Federal Reserve Bulletin, 1995-02

VOLUME 81 • NUMBER 2 • FEBRUARY 1995 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Richard Spillenkothen • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Graphics Center under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 71 HOME PURCHASE LENDING Issuance of final amendments to risk-based IN LOW-INCOME NEIGHBORHOODS capital guidelines to account for a component AND TO LOW-INCOME BORROWERS of stockholders' equity. This article reviews the economic arguments Issuance of final amendments to risk-based underlying the debate about whether enough capital guidelines to account for netting housing credit is being provided in lower- contracts. income areas and uses the 1993 data supplied Amendments to the risk-based capital guideunder the Home Mortgage Disclosure Act to lines regarding credit risk and risks of nonmeasure the extent of home purchase lending traditional activities. in lower-income and other neighborhoods, as well as the extent of such lending to lower- Issuance of amendments to capital adequacy income and other borrowers. A summary of guidelines regarding deferred tax assets. the 1993 HMD A data is also provided in the Issuance of final rule on enhanced recordkeepappendix to the article. ing related to certain wire transfers by financial institutions. 104 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION Adoption of measures to help ease financial FOR DECEMBER 1994 stress in areas of flooding in Texas. Industrial production rose 1.0 percent in Amendments to Regulation C. December, to 121.4 percent of its 1987 average, after a revised gain of 0.7 percent in Amendments to Regulation H and interpretation of Regulation Y. November. The substantial growth in output in December boosted capacity utilization to Amendments to Regulation Y. 85.4 percent, its highest level since October 1979. Expansion of the format for Fedwire funds transfers. 107 STATEMENT TO THE CONGRESS Delay in the expansion of operating hours for Alan Greenspan, Chairman, Board of Gover- Fedwire on-line transfers. nors, discusses current economic conditions Proposed revisions to the official staff comand monetary policy developments and says mentary on Regulation B; proposed amendthat the impressive performance of the U.S. ment to Regulation K; proposed revisions to economy continues but that we must remain the official staff commentary on Regulation Z; alert to signs of inflationary pressures on request for comments on whether consumers resources, before the Joint Economic Commitmight benefit from greater flexibility in waivtee of the U.S. Congress, December 7, 1994. ing the right of recission under the Truth in ill ANNOUNCEMENTS Lending Act; request for comments on opening the Fedwire on-line book-entry securities Appointment of new members to the Thrift transfer service earlier in the day and on Institutions Advisory Council. whether a firm closing time for this service Approval of policy statement on privately should be established; request for comments operated netting systems. on new service capabilities that would give Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

banks the option of participating in earlier A1 FINANCIAL AND BUSINESS STATISTICS Fedwire securities hours and other capabilities These tables reflect data available as of that would allow them to control their use of December 27, 1994. intraday credit; request for comments on an internal appeals process for institutions wishing to appeal an adverse material supervisory A3 GUIDE TO TABULAR PRESENTATION determination. A4 Domestic Financial Statistics Issuance of a report on depository loans pro- A45 Domestic Nonfinancial Statistics vided to small businesses and farms in 1994. A53 International Statistics Publication of the Annual Statistical Digest, 1993. A67 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES Publication of a supplement to the Bank Holding Company Supervision Manual. A76 INDEX TO STATISTICAL TABLES 117 MINUTES OF THE FEDERAL OPEN MARKET COMMITTEE MEETING A78 BOARD OF GOVERNORS AND STAFF At its meeting on November 15, 1994, the Committee adopted a directive that called for a significant increase in the degree of pressure A80 FEDERAL OPEN MARKET COMMITTEE on reserve positions, taking account of a pos- AND STAFF; ADVISORY COUNCILS sible increase of 3A percentage point in the discount rate. The directive did not include a A82 FEDERAL RESERVE BOARD presumption about the likely direction of any PUBLICATIONS adjustment to policy during the intermeeting period. A84 MAPS OF THE FEDERAL RESERVE 127 LEGAL DEVELOPMENTS SYSTEM Various bank holding company, bank service corporation, and bank merger orders; and A86 FEDERAL RESERVE BANKS, BRANCHES, pending cases. AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers Glenn B. Canner and Wayne Passmore, of the views—the first of which we will call the "dis- Board's Division of Research and Statistics, pre- crimination" view and the second (regarding pared this article. Wayne C. Cook and Lisa Kirch, neighborhood conditions), the "externalities" of the Division of Research and Statistics, and Kathy L. McLeod and Gary G. Myers, of the Division of Information Resources Management, provided research assistance. Highlights of the 1993 HMDA Data The long-standing debate about whether enough Data reported by lenders under the Home Mortgage housing credit is being provided in lower-income Disclosure Act cover applications and extensions of areas has received renewed attention in recent dis- credit for home purchase loans, home improvement cussions about how to implement the Community loans, and home refinancings. Here are some qualita- Reinvestment Act. In this article, we review the tive findings from the 1993 data. economic arguments underlying the debate and use 1993 data supplied under the Home Mortgage • The number of reported loans and applications Disclosure Act (HMDA) to measure the extent of increased sharply from 1992 both because of a boom in refinancings and because of a rule change that raised home purchase lending in lower-income and other the number of independent mortgage companies neighborhoods as well as the extent of such lending reporting. to lower-income and other borrowers. We also • The use of government-backed mortgage prosummarize the 1993 HMDA data in the appendix grams for refinancings rose. to this article (see box "Highlights of the 1993 • Mortgage companies (including those affiliated HMDA Data"). with depository institutions) originated the majority of By most measures, the number of home purchase home purchase loans (and most government-backed loans made by commercial banks and savings asso- home purchase loans) and the majority of home reficiations in lower-income neighborhoods is small nancings, whereas depository institutions originated compared with the number of such loans in higher- most loans for home improvement and for multifamily income neighborhoods. To some observers, this dwellings (dwellings housing five or more families). • Among would-be homebuyers grouped by racial pattern of lending is readily understood within the or ethnic identity, black applicants were the most likely context of the business of banking, where profitto seek government-backed mortgages. seeking institutions strive to meet the demands of • Among all home loan applicants grouped by racial creditworthy borrowers. In this view (which we or ethnic identity, black applicants were the least likely will call the "efficient markets" view), the low to file joint applications. number of home purchase loans in lower-income • Although most applications for home loans are neighborhoods reflects the relatively small number approved, rates of denial for black and Hispanic appliof creditworthy borrowers and the relatively small cants exceeded those for white and Asian applicants. supply of owner-occupied housing. To others, • The number of conventional home purchase loans the disparity in such lending results from dis- extended to lower-income, black, and Hispanic housecrimination, neighborhood conditions, or both— holds rose sharply from 1992. circumstances that lead bankers, who may have • Among the home loans bought or securitized by little knowledge of lower-income neighborhoods, government-sponsored enterprises, those securitized by Ginnie Mae were the most likely to involve lowerto erroneously conclude that these areas do not income households. offer profitable lending opportunities. In these Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 Federal Reserve Bulletin • February 1995 view—the amount of home purchase lending in jective and objective measures of CRA complilower-income areas is too small. ance, and they take into account the characteristics The Community Reinvestment Act (CRA) and needs of an institution's community as well as requires the supervisory agencies of commercial the capacity of the institution and the constraints it banks and savings associations to encourage such faces. lenders "to help meet the credit needs of the local A consideration of these issues in light of the communities in which they are chartered consistent 1993 HMDA data yields the following results, with the safe and sound operation of such institu- which will be discussed in detail in the balance of tions."1 For proponents of the efficient markets this article. The HMDA data for 1993, as for earlier view, lenders already have ample incentives to years, show a relatively low number of home purseek all profitable lending opportunities and face chase loans in low-income areas. The data also few barriers to providing such credit everywhere; suggest that although mortgage credit is extended therefore such legislation should have little effect in almost all neighborhoods, individual lenders on lending because lenders are already doing what vary greatly in the extent to which they are the law is encouraging them to do.2 However, if the involved in low- and moderate-income neigh- CRA forces lenders to make unprofitable loans, borhoods. Many lenders make only a very small then the proponents of the efficient markets view percentage of their home purchase loans in lowwould see the CRA as a burden on the banking income neighborhoods or to low-income borrowsystem. For proponents of either the discrimination ers. Thus, a performance test based on the proor the externalities view, lenders overlook safe portion of loans made either in low-income and sound lending opportunities in lower-income neighborhoods or to low-income borrowers could or predominately minority neighborhoods; there- lead some lenders to change their lending behavior fore, the CRA may have the power to change to satisfy the test, depending on the definition of lending patterns to the benefit of both lenders and their service area and on the particular characterisneighborhoods. tics of their market. A performance test that com- The debate over the appropriate amount of lend- pares a lender's market share of home purchase ing in low-income neighborhoods is perhaps best loans in low- and moderate-income neighborhoods illustrated by the diverse views over whether to with the lender's share in higher-income neighborestablish, as part of CRA monitoring and enforce- hoods would, however, yield a favorable outcome ment, a performance test for lenders that evaluates for many lenders who make loans in low-income the quantity of their lending in the various neigh- neighborhoods. Such lenders generally have a borhoods of their local communities. Banks and larger market share in these neighborhoods because savings associations frequently argue that such a they face fewer competitors than is typical in their test would result in nonmarket credit allocation, higher-income neighborhoods. which is lending based on noneconomic criteria; In addition, residents of low-income neighborsuch lending would more likely be unprofitable and hoods who obtain loans generally have incomes would violate the original intent of the CRA. Com- well above the median family income of their munity groups and others believe, however, that a neighborhood, and low-income borrowers who purloan performance test would simply encourage chased homes in 1993 frequently did not buy them banks to extend a more economically appropriate in low-income neighborhoods. These findings amount of credit. These contrasting views of lend- illustrate the complications involved in targeting ing performance standards have persisted since the specific groups or neighborhoods for special passage of the CRA. In an attempt to balance these efforts, and they suggest that (1) a lending test concerns, CRA evaluations incorporate both sub- focusing exclusively on low-income neighborhoods may not necessarily encourage lending to lowincome individuals and (2) a test focusing exclusively on low-income borrowers may not nec- 1. Community Reinvestment Act of 1977, P.L. 95-128, 91 Stat. essarily encourage lending in low-income 1147(1977). neighborhoods. Furthermore, lending to people 2. The CRA may impose substantial compliance costs unrelated to lending, such as the costs of familiarizing staff with the require- with low incomes may not be the same as lending ments of the law and maintaining records to document for regula- to people with limited financial resources (for tors actions taken to comply with the regulation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 73 example, retirees may have low incomes but sig- cation for a charter, deposit insurance, branch or nificant holdings of financial assets, and newly other deposit facility, office relocation, merger, or graduated professionals may have small current acquisition. incomes but substantial future incomes). The debate on the bill that led to the CRA However, lending in lower-income neighbor- indicates that the Congress was concerned prihoods does more frequently result in loans to marily with inner-city neighborhoods in general moderate-income borrowers than lending in other and with blighted and economically depressed neighborhoods, and lending to lower-income bor- areas in particular. The proponents of the CRA rowers does more frequently result in loans in asserted that depository institutions were accepting lower-income neighborhoods than lending to bor- deposits from households and businesses in these rowers with higher incomes. The current CRA pro- areas while lending mostly elsewhere and overposal attempts to balance concerns about lending to looking qualified loan applicants from the local lower-income neighborhoods with concerns about community. They believed that the failure of lending to lower-income borrowers, but it does not depository institutions to take advantage of sound address the issue that some low-income borrowers lending opportunities in these neighborhoods accelmay have substantial current or future financial erated the process of economic decay and inhibited resources. private revitalization efforts. Congressional supporters of the legislation viewed residential mortgage lending, including the provision of home A BRIEF HISTORY OF THE COMMUNITY improvement and rehabilitation credit, as particu- REINVESTMENT ACT larly important for neighborhood stability and revitalization. The Community Reinvestment Act of 1977 is The legislative debate indicates that the Conintended to encourage commercial banks and sav- gress did not support nonmarket methods of credit ings associations to help meet the credit needs of allocation, such as quotas, to meet the credit needs the local communities in which they are chartered.3 of the local community. However, the Congress did In adopting the CRA, the Congress reaffirmed the not provide the regulatory agencies with any guidprinciple that depository institutions have an obli- ance in defining a low- or moderate-income neighgation under their charters to serve "the con- borhood or a bank's "community," in assessing a venience and needs" of their communities by community's credit needs, or in determining how extending credit to all parts of those communities. well a particular institution is meeting those needs. The CRA is directed primarily at four federal To implement the CRA, the supervisory agencies supervisory agencies—the Board of Governors of adopted joint regulations that reflected two printhe Federal Reserve System, the Comptroller of the ciples: The regulation should not require lenders to Currency, the Federal Deposit Insurance Corpora- allocate credit; and financial institutions should be tion, and the Office of Thrift Supervision. The act free to meet their CRA obligations in different calls upon the agencies to (1) use their supervisory ways to reflect the needs of their communities and authority to encourage each financial institution to their own capabilities. help meet local credit needs in a manner consistent To enforce the CRA, the regulatory agencies with safe and sound operation, (2) assess an institu- conduct CRA examinations of institutions and, as tion's record of meeting the credit needs of its required by the statute, evaluate CRA performance entire community, including low- and moderate- during the application process for bank acquisiincome neighborhoods, and (3) consider the institu- tions, mergers, and other actions. The vagueness of tion's CRA performance when assessing an appli- the affirmative responsibility placed on lenders by the Congress has made determining compliance with the CRA difficult for the regulatory agencies. The agencies currently measure CRA compliance 3. The act does not cover credit unions and other types of using twelve assessment factors, including activifinancial institutions. For a more expansive overview of the history of the CRA and of the issues associated with it, see Griffith L. ties undertaken by institutions to ascertain the Garwood and Dolores S. Smith, "The Community Reinvestment credit needs of the community, to communicate the Act: Evolution and Current Issues," Federal Reserve Bulletin, availability of credit services, and to provide credit vol. 79 (April 1993), pp. 251-67. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Bulletin • February 1995 to all geographic areas of their community (see box denied. The CRA has, however, prompted institu- "Twelve CRA Performance Factors"). Most tions to undertake specific actions to enhance their depositories receive a rating of satisfactory or bet- CRA performance before or during the application ter on their performance, and few institutions have process. had their applications for mergers or acquisitions After more than fifteen years of experience under the CRA, community organizations and depository institutions have expressed frustration with the process of enforcement. Community Twelve CRA Performance Factors groups believe that the examination process fails to make meaningful distinctions between depository The federal supervisory agencies have traditionally institutions that perform well and those that perconsidered the following factors in assessing an institu- form poorly. Depository institutions complain that tion's record of performance under the Community CRA enforcement is too focused on process and Reinvestment Act: paperwork and that the examination standards are unclear and inconsistently applied. • Activities conducted by the institution to ascertain the credit needs of its community, including the extent of the institution's efforts to communicate with mem- THE PROPOSED CRA REGULATION bers of its community regarding its credit services • The extent of the institution's marketing and special credit-related programs in the community Believing that the implementation of the CRA • The extent of participation by the institution's could be improved, President Clinton in July 1993 board of directors in formulating the institution's poli- requested that the federal financial supervisory cies and reviewing its performance with respect to the agencies reform the CRA examination and enforcepurposes of the CRA ment system. The President asked the agencies to • Any practices intended to discourage applications refocus the CRA examination system on more for types of credit set forth in the institution's CRA objective, performance-based assessment standards statement with the goals of minimizing the burden of compli- • The geographic distribution of the institution's ance, promoting consistency and even-handedness, credit extensions, credit applications, and credit and providing more effective sanctions against denials institutions with consistently poor performance. • Evidence of prohibited discriminatory credit practices or of other illegal credit practices In December 1993 the agencies published for • The institution's record of opening and closing public comment a proposal to revise the CRA offices and providing services at offices regulation that would have substituted three • The institution's participation, including invest- performance-based measures—a lending test, an ment, in local community development and redevelop- investment test, and a service test—for the twelve ment projects or programs assessment factors currently used to measure CRA • The institution's origination of residential mort- compliance.4 In particular, the agencies proposed gage loans, housing rehabilitation loans, home as the main part of the lending test a "market improvement loans, and small-business or small-farm share" measure that would quantify an institution's loans within its community, or the purchase of such CRA performance by comparing its market share loans originated in the community of loans in lower-income neighborhoods to its • The institution's participation in governmentmarket share in other neighborhoods. insured, -guaranteed, or -subsidized loan programs for housing, small businesses, or small farms The controversy generated by the December • The institution's ability to meet various commu- proposal was reminiscent of the arguments made nity credit needs given its financial condition and size, during the consideration of the CRA in 1977. legal impediments, local economic conditions, and Many banks and savings associations believed other factors that the market share test would result in forced • Other factors that, in the supervisory agency's judgment, reasonably bear upon the extent to which an institution is helping to meet the credit needs of its entire community. 4. "Community Reinvestment Act Regulations," 58 Fed. Reg. 67466 (1993) and 59 Fed. Reg. 5138 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 75 credit allocation, while many community groups the broader area (such as a metropolitan statistical expressed concern that the formula did not take area, or MSA).7 In a moderate-income area, the into account the complexity and effort involved in median family income is at least 50 percent and making different types of loans. In particular, com- less than 80 percent of that for the broader area. In munity development loans, which can benefit a middle-income area, the percentage ranges from groups with special credit needs but are time con- at least 80 percent to less than 120 percent. And in suming and costly to originate, would have been treated in the same way as more standardized types of loans. 7. According to the Bureau of the Census, a family consists of a In response to the more than six thousand com- householder plus at least one other person living in the same ments received on the December proposal, the household related to the householder by birth, marriage, or adoption. A householder is, in most cases, the person or one of the regulatory agencies issued a revised CRA proposal persons in whose name the home is owned or rented. in September 1994.5 It, too, includes three An MSA typically consists of a central city with population of at performance-based measures of CRA performance, least 50,000 plus the geographically larger jurisdiction, if any, in which the city is located and any other jurisdictions tied economibut the importance of the market share test and cally and socially to the city. other quantitative standards is diminished (see box "The Proposed New Performance Tests"). The agencies stated that the examination process is inherently subjective and requires that performance The Proposed New Performance Tests be measured within the context of (1) a community's credit needs and (2) the capability of the lender. The September 1993 CRA regulatory proposal puts These two standards are referred to as the "assess- forth three tests by which to assess the CRA performent context." The benefit of the proposed new mance of depository institutions covered by the act: a CRA regulation, according to the agencies, is that lending test, an investment test, and a service test. it would lower the costs of compliance and make The lending test would employ assorted measures of CRA performance ratings more meaningful by lending activity for a variety of loan types, including spelling out, in greater detail, the process regulators home purchase loans. Among the assessment criteria are the geographic distribution of lending, the distribuwould use to make a CRA evaluation. tion of lending across different types of borrowers, the The CRA legislation places a heavy emphasis on extent of community development lending, and the use the analysis of the geographic distribution of an of innovative or flexible lending practices to address institution's lending across its entire community. the credit needs of low- or moderate-income individu- The CRA proposal would implement this legisla- als or areas. tive intent by classifying neighborhoods in a lend- The investment test would evaluate the extent of an er's service area as low-, moderate-, middle-, or institution's involvement with qualified investments. A upper-income.6 A low-income area is defined as an qualified investment is an investment, deposit, or grant area in which the median family income is less that benefits primarily low- or moderate-income indithan 50 percent of the median family income for viduals, small businesses, or small farms or addresses affordable-housing needs. The service test would evaluate the availability and responsiveness of an institution's system for delivering retail banking services and judge the extent of its 5. "Community Reinvestment Act Regulations," 59 Fed. Reg. 51232 (1994). community development services and their degree of 6. Financial institutions may delineate their service areas using innovation. Among the assessment criteria are the geoany method they choose provided that the definition does not reflect graphic distribution of an institution's branches and illegal discrimination, does not arbitrarily exclude low- and ATMs, the availability of alternative systems for delivmoderate-income areas (taking into account the institution's size and financial condition and the extent of its branching network), ering retail banking services in low- and moderateand consists of whole census tracts or block numbering areas. income areas and to low- and moderate-income indi- In addition, for a retail bank, the service area is to include areas viduals, and the provision of community development around its branches and deposit-taking ATMs in which it had services. A community development service is one that originated or had outstanding during the previous calendar year a benefits primarily low- and moderate-income individusignificant number and dollar amount of home mortgages and loans to small businesses, small farms, and consumers (if consumer loans als or addresses the affordable-housing or other ecoare included by the bank in the CRA evaluation) plus any other nomic development needs of the community. areas equidistant from its branches and deposit-taking ATMs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 Federal Reserve Bulletin • February 1995 an upper-income area, the percentage is at least return to savers that is higher than that from avail- 120 percent. As this article will show, these income able alternatives. In turn, for lending activity to divisions divide the population and the number of grow and prosper, expected revenues from lending census tracts into groups of unequal size. must more than offset the expected costs of making The September proposal also extends the evalua- loans. tion of a bank's lending to encompass the distribu- One type of savings—capital (funds invested tion of loans across low-, moderate-, middle-, and in a depository institution and not merely upper-income borrowers, for which the income deposited)—is of special importance because the categories follow the same groupings as that for owners of capital—the shareholders in the neighborhoods but rely on the borrower's income institution—bear most of the risk of lending. If a relative to that of his or her MSA. Thus, while borrower fails to pay back what was promised in continuing to place a heavy emphasis on the geo- the credit agreement, the shareholders usually must graphic distribution of an institution's lending, the absorb the loss. The position of depositors differs agencies will favorably consider loans made to from that of shareholders because depositors' savlow- and moderate-income individuals. ings are typically guaranteed by the government. If CRA examiners consider a broad range of loan an institution fails, most depositors eventually get products, including all types of residential, con- back their savings, whereas the shareholders lose sumer, and small business loans. This article some or all of their savings. Because their form of focuses on home purchase lending, an important savings carries greater risk than that associated component of the proposed lending test. The with deposits, shareholders expect their returns to HMDA data allow the empirical investigation of exceed those of depositors. the nature and extent of this type of lending by the The revenues from lending accrue primarily mortgage industry to different neighborhoods and from the interest rates charged on the loans and any different borrowers in all MSAs.8 points or other fees assessed when the loans are As discussed below, the proposed regulation originated. Although the lender knows at the time does not establish specific lending thresholds for of loan origination how much revenue from points obtaining a particular CRA rating; such lending is and fees it will receive on a particular loan, the to be reviewed within an "assessment context." timing and amount of revenue that will be gener- Moreover, a particular CRA rating would include ated by the stream of interest payments on the loan the proposed investment and service tests—tests is much less certain: The borrower may repay the that are not considered in this article. Thus, the loan ahead of schedule (for example, a homeowner distribution of lenders measured by some aspect of may refinance the mortgage or sell the home before their home purchase lending may not parallel the the loan expires) or the borrower may fail to make distribution of lenders by their CRA ratings. the required payments and default on the loan. A lender, in determining the expected return from a loan, must assess the likelihood of each of these A REVIEW OF THE BUSINESS OF BANKING contingencies. The cost of lending has at least four components. Depository institutions, like other businesses, rely The first component is expenses required to pay on the savings of households and businesses to staff and provide the physical facilities for operadevelop and expand their activities. Because savers tions. The second is expenses associated with proare seeking the highest risk-adjusted returns, cessing loans, including origination activities (such depository institutions can attract additional funds as evaluating an applicant's credit history and abiland thus grow only when they offer a risk-adjusted ity to repay the debt as scheduled), the appraisal and survey of properties offered as collateral, and servicing activities (such as processing loan payments and monitoring borrowers who have fallen 8. HMDA applies only to lenders of a certain size or that receive behind on their payments or are likely to fall a certain number of loan applications during the year and have a home office or branch in an MSA. Therefore the analysis presented behind). Although the amount of time and effort here is limited to a subset of the mortgage industry. Nevertheless, expended on origination, processing, and servicing the lenders covered by HMDA in 1993 accounted for about 73 per- activities vary considerably among loans dependcent of all home purchase loans made that year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 77 ing on their type and complexity, all loans require a rendered socially inefficient by "externalities." The minimum level of such activities. efficient markets view concludes that the CRA is a The third component is the expenses associated "tax" on the banking system, whereas the latter with possible loan default, often referred to as two views may, though not always, support the credit risk.9 When a lender extends a loan, it knows position that the CRA is a useful public policy tool that there is some probability that the borrower will that ultimately benefits lenders as well as borrownot repay the loan or will significantly delay pay- ers and their neighborhoods. ment. In some cases of default, the lender is able to take action against the borrower—for example, by foreclosing on assets serving as collateral on the The Efficient Markets View loan. If the collateral has sufficient market value, the lender may not suffer a loss on the loan. If The HMDA data indicate that home purchase loans thecollateral is impaired or has declined in value, are extended in almost all neighborhoods but that or if foreclosure expenses are too high, then the the loan volume in low- and moderate-income lender will incur a loss. neighborhoods is smaller than in middle- and A lender that makes a large number of loans upper-income areas. Because financial institutions knows that a small percentage will not be repaid as are present and able to lend in nearly all neighborscheduled. In estimating this risk, lenders often can hoods, an adherent of the efficient-markets view rely on their past experience with similar types of would conclude that the low volume of lending in credit. If they have had considerable experience low- and moderate-income neighborhoods simply with a particular type of lending, they can use reflects the lower returns of, and the lower demand statistical techniques to evaluate the credit risk for, such lending. posed by individuals with different characteristics In this view, any regulation that encourages addiand to establish reserves against possible losses. tional lending, including the CRA, is equivalent to For unusual or large loans, they must rely on their a tax because it requires a depository to make a judgment and experience. loan that is expected to yield, at best, an amount The fourth component of lending costs is the less than that required to cover all expenses, includexpense associated with funding loans. The bulk of ing the return expected by shareholders. As with all the funds used for loans and related activities taxes imposed on a particular sector of the econcomes from depositors; the remainder comes from omy, the effect of higher taxes is to encourage shareholders who contribute capital. The interest economic activity to move to other, lower-taxed rates paid on deposits and the returns on sharehold- sectors of the economy. Thus, if the CRA is indeed ers' capital must be high enough to attract and such a tax and if all other things are held equal, retain funds from both sources so that lending can then overall lending by CRA-covered depository take place. institutions will decline (even though lending in lower-income neighborhoods may increase) relative to lending by institutions not covered by the HOW THE CRA MIGHT AFFECT CRA. THE BUSINESS OF BANKING Economic theory offers at least three perspectives The Discrimination View from which to consider how the CRA might affect the business of banking: (1) the lending market is Economic theory suggests that systematic differefficient, (2) the lending market embodies illegal ences in treatment based on race or other inherent discrimination, and (3) the lending market is attributes of prospective borrowers (that is, illegal discrimination) may arise from two distinct sources: (1) prejudice or (2) information-based efforts to enhance profitability. The economic 9. Various factors affect the risks of and returns on lending by depository institutions across geographic areas. For additional theory discussing prejudicial discrimination sugdetails, see Board of Governors of the Federal Reserve System, gests that some individuals or firms are willing Report to the Congress on Community Development Lending by to forgo profitable exchanges to satisfy a "taste for Depository Institutions (Board of Governors, 1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Bulletin • February 1995 discrimination" against a specific group.10 The may decline, and such groups may develop and theory also suggests that illegal discrimination of use alternative methods of financing home purthis type will disappear over time as long as entry chases (for example, the use of seller-financing or into markets is possible. According to this theory, of government-backed lending programs). The loan firms that act on the basis of prejudice will eventu- demand may not return even if, at some point, ally be driven out of business because other firms lenders decide to seek the business of these groups. that do not discriminate will expand and take As with prejudicial discrimination, the CRA advantage of profitable opportunities left open by combined with fair lending laws might be an effecthe firms that are discriminating. However, the tive, although indirect, mechanism for addressing length of time required for market participants to information-based discrimination. But unlike the identify and take advantage of profitable opportuni- case of prejudicial discrimination, the CRA may ties is not specified by this theory. lower profitability in the short-run if information- If many lenders engage in prejudicial discrimina- based discrimination can yield higher returns. tion against minorities, perhaps reflecting a historical, societywide bias, then they may not extend credit in low-income neighborhoods because of the The Externalities View high proportions of minority residents in these neighborhoods.11 In this case, the CRA is likely An externality exists when the decisions and to increase lender profitability if it works with actions of one market participant affect the wellfair lending laws and forces lenders to lend to being of another without the decisionmaker's either minorities who are good credit risks but who bearing the full costs of, or reaping the full benefits would have been denied loans because of illegal from, those actions. For example, within a neighdiscrimination. borhood, the failure of some homeowners to main- However, discrimination against minorities, tain their properties can have spillover effects on against neighborhoods with high proportions of the prices of surrounding, well-maintained properminority residents, or against low-income neigh- ties. The homeowners who allow their properties to borhoods may be "information-based" discrimina- decline suffer only some of the costs of their tion.12 Under this theory, group membership is actions—their neighbors suffer some as well. And perceived by the creditor as providing valuable those who do maintain their properties likewise do information. That is, lenders may use an appli- not receive all the benefits of that choice—their cant's ethnic or racial status or neighborhood as a neighbors receive some benefit as well. measure of the expected returns on a loan and thus A lender's assessment of the risks of, or returns require applicants with certain racial or ethnic iden- to, mortgage lending in a neighborhood will be tities or from certain neighborhoods to meet higher influenced by the condition of the properties there. underwriting standards to qualify for credit. In this If others are lending in the neighborhood at the theory, market competition does not ensure the same time, a lender may have greater confidence eventual elimination of information-based discrimi- that the externalities will be positive because it nation because such activities may be profitable, knows that other lenders and borrowers are albeit illegal. Over time, however, the demand for committed to maintaining or improving property loans from the groups subject to discrimination values. Thus, a regulation that encourages more concentrated or coordinated lending in a particular neighborhood may raise the profitability of all lending in that neighborhood. 10. The first theoretical model of this type was developed in Many factors may account for the relatively Gary S. Becker, The Economics of Discrimination (University of Chicago Press, 1971). lower volume of loans in lower-income neighbor- 11. Prejudicial discrimination in lending may occur at different hoods, but a consequence of the lower volume is stages in the lending process: before the filing of an application that lenders tend to have less experience, and thus (application screening), in the decision to approve or deny credit, in higher costs, when evaluating the risks of lending the setting of the loan terms, and in the level of service provided after a loan is extended. in lower-income areas. If the information needed to 12. See, for example, Edmund S. Phelps, "The Statistical assess the risks of some borrowers is costly to Theory of Racism and Sexism," American Economic Review, acquire, and the benefits of obtaining the informavol. 62 (September 1972), pp. 659-61. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 79 tion accrue only partly to the lender acquiring the borrowers and perceptions of risk differ across information (and partly to competitors who do not neighborhoods, then neighborhood characteristics seek costly information and therefore have, other can be correlated with credit rationing. things being equal, a lower cost structure), then If the CRA encourages the pooling of informalenders are less likely to invest sufficiently in tion about borrowers or neighborhoods, or the sharacquiring the information; in other words, an ing of personnel, or joint lending activities, then, information externality exists.13 according to the externalities view, it may have a One information externality that may affect lend- positive effect on profitability. Lending in lowing primarily in low-income areas arises from the income areas frequently involves the use of nontrapaucity of real estate transactions in those areas.14 ditional lending criteria and subsidies and thereby If, in the case of single-family real estate, low- and makes risk assessment less standard and more commoderate-income census tracts have fewer homes, plex. By sharing information as well as skilled and fewer sales, and a more heterogenous housing stock knowledgeable personnel, each lender may be able than do upper-income areas, then establishing the to lower the costs of using nonstandard lending value of homes for use as the collateral for mort- criteria and to make profitable loans. Such cooperagages will be more difficult. Lenders may hesitate tion might occur without the CRA because it is in to invest in learning fully about the market value of the best interests of lenders as well as borrowers, homes because keeping such information propri- but the CRA could make cooperation easier to the etary may be difficult. extent that the CRA sanctions and encourages such Another information externality may be limited activities.15 knowledge about governmental and other nonprofit If the CRA simply forces lenders to compete for programs for promoting lending in low-income less profitable loans, however, it may heighten the neighborhoods. If subsidy programs can be used problems created by externalities. This result may effectively to mitigate risk but acquiring infor- arise if lenders believe they will not receive suffimation about such programs requires highly trained cient recognition for shared projects in their CRA and highly paid personnel (who may be in short evaluations and hence refuse to coordinate lending supply), then using these programs may be too or share information. If the CRA encourages lendcostly for many lenders. ers to compete for "CRA loans" and undermines A lack of information about borrowers can also the sharing of information, then the profitability of result in nonprice credit rationing and, as a conse- lending may fall, and the CRA may again be quence, some borrowers who are potentially able to thought of as a tax. repay loans may be unable to obtain credit. If a lender raises the interest rate to cover the cost of potential credit losses, it may attract a dispropor- CHARACTERISTICS OF CENSUS TRACTS tionately large number of high-risk borrowers GROUPED BY NEIGHBORHOOD INCOME because low-risk borrowers, knowing that they have a relatively low probability of defaulting, are As reviewed earlier in this article, CRA evaluations unwilling to pay higher interest rates. Conse- place emphasis on the distribution of a bank's quently, the higher interest rates may fail to provide the overall returns expected by the lender, who may therefore find it more profitable only to make 15. For examples of such cooperation, see Paul S. Calem, "The loans with lower interest rates to borrowers judged Delaware Valley Mortgage Plan: Extending the Research of to pose a low risk. If a lender's knowledge about Mortgage Lenders," Journal of Housing Research, vol. 4 (1993), pp. 337-58; and Richard G. Fritz and Rawi E. Abdelal, "Consortium Residential Lending and Community Reinvestment: An Analysis of the Atlanta Mortgage Consortium" (paper presented at 13. A detailed model of this phenomenon is presented in the American Real Estate and Urban Economics Association, Janu- William C. Gruben, Jonathan A. Neuberger, and Ronald H. ary 3,1994). Schmidt, "Imperfect Information and the Community Reinvest- A different method of overcoming these externalities would be ment Act," Federal Reserve Bank of San Francisco, Economic to allow only a few lenders (or even one) to specialize in lending in Review, vol. 3 (Summer 1990), pp. 27^6. targeted lower-income communities and have other lenders invest 14. This argument is developed in detail in William W. Lang in these specialized lenders. However, to date the CRA has been and Leonard I. Nakamura, "A Model of Redlining," Journal of interpreted as requiring all lenders to help meet credit needs by Urban Economics, vol. 33 (1993), pp. 223-34. lending directly in all parts of their local communities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • February 1995 services within its service area, with particular tracts fall into the middle- or upper-income attention paid to low- and moderate-income neigh- categories. borhoods.16 The proposed CRA regulation would Low-income census tracts are distinct from also have examiners evaluate a bank's performance upper-income census tracts. First, median family within an "assessment context," which would income in the median low-income tract is only include an analysis of information about the popu- about 30 percent of the median income of the lation, the housing units, and other characteristics median upper-income census tract. Second, the of a bank's service area. population of the median low-income census tract The basic unit of analysis for CRA evaluations is is about two-thirds that of the typical upper-income the neighborhood. One common way to define a tract; hence, the 7.5 percent of tracts that are lowneighborhood is as a census tract.17 A few census income have only about 5.4 percent of the populatracts are primarily commercial or industrial in tion of all tracts. Third, the median low-income nature and have few or no residents. In our analysis tract has a proportion of minority residents that is of home purchase lending, we excluded census more than eleven times greater than that found in tracts if the 1990 census showed they had (1) no the median upper-income census tract. Thus, an residents, (2) no owner-occupied housing, or (3) no emphasis on lending in low- and moderate-income reported median family income.18 neighborhoods would likely result in a focus on As of 1990, low-income census tracts constituted credit to minority residents. only 7.5 percent of the roughly 42,700 census The demand for mortgage credit for ownertracts in the United States (table l).19 Most census occupied homes in a census tract is influenced by the composition of the housing stock, the prevalence of families, and the level of population in the tract. Low-income tracts have few owner-occupied homes and only a small proportion of all the owner- 16. A detailed description of characteristics of neighborhoods grouped by neighborhood income can be found in Glenn B. Canner, occupied housing units in metropolitan areas Wayne Passmore, and Dolores S. Smith, "Residential Lending to because most residents in these tracts are renters. Low-Income and Minority Families: Evidence from the 1992 Only 2.2 percent of all owner-occupied housing HMDA Data," Federal Reserve Bulletin, vol. 80 (February 1994), pp. 79-108. In some cases, statistics in the 1994 article are not units are in low-income census tracts, and the numidentical to those presented here because additional census tracts ber of owner-occupied units in the median lowand MS As were added in 1993, because the calculation techniques income tract is only one-fifth the number in the sometimes vary, and because loan product and census tract selection choices can differ. median upper-income tract. Moreover, the rate of 17. Census tracts are geographic areas drawn by the Bureau of family formation appears to be lower in lowthe Census to be homogenous with respect to population characterincome census tracts, judging by the ratio of famiistics, economic status, and living conditions. For geographic areas without census tracts, the proposed CRA regulation relies on block lies to households. (A household includes all numbering areas, which the Bureau of the Census defines as a people who occupy a housing unit whereas a famcluster of small geographic subdivisions signified by visible feaily is a component of households and, as defined tures such as streets, roads, railroad tracks and streams, and invisible features such as political boundaries. earlier, consists only of households with related 18. For 1993, 1,470 owner-occupied home purchase loans were persons.) reported in 282 census tracts that had a reported family median income but no owner-occupied housing units. The presence of Other typical characteristics of low-income owner-occupied home lending in these neighborhoods may reflect neighborhoods are high rates of poverty, housing the conversion, since 1990, of commercial or industrial structures vacancy, and unemployment.20 In addition, the or public facilities such as schools to residential uses. In addition, some rental properties may have been converted to cooperatives or housing stock in such neighborhoods tends to be condominiums. quite old, which may indicate that many properties Also in 1993, 6,323 home purchase loans were reported in in these neighborhoods are in poor physical condi- 914 census tracts that had no reported median family income. tion. Before extending a loan, creditors often These tracts were recorded in the 1990 census with either no population or with a small number of people and, to protect the confidentiality of the respondents, the Bureau of the Census did not report a median family income. 19. This count of census tracts includes only those in MS As where a commercial bank, savings association, credit union, or 20. The poverty level for 1989 varied according to the number mortgage company made at least one home purchase loan for an of persons in a household; the poverty level was $6,310 for a owner-occupied home in 1993 as reported under HMDA. The one-person household, $12,575 for a four-person household, and count excludes all census tracts in Puerto Rico. $23,973 for a nine-person household. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 81 require that a property be in sound physical condi- whether these census tracts are actually part of any tion. Given these characteristics of low-income particular bank's service area.21 areas, potential borrowers there would seem less likely to seek home purchase loans and more likely to seek loans for home improvement and for rental 1993 HOME PURCHASE LENDING properties. In 1993, fewer than 2 percent of all census tracts We now examinine the 1993 HMDA data on home had no reported home purchase loans. Census tracts purchase lending in terms of neighborhood, borwithout loans were excluded from further analysis rower, and lender characteristics. because they have characteristics, such as fewer people and fewer owner-occupied housing units, 21. Under the proposed regulation, lenders would have to identhat indicate they may be primarily commercial or tify the census tracts and block numbering areas in their service industrial areas and because we cannot determine areas regardless of whether they made loans in these tracts. 1. Selected characteristics of metropolitan-area census tracts in which home purchase loans were made and of metropolitanarea tracts without such loans, by census-tract income group, 1993 Characteristic Low Moderate Middle Upper All Census tracts in which home purchase loans were made in 1993 ALL TRACTS Distribution of tracts Number 3,202 8,959 20,234 10,336 42,731 Percent 7.5 21.0 47.4 24.2 100 Percentage of population 5.4 19.5 49.7 25.4 100 Percentage of owner-occupied housing units 2.2 14.3 53.2 30.2 100 MEDIAN TRACT 1 Income and employment Median family income relative to MSA median (percent) 40.3 68.0 98.8 140.8 97.2 Poverty rate (percent)2 41.8 20.2 7.5 3.5 8.4 Unemployment rate (percent)3 16.6 9.1 5.0 3.3 5.3 Population Number 2,849 3,729 4,244 4,258 4,024 Percentage belonging to a racial/ethnic minority . 88.5 39.2 9.4 7.8 13.3 Percentage of households made up of families ... 66.7 67.9 73.8 78.6 73.1 All housing units Number owner-occupied4 244 616 1,057 1,187 92.6 Percentage rented 59.6 44.0 25.6 16.5 29.0 Percentage vacant 12.1 8.1 5.0 4.2 5.6 Median age (years) 41 36 27 22 28 Census tracts in which no home purchase loans were made in 1993 ALL TRACTS Distribution of tracts Number 455 142 59 32 688 Percent 66.1 20.6 8.6 4.7 100 MEDIAN TRACT 1 Population (number) 2,065 1,439 509 111 1,779 Number of owner-occupied housing units4 67 78 34 8 60 Median family income relative to MSA median (percent) 34.2 62.8 94.8 146.8 42.1 NOTE. The data exclude Puerto Rico. Home purchase loans are those Middle-income tracts are those in which the ratio is at least 80 percent and extended on owner-occupied one- to four-family dwellings in 1993 and less than 120 percent. reported under the Home Mortgage Disclosure Act (HMDA). The median Upper-income tracts are those in which the ratio is at least 120 percent. family incomes of census tracts and other characteristics reported here are 1. Ranked according to the median family income of each tract in the 1990 values from the Bureau of the Census. For definitions of family, group. metropolitan statistical area (MSA), and census tract, see text notes 7 and 17. 2. See text note 20. For definitions of lenders covered by HMDA, see the appendix. 3. Percentage of population 16 years of age and older that is unemployed Low-income census tracts are those in which the median family income is and seeking employment. less than 50 percent of the median family income of the MSA in which the 4. Excludes non-year-round housing units. tract is located. SOURCE. Federal Financial Institutions Examination Council (FFIEC). Moderate-income tracts are those in which the ratio of the medians is at least 50 percent and less than 80 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 Federal Reserve Bulletin • February 1995 Aggregate Lending by Neighborhood Income end" ratio, which combines the proposed housing debt payments with the applicant's existing debt The distribution of loans for the purchase of owner- payments. Income, per se, is thus not necessarily a occupied homes in 1993, as reported in the HMDA determinant of creditworthiness because a lowdata, indicates that nearly 90 percent of the number income borrower may be seeking a small loan for of home purchase loans and about 92 percent of the an inexpensive house whereas a high-income bordollar value of such loans are made in middle- and rower may be seeking a large loan for an expensive upper-income neighborhoods (table 2). For census house. Thus, a low-income borrower may have tracts with at least one reported home purchase a lower payment burden than a higher-income loan in 1993, the median low-income census tract borrower. had only five loans made within its boundaries Income may, however, be a proxy for the ability compared with sixty-six in the median upper- of a household to save sufficient funds for a down income census tract. The number of loans payment on a home. Thus, there may be an income extended, relative to the number of owner-occupied threshold below which relatively few borrowers housing units, was 2.7 percent in the low-income can qualify for a mortgage regardless of debt paytracts, compared with 7.2 percent in the upper- ment ratios.22 income tracts. In low-income areas, where the median family That the ratio of home-purchase loans to the income of the census tract is, by definition, less number of owner-occupied housing units is much than 50 percent of the MSA median family income, smaller in low-income neighborhoods than in the median income of borrowers relative to the upper-income areas may be viewed by some as MSA median family income (referred to here as evidence of discrimination in mortgage lending. the borrower's relative income) was 76 percent in However, this statistic by itself does not take into 1993 (table 3).23 In moderate income tracts, where account important factors that may influence the the relative income of families ranges between 50 volume of lending in these areas—property turn- and 80 percent of the MSA median, the relative over rates, changes in home values, and the number income of borrowers was about 80 percent. Thus, of loan applicants who can qualify for credit. for lower-income neighborhoods, a large drop in Characteristics of Home Purchase Loan 22. A similar point is made in Howard A. Savage and Peter J. Fronczek, "Who Can Afford to Buy a House in 1991?" Current Borrowers Grouped by Neighborhood Income Housing Reports (Bureau of the Census, July 1993), in which the authors estimate what percentage of current owners and renters When evaluating a mortgage application, lenders could afford to buy a house. 23. The borrower income is not the same as family income. A often calculate two ratios of debt payment to borrower may be a single individual or two or more unrelated income for the applicant: the "front-end" ratio, individuals as well as a family. Moreover, income reported under which includes only the debt payments associated HMDA may understate an applicant's actual income both because applicants sometimes do not reveal all sources of income to lenders with the home purchase (including property taxes and because lenders report under HMDA only that portion of the and mortgage and home insurance), and the "back- applicant's income relied on for the credit decision. 2. Selected indicators of home purchase loan activity reported under HMDA, by census-tract income group, 1993 Indicator Low Moderate Middle Upper All Distribution of loans (percent) Number 1.1 9.7 50.0 39.3 100 Dollar amount .7 6.9 44.1 48.3 100 Number of loans in median tract1 5 19 46 66 39 Ratio of number of loans to number of owner-occupied housing units (percent) 2.7 3.7 5.2 7.2 5.5 NOTE. Excludes census tracts in which no home purchase loans were incomes for 2,383,205 of the loans and did not report the borrowers' incomes extended in 1993. Lenders covered by HMDA reported that they originated for the remaining 41,365 loans. See also general note to table 1. 2,424,570 home purchase loans in 1993, on which they extended $269.2 bil- 1. For definition of median tract, see note 1, table 1. lion; the data in this table cover those loans. Lenders reported the borrowers' SOURCE. FHEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 83 the median income of residents of a neighborhood income neighborhoods.24 This rough approximaseems to yield only a small drop in the relative tion also indicates that the typical borrower in a income of borrowers, suggesting that financial low-income neighborhood made little or no down institutions lend to borrowers who meet an income payment on the home purchase, while the typical threshold regardless of neighborhood income. borrower in an upper-income neighborhood made a The average borrower income is generally much down payment roughly equal to 20 percent of the higher than the median, even for low-income cen- home value. sus tracts, because some borrowers have very high The high loan-to-value ratio in lower-income incomes. For borrowers in low-income census neighborhoods may partly reflect the widespread tracts, the average relative income was 113 percent use of government-backed mortgage programs in (not shown in table), almost 50 percent higher than these neighborhoods (see appendix table A.4). New the median relative income of these borrowers. borrowers using these programs often have loan-to- Overall, the median relative income of all home value ratios close to 100 percent. A high loan-topurchase loan borrowers was 109 percent com- value ratio may also indicate a high proportion of pared with the average of 148 percent (not shown first-time homebuyers. These buyers may have few in table). financial assets available for a downpayment but The loan-to-income ratio for the median bor- relatively high incomes, and thus they tend to rower in each neighborhood income group is fairly locate in neighborhoods with lower house prices. uniform, ranging from about 189 percent to 200 percent; the narrow range perhaps reflects underwriting standards that do not vary signifi- Neighborhood Income and Borrower Income cantly with neighborhood characteristics. Although the loan-to-income ratio is not generally calcu- Most borrowers in low-income neighborhoods do lated by lenders when underwriting a mortgage, not have low incomes (table 4). In 1993, only it is directly related to the debt-to-income ratios 23 percent of the borrowers in low-income neighdescribed above. borhoods had low incomes, whereas more than A commonly used underwriting ratio is the loanto-value ratio. HMDA data do not include the value of the home purchased by the mortgage borrower. 24. The loan amounts are from the 1993 HMDA data, but the home values come from the 1990 census. As house prices increase, However, the census data provide, for each census the loan size will also increase. To adjust for this mismatch in tract, the median value of owner-occupied homes timing, we have inflated the 1990 home values by 9 percent. in a census tract. Dividing the median-income bor- There are three commonly used home price indexes. The Department of Commerce's new single-family, constant-quality unit index rower's loan amount by the median home value for indicates that new home prices for the United States as a whole the census tract of the property related to the loan rose 5.8 percent from year-end 1990 to year-end 1993. The provides a rough calculation of the loan-to-value National Association of Realtors's existing single-family home price index shows an 11.8 percent increase over that period, while ratio and indicates that loan-to-value ratios for the the Freddie Mac/Fannie Mae conventional mortgage home price typical borrower are significantly higher in lower- index shows about a 9 percent increase. 3. Median values of selected characteristics of home purchase loans reported under HMDA, by census-tract income group, 1993 Characteristic Low Moderate Middle Upper All Income relative to MSA (percent)1 75.9 79.8 98.7 136.6 109.2 Loan-to-income ratio (percent) 188.5 191.4 196.8 200.0 197.6 Loan-to-value ratio (percent)2 98.2 89.5 86.1 78.1 83.2 Income (thousands of dollars) 33 35 43 58 47 Loan amount (thousands of dollars) 59 63 81 113 90 NOTE. The values reported here are the medians for each census-tract 2. Home values were calculated by inflating those reported by the Bureau income group. Excludes borrowers for whom income was not reported (see of the Census for 1990 by 9 percent to approximate 1993 home values (see general note to table 2). For definition of census-tract income groups, see text note 24). general note to table 1. SOURCE. FFIEC. 1. Ratio of borrower income to HUD's 1993 measure of the median family income in the MSA of the property purchased by that borrower. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Federal Reserve Bulletin • February 1995 46 percent had middle or upper incomes. Perhaps Distribution of Lenders by Neighborhood surprisingly, the proportion of upper-income bor- Income and Borrower Income rowers in the low-income census tracts was about equal to the proportion in the moderate-income Lending tests for evaluating CRA performance can census tracts (about 21 percent). be structured in many ways, but proposals for such Similarly, most low-income borrowers (like bor- tests often include the proportion of a bank's loans rowers in other income groups) purchased homes in low-income census tracts, the proportion of in middle- and upper-income neighborhoods a bank's loans to low-income borrowers, or the (table 5). In 1993, 72 percent of low-income bank's market share in lower-income neighborborrowers purchased homes in middle- or upper- hoods relative to its share in higher-income neighincome census tracts. Even middle- and upper- borhoods. The current CRA proposal suggests that income neighborhoods have homes with modest the examiner consider these ratios during a CRA prices, and many low-income borrowers may prefer performance examination but does not specify to purchase homes in these neighborhoods because thresholds that would be associated with particular of the neighborhood amenities. In addition, some levels of performance. of these borrowers may be older, retired indi- The 1993 HMDA data provide an opportunity to viduals with lower incomes but with substantial examine the distribution of lending institutions wealth, which allows them to purchase more across these ratios. The lending tests used in any expensive homes in middle- and upper-income regulation would be based on bank service areas. In neighborhoods. using the HMDA data, our analysis assumes that a The high proportion of middle- and high-income bank's service area corresponds to the census tracts homebuyers in low- and moderate-income neigh- where the bank originated home purchase loans borhoods suggests that the additional emphasis on in 1993. Furthermore, the HMDA data presented lower-income borrowers in the proposed CRA here represent a national distribution of lenders and regulation may lead some CRA-covered lenders to thus may not reflect the distribution in any given change their lending strategies (for example, by market. participating in government-backed lending programs or by working more with nonprofit organizations). However, whether a loan to a high-income Distribution of Lending Activity individual in a low-income neighborhood or a loan in Neighborhoods Grouped by Income to a low-income individual in a upper-income neighborhood better fulfills the intent of the In 1993, only a small percentage of all home pur- Congress when the CRA was enacted is unclear chase loans (1.1 percent) were made in low-income because, as mentioned above, the legislation is neighborhoods (table 2). Not all lenders were vague. equally active in low-income neighborhoods; in 4. Home purchase loans reported under HMDA, grouped by census-tract income and distributed by borrower income group, 1993 Percent MEMO Borrower income group Distribution of loans by CCeennssuuss--ttrraacctt iinnccoommee ggrroouupp census-tract income group Low Moderate Middle Upper All Number Percent Low 23.0 30.7 25.0 21.3 100 25,999 1.1 Moderate 16.8 33.3 28.7 21.2 100 230,377 9.7 Middle 7.2 25.0 34.4 33.5 100 1,190,430 50.0 Upper 2.8 11.2 25.6 60.4 100 936,399 39.3 All 6.6 20.4 30.3 42.8 100 2,383,205 100 NOTE. Excludes loans for which borrower income was not reported; see and Urban Development. The ranges of ratios that distinguish the borrower general notes to tables 1 and 2. Borrower income groups are constructed income groups are the same as those that distinguish the census-tract income from the ratio of the income of each borrower to the 1993 median family groups. income of the MSA of the property purchased by the borrower; median SOURCE. FFIEC. incomes of each MSA are calculated annually by the Department of Housing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 85 fact, most depository institutions covered by the to moderate-income borrowers in both low- and CRA made few or no loans in low-income census moderate-income neighborhoods. tracts (table 6).25 Given the relatively small number Most credit unions, like other lenders, make few of low-income census tracts, many of these lenders or no loans in low-income neighborhoods. Credit may not have had such tracts within their bank unions are more likely than other lenders to make service areas. no loans in other neighborhoods, particularly Most CRA-covered lenders were focused on moderate-income neighborhoods. The relatively middle- or upper-income neighborhoods, with high proportion of credit unions with no loans about 88 percent of these lenders originating more within a neighborhood income group may reflect than 20 percent of their home purchase loans in the fact that credit unions, unlike other lenders, can middle-income neighborhoods and about 62 per- lend only to their members. Some credit unions cent originating more than 20 percent in upper- may not have many members who seek to buy income neighborhoods. Few lenders originated a homes in certain neighborhoods. substantial portion of their loans in low-income CRA evaluations consider a lender's record in neighborhoods. But the majority of CRA-covered the context of its banking market because the needs lenders reported some involvement in moderate- of the market and the capability of a lender to meet income neighborhoods, with more than 55 percent those needs can sometimes be determined only by of these lenders making at least 5 percent of their comparing an institution with its peers. One meahome purchase loans in these neighborhoods. sure of the capability of a lender is its overall A large share of independent mortgage compa- volume of loans for a particular product. Many nies reported making less than 5 percent of their lenders covered by HMDA do not specialize in loans in low-income neighborhoods; like CRA- home purchase lending and consequently report covered lenders, most mortgage companies were making few such loans. focused on middle- and upper-income neighbor- In 1993, about half of the lenders who reported hoods. However, mortgage companies were more home purchase loans under HMDA made at least likely than CRA-covered lenders to originate more twenty-five such loans (they are referred to here as than 5 percent of their loans in moderate-income high-volume lenders). Using this benchmark as a neighborhoods. As is discussed below, the wider crude definition of lenders that specialize in home use of the FHA loan programs by mortgage purchase lending, we recalculated the distributions companies may allow them to make more loans for the high-volume lenders. In this group, the proportion of lenders with no lending in lowincome neighborhoods drops for all types of lenders (bottom half of table 6). The proportion for 25. The CRA covers commercial banks and savings associations. Under the September CRA proposal, lenders have the option CRA-covered lenders, for example, drops from of including their affiliated mortgage companies in their CRA 74 percent to 57 percent. For moderate- and higherevaluation. Thus, for purposes of this analysis, we include mortincome neighborhoods, the proportions of lenders gage companies affiliated with CRA institutions in the definition of CRA-covered lenders. reporting no loans generally decrease even more. 5. Home purchase loans reported under HMDA, grouped by borrower income and distributed by census-tract income group, 1993 Percent MEMO Census-tract income group Distribution of loans by BBoorrrroowweerr iinnccoommee ggrroouupp borrower income group Low Moderate Middle Upper All Number Percent Low 3.8 24.7 55.0 16.5 100 156,299 6.6 Moderate 1.6 15.8 61.0 21.6 100 487,045 20.4 Middle .9 9.2 56.7 33.2 100 720,958 30.3 .5 4.8 39.1 55.5 100 1,018,903 42.8 ST.:::::::::::::::::::::::: 1.1 9.7 50.0 39.3 100 2,383,205 100 NOTE. See notes to table 4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Bulletin • February 1995 Nonetheless, the typical high-volume lender's per- while roughly 29 percent of these lenders reported centage of loans in low-income neighborhoods granting no loans to such borrowers. remained under 5 percent and in moderate- Mortgage companies, who generally sell the income neighborhoods remained within 5 percent loans they make into the secondary mortgage marto 20 percent. ket, may have more difficulty making loans to A particular institution's position in the dis- lower-income borrowers partly because they must tribution of lenders, as measured by the proportion meet secondary market underwriting guidelines. of loans in lower-income neighborhoods (or to Such guidelines limit a lender's flexibility to extend lower-income borrowers) is sometimes suggested credit to low-income borrowers, who more often as one measure of CRA performance. But, as have complex credit circumstances. Depository shown above, important in any such measure are institutions often fund their loans directly and thus the criteria that determine which lenders are can vary underwriting standards to a greater included in a particular market. In addition, this extent.26 The mortgage companies' lack of undertype of measure could encourage unsafe and writing flexibility, relative to CRA-covered lendunsound lending unless appropriate consideration ers, may partly account for the smaller share of is given to the market definition, the credit needs mortgage companies extending more than 20 perof the neighborhood, and the lender's capacity to cent of their loans to low-income borrowers. provide a particular type of lending. However, a larger share of mortgage companies reported extending more than 20 percent of their loans to moderate- and middle-income borrowers. Mortgage companies may be better able to reach Distribution of Lending Activity moderate- and middle-income buyers because of among Borrowers Grouped by Income their more frequent participation in governmentbacked lending programs. The programs impose The degree of lending among borrower income uniform underwriting standards but provide greater groups generally rises with the income of the group latitude on the acceptable debt-to-income ratios analyzed (table 7). Among CRA-covered lenders, the proportion of home purchase loans extended to low-income borrowers varies significantly. More 26. For more detailed information about the influence of underwriting standards and the secondary market on community developthan 12 percent of such lenders made more than ment lending, see Report to the Congress on Community Develop- 20 percent of their loans to low-income borrowers, ment Lending. 6. All home purchase lenders reporting under HMDA and those that are "high-volume" lenders, grouped by type and distributed by the percentage of their loans extended in each census-tract income group, 1993 Percent except as noted Low Moderate Type of lender of More More lenders 0 0-5 5-20 20-50 than Total 0 0-5 5-20 20-50 than Total 50 50 All home purchase lenders in 1993 CRA lenders 6,330 73.5 20.5 4.9 1.0 .1 100 32.0 12.8 38.8 12.4 4.0 100 Independent mortgage companies 875 31.1 62.6 5.9 .3 0 100 7.4 15.3 64.6 12.0 .7 100 Credit unions 1,354 87.7 5.4 5.2 1.3 .3 100 50.0 3.8 26.4 16.0 3.8 100 Lenders that made at least twenty-five home purchase loaii s in 1993 CRA lenders 3,241 56.9 39.1 3.8 .3 0 100 9.3 23.3 55.9 9.6 2.0 100 Independent mortgage companies 788 24.5 69.3 6.0 .3 0 100 1.8 16.5 69.0 12.2 .5 100 Credit unions 210 63.8 33.3 2.4 .5 0 100 11.0 18.6 60.5 9.5 .5 100 NOTE. For definition of CRA lender, see text note 25. See also general SOURCE. FFIEC. note to table 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 87 and the amount of the borrower's funds needed to borrowers are present in all census tracts, the numclose a loan.27 ber of such borrowers might be few for some Credit unions are less likely than CRA-covered banks, particularly for those located in predomilenders to make home purchase loans to low- nately upper-income areas and for those with many income borrowers. More than three-fifths of the competitors. credit unions reported extending no loans to low- As in the analysis of lender activity by neighborincome borrowers. Unlike commercial banks or hood, we recalculated the distribution of lenders' savings associations, credit unions can lend only to share of lending by borrower income group after their members, and some credit unions may have excluding low-volume lenders (bottom half of few low-income members or few such members table 7). Here, dropping low-volume lenders prowho seek home purchase loans. duces sharp changes in the distributions. The A significant number of institutions make few or proportion of lenders with no loans to low- or no home purchase loans to low-income borrowers. moderate-income borrowers falls significantly; and Proponents of the discrimination view and, per- the proportion of lenders with more than 5 percent haps, of the externalities view would likely argue of their loans to low- or moderate-income borrowthat such lenders cannot be meeting the conve- ers rises. nience and the needs of their communities because, as noted above, low-income borrowers can be found in almost all census tracts (table 5). Propo- Distribution of Lenders by Market Share nents of the efficient-markets view might respond that whether a particular lender provides a particu- Although not given prominence in the current CRA lar type of credit is less important than whether all proposal, one proposed standard of lending perforqualified borrowers receive credit. In fact, in this mance would compare a lender's share of reported view, if such lending requires specialized knowl- loans (in various product lines) in low- and edge, not all lenders could profitably undertake moderate-income areas of its delineated commusuch lending. Furthermore, although low-income nity to its share of reported loans in other parts of its service area. Precise evaluations of how individual lenders perform under such a standard are 27. A review of the FHA loan program can be found in Glenn B. not possible because information is not available Canner, Wayne Passmore, and Monisha Mittal, "Private Mortgage on the census tracts that constitute a lender's ser- Insurance," Federal Reserve Bulletin, vol. 80 (October 1994), vice area. As before, we can estimate market shares pp. 883-99. 6.—Continued Middle Upper TTyyppee ooff lleennddeerr More More 0 0-5 5-20 20-50 than Total 0 0-5 5-20 20-50 than Total 50 50 All home purchase lenders in 1993 CRA lenders 6.7 .2 4.9 33.7 54.5 100 17.6 3.4 17.3 39.3 22.5 100 Independent mortgage companies 1.6 .1 2.1 41.9 54.3 100 2.7 1.8 17.1 57.4 20.9 100 Credit unions 11.0 0 3.0 32.9 53.1 100 28.4 .4 14.9 37.4 18.8 100 Lenders that made at least twenty-five home purchase loans in 1993 CRA lenders .2 .3 3.2 37.0 59.3 100 4.6 5.8 19.4 49.7 20.6 100 Independent mortgage companies 0 .1 1.8 43.2 55.0 100 .6 1.9 17.8 60.0 19.7 100 Credit unions 0 0 3.3 39.5 57.1 100 1.4 1.4 20.5 55.2 21.4 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 Federal Reserve Bulletin • February 1995 7. All home purchase lenders reporting under HMDA and those that are "high-volume" lenders, grouped by type and distributed by the percentage of their loans extended in each borrower income group, 1993 Percent except as noted Low Moderate Number Type of lender of More More lenders 0-5 5-20 20-50 than Total 0-5 5-20 20-50 than Total 50 50 All home purchase lenders in 1993 CRA lenders 6,330 28.6 18.5 40.1 11.6 1.1 100 15.0 1.8 39.2 41.4 2.6 100 Independent mortgage companies 875 12.8 45.8 37.7 3.1 .6 100 4.6 2.4 35.7 56.0 1.4 100 Credit unions 1,354 61.4 6.2 21.6 8.6 2.2 100 34.9 1.3 24.4 33.9 5.6 100 Lenders tl at made at least twenty-five home purchase loans in 1993 CRA lenders 3,241 8.1 33.7 51.3 6.7 .3 100 .6 2.6 50.8 45.7 .3 100 companies 788 6.3 52.1 38.5 2.9 .2 100 .5 3.0 39.4 56.7 .5 100 Credit unions .. 210 18.6 35.2 42.4 3.8 0 100 1.0 5.2 49.5 43.3 1.0 100 NOTE. See general note to table 1 and notes to table 6. For definition of borrower income groups, see general note to table 4. for each institution if we assume that the census The 1993 HMDA data indicate that for a signifitracts in which a lender reported home purchase cant proportion of lenders, the market share of loans under HMDA are the same as the census home purchase lending in low- and moderatetracts the institution would identify as constituting income census tracts exceeded their market share its service area. This assumption is probably rea- in middle- and upper-income neighborhoods sonably accurate for larger lenders but may be less (table 8). For example, 59 percent of the CRAso for smaller lenders, who may be more likely to covered lenders had lower-income market shares extend home purchase loans in areas outside their that exceeded their higher-income shares (table 8, service area (say, for instance, to long-standing memo item). For many institutions, the lowercustomers who move to a new residential develop- income neighborhood share exceeded the higherment in a suburb of a metropolitan area). income neighborhood share by a wide margin. The All home purchase lenders reporting under HMDA and those that are "high-volume" lenders, grouped by type and distributed by their percentage share of lending in each census-tract income group, 1993 Percent except as noted Low and moderate NNuummbbeerr ooff TTyyppee ooff lleennddeerr lleennddeerrss More 0 0-3 3-6 than Total 6 All home purchase lenders in 1993 CRA lenders 6,330 30.1 15.7 24.3 29.8 100 Independent mortgage companies 875 7.1 22.4 42.2 28.3 100 Credit unions 1,354 47.4 17.5 18.7 16.4 100 Lenders that made at least twenty-five home purchase loans in 1993 CRA lenders 3,241 8.6 16.4 32.2 42.8 100 Independent mortgage companies 788 1.4 22.7 45.2 30.7 100 Credit unions 210 9.0 31.0 32.4 27.6 100 NOTE. See general note to table 1 and notes to table 6. Market shares are in a given census-tract income group and dividing by the number of home calculated by summing the number of home purchase loans made by a lender purchase loans made by all lenders in that census-tract income group. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 89 7.—Continued Middle Upper TTyyppee ooff lleennddeerr More More 0 0-5 5-20 20-50 than Total 0 0-5 5-20 20-50 than Total 50 50 All home purchase lenders in 1993 CRA lenders 12.8 .4 18.4 64.7 3.7 100 5.7 .3 7.9 52.0 34.1 100 Independent mortgage companies 2.5 0 4.6 90.1 2.9 100 1.1 .7 13.8 61.5 22.9 100 Credit unions .....— 24.2 .2 12.3 51.3 12.0 100 17.4 .2 8.2 42.3 32.0 100 Lenders that made at least twenty-five home purchase loans in 1993 CRA lenders .3 .6 16.1 82.6 .4 100 .1 .5 5.7 60.6 33.1 100 Independent mortgage companies .3 .1 5.3 92.9 1.4 100 .4 .9 15.5 64.5 18.8 100 Credit unions 0 1.0 11.4 86.2 1.4 100 0 0 9.1 59.5 31.4 100 bulk of the institutions with low market share in (table 9). The number of competitors in upperlow- and moderate income neighborhoods are low- income neighborhoods is typically four to five volume lenders who made no loans in low- and times higher than the number in low-income moderate-income neighborhoods. When these neighborhoods. institutions are excluded (bottom half of table 8), most lenders had higher market shares in lowerincome neighborhoods than in higher-income SUMMARY neighborhoods. The relatively high market shares in lower- The volume of home purchase lending in lowincome census tracts result from the smaller income neighborhoods and to low-income borrownumber of competitors in these neighborhoods ers in the United States is small and is generated by 8.—Continued MEMO Ratio of market share in low- and Middle and upper moderate-income tracts to share in middle- and upper-income tracts Type of lender More More 0-3 3-6 than Total 0-.5 .5-1 1-1.5 than Total 6 1.5 All home purchase lenders in 1993 CRA lenders 1.5 46.1 32.7 19.7 100 30.1 2.2 8.8 11.9 47.0 100 Independent mortgage companies .0 46.6 41.3 12.1 100 7.1 .7 5.6 16.3 70.3 100 Credit unions 2.7 70.8 23.2 3.3 100 47.4 .4 3.7 6.1 42.3 100 Lenders that made at least twenty-five home purchase loans in 1993 CRA lenders .0 30.4 40.0 29.5 100 8.6 2.7 13.6 18.1 57.1 100 Independent mortgage companies .0 42.5 44.2 13.3 100 1.4 .8 6.1 17.8 74.0 100 Credit unions .0 59.6 31.0 9.5 100 9.0 1.0 7.6 15.7 66.7 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 Federal Reserve Bulletin • February 1995 only a small proportion of lenders. The questions lenders. As long as mortgage credit is made availarise, is the small volume of such activity appropri- able in a nondiscriminatory and competitive manate, and if not, how can it be raised? ner, an efficient markets proponent would not be Safe and sound lending practices require all lend- concerned about the number of lenders providing ers to evaluate the condition of properties offered such credit. Furthermore, evidence that low-income as collateral for a prospective loan and to evaluate borrowers are found in all neighborhoods and that the creditworthiness of the prospective borrowers. borrowers from all income groups purchase proper- A proponent of the efficient markets view of lend- ties in low-income neighborhoods suggests that a ing would see the characteristics of low-income diversity of borrowers fall under the regulatory neighborhoods as recorded in the census as partly rubric of "low-income." An efficient markets proexplaining the low volume of home purchase lend- ponent would argue that the market is best suited to ing and the relatively small number of lenders determine which lenders and how many are needed active in these neighborhoods. From this perspec- to serve this diverse group of borrowers. tive, the small population, the high proportion of Finally, efficient markets imply that the CRA, if renters, and the often distressed nature of these it alters bank lending, is a tax. Further, it may be a neighborhoods, together with the requirements of particularly onerous tax because it does not apply safe and sound lending, translate into few opportu- to all mortgage lenders and because it makes lendnities to make profitable home purchase loans. ing in low-income neighborhoods a responsibility The efficient markets view suggests that the of all commercial banks and savings associations small amount of lending to minority households that have such neighborhoods in their service area, and the concentration of such households in lower- regardless of their ability to extend such credit. income neighborhoods are a result of their gener- A different interpretation of the status of home ally lower incomes and lower holdings of financial purchase lending in low-income neighborhoods and assets. A nondiscriminatory use of underwriting to low-income borrowers comes from those who criteria that reflect the credit risk or the cost of believe discrimination is the explanation for lendextending credit to individual applicants will result ers' behavior. As noted, lending in low-income in a volume of home purchase lending in low- neighborhoods is frequently equivalent to lending income areas that is generally smaller than any- in neighborhoods with a high proportion of minorwhere else. ity residents, and lending to low-income borrowers Given the characteristics of lower-income neigh- often involves lending to minorities. In this view, borhoods, a proponent of the efficient markets view the underwriting process used by lenders unfairly might also argue that lending in these neighbor- discriminates against minorities, and consequently hoods is likely to be a highly specialized activity a small proportion of loans are made in lowerand thus most efficiently pursued by only a few income neighborhoods. Moreover, in this view, both the neighborhood characteristics found in the census data and the performance of lenders are, in part, outcomes of an unfair process. 9. Median and mean number of home purchase lenders in From the discrimination view, the CRA may each lender's "lending area," calculated over all such work with fair lending laws to push banks and lenders reporting under HMDA, by census-tract income savings associations to make loans that are profitgroup, 1993 able but overlooked because of the racial or ethnic Measure Low | Moderate Middle Upper 1 All composition of the neighborhoods. If discrimination is information-based—that is, the racial or Median 7 15 25 32 25 Mean 8 16 26 34 27 ethnic characteristics of the neighborhood or of the borrower provide a low-cost method of screening NOTE. For each home purchase lender, the census tracts in which the lender made home purchase loans in 1993 were identified (the "lending loan applicants for potential returns—then the CRA area") and grouped by income level. The total number of lenders that made may work with fair lending laws to overcome such home purchase loans in those tracts in 1993 was then counted, and a median and mean number of lenders in each lender's lending area, grouped by illegal behavior, but it also may lower the profitincome, was calculated. Finally, the median value of all lenders' medians and ability of commercial banks or saving associations. the mean value of all lenders' mean values were calculated and are reported here. Excludes loans for which borrower income was not reported. See A third interpretation of the data presented here general notes to tables 1 and 2. is based on the view that certain market impedi- SOURCE. FFIEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 91 ments, or externalities, are responsible for the small The data reported under HMDA are the only inforamount of lending in lower-income neighborhoods mation on annual home lending activity at the and to lower-income individuals. Proponents of neighborhood (census tract) level that is readily this view may agree with the efficient markets view available to the public (see the box "Public Access that the current level of home purchase lending in to HMDA Data"). lower-income neighborhoods is consistent with characteristics of these neighborhoods, but they argue that the weakening or elimination of eternalities would allow the volume of profitable loans to Public Access to HMDA Data rise. From the externalities perspective, a smaller The HMDA data are made available to the public by number of lenders in lower-income neighborhoods the financial institutions covered by the act, by central and a smaller number of loans to lower-income data depositories (usually a public library, regional borrowers would be signs that information about planning agency, or other public entity), and by the the riskiness of this lending may be difficult to Federal Financial Institutions Examination Council (FFIEC). Under HMDA, each financial institution obtain and that such lending would be greater and submits its lending data to its supervisory agency on more profitable if lenders shared information and a Loan/Application Register (HMDA-LAR) in a coordinated lending activities. Moreover, lending transaction-by-transaction format and makes an edited to low-income borrowers—which often requires version of its LAR available to the public. The FFIEC knowledge of government mortgage programs and processes the LAR data and prepares public disclosure other vehicles for qualifying lower-income house- statements for individual lenders; each lender in turn holds for mortgages—may also be a highly skilled makes the disclosure statements available in at least endeavor and thus difficult for all CRA-covered one office in each MSA in which it is located. The lenders to pursue simultaneously. Thus, if the CRA FFIEC also sends these disclosure statements and an encourages such coordination, then it may encour- aggregate report for each MSA to the central data age additional profitable lending. If, however, the depository in each MSA. CRA merely encourages competition among lend- The FFIEC makes the HMDA data available for purchase in several media. Facsimiles of disclosure ers because of the need to make additional loans in reports for the individual institutions and the aggregate low-income neighborhoods or to low-income indireports for each MSA are available in paper form, in viduals (that is, if loans resulting from coordinated microfiche, and on CD-ROM. HMDA-LAR records activities are discounted in CRA evaluations), then and selected census data for each census tract in each a proponent of this view might also agree that the MSA are available on PC diskettes, and such data for CRA is best considered a tax. the entire nation are available on computer tape and CD-ROM. The sociodemographic data used to prepare the HMDA disclosure reports include data from the APPENDIX: SUMMARY 1980 and the 1990 decennial Census of Population and OF THE 1993 HMDA DATA Housing and annual estimates of the median fourperson family income for each MSA from the Depart- The Home Mortgage Disclosure Act of 1975 ment of Housing and Urban Development; these data (HMDA) requires most depository institutions with can also be obtained from the FFIEC. The FFIEC also makes available a series of reports, offices in metropolitan areas to report the geodrawn from the HMDA data, that were developed by graphic location of the properties related to the the regulatory agencies to enhance their enforcement home purchase, home refinancing, and home of fair-lending laws and assessment of lender efforts improvement loans that they originate or buy.28 under the Community Reinvestment Act. For information about the availability of data or to 28. HMDA, which became effective in 1976, is implemented by request data from the FFIEC, contact the HMDA Federal Reserve Board Regulation C (12 C.F.R. 203). For a more Operations Unit, Mail Stop 502, Board of Governors detailed description of the requirements of HMDA and a discussion of the Federal Reserve System, Washington, DC of data from previous years, see Glenn B. Canner and Dolores S. 20551. A copy of the HMDA data order form is Smith, "Home Mortgage Disclosure Act: Expanded Data on Residential Lending," Federal Reserve Bulletin, vol. 77 (November available through the HMDA Assistance Line, 1991), pp. 859-81; and Canner, Passmore, and Smith, "Residential (202) 452-2016. Lending to Low-Income and Minority Families." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 Federal Reserve Bulletin • February 1995 Amendments to HMDA in 1989 and 1991 sub- behalf of the 9,650 covered institutions.31 The stantially increased the information that lenders FFIEC mailed these reports to lending institutions must collect and the number of lenders required to in July 1994 and to central data depositories in report.29 Under HMDA, covered lenders now re- October. Both types of institution make the reports port the disposition of home loan applications (for available to the public. example, whether an application was approved, In 1993, lenders covered by HMDA acted on denied, or withdrawn) and on the race or national 13.6 million home loan applications and purchased origin, sex, and annual income of applicants. They 1.8 million loans. In comparison, in 1992 lenders also report characteristics of borrowers whose loans reported information on 10.0 million home loan are purchased. The type of purchaser of a loan must applications and 2.0 million purchased loans. also be reported if the loan was sold the same year Of the 4.5 million applications for home purin which it was originated or acquired. As of 1993, chase loans in 1993, 3.4 million, or 75 percent, a large number of additional independent mortgage were for conventional loans (table A.2). The recompanies became covered by the act; many of mainder were for government-backed mortgages— these firms are active lenders, often extending loans insured or guaranteed by the Federal Housing credit in dozens of metropolitan areas.30 Administration (FHA), the Department of Veterans This appendix summarizes the 1993 HMDA Affairs (VA), or the Farmers Home Administration data. Beginning with the release of the 1994 (FmHA). HMDA data, these types of summary tables will appear each year in the Financial and Business Statistics section of the September issue of the 31. The member agencies of the FFIEC are the Board of Gover- Federal Reserve Bulletin. nors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of Thrift Supervision. For HMDA-related matters, HUD also participates in FFIEC The 1993 HMDA Data deliberations. For 1993, the 9,650 home lenders submitting HMDA data (table A.l) consisted of 5,300 com- A. 1. Residential lending activity of financial institutions mercial banks, 1,209 savings associations, covered by HMDA, 1981-93 l,907credit unions, and 1,235 mortgage compa- Number nies, of which 962 were independent entities. The Loans or Reporting Disclosure inclusion of additional independent mortgage com- Year a ( p m p i l l i l c i a o t n io s) n 1 s institutions reports panies in 1993 increased the number of such firms 1981 1.28 8,094 10,945 reporting data more than three-fold and accounted 1982 1.13 8,258 11,357 for most of the increase from 1992 in the overall 1983 1.71 8,050 10,970 1984 1.86 8,491 11,799 number of reporters. 1985 1.98 8,072 12,567 Using the 1993 HMDA data, the Federal Finan- 1986 2.83 8,898 12,329 cial Institutions Examination Council (FFTEC) pre- 1987 3.42 9,431 13,033 1988 3.39 9,319 13,919 pared 35,976 disclosure statements, each relating to 1989 3.13 9,203 14,154 a specific metropolitan statistical area (MSA), on 19902 6.59 9,332 24,041 1991 7.89 9,358 25,934 1992 12.01 9,073 28,782 1993 15.38 9,650 35,976 1. Before 1990, includes only home purchase, home refinancing, and 29. The Financial Institutions Reform, Recovery, and Enforce- home improvement loans originated by covered institutions; beginning in ment Act of 1989 contains the 1989 amendments to HMDA; the 1990 (first year under revised reporting system), includes such loans origi- Federal Deposit Insurance Corporation Improvement Act of 1991 nated and purchased, applications approved but not accepted by the applicontains the 1991 amendments. The 1989 amendments to HMDA cant, applications denied or withdrawn, and applications closed because extended coverage for the first time to independent mortgage information was incomplete. Lending activity regarding home equity lines of credit is reported by institutions under HMDA if the applicant states that the companies (mortgage companies not affiliated with a depository credit is for home improvement. institution.) 2. Revised from preliminary data published in Glenn B. Canner and 30. Before 1993, independent mortgage companies had to report Dolores S. Smith, "Home Mortgage Disclosure Act: Expanded Data on only if they (or their parent) had at least $10 million in assets. Now, Residential Lending," Federal Reserve Bulletin, vol. 77 (November 1991), an independent mortgage company must also report if it receives p. 861, to reflect corrections and the reporting of additional data. 100 or more home loan applications during the year. SOURCE. FFIEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 93 A.2. Applications for home loans reported under HMDA, grouped by type of dwelling and purpose of loan and distributed by loan program, 1993 Thousands One- to four-family dwellings MMuullttiiffaammiillyy LLooaann pprrooggrraamm AAllll Home Home Home ddwweelllliinnggss All purchase refinancing improvement FHA 777.7 717.8 116.9 1,612.4 .6 1,613.0 VA 312.8 285.4 5.0 603.2 * 603.3 FmHA 7.4 2.0 * 9.5 * 9.6 Conventional 3,410.6 6,678.1 1,270.3 11,395.0 33.6 11,392.6 Total 4^08.5 7,683.3 1,392.3 13,584.1 34.4 13,618.5 NOTE. Multifamily dwellings are those for five or more families. * Fewer than 500. FHA Federal Housing Administration SOURCE. FFIEC. VA Department of Veterans Affairs FmHA Farmers Home Administration Historically, relatively few homeowners have some homeowners with little equity to refinance at used either FHA-insured or VA-guaranteed loans a low cost and with minimal paperwork. when refinancing their existing mortgage. For In 1993, depository institutions originated about instance, in 1992 less than 6 percent of the borrow- 48 percent of all home loans; independent morters seeking to refinance applied for government- gage companies or the mortgage company affiliates backed loans (data not shown in tables). The of depository institutions originated the rest small share of refinancings using government- (table A.3). Lending institutions tend to specialize backed loans has reflected the relatively high in different types of home loans. In 1993, mortgage cost and inconvenience of that type of transaction. companies originated about 80 percent of the Until recently, homeowners who refinanced their government-backed home purchase loans. Deposigovernment-backed mortgages were usually those tory institutions, on the other hand, were the domiwith equity sufficient to qualify for a conven- nant source of home improvement loans and loans tional mortgage. In 1993, however, the use of for multifamily dwellings. government-backed loans for refinancing increased Refinancing has been the most common type of markedly, to 13 percent. This increase probably home loan transaction in the past two reporting reflects the streamlined refinancing programs intro- years, accounting for 55 percent of all reported duced by the government agencies, which allowed home loans in 1992 and 60 percent in 1993. The A.3. Home loans originated by lenders reporting under HMDA, grouped by type of dwelling and purpose of loan distributed by type of lender, 1993 Percent One- to four-family dwellings MMMuuullltttiii--- TTT lll yyy eeennn ppp ddd eee eee ooo rrr fff Home purchase HHoommee iimm HH pp oo rr mm oovv ee ee -- AAllll dddwww fffaaa eee mmm lllllliii iii nnn lllyyy ggg sss AAAllllll FHA- VA- FmHA- Con- All rreeffiinnaanncciinngg mmeenntt insured guaranteed insured ventional Commercial bank 7.7 8.9 27.8 26.0 21.4 24.3 68.7 37.9 27.3 Savings association ... 11.1 10.4 21.3 20.3 17.9 19.0 9.4 47.2 17.9 Credit union .2 1.2 .3 1.3 1.1 2.8 10.6 .5 3.0 Mortgage company1 .. 81.1 79.5 50.6 52.4 59.6 53.8 11.2 14.4 51.8 Total 100 100 100 100 100 100 100 100 100 100 MEMO Distribution of loans Number 577,413 234,492 4,600 2,371,188 3,187,693 6,098,429 883,946 10,170,068 24,098 10,194,166 Percent 5.7 2.3 * 23.3 31.3 59.8 8.7 98.8 .2 100 NOTE. Multifamily dwellings are those for five or more families. 1. Includes mortgage companies affiliated with a commercial bank or * Less than 0.05 percent. savings association. SOURCE. FFIEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 Federal Reserve Bulletin • February 1995 extraordinarily high number of applications and Distribution of Applications by Applicant credit extensions for refinancing in both years is and Census Tract Characteristics attributable to low mortgage rates, the availability of no-fee loans, and more efficient processing of In general, households with lower incomes are the applications.32 most likely to use government-sponsored home loan programs, particularly those of the FHA and 32. With a no-fee loan, the borrower incurs no out-of-pocket the FmHA. In 1993, 36 percent of home purchase expenses for either closing costs or discount points on the loan. loan applicants with incomes below the median Such loans are often written with a higher interest rate, and closing family income for their MSA applied for costs are typically added to the amount being financed. A.4. Applications for one- to four-family home loans reported under HMDA, grouped by purpose of loan and distributed by characteristic of applicant and census tract, 1993 Home purchase HHoommee rreeffiinnaanncciinngg HHoommee iimmpprroovveemmeenntt Government-backed1 Conventional MEMO MEMO Characterisitc Percentage Percentage of of character- character- Number Percent Number Percent Number Percent Number Percent istic's istic's home home purchase purchase loans loans APPLICANT Racial/ethnic identity American Indian/ Alaskan native 4,850 .5 23.8 15,537 .5 76.2 27,676 .4 7,028 .6 Asian/Pacific Islander ... 16,849 1.6 13.3 109,636 3.4 86.7 315,472 4.4 18,625 1.6 Black 124,589 11.7 44.1 157,860 4.9 55.9 235,384 3.3 116,432 10.0 Hispanic 94,702 8.9 38.2 153,371 4.7 61.8 306,061 4.3 92,047 7.9 White 781,615 73.7 22.3 2,729,280 84.0 77.7 6,017,544 84.8 892,993 77.0 Other 4,528 .4 19.2 19,025 .6 80.8 43,926 .6 14,967 1.3 Joint (white and minority) 33,417 3.2 34.5 63,417 2.0 65.5 153,155 2.2 17,955 1.5 Total 1,060,550 100 24.6 3,248,126 100 75.4 7,099,218 100 1,160,047 100 Income (percentage of MSA median)2 Less than 80 344,277 39.4 36.2 607,305 24.9 63.8 974,967 16.8 383,544 36.5 80-99 185,031 21.2 36.3 325,173 13.3 63.7 733,603 12.7 154,051 14.7 100-119 136,607 15.6 30.4 312,966 12.8 69.6 776,904 13.4 135,416 12.9 120 or more 207,445 23.8 14.8 1,190,595 48.9 85.2 3,308,289 57.1 376,752 35.9 Total 873,360 100 26.4 2,436,039 100 73.6 5,793,763 100 1,049,763 100 CENSUS TRACT Racial/ethnic composition (minorities as percentage of population) Less than 10 353,019 40.1 20.6 1,357,135 55.0 79.4 3,238,724 50.6 529,096 50.9 10-19 : 206,553 23.5 28.5 518,845 21.0 71.5 1,421,100 22.2 176,228 16.9 20-49 215,352 24.5 35.4 392,833 15.9 64.6 1,170,252 18.3 165,316 15.9 50-79 65,073 7.4 33.9 126,690 5.1 66.1 362,150 5.7 73,983 7.1 80-100 40,323 4.6 35.6 72,949 3.0 64.4 206,159 3.2 95,123 9.1 Total 880,320 100 26.3 2,468,452 100 73.7 6,398,385 100 1,039,746 100 Income3 Low or moderate 149,336 16.8 34.4 284,682 11.5 65.6 618,903 9.6 221,021 20.7 Middle 515,792 58.0 30.0 1,203,867 48.6 70.0 3,130,103 48.6 558,385 52.4 Upper 224,137 25.2 18.5 986,634 39.9 81.5 2,690,015 41.8 286,723 26.9 Total 889,265 100 26.4 2,475,183 100 73.6 6,439,021 100 1,066,129 100 Location4 Central city 419,081 46.8 30.5 954,862 38.3 69.5 2,370,565 36.6 480,762 44.6 Non-central city 475,639 53.2 23.6 1,540,258 61.7 76.4 4,103,529 63.4 596,643 55.4 Total 894,720 100 26.4 2,495,120 100 73.6 6,474,094 100 1,077,405 100 NOTE. Lenders reported 13,618,477 applications for home loans in 1993. 2. MSA median is median family income of the metropolitan statistical Not all characteristics were reported for all applications; thus the number of area (MSA) in which the property related to the loan is located. applications being distributed by characteristic varies by characteristic. 3. See general note to table 1. 1. Loans backed by the Federal Housing Adminstration, the Department 4. For census tracts located in MSAs. of Veterans Affairs, or the Farmers Home Adminstration. SOURCE. FFIEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 95 government-backed loans; in contrast, only 15 per- finance closing costs make them particularly attraccent of applicants with incomes of at least 120 per- tive to lower-income households and to first-time cent of the median applied for such loans homebuyers, who are likely to have fewer financial (table A.4, government-backed memo item). resources than others. The greater reliance of lower-income households When examined according to the racial or ethnic on government-backed loans reflects several fac- identity of applicants, the data show that those who tors. Limits on the amount of FHA loan insurance are black are more likely than others to seek make these loans unavailable to households seek- government-backed home purchase loans. In 1993, ing to buy more expensive properties; and the low about 44 percent of the black applicants for home down payment requirements and the ability to purchase loans sought a government-backed mort- A.5. Applications for one- to four-family home loans reported under HMDA, grouped by purpose of loan and distributed, with denial rate, by characteristic of applicant, 1993 Percent Home purchase HHoommee rreeffiinnaanncciinngg HHoommee iimmpprroovveemmeenntt Applicant characteristic Government-backed1 Conventional Distribution Denial rate Distribution Denial rate Distribution Denial rate Distribution Denial rate American Indian/ Alaskan native One male 30.70 15.70 25.60 29.72 22.41 16.93 25.97 31.59 Two males 1.54 10.81 1.81 24.73 1.84 14.09 1.47 28.71 One female 22.10 18.89 23.09 30.69 16.53 14.42 24.05 32.73 Two females 3.26 26.11 3.43 25.71 4.53 11.60 1.01 27.54 One male and one female 42.40 17.30 46.07 25.72 54.70 12.68 47.51 21.56 Total 100 17.46 100 27.80 100 13.86 100 26.85 Asian/Pacific Islander One male 20.13 12.25 16.53 17.80 11.24 16.79 17.27 34.37 Two males 3.70 10.27 3.30 17.89 1.99 17.30 1.47 31.37 One female 11.60 12.03 11.39 16.56 9.00 15.89 12.27 31.05 Two females 2.18 13.62 2.00 15.89 1.30 16.50 1.13 26.44 One male and one female 62.39 11.49 66.78 13.26 76.48 12.85 67.85 24.06 Total 100 11.73 100 14.59 100 13.70 100 26.90 Black One male 26.19 21.69 23.56 35.93 17.68 20.17 25.23 39.00 Two males 1.28 20.96 1.09 32.92 1.33 17.23 0.56 42.94 One female 27.76 20.69 32.02 35.19 23.82 19.71 34.92 40.47 Two females 2.43 22.73 2.50 37.71 1.63 21.65 1.85 44.80 One male and one female 42.34 23.63 40.83 31.71 55.54 17.21 37.44 35.07 Total 100 22.25 100 34.02 100 18.39 100 38.15 Hispanic One male 18.22 15.17 18.89 28.11 13.64 19.24 26.63 ' 37.14 Two males 5.04 11.16 3.88 27.79 2.18 22.06 1.25 43.92 One female 10.32 14.88 13.29 25.74 12.02 16.94 20.53 37.60 Two females 1.92 13.71 1.92 26.48 1.23 21.51 1.19 39.34 One male and one female 64.50 14.63 62.01 23.88 70.92 17.66 50.42 32.48 Total 100 14.56 100 25.14 100 17.94 100 35.00 White One male 20.99 12.27 17.96 19.72 12.63 11.94 19.44 22.46 Two males 1.29 12.90 1.32 17.23 1.00 11.88 .62 24.76 One female 14.64 10.59 14.27 17.77 10.63 9.79 15.80 22.33 Two females 1.04 12.67 1.02 18.94 .70 10.62 0.78 22.29 One male and one female 62.05 11.91 65.42 13.49 75.05 7.74 63.37 16.09 Total 100 11.78 100 15.33 100 8.54 100 18.42 All One male 21.40 13.92 18.28 21.19 12.82 12.89 20.62 26.33 Two males 1.67 13.06 1.50 19.21 1.11 13.44 0.68 29.43 One female 15.82 13.07 15.05 20.02 11.09 11.11 18.15 27.52 Two females 1.32 15.25 1.18 21.42 .80 12.59 .93 28.82 One male and one female 59.79 13.20 63.99 14.59 74.19 8.66 59.62 18.62 Total 100 13.70 100 17.20 100 10.40 100 25.80 NOTE. Applicants are categorized by race of first applicant listed on Loan 1. See table A.4, note 1. Application Register, except for joint white and minority applications, which SOURCE. FFIEC. are not shown in this table. See also general note to table A.4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 Federal Reserve Bulletin • February 1995 A.6. Applications for home loans reported under HMDA, grouped by loan program and distributed by disposition according to size of dwelling, 1993 Percent One- to four-family dwellings Home purchase Home refinancing LLLoooaaannn ppprrrooogggrrraaammm Approved Approved Approved Approved File File and but not Denied Withdrawn Total and but not Denied Withdrawn Total closed closed accepted accepted accepted accepted FHA 74.2 1.6 13.7 9.4 1.1 100 81.0 1.8 5.6 9.1 2.5 100 VA 75.0 .7 13.5 9.8 1.0 100 85.6 1.3 4.8 7.2 1.1 100 FmHA 62.2 .7 21.9 12.9 2.3 100 33.2 .2 51.9 14.5 .2 100 Conventional 69.5 4.8 17.2 7.5 1.0 100 78.9 2.3 11.1 6.4 1.2 100 All 70.7 4.0 16.3 8.0 1.0 100 79.4 2.2 10.4 6.7 1.3 100 NOTE. Loans approved and accepted were approved by the lender and applicant, the lender reported file closed and took no further action. See also accepted by the applicant. Loans approved but not accepted were approved notes to table A.2. by the lender but not accepted by the applicant. Applications withdrawn were * Less than 0.05 percent. withdrawn by the applicant. When an application was left incomplete by the gage; the comparable figure for Hispanics was requests by multiple applicants are found across 38 percent; for whites, 22 percent; and for Asians, racial groups. About 68 percent of requests by 13 percent. white or Hispanic applicants for conventional home Finally, applicants for loans on homes in low- purchase loans involved more than one applicant, or moderate-income neighborhoods requested whereas the corresponding proportion was about government-backed mortgage loans more often 44 percent for black applicants and 72 percent for than those seeking homes in upper-income neigh- Asian applicants. borhoods. Requests for government-backed loans also accounted for a higher share of all home purchase loan applications in neighborhoods with Disposition of Home Loan Applications higher proportions of minority residents. Most applications for home loans are filed by In 1993, as in earlier years, most applications for more than one person (table A.5). However, sub- home loans (regardless of purpose) were approved stantial differences in the frequency of loan (table A.6). In 1993, lenders approved nearly A.7. Applications for one- to four-family home loans reported under HMDA, grouped by racial or ethnic identity and income group of applicant and distributed by disposition according to purpose of loan, 1993 Home purchase AAAppppppllliiicccaaannnttt Government-backed1 Conventional ccchhhaaarrraaacccttteeerrriiissstttiiiccc Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Racial/ethnic identity American Indian/ Alaskan native 69.8 17.5 11.1 1.6 100 62.5 27.8 8.4 1.2 100 Asian/Pacific Islander 76.2 11.7 11.3 .8 100 74.8 14.6 9.2 1.4 100 Black 66.2 22.2 10.2 1.3 100 57.8 34.0 7.0 1.2 100 Hispanic 71.9 14.6 11.2 2.3 100 64.3 25.1 8.8 1.8 100 White 78.9 11.8 8.5 .9 100 77.0 15.3 6.8 .8 100 Other 68.9 17.8 12.4 .8 100 66.0 23.1 9.4 1.5 100 Joint (white and minority) .. 75.0 14.7 9.4 .8 100 73.7 17.3 8.1 .9 100 Income (percentage of MSA medianf- Less than 80 76.6 14.4 8.1 .9 100 71.3 21.5 6.4 .8 100 80-99 81.3 10.5 7.5 .7 100 79.3 13.1 6.8 .9 100 100-119 81.8 9.9 7.6 .7 100 81.3 11.1 6.8 .9 100 120 or more 80.7 9.4 8.6 1.2 100 82.4 9.2 7.4 1.0 100 NOTE. See general notes to tables A.4 and A.6. 2. See table A.4, note 2. 1. See table A.4, note 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 97 A.6.—Continued One- to four-family dwellings MMuullttiiffaammiillyy ddwweelllliinnggss TTTyyypppeee ooofff Home improvement llloooaaannn ppprrrooogggrrraaammm Approved Approved Approved Approved File File and but not Denied Withdrawn Total and but not Denied Withdrawn Total accepted accepted closed accepted accepted closed FHA 38.9 12.4 38.9 8.9 .9 100 75.6 1.8 10.3 9.8 2.5 100 VA 78.8 5.8 10.7 3.8 .9 100 77.8 * 7.4 11.1 3.7 100 FmHA 31.1 3.1 54.0 11.2 .6 100 94.3 * 1.1 4.6 * 100 Conventional 65.7 4.3 24.7 4.4 .9 100 69.9 2.9 16.5 8.9 1.8 100 All 63.5 5.0 25.8 4.8 .9 100 70.1 2.8 16.3 8.9 1.8 100 75 percent of the applications received for home past and are familiar with the basic underwriting purchase loans and about 82 percent of the appli- guidelines used by lenders in making credit cations for refinancings (and applicants either decisions. accepted or did not accept the loans). Applications Although most applications are approved, rates that were neither denied nor approved were with- of denial vary among applicants grouped by their drawn or left incomplete by the applicant ("file income and racial or ethnic characteristics and by closed"). the characteristics of the neighborhoods in which High rates of approval for home loans generally, the properties involved are located. However, and for home purchase loans and refinancings in denial rates generally differ little among applicants particular, are to be expected. Real estate agents grouped by sex, although applications filed by one and lenders often inform prospective loan appli- woman are somewhat more likely to be approved cants about the size of the loan for which they are than those filed by one man, and applications by likely to qualify. In addition, many home loan men and women jointly generally are the least applicants have applied for mortgages in the likely to be turned down (table A.5). A.7.—Continued Home refinancing Home improvement Applicant characteristic Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Racial/ethnic identity American Indian/ Alaskan native 74.4 13.9 9.9 1.8 100 68.4 26.8 4.0 .7 100 Asian/Pacific Islander 77.1 13.7 7.6 1.6 100 65.8 26.9 5.8 1.5 100 Black 71.2 18.4 8.4 2.0 100 57.2 38.1 3.9 .7 100 Hispanic 69.3 17.9 9.5 3.2 100 60.1 35.0 3.6 1.3 100 White 84.9 8.5 5.5 1.0 100 77.3 18.4 3.8 .5 100 Other 71.1 17.8 9.2 1.9 100 49.8 45.1 4.3 .7 100 Joint (white and minority) .. 80.8 11.6 6.4 1.1 100 72.5 23.2 3.6 .7 100 Income (percentage of MSA median)' Less than 80 76.8 15.1 7.1 1.0 100 60.0 34.8 4.5 .7 100 §' 80-99 82.2 10.8 6.1 .9 100 69.4 25.4 4.3 .9 ioo s 100-119 83.5 9.8 5.8 .9 100 72.3 22.4 4.3 .9 100 120 or more 84.0 9.1 5.8 1.1 100 76.6 17.9 4.4 1.2 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 Federal Reserve Bulletin • February 1995 A.8. Applications for one- to four-family home loans reported under HMDA, grouped by racial or ethnic identity of applicant within each applicant income group and distributed by disposition according to purpose of loan, 1993 Home purchase Applicant income ratio Government-backed1 Conventional and racial or ethnic identity Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Less than 80 percent American Indian/ Alaskan native 72.8 16.6 9.2 1.4 100 64.7 27.0 7.1 1.2 100 Asian/Pacific Islander 76.7 12.5 10.0 .8 100 74.7 16.0 8.2 1.2 100 Black 66.9 22.5 9.4 1.2 100 59.5 32.3 7.1 1.1 100 Hispanic 73.2 16.3 9.3 1.2 100 62.8 28.6 7.4 1.2 100 White 79.8 12.1 7.4 .7 100 74.1 19.3 5.9 .7 100 Other 74.7 14.0 10.5 .8 100 65.7 26.2 7.2 .9 100 Joint (white and minority) . 74.1 16.9 8.4 .7 100 66.2 26.2 6.8 .8 100 80-99 percent American Indian/ Alaskan native 77.7 13.4 8.3 .6 100 71.9 18.1 9.3 .7 100 Asian/Pacific Islander 81.1 8.5 9.8 .6 100 76.9 13.6 8.2 1.2 100 Black 71.9 18.6 8.5 1.0 100 67.8 23.1 7.8 1.3 100 Hispanic 77.2 12.6 9.2 1.0 100 67.5 22.3 8.5 1.7 100 White 83.8 8.8 6.8 .6 100 81.7 11.3 6.3 .7 100 Other 76.3 13.5 9.3 .8 100 72.9 17.2 8.1 1.7 100 Joint (white and minority) . 78.9 12.3 8.1 .7 100 74.8 17.5 6.9 .8 100 100-119 percent American Indian/ Alaskan native 75.2 14.8 9.2 .8 100 76.7 14.7 7.4 1.2 100 Asian/Pacific Islander 81.0 9.8 8.7 .5 100 77.5 13.1 8.2 1.2 100 Black 72.3 18.0 8.6 1.1 100 68.3 22.0 8.3 1.4 100 Hispanic 76.0 12.4 10.6 1.0 100 68.5 21.1 8.7 1.7 100 White 84.4 8.1 6.9 .6 100 83.7 9.3 6.3 .7 100 Other 77.9 12.9 8.3 .9 100 71.7 17.4 9.3 1.6 100 Joint (white and minority) . 80.0 11.3 8.0 .6 100 78.0 13.6 7.8 .6 100 120 percent or more American Indian/ Alaskan native 74.4 13.6 10.2 1.8 100 76.1 13.6 8.9 1.5 100 Asian/Pacific Islander 77.1 11.5 10.8 .6 100 75.6 13.7 9.3 1.4 100 Black 72.6 17.2 9.0 1.2 100 71.8 18.2 8.5 1.4 100 Hispanic 73.1 10.3 11.5 5.1 100 70.7 17.1 9.8 2.3 100 White 83.6 8.0 7.7 .7 100 84.4 7.9 6.9 .8 100 Other 75.5 13.0 10.7 .7 100 72.6 15.6 10.1 1.7 100 Joint (white and minority) . 79.8 10.7 8.9 .6 100 80.5 10.4 8.2 .8 100 NOTE. Applicant income ratio is applicant income as a percentage of 1. See table A.4, note 1. MSA median (see table A.4, note 2). See also general notes to tables A.4 and A.6. A.9. Applications for one- to four-family home loans reported under HMDA, grouped by census tract characteristic and distributed by disposition according to purpose of loan, 1993 Home purchase Census tract Government-backed Conventional characteristic Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Racial/ethnic composition (minorities as percentage of population) Less than 10 81.6 10.3 7.5 .7 100 82.1 10.5 6.6 .8 100 10-19 80.1 11.0 8.1 .8 100 77.8 13.1 8.0 1.2 100 20-49 76.5 13.1 9.4 .9 100 73.0 17.0 8.6 1.3 100 50-79 72.1 16.6 10.1 1.2 100 67.9 21.4 9.2 1.5 100 80-100 68.4 19.0 11.3 1.3 100 62.8 25.8 9.4 1.9 100 Income Low or moderate 73.0 15.8 10.0 1.2 100 68.7 21.8 8.2 1.3 100 Middle 79.5 11.5 8.1 .9 100 77.8 14.2 7.0 .9 100 Upper 80.2 10.3 8.6 .9 100 82.0 9.3 7.6 1.1 100 Location Central city 77.0 13.2 8.8 1.0 100 77.0 14.1 7.7 1.1 100 Non-central city 79.9 10.8 8.4 .9 100 79.3 12.5 7.2 1.0 100 NOTE. See notes to tables A.4 and A.6. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 99 A. 8.—Continued Home refinancing Home improvement AApppplliiccaanntt iinnccoommee rraattiioo and racial or ethnic identity Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Less than 80 percent American Indian/ Alaskan native 70.8 19.5 8.3 1.5 100 61.5 33.8 4.4 .4 100 Asian/Pacific Islander 73.7 16.9 8.0 1.3 100 55.5 37.9 5.2 1.4 100 Black 64.7 24.6 9.1 1.5 100 52.7 42.8 3.8 .6 100 Hispanic 64.6 24.4 9.2 1.8 100 52.8 42.3 4.0 .9 100 White 81.1 12.2 5.9 .8 100 70.8 25.1 3.7 .4 100 Other 64.9 24.7 9.2 1.3 100 41.6 53.5 4.5 .4 100 Joint (white and minority) .. 75.3 16.9 6.9 .9 100 61.5 33.3 4.3 .9 100 80-99 percent American Indian/ Alaskan native 76.5 14.7 7.7 1.1 100 71.9 24.0 3.6 .4 100 Asian/Pacific Islander 78.0 13.6 7.0 1.4 100 64.0 28.6 5.7 1.7 100 Black 70.3 19.9 8.3 1.5 100 59.0 36.5 3.7 .7 100 Hispanic 68.2 20.8 9.1 1.9 100 58.7 36.6 3.6 1.1 100 White 85.5 8.7 5.1 .7 100 78.1 18.0 3.4 .5 100 Other 70.6 18.0 9.8 1.6 100 51.3 44.5 3.5 .8 100 Joint (white and minority) .. 79.7 13.1 6.2 1.0 100 71.3 24.6 3.4 .6 100 100-119 percent American Indian/ Alaskan native 76.7 13.9 8.4 1.0 100 73.6 18.8 6.2 1.3 100 Asian/Pacific Islander 78.8 12.9 6.9 1.4 100 67.6 25.0 6.0 1.5 100 Black 71.5 18.7 8.3 1.5 100 61.4 34.0 3.9 .7 100 Hispanic 68.3 20.0 9.4 2.3 100 58.7 36.1 4.1 1.1 100 White 86.5 7.9 4.9 .7 100 80.4 15.7 3.4 .5 100 Other 74.2 15.9 8.3 1.6 100 53.9 41.5 3.8 .7 100 Joint (white and minority) .. 81.2 12.1 5.9 .7 100 72.2 23.2 3.8 .8 100 120 percent or more American Indian/ Alaskan native 76.0 14.3 8.3 1.4 100 75.5 18.4 4.7 1.4 100 Asian/Pacific Islander 77.3 13.7 7.5 1.5 100 69.3 22.9 6.1 1.8 100 Black 73.3 17.6 7.7 1.5 100 66.3 28.6 4.1 .9 100 Hispanic 69.1 16.2 9.7 4.9 100 64.7 29.2 3.9 2.2 100 White 86.5 7.6 5.1 .8 100 83.3 12.5 3.5 .7 100 Other 74.4 15.6 8.4 1.6 100 62.4 32.1 4.9 .6 100 Joint (white and minority) .. 81.6 11.3 6.2 .9 100 77.5 18.2 3.4 .9 100 A.9.—Continued Home refinancing Home improvement CCeennssuuss ttrraacctt characteristic Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total Racial/ethnic composition (minorities as percentage of population) Less than 10 86.5 7.3 5.3 .9 110000 7766..33 1188..99 44..22 .6 100 10-19 81.1 10.5 6.9 1.5 100 69.0 25.2 4.6 1.1 100 20-49 77.3 13.1 7.9 1.7 100 63.3 30.6 4.8 1.3 100 50-79 72.0 17.2 9.0 1.9 100 56.5 37.2 5.0 1.3 100 80-100 64.5 23.1 10.2 2.1 100 50.6 43.2 5.0 1.2 100 Income Low or moderate 73.1 16.5 8.7 1.8 100 57.5 36.8 4.7 1.0 100 Middle 82.2 10.1 6.5 1.3 100 70.7 24.1 4.3 .8 100 Upper 83.8 8.8 6.2 1.3 100 74.6 19.8 4.5 1.2 100 Location Central city 80.2 11.0 7.2 1.5 100 65.8 28.7 4.5 1.0 100 Non-central city 83.1 9.5 6.2 1.2 100 71.8 23.0 4.3 .9 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

100 Federal Reserve Bulletin • February 1995 In 1993, 34.0 percent of black applicants, Changes in Lending Volume 25.1 percent of Hispanic applicants, 14.6 percent of by Race and Income Asian applicants, and 15.3 percent of white applicants were denied credit for conventional home In recent years, mortgage originators, as well as purchase loans (table A.7). The comparable denial entities in the secondary mortgage market have rates in 1992 were 35.9 percent for blacks, initiated a wide variety of affordable home loan 27.3 percent for Hispanics, 15.3 percent for Asians, programs intended to benefit low- and moderateand 15.9 percent for whites. The lower denial rates income and minority households and neighborin 1993 may stem from two sources: the lower hoods. A comparison of the 1992 and 1991 HMDA mortgage interest rates prevailing in 1993, which, data showed that these programs may have made a everything else equal, improved housing affordabil- difference: Between those two years, the number of ity; and the greater availability of special afford- conventional home purchase loans extended to loan able housing programs (which often use more applicants with incomes below the median family flexible underwriting standards) sponsored by both primary market lenders and secondary market institutions. A. 10. Increase in number of conventional home purchase Differences in the distribution of applicants by loans from 1992 to 1993 for lenders reporting under income account for some of the differences in HMDA, by characteristic of borrower and census tract denial rates among racial or ethnic groups. Other factors are more important, however, because white Percent applicants in each income category had a substan- Excluding newly reporting tially lower rate of denial than the black or His- Characteristic All lenders independent panic applicants in that category (table A.8). mortgage companies The pattern of denial rates found when applicants are grouped by income and by race or ethnic AH 24.6 16.5 status is consistent with the increase in denial rates BORROWER Racial/ethnic identity found for applicants from neighborhoods with American Indian/Alaskan native ... 18.7 7.3 Asian/Pacific Islander 15.0 6.5 greater proportions of lower-income or minority Black 43.9 35.8 residents (table A.9). 36.3 25.4 White 24.6 17.5 Under HMDA, lenders also provide information Other 74.4 64.1 Joint (white and minority) 25.8 17.8 on the reasons for denial. The most frequently cited Income reason for the denial of applications for conven- (percentage of MSA median) tional home purchase loans (regardless of the appli- Less than 80 46.2 38.4 80-99 30.5 21.4 cants' race or ethnic status) was a weak or non- 100-119 25.5 16.2 120 or more 16.0 8.2 existent credit history; this factor was cited particularly often for blacks and relatively rarely MEMO Income less than 80 percent for Asians (data not shown in tables). The most of MSA median American Indian/Alaskan native ... 30.8 22.1 frequently cited reason for denial for Asians was an Asian/Pacific Islander 38.7 28.6 excessive debt-to-income ratio. Black 75.2 67.7 Hispanic 58.7 49.5 The extent to which racial discrimination may White 44.0 36.4 Total 46.2 38.4 account for differences in denial rates among applicants from different racial groups is not known. CENSUS TRACT Racial/ethnic composition The HMDA data provide little information about (minorities as percentage of population) the creditworthiness of applicants and the charac- Less than 10 26.0 18.2 10-19 24.4 16.2 teristics of the properties that applicants seek to 20-49 21.0 12.6 purchase or improve, and the data give no informa- 50-79 19.8 10.4 80-100 17.1 7.9 tion about the specific underwriting standards used Income to evaluate each application. Thus, the informa- Low or moderate 21.6 14.9 tion required by HMDA does not provide a solid Middle 23.8 16.1 Upper 26.6 17.6 basis on which to assess the fairness of the loan process. NOTE. See text note 30 regarding 1993 expansion of HMDA coverage of independent mortgage companies; see also notes to table A.4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 101 income for their MSA went up 27 percent com- teristics of the borrowers and neighborhoods in pared with only 10 percent for higher-income which their properties are located can be expected families. to differ. A similar comparison of the 1992 and 1993 The 1989 amendments to HMDA require lenders HMDA data indicates an even larger increase in the to report the type of secondary market purchaser of number of conventional home purchase loans home loans sold during that year (and the name, if granted to lower-income and minority applicants. it is a government-related entity). The HMDA data The number of conventional home purchase loans are currently the only publicly available source of extended to low-income households went up information on the characteristics of borrowers 38 percent from 1992 to 1993, while those whose loans are purchased by secondary market extended to the highest-income households went institutions and on the neighborhoods in which up only 8 percent (table A. 10, second column).33 these borrowers reside. As for loans by racial or ethnic group, the number Three government-sponsored enterprises (GSEs) to black applicants went up 36 percent; to Hispanic dominate secondary market activity—the Federal applicants, 25 percent; and to white applicants, 18 National Mortgage Association (Fannie Mae), the percent. The changes in lending volumes were par- Federal Home Loan Mortgage Corporation (Fredticularly large for lower-income black and His- die Mac), and the Government National Mortgage panic households. From 1992 to 1993, among low- Association (Ginnie Mae). Fannie Mae and Freddie income borrowers, the number of conventional Mac purchase or securitize mainly conventional home purchase loans went up 68 percent for black mortgage loans, whereas Ginnie Mae only securiborrowers, and 50 percent for Hispanic borrowers, tizes loans and only those that are governmentbut only 36 percent for white borrowers backed. In 1993, the GSEs accounted for 72 per- (table A. 10, memo item). cent of the roughly 7.4 million loans sold in the secondary market by lenders covered by HMDA (table A. 11, top row). HMDA Data on Secondary Market Activity Other institutions, including commercial banks, savings associations, insurance companies, and The large secondary market for mortgages—in pension funds, are also active in the secondary which institutions buy and sell billions of dollars of mortgage market. Although the non-GSE institumortgage loans or securities backed by mortgage tions buy the same types of loans purchased by the loans each year—plays an important role in the GSEs, they provide an opportunity for lenders who U.S. housing market. The secondary market originate nonconforming loans, such as jumbo enables originators of mortgage loans to sell these loans, loans on mobile homes, and certain types of otherwise relatively illiquid assets and obtain funds adjustable-rate mortgages, to sell their products as to extend new loans or to use in other ways. well.35 Secondary market institutions generally do not Because Ginnie Mae focuses on governmentoriginate loans but rather specify the underwriting backed loans, it is more involved with home purguidelines that loans must meet to be eligible for chase loans extended to low- or moderate-income purchase or securitization. Underwriting guidelines households than are other secondary market instituand related limitations on the size of loans that may tions.36 For 1993, 55 percent of the loans securibe purchased vary among the secondary market purchasers.34 As a consequence, for the loans that these institutions purchase or securitize, the charac- 35. In this context, jumbo loans are conventional single-family mortgage loans that exceed the size limit on mortgages that may be purchased by Fannie Mae or Freddie Mac. In 1993, the limit was 33. To provide the most appropriate year-over-year compari- $203,150 for a single-family property; the limit was higher in sons, the lending activity of the newly covered mortgage compa- certain locations, including Alaska, Guam, and Hawaii. nies has been excluded from these calculations. 36. Borrowers who use FHA-insured and VA-guaranteed mort- 34. Basic underwriting guidelines include the allowable debt- gages differ from those who use conventional mortgages because to-income and maximum loan-to-value ratios. Fannie Mae and HUD and the VA generally allow borrowers to qualify with more Freddie Mac, as well as most other secondary market participants, debt relative to income and to make smaller down payments than establish their own guidelines for the conventional mortgage loans do conventional lenders. The more relaxed underwriting guidelines they purchase. In the case of Ginnie Mae, underwriting standards applicable to FHA and VA loans are often needed by families with are established by HUD and by the VA. more moderate incomes because, compared with families with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

102 Federal Reserve Bulletin • February 1995 tized by Ginnie Mae were made to households Data Quality whose incomes were less than the median family income of the MSAs in which they lived. The The FFIEC member agencies have a program for comparable figures were 30 percent for Fannie Mae the identification and resolution of errors in the and 29 percent for Freddie Mac. A similar pattern HMDA information submitted by lenders. Over the among the GSEs is found with respect to loans past four years the quality of the HMDA data has grouped by the income characteristics of the census improved. For the 1993 data, the proportion of loan tracts where the properties related to these loans records containing detected errors was less than are located. 0.5 percent, down from about 4.4 percent in 1991. To further improve the accuracy and completeness of the HMDA data, the Federal Reserve higher incomes, they tend to carry relatively higher debt loads and amended Regulation C in November 1994 to have fewer assets available to make a down payment and pay closing costs. require lenders to update quarterly the HMDA A.l 1. Home loans sold, grouped by purchaser and distributed by characteristic of borrower and census tract, 1993 Fannie Mae Ginnie Mae Freddie Mac FmHA Commercial bank Characteristic Number Percent Number Percent Number Percent Number Percent Number Percent All 2319,638 100 1,333,231 100 1,640,221 100 2,045 100 168365 100 BORROWER Racial/ethnic identity American Indian/ Alaskan native 6,354 .3 3,858 .4 4,924 .3 6 .3 793 .5 Asian/Pacific Islander 86,191 4.2 16,610 1.8 73,251 5.0 34 1.8 3,143 2.1 Black 46,139 2.2 72,815 7.9 26,957 1.8 125 6.5 8,501 5.7 Hispanic 63,583 3.1 70,821 7.7 46,871 3.2 91 4.7 6,583 4.4 White 1,796,003 87.6 725,357 78.6 1,271,706 87.2 1,621 84.5 126,771 84.5 Other 12,168 .6 3,414 .4 7,082 .5 6 .3 748 .5 Joint (white and minority) .. 40,872 2.0 30,369 3.3 27,166 1.9 35 1.8 3,532 2.4 Total 2,051310 100 923,244 100 1,457,957 100 1,918 100 150,071 100 Income (percentage of MSA median) Less than 80 283,738 15.9 197,577 35.7 194,803 15.5 594 43.3 22,082 20.2 80-99 246,618 13.8 106,822 19.3 169,325 13.5 241 17.6 15,937 14.6 100-119 264,499 14.8 86,238 15.6 187,238 14.9 133 9.7 15,222 13.9 120 or more 990,282 55.5 162,781 29.4 705,094 56.1 403 29.4 56,283 51.4 Total 1,785,137 100 553,418 100 1,256,460 100 1371 100 109324 100 CENSUS TRACT Racial/ethnic composition (minorities as percentage of population) Less than 10 1,110,117 56.6 459,024 40.5 753,762 56.1 725 49.0 72,856 51.5 10-19 413,476 21.1 282,540 25.0 280,123 20.8 321 21.7 32,805 23.2 20-49 307,592 15.7 277,549 24.5 219,565 16.3 335 22.7 25,847 18.3 50-79 90,276 4.6 74,123 6.5 63,810 4.7 71 4.8 6,031 4.3 80-100 40,530 2.1 38,791 3.4 27,481 2.0 27 1.8 3,942 2.8 Total 1,961,991 100 1,132,027 100 1344,741 100 1,479 100 141,481 100 Income Low or moderate 140,463 7.2 160,289 14.0 98,666 7.3 275 18.6 13,863 9.8 Middle 951,192 48.4 674,492 58.7 650,476 48.2 770 52.0 70,773 49.9 Upper 872,308 44.4 313,733 27.3 600,511 44.5 436 29.4 57,079 40.3 Total 1,963,963 100 1,148,514 100 1349,653 100 1,481 100 141,715 100 Location Central city 688,181 35.0 511,168 44.5 471,163 34.9 323 21.8 55,085 38.9 Non-central city 1,275,796 65.0 637,376 55.5 878,490 65.1 1,158 78.2 86,630 61.1 Total 1,963,977 100 1,148344 100 1349,653 100 1,481 100 141,715 100 NOTE. Includes securitized loans. See also notes to table A.4. Fannie Mae Federal National Mortgage Association Ginnie Mae Government National Mortgage Association Freddie Mac Federal Home Loan Mortgage Corporation FmHA Farmers Home Administration Affiliate Affiliate of institution reporting the loan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Purchase Lending in Low-Income Neighborhoods and to Low-Income Borrowers 103 information on their loan activity and to require submitted in machine-readable form. Paper records most lenders to submit their data to the supervisory are also more costly for the agencies to process. agencies in a machine-readable form (for example, Before the November amendments, lenders that on a computer diskette or magnetic tape). Under had 100 or more loan application records were the new rules, which take effect January 1, 1996, expected (but not required) to submit data in lenders must record HMDA information about loan machine-readable form rather than on paper; such applications within thirty calendar days after the lenders accounted for about three-fourths of all end of each calendar quarter in which a final action institutions. The new rule requires lenders that have on an application is taken. This requirement will more than 25 records to submit their data in allow consumer compliance examiners to better machine-readable form and to edit their data before monitor the quality of a lender's data. submission using free computer programs supplied Historically, the quality of HMDA data submit- by their supervisory agencies or comparable proted in paper form has been far worse than that grams supplied by others. A. 11.—Continued Savings bank or Life insurance savings and loan Affiliate Other company CChhaarraacctteerriissttiicc association Number Percent Number Percent Number Percent Number Percent All 78,528 100 40,153 100 620,676 100 1,183,289 100 BORROWER Racial/ethnic identity American Indian/ Alaskan native 274 .4 113 .3 2,166 .4 5,768 .5 Asian/Pacific Islander 1,438 2.2 1,173 3.2 18,405 3.7 41,242 3.9 Black 2,361 3.5 1,757 4.7 18,837 3.7 56,501 5.3 Hispanic 2,213 3.3 1,024 2.8 14,916 3.0 51,361 4.8 White 58,923 88.3 32,135 86.6 435,735 86.7 872,561 82.4 Other 258 .4 171 .5 2,054 .4 5,465 .5 Joint (white and minority) 1,235 1.9 753 2.0 10,609 2.1 26,423 2.5 Total 66,702 100 37,126 100 502,722 100 1,059,321 100 Income (percentage of MSA median) Less than 80 11,156 20.2 6,406 20.6 65,331 15.9 173,165 20.9 80-99 7,549 13.7 4,526 14.5 45,057 10.9 110,509 13.3 100-119 7,782 14.1 4,102 13.2 45,008 10.9 103,978 12.5 120 or more 28,642 52.0 16,104 51.7 256,600 62.3 441,452 53.2 Total 55,129 100 31,138 100 411,996 100 829,104 100 CENSUS TRACT Racial/ethnic composition (minorities as percentage of population) Less than 10 39,332 58.9 18,705 52.4 247,283 54.3 438,554 45.4 10-19 14,067 21.1 8,520 23.9 111,665 24.5 242,015 25.1 20-49 9,550 14.3 6,493 18.2 71,023 15.6 198,318 20.5 50-79 2,550 3.8 1,362 3.8 16,447 3.6 55,712 5.8 80-100 1,261 1.9 610 1.7 8,889 2.0 31,462 3.3 Total 66,760 100 35,690 100 455,307 100 966,061 100 Income Low or moderate 6,362 9.5 3,370 9.4 35,353 7.7 100,799 10.4 Middle 32,366 48.2 17,096 47.9 191,801 42.0 446,302 46.1 Upper 28,362 42.3 15,226 42.7 229,411 50.2 420,151 43.4 Total 67,090 100 35,692 100 456,565 100 967,252 100 Location Central city 24,769 36.9 13,736 38.5 159,024 34.8 381,433 39.4 Non-central city 42,321 63.1 21,956 61.5 297,541 65.2 585,819 60.6 Total 67,090 100 35,692 100 456,565 100 967,252 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

104 Industrial Production and Capacity Utilization for December 1994 Released for publication January 17 nondurable manufacturing. Unseasonably mild weather further depressed production at electric Industrial production rose 1.0 percent in December and gas utilities, however. Industrial production in after a revised gain of 0.7 percent in November. December was at 121.4 percent of its 1987 average The December increase was broadly based, with and 5.8 percent higher than it was in December significant gains in mining and in durable and 1993. Output grew at an annual rate of 5.4 percent Industrial production indexes Twelve-month percent change Twelve-month percent change 10 Materials 5 Products Nondurable manufacturing J L 1989 1990 1991 1992 1993 1994 1995 1989 1990 1991 1992 1993 1994 1995 Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production =100 140 — Manufacturing Capacity — 140 120 - * - 120 100 ^ — 100 — Production 80 80 I I I I I I I I I I I I L 1 1 1 1 1 1 1 1 I 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 Utilization 90 80 - 80 70 70 J I I L J I I L I I I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1981 1983 1985 1987 1989 1991 1993 1995 1981 1983 1985 1987 1989 1991 1993 1995 All series are seasonally adjusted. Latest series, December. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

105 Industrial production and capacity utilization, December 1994 Industrial production, index, 1987=100 Percentage change Category 1994 1994' Dec. 1993 to Sept.' Oct.r Nov.1 Dec.P Sept.r Oct/ Nov.r Dec.P Dec. 1994 Total 119.0 119.4 120.3 121.4 -.1 .4 .7 1.0 5.8 Previous estimate 119.0 119.6 120.2 -.1 .5 .5 Major market groups Products, total2 116.4 116.8 117.6 118.5 -.3 .4 .7 .7 5.0 Consumer goods 113.0 112.6 113.6 114.6 -.6 -.4 .9 .9 3.4 Business equipment . 149.5 151.4 152.0 153.7 .4 1.3 .4 1.1 9.8 Construction supplies 108.6 109.6 110.2 110.4 .3 1.0 .5 .2 6.5 Materials 122.9 123.4 124.3 125.9 .1 .3 .8 1.3 7.2 Major industry groups Manufacturing 120.9 121.4 122.6 123.9 .0 .4 1.0 1.0 6.7 Durable 127.2 128.2 129.5 131.2 .2 .8 1.0 1.3 8.2 Nondurable 113.7 113.8 115.0 115.8 -.3 .1 1.0 .7 4.9 Mining 100.1 99.2 98.7 99.9 .1 -.9 -.5 1.2 1.5 Utilities 116.5 117.2 115.8 114.9 -1.9 .6 -1.3 -.8 -.6 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1993 1994 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, DDDeeeccc... 111999999333 11996677--9944 11998822 11998888--8899 Dec. Sept.r Oct.r Nov.r Dec.P tttooo DDDeeeccc... 111999999444 Total 82.0 71.8 84.9 82.9 84.2 84.3 84.7 85.4 2.8 Previous estimate 84.3 84.5 84.7 Manufacturing 81.3 70.0 85.2 82.2 83.6 83.8 84.4 85.1 3.1 Advanced processing 80.7 71.4 83.5 80.3 81.8 82.0 82.5 83.1 3.5 Primary processing . 82.5 66.8 89.0 86.9 88.2 88.3 89.3 90.0 2.0 Mining 87.4 80.6 86.5 88.2 89.8 89.0 88.5 89.6 -.1 Utilities 86.7 76.2 92.6 86.1 86.0 86.4 85.3 84.5 1.2 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. in the fourth quarter, compared with 4.9 percent in The production of business equipment, which the third quarter. The substantial growth in output advanced 1.1 percent in December, rose about in December boosted capacity utilization to 10 percent over the past twelve months. Industrial, 85.4 percent, its highest level since October 1979. information processing, and transit equipment all When analyzed by market group, the data show increased solidly in the past few months. The outthat the output of consumer goods rose 0.9 percent put of defense and space equipment, which had in December, after a similar increase in November. fallen substantially during the past few years, The production of durable consumer goods, pro- gained a bit in November and December. pelled by another strong gain in automotive prod- The output of construction and business supplies ucts, increased 1.9 percent; the production of other changed little in December after strong gains in the consumer durables, such as appliances, air condi- preceding two months. The production of materials tioners, and carpets, also rose. The output of non- increased 1.3 percent. Once again, noticeable gains durable consumer goods, which had declined from were spread widely among durable materials such June to October, advanced 0.8 percent in Novem- as semiconductors, auto parts, plastics, and metals. ber and 0.7 percent in December, with gains in Among nondurables, the output of chemicals and foods and tobacco, paper products, and drugs, textiles advanced. The output of energy materials soaps, and toiletries. rebounded in December, despite continued weak- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

106 Federal Reserve Bulletin • February 1995 ness in the generation of electricity and the extrac- NOTICE tion of natural gas; the production of coal and crude oil rose. An annual revision to industrial production, capac- When analyzed by industry group, the data show ity, and capacity utilization was published on that manufacturing output rose 1.0 percent in November 30, 1994. The revision to the production December to a level 6.7 percent higher than that indexes affects data beginning in January 1991 and of a year earlier. Increases in production were incorporates 1992 value-added proportions and pronounced among durables such as metals and revisions to monthly source data and seasonal machinery and equipment. Factories operated at factors. The revision to capacity and utilization 85.1 percent of capacity, just below the recent incorporates the 1992 value-added weights along cyclical peak of capacity utilization in January with available new data on physical capacity mea- 1989. The utilization rate in the primary-processing sures and investment. The capacity revision chiefly industries rose 0.7 percentage point, to 90.0 per- affects the individual series from 1991 forward; cent, which was above the cyclical highs reached in aggregate utilization may be changed slightly for January 1989 and November 1978 but still below earlier years to accommodate the introduction of the 1973 average of 91.5 percent. Rates for primary 1992 weights. metals, lumber, wood pulp, paperboard, plastics Diskettes containing either historical data resins, petroleum refining, and rubber and plastics (through 1985) or more recent data (1986 to those products remained relatively high. Utilization for most recently published in the G.17 release) are advanced-processing industries rose 0.6 percentage available from Publications Services, Mail Stop point, to 83.1 percent, but remained 0.4 percentage 127, Board of Governors of the Federal Reserve point below its high in January 1989. Among System, Washington, DC 20551 (202-452-3245). advanced-processing industries, the operating rates Files containing the revised data and the text and for trucks, electrical machinery, and industrial tables from this release are also available through machinery and computer equipment stayed high, the Economic Bulletin Board of the Department of but the rates for aircraft and space equipment, Commerce; for information, call (202) 482-1986. ships, instruments, and printing and publishing A document with printed tables of the revised remained relatively low. estimates of the series shown in the G.17 release is Because of continued mild weather, operating available upon written request to the Industrial rates at utilities decreased further, to 84.5 percent Output Section, Mail Stop 82, Division of Research in December compared with an average of and Statistics, Board of Governors of the Federal 87.0 percent for 1994. Last June, when tempera- Reserve System, Washington, DC 20551. • tures were unusually high, the utilization rate for utilities reached a high of 89.6 percent. Operating rates at mines rose 1.1 percentage points with a significant gain in output of coal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

107 Statement to the Congress Statement by Alan Greenspan, Chairman, Board of has done, this meant that with inventory-sales ratios Governors of the Federal Reserve System, before the no longer falling the growth in inventory levels had to Joint Economic Committee, U.S. Congress, December accelerate from its path of recent years. Implied, of 7, 1994 course, has been a sharp pickup in inventory investment, and a corresponding boost to overall output and incomes. This process, in turn, has added to the strong I appreciate the opportunity to appear before you growth in consumer expenditures and the consequent today to discuss current economic conditions and pickup in business cash flow, which has been a potent monetary policy developments. force in the expansion of plant and equipment outlays. The impressive performance of the U.S. economy If the inventory accumulations of recent quarters continues. Real gross domestic product has grown had been the result of unexpected weakness in sales, more than 4 percent over the past year, and although and hence unintentional, we would have expected a price increases have picked up at earlier stages of widespread falloff in new industrial orders. As yet processing, inflation at the consumer level remained there is no evidence to suggest that. Moreover, albelow 3 percent over the twelve months through though inventory investment has been substantial October. since the spring, a greater-than-usual proportion re- In the early stages of the economic recovery, flects the value added of goods that have moved employment growth lagged behind the upturn in further down the distribution chain. Thus, although activity, raising concerns about the job-creating po- large increases in the constant dollar value of inventential of our economy. But these concerns have been tory investment have added to gross domestic prodassuaged by the performance of our labor markets uct, the buildup in physical units, or the factory value over the past two years. During this period, several of inventories, is still modest relative to sales. It is million jobs have been added to nonfarm payrolls, and excessive units of physical inventories that depress the unemployment rate has dropped sharply, to its production irrespective of where in the distribution lowest level since the summer of 1990. pipeline they reside. Of course, a sudden weakening A driving force in the greater-than-expected eco- in final demand could make existing levels of invennomic strength in recent quarters has been inventory tories, wherever they are, look excessive fairly investment. The growth in inventory levels has appre- quickly, so we cannot be complacent that the current ciably lagged the growth in sales in recent years, as economic expansion is without risk. just-in-time inventory programs have progressively But we should also keep in mind that to the extent lowered the levels of stocks required to ensure coor- that retail and wholesale trade inventories are domidinated production schedules. Moreover, improve- nant elements in the overall inventory expansion, ments in transportation scheduling and telecommuni- changes in inventory investment will not fall solely on cations have allowed both foreign and domestic domestic production and employment. This is besuppliers to fill orders from US. firms more quickly. cause, as the U.S. appetite for foreign products rises, But there is obviously a limit to how tight goods- a commensurately larger proportion of inventories is flow schedules can be pressed and how slim invento- imported. Rough estimates suggest that, currently, ry-sales ratios can become, without jeopardizing re- perhaps a quarter of all wholesale and retail stocks are quired production levels to meet customer orders. imported, whereas as recently as the late 1970s the Judging from evidence of lagging product deliveries, share was substantially less. As a result, swings in that limit appears to have been reached last spring, at final demands and accompanying changes in desired least for this business cycle. inventories now fall to a larger extent than in the past So long as sales growth was holding up, which it on foreign producers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

108 Federal Reserve Bulletin • February 1995 When all is said and done, stocks appear lean Solid income growth, the improved labor market, and relative to final demand right now, despite several buoyant consumer confidence have been important quarters of significant accumulation. Nonetheless, factors boosting demand for houses this year. In intended inventory investment cannot be expected to addition, residential construction has also likely been rise appreciably from current levels and eventually supported by some easing in the standards that mortwill have to fall to a level more consistent with gage lenders use in qualifying prospective homebuysustainable growth in final demand. Thus, the degree ers. In particular, lenders have been increasingly of strength in final sales will be central to the support willing to accept mortgages with low down payments. of future gains in output. In fact, according to a survey by the Federal Housing Over the past two years, business fixed investment, Finance Board, one-third of loans recently have had particularly in producers' durable equipment, has down payments of less than 10 percent. Also, some of made an important contribution to the growth in final the damping effect of higher rates on fixed-rate sales. The growth rate of spending on computers has mortgages has been attenuated by a sharp rise in the fallen off this year from last year's phenomenal pace, market share of adjustable rate mortgages. Lenders but outlays have, nonetheless, continued to advance at have been making these adjustable rate loans more a double-digit rate in real terms as the computeriza- attractive by keeping first-year loan rates low relative tion of the U.S. economy proceeds apace. Business to market interest rates and by extending the period spending on motor vehicles, particularly heavy trucks, before annual adjustments occur, often for as long as has been strong this year, while spending on other five or ten years. equipment, especially in the communications area, As I noted earlier, healthy growth of real incomes has accelerated from last year's already quite rapid has also been an important factor behind the strength growth rate. Recent data on orders for capital goods in consumer spending. Outlays for consumer durable suggest that the above-average growth in equipment goods have been quite robust this year, and growth in spending will likely continue. spending on nondurables and services has picked up In the nonresidential structures area, construction from last year. Much of the growth in consumer has begun to increase again after several years of durables this year has been spending on computers decline. Even in the office building sector, where and other electronic goods, which has been especially construction fell about one-half between 1989 and strong. Purchases of motor vehicles have remained 1993, activity has begun to recover. Construction buoyant after having climbed in 1993 to the highest would have been even weaker in the early 1990s if it level in four years. had not been for the completion of a large backlog of Exports of goods and services have also been an unfinished projects that had built up during the 1980s. important source of economic growth this year, with The backlog of projects in the office sector fell real gains over the past four quarters averaging more steadily from 1989 to 1993 but recently has stabilized than 10 percent at an annual rate. U.S. exporters have so that the pickup in construction this year has been benefited from an increase in demand associated with fueled by a recovery in starts of new projects. Recent the pickup in economic activity abroad. The economic nonresidential construction contracts and permits sug- recoveries that began in 1992 in Canada and the gest further gains in outlays. United Kingdom gained momentum in the past year, Support for capital outlays during the past year has and the more tentative recoveries in the continental come from the extraordinary rise in corporate profits. European countries and Japan appear to be gaining a During the first three quarters of 1994, profits were 14 firmer footing. Much the same can be said for Mexico. percent higher than in the first three quarters of 1993. Meanwhile, rapid growth in other developing coun- Moreover, profits continue to come in ahead of tries that are major U.S. trading partners has continexpectations, a factor that has been spurring business ued. These developments should help undergird confidence and capital commitments. growth in exports from the United States in the near Turning to the residential sector, housing starts term. Nevertheless, imports recently have been growremained robust in the third quarter but edged off a bit ing even faster than exports. Consequently, the exterin October. Construction of single-family homes has nal sector has made a negative contribution to GDP held at a fairly high level, and multifamily activity, growth, though less than in 1993. although still at a low level, has begun to recover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statement to the Congress 109 One sector in which spending has been on a running at about the same pace as through all of 1993. downtrend in recent years is the federal government, Excluding the food and energy components, which especially in the defense area. The decline in defense are volatile, consumer prices have increased 2.8 spending was interrupted in the third quarter, how- percent through October, somewhat less than in 1993 ever, by the first increase in real defense purchases in as a whole. two years. This uptick was partially attributable to Although inflation at the consumer level has been outlays for the invasion of Haiti and the detention of flat or down somewhat compared with last year, prices Cuban refugees. Defense purchases of durables were of intermediate supplies have accelerated. This strong as well, stemming in part from the delivery of pickup, in turn, reflects pressures from prices of raw two B2 "stealth" bombers in August. These short- commodities, which have been rising rapidly for term developments will not alter the longer-term nearly two years, as well as high and rising levels of declines in defense spending embodied in current capacity utilization. So far, increases in manufacturbudgetary plans, however. ers' prices at the finished goods level have remained Adding all sectors together, growth in gross domes- contained. To date, modest increases in labor comtic product this year is running somewhat stronger pensation coupled with rapid growth in labor producthan we had anticipated earlier in the year. Spending tivity have suppressed increases in unit labor costs in 1994 has been encouraged by the greater willing- and helped alleviate the pressures of higher input ness of banks and other lenders to extend credit after costs on final prices. With demand for their output a protracted period of bank lending restraint that was strong, however, finished goods producers may soon characterized as the "credit crunch." I have already attempt to pass on their higher costs. noted the possibility that more generous and flexible Some have argued that businesses will not be loan terms have supported the housing market. But successful in raising prices—that the competitive easier loan terms and conditions are more widespread. environment has changed in such a way that the In effect, not all of the rise in short- and intermediate- economy can grow on a sustained basis much faster term market interest rates is being passed through to and operate at substantially higher levels of resource bank borrowers. Spreads of bank loan rates over utilization than in the past. These analysts often cite market rates have narrowed for many business and the improving productivity of U.S. businesses and the household borrowers, other fees have been cut, and more intense pressure from actual or potential foreign standards for approving loans have been eased. This sources of goods and services. They also note that the trend is one that we are monitoring carefully, not only pressures of changing technology and corporate in our role as monetary policymakers but also as bank downsizing may be increasing labor insecurity and supervisors with responsibility for the safety and damping wage demands. soundness of the banking system. There is a significant element of truth in these As the repressive pall of the balance sheet strain of arguments. But these developments are evolutionary, the early 1990s dissipated, and employment and working slowly and incrementally over time. The production picked up, households and businesses pickup in trend productivity growth is probably no have gained greater confidence. This increased opti- more than a few tenths of a percentage point annually. mism has manifested itself in several reinforcing Unemployment rates have fallen, and the slowing of ways. It has motivated households to increase their product delivery schedules underscores that capacity borrowing and spending, which has inspired busi- utilization rates have risen substantially; if the pronesses to invest more and to hire workers in anticipa- ductivity trend had moved sharply higher, we could tion of future sales growth. Of course, increased have achieved higher output growth without these hiring, in turn, helps assuage the concerns of house- developments. Moreover, the increase in international holds about employment prospects, contributing to trade is a gradual process that has been going on for gains in household confidence. Indeed, as measured several decades. And the weakness of the dollar on by one survey, consumer confidence moved up in foreign exchange markets, on average, this year has November to a new high for this expansion. tended to undercut any cost-containment pressures Despite strong output and employment growth this from this source in the near term. year, consumer price inflation—at a 2.6 percent an- We recognize that estimates of the economy's nual rate so far this year through October—has been potential are just that—estimates, subject to the con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

110 Federal Reserve Bulletin • February 1995 siderable uncertainties attached to all economic esti- The potential for higher inflation has had an impormates. In setting monetary policy, the Federal Reserve tant influence on the behavior of financial markets this is looking to encourage the highest level of activity year. Prices in those markets seem to incorporate that the economy can sustain, not to hold it back. We significant further increases in real short-term interest would welcome the possibility that our economic rates but, nonetheless, also appear to suggest that performance can be in excess of historical relation- inflation will move higher. ships. Although a good deal of uninformed opinion is But if we ignore experience, we would be taking doubtless driving market prices up and down in the unacceptable risks of higher inflation, economic and short run, we cannot ignore broad movements in these financial instability, and, ultimately, subpar economic markets, for they may be telling us something about performance over time. We must remain alert to signs deep-seated changes in expectations. The prices set in of inflationary pressures on resources. If we allow financial markets represent the views of a large and these pressures to develop, resources will begin to be diverse group of participants worldwide. The trading used less efficiently, productivity improvements will professionals in bond, equity, and foreign exchange be harder to find, and firms will be more disposed to markets can move prices around for a brief time. But raise prices. because their securities holdings are a small share of If price increases are accommodated, they can overall markets, after a period of a few days or weeks, become readily embedded in higher inflation expec- the actions of other major participants become domtations. It is these expectations that make an inflation- inant. These actions include corporate and state and ary process, once begun, difficult and expensive to local government treasurers deciding on the best time reverse. As people begin to expect higher inflation, to raise funds, and, on the other side of the market, their actions to protect the purchasing power of their experienced managers both here and abroad of the wages and profits add to the impetus toward acceler- large sums of dollar-denominated securities in penating prices. Experience suggests that these expecta- sion funds, insurance companies, and university entions can be turned around only slowly and with some dowments. Moreover, millions of Americans have cost to the economy's performance. taken a more direct role in financial markets through We have been especially concerned about the their purchases of mutual funds. Indeed, more than possibility that in the current circumstances inflation half of the net capital market securities issued in the expectations could be particularly prone to adjust United States since the end of 1992 were absorbed by upward if actual inflation were to pick up. As best we mutual funds. Transactions in these funds are driven can infer from surveys and financial markets, inflation by sales to "Main Street America." is expected to be higher in the future than it has been To forestall a new round of higher inflation and in the recent past. This suggests some nervousness inflation expectations, the Federal Reserve began to about the resolve of anti-inflation policies. Indeed, adjust policy earlier this year in advance of an actual with inflation at the lower end of its range over the acceleration in broad measures of prices. Monetary past thirty years, it would be natural for many, if not policy works with considerable lags, and waiting until most, workers, businesses, and financial people to be inflation picks up risks a boom-and-bust economic quick to see reasons for inflation to return to the cycle inimical to business and household planning, to higher levels that dominate their experience. An saving and investment, and to the longer-term growth inclination toward higher expected inflation would be of the U.S. economy. As I indicated to the Congress in reinforced by the tendency in the past for actual testimony earlier this year, the hallmark of a successinflation to pick up at some point in a business ful monetary policy will be an inflation rate that does expansion. not rise. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Ill Announcements APPOINTMENT OF NEW MEMBERS TO THE Other members of the council are the following: THRIFT INSTITUTIONS ADVISORY COUNCIL Malcolm E. Collier, Chairman and CEO, First Federal Savings Bank, Lakewood, Colorado The Federal Reserve Board announced on Decem- John M. Tippets, President and CEO, American Airber 9, 1994, the names of eight new members of its lines Employees Federal Credit Union, DFW Airport, Thrift Institutions Advisory Council (TIAC) and Texas. designated a new president and vice president of the council for 1995. The council is an advisory group made up APPROVAL OF POLICY STATEMENT ON of twelve representatives from thrift institutions. PRIVATELY OPERATED NETTING SYSTEMS The panel was established by the Board in 1980 and includes representatives of savings and loan associations, savings banks, and credit unions. The Federal Reserve Board approved on Decem- The council meets at least four times each year ber 21, 1994, a policy statement on "Privately with the Board of Governors to discuss develop- Operated Large-Dollar Multilateral Netting Sysments relating to thrift institutions, the housing tems" as part of its overall program of reduction of industry, mortgage finance, and certain regulatory payment system risk. The policy statement was issues. effective immediately. The statement incorporates the minimum stan- The new council president for 1995 is Charles dards for the design and operation of privately John Koch, President and CEO of the Charter One operated large-dollar multilateral netting systems Bank, F.S.B., Cleveland. The new vice president of set forth in the Report of the Committee on Interthe Council is Stephen D. Taylor, President and bank Netting Schemes of the Central Banks of the CEO, American Savings of Florida, F.S.B., Miami. Group of Ten Countries (Lamfalussy Report), The eight new members, named for two-year which was published in November 1990 by the terms that began January 1, are the following: Bank for International Settlements. Multilateral netting systems, including clearing- Ms. E. Lee Beard, President and CEO, First Federal house arrangements, have the potential to improve Savings & Loan Association, Hazleton, Pennsylvania the efficiency of interbank settlements by reducing John E. Brubaker, President and CEO, Bay View Federal Bank, A FSB, San Mateo, California the costs of credit, liquidity, and operations. How- George L. Engelke, Jr., President and CEO, Astoria ever, these systems concentrate settlement and Federal Savings & Loan Association, Lake Success, operational risks at a single point in the financial New York system. The standards set out in the Lamfalussy Ms. Beverly D.S. Harris, President, Empire Federal Report are designed to provide a set of minimum Savings & Loan Association, Livingston, Montana standards that permit the advantages of multilateral David F. Holland, Chairman, President, and netting to be gained, while controlling systemic CEO, Boston Federal Savings Bank, Burlington, risks. Massachusetts The Board's policy statement generally applies Joseph C. Scully, Chairman and CEO, St. Paul Fedto domestic, privately operated, large-dollar multieral Bank for Savings, Chicago lateral netting systems; offshore large-dollar Larry T. Wilson, President and CEO, Coastal Federal multilateral payment netting systems; multilateral Credit Union, Raleigh, North Carolina William W. Zuppe, President and COO, Sterling Sav- foreign exchange clearinghouses involving setings Association, Spokane. tlements in U.S. dollars; and multicurrency pay- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

112 Federal Reserve Bulletin • February 1995 ment netting systems involving settlements in companies to recognize the risk-reducing benefits U.S. dollars. of netting arrangements. The amendments were At this time, the Board is not applying this effective December 31, 1994. policy statement to privately operated large-dollar Under the amendments, institutions will be permultilateral netting systems for batch-processed, mitted to net, for risk-based capital purposes, the paper-based or electronic payments. However, the mark-to-market values of interest and exchange Board intends to study further the implications of rate contracts subject to qualifying bilateral netting the standards contained in this policy statement as contracts. well as other risk-management standards for such The amendments will allow state member banks systems. and bank holding companies to net positive and negative mark-to-market values of rate contracts in determining the current exposure portion of the credit equivalent amount of such contracts to be ISSUANCE OF FINAL AMENDMENTS TO included in risk-weighted assets. RISK-BASED CAPITAL GUIDELINES TO The amendments implement a recent revision to ACCOUNT FOR A COMPONENT OF the Basle Accord that allows the recognition of STOCKHOLDERS' EQUITY such netting arrangements. The Federal Reserve Board issued on December 5, 1994, final amendments to its risk-based capital AMENDMENTS TO THE RISK-BASED CAPITAL guidelines for state member banks and bank hold- GUIDELINES FOR STATE MEMBER BANKS ing companies. The amendments were effective REGARDING CREDIT RISK AND RISKS OF December 31, 1994. NONTRADITIONAL ACTIVITIES Under this final rule, institutions are generally directed not to include in tier 1 capital the compo- The Federal Reserve Board on December 13, 1994, nent of common stockholders' equity that is comissued amendments to its risk-based capital guideposed of net unrealized holding gains and losses on lines for state member banks regarding concentrasecurities available for sale. tion of credit risk and risks of nontraditional activi- This component was created by the Financial ties. The amendments were effective January 17, Accounting Standards Board (FASB) Statement 1995. No. 115, "Accounting for Certain Investments in The amendments implement section 305 of the Debt Equity Securities" (FAS 115). Federal Deposit Insurance Corporation Improve- Net unrealized losses on marketable equity secument Act (FDICIA), which directs each federal rities (equity securities with readily determinable banking agency to revise its risk-based capital stanfair values), however, will continue to be deducted dards to ensure that the standards take adequate from tier 1 capital. This rule has the general effect account of these risks. of valuing available-for-sale securities at amortized As amended, the risk-based capital guidelines cost (based on historical cost), rather than at fair explicitly identify concentrations of credit risk and value (generally at market value), for purposes of an institutions's ability to manage them as imporcalculating the risk-based and leverage capital tant factors in assessing an institution's overall ratios. capital adequacy. The amendments also identify an institution's ability to adequately manage the risks posed by ISSUANCE OF FINAL AMENDMENTS TO nontraditional activities as an important factor to RISK-BASED CAPITAL GUIDELINES TO consider in assessing an institution's overall capital ACCOUNT FOR NETTING CONTRACTS adequacy. The Board initially approved the amendments The Federal Reserve Board issued amendments on on August 3, 1994. Publication of the joint final December 2, 1994, to its risk-based capital guide- rule was delayed until interagency agreement was lines for state member banks and bank holding reached. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 113 ISSUANCE OF AMENDMENTS TO CAPITAL and its effect on the cost and efficiency of the ADEQUACY GUIDELINES REGARDING payments system. DEFERRED TAX ASSETS This rule will be codified with other Bank Secrecy Act regulations as part of the Treasury's The Federal Reserve Board issued on Decem- regulations in 31 CFR Part 103. A new subpart to ber 19, 1994, amendments to its capital adequacy Regulation S will cross-reference the jointly preguidelines for state member banks and bank hold- scribed requirements. ing companies to establish a limitation on the amount of certain deferred tax assets that may be included in (that is, not deducted from) tier 1 ADOPTION OF MEASURES TO HELP EASE capital for risk-based and leverage capital pur- FINANCIAL STRESS IN AREAS AFFECTED poses. The amendments will be effective April 1, BY FLOODING IN TEXAS 1995. The capital rule was developed in response to the The Federal Reserve Board announced on Decem- Financial Accounting Standards Board's (FASB) ber 5, 1994, a series of steps designed to help ease issuance of Statement No. 109, "Accounting for financial stress in areas affected by recent flooding Income Taxes" (FAS 109). in Texas. Under the final rule, deferred tax assets that can A supervisory statement adopted by the Board be realized only if an institution earns taxable encourages financial institutions to work construcincome in the future are limited for regulatory tively with borrowers who are experiencing difficapital purposes to the amount that the institution culty due to the flooding. expects to realize within one year of the quarter- The statement says that banks may find it approend report date—based on its projection of taxable priate to ease credit terms to help new borrowers income—or 10 percent of tier 1 capital, whichever restore their financial strength, consistent with pruis less. Deferred tax assets that can be realized from dent banking practices, and to restructure debt or taxes paid in prior carryback years would generally extend repayment terms for existing borrowers. not be limited. The Board also waived appraisal regulations for real estate-related transactions affected by the flooding and temporarily amended its Regulation Z ISSUANCE OF FINAL RULE ON ENHANCED (Truth in Lending) to provide relief under waiver RECORDKEEPING RELATED TO CERTAIN WIRE rules so that borrowers may gain ready access to TRANSFERS BY FINANCIAL INSTITUTIONS loan funds when they use their primary dwelling as collateral for a loan. The Federal Reserve Board and the Department Under the right of rescission, a borrower norof the Treasury on December 22, 1994, jointly mally has three business days to cancel a loan announced a final rule that requires enhanced contract when it is secured by the borrower's prinrecordkeeping related to certain wire transfers by cipal dwelling. financial institutions in accordance with the Bank Secrecy Act. The final rule will be effective January 1, 1996. AMENDMENTS TO REGULATION C Each domestic financial institution involved in a wire transfer must collect and retain certain infor- The Federal Reserve Board adopted on Decemmation, depending on the type of financial institu- ber 6, 1994, amendments to its Regulation C tion, its role in the particular wire transfer, the (Home Mortgage Disclosure Act (HMDA)). amount of the wire transfer, and the relationship of HMDA requires most lenders in metropolitan areas the parties to the transaction with the financial annually to report to regulators and to disclose to institution. the public data on their mortgage lending activity. In issuing this final rule, the Board and the Under the new rule, institutions will be required Treasury have considered its usefulness in crimi- to report in machine-readable form (such as magnal, tax, or regulatory investigations or proceedings netic tape or computer diskette), except for insti- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 Federal Reserve Bulletin • February 1995 tutions with twenty-five or fewer line entries to involved in the arrangement and the products are report. In addition, institutions must update their separately available for purchase by the customer. loan/application registers (the forms used for reporting data to regulatory agencies) quarterly. These changes are intended to improve the quality EXPANSION OF THE FORMAT of the data and to help in bringing about earlier FOR FEDWIRE FUNDS TRANSFERS public disclosure. Other revisions to the regulation clarify reporting requirements in response to ques- The Board announced plans on December 22, tions raised by institutions. 1994, to expand the format for Fedwire funds trans- Institutions may comply with the amendments at fers and to adopt a more comprehensive set of data their option beginning January 1, 1995. Compli- elements. The new format will be fully impleance is mandatory for the collection of data that mented by year-end 1997. begins January 1, 1996, for submission by An expanded format for Fedwire funds transfers March 1, 1997. will improve efficiency in the payments mechanism by reducing the need for manual intervention when processing and posting transfers. Further, the new AMENDMENTS TO REGULATION H AND format will eliminate the need to truncate payment- INTERPRETATION OF REGULATION Y related information when forwarding payment orders through Fedwire that were received via other The Federal Reserve Board on December 7, 1994, large-value transfer systems, such as the Clearing issued final amendments to Regulation H (Mem- House Interbank Payments System (CHIPS) and bership of State Banking Institutions in the Federal the Society for Worldwide Interbank Financial Reserve System) regarding public welfare invest- Telecommunication (S.W.I.F.T.) system. ments by state member banks and a corresponding The increased size and more comprehensive set Regulation Y (Bank Holding Companies and of data elements will permit the inclusion of the Change in Bank Control) interpretation for bank name and address of the originator and beneficiary holding companies. The amendments were effec- of a transfer, which is required under regulations tive January 9, 1995. that have been adopted by the Department of the The final amendments permit state member Treasury. banks to make certain public welfare investments without specific Board approval and other public welfare investments with specific approval. The DELAY IN THE EXPANSION OF OPERATING amendments also address the procedural aspects of HOURS FOR FEDWIRE ON-LINE TRANSFERS these investments. The Board announced on December 22, 1994, a delay in the implementation of the expanded oper- AMENDMENTS TO REGULATION Y ating hours for Fedwire on-line funds transfers until the fourth quarter of 1997. A specific imple- The Federal Reserve Board announced on Decem- mentation date will be announced one year in ber 15, 1994, adoption of final amendments to the advance of the effective date. antitying provisions of Regulation Y (Bank Hold- In February 1994, the Board approved the expaning Companies and Change in Bank Control). The sion of the operating hours of the Fedwire on-line amendments were effective January 23, 1995. funds transfer service to eighteen hours a day, from The amendments permit a bank holding com- 12:30 a.m. to 6:30 p.m. eastern time (ET), beginpany or its nonbank subsidiary to offer a discount ning in early 1997. Currently, the Fedwire funds on its product or service on condition that a cus- transfer service operates ten hours a day, from tomer obtain any other product or service from that 8:30 a.m. ET to 6:30 p.m. ET. company or from any of its nonbank affiliates. Expansion of the operating hours for Fedwire Thus, the final rule generally removes Board- on-line funds transfer services to eighteen hours a imposed restrictions on tying when no bank is day could be a useful component of private-sector Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 115 initiatives to reduce settlement risk in the foreign lier in the day. Currently, the book-entry securities exchange markets and will eliminate an operational transfer service begins operation at 8:30 a.m. eastbarrier to potentially important innovation in pri- ern time (ET) and closes at 2:30 p.m. ET for vately provided payment and settlement services. transfers and at 3:00 p.m. ET for reversals. Com- The Board has delayed the implementation of ments were requested by April 28, 1995. Also, the the expanded operating hours for Fedwire funds Board is requesting comment on the establishment transfers to provide banks that intend to participate of a firm closing time for the Fedwire book-entry during the expanded hours an opportunity to first securities transfer service, beginning in January complete their conversion to the new Fedwire 1996. format, which the Board also announced on The Board also is requesting comment on new December 22. service capabilities that would give banks the The Board believes that a modest delay in the option of participating in earlier Fedwire securities implementation of the earlier Fedwire opening time hours and new service capabilities that would allow will be sufficient to address industry concerns banks to control their use of intraday credit during regarding the interdependencies between these two expanded hours and core business hours. Fedwire initiatives, while not deferring for a sig- The Board also requested on December 22, 1994, nificant period of time the potential changes in public comment on an internal appeals process for payment and settlement practices that can contrib- institutions wishing to appeal an adverse material ute to reductions in Herstatt risk. supervisory determination. Comments were requested by February 6, 1995. PROPOSED ACTIONS ISSUANCE OF REPORT ON DEPOSITORY The Federal Reserve Board published for public LOANS PROVIDED TO SMALL BUSINESSES comment on December 21, 1994, proposed revi- AND FARMS IN 1994 sions to its official staff commentary on Regulation B (Equal Credit Opportunity). Comments are The Federal Reserve Board on December 27, 1994, requested by February 15, 1995. issued a compilation of depository loans provided The Board issued for public comment on Decemto small businesses and farms in 1994. The inforber 9, 1994, a proposed amendment to Regulamation, provided under the Federal Deposit Insurtion K (International Banking Operations) to proance Corporation Improvement Act of 1991, is vide criteria for use in evaluating the operations of taken primarily from the reports of condition filed any foreign bank in the United States that the by insured depositories in their June 30 Call Board has determined is not subject to comprehen- Reports. The compilation, entitled Information on sive supervision or regulation on a consolidated Depository Credit for Small Businesses and Small basis by its home country supervisor. Comments Farms, is available on request from Publications are requested by February 13, 1995. Services, Mail Stop 127, Board of Governors of the The Board issued for public comment on Decem- Federal Reserve System, Washington, DC 20551. ber 8, 1994, proposed revisions to its official staff commentary on Regulation Z (Truth in Lending). Comments were requested by February 1, 1995. On December 20, 1994, the Board invited public PUBLICATION OF THE ANNUAL STATISTICAL comment on whether consumers might benefit from DIGEST, 1993 greater flexibility in waiving the right of rescission under the Truth in Lending Act. Comments were The Annual Statistical Digest, 1993 is now availrequested by January 30, 1995. able. This one-year Digest is designed as a compact The Board requested on December 22, 1994, source of economic, and, especially, financial data. public comment on the potential benefits, costs, The Digest provides a single source of historical and market implications of opening the Fedwire continuations of the statistics carried regularly in on-line book-entry securities transfer service ear- the Federal Reserve Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

116 Federal Reserve Bulletin • February 1995 This issue of the Digest covers only 1993 unless include the following: (1) the examiner guidance data were revised for earlier years. It serves to for the review of structured notes; and (2) the maintain the historical series first published in examination and inspection procedures for the Banking and Monetary Statistics, 1941-1970, and interagency policy statement on retail sales of nonthe Digest for 1970-79, for 1980-89, and yearly deposit investment products (that is, mutual funds). issues. A Concordance of Statistics will be The supplement also includes several revised secincluded with all orders. The Concordance pro- tions pertaining to the following: (1) the Board's vides a guide to tables that cover the same material July 27, 1994, revision of Regulation Y (Bank in the current and the previous single-year issues of Holding Companies and Change in Bank Control) the Digest, the ten-year Digest for 1980-89, and to provide limited extensions of a statutory excepthe Bulletin. tion that permits bank holding company affiliates Copies of the Digest at $25.00 each are available (bank and nonbank) to offer package discounts and from Publications Services, Mail Stop 127, Board to also offer a discount on securities brokerage of Governors of the Federal Reserve System, services (subject to the condition that a customer Washington, DC 20551. obtain a traditional bank product); (2) the Board's July 19, 1994, technical amendments to Regulation O (Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks); (3) the changes resulting from the Federal Reserve Sys- PUBLICATION OF A SUPPLEMENT tem's Supervisory Information System (SIS) that TO THE BANK HOLDING COMPANY were made effective July 18, 1994; and (4) the SUPERVISION MANUAL revisions for issuing a combined examination- A December 1994 supplement to the Bank Holding inspection report. These and other changes are Company Supervision Manual has been published described in a summary included with the by the Board's Division of Banking Supervision supplement. and Regulation and is now available for purchase The December 1994 supplement is available to by the public. The Manual is used by Federal the public and may be obtained from Publications Reserve examiners in the supervision, regulation, Services, Mail Stop 127, Board of Governors of the and inspection of bank holding companies and their Federal Reserve System, Washington, DC 20551. subsidiaries. A copy of the Manual is available at a cost of Topics in the supplement (no. 7) place emphasis $50.00. Supplements are available for an additional on the responsibilities of holding companies to cost. For information on purchasing the Manual or oversee the activities of their subsidiaries and the supplements, call (202) 452-3244. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

117 Minutes of the Federal Open Market Committee Meeting Held on November 15,1994 A meeting of the Federal Open Market Commit- Mr. Ettin, Deputy Director, Division of Research tee was held in the offices of the Board of Gov- and Statistics, Board of Governors Mr. Slifman, Associate Director, Division of ernors of the Federal Reserve System in Wash- Research and Statistics, Board of Governors ington, D.C., on Tuesday, November 15, 1994, at 9:00 a.m. Mr. Madigan, Associate Director, Division of Monetary Affairs, Board of Governors Present: Mr. Brayton, Assistant Director, Division of Mr. Greenspan, Chairman Research and Statistics, Board of Governors Mr. McDonough, Vice Chairman Ms. Low, Open Market Secretariat Assistant, Mr. Blinder Division of Monetary Affairs, Board of Mr. Broaddus Governors Mr. Forrestal Mr. Jordan Ms. Pianalto, First Vice President, Federal Reserve Mr. Kelley Bank of Cleveland Mr. LaWare Ms. Browne and Messrs. Davis, Dewald, Lang, Mr. Lindsey Rolnick, Rosenblum, and Vander Wilt, Senior Mr. Parry Vice Presidents, Federal Reserve Banks of Ms. Phillips Boston, Kansas City, St. Louis, Philadelphia, Ms. Yellen Minneapolis, Dallas, and Chicago respectively Mr. Judd, Vice President, Federal Reserve Bank of San Francisco Messrs. Hoenig, Melzer, and Moskow and Mr. Guentner, Assistant Vice President, Federal Ms. Minehan, Alternate Members of the Reserve Bank of New York Federal Open Market Committee Messrs. Boehne, McTeer, and Stern, Presidents of By unanimous vote, the minutes of the meeting the Federal Reserve Banks of Philadelphia, of the Federal Open Market Committee held on Dallas, and Minneapolis respectively September 27, 1994, were approved. The Report of Examination of the System Open Mr. Kohn, Secretary and Economist Market Account, conducted by the Board's Divi- Mr. Bernard, Deputy Secretary sion of Reserve Bank Operations and Payment Mr. Coyne, Assistant Secretary Mr. Gillum, Assistant Secretary Systems as of the close of business on June 30, Mr. Mattingly, General Counsel 1994, was accepted. Mr. Patrikis, Deputy General Counsel The Manager for Foreign Operations reported on Mr. Prell, Economist developments in foreign exchange markets and on Mr. Truman, Economist System open market transactions in foreign currencies during the period September 27, 1994, through Messrs. Goodfriend, Lindsey, Mishkin, Promisel, Siegman, and Simpson and Ms. Tschinkel, November 14, 1994. By unanimous vote, the Associate Economists Committee ratified these transactions. The Manager for Domestic Operations reported Ms. Lovett, Manager for Domestic Operations, on developments in domestic financial markets and System Open Market Account on System open market transactions in government Mr. Fisher, Manager for Foreign Operations, System Open Market Account securities and federal agency obligations during the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

118 Federal Reserve Bulletin • February 1995 period September 27, 1994, through November 14, ponents. In manufacturing, the pace of motor 1994. By unanimous vote, the Committee ratified vehicle assemblies was unchanged, but production these transactions. in automotive-related industries was stepped up The Committee then turned to a discussion of the noticeably and output of business equipment coneconomic and financial outlook and the implemen- tinued to expand vigorously. Total utilization of tation of monetary policy over the intermeeting industrial capacity climbed further in October from period ahead. A summary of the economic and already elevated rates. financial information available at the time of the Consumer confidence remained at a high level, meeting and of the Committee's discussion is and retail sales continued to rise rapidly in October. provided below, followed by the domestic policy Automotive dealers reported a large increase in directive that was approved by the Committee and sales, but strength also was evident elsewhere: Furissued to the Federal Reserve Bank of New York. niture and appliance stores posted another appre- The information reviewed at this meeting sug- ciable gain; apparel outlets registered a brisk rise; gested that the growth of the economy remained and spending at food and general merchandise substantial. Consumer spending was robust, busi- stores grew moderately. Housing starts rose appreness fixed investment continued on a strong up- ciably in September, reaching their highest level of ward trend, and housing activity had been well the year. Sales of new and existing homes were sustained despite the increase in mortgage interest stronger in September, despite the higher interest rates over the past year. Business inventory invest- rates on both fixed- and adjustable-rate mortgages ment had been brisk since the spring, apparently in that had prevailed since earlier in the year. response to the strong growth in final sales. Further Business capital spending remained on a solid sizable gains had been recorded in industrial pro- uptrend. Shipments of nondefense capital goods duction and employment. Increases in labor com- were brisk during the third quarter, and with orders pensation were still moderate, although there were continuing to exceed shipments, already large some tentative signs of wage acceleration associ- backlogs increased further for most types of busiated with the further tightening of labor markets. ness equipment. Spending for transportation equip- Prices of many materials continued to move up ment grew at a healthy rate in the third quarter; rapidly, but broad indexes did not indicate a pickup purchases of heavy trucks persisted at a very high in consumer inflation. level, and spending for motor vehicles picked up Nonfarm payroll employment rose appreciably after a second-quarter lull. Nonresidential construcfurther in October, with job gains widespread tion activity advanced at a reduced pace in the third by industry. In the service-producing sector, retail quarter; however, permits for new construction trade posted a particularly large advance while continued to trend higher. health and business services continued to record Business inventory investment apparently conmoderate increases. Manufacturing employment tinued at a brisk pace in the third quarter, with was up in October after having been unchanged in much of the accumulation occurring in types of September; the rise was related partly to continued goods where sales were strong. Manufacturing job growth in automobile- and construction-related stocks fell in September, but for the third quarter as industries, but payrolls also expanded in a number a whole they increased at the same moderate rate as of other industries, including textiles, paper, rubber, in the second quarter; the inventory-to-shipments and plastics. Construction hiring slowed after a ratio for manufacturing in September remained large rise in September. Employment, as measured near the historical low reached the previous month. by the household survey, increased by more than At the wholesale level, inventory accumulation the labor force in October, and the civilian unem- slowed slightly in the third quarter, and the ployment rate edged down to 5.8 percent. inventory-to-sales ratio was in the lower end of its Industrial production increased substantially in range over recent years. Retail inventories surged October after having posted appreciable advances in August (latest data available) after having deon balance in previous months. Manufacturing out- clined slightly in July. Nonetheless, the inventoryput accounted for all of the October rise as produc- to-sales ratio for this sector remained near the tion declined again in the mining and utilities com- middle of its range in recent years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 119 The nominal deficit on U.S. trade in goods and were expected to be consistent with modest growth services narrowed in August, but for July and of M2 and M3 over the balance of the year. August combined the deficit was substantially Open market operations during the intermeeting larger than its second-quarter average. The value period were directed toward maintaining the existof exports of goods and services rebounded in ing degree of pressure on reserve positions. As the August, with increases spread widely among auto- need for seasonal credit waned over the period, motive products, aircraft, agricultural products, adjustment plus seasonal borrowing declined submachinery, and consumer goods. The value of stantially, with actual borrowing remaining close imports also increased in August, but by a lesser to anticipated levels. Apart from some tightness amount than that of exports; much of the rise in reserves markets around the end of the third reflected greater imports of automotive vehicles quarter, the federal funds rate averaged close to from Canada. Economic activity continued to 43/4 percent. expand in the major foreign industrial countries in Most market interest rates rose appreciably over the third quarter, but growth apparently was at a the period since the September 27 meeting in more moderate pace than in the first half of the response to incoming economic data that generally year. indicated sustained momentum in final sales and Consumer price inflation remained moderate in inventory investment and high levels of aggregate September. For items other than the food and output relative to the economy's potential. The energy components, the increase in consumer strong economic data and persisting upward presprices over the twelve months ending in September sures on prices at earlier stages of production was slightly smaller than the rise over the previous appeared to heighten concerns among market partwelve months. At the producer level, prices of ticipants about inflationary pressures and prospects finished goods declined, largely reflecting a sharp for even more monetary tightening than had prefall in prices of finished energy goods. Excluding viously been anticipated. Most major indexes of food and energy items, producer prices edged up in equity prices were little changed on balance over September and had risen slowly over the twelve the intermeeting period. months ending in September. At intermediate The trade-weighted value of the dollar in terms stages of processing, prices of many materials, of the other G-10 currencies changed little on net notably industrial materials, had continued to move over the intermeeting period. The dollar trended up rapidly. Total compensation of private industry lower over much of the period, apparently reflectworkers rose significantly less over the four quar- ing market perceptions that inflation risks in the ters ending in September than over the previous United States were on the rise. In early November, four quarters, primarily reflecting a sharply smaller after reaching a new post-World War II low against increase in benefit costs. Average hourly earnings the yen and a two-year low against the mark, the of production or nonsupervisory workers recorded dollar began to recover. The rebound in the value a large gain in September after having expanded of the dollar apparently was in part a response to moderately over previous months. U.S. intervention in support of the dollar and At its meeting on September 27, 1994, the Com- heightened expectations of further monetary tightmittee adopted a directive that called for maintain- ening in the United States. ing the existing degree of pressure on reserve posi- M2 continued to edge lower in October; the tions but included a bias toward possible finning weakness was concentrated in its more-liquid during the intermeeting period. The directive stated deposit components, for which opportunity costs that in the context of the Committee's long-run had risen very substantially this year. M3 expanded objectives for price stability and sustainable eco- at a moderate pace, buoyed by continued rapid nomic growth, and giving careful consideration to growth in large-denomination time deposits issued economic, financial, and monetary developments, to finance rapid loan growth and to counter runoffs somewhat greater reserve restraint would be of nondeposit sources of funds. For the year acceptable or slightly lesser reserve restraint might through October, M2 grew at a rate at the bottom of be acceptable during the intermeeting period. The the Committee's range for 1994 and M3 at a rate in reserve conditions contemplated at this meeting the lower half of its range for the year. Total Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

120 Federal Reserve Bulletin • February 1995 domestic nonfinancial debt continued to expand at felt in an environment where the utilization of a moderate rate in recent months. labor and other producer resources was already at, The staff forecast prepared for this meeting sug- if not above, sustainable full employment levels. gested that growth in economic activity would slow The evidence of persisting growth in aggregate markedly over the next several quarters and for a demand at a pace appreciably above that of the period would average less than the rate of increase economy's long-run potential and of developing in the economy's potential output. In the staff's pressures on resources tended to be confirmed judgment, the economy currently was operating at by anecdotal reports of robust business expansion or beyond its long-run capacity, and the forecast in many parts of the country and growing difficulassumed that monetary policy would not accom- ties in hiring and retaining some types of labor. modate any continuing tendency for aggregate Ongoing cutbacks in some industries, such as demand to expand at a pace that could foster sus- defense, were tending to hold down overall ecotained higher inflation. The expansion of consumer nomic activity in a few regions, but all parts of the spending was projected to slow considerably in country appeared to be experiencing at least modresponse to diminishing pent-up demands, higher est economic growth, including California where borrowing costs, and reduced income growth. Busi- economic activity now seemed to have turned up ness fixed investment also was anticipated to decel- after an extended period of weakness. Sentiment erate appreciably in the context of smaller increases among retailers and other business contacts was in sales and less favorable financial conditions. widely reported to be quite favorable. In addition, Homebuilding was expected to be damped by some members commented that despite higher higher financing costs, although housing activity interest rates financial conditions generally relikely would remain well above the depressed lev- mained conducive to further business expansion. els of recent years when cash-flow affordability had The lending constraints that had tended to retard been less favorable. The lower value of the dollar the expansion earlier seemed to have given way to and the favorable prospects for faster economic increasingly accommodative loan policies by recovery abroad were projected to bolster the depository institutions and ready access to market demand for U.S. exports. With the economy having sources of financing for many business firms. reached or exceeded its long-run potential in the In their assessment of the contribution of key staff's judgment, wage and price inflation was pro- sectors of the economy to the expansion, members jected to pick up for a period before turning down commented on the current strength of consumer as pressures on productive resources eased. spending and also noted that business contacts were In the Committee's discussion of current and expressing considerable optimism about the prosprospective economic developments, members pects for retail sales over the holiday season. Concommented on widespread statistical and anecdotal sumer sentiment, as evidenced by survey results indications of considerably greater strength in the and retailer comments, appeared to be at a high business expansion than they had anticipated ear- level. Some moderation in the growth of consumer lier, with numerous industries now operating at or spending could be expected to emerge next year for beyond historic, long-run capacity levels. They saw a variety of reasons, including reduced pent-up few signs that growth in aggregate demand might demands and some anticipated slowing in the be moderating toward a more sustainable pace; growth of employment and consumer incomes. nonetheless, they continued to view some slowing Members also noted that rising interest rates were as a reasonable expectation as the monetary policy likely to damp consumer spending, notably for tightening actions implemented earlier exerted their durable goods, though there was little evidence of lagged effects on interest-sensitive sectors of the such a development thus far. A projected softening economy. At this point, increases in prices of final in housing markets would contribute to slower goods and services and of wages generally did not growth in demand for housing-related consumer appear to be trending higher, but the members were durables. concerned that inflation would worsen as the effects Expanding sales and favorable profit margins of continuing strong demand, rising production were fostering strong growth in business fixed costs, and higher import prices increasingly were investment, and much of the momentum in this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 121 sector probably would carry over into 1995. Some external sector of the economy would provide some business contacts reported that they were develop- impetus to the expansion. The recent depreciation ing plans for major capital outlays over coming of the dollar and strength in foreign economic months. As the year progressed, however, the activity could be expected to boost real exports at a increases that had occurred in interest rates, and the time when growth in real imports was likely to possibility of less receptive financial conditions moderate. The resulting improvement in the more generally, should begin to exert some inhibit- nation's net trade position would, however, tend to ing effects on business fixed investment, especially exacerbate any tendency for domestic demand to if profit margins also were to fall in the context of outrun the economy's output potential. rising labor and other costs. In the Committee's discussion of the outlook for With regard to the outlook for housing, members prices, the members saw a considerable risk of reported that conditions were somewhat uneven higher inflation if growth in demand and output across the country but that for the nation as a whole continued at an unsustainable pace, placing added rising mortgage rates had had surprisingly little pressures on labor and other producer resources. effect thus far on this typically interest-sensitive They noted indications of greater inflation pressector of the economy. One reason, it was sug- sures, especially in the rising prices of many mategested, was the apparent willingness of some rials used in the production process and the increashomebuyers to accept higher mortgage rates at this ing number of reports of labor shortages. To date, point because they expected rates to rise further prices of finished goods and services did not reflect later. Even so, the members continued to anticipate those pressures and overall wage inflation did not some slowdown in housing construction over com- appear to be trending higher. Even so, at least some ing quarters. Overall construction activity was modest worsening of inflation seemed quite likely likely to be supported to some extent, however, by over the quarters immediately ahead, despite the further gradual gains in nonresidential construc- persistence of strong competition that continued to tion, notably commercial and industrial structures, limit attempts to raise prices in most markets. This and perhaps some continuing strength in multi- view seemed to be reinforced by increasing reports family housing. of successful efforts by some business firms to After a surge in the second quarter, inventory establish and sustain higher prices and by numerinvestment remained substantial in the third quarter ous indications of business plans to raise prices and appeared to be continuing at a robust pace in around year-end or the early part of next year. the current quarter. For a variety of reasons, inven- Other factors that appeared to have adverse implitory accumulation might well be relatively brisk for cations for the inflation outlook included faster some period of time, given the favorable sales increases in import prices, and in the view of at experience of numerous business firms and the still least some members the prospect of diminishing quite low levels of inventories relative to sales. gains in productivity. Moreover, as evidenced by Moreover, with capacity pressures in many indus- the comments of some business contacts and the tries leading to some lengthening in delivery times, behavior of financial markets, inflationary expectabusinesses would tend to build inventories to sup- tions might be in the process of worsening, though port sales and avoid disruptions to production such a development could not be seen in broad schedules. Tending to confirm such an assessment survey results. To what extent such expectations were anecdotal reports suggesting that recent addi- would become more pervasive and foster greater tions to inventories were largely intended and not inflation momentum was very difficult to gauge at the result of disappointing sales. An inventory this point. One member suggested that some furbuildup at the pace recorded on average in the ther rise in inflation might reflect a typical developsecond and third quarters would not be sustainable, ment in a maturing cyclical expansion but that such but inventory investment was likely to be relatively a rise would not necessarily augur a permanent well maintained over coming months if aggregate uptick in inflation or even that progress toward demand were to expand in line with current price stability would not continue to be made over expectations. time, provided appropriate monetary policies were pursued. The members generally anticipated that the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

122 Federal Reserve Bulletin • February 1995 In the Committee's discussion of policy for the greater inflation pressures. A somewhat aggressive intermeeting period ahead, all the members agreed tightening action would improve the prospects for that the current stance of monetary policy pre- curbing intensifying inflationary pressures before sented unacceptable risks of embedding higher they gathered further momentum and would help inflation in the economy. The expansion retained position the economy on a sustainable growth path appreciably more forward momentum and greater consistent with the economy's long-run potential. inflationary potential than the members had antici- The members acknowledged the difficulty of judgpated, given the policy restraint implemented ing the precise degree of monetary restraint that earlier this year. The reasons for that outcome would be needed to attain the Committee's objecremained unclear. Among the suggested explana- tives and in particular the risk that further efforts to tions were that the earlier restraint appeared to control inflation at this juncture might foster have had a less-than-expected effect on current greater-than-intended weakening of the expansion. economic conditions and, in particular, on the more The Committee could not prejudge how much, if interest-sensitive sectors of the economy. Some any, additional monetary restraint might be needed members also suggested that the underlying expan- in the future. That would depend on further develsion was stronger than they had anticipated, and a opments, but for most members a sizable move at couple referred to the possibility that the lingering this point represented the most appropriate balance effects from the accommodative policy stance among the competing risks. During this discussion, maintained through last year were larger than had it was noted that recent developments were having been expected. Moreover, additional monetary an unsettling effect on financial markets, and a restraint seemed to be needed to counteract the tightening move of this magnitude might contribute stimulative effects on domestic economic activity to market stability by reducing expectations of of a number of atypical financial developments in a higher inflation and a further near-term policy period of rising interest rates; these included the action. Some members also commented that the easing of nonprice credit terms by depository insti- action would tend to reinforce the recent interventutions, the ample availability of funds in debt and tion in the foreign exchange markets. equity markets, and the depreciation of the dollar Other members indicated that they preferred a in foreign exchange markets. The members recogless forceful policy move at this point, one that nized that monetary policy actions exerted much would be consistent with the xh percentage point of their effects after relatively long lags and that a increase in the discount rate that had been prosubstantial portion of the restraint stemming from posed by several Federal Reserve Banks. In their the earlier policy actions undoubtedly had not yet view, substantial further restraint could be been felt in the economy. They agreed, nonetheexpected from the combined effects of the policy less, that monetary policy was still insufficiently tightening actions implemented earlier this year restrictive in light of emerging inflationary signals and the inevitable waning of the stimulative effects in the economy. Views differed to some extent, of policy actions taken in previous years. While however, regarding the degree of additional the need for further monetary restraint could not restraint that might be needed to foster the Commitbe ruled out, a more limited policy move at this tee's objectives for sustainable, noninflationary point could reasonably be expected in this view to economic growth. accomplish the greater part or all of the Commit- A majority of the members believed that an tee's anti-inflationary objectives over time and unusually sizable firming of monetary policy was would minimize the risk of setting policy on an desirable at this time, and they endorsed a proposal overly restrictive course with undesired conseto tighten reserve conditions in line with a 3A per- quences for the business expansion later. Moreover, centage point increase in the discount rate that a a cautious approach could lessen the risk that number of Federal Reserve Banks had proposed for the Committee's policy intentions would be misapproval by the Board of Governors. In this view, interpreted, with some resulting damage to conthe data becoming available in recent months had sumer and business confidence and dislocation in suggested considerable resilience and underlying financial markets. Despite their reservations, these strength in economic activity and rising risks of members indicated that they could accept the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 123 degree of restraint preferred by the majority The information reviewed at this meeting suggests because of the quite small difference in the that the growth of the economy has remained substantial. Nonfarm payroll employment advanced appreciably fureffects of the alternative moves on the economy ther in October, and the civilian unemployment rate over time. edged down to 5.8 percent. Industrial production regis- With regard to possible changes in policy during tered a large increase in October after posting sizable the period until the next meeting, a majority of the gains on average over other recent months, and capacity members favored associating the more substantial utilization moved up further from already high levels. policy adjustment with a symmetric intermeeting Retail sales have continued to rise rapidly. Housing starts rose appreciably in September. Orders for noninstruction. This preference was based on expectadefense capital goods point to a continued strong expantions that a further policy action was not likely to sion in spending on business equipment; permits for be called for over the near term, although a sym- nonresidential construction have been trending higher. metric directive would not prevent an intermeeting Inventory accumulation appears to have continued at a adjustment if near-term developments differed brisk pace in the third quarter. For July and August substantially from expectations. One member combined, the nominal deficit on U.S. trade in goods and services widened from its second-quarter average. Prices expressed the view that the unusually large move of many materials have continued to move up rapidly, made it especially important to follow a steady but broad indexes of prices for consumer goods and policy course for some period of time and to under- services have increased moderately on average over take any further firming only if new information recent months. of a surprisingly strong nature were to be received. Most market interest rates have risen appreciably since Another member indicated a preference for an the September meeting. The trade-weighted value of the dollar in terms of the other G-10 currencies was essenasymmetric directive toward restraint because tially unchanged on balance over the intermeeting such a directive would be more consistent with period, though it was weaker through much of the the likely need in his view for further monetary period. restraint to contain inflationary forces in the M2 contracted further in October while M3 expanded economy. at a moderate pace, buoyed by continued rapid growth in large-denomination time deposits. For the year through At the conclusion of the Committee's policy October, M2 grew at a rate at the bottom of the Commitdiscussion, all the members indicated that they tee' s range for 1994 and M3 at a rate in the lower half of could support a directive that called for a signifi- its range for the year. Total domestic nonfinancial debt cant increase in the degree of pressure on reserve has continued to expand at a moderate rate in recent positions, taking account of a possible increase of months. 3/4 percentage point in the discount rate, and that The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability did not include a presumption about the likely and promote sustainable growth in output. In furtherance direction of any adjustment to policy during the of these objectives, the Committee at its meeting in intermeeting period. Accordingly, in the context of July reaffirmed the ranges it had established in February the Committee's long-run objectives for price sta- for growth of M2 and M3 of 1 to 5 percent and 0 to bility and sustainable economic growth, and giving 4 percent respectively, measured from the fourth quarter of 1993 to the fourth quarter of 1994. The Committee careful consideration to economic, financial, and anticipated that developments contributing to unusual monetary developments, the Committee decided velocity increases could persist during the year and that that somewhat greater or somewhat lesser reserve money growth within these ranges would be consistent restraint would be acceptable during the inter- with its broad policy objectives. The monitoring range meeting period. According to a staff analysis, the for growth of total domestic nonfinancial debt was maintained at 4 to 8 percent for the year. For 1995, the reserve conditions contemplated at this meeting Committee agreed on tentative ranges for monetary would be consistent with modest growth in M2 and growth, measured from the fourth quarter of 1994 to the M3 over coming months. fourth quarter of 1995, of 1 to 5 percent for M2 and 0 to At the conclusion of the meeting, the Federal 4 percent for M3. The Committee provisionally set the Reserve Bank of New York was authorized and associated monitoring range for growth of domestic nonfinancial debt at 3 to 7 percent for 1995. The behavior of directed, until instructed otherwise by the Committhe monetary aggregates will continue to be evaluated in tee, to execute transactions in the System Account the light of progress toward price level stability, movein accordance with the following domestic policy ments in their velocities, and developments in the econdirective: omy and financial markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

124 Federal Reserve Bulletin • February 1995 In the implementation of policy for the immediate broad financial objectives. Nonetheless, the apparfuture, the Committee seeks to increase significantly the ently limited and temporary effectiveness of sterilexisting degree of pressure on reserve positions, taking ized intervention counseled a cautious reliance on account of a possible increase in the discount rate. In the such transactions. Against this background, nearly context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving all the members believed that the System's reciprocareful consideration to economic, financial, and mone- cal currency arrangements, which were a potential tary developments, somewhat greater reserve restraint or source of foreign currencies that might be used for somewhat lesser reserve restraint would be acceptable in intervention purposes as well as an ongoing symbol the intermeeting period. The contemplated reserve conof cooperation with other participating central ditions are expected to be consistent with modest growth banks, should be renewed for another year. in M2 and M3 over coming months. At the conclusion of this discussion, the Commit- Votes for this action: Messrs. Greenspan, McDon- tee authorized the renewal for further periods of ough, Blinder, Broaddus, Forrestal, Jordan, Kelley, one year of the System's reciprocal currency LaWare, Lindsey, and Parry and Mses. Phillips and arrangements with twelve foreign central banks Yellen. Votes against this action: None. and the Bank for International Settlements. The amounts and existing maturity dates of the arrange- Secretary's note. The meeting was recessed briefly at this point and the members of the Board of Governors ments are indicated in the table that follows: convened to consider pending Reserve Bank proposals for increases in the discount rate. After the conclusion of that meeting, the Presidents of the Federal Reserve Amount of arrangement Banks were informed that the Board of Governors had Foreign bank (millions of Term Maturity (months) date approved an increase of 3A percentage point in the dis- dollars equivalent) count rate, effective immediately, and the meeting of the Federal Open Market Committee then resumed. Austrian National Bank 250 12 12/04/94 Bank of England 3,000 " 12/04/94 Bank of Japan 5,000 " 12/04/94 Bank of Mexico 3,000 20 12/15/95 Bank of Norway 250 12 12/04/94 SYSTEM FOREIGN CURRENCY ARRANGEMENTS Bank of Sweden 300 " 12/04/94 Swiss National Bank 4,000 12/04/94 Bank for International The Committee considered the renewal of the Sys- Settlements tem's currency ("swap") arrangements with for- Swiss francs 600 " 12/04/94 Other authorized European eign central banks. These arangements normally currencies 1,250 12/04/94 have one-year maturities and, except for those with National Bank of Belgium ... 1,000 - 12/18/94 the Bank of Canada and the Bank of Mexico, were Bank of Canada 2,000 20 12/15/95 National Bank of Denmark .. 250 12 12/28/94 due to mature on various dates in December 1994. Bank of France 2,000 " 12/28/94 German Federal Bank 6,000 " 12/28/94 In the course of their review, the members dis- Bank of Italy 3,000 " 12/28/94 Netherlands Bank 500 12/28/94 cussed sterilized intervention by the Federal Reserve in the foreign exchange markets. They Votes for this action: Messrs. Greenspan, McDongenerally agreed that in certain circumstances such ough, Blinder, Forrestal, Jordan, Kelley, LaWare, intervention serves a useful purpose, such as help- Lindsey, and Parry and Mses. Phillips and Yellen. ing to counter disorderly market conditions, but it Vote against this action: Mr. Broaddus. normally would not be expected to have lasting effects on the foreign exchange value of the dollar Mr. Broaddus dissented because he believed that in the absence of other policy adjustments. In the the Federal Reserve's participation in foreign overwhelming number of instances for more than a exchange market intervention compromises its abildecade, the Federal Reserve has participated jointly ity to conduct monetary policy effectively. Because with the U.S. Treasury in foreign exchange opera- sterilized intervention cannot have sustained effects tions. In the view of most members it seemed in the absence of conforming monetary policy advisable to continue that procedure, especially actions, Federal Reserve participation in foreign given the System's responsibilities for the overall exchange operations risks one of two undesirable financial health of the economy and ongoing coop- outcomes. First, the independence of monetary poleration with the Treasury regarding the nation's icy is jeopardized if the System adjusts its policy Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 125 actions to support short-term foreign exchange because they are used primarily to facilitate market objectives set by the Treasury. Alternatively, the intervention. credibility of monetary policy is damaged if the It was agreed that the next meeting of the Com- System does not follow interventions with compat- mittee would be held on Tuesday, December 20, ible policy actions, the interventions consequently 1994. fail to achieve their objectives, and the System is The meeting adjourned at 2:05 p.m. associated in the mind of the public with the failed operations. In these circumstances, he did not view Donald L. Kohn renewal of the existing swap lines as desirable Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

127 Legal Developments FINAL RULE—AMENDMENT TO RISK-BASED CAPITAL (b) A bank receiving special supervisory attention; STANDARDS (c) A bank that has, or is expected to have, losses resulting in capital inadequacy; The Office of the Comptroller of the Currency ("OCC"), (d) A bank with significant exposure due to interest rate Treasury; Board of Governors of the Federal Reserve Sys- risk, the risks from concentrations of credit, certain risks tem ("Board"); Federal Deposit Insurance Corporation arising from nontraditional activities, or management's ("FDIC"); and the Office of Thrift Supervision ("OTS"), overall inability to monitor and control financial and operat- Treasury, are amending 12 C.F.R. Parts 3, 208, 325, and ing risks presented by concentrations of credit and nontradi- 567, and issuing this final rule to implement the portions of tional activities; section 305 of the Federal Deposit Insurance Corporation (e) A bank with significant exposure due to fiduciary or Improvement Act of 1991 ("FDICIA") that require the operational risk; agencies to revise their risk-based capital standards for (f) A bank exposed to a high degree of asset depreciation, or a insured depository institutions to ensure that those stan- low level of liquid assets in relation to short-term liabilities; dards take adequate account of concentration of credit risk (g) A bank exposed to a high volume of, or particularly and the risks of nontraditional activities. The final rule severe, problem loans; amends the risk-based capital standards by explicitly identi- (h) A bank that is growing rapidly, either internally or fying concentration of credit risk and certain risks arising through acquisitions; or from nontraditional activities, as well as an institution's (i) A bank that may be adversely affected by the activities or ability to manage these risks, as important factors in assess- condition of its holding company, affiliate(s), or other pering an institution's overall capital adequacy. sons or institutions including chain banking organizations, Effective January 17, 1995, 12 C.F.R. Parts 3, 208, 325, with which it has significant business relationships. and 567, are amended as follows: Part 208—Membership of State Banking Institutions Part 3—Minimum Capital Ratios; Issuance of in the Federal Reserve System (Regulation H) Directives 1. The authority citation for Part 208 continues to read as 1. The authority citation for Part 3 is revised to read as follows: follows: Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 371d, Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 461, 481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, 183 In note, 3907 and 3909. 1831p-l, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-l, and 2. Section 3.1 is revised to read as follows: 78w; 31 U.S.C. 5318. Section 3.1—Authority. 2. Appendix A to Part 208 is amended by revising the fifth and sixth paragraphs under "/. Overview" to read as follows: This part is issued under the authority of 12 U.S.C. 1 et seq., 93a, 161, 1818, 3907 and 3909. APPENDIX A TO PART 208—CAPITAL ADEQUACY 3. Section 3.10 is revised to read as follows: GUIDEUNES FOR STATE MEMBER BANKS: RISK-BASED MEASURE Section 3.10—Applicability. I. Overview The OCC may require higher minimum capital ratios for an individual bank in view of its circumstances. For example, higher capital ratios may be appropriate for: The risk-based capital ratio focuses principally on broad (a) A newly chartered bank; categories of credit risk, although the framework for assign- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

128 Federal Reserve Bulletin • February 1995 ing assets and off-balance-sheet items to risk categories financial condition. These factors include overall interest does incorporate elements of transfer risk, as well as limited rate risk exposure; liquidity, funding and market risks; the instances of interest rate and market risk. The framework quality and level of earnings; investment, loan portfolio, incorporates risks arising from traditional banking activities and other concentrations of credit risk; certain risks arising as well as risks arising from nontraditional activities. The from nontraditional activities; the quality of loans and inrisk-based ratio does not, however, incorporate other factors vestments; the effectiveness of loan and investment polithat can affect an institution's financial condition. These cies; and management's overall ability to monitor and confactors include overall interest-rate exposure; liquidity, trol financial and operating risks, including the risk funding and market risks; the quality and level of earnings; presented by concentrations of credit and nontraditional investment, loan portfolio, and other concentrations of activities. In addition to evaluating capital ratios, an overall credit risk; certain risks arising from nontraditional activi- assessment of capital adequacy must take account of each ties; the quality of loans and investments; the effectiveness of these other factors, including, in particular, the level and of loan and investment policies; and management's overall severity of problem and adversely classified assets. For this ability to monitor and control financial and operating risks, reason, the final supervisory judgement on a bank's capital including the risks presented by concentrations of credit and adequacy may differ significantly from the conclusions that nontraditional activities. might be drawn solely from the absolute level of the bank's In addition to evaluating capital ratios, an overall assess- risk-based capital ratio. ment of capital adequacy must take account of those factors, including, in particular, the level and severity of problem and classified assets. For this reason, the final supervisory judgement on a bank's capital adequacy may differ signifi- Part 567—Capital cantly from conclusions that might be drawn solely from the level of its risk-based capital ratio. 1. The authority citation for Part 567 continues to read as follows: [RISK-BASED CAPITAL STANDARDS: CONCENTRA- Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828 TION OF CREDIT RISK AND OF NONTRADITIONAL (note). ACTIVITIES] Part 325—Capital Maintenance 2. Section 567.3 is amended by revising paragraphs (b)(3) and (b)(9) to read as follows: 1. The authority citation for Part 325 is revised to read as follows: Section 567.3—Individual minimum capital Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), requirements. 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1828 note, 1831n note, 1831o, 3907, 3909. Section 325.3—[Amended] (b) * * * (3) A savings association that has a high degree of 2. Section 325.3(a) is amended in the fourth sentence by exposure to interest rate risk, prepayment risk, credit risk, adding "significant risks from concentrations of credit or concentration of credit risk, certain risks arising from nontraditional activities," immediately after "funding nontraditional activities, or similar risks; or a high prorisks," and by adding "will take these other factors into portion of off-balance sheet risk, especially standby letaccount in analyzing the bank's capital adequacy and" ters of credit; immediately after "FDIC" and before "may". 3. The fifth paragraph of the introductory text of Appendix A to Part 325 is revised to read as follows: (9) A savings association that has a record of operational losses that exceeds the average of other, similarly situated APPENDIX A TO PART 325—STATEMENT OF POUCY savings associations; has management deficiencies, in- ON RISK-BASED CAPITAL cluding failure to adequately monitor and control financial and operating risks, particularly the risks presented by concentrations of credit and nontraditional activities; The risk-based capital ratio focuses principally on broad or has a poor record of supervisory compliance. categories of credit risk; however, the ratio does not take account of many other factors that can affect a bank's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 129 FINAL RULE—AMENDMENTS TO REGULATIONS H minable fair values. For this purpose, net unrealized AND Y holding gains on such equity securities and net unrealized holding gains (losses) on available-for-sale The Board of Governors is amending 12 C.F.R. Parts 208 debt securities are not included in common stockand 225, its Regulations H and Y (Capital; Capital Ade- holders' equity. quacy Guidelines), for state member banks and bank holding companies. Under this final rule, institutions are gener- % # $ % $ ally directed to not include in regulatory capital the "net 2 * * * unrealized holding gains (losses) on securities available for f. Revaluation reserves. sale," the new common stockholders' equity account cre- i. Such reserves reflect the formal balance sheet ated by Statement of Financial Accounting Standards Num- restatement or revaluation for capital purposes of ber 115 (FAS 115), Accounting for Certain Investments in asset carrying values to reflect current market val- Debt and Equity Securities. Net unrealized losses on mar- ues. The federal banking agencies generally have ketable equity securities (i.e., equity securities with readily not included unrealized asset appreciation in capital determinable fair values), however, will continue to be ratio calculations, although they have long taken deducted from Tier 1 capital. This rule has the general effect such values into account as a separate factor in of valuing available-for-sale securities at amortized cost assessing the overall financial strength of a bank. (i.e., based on historical cost), rather than at fair value (i.e., ii. Consistent with long-standing supervisory pracgenerally at market value), for purposes of calculating the tice, the excess of market values over book values risk-based and leverage capital ratios. for assets held by state member banks will generally Effective December 31, 1994, 12 C.F.R. Parts 208 and not be recognized in supplementary capital or in the 225 are amended as follows: calculation of the risk-based capital ratio. However, all banks are encouraged to disclose their equivalent Part 208—Membership of State Banking Institutions of premises (building) and security revaluation rein the Federal Reserve System (Regulation H) serves. The Federal Reserve will consider any appreciation, as well as any depreciation, in specific asset 1. The authority citation for Part 208 is revised to read as values as additional considerations in assessing follows: overall capital strength and financial condition. Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 371d, 461, 481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, Part 225—Bank Holding Companies and Change in 1831p-l, 3105, 3310, 3331-3351 and 3906-3909; 15 U.S.C. Bank Control (Regulation Y) 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-l and 78w; 31 U.S.C. 5318. 1. The authority citation for Part 225 is revised to read as 2. Appendix A to Part 208 is amended by revising sections follows: II.A.l.a. and II.A.2.f to read as follows: Authority: 12 U.S.C. 18170(13), 1818, 1831i, 1831p-l, 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331- APPENDIX A TO PART 208—CAPITAL ADEQUACY 3351, 3907, and 3909. GUIDEUNES FOR STATE MEMBER BANKS: RISK-BASED MEASURE 2. Appendix A to Part 225 is amended by revising sections II.A.l.a. and II.A.2.f to read as follows: JJ * * * ^ ^ H5 APPENDIX A TO PART 225—CAPITAL ADEQUACY 1 * * * GUIDEUNES FOR BANK HOLDING COMPANIES: a. Common stockholders' equity. For purposes of RISK-BASED MEASURE calculating the risk-based capital ratio, common stockholders' equity is limited to common stock; related surplus; and retained earnings, including cap- JJ * * * ^ ^ ^ ital reserves and adjustments for the cumulative ef- 1 * * * fect of foreign currency translation, net of any treasury stock; less net unrealized holding losses on a. Common stockholders' equity. For purposes of calavailable-for-sale equity securities with readily deter- culating the risk-based capital ratio, common stock- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

130 Federal Reserve Bulletin • February 1995 holders' equity is limited to common stock; related Part 203—Home Mortgage Disclosure surplus; and retained earnings, including capital re- (Regulation C) serves and adjustments for the cumulative effect of foreign currency translation, net of any treasury stock; 1. The authority citation for Part 203 continues to read as less net unrealized holding losses on available-for-sale follows: equity securities with readily determinable fair values. For this purpose, net unrealized holding gains on such Authority: 12 U.S.C. 2801-2810. equity securities and net unrealized holding gains (losses) on available-for-sale debt securities are not in- 2. Section 203.2 is amended by republishing (e) introduccluded in common stockholders' equity. tory text, and by revising paragraph (e)(1) introductory text, and paragraphs (e)(2) and (f) as to read as follows: 2 * * * Section 203.2—Definitions. f. Revaluation reserves. i. Such reserves reflect the formal balance sheet restatement or revaluation for capital purposes of asset carrying values to reflect current market val- (e) Financial institution means: ues. The Federal Reserve generally has not included (1) A bank, savings association, or credit union that unrealized asset appreciation in capital ratio calcula- originated in the preceding calendar year a home purtions, although it has long taken such values into chase loan (other than temporary financing such as a account as a separate factor in assessing the overall construction loan), including a refinancing of a home financial strength of a banking organization. purchase loan, secured by a first lien on a one- to fourfamily dwelling if: ii. Consistent with long-standing supervisory practice, the excess of market values over book values for assets held by bank holding companies will generally not be recognized in supplementary capi- (2) A for-profit mortgage lending institution (other than a tal or in the calculation of the risk-based capital bank, savings association, or credit union) whose home ratio. However, all bank holding companies are en- purchase loan originations (including refinancings of couraged to disclose their equivalent of premises home purchase loans) equaled or exceeded ten percent of (building) and security revaluation reserves. The its loan origination volume, measured in dollars, in the Federal Reserve will consider any appreciation, as preceding calendar year. well as any depreciation, in specific asset values as (f) Home improvement loan means any loan that: additional considerations in assessing overall capital (1) Is for the purpose, in whole or in part, of repairing, strength and financial condition. rehabilitating, remodeling, or improving a dwelling or the real property on which it is located; and (2) Is classified by the financial institution as a home improvement loan. FINAL RULE—AMENDMENT TO REGUIATION C 3. Section 203.4 is amended by revising the second sen- The Board of Governors is amending 12 C.F.R. Part 203, its tence of the introductory text in paragraph (a), and para- Regulation C (Home Mortgage Disclosure), to revise the graph (a)(7), to read as follows: instructions and reporting forms that financial institutions must use in complying with the annual reporting require- Section 203.4—Compilation of loan data. ments. The amendments respond to the statutory provisions regarding earlier availability of the Home Mortgage Disclosure Act (HMDA) disclosure statements to the public; provide (a) Data format and itemization. * * * These transactions clarifications requested by financial institutions that report shall be recorded, within thirty calendar days after the end under HMDA; and are intended to help improve the quality of of each calendar quarter in which final action is taken (such the HMDA data. The amendments require reporting in as origination or purchase of a loan, or denial or withdrawal machine-readable format; require institutions to update their of an application), on a register in the format prescribed in loan application registers quarterly during the year as data are Appendix A of this part and shall include the following being collected; and make a number of other changes. items: Effective January 1, 1995, 12 C.F.R. Part 203 is amended as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 131 (7) The race or national origin and sex of the applicant or numbered, and the total number of pages must be given (for borrower, and the gross annual income relied upon in example, "Page 1 of 3").) processing the application. * * * ** E. Applications and loans must be recorded on your register 4. Section 203.5 is amended by revising paragraphs (a) and within thirty calendar days after the end of the calendar (e), to read as follows: quarter in which final action (such as origination or purchase of a loan, or denial or withdrawal of an application) is Section 203.5—Disclosure and reporting. taken. The type of purchaser for loans sold need not be included in these quarterly updates. (a) Reporting to agency. By March 1 following the calendar year for which the loan data are compiled, a financial * * * ** institution shall send its complete loan application register 6. Item III. of Appendix A to Part 203 is amended by to the agency office specified in Appendix A of this regularevising paragraphs B., C., and G., as follows: tion, and shall retain a copy for its records for a period of not less than three years. * * * ** III. Submission of HMDA-LAR and Public Release of Data (e) Notice of availability. A financial institution shall post a general notice about the availability of its HMDA data in the lobbies of its home office and any physical branch B. You must submit all required data to your supervisory offices located in an MSA. Upon request, it shall promptly agency in one complete package, with the prescribed transprovide the location of the institution's offices where the mittal sheet. An officer of your institution must certify to the statement is available. At its option, an institution may accuracy of the data. Any additional data submissions that include the location in its notice. become necessary (for example, because you discover that data were omitted from the initial submission, or because 5. Item II. of Appendix A to Part 203 is amended by revisions are called for) also must be accompanied by a revising paragraph A. and by adding a new paragraph E., as transmittal sheet. follows: C. The transmittal sheet must state the total number of line entries contained in the accompanying data submission. If the data submission involves revisions or deletions of previ- APPENDIX A TO PART 203—FORM AND ously submitted data, state the total of all line entries contained in that submission, including both those repre- INSTRUCTIONS FOR COMPLETION OF HMDA senting revisions or deletions of previously submitted en- LOAN/APPLICATION REGISTER tries, and those that are being resubmitted unchanged or are * * * ** being submitted for the first time. If you are a depository II. Required Format and Reporting Procedures institution, you also are asked to provide a list of the MSAs where you have a home or branch office. A. Institutions must submit data to their supervisory agencies in an automated, machine-readable form. The format * * * ** must conform exactly to that of form FR HMDA-LAR, G. Posters. Some of the agencies provide HMDA posters including the order of columns, column headings, etc. Con- that you can use to inform the public of the availability of tact your federal supervisory agency for information regard- your HMDA data, or you may create your own posters. If ing procedures and technical specifications for automated you print your own, the following language is suggested but data submission; in some cases, agencies also make soft- is not required: ware for automated data submission available to institutions. The data must be edited before submission, using the HOME MORTGAGE DISCLOSURE ACT NOTICE edits included in the agency-supplied software or equivalent edits in software available from vendors or developed in- The HMDA data about our residential mortgage lending are house. (Institutions that report 25 or fewer entries on their available for review. The data show geographic distribution of HMDA-LAR may collect and report the data in paper form. loans and applications; race, gender, and income of applicants and borrowers; and information about loan approvals and denials. In- An institution that submits its register in nonautomated quire at this office regarding the locations where HMDA data may form must send two copies that are typed or computer be inspected. printed, and must use the format of form FR HMDA-LAR (but need not use the form itself). Each page must be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

132 Federal Reserve Bulletin • February 1995 7. Item V. of Appendix A to Part 203 is amended as follows: regardless of the amount of new money (if any) that is for a. Paragraphs A.5.Code 2 a. and c., A.5. Code 3 a. and c., home purchase or home improvement purposes. and A.8. b., c., d., and f. are revised; b. Paragraphs B.2.a., B.2.b., and B.2.c. are redesignated as paragraphs B.2.b., B.2.d., and B.2.e., respectively; 8. Loan Amount. c. New paragraphs B.2.a. and B.2.c. are added; d. Paragraph C.5. is revised; and e. Paragraph D.5.c. is revised. b. For home improvement loans (both originations and purchases), you may include unpaid finance charges in the The revisions and additions read as follows: loan amount if that is how you record such loans on your books. For a multiple purpose loan classified by you as a home improvement loan because it involves a home im- V. Instructions for Completion of Loan/Application provement purpose, enter the full amount of the loan, not Register just the amount specified for home improvement. c. For home-equity lines of credit (if you have chosen to report them), enter as the loan amount only that portion of A. Application or Loan Information the line that is for home improvement purposes. Report the loan amount for applications that did not result in originations in the same manner. Report only in the year the line is 5. Explanation of Purpose Codes established. d. For refinancings of dwelling-secured loans, indicate the total amount of the refinancing, including the amount outstanding on the original loan and the amount of new money Code 2: Home improvement. (if any). A. Code 2 applies to loans and applications for loans if: (i) A portion of the proceeds is to be used for repairing, rehabilitating, remodeling, or improving a one- to four- f. If you make a counteroffer for an amount different from family residential dwelling, or the real property upon the amount initially applied for, and the counteroffer is which it is located, and accepted by the applicant, report it as an origination for the (ii) The loan is classified as a home improvement loan. amount of the loan actually granted. If the applicant turns down the counteroffer or fails to respond, report it as a c. At your option, you may report data about home-equity denial for the amount initially requested. lines of credit—even if the credit line is not classified as a home improvement loan. If you choose to do so, you may B. Action Taken report a home-equity line of credit as a home improvement loan if some portion of the proceeds will be used for home improvement. (See Paragraph 8. "Loan amount.") If you 2. Explanation of Codes report originations of home-equity lines of credit, you must a. Use code 1 for a loan that is originated, including one also report applications for such loans that did not result in resulting from a counteroffer (your offer to the applicant to originations. make the loan on different terms or in a different amount Code 3: Refinancings. than initially applied for) that the applicant accepts. a. Use this code for refinancings (and applications for refinancings) of loans secured by one- to four-family residential dwellings. A refinancing involves the satisfaction of c. Use code 3 when an application is denied. This includes an existing obligation that is replaced by a new obligation the situation when an applicant turns down or fails to undertaken by the same borrower. But do not report a respond to your counteroffer. Do not report as a withdrawn refinancing if, under the loan agreement, you are uncondi- application or as an application that was approved but not tionally obligated to refinance the obligation, or you are accepted. obligated to refinance the obligation subject to conditions within the borrower's control. C. Property Location. c. You may report all refinancings of loans secured by oneto four-family residential dwellings, regardless of the pur- 5. Outside-MSA. For loans on property located outside the pose of or amount outstanding on the original loan, and MSAs in which you have a home or branch office (or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 133 outside any MSA), you have two options. Under option 1, 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-l, and you may enter the MSA, state, and county codes and the 78w; 31 U.S.C. 5318. census tract number. You may enter "NA" in the MSA or census tract column if no code or number exists for the 2. A new section 208.21 is added to Subpart A to read as property. (Codes exist for all states and counties.) If you follows: choose option 1, the codes and tract number must accurately identify the location for the property in question. Under Section 208.21—Community development and option 2, you may enter "NA" in all four columns, whether public welfare investments. or not the codes or number exist for the property. (a) Definitions — (1) Low- or moderate-income area means: D. Applicant Information — Race or National Origin, Sex, (i) One or more census tracts in a Metropolitan Statisand Income. tical Area where the median family income adjusted for family size in each census tract is less than eighty percent of the median family income adjusted for 5. Income. family size of the Metropolitan Statistical Area; or (ii) If not in a Metropolitan Statistical Area, one or more census tracts or block-numbered areas where the c. If no income information is asked for or relied on in the median family income adjusted for family size in each credit decision, enter "NA." census tract or block-numbered area is less than eighty percent of the median family income adjusted for family size of the State. 8. A Loan/Application Register Transmittal Sheet is added (2) Low- and moderate-income persons has the same to Appendix A to Part 203 immediately following parameaning as low- and moderate-income persons as degraph VI.G., to read as follows: fined in 42 U.S.C. 5302(a)(20)(A). (3) Small business means a business that meets the size eligibility standards of 13 C.F.R. 121.802(a)(2). (b) Investments that do not require prior Board approval. Notwithstanding the provisions of section 5136 of the Re- FINAL RULE—AMENDMENT TO REGULATION H vised Statutes (12 U.S.C. 24 (Seventh)) made applicable to State member banks by paragraph 20 of section 9 of the The Board of Governors is amending 12 C.F.R. Part 208, its Federal Reserve Act (12 U.S.C. 335), a State member bank Regulation H (Membership of State Banking Institutions in may make an investment, without prior Board approval, if the Federal Reserve System), to implement a provision of the following conditions are met: the Depository Institutions Disaster Relief Act of 1992 that (1) The investment is in a corporation, limited partnerauthorizes state member banks to make investments de- ship, or other entity: signed primarily to promote the public welfare to the extent (i) Where the Board has determined that an investment permissible under state law and subject to regulation by the in that entity or class of entities is a public welfare Board. The amendment would permit state member banks investment under paragraph 23 of section 9 of the to make certain public welfare investments without prior Federal Reserve Act (12 U.S.C. 338a), or a commuapproval and other public welfare investments with specific nity development investment under Regulation Y Board approval. The amendment also addresses the proce- (12 C.F.R. 225.25(b)(6)); dural aspects of these investments. (ii) Where the Comptroller of the Currency has deter- Effective January 9, 1995, 12 C.F.R. Part 208 is amended mined, by order or regulation, that an investment in as follows: that entity by a national bank is a public welfare investment under section 5136 of the Revised Statutes Part 208—Membership of State Banking Institutions (12 U.S.C. 24 (Eleventh)); in the Federal Reserve System (Regulation H) (iii) Where that entity is a community development financial institution as defined in section 103(5) of the 1. The authority citation for Part 208 continues to read as Community Development Banking and Financial Instifollows: tutions Act of 1994 (12 U.S.C. 4702(5)); or (iv) Where that entity, directly or indirectly, engages Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 37Id, solely in or makes loans solely for the purposes of one 461, 481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, or more of the following community development 1831p-l, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. activities: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

134 Federal Reserve Bulletin • February 1995 LOAN/APPUCATION REGISTER TRANSMITTAL SHEET Form FR HMDA-LAR OMB No. 7100-0247. Approval expires March 31. 1997 Hours per response: 10 to 10.000 (200 averagei LOAN/APPLICATION REGISTER This repon is required by law (12 USC 2801 -2810 and 12 CFR 203) TRANSMITTAL SHEET You must complete this transmittal sheet (please type or print) and attach it to the Loan/Application Register, required by the Home Mortgage Disclosure Act, that you submit to your supervisory agency. Agency Total line entries contained in Reporter's Identification Number Code Reporter's Tax Identification Number attached Loan/Application Register I I I I I I I I I I I-I I I I l-l I I I I ! I I The Loan/Application Register that is attached covers activity during 19 ana contains a total of pages. Enter the name and address of your institution. The disclosure statement that is produced by the Federal Financial Institutions Examination Council will be mailed to the address you supply below: Name of Institution Address City, State. ZIP Enter the name and telephone number of a person who may be contacted about questions regarding your register: ( ) Name Telephone Number If your institution is a subsidiary of another institution or corporation, enter the name of your parent: City, State. ZIP Enter the name and address of your supervisory agency (or your parent's supervisory agency): City, State. ZIP An officer of your institution must complete the following section. I certify to the accuracy of the data contained in this register. Name of Officer Signature Date Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 135 (A) Investing in, developing, rehabilitating, manag- ment, including the amount of the investment and the ing, selling, or renting residential property if a ma- identity of the entity in which the investment is made. jority of the units will be occupied by low- and (d) Investments requiring Board approval. (1) With prior moderate-income persons or if the property is a Board approval, a State member bank may make public "qualified low-income building" as defined in sec- welfare investments under paragraph 23 of section 9 of tion 42(c)(2) of the Internal Revenue Code the Federal Reserve Act (12 U.S.C. 338a), other than (26 U.S.C. 42(c)(2)); those specified in paragraph (b) of this section. (B) Investing in, developing, rehabilitating, manag- (2) Requests for approval under this paragraph should ing, selling, or renting nonresidential real property include, at a minimum, the amount of the proposed or other assets located in a low- or moderate-income investment, a description of the entity in which the investarea and targeted towards low- and moderate- ment is to be made, an explanation of why the investment income persons; is a public welfare investment under paragraph 23 of (C) Investing in one or more small businesses lo- section 9 of the Federal Reserve Act (12 U.S.C. 338a), a cated in a low- or moderate-income area to stimulate description of the State member bank's potential liability economic development; under the proposed investment, the amount of the State (D) Investing in, developing, or otherwise assisting member bank's aggregate outstanding public welfare injob training or placement facilities or programs that vestments under paragraph 23 of section 9 of the Federal will be targeted towards low- and moderate-income Reserve Act, and the amount of the State member bank's persons; capital stock and surplus as defined in 12 C.F.R. 250.162. (E) Investing in an entity located in a low- or (3) The Board will act on a request under this paragraph moderate-income area if that entity creates long- within 60 calendar days after receipt of a request that term employment opportunities, a majority of which meets the requirements of paragraph (d)(2) of this sec- (based on full time equivalent positions) will be held tion, unless the Board notifies the requesting State memby low- and moderate-income persons; and ber bank that a longer time period will be required. (F) Providing technical assistance, credit counsel- (e) Divestiture of investments. A State member bank shall ing, research, and program development assistance divest itself of an investment made under paragraph (b), (d) to low- and moderate-income persons, small busi- or (f) of this section to the extent that the investment nesses, or nonprofit corporations to help achieve exceeds the scope of, or ceases to meet, the requirements of community development; paragraphs (b)(1) through (b)(5), or paragraph (d) of this (2) The investment is permitted by State law; section. The divestiture shall be made in the manner speci- (3) The investment will not expose the State member fied in 12 C.F.R. 225.140, Regulation Y, for interests acbank to liability beyond the amount of the investment; quired by a lending subsidiary of a bank holding company (4) The investment does not exceed the sum of two or the bank holding company itself in satisfaction of a debt percent of the State member bank's capital stock and previously contracted. surplus as defined under 12 C.F.R. 250.162; (f) Preexisting investments. (1) For ongoing investments (5) The aggregate of all such investments of the State made prior to January 9, 1995, that are covered by member bank does not exceed the sum of five percent of paragraph (b) of this section, a State member bank shall its capital stock and surplus as defined under 12 C.F.R. notify its Federal Reserve Bank of the investment not 250.162; more than sixty days after January 9, 1995. (6) The State member bank is well capitalized or ade- (2) For other ongoing investments made prior to the quately capitalized under sections 208.33(b)(1) and (2); January 9, 1995, a State member bank shall request (7) The State member bank received a composite Board approval not more than one year after January 9, CAMEL rating of "1" or "2" under the Uniform Finan- 1995. cial Institutions Rating System as of its most recent examination and an overall rating of at least "satisfactory" as of its most recent consumer compliance examina- FINAL RULE—AMENDMENTS TO REGULATIONS H tion; and AND Y (8) The State member bank is not subject to any written agreement, cease and desist order, capital directive, The Board of Governors is amending 12 C.F.R. Parts 208 prompt corrective action directive, or memorandum of and 225, its Regulations H and Y (Capital; Capital Adeunderstanding issued by the Board or a Federal Reserve quacy Guidelines), to recognize the risk-reducing benefits Bank. of qualifying bilateral netting contracts. This final rule (c) Notice. Not more than 30 days after making an invest- implements a recent revision to the Basle Accord permitting ment under paragraph (b) of this section, the State member the recognition of such netting arrangements. The effect of bank shall advise its Federal Reserve Bank of the invest- the final rule is that state member banks and bank holding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

136 Federal Reserve Bulletin • February 1995 companies (banking organizations, institutions) may net fied in the contract, and should reflect changes in the positive and negative mark-to-market values of interest and relevant rates, as well as counterparty credit quality, exchange rate contracts in determining the current exposure c. The potential future credit exposure of a contract, portion of the credit equivalent amount of such contracts to including a contract with a negative mark-to-market be included in risk-weighted assets. value, is estimated by multiplying the notional prin- Effective December 31, 1994, 12 C.F.R. Parts 208 and cipal amount of the contract by a credit conversion 225 are amended as follows: factor. Banks should, subject to examiner review, use the effective rather than the apparent or stated Part 208—Membership of State Banking Institutions notional amount in this calculation. The conversion in the Federal Reserve System (Regulation H) factors are: 1. The authority citation for Part 208 is revised to read as Interest rate Exchange rate follows: Remaining Maturity contracts contracts (percent) (percent) Authority: 12 U.S.C. 36, 248(a) and 248(c), 321-338a, One year or less 0 1.0 37Id, 461, 481^486, 601, 611, 1814, 1823(j), 1828(o), Over one year 0.5 5.0 1831o, 1831p-l, 3105, 3310, 3331-3351 and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-l d. Examples of the calculation of credit equivalent and 78w; 31 U.S.C. 5318. amounts for these instruments are contained in Attachment V of Appendix A. 2. Appendix A to part 208 is amended by revising: e. Because exchange rate contracts involve an exa. Section III.E.2.; change of principal upon maturity, and exchange b. Section ffl.E.3; rates are generally more volatile than interest rates, c. Section III.E.5.; higher conversion factors have been established for d. The last heading and two subsequent paragraphs of foreign exchange rate contracts than for interest rate Attachment IV; and contracts. e. Attachment V. f. No potential future credit exposure is calculated for single currency interest rate swaps in which The revisions read as follows: payments are made based upon two floating rate indices, so-called floating/floating or basis swaps; the credit exposure on these contracts is evaluated solely on the basis of their mark-to-market values. APPENDIX A TO PART 208—CAPITAL ADEQUACY 3. Risk Weights. Once the credit equivalent amount for GUIDEUNES FOR STATE MEMBER BANKS: an interest rate or exchange rate contract has been RISK-BASED MEASURE determined, that amount is assigned to the risk weight category appropriate to the counterparty, or, if relevant, to the guarantor or the nature of any collateral.49 m * * * However, the maximum weight that will be applied to J7 * * * the credit equivalent amount of such instruments is 2. Calculation of credit equivalent amounts. 50 percent. a. The credit equivalent amount of an off-balancesheet rate contract that is not subject to a qualifying bilateral netting contract in accordance with section 5. Netting. III.E.5. of this Appendix A is equal to the sum of: a. For purposes of Appendix A, netting refers to the (i) The current exposure (sometimes referred to as offsetting of positive and negative mark-to-market the replacement cost) of the contract; and values in the determination of a current exposure to (ii) An estimate of the potential future credit be used in the calculation of a credit equivalent exposure over the remaining life of the contract. amount. Any legally enforceable form of bilateral b. The current exposure is determined by the markto-market value of the contract. If the mark-tomarket value is positive, then the current exposure is 49. For interest and exchange rate contracts, sufficiency of collateral or guarantees is determined by the market value of the collateral or the amount that mark-to-market value. If the mark-to-market of the guarantee in relation to the credit equivalent amount. Collateral and value is zero or negative, then the current exposure guarantees are subject to the same provisions noted under section III.B. of Appendix A. Collateral held against a netting contract is not recognized for is zero. Mark-to-market values are measured in dolcapital purposes unless it is legally available to support the single legal lars, regardless of the currency or currencies speci- obligation created by the netting contract. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 137 netting (that is, netting with a single counterparty) of contract, or any of its underlying individual conrate contracts is recognized for purposes of calculat- tracts, may not be legally enforceable under any one ing the credit equivalent amount provided that: of the bodies of law described in paragraph 5.a.2.i. 1. The netting is accomplished under a written through 5.a.2.iii. of section III of Appendix A. If netting contract that creates a single legal obliga- such a determination is made, the netting contract tion, covering all included individual contracts, may be disqualified from recognition for risk-based with the effect that the bank would have a claim capital purposes or underlying individual contracts to receive, or obligation to pay, only the net may be treated as though they are not subject to the amount of the sum of the positive and negative netting contract. mark-to-market values on included individual d. The credit equivalent amount of rate contracts contracts in the event that a counterparty, or a that are subject to a qualifying bilateral netting counterparty to whom the contract has been val- contract is calculated by adding: idly assigned, fails to perform due to any of the (i) The current exposure of the netting contract, following events: default, insolvency, liquidation, and or similar circumstances. (ii) The sum of the estimates of the potential 2. The bank obtains a written and reasoned legal future credit exposures on all individual contracts opinion(s) representing that in the event of a legal subject to the netting contract, estimated in accorchallenge—including one resulting from default, dance with section III.E.2. of Appendix A.50 insolvency, liquidation, or similar circum- e. The current exposure of the netting contract is stances—the relevant court and administrative au- determined by summing all positive and negative thorities would find the bank's exposure to be mark-to-market values of the individual contracts such a net amount under: included in the netting contract. If the net sum of the i. The law of the jurisdiction in which the mark-to-market values is positive, then the current counterparty is chartered or the equivalent loca- exposure of the netting contract is equal to that sum. tion in the case of noncorporate entities, and if If the net sum of the mark-to-market values is zero a branch of the counterparty is involved, then or negative, then the current exposure of the netting also under the law of the jurisdiction in which contract is zero. The Federal Reserve may determine the branch is located; that a netting contract qualifies for risk-based capital ii. The law that governs the individual con- netting treatment even though certain individual tracts covered by the netting contract; and contracts may not qualify. In such instances, the iii. The law that governs the netting contract. nonqualifying contracts should be treated as individual contracts that are not subject to the netting 3. The bank establishes and maintains procedures contract. to ensure that the legal characteristics of netting contracts are kept under review in the light of f. In the event a netting contract covers contracts possible changes in relevant law. that are normally excluded from the risk-based ratio 4. The bank maintains in its files documentation calculation—for example, exchange rate contracts adequate to support the netting of rate contracts, with an original maturity of fourteen calendar days including a copy of the bilateral netting contract or less, or instruments traded on exchanges that and necessary legal opinions. require daily payment of variation margin—an instib. A contract containing a walkaway clause is not tution may elect to consistently either include or eligible for netting for purposes of calculating the exclude all mark-to-market values of such contracts credit equivalent amount.50 when determining net current exposure. c. By netting individual contracts for the purpose of g. An example of the calculation of the credit equivalent calculating its credit equivalent amount, a bank rep- amount for rate contracts subject to a qualifying netting resents that it has met the requirements of Appen- contract is contained in Attachment V of Appendix A. dix A and all the appropriate documents are in the bank's files and available for inspection by the Federal Reserve. The Federal Reserve may determine that a bank's files are inadequate or that a netting 50. For purposes of calculating potential future credit exposure to a netting counterparty for foreign exchange contracts and other similar contracts in 50. A walkaway clause is a provision in a netting contract that permits a which notional principal is equivalent to cash flows, total notional principal non-defaulting counterparty to make lower payments than it would make is defined as the net receipts falling due on each value date in each currency. otherwise under the contract, or no payment at all, to a defaulter or to the The reason for this is that offsetting contracts in the same currency maturing estate of a defaulter, even if the defaulter or the estate of the defaulter is a net on the same date will have lower potential future exposure as well as lower creditor under the contract. current exposure. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

138 Federal Reserve Bulletin • February 1995 APPENDIX A TO PART 208—CAPITAL ADEQUACY GUIDELINES FOR STATE MEMBER BANKS Attachment V—Calculation of Credit Equivalent Amounts for Interest Rate and Exchange Rate-Related Transactions for State Member Banks Potential Current Credit equivalent exposure + exposure = amount Notional Potential Mark-to- Current Type of contract Conversion principal exposure market exposure (remaining maturity) factor (dollars) (dollars) value (dollars) (1) 120-day forward foreign exchange 5,000,000 .01 50,000 100,000 100,000 150,000 (2) 120-day forward foreign exchange 6,000,000 .01 60,000 -120,000 0 60,000 (3) 3-year singlecurrency fixed/ floating interestrate swap 10,000,000 .005 50,000 200,000 200,000 250,000 (4) 3-year singlecurrency fixed/ floating interestrate swap 10,000,000 .005 50,000 -250,000 0 50,000 (5) 7-year crosscurrency fixed/ floating interestrate swap 20,000,000 .05 1,000,000 -1,300,000 0 1,000,000 Total 1,210,000 300,000 1,510,000 If contracts (1) through (5) above are subject to a qualifying bilateral netting contract, then the following applies: Potential future KNTe t . current Credit equivalent exposure , amount (from above) exPosure' (1) 50,000 (2) 60,000 (3) 50,000 (4) 50,000 (5) 1,000,000 Total 1,210,000 + 0 1,210,000 1. The total of the mark-to-market values from above is -1,370,000. Since this is a negative amount, the net current exposure is zero. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 139 Attachment IV—Credit Conversion Factors for d. The last heading and subsequent two paragraphs of Off-Balance-Sheet Items for State Member Banks Attachment IV; and e. Attachment V. The revisions read as follows: Credit Conversion for Interest Rate and Exchange Rate Contracts APPENDIX A TO PART 225—CAPITAL ADEQUACY 1. The credit equivalent amount of a rate contract is the sum GUIDEUNES FOR BANK HOLDING COMPANIES: of the current credit exposure of the contract and an esti- RISK-BASED MEASURE mate of potential future increases in credit exposure. The current exposure is the positive mark-to-market value of the contract (or zero if the mark-to-market value is zero or JJJ * * * negative). For rate contracts that are subject to a qualifying g * * * bilateral netting contract the current exposure is, generally, 2. Calculation of credit equivalent amounts. the net sum of the positive and negative mark-to-market a. The credit equivalent amount of an off-balance values of the contracts included in the netting contract (or sheet rate contract that is not subject to a qualifying zero if the net sum of the mark-to-market values is zero or bilateral netting contract in accordance with section negative). The potential future exposure is calculated by III.E.5. of Appendix A is equal to the sum of: multiplying the effective notional amount of a contract by (i) The current exposure (sometimes referred to as one of the following credit conversion factors, as approprithe replacement cost) of the contract; and ate: (ii) An estimate of the potential future credit exposure over the remaining life of the contract. Interest rate Exchange rate b. The current exposure is determined by the mark- Remaining Maturity contracts contracts to-market value of the contract. If the mark-to- (percent) (percent) market value is positive, then the current exposure is that mark-to-market value. If the mark-to-market One year or less 0 1.0 Over one year 0.5 5.0 value is zero or negative, then the current exposure is zero. Mark-to-market values are measured in dollars, regardless of the currency or currencies speci- 2. No potential future exposure is calculated for single fied in the contract, and should reflect changes in the currency interest rate swaps in which payments are made relevant rates, as well as counterparty credit quality. based upon two floating indices, that is, so called floating/ floating or basis swaps. The credit exposure on these con- c. The potential future credit exposure of a contract, tracts is evaluated solely on the basis of their mark-to- including a contract with a negative mark-to-market market value. Exchange rate contracts with an original value, is estimated by multiplying the notional prinmaturity of fourteen days or less are excluded. Instruments cipal amount of the contract by a credit conversion traded on exchanges that require daily payment of variation factors. Banking organizations should, subject to margin are also excluded. examiner review, use the effective rather than the apparent or stated notional amount in this calculation. The conversion factors are: Part 225—Bank Holding Companies and Change in Bank Control (Regulation Y) Interest rate Exchange rate Remaining Maturity contracts contracts (percent) (percent) 1. The authority citation for Part 225 is revised to read as follows: One year or less 0 1.0 Over one year 0.5 5.0 Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, 1831p-l, 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331- d. Examples of the calculation of credit equivalent 3351,3907, and 3909. amounts for these instruments are contained in Attachment V of Appendix A. 2. Appendix A to part 225 is amended by revising: e. Because exchange rate contracts involve an exa. Section III.E.2.; change of principal upon maturity, and exchange b. Section III.E.3.; rates are generally more volatile than interest rates, c. Section III.E.5.; higher conversion factors have been established Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

140 Federal Reserve Bulletin • February 1995 for exchange rate contracts than for interest rate i. The law of the jurisdiction in which the contracts. counterparty is chartered or the equivalent locaf. No potential future credit exposure is calculated tion in the case of noncorporate entities, and if for single currency interest rate swaps in which a branch of the counterparty is involved, then payments are made based upon two floating rate also under the law of the jurisdiction in which indices, so-called floating/floating or basis swaps; the branch is located; the credit exposure on these contracts is evaluated ii. The law that governs the individual consolely on the basis of their mark-to-market values. tracts covered by the netting contract; and 3. Risk weights. Once the credit equivalent amount for iii. The law that governs the netting contract. an interest rate or exchange rate contract has been 3. The banking organization establishes and maindetermined, that amount is assigned to the risk weight tains procedures to ensure that the legal charactercategory appropriate to the counterparty, or, if relevant, istics of netting contracts are kept under review in to the guarantor or the nature of any collateral.53 the light of possible changes in relevant law. However, the maximum weight that will be applied to 4. The banking organization maintains in its files the credit equivalent amount of such instruments is documentation adequate to support the netting of 50 percent. rate contracts, including a copy of the bilateral netting contract and necessary legal opinions. b. A contract containing a walkaway clause is not 5. Netting, a. For purposes of Appendix A, netting eligible for netting for purposes of calculating the refers to the offsetting of positive and negative mark- credit equivalent amount.50 to-market values in the determination of a current c. By netting individual contracts for the purpose of exposure to be used in the calculation of a credit calculating its credit equivalent amount, a banking equivalent amount. Any legally enforceable form of organization represents that it has met the requirebilateral netting (that is, netting with a single coun- ments of Appendix A and all the appropriate docuterparty) of rate contracts is recognized for purposes ments are in the organization's files and available of calculating the credit equivalent amount provided for inspection by the Federal Reserve. The Federal that: Reserve may determine that a banking organiza- 1. The netting is accomplished under a written tion's files are inadequate or that a netting contract, netting contract that creates a single legal obliga- or any of its underlying individual contracts, may tion, covering all included individual contracts, not be legally enforceable under any one of the with the effect that the organization would have a bodies of law described in paragraph 5.a.2.i. through claim to receive, or obligation to receive or pay, 5.a.2.iii. of section III of Appendix A. If such a only the net amount of the sum of the positive and determination is made, the netting contract may be negative mark-to-market values on included indi- disqualified from recognition for risk-based capital vidual contracts in the event that a counterparty, purposes or underlying individual contracts may be or a counterparty to whom the contract has been treated as though they are not subject to the netting validly assigned, fails to perform due to any of contract. the following events: default, bankruptcy, liquida- d. The credit equivalent amount of rate contracts tion, or similar circumstances. that are subject to a qualifying bilateral netting 2. The banking organization obtains a written and contract is calculated by adding: reasoned legal opinion(s) representing that in the (i) The current exposure of the netting contract, event of a legal challenge—including one result- and ing from default, bankruptcy, liquidation, or simi- (ii) The sum of the estimates of the potential lar circumstances—the relevant court and admin- future credit exposures on all individual contracts istrative authorities would find the banking subject to the netting contract, estimated in accororganization's exposure to be such a net amount dance with section III.E.2. of Appendix A.55 under: 50. A walkaway clause is a provision in a netting contract that permits a non-defaulting counterparty to make lower payments than it would make 53. For interest and exchange rate contracts, sufficiency of collateral or otherwise under the contract, or no payment at all, to a defaulter or to the guarantees is determined by the market value of the collateral or the amount estate of a defaulter, even if the defaulter or the estate of the defaulter is a net of the guarantee in relation to the credit equivalent amount. Collateral and creditor under the contract. guarantees are subject to the same provisions noted under section III.B. of 55. For purposes of calculating potential future credit exposure to a netting Appendix A. Collateral held against a netting contract is not recognized for counterparty for foreign exchange coniracts and other similar contracts in capital purposes unless it is legally available to support the single legal which notional principal is equivalent to cash flows, total notional principal obligation created by the netting contract. is defined as the net receipts falling due on each value date in each currency. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 141 e. The current exposure of the netting contract is effective notional amount of a contract by one of the followdetermined by summing all positive and negative ing credit conversion factors, as appropriate: mark-to-market values of the individual contracts included in the netting contract. If the net sum of the mark-to-market values is positive, then the current Interest rate Exchange rate exposure of the netting contract is equal to that sum. Remaining Maturity contracts contracts (percent) (percent) If the net sum of the mark-to-market values is zero or negative, then the current exposure of the netting One year or less 0 1.0 contract is zero. The Federal Reserve may determine Over one year 0.5 5.0 that a netting contract qualifies for risk-based capital netting treatment even though certain individual contracts may not qualify. In such instances, the 2. No potential future exposure is calculated for single nonqualifying contracts should be treated as individ- currency interest rate swaps in which payments are made ual contracts that are not subject to the netting based upon two floating indices, that is, so called floating/ contract. floating or basis swaps. The credit exposure on these contracts is evaluated solely on the basis of their mark-tof. In the event a netting contract covers contracts that are normally excluded from the risk-based ratio market value. Exchange rate contracts with an original calculation—for example, exchange rate contracts maturity of fourteen days or less are excluded. Instruments with an original maturity of fourteen calendar days traded on exchanges that require daily payment of variation or less, or instruments traded on exchanges that margin are also excluded. require daily payment of variation margin—an institution may elect to consistently either include or exclude all mark-to-market values of such contracts FINAL RULE—AMENDMENTS TO REGULATIONS H when determining net current exposure. AND Y g. An example of the calculation of the credit equivalent amount for rate contracts subject to a qualifying netting The Board of Governors is amending 12 C.F.R. Parts 208 contract is contained in Attachment V of Appendix A. and 225, its Regulations H and Y (Capital; Capital Adequacy Guidelines), for state member banks and bank holding companies to establish a limitation on the amount of certain deferred tax assets that may be included in (that is, Attachment IV—Credit Conversion Factors for not deducted from) Tier 1 capital for risk-based and lever- Off-Balance-Sheet Items for Bank Holding age capital purposes. The capital rule was developed in Companies response to the Financial Accounting Standards Board's (FASB) issuance of Statement No. 109, "Accounting for Income Taxes" (FAS 109). Under the final rule, deferred tax assets that can only be realized if an institution earns Credit Conversion for Interest Rate and Exchange Rate taxable income in the future are limited for regulatory Contracts capital purposes to the amount that the institution expects to realize within one year of the quarter-end report date— 1. The credit equivalent amount of a rate contract is the sum based on its projection of taxable income—or 10 percent of of the current credit exposure of the contract and an esti- Tier 1 capital, whichever is less. mate of potential future increases in credit exposure. The Effective April 1, 1995, 12 C.F.R. Parts 208 and 225 are current exposure is the positive mark-to-market value of the amended as follows: contract (or zero if the mark-to-market value is zero or negative). For rate contracts that are subject to a qualifying Part 208—Membership of State Banking Institutions bilateral netting contract the current exposure is the net sum in the Federal Reserve System (Regulation H) of the positive and negative mark-to-market values of the contracts included in the netting contract (or zero if the net 1. The authority citation for Part 208 continues to read as sum of the mark-to-market values is zero or negative). The follows: potential future exposure is calculated by multiplying the Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338, 37Id, 461, 481^186, 601, 611, 1814, 1823(j), 1828(o), 1831o, 1831p-l, 3105, 3310, 3331-3351 and 3906-3909; 15 U.S.C. The reason for this is that offsetting contracts in the same currency maturing 78b, 781(b), 781(g), 781(i), 78o-4(c) (5), 78q, 78q-l, and on the same date will have lower potential future exposure as well as lower current exposure. 78w; 31 U.S.C. 5318. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

142 Federal Reserve Bulletin • February 1995 APPENDIX A TO PART 225—CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES Attachment V—Calculation of Credit Equivalent Amounts for Interest Rate and Exchange Rate-Related Transactions for Bank Holding Companies Potential Current Credit equivalent exposure + exposure = amount Notional Potential Mark-to- Current Type of contract Conversion principal exposure market exposure (remaining maturity) factor (dollars) (dollars) value (dollars) (1) 120-day forward foreign exchange 5,000,000 .01 50,000 100,000 100,000 150,000 (2) 120-day forward foreign exchange 6,000,000 .01 60,000 -120,000 0 60,000 (3) 3-year singlecurrency fixed/ floating interestrate swap 10,000,000 .005 50,000 200,000 200,000 250,000 (4) 3-year singlecurrency fixed/ floating interestrate swap 10,000,000 .005 50,000 -250,000 0 50,000 (5) 7-year crosscurrency fixed/ floating interestrate swap 20,000,000 .05 1,000,000 -1,300,000 0 1,000,000 Total 1,210,000 300,000 1,510,000 If contracts (1) through (5) above are subject to a qualifying bilateral netting contract, then the following applies: Potential future Net current Credit equivalent exposure exposure1 amount (from above) (1) 50,000 (2) 60,000 (3) 50,000 (4) 50,000 (5) 1,000,000 Total 1,210,000 + 0 = 1,210,000 1. The total of the mark-to-market values from above is -1,370,000. Since this is a negative amount, the net current exposure is zero. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 143 2. Appendix A to Part 208 is amended by adding a new For purposes of calculating this limitation, Tier 1 capiparagraph (iv) to the introductory text of Section II.B. to tal is defined as the sum of core capital elements, net of read as follows: goodwill and all identifiable intangible assets other than purchased mortgage servicing rights and purchased credit card relationships (and before any disal- APPENDIX A TO PART 208—CAPITAL ADEQUACY lowed deferred tax assets are deducted). The amount of GUIDELINES FOR STATE MEMBER BANKS: deferred tax assets that can be realized from taxes paid RISK-BASED MEASURE in prior carryback years and from future reversals of existing taxable temporary differences and that do not exceed the amount which the bank could reasonably J g J * * * * * * expect to have refunded by its parent (if applicable) generally are not limited. The reported amount of (iv) Deferred tax assets—portions are deducted from deferred tax assets, net of any valuation allowance for the sum of core capital elements in accordance with deferred tax assets, in excess of these amounts is to be section II.B.4. of Appendix A. deducted from a bank's core capital elements in determining Tier 1 capital. 4. Appendix B to Part 208 is revised to read as follows: 3. Appendix A to Part 208 is amended by: a. Revising footnote 19 in Section II.B.3.; b. Removing footnote 20 from the end of Section II.B.3.; APPENDIX B TO PART 208—CAPITAL ADEQUACY and GUIDEUNES FOR STATE MEMBER BANKS: TIER 1 c. Adding Section II.B.4. LEVERAGE MEASURE The additions and revisions read as follows: I. Overview a. The Board of Governors of the Federal Reserve Sys- JJ * * * tem has adopted a minimum ratio of Tier 1 capital to total assets to assist in the assessment of the capital adequacy g * * * of state member banks.1 The principal objective of this 3 * * *19* * * measure is to place a constraint on the maximum degree 4. Deferred tax assets. The amount of deferred tax to which a state member bank can leverage its equity assets that are dependent upon future taxable income, capital base. It is intended to be used as a supplement to net of the valuation allowance for deferred tax assets, the risk-based capital measure. that may be included in, that is, not deducted from, a b. The guidelines apply to all state member banks on a bank's capital may not exceed the lesser of: consolidated basis and are to be used in the examination (i) The amount of these deferred tax assets that the and supervisory process as well as in the analysis of bank is expected to realize within one year of the applications acted upon by the Federal Reserve. The calendar quarter-end date, based on its projections Board will review the guidelines from time to time and of future taxable income for that year,20 or will consider the need for possible adjustments in light of (ii) Ten percent of Tier 1 capital. any significant changes in the economy, financial markets, and banking practices. II. The Tier 1 Leverage Ratio 19. Deductions of holdings of capital securities also would not be made in the case of interstate "stake out" investments that comply with the Board's a. The Board has established a minimum level of Tier 1 Policy Statement on Nonvoting Equity Investments, 12 C.F.R. 225.143 capital to total assets of 3 percent. An institution operat- (Federal Reserve Regulatory Service 4—172.1; 68 Federal Reserve Bulletin ing at or near these levels is expected to have well- 413 (1982)). In addition, holdings of capital instruments issued by other banking organizations but taken in satisfaction of debts previously contracted diversified risk, including no undue interest-rate risk exwould be exempt from any deduction from capital. The Board intends to posure; excellent asset quality; high liquidity; and good monitor nonreciprocal holdings of other banking organizations' capital inearnings; and in general be considered a strong banking struments and to provide information on such holdings to the Basle Supervisors' Committee as called for under the Basle capital framework. organization, rated composite 1 under CAMEL rating 20. Projected future taxable income should not include net operating loss system of banks. Institutions not meeting these charactercarryforwards to be used during that year or the amount of existing tempoistics, as well as institutions with supervisory, financial, rary differences a bank expects to reverse within the year. Such projections should include the estimated effect of tax planning strategies that the organization expects to implement to realize net operating losses or tax credit carryforwards that would otherwise expire during the year. Institutions may assume that all existing temporary differences fully reverse as of the report use the future taxable income projections for their current fiscal year (adjust- date. ed for any significant changes that have occurred or are expected to occur) when applying the capital limit at an interim report date rather than preparing 1. Supervisory risk-based capital ratios that related capital to weighted-risk a new projection each quarter. To determine the limit, an institution should assets for state member banks are outlined in Appendix A to this part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

144 Federal Reserve Bulletin • February 1995 or operational weaknesses, are expected to operate well otherwise facing unusual or abnormal risks, the Board above minimum capital standards. Institutions experienc- will continue to consider the level of an individual bank's ing or anticipating significant growth also are expected to tangible Tier 1 leverage ratio (after deducting all intangimaintain capital ratios, including tangible capital posi- bles) in making an overall assessment of capital adetions, well above the minimum levels. For example, most quacy. This is consistent with the Federal Reserve's such banks generally have operated at capital levels risk-based capital guidelines an long-standing Board polranging from 100 to 200 basis points above the stated icy and practice with regard to leverage guidelines. Banks minimums. Higher capital ratios could be required if experiencing growth, whether internally or by acquisiwarranted by the particular circumstances or risk profiles tion, are expected to maintain strong capital position of individual banks. Thus for all but the most highly rated substantially above minimum supervisory levels, without banks meeting the conditions set forth above, the mini- significant reliance on intangible assets. mum Tier 1 leverage ratio is to be 3 percent plus an additional cushion of at least 100 to 200 basis points. In Part 225—Bank Holding Companies and Change in all cases, banking institutions should hold capital com- Bank Control (Regulation Y) mensurate with the level and nature of all risks, including the volume and severity of problem loans, to which they 1. The authority citation for Part 225 continues to read as are exposed. follows: b. A bank's Tier 1 leverage ratio is calculated by dividing its Tier 1 capital (the numerator of the ratio) by its Authority: 12 U.S.C. 1817(j) (13), 1818, 1831i, 1831p-l, average total consolidated assets (the denominator of the 1843(c) (8), 1844(b), 1972(i), 3106, 3108, 3310, 3331ratio). The ratio will also be calculated using period-end 3351, 3907, and 3909. assets whenever necessary, on a case-by-case basis. For the purpose of this leverage ratio, the definition of Tier 1 2. Appendix A to Part 225 is amended by adding a new capital for year-end 1992 as set forth in the risk-based paragraph (iv) to the introductory text of section II. B. to capital guidelines contained in Appendix A of this part read as follows: will be used.2 As a general matter, average total consolidated assets are defined as the quarterly average total assets (defined net of the allowance for loan and lease APPENDIX A TO PART 225—CAPITAL ADEQUACY losses) reported on the bank's Reports of Condition and GUIDEUNES FOR BANK HOLDING COMPANIES: Income (Call Report), less goodwill; amounts of pur- RISK-BASED MEASURE chased mortgage servicing rights and purchased credit card relationships that, in the aggregate, are in excess of 50 percent of Tier 1 capital; amounts of purchased credit B JJ * * * * * * card relationships in excess of 25 percent of Tier 1 capital; all other intangible assets; any investments in (iv) Deferred tax assets—portions are deducted from subsidiaries or associated companies that the Federal the sum of core capital elements in accordance with Reserve determines should be deducted from Tier 1 section II.B.4. of Appendix A. capital; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, 3. Appendix A to Part 225 is amended by: in excess of the limitation set forth in section II.B.4 of Appendix A.3 a. Revising footnote 22 in section II.B.3.; b. Removing footnote 23 from the end of section II.B.3. c. Whenever appropriate, including when a bank is underand; taking expansion, seeking to engage in new activities or c. Adding section II.B.4. The revisions and additions read as follows: 2. At the end of 1992, Tier 1 capital for state member banks includes common equity, minority interest in the equity accounts of consolidated JJ * * * subsidiaries, and qualifying noncumulative perpetual preferred stock. In addition, as a general matter, Tier 1 capital excludes goodwill; amounts of purchased mortgage servicing rights and purchased credit card relationships B * * * that, in the aggregate, exceed 50 percent of Tier 1 capital; amounts of 3 * * *22 * * * purchased credit card relationships that exceed 25 percent of Tier 1 capital; all other intangible assets; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, in excess of certain limitations. The Federal Reserve may exclude certain investments in subsidiaries or associated companies as appropriate. 22. Deductions of holdings of capital securities also would not be made in 3. Deductions from Tier 1 capital and other adjustments are discussed the case of interstate "stake out" investments that comply with the Board's more fully in section II.B. in Appendix A of this part. Policy Statement on Nonvoting Equity Investments, 12 C.F.R. 225.143 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 145 4. Deferred tax assets. The amount of deferred tax of bank holding companies (banking organizations).1 The assets that are dependent upon future taxable income, principal objectives of this measure is to place a connet of the valuation allowance for deferred tax assets, straint on the maximum degree to which a banking orgathat may be included in, that is, not deducted from, a nization can leverage its equity capital base. It is intended banking organization's capital may not exceed the to be used as a supplement to the risk-based capital lesser of: measure. (i) The amount of these deferred tax assets that the b. The guidelines apply to consolidated basis to banking banking organization is expected to realize within holding companies with consolidated assets of $150 milone year of the calendar quarter-end date, based on lion or more. For bank holding companies with less than its projections of future taxable income for that $150 million in consolidated assets, the guidelines will be year,23 or applied on a bank-only basis unless: (ii) 10 percent of Tier 1 capital. (i) The parent bank holding company is engaged in For purposes of calculating this limitation, Tier 1 capi- nonbank activity involving significant leverage;2 or tal is defined as the sum of core capital elements, net of (ii) The parent company has a significant amount of goodwill and all identifiable intangible assets other outstanding debt that is held by the general public. than purchased mortgage servicing rights and pur- c. The Tier 1 leverage guidelines are to be used in the chased credit card relationships (and before any disal- inspection and supervisory process as well as in the lowed deferred tax assets are deducted). The amount of analysis of applications acted upon by the Federal Redeferred tax assets that can be realized from taxes paid serve. The Board will review the guidelines from time to in prior carryback years and from future reversals of time and will consider the need for possible adjustments existing taxable temporary differences generally are in light of any significant changes in the economy, finannot limited. The reported amount of deferred tax as- cial markets, and banking practices. sets, net of any valuation allowance for deferred tax II. The Tier 1 Leverage Ratio assets, in excess of these amounts is to be deducted a. The Board has established a minimum level of Tier 1 from a banking organization's core capital elements in capital to total assets of 3 percent. A banking organizadetermining Tier 1 capital. tion operating at or near these levels is expected to have well-diversified risk, including no undue interest-rate risk 4. Appendix D to Part 225 is revised to read as follows: exposure; excellent asset quality; high liquidity; and good earnings; and in general be considered a strong banking organization, rated composite 1 under BOPEC rating APPENDIX D TO PART 225—CAPITAL ADEQUACY system of bank holding companies. Organizations not GUIDEUNES FOR BANK HOLDING COMPANIES: TIER meeting these characteristics, as well as institutions with 1 LEVERAGE MEASURE supervisory, financial, or operational weaknesses, are expected to operate well above minimum capital standards. I. Overview Organizations experiencing or anticipating significant a. The Board of Governors of the Federal Reserve Sys- growth also are expected to maintain capital ratios, intem has adopted a minimum ratio of Tier 1 capital to total cluding tangible capital positions, well above the miniassets to assist in the assessment of the capital adequacy mum levels. For example, most such banks generally have operated at capital levels ranging from 100 to 200 basis points above the stated minimums. Higher capital ratios could be required if warranted by the particular (Federal Reserve Regulatory Service 4-172.1; 68 Federal Reserve Bulletin circumstances or risk profiles of individual banking orga- 413 (1982)). In addition, holdings of capital instruments issued by other nizations. Thus for all but the most highly rated banks banking organizations but taken in satisfaction of debts previously contracted would be exempt from any deduction from capital. The Board intends to meeting the conditions set forth above, the minimum Tier monitor nonreciprocal holdings of other banking organizations' capital in- 1 leverage ratio is to be 3 percent plus an additional struments and to provide information on such holdings to the Basle Supervicushion of at least 100 to 200 basis points. In all cases, sors' Committee as called for under the Basle capital framework. 23. Projected future taxable income should not include net operating loss banking organizations should hold capital commensurate carryforwards to be used during that year or the amount of existing tempo- with the level and nature of all risks, including the rary differences a bank holding company expects to reverse within the year. Such projections should include the estimated effect of tax planning strategies that the organization expects to implement to realize net operating loss or tax credit carryforwards that will otherwise expire during the year. Banking organizations may use the future taxable income projections for their current fiscal year (adjusted for any significant changes that have 1. Supervisory ratios that related capital to total assets for state member occurred or are expected to occur) when applying the capital limit at an banks are outlined in Appendix B of this part. interim report date rather than preparing a new projection each quarter. To 2. A parent company that is engaged is significant off balance sheet determine the limit, a banking organization should assume that all existing activities would generally be deemed to be engaged in activities that involve temporary differences fully reverse as of the report date. significant leverage. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

146 Federal Reserve Bulletin • February 1995 volume and severity of problem loans, to which they are FINAL RULE—AMENDMENT TO REGULATION S exposed. b. A banking organization's Tier 1 leverage ratio is The Board of Governors is amending 12 C.F.R. Part 219, its calculated by dividing its Tier 1 capital (the numerator of Regulation S (Reimbursement for Providing Financial the ratio) by its average total consolidated assets (the Records; Recordkeeping Requirements for Certain Finandenominator of the ratio). The ratio will also be calcu- cial Records), finalizing the enhanced recordkeeping related using period-end assets whenever necessary, on a quirements relating to certain wire transfers (which include case-by-case basis. For the purpose of this leverage ratio, funds transfers and transmittals of funds) by financial instithe definition of Tier 1 capital for year-end 1992 as set tutions. The final rule takes into consideration the public forth in the risk-based capital guidelines contained in comments received on the initial notice of proposed rule- Appendix A of this part will be used.3 As a general making. These recordkeeping requirements are being promatter, average total consolidated assets are defined as mulgated jointly by the Board and the Department of Treathe quarterly average total assets (defined net of the sury (Treasury). A companion notice published by the allowance for loan and lease losses) reported on the Treasury and the Board (Joint Notice) sets forth the organization's Consolidated Financial Statements (FR substantive provisions of the recordkeeping requirements Y-9C Report), less goodwill; amounts of purchased mort- and provides an analysis of comments received on the gage servicing rights and purchased credit card relation- proposal. This notice sets forth the regulation for codificaships that, in the aggregate, are in excess of 50 percent of tion at 12 C.F.R. Part 219, subpart B, which cross- Tier 1 capital; amounts of purchased credit card relation- references the substantive provisions set forth in the Joint ships in excess of 25 percent of Tier 1 capital; all other Notice. Under the Joint Notice, each domestic financial intangible assets; any investments in subsidiaries or assoinstitution involved in either a domestic or international ciated companies that the Federal Reserve determines wire transfer must collect and retain certain information. should be deducted from Tier 1 capital; and deferred tax The amount and type of information collected and reassets that are dependent upon future taxable income, net tained will depend upon the nature of the financial instituof their valuation allowance, in excess of the limitation tion, its role in the particular wire transfer, and the relaset forth in section II.B.4 of Appendix A.4 tionship of the parties to the transaction with the financial c. Whenever appropriate, including when an organization institution. is undertaking expansion, seeking to engage in new activ- Effective January 1, 1996, 12 C.F.R. Part 219 is amended ities or otherwise facing unusual or abnormal risks, the as follows: Board will continue to consider the level of an individual organization's tangible Tier 1 leverage ratio (after deduct- Part 219—Reimbursement for Providing Financial ing all intangibles) in making an overall assessment of Records; Recordkeeping Requirements for Certain capital adequacy. This is consistent with the Federal Financial Records (Regulation S) Reserve's risk-based capital guidelines an long-standing Board policy and practice with regard to leverage guide- 1. The title of Part 219 is revised to read as set forth above. lines. Organizations experiencing growth, whether internally or by acquisition, are expected to maintain strong capital position substantially above minimum supervi- Subpart A—Reimbursement to Financial Institutions sory levels, without significant reliance on intangible for Providing Financial Records assets. Sections 219.1 through 219.7—[Designated as Subpart A] 2. Sections 219.1 through 219.7 are designated as Subpart A, and a new Subpart A heading is added to read set 3. At the end of 1992, Tier 1 capital for state member banks includes common equity, minority interest in the equity accounts of consolidated forth above. subsidiaries, and qualifying noncumulative perpetual preferred stock. In addition, as a general matter, Tier I capital excludes goodwill; amounts of 3. The authority citation for Part 219 is designated as the purchased mortgage servicing rights and purchased credit card relationships that, in the aggregate, exceed 50 percent of Tier 1 capital; amounts of authority for Subpart A and continues to read as follows: purchased credit card relationships that exceed 25 percent of Tier 1 capital; all other intangible assets; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, in excess of certain Authority: 12 U.S.C. 3415. limitations. The Federal Reserve may exclude certain investments in subsidiaries or associated companies as appropriate. 4. Subpart A is amended by revising section 219.1 to read 4. Deductions from Tier 1 capital and other adjustments are discussed more fully in section II.B. in Appendix A of this part. as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 147 Section 219.1—Authority, purpose and scope. mined to have a high degree of usefulness in criminal, tax or regulatory investigations or proceedings. This subpart of Regulation S (12 C.F.R. Part 219, Subpart Section 219.22—Definitions. A) is issued by the Board of Governors of the Federal Reserve System (the Board) under section 1115 of the Right to Financial Privacy Act (the Act) (12 U.S.C. 3415). It The following terms are defined in 31 C.F.R. 103.11 under establishes the rates and conditions for reimbursement of the joint authority of the Board and the Treasury: reasonably necessary costs directly incurred by financial Accept. institutions in assembling or providing customer financial Beneficiary. records to a government authority pursuant to the Act. Beneficiary's bank. Established customer. 5. Section 219.2 is amended by revising the introductory Execution date. text to read as follows: Funds transfer. Intermediary bank. Intermediary financial institution. Section 219.2—Definitions. Originator. Originator's bank. For the purposes of this subpart, the following definitions Payment date. shall apply: Payment order. Receiving bank. Receiving financial institution. 6. Subpart B is added to Part 219 to read as follows: Recipient. Recipient's financial institution. Subpart B—Recordkeeping and Reporting Sender. Requirements for Funds Transfers and Transmittals Transmittal of funds. of Funds Transmittal order. Transmittor. Section 219.21 Authority, purpose and scope. Transmittor's financial institution. Section 219.22 Definitions. Section 219.23 Recordkeeping and reporting require- Section 219.23—Recordkeeping and reporting ments. requirements. Section 219.24 Retention period. (a) Domestic and international funds transfers by insured Authority: 12 U.S.C. 1829b(2) and (3). depository institutions. The Board and the Treasury are authorized to promulgate jointly recordkeeping and report- Section 219.21—Authority, purpose and scope. ing requirements for domestic and international funds transfers by insured depository institutions whenever the agen- This subpart of Regulation S (12 C.F.R. Part 219, Subpart cies determine that the maintenance of such records has a B) is issued by the Board under the authority of section high degree of usefulness in criminal, tax, or regulatory 21(b) of the Federal Deposit Insurance Act (12 U.S.C. investigations or proceedings. These regulations are codi- 1829b), as amended by the Annunzio-Wylie Anti-Money fied at 31 C.F.R. 103.33(e). For the purposes of this subpart, Laundering Act of 1992 (Pub. L. 102-550, Title XV; 106 the provisions of 31 C.F.R. 103.33(e) apply only to funds Stat. 3672-4044), which authorizes the Board and the Secre- transfers by insured depository institutions. tary of the Treasury jointly to prescribe recordkeeping and (b) International transmittals of funds by financial institureporting requirements for domestic wire transfers by in- tions other than insured depository institutions. The Board sured depository institutions; and which also requires the and the Treasury are required to promulgate jointly report- Board and the Treasury jointly to prescribe recordkeeping ing and recordkeeping requirements for international transand reporting requirements for international wire transfers mittals of funds by financial institutions, including brokers by insured depository institutions and by nonbank financial and dealers in securities and businesses that provide money institutions. The definitions and recordkeeping and report- transmitting services. In prescribing these requirements, the ing requirements referenced in this subpart are promulgated Board and the Treasury take into account the usefulness of and administered jointly by the Board and the Treasury and these records in criminal, tax, or regulatory investigations are codified in 31 C.F.R. 103.11 and 103.33(e) and (f). Such or proceedings and the effect the recordkeeping will have on recordkeeping and reporting requirements will assist in the the cost and efficiency of the payment system. These regulaprosecution of money laundering activities and are deter- tions are codified at 31 C.F.R. 103.33(f). For the purposes of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 Federal Reserve Bulletin • February 1995 this subpart, the provisions of 31 C.F.R. 103.33(f) apply some additional credit, property, or service from itself or only to international transmittals of funds. a nonbank affiliate. (c) ^ ^ ^ Section 219.24—Retention period. (2) Any exception granted pursuant to this section shall terminate upon a finding by the Board that the arrange- All records that are required to be retained by this subpart ment is resulting in anti-competitive practices. The eligishall be retained for a period of five years. All these records bility of a bank holding company or bank or nonbank shall be filed or stored in such a way as to be accessible subsidiary thereof to operate under any exception granted within a reasonable period of time, taking into consideration pursuant to this section shall terminate upon a finding by the nature of the record and the amount of time that has the Board that its exercise of this authority is resulting in expired since the record was made. Any records required to anti-competitive practices. be retained by this subpart shall be made available to the Board upon request. FINAL RULE—AMENDMENT TO REGULATION Z FINAL RULE—AMENDMENT TO REGULATION Y The Board of Governors is amending 12 C.F.R. Part 226, its The Board of Governors is amending 12 C.F.R. Part 225, its Regulation Z (Trust in Lending), to provide some relief in Regulation Y (Bank Holding Companies and Change in areas in Texas recently affected by major flooding. The Bank Control), to permit a bank holding company or its amendments provide a temporary exception to its provinonbank subsidiary to offer a discount on its product or sions that prohibit the use of a preprinted form by a creditor service on condition that a customer obtain any other prod- to obtain a consumer's waiver of the right to rescind certain uct or service from that company or from any of its nonbank home-secured loans when loan proceeds are needed immeaffiliates. Thus, the final rule would generally remove diately to meet a consumer's bona fide personal financial Board-imposed restrictions on tying when no bank is in- emergency. Generally, Regulation Z requires a mandatory volved in the arrangement and the products are separately three day waiting period on rescindable transactions before available for purchase by the customer. The Board believes funds can be disbursed. The relief also provides that a that the amendment will relieve bank holding companies of consumer's need to obtain funds immediately shall be rea competitive disadvantage, promote efficiency in the deliv- garded as a bona fide personal financial emergency for ery of services, and provide benefits for consumers. purposes of Regulation Z for transactions secured by a Effective January 23, 1995, 12 C.F.R. Part 225 is consumer's principal dwelling located in areas of Texas amended as follows: recently declared to be major disaster areas because of extensive flooding. The exception expires one year from the Part 225—Bank Holding Companies and Change in date the area was declared a major disaster. Bank Control (Regulation Y) Effective December 8, 1994, 12 C.F.R. Part 226 is amended as follows: 1. The authority citation for 12 C.F.R. Part 225 is revised to read as follows: Part 226—Truth in Lending (Regulation Z) Authority: 12 U.S.C. 18170(13), 1818, 1831i, 1831p-l, 1. The authority citation for Part 226 continues to read as 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, follows: 3907, and 3909. Authority: 12 U.S.C. 3806, 15 U.S.C. 1604 and 1637(c)(5). 2. In section 225.7, a new paragraph (b)(3) is added and paragraph (c)(2) is revised to read as follows: Subpart B—Open-End Credit Section 225.7—Tying restrictions. Section 226.16—[Amended] ^ * * * (3) Discounts on tie-in arrangements not involving banks. 2. In section 226.16, footnotes 36c and 36d are redesignated A bank holding company or any nonbank subsidiary as footnotes 36d and 36e, respectively. thereof may vary the consideration for any extension of credit, lease or sale of property of any kind, or service, on 3. In section 226.15, a new paragraph (e)(4) and footnote the condition or requirement that the customer obtain 36c are added to read as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 149 Section 226.15—Right of rescission. rules' provisions relating to ex parte communications conform to the requirements of the Administrative Procedure Act. In particular, the amendment would clarify that the (c) ^ ex parte provisions do not apply to intra-agency communi- (4) The consumer's need to obtain funds immediately cations, which are governed by a separate provision of the shall be regarded as a bona fide personal financial emer- Administrative Procedure Act. gency provided that the dwelling securing the extension Effective January 18, 1995, 12 C.F.R. Part 263 is of credit is located in an area declared during October amended as follows: 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in Texas.36c Part 263—Rules of Practice for Hearings In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to 1. The authority citation for Part 263 is revised to read as paragraph (e)(1) of this section shall expire one year from follows: the date an area was declared a major disaster. Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, 505, 1817Q, 1818, 1828(c), 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 3107, 3108, 3907, and 3909; 15 U.S.C. Subpart C—Closed-End Credit 21, 78o-4, 78o-5, and 78u-2. 4. In section 226.23, a new paragraph (e)(4) and footnote 2. Section 263.9 is amended by revising paragraphs (a) and 48c are added to read as follows: (b) and adding a new paragraph (e) to read as follows: Section 226.23—Right of rescission. Section 263.9—Ex parte communications. (a) Definition—(1) Ex parte communication means any ^ material oral or written communication relevant to the (4) The consumer's need to obtain funds immediately merits of an adjudicatory proceeding that was neither on shall be regarded as a bona fide personal financial emerthe record nor on reasonable prior notice to all parties gency provided that the dwelling securing the extension that takes place between: of credit is located in an area declared during October (i) An interested person outside the Board (including 1994 to be a major disaster area, pursuant to 42 U.S.C. such person's counsel); and 5170, because of severe storms and flooding in Texas.48c (ii) The administrative law judge handling that proceed- In this instance, creditors may use printed forms for the ing, a member of the Board, or a decisional employee. consumer to waive the right to rescind. This exemption to (2) Exception. A request for status of the proceeding does paragraph (e)(1) of this section shall expire one year from not constitute an ex parte communication. the date an area was declared a major disaster. (b) Prohibition of ex parte communications. From the time the notice is issued by the Board until the date that the Board issues its final decision pursuant to section 263.40(c): FINAL RULE—AMENDMENT TO UNIFORM RULES OF (1) No interested person outside the Federal Reserve PRACTICE AND PROCEDURE System shall make or knowingly cause to be made an The Board of Governors is amending 12 C.F.R. Part 263, its ex parte communication to a member of the Board, the Uniform Rules of Practice and Procedure, to clarify that the administrative law judge, or a decisional employee; and (2) A member of the Board, administrative law judge, or decisional employee shall not make or knowingly cause to be made to any interested person outside the Federal 36c. A list of the affected areas will be maintained and published by the Reserve System any ex parte communication. Board. Such areas now include the following counties in Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, (e) Separation of functions. Except to the extent required for San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington, Waller, Walker, and Wharton. the disposition of ex parte matters as authorized by law, the 48c. A list of the affected areas will be maintained and published by the administrative law judge may not consult a person or party Board. Such areas now include the following counties in Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, on any matter relevant to the merits of the adjudication, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, unless on notice and opportunity for all parties to partici- Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, pate. An employee or agent engaged in the performance of San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington, Waller, Walker, and Wharton. investigative or prosecuting functions for the Board in a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 Federal Reserve Bulletin • February 1995 case may not, in that or a factually related case, participate by executing the transmittal order. A recipient's financial or advise in the decision, recommended decision, or agency institution accepts a transmittal order by paying the recipireview of the recommended decision under section 263.40, ent, by notifying the recipient of the receipt of the order or except as witness or counsel in public proceedings. by otherwise becoming obligated to carry out the order. FINAL RULE—AMENDMENT TO THE BANK SECRECY (d) Beneficiary. The person to be paid by the beneficiary's ACT REGULATIONS RELATING TO RECORDKEEPING bank. FOR FUNDS TRANSFERS AND TRANSMITTALS OF (e) Beneficiary's bank. The bank identified in a payment FUNDS BY FINANCIAL INSTITUTIONS order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make The Financial Crimes Enforcement Network (FinCEN) of the payment to the beneficiary if the order does not provide for Department of the Treasury (Treasury) and the Board of payment to an account. Governors of the Federal Reserve System (Board) jointly have adopted a final rule that requires enhanced recordkeeping related to certain wire transfers (which include funds (1) Established customer. A person with an account with the transfers and transmittals of funds) by financial institutions. financial institution, including a loan account or deposit or The final rule takes into consideration the public comments other asset account, or a person with respect to which the received on the notice of proposed rulemaking. Each domestic financial institution has obtained and maintains on file the financial institution involved in a wire transfer must collect person's name and address, as well as taxpayer identificaand retain certain information, depending upon the type of tion number (e.g., social security or employer identification financial institution, its role in the particular wire transfer, the number) or, if none, alien identification number or passport amount of the wire transfer, and the relationship of the parties number and country of issuance, and to which the financial to the transaction with the financial institution. institution provides financial services relying on that infor- Effective January 1, 1996, 31 C.F.R. Part 103 is amended mation. as follows: (m) Execution date. The day on which the receiving financial institution may properly issue a transmittal order in Part 103—Financial Recordkeeping and Reporting execution of the sender's order. The execution date may be of Currency and Foreign Transactions determined by instruction of the sender but cannot be earlier than the day the order is received, and, unless otherwise 1. The authority citation for Part 103 is revised to read as determined, is the day the order is received. If the sender's follows: instruction states a payment date, the execution date is the payment date or an earlier date on which execution is Authority: 12 U.S.C. 1829b and 1951-1959, 31 U.S.C. 5311- reasonably necessary to allow payment to the recipient on 5328. the payment date. 2. Section 103.11 is amended as follows: a. By redesignating paragraphs (a), (b), (c) through (h), (q) Funds transfer. The series of transactions, beginning (i) through (k), (1), (m), (n), (o), (p) through (r), and (s) with the originator's payment order, made for the purpose through (u) as paragraphs (b), (c), (f) through (k), (n) of making payment to the beneficiary of the order. The term through (p), (t), (u), (z), (ee), (gg) through (ii), and (nn) includes any payment order issued by the originator's bank through (pp), respectively; or an intermediary bank intended to carry out the originab. By removing the words "For purposes of § 103.29 of tor's payment order. A funds transfer is completed by this part, deposit" and adding in their place, "Deposit" acceptance by the beneficiary's bank of a payment order for in newly designated paragraph (j); and the benefit of the beneficiary of the originator's payment c. By adding new paragraphs (a), (d), (e), (1), (m), (q), (r), order. Funds transfers governed by the Electronic Fund (s), (v), (w), (x), (y), (aa), (bb), (cc), (dd), (ff), (jj), (kk), Transfer Act of 1978 (Title XX, Pub. L. 95-630, 92 Stat. (11), and (mm). 3728, 15 U.S.C. 1693, et seq.), as well as any other funds transfers that are made through an automated clearinghouse, The revisions and amendments read as follows: an automated teller machine, or a point-of-sale system, are excluded from this definition. Section 103.11—Meaning of terms. (r) Intermediary bank. A receiving bank other than the originator's bank or the beneficiary's bank, (a) Accept. A receiving financial institution, other than the (s) Intermediary financial institution. A receiving financial recipient's financial institution, accepts a transmittal order institution, other than the transmitter's financial institution Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 151 or the recipient's financial institution. The term intermedi- (jj) Transmittal of funds. A series of transactions beginning ary financial institution includes an intermediary bank. with the transmitter's transmittal order, made for the purpose of making payment to the recipient of the order. The term includes any transmittal order issued by the transmit- (v) Originator. The sender of the first payment order in a ter's financial institution or an intermediary financial institufunds transfer. tion intended to carry out the transmitter's transmittal order. (w) Originator's bank. The receiving bank to which the The term transmittal of funds includes a funds transfer. A payment order of the originator is issued if the originator is transmittal of funds is completed by acceptance by the not a bank, or the originator if the originator is a bank, recipient's financial institution of a transmittal order for the (x) Payment date. The day on which the amount of the benefit of the recipient of the transmitter's transmittal order. transmittal order is payable to the recipient by the recipi- Funds transfers governed by the Electronic Fund Transfer ent's financial institution. The payment date may be deter- Act of 1978 (Title XX, Pub. L. 95-630, 92 Stat. 3728, 15 mined by instruction of the sender, but cannot be earlier U.S.C. 1693, et seq.), as well as any other funds transfers than the day the order is received by the recipient's financial that are made through an automated clearinghouse, an autoinstitution and, unless otherwise prescribed by instruction, mated teller machine, or a point-of-sale system, are exis the date the order is received by the recipient's financial cluded from this definition. institution. (kk) Transmittal order. The term transmittal order includes (y) Payment order. An instruction of a sender to a receiving a payment order and is an instruction of a sender to a bank, transmitted orally, electronically, or in writing, to pay, receiving financial institution, transmitted orally, electronior to cause another bank to pay, a fixed or determinable cally, or in writing, to pay, or to cause another financial amount of money to a beneficiary if: institution to pay, a fixed or determinable amount of money (1) The instruction does not state a condition to payment to a recipient if: to the beneficiary other than time of payment; (1) The instruction does not state a condition to payment (2) The receiving bank is to be reimbursed by debiting an to the recipient other than time of payment; account of, or otherwise receiving payment from, the (2) The receiving financial institution is to be reimbursed sender; and by debiting an account of, or otherwise receiving pay- (3) The instruction is transmitted by the sender directly to ment from, the sender; and the receiving bank or to an agent, funds transfer system, (3) The instruction is transmitted by the sender directly to or communication system for transmittal to the receiving the receiving financial institution or to an agent or combank. munication system for transmittal to the receiving financial institution. (11) Transmittor. The sender of the first transmittal order in a (aa) Receiving bank. The bank to which the sender's instruc- transmittal of funds. The term transmittor includes an origition is addressed. nator, except where the transmitter's financial institution is (bb) Receiving financial institution. The financial institution a financial institution other than a bank, to which the sender's instruction is addressed. The term (mm) Transmittor's financial institution. The receiving fireceiving financial institution includes a receiving bank, nancial institution to which the transmittal order of the (cc) Recipient. The person to be paid by the recipient's transmittor is issued if the transmittor is not a financial financial institution. The term recipient includes a benefi- institution, or the transmittor if the transmitter is a financial ciary, except where the recipient's financial institution is a institution. The term transmitter's financial institution infinancial institution other than a bank, cludes an originator's bank, except where the originator is a (dd) Recipient's financial institution. The financial institu- transmitter's financial institution other than a bank. tion identified in a transmittal order in which an account of the recipient is to be credited pursuant to the transmittal order or which otherwise is to make payment to the recipi- 3. Paragraph (b)(2) of § 103.25 is revised to read as follows: ent if the order does not provide for payment to an account. The term recipient's financial institution includes a benefi- Section 103.25—Report of transactions with foreign ciary's bank, except where the beneficiary is a recipient's financial agencies. financial institution. (ff) Sender. The person giving the instruction to the receiv- * * * ing financial institution. (2) Transmittal orders received by a respondent financial institution from a foreign financial agency or sent by respondent financial institution to a foreign financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

152 Federal Reserve Bulletin • February 1995 agency, including all information maintained by that in- as a record of the person's taxpayer identification stitution pursuant to § 103.33. number (e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation 4. Section 103.33 is amended by adding new paragraphs (e) in the record of the lack thereof. If the originator's and (f), to read as follows: bank has knowledge that the person placing the payment order is not the originator, the originator's bank Section 103.33—Records to be made and retained shall obtain and retain a record of the originator's by financial institutions. taxpayer identification number (e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of (e) Banks. With respect to a funds transfer in the amount of issuance, if known by the person placing the order, or a $3,000 or more by a bank: notation in the record of the lack thereof, (1) Recordkeeping requirements, (i) For each payment (ii) If the payment order accepted by the originator's order that it accepts as an originator's bank, the bank bank is not made in person, the originator's bank shall shall obtain and retain either the original or a micro- obtain and retain a record of name and address of the film, other copy, or electronic record of the following person placing the payment order, as well as the perinformation relating to the payment order: son's taxpayer identification number (e.g., social secu- (A) The name and address of the originator; rity or employer identification number) or, if none, (B) The amount of the payment order; alien identification number or passport number and (C) The execution date of the payment order; country of issuance, or a notation in the record of the (D) Any payment instructions received from the lack thereof, and a copy or record of the method of originator with the payment order; payment (e.g., check or credit card transaction) for the (E) The identity of the beneficiary's bank; and funds transfer. If the originator's bank has knowledge (F) As many of the following items as are received that the person placing the payment order is not the with the payment order:1 originator, the originator's bank shall obtain and retain (1) The name and address of the beneficiary; a record of the originator's taxpayer identification (2) The account number of the beneficiary; and number (e.g., social security or employer identification (3) Any other specific identifier of the beneficiary. number) or, if none, alien identification number or (ii) For each payment order that it accepts as an passport number and country of issuance, if known by intermediary bank, the bank shall retain either the the person placing the order, or a notation in the record original or a microfilm, other copy, or electronic record of the lack thereof. of the payment order. (3) Beneficiaries other than established customers. For (iii) For each payment order that it accepts as a benefi- each payment order that it accepts as a beneficiary's bank ciary's bank, the bank shall retain either the original or for a beneficiary that is not an established customer, in a microfilm, other copy, or electronic record of the addition to obtaining and retaining the information repayment order. quired in paragraph (e)(l)(iii) of this section: (2) Originators other than established customers. In the (i) If the proceeds are delivered in person to the case of a payment order from an originator that is not an beneficiary or its representative or agent, the beneficiaestablished customer, in addition to obtaining and retain- ry's bank shall verify the identity of the person receiving the information required in paragraph (e)(l)(i) of this ing the proceeds and shall obtain and retain a record of section: the name and address, the type of identification re- (i) If the payment order is made in person, prior to viewed, and the number of the identification document acceptance the originator's bank shall verify the iden- (e.g., driver's license), as well as a record of the tity of the person placing the payment order. If it person's taxpayer identification number (e.g., social accepts the payment order, the originator's bank shall security or employer identification number) or, if none, obtain and retain a record of the name and address, the alien identification number or passport number and type of identification reviewed, the number of the country of issuance, or a notation in the record of the identification document (e.g., driver's license), as well lack thereof. If the beneficiary's bank has knowledge that the person receiving the proceeds is not the beneficiary, the beneficiary's bank shall obtain and retain a record of the beneficiary's name and address, as well 1. For funds transfers effected through the Federal Reserve's Fedwire funds transfer system, only one of the items is required to be retained, if as the beneficiary's taxpayer identification number received with the payment order, until such time as the bank that sends the (e.g., social security or employer identification numorder to the Federal Reserve Bank completes its conversion to the expanded ber) or, if none, alien identification number or passport Fedwire message format. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 153 number and country of issuance, if known by the (ii) Funds transfers where both the originator and the person receiving the proceeds, or a notation in the beneficiary are the same person and the originator's record of the lack thereof. bank and the beneficiary's bank are the same domestic (ii) If the proceeds are delivered other than in person, bank. the beneficiary's bank shall retain a copy of the check (f) Nonbank financial institutions. With respect to a transor other instrument used to effect payment, or the mittal of funds in the amount of $3,000 or more by a information contained thereon, as well as the name and financial institution other than a bank: address of the person to which it was sent. (1) Recordkeeping requirements, (i) For each transmittal (4) Retrievability. The information that an originator's order that it accepts as a transmitter's financial institubank must retain under paragraphs (e)(l)(i) and (e)(2) of tion, the financial institution shall obtain and retain this section shall be retrievable by the originator's bank either the original or a microfilm, other copy, or elecby reference to the name of the originator. If the origina- tronic record of the following information relating to tor is an established customer of the originator's bank the transmittal order: and has an account used for funds transfers, then the (A) The name and address of the transmittor; information also shall be retrievable by account number. (B) The amount of the transmittal order; The information that a beneficiary's bank must retain (C) The execution date of the transmittal order; under paragraphs (e)(l)(iii) and (e)(3) of this section (D) Any payment instructions received from the shall be retrievable by the beneficiary's bank by refer- transmittor with the transmittal order; ence to the name of the beneficiary. If the beneficiary is (E) The identity of the recipient's financial instituan established customer of the beneficiary's bank and has tion; an account used for funds transfers, then the information (F) As many of the following items as are received also shall be retrievable by account number. This infor- with the transmittal order:2 mation need not be retained in any particular manner, so (1) The name and address of the recipient; long as the bank is able to retrieve the information (2) The account number of the recipient; and required by this paragraph, either by accessing funds (5) Any other specific identifier of the recipient; transfer records directly or through reference to some and other record maintained by the bank. (G) Any form relating to the transmittal of funds (5) Verification. Where verification is required under that is completed or signed by the person placing the paragraphs (e)(2) and (e)(3) of this section, a bank shall transmittal order. verify a person's identity by examination of a docu- (ii) For each transmittal order that it accepts as an ment (other than a bank signature card), preferably one intermediary financial institution, the financial instituthat contains the person's name, address, and photo- tion shall retain either the original or a microfilm, other graph, that is normally acceptable by financial institu- copy, or electronic record of the transmittal order. tions as a means of identification when cashing checks (iii) For each transmittal order that it accepts as a for persons other than established customers. Verifica- recipient's financial institution, the financial institution tion of the identity of an individual who indicates that shall retain either the original or a microfilm, other he or she is an alien or is not a resident of the United copy, or electronic record of the transmittal order, as States may be made by passport, alien identification well as any form completed or signed by the person card, or other official document evidencing nationality receiving the proceeds of the transmittal of funds. or residence (e.g., a foreign driver's license with indica- (2) Transmittors other than established customers. In the tion of home address). case of a transmittal order from a transmittor that is not (6) Exceptions. The following funds transfers are not an established customer, in addition to obtaining and subject to the requirements of this section: retaining the information required in paragraph (f)(l)(i) (i) Funds transfers where the originator and beneficiary of this section: are any of the following: (i) If the transmittal order is made in person, prior to (A) A domestic bank; acceptance the transmittor's financial institution shall (B) A wholly owned domestic subsidiary of a do- verify the identity of the person placing the transmittal mestic bank; order. If it accepts the transmittal order, the transmit- (C) A domestic broker or dealer in securities; tor's financial institution shall obtain and retain a (D) A wholly owned domestic subsidiary of a domestic broker or dealer in securities; (E) The United States; 2. For transmittals of funds effected through the Federal Reserve's Fed- (F) A state or local government; or wire funds transfer system by a domestic broker or dealers in securities, only one of the items is required to be retained, if received with the transmittal (G) A federal, state or local government agency or order, until such time as the bank that sends the order to the Federal Reserve instrumentality; and Bank completes its conversion to the expanded Fedwire message format. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 Federal Reserve Bulletin • February 1995 record of the name and address, the type of identifica- institution shall obtain and retain a record of the reciption reviewed, and the number of the identification ient's name and address, as well as the recipient's document (e.g., driver's license), as well as a record of taxpayer identification number (e.g., social security or the person's taxpayer identification number (e.g., so- employer identification number) or, if none, alien idencial security or employer identification number) or, if tification number or passport number and country of none, alien identification number or passport number issuance, if known by the person receiving the proand country of issuance, or a notation in the record the ceeds, or a notation in the record of the lack thereof, lack thereof. If the transmitter's financial institution (ii) If the proceeds are delivered other than in person, has knowledge that the person placing the transmittal the recipient's financial institution shall retain a copy order is not the transmittor, the transmitter's financial of the check or other instrument used to effect payinstitution shall obtain and retain a record of the trans- ment, or the information contained thereon, as well as mittor's taxpayer identification number (e.g., social the name and address of the person to which it was security or employer identification number) or, if none, sent. alien identification number or passport number and (4) Retrievability. The information that a transmitter's country of issuance, if known by the person placing financial institution must retain under paragraphs (f)(l)(i) the order, or a notation in the record the lack thereof, and (f)(2) of this section shall be retrievable by the (ii) If the transmittal order accepted by the transmit- transmittor's financial institution by reference to the name tor's financial institution is not made in person, the of the transmittor. If the transmittor is an established transmittor's financial institution shall obtain and re- customer of the transmitter's financial institution and has tain a record of the name and address of the person an account used for transmittals of funds, then the inforplacing the transmittal order, as well as the person's mation also shall be retrievable by account number. The taxpayer identification number (e.g., social security or information that a recipient's financial institution must employer identification number) or, if none, alien iden- retain under paragraphs (f)(l)(iii) and (f)(3) of this sectification number or passport number and country of tion shall be retrievable by the recipient's financial instiissuance, or a notation in the record of the lack thereof, tution by reference to the name of the recipient. If the and a copy or record of the method of payment (e.g., recipient is an established customer of the recipient's check or credit card transaction) for the transmittal of financial institution and has an account used for transmitfunds. If the transmittor's financial institution has tals of funds, then the information also shall be retrievknowledge that the person placing the transmittal order able by account number. This information need not be is not the transmittor, the transmitter's financial institu- retained in any particular manner, so long as the financial tion shall obtain and retain a record of the transmitter's institution is able to retrieve the information required by taxpayer identification number (e.g., social security or this paragraph, either by accessing transmittal of funds employer identification number) or, if none, alien iden- records directly or through reference to some other record tification number or passport number and country of maintained by the financial institution. issuance, if known by the person placing the order, or a (5) Verification. Where verification is required under notation in the record the lack thereof. paragraphs (f)(2) and (f)(3) of this section, a financial (3) Recipients other than established customers. For each institution shall verify a person's identity by examination transmittal order that it accepts as a recipient's financial of a document (other than a customer signature card), institution for a recipient that is not an established cus- preferably one that contains the person's name, address, tomer, in addition to obtaining and retaining the informa- and photograph, that is normally acceptable by financial tion required in paragraph (f)(l)(iii) of this section: institutions as a means of identification when cashing (i) If the proceeds are delivered in person to the checks for persons other than established customers. Verrecipient or its representative or agent, the recipient's ification of the identity of an individual who indicates financial institution shall verify the identity of the that he or she is an alien or is not a resident of the United person receiving the proceeds and shall obtain and States may be made by passport, alien identification card, retain a record of the name and address, the type of or other official document evidencing nationality or resiidentification reviewed, and the number of the identifi- dence (e.g., a foreign driver's license with indication of cation document (e.g., driver's license), as well as a home address). record of the person's taxpayer identification number (6) Exceptions. The following transmittals of funds are not (e.g., social security or employer identification num- subject to the requirements of this section: ber) or, if none, alien identification number or passport (i) Transmittals of funds where the transmittor and the number and country of issuance, or a notation in the recipient are any of the following: record of the lack thereof. If the recipient's financial (A) A domestic bank; institution has knowledge that the person receiving the (B) A wholly owned domestic subsidiary of a doproceeds is not the recipient, the recipient's financial mestic bank; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 155 (C) A domestic broker or dealer in securities; Applicants operate one subsidiary bank in New York. (D) A wholly owned domestic subsidiary of a do- Applicants are the 44th largest commercial banking organimestic broker or dealer in securities; zation in New York, controlling deposits of $349.5 million, (E) The United States; representing less than 1 percent of total deposits in commer- (F) A state or local government; or cial banks in the state.2 Bank is the 182d largest commercial (G) A federal, state or local government agency or banking organization in California, controlling deposits of instrumentality; and $82.9 million, representing less than 1 percent of total (ii) Transmittals of funds where both the transmittor and deposits in commercial banks in the state.3 recipient are the same person and the transmittor's finan- Applicants and Bank do not compete directly in any cial institution and the recipient's financial institution are banking market. Accordingly, consummation of this prothe same domestic broker or dealer in securities. posal would not have a significantly adverse effect on competition or the concentration of banking resources in any relevant banking market. ORDERS ISSUED UNDER BANK HOLDING COMPANY Considerations relating to the financial and managerial ACT resources and future prospects of applicants, their subsidiaries, and Bank, the convenience and needs of the communi- Orders Issued Under Section 3 of the Bank ties to be served, and the other supervisory factors that the Holding Company Act Board is required to consider under section 3 of the BHC Act are consistent with approval of this application. In China Trust Holdings N.V. addition, the Board has received commitments to ensure Curacao, Netherlands Antilles that it will have access to information on the operations or activities of applicants, and of their affiliates, to permit the China Trust Capital B.V. Board to determine and enforce compliance with the BHC Amsterdam, The Netherlands Act and other federal banking law. Based on the foregoing and all the facts of record, the China Trust Holdings Corp. Board has determined that the applications should be, and New York, New York hereby are, approved. The Board's approval of this proposal is expressly conditioned on compliance by Applicants and Order Approving the Acquisition of a Bank their principal shareholders with all the commitments made in connection with this application and on receipt of all China Trust Holdings N.V., Curacao, Netherlands Antilles required state regulatory approval. For purposes of this ("CT Antilles"); China Trust Capital B.V., Amsterdam, action, these commitments and conditions are deemed to be The Netherlands ("CT Netherlands"); and China Trust conditions imposed in writing by the Board in connection Holdings Corp., New York, New York ("CT New York") with its findings and decision, and, as such, may be en- (together, "Applicants"), bank holding companies within forced in proceedings under applicable law. the meaning of the Bank Holding Company Act ("BHC This transaction shall not be consummated before the Act"), have applied under section 3(a)(3) of the BHC Act thirtieth calendar day following the effective date of this (12 U.S.C. § 1842(a)(3)) to acquire by merger Trans Bank- order, unless such period is shortened with the concurrence corp, Inc., and thereby acquire its wholly owned subsidiary, of the Attorney General, or later than three months after the Trans National Bank, both of Monterey Park, California effective date of this order, unless such period is extended ("Bank").1 for good cause by the Board or by the Federal Reserve Bank Notice of the applications, affording interested persons an of New York, acting pursuant to delegated authority. opportunity to submit comments, has been published (58 By order of the Board of Governors, effective Decem- Federal Register 19,671 (1993)). The time for filing com- ber 19, 1994. ments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in section 3(c) of the BHC Act. 2. State deposit data are as of June 30, 1994. 3. The Board previously has determined that the interstate banking statute of California permits a New York bank holding company to acquire a 1. CT New York is a wholly owned subsidiary of CT Netherlands, banking organization in California. See Citicorp, 77 Federal Reserve Bullewhich is a wholly owned subsidiary of CT Antilles. In connection with tin 325 (1991). As required by California law, the California Superintendent this transaction, CT Antilles proposes to acquire direct ownership of of Banks has determined that the New York interstate banking statute is 51.24 percent of the voting shares of CT New York from CT Netherlands. substantially reciprocal with California law, and has preliminarily indicated Applicants also have applied to the Federal Deposit Insurance Corporation to Board staff that this proposal would not have an "adverse effect on the and the California Superintendent of Banks to convert Bank to a state public convenience or advantage in California." See Cal. Fin. Code §§ 3753 non-member bank. Applicants have committed not to consummate this and 3756 (West Supp. 1993). Thus, consummation of this transaction is not proposal until after the charter conversion is completed. barred by section 3(d) of the BHC Act (12 U.S.C. § 1842(d)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 Federal Reserve Bulletin • February 1995 Voting for this action: Chairman Greenspan, Vice Chairman by Applicants, including commitments made by the princi- Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and pals of Applicants and related parties, in connection with Yellen. these applications. The commitments and conditions relied on by the Board in reaching this decision are deemed to be JENNIFER J. JOHNSON conditions imposed in writing by the Board in connection Deputy Secretary of the Board with its findings and decision, and, as such, may be enforced in proceedings under applicable law. First International Bancorp Texas, Inc. This transaction shall not be consummated before the Bedford, Texas fifteenth calendar day following the effective date of this order, or later than three months after the effective date of First International Bancorp America this order, unless such period is extended for good cause by Reno, Nevada the Federal Reserve Bank of Dallas, acting pursuant to delegated authority. Order Approving Formation of Bank Holding Companies By order of the Board of Governors, effective December 12, 1994. First International Bancorp Texas, Inc., Bedford, Texas, and First International Bancorp America, Reno, Nevada (togeth- Voting for this action: Vice Chairman Blinder and Governors er, "Applicants"), have applied under section 3(a)(1) of the Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not Bank Holding Company Act ("BHC Act") (12 U.S.C. voting: Chairman Greenspan. § 1842(a)(1)) to become bank holding companies by acquiring all the voting shares of First International Bank, Bed- WILLIAM W. WILES ford, Texas ("Bank").1 Secretary of the Board Notice of the applications, affording interested persons an opportunity to submit comments, has been published (59 Fourth Financial Corporation Federal Register 35,122 (1994)). The time for filing com- Wichita, Kansas ments has expired, and the Board has considered the applications and any comments received in light of the factors Order Approving the Acquisition of a Bank Holding set forth in section 3 of the BHC Act. Company Applicants are nonoperating corporations formed for the purpose of acquiring Bank. Bank is the 623d largest com- Fourth Financial Corporation, Wichita, Kansas ("Fourth mercial banking organization in Texas, controlling deposits Financial"), a bank holding company within the meaning of of approximately $29.4 million, representing less than 1 per- the Bank Holding Company Act ("BHC Act"), has applied cent of total deposits in depository institutions in the state.2 under section 3 of the BHC Act (12 U.S.C. § 1842) to Based on all the facts of record, including the fact that this acquire substantially all of the voting shares of Blackwell transaction constitutes a corporate reorganization, the Board Security Bancshares, Inc. ("Blackwell"), and thereby indibelieves that consummation of this proposal would not have rectly acquire Blackwell's bank subsidiary, Security Bank a significantly adverse effect on competition or the concen- and Trust Company ("Security Bank"), both of Blackwell, tration of banking resources in any relevant banking market. Oklahoma.1 Accordingly, the Board concludes that competitive consid- Notice of the application, affording interested persons an erations are consistent with approval. opportunity to submit comments, has been published (59 The Board also concludes that the financial and manage- Federal Register 54,455 (1994)). The time for filing comrial resources and future prospects of Applicants and Bank, ments has expired, and the Board has considered the appliand the convenience and needs and other supervisory fac- cation and all comments received in light of the factors set tors that the Board is required to consider under section 3 of forth in section 3(c) of the BHC Act. the BHC Act, are consistent with approval of this proposal. Fourth Financial, with consolidated assets of approxi- Based on the foregoing and all the facts of record, the mately $7.7 billion, operates two subsidiary banks in Kan- Board has determined that the applications should be, and sas and Oklahoma.2 Fourth Financial is the third largest hereby are, approved. The Board's approval is expressly commercial banking organization in Oklahoma, controlling conditioned on compliance with all the commitments made 1. Blackwell would merge into Fourth Financial, and Security Bank would merge into Fourth Financial's bank subsidiary, Bank IV Oklahoma, N.A., 1. This transaction constitutes a reorganization of interests by the share- Tulsa, Oklahoma ("Oklahoma Bank"). On September 15, 1994, Oklahoma holders of Bank. Upon consummation of this transaction, all shareholders of Bank's primary federal regulator, the Office of the Comptroller of the Bank would become shareholders of First International Bancorp Texas, Inc. Currency ("OCC"), approved Oklahoma Bank's application to merge with First International Bancorp America would become a mid-tier holding com- Security Bank pursuant to section 18(c) of the Federal Deposit Insurance Act pany, owning the voting shares of Bank. (12 U.S.C. § 1828(c) ("Bank Merger Act")). 2. Deposit data are as of June 30, 1994. 2. Asset data are as of September 30, 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 157 deposits of $1.6 billion, representing approximately 6 per- Fourth Financial receiving all required state regulatory apcent of total deposits in commercial banking organizations provals. in Oklahoma.3 Blackwell is the 170th largest commercial banking organization in Oklahoma, controlling deposits of Competitive Considerations $43.1 million, representing less than 1 percent of total deposits in commercial banking organizations in the state. Fourth Financial and Blackwell own depository institutions Upon consummation of this proposal, Fourth Financial that compete directly in the Kay County banking market.7 would remain the third largest commercial banking organi- Upon consummation of this proposal, Oklahoma Bank zation in Oklahoma, controlling approximately $1.6 billion would become the largest depository institution in the Kay in deposits, representing approximately 6.2 percent of total County banking market, controlling deposits of $144 mildeposits in commercial banking organizations in the state. lion, representing approximately 26 percent of total deposits in depository institutions in the market.8 The Kay County Douglas Amendment Analysis banking market would remain moderately concentrated as measured by the Herfindahl-Hirschman Index ("HHI"),9 Section 3(d) of the BHC Act, the Douglas Amendment, and numerous competitors would remain. In this light, and prohibits the Board from approving an application by a based on all the facts of record, the Board concludes that bank holding company to acquire control of any bank consummation of the proposal would not result in a signifilocated outside its home state unless such acquisition is cantly adverse effect on competition or concentration of "specifically authorized by the statute laws of the State in banking resources in the Kay County banking market or any which the bank is located, by language to that effect and not other relevant banking market. merely by implication."4 For purposes of the Douglas Amendment, the home state of Fourth Financial is Kansas Convenience and Needs Considerations and the home state of Blackwell is Oklahoma. Kansas and Oklahoma have enacted banking statutes that In acting on an application to acquire a depository institupermit out-of-state bank holding companies to acquire tion under the BHC Act, the Board must consider the banks in these states on a reciprocal basis. Under the convenience and needs of the communities to be served and Kansas interstate banking statute, a bank holding company take into account the records of the relevant depository located in any state contiguous to Kansas, which would institutions under the Community Reinvestment Act include Oklahoma, may acquire a Kansas bank or bank (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the holding company, if the laws of the state in which the federal financial supervisory agencies to encourage finanacquiring bank holding company is located allow Kansas cial institutions to help meet the credit needs of the local bank holding companies to acquire banks in that state on communities in which they operate, consistent with their terms that are substantially no more restrictive than those safe and sound operation. To accomplish this end, the CRA established under the Kansas statute.5 Oklahoma's interstate requires the appropriate federal supervisory authority to banking statute permits an out-of-state bank holding com- "assess the institution's record of meeting the credit needs pany to acquire a bank in Oklahoma, provided that the of its entire community, including low- and moderatehome state of the applicant permits Oklahoma-based bank income neighborhoods, consistent with the safe and sound holding companies to acquire banks in that state on a reciprocal basis, and certain other requirements, including shareholder notice and approval, are met.6 The Kansas State 7. The Kay County banking market is approximated by Kay County, Bank Commissioner and the Oklahoma Bank Commis- Oklahoma. 8. Market data are as of June 30, 1993. In this context, depository sioner have indicated that their respective reciprocity re- institutions include commercial banks, savings banks, and savings associaquirements have been satisfied. In light of the foregoing, tions. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board and based on an analysis of the interstate banking statutes previously has indicated that thrift institutions have become, or have the involved, the Board has concluded that approval of this potential to become, significant competitors of commercial banks. See WM proposal is not prohibited by the Douglas Amendment. Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Approval of this proposal is specifically conditioned upon 9. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating 3. State deposit data are as of December 31, 1993. anti-competitive effects) unless the post-merger HHI is at least 1800 and the 4.12 U.S.C. § 1842(d). A bank holding company's home state is that state merger increases the HHI by 200 points. The Justice Department has stated in which the operations of the bank holding company's banking subsidiaries that the higher than normal HHI thresholds for screening bank mergers for were principally conducted on July 1, 1966, or the date on which the anti-competitive effects implicitly recognize the competitive effect of limitedcompany became a bank holding company, whichever is later. purpose lenders and other non-depository financial entities. The HHI for the 5. See Kan. Stat. Ann. § 9-532,9-535 (1991). Kay County banking market would increase by 284 points to 1667 as a result 6. See 6 Okla. Stat. Ann. § 506 (1989). of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 Federal Reserve Bulletin • February 1995 operation of such institution," and to take that record into ry" rating from its primary regulator, the Federal Deposit account in its evaluation of applications.10 Insurance Corporation, at its most recent examination for In connection with this application, the Board has re- CRA performance as of June 1993. ceived comments from the Community Development Coalition ("Protestant") alleging on the basis of data filed under B. HMDA Data and Lending Activities the Home Mortgage Disclosure Act ("HMDA") that Fourth Financial's lead bank subsidiary, Bank IV Kansas, National The Board has carefully reviewed the 1993 HMDA data Association, Wichita, Kansas ("Kansas Bank"), illegally reported by Kansas Bank in light of Protestant's comments. discriminates against minority borrowers in Wichita.11 In These data show an increase in the number of applications addition, Protestant maintains that Kansas Bank has not received by Kansas Bank from minority borrowers, and a adequately marketed its credit product to its entire commu- decrease in denial rates for minorities when compared to nity, particularly in low- to moderate-income areas in Wich- data for 1992. However, these data also show that the rates ita.12 The Board has carefully reviewed the CRA perfor- in denials of housing-related loan applications vary by race mance record of Fourth Financial, Blackwell, and their in areas served by Kansas Bank. respective subsidiary banks in light of the CRA, the Board's The Board is concerned when an institution's record regulations, the Statement of the Federal Financial Supervi- indicates disparities in lending to minority applicants and sory Agencies Regarding the Community Reinvestment Act believes that all banks are obligated to ensure that their ("Agency CRA Statement"), Protestant's comments, and lending practices are based on criteria that assure not only Fourth Financial's response to those comments.13 safe and sound lending, but also equal access to credit by creditworthy applicants regardless of race. The Board rec- Record of CRA Performance ognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community, A. Evaluation of CRA Performance and have limitations that make the data an inadequate basis, absent other information, for concluding that an institution The Agency CRA Statement provides that a CRA examina- has engaged in illegal discrimination in making lending tion is an important and often controlling factor in the decisions. consideration of an institution's CRA record, and that these The Board notes that the 1993 CRA performance examireports will be given great weight in the applications pro- nation for Kansas Bank found no evidence of prohibited cess.14 Kansas Bank, Fourth Financial's lead bank, received discrimination or other illegal credit practices. The examia "satisfactory" rating from its primary regulator, the OCC, nation also found no evidence of practices intended to at its most recent examination for CRA performance as of discourage applications for the types of credit listed in the October 1993.15 Security Bank also received a "satisfacto- banks' CRA statements.16 Procedures and training to prevent illegal discrimination are monitored through the holding company's internal audit reviews, and the results of these audits are reviewed periodically by the bank's board 10. See 12 U.S.C. § 2903. 11. Kansas Bank is made up of 15 "Market Based Banks" that serve of directors. In addition, Kansas Bank has formed a Second specific geographical areas in Kansas, with units designated to serve Wichita. Review Committee to review all initially denied mortgage Protestant's comments focus on Kansas Bank's lending activities in an area loans applications to ensure that fair and equitable lending approximated by 13 low- and moderate-income census tracts, five of which are also minority census tracts, and one middle-income census tract, all in standards are consistently applied in all markets. south and northeast Wichita ("the 14 census tract area"). This area consti- Kansas Bank has also taken a number of steps to improve tutes approximately one-third of the 39 low- and moderate-income and minority census tracts in Wichita. its record of meeting the housing-related credit needs of 12. Protestant has included comments from other organizations and indi- minorities and low- and moderate-income individuals in viduals criticizing Kansas Bank's record of CRA performance in assisting to Wichita. For example, in 1993 Kansas Bank commenced an meet the credit needs of the bank's communities in Wichita and the 14 census tract area. enhanced version of its Welcome Home Loan Program in 13. 54 Federal Register 13,742 (1989). Protestant also criticizes Kansas the Wichita area. This affordable mortgage program, which Bank for failing to negotiate an agreement with Protestant on lending goals is available only to low- to moderate-income borrowers, for the 14 census tract area in Wichita. The Board has indicated in previous orders and in the Agency CRA Statement that communication by depository offers flexible underwriting standards and down payments institutions with community groups provides a valuable method of assessing as low as 5 percent without private mortgage insurance, and and determining how best to address the credit needs of the community. However, neither the CRA nor the Agency CRA Statement require depository institutions to enter into agreements with particular organizations. Accordingly, the Board's review has focused on the programs and policies that 16. Protestant submitted complaints from five loan applicants alleging Fourth Financial and Kansas Bank have in place to assist in meeting the illegal discrimination by the bank. Each of these complaints has been credit needs of its entire community. See Fifth Third Bancorp, 80 Federal investigated or is under investigation by Kansas Bank's primary regulator, Reserve Bulletin 838 (1994). the OCC, which has supervisory authority to address these issues. Based on 14. Id. at 13,745. all the facts of record, including examination and other information provided 15. Fourth Financial's other subsidiary bank, Oklahoma Bank, also re- by the OCC, the Board concludes that these complaints do not provide a ceived a "satisfactory" rating from the OCC as of September 1993. basis for disapproving this transaction. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 159 it imposes no restrictions on the source of a borrower's churches serving low- to moderate-income areas. In addidown payment. During the first 11 months of the enhanced tion, Kansas Bank advertises its credit products in publicaprogram's availability, Kansas Bank originated 373 loans tions aimed at reaching the African-American, Hispanic, totalling $15.4 million to low- to moderate-income individ- and Vietnamese areas of its communities.18 uals in the Wichita area. In addition, Kansas Bank partici- The bank also advertises on a Wichita radio station that is pates in government-sponsored loan programs, such as the a member of the Inspirational Black Network. In addition, a City of Wichita/BANK IV Home Improvement Loan pro- current advertising campaign featuring the theme "Limited gram. Examiners also noted in the bank's most recent CRA Income Doesn't Mean Limited Resources" is aimed specifperformance examination that Kansas Bank's loan officers ically at low- to moderate-income individuals, and is Spanhave been recertified so the bank can resume offering Fed- ish and Vietnamese in appropriate markets. eral Housing Administration loans to borrowers in Wichita in order to meet community demand for these lending D. Conclusions Regarding Convenience and Needs products. Considerations C. Other Aspects of CRA Performance The Board has carefully considered all the facts of record, including the comments received, in reviewing Fourth Small Business and Consumer Lending. Kansas Bank ac- Financial's record of CRA performance. Based on a review tively participates in government-sponsored programs of- of the entire record, including the most recent CRA perforfered by the Small Business Administration. During the first mance examinations of Kansas Bank, the Board believes 11 months of 1994, Kansas Bank originated 27 SBA loans that the efforts of Fourth Financial to help meet the credit in the Wichita area totalling $4.7 million. In addition, needs of all segments of the communities it serves, includ- Kansas Bank established a Small Business Banking Unit in ing low- and moderate-income neighborhoods, and other 1991 to focus on the needs of small business customers, convenience and needs considerations, are consistent with including low- and moderate-income and minority entrepre- approval of this application. neurs in the Wichita area. This unit recently instituted a The Board expects Fourth Financial to continue to improgram of calling on minority-owned businesses and made prove its record of assisting in meeting the housing-related approximately 30 calls in the first three months of this credit needs of minorities and low- to moderate-income initiative.17 Kansas Bank also has taken a leading role in the individuals in Wichita and its progress will be reviewed by creation and financial support of the Financial Assistance the Board in future applications to establish depository and Referral Service ("FARS"), a community assistance facilities. referral center in Wichita formed through a cooperative effort with financial institutions. FARS is designed to im- Other Considerations prove access to financial services and business capital for low- and moderate-income business owners. The Board finds that the financial and managerial resources Kansas Bank also actively engages in consumer lending, and future prospects of Fourth Financial and Blackwell, and and during the first ten months of 1994, originated 1,142 their respective subsidiaries and the other supervisory facconsumer loans totalling $4.3 million to individuals in low- tors the Board must consider under section 3 of the BHC and moderate-income communities. Moreover, Kansas Act are consistent with approval of this proposal. Bank has developed a low-cost consumer loan product to Based on the foregoing and all the facts of record, the provide consumer credit services to low- and moderate- Board has determined that this application should be, and income individuals. hereby is, approved. The Board's approval is specifically Marketing. OCC examiners found that Kansas Bank has conditioned upon Fourth Financial's compliance with all taken steps to inform its entire community of the products the commitments made in connection with this application. and services it offers. To address the ineffectiveness of the For purposes of this action, the commitments and condibank's traditional marketing methods in reaching areas with tions relied on in reaching this decision shall be deemed to low- and moderate-income and minority residents, Kansas be conditions imposed in writing by the Board and, as such, Bank has developed new programs designed to focus its may be enforced in proceedings under applicable law. marketing efforts on these areas. For example, the bank This transaction shall not be consummated before the recently implemented an officer call program to reach fifteenth calendar day following the effective date of this order, or later than three months after the effective date of the order, unless such period is extended for good cause by 17. The Small Business Banking Unit staff also conducts educational seminars in its community and has accepted invitations to make presentations to such organizations as the Hispanic Multicultural Center, the Kansas chapter of the National Association of Minority Contractors, and a number of 18. Advertisements have appeared in The Ebony Shopper, El Perico, and church groups. Ngay Nay. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

160 Federal Reserve Bulletin • February 1995 the Board or the Federal Reserve Bank of Kansas City, "specifically authorized by the statute laws of the State in acting pursuant to delegated authority. which the bank is located, by language to that effect and not By order of the Board of Governors, effective Decem- merely by implication."3 For purposes of the Douglas ber 21, 1994. Amendment, the home state of KeyCorp is Ohio. Vermont and Ohio have enacted banking statutes that Voting for this action: Chairman Greenspan and Governors permit out-of-state bank holding companies to acquire Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not banks in these states on a reciprocal basis. The statute laws voting: Vice Chairman Blinder. of Vermont permit an out-of-state bank holding company, such as KeyCorp, to acquire a Vermont bank holding com- JENNIFER J. JOHNSON pany, and thereby acquire control of a Vermont bank, pro- Deputy Secretary of the Board vided that the out-of-state bank holding company's home KeyCorp state would permit the acquisition by a Vermont bank Cleveland, Ohio holding company of banks and bank holding companies located in that state under conditions not substantially more restrictive than those imposed under Vermont's interstate Order Approving the Acquisition of a Bank Holding banking statute.4 Ohio law permits the acquisition of Ver- Company mont banks by out-of-state organizations, if Ohio banking organizations are permitted to acquire banking organiza- KeyCorp, Cleveland, Ohio, a bank holding company within tions in other jurisdictions on terms that are, on a whole, the meaning of the Bank Holding Company Act ("BHC substantially no more restrictive than the conditions estab- Act"), has applied under section 3 of the BHC Act lished under the Ohio statute.5 The Vermont Commissioner (12 U.S.C. § 1842) to acquire all the voting shares of of Banking, Insurance, and Securities and the Ohio Superin- BANKVERMONT Corporation ("BANKVERMONT"), tendent of Banks have indicated that their respective statand thereby indirectly acquire BANKVERMONT's bank utes satisfy these reciprocity requirements. In light of the subsidiary, Bank of Vermont ("Bank"), both of Burlington, foregoing, and based on an analysis of the interstate bank- Vermont. ing statutes involved, the Board has concluded that approval Notice of the application, affording interested persons an of this proposal is not prohibited by the Douglas Amendopportunity to submit comments, has been published (59 ment. Approval of this proposal is specifically conditioned Federal Register 42,274 (1994)). The time for filing comupon KeyCorp receiving all required state regulatory apments has expired, and the Board has considered the appliprovals. cation and all comments received in light of the factors set forth in section 3(c) of the BHC Act.1 Convenience and Needs Considerations KeyCorp, with consolidated assets of approximately $61 billion, operates 15 subsidiary banks in Alaska, Colo- In acting on an application to acquire a depository institurado, Florida, Idaho, Indiana, Maine, Michigan, New tion under the BHC Act, the Board must consider the York, Ohio, Oregon, Utah, Washington and Wyoming, convenience and needs of the communities to be served, and holds approximately $42.4 billion in total deposits.2 and take into account the records of the relevant depository BANKVERMONT, with consolidated assets of approxiinstitutions under the Community Reinvestment Act mately $705.8 million, controls one bank subsidiary in (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the Vermont, holding approximately $536.7 million in total federal financial supervisory agencies to encourage finandeposits. Upon consummation of this proposal, KeyCorp cial institutions to help meet the credit needs of the local would remain the tenth largest commercial banking organicommunities in which they operate, consistent with the safe zation in the United States, with approximately $61.7 biland sound operation of such institutions. To accomplish this lion in consolidated assets and $42.9 billion in deposits. end, the CRA requires the appropriate federal supervisory authority to "assess the institution's record of meeting the Douglas Amendment Analysis credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe Section 3(d) of the BHC Act, the Douglas Amendment, prohibits the Board from approving an application by a bank holding company to acquire control of any bank located outside its home state unless such acquisition is 3. 12 U.S.C. § 1842(d). A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the 1. BANKVERMONT is a subsidiary bank holding company of the Bank company became a bank holding company, whichever is later. of Boston Corporation, Boston, Massachusetts. 4. See Vt. Stat. Ann. tit. 8, § 1052(a) (Supp. 1994). 2. Asset and deposit data are as of March 31,1994. 5. See Ohio Rev. Code Ann. § 1101.05(b) (Anderson 1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 161 and sound operation of such institution," and to take that the most recent examinations of their CRA performance.10 record into account in its evaluation of applications.6 In particular, KeyCorp's lead bank, Society Bank, received The Board received comments from the Vermont Com- an "outstanding" rating from its primary regulator, the munity Reinvestment Organization ("Vermont Protestant") Office of the Comptroller of the Currency ("OCC"), at its commending some aspects of KeyCorp's CRA-related lend- most recent examination for CRA performance as of March ing activities, particularly in the area of affordable housing 1994. Key Bank-NY also received an "outstanding" CRA in Syracuse, New York. Vermont Protestant also raised performance rating from its primary regulator, the Federal questions, however, about whether Bank would maintain it Deposit Insurance Corporation ("FDIC") as of May 1993. relationships with community groups and its autonomy over In addition, Key Bank-USA received a "satisfactory" CRA lending decisions after its acquisition by KeyCorp.7 The performance rating from the OCC as of May 1992, and Board also received comments from an individual ("New Bank received an "outstanding" rating from the FDIC as of York Protestant") alleging generally that KeyCorp's bank September 1991. subsidiaries, Key Bank-NY; Key Bank USA, N.A., Albany, New York ("Key Bank-USA"); and Society National Bank, B. Other Aspects of CRA Performance Cleveland, Ohio ("Society Bank"), have failed to comply with the CRA. In particular, New York Protestant alleges Key Bank-NY. Examiners concluded after sampling acthat Key Bank-NY charges excessive fees for the services cepted and denied applications that Key Bank-NY serves all provided and that Key Bank-USA does not reinvest depos- areas within its delineated community, including low- and its within its community. moderate-income areas, and that the bank offers a wide The Board has carefully reviewed the CRA performance array of consumer credit products that are designed to meet record of KeyCorp, BANKVERMONT, and their respective the credit needs of low- and moderate-income borrowers in subsidiary banks, as well as all other relevant facts of its community. In 1991, Key Bank-NY introduced the Key record, in light of the CRA, the Board's regulations, the Affordable Mortgage Program ("KEYAMP") to its banking Statement of the Federal Financial Supervisory Agencies market. This loan program, developed in conjunction with Regarding the Community Reinvestment Act ("Agency the New York State Affordable Homeownership Develop- CRA Statement"),8 the comments of protestants, and Key- ment Program, the Federal National Mortgage Association, Corp's response to these comments. the State of New York Mortgage Agency, and other secondary market investors, offers a conventional loan product that Record of CRA Performance allows the borrower to use government and other grant monies as down payments when being qualified during the A. Evaluation of CRA Performance underwriting process. Key Bank-NY has committed $100 million to this program, and had originated The Agency CRA Statement provides that a CRA examina- $11.2 million in loans under this program at the time of its tion is an important and often controlling factor in the most recent CRA examination. In 1994, Key Bank-NY consideration of an institution's CRA record, and that these offered a mortgage product called "Key to the City" that reports will be given great weight in the applications pro- provides flexible terms, including low down payments, ficess.9 The Board notes that 14 of KeyCorp's 15 subsidiary nancing of closing costs and prepaid escrow accounts. The banks received "outstanding" or "satisfactory" ratings at bank allocated $50 million for this program. Key Bank-NY also has developed community banking offices throughout New York State to provide services to its small commercial account customers (accounts of $150,000 to $500,000). The bank had approximately 6,900 small business loans with total outstanding balances of $349 mil- 6. See 12 U.S.C. § 2903. 7. Vermont Protestant also maintains that KeyCorp Mortgage Company, lion at its most recent CRA performance examination. Key ("KeyCorp Mortgage"), a mortgage subsidiary of Key Bank of New York, Bank-NY also participates in governmentally insured proboth of Albany, New York ("Key Bank-NY"), uses credit histories as the grams, such as those of the Small Business Administration sole criterion to deny loans to low-income applicants and does not coordinate loan originations with Key Bank-NY, thus producing unnecessary processing ("SBA"), and originated 184 SBA loans totalling $28.9 mildelays. Data filed by KeyCorp Mortgage under the Home Mortgage Disclo- lion in 1993. Key Bank-NY's marketing and advertising sure Act for 1993 show that credit history accounted for approximately the same percentage of denials for low- and moderate-income applicants as for high-income applicants. These data also show that a significant percentage of low- and moderate-income applicants were denied on other grounds, including high debt-to-income ratios and insufficient collateral. In addition, Key- Corp expects to have its mortgage lending activities handled directly by its subsidiary banks in the future and thereby eliminate any need to coordinate procedures with another subsidiary. 10. One of KeyCorp's recently acquired subsidiary banks, Key Bank of 8. 54 Federal Register 13,742 (1989). Colorado, Fort Collins, Colorado, has not yet been examined for CRA 9. Id. at 13,745. performance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

162 Federal Reserve Bulletin • February 1995 programs are designed to inform all segments of its local development and redevelopment programs, and has focused community about the bank's products and services.11 its local community efforts in Albany and Schenectady, Society Bank. Society Bank's performance in CRA- New York. related lending activities was considered by examiners to be Policies and Programs. KeyCorp has developed policies very strong. Examiners found that the bank had extended and programs designed to encourage outreach to the comsignificant amounts of real estate and small business credit munity. For example, examiners noted that Society Bank in its delineated communities and that the levels of lending personnel regularly met with community organizations, inindicated that the bank was responsive to meeting the credit cluding nonprofit groups, religious groups, and city offineeds of its delineated community. For example, Society cials. In addition, Key Bank-NY has initiated a statewide Bank offers an affordable mortgage product, the Home- Officer Outreach Program that requires all customer contact Assist Program, that provides flexible financing and grants officials to call regularly on nonprofit housing organizato low- to moderate-income individuals. Under this pro- tions, as well as a number of civic and business organizagram, Society Bank contributes 2 percent of the purchase tions.14 Both banks also encourage membership by bank price toward the down payment and pays the first year of officers in community groups and civic organizations. In private mortgage insurance. The HomeAssist Program also connection with this proposal, KeyCorp has analyzed offers a maximum loan-to-value ratio of 95 percent and Bank's participation in CRA-related programs in an effort flexible debt-to-income ratios. During 1993, Society Bank to ensure that Bank would continue to meet or exceed its originated 1,080 loans totalling $46.1 million under this established standards. KeyCorp maintains that its state bank program.12 Society Bank also participates in governmen- structure promotes lending and product development autontally insured programs, such as those of the SBA, and omy in conjunction with a community partnership aporiginated 59 SBA loans totalling $9.9 million in 1993. proach. Examiners noted that Society Bank maintains a leadership role and an exceptional level of participation in community C. Conclusion Regarding Convenience and Needs development programs throughout its local community di- Factors rectly and through the KeyCorp Community Development Corporation.13 The bank's efforts in marketing its products The Board has carefully considered all the facts of record, in a manner designed to reach the widest range of potential including the comments received, in reviewing the convecustomers, including low- and moderate-income and minor- nience and needs factor under the BHC Act. Based on a ity borrowers, were also commended by examiners. review of the entire record of this application, including the Key Bank-USA. Key Bank-USA is a specialized institu- most recent CRA performance examination of Key Banktion with a principal credit product of equipment lease NY, Society Bank and Key Bank-USA, the Board believes financing. It operates nationwide, and does not engage in that the efforts of KeyCorp to help meet the credit needs of traditional retail lending activities. To assist in meeting the all segments of the communities it serves, including lowcredit needs of its local community, Key Bank-USA pur- and moderate-income neighborhoods, and all other convechases home mortgage loans originated in its community, nience and needs considerations, are consistent with apand has allocated $2 million toward Key Bank-NY's "Key proval of this application. to the City" mortgage program. The bank also markets special equipment lease products to local small businesses. Other Considerations For example, Key Bank-USA's small business leasing program focuses on leasing transactions of less than $50,000. The bank subsidiaries of KeyCorp and BANKVERMONT From January 1993 to August 1994, Key Bank USA's gross do not compete in any relevant banking market. Based on lease originations under this program totalled $13.6 million, all the facts of record, the Board concludes that KeyCorp's including $1.8 million to borrowers in its delineated com- acquisition of BANKVERMONT and its subsidiary bank munity. Key Bank-USA also participates in community would not result in any significantly adverse effects on competition in any relevant banking market.15 The Board 11. Key Bank-NY maintains that its service fees are competitive with other major financial institutions and notes that it also offers banking prod- 14. Examiners found that many of these contacts included affordable ucts, such as Value Checking accounts that provide check writing, automatic housing groups, community development organizations, economic developteller machine services, and direct deposit of government checks at a lower ment agencies, neighborhood associations, and various civic organizations. cost than its regular checking accounts. 15. New York Protestant alleges that this proposal would have anti- 12. KeyCorp intends to implement this program at Bank after consumma- competitive effects on banking services in Vermont and restrict the choices of tion of the proposal. upstate New York residents who wish to bank in Vermont. As noted above, 13. For example, Society Bank has issued a standby letter of credit to the consummation of this proposal would not eliminate any existing competitors Cleveland Housing Network ("Network") for rehabilitation in Cleveland, in any of the Vermont banking markets currently served by Bank. In Ohio, and KeyCorp Community Development Corporation has issued a line addition, each of these markets has numerous banking competitors. Based on of credit to the Network's Homeward Program for rehabilitation loans for all the facts of record, the Board concludes that competitive considerations first-time homebuyers. are consistent with approval. 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Legal Developments 163 also finds that the financial and managerial resources16 and By order of the Board of Governors, effective Decemfuture prospects of KeyCorp and BANKVERMONT, and ber 19, 1994. their respective subsidiaries and the other supervisory factors the Board must consider under section 3 of the BHC Voting for this action: Chairman Greenspan, Vice Chairman Act are consistent with approval of this proposal.17 Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Based on the foregoing and all the facts of record, the Board has determined that this application should be, and JENNIFER J. JOHNSON hereby is, approved.18 The Board's approval is specifically Deputy Secretary of the Board conditioned upon compliance with all the commitments made by KeyCorp in connection with this application. For New American Bank Holding Corporation purposes of this action, the commitments and conditions Corpus Christi, Texas relied on in reaching this decision shall be deemed to be conditions imposed in writing by the Board and, as such, Order Approving Acquisition of a Bank Holding Company may be enforced in proceedings under applicable law. This transaction shall not be consummated before the New American Bank Holding Corporation, Corpus Christi, fifteenth calendar day following the effective date of this Texas ("Applicant"), has applied under section 3(a)(1) of order, or later than three months after the effective date of the Bank Holding Company Act ("BHC Act") (12 U.S.C. the order, unless such period is extended for good cause by § 1842(a)(1)) to merge with American Bank Holding Corthe Board or by the Federal Reserve Bank of Cleveland, poration ("American BHC"), and thereby indirectly acquire acting pursuant to delegated authority. American National Bank ("Bank"), both of Corpus Christi, Texas.1 Notice of the application, affording interested persons an opportunity to submit comments, has been published (59 16. In support of his contention that financial and managerial resource considerations do not warrant approval of this proposal, New York Protestant Federal Register 26,646 (1994)). The time for filing comhas alleged that KeyCorp, Society Bank and Key Bank-NY have lax credit ments has expired, and the Board has considered the appliadministration policies, conducted inadequate due diligence in major acquisitions, violated banking rules and regulations, engaged in mismanagement cation and all comments received in light of the factors set that resulted in substantial losses, and engaged in other unsafe and unsound forth in section 3 of the BHC Act. banking practices. New York Protestant has provided no evidence to support Applicant is a nonoperating corporation formed for the these allegations. The Board has carefully reviewed these allegations in light of all facts of record, including responses by KeyCorp and relevant reports of purpose of becoming a bank holding company through the examination by federal regulators. The Board notes that the findings and acquisition of American BHC.2 American BHC, with total conclusions in these examinations do not support New York Protestant's consolidated assets of $203.7 million, is the 83d largest allegations. Based on all the facts of record, the Board does not believe that these allegations warrant denial of this proposal. commercial banking organization in Texas, controlling de- 17. The Board also has carefully reviewed New York Protestant's allega- posits of $170.3 million, representing less than 1 percent of tions involving transactions and other business dealings between the protestant and KeyCorp's subsidiary banks, including Society Bank and Key the total deposits in commercial banks in the state.3 Appli- Bank-NY, and their predecessor institutions. These allegations involve indi- cant and Bank do not compete directly in any banking vidual transactions and disputes between New York Protestant and KeyCorp market. Accordingly, based on all the facts of record, coninstitutions. In some cases, the record of litigation reveals that judgments were entered in favor of KeyCorp and that New York Protestant has been summation of this proposal would not have a significantly unsuccessful in overturning these rulings on appeal. Other allegations in- adverse effect on competition or the concentration of bankvolve circumstances in which civil courts would provide New York Protesing resources in any relevant banking market. tant with a full opportunity to press his claims and obtain a remedy it his allegations are proven and a remedy is appropriate. In this light, and based on The Board also has concluded that the financial and all facts of record, including KeyCorp's responses and relevant reports of managerial resources and future prospects of Applicant and examination, the Board believes that other supervisory considerations are consistent with approval. Bank, and all other supervisory factors the Board must 18. New York Protestant has requested that the Board hold a public consider under section 3 of the BHC Act, are consistent meeting or hearing on these applications. Section 3(b) of the BHC Act does with approval of this application. Considerations relating to not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely the convenience and needs of the communities to be served written recommendation of denial of the application. In this case, the Board also are consistent with approval. has not received such a recommendation. Generally, under its rules, the Board may, in its discretion, hold a public meeting or hearing on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Board has carefully considered New York Protestant's re- 1. Applicant would acquire American BHC through a merger, and thereby quest. In the Board's view, New York Protestant has had ample opportunity acquire ABHC Delaware, Inc., Wilmington, Delaware ("ABHC"), a secondto present written submissions, and New York Protestant has submitted tier bank holding company that owns 100 percent of the voting shares of substantial written comments that have been considered by the Board. In Bank. light of the foregoing and all the facts of record, the Board has determined 2. The proposal primarily represents a reorganization of existing ownerthat a public meeting or hearing is not necessary to clarify the factual record ship interests under which the number of shareholders of American BHC on these applications, or otherwise warranted in this case. Accordingly, the would be reduced from approximately 60 to 35 or fewer. request for a public meeting or hearing on these applications is hereby denied. 3. Asset and state deposit data are as of June 30, 1994. 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164 Federal Reserve Bulletin • February 1995 Based on the foregoing and all the other facts of record, 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section the Board has determined that this application should be, 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to and hereby is, approved. The Board's approval is expressly engage through its subsidiary, Citicorp Futures Corporation, conditioned upon compliance with all the commitments New York, New York ("Company"), in providing futures made by Applicant in connection with this application.4 For commission merchant ("FCM") execution and clearance, purposes of this action, these commitments and conditions clearance-only, execution-only and advisory services to cusare deemed to be conditions imposed in writing by the tomers with respect to futures and options on futures on Board in connection with its findings and decision, and, as non-financial commodities.1 A complete list of the prosuch, may be enforced in proceedings under applicable law. posed contracts is set forth in the appendix. Company This transaction shall not be consummated before the would not trade in the proposed derivative instruments for fifteenth calendar day following the effective date of this its own account for any purpose, and would not trade in the order, or later than three months after the effective date of physical commodities themselves, except when necessary this order, unless such period is extended for good cause by to assist in the orderly resolution of an account. Company the Board or by the Federal Reserve Bank of Dallas, acting would provide the proposed FCM services only to institupursuant to delegated authority. tional customers as defined in section 225.2(g) of Regula- By order of the Board of Governors, effective Decem- tion Y.2 Company would not provide the proposed services ber 6, 1994. to retail brokerage customers, locals, or market makers. Notice of the application, affording interested persons an Voting for this action: Chairman Greenspan, Vice Chairman opportunity to submit comments, has been published (59 Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Federal Register 59,227 (1994)). The time for filing com- Yellen. ments has expired, and the Board has considered the application and all comments received in light of the factors set JENNIFER J. JOHNSON forth in section 4(c)(8) of the BHC Act. Deputy Secretary of the Board Applicant, with $253 billion in total consolidated assets,3 operates subsidiary banks in several states, and engages in Orders Issued Under Section 4 of the Bank Holding permissible nonbanking activities. Company4 is an FCM Company Act registered with the Commodity Futures Trading Commission ("CFTC") and a member of the National Futures Citicorp Association ("NFA"), and, therefore, is subject to the re- New York, New York cordkeeping, reporting, fiduciary standards, and other requirements of the Commodity Exchange Act (7 U.S.C. § 1 Order Approving an Application to Engage in Futures et seq.), the CFTC, and the NFA. Commission Merchant Activities The Board previously has determined that the proposed FCM activities are closely related to banking within the Citicorp, New York, New York ("Applicant"), a bank holdmeaning of section 4 of the BHC Act, and are, therefore, ing company subject to the provisions of the Bank Holding permissible activities for bank holding companies.5 Com- Company Act ("BHC Act"), has applied under section pany would conduct the proposed FCM activities subject to the limitations, conditions and commitments relied on by 4. Applicant also has filed applications in connection with the proposed conversion of Bank to a Texas-chartered limited banking association ("Amer- 1. Applicant currently conducts all of the proposed activities through an ican LBA"), including an application for American LBA to become a Federal operating subsidiary of Citibank, N.A., New York, New York. Reserve System member and an application to reorganize ABHC, the second- 2. Applicant anticipates that following consummation of the proposal, Comtier bank holding company, into a Delaware limited liability company after pany would perform services for commodity funds (or commodity pools), Bank's conversion. These membership and second-tier bank holding com- which are regulated by the Commodity Futures Trading Corporation and the pany applications raise a number of legal, financial, supervisory, and safety National Futures Association. Company would apply its standard credit apand soundness issues under the Federal Reserve Act and the BHC Act. The proval procedures to its commodity pool customers. Applicant has committed Board's consideration of these issues will depend in part on the views of the to provide the Federal Reserve System with prior notice of any material change Federal Deposit Insurance Corporation and the Internal Revenue Service on in the characteristics of Company's customer base. Neither Applicant nor any related deposit insurance and tax treatment matters. The Board, however, direct or indirect nonbanking subsidiary of Applicant would sponsor, own or must independently determine whether the applications meet the statutory control a commodity pool or commodity fund in the United States without the factors under the Federal Reserve Act and the BHC Act on the basis of all the prior written approval of the Federal Reserve System. facts of record. In this regard, Applicant has committed that it will not, 3. Asset data are as of September 30, 1994. without the Board's prior approval: 4. Company is currently a clearing member of the Chicago Board of (1) Convert Bank into a limited banking association under Texas law, or Trade, Chicago Mercantile Exchange and Tokyo International Financial acquire in any manner any limited banking association formed under Futures Exchange. Company would become a clearing member of the New Texas law; or York Mercantile Exchange, Kansas City Board of Trade, MidAmerica Com- (2) Convert itself or ABHC into a limited liability company or otherwise modity Exchange and Singapore International Monetary Exchange to conreorganize, liquidate, or modify its corporate structure or that of ABHC, or duct the proposed activities. cause itself or ABHC to elect subchapter S corporation tax treatment under 5. See J.P. Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 the Internal Revenue Code. (1994) CJ.P. Morgan"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 165 the Board in previous orders. In this regard, Applicant has Based on the commitments made by Applicant regarding committed that Company will provide clearing-only ser- its conduct of the proposed activities, the limitations on the vices to customers pursuant to customer agreements and activities noted in this order, and all the facts of record, the give-up agreements that afford Company the right to refuse Board has determined that the performance of the proposed to clear customer trades that Company reasonably deems activities by Applicant could reasonably be expected to unsuitable in light of market conditions or a customer's produce public benefits that would outweigh the possible financial situation or objectives. In addition, Company adverse effects that may result from the proposal. would not serve as the primary or qualifying clearing firm In every case under section 4 of the BHC Act, the Board for any unaffiliated parties, and would subject its clearing- must consider the financial condition and resources of the only and execution-only customers to the same credit re- applicant and its subsidiaries and the effect of the proposal view procedures set forth in J.P. Morgan. Company also on these resources.8 Based on the facts of this case, the would conduct the proposed FCM activities through omni- Board concludes that financial considerations are consistent bus trading accounts established in its own name with with approval of this application. The managerial resources clearing members of exchanges on which Company would of Applicant also are consistent with approval. not itself be a clearing member. Applicant has committed Based on the foregoing and all the facts of record, the that, with respect to Company's omnibus account custom- Board has determined to, and hereby does, approve the ers, Company will employ the same credit approval and risk application subject to all the terms and conditions set forth management procedures developed for its executing and in this order, and in the Board's regulations and orders that clearing activities. relate to these activities.9 The Board's determination also is In order to approve this application, the Board also must subject to all the terms and conditions set forth in the determine that the performance of the proposed activities by Board's Regulation Y, including those in sections 225.7 and Applicant can reasonably be expected to produce benefits to 225.23(b), and to the Board's authority to require modificathe public, such as greater convenience, increased competi- tion or termination of the activities of a bank holding tion and gains in efficiency, that outweigh possible adverse company or any of its subsidiaries as the Board finds effects, such as undue concentration of resources, decreased necessary to assure compliance with, and to prevent evasion or unfair competition, conflicts of interests, and unsound of, the provisions of the BHC Act, and the Board's regulabanking practices. The Board expects that Applicant's pro- tions and orders issued thereunder. The Board's decision is posal would provide added convenience to Applicant's cus- specifically conditioned on compliance with all the committomers and produce gains in efficiency for Applicant. To ments made by Applicant in this application, including the address the potential adverse effects of the proposed activi- commitments discussed in this order and the conditions set ties, Applicant has committed to conduct the proposed forth in this order and in the above noted Board regulations execution and clearance activities subject to the same rules and orders. For purposes of this action, these commitments and procedures imposed by the Board on the performance and conditions shall be deemed to be conditions imposed in of FCM activities with respect to financial commodities.6 In writing by the Board in connection with its findings and addition, in order to minimize risks associated with the decisions, and, as such, may be enforced in proceedings delivery of non-financial commodities, Applicant has com- under applicable law. mitted to take a number of steps in the event one of This transaction shall not be consummated later than Company's customers has an open position in a contract three months after the effective date of this order, unless after the contract has expired and the customer is unable or such period is extended for good cause by the Board or by unwilling to make or take delivery, or if one of Company's customers otherwise defaults on a contract after the contract expires and Company is required to make or take delivery of the underlying commodity.7 8. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987). 6. See 12 C.F.R. 225.25(b)(18). Applicant also has committed that Com- 9. Consistent with previously approved proposals to engage in these pany will not enter into any impermissible tying arrangements with any activities, Applicant must provide at least 20 days prior written notice to the lending affiliates, and that all customer trading positions of Company will be Federal Reserve System before: marked to market at least daily. (i) Engaging in FCM activities with respect to additional exchange- 7. Among the steps Applicant will take are: traded derivative contracts on agricultural, energy, or non-precious (1) Retendering or redelivering the commodity; metal commodities (unless the Board has approved the contracts for any (2) Offsetting the customer's open position through an exchange-for- other bank holding company under the BHC Act) to assure that such physical transaction; contracts are comparable to previously approved contracts; or (3) Offsetting the commodity in the cash market; and (ii) Becoming a clearing or non-clearing member of any commodities (4) Seeking to avoid delivery through some other mechanism. exchange that previously has been reviewed and approved by the Board See Bank of Montreal, 79 Federal Reserve Bulletin 1049, 1052 n.21 (1993). under the BHC Act. Company would take these or other appropriate actions as soon as commer- Applicant must obtain prior Board approval before becoming a clearing or cially practicable. Company also would take these steps if it exercises its non-clearing member of any commodities exchange that has not been reright to liquidate a customer's account. viewed and approved by the Board under the BHC Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

166 Federal Reserve Bulletin • February 1995 the Federal Reserve Bank of New York, pursuant to dele- Kansas City Board of Trade gated authority. By order of the Board of Governors, effective Decem- Hard Red Winter Wheat Futures ber 13, 1994. Option on Hard Red Winter Wheat Futures Voting for this action: Vice Chairman Blinder and Governors MidAmerica Commodity Exchange Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not voting: Chairman Greenspan. Soybean Futures WILLIAM W. WILES Options on Soybean Futures Secretary of the Board Coffee, Sugar & Cocoa Exchange, Inc. Appendix World Sugar No. 11 Futures Options on World Sugar No. 11 Futures Chicago Board of Trade Coffee "C" Futures Options on Coffee "C" Futures Corn Futures Cocoa Futures Options on Corn Futures Options on Cocoa Futures Wheat Futures Options on Wheat Futures CNB Bancshares, Inc. Soybean Futures Evansville, Indiana Options on Soybean Futures Soybean Meal Futures Order Approving Acquisition of Shares of a Savings Options on Soybean Meal Futures Association Soybean Oil Futures Options on Soybean Oil Futures CNB Bancshares, Inc., Evansville, Indiana ("CNB"), a bank holding company within the meaning of the Bank Chicago Mercantile Exchange Holding Company Act ("BHC Act"), has applied for the Board's approval under section 4(c)(8) of the BHC Act Live Cattle Futures (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Options on Live Cattle Futures Regulation Y (12 C.F.R. 225.23) to acquire King City Fed- Feeder Cattle Futures eral Savings Bank, Mount Vernon, Illinois ("King City"), a Options on Feeder Cattle Futures savings association. In connection with this acquisition, Live Hog Futures CNB also has applied to engage in the following nonbank- Options on Live Hog Futures ing activities through King City's wholly owned subsidiary, King City Financial Services Corp., Mount Vernon, Illinois New York Mercantile Exchange ("Services Corp."): (1) Investment advisory services pursuant to section 225.25(b)(4) of Regulation Y (12 C.F.R. 225.25(b)(4)); Light Sweet Crude Oil Futures (2) Securities brokerage activities, including related secu- Options on Light Sweet Crude Oil Futures rities credit activities pursuant to the Board's Regulation Sour Crude Oil Futures T, pursuant to section 225.25(b)(15)(i) of Regulation Y Gulf Coast Unleaded Gasoline Futures (12 C.F.R. 225.25(b)( 15)(i)); New York Harbor Unleaded Gasoline Futures (3) Providing investment advisory and securities broker- Options on New York Harbor Unleaded Gasoline Futures age services on a combined basis ("full-service broker- Heating Oil Futures age activities") pursuant to sections 225.25(b)(4) and Options on Heating Oil Futures (b)(15)(ii) of Regulation Y (12 C.F.R. 225.25(b)(4) and Propane Futures (b)(15)(ii)); Natural Gas Futures (4) Acting as agent or broker in the sale of credit-related Options on Natural Gas Futures insurance pursuant to section 225.25(b)(8)(i) of Regulation Y (12 C.F.R. 225.25(b)(8)(i)); Singapore International Monetary Exchange Limited (5) Acting as agent or broker for insurance directly related to an extension of credit by a finance company High Sulphur Fuel Oil Futures that is a subsidiary of a bank holding company pursuant Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 167 to section 225.25(b)(8)(ii) of Regulation Y (12 C.F.R. would control the 95th largest depository institution in 225.25(b)(8)(ii)); Illinois, with deposits of $285 million, representing less (6) Engaging in the issuance and sale at retail of money than 1 percent of the total deposits in depository institutions orders and similar consumer type-payment instruments in Illinois. having a face value of not more than $1,000, the sale of CNB and King City do not compete directly in any U.S. savings bonds, and the issuance and sale of travel- banking market. Accordingly, consummation of this proer's checks ("consumer payment instrument activities") posal would not have a significantly adverse effect on pursuant to section 225.25(b)(12) of Regulation Y competition or the concentration of banking resources in (12 C.F.R. 225.25(b)(12)). any relevant banking market. Notice of this proposal, affording interested persons an Record of Performance Under the CRA opportunity to submit comments, has been published (59 Federal Register 46,841 (1994)). The time for filing com- In considering an application to acquire a savings associaments has expired, and the Board has considered the appli- tion under section 4 of the BHC Act, the Board reviews the cation and all comments received in light of the factors set records of performance of the relevant institutions under the forth in section 4(c)(8) of the BHC Act. Community Reinvestment Act (12 U.S.C. § 2901 et seq.) The Board has determined that the operation of a savings ("CRA").4 The CRA requires the federal financial superviassociation is closely related to banking and permissible for sory agencies to encourage financial institutions to help bank holding companies. 12 C.F.R. 225.25(b)(9). In making meet the credit needs of the local communities in which this determination, the Board requires that savings associa- they operate, consistent with the safe and sound operation tions acquired by bank holding companies conform their of such institutions. To accomplish this end, the CRA direct and indirect activities to those permissible for bank requires the appropriate federal supervisory authority to holding companies under section 4 of the BHC Act. CNB "assess the institution's record of meeting the credit needs has committed to conform all activities of King City and of its entire community, including low- and moderate- Services Corp. to the requirements of section 4 of the BHC income neighborhoods, consistent with the safe and sound Act and Regulation Y.1 operations of such institution," and to take that record into The Board also has previously determined by regulation account in its evaluation of bank holding company applicathat the investment advisory, securities brokerage, full-ser- tions.5 vice brokerage, credit-related insurance, and consumer pay- The Board has carefully reviewed the entire record of ment instrument activities CNB proposes to conduct CRA performance of CNB and King City in light of the through Services Corp. are closely related to banking for CRA, the Board's regulations, and the Statement of the purposes of section 4 of the BHC Act.2 CNB has committed Federal Financial Supervisory Agencies Regarding the that it will conduct these activities in accordance with the Community Reinvestment Act ("Agency CRA State- Board's regulations and orders. ment").6 CNB, with total consolidated assets of $2.5 billion, operates in Kentucky, Illinois, and Indiana. CNB controls the A. CRA Performance Examinations 230th largest depository institution in Illinois, with deposits of $117.6 million, representing less than 1 percent of the The Agency CRA Statement provides that a CRA examinatotal deposits in depository institutions in Illinois.3 King tion is an important and often controlling factor in the City is the 167th largest depository institution in Illinois, consideration of an institution's CRA record, and that these controlling deposits of $167.4 million, representing less reports will be given great weight in the applications prothan 1 percent of the total deposits in depository institutions in Illinois. Upon consummation of this proposal, CNB 4. The Board previously has determined that the CRA by its terms 1. King City engages in certain insurance and real estate activities that are generally does not apply to applications by bank holding companies to not permissible for bank holding companies under the BHC Act. CNB has acquire nonbanking companies under section 4(c)(8) of the BHC Act. The committed to divest or terminate all impermissible insurance activities within Mitsui Bank, Ltd., 76 Federal Reserve Bulletin 381 (1990). The Board also two years of consummation of the proposal, and that during this two-year has stated that, unlike other companies that may be acquired by bank holding period, King City will limit such activities to renewals of existing policies. In companies under section 4(c)(8) of the BHC Act, savings associations are addition, CNB has committed to divest any impermissible real estate invest- depository institutions, as that term is defined in the CRA, and thus acquisiments within two years of consummation of this proposal, and not to engage tions of savings associations are subject to review under the express terms of in any new impermissible real estate development projects or investments the CRA. Norwest Corporation, 76 Federal Reserve Bulletin 873 (1990). during this period, and that capital adequacy guidelines will be met exclud- 5. See 12 U.S.C. § 2903. ing specified real estate investments. 6. 54 Federal Register 13,742 (1989). The Board also received comments 2. See 12 C.F.R. 225.25(b)(4), (b)(15), (b)(8)(i) and (ii), and (b)(12). from a community organization regarding CNB's performance under the 3. Asset data are as of June 30, 1994; state deposit data are as of June 30, CRA. These comments were subsequently withdrawn after CNB and the 1993. In this context, depository institutions include commercial banks, commenter reached an agreement to address the issues raised by the comsavings banks, and savings associations. menter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

168 Federal Reserve Bulletin • February 1995 cess.7 In this case, the Board notes that all of CNB's eluding newspapers marketed to predominantly minority subsidiary banks and thrifts received "outstanding" or "sat- communities. Bank also has increased its marketing efforts isfactory" ratings at the most recent examinations of their to focus on low- and moderate-income and minority bor- CRA performance. In particular, CNB's lead bank subsid- rowers, increased CRA training for Bank personnel, and iary, Citizens National Bank of Evansville, Evansville, Indi- established new CRA-related committees. ana ("Bank"), received a "satisfactory" rating from its The Board also has carefully reviewed Bank's compliprimary regulator, the Office of the Comptroller of the ance with fair lending laws. The 1993 examination by Currency ("OCC"), at its most recent examination for CRA Bank's primary regulator, the OCC, indicates no evidence performance as of March 29, 1993. The record in this case of prohibited discriminatory or other illegal credit practices also indicates that King City received a "satisfactory" and that the bank is in compliance with Federal fair lending rating from its primary regulator, the Office of Thrift Super- laws and regulations, including the ECOA and FHA. Bank vision ("OTS"), at its most recent CRA performance exam- also has developed policies that prohibit illegal discriminaination as of April 5, 1993. tory lending practices, and all initially denied residential The Board recently reviewed CNB's record of perfor- mortgage loan applications are reviewed to ensure complimance in meeting the credit needs of communities with ance with fair lending laws. predominately low- and moderate-income and minority residents.8 For the reasons described in greater detail in the B. Conclusion Regarding Record of CRA CNB Order and incorporated here by reference, the Board Performance concluded that the CRA performance record of CNB was consistent with approval of an application to acquire a The Board has carefully considered all the facts of record in deposit-taking institution. The CNB Order also noted that reviewing Bank's record of CRA performance. Based on a Bank's performance record indicated areas for improve- review of the entire record, including the considerations ment, particularly in housing-related lending, and that CNB discussed in the CNB Order, the most recent CRA perforhad initiated steps designed to strengthen the bank's CRA mance examinations of Bank, and Bank's first report on performance. These efforts would be monitored by the efforts to improve its CRA performance, the Board believes Federal Reserve Bank of St. Louis ("Reserve Bank") that Bank's record in assisting to meet the credit needs of all through semiannual reports that would be submitted by segments of the communities it serves, including low- and CNB. moderate-income neighborhoods, is consistent with ap- The Board has carefully considered the progress demon- proval of this application. The Board expects CNB and strated in CNB's first report covering the first six months of Bank to continue to make progress in all areas of CRA 1994. For example, Bank significantly increased the num- performance, including housing-related lending. Bank's ber of its housing-related loan applications from low- and progress will continue to be monitored by the Reserve Bank moderate-income and minority borrowers during this report- through semiannual reports and will be assessed in connecing period compared to 1993.9 These applications have tion with future applications to expand its deposit-taking originated from 23 of the 28 low- and moderate-income facilities. census tracts in Bank's delineated service area. CNB's report also indicates increased levels of housing-related Other Considerations lending to minority borrowers.10 CNB's progress in improving other aspects of Bank's The financial and managerial resources of CNB, King City, CRA performance record is also reflected in this report. and their subsidiaries are consistent with approval. The Bank's Partnership Mortgage Program and Community Re- Board also finds that consummation of this proposal is not source Center11 have been actively promoted, and have likely to result in any significantly adverse effects, such as received favorable publicity from various newspapers, in- undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices that are not likely to be outweighed by the public benefits, 7. Id. at 13,745. such as increased competition and added convenience, that 8. CNB Bancshares, Inc., 80 Federal Reserve Bulletin 538 (1994) ("CNB Order"). are expected from this proposal. Accordingly, the Board has 9. Bank received 150 housing-related loan applications from borrowers determined that the balance of public interest factors it must residing in low- and moderate-income areas during the first six months of consider under section 4(c)(8) of the BHC Act is favorable 1994 compared to a total of 197 housing-related loan applications in 1993. Bank also received 29 housing-related loan applications from African Amer- and consistent with approval of the application. icans during the first six months of 1994 compared to a total of 22 housingrelated loan applications in 1993. 10. During the first six months of 1994, 20 of the 35 housing-related loan applications from minority borrowers were approved, four applications were denied, and the remaining applications are still under review. 11. The Partnership Mortgage Program provides affordable mortgage area. The Community Resource Center provides credit services and educafinancing for families earning 80 percent or less of the median income in an tion to low- and moderate-income individuals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 169 Based on the foregoing and all the facts of record, the pursuant to section 4(c)(8)(G) of the BHC Act (12 U.S.C. Board has determined that the application should be, and § 1843(c)(8)(G)) and sections 225.25(b)(1), (b)(8)(vii), and hereby is, approved. The Board's approval is specifically (b)(15) of the Board's Regulation Y (12 C.F.R. conditioned on compliance by CNB with all the commit- 225.25(b)(1), (b)(8)(vii), and (b)(15)).2 ments made in connection with this application. The Notice of this proposal, affording interested persons an Board's determination also is subject to all the conditions opportunity to submit comments, has been published (59 set forth in Regulation Y, including those in sections 225.7 Federal Register 48,326 (1994)). The time for filing comand 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and ments has expired, and the Board has considered the appli- 225.23(b)), and to the Board's authority to require modifica- cation and all comments received in light of the factors set tion or termination of the activities of a bank holding forth in the BHC Act. company or any of its subsidiaries as the Board finds FBS, with consolidated assets of $25.9 billion, controls necessary to assure compliance with, and to prevent evasion nine bank subsidiaries in Colorado, Illinois, Minnesota, of, the provisions and purposes of the BHC Act and the Montana, North Dakota, South Dakota, and Wisconsin, Board's regulations and orders issued thereunder. For the with approximately $18.9 billion in total deposits.3 MFC, purpose of this action, the commitments and conditions with consolidated assets of $8 billion, controls one thrift relied on by the Board in reaching this decision are deemed subsidiary with branches in Arizona, Iowa, Kansas, Minneto be conditions imposed in writing by the Board in connec- sota, Nebraska, North Dakota, South Dakota, Wisconsin, tion with its findings and decision, and, as such, may be and Wyoming, with approximately $5.6 billion in total enforced in proceedings under applicable law. deposits. Upon consummation of this proposal, FBS would This transaction shall not be consummated later than become the 26th largest commercial banking organization three months after the effective date of this order, unless in the United States, based on consolidated assets of such period is extended for good cause by the Board or by $33.9 billion. the Federal Reserve Bank of St. Louis, acting pursuant to Following the acquisition of the shares of MFC, FBS delegated authority. proposes that Metropolitan continue to operate as a feder- By order of the Board of Governors, effective Decem- ally chartered savings association with branches in Arizona, ber 5, 1994. Iowa, Kansas, Nebraska, North Dakota, and Wyoming.4 The Board previously has determined that a bank holding Voting for this action: Chairman Greenspan, Vice Chairman company may own and control a savings association, in- Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and cluding a federally chartered savings association that oper- Yellen. ates interstate branches subject to the limitations on such branching imposed by the Office of Thrift Supervision JENNIFER J. JOHNSON ("OTS").5 The OTS, which is Metropolitan's primary fed- Deputy Secretary of the Board eral regulator, has approved FBS's application to operate branches of Metropolitan in these states. In determining that First Bank System, Inc. a bank holding company may operate a savings association, Minneapolis, Minnesota the Board required that savings associations acquired by bank holding companies conform their direct and indirect Order Approving Acquisition of Shares of a Savings activities to those permissible for bank holding companies Association under section 4 of the BHC Act. FBS has committed to conform all activities of MFC, Metropolitan, and their First Bank System, Inc., Minneapolis, Minnesota ("FBS"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied under 2. A list of the nonbanking subsidiaries of MFC is contained in Appensection 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and dix A. 3. Asset data and state deposit data are as of June 30, 1994. In this context, section 225.23 of the Board's Regulation Y (12 C.F.R. depository institutions include commercial banks, savings banks, and savings 225.23), to acquire Metropolitan Financial Corporation, associations. Minneapolis, Minnesota ("MFC"),1 and thereby indirectly 4. FBS proposes to consolidate the operations of Metropolitan in Minnesota, South Dakota, and Wisconsin with FBS's subsidiary bank in those acquire MFC's savings association subsidiary, Metropolitan states as follows: First Bank N.A., Minneapolis, Minnesota, would acquire Federal Bank, FBS, Fargo, North Dakota ("Metropolitan"). certain branches of Metropolitan operating in Minnesota; First Bank South FBS also has applied to acquire the nonbank subsidiaries of Dakota, N.A., Sioux Falls, South Dakota, would acquire certain branches of Metropolitan operating in South Dakota; and First Bank, N.A. Wisconsin, Metropolitan and thereby engage in nonbanking activities Milwaukee, Wisconsin, would acquire certain branches of Metropolitan operating in Wisconsin. These banks have received approval for these transactions from their primary Federal regulator, the Office of the Comptroller of the Currency ("OCC"), pursuant to sections 5(d)(3) and 18(c) of the 1. In connection with this proposal, FBS has requested approval to acquire Federal Deposit Insurance Act (12 U.S.C. § 1815(d)(3) and 1828(c)). an option to purchase up to 19.9 percent of the outstanding voting shares of 5. 12 C.F.R. 225.25(b)(9). See also National Commerce Bancorporation, MFC that would terminate upon consummation of this proposal. 79 Federal Reserve Bulletin 890 (1993); see also 12 C.F.R. 556.5. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

170 Federal Reserve Bulletin • February 1995 nonbanking subsidiaries to the requirements of section 4 of A. Douglas Amendment Analysis the BHC Act and Regulation Y.6 The Board has received comments relating to the various The initial issue raised by the Banking Board is whether legal and competitive effects of this proposal, including FBS's acquisition of Metropolitan, as structured, is permiscomments from the North Dakota State Banking Board, sible under the Douglas Amendment. The Douglas Amendindividual commenters, and National Title Resources Corp.7 ment prohibits the Board from approving any application to The Board has carefully considered these comments and the acquire a bank that would result in the acquisition by a bank responses filed by FBS in light of all the facts of record. holding company located in one state of an additional bank located in another state unless the Board determines that the Comments of the North Dakota State Banking Board acquisition is specifically authorized by the laws of the state where such target bank is located, "by language to that Within a few months of this acquisition, FBS proposes to effect and not merely by implication."8 merge its existing subsidiary bank in North Dakota, First The Board already has determined that the acquisition of Bank North Dakota, N.A., ("Bank"), into Metropolitan, a savings association, such as Metropolitan, is not subject to with Metropolitan surviving the merger and continuing to the interstate limitations of the Douglas Amendment.9 The operate as a federally chartered savings association. FBS Douglas Amendment applies only to the interstate acquisihas applied to the OTS for approval for this merger. tion of an additional bank, and, by its terms, does not apply The North Dakota State Banking Board ("Banking to the acquisition of a savings association, which the BHC Board") asserts that this transaction is barred by both North Act specifically excludes from its definition of a "bank."10 Dakota and federal law. The Banking Board claims that The second step of this proposal — the merger of Bank FBS has structured this transaction to circumvent the North into Metropolitan — also is not subject to the Douglas Dakota interstate banking statute ("ND Statute"), and that Amendment.11 The Douglas Amendment bars approval of the Board should direct FBS to file an application with the the acquisition of "an additional bank" in North Dakota by Banking Board for prior approval of this proposal under the FBS unless the acquisition is specifically authorized by ND Statute. The Banking Board further alleges that because North Dakota law.12 In this case, the proposal represents the this transaction would be barred by the ND Statute, the merger of a bank that is already controlled by FBS into a Board is precluded by section 3(d) of the BHC Act, the savings association that will be owned by FBS at the time of "Douglas Amendment," from approving this transaction. the merger. The transaction therefore does not represent the acquisition by FBS of an "additional bank." In fact, after the merger, FBS will no longer own a bank in North Dakota. Thus, the Board is not precluded from approving this merger by the Douglas Amendment. 6. By acquiring MFC, FBS would also acquire MFC's two other nonbank subsidiaries, LMN Management Corporation, Fargo, North Dakota B. Permissibility of Transactions Under State Law ("LMN"), and Edina Realty, Inc., Fargo, North Dakota ("Edina Realty"). While LMN is currently inactive, Edina Realty engages in residential real estate brokerage and related operations in Minnesota, South Dakota, and The Banking Board contends that the ND Statute would Wisconsin. FBS has committed that, within two years of consummation of prohibit FBS from acquiring Metropolitan without the prior this proposal, FBS will divest all impermissible real estate activities and that it will not undertake any new investments during this time. FBS also has committed that capital adequacy guidelines will be satisfied after excluding these investments from its capital calculations. 8. 12 U.S.C. § 1842(d). 7. The Board also received comments from a Minnesota bank maintaining 9. See, e.g., Old National Bancorp, 79 Federal Reserve Bulletin 55, 56 n.4 that the proposal violates the Minnesota law that restricts a bank from (1993). establishing more than five branches, and requires consent of all banks in a 10. 12 U.S.C. § 1841(c)(2)(B) and (j). municipality with a population of less than 10,000 to establish a branch in 11. The Douglas Amendment governs only the acquisition of a bank in a that municipality. Minn. Stat. Ann. § 47.52 (West 1992). These restrictions, transaction that requires Board approval under section 3 of the BHC Act. however, do not apply to branches acquired through certain merger transac- Section 3(a)(4) of the BHC Act requires Board approval for "any subsidiary tions, and FBS has structured this transaction to comply with the merger [of a bank holding company], other than a bank, to acquire all or substanexceptions. Metropolitan's Minnesota branches would be acquired tially all the assets of a bank." This transaction would fall within the literal (1) By five newly chartered national banks owned by FBS, with each bank terms of this section. Based on all the information provided by FBS in owning less than five branches (no consent required under Minn. Stat. connection with this proposal, the Board believes that FBS has satisfied the Ann. §47.55 Subd. 2 (West 1992) for acquisitions of existing thrift application requirement in section 3 of the BHC Act. FBS has already branches), and published notice of this proposal in local newspapers, and the Board has (2) In turn by FBS's Minnesota subsidiary bank (no number or consent invited comment through the Federal Register. FBS has filed substantial restrictions under Minn. Stat. Ann. § 49.34 Subd. 2(a)(West 1992) for information relating to the factors the Board must consider under section 3, branches acquired in bank mergers). and the Board has considered this information, as well as the comments The Minnesota Commissioner of Commerce has indicated in a 1990 received, in light of the factors applicable under section 3 of the BHC Act in opinion that a newly chartered interim national bank may facilitate the reviewing this proposed transaction. acquisition of thrift branches consistent with Minnesota law, and the OCC 12. The Banking Board argues that the merger of Bank into Metropolitan considered commenter's objections in approving this proposal. Based on all is not authorized by North Dakota law because FBS has refused to seek the the facts of record, the Board concludes that this proposal is consistent with approval of the Banking Board for this merger, which the Banking Board Minnesota law. asserts is required under the ND Statute. 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Legal Developments 171 approval of the Banking Board. The North Dakota Attorney Banking Board has requested the Board to hold a hearing to General has concluded, however, that the Banking Board's determine whether Metropolitan would be operated as a assertion of jurisdiction must be consistent with the BHC bank by FBS.16 Act and the Board's interpretations.13 For the reasons previ- Under section 4 of the BHC Act, the Board may order a ously discussed, the Board has concluded that this proposal hearing on an application "if there are disputed issues of is consistent with the Douglas Amendment because FBS material fact that cannot be resolved in some other manwould only own a savings association in North Dakota after ner." 12 C.F.R. 225.23(g). Metropolitan would continue to consummation.14 be a federally chartered savings bank, and therefore, the Moreover, by its terms, the ND Statute does not appear to Board concludes that it would not be a considered a "bank" require that FBS obtain the approval of the Banking Board for purposes of federal law, including the BHC Act.17 The for the second-step merger of Bank into Metropolitan. The factual issues raised by the Banking Board regarding the ND Statute provides that a bank holding company operating manner of Metropolitan's operations are not material to this in certain states may acquire an interest in a bank located in determination. In this light, the Board concludes that the North Dakota and requires that "if the interest acquired will Banking Board has not raised any disputed issues of materesult in the reciprocating state bank holding company rial fact that cannot be resolved in some other manner, or obtaining control of the bank or banks, the company file [an that a public hearing or meeting is necessary to clarify the application] with the [Banking Board]," (emphasis add- factual record in this application, or otherwise warranted in ed).15 Thus, the acquisition by an out-of-state bank holding this case. Accordingly, the Banking Board's request for a company of an interest in a bank in North Dakota requires public hearing or public meeting is hereby denied. the prior approval of the Banking Board only if the acquisition would result in the company "obtaining control" of the Competitive Considerations bank in North Dakota. As explained above, FBS already controls Bank, and FBS and Metropolitan Bank compete directly in 19 banking received approval from the Banking Board under the ND markets in Minnesota, North Dakota, South Dakota, and Statute at the time FBS acquired control of Bank. Thus, the Wisconsin.18 The relative size of FBS in Minnesota, North merger of Bank into Metropolitan is not a situation in which Dakota, South Dakota, and Wisconsin following this proa "reciprocating state bank holding company" will acquire posal is described in Appendix B to this order. "control" of a bank in North Dakota, and therefore, does In connection with this application, the Board received not appear to require approval of the Banking Board under comments from individuals in the Minneapolis-St. Paul area the ND Statute. alleging that FBS's acquisition of Metropolitan would have For these reasons, the Board does not believe that the ND an adverse effect on competition in the state of Minnesota, Statute bars Board approval of this proposal. and particularly in the Minneapolis-St. Paul banking market.19 The Board also received comments from the Banking C. The Banking Board's Request for a Hearing Board alleging that competition in North Dakota's five largest banking markets, particularly the Fargo banking The Banking Board alleges that Metropolitan would be operated in a manner indistinguishable from a commercial bank after consummation of the proposed transaction, and 16. The Banking Board would be entitled to a hearing under section 3 of therefore the acquisition of Metropolitan should be viewed the BHC Act, which requires the Board to hold a hearing on an application as the acquisition of a bank subject to its jurisdiction. The when requested by a state banking agency, if the application involved a state-chartered bank and the agency has denied, in a timely manner, the application made to such agency for approval of such acquisition. 12 U.S.C. § 1842(b). In this case, Bank is a nationally chartered bank and is not subject to supervision by the Banking Board. 13. See letter from Heidi Heitkamp, North Dakota Attorney General, to the 17. See 12 U.S.C. § 1841(c)(2)(B) and 1841(j); see also 12 U.S.C. Honorable James Maxson, North Dakota State Senator (September 8, 1994) § 1467a (a)(1). ("Heitkamp Letter"). The North Dakota Attorney General has indicated that 18. Specifically, FBS and MFC compete directly in the Albert Lea, the definition of "bank" for purposes of the ND Statute must be read Alexandria, Brainerd, Fairmont, Hibbing, Mankato, Minneapolis-St. Paul, co-terminously with the definition of bank under the BHC Act. Owatonna, Rochester, and St. Cloud, banking markets, all in Minnesota; the 14. In amending Regulation Y in 1989, the Board noted that certain Bismark, Cando-Devils Lake, Fargo-Moorhead, Grand Forks, Jamestown, mergers or conversions involving savings associations and banks must and Minot, banking markets, all in North Dakota; and in the Aberdeen, Rapid comply with the Douglas Amendment. 54 Federal Register at 37,299 (1989). City, and Sioux Falls, banking markets, all in South Dakota. This commentary referred to section 5(d)(3) of the Federal Deposit Insurance 19. One individual asserts that the recent series of small in-market acquisi- Act, as amended by the Financial Institutions Reform, Recovery, and En- tions by FBS and Norwest Corporation, Minneapolis, Minnesota ("Norforcement Act of 1989, which requires a Douglas Amendment analysis for west"), the two largest commercial banking organizations in the any transaction in which a savings association merges or consolidates with a Minneapolis-St. Paul banking market, has led to anticompetitive market bank and the resulting institution is a bank within the meaning of the BHC conditions, and should not be permitted to continue. The proposed acquisi- Act. See 12 U.S.C. § 1815(d)(3). A Douglas Amendment determination tion, according to this individual, would solidify the dominance of the two under this provision is not required in this proposal because the resulting largest banking organizations in the Minneapolis-St. Paul banking market, institution is not a bank. thereby eliminating opportunities for expansion by smaller in-market partici- 15. N.D. Cent. Code § 6-08.3-02 (1991). pants or entry by out-of-market participants. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

172 Federal Reserve Bulletin • February 1995 market, would be substantially reduced as a result of the ing the competitive effect on the market concentration in consolidation of Bank into Metropolitan. The Board has light of previous acquisitions by the two largest depository carefully considered the effects that consummation of this organizations, however, this proposal is not likely to have a proposal would have on competition in these banking mar- significantly adverse competitive effect in the market.24 kets in light of all the facts of record, including all com- Metropolitan, with less than 1 percent of market deposits, ments received, FBS's responses to these comments, the does not control a significant share of market deposits. In characteristics of these markets, the increase in the concen- addition, the Board notes that 99 competitors would remain tration of total deposits in depository institutions20 in these in the market, including 92 commercial banks and 7 thrifts, markets as measured by the Herfindahl-Hirschman Index upon consummation of this proposal. ("HHI"),21 and commitments made by FBS. In addition, the Minneapolis-St. Paul banking market is a major urban area that is attractive for entry, and this acquisi- A. The Minneapolis-St. Paul Banking Market tion is not likely to affect the availability of attractive entry points for potential entrants.25 The market has experienced First Bank-Minnesota is the largest commercial bank or both de novo entry and entry by acquisition in recent years. thrift institution ("depository institution") in the For example, seven commercial banking institutions have Minneapolis-St. Paul banking market,22 controlling deposits entered the market since 1989 by establishing branches. In of $9.97 billion, representing 36.3 percent of total deposits addition, three de novo banks were chartered in this market in depository institutions in the banking market ("market since 1990, and one of the commercial banking institutions deposits"). Metropolitan Bank is the 13th largest depository that entered this market since 1987 has become the fourth institution in the market, controlling deposits of $205.2 mil- largest depository institution in the market. lion, representing less than 1 percent of market deposits. On the basis of all the facts of record, including the Upon consummation of this proposal, First Bank-Minnesota number of competitors remaining in the market and the size would remain the largest depository institution in the of Metropolitan in this market, the Board concludes that Minneapolis-St. Paul banking market, controlling deposits consummation of this proposal would not have a signifiof $10.38 billion, representing 37.5 percent of market de- cantly adverse effect on competition or the concentration of posits. The HHI would increase by 78 points to 2172. banking resources in the Minneapolis-St. Paul banking mar- The Board previously has indicated that merger transac- ket.26 tions in the Minneapolis-St. Paul banking market involving one of the two largest depository institutions in the market institutions with relatively small market shares could, on a cumulative basis, warrant close review because of the size of these institulead to significant anti-competitive effects. tions relative to other market competitors.23 Even consider- 24. The Board also received comments from two individuals asserting that FBS's acquisition of Metropolitan would result in anticompetitive effects in Plymouth, Minnesota, which is part of the Minneapolis-St. Paul banking market. These commenters have not presented any evidence to support a 20. Market data are as of June 30, 1993. Market share data before different delineation of the relevant banking market. consummation are based on calculations in which the deposits of thrift The Board previously has indicated that the relevant banking market must institutions are included at 50 percent. The Board previously has indicated reflect the commercial and banking realities and should consist of the that thrift institutions have become, or have the potential to become, signifi- localized area where the banks involved offer their services and where local cant competitors of commercial banks. See WM Bancorp, 76 Federal Re- customers practically turn for alternatives. See United States v. Philadelphia serve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve National Bank, 374 U.S. 321, 361 (1963); St. Joseph Valley Bank, 68 Federal Bulletin 743 (1984). Because the deposits of Metropolitan would be con- Reserve Bulletin 673, 674 (1982). The record in this case indicates that trolled by a bank holding company under this proposal, those deposits are numerous consumers residing in Plymouth, Minnesota work outside of this included' at 100 percent in the calculation of pro forma market share. See community in other portions of the Minneapolis-St. Paul banking market, Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, and that there is a substantial amount of commuting between Plymouth and Inc., 76 Federal Reserve Bulletin 669 (1990). the other areas of the Minneapolis-St. Paul banking market. Thus, based on 21. Under the revised Department of Justice Merger Guidelines, 49 all the facts of record, the Board believes that the relevant banking market is Federal Register 26,823 (June 29, 1984), a market in which the post-merger the Minneapolis-St. Paul banking market, and that the proposed merger HHI is above 1800 is considered to be highly concentrated. In such markets, would not have a significantly adverse effect on competition in this market. the Justice Department is likely to challenge a merger that increases the HHI 25. The Minneapolis-St. Paul metropolitan area, with a population of 2.46 by more than 50 points. The Justice Department has informed the Board that million, is the 16th largest in the United States according to 1990 census a bank merger or acquisition generally will not be challenged (in the absence data, and has increased 15.3 percent in population since 1980. of other factors indicating anticompetitive effects) unless the post-merger 26. One of the commenters also claims that consummation of this proposal HHI is at least 1800 and the merger increases the HHI by more than 200 would result in the two largest banking organizations in this Minnesota points. The Justice Department has stated that the higher than normal HHI collectively controlling approximately 30 percent of all housing-related thresholds for screening bank mergers for anticompetitive effects implicitly lending in Minnesota, and 40 percent of all housing-related lending to recognize the competitive effect of limited-purpose lenders and other non- minorities in the state. Accordingly, this individual alleges that this proposed depository financial entities. acquisition would have an anti-competitive effect on residential loan policies, 22. The Minneapolis-St. Paul banking market is approximated by Anoka, particularly with respect to minority borrowers. Hennepin, Ramsey, Washington, Carver, Scott, and Dakota Counties, and In fact, numerous other sources of residential mortgage credit would portions of Chisago, Le Sueur, Sherburne, and Wright Counties in Minne- continue to operate in Minnesota following consummation of this proposal. sota, and the town of Hudson in St. Croix County in Wisconsin. In the Minneapolis-St. Paul banking market alone, the largest banking 23. See Norwest Corporation, 80 Federal Reserve Bulletin 164 (1994); market in Minnesota, over 70 mortgage companies would compete for First Bank System, Inc., 79 Federal Reserve Bulletin 50 (1993). Acquisitions residential loan customers with the 100 depository institutions that would by either of these two banking organizations of a series of depository operate in this market following consummation of this proposal. Moreover, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 173 B. The Hibbing Banking Market The HHI would increase 352 points to 1804. A number of factors indicate that the increase in concentration levels in FBS would become the largest depository institution in the the Owatoona banking market as measured by the HHI tend Hibbing banking market,27 controlling $204.4 million in to overstate the competitive effects of this proposal. For deposits, representing approximately 31.1 percent of market example, upon consummation of this proposal, fourteen deposits. The HHI would increase 313 points to 2016. In depository institutions, including the second largest deposiorder to mitigate the adverse competitive effects that would tory institution in the state, would remain in the market. In otherwise result from consummation of this proposal, FBS addition, the Owatoona banking market is relatively attrachas committed to divest Metropolitan's branch office in tive for entry, with two commercial banks and one thrift Chisolm, Minnesota to a competitively-suitable acquiror having entered the market by acquisition between 1989 and whose purchase would not result in substantial lessening of 1993. In light of all the facts of record, including the competition in the Hibbing banking market.28 Following characteristics of this market, the Board concludes that consummation of this proposal and the divestiture of the consummation of this proposal would not result in signifi- Chisolm branch, at least 13 depository institutions, includ- cantly adverse effects on competition in the Owatoona ing the second largest depository institution in the state, banking market. would compete with FBS in this market. Based on all of the facts of record, including the commitments made by FBS,29 D. North Dakota Banking Markets the Board concludes that consummation of this proposal would not result in significantly adverse effects on competi- The Banking Board alleges that consummation of this protion in the Hibbing banking market. posal would significantly reduce banking competition in five banking markets in North Dakota, and particularly in C. The Owatoona Banking Market the Fargo-Moorhead banking market,31 and that any convenience or gain in efficiency would not outweigh the possible FBS would become the largest depository institution in the adverse effects resulting from this acquisition. Owatoona banking market,30 controlling $153.6 million, The record in this case indicates that in the Fargorepresenting approximately 28.4 percent of market deposits. Moorhead, North Dakota banking market,32 FBS would become the largest depository institution in the market, controlling $795.8 million in deposits, representing approxas discussed below, FBS offers a number of affordable mortgage programs to imately 35 percent of market deposits. The HHI would meet the housing-related credit needs of minorities and low- to moderate- increase 730 points to 1692. Although the increase in marincome individuals. Accordingly, the Board concludes that consummation of this proposal would not significantly affect the availability of residential ket concentration resulting from this acquisition as meamortgage credit in the Minneapolis-St. Paul metropolitan area or in any of sured by the HHI is significant, this market would not be the areas in Minnesota served by FBS and its subsidiaries. considered highly concentrated as measured by the HHI, 27. The Hibbing banking market is approximated by Carpenter, Bearvile, Nashwauk, and Lone Pine Townships, Effie Unorganized Territory and and this acquisition would not exceed the Department of Northeast Itasca Unorganized Territory in Itasca County; St. Louis County Justice's merger guidelines in this market. Additionally, 32 with the exception of Fairbanks, Ellsburg, Ault, Kelsey, Cotton, Pequay wan, depository institutions would remain in this market follow- Elmer, Meadowlands, Payne, Northland, Alden, Van Buren, Ness, Alborn, New Independence, Fredenberg, Gnesen, Normanna, Halden, Floodwood, ing consummation of this proposal. Culver, Industrial, Grand Lake, Canosia, Rice Lake, Lakewood, Duluth, Similarly, the increase in market concentration as mea- Prairie Lake, Fine Lakes, Arrowhead, Stoney Brook, Brevator, Solway, and Midway Townships, the cities of Hermantown, Proctor, and Duluth, Potshot sured by the HHI in the other banking markets in North Lake Unorganized Territory and Whiteface Reservoir Unorganized Territory Dakota where FBS and Metropolitan compete indicate that South of a horizontal line drawn from the northern border of Ault Township. all of these markets would remain moderately concentrated 28. FBS has committed to sell this branch either to a firm that does not currently operate in this market (which divestiture would cause the HHI to upon consummation of this proposal, and this acquisition increase 181 points to 1883), or to a current market competitor whose acquisitions of this branch would not cause the HHI to increase by 200 points or more. 29. In this regard, FBS has committed to execute a sales agreement prior to 31. The Banking Board argues that restrictions on entry into the city of consummation of this proposal, and to complete these divestitures within 180 Fargo imposed by North Dakota law exacerbate the significant effects that days of consummation of this proposal. FBS also has committed that in the consummation of this proposal would have on competition in this market. event that it is unsuccessful in completing these divestitures within 180 days However, the Fargo-Moorhead banking market encompasses an area signifiof consummation of the proposal, it will transfer the Chisolm branch office to cantly greater in size than the city of Fargo, including communities in an independent trustee that has been instructed to sell the office promptly Minnesota, and as discussed below, a significant number of financial instituwithout regard to price. See BankAmerica Corporation, 78 Federal Reserve tions would continue to operate in this market upon consummation of this Bulletin 338, 340 (1992); United New Mexico Financial Corporation, 77 proposal. Federal Reserve Bulletin 484, 485 (1991). Furthermore, FBS has committed 32. The Fargo-Moorhead banking market is approximated by Cass and to submit to the Board, prior to consummation of the acquisition, an executed Ransom Counties; Helendale, Barrie, Walcott, Sheyenne, Viking, Colfax and trust agreement acceptable to the Board stating the terms of the divestiture. Eagle Townships in Richland County; Sherbrooke, Primrose, Hugo, Eclen- 30. The Owatonna banking market is approximated by Steele County, dale, Colgate and Broadlawn Townships in Steele County; Treill County less Waseca County with the exception of Janesville, Alton, Freedom, and Vivian Garfield, Morgan, Buston, Stavenger, Belmont, Viking, Lindess, Wold, Ervin Townships; Ellington, Claremont, Ripley, and Westfield townships in Dodge and Bingham Townships; all in North Dakota; and Norman and Clay County. Counties in Minnesota. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

174 Federal Reserve Bulletin • February 1995 would not exceed the Department of Justice's merger guide- mance of FBS and Metropolitan, and all comments received lines in any of these banking markets.33 The record in this regarding this application, in light of the CRA, the Board's case indicates that numerous competitors would remain in regulations, and the Statement of the Federal Financial each of these markets. In addition, the United States Attor- Supervisory Agencies Regarding The Community Reinvestney General, after a review of the competitive effects of the ment Act ("Agency CRA Statement").36 merger of Bank into Metropolitan, has indicated that the proposal is not likely to result in any significantly adverse A. CRA Performance Examinations competitive effects in any market in North Dakota. For these reasons, and based on all the facts of record, the Board The Agency CRA Statement provides that a CRA examinaconcludes that consummation of this proposal would not tion is an important and often controlling factor in the result in significantly adverse effects on competition in any consideration of an institution's CRA record, and that these relevant banking market in North Dakota. reports will be given great weight in the applications pro- Consummation of this proposal in the remaining banking cess.37 In this case, the Board notes that all of FBS's markets in Minnesota and South Dakota where FBS and subsidiary banks and thrifts received "outstanding" or "sat- Metropolitan compete also would not exceed the Depart- isfactory" ratings at the most recent examinations of their ment of Justice Merger Guidelines,34 and numerous compet- CRA performance. In particular, FBS's lead bank subsiditors would remain in all these banking markets. Based on iary, First Bank-Minnesota, received a "satisfactory" rating these and all the facts of record, including Protestants' from its primary regulator, the OCC, at its most recent examicomments, the Board concludes that consummation of this nation for CRA performance as of February 1993. The record proposal would not have significantly adverse effects on in this case also indicates that Metropolitan received a "satiscompetition or on the concentration of resources in any factory" rating from the OTS at its most recent examination relevant banking market. for CRA performance as of February 1993. Record of Performance Under the CRA B. HMDA Data and Lending Activities The Board has reviewed a comment alleging that FBS's First Bank-Minnesota and FBS Mortgage have initiated a acquisition of Metropolitan would adversely effect the resi- number of steps to strengthen their records of meeting the dential credit needs of individuals, and particularly minori- housing-related credit needs in low- to moderate-income ties, in Minnesota and in the Minneapolis-St. Paul area.35 areas of the Minneapolis-St. Paul area and all of Minnesota. The Board also has reviewed comments from the Banking FBS Mortgage employs a full-time staff of seven individu- Board expressing concerns as to how the proposed merger als who are responsible for developing programs and prodof Bank into Metropolitan will affect developmental loan ucts designed to increase minority home ownership primarcommitments made by FBS to the banking Board in connec- ily through community outreach, educational programs and tion with its acquisition of Bank earlier this year. The Board public-private community home ownership initiatives. has carefully reviewed the entire record of CRA perfor- Some of the initiatives implemented at FBS Mortgage include a second review procedure and a quarterly audit of denied loan applications to ensure compliance with fair 33. Upon consummation of this proposal, the HHI in the Bismark banking lending laws. FBS Mortgage also provides increased oppormarket would increase by 398 points to 1366; in the Cando-Devils Lake banking market, the HHI would increase by 482 points to 1425; in the Grand tunities for home ownership for low- to moderate-income Forks banking market, the HHI would increase by 311 points to 1347; in the and minority individuals through its Lending Options for Jamestown banking market, the HHI would increase by 392 points to 1257; All Neighborhoods Resource Program ("L.O.A.N. Reand in the Minot banking market, the HHI would increase by 290 points to 1308. source"). Through L.O.A.N. Resource, FBS Mortgage 34. Upon consummation of this proposal, the HHI in the remaining works with nonprofit civic and community-based organizabanking markets in Minnesota would increase as follows: Albert Lea (by 279 points to 1094); Alexandria (by 369 points to 1407); Brainerd (by 499 points tions to develop and provide credit products to meet the to 1572); Fairmont (by 60 points to 812); Mankato (by 16 points to 587); housing-related credit needs of these individuals. Rochester (by 9 points to 964); and St. Cloud (by 22 points to 887). The HHI In Minnesota, in particular, FBS Mortgage has worked in the banking markets in South Dakota affected by this proposal would increase upon consummation as follows: Aberdeen (by 10 points to 1507); with various community groups, including the St. Paul Rapid City (by 118 points to 2427); and Sioux Falls (by 18 points to 907). Ecumenical Alliance of Congregations, the Association of 35. As noted previously, this commenter asserts that the anti-competitive Community Organizations for Reform Now ("ACORN"), effects of this proposal would place FBS and Norwest in a position to dictate residential loan policies in the Minneapolis-St. Paul banking market, particu- and Neighborhood Housing Services, to develop the Home larly with respect to minorities. In this context, the commenter raises con- Advantage Loan Program, an affordable home mortgage cerns regarding ability of FBS and Norwest to meet the housing-related credit needs of minorities given disparities in minority denial rates for FBS' mortgage subsidiary, FBS Mortgage Corporation, St. Paul, Minnesota ("FBS Mortgage"). In support of this assertion, the commenter cites 1992 and 1993 data reported by FBS Mortgage pursuant to the Home Mortgage Disclosure 36. 54 Federal Register 13,742 (1989). Act ("HMDA"). 37. Id. at 13,745. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 175 product. This program, which is intended specifically for area indicate an increase in applications from minorities and low- and moderate-income borrowers who do not qualify a decrease in minority denial rates. The Board believes that for secondary mortgage products, offers flexible underwrit- the programs implemented at FBS Mortgage and First ing criteria, down payment assistance, and a home rehabili- Bank-Minnesota should enable these companies to continue tation component.38 In 1993, FBS originated 143 loans to improve their record of meeting the credit needs of their totalling $8.5 million under this program in Minnesota.39 community following FBS's acquisition of Metropolitan, With respect to small business lending, First Bank- including the housing-relating credit needs of low- and Minnesota sponsors the First Bank Civic Banking Group in moderate-income and minority individuals. order to develop and provide various credit products tailored to small businesses. First Bank-Minnesota also partic- C. FBS's Lending Commitments in North Dakota ipates in a number of government-sponsored lending programs, including a program sponsored by the Small In its application to the Banking Board to acquire Bank, Business Administration ("SBA"). In 1993, First Bank- FBS made various commitments pertaining to its lending Minnesota originated 24 SBA loans totalling more than activities in North Dakota. The Banking Board raises con- $12 million. Additionally, First Bank-Minnesota has signed cerns that commitments FBS made relating to lending by an agreement with the St. Paul Port Authority ("Authority") Bank in North Dakota will be unenforceable once Bank is to provide an $8 million letter of credit that will enable the merged into Metropolitan.40 In response to these allega- Authority to create an industrial fund to finance business tions, FBS states that it fully intends to abide by the expansion projects. commitments it has made to the state of North Dakota The Board has reviewed the 1992 and 1993 HMDA data relating to developmental lending in that state. In particular, reported by First Bank-Minnesota and FBS Mortgage in FBS has committed that FBS and its subsidiaries will conlight of Minnesota Protestant's comments. These data indi- tinue to engage in developmental lending in North Dakota, cate denials of housing-related loan applications that vary consistent with the parameters for such lending as set forth by race in areas served by First Bank-Minnesota. The Board in FBS's commitments to the Banking Board, following is concerned when an institution's record indicates dispari- consummation of this proposal. ties in lending to minority applicants and believes that all banks are obligated to ensure that their lending practices are D. Branch Locations and Closings based on criteria that assure not only safe and sound lending, but also assure equal access to credit by creditworthy The Board has reviewed comments from various commentapplicants regardless of race. The Board recognizes, how- ers, including the Banking Board, that the consolidation of ever, that HMDA data alone provide an incomplete measure the branches of FBS and Metropolitan will have an adverse of an institution's lending in its community, and have effect on the economies of areas currently served by these limitations that make the data an inadequate basis, absent organizations. As a general matter, the Board notes that other information, for concluding that an institution has FBS has committed to maintain or enhance all existing engaged in illegal discrimination in making lending deci- levels of services currently provided by FBS or Metropolisions. tan branches in all service areas. If FBS determines to close The Board notes that the 1993 CRA performance exami- any branches of FBS subsidiaries or of Metropolitan, FBS nation for First Bank-Minnesota found no evidence of pro- has committed that it will abide by all applicable federal hibited discrimination or other illegal credit practices. The laws in effectuating these branch closings. The Board also examination also found no evidence of practices intended to has reviewed FBS's branch closure policy as it relates to discourage applications for the types of credit listed in the this proposal. The record in this case indicates that FBS's banks' CRA statements. Additionally, the record in this branch closure policy provides that each subsidiary bank is case indicates that FBS has aggressively sought to improve required to assess and consider the impact of branch closure its record of lending to minorities, and in fact has shown on the communities served, including low- to moderateincome neighborhoods. The policy also states that, when improvement in this area. In particular, the 1993 HMDA appropriate, bank management should present branch closdata for FBS subsidiaries serving the Minneapolis-St. Paul 40. The Banking Board asserts that it was misled by FBS because FBS did 38. Specifically, FBS Mortgage offers down payment and closing assis- not apprise the Banking Board of FBS's intention to acquire Metropolitan tance, gap financing assistance, and counseling support. In 1993, FBS (and merge Bank into Metropolitan) at the time FBS was applying to the Mortgage extended over $800,000 in acquisition and gap assistance loans in Banking Board to acquire Bank. In response to this allegation, FBS claims the Minneapolis-St. Paul metropolitan area. that FBS notified the North Dakota State Banking Commissioner of its 39. In addition, in February 1993, First Bank-Minnesota extended a intentions to acquire Metropolitan prior to the Banking Board's approval of $2.5 million line of credit with a below-market interest rate to the Greater FBS's acquisition of Bank. In light of FBS's representation that FBS will Minneapolis Metropolitan Housing Coiporation, a non profit housing devel- continue to abide by its commitments to the Banking Board following the oper, to assist in the construction of over 100 homes to be sold to low- to merger of Bank into Metropolitan, the Board does not believe that these moderate-income families in inner city neighborhoods. allegations warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

176 Federal Reserve Bulletin • February 1995 ing plans to key neighborhood organizations and commu- assembling and considering the entire record relating to nity leaders for input prior to making final recommenda- these allegations and supports its request in part by citing tions to the bank's board of directors regarding branch alleged anti-competitive practices by Edina Realty and Eqclosures. uity Title.43 FBS does not currently engage in any title insurance E. Conclusion Regarding Record of CRA agency activities or real estate settlement services, which Performance include escrow services.44 Accordingly, FBS's acquisition of MFC would not eliminate any existing competition in the The Board has carefully considered all the facts of record, markets affected by this proposal. including the comments received, in reviewing FBS's As noted above, FBS has also committed to divest Edina record of CRA performance. Based on a review of the Realty, which Insurance Protestant alleges has engaged in entire record, including the most recent CRA performance illegal anti-competitive practices. In addition, FBS has made examinations of all of FBS's subsidiaries, including First commitments, consistent with previous Board orders, that Bank-Minnesota, the Board believes that Bank's record in would prohibit the practices cited in the pending litigation meeting the credit needs of all segments of the communities and that should prevent the affiliation of Equity Title with it serves, including low- and moderate-income neighbor- FBS from adversely affecting competition or consumers as hoods, is consistent with approval of this proposal.41 alleged by the Insurance Protestant. FBS affiliates would also inform their customers that they are not required to Other Nonbanking Activities purchase title insurance from Equity Title in connection with a loan origination.45 Section 106 of the BHC Act In considering the nonbanking subsidiaries acquired in this Amendments of 1970 and the Board's anti-tying rules proposal, the Board has carefully reviewed comments from would prohibit FBS lending affiliates from conditioning the a Minnesota title insurance agency ("Insurance Protestant") availability of credit on the purchase of any nontraditional regarding MFC's real estate brokerage subsidiary (Edina banking product or service like real estate settlement ser- Realty) and title insurance agency subsidiary (Equity Title). vices or title insurance. In addition, the Board's rules pro- Initially, the Board notes that real estate brokerage activities hibit conditioning the availability of real estate settlement are not permissible under the BHC Act, and, consequently, services on the purchase of title insurance, and vice versa 46 FBS has committed to divest its interest in Edina Realty Insurance Protestant has questioned whether FBS will within two years of this acquisition. However, FBS may, abide by its commitments but has not provided any facts in with Board approval, engage in title insurance agency activ- support of its position. Insurance Protestant does not cite ities pursuant to an exemption from the BHC Act's general any past practices by FBS or provide any information that prohibition against insurance agency activities.42 would suggest that FBS would be unable to ensure that Insurance Protestant alleges that consummation of this proposal would result in decreased and unfair competition in the market for title insurance in Minnesota because of the 43. Insurance Protestant alleges that Edina Realty and Equity Tide have proposed affiliation between one of the largest title insur- engaged in illegal "steering" practices whereby customers of Edina Realty ance agencies (Equity Title) with one of the largest loan were directed to buy title insurance and real estate setdement services from Equity Title. Insurance Protestant cites pending civil actions brought against originators (FBS) in the Minneapolis-St. Paul area. In addithese companies as well as a 1992 enforcement action and fine directed tion, Insurance Protestant maintains that escrow services against Edina Realty by the Department of Housing & Urban Development. constitute a distinct function from title insurance agency Insurance Protestant contends that these practices have illegally deprived other title insurance agencies of business and have adversely affected conservices, requiring separate consideration of the effect of the sumers because of alleged higher prices charged by Equity Title. proposal on these services. The Insurance Protestant asserts 44. The Board previously has determined that real estate settlement that a public hearing or public meeting is the only means of services, which include collecting and dispersing funds and holding funds in escrow pending satisfaction of certain commitments, are permissible activities for bank holding companies under section 4(c)(8) of the BHC Act. Norwest Corporation, 76 Federal Reserve Bulletin 1058 (1990). Insurance 41. One commenter alleges that FBS made certain representations relating Protestant provides no basis to substantiate its contention that these services to lending authority at a branch following a previous acquisition by FBS, and are not closely related to banking, and the Board has found that banks do, in that FBS's alleged failure to abide by these representations indicates that fact, engage in these activities. See Norwest Corporation, supra at 1059. The FBS will not abide by its commitment to meet the credit needs of its Board also concluded that these services could be — but are not required to community following this acquisition. The Board has considered this com- be — offered by bank holding companies also engaged in title insurance ment in reviewing this proposal. The Board believes that, overall, the agency activities. performance of FBS and its subsidiaries in meeting the credit needs of the 45. FBS has also committed that Equity Title would inform its customers communities they serve has been satisfactory and is consistent with approval that they are not required to purchase Equity Title's real estate settlement of this proposal. services in connection with the purchase of tide insurance in a real estate 42. Section 4(c)(8)(G), commonly referred to as "exemption G," permits transaction. bank holding companies that were lawfully engaged in general insurance 46. 12 C.F.R. 225.7. Section 106 and the Board's anti-tying rules would agency activities prior to 1971 to continue those activities. See 12 U.S.C. also generally prohibit FBS subsidiary banks from tying extensions of credit § 1843(c)(8)(G). FBS is one of several bank holding companies with exemp- (discounting or conditioning availability) to the purchase of real estate tion G rights. settlement services or title insurance from Equity Title. 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Legal Developments 109 Equity Title would comply with these commitments. The tunity to cross-examine FBS personnel and that requiring Board notes that FBS's commitments would be conditions the Insurance Protestant to submit information in writing imposed in writing as part of the Board's action on this would be "inefficient, overly time consuming and counter application and, as such, would be enforceable under appli- productive."50 Thus, the Insurance Protestant has not procable provisions of law. FBS is aware that the Board vided a sufficient basis to conclude that material facts considers the commitments made in this case to be legally relevant to the Board's decision are in dispute in this case. binding and has indicated that these commitments will be Based on all the facts of record, and for the reasons reviewed as part of its compliance efforts. discussed above, the Board concludes that Insurance Protes- The record also indicates that FBS has a formal program tant's comments do not warrant denial of this application. at its nonbanking subsidiaries for assuring and monitoring In addition, the Board believes that interested parties have compliance with applicable law, and FBS has committed to also had a sufficient opportunity to present written submisimplement these programs at Equity Title upon consumma- sions, and have submitted substantial written comments that tion of this proposal.47 The Board has also considered have been considered by the Board. In light of all the facts confidential supervisory information in assessing the man- of record, the Board has determined that a public hearing or agement of FBS and management's ability to address super- public meeting is not necessary to clarify the factual record visory issues. Based on these and other facts of record, the in this application or otherwise warranted in this case. Board believes that FBS's commitments will be effectively Accordingly, Insurance Protestant's request for a public implemented. The Federal Reserve Bank of Minneapolis hearing or public meeting on this application is hereby also will monitor FBS's compliance with these commit- denied. ments on a regular basis. In reviewing the request for a public hearing or public Conclusion Regarding Public Interests Considerations meeting, the Board notes that Insurance Protestant has not identified any disputed material facts that would require a The financial and managerial resources of FBS, MFC, and hearing under the Board's Rules.48 Instead, Insurance Prot- their subsidiaries are consistent with approval.51 Additionestant raises speculative concerns that FBS will act in an ally, the record in this case indicates that FBS's acquisition anti-competitive manner in violation of the anti-tying rules. of MFC should result in public benefits resulting from the However, these concerns are based on the way Edina Realty continued operation of MFC and its subsidiaries under FBS and Equity Title were operated by Metropolitan. as a bank holding company.52 For the reasons discussed As noted, FBS proposes to change the manner in which above, and under the framework and conditions established these companies operate under commitments that address in this and prior decisions, the Board concludes that conthese concerns directly. Insurance Protestant has presented summation of this proposal is not likely to result in any no evidence to indicate that FBS cannot or will not take the significantly adverse effects, such as undue concentration of steps it proposes or that those steps are not sufficient. resources, decreased or unfair competition, conflicts of in- Moreover, Insurance Protestant does not present any evi- terests, or unsound banking practices that are not likely to dence to support its allegations that the affiliation of Equity be outweighed by the public benefits, such as increased Title and FBS will effectively eliminate competition in the competition and added convenience, that are expected from title services and escrow markets 49 this proposal. Accordingly, the Board has determined that the balance of public interest factors it must consider under In addition, the Insurance Protestant has not indicated why written submissions are not adequate in this case to explore Insurance Protestant's allegations. Instead, the Insurance Protestant simply asserts that it must have an oppor- 50. Insurance Protestant also states that it is prepared to present expert testimony at a hearing or public meeting but has not explained what its experts will say or why their views cannot be presented in writing. 47. Under this program, each subsidiary designates compliance personnel 51. The Board also received comments from a South Dakota resident who are independent of the subsidiary's operating personnel. In addition, requesting that the Board withhold approval of the above proposed transaccompliance efforts are monitored by an audit committee of FBS's board of tion until FBS changes its policy of not extending credit to individuals with a directors which regularly reviews the compliance programs of the subsidiar- prior personal bankruptcy. This policy, S.D. Protestant asserts, unfairly ies. discriminates against responsible individuals who have suffered temporary 48. 12 C.F.R. 225.23(g) provides that "[a]ny request for a hearing on an hardships, thereby defeating the intent of the Bankruptcy Act (11 U.S.C. application or notice under this section shall comply with the provisions of § 101 et al.). In this regard, the Board notes that FBS's policy is not illegal Section 262.3(e) of the Board's Rules of Procedure (12 C.F.R. 262.3(e)) under federal law, and requiring FBS to change this policy as a condition of [requiring a statement of why a written presentation would not suffice in lieu approval of this proposal is not warranted under the facts of this case. of a hearing, identifying specifically any questions of fact that are in dispute 52. Insurance Protestant has questioned whether FBS's acquisition would and summarizing the evidence that would be presented at a hearing] The result in any public benefits. The Board believes that FBS's acquisition of Board shall order a hearing only if there are disputed issues of material fact MFC's subsidiaries should provide financial strength to these companies, and that cannot be resolved in some other manner." provide added convenience to the customers of both FBS and these compa- 49. Because there are numerous sources for mortgage loans in the nies. This proposal also should enable the subsidiaries of MFC acquired by Minneapolis-St. Paul area, FBS does not have the type of market power that FBS to remain active competitors in the markets in which these companies could result in voluntary tying. operate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

178 Federal Reserve Bulletin • February 1995 section 4(c)(8) of the BHC Act is favorable and consistent (3) Equity Title Services, Inc., Edina, Minnesota, which is with approval of the application. authorized to engage in title insurance activities and real Based on the foregoing and all the facts of record, the estate settlement and closing services pursuant to 12 U.S.C. Board has determined that the application should be, and § 1843(c)(8)(G); 12 C.F.R. 225.25(b)(8)(vii). hereby is, approved. The Board's approval is specifically (4) Rocky Mountain Management Information Services, conditioned on compliance by FBS with all the commit- Inc., Minneapolis, Minnesota, which is a Wyoming Corpoments made in connection with this application. The ration, the sole activity of which is the ownership of Metro- Board's determination also is subject to all the conditions politan's 10 percent interest in WYNEB Financial Limited set forth in Regulation Y, including those in sections 225.7 Liability Company. and 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and (5) WYNEB Financial Limited Liability Company, Chey- 225.23(b)), and to the Board's authority to require modifica- enne, Wyoming, which was established in 1993 to particition or termination of the activities of a bank holding pate in the acquisition of commercial real estate loans from company or any of its subsidiaries as the Board finds the Federal Deposit Insurance Corporation, and thereby necessary to assure compliance with, and to prevent evasion engage in commercial lending pursuant to 12 C.F.R. of, the provisions and purposes of the BHC Act and the 225.25(b)(1). Board's regulations and orders issued thereunder. For the (6) American Charter Credit Corporation, Minneapolis, purpose of this action, the commitments and conditions Minnesota, which performs various servicing activities rerelied on by the Board in reaching this decision are deemed lated to four collateralized mortgage obligations pursuant to to be conditions imposed in writing by the Board in connec- 12 U.S.C. § 1843(c)(1); 12 C.F.R. 225.22(a)(1). tion with its findings and decision, and, as such, may be (7) Security Consumer Services, Inc., Minneapolis, Minneenforced in proceedings under applicable law. sota, which is a Minnesota corporation whose sole activity This transaction shall not be consummated later than is the ownership of a 75 percent interest in Security Finanthree months after the effective date of this order, unless cial Center of St. Cloud Partnership. such period is extended for good cause by the Board or by (8) Security Financial Center of St. Cloud Partnership, Saint the Federal Reserve Bank of Minneapolis, acting pursuant Cloud, Minnesota, whose only activity is the ownership of a to delegated authority. building occupied by one of Metropolitan's offices pursuant By order of the Board of Governors, effective Decem- to 12 U.S.C. § 1843(c)(1); 12 C.F.R. 225.22(a)(2)(vi). ber 23, 1994. MFC Subsidiaries to be Divested by FBS Voting for this action: Chairman Greenspan and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not (9) Metropolitan Service Corporation, Fargo, North Dakota voting: Vice Chairman Blinder. ("MSC"), which was established to participate directly in a real estate joint venture in Arizona. JENNIFER J. JOHNSON (10) Candlewood Investors, Fargo, North Dakota, which is Deputy Secretary of the Board a general partnership in which MSC owns 50 percent. (11) Lancaster Investment Corporation, Minneapolis, Min- Appendix A nesota ("LIC"), which is a company whose principal business is real estate development and construction. Nonbanking Subsidiaries of Metropolitan (12) LIC-2, Inc., Minneapolis, Minnesota, which is a wholly owned subsidiary of LIC, which was established to partici- Permissible Activities pate directly in a real estate joint venture in Chicago, Illinois. (1) Metropolitan Financial Services, Minneapolis, Minne- (13) LIC-3, Inc., Minneapolis, Minnesota,which is a wholly sota, which is authorized to sell life insurance, securities, owned subsidiary of LIC, which was established to particiand other investment products, including fixed and variable pate directly in a real estate joint venture in Charlotte, North rate annuities, through offices of Metropolitan in Arizona, Carolina. Iowa, Kansas, Minnesota, Nebraska, North Dakota, South (14) LIC-4, Inc., Minneapolis, Minnesota, which is a wholly Dakota, and Wisconsin pursuant to 12 U.S.C. owned subsidiary of LIC, which was established to partici- § 1843(c)(8)(G); 12 C.F.R. 225.25(b)(8)(vii) and (b)(15)). pate directly in a real estate joint venture in Colorado (2) Rocky Mountain Insurance and Investment Corporation, Springs, Colorado. Minneapolis, Minnesota, which is authorized to sell life (15) LIC-7, Inc., Minneapolis, Minnesota, which is a wholly insurance, securities, and other financial products, including owned subsidiary of LIC, which was established to particifixed and variable rate annuities, through branch offices of pate directly in a real estate joint venture in Illinois. Metropolitan in Wyoming pursuant to 12 U.S.C. (16) Portrait Homes Colorado Springs Joint Venture, Home- § 1843(c)(8)(G); 12 C.F.R. 225.25(b)(8)(vii) and (b)(15). wood, Illinois, which is a partnership in which LIC-4 owns Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 179 50 percent. This joint venture was established to participate Appendix B in real estate acquisition, development, and construction in Colorado Springs, Colorado. Deposit Information for States in which FBS and (17) Property Investor Realty, Homewood, Illinois ("PIR"), Metropolitan compete. which is a partnership in which LIC-7 owns 50 percent. This joint venture was established to participate in real Deposit Data are as of June 30, 1994. estate acquisition, development, and construction in Illinois. PIR also owns real property in Charlotte, North Carolina. (1) Minnesota (18) Ferndale Corporation, Inc., Council Bluffs, Iowa, which is an Iowa corporation in which Metropolitan owns FBS is the second largest depository institution in Minne- 20 percent of the issued and outstanding stock. Ferndale's sota, with deposits of $10.2 billion, representing 20.5 perassets consist of approximately 73 acres of land for develop- cent of total deposits in depository institutions in Minnement in Council Bluffs, Iowa. sota. MFC is the fourth largest depository institution in (19) WDRA, which is a partnership in which CMC shares Minnesota, controlling deposits of $1.3 billion, representing in 19.8 percent of the profits and losses. This partnership 2.5 percent of total deposits in Minnesota. Upon consummaowns the Residence Inn Hotel in Wichita, Kansas. tion of this proposal, FBS would become the largest depository institution in Minnesota, controlling deposits of $11.5 billion, representing 23.1 percent of total deposits in depos- Inactive Subsidiaries to be Terminated itory institutions in the state. (20) Portrait Homes Chicago Joint Venture, Homewood, (2) North Dakota Illinois, which is a partnership in which LIC-2 owns 50 percent. This joint venture was established to participate in FBS is the third largest depository institution in North real estate acquisition, development, and construction in Dakota, controlling deposits of $633.8 million, representing Chicago, Illinois. 7.2 percent of total deposits in depository institutions in (21) Portrait Homes Charlotte Joint Venture, Homewood, North Dakota. MFC is the largest depository institution in Illinois, which is a partnership in which LIC-3 owns 50 North Dakota, controlling deposits of $1.4 billion, reprepercent. This joint venture was established to participate in senting approximately 16.4 percent of total deposits in real estate acquisition, development, and construction in depository institutions in North Dakota. Upon consumma- Charlotte, North Carolina. tion of this proposal, FBS will become the largest deposi- (22) Columbia Mortgage Corporation of Kansas City, Min- tory institution in North Dakota, controlling $2.1 billion in neapolis, Minnesota, which previously provided mortgage deposits, representing approximately 23.7 percent of total banking services in Missouri but now only owns a minority deposits in depository institutions in the state. interest in Wichita Downtown Residence Associates, Wichita, Kansas ("WDRA"). (3) South Dakota (23) Western Columbia Mortgage, Minneapolis, Minnesota ("WCM"), which previously engaged in mortgage banking FBS controls the fourth largest depository institution in in California. Most of the assets of WCM have been sold, South Dakota, with $432.1 million in deposits, representing and its loan servicing was transferred to Metropolitan dur- 3.7 percent of total deposits in depository institutions in ing the fourth quarter of 1993. South Dakota. MFC is the 12th largest depository institu- (24) Western Columbia Mortgage Holdings, Inc., Minneap- tion in South Dakota, controlling deposits of $195.7 milolis, Minnesota, which is a Kansas corporation formed in lion, representing approximately 1.7 percent of total depos- 1992 as a holding company for WCM. its in depository institutions in South Dakota. Upon (25) Uniwest Insurance, Minneapolis, Minnesota, which consummation of this proposal, FBS would become the was previously used to maintain REO properties. third largest depository institution in South Dakota, control- (26) Rocky Mountain Capital Agency, Inc., Minneapolis, ling $627.9 million in deposits, representing approximately Minnesota ("RMCA"), which was formerly engaged in the 5.4 percent of total deposits in depository institutions in the sale of property and casualty insurance. RMCA's assets state. were sold in May 1994. (27) Rocky Mountain Property Management, Inc., Minne- (4) Wisconsin apolis, Minnesota, which previously engaged in the property management business. FBS controls the 16th largest depository institution in Wis- (28) Edina Financial Services, Inc., Minneapolis, Minne- consin, with deposits of $500 million, representing less than sota, which previously engaged in mortgage banking activi- 1 percent of total deposits in depository institutions in ties. Wisconsin. MFC is the 165th largest depository institution Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

180 Federal Reserve Bulletin • February 1995 in Wisconsin, controlling deposits of $100 million, repre- Mercantile, with consolidated assets of $12.4 billion, senting less than 1 percent of total deposits in depository controls subsidiary banks in Illinois, Kansas, and Missouri.4 institutions in Wisconsin. Upon consummation of this pro- Mercantile is the second largest depository institution in posal, FBS would control the 15th largest depository institu- Missouri, controlling deposits of $7.6 billion in Missouri, tion in Wisconsin, with deposits of $600 million, represent- representing approximately 11.6 percent of total deposits in ing approximately 1 percent of total deposits in depository depository institutions in the state.5 Savings Bank is the institutions in the state. 18th largest depository institution in Missouri, controlling deposits of $368.3 million, representing less than 1 percent Mercantile Bancorporation Inc. of total deposits in the state. Upon consummation of this St. Louis, Missouri proposal, Mercantile would remain the second largest depository institution in Missouri, controlling deposits of Order Approving Application to Acquire a Savings $8 billion that represent approximately 12.1 percent of the Association total deposits in depository institutions in the state. Mercantile Bancorporation Inc., St. Louis, Missouri ("Mer- Competitive Considerations cantile"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied Mercantile and UNSL compete directly in the Phelps for the Board's approval under section 4(c)(8) of the BHC County, Aurora/Monett, Boone County, Camden/Miller Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Counties, Lafayette County, Morgan County, and Spring- Board's Regulation Y (12 C.F.R. 225.23) to acquire UNSL field banking markets, all in Missouri. In all but the Phelps Financial Corporation, Lebanon, Missouri ("UNSL"), and County banking market, consummation of the proposal thereby indirectly acquire UNSL's savings association sub- would not exceed the Department of Justice guidelines, and sidiary, United Savings Bank, Lebanon, Missouri ("Savings a number of competitors would remain in each of these Bank").1 markets.6 Notice of this proposal, affording interested persons an In the Phelps County banking market,7 Mercantile is the opportunity to submit comments, has been published (59 third largest of eight depository institutions, controlling Federal Register 47,143 (1994)). The time for filing com- deposits of $56.6 million, representing approximately ments has expired, and the Board has considered the appli- 17.4 percent of the total deposits in depository institutions cation and all comments received in light of the factors set in the market ("market deposits").8 Savings Bank is the forth in section 4(c)(8) of the BHC Act. sixth largest depository institution in the market, controlling The Board has determined that the operation of a savings $17.8 million in deposits, representing approximately association by a bank holding company is closely related to 5.5 percent of market deposits. Upon consummation of this banking for purposes of section 4(c)(8) of the BHC Act.2 In proposal, Mercantile would become the largest depository making this determination, the Board required that savings institution in the Phelps County banking market, controlling associations acquired by bank holding companies conform $92.1 million in deposits, representing 26.9 percent of total their direct and indirect activities to those permissible for bank holding companies under section 4(c)(8) of the BHC Act. Mercantile has committed to conform all activities of 4. Asset data are as of September 30, 1994. Savings Bank to these requirements.3 5. State data are as of June 30, 1993, and are adjusted to reflect bank holding company acquisitions approved and consummated through August 12, 1994. In this context, depository institutions includes commercial banks, savings banks, and savings associations. 6. After consummation of this proposal, the post-merger Herfindahl- Hirschman Index ("HHI") would rise by 62 to 1441 in the Aurora/Monett 1. Mercantile will acquire Savings Bank by merger of UNSL with Mercan- banking market; increase by 81 to 1903 in the Camden/Miller Counties tile's wholly owned subsidiary, Ameribanc, Inc., St. Louis, Missouri, and banking market; increase by 13 to 1423 in the Lafayette County banking operate Savings Bank as a separate subsidiary. market; increase by 7 to 4245 in the Morgan County banking market; and 2. 12 C.F.R. 225.25(b)(9). increase by 14 to 1317 in the Springfield banking market. In the Boone 3. Savings Bank engages in certain insurance and real estate activities that County banking market, the HHI would not increase. are impermissible for bank holding companies under the BHC Act. Mercan- 7. The Phelps County banking market is approximated by Phelps County, tile has committed that all impermissible insurance activities will be divested Missouri. or terminated within two years of consummation of the proposal and during 8. Market share data before consummation are based on calculations in this two-year period, insurance activities will be limited to renewals of which the deposits of thrift institutions are included at 50 percent. The Board existing policies and those insurance activities permitted under section previously has indicated that thrift institutions have become, or have the 4(c)(8) of the BHC Act. Mercantile also has committed that all impermissi- potential to become, significant competitors of commercial banks. See WM ble real estate activities will be divested or terminated within two years of Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporaconsummation of the proposal, that no new impermissible projects or invest- tion, 70 Federal Reserve Bulletin 743 (1984). Because the deposits of ments will be undertaken during the period, and that capital adequacy Savings Bank would be transferred to a commercial bank under this proguidelines will be met excluding specified real estate investments. Mercantile posal, those deposits are included at 100 percent in the calculation of pro also has committed that any impermissible securities activities conducted by forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin Savings Bank will cease on or before consummation of the proposal. 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 181 market deposits. The HHI would increase by 227 points to consummation of this proposal is likely to result in any 2179.9 significantly adverse effects, such as undue concentration of A number of factors indicate that the increase in the resources, decreased or unfair competition, conflicts of inconcentration level in the Phelps County banking market, as terests, or unsound banking practices that are not likely to measured by the HHI, tends to overstate the competitive be outweighed by the public benefits of this proposal. effects of this proposal. For example, six competitors would Accordingly, the Board has determined that the balance of remain in the Phelps County banking market, including the public interest factors it must consider under section 4(c)(8) largest banking organization and the largest thrift institution of the BHC Act is favorable and consistent with approval. in Missouri.10 In addition, the market is attractive for entry Based on the foregoing and all the facts of record, the to new competitors. For example, population and income Board has determined that the application should be, and data indicate that the market's per capita income and popu- hereby is, approved. The Board's approval of this proposal lation per banking office are higher than average for rural is specifically conditioned on compliance by Mercantile counties in Missouri.11 Moreover, entry by out-of-state bank with the commitments made in connection with this applicaholding companies into a Missouri banking market is per- tion, including all the terms of its divestiture commitments. mitted under Missouri law.12 The Board's determination also is subject to all the condi- As in other cases, the Board sought comments from the tions set forth in Regulation Y, including those in sections United States Attorney General, the Office of the Comptrol- 225.7 and 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 ler of the Currency, the Federal Deposit Insurance Corpora- and 225.23(b)), and to the Board's authority to require tion, and the Office of Thrift Supervision on the competitive modification or termination of the activities of a bank effects of this proposal. Neither the Attorney General nor holding company or any of its subsidiaries as the Board any federal bank regulator has objected to this proposal. finds necessary to assure compliance with, and to prevent For the reasons discussed above, and based on all the evasion of, the provisions and purposes of the BHC Act and facts of record, the Board concludes that consummation of the Board's regulations and orders issued thereunder. For this proposal would not have significantly adverse effects on the purpose of this action, the commitments and conditions competition or on the concentration of resources in any relied on by the Board in reaching this decision are deemed relevant banking market in which Mercantile and Savings to be conditions imposed in writing by the Board in connec- Bank compete. tion with its findings and decision and, as such, may be enforced in proceedings under applicable law. Other Considerations This transaction shall not be consummated later than three months after the effective date of this order, unless The financial and managerial resources of UNSL, Mercan- such period is extended for good cause by the Board or by tile, and their respective subsidiaries are consistent with the Federal Reserve Bank of St. Louis, acting pursuant to approval. In addition, the record does not indicate that the delegated authority. By order of the Board of Governors, effective December 5, 1994. 9. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is Voting for this action: Chairman Greenspan, Vice Chairman above 1800 is considered to be highly concentrated. In such markets, the Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Justice Department is likely to challenge a merger that increases the HHI by Yellen. more than 50 points. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger JENNIFER J. JOHNSON HHI is at least 1800 and the merger increases the HHI by more than 200 Deputy Secretary of the Board points. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non- National Bank of Canada depository financial entities. Montreal, Quebec, Canada 10. Boatmen's Bancshares Inc., St. Louis, Missouri, the largest banking organization in the state, with $11.7 billion in total deposits, and Roosevelt Bank, a Federal Savings Bank, St. Louis, Missouri, the largest thrift organization in the state, with total deposits of $5.3 billion, both operate in the Order Approving the Operation of a Savings Association market. 11. 1990 population and 1989 income data indicate Phelps County has per capita income of $10,531 compared to an average of $9,560 for all rural National Bank of Canada, Montreal, Quebec, Canada ("Apareas of the state, and it has 2,900 people per banking office, compared to an plicant"), a bank holding company within the meaning of average of 2,600 for all rural counties in Missouri. Population data are from the Bank Holding Company Act ("BHC Act"), has applied U.S. Census Bureau estimates and income data are from the U.S. Department of Commerce, "City and County Book 1994" (13th edition). for the Board's approval under section 4(c)(8) of the BHC 12. Missouri's interstate banking statute permits out-of-state bank holding Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the companies in eight adjacent states to acquire banking organizations in Board's Regulation Y (12 C.F.R. 225.23) to engage de novo Missouri on a reciprocal basis. Mo. Ann. Stat. § 362.925 (Vernon Supp. 1994). through its indirect subsidiary, Natbank, F.S.B., Pompano Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

182 Federal Reserve Bulletin • February 1995 Beach, Florida ("Natbank"), in the operation of a savings set forth in Regulation Y, including those in sections 225.7 association pursuant to section 225.25(b)(9) of the Board's and 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and Regulation Y (12 C.F.R. 225.25(b)(9)).1 225.23(b)), and to the Board's authority to require modifica- Notice of this proposal, affording interested persons an tion or termination of the activities of a bank holding opportunity to submit comments, has been published (59 company or any of its subsidiaries as the Board finds Federal Register 59,778 (1994)). The time for filing com- necessary to assure compliance with, and to prevent evasion ments has expired, and the Board has considered the appli- of, the provisions and purposes of the BHC Act and the cation and all comments received in light of the factors set Board's regulations and orders issued thereunder. For purforth in section 4(c)(8) of the BHC Act. poses of this action, the commitments and conditions relied The Board has determined that the operation of a savings on by the Board in reaching this decision are deemed to be association is closely related to banking and permissible for conditions imposed in writing by the Board in connection bank holding companies. 12 C.F.R. 225.25(b)(9). In making with its findings and decision, and, as such, may be enthis determination, the Board required that savings associa- forced in proceedings under applicable law. tions acquired by bank holding companies conform their This transaction shall not be consummated later than direct and indirect activities to those permissible for bank three months after the effective date of this order, unless holding companies under section 4 of the BHC Act. Appli- such period is extended for good cause by the Board or by cant has committed to conform all the activities of Natbank the Federal Reserve Bank of New York, acting pursuant to to the requirements of section 4 of the BHC Act and delegated authority. Regulation Y. By order of the Board of Governors, effective Decem- Applicant, with total consolidated assets of $43.6 billion ber 5, 1994. (Canadian), is the sixth largest banking organization in Canada.2 In the United States, Applicant operates branches Voting for this action: Chairman Greenspan, Vice Chairman in New York, New York, and Chicago, Illinois; agencies in Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Atlanta, Georgia, and Los Angeles, California; and representative offices in Buffalo, New York, and Dallas, Texas. JENNIFER J. JOHNSON Applicant and Natbank do not compete directly in any Deputy Secretary of the Board banking market. Accordingly, consummation of this proposal would not have a significantly adverse effect on Stichting Prioriteit ABN AMRO Holding competition or the concentration of banking resources in Stichting Administratiekantoor ABN AMRO any relevant banking market. The record in this case also Holding indicates that the financial and managerial resources of ABN AMRO Holding N.V. Applicant and its subsidiaries and Natbank are consistent ABN AMRO Bank N.V. with approval. Based on all the facts of record, the Board finds that All of Amsterdam, The Netherlands consummation of this proposal is not likely to result in any significantly adverse effects, such as undue concentration of ABN AMRO North America, Inc. resources, decreased or unfair competition, conflicts of in- Chicago, Illinois terests, or unsound banking practices, that are not likely to be outweighed by the public benefits, such as increased competition and added convenience, that are expected from Order Approving an Application to Engage in this proposal. Accordingly, the Board has determined that Underwriting and Dealing in Bank-Ineligible Securities the balance of public interest factors it must consider under on a Limited Basis section 4(c)(8) of the BHC Act is favorable and consistent with approval of the application. Stichting Prioriteit ABN AMRO Holding, Stichting Admin- Based on the foregoing and all the facts of record, the istratiekantoor ABN AMRO Holding, and ABN AMRO Board has determined that the application should be, and Holding N.V., all of Amsterdam, The Netherlands, foreign hereby is, approved. The Board's approval is specifically banking organizations subject to the Bank Holding Comconditioned on compliance by Applicant with all the com- pany Act ("BHC Act"); and ABN AMRO Bank N.V., mitments made in connection with this application. The Amsterdam, The Netherlands ("ABN AMRO Bank"), and Board's determination also is subject to all the conditions ABN AMRO North America, Inc., Chicago, Illinois, bank holding companies within the meaning of the BHC Act (collectively referred to as "Applicant"), have each applied 1. Applicant proposes to establish a wholly owned intermediate savings under section 4(c)(8) of the BHC Act (12 U.S.C. and loan holding company subsidiary, NatBC Holding Corporation, Wilm- § 1843(c)(8)) and section 225.23 of the Board's Regulation ington, Delaware, which in turn will own all the shares of Natbank. 2. Asset data are as of July 31, 1994. Y (12 C.F.R. 225.23) to engage de novo indirectly through Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 183 ABN AMRO Securities (USA) Inc., New York, New York Commission ("SEC") under the Securities Exchange Act ("Company"), in underwriting and dealing in, to a limited of 1934 (15 U.S.C. § 78a et seq.) and is a member of the extent, all types of debt and equity securities. These securi- National Association of Securities Dealers, Inc. ("NASD"). ties would include, without limitation, corporate debt secu- Accordingly, Company is subject to the record-keeping and rities; sovereign debt securities; securities issued by a trust reporting obligations, fiduciary standards, and other requireor other vehicle secured by or representing interests in debt ments of the Securities Exchange Act of 1934, the SEC, and obligations; preferred stock; common stock; American De- the NASD. positary Receipts; securities convertible into equity securi- The Board has determined that, subject to the prudential ties; and other direct and indirect equity ownership interests framework of limitations established in previous decisions in corporations and other entities, but not including owner- to address the potential for conflicts of interests, unsound ship interests in open-end investment companies.1 Com- banking practices, or other adverse effects ("section 20 pany proposes to conduct these activities worldwide. firewalls"), the proposed activities of underwriting and Notice of the applications, affording interested persons an dealing in bank-ineligible securities are so closely related to opportunity to submit comments, has been published banking as to be a proper incident thereto within the mean- (58 Federal Register 40,650 (1993)). The time for filing ing of section 4(c)(8) of the BHC Act.6 Applicant has comments has expired, and the Board has considered the committed that Company will conduct the proposed underapplications and all comments received in light of the writing and dealing activities using the same methods and factors set forth in section 4(c)(8) of the BHC Act. procedures and subject to the same prudential limitations as Applicant, with total consolidated assets of $286.9 bil- were established by the Board in the Section 20 Orders.7 lion,2 controls nine depository institutions3 in Illinois and one commercial bank in New York. ABN AMRO Bank operates branches in Boston, Massachusetts; Chicago, Illi- (3) Providing securities brokerage and investment advisory services, on nois; New York, New York; Pittsburgh, Pennsylvania; and both a separate and combined basis, pursuant to sections 225.25(b)(4) and Seattle, Washington; and operates agencies in Atlanta, (b)(15) of Regulation Y (12 C.F.R. 225.25(b)(4) and (b)(15»; (4) Acting as agent in the private placement of all types of securities, and Georgia; Miami, Florida; Houston, Texas; and Los Angeles providing related advisory services; and and San Francisco, California. (5) Buying and selling all types of securities on customer order as a Company currently is engaged in limited bank-ineligible "riskless principal." See Stichting Amro and Amsterdam-Rotterdam Bank, N.V., 76 Federal securities4 underwriting and dealing activities that are per- Reserve Bulletin 682 (1990); and Algemene Bank Nederland, N.V., and missible under section 20 of the Glass-Steagall Act A.B.N. Stichting, 75 Federal Reserve Bulletin 842 (1989). (12 U.S.C. § 377).5 Company is, and will continue to be, a 6. See Canadian Imperial Bank of Commerce, et al., 76 Federal Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., 75 Federal broker-dealer registered with the Securities and Exchange Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industries Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve 1. In connection with this proposal, Applicant intends to transfer to System, 839 F.2d 47 (2d Cir. 1988), cert, denied, 486 U.S. 1059 (1988) Company certain securities-related activities currendy being conducted by (collectively, "Section 20 Orders"). LaSalle National Bank, Applicant's commercial bank subsidiary located in In addition, to address potential conflicts of interests arising from Compa- Chicago, Illinois ("LaSalle"). In particular, Applicant intends to transfer ny's conduct of full-service brokerage activities together with underwriting certain underwriting and dealing, securities brokerage and riskless principal and dealing in bank-ineligible securities, Applicant has committed that activities from LaSalle to Company. Applicant also would transfer the whenever Company provides full-service brokerage services with respect to government securities trading activities of the U.S. offices of ABN AMRO ineligible securities that it holds as principal, Company will inform its Bank to Company. customers at the commencement of the relationship that, as a general matter, The Board notes that Company may engage in activities that are necessary Company may be a principal or may be engaged in underwriting with respect incidents to the proposed underwriting and dealing activities, provided they to, or may purchase from an affiliate, those securities for which brokerage are treated as part of the bank-ineligible securities activities, unless Company and advisory services are provided. In addition, at the time any brokerage has received specific approval under section 4(c)(8) of the BHC Act to order is taken, the customer will be informed (usually orally) whether conduct the activities independently. Until such approval is obtained, any Company is acting as agent or principal with respect to a security. Confirmarevenues from the incidental activities must be counted as ineligible revenues tions sent to customers also will state whether Company is acting as agent or subject to the 10 percent revenue limitation. principal. See PNC Financial Corp., 75 Federal Reserve Bulletin 396 (1989). 2. Asset data are as of June 30, 1994. Company will not conduct its full-service brokerage activities from the 3. In this context, depository institutions include commercial banks, sav- premises of affiliated banks. ings banks, and savings associations. 7. Applicant proposes that its subsidiary banks act as a riskless principal or 4. As used in this order, "bank-ineligible securities" refers to all types of broker for customers in buying and selling bank-eligible securities that debt and equity securities that a bank may not underwrite or deal in directly Company underwrites or deals in. There would be no employees in common under section 16 of the Glass-Steagall Act (12 U.S.C. § 24(7)). between Company and any of its bank affiliates. In addition, Company's 5. Company currently has authority to conduct a variety of securities- arrangement to sell bank-eligible securities through affiliated banks would related activities, including: not involve any exclusive arrangements. Moreover, Company's role in (1) Underwriting and dealing in securities that state member banks are underwriting or dealing in the securities brokered by affiliates would be fully authorized to underwrite and deal in under sections 5(c) and 16 of the disclosed to the affiliates' brokerage customers, and all such brokerage Glass-Steagall Act (12 U.S.C. §§ 335 and 24(7)), pursuant to section transactions would be conducted on an arm's-length basis. The Board 225.25(b)(16) of Regulation Y (12 C.F.R. 225.25(b)(16)); previously has determined that these activities are consistent with the Glass- (2) Underwriting and dealing in, on a limited basis, certain municipal Steagall Act. See BankAmerica Corporation, 79 Federal Reserve Bulletin revenue bonds, 1-4 family mortgage-backed securities, commercial paper, 1163 (1993). The Board also notes that the sale by a financial institution of and consumer receivable-related securities; uninsured investment products, such as bank-eligible securities, must comply Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

184 Federal Reserve Bulletin • February 1995 The Board also has determined that the conduct of these The Board has reviewed the capitalization of Applicant securities underwriting and dealing activities is consistent and Company in accordance with the standards set forth in with section 20 of the Glass-Steagall Act (12 U.S.C. § 377), the Section 20 Orders, and finds the capitalization of each to provided that the company engaged in the underwriting and be consistent with approval.10 With respect to the capitalizadealing activities derives no more than 10 percent of its tion of Company, this determination is based upon all the total gross revenue from underwriting and dealing in bank- facts of record, including Applicant's projections of the ineligible securities over any two-year period.8 Applicant volume of Company's underwriting and dealing activities has committed that Company will conduct its underwriting in bank-ineligible securities. The Federal Reserve Bank of and dealing activities in bank-ineligible securities subject to Chicago ("Reserve Bank") has reviewed the operational the 10 percent revenue test.9 and managerial infrastructure of Company, including its computer, audit, and accounting systems, and internal risk management procedures and controls with respect to the proposed underwriting and dealing in debt and equity secuwith applicable regulations and guidelines of the institution's primary federal rities. The Reserve Bank has determined that Company has regulator. Company proposes to engage in securities borrowing and lending transac- established an adequate operational and managerial infrations and/or bonds borrowed transactions with affiliates or third parties structure for underwriting and dealing in all types of debt ("bonds borrowed transactions"). The Board has previously permitted bank and equity securities to ensure compliance with the requireholding company subsidiaries to engage, as part of their permissible securities brokerage and securities credit activities, in lending and borrowing ments of the Section 20 Orders. On the basis of the Reserve securities that an affiliated bank holds on behalf of customers. See The Chase Bank's review and all the facts of record, the Board has Manhattan Corporation, 69 Federal Reserve Bulletin 725 (1983); Canadian Imperial Bank of Commerce, 74 Federal Reserve Bulletin 571 (1988); see determined that Company has in place the managerial and also Saban, S.A., 78 Federal Reserve Bulletin 955 (1992). Company would operational infrastructure and other policies and procedures conduct all bonds borrowed transactions in accordance with the Board's necessary to comply with the requirements of the Section policy statement on securities lending activities (I F.R.R.S. 3-1579.5), and Company would not engage in bonds borrowed transactions with Applicant 20 Orders and this order. Accordingly, the Board concludes or its nonbank subsidiaries. Moreover, Company would not borrow securities that financial and managerial considerations are consistent from any customer custodial account over which a U.S. affiliate or branch exercises trustee powers. Applicant has committed that neither it nor any with approval of the proposal for Company to underwrite subsidiary, branch or agency of Applicant will directly or indirectly guaran- and deal in all types of debt and equity securities on a tee or indemnify any customers against losses arising from Company's limited basis. nonperformance in connection with any bonds borrowed transactions, including Company's failure to return borrowed securities. In order to approve this proposal, the Board also must 8. See Section 20 Orders. Compliance with the 10 percent revenue determine that the performance of the proposed underwritlimitation shall be calculated in accordance with the method stated in the ing and dealing activities by Applicant can reasonably be Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); the Order expected to produce public benefits that would outweigh Approving Modifications to the Section 20 Orders, 79 Federal Reserve possible adverse effects under the proper incident to bank- Bulletin 226 (1993); and the Supplement to Order Approving Modifications ing standard of section 4(c)(8) of the BHC Act. Under the to Section 20 Orders, 79 Federal Reserve Bulletin 360 (1993) (collectively, "Modification Orders"). The Board notes that Applicant has not adopted the framework established in this and prior decisions, consum- Board's alternative indexed-revenue test to measure compliance with the 10 mation of this proposal is not likely to result in any signifipercent limitation on bank-ineligible securities activities, and, absent such election, will continue to employ the Board's original 10 percent revenue cant adverse effects, such as undue concentration of retest. sources, decreased or unfair competition, conflicts of 9. Company also proposes to act as a dealer-manager in connection with interests, or unsound banking practices. Moreover, the cash tender and exchange offer transactions. See Chemical Banking Corporation, 80 Federal Reserve Bulletin 49, 50 n.5 (1994). Dealer-managers gener- Board expects that the de novo entry of Applicant into the ally act as agent for tender or exchange offerors in arranging or facilitating market for the proposed services in the United States would mergers, acquisitions, and other corporate transactions. All-cash tender offers do not, themselves, involve the issuance, public sale, or distribution of provide added convenience to Applicant's customers, and securities. Accordingly, all revenues derived from Company acting as a would increase the level of competition among existing dealer-manager in connection with such tender offers may be treated by providers of these services. Accordingly, the Board has Company as eligible revenue for purposes of determining compliance with the Board's 10 percent limitation on bank-ineligible securities activities. determined that the performance of the proposed activities However, exchange offers may entail the public sale or distribution of by Applicant could reasonably be expected to produce securities when the consideration to be paid for the securities to be acquired public benefits that will outweigh possible adverse effects comprises, either in whole or in part, securities of the purchaser. See Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 22 (1976); Federal Reserve System under the proper incident to banking standard of section (In Re Bankers Trust and Louisiana Land Company), SEC No-Action Letter 4(c)(8) of the BHC Act. (May 18, 1984); 5 Loss & Seligman, Securities Regulation 2129 (1990). Accordingly, dealer-manager revenues derived from Company engaging in a Accordingly, and for the reasons set forth in the Section securities underwriting, or revenues tied to a distribution of securities, must 20 Orders, the Board concludes that Applicant's proposal to be treated as ineligible revenue for purposes of determining compliance with the Board's 10 percent limitation on bank-ineligible securities activities. Applicant has committed that Company will abide by all the section 20 firewalls when acting as a dealer-manager in connection with exchange offers 10. The Board notes that Applicant's capital ratios satisfy applicable (including partial cash tender/partial exchange offers), or when engaging in risk-based standards established under the Basle Accord, and are considered dealer-manager activities performed in connection with any underwriting or equivalent to the capital levels that would be required of a U.S. banking dealing activities. organization. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 185 engage through Company in the proposed underwriting and Swiss Bank Corporation dealing activities is consistent with the Glass-Steagall Act, Basel, Switzerland and is so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the Order Approving Application to Engage in Underwriting BHC Act, provided that Applicant limits Company's activi- and Dealing in All Types of Debt and Equity Securities ties as specified in this order and the Section 20 Orders, as on a Limited Basis, and Certain Other Securities- and modified by the Modification Orders. Derivatives-Related Activities On the basis of the record, the Board has determined to, and hereby does, approve these applications subject to all Swiss Bank Corporation, Basel, Switzerland ("Swiss the terms and conditions discussed in this order and in the Bank"), a foreign bank subject to the provisions of the Section 20 Orders, as modified by the Modification Orders. Bank Holding Company Act ("BHC Act"),1 has applied The Board's approval of this proposal extends only to under section 4(c)(8) of the BHC Act (12 U.S.C. activities conducted within the limitations of those orders § 1843(c)(8)) and section 225.23(a) of the Board's Regulaand this order, including the Board's reservation of author- tion Y (12 C.F.R. 225.23(a)): ity to establish additional limitations to ensure that Compa- (1) To establish a section 20 subsidiary, SBC Governny's activities are consistent with safety and soundness, ment Securities, Inc., New York, New York ("Compaconflicts of interests, and other relevant considerations un- ny"); der the BHC Act. Underwriting and dealing in any manner (2) To acquire through Company substantially all the other than as approved in this order or the Section 20 assets and certain of the liabilities of O'Connor & Asso- Orders, as modified by the Modification Orders, is not ciates, Chicago, Illinois ("OCA"); and authorized for Company. (3) To engage through Company in a wide range of The Board's determination also is subject to all the terms securities- and derivatives-related activities. and conditions set forth in Regulation Y, including those in This application presents a number of significant issues, sections 225.7 and 225.23(b) of Regulation Y, and to the including: Board's authority to require modification or termination of (1) Whether certain of the proposed activities, including, the activities of a bank holding company or any of its in particular, proprietary trading for Company's own subsidiaries as the Board finds necessary to assure compli- account in nonfinancial futures, are so closely related to ance with, and to prevent evasion of, the provisions of the banking as to be proper incidents thereto within the BHC Act and the Board's regulations and orders issued meaning of the BHC Act, and thereunder. The Board's decision is specifically conditioned (2) Whether Company's policies and practices in acting on compliance with all the commitments made in connec- as principal and advisor in various types of derivative tion with these applications, including the commitments transactions would be adequate to mitigate the potential discussed in this order, and the conditions set forth in the conflicts of interests and other potential adverse effects above noted Board regulations and orders. These commit- inherent in this proposal. ments and conditions shall be deemed to be conditions Specifically, Swiss Bank has applied to engage in the imposed in writing by the Board in connection with its following nonbanking activities: findings and decisions, and may be enforced in proceedings (1) Making, acquiring, and servicing loans and other under applicable law. extensions of credit for its own account and for the This transaction shall not be consummated later than account of third parties, pursuant to section 225.25(b)(1) three months after the effective date of this order, unless of Regulation Y; such period is extended for good cause by the Board or by (2) Providing various types of investment and financial the Reserve Bank, acting pursuant to delegated authority. advisory services, pursuant to section 225.25(b)(4) of By order of the Board of Governors, effective Decem- Regulation Y; ber 12, 1994. (3) Conducting discount and full-service brokerage activities, pursuant to section 225.25(b)(15) of Regulation Y; (4) Acting as a futures commission merchant ("FCM") for nonaffiliated persons in the execution and clearance Voting for this action: Vice Chairman Blinder and Governors on major commodity exchanges of futures and options on Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not futures contracts based on bullion, foreign exchange, voting: Chairman Greenspan. government securities, or certificates of deposit or other money market instruments that a bank may buy or sell in 1. Swiss Bank, a foreign bank with branches and an agency in the United WILLIAM W. WILES States, is subject to the BHC Act by operation of section 8(a) of the Secretary of the Board International Banking Act of 1978 (12 U.S.C. § 3106(a)) ("IBA"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

186 Federal Reserve Bulletin • February 1995 the cash market for its own account, and providing invest- market instruments eligible for investment by national ment advice with respect to such contracts, pursuant to banks;5 sections 225.25(b)(18) and (19) of Regulation Y;2 (13) Trading for its own account in platinum coin and (5) Underwriting and dealing in, to a limited extent, all bullion; types of debt and equity securities (other than securities (14) Acting as originator, principal, agent, broker, or issued by open-end investment companies), including advisor with respect to swaps and swap derivative prodsovereign debt securities, municipal revenue bonds, ucts, and over-the-counter option transactions, based on mortgage-related securities, consumer receivable-related certain commodities, stock, bond, or commodity indices, securities, commercial paper, corporate debt securities, or a hybrid of interest rates and such commodities or convertible debt securities, debt securities issued by a indices; and trust or other vehicle secured by or representing interests (15) Trading for its own account, for purposes other than in debt obligations, preferred stock, common stock, hedging, in futures, options, and options on futures con- American Depositary Receipts, other direct and indirect tracts based on certain commodities or on stock, bond, or equity ownership interests in corporations and other enti- commodity indices. ties, and options on debt and equity securities ("bank- Swiss Bank seeks approval for Company and SBC Derivaineligible securities"); tives to conduct the proposed activities throughout the (6) Acting as agent in the private placement of all types United States, and plans for these entities to conduct the of securities, and providing related advisory services; activities worldwide. (7) Purchasing and selling all types of securities as a Notice of the application, affording interested persons an "riskless principal" on the order of customers; opportunity to submit comments on the proposal, has been (8) Acting as an FCM for nonaffiliated persons in the published (59 Federal Register 8624, 27,274 (1994)). The execution and clearance on major commodity exchanges time for filing comments has expired, and the Board has of futures and options on futures contracts based on considered the application and all comments received in bonds or other debt instruments, certain commodities, or light of the factors set forth in section 4(c)(8) of the BHC stock, bond, or commodity indices, and providing invest- Act. For the reasons discussed below, the Board has conment advice with respect to such contracts;3 cluded that all the proposed activities are so closely related (9) Trading for its own account in gold and silver bullion, to banking as to be proper incidents thereto within the bars, rounds, and coins; meaning of the BHC Act, provided that the activities are (10) Trading for its own account in foreign exchange conducted in accordance with the framework and limitaspot, forward, futures, options, and options on futures tions hereinafter described. transactions; Swiss Bank, with total consolidated assets of $139.3 bil- (11) Acting as originator, principal, agent, or broker with lion, is the third largest commercial banking organization in respect to interest rate and currency swap transactions Switzerland and the 44th largest commercial banking orgaand related swap derivative products;4 nization in the world.6 In the United States, Swiss Bank (12) Trading for its own account, for purposes other than operates branches in New York, New York; Chicago, Illihedging, in futures, options, and options on futures con- nois; and San Francisco, California; maintains an agency in tracts based on certificates of deposit or other money Miami, Florida; and engages through subsidiaries in a broad range of nonbanking activities. Company is, and will continue to be, a broker-dealer registered with the Securities and Exchange Commission ("SEC") and a member of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Company is subject to the recordkeeping and 2. Swiss Bank has proposed that both Company and a second Swiss Bank reporting obligations, fiduciary standards, and other requiresubsidiary, SBC Derivatives, Inc., Chicago, Illinois ("SBC Derivatives"), engage in the FCM and related advisory activities listed in paragraphs 4 ments of the Securities Exchange Act of 1934 (15 U.S.C. and 8. Swiss Bank has proposed that SBC Derivatives execute and clear trades, provide advisory services, execute trades that will be given up at a customer's request to an unaffiliated FCM for clearance, and engage in clearing-only activities. Company would conduct the proposed FCM activities as a carrying broker through omnibus customer trading accounts, in addition to providing advisory services. See Northern Trust Corporation, 79 5. The specific contracts to be traded by Company for its own account in Federal Reserve Bulletin 723 (1993). conducting the activities described in paragraphs 12 and 15 are listed either: 3. The specific contracts with respect to which Company and SBC Deriva- (i) In the FCM SR Letter, or tives propose to conduct the activities described in paragraph 8 are listed (ii) In Appendix A attached hereto. either: The approval contained herein is limited to this specific proposal. Accord- (i) In SR Letter No. 93-27 (FIS) (May 21, 1993) ("FCM SR Letter"), ingly, before Company trades additional contracts for its own account, it or must request and receive relief from this limitation from the Federal Reserve (ii) In Appendix A attached hereto. System. 4. As used herein, the term "swap derivative products" means caps, floors, 6. Asset data are as of December 31, 1993, and use exchange rates then in collars, and options on swaps, caps, floors, and collars. effect. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 187 § 78a et seq.), the SEC, and the NASD. Company also is a Activities Authorized by Regulation primary dealer in United States government securities.7 Swiss Bank's proposal involves, inter alia, the consolida- The Board has previously determined by regulation that tion into Company of certain activities currently conducted certain of the proposed lending-related activities, investby OCA and two of Swiss Bank's wholly owned subsidiar- ment and financial advisory services, securities brokerage ies, SBC Derivatives and SBCI Swiss Bank Corporation activities, and FCM and futures advisory services are so Investment Banking Inc., New York, New York ("SBCI").8 closely related to banking as to be proper incidents thereto In connection with, and substantially contemporaneously within the meaning of the BHC Act.11 With one exception, with, this transaction, OCA proposes to acquire certain Swiss Bank has committed that these activities will be assets and liabilities of KK & Company, New York, New conducted within the limitations established by Regulation York ("KK").9 Accordingly, Swiss Bank has applied for Y and the Board's orders with respect to these activities.12 approval to acquire KK as part of this transaction. Underwriting and Dealing Activities Closely Related to Banking Standard The Board has previously determined that the proposed Section 4(c)(8) of the BHC Act provides that a bank hold- underwriting and dealing activities involving banking company may, with Board approval, engage in any ineligible securities are so closely related to banking as to activity that the Board determines to be "so closely related be proper incidents thereto within the meaning of section to banking or managing or controlling banks as to be a 4(c)(8) of the BHC Act, provided that the activities are proper incident thereto." An activity may be deemed to be conducted within the prudential framework of limitations closely related to banking if it is demonstrated that: established in previous decisions to address the potential for (1) Banks generally provide the proposed services; conflicts of interests, unsound banking practices, and other (2) Banks generally provide services that are operation- adverse effects.13 With one exception, Swiss Bank has ally or functionally so similar to the proposed services as committed that Company will conduct the proposed underto equip them particularly well to provide the proposed writing and dealing activities using the same methods and services; or procedures, and subject to the same prudential limitations, (3) Banks generally provide services that are so integrally related to the proposed services as to require their provision in a specialized form.10 11. See 12 C.F.R. 225.25(b)(1), (4), (15), (18), and (19). 12. See id. Swiss Bank has committed that Company's lending-related activities would be conducted in conformity with the prudential limitations governing credit extensions applicable to Company's proposed underwriting and dealing activities, and that Swiss Bank would adopt procedures to ensure 7. Company currently engages in: that these activities are conducted in a manner that complies with the (i) Underwriting and dealing in obligations of the United States and anti-tying restrictions of the BHC Act and Regulation Y. See 12 U.S.C. other securities that state member banks of the Federal Reserve System §§ 1971 and 1972; 12 C.F.R. 225.7. In order to address potential conflicts of are authorized to underwrite and deal in under sections 5(c) and 16 of interests arising from Company's conduct of securities brokerage and advithe Glass-Steagall Act (12 U.S.C. §§ 335 and 24(7)), pursuant to sory activities combined with underwriting and dealing in bank-ineligible section 225.25(b)(16) of Regulation Y, and securities, Swiss Bank has committed that Company would comply with the (ii) Trading in futures, options, and options on futures contracts based customer disclosure requirements established by the Board in previous cases on certain bank-eligible securities or on certain money market instru- and with the Board's supervisory guidance in this area. See PNC Financial ments. See Swiss Bank Corporation, 77 Federal Reserve Bulletin 759 Corp., 75 Federal Reserve Bulletin 396 (1989) ("PNC Financial"). See also (1991) ("Swiss Bank 1991"). SR Letter No. 93-69 (FIS) (December 20, 1993) (current supervisory guid- 8. OCA engages in trading, for its own account, in debt and equity ance). Swiss Bank also has committed that the FCM and futures advisory securities, options on debt and equity securities, and options on stock, bond, services of Company and SBC Derivatives, including the proposed clearingand commodity indices. SBC Derivatives engages in foreign exchange only and omnibus account activities, would be conducted in a manner options trading for its own account pursuant to section 4(c)(8) of the BHC consistent with the risk management and other conditions established by the Act. See Swiss Bank Corporation, 77 Federal Reserve Bulletin 126 (1991). Board in previous cases approving such FCM and advisory activities. See, SBCI engages in various nonbanking activities, including underwriting and e.g., Northern Trust Corporation, 79 Federal Reserve Bulletin 723 (1993); dealing in corporate debt and equity securities. Swiss Bank controls SBCI Commerzbank Aktiengesellscha.fi, 79 Federal Reserve Bulletin 961 (1993). pursuant to the grandfather provisions of section 8(c) of the IBA (12 U.S.C. The exception in this case to the limitations imposed in prior applications § 3106(c)). SBCI would cease to exist upon consummation of this proposal, relates to potential conflicts of interests with respect to the proposed FCM and Swiss Bank's grandfather rights relating to SBCI would end. activities, and is discussed below under the heading "Potential Conflicts of 9. KK engages in executing securities transactions for third party cus- Interests and Related Risks ". tomers. 13. See Canadian Imperial Bank of Commerce, et al., 76 Federal Reserve 10. See National Courier Association v. Board of Governors of the Federal Bulletin 158 (1990) ("CIBC"); J.P. Morgan & Co. Incorporated, et al., 75 Reserve System, 516 F.2d 1229,1237 (D.C. Cir. 1975). In addition, the Board Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industries may consider any other basis that may demonstrate that the proposed activity Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 has a reasonable or close connection or relationship to banking or managing (D.C. Cir. 1990) ("Morgan")-, Citicorp, et al., 73 Federal Reserve Bulletin or controlling banks. See Board Statement Regarding Regulation Y, 49 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors Federal Register 806 (1984); Securities Industry Association v. Board of of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, den., 486 Governors of the Federal Reserve System, 468 U.S. 207, 210-211 n.5 (1984). U.S. 1059 (1988) (collectively, "Section 20 Orders"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

188 Federal Reserve Bulletin • February 1995 as were established by the Board in the Section 20 Orders closely related to banking as to be proper incidents thereto and other previous cases.14 within the meaning of section 4(c)(8) of the BHC Act, The Board also has previously determined that the con- provided that the activities are conducted within the prudenduct of the proposed underwriting and dealing activities is tial framework of limitations established in previous deciconsistent with section 20 of the Glass-Steagall Act sions to address the potential for conflicts of interests, (12 U.S.C. § 377), provided that the company engaged in unsound banking practices, and other adverse effects.17 The the underwriting and dealing activities derives no more than Board also has previously determined that acting as agent in 10 percent of its total gross revenues from underwriting and the private placement of securities, and purchasing and dealing in bank-ineligible securities over any two-year peri- selling securities on the order of customers as a riskless od.15 Swiss Bank has committed that Company will conduct principal, do not constitute underwriting or dealing in secuits underwriting and dealing activities with respect to bank- rities for purposes of section 20 of the Glass-Steagall Act ineligible securities subject to this 10 percent revenue test.16 when conducted in the manner established in prior orders, and, accordingly, that revenues derived from these activities Private Placement and Riskless Principal Activities are not subject to the 10 percent revenue limitation on bank-ineligible securities activities.18 Swiss Bank has com- The Board has previously determined that the proposed mitted that Company will conduct its private placement and private placement and riskless principal activities are so riskless principal activities using the same methods and procedures, and subject to the same prudential limitations, as were established by the Board in Bankers Trust and J.P. 14. The exception relates to the condition established in the Section 20 Morgan. These methods, procedures, and prudential limita- Orders, as modified for foreign banking organizations, requiring that the U.S. tions include the comprehensive framework of restrictions offices of such organizations establish policies, procedures, and limitations designed to avoid potential conflicts of interests, unsound regarding the combined exposure of such offices to the customers of the underwriting subsidiary. See CIBC, supra, 76 Federal Reserve Bulletin at banking practices, and other adverse effects imposed by the 171 (Condition 12). Swiss Bank has proposed to establish these policies, Board in cases involving underwriting and dealing in bankprocedures, and limitations worldwide on a consolidated basis. This proposal is identical to the condition imposed by the Board in the Section 20 Orders ineligible securities. involving domestic banking organizations. See Morgan, supra, 75 Federal Reserve Bulletin at 215 (Condition 12). For this reason, and because the Additional FCM and Futures Advisory Activities narrower condition imposed on foreign organizations was designed only to limit the extraterritorial effect of the Section 20 Orders, the Board believes that Swiss Bank's proposed modification to the section 20 prudential frame- In addition to the FCM and related advisory services diswork is consistent with the purposes of that framework, and should be permitted. cussed above, Swiss Bank has proposed that SBC Deriva- 15. See Section 20 Orders. Compliance with the 10 percent revenue tives and Company act as FCM for, and provide advisory limitation shall be calculated in accordance with the method stated in the services to, nonaffiliated persons in connection with the Section 20 Orders, as modified by the Order Approving Modifications to the purchase and sale of futures and options on futures con- Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), the Order Approving Modifications to the Section 20 Orders, 79 Federal Reserve tracts based on bonds or other debt instruments, certain Bulletin 226 (1993), and the Supplement to Order Approving Modifications commodities, or stock, bond, or commodity indices. The to Section 20 Orders, 79 Federal Reserve Bulletin 360 (1993) (collectively, "Modification Orders"). The Board notes that Swiss Bank has elected to use commitments and limitations noted above with respect to the Board's alternative indexed revenue test to measure compliance with the the proposed FCM and futures advisory activities described 10 percent limitation on bank-ineligible securities activities. in Regulation Y also would apply to these proposed activi- 16. Swiss Bank also has proposed that Company engage in other activities in connection with the proposed underwriting and dealing activities, includ- ties. ing certain risk management and securities lending activities. The securities Most of the contracts for which SBC Derivatives and lending activities would be conducted in conformity with the Board's Regulation T (12 C.F.R. Part 220) and the Board's Policy Statement on Securities Company propose to provide these services, and the ex- Lending Activities (I F.R.R.S. 3-1579.5). In addition, these activities would changes on which these contracts are traded, have previbe conducted in accordance with the section 20 prudential framework. ously been approved by the Board or the Federal Reserve Swiss Bank maintains that these additional activities are incidental to the proposed underwriting and dealing activities. The Board notes that Company System.19 These previously approved contracts and exmay provide services that are necessary incidents to the proposed underwrit- changes either were listed in the FCM SR Letter or have ing and dealing activities, provided that any activities conducted as a necessary incident to the bank-ineligible securities activities must be treated as part of the bank-ineligible securities activities, unless Company has received specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently. Until such approval is obtained, any revenues from the incidental activities must be counted as ineligible revenues subject to the 10 percent revenue limitation set forth in the Section 20 Orders, as modified by the Modification Orders. The Board notes that this order approves, under 17. See J.P. Morgan & Company Incorporated, 76 Federal Reserve section 4(c)(8) of the BHC Act, Company's conduct of certain transactions Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corporation, that may be used for risk management purposes. Accordingly, revenues from 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). such transactions may be treated as eligible revenues for purposes of the 18. See Bankers Trust. 10 percent revenue limitation, except, as discussed below, to the extent that 19. Swiss Bank has committed that any expansion of these futures-related such transactions themselves constitute underwriting or dealing in ineligible activities to additional instruments or exchanges would be undertaken in securities, or provide for the delivery of ineligible securities. accordance with the procedures set forth in the FCM SR Letter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 189 since been approved by Board order20 or pursuant to the involving non-financial contracts in accordance with the expedited procedures established in the FCM SR Letter. limitations established in prior cases.23 The only proposed contracts not previously considered by the Federal Reserve System are Options on Eurotop 100 Certain Precious Metals and Foreign Exchange Activities Index Futures, to be traded on the Commodity Exchange, Inc.21 ("Eurotop Contracts"), and the One-Month Canadian Swiss Bank also has proposed that Company trade for its Bankers Acceptance Futures, to be traded on The Montreal own account in gold and silver bullion, bars, rounds, and Exchange ("Bankers Acceptance Futures"). These con- coins, and in foreign exchange spot, forward, futures, optracts are based on a financial instrument, or a broad-based tions, and options on futures transactions. The Board has financial index, and are comparable to contracts previously previously determined by order that the proposed precious considered by the Federal Reserve System. In particular, metals trading activities are closely related to banking and these contracts have essentially the same terms, and serve permissible for bank holding companies under section the same functions, as futures and options contracts for 4(c)(8) of the BHC Act.24 The Board also has previously which FCM and related advisory services have been ap- approved trading for one's own account in foreign exproved by the Board under section 4(c)(8) of the BHC Act. change spot transactions,25 and, subject to certain limita- In addition, the Board believes that the skills necessary to tions and commitments, in foreign exchange forward, fuengage in providing FCM and futures advisory services tures, options, and options on futures transactions.26 Swiss with respect to these contracts are virtually indistinguish- Bank has committed that Company will conduct its foreign able from those employed in providing such services with exchange trading activities within the limitations estabrespect to contracts previously approved. In light of these lished by the Board in previous cases.27 considerations, the Board believes that the reasoning employed in earlier cases involving FCM and futures advisory Interest Rate and Currency Swap Activities services for similar instruments is also applicable to these contracts. Accordingly, the Board has concluded that pro- Under this proposal, Company also would act as originator, viding FCM and related advisory services with respect to principal, agent, or broker with respect to interest rate and the Eurotop Contracts and the Bankers Acceptance Futures currency swap transactions and related swap derivative is closely related to banking within the meaning of section products.28 The Board has previously determined that these 4(c)(8) of the BHC Act. activities are closely related to banking within the meaning Swiss Bank also has proposed that Company and SBC Derivatives engage in FCM and futures advisory activities with respect to contracts based on non-financial commodi- 23. As noted previously, Swiss Bank has proposed for Company to trade ties (in particular, certain petroleum products and commod- non-financial futures and options contracts for its own account, and, accordingly, Swiss Bank has not committed that Company would refrain from ity indices). The Board has previously determined that these trading these contracts as principal. For the reasons discussed below, the activities are so closely related to banking as to be proper Board believes that the proposal for Company to trade these contracts for its incidents thereto, provided that the activities are conducted own account, in addition to providing FCM and advisory services with respect to these contracts, is consistent with the closely related to banking in conformity with certain limitations and conditions de- and proper incident to banking standards set forth in the BHC Act. Accordsigned to ensure, inter alia, that these activities are con- ingly, the Board has determined that Company may conduct its proposed FCM and futures advisory activities with respect to contracts based on ducted consistently with sound banking practices and that non-financial commodities without complying with the condition imposed in the subsidiary conducting these activities does not engage previous cases that it not trade such instruments for its own account. in trading non-financial contracts as principal.22 With one 24. See Midland Bank PLC, 76 Federal Reserve Bulletin 860 (1990) exception, Swiss Bank has committed that Company and ("Midlandsis. See Midland, supra; The Long-Term Credit Bank of Japan, Limited, 74 SBC Derivatives would conduct the proposed activities Federal Reserve Bulletin 573 (1988). 26. See The Long-Term Credit Bank of Japan, Limited, 79 Federal Reserve Bulletin 347 (1993) ("LTCB 1993"). 27. See LTCB 1993, supra. 28. Company also would provide advisory services for these transactions to the extent authorized by Regulation Y. See 12 C.F.R. 225.25(b)(4)(vi)(A)(2). Swiss Bank has indicated, with respect to Company's proposed derivatives activities, that Company would act as a principal 20. See Bank of Montreal, et al, 79 Federal Reserve Bulletin 1049 (1993) primarily in exchange-traded futures, options, and options on futures transacand J. P. Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 tions and in options transactions executed in the over-the-counter market. For (1994) (approving FCM and advisory activities with respect to certain other types of over-the-counter derivative contracts, such as swaps and swap petroleum-based contracts traded on the New York Mercantile Exchange). derivative products, Company would act primarily as an agent, broker, or 21. The Board notes that earlier this year, the Commodity Exchange, Inc. advisor in transactions in which an affiliate (usually Swiss Bank or a branch merged with the New York Mercantile Exchange. These two exchanges, thereof) would act as counterparty principal. In some instances, however, however, have not yet fully consolidated their operational rules and proce- Company may act as a principal in swap transactions, or as an agent or dures. Accordingly, the Board has considered this proposal in light of the advisor for exchange-traded contracts. Accordingly, the application seeks exchange rules currendy applicable to the proposed instruments. authority for Company to engage in a full range of principal, agency, and 22. See Bank of Montreal, et al., 79 Federal Reserve Bulletin 1049 (1993); advisory activities with respect to a wide variety of both exchange-traded and J.P. Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 (1994). over-the-counter derivative transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

190 Federal Reserve Bulletin • February 1995 of the BHC Act.29 Swiss Bank has committed that Com- Trading Platinum Coin and Bullion pany will conduct these swap-related activities in a manner similar to proposals previously approved by the Board.30 Swiss Bank also has proposed that Company trade platinum coin and bullion for its own account.33 The OCC has Trading Futures and Options on Bank-Eligible determined that a national bank may engage in this activi- Instruments ty.34 The New York State Banking Department ("NYSBD") also has authorized platinum trading for state-chartered The Board has previously authorized Company to trade for banks under its jurisdiction.35 On the basis of the foregoing, its own account, for purposes other than hedging, in futures, the Board has concluded that Company's proposed trading options, and options on futures contracts based on U.S. of platinum coin and bullion for its own account is an government securities that are permissible investments for activity conducted by banks, and, therefore, is closely renational banks, and similar contracts based on certain lated to banking within the meaning of section 4(c)(8) of the money market instruments.31 Swiss Bank has proposed that BHC Act. Company now be permitted to trade in all futures, options, and options on futures contracts based on certificates of Additional Swap-Related Activities deposit or other money market instruments that are permissible investments for national banks. Swiss Bank also has proposed that Company act as origina- In Swiss Bank 1991, the Board noted that the proposed tor, principal, agent, broker, or advisor with respect to trading in contracts based on money market instruments swaps and swap derivative products, and over-the-counter would require a market judgment on interest rates. The option transactions, based on certain commodities, stock, Board also noted that banks, through their core lending and bond, or commodity indices, or a hybrid of interest rates funding activities, have developed expertise in judging in- and such commodities or indices ("commodity and index terest rates and predicting future price movements. For swap transactions").36 The Board has not previously deterthese reasons, and because the proposal would not authorize mined that these activities, other than certain advisory ser- Company to trade derivative contracts based on securities vices with respect to transactions based on economic or or instruments that a state member bank could not purchase financial indices,37 are closely related to banking within the for its own account, the Board determined that the proposed meaning of section 4(c)(8) of the BHC Act.38 trading activity was closely related to banking within the meaning of section 4(c)(8) of the BHC Act. The Board 33. The Board has not previously determined that this activity is closely believes that the same reasoning applies to this expanded related to banking within the meaning of section 4(c)(8) of the BHC Act. The proposal. Moreover, the Board notes that the Office of the Board has determined, however, that the purchase and sale of platinum coins Comptroller of the Currency ("OCC") has determined that that function as legal tender is an activity closely related to banking, and, therefore, permissible for bank holding companies. See National City Corpotrading in futures and options contracts based on bankration, 80 Federal Reserve Bulletin 346 (1994); Standard Chartered PLC, 76 eligible securities or instruments is an activity within the Federal Reserve Bulletin 681 (1990). The Board also has approved, under legally authorized powers of national banks.32 For the fore- Regulation K, trading in platinum by bank holding company subsidiaries located abroad. See Republic National Bank of New York, 80 Federal Reserve going reasons, the Board has determined that the proposed Bulletin ill (1994); J.P. Morgan & Co. Inc., 76 Federal Reserve Bulletin trading activity is conducted by banks, and is operationally 552 (1990). 34. See 12 U.S.C. § 24(7); OCC Interpretive Utter No. 553 (May 2, 1991), and functionally so similar to activities conducted by banks reprinted in Federal Banking Law Reporter (CCH) 183,300 (May 31, 1991). that banks are particularly well equipped to engage in the In reaching this determination, the OCC relied, in part, on the fact that proposed activity. Accordingly, the Board has concluded several countries had recently introduced platinum coins. 35. See Letter from David T. Halvorson, First Deputy Superintendent of that trading for one's own account, for purposes other than Banks, to Jeffrey D. Haroldson, Esq., Milbank, Tweed, Hadley & McCloy hedging, in futures, options, and options on futures con- (May 22, 1991). The NYSBD based this decision in part on characteristics shared by platinum, gold, and silver that serve to distinguish these products tracts based on certificates of deposit or other money market from base metals and other commodities. In particular, the NYSBD noted instruments that are permissible investments for national that all three metals are perceived by market participants as having intrinsic banks is an activity closely related to banking within the value, resulting in their use for investment purposes and as hedges against political and financial uncertainties. In addition, it was noted that all three meaning of section 4(c)(8) of the BHC Act. precious metals share similarly structured trading markets and common major market participants. 36. The commitments described above with respect to interest rate and currency swap transactions and related swap derivative products also would 29. See The Long-Term Credit Bank of Japan, Limited, 79 Federal Reserve apply to these proposed activities. Bulletin 345 (1993). 37. See 12 C.F.R. 225.25(b)(4)(vi)(A)(2). 30. The differences between this case and earlier applications relate to 38. As noted previously, the Board has determined, by order or regulation, Swiss Bank's proposal for Company to engage in unmatched swap transac- that acting as an originator, principal, broker, agent, or advisor with respect to tions, and are discussed below under the heading "Risk Management Poli- interest rate and currency swaps and swap derivative products relating cies and Procedures". thereto ("financial swap transactions") are activities closely related to bank- 31. See Swiss Bank 1991, supra. ing, and, therefore, permissible for bank holding companies under section 32. See OCC Interpretive Letter No. 494 (December 20, 1989), reprinted 4(c)(8) of the BHC Act. See 12 C.F.R. 225.25(b)(4)(vi)(A)(2); The Longin Federal Banking Law Reporter (CCH) I 83,083 (January 26, 1990). Term Credit Bank of Japan, Limited, 19 Federal Reserve Bulletin 345 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 191 Swiss Bank expects that Company's commodity and For the foregoing reasons, and on the basis of all the facts index swap transactions would be based on a variety of of record, the Board has determined that engaging in comstock and bond indices of the type previously approved in modity and index swap transactions is an activity conducted connection with proposed FCM activities (or a specially by banks43 Accordingly, the Board has concluded that tailored basket of securities selected by the parties) ("index these proposed activities are closely related to banking transactions"), or upon precious metals and energy prod- within the meaning of section 4(c)(8) of the BHC Act.44 ucts or related commodity indices ("commodity transactions"), and would include hybrid transactions based upon a Trading Futures and Options on Commodities and Indices combination of interest rates and such indices or commodities.39 Swiss Bank also has proposed that Company engage in The OCC has permitted national banks to engage in trading for its own account, for purposes other than hedgactivities involving matched and unmatched commodity ing, in futures, options, and options on futures contracts and index swap transactions (including related swap deriva- based on certain commodities or on stock, bond, or comtive products and over-the-counter options).40 The NYSBD modity indices — transactions which have not been exalso has approved these activities for state-chartered banks under its jurisdiction.41 In addition, the Board permits state Dempsey, Jr., Bankers Trust Company, and Shirin Emami, J.P. Morgan & member banks, to the extent consistent with their state Co. Incorporated. charters, to enter into perfectly matched commodity and 43. The Board also believes that commodity and index swap transactions index swap transactions, and the Federal Reserve Bank of are operationally, structurally, and functionally similar to financial swap transactions. Both types of swaps represent privately negotiated financial New York, acting pursuant to delegated authority, has aptransactions in which parties agree to exchange specified payment streams proved proposals by state member banks to engage in such over time according to a predetermined formula. For example, the basic activities on an unmatched basis42 structure of an interest rate swap is an exchange between two counterparties of the payment streams that arise out of differing interest payment obligations calculated on the basis of an agreed-upon notional principal amount. In a commodity or index swap transaction, the parties exchange payment streams based on a notional principal amount and the prices of certain commodities, or the values of or returns on certain securities or indices of securities, or a (1993); The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 combination of these and other financial measures such as interest rates. The (1989). parties to both types of transactions enter into these contracts to meet various 39. Swiss Bank has stated that the index transactions and commodity common investment objectives, including taking positions in the market for transactions that Company would enter into would provide for cash pay- the underlying assets for investment purposes, limiting one's exposure to ments based on the underlying assets, rates, or indices, and, in general, would market uncertainties and future price fluctuations, and preserving principal not provide for delivery of any security or commodity. Swiss Bank has while participating in the potential returns of a particular financial market or indicated, however, that commodity transactions may provide for physical economic sector. Because a swap or swap derivative product is negotiated delivery of the underlying commodities. Swiss Bank has stated that Com- between the parties, the economic terms of the transaction — including the pany would not enter into energy-related contracts calling for physical duration of the contract, the notional principal amount, the method of delivery, but may enter into such arrangements in contracts based upon calculating and frequency of payments, and the underlying assets, rates, or precious metals (in particular, gold, silver, and platinum). In addition, while indices upon which the payments are to be based — may be individually index transactions may be structured in a manner that provides for delivery tailored to the specific financial goals and risk-sensitivities of the counteiparof securities, Swiss Bank has stated that it is unlikely that Company would ties. In addition, banks and other intermediaries play a similar role in both enter into any such contract. In this regard, the Board believes that revenues commodity and index swap transactions and financial swap transactions. All derived from any transaction that provides for delivery of ineligible securi- these contracts represent forms of financial intermediation in which banks ties, or from any transaction that itself constitutes underwriting or dealing in have historically engaged. ineligible securities, should be treated as ineligible revenues for purposes of 44. As noted previously, Swiss Bank has proposed that Company provide calculating compliance with the Board's 10 percent revenue limitation on advisory, agency, and brokerage services with respect to commodity and bank-ineligible securities underwriting and dealing activities. The Board also index swap transactions. The Board believes that the authority of banks to notes that delivery in any securities-based transaction would be subject to the conduct these activities may be implicit in or incidental to their authority to limits on acquisitions of securities contained in the BHC Act and the Board's engage in these transactions as principal. The Board also notes that, in acting related policies and interpretations, including the Policy Statement on Non- as principal in these transactions, banks are able to develop a familiarity and voting Equity Investments by Bank Holding Companies (12 C.F.R. 225.143). expertise with respect to the structure and economic effects of these transac- 40. See, e.g., OCC Interpretive Letter (September 13,1994), from Douglas tions that should equip them particularly well to provide related advisory, E. Harris, Senior Deputy Comptroller for Capital Markets, to Carl Howard, agency, or brokerage services. Moreover, banks have been expressly autho- Esq., Citibank, N.A.; OCC Interpretive Letter No. 632 (June 30,1993); OCC rized to provide advisory, execution, and other services with respect to Interpretive Letter (May 13, 1992), from Jimmy F. Barton, Deputy Comptrol- exchange-traded futures and options on futures contracts based on financial ler of the Currency, to Carl Howard, Esq., Citibank, N.A.; OCC Interpretive and non-financial commodities. See OCC Interpretive Letter No. 494 (De- Letter (March 2, 1992), from Horace G. Sneed, Senior Attorney, to Jeffrey S. cember 20, 1989), reprinted in Federal Banking Law Reporter (CCH) Lillien, Esq., The First National Bank of Chicago; OCC No-Objection Letter 183,083 (January 26,1990). These exchange-traded transactions are used for No. 90-1 (February 16, 1990), reprinted in Federal Banking Law Reporter similar purposes as the over-the-counter transactions for which Swiss Bank (CCH) 183,095 (March 23, 1990); OCC No-Objection Letter No. 87-5 (July proposes that Company render advisory, agency, and brokerage services. The 20, 1987), reprinted in Federal Banking Law Reporter (CCH) 5 84,034 pricing bases for, economic effects of, and risks presented by the two types of (August 21,1987). transactions also are similar in important respects. For these reasons, and on 41. See, e.g.. Letter dated August 11, 1989, from David T. Halvorson, First the basis of all the facts of record, the Board has determined that these Deputy Superintendent, to Edmund P. Rogers, III, Esq., Morgan Guaranty proposed activities with respect to commodity and index swap transactions Trust Company of New York; Letter dated November 14, 1988, from David are activities conducted by banks, or are operationally and functionally so T. Halvorson, First Deputy Superintendent, to Anthony J. Horan, Esq., similar to activities conducted by banks that banks are particularly well Bankers Trust Company. equipped to engage in the proposed activities. Accordingly, the Board has concluded that these proposed activities are closely related to banking within 42. See 12 C.F.R. 208.128; Letters dated June 30, 1994, from John S. the meaning of section 4(c)(8) of the BHC Act. Cassidy, Assistant Vice President, to Philip Levy, Chemical Bank, Guy C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

192 Federal Reserve Bulletin • February 1995 pressly authorized for banks. In general, the instruments to these instruments have not been authorized for banks (other be traded are the same as those previously approved by the than for hedging purposes), the Board believes that these Board in considering FCM and futures advisory activities of trading activities are closely related to banking within the bank holding company subsidiaries,45 such as crude oil meaning of section 4(c)(8) of the BHC Act. The Board futures, Standard & Poor's 500 Stock Price Index Futures, notes that banks engage in activities with respect to the and municipal bond index futures.46 Swiss Bank proposes instruments in question that are similar or related to the to go beyond furnishing FCM and related advisory services, proposed trading activities, and that they engage in trading however, and seeks authority for Company to trade these activities for the same purposes with respect to similar instruments for its own account. Swiss Bank has indicated instruments, including both exchange-traded contracts based that Company's trading activities would include arbitrage on bank-eligible securities and instruments and over-theoperations, market-making for customer accommodation counter transactions based on commodities and various purposes, and proprietary trading (or taking positions for indices. investment purposes), as well as hedging transactions. Banking organizations have substantial experience with The Board has not previously approved this trading activ- respect to exchange-traded derivative transactions based on ity, with respect to these instruments, for bank holding commodities or on commodity or securities indices. As companies or their subsidiaries under section 4(c)(8) of the discussed previously, banks are permitted to engage in BHC Act47 Moreover, neither the Board nor other banking over-the-counter customer transactions based on these comregulators have expressly permitted banks to trade these modities and indices. In connection with these customer instruments for their own accounts for purposes other than transactions, banks and other financial intermediaries often hedging48 Notwithstanding the fact that transactions in enter into hedging transactions on various exchanges. Moreover, banks provide execution, clearance, and advisory services to third parties with respect to these exchange-traded 45. See, e.g., Bank of Montreal, et al., 79 Federal Reserve Bulletin 1049 transactions. As an incident to such hedging, execution, (1993); J.P. Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 advisory, or other activities, an intermediary may become (1994). See generally FCM SR Letter. involved in market-making activities in order to secure 46. Exchange-traded instruments based on commodities such as crude oil may provide for delivery of the underlying commodity at the expiration of overall market liquidity and to ensure competitive prices the contract. Swiss Bank has stated, however, that Company does not intend and adequate information for itself and its customers. From to take delivery, and would pursue a number of steps to avoid delivery, for any commodity contract not based on a precious metal (in particular, gold, that position, the intermediary would be particularly well silver, and platinum). Steps to be taken to avoid delivery would include equipped to trade these instruments for arbitrage and other closing positions in expiring contracts during trading periods and engaging in profit-seeking purposes. In this sense, the proposed trading exchange-for-physical transactions after the close of trading. In addition, the record indicates that, in general, only a very small percentage of the histori- activities may be seen as a natural outgrowth of traditional cal volume of any particular commodity futures contract has resulted in intermediation services. actual physical delivery. Accordingly, as a condition of approval of this application, Swiss Bank may not take delivery of these commodities except In addition, there are important similarities between the in unusual circumstances. In this regard, whenever Swiss Bank takes deliv- proposed instruments and transactions that have been authoery of any such commodity, Swiss Bank shall notify the Federal Reserve rized for banks for non-hedging purposes. In particular, the System and divest itself of the commodity promptly. In light of these considerations, the Board believes that these contracts may be viewed as proposed exchange-traded contracts are operationally, ecofinancial instruments despite the possibility that trading in these contracts nomically, and structurally similar to transactions permissicould result in the delivery and ownership of commodities that banking organizations are generally not permitted to hold. The Board also notes that, ble for banks. The process of trading a futures contract with respect to Company's proposed exchange-traded transactions based on based on heating oil, or a stock index, does not differ an index of securities or commodities, Swiss Bank has indicated that such substantially from that of trading a futures contract based on transactions would be settled with cash and would not provide for delivery of the underlying securities or commodities. U.S. government securities. Moreover, the pricing bases for, 47. As noted above, however, the Board has approved acting as an FCM, and economic effects of, exchange-traded futures and opand providing advisory services, with respect to the instruments to be traded. tions contracts are similar to those of over-the-counter The Board also has approved similar trading with respect to contracts based on U.S. government securities or money market instruments that are eligible derivative transactions that are based on the same commodfor investment by national banks. See Swiss Bank Corporation, 11 Federal Reserve Bulletin 759 (1991). In addition, the Board has recognized the utility of trading in futures and other instruments for purposes of hedging the market exposure resulting from the other trading activities of a section 20 subsidiary, and has indicated that these bank holding company subsidiaries may engage in such risk management transactions as are a necessary incident tember 13, 1994), from Douglas E. Harris, Senior Deputy Comptroller for to their underwriting and dealing activities. See First Chicago Corporation, Capital Markets, to Carl Howard, Esq., Citibank, N.A.; OCC Interpretive 80 Federal Reserve Bulletin 449 (1994). Letter No. 632 (June 30, 1993). The New York State Banking Department, 48. For example, the Office of the Comptroller of the Currency has similarly, has permitted state-chartered banks under its jurisdiction to engage permitted national banks to enter into futures and options transactions based in these transactions, but only to hedge exposure resulting from permissible on commodities or ineligible securities in order to manage the risks arising banking activities. See, e.g., Letter dated August 11, 1989, from David T. from their permissible banking activities (for example, swap transactions Halvorson, First Deputy Superintendent, to Edmund P. Rogers, III, Esq., based on such impermissible assets), but has not permitted national banks to Morgan Guaranty Trust Company of New York; Letter dated November 14, purchase futures and options based on nonfinancial commodities or ineligible 1988, from David T. Halvorson, First Deputy Superintendent, to Anthony J. securities for investment purposes. See, e.g., OCC Interpretive Letter (Sep- Horan, Esq., Bankers Trust Company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 193 ities and indices.49 In addition, an exchange-traded contract levels that would be required of a U.S. banking organizamay be structurally similar to specific types of permissible tion. The Board also has reviewed the capitalization of over-the-counter transactions, in particular, forward or op- Swiss Bank and Company in accordance with the standards tion contracts that are privately negotiated between counter- set forth in the Section 20 Orders, and finds the capitalizaparties. tion of each to be consistent with approval of this proposal. Finally, the Board believes that many of the risks inher- This determination on the capitalization of Company is ent in the proposed trading activities are similar to those based on all the facts of record, including related commitencountered by banks that engage in swaps and other per- ments and representations made by Swiss Bank. On the missible transactions. Hence, conducting the proposed trad- basis of all the facts of record, including the foregoing, the ing activity would require analytical skills, risk manage- Board has concluded that these financial and managerial ment policies, procedures, and techniques, and computer considerations are consistent with approval of this proposal. and operations systems similar to those developed by banks In order to approve this application, the Board also must for engaging in those permissible transactions. Moreover, determine that the activities are a proper incident to bankthis similarity of risk indicates that the risks of the proposed ing, that is, that the performance of the proposed activities trading activity can be managed adequately, if the organiza- by Company "can reasonably be expected to produce benetion in question possesses the requisite expertise and con- fits to the public . . . that outweigh possible adverse effects, ducts the activity subject to appropriate policies, proce- such as undue concentration of resources, decreased or dures, systems, and controls. Accordingly, the Board unfair competition, conflicts of interests, or unsound bankbelieves that some banking organizations have developed a ing practices." 12 U.S.C. § 1843(c)(8). The Board expects special expertise that would equip them particularly well to that consummation of this proposal should provide added engage in this type of transaction in a safe and sound convenience to Swiss Bank's customers by expanding the manner. range of securities and capital markets products, as well as For the foregoing reasons, and on the basis of all the facts hedging and other risk management services, that are availof record, the Board has determined that the proposed able to such customers. In addition, the Board expects that activity is functionally and operationally so similar to activ- the conduct of the proposed activities by Company and ities conducted by banks that banking organizations are SBC Derivatives, particularly those activities not now conparticularly well equipped to engage in the proposed activ- ducted by OCA, will increase the level of competition ity. Accordingly, the Board has concluded that trading for among existing providers of those services. one's own account, for purposes other than hedging, in In considering the potential adverse effects of this profutures, options, and options on futures contracts based on posal, the Board has found that there is no evidence in the certain commodities, or on stock, bond, or commodity record to indicate that consummation of the proposal would indices, is an activity closely related to banking within the result in an undue concentration of resources or any submeaning of section 4(c)(8) of the BHC Act. stantial decrease in competition. As discussed in further detail below, the Board also believes that, in light of all the Proper Incident to Banking Standard and Other facts of record, considerations relating to potential unfair Considerations competition, conflicts of interests, and unsound banking practices are consistent with approval of this application. In every case under section 4(c)(8) of the BHC Act, the Potential Unfair Competition. After consummation of Board considers the financial and managerial resources of this proposal, Swiss Bank will retain two nonbanking subthe applicant and its subsidiaries and the effect of the sidiaries in the United States that operate pursuant to the transaction upon those resources.50 In considering these grandfather provisions of the IB A.51 In order to mitigate the factors, the Board has noted that Swiss Bank's capital ratios potential unfair competition in the United States that could satisfy applicable risk-based standards established under the result from a foreign banking organization's combining Basle Accord, and are considered equivalent to the capital activities permissible under section 4(c)(8) of the BHC Act with activities not permissible for domestic banking organizations, Swiss Bank has committed that Futures and PMI 49. Parties also enter into the proposed futures and options transactions for will remain completely separate from its section 4(c)(8) reasons similar to those that lead them to enter into commodity- or index- subsidiaries, and will not engage in any business with or on based swap transactions, as well as futures and options transactions based on behalf of such subsidiaries (or vice versa). Swiss Bank also bank-eligible securities or instruments. These common purposes include taking positions in the market for the underlying product for investment has made a number of specific commitments relating to the purposes, utilizing arbitrage opportunities between the spot (or cash) and futures markets, limiting exposure resulting from transactions in related financial instruments, and managing the risk arising from a party's dealings in the assets on which the derivative transactions are based. 51. See 12 U.S.C. § 3106(c). These two remaining grandfathered subsidiar- 50. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Federal ies are SBCI Futures Inc. ("Futures"), which engages in certain FCM Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve activities, and SBC Portfolio Management International, Inc. ("PMI"), Bulletin 155 (1987). which engages in certain investment advisory activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

194 Federal Reserve Bulletin • February 1995 businesses proposed to be conducted by these subsidiaries previously stated that sound business practices require bankthat are designed to confirm and reflect the complete separa- ing organizations to take steps to ascertain the character and tion of its section 4(c)(8) subsidiaries from its grandfathered financial sophistication of their counterparties, including subsidiaries.52 The Board believes that these commitments efforts to ensure that counterparties understand the nature of are adequate to mitigate any potential unfair competition and risks inherent in contemplated transactions, and to that could result from this aspect of the proposal. ensure that recommendations to customers are based on Potential Conflicts of Interest and Related Risks. Swiss adequate information about the customer.54 The Board has Bank has proposed that Company act as principal in a carefully considered information provided by Swiss Bank number of different types of transactions — including secu- concerning the manner in which Company's business would rities dealing transactions, exchange-traded futures and op- be conducted, including information relating to: tions on futures contracts, and swap and other over-the- (1) "Know your customer" policies, counter derivative transactions — for which Company or (2) Criteria for recommending and entering into transac- SBC Derivatives may also provide advisory services. In tions, reviewing this proposal under the proper incident to bank- (3) Disclosures and explanations provided to customers ing standard of the BHC Act, the Board has carefully concerning particular transactions and risks, considered the potential conflicts of interests, and related (4) Internal controls on approval of transactions and other legal and reputational risks, that could result from this matters, proposed combination of advisory and proprietary trading (5) Education of customers and employees, in general, activities, as well as the steps proposed by Swiss Bank to (6) Management of customer relationships, mitigate these potential conflicts and risks. Swiss Bank has (7) Pricing methodologies, made commitments relating to the sophistication of its (8) Internal review of transactions by senior management advisory customers, and the disclosures that would be made and internal compliance personnel, and related systems to those customers concerning the trading activities of Com- and procedures, and pany and its affiliates, that the Board has relied on in (9) Compensation of traders and salespeople. previous cases presenting similar potential conflicts.53 In addition, the Board has reviewed the policies, systems, On the basis of this review and all the facts of record, the internal controls, and operational procedures established by Board believes that the policies, procedures, systems, and Swiss Bank for Company's derivatives trading operations controls established by Swiss Bank are consistent with the in light of the Board's policies in this area. The Board has Board's existing policies and guidance in this area and are adequate to minimize the potential conflicts of interests, and related legal and reputational risks, presented by this pro- 52. These commitments are substantially similar to commitments relied on posal. Swiss Bank has committed to conduct this business by the Board in previous applications by foreign banking organizations that control grandfathered subsidiaries in the United States. See Deutsche Bank in conformity with current supervisory guidance and to AG, 79 Federal Reserve Bulletin 133, 139-141 (1993). notify the Federal Reserve System, and provide a reason- 53. See, e.g., PNC Financial, supra (combination of full-service securities able opportunity for comment, before altering the manner in brokerage activities with securities underwriting and dealing activities); The Long-Term Credit Bank of Japan, Limited, 79 Federal Reserve Bulletin 345 which this business is conducted if it would render inaccu- (1993) (trading and advisory activities relating to swap transactions). See rate information furnished to the Board with respect to these also 12 C.F.R. 225.25(b)(4)(vi)(A)(2), (B), and (C). Swiss Bank has promatters. posed that Company trade for its own account, for purposes other than hedging, in the same futures contracts and options on futures contracts for The Board notes that it may provide additional guidance which it proposes to offer FCM and advisory services to third parties. This concerning these matters in the future. Accordingly, Swiss combination of activities has not previously been approved for bank holding company subsidiaries. See 12 C.F.R. 225.25(b)(18)(ii) and (19)(i). In order to Bank also has committed to conduct this business in conforminimize the potential conflicts of interests arising from this combination of mity with any future supervisory or examination policies or activities, Swiss Bank has provided a number of commitments, including a guidance issued by the Board concerning a banking organicommitment that Company will disclose to each customer it advises the fact that Company may be trading for its own account in the same contracts. In zation's conduct of a derivatives business, including poliaddition, Company's advisory services would be offered only to sophisti- cies or guidance with respect to customer transactions, cated institutional customers that would be better able to detect advice that is motivated by self-interest. Swiss Bank has provided similar commitments trading and marketing practices and policies, and related with respect to Company's other FCM activities, as well as the activities of systems and controls. SBC Derivatives. Swiss Bank also has indicated that there would be no Risk Management Policies and Procedures. In reviewing interaction between Company's trading personnel and its personnel engaged in FCM and futures advisory activities. In addition, the only interaction between this proposal under the proper incident to banking standard Company's trading personnel and the personnel of SBC Derivatives engaged in of section 4(c)(8) of the BHC Act, the Board also has FCM and futures advisory services will be in connection with the execution and clearance by SBC Derivatives of trades made by Company for its own account. carefully considered the risk management policies, proce- The Board believes that these commitments, in light of all the other facts of dures, systems, and controls proposed for Company, with record, are adequate to assist Swiss Bank in complying with the Board's supervisory policies and guidance in this area and to mitigate the potential conflicts of interests and related risks arising from the proposed combination of own-account trading activities with FCM and related advisory services. 54. See SR Letter No. 93-69 (FIS) (December 20, 1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 195 particular attention to the market and other risks inherent in proposed derivatives trading activities are not expected to the proposed derivatives trading activities. In reviewing constitute an excessively large part of Company's overall these matters, the Board has noted that Swiss Bank, Com- business, and that Company's derivative positions would pany, and OCA have substantial experience in trading deriv- bear a reasonable relationship to its aggregate asset ative products based on interest rates, foreign exchange, portfolio. debt and equity securities, and other assets and indices. As In addition, the Board has carefully reviewed the risk noted previously, OCA currently engages in trading for its management policies, procedures, systems, and controls to own account in options on debt and equity securities and be utilized by Company in conducting and monitoring the options on stock, bond, and commodity indices. OCA acts proposed activities. These policies and other risk manageas a Specialist, market maker, or registered options trader ment structures systems are currently in place and have on various exchanges and as a NASDAQ market maker in been used in connection with Company's existing securities the over-the-counter market. Company and SBC Deriva- business and related derivatives activities, and should assist tives currently engage in a variety of derivatives trading in minimizing the likelihood of significant losses that could activities based on foreign exchange, U.S. government secu- result from the activities that are the subject of this applicarities, and money market instruments. The record of this tion. application also indicates that Swiss Bank has substantial Credit limits for any particular counterparty are estabexperience in trading derivative products based on foreign lished by Swiss Bank's Credit Committee after extensive exchange and money market instruments, precious metals analysis of the counterparty's financial strength, and are and other commodities, and debt and equity securities. reviewed periodically, and more frequently when warranted The Board also has noted that, as a registered broker- by possible changes in a counterparty's financial condition. dealer, Company must comply with the SEC's net capital Counterparty credit risk guidelines, applicable to all Swiss rule.S5 In addition, as a section 20 subsidiary, Company Bank affiliates engaged in derivatives trading activities, also would be subject to the comprehensive framework of pru- have been established by senior management personnel of dential limitations established by the Board in the Section Swiss Bank, with the participation of the bank's Credit 20 Orders, including minimum capital requirements for Committee. Every transaction must conform to Swiss Company and Swiss Bank and restrictions designed to Bank's credit policies, and a computerized credit risk moniinsulate affiliated depository institutions from the risks of toring system would be used to determine whether a prothe proposed activities.56 Moreover, Swiss Bank has made a posed transaction is within the credit available to the counnumber of commitments relating to management of the terparty in question. Transactions are entered into this risks inherent in derivatives trading activities that are simi- monitoring system on a real-time basis, thereby causing a lar to commitments relied upon by the Board in prior cases recalculation of credit use and availability for the counterinvolving proposals to engage in swap and other derivative party. In addition, market values are updated overnight, transactions.57 Swiss Bank also has represented that the resulting in a daily recalculation of replacement values for all transactions. This monitoring system produces limit excess reports that are reviewed at least daily by senior credit risk management personnel. 55. See 15 C.F.R. 240.15c3-l. Company also would be required to comply with any further requirements that may result from its status as a primary With respect to market risk, senior management personnel dealer of U.S. government securities. of Swiss Bank have adopted written policies and risk limits 56. In connection with this section 20 application, Company also has been subject to an infrastructure review by the Federal Reserve Bank of New York for each derivative product traded by Company. Traditional that evaluated the adequacy of Company's risk management policies, proce- volume restrictions are supplemented by loss limits, which set dures, systems, and controls in light of the activities proposed to be contrading limits in terms of the maximum potential loss to be ducted by Company. 57. In particular, Swiss Bank has provided commitments relied on in allowed in any trading book. Loss limits have been estabprevious cases concerning the management and monitoring of the risks lished both for Company and for the consolidated organizapresented by these activities. These commitments include matters relating to credit risk, market risk, and operational risk, as well as the roles of senior tion. Swiss Bank has stated that specific measurable limits management and auditing personnel in establishing and ensuring compliance would be adopted for each relevant risk exposure in the with risk limits and risk management policies and procedures. See The Long-Term Credit Bank of Japan, Limited, 79 Federal Reserve Bulletin 345 (1993). In past cases, however, the Board also has relied upon commitments and representations to the effect that the subsidiary conducting the swap- and currency swap transactions on both a matched and unmatched basis. See related activities would seek to match all the transactions in which it is a OCC No-Objection Letter No. 90-1 (February 16, 1990), reprinted in Federal principal, and would hedge any unmatched positions pending a suitable Banking Law Reporter (CCH) 183,095 (March 23, 1990), and OCC Nomatch. Company's proposed risk management procedures differ from these Objection Letter No. 87-5 (July 20, 1987), reprinted in Federal Banking Law methods in that Company would engage as principal in these swap and Reporter (CCH) I 84,034 (August 21, 1987) (national banks); 12 C.F.R. related transactions on an unmatched basis. The Board believes, however, 208.128 (state member banks). Swiss Bank also has committed to conduct that the proposal for Company to engage in these transactions on an un- this business in conformity with any present or future supervisory or examimatched basis does not alter the permissibility of the activity under the nation policies or guidance issued by the Board concerning a banking closely related to banking and proper incident to banking standards of the organization's conduct of a derivatives business, including policies or guid- BHC Act. In this regard, the Board notes that both the OCC and the Board ance with respect to risk management policies and procedures and related permit banks under their respective jurisdictions to engage in interest rate systems and controls. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

196 Federal Reserve Bulletin • February 1995 trading operation.58 In effect, these loss limits express and lished policies and procedures designed to ensure that traders establish the market risk that Swiss Bank is willing to bear, and risk managers comply with all trading limits. Profits from overall and in any particular portfolio, as measured by risk a nonconforming transaction would be removed from the parameters that reflect historical market movements observed trading book, thereby eliminating any incentive to exceed during periods of market disruption and unusual volatility.59 limits, and any trader or risk manager exceeding risk limits To assist in compliance with these limits, Company would more than once would be subject to disciplinary sanctions, utilize a portfolio risk management strategy that contemplates including dismissal. In addition, once a trader has effected a two levels of hedging: an initial hedge, in each case, of the transaction and the resulting position becomes a part of Comdirectional risk attendant on a specific transaction; and subse- pany's overall portfolio, control over the position is transquent, ongoing hedging of the entire portfolio in order to ferred from the trader to risk managers responsible for monimaintain all risk attributes within acceptable levels.60 Market toring and managing the risk attributes of the portfolio. risk limits are reviewed annually, and can be reduced at any Operations risk, similarly, is mitigated by extensive retime as market conditions warrant. view and monitoring of Company's trading operation, in- Throughout the day, transactions are entered into the cluding the policies, procedures, systems, and controls distrading operation's computerized market risk control sys- cussed above. Swiss Bank has stated that Company would tem upon execution, and market prices are updated continu- maintain a comprehensive set of front office and back office ously, thereby permitting the real-time, on-line monitoring procedures, including constant verification of trade data by of market risk by risk control staff. Each trade thus can be back-office personnel, for position and profit and loss balreviewed promptly by risk managers, including with respect ancing to ensure that all positions are properly recorded and to the trade's impact on the overall portfolio. Risk control understood by risk managers and the global risk control reports produced by the computer system are monitored and group. In addition, senior management would serve a conreviewed throughout the day by portfolio and risk manag- trol function over trading operations by monitoring adherers, and are reviewed daily by the global risk management ence to established risk limits through analysis of periodic group in Switzerland to ensure compliance with bank- reports that are produced at least daily. Moreover, a departapproved market risk limits. Risk control reports are pro- ment independent of Company's traders would be responsiduced both in hard copy and on computer screens, and are ble for monitoring compliance by risk managers and traders balanced with back office accounting systems for position with all of Company's risk management procedures. Swiss and profit and loss purposes. These reports provide risk Bank also has stated that Company's risk management managers with information concerning exposure to each systems would be tested periodically, both by comparing measured risk in the portfolio, and are the basis for all risk actual with simulated profitability to ensure model integrity management decisions. Using these reports, senior risk and by evaluating the reasonableness of the assumptions managers monitor loss limits constantly and adjust the risk underlying established risk parameters. attributes of each trading book to avoid exceeding such The Board recognizes that the proposed derivatives tradlimits. In the event that a limit is exceeded, risk managers ing activities present substantial risks requiring that, in take immediate steps to adjust the relevant trading book to order to conduct such activities in a safe and sound manner, desired risk levels. Swiss Bank and Company must establish sophisticated and Portfolio and product risk managers are in contact with comprehensive risk management policies and procedures trading personnel throughout the day, beginning with a morn- and related computer and accounting systems and internal ing meeting in which the portfolio is reviewed and risk controls, and must employ personnel with expertise suffimanagers discuss the specific risk attributes to be adjusted cient to implement and adhere to these systemic protections. during the course of the trading session. These instructions are The Board has conducted a careful and thorough review of adjusted throughout the session to reflect changes in the these matters in considering this proposal, and, on the basis portfolio or in market conditions. Company also has estab- of all the facts of record, including the foregoing, the Board believes that Company's risk management policies, procedures, systems, and controls include the principal components of an effective risk management system capable of 58. Swiss Bank has indicated that risk is measured independently for each trading area without assuming any correlation between business sectors, and monitoring and controlling the risks inherent in the prothat the risk exposure for the entire portfolio is computed as the sum of the posed activities, and that the record in this case indicates individual risk exposures for each area. Swiss Bank maintains that this that Company intends to be operated in a manner consistent technique is very conservative because it is equivalent to assuming that a worst-case scenario occurs simultaneously in each business sector. with sound banking practices.61 59. Company's hedging strategies would rely upon both historical volatility measures and implied volatility calculated daily on the basis of closing option prices. 60. In addition, Swiss Bank has indicated that the proposed derivatives 61. In this regard, the Board notes that the record in this case also indicates activities will be integrated with Company's trading operations in the under- that the risk management policies and procedures of Swiss Bank and Comlying securities markets and other cash markets, and will not function as an pany would address the other risks, including legal risks, liquidity risks, and independent unit seeking separate profits solely from the derivatives markets. delivery risks, inherent in the proposed derivatives trading operations. The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 197 On the basis of the foregoing and all the other facts of Board has determined that Swiss Bank and Company have record, the Board has determined that under the framework in place the managerial and operational infrastructure and and conditions established in this and prior decisions, con- other policies and procedures necessary to comply with the summation of this proposal is not likely to result in any requirements of the Section 20 Orders and this order, includsignificant adverse effects, such as undue concentration of ing the commitments and conditions established in this resources, decreased or unfair competition, conflicts of in- order with respect to the conduct of Company's derivativesterests, or unsound banking practices, that are not out- related activities. Accordingly, Company may commence weighed by the public benefits that reasonably can be underwriting and dealing in all types of debt and equity expected to ensue from this proposal. Accordingly, the securities as permitted by, and subject to the other condi- Board has concluded that the balance of the public interest tions of, this order and the Section 20 Orders. factors it is required to consider under the proper incident to The Board's determination also is subject to all the terms banking standard of section 4(c)(8) of the BHC Act is and conditions set forth in Regulation Y, including those in favorable, and consistent with approval of this application. sections 225.7 and 225.23(b) of Regulation Y, and to the On the basis of the foregoing and all the other facts of Board's authority to require such modification or terminarecord, including the commitments furnished by Swiss tion of the activities of a bank holding company or any of Bank, the Board has determined that the application should its subsidiaries as the Board finds necessary to ensure be, and hereby is, approved, subject to all the terms and compliance with, and to prevent evasion of, the provisions conditions of this order and the Board's prior orders cited of the BHC Act and the Board's regulations and orders herein, including the Section 20 Orders, as modified by the issued thereunder. The Board's decision is specifically con- Modification Orders. The Board's approval of this proposal ditioned on: extends only to activities conducted within the limitations (1) Swiss Bank's compliance with all the commitments of those orders and this order, including the Board's reserva- made in connection with this application, including the tion of authority to establish additional limitations to ensure commitments discussed in this order, that the activities of Company and SBC Derivatives are (2) The conduct of the proposed activities in accordance consistent with safety and soundness, conflicts of interests, with the descriptions thereof set forth in the application and other relevant considerations under the BHC Act. Un- and related materials, and derwriting and dealing in any manner other than as ap- (3) The conditions set forth in this order and in the proved in this order and the Section 20 Orders is not within above-noted Board regulations and orders. the scope of the Board's approval and is not authorized for Company. For purposes of this action, these commitments and condi- Included among the conditions set forth in the Section 20 tions are deemed to be conditions imposed in writing by the Orders is that Company may not commence the proposed Board in connection with its findings and decision, and, as underwriting and dealing activities until the Board has such, may be enforced in proceedings under applicable law. determined that Swiss Bank and Company have established The Board notes that compliance with the commitments policies and procedures to ensure compliance with the made in connection with this application will be reviewed requirements of this order, including computer, audit, and in future examinations of Company or other Swiss Bank accounting systems, internal risk management procedures offices or affiliates in the United States. and controls, and the necessary operational and managerial This transaction shall not be consummated later than infrastructure. The Federal Reserve Bank of New York has three months after the effective date of this order, unless reviewed these matters, and has determined that Company such period is extended for good cause by the Board or by has established an operational and managerial infrastructure the Federal Reserve Bank of New York, acting pursuant to for underwriting and dealing in all types of debt and equity delegated authority. securities, including policies, procedures, systems, and con- By order of the Board of Governors, effective Decemtrols, that is adequate to ensure compliance with the require- ber 23, 1994. ments of this order and the Section 20 Orders. On the basis of the Reserve Bank's review and all the facts of record, the Voting for this action: Chairman Greenspan and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not Board also notes that these activities have been approved for Company on voting: Vice Chairman Blinder. the basis of all the facts of record. Accordingly, in addition to the commitments Swiss Bank has made regarding the conduct of its bank-ineligible securities underwriting and dealing and private placement activities in Company, Swiss Bank may not conduct the activities of trading derivative instruments for its own account as authorized by this order through any nonbanking subsidiary other than Company before consulting with the Federal Reserve System to determine whether prior approval would be JENNIFER J. JOHNSON required. Deputy Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

198 Federal Reserve Bulletin • February 1995 Appendix A modification of a commitment to which Norwest's section 20 company, Norwest Investment Services, Inc. ("Compa- Chicago Mercantile Exchange ny"), is currently subject, to allow Company to underwrite and deal in certain unrated municipal revenue bonds. You Standard & Poor's Midcap 400 Index Futures, and options also request that Norwest's subsidiary banks be permitted to thereon engage in the following activities with respect to Company: • Norwest's subsidiary banks would send materials de- Commodity Exchange, Inc. scribing Company and Company's services to their retail and commercial customers directly or as a stuffer to bank Eurotop 100 Index Futures, and options thereon statements; • officers and employees of Norwest's subsidiary banks would send materials and letters on bank letterhead de- Mercado de Productos Financieros Derivados de Renta scribing Company and Company's services to their retail Fija (Barcelona) and commercial customers; • Norwest's subsidiary banks would sponsor or co- Mibor '90 Futures, and options thereon sponsor with Company educational seminars to inform The Montreal Exchange retail and commercial customers about investment opportunities, investment strategies, and Company's services; One-Month Canadian Bankers Acceptance Futures and Three-Month Canadian Bankers Acceptance Futures • officers and employees of Norwest's subsidiary banks would send invitations on bank letterhead inviting their London International Financial Futures and Options customers to attend the educational seminars sponsored Exchange or co-sponsored by Norwest's subsidiary banks. Three-Month Eurolira Interest Rate Futures On December 20, 1989, the Board approved Norwest's Italian Government Bond (BTP) Futures, and options application to engage, through Company, in underwriting and thereon dealing in, to a limited extent, certain bank-ineligible securities.1 In approving that application, the Board relied, in part, New York Mercantile Exchange on Norwest's commitment that Company would underwrite and deal in only those municipal revenue bonds that are rated Light Sweet Crude Oil Futures, and options thereon in one of the top four categories by a nationally recognized New York Harbor Unleaded Gasoline Futures, and options rating agency. Norwest also committed that no bank or thrift thereon affiliate of Company would act as agent for, or engage in Heating Oil Futures, and options thereon marketing activities on behalf of, Company. Natural Gas Futures, and options thereon Underwriting unrated municipal revenue bonds. Norwest has requested permission to allow Company to underwrite Letter Interpreting Section 20 Orders and deal in unrated municipal revenue bonds under certain circumstances. In this regard, Norwest has committed that Letter Interpreting the Cross-Marketing Firewall and Company will not underwrite or deal in any unrated munic- Granting Permission to Underwrite and Deal in Unrated ipal revenue bonds until Norwest's Capital Markets Credit Municipal Revenue Bonds that are Judged to be of staff conducts an independent credit review and determines Investment-Grade Quality that the securities are of investment-grade quality, and that no single issue of unrated municipal revenue bonds under- December 5,1994 written by Company will exceed $7.5 million. In addition, Norwest has committed that official statements and other Bruce Moland information supplied to purchasers will state that the securi- Assistant General Counsel ties being sold are not rated; there will be no indication Norwest Corporation whatsoever that Company or Norwest deems the securities Sixth and Marquette to be of investment-grade quality; and the securities will not Minneapolis, Minnesota 55479-1026 be sold by any of Norwest's bank or nonbank subsidiaries, other than Company. Dear Mr. Moland: 1. As used in this letter, "bank-ineligible securities" refers to securities This responds to your letters requesting, on behalf of Northat a bank may not underwrite or deal in directly under section 16 of the west Corporation, Minneapolis, Minnesota ("Norwest"), Glass-Steagall Act (12 U.S.C. § 24(Seventh)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 199 Based on all the facts of record, including those commit- In order to address the potential conflicts of interest that ments made by Norwest in connection with this request, the could arise from activities that concern the family of funds Board hereby grants Norwest's request to allow Company ("Norwest Funds") advised by Norwest Bank Minnesota, to underwrite and deal in unrated municipal revenue bonds. N.A. ("Norwest Bank") and brokered, but not underwrit- In granting this request, the Board has relied on the credit ten, by Company, Norwest has committed that if Norwest evaluation packages that Norwest's Capital Markets Credit Funds is mentioned in materials provided to bank customers staff will use to review unrated municipal revenue bonds or during educational seminars, then Norwest will disclose that Company would like to underwrite or in which Com- that Norwest Bank is the investment adviser for Norwest pany would like to deal. Funds, and that a detailed description of the fees received Cross-marketing. The cross-marketing limitation to by Norwest Bank for performing these services can be found which Norwest committed is intended, in part, to ensure in the applicable prospectus. In addition, if a particular mutual that the bank affiliates of a section 20 company do not fund advised by Norwest Bank is mentioned in materials become involved in the underwriting, dealing, or distribu- provided to bank customers or during educational seminars, tion of bank-ineligible securities sold by the section 20 bank customers will be informed of the particular fee arrangecompany. The cross-marketing restriction also is intended ment between Norwest Bank and the mutual fund. to ensure that the public does not link the economic fortunes Norwest also has made several commitments that address of a financial institution with an affiliated section 20 com- conflicts of interest and customer confusion that could arise pany. In J.P. Morgan & Co. Incorporated, et al.,2 the Board when Company employees who participate in educational indicated that the purposes of the cross-marketing firewall seminars sponsored or co-sponsored by Norwest's subsiddo not require a complete prohibition of marketing activi- iary banks market bank-ineligible securities underwritten or ties, and the Board has permitted banks to act as riskless dealt in by Company. Norwest has committed that at the principal or broker for customers in buying and selling beginning of educational seminars, seminar attendees will bank-eligible securities underwritten by, or held in the deal- be told which seminar participants are Company employees ing portfolio of, a section 20 affiliate.3 and which are bank employees. Norwest also has commit- Norwest has committed that bank-ineligible underwriting ted that before bank-ineligible securities underwritten or or dealing services offered by Company will not be men- dealt in by Company are marketed by Company employees, tioned or marketed in any manner in materials provided to seminar attendees will be informed that such securities are bank customers or during educational seminars, and that underwritten or dealt in by Company and not by the bank. bank employees who attend the educational seminars will Norwest has made several commitments to ensure that not market or provide advice relating to bank-ineligible Norwest's subsidiary banks will not have any control over securities underwritten or dealt in by Company, even if Company. Norwest has committed that there will be no seminar attendees request advice relating to such securities. employees in common between Company and any of its As required under the firewalls, Norwest also has commit- bank affiliates or their subsidiaries; and Company will reted that sales literature relating to bank-ineligible securities main separately incorporated, capitalized, and funded, and underwritten or dealt in by Company will not be distributed will be operationally distinct from its bank affiliates. In by Norwest's subsidiary banks to their customers either addition, Norwest has committed that all services perthrough the mail or during educational seminars. In addi- formed by Norwest's subsidiary banks on behalf of Comtion, to minimize the possibility of customer confusion, pany will be conducted in accordance with section 23B of Norwest has committed that it will make certain disclosures the Federal Reserve Act. conspicuously in all sales literature provided to bank cus- Based on all the facts of record, including those committomers either through the mail or during educational semi- ments made by Norwest in connection with this request, nars.4 These disclosures also will be made orally and in Norwest's subsidiary banks may engage in the proposed writing at the beginning of educational seminars. cross-marketing activities consistent with the commitment made to the Board by Norwest in connection with its application to underwrite and deal in, to a limited extent, certain bank-ineligible securities. This determination is lim- 2. 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities ited to the specified practices and does not permit any other Industry Ass'n v. Board of Governors of the Federal Reserve System, 900 types of joint marketing, advertising or selling practices F.2d 360 (D.C. Cir. 1990). between Company and its affiliated banks. 3. See Chemical Banking Corporation, 80 Federal Reserve Bulletin 49 (1994). 4. Norwest has committed to disclose that products offered by Company are not FDIC insured, and are subject to investment risk, including the Very truly yours, possible loss of the principal amount invested; investment products offered by Company are not deposits or other obligations of, or guaranteed by, the WILLIAM W. WILES depository institution; Company is not a bank, and is separate from any Secretary of the Board affiliated bank; and Company is solely responsible for its contractual obligations and commitments. cc: Federal Reserve Bank of Minneapolis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

200 Federal Reserve Bulletin • February 1995 Section 20 Firewall Interpretation In order to relieve other bank holding companies from the burden of having to apply individually to engage in the Order Interpreting the Cross-Marketing Limitation cross-marketing activity approved in BankAmerica, the Applicable to Section 20 Subsidiaries Board hereby clarifies that, under the circumstances relied on in BankAmerica, a bank or thrift or their subsidiaries In October 1993, the Board approved an application by may act as a riskless principal or broker for customers in BankAmerica Corporation to conduct certain securities- buying and selling bank-eligible securities that an affiliated related activities through its section 20 subsidiary.1 In its section 20 subsidiary underwrites or deals in, subject to the Order, the Board interpreted the cross-marketing limitation, above conditions and receipt of any other necessary regulawhich prohibits bank and thrift affiliates of a section 20 tory approvals. company from acting as an agent for, or engaging in market- By order of the Board of Governors, effective Deceming activities on behalf of, the section 20 company. The ber 14, 1994. Board stated that BankAmerica's subsidiary banks may, consistent with the cross-marketing limitation, act as a Voting for this action: Chairman Greenspan, Vice Chairman riskless principal or broker for customers in buying and Blinder, and Governors Kelley, LaWare, Phillips, and Yellen. Abselling bank-eligible securities that the section 20 company sent and not voting: Governor Lindsey. underwrites or deals in.2 WILLIAM W. WILES In setting out this interpretation, the Board relied on Secretary of the Board several commitments by BankAmerica. BankAmerica committed that: (1) its section 20 subsidiary would remain separately ORDERS ISSUED UNDER BANK MERGER ACT incorporated, capitalized, and funded, and operationally distinct from BankAmerica's subsidiary banks; Crestar Bank (2) there would be no employees in common between its Richmond, Virginia section 20 subsidiary and any of BankAmerica's subsidiary banks or their subsidiaries; Order Approving the Merger of Banks (3) sales by its section 20 subsidiary of bank-eligible securities through BankAmerica's subsidiary banks and Crestar Bank, Richmond, Virginia ("Crestar"), a state memtheir subsidiaries would not involve any exclusive arber bank, has applied under section 18(c) of the Federal rangements;3 and Deposit Insurance Act (12 U.S.C. § 1828(c)) ("Bank Merger (4) the section 20 subsidiary's role in underwriting or Act") to merge with Independent Bank, Manassas, Virginia dealing in the bank-eligible securities brokered by ("Bank"). Crestar also has applied to establish branches at the BankAmerica's subsidiary banks would be fully dispresent locations of Bank listed in the Appendix pursuant to closed to the banks' brokerage customers and would be section 9 of the Federal Reserve Act (12 U.S.C. § 321). conducted on an arm's length basis. In addition, the Notice of the applications, affording interested persons an banks must continue to operate in accordance with the opportunity to submit comments, has been given in accorguidelines established by the Board and the other agendance with the Bank Merger Act and the Board's Rules of cies for the sale of uninsured products on bank premises.4 Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). 1. BankAmerica Corporation, 79 Federal Reserve Bulletin 1163 (1993) The time for filing comments has expired, and the Board ("BankAmerica "). has considered the applications and all comments received 2. The term "bank-eligible securities" refers to securities that a state in light of the factors set forth in the Bank Merger Act and member bank may underwrite or deal in under sections 5(c) and 16 of the Glass-Steagall Act (12 U.S.C. §§ 335 and 24(7)). the Federal Reserve Act. 3. In other words, the section 20 subsidiary also would sell its bank- Crestar is a wholly owned subsidiary of Crestar Financial eligible securities both direcdy and through other broker-dealers, and the section 20 subsidiary's bank affiliates would sell bank-eligible securities Corporation, Richmond, Virginia ("CFC"). CFC controls underwritten or dealt in by other broker-dealers. total consolidated assets of $13.0 billion, and operates sub- 4. See Interagency Statement on Retail Sales of Nondeposit Investment sidiary banks in Virginia, Maryland, and the District of Products, February 15,1994. Pursuant to this statement, among other things, banks engaging in retail sales of nondeposit investment products should Columbia.1 CFC is the largest commercial banking organiensure that customers are fully informed that these products: zation in Virginia, controlling approximately $9.2 billion in (1) Are not FDIC-insured, (2) Are not deposits or other obligations of the bank and are not guaranteed by the bank, and (3) Involve investment risks, including possible loss of principal. 1. All state banking data are as of June 30, 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 201 deposits, representing 16.0 percent of total deposits in com- The Board also concludes that the financial and managemercial banking organizations in the state. Bank is the 63d rial resources and future prospects of Crestar and Bank, and largest commercial banking organization in Virginia, con- considerations relating to the convenience and needs of the trolling deposits of $85.4 million, representing less than communities to be served, also are consistent with approval 1 percent of total deposits in commercial banking organiza- of this application.6 tions in the state. Upon consummation of the proposed The Board also has reviewed the factors it is required to transaction, CFC would control approximately $9.3 billion consider in applications for the establishment and operation in deposits, representing 16.2 percent of total deposits in of branches pursuant to the Federal Reserve Act.7 Based on commercial banks in the state. all the facts of record, the Board believes that the financial Crestar and Bank compete directly in the Washington, condition of Crestar, the general character of its manage- D.C. banking market.2 CFC is the second largest of the 116 ment, and the proposed exercise of corporate powers are depository institutions in the market, controlling deposits of consistent with approval and the purposes of section 9 of $5.1 billion, representing 11.8 percent of total deposits in the Federal Reserve Act. depository institutions in the market ("market deposits").3 Based on the foregoing and all the facts of record, the Bank is the 48th largest depository institution in the market, Board has determined that these applications should be, and controlling deposits of $85.1 million, representing less than hereby are, approved. The Board's approval of these appli- 1 percent of the total deposits in depository institutions in cations is specifically conditioned upon compliance by Crethe market. Upon consummation of this proposal, CFC star with the commitments made in connection with these would control $5.2 billion in deposits, representing applications. For purposes of this action, the commitments 12.0 percent of total deposits in depository institutions in and conditions relied on in reaching this decision are both the market. The Herfindahl-Hirschman Index ("HHI") in conditions imposed in writing by the Board and, as such, the Washington, D.C., banking market would increase by may be enforced in proceedings under applicable law. 5 points to 930.4 The Department of Justice has indicated This transaction may not be consummated before the that this proposal would not have a significantly adverse fifteenth calendar day after the effective date of this order, effect on competition, and neither the OCC nor the FDIC or later than three months after the effective date of this objected to this proposal. After considering the number of order, unless such period is extended by the Board or by the competitors remaining in the market, the small increase in Federal Reserve Bank of Richmond, acting pursuant to concentration, and all other facts of record, the Board delegated authority. concludes that consummation of this proposal would not By order of the Board of Governors, effective Decemresult in significantly adverse effects on competition in this ber 14, 1994. market or any other relevant market.5 2. The Washington, D.C., banking market is approximated by the Washington, D.C., Ranally Metro Area ("Washington RMA") and the remainder of Loudoun County, Virginia. Federal Reserve Bulletin 673, 674 (1982). The Board also has previously 3. In this context, depository institutions include banks, savings banks, and found RMA definitions to be helpful as a guide in defining relevant geosavings associations. Market deposit data are as of June 30, 1993, and are graphic banking markets. See St. Joseph Valley Bank, supra, note 5 (an RMA based on calculations in which deposits of thrift institutions are included at is defined generally as a compact area with relatively high population density 50 percent. The Board previously has indicated that thrift institutions have that is linked by commuting, retail, and wholesale trade patterns, and by become, or have the potential to become, significant competitors of commer- definition would include a central city or cities and all adjacent continuously cial banks. See Midwest Financial Group 75 Federal Reserve Bulletin 386 built up areas, as well as certain other areas). In this regard, 1990 data from (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). the U.S. Census Bureau indicate that 65 percent of the workers that reside in 4. Under the revised Department of Justice Merger Guidelines, 49 Federal Manassas and Manassas Park, Virginia, work outside of these communities Register 26,823 (June 29, 1984), a market in which the post-merger HHI is in other portions of the Washington RMA. In light of the substantial amount below 1000 is considered to be unconcentrated. The Justice Department has of commuting between Manassas, Manassas Park, and the remainder of the informed the Board that a bank merger or acquisition generally will not be Washington RMA, and based on all the facts of record, the Board believes challenged (in the absence of other factors indicating anticompetitive effects) that the relevant geographic banking market is the Washington, D.C., bankunless the post-merger HHI is at least 1800 and the merger increases the HHI ing market, and that the proposed merger would not have a significantly by more than 200 points. The Justice Department has stated that the higher adverse effect on competition in this market. than normal HHI thresholds for screening bank mergers for anticompetitive 6. The Board has carefully reviewed comments from several individuals effects implicitly recognize the competitive effect of limited-purpose lenders commending the services provided by Bank and expressing concern that the and other non-depository financial entities. acquisition of a locally controlled bank by a large multi-bank holding 5. The Board has carefully reviewed comments from an individual main- company would diminish the level of service at Bank. The Board notes that taining that this proposal would result in anticompetitive effects in Manassas Crestar received an "outstanding" rating in its most recent performance and Manassas Park, Virginia, which are part of the Washington, D.C., examination under the Community Reinvestment Act for its activities to banking market, as defined above. This commenter has not provided evi- assist in meeting the credit needs of its entire communities, including lowdence to support a different delineation of the relevant banking market. and moderate-income areas. In addition, Crestar will expand the banking The Board previously has indicated that the relevant banking market must services available at Bank to include trust services, investment advisory reflect the commercial and banking realities and should consist of the services, and full-service brokerage services. Based on a review of these and localized area where the banks involved offer their services and where local other facts of record, the Board concludes that convenience and needs customers can practicably turn for alternatives. See United States v. Philadel- considerations are consistent with approval of this proposal. phia National Bank, 374 U.S. 321, 361 (1963); St. Joseph Valley Bank, 68 7. See 12 U.S.C. § 322. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

202 Federal Reserve Bulletin • February 1995 Voting for this action: Chairman Greenspan, Vice Chairman its only subsidiary is an Argentine venture capital company. Blinder, and Governors Kelley, LaWare, Phillips, and Yellen. Ab- Bank's ultimate parents are Roberts S.A. Inversiones, which sent and not voting: Governor Lindsey. owns approximately 70 percent of Bank, and Midland Bank International S.A., an indirect subsidiary of HSBC Holdings WILLIAM W. WILES pic, London, England, which owns approximately 30 per- Secretary of the Board cent of Bank. Appendix The proposed representative office would engage in traditional representational functions, including acting as liaison List of the addresses of the Branches of Independent Bank between Bank's head office and customers in the United to be acquired by Crestar Bank. States, providing information regarding services offered by Bank to potential customers, and gathering business and Corporate Office economic information. 8751 Sudley Road In acting on an application to establish a representative Manassas, Virginia 22110 office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages Woodbridge Office directly in the business of banking outside of the United 1708 David Ford Road States and has furnished to the Board the information it Woodbridge, Virginia 22192 needs to assess adequately the application. The Board also shall take into account whether the foreign bank and any Remote Drive In foreign bank parent is subject to comprehensive supervision 8950 Mathis Avenue or regulation on a consolidated basis by its home country Manassas, Virginia 22110 supervisors (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24). The Board may also take into account additional standards as set Remote Drive In forth in the IBA (12 U.S.C. § 3105(d)(3)-(4)) and Regula- 8112 Sudley Road tion K (12 C.F.R. 211.24(c)). Manassas, Virginia 22110 The Board has previously stated that the standards that apply to the establishment of a branch or agency need not in every case apply to the establishment of a representative ORDERS ISSUED UNDER INTERNATIONAL BANKING office because representative offices do not engage in a ACT banking business and cannot take deposits or make loans.2 Banco Roberts, S.A. In evaluating an application to establish a representative Buenos Aires, Argentina office under the IBA and Regulation K, the Board will take into account the standards that apply to establishment of Order Approving Establishment of Representative Office branches and agencies, subject to the following considerations. With respect to supervision by home country author- Banco Roberts, S.A. ("Bank"), Buenos Aires, Argentina, a ities, a foreign bank that proposes to establish a representaforeign bank within the meaning of the International Bank- tive office must be subject to a significant degree of ing Act ("IBA"), has applied under section 10(a) of the IBA supervision by its home country supervisor.3 A foreign (12 U.S.C. § 3107(a)) to establish a representative office in bank's financial and managerial resources are reviewed to New York, New York. The Foreign Bank Supervision En- determine whether its financial condition and performance hancement Act of 1991, which amended the IBA, provides demonstrate that it is capable of complying with applicable that a foreign bank must obtain the approval of the Board to laws and has an operating record that would be consistent establish a representative office in the United States. with the establishment of a representative office in the United States. Finally, all foreign banks, whether operating Notice of the application, affording interested persons an through branches, agencies, or representative offices, will be opportunity to submit comments, has been published in a required to provide adequate assurances of access to infornewspaper of general circulation in New York, New York mation on the operations of bank and its affiliates necessary (Wall Street Journal, September 4 and 11, 1992). The time to determine compliance with U.S. laws. for filing comments has expired and the Board has considered the application and all comments received. In this case, with respect to the issue of supervision by home country authorities, the Board has considered the Bank is a commercial bank chartered in Argentina, and has total consolidated assets of approximately $1.6 billion.1 following information. The Central Bank of the Republic of Bank does not have any operations outside Argentina and 2. See 58 Federal Register 6348, 6351 (1993). 1. Data are as of July 31, 1994, unless otherwise noted. 3. See Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 203 Argentina ("Central Bank") is the bank supervisory author- Kingdom were subject to comprehensive home country ity in Argentina and, as such, is the home country supervi- supervision on a consolidated basis.5 Based upon a review sor of Bank. The Central Bank has authorized Bank to of the facts of record, the Board has determined that Midestablish the proposed representative office.. The Central land Bank pic is subject to a significant degree of supervi- Bank performs its supervisory function through the Superin- sion by the Bank of England. tendency of Financial Entities. The Central Bank is autho- Based upon all the facts of record, which include the rized to approve and revoke bank licenses, set capital and information described above, the Board concludes that facliquidity requirements, approve the establishment of domes- tors relating to the supervision of Bank by its home country tic or overseas offices or subsidiaries, and approve new supervisors are consistent with approval of the proposed banking activities. The Central Bank is also responsible for representative office. enforcement of laws regulating banking activities. The Board has also found that Bank engages directly in In approving an application by another Argentine bank, the business of banking outside the United States through the Board noted that the Central Bank currently is in the its commercial banking operations in Argentina. Bank has process of making significant changes and enhancements to provided the Board with the information necessary to assess its system of bank supervision.4 Under the enhanced sys- the application through submissions that address the reletem, the Central Bank monitors the operations and financial vant issues. condition of Bank through on-site examinations and the The Board has also taken into account the additional review of required regulatory reports and external audit standards set forth in section 7 of the IBA and Regulation K reports. Bank is subject to two types of on-site reviews, (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). As comprehensive inspections and partial inspections. Compre- noted above, the Central Bank has authorized Bank to hensive inspections include a review of internal controls, establish the proposed representative office. In addition, the credit policy, portfolio risk, capital and reserve require- Central Bank may share information on Bank's operations ments, transactions with related institutions, and foreign with other supervisors, including the Board. exchange operations and foreign currency transactions. With respect to the financial and managerial resources of Comprehensive inspections also include an evaluation of Bank, given Bank's record of operations in its home counmanagement's ability to operate the bank in a safe and try, its overall financial resources, and its standing with its sound manner. Partial inspections have a more specific home country supervisors, the Board has also determined scope and are used to evaluate potential weaknesses that that financial and managerial factors are consistent with need immediate attention. Bank is scheduled to receive a approval of the proposed representative office. Although comprehensive inspection every year. Bank currently operates no offices outside Argentina, Bank Off-site monitoring of Bank by the Central Bank is appears to have the experience and capacity to support the carried out through the review of required financial reports proposed representative office given the limited nature of and external audit reports that provide information on the activities and the fact that experienced personnel have Bank's financial condition and compliance with law and been retained. Bank has also established controls and proceregulation. Bank files with the Central Bank monthly, quar- dures for the proposed representative office to ensure comterly, and annual reports that are prepared on a consolidated pliance with U.S. law. basis and address, among other things, asset balances, earn- Finally, with respect to access to information about ings performance, asset and liability structure, credit risk of Bank's operations, the Board has reviewed the relevant large borrowers, and financial transactions with affiliates. provisions of law in Argentina and the United Kingdom and The Central Bank also imposes certain investment and has communicated with appropriate governmental authorilending limits on Bank in its dealings with affiliates, senior ties regarding access to information. Bank and its ultimate management and directors. Bank monitors its activities and parents have each committed to make available to the Board operations through periodic internal audits and has imple- such information on the operations of Bank and its affiliates mented policies and procedures to safeguard against money that the Board deems necessary to determine and enforce laundering and other illicit activities. compliance with the IBA, the Bank Holding Company Act With respect to Midland Bank pic, London, England, of 1956, as amended, and other applicable Federal law. To which owns indirectly approximately 30 percent of Bank's the extent that the provision of such information may be shares, the Bank of England is the home country supervisor. prohibited by law, Bank and its ultimate parents have The Bank of England has broad statutory powers to super- committed to cooperate with the Board in obtaining any vise and take enforcement action against authorized institu- necessary consents or waivers that might be required from tions. The Board has previously considered applications in third parties in connection with the disclosure of certain which it determined that particular banks in the United 5. See Coutts & Co. AG, 79 Federal Reserve Bulletin 636 (1993), with respect to supervision of National Westminster Bank, pic; Singer & Fried- 4. See Banco de Galicia, 80 Federal Reserve Bulletin 846 (1994). lander, 79 Federal Reserve Bulletin 809 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

204 Federal Reserve Bulletin • February 1995 necessary information. In light of these commitments and Notice of the application, affording interested persons an other facts of record, and subject to the condition described opportunity to submit comments, has been published in a below, the Board concludes that Bank has provided ade- newspaper of general circulation in New York, New York quate assurances of access to any necessary information the (New York Times, September 23, 1993). The time for filing Board may request. comments has expired, and the Board has considered the On the basis of all the facts of record, and subject to the application and all comments received. commitments made by Bank and its ultimate parents, as Bank, with $7.6 billion in consolidated assets,1 is a well as the terms and conditions set forth in this order, the commercial bank chartered in Mexico. Bank operates ap- Board has determined that Bank's application to establish a proximately 150 branches in Mexico and a branch in the representative office should be, and hereby is, approved. If Cayman Islands.2 Bank engages, indirectly, in insurance any restrictions on access to information on the operations activities in the United States through an office of its affilior activities of Bank and any of its affiliates subsequently ate, Aseguradora Mexicana, Mexico City, Mexico, and in interfere with the Board's ability to determine the compli- foreign exchange activities through another affiliate, Banance by Bank or its affiliates with applicable federal stat- pais Exchange, Inc., Houston, Texas. The proposed repreutes, the Board may require termination of any of Bank's sentative office will solicit loans for Bank's head office and direct or indirect activities in the United States. Approval of provide liaison, customer relations and market research this application is also specifically conditioned on compli- services. Bank is majority owned by a holding company, ance by Bank and its ultimate parent with the commitments Grupo Financiero Asemex Banpais, S.A. de C.V., Mexico made in connection with this application, and with the City, Mexico ("Holdings").3 No other single shareholder conditions contained in this order.6 The commitments and owns more than five percent of the shares of Banpais. conditions referred to above are conditions imposed in In acting on an application to establish a representative writing by the Board in connection with its decision, and office, the IBA and Regulation K provide that the Board may be enforced in proceedings under 12 U.S.C. § 1818 shall take into account whether the foreign bank engages against Bank and its affiliates. directly in the business of banking outside of the United By order of the Board of Governors, effective Decem- States, has furnished to the Board the information it needs ber 21, 1994. to assess adequately the application, and is subject to comprehensive supervision or regulation on a consoli- Voting for this action: Chairman Greenspan, and Governors dated basis by its home country supervisor (12 U.S.C. Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not § 3105(d)(2); 12 C.F.R. 211.24(c)(1)). The Board may voting: Vice Chairman Blinder. also take into account additional standards as set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4)) and Regulation K JENNIFER J. JOHNSON (12 C.F.R. 211.24(c)(2)). Deputy Secretary of the Board The Board has previously stated that the standards that apply to the establishment of a branch or agency need not in Banpais, S.A. every case apply to the establishment of a representative Mexico City, Mexico office because a representative office does not engage in a banking business and cannot take deposits or make loans Order Approving Establishment of a Representative Office (see 58 Federal Register 6348, 6351 (1993)). In evaluating an application to establish a representative office under the Banpais, S.A., Mexico City, Mexico ("Bank"), a foreign IBA and Regulation K, the Board will take into account the bank within the meaning of the International Banking Act standards that apply to the establishment of a branch or ("IBA"), has applied under section 10(a) of the IB A agency, subject to the following considerations. With re- (12 U.S.C. § 3107(a)) to establish a representative office in spect to supervision by home country authorities, a foreign New York, New York. The Foreign Bank Supervision Enbank that proposes to establish a representative office must hancement Act of 1991, which amended the IBA, provides be subject to a significant degree of supervision by its home that a foreign bank must obtain the approval of the Board to establish a representative office in the United States. 1. Data are as of June 30,1994, unless otherwise noted. 2. Bank also owns seven Mexican subsidiaries that engage in real estate activities. 6. The Board's authority to approve the establishment of the proposed 3. Four shareholders own more than 5 percent of the shares of Holdings: representative office parallels the continuing authority of the State of New Holding Fiasa, S.A. de C.V., (9.2 percent); Fideicomiso Comermex (12.8 per- York to license offices of a foreign bank. The Board's approval of this cent); Grupo Alper, S.A. de C.V. (6.2 percent); and Mr. Angel I. Rodriguez application does not supplant the authority of the State of New York and its Saez, the Chairman of the Boards of Holdings, Bank, other affiliates of agent, the New York State Banking Department, to license the proposed Holdings, and Holding Fiasa (6.7 percent). Each of these shareholders is representative office of Bank in accordance with any terms or conditions that Mexican. Holdings also owns six other subsidiaries that provide diverse the State of New York may impose. financial services including insurance and investment banking services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 205 country supervisor.4 A foreign bank's financial and manage- quarterly, semi-annual, and annual basis. These reports inrial resources will be reviewed to determine whether its clude consolidated financial information on Banks domestic financial condition and performance demonstrate that the subsidiaries and its Cayman Islands branch. These reports bank is capable of complying with applicable laws and has submitted include balance sheets, income statements, and an operating record that would be consistent with the estab- investment and capital adequacy reports. The Banking lishment of a representative office in the United States. All Commission also receives annual reports from the external foreign banks, whether seeking to establish a branch, agency auditor of Bank which reviews the domestic and foreign or representative office, will be required to provide adequate operations of Bank. Holdings, the ultimate parent of Bank, assurances of access to information on the operations of also must submit unaudited monthly and audited annual bank and its affiliates that is necessary to determine compli- financial statements to the Banking Commission. ance with U.S. laws. Bank monitors its domestic and foreign branch opera- In this case, with respect to supervision by home country tions through periodic internal audit and financial reports. authorities, the Board has considered the following informa- Bank's head office in Mexico maintains financial records tion. Over the last several years, authorities in Mexico have for the Cayman branch and obtains an external auditor's extensively reviewed and revised the laws and regulations report on the financial statements of the Cayman branch applicable to Mexican banks and their affiliates. The legal each year. The proposed representative office also will be framework for the regulation and supervision of banks has subject to internal reporting requirements by Bank regardbeen strengthened and the Ministry of Finance and the ing its activities. National Banking Commission ("Banking Commission") Based on all the facts of record, which include the have instituted new programs that materially enhance the information described above, the Board concludes that facprudential supervision of all banking organizations in tors relating to the supervision of Bank by its home country Mexico. supervisors are consistent with approval of the proposed With respect specifically to Bank, Bank is subject to the representative office. supervisory authority of the Ministry of Finance, the Na- The Board has also found that Bank engages directly in the tional Banking Commission, and, by virtue of its affiliation business of banking outside of the United States through its with Aseguradora Mexicana, the National Insurance Bond- commercial banking operations in Mexico. Bank has provided ing Commission ("Insurance Commission"). The Banking the Board with the information necessary to assess the appli- Commission is the primary supervisor of Bank and Hold- cation through submissions that address relevant issues. ings and is responsible for the oversight of Bank's opera- The Board has also taken into account the additional tions. The Ministry of Finance, which has authority regard- standards set forth in section 7 of the IBA and Regulation K ing the expansion of operations of Mexican banks, does not (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). As object to Bank's establishment of the proposed representa- noted above, the Ministry of Finance does not object to tive office. Bank establishing the proposed representative office. The Banking Commission obtains information on the With respect to the financial and managerial resources of operations of Bank primarily through on-site examinations Bank, given Bank's record of operations in its home counand periodic reports. The Banking Commission also has try, its overall financial resources, and its standing with its supervisory powers that include the ability to approve or home country supervisors, the Board has determined that replace Bank's management and to subject Bank to penal- the financial and managerial factors are consistent with ties for noncompliance with Mexican banking laws. approval of the proposed representative office. Bank ap- The Banking Commission conducts examinations to en- pears to have the experience and capacity to support the sure the safe and sound operations of Bank through reviews proposed office and has also established controls and proceof, among other things, the management, asset quality, dures for the proposed representative office to ensure comliquidity, capital adequacy, and earnings performance of pliance with U.S. law. Bank. Since August of 1993, the Banking Commission has Bank and Holdings each have committed to make availperformed continuous examinations of Bank through exam- able to the Board such information on the operations of iners resident on Bank's premises.5 The Banking Commis- Bank and any affiliate of Bank that the Board deems necession also has ongoing discussions with bank management sary to determine and enforce compliance with the IBA, the on the results of these examinations and reviews. Bank Holding Company Act of 1956, as amended, and The Banking Commission reviews mandatory financial other applicable Federal law. The Board has reviewed the and prudential reports that Bank must submit on a monthly, restrictions on disclosure of information in Mexico and the Cayman Islands and has communicated with certain governmental authorities regarding access to information. The 4. See also Citizens National Bank, 79 Federal Reserve Bulletin 805 Board notes that Bank, Holdings, and certain of their affili- (1993). ates, may not provide certain information directly to the 5. Prior to this date, the Banking Commission performed targeted examinations of portions of Bank's operations. Board. However, the Banking Commission has confirmed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

206 Federal Reserve Bulletin • February 1995 that these restrictions will not prevent the sharing of general is also specifically conditioned on compliance by Bank with supervisory or financial information. Moreover, other infor- the commitments made in connection with this application mation may be shared by the Banking Commission with and with the conditions contained in this order.6 The comforeign authorities, including the Board. Each of Bank and mitments and conditions referred to above are conditions Holdings also has committed to cooperate with the Board to imposed in writing by the Board in connection with its obtain any approvals or consents that may be required for decision, and may be enforced in proceedings under the Board to gain access to such information. In light of 12 U.S.C. § 1818 against Bank and its affiliates. these commitments and other facts of record, and subject to By order of the Board of Governors, effective Decemthe condition described below, the Board concludes that ber 21, 1994. Bank has provided adequate assurances of access to any necessary information the Board may request. Voting for this action: Chairman Greenspan and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Absent and not On the basis of all the facts of record, and subject to the voting: Vice Chairman Blinder. commitments made by Bank, as well as the terms and conditions set forth in this order, the Board has determined JENNIFER J. JOHNSON that Bank's application to establish a representative office Deputy Secretary of the Board should be, and hereby is, approved. If any restrictions on access to information on the operations or activities of Bank 6. The Board's authority to approve the establishment of the proposed and any of its affiliates subsequently interfere with the representative office parallels the continuing authority of the State of New Board's ability to determine the compliance by Bank or its York to license offices of a foreign bank. The Board's approval of this affiliates with applicable federal statutes, the Board may application does not supplant the authority of the State of New York and its agent, the New York State Banking Department, to license the proposed require termination of any of the Bank's direct or indirect representative office of Bank in accordance with any terms or conditions that activities in the United States. Approval of this application the New York State Banking Department may impose. ACTIONS TAKEN UNDER SECTIONS 5(d)(3) AND 18(C) OF THE FEDERAL DEPOSIT INSURANCE ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Acquiring Acquired Reserve Approval Bank(s) Thrift Bank Date Crestar Bank, Jefferson Savings and Loan Richmond November 23, 1994 Richmond, Virginia Association, F.A., Warrenton, Virginia First of America Bank-West Great Lakes Savings Bank, Chicago December 5, 1994 Michigan, A Federal Savings Bank, Grand Rapids, Michigan Ann Arbor, Michigan United Jersey Bank, Palisade Savings Bank, New York December 14, 1994 Hackensack, New Jersey Federal Savings Bank, Ridgefield Park, New Jersey Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 207 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Effective Applicant(s) Bank(s) Date Altus NBC Corporation, Capital National Bancshares, Inc. December 15, 1994 Altus, Oklahoma Oklahoma City, Oklahoma Compass Bancshares, Inc. Southwest Bankers, Inc., December 19, 1994 Birmingham, Alabama San Antonio, Texas Bank of San Antonio, San Antonio, Texas FCNB Corp., ENB Financial Corp., December 16, 1994 Frederick, Maryland Elkridge, Maryland First Interstate Bancorp, Levy Bancorp, December 20, 1994 Los Angeles, California Ventura, California First Interstate Bank of California, Los Angeles, California Section 4 Nonbanking Effective Applicant(s) Activity/Company Date Bank South Corporation, to engage in providing card embossing and December 12, 1994 Atlanta, Georgia issuing services to institutions (financial SunTrust Banks, Inc., and non-financial) that are not members Atlanta, Georgia of the Honor EFT network Synovus Financial Corp., Columbus, Georgia TB&C Bancshares, Inc., Columbus, Georgia Barnett Banks, Inc., Jacksonville, Florida BB&T Financial Corporation, Wilson, North Carolina First Citizens Bancshares, Inc., Raleigh, North Carolina First Union Corporation, Charlotte, North Carolina NationsBank Corporation, Charlotte, North Carolina Southern National Corporation, Lumberton, North Carolina Wachovia Corporation, Winston-Salem, North Carolina United Carolina Bancshares Corporation, Whiteville, North Carolina Keystone Financial, Inc., Key Trust Company, December 21, 1994 Harrisburg, Pennsylvania Philadelphia, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

208 Federal Reserve Bulletin • February 1995 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Reserve Effective AApppplliiccaanntt((ss)) BBaannkk((ss)) Bank Date American Bancshares, Inc., American Bank of Illinois in St. Louis November 23, 1994 Highland, Illinois Highland, Highland, Illinois The Bank of Kentucky Financial The Bank of Boone County, Cleveland December 20, 1994 Corporation, Inc., Florence, Kentucky Florence, Kentucky Berlau Bancshares, Inc., Brooke State Bank, Kansas City December 13, 1994 Prairie Village, Kansas Jewell, Kansas California Bancshares, Inc., Bank of Livermore, San Francisco November 29, 1994 San Ramon, California Livermore, California Capital City Bancshares, Inc., Johnson County Bank, Kansas City December 9, 1994 Topeka, Kansas Overland Park, Kansas Casey Bancorp, Inc., Grand Prairie State Bank, Dallas November 29, 1994 Grand Prairie, Texas Grand Prairie, Texas Centennial Holdings, Ltd., Centennial Bank, San Francisco December 14, 1994 Olympia, Washington Olympia, Washington Centura Banks, Inc., Cleveland Interim Bank, Richmond December 22, 1994 Rocky Mount, North Carolina Shelby, North Carolina Century Capital Financial - City National Bank of Dallas December 2, 1994 Delaware, Inc., Kilgore, Wilmington, Delaware Kilgore, Texas Century Capital Financial, Inc., Century Capital Financial - Dallas December 2, 1994 Kilgore, Texas Delaware, Inc., Wilmington, Delaware City National Bank of Kilgore, Kilgore, Texas Century South Banks, Inc., First Community Bank of Atlanta December 22, 1994 Dahlonega, Georgia Dawsonville, Dawsonville, Georgia Gwinnett Bancorp, Inc., Duluth, Georgia Chemung Financial Corporation, Owego National Financial New York November 28, 1994 Elmira, New York Corporation, Owego, New York CNB Bancshares, Inc., Harrisburg Bancshares, Inc., St. Louis December 7, 1994 Evansville, Indiana Harrisburg, Illinois The Colonial BancGroup, Inc., Brundidge Banking Atlanta November 25, 1994 Montgomery, Alabama Company, Inc., Brundidge, Alabama Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 209 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Community Bancshares, Inc. Community Bancshares of Dallas December 15, 1994 Katy, Texas Delaware, Inc., Wilmington, Delaware Community Bank, Katy, Texas Community Bancshares of Community Bank, Dallas December 15, 1994 Delaware, Inc., Katy, Texas Wilmington, Delaware Community Bancshares of M & M Bancorp, Inc., Atlanta December 29, 1994 Mississippi, Inc., Laurel, Mississippi Forest, Mississippi Community Bankshares, Inc., Plains States Financial Kansas City December 21, 1994 Denver, Colorado Corporation, Walsenburg, Colorado Community First Bankshares, Inc. Bank of Colorado Holding Minneapolis December 7, 1994 Fargo, North Dakota Company, Vail, Colorado Community First Financial, Inc., The Grant Bancshares, Inc., Cleveland November 18, 1994 Maysville, Kentucky Dry Ridge, Kentucky The Conrad Company, The Bank of Santa Fe, Minneapolis December 14, 1994 Minneapolis, Minnesota Santa Fe, New Mexico Consumers Bancorp, Inc., Consumers National Bank, Cleveland December 19, 1994 Minerva, Ohio Minerva, Ohio Dakota Community Bancshares, Hebron Banshares, Inc., Minneapolis November 29, 1994 Inc., Hebron, North Dakota Hebron, North Dakota First State Bank, New Leipzig, North Dakota Dakota County Bancshares, Inc., St. Paul Bancshares, Inc., Minneapolis December 13, 1994 Mendota Heights, Minnesota St. Paul, Minnesota Dutton Bancorporation, Inc., Dutton State Bank, Minneapolis December 2, 1994 Dutton, Montana Dutton, Montana FBOP Corporation, Citizens National Bank, Chicago November 30, 1994 Oak Park, Illinois Teague, Texas Firstar Corporation, First Colonial Bankshares Chicago December 19, 1994 Milwaukee, Wisconsin Corporation, Chicago, Illinois First Mid-Illinois Bancshares, Inc. Heartland Federal Savings Chicago November 30, 1994 Mattoon, Illinois Bank, Mattoon, Illinois First National of Nebraska, Inc., Union Colony Kansas City December 6, 1994 Omaha, Nebraska Bancorporation, Inc., First National of Colorado, Inc., Greeley, Colorado Omaha, Nebraska First Security Bankshares, Inc., Braselton Banking Atlanta November 25, 1994 Lavonia, Georgia Company, Braselton, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

210 Federal Reserve Bulletin • February 1995 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date First Southeastern BancGroup, Inc. Granger State Bank, Minneapolis December 29, 1994 Harmony, Minnesota Granger, Minnesota Florida Gulfcoast Bancorp, Inc., Enterprise National Bank of Atlanta November 30, 1994 Sarasota, Florida Sarasota, Sarasota, Florida Fourth Financial Corporation, Standard Bancorporation, Kansas City December 23, 1994 Wichita, Kansas Inc., Independence, Missouri Hancock Holding Company, First Denham Bancshares, Atlanta December 13, 1994 Gulfport, Mississippi Inc., Denham Springs, Louisiana HCB Bancorp, Harrison County Bank, St. Louis November 23, 1994 Palmyra, Indiana Palmyra, Indiana Laurel Capital Group, Inc., Laurel Savings Bank, Cleveland December 8, 1994 Allison Park, Pennsylvania Allison Park, Pennsylvania LCS Bancorp, Inc., Litchfield Community St. Louis December 27, 1994 Litchfield, Illinois Savings, S.B., Litchfield, Illinois Malmo Bancorp, Inc., Malmo Agency Company, Kansas City December 7, 1994 Malmo, Nebraska Malmo, Nebraska Merchants Bancorp of Pennsylvania, The Merchants National Cleveland December 14, 1994 Inc., Bank of Kittanning, Kittanning, Pennsylvania Kittanning, Pennsylvania Merit Holding Corporation, Charter Bank and Trust Co., Atlanta November 22, 1994 Tucker, Georgia Marietta, Georgia Mid Am, Inc., ASB Bankcorp, Inc., Cleveland December 19, 1994 Bowling Green, Ohio Adrian, Michigan M & L Holding Company, First Community Bank of St. Louis November 25, 1994 Alton, Illinois Taney County, Branson, Missouri National Westminster Bank Pic, NatWest Bank (Delaware), New York December 23, 1994 London, England Wilmington, Delaware NatWest Holdings Inc., New York, New York National Westminster Bancorp Inc., Jersey City, New Jersey National Westminster Bancorp NJ, Jersey City, New Jersey The New Prosperity Banking The Prosperity Banking Atlanta December 16, 1994 Corporation, Company, St. Augustine, Florida St. Augustine, Florida Norwest Corporation, Parker Bankshares, Inc., Minneapolis December 28, 1994 Minneapolis , Minnesota Parker, Colorado Oak Bancorporation, Security Bancorp, Chicago December 14, 1994 Oakland, Iowa Stanton, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 211 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Old Kent Financial Corporation, First National Bank Corp., Chicago December 29, 1994 Grand Rapids, Michigan Mount Clemens, Michigan Peoples Trust of 1987, Johnson County Bank, Kansas City November 23, 1994 Ottawa, Kansas Overland Park, Kansas Pioneer Bancshares, Inc. Employee Pioneer Bancshares, Inc., Kansas City December 23, 1994 Stock Ownership Plan, Ponca City, Oklahoma Ponca City, Oklahoma Principal National Bancorp, Inc., Home Guaranty Savings Chicago December 16, 1994 Pontiac, Illinois Association, Piper City, Illinois Raddatz Family Limited Partnership, East Side Financial, Inc., Chicago November 29, 1994 Chicago, Illinois Chicago, Illinois Rockcastle Bancorp, Inc., Citizens Bank, Cleveland December 14, 1994 Brodhead, Kentucky Brodhead, Kentucky Roxton Corporation Employees' The Roxton Corporation, Dallas December 22, 1994 Stock Ownership Plan, Whitesboro, Texas Whitesboro, Texas The First State Bank, Roxton, Texas Royal Bancshares, Inc., Iowa-Grant Bankshares, Chicago December 16, 1994 Elroy, Wisconsin Inc., Cobb, Wisconsin Salinas Valley Bancorp, Bank of Salinas, San Francisco November 23, 1994 Salinas, California Salinas, California San Jose Banco, Inc., First National Bank of Chicago December 15, 1994 Fremont, Indiana Fremont, Fremont, Indiana Summerville/Trion Bancshares, Inc., Adairsville Bancshares, Inc., Atlanta December 28, 1994 Trion, Georgia Adairsville, Georgia Texas Financial Bancorporation, Monmouth Financial Dallas December 14, 1994 Inc., Services, Inc., Minneapolis, Minnesota Minneapolis, Minnesota Monmouth Trust and Savings Bank, Monmouth, Illinois, Fulton State Bank, Fulton, Illinois First National Bank of Rosenberg, Rosenberg, Texas Truman Bancorp, Inc., United States National Bank St. Louis December 6, 1994 Brentwood, Missouri of Clayton, St. Louis, Missouri Yoakum National Bancshares Yoakum National Bank, Dallas November 29, 1994 Delaware, Inc., Yoakum, Texas Wilmington, Delaware Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

212 Federal Reserve Bulletin • February 1995 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Yoakum National Bancshares, Inc. Yoakum National Dallas November 29, 1994 Yoakum, Texas Bancshares - Delaware, Inc., Wilmington, Delaware Yoakum National Bank, Yoakum, Texas Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank Date A.N.B. Holding Company, Ltd. to engage de novo in Dallas December 21, 1994 Terrell, Texas making, acquiring, or servicing loans directly for itself or for others Associated Banc-Corp., Associated Trust Company Chicago December 16, 1994 Green Bay, Wisconsin of Illinois, Chicago, Illinois Banco Santander, S.A., First Fidelity New York December 22, 1994 Santander, Spain Bancorporation, Lawrenceville, New Jersey BankAmerica Corporation, Arbor National Holdings, San Francisco December 15, 1994 San Francisco, California Inc., Uniondale, New York Bank of Montreal, Burns Fry and Timmins Chicago December 22, 1994 Toronto, Canada Holdings Inc., Bankmont Financial Corp., Chicago, Illinois Chicago, Illinois Harris Nesbitt Thomson Securities, Inc., Chicago, Illinois Banterra Corp., Ron Clark Insurance, Inc., St. Louis November 28, 1994 Eldorado, Illinois Eldorado, Illinois Barnett Banks, Inc., EquiCredit Corporation, Atlanta Jacksonville, Florida Jacksonville, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 213 Section 4—Continued Nonbanking Reserve Effective Applicant(s) Activity/Company Bank Date Boatmen's Bancshares, Inc. National Mortgage St. Louis December 5, 1994 St. Louis, Missouri Company, Memphis, Tennessee Arkansas Home Loan Company, Memphis, Tennessee National Home Loan Company, Inc., Memphis, Tennessee National Home Loan Company of Mississippi, Inc., Memphis, Tennessee Chadwick Bancshares, Inc., Community Insurance, Inc., Chicago December 2, 1994 Chadwick, Illinois Miles, Iowa Charter Bancorporation, Inc., to engage de novo in San Francisco November 28, 1994 Scottsdale, Arizona making, acquiring, or servicing loans or other extensions of credit CNB Bancshares, Inc., Shelbyville High St. Louis December 15, 1994 Evansville, Indiana Apartments, Limited Partnership, Huntingburg, Indiana Commerzbank Aktiengesellschaft, CB Clearing, Inc., New York December 12, 1994 Frankfurt, Germany Chicago, Illinois First Bancorporation of Ohio, The CIVISTA Corporation, Cleveland November 22, 1994 Akron, Ohio Canton, Ohio First Deposit Bancshares, Inc., South Central Savings Bank, St. Louis December 23, 1994 Tompkinsville, Kentucky FSB, Edmonton, Kentucky First of America Bank Corporation, New England Trust Chicago December 5, 1994 Kalamazoo, Michigan Company, Providence, Rhode Island First Virginia Banks, Inc., First General Leasing Richmond December 14, 1994 Falls Church, Virginia Company, Falls Church, Virginia Lowndes Bancshares, Inc., to expand its data processing Atlanta December 15, 1994 Valdosta, Georgia and transmission services to Panama Marshall & Ilsley Corporation, Software Alliance Chicago December 29, 1994 Milwaukee, Wisconsin Corporation, M&I Data Services, Inc., Berkeley, California Milwaukee, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

214 Federal Reserve Bulletin • February 1995 Section 4—Continued Nonbanking Reserve Effective Applicant(s) Activity/Company Bank Date Mid Am, Inc., Lucas County Credit Cleveland November 23, 1994 Bowling Green, Ohio Bureau, Inc., d.b.a. International Credit Service, Toledo, Ohio MWN Corporation, d.b.a. CCB Services, St. Petersburg, Florida NationsBank Corporation, Greyrock Capital Group Richmond December 21, 1994 Charlotte, North Carolina Inc., Stamford, Connecticut Northern Bankshares, Inc., to expand the scope of its Chicago December 5, 1994 McFarland, Wisconsin lending activity of making and servicing loans by increasing loan participations, in an aggregate amount, up to $2 million Norwest Corporation, Bank of Montana System, Minneapolis December 20, 1994 Minneapolis, Minnesota Great Falls, Montana One Valley Bancorp of West Point Bancorp, Inc., Richmond December 20, 1994 Virginia, Inc., Point Pleasant, Charleston, West Virginia West Virginia PAB Bankshares, Inc., First Federal Savings Bank Atlanta December 1, 1994 Valdosta, Georgia of Bainbridge, Bainbridge, Georgia PNC Bank Corp., Indian River Federal Cleveland November 18, 1994 Pittsburgh, Pennsylvania Savings Bank, Vero Beach, Florida Republic Bancorp, Inc., CUB Funding, Chicago December 20, 1994 Ann Arbor, Michigan Calabasas, California Saban, S.A., Republic New York New York December 20, 1994 Panama City, Panama Securities Corporation, RNYC Holdings Limited, New York, New York Marina Bay, Gibraltar Republic New York Corporation, New York, New York Security Richland Corporation, Hansen-Lawrence Agency, Minneapolis December 21, 1994 Miles City, Montana Inc., Worden, Montana West Concord Bancshares, Inc., to engage de novo in Minneapolis November 25, 1994 West Concord, Minnesota making loans for its own account Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 215 Sections 3 and 4 Nonbanking Reserve Effective Activity/Company Bank Date Hibernia Corporation, Pioneer Bancshares Atlanta November 23, 1994 New Orleans, Louisiana Corporation, Shreveport, Louisiana Zachary Taylor Life Insurance Company, Shreveport, Louisiana N.S. Bancorp, Inc., Northwestern Savings Bank, Chicago December 14, 1994 Chicago, Illinois Chicago, Illinois FirstFed Bancshares, Inc., Des Plaines, Illinois First Federal Bank for Savings, Des Plaines, Illinois APPLICATIONS APPROVED UNDER BANK MERGER ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Applicant(s) Bank(s) Effective uate First Interstate Bank of California, Bank of A. Levy, December 20, 1994 Los Angeles, California Ventura, California SouthTrust Bank of West Florida, Plant State Bank, December 28, 1994 St. Petersburg, Florida Plant City, Florida APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Reserve Effective Applicant(s) Bank(s) Bank Date Chemung Canal Trust Company, Owego National Bank, New York November 28, 1994 Elmira, New York Owego, New York Cleveland Interim Bank, Centura Bank, Richmond December 22, 1994 Shelby, North Carolina Rocky Mount, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

216 Federal Reserve Bulletin • February 1995 Bank Merger Act—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Dakota County State Bank, Phalen Bank, Minneapolis December 13, 1994 Mendota Heights, Minnesota St. Paul, Minnesota First Community Bank, Inc., Ameribank, Inc., Richmond December 22, 1994 Princeton, West Virginia Welch, West Virginia Integra Bank/North, Bucktail Bank and Trust Cleveland November 23, 1994 Titusville, Pennsylvania Company, Emporium, Pennsylvania Integra Bank/Pittsburgh, Lincoln Savings Bank, Cleveland December 2, 1994 Pittsburgh, Pennsylvania Pittsburgh, Pennsylvania Integra Bank/South, Integra Bank/Pittsburgh, Cleveland December 2, 1994 Uniontown, Pennsylvania Pittsburgh, Pennsylvania Vail Bank, Colorado Community First Kansas City December 7, 1994 Vail, Colorado State Bank, Steamboat Springs, Colorado Wesbanco Bank Wheeling, Wesbanco Bank Elm Grove, Cleveland December 6, 1994 Wheeling, West Virginia Wheeling, West Virginia Westamerica Bank, Pacific Valley National San Francisco December 8, 1994 San Rafael, California Bank, Modesto, California PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the order against petitioner (Cavallari v. OCC, No. 94- Federal Reserve Banks in which the Board of Governors is 4151). The consolidated brief of the agencies is due not named a party. January 9, 1995. Jackson v. Board of Governors, No. 94-16789 (9th Cir., DLG Financial Corp. v. Board of Governors, No. 94-891 filed September 22, 1994). Appeal of dismissal of pro se action for violation of a prisoner's civil rights. On De- (U.S. Supreme Court, filed November 14, 1994). Appeal cember 1, 1994, the court dismissed the appeal. of an order of the Fifth Circuit Court of Appeals (29 F.3d 993) affirming both an asset freeze order obtained by the Board of Governors v. MacCallum, No. 94 Civ. 5652 (WK) Board in connection with a pending enforcement action (S.D. New York, filed August 3, 1994). Action to freeze and the district court's dismisal of appellant's claims assets of individual pending administrative adjudication seeking an injunction and damages against the Board and of civil money penalty assessment by the Board. On the Federal Reserve Bank of Dallas relating to the same August 3, 1994, the court issued an order temporarily enforcement action. restraining the transfer or disposition of the individual's Cavallari v. Board of Governors, No. 94-4183 (2d Cir., assets. On December 22, 1994, the order was dissolved filed October 17, 1994). Petition for review of Board by agreement of the parties. order of prohibition against a former outside counsel to National Title Resource Agency v. Board of Governors, a national bank (80 Federal Reserve Bulletin 1046 No. 94-2050 (8th Cir., filed April 28, 1994). Petition (1994)). The case was consolidated with a petition for for review of Board's order, issued under section 4 of review of orders of the Comptroller of the Currency the Bank Holding Company Act, approving the applicaimposing a civil money penalty and cease and desist tion of Norwest Corp., Minneapolis, Minnesota, to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 217 acquire Double Eagle Financial Corp., Phoenix, Ari- Banco Latino C.A., S.A.C.A., Caracas, Venezuela, and its zona, and its subsidiary, United Title Agency, Inc., and U.S. subsidiary Edge corporation, Banco Latino Internathereby engage in title insurance agency activities and tional, Miami, Florida. real estate settlement services (80 Federal Reserve Bulletin 453). Oral argument was held November 17, Michael A. Jacobs 1994. Stamford, New York Beckman v. Greenspan, No. CV 94-41-BCG-RWA (D. Mont., filed April 13, 1994). Action against Board and others seeking damages for alleged violations of constitu- The Federal Reserve Board announced on December 15, tional and common law rights. The Board's motion to 1994, the issuance of a combined Order of Prohibition, dismiss was filed May 19, 1994. Order to Cease and Desist, and Order of Assessment of a Scott v. Board of Governors, No. 94-0104 (D. D.C., filed Civil Money Penalty against Michael A. Jacobs, an January 21, 1994). Petition for review of a Board order institution-affiliated party of United Bank Corporation of approving the application of Society Corporation, Cleve- New York, Stamford, New York, a bank holding company, land, Ohio, to merge with KeyCorp, Albany, New York and of United Bank Corporation's current or former subsid- (80 Federal Reserve Bulletin 253 (1994)). On Decem- iary banks, the First National Bank of Lisbon, Ogdensburg, ber 7, 1994, the court granted the Board's motion to New York, the First National Bank of Amenia, Amenia, dismiss. New York, and the First National Bank of Downsville, Bennett v. Greenspan, No. 93-1813 (D. D.C., filed April 20, Downsville, New York. 1993). Employment discrimination action. A jury verdict for the plaintiff was rendered on October 13, 1994. The James A. MacCallum Board's motion for a new trial on the issue of damages is New York, New York pending. Adams v. Greenspan, No. 93-0167 (D. D.C., filed Janu- The Federal Reserve Board announced on December 29, ary 27, 1993). Action by former employee under the 1994, the issuance of a combined Order to Cease and Desist Civil Rights Act of 1964 and the Rehabilitation Act of and of Removal and Prohibition against James A. MacCal- 1973 concerning termination of employment. An order lum, a former vice president and institution-affiliated party dismissing the case was entered on November 18, of the New York branch of The Toyo Trust & Banking Co., 1994. Ltd., Tokyo, Japan, and an officer and institution-affiliated Zemel v. Board of Governors, No. 92-1056 (D. D.C., filed party of the Canadian Imperial Bank of Commerce, New May 4, 1992). Age Discrimination in Employment Act York, New York, and the New York agency of the Canadian case. On November 29, 1994, the court granted the Imperial Bank of Commerce, Toronto, Canada. Board's motion for summary judgment. Board of Governors v. Ghaith R. Pharaon, No. 91-CIV- 6250 (S.D. New York, filed September 17, 1991). Action to freeze assets of individual pending administrative adju- WRITTEN AGREEMENTS APPROVED BY FEDERAL dication of civil money penalty assessment by the Board. RESERVE BANKS On September 17, 1991, the court issued an order temporarily restraining the transfer or disposition of the individ- Bankers Trust New York Corporation ual's assets. New York, New York FINAL ENFORCEMENT ORDERS ISSUED BY THE The Federal Reserve Board announced on December 5, BOARD OF GOVERNORS 1994, the execution of a Written Agreement between the Federal Reserve Bank of New York and Bankers Trust New Banco Latino C.A., S.A.C.A. York Corporation, New York, New York, and its subsidiar- Caracas, Venezuela ies, Bankers Trust Company, New York, New York, and BT Securities Corporation, New York, New York, regarding the The Federal Reserve Board announced on December 23, conduct of the leverage derivatives transaction business by 1994, the issuance of a Cease and Desist Order against these companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

218 Federal Reserve Bulletin • February 1995 Citizens Bancshares, Inc. The San Francisco Company Walnut, Illinois San Francisco, California The Federal Reserve Board announced on December 29, The Federal Reserve Board announced on December 28, 1994, the execution of two Written Agreements between the 1994, the execution of a Written Agreement between the Federal Reserve Bank of Chicago and Citizens Bancshares, Federal Reserve Bank of San Francisco and The San Fran- Inc., Walnut, Illinois, and the Federal Reserve Bank of cisco Company, San Francisco, California. Chicago and the Citizens First State Bank of Walnut, Walnut, Illinois. Hanmi Bank Los Angeles, California The Federal Reserve Board announced on December 29, 1994, the execution of a Written Agreement between the Federal Reserve Bank of San Francisco and the Hanmi Bank, Los Angeles, California. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities A3 Guide to Tabular Presentation A21 Large reporting banks A23 Branches and agencies of foreign banks Domestic Financial Statistics MONEY STOCK AND BANK CREDIT FINANCIAL MARKETS A4 Reserves, money stock, liquid assets, and debt A24 Commercial paper and bankers dollar measures acceptances outstanding A5 Reserves of depository institutions, Reserve Bank A25 Prime rate charged by banks on short-term credit business loans A6 Reserves and borrowings—Depository A26 Interest rates—money and capital markets institutions All Stock market—Selected statistics A7 Selected borrowings in immediately available funds—Large member banks FEDERAL FINANCE POLICY INSTRUMENTS A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays A8 Federal Reserve Bank interest rates A30 Federal debt subject to statutory limitation A9 Reserve requirements of depository institutions A30 Gross public debt of U.S. Treasury—Types A10 Federal Reserve open market transactions and ownership A31 U.S. government securities dealers—Transactions FEDERAL RESERVE BANKS A32 U.S. government securities dealers—Positions and financing All Condition and Federal Reserve note statements A3 3 Federal and federally sponsored credit A12 Maturity distribution of loan and security agencies—Debt outstanding holdings MONETARY AND CREDIT AGGREGATES SECURITIES MARKETS AND CORPORATE FINANCE A13 Aggregate reserves of depository institutions and monetary base A34 New security issues—Tax-exempt state and local A14 Money stock, liquid assets, and debt measures governments and corporations A16 Deposit interest rates and amounts outstanding— A3 5 Open-end investment companies—Net sales commercial and BIF-insured banks and assets A17 Bank debits and deposit turnover A35 Corporate profits and their distribution A35 Nonfarm business expenditures on new plant and equipment COMMERCIAL BANKING INSTITUTIONS A36 Domestic finance companies—Assets and liabilities, and consumer, real estate, and business A18 Assets and liabilities, Wednesday figures credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • February 1995 Domestic Financial Statistics—Continued REPORTED BY BANKS IN THE UNITED STATES REAL ESTATE A55 Liabilities to and claims on foreigners A37 Mortgage markets A56 Liabilities to foreigners A3 8 Mortgage debt outstanding A58 Banks' own claims on foreigners A59 Banks' own and domestic customers' claims on foreigners CONSUMER INSTALLMENT CREDIT A59 Banks' own claims on unaffiliated foreigners A39 Total outstanding A60 Claims on foreign countries—Combined A39 Terms domestic offices and foreign branches FLOW OF FUNDS REPORTED BYNONBANKING BUSINESS A40 Funds raised in U.S. credit markets ENTERPRISES IN THE UNITED STATES A42 Summary of financial transactions A43 Summary of credit market debt outstanding A61 Liabilities to unaffiliated foreigners A44 Summary of financial assets and liabilities A62 Claims on unaffiliated foreigners Domestic Nonfinancial Statistics SECURITIES HOLDINGS AND TRANSACTIONS SELECTED MEASURES A63 Foreign transactions in securities A64 Marketable U.S. Treasury bonds and A45 Nonfinancial business activity—Selected notes—Foreign transactions measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization INTEREST AND EXCHANGE RATES A47 Industrial production—Indexes and gross value A49 Housing and construction A65 Discount rates of foreign central banks A50 Consumer and producer prices A65 Foreign short-term interest rates A51 Gross domestic product and income A66 Foreign exchange rates A52 Personal income and saving A67 Guide to Statistical Releases and Special Tables International Statistics SUMMARY STATISTICS SPECIAL TABLES A53 U.S. international transactions—Summary A68 Terms of lending at commercial banks, A54 U.S. foreign trade November 1994 A54 U.S. reserve assets A72 Assets and liabilities of U.S. branches and agencies A54 Foreign official assets held at Federal Reserve of foreign banks, September 30, 1994 Banks A55 Selected U.S. liabilities to foreign official institutions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified HUD Department of Housing and Urban P Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column IO Interest only are changed.) IPCs Individuals, partnerships, and corporations * Amounts insignificant in terms of the last decimal IRA Individual retirement account place shown in the table (for example, less than MMDA Money market deposit account 500,000 when the smallest unit given is millions) MSA Metropolitan statistical area 0 Calculated to be zero NOW Negotiable order of withdrawal Cell not applicable OCD Other checkable deposit ATS Automatic transfer service OPEC Organization of Petroleum Exporting Countries BIF Bank insurance fund OTS Office of Thrift Supervision CD Certificate of deposit PO Principal only CMO Collateralized mortgage obligation REIT Real estate investment trust FFB Federal Financing Bank REMIC Real estate mortgage investment conduit FHA Federal Housing Administration RP Repurchase agreement FHLBB Federal Home Loan Bank Board RTC Resolution Trust Corporation FHLMC Federal Home Loan Mortgage Corporation SAIF Savings Association Insurance Fund FmHA Farmers Home Administration SCO Securitized credit obligation FNMA Federal National Mortgage Association SDR Special drawing right FSLIC Federal Savings and Loan Insurance Corporation SIC Standard Industrial Classification G-7 Group of Seven VA Department of Veterans Affairs GENERAL INFORMATION In many of the tables, components do not sum to totals because include not fully guaranteed issues) as well as direct obligaof rounding. tions of the Treasury. "State and local government" also in- Minus signs are used to indicate (1) a decrease, (2) a negative cludes municipalities, special districts, and other political figure, or (3) an outflow. subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Nonfinancial Statistics • February 1995 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1993 1994 1994 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q4 Q1 Q2 Q3 July' Aug/ Sept/ Oct. Nov. Reserves of depository institutions2 1 Total 14.2 3.1 -4.4 -2.5 2.2 -6.0 -.7 -6.3 -3.2 2 Required 14.1 2.5 -3.6 -2.6 2.2 -4.0 -1.9 -1.2 -7.4 3 Nonborrowed 15.6 3.7 -5.4 -4.2 -.3 -6.3 -1.1 -4.2 -.6 4 Monetary base3 9.8 10.2 8.4 7.3 8.1 6.3 5.4 6.7 8.8 Concepts of money, liquid assets, and debt* 5 Ml 9.4 6.0 1.9 3.If 7.1 -2.2 1.0 -3.6 -.8 6 M2 2.4r 1.9 1.9 ,8r 4.8 -1.9 -.4 -1.6 .6 7 M3 2.6 .3 .7 1.7r 5.9 -1.9 1.6 2.5 2.2 8 L 2.0 2.4r 1.4r 1.1 6.0 -1.6 -1.0 6.7 n.a. 9 Debt 5.3 5.6r 4.4 2.6 6.2 5.7 4.7 n.a. Nontransaction components 10 InM25 -.8 .0 1.9r -.3r 3.7 -1.8 -1.0 -.7 1.4 11 In M3 only6 4.0 -8.0 -6.2 7.r 12.4 -2.0 12.6 25.6 10.4 Time and savings deposits Commercial banks 12 Savings, including MMDAs 3.6 4.3 -3.3 -4.1 -2.2 -2.8 -3.6 -12.1 -9.7 13 Small time1 -7.3r -5.2 .1 8.9 5.7 15.1 12.6 17.5 18.0 14 Large time8'9 -.4 -2.6 -2.5r 10.0 7.0 14.3 21.0 22.8 24.0 Thrift institutions 15 Savings, including MMDAs -.4 .5 .2 -ii.r -9.3 -16.7 -16.9 -15.7 -21.5 16 Small time7 -9.4 -11.5 -7.5 -2.4r .0 -3.2 2.4 13.0 19.6 17 Large time8 -6.7 -8.5 -6.5 4.8 15.9 -5.9 23.6 23.2 3.8 Money market mutual funds 18 General purpose and broker-dealer 1.2 -.1 17.7 1,0r 14.0 -2.0 -2.0 8.9 15.8 19 Institution-only 8.8 -26.7 -22.8 -6.0 9.9 -11.2 -9.9 52.9 2.1 Debt components4 20 Federal 6.2r 7.3 5.4r 3.9 1.0 6.1 6.0 5.4 n.a. 21 Nonfederal 4.6r 4.6 5.6r 4.6 3.2 6.3 5.6 4.5 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts Kingdom and Canada, and (3) balances in both taxable and tax-exempt, institution-only outstanding during preceding month or quarter. money market funds. Excludes amounts held by depository institutions, the U.S. govern- 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with ment, money market funds, and foreign banks and official institutions. Also excluded is regulatory changes in reserve requirements. (See also table 1.20.) the estimated amount of overnight RPs and Eurodollars held by institution-only money 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally market funds. Seasonally adjusted M3 is computed by adjusting its non-M2 component as adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency a whole and then adding this result to seasonally adjusted M2. component of the money stock, plus (3) (for all quarterly reporters on the "Report of L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters securities, commercial paper, and bankers acceptances, net of money market fund holdwhose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted ings of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, difference between current vault cash and the amount applied to satisfy current reserve short-term Treasury securities, commercial paper, and bankers acceptances, each seasonrequirements. ally adjusted separately, and then adding this result to M3. 4. Composition of the money stock measures and debt is as follows: Debt: The debt aggregate is the outstanding credit market debt of the domestic Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of nonfinancial sectors—the federal sector (U.S. government, not including governmentdepository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all sponsored enterprises or federally related mortgage pools) and the nonfederal sectors commercial banks other than those owed to depository institutions, the U.S. government, (state and local governments, households and nonprofit organizations, nonfinancial corpoand foreign banks and official institutions, less cash items in the process of collection and rate and nonfarm noncorporate businesses, and farms). Nonfederal debt consists of Federal Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable mortgages, tax-exempt and corporate bonds, consumer credit, bank loans, commercial order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository paper, and other loans. The data, which are derived from the Federal Reserve Board's flow institutions, credit union share draft accounts, and demand deposits at thrift institutions. of funds accounts, are break-adjusted (that is, discontinuities in the data have been Seasonally adjusted Ml is computed by summing currency, travelers checks, demand smoothed into the series) and month-averaged (that is, the data have been derived by deposits, and OCDs, each seasonally adjusted separately. averaging adjacent month-end levels). M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) 5. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund issued by all depository institutions and overnight Eurodollars issued to U.S. residents by balances (general purpose and broker-dealer), (3) savings deposits (including MMDAs), foreign branches of U.S. banks worldwide, (2) savings (including MMDAs) and small and (4) small time deposits. time deposits (time deposits—including retail RPs—in amounts of less than $100,000), 6. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. residents, and (3) balances in both taxable and tax-exempt general-purpose and broker-dealer and (4) money market fund balances (institution-only), less (5) a consolidation adjustment money market funds. Excludes individual retirement accounts (IRAs) and Keogh balances that represents the estimated amount of overnight RPs and Eurodollars held by institutionat depository institutions and money market funds. Also excludes all balances held by only money market funds. This sum is seasonally adjusted as a whole. U.S. commercial banks, money market funds (general purpose and broker-dealer), foreign 7. Small time deposits—including retail RPs—are those issued in amounts of less governments and commercial banks, and the U.S. government. Seasonally adjusted M2 is than $100,000. All IRA and Keogh account balances at commercial banks and thrift computed by adjusting its non-Mi component as a whole and then adding this result to institutions are subtracted from small time deposits. seasonally adjusted Ml. 8. Large time deposits are those issued in amounts of $100,000 or more, excluding M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of $100,000 or those booked at international banking facilities. more) issued by all depository institutions, (2) term Eurodollars held by U.S. residents at 9. Large time deposits at commercial banks less those held by money market funds, foreign branches of U.S. banks worldwide and at all banking offices in the United depository institutions, the U.S. government, and foreign banks and official institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT1 Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures 1994 1994 Sept. Oct. Nov. Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 392,939r 394,856 399,250 394,426 394,749 396,105 396,013 399,576 400,702 400,880 U.S. government securities2 2 Bought outright—System account 354,429 354,275 357,686 353,754 353,467 353,635 354,941 358,166 359,509 359,214 3 Held under repurchase agreements 296 1,648 2,899 1,791 2,211 2,664 1,960 2,743 3,553 3,134 Federal agency obligations 4 Bought outright 3,822 3,772 3,730 3,762 3,757 3,744 3,744 3,744 3,744 3,684 5 Held under repurchase agreements 346 349 969 161 448 386 344 807 1,193 1,694 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 45 20 103 10 32 13 242 40 57 97 8 Seasonal credit 448 344 159 348 303 258 188 164 140 127 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 730r 559 718 719 535 995 397 705 764 667 11 Other Federal Reserve assets 32,824 33,890 32,987 33,882 33,996 34,410 34,198 33,208 31,743 32,264 12 Gold stock 11,054 11,054 11,052 11,054 11,053 11,053 11,052 11,052 11,052 11,051 13 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 22,698 22,758 22,819 22,758 22,772 22,786 22,800 22,814 22,828 22,842 ABSORBING RESERVE FUNDS 15 Currency in circulation 386,408 388,817 393,820 389,572 388,763 389,561 391,654 394,224 394,192 396,053 16 Treasury cash holdings 372 367 379 367 371 363 364 371 396 390 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,953 5,553 5,250 5,112 5,078 6,119 5,503 5,225 4,821 5,351 18 Foreign 199 192 192 177 176 186 166 181 197 224 19 Service-related balances and adjustments .. 5,156 4,849 4,615 4,697 4,715 4,782 4,725 4,685 4,537 4,466 20 Other 325 336 316 346 325 336 322 318 310 302 21 Other Federal Reserve liabilities and capital . 11,178 11,724 12,020 11,420 11,672 12,000 12,222 11,755 12,098 11,902 22 Reserve balances with Federal Reserve Banks- 25,119r 24,848 24,547 24,566 25,492 24,616 22,926 24,701 26,049 24,102 End-of-month figures Wednesday figures Sept. Oct. Nov. Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 393,466r 395,756 402,169 395,316 395,802 398,046 397,399 399,901 403,171 402,169 U.S. government securities2 2 Bought outright—System account 353,010 352,313 359,190 353,103 356,241 354,284 356,721 358,817 359,627 359,190 3 Held under repurchase agreements 2,140 3,615 6,510 4,180 1,139 3,615 400 3,310 4,306 6,510 Federal agency obligations 4 Bought outright 3,806 3,744 3,674 3,762 3,744 3,744 3,744 3,744 3,744 3,674 5 Held under repurchase agreements 370 400 1,655 375 500 400 760 850 2,050 1,655 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 69 17 31 11 82 21 1,641 16 338 31 8 Seasonal credit 436 247 113 326 288 216 175 163 131 113 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 188r 579 -432 -281 -231 882 30 1,317 930 -432 11 Other Federal Reserve assets 33,448 34,841 31,428 33,840 34,039 34,884 33,928 31,685 32,046 31,428 12 Gold stock 11,054 11,053 11,052 11,053 11,053 11,052 11,052 11,052 11,052 11,052 13 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 22,730 22,786 22,842 22,758 22,772 22,786 22,800 22,814 22,828 22,842 ABSORBING RESERVE FUNDS 15 Currency in circulation 385,516 389,604 396,703 389,807 389,675 391,220 393,816 394,580 395,796 396,703 16 Treasury cash holdings 363 363 389 372 363 363 367 397 391 389 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,848 5,164 5,348 5,510 5,912 4,806 6,272 4,250 4,532 5,348 18 Foreign 342 223 230 170 178 198 161 184 198 230 19 Service-related balances and adjustments .. 5,032r 4,782 4,466 4,697 4,715 4,782 4,725 4,685 4,537 4,466 20 Other 318 392 302 280 320 340 304 331 290 302 21 Other Federal Reserve liabilities and capital 12,012 12,584 11,133 11,247 11,452 12,205 11,452 11,567 11,905 11,133 22 Reserve balances with Federal Reserve Banks: 24,837r 24,502 25,509 25,064 25,030 25,989 22,173 25,792 27,420 25,509 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Excludes required clearing balances and adjustments to compensate for float. 2. Includes securities loaned—fully guaranteed by U.S. government securities pledged with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • February 1995 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1991 1992 1993 1994 Dec. Dec. Dec. May June July Aug. Sept.1 Oct. Nov. 1 Reserve balances with Reserve Banks2 26,659 25,368 29,374 26,790 26,502 25,996 25,284 25,157 24,745 24,714 2 Total vault cash3 32,509 34,542 36,812 35,892 36,898 37,635 37,614 38,431 38,231 38,931 3 Applied vault cash4 28,872 31,172 33,484 32,483 33,422 34,096 34,052 34,794 34,745 35,291 4 Surplus vault cash5 3,637 3,370 3,328 3,409 3,476 3,539 3,562 3,637 3,486 3,641 5 Total reserves6 55,532 56,540 62,858 59,273 59,924 60,092 59,337 59,951 59,490 60,005 6 Required reserves 54,553 55,385 61,795 <58,358 58,819 58,985 58,333 58,891 58,686 59,000 7 Excess reserve balances at Reserve Banks7 979 1,155 1,063 915 1,105 1,107 1,004 1,060 804 1,005 8 Total borrowings at Reserve Banks8 192 124 82 200 333 458 469 487 380 249 9 Seasonal borrowings 38 18 31 134 226 364 445 444 339 164 10 Extended credit9 1 1 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1994 Aug. 3 Aug. 17 Aug. 31 Sept. 14 Sept. 28r Oct. 12r Oct. 26 Nov. 9 Nov. 23 Dec. 7 1 Reserve balances with Reserve Banks2 24,703 25,594 25,099 25,720 24,641 24,824 25,025 23,771 25,360 24,636 2 Total vault cash3 38,557 38,114 36,913 38,451 38,397 38,539 37,608 39,236 38,235 39,934 3 Applied vault cash4 34,818 34,486 33,455 34,839 34,700 35,138 34,137 35,506 34,677 36,243 4 Surplus vault cash5 3,739 3,628 3,458 3,612 3,697 3,401 3,472 3,730 3,558 3,691 5 Total reserves 59,521 60,080 58,554 60,559 59,341 59,962 59,161 59,276 60,037 60,879 6 Required reserves 58,176 59,141 57,559 59,643 58,138 58,907 58,587 58,435 59,092 59,544 7 Excess reserve balances at Reserve Banks 1,346 939 995 917 1,204 1,055 574 841 945 1,335 8 Total borrowings at Reserve Banks8 458 442 498 447 535 433 346 351 201 216 9 Seasonal borrowings 413 430 468 437 458 403 326 223 152 112 10 Extended credit 0 0 0 0 0 0 0 0 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistical release. For cash applied during the maintenance period by "nonbound" institutions (that is, those ordering address, see inside front cover. whose vault cash exceeds their required reserves) to satisfy current reserve requirements. 2. Excludes required clearing balances and adjustments to compensate for float and 5. Total vault cash (line 2) less applied vault cash (line 3). includes other off-balance-sheet "as-of" adjustments. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash (line 3. Total "lagged" vault cash held by depository institutions subject to reserve 3). requirements. Dates refer to the maintenance periods during which the vault cash may be 7. Total reserves (line 5) less required reserves (line 6). used to satisfy reserve requirements. The maintenance period for weekly reporters ends 8. Also includes adjustment credit. sixteen days after the lagged computation period during which the vault cash is held. 9. Consists of borrowing at the discount window under the terms and conditions Before Nov. 25, 1992, the maintenance period ended thirty days after the lagged established for the extendi credit program to help depository institutions deal with computation period. sustained liquidity pressures. Because there is not the same need to repay such borrowing 4. All vault cash held during the lagged computation period by "bound" institutions promptly as with traditional short-term adjustment credit, the money market impact of (that is, those whose required reserves exceed their vault cash) plus the amount of vault extended credit is similar to that of nonborrowed reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A7 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Millions of dollars, averages of daily figures 1994, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Oct 3 Oct. 10 Oct. 17 Oct. 24 Oct. 31 Nov. 7 Nov. 14 Nov. 21 Nov. 28 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 73,249 76,739 74,555 68,759 69,873 75,143 72,603 76,387 75,368 2 For all other maturities 12,920 12,492 12,889 13,879 15,923 16,685 14,817 17,343 15,334 From other depository institutions, foreign banks and official institutions, and US. government agencies 3 For one day or under continuing contract 20,162 19,205 18,386 18,240 16,902 17,835 18,979 20,140 18,621 4 For all other maturities 21,455 20,655 20,607 22,922 22,242 22,074 22,471 21,515 21,441 Repurchase agreements on US. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 23,178 23,964 24,034 22,995 22,000 22,406 23,109 25,838 17,864 6 For all other maturities 29,333 29,910 28,918 33,192 32,215 31,392 29,513 27,429 33,284 All other customers 7 For one day or under continuing contract 33,965 33,091 33,451 33,799 32,802 34,363 33,299 35,679 34,426 8 For all other maturities 16.814 16,528 16,698 17,004 17,134 16,875 16,955 17,389 19,759 MEMO Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 60,790 58,607 59,293 56,776 59,630 60,309 61,075 60,169 63,006 10 To all other specified customers 21,031 21,283 21,488 21,415 21,842 22,347 22,091 22,698 22,601 1. Banks with assets of $4 billion or more as of Dec. 31, 1988. 2. Brokers and nonbank dealers in securities, other depository institutions, foreign Data in this table also appear in the Board's H.5 (507) weekly statistical release. For banks and official institutions, and US. government agencies, ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • February 1995 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 1/ O 6 n /9 5 Effective date Previous rate 1/ O 6 n /9 5 Effective date Previous rate 1/ O 6 n /9 5 Effective date Previous rate Boston 4.75 11/16/94 4.00 5.90 1/5/95 5.90 6.40 1/5/95 6.40 New York 11/15/94 Philadelphia 11/17/94 Cleveland 11/16/94 Richmond 11/16/94 Atlanta 11/16/94 Chicago 11/17/94 St. Louis 11/15/94 Minneapolis 11/16/94 Kansas City 11/15/94 Dallas 11/16/94 San Francisco 4.75 11/15/94 4.00 5.90 1/5/95 5.90 6.40 1/5/95 6.40 Range of rates for adjustment credit in recent years4 Range (or F.R. Range (or F.R. Range (or F.R. Effective date l A e l v l e F l . s R - . B o an f k Effecti\ l A e l v l e F l) . — R. B o a f n k Effective date l A e l v l e F l) . — R. B o an f k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31,1977 6 6 1981—May 5 13-14 14 1986—Aug. 21 5.5-6 5.5 14 14 22 5.5 5.5 1978—Jan. 9 6-6.5 6.5 Nov. 2 13-14 13 20 6.5 6.5 6 13 13 1987—Sept. 4 5.5-6 6 May 11 6.5-7 7 Dec. 4 12 12 11 6 6 12 7 7 July 3 7-7.25 7.25 1982—July 20 11.5-12 11.5 1988—Aug. 9 6-6.5 6.5 10 7.25 7.25 23 11.5 11.5 11 6.5 6.5 Aug. 21 7.75 7.75 Aug. 2 11-11.5 11 Sept. 22 8 8 3 11 11 1989—Feb. 24 6.5-7 7 Oct. 16 8-8.5 8.5 16 10.5 10.5 27 7 7 20 8.5 8.5 27 10-10.5 10 Nov. 1 8.5-9.5 9.5 30 10 10 1990—Dec. 19 6.5 6.5 3 9.5 9.5 Oct. 12 9.5-10 9.5 13 9.5 9.5 1991—Feb. 1 6-6.5 6 1979—July 20 10 10 Nov. 22 9-9.5 9 4 6 6 Aug. 17 10-10.5 10.5 26 9 9 Apr. 30 5.5-6 5.5 20 10.5 10.5 Dec. 14 8.5-9 9 May 2 5.5 5.5 Sept. 19 10.5-11 11 15 8.5-9 8.5 Sept. 13 5-5.5 5 21 11 11 17 8.5 8.5 17 5 5 Oct. 8 11-12 12 Nov. 6 4.5-5 4.5 10 12 12 1984—Apr. 9 8.5-9 9 7 4.5 4.5 13 9 9 Dec. 20 3.5-4.5 3.5 1980—Feb. 15 12-13 13 Nov. 21 8.5-9 8.5 24 3.5 3.5 19 13 13 26 8.5 8.5 May 29 12-13 13 Dec. 24 8 8 1992—July 2 3-3.5 3 30 12 12 7 3 3 June 13 11-12 11 1985—May 20 7.5-8 7.5 16 11 11 24 7.5 7.5 1994—May 17 3-3.5 3.5 July 28 10-11 10 18 3.5 3.5 29 10 10 1986—Mar. 7 7-7.5 7 Aug. 16 3.5-4 4 Sept. 26 11 11 10 7 7 18 4 4 Nov. 17 12 12 Apr. 21 6.5-7 6.5 Nov. 15 4-4.75 4.75 Dec. 5 12-13 13 23. 6.5 6.5 17 4.75 4.75 8 13 13 July 11 6 6 In effect Jan. 6, 1995 4.75 4.75 1. Available on a short-term basis to help depository institutions meet temporary needs thirty days; however, at the discretion of the Federal Reserve Bank, this time period may for funds that cannot be met through reasonable alternative sources. The highest rate be shortened. Beyond this initial period, a flexible rate somewhat above rates charged on established for loans to depository institutions may be charged on adjustment credit loans market sources of funds is charged. The rate ordinarily is reestablished on the first of unusual size that result from a major operating problem at the borrower's facility. business day of each two-week reserve maintenance period, but it is never less than the 2. Available to help relatively small depository institutions meet regular seasonal needs discount rate applicable to adjustment credit plus 50 basis points. for funds that arise from a clear pattern of intrayearly movements in their deposits and 4. For earlier data, see the following publications of the Board of Governors: Banking loans and that cannot be met through special industry lenders. The discount rate on and Monetary Statistics, 1914-1941, and 1941-1970-, and the Annual Statistical Digest, seasonal credit takes into account rates charged by market sources of funds and ordinarily 1970-1979. is reestablished on the first business day of each two-week reserve maintenance period; In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustmenthowever, it is never less than the discount rate applicable to adjustment credit. credit borrowings by institutions with deposits of $500 million or more that had borrowed 3. May be made available to depository institutions when similar assistance is not in successive weeks or in more than four weeks in a calendar quarter. A 3 percent reasonably available from other sources, including special industry lenders. Such credit surcharge was in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 may be provided when exceptional circumstances (including sustained deposit drains, percent was reimposed on Nov. 17, 1980; the surcharge was subsequently raised to 3 impaired access to money market funds, or sudden deterioration in loan repayment percent on Dec. 5,1980, and to 4 percent on May 5, 1981. The surcharge was reduced to 3 performance) or practices involve only a particular institution, or to meet the needs of percent effective Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, institutions experiencing difficulties adjusting to changing market conditions over a longer 1981, the formula for applying the surcharge was changed from a calendar quarter to a period (particularly at times of deposit disintermediation). The discount rate applicable to moving thirteen-week period. The surcharge was eliminated on Nov. 17, 1981. adjustment credit ordinarily is charged on extended-credit loans outstanding less than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit2 Net transaction accounts3 1 $0 million-$54.0 million.. 12/20/94 2 More than $54.0 million4 . 12/20/94 3 Nonpersonal time deposits' 12/27/90 4 Eurocurrency liabilities6... 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve no more than three may be checks (accounts subject to such limits are considered savings Banks or vault cash. Nonmember institutions may maintain reserve balances with a deposits). Federal Reserve Bank indirectly, on a pass-through basis, with certain approved The Monetary Control Act of 1980 requires that the amount of transaction accounts institutions. For previous reserve requirements, see earlier editions of the Annual against which die 3 percent reserve requirement applies be modified annually by 80 Report or the Federal Reserve Bulletin. Under provisions of the Monetary Control Act percent of the percentage change in transaction accounts held by all depository instituof 1980, depository institutions include commercial banks, mutual savings banks, tions, determined as of June 30 of each year. Effective Dec. 20, 1994, the amount was savings and loan associations, credit unions, agencies and branches of foreign banks, increased from $51.9 million to $54.0 million. and Edge Act corporations. 4. The reserve requirement was reduced from 12 percent to 10 percent on 2. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97-320) Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that requires that $2 million of reservable liabilities of each depository institution be subject to report quarterly. a zero percent reserve requirement. The Board is to adjust the amount of reservable 5. For institutions that report weekly, the reserve requirement on nonpersonal time liabilities subject to this zero percent reserve requirement each year for the succeeding deposits with an original maturity of less than 1V4 years was reduced from 3 percent to calendar year by 80 percent of the percentage increase in the total reservable liabilities of 1 '/> percent for the maintenance period that began Dec. 13, 1990, and to zero for the all depository institutions, measured on an annual basis as of June 30. No corresponding maintenance period that began Dec. 27, 1990. The reserve requirement on nonpersonal adjustment is to be made in the event of a decrease. On Dec. 20, 1994, the exemption was time deposits with an original maturity of 1 Vi years or more has been zero since Oct. 6, raised from $4.0 million to $4.2 million. The exemption applies only to accounts that 1983. would be subject to a 3 percent reserve requirement. For institutions that report quarterly, the reserve requirement on nonpersonal time 3. Includes all deposits against which the account holder is permitted to make with- deposits with an original maturity of less than 1 '/i years was reduced from 3 percent to drawals by negotiable or transferable instruments, payment orders of withdrawal, and zero on Jan. 17, 1991. telephone and preauthorized transfers for the purpose of making payments to third persons 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to or others, other than money market deposit accounts (MMDAs) and similar accounts that zero in the same manner and on the same dates as was the reserve requirement on permit no more than six preauthorized, automatic, or other transfers per month, of which nonpersonal time deposits with an original maturity of less than 1 Vi years (see note 5). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • February 1995 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1994 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999911 11999922 11999933 Apr. May June July Aug. Sept. Oct. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 20,158 14,714 17,717 1,101 1,395 4,143 0 1,610 0 518 2 Gross sales 120 1,628 0 0 0 0 0 0 0 0 3 Exchanges 277,314 308,699 332,229 28,881 29,807 39,484 29,559 36,281 29,668 29,361 4 Redemptions 1,000 1,600 0 0 0 0 0 0 0 0 Others within one year 5 Gross purchases 3,043 1,096 1,223 209 155 0 0 0 151 450 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 24,454 36,662 31,368 2,316 0 1,197 1,692 6,131 961 460 8 Exchanges -28,090 -30,543 -36,582 -907 0 -3,192 -1,626 -4,089 -2,203 0 9 Redemptions 1,000 0 0 0 0 0 0 0 0 0 One to five years 10 Gross purchases 6,583 13,118 10,350 2,817 0 0 0 0 2,530 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -21,211 -34,478 -27,140 1,607 0 -1,197 -1,692 -5,506 -837 -460 13 Exchanges 24,594 25,811 0 907 0 3,192 1,626 2,889 2,203 0 Five to ten years 14 Gross purchases 1,280 2,818 4,168 1,117 0 0 0 0 938 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts -2,037 -1,915 0 709 0 0 0 -549 -125 0 17 Exchanges 2,894 3,532 0 0 0 0 0 750 0 0 More than ten years 18 Gross purchases 375 2,333 3,457 8% 0 0 0 0 840 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -1,209 -269 0 0 0 0 0 -76 0 0 21 Exchanges 600 1,200 0 0 0 0 0 450 0 0 All maturities 22 Gross purchases 31,439 34,079 36,915 6,140 1,550 4,143 0 1,610 4,459 968 23 Gross sales 120 1,628 0 0 0 0 0 0 0 0 24 Redemptions 1,000 1,600 767 440 0 0 302 0 11 979 Matched transactions 25 Gross sales 1,570,456 1,482,467 1,475,085 120,393 135,796 133,939 125,181 170,356 151,589 137,242 26 Gross purchases 1,571,534 1,480,140 1,475,941 120,512 137,195 133,075 126,677 169,018 151,029 136,556 Repurchase agreements 27 Gross purchases 310,084 378,374 475,447 19,741 21,517 10,059 28,085 44,948 4,975 17,088 28 Gross sales 311,752 386,257 470,723 25,041 17,112 4,405 35,374 41,199 9,354 15,613 29 Net change in U.S. Treasury securities 29,729 20,642 41,729 519 7,353 8,933 -6,095 4,022 -479 778 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 5 0 0 0 0 0 0 0 0 0 32 Redemptions 292 632 774 180 70 58 20 63 31 62 Repurchase agreements 33 Gross purchases 22,807 14,565 35,063 728 4,195 580 9,472 8,491 3,620 2,868 34 Gross sales 23,595 14,486 34,669 878 2,895 1,300 8,702 8,109 4,982 2,838 35 Net change in federal agency obligations -1,085 -554 -380 -330 1,230 -778 448 319 -1,393 -32 36 Total net change in System Open Market Account 28,644 20,089 41,348 189 8,583 8,155 —5,345 4,341 -1,872 746 1. Sales, redemptions, and negative figures teduce holdings of the System Open Market Account; all other figures increase such holdings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month Account 1994 1994 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 Sept. 30 Oct. 31 Nov. 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,052 11,052 11,052 11,052 11,052 11,054 11,053 11,052 2 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 3 Coin 351 353 346 341 321 360 360 321 Loans 4 To depository institutions 237 1,816 179 469 144 504 264 144 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 3,744 3,744 3,744 3,744 3,674 3,806 3,744 3,674 8 Held under repurchase agreements 400 760 850 2,050 1,655 370 400 1,655 9 Total US. Treasury securities 357,899 357,121 362,127 363,933 365,700 355,150 355,928 365,700 10 Bought outright2 354,284 356,721 358,817 359,627 359,190 353,010 352,313 359,190 11 Bills 171,588 174,026 176,121 176,931 176,294 169,785 169,617 176,294 12 Notes 140,860 140,860 140,950 140,950 141,150 141,389 140,860 141,150 13 Bonds 41,836 41,836 41,746 41,746 41,746 41,836 41,836 41,746 14 Held under repurchase agreements 3,615 400 3,310 4,306 6,510 2,140 3,615 6,510 15 Total loans and securities 362,280 363,442 366,899 370,195 371,172 359,830 360,336 371,172 16 Items in process of collection 6,349 5,496 7,325 6,243 4,983 4,104 2,477 4,983 17 Bank premises 1,068 1,069 1,070 1,071 1,067 1,068 1,068 1,067 Other assets 18 Denominated in foreign currencies 23,927 22,632 22,648 22,664 21,909 23,197 23,922 21,909 19 All other4 9,898 10,015 8,001 8,320 8,373 9,218 9,848 8,373 20 Total assets 422,944 422,076 425,358 427,904 426,895 416,848 417,080 426,895 LIABILITIES 21 Federal Reserve notes 369,148 371,735 372,508 373,700 374,571 363,509 367,540 374,571 22 Total deposits 36,248 34,025 35,223 36,862 36,554 37,562 35,050 36,554 23 Depository institutions 30,904 27,288 30,459 31,841 30,674 30,054 29,271 30,674 24 U.S. Treasury—General account 4,806 6,272 4,250 4,532 5,348 6,848 5,164 5,348 25 Foreign—Official accounts 198 161 184 198 230 342 223 230 26 Other 340 304 331 290 302 318 392 302 27 Deferred credit items 5,344 4,864 6,060 5,438 4,637 3,765 1,906 4,637 3,924 3,768 3,900 4,197 4,210 3,831 3,992 4,210 28 Other liabilities and accrued dividends 414,663 414,392 417,691 420,197 419,973 408,667 408,488 419,973 29 Total liabilities CAPITAL ACCOUNTS 3,644 3,646 3,646 3,656 3,668 3,608 3,643 3,668 3301 CSuaprpitlauls paid in 3,401 3,401 3,401 3,401 3,178 3,401 3,401 3,178 32 Other capital accounts 1,236 636 620 650 77 1,172 1,548 77 33 Total liabilities and capital accounts 422,944 422,076 425,358 427,904 426,895 416,848 417,080 426,895 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 411,381 414,476 412,436 414,559 416,344 399,937 407,851 416,344 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 450,273 451,517 452,030 452,852 453,444 449,006 449,946 453,444 36 LESS: Held by Federal Reserve Banks 81,125 79,782 79,522 79,153 78,873 85,498 82,406 78,873 37 Federal Reserve notes, net 369,148 371,735 372,508 373,700 374,571 363,509 367,540 374,571 Collateral held against notes, net 38 Gold certificate account 11,052 11,052 11,052 11,052 11,052 11,054 11,053 11,052 39 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 350,077 352,665 353,438 354,630 355,502 344,437 348,469 355,502 42 Total collateral 369,148 371,735 372,508 373,700 374,571 363,509 367,540 374,571 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly 3. Valued monthly at market exchange rates. statistical release. For ordering address, see inside front cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago in 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged Treasury bills maturing within ninety days. with Federal Reserve Banks—and excludes securities sold and scheduled to be bought 5. Includes exchange-translation account reflecting the monthly revaluation at market back under matched sale-purchase transactions. exchange rates of foreign exchange commitments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Nonfinancial Statistics • February 1995 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1994 1994 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 Sept. 30 Oct. 31 Nov. 30 1 Total loans 237 1,816 179 469 144 504 264 224 2 Within fifteen days1 65 1,669 167 459 65 264 133 201 3 Sixteen days to ninety days 172 147 12 10 79 240 131 23 4 Ninety-one days to one year 0 0 0 0 0 0 0 0 5 Total acceptances 0 0 0 0 0 0 0 0 6 Within fifteen days1 0 0 0 0 0 0 0 0 7 Sixteen days to ninety days 0 0 0 0 0 0 0 0 8 Ninety-one days to one year 0 0 0 0 0 0 0 0 9 Total U.S. Treasury securities 354,288 356,722 358,820 359,631 359,196 353,010 352,313 359,196 10 Within fifteen days1 20,189 16,605 16,914 13,014 15,444 5,373 10,538 15,444 11 Sixteen days to ninety days 76,342 82,504 81,270 85,653 83,053 87,966 83,281 83,053 12 Ninety-one days to one year 109,243 109,098 111,904 12,232 111,940 110,922 109,980 111,940 13 One year to five years 88,463 88,463 87,745 87,746 87,773 88,294 88,463 87,773 14 Five years to ten years 25,711 25,711 27,036 27,036 27,036 26,116 25,711 27,036 15 More than ten years 34,339 34,339 33,950 33,950 33,950 34,339 34,339 33,950 16 Total federal agency obligations 3,744 3,744 3,745 3,746 3,675 3,806 3,744 3,675 17 Within fifteen days' 0 0 403 404 334 230 119 334 18 Sixteen days to ninety days 724 841 439 439 494 546 725 494 19 Ninety-one days to one year 866 750 850 850 915 780 747 915 20 One year to five years 1,603 1,603 1,510 1,510 1,390 1,666 1,603 1,390 21 Five years to ten years 525 525 518 518 518 559 525 518 22 More than ten years 25 25 25 25 25 25 25 25 1. Holdings under repurchase agreements are classified as maturing within fifteen days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1994 IItteemm DD 1199 ee 99 cc 00 .. DD 1199 ee 99 cc 11 .. DD 1199 ee 99 cc 22 .. DD 1199 ee 99 cc 33 .. Apr. May June July Aug. Sept. Oct. Nov. Seasonally adjusted AAAADDDDJJJJUUUUSSSSTTTTEEEEDDDD FFFFOOOORRRR CCCCHHHHAAAANNNNGGGGEEEESSSS IIIINNNN RRRREEEESSSSEEEERRRRVVVVEEEE RRRREEEEQQQQUUUUIIIIRRRREEEEMMMMEEEENNNNTTTTSSSS2222 1111 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss3333 41.77 45.53 54.34 60.48 60.33 59.91 59.71 59.82 59.52 59.48r 59.17 59.01 2222 NNNNoooonnnnbbbbooooiiiirrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss4444 41.44 45.34 54.22 60.39 60.21 59.71 59.37 59.36 59.05 59.00 58.79 58.76 3333 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiitttt5555 41.47 45.34 54.22 60.39 60.21 59.71 59.37 59.36 59.05 59.00 58.79 58.76 4444 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss 40.11 44.55 53.19 59.41 59.18 59.00 58.60 58.71 58.51 58.42 58.37 58.01 5555 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee6666 293.16 317.12 350.61 385.86 399.20 401.73 404.32 407.04 409.18 411.03r 413.33 416.38 Not seasonally adjusted 6666 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss7777 43.07 46.98 56.06 62.37 61.40 58.97 59.56 59.66 58.84 59.39 58.87 59.32 7777 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss 42.74 46.78 55.93 62.29 61.27 58.77 59.22 59.20 58.37 58.90 58.49 59.07 8888 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiitttt5555 42.77 46.78 55.93 62.29 61.27 58.77 59.22 59.20 58.37 58.90 58.49 59.07 9999 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss8888 41.40 46.00 54.90 61.31 60.25 58.06 58.45 58.55 57.84 58.33 58.06 58.32 11110000 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee 296.68 321.07 354.55 390.59 399.76 400.26 404.72 408.17 408.95 411.05 412.78 416.67 NNNNOOOOTTTT AAAADDDDJJJJUUUUSSSSTTTTEEEEDDDD FFFFOOOORRRR CCCCHHHHAAAANNNNGGGGEEEESSSS IIIINNNN RRRREEEESSSSEEEERRRRVVVVEEEE RRRREEEEQQQQUUUUIIIIRRRREEEEMMMMEEEENNNNTTTTSSSS11110000 11111111 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss"""" 59.12 55.53 56.54 62.86 61.64 59.27 59.92 60.09 59.34 59.95r 59.49 60.01 11112222 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss 58.80 55.34 56.42 62.78 61.52 59.07 59.59 59.63 58.87 59.47 59.11 59.76 11113333 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiirrrr 58.82 55.34 56.42 62.78 61.52 59.07 59.59 59.64 58.87 59.47 59.11 59.76 11114444 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss 57.46 54.55 55.39 61.80 60.49 58.36 58.82 58.99 58.33 58.89 58.69 59.00 11115555 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee 313.70 333.61 360.90 397.62 406.32 406.59 410.94 414.39 414.90 416.65' 418.12 421.82 11116666 EEEExxxxcccceeeessssssss rrrreeeesssseeeerrrrvvvveeeessss 1.66 .98 1.16 1.06 1.15 .92 1.11 1.11 1.00 1.06 .80 1.01 11117777 BBBBoooorrrrrrrroooowwwwiiiinnnnggggssss ffffrrrroooommmm tttthhhheeee FFFFeeeeddddeeeerrrraaaallll RRRReeeesssseeeerrrrvvvveeee .33 .19 .12 .08 .12 .20 .33 .46 .47 .49 .38 .25 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) 8. To adjust required reserves for discontinuities that are due to regulatory changes in weekly statistical release. Historic^ data starting in 1959 and estimates of the impact on reserve requirements, a multiplicative procedure is used to estimate what required required reserves of changes in reserve requirements are available from the Money and reserves would have been in past periods had current reserve requirements been in effect. Reserves Projections Section, Division of Monetary Affairs, Board of Governors of the Break-adjusted required reserves include required reserves against transactions deposits Federal Reserve System, Washington, DC 20551. and nonpersonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regula- 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), tory changes in reserve requirements. (See also table 1.10) plus (2) the (unadjusted) currency component of the money stock, plus (3) (for all 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault adjusted required reserves (line 4) plus excess reserves (line 16). Cash" and for all those weekly reporters whose vault cash exceeds their required 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally ad- reserves) the break-adjusted difference between current vault cash and the amount applied justed, break-adjusted total reserves (line 1) less total borrowings of depository institu- to satisfy current reserve requirements. tions from the Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with 5. Extended credit consists of borrowing at the discount window under no adjustments to eliminate the effects of discontinuities associated with regulatory the terms and conditions established for the extended credit program to help depository changes in reserve requirements. institutions deal with sustained liquidity pressures. Because there is not the same need to 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy repay such borrowing promptly as with traditional short-term adjustment credit, the reserve requirements. money market impact of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally total reserves (line 11), plus (2) required clearing balances and adjustments to compensate adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency for float at Federal Reserve Banks, plus (3) the currency component of the money stock, component of the money stock, plus (3) (for all quarterly reporters on the "Report of plus (4) (for all quarterly reporters on the "Report of Transaction Accounts, Other Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Deposits and Vault Cash" and for all those weekly reporters whose vault cash exceeds whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted their required reserves) the difference between current vault cash and the amount applied difference between current vault cash and the amount applied to satisfy current reserve to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements. requirements in February 1984, currency and vault cash figures have been measured over 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus the computation periods ending on Mondays. excess reserves (line 16). 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • February 1995 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1994 1990 1991 1992 1993 Dec. Dec. Dec. Dec. Aug.' Sept.' Oct. Nov. Seasonally adjusted Measures2 1 Ml 826.4 897.7 1,024.8 1,128.4 1,151.0 1,152.0 1,148.5 1,147.7 2 M2 3,353.0 3,455.2r 3,509.0 l&HSF 3,597.8 3,596.6 3,591.7 3,593.6 3 M3 4,125.7 4,180.4 4,183.0' 4,232.0' 4,243.3 4,248.9 4,257.9 4,265.6 4 L 4,974.8 4,992.9 5,057.1' s.ns.o' 5,179.6 5,175.2 5,204.0 n.a. 5 Debt 10,690.2r 11,171.1' 11,706.1' 12,335.4' 12,749.1 12,809.6 12,860.3 n.a. Ml components 6 Currency 246.7 267.1 292.2 321.4 345.4 347.3 349.9 352.9 7 Travelers checks4 7.8 7.7 8.1 7.9 8.3 8.4 8.4 8.4 8 Demand deposits5 277.9 290.0 339.6 384.8 387.5 388.0 385.9 383.5 9 Other checkable deposits6 294.0 332.8 384.9 414.3 409.7 408.2 404.4 402.9 Nontransaction components 10 In M27 2,526.6 2,557.5' 2,484.2' 2,439.5' 2,446.7 2,444.6 2,443.1 2,445.9 11 In M38 only 772.7 725.2 674.0' 664.1 645.5 652.3 666.2 672.0 Commercial banks 12 Savings deposits, including MMDAs 582.1 665.5 754.6 785.3 776.0 773.7 765.9 759.7 13 Small time deposits9 611 -4r 602.9 508.7 468.6' 474.8 479.8 486.8 494.1 14 Large time deposits10, " 368.6 342.4 292.8 277.2' 279.8 284.7 290.1 295.9 Thrift institutions IS Savings deposits, including MMDAs 338.3 375.6 429.0 430.2 418.8 412.9 407.5 400.2 16 Small time deposits9 563.2 464.5 361.8 317.1' 302.9 303.5 306.8 311.8 17 Large time deposits10 120.9 83.4 67.5 61.8 60.9 62.1 63.3 63.5 Money market mutual funds 18 General purpose and broker-dealer 355.5 370.4 352.0 348.8 362.9 362.3 365.0 369.8 19 Institution-only 135.0 181.0 201.5 197.0 169.3 167.9 175.3 175.6 Debt components 20 Federal debt 2,490.3 2,763.3 3,067.9 3,328.0' 3,436.7 3,454.0 3,469.4 n.a. 21 Nonfederal debt 8,407.8' 8,638.1' 9,007.4' 9,312.5 9,355.6 9,390.8 n.a. Not seasonally adjusted Measures2 22 Ml 843.8 916.7 1,046.7 1,153.8 1,144.0 1,146.1 1,147.4 1,155.4 23 M2 3,366.0 3,470.3' 3,527.6 3,590.5' 3,590.1 3,586.2 3,590.0 3,603.2 24 M3 4,135.5 4,191.9 4,198.2' 4,251.4' 4,239.3 4,238.2 4,252.4 4,278.5 25 L 4,997.2 5,018.0 5,087.6' 5,169.9' 5,168.9 5,163.1 5,196.3 n.a. 26 Debt 10,687.2r 11,168.5' 11,708.9' 12,327.6' 12,700.9 12,765.9 12,819.8 n.a. Ml components 27 Cuirency 249.5 269.9 295.0 324.9 345.7 347.1 349.6 353.3 28 Travelers checks4 7.4 7.4 7.8 7.6 8.9 8.8 8.5 8.2 29 Demand deposits5 289.9 303.1 355.1 402.6 384.2 385.7 389.0 391.8 30 Other checkable deposits6 297.0 336.3 388.9 418.6 405.2 404.5 400.3 402.1 Nontrqnsaction components 31 In M27 2,522.3 2,553.7 2,480.8' 2,436.7' 2,446.0 2,440.1 2,442.6 2,447.8 32 In M38 769.5 721.6 670.6 660.9 649.3 652.1 662.4 675.3 Commercial banks 33 Savings deposits, including MMDAs 580.8 664.0 752.9 783.9 776.6 772.4 765.2 761.4 34 Small time deposits9 610.5 601.9 507.8 467.6 475.9 481.2 487.7 493.3 35 Large time deposits10, 11 367.7 341.3 291.7 276.0 281.6 285.8 289.8 296.3 Thrift institutions 36 Savings deposits, including MMDAs 337.6 374.8 428.1 429.4 419.0 412.2 407.1 401.1 37 Small time deposits9 562.4 463.7' 361.1' 316.4' 303.6 304.3 307.4 311.3 38 Large time deposits10 120.6 83.1 67.2 61.6 61.3 62.3 63.2 63.6 Money market mutual funds 39 General purpose and broker-dealer 353.8 368.5 350.2 347.2 360.2 357.5 360.9 367.7 40 Institution-only 134.7 180.4 200.4 195.8 169.5 165.1 170.5 175.0 Repurchase agreements and Eurodollars 41 Overnight and continuing 77.3 80.6 80.7 92.3 110.8 112.5 114.3 113.0 42 Term 158.3 130.1 126.8 143.8 151.9 153.6 154.4 156.7 Debt components 43 Federal debt 2,491.3 2,765.0 3,069.8 3,329.5 3,418.4 3,438.4 3,448.7 n.a. 44 Nonfederal debt 8,195.9" 8,403.5' 8,639.1' 8,998.1' 9,282.5 9,327.5 9,371.2 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) short-term Treasury securities, commercial paper, and bankers acceptances, each seasonweekly statistical release. Historical data starting in 1959 are available from the Money ally adjusted separately, and then adding this result to M3. and Reserves Projections Section, Division of Monetary Affairs, Board of Governors of Debt: The debt aggregate is the outstanding credit market debt of the domestic the Federal Reserve System, Washington, DC 20551. nonfinancial sectors—the federal sector (U.S. government, not including government- 2. Composition of the money stock measures and debt is as follows: sponsored enterprises or federally related mortgage pools) and the nonfederal sectors Ml: (1) currency outside the US. Treasury, Federal Reserve Banks, and the vaults of (state and local governments, households and nonprofit organizations, nonfinancial corpodepository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all rate and nonfarm noncorporate businesses, and farms). Nonfederal debt consists of commercial banks other than those owed to depository institutions, the U.S. government, mortgages, tax-exempt and corporate bonds, consumer credit, bank loans, commercial and foreign banks and official institutions, less cash items in the process of collection and paper, and other loans. The data, which are derived from the Federal Reserve Board's flow Federal Reserve float, and (4), other checkable deposits (OCDs), consisting of negotiable of funds accounts, are break-adjusted (that is, discontinuities in the data have been order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository smoothed into the series) and month-averaged (that is, the data have been derived by institutions, credit union share draft accounts, and demand deposits at thrift institutions. averaging adjacent month-end levels). Seasonally adjusted Ml is computed by summing currency, travelers checks, demand 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of deposideposits, and OCDs, each seasonally adjusted separately. tory institutions. M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issued by all depository institutions and overnight Eurodollars issued to U.S. residents by issuers. Travelers checks issued by depository institutions are included in demand foreign branches of U.S. banks worldwide, (2) savings (including MMDAs) and small deposits. time deposits (time deposits—including retail RPs—in amounts of less than $100,000), 5. Demand deposits at commercial banks and foreign-related institutions other than and (3) balances in both taxable and tax-exempt general-purpose and broker-dealer those owed to depository institutions, the U.S. government, and foreign banks and official money market funds. Excludes individual retirement accounts (IRAs) and Keogh balances institutions, less cash items in the process of collection and Federal Reserve float. at depository institutions and money market funds. Also excludes all balances held by 6. Consists of NOW and ATS account balances at all depository institutions, credit U.S. commercial banks, money market funds (general purpose and broker-dealer), foreign union share draft account balances, and demand deposits at thrift institutions. governments and commercial banks, and the U.S. government. Seasonally adjusted M2 is 7. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund computed by adjusting its non-Mi component as a whole and then adding this result to balances (general purpose and broker-dealer), (3) savings deposits (including MMDAs), seasonally adjusted Ml. and (4) small time deposits. M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of $100,000 or 8. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. residents, more) issued by all depository institutions, (2) term Eurodollars held by U.S. residents at and (4) money market fund balances (institution-only), less (5) a consolidation adjustment foreign branches of U.S. banks worldwide and at all banking offices in the United that represents the estimated amount of overnight RPs and Eurodollars held by institution- Kingdom and Canada, and (3) balances in both taxable and tax-exempt, institution-only only money market funds. money market funds. Excludes amounts held by depository institutions, the U.S. govern- 9. Small time deposits—including retail RPs—are those issued in amounts of less ment, money market funds, and foreign banks and official institutions. Also excluded is than $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions the estimated amount of overnight RPs and Eurodollars held by institution-only money are subtracted from small time deposits. market funds. Seasonally adjusted M3 is computed by adjusting its non-M2 component as 10. Large time deposits are those issued in amounts of $100,000 or more, excluding a whole and then adding this result to seasonally adjusted M2. those booked at international banking facilities. L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury 11. Large time deposits at commercial banks less those held by money market funds, securities, commercial paper, and bankers acceptances, net of money market fund hold- depository institutions, the U.S. government, and foreign banks and official institutions. ings of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • February 1995 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1994 1992 1993 Dec. Dec. Mar. Apr. May June July Aug. Sept/ Oct. Nov. Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 2.33 1.86 1.82 1.81 1.83 1.82 1.83 1.85 1.87 1.88 1.92 2 Savings deposits3 2.88 2.46 2.43 2.45 2.50 2.54 2.57 2.63 2.67 2.72 2.80 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.90 2.65 2.76 2.87 2.99 3.08 3.17 3.29 3.36 3.47 3.62 4 92 to 182 days 3.16 2.91 3.02 3.13 3.28 3.36 3.44 3.61 3.75 3.93 4.22 5 183 days to 1 year 3.37 3.13 3.27 3.42 3.64 3.76 3.88 4.11 4.27 4.49 4.82 6 More than 1 year to 2'/z years 3.88 3.55 3.69 3.87 4.12 4.26 4.39 4.61 4.80 5.08 5.41 7 More than IVi years 4.77 4.29 4.46 4.67 4.89 5.02 5.14 5.33 5.47 5.76 6.08 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 2.45 1.87 1.83 1.86 1.86 1.88 1.89 1.89 1.91 1.88 1.91 9 Savings deposits3 3.20 2.63 2.63 2.65 2.67 2.69 2.67 2.74 2.78 2.76 2.84 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 3.13 2.70 2.71 2.72 2.77 2.84 2.98 3.03 3.11 3.31 3.49 11 92 to 182 days 3.44 3.02 3.08 3.13 3.21 3.41 3.53 3.69 3.87 4.09 4.40 12 183 days to 1 year 3.61 3.31 3.37 3.47 3.67 3.92 4.02 4.24 4.47 4.78 5.15 13 More than 1 year to 2 Vi years 4.02 3.66 3.85 3.96 4.12 4.38 4.56 4.83 5.04 5.36 5.67 14 More than 2Vz years 5.00 4.62 4.75 4.85 5.08 5.24 5.35 5.47 5.64 5.78 6.16 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 286,541 305,223 297,496 293,888 292,797 290,220 290,631 295,320 286,787 294,069 294,279 16 Savings deposits3 738,253 766,413 779,340 771,869 773,170 767,539 765,751 764,035 755,249 751,300 746,647 17 Personal 578,757 597,838 615,875 611,720 612,648 608,132 605,881 600,892 595,175 591,304 584,989 18 Nonpersonal 159,496 168,575 163,465 160,149 160,522 159,407 159,870 163,143 160,074 159,996 161,658 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 38,474 29,455 29,539 29,467 29,950 28,763 28,659 27,959 28,312 31,387 31,487 20 92 to 182 days 127,831 110,069 107,407 105,615 104,400 102,439 100,424 98,085 96,398 95,328 94,691 21 183 days to 1 year 163,098 146,565 144,022 146,733 148,102 151,165 152,216 155,964 157,253 158,564 159,894 22 More than 1 year to 2Vi years 152,977 141,223 139,946 139,313 140,764 144,686 146,875 150,807 152,514 155,251 158,553 23 More than 2 Vi years 169,708 181,528 180,973 181,977 180,381 181,843 182,944 186,490 190,209 188,456 189,017 24 IRA and Keogh plan deposits 147,350 143,985 142,002 142,448 142,047 142,513 142,649 142,617 142,700 142,742 142,923 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 10,871 11,151 11,078 11,051 11,052 10,792 10,925 11,016 10,769 11,136 10,999 26 Savings deposits3 81,786 80,115 78,701 78,982 78,817 77,289 77,337 75,108 74,659 73,416 72,622 27 Personal 78,695 77,035 75,444 75,717 75,474 74,121 74,064 72,040 71,525 70,215 69,412 28 Nonpersonal 3,091 3,079 3,257 3,265 3,344 3,168 3,273 3,068 3,134 3,201 3,211 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 3,867 2,793 2,671 2,697 2,702 2,614 2,531 2,523 2,402 2,258 2,209 30 92 to 182 days 17,345 12,946 13,177 13,058 12,822 12,515 12,511 12,292 12,276 11,896 11,833 31 183 days to 1 year 21,780 17,426 17,511 17,504 17,444 17,310 17,591 17,593 17,928 18,213 18,608 32 More than 1 year to 2 V5 years 18,442 16,546 16,180 16,453 16,477 16,493 16,901 16,824 17,287 17,521 17,962 33 More than 2Vi years 18,845 20,464 21,110 21,454 21,546 21,079 21,573 21,531 21,923 21,625 21,688 34 IRA and Keogh plan accounts 21,713 19,356 19,447 19,860 19,772 19,511 19,757 19,445 19,532 19,550 19,532 1. BIF, Bank Insurance Fund. Data in this table also appear in the Board's H.6 (S08) 2. As of October 31, 1994, interest rate data for NOW accounts and savings deposits Special Supplementary Table monthly statistical release. For ordering address, see inside reflect a series break caused by a change in the survey used to collect these data. front cover. Estimates are based on data collected by the Federal Reserve System from a 3. Includes personal and nonpersonal money market deposits. stratified random sample of about 425 commercial banks and 77 savings banks on the last 4. Includes both mutual and federal savings banks. day of each month. Data are not seasonally adjusted and include IRA and Keogh deposits and foreign currency-denominated deposits. Data exclude retail repurchase agreements and deposits held in U.S. branches and agencies of foreign banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A17 1.23 BANK DEBITS AND DEPOSIT TURNOVER1 Debits are in billions of dollars; turnover is ratio of debits to deposits; monthly data are at annual rates 1994 BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt Apr/ May1 Juner Julyr Aug. Sept. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 277,741.7 313,179.6 334,375.0 352,704.5 376,228.7 371,514.3 345,270.8 384,057.8 370,534.3 2 Major New York City banks 137,337.2 165,484.6 171,310.7 184,408.9 200,277.5 195,079.5 182,408.3 196,505.5 186,294.7 3 Other banks 140,404.5 147,695.1 163,064.2 168,295.5 175,951.2 176,434.8 162,862.5 187,552.3 184,239.7 4 Other checkable deposits4 3,643.1 3,780.7 3,468.9 3,581.6 3,876.9 3,853.9 3,502.6 3,868.2 3,916.0 5 Savings deposits (including MMDAs)5 3,206.4 3,310.6 3,511.0 3,460.9 3,503.2 3,788.9 3,408.8 3,855.3 3,806.0 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 803.7 825.8 785.4 778.5 834.0 828.6 756.3 852.4 820.1 7 Major New York City banks 4,267.1 4,794.5 4,200.5 4,233.2 4,714.8 4,480.9 4,074.6 4,635.6 4,503.6 8 Other banks 448.1 428.7 423.7 411.0 430.6 435.8 395.5 459.5 448.9 9 Other checkable deposits4 16.2 14.4 11.8 12.0 12.9 12.8 11.5 12.8 13.0 10 Savings deposits (including MMDAs)5 5.2 4.7 4.6 4.4 4.5 4.9 4.4 5.0 5.0 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 277,752.4 313,344.9 334,354.6 350,126.4 364,462.2 387,217.2 347,416.1 394,407.7 365,077.0 12 Major New York City banks 137,307.2 165,595.0 171,283.5 181,272.6 188,885.2 204,251.8 182,452.9 202,845.6 186,161.8 13 Other banks 140,445.2 147,749.9 163,071.0 168,853.8 175,577.0 182,965.4 164,963.2 191,562.1 178,915.2 14 Other checkable deposits4 3,645.2 3,783.6 3,467.5 3,790.1 3,693.6 3,911.3 3,509.1 3,856.0 3,951.2 15 Savings deposits (including MMDAs)5 3,209.2 3,310.0 3,509.5 3,636.5 3,539.7 3,911.0 3,525.0 3,876.6 3,719.6 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 803.6 826.1 785.4 771.3 823.3 868.4 761.9 889.5 811.9 17 Major New York City banks 4,269.0 4,803.5 4,197.9 4,228.8 4,449.3 4,878.2 4,150.3 4,960.2 4,539.5 18 Other banks 448.1 428.8 423.8 410.8 438.7 452.9 400.4 475.9 437.8 19 Other checkable deposits4 16.2 14.4 11.8 12.3 12.4 13.0 11.7 12.9 13.2 20 Savings deposits (including MMDAs)5 5.2 4.7 4.6 4.6 4.6 5.0 4.6 5.0 4.9 1. Historical tables containing revised data for earlier periods can be obtained from the 3. Represents accounts of individuals, partnerships, and corporations and of states and Publications Section, Division of Support Services, Board of Governors of the Federal political subdivisions. Reserve System, Washington, DC 20551. 4. As of January 1994, other checkable deposits (OCDs), previously defined as Data in this table also appear in the Board's G.6 (406) monthly statistical release. For automatic transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) ordering address, see inside front cover. accounts, were expanded to include telephone and preauthorized transfer accounts. This 2. Annual averages of monthly figures. change redefined OCDs for debits data to be consistent with OCDs for deposits data. 5. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • February 1995 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1993 1994 1994 Nov. Mayr June' July' Aug.' Sept.' Oct. Nov. Nov. 9 Nov. 16 Nov. 23 Nov. 30 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,091.1 3,212.2 3,224.4 3,259.6 3,269.6 3,278.7 3,286.6 3,296.1 3,284.2 3,2910 3303.3 3,305.9 2 Securities in bank credit 903.1' 972.9 975.6 979.5 971.4 967.2 957.5 950.6 950.7 949.8 949.5 950.0 3 U.S. government securities 720.8r 750.8 751.8 751.5 746.3 740.1 727.9 719.9 719.3 720.5 718.5 719.3 4 Other securities 182.2r 222.1 223.8 228.0 225.1 227.1 229.7 230.7 231.4 229.3 231.0 230.7 5 Loans and leases in bank credit2 ... 2,188.1 2^39.4 2,248.9 1280.1 2,298.2 2311.5 2329.1 1345.5 2,333.5 23412 1353.9 1355.8 6 Commercial and industrial 584.2 607.1 610.2 618.7 623.3 627.7 633.8 639.1 635.4 639.4 640.2 6413 7 Real estate 933.8r 948.9 956.0 962.7 971.4 978.9 983.7 990.1 986.4 989.7 991.8 993.3 8 Revolving home equity 73.5 73.7 74.1 74.2 74.4 74.7 75.0 75.6 75.4 75.5 75.6 75.9 9 Other 860.3' 875.2 881.9 888.5 897.0 904.1 908.6 914.5 911.0 914.2 916.2 917.4 10 Consumer 388.4 412.3 416.0 424.0 430.1 434.9 441.9 444.7 444.0 443.9 444.4 446.9 11 Security3 88.2 77.5 76.2 77.7 75.1 69.2 72.1 73.3 71.1 70.0 77.2 75.6 12 Other 193.6 193.6 190.4 197.0 198.3 200.8 197.7 198.3 196.7 199.2 200.2 197.8 13 Interbank loans4 153.8' 157.9 156.7 160.2 159.0 160.0 163.4 171.7 169.3 161.2 180.0 179.2 14 Cash assets5 218.8 216.1 214.5 210.9 203.3 202.4 209.7 204.9 195.0 202.6 219.3 201.6 15 Other assets6 216.9 225.2 219.6 226.9 228.2 2210 222.6 225.0 222.3 222.1 228.9 227.7 16 Total assets7 3,621.9 3,754.3 3,7582 3300.1 3,802.9 3,805.8 3,825.1 3,840.8 3,813.9 3,821.0 3,874Jt 3,857.6 Liabilities 17 Deposits 2,532.9 2,520.1 1507.0 1513.4 1517.0 2,520.5 1534.6 1530.8 2,522.7 2,529.8 1543.9 1526.5 18 Transaction 816.4 812.1 808.8 809.8 807.6 803.2 806.9 798.1 790.8 798.2 809.8 792.9 19 Nontransaction l,716.tf 1,707.9 1,698.2 1,703.6 1,709.4 1,717.4 1,727.7 1,732.7 1,731.8 1,731.6 1,734.1 1,733.7 20 Large time 347.4 338.1 334.4 339.2 342.6 348.9 357.8 362.5 361.7 360.4 363.3 365.3 21 Other 1369.1 1369.8 1363.8 1364.4 1366.8 1368.4 1369.9 1370.2 1,370.1 1371.2 1370.8 1,368.4 22 Borrowings 517.3 573.4 568.9 572.2 567.8 577.0 576.2 578.1 5615 559.6 587.2 600.7 23 From banks in the U.S 154.8 159.5 155.3 161.7 158.6 156.8 164.5 171.4 166.8 164.0 177.8 179.5 24 From nonbanks in the U.S 362.5 413.9 413.6 410.5 409.2 420.1 411.7 406.6 395.8 395.7 409.3 421.2 25 Net due to related foreign offices 121.4 174.5 184.6 200.8 211.2 215.6 213.9 208.6 210.9 205.6 215.5 203.8 26 Other liabilities8 143.7 177.3 171.7 177.8 1719 172.3 173.4 1719 174.1 171.8 173.6 171.1 27 Total UabUitles 3J153r 3,445.3 3^32.1 3^642 3,469.0 3,485.4 3,498.1 3,4903 3,470.2 3,466.7 3,5203 3^02.1 28 Residual (assets less liabilities)9 306.6 309.0 326.1 335.9 333.9 320.4 327.0 350.5 343.7 354.2 354.5 355.5 Not seasonally adjusted Assets 29 Bank credit 3,101.9 3,200.8 3,219.6 3,243.2 3,261.4 3,279.0 3,2905 3308.6 3,301.1 3,306.8 3307.7 3,318.8 30 Securities in bank credit 908.4 968.4 972.1 973.2 970.8 968.6 962.1 957.8 959.4 958.8 954.2 955.6 31 U.S. government securities 124.9 747.9 749.4 745.9 745.5 741.6 729.5 723.7 724.6 725.3 720.2 7218 32 Other securities 183.6 220.5 222.8 227.3 225.3 227.0 232.6 234.1 234.8 233.6 234.0 232.9 33 Loans and leases in bank credit2 ... 2,193.5 1232.4 2,247.4 2,270.0 1290.6 2310.4 2328.4 2350.9 2,341.7 1348.0 13535 1363.2 34 Commercial and industrial 585.0 608.6 611.2 616.5 619.6 624.0 631.6 639.9 636.0 639.7 641.7 643.4 35 Real estate 936.2' 949.3 956.5 963.5 970.4 979.1 985.4 993.1 991.2 9917 993.5 996.1 36 Revolving home equity 74.0 73.5 73.9 74.0 74.4 75.0 75.7 76.1 76.0 76.1 76.1 76.2 3/ Other 862.2r 875.8 882.5 889.5 896.0 904.1 909.7 917.0 915.2 916.6 917.4 919.9 38 Consumer 388.6 411.1 414.1 421.4 429.4 436.1 441.7 444.9 443.3 443.9 444.4 448.2 39 Security3 88.1 73.4 74.3 72.5 72.5 68.3 70.9 73.3 717 705 75.0 75.2 40 Other 195.6 190.0 191.4 196.1 198.8 202.9 198.8 199.7 198.4 201.2 199.0 200.3 41 Interbank loans4 155.4' 153.1 154.4 155.7 155.5 157.2 161.4 171.9 166.8 166.4 1715 183.6 42 Cash assets5 226.3 213.6 2112 207.5 197.7 204.0 209.0 211.5 194.1 2165 217.2 218.9 43 Other assets6 219.7 222.3 216.9 225.1 226.6 223.2 225.1 228.0 227.1 225.0 228.6 231.6 44 Total assets7 3,644.2 3,732.6 3,746.1 3,774a 3,784.0 3,806J! 3,829.0 3,8619 333U 3^575 3,868.9 3395.7 Liabilities 45 Deposits 2,543.8 2508.8 1508.6 1507.3 2505.5 2517.3 2525.7 2541.2 1528.9 1550.8 1539.1 2547.1 46 Transaction 828.1 800.8 807.2 801.9 7914 799.8 800.6 809.5 793.5 819.2 808.3 817.7 47 Nontransaction 1,715.8' 1,708.0 1,701.4 1,705.4 1,713.0 1,717.6 1,725.0 1,731.6 1,735.4 1,731.6 1,730.9 1,729.4 48 Large time 344.3 342.1 337.2 339.5 344.2 348.5 353.8 359.2 358.5 356.6 360.7 361.9 49 Other 13715" 1365.9 1364.2 1365.9 1368.8 1369.1 1371.3 1,3714 1376.9 1375.0 1,370.2 1367.5 50 Borrowings 528.3 561.0 575.1 580.0 583.5 588.6 590.5 6018 592.3 591.5 6018 6235 51 From banks in the U.S 155.8 153.4 154.7 156.0 155.5 157.2 161.4 171.9 166.8 166.4 1715 183.6 52 From nonbanks in the U.S 372.5 407.6 420.4 424.1 428.0 431.4 429.1 430.9 425.5 425.1 430.3 439.9 53 Net due to related foreign offices 124.1 180.1 179.8 1919 200.4 203.7 212.6 211.7 204.0 208.2 218.5 218.2 54 Other liabilities8 149.5 1715 167.8 174.1 1714 172.9 176.9 180.2 180.0 179.4 180.3 180.3 55 Total UabUities 3345.8 3,422.4 3,4313 3/1543 3,461.7 3,4815 3505.7 3535.8 3505.0 3529.9 3540.7 3569.2 56 Residual (assets less liabilities)9 298.4' 310.2 314.9 320.5 322.3 323.6 323.3 327.1 326.8 327.6 328.2 326.6 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A19 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures Account 1993 1994 1994 Nov. May' June' July' Aug.' Sept.' Oct. Nov. Nov. 9 Nov. 16 Nov. 23 Nov. 30 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 2,7562 2,864.4 2,877.6 2,902.3 2,913.1 2,919.8 2930.5 2941.3 2934.7 2939.4 2942.5 2,948.4 58 Securities in bank credit 826.1r 885.9 886.7 892.2 882.7 876.1 868.1 865.4 866.5 865.1 862.8 865.0 59 US. government securities 668.6r 692.2 691.1 691.6 685.9 678.9 669.8 665.6 665.8 666.0 663.2 665.5 60 Other securities 157.5 193.7 195.6 200.5 196.9 197.3 198.4 199.8 200.7 199.1 199.6 199.4 61 Loans and leases in bank credit2 1,930.1 1,978.5 1,990.9 2,010.2 2,030.4 2,043.7 20624 2075.9 2,068.2 2074.3 2079.6 2,083.5 6? Commercial and industrial 434.1 452.1 455.7 460.8 464.1 467.9 471.8 474.4 4724 474.4 475.5 475.7 63 Real estate 886.r 905.7 912.8 920.4 929.3 937.1 943.0 949.4 945.7 948.9 951.1 952.7 64 Revolving home equity 135 73.7 74.0 74.2 74.4 74.7 75.0 75.6 75.4 75.5 75.6 75.9 65 Other 832.0 838.8 846.2 854.9 862.4 868.0 873.9 870.3 873.4 875.5 876.8 66 Consumer 388.4 4113 416.0 424.0 430.1 434.9 441.9 444.7 444.0 443.9 444.4 446.9 67 Security3 60.3 51.2 49.6 46.5 47.0 43.4 46.7 47.4 47.1 46.2 47.8 48.8 68 Other 160.6' 157.1 156.9 158.5 159.9 160.4 159.0 159.9 159.1 160.8 160.8 159.3 69 Interbank loans4 132.8' 131.8 131.5 133.7 134.5 136.5 138.7 148.8 146.2 143.1 156.2 1529 70 Cash assets5 193.2 189.1 188.6 185.5 179.6 180.7 187.0 181.6 1720 180.5 194.9 177.7 71 Other assets6 172.4 173.1 166.8 171.3 173.2 168.5 168.1 169.3 167.3 167.4 173.2 170.0 72 Total assets7 3,195.8 330U 3307.6 3335.6 3343.0 3,3483 3367.0 33842 33634 3373J 3*410.1 33923 Liabilities 73 Deposits 2378./ 2376.4 2369.0 2371.4 2371.9 2368.5 2374.9 2371.0 23628 2371.1 23828 2366.6 74 Transaction 804.8 801.9 798.4 799.9 797.8 793.2 797.4 788.9 781.0 789.1 800.6 784.2 75 Nontransaction 1,573.8 1,574.5 1370.6 1371.5 1374.2 1375.2 1377.4 1382.0 1381.8 13820 13822 13824 76 Large time 210.8 209.9 210.1 211.4 212.5 211.2 214.6 218.8 218.5 218.1 219.0 219.9 77 Other 1,363.1' 1364.6 1360.5 1360.2 1361.7 1364.0 13629 1363.2 1363.3 1,363.9 1363.2 13625 78 Borrowings 410.3 471.0 462.4 4622 460.9 473.5 477.5 476.0 462.5 460.2 479.9 497.6 79 From banks in the U.S 121.5 138.5 131.9 140.6 139.5 139.0 148.2 154.2 148.7 149.2 159.2 161.5 80 From nonbanks in the U.S 288.9 3325 330.5 321.6 321.5 334.4 329.3 321.8 313.7 311.0 320.7 336.1 81 Net due to related foreign offices.... -2.7 25.3 3Z6 44.6 53.4 59.9 64.6 64.6 64.8 64.8 729 58.2 82 Other liabilities8 104.9 133.7 128.9 131.5 126.5 127.0 126.6 125.1 126.9 125.7 125.2 121.9 83 Total liabilities 2*91.2 3,0064 2^93.0 3,009.7 3/11X8 30K9 3043.6 3,036.7 3^)17.0 3,021.8 3060.8 3,0443 84 Residual (assets less liabilities)9 304.7 294.9 314.6 325.9 330.3 319.4 323.4 347.6 346.4 351.7 349.3 348.0 Not seasonally adjusted Assets 85 Bank credit 2,764.9' 2,859.2 2,876.6 2,894.5 2,908.8 2,924.0 2936.9 2951.8 2945.8 2,951.4 2,949.8 2,959.4 86 Securities in bank credit 830.? 883.0 886.1 887.8 883.5 879.0 873.1 871.1 873.4 8720 867.3 869.1 87 U.S. government securities 671.3' 690.9 690.7 687.7 686.4 681.6 671.4 667.8 669.2 668.7 664.5 667.3 88 Other securities 158.9 192.1 195.4 200.1 197.2 197.4 201.7 203.3 204.2 203.2 2028 201.8 89 Loans and leases in bank credit2 1,934.7 1,976.1 1,990.5 2,006.6 2,025.3 2,045.0 2063.8 2,080.7 2,072.4 2,079.4 2,0825 2,090.3 90 Commercial and industrial 434.9 454.8 456.7 459.4 461.3 465.3 471.2 475.2 473.0 475.3 476.3 476.7 91 Real estate 889.1' 906.2 913.5 921.2 928.2 937.2 944.6 9524 950.5 951.9 9528 955.4 92 Revolving home equity 74.0 73.4 73.9 74.0 74.4 75.0 75.7 76.0 75.9 76.0 76.0 76.2 93 Other 815.1' 832.7 839.6 847.2 853.8 8622 868.9 876.3 874.5 875.9 876.7 879.2 94 Consumer 388.6 411.1 414.1 421.4 429.4 436.1 441.7 444.9 443.3 443.9 444.4 448.2 95 Security3 60.1 49.1 48.8 45.7 46.0 43.7 46.0 47.3 46.2 45.8 48.7 48.4 96 Other 162.1' 155.1 157.4 158.9 160.4 1627 160.3 161.0 159.4 162.5 160.4 161.6 97 Interbank loans4 134.5 127.7 130.7 129.6 132.4 133.4 136.1 148.9 146.1 147.1 149.8 154.3 98 Cash assets3 200.6 187.6 186.1 182.4 173.4 181.4 185.4 188.2 171.1 193.6 193.3 195.2 99 Other assets6 173.8 171.3 165.7 170.9 171.8 169.9 170.5 170.5 170.1 168.6 170.8 1723 100 Total assets7 3,214.6 3302-2 3320.7 3329.2 3351.5 3371.9 3376.0 3,403.6 3,406.6 3Y424J Liabilities 101 Deposits 2393.8 2361.9 2366.7 2364.1 2360.3 2366.7 23722 2385.6 2373.4 2396.1 2382.0 2391.4 102 Transaction 816.4 790.9 796.9 791.9 782.8 789.5 791.0 800.4 784.0 809.8 799.3 808.8 103 Nontransaction 1,577.4 1371.0 1369.8 1372.3 1377.5 1377.3 1381.1 1385.3 1389.3 1386.3 13827 13826 104 Large time 211.3 210.5 209.6 211.0 213.8 212.3 215.7 219.3 219.3 218.3 219.7 220.0 105 Other 1366.1 1360.5 1360.2 1361.3 1363.6 1365.0 1365.4 1366.0 1370.0 1,368.0 1363.1 1362.6 106 Borrowings 420.2 461.7 468.3 469.8 475.6 483.7 489.7 500.3 489.3 490.7 499.2 520.6 107 From banks in the U.S 121.3 134.3 132.1 134.6 136.3 138.6 145.4 154.5 148.3 150.9 155.4 165.0 108 From nonbanks in the U.S 298.8 327.4 336.2 335.2 339.3 345.2 344.3 345.8 341.1 339.8 343.8 355.6 109 Net due to related foreign offices -3.3 31.1 329 43.5 51.0 55.4 623 64.1 60.9 63.3 724 61.8 110 Other liabilities8 109.6 129.5 125.4 128.9 126.1 127.7 130.3 131.0 131.4 131.7 130.4 129.6 111 Total liabilities 2^203' 2^6*2 2&9X3 3,0063 3,012.9 3,033.6 3,0544 3^81.1 3,055.0 3,081.7 3,084.1 3,1033 112 Residual (assets less liabilities)9 294.3' 304.5 308.9 314.4 316.3 317.9 317.5 321.4 321.0 321.9 3225 320.9 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • February 1995 NOTES TO TABLE 1.26 1. Covers the following types of institutions in the fifty states and the District of 5. Includes vault cash, cash items in process of collection, demand balances due from Columbia: domestically chartered commercial banks that submit a weekly report of depository institutions in the United States, balances due from Federal Reserve Banks, condition (large domestic); other domestically chartered commercial banks (small domes- and other cash assets. tic); branches and agencies of foreign banks; New York State investment companies, and 6. Excludes the due-from position with related foreign offices, which is included in Edge Act and agreement corporations (foreign-related institutions). Excludes interna- lines 25, 53, 81, and 109. tional banking facilities. Data are Wednesday values, or pro rata averages of Wednesday 7. Excludes unearned income, reserves for losses on loans and leases, and reserves for values. Large domestic banks constitute a universe; data for small domestic banks and transfer risk. Loans are reported gross of these items. foreign-related institutions are estimates based on weekly samples and on quarter-end 8. Excludes the due-to position with related foreign offices, which is included in lines condition reports. Data are adjusted for breaks caused by reclassifications of assets and 25, 53, 81, and 109. liabilities. 9. This balancing item is not intended as a measure of equity capital for use in capital 2. Excludes federal funds sold to, reverse repurchase agreements with, and loans to adequacy analysis. commercial banks in the United States. NOTE. Data have been benchmarked to the June 1994 Call Report. Earlier tables were 3. Consists of reserve repurchase agreements with broker-dealers and loans to pur- benchmarked to the March 1994 Call Report. chase and carry securities. 4. Consists of federal funds sold to, reverse repurchase agreements with, and loans to commercial banks in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS Millions of dollars, Wednesday figures 1994 Account Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 ASSETS 1 Cash and balances due from depository institutions 111,935 122,724 110,588 105,836 114,500 102,414 119,851 120,520 119,636 7, U.S. Treasury and government securities 300,939 300,425 301,546 301,946 305,139 300,233 302,400 299,623 302,617 Trading account 22,463 22,994 25,308 24,840 26,700 22,978 26,552 21,680 24,125 4 Investment account 278,475 277,431 276,238 277,107 278,439 277,256 275,848 277,944 278,492 5 Mortgage-backed securities1 91,337 91,125 91,026 90,625 91,636 91,499 92,735 92,528 93,608 All others, by maturity 6 One year or less 43,329 42,402 42,014 42,937 43,096 42,541 41,135 44,240 4455,,006633 7 One year through five years 76,908 77,166 77,010 77,540 78,029 77,235 75,071 74,177 74,093 8 More than five years 66,901 66,738 66,187 66,005 65,677 65,980 66,907 66,998 65,728 9 Other securities 104,848 104,507 109,177 119,216 120,038 117,339 116,326 115,692 114,482 10 Trading account 1,437 1,685 1,622 1,637 1,846 1,721 1,830 1,775 1,849 11 Investment account 61,718 61,804 61,833 61,804 62,499 62,743 62,623 62,904 62,746 1? State and local government, by maturity 21,544 21,520 21,643 21,651 21,706 21,684 21,730 21,829 21,817 13 One year or less 5,277 5,270 5,290 5,290 5,400 5,439 5,419 5,424 5,502 14 More than one year 16,267 16,251 16,354 16,361 16,306 16,245 16,311 16,404 16,315 15 Other bonds, corporate stocks, and securities 40,174 40,284 40,190 40,152 40,793 41,060 40,894 41,075 40,930 16 Other trading account assets 41,693 41,018 45,722 55,775 55,693 52,875 51,872 51,014 49,887 17 Federal funds sold2 90,122 97,636 93,058 99,002 99,136 99,777 97,740 105,780 107,882 18 To commercial banks in the United States 58,554 68,130 61,196 69,578 68,342 70,180 68,877 72,972 77,877 19 To nonbank brokers and dealers in securities 23,379 24,060 26,731 24,205 25,600 23,794 23,333 27,298 24,406 ">0 To others3 8,189 5,446 5,132 5,220 5,193 5,803 5,529 5,510 5,599 ?1 Other loans and leases, gross 1,113,864 1,115,804 1,116,922 1,119,232 1,129,609 1,129,041 1,134,465 1,134,335 1,142,898 ?? Commercial and industrial 306,938 306,179 307,240 306,917 309,275 308,155 310,205 311,316 311,378 73 Bankers acceptances and commercial paper 2,885 3,243 3,393 3,278 3,270 3,143 3,273 3,295 3,390 74 All other 304,053 302,935 303,847 303,639 306,005 305,012 306,932 308,021 307,988 ? ? * 6 > U N . o S n . -U ad .S dr . e a s d s d ee re s ssees 302 1 , , 2 7 8 7 0 2 301 1 , , 1 7 3 9 7 9 302 1 , , 0 8 2 1 8 9 301 1 , , 7 8 5 8 9 0 304 1 , , 0 9 3 7 5 0 30 2 2 , ,9 0 7 3 7 5 304 2 , ,2 7 0 3 1 1 30 2 5 , , 1 9 2 0 1 0 30 2 5 , , 2 7 7 1 5 3 77 Real estate loans 443,492 444,149 444,252 445,045 448,517 449,586 449,948 450,716 453,289 78 Revolving, home equity 45,821 45,864 46,129 46,251 46,303 46,318 46,357 46,584 46,812 ?9 All other 397,671 398,285 398,123 398,794 402,214 403,268 403,591 404,132 406,477 30 To individuals for personal expenditures 231,292 231,973 232,566 233,046 234,561 235,525 234,684 234,508 237,443 31 To depository and financial institutions 43,141 45,660 45,642 45,734 47,329 46,498 47,923 48,783 48,237 3? Commercial banks in the United States 25,140 26,196 26,347 26,498 27,325 27,123 28,145 28,749 27,923 33 Banks in foreign countries 2,458 3,005 2,542 2,744 3,063 2,334 2,835 3,217 3,614 34 Nonbank depository and other financial institutions 15,542 16,459 16,753 16,491 16,941 17,041 16,942 16,817 16,700 For purchasing and carrying securities 15,365 15,226 16,027 16,933 16,296 17,041 17,006 16,004 18,628 36 To finance agricultural production 6,500 6,467 6,423 6,358 6,357 6,335 6,344 6,300 6,347 37 To states and political subdivisions 11,488 11,549 11,571 11,572 11,453 11,373 11,296 11,392 11,493 38 To foreign governments and official institutions 940 1,050 915 920 917 921 1,087 906 1,070 39 All other loans4 24,773 23,541 22,185 22,465 24,531 23,031 25,374 23,661 24,048 40 Lease-financing receivables 29,938 30,011 30,101 30,242 30,372 30,575 30,598 30,749 30,965 41 LESS: Unearned income 1,633 1,635 1,624 1,624 1,597 1,598 1,609 1,611 1,595 47 Loan and lease reserve5 34,651 34,754 34,565 34,528 34,606 34,826 34,765 34,704 34,721 43 Other loans and leases, net 1,077,580 1,079,416 1,080,734 1,083,080 1,093,406 1,092,617 1,098,092 1,098,020 1,106,582 44 All other assets 148,281 150,066 143,360 135,858 141,350 138,946 136,734 134,852 140,553 45 Total assets6 1,833,705 1,854,774 1,838,462 1,844,938 1,873,568 1,851,326 1,871,142 1,874,487 1,891,753 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • February 1995 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1994 AAccccoouunntt Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 LIABILITIES 46 Deposits 1,145,964 1,157,278 1,126,673 1,125,397 1,149,509 1,138,825 1,157,563 1,150,053 1,158,859 47 Demand deposits7 299,886 311,565 284,836 283,596 299,232 287,119 308,311 302,406 308,991 48 Individuals, partnerships, and corporations 253,417 260,473 242,298 237,908 250,961 244,352 257,254 253,224 259,552 49 Other holders 46,470 51,092 42,538 45,688 48,272 42,767 51,058 49,182 49,439 50 States and political subdivisions 8,229 8,180 8,148 8,237 8,755 7,607 9,180 8,976 9,648 51 U.S. government 2,313 1,858 1,891 1,957 2,554 2,262 3,157 2,867 2,345 52 Depository institutions in the United States 21,038 25,065 18,665 18,608 21,485 18,171 22,064 20,748 20,655 53 Banks in foreign countries 5,144 5,819 5,021 5,293 5,424 4,811 5,508 6,115 6,508 54 Foreign governments and official institutions 788 848 640 733 756 693 774 1,466 680 55 Certified and officers' checks 8,957 9,323 8,173 10,860 9,298 9,223 10,374 9,010 9,603 56 Transaction balances other than demand deposits 126,520 124,360 122,944 121,733 125,644 125,756 125,659 125,070 125,698 57 Nontransaction balances 719,558 721,354 718,893 720,068 724,632 725,950 723,593 722,577 724,170 58 Individuals, partnerships, and corporations 699,043 700,730 698,457 699,485 704,023 705,467 703,312 701,736 703,073 59 Other holders 20,515 20,624 20,437 20,583 20,609 20,483 20,281 20,841 21,097 60 States and political subdivisions 16,749 16,836 16,853 16,933 16,932 16,968 16,941 17,242 17,372 61 U.S. government 1,678 1,776 1,724 1,711 1,725 1,545 1,423 1,402 1,426 62 Depository institutions in the United States 1,639 1,562 1,414 1,490 1,519 1,492 1,477 1,671 1,773 63 Foreign governments, official institutions, and banks .. 449 449 446 448 433 478 439 526 526 64 Liabilities for borrowed money5 346,165 358,228 362,114 361,451 369,568 358,201 358,128 364,060 380,569 65 Borrowings from Federal Reserve Banks 0 0 0 54 0 54 0 100 0 66 Treasury tax and loan notes 2,831 3,565 12,374 12,580 20,507 6,177 4,512 4,320 15,354 67 Other liabilities for borrowed money 343,333 354,663 349,739 348,817 349,062 351,969 353,616 359,640 365,216 68 Other liabilities (including subordinated notes and debentures)... 169,423 166,263 175,940 183,788 180,988 180,396 181,840 186,985 178,489 69 Total UabiUties 1,661,551 1,681,770 1,664,726 1,670,636 1,700,066 1,677,422 1,697,531 1,701,097 1,717,918 70 Residual (total assets less total liabilities)7 172,154 173,004 173,736 174,302 173,502 173,904 173,611 173,390 173,835 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 1,526,079 1,524,046 1,533,161 1,543,321 1,558.253 1,549,087 1,553,908 1,553,710 1,562,079 72 Time deposits in amounts of $100,000 or more 94,253 95,856 96,910 98,238 99,674 99,1% 98,600 99,586 99,923 73 Loans sold outright to affiliates9 678 682 681 681 681 677 669 667 670 74 Commercial and industrial 328 339 338 339 339 339 338 337 340 75 Other 350 343 343 342 342 338 331 330 330 76 Foreign branch credit extended to U.S. residents10 22,756 22,857 22,369 22,734 22,743 22,662 22,646 23,034 23,211 77 Net owed to related institutions abroad 52,834 49,933 60,838 61,382 51,274 55,984 58,042 67,078 56,131 1. Includes certificates of participation, issued or guaranteed by agencies of the U.S. 8. Excludes loans to and federal funds transactions with commercial banks in the government, in pools of residential mortgages. United States. 2. Includes securities purchased under agreements to resell. 9. Affiliates include a bank's own foreign branches, nonconsolidated nonbank affiliates 3. Includes allocated transfer risk reserve. of the bank, the bank's holding company (if not a bank), and nonconsolidated nonbank 4. Includes negotiable order of withdrawal (NOWs) and automatic transfer service subsidiaries of the holding company. (ATS) accounts, and telephone and preauthorized transfers of savings deposits. 10. Credit extended by foreign branches of domestically chartered weekly reporting 5. Includes borrowings only from other than directly related institutions. banks to nonbank U.S. residents. Consists mainly of commercial and industrial loans, but 6. Includes federal funds purchased and securities sold under agreements to repur- includes an unknown amount of credit extended to other than nonfinancial businesses. chase. 7. This balancing item is not intended as a measure of equity capital for use in capital-adequacy analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A23 1.28 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities Millions of dollars, Wednesday figures 1994 AAccccoouunntt Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 ASSETS 1 Cash and balances due from depository institutions 15,309 15,819 15,625 15,861 14,700 14,984 14,954 15,677 15,481 2 U.S. Treasury and government agency securities 40,319 40,377 40,722 38,697 38,659 37,688 3388,,449944 3377,,886688 3377,,775577 3 Other securities 12,476 12,377 12,449 12,518 12,494 12,351 12,261 12,624 12,550 4 Federal funds sold1 28,902 29,978 27,165 26,615 25,981 26,238 23,403 26,462 30,071 To commocial banks in the United States 9,692 10,444 7,282 7,456 6,786 5,686 4,921 6,514 10,018 6 To others2 19,210 19,534 19,882 19,160 19,195 20,552 18,482 19,948 20,053 7 Other loans and leases, gross 159,808 160,009 161,669 161,959 162,554 163,066 164,471 164,837 166,162 8 Commercial and industrial 102,458 102,326 103,635 103,523 104,021 104,491 105,521 105,967 106,872 9 Bankers acceptances and commercial paper . 3,167 3,285 3,097 2,957 2,889 3,096 3,143 3,180 3,101 10 All other 99,292 99,041 100,538 100,566 101,131 101,396 102,378 102,787 103,771 11 U.S. addressees 95,128 94,851 96,469 96,594 97,116 97,402 98,368 98,656 99,673 12 Non-U.S. addressees 4,164 4,189 4,069 3,972 4,015 3,994 4,010 4,131 4,098 13 Loans secured by real estate 26,450 26,329 26,222 26,212 26,135 26,096 26,134 26,093 26,079 14 Loans to depository and financial institutions 24,128 24,456 24,707 24,897 24,761 24,898 25,119 25,496 25,308 1*) Commercial banks in the United States 4,775 4,804 4,940 5,300 5,094 5,129 5,190 5,386 5,361 16 Banks in foreign countries 2,087 2,014 2,120 2,103 1,998 2,005 1,994 1,949 1,800 17 Nonbank financial institutions 17,266 17,637 17,647 17,495 17,669 17,764 17,935 18,160 18,147 18 For purchasing and carrying securities 2,932 2,990 3,351 3,361 3,463 3,677 3,799 3,432 4,057 19 To foreign governments and official institutions 346 357 358 381 335 338 338800 336699 337722 70 All other 3,493 3,552 3,396 3,586 3,840 3,566 3,518 3,480 3,476 21 Other assets (claims on nonrelated parties) 34,465 35,299 35,179 35,573 36,217 37,007 36,581 37,612 38,679 22 Total assets3 315,396 320,204 319,613 317,870 318,077 320,779 318,253 321,716 325,715 LIABILITIES J 23 Deposits or credit balances owed to other than directly related institutions 96,518 95,876 96,895 97,885 96,149 98,385 97,645 99,184 98,952 74 Demand deposits4 4,333 4,545 4,107 4,261 4,046 4,198 4,173 3,878 3,864 25 Individuals, partnerships, and corporations .... 3,652 3,653 3,382 3,394 3,414 3,412 3,464 3,198 3,253 76 Other 682 892 725 867 632 786 709 680 611 77 Nontransaction accounts 92,184 91,332 92,789 93,624 92,103 94,187 93,472 95,306 95,088 28 Individuals, partnerships, and corporations .... 62,325 61,414 62,529 62,861 62,702 64,076 63,670 64,322 63,757 29 Other 29,859 29,917 30,260 30,763 29,400 30,110 29,803 30,984 31,331 30 Borrowings from other than directly related institutions 71,153 72,768 73,108 72,376 72,563 74,574 72,846 75,449 7755,,007766 31 Federal funds purchased3 37,213 38,470 38,598 35,937 37,099 37,905 36,653 37,824 38,259 3? From commercial banks in the United States .. 5,334 6,318 6,170 6,444 6,511 7,547 6,065 6,373 7,894 33 From others 31,879 32,152 32,427 29,493 30,588 30,358 30,588 31,451 30,365 34 Other liabilities for borrowed money 33,940 34,298 34,510 36,440 35,464 36,669 36,193 37,624 36,817 35 To commercial banks in the United States 6,478 6,434 7,061 6,951 6,591 6,394 6,387 5,929 6,232 36 To others 27,462 27,864 27,449 29,489 28,873 30,275 29,806 31,695 30,585 37 Other liabilities to nonrelated parties 31,491 32,937 32,034 32,363 34,060 34,097 33,390 34,978 35,844 38 Total liabilities6 315,396 320,204 319,613 317,870 318,077 320,779 318,253 321,716 325,715 MEMO 39 Total loans (gross) and securities, adjusted 227,038 227,492 229,782 227,034 227,807 228,529 228,518 229,892 231,160 40 Net owed to related institutions abroad 92,119 92,278 90,771 88,599 87,832 84,279 86,284 85,470 90,827 1. Includes securities purchased under agreements to resell. 5. Includes securities sold under agreements to repurchase. 2. Includes transactions with nonbank brokers and dealers in securities. 6. For U.S. branches and agencies of foreign banks having a net "due to" position, 3. For U.S. branches and agencies of foreign banks having a net "due from" position, includes net owed to related institutions abroad. includes net due from related institutions abroad. 7. Excludes loans to and federal funds transactions with commercial banks in the 4. Includes other transaction deposits. United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • February 1995 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1994 IItteemm 1989 1990 1991 1992 1993 May June July Aug. Sept. Oct. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 525,831 562,656 528,832 545,619 555,075 559,915r 563,454' 572,925' 564,639' 574,471 592^18 Financial companies' Dealer-placed paper2 2 Total 183,622 214,706 212,999 226,456 218,947 213,623 214,313 222,780 214,769 214,349 224,280 3 Bank-related (not seasonally adjusted)3 ... n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Directly placed paper4 4 Total 210,930 200,036 182,463 171,605 180,389 198,158r 199,555r 199,56lr 199,031r 203,573 207,296 S Bank-related (not seasonally adjusted)3... n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6 Nonfinancial companies5 131,279 147,914 133,370 147,558 155,739 148,134 149,586 150,584 150,839 156,549 160,942 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 62,972 54,771 43,770 38,194 32,348 29,867 30,659 30,390 30,448 31,164 30,413 By holder 8 Accepting banks 9,433 9,017 11,017 10,555 12,421 11,533 12,334 11,608 11,543 11,299 11,061 9 Own bills 8,510 7,930 9,347 9,097 10,707 10,601 11,273 10,838 10,824 10,475 9,931 10 Bills bought from other banks 924 1,087 1,670 1,458 1,714 932 1,061 770 719 824 1,130 Federal Reserve Banks7 11 Foreign correspondents 1,066 918 1,739 1,276 725 465 453 386 325 388 332 12 Others 52,473 44,836 31,014 26,364 19,202 17,869 17,872 18,396 18,580 19,477 19,020 By basis 13 Imports into United States 15,651 13,095 12,843 12,209 10,217 10,396 10,625 10,956 10,486 10,985 10,674 14 Exports from United States 13,683 12,703 10,351 8,096 7,293 6,367 6,576 6,399 6,458 6,575 6,754 15 All other 33,638 28,973 20,577 17,890 14,838 13,104 13,458 13,035 13,505 13,604 12,986 1. Institutions engaged primarily in commercial, savings, and mortgage banking; 6. Data on bankers dollar acceptances are gathered from approximately 100 institusales, personal, and mortgage financing; factoring, finance leasing, and other business tions. The reporting group is revised every January. lending; insurance underwriting; and other investment activities. 7. In 1977 the Federal Reserve discontinued operations in bankers dollar acceptances 2. Includes all financial-company paper sold by dealers in the open market. for its own account. 3. Series were discontinued in January 1989. 4. As reported by financial companies that place their paper directly with investors. 5. Includes public utilities and firms engaged primarily in such activities as communications, construction, manufacturing, mining, wholesale and retail trade, transportation, and services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans1 Percent per year Average Average Average Date of change Rate Period rate Period rate Period rate 1992—Jan. 1 6.50 1992 6.25 1993—Jan 6.00 1994—Jan 6.00 JJuullyy 22 6.00 1993 6.00 Feb 6.00 Feb 6.00 1994 7.15 Mar. 6.00 Mar. 6.06 1994—Mar. 24 6.25 Apr. 6.00 Api 6.45 Apr. 19 6.75 1992—Jan 6.50 May 6.00 May 6.99 May 17 7.25 Feb 6.50 June 6.00 June 7.25 Aug. 16 7.75 Mar 6.50 July 6.00 July 7.25 Nov. 15 8.50 Apr. 6.50 Aug 6.00 Aug 7.51 May 6.50 Sept 6.00 Sept 7.75 June 6.50 Ocl 6.00 Oct 7.75 July 6.02 Nov. 6.00 Nov. 8.15 Aug 6.00 Dec 6.00 Dec 8.50 Sept 6.00 Oct 6.00 Nov 6.00 Dec 6.00 1. The prime rate is one of several base rates that banks use to price short-term recent Call Report. Data in this table also appear in the Board's H.15 (519) weekly and business loans. The table shows the date on which a new rate came to be the predominant G. 13 (415) monthly statistical releases. For ordering address, see inside front cover, one quoted by a majority of the twenty-five largest banks by asset size, based on the most Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • February 1995 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1994 1994, week ending IItteemm 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Oct. 28 Nov. 4 Nov. 11 Nov. 18 Nov. 25 MONEY MARKET INSTRUMENTS 1 Federal funds1,2'3 5.69 3.52 3.02 4.47 4.73 4.76 5.29 4.72 4.77 4.74 5.22 5.53 2 Discount window borrowing2,4 5.45 3.25 3.00 3.76 4.00 4.00 4.40 4.00 4.00 4.00 4.21 4.75 Commercial paper3'5'6 3 1-month 5.89 3.71 3.17 4.65 4.90 5.02 5.40 4.98 5.05 5.24 5.50 5.60 4 3-month 5.87 3.75 3.22 4.84 5.02 5.51 5.81 5.55 5.63 5.74 5.82 5.90 5 6-month 5.85 3.80 3.30 5.19 5.32 5.70 6.01 5.77 5.82 5.94 6.01 6.11 Finance paper, directly placed3'5'7 6 1-month 5.73 3.62 3.12 4.56 4.79 4.91 5.30 4.88 4.96 5.16 5.41 5.49 7 3-month 5.71 3.65 3.16 4.73 4.89 5.36 5.67 5.45 5.47 5.59 5.71 5.79 8 6-month 5.60 3.63 3.15 4.79 4.99 5.30 5.58 5.33 5.32 5.42 5.63 5.76 Bankers acceptances3'5'8 9 3-month 5.70 3.62 3.13 4.74 4.95 5.41 5.71 5.45 5.52 5.63 5.74 5.77 10 6-month 5.67 3.67 3.21 5.03 5.24 5.59 5.93 5.64 5.73 5.83 5.95 6.01 Certificates of deposit, secondary market* 11 1-month 5.82 3.64 3.11 4.60 4.85 4.98 5.38 4.94 5.04 5.21 5.44 5.55 12 3-month 5.83 3.68 3.17 4.81 5.03 5.51 5.79 5.56 5.59 5.72 5.80 5.87 13 6-month 5.91 3.76 3.28 5.17 5.40 5.79 6.11 5.87 5.92 6.02 6.10 6.23 14 Eurodollar deposits, 3-month3'10 5.86 3.70 3.18 4.80 5.01 5.52 5.78 5.55 5.56 5.74 5.81 5.85 U.S. Treasury bills Secondary market3'5 lb 3-month 5.38 3.43 3.00 4.48 4.62 4.95 5.29 5.01 5.10 5.22 5.34 5.31 16 6-month 5.44 3.54 3.12 4.88 5.04 5.39 5.72 5.48 5.53 5.64 5.77 5.78 17 1-year 5.52 3.71 3.29 5.25 5.43 5.75 6.13 5.86 5.90 6.00 6.18 6.22 Auction average3'5'11 18 3-month 5.42 3.45 3.02 4.50 4.64 4.96 5.25 5.07 5.07 5.25 5.29 5.40 19 6-month 5.49 3.57 3.14 4.91 5.02 5.39 5.69 5.51 5.51 5.68 5.72 5.85 20 1-year 5.54 3.75 3.33 5.36 5.38 5.72 6.09 n.a. n.a. n.a. 6.09 n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 5.86 3.89 3.43 5.56 5.76 6.11 6.54 6.22 6.28 6.42 6.58 6.63 22 2-year 6.49 4.77 4.05 6.18 6.39 6.73 7.15 6.86 6.95 7.04 7.15 7.24 23 3-year 6.82 5.30 4.44 6.50 6.69 7.04 7.44 7.16 7.24 7.38 7.45 7.50 24 5-year 7.37 6.19 5.14 6.88 7.08 7.40 7.72 7.53 7.61 7.69 7.73 7.74 25 7-year 7.68 6.63 5.54 7.06 7.28 7.58 7.83 7.70 7.77 7.84 7.85 7.81 26 10-year 7.86 7.01 5.87 7.24 7.46 7.74 7.96 7.86 7.94 8.00 7.97 7.91 27 20-year n.a. n.a. 6.29 7.62 7.87 8.08 8.20 8.16 8.21 8.26 8.22 8.15 28 30-year 8.14 7.67 6.59 7.49 7.71 7.94 8.08 8.03 8.08 8.13 8.10 8.04 Composite '29 More than 10 years (long-term) 8.16 7.52 6.45 7.55 7.81 8.02 8.16 8.11 8.16 8.21 8.18 8.12 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 6.56 6.09 5.38 5.89 5.87 6.05 n.a. 6.15 6.30 6.30 6.80 6.80 31 BBaaaa 6.99 6.48 5.82 6.23 6.23 6.37 n.a. 6.46 6.62 6.62 7.12 7.12 32 BBoonndd BBuuyyeerr sseerriieess1144 6.92 6.44 5.60 6.21 6.28 6.52 6.97 6.64 6.83 6.96 7.06 7.03 CORPORATE BONDS 33 Seasoned issues, all industries15 9.23 8.55 7.54 8.36 8.60 8.83 8.94 8.91 8.94 9.00 8.96 8.89 Rating group 34 Aaa 8.77 8.14 7.22 8.07 8.34 8.57 8.68 8.65 8.68 8.74 8.70 8.63 35 Aa 9.05 8.46 7.40 8.25 8.49 8.71 8.83 8.80 8.83 8.88 8.85 8.78 36 A 9.30 8.62 7.58 8.38 8.61 8.82 8.94 8.91 8.94 9.00 8.97 8.89 37 Baa 9.80 8.98 7.93 8.74 8.98 9.20 9.32 9.29 9.32 9.37 9.33 9.26 38 A-rated, recently offered utility bonds16 9.32 8.52 7.46 8.36 8.62 8.80 8.95 8.85 9.05 9.00 9.00 8.80 MEMO Dividend-price ratio17 39 Preferred stocks18 8.17 7.46 6.89 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 40 Common stocks 3.24 2.99 2.78 2.78 2.80 2.82 2.86 2.84 2.82 2.83 2.83 2.93 1. The daily effective federal funds rate is a weighted average of rates on trades 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. through New York brokers. Department of the Treasury. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the 13. General obligations based on Thursday figures; Moody's Investors Service. current week; monthly figures include each calendar day in the month. 14. State and local government general obligation bonds maturing in twenty years are 3. Annualized using a 360-day year for bank interest. used in compiling this index. The twenty-bond index has a rating roughly equivalent to 4. Rate for the Federal Reserve Bank of New York. Moodys' A1 rating. Based on Thursday figures. 5. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields to maturity on 6. An average of offering rates on commercial paper placed by several leading dealers selected long-term bonds. for firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on 7. An average of offering rates on paper directly placed by finance companies. recently offered, A-rated utility bonds with a thirty-year maturity and five years of call 8. Representative closing yields for acceptances of the highest-rated money center protection. Weekly data are based on Friday quotations. banks. 17. Standard & Poor's corporate series. Preferred stock ratio is based on a sample of 9. An average of dealer offering rates on nationally traded certificates of deposit. ten issues: four public utilities, four industrials, one financial, and one transportation. 10. Bid rates for Eurodollar deposits at 11:00 a.m. London time. Data are for indication Common stock ratio is based on the 500 stocks in the price index. purposes only. 18. Data for the preferred stock yield was discontinued as of June 29,1994. 11. Auction date for daily data; weekly and monthly averages computed on an NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and issue-date basis. G. 13 (415) monthly statistical releases. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A27 1.36 STOCK MARKET Selected Statistics 1994 IInnddiiccaattoorr 11999911 11999922 11999933 Mar. Apr. May June July Aug. Sept. Oct. Nov. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 206.35 229.00 249.71 257.32 247.97 249.56 251.21 249.29 256.08 257.61 255.22 252.48 2 Industrial 258.16 284.26 300.10 318.08 304.48 307.58 308.66 307.34 316.56 322.19 321.53 319.33 3 Transportation 173.97 201.02 242.68 265.68 250.43 244.75 246.64 244.21 244.67 239.10 230.71 227.44 4 Utility 92.64 99.48 114.55 107.72 105.04 102.89 103.27 102.73 105.61 102.30 101.67 100.07 5 Finance 150.84 179.29 216.55 211.02 208.12 211.30 215.89 210.91 214.77 211.90 203.33 198.38 6 Standard & Poor's Corporation (1941-43 = 10)' 376.20 415.75 451.63 463.81 447.23 450.90 454.83 451.40 464.24 466.96 463.81 461.01 7 American Stock Exchange (Aug. 31, 1973 = 50)2 360.32 391.28 438.77 465.72 437.01 437.54 436.08 430.10 444.89 456.31 456.25 445.16 Volume of trading (thousands of shares) 8 New York Stock Exchange 179,411 202,558 263,374 311,096 301,242 269,812 265,341 250,382 277,877 292,356 301,327 297,001 9 American Stock Exchange 12,486 14,171 18,188 19,481 15,805 15,727 18,400 14,378 15,874 18,785 20,731 18,465 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 36,660 43,990 60,310 61,960 60,700 59,870 60,800 61,930 63,070 61,630 62,150 61,000 Free credit balances at brokers'' 11 Margin accounts5 8,290 8,970 12,360 13,185 13,175 12,715 12,560 12,620 12,090 12,415 12,875 13,635 12 Cash accounts 19,255 22,510 27,715 26,190 24,800 23,265 28,585 25,790 24,400 25,230 24,180 25,625 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. In July 1976 a financial group, composed of banks and insurance companies, was credit is collateralized by securities. Margin requirements on securities other than options added to the group of stocks on which the index is based. The index is now based on 400 are the difference between the market value (100 percent) and the maximum loan value of industrial stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility collateral as prescribed by the Board. Regulation T was adopted effective Oct. 15, 1934; (formerly 60), and 40 financial. Regulation U, effective May 1, 1936; Regulation G, effective Mar. 11, 1968; and 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Regulation X, effective Nov. 1, 1971. previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has the initial margin required for writing options on securities, setting it at 30 percent of the included credit extended against stocks, convertible bonds, stocks acquired through the current market value of the stock underlying the option. On Sept. 30, 1985, the Board exercise of subscription rights, corporate bonds, and government securities. Separate changed the required initial margin, allowing it to be the same as the option maintenance reporting of data for margin stocks, convertible bonds, and subscription issues was margin required by the appropriate exchange or self-regulatory organization; such maintediscontinued in April 1984. nance margin rules must be approved by the Securities and Exchange Commission. 4. Free credit balances are amounts in accounts with no unfulfilled commitments to Effective Jan. 31, 1986, the SEC approved new maintenance margin rules, permitting brokers and are subject to withdrawal by customers on demand. margins to be the price of the option plus 15 percent of the market value of the stock 5. Series initiated in June 1984. underlying the option. 6. Margin requirements, stated in regulations adopted by the Board of Governors Effective June 8, 1988, margins were set to be the price of the option plus 20 percent of pursuant to the Securities Exchange Act of 1934, limit the amount of credit that can be the market value of the stock underlying the option (or 15 percent in the case of used to purchase and carry "margin securities" (as defined in the regulations) when such stock-index options). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • February 1995 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1994 11999922 11999933 11999944 June July Aug. Sept. Oct. Nov. US. budget1 1 Receipts, total 1,090,453 1,153,226 1,257,187 138,124 84,827 97,338 135,895 89,024 87,673 2 On-budget 788,027 841,292 922,161 106,014 60,145 70,949 105,212 65,385 62,083 3 Off-budget 302,426 311,934 335,026 32,110 24,681 26,389 30,683 23,639 25,590 4 Outlays, total 1,380,856 1,408,532 1,460,557 123,275 118,025 121,608 131,903 121,480" 125,131 5 On-budget 1,128,518 1,141,945 1,181,185 108,166 93,164 95,279 103,189 95,307" 99,464 6 Off-budget 252,339 266,587 279,372 15,108 24,861 26,329 28,714 26,174 25,668 7 Surplus or deficit (-), total -290,403 -255,306 -203,370 14,850 -33,198 -24,270 3,993 -32,457" -37,458 8 On-budget -340,490 -300,653 -259,024 -2,152 -33,018 -24,330 2,024 -29,922" -37,381 9 Off-budget 50,087 45,347 55,654 17,002 -180 60 1,969 -2,535 -78 Source of financing (total) 10 Borrowing from the public 310,918 248,594 184,998 2,098 -3,245 52,350 -11,996 32,457 40,528 11 Operating cash (decrease, or increase (—)) -17,305 6,283 16,564 -23,797 30,705 -9,802 -5,855 -480 9,366 12 Other2 -3,210 429 1,808 7,049 5,737 -18,374 13,858 480" -12,436 MEMO 13 Treasury operating balance (level, end of period) 58,789 52,506 35,942 50,991 20,285 30,087 35,942 36,422 27,056 14 Federal Reserve Banks 24,586 17,289 6,848 9,356 3,683 5,994 6,848 5,164 5,348 IS Tax and loan accounts 34,203 35,217 29,094 41,635 16,603 24,093 29,094 31,258 21,709 1. Since 1990, off-budget items have been the social security trust funds (federal gold; net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF old-age survivors insurance and federal disability insurance) and the U.S. Postal Service. loan-valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Outlays of the US. Government; and U.S. Office of Management and Budget, Budget of accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous the US. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1992 1993 1994 1994 11999933 11999944 H2 HI H2r HI Sept. Oct. Nov. RECEIPTS 1 All sources 1,153,226 1,257,453' 540,484 593,212 582,038r 652,236r 135,895 89,024 87,673 2 Individual income taxes, net 509,680 543,055r 246,938 255,556 262,073 275,053r 57,964 43,239 37,414 3 Withheld 430,211 459,699 215,584 209,517 228,423 225,387 35,201 40,480 37,882 4 Presidential Election Campaign Fund 28 70 10 25 2 63 1 0 2 5 Nonwithheld 154,989 160,364r 39,288 113,510 41,768 118,245r 24,811 3,919 1,857 6 Refunds 75,546 77,077 7,942 67,468 8,115r 68,642 2,050 1,160 2,327 Corporation income taxes 7 Gross receipts 131,548 154,205 58,022 69,044 68,266 80,536 28,921 55,,551133 22,,668822 8 Refunds 14,027 13,820 7,219 7,198 6,514 6,933 1,656 2,043 1,185 9 Social insurance taxes and contributions, net ... 428,300 461,475 192,599 227,177 206,176 248,301 40,371 32,687 37,387 10 Employment taxes and contributions2 ... 396,939 428,810 180,758 208,776 192,749 228,714 39,614 31,263 33,786 11 Self-employment taxes and contributions . 20,604 24,433 3,988 16,270 4,335 20,762 3,578 464 0 12 Unemployment insurance 26,556 28,004 9,397 16,074 11,010 17,301 346 1,073 3,249 13 Other net receipts4 4,805 4,661 2,445 2,326 2,417 2,284 411 351 352 48,057 55,225 23,456 23,398 25,994 26,444 5,518 4,275 5,518 15 Customs deposits 18,802 20,099 9,497 8,860 10,215 9,500 1,799 1,848 1,827 16 Estate and gift taxes 12,577 15,225 5,733 6,494 6,617 8,197 1,254 1,206 1,220 17 Miscellaneous receipts 18,273 22,041 11,458 9,879 9,227 11,170" 1,730" 2,300 2,811 OUTLAYS 18 All types l,408,532r l,461,067r 723,527 673,915 727,580r 710,621r 132,133r 121,480 125,131 291,086 281,451 155,231 140,535 146,668r 133,739 27,657 18,801 22,428 20 International affairs 16,826 17,249 9,916 6,565 10,186 5,800 2,323 4,339 2,177 21 General science, space, and technology 17,030 17,602 8,521 7,996 8,880 8,502 1,772 1,115 1,673 22 Energy 4,319 5,398 3,109 2,462 1,663 2,036 987 525 166 23 Natural resources and environment 20,239 20,902 11,467 8,592 11,227 9,179 2,156 3,418 1,797 24 Agriculture 20,443 15,131 8,852 11,872 7,516 7,451 236 2,048 2,784 25 Commerce and housing credit -22,725 -4,851 -7,697 -14,537 -1,490 -5,114 2,623 858 -1,244 26 Transportation 35,004 36,835 18,425 16,076 19,579r 16,772 3,583 3,434 3,506 27 Community and regional development 9,051 11,877 4,464 4,929 4,288 5,592 1,469 1,171 1,109 28 Education, training, employment, and social services 50,012 44,730 21,241 24,080 26,804r 1188,,997766 55,,008888 33,,770055 44,,002255 29 Health 99,415 106,495 47,232 49,882 52,958 53,121 9,106 8,631 9,525 30 Social security and Medicare 435,137 464,314 232,109 195,933 223,735 232,777 39,944 37,801 39,299 31 Income security 207,257 213,972 98,382 107,870 102, 330" 109,103 17,101 15,275 16,151 32 Veterans benefits and services 35,720 37,637 18,561 16,385 19,852 16,686 4,257 1,677 3,337 33 Administration of justice 14,955 15,283 7,238 7,482 7,400 7,718 1,362 1,340 1,176 34 General government 13,009 11,348 8,223 5,205 6,531 5,076 1,292 1,261 1,556 35 Net interest6 198,811 202,957 98,692 99,635 99,914 99,844 16,944 18,669 18,242 36 Undistributed offsetting receipts -37,386 -37,772 -20,628 -17,035 -20,344 -17,308 -5,996 -2,596 -2,575 1. Functional details do not sum to total outlays for calendar year data because 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. revisions to monthly totals have not been distributed among functions. Fiscal year total for 6. Includes interest received by trust funds. outlays does not correspond to calendar year data because revisions from the Budget have 7. Rents and royalties for the outer continental shelf, U.S. government contributions for not been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and 3. Old-age, disability, and hospital insurance. Outlays of the US. Government; and U.S. Office of Management and Budget, Budget of 4. Federal employee retirement contributions and civil service retirement and the US. Government, Fiscal Year 1995. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • February 1995 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1992 1993 1994 IItteemm Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 4,083 4,196 4,250 4,373 4,436 4,562 4,602r 4,673 4,693r 2 Public debt securities 4,065 4,177 4,231 4,352 4,412 4,536 4,576 4,646 I 3 Held by public 3,048 3,129 3,188 3,252 3,295 3,382 3,434 3,443 T 4 Held by agencies 1,016 1,048 1,043 1,100 1,117 1,154 1,142 1,203 5 Agency securities 18 19 20 21 25 27 26 28 n.a. 6 Held by public 18 19 20 21 25 27 26 27 1 7 Held by agencies 0 0 0 0 0 0 0 0 • 8 Debt subject to statutory limit 3,973 4,086 4,140 4,256 4,316 4,446 4,491 4,559 4,605 9 Public debt securities 3,972 4,085 4,139 4,256 4,315 4,445 4,491 4,559 4,605 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,145 4,145 4,145 4,370 4,900 4,900 4,900 4,900 4,900 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCES. U.S. Department of the Treasury, Monthly Statement of the Public Debt of the participation certificates, notes to international lending organizations, and District of United States and Treasury Bulletin. Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1993 1994 TTyyppee aanndd hhoollddeerr 11999900 11999911 11999922 11999933 04 QL Q2 Q3 1 Total gross public debt 3,364.8 3,801.7 4,177.0 4,535.7 4,535.7 4,575.9 4,645.8 n.a. By type 2 Interest-bearing 3,362.0 3,798.9 4,173.9 4,532.3 4,532.3 4,572.6 4,642.5 4,689.5 3 Marketable 2,195.8 2,471.6 2,754.1 2,989.5 2,989.5 3,042.9 3,051.0 3,091.6 4 Bills 527.4 590.4 657.7 714.6 714.6 721.2 698.5 697.3 5 Notes 1,265.2 1,430.8 1,608.9 1,764.0 1,764.0 1,802.5 1,835.7 1,867.5 6 Bonds 388.2 435.5 472.5 495.9 495.9 504.2 501.8 511.8 7 Nonmarketable1 1,166.2 1,327.2 1,419.8 1,542.9 1,542.9 1,529.7 1,591.5 1,597.9 8 State and local government series 160.8 159.7 153.5 149.5 149.5 145.5 143.4 137.4 9 Foreign issues 43.5 41.9 37.4 43.5 43.5 42.7 42.2 42.0 10 Government 43.5 41.9 37.4 43.5 43.5 42.7 42.2 42.0 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 124.1 135.9 155.0 169.4 169.4 172.6 174.9 176.4 13 Government account series3 813.8 959.2 1,043.5 1,150.0 1,150.0 1,138.4 1,200.6 1,211.7 14 Non-interest-bearing 2.8 2.8 3.1 3.4 3.4 3.3 3.3 3.2 By holder4 15 U.S. Treasury and other federal agencies and trust funds 828.3 968.7 1,047.8 1,153.5 1,153.5 1,141.7 1,203.0 16 Federal Reserve Banks 259.8 281.8 302.5 334.2 334.2 342.6 357.7 17 Private investors 2,288.3 2,563.2 2,839.9 3,047.7 3,047.7 3,094.6 3,088.2 18 Commercial banks 171.5 233.4 294.0 316.0 316.0 344.3 350.0 19 Money market funds 45.4 80.0 79.4 80.5 80.5 70.5 59.5 ?0 Insurance companies 142.0 168.7 197.5 216.0 216.0 218.1 222.0 n.a. ?1 Other companies 108.9 150.8 192.5 213.0 213.0 216.3 226.3 22 State and local treasuries 490.4 520.3 534.8 564.0 564.0 582.8 585.0 Individuals ?3 Savings bonds 126.2 138.1 157.3 171.9 171.9 175.0 177.1 ?4 Other securities 107.6 125.8 131.9 137.9 137.9 140.1 144.0 25 Foreign and international5 458.4 491.8 549.7 623.3 623.3 633.5 633.2 26 Other miscellaneous investors6 637.7 651.3 702.4 725.0 725.0 714.0 693.1 1. Includes (not shown separately) securities issued to the Rural Electrification Admin- 5. Consists of investments of foreign balances and international accounts in the United istration, depository bonds, retirement plan bonds, and individual retirement bonds. States. 2. Nonmarketable series denominated in dollars, and series denominated in foreign 6. Includes savings and loan associations, nonprofit institutions, credit unions, mutual currency held by foreigners. savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury 3. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. deposit accounts, and federally sponsored agencies. 4. Data for Federal Reserve Banks and U.S. government agencies and trust funds are SOURCES. U.S. Treasury Department, data by type of security. Monthly Statement of the actual holdings; data for other groups are Treasury estimates. Public Debt of the United States; data by holder. Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1994 1994, week ending IItteemm Aug/ Sept/ Oct. Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 OUTRIGHT TRANSACTIONS2 By type of security 1 US. Treasury bills 52,540 52,362 53,226r 50,656 52,378 58,789 52,545 49,072 44,647 69,320 54,915 46,232 Coupon securities, by maturity 2 Five years or less 84,229 80,185 87,707r 89,320 82,896 77,633 97,394 94,759 95,554 108,065 108,538 97,280 3 More than five years 50,914 40,275 42,798r 39,096 39,218 41,079 46,033 49,938 52,012 60,011 51,878 46,486 4 Federal agency 16,047 17,398 17,787r 19,984 17,507 16,369 16,989 19,748 16,133 18,394 19,681 21,507 5 Mortgage-backed 32,471 34,616 38,452r 39,170 53,701 37,674 30,635 26,645 42,862 35,861 31,400 18,842 By type of counterparty With interdealer broker 6 U.S. Treasury 105,610 99,631 106,388r 103,050 99,394 104,095 113,645 113,108 114,346 137,216 127,925 107,823 7 Federal agency 696 732 650r 861 485 517 718 825 511 470 557 527 8 Mortgage-backed 12,063 13,004 14,137r 16,433 18,650 13,372 11,912 9,300 13,453 12,226 11,266 6,339 With other 9 U.S. Treasury 82,073 73,191 77,343r 76,022 75,097 73,406 82,326 80,661 77,868 100,180 87,406 82,175 10 Federal agency 15,350 16,665 17,137r 19,123 17,023 15,853 16,271 18,924 15,622 17,924 19,124 20,980 11 Mortgage-backed 20,408 21,613 24,316r 22,738 35,051 24,302 18,723 17,345 29,409 23,634 20,134 12,503 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 814 1,157 11,,0088^^ 1,339 1,178 1,301 890 606 873 22,,552222 2,024 1,675 Coupon securities, by maturity 13 Five years or less 2,779 3,521 2,593r 2,888 2,352 2,572 2,740 2,490 2,082 44,,226688 3,951 44,,772288 14 More than five years 13,615 13,548 12,402r 12,417 11,078 11,431 13,980 13,582 12,179 16,870 14,178 14,202 15 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 16 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 17 U.S. Treasury bills 0 0 0 0 00 00 00 00 00 00 00 00 Coupon securities, by maturity 18 Five years or less 4,098 3,566 4,712r 4,203 6,176 4,170 5,286 2,729 2,203 3,748 3,070 1,866 19 More than five years 5,162 4,714 5,527r 5,664 5,696 5,101 6,257 4,605 4,902 6,568 6,043 4,084 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 675 523 559r 768 388 447 599 753 364 422 494 458 1. Transactions are market purchases and sales of securities as reported to the Federal Forward transactions are agreements made in the over-the-counter market that specify Reserve Bank of New York by the US. government securities dealers on its published list delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt of primary dealers. Monthly averages are based on the number of trading days in the securities are included when the time to delivery is more than five business days. Forward month. Transactions are assumed evenly distributed among the trading days of die report contracts for mortgage-backed agency securities are included when the time to delivery is week. Immediate, forward, and futures transactions are reported at principal value, which more than thirty business days. does not include accrued interest; options transactions are reported at the face value of the 3. Futures transactions are standardized agreements arranged on an exchange. All underlying securities. futures transactions are included regardless of time to delivery. Dealers report cumulative transactions for each week ending Wednesday. 4. Options transactions are purchases or sales of put and call options, whether arranged 2. Outright transactions include immediate and forward transactions. Immediate deliv- on an organized exchange or in the over-the-counter market, and include options on ery refers to purchases or sales of securities (other than mortgage-backed federal agency futures contracts on U.S. Treasury and federal agency securities. securities) for which delivery is scheduled in five business days or less and "when- NOTE, "n.a." indicates that data are not published because of insufficient activity. issued" securities that settle on the issue date of offering. Transactions for immediate delivery Major changes in the report form filed by primary dealers induced a break in the dealer of mortgage-backed agency securities include purchases and sales for which delivery is scheduled data series as of the week ending July 6, 1994. in thirty business days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • February 1995 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1994 1994, week ending IItteemm Aug/ Sept/ Oct. Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 3,970 1,906 3,177 -5,041 7,108 5,100 2,428 4,251 6,260 16,778 1122,,995588 Coupon securities, by maturity 2 Five years or less -10,664 -16,175 -16,957 -20,732 -19,668 -20,534 -9,809 -14,383 -7,634 -8,299 -2,146 3 More than five years -22,949 -22,799 -27,282 -24,944 -25,604 -29,001 -28,031 -28,513 -27,736 -33,172 -32,612 4 Federal agency 19,392 21,306 22,584 23,172 24,176 21,782 21,264 22,739 22,151 18,761 20,745 5 Mortgage-backed 42,415 37,645 37,701 38,767 38,432 36,609 36,412 38,947 35,102 37,598 36,077 NET FUTURES POSITIONS By type of deliverable security 6 U.S. Treasury bills -5,172 -2,829 -776 182 176 -1,345 -431 -2,752 -1,313 -717 604 Coupon securities, by maturity 7 Five years or less 5,561 8,285 8,196 9,710 7,595 8,109 7,611 8,465 8,094 7,346 6,679 8 More than five years -5,231 -1,681 91 1,333 -340 -365 116 57 1,939 5,166 1,415 9 Federal agency 0 0 0 0 0 0 0 0 0 0 0 10 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 Financing5 Reverse repurchase agreements 11 Overnight and continuing 272,215 261,844 259,660 262,402 266,164 253,313 258,162 258,797 241,378 269,105 223,898 12 Term 377,641 387,958 388,809 361,674 371,325 405,719 410,804 385,956 391,524 312,801 355,649 Securities borrowed 13 Overnight and continuing 175,792 174,381 181,291 180,525 179,441 183,088 180,609 183,089 179,611 187,161 178,637 14 Term 44,677 44,574 45,783 41,997 42,108 45,726 48,332 51,228 54,201 40,062 48,052 Securities received as pledge 15 Overnight and continuing 2,096 2,015 2,058 2,283r 2,214 2,150 1,620 2,100 1,915 1,933 2,658 16 Term 31 129 53 n.a. 53 n.a. n.a. n.a. 32 n.a. n.a. Repurchase agreements 17 Overnight and continuing 490,518 473,761 461,787 459,803 458,972 463,363 464,629 461,525 452,491 482,294 365,714 18 Term 351,975 359,336 360,693 330,918 340,792 376,463 384,017 363,599 373,293 289,697 402,988 Securities loaned 19 Overnight and continuing 5,777 5,402 5,592 5,827 5,505 5,557 5,376 5,828 5,904 6,847 5,968 20 Term 1,233 922 1,234 820 1,104 1,363 1,167 1,743 1,609 1,476 1,018 Securities pledged 21 Overnight and continuing 29,543 32,972 34,263 34,702r 33,765 34,316 34,021 34,786 31,205 31,165 36,266 22 Term 4,691 4,525 4,095 4,215 3,973 3,894 3,966 4,610 4,516 4,027 2,159 Collateralized loans 23 Overnight and continuing 22,395 18,407 19,273 17,220 17,813 21,269 19,164 20,729 18,093 18,472 16,333 24 Term n.a. 6,130 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MEMO: Matched book6 Securities in 25 Overnight and continuing 235,441 225,440 228,104 228,572 221,701 226,856 232,307 232,463 223,740 249,760 209,480 26 Term 349,799 355,640 363,804 339,462 346,234 379,079 382,981 364,511 368,392 293,829 336,610 Securities out 27 Overnight and continuing 292,030 283,925 276,523 279,305 271,377 281,665 280,482 268,206 280,615 290,586 215,238 28 Term 289,866 294,295 301,669 275,978 283,186 316,415 320,228 306,609 309,287 234,890 310,998 1. Data for positions and financing are obtained from reports submitted to the Federal 4. Futures positions reflect standardized agreements arranged on an exchange. All Reserve Bank of New York by the US. government securities dealers on its published list futures positions are included regardless of time to delivery. of primary dealers. Weekly figures are close-of-business Wednesday data. Positions for 5. Overnight financing refers to agreements made on one business day that mature on calendar days of the report week are assumed to be constant. Monthly averages are based the next business day; continuing contracts are agreements that remain in effect for more on the number of calendar days in the month. than one business day but have no specific maturity and can be terminated without 2. Securities positions are reported at market value. advance notice by either party; term agreements have a fixed maturity of more than one 3. Net outright postitions include immediate and forward positions. Net immediate business day. Financing data are reported in terms of actual funds paid or received, positions include securities purchased or sold (other than mortgage-backed agency securi- including accrued interest. ties) that have been delivered or are scheduled to be delivered in five business days or less 6. Matched-book data reflect financial intermediation activity in which the borrowing and "when-issued" securities that settle on the issue date of offering. Net immediate and lending transactions are matched. Matched-book data are included in the financing positions for mortgage-backed agency securities include securities purchased or sold that breakdowns given above. The reverse repurchase and repurchase numbers are not always have been delivered or are scheduled to be delivered in thirty business days or less. equal because of the "matching" of securities of different values or different types of Forward positions reflect agreements made in the over-the-counter market that specify collateralization. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt NOTE. "n.a." indicates that data are not published because of insufficient activity. securities are included when the time to delivery is more than five business days. Forward Major changes in the report form filed by primary dealers induced a break in the dealer contracts for mortgage-backed agency securities are included when the time to delivery is data series as of the week ending July 6, 1994. more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A3 3 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1994 AAggeennccyy 11999900 11999911 11999922 11999933 May June July Aug. Sept. 1 Federal and federally sponsored agencies 434,668 442,772 483,970 570,711 633,366 646,661 659,206 674,020 0 2 Federal agencies 42,159 41,035 41,829 45,193 43,681 43,040 43,416 43,861 42,544 3 Defense Department1 7 7 7 6 6 6 6 6 6 4 Export-Import Bank2'3 11,376 9,809 7,208 5,315 4,853 4,389 4,389 4,389 3,932 5 Federal Housing Administration4 393 397 374 255 131 138 82 101 112 6 Government National Mortgage Association certificates of participation5 0 0 0 0 0 0 0 0 0 7 Postal Service6 6,948 8,421 10,660 9,732 9,473 9,473 9,473 9,773 8,973 8 Tennessee Valley Authority 23,435 22,401 23,580 29,885 29,218 29,037 29,466 29,592 29,521 9 United States Railway Association6 0 0 0 0 0 0 0 0 0 10 Federally sponsored agencies7 392,509 401,737 442,141 525,518 589,685 603,621 615,790 630,159 0 11 Federal Home Loan Banks 117,895 107,543 114,733 141,577 156,955 160,822 166,137 169,284 174,414 12 Federal Home Loan Mortgage Corporation 30,941 30,262 29,631 49,993 71,274 73,340 78,929 81,270 83,947 13 Federal National Mortgage Association 123,403 133,937 166,300 201,112 223,173 227,897 230,484 237,564 239,320 14 Farm Credit Banks8 53,590 52,199 51,910 53,123 52,534 53,692 52,276 53,844 54,333 15 Student Loan Marketing Association9 34,194 38,319 39,650 39,784 45,820 47,940 48,069 48,313 49,692 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation11 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 23,055 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 179,083 185,576 154,994 128,187 116,092 115,603 113,689 112,804 109,357 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 11,370 9,803 7,202 5,309 4,847 4,383 4,383 4,383 3,926 21 Postal Service6 6,698 8,201 10,440 9,732 9,473 9,473 9,473 9,773 8,973 22 Student Loan Marketing Association 4,850 4,820 4,790 4,760 0 0 0 0 0 23 Tennessee Valley Authority 14,055 10,725 6,975 6,325 4,675 4,375 4,375 4,375 3,400 24 United States Railway Association6 0 0 0 0 0 0 0 0 0 Other lending14 25 Farmers Home Administration 52,324 48,534 42,979 38,619 37,124 35,999 35,104 34,594 34,129 26 Rural Electrification Administration 18,890 18,562 18,172 17,578 17,419 17,357 17,372 17,402 17,316 27 Other 70,896 84,931 64,436 45,864 42,554 44,016 42,982 42,322 41,613 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration 12. The Resolution Funding Corporation, established by the Financial Institutions insurance claims. Once issued, these securities may be sold privately on the securities Reform, Recovery, and Enforcement Act of 1989, undertook its first borrowing in October market. 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government 13. The FFB, which began operations in 1974, is authorized to purchase or sell National Mortgage Association acting as trustee for the Farmers Home Administration, obligations issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt the Department of Health, Education, and Welfare, the Department of Housing and Urban solely for the purpose of lending to other agencies, its debt is not included in the main Development, the Small Business Administration, and the Veterans' Administration. portion of the table in order to avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. In- guaranteed by numerous agencies, with the amounts guaranteed by any one agency cludes Federal Agricultural Mortgage Corporation, therefore details do not sum to total. generally being small. The Farmers Home Administration entry consists exclusively of Some data are estimated. agency assets, whereas the Rural Electrification Administration entry consists of both 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is agency assets and guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • February 1995 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1994 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999911 11999922 11999933 Apr. May June July Aug. Sept. Oct. Nov. 1 All issues, new and refunding1 154,402 226,818 279,945 11,256' 13,563' 15,076r 13,400r 12,175' 7*10' 10,537 11,685 By type of issue 2 General obligation 55,100 78,611 90,599 3,469 4,029 5,556 7,110 4,177 2,309 2,891 5,592 3 Revenue 99,302 136,580 189,346 6,660 8,359 9,223 5,340 8,133 5,325 6,899 6,093 By type of issuer 4 State 24,939 24,874 27,999 1,013 1,158 1,733 4,686 1,675 1,009 952 1,528 5 Special district or statutory authority2 80,614 138,327 178,714 5,235 8,085 9,335 4,931 7,963 4,962 6,511 6,148 6 Municipality, county, or township 48,849 63,617 73,232 3,881 3,145 3,711 2,833 2,672 1,663 2,327 4,009 7 Issues for new capital 116,953 101*65 91,434 8,843r 9,465r 9,913r 10,843r 10,479r 6,155' 8,893 10,137 By use of proceeds 8 Education 21,121 18,852 16,831 2,102 1,933 1,945 1,147 2,075 883 1,596 1,716 9 Transportation 13,395 14,357 9,167 1,453 1,037 2,033 290 1,088 334 1,135 799 10 Utilities and conservation 21,039 12,164 12,014 707 423 856 694 784 433 1,887 644 11 Social welfare 25,648 16,744 13,837 1,475 2,136 1,312 1,698 2,117 1,897 1,887 1,535 12 Industrial aid 8,376 6,188 6,862 601 657 935 959 1,128 403 420 688 13 Other purposes 30,275 33,560 32,723 1,809 2,939 2,645 5,560 3,401 2,011 2,396 4,750 1. Par amounts of long-term issues based on date of sale. SOURCES. Securities Data Company beginning January 1993; Investment 2. Includes school districts. Dealer's Digest before then. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1994 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, oorr iissssuueerr 11999911 11999922 11999933 Mar. Apr. May June July Aug.' Sept. Oct 1 All issues' 465,246 559,827 764,509 52,881 35,110' 44,263' 49,457' 29,468' 38,144 29,933 29,891 2 Bonds2 389,822 471,502 641,498 43,671 29,645' 40,589' 43,126 25,804' 34*12 26,585 26,600 By type of offering 3 Public, domestic 286,930 378,058 486,879 41,097 26,436r 33,414r 38,387 22,087' 30,405 23,337 22,000 4 Private placement, domestic3 74,930 65,853 116,240 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 27,962 27,591 38,379 2,574 3,209 7,175 4,738 3,718 4,406 3,248 4,600 By industry group 6 Manufacturing 86,628 82,058 88,002 2,446 2,229 3,266 2,093' 2,107 2,251 2,165 2,419 7 Commercial and miscellaneous 36,666 43,111 60,443 3,020 990 2,496 3,177 1,413 3,769 2,152 1,609 8 Transportation 13,598 9,979 10,756 920 97 150 1,082 248 315 229 327 9 Public utility 23,944 48,055 56,272 1,632 546 1,071 681 472 320 707 1,601 10 Communication 9,431 15,394 31,950 2,090 1,298 944 618 429 345 526 379 11 Real estate and financial 219,555 272,904 394,076 33,563 24,484r 32,662' 35,475' 21,135' 27,812 20,806 20,266 12 Stocks2 75,424 88,325 n.a. 9,210 5,465 3,674' 6,331' 3,664' 3,332 3,348 3,291 By type of offering 13 Public preferred 17,085 21,339 19,898 1,969 2,248 695 1,366 599 710 555 1,098 14 Common 48,230 57,118 87,356 7,241 3,218 2,979' 4,965' 3,065' 2,622 2,793 2,193 15 Private placement3 10,109 9,867 11,917 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 24,111 22,723 22,271 2,499 2,696 956 1,056 489 569 860 720 17 Commercial and miscellaneous 19,418 20,231 25,761 1,491 773 850 1,853' 708' 838 865 968 18 Transportation 2,439 2,595 2,237 358 106 105' 449 75 50 223 69 19 Public utility 3,474 6,532 7,050 480 75 239 297 0 180 78 10 20 Communication 475 2,366 3,439 0 0 32 28 0 0 0 0 21 Real estate and financial 25,507 33,879 49,889 4,381 1,815 1,492 2,647' 2,386 1,691 1,323 1,523 1. Figures represent gross proceeds of issues maturing in more than one year; they are 2. Monthly data cover only public offerings. the principal amount or number of units calculated by multiplying by the offering price. 3. Monthly data are not available. Figures exclude secondary offerings, employee stock plans, investment companies other SOURCES. Beginning July 1993, Securities Data Company and the Board of Governors than closed-end, intracorporate transactions, equities sold abroad, and Yankee bonds. of the Federal Reserve System. Stock data include ownership securities issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A35 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1994 IItteemm 11999922 11999933 Mar. Apr. May June July Aug.r Sept. Oct, 1 Sales of own shares2 647,055 851,885 87,381 71,164 65,179 65,333 59,258 64,833 62,263 59,427 2 Redemptions of own shares 447,140 567,881 73,395 61,925 55,036 56,068 50,275 53,242 53,383 53,772 3 Net sales3 199,915 284,004 13,986 9,239 10,144 9,265 8,983 1,592 8,880 5,655 4 Assets4 1,056,310 1,510,209 1,500,745 1,510,827 1,529,478 1,509,998 1,552,652 1,604,961 1,588,277 1,601,785 5 Cash5 73,999 100,209 112,399 118,221 119,982 114,885 120,129 120,315 121,575 127,263 6 Other 982,311 1,409,838 1,388,347 1,392,606 1,409,496 1,395,113 1,432,523 1,484,646 1,466,702 1,474,522 1. Data on sales and redemptions exclude money market mutual funds but include 4. Market value at end of period, less current liabilities. limited-maturity municipal bond funds. Data on asset positions exclude both money 5. Includes all U.S. Treasury securities and other short-term debt securities. market mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, which 2. Includes reinvestment of net income dividends. Excludes reinvestment of capital comprises substantially all open-end investment companies registered with the Securities gains distributions and share issue of conversions from one fund to another in the same and Exchange Commission. Data reflect underwritings of newly formed companies after group. their initial offering of securities. 3. Excludes sales and redemptions resulting from transfers of shares into or out of money market mutual funds within the same fund family. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1992 1993 1994 AAccccoouunntt 11999911 11999922 11999933 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 1 Profits with inventory valuation and capital consumption adjustment 390.3 405.1 485.8 432.5 442.5 473.1 493.5 533.9 508.2 546.4 556.0 2 Profits before taxes 365.2 395.9 462.4 413.5 432.7 456.6 458.7 501.7 483.5 523.1 538.1 3 Profits-tax liability 131.1 139.7 173.2 148.6 159.8 171.8 169.9 191.5 184.1 201.7 208.6 4 Profits after taxes 234.1 256.2 289.2 264.8 273.0 284.8 288.9 310.2 299.4 321.4 329.5 5 Dividends 160.0 171.1 191.7 182.1 188.2 190.7 193.2 194.6 196.3 202.5 207.9 6 Undistributed profits 74.1 85.1 97.5 82.7 84.7 94.1 95.6 115.6 103.0 118.9 121.6 7 Inventory valuation 5.8 -6.4 -6.2 2.1 -11.2 -10.0 3.0 -6.5 -12.3 -14.1 -19.6 8 Capital consumption adjustment 19.4 15.7 29.5 16.9 21.0 26.5 31.7 38.8 37.0 37.4 37.5 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.50 NONFARM BUSINESS EXPENDITURES New Plant and Equipment Billions of dollars; quarterly data at seasonally adjusted annual rates 1993 1994 IInndduussttrryy 11999922 11999933 1199994411 Ql Q2 Q3 Q4 Ql Q2 Q3 Q41 1 Total nonfarm business 546.60 586.73 63837 563.48 578.95 594.56 604.51 619.34 637.08 651.92 645.13 Manufacturing 2 Durable goods industries 73.32 81.45 92.78 78.19 80.33 82.74 83.64 86.03 91.71 98.97 94.44 3 Nondurable goods industries 100.69 98.02 99.77 95.80 97.22 99.74 98.51 99.02 102.28 98.39 99.39 Nonmanufacturing 4 Mining 8.88 10.08 11.24 8.98 9.10 11.09 10.92 11.43 10.70 11.57 11.27 Transportation 5 Railroad 6.67 6.14 6.72 6.16 5.94 5.89 6.55 7.46 5.36 6.65 7.40 6 Air 8.93 6.42 3.95 7.26 6.63 6.70 5.06 4.23 4.53 3.86 3.16 7 Other 7.04 9.22 10.53 8.96 8.92 8.74 10.23 10.77 9.70 10.22 11.42 Public utilities 8 Electric 48.22 52.55 52.25 49.98 50.61 52.96 55.60 48.68 53.55 54.15 52.60 9 Gas and other 23.99 23.43 24.20 23.79 23.83 22.98 23.27 24.51 22.96 24.35 24.97 10 Commercial and other2 268.84 299.44 336.93 284.35 296.35 303.74 310.73 327.20 336.28 343.76 340.48 1. Figures are amounts anticipated by business. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. "Other" consists of construction, wholesale and retail trade, finance and insurance, personal and business services, and communication. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • February 1995 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1992 1993 1994 AAccccoouunntt 11999911 11999922 11999933 Q4 Q1 Q2 Q3 Q4 Ql Q2 ASSETS 1 Accounts receivable, gross2 484.6 491.8 482.8 491.8 477.9 473.7 474.0 482.8 494.5 511.3 2 Consumer 121.7 118.3 116.5 118.3 112.6 110.6 111.0 116.5 120.1 124.3 3 Business 295.8 301.3 294.6 301.3 292.7 291.8 291.9 294.6 302.3 313.2 4 Real estate 67.1 72.2 71.7 72.2 72.5 71.4 71.1 71.7 72.1 73.8 5 LESS: Reserves for unearned income 56.1 53.2 50.7 53.2 50.1 49.7 49.5 50.7 51.2 51.9 6 Reserves for losses 13.1 16.2 11.2 16.2 15.2 10.8 11.2 11.2 11.6 12.1 7 Accounts receivable, net 415.4 422.4 420.9 422.4 412.6 413.2 413.3 420.9 431.7 447.3 8 All other 144.9 142.5 170.9 142.5 150.6 151.5 163.9 170.9 171.2 174.6 9 Total assets 560.3 564.9 591.8 564.9 5633 564.7 5773 591.8 602.9 621.9 LIABILITIES AND CAPITAL 10 Bank loans 42.3 37.6 25.3 37.6 34.1 29.4 25.8 25.3 24.2 23.3 11 Commercial paper 159.5 156.4 159.2 156.4 149.8 144.5 149.9 159.2 165.9 171.2 Debt 12 Other short-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 Long-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14 Owed to parent 35.5 39.5 42.7 39.5 43.1 45.0 44.6 42.7 41.1 44.7 15 Not elsewhere classified 190.2 196.3 206.0 196.3 197.3 199.9 204.2 206.0 211.7 219.6 16 All other liabilities 68.4 68.0 87.1 68.0 72.5 77.8 83.8 87.1 90.5 89.9 17 Capital, surplus, and undivided profits 64.5 67.1 71.4 67.1 66.5 68.1 68.9 71.4 69.5 73.2 18 Total liabilities and capital 560.3 564.9 591.8 564.9 563-3 564.7 5773 591.8 602.9 621.9 1. Includes finance company subsidiaries of bank holding companies but not of 2. Before deduction for unearned income and losses, retailers and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period Type of credit May July Aug. Sept. Seasonally adjusted 1 Total 523,824 540,679 546,020 573,851 576,239 571,470 579,032 590,512 596,397 2 Consumer.. 154,389 157,857 160,802 166,534 168,531 166,639 166,921 172,547 173,178 3 Real estate2 67,376 72,496 71,991 74,371 74,503 75,321 75,524 76,424 76,971 4 Business... 302,060 310,325 313,226 332,946 333,205 329,510 336,587 341,542 346,248 Not seasonally adjusted 5 Total 527,329 544,691 550,387 573,773 577,546 568,648 575,769 588,525 596,054 6 Consumer 155,671 159,558 162,770 165,580 167,909 164,749 166,501 172,002 172,813 7 Motor vehicles 62,232 57,259 56,057 59,398 59,788 58,107 58,589 60,522 60,750 8 Other consumer • 59,468 61,020 60,396 62,806 64,530 65,095 66,608 69,784 70,812 9 Securitized motor vehicles . 23,361 29,734 36,024 32,623 32,705 31,848 31,787 32,372 31,592 10 Securitized other consumer 10,610 11,545 10,293 10,753 10,886 9,699 9,517 9,324 9,659 11 Real estate2 67,132 72,243 71,727 74,215 73,755 75,379 76,012 76,585 77,235 12 Business 304,526 312,890 315,890 333,978 335,882 328,520 333,256 339,938 346,006 13 Motor vehicles 91,554 89,011 95,173 104,023 105,828 101,878 102,655 106,365 110,089 14 Retail5... 23,967 20,541 18,091 20,882 21,024 20,670 20,272 21,164 21,645 15 Wholesale6 31,164 29,890 31,148 31,215 31,188 26,154 25,875 27,201 29,302 16 Leasing 36,423 38,580 45,934 51,926 53,616 55,054 56,508 58,000 59,142 17 Equipment 140,396 151,424 145,452 151,182 151,542 151,480 151,388 152,782 152,675 18 Retail.... 30,952 33,521 35,513 38,518 39,062 39,348 39,629 39,357 38,584 19 Wholesale6 9,671 8,680 8,001 8,421 8,419 8,859 8,968 9,119 9,134 20 Leasing 99,773 109,223 101,938 104,243 104,061 103,273 102,791 104,306 104,957 21 Other business 63,802 60,856 53,997 55,433 55,849 54,444 56,389 58,101 59,314 22 Securitized business assets 8,774 11,599 21,268 23,340 22,663 20,718 22,824 22,690 23,928 23 Retail 576 1,120 2,483 2,406 2,619 2,480 2,656 2,564 2,956 24 Wholesale 5,285 5,756 10,584 14,577 14,240 12,817 14,147 14,411 15,173 25 Leasing 2,913 4,723 8,201 6,357 5,804 5,421 6,021 5,715 5,799 1. Includes finance company subsidiaries of bank holding companies but not of 4. Outstanding balances of pools upon which securities have been issued; these retailers and banks. Data are before deductions for unearned income and losses. Data in balances are no longer carried on the balance sheets of the loan originator. this table also appear in the Board's G.20 (422) monthly statistical release. For ordering 5. Passenger car fleets and commercial land vehicles for which licenses are required. address, see inside front cover. 6. Credit arising from transactions between manufacturers and dealers, that is, floor 2. Includes all loans secured by liens on any type of real estate, for example, first and plan financing. junior mortgages and home equity loans. 7. Includes loans on commercial accounts receivable, factored commercial accounts, 3. Includes personal cash loans, mobile home loans, and loans to purchase other types and receivable dealer capital; small loans used primarily for business or farm purposes; of consumer goods such as appliances, apparel, general merchandise, and recreation and wholesale and lease paper for mobile homes, campers, and travel trailers. vehicles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A37 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1994 IItteemm 11999911 11999922 11999933 May June July Aug. Sept. Oct. Nov. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 155.0 158.1 163.1 171.6 172.6 166.0 167.6 170.6 173.4 178.2 2 Amount of loan (thousands of dollars) 114.0 118.1 123.0 132.2 130.0 129.0 129.3 133.7 131.9 136.2 3 Loan-to-price ratio (percent) 75.0 76.6 78.0 78.5 78.0 79.4 79.0 79.4 78.3 78.0 4 Maturity (years) 26.8 25.6 26.1 27.6 26.5 27.5 28.0 27.9 27.6 27.9 5 Fees and charges (percent of loan amount)2 1.71 1.60 1.30 1.45 1.30 1.35 1.38 1.36 1.22 1.30 Yield (percent per year) 6 Contract rate1 9.02 7.98 7.02 7.20 7.41 7.50 7.45 7.48 7.55 7.59 7 Effective rate1,3 9.30 8.25 7.24 7.43 7.62 7.71 7.67 7.70 7.76 7.81 8 Contract rate (HUD series)4 9.20 8.43 7.37 8.61 8.72 8.64 8.68 8.96 9.19 n.a. SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 9.25 8.46 7.46 8.63 9.03 8.65 8.66 9.10 9.23 n.a. 10 GNMA securities6 8.59 7.71 6.65 8.05 8.01 8.23 8.15 8.28 8.66 8.86 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 128,983 158,119 190,861 206,147 208,180 210,666 212,680 215,249 218,479 220,377 12 FHA/VA insured 21,796 22,593 23,857 25,303 25,390 25,477 25,604 25,800 26,226 27,118 13 Conventional 107,187 135,526 167,004 180,844 182,790 185,189 187,076 189,449 192,253 193,259 Mortgage transactions (during period) 14 Purchases 37,202 75,905 92,037 7,238 4,386 4,628 4,077 4,266 5,003 3,549 Mortgage commitments (during period) 15 Issued7 40,010 74,970 92,537 3,801 4,268 3,798 3,776 4,880 3,421 2,696 16 To sell8 7,608 10,493 5,097 281 1 0 0 0 48 20 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)* 17 Total 26,809 33,665 55,012 60,799 62,232 62,993 64,118 66,478 69,340 70,757 18 FHA/VA insured 460 352 321 304 299 296 291 287 284 279 19 Conventional 26,349 33,313 54,691 60,495 61,933 62,697 63,827 66,191 69,057 70,477 Mortgage transactions (during period) 20 Purchases 99,965 191,125 229,242 10,629 8,341 6,535 6,407 5,512 8,351 3,022 21 Sales 92,478 179,208 208,723 10,228 8,097 6,338 5,828 5,213 8,139 2,865 Mortgage commitments (during periodf 22 Contracted 114,031 261,637 274,599 9,586 7,252 5,820 5,649 5,035 7,288 3,454 1. Weighted averages based on sample surveys of mortgages originated by major 6. Average net yields to investors on fully modified pass-through securities backed by institutional lender groups for purchase of newly built homes; compiled by the Federal mortgages and guaranteed by the Government National Mortgage Association (GNMA), Housing Finance Board in cooperation with the Federal Deposit Insurance Corporation. assuming prepayment in twelve years on pools of thirty-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or Federal Housing Administration or guaranteed by the Department of Veterans Affairs. the seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from 9. Includes conventional and government-underwritten loans. The Federal Home Loan U.S. Department of Housing and Urban Development (HUD). Based on transactions on Mortgage Corporation's mortgage commitments and mortgage transactions include activthe first day of the subsequent month. ity under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages exclude swap activity. insured by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A188 Domestic Nonfinancial Statistics • February 1995 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1993 1994 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999900 11999911 11999922 Q3 Q4 Q1 Q2' Q3P 1 AU holders 3,763,628r 3,926,154r 4,056,233' 4,174,202r 4,215,480' 4,239,496r 4,290,640 4,346,606 By type of property 2 One- to four-family residences 2,617,044r 2,781,416' 2,963,391' 3,098,344' 3,147,255' 3,178,389' 3,225,062 3,276,039 3 Multifamily residences 309,369 306,410 295,417 290,690' 290,489' 288,988' 290,109 291,907 4 Commercial 758,313 759,023 716,687' 704,032' 696,542' 690,726' 692,584 694,842 5 78,903 79,306 80,738' 81,136' 81,194' 81,393' 82,886 83,818 By type of holder 6 Major financial institutions 1,914,315 1,846,726 1,769,187 1,769,950' 1,767,835' 1,746,474' 1,763,249 1,784,191 7 Commercial banks2 844,826 876,100 894,513 922,670' 940,444' 937,944' 956,793 981,350 8 One- to four-family 455,931 483,623 507,780 537,661' 556,538' 554,117' 570,325 590,244 9 Multifamily 37,015 36,935 38,024 37,655' 38,635' 38,451' 37,948 38,130 10 Commercial 334,648 337,095 328,826 326,507' 324,409' 324,122' 326,605 330,568 11 Farm 17,231 18,447 19,882 20,848 20,862' 21,254' 21,916 22,408 12 Savings institutions3 801,628 705,367 627,972 609,654 598,330 584,531' 585,671 587,375 13 One- to four-family 600,154 538,358 489,622 478,456 469,959 458,075' 462,240 466,414 14 Multifamily 91,806 79,881 69,791 68,440 67,362 66,914' 66,245 65,611 15 Commercial 109,168 86,741 68,235 62,439 60,704 59,245' 56,887 55,058 16 Farm 500 388 324 320 305 297 299 292 17 Life insurance companies 267,861 265,258 246,702 237,626 229,061 223,999 220,785 215,466 18 One- to four-family 13,005 11,547 11,441 9,835' 9,458' 9,245' 9,107 8,877 19 Multifamily 28,979 29,562 27,770 26,844' 25,814' 25,232' 24,855 24,227 20 Commercial 215,121 214,105 198,269 191,660' 184,305' 180,152' 177,463 172,977 21 Farm 10,756 10,044 9,222 9,287 9,484 9,370 9,360 9,385 22 Federal and related agencies 239,003 266,146 286,263 306,578' 317,486' 323,464' 327,690 334,284 23 Government National Mortgage Association 20 19 30 43 22 20 12 12 24 One- to four-family 20 19 30 37 15 13 12 12 25 Multifamily 0 0 0 7 7 7 0 0 26 Farmers Home Administration4 41,439 41,713 41,695 41,424 41,386 41,209 41,370 41,390 27 One- to four-family 18,527 18,496 16,912 15,714 15,303 14,870 14,459 14,063 28 Multifamily 9,640 10,141 10,575 10,830 10,940 11,037 11,147 11,254 29 Commercial 4,690 4,905 5,158 5,347 5,406 5,399 5,526 5,587 30 Farm 8,582 8,171 9,050 9,533 9,739 9,903 10,239 10,485 31 Federal Housing and Veterans' Administrations 8,801 10,733 12,581 11,797 12,215 11,344 11,169 10,657 32 One- to four-family 3,593 4,036 5,153 4,850 5,364 4,738 4,826 4,503 33 Multifamily 5,208 6,697 7,428 6,947 6,851 6,606 6,343 6,154 34 Resolution Trust Corporation 32,600 45,822 32,045 19,925 17,284 14,241 13,908 15,401 35 One- to four-family 15,800 14,535 12,960 8,381 7,203 6,308' 6,045 6,984 36 Multifamily 8,064 15,018 9,621 6,002 5,327 4,208' 4,230 4,528 37 Commercial 8,736 16,269 9,464 5,543 4,754 3,726' 3,633 3,889 38 Farm 0 0 0 0 0 0 0 0 39 Federal National Mortgage Association 104,870 112,283 137,584 160,721 166,642 172,343 175,377 177,200 40 One- to four-family 94,323 100,387 124,016 146,009 151,310 156,576 159,437 161,255 41 Multifamily 10,547 11,896 13,568 14,712 15,332 15,767 15,940 15,945 42 Federal Land Banks 29,416 28,767 28,664 28,810 28,460 28,181 28,475 28,538 43 One- to four-family 1,838 1,693 1,687 1,695 1,675 1,658 1,675 1,679 44 Farm 27,577 27,074 26,977 27,115 26,785 26,523 26,800 26,859 45 Federal Home Loan Mortgage Corporation 21,857 26,809 33,665 43,858' 51,476' 56,127' 57,379 61,087 46 One- to four-family 19,185 24,125 31,032 41,314' 48,929' 53,571' 54,799 58,432 47 Multifamily 2,672 2,684 2,633 2,544 2,547 2,556 2,580 2,655 48 Mortgage pools or trusts5 1,079,103 1,250,666 1,425,546 1,517,003' 1,550,818' 1,604,449' 1,643,627 1,668,496 49 Government National Mortgage Association 403,613 425,295 419,516 415,076 414,066 423,446 435,709 444,976 50 One- to four-family 391,505 415,767 410,675 405,963 404,864 414,194 426,363 435,511 51 Multifamily 12,108 9,528 8,841 9,113 9,202 9,251 9,346 9,465 52 Federal Home Loan Mortgage Corporation 316,359 359,163 407,514 433,090' 443,029' 459,949' 470,183 469,062 53 One- to four-family 308,369 351,906 401,525 428,155' 438,494' 455,779' 466,361 465,614 54 Multifamily 7,990 7,257 5,989 4,935 4,535 4,170 3,822 3,448 55 Federal National Mortgage Association 299,833 371,984 444,979 481,880 495,525 507,376 514,855 523,512 56 One- to four-family 291,194 362,667 435,979 473,599 486,804 498,489 505,730 514,375 57 Multifamily 8,639 9,317 9,000 8,281 8,721 8,887 9,125 9,137 58 Farmers Home Administration4 66 47 38 30 28 26 22 20 59 One- to four-family 17 11 8 6 5 5 4 3 60 Multifamily 0 0 0 0 0 0 0 0 61 Commercial 24 19 17 14 13 12 10 9 62 Farm 26 17 13 10 10 9 8 8 63 Private mortgage conduits 59,232 94,177 153,499 186,927 198,171 213,653' 222,858 230,926 64 One- to four-family 53,335 84,000 132,000 158,000 164,000 177,000 179,500 182,300 65 Multifamily 731 3,698 6,305 7,991 8,701 9,202' 11,514 13,891 66 Commercial 5,166 6,479 15,194 20,936 25,469 27,451' 31,844 34,735 67 Farm 0 0 0 0 0 0 0 0 68 Individuals and others6 531,208r 562,616' 575,237' 580,670' 579,341' 565,109' 556,074 559,635 69 One- to four-family 350,247' 370,246' 382,572' 388,669' 387,334' 373,752' 364,178 365,772 70 Multifamily 85,969 83,7% 85,871 86,391 86,516 86,700' 87,014 87,462 71 Commercial 80,761 93,410 91,524' 91,588' 91,482' 90,621' 90,617 92,020 72 14,232 15,164 15,270' 14,023' 14,009' 14,037' 14,264 14,380 1. Multifamily debt refers to loans on structures of five or more units. 6. Other holders include mortgage companies, real estate investment trusts, state and 2. Includes loans held by nondeposit trust companies but not loans held by bank trust local credit agencies, state and local retirement funds, noninsured pension funds, credit departments. unions, and finance companies. 3. Includes savings banks and savings and loan associations. SOURCES. Based on data from various institutional and government sources. Separation 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated of nonfarm mortgage debt by type of property, if not reported directly, and interpolations from FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of and extrapolations, when required for some quarters, are estimated in part by the Federal accounting changes by the Farmers Home Administration. Reserve. Line 64 from Inside Mortgage Securities. 5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Installment Credit A39 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1994 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999911 11999922 11999933 May June July Aug. Sept. Oct. Seasonally adjusted 1 Total 728,389 731,098 794,300 836,936 847,715 854,469 869,628 879,961 891,603 2 Automobile 259,594 257,678 282,036 298,278 303,526 305,193 309,721 315,162 318,036 3 Revolving 245,281 257,304 287,875 305,528 309,472 313,591 321,365 322,823 327,707 4 Other 223,514 216,117 224,389 233,130 234,717 235,685 238,542 241,976 245,860 Not seasonally adjusted 5 Total 744,039 747,690 812,782 830,065 842,126 847,727 868,049 880,609 891,442 By major holder 6 Commercial banks 340,713 330,088 368,549 380,063 386,235 393,927 404,438 410,312 414,833 7 Finance companies 121,700 118,279 116,453 122,204 124,318 123,202 125,197 130,306 131,562 8 Credit unions 90,302 91,694 101,634 105,718 108,183 109,838 113,122 114,699 116,325 9 Savings institutions 41,373 37,049 37,855 37,803 38,134 38,055 37,975 37,943 38,122 10 Nonfinancial business 46,658 49,184 57,637 54,505 55,374 55,775 56,496 55,967 56,020 11 Pools of securitized assets2 103,293 121,396 130,654 129,772 129,882 126,930 130,821 131,382 134,580 By major type of credit3 12 Automobile 259,863 258,226 282,825 297,172 302,874 304,026 310,925 316,778 320,182 13 Commercial banks 112,666 109,623 123,358 132,979 136,038 138,907 142,452 144,260 146,456 14 Finance companies 62,232 57,259 56,057 59,398 59,788 58,107 58,589 60,522 60,750 15 Pools of securitized assets2 28,588 33,888 39,490 35,836 35,817 34,436 34,584 35,149 34,394 16 Revolving 258,841 271,368 303,444 301,609 305,758 309,716 319,003 321,205 325,872 17 Commercial banks 138,005 132,966 149,527 149,972 153,032 156,940 161,417 164,724 165,561 18 Nonfinancial business 41,658 43,974 52,113 49,005 49,845 50,218 50,873 50,314 50,332 19 Pools of securitized assets2 63,333 74,931 79,887 82,064 82,075 81,704 85,644 85,051 88,762 20 Other 225,335 218,096 226,513 231,284 233,494 233,985 238,121 242,626 245,388 21 Commercial banks 90,042 87,499 95,664 97,112 97,165 98,080 100,569 101,328 102,816 22 Finance companies 59,468 61,020 60,396 62,806 64,530 65,095 66,608 69,784 70,812 23 Nonfinancial business 5,000 5,210 5,524 5,500 5,529 5,557 5,623 5,653 5,688 24 Pools of securitized assets2 11,372 12,577 11,277 11,872 11,990 10,790 10,593 11,182 11,424 1. The Board's series on amounts of credit covers most short- and intermediate-term 2. Outstanding balances of pools upon which securities have been issued; these credit extended to individuals that is scheduled to be repaid (or has the option of balances are no longer carried on the balance sheets of the loan originator. repayment) in two or more installments. 3. Totals include estimates for certain holders for which only consumer credit totals are Data in this table also appear in the Board's G.19 (421) monthly statistical release. For available. ordering address, see inside front cover. 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent per year except as noted 1994 IItteemm 11999911 11999922 11999933 Apr. May June July Aug. Sept. Oct. INTEREST RATES Commercial banks2 1 48-month new car 11.14 9.29 8.09 n.a. 7.76 n.a. n.a. 8.41 n.a. n.a. 2 24-month personal 15.18 14.04 13.47 n.a. 12.96 n.a. n.a. 13.33 n.a. n.a. 3 120-month mobile home 13.70 12.67 11.87 n.a. 11.60 n.a. n.a. 12.04 n.a. n.a. 4 Credit card 18.23 17.78 16.83 n.a. 16.15 n.a. n.a. 16.25 n.a. n.a. Auto finance companies 5 New car 12.41 9.93 9.48 9.71 9.92 9.96 10.17 10.32 10.13 10.39 6 Used car 15.60 13.80 12.79 13.25 13.51 13.78 13.86 13.92 13.98 14.01 OTHER TERMS3 Maturity (months) 7 New car 55.1 54.0 54.5 53.8 53.5 53.3 53.9 54.2 54.3 54.9 8 Used car 47.2 47.9 48.8 50.0 50.6 50.0 50.2 50.1 50.2 50.2 Loan-to-value ratio 9 New car 88 89 91 92 93 94 93 93 93 92 10 Used car 96 97 98 99 99 100 100 100 100 100 Amount financed (dollars) 11 New car 12,494 13,584 14,332 15,067 15,194 15,180 15,319 15,283 15,419 15,827 12 Used car 8,884 9,119 9,875 10,477 10,606 10,656 10,735 10,755 10,906 10,554 1. The Board's series on amounts of credit covers most short- and intermediate-term 2. Data are available for only the second month of each quarter, credit extended to individuals that is scheduled to be repaid (or has the option of 3. At auto finance companies, repayment) in two or more installments. Data in this table also appear in the Board's G.19 (421) monthly statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • February 1995 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1993 1994 Ql Q2 Q3r Q4 Ql" Q2" Q3" Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 729.0 635.6 475.8 536.1 628.1 481.4r 740.5r 6133 677.2r 651.2 543.4 6123 By sector and instrument 2 U.S. government 146.4 246.9 278.2 304.0 256.1 240.5 336.4 173.4 274.2 210.6 122.9 134.1 3 Treasury securities 144.7 238.7 292.0 303.8 248.3 237.4 332.3 157.2 266.5 211.8 118.2 129.8 4 Budget agency issues and mortgages 1.6 8.2 -13.8 .2 7.8 3.2 4.1 16.3 7.7 -1.3 4.7 4.4 5 Private 582.7 388.7 197.5 232.1 372.0 240.9r 404. lr 439.9 403.0" 440.6 420.5 478.1 By instrument 6 Tax-exempt obligations 69.8 48.7 68.7 31.1 78.1 88.7r 130.3r 66.2 21.4' 22.6 -9.8 -41.2 7 Corporate bonds 73.8 47.1 78.8 67.5 75.2 85.7 75.7 72.0 67.4 35.1 38.9 24.6 8 Mortgages 281.2 199.5 161.4 123.9 155.6 99.8r 152.2r 222.1 148.5" 151.5 162.2 219.4 9 Home mortgages 224.5 185.6 163.8 179.5 183.9 120.9r 193.5r 236.5 184.5" 180.2 144.9 199.6 10 Multifamily residential 11.5 4.8 -3.1 -11.2 -6.1 -5.5r -11.4 -4.9 -2.6 -6.1 4.3 7.1 11 Commercial 47.8 9.3 .4 -45.5 -22.5 -15.7r -30.9r -9.9 -33.6" -23.4 7.1 8.9 12 Farm -2.5 -.3 .4 1.1 .5 .2 1.0r .4 .2" .8 6.0 3.7 13 Consumer credit 45.8 16.0 -15.0 5.5 62.3 20.3" 41.6r 76.2 111.3" 72.7 121.9 127.1 14 Bank loans n.e.c 27.3 .4 -40.9 -13.8 5.0 -16.2r -,2r 7.8 28.5" 74.2 73.0 93.5 15 Commercial paper 21.4 9.7 -18.4 8.6 10.0 -14.1 33.2 17.2 3.8 8.0 16.4 33.8 16 Other loans 63.3 67.4 -37.1 9.2 -14.3 -23.3r -28.6r -21.7 16.2" 76.5 17.8 20.9 By borrowing sector 17 Household 281.6 218.9 170.9 217.7 284.5 167.5r 264. lr 368.5 337.7" 299.4 303.6 370.5 18 Nonfinancial business 233.1 123.7 -35.9 -2.0 21.9 — 11.6r 26.7r 24.1 48.2" 131.4 144.7 156.4 19 Farm .6 2.3 2.1 1.0 2.0 -2.3 2.7r 4.1 3.6" 3.1 11.8 3.6 20 Nonfarm noncorporate 40.3 10.1 -28.5 -43.9 -26.0 —28.6r —33.4r -26.2 -15.6" 8.4 16.5 26.9 21 Corporate 192.1 111.3 -9.6 40.9 45.8 19.3r 57.4r 46.3 60.2" 119.9 116.4 125.9 22 State and local government 68.0 46.0 62.6 16.4 65.7 85.0r 113.2r 47.3 17.1" 9.9 -27.8 -48.8 23 Foreign net borrowing in United States 10.2 23.9 13.9 21.3 46.9 38.9 42.8 83.1 22.9 -66.3 -1.9 -3.4 24 Bonds 4.9 21.4 14.1 14.4 59.4 66.5 45.3 84.5 41.4 29.0 11.1 6.6 25 Bank loans n.e.c -.1 -2.9 3.1 2.3 .7 1.5 6.6 1.0 -6.3 6.0 -.8 .9 26 Commercial paper 13.1 12.3 6.4 5.2 -9.0 -21.7 -.6 -1.6 -12.0 -101.8 -5.2 -8.1 27 US. government and other loans -7.6 -7.0 -9.8 -.6 -4.2 -7.5 -8.4 -.8 -.1 .5 -7.0 -2.7 28 Total domestic plus foreign 739.2 659.4 489.6 557.4 675.0 520.3" 783.3" 696.4 700.2" 584.9 541.5 608.9 Financial sectors 29 Total net borrowing by financial sectors 225.1 202.9 152.6 237.1 286.1 180.4r 175.5r 438.9 349.8r 477.0 294.9 345.6 By instrument 30 US. government-related 149.5 167.4 145.7 155.8 161.2 169.4 56.6 287.3 131.3" 320.8 245.2 224.9 31 Government-sponsored enterprises securities 25.2 17.1 9.2 40.3 80.6 32.2 68.8 167.8 53.4 160.0 146.6 152.1 32 Mortgage pool securities 124.3 150.3 136.6 115.6 80.6 137.2 -12.2 119.5 77.9" 180.0 98.6 72.8 33 Loans from U.S. government .0 -.1 .0 .0 .0 .0 .0 .0 .0 -19.2 .0 .0 34 75.7 35.5 6.8 81.3 125.0 11.0r 118.9r 151.6 218.5" 156.2 49.7 120.7 35 Corporate bonds 41.5 46.3 67.6 78.5 118.3 99.0r 92.4r 143.4 138.3" 148.6 59.9 65.3 36 Mortgages .3 .6 .5 .6 3.6 1.4 1.4 6.2 5.5 .2 .6 .1 37 Bank loans n.e.c 13.5 4.7 8.8 2.2 -14.0 -34.6 12.8r -16.1 -18.0 -18.3 -45.1 -17.6 38 Open market paper 31.3 8.6 -32.0 -.7 -6.2 -75.1 -16.2 -9.4 76.0 36.6 2.1 42.1 39 Loans from Federal Home Loan Banks -11.0 -24.7 -38.0 .8 23.3 20.4 28.4 27.4 16.8 -10.8 32.3 30.7 By borrowing sector 40 Government-sponsored enterprises 25.2 17.0 9.1 40.2 80.6 32.2 68.8 167.8 53.4 140.8 146.6 152.1 41 Federally related mortgage pools 124.3 150.3 136.6 115.6 80.6 137.2 -12.2 119.5 77.9" 180.0 98.6 72.8 42 75.7 35.5 6.8 81.3 125.0 11.0r 118.9r 151.6 218.5" 156.2 49.7 120.7 43 Commercial banks -1.4 -.7 -11.7 8.8 5.6 3.5 11.3 6.5 1.2 2.0 12.4 22.8 44 Bank holding companies 6.2 -27.7 -2.5 2.3 8.8 21.1 1.3 .5 12.2 3.5 8.2 11.7 45 Funding corporations 12.5 15.4 -6.5 13.2 2.9 -31.4 -1.6 7.9 36.7 47.4 -17.1 47.0 46 Savings institutions -15.1 -30.2 -44.5 -6.7 11.1 9.7 12.6 13.5 8.8 -5.6 5.8 14.8 47 Credit unions .0 .0 .0 .0 .2 .0 .3 .3 .1 .1 .2 .5 48 Life insurance companies .0 .0 .0 .0 .2 .1 .6 -.1 .4 .0 .0 .0 49 Finance companies 27.4 24.0 18.6 -3.6 .2 -19.6r -13.6r 17.5 16.3 63.3 67.0 16.9 50 Mortgage companies 10.1 .0 -2.4 8.0 -1.0 -25.2 32.4 -.8 -10.4 -27.6 -33.2 -10.0 51 Real estate investment trusts (REITs) 1.4 .8 1.2 .3 3.5 .4 1.3 6.0 6.2 1.2 2.2 2.3 52 Issuers of asset-backed securities (ABSs) 28.3 52.3 51.0 56.3 81.5 62.0r 60.5 85.8 117.6" 81.8 4.0 22.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 11999933 QL Q2 Q3 Q4 Qlr Q2r Q3r Ail sectors S3 Total net borrowing, all sectors 964.4 862.3 642.2 794.5 961.2 700.7r 958.8r 1,135.3 l,050.0r 1,061.9 836.4 954.5 54 U.S. government securities 295.8 414.4 424.0 459.8 417.3 409.9 393.0 460.7 405.5' 550.5 368.1 359.0 55 Tax-exempt securities 69.8 48.7 68.7 31.1 78.1 88.7r 130.3r 66.2 27.4' 22.6 -9.8 -41.2 56 Corporate and foreign bonds 120.2 114.7 160.5 160.4 252.9 251.2r 213.4r 299.9 247.1' 212.6 109.8 96.5 57 Mortgages 281.6 200.1 161.9 124.5 159.2 101.2r 153.5' 228.3 154.0' 151.8 162.7 219.6 58 Consumer credit 45.8 16.0 -15.0 5.5 62.3 20.3r 41.6' 76.2 111.3' 72.7 121.9 127.1 59 Bank loans n.e.c 40.7 2.2 -29.1 -9.4 -8.3 -49.2r 19.2' -7.3 4.2' 61.9 27.1 76.8 60 Open market paper 65.9 30.7 -44.0 13.1 -5.1 -110.9 16.4 6.3 67.7 -57.2 13.3 67.8 61 Other loans 44.7 35.6 -84.9 9.5 4.7 — 10.4r -8.7' 4.9 32.9' 47.0 43.1 49.0 Funds raised through mutual funds and corporate equities 62 Total net share issues -60.8 19.7 215.4 296.0 436.9 343.9r 471.9r 498.0 434.0 214.5 218.6 117.4 63 Mutual funds 37.2 65.3 151.5 211.9 316.8 268.9 358.0 348.9 291.5 114.0 152.7 131.2 64 Corporate equities -98.0 -45.6 64.0 84.1 120.1 75.0r 113.9' 149.1 142.4 100.5 65.8 -13.8 65 Nonfinancial corporations -124.2 -63.0 18.3 27.0 21.3 8.2r 23.2' 32.3 21.5 -9.6 -2.0 -50.0 66 Financial corporations 9.0 10.0 15.1 26.4 38.2 35.2 38.6 38.2 40.9 40.7 29.0 21.6 67 Foreign shares purchased in United States 17.2 7.4 30.7 30.7 60.6 31.6 52.1 78.6 80.0 69.4 38.9 14.6 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Financial Statistics • February 1995 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 11999933 QL Q2 Q3 Q4 QL' Q2' Q3 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 964.4 8623 642.2 794.5 961.2r 700.7r 958.8' l,135.3r 1,050.0' 1,061.9 836.4 954.5 2 Private domestic nonfinancial sectors 137.0 190.1 -7.5 72.0 6.8R —23.1R -3.7R -39.5R 93.3R 458.8 346.1 208.8 3 Households 94.7 157.2 -39.6 70.7 -9.6R -74.8R -75.6' -69.7' 181.8R 462.2 412.3 316.4 4 Nonfarm noncorporate business -.8 -1.7 -3.7 -1.1 -3.2 -3.0 -3.2 -3.3 -3.5 -3.6 -1.8 -1.9 5 Nonfinancial corporate business 13.7 -3.7 6.7 29.2 IS.O' -2.4R 17.3' 41.2' I6.C 21.9 23.8 -1.7 6 State and local governments 29.3 38.3 29.2 -26.8 1.5R 57.ff 57.7' -7.7' -101.0R -21.6 -88.2 -104.0 7 U.S. government -3.1 33.7 10.5 -11.9 -18.4 -23.2 -27.1 -15.4 -7.9 -40.8 -8.2 -6.6 8 Foreign 86.6 85.5 26.6 100.5 126.ff 65.91 93.4R 123.5R 221.2R 127.5 51.9 113.1 9 Financial sectors 743.8 553.0 612.5 633.9 846.8R 681.lr 896.2R l,066.6R 743.3R 516.4 446.7 639.3 10 Government sponsored enterprises -4.1 13.9 15.2 69.0 90.2 16.7 128.0 144.8R 71.2' 92.4 101.1 135.6 11 Federally related mortgage pools 124.3 150.3 136.6 115.6 80.6R 137.2 -12.2 119.5R 77.9' 180.0 98.6 72.8 12 Monetary authority -7.3 8.1 31.1 27.9 36.2 42.5 35.7 28.2 38.5 48.8 17.9 24.0 13 Commercial banking 177.2 125.1 80.8 95.3 142.2 100.5 133.4 146.7 188.1 184.7 112.7 183.5 14 U.S. commercial banks 146.1 94.9 35.7 69.5 149.6 103.4 137.4 160.3 197.3 120.6 128.4 164.7 15 Foreign banking offices 26.7 28.4 48.5 16.5 -9.8 -1.4 -14.3 -16.9 -6.5 59.0 -17.8 19.2 16 Bank holding companies 2.8 -2.8 -1.5 5.6 .0 -4.5 7.9 1.2 -4.8 3.1 .2 -2.4 17 Banks in U.S. affiliated areas 1.6 4.5 -1.9 3.7 2.4 3.0 2.4 2.2 2.1 2.1 1.9 1.9 18 Funding corporations 8.0 16.1 15.8 23.5 18.1 -3.8 1.1 32.4 42.6 17.8 35.3 18.7 19 Thrift institutions -90.0 -154.0 -123.5 -61.3 -2.C -30.7 15.2R 21.0R -13.3 13.5 42.1 44.7 20 Life insurance companies 101.8 94.4 83.2 79.1 105.1 113.0R 109.4R 111.8 86.4R 53.7 6.1 33.3 21 Other insurance companies 29.7 26.5 32.6 12.8 33.3 27.3 36.0 37.6 32.1 27.9 20.8 16.0 22 Private pension funds 81.1 17.2 85.7 37.3 40.2 118.0 11.1 91.9 -60.1 -97.7 -30.7 -13.4 23 State and local government retirement funds 46.1 34.9 46.0 34.4 25.5R -9.8R 47.5R 27.4' 36.9R 45.3 51.2 41.1 24 Finance companies 32.0 29.0 -12.7 1.7 -9.0R —33.3R -34.7' 9.4' 22.6' 72.1 49.8 59.0 25 Mortgage companies 20.1 .0 11.2 .1 .0 -50.4 65.1 -1.6 -13.3 -55.4 -66.2 -20.0 26 Mutual funds 23.8 41.4 90.3 123.7 164.0 148.6 194.4 174.6 138.4 -72.6 11.3 -18.6 27 Closed-end funds 6.6 .2 14.7 17.4 10.2 16.7 10.5 5.9 7.7 8.7 3.6 1.4 28 Money market funds 67.1 80.9 30.1 1.3 12.9 -57.3 33.3 25.3 50.3 -37.4 33.7 54.4 29 Real estate investment trusts (REITs) .5 -.7 -.7 1.1 .6 .2 .8 1.0 .2 .7 .7 .7 30 Brokers and dealers 80.2 2.8 17.5 -6.9 9.2 75.2 52.5 -7.8 -82.8 -56.1 -52.6 -14.4 31 Asset-backed securities issuers (ABSs) 27.1 51.1 48.9 53.8 80. lr 61.5R 59.4 88.6R 111.1' 81.0 6.2 17.5 32 Bank personal trusts 19.7 15.9 10.0 8.0 9.5 9.1 10.0 9.9 8.9 9.3 5.2 2.9 RELATION OF LIABILRRIES TO FINANCIAL ASSETS 33 Net flows through credit markets 964.4 8623 642.2 794.5 961.2r 700.7r 958.8r l,135.3r 1,050.0' 1,061.9 836.4 954.5 Other financial sources 34 Official foreign exchange 24.8 2.0 -5.9 -1.6 .8 3.4 -4.0 1.7 2.2 -.2 -11.2 -.6 35 Special drawing rights certificates 3.5 1.5 .0 -2.0 .0 .0 .0 .0 .0 .0 .0 .0 36 Treasury currency .6 1.0 .0 .2 .4 .3 .4 .4 .7 .7 .6 .8 37 Life insurance reserves 28.8 25.7 25.7 27.3 35.2 38.6' 35.3 46.6R 20.5' 20.0 8.1 23.8 38 Pension fund reserves 321.2 165.1 360.3 249.7 304.7R 331.7R 333.7R 359.9R 193.6' -18.8 64.3 197.8 39 Interbank claims -16.2 35.4 -3.9 61.7 42. lr 63.8' 130.2R -7.6' -18.1' 150.8 195.7 -44.5 40 Checkable deposits and currency 6.4 43.3 86.4 113.8 117.3 99.7 214.4 73.1 81.9 173.1 -68.0 -81.0 41 Small time and savings deposits 98.7 63.7 1.5 -57.2 -70.3 -108.5 -67.8 -68.1 -36.6 2.5 -59.9 -61.5 42 Large time deposits 16.9 -66.1 -58.5 -73.2 -23.5 -21.6 -26.8 -59.5 13.7 -39.6 -4.8 80.6 43 Money market fund shares 90.1 70.3 41.2 3.9 15.8 -46.8 61.8 .6 47.7 -10.9 67.8 50.3 44 Security repurchase agreements 77.8 -24.2 -16.5 35.5 65.5 170.7 37.9 67.8 -14.4 12.8 176.3 68.3 45 Foreign deposits 35.7 38.2 -16.7 -7.2 -22.1 -11.9 -17.1 -50.7 -8.6 24.9 35.9 5.0 46 Mutual fund shares 37.2 65.3 151.5 211.9 316.8 268.9 358.0 348.9 291.5 114.0 152.7 131.2 47 Corporate equities -98.0 -45.6 64.0 84.1 120. LR 75.0R 113.9R 149. LR 142.4 100.5 65.8 -13.8 48 Security credit 15.6 3.5 51.4 4.2 61.9 44.8 40.0 76.6 86.5 29.7 -17.3 -62.3 49 Trade debt 68.2 37.0 3.6 41.5 49.0 43.4R SUR 49.6R 51.9 30.3 67.2 61.6 50 Taxes payable 2.4 -4.8 -6.2 8.5 4.6 7.9 7.3 -1.8 4.9 13.7 -3.4 5.9 51 Noncorporate proprietors' equity -25.8 -28.3 -3.3 18.4 -10.2' -6.6R - 14.8R 6.2R -25.8' -45.8 -47.2 -39.9 52 Investment in bank personal trusts 19.6 29.7 16.1 -7.1 1.6 -4.2 -7.2 .1 17.6 15.4 -15.5 6.7 53 Miscellaneous 313.8 135.7 197.2 257.6 302. lr 197.9R 404.0R 222.3R 384.0' 279.6 204.8 316.8 54 Total financial sources 1,985.7 1,410.6 1,530.2 1,764.5 2,273.0' l,847.1r 2,608.9r 2,350.7' 2,285.5' 1,914.8 1,648.4 1,599.4 Floats not included in assets (—) 55 U.S. government checkable deposits 8.4 3.3 -13.1 .7 -1.5 4.7 2.9 2.1 -15.5 -2.4 .3 14.7 56 Other checkable deposits -2.2 8.5 4.5 1.6 -1.3 -2.0 8.3 -5.2 -6.2 .6 -1.1 -6.2 57 Trade credit 7.0 9.1 9.7 4.1 16.5R 5.8R 25.7' 22.2' 12.5' -27.0 -10.3 -2.2 Liabilities not identified as assets (—) 58 Treasury currency -.2 .2 -.6 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 .0 59 Interbank claims -4.4 1.6 26.2 -4.9 4.2 2.7 .5 -10.4 24.0 -29.1 5.3 11.4 60 Security repurchase agreements 32.4 -24.0 6.2 27.9 8I.R 179.6 60.8 66.6 17.3' 7.1 119.1 63.8 61 Taxes payable 2.7 .1 1.3 14.0 1.0 -6.9 18.2 1.2 -8.6 -.7 12.4 -1.4 62 Miscellaneous -55.6 -35.4 -45.3 -46.0 -45.3R -101.5R -97.6' - 18.4R 36.4' -87.6 -173.7 79.9 63 Total identified to sectors as assets 1,997.6 1,447.2 1,541.2 1,767.2 2,218.5' l,765.0r 2,590.2' 2,292.9' 2,225.9' 2,054.2 1,696.6 1,439.4 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, 2. Excludes corporate equities and mutual fund shares, tables F.6 and F.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A43 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1993' 1994' TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933'' Ql Q2 Q3 Q4 Ql Q2 Q3 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 10,712.6 11,181.5 11,720.7 12,363.1 11,816.1 12,008.9 12,155-3 12,363.1 12,485.5 12,629.7 12,775.0 By sector and instrument 2. U.S. government 2,498.1 2,776.4 3,080.3 3,336.5 3,140.2 3,201.2 3,247.3 3,336.5 3,387.7 3,395.5 3,432.5 3 Treasury securities 2,465.8 2,757.8 3,061.6 3,309.9 3,120.6 3,180.6 3,222.6 3,309.9 3,361.4 3,368.0 3,403.9 4 Budget agency issues and mortgages 32.4 18.6 18.8 26.6 19.6 20.6 24.7 26.6 26.3 27.5 28.6 5 8,214.5 8,405.1 8,640.4 9,026.6 8,675.9 8,807.7 8,908.1 9,026.6 9,097.8 9,234.3 9,342.5 By instrument 6 Tax-exempt obligations 1,039.9 1,108.6 1,139.7 1,217.8 1,160.7 1,202.2 1,210.0 1,217.8 1,222.3 1,229.5 1,209.9 7 Corporate bonds 1,008.2 1,086.9 1,154.4 1,229.6 1,175.9 1,194.8 1,212.8 1,229.6 1,238.4 1,248.1 1,254.3 8 Mortgages 3,758.5 3,920.0 4,043.9 4,206.5 4,061.5 4,109.9 4,166.6 4,206.5 4,230.5 4,281.5 4,337.4 9 Home mortgages 2,616.3 2,780.0 2,959.6 3,147.3 2,979.3 3,038.1 3,098.3 3,147.3 3,178.4 3,225.1 3,276.0 10 Multifamily residential 307.9 304.8 293.6 287.5 292.3 289.4 288.2 287.5 286.0 287.1 288.8 11 Commercial 755.4 755.8 710.3 690.6 709.2 701.4 699.0 690.6 684.7 686.5 688.7 1? Farm 78.9 79.3 80.4 81.2 80.8 81.0 81.1 81.2 81.4 82.9 83.8 13 Consumer credit 812.4 797.4 803.0 866.5 788.2 800.2 824.3 866.5 863.6 895.3 932.1 14 Bank loans n.e.c 726.9 686.0 672.1 677.2 660.9 666.3 665.6 677.2 688.8 712.6 732.7 15 Commercial paper 116.9 98.5 107.1 117.8 113.9 124.0 123.2 117.8 129.9 135.7 138.7 16 Other loans 751.8 707.8 720.2 711.1 714.9 710.2 705.5 711.1 724.3 731.4 737.5 By borrowing sector 17 Household 3,614.3 3,784.7 4,002.3 4,292.0 4,012.6 4,093.0 4,190.9 4,292.0 4,330.4 44,,442200..77 44,,551188..55 18 Nonfinancial business 3,751.7 3,709.3 3,710.5 3,741.5 3,715.7 3,729.8 3,729.1 3,741.5 3,772.9 3,816.4 3,848.4 19 Farm 135.4 135.0 136.0 138.3 133.4 136.7 138.7 138.3 136.7 142.4 144.3 20 Nonfarm noncorporate 1,147.0 1,116.4 1,074.1 1,049.1 1,067.2 1,059.4 1,052.2 1,049.1 1,050.4 1,055.1 1,061.2 7.1 Corporate 2,469.2 2,458.0 2,500.4 2,554.1 2,515.1 2,533.7 2,538.3 2,554.1 2,585.7 2,618.9 2,642.9 22 State and local government 848.6 911.1 927.5 993.2 947.6 984.9 988.0 993.2 994.4 997.2 975.7 7.3 Foreign credit market debt held in United States 285.0 298.8 310.9 357.8 319.8 332.0 3513 357.8 3403 341.2 339.0 74 115.4 129.5 143.9 203.4 160.6 171.9 193.0 203.4 210.6 213.4 215.0 75 Bank loans n.e.c 18.5 21.6 23.9 24.6 24.3 25.9 26.2 24.6 26.2 26.0 26.2 26 Commercial paper 75.3 81.8 77.7 68.7 72.3 72.1 71.7 68.7 43.3 42.0 39.9 27 U.S. government and other loans 75.7 65.9 65.3 61.1 62.7 62.0 60.3 61.1 60.3 59.9 57.8 7,8 Total credit market debt owed by nonfinancial sectors, domestic and foreign 10,997.6 11,4803 12,031.6 12,720.8 12,135.9* 12,340.9 12,506.6 12,720.8 12,825.8 12,971.0 1133,,111144..00 Financial sectors 29 Total credit market debt owed by financial sectors 2,599.5 2,752.1 3,004.7 3,297.3 3,047.0 3,096.6 3,204.7 3,297.3 3,4123 3,492.5 3,577.1 By instrument 30 U.S. government-related 1,418.4 1,564.2 1,720.0 1,881.1 1,755.8 1,774.5 1,845.2 1,881.1 1,954.5 2,021.1 2,075.9 31 Government-sponsored enteiprises securities 393.7 402.9 443.1 523.7 451.2 468.4 510.3 523.7 563.7 600.3 638.3 32 Mortgage pool securities 1,019.9 1,156.5 1,272.0 1,352.6 1,299.8 1,301.3 1,330.1 1,352.6 1,390.8 1,420.8 1,437.6 33 Loans from U.S. government 4.9 4.8 4.8 4.8 4.8 4.8 4.8 4.8 .0 .0 .0 34 Private 1,181.1 1,187.9 1,284.8 1,416.1 1,291.3 1,322.2 1,359.5 1,416.1 1,457.9 1,471.4 1,501.1 35 Coiporate bonds 572.4 640.0 724.8 844.1 751.0 774.8 810.5 844.1 879.3 895.0 911.1 36 Mortgages 4.3 4.8 5.4 8.9 5.7 6.0 7.6 8.9 9.0 9.1 9.2 37 Bank loans n.e.c 69.6 78.4 80.5 66.5 70.3 73.3 69.2 66.5 60.3 48.9 44.5 38 Open market papa- 417.7 385.7 394.3 393.5 379.3 375.9 373.2 393.5 408.8 409.9 420.1 39 Loans from Fedaal Home Loan Banks ... 117.1 79.1 79.9 103.1 85.0 92.1 98.9 103.1 100.4 108.5 116.2 By borrowing sector 40 Government-sponsored enterprises 398.5 407.7 447.9 528.5 456.0 473.2 515.1 528.5 563.7 600.3 638.3 41 Federally related mortgage pools 1,019.9 1,156.5 1,272.0 1,352.6 1,299.8 1,301.3 1,330.1 1,352.6 1,390.8 1,420.8 1,437.6 42 Private financial sectors 1,181.1 1,187.9 1,284.8 1,416.1 1,291.3 1,322.2 1,359.5 1,416.1 1,457.9 1,471.4 1,501.1 43 Commercial banks 76.7 65.0 73.8 79.5 73.1 76.6 77.9 79.5 78.4 82.1 87.5 44 Bank holding companies 114.8 112.3 114.6 123.4 119.9 120.2 120.3 123.4 124.2 126.3 129.2 45 Funding coiporatians 145.7 139.1 161.6 169.9 162.2 166.5 166.3 169.9 190.4 191.1 200.3 46 Savings institutions 139.1 94.6 87.8 99.0 90.3 93.4 96.8 99.0 97.6 99.0 102.7 47 Credit unions .0 .0 .0 .2 .0 .1 .2 .2 .3 .3 .4 48 Life insurance companies .0 .0 .0 .2 .0 .2 .1 .2 .3 .3 .3 49 Finance companies 374.4 393.0 389.4 390.5 381.3 373.8 380.0 390.5 401.9 414.2 420.9 50 Mortgage companies 24.6 22.2 30.2 29.2 23.9 32.0 31.8 29.2 22.3 14.0 11.5 51 Real estate investment trusts (REITs) 12.4 13.6 13.9 17.4 14.0 14.4 15.8 17.4 17.7 18.3 18.8 52 Issuers of asset-backed securities (ABSs) .. 278.1 329.1 391.7 473.2 407.2 422.3 443.8 473.2 493.6 494.6 500.2 All sectors 53 Total credit market debt, domestic and foreign.... 13,597.1 14,2323 15,0363 16,018.1 15,183.0 15,437.5 15,7113 16,018.1 16,238.1 16,463.5 16,691.0 54 U.S. government securities 3,911.7 4,335.7 4,795.5 5,212.8 4,891.2 4,970.9 5,087.7 5,212.8 5,342.2 5,416.5 5,508.3 55 Tax-exempt securities 1,039.9 1,108.6 1,139.7 1,217.8 1,160.7 1,202.2 1,210.0 1,217.8 1,222.3 1,229.5 1,209.9 56 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss 1,696.0 1,856.5 2,023.1 2,277.0 2,087.4 2,141.5 2,216.3 2,277.0 2,328.3 2,356.5 2,380.4 57 MMoorrttggaaggeess 3,762.9 3,924.8 4,049.3 4,215.5 4,067.2 4,116.0 4,174.2 4,215.5 4,239.5 4,290.6 4,346.6 58 Consumer credit 812.4 797.4 803.0 866.5 788.2 800.2 824.3 866.5 863.6 895.3 932.1 59 815.0 785.9 776.6 768.4 755.4 765.5 761.0 768.4 775.4 787.5 803.5 60 Open maiket paper 609.9 565.9 579.0 580.0 565.5 572.0 568.2 580.0 582.0 587.5 598.7 61 Other loans 949.4 857.5 870.2 880.1 867.4 869.1 869.6 880.1 884.9 899.8 911.5 Digitized for FRASE1.R D ata in this table also appear in the Board's Z.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Financial Statistics • February 1995 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 Ql Q2 Q3 Q4 Ql' Q2' Q3 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 13,597.1 14,232-3 15,0363 16,018.1R 15,183.0R 15,437.5' 15,7113' 16,018.1' 16,238.1 16,463.5 16,691.0 2 Private domestic nonfinancial sectors 2,260.8 2,240.2 2,318.0 2,340.9r 2,301.4r 2,296.4' 2,285.0' 2,340.9' 2,429.1 2,511.5 2,562.9 3 Households 1,499.3 1,446.5 1,523.1 l,557.5r 1,501.8r 1,501.4' 1,488.3' 1,557.5' 1,657.1 1,747.0 1,826.8 4 Nonfarm noncorporate business 47.8 44.1 42.9 39.7 42.2 41.4 40.6 39.7 38.8 38.4 37.9 5 Nonfinancial corporate business 189.6 196.2 225.4 248. lr 220.1' 227.3' 234.7' 248.1' 243.7 252.5 249.6 6 State and local governments 524.1 553.3 526.5 495.6r 537.3' 526.2' 521.5' 495.6' 489.5 473.6 448.6 7 U.S. government 239.0 246.9 235.0 216.6 229.4 223.1 218.8 216.6 206.3 204.7 202.6 8 Foreign 918.3 958.1 1,052.7 l,175.1r 1,061.8' 1,084.0' 1,118.1' 1,175.1' 1,206.8 1,219.1 1,250.4 9 Financial sectors 10,179.0 10,787.2 11,430.6 12,285.5r 11,590.3' 11,834.0' 12,089.4' 12,285.5' 12,395.9 12,528.2 12,675.1 10 Government-sponsored enterprises 375.6 390.7 459.7 549.8 463.0 495.5 531.8' 549.8 572.0 597.9 631.9 11 Federally related mortgage pools 1,019.9 1,156.5 1,272.0 l,352.6r 1,299.8 1,301.3 1,330.1' 1,352.6' 1,390.8 1,420.8 1,437.6 12 Monetary authority 241.4 272.5 300.4 336.7 303.6 318.2 324.2 336.7 341.5 351.6 356.8 13 Commercial banking 2,772.5 2,853.3 2,948.6 3,090.8 2,956.6 2,998.8 3,036.4 3,090.8 3,120.2 3,157.1 3,203.1 14 U.S. commercial banks 2,466.7 2,502.5 2,571.9 2,721.5 2,589.4 2,628.5 2,670.2 2,721.5 2,743.8 2,780.3 2,822.4 15 Foreign banking offices 270.8 319.2 335.8 326.0 326.7 327.1 322.3 326.0 331.8 331.7 335.7 16 Bank holding companies 13.4 11.9 17.5 17.5 16.4 18.4 18.7 17.5 18.2 18.3 17.7 17 Banks in U.S. affiliated areas 21.6 19.7 23.4 25.8 24.2 24.8 25.3 25.8 26.4 26.8 27.3 18 Funding corporations 35.7 51.5 75.0 93.1 74.0 74.3 82.4 93.1 97.5 106.3 111.0 19 Thrift institutions 1,320.5 1,192.6 1,134.5 l,132.5r 1,124.8 1,129.8' 1,136.2' 1,132.5' 1,134.0 1,145.7 1,157.9 20 Life insurance companies 1,116.5 1,199.6 1,278.8 1,383.9 1,313.3' 1,343.9 1,372.1 1,383.9 1,404.2 1,409.1 1,417.8 21 Other insurance companies 344.0 376.6 389.4 422.7 396.3 405.3 414.6 422.7 429.6 434.8 438.8 22 Private pension funds 607.4 693.0 730.4 770.6 759.8 762.6 785.6 770.6 746.2 738.5 735.1 23 State and local government retirement funds 433.9 479.9 514.3 542.6r 514.6' 526.5' 533.4' 542.6' 553.9 566.7 577.0 24 Finance companies 497.6 484.9 486.6 482.8' 477.9' 473.7' 474.0' 482.8' 494.5 511.3 524.2 25 Mortgage companies 49.2 60.3 60.5 60.4 47.9 64.1 63.8 60.4 46.6 30.0 25.0 26 Mutual funds 360.2 450.5 574.2 738.2 611.4 659.9 703.6 738.2 720.0 722.9 718.2 27 Closed-end funds 35.6 50.3 67.7 77.9 71.9 74.5 76.0 77.9 80.1 81.0 81.3 28 Money market funds 372.7 402.7 404.1 417.0 404.5 403.9 400.6 417.0 422.2 422.0 425.1 29 Real estate investment trusts (REITs) 7.7 7.0 8.1 8.6 8.1 8.3 8.6 8.6 8.8 9.0 9.1 30 Brokers and dealers 106.5 124.0 117.1 126.3 135.9 149.0 147.1 126.3 112.3 99.2 95.6 31 Asset-backed securities issuers (ABSs) 268.9 317.8 377.9 458.1/ 393.3' 408.1 430.2' 458.0' 478.2 479.8 484.2 32 Bank personal trusts 213.4 223.5 231.5 240.9 233.7 236.2 238.7 240.9 243.3 244.6 245.3 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 13,597.1 14,232.3 15,0363 16,018.1R 15,183.0R 15,437.5' 15,7113' 16,018.1' 16,238.1 16,463.5 16,691.0 Other liabilities 34 Official foreign exchange 61.3 55.4 51.8 53.4 54.5 53.9 55.6 53.4 56.4 54.9 55.5 35 Special drawing rights certificates 10.0 10.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 36 Treasury currency 16.3 16.3 16.5 17.0 16.6 16.7 16.8 17.0 17.1 17.3 17.5 37 Life insurance reserves 380.0 405.7 433.0 468.2 442.6' 451.4' 463.1' 468.2 473.2 475.2 481.2 38 Pension fund reserves 3,484.2 4,138.3 4,516.5 4,945. lr 4,652.7' 4,710.4' 4,869.4' 4,945.1' 4,890.7 4,880.8 5,016.8 39 Interbank claims 95.3 96.4 132.8 175.2r 135.7' 144.3' 165.4' 175.2' 201.6 223.9 238.9 40 Deposits at financial institutions 5,005.3 5,044.8 5,059.1 5,141.8 5,055.3 5,097.1 5,088.5 5,141.8 5,155.8 5,182.8 5,201.3 41 Checkable deposits and currency 934.2 1,020.6 1,134.4 1,251.7 1,089.1 1,168.0 1,181.9 1,251.7 1,220.5 1,229.3 1,206.5 42 Small time and savings deposits 2,349.2 2,350.7 2,293.5 2,223.2 2,275.7 2,255.0 2,236.6 2,223.2 2,233.8 2,214.7 2,198.3 43 Large time deposits 546.9 488.4 415.2 391.7 410.6 401.1 389.4 391.7 382.6 378.9 402.0 44 Money market fund shares 498.4 539.6 543.6 559.4 556.6 549.8 547.9 559.4 582.4 576.4 586.1 45 Security repurchase agreements 372.3 355.8 392.3 457.8 446.2 450.4 472.5 457.8 472.4 510.3 534.0 46 Foreign deposits 304.3 289.6 280.1 258.0 277.1 272.8 260.2 258.0 264.3 273.2 274.5 47 Mutual fund shares 602.1 813.9 1,042.1 1,429.3 1,134.6 1,225.8 1,342.4 1,429.3 1,439.0 1,443.1 1,563.7 48 Security credit 137.4 188.9 217.3 279.3 225.0 234.7 254.5 279.3 282.7 278.1 263.2 49 Trade debt 942.2 935.9 977.4 1,026.4 976.9 989.7' 1,009.6' 1,026.4 1,022.3 1,039.5 11,,006622..55 50 Taxes payable 77.4 71.2 79.6 84.2 82.9 81.2 82.8 84.2 88.8 84.4 8888..11 51 Investment in bank personal trusts 522.1 608.3 629.6 660.9 639.0 637.6 651.2 660.9 655.3 640.2 656.8 52 Miscellaneous 2,820.4 2,992.2 3,160.2 3,414.6' 3,174.9' 3,249.9' 3,316.5' 3,414.6' 3,503.2 3,550.8 3,673.6 53 Total UabQities 27,751.1 29,609.6 31,360.1 33,7213R 31,781.7R 32,338.1' 33,035.0' 33,7213' 34,032.4 34342.6 35,018.1 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 22.0 22.3 19.6 20.1 19.8 20.0 20.3 20.1 20.4 20.8 21.0 55 Corporate equities 3,530.2 4,863.6 5,462.9 6,186.5 5,647.3 5,683.7 5,941.7 6,186.5 6,052.2 5,877.7 6,135.1 56 Household equity in noncorporate business 2,529.1 2,444.4 2,411.5 2,427.7r 2,419.5' 2,434.2' 2,445.3' 2,427.7' 2,457.8 2,478.9 2,487.3 Floats not included in assets (—) 57 U.S. government checkable deposits 15.0 3.8 6.8 5.6 3.4 3.5 2.2 5.6 .3 .9 1.2 58 Other checkable deposits 35.9 40.4 42.0 40.7 36.7 41.6 33.7 40.7 36.3 38.7 30.6 59 Trade credit -130.3 -129.3 -124.6 -101.7r -130.9' -135.0' -130.4' -101.7' -121.6 -135.1 -136.0 Liabilities not identified as assets (—) 60 Treasury currency -4.1 -4.8 -4.9 -5.1 -5.0 -5.0 -5.1 -5.1 -5.2 -5.2 -5.3 61 Interbank claims -32.0 -4.2 -9.3 -4.7 -5.8 -5.7 -7.8 -4.7 -7.7 -7.4 -3.5 62 Security repurchase agreements 3.0 9.2 38.1 119.2r 94.9 108.0 132.6 119.2' 133.0 160.3 186.3 63 Taxes payable 17.8 17.8 25.2 26.2r 14.5' 24.3' 24.3' 26.2' 15.2 23.6 23.8 64 Miscellaneous -261.2 -330.7 -398.4 -451.0r -432.7' -409.3' -452.6' -451.0' -470.3 -441.1 -456.3 65 Total identified to sectors as assets 34,188.3 37,337.6 39,679.1 42,726.5R 40,293.1' 40,853.6' 41,845.5' 42,726.5' 42,982.9 43,0853 44,020.8 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, 2. Excludes corporate equities and mutual fund shares, tables L.6 and L.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted Apr. May July Aug.' Sept.1 1 Industrial production1 104.3" 107.6" 116.6r 116.7" 117.4" 118.0" 118.2" Market groupings 2 Products, total 103.5r 106.5r 110.7" 114.7 114.7 115.3 115.9" 116.2" 116.7 116.4 3 Final, total 105,6r 109.0" 113.4" 117.4" 117.3 117.8 118.4" 118.5" 119.2 118.9 4 Consumer goods 103.0r 105.9" 109.4" 112.9" 112.3" 112.8" 113.5" 113.3" 113.8 113.1 5 Equipment 109.4r 113.4" 119.3" 124.3" 124.9" 125.4" 125.8" 126.4" 127.5 127.9 6 Intermediate 96.9r 98.8" 102.4" 106.3" 106.9" 107.7" 108.5" 109.1" 109.2 108.9 7 Materials 105.4 109.2" 114.1" 119.5" 119.7" 120.5" 121.2" 121.4" 122.8 123.0 Industry groupings 103.9r 108.0" 112.9" 118.0" 118.4" 119.0" 119.3" 119.8" 8 Manufacturing 78.0" 79.2" 80.9" 82.9" 83.0" 83.2" 83.3" 83.8 83.6 9 Capacity utilization, manufacturing (percent)' 89.7 97.7 103.9" 110.0 103.0 108.0 105.0 109.0 110.0 109.0 10 Construction contracts3 106.2 106.4 108.1 110.1 110.5 110.8 111.2 111.4 111.7 112.0 11 Nonagricultural employment, total4 96.6 94.9 93.1 94.8 95.3 95.3 95.6 95.6 95.8 95.9 12 Goods-producing, total 97.1 95.8 93.7 94.6 94.8 94.8 95.0 95.0 95.2 95.3 13 Manufacturing, total 96.0 94.5 93.7 95.4 95.7 95.7 96.0 96.0 96.3 96.4 14 Manufacturing, production workers 109.4 110.5 112.8 115.0 115.4 115.7 116.1 116.5 116.8 117.1 15 Service-producing 127.8 135.6 141.4 147.5 148.3 149.0 149.3 150.0 150.7 151.7 16 Personal income, total 124.5 131.6 136.2 142.4 143.3 144.3 144.5 145.2 145.5 146.4 17 Wages and salary disbursements 113.7 118.0 120.0 124.8 124.8 124.9 125.3 125.6 126.2 126.7 18 Manufacturing 128.8 137.0 142.5 148.4 148.2 149.8 150.1 150.9" 151.6 152.6 19 Disposable personal income 121.1 126.9 135.2 144.5 143.1 143.0 144.3 144.5 146.6 147.8 20 Retail sales5 Prices6 21 Consumer (1982-84=100) 136.2 140.3 144.5 147.2 147.4 147.5 148.0 148.4 149.0 149.4 22 Producer finished goods (1982=100) 121.7 123.2 124.7 124.9 125.0 125.3 125.6" 126.0 126.6 125.5 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. covers employees only, excluding personnel in the armed forces. For the ordering address, see die inside front cover. The latest historical revision of the 5. Based on data from U.S. Department of Commerce, Survey of Current Business. industrial production index and the capacity utilization rates was released in November 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve price indexes can be obtained from the US. Department of Labor, Bureau of Labor Bulletin, vol. 81 (January 1995), pp. 16-29. For a detailed description of the industrial Statistics, Monthly Labor Review. production index, see "Industrial Production: 1989 Developments and Historical Revi- NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for sion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. series mentioned in notes 3 and 6, can also be found in the Survey of Current Business. 2. Ratio of index of production to index of capacity. Based on data from the Federal Figures for industrial production for the latest month are preliminary, and many figures Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. for the three months preceding the latest month have been revised. See "Recent Develop- 3. Index of dollar value of total construction contracts, including residential, nonresi- ments in Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June dential, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. 1990), pp. 411-35. See also "Industrial Production Capacity and Capacity Utilization Dodge Division. since 1987," Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted except as noted 1994 CCaatteeggoorryy 11999911 11999922 11999933 Apr. May June July Aug." Sept." Oct. Nov. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 125,303 126,982 128,040 130,747 130,774 130,248 130,457 131,189 131,343 131,836 131,937 Employment 114,644 114,391 116,232 118,880 119,437 119,195 119,173 119,722 120,219 120,741 121,048 3 Agriculture 3,233 3,207 3,074 3,459 3,435 3,235 3,278 3,444 3,409 3,495 3,561 Unemployment 8,426 9,384 8,734 8,408 7,902 7,817 8,005 8,023 7,715 7,600 7,328 5 Rate (percent of civilian labor force) 6.7 7.4 6.8 6.4 6.0 6.0 6.1 6.1 5.9 5.8 5.6 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 108,256 108^19 110,171 112,699 112,951 113,334 113,624 113,914 114,186 114,350 114,700 18,455 18,192 17,804 18,007 18,009 18,044 18,045 18,095 18,096 18,138 18,189 689 631 599 606 603 605 601 603 605 602 600 4,650 4,471 4,571 4,893 4,907 4,927 4,944 4,942 4,972 4,976 5,047 10 Transportation and public utilities 5,762 5,709 5,710 5,759 5,843 5,849 5,857 5,866 5,865 5,864 5,879 11 Trade 25,365 25,391 25,849 26,165 26,190 26,328 26,439 26,484 26,565 26,614 26,648 6,646 6,571 6,605 6,791 6,787 6,798 6,797 6,801 6,794 6,783 6,791 28,336 29,053 30,193 31,497 31,598 31,765 31,918 32,036 32,138 32,238 32,385 14 Government 18,402 18,653 18,841 18,981 19,014 19,018 19,023 19,087 19,151 19,135 19,161 1. Beginning January 1994, reflects redesign of current population survey and popula- 4. Includes all full- and part-time employees who worked during, or received pay for, tion controls from the 1990 census. the pay period that includes the twelfth day of the month; excludes proprietors, self- 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly employed persons, household and unpaid family workers, and members of the armed figures are based on sample data collected during the calendar week that contains the forces. Data are adjusted to the March 1992 benchmark, and only seasonally adjusted data twelfth day; annual data are averages of monthly figures. By definition, seasonality does are available at this time. not exist in population figures. SOURCE. Based on data from US. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • February 1995 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1993 1994r 1993 1994r 1993 1994r SSeerriieess Q4r Ql Q2 Q3 Q4r Ql Q2 Q3 Q4r Ql Q2 Q3 Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 113.7 115.7 117.4 118.8 138.2 139.0 140.0 140.9 82.3 83.2 83.8 84.3 2 Manufacturing 114.8 116.8 118.9 120.5 141.0 142.0 143.1 144.2 81.4 82.3 83.1 83.6 3 Primary processing3 111.3 112.4 114.7 115.9 129.7 130.3 131.0 131.6 85.8 86.3 87.6 88.1 4 Advanced processing4 116.5 118.9 120.9 122.7 146.2 147.4 148.7 150.0 79.7 80.7 81.3 81.8 5 Durable goods 119.3 122.0 124.1 126.5 147.7 148.8 150.2 151.6 80.8 82.0 82.6 83.4 6 Lumber and products 103.7 104.4 105.4 106.6 114.7 115.1 115.5 116.0 90.4 90.7 91.2 91.9 7 Primary metals 109.7 110.6 114.4 114.1 124.7 124.7 125.0 125.2 88.0 88.6 91.6 91.1 8 Iron and steel 114.7 114.5 120.2 115.8 127.4 127.5 127.9 128.4 90.0 89.8 93.9 90.2 9 Nonferrous 103.2 105.3 106.9 111.4 120.6 120.6 120.5 120.5 85.6 87.3 88.7 92.4 10 Industrial machinery and equipment 148.0 152.1 157.6 162.6 174.3 176.5 179.0 181.6 84.9 86.2 88.0 89.5 11 Electrical machinery 145.4 150.3 156.8 163.6 172.2 175.8 179.9 184.1 84.5 85.5 87.1 88.8 12 Motor vehicles and parts 131.1 140.0 133.3 134.9 155.3 156.7 158.5 160.3 84.4 89.4 84.1 84.1 13 Aerospace and miscellaneous transportation equipment 85.5 83.7 84.2 82.1 130.6 130.1 129.8 129.4 65.5 64.4 64.9 63.5 14 Nondurable goods 109.8 111.0 113.1 113.8 133.2 134.0 134.8 135.5 82.4 82.9 83.9 84.0 15 Textile mill products 105.8 106.8 108.7 108.9 119.5 120.1 120.8 121.4 88.5 88.9 90.1 89.7 16 Paper and products 116.1 115.1 115.9 118.5 125.5 126.0 126.6 127.1 92.5 91.4 91.6 93.2 17 Chemicals and products 120.4 122.1 123.6 124.3 149.2 150.5 151.9 153.3 80.7 81.1 81.4 81.1 18 Plastics materials 117.9 120.6 124.3 126.9 128.5 129.2 130.0 130.8 91.7 93.4 95.6 97.0 19 Petroleum products 106.1 103.7 106.3 104.9 115.6 115.4 115.3 115.2 91.8 89.9 92.2 91.1 20 Mining 98.4 99.3 100.7 100.1 111.7 111.5 111.5 111.5 88.1 89.1 90.3 89.8 21 Utilities 116.0 119.3 117.2 118.4 134.2 134.6 135.0 135.4 86.5 88.6 86.8 87.5 22 Electric 115.1 117.6 118.0 118.2 131.7 132.1 132.6 133.1 87.4 89.0 89.0 88.8 1973 1975 Previous cycle5 Latest cycle6 1993 1994 High Low High Low High Low Nov. June July Aug.r Sept/ Oct/ Nov.p Capacity utilization rate (percent 2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 82.3 84.r 84.r 84.5 84.3 84.5 84.7 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 81.4 83.2r 83.3r 83.8 83.6 83.9 84.4 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 85.8 87.5 87.7r 88.3 88.2 88.5 89.2 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.2 79.7 81.5r 81.5r 82.1 81.9 82.1 82.5 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 80.7 82.7r 82.8r 83.7 83.7 84.1 84.8 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.3 90.2 91.8r 92.2r 91.0 92.4 91.9 93.4 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.0 87.5 90.9r 90.0r 90.7 92.6 93.0 93.6 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.1 89.4 92.3r 90.5r 88.0 92.1 93.8 93.6 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.0 85.1 89.3r 89.6r 94.2 93.4 92.0 93.8 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 72.5 84.5 88.4r 88.9r 89.5 90.2 90.9 91.6 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 76.6 84.2 87.9r 88.4r 89.2 89.0 89.5 90.1 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 57.6 85.3 83. lr 81.lr 86.1 85.2 85.5 87.2 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 79.4 65.6 64.7r 63.9r 63.6 62.9 62.9 63.0 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.4 82.5 84.0' 84.0r 84.1 83.8 83.9 84.1 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.9 88.5 89.8r 90.3r 89.8 89.0 90.9 91.1 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.5 92.6 92.0r 91.8r 94.6 93.2 93.2 93.6 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 78.9 80.9 81.7r 81.6r 81.4 80.2 80.3 80.3 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 90.7 97.9r 97.3 95.7 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 83.7 92.5 90.7r 90.5r 91.4 91.4 91.8 93.7 20 Mining 94.4 88.4 96.6 80.6 86.5 86.0 87.9 90.3r 89.8r 89.7 89.8 89.4 88.9 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.2 87.0 89.6r 88^ 87.8 86.7 86.0 84.6 22 Electric 99.0 82.7 88.3 78.7 94.8 86.5 87.8 91.4 89.5r 89.0 87.9 87.1 85.6 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. 3. Primary processing includes textiles; lumber; paper; industrial chemicals; petroleum For the ordering address, see die inside front cover. The latest historical revision of the refining; rubber and plastics; stone, clay, and glass; and primary and fabricated metals. industrial production index and the capacity utilization rates was released in November 4. Advanced processing includes food, tobacco, apparel, fiirniture, printing, chemical 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve products such as drugs and toiletries, leather and products, machinery, transportation Bulletin, vol. 81 (January 1995), pp. 16-29. For a detailed description of the industrial equipment, instruments, miscellaneous manufacturing, and ordnance. production index, see "industrial Production: 1989 Developments and Historical Revi- 5. Monthly highs, 1978-80; monthly lows, 1982. sion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted index of industrial production to the corresponding index of capacity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1993r 1994r 1993 GGrroouupp por- aavvgg.. tion Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. NNoovv..pp Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 112.0 113.7 114.7 114.7 115.6 116.6 116.7 117.4 118.0 118.2 119.1 119.6 119.6 120.2 ? Products 60.9 110.7 112.2 112.9 113.1 114.0 114.7 114.7 115.3 115.9 116.2 116.7 116.4 116.9 117.4 Final products 46.6 113.4 115.0 115.5 115.9 117.0 117.4 117.3 117.8 118.4 118.5 119.2 118.9 119.2 119.9 4 28.5 109.4 110.6 110.9 111.5 112.4 112.9 112.3 112.8 113.5 113.3 113.8 113.1 113.0 113.6 5 Durable consumer goods 5.5 110.7 115.5 117.1 118.6 121.1 119.0 117.8 116.4 118.0 118.0 120.7 119.2 119.9 122.0 6 Automotive products 2.5 111.3 119.4 123.1 126.6 131.5 126.4 124.1 120.1 121.0 119.5 124.9 123.7 124.2 127.5 7 1.6 108.9 120.9 125.9 128.3 134.8 127.7 125.0 118.1 118.5 115.0 126.0 122.4 122.3 126.6 8 Autos, consumer .9 84.2 92.5 95.0 98.7 102.7 98.8 96.0 90.4 89.6 86.5 91.7 90.1 92.8 94.1 9 Trucks, consumer .7 153.3 172.0 181.8 181.5 192.7 179.6 177.2 168.0 170.7 166.6 189.0 181.5 175.5 185.8 10 Auto parts and allied goods .9 114.2 114.0 114.7 120.4 121.9 121.1 119.8 121.9 123.8 126.6 120.0 123.9 125.8 127.0 11 Other 3.0 110.1 112.3 112.0 111.8 112.2 112.7 112.5 113.2 115.4 116.7 117.1 115.4 116.3 117.4 17 Appliances televisions and air conditioners .7 122.9 131.7 127.5 124.0 121.6 124.3 120.7 125.6 132.8 129.7 135.1 113311..33 129.9 113344..44 N Carpeting and furniture .8 101.1 99.9 100.9 102.3 103.5 103.1 104.5 103.3 103.6 108.4 106.9 104.1 107.4 108.0 14 Miscellaneous home goods 1.5 109.4 110.4 111.2 111.4 112.7 112.8 113.2 113.1 114.2 115.3 114.6 114.6 115.0 114.8 15 Nondurable consumer goods 23.0 109.2 109.5 109.5 109.8 110.4 111.5 111.0 112.0 112.5 112.2 112.2 111.8 111.4 111.7 16 10.3 106.3 106.2 106.6 106.5 107.6 109.8 110.2 110.9 110.5 110.6 111.2 112.2 111.7 112.4 17 Clothing 2.4 95.5 94.6 95.2 93.6 94.5 95.7 96.4 97.2 96.3 96.5 95.9 95.5 96.2 95.5 18 Chemical products 4.5 126.7 127.2 127.9 127.7 128.7 130.3 128.4 129.5 131.4 131.1 129.8 126.9 126.8 127.5 19 Paper products 2.9 104.0 104.7 104.3 104.0 103.9 103.9 105.1 105.6 105.8 105.2 105.9 105.2 104.0 104.1 ?0 2.9 113.7 115.9 113.2 118.4 117.3 114.5 110.0 112.4 115.5 114.3 113.1 111.4 110.8 110.1 71 .9 107.2 110.9 107.9 105.8 105.4 105.8 108.3 107.4 106.5 105.8 105.8 107.4 108.3 111.5 22 Residential utilities 2.1 116.4 117.9 115.3 123.6 122.2 118.1 110.5 114.4 119.3 117.8 116.1 113.0 111.8 109.4 73 18.1 119.3 121.5 122.6 122.7 123.8 124.3 124.9 125.4 125.8 126.4 127.5 127.9 129.0 129.6 ?4 Business equipment 14.0 134.6 138.3 140.0 140.4 142.0 142.6 143.5 144.5 145.5 146.9 148.9 149.2 151.2 152.2 25 Information processing and related 5.7 157.7 162.5 165.0 167.1 168.5 170.0 170.2 171.8 173.7 177.1 179.7 180.6 183.2 184.1 76 Computer and office equipment 1.5 230.9 253.9 262.5 265.5 267.6 270.9 270.8 271.6 276.5 282.6 288.9 293.7 299.4 305.7 ?7 4.0 111.7 114.2 115.7 114.6 116.4 117.8 119.2 120.7 120.6 122.1 122.3 123.3 124.7 126.3 78 2.6 136.3 139.2 139.0 140.1 142.3 139.3 138.0 135.3 136.1 132.6 137.9 136.4 137.9 139.6 79 Autos and trucks 1.2 131.5 148.0 147.9 149.1 154.6 148.1 145.9 140.0 141.7 138.2 149.4 147.6 149.2 151.7 30 Other 1.7 116.1 120.3 122.5 121.1 122.3 123.3 127.1 129.4 130.5 132.6 133.5 132.6 134.4 133.8 31 Defense and space equipment 3.4 78.5 76.3 75.2 74.5 73.6 73.7 73.6 72.4 71.3 69.9 69.2 68.8 68.6 68.6 3? Oil and gas well drilling .5 86.1 87.2 88.1 88.9 91.9 92.1 93.2 94.6 94.2 93.7 89.6 93.9 88.3 86.0 33 Manufactured homes .2 114.6 124.1 128.9 132.4 131.5 135.6 132.4 135.2 137.8 133.3 134.5 138.4 142.0 34 Intermediate products, total 14.3 102.4 103.9 104.7 104.6 104.9 106.3 106.9 107.7 108.5 109.1 109.2 108.9 109.7 109.9 35 Construction supplies 5.3 98.9 101.0 103.7 102.9 102.7 103.2 104.7 106.1 106.4 107.9 108.2 108.5 109.1 109.9 36 Business supplies 9.0 104.9 105.8 105.5 105.8 106.5 108.4 108.5 108.8 110.1 110.0 109.9 109.3 110.3 110.1 37 39.1 114.1 115.9 117.5 117.1 118.1 119.5 119.7 120.5 121.2 121.4 122.8 123.0 123.8 124.5 38 20.6 119.8 122.8 125.4 125.2 126.2 128.3 129.2 129.8 130.0 130.9 132.6 133.4 134.7 136.3 39 Durable consumer parts 3.9 118.4 123.8 128.5 129.9 129.7 131.5 130.1 129.7 129.2 130.4 133.2 133.8 135.1 136.8 40 7.5 128.2 131.6 133.2 134.1 135.6 137.9 139.6 140.5 142.1 143.8 145.2 146.6 149.0 151.0 41 Other 9.1 113.6 115.3 117.8 116.0 117.1 119.3 120.4 121.2 120.8 121.1 122.3 122.7 123.2 124.5 4? Basic metal materials 3.0 113.5 115.0 118.5 114.4 116.9 117.6 119.7 120.0 119.6 118.8 119.3 121.0 121.9 122.6 43 Nondurable goods materials 8.9 113.4 115.0 116.3 114.6 115.6 116.7 115.9 118.2 118.1 118.6 120.3 119.6 120.4 120.9 44 Textile materials 1.1 101.9 101.9 101.3 101.8 102.7 104.0 104.4 104.2 104.8 104.8 105.7 105.9 107.2 108.4 45 Paper materials 1.8 115.4 117.1 117.7 113.8 116.3 117.8 116.1 118.9 118.4 117.5 122.5 121.5 120.4 121.0 46 Chemical materials 4.0 116.1 118.3 119.3 119.5 120.0 120.6 120.6 123.8 122.9 123.4 124.8 123.7 124.7 124.8 47 Other 2.0 113.2 114.4 118.0 113.4 114.0 115.6 113.3 114.8 116.5 118.6 118.1 118.2 119.7 120.7 48 Energy materials 9.6 103.6 103.5 103.2 103.8 104.7 105.0 104.8 104.6 106.7 105.2 106.1 105.9 105.5 104.6 49 Primary energy 6.3 99.2 98.2 98.3 97.3 99.4 100.5 100.9 100.4 100.2 100.3 100.9 101.0 100.4 99.6 50 Converted fuel materials 3.3 112.4 114.0 113.1 116.9 115.2 114.0 112.5 112.8 119.9 114.9 116.3 115.7 115.7 114.6 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 111.9 113.2 114.1 114.1 114.8 116.1 116.2 117.1 117.7 118.1 118.7 118.7 119.2 119.7 52 Total excluding motor vehicles and parts 95.2 111.6 112.7 113.6 113.5 114.3 115.5 115.7 116.6 117.3 117.7 118.2 118.1 118.7 119.1 53 Total excluding computer and office 98.3 109.9 111.3 112.2 112.2 113.1 114.0 114.1 114.8 115.4 115.5 116.4 111166..22 111166..77 111177..33 54 Consumer goods excluding autos and trucks . 26.9 109.4 109.9 109.9 110.4 111.0 111.9 111.5 112.4 113.2 113.2 113.0 112.6 112.4 112.8 55 Consumer goods excluding energy 25.6 108.9 110.0 110.6 110.7 111.9 112.7 112.5 112.8 113.2 113.2 113.8 113.3 113.2 114.0 56 Business equipment excluding autos and trucks 12.8 134.8 137.2 139.1 139.4 140.7 142.0 143.2 144.8 145.7 114477..77 114488..88 114499..33 115511..33 115522..22 57 Business equipment excluding computer and 12.5 122.3 124.3 125.4 125.6 127.2 127.6 128.5 129.4 130.0 113311..11 113322..77 113322..66 113344..22 113344..88 58 Materials excluding energy 29.5 117.8 120.4 122.6 121.9 122.9 124.8 125.1 126.2 126.4 127.2 128.8 129.2 130.3 131.6 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • February 1995 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 1993r 1994r SIC pro- 1993 Group code2 por- avg. tion Apr. May July Aug. Sept. Nov.p Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 112.0 113.7 114.7 114.7 115.6 116.6 116.7 117.4 118.0 118.2 119.1 119.0 119.6 120.2 60 Manufacturing 85.5 112.9 114.8 116.1 115.8 116.7 118.0 118.4 119.0 119.3 119.8 120.9 120.9 121.6 122.6 61 Primary processing 26.5 109.1 111.2 112.9 111.7 112.2 113.3 114.0 115.2 114.7 115.3 116.3 116.2 116.9 118.0 62 Advanced processing 59.0 114.7 116.5 117.6 117.7 118.9 120.2 120.5 120.8 121.5 121.9 123.1 123.1 123.9 124.7 63 Durable goods 45.1 116.1 119.1 121.2 121.0 122.1 122.9 123.7 124.0 124.6 125.2 127.0 127.3 128.3 129.7 64 Lumber and products 24 2.0 100.2 103.5 104.6 105.3 103.8 104.0 103.9 106.0 106.2 106.8 105.5 107.4 106.9 108.8 65 Furniture and fixtures 25 1.4 105.0 104.4 107.0 105.8 107.6 107.7 110.2 110.1 111.8 114.0 115.5 112.4 114.8 114.7 66 Stone, clay, and glass products 32 2.1 99.2 101.0 104.4 101.8 101.8 103.7 105.0 105.5 104.4 104.3 105.8 106.0 105.7 106.5 67 Primary metals 33 3.1 106.9 109.1 113.4 108.0 111.6 112.1 114.8 114.8 113.7 112.7 113.5 116.0 116.5 117.4 68 Iron and steel 331,2 1.7 111.4 114.0 118.6 110.8 116.0 116.7 121.5 120.9 118.2 116.1 113.0 118.3 120.7 120.5 69 Raw steel 331PT .1 105.7 106.2 110.9 102.0 105.8 106.0 105.3 105.7 106.3 104.7 107.0 109.9 109.0 70 Nonferrous 333-6,9 1.4 101.0 102.6 106.6 104.1 105.8 106.0 106.2 106.9 107.6 108.0 113.6 112.5 110.9 113 j 71 Fabricated metal products... 34 5.0 103.7 105.6 107.1 107.2 106.6 108.5 109.6 110.0 110.2 111.7 112.4 112.0 112.8 114.0 72 Industrial and commercial machinery and computer equipment .. 35 7.9 141.1 147.3 151.3 150.3 151.9 154.0 156.1 157.7 158.9 160.6 162.6 164.5 166.6 168.6 73 Computer and office equipment 357 1.7 230.9 253.9 262.5 265.5 267.6 270.9 270.8 271.6 276.5 282.6 288.9 293.7 299.4 305.7 74 Electrical machinery 36 7.3 139.3 145.0 147.3 148.1 150.1 152.6 154.3 156.5 159.5 161.5 164.1 165.1 167.3 169.6 75 Transportation equipment.. . 37 9.6 105.5 108.5 109.8 110.8 112.3 110.7 109.5 107.6 107.5 105.7 109.5 108.7 109.1 110.7 76 Motor vehicles and parts . 371 4.8 121.1 132.4 135.9 138.7 142.6 138.8 136.2 131.6 132.2 129.6 138.1 137.1 138.2 141.4 77 Autos and light trucks . 371PT 2.5 114.8 127.3 132.3 135.2 141.9 134.7 131.7 124.4 124.6 120.8 131.9 128.3 128.6 132.8 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.8 90.6 85.7 84.9 84.1 83.3 83.8 84.1 84.6 83.8 82.8 82.3 81.4 81.2 81.4 79 Instruments 38 5.4 106.2 105.0 104.9 105.9 106.3 106.9 106.6 106.4 106.8 108.5 108.7 108.0 108.6 108.9 80 Miscellaneous 39 1.3 109.8 111.4 112.4 112.6 113.5 114.1 115.2 115.4 115.8 118.6 117.1 117.0 118.1 118.9 81 Nondurable goods 40.5 109.3 110.0 110.4 110.0 110.7 112.5 112.4 113.4 113.4 113.6 114.0 113.8 114.2 114.6 82 Foods "20 9.4 109.4 110.1 110.3 109.9 109.9 112.9 111.9 112.8 112.8 113.4 113.7 114.6 113.9 114.7 83 Tobacco products 21 1.6 88.7 82.2 86.9 87.0 93.6 93.0 98.1 98.5 95.9 93.7 96.2 97.4 98.3 96.7 84 Textile mill products 22 1.8 105.7 105.7 105.7 106.0 106.4 107.9 108.6 108.9 108.7 109.4 109.0 108.2 110.8 111.1 85 Apparel products 23 2.2 94.9 94.5 94.7 93.5 94.9 95.7 96.2 97.1 97.0 97.0 96.8 96.8 97.0 96.3 86 Paper and products 26 3.6 113.8 116.2 117.6 114.0 115.7 115.7 114.4 116.7 116.6 116.6 120.2 118.7 118.9 119.6 87 Printing and publishing 27 6.8 99.3 99.3 98.8 98.2 98.8 101.3 101.7 101.6 102.4 102.1 101.5 101.2 102.0 101.9 88 Chemicals and products .... 28 9.9 119.1 120.7 120.9 121.3 121.8 123.1 122.4 124.0 124.4 124.7 124.7 123.4 123.8 124.2 89 Petroleum products 29 1.4 104.5 107.0 105.1 104.0 103.8 103.4 107.5 107.0 104.5 104.3 105.2 105.3 105.7 107.9 90 Rubber and plastic products . 30 3.5 123.1 125.8 127.4 128.3 128.2 130.9 130.8 132.4 132.8 134.5 134.5 134.5 136.1 137.9 91 Leather and products 31 .3 87.3 85.7 86.6 86.8 85.4 87.0 87.6 85.9 85.5 86.3 85.5 85.4 86.6 86.0 92 Mining 6.8 98.2 98.2 98.4 97.8 99.5 100.5 100.7 100.7 100.6 100.1 100.0 100.1 99.7 99.1 93 Metal 10 .4 162.4 163.6 167.8 164.2 161.6 165.2 157.0 156.4 162.8 159.5 156.6 159.4 161.7 160.1 94 Coal 12 1.0 102.9 100.9 104.7 101.6 112.0 117.7 118.3 111.5 113.4 108.6 111.4 110.7 110.2 109.9 95 Oil and gas extraction 13 4.7 93.0 93.1 92.5 92.4 92.7 92.9 93.2 94.3 93.8 93.9 93.5 93.7 93.0 92.2 96 Stone and earth minerals 14 .6 101.0 103.4 103.1 103.6 104.8 104.7 105.9 108.1 105.6 107.9 106.6 106.7 107.5 108.7 97 Utilities 7.7 116.2 116.7 115.6 120.3 119.6 117.9 114.7 115.8 121.1 119.0 118.8 117.5 116.7 114.8 98 Electric 49L3PT 6.1 115.8 115.6 115.2 118.1 117.5 117.2 116.4 116.2 121.4 119.0 118.4 117.1 116.2 114.4 99 Gas 492.3PT 1.6 117.7 120.9 117.0 128.9 128.1 120.5 107.9 114.1 120.0 118.9 120.4 119.1 118.5 116.4 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.7 112.4 113.8 114.9 114.4 115.2 116.7 117.3 118.2 118.6 119.2 119.8 119.9 120.6 121.4 101 Manufacturing excluding office and computing machines ... 83.8 110.4 112.0 113.2 112.8 113.7 114.9 115.3 115.9 116.2 116.6 117.6 117.5 118.2 119.1 Gross value (billions of 1987 dollars, annual rates) MAJOR MARKETS 102 Products, total 1,707.0 1,907.2 1,948.9 1,958.9 1,964.4 1,977.8 1,985.6 1,985.8 1,990.7 2,002.5 2,002.1 2,020.2 2,017.8 2,025.7 2,040.8 103 Final 1,314.6 1,500.9 1,535.7 1,542.4 1,547.1 1,559.9 1,563.6 1,559.9 1,561.7 1,571.1 1,569.3 1,586.6 1,585.1 1,590.5 1,604.6 104 Consumer goods 866.6 951.1 967.9 968.8 972.5 979.6 981.3 976.0 977.1 983.0 979.0 987.3 983.3 983.0 992.1 105 Equipment 448.0 549.8 567.8 573.6 574.6 580.4 582.3 583.9 584.5 588.1 590.3 599.3 601.8 607.5 612.4 106 Intermediate 392.5 406.4 413.2 416.5 417.3 417.8 422.0 425.9 429.0 431.4 432.9 433.5 432.7 435.3 436.3 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. Bulletin, vol. 81 (January 1995), pp. 16-29. For a detailed description of the industrial For the ordering address, see the inside front cover. The latest historical revision of the production index, see "Industrial Production: 1989 Developments and Historical Reviindustrial production index and the capacity utilization rates was released in November sion," Federal Reserve Bulletin, vol. 76, (April 1990), pp. 187-204. 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve 2. Standard industrial classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1994 IItteemm 11999911 11999922 11999933 Jan. Feb. Mar. Apr. May June Julyr Aug/ Sept. Oct. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 949 1,095 1,199 1,312 1,252 1,313 1,380 1,357 1,316 1,337 1,354 1,425 1,398 2 One-family 754 911 986 1,071 1,054 1,068 1,069 1,083 1,046 1,034 1,046 1,052 1,047 3 Two-family or more 195 184 213 241 198 245 311 274 270 303 308 373 351 4 Started 1,014 1,200 1,288 1,271 1,328 1,519 1,471 1,491 1,358 1,439 1,463 1,509 1,440 5 One-family 840 1,030 1,126 1,125 1,121 1,271 1,211 1,200 1,163 1,219 1,176 1,234 1,153 6 Two-family or more 174 169 162 146 207 248 260 291 195 220 287 275 287 7 Under constmction at end of period 606 612 680 716 720 732 740 748 751 758 768 776 783 434 473 543 577 578 585 585 582 584 585 587 592 591 9 Two-or-more-family 173 140 137 139 142 147 155 166 167 173 181 184 192 10 Completed 1,091 1,158 1,193 1,216 1,334 1,273 1,354 1,446 1,329 1,282 1,342 1,406 1,373 838 964 1,040 1,075 1,185 1,115 1,192 1,257 1,151 1,160 1,145 1,164 1,160 12 Two-or-more-family 253 194 153 141 149 158 162 189 178 122 197 242 213 13 Mobile homes shipped 171 210 254 316 301 308 290 292 292 286 288 301 310 Merchant builder activity in one-family units 507 610 666 642 697 722 673 692 628r 630 667799 771177 772266 15 Number for sale at end of period 284 266 294 296 298 298 298 301 313r 317 321 326 330 Price of units sold (thousands 120.0 121.3 126.1 126.0 129.9 132.3 129.0 129.9 133.5r 124.4 133.3 129.3 130.5 17 Average 147.0 144.9 147.6 153.4 150.7 152.8 152.9 151.8 158.4r 144.4 154.0 154.7 151.6 EXISTING UNITS (one-family) 18 Number sold 3,219 3,520 3,800 4,250 3,840 4,070 4,120 4,110 3,960 3,970 3,930 3,890 3,910 Price of units sold (thousands of dollars)2 99.7 103.6 106.5 107.9 107.2 107.6 108.9 109.8 112.8 111.7 112.4 108.4 108.0 20 Average 127.4 130.8 133.1 134.6 133.3 134.4 135.5 136.6 140.9 139.3 140.6 135.2 133.7 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 403,644 435,355 466,365 488,469 485,894 496,042 497,035 504,356 506,144 506,827 504,751 513,350 518,099 10 293,536 316,115 341,101 363,852 361,895 371,681 374,091 378,235 379,345 377,694 375,473 381,313 380,450 73 157,837 187,870 210,455 229,775 233,322 236,767 238,049 241,162 240,694 239,422 236,773 238,353 235,204 ">4 135,699 128,245 130,646 134,077 128,573 134,914 136,042 137,073 138,651 138,272 138,700 142,960 145,246 75 Industrial buildings 22,281 20,720 19,533 19,682 19,972 19,905 21,221 21,338 20,960 20,967 22,054 22,643 22,819 ?6 Commercial buildings 48,482 41,523 42,627 43,261 42,065 46,602 47,481 47,912 48,410 48,702 48,245 50,004 50,086 77 20,797 21,494 23,626 22,998 22,258 23,918 23,824 23,956 24,439 23,764 23,287 24,612 25,084 28 Public utilities and other 44,139 44,508 44,860 48,136 44,278 44,489 43,516 43,867 44,842 44,839 45,114 45,701 47,257 79 Public 110,107 119,238 125,262 124,617 123,999 124,361 122,944 126,121 126,799 129,133 129,278 132,038 137,649 30 1,837 2,502 2,454 2,911 2,404 2,231 1,959 2,024 2,277 2,087 1,996 1,890 2,774 31 32,041 34,899 37,355 38,410 36,329 38,830 39,508 40,655 40,300 40,272 40,213 40,855 41,847 3?, Conservation and development 5,010 6,021 5,976 5,707 6,731 5,206 5,851 5,677 4,605 5,895 5,766 7,590 7,720 33 Other 71,219 75,816 79,477 77,589 78,535 78,094 75,626 77,765 79,617 80,879 81,303 81,703 85,308 1. Not at annual rates. SOURCES. Bureau of the Census estimates for all series except (1) mobile homes, which 2. Not seasonally adjusted. are private, domestic shipments as reported by the Manufactured Housing Institute and 3. Recent data on viue of new construction may not be strictly comparable with data seasonally adjusted by the Census Bureau, and (2) sales and prices of existing units, for previous periods because of changes by the Bureau of the Census in its estimating which are published by the National Association of Realtors. All back and current figures techniques. For a description of these changes, see Construction Reports (C-30-76-5), are available from the originating agency. Permit authorizations are those reported to the issued by the Census Bureau in July 1976. Census Bureau from 17,000 jurisdictions beginning in 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • February 1995 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier months earlier (annual rate) Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1993 1994r 1994 NNNooovvv... 11999933 11999944 111999999444111 NNoovv.. NNoovv.. Dec. Mar. June Sept. July Aug. Sept. Oct. Nov. CONSUMER PRICES2 (1982-84=100) 1 All items 2.7 2.7 3-3 2.5 0.5 3.6 3 3 .2 .1 149.7 2 Food 2.6 2.4 4.9 -1.1 2.8 5.1 .5 .4 .3 .0 .2 145.3 3 Energy items -.8 1.9 1.2 4.7 -4.9 10.9 1.8 1.4 -.7 -.7 .7 105.7 4 All items less food and energy 3.1 2.8 3.4 2.9 3.1 2.6 .2 .3 .2 .2 .2 158.2 5 Commodities 1.6 1.5 2.4 .6 4.2 .6 .1 -.1 .1 .0 .1 138.4 6 Services 3.7 3.5 3.7 4.2 2.4 3.6 .2 .4 .2 .2 .3 169.6 PRODUCER PRICES (1982=100) 7 Finished goods .4 1.3 -.3 3.6 -.3 2.6 .5 .6 -.5 -.5 .5 126.1 8 Consumer foods 2.6 .2 5.2 -.6 -5.5 3.9 ,4r .7 -.2 -.2 .2 126.8 9 Consumer energy -2.8 2.1 -15.6 15.4 -1.0 3.2 2.0' 1.8r -2.9 -1.2 2.1 77.8 10 Other consumer goods -.5 1.5 1.5 2.0 1.5 2.0 .R .4 .1 -.3 .2 139.7 11 Capital equipment 1.8 1.7 .3 4.3 3.0 2.4 .1 ,3r .1 -1.0 .1 134.8 Intermediate materials 12 Excluding foods and feeds 1.1 4.1 -.3 2.8 3.1 5.9 .6 ,6r .3 .4 1.1 121.3 13 Excluding energy 1.6 4.8 1.6 1.9 3.9 6.2 .5r ,4r .6 .7 .9 130.2 Crude materials 14 7.2 -9.1 18.4 -4.5 -20.6 -12.9 -2.5' -i.R .2 -2.0 1.5 100.2 15 Energy -11.2 -5.5 -22.1 10.1 21.0 -20.5 ,lr —A' -5.3 .0 -1.0 70.3 16 Other 11.6 15.4 15.4 22.7 -.8 18.8 2.0 1 .(f 1.3 .9 3.4 163.6 1. Not seasonally adjusted. SOURCE. US. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rentalequivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A51 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates Q3 Q4 Ql Q2 GROSS DOMESTIC PRODUCT 1 Total 5,724.8 6,020.2 6,343.3 6,359.2 6,478.1 6,574.7 6,689.9 By source 2 Personal consumption expenditures 3,902.4 4,136.9 4,378.2 4,401.2 4,469.6 4,535.0 4,586.4 3 Durable goods 456.6 492.7 538.0 541.9 562.8 576.2 580.3 4 Nondurable goods 1,257.8 1,295.5 1,339.2 1,340.2 1,355.2 1,368.9 1,381.4 5 Services 2,188.1 2,348.7 2,501.0 2,519.1 2,551.6 2,589.9 2,624.7 6 Gross private domestic investment 744.8 788.3 882.0 882.2 922.5 966.6 1,034.4 7 Fixed investment 746.6 785.2 866.7 868.3 913.5 942.5 967.0 8 Nonresidential 557.0 561.4 616.1 619.0 646.3 665.4 683.3 9 Structures 182.9 171.1 173.4 173.9 176.7 172.7 181.8 10 Producers' durable equipment 374.1 390.3 442.7 445.1 469.6 492.7 501.5 11 Residential structures 189.6 223.8 250.6 249.3 267.2 277.1 283.6 12 Change in business inventories -1.8 3.0 15.4 13.9 9.0 24.1 67.4 13 Nonfarm -1.2 -2.7 20.1 24.2 10.7 22.3 60.4 14 Net exports of goods and services -19.9 -30.3 -65.3 -77.0 -71.2 -86.7 -97.6 15 Exports 601.1 638.1 659.1 649.0 680.3 674.2 704.5 16 Imports 620.9 668.4 724.3 726.0 751.4 760.9 802.1 17 Government purchases of goods and services .. 1,097.4 1,125.3 1,148.4 1,152.9 1,157.2 1,159.8 1,166.7 18 Federal 445.8 449.0 443.6 442.7 439.8 437.8 435.1 19 State and local 651.6 676.3 704.7 710.2 717.4 722.0 731.5 By major type of product 20 Final sales, total 5.726.6 6,017.2 6,327.9 6,345.4 6.469.2 6,550.6 6,622.5 21 Goods 2.225.7 2,292.0 2,390.4 2,381.9 2.452.6 2.489.1 2,493.7 22 Durable 934.2 968.6 1.032.4 1,026.8 1,072.9 1.098.2 1,099.4 23 Nondurable 1,291.5 1,323.4 1,358.1 1,355.1 1.379.7 1,390.9 1.394.3 24 Services 3,028.9 3,227.2 3.405.5 3,429.3 3.459.3 3,503.8 3.555.4 25 Structures 472.0 498.1 532.0 534.1 557.2 557.7 573.4 26 Change in business inventories -1.8 3.0 15.4 13.9 9.0 24.1 67.4 27 Durable goods -16.9 -13.0 8.6 14.9 9.0 20.6 38.2 28 Nondurable goods 15.1 16.0 6.7 -1.1 .0 3.5 29.2 MEMO 4,867.6 4,979.3 5,134.5 5,139.4 5,218.0 5,261.1 5,314.1 29 Total GDP in 1987 dollars NATIONAL INCOME 4,608.2 4,829.5 5,131.4 5,138.5 5,262.0 5,308.7 5,430.7 30 Total 3,404.8 3,591.2 3,780.4 3.801.7 3,845.8 3,920.0 3.979.3 31 Compensation of employees 2,816.0 2,954.8 3,100.8 3,115.9 3,148.4 3,208.3 3,257.2 32 Wages and salaries 545.4 567.3 583.8 586.1 587.8 595.7 601.9 33 Government and government enterprises .. 2,270.6 2,387.5 2,517.0 2.529.8 2,560.7 2,612.6 2.655.4 34 Other 588.8 636.4 679.6 685.9 697.4 711.7 722.0 35 Supplement to wages and salaries 289.8 307.7 324.3 327.0 330.6 338.5 343.6 36 Employer contributions for social insurance 299.0 328.7 355.3 358.8 366.8 373.2 378.4 37 Other labor income 38 Proprietors' income1 376.2 418.7 441.6 420.3 462.9 471.0 471.3 39 Business and professional1 339.5 374.4 404.3 404.5 418.5 423.8 431.9 40 Farm1 36.7 44.4 37.3 15.8 44.4 47.2 39.3 41 Rental income of persons2 -10.5 -5.5 24.1 26.3 30.3 15.3 34.1 42 Corporate profits1 390.3 405.1 485.8 493.5 533.9 508.2 546.4 43 Profits before tax3 365.2 395.9 462.4 458.7 501.7 483.5 523.1 44 Inventory valuation adjustment 5.8 -6.4 -6.2 3.0 -6.5 -12.3 -14.1 45 Capital consumption adjustment 19.4 15.7 29.5 31.7 38.8 37.0 37.4 46 Net interest 447.4 420.0 399.5 396.7 389.1 394.2 399.7 1. With inventoiy valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics • February 1995 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 11999911 11999922 11999933 Q3 Q4 QL Q2 Q3 PERSONAL INCOME AND SAVING 1 Total personal income 4,8603 5,1543 5,375.1 5,395.9 5,484.6 5,555.8 5,659.9 5,734.5 2 Wage and salary disbursements 2,816.1 2,974.8 3,080.8 3,115.9 3,148.4 3,208.3 3,257.2 3,293.9 3 Commodity-producing industries 738.4 757.6 773.8 781.4 791.0 801.9 811.6 821.8 4 Manufacturing 557.4 578.3 588.4 594.9 601.7 609.4 612.8 618.3 5 Distributive industries 648.0 682.3 701.9 709.6 712.6 728.6 742.5 753.5 6 Service industries 884.2 967.6 1,021.4 1,038.8 1,057.0 1,082.0 1,101.2 1,114.3 7 Government and government enterprises 545.5 567.3 583.8 586.1 587.8 595.7 601.9 604.4 8 Other labor income 299.0 328.7 355.3 358.8 366.8 373.2 378.4 383.7 9 Proprietors' income1 376.2 418.7 441.6 420.3 462.9 471.0 471.3 467.0 10 Business and professional1 339.5 374.4 404.3 404.5 418.5 423.8 431.9 437.1 11 Farm1 36.7 44.4 37.3 15.8 44.4 47.2 39.3 29.8 12 Rental income of persons2 -10.5 -5.5 24.1 26.3 30.3 15.3 34.1 32.6 13 Dividends 150.5 161.0 181.3 182.8 184.1 185.7 191.7 196.9 14 Personal interest income 695.1 665.2 637.9 634.1 627.7 631.1 649.4 674.2 15 Transfer payments 770.1 860.2 915.4 921.6 931.0 947.4 957.6 969.0 16 Old-age survivors, disability, and health insurance benefits 382.3 414.0 444.4 446.8 452.1 463.8 470.7 476.5 17 LESS: Personal contributions for social insurance 236.2 248.7 261.3 263.8 266.6 276.3 279.9 282.9 18 EQUALS: Personal income 4,860.3 5,154.3 5,375.1 5,395.9 5,484.6 5,555.8 5,659.9 5,734.5 19 LESS: Personal tax and nontax payments 623.7 648.6 686.4 695.4 707.0 723.0 746.4 744.1 20 EQUALS: Disposable personal income 4,236.6 4,505.8 4,688.7 4,700.5 4,777.6 4,832.8 4,913.5 4,990.3 21 LESS: Personal outlays 4,025.0 4,257.8 4,496.2 4,518.2 4,588.2 4,657.3 4,712.4 4,787.0 22 EQUALS: Personal saving 211.6 247.9 192.6 182.3 189.4 175.5 201.1 203.3 MEMO Per capita (1987 dollars) 23 Gross domestic product 19,263.3 19,489.7 19,878.8 19,871.2 20,119.1 20,235.2 20,389.7 20.536.5 24 Personal consumption expenditures 12,898.9 13,110.4 13,390.8 13,425.1 13,518.9 13,639.8 13,650.9 13.716.6 25 Disposable personal income 14,003.0 14,279.0 14,341.0 14,338.0 14,451.0 14,535.0 14,625.0 14,697.0 26 Saving rate (percent) 5.0 5.5 4.1 3.9 4.0 3.6 4.1 4.1 GROSS SAVING 27 Gross saving 751.4 722.9 787.5 788.9 825.8 886.2 9233 922.6 28 Gross private saving 937.3 980.8 1,002.5 989.9 1,011.4 1,037.3 1,041.4 1,052.7 29 Personal saving 211.6 247.9 192.6 182.3 189.4 175.5 201.1 203.3 30 Undistributed corporate profits' 99.2 94.3 120.9 130.3 147.9 127.7 142.3 139.5 31 Corporate inventory valuation adjustment 5.8 -6.4 -6.2 3.0 -6.5 -12.3 -14.1 -19.6 Capital consumption allowances 32 Corporate 383.3 396.8 407.8 413.3 411.1 432.2 425.9 432.6 33 Noncorporate 243.1 261.8 261.2 264.1 263.0 301.8 272.1 277.3 34 Government surplus, or deficit (-), national income and product accounts -185.9 -257.8 -215.0 -201.0 -185.6 -151.1 -118.1 -130.1 35 Federal -202.9 -282.7 -241.4 -224.9 -220.1 -176.2 -145.1 -154.0 36 State and local 17.0 24.8 26.3 23.9 34.5 25.2 27.0 23.9 37 Gross investment 752.9 731.7 789.8 783.4 8093 850.2 8993 901.5 38 Gross private domestic investment 744.8 788.3 882.0 882.2 922.5 966.6 1,034.4 1,055.1 39 Net foreign investment 8.1 -56.6 -92.3 -98.8 -113.2 -116.4 -135.1 -153.6 40 Statistical discrepancy 1.5 8* 23 -5.5 —16.5 -36.1 -24.0 -21.1 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1993 1994 IItteemm ccrreeddiittss oorr ddeebbiittss 11999911 11999922 11999933 Q3 Q4 Ql Q2r Q3P 1 Balance on current account -6,952 -67,886 -103,896 -27,856 ' -30,587 -32,317 -37,906 -41,722 2 Merchandise trade balance2 -74,068 -96,097 -132,575 -36,488 -33,169 -36,962 -41,632 -44,633 3 Merchandise exports 416,913 440,361 456,866 111,736 119,679 118,018 122,683 127,817 4 Merchandise imports -490,981 -536,458 -589,441 -148,224 -152,848 -154,980 -164,315 -172,450 5 Military transactions, net -5,485 -3,034 -763 -87 -444 -338 177 376 6 Other service transactions, net 51,082 58,747 57,613 14,317 13,637 12,972 14,809 14,746 7 Investment income, net 14,833 4,540 3,946 2,015 -590 -811 -2,809 -3,948 8 U.S. government grants 23,959 -15,010 -14,620 -3,114 -5,591 -2,371 -3,590 -2,789 9 U.S. government pensions and other transfers -3,461 -3,735 -3,785 -986 -987 -968 -974 -1,550 10 Private remittances and other transfers -13,811 -13,297 -13,712 -3,513 -3,443 -3,839 -3,887 -3,924 11 Change in U.S. government assets other than official reserve assets, net (increase, —) 2,900 -1,652 -306 -192 -321 490 462 -118 12 Change in U.S. official reserve assets (increase, -) 5,763 3,901 -1,379 -545 -673 -59 3,537 -165 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -177 2,316 -537 -118 -113 -101 -108 -111 15 Reserve position in International Monetary Fund -367 -2,692 -44 -48 -80 -3 251 273 16 Foreign currencies 6,307 4,277 -797 -378 -480 45 3,394 -327 17 Change in U.S. private assets abroad (increase, -) -60,175 -63,759 -146,213 -34,915 -62,628 -48,667 -11,030 -20,111 18 Bank-reported claims3 4,763 22,314 32,238 7,335 -9,293 -1,236 15,248 -3,458 19 Nonbank-reported claims 11,097 45 -598 4,838 -303 1,941 -4,264 20 U.S. purchases of foreign securities, net -44,740 -45,114 -119,983 -40,777 -30,349 -24,605 -14,007 -7,146 21 U.S. direct investments abroad, net -31,295 -41,004 -57,870 -6,311 -22,683 -24,767 -8,007 -9,507 22 Change in foreign official assets in United States (increase, +) 17,199 40,858 71,681 19,259 23,962 11,530 8,925 17,496 23 U.S. Treasury securities 14,846 18,454 48,702 19,098 22,856 1,193 6,033 15,207 24 Other U.S. government obligations 1,301 3,949 4,062 1,345 970 50 2,355 2,003 25 Other U.S. government liabilities4 1,177 2,572 1,666 1,121 825 938 252 526 26 Other U.S. liabilities reported by U.S. banks3 -1,484 16,571 14,666 -2,489 -587 10,139 1,241 539 27 Other foreign official assets5 1,359 -688 2,585 184 -102 -790 -956 -779 28 Change in foreign private assets in United States (increase, +) 80,935 105,646 159,017 52,675 66,200 83,548 40,332 49,943 29 U.S. bank-reported liabilities3 3,994 15,461 18,452 27,618 7,370 35,200 25,539 16,826 30 U.S. nonbank-reported liabilities -3,115 13,573 14,282 1,169 4,733 5,867 3,662 31 Foreign private purchases of U.S. Treasury securities, net 18,826 36,857 24,849 3,474 7,996 9,260 -7,434 5,661 32 Foreign purchases of other U.S. securities, net 35,144 29,867 80,068 17,445 38,008 21,258 13,152 14,162 33 Foreign direct investments in United States, net 26,086 9,888 21,366 2,969 8,093 11,963 5,413 13,294 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -39,670 -17,108 21,096 -8,427 4,047 -14,525 -4,320 -5,323 36 Due to seasonal adjustment -6,643 103 5,810 639 -6,919 37 Before seasonal adjustment -39,670 -17,108 2i,096 -1,785 3,944 -20,335 -4,959 1,596 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) 5,763 3,901 -1,379 -545 -673 -59 33,,553377 --116655 39 Foreign official assets in United States, excluding line 25 (increase, +) 16,022 38,286 70,015 18,138 23,137 10,592 8,673 16,970 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -4,882 5,942 -3,847 -3,194 -229 -1,674 -4,149 3,592 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^t0. 4. Associated primarily with military sales contracts and other transactions arranged 2. Data are on an international accounts basis. The data differ from the Census basis with or through foreign official agencies. data, shown in table 3.11, for reasons of coverage and timing. Military exports are 5. Consists of investments in U.S. corporate stocks and in debt securities of private excluded lirom merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institution as well as some brokers SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of and dealers. Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • February 1995 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1994r IItteemm 11999911 11999922 11999933 Apr. May June July Aug. Sept. Oct.p 1 Goods and services, balance -28,472 -40,384 -75,725 -8,582 -9,219 -8,845 -10,953 -9,060 -9,354 -10,141 2 Merchandise -74,068 -96,097 -132,575 -13,339 -14,272 -14,020 -15,955 -14,101 -14,433 -15,018 3 Services 45,596 55,713 56,850 4,757 5,053 5,175 5,002 5,041 5,079 4,877 4 Goods and services, exports 580,127 616,924 641,677 55,977 56,258 58,333 56,297 60,292 60,063 59,699 5 Merchandise 416,913 440,361 456,866 40,378 40,276 42,028 40,128 44,121 43,596 43,306 6 Services 163,214 176,563 184,811 15,599 15,982 16,305 16,169 16,171 16,467 16,393 7 Goods and services, imports -608,599 -657,308 -717,402 -64,559 -65,477 -67,178 -67,250 -69,352 -69,417 -69,840 8 Merchandise -490,981 -536,458 -589,441 -53,717 -54,548 -56,048 -56,083 -58,222 -58,029 -58,324 9 Services -117,618 -120,850 -127,961 -10,842 -10,929 -11,130 -11,167 -11,130 -11,388 -11,516 MEMO 10 Balance on merchandise trade, Census basis -66,723 -84,501 — 115,568 -12,045 -12,885 -13,028 -14,845 -12,758 —13,388 -13,719 1. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1994 AAsssseett 11999911 11999922 11999933 May June July Aug. Sept. Oct. Nov.p 1 Total 77,719 71,323 73,442 74,420 75,732 75,443 75,740 76,532 78,172 74,000 2 Gold stock, including Exchange Stabilization Fund' 11,057 11,056 11,053 11,052 11,052 11,052 11,054 11,054 11,053 11,052 3 Special drawing rights2"3 11,240 8,503 9,039 9,522 9,731 9,696 9,837 9,971 10,088 10,017 4 Reserve position in International Monetary Fund2 9,488 11,759 11,818 11,841 12,184 12,183 12,161 12,067 12,339 12,037 5 Foreign currencies4 45,934 40,005 41,532 42,005 42,765 42,512 42,688 43,440 44,692 40,894 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international been used. U.S. SDR holdings and reserve positions in the IMF also have been valued on accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold this basis since July 1974. stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the 2. Special drawing rights (SDRs) are valued according to a technique adopted by the year indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 mil- International Monetary Fund (IMF) in July 1974. Values are based on a weighted average lion; 1979—$1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net of exchange rates for the currencies of member countries. From July 1974 through transactions in SDRs. December 1980, sixteen currencies were used; since January 1981, five currencies have 4. Valued at current market exchange rates. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1994 AAsssseett 11999911 11999922 11999933 May June July Aug. Sept. Oct. Nov.p 1 Deposits 968 205 386 174 604 181 188 342 223 230 Held in custody 2 U.S. Treasury securities2 281,107 314,481 379,394 402,170 411,580 423,715 427,574 429,819 439,854 444,339 3 Earmarked gold3 13,303 13,118 12,327 12,065 12,065 12,056 12,044 12,044 12,039 12,037 1. Excludes deposits and U.S. Treasury securities held for international and regional 3. Held in foreign and international accounts and valued at $42.22 per fine troy ounce; organizations. not included in the gold stock of the United States. 2. Marketable U.S. Treasury bills, notes, and bonds and nonmarketable U.S. Treasury securities, in each case measured at face (not market) value. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A55 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1994r IItteemm 11999922 11999933 Apr. May June July Aug. Sept. Oct.p 1 Total1 412,624 482,808 479,215 488,161 501,827 516,419 518,671 520,181 530,592 By type 2 Liabilities reported by banks in the United States 54,967 69,808 74,695 76,911 80,937 84,889 79,742 82,228 79,006 3 US. Treasury bills and certificates3 104,596 150,900 140,653 134,568 141,338 146,247 143,400 138,261 147,849 US. Treasury bonds and notes 4 Marketable 210,931 212,203 214,841 226,094 228,773 233,670 242,886 247,574 250,405 5 Nonmarketable4 4,532 5,652 5,799 5,837 5,875 5,913 5,952 5,990 6,031 6 U.S. securities other than U.S. Treasury securities5 37,598 44,245 43,227 44,751 44,904 45,700 46,691 46,128 47,301 By area 7 Europe1 189,230 206,921 210,417 213,549 221,957 227,469 226,170 225,246 222,812 8 Canada 13,700 15,285 13,901 14,505 15,996 18,656 18,597 19,287 18,402 9 Latin America and Caribbean 37,973 55,898 44,439 43,731 42,696 42,749 44,224 44,427 47,847 10 Asia 164,690 197,708 203,434 209,029 211,200 217,881 221,050 222,921 232,100 11 Africa 3,723 4,052 3,691 3,969 4,110 3,862 4,259 4,388 4,232 12 Other countries6 3,306 2,942 3,331 3,376 5,866 5,800 4,369 3,910 5,197 1. Includes the Bank for International Settlements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, and U.S. corporate stocks and bonds. negotiable time certificates of deposit, and borrowings under repurchase agreements. 6. Includes countries in Oceania and Eastern Europe. 3. Includes nonmarketable certificates of indebtedness (including those payable in SOURCE. Based on U.S. Department of the Treasury data and on data reported to the foreign currencies through 1974) and Treasury bills issued to official institutions of department by banks (including Federal Reserve Banks) and securities dealers in the foreign countries. United States, and on the 1989 benchmark survey of foreign portfolio investment in the 4. Excludes notes issued to foreign official nonreserve agencies. Includes bonds and United States. notes payable in foreign currencies; zero coupon bonds are included at current value. 3.16 LIABILITIES TO, AND CLAIMS ON, FOREIGNERS Reported by Banks in the United States1 Payable in Foreign Currencies Millions of dollars, end of period 1993 1994 IItteemm 11999900 11999911 11999922 Dec. Mar. June Sept, 1 Banks' liabilities 70,477 75,129 72,796 77,627 85,737 71,695 81,643 2 Banks' claims 66,796 73,195 62,799 59,151 72,728 55,698 58,373 3 Deposits 29,672 26,192 24,240 19,379 19,912 20,440 19,730 4 Other claims 37,124 47,003 38,559 39,772 52,816 35,258 38,643 5 Claims of banks' domestic customers2 6,309 3,398 4,432 3,058 3,655 4,182 4,987 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • February 1995 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1994 IItteemm 11999911 11999922 11999933 Apr. May Juner July Aug.' Sept. Oct.p BY HOLDER AFRO TYPE OF LIABILITY 1 Total, all foreigners 756,066 810,259 914,989 960,143 961,827 991,232 997,099r 993,154 993,423 1,005,764 2 Banks' own liabilities 575,374 606,444 621,118 666,673 664,770 685,265 697,114' 692,679 706,331 708,174 3 Demand deposits 20,321 21,828 21,575 23,646 27,878 24,566 23,595 23,000 23,541 24,546 4 Time deposits2 159,649 160,385 175,117 178,224 183,171 184,473 186,400r 185,246 177,020 181,104 5 Other3 66,305 93,237 110,117 123,797 122,681 117,368 126,973r 117,838 135,611 133,232 6 Own foreign offices4 329,099 330,994 314,309 341,006 331,040 358,858 360,146' 366,595 370,159 369,292 7 Banks' custodial liabilities5 180,692 203,815 293,871 293,470 297,057 305,967 299,985' 300,475 287,092 297,590 8 U.S. Treasury bills and certificates6 110,734 127,644 176,523 167,999 161,145 171,315 170,051' 170,579 164,321 174,271 9 Other negotiable and readily transferable instruments7 18,664 21,974 36,288 38,167 48,775 49,915 46,257' 46,352 38,914 37,878 10 Other 51,294 54,197 81,060 87,304 87,137 84,737 83,677' 83,544 83,857 85,441 11 Nonmonetary international and regional organizations8... 8,981 9,350 10,935 5,912 8,363 8,631 7,318 4,967 7,225 7,391 12 Banks' own liabilities 6,827 6,951 5,639 4,328 6,437 5,256 5,511 3,972 6,248 5,614 13 Demand deposits 43 46 15 26 35 31 29 36 28 83 14 Time deposits2 2,714 3,214 2,780 2,411 2,785 3,073 3,469 2,335 2,663 2,845 15 Other3 4,070 3,691 2,844 1,891 3,617 2,152 2,013 1,601 3,557 2,686 16 Banks' custodial liabilities5 2,154 2,399 5,296 1,584 1,926 3,375 1,807 995 977 1,777 17 U.S. Treasury bills and certificates6 1,730 1,908 4,275 1,358 857 2,825 1,082 836 767 1,572 18 Other negotiable and readily transferable instruments7 424 486 1,021 226 1,069 548 725 159 205 205 19 Other 0 5 0 0 0 2 0 0 5 0 20 Official institutions9 131,088 159,563 220,708 215,348 211,479 222,275 231,136' 223,142 220,489 226,855 21 Banks' own liabilities 34,411 51,202 64,231 64,682 64,817 67,691 73,967' 67,619 71,859 67,150 22 Demand deposits 2,626 1,302 1,601 1,504 1,435 2,029 1,472 1,232 1,691 2,028 23 Time deposits2 16,504 17,939 21,654 22,064 24,398 26,029 28,052' 26,953 26,543 23,551 24 Other3 15,281 31,961 40,976 41,114 38,984 39,633 44,443' 39,434 43,625 41,571 25 Banks' custodial liabilities5 96,677 108,361 156,477 150,666 146,662 154,584 157,169 155,523 148,630 159,705 26 U.S. Treasury bills and certificates6 92,692 104,596 150,900 140,653 134,568 141,338 146,247 143,400 138,261 147,849 27 Other negotiable and readily transferable instruments7 3,879 3,726 5,482 9,969 12,050 13,112 10,863 11,990 10,303 11,820 28 Other 106 39 95 44 44 134 59 133 66 36 29 Banks10 522,265 547,320 582,441 624,710 628,200 645,698 649,355' 652,539 646,787 652,542 30 Banks' own liabilities 459,335 476,117 474,695 514,901 510,790 530,866 536,263' 536,432 538,258 545,333 31 Unaffiliated foreign banks 130,236 145,123 160,386 173,895 179,750 172,008 176,117 169,837 168,099 176,041 32 Demand deposits 8,648 10,170 9,719 11,785 15,551 12,323 11,792 11,837 10,555 11,023 33 Time deposits2 82,857 90,296 105,192 107,662 109,084 108,317 106,889 107,112 101,095 106,996 34 Other3 38,731 44,657 45,475 54,448 55,115 51,368 57,436 50,888 56,449 58,022 35 Own foreign offices4 329,099 330,994 314,309 341,006 331,040 358,858 360,146' 366,595 370,159 369,292 36 Banks' custodial liabilities5 62,930 71,203 107,746 109,809 117,410 114,832 113,092' 116,107 108,529 107,209 37 U.S. Treasury bills and certificates6 7,471 11,087 10,707 10,081 11,407 10,834 10,135 12,249 10,951 10,771 38 Other negotiable and readily transferable instruments7 5,694 7,555 17,020 15,684 22,081 22,347 21,446 22,049 15,388 13,248 39 Other 49,765 52,561 80,019 84,044 83,922 81,651 81,511' 81,809 82,190 83,190 40 Other foreigners 93,732 94,026 100,905 114,173 113,785 114,628 109,290 112,506 118,922 118,976 41 Banks' own liabilities 74,801 72,174 76,553 82,762 82,726 81,452 81,373 84,656 89,966 90,077 42 Demand deposits 9,004 10,310 10,240 10,331 10,857 10,183 10,302 9,895 11,267 11,412 43 Time deposits2 57,574 48,936 45,491 46,087 46,904 47,054 47,990' 48,846 46,719 47,712 44 Other3 8,223 12,928 20,822 26,344 24,965 24,215 23,081' 25,915 31,980 30,953 45 Banks' custodial liabilities5 18,931 21,852 24,352 31,411 31,059 33,176 27,917 27,850 28,956 28,899 46 U.S. Treasury bills and certificates6 8,841 10,053 10,641 15,907 14,313 16,318 12,587' 14,094 14,342 14,079 47 Other negotiable and readily transferable instruments7 8,667 10,207 12,765 12,288 13,575 13,908 13,223' 12,154 13,018 12,605 48 Other 1,423 1,592 946 3,216 3,171 2,950 2,107 1,602 1,596 2,215 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 7,456 9,111 17,567 17,961 26,385 27,075 25,589 25,338 19,160 17,032 1. Reporting banks include all types of depository institutions, as well as some brokers 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to and dealers. official institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other 7. Principally bankers acceptances, commercial paper, and negotiable time certificates negotiable and readily transferable instruments." of deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the Inter- 4. For U.S. banks, includes amounts owed to own foreign branches and foreign American Development Bank, and the Asian Development Bank. Excludes "holdings of subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank dollars" of the International Monetary Fund. regulatory agencies. For agencies, branches, and majority-owned subsidiaries of foreign 9. Foreign central banks, foreign central governments, and the Bank for International banks, consists principally of amounts owed to the head office or parent foreign bank, and Settlements. to foreign branches, agencies, or wholly owned subsidiaries of die head office or parent 10. Excludes central banks, which are included in "Official institutions." foreign bank. 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A57 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1994 IItteemm 11999911 11999922 11999933 Apr. May June July Aug. Sept. Oct.p AREA 1 Total, all foreigners 756,066 810,259 914,989 960,143 961,827 991,232' 997,099r 993,154' 993,423 1,005,764 2 Foreign countries 747,085 800,909 904,054 954,231 953,464 982,601r 989,781' 988,187r 986,198 998,373 3 249,097 307,670 376,989 405,686 404,477 412,205R 422,604R 419,884' 406,821 413,466 4 Austria 1,193 1,611 1,917 2,719 3,309 3,578 3,364 3,349 3,014 3,725 5 Belgium and Luxembourg 13,337 20,567 28,627 32,049 32,612 25,306 25,145 27,159' 27,593 23,472 6 Denmark 937 3,060 4,517 3,342 3,207 3,473 2,877 2,634 2,128 2,374 7 Finland 1,341 1,299 1,872 1,932 1,849 2,649 2,504 1,747' 2,319 2,601 8 France 31,808 41,411 39,741 43,147 41,982 43,246R 41,410 41,911 43,143 44,145 9 Germany 8,619 18,630 26,613 32,704 27,583 33,114R 30,838R 31,045' 31,888 32,995 10 765 913 1,519 1,160 1,453 1,377 1,153 1,199 1,227 1,751 11 13,541 10,041 11,559 11,915 13,015 12,771 11,537 11,725' 10,781 10,701 1? Netherlands 7,161 7,365 16,096 16,347 18,514 18,709R 18,458 17,213' 18,755 18,035 N Norway 1,866 3,314 2,966 2,537 3,278 4,018 3,731 3,195 2,861 3,400 14 Portugal 2,184 2,465 3,366 4,061 2,853 2,920 2,865 2,867 3,023 2,859 IS 241 577 2,511 3,041 4,016 4,497 4,593 3,794 2,899 2,337 16 Spain 11,391 9,793 20,493 18,321 17,482 15,839R 17,142R 15,454' 14,197 16,298 17 Sweden 2,222 2,953 2,572 2,532 3,443 4,043 5,710 4,152 4,654 3,472 18 37,238 39,440 41,555 40,998 40,174 38,075 41,378 43,486' 41,300 42,084 19 Turkey 1,598 2,666 3,227 2,972 2,759 3,250 3,515 3,238 3,013 3,133 ?N United Kingdom 100,292 111,805 133,936 153,906 158,962 163,339R 171,248 174,015' 160,243 172,306 ?1 Yugoslavia" 622 504 570 407 424 434 230 227 224 220 22 Other Europe and other former U.S.S.R. 12,741 29,256 33,332 31,596 27,562 31,567R 34,906 31,474 33,659 27,758 23 21,605 22,420 20,227 22,552 25,948 25,480R 26,625 26,346 24,660 23,115 n Latin America and Caribbean 345,529 317,228 351,356 364,556 358,829 381,060R 375,495R 377,876' 384,770 385,711 ?S Argentina 7,753 9,477 14,477 13,270 13,474 13,750 14,592 14,807 13,783 15,571 7761 Bahamas 10 3 0 , , 1 6 7 2 8 2 82 7 , , 2 0 8 7 4 9 72 7 , , 9 8 6 3 4 0 8 7 0 , , 6 8 7 4 1 3 79 8 , , 2 1 6 8 5 2 85 8 , ,9 8 7 1 5 7 8 1 7 0 , ,1 2 0 64 3 R 83 8 , , 2 4 6 2 0 2 ' ' 8 1 6 0 , , 0 3 1 3 1 4 8 8 8 , , 9 0 3 8 6 6 78 5,704 5,584 5,301 4,880 5,572 5,708 6,259 5,695 5,669 6,183 79 163,620 153,033 184,608 195,456 188,943 206,263R 198,280' 204,702' 208,435 204,571 30 Chile 3,283 3,035 3,183 3,832 3,286 3,523 3,353 2,988 3,407 3,076 31 4,661 4,580 3,171 4,003 3,865 3,929 3,773 3,726 4,027 4,457 3? Cuba 2 3 33 9 11 11 12 13 13 126 33 Ecuador 1,232 993 880 846 842 812 819 847 823 705 34 1,594 1,377 1,207 1,157 1,137 1,143 1,206 1,141 1,101 1,068 35 Jamaica 231 371 410 495 526 475 518 531 565 588 36 Mexico 19,957 19,454 28,018 22,362 21,900 21,286 20,179 20,817' 19,932 21,227 37 Netherlands Antilles 5,592 5,205 4,195 5,036 7,021 4,885 4,301 5,058 4,268 4,143 38 Panama 4,695 4,177 3,582 3,521 3,811 3,861 4,087 3,843 4,081 4,287 39 1,249 1,080 926 898 912 930 916 1,027 1,079 1,021 40 Uruguay 2,096 1,955 1,611 1,536 1,561 1,597 1,420 1,336 1,399 1,471 41 Venezuela 13,181 11,387 12,786 12,312 12,013 11,655 12,004R 13,157' 13,297 13,676 42 Other 6,879 6,154 6,174 6,429 6,508 6,440 6,409 6,506 6,546 6,519 43 120,462 143,540 144,656 149,188 152,135 148,761R 151,317' 152,596' 158,392 163,425 China 44 People's Republic of China 2,626 3,202 4,011 6,058 5,358 6,158R 5,018' 4,394 5,062 5,725 45 Republic of China (Taiwan) 11,491 8,408 10,633 8,698 9,820 8,375 8,811 8,737 8,863 9,383 46 Hong Kong 14,269 18,499 17,233 19,093 21,665 i9,ur 18,777 18,722 18,881 18,320 47 2,418 1,399 1,114 1,450 1,521 2,136 1,695 1,777' 2,187 2,376 48 Indonesia 1,463 1,480 1,986 1,802 1,537 2,002 1,676' 1,835' 1,828 1,734 49 2,015 3.773 4,435 4.134 3,460 3,762 3,822 3,436 3,204 6,615 50 47,069 58,435 61,483 62,295 63,051 64,124 65,690 65,778' 68,244 66,140 51 Korea (South) 2,587 3,337 4,913 4,646 4,523 4,581 5,311 4,873 4,622 4,739 5? Philippines 2,449 2,275 2,035 2,619 2,590 3,150 3,396 3,214 3,135 3,158 53 Thailand 2,252 5,582 6,137 5,550 5,788 4,851 5,222 6,364 6,503 5,682 54 Middle Eastern oil-exporting countries 15,752 21,437 15,824 13,655 14,895 14,374 14,935' 15,928 17,138 17,233 55 Other 16,071 15,713 14,852 19,188 17,927 16,137 16,964' 17,538 18,725 22,320 56 4,825 5,884 6,634 5,813 6,166 6,411 6,153 6,360' 6,278 6,375 57 Egypt 1,621 2,472 2,208 1,688 1,984 1,999 1,706 1,914 2,014 1,996 58 Morocco 79 76 99 76 93 78 80 82 72 66 59 South Africa 228 190 451 331 230 290 289 417 197 245 60 Zaire 31 19 12 11 8 7 8 8 9 9 61 Oil-exporting countries1 1,082 1,346 1,303 983 1,057 1,204 1,291 1,156' 1,186 1,180 62 Other 1,784 1,781 2,561 2,724 2,794 2,833 2,779 2,783' 2,800 2,879 63 5,567 4,167 4,192 6,436 5,909 8,684 7,587 5,125 5,277 6,281 64 Australia 4,464 3,043 3,308 2,991 2,796 5,804 6,288 3,935 3,966 5,114 65 Other 1,103 1,124 884 3,445 3,113 2,880 1,299 1,190 1,311 1,167 66 Nonmonetary international and regional organizations.. . . 8,981 9,350 10,935 5,912 8,363 . 8,631' 7,318 4,967 7,225 7,391 67 International15 6,485 7,434 6,850 4,249 5,634 6,647R 5,446 3,642 5,296 5,647 68 Latin American regional16 1,181 1,415 3,218 393 909 847 612 418 1,058 950 69 Other regional17 1,315 501 867 1,270 1,820 1,137 1,260 907 871 794 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 14. Comprises Algeria, Gabon, Libya, and Nigeria. 12. Includes the Bank for International Settlements. Since December 1992, has 15. Principally the International Bank for Reconstruction and Development. Excludes included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and "holdings of dollars" of the International Monetary Fund. Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United 17. Asian, African, Middle Eastern, and European regional organizations, except the Arab Emirates (Trucial States). Bank for International Settlements, which is included in "Other Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • February 1995 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1994 AArreeaa oorr ccoouunnttrryy 11999911 11999922 11999933 Apr. May June July Aug/ Sept/ Oct." 1 Total, all foreigners 514,339 499,437 483,216 476,239 472,522 476,500' 469,277' 478,018 474,396 478,696 2 Foreign countries 508,056 494,355 480,811 475,055 470,796 474,079' 467,881' 476,059 471,132 476,691 3 Europe 114,310 123,377 121,044 124,723 123,505 119,709r m.no' 124,262 119,778 131,550 4 Austria 327 331 413 420 486 416 470 442 282 440 5 Belgium and Luxembourg 6,158 6,404 6,535 6,774 6,391 7,115 6,917 6,543 7,250 6,323 6 Denmark 686 707 382 8% 1,332 539 622 464 521 880 7 Finland 1,907 1,418 598 647 669 699 739 511 603 595 8 France 15,112 14,723 11,490 11,398 13,092 13,763 13,278r 16,001 14,818 16,283 9 Germany 3,371 4,222 7,683 9,374 8,303 7,224r 7,887r 9,986 8,650 8,496 10 Greece 553 717 679 720 682 661 583 657 613 520 11 Italy 8,242 9,047 8,876 6,370 6,749 6,128 6,074 5,538 5,338 6,692 12 Netherlands 2,546 2,468 3,063 2,575 3,272 3,003 3,006 2,948 2,854 3,358 13 Norway 669 355 396 598 605 620 751 826 650 905 14 Portugal 344 325 720 846 835 876 1,035 1,040 1,182 1,056 15 Russia 1,970 3,147 2,295 1,862 1,642 1,605 1,541 1,378 1,272 1,220 16 Spain 1,881 2,755 2,763 1,859 2,828 2,502 1,905 2,664 2,211 2,731 17 Sweden 2,335 4,923 4,100 3,313 3,420 3,411 3,632 4,194 3,933 3,186 18 Switzerland 4,540 4,717 6,567 5,578 6,487 6,674 9,028 6,938 5,854 7,670 19 Turkey 1,063 962 1,287 1,546 1,324 1,210 1,208 1,152 1,024 1,142 20 United Kingdom 60,395 63,430 60,939 67,347 63,110 61,166 62,478r 61,240 60,485 68,211 21 Yugoslavia^. 825 569 536 364 361 340 274 273 258 266 22 Other Europe and other former U.S.S.R.3 1,386 2,157 1,722 2,236 1,917 1,757 1,682 1,467 1,980 1,576 23 Canada 15,113 13,845 18,410 17,920 17,114 20,538r 19,919r 19,688 19,236 16,404 24 Latin America and Caribbean 246,137 218,078 224,032 219,983 219,608 221,929r 215,931r 223,151 220,031 221,199 25 Argentina 5,869 4,958 4,425 5,161 5,178 5,506 5,811 5,876 5,586 5,588 26 Bahamas 87,138 60,835 65,045 66,239 64,974 64,098 67,951 63,273 63,016 65,146 27 Bermuda 2,270 5,935 8,032 8,837 6,591 6,276 5,783r 7,328 5,430 5,186 28 Brazil 11,894 10,773 11,803 11,457 11,995 11,356 10,618 10,051 10,278 10,138 29 British West Indies 107,846 101,507 97,993 91,700 94,150 98,045 89,474 100,454 100,632 99,297 30 Chile 2,805 3,397 3,614 3,455 3,353 3,419 3,327 3,410 3,391 3,520 31 Colombia 2,425 2,750 3,179 3,263 3,229 3,366 3,326 3,414 3,459 3,670 32 Cuba 0 0 0 0 0 0 8 0 0 12 33 Ecuador 1,053 884 673 679 677 707 683 604 624 628 34 Guatemala 228 262 286 273 291 312 308 320 310 337 35 Jamaica 158 162 195 191 198 194 186 210 204 255 36 Mexico 16,567 14,991 15,835 16,300 16,456 16,768 16,684r 16,459 16,223 16,824 37 Netherlands Antilles 1,207 1,379 2,367 2,769 2,871 2,366 2,118 2,139 1,295 1,158 38 Panama 1,560 4,654 2,913 2,539 2,341 2,219 2,357 2,386 2,365 2,325 39 Peru 739 730 651 807 901 908 926 924 943 857 40 Uruguay 599 936 951 500 540 608 748 706 711 800 41 Venezuela 2,516 2,525 2,904 2,526 2,462 2,434 2,245 2,150 2,060 1,936 42 Other 1,263 1,400 3,166 3,287 3,401 3,347r 3,378r 3,447 3,504 3,522 43 125,262 131,789 110,697 105,412 103,874 104,857r 102,360" 102,341 105,485 101,042 China 44 People's Republic of China 747 906 2,299 843 802 784 941 754 1,167 812 45 Republic of China (Taiwan) 2,087 2,046 2,628 1,817 2,024 1,948 1,786 1,807 1,256 1,467 46 Hong Kong 9,617 9,642 10,864 9,903 8,996 9,783 10,031 9,877 12,988 10,308 47 India 441 529 589 684 738 784 791 829 950 951 48 Indonesia 952 1,189 1,522 1,545 1,378 1,319 1,369 1,363 1,343 1,326 49 Israel 860 820 826 676 711 67 lr 638r 675 663 860 50 Japan 84,807 79,172 59,576 54,931 53,120 55,535r 53,313r 52,629 52,872 50,032 51 Korea (South) 6,048 6,179 7,569 7,457 7,410 7,984 8,112 8,553 8,636 8,869 52 Philippines 1,910 2,145 1,408 925 914 654 514 533 562 639 S3 Thailand 1,713 1,867 2,154 2,744 2,944 2,979r 2,839r 2,784 2,685 2,756 54 Middle Eastern oil-exporting countries4 8,284 18,540 14,398 16,387 18,323 16,565 16,342 16,080 15,293 15,424 55 Other 7,796 8,754 6,864 7,500 6,514 5,85 lr 5,684r 6,457 7,070 7,598 56 Africa 4,928 4,279 3,819 3,680 3,684 3,788 3,456 3,659 3,473 3,147 57 Egypt 294 186 196 206 219 281 234 229 250 237 58 Morocco 575 441 444 472 470 518 479 485 490 468 59 South Africa 1,235 1,041 633 557 575 556 492 656 569 480 60 Zaire 4 4 4 5 5 4 3 3 3 3 61 Oil-exporting countries5 1,298 1,002 1,128 1,207 1,211 1,239 1,194 1,189 1,103 955 62 Other 1,522 1,605 1,414 1,233 1,204 1,190 1,054 1,097 1,058 1,004 63 Other 2,306 2,987 2,809 3,337 3,011 3,258 3,105 2,958 3,129 3,349 64 Australia 1,665 2,243 2,072 1,859 1,369 1,489 1,587 1,390 1,809 2,158 65 Other 641 744 737 1,478 1,642 1,769 1,518 1,568 1,320 1,191 66 Nonmonetary international and regional organizations6... 6,283 5,082 2,405 1,184 1,726 2,421 1,396 1,959 3,264 2,005 1. Reporting banks include all types of depository institutions, as well as some brokers 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab and dealers. Emirates (Trucial States). 2. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Includes the Bank for International Settlements. Since December 1992, has included 6. Excludes the Bank for International Settlements, which is included in "Other all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1994 TTyyppee ooff ccllaaiimm 11999911 11999922 11999933 Apr. May Juner Julyr Aug.r Sept/ Oct.p 1 Total 579,683 559,495 523,626 529,695 527,884 2 Banks' claims 514,339 499,437 483,216 476,239 472,522 476,500 469,277 478,018 474,396 478,696 3 Foreign public borrowers 37,126 31,367 28,814 25,116 22,552 21,653 21,929 22,412 24,439 22,144 4 Own foreign offices2 318,800 303,991 286,882 280,435 284,532 289,976 283,858 287,013 283,250 287,012 5 Unaffiliated foreign banks 116,602 109,342 98,030 96,903 98,186 101,897 100,889 102,026 100,261 106,540 6 Deposits 69,018 61,550 46,887 47,971 50,323 50,970 50,765 49,593 50,527 52,622 7 Other 47,584 47,792 51,143 48,932 47,863 50,927 50,124 52,433 49,734 53,918 8 All other foreigners 41,811 54,737 69,490 73,785 67,252 62,974 62,601 66,567 66,446 63,000 9 Claims of banks' domestic customers3 65,344 60,058 40,410 53,195 53,488 10 Deposits 15,280 15,452 9,619 13,601 24,441 11 Negotiable and readily transferable instruments4 37,125 31,474 17,155 25,995 16,075 12 Outstanding collections and other claims 12,939 13,132 13,636 13,599 12,972 MEMO 13 Customer liability on acceptances 8,974 8,655 7,871 7,506 7,620 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 43,024 36,213 22,854 21,901 20,603 20,098 22,210 21,771 22,284 n.a. 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data and to foreign branches, agencies, or wholly owned subsidiaries of the head office or are for quarter ending with month indicated. parent foreign bank. Reporting banks include all types of depository institution, as well as some brokers and 3. Assets held by reporting banks in the accounts of their domestic customers. dealers. 4. Principally negotiable time certificates of deposit and bankers acceptances. 2. For U.S. banks, includes amounts due from own foreign branches and foreign 5. Includes demand and time deposits and negotiable and nonnegotiable certificates of subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank deposit denominated in U.S. dollars issued by banks abroad. For description of changes in regulatory agencies. For agencies, branches, and majority-owned subsidiaries of foreign data reported by nonbanks, see Federal Reserve Bulletin, vol. 65 (July 1979), p. 550. banks, consists principally of amounts due from the head office or parent foreign bank. 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1993 1994 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999900 11999911 11999922 Dec. Mar. June' Sept.p 1 Total 206,903 195,302 195,119 194,794 193,255 185,638 189,942 By borrower 2 Maturity of one year or less 165,985 162,573 163,325 166,244 166,385 160,045 164,356 3 Foreign public borrowers 19,305 21,050 17,813 17,458 15,896 12,603 16,683 4 All other foreigners 146,680 141,523 145,512 148,786 150,489 147,442 147,673 5 Maturity of more than one year 40,918 32,729 31,794 28,550 26,870 25,593 25,586 6 Foreign public borrowers 22,269 15,859 13,266 10,828 9,585 8,641 7,399 7 All other foreigners 18,649 16,870 18,528 17,722 17,285 16,952 18,187 By area Maturity of one year or less X Europe 49,184 51,835 53,300 56,300 58,786 50,955 57,624 9 Canada 5,450 6,444 6,091 7,542 7,291 8,255 7,197 10 Latin America and Caribbean 49,782 43,597 50,376 56,624 58,717 56,621 56,655 11 Asia 53,258 51,059 45,709 40,287 36,007 37,784 36,082 12 Africa 3,040 2,549 1,784 1,783 1,603 1,797 1,496 13 All other3 5,272 7,089 6,065 3,708 3,981 4,633 5,302 Maturity of more than one year 14 Europe 3,859 3,878 5,367 4,327 3,822 3,316 3,714 15 Canada 3,290 3,595 3,287 2,553 2,548 2,496 2,622 16 Latin America and Caribbean 25,774 18,277 15,312 13,877 13,341 12,691 12,158 17 5,165 4,459 5,038 5,412 4,709 4,805 4,794 18 Africa 2,374 2,335 2,380 1,934 2,001 1,850 1,836 19 All other3 456 185 410 447 449 435 462 1. Reporting banks include all kinds of depository institutions besides commercial 2. Maturity is time remaining to maturity, banks, as well as some brokers and dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • February 1995 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1992 1993 1994 AArreeaa oorr ccoouunnttrryy 11999900 11999911 Sept. Dec. Mar. June Sept. Dec. Mar. June Sept.p 1 Total 320.1 343.6 344.5 346.5 361.0 377.0 3883 403.7 488.9r 4953r 502.8 2 G-10 countries and Switzerland 132.2 137.6 136.0 132.9 142.4 150.0 153.3 161.0 178.0 165.6r 183.8 3 Belgium and Luxembourg .0 6.0 6.2 5.6 6.1 7.0 7.1 7.4 7.9 8.6 9.5 4 France 10.4 11.0 15.3 15.3 13.5 14.0 12.3 11.7 16.4 18.8r 19.3 5 Germany 10.6 8.3 10.9 9.3 9.9 10.8 12.4 12.6 28.7 24.3 24.3 6 Italy 5.0 5.6 6.4 6.5 6.7 7.9 8.7 7.6 15.5 14.0 11.6 7 Netherlands .0 4.7 3.7 2.8 3.6 3.7 3.7 4.7 4.1 3.6 3.4 8 Sweden 2.2 1.9 2.2 2.3 3.0 2.5 2.5 2.5 2.8 2.9 2.6 9 Switzerland 4.4 3.4 5.2 4.8 5.3 4.7 5.6 5.9 6.3 6.5 6.2 10 United Kingdom 60.9 68.5 61.0 60.8 65.7 73.5 74.7 84.5 69.8 51.1' 81.0 11 Canada 5.9 5.8 6.3 6.3 8.2 8.0 9.7 6.6 7.6 9.5r 9.8 12 Japan 24.0 22.6 18.9 19.3 20.4 17.9 16.8 17.4 18.8 19.6r 16.0 13 Other industrialized countries 22.9 22.8 25.0 24.0 25.4 27.2 26.0 24.6 41.2 43.2r 41.5 14 Austria 1.4 .6 .7 1.2 1.2 1.3 .6 .4 1.0 1.0 1.0 15 Denmark 1.1 .9 1.5 .9 .8 1.0 1.1 1.0 1.1 1.1 .8 16 Finland .7 .7 1.0 .7 .7 .9 .6 .4 1.0 ,8r .8 17 Greece 2.7 2.6 3.0 3.0 2.7 3.1 3.2 3.2 3.8 4.6 4.3 18 Norway 1.6 1.4 1.6 1.2 1.8 1.8 2.1 1.7 1.6 1.6 1.6 19 Portugal .6 .6 .5 .4 .7 .9 1.0 .8 1.2 1.1 1.0 20 Spain 8.3 8.3 9.7 8.9 9.5 10.5 9.3 8.9 12.3 13.2 13.0 21 Turkey 1.7 1.4 1.5 1.3 1.4 2.1 2.1 2.1 2.4 2.1 1.8 22 Other Western Europe 1.2 1.8 1.5 1.7 2.0 1.7 2.2 2.6 3.0 2.8 1.0 23 South Africa 1.8 1.9 1.7 1.7 1.6 1.3 1.2 1.1 1.2 1.2 1.2 24 Australia 1.8 2.7 2.3 2.9 2.9 2.5 2.8 2.3 12.7 13.7 15.0 25 OPEC2 12.8 14.5 15.9 16.1 16.6 15.7 14.8 16.7 22.4r 21.5 21.5 26 Ecuador 1.0 .7 .7 .6 .6 .6 .5 .5 .5 .5 .4 27 Venezuela 5.0 5.4 5.4 5.2 5.1 5.5 5.4 5.1 4.7 4.4 3.9 28 Indonesia 2.7 2.7 3.0 3.0 3.1 3.1 2.8 3.2 3.4r 3.2 3.2 29 Middle East countries 2.5 4.2 5.4 6.2 6.6 5.4 4.9 6.7 12.8 12.4 13.0 30 African countries 1.7 1.5 1.4 1.1 1.1 1.1 1.1 1.2 1.0 1.1 1.0 31 Non-OPEC developing countries 65.4 63.9 72.8 72.1 74.4 76.6 77.0 82.5 93.4r 93.9r 91.9 Latin America 32 Argentina 5.0 4.8 6.2 6.6 7.0 6.6 7.2 7.7 8.7 9.8 10.5 33 Brazil 14.4 9.6 10.8 10.8 11.6 12.3 11.7 12.0 12.5 11.8 9.1 34 Chile 3.5 3.6 4.2 4.4 4.6 4.6 4.7 4.7 5.1 5.1 5.4 35 Colombia 1.8 1.7 1.7 1.8 1.9 1.9 2.0 2.1 2.2 2.4 2.4 36 Mexico 13.0 15.5 17.1 16.0 16.8 16.8 17.5 17.7 18.7 18.3 19.5 37 Peru .5 .4 .5 .5 .4 .4 .3 .4 .5 .6 .6 38 Other 2.3 2.1 2.5 2.6 2.6 2.7 2.6 3.0 2.6 2.7 2.7 Asia China 39 Peoples Republic of China .2 .3 .3 .7 .6 1.6 .5 2.0 .8 .7 1.0 40 Republic of China (Taiwan) 3.5 4.1 5.0 5.2 5.3 5.9 6.4 7.3 7.5 7.1 6.9 41 India 3.3 3.0 3.6 3.2 3.1 3.1 2.9 3.2 3.6r 3.7 3.9 42 Israel .5 .5 .4 .4 .5 .4 .4 .5 .4 .4 .4 43 Korea (South) 6.2 6.8 7.4 6.6 6.5 6.9 6.5 6.7 13.9 14. lr 13.9 44 Malaysia 1.9 2.3 3.0 3.1 3.4 3.7 4.1 4.4 5.2 5.2 3.9 45 Philippines 3.8 3.7 3.6 3.6 3.4 2.9 2.6 3.1 3.4 3.2 2.9 46 Thailand 1.5 1.7 2.2 2.2 2.2 2.4 2.8 3.1 2.9 3.3 3.4 47 Other Asia 1.7 2.0 2.7 2.7 2.7 2.6 3.0 2.9 3.1 3.5 3.6 Africa 48 Egypt .4 .4 .3 .2 .2 .2 .2 .4 .4 .5 .3 49 Morocco .8 .7 .6 .6 .5 .6 .6 .6 .7 .7 .7 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.0 .7 .9 1.0 .8 .9 .8 .8 1.0 .9 .9 52 Eastern Europe 2.3 2.4 3.1 3.1 2.9 3.2 3.0 3.0 3.3 3.<f 3.4 53 Russia4 .2 .9 1.8 1.9 1.7 1.9 1.7 1.6 1.5 1.2 1.1 54 Yugoslavia5 1.2 .9 .7 .6 .6 .6 .6 .6 .5 .5 .5 55 Other .9 .7 .7 .6 .7 .7 .7 .9 1.4 1.4r 1.9 56 Oifshore banking centers 44.7 54.2 54.5 58.3 60.2 58.0 67.9 72.5 78.3r 16.6' 77.9 57 Bahamas 2.9 11.9 8.9 6.9 9.7 7.1 12.7 12.6 15.4 13.5 16.4 58 Bermuda 4.4 2.3 3.8 6.2 4.1 4.5 5.5 8.1 8.4 6.1 5.3 59 Cayman Islands and other British West Indies 11.7 15.8 16.9 21.8 17.6 15.6 15.1 16.9 17.2 20. lr 20.5 60 Netherlands Antilles 7.9 1.2 .7 1.1 1.6 2.5 2.8 2.3 2.7 2.4 1.7 61 Panama6 1.4 1.4 2.0 1.9 2.0 2.1 2.1 2.4 2.0 1.9 1.8 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 9.7 14.4 15.2 13.8 16.7 16.9 19.1 18.7 19.7' 21.8 20.3 64 Singapore 6.6 7.1 6.8 6.5 8.4 9.3 10.4 11.2 12.7 10.6 11.7 65 Other' .0 .0 .0 .0 .0 .0 .0 .1 .0 .0 .1 66 Miscellaneous and unallocated8 39.9 48.0 36.8 39.7 38.8 46.2 46.3 43.3 72.0r 91.0r 82.5 1. The banking offices covered by these data include U.S. offices and foreign branches 3. Excludes Liberia. Beginning March 1994 includes Namibia. of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not 4. As of December 1992, excludes other republics of the former Soviet Union. covered include U.S. agencies and branches of foreign banks. Beginning March 1994, the 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. data include large foreign subsidiaries of U.S. banks. The data also include other types of 6. Includes Canal Zone. U.S. depository institutions as well as some types of brokers and dealers. To eliminate 7. Foreign branch claims only. duplication, the data are adjusted to exclude the claims on foreign branches held by a U.S. 8. Includes New Zealand, Liberia, and international and regional office or another foreign branch of the same banking institution. organizations. 2. Organization of Petroleum Exporting Countries, shown individually; other members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates); and Bahrain and Oman (not formally members of OPEC). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A61 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1993 1994 Type of liability, and area or country 11999900 11999911 11999922 Mar. June Sept. Dec. Mar. June 1 Total 46,043 44,708 45,260 46,170 46,514 48,524 49,136 51,740 55,265 2 Payable in dollars 40,786 39,029 37,276 37,896 37,027 39,311 37,880 38,115 42,463 3 Payable in foreign currencies 5,257 5,679 7,984 8,274 9,487 9,213 11,256 13,625 12,802 By type 4 Financial liabilities 21,066 22,518 23,590 24,239 25,100 26,731 28,254 30,111 33,226 5 Payable in dollars 16,979 18,104 16,780 17,178 16,935 18,705 18,175 18,481 22,424 6 Payable in foreign currencies 4,087 4,414 6,810 7,061 8,165 8,026 10,079 11,630 10,802 7 Commercial liabilities 24,977 22,190 21,670 21,931 21,414 21,793 20,882 21,629 22,039 8 Trade payables 10,683 9,252 9,566 9,684 9,370 9,226 8,800 8,956 9,855 9 Advance receipts and other liabilities . .. 14,294 12,938 12,104 12,247 12,044 12,567 12,082 12,673 12,184 10 Payable in dollars 23,807 20,925 20,496 20,718 20,092 20,606 19,705 19,634 20,039 11 Payable in foreign currencies 1,170 1,265 1,174 1,213 1,322 1,187 1,177 1,995 2,000 By area or country Financial liabilities 12 Europe 10,978 12,003 13,207 13,567 14,199 16,445 18,185 20,293 23,564 13 Belgium and Luxembourg 394 216 414 306 268 278 175 525 503 14 France 975 2,106 1,623 1,625 2,219 2,077 2,326 2,589 1,590 15 Germany 621 682 889 899 863 855 975 1,214 939 16 Netherlands 1,081 1,056 606 639 585 573 534 564 533 17 Switzerland 545 408 569 503 491 378 634 1,200 631 18 United Kingdom 6,357 6,528 8,430 9,035 9,118 11,694 12,925 13,595 18,151 19 Canada 229 292 544 604 493 663 859 508 698 20 Latin America and Caribbean 4,153 4,784 4,053 4,299 4,199 3,719 3,359 3,553 3,282 21 Bahamas 371 537 379 626 476 1,301 1,148 1,157 1,052 22 Bermuda 0 114 114 114 124 114 0 120 115 23 Brazil 0 6 19 18 18 18 18 18 18 24 British West Indies 3,160 3,524 2,850 2,865 2,901 1,600 1,533 1,613 1,454 25 Mexico 5 7 12 13 11 15 17 14 13 26 Venezuela 4 4 6 5 5 5 5 5 5 27 Asia2 5,295 5,381 5,747 5,703 6,039 5,754 5,689 5,601 5,643 28 Japan 4,065 4,116 4,679 4,692 4,857 4,725 4,620 4,589 4,709 29 Middle Eastern oil-exporting countries; 5 13 19 24 19 23 23 24 24 30 Africa 2 6 6 6 130 132 133 133 9 0 4 0 0 123 124 123 124 0 31 Oil-exporting countries 409 52 33 60 40 18 29 23 30 32 All other5 Commercial liabilities 10,310 8,701 7,398 6,992 6,807 7,051 6,825 6,549 6,903 33 Europe 275 248 298 264 269 257 240 253 254 34 Belgium and Luxembourg 1,218 1,039 700 707 775 643 648 554 711 35 France 1,270 1,052 729 650 603 571 684 577 669 36 Germany 844 710 535 537 577 601 687 628 642 37 Netherlands 775 575 350 472 441 536 375 387 472 38 Switzerland 2,792 2,297 2,505 2,119 2,186 2,319 2,051 2,156 2,309 39 United Kingdom 40 Canada 1,261 1,014 1,002 1,005 942 847 883 1,039 1,062 41 Latin America and Caribbean 1,672 1,355 1,533 1,776 1,828 1,759 1,661 1,911 2,004 42 Bahamas 12 3 3 11 6 4 21 8 2 43 Bermuda 538 310 307 429 356 340 348 493 416 44 Brazil 145 219 209 236 226 214 216 211 217 45 British West Indies 30 107 33 34 16 36 26 19 23 46 Mexico 475 307 457 553 659 577 485 557 705 47 Venezuela 130 94 142 171 172 173 126 150 194 48 Asia2 9,483 9,334 10,594 10,757 10,520 10,916 10,458 10,906 10,898 49 Japan 3,651 3,721 3,612 3,709 3,390 3,726 3,951 4,613 4,385 50 Middle Eastern oil-exporting countries^ 2,016 1,498 1,889 1,796 1,815 1,968 1,525 1,533 1,813 51 Africa 844 715 568 675 665 641 463 490 523 52 Oil-exporting countries4 422 327 309 322 378 320 171 199 247 53 Other5 1,406 1,071 575 726 652 579 592 734 649 1. For a description of the changes in the international statistics tables, see Federal 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Reserve Bulletin, vol. 65, (July 1979), p. 550. Emirates (Trucial States). 2. Revisions include a reclassification of transactions, which also affects the totals for 4. Comprises Algeria, Gabon, Libya, and Nigeria. Asia and the grand totals. 5. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • February 1995 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1993 1994 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999900 11999911 11999922 Mar. June Sept. Dec. Mar. June 1 Total 35,348 45,262 42,286 46,753 42,589 43,199 43,603 43,447 50,401R 2 Payable in dollars 32,760 42,564 39,594 43,610 39,304 39,664 40,371 40,028 46,858r 3 Payable in foreign currencies 2,589 2,698 2,692 3,143 3,285 3,535 3,232 3,419 3,543 By type 4 Financial claims 19,874 27,882 23,822 26,833 22,656 24,212 23,656 23,324 29,626r 5 Deposits 13,577 20,080 15,136 16,732 11,966 13,499 13,272 13,852 17,567r 6 Payable in dollars 12,552 19,080 14,313 15,602 10,997 12,490 12,421 12,953 16,654r 7 Payable in foreign currencies 1,025 1,000 823 1,130 969 1,009 851 899 913 8 Other financial claims 6,297 7,802 8,686 10,101 10,690 10,713 10,384 9,472 12,059r 9 Payable in dollars 5,280 6,910 7,762 9,045 9,541 9,605 9,328 8,407 10,99^ 10 Payable in foreign currencies 1,017 892 924 1,056 1,149 1,108 1,056 1,065 1,069 11 Commercial claims 15,475 17,380 18,464 19,920 19,933 18,987 19,947 20,123 20,775 12 Trade receivables 13,657 14,468 15,907 17,566 17,450 16,009 17,003 17,285 18,004 13 Advance payments and other claims 1,817 2,912 2,557 2,354 2,483 2,978 2,944 2,838 2,771 14 Payable in dollars 14,927 16,574 17,519 18,963 18,766 17,569 18,622 18,668 19,214 15 Payable in foreign currencies 548 806 945 957 1,167 1,418 1,325 1,455 1,561 By area or country Financial claims 16 Europe 9,645 13,441 9,331 10,405 9,744 8,384 8,095 7,347 8,075r 17 Belgium and Luxembourg 76 13 8 67 74 70 131 122 83 18 France 371 269 764 905 781 708 785 753 899 19 Germany 367 283 326 388 383 362 472 441 407' 20 Netherlands 265 334 515 544 499 485 502 503 480 21 Switzerland 357 581 490 478 494 512 515 520 495 22 United Kingdom 7,971 11,534 6,252 6,991 6,579 5,230 4,527 3,916 4,638 23 Canada 2,934 2,642 1,716 2,013 1,805 1,627 1,870 2,508 3,546 24 Latin America and Caribbean 6,201 10,717 11,323 10,298 7,349 10,741 11,314 10,388 15,304r 25 Bahamas 1,090 827 658 320 762 580 496 502 1,215 26 Bermuda 3 8 40 79 258 197 125 34 65 27 Brazil 68 351 686 592 590 590 599 567 359 28 British West Indies 4,635 9,056 9,297 8,397 4,803 8,176 8,759 8,143 12,868r 29 Mexico 177 212 445 656 665 882 865 782 473 30 Venezuela 25 40 29 23 24 25 161 26 33 31 860 640 864 3,362 3,016 2,756 1,801 2,626 2,237r 32 Japan 523 350 668 3,123 2,485 2,215 1,063 1,762 l,351r 33 Middle Eastern oil-exporting countries2 8 5 3 3 10 5 3 5 2 34 Africa 37 57 83 128 125 88 99 76 74 35 Oil-exporting countries3 0 1 9 1 1 1 1 0 1 36 All other" 195 385 505 627 617 616 477 379 390 Commercial claims 37 Europe 7,044 8,193 8,351 8,800 8,968 8,088 8,764 8,407 8,563 38 Belgium and Luxembourg 212 194 189 170 173 163 185 174 179 39 France 1,240 1,585 1,537 1,492 1,511 1,438 1,943 1,817 1,761 40 Germany 807 955 933 1,025 1,046 935 997 923 920 41 Netherlands 555 645 552 734 565 410 417 351 287 42 Switzerland 301 295 362 437 442 376 424 404 642 43 United Kingdom 1,775 2,086 2,094 2,363 2,562 2,288 2,252 2,219 2,338 44 Canada 1,074 1,121 1,286 1,334 1,359 1,360 1,356 1,465 1,451 45 Latin America and Caribbean 2,375 2,655 3,043 3,474 3,456 3,071 3,207 3,499 3,801 46 Bahamas 14 13 28 18 17 20 11 12 17 47 Bermuda 246 264 255 195 239 225 173 210 285 48 Brazil 326 427 357 836 788 407 462 423 494 49 British West Indies 40 41 40 17 43 39 70 58 66 50 Mexico 661 842 924 998 913 866 945 985 1,000 51 Venezuela 192 203 345 349 317 286 295 290 303 52 4,127 4,591 4,866 5,430 5,220 5,538 5,623 5,763 6,028 53 Japan 1,460 1,899 1,903 2,163 1,885 2,519 2,142 2,338 2,326 54 Middle Eastern oil-exporting countries 460 620 693 773 673 456 657 654 601 55 Africa 488 430 554 463 516 493 492 512 484 56 Oil-exporting countries 67 95 78 75 99 107 71 101 90 57 Other4 367 390 364 419 414 437 505 477 448 1. For a description of the changes in the international statistics tables, see Federal 3. Comprises Algeria, Gabon, Libya, and Nigeria. Reserve Bulletin, vol. 65 (July 1979), p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions A63 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1994 1994 Transaction, and area or country 1992 1993 J O an ct . . - Apr. May June July Aug/ Sept/ Oct.p U.S. corporate securities STOCKS 1 Foreign purchases 221,367 319,728 298,376 29,853 26,699 28,349 24,332 29,312 28,849 27,781 2 Foreign sales 226,503 298,145 294,826 31,654 25,113 30,249 25,174 26,400 30,431 29,841 3 Net purchases, or sales (—) -5,136 21,583 3,550 -1,801 1,586 -1,900 -842 2,912 —1,582 -2,060 4 Foreign countries -5,169 21,311 3,565 -1,799 1,569 -1,891 -846 2,914 -1,596 -2,092 5 Europe -4,927 10,665 7,826 803 1,219 -378 -291 1,424 -1,198 -1,394 ft France -1,350 -103 -74 -83 210 -241 -68 -22 -63 -198 7 Germany -80 1,647 2,578 252 398 119 56 73 -104 -158 8 Netherlands -262 -600 1,376 82 176 89 357 266 -134 316 9 Switzerland 168 2,986 575 174 30 74 82 136 -104 -655 10 United Kingdom -3,301 4,560 1,385 230 174 -322 -830 866 -641 -505 11 Canada 1,407 -3,213 -1,150 290 156 -529 -313 -366 57 -416 17 Latin America and Caribbean 2,203 5,724 -1,723 -1,862 -207 -839 -476 989 -625 -530 N Middle East1 -88 -328 -991 4 49 -111 -94 -281 -431 -74 14 Other Asia -3,943 8,198 -1,088 -1,191 476 -143 280 1,031 589 335 15 Japan -3,598 3,825 1,183 -658 335 171 555 1,132 761 251 16 Africa 10 63 59 33 -1 6 -7 0 10 12 17 Other countries 169 202 632 124 -123 103 55 117 2 -25 18 Nonmonetary international and regional organizations 33 272 -15 -2 17 -9 4 -2 1144 3322 BONDS2 19 Foreign purchases 214,922 283,800 250,582 29,756 24,955 31,789 25,166 22,963 19,131 20,209 20 Foreign sales 175,842 217,943 200,615 27,473 20,868 21,123 18,898 15,686 17,520 16,102 21 Net purchases, or sales (—) 39,080 65,857 49,967 2,283 4,087 10,666 6,268 7,277 1,611 4,107 22 Foreign countries 37,964 65,319 49,356 2,298 4,025 10,538 5,883 7,344 1,594 4,108 23 Europe 17,435 22,429 31,301 346 528 6,031 4,531 5,152 2,406 3,755 74 France 1,203 2,346 345 181 -3 47 21 -18 -16 105 25 Germany 2,480 885 -4 83 -244 52 52 34 -355 449 76 Netherlands 540 -290 2,646 216 358 868 29 610 -64 125 71 Switzerland -579 -627 550 -189 136 144 -192 -9 292 4 28 United Kingdom 12,421 19,529 27,543 556 894 5,624 4,409 4,497 1,997 1,684 79 Canada 237 1,668 2,353 -16 286 422 625 519 194 458 30 Latin America and Caribbean 9,300 15,697 3,117 873 762 1,553 -527 -81 -1,832 -981 31 Middle East1 3,166 3,257 1,012 7 17 339 375 157 -76 56 37 Other Asia 7,545 20,846 10,860 903 2,287 2,177 766 1,558 857 745 33 Japan -450 11,569 5,263 523 1,575 1,396 712 763 340 375 34 Africa 354 1,149 40 55 10 9 -23 18 2 20 35 Other countries -73 273 673 130 135 7 136 21 43 55 36 Nonmonetary international and regional organizations 1,116 538 611 -15 62 128 385 -67 1177 -1 Foreign securities 37 Stocks, net purchases, or sales (—) -32,259 -63,340 -42,139 -1,940 -4,028 -6,715 —3,093r -4,568 679 -4,003 38 Foreign purchases 150,051 245,527 330,104 33,083 30,946 31,098 29,291 30,534 37,367 29,788 39 Foreign sales3 182,310 308,867 372,243 35,023 34,974 37,813 32,384r 35,102 36,688 33,791 40 Bonds, net purchases, or sales (—) -15,605 -69,471 -18,065 -5,565 -147 427 —2,202r 861 -949 -3,864 41 Foreign purchases 513,589 829,871 773,271 69,086 64,158 71,762 59,351 67,288 78,604 70,360 42 Foreign sales 529,194 899,342 791,336 74,651 64,305 71,335 61,553r 66,427 79,553 74,224 43 Net purchases, or sales (-), of stocks and bonds -47,864 -132,811 -60,204 —7,505 -4,175 —6,288 -5,295" -3,707 -270 -7,867 44 Foreign countries —51,274 —132,972 -60,016 -7,461 -4,462 —6,281 —5,477R -3,890 257 -7,717 45 Europe -31,350 -89,390 -7,209 -40 -1,291 4,268 -2,410 -174 -2,931 -4,176 46 Canada -6,893 -14,997 -8,087 -412 436 -769 -2,041 -600 865 -813 47 Latin America and Caribbean -4,340 -9,229 -19,192 -6,602 -2,421 -4,997 -1,437" -2,287 5,020 -1,330 48 -7,923 -15,303 -22,224 -117 -528 -4,309 339" -321 -1,913 -1,227 49 Africa -13 -185 -260 -31 -4 -45 29 48 -22 -73 50 Other countries -755 -3,868 -3,044 -259 -654 -429 43 -556 -762 -98 51 Nonmonetary international and regional organizations 3,410 161 -188 -44 287 -7 182 183 -527 -150 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). corporations organized to finance direct investments abroad. 2. Includes state and local government securities and securities of U.S. government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • February 1995 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1994 1994 AArreeaa oorr ccoouunnttrryy 11999922 11999933 J O an ct . . - Apr. May June July Aug.r Sept.' Oct.p 1 Total estimated 39,288 23,401 52,925 -13,607 19,778 -5,353 l,710r 15,160 11,088 10,516 2 Foreign countries 37,935 23,175 52,686 -12,879 19,727 -4,901 2,043r 14,744 11,166 9,475 3 Europe 19,625 -2,403 22,414 -5,356 8,772 -2,702 4,891r 8,274 3,922 -1,430 4 Belgium and Luxembourg 1,985 1,218 604 -175 147 -170 -78 529 -15 32 5 Germany 2,076 -9,975 5,020 -465 2,279 143 714 1,795 -243 254 6 Netherlands -2,959 -515 1,258 187 21 560 120 -15 -68 954 7 Sweden -804 1,421 522 -154 150 257 100 -158 105 -37 8 Switzerland 488 -1,501 1,251 3 -211 158 -416 -259 441 -718 9 United Kingdom 24,184 6,167 8,733 -3,910 4,955 -5,562 4,820 5,361 3,522 -1,822 10 Other Europe and former U.S.S.R -5,345 782 5,026 -842 1,431 1,912 -369r 1,021 180 -93 11 Canada 562 10,309 5,087 -1,662 98 -11 2,937 1,888 1,515 -420 12 Latin America and Caribbean -3,222 -4,572 -11,539 -6,002 -2,652 -7,080 -7,273 -2,310 -666 6,683 13 Venezuela 539 390 -404 -146 -130 -9 17 -132 19 7 14 Other Latin America and Caribbean -1,956 -5,806 -18,039 -6,911 -2,708 -6,744 -7,663 3,172 1,487 -446 15 Netherlands Antilles -1,805 844 6,904 1,055 186 -327 373 -5,350 -2,172 7,122 16 Asia 23,517 20,531 37,646 403 13,286 5,128 2,522 5,987 6,764 4,366 17 Japan 9,817 17,070 22,966 2,976 8,185 5,099 -812 3,681 3,210 2,190 18 Africa 1,103 1,156 193 59 -29 16 5 80 200 135 19 Other -3,650 -1,846 -1,115 -321 252 -252 -1,039 825 -569 141 20 Nonmonetary international and regional organizations 1,353 226 239 -728 51 -452 -333 416 -78 1,041 21 International 1,018 -279 246 -724 70 -395 -425 317 -65 1,017 22 Latin American regional 533 654 77 21 -111 54 23 -4 -1 9 MEMO 23 Foreign countries 37,935 23,175 52,686 -12,879 19,727 -4,901 2,043r 14,744 11,166 9,475 24 Official institutions 6,876 1,272 38,202 -640 11,253 2,679 4,897r 9,216 4,688 2,831 25 Other foreign2 31,059 21,903 14,484 -12,239 8,474 -7,580 -2,854 5,528 6,478 6,644 Oil-exporting countries 26 Middle East2 4,317 -8,836 -197 144 -342 -495 12 621 3 445 27 Africa3 11 -5 1 0 0 0 0 1 0 0 1. Official and private transactions in marketable U.S. Treasury securities having an 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of 3. Comprises Algeria, Gabon, Libya, and Nigeria. foreign countries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A65 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS1 Percent per year, averages of daily figures Rate on Dec. 31, 1994 Rate on Dec. 31, 1994 Rate on Dec. 31, 1994 Country Country Country Month Month Month effective effective effective Austria.. 4.5 May 1994 Germany... 4.5 May 1994 Norway 4.75 Feb. 1994 Belgium. 4.5 May 1994 Italy 7.5 Aug. 1994 Switzerland 3.5 Apr. 1994 Canada.. 7.43 Dec. 1994 Japan 1.75 Sept. 1993 United Kingdom 12.0 Sept. 1992 Denmark 5.0 May 1994 Netherlands 4.5 May 1994 France2 . 5.0 July 1994 1. Rates shown are mainly those at which the central bank either discounts or makes 2. Since February 1981, the rate has been that at which the Bank of France discounts advances against eligible commercial paper or government securities for commercial Treasury bills for seven to ten days. banks or brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood that the central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES1 Percent per year, averages of daily figures 1994 TTyyppee oorr ccoouunnttrryy 11999922 11999933 11999944 June July Aug. Sept. Oct. Nov. Dec, 3.70 3.18 4.63 4.51 4.74 4.80 5.01 5.52 5.78 6.27 9.56 5.88 5.45 5.13 5.15 5.47 5.65 5.83 5.98 6.30 6.76 5.14 5.57 6.50 6.28 5.71 5.61 5.56 5.77 6.75 9.42 7.17 5.25 4.95 4.86 4.89 4.95 5.12 5.10 5.29 7.67 4.79 4.03 4.21 4.17 4.21 4.00 4.02 3.86 4.07 9.25 6.73 5.09 4.95 4.84 4.88 4.98 5.12 5.15 5.35 10.14 8.30 5.72 5.44 5.51 5.46 5.50 5.52 5.49 5.82 8 Italy 13.91 10.09 8.45 8.04 8.39 8.88 8.68 8.80 8.72 8.98 9.31 8.10 5.65 5.33 5.53 5.47 5.34 5.15 5.09 5.42 4.39 2.96 2.24 2.12 2.14 2.28 2.31 2.33 2.33 2.34 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper, Belgium, three-month Treasury bills; and Japan, CD rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • February 1995 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1994 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999922 11999933 11999944 July Aug. Sept. Oct. Nov. Dec. 1 Australia/dollar2 73.521 67.993 73.161 73.409 74.010 74.200 73.787 75.492 77.389 2 Austria/schilling 10.992 11.639 11.409 11.027 11.010 10.904 10.695 10.838 11.063 3 Belgium/franc 32.148 34.581 33.424 32.315 32.248 31.871 31.284 31.694 32.329 4 Canada/dollar 1.2085 1.2902 1.3664 1.3826 1.3783 1.3540 1.3503 1.3647 1.3893 5 China, P.R./yuan 5.5206 5.7795 8.6295 8.6605 8.6072 8.5581 8.5492 8.5370 8.3833 6 Denmark/krone 6.0372 6.4863 6.3561 6.1581 6.1845 6.1038 5.9479 6.0268 6.1614 7 Finland/markka 4.4865 5.7251 5.2340 5.1996 5.1493 4.9689 4.6866 4.7388 4.8590 8 France/franc 5.2935 5.6669 5.5459 5.3702 5.3602 5.2975 5.2025 5.2867 5.4132 9 Germany/deutsche mark 1.5618 1.6545 1.6216 1.5674 1.5646 1.5491 1.5195 1.53% 1.5716 10 Greece/drachma 190.81 229.64 242.50 236.92 237.11 235.98 233.06 237.38 242.% 11 Hong Kong/dollar 7.7402 7.7357 7.7290 7.7265 7.7272 7.7275 7.7276 7.7306 7.7379 12 India/rupee. 28.156 31.291 31.394 31.376 31.373 31.372 31.373 31.394 31.389 13 Ireland/pound 170.42 146.47 149.69 152.79 152.22 154.61 158.64 156.39 153.36 14 Italy/lira 1,232.17 1,573.41 1,611.49 1,562.31 1,582.15 1,565.79 1,548.29 1,583.81 1,633.71 15 Japan/yen 126.78 111.08 102.18 98.44 99.94 98.77 98.35 98.04 100.18 16 Malay sia/ringgit 2.5463 2.5738 2.6237 2.5948 2.5633 2.5575 2.5589 2.5604 2.5626 17 Netherlands/guilder, 1.7587 1.8585 1.8190 1.7585 1.7570 1.7372 1.7028 1.7261 1.7601 18 New Zealand/dollar2 53.792 54.127 59.358 60.063 60.119 60.297 60.898 62.093 63.726 19 Norway/krone 6.2142 7.0979 7.0553 6.8560 6.8644 6.7961 6.6166 6.7297 6.8561 20 Portugal/escudo 135.07 161.08 165.93 160.98 159.80 157.91 155.26 157.27 161.21 21 Singapore/dollar 1.6294 1.6158 1.5275 1.5137 1.5045 1.4885 1.4761 1.4682 1.4657 22 South Africa/rand 2.8524 3.2729 3.5534 3.6705 3.5968 3.5570 3.5420 3.5256 3.5703 23 South Korea/won 784.66 805.75 806.93 808.39 806.83 803.69 801.98 799.46 794.81 24 Spain/peseta 102.38 127.48 133.86 129.31 129.90 128.41 126.34 128.34 132.31 25 Sri Lanka/rupee 44.013 48.211 49.170 49.010 49.241 49.260 49.112 49.163 49.531 26 Sweden/krona 5.8258 7.7956 7.7161 7.7471 7.7420 7.5227 7.2631 7.3637 7.5161 27 Switzerland/franc 1.4064 1.4781 1.3667 1.3239 1.3184 1.2892 1.2648 1.2956 1.3289 28 Taiwan/dollar 25.160 26.416 26.457 26.658 26.419 26.210 26.132 26.188 26.286 29 Thailand/baht 25.411 25.333 25.161 24.977 25.021 24.968 25.001r 24.992 25.109 30 United Kingdom/pound2 176.63 150.16 153.19 154.67 154.22 156.61 160.64 158.92 155.87 MEMO 31 United States/dollar3 86.61 93.18 91.32 89.06 89.26 88.08 86.66 87.71 89.64 1. Averages of certified noon buying rates in New York for cable transfers. Data in this world trade of that country divided by the average world trade of all ten countries table also appear in the Board's G.5 (405) monthly statistical release. For ordering combined. Series revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 address, see inside front cover. (August 1978), p. 700). 2. Value in US. cents. 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten industrial countries. The weight for each of the ten countries is the 1972-76 average Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1994 A76 SPECIAL TABLES—Quarterly Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31,1993 August 1993 A70 June 30, 1993 November 1993 A70 September 30, 1993 February 1994 A70 December 31, 1993 May 1994 A68 Terms of lending at commercial banks February 1994 May 1994 A74 May 1994 August 1994 A68 August 1994 November 1994 A68 November 1994 February 1995 A68 Assets and liabilities of US. branches and agencies of foreign banks December 31, 1993 May 1994 A78 March 31, 1994 August 1994 A72 June 30, 1994 November 1994 A72 September 30, 1994 ..., February 1995 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1991 November 1991 A80 September 30, 1991 January 1992 A70 March 30, 1992 August 1992 A80 June 30, 1992 October 1992 A70 Assets and liabilities of life insurance companies June 30, 1991 December 1991 A79 September 30, 1991 May 1992 A81 December 31, 1991 August 1992 A83 September 30, 1992 March 1993 A71 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • February 1995 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 19941 Commercial and Industrial Loans Weighted Loan rate (percent) Loans Loans made Amount of Average size average secured under Partici- (tho lo u a s n a s n ds (thousands maturity2 Weighted by commit- pation loans of dollars) of dollars) average collateral ment (percent) Days effective3 (percent) (percent) ALL BANKS 1 Overnight6 10,570,154 7,276 2 One month or less (excluding overnight) 7,150,915 1,445 5.77 16.7 75.7 9.1 3 Fixed rate 5,707,387 2,095 5.68 14.6 71.9 7.8 4 Floating rate 1,443,529 649 6.13 24.9 90.5 14.5 5 More than one month and less than one year 9,622,138 222 144 7.02 38.4 71.2 8.1 6 Fixed rate 4,025,487 209 128 6.55 26.1 69.0 10.4 7 Floating rate 5,596,651 233 156 7.36 47.2 72.7 6.3 8 Demand7 12,365,873 273 7.11 59.4 65.6 6.0 9 Fixed rate 3,107,446 683 5.73 20.8 67.0 9.0 10 Floating rate 9,258,426 227 7.57 72.4 65.1 4.9 11 Total short-term 39,709,080 418 6.37 32.7 67.7 12 Fixed rate (thousands of dollars) 23,316,087 835 31 5.67 14.0 66.0 5.9 13 1-99 320,092 14 151 7.76 89.1 43.4 .5 14 100-499 361,690 209 178 7.80 74.4 70.8 8.9 15 500-999 360,723 683 67 6.64 49.3 79.3 7.5 16 1,000-4,999 3,520,303 2,237 49 6.15 26.3 75.0 8.7 17 5,000-9,999 4,153,165 6,667 32 5.68 13.1 69.0 7.8 18 10,000 or more 14,600,113 19,924 20 5.43 7.2 63.1 4.7 19 Floating rate (thousands of dollars) 16,392,994 244 126 7.36 59.2 70.1 6.5 20 1-99 1,302,110 26 173 9.11 81.8 85.7 1.8 21 100-499 2,618,985 201 181 8.60 76.9 88.9 6.0 22 500-999 1,332,116 674 178 8.31 74.3 89.9 6.9 23 1,000-4,999 3,683,462 2,031 151 7.85 59.1 81.6 10.5 24 5,000-9,999 1,747,468 6,723 139 6.92 55.6 75.7 5.1 25 10,000 or more 5,708,852 26,385 75 5.98 43.6 44.3 5.4 26 Total long-term 5,098,070 241 7.53 66.7 79.5 9.4 27 Fixed rate (thousands of dollars).. 1,141,140 118 7.30 55.8 61.4 1.3 28 1-99 155,707 18 9.42 93.2 26.7 .3 29 100-499 139,428 176 8.70 89.3 38.7 3.7 30 500-999 39,804 743 6.97 45.2 93.1 11.1 31 1,000 or more 806,200 3,938 6.66 43.3 70.4 .5 32 Floating rate (thousands of dollars) 3,956,930 345 7.59 69.8 84.7 11.8 33 1-99 187,669 25 9.21 84.6 60.3 2.6 34 100-499 543,322 219 8.42 80.5 84.3 9.0 35 500-999 355,859 671 8.15 69.7 85.9 10.0 36 1,000 or more 2,870,081 3,537 7.26 66.9 86.2 13.1 Loan rate (percent) Days Effective Nominal LOANS MADE BELOW PRIME 37 Overnight6 10,411,094 9,326 5.27 5.24 5.9 61.2 2.5 38 One month or less (excluding overnight) 6,701,987 3,541 15 5.59 5.56 12.9 75.2 9.1 39 More than one month and less than one year 6,277,265 123 6.18 6.10 18.2 69.8 8.9 40 Demand7 6,574,511 2,350 5.67 5.60 44.1 44.6 6.0 41 Total short-term 29,964,858 2,298 42 Fixed rate 21,980,678 2,559 5.51 5.48 10.0 65.5 5.6 43 Floating rate 7,984,180 1,794 5.90 5.82 41.5 54.2 7.4 44 Total long-term 2,436,248 696 45 Fixed rate 678,560 296 6.11 6.06 33.6 68.2 1.7 46 Floating rate ... 1,757,688 1,452 6.36 6.26 59.5 86.0 13.2 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A69 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 1994—Continued Commercial and industrial loans—Continued Weighted Loan rate (percent) Loans Loans made Amount of Average size average secured under Partici- ( o t f h o l d o u o a s l n a l s a n r d s s ) ( o t f h o d u o s l a la n r d s s ) ma D tu a r y i s t y2 W e a f v f e e e ig c r t a h i g t v e e e d 3 Standard c (p o e ll r b a c y t e e n ra t) l ( c p o m e m r e c m n e t n i t t - ) pa ( t p io e n rc e l n o t a ) n s LARGE BANKS 1 Overnight6 8,310,689 8,686 6.9 59.6 2 One month or less (excluding overnight) 4,907,688 3,531 5.76 15.3 76.0 10.9 3 Fixed rate 3,726,359 4,627 5.72 14.4 70.3 8.8 4 Floating rate 1,181,329 2,021 5.89 18.3 94.0 17.4 5 More than one month and less than one year 4,680,361 959 139 6.86 33.0 87.8 8.2 6 Fixed rate 1,992,411 2,849 113 6.54 23.5 82.5 10.8 7 Floating rate 2,687,950 643 159 7.09 40.0 91.7 6.3 8 Demand7 7,254,436 481 6.59 55.6 56.1 5.8 9 Fixed rate 2,233,979 2,662 5.58 13.9 63.0 5.5 10 Floating rate 5,020,457 353 7.04 74.1 53.0 5.9 11 Total short-term 25,153,174 1,128 6.06 27.4 67.0 12 Fixed rate (thousands of dollars) 16,204,112 4,922 21 5.60 11.6 65.2 5.5 13 1-99 14,442 31 120 7.41 71.9 65.0 .5 14 100-499 107,938 244 56 6.78 50.2 76.2 2.4 15 500-999 211,868 695 56 6.61 49.9 85.0 5.6 16 1,000-4,999 2,458,833 2,223 38 6.17 24.6 73.0 5.1 17 5,000-9,999 2,971,850 6,972 21 5.65 13.4 63.9 6.0 18 10,000 or more 10,439,180 19,397 17 5.42 6.8 63.2 5.5 19 Floating rate (thousands of dollars) 8,949,062 471 115 6.89 56.0 70.4 7.9 20 1-99 389,746 35 170 8.87 81.5 90.9 .9 21 100-499 1,170,265 205 166 8.51 76.6 90.9 5.4 22 500-999 641,669 671 159 8.16 70.2 91.5 8.3 23 1,000-4,999 1,677,956 2,034 139 7.46 44.3 89.4 12.3 24 5,000-9,999 886,054 6,458 124 6.40 41.5 74.1 8.3 25 10,000 or more 4,183,372 26,311 86 5.94 53.5 51.0 7.4 Months 26 Total long-term 3,003,771 742 731 63.1 87.1 27 Fixed rate (thousands of dollars).. 381,798 798 6.61 39.3 78.3 .7 28 1-99 6,532 30 9.21 82.1 47.1 .0 29 100-499 34,924 260 7.82 70.4 84.1 .0 30 500-999 24,062 748 6.94 39.0 93.5 3.7 31 1,000 or more 316,279 3,412 6.40 35.0 77.1 .5 32 Floating rate (thousands of dollars) 2,621,974 735 7.41 66.6 88.3 14.5 33 1-99 45,766 32 8.60 89.9 88.1 4.9 34 100-499 309,838 239 8.40 77.2 89.8 7.2 35 500-999 242,825 666 8.15 66.8 85.3 9.9 36 1,000 or more 2,023,545 4,230 7.14 64.4 16.4 Loan rate (percent) Days Effective Nominal LOANS MADE BELOW PRIME 37 Overnight6 8,155,951 9,941 5.27 5.25 5.5 58.8 3.2 38 One month or less (excluding overnight) 4,682,199 4,878 17 5.64 5.61 12.9 75.6 11.0 39 More than one month and less than one yeat 3,370,707 3,047 132 6.18 6.12 22.5 87.8 7.9 40 Demand' 4,772,355 5.58 5.49 48.7 36.4 4.6 41 Total short-term 20,981,212 5,100 5.57 62.1 42 Fixed rate 15,522,787 5,755 5.49 5.46 9.2 64.1 5.2 43 Floating rate 5,458,426 3,853 5.80 5.71 49.6 56.5 8.5 Months 44 Total long-term 1,566,468 2,636 533 85.8 13.4 45 Fixed rate 298,447 1,688 6.06 5.98 27.0 75.5 .3 46 Floating rate ... 1,268,022 3,038 6.30 6.18 59.4 88.2 16.5 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • February 1995 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 19941—Continued Commercial and industrial loans—Continued Weighted Loan rate (percent) Loans Loans made Amount of Average size average secured under Partici- ( o t f h o l d o u o a s l n a l s a n r d s s ) ( o t f h o d u o s l a la n r d s s ) maturity2 W av e e ig r h ag te e d Standard coll b a y te ral co m m e m nt i t- pa ( t p io e n rc e lo n a t) n s Days eifective3 (percent) (percent) OTHER BANKS 1 Overnight5 2,259,465 4,556 2 One month or less (excluding overnight) 2,243,227 630 5.78 19.6 75.1 5.3 3 Fixed rate 1,981,028 1,032 5.60 15.0 75.1 5.8 4 Floating rate 262,199 160 7.19 54.5 74.7 1.5 5 More than one month and less than one year 4,941,777 129 149 7.17 43.5 55.5 7.9 6 Fixed rate 2,033,076 110 143 6.55 28.7 55.8 10.1 7 Floating rate 2,908,701 146 153 7.60 53.9 55.2 6.4 8 Demand7 5,111,437 169 7.84 64.9 79.0 6.2 9 Fixed rate 873,467 235 6.12 38.4 77.0 18.0 10 Floating rate 4,237,969 160 8.20 70.4 79.4 3.7 11 Total short-term 14,555,906 200 6.90 41.7 68.9 5.7 12 Fixed rate (thousands of dollars) 7,111,974 289 51 5.83 19.3 68.0 6.7 13 1-99 305,649 14 151 7.78 89.9 42.4 .5 14 100-499 253,752 197 225 8.23 84.7 68.5 11.7 15 500-999 148,856 667 83 6.68 48.3 71.3 10.1 16 1,000-4,999 1,061,470 2,270 71 6.11 30.3 79.6 17.1 17 5,000-9,999 1,181,315 6,006 56 5.77 12.5 81.9 12.3 18 10,000 or more 4,160,933 21,383 29 5.46 8.3 62.7 2.5 19 Floating rate (thousands of dollars) 7,443,932 155 141 7.92 63.1 69.9 4.7 20 1-99 912,364 24 174 9.21 82.0 83.5 2.2 21 100-499 1,448,719 197 189 8.67 77.1 87.3 6.4 22 500-999 690,448 677 196 8.46 78.1 88.4 5.6 23 1,000-4,999 2,005,506 2,029 162 8.18 71.6 75.1 9.0 24 5,000-9,999 861,414 7,020 192 7.46 70.0 77.3 1.8 25 10,000 or more 1,525,481 26,590 49 6.09 16.5 25.7 .0 26 Total long-term 2,094,299 123 7.84 71.9 68.6 4.6 27 Fixed rate (thousands of dollars).. 759,342 83 7.64 64.1 52.9 1.6 28 1-99 149,176 18 9.43 93.7 25.8 .3 29 100-499 104,504 159 9.00 95.6 23.6 5.0 30 500-999 15,742 735 7.01 54.8 92.4 22.3 31 1,000 or more 489,921 4,372 6.82 48.6 66.1 .5 32 Floating rate (thousands of dollars) 1,334,957 169 7.95 76.3 77.5 6.4 33 1-99 141,903 23 9.40 82.9 51.3 1.8 34 100-499 233,485 197 8.46 84.9 77.1 11.4 35 500-999 113,034 681 8.17 75.8 87.2 10.1 36 1,000 or more 846,535 2,541 7.54 72.9 80.7 5.3 Loan rate (percent) Days Effective Nominal' LOANS MADE BELOW PRIME 37 Overnight6 2,255,143 7,622 5.27 5.20 7.1 69.6 .1 38 One month or less (excluding overnight) 2,019,788 2,165 13 5.47 5.43 13.0 74.4 4.8 39 More than one month and less than one year 2,906,558 474 114 6.17 6.08 13.2 48.9 10.0 40 Demand7 1,802,156 1,148 5.90 5.89 31.9 66.1 9.9 41 Total short-term 8,983,645 1,006 42 Fixed rate 6,457,891 1,096 5.58 5.52 12.1 6.7 43 Floating rate 2,525,754 832 6.13 6.06 23.8 49.3 5.3 44 Total long-term 869,779 45 Fixed rate 380,113 180 6.16 6.12 38.7 62.6 2.7 46 Floating rate .. . 489,667 617 6.52 6.47 59.8 80.4 4.7 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A71 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 1994—Continued NOTES 1. The survey of terms of bank lending to business collects data on gross loan 4. The chances are about two out of three that the average rate shown would differ by extensions made during the first full business week in the mid-month of each quarter by a less than the amount of the standard error from the average rate that would be found by a sample of 340 commercial banks of all sizes. A sample of 250 banks reports loans to complete survey of lending at all banks. fanners. The sample data are blown up to estimate the lending terms at all insured 5. The rate used to price the largest dollar volume of loans. Base pricing rates include commercial banks during that week. The estimated terms of bank lending are not intended the prime rate (sometimes referred to as a bank's "basic" or "reference" rate); the federal for use in collecting the terms of loans extended over the entire quarter or residing in the funds rate; domestic money market rates other than the federal funds rate; foreign money portfolios of those banks. Construction and land development loans include both unsecure market rates; and other base rates not included in the foregoing classifications. loans and loans secured by real estate. Thus, some of die construction and land develop- 6. Overnight loans mature on the following business day. ment loans would be repented on the statement of condition as real estate loans and the 7. Demand loans have no stated date of maturity. remainder as business loans. Mortgage loans, purchased loans, foreign loans, and loans of 8. Nominal (not compounded) annual interest rate calculated from the stated rate and less that $1,000 are excluded from the survey. As of September 30, assets of most of the other terms of the loans and weighted by loan size. large banks were at least $7.0 billion. For all insured banks, total assets averaged $275 9. Calculated by weighting die prime rate reported by each bank by the volume of million. loans reported by that bank, summing the results, and then averaging over all reporting 2. Average maturities are weighted by loan size; excludes demand loans. banks. 3. Effective (compounded) annual interest rate calculated from the stated rate and other 10. The proportion of loans made at rates below the prime may vary substantially from terms of the loans and weighted by loan size. the proportion of such loans outstanding in banks' portfolios. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • February 1995 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, September 30, 1994'—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s 1 Total assets4 718,261 318,573 549,602 258,360 71,415 32,475 60,715 20,379 2 Claims on nonrelated parties 640,124 190,135 487,697 157,666 65,250 15,068 58,304 12,960 3 Cash and balances due from depository institutions 150,011 127,348 130,270 109,704 6,836 6,000 11,733 11,066 4 Cash items in process of collection and unposted debits 2,466 0 2,309 0 8 0 104 0 5 Currency and coin (U.S. and foreign) 23 n.a. 16 n.a. 2 n.a. 1 n.a. 6 Balances with depository institutions in United States 92,733 74,103 79,885 62,943 4,852 4,056 7,275 6,790 7 U.S. branches and agencies of other foreign banks (including IBFs) 87,653 71,094 76,212 60,886 4,616 4,016 6,277 5,878 8 Other depository institutions in United States (including IBFs) 5,079 3,009 3,673 2,057 236 40 998 912 9 Balances with banks in foreign countries and with foreign central banks 54,263 53,245 47,613 46,762 1,950 1,945 4,343 4,275 10 Foreign branches of U.S. banks 1,552 1,478 1,366 1,294 42 42 136 136 11 Other banks in foreign countries and foreign central banks . 52,712 51,767 46,247 45,467 1,908 1,903 4,207 4,140 12 Balances with Federal Reserve Banks 526 n.a. 447 n.a. 24 n.a. 9 n.a. 13 Total securities and loans 370,265 52,065 254,891 38,365 52,928 8,284 36,229 1,614 14 Total securities, book value 88,203 12,540 80,256 11,352 4,677 690 2,591 478 15 U.S. Treasury 27,433 n.a. 25,736 n.a. 1,145 n.a. 452 n.a. 16 Obligations of U.S. government agencies and corporations .. . 20,880 n.a. 20,337 n.a. 324 n.a. 36 n.a. 17 Other bonds, notes, debentures, and corporate stock (including state and local securities) 39,891 12,540 34,184 11,352 3,208 690 2,103 478 18 Federal funds sold and securities purchased under agreements to resell 48,669 5,476 44,896 5,088 785 289 2,598 85 19 U.S. branches and agencies of other foreign banks 11,685 3,628 10,456 3,386 470 150 573 85 20 Commercial banks in United States 12,605 319 12,057 299 160 20 198 0 21 Other 24,379 1,529 22,383 1,403 156 119 1,826 0 22 Total loans, gross 282,183 39,534 174,708 27,017 48,276 7,597 33,646 1,136 23 LESS: Unearned income on loans 120 8 74 4 25 2 8 0 24 EQUALS: Loans, net 282,062 39,525 174,634 27,013 48,251 7,594 33,638 1,136 Total loans, gross, by category 25 Real estate loans 40,860 275 23,036 94 12,215 180 3,486 0 26 Loans to depository institutions 37,704 25,148 24,909 16,239 7,614 5,751 1,762 740 27 Commercial banks in United States (including IBFs) 17,175 9,650 9,714 5,033 5,675 3,966 1,491 502 28 U.S. branches and agencies of other foreign banks 15,063 9,096 8,473 4,625 5,503 3,846 870 502 29 Other commercial banks in United States 2,112 554 1,241 407 171 120 621 0 30 Other depository institutions in United States (including IBFs) 0 0 0 0 0 0 0 0 31 Banks in foreign countries 20,529 15,499 15,195 11,207 1,939 1,785 271 238 32 Foreign branches of U.S. banks 472 412 313 259 148 148 0 0 33 Other banks in foreign countries 20,057 15,087 14,882 10,948 1,791 1,637 271 238 34 Loans to other financial institutions 22,839 816 18,783 726 1,411 27 2,132 23 35 Commercial and industrial loans 163,657 10,431 94,565 7,350 26,270 1,556 24,177 353 36 U.S. addressees (domicile) 144,257 44 80,909 32 23,716 2 23,428 0 37 Non-U.S. addressees (domicile) 19,400 10,387 13,656 7,317 2,554 1,554 748 353 38 Acceptances of other banks 962 88 696 83 89 0 59 0 39 U.S. banks 395 0 360 0 16 0 2 0 40 Foreign banks 568 88 335 83 73 0 57 0 41 Loans to foreign governments and official institutions (including foreign central banks) 3,774 2,526 3,026 2,307 196 83 110 20 42 Loans for purchasing or carrying securities (secured and unsecured) 6,147 50 5,732 50 186 0 141 0 43 All other loans 5,049 159 2,774 129 295 0 1,776 0 44 Assets held in trading accounts 12,380 88 10,235 48 113 40 2,030 0 45 All other assets 58,799 5,157 47,405 4,460 4,588 455 5,714 196 46 Customers' liabilities on acceptances outstanding 13,393 n.a. 9,099 n.a. 2,958 n.a. 672 n.a. 47 U.S. addressees (domicile) 10,318 n.a. 6,547 n.a. 2,759 n.a. 645 n.a. 48 Non-U.S. addressees (domicile) 3,074 n.a. 2,552 n.a. 198 n.a. 28 n.a. 49 Other assets including other claims on nonrelated parties .... 45,406 5,157 38,306 4,460 1,630 455 5,041 196 50 Net due from related depository institutions5 78,137 128,438 61,905 100,695 6,165 17,407 2,412 7,419 51 Net due from head office and other related depository institutions5 78,137 n.a. 61,905 n.a. 6,165 n.a. 2,412 n.a. 52 Net due from establishing entity, head offices, and other related depository institutions5 n.a. 128,438 n.a. 100,695 n.a. 17,407 n.a. 7,419 53 Total liabilities4 718,261 318,573 549,602 258,360 71,415 32,475 60,715 20,379 54 Liabilities to nonrelated parties 604,004 300,024 494,043 244,947 54,476 32,098 38,153 17,266 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A73 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, September 30, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s 55 Total deposits and credit balances 151,021 230,743 129,145 210,306 4,906 5,492 7,835 10,307 56 Individuals, partnerships, and corporations 102,597 13,087 84,771 9,086 4,230 501 6,061 78 57 U.S. addressees (domicile) 88,838 287 76,951 287 2,456 0 5,204 0 58 Non-U. S. addressees (domicile) 13,758 12,800 7,820 8,799 1,774 501 858 78 59 Commercial banks in United States (including IBFs) 25,951 69,777 23,263 65,125 372 1,959 1,583 2,424 60 U.S. branches and agencies of other foreign banks 14,000 63,934 12,949 60,026 69 1,724 318 1,959 61 Other commercial banks in United States 11,950 5,842 10,314 5,099 303 236 1,266 466 67, Banks in foreign countries 9,119 125,776 8,845 117,069 50 2,380 48 5,644 63 Foreign branches of U.S. banks 3,789 3,957 3,762 3,249 0 115 26 578 64 Other banks in foreign countries 5,330 121,819 5,083 113,820 49 2,265 22 5,066 65 Foreign governments and official institutions (including foreign central banks) 5,650 21,889 5,297 18,926 228 652 3 2,045 66 All other deposits and credit balances 7,334 214 6,648 99 6 0 131 115 67 Certified and official checks 370 322 21 7 68 Transaction accounts and credit balances (excluding IBFs) .... 8,537 6,918 378 353 69 Individuals, partnerships, and corporations 6,623 5,334 264 340 70 U.S. addressees (domicile) 4,811 4,161 202 336 71 Non-U.S. addressees (domicile) 1,812 1,173 62 4 72 Commercial banks in United States (including IBFs) 56 50 2 0 73 U.S. branches and agencies of other foreign banks 22 19 0 0 74 Other commercial banks in United States 34 31 2 0 75 Banks in foreign countries 935 758 41 2 76 Foreign branches of U.S. banks 1 1 0 0 77 Other banks in foreign countries 934 757 40 2 78 Foreign governments and official institutions (including foreign central banks) 437 335511 4444 3 79 All other deposits and credit balances 116 104 6 1 80 Certified and official checks 370 322 21 7 81 Demand deposits (included in transaction accounts and credit balances) 7,972 6,695 269 341 82 Individuals, partnerships, and corporations 6,210 5,202 201 328 83 US. addressees (domicile) 4,644 4,092 158 324 84 Non-U.S. addressees (domicile) 1,567 1,110 43 4 85 Commercial banks in United States (including IBFs) 38 33 0 0 86 U.S. branches and agencies of other foreign banks 11 n.a. 9 n.a. 0 n.a. 0 n.a. 87 Other commercial banks in United States 27 24 0 0 88 Banks in foreign countries 900 727 40 2 89 Foreign branches of U.S. banks 1 1 0 0 90 Other banks in foreign countries 900 727 40 2 91 Foreign governments and official institutions (including foreign central banks) 384 347 4 3 92 All other deposits and credit balances 70 63 1 1 93 Certified and official checks 370 322 21 7 94 Nontransaction accounts (including MMDAs, excluding IBFs) 142,484 122,227 4,528 7,481 95 Individuals, partnerships, and corporations 95,974 79,437 3,966 5,721 96 U.S. addressees (domicile) 84,027 72,790 2,254 4,867 97 Non-U.S. addressees (domicile) 11,947 6,647 1,711 854 98 Commercial banks in United States (including IBFs) 25,895 23,213 370 1,583 99 U.S. branches and agencies of other foreign banks 13,979 12,930 69 318 100 Other commercial banks in United States 11,916 10,284 301 1,266 101 Banks in foreign countries 8,184 8,087 9 46 102 Foreign branches of U.S. banks 3,788 3,761 0 26 103 Other banks in foreign countries 4,396 4,325 9 20 104 Foreign governments and official institutions (including foreign central banks) 5,213 4,946 184 00 105 All other deposits and credit balances 7,218 6,544 0 131 106 IBF deposit liabilities 230,743 210,306 5,492 10,307 107 Individuals, partnerships, and corporations 13,087 9,086 501 78 108 U.S. addressees (domicile) 287 287 0 0 109 Non-U.S. addressees (domicile) 12,800 8,799 501 78 110 Commercial banks in United States (including IBFs) 69,777 65,125 1,959 2,424 111 U.S. branches and agencies of other foreign banks n.a. 63,934 n.a. 60,026 n.a. 1,724 n.a. 1,959 112 Other commercial banks in United States 5,842 5,099 236 466 113 Banks in foreign countries 125,776 117,069 2,380 5,644 114 Foreign branches of U.S. banks 3,957 3,249 115 578 115 Other banks in foreign countries 121.819 113,820 2,265 5,066 116 Foreign governments and official institutions (including foreign central banks) 21.889 18,926 652 2,045 117 All other deposits and credit balances 214 99 0 115 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • February 1995 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, September 30, 1994'—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u F t d a s i l n g I o B n F ly s 118 Federal funds purchased and securities sold under agreements to repurchase 61,580 14,799 49,575 9,294 5,940 2,861 5,729 2,570 119 US. branches and agencies of other foreign banks 11,963 3,687 7,750 1,673 2,503 1,366 1,637 645 120 Other commercial banks in United States 6,420 522 3,860 155 1,951 301 511 67 121 Other 43,197 10,590 37,965 7,467 1,487 1,195 3,581 1,858 122 Other borrowed money 107,392 49,766 62,009 21,269 33,973 23,276 9,133 4,255 123 Owed to nonrelated commercial banks in United States (including IBFs) 36,822 19,563 15,287 5,064 17,725 12,832 2,564 1,286 124 Owed to U.S. offices of nonrelated U.S. banks 9,124 1,748 5,285 576 2,799 987 698 166 125 Owed to U.S. branches and agencies of nonrelated foreign banks 27,697 17,815 10,002 4, 1-88 14,927 11,845 1,867 1,120 126 Owed to nonrelated banks in foreign countries 30,794 28,763 16,866 15,030 10,396 10,264 2,892 2,885 127 Owed to foreign branches of nonrelated U.S. banks 866 811 372 332 406 406 65 65 128 Owed to foreign offices of nonrelated foreign banks 29,929 27,952 16,494 14,698 9,990 9,859 2,827 2,820 129 Owed to others 39,776 1,440 29,856 1,174 5,852 181 3,677 83 130 All other liabilities 53,268 4,715 43,009 4,078 4,164 469 5,150 135 131 Branch or agency liability on acceptances executed and outstanding 14,111 n.a. 9,743 n.a. 2,983 n.a. 684 n.a. 132 Other liabilities to nonrelated parties 39,156 4,715 33,265 4,078 1,181 469 4,466 135 133 Net due to related depository institutions5 114,257 18,550 55,558 13,414 16,939 377 22,563 3,113 134 Net owed to head office and other related depository institutions5 114,257 n a. 55,558 n.a. 16,939 n.a. 22,563 n a. 135 Net owed to establishing entity, head office, and other related depository institutions5 n.a. 18,550 n.a. 13,414 n.a. 377 n.a. 3,113 MEMO 136 Non-interest-bearing balances with commercial banks in United States 1,111 0 861 0 98 0 51 0 137 Holding of commercial paper included in total loans 953 901 22 11 138 Holding of own acceptances included in commercial and industrial loans 33,,556600 2,662 702 67 139 Commercial and industrial loans with remaining maturity of one year or less 96,911 55,217 15,576 15,225 140 Predetermined interest rates 55,449 n.a. 31,713 n.a. 9,135 n.a. 10,392 n a. 141 Floating interest rates 4411,,446622 2233,,550033 66,,444411 44,,883333 142 Commercial and industrial loans with remaining maturity of more than one year 66,746 39,348 10,695 8,952 143 Predetermined interest rates 19,745 11,056 3,937 3,390 144 Floating interest rates 47,002 28,292 6,758 5,561 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A75 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, September 30, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T IB l o u t F d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u t F d a s i l n g I o B n F ly s 111144445555 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ttttoooottttaaaallll ddddeeeeppppoooossssiiiittttssss aaaannnndddd ccccrrrreeeeddddiiiitttt bbbbaaaallllaaaannnncccceeeessss ooooffff nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddiiiinnnngggg IIIIBBBBFFFFssss 146,294 n.a. 126,467 n.a. 5,150 n.a. 7,649 n.a. 111144446666 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 110,522 n.a. 95,225 n.a. 2,944 n.a. 6,060 n.a. 111144447777 OOOOtttthhhheeeerrrr ttttiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 n.a. n.a. n.a. n.a. oooorrrr mmmmoooorrrreeee 26,734 n.a. 23,740 n.a. 1,186 n.a. 1,165 n.a. 111144448888 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 9,037 n.a. 7,502 n.a. 1,019 n.a. 424 n.a. All states2 New York California Illinois inc T l o u t d a i l n g IBFs inc T l o u t d a i l n g IBFs inc T l o u t d a i l n g IBFs inc T l o u t d a i l n g IBFs IBFs only IBFs only IBFs only IBFs only 111144449999 MMMMaaaarrrrkkkkeeeetttt vvvvaaaalllluuuueeee ooooffff sssseeeeccccuuuurrrriiiittttiiiieeeessss hhhheeeelllldddd 0 0 0 0 0 0 0 0 111155550000 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 64,464 n.a. 32,363 n.a. 27,211 n.a. 3,497 n.a. 111155551111 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd5555 544 0 257 0 124 0 47 0 1. Data are aggregates of categories reported on the quarterly form FFIEC 002, item, either because the item is not an eligible IBF asset or liability or because that level "Report of Assets and Liabilities of US. Branches and Agencies of Foreign Banks." The of detail is not reported for IBFs. From December 1981 through September 1985, IBF form was first used for reporting data as of June 30,1980, and was revised as of December data were included in all applicable items reported. 31,1985. From November 1972 through May 1980, U.S. branches and agencies of foreign 4. Total assets and total liabilities include net balances, if any, due from or owed to banks had filed a monthly FR 886a report. Aggregate data from that report were available related banking institutions in the United States and in foreign countries (see note 5). On through the Federal Reserve statistical release G.ll, last issued on July 10, 1980. Data in the former monthly branch and agency report, available through the G.ll statistical this table and in the G.ll tables are not strictly comparable because of differences in release, gross balances were included in total assets and total liabilities. Therefore, total reporting panels and in definitions of balance sheet items. IBF, international banking asset and total liability figures in this table are not comparable to those in the G.l 1 tables. facility. 5. Related depository institutions includes the foreign head office and other US. and 2. Includes the District of Columbia. foreign branches and agencies of a bank, a bank's parent holding company, and majority- 3. Effective December 1981, the Federal Reserve Board amended Regulations D and Q owned banking subsidiaries of the bank and of its parent holding company (including to permit banking offices located in the United States to operate international banking subsidiaries owned both directly and indirectly). facilities (IBFs). Since December 31,1985, data for IBFs have been reported in a separate 6. In some cases two or more offices of a foreign bank within the same metropolitan column. These data are either included in or excluded from the total columns as indicated area file a consolidated report. in the headings. The notation "n.a." indicates that no IBF data have been reported for that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Index to Statistical Tables References are to pages A3-A75 although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 21, 22 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 23 Banks, by classes, 18-22 Turnover, 17 Domestic finance companies, 36 Depository institutions Federal Reserve Banks, 11 Reserve requirements, 9 Financial institutions, 28 Reserves and related items, 4, 5, 6, 13 Foreign banks, U.S. branches and agencies, 23, 72-75 Deposits (See also specific types) Automobiles Banks, by classes, 4, 18-22, 24 Consumer installment credit, 39 Federal Reserve Banks, 5,11 Production, 47, 48 Interest rates, 16 Turnover, 17 BANKERS acceptances, 10, 22, 26 Discount rates at Reserve Banks and at foreign central banks and Bankers balances, 18-22, 72-75. (See also Foreigners) foreign countries (See Interest rates) Bonds (See also U.S. government securities) Discounts and advances by Reserve Banks (See Loans) New issues, 35 Dividends, corporate, 35 Rates, 26 Branch banks, 23 EMPLOYMENT, 45 Business activity, nonfinancial, 45 Eurodollars, 26 Business expenditures on new plant and equipment, 35 Business loans (See Commercial and industrial loans) FARM mortgage loans, 38 Federal agency obligations, 5, 10, 11, 12, 31, 32 Federal credit agencies, 33 CAPACITY utilization, 46 Federal finance Capital accounts Debt subject to statutory limitation, and types and ownership Banks, by classes, 18 of gross debt, 30 Federal Reserve Banks, 11 Receipts and outlays, 28, 29 Central banks, discount rates, 65 Treasury financing of surplus, or deficit, 28 Certificates of deposit, 26 Treasury operating balance, 28 Commercial and industrial loans Federal Financing Bank, 28, 33 Commercial banks, 21 Federal funds, 7, 19, 21, 22, 23, 26, 28 Weekly reporting banks, 21-23 Federal Home Loan Banks, 33 Commercial banks Federal Home Loan Mortgage Corporation, 33, 37, 38 Assets and liabilities, 18-22, 68-71 Federal Housing Administration, 33, 37, 38 Commercial and industrial loans, 18-23 Federal Land Banks, 38 Consumer loans held, by type and terms, 39 Federal National Mortgage Association, 33, 37, 38 Deposit interest rates of insured, 16 Federal Reserve Banks Loans sold outright, 21 Condition statement, 11 Real estate mortgages held, by holder and property, 38 Discount rates (See Interest rates) Terms of lending, 68-71 U.S. government securities held, 5, 11, 12, 30 Time and savings deposits, 4 Federal Reserve credit, 5, 6, 11, 12 Commercial paper, 24, 26, 36 Federal Reserve notes, 11 Condition statements (See Assets and liabilities) Federally sponsored credit agencies, 33 Construction, 45, 49 Finance companies Consumer installment credit, 39 Assets and liabilities, 36 Consumer prices, 45, 46 Business credit, 36 Consumption expenditures, 52, 53 Loans, 39 Corporations Paper, 24, 26 Nonfinancial, assets and liabilities, 35 Financial institutions, loans to, 21, 22, 23 Profits and their distribution, 35 Float, 5 Security issues, 34, 65 Flow of funds, 40, 42, 43, 44 Cost of living (See Consumer prices) Foreign banks, assets and liabilities of U.S. branches and Credit unions, 39 agencies, 22, 23, 72-75 Currency in circulation, 5, 14 Foreign currency operations, 11 Customer credit, stock market, 27 Foreign deposits in U.S. banks, 5, 11, 21, 22 Foreign exchange rates, 66 DEBITS to deposit accounts, 17 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 58, 59, 60, 62 Banks, by classes, 18-23 Liabilities to, 22, 54, 55, 56, 61, 63, 64 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All GOLD Real estate loans—Continued Certificate account, 11 Terms, yields, and activity, 37 Stock, 5, 54 Type of holder and property mortgaged, 38 Government National Mortgage Association, 33, 37, 38 Repurchase agreements, 7, 21-23 Gross domestic product, 51 Reserve requirements, 9 Reserves HOUSING, new and existing units, 49 Commercial banks, 18 Depository institutions, 4, 5, 6, 13 INCOME, personal and national, 45, 51, 52 Federal Reserve Banks, 11 Industrial production, 45, 47 U.S. reserve assets, 54 Installment loans, 39 Residential mortgage loans, 37 Insurance companies, 30, 38 Retail credit and retail sales, 39, 40, 45 Interest rates Bonds, 26 Commercial banks, 68-71 SAVING Consumer installment credit, 39 How of funds, 40, 42, 43, 44 Deposits, 16 National income accounts, 51 Federal Reserve Banks, 8 Savings and loan associations, 38, 39, 40 Foreign central banks and foreign countries, 66 Savings banks, 38, 39 Money and capital markets, 26 Savings deposits (See Time and savings deposits) Mortgages, 37 Securities (See also specific types) Prime rate, 25 Federal and federally sponsored credit agencies, 33 International capital transactions of United States, 53-65 Foreign transactions, 63 New issues, 34 International organizations, 55, 56, 58, 61, 62 Prices, 27 Inventories, 51 Special drawing rights, 5, 11, 53, 54 Investment companies, issues and assets, 35 State and local governments Investments (See also specific types) Deposits, 21, 22 Banks, by classes, 18-23 Commercial banks, 4, 18-23 Holdings of U.S. government securities, 30 Federal Reserve Banks, 11, 12 New security issues, 34 Ownership of securities issued by, 21, 22 Financial institutions, 38 Rates on securities, 26 LABOR force, 45 Stock market, selected statistics, 27 Life insurance companies (See Insurance companies) Stocks (See also Securities) Loans (See also specific types) New issues, 34 Banks, by classes, 18-23 Prices, 27 Commercial banks, 4, 18-23 Federal Reserve Banks, 5, 6, 8, 11, 12 Student Loan Marketing Association, 33 Financial institutions, 38 Insured or guaranteed by United States, 37, 38 TAX receipts, federal, 29 MANUFACTURING Thrift institutions, 4. (See also Credit unions and Savings and Capacity utilization, 46 loan associations) Production, 46, 48 Time and savings deposits, 4, 14, 16, 18-23 Margin requirements, 27 Trade, foreign, 54 Member banks (See also Depository institutions) Treasury cash, Treasury currency, 5 Federal funds and repurchase agreements, 7 Treasury deposits, 5, 11, 28 Reserve requirements, 9 Treasury operating balance, 28 Mining production, 48 UNEMPLOYMENT, 45 Mobile homes shipped, 49 U.S. government balances Monetary and credit aggregates, 4, 13 Commercial bank holdings, 18-23 Money and capital market rates, 26 Treasury deposits at Reserve Banks, 5, 11, 28 Money stock measures and components, 4, 14 U.S. government securities Mortgages (See Real estate loans) Bank holdings, 18-23, 30 Mutual funds, 35 Dealer transactions, positions, and financing, 32 Mutual savings banks (See Thrift institutions) Federal Reserve Bank holdings, 5, 11, 12, 30 Foreign and international holdings and NATIONAL defense outlays, 29 transactions, 11, 30, 64 National income, 51 Open market transactions, 10 Outstanding, by type and holder, 28, 30 OPEN market transactions, 10 Rates, 25 U.S. international transactions, 53-66 PERSONAL income, 52 Utilities, production, 48 Prices Consumer and producer, 45, 50 Stock market, 27 VETERANS Administration, 37, 38 Prime rate, 25 Producer prices, 45, 50 WEEKLY reporting banks, 22-24 Production, 45, 47 Wholesale (producer) prices, 45, 50 Profits, corporate, 35 REAL estate loans Banks, by classes, 21, 22, 38 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALAN S. BLINDER, Vice Chairman JOHN P. LAWARE OFFICE OF BOARD MEMBERS DIVISION OF INTERNATIONAL FINANCE JOSEPH R. COYNE, Assistant to the Board EDWIN M. TRUMAN, Staff Director DONALD J. WINN, Assistant to the Board LARRY J. PROMISEL, Senior Associate Director THEODORE E. ALLISON, Assistant to the Board for Federal CHARLES J. SIEGMAN, Senior Associate Director Reserve System Affairs DALE W. HENDERSON, Associate Director LYNN S. FOX, Deputy Congressional Liaison DAVID H. HOWARD, Senior Adviser WINTHROP R HAMBLEY, Special Assistant to the Board DONALD B. ADAMS, Assistant Director BOB STAHLY MOORE, Special Assistant to the Board THOMAS A. CONNORS, Assistant Director DIANE E. WERNEKE, Special Assistant to the Board PETER HOOPER III, Assistant Director PORTIA W. THOMPSON, Equal Employment Opportunity KAREN H. JOHNSON, Assistant Director Programs Adviser CATHERINE L. MANN, Assistant Director RALPH W. SMITH, JR., Assistant Director LEGAL DIVISION DIVISION OF RESEARCH AND STATISTICS J. VIRGIL MATTINGLY, JR., General Counsel SCOTT G. ALVAREZ, Associate General Counsel MICHAEL J. PRELL, Director RICHARD M. ASHTON, Associate General Counsel EDWARD C. ETTIN, Deputy Director OLIVER IRELAND, Associate General Counsel DAVID J. STOCKTON, Deputy Director KATHLEEN M. O'DAY, Associate General Counsel MARTHA BETHEA, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel WILLIAM R. JONES, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel MYRON L. KWAST, Associate Director PATRICK M. PARKINSON, Associate Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director WILLIAM W. WILES, Secretary MARTHA S. SCANLON, Deputy Associate Director JENNIFER J. JOHNSON, Deputy Secretary PETER A. TINSLEY, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary DAY W. RADEBAUGH, JR., Assistant Secretary1 FLINT BRAYTON, Assistant Director DAVID S. JONES, Assistant Director STEPHEN A. RHOADES, Assistant Director DIVISION OF BANKING CHARLES S. STRUCKMEYER, Assistant Director SUPERVISION AND REGULATION ALICE PATRICIA WHITE, Assistant Director RICHARD SPILLENKOTHEN, Director JOYCE K. ZICKLER, Assistant Director STEPHEN C. SCHEMERING, Deputy Director JOHN J. MINGO, Senior Adviser DON E. KLINE, Associate Director GLENN B. CANNER, Adviser WILLIAM A. RYBACK, Associate Director FREDERICK M. STRUBLE, Associate Director DIVISION OF MONETARY AFFAIRS HERBERT A. BIERN, Deputy Associate Director ROGER T. COLE, Deputy Associate Director DONALD L. KOHN, Director JAMES I. GARNER, Deputy Associate Director DAVID E. LINDSEY, Deputy Director HOWARD A. AMER, Assistant Director BRIAN F. MADIGAN, Associate Director RICHARD D. PORTER, Deputy Associate Director GERALD A. EDWARDS, JR., Assistant Director JAMES D. GOETZINGER, Assistant Director VINCENT R. REINHART, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board STEPHEN M. HOFFMAN, JR., Assistant Director LAURA M. HOMER, Assistant Director DIVISION OF CONSUMER JAMES V. HOUPT, Assistant Director AND COMMUNITY AFFAIRS JACK P. JENNINGS, Assistant Director MICHAEL G. MARTINSON, Assistant Director GRIFFITH L. GARWOOD, Director RHOGER H PUGH, Assistant Director GLENN E. LONEY, Associate Director SIDNEY M. SUSSAN, Assistant Director DOLORES S. SMITH, Associate Director MOLLY S. WASSOM, Assistant Director MAUREEN P. ENGLISH, Assistant Director WILLIAM SCHNEIDER, Project Director, IRENE SHAWN MCNULTY, Assistant Director National Information Center 1. On loan from the Division of Information Resources Management Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LAWRENCE B. LINDSEY JANET L. YELLEN SUSAN M. PHILLIPS OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director DAVID L. ROBINSON, Deputy Director (Finance and DIVISION OF HUMAN RESOURCES Control) MANAGEMENT LOUISE L. ROSEMAN, Associate Director CHARLES W. BENNETT, Assistant Director DAVID L. SHANNON, Director JACK DENNIS, JR., Assistant Director JOHN R. WEIS, Associate Director EARL G. HAMILTON, Assistant Director ANTHONY V. DIGIOIA, Assistant Director JEFFREY C. MARQUARDT, Assistant Director JOSEPH H. HAYES, JR., Assistant Director JOHN H. PARRISH, Assistant Director FRED HOROWITZ, Assistant Director FLORENCE M. YOUNG, Assistant Director OFFICE OF THE CONTROLLER OFFICE OF THE INSPECTOR GENERAL GEORGE E. LIVINGSTON, Controller STEPHEN J. CLARK, Assistant Controller (Programs and BRENT L. BOWEN, Inspector General DONALD L. ROBINSON, Assistant Inspector General Budgets) BARRY R. SNYDER, Assistant Inspector General DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director ELIZABETH B. RIGGS, Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • February 1995 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman ALAN S. BLINDER LAWRENCE B. LINDSEY MICHAEL H. MOSKOW THOMAS M. HOENIG THOMAS C. MELZER SUSAN M. PHILLIPS EDWARD W. KELLEY, JR. CATHY E. MINEHAN JANET L. YELLEN JOHN P. LAWARE ALTERNATE MEMBERS EDWARD G. BOEHNE ROBERT D. MCTEER GARY H. STERN JERRY L. JORDAN JAMES H. OLTMAN STAFF DONALD L. KOHN, Secretary and Economist MARVIN S. GOODFRIEND, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary DAVID E. LINDSEY, Associate Economist JOSEPH R. COYNE, Assistant Secretary FREDERIC S. MISHKIN, Associate Economist GARY P. GILLUM, Assistant Secretary LARRY J. PROMISEL, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel CHARLES J. SIEGMAN, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel THOMAS D. SIMPSON, Associate Economist MICHAEL J. PRELL, Economist MARK S. SNIDERMAN, Associate Economist EDWIN M. TRUMAN, Economist DAVID J. STOCKTON, Associate Economist JACK H. BEEBE, Associate Economist SHEILA L. TSCHINKEL, Associate Economist JOAN E. LOVETT, Manager for Domestic Operations, System Open Market Account PETER R. FISHER, Manager for Foreign Operations, System Open Market Account FEDERAL ADVISORY COUNCIL MARSHALL N. CARTER, First District ROGER L. FITZSIMONDS, Seventh District WALTER V. SHIPLEY, Second District ANDREW B. CRAIG, III, Eighth District ANTHONY P. TERRACCIANO, Third District RICHARD M. KOVACEVICH, Ninth District FRANK V. CAHOUET, Fourth District CHARLES E. NELSON, Tenth District RICHARD G. TILGHMAN, Fifth District CHARLES R. HRDLICKA, Eleventh District CHARLES E. RICE, Sixth District EDWARD A. CARSON, Twelfth District HERBERT V. PROCHNOW, Secretary Emeritus JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONSUMER ADVISORY COUNCIL JAMES L. WEST, Tijeras, New Mexico, Chairman KATHARINE W. MCKEE, Washington, D.C., Vice Chairman D. DOUGLAS BLANKE, St. Paul, Minnesota THOMAS L. HOUSTON, Dallas, Texas THOMAS R. BUTLER, Riverwoods, Illinois TERRY JORDE, Cando, North Dakota ROBERT A. COOK, Baltimore, Maryland EUGENE I. LEHRMANN, Madison, Wisconsin ALVIN J. COWANS, Orlando, Florida RONALD A. PRILL, Minneapolis, Minnesota MICHAEL FERRY, St. Louis, Missouri LISA RICE-COLEMAN, Toledo, Ohio ELIZABETH G. FLORES, Laredo, Texas JOHN R. RINES, Detroit, Michigan EMANUEL FREEMAN, Philadelphia, Pennsylvania JULIA M. SEWARD, Richmond, Virginia NORMA L. FREIBERG, New Orleans, Louisiana ANNE B. SHLAY, Philadelphia, Pennsylvania DAVID C. FYNN, Cleveland, Ohio REGINALD J. SMITH, Kansas City, Missouri LORI GAY, LOS Angeles, California JOHN E. TAYLOR, Washington, D.C. ROBERT G. GREER, Houston, Texas LORRAINE VANETTEN, Troy, Michigan KENNETH R. HARNEY, Chevy Chase, Maryland GRACE W. WEINSTEIN, Englewood, New Jersey GAIL K. HILLEBRAND, San Francisco, California LILY K. YAO, Honolulu, Hawaii RONALD A. HOMER, Boston, Massachusetts ROBERT O. ZDENEK, Greenwich, Connecticut THRIFT INSTITUTIONS ADVISORY COUNCIL CHARLES JOHN KOCH, Cleveland, Ohio, President STEPHEN D. TAYLOR, Miami, Florida, Vice President E. LEE BEARD, Hazleton, Pennsylvania DAVID F. HOLLAND, Burlington, Massachusetts JOHN E. BRUBAKER, San Mateo, California JOSEPH C. SCULLY, Chicago, Illinois MALCOLM E. COLLIER, Lakewood, Colorado JOHN M. TIPPETS, DFW Airport, Texas GEORGE L. ENGELKE, JR., Lake Success, New York LARRY T. WILSON, Raleigh, North Carolina BEVERLY D. S. HARRIS, Livingston, Montana WILLIAM W. ZUPPE, Spokane, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated MS-127, Board of Governors of the Federal Reserve System, monthly. (Requests must be prepaid.) Washington, DC 20551 or telephone (202) 452-3244 or FAX Consumer and Community Affairs Handbook. $75.00 per (202) 728-5886. When a charge is indicated, payment should year. accompany request and be made payable to the Board of Monetary Policy and Reserve Requirements Handbook. Governors of the Federal Reserve System or may be ordered $75.00 per year. via Mastercard or Visa. Payment from foreign residents should Securities Credit Transactions Handbook. $75.00 per year. be drawn on a U.S. bank. The Payment System Handbook. $75.00 per year. Federal Reserve Regulatory Service. Four vols. (Contains all four Handbooks plus substantial additional material.) $200.00 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Rates for subscribers outside the United States are as follows 1984. 120 pp. and include additional air mail costs: ANNUAL REPORT. Federal Reserve Regulatory Service, $250.00 per year. ANNUAL REPORT: BUDGET REVIEW, 1993-94. Each Handbook, $90.00 per year. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- $2.50 each in the United States, its possessions, Canada, COUNTRY MODEL, May 1984. 590 pp. $14.50 each. and Mexico. Elsewhere, $35.00 per year or $3.00 each. WELCOME TO THE FEDERAL RESERVE. March 1989. 14 pp. ANNUAL STATISTICAL DIGEST: period covered, release date, INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. number of pages, and price. 440 pp. $9.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1982 December 1983 266 pp. $ 7.50 December 1986. 264 pp. $10.00 each. 1983 October 1984 264 pp. $11.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1984 October 1985 254 pp. $12.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1985 October 1986 231 pp. $15.00 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 EDUCATION PAMPHLETS 1988 November 1989 256 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1980-89 March 1991 712 pp. $25.00 available without charge. 1990 November 1991 185 pp. $25.00 1991 November 1992 215 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1992 December 1993 215 pp. $25.00 Consumer Handbook to Credit Protection Laws 1993 December 1994 281 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES The Board of Governors of the Federal Reserve System OF CHARTS. Weekly. $30.00 per year or $.70 each in the The Federal Open Market Committee United States, its possessions, Canada, and Mexico. Else- Federal Reserve Bank Board of Directors where, $35.00 per year or $.80 each. Federal Reserve Banks Organization and Advisory Committees THE FEDERAL RESERVE ACT and other statutory provisions A Consumer's Guide to Mortgage Lock-Ins affecting the Federal Reserve System, as amended through A Consumer's Guide to Mortgage Settlement Costs August 1990. 646 pp. $10.00. A Consumer's Guide to Mortgage Refinancings REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Home Mortgages: Understanding the Process and Your Right RESERVE SYSTEM. to Fair Lending ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— How to File a Consumer Complaint Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Making Deposits: When Will Your Money Be Available? Vol. II (Irregular Transactions). 1969. 116 pp. Each vol- Making Sense of Savings ume $2.25. SHOP: The Card You Pick Can Save You Money GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 When Your Home is on the Line: What You Should Know each. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 STAFF STUDIES: Only Summaries Printed in the 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM BULLETIN MORTGAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Studies and papers on economic and financial subjects that are ( of general interest. Requests to obtain single copies of the full CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, text or to be added to the mailing list for the series may be sent Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary to Publications Services. Ann Taylor. March 1992. 37 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by Staff Studies 1-157 are out of print. James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, PRODUCTS, by Mark J. Warshawsky with the assistance of by Gregory E. Elliehausen and John D. Wolken. Septem- Dietrich Earnhart. September 1989. 23 pp. ber 1993. 18 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSID- 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, IARIES OF BANK HOLDING COMPANIES, by Nellie Liang by Mark Carey, Stephen Prowse, John Rea, and Gregory and Donald Savage. February 1990. 12 pp. Udell. January 1994. Ill pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by BANKING, 1980-93, AND AN ASSESSMENT OF THE "OPER- Gregory E. Elliehausen and John D. Wolken. September ATING PERFORMANCE" AND "EVENT STUDY" METHOD- 1990. 35 pp. OLOGIES, by Stephen A. Rhoades. July 1994. 37 pp. 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 1980-90, by Margaret Hastings Pickering. May 1991. 21pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 Maps of the Federal Reserve System ALASKA LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city • Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts Commonwealth of Puerto Rico and the U.S. Virgin by number and Reserve Bank city (shown on both Islands; the San Francisco Bank serves American pages) and by letter (shown on the facing page). Samoa, Guam, and the Commonwealth of the In the 12th District, the Seattle Branch serves Northern Mariana Islands. The Board of Governors Alaska, and the San Francisco Bank serves Hawaii. revised the branch boundaries of the System most The System serves commonwealths and terri- recently in December 1991. Digitized for FRAStEoRri es as follows: the New York Bank serves the http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A85 1-A 2-B 3-C 4-D 5_E Baltimore^ Pittsburgh d" i< / NH • Cincinnati Buffalo MA| • • \ KV NJ NY BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 7-G 8-H * 1 IN # slBBBBf JBpMr^ ./^Louisville IHHHsi Detroit • J, Ij TN LA AR • Memphis New? Orleans Littlf > MS Rock I ATLANTA CHICAGO ST. LOUIS 9-1 10-J 12-L KANSAS CITY 11-K DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 Jerome H. Grossman Cathy E. Minehan William C. Brainard Paul M. Connolly NEW YORK* 10045 Maurice R. Greenberg William J. McDonough David A. Hamburg James H. Oltman Buffalo 14240 Joseph J. Castiglia Carl W. Turnipseed1 PHILADELPHIA 19105 James M. Mead Edward G. Boehne Donald J. Kennedy William H. Stone, Jr. CLEVELAND* 44101 A. William Reynolds Jerry L. Jordan G. Watts Humphrey, Jr. Sandra Pianalto Cincinnati 45201 John N. Taylor, Jr. Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Henry J. Faison J. Alfred Broaddus, Jr. Claudine B. Malone Jimmie R. Monhollon Baltimore 21203 Michael R. Watson Ronald B. Duncan1 Charlotte 28230 James O. Roberson Walter A. Varvel1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 LeoBenatar Robert P. Forrestal Hugh M. Brown Jack Guynn Donald E. Nelson1 Birmingham 35283 Patricia B. Compton Fred R. Herr1 Jacksonville 32231 Lana Jane Lewis-Brent James D. Hawkins1 Miami 33152 Michael T. Wilson James T. Curry III Nashville 37203 James E. Dalton, Jr. Melvyn K. Purcell New Orleans 70161 Jo Ann Slaydon Robert J. Musso CHICAGO* 60690 Robert M. Healey Michael H. Moskow Richard G. Cline William C. Conrad Detroit 48231 John D. Forsyth Roby L. Sloan1 ST. LOUIS 63166 Robert H. Quenon Thomas C. Melzer John F. McDonnell James R. Bowen Little Rock 72203 To be announced Karl W. Ashman Louisville 40232 To be announced Howard Wells Memphis 38101 Woods E. Eastland John P. Baumgartner MINNEAPOLIS 55480 Gerald A. Rauenhorst Gary H. Stern Jean D. Kinsey Colleen K. Strand Helena 59601 Matthew J. Quinn John D. Johnson KANSAS CITY 64198 Herman Cain Thomas M. Hoenig A. Drue Jennings Richard K. Rasdall Denver 80217 Sandra K. Woods Kent M. Scott1 Oklahoma City 73125 Ernest L. Holloway David J. France Omaha 68102 Sheila Griffin Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Tony J. Salvaggio El Paso 79999 To be announced Sammie C.Clay Houston 77252 To be announced Robert Smith, III1 San Antonio 78295 To be announced James L. Stull1 SAN FRANCISCO 94120 Judith M. Runstad Robert T. Parry James A. Vohs Patrick K. Barron Los Angeles 90051 Anita E. Landecker John F.Moore1 Portland 97208 Ross R. Runkel1 A. Kenneth Ridd Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 George F. Russell, Jr. Gordon Werkema1 •Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. 1. Senior Vice President. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of Three booklets on the mortgage process are also pamphlets covering individual credit laws and topics, available: A Consumer's Guide to Mortgage Lock-Ins, as pictured below. The series includes such subjects A Consumer's Guide to Mortgage Refinancings, and as how the Equal Credit Opportunity Act protects A Consumer's Guide to Mortgage Settlement Costs. women against discrimination in their credit dealings, These booklets were prepared in conjunction with the how to use a credit card, and how to resolve a billing Federal Home Loan Bank Board and in consultation error. with other federal agencies and trade and consumer The Board also publishes the Consumer Handbook groups. to Credit Protection Laws, a complete guide to con- Copies of consumer publications are available free sumer credit protections. This forty-four-page booklet of charge from Publications Services, mail stop 127, explains how to shop and obtain credit, how to main- Board of Governors of the Federal Reserve System, tain a good credit rating, and how to dispute unfair Washington, DC 20551. Multiple copies for classcredit transactions. room use are also available free of charge. A 9ui4ft to Business A Consumer's A Consumer's Credit Guide to Guide to Mortgage Mortgage Lock-Ins Settlement Costs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Statistical Releases Available on the Commerce Department's Economic Bulletin Board The Board of Governors of the Federal Reserve scription. For further information regarding a System makes some of its statistical releases avail- subscription to the economic bulletin board, able to the public through the U.S. Department of please call (202) 482-1986. The releases transmitted Commerce's economic bulletin board. Computer to the economic bulletin board, on a regular basis, access to the releases can be obtained by sub- are the following: Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H.4.1 Factors Affecting Reserve Balances Weekly/Thursday H.6 Money Stock Weekly/Thursday H.8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H.15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z.7 Row of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis