
7,287
-21,356
0
-14.000
-1,485
-12,515
0
-29,482
-8,489
-20,993
0
-39,566
2,683
-42,249
12 Change in U.S. official reserve assets (increase, - )
13 Gold
14 Special drawing rights (SDRs)
15 Reserve position in International Monetary Fund
16 Foreign currencies
17 Change in U.S. private assets abroad (increase, - )
18 Bank-reported claims^
19 Nonbank-reported claims
20 U.S. purchases of foreign securities, net
21
U.S. direct investments abroad, net
33
Foreign direct investments in United States, net
35 Discrepancy
36
Due to seasonal adjustment
37
Before seasonal adjustment
MEMO
Changes in official assets
38 U.S. official reserve assets (increase, - )
39 Foreign official assets in United States, excluding line 25
(increase. +1
40 Change in Organization of Petroleum Exporting Countries official
assets in United States (part of line 22)
43,731
38,362
24.641
-9,742
6,668
-1,010
-315
4,480
-236
-730
-4,524
109,985
121,634
17,618
32,937
28,413
-6.028
22,377
-27,144
4,239
12,278
12,782
3,315
9,272
2,287
2,619
-1,396
1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38-40.
2. Data are on an international accounts basis. The data differ from the Census basis data,
shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from
merchandise trade data and are included in line 5.
3. Reporting banks include all types of depository institutions as well as some brokers and
dealers.
189,273
107,928
-3.722
-32,936
4. Associated primarily with military sales contracts and other transactions arranged with
or through foreign official agencies.
5. Consists of investments in U.S. corporate stocks and in debt securities of private
corporations and state and local governments.
SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis. Survey of Current
Business.
Summary Statistics A51
U.S. FOREIGN TRADE1
3.11
Millions of dollars; monthly data seasonally adjusted
1997
Item
1995
1998
1997
1996
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.p
1 Goods and services, balance
2
Merchandise
-101,857
-173,560
71,703
-111,040
-191,170
80,130
-113,684
-198,975
85,291
-8,993
-16,578
7,585
-10.996
-18.557
7,561
-8.979
-16.498
7,519
-8,904
-15,741
6,837
-10,897
-17,703
6.806
-11.619
-18,328
6,709
-12,108
-18,565
6,457
4 Goods and services, exports
794.610
575,871
218,739
848,833
612,069
236,764
931,370
678,150
253,220
78,867
57,264
21,603
78,104
56.308
21.796
80,067
58,388
21,679
78,661
57,524
21,137
79,352
58,414
20,938
77,642
56,686
20.956
77,011
55,609
21,402
-896,467
-749,431
-147,036
-959,873
-803,239
-156,634
-1,045,054
-877,125
-167.929
-87.860
-73.842
-14,018
-89.100
-74,865
-14,235
-89,046
-74,886
-14,160
-87,565
-73,265
-14,300
-90,249
-76.117
-14.132
-89.261
-75,014
-14,247
-89.119
-74,174
-14,945
6
Services
7 Goods and services, imports
9
Services
1. Data show monthly values consistent with quarterly figures in the U.S.
payments accounts.
3.12
SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of
Economic Analysis.
alance of
US. RESERVE ASSETS
Millions of dollars, end of period
1997
Asset
1994
1995
1998
1996
Aug.
1 Total
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.p
74,335
85,832
75,090
66,640
67,148
68,036
67,112
69,954
70,003
70,632
69,354
11,051
10,039
11.050
11.037
11,049
10,312
11,050
9,985
11,050
9,997
11,050
10,132
11,050
10.120
11,050
10,027
11,046
9.998
11.050
10,217
11,050
10,108
12.030
41.215
2 Gold stock, including Exchange
Stabilization Fund1
3 Special drawing rights2'3
4 Reserve position in International Monetary
Fund2
5 Foreign currencies4
14.649
49.096
15,435
38,294
13,959
31,646
14,042
32,059
14.243
32,611
14,571
31,371
18,071
30,809
18.039
30.920
18,135
31,230
17,976
30,220
SDR holdings and reserve positions in the IMF also have been valued on this basis since July
1974.
3. Includes allocations of SDRs by the International Monetary Fund on Jan, 1 of the year
indicated, as follows: 1970—$867 million; 1971—$717 million: 1972—$710 million; 1979—
$1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net transactions in SDRs.
4. Valued at current market exchange rates.
1. Gold held "under earmark" at Federal Reserve Banks for foreign and international
accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold
stock is valued at $42.22 per fine troy ounce.
WJIWIILIII^V I U « V J
IUI
IMtw b u t IWIIW1WD U l
HIV1IIW1
W VS U1111 A V L • * l^f IJI * ** >• J
I
* •* I • l l l l V S k a ^ l l
M*f \t W \* • • **^*rf a
1980, sixteen currencies were used; since January 1981, five currencies have been used. U.S.
3.13
FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS'
Millions of dollars, end of period
1998
1997
Asset
1994
1995
1996
Aug.
1 Deposits
Held in custody
2 U.S. Treasury securities2
3 Earmarked gold3
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.r
250
386
167
169
188
190
167
457
215
243
167
441.866
12.033
522.170
11,702
638,049
11,197
660,461
10,793
655,406
10,793
638,100
10,793
635,092
10,793
620,885
10,763
625,219
10,709
621,956
10,705
630,602
10,664
1. Excludes deposits and U.S. Treasury securities held for international and regional
organizations.
2. Marketable U.S. Treasury bills, notes, and bonds and nonmarketable U.S. Treasury
securities, in each case measured at face (not market) value.
Sept.
3. Held in foreign and international accounts and valued at $42.22 per fine troy ounce; not
included in the gold stock of the United States.
A52
3.15
International Statistics • June 1998
SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS
Millions of dollars, end of period
1998
1997'
Item
1995
1996
Aug.
1 Total1
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.p
630,918
758,624
793,648
803,721
798,696
791,668
776,986
778,915
777,095
107,394
168,534
113,098
198,921
128,728
165,453
138.276
161,610
153,804
153,283
147,796
150.102
135.026
148,301
140,511
145,609
137.693
144.324
293,690
6,491
54,809
379,497
5,968
61,140
431,169
5,841
62,457
434,260
5,879
63,696
421,412
5,919
64,278
423,24.1
5,955
64.572
422,876
5,994
64,789
421,687
6,033
65,075
422,929
6,069
66.080
222,406
19,473
66,721
311,016
6,296
5,004
257,915
21,295
80,623
385,484
7,379
5,926
272,666
20,959
94,262
390,584
8,934
6,241
276,694
21,233
94,754
394,551
10,218
6.269
280,589
19,418
90,190
391,541
9.812
7,144
272,680
19,275
94,135
390,203
9,542
5,831
263,078
18.749
97,316
381.196
10,118
6,527
261,505
18,339
96,697
386,007
10,213
6,152
260,718
19,065
98.948
383,547
10.323
4.492
By Type
2 Liabilities reported by banks in the United States2
3 U.S. Treasury bills and certificates
U.S. Treasury bonds and notes
4
Marketable
6 U.S. securities other than U.S. Treasury securities
By area
1 Europe'
9
10
11
12
Latin America and Caribbean
Asia
Africa
Other countries
1. Includes the Bank for International Settlements.
2. Principally demand deposits, time deposits, bankers acceptances, commercial paper,
negotiable time certificates of deposit, and borrowings under repurchase agreements.
3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official
institutions of foreign countries.
4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of
zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning
March 1988. 20-yeur maturity issue and beginning March 1990, 30-year maturity issue;
3.16
LIABILITIES TO, AND CLAIMS ON, FOREIGNERS
Payable in Foreign Currencies
Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April
1993, 30-year maturity issue.
5- Debt securities of US. government corporations and federally sponsored agencies, and
US. corporate stocks and bonds.
SOURCE. Based on U.S. Department of the Treasury data and on daia reported to the
department by banks (including Federal Reserve Banks) and securities dealers in the United
States, and on the 1989 benchmark survey of foreign portfolio investment in the United
Slates.
Reported by Banks in the United States'
Millions of dollars, end of period
1997'
Item
1994
1995
1996
Mar.
1 Banks' liabilities
2 Banks" claims
3
Deposits
4
Other claims
v
5 Claims of banks' domestic customers2
89,258
60,711
19,661
41,050
10,878
1. Data on claims exclude foreign currencies held by U.S. monetary authorities.
109,713
74.016
22,696
51.320
6.145
103,383
66,018
22,467
43,551
10,978
June
Sept.
Dec
110.102
72,731
26,390
46,341
10.196
110,224
85,305
28,900
56,405
10,265
120,105
91,158
32,154
59,004
10,210
116,738
82.729
28.355'
54.374'
8.476
2. Assets owned by customers of the reporting bank located in the United Slates that
represent claims on foreigners held by reporting banks for the accounts of the domestic
customers.
Bank-Reported Data
3.17
LIABILITIES TO FOREIGNERS
Payable in U.S. dollars
A53
Reported by Banks in the United States'
Millions of dollars, end of period
Sept.
Oct.
Nov.
Dec'
Jan.
Feb.1
B Y HOLDER AND TYPE OF LIABILITY
Total, all foreigners
2 Banks' own liabilities
3
Demand deposits
4 Time deposits
5
6
Other'
Own foreign offices4
7 Banks' custodial liabilities5
8
U.S. Treasury bills and certificates1'
9
Other negotiable and readily transferable
instruments7
10 Other
11 Nonmonetary international and regional organizations^
12 Banks' own liabilities
13
Demand deposits
14
Time deposits
Other3
15
16
17
18
19
Banks' custodial liabilities5
U.S. Treasury bills and certificates6
Other negotiable and readily transferable
instruments7
Other
20 Official institutions9
21
Banks' own liabilities
22
Demand deposits
23
Time deposits2
24
Other3
25
26
27
28
Banks' custodial liabilities5
U.S. Treasury bills and certificates'1
Other negotiable and readily transferable
instruments7
Other
1
29 Banks"
30
Banks' own liabilities
31
Unaftiliated foreign banks
32
Demand deposits
33
Time deposits2
34
35
36
37
38
39
Other 3
Own foreign offices4
Banks' custodial liabilities5
U.S. Treasury bills and certificates6
Other negotiable and readily transferable
instruments
Other
4ft Othei foreigners
41
Banks' own liabilities
42
Demand deposits
43
Time deposits2
44
Other3
45
46
47
48
Banks' custodial liabilities5
U.S. Treasury bills and certificates6
Other negotiable and readily transferable
instruments
Other
1,099,549
1,162.148
1,283,270
l,192,430r
l,200,331 r
l,226,033 r
l,240,488r
1,283,270
1,264,143
1,279,919
753.461
24.448
192.558
140.165
396.290
758,998
27,034
186,910
143,510
401.544
883.174
32,104
198.546
167,637
484,887
788,607
27,090'
190,482'
162.026
409.009
799,271'
28,332
187,840'
171,138'
411.961'
824,677'
33,503'
193,751'
193,950'
403,473'
834,237'
35,690
191,970'
180,925
425.652'
883,174
32,104
198,546
167,637
484,887
864.040
29,712
187,763
184,775
461,790
876,116
29,687
181,527
188,435
476,467
346,088
197,355
403,150
236,874
400.096
193,325
403,823'
209.121
401,060'
205,146
401,356'
200,215
406 251'
196.476
400,096
193.325
400,103
184,955
403,803
186,637
52,200
96,533
72,011
94,265
93,604
113,167
89,096
105.606'
104.-OS'
95,108
106.033'
99,882
109.893'
93.604
113,167
96,945
118,203
99,343
117,823
11,039
10,347
21
4,656
5,670
13,972
13,355
10,569
10.068
217
4,879
4,972
11.806
11.524
771
5,967
4,786
13,914
13.509
5,784
7,542
11.390
11,186
16
5,466
5,704
5,161
8,312
12.469
12,205
43
6,310
5.852
11.390
11,186
16
5,466
5.704
11,255
11,063
175
5,023
5,865
16,259
15.930
74
5,223
10,633
692
350
617
352
204
69
501
166
405
148
264
46
204
69
192
53
85
329
149
341
1
265
0
314
21
229
0
257
0
217
1
133
107
0
180
0
275.928
8.1,447
2,098
30.717
50,632
312,019
79,406
1,511
33,336
286,120
110,607
38,306
70,619
282,017
107,913
1.910
36.582
69.421
29
36
294,181'
99,21 l r
2,181'
40 418'
56.612
299,886'
105.454'
1.745
39.984'
63.725
307,087'
118,154'
2,034
41,770'
74,350
297,898'
109,988'
1,891
44,559
283,327
101,610
2,314
41.120
58.176
39.716'
68,381
283,327
101,610
2,314
41,120
58.176
192,481
168,534
232,613
198.921
181,717
148,301
194 970
165.453
194,432
161,610
188,933
153,283
187,910
150.102
181.717
148.301
175,513
145,609
174,104
144,324
23,603
344
33.266
426
33,211
205
29.349
168
32,315
507
35,236
414
37,374
434
33,211
205
29,614
290
29,643
137
691,412
567,834
171,544
11,758
103,471
56,315
396,290
694,835
562.898
161,354
13,692
89,765
57,897
401,544
816.199
642.459
157.572
17.527
83.809
56,236
484,887
730.209'
732,963'
568,367'
164.894'
18,354
83,162'
63,378'
403,473'
765,574'
595,667'
170,015
21,316
84,621
64,078
425,652'
816,199
642,459
157,572
17,527
83,809
56,236
484.887
791,980
13,323
81,790'
62,144
409,009
724,645'
563,884'
151.923'
13,852
76,683'
61,388'
411,961'
155,952
15,974
79,639
60,339
461.790
798,587
621,857
145,390
16,084
74,894
54,412
476,467
123,578
15,872
131,937
23,106
173,740
31,915
163,943'
30,629
160.761'
30.012
164,596'
33,085
169,907'
32,995
173,740
31,915
174.238
27.607
176,730
30,620
13.035
94,671
17,027
91,804
35,333
106,492
33,960
99,354'
32.886
97,863'
32,065
99.446'
33.826
103.086'
35,333
106,492
35.266
111.365
35.107
111.003
121,170
91,833
10,571
53,714
27,548
141,322
103,339
11,802
58,025
33,512
172.354
127.919
12,247
68,151
47,521
157.471
113,062
63.395
38.298
163,994'
118,409'
11,964
65,206'
41,239
172,069'
124,647'
13,079'
63,658'
47,910
164.547'
116.377'
12.440
61,323'
42.614
172.354
127,919
12.247
68.151
47.521
174,788
124.628
11.881
64.795
47,952
183,056
130,416
11,619
64,828
53,969
29.337
12,599
37.983
14.495
44,435
13,040
44.409
12.873
45,585
14,271
47,422
13,699
48.170
13.333
44,435
13,040
50,160
11,654
52,640
11,544
15.221
1.517
21.453
2,035
24,927
6.468
25,473
6,063
25,256
6.058
27,550
6.173
28,465
6,372
24.927
6.468
31.958
6,548
34,413
6,683
16,040
15,872
15,485
16.553
16,046
17.038
20,791
566,266'
157,257'
11,369
1,682
617,742
MEMO
49 Negotiable time certificates of deposit in custody for
foreigners
14,573
1. Reporting banks include all types of depository institutions as well as some brokers and
dealers. Excludes bonds and notes of maturities longer than one year.
2. Excludes negotiable time certificates of deposit, which are included in "Other negotia
ble and readily transferable instruments."
3. Includes borrowing under repurchase agreements.
4. For U.S. banks, includes amounts owed to own foreign branches and foreign subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory'
agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists
principally of amounts owed to the head office or parent foreign bank, and to foreign
ign
branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank
5 Financial claims on residents of the United Slates, other than long-term securities, held
h
by or through reporting banks for foreign customers.
6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official
institutions of foreign countries.
7. Principally bankers acceptances, commercial paper, and negotiable time certificates of
deposit.
8. Principally the International Bank for Reconstruction and Development, the InterAmerican Development Bank, and the Asian Development Bank. Excludes "holdings of
dollars" pf the International Monetary Fund.
9. Foreign central banks, foreign central governments, and the Bank for International
Settlements.
10. Excludes central banks, which are included in "Official institutions."
A54
3.17
International Statistics • June 1998
LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued
1996
Aug.
Sept.
Jan.
Oct.
Feb.p
AREA
50 Total, all foreigners
51 Foreign countries
52 Europe
53
Austria
54
Belgium and Luxembourg
55
Denmark
56
Finland
57
France
58
Germany
59 Greece
60 Italy
61 Netherlands
62
Norway
63 Portugal
64
Russia
65
Spain
66
Sweden
67
Switzerland
68
Turkey
69 United Kingdom
70
Yugoslavia"
71
Other Europe and other former U.S.S.R.'2
72 Canada
73 Latin America and Caribbean
74
Argentina
75
Bahamas
76
Bermuda
77
Brazil
78
British West Indies
79
Chile
80
Colombia
81
Cuba
82
Ecuador
83
Guatemala
84
Jamaica
85
Mexico
86
Netherlands Antilles
87
Panama
88
Peru
89
Uruguay
90
Venezuela
91
Other
1,099,549
1,162,148
1,088,510
1,148,176
362,819
3.537
24.792
2,921
2,831
39,218
24,035
2,014
10,868
13,745
1,394
2,761
7,948
10,011
3,246
43,625
4,124
139,183
177
26,389
1,283,270
1,192,430' 1,200,331r 1,226,033' 1^40,488'
1,271,880
1,181,861' 1,188,525' 1,212,119'
376,590
5,128
24,084
2,565
1,958
35,078
24,660
1,835
10,946
11,110
1,288
3,562
7,623
17,707
1,623
44,538
6,738
153,420
206
22,521
420,448
2,717
41,007
1,514
2,246
46,607
23,737
1,515
11.378
7,385
317
2,262
7,968
18,989
1,628
39,258
4,054
181,865
239
25.762
407,700
3.404
46,063
1,736
1,751
41,213
22,626
1,592
9,179
7,823
604
1,931
402.428'
2,691
43,436
2,867
2,163
43,065
25,201
2,086
9,852
8,413'
1.321
1,958
13,216
12,784
17,796
2,024
36,862
15,203
2,317
41,076
5,933
167,914
244
23,875
4,736
159,189'
243
25,741
418,988
2.679
46,067
2.359
1,997
45.057
22,117
2,075
11,449
8,119
1,022
1,888
11,722
21,934
1,348
37,075
4,661
165,199
233
31,987
1,283,270
1,264,143'
1,279,919
1,228,019'
1,271,880
1,252,888'
1,263,660
425,584
2,319
46,258
2,157
1,969
45,653
23,040
1,229
10,713
7,010
1,793
1,987
6,938
20,921
1,614
39,665
4,218
177,781
234
30.085
420,448
2,717
41,007
1,514
2,246
46,607
23,737
1,515
11,378
7,385
317
2.262
7.968
18,989
1,628
39,258
4,054
181,865
239
25,762
401,473'
2,787
416,890
2,774
36,934
1,465
2.136
44,990
23,040
1,661
9,682
7,043
845
1,427
6,039
20,129
2,055
37,231
4,047
39,018
1,625
2,177
44,773
21,988'
1,676
9,854
6,287
955
1,515
5,573
19,413
1.415
37.414
3,659
176.402'
292
24,650
189,745
244
25.403
30,468
38,920
28,341
27,629
29.592
30,282
30,921
28,341
29,035'
29.384
440,213
12,235
94.991
4,897
23.797
239,083
2,826
3,659
8
1,314
467,529
13,877
88,895
5,527
27,701
251,465
2,915
536.342
20,199
112,217
6,911
31,037
504.051'
16,643
86,914
6,084
33,575
274,964'
3,327
2,657
55
1,508
1,449
523
32.640
7.591'
3.835
904
1,997
20,639'
8,746'
502,099'
17,700'
89,631'
6,209
31,680'
269,997'
3,579
3,478'
499,513'
18,358'
92,390'
1,671
1,399
481
32,749'
6,069'
4,109'
917
2.184
20.699'
9,476'
5,085
4,241
893
2,382
21,601
9,626
530,305'
19,215'
117,212'
6,279'
31,857'
265,999'
4,514'
3,559'
63
1,876
1,492'
449
33,230'
5,777
3,921'
876'
2,201
22,340'
9,445'
532.662
32,614'
263,763'
3,283
3,341'
57
1.704
1,361
445
32,678'
4,995'
4,293'
907
2,247
22,111'
8,954'
536,342
20,199
112,217
6,911
31,037
276,366
4,072
3,652
66
2,078
1.494
450
21,601
9,626
496,645'
18,033
86,271
7,786
31,567
268,488'
3,353
2,587
60
1,512
1,389
534
30,804
8,286
3,805
1,006
2,070
20,229'
8,865'
1,276
481
24,560
3,256
21
1,767
1.282
628
31.240
276,366
4,072
3.652
66
2,078
1.494
450
33.972
5.085
71
6,012
33,972
17.430
110.744
8,282
33.022
273,513
4 445
3.883
58
1.987
1,381
437
33.592
5.413
4,050
913
2,245
21,749
9,518
974
1,836
11,808
7,531
6.099
4,099
834
1.890
17.363
8,670
240.595
249,083
269,196
231,017
234,560
242,064'
255,000
269,196
274,303'
269.058
33.750
11.714
20,197
3,373
2,708
4,041
109.193
5,749
3,092
12.279
15.582
18.917
30,438
15,995
18,789
3,930
2,298
6,051
117,316
5,949
3,378
10,912
16,285
17.742
18,252
11,760
17,722
4,567
3,554
6,283
143,401
12,955
3.250
6,501
14,959
25,992
10,450
11,803
17,647
4,474
3,737
5,202
119,581
9,646
2,541
4,956
15,325
25,655
12,664
13,460
18,533
4,451
2,810
4,534
118,536
9,327
2,409
6.545
14,279
27,012
16,234'
15,207
19,755
5,131
4,568
4,200
116,852
8,597
2,505
6,988
14,436
27,591
17,433
13.586
18,886
4.913
3,092
3,745
133.690
9.982
2.558
5,824
14.017
27,274
18.252
11,760
17,722
4,567
3,554
6,283
143,401
12,955
3.250
6,501
14,959
25.992
20,153'
12,936'
18,002'
5,331
2,909'
7,192
138,685'
11,703'
2,530'
5,858
16,059
32,945'
18,570
12,941
17.730
5.315
2,988
7,190
142,243
12,520
2,867
4.676
13,485
26,727
105 Africa
106
Egypt
107
Morocco
108
South Africa
109
Zaire
110 Oil-exporting countries
111 Other
7,641
8,116
2.012
112
458
10
2,626
2,898
10,347
2,136
104
739
10
1,797
2,855
9,731
1,973
94
1,694
7
3,211
2,752
10,380
2,050
99
2,047
14
3,280
2,890
10,310
1,742
105
2,028
3
3,194
3,238
9,520
1,836
69
1,615
5
10,347
1,663
138
2,158
10
3,060
3,318
10,291
1.949
131
1,685
7
3,470
3,049
112 Other
113
Australia
114
Other
6.774
5,647
1.127
7,938
6,479
1,459
7.206
9,139
7,917
1.222
7,514
6,391
1.123
8,376
7,284
1,092
7,481
6,283
1,198
7,206
6,304
902
902
7,481'
6,385'
1,096
6,469
5,466
1,003
11,039
9,300
893
846
13,972
12,099
1,339
534
11,390
10,217
424
749
10.569
9,434
579
556
11.806
10,634
13,914
11,943
1,277
694
12,469
10,926
1,053
11,390
10,217
424
749
11,255'
10,031'
975
249
16,259
14,666
1,217
376
92 Asia
China
93
Mainland.
94
Taiwan...
95
Hong Kong
96
India
97
Indonesia
98
Israel
99
Japan
100
Korea (South)
101
Philippines
102
Thailand
103
Middle Eastern oil-exporting countries13.
104
Oh
Other
115 Nonmonetary international and regional organizations.
116
International15
117
Latin American regional16
118 Other regional"
4,673
4.264
11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia.
12. Includes the Bank for International Settlements. Since December 1992, has
included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia.
13. Comprises Bahrain. Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab
Emirates (Trucial States).
14. Comprises Algeria, Gabon, Libya, and Nigeria.
4,241
893
2,382
1,663
138
2,158
10
3,060
3,318
6.304
708
464
2,948
3,047
490
9.197
1.664
73
1.645
4
2.716
2,575
15. Principally the International Bank for Reconstruction and Development. Excludes
"holdings of dollars" of Ihe International Monetary Fund.
16. Principally the Inter-American Development Bank.
17. Asian, African. Middle Eastern, and European regional organizations, except the Bank
for Internationa) Settlements, which is included in "Other Europe."
Bank-Reported Data
3.18
A55
BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1
Payable in U.S. Dollars
Millions of dollars, end of period
1997'
1996
Area or country
1997
Aug.
Sept.
Nov.
Dec.
Jan.
Feb.p
[ Total, all foreigners...
532,444
599,925
708,197r
650,506
655,419
681,287
699,095
708,197
703,125
703,279
2 Foreign countries . . . .
530,513
597^21
705,734r
648,089
653,376
679,539
696,609
705,734
700,208
700,524
132,150
565
67,784
147
4,355
165,769
1,662
6,727
492
971
15,246
8,472
568
6,457
7,117
808
418
1,669
3,211
1,739
19.798
1,109
85,234
115
3,956
199,881'
1,354
6.641'
980
1,233
16,239
12,676
402
6,2Vf
6,141
555
777
1,248
2,942'
1,854
28,846
1,558
103,143
52
7,010
189,759
1,739
8,124
811
1,773
16.232
8,685
481
8,015
11,083
849
732
2.192
6,175
1,639
24,338
1,305
90,226
76
5,284
199,256
1,371
7,847
1.082
1,889
17,531
11,724
499
7,670
11,543
1,713
563
1,927
5,431
1,659
25,393
1,410
93,825
75
6,104
213,472
1,913
8,347
896
1,808
16,831
11,617
463
7,145
11,503
1,419
615
2,054
6,625
1,838
29,779
1,424
102,405
75
6,715
215,077
2,034
7,475
844
1,259
19,817
13,245
401
6,871
11,496
2,080
695
2,207
6,339
1,804
29,399
1,572
100,870
74
6,595
199,881
1,354
6,641
980
1,233
16.239
12.676
402
6.230
6.141
555
777
1,248
2,942
1,854
28,846
1,558
103,143
52
7,010
204.763
1,917
5,714
1,531
1,492
21,474
10,849
504
6,655
5,384
989
655
1,297
6,926
1,736
28,515
1,648
99,302
53
8,122
211,999
1,934
6,021
907
1,554
18,963
10,752
504
5,974
5,447
1,296
533
1,143
6,255
1,838
29,102
1,675
110,307
53
20,874
26,436
27,170
24,452
23,523
22,815
24,765
27,170
25,155
24,872
24 Latin America and Caribbean
25
Argentina
26
Bahamas
27
Bermuda
28
Brazil
29
British West Indies
30 Chile
31 Colombia
32 Cuba
33
Ecuador
34 Guatemala
35 Jamaica
36
Mexico
37 Netherlands Antilles
38
Panama
39
Peru
40
Uruguay
41
Venezuela
42
Other
256,944
6,439
58.818
5.741
13,297
124,037
274,153
7,400
71,871
4,129
17,259
105,510
5,136
302,678
7,243
66,073
9,353
19,429
133,797
6.350
6,543
0
1,218
764
374
18,770
20,335
3,555
3,060
728
1,716
3,370
303,917
8,129
73,838
8,008
20,134
133,309
7,304
6,869
0
1,307
761
364
18,584
12,274
3,958
3,185
709
1,642
3,542
141,801
7,783
6,976
3
1,292
787
405
18,904
17,064
4,089
3,457
651
1,921
3,933
343,806
8,924
89,379
8,782
21,696
145,471
7.913
6,945
0
1,311
886
424
19,518
17,838
4,364
3,491
629
2,129
4,106
345,779
9,076
90,823
9,385
22,541
145,935
7.910
6,733
0
1,390
863
410
20,510
16,031
4,074
3.413
588
2,257
3,840
345,383
9,402
1,661
3,376
298,829
7,277
70,031
9,840
19,249
128,416
5,919
6.608
0
1,199
689
375
18,680
18,399
3,471
2,850
702
1,750
3,374
317,508
345
18,425
25,209
2,786
2,720
589
1,702
3,174
343,806'
8,924'
89,379
8,782
21,696'
145.471'
7.913
6,945'
0
1,311
886
424
19,518'
17,838
4,364
3,491'
629
2,129'
4,106'
43 Asia . .
China
44
Mainland
45
Taiwan
46
Hong Kong
47
India
48
Indonesia
49
Israel
50 Japan
51
Korea (South)
52
Philippines
53 Thailand
54
Middle Eastern oil-exporting countriesJ
55 Other
115,336
122,478
125,007'
124,927
119,395
129,622
129,760
125,007
114,400
108,904
1,023
1,579
921
13,99c
2,200
2,611
768
59,546
18.123'
1,689
2,259
10,790
10,531'
2,574
1.521
13,183
2,110
2,579
749
54,427
21,695
1,834
2,641
9.503
12,111
2.798
1,250
13,568
2,086
2.713
907
52,480
19,983
1,670
2,479
7,988
11,473
2,345
1,271
15,338
2,360
2,731
1,539
59,437
19,927
1,455
2,317
8,490
12,412
2,102
1,000
15,151
2,501
2,774
1.201
60.195
19,258
1,533
2,180
8,909
12,956
1,579
921
13,990
2,200
2,611
768
59,546
18,123
1,689
2,259
10,790
10,531
2,534
847
14,548
2,299
2,346
946
52,904
14,429
1,794
2,164
9.133
10,456
13,477
2,172
2,243
987
51,891
12,741
1,645
2,138
9,101
9,701
3 Europe . . . .
4
Austria
5
Belgium and Luxembourg
6
Denmark
7
Finland
8
France
9
Germany
10 Greece
11 Italy
12 Netherlands
13 Norway
14 Portugal
15 Russia
16 Spain
17 Sweden
18 Switzerland
19 Turkey
20
United Kingdom
21
Yugoslavia^
22 Other Europe and other former U.S.S.R.-' .
23 Canada ..
7,624
403
1,055
15,033
9,263
469
5.370
5,346
665
888
660
2,166
2,080
7,474
803
4,864
4,550
0
825
457
323
18,024
9,229
3,008
1,829
466
6,247
0
1,031
620
8,761
72,739
6,552
20,390
7,741
84,982
8,917
24.188
149,065
8,249
6,729
0
1,398
868
401
21,103
15,598
4,232
3,550
594
2,334
3,773
6,486
1,401
1,894
12,802
1,946
1,762
633
59,967
18,901
1,697
2,679
10,424
8,372
56 Africa
57
Egypt
58
Morocco
59
South Africa
60 Zaire
61
Oil-exporting countries5
62
Other
2,742
210
514
465
1
552
1,000
2,776
247
524
584
0
420
1,001
3,530
247
511
805
0
1,212
755
3,281
288
554
489
0
1,178
772
3,464
251
547
655
0
1,123
3,342
245
599
557
0
1,111
830
3,332
282
412
743
0
1,091
804
3,530
247
511
805
0
1,212
755
3,580
279
498
694
0
1,324
785
3,403
304
514
573
0
1,219
793
63 Other
64
Australia .
65
Other
2,467
1,622
845
5,709
4,577
1,132
6,340'
5,299
1,041'
6,841
5,266
1,575
5,060
4,314
746
6,371
5,296
1,075
6,167
4,962
1,205
6,340
5,299
1,041
6,531
5,419
1,112
5,963
5,139
66 Nonmonetary international and regional organizations6
1,931
2,604
2,463
2,417
2,043
1,748
2,486
2,463
2,917
2,755
1,713
12,821
1,846
1,696
739
61,468
13,975
1,318
2,612
9,639
1. Reporting banks include all types of depository institutions as well as some brokers and
dealers.
2. Since December 1992, has excluded Bosnia. Croatia, and Slovenia.
3. Includes the Bank for International Settlements. Since December 1992, has included all
pans of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia.
1,988
820
824
4. Comprises Bahrain, Iran. Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab
Emirates (Trucial States).
5. Comprises Algeria, Gabon, Libya, and Nigena
6. Excludes the Bank for International Settlements, which is included in "Other Europe."
A56
3.19
International Statistics • June 1998
BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS
Payable in U.S. Dollars
Millions of dollars, end of period
Reported by Banks in the United States'
1997'
Type of claim
1995
1996
1998
1997'
Aug.
Sept.
Oct.
Nov.
681,287
29,795
400,207
115,095
31,711
83,384
136,190
699,095
27,739
409,314
122,350
33,850
88,500
139,692
Jan.
Feb.""
703,125
30,184
415,690
111,009
30,670
80,339
146,242
703,279
27,029
421,051
106,412
26,500
79,912
148.787
36,328
37,119
Dec.
1 Total
655,211
743.919
857,931
2 Banks' claims
3
Foreign public borrowers
4
Own foreign offices2
5
Unaffiliated foreign banks
532.444
22,518
307,427
101,595
37,771
63,824
100,904
599,925
22,216
341,574
113,682
33,826
79,856
122.453
708,197
20,660
431,679
109,225
31,010
78,215
146.633
122,767
58.519
143,994
77,657
149,734
73,110
169,993
100,460
149,734
73,110
44,161
51,207
53,967
51.514
53,967
20,087
15,130
22,657
18,019
22,657
8,410
10,388
9,623
10.881
9,623
30,717
39,661
34,148
7
Other
9 Claims of banks' domestic customers3
11
Negotiable and readily transferable
instruments4
Outstanding collections and other
12
857,931
825,412
650,506
28,258
370,642
115,348
37,123
78,225
136,258
655,419
28,875
374,452
104,744
31,056
73,688
147,348
708,197
20,660
431,679
109,225
31,010
78,215
146,633
MEMO
13 Customer liability on acceptances
14 Dollar deposits in banks abroad, reported by
nonbanking business enterprises in the
45,342
1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are
for quarter ending with month indicated.
Reporting banks include all types of depository institution as well as some brokers and
dealers.
2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory
agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists
3.20
38,171
39,157
37,527
34,148
principally of amounts due from the head office or parent foreign bank, and from foreign
branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank.
3. Assets held by reporting banks in the accounts of their domestic customers.
4. Principally negotiable time certificates of deposit, bankers acceptances, and commercial
paper.
5. Includes demand and time deposits and negotiable and nonnegotiable certificates of
deposit denominated in U.S. dollars issued by banks abroad.
BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS
Payable in U.S. Dollars
Millions of dollars, end of period
Reported by Banks in the United States'
1997'
Maturity, by borrower and area
1995
Sept.
1 Total
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
By borrower
Maturity of one year or less
Foreign public borrowers
All other foreigners
Maturity of more than one year
Foreign public borrowers
All other foreigners
By area
Maturity of one year or less
Europe
Canada
Latin America and Caribbean
Asia
Africa
Allother 3
Maturity of more than one year
Europe
Canada
Latin America and Caribbean
Asia
Africa
All other3
202,282
224,932
258,106
276,217
272,014
280,968
276,507
170,411
15,435
154,976
31,871
7,838
24,033
178,857
14,995
163,862
46,075
7,522
38,553
211,859
15,411
196,448
46,247
6,790
39,457
223,836
19,935
203,901
52,381
8,903
43,478
210,882
17,979
192,903
61,132
11,406
49,726
217,949
20,123
197,826
63,019
8,752
54,267
205,808
12,135
193,673
70,699
8,525
62,174
56,381
6,690
59,583
40,567
1,379
5,811
55,622
6,751
72,504
40,296
1,295
2.389
55,690
8,339
103,254
38,078
1,316
5,182
96,942
36,484
1,451
3,648
69,233
10,381
87,059
38,435
1,899
3,875
69.204
8,460
99,918
34,629
2,157
3,581
58,295
9,917
97,242
33,955
2,211
4,188
4,358
3,505
15,717
5,323
1,583
1,385
4,995
2,751
27,681
7,941
1,421
1,286
6,965
2,645
24,943
9,392
1,361
941
9,512
2,944
26,797
10,772
1,204
1.152
11,884
3,174
31,001
12,509
1,264
1,300
11,202
3,842
34,988
10,393
1,236
13,240
2,512
42,069
10,159
1,236
1,483
1. Reporting banks include all types of depository institutions as well as some brokers and
dealers.
10,423
1,358
2. Maturity is time remaining until maturity.
3. Includes nonmonetary international and regional organizations.
Bank-Reported Data A57
3.21
CLAIMS ON FOREIGN COUNTRIES
Held by U.S. and Foreign Offices of U.S. Banks'
Billions of dollars, end of period
1997'
Area or country
Sept.
1 Total
2 G-10 countries and Switzerland
3
Belgium and Luxembourg
4
France
5
Germany
6
Italy
7
Netherlands
8
Sweden
9
Switzerland
10 United Kingdom
11 Canada
12 Japan
409.5
499.5
551.9
574.7
612.8
586.2
645.3
688.4
718.7
747.8
161.9
7.4
191.2
7.2
19.1
24.7
11.8
3.6
2.7
5.1
85.8
10.0
21.1
206.0
13.6
19.4
27.3
11.5
3.7
2.7
6.7
82.4
10.3
28.5
203.4
11.0
17.9
31.5
13.2
3.1
3.3
5.2
84.7
10.8
22.7
226.9
11.4
18.0
31.4
14.9
4.7
2.7
6.3
101.6
12.2
23.6
220.0
11.3
17.4
33.9
15.2
5.9
3.0
6.3
90.5
14.8
21.7
228.3
11.7
16.6
29.8
16.0
4.0
2.6
5.3
104.7
14.0
23.7
255.9
15.2
21.5
34.0
16.4
4.6
3.4
6.1
112.7
17.0
25.1
274.0
10.8
19.3
35.1
23.1
7.1
3.6
5.5
119.9
17.5
32.1
268.4
12.5
21.6
37.3
22.4
7.7
4.1
4.9
115.9
15.8
26.2
45.7
1.1
1.3
.9
4.5
2.0
1.2
13.6
1.6
3.2
1.0
15.4
50.2
.9
61.3
1.3
2.6
.8
3.4
.7
56
2.1
1.6
17.5
2.0
3.8
1.7
21.7
55.5
1.2
3.3
.6
5.6
2.3
1.6
13.6
2.3
3.4
2.0
19.6
62.1
1.0
1.7
.6
6.1
3.0
1.4
16.1
2.8
4.8
1.7
22.8
65.7
1.1
1.5
.8
6.7
8.0
.9
13.2
2.7
4.7
2.0
24.0
67.4
2.0
1.7
.7
6.3
5.3
1.0
15.0
2.8
6.3
1.9
24.5
72.7
1.6
2.8
1.4
6.1
4.7
1.2
16.2
3.4
5.5
1.9
27 8
74.7
1.8
3.7
1.9
6.2
4.6
1.4
14.6
4.4
6.1
1.9
28.1
24.1
.5
3.7
3.8
15.3
22.1
.7
27
4.8
13.3
20.1
.9
2.3
19.2
.6
21.2
.8
2.9
4.7
12.3
.6
19.7
1.1
2.4
5.2
10.7
.4
22.1
1.1
2.0
5.0
13.3
7
22.5
1.0
2.1
5.7
12.6
1.2
23.2
1.3
2.3
6.6
11.8
1.2
112.6
118.6
126.5
12.9
13.7
6.8
2.9
17.3
12.7
18.3
6.4
2.9
16.1
9
3.1
14.1
21.7
6.7
2.8
15.4
1.2
3.0
15.0
17.8
6.6
3.1
16.3
1.3
3.0
14.3
20.7
7.0
4.1
16.2
1.6
3.3
14.9
22.7
7.1
3.9
17.9
1.7
3.6
16.9
28.3
7.9
3.6
17.4
1.6
3.7
17.5
27 4
8.3
3.6
17.1
2.0
3.8
1.1
1.8
9.4
4.4
3.3
9.7
4.7
.5
19.3
5.2
3.9
5.2
4.3
2.9
9.8
4.2
.6
21.7
5.3
4.7
5.4
4.8
2.6
10.4
3.8
.5
21.9
5.5
5.4
4.8
4.1
2.5
10.3
4.3
.5
21.5
6.0
5.8
5.7
4.1
2.7
10.5
4.9
1.0
14.9
6.5
3.6
9.2
4.2
.4
10.6
5.3
I I
16.6
6.8
4.4
6.4
7.0
7.3
4.8
4.3
9.7
5.0
1.5
16.5
5.6
5.7
6.2
4.6
.6
.7
.0
1.0
.7
.7
.1
.9
.9
.6
.0
.9
1.1
7
.0
.9
.9
.7
.0
.9
12.0
12.6
7.7
47
2.7
5.9
84.4
6.9
17.6
13 Other industrialized countries
14 Austria
15 Denmark
16 Finland
17 Greece
18 Norway
19 Portugal
20 Spain
21
Turkey
22
Other Western Europe
23
South Africa
24 Australia
26.5
.7
1.0
.4
3.2
25 OPEC2
26
Ecuador
27
Venezuela
28
Indonesia
29
Middle East countries
30
African countries
17.6
.5
5.1
3.3
7.6
1.2
1.7
.8
9.9
2.1
3.2
1.1
2.3
31 Non-OPEC developing countries
32
33
34
35
36
37
38
Latin America
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Other
39
40
41
42
43
44
45
46
47
Asia
China
Mainland
Taiwan
India
Israel
Korea (South)
Malaysia
Philippines
Thailand
Other Asia
48
49
51)
51
Africa
Egypt
Morocco
Zaire
Other Africa'
52 Eastern Europe
53
Russia4
54
Other
55 Offshore banking centers
56
Bahamas
57
Bermuda
58
Cayman Islands and other British West Indies
59
Netherlands Antilles
60
Panama5
61
Lebanon
62
Hong Kong, China
63
Singapore
64
Other*
65 Miscellaneous and unallocated7
7.7
12.0
4.7
2.1
17.9
.4
3.1
2.0
7.3
3.2
.5
6.7
4.4
3.1
3.1
3.1
11.2
8.4
6.1
2.6
18.4
.5
2.7
16.2
3.1
3.3
2.1
4.7
5.7
3.2
1.3
11.6
1.9
4.7
1.2
16.4
.5
19.1
4.4
4.1
4.9
4.5
4.9
11.5
.5
.4
7
0
.9
.9
2.3
5.4
10.2
.4
131.9
6.1
141 4
3.2
1.6
1.6
2.7
.8
1.9
4.2
1.0
3.2
6.3
1 4
4.9
5.1
1.0
4.1
5.3
1.8
3.5
6.9
3.7
3.2
9.0
3.6
5.4
7.2
4.2
3.0
9.9
5.1
4.7
73.5
10.9
8.9
18.4
2.8
2.4
.1
18.8
11.2
.1
72.9
10.2
8.4
99.2
11.0
6.3
32.4
10.3
1.4
.1
25.0
13.1
1
101.3
13.9
5.3
28.8
II.I
1.6
I
25.3
15.4
I
134.7
20.3
4.5
37.2
26.1
2.0
.1
27.9
16.7
.1
59.6
140.0
62.6
105.2
14.2
4.0
32.0
11.7
1.7
.1
26.0
15.5
.1
50.0
142.5
21.1
6.7
57.6
106.1
17.3
4.1
26.1
13.2
1.7
.1
27.6
15.9
.1
72.7
149.6
20.5
9.8
52.1
21.8
2.3
I
27.3
15.9
.1
80.8
43.6
21.4
1.6
1.3
.1
20.0
10.1
.1
66.9
I. The banking offices covered by these data include U.S. offices and foreign branches of
U.S banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered
include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include
large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository
institutions as well as some types of brokers and dealers. To eliminate duplication, the data
are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign
branch of the same banking institution.
These data are on a gross claims basis and do not necessarily reflect the ultimate country
risk or exposure of US. banks. More complete data on the country risk exposure of U.S. banks
are available in the quarterly Country Exposure Lending Survey published by the Federal
Financial Institutions Examination Council.
Sept.
41.2
20.0
2.2
.1
30.9
20.3
.1
59.6
17.2
7.9
43.1
15.9
2.7
I
35.2
17.7
.3
57.6
2. Organization of Petroleum Exporting Countries, shown individually; other members of
OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigena, Qatar, Saudi Arabia, and United
Arab Emirates); and Bahrain and Oman (not formally members of OPEC).
3. Excludes Liberia. Beginning March 1994 includes Namibia.
4. As of December 1992. excludes other republics of the former Soviet Union.
5. Includes Canal Zone.
6. Foreign branch claims only.
7. Includes New Zealand, Liberia, and international and regional organizations.
A58
3.22
International Statistics • June 1998
LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in
the United States
Millions of dollars, end of period
1996
Type of liability, and area or country
1997
1994
Sept.
June
Sept.
Dec.p
54,309
46,448
54,798
51,604
54,798
58,750
55,184
55,476
58,245
Payable in dollars
Payable in foreign currencies
38,298
16,011
33,903
12,545
38,956
15,842
36,374
15,230
38,956
15,842
39,944
18,806
38,494
16,690
39,583
15,893
41,838
16,407
By type
Financial liabilities
Payable in dollars
Payable in foreign currencies
32,954
18,818
14,136
24,241
12,903
11,338
26,065
11,327
14,738
25,445
11,272
14,173
26,065
11,327
14,738
29,633
11,847
17,786
26,864
11,203
15,661
25,970
11,248
14,722
27,790
12,975
14.815
Commercial liabilities
Trade payables
Advance receipts and other liabilities
21,355
10,005
11,350
22,207
11,013
11,194
28,733
12,720
16,013
26,159
11,791
14,368
28,733
12,720
16,013
29,117
11,515
17,602
28,320
11,122
17,198
29,506
10,961
18,545
30,455
10,900
19.555
Payable in dollars
Payable in foreign currencies
19,480
1,875
21,000
1.207
27,629
1,104
25,102
1,057
27,629
1,104
28,097
1,020
27,291
1.029
28,335
1,171
28.863
1,592
By area or country
Financial liabilities
Europe
Belgium and Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
21,703
495
1,727
1,961
552
688
15,543
15,622
369
999
1,974
466
895
10,138
16,195
632
1,091
1,834
556
699
10,177
16,086
547
1,220
2,276
519
830
9,837
16,195
632
1,091
1,834
556
699
10,177
20,081
769
1,205
1,589
507
694
13,863
18,530
238
1,280
1,765
466
591
12.968
18,019
89
1,334
1,730
507
645
12,165
19,121
186
1,684
2,018
494
776
12,201
629
632
1,401
973
1,401
602
456
399
1.186
20
21
22
23
24
25
26
Latin America and Caribbean .. .
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
2,034
101
80
207
998
0
5
1,783
59
147
57
866
12
1.668
236
50
78
1.030
17
1
1,169
50
25
52
764
13
I
1,668
236
50
78
1.030
17
1
1,876
293
27
75
965
16
1
1.279
55
97
769
15
1
1,061
10
64
52
663
76
1
1.386
141
229
143
604
26
1
27
28
29
Asia
Japan
Middle Eastern oil-exporting countries
8,403
7,314
35
5,988
5.436
27
6,423
5,869
25
6,969
6,602
25
6,423
5,869
25
6,370
5,794
72
6,015
5,435
39
6,006
5,492
23
5,394
5,085
32
30
31
Africa
Oil-exporting countries2
135
123
150
122
38
0
153
121
38
0
29
0
29
0
33
0
60
0
32
33
34
35
36
37
38
39
124
All other'
Commercial liabilities
Europe
Belgium and Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
643
6.773
241
728
604
722
327
2,444
7,700
331
481
767
500
413
1,037
1,040
1.090
1,144
1,090
1,068
1,136
1,150
1,171
1,857
19
345
161
23
574
276
1,740
1
205
98
56
416
221
2,574
63
297
196
14
665
328
2,386
33
355
198
15
446
341
2,574
63
297
196
14
665
328
2,563
43
479
201
14
633
318
2,501
33
397
225
26
594
304
2,225
38
180
233
23
562
322
2,159
16
203
212
11
564
259
10,741
4,555
1,576
10,421
3,315
1,912
13,422
4,614
2,168
12,227
4,149
1,951
13,422
4,614
2,168
13,968
4,502
2,495
13,926
4,460
2,420
14,682
4,587
2,984
14,958
4,499
3,109
619
254
1,040
532
1,020
490
1,040
532
1,037
479
941
423
929
504
41
42
43
44
45
46
47
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
48
49
50
Asia
Japan
Middle Eastern oil-exporting countries1.
51
52
Africa
Oil-exporting countries2
428
256
53
Other1.
3,568
519
I. Comprises Bahrain. Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab
Emirates (Trucial States).
9,767
479
680
1,002
766
624
4,303
8.680
427
657
949
668
405
3.663
9,767
479
680
1,002
766
624
4,303
9,551
643
680
1,047
553
481
4,165
8,711
738
709
852
290
430
3.827
840
2. Comprises Algeria, Gabon. Libya, and Nigeria.
3. Includes nonmonetary international and regional organizations.
9,362
705
783
950
453
401
3,834
1,158
10,212
666
763
1,271
439
375
4,083
1,085
Nonbank-Reported Data A59
3.23
CLAIMS ON UNAFFILIATED FOREIGNERS
the United States
Millions of dollars, end of period
Reported by Nonbanking Business Enterprises in
Type of claim, and area or country
Sept.
Dec.
Mar.
June
Sept.
57,888
52,509
63,642
59,092
63,642
66,202
67,039
68,646
65,287
53,805
4,083
48,711
3,798
58,630
5,012
55,014
4,078
58,630
5,012
60,226
5.976
60,855
6,184
62,030
6,616
57.383
7,904
By type
4 Financial claims
5
Deposits
6
Payable in dollars
7
Payable in foreign currencies
8
Other financial claims
9
Payable in dollars
10
Payable in foreign currencies
33,897
18.507
18,026
481
15,390
14,306
1.084
27,398
15,133
14,654
12.265
10,976
1,289
35,268
21,404
20,631
773
13.864
12,069
1,795
34,200
19,877
19,182
695
14,323
12,234
2,089
35,268
21,404
20.631
773
13,864
12,069
1,795
38,647
20.250
18.599
1,651
18,397
15,381
3,016
39,490
22,896
21,405
1.491
16,594
13.337
3.257
39,945
21,837
20,278
1,559
18,108
14.795
3,313
34,200
18.431
16.582
1.849
15,769
11,576
4,193
11 Commercial claims
12 Trade receivables
13 Advance payments and other claims
23,991
21,158
2.833
25,111
22,998
2,113
28,374
25,751
2,623
24,892
22,454
2,438
28,374
25,751
2,623
27.555
24,801
2.754
27,549
24,858
2,691
28,701
25,110
3,591
31,087
27,454
3,633
14
15
21,473
2,518
23,081
2,030
25,930
2.444
23.598
1,294
25,930
2,444
26,246
1,309
26,113
1,436
26,957
1,744
29,225
1,862
7,936
86
800
540
429
523
4,649
7,609
193
803
436
517
498
4,303
9,282
185
694
276
493
474
6,119
9,777
126
733
272
520
432
6.603
9,282
185
694
276
493
474
6,119
11,176
119
760
324
567
570
7,937
11,677
203
680
281
519
447
8,604
13,758
360
1.112
352
764
448
9,150
12,240
406
1.015
427
677
434
7,578
3,581
2,851
3,445
4.502
3,445
4,917
6,422
4,279
3,313
19.536
2,424
27
520
15,228
723
35
14,500
1,965
81
830
10,393
554
32
19,577
1.452
140
1.468
15,182
457
31
17,241
1,746
113
1,438
12,819
413
20
19,577
1.452
140
1.468
15,182
457
31
19,742
1,894
157
1,404
15,176
517
22
18,725
2.064
188
1,617
13.553
497
21
19,166
2,442
190
1,501
12,947
508
15
15.543
2,459
108
1,313
10,311
537
36
1,871
953
141
1,579
871
3
2,221
1.035
22
1,834
1,001
13
2,221
1,035
2,068
831
12
1,934
766
20
2,015
999
15
2,133
823
11
373
0
276
5
174
14
177
13
174
14
182
14
179
15
174
16
319
15
669
569
562
9.288
213
1.532
1,250
424
594
2,516
10.443
226
1,644
1.337
562
642
2,946
9,863
364
1,514
1,364
582
418
2,626
9.603
327
1,377
1,229
613
389
2.836
10,486
331
1.395
573
381
2,904
12,098
328
1.793
1.612
597
551
3.652
2 Payable in dollars
3 Payable in foreign currencies
16
17
18
19
20
21
22
Payable in dollars
Payable in foreign currencies . ..
By area or country
Financial claims
Europe
Belgium and Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
23
Canada
24
25
26
27
28
29
30
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
31
32
33
Asia
Japan
Middle Eastern oil-exporting countries1
34
35
Africa
Oil-exporting countries2
36
37
38
39
40
41
42
43
479
3
All other
Commercial claims
Europe
Belgium and Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
9,540
213
1.881
1,027
311
557
2,556
9,824
231
1,830
1,070
452
520
2,656
10,443
226
1,644
1.337
562
642
2,946
1.642
1,988
1,951
2.165
2,083
2,165
2,381
2.464
2,649
2,636
45
46
47
48
49
50
51
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
4,117
9
234
612
83
1,243
348
4,364
30
272
898
79
993
285
5,276
35
275
1,303
190
1,128
357
4,409
14
290
968
119
936
316
5,276
35
275
1,303
190
1,128
357
5,067
40
159
1,216
127
1.102
330
5,241
29
197
1,136
98
1,140
451
5,028
->2
1,219
418
5,742
27
244
1.163
109
1,385
576
52
53
54
Asia
Japan
Middle Eastern oil-exporting countries'
6,982
2,655
708
7,312
1,870
974
8,376
2,003
971
7,289
1,919
945
8.376
2.003
971
8.348
2.065
1,078
8,460
2,079
1,014
8,576
2.048
987
8,691
1.973
1,104
55
56
Africa
Oil-exporting countries2
454
67
654
87
746
166
731
142
746
166
718
100
618
81
764
207
677
119
57
Other'..
1,006
1,368
1,092
1,178
1,163
1.198
1.243
1. Comprises Bahrain, [ran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab
Emirates (Trucial States).
2. Comprises Algeria, Gabon, Libya, and Nigeria.
3. Includes nonmonetary international and regional organizations.
128
1,101
98
A60
International Statistics • June 1998
3.24
FOREIGN TRANSACTIONS IN SECURITIES
Millions of dollars
1997'
Transaction, and area or country
1996
1997'
Jan.Feb.
Aug.
Nov.
Sept.
Dec.
Jan.
Feb.!"
U.S. corporate securities
STOCKS
1 Foreign purchases
590,714
578,203
3 Net purchases, or sales (—)
4 Foreign countries
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Europe
France
Germany
Netherlands
Switzerland
United Kingdom
Canada
Latin America and Caribbean .. .
Middle East1
Other Asia
Japan
Africa
Other countries
Nonmonetary international and
963,885
897,850
189,384
173,118
84,953
76,820
80,546
75,428
106,673
105,668
85,149
80,133
90,994
85,670
90,130
83,877
99,254
89,241
12,511
66,035
16,266
8,133
5,118
1,005
5,016
5,324
6,253
10,013
12,585
2 Foreign sales
66,175
1638
8,176
5,123
1,023
5,024
5,358
63)5
10,003
5,367
-2,402
1,104
1,415
2,715
4,478
2,226
5,816
-1,600
918
-372
-85
-57
59,041
3,134
9,075
3,833
7,845
22,215
-1,174
5,264
171
2,061
4.780
471
341
16,255
1,157
1,314
753
1,815
7,336
-732
4,830
-439
-3,639
-1,781
47
-14
4,391
461
584
-118
557
2,170
-286
2,456
-64
1,545
888
2
132
5,296
241
374
820
-405
3,559
-560
813
32
-519
-313
94
-33
5,910
-80
538
757
848
2,444
-520
-4,091
78
-508
229
80
74
5,318
-65
857
579
1,043
1,875
-344
-627
15
888
709
-36
-190
5,832
299
788
409
1,474
1,232
-304
-1,224
21
1,071
551
7
-45
6,623
665
546
613
683
2,741
-254
2,646
-166
-2,693
-1,112
34
115
9,632
492
768
140
1,132
4,595
-478
2,184
-273
-946
-669
13
-129
-140
-42
-43
-5
-18
614,253
477,786
125,116
94,404
62,622
48,283
50,709
41,201
52,632
48,772
52,484
43,171
57,331
44,301
67,785
50,103
3,860
9,313
13,030
17,682
12,998
17,714
5,286
74
289
-433
760
4,018
1,409
5,354
78
485
-958
142
244
8,607
272
419
199
266
6,601
114
5,512
820
2,430
888
36
195
regional organizations
BONDS 2
19 Foreign purchases
393,953
268,487
58,462
44,435
20 Foreign sales
125,466
136,467
30,712
14,339
9,508
21 Net purchases, or sales (—)
125,295
135,875
30,712
14,271
9,507
77,570
4,460
4,439
2,107
1,170
60,509
4,486
17,737
1,679
23,762
14,173
624
-563
74,301
3,300
2,742
3,576
187
56,804
6,264
34,821
1,656
17,017
9,354
1,005
811
13,893
346
708
-234
1,026
10,619
1,523
10,866
898
2,915
-70
178
439
7,603
275
34
602
-304
6,594
557
2,110
-44
3,916
2,996
103
26
5,843
300
638
135
-501
4,109
624
1,265
-1
1,591
-613
8
177
14,027
3,948
13400
22 Foreign countries
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Europe
France
Germany
Netherlands
Switzerland
United Kingdom
Canada
Latin America and Caribbean
Middle East1
Oilier Asia
Japan
Africa
Other countries
Nonmonetary international and
regional organizations
3,598
142
120
369
-109
2,611
866
3,712
-183
5,634
5,207
11
-138
2,395
546
165
185
712
-104
459
3,884
199
-3,193
-2,883
88
116
4,575
-67
-474
425
733
3,069
677
7,220
142
-3,526
-3,764
49
165
527
68
-32
Foreign securities
37 Stocks, net purchases, or sales (—)
38
Foreign purchases
39
Foreign sales
40 Bonds, net purchases, or sales (—)
41
Foreign purchases
42
Foreign sales
1,165,404
-334
62,690
63,024
-8,006
121,636
129,642
-2,820
79,549
82,369
-739
163,626
164,365
2,045
70,286
68,241
-4,468
111,000
115,468
1,541
64,328
62,787
-3,062
115,302
118,364
150
62,369
62,219
-3,748
95,235
98,983
-1,027
66,648
67,675
-2,825
100,213
103,038
-13,107
-8,340
-3,559
-2,423
-1,521
-3,598
-3,852
-8,334
-3,394
-2^75
-1,435
-3,509
-3,812
-5,773
1,275
1,396
-4,117
-2,230
-245
143
-4,587
-1,453
-207
-4,803
95
-703
-1,283
-5,544
-1,236
-146
-709
-183
-273
-426
-5,227
412
1,899
889
1,828
-1,027
-340
-2,528
557
-2,160
1,684
2,261
-380
452
909
-78
-2,918
936
1,862
-74
-210
-3,979
841
825
-1,120
-404
-113
37
-1,794
434
571
-2,997
-1,826
-132
106
-129
-71
-6
-165
-86
-89
-40
1,514,025
-110,637
-7,893
60,734
68,627
-5,214
123,203
128,417
-13,036
-40,243
719,145
759,388
-47,241
1,466,784
-877
129,017
129,894
-6,573
195,448
202,021
-7,450
-59,268
450,365
509,633
-51,369
1,114,035
-87,484
43 Net purchases, or sales (—), of stocks and bonds
44 Foreign countries
-109,766
45
46
47
48
49
50
51
Europe
Canada
Latin America and Caribbean
Asia
Japan
Africa
Other countries
-57,139
-7,685
-11,507
-27,831
-5,887
-1,517
-4,087
-87,428
-28,060
-3,794
-25,043
-24,972
-10,014
-3,296
-2,263
52 Nonmonetary international and
regional organizations
1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar,
Saudi Arabia, and United Arab Emirates (Trucial States).
2. Includes state and local government securities and securities of U.S. government
agencies and corporations. Also includes issues of new debt securities sold abroad by U.S.
corporations organized to finance direct investments abroad.
Securities Holdings and Transactions/Interest and Exchange Rates A61
3.25
MARKETABLE U.S. TREASURY BONDS AND NOTES
Foreign Transactions1
Millions of dollars; net purchases, or sales (—) during period
1997'
Area or country
JanFeb.
Sept.
1 Total estimated
232,241
183,596
16,293
24,153
15,174
16,858
15,909
-9,398
6,336
9,957
2 Foreign countries
234,083
183.179
15,905
24,359
14.788
17,094
15,489
-7,788
5,814
10,091
118,781
1,429
17,980
-582
2,242
328
65,658
31,726
2.331
144.920
3.427
22,471
1,746
-465
6,028
98,253
13,460
-811
25.231
556
11
-389
-348
4,109
17,754
3,538
265
19,216
92
4,050
882
583
-291
13,465
435
-839
19,152
138
2.714
-3
16
109
12,856
3.322
-414
23,102
357
4,847
334
302
690
18,779
-2,207
-730
10,158
384
5.255
375
-67
1,395
-37
161
3,052
-1,525
-124
5,640
-2.824
730
-1,792
-2,656
-2,132
18,433
304
-1.085
403
82
2,419
11,879
4,431
-1
6,798
252
1,096
-792
-430
1,690
5,875
-893
20,785
-69
8,439
12,415
89,735
41.366
1,083
1,368
-2,541
1,063
25
-3,245
4,283
4,860
-3.458
-769
-1,434
107
-3,723
6,512
397
-723
6,838
-1,002
-4,784
-82
-827
3,737
-36
2,485
1,288
-10,359
-7,860
268
735
-3,619
4
1,711
-5,334
-8,231
-6,384
37
-805
2.123
97
2,949
39,047
20.360
1,523
1.041
-1,496
101
4,660
-6,257
-6,883
-5,620
213
-1,425
-1,842
-1,390
-779
417
552
173
-74
78
420
451
-24
-1,610
-1,025
522
445
32
-134
-223
-29
234,083
85,807
148,276
5.814
-1,189
7,003
10,091
10,232
1
-2,411
409
0
3
4
5
6
7
8
9
10
11
Europe
Belgium and Luxembourg
Germany
Netherlands
Sweden
Switzerland
United Kingdom
Other Europe and former U.S.S.R
Canada
12
13
14
15
Latin America and Caribbean
Venezuela
Other Latin America and Caribbean
Netherlands Antilles
16
Asia
17
18
19
Japan
Africa
Other
20 Nonmonetary international and regional organizations
21
International
22
Latin American regional
-159
-691
-2.880
2,802
-4,614
-2,782
461
972
222
3
-206
-190
-117
386
341
-21
183,179
43,379
139,800
15,905
53
15,852
24,359
8,235
16,124
14,788
3,091
11,697
7,116
-13
-2,002
1
3.455
-7
655
-536
-2,660
218
2,182
-5.394
4.160
45
1,505
-236
2,847
-131
266
-923
1,348
764
176
-620
MEMO
23 Foreign countries
24
Official institutions
25
Other foreign
Oil-exporting countries
26 Middle East 2
27 Africa3
1. Official and private transactions in marketable U.S. Treasury securities having an
original maturity of more than one year. Data are based on monthly transactions reports.
Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of foreign
countries.
3.26
17,094
15,489
-7,788
-12,848
29,942
1,831
13,658
-7,421
-3,877
0
3,175
0
1,506
0
-367
1,242
8,849
2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab
Emirates (Trucial States).
3. Comprises Algeria. Gabon. Libya, and Nigeria.
DISCOUNT RATES OF FOREIGN CENTRAL BANKS1
Percent per year, averages of daily figures
Rate on Apr. 30, 1998
Rate on Apr. 30, 1998
Country
Country
Month
effective
Percent
2.5
2.75
5.0
3.5
3.3
Belgium
Canada
France
Apr.
Oct.
Jan,
Oct.
Oct.
1996
L997
1998
1997
1997
1. Rates shown are mainly those at which the central bank either discounts or makes
advances against eligible commercial paper or government securities for commercial banks or
brokers. For countries with more than one rate applicable to such discounts or advances, the
rate shown is the one at which it is understood that the central bank transacts the largest
proportion of its credit operations.
3.27
Month
effective
Percent
Germany
Italy
Apr.
Apr.
Sept.
Apr.
Sept.
2.5
5.0
.5
2.5
1.0
Netherlands
Switzerland
1996
1998
1995
1996
1996
2. Since February 1981, the rate has been that at which the Bank of France discounts
Treasury bills for seven to ten days.
FOREIGN SHORT-TERM INTEREST RATES'
Percent per year, averages of daily figures
1998
1997
Type or country
1995
1996
1997
Oct.
2 United Kingdom
3 Canada
6
7
8
9
10
Netherlands
France
Italy
Belgium
Japan
5.93
6.63
7.14
4.43
2.94
4.30
6.43
10.43
4.73
1.20
5.38
5.99
4.49
3.21
1.92
2.91
3.81
8.79
3.19
.58
5.61
6.81
3.59
3.24
1.58
3.25
3.35
6.86
3.40
.58
1. Rates are for three-month interbank loans, with the following exceptions: Canada,
finance company paper; Belgium, three-month Treasury bills; and Japan, CD rate.
Nov.
Dec.
Jan.
Feb.
Mar.
5.63
7.24
3.83
3.51
1.73
3.50
3.47
6.63
3.76
.52
5.71
7.52
4.02
3.68
1.91
3.65
3.57
6.49
3.72
.53
5.79
7.60
4.61
3.67
1.56
3.61
3.57
6.07
3.61
.78
5.53
7.49
4.68
3.51
1.27
3.42
3.50
6.05
3.47
.77
5.53
7.46
5.02
3.45
.98
3.36
3.45
6.12
3.53
.84
5.56
7.47
4.93
3.44
1.06
3.42
3.45
5.59
3.61
.74
Apr.
5.56
7.41
4.94
3.56
1.39
3.52
3.50
5.09
3.69
.66
A62 International Statistics • June 1998
3.28
FOREIGN EXCHANGE RATES1
Currency units per dollar except as noted
1998
Country/currency unit
1995
Apr.
74.073
10.076
29.472
1.3725
8.3700
5.5999
4.3763
4.9864
1.4321
231.68
78.283
10.589
30.970
1.3638
8.3389
5.8003
4.5948
5.1158
1.5049
240.82
74.368
12.206
35.807
1.3849
8.3193
6.6092
5.1956
5.8393
1.7348
273.28
69.526
12.182
35.737
1.4128
8.3109
6.5937
5.2217
5.8001
1.7323
271.87
66.187
12.510
36.748
1.4271
8.3099
6.7752
5.3789
5.9542
1.7788
279.93
65.659
12.765
37.536
1.4409
8.3094
6.9190
5.5006
6.0832
1.8165
287.24
67.436
12.735
37.417
1.4334
8.3072
6.9089
5.4999
6.0744
1.8123
286.70
66.963
12.852
37.699
1.4166
8.3076
6.9661
5.5467
6.1257
1.8272
306.05
65.231
12.760
37.424
1.4298
8.3058
6.9174
5.5053
6.0782
1.8132
315.82
Hong Kong/dollar
India/rupee
Ireland/pound2
Italy/lira
Japan/yen
Malaysia/ringgit
Netherlands/guilder
New Zealand/dollar 2 ....
Norway/krone
Portugal/escudo
7.7357
32.418
160.35
1,629.45
93.96
2.5073
1.6044
65.625
6.3355
149.88
7.7345
35.506
159.95
1,542.76
108.78
2.5154
1.6863
68.765
6.4594
154.28
7.7431
36.365
151.63
1,703.81
121.06
2.8173
1.9525
66.247
7.0857
175.44
7.7314
37.289
150.30
1,697.08
125.38
3.3791
1.9524
62.420
7.0588
176.84
7.7456
39.400
145.33
1,743.86
129.73
3.7907
2.0051
59.137
7.2630
181.91
7.7425
39.391
138.19
1,787.87
129.55
4.4093
2.0472
57.925
7.5007
185.80
7.7412
39.008
137.71
1,788.28
125.85
3.8148
2.0432
58.286
7.5530
185.54
7.7458
39.569
136.72
1,799.07
129.08
3.7456
2.0598
57.261
7.5833
187.03
7.7497
39.703
138.94
1,791.24
131.75
3.7376
2.0422
55.339
7.5315
185.81
Singapore/dollar
South Africa/rand
South Korea/won
Spain/peseta
Sri Lanka/rupee
Sweden/krona
Switzerland/franc
Taiwan/dollar
Thailand/baht
United Kingdom/pound2.
1.4171
3.6284
772.69
124.64
51.047
7.1406
1.1812
26.495
24.921
157.85
1.4100
4.3011
805.00
126.68
55.289
6.7082
1.2361
27.468
25.359
156.07
1.4857
4.6072
950.77
146.53
59.026
7.6446
1.4514
28.775
31.072
163.76
1.5820
4.8394
1,035.22
146.30
60.132
7.5589
1.4069
31.794
39.092
168.89
1.6518
4.8706
1,494.04
150.46
61.591
7.7977
1.4393
32.502
44.309
165.97
1.7477
4.9417
1,707.30
153.93
62.281
8.0193
1.4748
34.117
52.983
163.50
1.6509
4.9337
1,628.42
153.61
62.363
8.0723
1.4631
32.948
45.987
164.08
1.6188
4.9746
1,489.36
154.95
62.083
7.9677
1.4901
32.524
41.366
166.19
1.6007
5.0459
1,391.55
153.99
62.903
7.8238
1.5051
33.016
39.654
167.23
96.37
98.82
100.52
99.93
100.47
100.30
1
2
3
4
5
6
7
8
9
10
Australia/dollar"
Austria/schilling
Belgium/franc
Canada/dollar
China, P.RYyuan
Denmark/krone
Finland/markka
France/franc
Germany/deutsche mark
Greece/drachma
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
MEMO
31 United States/dollar3
1. Averages of certified noon buying rates in New York for cable transfers. Data in this
table also appear in the Board's G.5 (405) monthly statistical release. For ordering address,
see inside front cover.
2. Value in U.S. cents.
3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten
industrial countries. The weight for each of the ten countries is the 1972-76 average world
trade of that country divided by the average world trade of all ten countries combined. Series
revised as of August 1978 (see Federal Resem Bulletin, vol. 64 (August 1978), p. 700).
A63
Guide to Statistical Releases and Special Tables
STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference
Issue Page
Anticipated schedule of release dates for periodic releases
June 1998
A72
Issue
Page
SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference
Title and Date
Assets and liabilities of commercial banks
March 31, 1997
June 30, 1997
September 30, 1997
December 31, 1997
September
November
February
May
1997
1997
1998
1998
A64
A64
A64
A64
Terms of lending at commercial banks
May 1997
August 1997
November 1997
February 1998
October
November
February
May
1997
1997
1998
1998
A64
A68
A68
A66
Assets and liabilities of U.S. branches and agencies offoreign banks
March 31, 1997
June 30, 1997
September 30, 1997
December 31, 1997
August
November
February
May
1997
1997
1998
1998
A64
A72
A72
A70
January
July
October
January
1997
1997
1997
1998
A64
A64
A68
A64
Residential lending reported under the Home Mortgage Disclosure Act
1994
1995
1996
September 1995
September 1996
September 1997
A68
A68
A68
Disposition of applications for private mortgage insurance
1996
September 1997
A76
Pro forma balance sheet and income statements for priced service operations
September 30, 1996
March 31, 1997
June 30, 1997
September 30, 1997
A64
Federal Reserve Bulletin • June 1998
Index to Statistical Tables
References are to pages A3-A62 although the prefix "A" is omitted in this index
ACCEPTANCES, bankers (See Bankers acceptances)
Assets and liabilities (See also Foreigners)
Commercial banks, 15-21
Domestic finance companies, 32, 33
Federal Reserve Banks, 10
Foreign-related institutions, 20
Automobiles
Consumer credit, 36
Production, 44, 45
BANKERS acceptances, 5, 10, 22, 23
Bankers balances, 15-21. (See also Foreigners)
Bonds (See also U.S. government securities)
New issues, 31
Rates, 23
Business activity, nonfinancial, 42
Business loans (See Commercial and industrial loans)
CAPACITY utilization, 43
Capital accounts
Commercial banks, 15-21
Federal Reserve Banks, 10
Central banks, discount rates, 61
Certificates of deposit, 23
Commercial and industrial loans
Commercial banks, 15-21
Weekly reporting banks, 17, 18
Commercial banks
Assets and liabilities, 15-21
Commercial and industrial loans, 15-21
Consumer loans held, by type and terms, 36
Real estate mortgages held, by holder and property, 35
Time and savings deposits, 4
Commercial paper, 22, 23, 32
Condition statements (See Assets and liabilities)
Construction, 42, 46
Consumer credit, 36
Consumer prices, 42
Consumption expenditures, 48, 49
Corporations
Profits and their distribution, 32
Security issues, 31, 61
Cost of living (See Consumer prices)
Credit unions, 36
Currency in circulation, 5, 13
Customer credit, stock market, 24
DEBT (See specific types of debt or securities)
Demand deposits, 15-21
Depository institutions
Reserve requirements, 8
Reserves and related items, 4, 5, 6, 12
Deposits (See also specific types)
Commercial banks, 4, 15-21
Federal Reserve Banks, 5, 10
Interest rates, 14
Discount rates at Reserve Banks and at foreign central banks and
foreign countries (See Interest rates)
Discounts and advances by Reserve Banks (See Loans)
Dividends, corporate, 32
EMPLOYMENT, 42
Eurodollars, 23, 61
FARM mortgage loans, 35
Federal agency obligations, 5, 9, 10, 11, 28, 29
Federal credit agencies, 30
Federal finance
Debt subject to statutory limitation, and types and ownership
of gross debt, 27
Receipts and outlays, 25, 26
Treasury financing of surplus, or deficit, 25
Treasury operating balance, 25
Federal Financing Bank, 30
Federal funds, 23, 25
Federal Home Loan Banks, 30
Federal Home Loan Mortgage Corporation, 30, 34, 35
Federal Housing Administration, 30, 34, 35
Federal Land Banks, 35
Federal National Mortgage Association, 30, 34, 35
Federal Reserve Banks
Condition statement, 10
Discount rates (See Interest rates)
U.S. government securities held, 5, 10, 11, 27
Federal Reserve credit, 5, 6, 10, 12
Federal Reserve notes, 10
Federally sponsored credit agencies, 30
Finance companies
Assets and liabilities, 32
Business credit, 33
Loans, 36
Paper, 22, 23
Float, 5
Flow of funds, 37—41
Foreign currency operations, 10
Foreign deposits in U.S. banks, 5
Foreign exchange rates, 62
Foreign-related institutions, 20
Foreign trade, 51
Foreigners
Claims on, 52, 55, 56, 57, 59
Liabilities to, 51, 52, 53, 58, 60, 61
GOLD
Certificate account, 10
Stock, 5, 51
Government National Mortgage Association, 30, 34, 35
Gross domestic product, 48, 49
HOUSING, new and existing units, 46
INCOME, personal and national, 42, 48, 49
Industrial production, 42, 44
Insurance companies, 27, 35
Interest rates
Bonds, 23
Consumer credit, 36
Federal Reserve Banks, 7
Foreign central banks and foreign countries, 61
Money and capital markets, 23
Mortgages, 34
Prime rate, 22
International capital transactions of United States, 50-61
International organizations, 52, 53, 55, 58, 59
Inventories, 48
Investment companies, issues and assets, 32
Investments (See also specific types)
Commercial banks, 4, 15-21
A65
Federal Reserve Banks, 10, 11
Financial institutions, 35
LABOR force, 42
Life insurance companies (See Insurance companies)
Loans (See also specific types)
Commercial banks, 15-21
Federal Reserve Banks, 5, 6, 7, 10, 11
Financial institutions, 35
Insured or guaranteed by United States, 34, 35
MANUFACTURING
Capacity utilization, 43
Production, 43, 45
Margin requirements, 24
Member banks (See also Depository institutions)
Reserve requirements, 8
Mining production, 45
Mobile homes shipped, 46
Monetary and credit aggregates, 4, 12
Money and capital market rates, 23
Money stock measures and components, 4, 13
Mortgages (See Real estate loans)
Mutual funds, 13, 32
Mutual savings banks (See Thrift institutions)
NATIONAL defense outlays, 26
National income, 48
OPEN market transactions, 9
PERSONAL income, 49
Prices
Consumer and producer, 42, 47
Stock market, 24
Prime rate, 22
Producer prices, 42, 47
Production, 42, 44
Profits, corporate, 32
REAL estate loans
Banks, 15-21, 35
Terms, yields, and activity, 34
Type of holder and property mortgaged, 35
Reserve requirements, 8
Reserves
Commercial banks, 15-21
Depository institutions, 4, 5, 6, 12
Federal Reserve Banks, 10
U.S. reserve assets, 5 ]
Residential mortgage loans, 34, 35
Retail credit and retail sales, 36, 42
SAVING
Flow of funds, 37-41
National income accounts, 48
Savings institutions, 35, 36, 37^tl
Savings deposits (See Time and savings deposits)
Securities (See also specific types)
Federal and federally sponsored credit agencies, 30
Foreign transactions, 60
New issues, 31
Prices, 24
Special drawing rights, 5, 10, 50, 51
State and local governments
Holdings of U.S. government securities, 27
New security issues, 31
Rates on securities, 23
Stock market, selected statistics, 24
Stocks (See also Securities)
New issues, 31
Prices, 24
Student Loan Marketing Association, 30
TAX receipts, federal, 26
Thrift institutions, 4. (See also Credit unions and Savings
institutions)
Time and savings deposits, 4, 13, 15-21
Trade, foreign, 51
Treasury cash, Treasury currency, 5
Treasury deposits, 5, 10, 25
Treasury operating balance, 25
UNEMPLOYMENT, 42
U.S. government balances
Commercial bank holdings, 15-21
Treasury deposits at Reserve Banks, 5, 10, 25
U.S. government securities
Bank holdings, 15-21.27
Dealer transactions, positions, and financing, 29
Federal Reserve Bank holdings, 5, 10, 11, 27
Foreign and international holdings and
transactions, 10, 27, 61
Open market transactions, 9
Outstanding, by type and holder, 27, 28
Rates, 23
U.S. international transactions, 50-62
Utilities, production, 45
VETERANS Administration, 34, 35
WEEKLY reporting banks, 17, 18
Wholesale (producer) prices, 42, 47
YIELDS (See Interest rates)
A66
Federal Reserve Bulletin • June 1998
Federal Reserve Board of Governors
and Official Staff
ALAN GREENSPAN, Chairman
ALICE M. RIVLIN, Vice Chair
EDWARD W. KELLEY, JR.
SUSAN M. PHILLIPS
OFFICE OF BOARD MEMBERS
LYNN S. FOX, Assistant to the Board
DIVISION OF INTERNATIONAL FINANCE
DONALD J. WINN, Assistant to the Board
THEODORE E. ALLISON, Assistant to the Board for Federal
Reserve System Affairs
WINTHROP P. HAMBLEY, Special Assistant to the Board
BOB STAHLY MOORE, Special Assistant to the Board
DIANE E. WERNEKE, Special Assistant to the Board
LEGAL DIVISION
J. VIRGIL MATTINGLY, JR., General Counsel
SCOTT G. ALVAREZ, Associate General Counsel
RICHARD M. ASHTON, Associate General Counsel
OLIVER IRELAND, Associate General Counsel
KATHLEEN M. O'DAY, Associate General Counsel
KATHERINE H. WHEATLEY, Assistant General Counsel
OFFICE OF THE SECRETARY
JENNIFER J. JOHNSON, Secretary
ROBERT DEV. FRIERSON, Associate Secretary
BARBARA R. LOWREY, Associate Secretary and Ombudsman
DIVISION OF BANKING
SUPERVISION AND REGULATION
RICHARD SPILLENKOTHEN, Director
STEPHEN C. SCHEMERING, Deputy Director
HERBERT A. BIERN, Associate Director
ROGER T. COLE, Associate Director
WILLIAM A. RYBACK, Associate Director
GERALD A. EDWARDS, JR., Deputy Associate Director
STEPHEN M. HOFFMAN, JR., Deputy Associate Director
JAMES V. HOUPT, Deputy Associate Director
JACK P. JENNINGS, Deputy Associate Director
MICHAEL G. MARTINSON, Deputy Associate Director
SIDNEY M. SUSSAN, Deputy Associate Director
MOLLY S. WASSOM, Deputy Associate Director
HOWARD A. AMER, Assistant Director
NORAH M. BARGER, Assistant Director
BETSY CROSS, Assistant Director
RICHARD A. SMALL, Assistant Director
WILLIAM SCHNEIDER, Project Director,
National Information Center
EDWIN M. TRUMAN, Staff Director
LEWIS S. ALEXANDER, Associate Director
DALE W. HENDERSON, Associate Director
PETER HOOPER III, Associate Director
KAREN H. JOHNSON, Associate Director
DAVID H. HOWARD, Senior Adviser
DONALD B. ADAMS, Assistant Director
THOMAS A. CONNORS, Assistant Director
DIVISION OF RESEARCH AND STATISTICS
MICHAEL J. PRELL. Director
EDWARD C. ETTIN, Deputy Director
DAVID J. STOCKTON, Deputy Director
WILLIAM R. JONES, Associate Director
MYRON L. KWAST, Associate Director
PATRICK M. PARKINSON, Associate Director
THOMAS D. SIMPSON, Associate Director
LAWRENCE SLIFMAN, Associate Director
MARTHA S. SCANLON, Deputy Associate Director
PETER A. TINSLEY, Deputy Associate Director
DAVID S. JONES, Assistant Director
STEPHEN D. OLINER, Assistant Director
STEPHEN A. RHOADES, Assistant Director
JANICE SHACK-MARQUEZ, Assistant Director
CHARLES S. STRUCKMEYER, Assistant Director
ALICE PATRICIA W H I T E , Assistant Director
JOYCE K. ZICKLER, Assistant Director
GLENN B. CANNER, Senior Adviser
JOHN J. MINGO, Senior Adviser
DIVISION OF MONETARY AFFAIRS
DONALD L. KOHN, Director
DAVID E. LINDSEY, Deputy Director
BRIAN F. MADIGAN, Associate Director
RICHARD D. PORTER, Deputy Associate Director
VINCENT R. REINHART, Assistant Director
NORMAND R.V. BERNARD, Special Assistant to the Board
DIVISION OF CONSUMER
AND COMMUNITY AFFAIRS
DOLORES S. SMITH, Director
GLENN E. LONEY, Deputy Director
SANDRA F. BRAUNSTEIN, Assistant Director
MAUREEN P. ENGLISH, Assistant Director
ADRIENNE D. HURT, Assistant Director
IRENE SHAWN MCNULTY, Assistant
Director
A67
LAURENCE H. MEYER
ROGER W. FERGUSON, JR.
EDWARD M. GRAMLICH
OFFICE OF
STAFF DIRECTOR FOR MANAGEMENT
DIVISION OF RESERVE BANK OPERATIONS
AND PAYMENT SYSTEMS
S. DAVID FROST, Staff Director
SHEILA CLARK, EEO Programs Director
CLYDE H. FARNSWORTH, JR., Director
JOHN R. WEIS, Adviser
LOUISE L. ROSEMAN, Associate Director
PAUL W. BETTGE, Assistant Director
JACK DENNIS, JR., Assistant Director
EARL G. HAMILTON, Assistant Director
JOSEPH H. HAYES, JR., Assistant Director
JEFFREY C. MARQUARDT, Assistant Director
MARSHA REIDHILL, Assistant Director
MANAGEMENT DIVISION
S. DAVID FROST, Director
STEPHEN J. CLARK, Associate Director, Finance Function
DARRELL R. PAULEY, Associate Director, Human Resources
Function
DIVISION OF SUPPORT SERVICES
ROBERT E. FRAZIER, Director
GEORGE M. LOPEZ, Assistant Director
DAVID L. WILLIAMS, Assistant Director
DIVISION OF INFORMATION RESOURCES
MANAGEMENT
STEPHEN R. MALPHRUS, Director
MARIANNE M. EMERSON, Assistant Director
Po KYUNG KIM, Assistant Director
RAYMOND H. MASSEY, Assistant Director
EDWARD T. MULRENIN, Assistant Director
DAY W. RADEBAUGH, JR., Assistant Director
ELIZABETH B. RIGGS, Assistant Director
RICHARD C. STEVENS, Assistant Director
DAVID L. ROBINSON, Deputy Director (Finance and Control)
OFFICE OF THE INSPECTOR
GENERAL
DONALD L. ROBINSON, Assistant Inspector General
BARRY R. SNYDER. Assistant Inspector General
A68
Federal Reserve Bulletin • June 1998
Federal Open Market Committee
and Advisory Councils
FEDERAL OPEN MARKET COMMITTEE
MEMBERS
WILLIAM J. MCDONOUGH, Vice Chairman
ALAN GREENSPAN, Chairman
ROGER W. FERGUSON, JR.
EDWARD M. GRAMLICH
THOMAS M. HOENIG
JERRY L. JORDAN
EDWARD W. KELLEY, JR.
LAURENCE H. MEYER
CATHY E. MINEHAN
SUSAN M. PHILLIPS
WILLIAM POOLE
ALICE M. RIVLIN
ALTERNATE MEMBERS
MICHAEL H. MOSKOW
ERNEST T. PATRIKIS
EDWARD G. BOEHNE
ROBERT D. MCTEER, JR.
GARY H. STERN
STAFF
DONALD L. KOHN, Secretary and Economist
NORMAND R.V. BERNARD, Deputy Secretary
GARY P. GILLUM, Assistant Secretary
J. VIRGIL MATTINGLY, JR., General Counsel
THOMAS C. BAXTER, JR., Deputy General Counsel
MICHAEL J. PRELL, Economist
EDWIN M. TRUMAN, Economist
LYNN E. BROWNE, Associate
STEPHEN G. CECCHETTI, Associate Economist
WILLIAM G. DEWALD, Associate Economist
CRAIG S. HAKKIO, Associate Economist
DAVID E. LINDSEY, Associate Economist
MARK S. SNIDERMAN, Associate Economist
THOMAS D. SIMPSON, Associate Economist
DAVID J. STOCKTON, Associate Economist
Economist
PETER R. FISHER, Manager, System Open Market Account
FEDERAL ADVISORY COUNCIL
THOMAS H. JACOBSEN, President
CHARLES T. DOYLE, Vice President
WILLIAM M. CROZIER, JR., First District
DOUGLAS A. WARNER III, Second District
WALTER E. DALLER, JR., Third District
ROBERT W. GILLESPIE, Fourth District
KENNETH D. LEWIS, Fifth District
STEPHEN A. HANSEL, Sixth District
NORMAN R. BOBINS, Seventh District
THOMAS H. JACOBSEN, Eighth District
RICHARD A. ZONA, Ninth District
C. Q. CHANDLER, Tenth District
CHARLES T. DOYLE, Eleventh District
DAVID A. COULTER, Twelfth District
HERBERT V. PROCHNOW, Secretary Emeritus
JAMES ANNABLE, Co-Secretary
WILLIAM J. KORSVIK, Co-Secretary
A69
CONSUMER ADVISORY COUNCIL
WILLIAM N. LUND, Augusta, Maine, Chairman
YVONNE S. SPARKS, St. Louis, Missouri, Vice Chairman
RICHARD S. AMADOR, LOS Angeles, California
WALTER J. BOYER, Garland, Texas
WAYNE-KENT A. BRADSHAW, LOS Angeles, California
JEREMY EISLER, Ocean Springs, Mississippi
ROBERT F. ELLIOT, Prospect Heights, Illinois
HERIBERTO FLORES, Springfield, Massachusetts
DWIGHT GOLANN, Boston, Massachusetts
MARVA H. HARRIS, Pittsburgh, Pennsylvania
KARLA IRVINE, Cincinnati, Ohio
FRANCINE C. JUSTA, New York, New York
JANET C. KOEHLER, Jacksonville, Florida
GWENN KYZER, Allen, Texas
JOHN C. LAMB, Sacramento, California
ERROL T. LOUIS, Brooklyn, New York
MARTHA W. MILLER, Greensboro, North Carolina
DANIEL W. MORTON, Columbus, Ohio
CHARLOTTE NEWTON, Springfield, Virginia
CAROL PARRY, New York, New York
PHILIP PRICE, JR., Philadelphia, Pennsylvania
DAVID L. RAMP, Minneapolis, Minnesota
MARILYN ROSS, Omaha, Nebraska
MARGOT SAUNDERS, Washington, D.C.
ROBERT G. SCHWEMM, Lexington, Kentucky
DAVID J. SHIRK, Eugene, Oregon
GAIL SMALL, Lame Deer, Montana
GREGORY D. SQUIRES, Milwaukee, Wisconsin
GEORGE P. SURGEON, Chicago, Illinois
THEODORE J. WYSOCKI, JR., Chicago, Illinois
THRIFT INSTITUTIONS ADVISORY COUNCIL
CHARLES R. RINEHART, Irwindale, California, President
WILLIAM A. FITZGERALD, Omaha, Nebraska, Vice President
GAROLD R. BASE, Piano, Texas
DAVID A. BOCHNOWSKI, Munster. Indiana
DAVID E. A. CARSON, Bridgeport, Connecticut
RICHARD P. COUGHLIN, Stoneham, Massachusetts
STEPHEN D. HAILER, Akron, Ohio
F. WELLER MEYER, Falls Church, Virginia
EDWARD J. MOLNAR, Harleysville, Pennsylvania
GUY C. PINKERTON, Seattle, Washington
TERRY R. WEST, Jacksonville, Florida
FREDERICK WILLETTS, III, Wilmington, North Carolina
A70
Federal Reserve Bulletin • June 1998
Federal Reserve Board Publications
For ordering assistance, write PUBLICATIONS SERVICES,
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residents should be drawn on a U.S. bank.
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A71
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166.
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BULLETIN
A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANKING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING
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BANK MERGERS AND INDUSTRYWIDE STRUCTURE, 1980-94,
PRODUCTS, by Mark J. Warshawsky with the assistance of
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158.
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T H E COST OF IMPLEMENTING CONSUMER FINANCIAL REGULATIONS: A N ANALYSIS OF EXPERIENCE WITH THE TRUTH
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BANKING MARKETS AND THE USE OF FINANCIAL SERVICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by
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1990. 35 pp.
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IN SAVINGS ACT, by Gregory Elliehausen and Barbara R.
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N E W DATA ON THE PERFORMANCE OF NONBANK SUBSIDIARIES OF BANK HOLDING COMPANIES, by Nellie Liang and
Donald Savage. February 1990. 12 pp.
160.
by Stephen A. Rhoades. February 1996. 29 pp.
A REVIEW
OF CORPORATE
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21pp.
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T H E COST OF BANK REGULATION: A REVIEW OF THE EVI-
DENCE, by Gregory Elliehausen, April 1998. 35 pp.
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CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR-
Rhoades. February 1992. 11 pp.
KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob.
Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary
Ann Taylor. March 1992. 37 pp.
164.
T H E 1989-92 CREDIT CRUNCH
FOR REAL ESTATE,
by
James T. Fergus and John L. Goodman, Jr. July 1993.
20 pp.
165.
T H E DEMAND FOR TRADE CREDIT: A N INVESTIGATION OF
MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by
Gregory E. Elliehausen and John D. Wolken. September
1993. 18 pp.
Limit of ten copies
FAMILY FINANCES IN THE U.S.: RECENT EVIDENCE FROM THE
SURVEY OF CONSUMER FINANCES. January 1997.
A72
Federal Reserve Bulletin • June 1998
ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES OF THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM (PAYMENT MUST ACCOMPANY REQUESTS)
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table numbers2
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rate
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Received
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Condition Statement of
Federal Reserve Banks3
H.6. Money Stock, Liquid Assets,
and Debt Measures3
$55.00
n.a.
Friday
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Thursday
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Assets and Liabilities of
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H.10. Foreign Exchange Rates3
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H. 15. Selected Interest Rates3
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A73
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table numbers2
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Flow of Funds Accounts
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Annual Release
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1. Please note that for some releases there is normally a certain variability in the release date because of reporting or processing procedures. Moreover,
for all series unusual circumstances may, from time to time, result in a release date being later than anticipated.
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A74
Federal Reserve Bulletin • June 1998
Maps of the Federal Reserve System
EWYORK
HAWAII
LEGEND
Both pages
•
Federal Reserve Bank city
•
Board of Governors of the Federal
Reserve System, Washington, D.C.
Facing page
• Federal Reserve Branch city
— Branch boundary
NOTE
The Federal Reserve officially identifies Districts by number and Reserve Bank city (shown on both pages) and by
letter (shown on the facing page).
In the 12th District, the Seattle Branch serves Alaska,
and the San Francisco Bank serves Hawaii.
The System serves commonwealths and territories as
follows: the New York Bank serves the Commonwealth
of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. The Board of
Governors revised the branch boundaries of the System
most recently in February 1996.
A75
1-A
2-B
3-C
4-D
5-E
Pittsburgh
Baltimore MD
. NJ
—wv
icinnati
BOSTON
NEW YORK
6-F
PHILADELPHIA
CLEVELAND
7-G
:te
RICHMOND
8-H
Birmingha
sville
ATLANTA
CHICAGO
9-1
IP
MINNEAPOLIS
10-J
12-L
^•^P1
K4
ALASKA
'""SHil
Ol
KANSAS CITY
11-K
DALLAS
SAN FRANCISCO
A76
Federal Reserve Bulletin • June 1998
Federal Reserve Banks, Branches, and Offices
FEDERAL RESERVE BANK
branch, or facility
Zip
Chairman
Deputy Chairman
President
First Vice President
BOSTON*
02106
William C. Brainard
William O. Taylor
Cathy E. Minehan
Paul M. Connolly
NEW YORK*
10045 John C. Whitehead
Thomas W. Jones
14240 Bal Dixit
William J. McDonough
Ernest T. Patrikis
PHILADELPHIA
19105
Edward G. Boehne
William H. Stone, Jr.
CLEVELAND*
44101
Vice President
in charge of branch
Buffalo
Joan Carter
Charisse R. Lillie
G. Watts Humphrey, Jr.
David H. Hoag
45201 George C. Juilfs
15230 John T. Ryan III
Jerry L. Jordan
Sandra Pianalto
RICHMOND*
23219
J. Alfred Broaddus, Jr.
Walter A. Varvel
Baltimore
Charlotte
21203
28230
Claudine B. Malone
Robert L. Strickland
Daniel R. Baker
Dennis D. Lowery
David R. Jones
John F. Wieland
Patricia B. Compton
Judy Jones
R. Kirk Landon
Frances F. Marcum
Lucimarian Roberts
Jack Guynn
Patrick K. Barron
Lester H. McKeever. Jr.
Arthur C. Martinez
Florine Mark
Michael H. Moskow
William C. Conrad
Cincinnati
Pittsburgh
ATLANTA
Birmingham
Jacksonville
Miami
Nashville
New Orleans
30303
35283
32231
33152
37203
70161
CHICAGO*
60690
Detroit
48231
ST.LOUIS
63166
Little Rock
Louisville
Memphis
MINNEAPOLIS
Helena
KANSAS CITY
Denver
Oklahoma City
Omaha
DALLAS
El Paso
Houston
San Antonio
John F. McDonnell
Susan S. Elliott
72203 Betta M. Carney
40232 Roger Reynolds
38101 Carol G. Crawley
William H. Poole
W. LeGrande Rives
55480
David A. Koch
James J. Howard
William P. Underriner
Gary H. Stern
Colleen K. Strand
Jo Marie Dancik
Terrence P. Dunn
Peter I. Wold
Barry L. Eller
Arthur L. Shoener
Robert T. Parry
John F. Moore
William J. Tignanelli1
Dan M. Bechter'
James M. Mckee
FredR. Herr1
James D. Hawkins1
James T. Curry III
Melvyn K. Purcell
Robert J. Musso
David R.Allardice1
Robert D. McTeer, Jr.
Helen E. Holcomb
Gary G. Michael
Cynthia A. Parker
Anne L. Evans
Carol A. Whipple
Richard E. Davis
Richard R. Sonstelie
Charles A. Cerino1
Robert B. Schaub
Thomas M. Hoenig
Richard K. Rasdall
Roger R. Hemminghaus
James A. Martin
Patricia Z. Holland-Branch
Edward O. Gaylord
H. B. Zachry, Jr.
Carl W. Turnipseed1
59601
64198
80217
73125
68102
75201
79999
77252
78295
SAN FRANCISCO
94120
Los Angeles
Portland
Salt Lake City
Seattle
90051
97208
84125
98124
Robert A. Hopkins
Thomas A. Boone
Martha L. Perine
John D.Johnson
Carl M. Gambs'
Kelly J. Dubbert
Steven D. Evans
Sammie C. Clay
Robert Smith, HI'
James L. Stull'
MarkL. Mullinix1
Raymond H. Laurence1
Andrea P. Wolcott
Gordon R. G. Werkema2
•Additional offices of these Banks are located at Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; Utica at Oriskany, New York 13424;
Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; Milwaukee,
Wisconsin 53202; and Peoria, Illinois 61607.
1. Senior Vice President.
2. Executive Vice President
@FedFRASER