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Announcements

ACTION BY THE FEDERAL OPEN MARKET COMMITTEE AND AN INCREASE IN THE DISCOUNT RATE

The Federal Open Market Committee on Novem-ber 16, 1999, voted to raise its target for the fed-eral funds rate by 25 basis points to 5Vi percent. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 5 percent.

Although cost pressures appear generally con-tained, risks to sustainable growth persist. Despite tentative evidence of a slowing in certain interest-sensitive sectors of the economy and of accelerating productivity, the expansion of activity continues in excess of the economy's growth potential. As a consequence, the pool of available workers willing to take jobs has been drawn down further in recent months, a trend that must eventually be contained if inflationary imbalances are to remain in check and economic expansion continue.

Today's increase in the federal funds rate, together with the policy actions in June and August and the firming of conditions more generally in U.S. financial markets over the course of the year, should markedly diminish the risk of inflation going forward. As a consequence, the directive the Federal Open Market Committee adopted is symmetrical with regard to the outlook for policy over the near term.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, Cleveland, Richmond, and Kansas City. Sub-sequently the Board approved similar requests by the board of directors of the Federal Reserve Bank of San Francisco, also effective on November 16; by the boards of directors of the Federal Reserve Banks of Atlanta and Dallas, effective November 17; and by the boards of directors of the Federal Reserve Banks of St. Louis, New York, Philadelphia, Chicago, and Minneapolis, effective November 18. The discount rate is the rate charged depository institutions when they borrow short-term adjustment credit from their District Federal Reserve Banks.

MODIFICATIONS TO THE SETTLEMENT FINALITY FOR ACH CREDIT TRANSACTIONS PROCESSED BY FEDERAL RESERVE BANKS

The Federal Reserve Board on November 12, 1999, approved modifications to the settlement finality for automated clearinghouse (ACH) credit transactions processed by the Federal Reserve Banks so that settlement becomes final when posted to depository institutions' accounts. The Board will require pre-funding for any ACH credit transactions that settle through a Federal Reserve account that is being moni-tored in real time to help manage settlement risk.

The Reserve Banks will be modifying their soft-ware and their ACH operating circular to implement settlement-day finality. To permit time for these changes, settlement-day finality and prefunding will be implemented in early 2001. A specific imple-mentation date will be announced three months in advance of the effective date.

ADJUSTMENT OF THE DOLLAR AMOUNT THAT TRIGGERS CERTAIN DISCLOSURE REQUIREMENTS UNDER THE TRUTH IN LENDING ACT

The Federal Reserve Board on November 3, 1999, published its annual adjustment of the dollar amount that triggers additional disclosure requirements under the Truth in Lending Act for mortgage loans that bear fees above a certain amount.

The Board has adjusted the dollar amount from $441 for 1999 to $451 for 2000 based on the annual percent change reflected in the consumer price index that was in effect on June 1, 1999. The adjustment is effective January 1, 2000.

The Home Ownership and Equity Protection Act of 1994 bars credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed $400 (to be adjusted annually) or 8 percent of the total loan amount, whichever is larger.

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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PROPOSED ACTION

The Federal Reserve Board on November 3, 1999, published proposed revisions to the official staff com-mentary that applies and interprets the requirements of Regulation Z (Truth in Lending). Comments are requested by January 10, 2000.

REVIEW OF PUBLICATIONS ACTIVITIES OF THE FEDERAL RESERVE BOARD

The Federal Reserve Board on November 3, 1999, announced a review of its publications activities. As part of this effort, the Board is seeking public com-ment on how the Board's publications are individu-ally and collectively meeting information needs and to offer suggestions for improving or possibly elimi-nating some publications or adding new ones. Com-ments are requested by December 17, 1999.

SURVEY RESULTS ON CONSUMER CONFIDENCE IN BANKS' Y2K PREPARATIONS

The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) announced on Novem-ber 18, 1999, the results of a survey by the Gallup Organization. According to the survey, current fig-ures indicate that nine out of ten U.S. bank cus-tomers believe that their banks are ready for the Year 2000or Y2K. By comparison, a March survey found that an estimated 76 percent of bank customers were confident that their banks would solve the Y2K problem.

Both surveys were sponsored by federal financial institution regulatory agencies. The Federal Reserve Board and the FDIC sponsored the current survey, which was delivered to the agencies on Novem-ber 15, 1999. The results, which are based on about 1,400 completed interviews, are from an ongoing survey of adult Americans who have bank accounts.

"The survey underscores growing consumer confi-dence that banks are prepared for Y2K and that it will be business as usual for bank customers on January 1, 2000 and thereafter," said FDIC Chairman Donna Tanoue.

The most recent Gallup report indicates that finan-cial institutions have been informing their customers

about their Year 2000 readiness. The percentage of American adult depositors who have received infor-mation about Y2K readiness from their financial institutions has significantly increased over the past seven months: An estimated 70 percent now report receiving information from their financial institution, compared with 23 percent in March. Additionally, in March, 52 percent of respondents reported having seen or heard a great deal about the Y2K issue, but that percentage is now up to 68 percent.

Only about 5 percent of bank customers currently indicate that they are very concerned about the Y2K issue, down from 11 percent in the March report. The November findings support the notion that a decreased level of concern about the likely effect of the century date change on computers is related to increased information about the Y2K issue. Con-sumer confidence in their own financial institutions has also increased. More than 90 percent of those surveyed expressed confidence in their own banks, with the proportion of those saying they would defi-nitely or probably take extra cash declining from 62 percent to 39 percent in the period between the March and October surveys. A majority of those who plan to withdraw extra cash say that they will take less than $500.

The survey results also indicate that the public is increasingly confident that basic payment systems will work properly during the century date change. Most American adult depositors believe that they will have access to their money; that checks will continue to be processed accurately; and that automatic teller machines, credit card systems, and electronic direct deposits will function normally.

Edward W. Kelley, Jr., a member of the Board of Governors of the Federal Reserve System stated,

From the beginning of our preparations for Y2K we said that there were two challenges facing usthe technical challenge and the challenge of public confidence. I believe we've met the technical challenge and these data indicate we've made good progress in ensuring Americans know we are ready for the century rollover.

Over the past three years, FDIC-insured financial institutions have been identifying and overhauling systems to make them Year 2000-ready. At the same time, the regulatory agencies have been closely moni-toring their efforts. As of today, the regulators have assigned a "Satisfactory" rating, the highest possible rating, to 99.9 percent of FDIC-insured financial institutions.


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42 Federal Reserve Bulletin January 2000

RELEASE OF A REPORT ON A SURVEY OF WEB SITE PRIVACY

The four federal banking agencies (the Federal Reserve Board, the Federal Deposit Insurance Cor-poration, the Comptroller of the Currency, and the Office of Thrift Supervision) on November 9, 1999, released a report on the results of a survey of Internet privacy policies of banking and thrift institutions.

The survey report, titled Interagency Financial Institution Web Site Privacy Survey Report, examined 314 World Wide Web sites selected randomly, plus those of the 50 largest banks and thrift institutions with web sites. Conducted during May and July by the federal agencies that supervise the institutions, the survey examined the collection of consumer information, interactive capabilities, and privacy dis-closures at these sites. The purpose of the survey was to provide an indication of the state of the industry with respect to data collection and on-line privacy disclosures.

Overall, 48 percent of the 364 web sites surveyed posted a privacy disclosurea privacy policy (a com-prehensive statement regarding the collection and use of consumer information) or an information practice statement (a statement describing a particular infor-mation handling policy or practice, such as data security). Sixty-two percent of web sites that col-lected personal information provided a privacy dis-closure. Sites that collected personal information were three times as likely to post a privacy policy as sites that did not collect personal information. The survey also found that 96 percent of the nation's fifty largest banks and thrifts that are on-line provided a privacy policy or information practice statement.

The agencies began work on the survey in Febru-ary 1999. The agencies will monitor, as appropriate, the industry's progress in responding to consumer privacy issues and complying with the new legal mandates contained in the financial services reform legislation through regular supervisory activities.

This survey supplements previous web site surveys that did not focus on financial institutions, such as the Federal Trade Commission's "Privacy Online: A Report to Congress" (June 1998), and the George-town Internet Privacy Policy Survey "Privacy Online in 1999: A Report to the Federal Trade Com-mission" (June 1999). Because the sample popula-tion and content of the questionnaire used to conduct the interagency survey differ materially from those in the surveys cited, direct comparisons between the results of the various surveys should not be made.

Copies of the survey report are available on the agencies's web sites.

INCREASE IN ADVERSELY CLASSIFIED SYNDICATED BANK LOANS

The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comp-troller of the Currency released data on Novem-ber 10, 1999, on syndicated bank loans rated adversely by examiners. According to the data, syn-dicated bank loans rated adversely by examiners increased in 1999 from low levels. The agencies released aggregate data for the past six years and data by major industry sector for the past three years.

Under the Shared National Credit (SNC) Program, the agencies review large syndicated loans annually, usually in May and June. The program, established in 1977, is designed to provide an efficient and consis-tent review and classification of any loan or loan commitment shared by three or more institutions and totaling $20 million or more.

In 1999, the SNC Program covered 8,974 credits to 5,587 borrowers totaling $1.8 trillion in drawn and undrawn loan commitments. Of the total, $37.4 bil-lion, or 2 percent, was classified adversely because of default or other significant credit concerns. That was up from the lowest level this decade, 1.3 percent in 1998, but still significantly below the 4.1 percent level reached in 1994.

Borrowers have drawn down about a third of the $1.8 trillion in loan commitments, or $630 billion. Of this amount, $33 billion, or 5.3 percent, was classi-fied adversely, up from 3.2 percent in 1998 but down from 11 percent in 1994.

The percentage of adversely classified credits rose in 1999 for most major industry sectors compared with 1998. The rise was sharpest for service indus-tries because of a large increase in problem loans in the health-care sector. Other industries recording an increase included oil and gas and wholesale and retail trade.

Credits listed as "special mention" by examiners because of potential weaknessa less serious cate-gory than the three adverse classifications: substan-dard, doubtful, and losstotaled $31.4 billion in 1999, up from $22.8 billion in 1998 but about the same as in 1994.

ENFORCEMENT ACTIONS

The Federal Reserve Board on November 16, 1999, announced the issuance of a consent order against Robert and Adele Barber, both institution-affiliated parties of the First Western Bank, Cooper City, Florida, a state member bank.


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The individuals, without admitting to any allega-tions, consented to the order to resolve allegations that they violated the Change in Bank Control Act in connection with their acquisition of beneficial owner-ship of the shares of the bank.

The Federal Reserve Board on November 16, 1999, announced the issuance of a consent order against Matthew J. Callahan, an institution-affiliated party of the First Western Bank, Cooper City, Florida, a state member bank.

The individual, without admitting to any allega-tions, consented to the order to resolve allegations that he violated the Change in Bank Control Act in connection with his acquisition of beneficial owner-ship of the shares of the bank.

The Federal Reserve Board on November 16, 1999, announced the issuance of a consent order against

Bertram Smith, an institution-affiliated party of the First Western Bank, Cooper City, Florida, a state member bank.

The individual, without admitting to any allega-tions, consented to the order to resolve allegations that he violated the Change in Bank Control Act in connection with his acquisition of beneficial owner-ship of the shares of the bank.

The Federal Reserve Board on November 16, 1999, announced the execution of a written agreement by and among Heritage Bancorp Company, Inc., Cleveland, Oklahoma; the First Bank of Cleveland, Cleveland, Oklahoma; the Federal Reserve Bank of Kansas City; and the Oklahoma State Banking Department.


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Announcements

DIRECTIVE OF THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Committee made no change on December 21, 1999, in its target for the federal funds rate.

Based on the available evidence, however, the Committee remains concerned with the possibility that over time increases in demand will continue to exceed the growth in potential supply, even after taking account of the remarkable rise in productivity growth. Such trends could foster inflationary imbal-ances that would undermine the economy's exem-plary performance.

Nonetheless, in light of market uncertainties asso-ciated with the century date change, the Committee decided to adopt a symmetric directive in order to indicate that the focus of policy in the intermeeting period must be ensuring a smooth transition into the Year 2000. At its next meeting the Committee will assess available information on the likely balance of supply and demand, conditions in financial markets, and the possible need for adjustment in the stance of policy to contain inflationary pressures.

APPOINTMENTS OF NEW MEMBERS AND A NEW PRESIDENT AND VICE PRESIDENT OF THE THRIFT INSTITUTIONS ADVISORY COUNCIL

The Federal Reserve Board on December 10, 1999, announced the names of four new members of its Thrift Institutions Advisory Council (TIAC) and des-ignated a new president and vice president of the council for 2000.

The council is an advisory group made up of twelve representatives from thrift institutions. The panel was established by the Board in 1980 and includes savings and loan, savings bank, and credit union representatives. The council meets at least three times each year with the Board of Governors to discuss developments related to thrift institutions, the housing industry, mortgage finance, and certain regu-latory issues.

The new council president for 2000 is F. Weller Meyer, President and CEO, Acacia Federal Savings

Bank, Falls Church, Virginia. The new vice president is Thomas S. Johnson, Chairman and CEO, Green-Point Bank, New York, New York.

The four new members, named for two-year terms beginning January 1, are the following:

Tom R. Dorety, President and CEO, Suncoast Schools Federal Credit Union, Tampa, Fla.

Cornelius D. Mahoney, Chairman, President, and CEO, Woronoco Savings Bank, Westfield, Mass.

Mark H. Wright, President and CEO, USAA Federal Savings Bank, San Antonio, Tex.

Clarence Zugelter, President, CEO, and Chairman of the Board, First Federal Bank, F.S.B., Kansas City, Mo.

Other TIAC members whose terms continue through 2000 are the following:

James C. Blaine, President, State Employees' Credit Union, Raleigh, N.C.

Lawrence L. Boudreaux III, President and CEO, Fidelity Homestead Association, New Orleans, La.

Babette E. Heimbuch, President and CEO, First Federal Bank of California, FSB, Santa Monica, Calif.

William A. Longbrake, Vice Chair and Chief Financial Officer, Washington Mutual Bank, Seattle, Wash.

Kathleen E. Marinangel, Chairman, President, and CEO, McHenry Savings Bank, McHenry, 111.

Anthony J. Popp, President and CEO, Marietta Savings Bank, Marietta, Ohio.

INCREASE IN THE EXEMPTION THRESHOLD FOR DEPOSITORY INSTITUTIONS REPORTING UNDER HMDA

The Federal Reserve Board on December 15, 1999, announced that the exemption threshold for deposi-tory institutions that are required to report data under the Home Mortgage Disclosure Act (HMDA) had been increased to $30 million. Under the revision to the Board's staff commentary to Regulation C (Home Mortgage Disclosure), depository institutions with assets totaling $30 million or less as of December 31, 1999, are not required to collect HMDA data in 2000.

The Board is required to adjust annually the asset-size exemption threshold for depository institutions


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102 Federal Reserve Bulletin February 2000

based on the annual percentage change in the con-sumer price index for urban wage earners and cleri-cal workers. The adjustment reflects changes for the twelve-month period ending in November 1999.

EXTENSION OF COMMENT PERIOD ON PROPOSALS TO ALLOW ELECTRONIC DELIVERY OF FEDERALLY MANDATED DISCLOSURES

The Federal Reserve Board on December 9, 1999, announced the reopening and extension of the com-ment period on proposals to allow electronic delivery of federally mandated disclosures. On September 14, 1999, the Board published revised proposals for pub-lic comment under five consumer protection regu-lations: B (Equal Credit Opportunity), E (Electronic Fund Transfers), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings).

The Board is reopening and extending the com-ment period to obtain views from individual consum-ers through focus group interviews. Although the comment period is being extended primarily for the purpose of conducting these focus groups, other members of the public may also submit comments during this period, but they are encouraged to submit them as soon as possible.

Final action on the proposals is expected shortly after the deadline for public comment, which is March 3, 2000.

CHANGES FOR 2000 IN THE FEE SCHEDULES FOR PRICED SERVICES OF THE FEDERAL RESERVE BANKS

Depository institutions that use the Federal Reserve Banks' electronic payment services will benefit from continued price reductions in 2000 under the fee schedules approved on December 17, 1999, by the Federal Reserve Board. The effective date of all fees have been delayed until April 3, 2000, to minimize change during the period surrounding the rollover to 2000.

Prices across all electronic payment services will decline nearly 5 percent in 2000, reflecting lower prices for Fedwire funds, book-entry securities, and automated clearinghouse (ACH) transactions. The savings reflect continued efficiencies gained from consolidating the Federal Reserve's automated pro-cessing facilities. Since 1996, prices for all elec-tronic payment services have declined more than 38 percent.

In the aggregate, prices for Reserve Bank priced services are projected to increase 1.3 percent in 2000. The 2000 price increase is attributable to a 3.6 per-cent increase across paper payment services, reflect-ing higher fees for check products.

For 2000, the Reserve Banks will reduce the basic fee for on-line Fedwire funds 11.9 percent and for book-entry securities transfers 17.6 percent. ACH origination fees will be reduced as much as 18.2 per-cent. Fees for paper check products will increase 3.3 percent, while fees for payer bank services will increase 11 percent. The increase in check service fees reflects, in part, increased investments in check automation and electronic check technologies and national standardization of payer bank product and pricing structures. The priced services fee schedules for 2000 are available from the Reserve Banks.

The Reserve Banks project that they will recover 99.0 percent of their priced services costs for 2000, including imputed expenses, leaving net income of $88.7 million, compared with $98.4 million of tar-geted return on equity. The Reserve Banks estimate that they will recover 102.8 percent of their costs in 1999. The Monetary Control Act of 1980 requires the Federal Reserve to recover the costs of providing certain payment services over the long term. During the 1989-98 period, the Reserve Banks recovered 99.9 percent of the costs of priced services, including targeted return on equity.

On December 17, the Board also approved the 2000 private-sector adjustment factor (PSAF) for Reserve Bank priced services of $192.6 million, an increase of $76.8 million, or 66.3 percent, from the 1999 PSAF of $115.8 million. The large increase in the PSAF for 2000 is due mainly to including addi-tional pension assets and benefit liabilities in the PSAF balance sheet. The PSAF is an allowance for taxes and other imputed expenses that would have been paid and return on capital that would have been earned had the Federal Reserve's priced services been provided by a private business firm.

ISSUANCE OF JOINT GUIDANCE ON ASSET SECURITIZATION ACTIVITIES

The four federal banking agencies (the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision) on Decem-ber 13, 1999, issued a joint statement addressing the agencies' supervisory approach to asset securitization activities. The statement reminds financial institution management and examiners of fundamental risk-


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management practices that should be in place at institutions that engage in securitization activities.

The statement highlights the risks associated with retained interests in securitization activities. It also details current supervisory concerns about the valua-tion and reporting of these assets and concentrations of these assets relative to capital.

Given the risks presented by these activities, the bank regulatory agencies are actively considering the establishment of regulatory restrictions that would limit or eliminate the amount of certain retained interests that may be recognized in determining the adequacy of regulatory capital.

Reported values for retained interests should be reasonable, conservative, and supported by objective and verifiable documentation. Institutions should en-sure that sufficient capital is held to support the risks associated with securitization activities and are expected to place concentration limits on retained interests relative to equity capital. The statement reit-erates that institutions should establish and imple-ment an adequate and independent audit function to effectively oversee securitization activities.

The statement is issued as part of the agencies' ongoing review of securitization activities at insured depository institutions. The agencies continue to review banking institutions' valuation of retained interests and the concentrations of these assets rela-tive to capital. As applicable, the agencies will pro-vide further guidance on the liquidity risk associ-ated with over-reliance on asset securitization as a funding source and on implicit recourse obligations. The statement is available on request to Publica-tions Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington, DC 20551 and also on the Board's public web site at www.federalreserve.gov/

NORMAL OPERATIONS REPORTED FOR FINANCIAL INSTITUTIONS AFTER THE CENTURY DATE CHANGE

On the first day of the Year 2000, the nation's banks, thrift institutions, and credit unions conducted busi-ness as usual, federal regulators said. No significant disruptions resulting from the century date change were detected, the regulators added.

The Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the National Credit Union Administration closely monitored financial institution operating performance during the first week of the Year 2000.

The Federal Reserve reported that the nation's payment systems were functioning well and that cur-rency supplies had been more than adequate to meet demand. Credit cards, debit cards, checks, and auto-mated teller machines were all working normally.

For the past three years, federal financial institu-tion regulators provided oversight of the efforts of banks, thrifts, and credit unions as they prepared their computer systems for the Year 2000 century date change.

SURVEY OF CONSUMER CONFIDENCE IN Y2K PREPARATIONS BY BANKS

U.S. bank customers remained confident that their banks were ready for the Year 2000, according to a report issued by the Gallup Organization. Nine out of ten bank customers continued to express confidence in their bank's readiness.

The report was based on about 1,800 interviews completed between November 13, 1999, and Decem-ber 12, 1999, as part of an ongoing survey of adult Americans who have bank accounts. The ongoing survey is being sponsored by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC).

"The survey shows that as we move closer to January 1, 2000, consumers are extremely confident that banks are prepared for Y2K," said FDIC Chair-man Donna Tanoue.

The survey results also indicated that the public remained confident that basic payment systems would work properly during the century date change. Most American adult depositors believed that they would have access to their money; that checks would con-tinue to be processed accurately; and that automatic teller machines, credit card systems, and electronic direct deposits would function normally.

"No one is predicting perfect performance for the rollover period, but this data demonstrates that the public is heading confidently into the weekend, mak-ing sensible and appropriate preparations," said Edward W. Kelley, Jr., a member of the Board of Governors of the Federal Reserve System.

Over the past several years, FDIC-insured financial institutions identified and overhauled computer sys-tems to make them Year 2000-ready. At the same time, regulatory agencies closely monitored their efforts. Based on their findings, the regulators said that the banking industry would be prepared for the Year 2000 and that it would be business as usual for bank customers on January 1, 2000, and thereafter.


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PUBLICATION OF THE DECEMBER 1 9 9 9 UPDATE TO THE BANK HOLDING COMPANY SUPERVISION MANUAL

The December 1999 update to the Bank Holding Company Supervision Manual, Supplement No. 17, has been published and is now available. The Manual comprises the Federal Reserve System's bank hold-ing company supervisory and inspection guidance. The new supplement includes guidance to address the following topics.

1. Supervisory concerns expressed about trends indi-cating weakened funding and compliance with loan underwriting standards, policies, internal controls, and loan review procedures, when there are favorable economic conditions and easy access to financial markets that may not continue. Funding and adherence to pre-established stan-dards, policies, and procedures provide protec-tions from concentrations of weakening credit risk. The use of meaningful stress tests are encour-aged during the lending decision process, validat-ing a borrower's financial capacity to repay over the short and long terms, thus guarding against increased loan losses in an economic downturn.

2. The maintenance of the allowance for loan and lease losses. Evolving examiner guidance is pro-vided to emphasize the need for banking organiza-tions to apply reserve practices that are balanced, yet conservative. Accounting guidance is pro-vided with respect to the Financial Accounting Standards Board's Statements Nos. 5 and 114 and the maintenance of loan-loss reserves.

3. The Federal Reserve System's initial and ongoing program of risk-focused supervision framework for large and other complex banking organiza-tions. Several sections of the update set forth the initial and ongoing risk-focused supervision, monitoring, and inspection/examination program. The guidance details the key elements, institu-tions, and specialty areas that are encompassed by the risk-focused supervision framework. The program endorses the concept of conducting, when appropriate, a series of targeted inspections/ examinations during a supervisory cycle and focusing on a single activity, business line, legal entity, and their associated risks. The program centers on avoidance of duplication, sharing of information, and continued close coordination and cooperation with federal and state supervisors.

Concerns are further expressed regarding cer-tain environmental factors that could initiate swift

and dramatic changes in the risk profiles of large complex banking organizations (LCBOs) and, thus, their financial condition. The Federal Reserve's ongoing supervision and monitoring program portrays and uses a continuous portfolio approach to supervisionthe continuous assess-ment and evaluation of informational resources and banking practices across a group of institu-tions with similar business lines, characteristics, and risk profiles. Emphasis is placed on an organi-zation's management of its internal systems and controls, including rating systems.

Ongoing, risk-focused supervision requires revision of supervisory ratings when there exists strong evidence of a change in the financial con-dition or risk profile of a banking organization. Such ratings are a continuum, not a point-in-time assessment. When one supervisory rating (for example, CAMELS or BOPEC) component is changed, the other components, management, and composite ratings need to be reaffirmed or revised.

4. Evaluating and monitoring counterparty risk man-agement functions and systems. This guidance focuses on transaction testing that is to be applied for those activities, business lines, and products experiencing significant growth, above-normal profitability, or large future potential exposures. Particular attention is placed on the following: (1) the standards, methodologies, and techniques used to measure and control counterparty credit risk exposures; (2) the use and management of credit enhancements to mitigate counterparty credit risks; and (3) the use of risk limits and monitoring systems that are established to set meaningful limits on counterparty credit risk and to alert management when the credit risk expo-sures exceed their established limits.

5. Capital maintenance and management for LCBOs. Because of the growing scope and complexity of business activities and ongoing financial inno-vation, simple ratios, including risk-based capital ratios, may no longer suffice when assessing the overall capital adequacy of many banking organi-zations. Examiners are to evaluate internal capi-tal management processes to judge whether they meaningfully tie the identification, monitoring, and evaluation of risk to the determination of the banking organization's capital needs. Funda-mental elements of a sound and comprehensive analysis of internal capital adequacy are stated for the key areas of risk. The management of banking organizations is encouraged to strengthen their risk measurement capabilities and to integrate


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them more fully when evaluating their own capital adequacy.

A more detailed summary of changes is included with the update package. The Manual and updates, including pricing information, are available from Publications Services, Mail Stop 127, Board of Gov-ernors of the Federal Reserve System, Washington, DC 20551 (or charge by facsimile: 202-728-5886). The Manual is also available on the Board's pub-lic web site at www.federalreserve.gov/boarddocs/ supmanual/

ENFORCEMENT ACTIONS AND TERMINATIONS OF ACTIONS

The Federal Reserve Board on December 6, 1999, announced the termination of the provision that addressed Year 2000 readiness of the written agree-ment by and among First Utah Bancorp, the First Utah Bank, and Premier Data Corporation, all of Salt Lake City, Utah, and the Federal Reserve Bank of San Francisco.

The Federal Reserve Board on December 6, 1999, announced the execution of a written agreement by and between the Foxdale Bank, South Elgin, Illinois, and the Federal Reserve Bank of Chicago.

The federal banking agencies (the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision) announced on December 13. 1999, the termination of the May 21, 1999, agree-ment with TransAlliance, L.P., Bellevue, Washing-ton. The agreement addressed the Year 2000 readi-ness of TransAlliance's electronic funds transfer services.

The Federal Reserve Board on December 14, 1999, announced the execution of a written agreement by and between the Arab American Bank, New York, New York, and the Federal Reserve Bank of New York.


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The Federal Open Market Committee voted on Feb-ruary 2, 2000, to raise its target for the federal funds rate by 25 basis points to 53/4 percent. In a related action, the Board of Governors approved a 25-basis-point increase in the discount rate to 5 LA percent.

The Committee remains concerned that over time increases in demand will continue to exceed the growth in potential supply, even after taking account of the pronounced rise in productivity growth. Such trends could foster inflationary imbalances that would undermine the economy's record economic expansion.

Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks are weighted mainly toward condi-tions that may generate heightened inflation pressures in the foreseeable future.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Rich-mond, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco. The Board subsequently approved similar actions by the boards of directors of the Federal Reserve Bank of Minneapolis, effective Feb-ruary 3, and of the Federal Reserve Bank of Dallas, effective February 4. The discount rate is the rate charged depository institutions when they borrow short-term adjustment credit from their District Fed-eral Reserve Banks.

MODIFICATIONS TO THE DISCLOSURE PROCEDURES OF THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Committee (FOMC) announced on January 19, 2000, that it approved modifications to its disclosure procedures at its December 21 meeting.

These modifications, which will take effect as of the February FOMC meeting, are designed to enhance communication to the public. They are sum-marized here and described in more detail in the accompanying attachment.1

First, the Committee determined that a statement will be issued to the public immediately after every FOMC meeting. The previously stated procedure was to release a statement only in the event of a policy action or a major shift in the Committee's view about prospective developments.

Second, the FOMC changed its language describ-ing its assessment of future developments. This new language will describe the FOMC's consensus about the balance of risks to the attainment of its long-run goals of price stability and sustainable economic growth and will be used in the announcement made after each meeting. More specifically, the announce-ment will indicate how the Committee assesses the risks of heightened inflation pressures or economic weakness in the foreseeable future. This time frame in the new language is intended to cover an interval extending beyond the next FOMC meeting.

Under its prior procedures, which will no longer be used, the FOMC's view about the period ahead (referred to as the "policy tilt" or "policy bias") was couched in terms of the relative chances of an increase or decrease in the intended federal funds rate. The "bias" language voted on by the Committee explicitly referenced the intermeeting period.

The revised disclosure procedures were proposed by the "Working Group on the Directive and Disclo-sure Policy," which was formed in August 1999 and chaired by Federal Reserve Board Vice Chairman Roger W. Ferguson, Jr. The Working Group also included the following FOMC members: Governors Edward W. Kelley, Jr., Laurence H. Meyer, and Edward M. Gramlich and Federal Reserve Bank Presidents Robert T. Parry (San Francisco), Michael H. Moskow (Chicago), and William Poole (St. Louis).

1. The at tachment is available on the Board ' s web site (www.federa l reserve .gov/boarddocs/press /Genera l /2000) and on request f rom Publications Services, Mail Stop 127, Board of Gover-nors of the Federal Reserve System, Washington, DC 20551.


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218 Federal Reserve Bulletin March 2000

APPOINTMENTS OF NEW MEMBERS TO THE CONSUMER ADVISORY COUNCIL AND DESIGNATION OF A NEW CHAIR AND VICE CHAIR FOR 2000

The Federal Reserve Board on January 5, 2000, named seven new members to its Consumer Advi-sory Council for three-year terms and designated a new chair and vice chair of the council for 2000.

The council advises the Board on the exercise of its responsibilities under the Consumer Credit Protec-tion Act and on other matters in the area of consumer financial services. The council meets three times a year in Washington, D.C.

Dwight Golann was designated chair; his term runs through December 2000. Mr. Golann is Professor of Law for the Sulfolk University Law School in Bos-ton, Massachusetts. Previous positions include Chief of the Consumer Protection Division, Deputy Chief of the Public Protection Bureau, and Assistant Attor-ney General for the Commonwealth of Massachu-setts. Lauren Anderson was designated vice chair; her term on the council ends in December 2001. Ms. Anderson is Executive Director of the Neighbor-hood Housing Services of New Orleans. Previously, she was a project manager for the Department of Housing and Economic Development for Jersey City, New Jersey, and a staff attorney for the American Civil Liberties Union.

The seven new members are the following:

Dorothy Broadman San Francisco, California

Ms. Broadman is Senior Vice President and Manager of the Community Development Department at Cal Fed Bank, FSB. She is Chairperson of the bank's senior management committee responsible for overseeing Community Rein-vestment Act (CRA) activities. Ms. Broadman is the senior officer responsible for CRA at the corporate level. Previ-ously, Ms. Broadman held positions at Citibank and at Wells Fargo Bank. She serves on several boards and advi-sory councils, including the Executive Committee of the National Association of Affordable Housing Lenders, the CRA Committee of the Consumer Bankers Association, and as chairperson of a Local Initiatives Support Corpora-tion advisory council.

Teresa Bryce Charlotte, North Carolina

Ms. Bryce is General Counsel of Bank of America Mort-gage and General Counsel of Bank of America Corpora-tion. She supports both the mortgage banking division and the Community Development Banking Group. Ms. Bryce oversees compliance with the Community Reinvestment Act, fair lending issues, and consumer protection laws. Previously, Ms. Bryce was with Prudential Home Mort-gage, where she promoted affordable housing initiatives.

She serves on several boards and committees, including the executive committee of the Research Institute for Housing America and the Mortgage Bankers Association of Ameri-ca's Residential Board of Governors.

Robert M. Cheadle Ada, Oklahoma

Mr. Cheadle is an attorney and serves as Business Devel-oper for Chickasaw Enterprises, the economic develop-ment division of the Chickasaw Nation. He has developed a tribally owned mortgage services firm to lead the effort for community development in the Chickasaw Nation. Previously, he served in other positions for the Chickasaw Nation and also was Senior Counsel at Fannie Mae. In 1999, the Chickasaw Nation received a Social Compact Award and a Housing and Urban Development Best Prac-tices Award for his work in developing a new Chickasaw mortgage loan program.

Lester W. Firstenberger Middletown, Connecticut

Since 1998, Mr. Firstenberger has been the Senior Vice President and General Counsel of Mortgage Lenders Net-work USA, Inc., one of the largest subprime lenders in the United States. He handles legal and regulatory matters, corporate firm mergers and acquisitions, and new product development. Previously, he had his own law firm, which focused on consumer lending and related activities for large banks. Mr. Firstenberger also acted as chief counsel for a large bank in developing an electronic check standard for the U.S. Department of Defense.

M. Dean Keyes St. Louis, Missouri

Ms. Keyes is a Senior Vice President and Director of Corporate/Community Reinvestment Act Initiatives for Mercantile Bancorporation, Inc., where she supports CRA activities in six states. Previously, she was Vice President for Community Investment at Citicorp Mortgage, Inc., where she developed CRA programs to ensure compliance with federal law. Ms. Keyes is a participant on the boards of organizations that serve to promote affordable housing, safe streets, racial equality, jobs, and economic develop-ment. She also was instrumental in the initial start-up of the Home Ownership Purchase Services Committee of the Neighborhood Housing Services of St. Louis; the commit-tee focuses on consumer education.

Jeremy Nowak Philadelphia, Pennsylvania

Mr. Nowak is the Chief Executive Officer of The Reinvest-ment Fund, a community development financial institu-tion. The organization's mission is to alleviate poverty and revitalize low- and moderate-income neighborhoods by providing capital and technical assistance to commu-nity organizations, developers, and businesses. In 1994, Mr. Nowak received The Philadelphia Award, the city's highest civic honor, for his work in advancing the best interests of the community. He is on several boards, includ-ing the Public/Private Ventures, the Economic Develop-ment Coalition of The Greater Philadelphia First Corpora-tion, and PhAME, Inc.


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Announcements 219

Russell W. Schrader Foster City, California

Mr. Schrader is Senior Vice President and Assistant Gen-eral Counsel of Visa, U.S.A. Inc. He is responsible for regulatory and legislative issues related to the applica-tion of consumer banking laws and regulations to credit, debit, and ATM cards and to the e-commerce environment. Before 1996, Mr. Schrader spent twelve years as Vice President and Senior Associate Counsel for The Chase Manhattan Bank, where he was involved with consumer and mortgage lending, legal services to retail banks, and insurance issues.

Council members whose terms continue through 2000 are the following:

Walter J. Boyer, Garland, Texas

Jeremy Eisler, Director of Litigation, South Mississippi Legal Services Corp., Biloxi, Mississippi

Robert F. Elliott, Lake Forest, Illinois

Karla Irvine, Executive Director, Housing Opportunities Made Equal of Greater Cincinnati, Inc., Cincinnati, Ohio

Gwenn Kyzer, Vice President, Target Marketing Ser-vice, Experian, Inc., Allen, Texas

John C. Lamb, Senior Staff Counsel, Department of Consumer Affairs, Sacramento, California

Martha W. Miller, President, Choice Federal Credit Union, Greensboro, North Carolina

Daniel W. Morton, Vice President and Senior Counsel, The Huntington National Bank, Columbus, Ohio

David L. Ramp, State of Minnesota, Assistant Attorney General, St. Paul, Minnesota

Robert G. Schwemm, Professor of Law, University of Kentucky, Lexington, Kentucky

David J. Shirk, Senior Manager, Lending Systems Framework, Inc., Tarry town, New York

Council members whose terms continue through 2001 are the following:

Malcolm M. Bush, President, The Woodstock Institute, Chicago, Illinois

Mary Ellen Domeier, President, State Bank & Trust Company of New Ulm, New Ulm, Minnesota

John C. Gamboa, Executive Director, The Greenlining Institute, San Francisco, California

Rose Garcia, Executive Director, Tierra del Sol Housing Corporation, Las Cruces, New Mexico

Vincent Giblin, Chief Executive Officer, International Union of Operating Engineers, West Caldwell, New Jersey

Willie Jones, Deputy Director, The Community Build-ers, Inc., Boston, Massachusetts

Anne S. Li, Executive Director, New Jersey Community Loan Fund, Trenton, New Jersey

Marta Ramos, Vice President and CRA Officer, Banco Popular de Puerto Rico, San Juan, Puerto Rico

Gary S. Washington, Senior Vice President, A B N AMRO, Chicago, Illinois

Robert L. Wynn II, Financial Education Officer, Depart-ment of Financial Institutions, Madison, Wisconsin

ADOPTION OF AN INTERIM RULE FOR PROCEDURES FOR ELECTING TO BECOME A FINANCIAL HOLDING COMPANY

The Federal Reserve Board on January 19, 2000, announced its approval of an interim rule setting forth procedures for bank holding companies and foreign banks with U.S. offices to elect to be treated as financial holding companies. Financial holding companies may engage in a broad range of securities, insurance, and other financial activities under Title I of the Gramm-Leach-Bliley Act, which becomes effective on March 11, 2000.

The Board has made the rule effective on March 11, 2000, the effective date of the statute. The Board will also accept public comments on the interim rule that are submitted by March 27, 2000, and will make changes to the rule as appropriate after reviewing the comments.

While the rule will not be effective until March 11, 2000, bank holding companies and foreign banks that meet the relevant qualifications may begin filing elec-tions to become financial holding companies at any time. Elections should be filed with the appropriate Reserve Bank for the bank holding company or for-eign bank.

The Federal Reserve System will endeavor on March 13, 2000, which is the first business day after the effective date of the financial holding company provisions of the Gramm-Leach-Bliley Act, to act on all elections filed before February 15, 2000. The System will act on all other elections as quickly as practicable. Any elections filed before March 11, 2000, would not become effective, in the absence of Board action, until the thirty-first day after March 11 (or April 11, 2000).

With respect to foreign banks, the Board believes that the standards and procedures proposed establish


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220 Federal Reserve Bulletin March 2000

a flexible approach that takes account of the statutory requirement for comparability of capital and man-agement standards while ensuring that foreign banks operating in the United States are also offered national treatment and equality of competitive opportunity.

PROPOSED ACTION

The Federal Reserve Board on February 3, 2000, voted to request comment on a new regulation imple-menting the privacy provisions of the Gramm-Leach-Bliley Act.

Regulation P (Privacy of Consumer Financial In-formation) would apply to institutions regulated by the Board, including bank holding companies, finan-cial holding companies, state-chartered banks that are members of the Federal Reserve System, and unin-sured state-chartered U.S. offices and branches of foreign banks. Comments are requested by March 31, 2000.

APPROVAL OF FEE SCHEDULES FOR PRICED SERVICES OF THE FEDERAL RESERVE BANKS

The Federal Reserve Board on January 6, 2000, announced fee schedules for priced services and elec-tronic connections, as well as the private-sector adjustment factor (PSAF) used in setting the fees.

The Board approved the fee schedules on Decem-ber 17, 1999. The effective date of the fees was delayed until April 3, 2000, to minimize change during the period surrounding the rollover to 2000.

PRELIMINARY FIGURES AVAILABLE ON OPERATING INCOME OF THE FEDERAL RESERVE BANKS

Preliminary figures indicate that operating income of the Federal Reserve Banks amounted to $29,347 bil-lion during 1999. Net income before payment of dividends, additions to surplus, and payments to the Treasury totaled $26,255 billion. About $25,400 bil-lion of this net income was distributed to the U.S. Treasury during 1999.

Federal Reserve System income is derived prima-rily from interest earned on U.S. government securi-ties that the Federal Reserve has acquired through open market operations. Income from the provision of financial services amounted to $836 million.

Operating expenses of the twelve Reserve Banks totaled $1,904 billion. In addition, the cost of earn-

ings credits granted to depository institutions under the Monetary Control Act of 1980 amounted to $322 million. Assessments against Reserve Banks for Board expenditures totaled $214 million, and the cost of currency amounted to $485 million.

Net deductions from income amounted to $526 million, resulting primarily from unrealized losses on assets denominated in foreign currencies that were revalued to reflect current market exchange rates. Statutory dividends to member banks were $375 million.

Under the policy established by the Board of Gov-ernors at the end of 1964, all net income after the statutory dividend to member banks and the amount necessary to equate surplus to paid-in capital is trans-ferred to the U.S. Treasury.

ENFORCEMENT ACTIONS

The Federal Reserve Board on January 19, 2000, announced the issuance of an order of assessment of a civil money penalty against Charles A. Drummond, a former president, chief executive officer and direc-tor, and an institution-affiliated party of the Profes-sional Bank, Denver, Colorado.

Mr. Drummond, without admitting to any allega-tions, consented to the issuance of the order for his alleged violations of sections 23A, 23B, and 22(h) of the Federal Reserve Act, 12 U.S.C. 371c, 371c-l, and 375b, and Regulation O, 12 C.F.R. Part 215, in connection with insider and affiliate transactions at the bank. Mr. Drummond paid a fine of $10,000.

The Federal Reserve Board on January 19, 2000, announced the issuance of a consent order against Solomon King, an institution-affiliated party of the First Western Bank, Cooper City, Florida, a state member bank.

Mr. King, without admitting to any allegations, consented to the order to resolve allegations that he violated the Change in Bank Control Act in connec-tion with his acquisition of beneficial ownership of the shares of the bank.

The Federal Reserve Board on January 19, 2000, announced the issuance of an order of prohibition against Christopher J. Woods, a former assistant vice president and institution-affiliated party of the Mid-west Bank and Trust Company, Elmwood Park, Illinois.

Mr. Woods, without admitting to any allegations, consented to the issuance of the order due to his alleged participation in violations of law and unsafe


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Announcements 221

or unsound practices regarding misapplication of bank funds and falsification of the bank's books and records.

CHANGE IN BOARD STAFF

The Federal Reserve Board announced the appoint-ment of Edgar A. Martindale as Assistant Director in

the Division of Reserve Bank Operations and Pay-ment Systems (RBOPS). Mr. Martindale began work-ing in the System in 1966 and has been in RBOPS as part of the System Interchange Program, on leave of absence from Federal Reserve Information Technol-ogy. He received a master's degree from Johns Hop-kins University and a bachelor's degree from the University of Baltimore.


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276

Announcements

MEETING OF THE CONSUMER ADVISORY COUNCIL

The Federal Reserve Board announced on Febru-ary 29, 2000, that the Consumer Advisory Council would hold its next meeting on Thursday, March 30, 2000. The council's function is to advise the Board on the exercise of the Board's responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its advice.

PROPOSED ACTION

The Federal Reserve Board on February 3, 2000, voted to request comment on a new regulation implementing the privacy provisions of the Gramm-Leach-Bliley Act.

Regulation P (Privacy of Consumer Financial Information) would apply to institutions regulated by the Board, including bank holding companies, financial holding companies, state-chartered banks that are members of the Federal Reserve System, and uninsured state-chartered U.S. offices and branches of foreign banks. Comments are requested by March 31, 2000.

The proposed rule is a result of an interagency effort by the Board, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insur-ance Corporation (FDIC), the Office of Thrift Super-vision (OTS), the National Credit Union Administra-tion, the Department of the Treasury, the Securities and Exchange Commission, and the Federal Trade Commission. The agencies also consulted with the National Association of Insurance Commissioners. On February 22, 2000, the Board, the FDIC, the OCC, and the OTS jointly published the proposed regulation in the Federal Register. The proposed rule pertains to all institutions regulated by the four fed-eral agencies.

JOINT PROPOSAL FOR REVISION OF THE RISK-BASED CAPITAL RULES

The four federal banking agencies on February 17, 2000, released proposed revisions to their risk-based

capital requirements for certain obligations related to securitized transactions.

The proposal by the Federal Reserve Board, Fed-eral Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision is intended to produce more consistent capital treatment for credit risks associated with exposures arising from securitization transactions. It would amend the risk-based capital requirements for asset-backed securities as well as recourse obliga-tions and direct credit substitutes. Public comments are requested by May 26, 2000.

RELEASE OF JOINT TREASURY-FEDERAL RESERVE REPORT ON COUNTERFEITING

Efforts to combat international counterfeiting of U.S. currency are working, according to a Treasury Department and Federal Reserve Board report released on Tuesday, February 29, 2000.

"Our efforts to make the U.S. currency as secure as possible are working," said Treasury Secretary Lawrence H. Summers. "By combating global coun-terfeiting we can ensure that our currency will remain a symbol of our strength and stability."

"The currency of the United States represents the strength and dependability of our economy and the financial system that supports it. As such, its integ-rity must be carefully protected," said Edward W. Kelley, Jr., member of the Board of Governors of the Federal Reserve System. "This study indicates that the new-design notes have been quite successful in thwarting counterfeiters. The Federal Reserve Bank of New York has detected a considerably smaller proportion of counterfeit notes among genuine new-design notes than among older-design notes."

The Use and Counterfeiting of United States Cur-rency Abroad, a study mandated by the Congress as part of the Anti-Terrorism and Effective Death Penalty Act of 1996 and conducted by the Treasury Department and the Federal Reserve, is a comprehen-sive review of the international use and counterfeit-ing of U.S. currency.

The efforts to protect U.S. currency have been effective. The incidence of counterfeiting is low both


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277

inside and outside the United States but slightly higher outside the United States, with approximately one note per 10,000 being counterfeit worldwide. The U.S. Secret Service is working closely with over-seas banks and law enforcement agencies to help suppress counterfeiting activities.

The report highlighted important steps the U.S. government is currently taking to combat global counterfeiting:

A pilot Secret Service web site allows law en-forcement agencies and currency handlers worldwide to report instances of counterfeiting.

Through its extended custodial inventory pro-gram, the Federal Reserve Bank of New York has established overseas cash depots at foreign banks. By lowering transportation costs, these facilities allow overseas dollar users to more efficiently obtain new U.S. currency and return worn and old-design U.S. currency.

U.S. enforcement agencies are working with their overseas counterparts to target cities and countries that first receive counterfeit notes in the wholesale distribution chain.

The study concluded that between $250 billion and $350 billion of the $500 billion of U.S. currency in circulation was held overseas at the end of 1998.

According to the report, technology will continue to require new and innovative responses to maintain the security of U.S. currency. These efforts will include further security enhancements to our cur-rency design, improved cooperation with interna-tional law enforcement agencies, and additional train-ing of foreign law enforcement and financial officials in counterfeit detection.

The report is available through the Treasury Office of Public Affairs at 202-622-2960 or the Federal Reserve Office of Public Affairs at 202-452-2955 or via the Internet at www.treas.gov/press.

PROGRAM FOR DIRECT SHIPMENT OF GOLDEN DOLLARS TO SMALL FINANCIAL INSTITUTIONS

The U.S. Mint and the Federal Reserve on Febru-ary 24, 2000, announced a program to provide direct shipments of Golden Dollars to community banks, credit unions, and savings and loans across the coun-try. Strong public demand for the new dollar coin has generated thousands of orders from banks and retail-ers and has led some banks to create Golden Dollar waiting lists for their individual and commercial customers.

"The U.S. Mint and the Federal Reserve have developed this program to accelerate shipments of Golden Dollars to small financial institutions," said Philip N. Diehl, Director of the Mint. "We want to get as many Golden Dollars to these institutions as quickly as possible. This program is designed to augment, not replace, the routine delivery of coins through the Federal Reserve System."

Depository institutions should continue to place regular orders for Golden Dollars with the Federal Reserve Banks (FRBs).

"We expect to produce at least 150 million Golden Dollars in Marchabout 100 million for distribu-tion through the Federal Reserve System and up to 50 million for direct shipment to small financial institutions," Mr. Diehl said. "No FRB orders will be reduced to supply Golden Dollars to financial institu-tions that participate in the temporary direct-shipment program."

By the end of March, the Mint expects that it will have placed 350 million Golden Dollars into circula-tionabout 200 million through the Federal Reserve System and the rest through direct shipment to retail-ers and small financial institutions. It recently doubled Golden Dollar production to five million a day.

The new program provides for direct shipment from the Mint of 1,000 or 2,000 Golden Dollars to community banks, credit unions, and savings and loans. The American Bankers Association, Ameri-ca's Community Bankers, Credit Union National Association, Independent Community Bankers of America, and the National Federation of Federal Credit Unions are also participating by assisting the Mint in informing the industry of the program. Orders will be accepted through the Mint's secure web site from March 1 through March 31. Only financial insti-tutions may participate in this program, and the U.S. Mint will validate orders. Delivery is expected to require five to ten business days, and orders will be shipped on a first-come-first-served basis. Coins will be shipped in rolls of twenty-five.

ENFORCEMENT ACTIONS

The Federal Reserve Board on February 8, 2000, announced the execution of a written agreement by and among the Bank of New York, New York, New York, the Federal Reserve Bank of New York, and the New York State Banking Department.

The Federal Reserve Board on February 25, 2000, announced the execution of a written agreement by and among United Bancshares, Inc., Philadelphia,


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278 Federal Reserve Bulletin April 2000

Pennsylvania; the United Bank of Philadelphia, Phila-delphia, Pennsylvania, and the Federal Reserve Bank of Philadelphia.

CHANGES IN BOARD STAFF

The Board of Governors announced that Edward T. Mulrenin, Assistant Director, Division of Information Technology, retired at the end of March after twenty-six years at the Board.

The Board of Governors announced on March 7, 2000, the approval of the appointment of Rosanna Pianalto-Cameron as Special Assistant to the Board for Public Information.

Ms. Pianalto-Cameron joined the Board's staff in 1980 and transferred to the Public Affairs office in 1998. She earned a B.A. from the University of Akron.

On March 7, 2000, the Board of Governors announced approval of the appointments of Stephen L. Siciliano, Ann E. Misback, and Sandra L. Richardson as Assistant General Counsels in the Legal Division.

Mr. Sicilano joined the Legal Division in 1973 as a staff attorney and was promoted to Special Assistant to the General Counsel for Administrative Law in 1985. He received his J.D. from Northwestern Uni-versity Law School.

Ms. Misback joined the Legal Division as a Senior Attorney in 1992. She received her J.D. from George-town University Law Center.

Ms. Richardson joined the Legal Division as a Senior Attorney in 1992. She received her J.D. from George Washington University Law Center.

The Board also announced on March 7, 2000, the approval of a restructuring of the Division of Infor-mation Technology. As part of the reorganization, the Board announced approval of the following official staff actions: the promotion of Maureen T. Hannan to Associate Director and the appointments of Geary L. Cunningham and Sharon L. Mowry as Assistant Directors.

Ms. Hannan recently began a six-month develop-mental assignment as Visiting Assistant Secretary in the Office of the Secretary and will assume her new responsibilities when she returns to the division.

Mr. Cunningham joined the Board's staff in 1978. He holds a B.A. from the University of Maryland and is currently attending the Stonier Graduate School of Banking.

Ms. Mowry joined the Board's staff in 1987. She holds a B.S. from the University of Pittsburgh and is currently attending the Stonier Graduate School of Banking.

REVISIONS TO THE MONEY STOCK DATA

Measures of the money stock were revised in Feb-ruary of this year to incorporate the results of the annual benchmark and seasonal factor review. Data in tables 1.10 and 1.21 in the statistical appendix to the Federal Reserve Bulletin reflect these changes beginning with this issue.

For 1999, the revisions had no effect on the annual growth rate of M2 and M3, but they lowered the annual growth rate of Ml by 0.3 percentage point.

The benchmark incorporates minor revisions to data reported on the weekly and quarterly deposit reports, and it takes account of deposit data from call reports for banks and thrift institutions that are not weekly or quarterly deposit reporters. These revisions to deposit data start in 1997. The benchmark also incorporates historical data for a number of money market mutual funds that began reporting for the first time during 1999 and revisions to data for the money funds; these revisions changed the level of M2 by a maximum absolute value of about $3 billion and raised the level of M3 over the years by a maximum of about $7 billion. Historical revisions have also raised the repurchase agreement component by a maximum of about $7 billion.

Seasonal factors for the monetary aggregates have been revised, using the benchmarked data primarily through November 1999. The X-12-ARIMA proce-dure was used to derive monthly seasonal factors. As usual, the revisions due to seasonal factors slightly changed the pattern of quarterly growth rates of M2 and M3 in 1999, but they had little effect on the annual growth rates of M2 and M3 over 1999.

Complete historical data are available in printed form from the Money and Reserve Analysis Section, Mail Stop 72, Board of Governors of the Federal Reserve System, Washington, DC 20551, or at 202-452-3062. Current and historical data for the mone-tary aggregates and their components are available each week in statistical release H.6 on the Board's web site (http://www.federalreserve.gov/) under Research and Data, Statistics: Releases and Histor-ical Data. Current and historical data are also on the Economic Bulletin Board of the U.S. Department of Commerce. For paid electronic access to the Eco-nomic Bulletin Board, call STAT-USA at 1-800-782-8872 or 202-482-1986.


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Announcements 279

1. M o n t h l y s e a s o n a l f a c t o r s u s e d to c o n s t r u c t M l , J a n u a r y 1 9 9 9 - M a r c h 2 0 0 1

Year and month Currency Nonbank travelers checks Demand deposits Other checkable deposits1

Year and month Currency Nonbank travelers checks Demand deposits Total At banks

1999January .9987 1.0224 1.0139 1.0128 1.0160 February .9980 1.0225 .9811 .9946 .9990 March .9994 1.0161 .9872 1.0037 1.0039 April 1.0002 1.0176 1.0013 1.0220 1.0198 May .9995 1.0105 .9877 .9972 .9975 June .9991 .9794 .9962 1.0006 1.0003 July 1.0008 .9570 .9996 .9928 .9905 August .9979 .9657 .9962 .9896 .9899 September .9959 .9816 .9884 .9892 .9907 October .9982 .9972 .9926 .9897 .9897 November 1.0017 1.0155 1.0093 .9964 .9952 December 1.0110 1.0184 1.0450 1.0110 1.0075

2000January .9977 1.0207 1.0136 1.0126 1.0154 February .9982 1.0218 .9811 .9945 .9985 March 1.0002 1.0160 .9870 1.0039 1.0039 April 1.0007 1.0188 1.0074 1.0229 1.0200 May .9992 1.0122 .9845 .9973 .9983 June .9990 .9823 .9942 1.0009 1.0011 July 1.0002 .9579 1.0023 .9930 .9906 August .9974 .9684 .9939 .9892 .9899 September .9970 .9824 .9903 .9893 .9901 October .9967 .9959 .9891 .9886 .9894 November 1.0019 1.0141 1.0095 .9963 .9952 December 1.0120 1.0164 1.0507 1.0119 1.0073

2001January .9973 1.0192 1.0094 1.0121 1.0153 February .9984 1.0223 .9818. .9944 .9984 March 1.0004 1.0157 .9892 1.0043 1.0039

1. Seasonally adjusted other checkable deposits at thrifts are derived as the difference between total other checkable deposits, seasonally adjusted, and seasonally adjusted other checkable deposits at commercial banks.

2. M o n t h l y s e a s o n a l f a c t o r s u s e d to c o n s t r u c t M 2 a n d M 3 , J a n u a r y 1 9 9 9 - M a r c h 2 0 0 1

Year and month Savings and

MMDA deposits'

Small-denomination time deposits1

Large-denomination time deposits1

Money market mutual funds RPs Eurodollars Year and month

Savings and MMDA

deposits'


Large-denomination time deposits1 In M2 In M3 only

RPs Eurodollars

1999January .9985 1.0023 .9849 1.0038 1.0220 1.0007 1.0108 February .9944 1.0036 .9928 1.0132 1.0361 1.0048 1.0111 March 1.0025 1.0026 1.0002 1.0196 1.0154 1.0064 .9983 April 1.0113 1.0008 .9993 1.0154 .9997 .9974 .9982 May .9971 .9970 1.0070 .9860 .9913 1.0131 1.0096 June 1.0010 .9949 1.0022 .9866 .9887 1.0034 .9994 July 1.0011 .9970 1.0011 .9859 .9720 .9937 .9870 August .9988 .9974 .9975 .9998 .9843 .9985 .9931 September .9971 .9990 1.0042 .9982 .9758 .9972 .9909 October .9964 1.0017 1.0077 .9951 .9883 .9915 .9909 November .9997 1.0025 1.0051 .9964 1.0051 1.0081 1.0012 December 1.0022 1.0013 .9970 .9984 1.0190 .9860 1.0121

2000January .9986 1.0025 .9856 1.0044 1.0235 1.0007 1.0068 February .9943 1.0040 .9929 1.0148 1.0373 1.0056 1.0084 March 1.0021 1.0031 1.0003 1.0199 1.0152 1.0078 .9994 April 1.0123 1.0010 .9996 1.0157 1.0002 .9959 .9995 May .9964 .9965 1.0072 .9865 .9927 1.0120 1.0083 June 1.0007 .9939 1.0024 .9865 .9889 1.0032 1.0016 July 1.0014 .9966 1.0010 .9846 .9707 .9925 .9882 August .9983 .9971 .9973 .9990 .9840 .9992 .9945 September .9978 .9991 1.0045 .9981 .9745 .9970 .9914 October .9958 1.0019 1.0070 .9952 .9868 .9897 .9896 November .9997 1.0029 1.0050 .9964 1.0060 1.0088 1.0028 December 1.0033 1.0016 .9969 .9983 1.0190 .9883 1.0109

2001January .9981 1.0026 .9861 1.0047 1.0237 1.0006 1.0042 February .9943 1.0041 .9931 1.0156 1.0380 1.0059 1.0072 March 1.0021 1.0033 1.0002 1.0201 1.0161 1.0086 1.0005

1. Seasonal factors are applied to deposits data at both commercial banks and thrift institutions.


April 2000


3. W e e k l y s e a s o n a l f a c t o r s u s e d t o c o n s t r u c t M l , D e c e m b e r 6, 1 9 9 9 - A p r i l 2 , 2 0 0 1

Week ending Currency Nonbank travelers checks Demand deposits Other checkable deposits1

Week ending Currency Nonbank travelers checks Demand deposits Total At banks

1999December 6 1.0061 1.0221 1.0114 1.0056 .9957 13 1.0080 1.0201 1.0243 .9961 .9910 20 1.0118 1.0182 1.0497 1.0065 1.0050 27 1.0182 1.0162 1.0626 1.0166 1.0184

2000January 3 1.0090 1.0142 1.0974 1.0435 1.0375 10 1.0015 1.0171 1.0367 1.0213 1.0194 17 .9978 1.0199 1.0090 1.0089 1.0110 24 .9936 1.0228 .9829 1.0042 1.0122 31 .9922 1.0257 .9924 1.0044 1.0126

February 7 .9980 1.0242 .9771 1.0000 .9998 14 1.0004 1.0227 .9759 .9863 .9898 21 .9988 1.0212 .9776 .9885 .9962 28 .9961 1.0197 .9887 .9989 1.0042

March 6 1.0018 1.0183 .9863 1.0040 1.0010 13 1.0017 1.0170 .9860 .9976 .9956 20 1.0005 1.0158 .9834 .9994 1.0003 27 .9985 1.0146 .9870 1.0064 1.0116

April 3 .9995 1.0134 1.0151 1.0240 1.0196 10 1.0040 1.0158 1.0140 1.0207 1.0158 17 1.0009 1.0183 1.0178 1.0317 1.0257 24 .9986 1.0208 .9921 1.0222 1.0243

May 1 .9979 1.0234 .9973 1.0148 1.0137 8 1.0029 1.0190 .9853 1.0026 .9984

15 .9997 1.0147 .9829 .9917 .9923 22 .9980 1.0104 .9717 .9884 .9942 29 .9982 1.0061 .9844 .9970 1.0001

June 5 1.0014 1.0019 .9987 1.0064 1.0014 12 1.0017 .9917 .9978 .9983 .9985 19 .9980 .9817 .9928 .9997 1.0015 26 .9948 .9718 .9893 1.0001 1.0059

July 3 .9991 .9622 1.0140 1.0104 1.0051 10 1.0049 .9603 1.0116 1.0009 .9945 17 1.0003 .9584 .9949 .9856 .9856 24 .9974 .9565 .9852 .9833 .9863 31 .9967 .9545 1.0061 .9943 .9912

August 7 1.0032 .9595 .9968 .9965 .9910 14 .9992 .9646 .9949 .9847 .9834 21 .9958 .9697 .9926 .9830 .9851 28 .9930 .9749 .9914 .9875 .9935

September 4 1.0023 .9801 .9947 .9951 .9930 11 .9983 .9812 .9945 .9917 .9886 18 .9961 .9823 .9936 .9883 .9899 25 .9934 .9834 .9795 .9831 .9914

October 2 .9936 .9845 .9952 .9946 .9939 9 1.0010 .9892 .9863 .9896 .9865

16 .9978 .9939 .9862 .9839 .9835 23 .9946 .9987 .9795 .9842 .9874 30 .9941 1.0035 .9935 .9903 .9960

November 6 1.0016 1.0084 1.0020 1.0009 .9945 13 1.0023 1.0116 .9996 .9900 .9882 20 1.0001 1.0147 1.0080 .9919 .9927 27 1.0044 1.0179 1.0216 .9977 1.0018

December 4 1.0063 1.0211 1.0342 1.0095 .9999 11 1.0080 1.0189 1.0290 .9999 .9937 18 1.0112 1.0167 1.0484 1.0053 1.0015 25 1.0179 1.0145 1.0572 1.0136 1.0156

2001January 1 1.0105 1.0124 1.0847 1.0363 1.0299 8 1.0034 1.0150 1.0488 1.0298 1.0257

15 .9986 1.0177 1.0140 1.0098 1.0132 22 .9949 1.0203 .9844 1.0027 1.0094 29 .9927 1.0230 .9804 1.0012 1.0092


April 2000

Announcements 281

3. W e e k l y s e a s o n a l f a c t o r s u s e d t o c o n s t r u c t M l , D e c e m b e r 6 , 1 9 9 9 - A p r i l 2 , 2 0 0 1 c o n t i n u e d

Week ending Currency Nonbank travelers checks Demand deposits Other checkable deposits1

Week ending Currency Nonbank travelers checks Demand deposits Total At banks

2001February 5 .9972 1.0257 .9794 1.0027 1.0027 12 1.0000 1.0238 .9754 .9893 .9933 19 .9992 1.0219 .9805 .9901 .9948 26 .9961 1.0200 .9864 .9954 1.0029

March 5 1.0007 1.0182 .9975 1.0033 1.0018 12 1.0020 1.0170 .9886 .9972 .9974 19 1.0002 1.0157 .9893 1.0000 1.0010 26 .9978 1.0145 .9801 1.0068 1.0105

April 2 .9995 1.0133 1.0065 1.0235 1.0169

1. Seasonally adjusted other checkable deposits at thrifts are derived as the difference between total other checkable deposits, seasonally adjusted, and seasonally adjusted other checkable deposits at commercial banks.

4 . W e e k l y s e a s o n a l f a c t o r s u s e d t o c o n s t r u c t M 2 a n d M 3 , D e c e m b e r 6, 1 9 9 9 - A p r i l 2 , 2 0 0 1

Week ending Savings and

MMDA deposits1



Money market mutual funds RPs Eurodollars Week ending

Savings and MMDA

deposits1 Small-

denomination time deposits1


RPs Eurodollars

1999December 6 1.0110 1.0029 1.0033 1.0023 1.0197 1.0010 1.0224 13 1.0074 1.0018 1.0024 1.0009 1.0333 .9956 1.0139 20 1.0003 1.0008 .9984 1.0007 1.0204 .9831 1.0025 27 .9935 .9999 .9927 .9964 1.0173 .9724 1.0094

2000January 3 1.0015 1.0012 .9831 .9881 .9932 .9760 1.0152 2000January 10 1.0128 1.0024 .9860 .9977 1.0195 .9986 1.0070 17 1.0068 1.0026 .9879 1.0110 1.0274 1.0036 1.0024 24 .9877 1.0026 .9830 1.0094 1.0330 1.0026 1.0047 31 .9807 1.0031 .9864 1.0065 1.0270 1.0087 1.0094

February 7 1.0003 1.0038 .9908 1.0122 1.0329 1.0095 .9987 February 14 .9997 1.0041 .9950 1.0143 1.0375 1.0127 1.0097 21 .9918 1.0040 .9908 1.0163 1.0398 1.0011 1.0094 28 .9877 1.0039 .9936 1.0158 1.0409 .9997 1.0189

March 6 1.0069 1.0039 1.0011 1.0197 1.0238 1.0031 .9871 13 1.0071 1.0035 1.0014 1.0203 1.0219 1.0129 .9971 20 1.0016 1.0029 1.0013 1.0195 1.0147 1.0138 .9992 27 .9913 1.0023 1.0005 1.0203 1.0138 1.0065 1.0115

April 3 1.0097 1.0029 .9950 1.0196 .9945 .9982 1.0011 April 10 1.0250 1.0026 .9982 1.0267 1.0096 .9972 .9978 17 1.0235 1.0013 .9986 1.0245 1.0057 .9931 .9881 24 1.0052 1.0000 .9999 1.0138 .9968 .9917 1.0027

May 1 .9901 .9989 1.0046 .9928 .9899 1.0014 1.0103 May 8 1.0051 .9982 1.0077 .9885 .9894 1.0082 .9955

15 1.0028 .9971 1.0058 .9844 .9893 1.0104 1.0019 22 .9910 .9960 1.0066 .9855 .9945 1.0118 1.0161 29 .9906 .9951 1.0086 .9864 .9956 1.0186 1.0216

June 5 1.0114 .9943 1.0084 .9870 1.0014 1.0143 1.0009 12 1.0094 .9937 1.0041 .9913 1.0036 1.0114 1.0036 19 1.0003 .9932 1.0027 .9875 .9868 1.0017 .9962 26 .9832 .9935 1.0003 .9844 .9823 .9945 1.0044

July 3 .9962 .9953 .9952 .9791 .9632 .9927 1.0037 July 10 1.0119 .9962 .9970 .9854 .9787 .9905 .9868 17 1.0052 .9963 1.0039 .9843 .9689 .9889 .9812 24 .9935 .9973 1.0044 .9852 .9717 .9943 .9870 31 .9909 .9972 1.0013 .9859 .9668 .9961 .9914

August 7 1.0092 .9971 1.0014 .9940 .9773 .9980 .9875 August 14 1.0075 .9969 .9968 .9986 .9857 1.0026 .9840 21 .9976 .9969 .9924 1.0016 .9856 .9930 .9917 28 .9863 .9970 .9967 1.0015 .9892 1.0021 1.0143


April 2000


4. Weekly seasonal factors used to construct M2 and M3, December 6, 1999-April 2, 2001continued

Week ending Savings and

MMDA deposits'



Money market mutual funds RPs Eurodollars Week ending

Savings and MMDA

deposits'



RPs Eurodollars

2000September 4 1.0043 .9979 1.0014 .9991 .9795 1.0012 .9949 11 1.0137 .9985 1.0022 1.0020 .9818 1.0017 .9931 18 .9997 .9991 1.0033 1.0011 .9766 1.0012 .9871 25 .9791 .9992 1.0074 .9959 .9687 .9941 .9928

October 2 .9865 1.0004 1.0078 .9906 .9653 .9853 .9903 9 1.0046 1.0021 1.0130 .9949 .9803 .9850 .9856

16 1.0034 1.0020 1.0081 .9975 .9847 .9885 .9874 23 .9905 1.0019 1.0053 .9961 .9940 .9895 .9858 30 .9859 1.0018 1.0015 .9938 .9931 .9955 .9996

November 6 1.0037 1.0024 1.0054 .9926 .9941 1.0002 .9887 13 1.0073 1.0028 1.0063 .9949 1.0015 1.0092 .9955 20 1.0016 1.0030 1.0044 .9967 1.0069 1.0145 1.0035 27 .9912 1.0031 1.0050 .9994 1.0143 1.0118 1.0175

December 4 1.0035 1.0030 1.0022 .9991 1.0184 1.0047 1.0122 11 1.0079 1.0024 1.0028 1.0027 1.0314 .9998 1.0117 18 1.0021 1.0015 .9992 1.0023 1.0218 .9887 1.0035 25 .9955 1.0007 .9943 .9976 1.0161 .9777 1.0074

2001January 1 .9998 1.0010 .9868 .9889 1.0050 .9759 1.0217 8 1.0135 1.0025 .9845 .9953 .9998 .9947 1.0110

15 1.0101 1.0025 .9898 1.0080 1.0263 1.0025 1.0009 22 .9942 1.0026 .9862 1.0085 1.0323 1.0002 .9993 29 .9820 1.0027 .9833 1.0078 1.0371 1.0064 1.0053

February 5 .9978 1.0036 .9877 1.0098 1.0301 1.0079 .9966 12 .9986 1.0041 .9927 1.0147 1.0437 1.0110 1.0067 19 .9938 1.0042 .9924 1.0159 1.0381 1.0046 1.0089 26 .9861 1.0043 .9954 1.0194 1.0413 1.0015 1.0181

March 5 1.0014 1.0042 1.0019 1.0190 1.0265 1.0030 .9919 12 1.0038 1.0038 1.0023 1.0206 1.0265 1.0115 .9976 19 1.0007 1.0032 1.0012 1.0194 1.0163 1.0150 .9987 26 .9934 1.0027 .9997 1.0207 1.0128 1.0092 1.0090

April 2 1.0069 1.0028 .9950 1.0207 .9956 1.0005 1.0035

1. Seasonal factors are applied to deposits data at both commercial banks and thrift institutions.


April 2000

324

Announcements


The Federal Open Market Committee voted on March 21, 2000, to raise its target for the federal funds rate by 25 basis points to 6 percent. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 5 Vi percent.

Economic conditions and considerations addressed by the Committee are essentially the same as when the Committee met in February. The Committee remains concerned that increases in demand will continue to exceed the growth in potential supply, which could foster inflationary imbalances that would undermine the economy's record economic expansion.

Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks are weighted mainly toward con-ditions that may generate heightened inflation pres-sures in the foreseeable future.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Rich-mond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco. Subsequently the Board approved a similar request by the board of directors of the Federal Reserve Bank of Dallas, effective March 23. The discount rate is the rate charged depository institutions when they borrow short-term adjustment credit from their District Fed-eral Reserve Banks.

REGULATION Z: REVISIONS TO THE OFFICIAL STAFF COMMENTARY

The Federal Reserve Board on March 24, 2000, announced revisions to its Regulation Z (Truth in Lending) official staff commentary, which applies and interprets the requirements of the regulation.

The commentary revisions address cash advances commonly called "payday loans." The Board is also publishing technical corrections to the regulation and

commentary. The revisions are effective immediately. Compliance is optional until October 1, 2000, when it becomes mandatory.

AMENDMENTS TO THE INTERIM RULE REGARDING PROCEDURES FOR ELECTING TO BE TREATED AS A FINANCIAL HOLDING COMPANY

The Federal Reserve Board on March 15, 2000, announced amendments to its interim rule regarding procedures for bank holding companies and foreign banks to elect to be treated as financial holding companies. The interim rule was issued on Janu-ary 19, 2000. The amendments announced on March 15 are effective immediately.

The Board has changed the procedures for process-ing elections filed by foreign banks to allow the use of the thirty-one-day notice procedure applicable to U.S. bank holding companies. The Board based its decision on its assessment of the comparability of the standards used in the first elections filed by foreign banks. Given this experience, the Board believes it can effectively perform its statutory responsibilities using a notice procedure. The Board also adopted several other amendments to the interim rule.

The Board will accept comments on these amend-ments until April 17, 2000.

INTERIM RULE LISTING FINANCIAL ACTIVITIES THAT WILL BE PERMISSIBLE FOR FINANCIAL HOLDING COMPANIES

The Federal Reserve Board on March 10, 2000, approved an interim rule, effective March 11, 2000, listing financial activities permissible for financial holding companies under the Gramm-Leach-Bliley Act.

The list will also help identify companies subject to the provisions of the act governing the privacy of customer information. The privacy provisions apply to a company doing a financial business regardless of whether the company is affiliated with a bank.


May 2000

325

The interim rule, which amends Regulation Y (Bank Holding Companies and Change in Bank Con-trol), establishes procedures for financial holding companies to engage in the listed financial activities. It also establishes procedures by which a party may ask the Board to list additional activities as financial in nature or as incidental to, or complementary to, a financial activity.

Comments are requested on the interim rule by May 12, 2000. The Board will revise it as appropriate after reviewing the comments.

INTERIM RULE PERMITTING QUALIFYING STATE MEMBER BANKS TO ESTABLISH FINANCIAL SUBSIDIARIES

The Federal Reserve Board on March 10, 2000, announced the approval of an interim rule permitting qualifying state member banks to establish financial subsidiaries and thereby engage in activities that have been determined to be financial in nature or inciden-tal to financial activities. The interim rule establishes a streamlined notice procedure for state member banks that wish to acquire control of, or an interest in, a financial subsidiary. The Board's rule parallels that adopted by the Comptroller of the Currency for financial subsidiaries of national banks.

The interim rule is effective on March 11, 2000, the effective date of Title I of the Gramm-Leach-Bliley Act. Comments will be accepted on the interim rule until May 12, 2000. The Board will revise the interim rule as appropriate after reviewing the comments.

INTERIM RULE ON OPERATING STANDARDS FOR FINANCIAL HOLDING COMPANIES THAT HAVE SECURITIES AFFILIATES

The Federal Reserve Board on March 10, 2000, approved an interim rule that would apply two of eight operating standards that currently apply to bank holding companies that control so-called section 20 affiliates to financial holding companies authorized under the Gramm-Leach-Bliley Act that have securi-ties affiliates. These two prudential provisions (1) re-quire that intra-day extensions of credit to a securities firm from an affiliated bank or thrift institution or U.S. branch or agency of a foreign bank be on market terms consistent with section 23B of the Federal Reserve Act and (2) apply the limitations of sec-tions 23A and 23B of the Federal Reserve Act to certain covered transactions between a U.S. branch

or agency of a foreign bank and a U.S. securities affiliate.

This interim rule will become effective on March 11, 2000. The Board requests comments on the interim rule by May 12, 2000, and will revise it as appropriate after reviewing comments.

All eight of the operating standards, as well as the Board's current 25 percent revenue test, will continue to apply to bank holding companies that control section 20 subsidiaries pursuant to section 4(c)(8) of the Bank Holding Company Act.

ELECTIONS TO BE TREATED AS FINANCIAL HOLDING COMPANIES

The Federal Reserve Board on March 13, 2000, announced that the elections to become or be treated as financial holding companies of 117 bank holding companies and foreign banking organizations were effective as of that date.

The Federal Reserve Board and the Secretary of the Treasury anticipate issuing shortly an interim rule governing the merchant banking activities of finan-cial holding companies

Documents

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