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ror release on delivery Expected at 2:30 p*nu (E.S.T#) January 24, 1979 Proposals to Facilitate the Implementation of Monetary Policy and to Promote Competitive Equality Among Depository Institutions Statement by G. William Miller Chairman, Board of Governors of the Federal Reserve System before the Committee on Banking, Finance and Urban Affairs House of Representatives January 24, 1979 Mr. Chairman, members of the Committee, the nation's financial system has been undergoing rapid change in recent years, altering the competitive environment in banking and other financial markets and complicating the Federal Reservefs ability to implement monetary policy. Nonmember depository institutions have been growing much more rapidly than member banks. Transactions-type deposit accounts have become more widespread at thrift institutions. And, in general, competition among depository institutions and between those institutions and the open market has become much more intense. This competition promotes efficiency in the financial system, and banks have been re-assessing their costs and operations. Many, as a result, have become less willing to bear the high cost of cash reserve requirements associated with being a member of the Federal Reserve System. Thus, there has been a steady—and in recent years accelerating—decline in the proportion of bank deposits, especially transaction deposits, subject to Federal reserve requirements. Moreover, the continued development of new transactions-type deposits at nonbank depository institutions will further worsen this situation. DEVELOPMENTS WEAKEN MONETARY CONTROL It is essential that the Federal Reserve maintain adequate control over the monetary aggregates if the nation is to succeed in its efforts to curb inflation, sustain economic growth, and maintain the value of the dollar in international exchange markets. The attrition in deposits subject to reserve requirements set by the Federal Reserve weakens the linkage between member bank reserves and ~9 — the monetary aggregates. As a larger and larger fraction of deposits at banks becomes subject to the diverse reserve requirements set by the 50 states rather than by the Federal Reserve, and as more transactions balances reside at thrift institutions, the relationship between the money supply and reserves controlled by the Federal Reserve will become less and less predictable. Open market operations, the basic tool of monetary policy, therefore are becoming less precise in their application• Our staff has attempted to assess the extent to which growth of deposits outside the Federal Reserve System would weaken the relationship between reserves and money. Their tentative results are shown in Chart I, which depicts the greater range of short-run variability in M-l and M-2, with a given level of bank reserves, that would develop as the per cent of deposits held outside the Federal Reserve rises. As more and more deposits are held outside the System, this chart suggests that control of money through the reserve base becomes increasingly uncertain. USE OF RESERVE REQUIREMENTS HAS BEEN RESTRICTED With the proportion of banks subject to Federal reserve requirements declining, the ability of the central bank to use changes in reserve requirements as a tool of monetary policy has been increasingly undermined. Changes in reserve ratios not only affect a smaller proportion of deposits today than in the past, but the Board also must weigh the potential impact of its actions on the membership problem—and hence on its ability to maintain monetary control over the longer run—each time it deliberates on the uses of this tool. Such -3concerns inhibit the Board's freedom of action to conduct monetary policy. If reserve requirements were applied universally, as is proposed in H.R. 7, adjustments in reserve ratios to affect the availability of credit throughout the country, or to influence banks1 efforts concerning particular types of deposits, may again become a more viable monetary instrument. Moreover, while open market operations in U.S. Government securities provide the Federal Reserve with a powerful policy instrument, it is possible that conditions could develop in the future—such as a less active market for U.S. Government securities in a period of reduced Federal budgetary deficits—where more flexible adjustment of reserve requirements might be a desirable adjunct in efforts to control the monetary aggregates. ... AS HAS BEEN THE DISCOUNT WINDOW The effectiveness of the Federal ReserveTs administration of the discount window also has been potentially compromised by recent developments. Membership attrition and the growth of trans- actions balances at nonbank depository institutions have resulted in a shrinking proportion of the financial system having immediate access to the discount window on a day-to-day basis. The discount window, as the "lender of last resort,11 provides the payments system with a basic liquidity backup by assuring member banks the funds to meet their obligations. But, if the proportion of institutions having access to this facility continues to decline, individual institutions could be forced to make abrupt adjustments -4in their lending or portfolio policies, because they could not turn to the window to cushion temporarily the impacts of restrictive monetary policies. Risks that liquidity squeezes would result in bank failures could also increase. Thus, the Federal Reserve may find that its ability to limit growth in money and credit in order to curb inflation was being unduly impeded because the safety valve provided by the discount window was gradually losing its effective coverage. .. . AND THE PAYMENTS SYSTEM FACES DETERIORATION The growth of transactions balances at institutions that do not have access to Federal Reserve clearing services also could lead to a deterioration of the quality of the nation 1 s payments system. Reserve balances held at Federal Reserve Banks are the foundation of the payments mechanism, because these balances are used for making payments and settling accounts between banks. Nonmember deposits at correspondent banks can serve the same purpose, but as more and more of the deposits used for settlement purposes are held outside the Federal Reserve, the banking system becomes more exposed to the risk that such funds might be immobilized if a large correspondent bank outside the Federal Reserve experienced substantial operating difficulties or liquidity problems. A liquidity crisis affecting such a large clearing bank could have widespread damaging effects on the banking system as a whole because smaller banks might become unable to use their clearing balances in the ordinary course -5of business. The Federal Reserve, of course, is not subject to liquidity risk and therefore serves, as Congress intended, as a completely safe foundation for the payments mechanism. In sum, the major functions of the Federal Reserve System— to conduct monetary policy in the public interest, to provide backup liquidity and flexibility to the financial system, and to assure a safe and efficient payments mechanism—all have been undermined by recent developments. These developments include, as I've noted earlier, attrition in Federal Reserve membership and the spreading of third-party payment powers to nonbank institutions. DECLINE IN SYSTEM MEMBERSHIP For more than 25 years there has been a continual decline in the proportion of commercial banks belonging to the Federal Reserve. The downward trend in the number of member banks has been accompanied by a decline in the proportion of bank deposits subject to Federal reserve requirements, as may be seen from Chart II. As of mid-1978, member banks held less than 72 per cent of total commercial bank deposits, down about 9 percentage points since 1970. Thus, more than one-fourth of commercial bank deposits—and over threefifths of all banks—are outside the Federal Reserve System. DUE TO THE EXCESSIVE COST OF MEMBERSHIP The basic reason for the decline in membership is the financial burden that membership entails. Most nonmember banks and thrift institutions may hold their required reserves in the form of earning -6assets or in the form of deposits (such as correspondent balances) that would be held in the normal course of business* Member banks, by contrast, must keep their required reserves entirely in nonearning form. The cost burden of Federal Reserve membership thus consists of the earnings that member banks forego because of the extra amount of non-earning assets that they are required to hold. Of course, member banks are provided with services by Reserve Banks, but the value of these services is insufficient to close the earnings gap between member and nonmember banks. The Board staff estimates that the aggregate cost burden to member banks of Federal Reserve membership exceeds $650 million annually, based on data for 1977, or about 9 per cent of member bank profits before income tax. The burden of membership is not distributed equally across all sizes of member banks. According to staff estimates, shown in the lower panel of Chart III, the relative burden is greatest for small banks—exceeding 20 per cent of profits for banks with less than $10 million in deposits.. Further reductions of reserve require- ments within existing statutory limits would do little to eliminate the burden for most classes of banks, especially for the smaller banks. INEQUITY OF COST BURDEN BORNE BY MEMBER BANKS The current regulatory structure is arbitrary and unfair because it forces member banks to bear the full burden of reserve requirements. Only member banks must maintain sterile reserve balances, while nonmember banks, which compete with members in the -7same markets for loans and deposits, and thrift institutions, which increasingly are competing in the same markets, do not face similar requirements. Thus, members are at a competitive disadvantage relative to other depository institutions. Among the major countries in the free world, only in the United States has this legislated inequity been imposed on the commercial banking system. It is no wonder that member banks continue to withdraw from the Federal Reserve. SPREAD OF THIRD-PARTY PAYMENT POWERS At the same time, the spread of third-party powers to thrift institutions is further increasing the proportion of transactions balances outside the control of the Federal Reserve. Commercial banks' virtual monopoly on transactions accounts, maintained in the past because of their ability to offer demand deposits, is being eroded. Moreover, recent financial innovations have led to widespread use of interest-bearing transactions accounts at both nonbank depository insitutions and commercial banks. These developments have increased both the costs and competitive pressures on banks, no doubt compelling members to reevaluate the costs and benefits of membership and thus playing a significant role in membership withdrawals. The payments innovations since 1970 are well know to this Committee, and include limited pre-authorized "bill-payer" transfers as well as telephone transfers from savings accounts at banks and savings and loan associtions, NOW accounts at practically all depository institutions in New England, credit union share drafts, automatic transfers from savings deposits, and the use of electronic terminals to make immediate transfers to and from savings accounts. -8Growth of these transactions-related interest-bearing deposits has been most dramatic in recent years. For example, NOW accounts in New England have grown from practically zero in 1974 to 8 per cent of household deposit balances in mid-1978, as shown in Chart IV, and one-third of these NOW deposits are at thrift institutions. The intense competition engendered by the introduction of NOW accounts has been accompanied by an acceleration of member bank attrition in New England to a rate well beyond that of the nation, as shown in Chart V. This increase in member bank withdrawals is clearly not just coincidental. There is no sign that the intense competition will abate. As shown in Chart VI, savings accounts authorized for automatic transfer have grown rapidly at commercial banks across the country since their introduction November 1; and in New York, NOW accounts, which were authorized November 10 for all depository institutions in the State, have been increasing vigorously. In addition, the Federal Home Loan Bank Board has announced its intention to authorize savings and loan associations to offer Payment Order Accounts, or POAs, which are interest-bearing deposits that can serve many of the same functions as NOWs. These developments have caused the distinctions among banks and thrifts with respect to the "moneyness" of their deposits to become increasingly blurred and have prompted the Federal Reserve to reevaluate its existing measures of the monetary aggregates and to consider possible readjustments to reflect the changing institutional environment. The most basic measure of transactions -9balances, M-l, clearly should include more than just currency and commercial bank demand deposits. And, the broader aggregates may be redefined to emphasize distinctions by type or function of deposit rather than by the institution in which the deposit is held. Changing the money measures to reflect economic reality, including the wider role played by depository institutions other than member banks in the monetary system, would be complemented by legislation for universal reserve requirements, LEGISLATIVE PROPOSALS POINT IN THE RIGHT DIRECTION The Monetary Control Act of 1979, H.R. 7 9 introduced by the Chairman of this Committee, represents a constructive approach to improving monetary control and reducing the inequities in markets in which depository institutions are competing. This bill proposes universal reserve requirements by establishing a reasonable set of reserve ratios applicable to all deposits at commercial banks and to transactions balances at thrift institutions. The definition of transactions accounts includes not only demand deposits, but also the growing number of new thirdparty payments accounts. Such an approach puts all depository institutions on an equal competitive basis in the market for transactions deposits and helps assure the continuation of a reserve structure needed for the efficient conduct of monetary policy. Under this legislation all commercial banks and thrift institutions with transactions accounts would have access to the Federal Reserve discount window. The Federal Reserve could then -10act as a "lender of last resort11 to a broader class of depository institutions and thereby enhance the overall safety and soundness of the depository system, as well as providing more flexibility to financial institutions to respond to changing monetary policy. The bill also gives all depository institutions access to Federal Reserve services. With the application of an appropriate pricing schedule for such services, this action should improve the efficiency of the payments mechanism which underlies all of the nation's economic transactions. But I should emphasize that open access to System services, desirable as it may be, is only practicable if the so-called membership problem is resolved, as H.R. 7 does in principle. Without resolution of the membership problem, open access at an explicit price set for all institutions would only exacerbate the problem and lead to even greater reduction in the Federal Reservefs deposit coverage, since services would be available to nonmembers without bearing the burden of reserves. BUT CERTAIN MODIFICATIONS OF H.R. 7 ARE NECESSARY The various features of E.R. 7 redress much of the growing competitive inequity among financial institutions and provide a potentially improved framework for enhancing the implementation of monetary policy. However, as drafted, certain provisions of this legislation compromise the improvement in monetary control that universal reserve requirements could foster. First, the exemption from any reserve requirement of the first $50 million of transactions balances and the first $50 million -11of other deposits reduces somewhat from present levels the proportion of deposits subject to Federal reserve requirements. More importantly, though, the rather complex procedure for indexing the exemption would mean that the proportion of deposits subject to direct Federal Reserve control could not increase over time. Hence, the Board believes that the bill needs to be modified, and it has a proposal which will both enhance monetary control and preserve for all institutions the earnings protection of the exemption contained in the bill, without increasing the cost to the Treasury from that associated with H.R. 7. PARTICIPATION IN FEDERAL RESERVE EARNINGS FOR EXEMPTED DEPOSITS The Board1s proposed modification involves establishment of an "Earnings Participation Account11 at the Federal Reserve to be held against deposits exempted by H.R. 7 from reserve requirements. To reduce the record-keeping burden, small institutions could be excluded from having to hold this account. This exclusion could amount to the first $10 million of transactions deposits at each institution and $10 million of other deposits at each commercial bank. For banks, with respect to all deposits, and for other depository institutions, with respect to transactions deposits, their Earnings Participation Account would be held against deposits above the $10 million exclusion and up to the amount of the $50 million exemption in H.R. 7. The size of this Earnings Participation Account for each deposit category would equal the reserve ratio applicable to deposits in that category times the amount of deposit liabilities between $10 million and $50 million. To the extent that an -12institution holds vault cash in excess of its required reserves on nonexempt deposits, the size of the Earnings Participation Account would be reduced correspondingly. This provision reduces the possibility that institutions would build up their excess reserves, which would tend to increase the slippage between reserves and deposits and thereby diminish monetary control. Chart VII compares the impacts of the Board 1 s proposal with H.R. 7 and with the current reserve system. As can be seen in the upper left-hand panel, the Board's modification has the advantage of greatly increasing the proportion of commercial bank transactions deposits covered by an account at the Federal Reserve— from the present 73 per cent to 94 per cent. This would be accomplished even though the $10 million exclusion would mean that 45 per cent of all commercial banks, as well as virtually all thrifts, would not be required to hold any account at the Federal Reserve. At the same time, as shown in the right-hand upper panel, the number of banks holding non-earning reserve balances at Federal Reserve Banks would be as low as under H.R. 7. The number would be sharply reduced from the current level of 5,664 to an estimated 656. Finally, the bottom panel indicates that the effect on bank earnings would be virtually the same under either H.R. 7 or the bill as modified by the Board's proposal. The difference would be that under our proposal, banks would hold some assets in the form of the Earnings Participation Account rather than as market investments or loans. -13The return on this account would be equivalent to the average return on the Federal Reserve's portfolio, which includes both short- and long-term securities. Some years this return might be higher than banks would earn on other assets—which are likely to be a combination of loans and liquid instruments—and some years less. On average, over time, there should be little difference. I would like to underline the advantage of bringing transactions-type deposits at thrifts under reserve requirements in this manner. It will be several years, at least, before any significant number of thrift institutions would actually have to hold non-earning reserves at the Fed. loan association or credit union Currently, no savings and has transactions deposits in excess of the $50 million exemption. Only 8 mutual savings banks have transaction accounts in excess of the exemption5 and each has vault cash considerably in excess of the reserve requirement that would apply to such deposits. Attachment A presents a listing of individual member and nonmember commercial banks and MSB's similar to that shown on pages 17 to 65 of the Committee print, Description of the Monetary Control Bill. An asterisk in the far right column indicates that it is a bank added to the list by the Board's proposal—that is, it has deposits above the excluded level but below the exempted level. These added banks would hold an Earnings Participation Account at the Federal Reserve but they would not hold any nonearning required reserves balance at Reserve Banks because their deposits are below the exempted level. Banks without an asterisk -14were on the committee list before, and their non-earning balance is affected exactly the same as in H.R. 7. reserve Column 4—entitled EPA—shows the amount of the Earnings Participation Account each institution would hold. If this column is zero, the bank at the end of 1977 had sufficient vault cash in excess of its required reserves so that it would have had no Earnings Participation Account. Thus, the additional institutions brought under Federal Reserve control would keep the earnings benefit of the exemption level proposed by H.R, 7, since they would participate in the Federal Reserve's earnings on the balances that they would be required to maintain in the Earnings Participation Account. More- over, the cost to the Treasury would be no different under the Board's proposal than under the proposed bill. Under the Board's plan, the Federal Reserve would earn additional interest on the greater amount of balances that would be held at Reserve Banks, thereby offsetting the cost of the depository institutions' Earnings Participation Account. In sum, the Board proposal would have the clear advantage of expanding significantly the coverage subject to reserve requirements, thereby enhancing the implementation of monetary policy. At the same time, it would sustain the earnings benefits of the exemption level for all depository institutions—at no additional cost to the Treasury. Finally, exclusion of the first $10 million of transactions-type deposits and $10 million of other deposits from the earnings participation requirement would reduce the recordkeeping burden of the proposal, with relatively modest policy impact. -15Attachment B provides language for a series of amendments to H.R. 7 that xv'ould implement the Board's proposed modification. Another modification proposed by the Board concerns affiliated institutions. Providing an exemption from required reserves of $100 million in deposits gives an incentive to banks to form new, affiliated commercial banking entities in lieu of branch offices in order to avoid the requirement to hold sterile reserves. A bank as large as $100 million would already enjoy many of the economies of scale associated with larger banking operations. Thus, the cost of creating new banks would be small relative to the benefit of avoiding reserve requirements. To eliminate this potential loophole, the Board proposes that affiliated commercial banks be limited to a total exemption equal to the number of such institutions as of August 1, 1978 times the exemption levels specified in the bill. Such an amendment to H.R, 7 as it would be applied to the Board's proposal is presented in Attachment C. Additional more technical amendments to clarify reporting requirements and to conform other provisions of the Federal Reserve Act are also attached for the Committee's consideration. Mr. Chairman, 1 want to thank you for the opportunity to present the Federal Reserve's view on the Monetary Control Act of 1979 this afternoon0 This bill deals constructively with issues of crucial importance to the long-run viability of the nation's central bank and to the health of our financial system. The problems are difficult9 but considerable progress has been made in recent months toward achieving a solution that promotes the public interest. -0- Chart I Effect of Member Bank Attrition On Short-Run Predictability of Monetary Aggregates Absolute Range of Unpredictable Variability In Two-month Growth Rales Percentage points 20 15 10 20 40 Per cent of Bank Deposits Not Subject to Reserve Requirements 60 80 100 Chart 1 Percentage of U.S. Commercial Banks and Deposits in the Federal Reserve System Per cent 90 80 DEPOSITS 70 60 50 BANKS 40 i i i i i i i i i i i i i i i ii 1961 1965 1969 1973 1977 , Chart HE Estimated Burden of Federal Reserve Membership AGGREGATE BURDEN, 1977 Millions of dollars 300 — — 200 — —100 j 1 _l_ = rnurni I i i AGGREGATE BURDEN AS PERCENT OF ESTIMATED 1977 DOMESTIC PRE-TAX EARNINGS Per cent 30 aunnag — 20 — 10 — — 1 0—10 Lli hi i In 10—50 50—100 i 111 100—500 1 1 _L_ I 500—1000 Bank size class(total deposits, millions of dollars) Over 1000 Ohwi 33 Dtp'Salt 3a ! Per cent 1974 1975 1976 1977 1978 Charts Percentage of New England Commercial Banks and Deposits in the Federal Reserve System Per cent 85 80 75 DEPOSITS 70 65 60 55 50 45 i i i i i i i i i i i i i i i i i 1961 1963 1965 1967 1969 1971 1973 1975 1977 Chart 32 ATS Accounts Nationwide and NOW Accounts in New York State Billions of dollars 5 TOTAL ATS i 8 _L i 15 I 22 29 November • NOW account authorization not effective until November 10. I 1 6 13 20 December 27 10 January Chart 3ZII Effects of Proposals on Commercial Banks Transactions deposits covered Per cent Banks holding non-earning reserve balances at F.R. Banks 100 Per cent 1100 80 80 60 60 40 — 5664 40 20 20 656 656 1 I Current H.R. 7 - Current Modified H.R. 7 Earnings gain from net reduction in non-earning balances H.R. 7 Billions of dollars Revenue from Earnings Participation Account Stp 600 400 200 H.R. 7 Based on December 1977 deposits. Modified H.R. 7 Modified H.R. 7 Attachment A to Proposals to Facilitate the Implementation of Monetary Policy and to Promote Competitive Equality Among Depository Institutions Statement by G. William Miller Chairman, Board of Governors of the Federal Reserve System before the Committee on Banking, Finance and Urban Affairs House of Representatives January 24, 1979 Attachment A Benefit to Banks Covered by Modified H.R. 7 Key to Column Headings (1) TDEP Total domestic deposits as of the end of 1977. (2) VLTGSH Vault cash as of the end of 1977. (3) 1977 REQBAL Estimated amount of reserve balances as of the end of 1977 required by current law to be held at Federal Reserve Banks (i.e., required reservesminus vault cash). (4) NEW EPA Amount that would have been held in Earnings Participation Account at the end of 1977 under modified H.R, 7. (5) NEW REQBAL New required reserves minus vault cash that would have been held at the F.R. Banks under modified H.R. 7o (This amount is the same as under H.R. 7.) (6) DIF Reduction in non-earnings required reserve balances at Federal Reserve Banks that would have been held under modified H.R. 7. A negative amount represents an increase. (This amount is the same as under H.R. 7.) (7) * A bank covered by^-modified H.R. 7 but not by H.R. 7. Examples for Member Banks (A) The table shows that the first bank listed, Albertsville National Bank, had deposits of $21,933,000 in December 1977. Vault cash amounted to $366,000, -and required non-earning balances at the Federal Reserve were $641,000. Under modified H.R. 7, this bank, as of the end of 1977, would not have had to hold any non-interest earning balances at the Federal Reserve because neither its transactions-type deposits nor the sum of its other deposits was greater than $50 million. Albertsville National therefore would have sav&d the $641,000 it held in noninterest bearing reserve balances at the Federal Reserve at the end of 1977. This is the same savings as under H.R. 7. Since its vault cash is in excess of required reserves (which would be zero), all vault cash would have been counted in lieu of the Earnings Participation Account. The Earnings Participation Account thus would have been zero because its vault cash was greater than the reserve ratios times the non-excluded deposits (deposits in excess of $10 million per account category). - 2 - Attachment A (B) As of December 1977, Birmingham Trust National Bank had domestic deposits of $828,915,000, vault cash of $6,100,000 and sterile balances at the Federal Reserve Bank of $39,847,000. Because it had both transactions deposits and other deposits well in excess of the $50,000,000 exemptions, Birmingham Trust, under modified H.R. 7, would have had to meet reserve requirements with all of its vault cash and reserve balances of $27,342,000. The difference between the actual 1977 sterile balances and those under modified H.R. 7 result in a savings of $12,505,000--the same as under H.R. 7. In this case, no vault cash would have been applied in lieu of the Earnings Participation Account^because required reserve would have exceeded the bank's holdings of vault cash. Thus, the Earnings Participation Account of Birmingham Trust will equal the reserve ratio on transactions deposits (9.5 per cent) times $40 million plus the weighted reserve ratio on other deposits times $40 million, or $5,162,000. Examples for Nonmember Banks (A) The first nonmember bank listed is The Bank of Abbeville, which had . total deposits, as of the end of 1977, of $23,421,000 and vault cash of $240,000. Under existing law, no nonmember bank has any Federal reserve requirements. Under modified H.R. 7, this bank would have continued to have no Federal reserve requirements because its transactions deposits and other deposits are well below the $50 million exemption level per account category. The same result would occur under H.R. 7. Since vault cash of the Bank of Abbeville would have been in excess of required reserves (which are zero), all vault cash would have been counted in lieu of the Earnings Participation Account. Thus, this bank would have had no Earnings Participation Account because vault cash was greater than the reserve ratio times the non-excluded deposits. (B) Central Bank of Birmingham had total deposits of $510,662,000 in December 1977. Vault cash was $3,050,000, and it had no Federal reserve requirements. Under the modified H.R. 7, required reserves would have been covered by its vault cash holdings plus $17,509,000 in sterile reserve balances. This results in a net increase in nonearnings reserve balances of $17,509,000, the same as under H.R. 7. In this case, no vault cash would have been applied in lieu of the Earnings Participation Account because required reserves would have exceeded the bank's holdings of vault cash* Thus, the Central Bank of Birmingham would have maintained3 under modified H.R. 7, an Earnings Participation Account of 9.5 per cent times $40 million in transaction balances plus the weighted average reserve ratios on $40 million of other deposits, or $5,459,000. NOTE: The full listing of Attachment A is 200 pages long. Only a few representative pages are provided here. The complete attachment is available upon request. MEMBER BANKS IFIEO H .R* 7 ID DSB 6010020 60 10040 6010050 6010090 6010100 6010110 6 01018 0 6010200 6010230 6010240 6010255 6010300 60 10308 60l03?0 6010325 6010339 6010360 6010410 6010455 60 1046 0 6010430 6010570 6010 580 6010630 6010660 6010670 6010638 601069 0 601073 5 6010740 6010750 6010825 6010850 6010S30 6010910 6010915 6010970 6010985 6011050 6011090 6011 1 I 5 6011 150 6011 163 6011170 601H30 6011190 NAME ALBERTVUIE NATL BANK FIRST NB OF ALEXANDER CITY ALICEVILlt BK £ TR CO ANNISTGN NATIONAL BANK COMMERCIAL NS Of: ANNISTON FIRST N3 OF ANNISTON FIRST AL BANK OF ATHENS NA FIRST No QF AT MORE AUBJPN NATIONAL BANK CENTRAL BANK OF AUBURN NA ALBERTVULE ALEXANDER CITY ALICEVILLE ANNISTON ANNISTON ANNISTON ATHENS ATMCRE AUBURN AUBURN 1ST AL BK OF BALOWIN CTY NA BAY MINETTE BIRMINGHAM TRUST NAT 8K BIRMINGHAM CITY HB OF BIRMINGHAM BIRMINGHAM FIPST NB OF BIRMINGHAM BIRMINGHAM NATIONAL BANK OF COMMERCE BIRMINGHAM SOUTHERN NATIONAL BANK BIRMINGHAM NATIONAL BK CF 80AZ BCAZ FIRST NATIONAL BANK BREWTON FIRST NB OF BUTLER BUTLER CENTRAL STATE BANK CALERA CAMDEN NATIONAL BANK CAMDEN FIRST NAT 8K OF CLANTON CLANTON PEOPLES SAVINGS BANK CLANTON FIRST NAT BK OF COLUMBIANA COLUMBIANA LEETH NAT BK OF CULLMAN CULLMAN PARKER BANK AND TRUST CO CULLMAN CENTRAL BANK OF ALABAMA NA DECATUR FIRST NAT BANK OF DECATUR DECATUR CITY NATIONAL BANK OF DOTHANOOTHAN FIRST ALABAMA BK OF OOTHAN DOTHAN FIRST NAT BK OF DOTHAN DOTHAN FIRST N8 OF EUFA'JLA EUFAULA FIRST NAT 8K OF BALDWIN CTY FAIRHOPE FIRST NB OF FAYETTE F'AYETTE FIRST NB CF FLORENCE FLORENCE SHOALS NAT BK OF FLORENCE FLORENCE AMERICAN NB OF GAQSQEN GAOSDEN 1ST AL BK OF GADSOEN NA GAOSDEN FIRST NB OF GREENVILLE GREENVILLE FIRST NB OF GUNTERSVILLE GUNTERSVILLE MARION COUNTY BANKING CO HAMILTON HEADLAND NATIONAL BANK HEADLAND AMERICAN NATIONAL BANK HUNTSVILLE 1ST At BK OF HUNTSVILLE NA HUNTSVULE HtN[)F.RSON NB OF HUNTSVILLE HUNTSVILLE PEOPLES HB OF HUNTSVILLE HUNTSVILLE TDEP LOCATION AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL 21933 42342 16979 57239 58006 81102 36876 32111 26805 228Q7 23484 828915 109328 1120037 23563 51975 17487 41640 24604 15260 20083 18557 19740 25163 27662 18711 511589 64544 31591 84933 116332 16235 46304 18242 135004 21105 61029 38170 46542 39060 32392 23771 39452 155664 67626 38474 (21 VLTCSH 366 1349 251 700 1039 1814 583 387 320 537 753 6100 1216 14329 531 732 240 373 508 225 259 263 327 284 673 243 7452 996 688 1023 3281 439 619 698 2336 399 1443 785 768 599 534 240 785 381? 1679 1122 1/17/79 (3) 1977 REQBAL (41 (5) (6! NEW EPA NEW DIF REQBAL C3)-(5) 641 881 506 1829 1713 2074 1482 1034 875 522 401 39847 4870 58436 658 2045 516 1520 378 406 633 562 64Q 1087 764 713 20913 2833 1035 3209 2301 211 1593 180 4698 503 1787 1165 1441 1212 1398 762 13*23 4962 2072 861 0 0 0 729 267 723 144 0 0 0 0 5162 3314 5363 0 744 0 296 0 0 0 0 0 0 0 0 4944 1268 0 2024 724 0 252 0 3099 0 287 0 0 5 108 0 31 3314 587 0 0 0 0 0 0 0 0 0 0 0 0 27342 0 41691 0 0 0 0 0 0 0 0 0 0 0 0 10465 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 641 881 506 1829 1713 2074 1482 1034 875 522 401 12505 4870 16745 658 2045 516 1520 378 406 633 562 640 1087 764 713 1044 8 2833 1035 3209 2301 211 1593 180 4698 503 1787 1165 1441 1212 1398 762 1323 4962 2072 661 * * * * * * * • * * * * * * HBHBm 8/:T; DSB 6011230 6011240 6011265 60U370 6011330 6011390 6Q11410 6011430 6011437 6011439 6011440 6011448 6011450 6011500 6011510 6011520 6011540 6011542 6011543 6011536 6011620 6011648 6011750 6011770 6011790 6011795 6011800 6011827 6011850 6011880 6011890 6011900 6011910 6011960 6011930 6011990 6012030 6012010 6012130 NAME 85 BANKS AFFECTED IN STATE (I) LOCATION FIRST UB OF JACKSONVILLE JACKSONVILLE FIRST NAT BANK OF JASPER JASPER VALLEY NATIONAL BANK LANETT AMERICAN NAT BANK C TRUST COHOBlLE FIRST NAT SANK OF MOBILE MOBILE MERCHANTS NAT BANK OF HOBILEMOBUE MONROE COUNTY BANK HONRQEVILLE ALABAMA NB OF MONTGOMERY MCNTGOMERY CENTRAL BANK OF MONTGOMERY MONTGOMERY EXCHANGE NB OF MONTGOMERY MONTGOMERY 1ST AL 3K OF MONTGOMERY NA MCNTGOMERY SOUTHERN SANK NA MONTGOMERY UNION BANK AND TRUST COMPANYMCNTGCMERY CITIZENS BANK ONECNTA FARMERS NB OF OPELIKA OPELIKA FIRST NAT BANK OF OPELIKA OPELIKA FIRST NATIONAL BANK OF OPP OPP CENTRAL BANK OF OXFORD OXFORD FIRST CITY NAT 8K OF OXFORD OXFORD FIRST ALA BK OF PHENIX CY NAPHENIX CITY FIRST NAT BANK OF PIEDMONT PIEDMONT CENTRAL BANK OF MOBILE NA PRICHARD FIRST NAT BK OF RUSSELLVILLERUSSELLVILLE FIRST NATIONAL BANK SCOTTSBORO CITY NATIONAL BANK OF SELMA SELMA FIRST AL BANK OF SELMA NA SELMA PEOPLES BANK AND TRUST CO SELMA FIRST COLBERT NATIONAL BANK SHEFFIELD FIRST MAT BANK OF STEVENSON STEVENSON CITY NAT BANK OF SYLACAUGA SYLACAUGA FIRST NAT BANK IN SYLACAUGA SYLACAUGA ISBELL NAT BK OF TALLADEGA TALLADEGA TALLAOEGA NATIONAL BANK TALLADEGA FIRST FARMERS AND MERCHANTS TROY 1ST AL BK OF TUSCALOOSA NA TUSCALOOSA FIRST NAT 8K OF TUSCALOOSA TUSCALOOSA FIRST N8 IN TUSCUMBIA TUSCUMBIA ALABAMA EXCHANGE BANK TUSKEGEE FIRST NAT BK OF WETUMPKA WETUMPKA OF 1/17/79 BENEFIT TO BANKS COVERED BY MODIFIED H«ft« ? 51 27 TOEP AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL 17983 78291 23227 155471 423921 449267 22291 114393 68865 20118 395276 14543 196100 19859 30744 20000 45651 33220 14647 17787 14478 51594 46242 42024 38509 39779 64526 27883 20099 22031 22119 30963 33854 31083 104494 162516 32733 19077 3 6451 €21 VLTCSH 424 1965 620 3092 8914 6743 344 1872 2151 390 6875 283 2285 269 953 284 421 901 151 475 192 1228 520 671 739 770 1199 482 373 431 377 463 951 764 1986 2589 769 344 563 (31 1977 REQBAL (4) (5) NEW EPA NEW REQBAL t31-151 393 2904 454 6187 15980 20317 709 4643 2067 439 15234 295 7707 567 506 670 1445 502 411 361 344 871 1639 1427 1029 1020 1921 841 402 611 718 682 853 620 4227 6567 732 609 1079 0 1006 0 4390 5648 5366 0 3211 769 0 5317 0 5119 0 0 0 0 0 0 0 0 0 156 40 0 0 589 0 0 0 0 0 0 0 2404 4733 0 0 0 0 0 0 0 6086 11275 0 0 0 0 7189 0 654 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 0 393 2904 454 6187 7894 9042 709 4843 2067 439 8045 295 7053 567 506 670 1445 502 411 361 344 871 1639 1427 1029 1020 1921 641 402 611 718 882 853 620 4227 6567 732 609 1079 HAVE NO EARNINGS PARTICIPATION ACCOUNT OR REQUIRED RESERVE BALANCE HAVE NO REQUREO RESERVE BALANCE (61 DIF * • * * * * * NONMEMBER BANKS FIED H« R« 7 m OSB 6010010 6010015 6010030 6010065 6010070 6010120 6010123 601C190 6010205 6010229 6010250 6010253 6010295 6C10305 6010310 6010323 6010350 6010370 6010390 6010450 6010520 6010530 6010630 6010693 6010720 6010780 6010805 6010*10 6010820 6010370 6010690 6010920 6010922 6010925 6010930 6010960 6010930 .6010995 6011030 6011055 60110*0 601U10 6011140 60111*3 6011160 6011165 NAME BANK CF ABBEVILLE FIRST BANK OF ALABASTER ALEXANDER CITY SANK CITIBANC OF At 4NDALUSIA AL COMMERCIAL BANK BANK Cf ARAB SECURITY BANK AND TRUST CO BA.%< CF ATMORE EXCHANGE BANK AUBURN-BANK £ TRUST CO BALDWIN CCUNTY BANK FIRST ALA BK CF MOBILE CTY BANK CF THE SOUTHEAST CENTRAL BANK O F BIRMINGHAM FIRST AL BANK OF BIRMINGHAM METROBANK BANK CF BLOUNTSVILLE SAND MOUNTAIN SANK BANK CF BREWTON CHOCTAW BA^K OF BUTLER CHEROKEE COUNTY -BANK FARMERS AND MERCHANTS BANK BANK CF DAOEVlLLE FIRST STATE BK OF DECATUR ROBERTSON BANKING CO ELBA EXCHANGE BANK CITIZENS BANK ENTERPRISE BANKING COMPANY EUFAULA BANK AND TRUST CO ClTIZENS BANK ESCAMBIA COUNTY BANK FARMERS' AND MERCHANTS BANK SOUTH BALDWIN BANK FORT PAYNE BANK FORT DEPOSIT BANK ALABAMA CITY BANK EAST GAOSDEN BANK AMERICAN BANK CITIZENS BANK GPEENVILLE BANK 1ST AL BASK OF GUNTERSVlLLE TRADERS AND FARMERS BANK CITIZENS BANK OF HARTSELLE FIRST AL BANK OF HARTSELLE BANK CF HEFLIN BANK Of HUNTSVSLIE TDEP LOCATION ABBEVILLE ALABASTER ALEXAN06R CITY ANDALUSIA ANDALUSIA ARAB ARA8 ATMORE ATTALLA AUBURN BAY MINETTE BAYOU LA 8ATRE BIRMINGHAM BIRMINGHAM BIRMINGHAM BIRMINGHAM BLOUNTSVILLE B0A2 BREWTON BUTLER CENTRE CENTRE OADEVILLE DECATUR DEMOPGLIS ELBA ENTERPRISE ENTERPRISE EUFAULA FAYETTE FLCMATON FOLEY FOLEY FORT PAYNE FCRT DEPOSIT GAOSDEN GAOSDEN GENEVA GENEVA GREENVILLE GUNTERSVILLE HALEYVILLE HARTSELLE HARTSELLE HEFLIN HUNTSVILLE AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL 23421 15370 19940 29491 40644 17585 16533 32781 16694 14606 24743 18 528 28729 510662 319352 34024 21242 28540 22737 24032 26687 32458 16584 36175 25302 20833 31130 58470 31237 18426 18092 27402 22471 23507 19465 35235 25700 15812 20872 23359 23018 43308 25051 20928 29855 '48563 1/17/79 (2) VLTCSH 240 '374 340 362 502 282 454 298 267 212 436 383 802 3050 6672 667 304 582 457 333 402 326 282 587 541 212 308 487 278 312 229 387 328 492 306 715 248 282 123 597 345 675 385 502 574 838 13) 1977 REQBAL 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 0 0 0 0 0 0 0 0 0 0 0 0 (4! NEW EPA 0 0 0 0 0 0 0 20 0 0 0 0 0 5459 5170 0 0 0 0 0 0 23 0 0 0 0 146 818 29 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (51 NEW REQBAL 0 0 0 0 0 0 0 0 0 0 0 0 0 17509 3201 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (61 OIF C3I-C5I 0 * 0 0 0 0 0 0 0 0 0 0 0 • * • * * • • • • • • 0 -17509 -3201 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 • N0NMEM8ER BANKS BENEFIT TO BANKS COVEREO BY MODIFIED H • R. 7 1E0 H»ft* 7 US OSB 6011220 6011225 6011237 6011270 6011300 6011310 6011350 6011376 6011420 6011460 6011470 6011505 6011550 6011565 6011535 6011590 6011610 6011640 6011649 6011730 6011740 6011780 6011785 6011860 6011920 6011935 6011970 6012080 6012125 NAME JACKSCN BANK AND TRUST CO JACKSON MERCHANTS BANK JACKSON CENTRAL BK CF WALKER CTY JASPER 9ANK OF LEXINGTON LEXINGTON MC tflLLAN ANO COMPANY BANKERLIVINGSTON LUVERNE BANK AND TRUST CO LUVERNE MARION BANK AND TRUST CO MARION COMMERCIAL GUARANTY BANK MOBILE MERCHANTS AND PLANTERS BANK MONTEVALLO BANK OF MOULTON MOULTON CITIZENS BANK MCULTON BANK OF EAST ALABAMA OPELIKA BANK OF 02ARK OZARK PEOPLES BANK PELL CITY FCM BANK OF RUSSELL CTY PHENIX CITY PHENIX GIRARD BANK PHENIX CITY FARMERS AND MERCHANTS BANK PIEDMONT BANK OF PRATTVILLE PRATTVILLE COOSA VALLEY BANK RAINBOW CITY EAST LAUDERDALE BANKING CO ROGERSVILLE CITIZENS BANK ANO SAVINGS CORUSSELLVILLE J C JACOBS BANKING CO INC SCOTTSBORO CITIZENS BANK AND TRUST CO SELMA BANK OF SULLIGENT SULLIGENT BANK OF TALLASSEE TALLASSEE BANK OF THOMASVILLE THOMASVILLE TROY BANK AND TRUST COMPANY TROY VERNON BANK OF VERNON CITIZENS BK OF WETUMPKA AL WETUMPKA OF 12020002 12020007 12020008 12020016 12O2CO22 12020060 75 BANKS AFFECTED IN STATE ALASKA BANK CF COMMERCE ALASKA PACIFIC BANK ALASKA STATEBANK PEOPLES BANK AND TRUST CO UNITEO BANK ALASKA B M BEHRENDS BANK OF TDEP LOCATION 67 6 ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE ANCHORAGE JUNEAU 6 BANKS AFFECTED IN STATE 0 6 AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL 23446 20138 17627 22204 17850 17821 20390 70466 15553 22675 19172 34333 39381 18146 17640 21856 13907 36125 17795 17941 17002 28569 24795 14873 19184 27026 35249 17216 17380 1/17/79 12} VLTCSH 422 411 682 236 448 241 323 1160 161 675 382 921 673 411 524 674 212 686 243 26 3 345 345 330 308 344 551 579 223 368 (3) 1977 REQ6AL 141 NEW EPA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1125 0 0 0 0 0 0 0 15$ NEW REQBAL 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 0 0 0 0 0 0 0 0 0 16) DIF U5-C5) 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 0 * HAVE NO EARNINGS PARTICIPATION ACCOUNT OR REQUIRED RESERVE BALANCE HAVE NO REQURED RESERVE BALANCE AK AK AK AK AK AK 125202 43939 115184 38139 37190 36732 2387 270 1793 460 124 352 0 0 0 0 0 0 2763 671 2700 309 411 436 HAVE NO EARNINGS PARTICIPATION ACCOUNT OR REQUIRED RESERVE BALANCE HAVE NO REQURED RESERVE BALANCE 0 0 0 0 0 0 * Attachment B-l Coimnents These amendments provide an exclusion from reserve requirements of up to $10 million for transaction deposits of depository institutions and an exclusion up to $10 million for time and savings deposits of banks. An institution's transaction deposits in excess of $10 million but not more than $50 million, and a bank's total time and savings deposits in excess of $10 million but not more than $50 million are exempted from reserve requirements• Reserve requirements will be imposed on c depository institution's transaction deposits that exceed $50 i million and a commercial bank's total time and savings deposits that exceed $50 million. A depository institution will maintain in an Earnings Participation Account at the Federal Reserve Bank (or passed through to the Federal Reserve by another institution) an amount resulting from first, multiplying the appropriate reserve ratios in effect for each deposit category by the level of the institution's exempted deposits for each deposit category and, second, deducting from this figure the amount by which the institution's vault cash exceeds its reserve requirements. The institution's Earnings Participation Account will earn interest at a rate equal to the average return earned on the Federal Reserve's securities portfolio. B-2 Section 3(a) is amended by striking subparagraph (E) and inserting in lieu thereof the following: "(E) A reference to net deposits of any given category in any given institution refers to the amount of reservable deposits of that category maintained by the institution," B-3 Section 3 (a) is further amended by adding after subparagraph (L) on page 5 the following: 8 8 (M) The term ^Category A excluded deposits5* means* with respect to any depository institution, the amount of its Category A deposits that does not exceed $10 million. "(N) The terms "Category B, C and D excluded deposits69 mean with respect to any bankr the amounts of its Category B, C, and D deposits that do not exceed $10 million, so long- as the total of its Category B, C, and D deposits do not exceed $10 million« If the total Category B, C, and D deposits of the bank exceeds $10 million* the amount of its Category B # Cs and D deposits that shall be excluded deposits shall be determined by multiplying $ 1 million by the proportion that the bank's deposits in .0 the respective categories bear to the total of its deposits in the three categories, "(0) The term "Category A exempted deposits'9 means*, with respect to any depository institution, the amount of its Category A deposits that are in excess of $10 million but not more than $50 million. B-4 "(P) The terms "Category B, C, and D exempted deposits" mean with respect to any bank, the amount of its Category B, C, and D deposits that are in excess of $10 million but not more than $50 million, so long as the total Category B, C, and D deposits of the bank do not exceed $50 million. If the total Category B, C, and D deposits of a bank exceeds $50 million, the amount of its Category B, C, and D deposits that shall be exempted deposits shall be determined by multiplying $50 million by the proportion that the bank's deposits in the respective categories bear to the total of its deposits in the three categories. "(Q) The term "reservable deposits" means the Category A, B, C, or D deposits of a depository institution that exceed its total excluded and exempted deposits for each deposit category." B-5 Section 3(a) is amended by striking paragraphs (2), (3), and (4) on pages 5, 6, and 7 respectively and inserting in lieu thereof the following: "(2) EARNINGS PARTICIPATION ACCOUNT—A depository institution shall maintain in an Earnings Participation Account at the Federal Reserve Bank of which it is a member or at which it maintains an account a balance determined first, by multiplying the amount of its Category A, B, C, and D exempted deposits by the reserve ratios in effect for its Category A, B, C, and D deposits, respectively, and, second, by deducting therefrom any amount by which the depository institution's holdings of vault cash exceeds its reserve requirements on its reservable deposits. "(3) PASS THROUGH OF BALANCES—A nonmember institution may maintain balances at a member or nonmember institution that maintains reserve balances at a Federal Reserve Bank or at a Federal Home Loan Bank, but only if such institution or Federal Home Loan Bank maintains such funds in the form of balances in a Federal Reserve Bank of which it is a member or at which it maintains an account. Such balances shall not be regarded as deposits of the intermediary institution for purposes of B-6 determining reserve requirements imposed by this Section and Federal deposit insurance assessment. "(4) EARNINGS PARTICIPATION RATE—The Earnings Participation Account of a depository institution shall earn interest at -\ rate equal to the average rate earned on the securities portfolio of the Federal Reserve System during the calendar quarter immediately preceding the interest payment date. The Board is authorized to adopt rules and regulations relating to the issuance and administration of Earnings Participation Accounts/ Attachment C Section 3(a) is further amended by adding the following subparagraph at the end thereof: 9 1 (R) In the case of affiliated depository institutions the total excluded and exempted deposits shall not exceed in the aggregate for such affiliated groups the product resulting from multiplying the number of institutions in such affiliated group on August 1, 1978 by $10 million for each category of excluded deposits and by $40 million for each category of exempted deposits, provided that no more than $10 million shall be excluded deposits under each deposit category and no more than $40 million shall be exempted deposits under each deposit category at any individual depository institution.11 Comment: This amendment limits the total amount of deposit exclusions and exemptions for affiliated institutions to the amount of the deposit exclusion and exemption times the number of affiliated institutions in existence on August 1, 1978, Attachment D Section 2, paragraph (2), subparagraph (A) is amended to read as follows: "(A) directly to the Board in the case of member banks and, for all deposit liabilities, in the case of other depository institutions maintaining deposits specified in sections 19(b)(1)(A) through 19(b)(1)(D) of this Act, and" Comments This amendment clarifies that depository institutions with transactions deposits will file reports on all deposit liabilities directly with the Board. Attachment E-l Section 3 is amended by adding at the end thereof the following subsectionss "(c) The first paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 342) is amended as follows: (1) by inserting after the words "member banks" the words "or other depository institutions", (2) by inserting after the words "payable upon presentation" the first and third tiroes they appear, the words "or other items, including negotiable orders of withdrawal or share drafts". (3) by inserting after the words "payable upon presentation within its district," the words "or other items, including negotiable orders of withdrawal or share drafts". (4) by inserting after the words "nonmember bank or trust company," wherever they appear the words "or other depository institution". E-2 (5) by inserting after the words "nonmembcr bank" after the second colon the words "or other depository institution". (d) The thirteenth paragraph of section 16 of the Federal Reserve Act (12 U.S.C. 360) is amended as follows: (1) by striking out the words "member banks" wherever they appear and inserting in lieu thereof "depository institutions". (2) by striking out the words "member bank" wherever they appear and inserting in lieu thereof "depository institution". (3) by inserting after "checks" wherever it appears the words "and other items, including negotiable orders of withdrawal and share drafts". (e) The fourteenth paragraph of section 16 of the Federal Reserve Act (12 U.S.C. 248(o) is amended by striking out "its member banks" and inserting in lieu thereof "depository institutions14, Comment; In order to assure equal treatment for all depository instituions." these amendements conform various sections of the Federal Reserve Act relating to clearing facilities by eliminating the distinctions drawn by the Act between member and nonmember depository institutions.