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Federal Reserve Bank of Dallas

October 1985

Phase-In Requirement Near Completion
Under the Monetary Control Act of
1980, uniform reserve requirements
were imposed on all depository in­
stitutions—that is, commercial banks,
savings banks, savings and loan
associations, credit unions and in­
dustrial banks. Prior to the passage
of this act, only members had been
required to keep reserves. Edge Act
and agreement corporations, and U.S.
branches and agencies of foreign
banks are also required to maintain
Reserves, a primary source of li­
quidity to the institution itself, form
the base of money over which Federal
Reserve monetary policy takes effect.
The purpose of maintaining reserves,
according to Bob Feil, manager of the
Reserve Maintenance and Federal Ac­
counts Divisions of the Financial
Planning and Control Department, is
“ to increase the effectiveness of
monetary policy, set by the Federal
Reserve Board, to all depository

Reserve requirements for non­
member depository institutions are
being gradually phased-in over an
eight-year period in order to avoid
disruptive effects on an institution’s
operations. The phase-in adjustment,
now 75 percent complete, has al­
lowed the reserve requirement for
non-members to gradually be phasedin, while the requirement for members
has been gradually phasing down. Ef­
fective Sept. 10, 1987, the phase-in
will be complete.
Depository institutions are required
to supply the Federal Reserve Bank in
their District with a Report of Trans­
action Accounts, Other Deposits and
Vault Cash (also known as the FR
2900) on a regular basis. Institutions
with total deposits of $25 million or
more and with reservable liabilities
greater than $2.4 million are required
to submit the report weekly. Institu­
tions with total deposits of less than
$25 million and reservable liabilities
greater than $2.4 million must report

on a quarterly basis. Institutions with
less than $2.4 million in total de­
posits are exempt from FR 2900 re­
porting. Reservable liabilities include
net transaction accounts, non­
personal time and savings deposits,
and Eurocurrency liabilities.
Reserves are held in the form of
vault cash, a balance maintained
directly with the Federal Reserve
Bank in the District in which it is
located or in a pass-through account
(one in which a correspondent holds
reserves at the Reserve Bank on
behalf of other depository
Reserves are computed on the
basis of the daily average deposit
balances, which are reported on the
FR 2900, during a period known as
the “ computation period.” In deter­
mining the reserve balance that is re­
quired to be maintained with the
Federal Reserve, the average daily
vault cash held during the computa­
tion period is deducted from the
amount of the institution’s required
reserves. The reserve balance held
with the Federal Reserve shall be
maintained during a corresponding
“ maintenance period.”
(Continued on page 2)

Bob Feil explains schedule for maintenance periods.


Dallas Fed Hosts Repo Seminar
The Dallas Fed hosted a workshop
aimed at presenting information on
the risks associated with investment
in repurchase agreements. The work­
shop was attended by nearly 200
representatives of depository finan­
cial institutions, as well as elected or
appointed officials from municipali­
ties across the Eleventh District. The
seminar took place at the Loews
Anatole Hotel in Dallas, on Friday,
Sept. 20.
A repurchase agreement, or “ repo,”
represents a money market transac­
tion in which a security—typically a
U.S. Government obligation or agency
issue—is sold at a specified price for
a designated period of time. The con­
tract prescribes that the security will
be bought back (“ repurchased” ) at
the end of the agreement’s term. In­
vestors ordinarily use repos to place
funds that may be available for
limited periods of time, as short as
overnight. On the other side of the
transaction, repo sellers attract cash
to meet temporary liquidity needs
without purging the underlying
securities from their portfolios
The Federal Reserve System’s in­
terest in repurchase agreements
stems from its role as manager of the
nation’s monetary policy. The effec­
tiveness of Fed “ open market opera­
tions” depends on safe, sound and ef­
ficient markets for U.S. Government
securities and agency issues. Such
securities, and dealers of those
securities, are often involved in repur­

chase transactions. The failure of
several large government securities
dealers earlier this year and the
resulting impact on those dealers’
customers have prompted special in­
terest in the procedures and capital
adequacy of government securities
Speakers at the workshop included
Richard Syron, senior vice president
of the Boston Fed and former assis­
tant to Fed Chairman Paul Volcker.
Syron reviewed the structure of the
government securities market and the
nature of repurchase transactions.
Gary Haberman, manager of Dealer
Surveillance at the New York Fed,
discussed the legal and regulatory
status of government securities
dealers and capital adequacy stan­
dards for dealers as proposed by the
Fed. New York Fed associate general
counsel Don Ringsmuth outlined legal

considerations surrounding repur­
chase agreements and the associated
custody of collateral.
A panel of experts then discussed
repos from a variety of viewpoints.
The panel consisted of: A. Judson
Bailiff, treasurer of the City of Fort
Worth; James A. Brickley, chairman
of the Asset and Liability Manage­
ment Committee at InterFirst Cor­
poration, Dallas; Winsome Jean, short
term investment officer, Texas State
Treasury; and S. Michael Edgar, vice
president of the Federal Home Loan
Bank of Dallas. G. C. Cochran, senior
vice president of the Dallas Fed,
served as workshop moderator.
Copies of workshop materials and
handouts may be obtained by writing
or calling the Public Affairs Depart­
ment, Federal Reserve Bank of
Dallas, Station K, Dallas, Texas
75222, (214) 651-6289.

quired to maintain reserves on both
types of accounts on a lagged basis
Under CRR, the responsibility for
calculating a reserve requirement has
shifted from the Federal Reserve to
each depository institution due to the
need for depository financial institu­
tions to know their requirement. In
order to aid the institutions in the

day-to-day management of their re­
serve position, the Federal Reserve
Bank of Dallas offers a computer pro­
gram which will allow institutions to
calculate their reserve requirements
using estimated or actual data. This
function is known as a “ what if”
calculation and has proven to be very
popular among many institutions in
this District.

Phase-In (cont.)
“ All weekly reporting institutions,”
added Feil, “ are required to maintain
reserves on their transaction account
balance ‘contemporaneously,’ i.e.,
with a two day lag, while reserve re­
quirements on nontransaction liabili­
ties must be met on a lagged basis.
This is referred to as Contempora­
neous Reserve Requirements (CRR).”
Quarterly reporting institutions are re­

Texas Money Featured in Slide Show
To prepare for the Sesquicentennial of Texas, the Federal
Reserve Bank of Dallas is coor­
dinating a slide show presenta­
tion on the history of Texas
money. In conjunction with the
economic education program, the
slide show will be used in ele­
mentary through high school
classrooms throughout the Ele­
venth Federal Reserve District
beginning in 1986.
Because money is used as a
medium of exchange, or promise
to pay, its value, use and design
are usually determined by its ac­
ceptance in the marketplace. This
helps explain why coins and cur­
rency have changed so much
throughout the years.
From 1519 until Mexico at­
tained independence in 1821,
Spain ruled the southern portion
of the New World, including
Texas. The Republic of Mexico
actively governed the land from
1821 through 1835, thus playing a
major role in setting up coin and
currency guidelines.
Gold and silver pesos, issued
in the name of Juan Antonio De
La Garza of San Antonio, were
the first form of Texas money.
One side bore his initials and the
other a five-pointed star. This
money was coined in 1818 with
the consent of the Spanish Vice
Rey in view of the great need of a
circulating media.
Handwritten bank notes are be­
lieved to have been issued by a
San Antonio bank in the early
1820s in denominations of one,
two, and four reales, and five, ten,
twenty, fifty and one hundred
pesos. However, upon first issue,
people were said to have refused

to use them. Other than San An­
tonio, no other Spanish towns in
Texas showed instances of hav­
ing issued any form of coin or
Prior to this time, colonial
notes were used back as early as
1690 and had been issued by the
Massachusetts Bay Colony. Eas­
ily counterfeited, they became
worthless through depreciation
and inflationary printing.
Banks, insurance companies,
railroads, corporations, and
associations issued obsolete
bank notes—more commonly
known as broken bank bills. This
was the only paper money the
United States had from the early
1800s to 1861, when the Govern­
ment began issuing Civil War
Following the Civil War, many
Texas banks received charters
under the National Currency Act
of 1863 and various other acts.
National banks in several hun­
dred Texas cities issued national
bank notes.
Both before and after Texas
formed a provisional government
in 1835 and declared indepen
dence in 1836, Texas had under
gone many changes of coin and

The first “ official” paper money
in the region were warrants is­
sued by the provisional govern­
ment of Texas in January and
February of 1836, before indepen­
dence. The warrants were com­
pletely handwritten and had no
printed designs. Vignettes, or
drawings, first appeared on notes
introduced in 1838-39. Some of
these notes are extremely popular
among collectors.
Forms of currency which Texas
used included Treasury Notes of
the Republic of Texas (presum­
ably signed by Sam Houston,
President of the Republic of
Texas, when in fact a stock clerk,
W. G. Cooke, signed for him),
Notes of the Confederate States
of America, State of Texas War­
rants, Postage and Fractional
Currency, United States and
Treasury Notes, United States
Silver Certificates, Federal
Reserve Notes, Federal Reserve
Bank Notes, and National Bank

News Briefs
Monthly Calendar Billing
Beginning in August, the Federal
Reserve System converted to a calen­
dar month billing cycle for priced ser­
vices offered to financial institutions.
Billing cycles now run from the first
day of a calendar month to the last
day of a calendar month, which
should prove less confusing for
depository institutions than the
previous method.
Under the new guidelines, the
Preliminary Statement of Service
Charges has been discontinued.
However, the Final Statement of Ser­
vice Charges are being mailed no
later than seven business days
following the end of each monthly
billing cycle. This new Final State­
ment of Service Charges will also
make it easier for our customers to
reconcile their bill.
Settlement of net service charges
occurs on the fifteenth of the month
following the end of the billing cycle.
If that day falls on a weekend, the


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next business day is being used.
Earnings credits, based on reserve
maintenance periods, are also re­
leased on the Final Statement of Ser­
vice Charges no later than seven
business days following the end of
each billing cycle.
Election of Directors
In concurrence with the Federal
Reserve Act, as amended by the
Federal Reserve Reform Act of 1977,
the Election of Directors was held
Oct. 2, through Oct. 24, 1985.
Nominations were taken prior to
Sept. 20, 1985, by Chairman of the
Board of Directors of the Eleventh
Federal Reserve District, Robert D.
Rogers, for both a Class A and Class
B Director. Class A Directors are
elected by Group 3 banks—those with
capital and surplus of $2 million or
less. Class B Directors are elected by
Group 1 banks—those with capital
and surplus of $6 million or more.
Class B Directors represent the public
and need not be officers or directors
of depository financial institutions.

Uniform Bank Performance Reports
Uniform Bank Performance Reports
(UBPR) for March 1985, are now
available from the Federal Financial
Institutions Examination Council
These quarterly reports are de­
signed for use by bank examiners,
financial analysts, and bank
managers, and permit both summary
and in-depth analysis of commercial
banks’ financial performance and
trends. These reports are also
available to anyone interested in com­
paring a specific bank’s performance
with that of its peers.
Copies of individual bank UBPRs
may be obtained by the public for $25
per report, with quantity discounts
available. UBPR User’s Guides can be
obtained for $6 each.
For ordering assistance, contact
the Federal Financial Institution Ex­
amination Council in Washington,
D.C., at (202) 383-5876.