Federal Reserve Bulletin, 1995-12

VOLUME 81 • NUMBER 12 • DECEMBER 1995 FEDERAL RESERVE 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 1065 DAYLIGHT OVERDRAFT FEES AND THE presents the views of the Board on issues FEDERAL RESERVE'S PAYMENT SYSTEM raised by various emerging electronic pay- RISK POLICY ment technologies that go under such names as "digital cash" or "electronic money" and In April 1994 the Federal Reserve began says that the Federal Reserve does not want charging fees for daylight overdrafts incurred to inhibit the evolution of this emerging in accounts at Federal Reserve Banks. The industry by regulation or to constrain its fees produced a dramatic decline in overgrowth and has encouraged, and will condrafts and led to significant changes in martinue to encourage, innovations in payments ket practices, particularly in the government technologies that benefit consumers and busisecurities market. This article summarizes nesses, before the Subcommittee on Domesthe results to date of the implementation of tic and International Monetary Policy of the the Federal Reserve's daylight overdraft pro- House Committee on Banking and Financial gram, focusing on the effect of fees. It also Services, October 11,1995. highlights related policies for large-value payment systems in the private sector. 1093 Janet L. Yellen, Member, Board of Governors, discusses issues related to mergers among U.S. banking organizations and says 1078 TREASURY AND FEDERAL RESERVE that the very large bank mergers that have FOREIGN EXCHANGE OPERATIONS been consummated or announced in recent During the third quarter of 1995, the dollar years, and particularly in recent months, have rose 17.6 percent against the Japanese yen, raised a number of public policy questions 3.3 percent against the German mark, and and concerns and that, in the view of the 2.1 percent against the Mexican peso but fell Federal Reserve Board, the primary objec- 2.3 percent against the Canadian dollar. On tives of public policy in this area should be a trade-weighted basis against the curren- to help manage the evolution of the banking cies of the Group of Ten countries, it rose industry in ways that preserve the benefits of 3.2 percent. competition for the consumers of banking services and to ensure a safe and sound bank- 1086 INDUSTRIAL PRODUCTION ing system, before the Subcommittee on AND CAPACITY UTILIZATION Financial Institutions and Consumer Credit FOR OCTOBER 1995 of the House Committee on Banking and Financial Services, October 17, 1995. Industrial production declined 0.3 percent in October, to 122.7 percent of its 1987 , after having edged up a revised 0.1 percent in September. Capacity utiliza- 1103 ANNOUNCEMENTS tion declined 0.5 percentage point, to Meeting of the Consumer Advisory Council. 83.6 percent. Development of new software for institu- 1089 STATEMENTS TO THE CONGRESS tions offering mortgage loans. Alan S. Blinder, Vice Chairman, Board of Schedule for review of major Federal Governors of the Federal Reserve System, Reserve regulations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publication of revised lists of OTC margin A68 INDEX TO STATISTICAL TABLES stocks and of foreign stocks subject to margin regulations. A70 BOARD OF GOVERNORS AND STAFF Availability of some Federal Reserve statisti- A72 FEDERAL OPEN MARKET COMMITTEE cal releases by fax. AND STAFF; ADVISORY COUNCILS 1105 LEGAL DEVELOPMENTS A74 FEDERAL RESERVE BOARD Various bank holding company, bank service PUBLICATIONS corporation, and bank merger orders; and pending cases. A76 SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES A1 FINANCIAL AND BUSINESS STATISTICS A78 INDEX TO VOLUME 81 These tables reflect data available as of October 27, 1995. A90 MAPS OF THE FEDERAL RESERVE SYSTEM A3 GUIDE TO TABULAR PRESENTATION A4 Domestic Financial Statistics A92 FEDERAL RESERVE BANKS, BRANCHES, A45 Domestic Nonfinancial Statistics AND OFFICES A53 International Statistics A67 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and the Federal Reserve's Payment System Risk Policy Heidi Willmann Richards, of the Board's Division Historically, intraday credit extensions went of Reserve Bank Operations and Payment Systems, largely unmeasured because attention within the prepared this article. banking industry was focused mainly on processing payments rather than on managing associated In April 1994 the Federal Reserve began charging intraday risks. In addition, nearly unlimited intrafees for daylight overdrafts incurred in accounts at day credit was available from the Federal Reserve Federal Reserve Banks. The event was an impor- at no cost. Banks normally accumulated payment tant step in the Federal Reserve's ten-year program instructions during the day and posted them to to control daylight overdrafts and their associated customers' accounts at the close of the banking payment system risk. The fees produced a dramatic day, a practice that can be viewed as reasonable decline in overdrafts and led to significant changes and cost-effective given the operational and legal in market practices, particularly in the government infrastructure at that time. As a result, however, securities market. This article summarizes the settlement conventions related to the transactions results to date of the implementation of the Federal most often characterized by same-day settlement— Reserve's daylight overdraft program, focusing on such as financing in the markets for federal funds the effect of fees. It also highlights related policies and repurchase agreements—came to be based for large-value payment systems in the private upon the availability of unlimited, free intraday sector. overdraft credit from the Federal Reserve. Daylight overdrafts in accounts at Federal Reserve Banks in fact arise from a variety of BACKGROUND causes. The Federal Reserve's original overdraft policies were focused on intraday credit resulting Daylight overdrafts are a form of intraday credit from the transfer of funds through Fedwire, the in which a holder of a deposit account at a bank Federal Reserve's electronic, real-time funds transor other depository institution runs a negative fer system often used for large-value interbank balance in its account during the day but ends the payments. Overdrafts are, however, also caused by day with a balance equal to or greater than zero. payments of banks and their customers that arise An example of a daylight overdraft is the case in from transfers of government securities via Fedwhich a deposit account holder (1) makes with- wire as well as from non-Fedwire transactions such drawals from the account in the early part of the as automated clearinghouse (ACH) payments, day that exceed the account's opening cash balance checks, and other payment activity posted directly and (2) does not make deposits sufficient to cover to depository institution accounts at the Federal the withdrawals until later in the day. When the Reserve. customer's withdrawals require its bank to send For many institutions, payments made on a given payments through Federal Reserve systems, this day may exceed that day's opening balance (the type of customer activity can, in turn, cause day- previous day's overnight balance) with the Federal light overdrafts in the Federal Reserve account of Reserve. Indeed, in 1994, the total value of funds the customer's bank. In addition, the bank's own and securities transfers through Fedwire, ACH activity, such as federal funds borrowing and lend- payments processed by the Federal Reserve, and ing and the associated payment activity, can also checks cleared through the Federal Reserve avercause daylight overdrafts. aged $1.5 trillion per day; in contrast, the average Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1066 Federal Reserve Bulletin • December 1995 daily opening balance of all depository institution greater dollar value of payments than does accounts at the Federal Reserve that year was Fedwire—in 1994, about $1.2 trillion per day for $32 billion (depository institutions maintain bal- CHIPS, and more than $800 billion per day for ances to satisfy reserve requirements as well as to Fedwire funds transfers. clear payments). Many of these payments were covered by funds in the accounts, but a significant portion were not. In 1994, for example, direct ORIGINS AND DEVELOPMENT OF measures of daylight overdrafts show that the Fed- THE PAYMENT SYSTEM RISK POLICY eral Reserve extended about $50 billion in intraday overdraft credit on average during the day (table 1); and on any given day an average of about The Federal Reserve's efforts to measure and con- 2,400 institutions incurred daylight overdrafts in trol daylight overdrafts and other risks in the paytheir accounts at the Federal Reserve out of a total ment system date from the late 1970s and early of nearly 11,000 institutions with such accounts. 1980s.2 During that period, public policy concerns were first raised about the size and growth of intra- Private payment systems such as the Clearing day credit related to large-value payment systems. House Interbank Payment System (CHIPS) also involve extensions of intraday credit.1 Owned and Because Fedwire payments are final and irrevooperated by the private New York Clearing House, cable, the Federal Reserve bears some degree of CHIPS currently has a membership of more than intraday credit risk when such payments are pro- 100 banks, a large number of which are branches cessed without sufficient funds in the sending and agencies of foreign banks. Through CHIPS, bank's account.3 Daylight overdrafts, if not repaid members can send electronic payment messages to by, the end of the day, could readily become unseone another during the day. The value of the pay- cured overnight overdrafts. The Federal Reserve ment messages is settled on a multilateral net basis strongly discourages overnight overdrafts by imat the end of the business day. No accounts analo- posing high monetary penalties on them and by gous to those at the Federal Reserve exist in taking administrative action against institutions that CHIPS, but members are exposed to credit risk incur them repeatedly. associated with payment messages they have Concerns about the magnitude of the credit risk received until settlement has been successfully borne by the Federal Reserve in regard to daylight completed each day. CHIPS currently handles a overdrafts were heightened in the early 1980s. During that time, the Reserve Banks began to monitor the intraday account balances of institutions rou- 1. For more information about CHIPS, see Bank for Interna- tinely and to collect data on institutions with the tional Settlements, Payment Systems in the Group of Ten Countries largest daylight overdrafts. These data indicated (December 1993), pp. 449-51; and Federal Reserve Bank of New York, "The Clearing House Interbank Payments System" that aggregate daylight overdrafts on any given day (January 1991). often ran into the billions of dollars; furthermore, overdrafts for a small group of institutions often 1. Daylight overdrafts of depository institutions at Federal exceeded their capital by several times. Reserve Banks, 1986-94 Also during the early 1980s, intraday credit risk Millions of dollars exposures in private systems, such as CHIPS, drew the attention of the Federal Reserve and private Average i nUt otSf1 participants. Under the rules then in effect, the 1986 33333333330000000000,,,,,,,,,,111111111177777777770000000000 66666666662222222222,,,,,,,,,,999999999944444444440000000000 1987 33333333332222222222,,,,,,,,,,333333333377777777773333333333 66666666665555555555..........222222222200000000003333333333 2. A summary of daylight overdraft issues and the Federal 1988 33333333331111111111,,,,,,,,,,999999999944444444445555555555 66666666663333333333,,,,,,,,,,222222222222222222228888888888 1989 33333333336666666666,,,,,,,,,,111111111111111111118888888888 77777777772222222222,,,,,,,,,,999999999988888888884444444444 Reserve's policies is in Terrence M. Belton, Matthew D. Gelfand, 1990 44444444444444444444,,,,,,,,,,000000000044444444447777777777 99999999991111111111,,,,,,,,,,111111111177777777770000000000 David B. Humphrey, and Jeffrey C. Marquardt, "Daylight Over- 1991 55555555552222222222,,,,,,,,,,999999999911111111118888888888 111111111100000000006666666666,,,,,,,,,,111111111188888888885555555555 drafts and Payments System Risk," Federal Reserve Bulletin, 1992 66666666663333333333,,,,,,,,,,333333333344444444447777777777 111111111122222222221111111111,,,,,,,,,,444444444422222222227777777777 vol. 73 (November 1987), pp. 839-52. 1993 77777777770000000000,,,,,,,,,,222222222200000000004444444444 111111111122222222228888888888,,,,,,,,,,555555555522222222223333333333 1994 4444444444----------9999999999,,,,,,,,,,888888888844444444446666666666 88888888884444444444,,,,,,,,,,444444444444444444449999999999 3. Under the Federal Reserve's Regulation J, Fedwire funds tranfers are final and irrevocable when the Reserve Bank credits the NOTE. Annual averages of daily figures. See text note 7 for definitions account of the receiving bank or sends the advice of payment to the of average per-minute and peak daylight overdrafts. bank, whichever occurs first (12 CFR 210.31). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1067 default of a large participant in CHIPS before end- Reserve did not endorse an outright prohibition of of-day settlement could have caused the unwinding daylight overdrafts as a necessary or desirable polof that day's net settlement on CHIPS, leaving icy outcome. Indeed, concerns expressed then as some other participants with a large, sudden short- well as now are that the prohibition of all overage of funds.4 The potential systemic repercussions drafts could seriously disrupt the U.S. money marof such a scenario were substantial given the in- kets, especially the markets for federal funds and creasing volumes of large-value interbank transac- government securities. tions being processed over CHIPS. As a result of these efforts, the Board in 1985 Prompted by these concerns, the Federal Reserve adopted a program of maximum limits, or net debit Board and private-sector groups began studies of caps, for each institution on the combined intraday the causes and potential means of controlling pay- credit provided both by the Federal Reserve and by ment system risk, including the risk arising from participants in CHIPS. These net debit caps were daylight overdrafts in Federal Reserve accounts. based on an institution's own assessment of its Between 1982 and 1988, they produced a series of capacity to absorb and control daylight credit risks, reports that analyzed a variety of potential means including its financial condition and liquidity of reducing overdrafts.5 Such measures included resources, controls on intraday credit extensions to quantitative limits on daylight overdrafts (caps), customers, and its ability to monitor payments on fees, collateral, and increases in minimum required an intraday basis. account balances. Under the 1985 initiative, the level of the cap In April 1984 the Federal Reserve Board issued could be as high as three times an institution's for public comment a proposed policy statement regulatory capital. The Federal Reserve monitored on reducing risk in large-dollar transfer systems. daylight overdrafts daily as well as on average over The stated objectives of the policy at that time were each two-week reserve maintenance period, and to contain the effects of a settlement failure, reduce the Reserve Banks took administrative measures the volume of intraday credit exposures, control the aimed at reducing the overdrafts of institutions remaining credit risk, and promote the smooth that repeatedly exceeded their caps. The Reserve operation of the payment system. The 1988 study Banks also retained the flexibility to deal with by the Federal Reserve, Controlling Risk in the troubled institutions as circumstances required. The Payments System, also included objectives of rapid Federal Reserve has modified its policy on caps final payments, low operating expense for making several times, most recently by incorporating a payments, equitable treatment of payment system streamlined approach to assessing an institution's participants, and effective tools for implementing creditworthiness and by including an assessment of monetary policy. Although the Fedwire system is its operating controls and contingency procedures. capable of automatically blocking funds transfers In 1989 the Federal Reserve issued a policy that would create an overdraft (and is currently statement aimed at reducing systemic risk in priused to do so in certain circumstances), the Federal vate, large-dollar payment systems. In part, this policy addressed concerns that efforts to reduce the intraday credit risk borne by the Federal 4. A discussion of settlement failure scenarios in netting arrangements is in David B. Humphrey, "Payments Finality and Reserve, such as by reducing net debit caps or Risk of Settlement Failure," in Anthony Saunders and Lawrence charging fees for the use of Federal Reserve day- White, eds., Technology and the Regulation of Financial Markets light credit, would cause risks to be shifted to (Lexington Books, 1986), pp. 97-120. 5. Among the studies on controlling payment system risk were private networks. By 1984 the New York Clearing Association of Reserve City Bankers, Issues and Needs in the House had implemented bilateral credit limits Nation's Payments System (Washington, 1982) and Risks in the among participants in CHIPS, and by 1986 it had Electronic Payments Systems (1983); Large-Dollar Payments System Advisory Group, A Strategic Plan for Managing Risk in the implemented net debit caps. In 1990, the New York Payments System: Report . .. to the Payments System Policy Clearing House adopted explicit arrangements for Committee of the Federal Reserve System (Board of Governors of loss sharing and took other steps to strengthen the Federal Reserve System for the ... Advisory Group, 1988); and Task Force on Controlling Payments System Risk, Controlling Risk settlement procedures in CHIPS. As a result, the in the Payments System: Report... to the Payments System Policy Federal Reserve eliminated its net debit caps on Committee of the Federal Reserve System (Board of Governors of CHIPS positions as of early 1991; the CHIPS caps the Federal Reserve System, 1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1068 Federal Reserve Bulletin • December 1995 were thereafter monitored automatically within the time, the Board stated that, rather than increase CHIPS system. the fee again in April 1996, it intended to wait two years before evaluating the results of the April 1995 increase. The Board's decision to moderate, Fee Policy on Daylight Overdrafts but not eliminate, the scheduled fee increase was based on three considerations. First, as discussed in Studies conducted by the private sector and by the greater detail below, the response by depository Federal Reserve in the late 1980s concluded that institutions and their customers to the 10 basis charging fees to reduce daylight overdrafts and point fee had significantly reduced the use of Fedtheir associated risk would be preferable to other eral Reserve daylight credit. Second, the Board means, such as collateralization and more restric- believed that some increase would provide a sigtive net debit caps. The Federal Reserve also nificant incentive for depository institutions and expected fees on daylight overdrafts to provide their customers to further evaluate and modify paymarket-oriented incentives that would distribute ment practices that create daylight overdrafts. Federal Reserve intraday credit more efficiently, Third, the Board was concerned that the more rapid that is, to those institutions that value it most highly increase in fees originally planned could cause a at a given time. In 1992, after considering public substantial volume of large-value payments to be comments, the Federal Reserve Board announced shifted to less secure payment systems and thereby its intention to charge fees for overdrafts, begin- increase payment system risk. ning in April 1994, as a supplement to the existing net debit cap policy, which the Board decided to retain in addition to fees. In effect, this decision left EXPERIENCE WITH THE PAYMENT SYSTEM institutions with two moderating influences on their RISK POLICY: 1986-93 use of Federal Reserve credit: a credit limit (the net debit cap) and an explicit price on the use of that During the period between the imposition of caps credit (the daylight overdraft fee). in March 1986 and the implementation of fees in The fee was set at a level intended to be compa- April 1994, daylight overdrafts in Federal Reserve rable to the cost of measures institutions could take accounts increased almost continuously. The to avoid daylight overdrafts. The Board set the increase is evident in two measures of aggregate initial fee at an annual rate of 10 basis points daylight overdrafts, the peak and the per-minute (0.10 percent) of chargeable daily daylight over- average (chart 1). The peak daylight overdraft can drafts, effective April 14, 1994. The chargeable be viewed as the Federal Reserve's maximum overdraft is the institution's average per-minute intraday credit exposure to all institutions comdaylight overdraft for a given day, less a deductible amount equal to 10 percent of its risk-based capital. The Board also scheduled increases in the fee, to 1. Peak and average daylight overdrafts, 1986-93 20 basis points in April 1995 and 25 basis points in April 1996, while reserving the right to change the the level of these fees or the timetable for their implementation in light of experience with the program.6 In early 1995, the Board determined that a smaller fee increase for April 1995, to 15 basis points, would be more appropriate than the doubling, to 20 basis points, originally planned. At that 6. These rates are quoted on a ten-hour basis, which is the current length of the operating day of the Fedwire funds transfer system. On a twenty-four-hour basis, the measure employed in the NOTE. Quarterly averages of daily data. Here and in the following charts, Federal Reserve's policy statement, the initial fee was 24 basis daylight overdrafts are for accounts of depository institutions at Federal points, to be increased, in phases, to 60 basis points. Reserve Banks. For definitions of peak and average, see text note 7. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1069 bined, at any particular time during the day; and the tice that had contributed to overdrafts.8 Securitiesaverage per-minute daylight overdraft is the Fed- related overdrafts continued to rise, however. In eral Reserve's average exposure to all institutions 1991, the Federal Reserve began including over the course of the day (and is the base upon securities-related overdrafts within the measure of which daylight overdraft fees are assessed).7 Dur- overdrafts subject to a cap. But the Federal Reserve ing the 1986-93 period, peak and average over- allowed financially healthy institutions to exclude drafts both grew at an average annual rate of about securities-related overdrafts from the cap by pledg- 12 percent; in fact, beginning in 1989, overdrafts ing collateral against those overdrafts, and it manincreased dramatically despite the fact that cap dated pledging of collateral for institutions that levels had been reduced the year before. breached their cap as a result of frequent and Securities activity on Fedwire appears to have material securities-related overdrafts. Indeed, generated much of the rise in overdrafts. Over- pledging collateral became standard practice drafts related to securities transfers were monitored among the small group of securities clearing banks separately because they were afforded special treat- whose customers' activity generated substantial ment under the net debt cap policy (as discussed daylight overdrafts. Thus, even after 1991, net debit below). Although the method of allocating total caps did not have a significant effect on the majordaylight overdrafts into a securities-related portion ity of overdrafts related to securities transfers. and a funds-related portion is based on an account- The most likely cause of the sharp rise in ing procedure that can be viewed as somewhat securities-related daylight overdrafts during the arbitrary, the distinction between the two is important to an understanding of the major trends in overdrafts during this period. 8. Securities dealers would hold securities until near the close of the Fedwire securities transfer system (2:30 p.m. or later) to make sure that they could complete large deliveries first and avoid costly failures to deliver. This practice delayed the receipt of funds into Securities-Related Overdrafts the dealers' accounts and exacerbated daylight overdrafts at major securities clearing banks. Concerns that caps on securities-related overdrafts might disrupt the government securities market led 2. Securities-related and funds-related peak daylight the Federal Reserve to apply net debit caps at the overdrafts, 1986-93 outset to only the portion of daylight overdrafts not related to transfers of securities through Fedwire. Between 1986 and 1993, the size of securitiesrelated daylight overdrafts more than doubled (chart 2), and their proportion of total overdrafts swelled from about one-half to about two-thirds. In early 1988, the Federal Reserve adopted a $50 million limit on the size of securities transfers to discourage "position building" by dealers, a prac- 7. The aggregate peak daylight overdraft for a given day is the NOTE. Quarterly averages of daily data. An institution's securities-related greatest value reached by the sum of daylight overdrafts in Federal daylight overdraft at any minute during the day is defined as a negative Reserve accounts for all depository institutions at the end of each securities-related balance in its Federal Reserve account plus any fundsminute during the day. (This measure is not to be confused with the related positive balance at that minute. The securities-related balance is composite peak daylight overdraft, a measure that aggregates all defined as the sum of all credits and debits from Fedwire securities transfers institutions' peak daily daylight overdrafts regardless of their up until the given minute of the day. The funds-related balance is defined as timing.) the sum of each institution's opening balance plus debits and credits for Fedwire funds transfers up to that minute, plus debits and credits for The aggregate average per-minute daylight overdraft for a given non-Fedwire payments posted according to the daylight overdraft measureday is the sum of average per-minute daylight overdrafts for all ment rules in effect at the time (see text). institutions on that day. An institution's average per-minute over- The Federal Reserve initiated net debit caps in March 1986. draft for a given day is the sum of its overdrafts at the end of each 1. First reduction in net debit caps. minute in the standard operating day of the Fedwire funds transfer 2. Second reduction in net debit caps. system divided by the number of such minutes. 3. Securities-related overdrafts included in net debit caps. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1070 Federal Reserve Bulletin • December 1995 1989-93 period was increased activity in the mar- funds overdrafts (those related to Fedwire funds ket for repurchase agreements (RPs). Securities transfers as well as ACH payments, checks, and dealers commonly use RPs for overnight or very miscellaneous other payments posted to Federal short term financing of the securities they hold. In Reserve accounts). Although not always binding the case of overnight RPs, the borrower of funds for all institutions, caps provide an incentive to (or the borrower's clearing bank in the case of control intraday account balances. For example, to nonbank dealers) typically delivers securities used reduce the probability of breaching caps, some as collateral to the lender in the afternoon and at institutions have installed automated systems for the same time receives funds in return. In the managing and queuing payments they send. morning the lender of funds returns the securities Moreover, because net debit caps are propor- (collateral) to the borrower (or its bank) and re- tional to each institution's capital base, the growth ceives its funds in exchange. When the borrower of funds-related overdrafts, if controlled, is likely and the lender do not use the same clearing bank, to be limited by the overall increase in the capital this process involves tranfers of securities against of institutions that typically incur overdrafts. In payment via the Fedwire securities transfer system fact, during the 1986-93 period, daylight overand typically generates overdrafts in the Federal drafts related to Fedwire funds transfers and other Reserve accounts of the clearing banks. These payments grew at 7 percent annually, on average, overdrafts start in the morning and extend into the roughly in line with growth in aggregate equity afternoon, when new RPs are arranged and settled. capital at all U.S. commercial banks. In turn, that No comprehensive measures of RP market activ- rate was less than the 8 percent growth rate of ity are available, but data collected by the Federal overall Fedwire funds transfer activity during this Reserve on RP positions of primary dealers in U.S. period. government securities provides an approximate The level of funds overdrafts (as well as of total picture of trends in this market. Indeed, the correla- overdrafts) was further affected by an Octotion between the growth in dealer RP positions ber 1993 change in the method of measuring dayand securities-related daylight overdrafts over the light overdrafts. The Federal Reserve's original 1989-93 period has been fairly close (chart 3). method tended to create additional intraday credit ("float") because credits for certain types of non- Fedwire payments were posted before correspond- Funds-Related Overdrafts ing debits. This float tends to reduce measured overdrafts by providing an implicit source of intra- During the 1986-93 period, net debit caps appear day credit. to have been successful in restraining the growth of The new method of measuring daylight overdrafts was designed to satisfy four basic principles: 3. Changes in average securities-related daylight the measurement method should (1) not provide overdrafts and in repurchase agreement positions intraday credit through float, (2) reflect the legal of primary dealers, 1989-93 rights and obligations of parties to a payment, (3) allow institutions to control their use of intraday credit, and (4) not give a competitive advantage to the payment services offered by the Reserve Banks. The new method measured daylight overdrafts comprehensively by posting non-Fedwire payments, such as checks and ACH payments, according to a predetermined schedule based on the type of payment and the time it was processed. Fedwire payments continued to be posted to accounts at the time they were executed. At the time it was implemented, the 1993 change 1989 1990 1991 1992 1993 in the method of measurement reduced average net NOTE. See note to chart 2. Data on repurchase agreements are reported intraday float about $25 billion (as reflected in the monthly in table 1.43 of the Federal Reserve Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1071 level of average net intraday balances—aggregate following April 14 (chart 5). Average per-minute positive balances less aggregate negative balances). overdrafts, the base measure upon which fees are The reduction in float reduced the implicit credit assessed, also declined 40 percent, from $70 bilavailable to cover daylight overdrafts and therefore lion, on average, to $43 billion. Although these caused such overdrafts to increase, as measured, data are not adjusted for seasonality and other roughly $10 billion.9 factors affecting longer-term trends in overdrafts, the direction and general magnitude of the shift is unmistakable. The effect has been proportionally EFFECT OF FEES ON OVERDRAFTS larger for securities-related overdrafts: Over the six months following April 14, securities-related day- The results of the initial implementation of daylight light overdrafts decreased about 45 percent, and overdraft fees has constituted the most significant funds overdrafts decreased about 25 percent. aspect of recent experience under the Federal Preliminary evidence from the April 1995 Reserve's daylight overdraft program. The imple- increase in the fee, to 15 basis points, does not, to mentation of the 10 basis point fee on April 14, date, show a significant additional effect on the 1994, had an immediate and dramatic effect on level of daylight overdrafts (chart 5 and table 2). daylight overdraft levels as well as on their typical Per-minute overdrafts have averaged $43 billion in intraday pattern (chart 4). the six months since the increase in the fee, the All measures of intraday overdrafts declined sig- same level as during the analogous period in 1994. nificantly beginning on April 14, 1994. Indeed, aggregate intraday peak overdrafts fell approximately 40 percent, from nearly $125 billion per 2. Daylight overdrafts of depository institutions at Federal Reserve Banks and assessed fees, 1994-95 day, on average, during the six months preceding Millions of dollars except as noted April 14, to about $70 billion in the six months Biweekly average of daily figures DDaayylliigghhtt DDaattee oovveerrddrraafftt ffeeeess Average 9. Although the dollar amount of increased overdrafts was not ((ddoollllaarrss))11 pe d r a - y m li i g n h u t t e Pe o a v k e r d d a r y a l f i t g 7 h t large relative to peak overdrafts of $130 billion at the time, the new overdraft2 measurement method made compliance with net debit caps difficult for those institutions, mostly smaller, whose payment activity con- 1994 sists primarily of checks or ACH payments. In 1994, the Federal Oct. 26 696,804 41,106 66,946 «» Nov. 9 680,195 40,448 68,574 Reserve modified its net debit cap classes and procedures some- Nov. 23 660,652 43,247 71,137 what to avoid undue burden on these institutions. Dec. 7 645,067 42,006 65,546 Dec 21 715,900 42,408 66,675 1995 4. Intraday pattern of daylight overdrafts Jan. 4 553,912 41,539 61,099 Jan. 18 630.555 42,001 60,822 before and after fees Feb 1 716,532 42,430 59,699 Feb. 15 726,262 42,173 59,281 S88S Mar I 685,962 44,079 64,789 Billions of dollars Mar 15 746,700 42,896 67,457 Mar. 29 640.989 38,888 62,882 Apr. 12 760,791 44.178 69,180 — 120 Apr. 26 855,770 36,635 54,986 y Before fees Ma\ 10 981,653 40,222 62,328 — X x — 100 Mav 24 1,060,085 42,619 67,885 June 7 46,875 74,623 — / \ — 80 June 21 43,087 72,674 July 5 44,797 69,979 V — 60 July 19 1,074,798 44.052 68,698 Aug. 2 1,089,331 44.171 68,903 v — 40 1,017,343 41,899 70,194 I After fees Aug. 30 41,328 66,648 — 20 1,010,447 44,799 72,925 r i i f i ll i i i Nv i 1,096,635 44,669 71,770 Oct. 11 1,090,043 46,948 72,932 9:00 10:00 11:00 12:00 1:00 2:00 3:00 4:00 5:00 6:00 Eastern time NOTE. Data for the period Oct. 27, 1993, to Nov. 23, 1994, were reported in the Federal Reserve Bulletin, vol. 81 (January 1995), p. 31. NOTE. Average at each fifteen-minute interval of the day for the six- 1. For the two-week period ending on the date shown; see text and text month periods before (Oct. 14, 1993, to April 3,1994) and after (April 14 to note 6 for definition of rate. Two-week fees of $25 or less are waived; neither Oct. 12, 1994) the implementation of daylight overdraft fees on April 14, waived fees nor daylight overdraft penalty fees are included in these totals. 1994. 2. See text note 7 for definition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1072 Federal Reserve Bulletin • December 1995 Institutions may have already implemented new 6. Real peak daylight overdrafts, 1986-95 systems and procedures in the period leading up to April 1994 based on an expectation that fees would Billions of 1986 dollars eventually increase to 25 basis points. Alternatively, daylight overdraft levels may not be espe- V — 100 cially sensitive to relatively small changes in the N level of the fee, or other factors may have offset 1 - SO any observable effect from the fee increase. When viewed over the longer term, the overall I — 60 reduction in overdrafts has been particularly striking. In constant-dollar terms, the implementation of fees has brought peak daylight overdrafts down below the levels of the mid-1980s (chart 6). NOTE. Quarterly averages of daily data adjusted to 1986 dollars using Another useful scale by which to analyze long-term the consumer price index. See text note 7 for definition of peak daylight trends in overdrafts is the dollar value of payments overdraft. made over the Fedwire funds and securities transfer system. Relative to the total dollar value of such tions. Historically, overdrafts have been highly conpayments, funds- and securities-related overdrafts centrated among a few institutions. In the six have now fallen to about the levels of 1988 months preceding the implementation of fees, for (chart 7). This pattern suggests that the explicit example, the ten institutions with the largest overcharges for the use of Federal Reserve daylight drafts accounted for 80 percent of total average credit has resulted in a significantly more efficient overdrafts. The reduction in daylight overdrafts has use of such credit for a given volume of payments been similarly concentrated: More than 90 percent relative to most of the experience of the last of the Systemwide reduction in average overdrafts decade. has come from the six institutions that typically incur average per-minute daylight overdrafts of more than $1 billion; overdrafts among these banks DISTRIBUTION OF DAYLIGHT OVERDRAFTS have fallen $25 billion overall, or 45 percent, over AND DAYLIGHT RESERVES the six months before and after the implementation of fees. As a result, the ten institutions with the In addition to reducing daylight overdrafts in the largest overdrafts now account for about 70 percent aggregate, fees have also led to some extent to a of overdrafts. redistribution of daylight overdrafts across institu- Under the daylight overdraft fee policy, net debit caps have remained in effect and are not related to the assessment of fees. For all but the largest insti- 5. Peak daylight overdrafts, 1993-95 tutions, net debit caps have continued to act as the more relevant factor constraining daylight overdrafts. For example, even after the 1995 fee increase, only about 90 institutions typically incurred fees of more than $100 in any two-week period. In contrast, caps seemed to be the effective boundary for management of daylight overdrafts for an average of more than 700 institutions (those with peak overdrafts of at least 75 percent of their net debit caps in any given two-week reserve maintenance period and who tended to incur zero or very low fees). Another important aspect of reduced daylight NOTE. Biweekly averages of daily data, Jan. 6, 1993, to Oct. 11, 1995. See text note 7 for definition of peak daylight overdraft. overdrafts has been the effect on institutions that do 1. 10 basis point daylight overdraft fee implemented. not typically incur overdrafts but rather hold posi- 2. 15 basis point daylight overdraft fee implemented. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1073 tive intraday balances. With the exception of activ- EFFECT ON MARKETS ity that adds or removes intraday reserves from the entire banking system, such as open market opera- The most noticeable market response to the impletions, changes in intraday float, or changes in Trea- mentation of fees on daylight overdrafts has been sury cash balances, Federal Reserve accounts con- reflected in daily movements of government securistitute a "closed" system. Thus, in general, for ties. In response to daylight overdraft fees, U.S. each dollar of a negative balance, or overdraft, in government securities dealers began arranging their one institution's account, one or more other institu- financing transactions earlier in the morning and tions must hold a corresponding dollar of positive delivering securities used as collateral for RPs more balances. Consequently, with the reduction in day- quickly to their counterparties to cover overdrafts light overdrafts has come an overall reduction in caused by early-morning repayment of maturing positive intraday balances in accounts held at the RPs. Traders reportedly facilitated faster back- Federal Reserve. office processing by pricing the securities to be In the six months after the implementation of used as collateral at the time of the trade rather than fees, positive intraday balances held by depository later in the morning, as had been the practice. institutions in Federal Reserve accounts averaged Dealers also completed settlement of many secondabout $70 billion, compared with $90 billion in the ary market trades in government securities earlier preceding six months. A small group of other insti- in the day. These activities not only reduced tutions, particularly government-sponsored enter- securities-related overdrafts but shifted the overall prises, also hold large positive intraday balances at intraday peak overdraft to earlier in the day the Federal Reserve and have seen a similar reduc- (chart 4).10 tion in these intraday balances since the onset of The anecdotal evidence on the earlier shift in fees. Depository institutions that typically carry trading and settlement practices in the government substantial positive intraday balances at the Federal securities market is supported by data on the timing Reserve include custodian banks that hold securi- of securities transfers over Fedwire. Before ties and funds on behalf of institutional investors April 1994, approximately 30 percent of the total such as mutual funds. These custodians often pro- daily value of securities transfers was processed by vide overnight financing in the form of repurchase 10:00 a.m. eastern time, 40 percent by 12 noon, agreements secured by government securities. and 90 percent by 2:30 p.m. (chart 8), and Fedwire Changes in the timing of RP settlements as a result securities transfer operations were frequently of daylight overdraft fees, discussed below, has extended to 4:00 p.m. or later because of surges in caused the duration of these loans to be lengthened transfer volume in the early afternoon. These produring a given twenty-four-hour period. portions began to rise significantly with the April 1994 implementation of overdraft fees and 7. Peak daylight overdrafts per daily dollar value continued to rise with the April 1995 increase in of Fedwire transfers, 1987-95 fees. As a result, the Fedwire securities transfer system has been able to close, on average, within Dollars 10. To encourage efforts to reduce overdrafts in the months leading up to the implementation of fees in April 1994, the Public Securities Association designated the week of December 6-10, 1993, as "Daylight Overdraft Prevention Week." The earlier trading in the RP market has not had an adverse effect on implementation of monetary policy. However, to reduce the impact of its own activity on daylight overdrafts, the New York Reserve Bank's Open Market Desk adopted a policy of returning securities held under repurchase agreements later in the morning, at 11 a.m., thereby delaying the receipt of funds from the banking sector. For a discussion of daylight overdraft fees in the context of NOTE. Quarterly averages of daily data. Securities-related overdrafts are shown relative to value of securities transfers originated (exluding reversals). RP market activity and open market operations, see "Monetary Funds-related overdrafts are shown relative to value of funds transfers Policy and Open Market Operations during 1994," Federal Reserve originated. See text note 7 and note to chart 2. Bulletin (June 1995), pp. 579-81. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1074 Federal Reserve Bulletin • December 1995 approximately fifteen minutes of its designated 9. Distribution of daily dollar value of Fedwire funds final closing time of 3:00 p.m. In part because of transfers, by time of day, July 1993-Sept. 1995 this development, the Federal Reserve has now Percent established a firm final closing time of 3:30 p.m., April 1994' April 19952 effective January 1996, for the Fedwire book-entry securities transfer system. 80 By 5 p.m. The timing of Fedwire funds transfers, however, has moved in the opposite direction, though in a — 60 much less dramatic fashion than securities trans- — 40 fers. After the implementation of daylight overdraft By 2 p.m. fees, the portion of the total daily value of Fedwire By 12 noon — 20 funds transfers originated by noon decreased approximately 5 percent, or roughly $40 billion, t 1 1 i relative to the period six months before fees were 1993 1994 1995 implemented (chart 9). This pattern is not surpris- NOTE. Monthly averages of daily data. ing given that the Federal Reserve account of an 1. 10 basis point daylight overdraft fee implemented. 2. 15 basis point daylight overdraft fee implemented. institution initiating a Fedwire funds transfer is debited (rather than credited as in the case of a securities transfer). As a result, institutions natu- INCIDENCE OF FEES rally have an incentive to delay less time-critical payments in order to reduce potential daylight In the first twelve months of the daylight overoverdrafts. The intraday pattern of funds-related draft fee program, the Federal Reserve collected a overdrafts has likewise shifted to later in the day total of $18.5 million in fees from 280 depository as a result of the later average transfer pattern. institutions. Of these institutions, approximately According to discussions with banks, this shift 110 have incurred charges in at least one of every appears to have been caused more by increased use two reserve maintenance periods. Since the 50 perof their existing funds-transfer queuing capabilities cent increase in the fee in April 1995, overdraft rather than by more explicit measures, such as charges have averaged $27 million at an annual charging customers higher fees to send payments rate, and about 120 institutions have incurred fees earlier in the day. regularly. Like daylight overdrafts, daylight overdraft charges have been highly concentrated among a few institutions. In fact, the concentration of fees is 8. Distribution of daily dollar value of Fedwire securities even greater than that of overdrafts because of the transfers, by time of day, July 1993-Sept. 1995 overdraft deductible and the waiving of fees of less than $25; these features effectively exempt many Percent smaller-overdrafting institutions from daylight overdraft fees in most periods. The ten institutions with the largest charges accounted for 86 percent of the total. The largest U.S. banks (those with assets of more than $10 billion) paid, on average, 92 percent of total charges. Discussions with larger banks indicate that those incurring the highest charges pass them on to those customers whose activity generates much of the banks' overdrafts. In particular, the securities clearing banks, who have experienced the largest reductions in overdrafts, have charged fees to their NOTE. Monthly averages of daily data. 1. Public Securities Association test week; see text note 10. securities-dealer customers whose market activity, 2. 10 basis point daylight overdraft fee implemented. particularly RP transactions, creates overdrafts in 3. 15 basis point daylight overdraft fee implemented. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1075 the Federal Reserve accounts of the clearing banks. minimum standards that should be met by multilat- These customer fees are assessed against measures eral netting systems. In December 1994 the Federal of the overdrafts in customer accounts. Of course, Reserve Board adopted a revised policy statement increases in costs to securities dealers could ulti- on risks in large-value multilateral netting systems, mately be passed on to dealers' customers or to the which incorporated the minimum standards in the Treasury in the form of higher borrowing costs; Lamfalussy report. The Board also stated that it given the amount of fees assessed for securities- would work with each netting system separately to related overdrafts relative to the volume of U.S. determine whether higher risk management stan- Treasury and federal agency securities transferred dards would be appropriate for those systems previa Fedwire each year, however (roughly $14 mil- senting a potentially higher degree of systemic risk. lion in charges at the current 15 basis point fee Shortly thereafter, in July 1995, the New York versus $145 trillion of securities transfers in 1994), Clearing House announced changes to CHIPS rules the incremental effect of any fees ultimately passed with the goal of reducing risk while maintaining on to the securities market would be small. cost effectiveness and system efficiency.11 The Indirect costs associated with daylight overdraft changes included a 20 percent reduction in CHIPS fees include costs incurred by institutions to reduce net debit caps to be implemented in three stages overdrafts and avoid fees. Such costs could include through early January 1997, an increase in the the investments by banks in systems to assess fees minimum amount of collateral pledged by a particion customers, automate clearing procedures, or pant, a modification to loss-sharing procedures in improve control over their cash balances. In addi- the event of a multibank default, and certain addition, some government securities dealers have tional procedures for liquidating collateral pledged also reportedly made investments to improve their by participants. These changes', when implemented, back-office processing of government securities are expected to result in a further increase in the transactions. Institutions are generally reluctant to certainty of settlement for payments made via provide proprietary information about such costs; a CHIPS. reasonable assumption is that institutions are not likely to have spent more to avoid overdrafts than they would have paid in daylight overdraft fees. An POTENTIAL FUTURE DEVELOPMENTS upper bound on this amount is the additional AFFECTING DAYLIGHT OVERDRAFTS amount of fees that institutions would hypothetically have been assessed in the absence of the Further changes in market practices, greater use of dramatic reductions in overdrafts in April 1994. private payment systems, and further consolidation Based on the experience in the six months before in the banking system all might affect the volume the implementation of fees, this amount could have and distribution of daylight overdrafts in the future. ranged roughly between $15 million and $40 million annually based on daylight overdraft fees of 10-25 basis points. Changes in Market Practices Additional changes in market practices, such as PRIVATE NETWORKS increased netting of securities transactions, may have the potential to further reduce daylight over- Since it implemented daylight overdraft fees, the drafts. For example, the Government Securities Federal Reserve has taken additional steps to help Clearing Corporation (GSCC) has recently begun control risks in the payment system, most recently accepting RPs into its trade matching system, and it in the area of multilateral netting systems. The plans to begin netting RPs in the near future. Net- November 1990 Report of the Committee on Inter- ting of RPs would reduce overdrafts to the extent bank Netting Schemes of the Central Banks of the Group of Ten Countries (commonly referred to as the "Lamfalussy Report," after the committee's 11. New York Clearing House Association, CHIPS: Settlement chairman, Alexandre Lamfalussy) identified six Finality Improvements, Rules and Documents (July 1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1076 Federal Reserve Bulletin • December 1995 that they are caused by movements of securities Greater use of private systems for securities across Fedwire between GSCC members or their transfers could also reduce use of daylight credit in customers. Federal Reserve accounts. Participants in such sys- Some private-sector participants have suggested tems would have to weigh costs—such as those of another potential change—the establishment of posting additional collateral to support additional settlement "windows" in which the settlement of clearing activity, as well as differences in settlefederal funds transfers would be more closely syn- ment timing and finality—against any benefits to chronized, thus reducing the duration of associated be realized from reduced daylight overdrafts in overdrafts. Other potential changes in market prac- Federal Reserve accounts. Several proposals have tices, such as increased use of "rollovers," or con- been made to clear Fedwire-eligible securities on tinuing contracts, in the federal funds market do existing private securities-clearing networks, but not appear to have been implemented widely to no such service has yet been implemented. Some date, and the prospects for adoption are unclear. anecdotal reports also cite greater use of "book" The development of an intraday funds market, in transfers of government securities, those in which which institutions engage in explicit lending trans- securities are transferred on the books of a bank actions for periods of several hours, may also be a rather than through the Fedwire system. This pracpotential means of reducing overdrafts in Federal tice may be feasible when, for example, two RP Reserve accounts; however, institutions have sug- counterparties agree to use the same custodian bank gested that such a development may not be cost- (a "tri-party RP"). effective at the current fee level. Institutions may In addition, some reports have suggested greater find other means of charging their counterparties use of what are primarily retail payment systems, for the use of intraday credit, however, such as by such as the ACH system, to settle interbank money negotiating differential transaction prices based on market transactions. These systems are not, howthe timing of settlements for federal funds or RP ever, designed with the high levels of security and transactions. Such practices require the ability to control over the timing of payments that charactermonitor closely and to enforce precise settlement ize large-value payment systems. Moreover, their times, capabilities that do not currently exist at use in large-value transfers would not necessarily many institutions. reduce daylight overdrafts in Federal Reserve accounts relative to current methods because of differences in the intraday timing of payments Greater Use of Alternative Payment Systems posted to Federal Reserve accounts. Greater use of private payment systems could further trim daylight overdrafts in Federal Reserve accounts by reducing the volume of funds transfers 10. Change in dollar values of Fedwire and CHIPS funds through the Federal Reserve. Whether daylight transfers, 1990-95 overdraft fees will drive such a process is unclear, as fees are only one of a large number of factors— including service pricing and other associated costs, risks, and patterns of usage—that may influence choices among payment and settlement systems. For example, although CHIPS has historically been used primarily to settle international transactions, for some purposes market participants may consider CHIPS and Fedwire to be fairly close substitutes. Although the growth in dollar volume on CHIPS has outpaced that on Fedwire over the past few years, the differential does not appear to have become more pronounced since the imposi- NOTE. Four-quarter change of quarterly averages of daily values. tion of fees (chart 10). 1. 10 basis point daylight overdraft fee implemented. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Daylight Overdraft Fees and Payment System Risk Policy 1077 Increased Consolidation the associated direct credit risk, with little evidence in the Banking Industry of disruption in the payment system or in the financial sector generally. That such a large reduc- The current trend toward greater consolidation in tion in overdrafts was the result of a relatively the banking industry may well continue. Moreover, small fee suggests that the economic inefficiencies in July 1997, nationwide interstate branch banking created by the provision of free daylight credit by will become effective in states that have not explic- the Federal Reserve were substantial. To date, the itly "opted out." As a result, holding companies response to the fees has been largely reflected in may convert some or all of their banks into branch changes in practices in the government securities banking organizations. Thus, many payments that market, and the incidence of fees has fallen primaare currently settled between two banks within a rily on the largest depository institutions and dealholding company may become transactions pro- ers in government securities. cessed on the books of a single interstate bank. When the Federal Reserve Board in April 1995 This may, in turn, result in fewer payments and increased the daylight overdraft fee to 15 basis associated daylight overdrafts being recorded on points, it recognized that significant progress had the books of the Federal Reserve Banks. been made in reducing overdrafts. Additional time would be needed, however, to encourage the study and evaluation of further changes in practices and market conventions that could help reduce over- CONCLUSION drafts. Thus, the Board stated that it will evaluate The introduction of daylight overdraft fees has the desirability of any additional changes in the fee reduced the level of daylight overdrafts in Federal after two years in light of experience with the Reserve accounts, the aggregate amount of day- current fee and the overall objectives of the paylight credit provided by the Federal Reserve, and ment system risk program. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1078 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes Treasury and Sys- renewed short-term swap facilities for Mexico, tem foreign exchange operations for the period each in the amount of $1 billion, for an additional from July 1995 through September 1995. It was ninety days. presented by Peter R. Fisher, Executive Vice President, Federal Reserve Bank of New York, and Manager for Foreign Operations, System Open Market Account. Soo J. Shin was primarily responsible for CHANGING GLOBAL ECONOMIC OUTLOOK preparation of the report.1 Even though the dollar had previously risen from During the third quarter of 1995, the dollar rose the historic lows against the yen and the mark 17.6 percent against the Japanese yen, 3.3 percent recorded in March and April, many market paragainst the German mark, 2.1 percent against the ticipants still perceived the dollar as undervalued Mexican peso, and 3.2 percent on a trade-weighted at the beginning of the third quarter, but they basis against other G-10 currencies, but it fell remained unsure of factors or conditions that might 2.3 percent against the Canadian dollar.2 The dol- prompt a sustained upward trend in the dollar's lar's appreciation reflected relative changes in value. Moreover, as suggested by implied yields on market participants' expectations of economic per- interest rate futures contracts, market participants formance and of the associated monetary policy had come to expect that the Federal Reserve would reactions of Japan, Germany, and the United States. ease the federal funds rate as much as 50 basis Exchange market cooperation among the monetary points by year-end and that the Bank of Japan authorities also contributed to the dollar's upward might ease call rates again but by a smaller incretrend. ment (roughly 25 basis points). Meanwhile, market The U.S. monetary authorities intervened in participants held disparate views on the outlook for the foreign exchange markets on three occasions Bundesbank monetary policy, with some expecting during the quarter—July 7, August 2, and an interest rate easing and others expecting no August 15—purchasing a total of $1,533 billion change. Expectations among market participants against the German mark and the Japanese yen. On reflected concerns that (1) the U.S. economy might each occasion, the dollar purchases by the U.S. slip into recession, (2) the Japanese economy was monetary authorities were divided evenly between unlikely to react to further monetary easing, and the Federal Reserve System and the U.S. Treasury (3) the German economy would moderately grow. Department's Exchange Stabilization Fund (ESF). In July, however, soon after the Federal In other operations, Mexico drew a total of $2.5 bil- Reserve's widely anticipated reduction in the fedlion on its medium-term swap facility with the eral funds rate of 25 basis points, different expecta- ESF. The ESF and the Federal Reserve also tions about the three major industrial economies began to emerge. In Japan, monetary, fiscal, and regulatory actions undertaken by the Japanese authorities increased confidence among market 1. The charts for the report are available on request from Publiparticipants that the authorities were prepared to cations Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington, DC 20551. actively address the economy's weakness. The per- 2. The dollar's movements on a trade-weighted basis against ception of softness in the German economy became ten major currencies are measured using an index developed by more pronounced. In the United States, however, staff at the Board of Governors of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1079 fears of a material economic slowdown abated as currencies from European countries where high the likelihood of achieving steady growth increased unemployment and concerns about fiscal consoliwhile hints of an economic rebound emerged later dation persisted. in the quarter. Supported by these developments, This sharp rise in the mark negatively affected the dollar rose 15.4 percent against the Japanese the dollar. Having reached a fifteen-month high of yen and 7.0 percent against the German mark by ¥104.68 and a seven-month high of DM 1.5045 by mid-August to reach ¥97.65 and DM 1.4775 mid-September, the dollar gave up some of its respectively. From the historical lows of ¥79.75 gains in the third week of September as a combinaand DM 1.3438 that had been reached on April 19 tion of events initiated a bout of profit-taking on and March 8 respectively, the dollar had risen long-dollar positions. The dollar consolidated at 22.4 percent against the Japanese yen and 9.9 per- the end of the month, however, and closed the cent against the German mark. quarter at ¥99.55 and DM 1.4273. Beginning in mid-August, the mark's downward trend halted while the yen continued to depreciate against most other currencies. Then in late Septem- JAPANESE POLICY MEASURES CONTRIBUTE ber, the mark appreciated sharply against most TO THE DOLLAR'S RALLY other European currencies as concerns grew about Europe's political and fiscal prospects and the At the start of the quarter, market participants achievability of European monetary union (EMU) remained wary of further risks of deflation in Japan, as scheduled. Doubts about France and Italy, in associated deterioration in the Japanese financial particular, prompted a general flight to German system, and persistent, large trade and current marks from French francs, Italian lira, and other account surpluses. Without immediately apparent 1. Foreign exchange holdings of U.S. monetary authorities, based on current exchange rates Millions of dollars Q uarterly changes ii balances by sounX BBaallaannccee,, IItteemm JJuunnee 3300,, 11999955 Net purchases Impact of Investment SSeepptt 3300,, 11999955 and sales' sales2 valuation -- '/ft-yv-L . FEDERAL RESERVE Deutsche marks 13,936.0 -200.0 -11.9 147.7 -442.0 13,429.8 Japanese yen 8,931.4 -566.7 -24.8 33.6 -1,220.7 7,152.9 Mexican pesos4 967.5 -14.1 .0 14.1 -11.35 956.2 Interest receivables6 126.0 114.1 Ibta! 23,960.8 21,653.0 U.S. TREASURY EXCHANGE STABILIZATION FUND Deutsche marks - 7,153,2 -200.0 -11.9 77.6 -223.7 6,795.1 Japanese ven 12,843.9 -566.7 -24.8 40.8 -1,784.0 10,509.3 Mexican pesos* 9,000.0 2,445.9 .0 14.1 .0' 11,500.0 Interest receivables6 72.8 304.0 Total 29,069.9 29,108.5 NOTE. Figures may not sum to totals because of rounding. 4. See table 4 for a breakdown of Mexican swap activities. Note that the 1. Purchases and sales include foreign currency sales and purchases investment income on Mexican swaps is sold back to the Bank of Mexico. related to official activity, swap drawings and repayments, and warehousing. 5. Valuation adjustments on peso balances do not affect profit and loss 2. Calculated using marked-to-market exchange rates; represents the dif- because the effect is offset by the unwinding of the forward contract at the ference between the sale exchange rate and the most recent revaluation repayment date. Note that the ESF does not mark to market its peso holdexchange rate. Realized profits and losses on sales of foreign currencies, ings, but the Federal Reserve System does. computed as the difference between the historic cost-of-acquisition exchange 6. Interest receivables for the ESF are revalued at month-end exchange rate and the sale exchange rate, are shown in table 2. rates. Interest receivables for the Federal Reserve System are carried at cost 3. Foreign currency balances are marked to market monthly at month- and are not marked to market until interest is paid. end exchange rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1080 Federal Reserve Bulletin • December 1995 remedies for these problems, market participants promptly by (1) the August 30 announcement by anticipated a renewed ascent in the Japanese yen. Governor Matsushita, of the Bank of Japan, of the Several policy actions taken by the Japanese plan to reconstruct Hyogo bank and (2) the Osaka authorities in July and August, however, prompted Prefecture's decision to suspend Kizu's operations. a shift in expectations. These policy actions were On August 30 the dollar surged to a seven-month perceived as enhancing the prospects for Japan's high of ¥99.40 as anticipation began to mount that economic recovery, and they sparked a sharp rally the Japanese authorities would announce broadin the dollar against the yen. On July 7 the Bank of based measures to strengthen the banking system. Japan guided the overnight call money rate to a Over the subsequent three weeks, the yen continhistoric low of 0.75 percent, below the official ued to depreciate, particularly after the Bank of discount rate (ODR). Market participants immedi- Japan on September 8 lowered the ODR 50 basis ately began to anticipate a near-term reduction in points, to 0.50 percent, and guided the call money the ODR, which would further reduce Japanese rate below the ODR. Increasingly, market particiinterest rates and weaken the yen. pants turned their attention toward the economic On August 2 the Ministry of Finance announced stimulus package scheduled to be unveiled on Sepa series of deregulatory measures aimed at encour- tember 20. In the run-up to the package, the dollar aging Japanese investment abroad, including rose to ¥104.68, as market participants anticipated changes that would allow Japanese financial institu- another clear effort by the Japanese authorities to tions to participate fully in longer-maturity, non- weaken the yen. yen-denominated loan facilities. The measures were well received by market participants as deliberate steps to weaken the yen and address domestic THE GERMAN ECONOMY APPEARS TO SLOW deflationary pressures. Although a surge in Japa- WHILE U.S. ECONOMY SHOWS SIGNS OF nese purchases of overseas assets was not observed QUICKENING ACTIVITY immediately after the announcement of the deregulatory package, market participants noted broad- At the start of the quarter, market participants genbased sales of yen against a variety of currencies erally expected German economic growth to and unwinding of currency hedges by Japanese remain moderate, prices to stabilize, and official investors on their existing foreign assets. On interest rates to remain unchanged. Over the course August 15, following the release of a lower-than- of July and August, however, expectations of Gerexpected Japanese trade surplus, the dollar rose man economic growth shifted perceptibly lower. above ¥94.50 in Tokyo trading; for technical trad- The lack of reliable official data, as government ers, the breach of this important level signified a agencies were in the process of recalibrating sevchange in the dollar's five-year downward trend eral key statistics, caused some confusion among against the yen. market participants. Available data and surveys of In addition, confidence in Japan's resolve to deal the industrial sectors suggested low inflation and with the problems of nonperforming loans and weak current activity, which, coupled with weak a weak financial sector increased following the M3 money supply growth, contributed to lower authorities' swift response to the failure of three economic growth forecasts and increased expecta- Japanese financial institutions. The closure of tions for monetary easing in Germany. Indeed, on Cosmo Credit Corporation, Japan's fifth largest August 9, the Bundesbank guided the repo rate credit union, was announced on July 31. Subse- lower by 5 basis points to 4.45 percent. This was quently, on August 30, the Japanese authorities the first appreciable cut since early April 1995, and announced the failures of Hyogo Bank and Kizu it gave rise to expectations that the Bundesbank Shinyo Kumiai ("Kizu") credit union, Japan's had begun a process of gradual monetary easing. largest second-tier regional bank and largest credit As anticipated, the Bundesbank lowered the repo union respectively. On August 28 the resolution of rate six more times in the following weeks, bringthe Cosmo case was announced jointly by the ing the cumulative repo rate reductions during the Ministry of Finance and the Tokyo metropolitan quarter to 42 basis points, down 4.08 percent. In authorities. This announcement was followed addition, on August 24 the Bundesbank reduced Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 1081 both its discount and Lombard rates 50 basis points, pants in the foreign exchange market appeared to to 3.5 percent and 5.5 percent respectively. After lack sufficient confidence in forecasts that called the reduction in official German interest rates, the for improving U.S. economic activity and for slowdollar rose as high as DM 1.4990 in late August. ing German economic growth. In July the dollar As perceptions of a slowing German economy moved only slightly higher against the German became increasingly widespread, the notion that mark, hovering near DM 1.3900. Although the the U.S. growth rate may have hit a trough became dollar appreciated against the mark in the first two more prevalent in August. Within a few days after weeks of August, its move upward appeared to the U.S. monetary easing on July 6, market partici- follow in sympathy with the dollar's move against pants substantially scaled back their expectations the yen rather than to reflect the shifting U.S. and for further easing, as reflected in the rise in implied German economic outlooks. yields on interest rate futures contracts. Implied yields moved gradually upward throughout July and most of August after a series of stronger-thanexpected data releases—particularly June nonfarm THE U.S. MONETARY AUTHORITIES employment, June retail sales, and second-quarter INTERVENE ON THREE OCCASIONS growth of gross domestic product—all of which were released in July. These releases were followed The first intervention operation of the quarter was by the Philadelphia Federal Reserve Bank's diffu- undertaken on July 7, when the dollar reached a sion index in late September, which similarly high of ¥86.20 after the monetary easing by the pointed to better-than-expected economic condi- Japanese authorities. The Federal Reserve Bank of tions in the United States. New York's Foreign Exchange Desk entered the Notwithstanding the diverging economic out- New York market on behalf of the U.S. monetary looks for Germany and the United States, partici- authorities and purchased $333.3 million against the yen. This operation was coordinated with the Japanese monetary authorities. The dollar reached 2. Net profits or losses (-) on U.S. Treasury a high of ¥87.15 after the intervention and before and Federal Reserve foreign exchange operations, closing the New York trading session at ¥86.70. based on historical cost-of-acquisition exchange rates On August 2 the Desk again entered the Millions of dollars New York market after the dollar had risen to U.S. Treasury IrXeNnMoWaJ anaJ i:tFeAmMN R Fe e d se e r r v a e l Stabilization ¥ m 9 e 0 a . s 1 u 5 r e f s o ll t o o w p in r g o m th o e te an o n v o e u rs n e c a e s m e in n v t e o st f m J e a n p t a n a e n s d e Fund loans. The Desk purchased $500 million against Valuation profits and losses on the yen on behalf of the U.S. monetary authorities. outstanding assets and liabilities, June 30, 1995 This operation was also coordinated with the Japa- 3,433.5 1,342.0 Japanese yen 3.454.8 4,966.4 nese monetary authorities. The dollar strengthened Total 6,888.3 6,308.5 after the intervention and closed the New York trading session at ¥90.99, near the day's high. Realized profits and losses from foreign currency sales,1 On both occasions, the U.S. Treasury confirmed June 30-Sept. 30, 1995 Deutsche marks 39.8 27.4 the operation. As the intervention began on Japanese yen 192.9 193.0 August 2, Treasury Secretary, Robert E. Rubin, Total 232.7 220.4 issued the following statement: Valuation profits and losses on outstanding assets and liabilities We welcome the actions taken by the Japanese authori- Sept. 30, 1995* Deutsche marks 2,939.8 1,079.0 ties to remove impediments to capital movements. These Japanese ven 2,016.4 2,964.7 actions and our joint operations are consistent with the Ibtal 4,9563 4,043.7 April 25 G-7 communique. NOTE. Figures may not sum to totals because of rounding. In the subsequent weeks, shifting economic expec- 1. As indicated in table 1, foreign currency sales totaled $400 million against German marks and $1,133.3 million against Japanese yen. tations combined with the concerted official inter- 2. Valuation profits or losses are not affected by peso holdings, which are vention contributed to the dollar's appreciation canceled by forward contracts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1082 Federal Reserve Bulletin • December 1995 against the yen. In addition, natural buyers of dol- In late August, however, upward momentum of lars, who in previous months had lagged their major European currencies against the German purchase requirements in anticipation of more mark began to dissipate as concerns surrounding advantageous levels, hastened to buy as the dollar the process of EMU reemerged. The unexpected rose. In the first weeks of August, natural sellers of resignation on August 25 of French Finance Minisdollars, including Japanese exporters, stayed on the ter Madelin cast doubts on the prospects of fiscal sidelines, thereby allowing the dollar to rise. Many contraction in Europe, particularly after reports that natural sellers, motivated by their concerns about Madelin had been forced to resign because of his the future depreciation of the dollar, had acceler- support for cuts in aggressive public spending. In ated their selling efforts in the earlier months and this context, the German mark appreciated against had already largely fulfilled their then-current sell- other European currencies from mid-August to ing needs. mid-September, and, in turn, as the mark strength- The third operation, on August 15, was coordi- ened, the dollar's upward trend began to encounter nated with the Japanese monetary authorities and some resistance. the Bundesbank. The Desk entered the markets in London, Frankfurt, and New York and purchased $300 million against the Japanese yen and DOLLAR RETRACES ITS GAINS LATE $400 million against the German mark. The dollar IN THE PERIOD was trading near ¥95.02 and DM 1.4476 as the operation began. After the intervention, the dollar Toward the end of the quarter, the dollar retraced rose to highs of ¥96.98 and DM 1.4795 before some of its earlier gains as a confluence of events declining modestly to close at ¥96.81 and in Japan, Europe, and the United States triggered DM 1.4765. In the next few days, market partici- dollar selling. Early on September 20, after the pants gained confidence in the view that the U.S. release of Japan's much-awaited economic stimu- Administration supported a stronger dollar not only lus package, the dollar came under pressure against against the yen but also against other currencies. the yen. In the days before the release of the package, comments from Japanese government officials led to heightened expectations of a signifi- MARKET REEXAMINES EUROPEAN POLITICAL cant stimulus package that would help revive the AND FISCAL PROSPECTS Japanese economy. Some market participants even began to speculate that the package would encom- In July and August the French franc, Italian lira, pass not only fiscal measures but also significant and other major European currencies strengthened regulatory changes and financial sector support, against the mark, benefiting from a combination of despite earlier indications from Japanese officials factors, including expectations of gradual monetary that the package would not include such measures. easing in Germany, continued investment shifts Although the ¥14.2 trillion package was somewhat into higher-yielding markets, greater seasonal tour- larger than originally anticipated, the measures ism flows into southern European countries, and were generally as expected and did not include any modest optimism of fiscal tightening in most new deregulatory or banking initiatives. In the European countries. By mid-August, the French event, speculative players began to unwind their franc and Italian lira strengthened against the long-dollar and short-yen positions that were estab- German mark, reaching a thirteen-month high of lished in anticipation of the release of the stimulus package. FRF 3.4014 and a six-month high of ITL 1084.70 respectively. Against the background of continuing Also on September 20, European financial marpositive performance in high-yielding markets and kets came under sharp selling pressure after reports positive comments from local government officials, of comments by several German officials sparked market participants became more confident that intensified skepticism about the viability of EMU. fiscal deficits in several European countries would German Finance Minister Waigel reportedly stated improve sufficiently to meet the targets established that Italy was unlikely to qualify for the initial for EMU. group of states forming a single currency. In Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 1083 addition, news reports indicated that Bundesbank FRF 3.4645. This upward pressure on the mark Council member Jochimsen had emphasized the within Europe placed downward pressure on the importance of member states' strict adherance to dollar in the subsequent days. the Maastricht Treaty and suggested that France The dollar's decline was aided by the Septemand Belgium might not meet EMU entry criteria. ber 20 release of worse-than-expected U.S. trade Earlier on the same day, the official presentation of data for July, which disappointed some market France's 1996 budget had elicited little initial reac- participants who had been hoping for evidence of tion among market participants, though some ana- an improvement in the U.S. trade and current lysts voiced skepticism about the budget's targets; account balances. In the background, some market following reports of the German officials' com- participants noted growing concern about the ments, however, skepticism escalated concerning debate between the Administration and the Conthe fiscal situations in various European countries. gress regarding the budget process and debt limit Market participants became more nervous as they extension, which triggered some concerns of began to focus more closely on the forthcoming possible disruptions to the upcoming Treasury presentation of Italy's 1996 budget. During the auctions. week of September 18, the German mark rose Between September 20 and 22, the combination 4.6 percent against the Italian lira, to ITL 1130.73, of events outlined above prompted severe selling and 0.7 percent against the French franc, to pressure on the dollar. The dollar fell 4.7 percent against the German mark and 4.4 percent against the Japanese yen to close at DM 1.4225 and ¥99.90 3. Currency arrangements respectively on September 22. Market participants, Millions of dollars many of whom had reportedly established long Amount of Outstanding, positions in European currencies and short posi- Institution facility Sept. 30, 1995 tions in the German mark during the summer, began to sell European currencies against the mark. FEDERAL RI SIRVE RECIPROCAL ARRANGEMENTS The effect on the dollar was accentuated by inves- Austrian National Bank 250 fSHfllgW; J National Bank of Belgium 1,000 I is-;-.-;.-. tors' sales of dollars for marks as a proxy for the Bank of Canada 2,000 National Bank of Denmark 250 less liquid cross exchange rates between the Euro- Bank of England 3,000 pean currencies and the German mark. Bank of France 2,000 Deutsche Bundesbank 6,000 Bank of Italy 3,000 1 f Bank of Japan 5,000 > Bank of Mexico1 Regular swaps 3,000 1,000 DOLLAR STABILIZES IN A NARROW RANGE Temporary swaps 3,000 J I Netherlands Bank 500 Bank of Norway 250 In the final week of September, after the adjustment Bank of Sweden 300 Swiss National Bank 4,000 of long-dollar positions had tapered off, the dollar recovered partially and consolidated in trading Bank for International Settlements Dollars against Swiss francs 600 ranges of DM 1.42 to DM 1.44 and ¥99 to ¥101. Dollars against other authorized 1,250 The dollar closed the quarter at DM 1.4273 and Total 35,400 1,000 ¥99.55. U.S. TREASURY EXCHANGE STABILIZATION FUND Deutsche Bundesbank 1,000 fcs«s D CANADA Bank of Mexico1 Regular swaps 3,000 1,000 United Mexican States' Over the quarter, the Canadian dollar was buffeted Medium-term swaps 10,500 by shifting prospects concerning Quebec sover- Total' 11,500 eignty and Quebec's relationship with the rest of 1. Facilities available to Mexico comprise short-term swaps between the Canada. Early in the quarter, the Canadian dollar Bank of Mexico and both the Federal Reserve and the ESF, as well as traded with a firmer tone as several polls showed medium-term swaps and government guarantees between the government of Mexico and the ESF. The total amount available from both medium-term dwindling support for separation. As the currency swaps and government guarantees is $20 billion, less any outstanding drawfirmed, the Bank of Canada lowered short-term ings on the short-term facilities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1084 Federal Reserve Bulletin • December 1995 interest rates. Specifically, on July 6, immediately bond issues during the period. At the same time, following the FOMC's decision, the Bank of Can- Mexican authorities took steps to reduce the peso's ada reduced its overnight call target range 25 basis volatility in the context of a floating exchange rate. points. In the following weeks the Bank of Canada In particular, the Bank of Mexico encouraged the lowered interest rates three more times to arrive at early redemption of maturing dollar-indexed tesothe end-of-quarter overnight range of 6.00 percent bonos directly through the central bank to minito 6.50 percent, 175 basis points below the recent mize spikes in dollar demand during a period of peak in early May. heavy tesobono maturities. During the quarter, In late August the Canadian dollar rallied to a maturing tesobonos totaled $7.4 billion, reducing nineteen-month high of Can$ 1.3345. In early Sep- the outstanding balance to $2.6 billion from tember, however, the Canadian dollar came under $29.2 billion at the beginning of the year. In addipressure after the official launch of the Quebec tion, dollar borrowings from the central bank's referendum campaign. The referendum, set for Fondo Bancario de Protection al Ahorro lending October 30, proposed sovereignty in conjunction facility were reduced to zero, as local banks continwith economic and political links with the rest of ued to find alternative sources of dollar funding. Canada.3 Following the release of the official refer- For most of the quarter, the peso traded in a endum question, the Canadian currency declined range of approximately NP 6.00 to NP 6.30 against almost 2.4 percent as polls indicated growing sup- the dollar. As concern about default dissipated, port for Quebec sovereignty. In the final weeks of many market participants shifted their focus to the quarter, however, polls began to indicate an Mexico's longer-term prospects, cautiously assessimproved outlook for a "no" outcome in the refer- ing the timing and sources of a return to economic endum. The Canadian dollar recovered much of its growth and the effect of banking system problems. losses of the earlier weeks and consolidated in a In the past few weeks of the period, amid several narrower range, ending the quarter at Can$1.3416. uncertainties on the domestic front, spillover from events elsewhere in Latin America, and usual quarter-end pressures, the peso's decline acceler- MEXICO ated slightly to close at NP 6.3770. The Mexican authorities drew $2.5 billion on Over the quarter, the peso declined 2.1 percent July 5 on their medium-term facility with the ESF, against the dollar to close at NP 6.377, from its bringing the total amount drawn by Mexico under second-quarter close of NP 6.245. At the outset of the Medium-Term Stabilization Agreement to the quarter, the perception became more widespread that the Mexican authorities were conduct- 4. Drawings and repayments (-) by Mexican monetary ing appropriately tight monetary and fiscal policies authorities as inflation and interest rates declined from April Millions of dollars highs, that the government would be able to meet Out heavy tesobono maturities in July and August, and Item June July Aug. that official transparency was improving. 1995 Given these improvements, and against the back- Reciprocal currency drop of an easing of U.S. interest rates, Mexican arrangements with the Federal Reserve markets rallied, and the peso traded to a 1995 high Bank of Mexico against the dollar of NP 5.98. In this environment, (regular) 1,000 Mexico returned to the international capital mar- Currency, kets, successfully launching several international with the U.S. Treasury Exchange. Fund Bank of Mexico 3. The referendum question was introduced in the Quebec (regular) 1,000 0 1,000' -1,000' National Assembly on September 7, 1995. It reads as follows. "Do Medium-term 8,000 2400 0 you agree that Quebec should become sovereign, after having made a formal offer to Canada for a new economic and political partner- NOTE. Data are on a value-date basis. ship, within the scope of the bill respecting the future of Quebec 1. Drawing of February 2 was renewed on August 1 for an additional and the agreement signed on June 12, 1995?" three months. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 1085 $10.5 billion. In addition, on August 1 the ESF and of special drawing rights certificates to Federal the Federal Reserve System renewed the Bank of Reserve Banks. Mexico's short-term swaps, each for $1 billion, for At the end of the period, the current values of the an additional three months. foreign exchange reserve holdings of the Federal Reserve System and the ESF were $21.7 billion and $29.1 billion respectively. The U.S. monetary TREASURY AND FEDERAL RESERVE FOREIGN authorities regularly invest their foreign currency EXCHANGE RESERVES balances in a variety of official instruments that yield market-related rates of return and have a high The U.S. monetary authorities intervened three degree of liquidity and credit quality. A significant times during the period, buying a total of portion of the balances is invested in foreign $1,133 billion against the Japanese yen and government-issued securities. As of September 30 $400 million against the German mark. On all three the Federal Reserve and the ESF held, either occasions, intervention operations were divided directly or under repurchase agreement, $7.7 bilequally by the Federal Reserve System and the lion and $11.2 billion respectively in foreign gov- ESF. On July 3 the Treasury issued $2.5 billion ernment securities. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1086 Industrial Production and Capacity Utilization for October 1995 Released for publication November 15 held down by a strike at a major aircraft manufacturer, which sharply curtailed the output of Total industrial production declined 0.3 percent in business equipment. Excluding the effects of the October after having edged up a revised 0.1 percent aircraft strike, industrial production decreased in September. Overall industrial production was 0.1 percent. A decline in motor vehicle assemblies Industrial production indexes Twelve-month percent change Twelve-month percent change 10 10 Materials 5 5 Products Nondurable manufacturing 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 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization J I I I L J I I I L I I I I I I I I I J L 1981 1983 1985 1987 1989 1991 1993 1995 1981 1983 1985 1987 1989 1991 1993 1995 All series are seasonally adjusted. Latest series, October. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1087 Industrial production and capacity utilization, October 1995 Industrial production, index, 1987=100 Percentage change Category 1995 19951 Oct. 1994 to July' Aug.r Sept.' Oct. P Julyr Aug.r Sept.r Oct. P Oct. 1995 Total 121.5 122.9 123.1 122.7 .1 1.2 .1 -.3 2.7 Previous estimate 121.5 122.9 122.6 .2 1.1 -.2 Major market groups Products, total2 118.6 120.0 120.2 119.4 .1 1.2 .1 -.6 2.2 Consumer goods ... 114.4 116.0 115.7 115.2 -.5 1.5 -.3 -.5 1.9 Business equipment 157.0 159.3 160.9 159.6 .9 1.5 .9 -.8 5.8 Construction supplies 107.8 108.1 109.3 108.7 .6 .3 1.1 -.6 -1.0 Materials 126.1 127.4 127.5 127.7 .2 1.1 .1 .2 3.5 Major industry groups Manufacturing 123.2 124.5 125.1 124.8 .0 1.0 .5 -.2 2.8 Durable 130.8 132.8 134.1 133.6 .2 1.6 .9 -.3 4.4 Nondurable 114.7 115.1 115.1 115.1 -.3 .4 .0 -.1 .8 Mining 100.9 100.2 100.5 98.7 .5 -.7 .3 -1.8 -.4 Utilities 123.7 128.5 122.9 122.4 1.4 3.9 -4.4 -.4 4.5 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1994 1995 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, OOOcccttt... 111999999444 11996677--9944 11998822 11998888--8899 Oct. July' Aug.r Sept.r Oct.P tttooo OOOcccttt... 111999999555 Total 82.0 71.8 84.9 84.4 83.6 84.3 84.1 83.6 3.6 Previous estimate 83.6 84.2 83.8 Manufacturing 81.3 70.0 85.2 83.8 82.5 83.1 83.3 82.8 4.1 Advanced processing 80.7 71.4 83.5 82.1 81.1 82.0 82.1 81.7 4.6 Primary processing . 82.5 66.8 89.0 88.3 86.2 86.1 86.3 85.8 2.8 Mining 87.4 80.6 86.5 89.0 90.6 90.0 90.3 88.7 -.1 Utilities 86.7 76.2 92.6 86.4 90.2 93.6 89.4 88.9 1.5 calculated from seasonally adjusted 2. Contains components in addition to those shown. monthly data. r Revised. 1. Change from preceding month. p Preliminary. was the largest factor in the overall weakening in sumer chemical products; the production of other the production of consumer goods. In addition, the consumer nondurables was little changed. The prooutput of construction supplies declined. Apart duction of business equipment fell 0.8 percent; from the effects of the aircraft strike, however, the however, excluding the effects of the aircraft strike, output of materials and business equipment posted output in this sector rose about 0.3 percent. The small gains. At 122.7 percent of its 1987 average, production of information processing equipment, industrial production in October was 2.7 percent which includes computers and communication higher than a year ago. Capacity utilization equipment, rose sharply further. However, the prodeclined 0.5 percentage point, to 83.6 percent. duction of industrial equipment, which had grown When analyzed by market group, the data show rapidly earlier this year, was about unchanged in that the output of consumer goods declined 0.5 per- both September and October; in addition, the outcent in October. A drop in motor vehicle assem- put of transit equipment other than aircraft fell blies accounted for nearly half of the decline. The sharply. production of nondurable consumer goods edged The output of materials edged up for a second down as the output of clothing and of energy successive month, mainly reflecting gains in the products, such as gasoline, fell sharply and more production of durables; the output of components than offset a further rise in the production of con- for high-technology equipment has been particu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1088 Federal Reserve Bulletin • December 1995 larly strong. The output of nondurable materials, most major industries were still noticeably above which had weakened over the third quarter, was their 1967-94 averages, with the gains in industrial little changed; the production of textiles and paper and electrical machinery the most pronounced. The remained weak. The output of energy materials operating rates in mining and at utilities both fell, mainly because of a decline in coal mining. declined. When analyzed by industry group, the data show that the output of manufacturing decreased 0.2 percent in October after an upward revised gain of NOTICE 0.5 percent in September; the aircraft strike accounted for all of the October decline. Excluding An annual revision to the measures of industrial the aircraft strike, the output of durable manu- production, capacity, and capacity utilization is facturing was about flat. Among the other major scheduled to be published on November 30, 1995. industries, the production of motor vehicles and The revisions to the production indexes begin with parts, primary metals, and lumber products fell; January 1991 and will incorporate updated figures however, the output of both industrial and electrical from the 1992 Census of Manufactures, new results machinery rose sharply. The output of nondurable from the 1993 Annual Survey of Manufactures, manufacturing remained sluggish, with ongoing more comprehensive physical data on mining and weakness in apparel, textiles, and paper; over the utilities for 1994, and updated monthly source data, past few months, only chemical products and rub- seasonal factors, and productivity relationships. ber and plastic products have shown signs of The revision to capacity and utilization will strength. reflect the revised production indexes and the Capacity utilization in manufacturing declined incorporation of preliminary results of the Census 0.5 percentage point, to 82.8 percent; the strike- Bureau's 1994 Survey of Plant Capacity, updated related plunge in aircraft production accounted for manufacturing capital stocks, and new data on about half of this overall drop. Utilization in both physical capacity and utilization for selected industhe primary- and advanced-processing industries tries. The estimates of capital stocks incorporate also declined about V2 percentage point, with the data on manufacturing investment in 1993 from the effects of the aircraft strike concentrated in the Annual Survey of Manufactures as well as investadvanced-processing aggregate. Even with the flat- ment plans for 1994 and 1995 reported in the tening in manufacturing output, operating rates for Census Bureau's Investment Plans Survey. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1089 Statements to the Congress Statement by Alan S. Blinder, Vice Chairman, experience—not always happy—with private bank Board of Governors of the Federal Reserve System, notes. But widespread use of private electronic before the Subcommittee on Domestic and Interna- currency would certainly raise a number of policy tional Monetary Policy of the Committee on Bank- questions. ing and Financial Services, U.S. House of Repre- On behalf of the entire Board, I want to state sentatives, October 11, 1995 clearly at the outset that the Federal Reserve has not the slightest desire to inhibit the evolution of I appreciate this opportunity to present the views of this emerging industry by regulation, or to conthe Federal Reserve Board on issues raised by strain its growth. On the contrary, the Board has various emerging electronic payment technologies encouraged, and will continue to encourage, innothat go under such names as "digital cash" or vations in payments technologies that benefit con- "electronic money." Spurred by recent advances in sumers and businesses. I am here today to raise computing, communications, and cryptography, questions and to bring some issues to the attention this nascent industry holds the promise of improv- of the Congress, not to provide answers. Given the ing the efficiency of the payment system, particu- considerable uncertainties surrounding the design larly for consumers. and ultimate usage of these products, it is far too While the potential for exciting developments in soon for answers. this field is certainly there, we should all keep the Nonetheless, it is not too early to begin thinking latest round of innovations in historical perspec- about a number of interesting and complex issues tive. First, the concept of "electronic money" is that may be raised by electronic currency. These not new; electronic transfer of bank balances has issues include the impact on federal revenues, the been with us for years. Indeed, some of the new legal and financial structure for these products, proposals simply make available to consumers and risks to participants, the application of consumer smaller businesses capabilities that large corpora- protection and anti-money laundering laws, and tions and banks have had for many years. Second, some issues related to monetary policy. Some of no one knows how this industry will evolve— these issues may need to be addressed by the either qualitatively or quantitatively. Some of us, Federal Reserve and other regulatory agencies and for example, can recall predictions made a genera- some by the Congress. Some may need prompt tion ago that the United States would soon be a attention, while others can wait. The present is, we cashless, checkless society. believe, an appropriate time for public debate and This last point reminds us that, at present, we discussion but a poor time for regulation and do not know which, if any, of the many potential legislation. electronic innovations will succeed commercially. In this testimony, I will concentrate on stored-value cards and other types of so-called "electronic cash" because they seem to raise the most challenging SEIGNIORAGE AND THE BUDGET public policy issues. In particular, depending on their design, they could amount to a new financial Let me start with a potential revenue issue that will instrument—an electronic version of privately arise if the stored-value industry grows large. The issued currency. But even the concept of private federal government currently earns substantial currency is not entirely new. Travelers checks are, revenue from what is sometimes referred to as of course, familiar to everyone. And in the nine- "seigniorage" on its currency issue. In effect, holdteenth century the United States had considerable ers of the roughly $400 billion of U.S. currency are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1090 Federal Reserve Bulletin • December 1995 lending interest-free to the government. In 1994, LEGAL AND REGULATORY STRUCTURES for example, the Federal Reserve turned over about One area that may need prompt attention from both $20 billion of its earnings to the Treasury, most of policymakers and the industry is clarification of the which was derived from seigniorage on Federal legal and regulatory structure that will govern elec- Reserve notes. tronic money products. In this case, failure of the Should some U.S. currency get replaced by government to act may, ironically, impede rather stored-value products—which are private monies— than facilitate private-sector developments. this source of government revenue would decline. As with other payment mechanisms, issuers and Indeed, one of the major economic motives for holders of electronic currency take on some degree institutions to issue prepaid payment instruments is of ongoing credit, liquidity, and operational risks. to capture part of this seigniorage, just as issuers of The risk to a consumer using a stored-value card travelers checks do now. Because the demand for for small "convenience" purchases may be inconstored-value products and the degree to which they sequential. But such risks can become significant will substitute for U.S. currency is totally unknown when larger amounts of money become involved— at present, the loss of seigniorage revenue is imposfor example, when merchants and banks accumusible to estimate. It is likely to be small. But it is late and exchange significant amounts of storedsomething that the Congress should keep an eye on. value obligations during the business day. We should not, by the way, jump to the conclu- Risks to participants arise from a number of sion that the government's lost seigniorage will go sources. Cards might malfunction or be counterto the companies that issue stored value—though feited. Issuers might invest the funds they receive that will probably happen at first. It may be techniin exchange for card balances in risky assets so as cally feasible to pay interest on stored-value prodto increase their earnings. But riskier investments ucts. To the extent that competition forces issuers can turn sour, possibly impairing the issuer's abilof these products to pay interest, the lost seigniority to redeem stored-value balances at par and age will accrue to holders rather than to issuers. imposing losses on consumers and other holders (if This discussion raises the question of whether the obligations are not insured). Further, the clearthe federal government should issue electronic curing and settlement mechanisms for stored-value rency in some form. (In posing this question, I refer cards and similar products—if they become widely to general-purpose, stored-value cards, not to used—could generate significant credit and other special-purpose instruments such as government settlement risks. benefit cards, which, in our view, do not raise We believe that both the industry and the governmajor issues.) Government-issued electronic curment should focus on answering several mundane rency would probably stem seigniorage losses and questions that seem to be receiving little attention provide a riskless electronic payment product to amid the continuing publicity about these products. consumers. In addition, should the industry turn Some examples follow: out to be a "natural monopoly" dominated by a single provider, either regulation or government • Whose monetary liability is the particular form provision of electronic money might be an approof electronic money? priate response. • If an issuer were to become bankrupt or insol- But such a conclusion seems quite premature. vent, what would be the status of the claim repre- And the availability of alternative payment mechasented by a balance on a card or other device? nisms would mitigate any potential exercise of • In such a situation, when and how would funds market power. Further, government issuance might be made available to the holder? preempt private-sector developments and stifle • Who is responsible for the clearing and settleimportant innovations. Finally, the government's ment mechanism? entry into this new and risky business might prove unsuccessful, costing the taxpayer money. So, Developers of these products have discussed a while we would not rule out an official electronic variety of possible options, but the industry does currency product in the future, the Federal Reserve not appear to be converging on one or more models would urge caution. that would be transparent and readily understood Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1091 by users. In addition, there is no specialized legal For example, if stored-value obligations of banks framework for stored-value transactions as there is are treated as insured deposits—which is, by the for checks and other common retail payment way, another legal question that needs to be cleared mechanisms. For example, state or federal law up—then credit risk is effectively transferred from specifies when an obligation is discharged by cash, consumers to the government. In fact, the Eurocheck, or wire transfer—but not if payment is by pean central banks have gone so far as to recomstored value. mend that only banking institutions be permitted to From the Federal Reserve's perspective, new issue prepaid cards, presumably because that gives and exciting technological developments in pay- such cards the same degree of protection and finanments mechanisms should not overshadow the con- cial oversight as traditional bank deposits. ventional and ongoing need for clear and soundly The Federal Reserve Board has not viewed such based legal and financial arrangements. It is essen- a restrictive policy as appropriate. But the regulatial that developers and issuers clarify the rights, tory structure for electronic money products does obligations, and risks borne by consumers, mer- merit further analysis. At a minimum, we believe chants, and other participants in new systems that issuers of stored-value cards and similar prodbefore these products are widely introduced. ucts should clearly disclose the various risks that The need to attract and retain customers will holders bear, including their coverage, if any, by naturally drive developers and issuers of electronic deposit insurance. money products toward investment policies and operational controls that make their products useful and safe. So, to some extent, the market will be self-policing. Nevertheless, it could be costly and CONSUMER PROTECTION difficult for consumers and merchants to monitor AND LAW ENFORCEMENT and evaluate the safety of electronic money products, especially given their technological complex- The question of whether and how to apply the ity. So the government is likely to become involved Electronic Fund Transfer Act (EFTA) and the Fedas well. eral Reserve's Regulation E to these products has To guard against financial instability and to pro- received considerable attention from industry partect individual consumers, the government has, in ticipants, at the Federal Reserve, and in the Conthe past, mandated a range of regulatory measures gress. Among other things, Regulation E limits for private financial instruments. Three principal consumers' liability for unauthorized electronic approaches are used. withdrawals from their accounts, provides proce- 1. Disclosure and surveillance. In the case of dures for resolving errors, and requires institutions mutual funds, securities laws generally require dis- to provide disclosures, terminal receipts, and closures about asset holdings. Audits and examina- account statements. Uncertainty regarding the tions of investment funds also help ensure that application of Regulation E may be holding back reported assets are actually held. the development of the industry, and resolving this 2. Portfolio restrictions. In some cases, stan- question would help clarify some of the major risks dards or restrictions on portfolios help limit the that consumers may bear. riskiness of the assets. Money market mutual funds, H.R.I858 would exempt all stored-value cards travelers checks in some states, and, historically, and a potentially wide range of other products, privately issued bank notes are familiar examples. including transactions through the Internet, from 3. Government insurance. Balances in deposi- the EFTA and Regulation E. The industry seems tory institutions, of course, receive the most com- worried that without such an exemption, the Fedprehensive protection mechanism available: federal eral Reserve will apply Regulation E in a heavydeposit insurance. handed manner. On behalf of the Board, I would At some point, though certainly not now, the Con- like to assure industry participants and this commitgress will have to decide which, if any, of these tee that we have no such intention. The Board protection mechanisms should be applied to stored- recognizes that some of the requirements of Reguvalue products. lation E should not be applied to certain of these Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1092 Federal Reserve Bulletin • December 1995 new payment products. For example, it makes little they are widely used and bypass the banking syssense to require either printed receipts at ordinary tem. Existing anti-money laundering regulations vending machines or periodic statements detailing may then need modification. small transactions. A related side issue is the possibility that non- It seems premature, however, to legislate a blan- bank entities could offer banking services illegally ket exemption from the EFTA without first explor- over the Internet. Using the term "bank" to market ing some of the basic issues raised by these new banking services without an appropriate license is payments mechanisms. Disclosure policy is a good generally a violation of federal or state laws. But example. If a consumer who loses a stored-value new electronic technologies may challenge both card with a balance of several hundred dollars is traditional definitions of "banking services" and not entitled to a refund, he or she should know this the ability to enforce existing laws. At some point, fact when the card is purchased. In this case at therefore, the Congress and the state legislatures least, Regulation E requirements could be bene- may want to review the basic legal concepts that ficial at minimal additional expense. The Federal define banking and their methods for preventing Reserve would like to develop, and then put out for fraud and unlicensed banking activity. Because public comment, proposals for applying parts of electronic messages show little respect for national the EFTA, such as appropriate disclosures, to borders, these issues will likely require the coordistored-value cards—and for exempting them from nated attention of the banking authorities in various the remainder. We would hope to be able to accom- countries. plish this within a few months. Another issue related to consumer protection is privacy. While physical cash leaves no audit trail, MONETARY POLICY ISSUES many electronic currency products would. Such a trail may be desirable for certain purposes. But Finally, let me say a few words about monetary consumers would almost certainly be concerned policy. Concerns have been expressed that introif each purchase from a vending machine was ducing what amounts to a form of private currency recorded for possible reporting to marketers and might damage the Federal Reserve's control of the others. Privacy is not a traditional Federal Reserve money supply and lead to inflationary pressures. I issue, but we do think it should be of concern to can assure you that this is most unlikely. The members of the Congress. Federal Reserve currently issues or withdraws cur- The mention of privacy leads naturally to some rency passively to meet demand, adjusting open potential, future law-enforcement concerns. While market operations accordingly to keep monetary we would caution against establishing restrictive and credit conditions on track. We would prerules that could stifle innovation, the eventual sumably continue to do this if private parties began opportunities for money laundering using elec- issuing electronic currency that reduced the tronic products may be serious. At present, the demand for paper currency. menu of new products proposed for distribution in In any event, electronic currency, if it grows the United States holds little appeal for illicit activi- large, will be only one of several changes in finanties because of their relatively low balance limits, cial markets in the years ahead. Some of these may the potential audit trail, and their limited accept- change the details of how monetary policy is ability as a means of payment—at least in the near implemented, just as financial innovations have in term. In fact, most of the proposed stored-value the past. We believe we have the capability of products are not designed to circulate freely like adjusting to these changing circumstances while currency and thus should be of limited concern to continuing to meet our traditional responsibilities law-enforcement authorities. Over the longer term, for economic stability. however, it seems possible that electronic mecha- However, there is a technical issue relating to our nisms that can hold large balances and make large reserve requirements. Depository institutions are untraceable transfers over communications netrequired to maintain reserves, either in cash or on works could become attractive vehicles for money deposit with Federal Reserve Banks, in proportion laundering and other illicit activities—especially if to their outstanding transaction accounts. Under Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1093 current regulations, stored-value balances issued the pervasive uncertainties that I emphasized at the by depository institutions would be treated as trans- outset, it is far too early to have any useful insights action accounts and hence subjected to reserve into the implications of this disparity. We simply requirements; the Board will need to review this want to call it to your attention. treatment as stored-value devices come into use. But the Federal Reserve does not currently have the authority to impose reserve requirements on CONCLUSION nondepository institutions. Thus there is a potential issue of disparate treatment of bank and nonbank In summary, it is clear that new electronic payment issuers. products raise a number of diverse policy issues, Depository institutions benefit from their access both for the Congress and for the Federal Reserve. to the federal safety net; but they pay for this I have not had time to mention all of them here. privilege by being subject to reporting obligations, But, at this point, the uncertainties regarding the reserve requirements, regulation, and supervision future of "electronic money" are so overwhelming by the banking agencies. Nonbank issuers are free that we mainly suggest patience and study rather of most such burdens and hence may have a com- than regulatory restrictions. We do believe, howpetitive advantage over banks in certain product ever, that certain rules need to be clarified and that lines. The Federal Reserve has often expressed future developments should be monitored closely. concern in the past about potential competitive We look forward to working with the Congress and inequities that disadvantage banks. But because of other regulatory agencies in this regard. Statement by Janet L. Yellen, Member, Board of existing law, the Federal Reserve is pursuing these Governors of the Federal Reserve System, before goals and will review the potential economic the Subcommittee on Financial Institutions and effects of bank mergers. Consumer Credit of the Committee on Banking and Financial Services, U.S. House of Representatives, October 17, 1995 TRENDS IN MERGERS AND BANKING STRUCTURE I am pleased to appear before this subcommittee on behalf of the Federal Reserve Board to discuss It is useful to begin a discussion of the public issues related to mergers among U.S. banking orga- policy and other implications of bank mergers with nizations. The past fifteen years have seen consid- a brief description of recent trends in merger activerable consolidation of our banking system, a pro- ity and overall U.S. banking structure. The stacess that probably will continue for some time. tistical tables in the appendix of my statement This ongoing consolidation is in many ways a provide some detail that may be of interest to the natural response to the changing banking environsubcommittee.1 ment. However, the very large bank mergers that have been consummated or announced in recent years, and particularly in recent months, have Bank Mergers raised a number of public policy questions and concerns. In the Board's view, the primary objec- From a variety of perspectives, the pace of bank tives of public policy in this area should be to help mergers (including mergers of banks and bank manage the evolution of the banking industry in holding companies and acquisitions of banks by ways that preserve the benefits of competition for the consumers of banking services and to ensure a safe and sound banking system. My statement 1. The attachments to this statement are available from Publications Services, Mail Stop 127, Board of Governors of the Federal today will focus on how, within the context of Reserve System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1094 Federal Reserve Bulletin • December 1995 bank holding companies) has accelerated since one-fourth in numbers of banks from 1980. These 1980. For example, excluding acquisitions of failed trends have also been accompanied by a substantial or failing banks by healthy banks and bank holding increase in the share of total banking assets concompanies, in 1980 there were less than 200 bank trolled by the largest banking organizations. For mergers involving about $10 billion in acquired example, the proportion of domestic banking assets assets; by 1987 the annual number of mergers accounted for by the 100 largest banking organizareached about 650 with almost $125 billion of tions went from just more than one-half in 1980, to acquired assets. In 1989, the number of mergers nearly two-thirds in 1990, to more than 70 percent dropped back to 350, involving about $43 billion of in June 1995. bank assets acquired. In the 1990s, however, the The trends I have just described must be placed number of mergers began to rise again, to nearly in perspective because taken by themselves they 450 in 1994 with about $110 billion of acquired hide some of the key dynamics of the banking assets. Through September 1995, the pace of industry. Although there was a large decline in the merger activity has remained high, and there has number of banking organizations over the period been an exceptional number of very large bank 1980-94, reflecting about 1,500 bank failures and merger announcements including Chase-Chemical, more than 6,300 bank acquisitions, about 3,200 First Union-First Fidelity, NBD-First Chicago, new banks were formed, in spite of a sharp decline Fleet-Shawmut, and PNC-Midlantic. Very large in formations after 1989. Similarly, although durmergers occurred with growing frequency after ing the period more than 13,000 bank branches 1980. In 1980, there were no mergers or acquisi- were closed, the same period saw the opening of tions of commercial banking organizations in well over 28,000 new branches. Perhaps even more which both parties had more than $1.0 billion in important, the total number of banking offices total assets. The years 1987 through 1994 averaged increased sharply from about 53,000 in 1980 to fourteen such transactions per year and—reflecting more than 65,000 in 1994, a 23 percent rise, and changes in state law—an increasing number of the population per banking office declined. Fewer these reflected interstate acquisitions by bank hold- banking organizations clearly has not meant fewer ing companies. Three of the largest mergers in U.S. banking offices serving the public. banking history took place during 1990-94— Data on the nationwide concentration of U.S. Chemical-Manufacturers Hanover, NCNB-C&S banking assets must also be viewed in perspective. Sovran, and BankAmerica-Security Pacific. These The increases in nationwide concentration and mergers would all be surpassed by the recently mergers reflect to a large degree a response by the announced proposal to merge Chemical and Chase larger banking organizations to the removal of Manhattan. legal restrictions on geographic expansion both within and across states. That is, the industry is moving from many separate state banking struc- National Banking Structure tures imposed by legal barriers toward more of a nationwide banking structure that long would have The high level of merger activity since 1980, along been in existence if legal restrictions had not stood with a large number of bank failures, is reflected in in the way. The sudden adjustment to a new legal a steady decline in the number of U.S. banking environment should not be a surprise, nor is the organizations from 1980 through 1994. In 1980, large adjustment necessarily one that will continue there were more than 12,000 banking organiza- for an extended period. tions, defined as bank holding companies and inde- The removal of legal restrictions on geographic pendent banks; the independent banks and banks diversification began in earnest during the midowned by bank holding companies numbered 1980s, as did the merger movement. For example, nearly 14,500 banks. By 1990 there were about twenty-two states during the 1980s reduced branch- 9,200 banking organizations, and in 1995 the num- ing restrictions compared with only six states durber of organizations had fallen to about 7,700 ing the 1970s. Also during the 1980s, most states (including more than 10,000 banks)—declines of passed laws allowing the acquisition of in-state more than one-third in organizations and more than banks by out-of-state organizations. As a result, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1095 although in 1987 only about 11 percent of banking as nationwide concentration has increased substanassets were owned by out-of-state organizations, tially. This trend has continued since the midby mid-1995 that figure had risen to more than 1970s. Essentially similar trends are apparent when one-fourth. Looked at another way, even by 1987 local market bank concentration is measured by the almost 92 percent of U.S. banking assets were open Herfindahl-Hirschman Index (HHI). Because of to access by at least some out-of-state bank holding the importance of local banking markets, I would companies, and by September 1995 that proportion like to provide somewhat more detail on the had risen to more than 99 percent. Passage of the implications of bank mergers for local market Interstate Banking and Branching Efficiency Act concentration. in September 1994 further expanded geographic Metropolitan statistical areas (MSAs) and nondiversification opportunities—opening up interstate MSA counties are often used as proxies for urban branching by banks and all interstate banking to and rural banking markets. The average three-firm common rules. It is undoubtedly a major factor deposit concentration ratio for urban markets behind the several large bank mergers and increased only two-tenths of a percentage point announcements of mergers during 1995 as firms between 1980 and 1994. Average concentration in expand into new areas or respond to the potential rural counties actually declined six-tenths of a for major firms entering their markets. point. Similarly, the average bank deposit-based Other forces have also been transforming the HHI for both urban and rural markets fell between banking landscape, and the resulting acceleration 1980 and 1994. When thrift deposits are given a of competitive pressures has encouraged many 50 percent weight in these calculations, average banks to seek merger partners. Chief among these HHIs are sharply lower than the bank-only HHIs, is technological change: the rapid growth of com- but the trend becomes somewhat positive. On balputers and telecommunications, which has allowed ance, the three-firm concentration ratios and the a scale of operations that would not have been HHI data strongly suggest that despite the fact that manageable previously. Technological change has there were more than 6,300 bank mergers between also encouraged financial globalization, with 1980 and 1994, local banking market concentration expanded cross-border asset holdings, trading, and has remained about the same. credit flows, and, in response, foreign and domes- Why have not all of these mergers increased tic banks and other financial institutions have local market concentration? There are several reaincreased their cross-border operations. The result- sons. First, many mergers are between firms operating increase in domestic competition, especially for ing primarily in different local banking markets. larger banking organizations, has been intense. Although these mergers may increase national or Today, for example, more than 40 percent of the state concentration, they do not tend to increase domestic commercial and industrial bank loan mar- concentration in local banking markets and thus do ket is accounted for by foreign banks. not reduce competition. Second, as I have already pointed out, there is new entry into banking markets. In most markets Local Market Banking Structure new banks can be formed fairly easily, and some key regulatory barriers, such as restrictions on Given the Board's statutory responsibility to ensure interstate banking, have been all but eliminated. competitive banking markets by applying antitrust New banks continue to be formed in states throughstandards, it is critical to understand that nation- out the country, although the number of new bank wide concentration statistics are not the appropriate formations has declined sharply during the 1990s. metric for assessing competitive effects. Virtually Third, the evidence overwhelmingly indicates all observers agree that in the vast majority of cases that banks from outside a market usually do not the relevant issue is competition in local banking increase their market share after entering a new markets. From 1980 through 1994 the average per- market by acquisition. An oft-mentioned example centage of bank deposits accounted for by the three here is the inability of the New York City banks to largest firms in both urban and rural markets has gain significant market share in upstate New York. remained steady or actually declined slightly even More general studies indicate that, when a local Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1096 Federal Reserve Bulletin • December 1995 bank is acquired by a large out-of-market bank, part for the same reasons that make generalizations there is normally some loss of market share. The difficult, the Federal Reserve devotes considerable new owners are not able to retain all of the custom- care and substantial resources to analyzing indiers of the acquired bank. vidual merger applications. Fourth, it is important to emphasize that small banks have been, and continue to be, able to retain their market share and profitability in competition FEDERAL RESERVE METHODOLOGY with larger banks. Our staff members have done FOR ANALYZING PROPOSED BANK MERGERS repeated studies of small banks; all these studies indicate that small banks continue to perform as The Federal Reserve Board is required by the Bank well as, or better than, their large counterparts, Holding Company Act (1956) and the Bank Merger even in the banking markets dominated by the Act (1960) to assess the effects when (1) a holding major banks. Indeed, size is not an important deter- company acquires a bank or merges with another mining factor even for international competition. holding company, or (2) the bank resulting from The United States has not had any banks among the a merger is a state-chartered member bank. The largest twenty in the world since 1989 and even if Board must evaluate the likely effects of such all of the proposed mergers were consummated, mergers on competition, the financial and manage- U.S. banks would still not rank among the largest rial resources and future prospects of the firms twenty. Yet those U.S. banks that compete in world involved, the convenience and needs of the commarkets are consistently among the most profitable munities to be served, and Community Reinvestin the world and include those that are ranked as ment Act requirements. the most innovative. It is notable that U.S. banks, This section of my statement briefly discusses besides being among the most profitable, have in the methodology the Board uses in assessing a the 1990s demonstrated their ability to attract capi- proposed merger. In light of the subcommittee's tal. When measured by equity, two of the largest interests, emphasis is placed on competitive ten banks in the world are U.S. banks and the factors. number will be three of the largest ten if the Chemical-Chase merger is consummated. Finally, administration of the antitrust laws has Competitive Criteria almost surely played a role. At a minimum, banking organizations have been deterred from propos- In considering the competitive effects of a proing seriously anticompetitive mergers. And in some posed bank acquisition, the Board is required to cases, to obtain merger approval, banks have apply the same competitive standards contained in divested banking assets and deposits in certain the Sherman and Clayton Antitrust Acts. The Bank local markets in which the merger would have Holding Company (BHC) Act and the Bank otherwise resulted in substantially more concen- Merger Act do contain a special provision, applicatrated markets. ble primarily in troubled-bank cases, that permits Overall, then, the picture that emerges is that of a the Board to balance public benefits from proposed dynamic U.S. banking structure adjusting to the mergers against potential adverse competitive removal of longstanding legal restrictions on geo- effects. graphic expansion, technological change, and The Board's analysis of competition begins with greatly increased domestic and international com- defining the geographic areas that are likely to be petition. Even as the number of banking organiza- affected by a merger. Under procedures established tions has declined, the number of banking offices by the Board, these areas are defined by staff has continued to increase in response to the members at the local Reserve Bank in whose Disdemands of consumers, and measures of local trict the merger would occur, with oversight by banking structure have remained quite stable. In staff members in Washington. In mergers in which such an environment, it is potentially very mislead- one or both parties are in two Federal Reserve ing to make broad generalizations without looking Districts, the Reserve Banks cooperate, as required. more deeply into what lies below the surface. In To ensure that market definition criteria remain Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1097 current, and in an effort to better understand the standard databases with information on market dynamics of the banking industry, the Board has income, population, deposits, and other variables. recently sponsored several surveys, including the These data, along with results of general empirical 1988 and 1993 National Surveys of Small Business research by Federal Reserve System staff members, Finances, a triennial national Survey of Consumer academics, and others, are used to assess the impor- Finances, and telephone surveys in specific merger tance of various factors that may affect competicases, to assist it in defining geographic markets in tion. To provide the subcommittee with an indicabanking. These surveys and other evidence con- tion of the range of other factors the Board may tinue to suggest that small businesses and house- consider in evaluating competition in local marholds tend to obtain their financial services in then- kets, I shall briefly outline these considerations. local area. This local geographic market definition Potential competition, or the possibility that would, of course, be less important for the financial other firms may enter the market, may be regarded services obtained by large businesses. as a significant procompetitive factor. It is most With this basic local market orientation of house- relevant in markets that are attractive for entry and holds and small businesses in mind, the staff con- when barriers to entry, legal or otherwise, are low. structs a local market index of concentration, the Thus, for example, potential competition is of rela- HHI, which is widely accepted as a sensitive mea- tively little importance in markets in which entry is sure of market concentration, to conduct a prelimi- unlikely for economic reasons, such as in smaller nary screen of a proposed merger. The HHI is markets. For potential competition to be a significalculated based on local bank and thrift deposits. cant factor, it will generally be necessary for there The merger would not be regarded as anticompeti- to be potential acquisition targets as well as meantive if the resulting market share, the HHI, and the ingful potential entrants. These conditions are most change in that index do not exceed the criteria in likely to be relevant in urban markets. the Justice Department's merger guidelines for Thrift institution deposits are now typically banking. However, while the HHI is an important accorded 50 percent weight in calculating statistiindicator of competition, it is not a comprehensive cal measures of the effect of a merger on market one. In addition to statistics on market share and structure for the Board's analysis of competition. bank concentration, economic theory and evidence In some instances, however, a higher percentage suggest that other factors, such as potential compe- may be included if thrift institutions in the relevant tition, the strength of the target, and the market market look very much like banks, as indicated environment may have important influences on by the substantial exercise of their transactions bank behavior. These other factors have become account, commercial lending, and consumer lendincreasingly important as a result of many recent ing powers. procompetitive changes in the financial sector. Competition from other depository and nonbank Thus, if the resulting market share and the level financial institutions may also be given weight if and change in the HHI are within Justice Depart- such entities clearly provide substitutes for the ment guidelines, there is a presumption that the basic banking services used by most households merger is acceptable, but if they are not, a more and small businesses. In this context, credit unions thorough economic analysis is required. and finance companies may be particularly impor- Because the importance of the other factors that tant, and over time, nonbank competition has may influence competition often varies from case become substantially more important. to case and market to market, an in-depth economic The competitive significance of the target firm analysis of competition is required in each of those can be a factor in some cases. For example, if the merger proposals when the Justice Department bank being acquired is not a reasonably active guidelines are exceeded. To conduct such an analy- competitor in a market, its market share might be sis of competition, the Board uses information from given a smaller weight in the analysis of competiits own major national surveys noted above, from tion than otherwise. telephone surveys of households and small busi- Adverse structural effects may be offset somenesses in the market being studied, from on-site what if the firm to be acquired is located in a investigations by staff members, and from various declining market. This factor would apply when a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1098 Federal Reserve Bulletin • December 1995 weak or declining market is clearly a fundamental acquisition unless the resulting organization is and long-term trend, and there are indications that expected to be strong and viable. exit by merger would be appropriate because exit The Board expects that holding company parents by closing offices is not desirable and shrinkage will be a source of strength to their bank subsidiwould lead to diseconomies of scale. This factor is aries. In doing so, the Board generally requires that most likely to be relevant in rural markets. the holding company applicant and its subsidiaries Competitive issues may be reduced in impor- be in at least satisfactory overall condition and that tance if the bank to be acquired has failed or is any weaknesses be addressed before Board action about to fail. In such a case, it may be desirable to on a proposal. The holding company applicant allow some adverse competitive effects if this must be able to demonstrate the ability to make the means that banking services will continue to be proposed acquisition without unduly diverting made available to local customers rather than be financial and managerial resources from the needs severely restricted or perhaps eliminated. of its existing subsidiary banks. A very high level of the HHI could raise ques- These general principles apply regardless of the tions about the competitive effects of a merger size or type of acquisition—banking or nonbankeven if the change in the HHI is less than the ing. The financial and managerial analysis of an Justice Department criteria. This factor would be application includes an evaluation of the existing given additional weight if there has been a clear organization, including bank and nonbank subsiditrend toward increasing concentration in the aries, the parent company, and the consolidated market. organization, as well as an evaluation of the entity Finally, other factors unique to a market or firm to be acquired. Also included in this analysis are would be considered if they are relevant to the the financial and accounting effects of the transanalysis of competition. These factors might action, that is, the purchase price, the funding and include evidence on the nature and degree of com- sources thereof, and any purchase accounting petition in a market, information on pricing behav- adjustments. Numerous factors are analyzed for ior, and the quality of services provided. strengths and weaknesses, including earnings, asset Some merger applications are approved only quality, cash flow, capital, risk management, interafter the applicant proposes the divestiture of of- nal controls, and compliance with law and regulafices in local markets, retention of which would tion. As the size of the applicant or resulting orgaotherwise violate Justice Department guidelines, nization increases because of mergers or internal and when the merger cannot be justified using any growth, so generally does the complexity of this of the criteria I have just discussed. We believe that analysis. Additionally, areas in which weaknesses such divestitures have provided a useful vehicle for or potential issues are identified receive more eliminating the potentially anticompetitive effects intense scrutiny. The financial condition and manof a merger in specific local markets while allow- agement of the resulting organization are expected ing the bulk of the merger to proceed. to be satisfactory and financial and managerial resources to be sufficient in relation to the risk of the transaction; thus, significant problems or issues must be resolved for favorable action. Safety and Soundness Criteria In acting upon merger applications, the Board is required to consider financial and managerial Community Reinvestment Act Criteria resources and the future prospects of the firm. In doing so, the Board's goal is to promote and pro- The Community Reinvestment Act (CRA) perfortect the safety and soundness of the banking system mance of banking organizations that seek the and to encourage prudent acquisition behavior by Board's approval to acquire a bank or thrift instituapplicant banking organizations. Indeed, except in tion is a major component of the "convenience and very special circumstances, usually involving fail- needs" criteria that must be considered by the ing banks, the Board will not approve a merger or Board. In making its judgments, the Board pays Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1099 particular attention to CRA examination findings. Effects of Mergers In addition, any comments received from the pub- on Locally Limited Customers lic regarding an applicant's CRA performance become part of the official record, and such com- The current merger wave in the banking industry is ments are reviewed carefully. The Board has devel- likely to have only modest effects on the availabiloped a substantial record in this area. ity of services to households and small businesses Banks supervised by the Federal Reserve that rely primarily on local providers for their System—regardless of the size or the geographic financial services and often have few convenient scope of a bank's operations—are examined for alternatives for such services. There are two rea- CRA purposes generally every eighteen months. sons for this: (1) to date, most mergers have not Banking organizations with identified weaknesses been between banks operating primarily in the in their consumer compliance are examined even same local banking markets; and (2) the effects of more frequently. Our practice is to review the per- intramarket mergers can be, and thus far have been, formance of banks with large intrastate branching limited by both market forces and antitrust consystems by examining a sample of branches, which straints on such mergers. consists of all major branches plus one-tenth of all Even in those places in which in-market mergers small branches selected on a rotating basis. The have occurred, the effect on competition has, on agencies will need to develop a similar procedure average, not been substantial. This, of course, does for large interstate branch systems as well. Some not mean that users of bank services will never be adjustments may be necessary, though, to ensure harmed by mergers. No policy can guarantee that that the CRA examination process continues to result. But, the trends in local market concentration work well for banking organizations that span I discussed earlier indicate that the Board's applicaseveral states. tion of antitrust standards to within-market merger The Board expects that banking organizations applications generally has preserved competition. will have policies and procedures in place and In addition, the Board's policies have almost cerworking well to address and implement their CRA tainly discouraged some potential bank mergers responsibilities before Board consideration of bank before an application was ever filed. Moreover, expansion proposals. The Board generally does not considerable intramarket consolidation could occur accept promises for future action in this area as without significant anticompetitive effects. Many a substitute for a demonstrated record of perfor- urban markets could see a relatively large number mance. Instead, the Board has accepted commit- of in-market mergers before antitrust guidelines ments for future action as a means of addressing would be violated. Furthermore, legislation passed areas of weakness in an otherwise satisfactory during the 1980s made thrift institutions more record. When commitments have been accepted, important competitors for banking services, and the Board monitors progress in implementing the this has helped to reduce concerns about anticomproposed actions, both through reports and through petitive effects from intramarket bank mergers. the application process. Proposed legislation before this subcommittee may make thrift institutions even more bank-like, encouraging even greater competition. Although many small banks remain viable com- POTENTIAL IMPLICATIONS petitors in markets after larger bank mergers, some OF BANK MERGERS research suggests that large banks may adopt new banking technologies—such as automated teller The increased rate of bank mergers has raised a machines and bank credit cards—more rapidly than number of concerns regarding the potential effects small banks. Thus, bank mergers may enhance of banking consolidation on those consumers consumer convenience. On the other hand, inwhose demands for banking services are primarily market bank mergers often lead to some branch local in nature and on the performance of the closings, raising concerns that consumer convenimerged banks (including prices paid by consumers ence may be harmed. Indeed, one of the factors at those banks). reviewed in a CRA examination is the bank's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1100 Federal Reserve Bulletin • December 1995 record of opening and closing offices. However, as This challenge is suspect because if a market is I pointed out earlier, there has been a substantial competitive, above-normal profits, whatever their increase in the number of bank offices in the United origin, should be driven down to a competitive States in recent years, and the number of ATMs has level. increased dramatically (from almost 14,000 in 1980 Other studies have looked across banking marto almost 110,000 in 1994). More important, there kets for differences in the prices that banks charge is no reason to suspect that the market factors that their loan and deposit customers. For the most part, have led to this increase in the number of offices such studies have found that banks located in relaand ATMs have changed. Indeed, the abolition of tively concentrated markets tend to charge higher constraints on interstate branches will greatly facili- interest rates for certain types of loans, particularly tate this process. That is, if merging banks should small business loans, and tend to offer lower interclose branches, the opening of branches by existing est rates on certain types of deposits, particularly competitors or by new entrants to the market is transactions accounts, than do banks in less concenlikely to occur as new profit opportunities arise. trated markets. These studies have been less sub- Such opportunities should become even easier with ject to question than profit studies and therefore full interstate branching, which will take effect tend to be clearer in terms of their implications for in June 1997 under the Interstate Banking and merger policy. In particular, they suggest that merg- Branching Efficiency Act of 1994. If consumers ers resulting in relatively high levels of local bankdemand locational convenience, banks of all sizes ing market concentration can adversely affect local will need to be responsive if they expect to remain bank customers. That is, these studies support the viable competitors for retail customers. need to maintain antitrust constraints if locally limited bank customers are to continue to receive competitively priced banking services. Effects of Mergers on Bank Performance A related issue relevant to the effect of mergers concerns the prospect that, through merger, greater Federal Reserve System staff members and others bank efficiency can be achieved, thus yielding a have conducted numerous studies over many years healthier, more competitive banking firm. Studies on the effects of bank mergers and acquisitions. that are relevant to the effect of mergers on bank Some of these studies have focused on the effect of efficiency may be divided into those that do and mergers on bank profits and prices, while others those that do not look directly at the effects of have looked at the potential for cost savings and mergers. efficiencies derived from mergers. A large number of studies have sought to deter- Of those studies concerned with profits and mine whether larger banking organizations exhibit prices, some have looked directly at the effects of lower average costs than do smaller organizations. mergers, while a majority have approached this In general, these studies of "scale economies" find issue more indirectly by examining how bank prof- that cost advantages of large firms either do not its and prices differ across banking markets. Each exist or are quite small and that most do not find type of study is relevant to an assessment of the scale economies to exist beyond the range of a impact of bank mergers on performance. small- to medium-sized bank. Thus, simply by Studies of differences in bank profitability across achieving larger size, mergers seem unlikely to markets with varying degrees of concentration rep- yield greater efficiency. resent the oldest type of study relevant to the issue. Another strand of research has attempted to dis- Typically, such studies have found that banks oper- cover whether there are important differences in the ating in more concentrated markets exhibit some- efficiency with which banks use inputs to produce a what higher profits than do banks in less concen- given level of services. These studies, which essentrated markets. These higher profits may reflect the tially focus on the efficiency effects of management lesser degree of competition in more concentrated skills, suggest that some banks, both large and markets. Many have argued, however, that they are small, are just a lot better than others at using their simply an indication of the greater efficiency and inputs, such as labor and capital, in a productive lower costs of the largest firms in such markets. way. Indeed, estimates of these so-called cost effi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 1101 ciencies suggest that management skills dominate mon for relatively efficient banks to take over any benefits from economies of scale. In addition, relatively inefficient ones and convert the more there is some evidence that these differences in poorly performing institutions into viable, low-cost management efficiencies play a role in the inci- competitors. Surely consumers of financial services dence of bank failure. It is estimated that more than could only be better off if such a future occurs and 50 percent of the bank failures in the 1980s came competitive markets are maintained. from the highest (noninterest) cost quartile of banks, while fewer than 10 percent are estimated to have occurred in the lowest cost quartile. CONCLUSION In the past several years, numerous researchers have sought to determine whether past mergers The recent wave of large mergers and merger have resulted in cost savings. Many such studies announcements reflects to a large degree a natural examine the changes in noninterest expenses response to new opportunities for geographic observed before and after the merger and, in some expansion as legal restraints are removed. The cases, compare them to the same changes observed industry is moving away from a legally fragmented concurrently in banks that did not participate in banking structure toward a nationwide banking mergers. Other research has used the event study structure. Rapid technological changes and global methodology to examine how the stock market competition in corporate banking are almost cerreacted to merger announcements. The great major- tainly a motivating factor for the very large banks. ity of these studies have not found evidence of The increased pace of bank mergers since the substantial efficiency gains from mergers. Evi- early 1980s has greatly reduced the number of U.S. dence on the relative efficiency of acquiring and banking organizations and resulted in a substanacquired firms is mixed. tially higher nationwide concentration of banking Let me emphasize that most of these studies are assets at the 100 largest banks. However, concenbased on many mergers and thus provide the basis tration in local banking markets, which is normally for statistically valid generalizations. However, in considered most important for the analysis of possome individual merger cases, cost savings and sible competitive effects, has remained virtually improved efficiency have been reported. Further- unchanged. In addition, there continues to be new more, the previously noted evidence indicating bank entry and there is a continuing increase in the substantial differences in the relative efficiency of number of banking offices. This illustrates that the banks suggests that substantial cost savings are U.S. banking structure is highly dynamic and that theoretically possible for many banks. For exam- sweeping generalizations are extremely difficult to ple, a study done at the Board a few years ago make. estimated that annual cost savings of about $17 bil- The dynamic nature of U.S. banking means that lion would result if the lowest cost banks in the analysis of the potential competitive and other country were to acquire the highest cost banks, and effects of individual bank mergers must be done on if the costs of the acquired banking organizations a case-by-case, market-by-market basis. The Fedwere subsequently reduced to the level of the ac- eral Reserve devotes considerable resources to this quiring banks. While some of these cost differences end. Many factors are considered in the analysis, may simply reflect differences in the level and including actual competition from bank and nontypes of services offered to the public, such results bank sources, potential competition, the general are nevertheless suggestive of potential gains from economic health of the market, and a variety of acquisitions of inefficient firms by efficient ones. In other factors unique to a given market. In addition, addition, it appears that in the evolving world of safety and soundness and CRA concerns are highly high technology and global markets for corporate relevant. banking, there is greater emphasis on efficiency to To date, the available evidence suggests that survive. This has probably played a role in the recent mergers have not resulted in adverse effects efficiency gains noted in some of the individual on the vast majority of consumers of banking serrecent large mergers. On balance, a possible future vices. It is certainly possible that some customers scenario is that it may become increasingly com- have been disadvantaged by some mergers. And Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1102 Federal Reserve Bulletin • December 1995 mergers can no doubt be very disruptive to bank managed entities acquire and modify the operations employees as functions are consolidated and reor- of high-cost organizations. Given the continuing ganized. But these disruptions do not appear to pressures for cost minimization in banking, it cerdiffer substantively from similar disruptions in tainly seems possible that some of this potential other industries that have experienced or are under- will be realized in the future. going fundamental change. In sum, law, regulation, and market forces have It is also clear that substantial harm to consumers so far kept banking markets competitive, and the would occur if mergers were allowed to decrease same forces should continue to do so as banks competitive pressures significantly. However, mar- adjust to a new legal and more competitive enviket developments and the removal of geographic ronment. Bank consolidation to date has not restrictions on banks have significantly lessened reduced competition in any meaningful way, and the chances for anticompetitive effects. In addition, we see no reason why it should begin to do so. the antitrust standards enforced by the bank regula- While there have been only a few cases of demontory agencies and the Department of Justice have strable efficiency gains from past mergers, there is helped to ensure the maintenance of competition. reason to expect that there may be a higher inci- The evidence to date does not indicate that, on dence of such gains in the future. Given that potenaverage, substantial efficiency improvements have tial and the antitrust laws protecting competition, resulted from bank mergers. However, in recent the Board sees no reason to be concerned if a years, there appear to have been some cases of banking organization's management and stockholdimprovements in efficiency, and our staff work ers choose to respond to the changing environment does suggest the potential for such savings if well- by consolidating with other such organizations. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1103 Announcements MEETING OF CONSUMER ADVISORY COUNCIL risks to financing safe and sound, affordable home mortgage loans. The Federal Reserve Board announced on The Partners program can also be used by com- October 12, 1995, that the Consumer Advisory munity groups, government agencies, and other Council would hold its next meeting on Thursday, community development practitioners who offer November 2, and that the session would be open to home purchase loans. the public. The council's function is to advise the The software can be installed on a stand- Board on the exercise of the Board's responsibili- alone, IBM compatible computer and operates in ties under the Consumer Credit Protection Act a Microsoft Windows environment. Copies of the and on other matters on which the Board seeks its program will be distributed free of charge to all advice. member banks (Federal Reserve state member banks and national banks). A copy of the program may be ordered from the Federal Reserve Community Affairs Office in each Federal Reserve DEVELOPMENT OF NEW SOFTWARE FOR District: Atlanta, 404-589-7226; Boston, 617-973- INSTITUTIONS OFFERING MORTGAGE LOANS 3095; Chicago, 312-322-5910; Cleveland, 216- 579-2891; Dallas, 214-922-5266; Kansas City, 816- The Federal Reserve announced on October 19, 881-2476; Minneapolis, 612-340-6913; New York, 1995, the development of a computer software 212-720-5921; Philadephia, 215-574-6482; Richprogram designed to serve as an analytic tool mond, 804-697-8448; St. Louis, 314-444-8644; and for financial institutions in offering affordable San Francisco, 415-974-3314. mortgage loans to low- and moderate-income applicants. The software program, entitled Partners, was developed by Ron Zimmerman, a vice president of SCHEDULE FOR REVIEW OF MAJOR FEDERAL the Federal Reserve Bank of Atlanta. The program RESERVE REGULATIONS can determine within seconds if potential homebuyers can qualify, mathematically, for a home pur- The Federal Reserve Board issued on October 11, chase loan, given the underwriting criteria and 1995, a schedule for review of its major regulafinancial information provided. tions, policy statements, and other regulatory guid- The program assists in breaking down the barri- ance, pursuant to the requirements of section 303 ers between the loan officer and the potential appli- of the Riegle Community Development and Regucant by offering new and innovative ways to look latory Improvement Act of 1994. at home purchase financing. It identifies ten quali- The timetable should enable interested parties fying alternatives, from self-help actions to loan to comment meaningfully at various points in subsidies or grants, to help those applicants inter- the review process, including providing suggesested in obtaining a mortgage loan who may not tions for the development of regulatory proposals. qualify for the loan based on their current financing Several major regulatory reviews are currently criteria. under way: Regulation T (Credit by Brokers and Besides determining loan eligibility, Partners Dealers); Regulation E (Electronic Funds Transoffers loan amortization schedules, equity buildup fers); Regulation M (Consumer Leasing); and calculations, and secondary market considerations Regulation K (International Banking Operaand can instantly recognize the opportunities and tions), subpart A (Investments by Foreign Bank- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1104 Federal Reserve Bulletin • December 1995 ing Organizations in U.S. Subsidiaries). Copies • Fifty-three stocks have been removed for of the timetable are available from Publica- reasons such as listing on a national securities tions Services, Mail Stop 127, Board of Governors exchange or involvement in an acquisition. of the Federal Reserve System, Washington, DC 20551. The OTC list is composed of OTC stocks that have been determined by the Board to be subject to margin requirements in Regulations G (Securities Credit by Persons other than Banks, Brokers, or PUBLICATION OF THE REVISED LISTS OF Dealers), T, and U (Credit by Banks for Purchasing OTC STOCKS AND OF FOREIGN STOCKS or Carrying Margin Stocks). It includes OTC stocks SUBJECT TO MARGIN REGULATIONS qualifying under Board criteria and also includes all OTC stocks designated as NMS securities. The Federal Reserve Board on October 27, 1995, Additional NMS securities may be added in the published a revised list of over-the-counter stocks interim between quarterly Board publications; these that are subject to its margin regulations (OTC list). securities are immediately marginable upon desig- Also published was a revised list of foreign equity nation as NMS securities. securities (foreign list) that meet the margin criteria The foreign list specifies those foreign equity in Regulation T (Credit by Brokers and Dealers). securities that are eligible for margin treatment at These lists are published quarterly for the informa- broker-dealers. There was one addition to and one tion of lenders and the general public. deletion from the foreign list; it now contains The lists became effective November 13, 1995, 701 foreign equity securities. and supersede the previous lists that were effective August 14, 1995. The next revision of the lists is scheduled to be effective February 1996. FEDERAL RESERVE STATISTICAL RELEASES The changes that were made to the revised OTC Now MAILABLE BY FAX list, which now contains 4,252 OTC stocks, are as follows: Subscriptions to some of the Board's statistical releases may now be ordered via fax. The list of • One hundred ninety-eight stocks have been releases and their prices appears on pages A76included for the first time, 172 under National A77 of this issue. To order a subscription to a Market System (NMS) designation. release, contact Publications Services, Board of • Forty-eight stocks previously on the list have Governors of the Federal Reserve System, Washbeen removed for substantially failing to meet the ington, DC 20551; telephone (202) 452-3244 or by requirements for continued listing. fax (202) 728-5886. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1105 Legal Developments ORDERS ISSUED UNDER BANK HOLDING COMPANY trolling deposits of approximately $952 million, repre- ACT senting less than 1 percent of total deposits in depository institutions in the state. Upon consummation of this Orders Issued Under Section 3 of the Bank proposal, NationsBank would remain the fourth largest Holding Company Act depository institution in Florida, controlling deposits of approximately $18 billion, representing 11.5 percent of NationsBank Corporation total deposits in depository institutions in the state. Charlotte, North Carolina NationsBank and Intercontinental compete directly in the Miami-Ft. Lauderdale and West Palm Beach banking NB Holdings, Inc. markets in Florida. The Board has carefully considered Charlotte, North Carolina the effects that consummation of this proposal would have on competition in these banking markets in light of Order Approving the Acquisition of a Bank all the facts of record, including the characteristics of the markets, the competition offered by other depository NationsBank Corporation and its wholly owned subsid- institutions in the markets, and the increase in the coniary, NB Holdings, Inc. (together, "NationsBank"), both centration of total deposits in depository institutions4 in of Charlotte, North Carolina, bank holding companies the markets as measured by the Herfindahl-Hirschman within the meaning of the Bank Holding Company Act Index ("HHI").5 Consummation of this proposal would ("BHC Act"), have applied for the Board's approval not exceed Justice Department guidelines in either of the under section 3 of the BHC Act (12 U.S.C. § 1842), to markets, and numerous competitors would remain in acquire Intercontinental Bank, Miami, Florida ("Inter- each market. Based on all the facts of record, the Board continental").1 has concluded that consummation of this proposal would Notice of the application, affording interested persons not result in any significantly adverse effect on competian opportunity to submit comments, has been published (60 Federal Register 44,891 (1995)). The time for filing comments has expired, and the Board has considered the 4. Market data are as of June 30, 1994. Market share data are application and all comments received in light of the based on calculations in which the deposits of thrift institutions are factors set forth in section 3(c) of the BHC Act. included at 50 percent. The Board previously has indicated that NationsBank, with total consolidated assets of thrift institutions have become, or have the potential to become, $184.2 billion, is the fourth largest commercial banking significant competitors of commercial banks. See WM Bancorp, 76 organization in the United States, and operates subsid- Federal Reserve Bulletin 788 (1990); National City Corporation, iary banks in nine states and the District of Columbia.2 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculations of market share NationsBank is the fourth largest depository institution on a 50 percent basis. See, e.g., First Hawaiian, Inc., 11 Federal in Florida, controlling deposits of approximately Reserve Bulletin 52 (1991). $17.1 billion, representing 10.8 percent of total deposits 5. Under the revised Department of Justice Merger Guidelines, in depository institutions in the state.3 Intercontinental is 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is below 1000 is considered to be unconcentrated, the ninth largest depository institution in Florida, conand a market in which the post-merger is between 1000 and 1800 is considered to be moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally 1. NationsBank has established a de novo national bank subsid- will not be challenged (in the absence of other factors indicating iary into which Intercontinental would be merged. Subsequent to anticompetitive effects) unless the post-merger HHI is at least 1800 consummation of this proposal, NationsBank anticipates that the and the merger increases the HHI by more than 200 points. The surviving bank would be merged into its Florida banking subsid- Justice Department has stated that the higher than normal HHI iary, NationsBank of Florida, N.A., Tampa, Florida. thresholds for screening bank mergers for anticompetitive eflFects 2. Asset data are as of June 30, 1995. NationsBank also operates implicitly recognize the competitive effects of limited-purpose and a limited-purpose credit card bank in Delaware. other non-depository financial entities. Upon consummation of this 3. State deposit data are as of June 30, 1995. In this context, proposal, the HHI would increase by 44 points to 841 in the depository institutions include commercial banks, savings banks, Miami-Ft. Lauderdale banking market, and would increase by and savings associations. 11 points to 1149 in the West Palm Beach banking market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1106 Federal Reserve Bulletin • December 1995 tion or the concentration of banking resources in any NationsBank's subsidiary banks and NationsBanc Mortrelevant banking market. gage Corporation, Dallas, Texas ("NationsBanc Mortgage"), its nonbanking mortgage lending subsidiary, dis- Interstate Analysis criminate against African Americans in home mortgage lending. In particular, Protestant asserts that data filed Section 3(d) of the BHC Act, as amended by Sec- under the Home Mortgage Disclosure Act ("HMDA") tion 101 of the Riegle-Neal Interstate Banking and for 1993 show that NationsBank denied a higher percent- Branching Efficiency Act of 1994, allows the Board to age of loan applications from African Americans than approve an application by a bank holding company to from non-minorities in the cities of Miami, Dallas, Baltiacquire control of a bank located in a State other than the more, and the District of Columbia.9 In addition, Proteshome State of such bank holding company, if certain tant contends that both NationsBank and Intercontinental conditions are met.6 These conditions are met in this made a disproportionately small number of loans to case.7 In view of all the facts of record, the Board is African Americans in the Miami market. Protestant also permitted to approve this proposal under section 3(d) of argues that NationsBank's ascertainment and marketing the BHC Act. efforts are not directed toward providing products and services related to the needs of African-American mem- Convenience and Needs Considerations bers of the communities it serves, and that this proposal may result in a reduction of branches, branch personnel In acting upon an application to acquire a depository and banking services in the markets currently served by institution under the BHC Act, the Board must consider Intercontinental.10 the convenience and needs of the communities to be The comments submitted by Protestant in the context served, and take into account the records of the relevant of this application also were filed in connection with depository institutions under the Community Reinvest- NationBank's proposal to acquire CSF Holdings, Inc., ment Act (12 U.S.C § 2901 et seq.) ("CRA"). The CRA Miami, Florida. The Board has fully addressed these requires the federal financial supervisory agencies to comments in its order approving that proposal.11 For the encourage financial institutions to help meet the credit reasons explained in the Board's order in that case, needs of the local communities in which they operate, which are incorporated by reference in this order, and consistent with their safe and sound operation. To ac- based on all the facts of record in these cases, the Board complish this end, the CRA requires the appropriate believes that convenience and needs factors, including federal supervisory authority to "assess the institution's CRA performance records, are consistent with approval record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of 9. Protestant supports these allegations by citing several studies such institution," and to take that record into account in and compilations of mortgage lending data by The Wall Street its evaluation of bank holding company applications.8 Journal (1993), the National Community Reinvestment Coalition (1995), the Washington Lawyers' Committee for Civil Rights and The Board has received comments on this proposal Urban Affairs (1994), and an individual researcher at the University from the International Brotherhood of Teamsters, Ware- of Texas (1992). housemen and Helpers ("Protestant") alleging that 10. In addition, Protestant reiterates criticisms of NationsBank's record of CRA performance that were considered by the Board in connection with a 1994 application to acquire branches of California Federal Bank, F.S.B., Los Angeles, California. Protestant al- 6. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding leges, for example, that NationsBank illegally discriminates against company's home state is that state in which the operations of the African Americans in mortgage lending in Florida, and, in particubank holding company's banking subsidiaries were principally lar, the Tampa Bay area. Protestant also contends that NationsBank conducted on July 1, 1966, or the date on which the company reneged on a commitment to support the Florida Community Debecame a bank holding company, whichever is later. For purposes velopment Assistance Corporation. Based on all the facts of record, of the BHC Act, the home state of NationsBank is North Carolina. and for the reasons discussed in this order and the 1994 order 7. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (which are incorporated herein), the Board does not believe that (B). NationsBank's subsidiary banks are adequately capitalized and these allegations warrant denial of this proposal. See NationsBank adequately managed. Intercontinental has been in existence and Corporation, 80 Federal Reserve Bulletin 1A1 (1994). Protestant continuously operated for the minimum period of time required also cites a 1994 civil judgment against NationsBank, which orunder Florida law. In addition, upon consummation of this pro- dered it to honor the commitment of an acquired banking organizaposal, NationsBank and its affiliates would control less than tion to purchase a Georgia federal savings bank, as additional 10 percent of the total amount of deposits of insured depository evidence of NationsBank's failure to comply with its commitments. institutions in the United States and less than 30 percent of the total Based on all the facts of record, the Board does not believe that this amount of deposits of insured depository institutions in Florida. All incident reflects so adversely on NationsBank as to warrant denial other requirements of section 3(d) of the BHC Act also would be of this proposal. met upon consummation of this proposal. 11. See NationsBank Corporation, 81 Federal Reserve Bulletin 8. 12 U.S.C. § 2903. 1121 (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1107 of this application. In particular, the Board notes that all should be, and hereby is, approved.14 The Board's apof NationsBank's subsidiary banks received either a proval is specifically conditioned upon compliance by "satisfactory" or "outstanding" rating from the Office NationsBank with all commitments made in connection of the Comptroller of the Currency ("OCC"), their with this application as well as the conditions discussed primary federal supervisor, in their most recent public in this order. The commitments and conditions relied on examinations for CRA performance. Intercontinental re- by the Board in reaching this decision are deemed to be ceived a "satisfactory" CRA performance rating from conditions imposed in writing by the Board in connecthe Federal Deposit Insurance Corporation, its primary tion with its findings and decision, and as such may be federal supervisor, as of September 1994. NationsBank enforced in proceedings under applicable law. This aphas indicated that it would implement its CRA policies proval is also conditioned upon NationsBank receiving and procedures at Intercontinental following consumma- all necessary Federal and state approvals. tion of this proposal. This transaction shall not be consummated before the In addition, the Board notes NationsBank's progress fifteenth calendar day following the effective date of this under its Community Investment Program ("CIP"), a order, or later than three months after the effective date 10-year commitment to make a minimum of $10 billion of this order, unless such period is extended for good of community investment loans.12 Under this program, cause by the Board or the Federal Reserve Bank of NationsBank loaned $2.2 billion in 1992, $2.9 billion in Richmond, acting pursuant to delegated authority. 1993, and $3.4 billion in 1994. During 1993, By order of the Board of Governors, effective NationsBank made CIP loans totalling $91.9 million in October 17, 1995. the Miami market; $358 million in the Dallas market; $38.2 million in the Baltimore market; and $346.1 mil- Voting for this action: Chairman Greenspan, Vice Chairman lion in the District of Columbia market. Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. WILLIAM W. WILES Other Considerations Secretary of the Board The Board also has concluded that the financial and The Shorebank Corporation managerial resources and future prospects of Chicago, Illinois NationsBank and its subsidiaries and of Intercontinental, and the other supervisory factors the Board must con- Order Approving Acquisition of a Bank Holding sider under section 3 of the BHC Act, are consistent with approval.13 Company Based on the foregoing, and in light of all the facts of The Shorebank Corporation, Chicago, Illinois ("Shorerecord, the Board has determined that this application bank"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied under section 3(a)(3) of the BHC Act (12 U.S.C. § 1842(a)(3)) to acquire all the voting shares of Indecorp, Inc., Chicago, Illinois ("Indecorp"), and 12. CIP is a collection of special products and services, such as home mortgage loans, student loans, and loans to public/private thereby indirectly acquire Indecorp's subsidiary banks, partnerships, designed to benefit low- and moderate-income individuals and small businesses. 13. Protestant notes published accounts regarding an alleged violation of the anti-tying restrictions enacted by the BHC Act amendments of 1970 by NationsBank's South Carolina banking 14. Protestant references a newspaper account of an investigation subsidiary and alleged improper marketing practices in the sale of by the Department of Labor of alleged illegal discriminatory emretail nondeposit investments by NationsBank's securities broker- ployment practices by NationsBank. The Board notes that because age subsidiary. Both of these activities were reviewed by the OCC, NationsBank's subsidiary banks employ more than 50 people, and the Board has carefully considered the information from this serve as depositories of government funds, and act as agents in review. In addition, the Board has considered the anti-tying policies selling or redeeming U.S. savings bonds and notes, each bank is adopted by NationsBank and steps it has taken relating to the sale required by Department of Labor regulations to: of retail nondeposit investments. In response to an internal audit, (1) File annual reports with the Equal Employment Opportunity for example, NationsBank has adopted a revised Code of Ethics, Commission; and increased disclosure requirements, and expanded its audit proce- (2) Have in place a written affirmative action compliance produres, to ensure that its retail nondeposit investment sales practices gram which states its efforts and plans to achieve equal opportuare in compliance with all supervisory guidelines. The OCC has nity in the employment, hiring, promotion, and separation of indicated that NationsBank's progress in this regard is generally personnnel. satisfactory. In view of all the facts of record, including supervisory See 41 C.F.R. 60-1.7(a), 60-1.40. The record also indicates that information provided by the OCC, the Board does not believe that NationsBank and its other subsidiaries are subject to those equal these matters warrant denial of this proposal. opportunity and affirmative action requirements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1108 Federal Reserve Bulletin • December 1995 Independence Bank ("Independence") and Drexel Chicago banking market would remain unconcentrated National Bank, Chicago, Illinois ("Drexel").1 as measured by the Herfindahl-Hirschman Index Notice of the application, affording interested persons ("HHI"),5 and numerous competitors would remain in an opportunity to submit comments, has been published the market. (60 Federal Register 37,448 (1995)). The time for filing The record also indicates that the institutions involved comments has expired, and the Board has considered the in this application are among the smaller banking organiapplication and all comments received in light of the zations in the Chicago banking market. Within this marfactors set forth in section 3(c) of the BHC Act.2 ket, the combined share of market deposits for Shore- Shorebank controls two banks and is the 73d largest bank and Indecorp (with savings associations weighted commercial banking organization in Illinois, controlling at 50 percent) would be less than 1 percent. Moreover, deposits of $254.6 million, representing less than 1 per- the market would remain unconcentrated following concent of total deposits in commercial banking organiza- summation and it would be served by more than 100 tions in the state. Indecorp is the 84th largest commercial banking and thrift competitors. The Chicago banking banking organization in Illinois, controlling deposits of market also is an attractive market for entry and inter- $226.9 million, representing less than 1 percent of total state acquisitions are authorized under Illinois law. deposits in commercial banking organizations in the Based on all the facts of record, the Board concludes that state. Upon consummation of this proposal, Shorebank consummation of this proposal is not likely to result in would become the 45th largest commercial banking or- significantly adverse effects on competition or the conganization in the state, and control deposits of centration of banking resources in the Chicago banking $481.5 million as of June 30, 1995, representing less market or any other relevant banking market.6 than 1 percent of total deposits in commercial banking organizations in the state. Convenience and Needs Considerations Shorebank and Indecorp compete directly in the Chicago, Illinois, banking market ("Chicago banking mar- In acting on an application to acquire a depository instiket").3 The Board has carefully considered comments tution, the Board must consider the convenience and maintaining that this proposal would have a significant needs of the communities to be served, and take into adverse effect on competition in this banking market.4 account the records of the relevant depository institu- Shorebank is the 60th largest commercial banking tions under the Community Reinvestment Act organization in the market, controlling deposits of (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires $241.1 million, representing less than 1 percent of total the federal financial supervisory agencies to encourage deposits in commercial banking organizations in the financial institutions to help meet the credit needs of the market ("market deposits"). Indecorp is the 58th largest local communities in which they operate, consistent with commercial banking organization in the market, control- their safe and sound operation. To accomplish this end, ling deposits of $246.2 million, representing less than 1 percent of market deposits. After consummation of this 5. The post-merger HHI for the Chicago banking market would proposal, Shorebank would become the 38th largest remain unchanged at 546. Under the revised Department of Justice commercial banking organization in the market, control- Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a ling deposits of $487.3 million as of June 30, 1994, market in which the post-merger HHI is less than 1000 is considrepresenting less than 1 percent of total deposits in ered to be unconcentrated. In such markets, the Justice Department commercial banking organizations in the market. The is unlikely to challenge a merger. 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 HHI is at least 1800 and 1. Shorebank would eventually merge both Drexel and Indepen- the merger increases the HHI by more than 200 points. The Justice dence with and into Shorebank's lead bank subsidiary, South Shore Department has stated that the higher than normal HHI thresholds Bank, Chicago, Illinois ("South Shore Bank"). Shorebank's other for screening bank mergers for anticompetitive effects implicitly subsidiary, Shore Bank & Trust Company, Cleveland, Ohio, is a recognize the competitive effect of limited-purpose lenders and recently chartered commercial bank that commenced business in other non-depository financial entities. the first quarter of 1995. 6. The Board also concludes that the proposed investment by 2. The Board received 64 comments on this proposal during the other bank holding companies in Shorebank in connection with this public comment period. Sixty-one commenters supported the pro- transaction is not likely to have an adverse effect on competition in posal and three opposed it. After the expiration of the public the market. Each of these proposed investments is limited to comment period, the Board received two additional comments varying amounts of nonvoting equity of Shorebank, and is consisopposing the proposal. tent with the Board's rules and precedents for noncontrolling 3. The Chicago banking market is approximated by Cook, investments. In addition, the Board notes that these investments Du Page, and Lake Counties, all in Illinois. would not have significantly adverse competitive effects in the 4. One commenter asserts that Shorebank would have a market Chicago banking market in light of the small share of market share exceeding 25 percent in the Chicago banking market but does deposits controlled by Shorebank after consummation and the not provide the basis for his calculation. unconcentrated nature of the Chicago banking market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1109 the CRA requires the appropriate federal supervisory consideration of an institution's CRA record and that authority to "assess the institution's record of meeting reports of these examinations will be given great weight the credit needs of its entire community, including low- in the applications process.10 The Board notes that South and moderate-income neighborhoods, consistent with Shore Bank received an "outstanding" rating from its the safe and sound operation of such institutions," and to primary federal supervisor, the Federal Deposit Insurtake that record into account in its evaluation of bank ance Corporation ("FDIC"), at its most recent examinaexpansion proposals.7 tion for CRA performance, as of May 9, 1994. Inde- Numerous commenters expressed support for this pro- corp's subsidiary bank, Independence, received "needs posal. These commenters cited personal experiences to improve" ratings from the FDIC at its two most with Shorebank and lauded Shorebank's record of lend- recent CRA performance examinations, as of August 29, ing in the communities it serves. A member of Congress 1994, and May 7, 1993. Indecorp's other subsidiary also commented that Shorebank's lead subsidiary bank, bank, Drexel, received a "satisfactory" rating from its South Shore Bank, Chicago, Illinois ("South Shore primary federal supervisor, the Office of the Comptroller Bank") has had a beneficial impact on the neighbor- of the Currency ("OCC"), at its most recent examinahoods it serves through various community lending, real tion for CRA performance, as of April 2, 1992. estate development and business investment efforts. The Board also received comments that asserted that B. Shorebank's Record Serving Low- and both Shorebank and Indecorp had poor records of help- Moderate-Income Communities ing to meet the credit needs of the African-American community. For example, the Community Banking Coa- Shorebank became a bank holding company in 1972 lition ("Coalition") and the Chicago Southside Branch through the acquisition of South Shore Bank, a commerof the NAACP criticized the lending record of South cial bank located in a deteriorating south side neighbor- Shore Bank and Indecorp to African-American borrow- hood of Chicago (the "South Shore community"). ers.8 These commenters also maintained that the pro- Shorebank's strategic plan has been to revitalize this posed acquisition would significantly reduce the amount distressed community of over 80,000 residents through a of credit that would be available to the communities comprehensive neighborhood development approach served by Indecorp, substantially weaken the viability of that has involved equity and debt financing. From 1974 the last remaining African-American-owned bank in to 1994, South Shore Bank has made approximately Chicago, preclude entry of new minority-owned banks $290 million in loans to individuals and entities in many into the Chicago banking market, and result in a loss of of Chicago's low- and moderate-income and minority jobs currently held by African Americans. neighborhoods ("new development loans").11 During The Board has carefully reviewed the CRA perfor- this period, Shorebank has provided financial assistance mance records of the subsidiary banks of Shorebank and for rehabilitating over 16,000 housing units. In 1994, Indecorp, all comments received regarding this applica- Shorebank made more than 467 new development loans tion, Shorebank's response to these comments, and all totalling $30.8 million. other relevant facts of record in light of the CRA, the Shorebank offers a variety of residential mortgage Board's regulations and the Statement of the Federal lending programs, including a single-family lending Financial Supervisory Agencies Regarding the Commu- product that provides financing of up to 97 percent of the nity Reinvestment Act ("Agency CRA Statement").9 purchase price of the property. In 1994, South Shore Bank made 141 one-to-four unit single family new de- Record of Performance Under the CRA velopment loans totalling $8.4 million. Forty-four of these loans, totalling $3 million, were made to South A. CRA Performance Examinations Shore community residents. In the same year, the bank also made 68 multi-family new development loans total- The Agency CRA Statement provides that a CRA exam- ling $11.6 million. Thirty-one of these loans, totalling ination is an important and often controlling factor in the 10. Id. at 13,742. 11. In addition to the South Shore community's minority and 7. 12 U.S.C. § 2903. low- and moderate-income communities of Chatham-Avalon, 8. The Coalition contends that South Shore approved only Auburn-Gresham and South Woodlawn, Shorebank has assisted in 411 loans in 1993, less than 1 percent of the loans made by banks meeting the credit needs of Austin (Chicago's west side) and in Chicago, and denied over 40 percent of the loan applications it businesses owned by African Americans and Hispanics in Chicago. received from African-American applicants. The Coalition also While South Shore Bank's lending in the South Shore community noted low levels of lending to African-American borrowers by concentrates primarily on the acquisition and rehabilitation of Independence and Drexel. multi-family housing, its lending in Austin is strongly focused on 9. 54 Federal Register 13,742 (1989). single-family mortgages and the financing of small manufacturers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1110 Federal Reserve Bulletin • December 1995 $6.1 million, were extended to residents of the South moderate-income residents with a variety of services Shore community. Also in 1994, South Shore Bank including job training and placement, remedial educamade 85 home improvement new development loans tion, and housing and small business development assistotalling $1.1 million. Sixteen of these loans, totalling tance.13 Shorebank Advisory Services was established in $236,000, were extended to South Shore community 1988 to meet the increasing demand by depository and residents. For the first eight months of 1995, the bank non-depository institutions for Shorebank's expertise in has extended 93 housing-related loans totalling $8 mil- community development lending. lion to South Shore community residents. The bank also underwrites loans through Federal Housing Administra- C. CRA Performance Record of Indecorp tion ("FHA") and Veterans Administration ("VA") loan programs, and was recently approved as a qualified FHA As previously noted, Independence has received two lender. FHA loan originations will commence during the consecutive "needs to improve" CRA performance ratthird quarter of 1995. ings from the FDIC. At the most recent examination, In addition, South Shore Bank is an active Small conducted in August, 1994, examiners noted that the Business Administration ("SBA") lender in Chicago and bank's CRA performance had improved; however, participates in the Certified Lenders, Preferred Lenders, examiners identified continued deficiencies in the bank's Low-Doc, and Cap Line programs offered by the SBA. ascertainment and marketing activities, as well as lim- Shorebank and South Shore Bank also actively engage ited lending within its delineated community and no in small business lending, with special programs focus- lending within certain specific neighborhoods of the ing on minority-owned businesses in low- and moderate- delineated service area.14 income areas. For example, South Shore Bank made In light of all the facts of record, and for the reasons 17 small business new development loans totalling previously discussed, the Board believes that Shorebank $2.7 million in 1994, which includes ten small business has the types of policies and programs in place at South loans totalling $1.8 million to businesses in Chicago's Shore Bank that are effective in helping meet the credit South Shore community. For the first six months of needs of its entire community, including low- and June 1995, the bank made ten small business loans moderate-income and minority neighborhoods. Shoretotalling $1.2 million to businesses in the South Shore bank has committed that, following consummation of community. this proposal, it will implement policies and programs to Shorebank also uses its nonbank subsidiaries to assist improve the CRA performance records of the Indecorp in community development activities. For example, City banks. The Board expects Shorebank to improve the Lands Corporation ("CLC") is a for-profit real estate CRA performance records of both Indecorp banks and development company that was established by Shore- will review Shorebank's progress in future applications bank to increase the number of rehabilitated residential to establish or acquire depository institutions.15 and commercial properties for rent or sale in the South Shore community and Austin.12 Since 1978, CLC has developed more than 1,800 residential units and 129,000 13. TNI has also provided financing for the construction of the square feet of commercial space totalling approximately second phase of a 19-unit single-family housing project, and has $122 million in fair market value. The Neighborhood assisted the City of Chicago's New Homes for Chicago Program in Fund ("TNF") is a SBA-licensed small business invest- the construction of 12 new homes. In addition, TNI hosted six home buyers and homeowners seminars and a Home Improvement ment company created by Shorebank that specializes in Fair in 1994. Moreover, 180 adults participated in TNI's literacy making equity and debt investments in minority-owned program during this year. businesses in Chicago. With a total portfolio of nineteen 14. An individual commenter objects to the proposal because investments totalling $1.9 million, TNF continues to Shorebank intends to reduce the delineated service community of Independence and Drexel. Shorebank responds that after acquisiprovide venture capital for minority businesses. TNF tion, it will substantially increase the lending activity of Indepenalso works closely with South Shore Bank by providing dence, and concentrate on community development lending. Shoreadditional financing to small businesses that have a bank believes that this objective requires a reduction in the size of borrowing relationship with the bank. Independence's current delineated service community. Within one year after acquiring Indecorp and merging the banks with South Other Shorebank initiatives provide assistance to low- Shore, Shorebank will reevaluate South Shore's community delinand moderate-income neighborhoods. For example, The eation. The Board notes that the proposed modification would be Neighborhood Institute ("TNI") provides low- and subject to review by Independence's primary federal supervisor, the FDIC. Based on all the facts of record, the Board believes that the decision to modify Independence's delineated service community 12. CLC recently completed a complex subsidy and equity is reasonable and does not warrant denial of the application. finance package for the renovation of 87 apartment units in five 15. The Board also has carefully considered the comments sugbuildings in the South Shore community, and a 161-unit rental gesting that this proposal should be denied, either because the project in Austin. purchaser of Indecorp should be an African-American-owned bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1111 D. HMDA Data delineated community in 1994. In addition, Independence's denial rate for African-American applicants was The Board has also carefully reviewed 1993 and 1994 47.4 percent in 1993, and 32.7 percent in 1994. African data of Shorebank and Indecorp under the Home Mort- Americans furnished approximately 50.5 percent of the gage Disclosure Act ("HMDA") in light of protestants' total applications received by Drexel in 1993, and comments. An analysis of South Shore Bank's HMDA 71.7 percent of the total applications received by Drexel data indicate that African Americans constituted approx- in 1994. Drexel's denial rate for African-American apimately 88 percent of the population in South Shore plicants was 45.5 percent in 1993, and 47.4 percent in Bank's delineated community in 1993 and 87 percent in 1994. Data on denial rates for both banks in 1993 and 1994. During 1994, African Americans furnished ap- 1994 compare unfavorably with data for the aggregate of proximately 91 percent of the total applications received all HMDA lenders in the delineated area. by South Shore Bank, a percentage that is significantly The Board has recognized that HMDA data alone higher than the percentage of applications received from provide an incomplete measure of an institution's lend- African Americans by the aggregate of all HMDA lend- ing in its community, and that these data have limitations ers in South Shore Bank's delineated community, which that make the data an inadequate basis, absent other is approximately 61 percent. In addition, South Shore information, for concluding that an institution has en- Bank's denial rate for African-American applicants was gaged in illegal discrimination in making lending deci- 13 percent in 1993, compared to a 16.7 percent denial sions. The Board notes that reports of examination for all rate for white applicants. In 1994, South Shore Bank's the subsidiary banks of Shorebank and Indecorp by their denial rate for African-American applicants increased to primary federal supervisors found the banks to be in 25.8 percent, but its denial rate for white applicants compliance with the substantive provisions of fair housincreased to 27.3 percent. In both years, South Shore ing and fair credit laws. Examiners also found no evi- Bank's performance, as measured by either the percent- dence of illegal discriminatory credit practices at any of age of applications received from, or loans originated to, the subsidiary banks. African-American applicants, compared favorably to aggregate data for all banks in the delineated area. The E. Conclusion data also show that South Shore Bank's percentage of applications and originations in minority census tracts The Board has carefully considered all the facts of was greater than the aggregate's percentage of applica- record, including the comments received on all subsidtions and originations these tracts in 1993 and 1994. iary banks of Shorebank and Indecorp, Shorebank's re- An analysis of Indecorp's HMDA data indicate that sponses, and the banks' CRA performance examina- African Americans furnished approximately 97.4 per- tions. Based on a review of the entire record, the Board cent of the total applications received by Independence concludes that convenience and needs considerations, in its delineated community in 1993, and 94.2 percent of including the CRA records of performance of Shorethe total applications received by Independence in its bank's subsidiary banks, are consistent with approval of this application.16 or bank holding company, or because the proposal would have an adverse effect on the provision of credit in the African-American 16. A commenter has requested that the Board hold a public community. Other commenters allege that the proposal would hearing or meeting on this proposal to clarify factual disputes and result in a loss of jobs that are currently held by African Americans. present certain facts as part of the record. Section 3(b) of the BHC The CRA expresses Congress's intention that all communities Act does not require the Board to hold a public hearing or meeting receive access to banking and credit services, and requires the on an application unless the appropriate supervisory authority for Board to carefully consider how banks making acquisitions have the bank to be acquired makes a timely written recommendation of fulfilled their responsibilities under the CRA. In this instance, the denial of the application. No supervisory agency has recommended Board's review indicates that South Shore is meeting the credit denial of the proposal. needs of the communities that it serves, most of which are predom- Generally, under its rules, the Board may, in its discretion, hold a inately African-American communities. Moreover, there is no evi- public hearing or meeting on an application to clarify factual issues dence in the record that the proposed acquisition would in any way related to the application and to provide an opportunity for testiprevent the establishment of any other bank to serve the African- mony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Board American community, or impair the ability of existing banks to has carefully considered this request. In the Board's view, the serve the African-American community. In addition, the Board is commenter has had ample opportunity to submit his views, and has prohibited by law and the U.S. Constitution from requiring that a presented written submissions to the Board. The commenter's bank be purchased by members of a specific racial or ethnic group. request fails to demonstrate why its written submissions do not Accordingly, the Board concludes, based on its review of all the adequately present its allegations or why a public hearing or facts of record, including South Shore's CRA performance exami- meeting is otherwise warranted in this case. For these reasons, and nations, and its plans to improve the lending performance of based on all the facts of record, the Board has determined that a Independence and Drexel, that these comments do not warrant public hearing or meeting is not necessary to clarify the factual denial of the application. record in this application, or otherwise warranted in this case. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1112 Federal Reserve Bulletin • December 1995 Other Considerations relied on by the Board in reaching this decision are deemed to be conditions imposed in writing by the The Board also concludes that the financial and manage- Board in connection with its findings and decision, and, rial resources17 and future prospects of Shorebank, Inde- as such, may be enforced in proceedings under applicacorp, and their respective subsidiary banks, and other ble law. supervisory factors the Board must consider under sec- This transaction shall not be consummated before the tion 3 of the BHC Act, are consistent with approval of fifteenth calendar day following the effective date of this this proposal.18 order, and shall not be consummated later than three Based on the foregoing, and in light of all the facts of months following the effective date of this order, unless record and the commitments made in connection with such period is extended for good cause by the Board or this application, the Board has determined that this appli- by the Federal Reserve Bank of Chicago, acting pursuant cation should be, and hereby is, approved. The Board's to delegated authority. approval is specifically conditioned on compliance by By order of the Board of Governors, effective Shorebank with all commitments made in connection October 16, 1995. with this application. The commitments and conditions Voting for this action: Chairman Greenspan, Vice Chairman Blinder, and Governors Kelley, Phillips, and Yellen. Absent and Accordingly, the commenter's request for a public hearing or not voting: Governor Lindsey. meeting on this application is denied. 17. Some comments have alleged that investments in Shorebank JENNIFER J. JOHNSON by several large non-minority-owned financial institutions would Deputy Secretary of the Board permit these investors to control Shorebank to the detriment of the African-American community, and represent an effort by large majority-owned banks to eliminate minority-owned financial insti- UB&T Financial Corporation tutions. The Board has carefully reviewed the current and proposed Dallas, Texas investments by bank holding companies in Shorebank. Shorebank currently has 46 shareholders, none of which owns more than UB&T Delaware Financial Corporation 7.5 percent of the total number of voting shares. Five bank holding companies currently have investments in Shorebank, none of which Dover, Delaware control more than 5 percent of the total voting shares of Shorebank. As a part of this proposal, two additional bank holding companies Order Approving Formation of Bank Holding would provide financing to Shorebank for this acquisition in the Companies and Acquisition of a Bank Holding form of non-voting common stock and debt to Shorebank. Each of these bank holding companies has made commitments that the Company Board has previously relied upon to ensure that an investing bank holding company does not exercise a controlling influence over the UB&T Financial Corporation, Dallas, Texas, and its institution it invests in and acquires shares as a passive investment. wholly owned subsidiary, UB&T Delaware Financial In light of the wide dispersal of Shorebank's voting shares, the Corporation, Dover, Delaware (together, "Applicants"), commitments referred to above, and the public benefits that would accrue as a result of increased funding capabilities at Shorebank, have applied under section 3 of the Bank Holding Comthe Board believes that the comments do not warrant denial of this pany Act (12 U.S.C. § 1842(a)(1)) ("BHC Act") to beproposal. come bank holding companies by acquiring all the vot- 18. The Board has received comments from an individual alleging shares of United Bank & Trust, N.A., Dallas, Texas ing that Shorebank has exercised a controlling influence over the management and policies of Independence without prior Board ("United Bank"). Applicants also have applied under approval in violation of the BHC Act and the Board's Rules, section 3 of the BHC Act to acquire all the voting shares including the authorization by South Shore Bank's president to of Southeast Bancshares, Inc. ("Southeast"), and terminate the employment of an Indecorp employee. Shorebank thereby indirectly acquire its wholly owned subsidiary, responds that its representatives have not attended any meetings of the Independence board of directors or its executive committee. Commercial National Bank ("Commercial Bank"), both Shorebank notes that a representative has attended credit commit- of Dallas, Texas.1 tee meetings, but that he had no vote at any such meetings, and no Notice of these applications, affording interested perauthority to approve or veto matters that came before the commitsons an opportunity to submit comments, has been pubtee. Indecorp also has represented that Shorebank does not exercise control over the management, policies or operations of Indepen- lished (60 Federal Register 26,436 and 37,897 (1995)). dence or its subsidiaries. Finally, Indecorp and Shorebank deny that The time for filing comments has expired, and the Board Shorebank exercised any influence or control in connection with has considered these applications and all comments rethe dismissal of the employee in question, noting that South Shore Bank's president did not attend the meeting at which the termination of employment was decided. The commenter has provided no evidence that contradict these statements, only allegations. Based on all the facts of record, the Board concludes that no controlling 1. Applicants propose to dissolve Southeast immediately after its influence has been exercised by Shorebank and that these com- acquisition, merge Commercial Bank into United Bank, and retain ments do not warrant denial of this proposal. Commercial Bank's sole office as a branch of United Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1113 ceived in light of the factors set forth in section 3 of the competition or the concentration of banking resources in BHC Act. the Dallas banking market or any other relevant banking Applicants are nonoperating companies formed for the market. purpose of acquiring United Bank and Southeast. United Bank is the 341st largest commercial banking organiza- Convenience and Needs Considerations tion in Texas, with deposits of $54.4 million, representing less than 1 percent of total deposits in commercial In considering an application to acquire a depository banking organizations in the state.2 Southeast is the institution, the Board must consider the convenience and 378th largest commercial banking organization in Texas, needs of the communities to be served and take into with deposits of $49 million, representing less than account the records of the relevant depository institu- 1 percent of total deposits in commercial banking organi- tions under the Community Reinvestment Act zations in the state. Upon consummation of this pro- (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires posal, Applicants would become the 171st largest com- the federal financial supervisory agencies to encourage mercial banking organization in Texas, with deposits of financial institutions to help meet the credit needs of the $103.4 million, representing less than 1 percent of the local communities in which they operate, consistent with state's banking deposits. their safe and sound operation. To accomplish this end, United Bank and Commercial Bank compete directly the CRA requires the appropriate federal supervisory in the Dallas banking market.3 United Bank and Com- authority to "assess the institution's record of meeting mercial Bank are the 45th and 49th largest depository the credit needs of its entire community, including lowinstitutions, respectively, in the market.4 Upon consum- and moderate-income neighborhoods, consistent with mation of this proposal, the market would remain moder- the safe and sound operation of such institutions," and to ately concentrated, as measured by the Herfindahl- take that record into account in its evaluation of these Hirschman Index ("HHI"), and this proposal would not applications.6 exceed the Department of Justice merger guidelines.5 In The Board has received comments from the Black addition, numerous competitors would remain in the State Employees Association of Texas, Inc. ("Protesmarket. Accordingly, based on all the facts of record, the tant"), criticizing the records of United Bank and Com- Board concludes that consummation of this proposal is mercial Bank in making home mortgage loans to African not likely to result in significantly adverse effects on Americans, and alleging that United Bank discriminates against African Americans in its lending practices. Protestant also alleges that neither bank has a program in place to ascertain the credit needs of the African- 2. Deposit data are as of June 30, 1995. American community or engages in marketing and out- 3. The Dallas banking market consists of Dallas County, the southwest quadrant of Collin County, the southeast quadrant of reach activities directed to that community.7 Denton County, the northern half of Rockwall County, and the communities of Forney and Terrell in Kaufman County, Midlothian, Waxahachie, and Ferris in Ellis County, and Grapevine and Arlington in Tarrant County, all in Texas. 4. All market data are as of June 30, 1994. In this context, 6. 12 U.S.C. § 2903. depository institutions include commercial banks, savings banks, 7. Protestant requested that the Board conduct an investigation of and savings associations. Market share data are based on calcula- the lending activities and operations of United Bank and Commertions in which the deposits of thrift institutions are included at cial Bank and delay action and extend the public comment period 50 percent. The Board previously has indicated that thrift institu- on these applications until that investigation is complete. As noted tions have become, or have the potential to become, significant below, the CRA performance records of both United Bank and competitors of commercial banks. See WM Bancorp, 76 Federal Commercial Bank were recently examined by the Office of the Reserve Bulletin 788 (1990); National City Corporation, 70 Fed- Comptroller of the Currency ("OCC"), which is the federal agency eral Reserve Bulletin 743 (1984). charged under the CRA with responsibility for evaluating the 5. The HHI for the Dallas banking market would remain un- lending performance of these banks. In addition, Protestant had changed at 1281 as a result of this transaction. Under the revised more than 45 days to submit comments on these applications, Department of Justice Merger Guidelines, 49 Federal Register which included two extensions of the comment period. 26,823 (June 29, 1984), a market in which the post-merger HHI is The Board is required by the BHC Act and the regulations between 1000 and 1800 is considered moderately concentrated. thereunder to use the appropriate federal banking agency's report The Justice Department has informed the Board that a bank merger of examination to the greatest extent possible in administering the or acquisition generally will not be challenged (in the absence of BHC Act, and to act on applications within specified time periods. other factors indicating anticompetitive effects) unless the post- In evaluating these applications, the Board has considered the merger HHI is at least 1800 and the merger increases the HHI by OCC's examination reports for United Bank and Commercial Bank, more than 200 points. The Justice Department has stated that the the information and analysis submitted by Protestant, information higher than normal HHI thresholds for screening bank mergers for submitted by Applicants regarding United Bank's record of lendanticompetitive effects implicitly recognize the competitive effect ing, and other information. Based on all the facts of record, the of limited-purpose lenders and other non-depository financial enti- Board concludes that an independent review of the lending activities. ties and operations of United Bank and Commercial Bank by the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1114 Federal Reserve Bulletin • December 1995 The Board has carefully reviewed the CRA perfor- B. Ascertainment and Marketing mance records of United Bank and Commercial Bank, Protestant's comments, and all other relevant facts of United Bank uses an officer calling program to identify record in light of the CRA, the Board's regulations, and the credit needs of its community. United Bank is prithe Statement of the Federal Financial Supervisory marily a commercial lender, and its ascertainment efforts Agencies Regarding the Community Reinvestment Act are concentrated on establishing personal contacts with ("Agency CRA Statement").8 existing and prospective commercial customers, realtors, non-profit developers, local government officials, and Record of CRA Performance community leaders and responding to the credit and other banking needs identified in this manner.12 United A. Evaluation of CRA Performance Bank has sponsored a meeting of business owners to inform them about the Small Business Administration The Agency CRA Statement provides that a CRA exam- ("SBA") loan application process. United Bank also ination is an important and often controlling factor in the sponsored a meeting of residents of South Dallas, a consideration of an institution's CRA record and that predominantly low- and moderate-income area of the reports of these examinations will be given great weight bank's community, to identify housing credit needs in in the applications process.9 United Bank received a this area. Based on information gathered at the housing "satisfactory" rating from the OCC in its most recent program, United Bank developed a home improvement examination for CRA performance as of December 1994 loan product for loans in amounts between $2500 and ("United Bank Examination"). Commercial Bank re- $5000.13 In addition, United Bank conducts regular surceived a "needs to improve" rating from the OCC in its veys of both existing and former customers and the most recent examination for CRA performance as of general public to ascertain community credit needs. In January 1995 ("Commercial Bank Examination"). In response to survey results, the bank introduced a reduced response to the OCC's criticisms, Commercial Bank interest rate credit card and an economy checking acinitiated a number of measures to improve its record of count for small businesses, and initiated the use of a lending to low- and moderate-income and minority credit card application mailer in low- and moderatemembers of its community.10 United Bank, which would income areas of its community. United Bank further acquire Commercial Bank as part of the proposed trans- responded to survey results by testing extended hours of action, also has outlined initiatives it would implement operation, opening one new branch, and negotiating to after consummation of this proposal to address the acquire a site for a drive-through banking facility. OCC's criticisms of Commercial Bank's record of CRA United Bank adopts an annual advertising schedule performance.11 that is reviewed by its Operations, Advertising, and Training Committee to ensure that the bank's products and services are promoted throughout its delineated community. United Bank advertises its products and services Federal Reserve System is not appropriate and that further delay in in metropolitan newspapers and in neighborhood newsacting on these applications is not warranted. 8. 54 Federal Register 13,742 (1989). papers that serve low- and moderate-income areas of 9. Id. at 13,742. United Bank's delineated community. Advertisements 10. For example, Commercial Bank introduced a home purchase feature several loan products, including personal loans mortgage program for households with incomes up to $30,000, and credit cards. featuring flexible underwriting guidelines and reduced closing costs, and home improvement loans for low- and moderate-income households. In addition, Commercial Bank increased its eiforts to C. Other Aspects of CRA Performance ascertain the credit needs of its community. The bank hired an independent firm to conduct a geographical analysis of its lending, United Bank's lending business has focused on commerand adopted procedures under which the loan committee of the cial real estate and corporate lending. During the twelve bank's board of directors receives monthly reports geographically analyzing the number and dollar amount of loans approved and months ending in May 1995, United Bank received denied. Commercial Bank's marketing efforts also have increased. 231 applications for small business loans and approved The bank uses various media, including newspapers and coupon 215 of them, for a total of $21.1 million. The bank also packages, that advertise specific credit products and are directed to is an approved SBA lender. low- and moderate-income neighborhoods. Home loan applications and brochures in Spanish also have been introduced. 11. In addition to continuing Commercial Bank's recent CRA initiatives, United Bank would introduce its officer calling program, directly to the bank's president, and to develop a consumer loan customer and community survey program, and sales program, department. featuring quantified production goals and incentive bonuses, to the 12. Bank officers made 422 calls during the first quarter of 1995. former Commercial Bank office. United Bank also proposes to 13. The bank received 15 applications and approved 10 loans expand the role of its CRA officer to a full-time position reporting under this program in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1115 The United Bank Examination report noted that the The Board recognizes that HMDA data alone provide bank's officers are encouraged to become active mem- an incomplete measure of an institution's lending in its bers of community development organizations that pro- community, and that they have limitations that make the vide direct benefit to United Bank's delineated commu- data an inadequate basis, absent other information, for nity, and all officers report quarterly to the bank's CRA concluding that an institution has engaged in illegal officer on their activities. During the period covered by discrimination in making lending decisions. The United the United Bank Examination, United Bank originated a Bank Examination did not find any evidence of practices $750,000 loan for the development of a Native Ameri- that would discourage applications for any kind of credit can social services center, originated a $70,000 loan for or any evidence of discrimination or other illegal credit purchase and renovation of a low- to moderate-income practices. The bank was in compliance with all fair apartment facility in South Dallas, purchased $100,000 lending laws and regulatory guidance in these areas. The of a local municipal bond issue, and donated bank prop- United Bank Examination further noted that the bank's erty in South Dallas valued at $35,000 to a shelter for delineated community and the geographic distribution of homeless children. Examiners also noted that United its loan applications was reasonable. The Commercial Bank oifered flexible credit terms to community devel- Bank Examination also found no evidence of practices opment borrowers that could not qualify for loans under that would discourage applications for any kind of credit the bank's normal underwriting criteria. or any evidence of discrimination or other illegal credit United Bank also provides special products and ser- practices. In addition, it found that the bank accepted vices to its customers that are not credit related. For exam- credit applications from all segments of its community, ple, the bank offers low cost checking accounts with including low- and moderate-income neighborhoods.17 no minimum balance requirement and 20 free checks a month. These accounts constitute 19 percent of the bank's E. Conclusion on Convenience and Needs individual checking accounts. The bank also offers a Considerations reduced cost senior citizens account, cashes Social Security Administration checks without charge, and waives service The Board has carefully considered all the facts of charges for deposit accounts of nonprofit organizations. record, including Protestant's comments, in reviewing the CRA record of performance of United Bank and D. HMDA Data Commercial Bank. The record indicates that United Bank has achieved a satisfactory level of CRA perfor- The Board has carefully reviewed data collected under mance, and Applicants have committed to implement the Home Mortgage Disclosure Act ("HMDA") for United Bank's outreach, ascertainment, and lending pro- United Bank and Commercial Bank during 1993 and grams at the Commercial Bank branch location after 1994, and for United Bank during the first six months of consummation of the proposed transaction. United Bank 1995, in light of Protestant's allegation that the number also will address weaknesses in Commercial Bank's of home mortgage loans made to African Americans was CRA performance as noted by the OCC. Based on a insufficient for banks of their size. HMDA data indicate review of the entire record, including information prothat housing-related loans at United Bank are increasing, vided by Protestant, information provided by United although their number is relatively small.14 Between Bank concerning its lending activities in its delineated 1993 and 1994, HMDA-reported loan applications in- community and its proposed efforts to improve Commercreased from 12 to 18.15 Nine of the 18 applications cial Bank's record of CRA performance, and relevant reports of examination, the Board concludes that convereceived in 1994 were from African Americans. Four nience and needs considerations, including United applications were denied, two of which were from Afri- Bank's record of CRA performance, are consistent with can Americans. During the first six months of 1995, approval of these applications. The Board expects Appli- United Bank received 14 HMDA-reported loan applications, of which five were from African Americans. Two applications were denied, one of which was from an African American.16 percent, were denied; 14 applications from Hispanics, of which 2, or 14 percent, were denied; and 17 applications from non-minority applicants, of which 6, or 35 percent, were denied. 17. The examiners noted technical violations of the Equal Credit 14. Residential mortgages constituted 22 percent of United Opportunity Act and HMDA, but found that these violations did Bank's loan portfolio in 1994. not affect the substance of Commercial Bank's credit granting 15. In 1994, 20 other applicants who sought fixed-rate mort- process. The examiners expressed concern, however, about the gages, which United Bank does not offer, were referred to other bank's low volume of total loans; the high percentage of HMDAlenders. related loans and total loans outside the bank's delineated commu- 16. Commercial Bank received 11 HMDA-reported loan applica- nity; and the low percentage of total loans in low- and moderatetions from African Americans during 1994, of which 5, or 45 income neighborhoods within its delineated community. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1116 Federal Reserve Bulletin • December 1995 cants to address fully the OCC's concerns about the Orders Issued Under Section 4 of the Bank CRA performance record of Commercial Bank. Holding Company Act Bank South Corporation Other Considerations Atlanta, Georgia Order Approving a Notice to Engage in Underwriting The financial and managerial resources18 and future "Private Ownership" Industrial Development Bonds prospects of Applicants, Southeast, and their respective subsidiary banks are consistent with approval of this Bank South Corporation, Atlanta, Georgia ("Bank proposal, as are the other supervisory factors that the South"), a bank holding company within the meaning of Board is required to consider under section 3 of the BHC the Bank Holding Company Act ("BHC Act"), has Act. provided notice under section 4(c)(8) of the BHC Act Based on the foregoing and after a review of all the (12 U.S.C. § 1843(c)(8)) and section 225.23 of the facts of record, the Board has determined that these Board's Regulation Y (12 C.F.R. 225.23) of its proposal applications should be, and hereby are, approved. The to engage de novo through its section 20 subsidiary, Board's approval is specifically conditioned on compli- Bank South Securities Corporation, Atlanta, Georgia ance with all the commitments made by Applicants and ("Company"), in underwriting, to a limited extent, certhe principals of Applicants and related parties, in con- tain "private ownership" industrial development bonds, nection with these applications. For purposes of this which are issued for the provision of the following action, the commitments and conditions relied on by the governmental services: water facilities, sewer facilities, Board in reaching this decision are deemed to be condi- solid waste disposal facilities, electric energy and gas tions imposed in writing by the Board in connection with facilities, and local district heating or cooling facilities its findings and decision, and, as such, may be enforced (collectively, "traditional governmental services"). in proceedings under applicable law. Notice of the proposal, affording interested persons an This transaction shall not be consummated before the opportunity to submit comments, has been published fifteenth calendar day following the effective date of this (60 Federal Register 31,309 (1995)). The time for filing order, or later than three months after the effective date comments has expired, and the Board has considered the of this order, unless such period is extended for good applications and all comments received in light of the cause by the Board or by the Federal Reserve Bank of factors set forth in section 4(c)(8) of the BHC Act.1 Dallas, acting pursuant to delegated authority. Bank South, with total consolidated assets of approxi- By order of the Board of Governors, effective mately $7.7 billion, controls one bank subsidiary in October 23, 1995. Georgia.2 Company currently is engaged in limited underwriting and dealing in certain municipal revenue Voting for this action: Chairman Greenspan, Vice Chairman bonds, activities permissible under section 20 of the Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. Glass-Steagall Act (12 U.S.C. § 377).3 Company is, and will continue to be, a broker-dealer registered with the JENNIFER J. JOHNSON Securities and Exchange Commission ("SEC") under Deputy Secretary of the Board the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Company is subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC, and the NASD. Bank South also engages directly and through subsidiaries in other permissible nonbanking activities. 18. Protestant also alleges that United Bank and Commercial The Board previously has determined that, subject to Bank have not hired African Americans in numbers proportionate the prudential framework of limitations established in to their presence in the communities served and that United Bank previous decisions to address the potential for conflicts has failed to abide by the terms of its December 1993 undertaking to use Protestant's assistance in its hiring decisions and selection of third party vendors. While the Board fully supports programs designed to stimulate and create economic opportunities for all 1. The only comment received by the Board on this application members of society, the Board believes that the alleged deficiencies expressed support for the proposal. in the banks' hiring practices and in United Bank's third party 2. Asset data are as of March 31, 1995. contracting practices are beyond the scope of the CRA or the BHC 3. See Bank South Corporation, 79 Federal Reserve Bulletin 716 Act. (1993) ("Bank South"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1117 of interests, unsound banking practices, or other adverse agrees to purchase the output of the facility.7 Bank South effects, the activities of underwriting and dealing in has committed that all the "private ownership" bonds municipal revenue bonds, including industrial develop- that Company would underwrite would be rated "investment bonds, are so closely related to banking as to be ment quality" by a nationally recognized rating agency proper incidents thereto within the meaning of section to the same extent as are the municipal revenue bonds 4(c)(8) of the BHC Act.4 In previous cases in which that Company currently underwrites. bank holding companies have requested approval to Under these circumstances, the Board concludes that underwrite and deal in only municipal revenue bonds, as underwriting and dealing in private ownership bonds opposed to a full range of debt securities, bank holding issued for the provision of traditional governmental sercompanies had limited their requests to underwriting and vices is a permissible activity if conducted subject to the dealing in industrial development bonds that are "public conditions and prudential limitations set forth in ownership" industrial development bonds. Public own- Citicorp/Morgan/Bankers Trust and agreed to by Bank ership industrial development bonds are those "tax ex- South in Bank South. empt bonds where the issuer, or the governmental unit In every notice under section 4 of the BHC Act, the on behalf of which the bonds are issued, is the sole Board considers the financial condition and resources of owner for federal income tax purposes of the financed the notificant and its subsidiaries and the effect of the facility."5 transaction on these resources.8 Based on the facts of this Bank South now proposes to engage through Com- case, the Board concludes that financial considerations pany in underwriting "private ownership" industrial de- are consistent with approval of this notice. The managevelopment bonds issued solely for the provision of tradi- rial resources of Bank South also are consistent with tional governmental services. Bank South has committed approval. to conduct this activity subject to the same limitations In order to approve this notice, the Board also must and other conditions that govern underwriting and deal- determine that the performance of the proposed activities ing in public ownership industrial development bonds.6 by Bank South can reasonably be expected to produce The underwriting risk and the risk analysis required to public benefits that would outweigh possible adverse underwrite "private ownership" industrial development effects under the proper incident to banking standard of bonds issued for traditional governmental services is section 4(c)(8) of the BHC Act. Under the framework essentially the same as the risk and analysis related to established in this order and prior decisions, consummaunderwriting traditional "public ownership" bonds. In tion of this proposal is not likely to result in any signifiboth cases, the source of repayment of the bonds is cantly adverse effects, such as undue concentration of revenue generated by the financed facility, including resources, decreased or unfair competition, conflicts of revenue generated by a service contract between the interests, or unsound banking practices, that are not owner/lessor of the financed facility and a state or local outweighed by public benefits. The Board expects that government or political subdivision, pursuant to which the entry of Bank South into the market for the proposed the state or local government or political subdivision activities would provide added convenience to Bank South's customers, and would increase the level of competition among existing providers of these services. Accordingly, the Board has determined that the perfor- 4. Citicorp, J.P. Morgan & Co. Incorporated, and Bankers Trust mance of the proposed activities by Bank South can New York Corporation, 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert, denied, 486 U.S. 1059 (1988), as modified by Order Approving Modifica- 7. Typically, in the case of "public ownership" bonds, the tions to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) governmental unit that issues the bonds owns the financed facility ("Citicorp/Morgan/Bankers Trust"). See also J.P. Morgan & Co. and repays the bonds from the revenue generated by the facility and Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd this service contract. The governmental unit may also enter into a sub nom. Securities Industries Ass'n v. Board of Governors of the contract with a third party to operate the financed facility. In the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990). case of the "private ownership" bonds that Bank South proposes to 5. Citicorp!J.P. Morgan!Bankers Trust, 73 Federal Reserve Bulle- underwrite, the governmental unit that issues the bonds either uses tin at 502. Examples of financed facilities include airports and mass the proceeds of the bonds to acquire or construct a facility, which commuting facilities. Id. the governmental unit then leases to a third party, or lends the 6. Citicorp/Morgan/Bankers Trust. All the bonds that Bank South proceeds of the bonds to a third party to acquire or construct the proposes that Company underwrite would qualify as "exempt facility. The third party agrees to make lease payments or loan facility bonds" under the Internal Revenue Code ("Code"). See repayments to the governmental unit that enable the governmental 26 U.S.C. § 142. The types of exempt facility bonds that Company unit to pay debt service on the bonds. As security for the lease or would underwrite may, subject to certain volume caps and other loan agreement, the third party assigns and pledges the revenues limitations, be tax-exempt under the Code even if the proceeds of generated by the facility and a service contract with a state or local the bonds are used to finance facilities that are privately owned. See government or political subdivision. 26 U.S.C. §§ 103, 141, 142, 146, 147. 8. See 12 C.F.R. 225.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1118 Federal Reserve Bulletin • December 1995 reasonably be expected to produce public benefits that Financial's savings association subsidiary, Raleigh Fedoutweigh possible adverse effects under the proper inci- eral Savings Bank ("Raleigh FSB"), both of Raleigh, dent to banking standard of section 4(c)(8) of the BHC North Carolina.1 Act. Notice of this proposal, affording interested persons an Based on all the facts of record, and subject to the opportunity to submit comments, has been published commitments made by Bank South, as well as all the (60 Federal Register 47,368 (1995)). The time for filing terms and conditions set forth in this order and in the comments has expired, and the Board has considered the above-noted Board orders, the Board has determined notice and all comments received in light of the factors that the notice should be, and hereby is, approved. Ap- set forth in section 4(c)(8) of the BHC Act.2 proval of this proposal is specifically conditioned on The Board has determined that the operation of a compliance by Bank South and Company with the com- savings association by a bank holding company is mitments made in connection with its notice and with closely related to banking for purposes of section 4(c)(8) the conditions in this order and the other referenced of the BHC Act.3 The Board requires savings associaorders. The Board's determination also is subject to all tions acquired by bank holding companies to conform of the conditions set forth in Regulation Y, including their direct and indirect activities to those permissible those in sections 225.7 and 225.23(b), and to the Board's for bank holding companies under section 4(c)(8) of the authority to require modification or termination of the BHC Act and Regulation Y. First Union has committed activities of a bank holding company or any of its to conform all activities of Raleigh FSB to those requiresubsidiaries as the Board finds necessary to assure com- ments.4 pliance with, and to prevent evasion of, the provisions of First Union, with total consolidated assets of the BHC Act and the Board's regulations and orders $77.9 billion, operates subsidiary banks in Florida, North issued thereunder. In approving this notice, the Board has relied on all the facts of record, and all the representations and commitments made by Bank South. For the 1. First Union proposes to merge Raleigh FSB with and into its purpose of this action, these commitments and condi- subsidiary bank, First Union National Bank of North Carolina, tions shall be deemed conditions imposed in writing and, Charlotte, North Carolina ("FUNB-NC"). FUNB-NC has filed an application with the Office of the Comptroller of the Currency as such, may be enforced in proceedings under applica- ("OCC") pursuant to section 5(d)(3) of the Federal Deposit Insurble law. ance Act (12 U.S.C. § 1815(d)(3)) ("FDI Act"), as amended, for This transaction shall not be consummated later than approval of this merger. three months after the effective date of this order, unless 2. Inner City Press/Community on the Move ("Protestant") maintains that public notice of this proposal was inadequate besuch period is extended for good cause by the Board or cause First Union did not publish notice of the proposal three times by the Federal Reserve Bank of Atlanta, acting pursuant in a local newspaper. The Board's Regulation Y requires notice of a to delegated authority. proposed acquisition of a savings association in the Federal Regis- By order of the Board of Governors, effective ter. (12 C.F.R. 225.23(c)). As a matter of policy, the Board also has required bank holding companies to publish notice in appropriate October 24, 1995. newspapers of a proposal to acquire a savings association under section 225.25(b)(9) of the Board's Regulation Y (12 C.F.R. Voting for this action: Chairman Greenspan, Vice Chairman 225.25(b)(9)). See Footnote 2 in the Board's notice of final rule- Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. making regarding applications processing, 57 Federal Register 41,641 (September 11, 1992). The Board's Rules of Procedure JENNIFER J. JOHNSON require that applications filed under the Bank Merger Act Deputy Secretary of the Board (12 U.S.C. § 1828(c)) be published three times in an appropriate newspaper. See 12 C.F.R. 262.3(b)(3). Notice of applications filed under the BHC Act, however, is only required to be published one First Union Corporation time in appropriate newspapers under the Board's Regulation Y. Charlotte, North Carolina See 12 C.F.R. 225.23(c). This is an application filed under the BHC Act. First Union published two notices in local newspapers stating that consideration of this proposal would include a review of the Order Approving Acquisition of a Savings Association record of First Union in helping to meet local credit needs. Based on all the facts of record, the Board concludes that public notice of this proposal was sufficient. First Union Corporation, Charlotte, North Carolina 3. See 12 C.F.R. 225.25(b)(9). ("First Union"), a bank holding company within the 4. First Union has committed that all impermissible real estate meaning of the Bank Holding Company Act ("BHC activities will be divested or terminated within two years of con- Act"), has given notice under section 4 of the BHC Act summation of the proposal, that no new impermissible projects or (12 U.S.C. § 1843(c)(8)) and section 225.23 of the investments will be undertaken during this period, and that capital adequacy guidelines will be met, excluding specified real estate Board's Regulation Y (12 C.F.R. 225.23) of its proposal investments. First Union also has committed that any impermissito acquire all the voting shares of RS Financial Corporable securities or insurance activities conducted by Raleigh FSB will tion ("RS Financial"), and thereby indirectly acquire RS cease on or before consummation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1119 Carolina, Georgia, Tennessee, Maryland, Virginia, South 10 the number of competitors that would remain in these Carolina, and the District of Columbia.5 First Union is markets, and all other facts of record, the Board conthe fourth largest commercial banking organization in cludes that consummation of this proposal would not North Carolina, controlling $10.6 billion in deposits, result in any significantly adverse effects on competition representing approximately 13.9 percent of total deposits or the concentration of banking resources in any relevant in depository institutions in the state.6 RS Financial is banking market. the tenth largest depository institution in North Carolina, controlling $642.3 million in deposits, representing less Convenience and Needs Considerations than 1 percent of total deposits in depository institutions in North Carolina. Upon consummation of this proposal, In acting on an application to acquire a savings associa- First Union would become the second largest commer- tion under section 4 of the BHC Act, the Board reviews cial banking organization in the state, controlling depos- the records of the relevant depository institutions under its of $11.2 billion, representing approximately the ' Community Reinvestment Act (12 U.S.C § 2901 14.7 percent of total deposits in depository institutions in et seq.) ("CRA").11 The CRA requires the federal finan- North Carolina. cial supervisory agencies to encourage financial institutions to help meet the credit needs of the local communi- Competitive Considerations ties in which they operate, consistent with their safe and sound operation. To accomplish this end, the CRA re- Under section 4(c)(8) of the BHC Act, the Board is quires the appropriate federal supervisory authority to required to consider whether a proposal is likely to result "assess the institution's record of meeting the credit in any significantly adverse effects, such as undue con- needs of its entire community, including low- and centration of resources, decreased or unfair competition, moderate-income neighborhoods, consistent with the conflicts of interests, or unsound banking practices. First safe and sound operation of such institution," and to take Union and Raleigh FSB compete directly in five banking that record into account in its evaluation of bank holding markets in North Carolina.7 Consummation of this pro- company applications.12 posal would not result in concentration levels in those markets that would exceed the threshold standards of market concentration as measured by the Herfindahl- Hirschman Index ("HHI") under the Department of 50 percent. The Board previously has indicated that thrift institu- Justice merger guidelines.8 After considering the rela- tions have become, or have the potential to become, significant competitors of commercial banks. See WM Bancorp, 76 Federal tively small change in concentration as measured by the Reserve Bulletin 743 (1984). Because the deposits of Raleigh FSB HHI, First Union's share of total deposits in depository would be transferred to a commercial bank under this proposal, institutions9 in the market ("market share"), those deposits are included at 100 percent in the calculation of First Union's pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Bank, Inc., 76 Federal Reserve Bulletin 669, 670 n. 9 (1990). 5. Asset data are as of June 30, 1995. 10. Upon consummation of the proposal, the HHI for the five 6. State deposit data are as of June 30, 1995. In this context, North Carolina banking markets would increase in the Durham/ depository institutions include commercial banks, savings banks, Chapel Hill RMA (1 point to 1574), Raleigh RMA (67 points to and savings associations. 1161), and Moore County (1 point to 1872); and decrease in the 7. The banking markets are the Durham/Chapel Hill Ranally Goldsboro RMA (16 points to 2479) and Rocky Mount RMA Metro Area ("RMA"), the Goldsboro RMA, the Rocky Mount (2 points to 2081). First Union's relative size by market share in RMA, the Raleigh RMA, and Moore County markets, all in North each market would be as follows after consummation: Durham/ Carolina. Chapel Hill RMA (fifth largest with 8.7 percent market share); 8. Market data are as of June 30, 1994. Under the revised Goldsboro RMA (fourth largest with 7.7 percent market share); Department of Justice Merger Guidelines, 49 Federal Register Rocky Mount RMA (third largest with 11 percent market share); 26,823 (June 29, 1984), a market in which the post-merger HHI is Raleigh RMA (third largest with 14.3 percent market share); and over 1800 is considered to be highly concentrated. In such markets, Moore County (third largest with 10.7 percent market share). the Justice Department is likely to challenge a merger that increases 11. The Board previously has determined that the CRA by its the HHI by more than 50 points. The Justice Department has terms generally does not apply to applications by bank holding informed the Board that a bank merger or acquisition generally will companies to acquire nonbanking companies under section 4(c)(8) not be challenged (in the absence of other factors indicating anti- of the BHC Act. The Mitsui Bank, Ltd., 76 Federal Reserve competitive effects) unless the post-merger HHI is at least 1800 and Bulletin 381 (1990). The Board also has stated that, unlike other the merger increases the HHI by more than 200 points. The Justice companies that may be acquired by bank holding companies under Department has stated that the higher than normal HHI thresholds section 4(c)(8) of the BHC Act, savings associations are depository for screening bank mergers for anticompetitive effects implicitly institutions, as that term is defined in the CRA, and thus acquisirecognize the competitive effect of limited-purpose lenders and tions of savings associations are subject to review under the express other non-depository financial entities. terms of the CRA. Norwest Corporation, 76 Federal Reserve 9. Market share data before consummation are based on calcula- Bulletin 873 (1990). tions in which the deposits of thrift institutions are included at 12. 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1120 Federal Reserve Bulletin • December 1995 Protestant contends that First Union's record of perfor- The record also indicates that consummation of this mance under the CRA is deficient in a number of re- proposal would result in increased economies of scale spects, including ascertainment, marketing and outreach and a broader financial network through which First activities; housing-related and small business lending; Union could serve customers in North Carolina. In addiavailable banking services; and branch locations and tion, former RS Financial customers would have inclosing policies. Protestant also maintains that data filed creased services, including special lending and leasing under the Home Mortgage Disclosure Act13 indicate that programs, corporate banking and cash management First Union's subsidiary banks and mortgage company products, trust services, and investment management illegally discriminate in their lending activities. services, and access to First Union's entire banking The Board notes that First Union's lead bank subsid- network. The Board also finds that consummation of this iary, FUNB-NC, received an "outstanding" rating from proposal is not likely to result in any significantly adits primary federal supervisor, the OCC, at its most verse effects, such as undue concentration of resources, recent publicly available examination for CRA perfor- decreased or unfair competition, conflicts of interests, or mance in April 1994. First Union's remaining seven unsound banking practices that would outweigh the pubsubsidiary banks received "satisfactory" ratings from lic benefits of this proposal. Accordingly, the Board has the OCC in the most recent examinations of their CRA determined that the balance of public interest factors it performance.14 Examiners also found that all of First must consider under section 4(c)(8) of the BHC Act is Union's banks were in compliance with applicable anti- favorable and consistent with approval. discrimination laws and regulations and that none of the Based on all the facts of record, including the commitbanks engaged in practices that would discourage indi- ments made to the Board by First Union in connection viduals from applying for credit.15 Raleigh FSB received with this notice, and for the reasons discussed in the an "outstanding" CRA performance rating from the First Union/First Fidelity Order, the Board has deter- Office of Thrift Supervision, its primary federal supervi- mined that this notice should be, and hereby is, apsor, in July 1995. First Union has indicated that it would proved.18 The Board's approval is specifically condiincorporate FUNB-NC's CRA policies and procedures at Raleigh FSB after consummation of this proposal. Protestant's comments on this notice also were filed in improperly entered into contracts to sell certain RS Financial connection with First Union's proposal to acquire First branches before receiving regulatory approval. First Union denies Fidelity Bancorporation, Newark, New Jersey, and Phil- any improper actions, and states that five potential purchasers adelphia, Pennsylvania. The Board fully addressed these submitted bids to acquire RS Financial, with First Union's being comments in its order approving that proposal.16 For the selected by RS Financial as the winning bidder. In addition, First Union notes that agreements to sell the RS Financial branches are reasons explained in the Board's order in that case, contingent on receipt of regulatory approval. The Board has carewhich are incorporated by reference in this order, and fully reviewed these and other comments submitted by Protestant based on all the facts of record in these cases, the Board on First Union's application to acquire First Fidelity relating to managerial resources in light of all the facts of record, including believes that convenience and needs factors, including reports of examination assessing the management and policies of CRA performance records, are consistent with approval First Union and its subsidiary banks, and other supervisory inforof this notice. mation from First Union's primary federal supervisors. Based on this review, and for the reasons stated above and in the First Other Considerations Union/First Fidelity Order, the Board does not believe that these comments warrant denial of the proposal. 18. Protestant has requested that the Board hold a public hearing The Board also concludes that the financial and manageor meeting on this notice. The Board's rules for processing applicarial resources and future prospects of First Union, RS tions provide that a hearing is required under section 4 of the BHC Financial, and their respective subsidiaries are consistent Act only if there are disputed issues of material fact that cannot be with approval of this proposal.17 resolved in some other manner. 12 C.F.R. 225.23(g). In addition, the Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 13. 12 U.S.C. § 2801 et seq. 12 C.F.R. 262.3(e) and 262.25(d). Protestant has had ample oppor- 14. The OCC conducted a joint CRA examination of all First tunity to present its views, and has submitted substantial written Union subsidiary banks, including FUNB-NC, in April 1994. comments that have been considered by the Board. After careful 15. Based on all the facts of record, and for the reasons stated in review of all the facts of record, the Board believes that Protesthe First Union/First Fidelity Order, the Board believes that the tant's request disputes the weight accorded to, and the conclusions OCC's 1994 examinations sufficiently reviewed the fair lending that may be drawn from, the facts of record, and does not identify performance of First Union's subsidiary banks. disputed issues of fact that are material to the Board's decision. 16. See First Union Corporation, 81 Federal Reserve Bulletin Protestant also fails to show why a written presentation would not 1143 (1995) ("First Union/First Fidelity Order"). suffice and to summarize what evidence would be presented at a 17. Protestant makes unsupported allegations that the bidding hearing or meeting. See 12 C.F.R. 262.3(e). In light of the record in process for RS Financial was flawed and that First Union has this case, the Board does not believe that a hearing or meeting is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1121 tioned on compliance by First Union with all owned subsidiary, Citizens Federal Bank, a Federal Savcommitments made in connection with this notice and ings Bank ("Citizens"), both of Miami, Florida.1 on First Union and FUNB-NC receiving all necessary Notice of this proposal, affording interested persons an federal and state approvals, including approval of the opportunity to submit comments, has been published OCC under the FDI Act.19 (60 Federal Register 44,501 (1995)). The time for filing The Board's determination is subject to all the condi- comments has expired, and the Board has considered the tions in the Board's Regulation Y, including those in notice and all comments received in light of the factors sections 225.7 and 225.23(b)(3) (12 C.F.R. 225.7 and set forth in section 4(c)(8) of the BHC Act. 225.23(b)(3)), and to the Board's authority to require The Board has determined that the operation of a such modification or termination of the activities of a savings association is closely related to banking and holding company or any of its subsidiaries as the Board permissible for bank holding companies. 12 C.F.R. finds necessary to assure compliance with, or to prevent 225.25(b)(9). In making this determination, the Board evasion of, the provisions and purposes of the BHC Act requires that savings associations acquired by bank holdand the Board's regulations and orders issued thereun- ing companies conform their direct and indirect activider. The commitments and conditions relied on by the ties to those permissible for bank holding companies Board in reaching this decision are deemed to be condi- under section 4 of the BHC Act. NationsBank has comtions imposed in writing by the Board in connection with mitted to conform all activities of CSF to the requireits findings and decision, and as such may be enforced in ments of section 4 of the BHC Act and Regulation Y. proceedings under applicable law. NationsBank, with total consolidated assets of The transaction shall not be consummated later than $184.2 billion, is the fourth largest commercial banking three months following the effective date of this order, organization in the United States, and operates subsidunless such period is extended for good cause by the iary banks in nine states and the District of Columbia.2 Board or by the Federal Reserve Bank of Richmond, NationsBank is the fourth largest depository institution acting pursuant to delegated authority. in Florida, controlling deposits of approximately By order of the Board of Governors, effective $17 billion, representing approximately 10.8 percent of October 26, 1995. total deposits in depository institutions in the state.3 CSF is the sixth largest depository institution in Florida, Voting for this action: Chairman Greenspan, Vice Chairman controlling deposits of approximately $3.6 billion, repre- Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. senting approximately 2.3 percent of total deposits in depository institutions in the state. Upon consummation JENNIFER J. JOHNSON of this proposal, NationsBank would become the third Deputy Secretary of the Board largest depository institution in Florida, controlling deposits of approximately $20.7 billion, representing ap- NationsBank Corporation proximately 13.1 percent of total deposits in depository Charlotte, North Carolina institutions in the state. NationsBank and CSF compete directly in ten banking Order Approving the Acquisition of a Savings markets in Florida. The Board has carefully considered Association the effects that consummation of this proposal would have on competition in these banking markets in light of NationsBank Corporation, Charlotte, North Carolina all the facts of record, including the characteristics of the ("NationsBank"), a bank holding company within the markets, the competition offered by other depository meaning of the Bank Holding Company Act ("BHC institutions in the markets, and the increase in the con- Act"), has filed notice pursuant to section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23(a) of the Board's Regulation Y (12 C.F.R. 225.23(a)) to 1. Citizens currently operates branches in California and Virginia acquire all the voting shares of CSF Holdings, Inc. in addition to its main office and branches in Florida. Subsequent to ("CSF"), and thereby indirectly acquire its wholly consummation of this proposal, NationsBank anticipates that Citizens would sell its California and Virginia branches to third parties and, thereafter, that Citizens would merge into NationsBank's Florida banking subsidiary, NationsBank of Florida, N.A., Tampa, Florida. NationsBank also would retain Citizens' interest in Comnecessary to clarify the factual record or is otherwise required or munity Reinvestment Group, L.C., Ft. Lauderdale, Florida. warranted. Accordingly, the request for a public meeting or hearing 2. Asset data are as of June 30, 1995. NationsBank also operates on this notice is hereby denied. a limited-purpose credit card bank in Delaware. 19. For the reasons discussed in the First Union!First Fidelity 3. State deposit data are as of June 30, 1995. In this context, Order, the Board does not believe that a delay in acting on this depository institutions include commercial banks, savings banks, application, as requested by Protestant, is warranted. and savings institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1122 Federal Reserve Bulletin • December 1995 centration of total deposits in depository institutions4 in quires the appropriate federal supervisory authority to the markets as measured by the Herfindahl-Hirschman "assess the institution's record of meeting the credit Index ("HHI").5 Consummation of this proposal would needs of its entire community, including low- and not exceed Justice Department guidelines in any of the moderate-income neighborhoods, consistent with the markets, and numerous competitors would remain in safe and sound operations of such institutions," and to each market.6 Based on all the facts of record, the Board take that record into account in its evaluation of bank has concluded that consummation of this proposal would holding company applications.8 not result in any significantly adverse effect on competi- The Board has received comments on this notice from tion or the concentration of banking resources in any the International Brotherhood of Teamsters, Warehouserelevant banking market. men and Helpers ("Protestant") alleging that NationsBank's subsidiary banks and NationsBanc Convenience and Needs Considerations Mortgage Corporation, Dallas, Texas ("NationsBanc Mortgage"), its nonbanking mortgage lending subsid- In considering a notice to acquire a savings association iary, discriminate against African Americans in home under section 4 of the BHC Act, the Board reviews the mortgage lending. In particular, Protestant asserts that records of performance of the relevant institutions under data filed under the Home Mortgage Disclosure Act the Community Reinvestment Act (12 U.S.C. § 2901 ("HMDA") for 1993 show that NationsBank denied a et seq.) ("CRA").7 The CRA requires the federal finan- higher percentage of loan applications from African cial supervisory agencies to encourage financial institu- Americans than from non-minorities in the cities of tions to help meet the credit needs of the local communi- Miami, Florida; Dallas, Texas; Baltimore, Maryland; ties in which they operate, consistent with their safe and and Washington, D.C.9 In addition, Protestant contends sound operation. To accomplish this end, the CRA re- that both NationsBank and CSF made a disproportionately small number of loans to African Americans in the Miami market. Protestant also argues that NationsBank's 4. Market data are as of June 30, 1994. Market share data before ascertainment and marketing efforts are not directed consummation are based on calculations in which the deposits of toward providing products and services related to the thrift institutions are included at 50 percent. The Board previously needs of African-American members of the communities has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. it serves, and that this proposal may result in a reduction See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); of branches, branch personnel and banking services in National City Corporation, 70 Federal Reserve Bulletin 743 the markets currently served by CSF.10 (1984). Because the deposits of CSF would be controlled by a bank holding company under this proposal, those deposits are included at 100 percent in the calculation of pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990). 8. See 12 U.S.C. § 2903. 5. Under the revised Department of Justice Merger Guidelines, 9. Protestant supports these allegations by citing several studies 49 Federal Register 26,823 (June 29, 1984), a market in which the and compilations of mortgage lending data by The Wall Street post-merger HHI is above 1800 is considered to be highly concen- Journal (1993), National Community Reinvestment Coalition trated. In such markets, the Justice Department is likely to chal- (1995), Washington Lawyers' Committee for Civil Rights and lenge a merger that increases the HHI by more than 50 points. The Urban Affairs (1994), and an individual researcher at the University Justice Department has informed the Board that a bank merger or of Texas (1992). acquisition generally will not be challenged (in the absence of other 10. In addition, Protestant reiterates criticisms of NationsBank's factors indicating anticompetitive effects) unless the post-merger record of CRA performance that were considered by the Board in HHI is at least 1800 and the merger increases the HHI by more than connection with a 1994 application to acquire branches of Califor- 200 points. The Justice Department has stated that the higher than nia Federal Bank, F.S.B., Los Angeles, California. Protestant alnormal HHI thresholds for screening bank mergers for anticompeti- leges, for example, that NationsBank illegally discriminates against tive effects implicitly recognize the competitive effects of limited- African Americans in mortgage lending in Florida, and, in particupurpose and other non-depository financial entities. lar, the Tampa Bay area. Protestant also contends that NationsBank 6. The changes in the HHI in the ten banking markets are set reneged on a commitment to support the Florida Community Deforth in the Appendix. velopment Assistance Corporation. Based on all the facts of record, 7. The Board previously has determined that the CRA by its and for the reasons discussed in this order and the 1994 order terms generally does not apply to applications by bank holding (which are incorporated herein), the Board does not believe that companies to acquire nonbanking companies under section 4(c)(8) these allegations warrant denial of this proposal. See NationsBank of the BHC Act. See The Mitsui Bank, Ltd., 76 Federal Reserve Corporation, 80 Federal Reserve Bulletin 747 (1994). Protestant Bulletin 381 (1990). The Board also has stated that, unlike other also cites a 1994 civil judgment against NationsBank, which orcompanies that may be acquired by bank holding companies under dered it to honor the commitment of an acquired banking organizasection 4(c)(8) of the BHC Act, savings associations are depository tion to purchase a Georgia federal savings bank, as additional institutions, as that term is defined in the CRA, and thus acquisi- evidence of NationsBank's failure to comply with its commitments. tions of savings associations are subject to review under the express Based on all the facts of record, the Board does not believe that this terms of the CRA. See Norwest Corporation, 76 Federal Reserve incident reflects so adversely on NationsBank as to warrant denial Bulletin 873 (1990). of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1123 The Board has carefully reviewed the CRA perfor- B. HMDA Data mance records of NationsBank and its subsidiaries, the CRA performance records of CSF and Citizens, all com- The Board has carefully considered Protestant's allegaments received regarding these applications, Na- tions regarding lending to African-American borrowers tionsBank's responses to these comments, and all other in Miami, Dallas, Baltimore, and Washington in light of relevant facts of record in light of the CRA, the Board's 1993 and 1994 HMDA data for NationsBank's subsidregulations, and the Statement of the Federal Financial iary banks serving these cities and for NationsBanc Supervisory Agencies Regarding the Community Rein- Mortgage.14 A comparison of the 1993 and 1994 HMDA vestment Act ("Agency CRA Statement").11 data indicate an increase in 1994 in the percentage of applications received by NationsBank from African Record of Performance Under the CRA Americans, applicants in minority census tracts, and applicants in low- and moderate-income census tracts in A. CRA Performance Examinations these MSAs. In addition, NationsBank received a higher percentage of its total applications from African Ameri- The Agency CRA Statement provides that a CRA exam- cans during 1994 than did financial institutions in these ination is an important and often controlling factor in the MSAs in the aggregate.15 The disparity between consideration of an institution's CRA record and that NationsBank's denial rates for African-American applireports of these examinations will be given great weight cants and non-minority applicants was reduced in each in the applications process.12 The Board notes that all of these MSAs. These data also show, however, that, in NationsBank subsidiary banks received either a "satis- some of these MSAs, this disparity rate exceeds the factory" or "outstanding" rating from the Office of the disparity rate among lenders in the aggregate; and Comptroller of the Currency ("OCC"), their primary NationsBank's denial rate for high-income Africanfederal supervisor, in their most recent public examina- American applicants exceeded its denial rate for lowtions for CRA performance (collectively, the "OCC income non-minority applicants. Examinations"). In particular, the NationsBank subsid- The Board is concerned when the record of an instituiary banks serving the cities mentioned in Protestant's tion indicates disparities in lending to minority applicomments received the following performance ratings cants, and it believes that all banks are obligated to from the OCC: NationsBank of Florida, N.A., Tampa, ensure that their lending practices are based on criteria Florida ("Florida Bank"), "satisfactory" as of Septem- that assure not only safe and sound lending, but also ber 1993; NationsBank of Texas, N.A., Dallas, Texas assure equal access to credit by creditworthy applicants ("Texas Bank"), "outstanding" as of September 1993; regardless of race. The Board recognizes, however, that NationsBank of Maryland, N.A., Bethesda, Maryland, HMDA data alone provide an incomplete measure of an "satisfactory" as of March 1993; and NationsBank of institution's lending in its community. The Board also D.C., N.A., Washington, D.C., "outstanding" as of Sep- recognizes that HMDA data have limitations that make tember 1993.13 The Board also has considered the pre- the data an inadequate basis, absent other information, liminary results of the CRA performance examinations for concluding that an institution has engaged in illegal recently completed by the OCC for all of NationsBank's discrimination in lending. subsidiary banks. Citizens received a "satisfactory" CRA performance rating from the Office of Thrift Supervision, its primary federal supervisor, as of December 14. HMDA data for Citizens in 1993 show that the institution 1993. NationsBank has indicated that it would imple- received 8.8 percent of its total applications from African Americans, while financial institutions in the Miami MSA in the aggrement its CRA policies and procedures at CSF following gate received 8.3 percent of total applications from African Americonsummation of this proposal. cans. In 1994, Citizens received 10.3 percent of its total applications from African Americans, compared to 11.6 percent for the aggregate. There was no disparity in its denial ratios for African-American applicants and non-minority applicants during 1994. 15. In the Dallas MSA, applications from African Americans 11. 54 Federal Register 13,742 (1989). increased from 652 to 1326 and from 11.3 percent to 19.2 percent 12. Id. at 13,745. of all applications, while African Americans constituted 15.6 per- 13. Subsequent to these examinations, NationsBank merged its cent of the population as a whole. By comparison, lenders in the Maryland and District of Columbia banks into NationsBank of Dallas MSA in the aggregate received 5.5 percent of all applica- Virginia, N.A., Richmond, Virginia ("Virginia Bank"), which re- tions from African Americans in 1993 and 8.3 percent in 1994. In ceived an "outstanding" rating as of September 1993. In addition, the District of Columbia MSA, while NationsBank's total applica- NationsBank's subsidiary banks in North Carolina and South Caro- tions decreased 27 percent between 1993 and 1994, applications lina received "outstanding" ratings, and its subsidiary banks in from African Americans increased 27 percent and constituted Kentucky, Tennessee, and Delaware received "satisfactory" rat- 23.9 percent of all applications in 1994, compared to African ings, all as of September 1993. American's 25.1 percent share of the total population. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1124 Federal Reserve Bulletin • December 1995 The OCC Examinations found that all of As part of the CIP initiative, NationsBanc Mortgage NationsBank's subsidiary banks are in compliance with developed two primary affordable home purchase loan the substantive provisions of fair lending laws.16 Exam- programs. The first mortgage product permits qualified iners found no evidence of prohibited discriminatory low- and moderate-income home purchasers to borrow practices or of practices intended to discourage applica- up to 95 percent of the purchase price, pay 3 percent of tions for the types of products set forth in the banks's the purchase price as a down payment, and finance the CRA statements. According to the examinations, each remaining 2 percent of the purchase price and all closing bank has adequate policies, procedures, and training costs from a variety of non-traditional sources. The programs in place to support nondiscrimination in lend- second mortgage product is similar to the first, but ing activities, and conducts internal audits to evaluate permits qualified low-income borrowers to provide as compliance with fair lending laws. Moreover, the exami- little as $500 toward the down payment. During 1994, nations found that these banks's community delineations NationsBanc Mortgage originated 4,895 loans for were reasonable and did not arbitrarily exclude low- and $308.9 million nationwide under these two programs. moderate-income areas, and that the banks annually re- NationsBanc Mortgage has dedicated $75 million to viewed their delineations and the geographic distribution these programs for 1995, including $2 million in Miami, of their lending. $8 million in Dallas, $6 million in Baltimore, and The Board also notes that NationsBank's Community $5 million in the District of Columbia. In addition, in Investment Group, which includes its Fair Lending Pro- 1995 NationsBanc Mortgage established loan officer pogram, has developed internal and external second and sitions in each of the markets dedicated solely to origithird review programs for declined mortgage applica- nating home mortgage loans to low-and moderatetions. In all the MS As identified in Protestant's com- income and minority borrowers.18 ments, NationsBank, in cooperation with the National Miami. During 1993, NationsBank made 157 home Urban League, has established a Community Loan Re- purchase and home improvement loans for $7.2 million view Board, which offers denied loan applicants the in low- and moderate-income census tracts, and 583 opportunity to appeal their loan decision. In addition, in home purchase and home improvement loans for Miami, Dallas, and the District of Columbia, all initially $46.4 million to minority borrowers.19 Florida Bank also rejected loan applications from low- to moderate-income made 10 commercial real estate loans for $18 million applicants are referred to a senior lending officer for a related to community development, such as for low- and second review before the loan decision is made final. moderate-income single- and multi-family housing units and renovation of community and retail centers in under- C. Record of Lending Activities served areas. In addition, Florida Bank supported the community development initiatives of other organiza- The Board also has considered NationsBank's progress tions designed to help to provide housing for low- and under its Community Investment Program ("CIP"), a moderate-income families. Florida Bank, for example, 10-year commitment to make a minimum of $10 billion committed $5 million to the Broward County Housing of community investment loans.17 Under this program, Finance Authority Lender's Program to fund mortgage NationsBank loaned $2.2 billion in 1992, $2.9 billion in loans for low- and moderate-income families, $3 million 1993, and $3.4 billion in 1994. During 1993, to the Dade County Bond Program to fund mortgage NationsBank made CIP loans totalling $91.9 million in loans to first-time, low-income home buyers, and the Miami market; $358 million in the Dallas market; $5 million to the Florida Housing Finance Agency Hur- $38.2 million in the Baltimore market; and $346.1 mil- ricane Relief Mortgage Revenue Bond Program. The lion in the District of Columbia market. first project nationwide of NationsBank Community Development Corporation ("NationsBank CDC") was the development of 25 new, single-family homes for lowand moderate-income families at the former Augustine 16. A separate examination of NationsBanc Mortgage also disclosed no violations of the Fair Housing Act or the Equal Credit Quarters in Sarasota.20 Florida Bank also cooperated Opportunity Act. The 1993 Examinations noted technical noncompliance with loan documentation requirements at Virginia Bank and at NationsBank's subsidiary banks in Georgia and Tennessee, but found no evidence that these exceptions resulted in the denial of 18. During 1993, NationsBanc Mortgage made 5,290 home mortcredit to an applicant on a prohibited basis. Management has gage loans totalling $444 million to African Americans. It ranked undertaken corrective actions, and the Board has considered these second nationwide in the number of loans made to African Amerifindings in light of preliminary examination reports by the OCC. cans, compared to a 15th rank in the number of loans overall. 17. CIP is a collection of special products and services, such as 19. Refinancings are not included in these loans or in the affordhome mortgage loans, student loans, and loans to public/private able housing loans discussed below. partnerships, designed to benefit low- and moderate-income indi- 20. Outside Miami, Florida Bank committed $16 million to a viduals and small businesses. $100 million loan pool established by ten banks and First Housing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1125 with the Urban League of Broward County to provide 10 of a 150 bed nursing home in west Baltimore that is home buyer classes attended by 220 participants and expected to employ 100 neighborhood residents and with the Miami-Dade branch of the National Association generate approximately $2 million in annual wages. for the Advancement of Colored People to establish the Washington. During 1993, NationsBank made Overtown Homebuyers Club, a credit counseling and 572 home mortgage loans totalling $60 million in lowsavings program for prospective low- and moderate- and moderate-income census tracts, and 956 home mortincome home buyers. gage loans totalling $118.5 million to minority borrow- Dallas. NationsBank made 529 home mortgage loans ers. Virginia Bank also made 24 commercial real estate totalling $16 million in low- and moderate-income cen- loans totalling $19.8 million related to community develsus tracts and 680 home mortgage loans totalling opment, such as loans to construct or rehabilitate afford- $216 million to minority borrowers during 1993. Bank able housing and renovate community and business cenalso made 23 commercial real estate loans totalling ters in under-served areas. In addition, the bank $7.8 million in low- and moderate-income areas. In supported the community development initiatives of addition, Texas Bank cooperated with other organiza- other organizations designed to help to provide affordtions in several initiatives designed to promote commu- able housing. Virginia Bank committed $5.5 million to nity development and the production of affordable hous- Luther Place Church, for example, to provide 93 single ing. Texas Bank, for example, invested $150,000 in the room occupancy and family units for homeless families, South Fair Community Development Corporation to fi- financed the construction of Woodridge Place, which nance the development of a master plan for the South constructed 37 new, single-family homes for low- and Dallas/Fair Park area and committed to make $40 mil- moderate-income families, and loaned $5.2 million to a lion of loans and equity investments in this area over 5 non-profit housing developer to acquire and renovate years, including the development of 100 single-family 162 rental units for lower-income families in Arlington homes and 300 multi-family housing units for low- and County, Virginia. In addition, NationsBank CDC inmoderate-income families, and two day care facilities. vested $1.35 million and borrowed an additional Texas Bank also committed $1 million to the Dallas $4 million to purchase and renovate an apartment build- Housing Finance Corporation to purchase revenue bonds ing and produce 322 units of affordable housing in the to fund below-market rate mortgages for low- and District of Columbia. moderate-income borrowers, and invested $600,000 in the Southern Dallas Development Fund, a multi-bank D. Ascertainment and Marketing Activities loan pool created to provide debt and equity investments in and management assistance to small and minority- NationsBank has engaged in a variety of outreach efforts owned businesses. in order to ascertain the credit needs of and advertise its Baltimore. In the Baltimore market during 1993, Na- credit products to African Americans and low- and tionsBank made 84 home mortgage loans totalling middle-income members of the banking markets it $4.5 million in low- and moderate-income census tracts serves. The officer call program at Florida Bank, for and 161 home mortgage loans totalling $14.3 million to example, has separate requirements for calling upon minority borrowers. Virginia Bank21 also made 7 com- individuals and businesses in low- and moderate-income mercial real estate loans totalling $2.7 million related to areas, and the results of all calls are reported to and community development in the market, such as low- and reviewed by senior management. NationsBanc Mortgage moderate-income single- and multi-family housing units also requires each of its account executives to make at and renovations of community and retail centers in least three calls per month on minority realtors, realtors under-served areas. During 1994, to assist the commu- located in low-and moderate-income census tracts, buildnity development initiatives of other organizations, Vir- ers of affordable housing, and other persons familiar ginia Bank made a $3.2 million loan for the construction with the housing-related credit needs of minority and low- and moderate-income members of the community. In May 1993, Florida Bank held a statewide public Development Corporation to fund the development of multi-family meeting in Tampa to assess the needs of under-served low-income housing in Tampa. The bank also established the East areas and receive ideas on ways to address these needs, Tampa Initiative and committed $5 million to housing and small and throughout the year held several local meetings with business loans in that area, which has been joined by a $35 million commitment to investment in that area by state and local govern- community leaders to identify local credit needs and mental entities. The first project nationwide of NationsBank Com- inform participants about NationsBank's available prodmunity Development Corporation ("NationsBank CDC") was the ucts and services. In the Miami area during 1993, development of 25 new, affordable single-family homes at the Florida Bank officers held over 500 meetings with comformer Augustine Quarters in Sarasota. munity leaders and made almost 700 calls on small- and 21. In this context, "Virginia Bank" also refers to its predecessor banks in Maryland and the District of Columbia. minority-owned businesses. Florida Bank also maintains Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1126 Federal Reserve Bulletin • December 1995 a special advertising budget to promote lower-cost loan Virginia Bank, were reasonable. NationsBank has indiand deposit products, and uses newspapers that are ori- cated that it would implement this policy at CSF followented to African-American and Hispanic communities as ing consummation of this proposal. NationsBank also well as newspapers of general circulation, radio, and has indicated that it would offer a broader array of home direct mail in this effort. mortgage and consumer loans at Citizens, and apply Texas Bank conducts similar programs. In the Dallas Florida Bank's underwriting and approval guidelines, banking market during 1993, the bank participated in and adjust deposit products and rates to respond to more than 60 outreach programs to inform small busi- specific markets and consider establishing additional nesses and residents of low- and moderate-income neigh- branches in order to attract additional deposits to replace borhoods of available products and service. Texas Bank deposits lost by the divestiture of out-of-state branches. also employs Spanish-speaking tellers and customer service representatives, and its ATMs permit customers to F. Conclusion Regarding Record of CRA conduct their transactions in Spanish. Performance In the Baltimore banking market, Virginia Bank conducted a public meeting during 1993 to ascertain com- The Board has carefully considered all the facts of munity credit needs; and it meets with several organiza- record in reviewing NationsBank's record of CRA pertions, including the Baltimore chapter of the NAACP formance. For the reasons discussed above, the Board and the State of Maryland Office of Minority Affairs, on believes that NationsBank and its subsidiary banks have at least a quarterly basis. Through these efforts, the bank the types of policies and programs in place and working has identified certain credit needs requiring additional well that support an effective record of CRA perforefforts to be met, such as automobile refinancing loans, mance. Following consummation of this proposal, home improvement loans, and loans for child care facili- NationsBank would introduce these CRA policies and ties, and has developed additional products to meet these procedures at Citizens before Citizens is eventually credit needs. In the District of Columbia, Virginia Bank merged into Florida Bank. Based on a review of the has worked extensively with the District of Columbia entire record of performance, including information pro- Council, the Association of Community Organizations vided by Protestants and NationsBank, and the CRA for Reform Now, and the D.C. Reinvestment Alliance to performance examinations and other information from identify priority credit needs and locations for public/ the OCC, the Board believes that NationsBank's record private partnership redevelopment efforts. in assisting to meet the credit needs of all segments of In 1993, the bank also established a business banking the communities served by its subsidiary banks, includunit, to focus on small businesses with annual revenues ing low- and moderate-income neighborhoods, are conunder $4 million and seeking loan amounts between sistent with approval of this proposal. $25,000 and $500,000, and a government guaranteed lending unit, to facilitate the use of Small Business Other Considerations Administration and other government guarantee loan programs. Virginia Bank also has entered into partner- The Board also has concluded that the financial and ships with 7 community organizations in the District of managerial resources of NationsBank, CSF, and their Columbia to provide educational programs to the public, respective subsidiaries are consistent with approval.22 and has sponsored two "loan mobiles" to accept loan applications and provide technical assistance in underserved areas. 22. Protestant notes published accounts regarding an alleged violation of the anti-tying restrictions enacted by the 1970 Amend- E. Branch Locations and Closings ments to the BHC Act by NationsBank's South Carolina banking subsidiary and alleged improper marketing practices in the sale of retail nondeposit investments by NationsBank's securities broker- NationsBank has a formal policy for all its subsidiary age subsidiary. Both of these activities were reviewed by the OCC, banks concerning branch closings, changes in hours, and and the Board has carefully considered the information from this service reductions. Decisions regarding these matters are review. In addition, the Board has considered the anti-tying policies adopted by NationsBank and steps it has taken relating to the sale reviewed by the bank's management. The bank also of retail nondeposit investments. In response to an internal audit, assesses several factors before closing a branch, includ- for example, NationsBank has adopted a revised Code of Ethics, ing the potential impact on the level of banking services increased disclosure requirements, and expanded its audit procein the community served by the branch or branches dures, to ensure that its retail nondeposit investment sales practices are in compliance with all supervisory guidelines. The OCC has affected, and seeks community input when appropriate. indicated that NationsBank's progress in this regard is generally In the OCC Examinations, the examiners concluded that satisfactory. In view of all the facts of record, including supervisory the branch closing records of all of NationsBank's sub- information provided by the OCC, the Board does not believe that sidiary banks, including Florida Bank, Texas Bank, and these matters warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1127 The Board also finds that consummation of this proposal Voting for this action: Chairman Greenspan, Vice Chairman is not likely to result in any significantly adverse effects, Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. such as undue concentration of resources, decreased or WILLIAM W. WILES unfair competition, conflicts of interest, or unsound Secretary of the Board banking practices that are not likely to be outweighed by the public benefits, such as increased competition and added convenience, that are expected from this proposal. Accordingly, the Board has determined that the balance Appendix of public interest factors it must consider under section 4(c)(8) of the BHC Act is favorable and consistent with Florida Banking Markets in Which NationsBank and approval of the application. CSF Currently Compete and the Post-Merger Increase Based on the foregoing and all the facts of record, the in HHI Board has determined that the application should be, and hereby is, approved.23 The Board's approval is specifically conditioned on compliance by NationsBank with (1) The Daytona Beach banking market consists of all the commitments made in connection with this appli- Allandale, Daytona Beach, Daytona Beach Shores, cation. The Board's determination also is subject to all De Leon Springs, Edgewater, Holly Hill, New Smyrna the conditions set forth in Regulation Y, including those Beach, Ormond Beach, Ormond-by-the-Sea, Port in sections 225.7 and 225.23(b)(3) of Regulation Y Orange, and South Daytona in Volusia County and the (12 C.F.R. 225.25.7 and 225.23(b)(3)), and to the town of Astor in Lake County. The HHI would not Board's authority to require modification or termination increase. of the activities of a bank holding company or any of its (2) The Fort Myers banking market consists of Lee subsidiaries as the Board finds necessary to assure com- County, minus the town of Boca Grande, and the town of pliance with, and to prevent evasion of, the provisions Immokalee in Collier County. The HHI would increase and purposes of the BHC Act and the Board's regula- by 33 points to 1378. tions and orders issued thereunder. For the purpose of (3) The Miami-Ft. Lauderdale banking market consists this action, the commitments and conditions relied on by of Dade and Broward Counties. The HHI would increase the Board in reaching this decision are deemed to be by 37 points to 834. conditions imposed in writing by the Board in connec- (4) The Naples banking market consists of Collier tion with its findings and decision, and, as such, may be County, minus the town of Immokalee. The HHI would enforced in proceedings under applicable law. increase by 7 points to 1486. This transaction shall not be consummated later than (5) The Ocala banking market consists of Marion County three months after the effective date of this order, unless and the town of Citrus Springs in Citrus County. The such period is extended by the Board or by the Federal HHI would increase by 42 points to 1679. Reserve Bank of Richmond, acting pursuant to delegated (6) The Orlando banking market consists of Orange, authority. Osceola, and Seminole Counties, the western half of By order of the Board of Governors, effective Volusia County, and the towns of Clermont and Grove- October 17, 1995. land in Lake County. The HHI would increase by 4 points to 1663. (7) The Punta Gorda banking market consists of Charlotte County, minus the towns of Englewood and Rotonda West, and the town of North Port in Sarasota 23. Protestant references a newspaper account of an investigation County. The HHI would not increase. by the Department of Labor of alleged illegal discriminatory em- (8) The Sarasota banking market consists of Manatee ployment practices by NationsBank. The Board notes that because NationsBank's subsidiary banks employ more than 50 people, County, Sarasota County, minus the town of North Port, serve as depositories of government funds, and act as agents in and the towns of Englewood and Rotonda West in Charselling or redeeming U.S. savings bonds and notes, each bank is lotte County and Boca Grande in Lee County. The HHI required by Department of Labor regulations to: would increase by 66 points to 1599. (1) File annual reports with the Equal Employment Opportunity (9) The Tampa Bay banking market consists of Her- Commission; and (2) Have in place a written affirmative action compliance pro- nando, Hillsborough, Pasco, and Pinellas Counties. The gram which states its efforts and plans to achieve equal opportu- HHI would increase by 60 points to 1735. nity in the employment, hiring, promotion, and separation of (10) The West Palm Beach banking market consists of personnnel. Palm Beach County, minus the towns of Belle Glade, See 41 C.F.R. 60-1.7(a), 60-1.40. The record also indicates that Pahotee, and South Bay. The HHI would increase by NationsBank and its other subsidiaries are subject to those equal opportunity and affirmative action requirements. 13 points to 1151. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1128 Federal Reserve Bulletin • December 1995 Norwest Corporation that some of the activities that Applicant proposes to Minneapolis, Minnesota conduct through Partnerships are permissible, and Applicant has committed to conduct these activities subject to Order Approving a Notice to Engage in Asset-Based the limitations previously established by the Board.5 Lending and Management of Assets Certain of the activities proposed by the Partnerships are new activities that the Board has not previously Norwest Corporation, Minneapolis, Minnesota ("Appli- approved.6 The Partnerships are engaged primarily in cant"), a bank holding company within the meaning of making, servicing and investing in discounted bank loans the Bank Holding Company Act ("BHC Act"), has and other debt securities.7 The Partnerships acquire debt given notice under section 4(c)(8) of the BHC Act that has been or that is in the process of being restruc- (12 U.S.C. § 1843(c)(8)) and section 225.23 of the tured, including secured and unsecured debt in the form Board's Regulation Y (12 C.F.R. 225.23), to acquire The Foothill Group, Inc., Los Angeles, California ("Company"),1 and thereby engage nationwide in asset-based managing general partners. Partners I, by its terms, will terminate commercial lending and management of assets. and must commence liquidation of its assets on December 31, Notice of the proposal, affording interested persons an 1995. Partners II will continue its investment activities until the end of 1999. opportunity to submit comments, has been published Institutional investors hold all the limited partnership interests. (60 Federal Register 44,891 (1995)). The time for filing The Partnerships are exempt from registration as investment comcomments has expired, and the Board has considered the panies under the Investment Company Act of 1940. notice and all comments received in light of the factors 12 U.S.C. § 80a-l et seq. The Partnerships are limited to not more set forth in section 4(c)(8) of the BHC Act. than 100 investors; both are fully subscribed, and no additional limited partners may be admitted. In addition, the Partnerships will Applicant, with total consolidated assets of approxinot be engaged in issuing new shares or redeeming limited partnermately $66.6 billion, controls bank subsidiaries in ship interests. Because the Partnerships would be subsidiaries of 15 states.2 Applicant also engages directly and through Applicant, Applicant must, for regulatory purposes, hold capital subsidiaries in a broad range of permissible nonbanking and present financial information relating to Company and the Partnerships on a consolidated basis. activities. Company is registered as investment adviser 5. See Meridian Bancorp, Inc., 80 Federal Reserve Bulletin 736 with the Securities and Exchange Commission ("SEC") (1994) ("Meridian"). The Partnerships, together with Applicant and, therefore, is subject to the recordkeeping, reporting, and its affiliates, would hold not more than 5 percent of any class of fiduciary standards, and other requirements of the Invest- voting securities of any issuer, and not more than 25 percent of the ment Advisers Act of 1940 (12 U.S.C. § 80b-1 et seq.) total equity, including subordinated debt, of any issuer. In addition, Applicant has committed that no directors, officers, or employees of and the SEC. Applicant or its affiliates will serve as directors, officers, or employees of any issuer of which Applicant and its affiliates hold more Proposed Activities than 10 percent of the total equity. Applicant has committed that future limited partnerships would be structured in the same manner The Board previously has determined by regulation that as the current Partnerships. 6. In order to approve a proposal under section 4(c)(8) of the engaging in commercial lending is closely related to BHC Act, the Board is required to determine that the proposed banking and permissible for bank holding companies activity is "so closely related to banking or managing or controlunder section 4(c)(8) of the BHC Act.3 Applicant has ling banks as to be a proper incident thereto." committed that Company will engage in this activity in 12 U.S.C. § 1843(c)(8). Under the National Courier test, the Board may find that an activity is closely related to banking for purposes accordance with the limitations imposed by Regulation of section 4(c)(8) if it concludes that banks generally: Y. In addition to this activity, Applicant proposes to (1) Provide the proposed services; engage through Company in managing certain assets as (2) Provide services that are operationally or functionally so the corporate general partner in two limited partnerships similar to the proposed services as to equip them particularly ("Partnerships").4 The Board previously has determined well to provide the proposed services; or (3) Provide services that are so integrally related to the proposed services as to require their provision in a specialized form. See National Courier Association v. Board of Governors, 516 1. In connection with this proposal, Applicant also has requested F.2d 1229, 1237 (D.C. Cir. 1975) ("National Courier"). In addiapproval to acquire an option to purchase up to 18.89 percent of the tion, the Board may consider any other basis that may demonstrate outstanding voting shares of Company. This option would termi- that the proposed activity has a reasonable or close connection or nate upon consummation of the proposal. relationship to banking or managing and controlling banks. See 2. Asset data are as of June 30, 1995. Board Statement Regarding Regulation Y, 49 Federal Register 794, 3. 12 C.F.R. 225.25(b)(1). 806 (1984); Securities Association v. Board of Governors, 468 U.S. 4. The 1 percent general partner interest in Foothill Partners L.P. 207,210-211 n. 5 (1984). ("Partners I") is 60 percent owned by Company and 40 percent 7. The Partnerships are not leveraged, and Applicant has stated owned by the managing general partners whereas the 1 percent that they will not be leveraged. Applicant has committed that general partner interest in Foothill Partners II., L.P. ("Partners II") neither Applicant nor any of its subsidiaries would be permitted to is 49 percent owned by Company and 51 percent owned by the make loans to Partnerships. 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Legal Developments 1129 of bank loans, privately placed and publicly-traded debt expertise in identifying, holding, valuing, and working instruments, bonds, notes, debentures, and discounted out defaulted debt; in determining the value of collateral receivables.8 Applicant has stated that the Partnerships for loans; and in participating in the financial restructurwill take an active role in the restructuring of the de- ing of companies whose debt obligations are impaired. faulted debt acquired by Partnerships, including partici- Applicant will only purchase debt, not equity, and will pating on creditor committees. Applicant indicates that stand in the position of a creditor. such discounted debt would be acquired for the purpose Accordingly, and based on all the facts of record, the of restructuring the debt to achieve a higher yield and Board concludes that the proposed activities are closely greater collateral protection. related to banking under the National Courier standard. Some of the debt that would be acquired by the Partnerships may be in default at the time of acquisition, Proper Incident to Banking Analysis and may be secured by voting shares or other assets that would be impermissible for a bank holding company to In determining whether an activity is a proper incident to hold without Board approval.9 Because the Partnerships banking, the Board must consider whether the activity would have the right in some cases to take title immedi- "can reasonably be expected to produce benefits to the ately to shares or assets securing defaulted debt that the public, such as greater convenience, increased competi- Partnerships acquire, Applicant has committed that Part- tion, or gains in efficiency, that outweigh possible adnerships would treat this collateral, as well as any other verse effects, such as undue concentration of resources, assets acquired in renegotiating this debt, as assets ac- decreased or unfair competition, conflicts of interests, or quired in satisfaction of a debt previously contracted unsound banking practices."11 The Board expects that ("DPC"). Under the BHC Act, a bank holding company the proposal would produce increased economies of must divest any shares or assets acquired DPC within scale and gains in efficiency for Applicant. Moreover, two years from the date the asset is acquired. For this the proposal can reasonably be expected to produce purpose, Applicant has committed that it will consider public benefits, such as an increase in funding available shares or assets acquired in satisfaction of defaulted debt to lenders as credit is purchased by Company. To address to have been acquired on the date the defaulted debt is the potential adverse effects of its performance of the acquired.10 proposed activities, Applicant has committed to conduct The Board believes that the acquisition of defaulted the proposed activities subject to a number of restricdebt under the circumstances and conditions proposed tions concerning extensions of credit. In particular, as by Applicant is an activity that is "closely related to noted above, Applicant has committed that Partnerships banking." Banks and bank holding companies provide will divest any shares or assets securing debt in default services that are operationally or functionally so similar within the time period set out for the divestiture of DPC to the proposed services as to equip them particularly property in the BHC Act.12 In addition, there is no well to provide the proposed services. Lending is a core evidence in the record to indicate that the proposed banking activity, and banks and bank holding companies activities would lead to any undue concentration of routinely make and purchase debt; collect, work out, and resources since the activities involve a market which is restructure debt; and participate on creditors committees national in scope. for companies in default on debt in connection with the Based on the commitments made by Applicant regardbank's or the holding company's direct lending activi- ing its conduct of the proposed activities, the limitations ties. Banks and bank holding companies have significant noted in this order, and all the facts of record, the Board has determined that the performance of the proposed activities by Applicant could reasonably be expected to 8. The debt investments may include investments in companies produce public benefits that would outweigh the possible that may be contemplating, involved in, or recently have completed, a negotiated restructuring of their outstanding debt or a reorganization under Chapter 11 of the Federal Bankruptcy Code. 9. Applicant has committed that Partnerships will not acquire 11. 12 U.S.C. § 1843(c)(8). debt in default that is secured by shares of banks or bank holding 12. The limited nature of the holding period restricts the ability companies. of the Partnerships to speculate in the value of the underlying 10. Applicant also may apply for three one-year extensions. See collateral. The length of the holding period and divestiture require- 12 C.F.R. 225.22(c)(1). The Board notes that the divestiture re- ment also limits potential attempts to acquire assets or shares not quirement would be satisfied if, during the divestiture period, the permissible for bank holding companies to hold in order to engage Partnerships renegotiate the debt into a performing obligation and in commercial or other activities. In addition, the Board notes that release the collateral to the borrower as part of the renegotiation. To the Partnership agreements require the establishment of conflict the extent that defaulted debt acquired by the Partnerships is review committees, nominated by the limited partners, to review secured by assets or shares that would be permissible investments any potential conflicts of interest between the general partners and for a bank holding company, this divestiture commitment would their affiliates on the one hand, and the Partnership or a debtor not apply. company on the other hand. 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1130 Federal Reserve Bulletin • December 1995 adverse effects under the proper incident to banking Angeles, California, and Orlandi Valuta Nacional, Boulstandard of section 4(c)(8) of the BHC Act. The financial der City, Nevada (collectively, "Companies"), in the and managerial resources of Applicant and Company activity of transmitting money for customers to third also are consistent with approval. parties within the United States and its territories ("domestic money transmission services").1 The proposed Conclusion activity would be conducted at first through a network of approximately 1,200 "outside representative offices" lo- Based on the foregoing and all the facts of record, the cated in California, Florida, Illinois, and Texas that are Board has determined that the notice should be, and under contract with Companies to provide money transhereby is, approved. Approval of this proposal is specif- mission services.2 Norwest proposes to engage in the ically conditioned on compliance by Applicant with the proposed activity nationwide. commitments made in connection with this notice. The Notice of the proposal, affording interested persons an Board's determination also is subject to all the terms and opportunity to submit comments, has been published conditions set forth in Regulation Y, including those in (60 Federal Register 46,281 (1995)). The time for filing sections 225.7 and 225.23(b) (12 C.F.R. 225.7 and comments has expired, and the Board has considered the 225.23(b)), and to the Board's authority to require such notice and all comments received in light of the factors modification or termination of the activities of a bank set forth in section 4(c)(8) of the BHC Act. holding company or any of its subsidiaries as the Board Norwest, with total consolidated assets of approxifinds necessary to ensure compliance with, and to pre- mately $61.8 billion, controls bank subsidiaries in vent evasion of, the provisions of the BHC Act and the 15 states.3 Norwest also engages directly and through Board's regulations and orders issued thereunder. For subsidiaries in a broad range of permissible nonbanking purposes of this transaction, these commitments and activities. Companies are corporations that currently enconditions shall be deemed to be conditions imposed in gage in the business of money transmission to Mexico writing by the Board in connection with its findings and through representatives in California, Florida, Illinois, decision, and, as such, may be enforced in proceedings and Texas. under applicable law. Domestic money transmission services would be pro- These activities shall not be commenced later than vided in the following manner. A customer would conthree months after the effective date of this order, unless tact Companies directly by means of a dedicated telesuch period is extended for good cause by the Board or phone located in the outside representative office to by the Federal Reserve Bank of Minneapolis, pursuant to request Companies to transmit funds to a third party for delegated authority. a fee. The outside representative would collect cash and By order of the Board of Governors, effective a fee from the customer, issue a receipt, and deposit October 17, 1995. funds in an account maintained by the outside representative solely for the purpose of receiving funds in trust to Voting for this action: Chairman Greenspan, Vice Chairman be transmitted to a third party. The outside representative Blinder, and Governors Kelley, Phillips, and Yellen. Absent and may maintain this account at any bank, including a not voting: Governor Lindsey. Norwest subsidiary bank, but would have no agreement with any bank to accept deposits on its behalf. Neither WILLIAM W. WILES the outside representatives nor Companies would be Secretary of the Board FDIC-insured institutions. Companies would collect funds deposited in an out- Norwest Corporation side representative's account on a daily basis through an Minneapolis, Minnesota ACH or similar transaction and deposit an amount equal to the amount to be transmitted into an account main- Order Approving a Notice to Engage in the Activity of tained by Companies at a bank, which may include a Transmitting Money within the United States Norwest subsidiary bank, located near the third party Norwest Corporation, Minneapolis, Minnesota ("Nor- 1. The Board previously approved Norwest's acquisition of Orwest"), a bank holding company within the meaning of landi to engage in the activity of transmitting funds to third parties the Bank Holding Company Act ("BHC Act"), and its in Mexico by using an unaffiliated foreign bank to make the cash subsidiary, Norwest Financial Services, Inc., Des payments. Norwest Corporation, 81 Federal Reserve Bulletin 974 Moines, Iowa ("NFS"), have filed notice under section (1995) ("Norwest Order"). 2. Outside representative offices currently include grocery stores, 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and travel agencies, pharmacies, and insurance agencies, and would be section 225.23 of the Board's Regulation Y (12 C.F.R. expanded to include Norwest's consumer finance offices. 225.23) to engage de novo through Orlandi Valuta, Los 3. Asset data are as of March 31, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1131 receiving the funds. The third party would be notified The Board previously has determined that money that money is available at a local disbursement site, transmission abroad is closely related to banking.6 The which could include a Norwest bank subsidiary or con- Office of the Comptroller of the Currency ("OCC") also sumer finance office, or an unaffiliated check cashing, has concluded that it is permissible for a national bank to finance, or other type of office. Funds would be made accept money from nonbank affiliates for the purpose of available to the third party by check drawn on Compa- transmitting the funds to a foreign country, and that a nies' account almost immediately after the transmission nonbank affiliate that participates with the national bank order is placed by the customer.4 in transmitting money abroad would not become a A customer may not transmit funds to any bank ac- branch of the bank.7 Based on all the facts of record, and count maintained by the customer or any third party. for the reasons discussed in this order and the Board's Thus, Norwest would not use this service to collect previous orders, the Board concludes that domestic deposits for customers of Norwest's subsidiary banks or money transmission services are closely related to bankany other bank. ing, and would not cause Norwest or its banks to be There is no agreement between a customer and a bank engaged in illegal branching activities under federal law. to accept money in an account for use by the bank in In determining whether an activity is a proper incident connection with the proposed domestic money transmis- to banking, the Board must consider whether the activity sion services. Companies and their outside representa- "can reasonably be expected to produce benefits to the tive would accept money from a customer for the sole public, such as greater convenience, increased competipurpose of transmitting funds to a third party. A cus- tion, or gains in efficiency, that outweigh possible adtomer would not give funds to Companies with the verse effects, such as undue concentration of resources, expectation that Companies would permit the customer decreased or unfair competition, conflicts of interests, or to reclaim the funds on demand or after a period of time. unsound banking practices."8 In weighing foreign money Moreover, Companies would not maintain balances or transmission services under the public benefits test, the pay interest on the money they receive, and would only Board relied on the fact that these companies are subject hold funds long enough to transmit them to the desig- to licensing and examination by state authorities.9 Comnated third party.5 panies have committed to comply with all applicable reporting requirements, including reporting all transactions over $10,000 to the Internal Revenue Service. Norwest also has committed to apply the internal controls currently in place at NFS to assure compliance with the Bank Secrecy Act.10 4. Domestic money transmission services do not involve lending The record indicates that Norwest's de novo entry into money because only funds provided by the customer would be this market can reasonably be expected to result in transmitted to a third party. Moreover, the proposal does not public benefits, including increased competition, greater involve the paying of checks because, although the third party receives money by means of a check drawn on an account maintained by Companies, the receipt of funds in check form is not the payment of a check. Independent Bankers Ass'n of America v. 6. Norwest Corporation, supra; Philippine Commercial Interna- Smith, 534 F.2d 921, 943^15 (D.C. Cir. 1976). tional Bank, 11 Federal Reserve Bulletin 270 (1991); Bergen Bank 5. Many states permit companies that are not chartered as banks A/S, 76 Federal Reserve Bulletin 457 (1990). to transmit money without deeming this activity to involve the 7. See Letter from Peter Liebesman, Assistant Director, Legal taking of deposits. Norwest must conduct the proposed activities in Advisory Services Division, May 15, 1990 (unpublished). Most of compliance with licensing and other requirements of relevant state Norwest's banks are national banks, and the courts have deterlaw. Norwest operates several state chartered banks in Colorado, mined that whether an entity would be a "branch" for purposes of South Dakota, and Texas. The state chartered banks are subject to the National Bank Act is a matter of federal law. First National state law branching restrictions. The record in this case indicates Bank in Plant City v. Dickinson, 396 U.S. 122 (1969). The OCC that the proposed activities would not constitute branch banking has reasoned that non-bank offices that transmit funds through a under the laws of Colorado, South Dakota, and Texas. Colorado national bank to a third party do not constitute "branches" under has established procedures for licensing money transmitters, and federal law. does not consider the proposed activities to constitute branch 8. 12 U.S.C. § 1843(c)(8). banking. Companies are licensed to conduct domestic money trans- 9. This order is specifically conditioned on Norwest obtaining all mission services in Illinois and Texas and have applied for a license necessary state licenses. in Florida. California does not require a license to transmit money 10. These procedures include a weekly review of all transactions to locations within the United States. A "payments instruments" over $10,000. In addition, Companies will require customer identilicense, however, is required to issue checks at disbursements sites fication, including the customer's current address and occupation, in California. Furthermore, although South Dakota has not estab- for all transmissions above $3,000. Companies also will run a lished formal licensing requirements for money transmitters, the computer match of all remitters and recipients by name and social Office of the Director of Banking has indicated that the proposed security number so that reporting requirements cannot be evaded activities would not constitute banking under South Dakota law. by means of a series of transactions. At this time, Orlandi does not See S.D. Codified Laws Ann. § 51A-7-1 (1990). contemplate engaging in transactions over $9,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1132 Federal Reserve Bulletin • December 1995 convenience for customers, and gains in efficiencies in SouthTrust Corporation the operation of Companies and Norwest. In addition, Birmingham, Alabama there is no evidence in the record to indicate that the proposed activities would lead to any undue concentra- Order Approving a Notice to Engage in Private tion of resources, unsound banking practices, or other Placement, Riskless Principal, and Investment adverse effects. Advisory Activities For these reasons, the Board believes that Norwest's proposal to engage in domestic money transmission, as SouthTrust Corporation, Birmingham, Alabama ("Notidescribed above, is not likely to result in significantly ficant"), a bank holding company within the meaning of adverse effects that would outweigh the public benefits the Bank Holding Company Act ("BHC Act"), has of Norwest's proposal. The financial and managerial given notice under section 4(c)(8) of the BHC Act resources of Norwest and NFS also are consistent with (12 U.S.C. § 1843(c)(8)) and section 225.23 of the approval. Board's Regulation Y (12 C.F.R. 225.23), of its proposal Based on the foregoing and all the facts of record, the to engage de novo through its subsidiary, SouthTrust Board has determined to, and hereby does, approve the Securities, Inc., Birmingham, Alabama ("Company"), notice. The Board's decision is specifically conditioned in the following nonbanking activities: on Norwest's complying with all the commitments made (1) Acting as agent in the private placement of all in connection with this notice, and obtaining all neces- types of debt and equity securities; sary approvals from state regulators.11 The Board's de- (2) Purchasing and selling all types of securities as a termination also is subject to all the terms and conditions "riskless principal" on the order of customers; and set forth in Regulation Y, including those in sections (3) Providing investment advisory services pursuant 225.7 and 225.23(b) of Regulation Y, and to the Board's to 12 C.F.R. 225.25(b)(4)); authority to require such modification or termination of the activities of a bank holding company or any of its Notice of this proposal, affording interested persons an subsidiaries as the Board finds necessary to ensure com- opportunity to submit comments, has been published pliance with, and to prevent evasion of, the provisions of (60 Federal Register 53,618 (1995)). The time for filing the BHC Act and the Board's regulations and orders comments has expired, and the Board has considered the issued thereunder. For purposes of this transaction, these notice and all comments received in light of the factors commitments and conditions shall be deemed to be set forth in section 4(c)(8) of the BHC Act. conditions imposed in writing by the Board in connec- Notificant, with total consolidated assets of approxition with its findings and decision, and, as such, may be mately $20 billion, is the largest banking organization in enforced in proceedings under applicable law. Alabama.1 Notificant operates banking subsidiaries in These activities shall not be commenced later than Alabama, Florida, Georgia, North Carolina, South Carothree months after the effective date of this order, unless lina, Mississippi, and Tennessee, and engages through such period is extended for good cause by the Board or subsidiaries in various permissible nonbanking activiby the Federal Reserve Bank of Minneapolis, pursuant to ties. Company is, and will continue to be, a registered delegated authority. broker-dealer with the Securities and Exchange Commis- By order of the Board of Governors, effective sion ("SEC"), and is a member of the National Associa- October 17, 1995. tion of Securities Dealers, Inc. ("NASD"). Therefore, Company is subject to the recordkeeping, reporting, Voting for this action: Chairman Greenspan, Vice Chairman fiduciary standards, and other requirements of the Secu- Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. rities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), the SEC, and the NASD. WILLIAM W. WILES As noted above, the proposed investment advisory Secretary of the Board activities previously have been determined by regulation to be closely related to banking for purposes of section 4(c)(8) of the BHC Act.2 Notificant has committed that Company will conduct these activities in accordance with the limitations set forth in Regulation Y and the Board's orders relating to these activities. 11. This order is conditioned on Norwest consulting with the Federal Reserve System before commencing domestic money transmission services in any state which does not require examination and licensure to give the System the opportunity to consider whether a separate application should be submitted for Board 1. Asset data are as of September 30, 1995. review. 2. 12 C.F.R. 225.25(b)(4). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1133 Private Placement and "Riskless Principal" Activities Notificant has committed that Company will conduct its private placement and riskless principal activitiesus- Private placement involves the placement of new securi- ing the same methods and procedures, and subject to the ties with a limited number of sophisticated purchasers in same prudential limitations, as those established by the a nonpublic offering. A financial intermediary in a pri- Board in Bankers Trust and J.P. Morgan,6 including the vate placement transaction acts solely as an agent for the comprehensive framework of restrictions imposed by the issuer in soliciting purchasers, and does not purchase Board in connection with underwriting and dealing in the securities and attempt to resell them. Securities that securities, which were designed to avoid potential conare privately placed are not subject to the registration flicts of interests, unsound banking practices, and other requirements of the Securities Act of 1933, and are of- adverse effects. fered only to financially sophisticated institutions and individuals and not to the public. Company would not privately place registered securities, and would only Other Considerations place securities with customers who qualify as accredited investors. In evaluating a notice under section 4(c)(8) of the BHC "Riskless principal" is the term used in the securities Act, the Board considers the financial and managerial business to refer to a transaction in which a broker- resources of the notificant and its subsidiaries and the dealer, after receiving an order to buy (or sell) a security effect the proposal would have on such resources.7 Based from a customer, purchases (or sells) the security for its on all the facts of this case, the Board concludes that own account to offset a contemporaneous sale to (or financial and managerial considerations are consistent purchase from) the customer.3 "Riskless principal" with approval of this notice. transactions are understood in the industry to include In order to approve this notice, the Board also must only transactions in the secondary market. Thus, Com- determine that the performance of the proposed activities pany would not act as a "riskless principal" in selling by Company can reasonably be expected to produce securities at the order of a customer that is the issuer of public benefits that would outweigh possible adverse the securities to be sold, or in any transaction in which effects under the proper incident to banking standard of Company has a contractual agreement to place the secu- section 4(c)(8) of the BHC Act. Under the framework rities as agent of the issuer. Company also would not act and conditions established in this and prior decisions, as a "riskless principal" in any transaction involving a consummation of this proposal is not likely to result in security for which it makes a market. significantly adverse effects, such as undue concentra- The Board previously has determined by order that, tion of resources, decreased or unfair competition, consubject to a number of prudential limitations that address the potential for conflicts of interests, unsound banking practices, or other adverse effects, the proposed private placement and riskless principal activities are closely 6. Among the prudential limitations detailed more fully in J.P. related to banking within the meaning of section 4(c)(8) Morgan and Bankers Trust are that Company will maintain specific of the BHC Act.4 The Board also has determined that records that will clearly identify all "riskless principal" transacacting as agent in the private placement of securities, and tions, and that Company will not engage in any "riskless principal" purchasing and selling securities on the order of inves- transactions for any securities carried in its inventory. When acting as a "riskless principal," Company will engage only in transactions tors as a "riskless principal," do not constitute underin the secondary market, and not at the order of a customer that is writing or dealing in securities for purposes of section 20 the issuer of the securities to be sold, will not act as "riskless of the Glass-Steagall Act, and that revenue derived from principal" in any transaction involving a security for which it these activities is not subject to the 10 percent revenue makes a market, nor hold itself out as making a market in the limitation on bank-ineligible securities underwriting and securities that it buys and sells as a "riskless principal." Moreover, Company will not engage in "riskless principal" transactions on dealing activities.5 behalf of any foreign affiliates that engage in securities dealing activities outside the United States, and will not act as "riskless principal" for registered investment company securities. In addition, Company will not act as a "riskless principal" with respect to any securities of investment companies that are advised by Notificant or any of its affiliates. With respect to private placement 3. See Securities and Exchange Commission Rule 10b-10. activities, Notificant has committed that Company will not pri- 17 C.F.R. 249.10b-10(a)(8)(i). vately place registered investment company securities or securities 4. See J.P. Morgan & Company Incorporated, 76 Federal Re- of investment companies that are advised by Notificant or any of its serve Bulletin 26 (1990) ("J.P. Morgan")-, Bankers Trust New York affiliates. Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers 7. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Trust"). Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 5. See Bankers Trust at 831-833. 73 Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1134 Federal Reserve Bulletin • December 1995 flicts of interests, or unsound banking practices. More- Stichting Prioriteit ABN AMRO Holding over, the Board expects that the entry of Company into Stichting Administratiekantoor ABN AMRO the market for the proposed services would provide Holding added convenience to Notificant's customers, and ABN AMRO Holding N.V. would increase the level of competition among existing ABN AMRO Bank N.V. providers of these services. Accordingly, the Board has all of Amsterdam, The Netherlands determined that the performance of the proposed activities by Company can reasonably be expected to pro- Order Approving a Notice to Engage in Underwriting duce public benefits that outweigh possible adverse ef- and Dealing in Bank-Ineligible Securities on a Limited fects under the proper incident to banking standard of Basis section 4(c)(8) of the BHC Act. Based on all the facts of record, and subject to the Stichting Prioriteit ABN AMRO Holding, Stichting Adcommitments made by Notificant, as well as the terms ministratiekantoor ABN AMRO Holding, ABN AMRO and conditions set forth in this order and in the above- Holding N.V, and ABN AMRO Bank N.V., all of noted Board orders, the Board has determined that the Amsterdam, The Netherlands, (collectively referred to as notice should be, and hereby is, approved. Approval of "Notificant"), bank holding companies within the meanthis proposal is specifically conditioned on compliance ing of the Bank Holding Company Act ("BHC Act"), by Notificant and Company with the commitments made have provided notice under section 4(c)(8) of the BHC in connection with this notice and the conditions in this Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the order and the above-referenced orders. The Board's de- Board's Regulation Y (12 C.F.R. 225.23) to retain termination also is subject to all the terms and conditions Alfred Berg, Inc., New York, New York ("Alfred set forth in Regulation Y, including those in Berg"),1 and thereby engage in the following activities: sections 225.7 and 225.23(g) of Regulation Y (1) Underwriting and dealing in, to a limited extent, (12 C.F.R. 225.7 and 225.23(g)), and to the Board's all types of debt and equity securities other than authority to require modification or termination of the ownership interests in open-end investment compaactivities of a bank holding company or any of its nies;2 subsidiaries as the Board finds necessary to ensure com- (2) Acting as agent in the private placement of all pliance with, and to prevent evasion of, the provisions of types of securities, including providing related advithe BHC Act and the Board's regulations and orders sory services, and buying and selling securities on the issued thereunder. In approving this proposal, the Board order of investors as a "riskless principal"; has relied upon all the facts of record, and all the (3) Providing securities brokerage services pursuant to representations and commitments made by Notificant. 12 C.F.R. 225.25(b)(15); and For purposes of this transaction, these commitments and (4) Providing investment advisory services pursuant conditions shall be deemed to be conditions imposed in to 12 C.F.R. 225.25(b)(4). writing by the Board in connection with its findings and Alfred Berg would conduct these activities worldwide. decision, and, as such, may be enforced in proceedings under applicable law. Notice of the proposal, affording interested persons an This transaction shall not be consummated later than opportunity to submit comments, has been published three months after the effective date of this order, unless (60 Federal Register 48,997 (1995)). The time for filing such period is extended for good cause by the Board or comments has expired, and the Board has considered the by the Federal Reserve Bank of Atlanta, acting pursuant notice and all comments received in light of the factors to delegated authority. set forth in section 4(c)(8) of the BHC Act. By order of the Board of Governors, effective October 30, 1995. Voting for this action: Chairman Greenspan, Vice Chairman Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. 1. Notificant previously received approval pursuant to section 4(c)(9) of the BHC Act to retain temporarily Alfred Berg, the JENNIFER J. JOHNSON United States subsidiary of Alfred Berg Holding AB, Stockholm, Deputy Secretary of the Board Sweden ("Holding AB"). See Letter dated September 5, 1995, from Jennifer J. Johnson, Deputy Secretary of the Board, to Isaac B. Lustgarten ("4(c)(9) Letter"). 2. Notificant currently has authority to engage in underwriting and dealing, to a limited extent, in debt and equity securities through ABN AMRO Securities (USA) Inc., New York, New York. See 81 Federal Reserve Bulletin 182 (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1135 Notificant, with total consolidated assets of $291 bil- conduct the proposed underwriting and dealing activities lion,3 controls seven depository institutions in Illinois using the same methods and procedures and subject to and one commercial bank in New York. ABN AMRO the same prudential limitations as were established by Bank N.V. operates branches in Boston, Massachusetts; the Board in the Section 20 Orders. Chicago, Illinois; New York, New York; Pittsburgh, The Board also has determined that the conduct of Pennsylvania; and Seattle, Washington; and operates these securities underwriting and dealing activities is agencies in Atlanta, Georgia; Miami, Florida; Houston, consistent with section 20 of the Glass-Steagall Act Texas; and Los Angeles and San Francisco, California. (12 U.S.C. § 377), provided that the company engaged in Alfred Berg is, and will continue to be, a broker- the underwriting and dealing activities derives no more dealer registered with the Securities and Exchange Com- than 10 percent of its total gross revenue from underwritmission ("SEC") under the Securities Exchange Act of ing and dealing in bank-ineligible securities over any 1934 (12 U.S.C. § 78a et seq.). Therefore, Alfred Berg is two-year period.7 Notificant has committed that Alfred subject to the record-keeping and reporting obligations, Berg will conduct its underwriting and dealing activities fiduciary standards, and other requirements of the Secu- in bank-ineligible securities subject to the 10-percent rities Exchange Act of 1934 and the SEC. revenue test.8 The Board previously has determined by regulation that the proposed securities brokerage and investment Private Placement and "Riskless Principal" Activities advisory services are closely related to banking.4 Notificant has committed that Alfred Berg will engage in the Private placement involves the placement of new issues proposed activities in accordance with Board regulations of securities with a limited number of sophisticated and orders.5 purchasers in a nonpublic offering. A financial intermediary in a private placement transaction acts solely as an Underwriting and Dealing in Bank-Ineligible agent of the issuer in soliciting purchasers, and does not Securities purchase the securities and attempt to resell them. Securities that are privately placed are not subject to the The Board has determined that, subject to the prudential registration requirements of the Securities Act of 1933, framework of limitations established in previous deci- and are offered only to financially sophisticated institusions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects ("section 20 firewalls"), the proposed activities of un- Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, denied, 486 U.S. 1059 derwriting and dealing in bank-ineligible securities are (1988) (collectively, "Section 20 Orders"). so closely related to banking as to be a proper incident 7. See Section 20 Orders. Compliance with the 10-percent revethereto within the meaning of section 4(c)(8) of the BHC nue limitation shall be calculated in accordance with the method Act.6 Notificant has committed that Alfred Berg will stated in the Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); the Order Approving Modifications to the Section 20 Orders, 79 Federal Reserve Bulletin 226 (1993); and the 3. Asset data are as of December 31, 1994, and use exchange Supplement to Order Approving Modifications to Section 20 Orrates then in effect. ders, 79 Federal Reserve Bulletin 360 (1993) (collectively, "Modi- 4. See 12 C.F.R. 225.25(b)(4) and (15). fication Orders"). In light of the fact that Notificant acquired a 5. To address potential conflicts of interests arising from Alfred going concern, the Board believes that allowing Alfred Berg to Berg's conduct of full-service securities brokerage activities to- calculate compliance with the revenue limitation on an annualized gether with underwriting and dealing in bank-ineligible securities, basis during the first year after consummation of the acquisition Notificant has committed that Alfred Berg will inform its custom- and thereafter on a rolling quarterly basis would be consistent with ers at the commencement of the relationship that, as a general the Section 20 Orders. See Dauphin Deposit Corporation, 11 matter, Alfred Berg may be a principal or may be engaged in Federal Reserve Bulletin 672 (1991). Notificant consummated the underwriting with respect to, or may purchase from an affiliate, acquisition of Holding AB and Alfred Berg on April 12, 1995. See those securities for which brokerage and advisory services are 4(c)(9) Letter. The Board notes that Notificant has not adopted the provided. In addition, at the time any brokerage order is taken, the Board's alternative indexed-revenue test to measure compliance customer will be informed (usually orally) whether Alfred Berg is with the 10-percent limitation on bank-ineligible securities activiacting as agent or principal with respect to a security. Confirma- ties, and, absent such election, will continue to employ the Board's tions sent to customers also will state whether Alfred Berg is acting original 10-percent revenue test. as agent or principal. See PNC Financial Corp., 75 Federal Re- 8. The Board also notes that Alfred Berg may engage in activities serve Bulletin 396 (1989). that are necessary incidents to the proposed underwriting and 6. See Canadian Imperial Bank of Commerce, et at., 76 Federal dealing activities, provided they are treated as part of the bank- Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, ineligible securities activities, unless Alfred Berg has received et at., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. specific approval under section 4(c)(8) of the BHC Act to conduct Securities Industries Ass'n v. Board of Governors of the Federal the activities independently. Until such approval is obtained, any Reserve System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., revenues from the incidental activities must be counted as ineligi- 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities ble revenues subject to the 10-percent revenue limitation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1136 Federal Reserve Bulletin • December 1995 tions and individuals and not to the public. Alfred Berg the comprehensive framework of restrictions imposed by will not privately place registered securities and will the Board in connection with underwriting and dealing only place securities with customers that qualify as ac- in securities, which were designed to avoid potential credited investors. conflicts of interests, unsound banking practices, and "Riskless principal" is the term used in the securities other adverse effects.13 business to refer to a transaction in which a brokerdealer, after receiving an order to buy (or sell) a security Financial Factors, Managerial Resources, and Other from a customer, purchases (or sells) the security for its Considerations own account to offset a contemporaneous sale to (or purchase from) the customer.9 Riskless principal transac- In evaluating a notice under section 4(c)(8) of the BHC tions are understood in the industry to include only Act, the Board considers the financial and managerial transactions in the secondary market. Thus, Alfred Berg resources of the notificant and its subsidiaries and the would not act as a riskless principal in selling securities effect the transaction would have on such resources.14 at the order of a customer that is the issuer of the The Board has reviewed the capitalization of Notificant securities to be sold, or in any transaction where Alfred and Alfred Berg in accordance with the standards set Berg has a contractual agreement to place the securities forth in the Section 20 Orders, and finds the capitalizaas agent of the issuer. Alfred Berg also would not act as tion of each to be consistent with approval.15 With a riskless principal in any transaction involving a secu- respect to Alfred Berg, this determination is based on all rity for which it makes a market. the facts of record, including Notificant's projections of The Board has determined by order that, subject to the volume of Alfred Berg's underwriting and dealing prudential limitations that address the potential for con- activities in bank-ineligible securities. On the basis of all flicts of interests, unsound banking practices, or other the facts of record, including the foregoing, and, with adverse effects, the proposed private placement and risk- respect to Notificant's proposal to underwrite and deal in less principal activities are so closely related to banking bank-ineligible securities, subject to the completion of a as to be a proper incident thereto within the meaning of satisfactory review of the operational and managerial section 4(c)(8) of the BHC Act.10 The Board also has determined that acting as agent in the private placement of securities, and purchasing and selling securities on the order of investors as a riskless principal, do not constitute underwriting and dealing in by Notificant or any of its affiliates. With regard to private placement activities, Notificant has committed that Alfred Berg will not securities for purposes of section 20 of the Glassprivately place registered investment company securities or securi- Steagall Act, and that revenue derived from these activities of investment companies that are advised by Notificant or any ties is not subject to the 10-percent revenue limitation on of its affiliates. bank-ineligible securities underwriting and dealing.11 13. In previous orders approving riskless principal activities, the Notificant has committed that Alfred Berg will con- Board has relied on commitments by bank holding companies to refrain from entering quotes for specific securities in the NASDAQ duct its private placement and riskless principal activior any other dealer quotation system in connection with riskless ties using the same methods and procedures, and subject principal transactions. Bankers Trust at 832. Notificant proposes to the same prudential limitations as those established by that Alfred Berg, in acting as a riskless principal, be permitted to the Board in Bankers Trust and J.P. Morgan,12 including enter bid or ask quotations, or publish "offering wanted" or "bid wanted" notices, on trading systems other than an exchange or the NASDAQ. In order to ensure that Alfred Berg would not hold itself out as a 9. See Securities and Exchange Commission Rule 10b-10. market maker with respect to securities for which it acted as 17 C.F.R. 240.10b-10(a)(8)(i). riskless principal, Notificant has committed that Alfred Berg will 10. See J.P. Morgan & Alfred Berg Incorporated, 76 Federal not enter price quotations on different sides of the market for a Reserve Bulletin 26 (1990) ("J.P. Morgan")-, Bankers Trust New particular security during the same two business day period. In York Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bank- other words, Alfred Berg would not enter an "ask" quote for two ers Trust"). business days after entering a "bid" quote with respect to the same 11. See Bankers Trust at 831-833. security, and vice versa. The Board previously has determined that 12. Among the prudential limitations detailed more fully in these activities are permissible and do not constitute underwriting Bankers Trust and J.P. Morgan are that Alfred Berg will maintain and dealing in securities for purposes of the Glass-Steagall Act. specific records that will clearly identify all riskless principal See BankAmerica Corporation, 79 Federal Reserve Bulletin 1163, transactions, and that Alfred Berg will not engage in any riskless 1165 n. 10 (1993); Dauphin Deposit Corporation, 11 Federal principal transactions for any securities carried in its inventory. Reserve Bulletin 672 (1991). When acting as a riskless principal, Alfred Berg will not hold itself 14. See 12 C.F.R. 225.24. out as making a market in the securities that it buys and sells as a 15. The Board notes that Notificant's capital ratios satisfy appliriskless principal. Moreover, Alfred Berg will not act as riskless cable risk-based standards under the Basle Accord, and are considprincipal for registered investment company securities or with ered equivalent to the capital levels that would be required of a U.S. respect to any securities of investment companies that are advised banking organization. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1137 infrastructure of Notificant and Alfred Berg, the Board controls, and the necessary operational and managerial has concluded that financial and managerial consider- infrastructure. ations are consistent with approval of this notice. The Board's determination is also subject to all the In order to approve this notice, the Board also must terms and conditions set forth in Regulation Y, including determine that the performance of the proposed activities those in sections 225.7 and 225.23(g), and to the Board's by Notificant can reasonably be expected to produce authority to require modification or termination of the public benefits that would outweigh possible adverse activities of a bank holding company or any of its effects under the proper incident to banking standard of subsidiaries as the Board finds necessary to assure comsection 4(c)(8) of the BHC Act. Under the framework pliance with, and to prevent evasion of, the provisions of established in this and prior decisions, consummation of the BHC Act and the Board's regulations and orders this proposal is not likely to result in significantly ad- issued thereunder. The Board's decision is specifically verse effects, such as undue concentration of resources, conditioned on compliance with all the commitments decreased or unfair competition, conflicts of interests, or made in connection with this notice, including the comunsound banking practices. The Board expects that con- mitments discussed in this order and the conditions set summation of the proposal would provide added conve- forth in the above-noted Board regulations and orders. nience to Notificant's customers and would increase the These commitments and conditions shall be deemed to level of competition among existing providers of these be conditions imposed in writing by the Board in conservices. Accordingly, the Board has determined that the nection with its findings and decisions, and may be performance of the proposed activities by Notificant can enforced in proceedings under applicable law. reasonably be expected to produce public benefits that This transaction shall not be consummated later than outweigh possible adverse effects under the proper inci- three months after the effective date of this order unless dent to banking standard of section 4(c)(8) of the BHC such period is extended for good cause by the Board or Act. by the Federal Reserve Bank of Chicago, acting pursuant Accordingly, and for the reasons set forth in this order to delegated authority. and in the Section 20 Orders, the Board has concluded By order of the Board of Governors, effective that Notificant's proposal to engage through Alfred Berg October 30, 1995. in the proposed activities is consistent with the Glass- Steagall Act, and that the proposed activities are so Voting for this action: Chairman Greenspan, Vice Chairman closely related to banking as to be proper incidents Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. thereto within the meaning of section 4(c)(8) of the BHC JENNIFER J. JOHNSON Act, provided that Notificant limits Alfred Berg's activi- Deputy Secretary of the Board ties as specified in this order and the Section 20 Orders, as modified by the Modification Orders. SunTrust Banks, Inc. On the basis of the record, the Board has determined Atlanta, Georgia to, and hereby does, approve this notice subject to all the terms and conditions discussed in this order and in the Order Approving a Notice to Engage in Certain Section 20 Orders as modified by the Modification Or- Securities, Leasing and Interest Rate and Currency ders. The Board's approval of this proposal extends only Swaps Activities to activities conducted within the limitations of those orders and this order, including the Board's reservation SunTrust Banks, Inc., Atlanta, Georgia ("SunTrust"), a of authority to establish additional limitations to ensure bank holding company within the meaning of the Bank that Alfred Berg's activities are consistent with safety Holding Company Act ("BHC Act"), has provided noand soundness, conflicts of interests, and other relevant tice under section 4(c)(8) of the BHC Act considerations under the BHC Act. Underwriting and (12 U.S.C. § 1843(c)(8)) and section 225.23 of the dealing in any manner other than as approved in this Board's Regulation Y (12 C.F.R. 225.23) of its proposal order and the Section 20 Orders (as modified by the to expand the activities of its section 20 subsidiary, Modification Orders) is not authorized for Alfred Berg. SunTrust Capital Markets, Inc., Atlanta, Georgia The Board's approval of Notificant's proposal to un- ("Company"), to include underwriting and dealing in derwrite and deal in all types of debt and equity securicertain unrated municipal revenue bonds,1 leasing perties is conditioned on a future determination by the Board that Notificant and Alfred Berg have established policies and procedures to ensure compliance with the section 20 firewalls and the other requirements of this 1. SunTrust is requesting a modification of a commitment to which Company is currently subject. The modification would allow order and the Section 20 Orders, including computer, Company to underwrite and deal in unrated municipal revenue audit, and accounting systems, internal risk management bonds. No single issue of unrated municipal revenue bonds under- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1138 Federal Reserve Bulletin • December 1995 sonal or real property and certain higher residual value Under section 4(c)(8) of the BHC Act, the Board leasing, and acting as broker, agent, or advisor to institu- considers the financial and managerial resources of the tional customers with respect to interest rate and cur- notificant and its subsidiaries and the effect of the transrency swap transactions and related swap derivative action upon such resources.7 On the basis of all the facts products.2 of record, the Board has concluded that financial and Notice of the proposal, affording interested persons an managerial considerations are consistent with approval opportunity to submit comments, has been published of this notice. (60 Federal Register 44,892 (1995)). The time for filing In order to approve this notice, the Board also must comments has expired, and the Board has considered the determine that the performance of the proposed activities notice and all comments received in light of the factors by SunTrust can reasonably be expected to produce set forth in section 4(c)(8) of the BHC Act. public benefits that outweigh possible adverse effects, SunTrust, with total consolidated assets of $44.2 bil- such as undue concentration of resources, decreased or lion, operates subsidiary banks in four states.3 Company unfair competition, conflicts of interests, or unsound currently is engaged in limited bank-ineligible securi- banking practices. Under the framework and conditions ties4 underwriting and dealing activities that are permis- established in this and prior decisions, consummation of sible under section 20 of the Glass-Steagall Act this proposal is not likely to result in any significant (12 U.S.C. § 377). Company is, and will continue to be, adverse effects, such as undue concentration of rea broker-dealer registered with the Securities and Ex- sources, decreased or unfair competition, conflicts of change Commission ("SEC") under the Securities Ex- interests, or unsound banking practices. The Board exchange Act of 1934 (12 U.S.C. § 78a et seq.) and is a pects that consummation of the proposal would provide member of the National Association of Securities Deal- added convenience to SunTrust's customers and would ers, Inc. ("NASD"). Accordingly, Company is subject to increase the level of competition among existing providthe record-keeping and reporting obligations, fiduciary ers of these services. Accordingly, the Board has deterstandards, and other requirements of the Securities Ex- mined that the performance of the proposed activities by change Act of 1934, the SEC, and the NASD. SunTrust can reasonably be expected to produce public In order to approve a proposal under section 4(c)(8) of benefits that outweigh possible adverse effects under the the BHC Act, the Board is required to determine that the proper incident to banking standard of section 4(c)(8) of proposed activity is "so closely related to banking or the BHC Act. Accordingly, the Board has concluded that managing or controlling banks as to be a proper incident the proposed activities are so closely related to banking thereto."5 The Board previously has determined by order as to be proper incidents thereto within the meaning of or regulation that the proposed activities are closely section 4(c)(8) of the BHC Act. related to banking within the meaning of section 4(c)(8). Based on the foregoing and all the facts of record, the SunTrust has committed that Company will conduct the Board has determined to, and hereby does, approve this proposed activities in accordance with the limitations notice subject to all the terms and conditions set forth in and conditions relied on by the Board in its prior orders this order, and in the above-noted Board regulations and and in Regulation Y.6 orders that relate to these activities. The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in secwritten by Company would exceed $7.5 million. In addition, Sun- tions 225.7 and 225.23(b), and to the Board's authority Trust has committed that Company will not underwrite any unrated to require modification or termination of the activities of municipal revenue bonds until SunTrust conducts an independent credit review, using policies and procedures approved by the Federal Reserve, and determines that the securities are of investmentgrade quality. rated municipal revenue bonds; 12 C.F.R. 225.25(b)(5) (leasing); 2. As used herein, the term "swap derivative products" means Saban, S.A., RNYC Holdings Limited, Republic New York Corporacaps, floors, collars, and options on swaps, caps, floors, and collars. tion, 80 Federal Reserve Bulletin 249 (1994); The Sanwa Bank, SunTrust will not act as a principal or originator with respect to Limited, 77 Federal Reserve Bulletin 64 (1991); C&S/Sovran Corswaps or swaps derivative products, but will act solely as agent or poration, 76 Federal Reserve Bulletin 857 (1990) (acting broker, broker. agent, or advisor to institutional customers with respect to interest 3. Asset data are as of June 30, 1995. rate and currency swap transactions and related swap derivative 4. Company has authority to underwrite and deal in, to a limited products). SunTrust has indicated that it expects that an affiliate of extent, certain municipal revenue bonds, 1-^t family mortgage- Company would act as counterparty principal for transactions on related securities, commercial paper, and consumer-receivable- which Company would provide advice. In these situations, Comrelated securities. See SunTrust Banks, Inc., 80 Federal Reserve pany would be acting as the agent of its affiliate. In order to address Bulletin 938 (1994). Company also is authorized to engage in a potential conflicts of interest that may arise, SunTrust has commitvariety of other nonbanking activities. ted that Company will disclose to each customer that an affiliate of 5. 12 U.S.C. § 1843(c)(8). Company will be the counterparty to the customer with respect to 6. See Letter Interpreting Section 20 Orders, 81 Federal Reserve the transaction which is the subject of the advice. Bulletin 198 (1995) (authorizing underwriting and dealing in un- 7. See 12 C.F.R. 225.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1139 a bank holding company or any of its subsidiaries as the shares of First Fidelity Bancorporation ("First Fideli- Board finds necessary to assure compliance with, and to ty"), when First Union acquires First Fidelity.2 prevent evasion of, the provisions of the BHC Act and Notice of this proposal, affording interested persons an the Board's regulations and orders issued thereunder. opportunity to submit comments, has been published The Board's decision is specifically conditioned on com- (60 Federal Register 44,032 (1995)). The time for filing pliance with all the commitments made in connection comments has expired, and the Board has considered with this notice, including the commitments discussed in this proposal and all comments received in light of the this order and the conditions set forth in the above-noted factors set forth in sections 3 and 4 of the BHC Act. Board regulations and orders. For purposes of this ac- Santander, with total consolidated assets equivalent to tion, these commitments and conditions shall be deemed approximately $129 billion, is the largest banking orgato be conditions imposed in writing by the Board in nization in Spain.3 In the United States, Santander has a connection with its findings and decisions, and may be controlling interest in First Fidelity; controls a subsidiary enforced in proceedings under applicable law. bank in Puerto Rico; operates a branch in New York, This transaction shall not be consummated later than New York; controls a finance company in Wilmington, three months after the effective date of this order unless Delaware; and operates an agency and an Edge Corporasuch period is extended for good cause by the Board or tion in Miami, Florida. In addition, Santander engages by the Federal Reserve Bank of Atlanta, acting pursuant directly and through subsidiaries in permissible nonto delegated authority. banking activities in the United States and abroad. By order of the Board of Governors, effective First Union, with consolidated assets of approximately October 16, 1995. $83.1 billion, is the ninth largest commercial banking organization in the United States. First Union operates Voting for this action: Chairman Greenspan, Vice Chairman subsidiary banks in North Carolina, Florida, Georgia, Blinder, and Governors Kelley, Phillips, and Yellen. Absent and Tennessee, Maryland, Virginia, South Carolina, and the not voting: Governor Lindsey. District of Columbia. First Union also engages directly and through subsidiaries in various nonbanking activities JENNIFER J. JOHNSON under section 4 of the BHC Act.4 Deputy Secretary of the Board The Board has carefully considered comments from Inner City Press/Community on the Move ("Protes- Orders Issued Under Sections 3 and 4 of the tant") alleging that Santander's proposed ownership in- Bank Holding Company Act terest in First Union, when considered in light of certain proposed relationships between Santander and First Banco Santander, S.A., Union, would result in Santander's exercising a control- Madrid, Spain, ling influence over First Union. In particular, Protestant believes that Santander's representation on First Union's Order Approving the Acquisition of Shares of a Bank board of directors and the existence of certain business Holding Company relationships between Santander and First Union warrant a finding that Santander would control First Union for Banco Santander, S.A., Madrid, Spain, a foreign bank purposes of the BHC Act. subject to the Bank Holding Company Act ("BHC After consummation of this proposal, Santander would Act"), and its wholly owned subsidiary, FFB Participaown approximately 12 percent of the voting shares of ?oes e Servi90s, S.A., Funchal, Portugal (together, "San- First Union. Accordingly, under the terms of the BHC tander"), have applied under sections 3 and 4 of the Act, Santander would not control First Union for pur- BHC Act (12 U.S.C. §§ 1842 and 1843) and secposes of the BHC Act unless the Board has made a tions 225.14, 225.21(a) and 225.23(a) of the Board's determination of control after providing Santander an Regulation Y (12 C.F.R. 225.14, 225.21(a), and opportunity for a hearing on the matter. 225.23(a)), to acquire approximately 12 percent of the outstanding voting shares of First Union Corporation, Charlotte, North Carolina ("First Union").1 Santander 2. See First Union Corporation, 81 Federal Reserve Bulletin would receive these shares from First Union in exchange 1143 (1995) ("First Union!First Fidelity Order"). for Santander's 28.8 percent of the outstanding voting 3. Asset data are as of June 30, 1995. 4. 12 U.S.C. § 1843. In particular, First Union engages in permissible securities and securities-related activities, community development activities, and acts as a futures commission merchant in executing and clearing futures contracts on certain commodity exchanges. First Union also operates an export trading company 1. A list of the bank and nonbank subsidiaries of First Union is pursuant to section 4(c)(14) of the BHC Act (12 U.S.C. attached as Appendix A. § 1843(c)(14)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1140 Federal Reserve Bulletin • December 1995 Protestant has not provided any evidence to support a Competitive Considerations finding that Santander would exercise a controlling influence over the management or policies of First Union. The Board previously has indicated that the acquisition Moreover, Santander has made a number of commit- of less than a controlling interest in a bank or bank ments to the Board to maintain its investment in First holding company is not a normal acquisition for a bank Union as a passive investment.5 In particular, Santander holding company.9 However, the requirement in section will have discretion to exercise only 9.9 percent of the 3(a)(3) of the BHC Act that the Board's approval be voting shares of First Union.6 Santander also has com- obtained before a bank holding company acquires more mitted not to exercise a controlling influence over the than 5 percent of the voting shares of a bank suggests management or policies of First Union or any of its that Congress contemplated the acquisition of between subsidiaries; not to attempt to influence the loan and 5 and 25 percent of the voting shares of a bank or a bank credit decisions or policies, the pricing of services, any holding company.10 Moreover, nothing in section 3(c) of personnel decision, the location of any offices, branch- the BHC Act requires denial of an application solely ing, the hours of operation or similar activities of First because a bank holding company proposes to acquire Union or any of its subsidiaries; not to solicit or partici- less than a controlling interest in a bank or a bank pate in soliciting proxies with respect to any matter holding company. On this basis, the Board previously presented to the shareholders of First Union or any of its has approved the acquisition by a bank holding company subsidiaries; not to have or seek to have any employee or of less than a controlling interest in a bank or bank representative serve as an officer, agent or employee holding company.11 with management responsibility at First Union or any of The question of whether acquisition of a minority its subsidiaries;7 and not to dispose or threaten to dispose interest in a competing bank or bank holding company of shares of First Union or any or its subsidiaries in any would result in a substantial lessening of competition manner as a condition of specific action or nonaction by must be answered in light of the specific facts of record First Union or any of its subsidiaries. of each case.12 The Board continues to believe that Based on all the facts of record, including the size of noncontrolling interests in directly competing banks or Santander and First Union, the independence of the bank holding companies may raise serious questions institutions and the historical relationships between under the BHC Act. The Board previously has noted that them, and the commitments made by Santander to main- one company need not acquire control of another comtain its investment as a passive investment and not to pany in order to substantially lessen competition beexercise a controlling influence over First Union, the tween them.13 It is possible, for example, that the acqui- Board concludes that the structure of the proposed rela- sition of a substantial ownership interest in a competitor tionship between Santander and First Union does not or a potential competitor of the acquiring firm may alter support a finding at this time that Santander would the market behavior of both firms in such a way as to control First Union for purposes of the BHC Act or the weaken or eliminate independence of action between the Board's rules.8 organizations and increase the likelihood of cooperative operations.14 Based on a careful analysis of all the facts of record, it 5. These commitments are set forth in Appendix B. is the Board's judgment that in this case no significant 6. All shares of First Union owned by Santander in excess of 9.9 reduction in competition is likely to result from the percent will be voted in proportion to shares held by parties not affiliated with First Union. 7. Certain employees of Santander may serve as nonmanagement officers, agents or employees of First Union and its Based on all the facts of record, the Board does not believe that subsidiaries as part of a training or information exchange program, these comments warrant denial of these applications. so long as: 9. See, e.g., North Fork Bancorporation, Inc., 81 Federal Re- (i) No such employee serves in such capacity for a term of more serve Bulletin 734 (1995) ("North Fork")-, State Street Boston than 24 months; and Corporation, 67 Federal Reserve Bulletin 82 (1981). (ii) No more than three such employees serve in such capacity at 10. 12 U.S.C. § 1842(a)(3); 12 C.F.R. 225.11(c). the same time without further Federal Reserve System approval. 11. See, e.g., North Fork (acquisition of 19.9 percent of the 8. Protestant also alleges that the acquisition of First Fidelity by voting shares of a bank holding company); Mansura Bancshares, First Union and the resulting investment by Santander in First Inc., 79 Federal Reserve Bulletin 37 (1993) (acquisition Union would remove decision making and accountability for the of 9.7 percent of the voting shares of a bank holding company) former First Fidelity franchise out of the region currently served by ("Mansura"); and SunTrust Banks, Inc., 76 Federal Reserve Bulle- First Fidelity. As noted above, Santander would not control First tin 542 (1990) ("SunTrust") (acquisition of up to 24.99 percent of Union for purposes of the BHC Act and Santander has specifically the voting shares of a bank). committed not to influence the daily operations of First Union or its 12. See, e.g., Mansura', and SunTrust. subsidiary banks. As discussed in the First Union/First Fidelity 13. See The Summit Bancorporation, 75 Federal Reserve Bulle- Order, each First Union subsidiary bank locally develops a strate- tin 712 (1989). gic plan to take into account the unique needs of its community. 14. See Mansura at 38. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1141 proposed acquisition. Upon consummation of the acqui- Convenience and Needs Considerations sition of First Fidelity by First Union, Santander and First Union would continue to compete directly in the The Community Reinvestment Act (12 U.S.C. § 2901 Metropolitan New York-New Jersey banking market et seq.) ("CRA") requires the Board to take into account ("New York banking market").15 Assuming a combina- the record of an institution in assisting to meet the credit tion of Santander and First Union, the combined organi- needs of its entire community, including low- and zation would control deposits of $18.3 billion, represent- moderate-income neighborhoods, consistent with the ing 5.3 percent of total deposits in banking or thrift safe and sound operation of such institution, in the organizations ("depository institutions") in the market acquisition of shares requiring approval under section 3 ("market deposits").16 The Herfindahl-Hirschman In- of the BHC Act. The Board notes that Santander's dex ("HHI")17 would increase by seven points to 536.18 subsidiary bank, Banco Santander Puerto Rico, Hato In light of all the facts of record, including the number of Rey, Puerto Rico ("BSPR"), received a "satisfactory" competitors that would remain in this market, and the rating for CRA performance at its most recent examinamodest increase in the concentration of market deposits tion by its primary federal supervisor, the Federal Deas measured by the HHI, the Board concludes that con- posit Insurance Corporation, as of September 1993. The summation of this proposal would not result in any New York branch of BSPR ("Branch") also received a significantly adverse effect on competition or the concen- "satisfactory" rating for CRA performance from its tration of banking resources in the New York banking primary supervisor, the New York State Banking Departmarket or any other relevant banking market. Accord- ment ("Department") in December 1994.19 Based on all ingly, the Board concludes that competitive consider- the facts of record, including the nature of Santander's ations are consistent with approval of this proposal. investment in First Union, relevant reports of examination on its record of performance under the CRA, and the performance record of First Union considered in the Board's order issued today and incorporated herein, the 15. The New York banking market includes New York City; Board concludes that convenience and needs consider- Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan and ations, including the CRA performance records of both Westchester Counties in New York; Bergen, Essex, Hudson, Hunt- Santander and First Union, are consistent with approval erdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in New of this proposal.20 Jersey; Pike County in Pennsylvania; and portions of Fairfield and Litchfield Counties in Connecticut. 16. In this context, depository institutions include commercial banks and savings associations. Market share data are as of June 19. Protestant maintains that the Department's examination 30, 1994, and are based on calculations in which the deposits of should be accorded little weight because Branch was not examined thrift institutions are included at 50 percent. The Board previously on-site by Department examiners. The Board notes that an on-site has indicated that thrift institutions have become, or have the examination is not required by the CRA. Moreover, the Board potential to become, major competitors of commercial banks. See believes that the Department's analysis of the relevant CRA assess- Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); ment factors in its examination, in light of Branch's size and the National City Corporation, 70 Federal Reserve Bulletin 743 scope of its activities, is sufficient. Branch, with total assets of (1984). Thus, the Board regularly has included thrift deposits in the approximately $83 million and no retail banking operations, encalculation of market share on a 50-percent weighted basis. See, gages in CRA-related lending activities by making community e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). development housing and small business loans. 17. Under the revised Department of Justice Merger Guidelines, 20. See First Union/First Fidelity Order. Protestant has requested 49 Federal Register 26,823 (June 29, 1984), a market in which the that a public hearing or meeting be held on the proposed acquisition post-merger HHI is below 1000 is considered to be unconcentrated. of First Fidelity by First Union, as well as the investment by The Department of Justice has informed the Board that a bank Santander in First Union. Section 3(b) of the BHC Act does not merger or acquisition generally will not be challenged (in the require the Board to hold a public hearing on an application unless absence of other factors indicating anticompetitive effects) unless the appropriate supervisory authority for the bank to be acquired the post-merger HHI is at least 1800 and the merger increases the makes a timely written recommendation of denial of the applica- HHI by more than 200 points. The Department of Justice has stated tion. In this case, neither the Office of the Comptroller of the that the higher than normal HHI thresholds for screening bank Currency nor any of the appropriate State supervisory authorities mergers for anticompetitive effects implicitly recognize the compet- have recommended that this proposal be denied. itive effects of limited-purpose lenders and other non-depository Generally, under the Board's Rules of Procedure, the Board may, financial entities. in its discretion, hold a public hearing or meeting on an application 18. If market deposits of Santander and First Union are not to clarify factual issues related to the application and to provide an combined,First Union would enter the New York banking market, opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and following its acquisition of First Fidelity, as the sixth largest 262.25(d). The Board has carefully considered this request. In the depository institution in the market, controlling deposits of Board's view, Protestant has had an ample opportunity to and has $15.8 billion, representing 4.6 percent of market deposits. San- presented substantial written submissions. Protestant has not identitander would be the 22d largest depository institution in the New fied facts that are material to the Board's decision and that are in York banking market, controlling deposits of $2.6 billion, repre- dispute, what substantial evidence it would produce at a public senting less than 1 percent of market deposits. meeting or hearing, and why its written submissions do not ade- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1142 Federal Reserve Bulletin • December 1995 Other Considerations mined that these applications should be, and hereby are, approved.24 The Board's approval is specifically condi- The Board previously has determined that Santander is tioned on compliance by Santander with all commitsubject to comprehensive supervision or regulation on a ments made in connection with these applications, as consolidated basis by its home country supervisor.21 The well as the conditions discussed in this order. Board also concludes that the financial and managerial The Board's determination also is subject to all the resources and future prospects of Santander and First terms and conditions set forth in Regulation Y, including Union, and their respective subsidiaries, and other super- those in sections 225.7 and 225.23(b) of Regulation Y visory factors the Board must consider under section 3 (12 C.F.R. 225.7 and 225.23(b)), and to the Board's of the BHC Act are consistent with approval of this authority to require such modification or termination of proposal.22 the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure com- Nonbanking Activities pliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders Santander also has provided notice under section 4(c)(8) issued thereunder. The commitments and conditions reof the BHC Act of its proposal to acquire shares of First lied on by the Board in reaching this decision are deemed Union. In light of all the facts of record, including the to be conditions imposed in writing by the Board in percentage of shares of First Union proposed to be connection with its findings and decision, and, as such, acquired in this transaction, the Board concludes that may be enforced in proceedings under applicable law. Santander's investment in voting shares of First Union The acquisition of shares of First Union's voting stock would not significantly affect competition in any rele- shall not be consummated before the fifteenth day folvant market. Furthermore, there is no evidence in the lowing the effective date of this order, and not later than record to indicate that consummation of this proposal is three months following the effective date of this order, likely to result in any significantly adverse effects, such unless such period is extended for good cause by the as undue concentration of resources, decreased or unfair Board or by the Federal Reserve Bank of New York, competition, conflicts of interests, or unsound banking acting pursuant to delegated authority. practices that are not outweighed by benefits to the By order of the Board of Governors, effective public. Accordingly, the Board has determined that the October 26, 1995. balance of public interest factors it must consider under section 4(c)(8) of the BHC Act is favorable and consis- Voting for this action: Chairman Greenspan, Vice Chairman tent with approval of this proposal.23 Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. Conclusion JENNIFER J. JOHNSON Deputy Secretary of the Board Based on the foregoing, and in light of all the facts of Appendix A record, including commitments made by Santander in connection with these applications, the Board has deter- Subsidiary Banks First Union National Bank of Florida, Jacksonville, quately present its allegations. Based on all the facts of record, the Florida; Board has determined that a public meeting or hearing is not First Union National Bank of North Carolina, Charlotte, necessary to clarify the factual record in this proposal, or otherwise warranted in this case and the request for a public meeting or North Carolina; hearing on this proposal is denied. First Union National Bank of Georgia, Atlanta, Georgia; 21. See First Fidelity Bancorporation and Banco Santander, S.A., First Union National Bank of Tennessee, Nashville, 79 Federal Reserve Bulletin 622 (1993). The Board also deter- Tennessee; mined that Santander has provided adequate assurances of access to First Union National Bank of Maryland, Rockville, information necessary to determine compliance with U.S. law. 22. The Board also has determined that the proposal is consistent Maryland; with the statutes of North Carolina, Rhode Island, and New York. First Union National Bank of Virginia, Roanoke, 23. First Union controls three companies engaged in certain real Virginia; estate development and insurance activities pursuant to a grandfather provision in section 4(a)(2) of the BHC Act (12 U.S.C. § 1843(a)(2)). See First Union Corporation, 67 Federal Reserve Bulletin 63 (1980). The Board has determined that First Union may retain its interest in these companies under section 24. For the reasons discussed in the First Union/First Fidelity 4(a)(2) after the acquisition by Santander of less than a controlling Order, the Board does not believe that a delay in acting on this interest in First Union. application, as requested by Protestant, is warranted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1143 First Union National Bank of Washington, D.C., officers, directors and affiliates to exceed the percentage Washington, D.C.; of the outstanding voting securities of First Union or any First Union National Bank of South Carolina, of its subsidiaries that they will own upon consumma- Greenville, South Carolina; and tion of the merger; First Union Home Equity Bank, National Association, (f) Exercise voting rights with respect to that portion of Charlotte, North Carolina. the voting securities of First Union at any time owned by Santander or any of its subsidiaries which exceeds 9.9 Nonbanking Subsidiaries percent of the outstanding voting securities of First Union at such time, other than to vote such shares for First Union Capital Markets Corporation, Charlotte, and against any proposition in the same proportions as North Carolina; the voting securities of First Union held by security First Union Community Development Corporation, holders not affiliated with First Union have been voted; Charlotte, North Carolina; (g) Propose a director or slate of directors in opposition First Union Development Corporation, Charlotte, North to a nominee or slate of nominees proposed by the Carolina; management or board of directors of First Union or any First Union Export Trading Company, Charlotte, North of its subsidiaries; Carolina; (h) Attempt to influence the dividend policies or prac- First Union Futures Corporation, Charlotte, North Caro- tices of First Union or any of its subsidiaries; lina; (i) Solicit or participate in soliciting proxies with respect First Union Mortgage Corporation, Charlotte, North to any matter presented to the shareholders of First Carolina; and Union or any of its subsidiaries; General Financial Life Insurance Company, Charlotte, (j) Attempt to influence the loan and credit decisions or North Carolina. policies, the pricing of services, any personnel decision, the location of any offices, branching, the hours of oper- Appendix B ation or similar activities of First Union or any of its subsidiaries; As part of this proposal, Santander has committed that (k) Dispose or threaten to dispose of shares of First it will not, without the Board's prior approval: Union or any or its subsidiaries in any manner as a condition of specific action or nonaction by First Union (a) Exercise or attempt to exercise a controlling influ- or any of its subsidiaries; or ence over the management or policies of First Union or (1) Enter into any banking or nonbanking transactions any of its subsidiaries; with First Union or any of its subsidiaries other than (b) Seek or accept representation on the board of direc- normal banking transactions and cooperative activities tors of First Union or any of its subsidiaries, except that that are in the ordinary course of business and on an it may have two representatives on the board of directors arm's-length basis.2 of First Union, one of whom shall be a senior executive officer of First Union; First Union Corporation (c) Have or seek to have any employee or representative Charlotte, North Carolina serve as an officer, agent or employee with management responsibility at First Union or any of its subsidiaries;1 Order Approving the Acquisition of a Bank Holding (d) Take any action causing First Union or any of its Company subsidiaries to become a subsidiary of Santander or any of its subsidiaries; First Union Corporation, Charlotte, North Carolina (e) Acquire or retain voting securities of First Union or ("First Union"), a bank holding company within the any of its subsidiaries that would cause the combined meaning of the Bank Holding Company Act ("BHC interests of Santander or any of its subsidiaries and its Act"), and First Union Corporation of New Jersey, Newark, New Jersey, have applied under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire all the voting shares of First Fidelity Bancorporation, Newark, New 1. Certain employees of Santander may serve as nonmanagement officers, agents or employees of First Union and its subsidiaries as part of a training or information exchange program, so long as: 2. These business relationships with First Union may include (i) No such employee serves in such capacity for a term of more correspondent banking relationships, participation in multilateral than 24 months; and clearing organizations, and training in areas such as operational and (ii) No more than three such employees serve in such capacity at computer systems and branch integration, but will not involve joint the same time without further Federal Reserve System approval. ventures or cross-marketing activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1144 Federal Reserve Bulletin • December 1995 Jersey, and Philadelphia, Pennsylvania ("First Fideli- acquire control of a bank located in a state other than the ty"), and thereby indirectly acquire its subsidiary banks, home state of such bank holding company, if certain First Fidelity Bank, N.A., Elkton, Maryland; First Fidel- conditions are met.4 These conditions are met in this ity Bank, Stamford, Connecticut; and First Fidelity case.5 In view of all the facts of record, the Board is Bank, Delaware, Wilmington, Delaware.1 permitted to approve this proposal under section 3(d) of First Union also has provided notice under section the BHC Act. 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. Competitive Considerations 225.23) of its proposal to acquire the nonbanking subsidiaries of First Fidelity set forth in the Appendix, and First Union and First Fidelity own depository institutions thereby engage nationwide in these permissible non- that compete directly in the Baltimore, Maryland, bankbanking activities. ing market ("Baltimore banking market"), and the Notice of the proposal, affording interested persons an Washington, D.C., banking market ("DC banking maropportunity to submit comments, has been published ket").6 First Union is the 20th largest banking or thrift (60 Federal Register 40,381 (1995)). The time for filing organization ("depository institution") in the Baltimore comments has expired and the Board has considered the banking market, controlling deposits of $85.5 million, applications and notices and all comments received in representing less than 1 percent of total deposits in light of the factors set forth in sections 3 and 4 of the depository institutions in the market ("market depos- BHC Act. its").7 First Fidelity is the third largest depository institu- First Union, with total consolidated assets of tion in the Baltimore banking market, controlling depos- $83.1 billion, operates subsidiary banks in Florida, North Carolina, Georgia, Tennessee, Maryland, Virginia, South Carolina, and the District of Columbia.2 First Union is 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding the ninth largest banking organization in the United company's home state is that state in which the operations of the States, controlling approximately 2.4 percent of total bank holding company's banking subsidiaries were principally banking assets in the United States. First Union also conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. For purposes engages in a number of permissible nonbanking activiof the BHC Act, the home state of First Union is North Carolina. ties nationwide. First Fidelity, with consolidated assets 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and of $35.4 billion, is the 27th largest banking organization (B). First Union is adequately capitalized and adequately managed. in the United States, controlling approximately 1.0 per- First Fidelity's banks have been in existence and continuously cent of total banking assets in the United States.3 operated for the minimum periods of time required under Connecticut and Delaware law. Maryland does not have a state age requirement. In addition, upon consummation of this proposal, First Union Interstate Analysis and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United Section 3(d) of the BHC Act, as amended by Sec- States and less than 30 percent, or the applicable state deposit cap, if any, of the total amount of deposits of insured depository tion 101 of the Riegle-Neal Interstate Banking and institutions in Maryland, Connecticut, Delaware, New Jersey, Penn- Branching Efficiency Act of 1994, allows the Board to sylvania, or New York. All other requirements of section 3(d) of approve an application by a bank holding company to the BHC Act also would be met upon consummation of this proposal. 6. The Baltimore banking market is approximated by the Baltimore Ranally Metro Area ("RMA") plus the remainder of Harford 1. First Union also would acquire First Fidelity's 24.4 percent County. The DC banking market is approximated by the Washinginterest in the voting stock of ExecuFirst Bancorp, Inc. ton, DC RMA plus the remainder of Loudoun County. While First ("ExecuFirst"), which is the parent corporation of First Executive Union and First Fidelity also currently compete in the Annapolis, Bank, both of Philadelphia, Pennsylvania. First Fidelity's invest- Maryland, banking market ("Annapolis banking market"), First ment in ExecuFirst is subject to certain commitments previously Union has entered into a binding agreement to sell its only branch relied on by the Board in cases involving passive investments of in this banking market. Accordingly, any potential anticompetitive less than 25 percent in a banking organization. These commitments effects of this proposal in the Annapolis banking market would be include a commitment not to exercise a controlling influence over eliminated by this divestiture. the management or policies of ExecuFirst; not to have any director, 7. Market data are as of June 30, 1994. Market share data are officer, or employee interlocks with ExecuFirst; and not to solicit or based on calculations in which the deposits of thrift institutions are participate in soliciting proxies with respect to any matter presented included at 50 percent. The Board previously has indicated that to the shareholders of ExecuFirst. First Union has committed that it thrift institutions have become, or have the potential to become, also would comply with all the commitments previously made by significant competitors of commercial banks. See Midwest Finan- First Fidelity to the Board in connection with First Fidelity's cial Group, 75 Federal Reserve Bulletin 386 (1989); National City acquisition of shares of ExecuFirst. Corporation, 70 Federal Reserve Bulletin 143 (1984). Thus, the 2. All asset data are as of June 30, 1995. Board has regularly included thrift deposits in the calculation of 3. Upon consummation of this proposal, First Union would market share on a 50-percent weighted basis. See, e.g., First become the nation's sixth largest banking organization. Hawaiian Inc., 11 Federal Reserve Bulletin 52 (1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1145 its of $2.6 billion, representing approximately Convenience and Needs Considerations 11.3 percent of market deposits. Upon consummation of this proposal, First Union would remain the third largest In acting on an application to acquire a depository instidepository institution in the Baltimore banking market, tution under the BHC Act, the Board must consider the controlling deposits of $2.7 billion, representing approx- convenience and needs of the communities to be served, imately 11.7 percent of market deposits. The Herfindahl- and take into account the records of the relevant deposi- Hirschman Index ("HHI") would increase by eight tory institutions under the Community Reinvestment Act points to 1130.8 (12 U.S.C § 2901 et seq.) ("CRA"). The CRA requires First Union is the third largest depository institution in the federal financial supervisory agencies to encourage the DC banking market, controlling deposits of financial institutions to help meet the credit needs of the $5.9 billion, representing approximately 13.4 percent of local communities in which they operate, consistent with market deposits. First Fidelity is the 14th largest deposi- their safe and sound operation. To accomplish this end, tory institution in the DC banking market, controlling the CRA requires the appropriate federal supervisory deposits of $453.3 million, representing approximately 1 authority to "assess the institution's record of meeting percent of market deposits. Upon consummation of this the credit needs of its entire community, including lowproposal, First Union would become the second largest and moderate-income neighborhoods, consistent with depository institution in the DC banking market, control- the safe and sound operation of such institution," and to ling deposits of $6.4 billion, representing approximately take that record into account in its evaluation of bank 14.4 percent of market deposits. The HHI would in- expansion proposals.10 crease by 27 points to 983. The Board has received comments supporting and The Board sought comments from the United States opposing this proposal. Commenters favoring the acqui- Attorney General, the Office of the Comptroller of the sition included the Urban League, Inc.; the Local Initia- Currency ("OCC"), and the Federal Deposit Insurance tives Support Corporation; the Nashville Minority Busi- Corporation ("FDIC") on the competitive effects of this ness Center; the Clarksville-Montgomery County proposal. The Attorney General has indicated that the (Tennessee) Regional Planning Commission; the Duval proposed transaction would not have a significantly ad- County (Florida) Housing Finance Authority; the City of verse effect on competition. The OCC and FDIC have Greenville, South Carolina; and the Northwest Corridor not objected to consummation of the proposal or indi- Community Development Corporation of Charlotte, cated that it would have any significantly adverse com- North Carolina. These commenters, who are primarily petitive effects in any relevant banking market. Based on involved in affordable housing initiatives, commended all the facts of record, including the number of competi- First Union's assistance in this area, which included tors that would remain in the Baltimore and DC banking start-up funds, direct loans, and lending programs for markets, and the relatively small increase in market minorities and low- and moderate-income individuals. concentration and market share in these markets, the First Union was also commended for providing leader- Board has concluded that consummation of this proposal ship by encouraging bank personnel with financial experwould not result in any significantly adverse effects on tise to assist in addressing housing-related and credit competition in the Baltimore or DC banking markets or needs of its entire community, including low- and any other relevant banking market.9 moderate-income neighborhoods. Other commenters ("Protestants") criticized the CRA performance records of First Union and First Fidelity in 8. Under the revised Department of Justice Merger Guidelines, helping to meet the credit needs of low- and moderate- 49 Federal Register 26,823 (June 29, 1984), a market in which the income neighborhoods and communities with predomipost-merger HHI is less than 1000 is considered unconcentrated. A nately minority populations. These Protestants include: market in which the post-merger HHI is between 1000 and 1800 is the Charlotte Organizing Project, Charlotte, North Caroconsidered moderately concentrated. The Justice Department has lina; Community Reinvestment Association of North informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anti- Carolina, Raleigh, North Carolina; Inner City Press/ competitive effects) unless the post-merger HHI is at least 1800 and Community on the Move, Bronx, New York; Commuthe merger increases the HHI by more than 200 points. The Justice nity Reinvestment Alliance, Philadelphia, Pennsylvania; Department has stated that the higher than normal threshold for an United Congregations of Chester County, Coatesville, increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effect of limited-purpose lenders and other non-depository financial entities. merge in order to compete with First Union, particularly in the 9. Some commenters have alleged that this proposal would result Mid-Atlantic region. For the reasons discussed in this order, and in significant anticompetitive effects by reducing competition based on all the facts of record, the Board concludes that these within the banking industry, which would cause increases in fees comments do not warrant denial of the proposal. for services, and encourage other large banking organizations to 10. 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1146 Federal Reserve Bulletin • December 1995 Pennsylvania; Regional Council of Neighborhood Orga- the Community Reinvestment Act ("Agency CRA Statenizations, Philadelphia, Pennsylvania; Neighborhood ment").16 Assistance Corporation of America, Boston, Massachusetts; and ACORN, Washington, D.C.11 Record of Performance Under the CRA On the basis of data filed under Home Mortgage Disclosure Act ("HMDA"),12 some Protestants main- A. CRA Performance Examinations tained that the subsidiary banks of both organizations illegally discriminate in their lending activities.13 In ad- The Agency CRA Statement provides that a CRA examdition, Protestants alleged that the level of performance ination is an important and often controlling factor in the by First Union and First Fidelity is deficient in ascertain- consideration of an institution's CRA record and that ment, marketing and outreach activities for their entire reports of these examinations will be given great weight communities, and in small business and housing-related in the applications process.17 The Board notes that First lending.14 Protestants also contended that the branch Union's lead bank subsidiary, First Union National Bank locations of First Union and First Fidelity do not serve of North Carolina, Charlotte, North Carolina ("FUNBthe credit needs of low- and moderate-income and mi- NC"), received an "outstanding" rating from its prinority customers, and that First Union's strategy of mary federal supervisor, the OCC, at its most recent branch closings after an acquisition disproportionately publicly available examination for CRA performance in impacts these customers.15 April 1994 ("1994 FUNB-NC Examination"). First The Board has carefully reviewed the CRA perfor- Union's remaining seven subsidiary banks received "satmance records of First Union, First Fidelity, and their isfactory" ratings from the OCC in the most recent respective subsidiary banks; all comments received; re- examinations of their CRA performance.18 First Fidelisponses to those comments by First Union and First Fidelity; and all other relevant facts of record in light of the CRA, the Board's regulations, and the Statement of 16. 54 Federal Register 13,742 (1989). Several Protestants conthe Federal Financial Supervisory Agencies Regarding tended that First Union and First Fidelity have been uncooperative in meeting with community-based organizations and unwilling to reach specific agreements with them. The Board has indicated in previous orders and in the Agency CRA Statement that communication by depository institutions with community groups provides a valuable method of assessing and determining how best to address 11. The Board also has received comments from individual the credit needs of the community. Neither the CRA nor the Protestants, including a number of identical comments submitted Agency CRA Statement, however, requires depository institutions after the close of the comment period. to enter into agreements with particular organizations. Accordingly, 12. 12 U.S.C. § 2801 etseq. the Board's review has focused on the programs and policies that 13. Protestants's allegations relate to several large Metropolitan First Union and First Fidelity have in place to assist in meeting the Statistical Areas ("MSAs") where First Union's subsidiary banks credit needs of their entire communities. See Fifth Third Bancorp, and First Union's subsidiary mortgage company, First Union Mort- 80 Federal Reserve Bulletin 838 (1994). gage Corporation, Charlotte, North Carolina ("First Union Mort- 17. Id. at 13,745. One Protestant maintained that First Union's gage") lend, including Tampa and Jacksonville, Florida; the Dis- most recent CRA performance examinations are out-of-date and trict of Columbia; Atlanta, Georgia; Baltimore, Maryland; and should not be a significant consideration in these applications. Each Charlotte. Several Protestants compared First Union's lending to of these examinations was completed within the past 18 months. that of its peers in North Carolina. Protestants also cite lending data The Board has considered these applications in light of all the facts from Pennsylvania, New Jersey, and Connecticut to support their of record, including the activities since these examinations were allegations regarding First Fidelity's lending activities. conducted. 14. Some Protestants maintained that First Union has a history of 18. The OCC conducted a joint CRA examination of all First purchasing organizations with poor CRA performance records and Union's subsidiary banks, including FUNB-NC, in April 1994 not improving their records. These commenters also alleged that (collectively, "1994 Examinations"). First Union's other subsiddata processing conversion problems in these acquisitions have iary banks are: First Union National Bank of Florida, Jacksonville, resulted in reduced lending and banking services to customers. Florida; First Union National Bank of Georgia, Atlanta, Georgia; Protestants contended that First Union's level of CRA performance First Union National Bank of Maryland, Rockville, Maryland; First is lower for banks located away from its Charlotte headquarters. Union National Bank of South Carolina, Greenville, South Caro- Several Protestants also asserted that this proposal would remove lina; First Union National Bank of Tennessee, Nashville, Tennesthe lending authority of local bank officers and replace it with see; First Union National Bank of Virginia, Roanoke, Virginia; and centralized decision making by officials in Charlotte. Other com- First Union National Bank of Washington, D.C. menters asserted that a number of jobs would be lost, particularly in One Protestant noted that the 1994 Examinations identified weakthe Philadelphia area, as a result of this acquisition. Some Protes- nesses in First Union's banks' CRA performance records, particutants speculated that this proposal is only a "foothold" acquisition larly in Tennessee and Virginia. For example, examiners recomand that future acquisitions would result in more branch closures, mended better documentation of changes in CRA action plans, layoffs and reductions in services. closer monitoring of outreach efforts, and analysis of geocoded 15. One Protestant claimed that First Union receives deposits lending data in some of the 1994 Examinations. Examiners also from customers at branches in low- and moderate-income commu- noted that systems conversions had not yet been completed at nities but fails to reinvest funds in those communities. several of these banks. Nevertheless, the OCC determined that the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1147 ty's lead bank, First Fidelity Bank, N.A., Elkton, Mary- The 1993 and 1994 HMDA data for FFB-MD indicate land ("FFB-MD"), was rated "satisfactory" for CRA similar improvement.22 These data indicate an increase performance by the OCC in July 1994.19 in the number of loan applications received by FFB-MD in 1994 from residents of low- to moderate-income B. HMDA Data census tracts, as well as an increase in the percentage of total loan applications from low- to moderate-income The Board has carefully reviewed 1993 and 1994 census tracts. In addition, data for New Jersey also HMDA data for First Union and First Fidelity in light of shows an increase in originations to borrowers from comments submitted by Protestants. These data indicate low- and moderate-income census tracts. FFB-MD also that First Union has generally improved its lending has shown improvement in its record of lending to record of home mortgage loans to low- and moderate- communities with predominately minority populations. income and African-American and Hispanic borrowers In particular, HMDA data for New Jersey and Pennsyland its lending approximates the level of lending in the vania indicate that the number and percentage of loan aggregate by HMDA-reporting lenders in most of its applications received from African Americans and Hisservice areas.20 For example, HMDA data for FUNB-NC panics have increased. In addition, these data also show showed that, although the total number of HMDA- that the number of loan originations to African-American reported loan applications decreased overall, the percent- and Hispanic borrowers have increased during this same age of applications from low- and moderate-income period. census tracts and African-American borrowers increased However, the data for First Union and First Fidelity in 1994 from 1993 levels. In addition, the percentage of also reflect some disparities in the rate of loan originaloan originations by FUNB-NC to low- and moderate- tions, denials, and applications by racial group or inincome census tracts and African-American borrowers come level. The Board is concerned when the record of has increased during this same period. HMDA data for an institution's record indicates disparities in lending to most other subsidiary banks indicate that, while the minority applicants, and the Board believes that all banks overall number of applications declined in 1994 com- are obligated to ensure that their lending practices are pared to 1993, the number of applications from African- based on criteria that assure not only safe and sound American borrowers increased during this period.21 lending, but also assure equal access to credit by creditworthy applicants regardless of race. The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its overall performance rating of all First Union's subsidiary banks community. The Board also recognizes that HMDA data was "satisfactory," except FUNB-NC which was rated "outstandhave limitations that make the data an inadequate basis, ing." The Board notes that First Union has already begun to take absent other information, for concluding that an institusteps to address these remarks and the steps undertaken by First Union's subsidiary banks to address the areas discussed in the 1994 tion has engaged in illegal discrimination in making Examinations will be evaluated by the OCC in future CRA perfor- lending decisions. mance examinations. The Board has carefully reviewed Protestants's allega- 19. First Fidelity Bank, Stamford, Connecticut ("FFB-CT") received a "satisfactory" from the FDIC in March 1995. First Fidel- tions of illegal discriminatory lending practices by First ity Bank, Wilmington, Delaware, which received a "satisfactory" Union in light of publicly available and other informafrom the FDIC in April 1994, was only recently acquired by First tion from the OCC. The 1994 Examinations found that Fidelity in March 1995. all of First Union's subsidiary banks were in substantial 20. One Protestant said that it could not analyze First Union's compliance with applicable antidiscrimation laws and recent mortgage lending in North Carolina because the Federal Financial Institutions Examination Council ("FFIEC") had not regulations and that none of the banks engaged in pracprovided it with the 1994 HMDA data for First Union and other tices that would discourage individuals from applying HMDA reporters in all North Carolina MS As. First Union provided for credit.23 Examiners also found that the geographic this Protestant with a copy of its 1994 Loan Application Register for North Carolina in machine-readable format. Individual disclosure statements and aggregate data for each MSA were available at a central repository in each MSA and from the FFIEC after Septem- 22. This includes a review of HMDA data for the five Pennsylber 1, 1995. The FFIEC does not have a record of a request for vania counties in the Philadelphia MSA. aggregate data of all North Carolina MSAs from Protestant. The 23. One Protestant suggested that conclusions on First Union's Board notes that Protestant has submitted extensive comments on compliance with applicable fair lending laws in the 1994 Examina- First Union's HMDA data, and based on all facts of record, the tions were deficient because the OCC did not consider lending data Board does not believe that this matter warrants delay or denial of from First Union Mortgage. This Protestant also asserted that a fair the proposal. lending compliance examination of First Union Mortgage should 21. For several of First Union's subsidiary banks, including be conducted. In reviewing compliance with applicable fair lending Florida, Tennessee, Virginia, and Washington, D.C., the number of laws in each of the 1994 Examinations, the OCC did, contrary to loan originations to African-American borrowers also increased Protestant's assertion, sample loans made by First Union Mortgage. during this same period. The Board does not believe that the HMDA data cited by Protestant Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1148 Federal Reserve Bulletin • December 1995 distribution of credit demonstrated reasonable penetra- C. First Union Lending Policies and Programs tion of all segments of each bank's communities, including low- and moderate-income neighborhoods.24 More- First Union's CRA plans and related lending activities over, the 1994 Examinations found that the delineations are developed locally by its subsidiary banks to incorpoof all subsidiaries of their local communities was reason- rate the unique credit needs of particular communities. able25 and did not arbitrarily exclude low- to moderate- First Union's corporate policy requires the development income areas.26 Finally, the 1994 Examinations indi- of an annual action plan, which includes a discussion of cated that all of First Union's subsidiary banks solicit the bank's identification of and response to the credit and accept credit applications from all segments of their needs of each community within a state. These action delineated communities, including individuals in low- plans are forwarded to First Union's state CRA coordiand moderate-income areas. nator for review and to ensure that the plans are properly First Union also has initiated a number of steps to implemented and that strategic objectives are achieved. increase lending by its subsidiary banks to low- and First Union has several specialized lending programs moderate-income and minority borrowers. For example, designed to improve its lending to low- and moderate- First Union has implemented a second review of denied income and minority communities. For example, the loan applications in the mortgage and consumer lending 1994 FUNB-NC Examination found that the bank areas to ensure that consistent loan decisions are made. offered the Affordable Home Mortgage Loan, a special- The second review is conducted before a final decision is ized product that offers flexible terms, such as liberal made when denial of a mortgage application is recom- debt-to-income requirements and lower down payments. mended. In addition, First Union has introduced a pilot Approximately 2,000 loans under this program were credit counseling program for applicants who are denied outstanding at year-end 1993, totalling $90 million, and loans due to poor credit history. Other corporate fair as of August 1995, over $134 million in loans were lending programs include semi-annual reviews of files to outstanding. FUNB-NC also offers other programs speassess the level of assistance and loan decisions made to cifically designed for low- and moderate-income individapplicants, regression modeling to test for variances in uals, such as the Special Home Improvement Loan, rates charged to borrowers, matched-pair shopping to which offers rebates for timely payments, flexible debtgauge the quality and level of assistance provided to to-income ratios, and no origination fee; Special Instant loan applicants, and annual policy reviews to ensure that Cash Reserve, a revolving line of credit that acts as an policies are nondiscriminatory. Examiners noted in the instant loan and overdraft protection; and Special 1994 Examinations that management of all First Union's FirstAdvance, an unsecured line of credit with flexible subsidiary banks had implemented comprehensive train- debt-to-income ratios.27 ing and compliance programs to support equal treatment FUNB-NC also participates, directly or through First in lending and to ensure that all applicants are treated Union Mortgage, in government-insured loan programs, fairly. including programs sponsored by the Small Business Administration ("SBA"), the Housing and Urban Development/Farmers Home Administration ("FmHA"), the Federal Housing Authority ("FHA"), the Veterans Administration ("VA"), and the Student Loan Corporafor First Union Mortgage would warrant a separate fair lending tion.28 For example, in 1993, FUNB-NC, a certified SBA examination of the mortgage subsidiary in light of all the facts of lender, originated 13 SBA loans, totalling $1.5 million, record. Based on all the facts of record, the Board concludes that the 1994 Examinations sufficiently reviewed the fair lending perfor- and as of August 1995, the bank's SBA loans totalled mance of First Union's subsidiary banks. over $3.8 million. The bank also reported $25 million in 24. In the 1994 Examination of First Union's subsidiary bank in FmHA loans and $900,000 in outstanding student loans Tennessee, examiners found a disproportionate distribution of credit at year-end 1993. In addition, First Union Mortgage extensions in a few low- and moderate-income communities. In originated $123 million in FHA/VA loans in 1993 and other areas, however, examiners noted that the bank had satisfactory levels of credit extensions in low- and moderate-income cen- over $81 million between January 1994 and August sus tracts. 1995. 25. First Union's delineation policy requires that low- and First Union's subsidiary banks also engage in other moderate-income tracts bordering each community served by a small business lending activity. For example, in July branch be included within a bank's delineated service area. 1993, FUNB-NC introduced a program for small busi- 26. One Protestant criticized First Union's subsidiary bank in Virginia for redefining its service community along state lines after the acquisition of a federal savings bank. The bank's 1994 Examination noted that this action complied with applicable CRA regula- 27. The 1994 Examinations found that all First Union subsidiary tions and First Union's policies, and that the bank had continued to banks participated in these specialized lending programs. provide services to communities in West Virginia and Tennessee 28. All other First Union subsidiary banks actively participate in that were excluded by the redefinition. these government-insured loan programs. 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Legal Developments 1149 ness owners to borrow amounts up to $100,000. The branch closings, consolidations, and reductions in ser- 1994 FUNB-NC Examination noted that during 1993 the vice. All subsidiary banks have adopted the corporate bank originated 1,854 loans, totalling $38 million under policy for branch closures that provides for objective this program. In addition, as of August 1995, FUNB-NC determination of branches to be closed, consideration of had over $963 million outstanding in small business alternative solutions, examination of options to miniloans to borrowers in low- and moderate-income census mize potential adverse effects on and inconvenience to tracts.29 the communities, and sufficient advance notice to com- All of First Union's subsidiary banks participate and munities. The policy also requires additional analyses, invest in local community development projects. In par- community contacts and/or review of need ascertainticular, the 1994 FUNB-NC Examination found that the ment calls when any branch closing affects a low- and bank maintains a high level of participation in develop- moderate-income community. ment and redevelopment programs within its local com- First Union also has sought alternative means to demunities, including a $5 million commitment for a mort- liver services to its customers that do not depend on a gage loan consortium to provide low-income housing traditional branching network. For example, small busiunits throughout Charlotte, North Carolina, and ness owners may call a toll free number to submit small $580,000 to help finance the Jeffries Ridge Housing business loan applications and receive a response within Development in Raleigh, North Carolina. The bank also 24 hours. is involved in several community development corporations. For example, since November 1994, FUNB-NC E. First Union's Ascertainment and Marketing provided a $500,000 revolving loan fund and a $300,000 Efforts contribution to the Monroe-Union County Community Development Corporation to increase low- and All of First Union's subsidiary banks engage in various moderate-income homeownership. activities to ascertain the credit needs of and market their products to their communities. For example, the 1994 D. First Union's Branching Network FUNB-NC examination stated that FUNB-NC has established a system of ongoing communications with com- The 1994 Examinations for all of First Union's subsid- munity, civic, and neighborhood groups that represent a iary banks found that branch locations and services were broad range of the bank's communities, including lowreasonably accessible to all segments of the delineated and moderate-income areas. The bank has an officer call communities.30 First Union has a corporate policy for program, conducts surveys, meets with community representatives, and uses advisory boards made up of local business and community leaders to help identify commu- 29. The Board has considered comments on First Union's small nity credit needs, market bank services, and assess perbusiness lending in light of an article cited by one Protestant in formance. In addition, FUNB-NC's 1994 CRA Marketsupport of its contention that multi-state bank holding companies ing Plan for North Carolina outlines several statetend to lend less to small businesses than subsidiary banks of small coordinated promotions, including banking seminars single-state bank holding companies. As a general matter, the article reviewed only one year of call report data from the Federal given in cooperation with realtors, builders/developers, Reserve System's Tenth District. As explained above, the Board community development corporations, financial counselcarefully reviewed First Union's record of ascertaining and helping ors, or nonprofit organizations, bank sponsorship of comto meet the credit needs, including the small business credit needs, munity events such as conventions, home shows and of the communities served by its subsidiary banks. The Board also notes that First Union has represented that it will make its programs housing fairs, minority college promotions, and advertisavailable to customers of First Fidelity (including the programs of ing in business publications directed towards minorities. its small business lending unit) in connection with this proposal. In The 1994-1995 Community Reinvestment Act Statethis light, and based on all the facts of record, the Board does not ment for FUNB-NC indicates that the bank uses newspabelieve that Protestant's comments warrant denial of this proposal. per and radio to advertise its products and services to The Board notes that the CRA requires that every bank, including a bank owned by an out-of-state bank holding company, be regularly low- and moderate-income segments of the community, examined and rated on its performance in helping to meet the credit including a series featuring CRA products that is used in needs of its community. Any diminution in First Union's CRA- local publications that reach low- and moderate-income related activities in any state would be reviewed by the OCC in individuals and minority small business owners. In addifuture performance examinations and by the Board in future applications by First Union for a depository facility under the BHC Act. 30. The 1994 Examinations specifically considered First Union's closing of 91 branches in Virginia after it had acquired several closings were part of the bank's plan to reduce the number of banking organizations in 1993. Approximately half these branches branches while improving overall levels of service to its customers. were consolidated with urban branches in close proximity and the Examiners found that the bank's record of closing offices has not remaining branches were in areas with low volumes of business adversely affected the level of services available in low- and and limited prospects for growth. Examiners noted that these moderate-income areas in the delineated communities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1150 Federal Reserve Bulletin • December 1995 tion, the bank has several brochures available at all chase, home improvement, small business, and student branches that highlight products designed to meet the loans.33 For example, in 1993, FFB-MD originated 94 credit needs of low- to moderate-income individuals, loans, totalling $10.2 million, under the guaranteed home including a brochure describing the bank's Affordable mortgage programs sponsored by the New Jersey Mort- Home Mortgage product. gage Financing Agency and 45 loans under a similar program sponsored by the Pennsylvania Housing Fi- F. First Fidelity nance Agency. In addition, FFB-MD participates in 11 small business lending programs sponsored by local As noted above, FFB-MD,31 which constitutes over municipalities, including the New Jersey Economic De- 90 percent of First Fidelity's consolidated assets, was velopment Authority Small Business Loan Pool. rated "satisfactory" for CRA performance by the OCC The 1994 FFB Examination found that FFB-MD's in July 1994 ("1994 FFB Examination").32 The 1994 branch locations provide reasonable access to all seg- FFB Examination did not find any practices that would ments of its delineated community. In addition, examindiscourage applications for credit and noted that FFB- ers noted that a thorough written policy and checklist for MD's credit policies and practices are in substantive branch openings, closings, consolidations and reduction compliance with anti-discrimination laws and regula- in services is in effect. This policy addresses factors such tions. Examiners also noted that FFB-MD provides train- as continuity of services, the impact on profitability and ing to branch managers and loan officers on anti- deposit levels, and potential community impact is anadiscrimination laws and regulations, as well as diversity lyzed and assessed with alternatives explored. FFBawareness training for residential mortgage loan person- MD's policy also requires proper notification to municinel, and solicited credit applications from all segments pal officials, community groups and regulatory agencies of its delineated community. prior to closing.34 FFB-MD has taken a number of steps to increase its The First Fidelity Urban Investment Corporation lending to low- and moderate-income individuals and ("FFUIC") develops projects and programs that benefit minorities. The 1994 FFB Examination found that a the economic development and affordable housing needs second review process is in place to review denied of urban areas within First Fidelity's delineated commuapplications from low- and moderate-income borrowers nity. For example, in 1994, the FFUIC closed 801 mortto help increase the number of approved applications gages, totalling $55.4 million, approximately 64 percent, and assure equal credit opportunities. The examination or 513 loans, were made to minority borrowers. In noted that as part of FFB-MD's efforts to improve lend- addition, FFUIC made over $1.1 million in investments ing to low- and moderate-income areas and to minority for 1994 in organizations such as the Allentown Develindividuals, goals for overall CRA lending in specified areas have been established by product division. The 1994 CRA strategic plan allocated $105 million of the 33. One Protestant criticized First Fidelity for not participating in VA or FHA mortgage products. First Fidelity has indicated that it $167 million Community Development Commitment for actively participates in other government sponsored programs that discounted mortgage and secured VISA loan products. have more favorable terms for low- and moderate-income borrow- The 1994 FFB Examination also found that the bank ers than VA or FHA products. actively participates in government-sponsored loan pro- 34. The Board also has carefully reviewed other aspects of grams, particularly state government, for home pur- FFB-MD's record of CRA performance, in light of comments received criticizing First Fidelity's record of CRA performance, particularly in the Philadelphia area. The Board notes that OCC examiners found FFB-MD's ascertainment efforts to be appropri- 31. FFB-MD operates branches in Maryland, New Jersey, Penn- ate, its marketing of products designed for low and moderatesylvania, and New York. income markets to be successful, its delineations to be reasonable, 32. The Board also has carefully reviewed comments critical of and the geographic distribution of its lending to be acceptable. In the CRA performance of FFB-CT. As noted above, FFB-CT re- addition, while noting that FFB-MD could improve its advertising ceived a satisfactory rating from the FDIC in March 1995. The for small business loans, OCC examiners credited the bank's other examination report indicated that FFB-CT had formalized proce- efforts to promote small business loans, including seminars, traindures to ascertain community credit needs and markets credit ing programs, outreach efforts by its Urban Bankers program, and products throughout its delineated community. In addition, examin- referral from other First Fidelity units. The 1994 FFB Examination ers found that the branch closing policy for FFB-CT included also contained no exceptions to the bank's CRA Statement and no consideration of the impact on the community, profitability, credit criticism of the oversight of or the involvement in the CRA process access, and other available options, such as consolidation, down- by its board of directors. Moreover, specific initiatives by FFB-MD grading of services, or sale. Although examiners noted some dispar- in Philadelphia and the surrounding area include a commitment for ities in lending to minorities based on 1993-94 HMDA data, the approximately $4.5 million in loans to assist in providing affordexamination report also indicates that these disparities have de- able housing through programs sponsored by the Philadelphia creased since 1993, and that there is no evidence that FFB-CT has Bankers Development Initiative, Advocate Community Developengaged in prohibited discriminatory or other illegal credit prac- ment Corporation, and the Women's Community Revitalization tices. Project. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1151 opment Corporation, Philadelphia Minority Venture implementation of First Union's corporate-wide CRA- Partners, and Garden State Affordable Housing. Finally, related policies and specific lending programs,37 the FFUIC participates in a number of loan pools, such as Board believes that the efforts of First Union and First Trenton Mortgage Plan and New Jersey Housing Oppor- Fidelity to help meet the credit needs of all segments of tunity Fund, LLC, to support development of affordable the communities served by their subsidiary banks, inhousing.35 cluding low- and moderate-income neighborhoods, are consistent with approval.38 For these reasons, and based G. Conclusion Regarding Convenience and Needs on all the facts of record, the Board concludes that Factors convenience and needs considerations, including the CRA performance records of the companies and banks The Board has carefully considered the entire record, involved in these proposals, are consistent with approval including the comments filed in this case, in reviewing of these applications.39 the convenience and needs factors under the BHC Act.36 Based on a review of the entire record of performance, including information provided by Protestants, First Union and First Fidelity; the CRA performance examinations and other information from the banks' primary supervisors; and First Union's planned initiatives for First Fidelity's banks after consummation, including the 35. One Protestant criticized FFB-MD because of decreased participation in the Delaware Valley Mortgage Plan. FFB-MD has indicated that the bank's participation in the program has continued, however, its percentage participation has dropped due to the 37. These initiatives include programs administered by First emphasis placed on the bank's own discounted mortgage plan, Union's Small Business Lending Unit, Affordable Housing Group, which the bank believes offers more favorable terms to low- to Municipal Finance Unit, and Direct Bank. moderate-income borrowers. 38. Several Protestants have contended that a longer public 36. Several Protestants contend that First Union practices "price comment period should have been provided or that action on the discrimination" by charging higher fees for some banking services proposal should be delayed. The Board notes that the public comand "output discrimination" by making a lower quantity and ment period for these applications was in accordance with the quality of loans available in states outside its home state of North Board's Rules of Procedure, and in fact provided 45 days for the Carolina, particularly in Florida. Data presented in the analysis submission of comments. The Board believes that this period supporting these allegations, however, have limitations that make provided a reasonable time in which to comment and notes that, in the data an inadequate basis to conclude that First Union discrimi- fact, a number of commenters submitted their views on this pronates against Florida customers in pricing its services. For example, posal. Moreover, the BHC Act and the Board's Rules require that these data do not control for supply and demand conditions that the Board act on applications within specified time periods, and the may directly affect pricing decisions. Moreover, First Union does Board believes that the present record is sufficient to act on these not have a dominant position in the 35 banking markets in which it applications and notices. The Board has concluded that delay of operates in Florida, and would not increase its market share in any action on these applications and notices on this basis is not warof these markets as a result of this proposal. In the majority of its ranted. Florida banking markets, including all of the large Florida metro- 39. Several Protestants have requested that the Board hold a politan banking markets, First Union controls less than 20 percent public meeting or hearing on the proposal. Section 3(b) of the BHC of market deposits, as of June 1994, and there are numerous other Act does not require the Board to hold a public hearing on an depository institution competitors under the market structure analy- application unless the appropriate supervisory authority for the sis used to assess the competitive effect of this acquisition. The bank to be acquired makes a timely written recommendation of Board also notes that the Department of Justice has full statutory denial. In this case, neither the OCC nor any appropriate state authority to investigate and redress any illegal pricing practices that supervisory authority has recommended denial. Protestants can substantiate. Generally, under the Board's rules, the Board may, in its discre- Convenience and needs considerations, including an institution's tion, hold a public hearing or meeting on an application to clarify record of performance under the CRA, focus on local communities factual issues related to the application and to provide an opportuserved by a banking organization. These considerations do not nity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). require that the quantity and quality of loans or pricing of services The Board has carefully considered these requests. In the Board's be comparable between geographic regions. First Union's record of view, Protestants have had ample opportunity to and have prelending to all its communities in Florida has been assessed by the sented substantial written submissions, and they have not identified OCC as "satisfactory" as of April 1994. This review found that facts that are material to the Board's decision and that are in First Union's Florida subsidiary bank was in substantial compli- dispute, what substantial evidence they would produce at a public ance with applicable antidiscrimination laws and regulations and meeting or hearing, and why their written submissions do not that it does not engage in practices that would discourage individu- adequately present their allegations. Based on all the facts of als from applying for credit. Protestants' comments and analysis record, the Board has determined that a public meeting or hearing have been provided to the OCC for consideration. In light of these is not necessary to clarify the factual record in this proposal, or and other facts of record, the Board concludes that these comments otherwise warranted in this case. Accordingly, Protestants' requests do not warrant denial of this proposal. for a public meeting or hearing on this matter are denied. 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1152 Federal Reserve Bulletin • December 1995 Other Considerations Nonbanking Activities The Board also has concluded that the financial40 and First Union also has given notice, pursuant to secmanagerial resources and future prospects of First tion 4(c)(8) of the BHC Act, of its proposal to acquire Union, First Fidelity, and their respective subsidiaries, subsidiaries of First Fidelity engaged in certain credit and other supervisory factors the Board must consider insurance and community development activities. The under section 3 of the BHC Act and the Riegle-Neal Act, Board has previously determined by regulation that the are consistent with approval of this proposal41 proposed insurance and community development activities are closely related to banking for purposes of section 4(c)(8) of the BHC Act. First Union has committed that it will conduct these activities in accordance with 40. Some Protestants maintained that several recent publicly the Board's regulations and orders approving these activannounced events raise adverse financial considerations, including ities for bank holding companies. In every case under criticism by industry analysts of the financial resources of First section 4 of the BHC Act, the Board considers the Union to effect this transaction, and First Union's asset-backed commercial paper activities. One Protestant has also questioned the financial condition and resources of the applicant and its safety and soundness implications of First Union's recent acquisi- subsidiaries and the effect of the transaction on those tion strategy. The Board has carefully reviewed these matters in resources.42 Based on all the facts of record, the Board light of the overall financial condition of First Union and its has concluded that financial and managerial considersubsidiaries. Based on all the facts of record, including reports of ations are consistent with approval. examination assessing the financial resources of First Union and its subsidiaries, other supervisory information from the primary fed- In order to approve this notice, the Board also must eral supervisors of First Union's subsidiary banks, First Union's determine that the performance of the proposed noncurrent and pro forma capital levels, and the method for funding banking activities "can reasonably be expected to prothis acquisition, the Board concludes that these comments do not duce benefits to the public . . . that outweigh possible reflect adversely on the financial condition of First Union or warrant denial of the proposal. adverse effects, such as undue concentration of re- 41. Some Protestants contend that alleged actions by First Union sources, decreased or unfair competition, conflicts of in acquiring Southeast Bank from the FDIC in 1991 reflect ad- interests, or unsound banking practices." versely on its managerial resources. Protestants repeat allegations 12 U.S.C. § 1843(c)(8). In considering First Union's acattributed to several lawsuits that have been pending at various quisition of First Fidelity's nonbanking activities, the times since the acquisition. Protestants do not, however, provide any independent evidence to support these allegations. These com- record in this case indicates that there are numerous ments include allegations that First Union had insider information providers of these nonbanking services, and there is no not available to other bidders, that Southeast Bank was inappropri- evidence in the record to indicate that consummation of ately designated as a failed institution by federal supervisors, and this proposal is likely to result in any significantly adthat First Union exerted improper influence over federal superviverse effects, such as undue concentration of resources, sors during the bid process. Other Protestants claim that isolated events, including an order by the NASD requiring First Union to decreased or unfair competition, conflicts of interests, or pay a broker who was fired in connection with the sale of uninsured unsound banking practices that would outweigh the pubinvestment products, and information that certain officers of First lic benefits of this proposal. Accordingly, the Board has Union have profited from trading First Union's stock, also raise determined that the balance of public interest factors it adverse managerial considerations. must consider under section 4(c)(8) of the BHC Act is The Board notes that the bid for Southeast Bank was awarded to First Union under a process administered by the FDIC more than favorable and consistent with approval. four years ago. The FDIC denies any irregularities in the process for reviewing and accepting the First Union bid for Southeast Conclusion Bank. In addition, the Board has considered supervisory information contained in reports of examination assessing the managerial resources and policies of First Union and its subsidiary banks. The Based on the foregoing, including the commitments facts of record in this case support that managerial resources are made to the Board by First Union in connection with satisfactory and consistent with approval, and these comments do these applications and notices, and in light of all the not present evidence that would alter those findings. Allegations involving improper conduct on the part of FDIC officials, and facts of record, the Board has determined43 that these questions posed by Protestants concerning the role of First Union and the Federal Reserve System, are beyond the scope of factors considered under the BHC Act in reviewing this proposal. Moreover, the allegations regarding Southeast Bank have been 42. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 the subject of civil litigation which provides an opportunity to Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, substantiate claims of wrongdoing and seek redress if appropriate. 73 Federal Reserve Bulletin 155 (1987). The Board will monitor any pending litigation involving the South- 43. One Protestant maintains that the Federal Reserve Bank of east Bank acquisition for evidence of wrongdoing by First Union Richmond ("Reserve Bank") should recuse itself from considerofficials. Both the Board and the OCC have sufficient statutory ation of this proposal because First Union is a shareholder and a authority to address any misconduct on the part of holding com- director of the Reserve Bank. First Union does not currently have a pany or bank officials if these allegations can be substantiated. director serving on the board of the Reserve Bank. Moreover, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1153 applications and notices should be, and hereby are, ap- tions imposed in writing by the Board in connection with proved.44 The Board's approval is specifically condi- its findings and decision, and, as such, may be enforced tioned on compliance by First Union with all commit- in proceedings under applicable law. ments made in connection with these applications.45 The acquisition of First Fidelity's subsidiary banks The Board's determinations on the nonbanking activi- shall not be consummated before the fifteenth calendar ties to be conducted by First Union are subject to all the day following the effective date of this order, and the conditions in the Board's Regulation Y, including those banking and the nonbanking transactions shall not be in sections 225.7 and 225.23(b)(3) (12 C.F.R. 225.7 and consummated later than three months following the ef- 225.23(b)(3)), and to the Board's authority to require fective date of this order, unless such period is extended such modification or termination of the activities of a for good cause by the Board or by the Federal Reserve holding company or any of its subsidiaries as the Board Bank of Richmond, acting pursuant to delegated authorfinds necessary to assure compliance with, or to prevent ity. evasion of, the provisions and purposes of the BHC Act By order of the Board of Governors, effective and the Board's regulations and orders issued thereun- October 26, 1995. der. The commitments and conditions relied on by the Board in reaching this decision are deemed to be condi- Voting for this action: Chairman Greenspan, Vice Chairman Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. JENNIFER J. JOHNSON Federal Reserve Bank directors do not participate in the direct Deputy Secretary of the Board supervision of banks or bank holding companies or in matters such as applications processing, examinations, or enforcement proceedings, and did not participate in or provide a recommendation to the Board in this case. 44. Protestants also raise issues that are not related to First Appendix Union's performance under the CRA, including general allegations that First Union illegally discriminates in terminating the employment of its employees. The Board notes that because FUNB-NC Nonbanking Subsidiaries of First Fidelity employs more than 50 people, serves as a depository of government funds, and acts as agent in selling or redeeming U.S. savings bonds and notes, it is required by Department of Labor regulations (1) Broad & Lombardy Associates, Inc., Newark, New to: (i) File annual reports with the Equal Employment Opportunity Jersey, and thereby engage in insurance activities, pursu- Commission ("EEOC"); and ant to sections 225.25(b)(8)(i) and (iv) of Regulation Y (ii) Have in place a written affirmative action compliance pro- (12 C.F.R. 225.25(b)(8)(i) and (iv)). gram which states its efforts and plans to achieve equal opportu- (2) Fidelcor Life Insurance Company, Phoenix, Arizona, nity in the employment, hiring, promotion, and separation of and thereby engage in credit reinsurance activities, purpersonnel. See 41 C.F.R. 60-1.7(a), 60-1.40. The Board notes that, pursuant suant to section 225.25(b)(8)(i) of Regulation Y to Department of Labor regulations, First Union, as the parent of (12 C.F.R. 225.25(b)(8)(i)). FUNB-NC, also is required to file an annual report with the EEOC (3) First Fidelity Community Development Corporation, covering all employees in its entire corporate structure. Newark, New Jersey, and Waller House Corporation, 45. Several Protestants have requested that the Board delay action on this proposal for a variety of reasons, including allega- Philadelphia, Pennsylvania, and thereby engage in comtions that Protestants have not received nor had sufficient time to munity development activities, pursuant to section review and comment on all the information submitted in connec- 225.25(b)(6) of Regulation Y (12 C.F.R. 225.25(b)(6)). tion with these applications; that First Union has not responded to all issues raised by the Protestants; and that further consideration should be given to information provided by the Protestants (includ- National Australia Bank Limited ing allegations in a recently filed lawsuit alleging that First Union Melbourne, Australia improperly excluded certain shareholders from a special shareholders' meeting). The Board notes that the comment period for this application has extended at least 45 days in which to receive comments from interested members of the public, and that Protes- National Equities Limited tants have, in fact, submitted voluminous comments that have been Melbourne, Australia carefully considered by the Board. Based on all the facts of record, and for the reasons discussed above, the Board believes that the record is sufficient to permit action on this application under the National Australia Group Limited factors the Board is required to consider under the BHC Act. In this London, England light, the Board finds that these requests do not warrant delaying action on this proposal. Moreover, the Board notes that the courts may provide appropriate remedies of the allegations of improper National Americas Holding Limited actions by First Union at the special shareholders meeting can be substantiated. London, England Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1154 Federal Reserve Bulletin • December 1995 MNC Acquisition Co. Supervisory Considerations Melbourne, Australia In order to approve an application by a foreign bank to Order Approving the Formation of Bank Holding acquire a U.S. bank or bank holding company, the BHC Companies Act and Regulation Y require the Board to determine that the foreign bank is subject to comprehensive super- National Australia Bank Limited, Melbourne, Australia vision or regulation on a consolidated basis by its home ("NAB"), and its subsidiaries, National Equities Lim- country supervisor.4 The Board also must determine that ited, Melbourne, Australia; National Australia Group the foreign bank has provided adequate assurances that it Limited, London, England; and National Americas Hold- will make available to the Board such information on its ing Limited, London, England (collectively, "Appli- operations and activities and those of its affiliates that the cants"), have applied under section 3(a)(1) of the Board deems appropriate to determine and enforce com- Bank Holding Company Act ("BHC Act") (12 U.S.C. pliance with applicable law.5 § 1842(a)(1)) to become bank holding companies within The Board considers a foreign bank to be subject to the meaning of the BHC Act by acquiring all the voting comprehensive supervision or regulation on a consolishares of Michigan National Corporation ("MNC"), and dated basis if the Board determines that its home country thereby indirectly acquire Michigan National Bank, both supervisor receives sufficient information on the foreign of Farmington Hills, Michigan.1 bank's worldwide operations, including the bank's rela- Applicants also have filed notices under sec- tionship to any affiliate, to assess the bank's overall tion 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) financial condition and compliance with law and regulaand section 225.23 of the Board's Regulation Y tion.6 (12 C.F.R. 225.23) to acquire the nonbanking subsidiar- Supervision and regulation of Australian banks, such ies of MNC listed in the Appendix. as NAB, is the responsibility of the Reserve Bank of Notice of the proposal, affording interested persons an Australia. As NAB's home country supervisor, the Reopportunity to submit comments, has been published serve Bank of Australia supervises NAB's operations on (60 Federal Register 38,838 (1995)). The time for filing a consolidated basis, including its foreign branches and comments has expired, and the Board has considered the subsidiaries. As discussed below, the Reserve Bank of applications and notices and all comments received in Australia discharges its responsibilities through the relight of the factors set forth in sections 3 and 4 of the view of external auditors' reports, annual consultations, BHC Act. and the review of financial reports submitted directly to NAB, with consolidated assets equivalent to approxi- the Reserve Bank of Australia. mately $99.4 billion, is the largest banking organization The Reserve Bank of Australia has cooperative arin Australia,2 and operates a branch office in New York. rangements with the banks and their external auditors by MNC is the fifth largest commercial banking organiza- which the external auditors report directly to the Reserve tion in Michigan, controlling deposits of $6.8 billion, Bank of Australia on certain prudential aspects of the representing approximately 8.6 percent of all deposits in banks' operations, both foreign and domestic. The Recommercial banking organizations in the state.3 4. See 12 U.S.C. § 1842(c)(3)(B); 12 C.F.R. 225.13(b)(5). 5. See 12 U.S.C. § 1842(c)(3)(A); 12 C.F.R. 225.13(b)(4). 6. In assessing this standard, the Board considers, among other 1. Applicants would acquire MNC by merger with MNC Acqui- factors, the extent to which the home country supervisor: sition Co., Melbourne, Australia ("Company"), a wholly owned (i) Ensures that the foreign bank has adequate procedures for subsidiary of National Americas Holding Limited formed to effect monitoring and controlling its activities worldwide; this proposal, and Applicants also have applied for approval of this (ii) Obtains information on the condition of the foreign bank and transaction under section 3 of the BHC Act. In connection with this its subsidiaries and offices outside the home country through proposal, MNC granted NAB an option to purchase, under certain regular reports of examination, audit reports, or otherwise; circumstances, up to 19.9 percent of the outstanding voting com- (iii) Obtains information on the dealings and relationships bemon stock of MNC. This option will terminate upon consummation tween the foreign bank and its affiliates, both foreign and domesof the proposed merger of Company and MNC. tic; Applicants also have applied to acquire Bloomfield Hills Ban- (iv) Receives from the foreign bank financial reports that are corp, Inc. ("Bloomfield"), and its subsidiary bank, Bank of Bloom- consolidated on a worldwide basis, or comparable information field Hills, both of Bloomfield Hills, Michigan. MNC owns pre- that permits analysis of the foreign bank's financial condition on ferred stock of Bloomfield that represents 40 percent of a worldwide, consolidated basis; and Bloomfield's total equity and is deemed voting stock for purposes (v) Evaluates prudential standards, such as capital adequacy and of the BHC Act. Any references to MNC in this order includes risk asset exposure, on a worldwide basis. These are indicia of Bloomfield. comprehensive, consolidated supervision. No single factor is 2. Asset data are as of March 31, 1995. essential, and other elements may inform the Board's determina- 3. State deposit and ranking data are as of June 30, 1995. tion. 12 C.F.R. 211.24(c)(1). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1155 serve Bank of Australia requires an annual opinion from penalties for being in breach of the Australian banking NAB's external auditors on the bank's observance of the statutes. Reserve Bank of Australia's prudential standards, the In Australia, NAB and certain of its securities and accuracy of the statistical data being provided to the insurance subsidiaries also are regulated by the Austra- Reserve Bank of Australia, and compliance with laws lian Securities Commission ("ASC") and the Insurance and regulations. In addition, the external auditors report and Superannuation Commission ("ISC"). Both the on NAB's risk management systems. NAB is required to ASC and the ISC require periodic reports from the provide to the Reserve Bank of Australia a written entities that they regulate and in some cases they condescription of its systems for controlling exposures and duct on-site examinations. Representatives of the Relimiting risks with respect to credit, liquidity, and for- serve Bank of Australia, ASC, and ISC meet regularly to eign exchange operations. The external auditor also is exchange information through the Australia Financial required to bring to the attention of the Reserve Bank of Committee. Australia any matter that may adversely affect the inter- Based on all the facts of record, the Board concludes ests of the bank's depositors. that Applicants are subject to comprehensive supervision The Reserve Bank of Australia conducts formal an- on a consolidated basis by its home country supervisor. nual consultations with NAB's management as part of its The Board has reviewed the restrictions on disclosure ongoing supervision of the bank. In the course of this in certain jurisdictions where Applicants operate and process, representatives of the Reserve Bank of Austra- have communicated with the relevant government aulia meet with management of offices of NAB, both thorities concerning access to information. Applicants domestic and foreign, to discuss, among other things, have committed to make available to the Board such NAB's global strategic plans, new regulatory develop- information on the operations or activities of Applicants ments and prudential supervision guidelines, financial and any affiliates of Applicants that the Board deems results and forecasts, and risk management policies and necessary to determine and enforce compliance with the practices. As a follow-up to these consultations, the International Banking Act, the BHC Act, as amended, Reserve Bank of Australia prepares a report, which is and other applicable federal law. To the extent that the provided to NAB's board of directors, that discusses the provision of such information to the Board may be more significant matters discussed in the meetings. In prohibited or impeded by law, Applicants have commitaddition, the Reserve Bank of Australia has commenced ted to cooperate with the Board in obtaining any necesa program of on-site reviews of certain areas of NAB's sary consent or waivers that might be required from third business. parties for disclosure. In light of these commitments and NAB is required to submit a number of financial other facts of record, and subject to the condition dereports to the Reserve Bank of Australia. These include scribed below, the Board concludes that Applicants have provided adequate assurances of access to any necessary consolidated quarterly information on capital adequacy, information the Board may request.7 impaired assets, off-balance sheet business, large exposures, country exposure, and unaudited semi-annual and audited annual consolidated balance sheets and income Other Considerations statements. The consolidated reports generally include NAB's domestic and foreign branches and subsidiaries. The Board also has considered the other factors enumer- With respect to affiliate transactions, exposures to ated in the BHC Act. Applicants' capital exceeds the affiliates are treated as exposures to third parties and are minimum standards contained in the Basle Accord and is subject to a general limit and the reporting requirement equivalent to capital that would be required of a U.S. on large exposures. The Reserve Bank of Australia re- banking organization. Based on the foregoing and all quires that financial dealings between a bank and its other facts of record, the Board has determined that the affiliates be conducted on the same basis as dealings with financial and managerial resources and future prospects unrelated customers of similar status. In addition, Reserve Bank of Australia guidelines provide that details with respect to transactions with affiliates should be reported on a regular basis as agreed upon between the 7. Two commenters objected to this proposal on the basis that an bank and the Reserve Bank of Australia. acquisition of a United States banking organization by a foreign The Reserve Bank of Australia has statutory authority banking organization would be contrary to public policy. The BHC to exercise its enforcement powers to protect depositors Act and the International Banking Act of 1978 (12 U.S.C. § 3101 and to take certain steps if a bank is found to be unable et seq.) clearly authorize acquisitions of domestic banking organizations by foreign banking organizations that meet the standards set to meet its obligations, including initiating an investigaforth in those Acts. Based on all the facts of record and for the tion of the affairs of the bank and closing or taking over reasons discussed in this order, the Board concludes that these the management of the bank. There also are substantial comments do not warrant denial of the applications and notices. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1156 Federal Reserve Bulletin • December 1995 of Applicants and MNC are consistent with approval.8 section 4(c)(8) of the BHC Act,10 and the Board previ- The convenience and needs factor, including the CRA ously has approved applications by MNC to engage in performance records of the depository institution subsid- these proposed activities. Applicants have committed iaries of MNC, and the supervisory factors the Board that they will conduct these activities in accordance with must consider under section 3 of the BHC Act are also the Board's regulations and orders approving these activconsistent with approval of this proposal.9 ities for bank holding companies.11 Applicants also have filed notice, pursuant to section In order to approve these applications and notices, the 4(c)(8) of the BHC Act, to operate a savings association Board also must determine that the proposed acquisition and to engage in investment advisory and credit-related of MNC's nonbanking subsidiaries by Applicants "can insurance activities. The Board has determined by regu- reasonably be expected to produce benefits to the public lation that the operation of a savings association, and ... that outweigh possible adverse effects, such as undue that investment advisory and credit-related insurance concentration of resources, decreased or unfair competiactivities, are closely related to banking for purposes of tion, conflicts of interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8). The record in this case indicates that the financial and managerial resources of 8. A minority shareholder of MNC ("Shareholder") requests that Applicants should allow MNC's nonbanking and bankthe Board withhold any action on the proposal until MNC holds its ing subsidiaries to provide additional products and ser- 1995 annual meeting. Shareholder alleges that: vices to customers, to operate more efficiently, and to (1) The failure of MNC to hold an annual meeting since compete more effectively in their respective markets. In April 19, 1994, violated shareholder's rights and Michigan law; and addition, the record indicates that there are numerous (2) The proxy materials ("Statements") provided to MNC share- providers of these nonbanking services, and there is no holders in connection with the special shareholder meeting held evidence in the record to indicate that consummation of on June 2, 1995 ("Special Meeting"), to vote on the proposal this proposal is likely to result in any significantly adcontained insufficient, misleading, and inaccurate disclosures verse effects, such as undue concentration of resources, about Shareholder's separate proposal to structure an acquisition of MNC on a tax-free basis. decreased or unfair competition, conflicts of interests, or Applicants respond that Michigan law only requires a corpora- unsound banking practices that would outweigh the pubtion to designate a date for an annual meeting within 15 months lic benefits of this proposal. Accordingly, the Board has after the corporation's last annual meeting. See Mich. Stat. Ann. determined that the balance of public interest factors it § 21.200(402) (Supp. 1995). Applicants contend that by designatmust consider under section 4(c)(8) of the BHC Act is ing, on July 10, 1995 (within 15 months of MNC's last annual meeting), an annual meeting to be held in November 1995, MNC favorable and consistent with approval. has complied with the requirements of Michigan law. This reading Based on the foregoing and all the facts of record, the of the Michigan statutory provision appears to be consistent with Board has determined that these applications and notices the express terms of the Michigan statute. The Corporations Division of the Michigan State Department of Commerce has reviewed should be, and hereby are, approved.12 Should any rethese allegations and indicated that corporate action taken by MNC would not be invalidated under Michigan law even if MNC had failed to hold its next annual meeting in a timely fashion. Id. The Board also notes that Michigan law provides shareholders with 10. See 12 C.F.R. 225.25(b)(4), (b)(8) and (b)(9). adequate remedies if they can demonstrate a violation of the annual 11. Applicants also have committed that they will not reactivate meeting requirement, and that a shareholder has, in fact, filed suit any currently inactive subsidiaries without the Board's prior apin Michigan state court under the appropriate statutory provisions. proval. Based on a review of the Statements and relevant background 12. Two minority shareholders allege that the compensation and documents, as well as informal discussions with staff of the Securi- severance benefits that certain MNC executive officers could reties and Exchange Commission ("SEC"), the shareholder's ceive upon the proposal's consummation represent "unjust selfsecurities-related allegations do not appear to warrant denial of this enrichment." In addition, these shareholders allege that potential proposal based on the factors that the BHC Act authorizes the benefits from the transaction created a conflict of interest for these Board to consider. The SEC is charged under the federal securities officers that caused them to negotiate the proposal as an all-cash laws with jurisdiction to investigate and redress any violations merger rather than as a tax-free exchange of stock in violation of relating to the Statements or other disclosures required under the their fiduciary duty to shareholders. One of the shareholders also securities laws. Based on all the facts of record, the Board con- notes that some MNC shareholders have filed an action in federal cludes that these allegations do not warrant denial of the applica- district court in Michigan, alleging that MNC management officials tions and notices. committed fraud and violated securities laws when they failed to 9. Another commenter speculates that Applicants would elimi- disclose their negotiations with Applicants while MNC repurnate many MNC jobs to recover their purchase price for the MNC chased its shares from such shareholders. shares. Applicants respond that they intend to expand the MNC These comments were submitted after the close of the public franchise rather than reduce MNC's operations in order to recover comment period provided for these applications and notices and are funds expended for the purchase price. Applicants also note that, as not required under the Board's Rules of Procedure to be consida general matter, the access to capital and other resources provided ered. 12 C.F.R. 262.3(e). The Board notes, however, that these by this proposal would result in MNC's growth. Based on all the benefits were disclosed to MNC shareholders in the Statements, facts of record, the Board has determined that this allegation does and that the proposed transaction was approved by the holders of a not warrant denial of the applications and notices. majority of MNC's voting securities who voted at the Special Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1157 strictions on access to information on the operations or Appendix activities of Applicants and any of their affiliates subsequently interfere with the Board's ability to determine Applicants have filed notices under section 4 of the compliance by Applicants or any of their affiliates with BHC Act to acquire the following nonbanking applicable federal statutes, the Board may require termi- subsidiaries of MNC: nation of any of Applicants' direct or indirect activities in the United States. (1) Independence One Capital Management Corp., Farm- The Board's approval is specifically conditioned on ington Hills, Michigan, and thereby engage in providing compliance by Applicants with all the commitments investment advisory services, pursuant to secmade in connection with these applications and notices tion 225.25(b)(4) of the Board's Regulation Y; and on receipt by Applicants of all necessary approvals (2) Independence One Life Insurance Company, Phoefrom state and federal regulators. The Board's determi- nix, Arizona, and thereby engage in underwriting reinnations as to the nonbanking activities are subject to all surance of credit life and credit disability risk, pursuant the terms and conditions set forth in Regulation Y, to section 225.25(b)(8)(i) of Regulation Y; including those in sections 225.7 and 225.23(b)(3) of (3) Michigan Bank, F.S.B., Troy, Michigan, and thereby Regulation Y (12 C.F.R. 225.7 and 225.23(b)(3)), and to engage in operating a savings association, pursuant to the Board's authority to require such modification or section 225.25(b)(9) of Regulation Y; termination of the activities of a bank holding company (4) MNC Leasing Company, Detroit, Michigan, curor any of its subsidiaries as the Board finds necessary to rently inactive; ensure compliance with, or to prevent evasion of, the (5) Independence One Asset Management Corporation, provisions of the BHC Act and the Board's regulations Irvine, California, currently inactive; and and orders issued thereunder. The commitments and (6) MNC Operations and Services, Inc., Farmington conditions relied on by the Board in reaching this deci- Hills, Michigan, currently inactive. sion are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under ORDERS ISSUED UNDER BANK MERGER ACT applicable law. The acquisition of MNC's banking subsidiaries shall Signet Bank/Virginia not be consummated before the fifteenth calendar day Richmond, Virginia following the effective date of this order, and the banking and nonbanking transactions shall not be consum- Order Approving the Merger of Banks and mated later than three months after the effective date of Establishment of Bank Branches this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Chi- Signet Bank/Virginia, Richmond, Virginia ("Signet Vircago, acting pursuant to delegated authority. ginia"), a state member bank, has applied under sec- By order of the Board of Governors, effective tion 18(c) of the Federal Deposit Insurance Act October 16, 1995. (12 U.S.C. § 1828(c)) (the "Bank Merger Act") to merge with Signet Bank/Maryland, Baltimore, Maryland ("Sig- Voting for this action: Chairman Greenspan, Vice Chairman net Maryland"), with Signet Virginia surviving the Blinder, and Governors Kelley, Phillips, and Yellen. Absent and merger.1 Signet Virginia also has applied under section not voting: Governor Lindsey. 9 of the Federal Reserve Act (12 U.S.C. § 321) to establish branch offices at the current locations of the Signet JENNIFER J. JOHNSON Maryland branch offices.2 Deputy Secretary of the Board Notice of the application, affording interested persons an opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Meeting. These benefits also would not adversely affect the finan- Rules of Procedure (12 C.F.R. 262.3(b)). As required by cial condition of MNC or Applicants. The record also indicates that the Bank Merger Act, reports on the competitive effects Applicants began their negotiations to acquire MNC after MNC of the merger were requested from the United States concluded its share repurchase transactions. Moreover, the Board Attorney General, the Office of the Comptroller of the notes that federal and Michigan state courts have authority to provide these shareholders with an appropriate remedy if their allegations of improper actions by MNC management can be sustained, and that the SEC has the authority to address any 1. Upon consummation of the merger, Signet Virginia would securities-related allegations. Based on all the facts of record, the change its name to "Signet Bank." Board does not believe these allegations warrant denial of the 2. The locations of the branches that Signet Virginia proposes to applications and notices. establish are listed in the Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1158 Federal Reserve Bulletin • December 1995 Currency, and the Federal Deposit Insurance Corpora- State Corporation Commission of the Commonwealth of tion. The time for filing comments has expired, and the Virginia and the Maryland Bank Commissioner have Board has considered the application and all the facts of approved this proposal. In light of the foregoing, it record in light of the factors set forth in the Bank Merger appears that this proposal complies with the Maryland Act and section 9 of the Federal Reserve Act. and Virginia interstate banking laws. Signet Virginia and Signet Maryland are wholly owned subsidiaries of Signet Banking Corporation, Other Considerations Richmond, Virginia ("Signet"). Signet is the fifth largest commercial banking organization in Virginia, con- The Board also concludes that the financial and managetrolling deposits of $4.78 billion, representing 6.8 per- rial resources and future prospects of Signet Virginia are cent of the total deposits in commercial banking consistent with approval of this application, as are the organizations in Virginia, and is the fifth largest com- convenience and needs of the communities to be served, mercial banking organization in Maryland, controlling and the other supervisory factors that the Board is redeposits of $2.07 billion, representing 3.9 percent of the quired to consider under the Bank Merger Act, the total deposits in commercial banking organizations in Riegle-Neal Act, and the Federal Reserve Act. Maryland.3 This proposal represents a reorganization of Based on the foregoing and all the facts of record, the Signet's existing banking operations, and therefore con- Board has determined that this application should be, summation of the proposal would not have any signifi- and hereby is, approved. The Board's approval of this cantly adverse effect on competition in any relevant proposal is conditioned on compliance by Signet Virbanking market. ginia with the commitments made in connection with this application. For purposes of this action, the commit- Riegle-Neal Act Analysis ments and conditions relied on in reaching this decision are both conditions imposed in writing by the Board and, Section 102 of the Riegle-Neal Interstate Banking and as such, may be enforced in proceedings under applica- Branching Efficiency Act of 1994 ("Riegle-Neal Act") ble law. (Pub. L. No. 103-328, 108 Stat. 2338 (1994)) authorizes The merger of Signet Maryland with and into Signet banks, after June 1, 1997, to conduct interstate mergers Virginia may not be consummated before the fifteenth and to convert the acquired bank offices into branches of calendar day following the effective date of this order, the acquiring institution. The Riegle-Neal Act, however, and this proposal may not be consummated later than provides that an interstate merger may be approved prior three months after the effective date of this order, unless to June 1, 1997, "if the home state of each bank in- such period is extended by the Board or by the Federal volved in the transaction has in effect, as of the date of Reserve Bank of Richmond, acting pursuant to delegated the approval of such transaction, a law that: authority. (i) Applies equally to all out-of-state banks; and By order of the Board of Governors, effective (ii) Expressly permits interstate merger transactions October 2, 1995. with all out-of state banks."4 Voting for this action: Vice Chairman Blinder and Governors Maryland and Virginia have adopted laws, which ap- Kelley, Lindsey, Phillips, and Yellen. Absent and not voting: Chairman Greenspan. ply equally to all out-of-state banks, allowing interstate mergers between banks located in their states and out-of- JENNIFER J. JOHNSON state banks to occur prior to June 1, 1997.5 Both the Deputy Secretary of Board 3. Deposit data are as of March 31, 1995. 4. 12 U.S.C. § 1831 u(a)(3)(A) (1994). 5. Effective September 29, 1995, the laws of Maryland authorize out-of-state banks to merge with, and subsequently maintain branches previously controlled by, Maryland banks if: (1) The acquiring bank has sufficient capital to safely and soundly support the acquired bank's operations; (2) The consolidated bank will provide increased public benefit; tion in which the Virginia state bank is the resulting bank," as long and as the resulting organization will have adequate management, will (3) The resulting banking institution would not control 30 per- be financially sound, and will provide some public benefit to the cent or more of the state's deposits in depository institutions. state of Virginia. Va. Code Ann. § 6.1-44.15 et seq. (1995). In Md. Code Ann., Fin. Inst. § 5-1001 et seq. (1995). addition, the Virginia interstate banking laws allow out-of-state The interstate banking laws of Virginia provide that "any Vir- banks to merge with Virginia banks and to maintain and operate ginia state bank may maintain and operate one or more branches in Virginia branches acquired as a result of an interstate bank merger. a state other than Virginia pursuant to an interstate merger transac- Id. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1159 Appendix 40. 4820 Eastern Avenue, Baltimore, Maryland 21224 41. 7400 Bradshaw Road, Kingsville, Maryland 21087 Branch offices of Signet Maryland to be established by 42. 721 N. Hammonds Ferry Road, Linthicum, Mary- Signet Virginia: land 21090 43. 7 Street Paul Street, Baltimore, Maryland 21202 1. 8411 Snouffer School Road, Gaithersburg, Maryland 44. 8630 Fenton Street, Silver Spring, Maryland 20910 20879 45. 4305 Mountain Road, Pasadena, Maryland 21122 2. 930 Bay Ridge Road, Annapolis, Maryland 21403 46. 1 Newport Drive, Forest Hill, Maryland 21050 3. 13801 York Road, Cockeysville, Maryland 21230 47.511 Crain Highway, S.E., Glen Burnie, Maryland 4. Race Street, Cambridge, Maryland 21613 21061 5. Blaustein Building, 1 N. Charles Street, Baltimore, 48. 5439 Harford Road, Baltimore, Maryland 21214 Maryland 21201 49. 11234 York Road, Cockeysville, Maryland 21030 6. 9940 York Road, Cockeysville, Maryland 21030 50. 313 S. Second Street, Laurel, Maryland 20707 7. 1777 Reisterstown Road, Pikesville, Maryland 21208 51. 300 E. Lombard Street, Baltimore, Maryland 21202 8. 17 Center Place, Dundalk, Maryland 21222 52. 1782 Merritt Boulevard, Dundalk, Maryland 21222 9. 1111 Mt. Hermon Road, Salisbury, Maryland 21801 53. 2008 E. Monument Street, Baltimore, Maryland 10.5701 Reisterstown Road, Baltimore, Maryland 21205 21215 54. 104 Bureau Drive, Gaithersburg, Maryland 20878 11. 563 Baltimore Pike, Bel Air, Maryland 21014 55. 2000 Linden Avenue, Baltimore, Maryland 21217 12. 4115 Ritchie Highway, Baltimore, Maryland 21225 56.2337 E. Northern Parkway, Baltimore, Maryland 13. 176 Carroll Island Road, Baltimore, Maryland 21220 21214 14.9200 Baltimore National Pike, Ellicott City, 57. 5040 Sinclair Lane, Baltimore, Maryland 21206 Maryland 21042 58. 4204 Ebenezer Road, Baltimore, Maryland 21236 15. 10 Corporate Center, 10400 Little Patuxent, 59. 8807 Pulaski Highway, Baltimore, Maryland 21237 Columbia, Maryland 21044 60. 10 N. Washington Street, Rockville, Maryland 20850 16. 1623 Crofton Center, Crofton, Maryland 21114 61. 564 Governor Ritchie Highway., Severna Park, 17. 1039 E. Baltimore Street, Baltimore, Maryland Maryland 21146 21202 62. 36 S. Charles Street, Baltimore, Maryland 21201 18. Dover Street, Easton, Maryland 21601 63. 2100 York Road, Baltimore, Maryland 21093 19. 201 Russell Avenue, Gaithersburg, Maryland 20877 64. 725 Mt. Wilson Lane, Baltimore, Maryland 21208 20. 7101 Wisconsin Avenue, Bethesda, Maryland 20814 65. 6817 Belair Road, Baltimore, Maryland 21206 21. 15707 Columbia Pike, Burtonsville, Maryland 20866 66. 2510 Riva Road, Annapolis, Maryland 21401 22. 582 Frederick Avenue, Catonsville, Maryland 21228 67. 3635 Old Court Road, Pikesville, Maryland 21208 23. Kent Plaza Shopping Center, Chestertown, Maryland 68. 9060 Liberty Road, Randallstown, Maryland 21133 21620 69. 5121 Roland Avenue, Baltimore, Maryland 21210 24.8600 Baltimore/Washington Boulevard, Jessup, 70. 16707 Crabbs Branch Way, Rockville, Maryland Maryland 20794 20855 25. 6309 York Road, Baltimore, Maryland 21212 71. 1776 E. Jefferson Street, Rockville, Maryland 20852 26. 601 Crusader Road, Cambridge, Maryland 21613 72. 102 W. Pennsylvania Avenue, Towson, Maryland 27. 1427 Liberty Road, Eldersburg, Maryland 21784 21204 28. 632 Eastern Avenue, Essex, Maryland 21221 73. 1810 N. Salisbury Boulevard, Salisbury, Maryland 29. 509 N. Frederick Avenue, Gaithersburg, Maryland 21801 20877 74. 10345 Reisterstown Road, Owings Mills, Maryland 30. 4830 Butler Road, Glyndon, Maryland 21071 21117 31. 2056 Harford Road, Baltimore, Maryland 21218 75. 8070 Ritchie Highway, Pasadena, Maryland 21122 32. 2030 E. Joppa Road, Baltimore, Maryland 21234 76. 1228 N. Charles Street, Baltimore, Maryland 21201 33. 4735 Liberty Heights Avenue, Baltimore, Maryland 77. 11945 Reisterstown Road, Reisterstown, Maryland 21207 21136 34. 8775 J. Cloudleap Court, Columbia, Maryland 21045 78. 860 N. Rolling Road, Baltimore, Maryland 21228 35. 3608 Milford Mill Road, Baltimore, Maryland 21207 79. 850 Sligo Avenue, Silver Spring, Maryland 20910 36. 1241 W. Pratt Street, Baltimore, Maryland 21223 80. 842 S. Salisbury Boulevard, Salisbury, Maryland 37. 5 Bel Air South Parkway, Bel Air, Maryland 21014 20910 38. Glebe Road at Marlboro Avenue, Easton, Maryland 81. 3200 W. North Avenue, Baltimore, Maryland 21216 21601 82. 2439 Frederick Avenue, Baltimore, Maryland 21223 39. 5234 York Road, Baltimore, Maryland 21212 83. 6225 N. Charles Street, Baltimore, Maryland 21212 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1160 Federal Reserve Bulletin • December 1995 84. 11427 Georgia Avenue, Wheaton, Maryland 20902 ers related investment advisory services. CBN would 85. 989 Fairmount Avenue, Towson, Maryland 21204 continue to trade for its own account, for purposes other 86. 11161 New Hampshire Avenue, Silver Spring, than hedging, in the same futures contracts for which it Maryland 20904 proposes to offer FCM and advisory services to third parties. The combination of activities proposed for CBN is not ORDERS ISSUED UNDER FEDERAL RESERVE ACT on the list of activities that the Board has found to be usual in connection with the transaction of banking or Chemical International Finance Limited financial operations abroad, because the Board's Regula- New York, New York tion Y does not allow a subsidiary that engages in proprietary trading for purposes other than hedging to Order Granting Approval to Engage in the Execution provide FCM services to third parties. 12 C.F.R. and Clearance, for its Own Account and that of 211.5(d)(17), 225.25(b)(18)(ii). Under the Federal Re- Non-Affiliated Parties, of Certain Futures Contracts on serve Act, however, the Board may permit Edge corporathe Oslo Stock Exchange, Oslo, Norway tions to engage through subsidiaries in such other activities abroad that the Board determines are usual in Chemical International Finance Limited, ("Chemical In- connection with the transaction of the business of bankternational"), New York, New York, an Edge corpora- ing or other financial operations abroad and are contion subsidiary of Chemical Bank, New York, New sistent with the Federal Reserve Act or the Bank Hold- York, has applied under section 25A of the Federal ing Company Act. 12 U.S.C. § 615(c), 12 C.F.R. Reserve Act and section 211.5(d)(20) of the Board's 211.5(d)(20). Regulation K (12 C.F.R. 211.5(d)(20)) for approval to In its exercise of this authority, the Board considers engage, through its subsidiary, Chemical Bank Norge, whether the conduct of the activity would enable U.S. A.S. ("CBN"), Oslo, Norway, in the execution and banking organizations to compete more effectively with clearing and execution only of futures contracts on Nor- foreign organizations in the provision of banking and wegian government bonds on the Oslo Stock Exchange other financial services. The Board also takes into ac- (the "Exchange"), both for its own account and the count whether the performance of the activity by a U.S. account of non-affiliated customers, and to engage in banking organization overseas would be consistent with providing related investment advice to customers. the prudent conduct and management of the company's Chemical Bank is a principal bank subsidiary of banking and nonbanking organizations. In this regard, Chemical Banking Corporation, a bank holding com- the Board takes into consideration the risks inherent in pany. Chemical Banking Corporation is the fourth larg- the activity, especially whether those risks are of a type est banking organization in the United States, with con- and nature normally associated with banking or activities solidated assets of $179 billion as of June 30, 1995. conducted by banks. The Board also examines the effect CBN had consolidated assets of approximately the activity would have on the capital and managerial $1.3 billion as of June 30, 1995. CBN, a bank that is resources of the U.S. banking organization. licensed and supervised by the Norwegian Banking, The Board recently approved the combination of FCM Insurance and Securities Commission, is a primary and advisory services with proprietary trading in the dealer in Norwegian government bonds. CBN trades United States by a U.S. subsidiary of a foreign bank.3 interest rate futures on Norwegian government bonds on Based on the Board's previous findings concerning acthe Exchange for its own account and for the account of tivities of this nature and Chemical International's repreaffiliates.1 Chemical International proposes that CBN sentation that other Norwegian banks engage in these execute and clear, and execute without clearing, these activities, the Board concludes that the proposed activifutures contracts2 as a futures commission merchant ties are usual in connection with the transaction of ("FCM") for nonaffiliated customers, and offer custom- banking or other financial operations abroad.4 The Board also has considered the policies and procedures the appli- 1. CBN also engages in commercial lending, the issuance of letters of credit and guarantees, foreign exchange activities, and the Corporation, 76 Federal Reserve Bulletin 770 (1990) (United trading of swaps, forward rate agreements and other instruments. Kingdom government bond futures). 2. The futures contracts for which CBN seeks approval are based 3. Swiss Bank Corporation, 81 Federal Reserve Bulletin 185 on the 10-year Norwegian government bond S463 maturing in (1995) ("Swiss Bank"). 2002 and the 7-year Norwegian government bond S462 maturing in 4. The Board also has determined in its Regulation K that acting 1999. The Board previously has approved the combination of as an FCM in accordance with the Board's Regulation Y and the execution and clearance activities and the provision of investment provision of investment advice are usual in connection with the advice under Regulations K and Y for instruments similar to these transaction of banking or other financial operations abroad. See futures contracts. See The Hong Kong and Shanghai Banking 12 C.F.R. 211.5(d)(8) and (17). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1161 cant has proposed for mitigating the potential conflicts International and Chemical Bank to compete in the of interest arising from this combination of activities, as market for Norwegian government bonds and related well as certain other commitments made by Chemical futures contracts by offering, through CBN, a more International. Based on all the facts of record, the Board complete range of financial products and services to concludes that Chemical International has put into place customers outside the United States, the Board has detersystems and procedures that are consistent with the mined that the proposed activities should be approved. Board's existing policies and guidance in this area and The Board has further determined on the basis of the are adequate to minimize the potential conflicts of inter- record that the conduct of the proposed activities is est, and related risks presented by the proposed combina- consistent with the supervisory purposes of the Federal tion of activities.5 Reserve Act. Accordingly, the application is approved. The Board also has considered the risks to which CBN Approval of this application is conditioned on complimay be exposed as a result of providing execution-only ance by Chemical International and CBN with commitservices on the Exchange, and the measures that would ments made in connection with this application. The be taken by applicant to manage and control these risks.6 commitments referred to above are conditions imposed Chemical International has committed that CBN, in eval- in writing by the Board in connection with its decision, uating prospective execution-only customers, will look and may be enforced under applicable law against to the market reputation of the customer, as well as its Chemical International and its affiliates. financial adviser, to determine whether the risks associ- By order of the Board of Governors, effective ated with executing trades for the customer are within October 2, 1995. acceptable limits.7 On the basis of all the facts of record and the commit- Voting for this action: Vice Chairman Blinder and Governors ments made by Chemical International, and taking into Kelley, Lindsey, Phillips, and Yellen. Absent and not voting: Chairman Greenspan. consideration the experience of Chemical Bank and its subsidiaries with managing the risks associated with JENNIFER J. JOHNSON FCM activities, the Board concludes that the risks of the Deputy Secretary of the Board execution-only services to be provided by CBN would be appropriately managed and limited. Moreover, the Citibank Overseas Investment Corporation proposed expansion of CBN's activities would not entail New Castle, Delaware any additional investment in CBN by Chemical International. Based on the foregoing representations, other facts of Order Granting Approval to Engage in the Execution record and the commitments made by Chemical Interna- and Clearance of Certain Futures Contracts on the tional, and the fact that the proposed expansion of the MEFF Sociedad Rectora de Productos Financieros activities of CBN would enhance the ability of Chemical Derivados de Renta Variable, S.A., Madrid, Spain Citibank Overseas Investment Corporation ("COIC"), 5. The proposed FCM activities would be conducted in accor- New Castle, Delaware, an Edge corporation subsidiary dance with the requirements of Regulation Y, other than its prohibi- of Citibank, N.A., New York, New York, has applied tion on proprietary trading for purposes other than hedging. under section 25 A of the Federal Reserve Act and the 6. Brokers providing execution-only services on the Exchange Board's Regulation K (12 C.F.R. 211.5(d)(17), are subject only to limited credit risk. Under the rules of the Exchange, a broker providing execution-only services is liable only 211.5(d)(20)) for approval to engage, through its subsidfor the obligation of the customer to pay trading commissions and iary, Citibank Espana, S.A. ("CBE"), Madrid, Spain, in option premium. Unlike the situation prevailing on other futures the execution and clearing, execution only, and clearing exchanges, an execution-only broker cannot be held liable for a only of futures contracts on an equity index on the customer's obligation to post margin or effect settlement of futures contracts at maturity, which are risks borne entirely by the custom- MEFF Sociedad Rectora de Productos Financieros Derier's clearing broker. See also Swiss Bank; Citicorp, 81 Federal vados de Renta Variable, S.A. ("MEFFRV"), Madrid, Reserve Bulletin 164 (1995); J.P. Morgan & Co. Incorporated, 80 Spain. Federal Reserve Bulletin 151 (1994). Citibank, N.A. is a principal bank subsidiary of Citi- 7. The Board also has reviewed the rules of the Exchange to corp, a bank holding company. Citicorp currently is the assess the risks of acting as an FCM on the Exchange. Under these rules, CBN would not share in the risks associated with default by largest banking organization in the United States, with other clearing brokers. On the basis of its review of the rules of the consolidated assets of $257 billion as of June 30, 1995. Exchange, including its customer margin rules and requirement that CBE had consolidated assets of approximately $2.2 bilfutures positions be marked to market daily, the Board concludes lion as of December 31, 1994. CBE, a bank that is that CBN's conduct of the proposed execution and clearing and supervised by the Bank of Spain, is a custodian clearing execution-only FCM services on the Exchange would not subject CBN to undue risk. member of the MEFFRV, where it trades in futures for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1162 Federal Reserve Bulletin • December 1995 the account of its affiliates.1 COIC has applied for ap- foreign organizations in the provision of banking and proval of a proposal for CBE to execute and clear, other financial services. The Board also takes into acexecute without clearing, and clear without executing count whether the performance of the activity by a U.S. futures on the IBEX 35 stock index2 a futures commis- banking organization overseas would be consistent with sion merchant ("FCM") for nonaffiliated customers. the prudent conduct and management of the company's The Board's Regulation K permits U.S. banking orga- banking and nonbanking organizations. In this regard, nizations to engage in executing and clearing futures the Board takes into consideration the risks inherent in contracts as an FCM for third-party customers, on ex- the activity, especially whether those risks are of a type changes and with respect to contracts approved by the and nature normally associated with banking or activities Board.3 On the basis of the record, including the rules of conducted by banks. The Board also examines the effect the MEFFRV, the Board determines that the MEFFRV the activity would have on the capital and managerial and the IBEX 35 futures contract meet the Board's resources of the U.S. banking organization. standards for futures exchanges and futures contracts, In several cases, the Board has determined that the respectively, and should be, and hereby are, approved for provision of execution-only and clearing-only FCM serthe purposes of Regulation K.4 vices is closely related to banking under the Bank Hold- The execution-only and clearing-only activities pro- ing Company Act. The Board has approved the conduct posed for CBE are not on the list of activities in Regula- of these activities in the United States by a subsidiary of tion K that the Board has found to be usual in connection Citicorp, COIC's parent organization,6 as well as by with the transaction of banking or financial operations subsidiaries of other U.S. bank holding companies and abroad.5 Under the Federal Reserve Act, however, the foreign banks.7 Board may permit Edge corporations to engage through Based on the Board's previous findings concerning subsidiaries in such other activities abroad that the Board these FCM activities, and on the fact that banks in Spain determines are usual in connection with the transaction and other countries engage in such activities, the Board of the business of banking or other financial operations concludes that the proposed execution-only and clearingabroad and are consistent with the Federal Reserve Act only activities are usual in connection with the transacor the Bank Holding Company Act. 12 U.S.C. § 615(c), tion of banking or other financial operations abroad.8 12 C.F.R. 211.5(d)(20). The Board also has considered the policies and proce- In its exercise of this authority, the Board considers dures the applicant has proposed for managing and conwhether the conduct of the activity would enable U.S. trolling the potential risks arising from these activities. banking organizations to compete more effectively with COIC has committed that CBE will conduct its execution-only and clearing-only activities in accordance with the commitments made by its parent organi- 1. CBE also engages in commercial banking, underwriting, deal- zation in Citicorp. Based on these commitments and all ing, and swap market activities authorized by regulation K. the facts of record, and taking into consideration the 2. The IBEX 35 index is based on the 35 most heavily traded experience of Citicorp and its subsidiaries with manag- Spanish stocks. Futures on the IBEX 35 index have terms and ing the risks associated with FCM activities, the Board conditions similar to those of foreign equity index contracts previously approved by the Board. See, e.g., Sakura Bank Limited, 79 concludes that COIC's proposed systems and procedures Federal Reserve Bulletin 728 (1993) (CAC 40 stock index futures); are consistent with the Board's existing policies and Northern Trust Corporation, 79 Federal Reserve Bulletin 723 guidance in this area and are adequate to manage and (1993) ("Northern Trust") (Deutsche Aktienindex 30 stock index limit the risks presented by the proposed execution-only and FT-SE 100 equity index futures). 3. 12 C.F.R. 211.5(d)(17). Such FCM activities are required to be and clearing-only activities on the MEFFRV. Moreover, conducted in accordance with the limitations specified in Regula- the proposed expansion of CBE's activities would not tion Y, 12 C.F.R. 225.25(b)(18). COIC has represented that CBE will execute and clear futures contracts in accordance with these limitations. 4. The Board has not previously approved the conduct of FCM 6. Citicorp, 81 Federal Reserve Bulletin 164 (1995) {"Citiactivities on the MEFFRV, although it has approved the conduct of corp"). such activities on a sister exchange. Board letter dated December 4, 7. See, e.g., Swiss Bank Corporation, 81 Federal Reserve Bulle- 1991, to Douglas E. Harris. The Board has reviewed the rules of the tin 185 (1995); J.P. Morgan & Co. Incorporated, 80 Federal MEFFRV to assess the risks of acting as an FCM there. On the Reserve Bulletin 151 (1994); Northern Trust. The Board recently basis of its review of these rules, which do not subject members of has also approved the provision of execution-only FCM services the exchange to liability for defaults by other members, the Board outside the United States by a subsidiary of another U.S. banking concludes that CBE's conduct of the proposed activities would not organization. Chemical International Finance Corporation, 81 expose CBE to undue risk. Federal Reserve Bulletin 1160 (1995). 5. Regulations K and Y, while permitting execution and clearing 8. The Board also has determined in its Regulation K that acting of futures contracts for customers under certain circumstances, do asan FCM in accordance with the Board's Regulation Y is usual in not authorize the provision of execution-only or clearing-only FCM connection with the transaction of banking or other financial operaservices. 12 C.F.R. 211.5(d)(17), 225.25(b)(18). tions abroad. See 12 C.F.R. 211.5(d)(17). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1163 entail any additional investment in CBE by the Citicorp CBE with commitments made in connection with this organization. application. The commitments referred to above are con- Based on the foregoing and other facts of record, the ditions imposed in writing by the Board in connection commitments made by COIC, and the fact that the with its decision, and may be enforced under applicable proposed expansion of the activities of CBE would en- law against COIC and its affiliates. hance the ability of COIC and CBE to compete in the By order of the Board of Governors, effective Spanish market, the Board has determined that the pro- October 4, 1995. posed execution-only and clearing-only activities should be approved. On the basis of the record, the Board has Voting for this action: Chairman Greenspan and Governors further determined on the basis of the record that the Kelley, Lindsey, Phillips, and Yellen. Absent and not voting: Vice Chairman Blinder. conduct of the proposed activities is consistent with the supervisory purposes of the Federal Reserve Act. Accordingly, the application is approved. Approval of this JENNIFER J. JOHNSON application is conditioned on compliance by COIC and Deputy Secretary of the Board 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 Applicant(s) Bank(s) Effective Date SunTrust Banks, Inc., Ponte Vedra Banking Corporation, October 23, 1995 Atlanta, Georgia Ponte Vedra Beach, Florida Sun Banks, Inc., Orlando, Florida Section 4 Applicant(s) Bank(s) Effective Date Old National Bancorp, First United Savings Bank, f.s.b., October 20, 1995 Evansville, Indiana Greencastle, Indiana SunTrust Banks, Inc., Stephens Diversified Leasing, Inc., October 5, 1995 Atlanta, Georgia Reno, Nevada Trust Company of Georgia, Atlanta, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1164 Federal Reserve Bulletin • December 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 Applicant(s) Bank(s) Reserve Bank Effective Date Ameribank Bankshares, Inc. First National Bancshares, Inc., Atlanta October 6, 1995 Hollywood, Florida Hollywood, Florida BancMidwest Corporation, South St. Paul Bancshares, Inc., Minneapolis October 11, 1995 St. Paul, Minnesota South St. Paul, Minnesota Southview Bank, South St. Paul, Minnesota Banque Nationale de Paris, Banc West Corporation, San Francisco September 22, 1995 Paris, France San Francisco, California Bank of the West, San Francisco, California BayBanks, Inc., Cornerstone Financial Corporation, Boston October 16, 1995 Boston, Massachusetts Derry, New Hampshire Caldwell Holding Company, Citizens Progressive Bank, Dallas October 19, 1995 Columbia, Louisiana Columbia, Louisiana Camino Real Bancshares, Inc., Texas Bank, N.A., Dallas September 28, 1995 San Antonio, Texas San Antonio, Texas Camino Real Delaware, Inc., Wilmington, Delaware Carolina Community Bancshares, SouthTrust Bank of Dillon County, Richmond September 27, 1995 Inc., Latta, South Carolina Latta, South Carolina Century South Banks, Inc., Peoples Bank, Atlanta September 29, 1995 Dahlonega, Georgia Lavonia, Georgia Citizens Bancorp of Delaware, Citizens National Bank, Dallas October 18, 1995 Inc., Victoria, Texas Wilmington, Delaware Citizens Community Bancshares, Citizens Community Bank, Atlanta September 27, 1995 Inc., Winchester, Tennessee Winchester, Tennessee Citizens National Bancshares, Inc. Peoples Bancshares, Inc., St. Louis October 24, 1995 Hope, Arkansas Lewisville, Arkansas CNB Bancorp, Inc., The Citizens National Bank of Cleveland October 13, 1995 Woodsfield, Ohio Woodsfield, Woodsfield, Ohio CNB Bancshares of Victoria, Inc., Citizens Bancorp of Delaware, Inc. Dallas October 18, 1995 Victoria, Texas Wilmington, Delaware Citizens National Bank, Victoria, Texas Draper Bancorp, Draper Bank and Trust, San Francisco October 24, 1995 Draper, Utah Draper, Utah F&A Financial Company, The Farmers National Bank of Cleveland October 13, 1995 Kittanning, Pennsylvania Kittanning, Kittanning, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1165 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Farmers Bancshares, Inc., The Farmers Bank & Trust of Atlanta October 6, 1995 Cheneyville, Louisiana Cheneyville, Cheneyville, Louisiana First Midwest Bancorp, Inc. CF Bancorp, Inc., Chicago October 18, 1995 Itasca, Illinois Davenport, Iowa Citizens Federal Savings Bank, FSB, Davenport, Iowa First National Bancshares, Inc., First National Bancshares, Inc., Kansas City October 24, 1995 ESOP and 401(k) Trusts, Goodland, Kansas Goodland, Kansas First Paducah Bancshares of The First National Bank of Paducah, Dallas October 18, 1995 Delaware, Inc., Paducah, Texas Dover, Delaware First Paducah Bancshares of First Paducah Bancshares of Dallas October 18, 1995 Texas, Inc., Delaware, Inc., Paducah, Texas Dover, Delaware The First National Bank of Paducah, Paducah, Texas FSB Bancshares, Inc., FSB Bancshares of Delaware, Inc., Dallas October 25, 1995 Clute, Texas Wilmington, Delaware First State Bank, Clute, Texas FSB Bancshares of Delaware, Inc. First State Bank, Dallas October 25, 1995 Wilmington, Delaware Clute, Texas FSB Corp., Farmers State Bank of Sublette, Chicago October 12, 1995 Sublette, Illinois Sublette, Illinois Harrell Bancshares, Inc., First Bank of South Arkansas, St. Louis October 6, 1995 Camden, Arkansas Junction City, Arkansas Calhoun County Bank, Hampton, Arkansas Heart of Georgia Bancshares, Inc. Citizens Bank & Trust Company of Atlanta October 6, 1995 Mount Vernon, Georgia Mount Vernon, Mount Vernon, Georgia Hibernia Corporation, FNB Bancshares, Inc., Atlanta October 23, 1995 New Orleans, Louisiana Lake Providence, Louisiana The First National Bank of Lake Providence, Lake Providence, Louisiana Home Savings Bank, SSB Home Savings Bank, SSB, Atlanta October 26, 1995 Employee Stock Ownership Meridian, Mississippi Plan, Meridian, Mississippi Investors Financial Services Corp. Investors Bank & Trust Company, Boston October 24, 1995 Boston, Massachusetts Boston, Massachusetts Lake Elmo Bancshares, Inc., Lake Elmo Bancorp, Inc., Minneapolis September 27, 1995 Lake Elmo, Minnesota Lake Elmo, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1166 Federal Reserve Bulletin • December 1995 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Liberty Bancshares, Inc., Liberty Bank, St. Louis October 11, 1995 Springfield, Missouri Springfield, Missouri Malvern Bancorporation, The National Bank of Malvern, Philadelphia October 18, 1995 Malvern, Pennsylvania Malvern, Pennsylvania Marblehead Bancorp, The Marblehead Bank, Cleveland October 2, 1995 Marblehead, Ohio Marblehead, Ohio Merchants Bancorp, Inc., Valley Banc Services Corp., Chicago September 29, 1995 Aurora, Illinois St. Charles, Illinois National Westminster Bank Pic, Natwest Bank National Association, New York October 6, 1995 London, England Scranton, Pennsylvania Nat West Holdings Inc., New York, New York National Westminster Bancorp Inc., Jersey City, New Jersey National Westminster Bancorp NJ, Jersey City, New Jersey Northwest Bancorp, MHC, Jamestown Savings Bank, Cleveland October 6, 1995 Warren, Pennsylvania Lakewood, New York Overton Financial Corporation, Longview Financial Corporation, Dallas October 20, 1995 Overton, Texas Longview, Texas Overton Delaware Corporation, Dover, Delaware Park Bank Corporation of Duluth, Park State Bank, Minneapolis October 25, 1995 Duluth, Minnesota Duluth, Minnesota Peoples of Fleming County The Peoples Bank of Fleming County, Cleveland October 4, 1995 Bancorp, Inc., Flemingsburg, Kentucky Flemingsburg, Kentucky Pinnacle Bancorp, Inc., State Bank, Kansas City October 20, 1995 Central City, Nebraska Palmer, Nebraska The Farmers National Bank of Central City, Central City, Nebraska Pioneer Bancshares, Inc., Sweetwater Valley Corporation, Atlanta October 12, 1995 Chattanooga, Tennessee Sweetwater, Tennessee Premier Financial Bancorp, Inc., The Citizens Bank, Cleveland October 10, 1995 Vanceburg, Kentucky Snarpsburg, Kentucky Randall Bancorp, Inc., Randall Holding Co., Inc., Minneapolis October 19, 1995 Pine River, Minnesota Pine River, Minnesota Norbanc Group, Inc., Pine River, Minnesota Republic Security Financial Republic Security Bank, Atlanta October 19, 1995 Corporation, West Palm Beach, Florida West Palm Beach, Florida Shamrock Bancshares, Inc., Clayton State Bank, Kansas City October 23, 1995 Coalgate, Oklahoma Clayton, Oklahoma Southern Financial Bancorp, Inc. Southern Financial Bank, Richmond September 28, 1995 Warrenton, Virginia Warrenton, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1167 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Texas Bancorp Shares, Inc. Camino Real Bancshares, Inc. Dallas September 28, 1995 San Antonio, Texas San Antonio, Texas Camino Real Delaware, Inc., Wilmington, Delaware Camino Real Bank, N.A., Eagle Pass, Texas Unison Bancorp, Inc., Western National Bank, Kansas City September 29, 1995 Lenexa, Kansas Lenexa, Kansas ValliCorp Holdings, Inc., El Capitan Bancshares, Inc., San Francisco September 22, 1995 Fresno, California Sonora, California Vectra Banking Corporation, First Denver Corporation, Kansas City October 26, 1995 Denver, Colorado Englewood, Colorado White Pine Bancorp Inc., Norbanc Group, Inc., Minneapolis September 27, 1995 Pine River, Minnesota Pine River, Minnesota Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Banc One Corporation, JP Mortgage Co., Cleveland September 26, 1995 Columbus, Ohio Columbus, Ohio Banc One Funding Corporation, Columbus, Ohio Banc One Payment Services, Will conduct permissible merchant Cleveland October 19, 1995 L.L.C., transaction (both debit and credit) Melville, New York card processing and check authorization and guarantee services throughout the United States Carlinville National Bank Shares, Carlinville Tax Service, St. Louis October 18, 1995 Inc., Carlinville, Illinois Carlinville, Illinois Carroll County Bancshares Inc., Carroll Credit, Inc., Chicago October 12, 1995 Carroll, Iowa Carroll, Iowa Citicorp, Citicorp North America, Inc., New York October 25, 1995 New York, New York New York, New York Crestar Financial Corporation, Loyola Capital Corporation, Richmond October 13, 1995 Richmond, Virginia Baltimore, Maryland Dartmouth Capital Group, Inc., SDN Bancorp, San Francisco September 22, 1995 Gilford, New Hampshire Encinitas, California Dartmouth Capital Group, L.P., Gilford, New Hampshire First American Corporation, Charter Federal Savings Bank, Atlanta October 20, 1995 Nashville, Tennessee Bristol, Virginia First Midwest Bancorp, Inc., CF Bancorp, Inc., Chicago October 18, 1995 Itasca, Illinois Davenport, Iowa Citizens Federal Savings Bank, FSB, Davenport, Iowa Mellon Bank Corporation, Target Trust Company, Cleveland September 25, 1995 Pittsburgh, Pennsylvania Philadelphia, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1168 Federal Reserve Bulletin • December 1995 Section A—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date MidWest Bancorporation, Inc., Graceville Insurance Agency, Inc., Minneapolis September 27, 1995 Minnetonka, Minnesota Graceville, Minnesota Todd County Agency, Inc., Minnetonka, Minnesota Norwest Corporation, AMFED Financial, Inc., Minneapolis October 26, 1995 Minneapolis, Minnesota Reno, Nevada American Federal Savings Bank, Reno, Nevada Pikeville National Corporation, To engage de novo in data processing Cleveland October 17, 1995 Pikeville, Kentucky activities Stichting Prioriteit ABN AMRO LINC Financial Services, Inc., Chicago October 6, 1995 Holding, Chicago, Illinois Amsterdam Zuid-Ooost, The Netherlands Stichting Administratiekantoor ABN AMRO Holding, Amsterdam Zuid-Ooost, The Netherlands ABN AMRO Holding N.V., Amsterdam Zuid-Ooost, The Netherlands ABN AMRO Bank N.V., Amsterdam Zuid-Ooost, The Netherlands MeesPierson N.V., Amsterdam and Rotterdam, The Netherlands United Security Bancorporation, USB Mortgage Company, Inc., San Francisco September 22, 1995 Spokane, Washington Spokane, Washington USB Leasing, Inc., Spokane, Washington Whitney Corporation of Iowa, To make and service loans Chicago October 18, 1995 Atlantic, Iowa WCN Bancorp, To make and service loans Chicago October 11, 1995 Wisconsin Rapids, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1169 Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date 401k Plan and ESOP of United New USTC Holdings Corporation, New York October 25, 1995 States Trust Company of New New York, New York York and Affiliated Companies, New York, New York Camden National Corporation, UNITEDCORP, Boston October 20, 1995 Camden, Maine Bangor, Maine Trust Company of Maine, Inc., Bangor, Maine First Bank System, Inc., Midwestern Services, Inc., Minneapolis October 2, 1995 Minneapolis, Minnesota Omaha, Nebraska Southwest Holdings, Inc., Omaha, Nebraska SWH & K Partnership, Omaha, Nebraska FBS Interim Bank, FSB, Omaha, Nebraska PNC Bank Corp., Midlantic Corporation, Cleveland September 26, 1995 Pittsburgh, Pennsylvania Edison, New Jersey PNC Bancorp, Inc., Wilmington, Delaware 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 Date Rapides Bank and Trust Company, Central Bank, October 26, 1995 Alexandria, Louisiana Monroe, Louisiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1170 Federal Reserve Bulletin • December 1995 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. Applicant(s) Bank(s) Reserve Bank Effective Date BankWest, BankWest, Kansas City October 12, 1995 Goodland, Kansas St. Francis, Kansas Crestar Bank MD, The Chase Manhattan Bank of Richmond September 22, 1995 Bethesda, Maryland Maryland, Baltimore, Maryland The Fifth Third Bank, Bank One Cincinnati, N.A., Cleveland October 23, 1995 Cincinnati, Ohio Cincinnati, Ohio First Virginia Bank-Colonial, First Virginia Bank-Southside, Richmond October 26, 1995 Richmond, Virginia Farmville, Virginia Rolling Hills Bank & Trust, Griswold State Bank, Chicago September 22, 1995 Atlantic, Iowa Griswold, Iowa Security Savings Bank, Boatmen's Bank of Fort Dodge, Chicago September 29, 1995 Farnhamville, Iowa Fort Dodge, Iowa Southern Financial Bank, Southern Financial Federal Savings Richmond September 28, 1995 Warrenton, Virginia Bank, Warrenton, Virginia ValliWide Bank, El Capitan National Bank, San Francisco September 22, 1995 Fresno, California Sonora, California Vectra Bank, The First National Bank of Denver, Kansas City October 26, 1995 Denver, Colorado Denver, Colorado PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the September 12, 1995, the court denied petitioners' motion Federal Reserve Banks in which the Board of Governors is for an emergency stay of the Board's orders. not named a party. Jones v. Board of Governors, No. 95-1359 (D.C. Cir., filed July 17, 1995). Petition for review of a Board order dated Menick v. Greenspan, No. 95-CV-01916 (D. D.C., filed June 19, 1995, approving the application by First Com- October 10, 1995). Complaint alleging sex, age, and merce Corporation, New Orleans, Louisiana, to acquire handicap discrimination in employment. Lakeside Bancshares, Lake Charles, Louisiana. Petitioner Kuntz v. Board of Governors, No. 95-1495 (D.C. Cir., filed filed a motion for a stay of the Board's order pending September 21, 1995). Petition for review of Board order appeal on August 16, 1995. On August 29, 1995, the dated August 23, 1995, approving the applications of The Board filed a motion to dismiss, and on September 5 it Fifth Third Bank, Cincinnati, Ohio, to acquire certain filed its opposition to the stay motion. assets and assume certain liabilities of 12 branches of Money Station, Inc. v. Board of Governors, No. 95-1182 PNC Bank, Ohio, N.A., Cincinnati, Ohio, and to establish (D.C. Cir., filed March 30, 1995). Petition for review of a certain branches. The Board's motion to dismiss was Board order dated March 1, 1995, approving notices by filed on October 26, 1995. Bank One Corporation, Columbus, Ohio; CoreStates Fi- Lee v. Board of Governors, No. 94-4134 (2nd Cir., filed nancial Corp., Philadelphia, Pennsylvania; PNC Bank August 22, 1995). Petition for review of Board orders Corp., Pittsburgh, Pennsylvania; and KeyCorp, Clevedated July 24, 1995, approving certain steps of a cor- land, Ohio, to acquire certain data processing assets of porate reorganization of U.S. Trust Corporation, New National City Corporation, Cleveland, Ohio, through a York, New York, and the acquisition of U.S. Trust by joint venture subsidiary. Oral argument is scheduled for Chase Manhattan Corporation, New York, New York. On February 2, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1171 Jones v. Board of Governors, No. 95-1142 (D.C. Cir., filed Final Decision March 3, 1995). Petition for review of a Board order dated February 2, 1995, approving the applications by This is an administrative proceeding pursuant to sec- First Commerce Corporation, New Orleans, Louisiana, to tion 8(e) of the Federal Deposit Insurance Act ("FDI merge with City Bancorp, Inc., New Iberia, Louisiana, Act"), 12 U.S.C. § 1818(e), in which the Office of the and First Bankshares, Inc., Slidell, Louisiana. Petitioner Comptroller of the Currency of the United States of filed a motion for injunctive relief and for a stay of the America ("OCC") seeks to prohibit Respondent Wil- Board's order on April 3, 1995. On August 17, 1995, the liam Vasa ("Vasa") from further participation in the court denied the motion. Oral argument on the petition affairs of any federally-supervised financial institution as for review is scheduled for February 27, 1996. a result of his conduct during his former affiliation as Kuntz v. Board of Governors, No. 95-3044 (6th Cir., filed vice-president and loan officer of First National Bank of January 12, 1995). Petition for review of a Board order Southeast Denver, Denver, Colorado (the "Bank"). As dated December 19, 1994, approving an application by required by statute, the OCC has referred the action to KeyCorp, Cleveland, Ohio, to acquire BANKVERMONT the Board of Governors of the Federal Reserve System Corp., Burlington, Vermont. On September 21, the court ("Board") for final decision. granted the Board's motion to dismiss. The proceeding comes before the Board in the form of In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., a Recommended Decision by Administrative Law Judge filed January 6, 1995). Action to enforce subpoena seek- ("ALJ") Walter J. Alprin, issued following an adminising pre-decisional supervisory documents sought in con- trative hearing held on December 13 and 14, 1994, in nection with an action by Bank of New England Corpora- Denver, Colorado, and the post-hearing filings of the tion's trustee in bankruptcy against the Federal Deposit parties. In the Recommended Decision, the ALJ found Insurance Corporation. The Board filed its opposition on that Vasa used his position as vice-president and loan January 20, 1995. Oral argument on the motion was held officer of the Bank to originate fraudulent loans in order July 14, 1995. to obtain the loan proceeds for himself. As a result of Beckman v. Greenspan, No. 95-35473 (9th Cir., file May 4, such conduct, the Bank suffered a loss of $48,994.41. 1995). Appeal of dismissal of action against Board and The ALJ found that Vasa breached his fiduciary duty to others seeking damages for alleged violations of constitu- the Bank and committed unsafe or unsound banking tional and common law rights. The appellants' brief was practices. Vasa did not submit exceptions to the Recomfiled on June 23, 1995; the Board's brief was filed on mended Decision. July 12, 1995. Accordingly, the Board hereby makes its Final Deci- Board of Governors v. Ghaith R. Pharaon, No. 91-CIV- sion, and adopts the ALJ's Recommended Decision, 6250 (S.D. New York, filed September 17, 1991). Action Recommended Findings of Fact and Recommended to freeze assets of individual pending administrative adju- Conclusions of Law together with the reasoning and dication of civil money penalty assessment by the Board. citations contained therein, except as specifically supple- On September 17, 1991, the court issued an order tempo- mented or modified herein. The Board therefore orders rarily restraining the transfer or disposition of the individ- that the attached Order of Prohibition issue against Vasa ual's assets. prohibiting him from future participation in the affairs of any federally-supervised financial institution without the approval of the appropriate supervisory agency. FINAL ENFORCEMENT DECISION ISSUED BY THE Statement of the Case BOARD OF GOVERNORS A. Standards for Prohibition Order In the Matter of Under the FDI Act, the ALJ is responsible for conducting an administrative hearing on a notice of intention to William Vasa prohibit participation. 12 U.S.C. § 1818(e)(4). Following Former Vice-President and the hearing, the ALJ issues a recommended decision that Loan Officer of is referred to the Board. The parties may then file with the Board exceptions to the ALJ's recommendations. First National Bank of Southeast Denver The Board makes the final findings of fact, conclusions Denver, Colorado of law, and determination whether to issue an order of prohibition. Id.-, 12 C.F.R. 263.40. OCC No. AA-EC-94—27 The FDI Act sets forth the substantive basis upon OCC No. AA-EC-94-28 which a federal banking agency may issue against a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1172 Federal Reserve Bulletin • December 1995 bank official an order of prohibition from further partici- different purported individuals,1 although circumstantial, pation in banking. In order to issue such an order pursu- was overwhelming. All of the loans were short-term, ant to section 1818(e)(1), the Board must make each of unsecured loans under $10,000. At the time the loans three findings: were made, Vasa knew that the Bank had no detailed (1) There must be a specified type of misconduct— monitoring of such loans. Seven of the loans were to violation of law, unsafe or unsound practice, or breach fictitious individuals. The only loan not in a fictitious of fiduciary duty; name was to an individual who had a relationship with (2) The misconduct must have a prescribed effect— the Bank, but who had no knowledge that Vasa had financial gain to the respondent or financial harm or originated loans in his name. Lastly, all but two of the other damage to the institution; and loans were single payment loans, requiring no payments (3) The misconduct must involve culpability of a until maturity. certain degree — personal dishonesty or willful or On October 18, 1990, Vasa originated the first frauducontinuing disregard for the safety or soundness of the lent loan in the name of Frank Young for $4,045. Vasa institution. had prior dealings with Mr. Young, who lived in Las Vegas, Nevada, because Young had applied to the Bank in September 1989 for a loan. The evidence establishes B. Relevant Individuals and Business Entities that Vasa completed a fictitious loan application, which contained no credit information, using Young's name At all times relevant to this proceeding, the Bank was a and other personal information; but Vasa fabricated the national banking association, chartered and examined by other information on the application, including the adthe OCC. At all times relevant to this proceeding, Vasa dress. Vasa made additional extensions of credit in was vice-president and a loan officer of the Bank, and Young's name on November 26, 1990, for $4,045 and on therefore an "institution-affiliated party" under the terms January 15, 1991, for $2,089.39.2 of the FDI Act subject to the OCC's supervisory author- The ALJ found that Vasa cashed the loan proceed ity. checks, misappropriated the loan proceeds, and made cash payments on the loans to keep them current.3 The ALJ rejected Vasa's claim that he cashed the checks as Findings and Conclusions an accommodation to the customer. As a result of the fraudulent loan, the Bank lost $7,776.76, the principal Upon review of the record of this proceeding, the Board remaining after payments had been made by Vasa. hereby adopts such of the ALJ's recommended decision, The ALJ further found that Vasa originated loans to findings, and conclusions as are not specifically modified seven apparently fictitious individuals. The social secuherein as the findings and conclusions of the Board, and rity numbers, addresses, and places of employment of incorporates by reference the ALJ's reasoning and cita- these purported borrowers were all fictitious, and credit tions to the record. bureau checks showed no listing for any of these supposed individuals. The loans to the fictitious individuals all followed a similar pattern. The loan applications for Findings each listed only assets that were not verifiable, such as cash and automobiles.4 Furthermore, on some loans, in Vasa was vice-president and loan officer at the Bank order to prevent the fraud from being uncovered, Vasa from October 1987 through June 1992, when he was indicated on the application that the customer would terminated. During that time, Vasa had authority to bring in additional credit information, and that only a originate unsecured loans up to $10,000 without other credit bureau check, and no other verification, should be approval. At the time he was terminated, Vasa handled a conducted by bank personnel. loan portfolio in excess of $12 million. Of these, 90 percent were secured commercial loans, and, apart from the fictitious loans at issue here, the remaining 1. In some cases, several extensions of credit were made to a unsecured loans were made to long-standing bank cus- purported customer. But in each case, the separate credits were then consolidated into a single loan. tomers. Vasa was terminated by the Bank on June 8, 2. The three credit extensions were consolidated into one note in 1992. The loans at issue were only discovered after a the amount of $10,000, for which payments were due monthly. review of Vasa's loan portfolio had been conducted by 3. Vasa admitted that his handwriting was on the loan deposit the individual who replaced Vasa. slips, which were used to make payments on the loan. Moreover, the loan payments ceased at about the time that Vasa was termi- Vasa fabricated eight loans totalling $53,994.41 benated from the Bank. tween October 18, 1990 and June 5, 1992. The evidence 4. None of the loan applications listed any bank account or that Vasa fabricated the loans, which were to eight previous employer or had any supporting financial information. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1173 The loan applications to the fictitious individuals, was never cashed. The ALJ found that Vasa was unable which were all typed5 and only partially completed, were to cash the check because he was terminated by the Bank all substantially the same. The first loan to a fictitious a few days after the check was issued.7 individual was made on March 13, 1991, when Vasa The ALJ found that Vasa misappropriated the prooriginated a loan in the name of David Frater for $2,545. ceeds from the fraudulent loans.8 The ALJ based his Additional extensions of credit in the same name, which finding on the evidence that all of the proceeds were were all consolidated, were made on April 22, 1991, and disbursed by cashier's checks and were cashed at the May 20, 1991, in the amounts of $1,960.96 and Bank.9 In addition, for several of the loans there was $2,406.19, respectively. Respondent made some pay- testimony that Vasa had bank tellers cash the checks and ments on the loan, as evidenced by his handwriting on that he then took the proceeds. Moreover, there were the payment documents, but the Bank lost $5,537.65, the unexplained large cash deposits into the bank accounts remaining principal. of Vasa and his wife exceeding $20,000 that were made The next fictitious loan was made in the name of Jack at about the times Vasa originated the various loans. The Rowland on July 1, 1991, in the amount of $8,545. This evidence further indicated that, on several occasions loan was charged off prior to maturity, resulting in a loss within days of a fraudulent loan having been made, Vasa to the Bank of the full amount of the loan. The ALJ paid large amounts of cash to repair his car.10 found that the charging-off of the loan prior to its matu- The ALJ reasonably found that Vasa failed to present rity was a further attempt by Vasa to conceal his fraudu- a credible defense. Vasa failed to rebut most of the lent conduct because charged-off loans were not scruti- OCC's allegations and did not call any witnesses or offer nized to the same degree as loans that were past due, as any documentary evidence at the hearing. The ALJ this loan would have become. rejected Vasa's claim that some of the cash deposits Following the same pattern as the earlier loans, Vasa were personal loans he had received from certain indioriginated a $5,045 loan in the name of David Tinner on viduals. The ALJ found that Vasa's explanations, even if August 19, 1991. A second loan of $3,955 was made in true, accounted for only a small fraction of the overall the name of Tinner on December 16, 1991, and consoli- cash deposits into his accounts; and Vasa failed to offer dated with the first loan, for a total of $9,000. Vasa made any evidence, other than his own testimony, to prove the no payments and the Bank lost the full amount of the existence of these loans. Therefore, the ALJ reasonably loan. Vasa next made two loans totalling $8,045 in the found that the OCC had supported its charges by a name of Mark Jameson as follows: a $5,045 loan on preponderance of the relevant credible evidence. October 18, 1991, and a $3,000 loan on January 14, 1992. Vasa made no payments on these loans and the Conclusions Bank suffered a loss of principal of $8,045, the full amount of the loan. On February 6, 1992, Vasa origi- A. Misconduct nated a loan for $4,045 in the name of Steven Zerbring. Because no payments were made, the Bank suffered a loss of the full amount of the loan. Upon the aforementioned facts, the ALJ reasonably Vasa's last two fraudulent loan applications followed found that Vasa's actions constituted both breaches of the same pattern. On April 10, 1992, Vasa made a $6,045 loan in the name of Thomas Robret. Because no 7. Vasa had been absent from work for a few days prior to the payments were made, the Bank suffered a loss in the full loan being finalized on June 8, 1992 — the same day that he was amount of the loan. The last loan application, for $5,000 terminated. Thus, he never had an opportunity to cash the check. in the name of Kyle Dry son, was made on June 5, 1992, 8. Because Vasa made payments on some of the loans, the and was almost identical to one of the earlier fraudulent amount he benefitted (and the Bank was harmed) was $48,994.41, which was less than the total principal amount of the loans. loan applications. The ALJ found that the Dryson loan 9. This in itself was further proof that the loans were fabricated application appeared to be a photocopy of the earlier because the evidence was that loan proceed checks were almost Tinner application, with the only difference being that a always deposited into customers' accounts and not cashed. few digits had been changed.6 However, the Bank did 10. The ALJ found that Vasa's close monitoring of the fraudulent not suffer a loss on the Dryson loan because the check loans was further evidence of his fraud. The Bank's confidential security system recorded which loans employees reviewed on their computers. This system showed that on more than one day, Vasa reviewed several of the fraudulent loans in succession. In fact, Vasa 5. The head of the Bank's lending operations, Jerald B. Hirsch, reviewed these loans more frequently than any other loans. The testified that it was very unusual for small loan applications to be ALJ found Vasa's extra attention to be probative of the fraudulent typed. He stated that most small loans are made to "walk-in" nature of the loans because loan officers generally reviewed loans customers, who typically hand-write their applications. infrequently and only in response to customer inquiries, particu- 6. For instance, the addresses and social security numbers on larly where the loans were single payment loans, as most of the both applications, except for one digit, were identical. loans were here. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1174 Federal Reserve Bulletin • December 1995 his fiduciary duty and unsafe and unsound practices. In By order of the Board of Governors, this 10th day of effecting his loan scheme, Vasa repeatedly falsified loan October, 1994. documents over a period lasting more than a year. More- Board of Governors of the over, he made misrepresentations to bank personnel in Federal Reserve System order to induce them to cash third party cashier's checks, WILLIAM W. WILES and he took other actions to conceal the fraud. Lastly, Secretary of the Board Vasa misappropriated the Bank's funds through the loan scheme. The ALJ reasonably found this misconduct to Order of Prohibition satisfy the applicable standards for breach of fiduciary duty and unsafe or unsound banking practices.11 WHEREAS, pursuant to section 8(e) of the Federal Deposit Insurance Act, as amended (the "Act") B. Effects (12 U.S.C. § 1818(e)), the Board of Governors of the Federal Reserve System ("the Board") is of the opinion, for the reasons set forth in the accompanying Final The ALJ also reasonably found that Vasa's misconduct Decision, that a final Order of Prohibition should issue satisfied the "effects" test necessary for a prohibition against WILLIAM VASA, because the Bank was harmed by Vasa's conduct. As a NOW, THEREFORE, IT IS HEREBY ORDERED, result of the fraudulent loans, the Bank lost $48,994.41, pursuant to sections 8(e) and 8(j) of the Act, the amount misappropriated by Vasa. In addition, Vasa (12 U.S.C. §§ 1818(e) and 1818(j», that: clearly received a financial benefit through his misappro- 1. In the absence of prior written approval by the priation of the loan proceeds. Board, and by any other Federal financial institution regulatory agency where necessary pursuant to section C. Culpability 8(e)(7)(B) of the Act (12 U.S.C. § 1818(e)(7)(B)), WILLIAM VASA is hereby prohibited: The ALJ also reasonably found that the "culpability" (a) From participating in the conduct of the affairs requirement for a prohibition order was satisfied. The of any bank holding company, any insured deposi- ALJ found that the record was replete with instances of tory institution or any other institution specified in Vasa's personal dishonesty and willful and continuing subsection 8(e)(7)(A) of the Act (12 U.S.C. disregard for the Bank's safety and soundness. In short, § 1818(e)(7)(A)); Vasa created at least eight fictitious loans over a period (b) From soliciting, procuring, transferring, attemptlasting more than a year. Vasa misrepresented facts and ing to transfer, voting or attempting to vote any defrauded the Bank each time he submitted a fraudulent proxy, consent, or authorization with respect to any loan application. Moreover, in order to cash the loan voting rights in any institution described in checks, Vasa deceived other Bank employees by telling subsection 8(e)(7)(A) of the Act (12 U.S.C. them that the proceeds were for customers. § 1818(e)(7)(A)); (c) From violating any voting agreement previously D. Challenges to Evidentiary Rulings approved by the appropriate Federal banking agency; or Vasa did not file any exceptions to the ALJ's evidentiary (d) From voting for a director, or from serving or rulings. acting as an institution-affiliated party as defined in section 3(u) of the Act (12 U.S.C. § 1813(u)), including serving as an officer, director, or employee. Conclusion 2. This Order, and each provision hereof, is and shall remain fully effective and enforceable until expressly For the foregoing reasons, the Board orders that the stayed, modified, terminated or suspended in writing attached Order issue. by the Board. This Order shall become effective upon the expiration of thirty days after service is made. By order of the Board of Governors, this 10th day of 11. An "unsafe or unsound banking practice" has been defined October, 1995. as a practice "deemed contrary to accepted standards of banking Board of Governors of the operation which might result in abnormal risk or loss to a banking institution or shareholder." First Nat'I Bank of Eden v. Comptroller Federal Reserve System of the Currency, 568 F.2d 610, 611 n.2 (8th Cir. 1978). A scheme to defraud a bank, as Vasa conducted here, certainly satisfies this WILLIAM W. WILES standard. SECRETARY OF THE BOARD Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1175 FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD To support its action of a temporary Cease and Desist OF GOVERNORS Order, the Federal Reserve Board also issued a Notice of Charges and Hearing against the bank and its New York The Daiwa Bank, Limited branch. Osaka, Japan The Security State Bank of Pecos The Federal Reserve Board and the New York State Pecos, Texas Banking Department announced on October 2, 1995, the issuance of an enforcement order against Daiwa Bank and its New York branch in connection with unautho- The Federal Reserve Board announced on October 18, rized trading activities by an official in the New York 1995, the issuance of a Cease and Desist Order against branch. the Security State Bank of Pecos, Pecos, Texas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Financial Markets A24 Commercial paper and bankers dollar DOMESTIC FINANCIAL STATISTICS acceptances outstanding A25 Prime rate charged by banks on short-term Money Stock and Bank Credit business loans A26 Interest rates—money and capital markets A4 Reserves, money stock, liquid assets, and debt A27 Stock market—Selected statistics measures A5 Reserves of depository institutions, Reserve Bank Federal Finance credit A6 Reserves and borrowings—Depository A28 Federal fiscal and financing operations institutions A29 U.S. budget receipts and outlays A7 Selected borrowings in immediately available A30 Federal debt subject to statutory limitation funds—Large member banks A30 Gross public debt of U.S. Treasury— Types and ownership Policy Instruments A31 U.S. government securities dealers—Transactions A8 Federal Reserve Bank interest rates A32 U.S. government securities dealers— A9 Reserve requirements of depository institutions Positions and financing A10 Federal Reserve open market transactions A3 3 Federal and federally sponsored credit agencies—Debt outstanding Federal Reserve Banks All Condition and Federal Reserve note statements Securities Markets and Corporate Finance A12 Maturity distribution of loan and security A34 New security issues—Tax-exempt state and local holdings governments and corporations A35 Open-end investment companies—Net sales Monetary and Credit Aggregates and assets A13 Aggregate reserves of depository institutions A35 Corporate profits and their distribution and monetary base A35 Nonfarm business expenditures on new A14 Money stock, liquid assets, and debt measures plant and equipment A16 Deposit interest rates and amounts outstanding— A36 Domestic finance companies—Assets and commercial and BIF-insured banks liabilities, and consumer, real estate, and business A17 Bank debits and deposit turnover credit Commercial Banking Institutions Real Estate A18 Assets and liabilities, Wednesday figures A37 Mortgage markets A3 8 Mortgage debt outstanding Weekly Reporting Commercial Banks— Assets and liabilities Consumer Installment Credit A21 Large reporting banks A39 Total outstanding A23 Branches and agencies of foreign banks A39 Terms Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • December 1995 DOMESTIC FINANCIAL STATISTICS- Reported by Banks in the United States CONTINUED A55 Liabilities to and claims on foreigners A56 Liabilities to foreigners Flow of Funds A58 Banks' own claims on foreigners A59 Banks' own and domestic customers' claims on A40 Funds raised in U.S. credit markets foreigners A42 Summary of financial transactions A59 Banks' own claims on unaffiliated foreigners A43 Summary of credit market debt outstanding A60 Claims on foreign countries— A44 Summary of financial assets and liabilities Combined domestic offices and foreign branches DOMESTIC NONFINANCIAL STATISTICS Reported by Nonbanking Business Enterprises in the United States Selected Measures A61 Liabilities to unaffiliated foreigners A45 Nonfinancial business activity— A62 Claims on unaffiliated foreigners Selected measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization Securities Holdings and Transactions A47 Industrial production—Indexes and gross value A49 Housing and construction A63 Foreign transactions in securities A50 Consumer and producer prices A64 Marketable U.S. Treasury bonds and A51 Gross domestic product and income notes—Foreign transactions A52 Personal income and saving Interest and Exchange Rates INTERNATIONAL STATISTICS A65 Discount rates of foreign central banks A65 Foreign short-term interest rates Summary Statistics A66 Foreign exchange rates A53 U.S. international transactions—Summary A54 U.S. foreign trade A54 U.S. reserve assets A67 GUIDE TO STATISTICAL RELEASES AND A54 Foreign official assets held at Federal Reserve SPECIAL TABLES Banks A55 Selected U.S. liabilities to foreign official institutions A68 INDEX TO STATISTICAL TABLES 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 Financial Statistics • December 1995 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1994 1995 1995 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q4 Q1 Q2 Q3 May June Julyr Aug. Sept. Reserves of depository institutions2 1 Total -3.3 -3.7 -8.0 -1.2 -4.1 -8.5 6.3 -2.9 -3.1 2 Required -3.0 -4.0 -7.0 -2.3 -6.8 -10.4 3.8 -.8 -2.3 3 Nonborrowed -2.1 -2.4 -8.6 -2.2 -4.9 -11.1 4.3 -1.1 -3.0 4 Monetary base3 6.9 6.4 6.3r 1.0 7.2 —2.6r -.3 3.3 1.1 Concepts of money, liquid assets, and debt4 !> Ml -1.2 .0 -.9 -.9 -7.0r .9 1.3 - 1.5r -3.7 6 M2 -.3 1.7 4.4r 7.7 5.5r 11.9r 6.2 8.3 4.7 7 M3 1.7 4.4r 7.1r 8.8 8.0 12.8r 8.4 7.6r 4.3 8 L 2.2 6.4r 7.6r n.a. 6.3r 8.3r 11.5 7.6 n.a. 9 Debt 5.2 5.5 6.7 n.a. 8.3 5.0 3.3 3.5 n.a. Nontransaction components 10 In M25 .2' 2.5r 6.9r 11.6 11.2r 16.8r 8.5 12.6 8.4 11 In M3 only6 12.4 18.5 20.7 13.8 20.8r 17.6r 18.6 4.7r 2.3 Time and savings deposits Commercial banks 12 Savings, including MMDAs -8.5 -13.2 -7.3 10.3 2.0 18.2 4.3 14.5r 11.7 13 Small time7 16.0 24.3 23.4 9.2 17.7 13.4 9.2 4.4 1.9 14 Large time8,9 17.7 12.7 15.8r 14.3 23.7r 12.9r 19.6 5.6' 8.1 Thrift institutions 15 Savings, including MMDAs -17.6 -20.5 -14.5 -5.7 -7.2 -4.0 -7.6 —6.7r -.3 16 Small time7 10.9r 21.5r 26.6r 4.0 20.9r 2.7f .7 1.7' 4.4 17 Large time8 14.1 23.3 14.6 13.4 -13.5 6.8 30.5 9.9 8.2 Money market mutual funds 18 General purpose and broker-dealer 7.5 7.9 18.lr 43.3 28.5r 61.6r 44.5 37.7r 17.6 19 Institution-only 7.3 10.0 27.1 29.3 11.8 66.5 39.7 -9.0 15.4 Debt components4 20 Federal 5.9 5.3 5.3 n.a. 5.9 8.4 4.1 1.9 n.a. 21 Nonfederal 5.0 5.7 7.2 n.a. 9.1 3.8 3.0 4.2 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 1995 1995 July Aug. Sept. Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 411,634 409,402' 410,885 410,301 408,534' 408,495' 409,163 411,208 413,459 409,638 U.S. government securities2 2 Bought outright—System account 371,272 371,942 371,068 372,422 372,241 372,169 370,815 371,236 371,826 371,349 3 Held under repurchase agreements 1,531 133 4,206 154 0 0 3,055 4,540 5,880 2,487 Federal agency obligations 4 Bought outright 3,079 3,019 2,932 3,028 3,028 2,953 2,941 2,941 2,941 2,921 5 Held under repurchase agreements 121 52 106 216 0 0 100 327 0 21 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 85 112 28 4 9 22 38 8 2 23 8 Seasonal credit 231 259 254 253 267 277 247 243 255 267 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 572 291' 408 45 270' 107' 353 295 652 476 11 Other Federal Reserve assets 34,742 33,595' 31,882 34,181 32,719' 32,967' 31,614 31,618 31,904 32,093 12 Gold stock 11,053 11,053 11,052 11,053 11,053 11,053 11,053 11,053 11,053 11,052 13 Special drawing rights certificate account 10,357 10,518 10,366 10,518 10,518 10,518 10.518 10,518 10,368 10,168 14 Treasury currency outstanding 23,533' 23,623' 23,708 23,614' 23,637' 23,660' 23,682 23,696 23,710 23,724 ABSORBING RESERVE FUNDS 15 Currency in circulation 410,930' 410,420' 410,989 411,083' 410,043' 409,344' 412,011 412,567 410,762 409,279 16 Treasury cash holdings 318 310 322 309 309 312 316 318 332 322 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,984 5,257 6,850 5,221 5,541 4,923 5,083 4,903 10,002 6,651 18 Foreign 196 184 179 176 183 175 172 182 174 181 19 Service-related balances and adjustments .. 4,347 4,599 4,688 4,521 4,738 4,700 4,612 4,643 4,693 4,759 20 Other 289 289 348 296 285 286 362 339 362 329 21 Other Federal Reserve liabilities and capital , 12,949 12,758 12,176 12,858 12,805 13,038 11,445 11,876 12,241 12,694 22 Reserve balances with Federal Reserve Banks 20,564 20,779' 20,459 21,021 19,837r 20,947' 20,416 21,648 20,024 20,368 End-of-month figures Wednesday figures July Aug. Sept. Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 413,574 408,461' 410,194 411,234 408,861' 409,683' 412,115 416,668 420,340 412,324 US. government securities 2 Bought outright—System account 375,524 369,818 367,669 374,597 372,085 373,531 372,665 372,102 370,992 369,652 3 Held under repurchase agreements 0 3,055 6,445 0 0 0 3,055 8,175 13,020 6,487 Federal agency obligations 4 Bought outright 3,063 2,941 2,895 3,028 3,028 2,941 2,941 2,941 2,941 2,895 5 Held under repurchase agreements 0 100 75 0 0 0 100 1,209 0 150 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 3 4 160 3 14 63 6 3 1 70 8 Seasonal credit 245 266 261 259 v 271 280 245 246 266 270 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 73 686' 73 694 598' 45' 1,361 -25 611 651 11 Other Federal Reserve assets 34,666 31,592' 32,616 32,651 32,865' 32,823' 31,743 32,018 32,509 32,150 12 Gold stock 11,053 11,053 11,051 11,053 11,053 11,053 11,053 11,053 11,053 11,051 13 Special drawing rights certificate account 10,518 10,518 10,168 10,518 10,518 10,518 10,518 10,518 10,168 10,168 14 Treasury currency outstanding 23,568' 23,682' 23,738 23,614' 23,637' 23,660' 23,682 23,696 23,710 23,724 ABSORBING RESERVE FUNDS 15 Currency in circulation 409,508' 410,984' 409,244 411,562' 410,324' 410,988' 413,566 412,618 410,841 410,202 16 Treasury cash holdings 306 316 322 309 311 316 315 334 322 322 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 11,206 4,767 8,620 5,583 5,399 5,653 5,065 6,086 17,499 6,553 18 Foreign 190 166 201 176 201 180 168 177 167 170 19 Service-related balances and adjustments .. 4,427 4,612' 4,769 4,521 4,738 4,700 4,612 4,643 4,693 4,759 20 Other 304 298 332 307 278 290 344 339 330 331 21 Other Federal Reserve liabilities and capital , 12,671 11,438 13,088 12,613 12,572 12,829 11,551 12,084 12,323 12,663 22 Reserve balances with Federal Reserve Banks' 20,102 21,134' 18,575 21,347 20,245' 19,957' 21,748 25,654 19,097 22,268 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 Financial Statistics • December 1995 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1992 1993 1994 1995 Dec. Dec. Dec. Mar. Apr. May June July Aug. Sept. 1 Reserve balances with Reserve Banks2 25,368 29,374 24,658 22,649 24,217 21,476 21,058 20,840 20,565 20,519 2 Total vault cash3 34,541 36,818 40,365 38,518 38,099 39,038 39,839 40,522 40,177 40,648 3 Applied vault cash4 31,172 33,484 36,682 34,934 34,657 35,281 35,986 36,550 36,255r 36,640 4 Surplus vault cash5 3,370 3,334 3,683 3,584 3,442 3,757 3,853 3,971 3,923 4,008 5 Total reserves6 56,540 62,858 61,340 57,583 58,874 56,757 57,044 57,390 56,819 57,159 6 Required reserves 55,385 61,795 60,172 56,789 58,120 55,877 56,079 56,300 55,832r 56,209 7 Excess reserve balances at Reserve Banks7 1,155 1,063 1,168 794 753 880 964 1,090 988r 950 8 Total borrowings at Reserve Banks8 124 82 209 69 111 150 272 371 282 278 9 Seasonal borrowings 18 31 100 51 82 137 172 231 258 252 10 Extended credit9 1 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1995 June 7 June 21 July 5 July 19 Aug. 2 Aug. 16 Aug. 30 Sept. 13 Sept. 27 Oct. 11 1 Reserve balances with Reserve Banks2 20,875 21,478 20,546 21,733 19,920 20,793 20,395 21,029r 20,182 19,884 2 Total vault cash3 39,373 40,146 39,724 40,411 40,983 40,889 39,324 40,554 40,628 41,153 3 Applied vault cash4 35,549 36,240 35,930 36,491 36,878 36,898 35,491 36,693 36,556 36,805 4 Surplus vault cash5 3,824 3,906 3,794 3,920 4,106 3,991 3,833 3,862r 4,072 4,348 5 Total reserves6 56,424 57,718 56,476 58,224 56,798 57,691 55,886 57,722 56,738 56,689 6 Required reserves 55,627 56,703 55,462 57,334 55,443 56,491 55,153r 56,879r 55,781 55,312 7 Excess reserve balances at Reserve Banks7 798 1,015 1,014 890 1,354 1,200 733r 843r 957 1,376 8 Total borrowings at Reserve Banks8 165 286 336 293 478 250 288 268 274 338 9 Seasonal borrowings 150 155 214 224 245 247 272 245 261 240 10 Extended credit9 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. Data are not break-adjusted or seasonally whose vault cash exceeds their required reserves) to satisfy current reserve requirements. adjusted. 5. Total vault cash (line 2) less applied vault cash (line 3). 2. Excludes required clearing balances and adjustments to compensate for float and 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash includes other off-balance-sheet "as-of" adjustments. (line 3). 3. Total "lagged" vault cash held by depository institutions subject to reserve 1. Total reserves (line 5) less required reserves (line 6). requirements. Dates refer to the maintenance periods during which the vault cash may be 8. Also includes adjustment credit. used to satisfy reserve requirements. The maintenance period for weekly reporters ends 9. Consists of borrowing at the discount window under the terms and conditions sixteen days after the lagged computation period during which the vault cash is held. established for the extended credit program to help depository institutions deal with Before Nov. 25, 1992, the maintenance period ended thirty days after the lagged sustained liquidity pressures. Because there is not the same need to repay such borrowing computation period. promptly as with traditional short-term adjustment credit, the money market impact of 4. All vault cash held during the lagged computation period by "bound" institutions extended credit is similar to that of nonborrowed reserves. (that is, those whose required reserves exceed their vault cash) plus the amount of vault 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 1995, week ending Monday SSoouurrccee aanndd mmaattuurriittyy July 31 Aug. 7 Aug. 14 Aug. 21 Aug. 28 Sept. 4 Sept. 11 Sept. 18 Sept. 25 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 77,305 83,233 79,795 78,638 73,023 80,287 79,342 77,611 74,600 2 For all other maturities 17,639R 18,325' 18,350R 16,503R 17,227R 18,086 16,701 16,473 16,001 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 22,029 24,885 26,327 27,244 26,953 24,256 23,443 22,768 26,575 4 For all other maturities 26,573R 26,356R 26,458R 26,029R 27,949R 27,651 27,431 25,979 24,595 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 17,040 17,837 18,730 21,678 18,956 19,873 19,126 18,285 18,985 6 For all other maturities 36,946 36,877 38,159 31,571 36,273 34,723 33,827 35,204 33,489 All other customers 7 For one day or under continuing contract 37,810 38,574 38,416 40,180 40,360 42,318 41,470 40,377 39,681 8 For all other maturities 18,517 17,902 18,374 18,401 18,740 19,004 18,585 18,440 17,692 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 56,819 57,530 55,140 57,032 53,380 58,363 55,344 55,844 55,159 10 To all other specified customers2 29,713 29,600 30,061 27,794 25,921 29,034 29,813 32,721 28,334 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 U.S. government agencies, ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics • December 1995 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 11 O /3 n / 95 Effective date Previous rate 11 O /3 n /9 5 Effective date Previous rate 11 O /3 n /9 5 Effective date Previous rate Boston 5.25 2/1/95 4.75 5.75 10/26/95 5.85 6.25 10/26/95 6.35 New York 2/1/95 Philadelphia 2/2/95 Cleveland 2/9/95 Richmond 2/1/95 Atlanta 2/2/95 Chicago 2/1/95 St. Louis 2/1/95 Minneapolis 2/2/95 Kansas City 2/1/95 Dallas 2/2/95 San Francisco 5.25 2/1/95 4.75 5.75 10/26/95 5.85 6.25 10/26/95 6.35 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) . — R. B o an f k Effectiv l A e l v l e F l) . — R. Ba o n f 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—Nov. 2 13-14 13 1987—Sept. 4 5.5-6 6 13 13 11 6 6 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1988—Aug. 9 6-6.5 6.5 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 11 6.5 6.5 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1989—Feb. 24 6.5-7 7 10 7.25 7.25 3 11 11 27 7 7 Aug. 21 7.75 7.75 16 10.5 10.5 Sept. 22 8 8 27 10-10.5 10 1990—Dec. 19 6.5 6.5 Oct. 16 8-8.5 8.5 30 10 10 20 8.5 8.5 Oct. 12 9.5-10 9.5 1991—Feb. 1 6-6.5 6 Nov. 1 8.5-9.5 9.5 13 9.5 9.5 4 6 6 3 9.5 9.5 Nov. 22 9-9.5 9 Apr. 30 5.5-6 5.5 26 9 9 May 2 5.5 5.5 1979—July 20 10 10 Dec. 14 8.5-9 9 Sept. 13 5-5.5 5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 17 5 5 20 10.5 10.5 17 8.5 8.5 Nov. 6 4.5-5 4.5 Sept. 19 10.5-11 11 7 4.5 4.5 21 11 11 1984—Apr. 9 8.5-9 9 Dec. 20 3.5-4.5 3.5 Oct. 8 11-12 12 13 9 9 24 3.5 3.5 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1992—July 2 3-3.5 3 1980—Feb. 15 12-13 13 Dec. 24 8 8 7 3 3 19 13 13 May 29 12-13 13 1985—May 20 7.5-8 7.5 1994—May 17 3-3.5 3.5 30 12 12 24 7.5 7.5 18 3.5 3.5 June 13 11-12 11 Aug. 16 3.5-4 4 16 11 11 1986—Mar. 7 7-7.5 7 18 4 4 July 28 10-11 10 10 7 7 Nov. 15 4-4.75 4.75 29 10 10 Apr. 21 6.5-7 6.5 17 4.75 4.75 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July 11 6 6 1995—Feb. 1 4.75-5.25 5.25 Dec. 5 12-13 13 Aug. 21 5.5-6 5.5 9 5.25 5.25 8 13 13 22 5.5 5.5 11998811——MMaayy 55 13-14 14 In effect Nov. 3, 1995 5.25 5.25 88 14 14 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 Requirement TTyyppee ooff ddeeppoossiitt22 Percentage of Effective date deposits Net transaction accounts3 1 $0 million-$54.0 million 33333 1111122222/////2222200000/////9999944444 2 More than $54.0 million4 1111100000 1111122222/////2222200000/////9999944444 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve The Monetary Control Act of 1980 requires that the amount of transaction accounts Banks or vault cash. Nonmember institutions may maintain reserve balances with a against which the 3 percent reserve requirement applies be modified annually by 80 Federal Reserve Bank indirectly, on a pass-through basis, with certain approved percent of the percentage change in transaction accounts held by all depository instituinstitutions. For previous reserve requirements, see earlier editions of the Annual tions, determined as of June 30 of each year. Effective Dec. 20, 1994 the amount was Report or the Federal Reserve Bulletin. Under the Monetary Control Act of 1980, increased from $51.9 million to $54.0 million. depository institutions include commercial banks, mutual savings banks, savings and 4. The reserve requirement was reduced from 12 percent to 10 percent on loan associations, credit unions, agencies and branches of foreign banks, and Edge Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that Act corporations. report quarterly. 2. Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts 5. For institutions that report weekly, the reserve requirement on nonpersonal time the amount of reservable liabilities subject to a zero percent reserve requirement each year deposits with an original maturity of less than 1 x/l years was reduced from 3 percent to for the succeeding calendar year by 80 percent of the percentage increase in the total ll/i percent for the maintenance period that began Dec. 13, 1990, and to zero for the reservable liabilities of all depository institutions, measured on an annual basis as of June maintenance period that began Dec. 27, 1990. The reserve requirement on nonpersonal 30. No corresponding adjustment is to be made in the event of a decrease. On Dec. 20, time deposits with an original maturity of 1 years or more has been zero since Oct. 6, 1994, the exemption was raised from $4.0 million to $4.2 million. The exemption applies 1983. only to accounts that would be subject to a 3 percent reserve requirement. For institutions that report quarterly, the reserve requirement on nonpersonal time 3. Transaction accounts include all deposits against which the account holder is deposits with an original maturity of less than 1VS years was reduced from 3 percent to permitted to make withdrawals by negotiable or transferable instruments, payment orders zero on Jan. 17, 1991. of withdrawal, and telephone and preauthorized transfers in excess of three per month for 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to the purpose of making payments to third persons or others. However, money market zero in the same manner and on the same dates as was the reserve requirement on deposit accounts (MMDAs) and similar accounts subject to the rules that permit no more nonpersonal time deposits with an original maturity of less than 1years (see note 5). than six preauthorized, automatic, or other transfers per month, of which no more than three may be checks, are savings deposits, not transaction accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics • December 1995 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1995 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 14,714 17,717 17,484 0 0 0 0 4,470 0 433 2 Gross sales 1,628 0 0 0 0 0 0 0 0 0 3 Exchanges 308,699 332,229 376,277 31,530 36,449 30,983 31,663 42,983 25,213 39,195 4 Redemptions 1,600 0 0 0 0 0 0 0 0 0 Others within one year 5 Gross purchases 1,096 1,223 1,238 0 0 0 0 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 36,662 31,368 0 5,872 4,802R 787R —6,028R 0 0 0 8 Exchanges -30,543 -36,582 -21,444 6,026R -2,096R 0 —7,374R 0 0 0 9 Redemptions 0 0 0 0 0 370R 0 0 0 0 One to five years 10 Gross purchases 13,118 10,350 9,168 0 0 2,549 0 0 0 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -34,478 -27,140 -6,004 -5,872R —4,802R -All' -5,548R 0 0 0 13 Exchanges 25,811 0 17,801 3,606R 1,050R 0 5,374R 0 0 0 Five to ten years 14 Gross purchases 2,818 4,168 3,818 0 0 839 0 0 0 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts -1,915 0 -3,145 0R 0 -310R 1,248R 0 0 0 17 Exchanges 3,532 0 2,903 1,720R L,046R 0 2,000R 0 0 0 More than ten years 18 Gross purchases 2,333 3,457 3,606 0 0 1,138 0 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -269 0 -918 0 0 0 -1,728R 0 0 0 21 Exchanges 1,200 0 775 700 0 0 0 0 0 0 All maturities 22 Gross purchases 34,079 36,915 35,314 0 0 4,526 0 4,470 0 433 23 Gross sales 1,628 0 0 0 0 0 0 0 0 0 24 Redemptions 1,600 767 2,337 0 0 370 0 0 0 0 Matched transactions 25 Gross purchases 1,480,140 1,475,941 1,700,836 178,877 168,800 148,306 155,027 170,083 166,674 179,130 26 Gross sales 1,482,467 1,475,085 1,701,309 176,232 170,724 147,616 153,534 171,959 163,490 185,270 Repurchase agreements 27 Gross purchases 378,374 475,447 309,276 1,300 22,070 36,314 35,158 40,989 8,527 4,130 28 Gross sales 386,257 470,723 311,898 3,310 16,477 39,157 34,377 28,196 24,851 1,075 29 Net change in U.S. Treasury securities 20,642 41,729 29,882 634 3,669 2,004 2,274 15,387 -13,141 -2,651 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 632 774 1,002 55 83 20 30 262 333 122 Repurchase agreements 33 Gross purchases 14,565 35,063 52,696 25 4,926 4,415 6,155 1,941 711 1,610 34 Gross sales 14,486 34,669 52,696 1,345 3,821 5,020 5,955 2,180 1,172 1,510 35 Net change in federal agency obligations -554 -380 -1,002 -1,375 1,022 -625 170 -501 -794 -22 36 Total net change in System Open Market Account... 20,089 41,348 28,880 -741 4,691 1,379 2,444 14,886 -13,935 -2,673 1. Sales, redemptions, and negative figures reduce 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 1995 1995 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 July 31 Aug. 31 Sept. 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,053 11,053 11,053 11,053 11,051 11,053 11,053 11,051 2 Special drawing rights certificate account 10,518 10,518 10,518 10,168 10,168 10,518 10,518 10,168 3 Coin 366 350 363 391 405 372 369 435 Loans 4 To depository institutions 343 251 249 267 340 248 269 421 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 2,941 2,941 2,941 2,941 2,895 3,063 22,,994411 2,895 8 Held under repurchase agreements 0 100 1,209 0 150 0 100 75 9 Total U.S. Treasury securities 373,531 375,720 380,277 384,012 376,139 375,524 372,873 374,114 10 Bought outright2 373,531 372,665 372,102 370,992 369,652 375,524 369,818 367,669 11 Bills 183,154 182,289 181,526 180,416 179,076 185,148 179,441 177,093 12 Notes 147,804 147,804 147,904 147,904 147,904 146,698 147,804 147,904 13 Bonds 42,573 42,573 42,673 42,673 42,673 43,679 42,573 42,673 14 Held under repurchase agreements 0 3,055 8,175 13,020 6,487 0 3,055 6,445 15 Total loans and securities 376,815 379,012 384,676 387,220 379,524 378,835 376,183 377,505 16 Items in process of collection 4,839 8,858 5,532 5,918 5,594 1,867 3,929 3,978 17 Bank premises 1,105 1,108 1,111 1,112 1,112 1,096 1,107 1,114 Other assets 18 Denominated in foreign currencies3 22,920 21,366 21,378 21,391 21,405 23,508 21,473 21,653 19 All other4 8,721 9,208 9,435 9,996 9,599 9,875 8,948 9,814 20 Total assets 436,336 441,473 444,066 447,250 438,858 437,124 433,580 435,717 LIABILITIES 21 Federal Reserve notes 388,011 390,549 389,619 387,843 387,204 386,617 387,987 386,263 22 Total deposits 30,920 32,047 37,216 41,916 34,323 36,171 30,316 32,585 23 Depository institutions 24,797 26,470 30,613 23,921 27,269 24,471 25,086 23,432 24 U.S. Treasury—General account 5,653 5,065 6,086 17,499 6,553 11,206 4,767 8,620 25 Foreign—Official accounts 180 168 177 167 170 190 166 201 26 Other 290 344 339 330 331 304 298 332 27 Deferred credit items 4,576 7,327 5,148 5,167 4,668 1,665 3,839 3,781 28 Other liabilities and accrued dividends5 4,606 4,477 4,549 4,454 4,623 4,582 4,697 4,617 29 Total liabilities 428,113 434,399 436,531 439,381 430,818 429,035 426,839 427,247 / CAPITAL ACCOUNTS 30 Capital paid in 3,908 3,906 3,907 3,910 3,918 3,861 3,910 3,915 31 Surplus 3,683 3,140 3,391 3,525 3,617 3,683 2,832 3,624 32 Other capital accounts 632 27 238 434 505 544 0 931 33 Total liabilities and capital accounts 436,336 441,473 444,066 447,250 438,858 437,124 433,580 435,717 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 478,286 480,340 479,996 480,439 447799,,334466 448866,,336688 447799,,552211 448844,,660011 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 470,304 470,192 470,948 471,742 472,233 469,711 470,405 472,874 36 LESS: Held by Federal Reserve Banks 82,294 79,644 81,329 83,898 85,029 83,094 82,418 86,611 37 Federal Reserve notes, net 388,011 390,549 389,619 387,843 387,204 386,617 387,987 386,263 Collateral held against notes, net 38 Gold certificate account 11,053 11,053 11,053 11,053 11,051 11,053 11,053 11,051 39 Special drawing rights certificate account 10,518 10,518 10,518 10,168 10,168 10,518 10,518 10,168 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 366,440 368,978 368,048 366,623 365,985 365,046 366,417 365,044 42 Total collateral 388,011 390,549 389,619 387,843 387,204 386,617 387,987 386,263 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 • December 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 1995 1995 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 July 31 Aug. 31 Sept. 30 1 Total loans 343 251 245 267 340 248 299 421 2 Within fifteen days1 302 64 60 235 306 116 262 273 3 Sixteen days to ninety days 41 187 189 33 35 132 37 149 4 Total U.S. Treasury securities 373,531 375,720 380,277 384,012 376,139 375,524 369,818 367,669 5 Within fifteen days1 14,131 18,846 22,724 27,676 15,187 16,480 2,215 2,645 6 Sixteen days to ninety days 86,612 83,959 84,588 88,072 88,437 87,822 86,645 92,851 7 Ninety-one days to one year 121,071 121,622 121,472 116,772 121,022 123,511 129,665 120,681 8 One year to five years 86,195 85,770 85,870 85,870 85,870 84,245 85,770 85,870 9 Five years to ten years 29,992 29,992 29,992 29,992 29,992 28,511 29,992 29,992 10 More than ten years 35,530 35,530 35,630 35,630 35,630 34,955 35,530 35,630 11 Total federal agency obligations 2,941 3,040 2,942 2,941 3,045 3,063 2,941 2,895 12 Within fifteen days' 265 120 47 231 335 135 265 185 13 Sixteen days to ninety days 658 975 929 744 747 666 658 747 14 Ninety-one days to one year 479 407 432 432 431 723 479 431 15 One year to five years 1,098 1,098 1,083 1,083 1,081 1,098 1,098 1,081 16 Five years to ten years 417 417 427 427 427 417 417 427 17 More than ten years 25 25 25 25 25 25 25 25 1. Holdings under repurchase agreements are classified as maturing within fifteen days NOTE. Total acceptances data have been deleted from this table because data are no in accordance with maximum maturity of the agreements. longer available. 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 1995 1991 1992 1993 1994 Dec. Dec. Dec. Dec. Feb. Mar. Apr. May June July Aug. Sept. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves' 45.54 54.35 60.50 59.34 58.92 58.55 57.96 57.76 57.35 57.66 57.52 57.37 2 Nonborrowed reserves4 45.34 54.23 60.42 59.13 58.86 58.48 57.85 57.61 57.08 57.28 57.23 57.09 3 Nonborrowed reserves plus extended credit5 45.34 54.23 60.42 59.13 58.86 58.48 57.85 57.61 57.08 57.28 57.23 57.09 4 Required reserves 44.56 53.20 59.44 58.17 57.97 57.76 57.20 56.88 56.39 56.57 56.53 56.42 5 Monetary base6 317.43 351.12 386.60 418.22 422.31 425.35 428.13 430.69 429.76r 429.66r 430.86r 431.24 Not seasonally adjusted 6 Total reserves7 46.98 56.06 62.37 61.13 57.72 57.62 58.93 56.82 57.13 57.49 56.93 57.29 7 Nonborrowed reserves 46.78 55.93 62.29 60.92 57.66 57.55 58.82 56.68 56.85 57.12 56.65 57.01 8 Nonborrowed reserves plus extended credit5 46.78 55.93 62.29 60.92 57.66 57.55 58.82 56.68 56.85 57.12 56.65 57.01 9 Required reserves8 46.00 54.90 61.31 59.96 56.78 56.83 58.18 55.95 56.16 56.40 55.95 56.34 10 Monetary base9 321.07 354.55 390.59 422.51 419.25 423.27 428.74 429.29 430.26r 431.30r 431.08r 431.61 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 55.53 56.54 62.86 61.34 57.70 57.58 58.87 56.76 57.04 57.39 56.82 57.16 12 Nonborrowed reserves 55.34 56.42 62.78 61.13 57.64 57.51 58.76 56.61 56.77 57.02 56.54 56.88 13 Nonborrowed reserves plus extended credit5 55.34 56.42 62.78 61.13 57.64 57.51 58.76 56.61 56.77 57.02 56.54 56.88 14 Required reserves 54.55 55.39 61.80 60.17 56.75 56.79 58.12 55.88 56.08 56.30 55.83 56.21 15 Monetary base12 333.61 360.90 397.62 427.25 423.57 427.56 432.79 433.47 434.57r 435.56r 435.59r 436.19 16 Excess reserves13 .98 1.16 1.06 1.17 .95 .79 .75 .88 .96 1.09 .99 .95 17 Borrowings from the Federal Reserve .19 .12 .08 .21 .06 .07 .11 .15 .27 .37 .28 .28 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. Historical data starting in 1959 and estimates of the effect 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 effect 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 • December 1995 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES5 Billions of dollars, averages of daily figures 1995 Item 1991 1992 1993 1994 Dec. Dec. Dec. Dec. Juner July' Aug. Sept. Seasonally adjusted Measures2 1 Ml 897.3 1,024.4 1,128.6 1,148.0 1,143.9 1,145.1 l,143.7r 1,140.2 2 M2 3,457.9 3,515.3 3,583.6 3,616.8r 3,698.3 3,717.5 3,743.2r 3,758.0 3 M3 4,176.0 4,182.9 4,242.3 4,304.0r 4,459.4 4,490.5 4,519.1r 4,535.4 4 L 4,989.8 5,059.3 5,145.8 5,269.8r 5,471.6 5,524.2 5,559.1 n.a. 5 Debt 11,179.9 11,719.6 12,341.5 12,959.6 13,374.8 13,411.4 13,450.9 n.a. Ml components 6 Currency3 267.4 292.8 322.1 354.5 367.4 367.2 368.3 369.1 7 Travelers checks4 7.7 8.1 7.9 8.4 9.0 8.9 8.9 8.8 8 Demand deposits5 289.5 338.9 383.9 382.2 386.8 389.5 390.1 389.8 9 Other checkable deposits6 332.7 384.6 414.7 402.9 380.7 379.5 376.4 372.4 Nontransaction components 10 In M27 2,560.6 2,490.9 2,455.0 2,468.8r 2,554.4 2,572.4 2,599.5r 2,617.8 11 In M3 only8 718.1 667.6 658.7 687.2 761.2 773.0 776.0r 777.5 Commercial banks 12 Savings deposits, including MMDAs 665.6 754.7 785.8 752.3 728.1 730.7 739.5r 746.7 13 Small time deposits9 602.5 508.1 468.6 502.6 562.4 566.7 568.8 569.7 14 Large time deposits10, 11 333.3 286.7 271.2 296.6 318.5 323.7 325.2' 327.4 Thrift institutions 15 Savings deposits, including MMDAs 375.6 428.9 429.8 391.9 363.0 360.7 358.7r 358.6 16 Small time deposits9 464.1 361.1 316.5 318.3r 357.3 357.5 358.0r 359.3 17 Large time deposits10 83.3 67.1 61.6 64.9 70.8 72.6 73.2 73.7 Money market mutual funds 18 General purpose and broker-dealer 374.2 356.9 360.1 389.0 426.2 442.0 455.9r 462.6 19 Institution-only 180.0 200.2 198.1 180.8 205.6 212.4 210.8 213.5 Debt components 20 Federal debt 2,763.6 3,068.3 3,328.0 3,497.4 3,602.0 3,614.4 3,620.0 n.a. 21 Nonfederal debt 8,416.3 8,651.2 9,013.6 9,462.3r 9,772.9 9,797.0 9,830.9 n.a. Not seasonally adjusted Measures2 22 Ml 916.0 1,046.0 1,153.7 1,173.7 1,139.3 1,144.1 l,137.3r 1,136.2 23 M2 3,472.7 3,533.6 3,606.1 3,640.4r 3,693.8 3,717.0 3,736.2r 3,747.9 24 M3 4,189.4 4,201.4 4,266.1 4,330. r 4,453.1 4,483.8 4,512.9r 4,523.0 25 L 5,014.2 5,088.9 5,180.3 5,307.4r 5,459.9 5,510.7 5,548.1 n.a. 26 Debt 11,176.9 11,720.2 12,333.7 12,951.6 13,309.0 13,356.5 13,389.1 n.a. MI components 27 Currency3 269.9 295.0 324.8 357.6 368.2 369.0 369.0 369.2 28 Travelers checks4 7.4 7.8 7.6 8.1 9.2 9.5 9.5 9.3 29 Demand deposits5 302.4 354.4 401.8 400.3 382.6 388.7 386.6 388.2 30 Other checkable deposits6 336.3 388.9 419.4 407.6 379.3 376.8 372.2 369.5 Nontransaction components 31 In M27 2,556.6 2,487.7 2,452.5 2,466.7r 2,554.5 2,572.9 2,598.9r 2,611.6 32 In M3 only8 716.7 667.7 660.0 689.7 759.3 766.8 116.1' 775.1 Commercial banks 33 Savings deposits, including MMDAs 664.0 752.9 784.3 751.1 730.2 732.6 740.8r 746.8 34 Small time deposits9 601.9 507.8 468.2 502.2 562.0 567.5 569.4 570.2 35 Large time deposits10- " 332.6 286.2 270.8 296.3 320.0 322.3 326.6r 328.6 Thrift institutions 36 Savings deposits, including MMDAs 374.8 427.9 429.0 391.2 364.0 361.6 359.3r 358.7 37 Small time deposits9 463.7 360.9 316.2 318.1r 357.0 357.9 358.3r 359.6 38 Large time deposits10 83.1 67.0 61.5 64.8 71.1 72.3 73.^ 73.9 Money market mutual funds 39 General purpose and broker-dealer 372.2 355.1 358.3 387.1 423.9 438.9 452.6r 454.9 40 Institution-only 180.8 201.7 200.0 183.1 199.2 206.6 209.3 209.0 Repurchase agreements and Eurodollars 41 Overnight and continuing 79.9 83.2 96.5 117.1 117.3 114.3 118.4 121.4 42 Term 132.7 127.8 143.9 157.9 182.2 178.6 180.3r 176.8 Debt components 43 Federal debt 2,765.0 3,069.8 3,329.5 3,499.0 3,579.3 3,588.8 3,602.2 n.a. 44 Nonfederal debt 8,411.9 8,650.4 9,004.2 9,452.7 9,729.7 9,767.7 9,786.9 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 U.S. 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 whoie and then adding this result to balances (general purpose and broker-dealer), (3) savings deposits (including MMDAs), seasonally adjusted M1. 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 US. savings bonds, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • December 1995 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1995 1993 1994 Dec. Dec. Jan. Feb. Mar. Apr. May June July Aug.' Sept. Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 1.86 1.96 1.98 2.01 2.00 1.95 1.96 1.94 1.91 1.93 1.93 2 Savings deposits3 2.46 2.91 2.98 3.09 3.14 3.17 3.20 3.19 3.15 3.12 3.14 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.81 3.96 4.19 4.24 4.28 4.25 4.19 4.17 4.10 4.10 4 92 to 182 days 2.91 4.44 4.67 4.83 4.97 4.94 4.93 4.81 4.77 4.77 4.76 5 183 days to 1 year 3.13 5.12 5.39 5.57 5.60 5.60 5.49 5.27 5.18 5.15 5.14 6 More than 1 year to 2 x/l years 3.55 5.74 6.00 6.12 6.12 6.05 5.83 5.53 5.38 5.39 5.32 7 More than 2 vi years 4.29 6.30 6.47 6.52 6.45 6.37 6.11 5.79 5.62 5.63 5.60 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 1.87 1.95 1.99 2.04 1.99 1.99 2.00 1.98 1.96 1.98 1.98 9 Savings deposits5 2.63 2.88 2.91 2.95 2.94 2.93 2.95 2.97 2.97 2.95 2.96 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.70 3.80 3.98 4.17 4.21 4.18 4.24 4.24 4.28 4.34 4.29 11 92 to 182 days 3.02 4.89 5.13 5.33 5.37 5.38 5.31 5.22 5.16 5.12 5.08 12 183 days to 1 year 3.31 5.52 5.75 5.94 5.94 5.87 5.83 5.61 5.47 5.45 5.35 13 More than 1 year to 2 V5 years 3.66 6.09 6.29 6.37 6.32 6.25 6.08 5.78 5.62 5.60 5.51 14 More than 2 Vl years 4.62 6.43 6.68 6.75 6.68 6.59 6.32 5.98 5.82 5.78 5.73 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,223 303,724 291,355 290,188 292,811 286,987 274,281 274,573 271,777 266,715 252,223 16 Savings deposits3 766,413 734,519 723,295 714,955 713,440 698,963 714,989 718,393 723,302 733,011 743,305 17 Personal 597,838 578,459 569,619 564,877 564,086 550,674 560,563 563,795 567,624 572,916 585,501 18 Nonpersonal 168,575 156,060 153,676 150,078 149,354 148,289 154,426 154,599 155,678 160,096 157,804 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,455 32,375 32,154 31,777 31,623 31,530 31,472 32,140 32,950 30,722 29,761 20 92 to 182 days 110,069 95,901 96,895 98,248 95,583 94,368 93,188 91,999 91,347 89,896 91,322 21 183 days to 1 year 146,565 161,831 163,939 169,103 176,657 179,625 184,560 187,185 186,716 187,141 187,505 22 More than 1 year to 2'/5 years 141,223 162,486 168,515 176,877 183,275 189,652 194,963 198,541 201,761 203,466 204,376 23 More than 2 vi years 181,528 190,897 190,215 191,383 194,722 194,426 192,542 195,024 194,500 199,944 200,336 24 IRA and Keogh plan deposits 143,985 143,428 143,900 145,040 145,959 146,679 146,842 148,894 148,878 149,320 148,886 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,151 11,317 11,127 10,950 11,218 11,005 11,019 11,354 11,262 11,104 11,393 26 Savings deposits' 80,115 70,642 71,639 69,982 68,595 67,453 67,322 67,185 66,706 66,776 69,669 27 Personal 77,035 67,673 68,760 67,144 65,692 64,204 64,484 63,966 63,524 63,483 66,374 28 Nonpersonal 3,079 2,969 2,878 2,837 2,902 3,248 2,838 3,219 3,182 3,293 3,294 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,793 2,166 2,041 2,086 1,943 1,780 1,885 1,567 1,784 1,873 1,735 30 92 to 182 days 12,946 11,793 12,084 11,953 11,707 11,245 11,449 11,025 11,131 11,183 11,233 31 183 days to 1 year 17,426 18,753 19,336 19,979 20,277 21,051 20,956 21,702 22,157 22,488 24,779 32 More than 1 year to 2'/5 years 16,546 17,842 20,460 21,870 22,648 23,445 24,014 24,658 25,141 25,296 27,784 33 More than 2 x/l years 20,464 21,600 21,888 22,275 22,446 22,671 22,819 22,935 22,930 22,780 23,301 34 IRA and Keogh plan accounts 19,356 19,325 19,802 20,099 20,221 20,388 20,236 20,499 20,568 20,531 21,789 1. BIF, Bank Insurance Fund. Data in this table also appear in the Board's H.6 (508) 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 75 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 1995 BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt Feb. Mar. Apr. May June July DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 313,128.1 334,784.1 369,029.1 384,140.0 393,325.2 362,527.2 418,140.7 408,037.0 389,896.6 2 Major New York City banks 165,447.7 171,224.3 191,168.8 195,129.3 197,666.4 185,751.6 217,464.9 203,338.6 197,709.7 3 Other banks 147,680.4 163,559.7 177,860.3 189,010.7 195,658.8 176,775.6 200,675.8 204,698.4 192,187.0 4 Other checkable deposits4 3,780.3 3,481.5 3,798.6 3,918.2 4,044.4 3,666.2 4,167.8 3,964.7 3,539.3 5 Savings deposits (including MMDAs)5 3,309.1 3,497.4 3,766.3 3,989.8 3,889.3 3,565.7 4,022.0 4,408.5 4,002.8 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 825.9 785.9 817.4 857.2 880.4 807.4 934.4 896.7 847.8 7 Major New York City banks 4,795.3 4,198.1 4,481.5 4,675.9 4,754.1 4,551.2 5,168.0 4,780.3 4,625.9 8 Other banks 428.7 424.6 435.1 465.1 482.9 433.1 495.0 496.2 460.7 9 Other checkable deposits4 14.4 11.9 12.6 13.4 13.9 12.6 14.7 14.3 12.7 10 Savings deposits (including MMDAs)5 4.7 4.6 4.9 5.5 5.4 5.0 5.6 6.1 5.5 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 313,344.9 334,899.2 369,121.8 355,792.9 412,196.9 357,561.2 407,765.3 420,396.4 389,072.0 12 Major New York City banks 165,595.0 171,283.5 191,226.1 181,697.8 209,255.5 180,169.1 207,259.8 209,349.5 196,873.1 13 Other banks 147,749.9 163,615.7 177,895.7 174,095.1 202,941.4 177,392.1 200,505.5 211,046.9 192,198.9 14 Other checkable deposits4 3,783.6 3,481.7 3,795.6 3,609.9 4,083.5 3,874.2 4,004.2 4,078.9 3,472.0 15 Savings deposits (including MMDAs)5 3,310.0 3,498.3 3,764.4 3,611.3 3,989.3 3,727.1 3,981.9 4,516.3 4,070.5 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 826.1 786.1 818.2 812.4 946.3 796.3 927.6 936.0 846.7 17 Major New York City banks 4,803.5 4,197.9 4,490.3 4,347.5 5,145.1 4,459.5 5,095.1 5,037.0 4,658.7 18 Other banks 428.8 424.8 435.3 439.5 513.9 434.1 502.6 517.8 460.6 19 Other checkable deposits4 14.4 11.9 12.6 12.3 14.0 13.0 14.3 14.8 12.7 20 Savings deposits (including MMDAs)5 4.7 4.6 4.9 5.0 5.6 5.2 5.6 6.2 5.6 1. Historical tables containing revised data for earlier periods can be obtained from the 4. As of January 1994, other checkable deposits (OCDs), previously defined as Publications Section, Division of Support Services, Board of Governors of the Federal automatic transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) Reserve System, Washington, DC 20551. accounts, were expanded to include telephone and preauthorized transfer accounts. This Data in this table also appear in the Board's G.6 (406) monthly statistical release. For change redefined OCDs for debits data to be consistent with OCDs for deposits data. ordering address, see inside front cover. 5. Money market deposit accounts. 2. Annual averages of monthly figures. 3. Represents accounts of individuals, partnerships, and corporations and of states and political subdivisions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • December 1995 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1994r 1995r 1995 Sept. Mar. Apr. May June July Aug. Sept. Sept. 6 Sept. 13 Sept. 20 Sept. 27 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,285.2 3,387.7 3,455.3 3,482.3 3,497.0 3,514.0 3,530.3 3,552.4 3,540.2 3,549.1 3,558.8 3,561.6 2 Securities in bank credit 971.2 939.2 981.0 976.9 973.5 964.3 971.3 977.0 966.4 980.2 978.7 980.7 3 U.S. government securities 750.0 711.5 710.3 713.1 710.8 704.8 709.1 706.4 704.3 707.3 703.9 708.1 4 Other securities 221.1 227.6 270.7 263.7 262.8 259.5 262.3 270.6 262.1 272.9 274.8 272.6 5 Loans and leases in bank credit2 .. . 2,314.0 2,448.5 2,474.3 2,505.4 2,523.5 2,549.7 2,559.0 2,575.4 2,573.8 2,569.0 2,580.1 2,580.8 6 Commercial and industrial 626.6 673.7 681.0 688.9 691.7 697.0 698.3 702.3 701.3 701.2 704.5 702.6 7 Real estate 980.7 1,028.3 1,036.4 1,041.7 1,049.7 1,060.6 1,066.3 1,070.5 1,068.4 1,071.1 1,071.0 1,071.2 8 Revolving home equity 74.4 76.4 77.0 77.6 78.1 78.6 78.5 78.9 78.8 78.9 79.0 78.9 9 Other 906.3 951.9 959.4 964.1 971.5 982.0 987.7 991.6 989.6 992.2 992.0 992.2 10 Consumer 434.2 465.4 471.5 473.3 478.5 481.7 487.0 490.1 491.4 489.1 489.5 490.9 11 Security3 76.3 74.7 78.1 89.7 89.7 88.9 84.2 86.6 88.7 81.8 88.7 89.8 12 Other 196.3 206.4 207.4 211.8 213.9 221.6 223.1 225.9 224.0 225.8 226.5 226.3 13 Interbank loans4 160.8 182.5 180.7 185.5 187.6 194.8 191.5 195.1 190.4 192.5 190.0 208.8 14 Cash assets5 202.7 208.8 208.7 210.8 211.3 214.1 208.7 212.3 214.8 207.9 211.5 212.9 15 Other assets6 222.9 235.5 225.9 224.9 225.1 225.8 225.6 230.0 230.6 235.2 227.3 225.5 16 Total assets7 3,814.7 3,958.2 4,013.6 4,046.6 4,064.1 4,091.6 4,099.4 4,132.9 4,1193 4,128.0 4,130.8 4,151.9 Liabilities 17 Deposits 2,517.6 2,546.5 2,554.7 2,567.3 2,584.5 2,608.2 2,614.3 2,627.8 2,627.5 2,617.9 2,628.8 2,633.9 18 Transaction 803.2 793.3 788.6 785.3 781.2 793.4 784.8 782.3 787.4 776.1 788.1 780.4 19 Nontransaction 1,714.4 1,753.2 1,766.1 1,782.0 1,803.3 1,814.9 1,829.5 1,845.5 1,840.1 1,841.8 1,840.7 1,853.5 20 Large time 347.4 382.3 388.6 392.9 395.9 400.8 407.3 414.0 411.6 412.7 411.8 416.7 21 Other 1,367.0 1,370.9 1,377.5 1,389.2 1,407.4 1,414.1 1,422.3 1,431.6 1,428.5 1,429.1 1,428.9 1,436.9 22 Borrowings 580.1 654.7 682.7 688.8 676.6 691.9 672.6 676.8 653.5 670.1 679.0 700.7 23 From banks in the U.S 160.5 186.3 186.1 187.6 187.5 201.0 196.5 200.3 194.3 200.3 193.1 215.9 24 From nonbanks in the U.S 419.6 468.4 496.6 501.2 489.0 490.9 476.1 476.5 459.2 469.7 485.9 484.7 25 Net due to related foreign offices 211.4 241.7 234.8 239.8 244.8 236.4 248.0 254.0 248.0 258.1 256.6 254.3 26 Other liabilities8 178.1 189.8 218.0 213.4 211.1 202.2 205.4 215.3 213.5 224.0 215.7 210.7 27 Total liabilities 3,4872 3,632.7 3,690.1 3,709.4 3,717.0 3,738.8 3,7403 3,773.9 3,742.5 3,770.1 3,780.1 3,799.5 28 Residual (assets less liabilities)9 327.6 325.5 323.6 337.2 347.1 352.8 359.0 359.1 376.8 358.0 350.7 352.3 Not seasonally adjusted Assets 29 Bank credit 3,283.3 3,388.4 3,456.7 3,474.1 3,493.4 3,500.8 3,520.3 3,547.5 3,540.0 3,547.6 3,554.8 3,548.1 30 Securities in bank credit 969.4 946.9 987.6 978.2 974.3 959.8 968.9 972.6 970.4 977.6 971.1 970.5 31 U.S. government securities 752.4 716.6 714.6 712.2 710.5 700.9 709.9 708.1 708.5 710.1 705.8 707.5 32 Other securities 217.0 230.3 273.0 265.9 263.8 258.9 259.0 264.4 261.8 267.4 265.3 263.0 33 Loans and leases in bank credit2 . . . 2,313.9 2,441.5 2,469.1 2,495.9 2,519.1 2,541.0 2,551.4 2,574.9 2,569.6 2,570.0 2,583.8 2,577.6 34 Commercial and industrial 623.1 676.9 685.4 692.0 693.7 696.3 694.9 698.5 696.3 695.8 702.4 698.6 35 Real estate 982.0 1,023.4 1,032.2 1,040.1 1,049.4 1,059.9 1,065.5 1,071.8 1,068.9 1,073.3 1,071.8 1,072.1 36 Revolving home equity 74.7 75.7 76.4 77.5 78.2 78.6 78.7 79.2 78.9 79.2 79.3 79.4 37 Other 907.3 947.8 955.8 962.6 971.2 981.3 986.8 992.5 990.0 994.1 992.5 992.7 38 Consumer 435.1 461.9 468.3 471.8 475.9 479.3 486.6 491.2 491.3 489.9 491.5 492.9 39 Security3 74.5 75.9 78.9 83.5 85.6 83.5 81.1 85.0 84.8 82.7 89.9 85.9 40 Other 199.2 203.3 204.3 208.5 214.5 222.0 223.3 228.4 228.3 228.3 228.3 228.1 41 Interbank loans4 158.0 180.6 180.3 179.9 184.6 190.7 186.8 191.4 191.9 191.1 183.1 200.1 42 Cash assets5 204.1 203.1 205.0 208.3 209.4 211.0 201.1 213.8 228.9 211.5 208.9 208.0 43 Other assets6 223.4 231.0 222.1 224.1 223.7 225.4 227.4 230.5 233.9 235.3 225.3 226.1 44 Total assets7 3,811.7 3,946.5 4,007.4 4,029.4 4,054.2 4,071.2 4,078.8 4,126.2 4,137.7 4,128.4 4,115.1 4,125.4 Liabilities 45 Deposits 2,514.4 2,536.8 2,557.7 2,558.3 2,581.6 2,599.1 2,600.2 2,624.2 2,657.8 2,627.2 2,606.6 2,602.3 46 Transaction 800.4 781.2 793.5 774.1 775.6 784.1 768.8 779.5 812.4 781.8 770.0 756.6 47 Nontransaction 1,714.0 1,755.7 1,764.2 1,784.1 1,806.0 1,815.0 1,831.5 1,844.7 1,845.4 1,845.4 1,836.7 1,845.7 48 Large time 347.3 383.5 387.2 397.1 398.4 400.1 407.9 413.9 412.1 413.7 411.6 415.9 49 Other 1,366.6 1,372.2 1,377.0 1,387.0 1,407.6 1,414.9 1,423.6 1,430.8 1,433.4 1,431.7 1,425.1 1,429.8 50 Borrowings 590.0 643.5 663.9 674.8 683.6 692.8 681.5 686.7 675.4 677.4 697.1 697.5 51 From banks in the U.S 158.6 182.6 182.5 182.1 187.4 197.4 194.3 198.3 200.7 200.0 188.4 205.5 52 From nonbanks in the U.S 431.4 460.9 481.5 492.6 496.1 495.5 487.2 488.5 474.7 477.4 508.7 492.0 53 Net due to related foreign offices 205.9 245.1 237.0 245.2 238.9 233.9 243.2 247.5 236.3 246.4 247.2 261.9 54 Other liabilities8 177.8 189.3 212.9 211.5 206.4 199.5 204.7 214.9 213.8 223.4 213.1 211.3 55 Total liabilities 3,488.0 3,614.7 3,671.6 3,689.7 3,710.5 3,725.4 3,729.6 3,7733 3,7833 3,774.4 3,764.0 3,773.0 56 Residual (assets less liabilities)9 323.7 331.8 335.8 339.7 343.7 345.8 349.2 352.9 354.4 354.0 351.1 352.4 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 1994r 1995r 1995 Sept. Mar. Apr. May June July Aug. Sept. Sept. 6 Sept. 13 Sept. 20 Sept. 27 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 2,930.0 3,022.8 3,057.2 3,081.5 3,097.8 3,109.1 3,123.0 3,139.0 3,129.3 3,133.1 3,143.2 3,150.1 58 Securities in bank credit 882.7 853.1 862.9 860.4 858.8 849.4 852.6 857.4 851.1 857.2 857.7 862.4 59 U.S. government securities 681.8 648.1 645.3 646.8 646.7 640.9 642.6 642.7 641.3 641.5 640.2 645.9 60 Other securities 200.9 205.0 217.6 213.6 212.1 208.5 210.0 214.7 209.8 215.7 217.5 216.5 61 Loans and leases in bank credit2 2,047.3 2,169.7 2,194.3 2,221.0 2,239.1 2,259.7 2,270.3 2,281.6 2,278.3 2,275.9 2,285.5 2,287.7 6? Commercial and industrial 469.2 502.3 510.5 516.6 518.9 523.4 524.4 526.7 525.4 525.0 527.8 528.1 63 Real estate 938.7 988.2 997.3 1,003.3 1,011.4 1,022.7 1,029.3 1,034.0 1,031.9 1,034.5 1,034.5 1,034.9 64 Revolving home equity 74.4 76.3 77.0 77.6 78.1 78.6 78.5 78.9 78.8 78.9 79.0 78.9 65 Other 864.3 911.9 920.4 925.7 933.3 944.1 950.8 955.1 953.2 955.6 955.5 955.9 66 Consumer 434.2 465.4 471.5 473.3 478.5 481.7 487.0 490.1 491.4 489.1 489.5 490.9 67 Security3 43.6 46.0 45.5 54.0 55.4 52.1 50.4 50.8 49.9 47.4 53.7 53.5 68 Other 161.7 167.9 169.5 173.7 174.7 179.8 179.2 180.1 179.5 180.0 180.0 180.3 69 Interbank loans4 137.2 157.2 157.8 160.6 164.3 172.3 164.6 167.6 164.9 167.0 166.6 173.4 7ft Cash assets5 180.7 182.1 182.5 182.6 184.4 187.3 182.5 187.0 190.0 181.9 186.4 188.4 71 Other assets6 168.9 176.1 173.4 170.6 170.3 172.9 172.5 174.7 174.3 175.2 173.6 173.2 72 Total assets7 3,360.0 3,481.8 3,514.0 3,538.4 3,560.0 3,584.5 3,585.8 3,611.7 3,601.8 3,600.6 3,612.9 3,6283 Liabilities 73 Deposits 2,367.7 2,395.8 2,398.6 2,409.5 2,424.1 2,447.2 2,448.0 2,457.1 2,458.2 2,449.2 2,461.1 2,458.5 74 Transaction 793.2 782.9 778.7 775.9 771.9 784.0 775.4 773.3 778.6 767.2 779.3 771.0 75 Nontransaction 1,574.5 1,612.9 1,619.9 1,633.6 1,652.2 1,663.3 1,672.6 1,683.8 1,679.7 1,682.0 1,681.7 1,687.6 76 Large time 209.8 242.4 244.4 247.1 247.6 247.9 248.9 252.6 251.1 253.3 252.7 252.2 77 Other 1,364.7 1,370.5 1,375.5 1,386.6 1,404.6 1,415.4 1,423.7 1,431.2 1,428.5 1,428.7 1,429.0 1,435.3 78 Borrowings 476.0 540.6 565.1 569.6 563.2 572.7 555.6 561.6 536.2 549.6 567.7 586.0 79 From banks in the U.S 143.5 167.4 165.3 164.9 168.2 181.5 178.4 182.2 174.2 179.8 176.5 199.5 80 From nonbanks in the U.S 332.5 373.2 399.9 404.8 395.0 391.2 377.2 379.5 362.0 369.8 391.2 386.5 81 Net due to related foreign offices .... 60.2 85.3 82.0 84.0 90.2 82.1 91.0 93.4 87.8 97.2 92.0 97.0 82 Other liabilities8 133.5 139.7 151.9 147.1 145.4 137.8 138.6 146.2 145.2 149.3 148.2 143.8 83 Total liabilities 3,037.5 3,161.3 3,197.7 3,210.2 3,223.0 3,239.8 3,233.1 3,2583 3,227.4 3,245-3 3,269.0 3,2853 84 Residual (assets less liabilities)9 322.5 320.4 316.2 328.2 337.0 344.7 352.7 353.4 374.4 355.3 343.9 342.9 Not seasonally adjusted Assets 85 Bank credit 2,930.7 33,,002222..00 3,061.4 3,079.9 3,098.7 3,099.3 3,114.8 3,137.3 3,132.2 3,134.1 3,142.0 3,140.0 86 Securities in bank credit 881.6 885599..88 870.8 862.9 861.8 845.8 850.4 854.3 854.5 856.0 852.6 854.1 87 U.S. government securities 684.7 652.5 650.7 647.7 647.6 637.9 643.6 645.0 645.6 645.1 642.8 645.7 88 Other securities 196.9 207.4 220.1 215.2 214.3 207.9 206.8 209.4 208.9 211.0 209.8 208.4 89 Loans and leases in bank credit2 2,049.1 2,162.2 2,190.6 2,217.0 2,236.9 2,253.6 2,264.4 2,283.0 2,277.7 2,278.0 2,289.4 2,285.9 90 Commercial and industrial 466.1 505.0 514.8 520.4 520.8 522.3 520.6 523.4 520.9 520.7 525.9 524.6 91 Real estate 939.7 983.3 993.5 1,001.8 1,011.2 1,022.1 1,028.4 1,035.0 1,032.1 1,036.5 1,034.9 1,035.6 92 Revolving home equity 74.7 75.7 76.4 77.5 78.2 78.6 78.7 79.2 78.9 79.2 79.3 79.4 93 Other 865.0 907.7 917.1 924.3 933.1 943.5 949.7 955.8 953.2 957.3 955.7 956.2 94 Consumer 435.1 461.9 468.3 471.8 475.9 479.3 486.6 491.2 491.3 489.9 491.5 492.9 95 Security3 43.7 46.7 46.8 51.9 54.2 50.0 49.3 50.9 50.0 48.6 55.3 51.0 96 Other 164.4 165.3 167.3 171.1 174.7 179.8 179.6 182.5 183.4 182.4 181.8 181.7 97 Interbank loans4 133.8 156.6 157.7 155.4 162.7 167.8 161.1 163.0 168.2 164.6 158.9 161.2 98 Cash assets5 180.9 177.0 179.6 181.4 182.0 184.0 174.2 187.1 202.8 184.3 182.3 181.5 99 Other assets6 170.3 172.9 170.9 169.9 169.6 173.3 173.4 176.2 177.7 176.1 173.1 174.9 100 Total assets7 3,358.7 3,472.0 3,513.0 3,529.7 3,556.1 3,567.8 3,566.7 3,606.8 3,624.1 3,602.1 3,5993 3,600.7 Liabilities 101 Deposits 2,365.1 2,384.3 2,402.9 2,398.5 2,418.3 2,438.3 2,434.3 2,454.4 2,489.6 2,459.3 2,440.1 2,426.8 10? Transaction 789.7 771.3 784.0 765.2 766.5 774.7 759.5 769.9 803.2 772.4 760.4 746.2 103 Nontransaction 1,575.4 1,613.0 1,618.8 1,633.3 1,651.8 1,663.6 1,674.8 1,684.5 1,686.4 1,686.9 1,679.7 1,680.7 104 Large time 210.7 241.2 243.7 248.7 247.2 248.0 250.7 253.6 252.8 255.2 253.9 251.9 105 Other 1,364.7 1,371.8 1,375.2 1,384.6 1,404.6 1,415.6 1,424.2 1,430.9 1,433.6 1,431.7 1,425.8 1,428.8 106 Borrowings 485.2 531.2 546.6 560.0 568.3 570.9 562.5 570.8 556.9 555.1 582.0 586.4 107 From banks in the U.S 141.2 163.8 162.8 161.6 167.8 177.4 176.4 179.6 180.1 177.8 171.3 189.3 108 From nonbanks in the U.S 344.1 367.5 383.8 398.5 400.5 393.5 386.1 391.2 376.8 377.3 410.7 397.1 109 Net due to related foreign offices .... 56.8 89.7 84.1 91.8 89.6 81.7 89.1 88.7 84.0 91.0 85.6 96.4 110 Other liabilities8 133.3 140.1 148.7 144.9 141.6 136.7 137.4 145.9 144.9 148.5 146.2 144.4 111 Total liabilities 3,040.4 3,145-3 3,182-3 3,195.2 3,217.8 3,227.6 3,2233 3,259.8 3,275.5 3,253.9 3,254.1 3,254.1 112 Residual (assets less liabilities)' 318.4 326.7 330.7 334.5 338.3 340.2 343.4 347.0 348.6 348.2 345.2 346.6 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • December 1995 NOTES TO TABLE 1.26 1. Covers the following types of institutions in the fifty states and the District of 4. Consists of federal funds sold to, reverse repurchase agreements with, and loans to Columbia: domestically chartered commercial banks that submit a weekly report of commercial banks in the United States. condition (large domestic); other domestically chartered commercial banks (small domes- 5. Includes vault cash, cash items in process of collection, demand balances due from tic); branches and agencies of foreign banks; New York State investment companies, and depository institutions in the United States, balances due from Federal Reserve Banks, Edge Act and agreement corporations (foreign-related institutions). Excludes interna- and other cash assets. tional banking facilities. Data are Wednesday values, or pro rata averages of Wednesday 6. Excludes the due-from position with related foreign offices, which is included in values. Large domestic banks constitute a universe; data for small domestic banks and lines 25, 53, 81, and 109. foreign-related institutions are estimates based on weekly samples and on quarter-end 7. Excludes unearned income, reserves for losses on loans and leases, and reserves for condition reports. Data are adjusted for breaks caused by reclassifications of assets and transfer risk. Loans are reported gross of these items. liabilities. 8. Excludes the due-to position with related foreign offices, which is included in lines 2. Excludes federal funds sold to, reverse repurchase agreements with, and loans to 25, 53, 81, and 109. commercial banks in the United States. 9. This balancing item is not intended as a measure of equity capital for use in capital 3. Consists of reserve repurchase agreements with broker-dealers and loans to pur- adequacy analysis. chase and carry securities. 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 1995 AAccccoouunntt Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 ASSETS 1 Cash and balances due from depository institutions 115,646 104,701 108,438 103,019 102,961 124,827 114,432 114,874 115,730 2 U.S. Treasury and government securities 296,1 llr 298,123 297,369 300,076 297,480 298,857 297,171 294,945 296,670 Trading account 20,549 21,793 19,296 20,070 18,970 20,964 21,641 19,806 20,331 4 Investment account 275,561 276,330 278,073 280,007 278,510 277,893 275,530 275,139 276,339 5 Mortgage-backed securities' 99,016 99,020 100,420 101,816 102,167 102,169 101,803 103,327 104,771 All others, by maturity One year or less 44,834 44,808 44,555 44,115 44,201 45,051 43,900 4433,,550066 4422,,993377 7 One year through five years 71,671 72,606 73,576 74,511 72,950 71,715 70,771 69,702 70,568 8 More than five years 60,041 59,896 59,523 59,564 59,192 58,958 59,056 58,605 58,063 9 120,869 119,751 123,003 122,471 124,709 124,435 126,387 125,268 124,192 10 Trading account 1,532 1,465 1,635 1,698 1,600 1,475 1,484 1,429 1,487 11 Investment account 62,357 62,490 62,619 62,904 62,690 62,833 63,015 62,873 62,687 12 State and local government, by maturity 19,718 19,688 19,950 19,970 20,065 19,926 19,970 19,992 19,936 N One year or less 5,072 5,077 5,106 5,107 5,215 5,196 5,193 5,216 5,189 14 More than one year 14,646 14,611 14,844 14,862 14,850 14,729 14,777 14,776 14,747 15 Other bonds, corporate stocks, and securities 42,639 42,801 42,669 42,934 42,625 42,907 43,045 42,882 42,751 16 Other trading account assets 56,981 55,796 58,748 57,869 60,419 60,127 61,888 60,965 60,017 17 Federal funds sold2 112,113 101,260 102,327 92,357 98,693 101,769 102,962 104,314 102,266 18 To commercial banks in the United States 75,898 63,707 68,325 61,257 66,042 66,164 67,357 66,766 68,694 19 To nonbank brokers and dealers in securities 30,104 31,402 28,777 26,182 27,503 29,466 28,139 32,080 28,741 ?0 6,112 6,152 5,226 4,918 5,147 6,140 7,467 5,469 4,830 ?1 Other loans and leases, gross 1,244,874 1,243,132 1,241,618 1,244,203 1,247,173 1,249,317 1,248,518 1,256,708 1,256,662 7 ? ? 3 Co B m a m nk e e rc rs ia a l c a c n e d p t i a n n d c u e s s t r a ia n l d commercial paper 345 l, , 5 7 5 8 9 1 r r 344 1 , , 1 5 9 5 9 7 r r 342 l, , 5 3 7 5 9 7 r r 340 l, , 5 5 1 3 6 6 r r 340 l, , 5 0 5 8 6 5 r r 341 1 , , 5 4 9 2 8 3 341 1 , , 5 4 6 9 1 6 345 1 , , 6 5 2 6 1 8 344 1 , , 0 5 6 61 0 74 All other 344,222r 342,643r 340,778r 339,020r 338,529r 340,175 340,065 344,053 342,500 75 U.S. addressees 341,494r 339,882r 338,198r 336,429r 336,022' 337,635 337,530 341,539 340,027 76 Non-U.S. addressees 2,728 2,761 2,580 2,591 2,506 2,540 2,536 2,514 2,473 71 491,873r 493,964r 493,596r 494,678r 495,409r 496,236 499,311 497,033 498,112 ?8 Revolving, home equity 48,152r 48,439r 48,523r 48,516r 48,557r 47,988 47,738 47,797 47,882 ?9 All other 443,721r 445,524r 445,073r 446,162r 446,852' 448,248 451,573 449,236 450,230 30 To individuals for personal expenditures 245,022r 244,990r 246,683r 248,719r 250,541' 249,537 247,711 249,014 249,581 31 To depository and financial institutions 66,312 65,295 64,078 64,489 66,053 65,629 65,349 64,880 65,477 3? Commercial banks in the United States 42,520 41,219 41,032 41,713 42,539 41,747 41,629 38,015 38,516 33 Banks in foreign countries 3,246 3,575 3,032 2,715 2,858 2,814 2,986 2,860 2,987 34 Nonbank depository and other financial institutions 20,546 20,501 20,014 20,062 20,656 21,068 20,734 24,005 23,974 35 For purchasing and carrying securities 14,627 14,745 14,953 15,108 15,896 14,552 14,764 17,843 16,877 36 To finance agricultural production 6,692r 6,74 lr 6,718 6,72 lr 6,741' 6,718 6,712 6,731 6,726 37 To states and political subdivisions 10,970 10,972 11,014 11,015 10,991 10,939 10,946 10,941 10,935 38 To foreign governments and official institutions 1,295 1,329 1,052 1,078 1,086 1,243 994 1,020 1,125 4 39 0 Lease-financing receivables 2 3 6 5 , , 6 6 2 7 5 6 r 3 24 5 , , 9 9 8 12 5 r 2 3 5 5 , , 2 9 1 5 4 3 r 2 3 5 6 , , 7 1 2 3 8 2 r 2 3 4 6 , , 1 2 5 2 0 1 ' 2 3 6 6 , , 3 5 3 3 2 4 2 3 4 6 , , 3 7 8 8 4 5 2 36 6 , , 9 6 4 8 1 4 2 37 6 , , 2 4 7 9 1 8 41 LESS: Unearned income 1,623 1,643 1,638 1,679 1,646 1,625 1,671 1,669 1,672 47 Loan and lease reserve5 34,156 34,322 34,319 34,204 34,185 34,279 34,292 34,346 34,194 43 Other loans and leases, net 1,209,095 1,207,167 1,205,660 1,208,319 1,211,342 1,213,412 1,212,554 1,220,693 1,220,795 44 All other assets 138,873 138,285 138,633 135,285 135,246' 138,997 138,741 139,383 138,834 45 Total assets6 1,992,706 1,969,287 1,975,430 1,961,526 l,970,430r 2,002,297 1,992,248 1,999,478 1,998,487 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • December 1995 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1995 AAccccoouunntt Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 LIABILITIES 46 Deposits 1,184,220 1,172,115 1,183,515 1,159,680' 1,164,187 1,202,963 1,184,986 1,176,596 1,167,484 47 Demand deposits 303,931 290,921" 300,950 284,479' 289,972 315,471 300,159 301,366 297,980 48 Individuals, partnerships, and corporations 256,333R 247,109' 254,897' 241,404' 247,413' 266,474 254,786 249,801 246,800 49 Other holders 47,598R 43,812R 46,052' 43,075' 42,559' 48,997 45,373 51,565 51,180 50 States and political subdivisions 8,864R 7,309R 7,944' 7,887' 8,226' 7,955 7,999 9,447 8,930 51 U.S. government 1,967 1,745 2,431 1,501 1,523 1,798 2,425 3,188 1,844 52 Depository institutions in the United States 20,515 18,728 21,114 17,467 17,994 23,487 19,406 20,711 20,709 53 Banks in foreign countries 4,910 4,556 4,719 4,954 5,113 4,873 4,755 4,915 4,719 54 Foreign governments and official institutions 645 714 605 633 702 924 892 759 852 55 Certified and officers' checks 10,697 10,759 9,240 10,633 9,000 9,961 9,895 12,545 14,126 56 Transaction balances other than demand deposits4 112,158 109,745 109,236 104,792 104,213 109,468 106,876 102,951 97,980 57 Nontransaction balances 768,130 771,449 773,329 770,409' 770,002 778,023 777,951 772,280 771,524 58 Individuals, partnerships, and corporations 745,531R 748,555R 750,520' 747,380' 747,201' 755,011 754,773 749,369 748,543 59 Other holders 22,599R 22,894' 22,810' 23,029' 22,800' 23,012 23,179 22,910 22,981 60 States and political subdivisions 18,453R 18,708R 18,529' 18,792' 18,584' 18,835 18,929 18,705 18,835 61 U.S. government 2,391 2,365 2,338 2,320 2,339 2,247 2,276 2,274 2,299 62 Depository institutions in the United States 1,456 1,502 1,644 1,618 1,580 1,631 1,648 1,593 1,532 63 Foreign governments, official institutions, and banks . . 298 319 299 300 298 300 325 338 315 64 Liabilities for borrowed money5 426,958 407,964 405,582 403,622 403,999 400,955 397,584 419,214 421,017 65 Borrowings from Federal Reserve Banks 700 0 0 0 50 0 0 0 0 66 Treasury tax and loan notes 27,523 12,319 5,286' 5,559' 3,804 1,006 2,489 30,689 26,005 67 Other liabilities for borrowed money6 398,734 395,645 400,297' 398,063' 400,145 399,948 395,095 388,524 395,013 68 Other liabilities (including subordinated notes and debentures) .. . 194,269R 202,255 199,744 211,288 215,347' 209,522 220,068 213,874 220,922 69 Total liabilities 1,805,446 1,782,334 1,788,841 l,774,590r l,783,533r 1,813,440 1,802,638 1,809,684 1,809,423 70 Residual (total assets less total liabilities)7 187,260R 186,953 186,590 186,936' 186,897 188,857 189,611 189,794 189,064 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 1,655,548 1,657,340 1,654,959 1,656,137 1,659,473 1,666,466 1,666,052 1,676,455 1,672,579 72 Time deposits in amounts of $100,000 or more 109,451 109,200 110,893 110,036' 110,390 111,243 112,190 110,707 108,281 73 Loans sold outright to affiliates9 1,520 1,520 1,509 1,498 1,485 1,476 1,465 1,453 1,443 74 Commercial and industrial 282 282 282 281 281 281 281 281 281 75 Other 1,238 1,238 1,227 1,216 1,204 1,195 1,184 1,172 1,162 76 Foreign branch credit extended to U.S. residents10 25,465 24,865 24,603 25,503 25,692 25,733 25,539 25,759 25,951 77 Net owed to related institutions abroad 72,892R 79,760 79,190 88,391 91,245 78,667 85,794 80,873 91,136 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 1995 AAccccoouunntt Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 ASSETS 1 Cash and balances due from depository institutions 16,821 16,737 17,059 17,178 17,337 16,504 17,156 16,850 16,941 2 U.S. Treasury and government agency secunties 41,957 43,016 44,472 44,466 44,921 41,726 4433,,221122 4411,,885544 4411,,445500 3 Other securities 30,681 30,696 32,787 31,211 32,125 32,074 34,459 33,823 33,534 4 Federal funds sold' 30,651 30,782 28,212 29,482 32,716 31,618 32,223 31,029 37,903 5 To commercial banks in the United States 7,612 7,173 7,329 8,498 11,093 7,616 9,185 8,226 15,333 6 To others2 23,039 23,609 20,883 20,984 21,622 24,002 23,038 22,803 22,570 7 Other loans and leases, gross 176,796 176,443 175,877 176,035 176,350 177,517 178,154 180,123 180,667 8 Commercial and industrial 113,292r 113,045r 113,622r 113,145r 113,340r 113,916 113,766 114,723 114,193 9 Bankers acceptances and commercial paper . 3,864 3,864 3,943 3,594 3,512 3,508 3,469 3,667 3,703 10 All other 109,428r 109,182r 109,679r 109,55 lr 109,828r 110,408 110,297 111,056 110,490 11 U.S. addressees 104,508r 104,294' 104,822r 104,738' 104,924r 105,498 105,387 106,101 105,442 1? Non-U.S. addressees 4,920 4,887 4,857 4,813 4,904 4,910 4,910 4,954 5,048 13 Loans secured by real estate 23,127 23,070 22,994 22,959 22,905 22,775 22,777 22,811 22,803 14 Loans to depository and financial institutions 28,527 28,659 28,419 28,767 28,286 28,834 29,051 2299,,660011 2299,,668899 15 Commercial banks in the United States 4,613 4,724 4,536 4,224 4,116 4,141 3,912 3,758 3,863 16 Banks in foreign countries 2,038 2,206 1,909 1,898 1,974 2,144 2,201 2,277 2,355 17 Nonbank financial institutions 21,876 21,729 21,974 22,645 22,196 22,549 22,938 23,566 23,471 18 For purchasing and carrying securities 5,5 llr 5,566r 5,106r 5,110r 4,842r 5,680 6,048 6,540 7,304 19 To foreign governments and official institutions 951 850 517 858 876 858 996611 889922 887722 70 All other 4,04 r 3,940r 3,915r 3,898r 4,576r 4,090 4,164 4,167 4,354 21 Other assets (claims on nonrelated parties) 38,328 38,988 39,288 40,014 40,230 41,351 43,941 38,145 37,778 22 Total assets3 364,303 363,991 363,919 370,409 373,932 370,787 378,199 368,468 374,477 LIABILITIES 73 Deposits or credit balances owed to other than directly related institutions 109,900 107,641 105,930 110,779 110,414r 109,310 108,448 110077,,007777 111122,,110088 ?4 Demand deposits4 3,706 3,680 3,806 3,769 4,484 3,818 3,964 3,992 4,515 7.5 Individuals, partnerships, and corporations .... 3,010 2,922 2,932 3,071 3,012 3,134 3,074 3,048 3,449 76 Other 696 759 874 698 1,472 684 890 944 1,066 71 Nontransaction accounts 106,194 103,961 102,124 107,010 105,930 105,492 104,485 103,085 107,593 78 Individuals, partnerships, and corporations .... 71,365 69,875 69,618 72,947 73,348 73,572 73,237 72,023 75,201 79 Other 34,829 34,086 32,506 34,063 32,581 31,919 31,248 31,061 32,392 30 Borrowings from other than directly related institutions 86,276 85,223 79,618 84,048 82,841 82,242 84,412 8800,,446644 7766,,778844 31 Federal funds purchased 43,777 42,936 37,990 41,085 40,698 41,679 43,938 43,902 40,378 37 From commercial banks in the United States . . 9,035 7,970 5,838 6,067 5,605 8,621 8,946 7,644 6,611 33 From others 34,742 34,966 32,152 35,018 35,092 33,058 34,992 36,257 33,767 34 Other liabilities for borrowed money 42,498 42,287 41,629r 42,963 42,143 40,564 40,474 36,562 36,406 35 To commercial banks in the United States 6,165 6,320 5,502 5,910 5,461 5,372 5,694 4,812 4,697 36 To others 36,333 35,968r 36,127 37,053 36,683 35,192 34,780 31,750 31,709 37 Other liabilities to nonrelated parties 49,929 51,303 53,010 52,886 53,965 53,474 58,204 51,257 50,905 38 Total liabilities6 364,303 363,991 363,919 370,409 373,932 370,787 378,199 368,468 374,477 MEMO 39 Total loans (gross) and securities, adjusted7 267,860 269,040 269,483 268,473 270,901 271,177 274,950 274,845 274,358 40 Net owed to related institutions abroad 89,129 92,494 99,137 90,674 96,458 95,763 98,079 103,026 108,476 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 • December 1995 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1995 IItteemm 1990 1991 1992 1993 1994 Mar. Apr. May June July Aug. Commercial paper (seasonally adjusted unless noted otherwise) 11 AAllll iissssuueerrss 562,656 528,832 545,619 555,075 595,382 633,324 651,128 650,580 648,819 657,938 660,719 FFiinnaanncciiaall ccoommppaanniieess11 22 DDeeaalleerr--ppllaacceedd ppaappeerr22,, ttoottaall 214,706 212,999 226,456 218,947 223,038 243,949 252,846 258,006 251,555 262,695 261,904 33 DDiirreeccttllyy ppllaacceedd ppaappeerr11,, ttoottaall 200,036 182,463 171,605 180,389 207,701 218,269 219,281 216,879 218,005 215,473 215,361 44 NNoonnffiinnaanncciiaall ccoommppaanniieess44 147,914 133,370 147,558 155,739 164,643 171,106 179,001 175,695 179,259 179,770 183,454 Bankers dollar acceptances (not seasonally adjusted) 5 Total 54,771 43,770 38,194 32,348 29,835 By holder 6 Accepting banks 9,017 11,017 10,555 12,421 11,783 7 Own bills 7,930 9,347 9,097 10,707 10,462 8 Bills bought from other banks 1,087 1,670 1,458 1,714 1,321 Federal Reserve Banks6 9 Foreign correspondents 918 1,739 1,276 725 410 10 Others 44,836 31,014 26,364 19,202 17,642 By basis 11 Imports into United States 13,095 12,843 12,209 10,217 10,062 12 Exports from United States 12,703 10,351 8,096 7,293 6,355 13 All other 28,973 20,577 17,890 14,838 13,417 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 5. Data on bankers dollar acceptances are gathered from approximately 100 institupersonal, and mortgage financing; factoring, finance leasing, and other business lending; tions. The reporting group is revised every January. Beginning January 1995, data for insurance underwriting; and other investment activities. Bankers dollar acceptances will be reported annually in September. 2. Includes all financial-company paper sold by dealers in the open market. 6. In 1977 the Federal Reserve discontinued operations in bankers dollar acceptances 3. As reported by financialc ompanies that place their paper directly with investors. for its own account. 4. 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 Loans' Percent per year Date of change Rate Period Av r e a r t a e g e Period Av r e a r t a e g e Period Av r e a r t a e g e 1992—Jan. 1 6.50 1992 6.25 1993—Jan 6.00 1994—Sept 7.75 JJuullyy 22 6.00 1993 6.00 Feb 6.00 Oct 7.75 1994 7.15 Mar 6.00 Nov 8.15 1994—Mar. 24 6.25 Apr. 6.00 Dec 8.50 Apr. 19 6.75 1992—Jan 6.50 May 6.00 May 17 7.25 Feb 6.50 June 6.00 1995—Jan 8.50 Aug. 16 7.75 Mar 6.50 July 6.00 Feb 9.00 Nov. 15 8.50 Apr. 6.50 Aug 6.00 Mar. 9.00 May 6.50 Sept 6.00 Apr 9.00 1995—Feb. 1 9.00 June 6.50 Oct 6.00 May 9.00 JJuullyy 77 8.75 July 6.02 Nov 6.00 June 9.00 Aug 6.00 Dec 6.00 July 8.75r Sept 6.00 Aug 8.75 Oct 6.00 1994—Jan 6.00 Sept 8.75 Nov 6.00 Feb 6.00 Oct 8.75 Dec 6.00 Mar. 6.06 Apr. 6.45 May 6.99 June 7.25 July 7.25 Aug 7.51 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 statistica lreleases. 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 • December 1995 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1995 1995, week ending IItteemm 11999922 11999933 11999944 June July Aug. Sept. Sept. 1 Sept. 8 Sept. 15 Sept. 22 Sept. 29 MONEY MARKET INSTRUMENTS 1 Federal funds',2'3 3.52 3.02 4.21 6.00 5.85 5.74 5.80 5.71 5.77 5.73 5.78 5.80 2 Discount window borrowing2'4 3.25 3.00 3.60 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 Commercial papei'3'5'6 3 1-month 3.71 3.17 4.43 6.05 5.87 5.85 5.82 5.84 5.82 5.81 5.80 5.85 4 3-month 3.75 3.22 4.66 5.94 5.79 5.82 5.74 5.79 5.76 5.72 5.70 5.76 5 6-month 3.80 3.30 4.93 5.79 5.68 5.75 5.66 5.73 5.70 5.63 5.60 5.70 Finance paper, directly placed3'5-7 6 1-month 3.62 3.12 4.33 5.92 5.74 5.72 5.71 5.73 5.73 5.71 5.69 5.72 7 3-month 3.65 3.16 4.53 5.73 5.60 5.64 5.58 5.63 5.58 5.58 5.54 5.60 8 6-month 3.63 3.15 4.56 5.47 5.39 5.51 5.45 5.51 5.48 5.44 5.42 5.47 Bankers acceptances3'5'8 9 3-month 3.62 3.13 4.56 5.80 5.66 5.68 5.66 5.67 5.66 5.64 5.62 5.70 10 6-month 3.67 3.21 4.83 5.65 5.56 5.62 5.58 5.62 5.60 5.56 5.54 5.63 Certificates of deposit, secondary marked'9 11 1-month 3.64 3.11 4.38 5.97 5.80 5.77 5.74 5.76 5.75 5.73 5.72 5.76 12 3-month 3.68 3.17 4.63 5.90 5.77 5.77 5.73 5.75 5.75 5.71 5.70 5.78 13 6-month 3.76 3.28 4.96 5.80 5.73 5.79 5.73 5.77 5.74 5.71 5.69 5.79 14 Eurodollar deposits, 3-month3'10 3.70 3.18 4.63 5.89 5.79 5.79 5.74 5.76 5.76 5.74 5.69 5.78 U.S. Treasury bills Secondary market3'5 15 3-month 3.43 3.00 4.25 5.47 5.42 5.40 5.28 5.31 5.33 5.31 5.22 5.26 16 6-month 3.54 3.12 4.64 5.42 5.37 5.41 5.30 5.32 5.32 5.29 5.25 5.35 17 1-year 3.71 3.29 5.02 5.33 5.28 5.43 5.31 5.34 5.32 5.29 5.26 5.37 Auction average3'5'" 18 3-month 3.45 3.02 4.29 5.50 5.47 5.41 5.26 5.34 5.30 5.34 5.25 5.14 19 6-month 3.57 3.14 4.66 5.46 5.41 5.40 5.28 5.34 5.30 5.33 5.22 5.27 20 1-year 3.75 3.33 5.02 5.38 5.38 5.55 5.21 n.a. n.a. n.a. 5.21 n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 3.89 3.43 5.32 5.64 5.59 5.75 5.62 5.66 5.63 5.59 5.57 5.69 22 2-year 4.77 4.05 5.94 5.72 5.78 5.98 5.81 5.86 5.80 5.76 5.79 5.89 23 3-year 5.30 4.44 6.27 5.80 5.89 6.10 5.89 5.96 5.88 5.84 5.87 5.97 24 5-year 6.19 5.14 6.69 5.93 6.01 6.24 6.00 6.08 5.99 5.96 5.98 6.08 25 7-year 6.63 5.54 6.91 6.05 6.20 6.41 6.13 6.23 6.13 6.08 6.12 6.20 26 10-year 7.01 5.87 7.09 6.17 6.28 6.49 6.20 6.31 6.20 6.15 6.17 6.26 27 20-year n.a. 6.29 7.49 6.59 6.74 6.92 6.65 6.74 6.65 6.61 6.64 6.70 28 30-year 7.67 6.59 7.37 6.57 6.72 6.86 6.55 6.68 6.59 6.51 6.53 6.57 Composite 29 More than 10 years (long-term) 7.52 6.45 7.41 6.59 6.71 6.90 6.63 6.73 6.63 6.59 6.62 6.68 STATE AND LOCAL NOTES AND BONDS Moody's series'3 30 Aaa 6.09 5.38 5.77 5.62 5.68 5.83 5.71 5.90 5.70 5.65 5.60 5.70 31 BBaaaa 6.48 5.83 6.17 5.89 5.91 5.95 5.90 5.93 5.90 5.85 5.85 5.98 32 BBoonndd BBuuyyeerr sseerriieess''44 6.44 5.60 6.18 5.84 5.92 6.06 5.91 5.98 5.90 5.83 5.91 6.00 CORPORATE BONDS 33 Seasoned issues, all industries15 8.55 7.54 8.26 7.54 7.66 7.81 7.56 7.66 7.58 7.54 7.56 7.58 Rating group 34 8.14 7.22 7.97 7.30 7.41 77..5577 7.32 7.41 7.33 7.29 7.31 7.33 35 Aa 8.46 7.40 8.15 7.43 7.54 7.69 7.45 7.53 7.45 7.41 7.44 7.47 36 A 8.62 7.58 8.28 7.53 7.65 7.79 7.56 7.64 7.57 7.53 7.56 7.58 37 BBaaaa 8.98 7.93 8.63 7.90 8.04 8.19 7.93 8.04 7.95 7.91 7.93 7.95 38 AA--rraatteedd.. rreecceennttllyy ooffffeerreedd uuttiilliittyy bboonnddss1166 8.52 7.46 8.29 7.60 7.72 7.84 7.55 7.60 7.58 7.48 7.58 7.49 MEMO Dividend-price ratio17 39 Common stocks 2.99 2.78 2.82 2.55 2.50 2.49 2.42 2.48 2.46 2.42 2.39 2.41 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 obligation bonds 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. Common stock ratio is based on the 500 stocks 9. An average of dealer offering rates on nationally traded certificates of deposit. in the price index. 10. Bid rates for Eurodollar deposits at 11:00 a.m. London time. Data are for indication NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and purposes only. G.13 (415) monthly statistical releases. For ordering address, see inside front cover. 11. Auction date for daily data; weekly and monthly averages computed on an issue-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.36 STOCK MARKET Selected Statistics 1995 IInnddiiccaattoorr 11999922 11999933 11999944 Jan. Feb. Mar. Apr. May June July Aug. Sept. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 229.00 249.71 254.16 253.56 261.86 266.81 274.38 281.81 289.52 298.18 300.05 310.41 2 Industrial 284.26 300.10 315.32 319.93 328.98 337.96 347.69 357.01 366.75 379.13 379.79 390.42 3 Transportation 201.02 242.68 247.17 230.25 237.29 252.37 254.36 254.70 256.80 279.15 285.63 295.54 4 Utility 99.48 114.55 104.96 100.58 103.87 102.08 104.70 106.02 108.12 109.59 111.06 114.67 5 Finance 179.29 216.55 209.75 201.05 211.76 213.29 219.38 228.45 236.26 240.49 245.27 260.72 6 Standard & Poor's Corporation (1941-43 = 10)' 415.75 451.63 460.42 465.25 481.92 493.20 507.91 523.83 539.35 557.37 559.11 578.77 7 American Stock Exchange (Aug. 31, 1973 = 50)2 391.28 438.77 449.49 436.09 446.37 456.06 471.54 487.03 492.60 513.25 526.86 547.64 Volume of trading (thousands of shares) 8 New York Stock Exchange 202,558 263,374 290,652 326,652 333,020 338,733 331,184 341,905 345,547 363,780 309,879 352,184 9 American Stock Exchange 14,171 18,188 17,951 18,829 18,424 17,905 19,404 19,266 24,622 23,283 21,825 25,422 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers 43,990 60,310 61,160 64,380 59,800 60,270 62,520 64,070 66,340 67,600 71,440 77,076 Free credit balances at brokers4 11 Margin accounts5 8,970 12,360 14,095 13,225 12,380 12,745 12,440 13,403 13,710 13,830 13,900 14,806 12 Cash accounts 22,510 27,715 28,870 26,440 25,860 26,680 26,670 27,464 29,860 28,600 29,190 29,796 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 Financial Statistics • December 1995 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1995 11999933 11999944 11999955 Apr. May June July Aug. Sept. U.S. budget1 1 Receipts, total 1,153,226 1,257,45 lr 1,350,576 165,392 90,405 147,868 92,749 96,560 143,219 2 On-budget 841,292 922,425r 999,496 126,170 61,027 115,998 65,788 69,265 112,510 3 Off-budget 311,934 335,026 351,080 39,222 29,378 31,870 26,961 27,295 30,709 4 Outlays, total 1,408,532 l,460,553r 1,514,389 115,673 129,958 135,054 106,328 130,411 135,933 5 On-budget 1,141,945 l,181,181r 1,225,724 90,628 103,184 120,236 80,931 104,135 105,098 6 Off-budget 266,587 279,372 288,665 25,045 26,773 14,818 25,397 26,276 30,836 7 Surplus or deficit (-), total -255,306 -203,370 -163,813 49,720 -39,553 12,814 -13,579 -33,851 7,286 8 On-budget -300,653 258,756r -226,228 35,542 -42,157 -4,237 -15,143 -34,870 7,412 9 Off-budget 45,347 55,654 62,415 14,178 2,604 17,051 1,564 1,019 -126 Source of financing (total) 10 Borrowing from the public 248,594 184,696' 171,288 -27,638 44,740 8,491 10,627 16,071 -6,618 11 Operating cash (decrease, or increase (—)) 6,283 16,564 -2,007 -19,972 11,841 -34,312 11,635 30,776 -19,820 12 Other2 429 1,842' -5,468 -2,110 22,578 12,250 15,523 12,996 19,152 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37,949 38,069 26,228 60,540 48,905 18,129 37,949 14 Federal Reserve Banks 17,289 6,848 8,620 8,241 4,646 20,977 11,206 4,767 8,620 15 Tax and loan accounts 35,217 29,094 29,329 29,828 21,582 39,563 37,700 13,363 29,329 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 International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; and Outlays of the U.S. Government; and U.S. Office of Management and Budget, Budget accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous of the U.S. 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 1993 1994 1995 1995 11999944rr 11999955 H2 HI H2 HI July Aug. Sept. RECEIPTS 1 All sources 1,257,453 1,350,576 582,038 652,234 625,557 710,542 92,749 96,560 143,219 2 Individual income taxes, net 543,055 590,157 262,073 275,052 273,474 307,498 42,819 44,122 60,909 3 Withheld 459,699 499,898 228,423 225,387 240,062 251,398 41,532 41,631 36,295 4 Presidential Election Campaign Fund 70 69 2 63 10 58 6 1 11 5 Nonwithheld 160,047 175,815 41,768 117,937 42,031 132,006 3,094 4,146 2244,,774433 6 Refunds 76,761 85,624 8,115 68,325 9,207 75,958 1,812 1,657 2,551 Corporation income taxes 7 Gross receipts 154,205 174,422 68,266 80,536 78,392 92,132 4,476 3,284 3333,,771199 8 Refunds 13,820 17,334 6,514 6,933 7,331 10,399 1,079 782 730 9 Social insurance taxes and contributions, net . . . 461,475 484,474 206,176 248,301 220,141 261,837 36,498 39,804 39,902 10 Employment taxes and contributions2 428,810 451,046 192,749 228,714 206,613 228,663 34,514 34,914 39,304 11 Self-employment taxes and contributions . 24,433 27,127 4,335 20,762 4,135 23,429 186 135 2,910 12 Unemployment insurance 28,004 28,878 11,010 17,301 11,177 18,001 1,636 4,454 235 13 Other net receipts4 4,661 4,550 2,417 2,284 2,349 2,267 349 436 364 14 Excise taxes 55,225 57,485 25,994 26,444 30,062 27,452 5,074 4,757 5,706 15 Customs deposits 20,099 19,300 10,215 9,500 11,042 8,847 1,603 1,794 1,634 16 Estate and gift taxes 15,225 14,764 6,617 8,197 7,071 7,424 1,037 1,500 1,289 17 Miscellaneous receipts5 21,988 27,306 9,227 11,170 13,305 15,749 2,320 2,081 789 OUTLAYS 18 All types 1,460,553 1,514,389 727,685 710,620 752,150r 760,824 106,328 130,411 135,933 19 National defense 281,563 272,179 146,672 133,844 141,876r 135,931 18,069 23,882 26,040 20 International affairs 17,083 16,448 10,186 5,800 1 l,889r 4,727 517 1,877 1,479 21 General science, space, and technology 16,227 17,563 8,880 8,502 7,603r 8,611 1,355 1,668 1,612 22 Energy 5,219 5,146 1,663 2,237 2,923r 2,358 547 13 969 23 Natural resources and environment 21,064 23,328 11,221 10,111 11,91 lr 10,273 1,811 2,116 1,915 24 Agriculture 15,057 9,763 7,516 7,451 7,623r 4,039 -482 -462 -102 25 Commerce and housing credit -5,122 -18,740 -1,490 -4,962 —4,270r -13,936 -733 -2,592 2,490 26 Transportation 38,134 38,555 19,570 16,739 21,835r 18,192 3,324 3,359 3,719 27 Community and regional development 10,454 11,000 4,288 4,571 6,283r 4,858 1,191 909 1,043 28 Education, training, employment, and social services 46,307 52,706 26,753 19,262 27,446r 25,738 2,869 5,785 44,,880022 29 Health 106,836 114,760 52,958 53,195 54,147r 58,759 8,777 10,422 9,401 30 Social security and Medicare 464,312 495,701 223,735 232,777 236,817 251,975 40,015 42,790 42,605 31 Income security 214,036 220,214 102,380 109,080 101,806r 117,639 15,310 16,919 19,591 32 Veterans benefits and services 37,642 37,935 19,852 16,686 19,761r 19,267 1,591 3,267 4,517 33 Administration of justice 15,238 16,255 7,400 7,718 1,15V 8,062 1,664 1,400 1,335 34 General government 11,316 13,856 6,531 5,084 7,356r 5,797 421 1,464 1,385 35 Net interest6 202,957 232,175 99,914 99,844 109,435 116,170 20,245 20,619 18,929 36 Undistributed offsetting receipts7 -37,772 -44,455 -20,344 -17,308 —20,066r -17,632 -10,163 -3,022 -5,796 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 3. Old-age, disability, and hospital insurance. and Outlays of the U.S. Government; and U.S. Office of Management and Budget, Budget 4. Federal employee retirement contributions and civil service retirement and of the U.S. Government, Fiscal Year 1996. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • December 1995 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1993 1994 1995 IItteemm Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 4,436 4,562 4,602 4,673 4,721 4,827 4,891 4,978 5,001 2 Public debt securities 4,412 4,536 4,576 4,646 4,693 4,800 4,864 4,951 4,974 3 Held by public 3,295 3,382 3,434 3,443 3,480 3,543 3,610 3,635 n.a. 4 Held by agencies 1,117 1,154 1,142 1,203 1,213 1,257 1,255 1,317 n.a. 5 Agency securities 25 27 26 28 29 27 27 27 27 6 Held by public 25 27 26 27 29 27 26 27 n.a. 7 Held by agencies 0 0 0 0 0 0 0 0 n.a. 8 Debt subject to statutory limit 4,316 4,446 4,491 4,559 4,605 4,711 4,775 4,861 4,885 9 Public debt securities 4,315 4,445 4,491 4,559 4,605 4,711 4,774 4,861 4,885 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,900 4,900 4,900 4,900 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 participation certificates, notes to international lending organizations, and District of the 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 1994 1995 TTyyppee aanndd hhoollddeerr 11999911 11999922 11999933 11999944 Q4 Qi Q2 Q3 1 Total gross public debt 3,801.7 4,177.0 4,535.7 4,800.2 4,800.2 4,864.1 4,951.4 4,974.0 By type 2 Interest-bearing 3,798.9 4,173.9 4,532.3 4,769.2 4,769.2 4,860.5 4,947.8 4,950.6 3 Marketable 2,471.6 2,754.1 2,989.5 3,126.0 3,126.0 3,227.3 3,252.6 3,260.5 4 Bills 590.4 657.7 714.6 733.8 733.8 756.5 748.3 742.5 5 Notes 1,430.8 1,608.9 1,764.0 1,867.0 1,867.0 1,938.2 1,974.7 1,9f( 0 3 6 Bonds 435.5 472.5 495.9 510.3 510.3 517.7 514.7 522.6 7 Nonmarketable1 1,327.2 1,419.8 1,542.9 1,643.1 1,643.1 1,633.2 1,695.2 1,690.2 8 State and local government series 159.7 153.5 149.5 132.6 132.6 122.9 121.2 113.4 9 Foreign issues2 41.9 37.4 43.5 42.5 42.5 41.8 41.4 41.0 10 Government 41.9 37.4 43.5 42.5 42.5 41.8 41.4 41.0 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 135.9 155.0 169.4 177.8 177.8 178.8 180.1 181.2 13 Government account series3 959.2 1,043.5 1,150.0 1,259.8 1,259.8 1,259.2 1,322.0 1,324.3 14 Non-interest-bearing 2.8 3.1 3.4 31.0 31.0 3.6 3.6 23.3 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 968.7 1,047.8 1,153.5 1,257.1 1,257.1 1,254.7 1,316.6 16 Federal Reserve Banks 281.8 302.5 334.2 374.1 374.1 369.3 389.0 17 Private investors 2,563.2 2,839.9 3,047.7 3,168.0 3,168.0 3,239.1 3,244.6 18 Commercial banks 232.5 294.4 322.2 290.6 290.6 303.5 305.0 19 Money market funds 80.0 79.7 80.8 67.6 67.6 67.7 58.7 20 Insurance companies 181.8 197.5 234.5 242.8 242.8 259.0 260.0 21 Other companies 150.8 192.5 213.0 226.5 226.5 230.3 227.7 n a. 22 State and local treasuries 485.1 476.7 508.9 443.3 443.3 415.2 415.0 Individuals 23 Savings bonds 138.1 157.3 171.9 180.5 180.5 181.4 182.6 24 Other securities 125.8 131.9 137.9 152.5 152.5 161.4 161.6 25 Foreign and international5 491.7 549.7 623.0 688.6 688.6 729.6 783.7 26 Other miscellaneous investors6 677.4 760.2 755.4 875.6 875.6 891.0 850.4 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 1995 1995, week ending IItteemm June July Aug. Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 47,751 42,521 44,812r 38,841 35,175 52,740 46,277 46,234r 50,858 46,628 48,928 5500,,663344 Coupon securities, by maturity 2 Five years or less 98,618 88,585 88,513 90,852 83,099 103,772 84,489 83,590 79,347 74,783 87,213 118,160 3 More than five years 55,441 48,238 51,000 51,120 57,784 62,429 36,884 47,257 48,983 45,900 52,648 49,971 4 Federal agency 22,595 21,442 21,039 20,578 19,585 20,150 21,165 23,049 22,997 22,975 24,819 27,798 5 Mortgage-backed 31,425 29,364 27,588 23,017 39,828 32,581 21,232 18,769 26,438 46,352 23,911 23,504 By type of counterparty With interdealer broker 6 U.S. Treasury 120,661 105,382 107,723 105,599 101,375 126,137 99,012 106,013 103,750 100,114 110,626 130,628 7 Federal agency 638 673 757 556 708 587 1,057 835 374 769 749 657 8 Mortgage-backed 10,912 10,315 8,587 8,003 11,741 10,116 6,300 6,339 9,023 16,930 9,008 10,174 With other 9 U.S. Treasury 81,150 73,961 76,60 f 75,214 74,683 92,804 68,637 71,068r 75,438 67,198 78,164 88,137 10 Federal agency 21,957 20,770 20,282 20,022 18,878 19,563 20,108 22,213 22,623 22,206 24,070 27,141 11 Mortgage-backed 20,513 19,049 19,001 15,014 28,087 22,465 14,932 12,431 17,415 29,422 14,904 13,329 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 916 493 764 434 304 786 725 1,240 1,424 1,177 800 888877 Coupon securities, by maturity 13 Five years or less 2,799 1,773 1,747 1,437 1,118 1,328 1,553 2,973 2,440 2,009 1,779 2,347 14 More than five years 17,667 13,585 13,206 13,377 12,639 15,494 10,107 13,914 16,211 14,983 16,563 16,948 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 0 0 n.a. 0 n.a. 00 n.a. 00 Coupon securities, by maturity 18 Five years or less 2,653 2,806 2,257 2,489 2,197 2,293 2,602 1,975 1,588 1,044 1,699 1,850 19 More than five years 4,319 4,265 4,019 2,872 4,116 4,363 4,838 3,148 4,374 4,425 4,120 4,273 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 1,201 1,117 1,123 666 1,597 1,211 507 1,429 767 1,353 609 710 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 U.S. 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 the 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 • December 1995 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1995 1995, week ending June July Aug. Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30 Sept. 6 Sept. 13 Sept. 20 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 634 8,454 5,044 10,058 9,258 -148 6,177 1,492 18,803 11,173 8,738 Coupon securities, by maturity 2 Five years or less 4,291 2,934 778 303 3,777 -5,491 3,933 169 6,781 7,447 2,771 3 More than five years -14,742 -17,954 -17,786 -19,950 -18,482 -17,555 -18,223 -16,364 -17,106 -15,742 -16,475 4 Federal agency 23,438 20,134 19,128 17,556 20,083 20,270 16,917 19,133 23,026 21,239 20,380 5 Mortgage-backed 31,381 32,714 30,040 32,934 30,972 29,475 29,005 29,738 31,054 31,607 33,770 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -7,706 -5,615 -3,539 -4,927 -4,605 -3,177 -2,509 -3,453 -3,656 -3,569 -997 Coupon securities, by maturity 7 Five years or less 2,020 1,913 2,329 2,483 2,315 2,707 2,610 1,831 990 1,086 535 8 More than five years -7,797 -1,271 -1,283 323 -1,659 -224 -496 -2,677 -5,033 -8,322 -11,675 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 NET OPTIONS POSITIONS By type of deliverable security 11 U.S. Treasury bills 0 0 0 n.a. n.a. n.a. 0 0 n.a. n.a. n.a. Coupon securities, by maturity 12 Five years or less 555 846 2,239 2,607 1,641 2,118 2,537 2,514 2,536 2,085 2,355 13 More than five years -2,537 -3,260 -2,883 -2,458 -2,068 -2,652 -3,876 -3,057 -2,895 -4,441 -1,833 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 2,816 1,802 1,567 2,045 1,228 1,137 1,790 2,136 465 1,195 1,294 Financing5 Reverse repurchase agreements 16 Overnight and continuing 237,727 222,594 222,035 230,011 224,967 235,306 216,262 211,239 208,646 213,107 230,402 17 Term 396,685 419,813 406,450 435,650 462,297 373,898 388,247 396,801 379,952 420,523 437,529 Securities borrowed 18 Overnight and continuing 158,449 156,460 156,456 153,449 152,405 158,770 158,343 156,079 164,046 167,213 167,421 19 Term 55,058 59,037 62,392 65,165 64,843 59,662 60,762 63,666 61,276 61,460 68,088 Securities received as pledge 20 Overnight and continuing 3,127 2,740 2,063 2,391 2,158 2,052 1,954 1,930 2,514 2,654 2,517 21 Term 102 81 112 135 120 120 99 91 180 113 45 Repurchase agreements 22 Overnight and continuing 490,204 479,826 476,058 488,088 484,479 486,452 461,895 464,861 497,826 501,084 510,364 23 Term 341,771 357,225 344,449 371,468 399,306 313,290 328,838 333,828 308,141 353,552 380,314 Securities loaned 24 Overnight and continuing 4,971 5,717 4,631 5,552 4,427 4,444 4,260 4,820 6,793 6,669 6,350 25 Term 2,003 2,132 2,102 2,095 2,160 2,099 2,070 2,067 2,194 2,534 2,530 Securities pledged 26 Overnight and continuing . . 33,240 30,162 28,712 29,601 27,661 27,891 27,693 30,836 32,290 31,225 29,361 27 Term 4,251 3,909 3,062 3,981 3,815 2,748 2,698 2,803 2,503 2,277 4,427 Collateralized loans 28 Overnight and continuing . . 13,613 18,645 16,913 20,267 18,672 15,490 16,683 16,050 15,511 14,345 13,927 29 Term 4,177 4,177 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MEMO: Matched book6 Securities in 30 Overnight and continuing 219,216 209,502 210,081 218,311 213,121 225,599 207,382 192,412 206,305 215,693 226,512 31 Term 367,824 397,443 386,600 415,688 435,287 354,902 369,435 382,459 358,637 404,962 427,363 Securities out 32 Overnight and continuing 286,362 298,309 306,428 316,582 310,888 314,299 297,949 297,731 320,041 326,389 330,499 33 Term 287,643 304,492 291,160 317,840 343,447 260,943 274,728 282,980 255,589 300,029 321,887 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 U.S. 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 positions 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 A33 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 AAggeennccyy 11999911 11999922 11999933 11999944 Mar. Apr. May June July 1 Federal and federally sponsored agencies 442,772 483,970 570,711 738,928 754,658 759,681 771,524 785,982r 788,323 2 Federal agencies 41,035 41,829 45,193 39,186 38,759 38,777 38,720 38,412 39,403 3 Defense Department' 7 7 6 6 6 6 6 6 6 4 Export-Import Bank2,3 9,809 7,208 5,315 3,455 3,156 3,156 3,156 2,652 2,652 5 Federal Housing Administration4 397 374 255 116 65 70 78 81 84 6 Government National Mortgage Association certificates of participation5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 Postal Service6 8,421 10,660 9,732 8,073 7,873 7,873 7,615 7,615 8,615 8 Tennessee Valley Authority 22,401 23,580 29,885 27,536 27,659 27,672 27,865 28,058 28,046 9 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 Federally sponsored agencies7 401,737 442,141 523,452 699,742 715,899 720,904 732,804 747,570' 748,920 11 Federal Home Loan Banks 107,543 114,733 139,512 205,817 210,185 211,944 218,131 223,089 223,100 12 Federal Home Loan Mortgage Corporation 30,262 29,631 49,993 93,279 101,673 106,432 107,686 108,484 111,427 13 Federal National Mortgage Association 133,937 166,300 201,112 257,230 258,653 258,176 263,023 270,937 268,458 14 Farm Credit Banks8 52,199 51,910 53,123 53,175 53,947 53,629 54,054 53,915 54,635 15 Student Loan Marketing Association9 38,319 39,650 39,784 50,335 51,554 50,758 49,993 51,268 51,325 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 Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 185,576 154,994 128,187 103,817 98,266 95,374 92,739 90,638 88,892 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 9,803 7,202 5,309 3,449 3,150 3,150 3,150 2,646 2,646 21 Postal Service6 8,201 10,440 9,732 8,073 7,873 7,873 7,615 7,615 8,615 22 Student Loan Marketing Association 4,820 4,790 4,760 n.a. n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 10,725 6,975 6,325 3,200 3,200 3,200 3,200 3,200 3,200 24 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Other lending]4 25 Farmers Home Administration 48,534 42,979 38,619 33,719 32,759 31,769 30,759 30,004' 28,419 26 Rural Electrification Administration 18,562 18,172 17,578 17,392 17,293 17,299 17,313 17,256R 17,274 27 Other 84,931 64,436 45,864 37,984 33,991 32,083 30,702 29,917' 28,738 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 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 • December 1995 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1995 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. Sept. 1 All issues, new and refunding' 226,818 279,945 153,950 7,366 11,844 8,552 11,804 17,956 9,777 12,308 9,764 By type of issue 2 General obligation 78,611 90,599 54,404 3,714 5,459 3,536 4,332 5,755 3,529 4,519 3,635 3 Revenue 136,580 189,346 99,546 3,652 6,385 5,016 7,472 12,201 6,248 7,789 6,129 By type of issuer 4 State 24,874 27,999 19,186 1,032 2,315 994 1,315 1,329 645 617 1,510 5 Special district or statutory authority2 138,327 178,714 95,896 4,889 6,572 5,814 8,039 11,382 7,399 7,491 5,821 6 Municipality, county, or township 63,617 73,232 38,868 1,445 2,957 1,744 2,450 5,245 1,733 4,200 2,433 7 Issues for new capital 101,865 91,434 105,972 5,670 10,538 6,497 8,406 13,796 8,384 7,142 6,843 By use of proceeds 8 Education 18,852 16,831 21,267 1,464 1,666 1,863 2,594 2,494 1,924 1,180 1,929 9 Transportation 14,357 9,167 10,836 671 454 615 606 3,127 1,926 869 446 10 Utilities and conservation 12,164 12,014 10,192 249 633 345 1,282 1,235 485 1,504 563 11 Social welfare 16,744 13,837 20,289 869 2,556 1,547 1,738 2,062 1,333 1,421 1,228 12 Industrial aid 6,188 6,862 8,161 215 1,011 391 416 411 500 201 627 13 Other purposes 33,560 32,723 35,227 2,202 4,218 1,736 1,770 4,467 2,216 1,967 2,050 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 1995 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, oorr iissssuueerr 11999922 11999933 11999944 Jan. Feb. Mar. Apr. May June Julyr Aug. 1 All issues' 559,827 754,969 n.a. 37,412r 42,121 40,008r 30,263r 54,103' 55,237r 33,096 46,557 2 Bonds2 471,502 641,498 n.a. 34,510r 37,290 37,088r 26,734r 48,105r 48,140r 28,971 40,626 By type of offering 3 Public, domestic 378,058 486,879 365,050 24,55 lr 29,392 32,900r 22,58 lr 39,777r 42,063r 23,051 32,139 4 Private placement, domestic3 65,853 116,240 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 27,591 38,379 56,238 9,959 7,898 4,188 4,153r 8,328r 6,076r 5,921 8,487 By industry group 6 Manufacturing 82,058 88,002 31,981 l,567r 4,450 2,184 2,701 1,745r 5,925 4,299 3,650 7 Commercial and miscellaneous 43,111 60,293 27,900 2,391 3,038 1,978r l,815r 6,085r 4,499r 1,078 2,480 8 Transportation 9,979 10,756 4,573 0 100 403 800 945 657r 10 123 9 Public utility 48,055 56,272 11,713 659 215 959 331 2,470 2,650 498 620 10 Communication 15,394 31,950 11,986 813 1,127 411 3361 l,767r 1,745 1,520 1,422 11 Real estate and financial 272,904 394,226 333,135 29,079 28,360 31,154' 20,75 lr 35,092r 32,664r 21,566 32,330 12 Stocks2 88,325 113,472 n a. 2,902 4,831 2,920 3,529 5,998 7,097 4,125 5,931 By type of offering 13 Public preferred 21,339 18,897 12,432 430 296 205 381 1,407 726 753 1,234 14 Common 57,118 82,657 47,881 2,472 4,535 2,715 3,148 4,591 6,371 3,372 4,697 15 Private placement3 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 22,723 22,271 1,086 1,582 1,010 612 2,258 2,243 1,235 2,192 17 Commercial and miscellaneous 20,231 25,761 n.a. 390 1,430r 907 11,,884411 1,050 2,413 1,601 1,304 18 Transportation 2,595 2,237 19 15 60 4488 101 0 0 75 19 Public utility 6,532 7,050 134 258 137 141 185 183 124 91 20 Communication 2,366 3,439 496 0 20 0 74 0 64 0 21 Real estate and financial 33,879 52,021 776 1,546r 786 887 2,232 2,258 1,101 2,262 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 Assets' Millions of dollars 1995 IItteemm 11999933 11999944 Jan. Feb. Mar. Apr. May June July Aug. 1 Sales of own shares2 851,885 841,286 75,099 59,121 69,898 68,294 70,798 74,749 76,081 72,113 2 Redemptions of own shares 567,881 699,823 63,737 50,738 60,970 59,957 57,033 61,932 56,344 57,610 3 Net sales3 284,004 141,463 11,362 8,383 8,928 8,337 13,765 12,817 19,736 14,503 4 Assets4 1,510,209 1,550,490 1,563,187 1,619,705 1,657,370 1,710,280 1,769,287 1,808,753 1,880,754 1,908,525 5 Cash5 100,209 121,296 124,351 126,307 121,424 124,092 128,375 122,461 126,340 127,173 6 Other 1,409,838 1,429,195 1,438,836 1,493,399 1,535,946 1,586,187 1,640,913 1,686,292 1,754,415 1,781,352 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 1993 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q3 Q4 Q1 Q2 Q3 Q4 Ql Q2 1 Profits with inventory valuation and capital consumption adjustment 405.1 485.8 542.7 493.5 533.9 508.2 546.4 556.0 560.3 569.7 581.1 2 Profits before taxes 395.9 462.4 524.5 458.7 501.7 483.5 523.1 538.1 553.5 570.6 574.1 3 Profits-tax liability 139.7 173.2 202.5 169.9 191.5 184.1 201.7 208.6 215.6 220.0 220.4 4 Profits after taxes 256.2 289.2 322.0 288.9 310.2 299.4 321.4 329.5 337.9 350.7 353.6 5 Dividends 171.1 191.7 205.2 193.2 194.6 196.3 202.5 207.9 213.9 217.1 219.9 6 Undistributed profits 85.1 97.5 116.9 95.6 115.6 103.0 118.9 121.6 124.0 133.5 133.8 7 Inventory valuation -6.4 -6.2 -19.5 3.0 -6.5 -12.3 -14.1 -19.6 -32.1 -39.0 -28.2 8 Capital consumption adjustment 15.7 29.5 37.7 31.7 38.8 37.0 37.4 37.5 38.8 38.1 35.2 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 11999944'' Ql Q2 Q3 Q4 Ql Q2 Q3 Q41 1 Total nonfarm business 546.60 586.73 638.37 563.48 578.95 594.56 604.51 619.34 637.08 651.92 645.13 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 • December 1995 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1993 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q4 QL Q2 Q3 Q4 QL Q2 ASSETS 1 Accounts receivable, gross2 491.8 482.8 551.0 482.8 494.5 511.3 524.1 551.0 568.5 586.9 2 Consumer 118.3 116.5 134.8 116.5 120.1 124.3 130.3 134.8 135.8 141.7 3 Business 301.3 294.6 337.6 294.6 302.3 313.2 317.2 337.6 351.9 361.8 4 Real estate 72.2 71.7 78.5 71.7 72.1 73.8 76.6 78.5 80.8 83.4 5 LESS: Reserves for unearned income 53.2 50.7 55.0 50.7 51.2 51.9 51.1 55.0 58.9 62.2 6 Reserves for losses 16.2 11.2 12.4 11.2 11.6 12.1 12.1 12.4 12.9 13.7 7 Accounts receivable, net 422.4 420.9 483.5 420.9 431.7 447.3 460.9 483.5 496.7 511.1 8 All other 142.5 170.9 183.4 170.9 171.2 174.6 177.2 183.4 194.6 198.0 9 Total assets 564.9 591.8 666.9 591.8 602.9 621.9 638.1 666.9 691.4 709.1 LIABILITIES AND CAPITAL 10 Bank loans 37.6 25.3 21.2 25.3 24.2 23.3 21.6 21.2 21.0 21.5 11 Commercial paper 156.4 159.2 184.6 159.2 165.9 171.2 171.0 184.6 181.3 181.3 Debt 12 Owed to parent 39.5 42.7 51.0 42.7 41.1 44.7 50.0 51.0 52.5 57.5 13 Not elsewhere classified 196.3 206.0 235.0 206.0 211.7 219.6 228.2 235.0 254.4 264.4 14 All other liabilities 68.0 87.1 99.5 87.1 90.5 89.9 95.0 99.5 102.5 102.1 15 Capital, surplus, and undivided profits 67.1 71.4 75.7 71.4 69.5 73.2 72.3 75.7 79.7 82.5 16 Total liabilities and capital 564.9 591.8 666.9 591.8 602.9 621.9 638.1 666.9 691.4 709.1 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 Credit' Millions of dollars, amounts outstanding, end of period Type of credit 1993 Apr. May July Seasonally adjusted 1 Total 539,996 545,533 614,784 637,911 644,041 653,872 660,714 661,881 671,221 2 Consumer. 157,579 160,349 176,198 180,029 181,775 186,584 188,666r 189,924 191,251 3 Real estate' 72,473 71.965 78,770 81,210 81,877 82,843 84,198 84,978 85,939 4 Business . . 309,944 313,219 359,816 376,672 380,389 384,446 387,850 386,980 394,030 Not seasonally adjusted 5 Total 544,691 550,751 620,975 640,378 646,621 653,503 661,910 658,365 664,955 6 Consumer 159,558 162,770 178,999 180,653 181,598 184,616 187,303 187,829 190,278 7 Motor vehicles 57,259 56,057 61,609 61,256 62,435 63,689 65,162 65,861 67,667 8 Other consumer1 61,020 60,396 73,221 74,534 75,369 75,943 76,581 76,302 77,251 9 Securitized motor vehicles4 29,734 36,024 31,897 32,155 31,261 32,117 32,135 32,381 31,551 10 Securitized other consumer' 11,545 10,293 12,272 12,708 12,533 12,867 13,425 13,285 13,809 11 Real estate2 72,243 71,727 78,479 80,762 82,104 82,735 83,351 85,079 86,291 12 Business 312,890 316,254 363,497 378,963 382,919 386,152 391,256 385,457 388,386 13 Motor vehicles 89,011 95,173 118,197 125,805 128,572 128,312 127,487 123,883 123,804 14 Retail5 20,541 18,091 21,514 21,652 22,370 21,228 22,142 22,945 23,471 15 Wholesale6 29,890 31,148 35,037 38,868 39,574 39,512 36,989 32,147 31,392 16 Leasing 38,580 45,934 61,646 65,285 66,628 67,572 68,356 68,791 68,941 17 Equipment 151,424 145,452 157,953 161,306 162,623 165,219 169,995 170,497 171,493 18 Retail 33,521 35,513 39,680 42,024 40,880 41,264 42,008 42,541 43,121 19 Wholesale6 8,680 8,001 9,678 8,913 9,661 10,643 11,725 12,107 12,272 20 Leasing 109,223 101,938 108,595 110,369 112,082 113,312 116,262 115,849 116,100 21 Other business7 60,856 53,997 61,495 64,815 64,426 64,099 64,365 63,849 64,701 22 Securitized business assets4 11,599 21,632 25,852 27,037 27,298 28,522 29,409 27,228 28,388 23 Retail 1,120 2,869 4,494 4,404 4,937 5,224 4,989 4,784 4,587 24 Wholesale 5,756 10,584 14,826 16,653 16,561 17,676 18,310 16,474 17,986 25 Leasing 4,723 8,179 6,532 5,980 5,800 5,622 6,110 5,970 5,815 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 1995 IItteemm 11999922 11999933 Mar. Apr. May June July Aug. Sept. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms' 1 Purchase price (thousands of dollars) 158.1 163.1 170.4 173.3 174.7 178.1 181.7 169.4 170.4 174.8 2 Amount of loan (thousands of dollars) 118.1 123.0 130.8 132.6 134.6 136.3 137.7 130.4 130.6 131.8 3 Loan-to-price ratio (percent) 76.6 78.0 78.8 78.2 79.2 78.7 78.2 78.9 78.9 78.1 4 Maturity (years) 25.6 26.1 27.5 28.6 28.1 28.4 27.2 26.6 27.3 28.0 5 Fees and charges (percent of loan amount)2 1.60 1.30 1.29 1.18 1.14 1.30 1.18 1.18 1.12 1.20 Yield (percent per year) 6 Contract rate1 7.98 7.03 7.26 8.02 7.96 7.79 7.54 7.58 7.56 7.50 7 Effective rate1,3 8.25 7.24 7.47 8.21 8.15 7.99 7.73 7.78 7.75 7.69 8 Contract rate (HUD series)4 8.43 7.37 8.58 8.60 8.44 7.84 7.80 7.98 7.91 7.78 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.46 7.46 8.68 8.60 8.56 8.03 8.00 8.09 8.03 8.03 10 GNMA securities6 7.71 6.65 7.96 8.08 7.96 7.53 7.24 7.27 7.49 7.26 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 158,119 190,861 222,057 223,956 226,197 228,078 232,534 235,882 238,850 241,378 12 FHA/VA insured 22,593 23,857 28,377 28,672 28,664 28,576 28,886 28,761 28,640 28,515 13 Conventional 135,526 167,004 194,499 195,998 198,161 200,004 204,022 207,227r 210,063r 212,652 14 Mortgage transactions purchased (during period) 75,905 92,037 62,389 2,390 3,709 3,787 6,575 5,657 5,688 5,002 Mortgage commitments (during period) 15 Issued7 74,970 92,537 54,038 3,372 3,277 6,085 5,605 4,512 6,284 6,019 16 To sell8 10,493 5,097 1,820 64 22 28 9 26 53 9 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of periodf 17 Total 33,665 55,012 72,693 77,313 79,147 81,008 85,532 88,874 91,544 94,989 18 FHA/VA insured 352 321 276 266 262 257 253 250 246 245 19 Conventional 33,313 54,691 72,416 77,047 78,885 80,751 85,278 88,624 91,298 94,744 Mortgage transactions (during period) 20 Purchases 191,125 229,242 124,697 4,609 4,530 10,982 7,001 7,316 9,594 11,458 21 Sales 179,208 208,723 117,110 3,546 3,805 10,479 5,326 6,074 8,161 10,239 22 Mortgage commitments contracted (during period)' 261,637 274,599 136,067 12,704 13,437 4,549 6,198 8,106 10,578 12,469 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 US. 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

A38 Domestic Nonfinancial Statistics • December 1995 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1994 1995 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999911 11999922 11999933 Q2 Q3 Q4 Q1 Q2P 1 All holders 3,926,337 4,056,233 4,229,592 4,315,839 4,375,155 4,426,606 4,474,715 4,527,103 By type of property 2 One- to four-family residences 2,781,327 2,963,391 3,149,634 3,235,939 3,292,201 3,344,791 3,383,139 3,431,841 3 Multifamily residences 306,551 295,417 291,985 295,013 297,650 296,902 298,230 300,629 4 Commercial 759,154 716,687 706,780 702,821 702,679 701,941 709,942 710,266 5 79,305 80,738 81,194 82,066 82,625 82,971 83,404 84,367 By type of holder 6 Major financial institutions 1,846,726 1,769,187 1,767,835 1,763,227 1,786,074 1,815,810 1,841,815 1,865,145 7 Commercial banks2 876,100 894,513 940,444 956,840 981,365 1,004,280 1,024,854 1,052,882 8 One- to four-family 483,623 507,780 556,538 569,512 592,021 611,697 625,378 648,815 9 Multifamily 36,935 38,024 38,635 38,609 38,004 38,916 39,746 40,519 10 Commercial 337,095 328,826 324,409 326,800 328,931 331,100 336,795 339,983 11 Farm 18,447 19,882 20,862 21,918 22,408 22,567 22,936 23,564 12 Savings institutions3 705,367 627,972 598,330 585,671 587,545 596,198 601,777 598,876 13 One- to four-family 538,358 489,622 469,959 462,219 466,704 477,499 483,625 481,434 14 Multifamily 79,881 69,791 67,362 66,281 65,532 64,400 63,778 64,373 15 Commercial 86,741 68,235 60,704 56,872 55,017 54,011 54,085 52,788 16 Farm 388 324 305 299 291 289 288 281 17 Life insurance companies 265,258 246,702 229,061 220,716 217,165 215,332 215,184 213,387 18 One- to four-family 11,547 11,441 9,458 8,122 7,984 7,910 7,892 7,817 19 Multifamily 29,562 27,770 25,814 24,958 24,534 24,306 24,250 24,019 20 Commercial 214,105 198,269 184,305 178,194 175,168 173,539 173,142 171,493 21 Farm 10,044 9,222 9,484 9,442 9,479 9,577 9,900 10,058 22 Federal and related agencies 266,146 286,263 328,598 329,725 329,304 323,491 319,770 315,211 23 Government National Mortgage Association 19 30 22 12 12 6 15 10 24 One- to four-family 19 30 15 12 12 6 15 10 25 Multifamily 0 0 7 0 0 0 0 0 26 Farmers Home Administration4 41,713 41,695 41,386 41,370 41,587 41,781 41,857 41,917 27 One- to four-family 18,496 16,912 15,303 14,459 14,084 13,826 13,507 13,217 28 Multifamily 10,141 10,575 10,940 11,147 11,243 11,319 11,418 11,512 29 Commercial 4,905 5,158 5,406 5,526 5,608 5,670 5,807 5,949 30 Farm 8,171 9,050 9,739 10,239 10,652 10,966 11,124 11,239 31 Federal Housing and Veterans' Administrations 10,733 12,581 12,215 11,169 10,533 10,964 10,890 10,098 32 One- to four-family 4,036 5,153 5,364 4,826 4,321 4,753 4,715 4,838 33 Multifamily 6,697 7,428 6,851 6,343 6,212 6,211 6,175 5,260 34 Resolution Trust Corporation 45,822 32,045 17,284 13,908 15,403 10,428 9,342 6,456 35 One- to four-family 14,535 12,960 7,203 6,045 6,998 5,200 4,755 2,870 36 Multifamily 15,018 9,621 5,327 4,230 4,569 2,859 2,494 1,940 37 Commercial 16,269 9,464 4,754 3,633 3,836 2,369 2,092 1,645 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 0 0 14,112 11,407 9,169 7,821 6,730 6,039 40 One- to four-family 0 0 2,367 1,706 1,241 1,049 840 731 41 Multifamily 0 0 1,426 1,701 2,090 1,595 1,310 1,135 42 Commercial 0 0 10,319 8,000 5,838 5,177 4,580 4,173 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 112,283 137,584 166,642 175,377 177,200 178,059 177,615 178,462 45 One- to four-family 100,387 124,016 151,310 159,437 161,255 162,160 161,780 162,674 46 Multifamily 11,896 13,568 15,332 15,940 15,945 15,899 15,835 15,788 47 Federal Land Banks 28,767 28,664 28,460 28,475 28,538 28,555 28,065 28,005 48 One- to four-family 1,693 1,687 1,675 1,675 1,679 1,671 1,651 1,648 49 Farm 27,074 26,977 26,785 26,800 26,859 26,885 26,414 26,357 50 Federal Home Loan Mortgage Corporation 26,809 33,665 48,476 48,007 46,863 45,876 45,256 44,224 51 One- to four-family 24,125 31,032 45,929 45,427 44,208 43,046 42,122 40,963 52 Multifamily 2,684 2,633 2,547 2,580 2,655 2,830 3,134 3,261 53 Mortgage pools or trusts5 1,250,666 1,425,546 1,553,818 1,652,999 1,682,421 1,703,076 1,714,357 1,737,483 54 Government National Mortgage Association 425,295 419,516 414,066 435,709 444,976 450,934 454,401 457,101 55 One- to four-family 415,767 410,675 404,864 426,363 435,511 441,198 444,632 446,855 56 Multifamily 9,528 8,841 9,202 9,346 9,465 9,736 9,769 10,246 57 Federal Home Loan Mortgage Corporation 359,163 407,514 446,029 479,555 482,987 486,480 488,723 496,139 58 One- to four-family 351,906 401,525 441,494 475,733 479,539 483,354 485,643 493,105 59 Multifamily 7,257 5,989 4,535 3,822 3,448 3,126 3,080 3,034 60 Federal National Mortgage Association 371,984 444,979 495,525 514,855 523,512 530,343 533,262 543,669 61 One- to four-family 362,667 435,979 486,804 505,730 514,375 520,763 523,903 533,091 62 Multifamily 9,317 9,000 8,721 9,125 9,137 9,580 9,359 10,578 63 Fanners Home Administration4 47 38 28 22 20 19 14 13 64 One- to four-family 11 8 5 4 4 3 2 2 65 Multifamily 0 0 0 0 0 0 0 0 66 Commercial 19 17 13 10 9 9 7 6 67 Farm 17 13 10 8 7 7 5 5 68 Private mortgage conduits 94,177 153,499 198,171 222,858 230,926 235,300 237,957 240,561 69 One- to four-family 84,000 132,000 164,000 179,500 182,300 183,600 184,400 187,000 70 Multifamily 3,698 6,305 8,701 11,514 13,891 14,925 15,743 15,745 71 Commercial 6,479 15,194 25,469 31,844 34,735 36,774 37,814 37,816 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others6 562,798 575,237 579,341 569,887 577,356 584,229 598,772 609,264 74 One- to four-family 370,157 382,572 387,345 375,167 379,964 387,057 398,279 406,770 75 Multifamily 83,937 85,871 86,586 89,417 90,924 91,201 92,137 93,218 76 Commercial 93,541 91,524 91,401 91,943 93,538 93,292 95,620 96,413 77 15,164 15,270 14,009 13,360 12,929 12,681 12,736 12,863 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 69 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 A3 9 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1995 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999922 11999933 11999944 Mar. Apr. May June Julyr Aug. Seasonally adjusted 1 Total 730,847 790,351 902,853 933,717 946,452r 959,593 970,741 979,550 988,605 2 Automobile 257,436 280,566 317,237 323,502 326,43 lr 330,390 333,164 337,588 339,052 3 Revolving 258,081 286,588 334,511 352,741 359,655 367,117 373,572 376,818 381,149 4 Other2 215,331 223,197 251,106 257,474 260,366 262,086r 264,005 265,145 268,405 Not seasonally adjusted 5 Total 748,057 809,440 925,000 927,260 938,108 951,096 964,362 971,578 987,871 By major holder ftC ommercial banks 330,088 367,566 427,851 425,208 431,444 434,863 437,498 441,165 450,985 7 Finance companies 118,279 116,453 134,830 135,790 137,804 139,632 141,743 142,163 144,918 8 Credit unions 91,694 101,634 119,594 121,946 123,233 125,052 126,352 127,549 129,314 9 Savings institutions 37,049 37,855 38,468 37,519 37,499 37,500 37,501 38,001 38,000 10 Nonfinancial business3 49,561 55,296 60,957 55,351 55,116 55,914 56,349r 56,360 55,723 11 Pools of securitized assets4 121,386 130,636 143,300 151,446 153,012 158,135 164,919r 166,340 168,931 By major type of credit5 12 Automobile 258,226 281,458 318,213 321,592 324,146 328,932 333,194 336,614 340,993 13 Commercial banks 109,623 122,000 141,851 141,857 142,014 142,865 144,761 146,149 147,989 14 Finance companies 57,259 56,057 61,609 61,256 62,435 63,689 65,162 65,861 67,667 15 Pools of securitized assets4 33,888 39,481 34,918 35,172 35,319 36,244 36,690 37,071 36,681 16 Revolving 271,850 301,837 352,266 348,411 355,012 362,283 368,809 372,046 379,256 17 Commercial banks 132,966 149,920 180,183 175,800 180,609 183,006 182,950 184,245 189,132 18 Nonfinancial business3 44,466 50,125 55,341 49,959 49,773 50,595 51,040' 51,077 50,437 19 Pools of securitized assets4 74,921 79,878 94,376 101,571 103,188 106,811 112,575' 113,782 116,268 20 Other 217,981 226,145 254,521 257,257 258,950 259,881 262,359 262,918 267,622 21 Commercial banks 87,499 95,646 105,817 107,551 108,821 108,992 109,787 110,771 113,864 22 Finance companies 61,020 60,396 73,221 74,534 75,369 75,943 76,581 76,302 77,251 23 Nonfinancial business3 5,095 5,171 5,616 5,392 5,343 5,319 5,309 5,283 5,286 24 Pools of securitized assets4 12,577 11,277 14,006 14,703 14,505 15,080 15,654 15,487 15,982 1. The Board's series on amounts of credit covers most short- and intermediate-term 3. Includes retailers and gasoline companies. credit extended to individuals that is scheduled to be repaid (or has the option of 4. Outstanding balances of pools upon which securities have been issued; these repayment) in two or more installments. Data in this table also appear in the Board's G.19 balances are no longer carried on the balance sheets of the loan originator. (421) monthly statistical release. For ordering address, see inside front cover. 5. Totals include estimates for certain holders for which only consumer credit totals are 2. Comprises mobile home loans and all other installment loans that are not included in available. automobile or revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be secured or unsecured. 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent per year except as noted 1995 IItteemm 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. INTEREST RATES Commercial banks2 1 48-month new car 9.29 8.09 8.12 9.70 n.a. n.a. 9.78 n.a. n.a. 9.44 2 24-month personal 14.04 13.47 13.19 14.10 n.a. n.a. 14.03 n.a. n.a. 13.84 Credit card plan 3 All accounts n.a. n.a. 15.69 16.14 n.a. n.a. 16.15 n.a. n.a. 15.98 4 Accounts assessed interest n.a. n.a. 15.77 15.27 n.a. n.a. 16.23 n.a. n.a. 15.94 Auto finance companies 5 New car 9.93 9.48 9.79 11.89 11.95 11.74 11.43 11.08 11.01 10.85 6 Used car 13.80 12.79 13.49 15.06 15.10 14.99 14.78 14.63 14.35 14.23 OTHER TERMS3 Maturity (months) 7 New car 54.0 54.5 54.0 54.1 54.5 54.6 54.4 53.9 54.1 53.5 8 Used car 47.9 48.8 50.2 52.0 52.1 52.2 52.2 52.3 52.4 52.3 Loan-to-value ratio 9 New car 89 91 92 92 92 92 92 92 92 92 10 Used car 97 98 99 99 99 100 99 99 100 99 Amount financed (dollars) 11 New car 13,584 14,332 15,375 15,774 15,826 16,029 16,155 16,083 16,086 16,056 12 Used car 9,119 9,875 10,709 11,181 11,220 11,505 11,396 11,518 11,637 11,662 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 Digitized f(o42r1 F) mRoAnthSlyE sRtat istical release. For ordering address, see inside front cover. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • December 1995 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS' Billions of dollars; quarterly data at seasonally adjusted annual rates 1993 1994 1995 TmnsnrHnn rate unrv nr sprtnr 11999922 11999933 11999944 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 635.3 478.7 540.6 618.5 602.4 660.0 650.3 527.8 607.6 623.9 842.4 819.6 By sector and instrument 2 US. government 246.9 278.2 304.0 256.1 155.9 274.2 210.5 122.9 133.6 156.4 271.8 193.6 3 Treasury securities 238.7 292.0 303.8 248.3 155.7 266.5 211.8 118.2 130.7 162.1 273.0 192.0 4 Budget agency issues and mortgages 8.2 -13.8 .2 7.8 .2 7.7 -1.3 4.7 2.9 -5.7 -1.2 1.6 5 Private 388.4 200.4 236.7 362.4 446.6 385.8 439.7 404.9 474.0 467.5 570.6 626.0 By instrument 6 Tax-exempt obligations 48.7 68.7 31.1 75.5 -29.9 27.3 13.1 -28.4 -46.4 -57.9 -57.4 -20.3 7 Corporate bonds 47.1 78.8 67.6 75.2 22.0 67.4 35.4 35.9 14.2 2.7 41.4 119.5 8 Mortgages 199.5 161.4 123.9 155.7 187.2 148.5 166.4 170.3 221.0 191.3 241.1 163.2 9 Home mortgages 185.6 163.8 179.5 183.9 195.2 184.6 194.7 164.4 220.8 200.7 207.2 153.3 10 Multifamily residential 4.8 -3.1 -11.2 -6.0 1.7 -2.3 .4 4.4 6.6 -4.6 3.6 8.0 11 Commercial 9.3 .4 -45.5 -22.6 -11.4 -33.9 -29.3 -1.4 -8.6 -6.2 28.6 -1.9 12 Farm -.3 .4 1.1 .5 1.8 .2 .6 2.9 2.2 1.4 1.7 3.9 13 Consumer credit 15.6 -14.8 7.3 58.9 121.2 110.1 68.7 122.8 131.6 161.5 100.3 147.9 14 Bank loans n.e.c .4 -40.9 -13.8 4.8 71.4 26.9 69.1 53.6 89.5 73.6 139.8 102.2 15 Commercial paper 9.7 -18.4 8.6 10.0 21.4 3.8 8.2 16.4 33.8 27.2 1.1 44.8 16 Other loans 67.5 -34.4 11.9 -17.7 53.2 1.8 78.9 34.3 30.2 69.2 104.3 68.6 By borrowing sector 17 Household 218.5 171.1 214.2 280.9 353.5 335.0 307.4 308.0 392.1 406.4 324.4 324.7 18 Nonfinancial business 123.9 -33.3 .8 18.5 137.1 33.8 135.2 144.2 135.2 133.8 302.4 328.8 19 Farm 2.3 2.1 1.0 2.0 2.8 3.6 2.9 8.7 2.2 -2.4 .6 6.8 20 Nonfarm noncorporate 10.1 -27.9 -43.5 -24.6 15.5 -15.3 11.8 12.7 18.1 19.2 71.8 32.0 21 Corporate 111.4 -7.4 43.2 41.1 118.8 45.5 120.6 122.7 115.0 117.0 230.0 289.9 22 State and local government 46.0 62.6 21.7 63.0 -44.0 17.0 -2.9 -47.2 -53.4 -72.6 -56.2 -27.5 23 Foreign net borrowing in United States 23.9 14.8 22.6 68.8 -20.3 41.8 -98.0 -37.0 20.6 32.9 64.3 36.0 24 Bonds 21.4 15.0 15.7 81.3 7.1 60.1 -2.6 -17.4 20.8 27.7 13.5 46.7 25 Bank loans n.e.c -2.9 3.1 2.3 .7 1.4 -6.3 6.0 -4.5 4.7 -.5 8.1 5.6 26 Commercial paper 12.3 6.4 5.2 -9.0 -27.3 -12.0 -101.8 -5.2 -8.1 5.9 37.9 -9.6 27 U.S. government and other loans -7.0 -9.8 -.6 -4.2 -1.6 .0 .5 -9.9 3.3 -.2 4.9 -6.7 28 Total domestic plus foreign 659.2 493.4 563.3 687.3 582.1 701.8 552.3 490.9 628.2 656.8 906.7 855.6 Financial sectors 29 Total net borrowing by financial sectors 202.6 151.7 239.2 289.5 456.3 364.3 520.6 370.8 412.1 521.9 315.3 381.7 By instrument 30 U.S. government-related 167.4 145.7 155.8 164.2 284.3 143.3 336.8 254.7 243.1 302.4 125.4 186.1 31 Government-sponsored enteiprises securities 17.1 9.2 40.3 80.6 176.9 53.4 160.0 146.6 152.1 249.0 62.9 127.2 32 Mortgage pool securities 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 33 Loans from U.S. government -.1 .0 .0 .0 -4.8 .0 -19.2 .0 .0 .0 .0 .0 34 35.3 6.0 83.4 125.3 172.1 221.0 183.8 116.1 169.0 219.5 189.9 195.6 35 Corporate bonds 46.0 66.8 80.5 118.6 110.2 140.8 158.1 95.4 95.9 91.2 150.3 145.3 36 Mortgages .6 .5 .6 3.6 9.8 5.5 9.8 12.4 12.0 4.9 5.1 4.8 37 Bank loans n.e.c 4.7 8.8 2.2 -14.0 -12.3 -18.0 -9.9 -27.7 -11.9 .5 17.8 10.1 38 Open market paper 8.6 -32.0 -.7 -6.2 41.6 76.0 36.6 3.6 42.3 84.0 40.3 33.3 39 Loans from Federal Home Loan Banks -24.7 -38.0 .8 23.3 22.8 16.8 -10.8 32.3 30.7 38.8 -23.6 2.2 By borrowing sector 40 Government-sponsored enterprises 17.0 9.1 40.2 80.6 172.1 53.4 140.8 146.6 152.1 249.0 62.9 127.2 41 Federally related mortgage pools 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 42 35.3 6.0 83.4 125.3 172.1 221.0 183.8 116.1 169.0 219.5 189.9 195.6 43 Commercial banks -.7 -11.7 8.8 5.6 10.0 1.2 2.0 12.4 22.8 2.9 9.3 18.4 44 Bank holding companies -27.7 -2.5 2.3 8.8 10.3 12.2 3.5 10.1 11.5 16.0 13.4 20.3 45 Funding corporations 15.4 -6.5 13.2 2.9 24.2 36.7 48.8 -17.2 47.2 17.9 62.3 10.4 46 Savings institutions -30.2 -44.5 -6.7 11.1 12.8 8.8 -5.6 5.8 14.8 36.1 -19.2 -6.9 47 Credit unions .0 .0 .0 .2 .2 .1 .1 .2 .5 .2 -.3 -.1 48 Life insurance companies .0 .0 .0 .2 .3 .4 .0 .0 .0 1.3 .0 .1 49 Finance companies 23.8 17.7 -1.6 .2 50.2 16.3 63.3 67.0 16.9 53.7 82.5 61.1 50 Mortgage companies .0 -2.4 8.0 -1.0 -11.5 -10.4 -21.6 -18.2 -7.0 1.0 8.2 1.2 51 Real estate investment trusts (REITs) .8 1.2 .3 3.4 13.7 6.1 14.5 15.3 18.8 6.3 6.9 6.4 52 Brokers and dealers 1.5 3.7 2.7 12.0 .5 29.3 -9.9 .3 -7.6 19.3 -29.5 -.1 53 Issuers of asset-backed securities (ABSs) 52.3 51.0 56.3 81.8 61.2 120.3 88.7 40.5 51.1 64.7 56.3 84.7 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 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 11999944 Q4 QL Q2 Q3 Q4 QL Q2 All sectors 54 Total net borrowing, all sectors 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 55 U.S. government securities 414.4 424.0 459.8 420.3 444.9 417.5 566.5 377.6 376.7 458.8 397.2 379.8 56 Tax-exempt securities 48.7 68.7 31.1 75.5 -29.9 27.3 13.1 -28.4 -46.4 -57.9 -57.4 -20.3 57 Corporate and foreign bonds 114.5 160.6 163.8 275.1 139.3 268.3 190.9 113.8 130.9 121.7 205.1 311.5 58 Mortgages 200.1 161.9 124.5 159.2 197.0 154.0 176.2 182.7 233.0 196.2 246.2 168.0 59 Consumer credit 15.6 -14.8 7.3 58.9 121.2 110.1 68.7 122.8 131.6 161.5 100.3 147.9 60 Bank loans n.e.c 2.2 -29.1 -9.4 -8.5 60.6 2.6 65.1 21.4 82.2 73.6 165.6 117.9 61 Open market paper 30.7 -44.0 13.1 -5.1 35.7 67.7 -57.0 14.8 68.0 117.1 79.3 68.5 62 Other loans 35.8 -82.2 12.1 1.3 69.6 18.6 49.4 56.8 64.3 107.8 85.6 64.1 Funds raised through mutual funds and corporate equities 63 Total net share issues 19.7 215.4 296.0 440.1 162.1 429.5 343.7 207.9 159.6 -62.9 49.6 146.6 64 Mutual funds 65.3 151.5 211.9 320.0 138.3 287.7 236.4 144.0 165.4 7.6 104.5 178.5 65 Corporate equities -45.6 64.0 84.1 120.1 23.7 141.8 107.3 63.9 -5.7 -70.5 -54.9 -31.9 66 Nonfinancial corporations -63.0 18.3 27.0 21.3 -44.9 21.5 -9.6 -2.0 -50.0 -118.0 -68.4 -73.2 67 Financial corporations 10.0 15.1 26.4 38.3 26.0 41.0 48.4 20.0 21.2 14.3 .7 5.6 68 Foreign shares purchased in United States 7.4 30.7 30.7 60.5 42.7 79.3 68.5 45.9 23.1 33.2 12.8 35.7 1. Data in this table also appear in the Board's Z.l (780) quarterly statistica lrelease, 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 • December 1995 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 11999944 Q4 QL Q2 Q3 Q4 QL Q2 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 2 Private domestic nonfinancial sectors 189.9 -7.4 75.9 15.8 234.9 104.4 288.8 270.4 141.9 238.5 -33.8 -238.2 3 Households 157.0 -39.6 74.2 3.1 317.4 196.7 337.0 385.9 186.2 360.3 148.3 -157.1 4 Nonfarm noncorporate business -1.7 -3.7 -1.1 -3.2 -2.0 -3.5 -3.6 -1.8 -1.9 -.5 .9 .9 5 Nonfinancial corporate business -3.7 6.7 29.6 14.5 24.1 12.2 19.9 12.2 25.1 39.2 6.2 26.6 6 State and local governments 38.3 29.2 -26.8 1.5 -104.6 -101.0 -64.4 -125.9 -67.6 -160.5 -189.2 -108.6 7 U.S. government 33.7 10.5 -11.9 -18.4 -24.2 -7.7 -46.5 -16.2 -9.3 -24.7 -13.0 -25.7 8 Foreign 85.5 26.6 101.2 121.7 132.1 204.2 123.9 64.3 132.2 208.1 260.1 340.8 9 Financial sectors 552.7 615.4 637.3 857.7 695.6 765.2 706.7 543.2 775.6 756.8 1,008.8 1,160.5 10 Government sponsored enterprises 13.9 15.2 69.0 90.2 123.3 71.2 92.4 101.1 125.6 174.3 12.2 86.7 11 Federally related mortgage pools 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 12 Monetary authority 8.1 31.1 27.9 36.2 31.5 38.5 48.8 17.9 24.0 35.4 24.8 12.6 13 Commercial banking 125.1 80.8 95.3 142.2 162.0 188.1 184.7 109.1 191.1 163.3 359.6 292.8 14 U.S. commercial banks 94.9 35.7 69.5 149.6 148.1 197.3 120.6 128.4 164.4 178.9 177.5 212.6 15 Foreign banking offices 28.4 48.5 16.5 -9.8 11.2 -6.5 59.0 -21.5 22.1 -15.0 182.3 75.4 16 Bank holding companies -2.8 -1.5 5.6 .0 .9 -4.8 3.1 .2 2.7 -2.4 -1.9 3.2 17 Banks in U.S. affiliated areas 4.5 -1.9 3.7 2.4 1.9 2.1 2.1 1.9 1.9 1.8 1.7 1.7 18 Funding corporations 16.1 15.8 23.5 18.1 13.8 42.6 19.5 33.5 25.1 -23.0 22.3 -36.6 19 Thrift institutions -154.0 -123.5 -61.3 -1.7 34.9 -13.3 13.6 42.6 52.8 30.5 29.4 5.4 20 Life insurance companies 94.4 83.2 79.1 105.1 58.1 86.4 47.6 6.4 80.5 98.1 109.9 91.1 21 Other insurance companies 26.5 32.6 12.8 33.3 21.1 32.1 27.9 20.8 16.0 19.7 13.0 14.9 22 Private pension funds 17.2 85.7 37.3 40.2 -42.4 -60.1 -97.7 -30.7 -17.6 -23.6 97.6 138.9 23 State and local government retirement funds 34.9 46.0 34.4 25.5 60.8 36.9 72.9 69.3 26.3 74.6 64.5 65.7 24 Finance companies 28.8 -9.8 5.0 -9.0 68.2 22.6 72.1 49.8 58.9 91.8 95.7 56.1 25 Mortgage companies .0 11.2 .1 :0 -22.9 -13.3 -43.5 -36.3 -14.0 2.1 16.5 2.3 26 Mutual funds 41.4 90.3 123.7 169.6 7.6 138.9 61.7 9.4 24.2 -64.8 -10.1 25.2 27 Closed-end funds .2 14.7 17.4 10.2 3.5 7.7 8.3 3.2 1.4 1.0 .8 1.1 28 Money market funds 80.9 30.1 1.3 14.6 28.5 56.9 -45.0 32.2 50.0 76.7 25.5 138.2 29 Real estate investment trusts (REITs) -.7 -.7 1.1 .6 4.7 .2 6.6 6.6 5.5 .2 2.5 3.1 30 Brokers and dealers 2.8 17.5 -6.9 9.2 -34.0 -82.8 -55.7 -52.6 -19.3 -8.6 30.7 124.2 31 Asset-backed securities issuers (ABSs) 51.1 48.9 53.8 80.5 57.8 113.7 87.9 42.8 46.3 54.3 49.8 78.3 32 Bank personal trusts 15.9 10.0 8.0 9.5 7.1 8.9 8.9 10.2 7.7 1.4 1.6 1.8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 Other financial sources 34 Official foreign exchange 2.0 -5.9 -1.6 .8 -5.8 2.2 -.2 -14.6 .2 -8.6 17.8 10.3 35 Special drawing rights certificates 1.5 .0 -2.0 .0 .0 .0 .0 .0 .0 .0 .0 .0 36 Treasury currency 1.0 .0 .2 .4 .7 .7 .7 .6 .8 .7 .7 .7 37 Life insurance reserves 25.7 25.7 27.3 35.2 20.1 35.5 20.0 10.6 23.8 26.2 25.4 25.3 38 Pension fund reserves 165.1 360.3 249.7 309.2 103.6 251.6 6.8 102.6 155.4 149.6 393.6 311.2 39 Interbank claims 35.0 -3.4 43.5 50.9 85.5 4.7 173.0 165.8 -55.0 58.0 27.4 119.4 40 Checkable deposits and currency 43.6 86.3 113.5 117.3 -10.1 81.9 173.1 -66.1 -89.6 -57.7 117.7 103.0 41 Small time and savings deposits 63.7 1.5 -57.2 -70.3 -40.5 -36.6 2.5 -62.4 -57.2 -44.9 52.9 134.3 42 Large time deposits -66.1 -58.5 -73.2 -23.5 19.0 13.7 -39.6 -4.4 81.2 39.0 95.1 44.0 43 Money market fund shares 70.3 41.2 3.9 19.2 45.4 61.1 -35.1 68.5 49.9 98.4 16.6 275.4 44 Security repurchase agreements -24.2 -16.5 35.5 65.5 84.3 -14.4 23.0 176.4 82.8 54.8 167.0 127.5 45 Foreign deposits 38.2 -16.7 -7.2 -11.7 30.1 32.8 16.0 16.9 23.2 64.3 5.0 10.0 46 Mutual fund shares 65.3 151.5 211.9 320.0 138.3 287.7 236.4 144.0 165.4 7.6 104.5 178.5 47 Corporate equities -45.6 64.0 84.1 120.1 23.7 141.8 107.3 63.9 -5.7 -70.5 -54.9 -31.9 48 Security credit 3.5 51.4 4.2 61.9 -2.3 86.5 29.9 -17.7 -62.3 40.9 -15.1 12.6 49 Trade debt 37.0 3.8 41.1 50.0 93.4 54.4 36.6 96.3 115.8 125.0 74.7 65.3 50 Taxes payable -4.8 -6.2 8.5 4.6 3.0 4.9 15.3 -14.4 8.2 3.0 20.9 -5.8 51 Noncorporate proprietors' equity -27.1 -4.2 18.3 -11.7 -30.0 -27.5 -49.5 -25.0 -17.2 -28.3 -40.8 -13.1 52 Investment in bank personal trusts 29.7 16.1 -7.1 1.6 18.8 17.6 15.0 24.7 23.6 11.9 21.0 22.3 53 Miscellaneous 139.0 203.4 270.2 315.6 269.6 389.9 386.7 223.1 320.1 148.7 534.7 298.8 54 Total financial sources 1,414.5 1,539.0 1,765.9 2,332.1 1,885.5 2,454.6 2,190.7 1,750.6 1,803.7 1,796.9 2,786.1 2,925.1 Floats not included in assets (—) 55 U.S. government checkable deposits 3.3 -13.1 .7 -1.5 -4.8 -15.5 -2.4 -1.4 15.2 -30.7 13.9 -19.0 56 Other checkable deposits 8.5 4.5 1.6 -1.3 -2.8 -6.2 .6 -1.1 -6.2 -4.3 -5.0 -5.4 57 Trade credit 9.1 9.7 4.5 14.2 5.6 10.5 -27.7 16.0 29.4 4.9 -18.0 -5.4 Liabilities not identified as assets (-) 58 Treasury currency .2 -.6 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.1 59 Interbank claims 1.6 26.2 -4.9 4.2 -2.7 24.0 -29.1 5.3 11.6 1.2 -3.9 9.7 60 Security repurchase agreements -24.0 6.2 27.9 82.5 48.6 22.8 13.5 117.0 66.8 -3.0 87.6 -32.8 61 Taxes payable .1 1.3 14.0 1.0 -2.0 -8.6 .8 1.4 1.0 -11.1 -16.3 30.6 62 Miscellaneous -32.2 -31.6 -51.8 -44.9 29.1 23.0 41.3 -170.0 149.4 95.6 -90.2 -122.3 63 Total identified to sectors as assets 1,447.9 1,536.4 1,774.2 2,278.1 1,814.7 2,404.6 2,194.1 1,783.4 1,536.9 1,744.5 2,818.2 3,069.9 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 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 Q4 Ql Q2 Q3 Q4 Ql Q2 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 11,184.1 11,727.9 12,368.3 12,970.5 12,368.3 12,490.8 12,620.8 12,776.8 12,970.5 13,140.6 13,343.2 By sector and instrument 2 U.S. government 2,776.4 3,080.3 3,336.5 3,492.3 3,336.5 3,387.7 3,395.4 3,432.3 3,492.3 3,557.9 3,583.5 Treasury securities 2,757.8 3,061.6 3,309.9 3,465.6 3,309.9 3,361.4 3,368.0 3,404.1 3,465.6 3,531.5 3,556.7 4 Budget agency issues and mortgages 18.6 18.8 26.6 26.7 26.6 26.3 27.4 28.2 26.7 26.4 26.8 5 Private 8,407.7 8,647.6 9,031.8 9,478.2 9,031.8 9,103.1 9,225.3 9,344.5 9,478.2 9,582.7 9,759.7 By instrument 6 Tax-exempt obligations 1,108.6 1,139.7 1,215.2 1,185.2 1,215.2 1,217.6 1,209.9 1,200.9 1,185.2 1,170.2 1,164.6 7 Corporate bonds 1,086.9 1,154.5 1,229.7 1,251.7 1,229.7 1,238.6 1,247.5 1,251.1 1,251.7 1,262.1 1,292.0 8 Mortgages 3,920.0 4,043.9 4,220.6 4,407.9 4,220.6 4,248.3 4,301.3 4,357.6 4,407.9 4,454.7 4,505.9 9 Home mortgages 2,780.0 2,959.6 3,149.6 3,344.8 3,149.6 3,184.4 3,235.9 3,292.2 3,344.8 3,383.1 3,431.8 10 Multifamily residential 304.8 293.6 289.0 290.7 289.0 289.1 290.2 291.9 290.7 291.6 293.6 11 Commercial 755.8 710.3 700.8 689.4 700.8 693.5 693.1 691.0 689.4 696.5 696.1 1? Farm 79.3 80.4 81.2 83.0 81.2 81.3 82.1 82.6 83.0 83.4 84.4 n Consumer credit 797.2 804.6 863.5 984.7 863.5 859.6 891.6 929.4 984.7 988.7 1,026.6 14 Bank loans n.e.c 686.0 672.1 677.0 748.3 677.0 687.4 706.3 725.4 748.3 776.9 807.9 i1) Commercial paper 98.5 107.1 117.8 139.2 117.8 129.9 135.7 138.7 139.2 149.8 162.5 16 Other loans 710.6 725.7 707.9 761.1 707.9 721.7 733.1 741.5 761.1 780.3 800.3 By borrowing sector 17 Household 3,784.5 3,998.7 4,285.8 4,638.9 4,285.8 4,326.3 4,417.7 4,520.9 4,638.9 4,684.8 44,,778800..11 18 Nonfinancial business 3,712.1 3,716.1 3,750.1 3,887.5 3,750.1 3,782.5 3,825.8 3,852.5 3,887.5 3,960.8 4,050.0 19 Farm 135.0 136.0 138.3 141.2 138.3 136.7 141.5 143.1 141.2 138.9 143.4 20 Nonfarm noncorporate 1,116.9 1,075.0 1,050.4 1,065.8 1,050.4 1,052.6 1,056.3 1,060.2 1,065.8 1,083.0 1,091.5 21 Corporate 2,460.2 2,505.1 2,561.5 2,680.5 2,561.5 2,593.2 2,628.0 2,649.2 2,680.5 2,738.9 2,815.1 22 State and local government 911.1 932.8 995.9 951.8 995.9 994.3 981.9 971.1 951.8 937.1 929.6 21 Foreign credit market debt held in United States 299.7 313.1 381.9 361.6 381.9 356.5 348.7 352.4 361.6 376.8 387.1 74 Bonds 130.5 146.2 227.4 234.6 227.4 226.8 222.4 227.6 234.6 237.9 249.6 ?5 Bank loans n.e.c 21.6 23.9 24.6 26.1 24.6 26.2 25.1 26.3 26.1 28.2 29.6 26 Commercial paper 81.8 77.7 68.7 41.4 68.7 43.3 42.0 39.9 41.4 50.9 48.5 27 U.S. government and other loans 65.9 65.3 61.1 59.6 61.1 60.3 59.2 58.6 59.6 59.8 59.5 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 11,483.8 12,041.0 12,750.2 13,332.2 12,750.2 12,847.3 12,969.5 13,129.2 13,332.2 13,517.4 13,730.4 Financial sectors 29 Total credit market debt owed by financial sectors 2,751.0 3,005.7 3,300.6 3,762.2 3,300.6 3,426.5 3,525.7 3,626.8 3,762.2 3,834.1 3,936.3 By instrument 30 U.S. government-related 1,564.2 1,720.0 1,884.1 2,168.4 1,884.1 1,961.5 2,030.5 2,089.8 2,168.4 2,192.7 2,245.0 31 Government-sponsored enterprises securities 402.9 443.1 523.7 700.6 523.7 563.7 600.3 638.3 700.6 716.3 748.1 32 Mortgage pool securities 1,156.5 1,272.0 1,355.6 1,467.8 1,355.6 1,397.8 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 33 Loans from U.S. government 4.8 4.8 4.8 .0 4.8 .0 .0 .0 .0 .0 .0 34 Private 1,186.8 1,285.8 1,416.5 1,593.8 1,416.5 1,465.1 1,495.2 1,537.0 1,593.8 1,641.4 1,691.3 35 Corporate bonds 638.9 725.8 844.4 952.1 844.4 882.0 906.6 930.4 952.1 990.2 1,027.3 36 Mortgages 4.8 5.4 8.9 18.7 8.9 11.4 14.5 17.5 18.7 20.0 21.2 37 Bank loans n.e.c 78.4 80.5 66.5 54.3 66.5 62.4 55.3 52.4 54.3 57.1 59.4 38 Open maricet paper 385.7 394.3 393.5 442.8 393.5 408.8 410.3 420.5 442.8 454.1 462.8 39 Loans from Federal Home Loan Banks 79.1 79.9 103.1 125.9 103.1 100.4 108.5 116.2 125.9 120.0 120.5 By borrowing sector 40 Government-sponsored enterprises 407.7 447.9 528.5 700.6 528.5 563.7 600.3 638.3 700.6 716.3 748.1 41 Federally related mortgage pools 1,156.5 1,272.0 1,355.6 1,467.8 1,355.6 1,397.8 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 42 Private financial sectors 1,186.8 1,285.8 1,416.5 1,593.8 1,416.5 1,465.1 1,495.2 1,537.0 1,593.8 1,641.4 1,691.3 43 Commercial banks 65.0 73.8 79.5 89.5 79.5 78.4 82.1 87.5 89.5 90.3 95.4 44 Bank holding companies 112.3 114.6 123.4 133.6 123.4 124.2 126.8 129.6 133.6 137.0 142.0 45 Funding corporations 139.1 161.6 169.9 199.3 169.9 190.7 191.5 200.6 199.3 221.2 229.1 46 Savings institutions 94.6 87.8 99.0 111.7 99.0 97.6 99.0 102.7 111.7 106.9 105.2 47 Credit unions .0 .0 .2 .5 .2 .3 .3 .4 .5 .4 .3 48 Life insurance companies .0 .0 .2 .6 .2 .3 .3 .3 .6 .6 .6 49 Finance companies 391.9 390.4 390.5 440.7 390.5 401.9 414.2 420.9 440.7 456.7 467.3 50 Mortgage companies 22.2 30.2 29.2 17.8 29.2 23.8 19.3 17.5 17.8 19.8 20.1 51 Real estate investment trusts (REITs) 13.6 13.9 17.4 31.1 17.4 21.0 24.8 29.5 31.1 32.8 34.4 52 Brokers and dealers 19.0 21.7 33.7 34.3 33.7 31.3 31.3 29.4 34.3 26.9 26.8 53 Issuers of asset-backed securities (ABSs) 329.1 391.7 473.5 534.7 473.5 495.7 505.8 518.6 534.7 548.8 570.0 All sectors 54 Total credit market debt, domestic and foreign.... 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17,351.5 17,666.7 55 U.S. government securities 4,335.7 4,795.5 5,215.8 5,660.7 5,215.8 5,349.2 5,425.9 5,522.1 5,660.7 5,750.6 5,828.5 56 Tax-exempt securities 1,108.6 1,139.7 1,215.2 1,185.2 1,215.2 1,217.6 1,209.9 1,200.9 1,185.2 1,170.2 1,164.6 57 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss 1,856.3 2,026.4 2,301.5 2,438.4 2,301.5 2,347.3 2,376.5 2,409.1 2,438.4 2,490.2 2,568.9 58 MMoorrttggaaggeess 3,924.8 4,049.3 4,229.6 4,426.6 4,229.6 4,259.7 4,315.8 4,375.2 4,426.6 4,474.7 4,527.1 59 Consumer credit 797.2 804.6 863.5 984.7 863.5 859.6 891.6 929.4 984.7 988.7 1,026.6 60 Bank loans n.e.c 785.9 776.6 768.2 828.8 768.2 776.0 786.7 804.0 828.8 862.1 896.9 61 Open market paper 565.9 579.0 580.0 623.5 580.0 582.0 587.9 599.2 623.5 654.7 673.8 62 Other loans 860.4 875.7 877.0 946.6 877.0 882.5 900.8 916.2 946.6 960.1 980.4 Digitized for F1.R DAatSa iEn Rthi s table also appear in the Board's Z.l (780) quarterly statistical release, http://fraserta.sbltelso Lu.2is thferodug.oh rLg.4/. For ordering address, see inside front cover. Federal Reserve Bank of St. Louis

A44 Domestic Financial Statistics • December 1995 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1993 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 Q4 Ql Q2 Q3 Q4 Ql Q2 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17,351.5 17,666.7 2 Private domestic nonfinancial sectors 2,240.1 2,320.1 2,351.5 2,623.2 2,351.5 2,397.5 2,450.6 2,497.3 2,623.2 2,586.1 2,511.4 3 Households 1,446.5 1,524.8 1,541.7 1,926.4 1,541.7 1,640.7 1,717.1 1,779.9 1,926.4 1,946.9 1,885.7 4 Nonfarm noncorporate business 44.1 42.9 39.7 37.7 39.7 38.8 38.4 37.9 37.7 38.0 38.2 5 Nonfinancial corporate business 196.2 225.8 244.9 269.0 244.9 240.0 245.9 249.7 269.0 259.8 269.3 6 State and local governments 553.3 526.5 525.2 390.0 525.2 478.0 449.2 429.8 390.0 341.5 318.1 7 U.S. government 246.9 235.0 230.7 206.5 230.7 219.0 215.4 212.6 206.5 203.2 197.1 8 Foreign 958.0 1,055.0 1,172.2 1,272.7 1,172.2 1,203.0 1,218.4 1,254.4 1,272.7 1,336.5 1,421.4 9 Financial sectors 10,789.8 11,436.6 12,296.3 12,991.9 12,296.3 12,454.3 12,610.7 12,791.7 12,991.9 13,225.8 13,536.8 10 Government-sponsored enterprises 390.7 459.7 549.8 673.2 549.8 572.0 597.9 629.4 673.2 675.3 697.7 11 Federally related mortgage pools 1,156.5 1,272.0 1,355.6 1,467.8 1,355.6 1,397.8 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 12 Monetary authority 272.5 300.4 336.7 368.2 336.7 341.5 351.6 356.8 368.2 367.1 375.7 13 Commercial banking 2,853.3 2,948.6 3,090.8 3,252.8 3,090.8 3,120.2 3,156.2 3,204.1 3,252.8 3,326.1 3,407.9 14 U.S. commercial banks 2,502.5 2,571.9 2,721.5 2,869.6 2,721.5 2,743.8 2,780.3 2,822.3 2,869.6 2,906.5 2,963.5 15 Foreign banking offices 319.2 335.8 326.0 337.1 326.0 331.8 330.8 335.5 337.1 373.6 397.2 16 Bank holding companies 11.9 17.5 17.5 18.4 17.5 18.2 18.3 19.0 18.4 17.9 18.7 17 Banks in U.S. affiliated areas 19.7 23.4 25.8 27.8 25.8 26.4 26.8 27.3 27.8 28.2 28.6 18 Funding corporations 51.5 75.0 93.1 106.9 93.1 97.9 106.3 112.6 106.9 112.4 103.3 19 Thrift institutions 1,192.6 1,134.5 1,132.7 1,167.6 1,132.7 1,134.2 1,146.1 1,160.3 1,167.6 1,173.1 1,175.7 20 Life insurance companies 1,199.6 1,278.8 1,383.9 1,442.1 1,383.9 1,402.7 1,407.6 1,428.1 1,442.1 1,476.8 1,503.0 21 Other insurance companies 376.6 389.4 422.7 443.8 422.7 429.6 434.8 438.8 443.8 447.0 450.8 22 Private pension funds 693.0 730.4 770.6 728.2 770.6 746.2 738.5 734.1 728.2 752.6 787.3 23 Stale and local government retirement funds 479.9 514.3 542.6 603.3 542.6 560.8 578.1 584.7 603.3 619.5 635.9 24 Finance companies 487.5 492.6 482.8 551.0 482.8 494.5 511.3 524.1 551.0 568.5 586.7 25 Mortgage companies 60.3 60.5 60.4 37.5 60.4 49.5 40.4 37.0 37.5 41.6 42.2 26 Mutual funds 450.5 574.2 743.8 751.4 743.8 759.2 761.5 767.6 751.4 748.9 755.2 27 Closed-end funds 50.3 67.7 77.9 81.4 77.9 80.0 80.8 81.1 81.4 81.6 81.9 28 Money market funds 402.7 404.1 418.7 447.1 418.7 422.0 421.4 423.4 447.1 467.9 494.0 29 Real estate investment trusts (REITs) 7.0 8.1 8.6 13.3 8.6 10.3 11.9 13.3 13.3 13.9 14.7 30 Brokers and dealers 124.0 117.1 126.3 92.3 126.3 112.4 99.3 94.5 92.3 100.0 131.0 31 Asset-backed securities issuers (ABSs) 317.8 377.9 458.4 516.1 458.4 480.3 491.0 502.6 516.1 528.6 548.2 32 Bank personal trusts 223.5 231.5 240.9 248.0 240.9 243.2 245.7 247.7 248.0 248.4 248.8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17,351.5 17,666.7 Other liabilities 34 Official foreign exchange 55.4 51.8 53.4 53.2 53.4 56.4 54.9 55.5 53.2 64.1 67.1 35 Special drawing rights certificates 10.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 36 Treasury currency 16.3 16.5 17.0 17.6 17.0 17.1 17.3 17.5 17.6 17.8 18.0 37 Life insurance reserves 405.7 433.0 468.2 488.4 468.2 473.2 475.9 481.8 488.4 494.7 501.0 38 Pension fund reserves 4,138.3 4,516.5 4,974.7 5,017.0 4,974.7 4,896.4 4,898.5 5,013.4 5,017.0 5,252.7 5,472.4 39 Interbank claims 96.4 132.6 183.9 270.3 183.9 215.8 230.7 243.1 270.3 266.3 267.0 40 Deposits at financial institutions 5,045.1 5,059.1 5,155.5 5,283.8 5,155.5 5,163.7 5,186.2 5,211.8 5,283.8 5,369.1 5,531.6 41 Checkable deposits and currency 1,020.9 1,134.4 1,251.7 1,241.6 1,251.7 1,220.5 1,229.7 1,204.8 1,241.6 1,193.5 1,245.4 42 Small time and savings deposits 2,350.7 2,293.5 2,223.2 2,182.7 2,223.2 2,233.8 2,214.1 2,198.7 2,182.7 2,206.3 2,235.5 43 Large time deposits 488.4 415.2 391.7 410.7 391.7 382.6 379.0 402.2 410.7 435.2 444.0 44 Money market fund shares 539.6 543.6 562.7 608.2 562.7 579.7 573.9 583.5 608.2 638.9 684.1 45 Security repurchase agreements 355.8 392.3 457.8 542.1 457.8 474.9 512.9 540.2 542.1 595.4 620.5 46 Foreign deposits 289.6 280.1 268.4 298.5 268.4 272.4 276.6 282.4 298.5 299.7 302.2 47 Mutual fund shares 813.9 1,042.1 1,446.3 1,562.9 1,446.3 1,483.9 1,506.9 1,587.7 1,562.9 1,607.2 1,747.1 48 Security credit 188.9 217.3 279.3 277.0 279.3 282.8 278.0 263.2 277.0 268.8 271.6 49 Trade debt 936.1 977.4 1,027.4 1,120.8 1,027.4 1,024.9 1,049.2 1,086.0 1,120.8 1,127.6 1,144.4 50 Taxes payable 71.2 79.6 84.2 87.3 84.2 89.2 82.0 86.3 87.3 93.5 88.5 51 Investment in bank personal trusts 608.3 629.6 660.9 670.0 660.9 655.2 650.1 671.5 670.0 707.2 745.7 52 Miscellaneous 2,991.9 3,176.7 3,430.7 3,746.3 3,430.7 3,560.9 3,600.2 3,701.5 3,746.3 3,872.5 3,907.9 53 Total liabilities 29,612.4 31,386.8 33,840.1 35,696.9 33,840.1 34,201.4 34,533.1 35,183.2 35,696.9 36,501.1 37,437.3 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 22.3 19.6 20.1 21.1 20.1 20.4 20.8 21.0 21.1 22.7 22.9 55 Corporate equities 4,863.6 5,462.9 6,278.5 6,293.4 6,278.5 6,142.6 5,965.8 6,228.7 6,293.4 6,835.8 7,393.0 56 Household equity in noncorporate business 2,448.7 2,413.7 2,425.4 2,512.8 2,425.4 2,474.2 2,502.7 2,526.6 2,512.8 2,525.7 2,528.5 Floats not included in assets (—) 57 U.S. government checkable deposits 3.8 6.8 5.6 3.4 5.6 .3 .9 1.2 3.4 4.2 2.0 58 Other checkable deposits 40.4 42.0 40.7 38.0 40.7 36.3 38.7 30.6 38.0 32.3 33.7 59 Trade credit -130.6 -125.9 -107.1 -101.4 -107.1 -127.1 -134.2 -126.9 -101.4 -120.3 -133.0 Liabilities not identified as assets (-) 60 Treasury currency -4.7 -4.9 -5.1 -5.4 -5.1 -5.2 -5.2 -5.3 -5.4 -5.4 -5.4 61 Interbank claims -4.2 -9.3 -4.7 -6.5 -4.7 -7.7 -7.4 -3.4 -6.5 -2.7 -2.6 62 Security repurchase agreements 9.2 38.1 120.5 169.1 120.5 135.9 162.5 189.3 169.1 203.3 192.0 63 Taxes payable 17.8 25.2 26.2 24.2 26.2 15.5 21.3 22.0 24.2 6.6 21.2 64 Miscellaneous -320.7 -378.2 -457.3 -347.8 -457.3 -398.7 -387.1 -395.6 -347.8 -382.3 -390.3 65 Total identified to sectors as assets 37,336.0 39,689.2 42,945.3 44,750.6 42,945.3 43,189.2 43,332.9 44,247.7 44,750.6 46,149.7 47,664.3 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 1995 11999922 11999933 11999944 Jan. Feb. Mar. Apr. May June' July' Aug. Sept. 1 Industrial production' 107.6 112.0 118.1 122.0 122.1 122.0 121.2 121.4 121.4 121.5 122.9r 122.6 Market groupings 2 Products, total 106.5 110.7 115.9 119.1 119.1 118.9 118.0 118.2 118.5 118.4 119.7' 119.5 3 Final, total 109.0 113.4 118.4 121.6 121.8 121.6 121.0 121.1 121.5 121.4 122.8' 122.7 4 Consumer goods 105.9 109.4 113.2 115.7 115.7 114.9 114.4 114.4 114.9 114.2 115.8' 115.2 5 Equipment 113.4 119.3 126.5 130.9 131.2 132.0 131.3 131.4 131.7 132.7 133.9' 134.4 6 Intermediate 98.8 102.4 108.1 111.3 110.9 110.7 108.9 109.4 109.3 109.4 110.3' 110.0 7 Materials 109.2 114.1 121.5 126.5 126.7 126.7 126.1 126.3 125.8 126.4 127.7 127.5 Industry groupings 108.0 112.9 119.7 124.5 124.2 124.2 123.3 123.2 123.2 123.1 124.3 124.6 8 Manufacturing 79.2 80.9 83.4 85.2 84.7 84.4 83.5 83.1 82.8 82.5 83.0 82.9 9 Capacity utilization, manufacturing (percent)' 97.4 105.2r 114.3' 111.0 115.0 116.0r 107.0r 117.0r 120.0 114.0 120.0' 116.0 10 Construction contracts3 106.5 108.4 111.3 113.6 113.9 114.1 114.1 114.0 114.3 114.3 114.6 114.7 11 Nonagricultural employment, total4 94.2 94.3 95.6 98.5 98.6 98.8 98.6 98.2 98.2 97.9 97.9 97.9 12 Goods-producing, total 95.3 94.8 95.1 97.4 97.5 97.5 97.4 97.1 97.0 96.6 96.6 96.5 13 Manufacturing, total 94.9 94.9 96.1 98.9 99.1 99.1 99.0 98.6 98.3 97.8 97.9 97.8 14 Manufacturing, production workers 110.5 112.9 116.3 118.4 118.8 119.0 119.0 119.1 119.4 119.6 119.9 120.1 15 Service-producing 135.6 141.4 150.0 156.0 156.8 157.6 157.9 157.6 158.5 159.5 159.5 n.a. 16 Personal income, total 131.6 136.2 145.0 150.0 150.7 150.9 151.7 150.6 151.8 153.0 152.8 n.a. 17 Wages and salary disbursements 118.0 120.0 126.0 129.0 131.0 130.6 128.9 128.1 128.4 128.4 128.9 n.a. 18 Manufacturing 137.0 142.5 150.8 156.8 157.6 158.4 157.lr 158.3r 159.0 159.9 159.9 n.a. 19 Disposable personal income5 126.4 134.7 145.2 150.7 149.6 150.6 150.5 152.2 153.5 152.9 153.6' 154.0 20 Retail sales5 Prices6 21 Consumer (1982-84=100) 140.3 144.5 148.2 150.3 150.9 151.4 151.9 152.2 152.5 152.5 152.9 153.2 22 Producer finished goods (1982=100) 123.2 124.7 125.5 126.6 126.9 127.1 127.6 128.1r 128.2 128.3 128.1 127.9 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. 5. Based on data from U.S. Department of Commerce, Survey of Current Business. For the ordering address, see the inside front cover. The latest historical revision of the 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the industrial production index and the capacity utilization rates was released in November price indexes can be obtained from the U.S. Department of Labor, Bureau of Labor 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve Statistics, Monthly Labor Review. Bulletin, vol. 81 (January 1995), pp. 16^26. For a detailed description of the industrial NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for production index, see "Industrial Production: 1989 Developments and Historical Revi- series mentioned in notes 3 and 6, can also be found in the Survey of Current Business. sion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. Figures for industrial production for the latest month are preliminary, and many figures 2. Ratio of index of production to index of capacity. Based on data from the Federal for the three months preceding the latest month have been revised. See "Recent Develop- Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. ments in Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 3. Index of dollar value of total construction contracts, including residential, nonresi- 1990), pp. 411-35. See also "Industrial Production Capacity and Capacity Utilization dential, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. since 1987," Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. Dodge Division. 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers employees only, excluding personnel in the armed forces. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1995 CCaatteeggoorryy 11999922 11999933 11999944 Feb. Mar. Apr. May June July' Aug.' Sept. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 126,982 128,040 131,056 132,308 132,511 132,737 131,811 131,869 132,519 132,211 132,591 Employment 2 Nonagricultural industries3 114,391 116,232 119,651 121,469 121,576 121,478 120,962 121,034 121,550 121,417 121,867 3 Agriculture 3,207 3,074 3,409 3,656 3,698 3,594 3,357 3,451 3,409 3,362 3,273 Unemployment 4 Number 9,384 8,734 7,996 7,183 7,237 7,665 7,492 7,384 7,559 7,431 7,451 5 Rate (percent of civilian labor force) 7.4 6.8 6.1 5.4 5.5 5.8 5.7 5.6 5.7 5.6 5.6 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 108,604 110,525 113,423 116,123 116,302 116,310 116,248 116,547 116,575 116,837 116,958 7 Manufacturing 18,104 18,003 18,064 18,523 18,525 18,506 18,456 18,428 18,353 18,357 18,325 8 Mining 635 611 604 588 589 583 582 582 577 575 573 9 Contract construction 4,492 4,642 4,916 5,213 5,256 5,242 5,190 5,230 5,226 5,231 5,247 10 Transportation and public utilities 5,721 5,787 5,842 6,156 6,175 6,184 6,177 6,192 6,195 6,212 6,218 11 Trade 25,354 25,675 26,362 27,069 27,047 27,062 27,045 27,118 27,184 27,178 27,227 12 Finance 6,602 6,712 6,789 6,929 6,938 6,924 6,925 6,930 6,938 6,947 6,955 13 Service 29,052 30,278 31,805 32,404 32,524 32,548 32,630 32,784 32,820 32,984 33,090 14 Government 18,653 18,817 19,041 19,241 19,248 19,261 19,243 19,283 19,282 19,353 19,323 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 U.S. 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 • December 1995 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1994 1995 1994 1995 1994 1995 Q4 Qi Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 120.5 122.0 121.3 122.3 141.9 143.1 144.5 145.8 84.9 85.2 84.0r 83.9 2 Manufacturing 122.7 124.3 123.2 124.0 145.3 146.6 148.2 149.7 84.5 84.7 83.2' 82.8 3 Primary processing3 118.4 119.3 117.2' 116.6 132.3 133.2 134.2 135.1 89.5 89.5 87.4' 86.3 4 Advanced processing4 124.8 126.6 126.1 127.5 151.3 152.9 154.7 156.5 82.5 82.8 81.5 81.4 5 Durable goods 129.4 131.6 130.4 132.4 153.1 154.9 157.1 159.2 84.6 84.9 83.0 83.1 6 Lumber and products 107.9 107.6 103.9' 105.8 116.5 117.1 118.0 118.8 92.7 91.9 88.0 89.0 7 Primary metals 119.4 120.4 116.8 114.8 125.4 126.7 127.5 128.2 95.2 95.0 91.6 89.5 8 Iron and steel 123.3 125.4 120.6 116.4 128.8 130.9 131.7 132.5 95.8 95.9 91.6 87.9 9 Nonferrous 113.9 113.7 111.6 112.3 120.5 120.9 121.6 122.3 94.5 94.1 91.8 91.8 10 Industrial machinery and equipment 167.5 171.5 172.9' 178.2 184.1 187.8 192.6 197.4 91.0 91.3 89.8 90.3 11 Electrical machinery 169.4 174.0 176.9' 184.8 188.5 193.8 199.9 205.9 89.9 89.8 88.5' 89.8 12 Motor vehicles and parts 141.5 145.9 136.0 136.0 162.2 164.2 166.5 168.8 87.2 88.8 81.7 80.6 13 Aerospace and miscellaneous transportation equipment 80.8 81.5 82.1 81.6 129.1 128.8 128.5 128.3 62.6 63.3 63.9 63.6 14 Nondurable goods 115.3 116.1 115.3' 114.7 136.3 137.1 138.0 138.9 84.6 84.7 83.5 82.6 15 Textile mill products 111.6 111.8 108.7' 105.3 122.0 122.7 123.5 124.3 91.4 91.1 88.1' 84.8 16 Paper and products 120.6 120.3 119.7' 118.0 127.7 128.4 129.3 130.1 94.4 93.6 92.6' 90.7 17 Chemicals and products 126.0 129.7 127.9' 128.2 154.7 156.2 157.6 159.0 81.4 83.1 81.2' 80.6 18 Plastics materials.... 130.2 134.3 128.8 131.6 132.6 133.8 98.9 101.3 96.2 19 Petroleum products .... 106.5 107.8 106.4 106.9 115.1 115.1 115.3 115.5 92.5 93.7 92.2' 92.6 20 Mining 99.2 100.3 100.5 101.0 111.4 111.4 111.4 111.4 89.0 90.0 90.2 90.7 21 Utilities 116.3 118.2 120.7' 125.2 135.8 136.3 136.8 137.3 85.6 86.8 88.2 91.2 22 Electric 117.3 118.5 120.9 126.6 133.6 134.1 134.7 135.3 87.8 88.4 89.7 93.6 1973 1975 Previous cycle5 Latest cycle6 1994 1995 High Low High Low High Low Sept. Apr. May June' July' Aug. Sept.? Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 84.2 84.1 84.0 83.7 83.6 84.2 83.8 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 83.6 83.5 83.1 82.8 82.5 83.0 82.9 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 88.2 88.0 87.5 86.6 86.4 86.3 86.3 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.2 81.8 81.8 81.4 81.3 81.0 81.7 81.6 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 83.6 83.4 82.8 82.7 82.6 83.4 83.5 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.3 92.6 89.1 87.1 88.0 88.2 89.4 89.4 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.0 92.6 92.6 92.3 90.0 90.3 88.6 89.7 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.1 92.0 93.3 92.7 88.9 87.9 87.0 88.8 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.0 93.5 91.8 91.9 91.6 93.6 90.7 91.1 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 72.5 90.2 90.2 90.0 89.2 89.9 90.5 90.5 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 76.6 88.9 88.5 88.5 88.5 89.3 89.9 90.1 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 57.6 85.3 83.9 80.7 80.5 78.8 81.5 81.4 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 79.4 62.9 64.1 63.8 63.8 63.5 63.8 63.5 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.4 83.8 83.8 83.7 83.1 82.6 82.7 82.4 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.9 89.0 90.2 88.7 85.2 83.4 86.0 84.9 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.5 93.2 92.7 93.8 91.2 92.7 90.9 88.5 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 78.9 80.4 81.3 81.1 81.1 80.6 80.7 80.7 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 95.7 97.1 97.0 94.6 92.8 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 83.7 91.4 92.8 92.1 91.8 92.6 91.0 94.1 20 Mining 94.4 88.4 96.6 80.6 86.5 86.0 89.8 90.4 90.2 90.1 91.2 90.2 90.7 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.2 86.0 86.4 89.2 89.1 90.3 94.2 89.0 22 Electric 99.0 82.7 88.3 78.7 94.8 86.5 87.9 88.1 90.2 90.7 92.5 97.4 90.8 1. Data in this table also appeal in the Board's G.17 (419) monthly statistical release. 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic For the ordering address, see the inside front cover. The latest historical revision of the materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and industrial production index and the capacity utilization rates was released in November glass; primary metals; and fabricated metals. 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; print- Bulletin, vol. 81 (January 1995), pp. 16—26. For a detailed description of the industrial ing and publishing; chemical products such as drugs and toiletries; agricultural chemicals; production index, see "Industrial Production: 1989 Developments and Historical Revi- leather and products; machinery; transportation equipment; instruments; and miscellasion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. neous manufactures. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally 5. Monthly highs, 1978-80; monthly lows, 1982. adjusted index of industrial production to the corresponding index of capacity. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 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 1994 1995 1994 GGrroouupp por- avg. tion Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Juner Julyr Aug. Sept.p Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 118.1 119.0 119.5 120.3 121.7 122.0 122.1 122.0 121.2 121.4 121.4 121.5 122.9 122.6 ? Products 60.9 115.9 116.4 116.9 117.5 118.7 119.1 119.1 118.9 118.0 118.2 118.5 118.4 119.7 119.5 Final products 46.6 118.4 118.9 119.2 119.8 121.2 121.6 121.8 121.6 121.0 121.1 121.5 121.4 122.8 122.7 4 Consumer goods, total 28.5 113.2 113.0 113.0 113.9 115.5 115.7 115.7 114.9 114.4 114.4 114.9 114.2 115.8 115.2 Durable consumer goods 5.5 119.4 119.1 119.4 120.5 123.4 124.5 123.4 121.4 119.4 116.5 117.1 115.5 118.9 119.9 6 Automotive products 2.5 125.5 123.8 124.5 127.1 131.1 131.7 132.3 129.7 126.1 121.1 122.9 119.7 125.0 126.4 7 Autos and trucks 1.6 125.4 122.5 122.3 126.5 131.4 132.7 133.5 130.8 124.9 119.0 120.2 115.4 123.8 124.6 8 Autos, consumer .9 94.9 90.2 92.9 94.0 100.5 103.6 103.6 103.1 94.4 88.2 86.6 88.9 88.6 90.6 9 Trucks, consumer .7 180.7 181.5 175.5 185.8 187.3 184.6 187.1 180.0 180.2 175.4 182.3 162.9 188.9 187.1 in Auto parts and allied goods .9 123.2 123.9 126.6 125.7 127.8 126.9 127.0 124.8 126.1 122.9 125.9 126.3 124.9 127.6 n Other 3.0 114.1 115.2 115.2 115.0 116.8 118.3 115.9 114.3 113.8 112.6 112.2 112.1 113.7 114.5 12 Appliances, televisions, and air conditioners .7 126.0 130.2 124.9 126.9 131.5 132.1 125.8 122.7 121.9 123.6 124.8 125.9 127.7 112299..99 N Carpeting and furniture .8 105.0 104.1 107.4 105.9 108.0 110.2 107.9 106.5 106.9 104.1 101.9 102.4 105.4 105.9 14 Miscellaneous home goods 1.5 113.8 114.6 114.9 114.5 114.9 116.5 115.8 114.7 113.8 112.3 112.3 111.1 111.8 112.1 15 Nondurable consumer goods 23.0 111.8 111.7 111.5 112.4 113.7 113.6 113.9 113.5 113.3 114.0 114.5 114.0 115.1 114.2 16 Foods and tobacco 10.3 110.5 111.9 112.2 112.4 114.3 113.1 112.9 112.9 113.8 114.1 115.2 113.9 114.2 114.1 17 Clothing 2.4 95.9 95.5 96.2 96.2 96.8 96.1 94.7 94.6 93.6 93.3 91.1 89.7 90.2 89.6 18 Chemical products 4.5 129.7 127.5 127.2 130.5 134.0 137.0 136.6 135.9 133.7 133.5 135.4 134.2 136.8 137.0 19 Paper products 2.9 104.7 105.2 103.6 104.6 104.3 103.4 104.1 102.9 104.2 103.7 103.2 105.0 104.0 103.1 ?N Energy 2.9 113.9 110.5 109.8 110.6 109.6 110.4 114.1 113.3 111.2 116.8 117.0 118.6 123.1 117.3 71 Fuels .9 106.7 107.4 103.9 109.8 107.4 107.4 109.1 110.6 109.9 108.3 108.2 108.3 105.4 110.6 22 Residential utilities 2.1 116.8 111.8 112.2 110.7 110.3 111.6 116.0 114.3 111.6 120.4 120.6 122.9 130.6 120.1 ?3 Equipment 18.1 126.5 128.0 128.8 128.9 130.1 130.9 131.2 132.0 131.3 131.4 131.7 132.7 133.9 134.4 ?4 Business equipment 14.0 146.7 149.5 150.9 151.0 152.6 153.7 154.5 155.9 154.9 154.9 155.5 156.9 158.8 159.5 75 Information processing and related 5.7 176.4 181.1 183.2 184.2 188.3 188.7 189.1 192.3 193.7 194.3 196.3 198.2 201.8 203.1 ?6 Computer and office equipment 1.5 284.2 295.8 300.5 305.7 311.9 318.0 325.3 331.8 340.0 346.8 350.5 360.0 366.8 374.2 ?7 Industrial 4.0 120.9 123.0 124.4 124.1 124.1 125.9 126.1 126.2 124.8 125.6 125.8 127.2 128.8 129.3 ?8 Transit 2.6 137.9 136.8 137.1 137.5 137.8 139.7 143.4 144.7 140.8 137.4 138.0 138.2 138.1 138.3 ?9 Autos and trucks 1.2 148.0 147.7 149.2 151.6 152.6 157.2 157.7 154.9 147.1 142.2 142.8 145.7 146.2 147.7 Other 1.7 129.4 133.3 134.3 133.1 133.1 133.5 132.9 132.6 130.4 131.2 128.8 130.7 130.5 130.7 31 Defense and space equipment 3.4 71.0 68.8 68.7 69.0 68.7 68.6 67.7 67.5 66.8 66.8 66.9 66.5 66.2 65.6 3? Oil and gas well drilling .5 90.8 93.9 88.3 86.0 86.0 86.7 89.1 85.7 89.2 91.9 86.4 89.6 89.6 91.3 33 Manufactured homes .2 137.3 138.4 142.0 143.1 153.6 153.6 147.4 148.3 147.2 150.4 152.4 147.6 153.7 34 Intermediate products, total 14.3 108.1 108.6 109.9 110.6 110.9 111.3 110.9 110.7 108.9 109.4 109.3 109.4 110.3 110.0 35 Construction supplies 5.3 106.8 108.6 109.7 109.8 111.6 112.2 111.0 110.5 108.6 107.1 107.2 107.7 108.3 109.0 36 Business supplies 9.0 109.1 108.7 110.1 111.3 110.7 110.9 111.0 110.9 109.3 111.0 110.8 110.6 111.8 110.9 37 39.1 121.5 122.9 123.4 124.6 126.3 126.5 126.7 126.7 126.1 126.3 125.8 126.4 127.7 127.5 38 Durable goods materials 20.6 131.2 133.3 134.2 136.0 138.6 139.1 139.2 139.2 138.4 138.3 138.2 139.0 141.1 142.0 39 Durable consumer parts 3.9 132.2 133.1 133.8 135.8 139.7 139.1 139.1 138.3 134.7 132.7 132.8 131.1 135.6 135.8 40 Equipment parts 7.5 143.1 146.7 149.0 150.7 152.3 153.6 155.1 156.2 157.7 158.9 160.1 163.3 166.0 168.1 41 Other 9.1 121.3 122.8 122.7 124.6 127.3 127.6 126.7 126.3 124.9 124.7 123.6 123.6 124.2 124.5 4? Basic metal materials 3.0 119.7 121.1 121.3 123.2 126.0 125.6 124.8 125.2 123.5 123.6 120.9 122.5 121.4 122.4 43 Nondurable goods materials 8.9 118.4 119.8 120.3 121.5 122.8 122.3 121.8 121.7 120.9 121.4 119.5 119.0 119.3 118.2 44 Textile materials 1.1 105.3 105.9 106.9 110.3 108.7 109.8 108.5 108.8 108.1 106.7 102.4 97.5 102.9 101.4 45 Paper materials 1.8 118.7 121.5 120.5 122.1 121.3 120.8 122.1 124.1 121.9 125.8 120.4 123.9 121.7 117.9 46 Chemical materials 4.0 123.2 124.0 124.6 125.9 127.5 128.6 128.3 127.6 127.0 127.5 126.1 126.3 126.2 126.0 47 Other 2.0 116.9 118.2 119.5 119.3 123.4 119.1 116.8 116.0 115.8 114.7 116.0 113.5 113.4 113.3 48 Energy materials 9.6 105.2 105.6 105.2 104.9 105.3 105.6 106.6 106.6 106.7 107.1 107.2 108.2 108.7 107.1 49 Primary energy 6.3 100.3 100.8 100.3 100.7 101.7 101.7 102.0 102.5 102.4 102.1 102.6 103.3 103.0 102.0 50 Converted fuel materials 3.3 114.9 115.1 115.1 113.4 112.3 113.4 115.6 114.7 115.2 116.9 116.2 118.0 120.1 117.2 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 117.6 118.6 119.1 119.8 121.1 121.4 121.4 121.4 120.8 121.2 121.1 121.4 122.6 122.3 52 Total excluding motor vehicles and parts 95.2 117.1 118.0 118.5 119.2 120.5 120.8 120.8 120.8 120.3 120.7 120.7 121.0 122.1 121.9 53 Total excluding computer and office equipment 98.3 115.4 116.1 116.6 117.4 118.7 118.9 118.9 118.7 117.9 111188..00 111177..99 111188..00 111199..33 111199..00 54 Consumer goods excluding autos and trucks . 26.9 112.4 112.4 112.4 113.1 114.5 114.6 114.5 113.9 113.8 114.1 114.6 114.2 115.2 114.6 55 Consumer goods excluding energy 25.6 113.1 113.3 113.3 114.2 116.2 116.3 115.9 115.1 114.8 114.1 114.7 113.7 114.9 115.0 56 Business equipment excluding autos and trucks 12.8 146.5 149.5 151.0 150.9 152.5 153.3 154.1 155.9 155.6 115566..11 156.7 115577..99 115599..99 116600..55 57 Business equipment excluding computer and office equipment 12.5 130.7 132.7 133.8 133.6 134.7 135.4 135.6 136.6 113355..00 113344..44 113344..77 113355..55 113366..88 113377..00 58 Materials excluding energy 29.5 127.3 129.2 129.9 131.6 133.8 134.0 133.9 133.9 133.0 133.1 132.5 132.9 134.4 134.7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • December 1995 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 Group sie pro- 1994 code por- avg. tion Sept. Oct. Nov. Dec Apr. May Juner Julyr Aug. Sept.F Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 118.1 119.0 119.5 120.3 121.7 122.0 122.1 122.0 121.2 121.4 121.4 121.5 122.9 122.6 60 Manufacturing 85.5 119.7 120.9 121.5 122.6 124.2 124.5 124.2 124.2 123.3 123.2 123.2 123.1 124.3 124.6 61 Primary processing 26.5 115.3 116.2 116.6 118.4 120.3 119.8 119.1 118.9 117.7 117.4 116.5 116.4 116.6 116.9 62 Advanced processing 59.0 121.8 123.1 123.8 124.6 126.0 126.6 126.6 126.7 126.0 125.9 126.3 126.3 127.9 128.2 63 Durable goods 45.1 125.5 127.2 128.0 129.1 131.2 131.6 131.5 131.6 130.4 130.1 130.5 130.9 132.7 133.5 64 Lumber and products "'24 2.0 106.0 107.6 106.7 106.7 110.4 110.2 107.4 105.2 104.9 102.7 104.0 104.5 106.2 106.5 65 Furniture and fixtures 25 1.4 111.4 112.4 114.8 113.0 114.7 116.0 115.6 113.8 112.7 111.4 112.3 112.3 113.5 113.2 66 Stone, clay, and glass products 32 2.1 104.9 105.8 105.4 106.9 110.1 108.7 107.4 108.1 105.8 106.1 106.8 105.6 105.3 106.0 67 Primary metals 33 3.1 114.5 116.0 115.9 119.1 123.0 120.9 119.8 120.5 117.8 117.7 115.0 115.6 113.6 115.3 68 Iron and steel 331,2 1.7 118.3 118.2 118.8 121.9 129.3 125.9 124.3 126.1 122.6 122.1 117.3 116.2 115.3 117.8 69 Raw steel .1 107.9 109.9 109.0 114.2 121.9 114.6 117.2 117.2 114.3 112.4 112.7 110.9 113.6 70 Nonferrous 333-6,9 1.4 109.3 112.7 111.8 115.2 114.8 114.2 113.8 113.1 111.5 111.8 111.6 114.3 111.0 11L6 71 Fabricated metal products. . . 34 5.0 110.8 111.6 112.2 113.3 115.3 115.3 114.9 114.6 112.9 113.8 114.5 113.3 115.4 116.3 72 Industrial machinery and equipment 35 7.9 159.9 164.6 166.5 167.5 168.5 171.4 171.1 172.0 172.3 173.3 173.1 175.9 178.6 180.0 73 Computer and office equipment 357 1.7 284.2 295.8 300.5 305.7 311.9 318.0 325.3 331.8 340.0 346.8 350.5 360.0 366.8 374.2 74 Electrical machinery 36 7.3 160.0 165.0 166.9 168.8 172.5 172.9 174.0 175.2 175.1 176.9 178.7 182.1 185.1 187.3 75 Transportation equipment. .. 37 9.6 109.7 108.8 109.0 110.5 111.9 112.6 113.5 112.9 110.1 107.6 107.7 106.4 109.1 109.1 76 Motor vehicles and parts . 371 4.8 137.9 137.4 138.4 141.4 144.6 146.1 146.7 144.8 139.0 134.4 134.7 132.4 137.6 138.1 77 Autos and light trucks . 371 2.5 131.9 128.4 128.6 132.7 138.4 140.0 140.8 138.2 131.3 124.8 125.7 121.6 129.4 130.4 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.8 82.6 81.4 80.8 80.9 80.6 80.4 81.7 82.3 82.4 82.0 82.0 81.5 81.8 81.4 79 Instruments 38 5.4 107.4 108.0 108.2 107.7 108.9 108.4 107.7 108.5 108.4 107.5 108.1 107.8 109.1 108.4 80 Miscellaneous 39 1.3 116.2 117.0 118.4 118.6 117.6 119.1 120.3 119.0 118.2 117.3 118.2 115.7 116.8 117.8 81 Nondurable goods 40.5 113.3 113.7 114.2 115.4 116.4 116.5 116.1 115.8 115.4 115.5 115.0 114.5 114.9 114.7 82 Foods "20 9.4 112.8 114.6 113.4 113.9 114.7 115.9 115.7 115.4 115.3 116.5 116.8 115.6 116.2 116.4 83 Tobacco products 21 1.6 96.5 96.1 104.5 101.5 108.0 97.3 96.4 97.9 104.1 101.4 104.3 103.2 102.1 99.5 84 Textile mill products 22 1.8 109.0 108.3 110.6 112.0 112.2 113.3 110.9 111.2 111.2 109.6 105.4 103.5 106.8 105.7 85 Apparel products 23 2.2 96.3 96.8 96.9 96.8 97.0 96.6 95.8 95.4 93.9 93.5 91.1 89.8 90.4 89.8 86 Paper and products 26 3.6 117.4 118.7 118.9 121.3 121.7 119.8 120.3 120.6 119.6 121.2 118.2 120.3 118.3 115.4 87 Printing and publishing 27 6.8 101.1 100.9 101.4 102.0 101.6 101.3 100.8 100.4 99.7 100.3 99.6 99.4 100.3 99.8 88 Chemicals and products .... 28 9.9 124.1 123.7 123.8 126.2 128.0 130.4 129.7 129.2 127.8 127.8 128.2 127.7 128.3 128.7 89 Petroleum products 29 1.4 105.3 105.3 104.0 107.6 107.7 107.4 107.6 108.5 106.9 106.2 105.9 106.9 105.1 108.7 90 Rubber and plastic products . 30 3.5 133.5 134.7 136.7 138.3 140.0 140.2 140.5 139.1 139.6 136.6 136.3 135.9 136.7 137.3 91 Leather and products 31 .3 85.8 85.4 85.6 84.5 84.4 82.9 82.8 82.7 80.2 80.5 78.5 76.8 78.5 79.0 92 Mining 6.8 99.8 100.1 99.2 98.3 100.1 100.0 100.6 100.2 100.7 100.5 100.4 101.6 100.4 101.0 93 Metal "lO .4 159.4 160.0 158.9 154.3 156.2 158.5 160.4 159.3 158.7 159.9 162.5 167.5 173.3 169.7 94 Coal 12 1.0 112.0 110.7 110.2 110.1 117.8 117.9 118.6 117.4 114.1 109.7 111.9 114.5 108.4 113.8 95 Oil and gas extraction 13 4.7 93.0 93.7 92.2 91.2 92.2 91.2 92.3 91.6 93.0 93.7 93.1 93.6 92.9 92.8 96 Stone and earth minerals 14 .6 107.0 106.7 109.3 109.9 109.9 115.1 112.0 114.8 114.2 112.5 111.5 114.6 114.0 115.3 97 Utilities 7.7 118.1 116.5 117.2 116.5 115.2 116.5 119.2 118.9 118.0 122.1 122.0 123.9 129.3 122.3 98 Electric 49L3PT 6.1 117.8 117.1 117.9 117.5 116.5 117.2 119.0 119.3 118.6 121.6 122.4 124.9 131.8 123.0 99 Gas 492,3PT 1.6 119.2 114.2 114.4 112.3 109.8 113.7 120.1 117.3 115.9 123.9 120.4 119.7 119.3 119.6 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.7 118.6 119.9 120.5 121.5 122.9 123.2 122.9 122.9 122.4 122.5 122.5 122.6 123.5 123.8 101 Manufacturing excluding office and computing machines .. . 83.8 116.5 117.5 118.1 119.1 120.6 120.8 120.5 120.4 119.4 119.2 119.1 119.0 120.0 120.3 Gross value (billions of 1987 dollars, annual rates) MAJOR MARKETS 102 Products, total 1,707.0 2,006.2 2,015.6 2,020.4 2,037.2 2,056.5 2,063.2 2,066.5 2,065.1 2,049.6 2,051.8 2,056.4 2,056.4 2,078.6 2,082.4 103 Final 1,314.6 1,576.3 1,584.2 1,584.4 1,598.4 1,615.1 1,621.1 1,626.4 1,626.1 1,615.5 1,616.5 1,621.6 1,620.2 1,639.6 1,643.9 104 Consumer goods 866.6 982.5 981.5 977.0 988.5 999.6 1,000.2 1,001.9 997.3 989.6 989.3 992.4 984.5 997.2 997.9 105 Equipment 448.0 593.8 602.7 607.3 609.9 615.5 620.9 624.5 628.7 625.9 627.2 629.3 635.7 642.3 646.0 106 Intermediate 392.5 429.8 431.4 436.0 438.8 441.4 442.0 440.1 439.0 434.1 435.3 434.7 436.1 439.1 438.5 1. Data in this table also appeal' in the Board's G.17 (419) monthly statistical release. Bulletin, vol. 81 (January 1995), pp. 16-26. 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 1995 IItteemm 11999922 11999933 11999944 Nov. Dec. Jan. Feb. Mar. Apr. May June Julyr Aug. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,095 1,199 1,372 1,358 1,420 1,293 1,282 1,235 1,243 1,243 1,275 1,355 1,368 2 One-family 911 987 1,068 1,025 1,105 990 931 911 905 930 958 1,011 1,044 3 Two-family or more 184 213 303 333 315 303 351 324 338 313 317 344 324 4 Started 1,200 1,288 1,457 1,536 1,545 1,366 1,319 1,238 1,269 1,282 1,298 1,432 1,392 5 One-family 1,030 1,126 1,198 1,186 1,250 1,055 1,048 987 1,009 988 1,034 1,107 1,127 6 Two-family or more 170 162 259 350 295 311 271 251 260 294 264 325 265 7 Under construction at end of period1 612 680 762 787 791 792 797 769 763 755 756 762 776 8 One-family 473 543 558 587 584 578 579 552 544 536 534 537 549 9 Two-family or more 140 137 204 200 207 214 218 217 219 219 222 225 227 10 Completed 1,158 1,193 1,347 1,371 1,388 1,436 1,302 1,443 1,334 1,342 1,256 1,322 1,217 11 One-family 964 1,040 1,160 1,136 1,173 1,209 1,080 1,222 1,089 1,072 1,053 1,045 986 12 Two-family or more 194 153 187 235 215 227 222 221 245 270 203 277 231 13 Mobile homes shipped 210 254 304 322 347 361 335 333 318 329 329 319 335 Merchant builder activity in one-family units 14 Number sold 610 666 670 642 627 643 575 612 607 667r 726 785 710 15 Number for sale at end of period1 265 293 338 335 338 342 347 347 348 347 347 346 352 Price of units sold (thousands of dollars)2 16 Median 121.3 126.1 130.4 129.9 135.0 127.9 135.0 130.0 134.0 133.9r 133.6 131.1 133.0 17 Average 144.9 147.6 153.7 155.4 159.6 147.4 160.2 153.3 157.8 158.0r 160.3 154.8 162.6 EXISTING UNITS (one-family) 18 Number sold 3,520 3,800 3,946 3,690 3,760 3,610 3,420 3,620 3,390 3,550 3,800 3,990 4,120 Price of units sold (thousands of dollars)2 19 Median 103.6 106.5 109.6 108.7 109.1 108.1 107.0 107.9 108.1 109.0 116.2 115.9 117.6 20 Average 130.8 133.1 136.4 134.7 135.6 135.3 133.4 134.5 134.2 135.4 143.3 142.2 144.4 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 435,022 464,504 506,904 520,183 521,771 521,054 521,429 523,467 526,297r 518,616r 523,277 531,614 530,421 22 Private 315,695 339,161 376,566 387,052 386,103 384,806 383,652 383,301 386,423r 380,249r 381,830 390,052 390,333 23 Residential 187,870 210,455 238,884 242,447 243,565 241,938 240,207 237,894 238,312r 235,443r 232,732 237,844 241,783 24 Nonresidential 127,825 128,706 137,682 144,605 142,538 142,868 143,445 145,407 148,111' 144,806r 149,098 152,208 148,550 25 Industrial buildings 20,720 19,533 21,121 25,060 22,769 22,715 23,370 23,911 24,707r 24,760r 24,416 24,399 23,878 26 Commercial buildings 41,523 42,627 48,552 52,008 53,491 53,338 53,687 55,439 55,01 lr 51,779r 55,420 56,259 52,916 27 Other buildings 21,494 23,626 23,912 24,147 24,694 24,373 24,039 23,062 23,948r 24,319r 23,447 24,424 23,808 28 Public utilities and other 44,088 42,920 44,097 43,390 41,584 42,442 42,349 42,995 44,445r 43,948' 45,815 47,126 47,948 79 Public 119,322 125,342 130,337 133,131 135,668 136,248 137,777 140,166 139,874r 138,367r 141,447 141,562 140,088 30 Military 2,502 2,454 2,319 2,354 2,784 2,925 2,624 3,048 2,736r 2,442r 2,569 2,362 2,451 31 Highway 34,899 37,431 39,882 39,283 38,464 38,574 38,681 40,667 41,158r 38,657' 40,875 44,099 41,996 32 Conservation and development 6,021 5,978 6,228 6,331 7,466 6,681 7,128 7,139 6,273r 5,531' 6,117 5,259 5,336 33 Other 75,900 79,479 81,908 85,163 86,954 88,068 89,344 89,312 89,707r 91,737' 91,886 89,842 90,305 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 value of new construction may not lie 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 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • December 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 IIIttteeemmm 1994 1995 1995 lll SSS eee eee vvv ppp eee ttt lll ... ,,, 11999944 11999955 111999999555 111 SSeepptt.. SSeepptt.. Dec. Mar. June Sept. Mayr Juner July Aug. Sept. CONSUMER PRICES2 (1982-84=100) I All items 3.0 2.5 1.9 3.2 3.2 1.8 .3 .1 .2 .1 .1 153.2 2 Food 2.8 2.7 3.9 .0 3.6 3.6 .1 .1 .2 .2 .5 148.9 3 Energy items 2.9 -1.8 .4 -1.1 5.4 -11.5 .5 .5 -.8 -.8 -1.4 106.2 4 All items less food and energy 3.0 2.9 2.0 4.1 3.0 2.8 .2 .2 .2 .2 .2 162.1 5 Commodities 1.9 1.5 .3 2.6 .6 2.3 .0 -.1 .1 .4 .1 139.7 6 Services 3.5 3.6 2.6 4.8 4.3 3.0 .3 .3 .3 .1 .3 174.9 PRODUCER PRICES (1982=100) 7 Finished goods 1.5 1.8 2.2 3.2 .9 .9 .2 -.2 .0 -.1 .3 127.9 8 Consumer foods .5 2.9 9.2 -1.2 -4.9 9.1 -.7 -.4 1.2 .0 1.0 129.9 9 Consumer energy .1 -.8 .0 11.3 2.0 -14.7 .6 -1.0 -2.5 -.9 -.5 79.0 10 Other consumer goods 1.8 2.2 .6 2.9 3.2 2.3 .4 .1 .2 .1 .3 141.3 11 Capital equipment 2.5 1.6 -.3 3.0 2.4 1.5 .2 .1 .1 .1 .1 135.7 Intermediate materials 12 Excluding foods and feeds 2.9 5.1 7.2 10.6 3.9 -.6 .3 .0 .0 -.1 -.1 126.6 13 Excluding energy 3.6 6.2 8.3 10.5 4.2 1.8 .3 .1 .3 .1 .1 136.2 Crude materials 14 Foods -5.9 7.3 -1.2 -4.6 -.4 41.7 -2.8 3.9 4.1 .7 4.2 108.7 15 Energy -4.3 -5.8 -7.6 -4.5 15.3 -22.4 .6 -1.1 -5.4 -3.8 3.2 67.2 16 Other 13.9 7.5 27.9 21.9 4.1 -17.8 -.3 .1 -1.8 -.9 -2.1 171.1 1. Not seasonally adjusted. SOURCE. U.S. 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 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q2 Q3 Q4 Ql Q2r GROSS DOMESTIC PRODUCT 1 Total 6,020.2 6,343.3 6,738.4 6,689.9 6,791.7 6,897.2 6,977.4 7,030.0 By source 2 Personal consumption expenditures 4,136.9 4,378.2 4,628.4 4,586.4 4,657.5 4,734.8 4,782.1 4,851.0 3 Durable goods 492.7 538.0 591.5 580.3 591.5 617.7 615.2 620.3 4 Nondurable goods 1,295.5 1,339.2 1,394.3 1,381.4 1,406.1 1,420.7 1,432.2 1,446.2 5 Services 2,348.7 2,501.0 2,642.7 2,624.7 2,659.9 2,696.4 2,734.8 2,784.5 6 Gross private domestic investment 788.3 882.0 1,032.9 1,034.4 1,055.1 1,075.6 1,107.8 1,094.1 7 Fixed investment 785.2 866.7 980.7 967.0 992.5 1,020.8 1,053.3 1,056.9 8 Nonresidential 561.4 616.1 697.6 683.3 709.1 732.8 766.4 779.3 9 Structures 171.1 173.4 182.8 181.8 184.6 192.0 198.6 204.3 in Producers' durable equipment 390.3 442.7 514.8 501.5 524.5 540.7 567.8 575.0 n Residential structures 223.8 250.6 283.0 283.6 283.4 288.0 286.8 277.6 12 Change in business inventories 3.0 15.4 52.2 67.4 62.6 54.8 54.5 37.2 13 Nonfarm -2.7 20.1 45.9 60.4 53.4 47.4 54.1 37.9 14 Net exports of goods and services -30.3 -65.3 -98.2 -97.6 -109.6 -98.9 -111.1 -124.7 15 Exports 638.1 659.1 718.7 704.5 730.5 765.5 778.8 797.5 16 Imports 668.4 724.3 816.9 802.1 840.1 864.4 889.9 922.2 17 Government purchases of goods and services 1,125.3 1,148.4 1,175.3 1,166.7 1,188.8 1,185.8 1,198.7 1,209.6 18 Federal 449.0 443.6 437.3 435.1 444.3 431.9 434.4 434.7 19 State and local 676.3 704.7 738.0 731.5 744.5 753.8 764.3 774.8 By major type of product 20 Final sales, total 6,017.2 6,327.9 6,686.2 6,622.5 6,729.1 6,842.4 6,922.9 6,992.8 21 Goods 2,292.0 2,390.4 2,532.4 2,493.7 2,543.6 2,603.3 2,638.1 2,650.0 22 Durable 968.6 1,032.4 1,118.8 1,099.4 1,125.8 1,151.8 1,175.0 1,178.6 23 Nondurable 1,323.4 1,358.1 1,413.6 1,394.3 1,417.8 1,451.5 1,463.1 1,471.4 24 Services 3,227.2 3,405.5 3,576.2 3,555.4 3,603.6 3,641.9 3,680.6 3,741.0 25 Structures 498.1 532.0 577.6 573.4 581.9 597.3 604.3 601.8 26 Change in business inventories 3.0 15.4 52.2 67.4 62.6 54.8 54.5 37.2 27 Durable goods -13.0 8.6 34.8 38.2 44.1 36.3 48.0 28.3 28 Nondurable goods 16.0 6.7 17.4 29.2 18.5 18.5 6.5 8.9 MEMO 29 Total GDP in 1987 dollars 4,979.3 5,134.5 5,344.0 5,314.1 5,367.0 5,433.8 5,470.1 5,487.8 NATIONAL INCOME 30 Total 4,829.5 5,131.4 5,458.4 5,430.7 5,494.9 5,599.4 5,688.4 5,719.4 31 Compensation of employees 3,591.2 3,780.4 4,004.6 3,979.3 4,023.7 4,095.3 4,157.3 4,183.0 32 Wages and salaries 2,954.8 3,100.8 3,279.0 3,257.2 3,293.9 3,356.4 3,403.4 3,422.3 33 Government and government enterprises 567.3 583.8 602.8 601.9 604.4 609.0 617.2 620.3 34 Other 2,387.5 2,517.0 2,676.2 2,655.4 2,689.6 2,747.4 2,786.2 2,802.0 35 Supplement to wages and salaries 636.4 679.6 725.6 722.0 729.7 738.9 753.9 760.8 36 Employer contributions for social insurance 307.7 324.3 344.6 343.6 346.0 350.2 354.3 356.8 37 Other labor income 328.7 355.3 381.0 378.4 383.7 388.7 399.6 403.9 38 Proprietors' income' 418.7 441.6 473.7 471.3 467.0 485.7 493.6 487.2 39 Business and professional1 374.4 404.3 434.2 431.9 437.1 444.0 449.2 452.2 40 Farm1 44.4 37.3 39.5 39.3 29.8 41.7 44.4 35.0 41 Rental income of persons2 -5.5 24.1 27.7 34.1 32.6 29.0 25.4 24.2 42 Corporate profits' 405.1 485.8 542.7 546.4 556.0 560.3 569.7 581.1 43 Profits tefore tax3 395.9 462.4 524.5 523.1 538.1 553.5 570.6 574.1 44 Inventory valuation adjustment -6.4 -6.2 -19.5 -14.1 -19.6 -32.1 -39.0 -28.2 45 Capital consumption adjustment 15.7 29.5 37.7 37.4 37.5 38.8 38.1 35.2 46 Net interest 420.0 399.5 409.7 399.7 415.7 429.2 442.4 444.0 1. With inventory 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 • December 1995 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q2 Q3 Q4 Ql Q2R PERSONAL INCOME AND SAVING 1 Total personal income 5,154.3 5,375.1 5,701.7 5,659.9 5,734.5 5,856.6 5,962.0 6,008.1 ? 2,974.8 3,080.8 3,279.0 3,257.2 3,293.9 3,356.4 3,403.4 3,422.3 3 Commodity-producing industries 757.6 773.8 818.2 811.6 821.8 837.3 848.5 842.0 4 578.3 588.4 617.5 612.8 618.3 629.5 638.1 629.6 682.3 701.9 748.5 742.5 753.5 769.6 776.8 782.9 6 967.6 1,021.4 1,109.5 1,101.2 1,114.3 1,140.5 1,160.9 1,177.0 7 Government and government enterprises 567.3 583.8 602.8 601.9 604.4 609.0 617.2 620.3 8 328.7 355.3 381.0 378.4 383.7 388.7 399.6 403.9 9 418.7 441.6 473.7 471.3 467.0 485.7 493.6 487.2 in Business and professional' 374.4 404.3 434.2 431.9 437.1 444.0 449.2 452.2 11 44.4 37.3 39.5 39.3 29.8 41.7 44.4 35.0 1? Rental income of persons2 -5.5 24.1 27.7 34.1 32.6 29.0 25.4 24.2 n 161.0 181.3 194.3 191.7 196.9 202.7 205.5 208.1 14 Personal interest income 665.2 637.9 664.0 649.4 674.2 701.1 723.6 739.3 15 860.2 915.4 963.4 957.6 969.0 979.7 1,004.8 1,018.6 16 Old age survivors, disability, and health insurance benefits 414.0 444.4 473.5 470.7 476.5 483.1 496.7 503.4 17 LESS: Personal contributions for social insurance 248.7 261.3 281.4 279.9 282.9 286.6 293.8 295.4 18 EQUALS: Personal income 5,154.3 5,375.1 5,701.7 5,659.9 5,734.5 5,856.6 5,962.0 6,008.1 19 LESS: Personal tax and nontax payments 648.6 686.4 742.1 746.4 744.1 754.7 777.6 807.0 20 EQUALS: Disposable personal income 4,505.8 4,688.7 4,959.6 4,913.5 4,990.3 5,101.9 5,184.4 5,201.0 21 LESS: Personal outlays 4,257.8 4,496.2 4,756.5 4,712.4 4,787.0 4,869.3 4,920.7 4,994.9 22 EQUALS: Personal saving 247.9 192.6 203.1 201.1 203.3 232.6 263.7 206.1 MEMO Per capita (1987 dollars) 23 Gross domestic product 19,489.7 19,878.8 20,475.8 20,389.7 20,536.5 20,739.8 20,836.3 2200,,885588..66 ?4 Personal consumption expenditures 13,110.4 13,390.8 13,715.4 13,650.9 13,716.6 13,853.5 13,880.1 13,965.7 25 Disposable personal income 14,279.0 14,341.0 14,696.0 14,625.0 14,697.0 14,927.0 15,048.0 14,973.0 26 Saving rate (percent) 5.5 4.1 4.1 4.1 4.1 4.6 5.1 4.0 GROSS SAVING 27 Gross saving 722.9 787.5 920.6 923.3 922.6 950.3 1,006.0 983.8 28 Gross private saving 980.8 1,002.5 1,053.5 1,041.4 1,052.7 1,082.7 1,126.4 1,090.0 99 247.9 192.6 203.1 201.1 203.3 232.6 263.7 206.1 30 Undistributed corporate profits1 94.3 120.9 135.1 142.3 139.5 130.7 132.6 140.8 31 Corporate inventory valuation adjustment -6.4 -6.2 -19.5 -14.1 -19.6 -32.1 -39.0 -28.2 Capital consumption allowances 396.8 407.8 432.2 425.9 432.6 438.0 444455..33 445544..77 33 Noncorporate 261.8 261.2 283.1 272.1 277.3 281.3 284.7 288.4 34 Government surplus, or deficit (-), national income and -257.8 -215.0 -132.9 -118.1 -130.1 -132.3 -120.4 -106.2 35 -282.7 -241.4 -159.1 -145.1 -154.0 -161.1 -148.6 -129.6 36 State and local 24.8 26.3 26.2 27.0 23.9 28.8 28.2 23.4 37 Gross investment 731.7 789.8 889.7 899.3 901.5 907.9 947.4 916.8 38 Gross private domestic investment 788.3 882.0 1,032.9 1,034.4 1,055.1 1,075.6 1,107.8 1,094.1 39 Net foreign investment -56.6 -92.3 -143.2 -135.1 -153.6 -167.7 -160.4 -177.3 40 Statistical discrepancy 8.8 2.3 -30.9 -24.0 -21.1 -42.4 -58.6 -67.0 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 1994 1995 IItteemm ccrreeddiittss oorr ddeebbiittss 11999922 11999933 11999944 Q2 Q3 Q4 Ql Q2P 1 Balance on current account -61,548 -99,925 -151,245 -37,986 -39,714 -43,276 -39,025 -43,622 ? Merchandise trade balance2 -96,106 -132,618 -166,099 -41,494 -44,627 -43,488 -45,050 -49,040 3 Merchandise exports 440,352 456,823 502,485 122,730 127,384 133,926 138,061 142,543 4 Merchandise imports -536,458 -589,441 -668,584 -164,224 -172,011 -177,414 -183,111 -191,583 Military transactions, net -2,142 448 2,148 376 1,124 679 542 537 6 Other service transactions, net 58,767 57,328 57,739 14,195 14,696 15,342 15,068 15,135 7 Investment income, net 10,080 9,000 -9,272 -2,285 -2,533 -4,571 -1,961 -2,874 8 U.S. government grants -15,083 -16,311 -15,814 -3,703 -3,488 -6,245 -2,867 -2,356 9 U.S. government pensions and other transfers -3,735 -3,785 -4,247 -1,063 -1,064 -1,063 -782 -988 10 Private remittances and other transfers -13,330 -13,988 -15,700 -4,012 -3,822 -3,931 -3,975 -4,036 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -1,661 -330 -322 491 -283 -931 --115522 --115577 12 Change in U.S. official reserve assets (increase, -) 3,901 -1,379 5,346 3,537 -165 2,033 -5,318 -2,722 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) 2,316 -537 -441 -108 -111 -121 -867 -156 15 Reserve position in International Monetary Fund -2,692 -44 494 251 273 -27 -526 -786 16 Foreign currencies 4,277 -797 5,293 3,394 -327 2,181 -3,925 -1,780 17 Change in U.S. private assets abroad (increase, -) -68,115 -182,880 -130,875 -10,001 -27,492 -56,258 -69,873 -72,228 18 Bank-reported claims3 20,895 29,947 915 15,107 1,590 -16,651 -29,284 -35,534 19 Nonbank-reported claims 45 1,581 -32,621 -10,230 -8,051 -12,449 -11,518 20 U.S. purchases of foreign securities, net -46,415 -141,807 -49,799 -7,128 -10,976 -15,238 -6,567 -20,597 21 U.S. direct investments abroad, net -42,640 -72,601 -49,370 -7,750 -10,055 -11,920 -22,504 -16,097 22 Change in foreign official assets in United States (increase, +) 40,466 72,146 39,409 9,162 19,691 -421 22,308 37,759 23 U.S. Treasury securities 18,454 48,952 30,723 5,919 16,477 7,470 10,131 25,169 24 Other U.S. government obligations 3,949 4,062 6,025 2,360 2,222 1,228 1,126 1,326 2.5 Other U.S. government liabilities 2,180 1,706 2,211 174 494 692 -154 513 26 Other U.S. liabilities reported by U.S. banks 16,571 14,841 2,923 1,674 1,298 -9,856 10,940 7,802 27 Other foreign official assets5 -688 2,585 -2,473 -965 -800 45 265 2,949 28 Change in foreign private assets in United States (increase, +) 113,357 176,382 251,956 37,364 60,045 85,136 72,533 76,459 29 U.S. bank-reported liabilities3 15,461 20,859 114,396 28,231 19,650 34,676 -531 15,006 30 U.S. nonbank-reported liabilities 13,573 10,489 -4,324 -2,047 487 -5,242 10,113 31 Foreign private purchases of U.S. Treasury securities, net 36,857 24,063 33,811 -7,317 5,428 25,929 29,910 29,966 32 Foreign purchases of other U.S. securities, net 29,867 79,864 58,625 12,551 14,762 10,195 15,816 20,202 33 Foreign direct investments in United States, net 17,599 41,107 49,448 5,946 19,718 19,578 17,225 11,285 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -26,399 35,985 -14,269 -2,567 -12,082 13,718 19,527 4,511 36 Due to seasonal adjustment 587 -6,641 782 6,183 410 37 Before seasonal adjustment -26,399 35,985 -14,269 -3,154 -5,441 12,936 13,344 4,101 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) 3,901 -1,379 5,346 3,537 -165 2,033 --55,,331188 --22,,772222 39 Foreign official assets in United States, excluding line 25 (increase, +) 38,286 70,440 37,198 8,988 19,197 -1,113 22,462 3377,,224466 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 5,942 -3,717 -1,184 --44,,221177 33,,556644 11,,112200 --332222 5 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^10. 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 from 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 • December 1995 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1995 IItteemm 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug." 1 Goods and services, balance -39,480 -74,841 -106,212 -9,504 -9,209 -11,076 -10,780 -11,280 -11,186 -8,819 2 Merchandise -96,106 -132,618 -166,099 -14,271 -14,537 -16,336 -15,976 -16,493 -16,230 -13,830 3 Services 56,626 57,777 59,887 4,767 5,328 5,260 5,196 5,213 5,044 5,011 4 Goods and services, exports 618,969 644,578 701,201 62,093 65,342 64,412 65,595 64,599 63,408 65,743 5 Merchandise 440,352 456,823 502,485 45,638 47,947 47,157 48,307 47,381 46,368 48,718 6 Services 178,617 187,755 198,716 16,455 17,395 17,255 17,288 17,218 17,040 17,025 7 Goods and services, imports -658,449 -719,420 -807,413 -71,597 -74,551 -75,488 -76,375 -75,879 -74,594 -74,562 8 Merchandise -536,458 -589,441 -668,584 -59,909 -62,484 -63,493 -64,283 -63,874 -62,598 -62,548 9 Services -121,991 -129,979 -138,829 -11,688 -12,067 -11,995 -12,092 -12,005 -11,996 -12,014 MEMO 10 Balance on merchandise trade, Census basis -84,501 -115,568 -150,630 -13,350 -12,886 -14,797 -14,058 -14,730 -15,290 -12,823 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 1995 AAsssseett 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. Sept.p 1 Total 71,323 73,442 74,335 81,439 86,761 88,756 90,549 90,063 91,534 86,648 87,152 2 Gold stock, including Exchange Stabilization Fund1 11,056 11,053 11,051 11,050 11,053 11,055 11,054 11,054 11,053 11,053 11,051 3 Special drawing rights2'3 8,503 9,039 10,039 11,158 11,651 11,743 11,923 11,869 11,487 11,146 11,035 4 Reserve position in International Monetary Fund2 11,759 11,818 12,030 12,853 13,418 14,206 14,278 14,276 14,761 14,470 14,681 5 Foreign currencies4 40,005 41,532 41,215 46,378 50,639 51,752 53,294 52,864 54,233 49,979 50,385 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 1995 AAsssseett 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. Sept.p 1 Deposits 205 386 250 188 370 166 227 167 190 165 201 Held in custody 2 U.S. Treasury securities2 314,481 379,394 441,866 447,206 459,694 469,482 474,181 482,506 505,613 502,737 506,572 3 Earmarked gold3 13,118 12,327 12,033 12,033 11,964 11,897 11,800 11,725 11,728 11,741 11,728 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 Apr/ Mayr Juner July Aug.' 1 Total1 483,002 520,578r 527,541r 542,768r 552,623 560,324 580,053 604,054 611,933 By type 2 Liabilities reported by banks in the United States' 73,03 lr 80,556r 83,697r 85,564 84,859 91,563 93,405 105,044 3 US. Treasury bills and certificates3 151,100 139,570 134,341 141,716 146,417 154,575 154,517 159,654 156,322 US. Treasury bonds and notes 4 Marketable 212,237 254,059 257,998 262,020 265,178 263,404 274,254 291,034 290,670 5 Nonmarketable4 5,652 6,109 6,095 6,135 6,174 6,209 6,245 6,288 6,329 6 US. securities other than U.S. Treasury securities' 44,205 47,809 48,551 49,200 49,290 51,277 53,474 53,673 53,568 By area 7 Europe1 207,121 215,024 213,876 218,385r 216,771 217,793 223,814 224,343 219.911 8 Canada 15,285 17,235 18,655 19,268 19,248 19,631 19,549 21,746 21,508 9 Latin America and Caribbean 55,898 41,492' 42,43 lr 39,847 42,475 44,707 50,268 57,662 62,994 10 Asia 197,702 236,819 244,650 256,845r 266,089 270,519 278,767 290,885 297.912 11 Africa 4,052 4,179 4,066 4,583 4,200 4,281 4,427 4,309 4,433 12 Other countries6 2,942 5,827 3,861 3,838 3,838 3,391 3,226 5,107 5,173 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 States' Payable in Foreign Currencies Millions of dollars, end of period 1994r 1995' IItteemm 11999911 11999922 11999933rr Sept. Dec. Mar. June 1 Banks' liabilities 75,129 72,796 78,259 83,444 89,587 96,190 106,069 2 Banks' claims 73,195 62,799 61,425 64,161 60,249 72,511 77,195 3 Deposits 26,192 24,240 20,401 20,731 19,640 24,257 28,915 4 Other claims 47,003 38,559 41,024 43,430 40,609 48,254 48,280 5 Claims of banks' domestic customers2 3,398 4,432 9,103 12,719 15,020 11,637 13,070 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 • December 1995 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1995 IItteemm 11999922 11999933 11999944'' Feb.' Mar. Apr.' May' June' July Aug.P BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 810,259 926,793r 1,017,047 1,021,668 l,031,278r 1,037,624 1,041,439 1,055,067 1,055,225 1,070,474 2 Banks' own liabilities 606,444 627,040' 721,624 726,939 725,066' 720,976 722,735 732,820 726,116 741,188 3 Demand deposits 21,828 21,573 23,376 24,090 22,746' 22,950 23,567 22,226 24,100 21,771 4 Time deposits" 160,385 175,032r 186,400 185,681 184,124' 182,196 184,299 192,883 189,317 195,651 5 Other3 93,237 112,056' 115,933 126,737 120,939' 123,852 127,544 122,065 139,247 137,028 6 Own foreign offices4 330,994 318,379 395,915 390,431 397,257' 391,978 387,325 395,646 373,452 386,738 7 Banks' custodial liabilities5 203,815 299,753 295,423 294,729 306,212' 316,648 318,704 322,247 329,109 329,286 8 U.S. Treasury bills and certificates6 127,644 176,739 162,826 160,353 170,138 175,540 182,046 182,204 188,621 185,980 9 Other negotiable and readily transferable instruments7 21,974 36,289 42,177 43,378 44,921 48,278 40,331 45,112 44,252 45,052 10 Other 54,197 86,725 90,420 90,998 91,153' 92,830 96,327 94,931 96,236 98,254 11 Nonmonetary international and regional organizations8 ... 9,350 10,936 8,606 8,355 9,263 8,710 8,576 9,776 11,955 9,920 12 Banks' own liabilities 6,951 5,639 8,176 7,706 8,639 7,547 7,609 8,972 10,884 8,616 13 Demand deposits 46 15 29 35 31 214 34 114 43 40 14 Time deposits2 3,214 2,780 3,298 3,548 3,899 3,954 3,516 4,459 4,977 4,486 15 Other3 3,691 2,844 4,849 4,123 4,709 3,379 4,059 4,399 5,864 4,090 16 Banks' custodial liabilities5 2,399 5,297 430 649 624 1,163 967 804 1,071 1,304 17 U.S. Treasury bills and certificates6 1,908 4,275 281 407 314 763 510 312 551 826 18 Other negotiable and readily transferable instruments7 486 1,022 149 242 307 400 456 492 520 478 19 Other 5 0 0 0 3 0 1 0 0 0 20 Official institutions' 159,563 220,908 212,601 214,897 225,413' 231,981 239,434 246,080 253,059 261,366 21 Banks' own liabilities 51,202 64,231 59,580 67,544 69,196' 67,999 68,974 73,109 75,041 83,645 22 Demand deposits 1,302 1,601 1,564 1,587 1,705 1,485 1,575 1,398 1,429 1,547 23 Time deposits2 17,939 21,654 23,511 25,614 23,925' 25,788 27,462 27,406 29,472 31,685 24 Other3 31,961 40,976 34,505 40,343 43,566 40,726 39,937 44,305 44,140 50,413 25 Banks' custodial liabilities5 108,361 156,677 153,021 147,353 156,217 163,982 170,460 172,971 178,018 177,721 26 U.S. Treasury bills and certificates6 104,596 151,100 139,570 134,341 141,716 146,417 154,575 154,517 159,654 156,322 27 Other negotiable and readily transferable instruments7 3,726 5,482 13,245 12,943 14,351 17,473 15,771 18,325 18,159 20,735 28 Other 39 95 206 69 150 92 114 129 205 664 29 Banks10 547,320 592,208 680,738 678,858 685,733' 681,438 680,063 686,230 665,995 683,767 30 Banks' own liabilities 476,117 478,792 566,647 562,029 565,555' 558,903 560,440 566,759 545,393 562,327 31 Unaffiliated foreign banks 145,123 160,413 170,732 171,598 168,298' 166,925 173,115 171,113 171,941 175,589 32 Demand deposits 10,170 9,719 10,633 10,996 10,878' 10,701 11,406 10,554 12,121 10,061 33 Time deposits2 90,296 105,192 111,156 107,157 107,507' 100,613 103,681 111,439 104,566 110,045 34 Other3 44,657 45,502 48,943 53,445 49,913 55,611 58,028 49,120 55,254 55,483 35 Own foreign offices4 330,994 318,379 395,915 390,431 397,257' 391,978 387,325 395,646 373,452 386,738 36 Banks' custodial liabilities5 71,203 113,416 114,091 116,829 120,178' 122,535 119,623 119,471 120,602 121,440 37 U.S. Treasury bills and certificates6 11,087 10,712 11,219 12,328 15,723 15,717 14,437 15,021 15,535 15,489 38 Other negotiable and readily transferable instruments7 7,555 17,020 14,234 15,232 15,254 15,815 10,955 11,188 10,583 10,142 39 Other 52,561 85,684 88,638 89,269 89,201' 91,003 94,231 93,262 94,484 95,809 40 Other foreigners 94,026 102,741' 115,102 119,558 110,869' 115,495 113,366 112,981 124,216 115,421 41 Banks' own liabilities 72,174 78,378' 87,221 89,660 81,676' 86,527 85,712 83,980 94,798 86,600 42 Demand deposits 10,310 10,238 11,150 11,472 10,132 10,550 10,552 10,160 10,507 10,123 43 Time deposits2 48,936 45,406' 48,435 49,362 48,793' 51,841 49,640 49,579 50,302 49,435 44 Other3 12,928 22,734' 27,636 28,826 22,751' 24,136 25,520 24,241 33,989 27,042 45 Banks' custodial liabilities5 21,852 24,363 27,881 29,898 29,193 28,968 27,654 29,001 29,418 28,821 46 U.S. Treasury bills and certificates6 10.053 10,652 11,756 13,277 12,385 12,643 12,524 12,354 12,881 13,343 47 Other negotiable and readily transferable instruments7 10,207 12,765 14,549 14,961 15,009 14,590 13,149 15,107 14,990 13,697 48 Other 1,592 946 1,576 1,660 1,799 1,735 1,981 1,540 1,547 1,781 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 9,111 17,567 17,895 17,137 16,741r 17,651 11,938 12,158 10,129 10,409 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 the 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

Nonbank-Reported Data A57 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1995 IItteemm 11999922 11999933 11999944'' Feb.' Mar. Apr.' May' June' July Aug.P AREA 50 Total, all foreigners 810,259 926,793r 1,017,047 1,021,668 l,031,278r 1,037,624 1,041,439 1,055,067 1,055,225 1,070,474 51 Foreign countries 800,909 915,857r 1,008,441 1,013,313 l,022,015r 1,028,914 1,032,863 1,045,291 1,043,270 1,060,554 52 Europe 307,670 378,107R 392,931 387,677 381,150' 368,495 377,387 374,451 377,294 374,982 53 Austria 1,611 1,917 3,649 4,021 4,012 4,030 3,961 3,853 3,922 3,868 54 Belgium and Luxembourg 20,567 28,670R 21,978 22,094 23,942' 22,855 25,734 21,076 24,791 24,588 55 Denmark 3,060 4,517 2,784 1,971 2,396 2,567 2,811 2,432 2,131 2,468 56 Finland 1,299 1,872 1,436 1,753 1,222' 2,028 1,708 1,455 2,390 2,270 57 France 41,411 40,316R 45,207 44,482 41,447' 38,668 40,976 45,029 42,864 43,251 58 Germany 18,630 26,685R 27,190 27,521 28,285' 28,496 31,968 34,257 33,705 31,217 59 Greece 913 1,519 1,393 2,065 2,264 2,195 2,160 2,325 2,272 2,358 60 Italy 10,041 11,759 10,882 12,021 8,686 9,414 9,810 10,368 10,215 10,808 61 Netherlands 7,365 16,096 15,971 15,891 15,784 12,545 14,622 11,449 11,742 10,684 6? Norway 3,314 2,966 2,338 2,147 2,066 1,374 1,289 1,305 1,119 2,087 63 Portugal 2,465 3,366 2,846 4,007 2,810 2,940 2,855 2,671 3,161 1,735 64 Russia 577 2,511 2,714 2,642 3,469 5,011 7,042 7,177 6,313 7,265 65 Spain 9,793 20,493 14,655 11,106 11,675 9,859 9,780 10,495 9,051 9,924 66 Sweden 2,953 2,738R 3,093 2,247 2,474 1,845 1,437 3,454 2,170 2,859 67 Switzerland 39,440 41,561 41,881 40,100 39,355 41,258 39,984 47,241 42,190 41,642 68 Turkey 2,666 3,227 3,341 2,701 2,513 3,624 3,187 3,253 2,971 3,521 69 United Kingdom 111,805 133,993R 163,768 163,525 160,162' 153,431 151,052 141,042 151,262 150,703 70 Yugoslavia" 504 570 245 255 210' 219 220 220 214 146 71 Other Europe and other former U.S.S.R. 29,256 33,331 27,760 27,328 28,478' 26,136 26,791 25,349 24,811 23,588 72 Canada 22,420 20,235R 24,627 26,580 27,035' 28,563 27,716 29,443 28,880 28,278 73 Latin America and Caribbean 317,228 362,161R 422,781 421,845 422,812' 431,632 429,741 443,505 432,660 444,531 74 Argentina 9,477 14,477 17,199 11,886 9,978 10,154 10,210 10,719 12,250 11,379 75 Bahamas 82,284 73,800 103,684 98,837 100,400' 97,304 92,324 97,044 88,375 95,644 76 Bermuda 7,079 8,117R 8,467 8,574 9,044' 8,955 8,617 7,156 6,907 6,606 77 Brazil 5,584 5,301 9,140 10,628 10,860 13,114 15,563 18,202 21,181 26,692 78 British West Indies 153,033 193,649' 229,620 233,826 236,331' 244,233 242,895 252,841 244,710 243,857 79 Chile 3,035 3,183 3,114 3,327 3,587 3,446 2,911 3,270 2,625 2,837 80 Colombia 4,580 3,171 4,579 4,037 3,644 3,598 3,401 3,245 3,401 3,318 81 Cuba 3 33 13 5 5 6 5 5 5 3 8? Ecuador 993 880 873 1,511 1,117 1,054 1,048 1,177 1,117 1,159 83 Guatemala 1,377 1,207 1,121 1,079 1,062 1,094 1,069 1,127 1,098 1,120 84 Jamaica 371 410 529 464 491 422 542 449 426 444 85 Mexico 19,454 28,018 12,244 16,767 15,750 17,246 18,174 19,109 20,915 22,028 86 Netherlands Antilles 5,205 4,686 4,530 4,495 4,013 4,076 6,001 3,957 4,395 3,833 87 Panama 4,177 3,582 4,542 4,281 4,361 4,816 4,881 4,193 4,495 4,856 88 Peru 1,080 926 899 892 893 931 1,004 985 932 1,016 89 Uruguay 1,955 1,611 1,594 1,610 1,754 1,930 2,091 2,023 1,945 1,929 90 Venezuela 11,387 12,786 13,975 12,970 12,632 12,122 12,041 10,867 11,083 10,658 91 Other 6,154 6,324R 6,658 6,656 6,890' 7,131 6,964 7,136 6,800 7,152 92 143,540 144,529R 155,556 165,978 178,417' 187,634 186,272 187,456 191,334 198,663 China 93 People's Republic of China 3,202 4,011 10,066 15,661 12,017 12,138 9,459 10,579 11,908 13,208 94 Republic of China (Taiwan) 8,408 10,627 9,826 9,942 10,021 9,630 9,137 9,689 9,103 9,766 95 Hong Kong 18,499 17,132' 17,087 18,059 19,888 20,069 22,690 22.709 24,764 23,784 96 India 1,399 1,114 2,338 2,119 2,354 2,194 1,939 2.102 2,267 2,653 97 Indonesia 1,480 1,986 1,587 1,957 2,107 1,696 2,331 1,818 1,656 1,941 98 Israel 3,773 4,435 5,155 4,955 5,003 5,411 5,326 4,568 4,594 4.718 99 Japan 58,435 61,466 64,259 63,200 77,846 84,761 83,174 83,332 85,785 89,066 ION Korea (South) 3,337 4,913 5,124 4,175 4,374' 4,760 5,030 4.971 5,050 4,862 101 Philippines 2,275 2,035 2,714 2,363 2,297 2,257 2,704 2,513 2,634 2,774 10? Thailand 5,582 6,137 6,466 9,906 9,564 10,416 11,582 11,472 11,229 11,163 103 Middle Eastern oil-exporting countries 21,437 15,824 15,475 14,935 15,516 15,730 15,612 16,843 16,465 15,757 104 Other 15,713 14,849 15,459 18,706 17,430 18,572 17,288 16,860 15,879 18,971 105 Africa 5,884 6,633 6,511 6,203 6,817 6,583 6,707 6,766 6,949 6,969 106 Egypt 2,472 2,208 1,867 1,830 1,781 2,102 2,045 2,143 1,840 1,924 107 Morocco 76 99 97 73 70 66 72 89 93 86 108 South Africa 190 451 433 400 706 401 539 594 1,000 744 109 Zaire 19 12 9 10 9 12 10 18 13 15 110 Oil-exporting countries14 1,346 1,303 1,343 1,122 1,599 1,328 1,302 1,418 1,364 1,666 111 Other 1,781 2,560 2,762 2,768 2,652 2,674 2,739 2,504 2,639 2,534 11? Other 4,167 4,192 6,035 5,030 5,784 6,007 5,040 3,670 6,153 7,131 113 Australia 3,043 3,308 5,141 4,351 5,024 4,912 4,255 2,943 5,471 5,457 114 Other 1,124 884 894 679 760 1,095 785 727 682 1,674 115 Nonmonetary international and regional organizations. .. 9,350 10,936 8,606 8,355 9,263 8,710 8,576 9,776 11,955 9,920 116 International15 7,434 6,851 7,537 7,202 8,092 7,173 6,597 8,124 10,266 7,875 117 Latin American regional16 1,415 3,218 613 582 576 666 1,067 804 834 1,039 118 Other regional17 501 867 456 571 595 871 912 848 855 1,006 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 • December 1995 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1995 AArreeaa oorr ccoouunnttrryy 11999922 11999933 11999944rr Feb.r Mar.r Apr.' Mayr Juner July Aug.P 1 Total, all foreigners 499,437 486,250r 483,372 477,172 491,402 480,697 483,947 518,617 506,534 515,373 2 Foreign countries 494,355 483,845r 478,781 476,288 487,668 477,760 482,337 515,984 505,217 513,944 3 Europe 123,377 122,823r 124,609 123,066 127,193 122,538 123,304 128,932 125,948 126,587 4 Austria 331 413 692 425 589 461 756 581 616 685 5 Belgium and Luxembourg 6,404 6,532r 6,737 4,965 7,424 8,505 8,052 5,148 8,063 8,249 6 Denmark 707 382 1,030 636 723 549 508 599 443 428 7 Finland 1,418 594 691 452 564 700 431 394 967 1,001 8 France 14,723 1 l,822r 12,767 12,305 13,480 13,132 14,083 15,362 15,419 15,192 9 Germany 4,222 7,722r 6,732 7,707 7,097 7,156 6,644 7,986 6,272 7,827 10 Greece 717 680r 592 765 611 560 407 442 445 393 11 Italy 9,047 8,836r 6,041 6,553 6,396 6,209 6,219 6,734 6,066 5,729 12 Netherlands 2,468 3,063 2,957 3,319 3,182 3,551 5,998 4,356 4,478 4,371 13 Norway 355 396 504 997 1,442 1,295 1,382 1,019 1,206 1,047 14 Portugal 325 834 938 1,045 907 915 990 1,208 987 916 15 Russia 3,147 2,310 949 759 770 657 511 508 495 504 16 Spain 2,755 2,800r 3,529 2,800 3,066 2,076 2,138 3,565 3,626 3,480 17 Sweden 4,923 4,252r 4,096 4,040 3,394 3,522 3,319 2,939 3,557 2,819 18 Switzerland 4,717 6,603r 7,492 8,074 7,854 7,398 7,631 10,290 7,539 7,361 19 Turkey 962 l,301r 874 882 690 810 722 713 725 764 20 United Kingdom 63,430 61,963r 66,558 65,574 67,724 63,642 62,218 65,790 63,746 64,479 21 Yugoslavia2 569 536 265 265 247 247 248 229 230 230 22 Other Europe and other farmer U.S.S.R.3 2,157 1,784 1,165 1,503 1,033 1,153 1,047 1,069 1,068 1,112 23 Canada 13,845 18,543r 18,150 19,098 20,302 17,482 20,553 19,715 18,870 17,266 24 Latin America and Caribbean 218,078 223,997r 222,541 221,274 224,955 224,901 223,659 242,360 237,548 245,610 25 Argentina 4,958 4,473r 5,834 6,348 6,297 6,178 6,352 6,596 6,255 6,164 26 Bahamas 60,835 63,296r 66,096 63,931 65,458 64,352 62,297 63,038 59,170 60,102 27 Bermuda 5,935 8,532r 8,381 11,907 8,804 11,843 10,884 8,549 6,373 8,944 28 Brazil 10,773 ll,845r 9,579 10,144 10,871 10,896 11,192 11,522 12,528 12,974 29 British West Indies 101,507 98,708r 95,609 91,855 96,422 94,155 95,284 113,870 113,951 117,416 30 Chile 3,397 3,619 3,794 4,207 4,348 4,247 3,867 4,316 4,245 4,646 31 Colombia 2,750 3,179 4,003 3,818 3,983 3,928 4,034 4,032 4,182 4,348 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 884 680 680 659 567 565 663 767 767 724 34 Guatemala 262 288 366 349 379 359 353 344 340 350 35 Jamaica 162 195 258 281 275 262 258 264 277 290 36 Mexico 14,991 15,713r 17,721 17,244 17,187 17,182 17,375 17,277 17,146 17,018 37 Netherlands Antilles 1,379 2,682 1,055 1,437 1,187 1,333 1,778 2,258 2,730 2,912 38 Panama 4,654 2,893 2,179 2,344 2,470 2,507 2,433 2,506 2,512 2,494 39 Peru 730 656 996 1,117 1,096 1,116 1,095 1,359 1,332 1,366 40 Uruguay 936 969r 503 416 355 366 398 377 424 424 41 Venezuela 2,525 2,907 1,828 1,725 1,649 1,679 1,662 1,608 1,647 1,767 42 Other 1,400 3,362' 3,659 3,492 3,607 3,933 3,734 3,677 3,669 3,671 43 Asia 131,789 11 l,765r 107,337 106,779 109,512 106,749 110088,,778800 118,697 111177,,118800 111188,,118899 China 44 People's Republic of China 906 2,271 836 869 841 980 879 1,143 1,206 1,163 45 Republic of China (Taiwan) 2,046 2,623 1,444 1,286 1,549 1,534 1,519 1,794 1,913 1,600 46 Hong Kong 9,642 10,826r 9,159 11,193 14,396 11,602 12,069 14,894 14,735 14,493 47 India 529 589 994 1,059 1,040 1,139 1,126 1,210 1,732 1,903 48 Indonesia 1,189 1,527 1,470 1,426 1,513 1,463 1,427 1,443 1,516 1,618 49 Israel 820 826 688 683 811 683 783 949 748 699 50 Japan 79,172 60,029r 59,425 57,216 55,602 55,191 58,475 61,039 61,268 63,286 51 Korea (South) 6,179 7,539r 10,286 10,740 12,303 11,953 12,265 12,617 13,142 12,844 52 Philippines 2,145 1,409 660 550 550 496 532 915 596 621 53 Thailand 1,867 2,170 2,902 2,635 2,778 2,757 2,755 2,688 2,670 2,594 54 Middle Eastern oil-exporting countries4 18,540 15,113' 13,741 13,341 13,069 13,292 11,643 12,570 11,946 11,401 55 Other 8,754 6,843 5,732 5,781 5,060 5,659 5,307 7,435 5,708 5,967 56 Africa 4,279 3,857 3,015 2,918 2,875 2,741 2,751 2,919 2,907 2,838 57 Egypt 186 196 225 234 205 181 237 204 193 194 58 Morocco 441 481 429 442 424 440 454 686 645 653 59 South Africa 1,041 633 671 599 644 584 579 563 531 544 60 Zaire 4 4 2 2 2 2 2 2 7 2 61 Oil-exporting countries5 1,002 1,129 842 772 731 700 658 657 659 614 62 Other 1,605 1,414 846 869 869 834 821 807 872 831 63 Other 2,987 2,860r 3,129 3,153 2,831 3,349 3,290 3,361 2,764 3,454 64 Australia 2,243 2,037r 2,186 1,891 1,723 1,768 1,877 1,999 2,072 2,072 65 Other 744 823 943 1,262 1,108 1,581 1,413 1,362 692 1,382 66 Nonmonetary international and regional organizations6 .. . 5,082 2,405 4,591 884 3,734 2,937 1,610 2,633 1,317 1,429 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 1995 TTyyppee ooff ccllaaiimm 11999922 11999933rr 11999944rr Feb.r Mar.r Apr.r Mayr Juner July Aug.P 1 Total 559,495 560,040 580,496 593,011 625,062 2 Banks' claims 499,437 486,250 483,372 477,172 491,402 480,697 483,947 518,617 506,534 515,373 3 Foreign public borrowers 31,367 29,004 23,470 18,253 23,722 22,193 19,075 23,772 19,716 21,435 4 Own foreign offices2 303,991 284,270 282,143 278,010 292,092 282,383 285,843 300,293 291,720 295,610 5 Unaffiliated foreign banks 109,342 100,169 111,494 106,122 105,406 104,883 104,005 112,184 113,321 111,544 6 Deposits 61,550 49,186 59,142 54,290 53,485 54,970 51,454 58,583 59,456 57,386 7 Other 47,792 50,983 52,352 51,832 51,921 49,913 52,551 53,601 53,865 54,158 8 All other foreigners 54,737 72,807 66,265 74,787 70,182 71,238 75,024 82,368 81,777 86,784 9 Claims of banks' domestic customers3 60,058 73,790 97,124 101,609 106,445 10 Deposits 15,452 34,291 56,649 56,584 58,526 11 Negotiable and readily transferable instruments4 31,474 25,819 27,188 30,565 31,591 12 Outstanding collections and other claims 13,132 13,680 13,287 14,460 16,328 MEMO 13 Customer liability on acceptances 8,655 7,846 8,377 8,415 8,499 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 38,623 29,287 32,004 37,843 35,259 26,429 29,437 34,754 32,296 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 1994r 1995 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999911 11999922 11999933rr Sept. Dec. Mar.r June 1 Total 195,302 195,119 201,611 196,600 201,117 198,959 217,954 By borrower 2 Maturity of one year or less 162,573 163,325 171,786 169,769 175,429 170,580 189,651 3 Foreign public borrowers 21,050 17,813 17,763 17,368 15,557 15,749 15,916 4 All other foreigners 141,523 145,512 154,023 152,401 159,872 154,831 173,735 5 Maturity of more than one year 32,729 31,794 29,825 26,831 25,688 28,379 28,303 6 Foreign public borrowers 15,859 13,266 10,880 7,414 7,670 7,689 7,726 7 All other foreigners 16,870 18,528 18,945 19,417 18,018 20,690 20,577 By area Maturity of one year or less 8 Europe 51,835 53,300 57,392 59,803 58,188 54,389 60,573 9 Canada 6,444 6,091 7,673 7,304 7,360 7,417 8,210 10 Latin America and Caribbean 43,597 50,376 59,689 58,735 61,448 63,803 70,491 11 Asia 51,059 45,709 41,419 37,086 40,696 38,213 44,327 12 Africa 2,549 1,784 1,820 1,530 1,371 1,223 1,443 13 Allother3 7,089 6,065 3,793 5,311 6,366 5,535 4,607 Maturity of more than one year 14 Europe 3,878 5,367 5,276 4,038 3,865 4,496 3,700 15 Canada 3,595 3,287 2,558 2,683 2,495 3,596 3,084 16 Latin America and Caribbean 18,277 15,312 14,007 12,714 12,230 13,003 14,116 17 Asia 4,459 5,038 5,600 5,093 4,731 5,215 5,491 18 Africa 2,335 2,380 1,936 1,840 1,553 1,592 1,372 19 Allother3 185 410 448 463 814 477 540 1. Reporting banks include all types of depository institutions as well as some brokers 2. Maturity is time remaining until maturity. 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 • December 1995 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1993 1994 1995 AArreeaa oorr ccoouunnttrryy 11999911 11999922 June Sept. Dec. Mar. June Sept. Dec. Mar. June 1 Total 343.5r 344.7r 376.3r 387.4r 405.2r 477.7r 486.5r 485.8r 494.2r 541.0r 525.3 2 G-10 countries and Switzerland 137.2r 131.2r 149.0r 152.0r 161.6r 180.7r 174.8r 183.7r 189.0r 204.3r 198.7 3 Belgium and Luxembourg .0 5.6 7.0 7.1 7.4 8.1r 8.8r 9.7r 7.0r 8.2r 7.1 4 France 11.0 15.3 14.0 12.3 12.0r 16.6r 19.f 21.2r 19.7r 20. lr 19.3 5 Germany 8.3 9.1r 10.7r 12.2r 12.6 30.2r 25.3 24.5 24.1r 30.4r 29.1 6 Italy 5.6 6.5 7.9 8.7 7.6 15.6r 14.0 11.6 11.8r 10.6 10.7 7 Netherlands .0 2.8 3.7 3.7 4.7 4.1 3.6 3.5r 3.6 3.6r 4.3 8 Sweden 1.9 2.3 2.5 2.5 2.7r 2.9r 3.0r 2.6 2.7 3.1 3.0 9 Switzerland 3.4 4.8 4.7 5.6 5.9 6.3 6.5 6.2 6.9 6.2 6.1 10 United Kingdom 68.4r 59.7r 72.9r 73.9r 84.2r 69.2r 64.lr 78.0r 82.5r 86.9r 86.2 11 Canada 5.8 6.3 8.0 9.7 6.8 7.8r 9.1' 9.9' 9.T 10.6r 10.8 12 Japan 22.2r 18.8r 17.6r 16.4r 17.6r 19.9' 20.7r 16.5r 21.0r 24.5r 22.1 13 Other industrialized countries 22.8 24.0 27.2 26.0 24.6 41.3r 41.7r 41,6r 45.2 43.9r 43.5 14 Austria .6 1.2 1.3 .6 .4 1.0 1.0 1.0 1.1 .9 .7 15 Denmark .9 .9 1.0 1.1 1.0 1.1 1.1 .9' 1.2 1.6 1.1 16 Finland .7 .7 .9 .6 .4 1.0 .8 .8 1.0 1.1 .5 17 Greece 2.6 3.0 3.1 3.2 3.2 3.8 4.6 4.3r 4.5 4.9r 5.0 18 Norway 1.4 1.2 1.8 2.1 1.7 1.6 1.6 1.6 2.0 2.4 1.8 19 Portugal .6 .4 .9 1.0 .8 1.2 1.1 1.0 1.2 1.0 1.2 20 Spain 8.3 8.9 10.5 9.3 8.9 12.3 11.7 13.lr 13.6 14.1r 13.6 21 Turkey 1.4 1.3 2.1 2.1 2.1 2.4 2.1 1.8 1.6 1.4 1.4 22 Other Western Europe 1.8 1.7 1.7 2.2 2.6 3.0r 2.8 1.0 2.7 2.5 2.6 23 South Africa 1.9 1.7 1.3 1.2 1.1 1.2 1.2 1.2 1.0 1.4 1.4 24 Australia 2.7 2.9 2.5 2.8 2.3 12.7 13.7 15.0 15.4r 12.6 14.3 25 OPEC2 14.5 15.8r 15.7 14.8 17.4 22.9r 21.6r 21.6r 22. r 19.5r 20.3 26 Ecuador .7 .6 .6 .5 .5 .5 .5 .4 .5 .5 .7 27 Venezuela 5.4 5.2 5.5 5.4 5.1 4.7r 4.4r 3.9r 3.7r 3.5r 3.5 28 Indonesia 2.7 2.7r 3.1 2.8 3.3 3.4r 3.2r 3.3r 3.8r 4.0 4.1 29 Middle East countries 4.2 6.2 5.4 4.9 7.4 13.2 12.4 13.0 13.3 10.7 11.4 30 African countries 1.5 1.1 1.1 1.1 1.2 l.lr i.r 1.0 .9' .7 .6 31 Non-OPEC developing countries 64.3r 72.6r 76.9r 11 A' 82.9r 94.6r 95.0r 93.1r 97.9r 100.9r 105.8 Latin America 32 Argentina 4.8 6.6 6.6 1.2 7.7 8.9r 10.T 10.7r 11.2r 11.4r 12.3 33 Brazil 9.6 10.8 12.3 11.7 12.0 12.7r 12.0r 9.3r 8.4r 9.2r 10.0 34 Chile 3.6 4.4 4.6 4.7 4.7 5.1 5.1 5.4 6.1 6.3 7.0 35 Colombia 1.7 1.8 1.9 2.0 2.1 2.2 2.4 2.4 2.6 2.6 2.6 36 Mexico 15.5 16.0 16.8 17.5 17.6r 18.8r 18.4r 19.6r 18.4r 17.8r 17.6 37 Peru .4 .5 .4 .3 .4 .6 .6 .6 .5 .6 .8 38 Other 2.1 2.6 2.7 2.7 3.r 2.9r 2.9r 2.9' 2.9r 2.6r 2.6 Asia China 39 People's Republic of China .3 .7 1.6 .5 2.0 .8 .8 1.0 1.1 1.1 1.4 40 Republic of China (Taiwan) 4.1 5.2 5.9 6.4 7.3 1.6' 7.1 6.9 9.2r 10.6 11.0 41 India 3.0 3.2 3.1 2.9 3.2 3.6 3.7 3.9r 4.2 3.8 4.0 42 Israel .5 .4 .4 .4 .5 .4 .4 .4 .4 .6 .6 43 Korea (South) 6.8 6.6 6.9 6.5 6.7 14.1 14.3 14.4r 16.2 16.9 18.7 44 Malaysia 2.3 3.1 3.7 4.1 4.4 5.2 5.2 3.7 3.1 3.9 4.1 45 Philippines 3.7 3.6 2.9 2.6 3.1 3.4 3.2 2.9 3.3 3.0 3.6 46 Thailand 1.7 2.2 2.4 2.8 3.1 3.0r 3.3 3.5 3.8 3.3 3.8 47 Other Asia 2.4r 3.1r 2.9r 3.4r 3.1r 3.1 3.5 3.6 4.8 5.2 3.8 Africa 48 Egypt .4 .2 .2 .2 .4 .4 .5 .3 .3 .4 .4 49 Morocco .7 .6 .6 .6 .7 .7 .7 .7 .6 .6 .9 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .7 1.0 .9 .8 .8 1.0 .9 .9 .8 .7 .6 52 Eastern Europe 2.4 3.1 3.2 3.0 3.1 3.4 3.0 3.0 2.7 2.4 2.0 53 Russia4 .9 1.9 1.9 1.7 1.6 1.5 1.2 i.r .8 .6 .4 54 Yugoslavia5 .9 .6 .6 .6 .6 .5 .5 .5 .5 .4 .3 55 Other .7 .6 .8 .7 .9 1.4 1.4 1.5 1.4 1.3 1.3 56 Offshore banking centers 54.r 58.2r 58.0 67.9 72.0r 78.6r 80.4r 16.1' 70.5r 84.8r 82.3 57 Bahamas 11.9 6.9 7.1 12.7 10.8 13.7 13.4 13.7r 10.0r 12.6r 7.6 58 Bermuda 2.3 6.2 4.5 5.5 8.6r 8.9r 6.5r 6.0r 8.3r 8.7r 8.5 59 Cayman Islands and other British West Indies 15.8 21.6r 15.6 15.1 17.4 17.6 23.5r 2i.r 19.8r 19.3 23.3 60 Netherlands Antilles 1.2 1.1 2.5 2.8 2.6 3.5 2.5 1.7 1.0 .9 1.9 61 Panama6 1.4 1.9 2.1 2.1 2.4 2.0 1.9 1.9r 1.3 1.1 1.3 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 14.3r 13.9 16.9 19.1 18.7 19.7 21.8r 20.3 19.9 22.8 23.2 64 Singapore 7.1 6.5 9.3 10.4 11.2 13.0 10.6 11.8 10.1 19.2 16.4 65 Other' .0 .0 .0 .0 .1 .0 .0 .0 .1 .0 .0 66 Miscellaneous and unallocated8 47.9r 39.7 46. r 46.2r 43.4 55.9r 69.7r 65.8r 66.6r 85.2r 72.6 1. The banking offices covered by these data include U.S. offices and foreign branches 2. Organization of Petroleum Exporting Countries, shown individually; other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and covered include U.S. agencies and branches of foreign banks. Beginning March 1994, the United Arab Emirates); and Bahrain and Oman (not formally members of OPEC). data include large foreign subsidiaries of U.S. banks. The data also include other types of 3. Excludes Liberia. Beginning March 1994 includes Namibia. U.S. depository institutions as well as some types of brokers and dealers. To eliminate 4. As of December 1992, excludes other republics of the former Soviet Union. duplication, the data are adjusted to exclude the claims on foreign branches held by a U.S. 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. office or another foreign branch of the same banking institution. 6. Includes Canal Zone. These data are on a gross claims basis and do not necessarily reflect the ultimate 7. Foreign branch claims only. country risk or exposure of U.S. banks. More complete data on the country risk exposure 8. Includes New Zealand, Liberia, and international and regional organizations. of U.S. banks are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. 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 1994 1995 Type of liability, and area or country 11999911 11999922 11999933 Mar. June Sept. Dec.' Mar. Junep 1 Total 44,708 45,511 50,330r 52,102r 55,350r 57,190r 54,586 51,092r 50,565 2 Payable in dollars 39,029 37,456 38,728' 38,543' 42,936' 42,712' 39,651 37,204' 35,635 3 Payable in foreign currencies 5,679 8,055 11,602' 13,559' 12,414' 14,478' 14,935 13,888 14,930 By type 4 Financial liabilities 22,518 23,841 28,959 30,485' 33,245 35,871' 32,852 29,752' 28,832 5 Payable in dollars 18,104 16,960 18,545 18,930 22,819 23,262 19,792 17,645' 15,876 6 Payable in foreign currencies 4,414 6,881 10,414 11,555' 10,426 12,609' 13,060 12,107 12,956 7 Commercial liabilities 22,190 21,670 21,371' 21,617' 22,105' 21,319' 21,734 21,340' 21,733 8 Trade payables 9,252 9,566 8,802' 8,979' 9,911' 9,550' 10,005 9,908' 10,558 9 Advance receipts and other liabilities .. . 12,938 12,104 12,569 12,638' 12,194' 11,769' 11,729 11,432' 11,175 10 Payable in dollars 20,925 20,496 20,183' 19,613' 20,117' 19,450' 19,859 19,559' 19,759 11 Payable in foreign currencies 1,265 1,174 1,188' 2,004' 1,988' 1,869' 1,875 1,781 1,974 By area or country Financial liabilities 12 Europe 12,003 13,387 18,810 20,582' 23,689 23,813' 20,870 16,804 17,217 13 Belgium and Luxembourg 216 414 175 525 524 661 495 612 778 14 France 2,106 11,,662233 2,539 2,606 1,590 2,241 1,727 2,046 1,101 15 Germany 682 888899 975 1,214 939 1,467 1,961 1,755 1,589 16 Netherlands 1,056 606 534 564 533 648 552 633 530 17 Switzerland 408 569 634 1,200 631 633 688 883 1,056 18 United Kingdom 6,528 8,610 13,332 13,865' 18,255 16,848' 14,709 10,025 11,133 19 Canada 292 544 859 508 698 618 629 1,817 894 20 Latin America and Caribbean 4,784 4,053 3,359 3,554 3,125 3,139 3,021 3,024 2,808 21 Bahamas 537 379 1,148 1,158 1,052 1,112 926 931 851 22 Bermuda 114 114 0 120 115 15 80 149 138 23 Brazil 6 19 18 18 18 7 207 58 58 24 British West Indies 3,524 2,850 1,533 1,613 1,297 1,344 1,160 1,231 1,118 25 Mexico 7 12 17 14 13 15 0 10 3 26 Venezuela 4 6 5 5 5 5 5 5 4 27 Asia2 5,381 5,818 5,689 5,650 5,694 8,149 8,147 7,911' 7,720 28 Japan 4,116 4,750 4,620 4,638 4,760 6,947 7,013 6,890' 6,791 29 Middle Eastern oil-exporting countries" 13 19 23 24 24 31 35 27 25 30 Africa 6 6 133 133 9 133 135 156 151 4 0 123 124 0 123 123 122 122 31 Oil-exporting countries4 52 33 109 58 30 19 50 40 42 32 All other5 Commercial liabilities 8,701 7,398 6,827' 6,553' 6,919' 6,866' 6,835 6,812' 6,964 33 Europe 248 298 239 263' 254 287 241 271' 288 34 Belgium and Luxembourg 1,039 700 655 554 712 742 760 692' 581 35 France 1,052 729 684 577 670 552 604 504' 575 36 Germany 710 535 688 628 649 674 722 574' 476 37 Netherlands 575 350 375 388 473 391 327 329' 434 38 Switzerland 2,297 2,505 2,039' 2,142' 2,309' 2,350' 2,444 2,848' 2,902 39 United Kingdom 40 Canada 1,014 1,002 879 1,039 1,070 1,068 1,037 1,198' 1,107 41 Latin America and Caribbean 1,355 1,533 1,658' 1,900' 2,000' 1,783' 1,857 1,389' 1,856 42 Bahamas 3 3 21 8 2 6 19 8 3 43 Bermuda 310 307 350 493 418 200 345 265 401 44 Brazil 219 209 214' 209' 215' 147' 161 97 108 45 British West Indies 107 33 27 20 24 33 23 29 12 46 Mexico 307 457 481' 554' 703' 672' 574 362' 428 47 Venezuela 94 142 123' 147' 192' 189' 276 273 204 48 Asia2 9,334 10,594 10,980' 10,927' 10,968' 10,501' 11,058 10,937' 10,874 49 Japan 3,721 3,612 4,314 4,617 4,389 4,235 4,801 4,785' 4,350 50 Middle Eastern oil-exporting countries^ 1,498 1,889 1,534' 1,534' 1,834' 1,680' 1,603 1,800 1,810 51 Africa 715 568 453' 478' 510' 468' 428 463 482 52 Oil-exporting countries4 327 309 167' 194' 241' 264' 256 248 252 53 Other5 1,071 575 574 720 638 633 519 541 450 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

A62 International Statistics • December 1995 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States' Millions of dollars, end of period 1994' 1995 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999911 11999922 11999933 Mar. June Sept. Dec. Mar.' Junep 1 Total 45,262 45,073 48,88lr 50,716 49,513 51,406 56,743 52,177 57,558 2 Payable in dollars 42,564 42,281 44,883r 46,596 45,018 47,065 52,690 47,878 53,177 3 Payable in foreign currencies 2,698 2,792 3,998r 4,120 4,495 4,341 4,053 4,299 4,381 By type 4 Financial claims 27,882 26,509 27,528 29,379 27,337 28,930 32,876 28,651 33,478 5 Deposits 20,080 17,695 15,681 16,404 15,842 16,764 18,720 17,218 22,053 6 Payable in dollars 19,080 16,872 15,146 15,847 15,203 16,153 18,245 1166,,660099 21,381 7 Payable in foreign currencies 1,000 823 535 557 639 611 475 660099 672 8 Other financial claims 7,802 8,814 11,847 12,975 11,495 12,166 14,156 11,433 11,425 9 Payable in dollars 6,910 7,890 10,655 11,788 10,172 10,978 13,096 10,266 10,338 10 Payable in foreign currencies 892 924 1,192 1,187 1,323 1,188 1,060 1,167 1,087 11 Commercial claims 17,380 18,564 21,353' 21,337 22,176 22.476 23,867 23,526 24,080 12 Trade receivables 14,468 16,007 18,390r 18,480 19,375 19,713 21,034 20,581 21,139 13 Advance payments and other claims 2,912 2,557 2,963r 2,857 2,801 2,763 2,833 2,945 2,941 14 Payable in dollars 16,574 17,519 19,082r 18,961 19,643 19,934 21,349 21,003 21,458 15 Payable in foreign currencies 806 1,045 2,271r 2,376 2,533 2,542 2,518 2,523 2,622 By area or country Financial claims 16 Europe 13,441 9,331 7,249 7,411 6,763 8,156 77,,667799 77,,227777 7,428 17 Belgium and Luxembourg 13 8 134 125 83 114 8866 6699 81 18 France 269 764 826 790 995 831 800 808 706 19 Germany 283 326 526 466 459 413 540 443 355 20 Netherlands 334 515 502 503 472 503 429 606 601 21 Switzerland 581 490 530 535 509 747 523 490 499 22 United Kingdom 11,534 6,252 3,535 3,853 3,127 4,440 4,436 3,919 4,482 23 Canada 2,642 1,833 2,032 2,294 3,080 3,164 3,801 4,064 3,929 24 Latin America and Caribbean 10,717 13,893 16,031 16,645 14,799 14,952 18,841 15,500 20,529 25 Bahamas 827 778 1,310 1,385 1,288 1,086 2,369 905 2,299 26 Bermuda 8 40 125 34 39 52 27 37 85 27 Brazil 351 686 654 672 466 411 520 487 460 28 British West Indies 9,056 11,747 12,536 13,281 11,993 12,271 14,880 13,274 16,771 29 Mexico 212 445 868 850 614 655 606 475 524 30 Venezuela 40 29 161 26 33 32 35 27 27 31 640 864 1,657 2,550 2,234 2,175 1,838 1,457 1,226 32 Japan 350 668 892 1,657 1,349 662 931 584 467 33 Middle Eastern oil-exporting countries2 5 3 3 5 2 19 141 4 5 34 Africa 57 83 99 76 74 87 249 77 64 35 Oil-exporting countries3 1 9 1 0 1 1 0 9 9 36 All other4 385 505 460 403 387 396 468 276 302 Commercial claims 37 Europe 8,193 8,451 9,105r 8,793 8,952 8,812 9,517 9,047 9,219 38 Belgium and Luxembourg 194 189 184 182 189 179 213 198 216 39 France 1,585 1,537 1,947 1,830 1,779 1,766 1,879 1,783 1,673 40 Germany 955 933 1,018 950 940 883 1,027 995 1,021 41 Netherlands 645 552 423 355 294 331 307 335 349 42 Switzerland 295 362 432 415 686 538 557 562 620 43 United Kingdom 2,086 2,094 2,311' 2,348 2,443 2,505 2,547 2,404 2,457 44 Canada 1,121 1,286 l,781r 1,870 1,875 1,906 1,988 2,006 1,982 45 Latin America and Caribbean 2,655 3,043 3,274r 3,560 3,900 3,960 4,117 4,146 4,340 46 Bahamas 13 28 11 13 18 34 9 17 21 47 Bermuda 264 255 182 222 295 246 234 202 207 48 Brazil 427 357 460r 419 500 471 612 678 765 49 British West Indies 41 40 71 58 67 49 83 59 85 50 Mexico 842 924 990' 1,011 1,048 1,136 11,,224433 1,114 1,112 51 Venezuela 203 345 293' 292 303 388 334488 294 317 52 4,591 4,866 5,979' 5,932 6,266 6,561 6,881 7,013 7,168 53 Japan 1,899 1,903 2,275' 2,447 2,490 2,586 2,623 22,,772255 2,805 54 Middle Eastern oil-exporting countries2 620 693 701' 654 608 605 690 669900 695 55 Africa 430 554 493' 487 472 445 454 475 460 56 Oil-exporting countries3 95 78 72' 88 78 59 67 75 73 57 Other4 390 364 721' 695 711 792 910 839 911 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 1995 1995 Transaction, and area or country 1993 1994 Jan.- Feb. Mar. Apr. May June July Aug.P Aug. U.S. corporate securities STOCKS 1 Foreign purchases 319,664 350,558 288,409 29,445R 35,332 30,082 38,769 45,429 42,444 41,908 2 Foreign sales 298,086 348,648 281,101 29,685 37,653 29,206 36,087 43,199 40,009 39,366 3 Net purchases, or sales (—) 21,578 1,910 7,308 —240r -2,321 876 2,682 2,230 2,435 2,542 4 Foreign countries 21,306 1,900 7,397 — 195r -2,291 877 2,692 2,238 2,443 2,565 5 Europe 10,658 6,717 2,555 —9' -1,304 165 381 -44 2,045 1,836 6 France -103 -201 -479 -21 -250 -80 -66 -79 261 17 7 Germany 1,642 2,110 -1,564 -55 -243 -261 -528 -224 8 -104 8 Netherlands -602 2,251 2,194 232 296 349 174 70 364 431 9 Switzerland 2,986 -30 -3,159 -78 -475 -673 -476 -201 -20 -847 in United Kingdom 4,559 840 6,420 —50R -309 1,125 1,382 243 1,445 2,330 11 Canada -3,213 -1,160 -1,476 28R -333 -197 75 -740 -425 -10 17 Latin America and Caribbean 5,719 -2,108 6,401 766 -243 570 -26 1,651 881 1,811 13 Middle East1 -321 -1,142 -384 -133 -73 59 -87 -99 -24 -5 14 Other Asia 8,198 -1,207 169 -851 -342 314 2,013 1,358 107 -961 15 Japan 3,825 1,190 -3,008 -541 -321 29 86 -466 141 -1,076 16 Africa 63 29 12 0 -10 -10 41 15 -5 17 17 Other countries 202 771 120 4 14 -24 295 97 -136 -123 18 Nonmonetary international and regional organizations 272 10 -89 -45 -30 -1 -10 -8 -8 -23 BONDS2 19 Foreign purchases 283,824 289,614R 184,901 22,809R 25,390 18,163 22,830 27,934 23,786 24,742 20 Foreign sales 217,824 229,665R 127,710 16,354 17,552 14,111 16,609 18,774 14,943 16,741 21 Net purchases, or sales (—) 66,000 59,949r 57,191 6,455r 7,838 4,052 6,221 9,160 8,843 8,001 22 Foreign countries 65,462 59,064r 57,580 6,509r 8,151 4,035 6,309 9,167 9,010 7,982 2.3 Europe 22,587 37,093R 44,589 6,037 4,976 2,271 4,944 7,772 6,221 5,561 74 France 2,346 242 110 296 -85 -874 27 44 7 538 75 Germany 887 657 3,647 526 -176 -83 -17 667 51 1,163 76 Netherlands -290 3,322 736 126 154 -37 191 -59 557 45 77 Switzerland -627 1,055 283 304 -61 -87 124 -130 317 -99 28 United Kingdom 19,686 31,592R 39,405 4,800 5,248 3,396 4,764 7,062 4,944 3,775 29 Canada 1,668 2,958 1,933 195R 289 184 277 159 169 415 30 Latin America and Caribbean 15,691 5,442 3,905 -480 1,285 889 678 289 1,145 754 31 Middle East1 3,248 771 1,499 119 328 326 -26 64 348 281 37 Other Asia 20,846 12,153 5,392 595 1,150 356 426 785 1,189 919 33 Japan 11,569 5,486 3,779 132 570 275 871 293 1,026 1,008 34 Africa 1,149 -7 108 -4 22 -11 -5 47 -13 64 35 Other countries 273 654 154 47 101 20 15 51 -49 -12 36 Nonmonetary international and regional organizations 538 885 -389 -54 -313 17 -88 -7 -167 19 Foreign securities 37 Stocks, net purchases, or sales ( —) -62,691 -47,236R -29,355 —1,112R —2,856R -2,135R —3,648R —4,379R -8,188 -6,868 38 Foreign purchases 245,490 386,942 224,662 27,158R 28,925R 24,519R 29,229' 29,067R 28,582 30,861 39 Foreign sales 308,181 434,178R 254,017 28,270R 31,781R 26,654R 32,877R 33,446R 36,770 37,729 40 Bonds, net purchases, or sales (-) -80,377 —9,212' -24,118 - L,793R - L,223R —824R -4,368R —7,473R -4,990 -2,648 41 Foreign purchases 745,952 848,288R 572,780 61,389R 79,170R 53,639 75,199R 96,154 66,737 72,217 42 Foreign sales 826,329 857,560R 596,898 63,182R 80,393R 54,463R 79,567R 103,627R 71,727 74,865 43 Net purchases, or sales (-), of stocks and bonds .... -143,068 -56,508r -53,473 -2,905r —4,079r -2,959r —8,016r -ll,852r -13,178 -9,516 44 Foreign countries -143,232 —57,028r -52,741 -2,741r -3,990r —3,115r —8,020r —11,541* -12,959 -9,343 45 Europe -100,872 —2,712R -27,374 -l,261R — 1,892' - L,893R -7,561R -5,857 -7,961 -2,540 46 Canada -15,664 —1,415' -5,853 853R — 1,154R - L,193R -f -1,425R -1,751 -996 47 Latin America and Caribbean -7,600 - 18,347R -3,117 -2,496 -L,304R 585R 47 R -512R -640 1,087 48 Asia -15,159 —24,276R -17,298 13 9 -558R -1,388 —2,941R -3,158 -7,231 49 Africa -185 -467 -190 -116 85 -14 -68 -67 -45 34 50 Other countries -3,752 -3,751 1,091 266 266R -42R 527 -739 596 303 51 Nonmonetary international and regional organizations 164 520 -732 -164 -89 156 4 -311 -219 -173 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, 2. Includes state and local government securities and securities of U.S. government Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • December 1995 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1995 1995 AArreeaa oorr ccoouunnttrryy 11999933 11999944 Jan.- Aug. Feb. Mar. Apr. May June July Aug." 1 Total estimated 23,552 78,796 134,335 14,103 9,211 6,400 14,519 22,578 31,865 26,081 2 Foreign countries 23,368 78,632 133,946 13,385 9,107 6,416 14,568 22,395 31,382 26,441 3 Europe -2,373 38,608 48,492 13,294 3,109 3,152 509 2,665 13,336 9,169 4 Belgium and Luxembourg 1,218 1,098 221 107 51 62 -512 -148 -53 580 5 Germany -9,976 5,709 233 -543 1,461 1,216 -4,129 -1,866 1,039 2,995 6 Netherlands -515 1,254 2,432 -239 -7 -243 40 1,078 883 -1,468 7 Sweden 1,421 794 520 97 30 -70 211 63 124 100 8 Switzerland -1,501 481 -232 165 -418 -173 353 9 206 -515 9 United Kingdom 6,197 23,438 38,204 10,448 3,099 2,251 5,203 1,359 7,315 7,950 10 Other Europe and former U.S.S.R 783 5,834 7,114 3,259 -1,107 109 -657 2,170 3,822 -473 11 Canada 10,309 3,491 4,235 1,486 434 -1,391 201 433 720 -825 12 Latin America and Caribbean -4,561 -10,179 19,197 -3,268 -2,332 3,212 3,803 5,368 513 11,265 13 Venezuela 390 -319 321 329 387 184 -16 121 -114 -359 14 Other Latin America and Caribbean -5,795 -20,493 12,515 -3,325 -3,358 2,189 2,425 55,,115588 1,034 5,364 15 Netherlands Antilles 844 10,633 6,361 -272 639 839 1,394 8899 -407 6,260 16 20,582 47,042 61,203 1,730 8,445 1,189 9,845 12,605 16,490 7,322 17 Japan 17,070 29,518 35,378 2,316 4,167 1,487 6,291 5,585 6,658 5,430 18 Africa 1,156 240 145 49 -9 -36 39 242 -1 -130 19 Other -1,745 -570 674 94 -540 290 171 1,082 324 -360 20 Nonmonetary international and regional organizations 184 164 389 718 104 -16 -49 183 483 -360 21 International -330 526 182 608 458 -294 356 -409 311 -140 22 Latin American regional 653 -154 244 199 -367 228 -528 629 99 -10 MEMO 23 Foreign countries 23,368 78,632 133,946 13,385 9,107 6,416 14,568 22,395 31,382 26,441 24 Official institutions 1,306 41,822 36,611 2,110 4,022 3,158r -1,774 10,850 16,780 -364 25 Other foreign 22,062 36,810 97,335 11,275 5,085 3,258r 16,342 11,545 14,602 26,805 Oil-exporting countries 26 Middle East2 -8,836 -38 5,660 -89 152 733 -1,063 815 3,582 1,890 27 -5 0 2 0 1 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 Oct. 31, 1995 Rate on Oct. 31, 1995 Rate on Oct. 31, 1995 Country Country Country Month Month Month effective effective effective Austria.. 3.5 Aug. 1995 Germany... 3.5 Aug. 1995 Norway 4.75 Feb. 1994 Belgium. 3.5 Aug. 1995 Italy 9.0 June 1995 Switzerland 2.0 Sept. 1995 Canada.. 6.18 Oct. 1995 Japan 0.5 Sept. 1995 United Kingdom 12.0 Sept. 1992 Denmark 5.0 Aug. 1995 Netherlands 3.5 Aug. 1995 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 1995 TTyyppee oorr ccoouunnttrryy 11999922 11999933 11999944 Apr. May June July Aug. Sept.r Oct. 1 Eurodollars 3.70 3.18 4.63 6.13 6.03 5.89 5.79 5.79 5.74 5.81 2 United Kingdom 9.56 5.88 5.45 6.64 6.64 6.63 6.73 6.74 6.71 6.69 3 Canada 6.76 5.14 5.57 8.16 7.56 7.07 6.69 6.62 6.66 6.66 4 Germany 9.42 7.17 5.25 4.58 4.49 4.43 4.46 4.35 4.09 4.00 5 Switzerland 7.67 4.79 4.03 3.33 3.29 3.09 2.77 2.79 2.67 2.15 6 Netherlands 9.25 6.73 5.09 4.60 4.41 4.21 4.14 4.02 3.85 3.88 7 France 10.14 8.30 5.72 7.60 7.29 7.04 6.31 5.81 5.86 6.73 8 Italy 13.91 10.09 8.45 10.94 10.38 10.91 10.93 10.45 10.36 10.74 9 Belgium 9.31 8.10 5.65 5.22 5.16 4.62 4.52 4.41 4.20 4.14 10 Japan 4.39 2.96 2.24 1.55 1.31 1.16 .91 .82 .56 .51 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 • December 1995 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1995 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999922 11999933 11999944 May June July Aug. Sept.' Oct. 1 Australia/dollar2 73.521 67.993 73.161 72.716 71.959 72.792 74.137 75.371 75.699 2 Austria/schilling 10.992 11.639 11.409 9.912 9.854 9.765 10.168 10.270 9.955 3 Belgium/franc 32.148 34.581 33.426 29.009 28.790 28.562 29.735 30.044 29.105 4 Canada/dollar 1.2085 1.2902 1.3664 1.3609 1.3775 1.3612 1.3552 1.3509 1.3458 5 China, P.R./yuan 5.5206 5.7795 8.6404 8.3370 8.3206 8.3207 8.3253 8.3374 8.3353 6 Denmark/krone 6.0372 6.4863 6.3561 5.5194 5.4604 5.4073 5.6060 5.6587 5.4912 7 Finland/markka 4.4865 5.7251 5.2340 4.3386 4.3134 4.2592 4.3170 4.3754 4.2781 8 France/franc 5.2935 5.6669 5.5459 4.9869 4.9172 4.8307 4.9727 5.0352 4.9374 9 Germany/deutsche mark 1.5618 1.6545 1.6216 1.4096 1.4012 1.3886 1.4456 1.4601 1.4143 10 Greece/drachma 190.81 229.64 242.50 228.46 226.56 225.45 232.38 235.65 232.65 11 Hong Kong/dollar 7.7402 7.7357 7.7290 7.7351 7.7356 7.7385 7.7416 7.7368 7.7317 12 India/rupee 28.156 31.291 31.394 31.418 31.404 31.385 31.592 33.310 34.656 13 Ireland/pound2 170.42 146.47 149.69 161.98 162.87 163.96 160.25 159.05 161.32 14 Italy/lira 1,232.17 1,573.41 1,611.49 1,652.78 1,639.75 1,609.71 1,607.18 1,613.41 1,605.69 15 Japan/yen 126.78 111.08 102.18 85.11 84.64 87.40 94.74 100.55 100.84 16 Malaysia/ringgit 2.5463 2.5738 2.6237 2.4684 2.4396 2.4500 2.4813 2.5124 2.5324 17 Netherlands/guilder 1.7587 1.8585 1.8190 1.5779 1.5686 1.5557 1.6195 1.6354 1.5846 18 New Zealand/dollar2 53.792 54.127 59.358 66.740 66.947 67.417 65.687 65.607 65.899 19 Norway/krone 6.2142 7.1009 7.0553 6.2980 6.2387 6.1710 6.3438 6.3943 6.2397 20 Portugal/escudo 135.07 161.08 165.93 148.40 147.63 145.88 149.88 152.11 148.94 21 Singapore/dollar 1.6294 1.6158 1.5275 1.3947 1.3953 1.3984 1.4116 1.4331 1.4231 22 South Africa/rand 2.8524 3.2729 3.5526 3.6574 3.6627 3.6404 3.6402 3.6616 3.6502 23 South Korea/won 784.66 805.75 806.93 764.43 763.88 760.05 768.88 772.04 767.20 24 Spain/peseta 102.38 127.48 133.88 123.22 121.71 119.71 123.45 125.41 122.51 25 Sri Lanka/rupee 44.013 48.211 49.170 49.558 50.210 50.899 51.227 52.547 52.539 26 Sweden/krona 5.8258 7.7956 7.7161 7.3072 7.2631 7.1749 7.2383 7.1227 6.8301 27 Switzerland/franc 1.4064 1.4781 1.3667 1.1693 1.1588 1.1556 1.1962 1.1868 1.1453 28 Taiwan/dollar 25.160 26.416 26.465 25.537 25.784 26.278 27.234 27.432 26.925 29 Thailand/baht 25.411 25.333 25.161 24.663 24.672 24.755 24.960 25.129 25.115 30 United Kingdom/pound2 176.63 150.16 153.19 158.74 159.48 159.52 156.68 155.90 157.79 MEMO 31 United States/dollar3 86.61 93.18 91.32 82.73 82.27 81.90 84.59 85.69 84.10 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 U.S. 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 1995 A76 SPECIAL TABLES—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 November 1994 February 1995 A68 February 1995 May 1995 A68 May 1995 August 1995 A68 August 1995 November 1995 A68 Assets and liabilities of U.S. branches and agencies of foreign banks September 30, 1994 February 1995 All December 31, 1994 May 1995 A72 March 31, 1995 October 1995 A68 June 30, 1995 November 1995 A72 Pro forma balance sheet and income statements for priced service operations March 31, 1992 August 1992 A80 June 30, 1992 October 1992 A70 March 31, 1995 August 1995 A76 June 30, 1995 October 1995 A72 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 Residential lending reported under the Home Mortgage Disclosure Act 1994 September 1995 A68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Index to Statistical Tables References are to pages A3-A66 although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Depository institutions Agricultural loans, commercial banks, 21, 22 Reserve requirements, 9 Assets and liabilities (See also Foreigners) Reserves and related items, 4, 5, 6, 13 Banks, by classes, 18-23 Deposits (See also specific types) Domestic finance companies, 36 Banks, by classes, 4, 18—23 Federal Reserve Banks, 11 Federal Reserve Banks, 5,11 Financial institutions, 28 Interest rates, 16 Foreign banks, U.S. branches and agencies, 23 Turnover, 17 Automobiles Discount rates at Reserve Banks and at foreign central banks and Consumer installment credit, 39 foreign countries (See Interest rates) Production, 47, 48 Discounts and advances by Reserve Banks (See Loans) Dividends, corporate, 35 BANKERS acceptances, 11, 12, 21-24, 26 Bankers balances, 18-23. (See also Foreigners) EMPLOYMENT, 45 Bonds {See also U.S. government securities) Eurodollars, 26 New issues, 34 Rates, 26 FARM mortgage loans, 38 Branch banks, 23 Federal agency obligations, 5, 10, 11, 12, 31, 32 Business activity, nonfinancial, 45 Federal credit agencies, 33 Business expenditures on new plant and equipment, 35 Federal finance Business loans (See Commercial and industrial loans) Debt subject to statutory limitation, and types and ownership of gross debt, 30 CAPACITY utilization, 46 Receipts and outlays, 28, 29 Capital accounts Treasury financing of surplus, or deficit, 28 Banks, by classes, 18 Treasury operating balance, 28 Federal Reserve Banks, 11 Federal Financing Bank, 33 Central banks, discount rates, 65 Federal funds, 7, 21, 22, 23, 26, 28 Certificates of deposit, 26 Federal Home Loan Banks, 33 Commercial and industrial loans Federal Home Loan Mortgage Corporation, 33, 37, 38 Commercial banks, 21, 22 Federal Housing Administration, 33, 37, 38 Weekly reporting banks, 21-23 Federal Land Banks, 38 Commercial banks Federal National Mortgage Association, 33, 37, 38 Assets and liabilities, 18-23 Federal Reserve Banks Commercial and industrial loans, 18-23 Condition statement, 11 Consumer loans held, by type and terms, 39 Discount rates (See Interest rates) Deposit interest rates of insured, 16 U.S. government securities held, 5, 11, 12, 30 Loans sold outright, 22 Federal Reserve credit, 5, 6, 11, 12 Real estate mortgages held, by holder and property, 38 Federal Reserve notes, 11 Time and savings deposits, 4 Federally sponsored credit agencies, 33 Commercial paper, 24, 26, 36 Finance companies Condition statements (See Assets and liabilities) Assets and liabilities, 36 Construction, 45,49 Business credit, 36 Consumer installment credit, 39 Loans, 39 Consumer prices, 45 Paper, 24, 26 Consumption expenditures, 52, 53 Financial institutions, loans to, 21, 22, 23 Float, 5 Corporations Profits and their distribution, 35 Flow of funds, 40-44 Security issues, 34, 65 Foreign banks, assets and liabilities of U.S. branches and Cost of living (See Consumer prices) agencies, 22,23 Credit unions, 39 Foreign currency operations, 11 Currency in circulation, 5, 14 Foreign deposits in U.S. banks, 5, 22 Customer credit, stock market, 27 Foreign exchange rates, 66 Foreign trade, 54 DEBITS to deposit accounts, 17 Foreigners Debt (See specific types of debt or securities) Claims on, 55, 58, 59, 60, 62 Demand deposits Liabilities to, 22, 54, 55, 56, 61, 63, 64 Banks, by classes, 18-23 Ownership by individuals, partnerships, and GOLD corporations, 22, 23 Certificate account, 11 Turnover, 17 Stock, 5, 54 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 Government National Mortgage Association, 33, 37, 38 REAL estate loans Gross domestic product, 51 Banks, by classes, 21, 22, 38 Terms, yields, and activity, 37 HOUSING, new and existing units, 49 Type of holder and property mortgaged, 38 Repurchase agreements, 7 Reserve requirements, 9 INCOME, personal and national, 45, 51, 52 Reserves Industrial production, 45, 47 Commercial banks, 18 Installment loans, 39 Depository institutions, 4, 5, 6, 13 Insurance companies, 30, 38 Federal Reserve Banks, 11 Interest rates U.S. reserve assets, 54 Bonds, 26 Residential mortgage loans, 37 Consumer installment credit, 39 Retail credit and retail sales, 39, 45 Deposits, 16 Federal Reserve Banks, 8 SAVING Foreign central banks and foreign countries, 65 Flow of funds, 40-44 Money and capital markets, 26 National income accounts, 51 Mortgages, 37 Savings institutions, 38, 39, 40 Prime rate, 25 Savings deposits (See Time and savings deposits) International capital transactions of United States, 53-65 Securities (See also specific types) International organizations, 55, 56, 58, 61,62 Federal and federally sponsored credit agencies, 33 Inventories, 51 Foreign transactions, 63 Investment companies, issues and assets, 35 New issues, 34 Investments (See also specific types) Prices, 27 Banks, by classes, 18—23 Special drawing rights, 5, 11, 53, 54 Commercial banks, 4, 18-23 State and local governments Federal Reserve Banks, 11, 12 Deposits, 21, 22 Financial institutions, 38 Holdings of U.S. government securities, 30 New security issues, 34 LABOR force, 45 Ownership of securities issued by, 21, 23 Life insurance companies (See Insurance companies) Rates on securities, 26 Loans (See also specific types) Stock market, selected statistics, 27 Banks, by classes, 18—23 Stocks (See also Securities) Commercial banks, 18-23 New issues, 34 Federal Reserve Banks, 5, 6, 8, 11, 12 Prices, 27 Financial institutions, 38 Student Loan Marketing Association, 33 Insured or guaranteed by United States, 37, 38 TAX receipts, federal, 29 MANUFACTURING Thrift institutions, 4. (See also Credit unions Capacity utilization, 46 and Savings institutions) 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 Mobile homes shipped, 49 UNEMPLOYMENT, 45 Monetary and credit aggregates, 4, 13 U.S. government balances Money and capital market rates, 26 Commercial bank holdings, 18-23 Money stock measures and components, 4,14 Treasury deposits at Reserve Banks, 5, 11, 28 Mortgages (See Real estate loans) U.S. government securities Mutual funds, 35 Bank holdings, 18-23, 30 Mutual savings banks (See Thrift institutions) Dealer transactions, positions, and financing, 32 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, 30, 31 OPEN market transactions, 10 Rates, 26 U.S. international transactions, 53-66 PERSONAL income, 52 Utilities, production, 48 Prices Consumer and producer, 45, 50 VETERANS Administration, 37, 38 Stock market, 27 Prime rate, 25 WEEKLY reporting banks, 18-23 Producer prices, 45, 50 Wholesale (producer) prices, 45, 50 Production, 45,47 Profits, corporate, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALAN S. BLINDER, Vice Chairman LAWRENCE B. LINDSEY 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 P. 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 and Ombudsman DAY W. RADEBAUGH, JR., Assistant Secretary1 FLINT BRAYTON, Assistant Director DAVID S. JONES, Assistant Director DIVISION OF BANKING STEPHEN A. RHOADES, Assistant Director SUPERVISION AND REGULATION CHARLES S. STRUCKMEYER, Assistant Director 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 DONALD L. KOHN, Director ROGER T. COLE, Deputy Associate Director DAVID E. LINDSEY, Deputy Director JAMES I. GARNER, Deputy Associate Director BRIAN F. MADIGAN, Associate Director HOWARD A. AMER, Assistant Director RICHARD D. PORTER, Deputy Associate Director GERALD A. EDWARDS, JR., Assistant Director VINCENT R. REINHART, Assistant Director STEPHEN M. HOFFMAN, JR., Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board LAURA M. HOMER, Assistant Director JAMES V. HOUPT, Assistant Director DIVISION OF CONSUMER JACK P. JENNINGS, Assistant Director AND COMMUNITY AFFAIRS MICHAEL G. MARTINSON, Assistant Director RHOGER H PUGH, Assistant Director GRIFFITH L. GARWOOD, Director SIDNEY M. SUSSAN, Assistant Director GLENN E. LONEY, Associate Director MOLLY S. WASSOM, Assistant Director DOLORES S. SMITH, Associate Director WILLIAM SCHNEIDER, Project Director, MAUREEN P. ENGLISH, Assistant Director National Information Center IRENE SHAWN MCNULTY, Assistant Director 1. On loan from the Division of Information Resources Management Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SUSAN M. PHILLIPS JANET L. YELLEN OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director SHEILA CLARK, EEO Programs Director DAVID L. ROBINSON, Deputy Director (Finance and Control) DIVISION OF HUMAN RESOURCES LOUISE L. ROSEMAN, Associate Director MANAGEMENT CHARLES W. BENNETT, Assistant Director JACK DENNIS, JR., Assistant Director DAVID L. SHANNON, Director EARL G. HAMILTON, Assistant Director JOHN R. WEIS, Associate Director JEFFREY C. MARQUARDT, Assistant Director ANTHONY V. DIGIOIA, Assistant Director JOHN H. PARRISH, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FLORENCE M. YOUNG, Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE CONTROLLER OFFICE OF THE INSPECTOR GENERAL BRENT L. BOWEN, Inspector General GEORGE E. LIVINGSTON, Controller DONALD L. ROBINSON, Assistant Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and BARRY R. SNYDER, Assistant Inspector General Budgets) 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

A72 Federal Reserve Bulletin • December 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 ALTERNATE MEMBERS EDWARD G. BOEHNE ROBERT D. MCTEER GARY H. STERN JERRY L. JORDAN ERNEST T. PATRIKIS STAFF DONALD L. KOHN, Secretary and Economist THOMAS E. DAVIS, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary WILLIAM G. DEWALD, Associate Economist JOSEPH R. COYNE, Assistant Secretary WILLIAM C. HUNTER, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID E. LINDSEY, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel FREDERIC S. MISHKIN, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel LARRY J. PROMISEL, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist LAWRENCE SLIFMAN, Associate Economist LYNN E. BROWNE, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL ANTHONY P. TERRACCIANO, President MARSHALL N. CARTER, Vice President 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, Durham, North Carolina, 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, Newark, New Jersey 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, Hillsborough, 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. HARRIS, Livingston, Montana WILLIAM W. ZUPPE, Spokane, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 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 1994. 157 pp. and include additional air mail costs: ANNUAL REPORT. Federal Reserve Regulatory Service, $250.00 per year. ANNUAL REPORT: BUDGET REVIEW, 1994-95. 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. INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. ANNUAL STATISTICAL DIGEST: period covered, release date, 440 pp. $9.00 each. number of pages, and price. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1981 October 1982 239 pp. $ 6.50 December 1986. 264 pp. $10.00 each. 1982 December 1983 266 pp. $ 7.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1983 October 1984 264 pp. $11.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1984 October 1985 254 pp. $12.50 1985 October 1986 231 pp. $15.00 1986 November 1987 288 pp. $15.00 EDUCATION PAMPHLETS 1987 October 1988 272 pp. $15.00 Short pamphlets suitable for classroom use. Multiple copies are 1988 November 1989 256 pp. $25.00 available without charge. 1980-89 March 1991 712 pp. $25.00 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 1994 December 1995 190 pp. $25.00 Businesses Series on the Structure of the Federal Reserve System The Board of Governors of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES The Federal Open Market Committee OF CHARTS. Weekly. $30.00 per year or $.70 each in the Federal Reserve Bank Board of Directors United States, its possessions, Canada, and Mexico. Else- Federal Reserve Banks where, $35.00 per year or $.80 each. Organization and Advisory Committees A Consumer's Guide to Mortgage Lock-Ins THE FEDERAL RESERVE ACT and other statutory provisions A Consumer's Guide to Mortgage Settlement Costs affecting the Federal Reserve System, as amended through A Consumer's Guide to Mortgage Refinancings August 1990. 646 pp. $10.00. Home Mortgages: Understanding the Process and Your Right REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL to Fair Lending RESERVE SYSTEM. How to File a Consumer Complaint ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— Making Deposits: When Will Your Money Be Available? Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Making Sense of Savings Vol. II (Irregular Transactions). 1969. 116 pp. Each vol- SHOP: The Card You Pick Can Save You Money ume $2.25. Welcome to the Federal Reserve 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

A75 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 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MARof general interest. Requests to obtain single copies of the full 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

A76 ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (PAYMENT MUST ACCOMPANY REQUESTS) Annual Annual Approximate Corresponding Period or date to Release number and title USPS fax release Bulletin which data refer rate rate days1 table numbers2 Weekly Releases H.2. Actions of the Board: $55.00 n.a. Friday Week ended Applications and Reports previous Received Saturday H.3. Aggregate Reserves of $20.00 $20.00 Thursday Week ended 1.20 Depository Institutions and previous the Monetary Base Wednesday H.4.1. Factors Affecting Reserves of $20.00 $35.00 Thursday Week ended 1.11,1.18 Depository Institutions and previous Condition Statement of Wednesday Federal Reserve Banks H.4.2. Weekly Consolidated Condition $20.00 $20.00 Friday Wednesday, one 1.26, 1.27, 1.28 Report of Large Commercial week earlier Banks in the Lfnited States H.5. Selected Borrowings in $20.00 $20.00 Wednesday Week ended 1.13 Immediately Available Funds Thursday of of Large Commercial Banks previous week H.6. Money Stock, Liquid Assets, $35.00 $90.00 Thursday Week ended 1.21 and Debt Measures Monday of previous week H.8. Assets and Liabilities of $30.00 $90.00 Friday Week ended 1.26 Commercial Banks in the previous United States Wednesday H.10. Foreign Exchange Rates $20.00 $20.00 Monday Week ended 3.28 previous Friday H.15. Selected Interest Rates $20.00 $20.00 Monday Week ended 1.35 previous Saturday Monthly Releases G.5. Foreign Exchange Rates $ 5.00 $ 5.00 First of month Previous month 3.28 G.6. Debits and Deposit Turnover at $ 5.00 $ 5.00 Twelfth of month Previous month 1.23 Commercial Banks G. 13. Selected Interest Rates $ 5.00 $ 5.00 First Tuesday of Previous month 1.35 month G. 15. Research Library—Recent No charge n.a. First of month Previous month Acquisitions G.17. Industrial Production and $15.00 n.a. Midmonth Previous month 2.12, 2.13 Capacity Utilization $ 5.00 $ 5.00 Fifth working day Second month 1.55, 1.56 G. 19. Consumer Installment Credit of month previous $ 5.00 $ 5.00 Fifth working day Second month 1.51, 1.52 G.20. Finance Companies of month previous Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 Annual Annual Approximate Corresponding Period or date to Release number and title USPS fax release Bulletin which data refer rate rate days1 table numbers2 Quarterly Releases E.2. Survey of Terms of Bank $ 5.00 $ 5.00 Midmonth of February, May, 4.23 Lending to Business March, June, August, and September, and November December E.7. List of OTC Margin Stocks No charge n.a. January, April, February, May, July, and August, and October November E.ll. Geographical Distribution of $5.00 $ 5.00 15th of March, Previous quarter Assets and Liabilities of June, Major Foreign Branches of September, and U.S. Banks December E.15. Agricultural Finance Databook $ 5.00 End of March, January, April, June, July, and September, and October December E.16. Country Exposure Lending $ 5.00 January, April, Previous quarter Survey July, and October Z. 1. Flow of Funds Accounts: $25.00 23rd of February, Previous quarter 1.57, 1.58 Seasonally Adjusted and May, August, Unadjusted and November Z.7. Flow of Funds Summary $5.00 $ 5.00 15 th of February, Previous quarter 1.59,1.60 Statistics May, August, and November Semiannual Release C.9. Balance Sheets for the U.S. $ 5.00 October and April Previous year Economy Annual Release C.2. Aggregate Summaries of Annual $ 5.00 February End of previous Surveys of Securities Credit June Extension 1. Please note that for some releases there is normally a certain variability in the release date because of reporting or processing procedures. Moreover, for all series unusual circumstances may, from time to time, result in a release date being later than anticipated. 2. The data in some releases are also reported in the Bulletin statistical appendix, n.a. Not available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Index to Volume 81 GUIDE TO PAGE REFERENCES IN MONTHLY ISSUES Issue Text "A" Pages Issue Text "A" pages Index to Index to tables tables January . 1-70 1-78 68-69 July 629- 756 1-78 68-69 February 71-218 1-86 76-77 August 757- 816 1-88 78-79 March .. 219-322 1-78 68-69 September 817- 916 1-86 76-77 April 323-406 1-78 68-69 October 917- 988 1-84 74—75 May 407-544 1-86 76-77 November 989-1064 1-86 76-77 June 545-628 1-80 68-69 December .... 1065-1175 1-77 68-69 The "A" pages consist of statistical tables and reference information. Statistical tables are indexed separately (see p. A68 of this issue). Pages Pages ADVERSE material supervisory determination, appeals Bank Holding Company Act of 1956—Continued process 435 Applications approved under—Continued American Association of Retired Persons 436 1st Jackson Bancshares, Inc 751 American Gas Association 20 215 Holding Co 1058 Annual Report 1994, publication 597 401 (k) Plan and ESOP of United States Trust Annual Report: Budget Review, 1994-95, publication 597 Company of New York and Affiliated Companies .. 1169 A. Wilbert's Sons Lumber and Shingle Co 401 Annuities, sale by banks, education campaign and A.N.B. Holding Company, Ltd 401 videotape availability 436, 941 Abess Properties, Ltd 912 Anti-tying restrictions, safe harbor 595 ABN AMRO Bank N.V., Amsterdam Zuid-Ooost, Argentina, Central Bank of 939 The Netherlands 1168 Articles ABN AMRO Holding N.V., Amsterdam Zuid-Ooost, Credit risk and the provision of mortgages to The Netherlands 1168 lower-income and minority homebuyers 989-1016 Ace Gas, Inc 751 Daylight overdraft fees and the Federal Reserve's Affiliated Community Bancorp, Inc 913 payment system risk policy 1065-77 Albina Community Bancorp 1059 FIMS: A new monitoring system for banking Allied Irish Banks, p.l.c., Dublin, Ireland 624, 912 institutions 1-15 Alpha Financial Group, Inc 65 Financial services used by small businesses: Evidence AMCORE Financial, Inc 62, 814 from the 1993 National Survey of Small Business Ameribank Bankshares, Inc 1164 Finances 629-67 Ameribank Corporation 751 German monetary targeting: A retrospective view 917-31 American Bancorporation 65 Home purchase lending in low-income neighborhoods American Bancorporation, Inc 526 and to low-income borrowers 71-103 American Bancshares, Inc 1058 American Community Bankshares, Inc 523 Household sector borrowing and the burden of debt ... 323-38 American National Corporation 319 Industrial production and capacity utilization: American River Holdings 751 A revision 16-26 Ames National Corporation 62 Monetary policy and open market operations ANB Corporation 401 during 1994 570-84 ANB Delaware Corporation 401 Monetary policy reports to the Congress 219-43, 757-74 Anchor Bancorp, Inc 319 Overview of derivatives disclosures by major Andover Bancorp of New Hampshire, Inc 985 U.S. banks 817-31 Andover Bancorp, Inc 985 Profits and balance sheet developments at U.S. Andrews Bancshares, Inc 910 commercial banks in 1994 545-69 Andrews Delaware Financial Corporation 910 Treasury and Federal Reserve foreign exchange Associated Banc-Corp 319, 910, 912 operations 244-50, 585-91, 832-37, 1078-85 Associated Illinois Banc-Corp 910 U.S. International transactions in 1994 407-18 Aurora Holding Company 317 ATM identification, interim rule to Regulation E 32 Baltz Family Partners, Ltd 523 Automated clearinghouse access, proposed action 940 Banc One Corporation 1167 Banc One Funding Corporation 1167 BANK failures, article on monitoring and prevention 1 Banc One Payment Services, L.L.C 1167 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 Pages Pages Bank Holding Company Act of 1956—Continued Bank Holding Company Act of 1956—Continued Applications approved under—Continued Applications approved under—Continued BancBoston Holdings, Inc 316 Citicorp 1167 BancFirst Ohio Corp 752 Citizens Bancorp of Delaware, Inc 1164 BancMidwest Corporation 1164 Citizens Bancshares Corporation 912, 1058 Banco de Sabadell, S.A., Sabadell, Spain 754 Citizens Bancshares, Inc 63 Banco Santander, S.A., Madrid, Spain 401 Citizens Community Bancshares, Inc 1164 Bancock Corporation 317 Citizens Independent Bancorp, Inc 401 BancorpSouth Inc 403 Citizens National Bancshares of Bossier, Inc 1058 BancTenn Corporation 987 Citizens National Bancshares, Inc 1164 Bank of Boston Corporation 316 Citizens National Corporation 317 Bank of Colorado Holding Company 752 City National Bancshares, Inc 912 Bank of Kentucky Financial Corporation 403 Clinton Bancorp, Inc 63 Bank of New York Company, Inc 909 CNB Bancorp, Inc 1164 Banner Bancorp, Ltd 403 CNB Bancshares of Victoria, Inc 1164 BanPonce Corporation 320 CNB Bancshares, Inc 317 Banque Nationale de Paris, Paris, France 1164 Colfax Bancshares, Inc 1058 Barlow Banking Corporation 985 Colonial BancGroup, Inc 987 Comerica California Incorporated 1058 Baraett Banks, Inc 403, 624, 1058 Comerica Incorporated 1058 Barry Limited Partnership 401 Comerica Texas Incorporated 1058 BayBanks, Inc 1164 Commerce Bancshares, Inc 317, 622, 752 Baylor Bancshares, Inc 813 Commerce Bankshares, Inc 813 Baylor/Delaware Corp 813 Commercial Bancgroup, Inc 912 BB&T Bancshares Corp 752 Commercial Bancshares, Inc 401 Beaman Bancshares, Inc 1058 Commercial Bank of Mott Employee Stock Bellevue Service Company 63 Ownership Plan and Trust 1058 Bellevue State Bank Employee Stock Ownership Commerzbank AG, Frankfurt, Germany 1060 Plan 63, 65 Community Bancshares, Inc. Employee Stock Benjamin Franklin Bancorp, M.H.C 524 Ownership Plan 622 BJ Morgan Bancshares, Inc 524 Community Capital Corporation 813 Blumberg BancUnits, Limited Partnership 752 Community Financial Corporation 752 Blumberg Family Partnership, Limited Partnership .... 752 Community First BancShares, Inc 317 Boatmen's Bancshares, Inc 317, 524, 1058 Community First Bankshares, Inc 63, 401, 752, 986 Boatmen's-Illinois, Inc 317 Community Group, Inc 622 BOK Financial Corporation 813 Community National Corporation 912 Brannen Banks of Florida, Inc 754 Community Trust Financial Services Corporation 987 Brazosport Corporation 754 Community Bancorp, Inc 401 Brazosport Corporation-Nevada, Inc 754 Confluence Bancshares Corporation 1058 Bremer Financial Corporation 525 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Bridger Company 401 Rabobank Nederland, Utrecht, The Netherlands . 403, 912 Brill Bancshares, Inc 622 Country Bank Shares Corporation 403 Byron State Inc 401 Country Bank Shares, Inc 1058 Cabot Bankshares, Inc 320 CRACO, Inc 752 Caldwell Holding Company 1164 CRB Financial Corp 622 Camden National Corporation 1169 Crestar Financial Corporation 320, 1167 Camino Real Bancshares, Inc 1164 CSB Financial Group, Inc 910 Camino Real Delaware, Inc 1164 Cullen/Frost Bankers, Inc 524 Campello Bancorp 401 Dacotah Banks, Inc 751, 985 Campello Co-operative Bank 401 Dakotah Bank Holding Co 316 Capital Bancorporation, Inc 624 Danny Management, Inc 622 Capitol Bankshares, Inc 910 Dartmouth Capital Group, Inc 1167 Carlinville National Bank Shares, Inc 1167 Dartmouth Capital Group, L.P. 1167 Carolina Community Bancshares, Inc 1164 Dauphin Deposit Corporation 403 Carroll County Bancshares Inc 1167 Davis Bancshares, Inc 910 Cass Commercial Corporation 624 Decatur Investment, Inc 63 CBI-Illinois, Inc 622 Delhi Bank Corp 63 CCB Financial Corporation 400 Dentel Bancorporation 1058 CENIT Bancorp, Inc 910 Deposit Guaranty Arkansas Corporation 986 Centennial Holdings, Ltd 1060 Deposit Guaranty Corporation 524, 986 Central Bancompany, Inc 813, 910 Deutsche Bank, AG, Frankfurt, Federal Republic of Central Corporation 985 Germany 526, 624, 814 Central Illinois Bancorp, Inc 1060 Draper Bancorp 1164 Central Louisiana Capital Corporation 403, 525 Duke Financial Group, Inc 752 Centura Banks, Inc 752 Eastside Holding Corporation 910 Century South Banks, Inc 1164 CFX Corporation 622 Eiden Interests, Ltd 402 Chambers Bancshares, Inc 622 Eitzen Independents, Inc 403 Charter Bancshares, Inc 66 Elgin Bancshares, Inc 402 Chase Manhattan Corporation 524 Ercil P. and Lee Nell Phillips Charitable Remainder Chase Manhattan National Holding Corporation 524 Unitrust 1058 Chatuge Bank Shares, Inc 986 ESB Bancorp, Inc 623 Chemical Banking Corporation 624 Estes Park Bank Restated Employee Stock Ownership Chittenden Corporation 401 401(k) Plan & Retirement Trust 402 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Federal Reserve Bulletin • December 1995 Pages Pages Bank Holding Company Act of 1956—Continued Bank Holding Company Act of 1956—Continued Applications approved under—Continued Applications approved under—Continued Executive Auto Lease, Inc 755 First United of Texas, Inc 62 F&A Financial Company 1164 Firstar Bank Illinois 912 F&M Bancorporation 1059 Firstar Corporation 317, 320, 402, 752 Fairbanco Holding Company, Inc., ESOP 63 Firstar Corporation of Iowa 317 Falcon Bancshares, Inc 63 Firstar Corporation of Minnesota 320, 402 Farmers & Merchants Bank Employee Stock Firstar Corporation of Wisconsin 752 Ownership Plan 813, 814 FirstBancorp, Inc 986 Farmers Bancshares, Inc 1165 FirstBank Holding Company of Colorado 986 FBD Holding Company 623 FirstBank Holding Company of Colorado Employee FBOP Corporation 317 Stock Ownership Plan 63, 986, 1059 FCFT, Inc 623 Firstbank of Illinois Co 1059 FCNBCorp 1057 Fleet Financial Group, Inc 754 FCT Bancshares, Inc 1059 Flint Creek Holding Company 63 FFB Participacoes e Servicos, S.A., Funchal, Foursquare Cornerstone, Inc 911 Portugal 401 Foxdale Bancorp 524 Fifth Third Bancorp 65, 524, 910 Frandsen Financial Corporation 63 Fifth Third Trust Co. & Savings Bank, FSB 910 Franklin Bancorp, Inc 63 Financial Trust Corp 1059 FSB Bancshares of Delaware, Inc 1165 Finger Interests Number One, Ltd 66 FSB Bancshares, Inc 1165 First American Corporation 754, 1167 FSB Corp 1165 First Bancorp, Inc. 525 Galatia Bancorp, Inc 63 First Bank System, Inc 318, 402, 1169 General Bancshares, Inc 911 First Banks, Inc 65, 317, 402, 987 Georgia Bancshares, Inc 813 First Bankshares, Inc 910 Gibbon Exchange Company 751 First Business Bancshares, Inc 912 Gillmor Financial Services, Inc 526 First Central Holdings, Inc 1059 GNB Bancorporation 909 First Centralia Bancshares, Inc 524 Golden Bancshares, Inc 623 First Citizens Bancorporation of South Carolina, Inc. . 910 Great Southern Bancorp 986 First Citizens BancShares, Inc 63, 524 GreatBanc, Inc 752 First Commerce Corporation 1057 Greater Brazos Valley Bancorp, Inc 813 First Commercial Corporation 984 Greater Brazos Valley Delaware Bancorp, Inc 813 First Community Bank Group, Inc 623 Greater Delaware Valley Holdings, A Mutual First Dakota Financial Corporation Employee Stock Company 402 Ownership Plan 910 Greater Rome Bancshares, Inc 623 First Delaware Bancorp, Inc 525 Gulf West Banks, Inc 63 First Empire State Corporation 1057 Habersham Bancorp 623 First Fidelity Bancorporation 402 Hansen-Lawrence Agency, Inc 753 First Financial Bancorp 752, 1062 Harrell Bancshares, Inc 1165 First Hawaiian, Inc 912, 987 Harris Taubman Financial Corporation 986 First Interstate BancSystem Of Montana, Inc 623 Haugo Bancshares, Inc 65 First Mariner Bancorp 752 Heart of Georgia Bancshares, Inc 1165 First Maryland Bancorp 624 Heartland Financial USA, Inc 911 First Michigan Bank Corporation 402 Heritage Bancorp, Inc 63, 318 First Midwest Bancorp, Inc 1165, 1167 HF Limited Partnership 318 First Mountain Company 752 ffiberaia Corporation 623, 1060, 1165 First Mutual Bancorp, Inc 755 Hoeme Family Partnership 402 First National Bancorp 625 Home Savings Bank, SSB Employee Stock First National Bancshares, Inc., ESOP and 401 (k) Ownership Plan 1165 Trusts 1165 Horizon Bancshares, Inc 63 First National Corporation 911 HSBC Holdings B.V., Amsterdam, The Netherlands .. 1060 First National Corporation North Dakota 912 HSBC Holdings pic, London, England 1060 First National Corporation of Ardmore, Inc 986 Huxley Bancorp 320 First National of Nebraska, Inc 400, 751, 985 IBW, Inc 524 First of America Bank Corporation 65, 403 Ida Grove Bancshares, Inc 524, 986, 987 First Paducah Bancshares of Delaware, Inc 1165 IJB Financial Corp 813 First Paducah Bancshares of Texas, Inc 1165 Independent Bancorp, Inc 524 First Peoples Bankshares, Inc 911 Intervest Bancshares Corporation 913 First Security Bancorp 752 InterWest Bancorp, Inc 911 First Security Corporation 1060 Investors Financial Services Corp 1165 First Southern Bancshares, Inc 752 ISB Financial Corporation 524, 526 First Southern Holding Bancorp, Inc 911 Jacksonville Bancorp, M.H.C 623 First State Bancorp of Monticello, Inc., Employee Jacob Schmidt Company 526 Stock Option Plan 625 JDOB, Inc 1060 First State Bancorp, Inc 1059 JSBC Holdings pic, London, United Kingdom 814 First State Bancshares, Inc 318 Keene Bancorp, Inc., 401 (k) Employee Stock First State Banking Corporation 912 Ownership Plan and Trust 911 First Sterling Bancshares, Inc 911 Kensington Bancorp, Inc 1059 First Tennessee National Corporation 402 Key Bancshares of Wyoming 754 First Union Corporation 403, 754, 814 KeyCorp 63, 318, 404, 754 First United Bancorporation 320 Kidd Partners, Ltd 402 First United Bancshares, Inc 62, 1057 L.B.S. McMullan Limited Partnership 524 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Volume 81 A81 Pages Pages Bank Holding Company Act of 1956—Continued Bank Holding Company Act of 1956—Continued Applications approved under—Continued Applications approved under—Continued Lake Elmo Bancshares, Inc 1165 Overland Bancorp, Inc 623 Laurel Capital Group, Inc 210 Overton Delaware Corporation 1166 Lexington Holding, Inc 913 Overton Financial Corporation 1166 Liberty Bancshares, Inc 1166 Paladon Investments, Ltd 316 Libertyville Bancorp, Inc 1059 Paladon Management Co., Inc 316 Lima Bancshares, Inc 623 Palmer National Bancorp, Inc 404 Linn Holding Company, Inc 402 Panhandle Aviation, Inc 813 Lisco State Company 909 Park Bank Corporation of Duluth 1166 Longview Capital Corporation 402 Pea River Capital Corporation 318 Maedgen & White, Ltd 1059, 1061 Peoples Bancorp of Delaware, Inc 525 Malvern Bancorporation 1166 Peoples Bancorp, Inc 525 Marblehead Bancorp 1166 Peoples Holding Company 987 Marshall & Ilsley Corporation 318, 913 Peoples Independent Bancshares, Inc 753 Mason-Dixon Bancshares, Inc 911 Peoples of Fleming County Bancorp, Inc 1166 MBNA Corporation 1061 Persons Banking Company 525 Mediapolis Bancorporation 63 Philipps Investment Company Limited MeesPierson N.V., Amsterdam and Rotterdam, Partnership 318, 1060 The Netherlands 1168 Philipps Investments Limited Partnership 319 Mellon Bank Corporation 624, 814, 1168 Pikeville Acquisition Corp 753 Menard Bancshares, Inc 318 Pikeville National Corporation 753, 1060, 1168 Mercantile Bancorporation Inc 623, 624, 813, 814 Pinnacle Bancorp, Inc 1166 Mercantile Bancorporation Inc. of Arkansas 623 Pinnacle Banc Group, Inc 64 Merchants Bancorp, Inc 1166 Pioneer Bancshares, Inc 1166 Mid Am, Inc 814 Plains Capital Corporation 1059, 1061 Midland Bancorporation, Inc 1059 Platte Valley Cattle Company 1060 MidWest Bancorporation, Inc 1168 Pleasant Hope Bancshares, Inc 753 Minnesota Valley Bancshares, Inc 63 PNC Bancorp, Inc 1169 Mission-Heights Management Company, Ltd 318 PNC Bank Corp 1169 MNB Bancshares, Inc 524 Pointe Financial Corporation 754 Morrill Bancshares, Inc 524 Pony Express Bancorp, Inc 911 Mott Bankshares, Inc 1058 Premier Bancshares, Inc 753 Moundville Bancshares, Inc 755, 911 Premier Bankshares Corporation 64, 320 Mountain Bancshares, Inc 753, 913 Premier Financial Bancorp, Inc 1166 Mountain Parks Financial Corp 753 Professional Bancorp 624 MSB Holding Company 754 Provident Bancorp, Inc 65, 1061 MWN Corporation, d.b.a. CCB Services 814 Ramsey Financial Corporation 1061 Nashville Holding Company 404 Randall Bancorp, Inc 1166 National Bancorp, Inc 524 Randall Holding Company, Inc 64 National City Bancshares, Inc 524, 624, 987 Raritan State Bancorp, Inc 64 National Commerce Bancorporation 913 Regency Bancorp 64 National Commerce Corporation 814 Regions Corporation 64 National Westminster Bancorp, Inc 1166 Regions Financial Corporation 64, 402, 624, 913 National Westminster Bancorp NJ 1166 Republic Security Financial Corporation 1166 National Westminster Bank Pic, Rice Insurance Agency, Inc 1060 London, England 404, 814, 1166 Riverside Acquisition Corporation 64 NationsBank Corporation 66 Riverside Bancshares, Inc 403 NatWest Holdings Inc 404, 1166 Riverway Holdings of Delaware, Inc 64 NBD Bancorp, Inc 624, 1059, 1061 Riverway Holdings, Inc 64 NBD Illinois, Inc 624 RNYC Holdings Limited, Gibraltar 64 New Central Illinois Financial Co., Inc 753 Royal Bancshares of Pennsylvania, Inc 813 New England Community Bancorp, Inc 986 Saban S.A., Panama 64 New Era Bancorporation, Inc 754, 1061 Security Richland Bancorporation 753 New York Mills Bancshares, Inc 1061 Security State Agency of Aitkin, Inc 320 North Fork Bancorporation, Inc 753 Security State Bank Holding Company 1060 Northeast Federal Corp 319 Shamrock Bancshares, Inc 1166 Northeast Portland Community Development 1059 Shawmut National Corporation, Boston, Northern Plains Investment, Inc 911 Massachusetts 319 Northern Trust Corporation 985 Shawmut National Corporation, Hartford, Northwest Bancorp, MHC 1166 Connecticut 319, 1061 Norwest Corporation 64, 65, 318, 320, 402, Shorebank Corporation 404, 986 404, 524, 623, 624, 753, Sidell Bancorp, Inc 624 911,913, 1059, 1061, 1168 Signature Bancshares, Inc 400 Norwest Financial Special Services, Inc 65 Signature Delaware Financial Corporation 400 Norwest Financial, Inc 65 Signet Banking Corporation 316, 751 Norwood Associates II 1059 Simmons First National Corporation 400, 909 Old National Bancorp 400, 523, 984, 1057, 1163 SN, Ltd 64 Old Second Bancorp, Inc 623 SNB Bancshares, Inc 911 Olympia Bancorporation, Inc., Employee Stock SNB Corporation 911 Ownership Plan 1059 Societe Generale, Paris, France 404, 754 Omega Financial Corporation 911 South Banking Company 986 Otto Bremer Foundation 525 South Pointe Financial Corporation 64 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 Federal Reserve Bulletin • December 1995 Pages Pages Bank Holding Company Act of 1956—Continued Bank Holding Company Act of 1956—Continued Applications approved under—Continued Applications approved under—Continued South Trust Corporation 523 Wells Fargo & Company 1062 South Valley Bancorporation 754 Wes-Tenn Bancorp, Inc 319 Southeast Bancorp of Texas, Inc 1061 West Bancorp, Inc 319 Southern Bancshares, Inc 911 West Bend Bancorp 987 Southern Financial Bancorp, Inc 1166 West Plains Investors, Inc 525 Southern National Banks, Inc 65 West Town Bancorp, Inc 404 SouthTrust Corporation 751, 985 Westamerica Bancorporation 64, 623 SouthTrust of Florida, Inc 751 Western Dakota Holding Company 1060 SouthTrust of Georgia, Inc 812 Western Oklahoma Financial Services, Inc 813 Southwestern Bancshares, Inc 911 Whipple Family Limited Partnership 404 Southwestern Delaware Financial Corporation 911 Whitcorp Financial Company 912 Spencer Bancorporation, Inc 1061 White Pine Bancorp Inc 1167 Standard Chartered Bank, London, England 1062 Whitewater Bancshares, Inc 753 Standard Chartered Holdings Limited, London, Whitley Acquisition Corp 1060 England 1062 Whitney Corporation of Iowa 1168 Standard Chartered PLC, London, England 1062 Wilmot Bank Holding Company 525 State Bank Employees Stock Ownership Plan 525 Windsor Bancshares, Inc 813 Stearns Financial Services, Inc., Employee Stock Winton Jones Limited Partnership 319 Ownership Plan 320 Wisconsin Bank Services, Inc 913 Stichting Administratiekantoor ABN AMRO Holding, Withee Bank Shares, Inc 1062 Amsterdam Zuid-Ooost, The Netherlands 1168 Orders issued under Stichting Prioriteit ABN AMRO Holding, Amsterdam A.N.B. Holding Company, Ltd 212 Zuid-Ooost, The Netherlands 1168 ABN AMRO Bank N.V., Amsterdam, Stine Family Partnership 623 The Netherlands 182, 1134 Stratford Bancshares of Delaware, Inc 65 ABN AMRO Holding N.V., Amsterdam, Stratford Bancshares, Inc 65 The Netherlands 182, 1134 Suburban Illinois Bancorp, Inc 753 ABN AMRO North American, Inc 182 Summit Financial Corporation 65, 754, 913 Abrams Centre Bancshares, Inc 42 Sun Banks, Inc 909, 1163 Alpha Bancorp 480 Sun Capital Bancorp 753 Altus NBC Corporation 207 SunTrust Banks, Inc 400, 909, 985, 1057, 1163 Ameribanc, Inc 608 Swiss Bank Corporation, Basle, Switzerland 624, 913 American Bancshares, Inc 208 Synovus Financial Corp 403, 525 Associated Banc-Corp 212 TB&C Bancshares, Inc 403, 525 Banc One Corporation 491, 492 Texas Bancorp Shares, Inc 1167 Banco Santander, S.A., Madrid, Spain 212, 501, 1139 Texas Bancshares Subsidiary Corporation, Inc 403 Bank of Ireland First Holdings, Inc 511 Texas Bancshares, Inc 403 Bank of Ireland, Dublin, Ireland 511 Texas Financial Bancorporation, Inc 525 Bank of Kentucky Financial Corporation 208 Thomasville Bancshares, Inc 1060 Bank of Montreal, Toronto, Canada 212 Tilden Bancshares, Inc 319 Bank of Tokyo, Ltd., Tokyo, Japan 279 Todd County Agency, Inc 623, 1168 Bank South Corporation 207, 1116 Toronto-Dominion Bank, Toronto, Canada 526 BankAmerica Corporation 212 Towne Bancorp, Inc 986 Bankmont Financial Corp 212 Trenton Bankshares, Inc 912 Banque Nationale de Paris, Paris, France 386 Triangle Bancorp, Inc 319 Banterra Corp 212 Trust Company of Georgia 1163 Barnett Banks, Inc 207, 212 Turner Bancshares, Inc 623 Battle Creek State Company 281 U.S. Bancorp 400 Bay Bancorporation 791 Union Bancorporation 624 BayBanks, Inc 723 Union Bancshares, Inc 319 BB&T Financial Corporation 207 Union Bank of Switzerland, Zurich, Switzerland 404 Berlau Bancshares, Inc 208 Union Illinois Company Employee Stock Berliner Handels-und Frankfurter Bank, Frankfurt Ownership Trust 753 am Main, Germany 390 Union-Calhoun Investments, Ltd 754 BNCCORP, Inc 295 Unison Bancorp, Inc 1167 Boatmen's Bancshares, Inc 213, 299 United Bancshares, Inc 985 BOK Financial Corporation 1052 United Community Banks, Inc 986 California Bancshares, Inc 208 United Security Bancorporation 1168 Canadian Imperial Bank of Commerce, Toronto, United Valley Bancorp, Inc 525 Ontario, Canada 878 Vail Bank 753 Capital City Bancshares, Inc 208 Valley Financial Corporation 64 Carbon County Holding Company 504 ValliCorp Holdings, Inc 1167 Casey Bancorp, Inc 208 Valrico Bancorp, Inc 623 CBI-Illinois, Inc 376 Vectra Banking Corporation 1167 Centennial Holdings, Ltd 208 Victoria Bankshares, Inc 912 Centura Banks, Inc 208 Victoria Financial Services, Inc 912 Century Capital Financial, Inc 208 Wachovia Corporation 812, 985 Century Capital Financial-Delaware, Inc 208 Warren County Bancshares, Inc 525 Century South Banks, Inc 208 Watford City Bancshares, Inc 912 Chadwick Bancshares, Inc 213 Waupaca Bancorporation, Inc 403 Charles Henderson Trust 873 WCN Bancorp 1168 Charter Bancorporation, Inc 213 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Volume 81 A83 Pages Pages Bank Holding Company Act of 1956—Continued Bank Holding Company Act of 1956—Continued Orders issued under—Continued Orders issued under—Continued Chase Manhattan Corporation 467, 883 Henderson Bancshares, Inc 873 Chemung Financial Corporation 208 Hibernia Corporation 215 Cheyenne Banking Corporation 375 HSBC Holdings BV, Amsterdam, China Trust Capita] B.V., Amsterdam, The Netherlands 728, 1037, 1044 The Netherlands 155 HSBC Holdings pic, London, China Trust Holdings Corp 155 United Kingdom 728, 1037, 1044 China Trust Holdings, N.V., Curacao, Netherlands Huntington Bancshares Florida, Inc 599 Antilles 155 Huntington Bancshares Incorporated 47, 598 Cho Hung Bank, Seoul, Korea 475 Huntington Bancshares Kentucky, Inc 47 Citicorp 164 Illinois Financial Services, Inc 480 CNB Bancshares, Inc 166, 208, 213 Industrial Bank of Japan, Limited, Tokyo, Japan 731 Coal City Corporation 283 Investors Banking Corporation 483 Colonial BancGroup, Inc 208 Irving National Bancshares, Inc 484 Comerica Incorporated 475 Johnson International, Inc 507 Commerce Bancshares, Inc 376 KeyCorp 160, 286, 491, 492 Commercial Bancorp 378 Keystone Financial, Inc 207 Commerzbank Aktiengesellschaft, Frankfurt, LCS Bancorp, Inc 210 Germany 213 Lone Star National Bancshares-Texas, Inc 717 Community Bancshares of Delaware, Inc 209 Lowndes Bancshares, Inc 213 Community Bancshares of Mississippi, Inc 209 M&I Data Services, Inc 213 Community Bancshares, Inc 209 M&L Holding Company 210 Community Bankshares, Inc 209 Malmo Bancorp, Inc 210 Community First Bankshares, Inc 209 Manufacturers National Corporation 283 Community First Financial, Inc 209 Marine Midland Bank 1044 Compass Bancshares, Inc 207 Marine Midland Banks, Inc 1037, 1044 Conrad Company 209 Marshall & Ilsley Corporation 213, 795 Consumers Bancorp, Inc 209 Mellon Bank Corporation 605 CoreStates Financial Corp 491, 492 Mercantile Bancorporation, Inc 180, 608 Corporation Bancaria de Espana, Madrid, Spain 598 Mercantile Bankshares Corporation 1034 Credit Commercial de France S.A., Paris, France 390 Mercantile Financial Enterprises, Inc 795 Credit Suisse, Zurich, Switzerland 46, 803 Merchants Bancorp of Pennsylvania, Inc 210 CS Holding, Zurich, Switzerland 46, 803 Merit Holding Corporation 210 Dakota Community Bancshares, Inc 209 Mid Am, Inc 210, 214 Dakota County Bancshares, Inc 209 MNC Acquisition Co., Melbourne, Australia 1154 Dutton Bancorporation, Inc 209 N.S. Bancorp, Inc 215 Farmington Bancorp 792 National Americas Holding Limited, London, Farmington Finance Corporation, Tortola, England 1153 British Virgin Islands 792 National Australia Bank Limited, Melbourne, FBOP Corporation 209 Australia 1153 FCNB Corp 207 National Australia Group Limited, London, England .. 1153 Fifth Third Bancorp 603 National Bank of Canada, Montreal, Quebec, Canada . 181 Fifth Third Bank of Northeastern Ohio 603 National City Corporation 491, 492, 807, 809 First Bancorporation of Ohio 213 National Equities Limited, Melbourne, Australia 1153 First Bancshares of Valley City, Inc 286 National Westminster Bancorp, Inc 210 First Bank System, Inc 169 National Westminster Bancorp NJ 210 First Citizens Bancshares, Inc 207 National Westminster Bank Pic., London, England .... 210 First Commerce Corporation 379, 793, 1033 NationsBank Corporation 207, 214, 1042, 1105, 1121 First Deposit Bancshares, Inc 213 NatWest Holdings Inc 210 First International Bancorp America 156 NB Holdings, Inc 1105 First International Bancorp Texas, Inc 156 New American Bank Holding Corporation 163 First Interstate Bancorp 207 New Prosperity Banking Corporation 210 First Interstate Bank of California 207 North Fork Bancorporation, Inc 509, 734 First Mid-Illinois Bancshares, Inc 209 Northern Bankshares, Inc 214 First National Company 805 Northern Trust Corporation 486, 797 First National of Colorado, Inc 209 Northern Trust of Florida Corporation 486 First National of Nebraska, Inc 209 Norwest Corporation 210, 214, 733, 974, 1128, 1130 First NH Bank 511 Oak Bancorporation 210 First of America Bank Corporation 213 Ogden Bancshares, Inc 719 First Place Financial Corporation 716 Old Kent Financial Corporation 211 First Security Bankshares, Inc 209 One Valley Bancorp of West Virginia, Inc 214 First Southeastern BancGroup, Inc 210 PAB Bankshares, Inc 214 First Union Corporation 207, 726, 1042, 1118, 1143 Peak Banks of Colorado, Inc 289 First Virginia Banks, Inc 213 Peoples Trust of 1987 211 Firstar Corporation 209 Pilot Bancshares, Inc 874 Florida Gulfcoast Bancorp, Inc 210 Pioneer Bancshares, Inc., Employee Stock Fourth Financial Corporation 156, 210 Ownership Plan 211 Fulton Financial Corporation 970 PNC Bank Corp 214, 491, 492 Hancock Holding Company 210 Principal National Bancorp, Inc 211 HCB Bancorp 210 Raddatz Family Limited Partnership 211 Hemisphere Financial, Ltd., Road Town, Regions Financial Corporation 44 British Virgin Islands 795 Republic Bancorp, Inc 214 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 Federal Reserve Bulletin • December 1995 Pages Pages Bank Holding Company Act of 1956—Continued Bank Merger Act—Continued Orders issued under—(Continued Applications approved under—Continued Republic New York Corporation 214 Crestar Bank MD 1170 RNYC Holdings Limited, Marina Bay, Gibraltar 214 Dakota County State Bank 216 Rockcastle Bancorp, Inc 211 Enterprise Bank and Trust Company 526 Roxton Corporation Employees' Stock F&M Bank-Massanutten 66 Ownership Plan 211 Fanners Trust Bank 405 Royal Bancshares, Inc 211 Fifth Third Bank 815, 1170 Saban, S.A., Panama City, Panama 214 Fifth Third Bank of Central Indiana 625 Salinas Valley Bancorp 211 Fifth Third Bank of Northeastern Ohio 526 San Jose Banco, Inc 211 First Community Bank, Inc 216 Security Richland Corporation 214 First Interstate Bank of California 215 Shorebank Corporation 1107 First Interstate Bank of Commerce 321 Societe Generale, Paris, France 880 First State Bank of Taos 987 South Texas Capital Group, Inc 384 First Virginia Bank-Colonial 914, 1170 Southern National Corporation 207, 307, 1042 First-Citizens Bank & Trust Company 815 SouthTrust Corporation 1132 Firstar Bank Illinois 526 State Street Boston Corporation 297, 1049 Home Bank 815 Stichting Administratiekantoor ABN AMRO Holding, Humboldt Bank 66 Amsterdam, The Netherlands 182, 1134 Integra Bank/North 216 Stichting Prioriteit ABN AMRO Holding, Amsterdam, Integra Bank/Pittsburgh 216, 405 The Netherlands 182, 1134 Integra Bank/South 216 Summerville/Trion Bancshares, Inc 211 Manufacturers and Traders Trust Company 755 Sun Belt Bancshares Corporation 385 Mercantile Bank of Kansas City 815 SunTrust Banks, Inc 207, 1137 Merchants Bank 625 Swiss Bank Corporation, Basle, Switzerland 185 Minden Bank & Trust Company 405 Synovus Financial Corp 207 Montour Interim Bank 914 TB&C Bancshares, Inc 207 New Pace American Bank 66 Texas Financial Bancorporation, Inc 211 Old Kent Bank 527 Totalbank Corporation of Florida 876 Old Kent Bank and Trust Company 67 Truman Bancorp, Inc 211 Pace American Bank 527 U.S. Trust Corporation 893 Premier Bank-North 405 UB&T Delaware Financial Corporation 1112 Princess Anne Bank 914 UB&T Financial Corporation 1112 Rapides Bank and Trust Company 1169 Union Bank of Switzerland, Zurich, Switzerland 392 Rolling Hills Bank & Trust 1170 Union Planters Corporation 45, 49, 800 Security Savings Bank 1170 United Carolina Bancshares Corporation 207 Shelby County State Bank 527 Wachovia Corporation 207, 1042 Southern Financial Bank 1170 Wells Fargo & Company 1037 SouthTrust Bank of West Florida 215 West Concord Bancshares, Inc 214 Sterling Bank and Trust Co 914 Westamerica Bancoiporation 601 Texas State Bank 914 Whitney Holding Corporation 290 Triangle Bank 1062 Woodforest Bancshares, Inc 385 Triangle East Bank 321 Woodforest Holdings Corporation 385 United Jersey Bank 815 Yoakum National Bancshares, Inc 212 United Valley Bank 527 Yoakum National Bancshares-Delaware, Inc 211 Vail Bank 216 Bank Holding Company Performance Report 4 Valliwide Bank 67, 1170 Bank Holding Company Supervision Manual, publication of VectraBank 1170 supplements 116, 784 Wesbanco Bank Wheeling 216 Bank holding companies Westamerica Bank 216, 755, 914 Applications, report on processing of 596 Orders issued under Capital adequacy guidelines 113, 268, 939, 952 Crestar Bank 200 Discounts for products and services 114, 148 Fifth Third Bank 976 Mergers among U.S. banking organizations, statement ... 1093 First Interstate Bank of California 515 Public welfare investments 114, 133 Marine Midland Bank 56 Risk-based capital guidelines 112, 127 Premier Bank 613 Bank Insurance Fund 1, 1020 Signet Bank/Virginia 1157 Bank Merger Act Westamerica Bank 900 Applications approved under Bank mergers, statement 1093 1st United Bank 526 Bank Secrecy Act, wire transfers, final rule on BancFirst 321 recordkeeping 113, 150 Banco Popular de Puerto Rico, San Juan, Banking institutions, mergers, statement 1093 Puerto Rico 66 Banking supervision, hemispheric conference held 939 Bank of Great Neck 405 Basle Committee on Banking Supervision 684 Bank of Naples 914 Bentsen, Lloyd, U.S. Treasury Secretary 245 Bank of Oakfield 1062 Blinder, Vice Chairman Alan S., statement on electronic BankWest 1170 money, 1089 Callaway Bank 405 Board of Governors (See also Federal Reserve System) Centura Bank 405, 755 Applications, report on processing of 596 Chemung Canal Trust Company 215 Consumer Advisory Council Cleveland Interim Bank 215 New member appointments 266 Community Bank and Trust 625 Nominations for appointments, announcement 684 Community Bank of the Islands 1062 Litigation (See Litigation) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Volume 81 A85 Pages Pages Board of Governors—Continued DAYLIGHT overdraft fees 31, 355, 1065-77 Members Debt burden, household 323, 326 LaWare, John P., resignation as Governor 434 Defense spending 109 List, 1913-95 627 Depository institutions (See also specific types) Orders issued or actions taken by, indexes . 355, 398, 748, 982 Daylight overdrafts 31 Proposed actions 32, 115, 268, 596, 784, 850, 940, 1024 Increase in amounts of transaction accounts covered by Publications (See Publications, 1994 and 1995) reserve requirements 30, 41 Regulations (See Regulations, Board of Governors) Derivatives Staff changes Activities, supervision 684 Clark, Sheila 269 Classes of 819 Goetzinger, James D 941 Contracts, amendments to risk-based capital Lowrey, Barbara R 941 standards 939,952 Ombudsman position established 941 Overview of disclosures, article 817-31 Statements to the Congress (See Statements to the Products, use of, statement 251 Congress) Directors of Federal Reserve Banks and Branches, list 529 Statistical releases, available by fax 1104 Disclosure about Derivative Financial Instruments and Thrift Institutions Advisory Council Ill Fair Value of Financial Instruments (SFAS 119) 823 Book-entry securities, Fedwire closing time 940 Discount rate changes 30, 41, 265, 371 Brochure, Shop . . . The Card You Pick Can Save You Money 685 ECONOMIC Growth and Regulatory Paperwork Reduction Business fixed investment 108 Act of 1995, statement 671 Businesses, small, use of financial services, article 629 Economy, U.S. Performance, monetary policy reports 760 CAEL 4 Statements 255, 258, 342 Call Report data 3, 8 CAMEL 2 Edison Electric Institute 20 Canada, financial markets 590 Edwards, Gerald A., Jr., article 817 Canner, Glenn B. Electronic money, statement 1089 Credit risk and provision of mortgages to lower-income Eller, Gregory E., article 817 and minority homebuyers, article 989 Employment increases 256 Home purchase lending, article 71 Energy, U.S. Department of 20 Household sector borrowing, article 323 English, William B., article 545 Capital accounts in international transactions 417 Euro-currency Standing Committee of the Group of Ten ... 824 Capital adequacy guidelines Examination Manual for U.S. Branches and Agencies of Amendment to Regulation H 371 Foreign Banking Organizations, publication 268 Deferred tax assets 113 Exports of U.S. goods and services, effect on GDP 108 Originated mortgage servicing rights 850 Treatment of certain transfers of assets, amendment . 939, 952 FANNIE Mae 993 Census of Manufactures, 1992 16, 20 Farm loans, issuance of report 115 Census of Mineral Industries, 1992 20 Federal Deposit Insurance Corporation Improvement Center for Latin American Monetary Studies 939 Act of 1991 Central Bank of Argentina 939 Actions taken under Clark, Sheila, appointed EEO Programs Director, Office Crestar Bank 206, 316 of Board Members 269 Fifth Third Bank 62 Cole, Rebel A., articles 1, 629 First of America Bank-West Michigan 206 Commercial banks First Security Bank 60 Business sector loans 546 Provident Bank 907 Capital accounts 556 SouthTrust Bank of West Florida 315 Derivatives disclosures, article 817-31 Household sector loans 549 United Jersey Bank 206 Income and expenses, tables 559-69 West One Bank, Idaho 812 Interest income and expenses 554 Risk-based capital standards, final rule 939 Profits and balance sheet developments, article 545-69 Federal Financial Institutions Examination Council 92 Committee on Interbank Netting Schemes of the Central Federal Home Loan Mortgage Corporation 101 Banks of the Group of Ten Countries, report Ill Federal Housing Administration 991 Community Reinvestment Act Federal National Mortgage Association 101 Federal Reserve perspectives, statement 424 Federal Open Market Committee Home purchase lending, article 72-79 Action to decrease degree of pressure on bank reserve Notice 713 positions 849 Revision to regulations 595 Disclosure of policy decisions 265 Conference of State Bank Supervisors 350 Meetings, minutes Construction 108 Sept. 27, 1994 33 Consumer Advisory Council Nov. 15, 1994 117 Meeting 1103 Dec. 20, 1994 358 New member appointments 266 Jan. 31, 1995 437 Nominations for appointments, announcement 684 Mar. 28, 1995 686 Consumer leasing, proposed action 1024 May 23, 1995 853 Cornyn, Barbara G., FIMS, article 1 July 5-6, 1995 942 Corra, Claudia, articles 585, 832 Aug. 22, 1995 1025 Credit Applications, proposal to permit banks to request Transcripts, 1989 435 information on race 596 Federal programs, adjustment factors, statement 431 Risk to lower-income and minority homebuyers, Federal Reserve and Treasury foreign exchange operations article 989-1016 (See Foreign exchange operations) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 Federal Reserve Bulletin • December 1995 Pages Pages Federal Reserve Act Home Mortgage Disclosure Act, data 92-103, 852 Orders issued under Home mortgage lending, article 71-103 Chemical International Finance Limited 1160 Home Ownership and Equity Protection Act of 1994 435 Citibank Overseas Investment Corporation .. 1161 Homebuying process, educational programs televised 850 Citizens State Bank 59 Household debt payment performance 326 Manufacturers and Traders Trust Company 394 Household finances study, Survey of Consumer Finances .. 941 Marine Midland Bank 310, 739 Household sector borrowing and the burden of debt, Republic Bank 977 article 323-38 Federal Reserve Banks Housing starts 108 Directors, list 529 Fee schedules for 1995 30 INCOME growth 108 New York Trading Desk 570 Industrial production and capacity utilization Federal Reserve Board (See Board of Governors) Releases 27, 104, 248, 339, Federal Reserve System (See also Board of Governors), 419, 592, 668, 775, Regulations, review planned 1103 838, 932, 1017, 1086 Fedwire Revision, article 16 Book-entry securities, closing time 940 Information on Depository Credit for Small Businesses and Change in format 114, 115, 146 Small Farms, report 115 Third-party access policy 940 Interagency Statement on Retail Sales of Nondeposit Fees (for Federal Reserve services to depository institutions) Investment Products 941 Daylight overdrafts 355, 1065 Interest rates, developments 235, 939 Schedules for 1995 30 International Banking Act of 1978 FIMS monitoring system for banking institutions, article ... 1 Orders issued under FIMS rating model 9, 10, 12, 13 Banco Bandeirantes, S.A., Sao Paulo, Brazil 742 Financial Accounting Standards Board Banco Exterior de Espana, S.A., Madrid, Spain 616 Accounting for Certain Investments in Debt Equity Banco Frances del Rio de la Plata S.A., Buenos Aires, Securities (FAS 115) 112 Argentina 618 Accounting for Income Taxes (FAS 109) 113 Banco Roberts, S.A., Buenos Aires, Argentina 202 Financial Institutions Monitoring System (FIMS) 1 Bank Austria Aktiengesellschaft, Vienna, Austria 979 Financial Institutions Regulatory Relief Act of 1995, Banpais, S.A., Mexico City, Mexico 204 statement, 679 Banque Nationale de Paris, Paris, France 515 Financial services Caisse Nationale de Credit Agricole, Paris, France 1055 Expansion of permissible affiliations, statement 349 Dongha Bank, Seoul, Korea 744 Small businesses, article 629-67 Farmers Bank of China, Taipei, Taiwan 620 Fisher Group, The 824 Hongkong and Shanghai Banking Corporation, Fisher, Peter R., Executive Vice President, Limited, Hong Kong 902 Federal Reserve Bank of New York, Liu Chong Hing Bank Limited, Hong Kong 905 articles, 244, 570, 585, 832, 1078 Standard Bank of South Africa, Johannesburg, Fleet Financial Group, public meetings regarding South Africa 517 application 851 Taiwan Business Bank, Taipei, Taiwan 746 Flood hazard determination form, final rule 871 Turkiye Vakiflar Bankasi, T.A.O., Ankara, Turkey 313 Foreign exchange developments 241, 590 West Merchant Bank Limited, London, England 519 Foreign exchange operations, International banking operations, proposed action 1024 articles 244-50, 585-91, 832-37, 1078-85 International transactions in 1994, article 407-18 Foreign stocks, list of marginable 268, 271, 596, 851, 1104 Investment income from international transactions 414, 416 Freddie Mac 993 KELLEY, Governor Edward W., Jr., statements on G-7 countries, monetary targeting 918 one dollar coin 675, 841 German monetary targeting: A retrospective view, Kennickell, Arthur B., article 323 article 917-31 Kole, Linda S„ article 917 Germany, monetary targeting 922 Ginnie Mae 993 LAMFALUSSY report Ill Goetzinger, James D., Assistant Director, Division of LaWare, Governor John P., resignation 434 Banking Supervision and Regulation, retirement 941 Leach bill 349 Government mortgage insurance 991 Leach, James A 349 Government National Mortgage Association 101, 993 Lindsey, Governor Lawrence B., Community Reinvestment Greenspan, Chairman Alan, statements Act, statement 424 Backdrop of the economy 255, 258 Litigation Federal programs, adjustment factors 431 Final enforcement orders issued by Board of Governors Financial Services Competitiveness Act of 1995 778 Banco Latino C.A., S.A.C.A., Caracas, Venezuela .... 217 Financial services, expansion of permissible affiliations . 349 Bank Saderat Iran, Tehran 68 Mexican economy 261 Bank Sepah Iran, Tehran 69 Monetary policy 107, 342, 422, 844, 1022 Besler, Daniel E 406 Savings Association Insurance Fund 935, 1020 Britton, Dane 626, 915 U.S. government budget 253 Cummings, A.G 756 Use of derivative products 251 Daiwa Bank, Limited 1175 Gunther, Jeffery W., Federal Reserve Bank of Dallas, DLG Financial Corp 322 FIMS, article 1 Echols, Earl E 69 Echols, Thomas E 69 H.R.1062, statement 778 First National Bank of Southeast Denver 1171 H.R.I362, statement 679 Harlow, John "Bud," Jr. 915 Hemispheric conference on banking supervision 939 Hirsch, Steven J 626 Hilton, Spence, article 570 Hotchkiss, Robert L 406 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Volume 81 A87 Pages Pages Litigation—Continued Monetary policy—Continued Final enforcement orders issued by Open market operations, article 570-84, 685 Board of Governors—Continued Reports to the Congress 219-^3, 757-74 Jacobs, Michael A 217 Money stock data, revisions 355, 357-60 Kim, Sunnie S 322 Mortgage lending, low-income and minorities 72, 323, 989 Long, James J 816 Mortgage loans, new software for financial institutions 1103 MacCallum, James A 217 Multilateral Program to Restore Financial Stability Sebastian Bankshares, Inc 69 in Mexico 265 Security State Bank of Pecos 1175 Mutual fund sales by banks, education campaign and Texas Coastal Bank 756 videotape availability 436, 941 Urban, Stuart G 915 Vasa, William 1171 NATIONAL Opinion Research Center 941 Vickerie, Colin 1063 National Survey of Small Business Finances, 1993 Termination of enforcement orders Article 629 Banca Nazionale del Lavaro, Rome, Italy 915 Publication 597 Citizens State Bank & Trust Co 915 Netting systems, policy statement Ill Columbus Junction State Bank 915 Constitution Bancorp, Inc 1064 OFFICIAL Staff Commentary, Regulation Z, revisions to .. 435 Constitution Bank 1064 Oil imports to the U.S 414 CSB Bancshares, Inc 915 One dollar coin, statement on legislation for First Prairie Bankshares, Inc 915 substitution 675, 841 Security Bank Corporation 1064 Open market operations, article 570-84 Sparta State Bank 1064 Osier, Carol, article 244 Union State Bank 1064 Over-the-counter margin stocks, United American Bank of Central Florida 1064 list of marginable 268, 271, 596, 851, 1104 USTCorp 1064 Index of orders and actions taken 398, 982 PARTNERS, software program 1103 Pending cases involving the Board of Governors, Passmore, Wayne list 68,216,321,405, Credit risk and provision of mortgages to lower-income 522, 626, 755, 815, and minority homebuyers, article 989 914, 988, 1063, 1170 Home purchase lending, article 71 Written agreements approved by Federal Reserve Banks Payment system risk policy, article 1065 Bank Meli Iran, Tehran 69 Bankers Trust New York Corporation 217 Phillips, Governor Susan M. CBC Bancorp, Inc 69 Economic Growth and Regulatory Paperwork Reduction Citizens Bancshares, Inc 218 Act of 1995, statement 671 Equitable Bank 523 Financial Institutions Regulatory Relief Act of 1995, Execufirst Bancorp, Inc 816 statement 679 First Security Banshares, Inc 406 Policy statements, netting systems Ill First State Bank of Manchester 69 Private mortgage insurance 991 Hanmi Bank 218 Privately operated large-dollar multilateral netting systems, P.T. Bank Ekspor Impor Indonesia (Persero), Jakarta, policy statement Ill Indonesia 322 Proposed actions P.T. Bank Niaga, Jakarta, Indonesia 322 Automated clearinghouse access 940 San Francisco Company 218 Capital adequacy guidelines 268 Southern Security Bank Corporation, Inc 626 Consumer leasing 1024 United Bank Limited, Karachi, Pakistan 915 Credit by Brokers and Dealers, regulation 784 Loan payment performance 326 Equal Credit Opportunity 115 Loans to small businesses and farms, report 115 Fedwire 115 Lowrey, Barbara R., Associate Secretary of the Board, Home Mortgage Disclosure, regulation 784 appointed Ombudsman 941 International Banking Operations 115, 1024 Luckett, Charles A., article 323 Loans to Executive Officers, amendment 596 Permission for banks to request additional information MANUFACTURING output 256 in credit applications 596 Meade, Ellen E., article 917 Reports on crime and suspicious financial transactions .. 784 Members, Board of Governors, list 627 Reserve mortgages, Regulation Z 32 Mergers among U.S. banking organizations 1093 Risk-based capital guidelines 850 Mergers and acquisitions by Board of Governors, Truth in lending 115, 784 indexes 398, 748, 982 Wire transfers 940 Meulendyke, Ann-Marie, article 570 Publications Mexico 81st Annual Report, 1994 597 Bank of, reciprocal currency arrangement Annual Report: Budget Review, 1994-95 597 increase 265, 368, 446 Annual Statistical Digest, 1993 115 Economy, statement 261 Bank Holding Company Supervision Manual, Swap line activity 590, 837 supplements 116, 784 Monetary policy Examination Manual for U.S. Branches and Agencies Business sector 226 of Foreign Banking Organizations 268 Credit and money flows 238 National Survey of Small Business Finances, report 597 Developments, statements 107, 232, 235, 422, 844, 1022 Purposes and Functions, 8th edition 355 Foreign exchange 229, 241 Government sector 227 RADDOCK, Richard D„ article 16 Household sector 223 Real estate appraisals, guidelines 32 Labor markets 230 Real estate secured loans 458 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A88 Federal Reserve Bulletin • December 1995 Pages Pages Regulations (Board of Governors, See also Rules) Section 20 securities A, Extensions of Credit by Federal Reserve Banks Factors to adjust interest income, table released 785 Discount rate increases 41, 371 Underwriting 351 B, Equal Credit Opportunity Securities and Exchange Commission 351 Official Staff Commentary, revision 684, 787 Senior Loan Officer Opinion Survey on Bank Lending C, Home Mortgage Disclosure Act Practices 547 Community Reinvestment Act, revision 595, 714 Shawmut National Corp., public meetings regarding Requirement to report in machine-readable form .. 113, 130 application 851 D, Reserve Requirements of Depository Institutions Shin, Soo J., article 1078 Increase in amounts of transaction accounts covered Shop . . .The Card You Pick Can Save You Money, by reserve requirements 41 brochure available 685 E, Electronic Fund Transfers Small businesses ATM identification, interim rule 32 Characteristics, tables 642-67 Identification of consumer accounts 435, 449 Financial services, use of, article 629 H, Membership of State Banking Institutions Loans, issuance report 115 in the Federal Reserve System Sniderman, Mark S., elected Associate Economist, Back-office facilities 449, 595 Federal Open Market Committee 358 Capital adequacy guidelines 141, 371, 955 Software for institutions offering mortgage loans, Netting contracts, capital adequacy guidelines 135 announcement 1103 Nontraditional activities 127 Standard Flood Hazard Determination Form, final rule 871 Public welfare investments 114, 133 State member banks Reports of condition, publication requirement Applications, report on processing of 596 removed 42 Back-office facilities, interpretation 595 O, Loans to Executive Officers, Directors, and Principal Capital adequacy guidelines 113, 268, 939, 952 Shareholders of Member Banks Public welfare investments 114, 133 Proposed action to conform definition of unimpaired Loan production and back-office facilities 449 capital and unimpaired surplus 596, 784, 790 Reports of condition, publication requirement removed .. 42 S, Reimbursement for Providing Financial Records Risk-based capital guidelines 112, 127 Fedwire recordkeeping requirements 115, 146 Safety and soundness standards 849 Y, Bank Holding Companies and Change in Bank Control Statement of Financial Accounting Standards, Capital adequacy guidelines 141, 371, 970 (SFAS 119) 823 Discounts for products or services 114, 148 Statements to the Congress (including reports and letters) Netting contracts, capital adequacy guidelines 135 Backdrop of the economy (Chairman Greenspan) .... 255, 258 Public welfare investments 114 Community Reinvestment Act (Governor Lindsey) 424 Risk-based capital guidelines, nontraditional Economic Growth and Regulatory Paperwork Reduction activities 127 Act of 1995 (Governor Phillips) 671 Safe harbor from anti-tying restrictions, revision .. 595, 598 Electronic money (Vice Chairman Blinder) 1089 Third-party sales of shares or assets 790 Federal programs, adjustment factors Z, Truth in lending (Chairman Greenspan) 431 Official Staff Commentary, revision 435 Financial Institutions Regulatory Relief Act of 1995 Real estate secured loans 458 (Governor Phillips) 679 Riegle Community Development and Regulatory Financial Services Competitiveness Act of 1995 Improvement Act of 1994 371, 450 (Chairman Greenspan) 349, 778 Texas, financial assistance with flood disaster 148 Mergers among U.S. banking organizations BB, Community Reinvestment Act (Governor Yellen) 1093 Final rule to emphasize performance 697 Mexico, economy in (Chairman Greenspan) 261 Revision 595 Monetary policy Review scheduled 1103 (Chairman Greenspan) 107, 342, 422, 844, 1022 Reid, Brian K., article 545 One dollar coin, (Governor Kelley) 675, 841 Reserve requirements, transaction account increases 30, 41 Savings Association Insurance Fund Richards, Heidi Willmann, article 1065 (Chairman Greenspan) 935, 1020 Riegle Community Development and Regulatory U.S. government budget (Chairman Greenspan) 253 Improvement Act of 1994 371, 450 Use of derivative products (Chairman Greenspan) 251 Risk-based capital guidelines Statistical releases, available by fax 1104 Derivative contracts 939, 952 Stock market credit, over-the-counter stocks (See Interest rate risk, final rule 939 Over-the-counter stocks, list of marginable; Netting contracts, amendment 112 Foreign stocks, list of marginable, and Regulations: Nontraditional activities, amendment 112, 127 G, T, U, and X) Revision 849,850 Survey of Consumer Finances 326, 337 Statement of policy 952 Survey of Terms of Bank Lending to Business 548 Stockholders' equity, amendment 112 Rules Regarding Access to Personal Information, TABLES (For index to tables published monthly, amendment 274 see guide at top of page A78; for special tables Rules Regarding Delegation of Authority published during the year, see list on page A67.) Approval authority for certain welfare investments 715 Technical Committee of the International Organisation of Foreign banking authorities, request for assistance 375 Securities Commissions 684 Texas, financial assistance for flood disaster 113 S.650, statement 671 Thomas, Charles P., article 407 S.874, statement 841 Thrift Institutions Advisory Council, new members Ill Safe harbor from anti-tying restrictions 595, 598 Tietmeyer, Hans, Bundesbank President 245 Safety and soundness standards, state Trading Desk, Federal Reserve Bank of New York 570 member banks 849, 861, 869 Treasury and Federal Reserve foreign exchange operations, Savings Association Insurance Fund, statements 935, 1020 articles 244-50, 585-91, 832-37, 1078-85 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Index to Volume 81 A89 Pages Pages U.S. dealer banks, comparison of Annual Reports VETERANS Affairs, Department of 991 of the top ten 825 U.S. economy, statements 255, 258, 342 WIRE transfers 113, 940 U.S. government budget, statement 253 Uniform Bank Performance Report 4 YELLEN, Governor Janet L., mergers among U.S. banking Uniform Bank Surveillance Screen (UBSS) 3 organizations, statement 1093 Uniform Financial Institutions Rating System 2 Uniform Rules of Practice and Procedure, Administrative ZIMMERMAN, Ron, developer of Partners software 1103 Procedure Act, ex parte communications 149 Unimpaired capital or surplus, definition 596, 784, 790 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A90 Maps of the Federal Reserve System ALASKA HAWAII 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 FRASER tories as follows: the New York Bank serves the http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A91 1-A 2-B 3-C 4-D 5-E Pittsburgh - • V^ / I ^ •Cincinnati Buffalo KY / I f \ MA NJ NY CT RI sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 7-G 8-H W1 MI MO KY • Detroit • J Louisville J —™ •Memphis Little Rock/ MS ATLANTA CHICAGO ST. Louis 9-1 ND MN WI MINNEAPOLIS 10-J 12-L s> ' MO • •uVenve r KS • • WA ; / , ALASKA -J m r City «Ht land OR • H BH ID KANSAS CITY m CA ill flsi 11-K •^ Isi S alt Lake City m < PIHMHBF \ \ * \ J ttjjljil \ A- UT HAWAII AZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A92 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 John C. Whitehead Ernest T. Patrikis 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 Walter A. Varvel Baltimore 21203 Michael R. Watson William J. Tignanelli1 Charlotte 28230 James O. Roberson Dan M. Bechter1 Culpeper 22701 Julius Malinowski, Jr.2 ATLANTA 30303 Leo Benatar 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 Slay don Robert J. Musso CHICAGO* 60690 Robert M. Healey Michael H. Moskow Richard G. Cline William C. Conrad Detroit 48231 John D. Forsyth David R. Allardice1 ST. LOUIS 63166 Robert H. Quenon Thomas C. Melzer John F. McDonnell James R. Bowen Little Rock 72203 Janet M. Jones Robert A. Hopkins Louisville 40232 Daniel L. Ash 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 Mark L. Mullinix Omaha 68102 LeRoy W. Thom Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Tony J. Salvaggio El Paso 79999 W. Thomas Beard III Sammie C. Clay Houston 77252 Isaac H. Kempner III Robert Smith, III1 San Antonio 78295 Carol L. Thompson 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. Runkel Raymond H. Laurence 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; Milwaukee, Wisconsin 53202; and Peoria, Illinois 61607. 1. Senior Vice President. 2. Assistant Vice President. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis