Full text of Federal Reserve Notes : December 1981

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

L

Cr

Federal Reserve Notes
n

FEDERAL RESERVE BANK OF SAN FRANCISCO

December 1981

Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington

GRIFFITH, SIMS NAMED
TO NEW TOP POSTS
Richard T. Griffith and Kent O. Sims
have become the first senior officers
of the Federal Reserve Bank of San

Francisco to be promoted to the
newly created position of executive
vice president.

Both are currently senior vice presi
dents. Griffith is in charge of District
Operations, while Sims heads Dis
trict Departments. Both promotions
are effective January 1.

Under the general supervision of
the Bank's president, Sims over
sees the departments dealing with
economic research, monetary pol
icy, public information, statistical
operations, bank supervision, regu
latory policy, credit policy, consum
er banking affairs and legal counsel.
Under the general supervision of
the first vice president, Griffith over
sees operations in the Bank's five
offices dealing with cash, checks,
electronic payments and Treasury
fiscal-agent operations. Additional
ly, he is responsible for administra
tion of the Financial Services Group,
which the Bank organized last June
to develop, price and market vari
ous Fed operating services being
offered to financial institutions in the
12th Federal Reserve District under

the Monetary Control Act of 1980.
Both senior officers are members of

the Management Committee, the
Reserve Bank's top policy-making
body, and advise Bank manage
ment on a variety of administrative
and policy matters. In making the
announcement, Reserve Bank
President John J. Balles said the
establishment of the new senior-

Richard Griffith

Kent Sims

officer classification "recognizes
the increasing challenges being
faced by our institution."

cessing, computer systems, bank
operations and other corporatebanking during a 10-year stint with

After joining the San Francisco Fed
in 1975, Griffith served as vice pres
ident of computer services, senior
vice president of the computer ser
vices group, and senior vice pres
ident of operations. In 1979, he
joined Burns International Security
as group vice president and chief
operating officer of the western
group, but then returned to the Fed
last July.

Sims joined the Fed as an econo
mist in 1969 and became an assis

tant vice president in 1971. He was
promoted to vice president in
charge of research in 1972, to se
nior vice president of research in
1974, and to senior vice president,
District Departments, in 1975.

Prior to joining the Fed, Griffith held
managerial positions in data pro-

Crocker National Bank. He also was

executive vice president of the
banking division of Teknekron, Inc.

of Berkeley. Griffith attended Pepperdine College, California State
College at San Luis Obispo, and the
Sloan Graduate School of Banking
at Stanford.

Before his association with the Fed,
Sims served as an economist with

the United States Agency for Inter
national Development in Washing
ton, D.C., and Pakistan. He also

was a research associate and taught
at the University of Colorado at Den
ver and Boulder, and served as an
economist for the Urban Renewal

Authority of the City and County of
Denver. Sims is a graduate of the
University of Colorado, where he

earned B.A. and Ph.D. degrees.1j|ji

CLEANER CURRENCY
ENVISIONED BY FED

By mid-1983, most financial institu
tions in the West should be receiving
crisper, cleaner and higher-quality
used currency from the Federal Re
serve System for distribution to its
customers.

Behind this improvement is the in
stallation of a high-speed Currency
Verification, Counting and Sorting
(CVCS) System at the five offices of
the Federal Reserve Bank of San

Francisco. All of these offices now

have the equipment with the excep
tion of Salt Lake City, which is
scheduled to install its CVCS unit in
1982.

Presently, there are seven CVCS
machines processing approximate
ly 50 percent of the bank notes

The high-speed Currency Verification, Counting and Sorting System of the Fed
can handle about 70,000 pieces of currency per hour.

received at the five Fed offices.

Meanwhile, currency which is
wrongly sized, stuck together, coun

Douglas O. Knudsen, assistant vice
president, cash, at the San Fran

terfeit or defaced drops into a reject
pocket for later sorting by hand.

cisco Fed, said that by mid-1983
there will be 14 of these high-speed,
optical-scanner machines in opera

Bogus bills and altered currency—
which average 16-20 bills daily—are

tion in the 12th Federal Reserve

District, enabling the Fed to process
all of the currency it receives.
"These electronic machines sort out

turned over to the Secret Service for

investigation, and the accounts of
depositing institutions are debited
for the amount of the counterfeit
money.

the good currency, count it, re-strap
it for circulation and destroy the unfit
currency on line," said William F.
Kress, assistant manager of the
cash department at the San Fran

the financial community have been
increasing approximately eight per

cisco Fed. Each of the San Francis

cent per year. "And these financial

co office's two CVCS units can

count and sort up to 70,000 pieces
of currency per hour.
Stacks of currency are fed into the
machinery and optically scanned.
Fit currency suitable for recircula
tion automatically is strapped and
deposited in pockets.

Unfit currency—any bill which is
badly soiled, worn ortorn—is shred

ded. Each day, approximately
765,000 pieces of currency worth
about $6.8 million are shredded and

disintegrated at the San Francisco
Fed. The 30 cubic yards of shred
ded currency are loaded into a
dumpster and hauled to a landfill
site by a disposal company under
contract to the Fed.

Kress said that the Fed installed the

CVCS system to prepare for future
needs. He noted that cash needs of

institutions are demanding more
uniform, high-quality currency for
their customers, especially for use

HAWAII RESERVE RULE
Under an amendment to the Federal

Reserve's Regulation D (reserves
of depository institutions), certain
nonmember institutions with offices

in Hawaii will have a five-year
exemption from Federal Reserve
reserve requirements.
The law previously provided such
an exemption only for certain statechartered institutions. The revised

law and regulation apply the fiveyear exemption to deposits held or
maintained in Hawaii by all institu
tions that were required to maintain
Federal reserves for the first time

under the provisions of the Mone

tary Control Act of 1980.1j|i

in their automated-teller machines,"
he added.

The San Francisco office's elec

tronic sorters, each costing about
$300,000, are operated 16 hours a
day, five days a week, by 16 operator-reconcilors and two supervisors.
Prior to the installation of the first

machines in 1979, 43 additional

employees performed the same
operation.

In 1983, when the Fed occupies a
new headquarters building in San

For additional information about
cash services of the Federal Re
serve Bank of San Francisco and its

branches, please refer to Operating
Circular 9 titled "Currency and
Coin," or contact the Cash Depart
ment at the following Federal Re
serve offices:

San Francisco

Los Angeles

Francisco, that office will have four

Portland

CVCS machines to handle the flow

Salt Lake City

of circulated currency.

Seattle

(415)544-2449
(213)683-8466
(503)221-5964
(801)322-7815
(206) 442-7763

REGULATORS DECIDE
ON CAPITAL POLICY

PINOLA NAMED
TO FED COUNCIL

The Federal Reserve and the

Joseph J. Pinola, board chairman

Comptroller of the Currency have
agreed on a uniform policy to as
sess the adequacy of bank capital,
while the third federal bank regula
tor—the Federal Deposit Insurance
Corporation—has adopted slightly
different guidelines.

and chief executive officer of First

In determining the minimum capital
requirements for a banking insti
tution, the Comptroller and the

Interstate Bancorporation of Los

Angeles, has been appointed to the
Federal Advisory Council for 1982
by the board of directors of the Fed
eral Reserve Bank of San Francisco.

Pinola succeeds Chauncey E.
Schmidt on the panel, which pro
vides a link between the banking
and financial community and the

Federal Reserve will consider two

Federal Reserve Board of Gover

principal ratios—primary capital to
total assets and total capital to total

nors. Schmidt, chairman, president

assets.

Primary capital is defined as com

and chief executive officer of the

Bank of California, N.A., has served

on the Council for three years.

mon stock, perpetual preferred
stock, capital surplus, undivided
profits, contingency and other capi
tal reserves, mandatory convertible

The Federal Advisory Council is
composed of 12 members repre
senting each of the districts in the
Federal Reserve System. It advises

instruments and loan-loss reserves.

the Board on a wide range of topics
including overall banking and mon
etary objectives, the Fed's regula
tion of depository institutions, and
the effects of monetary policy on fi
nancial institutions and the money

Total capital includes these items
plus limited-life preferred stock and
qualifying subordinated notes and
debentures.

Under the Comptroller-Fed guide
lines, institutions are split into three
categories: multinational, regional,
and community. The multinational
group consists at present of 17 insti
tutions with assets of more than $15
billion. The remaining institutions
with assets of more than $1 billion
are designated regional organiza
tions, and those with less than $1

market.

A former director of the Los Angeles
branch of the San Francisco Fed,

Pinola joined First Interstate Bank
of California (formerly United Cali
fornia Bank) as president and chief
operating officer in 1976 after 23
years with the Bank of America. At
B of A, he had risen to executive vice

billion are designated community

president of the North American

organizations.

Division.

The guidelines are designed to re
quire multinationals to improve their
capital positions over time, while
permitting smaller banks to main

A veteran of World War 11 with added

Joseph Pinola

an conflict, Pinola earned a degree
in economics from Bucknell. He is

also a graduate of Dartmouth Col
lege's Graduate School of Financial
Management and the Advanced
Management Program at Harvard's
Graduate School of Business
Administration.

Pinola is director of the Los Angeles
World Affairs Council, the Los An
geles Philharmonic Association,
and the National Conference of

Christians and Jews (Southern Cali
fornia Region), and is vice president
and director of the Los Angeles Area
Chamber of Commerce. Active in

community activities, he is general
chairman of the 1981-82 United

Way campaign for Los Angeles

County.^

service in the Navy during the Kore-

tain lower ratios than most of them

currently possess. For financially
sound and well-managed institu
tions, the minimum level of primary
capital to total assets will be 5 per
cent for regional and 6 percent for
community institutions. However,
regional and community institutions
are generally expected to operate
above these levels.

Meanwhile, the guidelines adopted
by the FDIC, which regulates thou
sands of state-chartered non-mem-

ber banks, stresses equity capital
as the major element in determining
capital adequacy, with uniform capi
tal standards regardless of an insti
tution's size. The FDIC also does
not include limited-life instruments

in its definition of capital.

The new supervisory approach of
the Comptroller and the Fed will ap

ply to national banks, state-charter
ed member banks, and bank hold

ing companies. The three federal
regulators had tried without success
for more than a year to agree on one
set of capital-adequacy guidelines
based on the definition of capital
proposed by the Federal Financial

Institutions Examination Council.1j|j)

fr8l-Z-frfrQ (Ql-fr) suoqd
021-^6 'B!UJOJ!|bo 'oosp
-UBJj UBS 'ZOLL X°9 O'd 'OOSIOUBJJ UBS
jo >(UBa aAjasay |Bjapaj 'uojpas uoubiu

-jojui oiiqnd am Aq suoiinmsm Ajojjsodap
oi painquisip s; uouBOjiqnd am >(sny
uajB» pus !>(su!dns uou 'a>|jna wbuhm
Aq paonpojd Sj sajON aAjasay lejapaj

dHVO 'OOSIONVdd NVS
ZQL ON ±IWU3d
aivd
asvisod s n
iivim ssvno isaid

021*6 VO 'odsioubjj ues 'IS auiosues 00*

oospuejj ues *o

>|ueg aAiasau |ejapaj

TRAVELERS CHECKS OK

RATE-CEILING ACTION
DELAYED BY DIDC

FED SETS RESERVE

At its December meeting, the De
pository Institutions Deregulation
Committee postponed action on
several proposals that had been
raised at earlier meetings. One

The Federal Reserve Board of Gov

been added to the list of nonbank

ernors has adjusted the amount of

activities permitted under Regula
tion Y. This action by the Board of
Governors allows the use of simpli
fied notification procedures and
thereby makes it easier for bank
holding companies to issue travel
ers checks. Previously, the Board
had approved the formation of trav

would have eliminated interest-rate

ceilings on some time deposits, and
the other would have created a new

deposit instrument to help deposi
tory institutions compete against

REQUIREMENT RULES

net transaction accounts to which

the lowest—3 percent—reserve re
quirement will apply in 1982. Under
this change, the amount to which
the 3-percent requirement applies
will rise from $25 million to $26 mil
lion in any one depository institution.

Upon the urging of congressional

The Board made the changes in
accordance with the Monetary Con
trol Act of 1980, which requires an

leaders, the Committee voted four

annual amendment to the Fed's

to zero to delay consideration of the
issues until at least its next meeting
on March 22. William M. Isaac,
chairman of the Federal Deposit In
surance Corporation, abstained
from the vote. Spokesmen for Con
gressional committees said they
wanted to study the matters more
fully after Congress' year-end recess.

Regulation D (Reserves of Deposi
tory Institutions). Under the law, the

money-market mutual funds.

The U.S. League of Savings Asso
ciations had lobbied against the
removal of interest-rate ceilings be
cause of the resultant increase in

amount of transaction accounts

against which the 3-percent reserve
requirement will apply in the next
calendar year is increased by 80
percent of the percentage increase
in transaction accounts held by all
depository institutions on the pre
vious June 30.
Total net transaction accounts of all

depository institutions increased
5.25 percent from June 30, 1980 to

are currently experiencing earnings

June 30, 1981. The statutory rule
thus requires an increase of 4.2 per

pressures.

cent, orto$26 million."SI)

the cost of funds for thrifts, which

elers check subsidiaries on a case-

by-case basis and had required
submission of a full application. In
making this decision, the Board said
it expected public benefits through
increased competition and reduced
l alcS. ^nw

PUBLICATION AVAILABLE
"Statfacts"—is a new publication
which will help in understanding
Federal Reserve statistical reports.
It is not a substitute for technical

instruction booklets provided to de
pository institutions but provides a
general explanation of the meaning
of terms used in major Federal Re
serve statistical releases.

For a copy of this publication con
tact the Publications Section, Fed

More than 1,000 comment letters

received by the DIDC revealed that
both the banking and thrift indus
tries are split on the entire issue of
creating a new instrument. Many
smaller banks argued against any

Issuance of travelers checks has

new deposit instrument, while some
larger savings-and-loan associa
tions said they would welcome an

instrument to help them compete

against money-market funds."9JS

eral Reserve Bank of San Francis

co, P.O. Box 7702, San Francisco,

CA 94120 or (415) 544-2184.1j|j