Federal Reserve Bulletin, 1996-06

VOLUME 82 • NUMBER 6 • JUNE 1996 FEDERAL RESERVE BULLETIN 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 483 PROFITS AND BALANCE SHEET 513 STATEMENTS TO THE CONGRESS DEVELOPMENTS AT U.S. COMMERCIAL Susan M. Phillips, member, Board of Gover- BANKS IN 1995 nors, provides comments on the Entrepreneurial Continued profitability and rapid growth of Investment Act of 1996, a bill that would permit assets combined to lift net income of U.S. com- smaller bank holding companies to provide limmercial banks almost 10 percent in 1995 to a ited equity capital to customers of subsidiary record $49 billion. Profitability, as measured by banks, and suggests some additional prudential either return on assets or return on equity, edged provisions, which the Board believes would not up near the peak level posted in 1993. Although be in significant conflict with the purpose of the net interest income as a share of average assets bill, to minimize the risk that could occur with fell slightly, the decline was more than offset by equity investments by smaller bank holding a decline in net noninterest expense. Provision- companies, before the Subcommittee on Capital ing for loan and lease losses edged up, as did Markets, Securities and Government-Sponsored charge-offs, but both remained quite low. With Enterprises of the House Committee on Banking delinquency rates for real estate and business and Financial Services, April 18, 1996. loans declining, overall loan quality continued 514 Lawrence B. Lindsey, member, Board of Goverto be very good, even though delinquency rates nors, comments on issues concerning fees imfor consumer loans, particularly credit card posed on electronic fund transfers at automated loans, rose sharply. Banks retained about one- teller machines (ATMs) and says that although third of their income, and capital-asset ratios the level of fees paid by consumers for bank generally remained well above regulatory services is a matter of importance for consumminimums. ers, competition in the marketplace—when combined with clear and full disclosure to consumers of fees—should be sufficient to keep fees at a 506 TREASURY AND FEDERAL RESERVE level commensurate with the value provided in FOREIGN EXCHANGE OPERATIONS return and to give consumers a range of choices, During the first quarter of 1996, the dollar appre- before the Subcommittee on Financial Instituciated 3.9 percent against the Japanese yen, tions and Consumer Credit of the House Com- 3.0 percent against the German mark, and mittee on Banking and Financial Services, 2.1 percent on a trade-weighted basis against April 25, 1996. other Group of Ten currencies. The U.S. mone- 517 Edward W. Kelley, Jr., member, Board of Govertary authorities did not undertake any intervennors, discusses issues concerning the supervition operations in the foreign exchange market sion and regulation of the U.S. banking system during the quarter. The U.S. Treasury's and says that the U.S. banking system today is Exchange Stabilization Fund and the Federal extremely healthy and competitive in both its Reserve System received final repayments from domestic and international operations and that Mexico on the remaining balances outstanding changes in regulatory structure should follow, under each of their respective short-term swap and not precede, adjustments to the basic strucarrangements. ture of our insured depository system and the modernization of its activities, before the House 510 INDUSTRIAL PRODUCTION AND CAPACITY Committee on Banking and Financial Services, UTILIZATION FOR APRIL 1996 April 30, 1996. Industrial production advanced 0.9 percent in 521 ANNOUNCEMENTS April after a decline of 0.5 percent in March. Capacity utilization rose 0.5 percentage point in Final rule and amendment to the staff commen- April, to 83.0 percent. tary to Regulation E. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Final rule and proposed amendment to the A3 GUIDE TO TABULAR PRESENTATION Board's margin regulations. A4 Domestic Financial Statistics Final rule regarding the definition of capital A42 Domestic Nonfinancial Statistics stock and surplus for purposes of section 23A A50 International Statistics of the Federal Reserve Act. A63 GUIDE TO STATISTICAL RELEASES AND Approval of a new cash access policy for the SPECIAL TABLES Federal Reserve Banks. Proposed amendments to Regulation O govern- A64 INDEX TO STATISTICAL TABLES ing insider lending. A66 BOARD OF GOVERNORS AND STAFF Availability of revised lists of over-the-counter stocks and of foreign stocks subject to margin A68 FEDERAL OPEN MARKET COMMITTEE AND regulations. STAFF; ADVISORY COUNCILS Change in Board staff. A70 FEDERAL RESERVE BOARD PUBLICATIONS 525 LEGAL DEVELOPMENTS A72 ANTICIPATED SCHEDULE OF RELEASE Various bank holding company, bank service DATES FOR PERIODIC RELEASES corporation, and bank merger orders; and pending cases. A74 MAPS OF THE FEDERAL RESERVE SYSTEM A1 FINANCIAL AND BUSINESS STATISTICS A76 FEDERAL RESERVE BANKS, BRANCHES, These tables reflect data available as of AND OFFICES April 26, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 William R. Nelson and Brian K. Reid, of the Board's 1. Measures of commercial bank profitability, 1970-95 Division of Monetary Affairs, prepared this article. Percent Percent Thomas C. Allard assisted in the preparation of the data, and Lisa J. Sanchez provided research Return on equity assistance. gfilllliiiiii^isiiiiii f ^l .5 1.0 — . Continued high profitability and rapid growth of assets combined to lift net income of U.S. commer- kJ — 10 cial banks almost 10 percent in 1995 to a record $49 billion. Profitability, as measured by either return 0.5 — on assets or return on equity, edged up near the peak —~ \ r — 5 level posted in 1993 (chart 1). Although net interest income as a share of average assets fell slightly, the f i ll 11111111111111' ! 1 ! i 1 N il decline was more than offset by a decline in net 1970 1975 1980 1985 1990 1995 noninterest expense (table 1). Provisioning for loan NOTE. The data are annual. and lease losses edged up, as did charge-offs, but both remained quite low. With delinquency rates for real estate and business loans declining, overall loan Banks retained more than one-third of their quality continued to be very good, even though delin- income, and capital-asset ratios generally remained quency rates for consumer loans, particularly credit well above regulatory minimums. At year-end, nearly card loans, rose sharply.1 all commercial bank assets were at well-capitalized The growth of assets last year resulted from the institutions. Six banks failed last year with total assets expansion of bank loan portfolios, which posted their of only $756 million—the smallest volume of assets largest increase in a decade, and, to a lesser extent, at failed banks since 1979. Combined assets at instifrom growth in trading accounts. Banks financed this tutions classified by the Federal Deposit Insurance growth by increasing managed liabilities and core Corporation as problem banks fell to $163/4 billion at deposits, by adding to capital, and by selling securi- year-end, half of the amount at the end of 1994 and ties from their investment accounts. 3 percent of the amount at the end of the first quarter of 1992, when assets at problem banks peaked. 1. Except where otherwise indicated, data in this article are from 1. Selected income and expense items, 1991-95 the quarterly Reports of Condition and Income (Call Reports) for Percent insured domestic commercial banks and nondeposit trust companies. The data, which cover all such institutions that filed Call Reports at Item 1991 1992 1993 1994 1995 least once, consolidate information from foreign and domestic offices and have been adjusted to take account of mergers. Size categories of Net interest income 3.61 390 3.90 3.79 3.73 such institutions (in this article called banks), which are based on Net noninterest expense 1.94 1.92 1.81 1.76 1.62 assets at the start of each quarter, are as follows: the ten largest banks; Loss provisioning 1.03 .78 .47 .28 .30 Realized gains on investment large banks, those ranked 11 through 100 by size; medium-sized account securities .09 .11 .09 -01 .01 banks, those ranked 101 through 1,000 by size; and small banks, those Income before taxes and not among the largest 1,000 banks. At the start of the fourth quarter of extraordinary items .73 1.32 1.70 1.74 1.81 1995, each of the ten largest banks had assets of more than approxi- Taxes and extraordinary items ... .22 .41 .50 .58 .63 mately $50 billion, large banks had assets between approximately Net income .51 .91 1.20 1.15 1.18 $7 billion and $50 billion, medium-sized banks had assets between approximately $300 million and $7 billion, and small banks had assets Dividends .45 .41 .62 .73 .75 of less than approximately $300 million. Because of revisions, data Retained income .07 .50 .59 .43 .43 shown may not match data published in earlier years. In the tables, components may not sum to totals because of rounding. NOTE. Percentage of average net consolidated assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • June 1996 2. Annual rates of growth of balance sheet items, 1986-95 Percent MEMO: Dec. 1995 Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 levels (billions of dollars) Assets 7.66 2.00 4.33 5.35 2.63 1.33 2.20 5.67 8.08 7.60 •I 4,293 Interest-earning assets 7.82 3.08 4.04 5.62 2.23 1.98 2.55 6.54 5.31 7.75 3,723 Loans and leases (net) 7.35 3.00 5.93 6.24 2.37 -2.65 -102 6.02 9.85 10.61 2,536 Commercial and industrial 3.95 -1.95 1.84 2.97 -.68 -9.10 -4.10 : .52 9.34 12,27 658 Real estate 17.46 16.56 12.43 12.69 8.79 2.73 1.94 6.13 7.94 8.28 1,072 Booked in domestic offices .. 17.06 17.11 11.99 13.02 8.54 2.90 2.57 6.17 7.68 8.43 1,045 Residential 12.78 18.03 13.89 15.75 13.49 8.08 7.88 10.96 10.00 10.10 657 Nonresidential 21.28 16.26 10.22 10.40 3.57 -2.82 -3.95 -.45 4.11 5.71 388 Booked in foreign offices ... 30.20 .84 27.03 3.00 16.65 -2.34 -17.80 4.66 18.37 2.80 27 Consumer 8.33 4.55 7.64 6.18 .37 -2.55 -1.53 8.92 16.03 9.99 533 Other loans and leases -.96 -5.33 -3.09 -.94 -5.68 -4.90 -4.25 9.97 5.26 14.23 330 Loan loss reserves and unearned income 9.41 44.36 -4.19 10.29 .34 -3.78 -4.79 -5.89 -2.23 45 58 Securities 9.92 4.94 3.27 5.08 8.45 16.23 12.29 12.26 -4.13 .60 917 Investment account 10.26 7.51 2.93 4.04 8.19 14.42 11.44 8.09 -1,71 -1.54 801 U.S. Treasury 1.64 .00 -5.80 -13.80 3.50 32.01 23.96 7.21 -8.44 -19.20 193 U.S. government agency and corporation obligations . 53.55 25.46 22.54 33.42 24.01 15.88 12.77 9.62 .87 6.44 422 Other 2.26 4.43 -2.46 -.87 -6.69 -2.57 -5.19 6.07 2.52 4.35 186 Trading account 6.21 -23.88 8.58 20.62 11.87 38.88 21.01 51.94 -20.51 18.52 115 Other 6.91 .24 -5.82 2.50 -11.70 2.82 1.57 -7.89 3.28 7.62 271 6.63 -5.07 6.45 3.50 5.50 -3.09 -.31 -.87 30.24 6.59 569 Liabilities 7.66 2.18 4.05 5.43 2.37 1.01 1.37 5.10 8.32 • 7.22 3,944. 11.79 -.76 5.48 5.75 7.57 5.25 5.09 1.49 -.16 3.96 2,292 Transaction deposits 17.53 -6.04 2.65 .93 2.42 3.38 14.63 5.47 -.32 -3.07 822 Savings and small time deposits .. 8.07 2.95 7.29 8.71 10.51 6.24 .18 -.85 -.06 8.36 1,470 Managed liabilities' 3.06 6.90 2.26 5.20 -6.16 -6.18 -6.03 12.29 17.64 10.61 1,380 Deposits booked in foreign offices -2.49 8.86 -7.77 -1.08 -5.88 3.82 -5.85 15.05 30.89 5.13 454 Large time -1.06 12.16 9.22 5.00 -5.68 -19.73 -26.20 -9.21 8.74 19.55 260 Subordinated notes and debentures 15.77 3.72 -4.26 16.98 20.99 4.69 34.89 10.82 9.24 6.61 43 Other managed liabilities 12.13 .78 5.45 10.12 -8.11 -1.34 7.11 22.18 13.02 11.66 623 Other -7.00 3.75 .08 2.59 4.36 -4.28 -1.05 14.93 77.92 20.27 272 Equity capital 7.59 -.66 8.77 4.18 6.68 5.98 13.78 12.56 5.26 12.06 349 MEMO Commercial real estate loans2 n.a. n.a. n.a. n.a. n.a. -3.53 -5.18 -1.33 3.73 5.82 384 NOTE. Data are from year-end to year-end. 2. Measured as the sum of construction and land development loans secured n.a. Not available. by real estate; real estate loans secured by nonfarm nonresidential properties; 1. Measured as the sum of deposits in foreign offices, large time deposits in and loans to finance commercial real estate, construction, and land development domestic offices, federal funds purchased and securities sold under agreements activities not secured by real estate. to resell, demand notes issued to the U.S. Treasury, subordinated notes and debentures, and other borrowed money. Because of continued industry consolidation, the growth in all the major loan categories—commercial number of commercial banks at year-end 1995 had and industrial, real estate, and consumer. This growth fallen below 10,000; nevertheless, employment in the resulted from increased demand for credit by both industry remained essentially unchanged. businesses and households and from efforts by banks to boost lending. As the year progressed, loan growth slowed owing to a slowdown in overall credit BALANCE SHEET DEVELOPMENTS demand, an increase in the share of that demand met by capital markets, and a stabilization of bank lend- Bank assets continued to grow briskly in 1995 ing standards. (table 2). Although measured asset growth was down slightly from that in the previous year, growth in 1994 had been exaggerated by an accounting change, the values of derivatives extended to a single counterparty). Derivatives used for trading purposes that have positive value are to be which had boosted reported non-interest-earning recorded as an asset, and those that have negative value as a liability. assets.2 The 1995 increase in bank assets was due to This change boosted bank assets in 1994 about 2Vi percent, one-third of the change in bank assets reported for that year. Excluding the effects of FIN 39, bank assets grew 5Vi percent in 1994 and IV2 per- 2. Since the beginning of 1994, Financial Accounting Standards cent in 1995. For a more detailed discussion of these issues see Board Interpretation No. 39 (FIN 39) has restricted banks from netting William B. English and Brian K. Reid, "Profits and Balance Sheet the values of off-balance-sheet derivatives multilaterally across coun- Developments at U.S. Commercial Banks in 1994," Federal Reserve terparties (although under certain conditions it does permit netting of Bulletin, vol. 81 (June 1994), pp. 548^19. 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Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 485 Loans to Businesses 3. Net percentage of selected large commercial banks that experienced increased demand for commercial and industrial loans, by size of firms seeking loans, 1991-96 In part because of strong demand, banks in 1995 posted the largest percentage increase in commercial Percent and industrial (C&I) loans in fifteen years. Data from the balance sheets of nonfarm nonfinancial corpora- Medium firms tions provide some information on the sources of the Small firms A\ /S — 40 increased demand (chart 2). The excess of corporate investment in plant, equipment, and inventories over — 20 internally generated funds—the financing gap— \ + surged to $60 billion in 1995. In addition, these firms substituted away from bonds and equities toward shorter-term financing, including bank loans, espe- If V Large firms cially early in the year. — / — 20 The findings from the Federal Reserve's quarterly Senior Loan Officer Opinion Survey on Bank Lend- 1 1 1991 1992 1993 1994 1995 1996 ing Practices (LPS) suggest that the demand for C&I NOTE. The data are quarterly. Net percentage is the percentage of banks loans rose not only from larger corporations but also reporting an increase less the percentage reporting a decrease. The definition for from small businesses and middle-market firms firm size suggested for, and generally used by, survey respondents is that medium firms are those with sales between $50 million and $250 million. SOURCE. Senior Loan Officer Opinion Survey on Bank Lending Practices. 2. Financing gap and funds raised, 1990-95 (chart 3).3 Banks attributed this increase in demand to customer inventory financing, to investment in plant and equipment, and to merger and acquisition financing by larger customers. The results from the LPS also suggest that easier lending standards contributed to the surge in C&I loans. On each of the first three surveys last year, more respondents indicated that they had eased standards on these loans over the preceding three months than indicated that they had tightened standards (chart 4). Throughout the year, banks that eased generally stated that they did so primarily because of increased competition from other banks and, to a lesser extent, from nonbank lenders. Another Federal Reserve survey—the Survey of Terms of Bank Lending to Business—showed an easing of terms (chart 5).4 According to the survey, average spreads of loan rates over market rates fell for loans of all sizes. Indeed, spreads on large loans fell to levels that had last prevailed in the mid-1980s; however, spreads on smaller loans remained somewhat elevated relative to their levels in the late 1980s. 3. About sixty domestic commercial banks from the twelve Federal Reserve Districts are surveyed by the LPS. Most of them are large: As of December 31, 1995, these banks' assets totaled $1.3 trillion, about one-third of the assets of domestic commercial banks. nonfarm nonfinancial corporate businesses. The financing gap is the difference 4. The Survey of Terms of Bank Lending to Business collects data between capital expenditures and internally generated funds. Net equity is funds on lending rates from a sample of more than 300 commercial banks. raised in equity markets less funds used to repurchase equity. Long-term debt These banks accounted for 57 percent of the volume of C&I loans is the sum of the net issuance of industrial revenue bonds, corporate bonds, and mortgages. Short-term debt is the sum of the change in outstanding bank outstanding at the end of 1995. Data are collected on the terms of C&I and other loans and the net issuance of commercial paper. loans made by these banks during the first full week of the middle SOURCE. Flow of funds accounts, table F.104. month of each quarter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

486 Federal Reserve Bulletin • June 1996 The expansion of C&I loans last year was uneven, 5. Average C&I loan rate spread over average federal funds with growth slowing from 17 percent in the first half rate, by size of loan, 1986-96 of 1995 to 6V2 percent in the second half. Long-term Basis points interest rates fell over the year, increasing the attractiveness of bond financing. Furthermore, business investment was much lower in the fourth quarter than — Less than $100 thousand — 500 earlier in the year, and with profits remaining high, the need for external finance declined. In addition, — 400 the net number of respondents to the LPS that indicated easing standards on business loans tailed off over the year. In fact, after ten consecutive quarters — 300 in which banks reported having eased standards, $100 thousand to $999 thousand respondents, on net, reported no change in standards $1 million and more — 200 in the fourth quarter of last year and indicated a slight tightening of standards in the first quarter of 1996. i i i i i i v V^ + 1 1986 1988 1990 1992 1994 1996 The LPS respondents reported little change in standards for commercial real estate loans on each of last NOTE. The data are quarterly. SOURCE. Survey of Terms of Bank Lending to Business, Federal Reserve year's surveys. Nevertheless, banks expanded their Board statistical release E.2. portfolios of these loans 53A percent, the second consecutive year of positive growth following three years of decline. With lending standards reportedly they can sell this real estate and a reduced number of little changed, this increase presumably resulted from new foreclosures. greater demand. Indeed, as evidenced by rising prices and falling vacancy rates for commercial properties, the health of the commercial real estate sector has Loans to Households improved markedly over the past two years. In addition, the share of bank assets included in the category Banks increased their share of home mortgage out- "other real estate owned" fell nearly one-half for the standings last year. Total home mortgage outstandsecond straight year. Banks usually acquire these ings increased 6 percent, while banks' holdings of assets when they foreclose on loans collateralized by these loans grew 10 percent. Although the volume real estate. The decline in banks' holdings of these of total outstandings expanded briskly throughout the assets likely reflects both the greater ease with which year, growth of banks' holdings of these loans decelerated from an annual rate of 13 percent over the first two quarters of 1995 to an annual rate of 23A percent in the fourth quarter. The rapid expansion of banks' 4. Net percentage of selected large commercial banks that mortgage holdings earlier in the year resulted, in part, tightened credit standards for commercial and industrial from the popularity of adjustable-rate mortgages. At loans, by size of firms seeking loans, 1990-96 the beginning of 1995, nearly 60 percent of new Percent mortgages carried adjustable rates (chart 6). Banks are more likely to keep on their books adjustable-rate mortgages, which have repricing frequencies more closely matching those of standard bank liabilities, than fixed-rate mortgages, which tend to be securitized. The share of mortgages with adjustable rates peaked as the interest rates on fixed-rate mortgages crested in late 1994. Rates on fixed-rate mortgages fell as 1995 progressed, however, and the share of adjustable-rate mortgages declined. The expansion in consumer loans on banks' balance sheets slowed noticeably last year from the 1990 1991 1992 1993 1994 1995 1996 torrid pace recorded in 1994. However, if loans they originated but then sold are added to those on their NOTE. The data are quarterly. Net percentage is the percentage of banks reporting tightening less the percentage reporting easing. Size categories for balance sheets, banks' consumer lending grew firms are defined in the note to chart 3. Wh percent last year, about the same as the pace in SOURCE. Senior Loan Officer Opinion Survey on Bank Lending Practices. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 487 6. Fixed-rate mortgage rate and adjustable-rate mortgage Easier lending terms and standards and increased proportion of new loans, 1993-96 marketing efforts by commercial banks also likely contributed to the growth in consumer loans. On each Percent Percent quarterly LPS in 1995, respondents, on net, indicated greater willingness to make consumer installment 60 — loans. Also suggestive of a growing availability of — 9 credit is the behavior of the credit card utilization rate 50 — FRM rate (the ratio of credit card balances to total credit limits), which edged down over the year to 23 percent 40 — J . — 8 despite rapid growth in credit card receivables. How- / / ARM proportion ever, standards for approving credit card applications 30 — may be firming: On net, one-fourth of the respon- V JSA — 7 dents to the January 1996 LPS said that they had 20 — 2s tightened such standards over the previous three 1 I 1 I 1 months. 1993 1994 1995 1996 NOTE. The data are monthly and are not seasonally adjusted. The FRM rate is the average contract rate on thirty-year, fixed-rate conventional home mortgage commitments. The ARM proportion is the number of adjustable-rate mortgages Securities closed as a percentage of all conventional home purchase mortgages closed at major lenders. SOURCE. Federal Home Loan Mortgage Corporation. Total holdings of securities were little changed last year, as increases in trading accounts about equaled declines in investment accounts. Banks used the sale of investment account securities as a source of funds 1994 (box). This continuing surge in consumer lendfor the second straight year. Nevertheless, these secuing reflected, in part, the high level of consumers' rities still make up a larger share of bank assets than purchases of durables. A small part of the rise in they did in the late 1980s (chart 7). Moreover, at consumer debt may have resulted from increased the end of 1995, banks enhanced the liquidity of use of credit cards, possibly resulting from the wider their investment account securities by significantly acceptance of credit cards at nontraditional outlets, increasing the share classified as "available for such as grocery stores, and from the growing popular- sale."5 ity of special incentive programs, such as cards that earn frequent-flier miles. Even if these charges were paid off each month, average outstanding balances would rise. 5. The Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115, implemented at the beginning of 1994, requires all banks to partition their investment account securities into those that are available for sale and those that are to be held to maturity. Securities to be held to maturity are valued at 7. Securities held in investment accounts as a share of bank amortized cost, with fluctuations in market value reflected neither in assets, 1986-95 income nor on the balance sheet. In contrast, those available for sale are valued at fair (market) value, with the revaluations of price Percent reflected in equity (but not income). At the time of the initial classification, the federal regulatory agencies had not yet indicated whether regulatory capital would be affected by the revaluations of availablefor-sale securities. Subsequently, the agencies decided that such / revaluations would not affect regulatory capital. On average, banks initially divided their investment accounts about evenly between the — — 21 two classifications. In part because of the timing of the decision on capital for regulatory purposes, but also because many banks were surprised by the stringency of the rules governing the sale of held-to-maturity securities, the Financial Accounting Standards Board allowed banks, — 18 between November 15 and December 31, 1995, to make a one-time reclassification of their investment account securities. Many banks took advantage of this opportunity. On average, commercial banks had increased the share of their investment account securities classified as "available for sale" from about 50 percent at the end of the ! I 1 1 1 1 1 1 1 1 1 third quarter to about 80 percent at year-end. On the January 1996 1986 1988 1990 1992 1994 LPS, most respondents said that they had reclassified securities and NOTE. The data are quarterly. that they had done so in order to increase their liquidity or flexibility. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

488 Federal Reserve Bulletin • June 1996 The Market for Consumer-Loan Asset-Backed Securities In 1995, the outstanding volume of securitized consumer years, but they can vary from three months to about ten loan receivables from all originators increased 40 percent, years. and the volume of these securities backed by loans origi- Most consumer-loan asset-backed securities carry a nated by banks jumped 53 percent. At the end of the year, triple-A rating from at least two rating agencies. To achieve $200 billion of these securities was outstanding, $125 bil- this rating, various credit enhancements are used. Among lion of which was backed by loans originated by banks. Of these enhancements are set-asides to absorb losses and the dollar volume of consumer loans originated by banks, third-party guarantees. Another widely used enhancement is 20 percent was securitized, up nearly 5 percentage points the creation of a lower-rated subordinated class of security from the end of 1994. that pays off only after obligations to the senior security Despite the magnitude of this market, public issuance of have been met. securities backed by consumer loans dates only to 1985, The largest issuers of consumer-loan asset-backed securwhen securities backed by automobile loans were first intro- ities are the finance subsidiaries of automobile manufacturduced. Publicly issued securities backed by credit card ers, banks that specialize in credit card lending, and receivables were not introduced until 1987, but they have nonbank issuers of credit cards. The securities are held by since come to dominate the market: At year-end 1995 they various investors, including insurance companies, retireaccounted for 69 percent of the securities backed by ment funds, and mutual funds—many of the same instituconsumer-loan receivables outstanding and 93 percent of tions that hold corporate bonds and mortgage-backed those backed by consumer loans originated by banks. securities. Indeed, because of the substitutability between Besides automobile loans and credit card receivables, collateralized mortgage obligations (CMOs) and securities mobile home loans, boat loans, and unsecured personal backed by consumer loans, the market for the latter may loans have been securitized. have benefited from the well-publicized losses some inves- Asset-backed securities can take a variety of forms tors took on CMOs when interest rates rose in 1994. depending on the type of loans used as collateral. Securities The results from the May 1996 LPS provide some inforbacked by automobile loans or other types of amortizing mation on why the pace of securitization picked up last loans usually pay both principal and interest over their life. year. The respondents that had increased the volume of In contrast, for securities backed by credit card receivables, their consumer loan securitizations over the preceding the most common form is either a bullet maturity (for which year gave several reasons for the increase. Two reasons the principal is repaid in one lump sum) or controlled commonly cited were that consumer loan originations had amortization (for which only interest is paid for a specified increased more rapidly than their bank's willingness to hold period and then the principal and interest are both paid for a such loans on its books and that their bank had become much shorter period). Asset-backed securities with fixed more proficient in effecting securitizations. To a lesser rates are generally priced in relation to comparable-maturity degree, the respondents also attributed the increase to the Treasury securities, whereas those issued with floating rates capital markets' greater receptiveness to consumer-loantend to be priced in relation to money market rates. Maturi- backed securities as well as the increased cost of funding ties of asset-backed securities are typically around three consumer loans on their bank's balance sheet. Securitized share of banks' consumer loan Outstanding consumer-loan asset-backed outstandings, 1987-95 securities, by type of loan, 1989-95 Billions of dollars Credit card Automobile and other 150 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 489 Banks actually sold a larger percentage of their mutual funds, fell relative to those on shorter-term investment account securities than indicated by the assets, including retail deposits, possibly also adding decline in book value because, on average, upward to household demand. revaluations of the prices of available-for-sale securi- Within core deposits, balances in transaction ties boosted their reported value. If available-for-sale accounts declined, and those in savings accounts securities were valued at amortized cost, investment rose. This shift resulted in large part from the estabaccount securities would have declined 33/4 percent lishment of "sweep" accounts at many banks. These last year rather than the IV2 percent drop actually programs sweep funds out of transaction accounts, recorded on banks' books. against which banks must hold reserves, into savings accounts, against which they need not hold reserves. By reducing the amount of required reserves, which do not earn interest, sweep programs free funds to be Liabilities invested in interest-earning assets, thereby increasing profits. In 1995, thirty bank holding companies, rep- For the third consecutive year, banks relied heavily resenting 220 separately chartered commercial banks on managed liabilities to fund asset growth. In 1993 and thrift institutions, instituted sweep programs. The and 1994, the use of managed liabilities was concencurrent amount being regularly swept is unknown, trated in non-deposit instruments, such as borrowings but as a rough indication of the size of these sweeps, from foreign offices and senior bank notes, which are the total amount swept at the initiation of these not subject to deposit insurance premiums.6 In 1995, programs was $48 billion. banks relied less on borrowings from abroad and more on large time deposits to fund growth. They may have chosen this source of funds, in part, because of the significant reduction in deposit insurance TRENDS IN PROFITABILITY premium rates that took place last year.7 Though insured only to $100,000, large certificates of de- Net income of U.S. commercial banks jumped posit, unlike deposits booked abroad and senior bank 9% percent last year. The industry's return on assets notes, are included in the assessment base used to (ROA) rose to 1.18 percent, marking the third condetermine deposit insurance premiums. Even so, the secutive year that banks have earned a return on reduction in deposit insurance premiums appears not assets appreciably higher than the historical average. to have been the only factor influencing banks' choice The increase in profits was widespread, with twoof managed liabilities last year: The fastest growth in thirds of commercial banks posting gains and average large time deposits occurred in the first quarter, ROAs rising in eight of the twelve Federal Reserve before the reduction in deposit insurance premiums. Districts. Banks paid out most of the profits in divi- Furthermore, banks again last year issued a large dends, but they also retained a substantial volume of volume of senior bank notes, which, as stated above, are not subject to deposit insurance premiums. After declining in 1994, core deposits were a sig- 8. Selected interest rates, 1987-96:Q1 nificant source of new funds for banks in 1995, Percent although their growth did not keep pace with the growth in assets. Interest rate developments in 1995 probably boosted household demand for retail deposits (chart 8). As market rates declined over the year, yields on these deposits, which tend to change more slowly than market rates, became relatively more attractive. Furthermore, as the yield curve flattened, current yields on longer-term assets, such as bond 6. Senior bank notes, which are included in "Other managed liabilities" in table 2, are non-deposit securities typically issued by banks in the medium-term note market. They are senior to subordi- 1987 1989 1991 1993 1995 nated debt. NOTE. The data are monthly. Rates are at commercial banks. Savings 7. The reduction in deposit insurance premiums is discussed in the accounts include money market deposit accounts. section "Noninterest Expenses." SOURCES. Federal Reserve Board statistical releases H.6 and H.15. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

490 Federal Reserve Bulletin • June 1996 earnings. These undivided profits, along with capital 10. Ratio of net interest income to total assets, gains on available-for-sale securities, accounted for 1970-95 three-quarters of the increase in equity capital. Percent of assets Most money center and regional bank holding companies increased dividends last year. The continued high profitability of commercial banks supported Net interest income (( TT NN// AA-- 33..55 a rally in the stocks of bank holding companies (chart 9). Even though the rally faded during the fourth quarter, indexes of stock prices of money 1 — 3.0 center and regional bank holding companies rose about 50 percent for the year, compared with about 35 percent for the S&P 500 index. N le e s t s i p n r t o e v re is s i t o i n n i c n o g m e \ \ , FF WW __ 22 55 Total Revenue LILT ! I 1 I I M I I M I I R M I N IM 1970 1975 1980 1985 1990 1995 NOTE. The data are annual. The series are adjusted to remove the effects of Profits were lifted last year by a 6% percent increase breaks in definitions. in total revenue—noninterest income plus net interest income. Net interest income as a share of assets was below the peak reached a few years ago, but it remained quite high by historical standards They have kept these margins partly by increasing (chart 10). In general, this ratio has been trending the share of loans, which generally earn higher interhigher for at least twenty-five years. The rise likely est rates than securities, in their portfolios of interestreflects, in part, greater riskiness of bank assets over earning assets. Furthermore, they have increased the period: After subtracting loan-loss provisioning, the fraction of their loans that are consumer loans, the ratio of net interest income to assets shows no which carry particularly high rates. The higher rates evidence of an upward trend, although it has been on consumer loans compensate banks for the addiwide in recent years when the level of provisioning tional risk associated with these loans, which have has been very low. higher charge-off rates than business and real estate Since 1992, banks have been able to maintain their loans. wide net interest margins despite narrower spreads on Banks also have been aggressive in generating business loans and an increased reliance on large noninterest income, and the share of total revenue certificates of deposit and other managed liabilities. accounted for by noninterest income has increased over the past decade (chart 11). A small part of the gain has come from higher fees on deposits, and some of the gain has come from revenues derived 9. Stock price indexes, 1995-April 1996 from trading and fiduciary activities (including trading gains from derivative products held or created by banks). Most of the increase, however, has come from the broad category "other noninterest income." Some types of other noninterest income are fee income from servicing real estate mortgages, income for performing data processing services, and income from providing lockbox services such as collecting and processing utility bills. Fees associated with credit cards—fees earned from securitizing credit card receivables, merchant credit card fees, and periodic fees paid by holders of credit cards—are also an important source of other noninterest income. In 1995, for instance, credit card banks—banks for which credit card loans account for at least 90 percent NOTE. The data are weekly; the bank indexes end April 24, 1996, and the of their loans—earned about 25 percent of the indus- S&P 500 index ends April 26, 1996. The bank indexes are for eight money center bank holding companies and forty-two regional bank holding companies try's other noninterest income but held only 3 percent as defined by Salomon Brothers. of commercial bank assets. SOURCES. Salomon Brothers and Standard and Poor's Corporation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 491 Noninterest Expenses part because of higher deposit insurance premiums and losses on other real estate owned. Noninterest expenses, which do not include loan-loss A major factor contributing to the decline in the provisioning, grew AVi percent in 1995. In part, banks ratio of noninterest expenses to total revenues is benefited from the $2Vi billion drop in deposit insur- that employment costs as a share of total revenues ance premiums. The recapitalization of the Bank have fallen over the past decade. Most of the Insurance Fund led the Federal Deposit Insurance improvement occurred between 1987 and 1992, when Corporation (FDIC) in August 1995 to lower premi- bank employment fell from 1.57 million to 1.48 milums per $100 of deposits from twenty-three cents to lion. Since then, employment has held near the lower four cents for well-capitalized banks. The change was level, and employment costs have risen at about made retroactive to June 1995, and because banks the same rate as total revenue. The growth in costs pay their premiums in advance, they received a rebate of %\Vi billion. In November, the FDIC announced that it was setting the assessment rate at zero for 12. Bank noninterest expenses, employment, and offices, 1985-95 well-capitalized banks for 1996. Consequently, most banks are to pay only the legal minimum, an annual fixed amount of $2,000. From a broader perspective, banks have made substantial progress toward improving their overall operating efficiency. One common measure of efficiency is the ratio of noninterest expenses to total revenue (chart 12). This ratio has been trending downward for the past decade, although it rose early in the 1990s in 11. Total noninterest income and its components as a share of total revenue, 1985-95 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

492 Federal Reserve Bulletin • June 1996 reflects higher average compensation per employee, the ratio of reserves to delinquent loans in 1995 were which rose 15 percent between 1992 and 1995, com- well above their historical averages. In fact, more pared with a 10 percent increase in the average than 500 banks, by reducing loan-loss reserves, compensation of private industry workers. boosted total reported profits about $1 billion. Another factor contributing to overall efficiency is Banks were able to hold provisioning at a low level a drop in occupancy costs relative to total revenue. because bank asset quality remained excellent last The decline has occurred despite a rise in the number year (chart 14). Decreases in delinquency and of bank offices. Two factors likely have helped contain occupancy costs. First, the depressed commercial real estate market during the early 1990s held down 14. Delinquency and charge-off rates, by type of loan, 1987-95 property costs. Second, banks have become more aggressive in closing high-cost branches and opening less costly ones; for instance, a number of banks have been closing stand-alone branches and opening branches in supermarkets. Loss Provisioning and Asset Quality The improvements in bank operating efficiency and the increases in total revenue started to show through to profits a few years ago when banks began to reduce their provisioning for loan and lease losses, which had been elevated for several years. Even though provisioning increased slightly last year, it remained low. About half the increase was at credit card banks. Despite the additional provisioning at these banks, they remained very profitable, with an average return on assets near 3 percent, more than twice the industry average. Banks again kept provisioning in line with net charge-offs (chart 13), leaving the level of loss reserves about unchanged. The level of loss reserves has not changed appreciably since 1990. Nonetheless, banks appear to have set aside ample reserves for future loan losses. The reserve-to-loan ratio and 13. Reserves for loan and lease losses, loss provisioning, and net charge-offs as a percentage of loans, 1980-95 are loans that are not accruing interest and those that are accruing interest but are more than thirty days past due. 1. The delinquency rate for a category of loans is the category's average level of delinquent loans for the period divided by the category's average level of outstanding loans for the period. The first period plotted is 1987:Q2. 2. The charge-off rate for a category of loans is the category's annualized 1980 1985 1990 1995 charge-offs for the period, net of recoveries, divided by the category's average NOTE. The data are annual. level of outstanding loans for the period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 493 charge-off rates for loans made to businesses about they had expected, suggesting that much of the offset the deterioration in loans to households. Favor- decline in quality was already built into the pricing of able experience with commercial and industrial loans such loans. persisted, even though banks reported on the LPS having relaxed standards during the previous two years. The quality of commercial real estate loans Changes in Capital continued to improve as the commercial property market strengthened (chart 15). Reductions in delin- Bank equity capital grew $37!/2 billion last year, a quency rates on these loans accounted for the better 12 percent increase from 1994. Retained earnings quality of overall real estate loans, as delinquency accounted for about half the advance. The 1995 bond rates on home mortgages rose slightly. market rally also generated about $11 billion in capi- Significant increases in delinquency and charge-off tal gains on securities classified as "available for rates were registered for consumer loans. By year- sale." These capital gains and losses are reflected, on end the delinquency rate had risen to 4 percent for an after-tax basis, in bank equity, even though they credit card loans and to 3 percent for other consumer do not affect reported income. loans. Respondents to the November LPS who However, because these capital gains and losses reported higher delinquency rates on consumer loans are not included in regulatory capital, tier 1 capital attributed the rise primarily to increased household rose only 7 percent.8 The percentage increase in tier 1 debt burdens. Some banks noted that an increased capital nearly matched the rise in assets, leaving willingness of borrowers to declare bankruptcy and the leverage ratio about unchanged (chart 16). Riskslower economic growth in their markets also con- based capital ratios—the total and the tier 1 ratios— tributed. Most of the respondents characterized their declined a bit because of the rapid growth of riskactual delinquency experience last year as about what weighted assets. Loans, which generally carry a higher risk weight than securities, made up a larger share of bank assets last year than in 1994. Even so, 15. Delinquency rates for real estate and consumer loans, the fraction of industry assets at well-capitalized by components, 1991-95 banks—adjusted for bank examiners' ratings—rose to 96 percent by year-end, up from just 30 percent at the end of 1990. DEVELOPMENTS IN 1996 During the first quarter of 1996, bank asset growth at domestic offices was near the moderate pace registered in the fourth quarter of last year. Business loan demand remained damped, likely because of an apparent softening in inventory investment as firms 8. The regulatory agencies' risk-based capital guidelines are based on the Basle Accord and were modified by the Federal Deposit Insurance Corporation Improvement Act of 1991. The tier 1 ratio is the ratio of tier 1 capital to risk-weighted assets. The total ratio is the ratio of the sum of tier 1 and tier 2 capital to risk-weighted assets. Tier 1 capital includes mainly common equity (excluding capital gains and losses in investment account securities classified as available for sale) and certain perpetual preferred stock. Tier 2 capital consists primarily of tier 1 capital, subordinated debt, non-tier 1 preferred stock, and loan-loss reserves. Risk-weighted assets are calculated by multiplying the amount of assets and the credit equivalent amount of off-balance-sheet items by the risk weight for each category. The leverage ratio is the ratio of tier 1 capital to average total assets. For a summary of the evolution of risk-based capital standards, see Allan D. Brunner and William B. English, "Profits and Balance Sheet NOTE. The data are quarterly and are not seasonally adjusted. The rates are Developments at U.S. Commercial Banks in 1992," Federal Reserve the end-of-period delinquent loans divided by the end-of-period outstandings. Bulletin, vol. 79 (July 1993), pp. 661-62. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

494 Federal Reserve Bulletin • June 1996 16. Regulatory capital ratios, and share of industry assets at sought to bring inventories more in line with sales. well-capitalized banks Consumer loans, especially credit card debt, continued to grow rapidly. Indexes of stock prices of bank holding companies were up about 10 percent to 15 percent early in the year following the release of strong fourth-quarter earnings reports. However, late in the first quarter these indexes began to back off somewhat. Bank holding companies released earnings reports for the first quarter of 1996 that were quite good—ROAs were up compared with the first quarter of 1995, and banks continued to maintain wide net interest margins. Although several firms reported reduced earnings because of special charges to cover mergerrelated expenses, their underlying operating profits were strong. NOTE. The data are quarterly. For definitions of tier 1 and tier 2 capital and leverage ratio, see text footnote 8. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 495 A.l. Report of income, all insured domestic commercial banks and nondeposit trust companies, 1986-95 Millions of dollars Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Gross interest income 239,084 245,089 274,144 317,075 320,185 289,853 257,037 244,892 257,419 303,054 Taxable equivalent 249,984 251,085 279,714 321,281 323,826 293,040 260,018 247,773 260,182 305,692 Loans 176,722 180,648 202,853 237,825 238,678 214,364 186,311 178,517 190,025 227,545 Securities 38,469 3399,,448855 42,199 4466,,772244 50,987 5522,,661188 52,051 4488,,772277 48,379 5511,,111188 Gross federal funds sold and reverse repurchase agreements 9,171 9,033 10,639 13,061 12,547 9,128 5,926 4,799 6,422 9,752 Other 14,720 15,923 18,453 19,463 17,970 13,745 12,748 12,847 12,593 14,643 Gross interest expense 143,741 145,166 166,345 205,094 204,822 167,848 122,788 105,671 110,963 148,376 Deposits 118,284 115,807 130,310 157,484 161,365 113388,,991177 9999,,003388 7799,,555500 7799,,221144 110055,,442266 Gross federal funds purchased and repurchase agreements 15,971 15,926 18,963 24,898 22,769 14,359 9,279 8,449 12,481 18,425 Other 9,484 13,432 17,073 22,712 20,686 14,572 14,471 17,672 19,268 24,523 Net interest income 95,343 99,923 107,799 111,981 115,363 122,005 134,249 139,221 146,456 154,678 Taxable equivalent 106,243 105,919 113,369 116,187 119,004 125,192 137,230 142,102 149,219 157,316 Loss provisioning1 22,356 37,891 19,777 31,304 32,275 34,868 26,866 16,843 10,972 12,618 Noninterest income 36,381 41,913 45,720 51,599 55,675 60,650 67,163 75,870 77,225 83,890 Service charges on deposits 8,020 8,758 9,532 10,272 11,444 12,842 14,178 14,905 15,306 16,075 Income from fiduciary activities 6,319 7,145 7,526 8,314 8,881 9,456 10,472 11,203 12,128 12,889 Foreign-exchange gains and fees 1,655 2,496 2,179 2,231 2,816 2,631 3,346 3,231 2,071 2,713 Trading income 1,303 1,064 1,512 1,819 2,038 3,331 2,927 6,010 4,178 3,625 Other 19,082 22,451 24,970 28,962 30,494 32,388 36,237 40,523 43,543 48,589 Noninterest expense 91,096 97,857 103,062 108,995 116,559 126,050 133,143 140,602 145,051 151,222 Salaries, wages, and employee benefits .. 43,327 45,405 47,134 49,414 52,082 53,597 55,625 58,538 60,988 64,076 Expenses of premises and fixed assets ... 14,663 15,342 16,002 16,697 17,541 17,904 18,190 18,587 19,000 19,780 Other 33,108 37,110 39,926 42,884 46,935 54,549 59,328 63,477 65,063 67,367 Net noninterest expense 54,715 55,944 57,342 57,396 60,884 65,400 65,980 64,732 67,826 67,332 Realized gains on investment account securities 3,964 1,447 278 799 474 2,925 3,956 3,054 -571 483 Income before taxes and extraordinary items 22,235 7,536 30,956 24,078 22,680 24,661 45,357 60,698 67,087 75,212 Taxes 5,301 5,410 9,996 9,551 7,741 8,284 14,476 19,849 22,455 26,305 Extraordinary items 283 200 811 313 649 993 404 2,091 -18 29 Net income 17,218 2327 21,771 14,841 15,589 17,372 31,285 42,942 44,615 48,935 Cash dividends declared 9,224 10,659 13,275 14,113 13,944 15,080 14,235 22,069 28,178 31,121 Retained income 7,994 -8,332 8,496 729 1,646 2,292 17,050 20,873 16,436 17,814 1. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

496 Federal Reserve Bulletin • June 1996 A.2. Portfolio composition, interest rates, and income and expense, all insured domestic commercial banks and nondeposit trust companies, 1986-95 A. All banks Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Balance sheet items as a percentage of average net consolidated assets Interest-earning assets 87.11 87.48 88.00 87.94 87.82 88.04 88.33 88.50 86.55 86.48 Loans and leases, net 59.09 59.12 59.80 60.64 60.53 59.55 57.30 56.25 56.06 58.38 Commercial and industrial 20.87 19.98 19.50 19.09 18.50 17.33 15.78 14.88 14.51 15.20 U.S. addressees 16.84 16.57 16.55 16.54 15.99 15.00 13.54 12.72 12.35 12.87 Foreign addressees 4.02 3.41 2.95 2.55 2.51 2.33 2.24 2.16 2.16 2.33 Consumer 11.38 11.42 11.72 11.89 11.77 11.45 11.02 11.00 11.43 12.11 Credit card 2.98 3.17 3.47 3.69 3.78 3.88 3.82 3.89 4.21 4.73 Installment and other 8.40 8.26 8.25 8.20 7.99 7.57 7.20 7.11 7.22 7.39 Real estate 16.90 19.00 20.86 22.50 23.86 24.87 24.87 24.81 24.43 25.00 In domestic offices 16.35 18.40 20.18 21.78 23.10 24.11 24.18 24.18 23.80 24.35 Construction and land development 3.51 3.90 4.06 4.16 4.00 3.41 2.64 1.99 1.65 1.59 Farmland .44 .47 .49 .51 .51 .53 .56 .57 .56 .56 One- to four-family residential 7.45 8.22 9.21 10.15 11.21 12.27 12.91 13.49 13.74 14.41 Home equity n.a. n.a. 1.14 1.42 1.67 1.95 2.09 2.07 1.91 1.88 Other n.a. n.a. 8.07 8.73 9.54 10.32 10.82 11.42 11.84 12.54 Multifamily residential .50 .57 .59 .60 .62 .66 .75 .79 .79 .81 Nonfarm nonresidential 4.45 5.25 5.83 6.36 6.76 7.23 7.32 7.33 7.06 6.97 In foreign offices .55 .60 .68 .72 .76 .76 .69 .62 .63 .65 Depository institutions 2.38 2.28 2.04 1.76 1.60 1.42 1.24 1.07 1.42 1.88 Foreign governments 1.43 1.35 1.22 1.03 .78 .75 .73 .67 .41 .30 Agricultural production 1.23 1.04 .98 .96 .96 1.01 1.02 .99 1.00 .96 Other loans 5.51 4.98 4.52 4.31 3.93 3.60 3.50 3.56 3.34 3.15 Lease-financing receivables .91 .98 1.06 1.10 1.12 1.09 1.03 .99 1.03 1.19 LESS: Unearned income on loans -.60 -.52 -.50 -.48 -.42 -.36 -.28 -.21 -.16 -.14 LESS: Loss reserves1 -.94 -1.40 -1.61 -1.52 -1.57 -1.62 -1.60 -1.51 -1.36 -1.27 Securities 17.85 18.34 18.45 18.39 19.09 20.70 23.52 25.37 24.27 21.94 Investment account 16.28 17.00 17.17 17.14 17.63 18.93 21.18 22.50 21.60 19.38 Debt 16.28 17.00 17.17 16.84 17.37 18.62 20.82 22.12 21.21 18.97 U.S. Treasury 6.24 6.02 5.60 4.98 4.57 5.06 6.49 7.07 6.77 5.25 U.S. government agency and corporation obligations 3.07 4.14 4.88 6.04 7.56 8.75 9.86 10.73 10.24 9.81 Government-backed mortgage pools 1.13 2.10 2.59 3.27 4.08 4.52 4.52 4.74 4.67 4.47 Collateralized mortgage obligations n.a. n.a. n.a. n.a. 1.28 2.07 3.12 3.72 3.24 2.67 Other 1.94 2.04 2.29 2.77 2.20 2.16 2.21 2.27 2.33 2.68 State and local government 5.37 4.40 3.69 3.15 2.64 2.28 2.08 2.06 2.02 1.80 Other 1.62 2.44 2.99 2.68 2.59 2.53 2.40 2.25 2.18 2.11 Equity2 n.a. n.a. n.a. .29 .27 .31 .37 .38 .39 .41 Trading account 1.56 1.34 1.28 1.25 1.46 1.77 2.34 2.87 2.67 2.55 Gross federal funds sold and reverse RPs 4.82 4.57 4.55 4.33 4.46 4.58 4.54 4.27 3.82 3.93 Interest-bearing balances at depositories 5.35 5.45 5.21 4.58 3.75 3.21 2.97 2.62 2.40 2.23 Non-interest-earning assets 12.89 12.52 12.00 12.06 12.18 11.96 11.67 11.50 13.45 13.52 Revaluation gains on off-balance-sheet items3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2.61 2.90 Other n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10.84 10.62 Liabilities 93.69 93.83 93.84 93.64 93.60 93.33 92.82 92.15 92.12 91.99 Interest-bearing liabilities 73.13 74.03 75.40 76.02 76.53 76.58 75.32 73.93 71.86 71.87 Deposits 60.63 61.26 62.06 62.58 63.44 64.45 62.93 60.26 57.34 56.29 In foreign offices 11.27 11.02 10.41 9.68 9.26 8.55 8.37 8.32 9.39 10.27 In domestic offices 49.36 50.24 51.66 52.90 54.18 55.90 54.56 51.94 47.96 46.01 Other checkable deposits 5.19 6.04 6.25 6.12 6.19 6.72 7.65 8.24 7.80 6.63 Savings (including MMDAs) 17.46 18.28 17.60 16.28 16.59 18.00 20.28 20.90 19.60 17.47 Small-denomination time deposits 15.85 15.06 16.25 18.37 19.96 21.30 19.21 16.98 15.33 16.14 Large-denomination time deposits 10.86 10.86 11.55 12.13 11.44 9.89 7.42 5.81 5.23 5.77 Gross federal funds purchased and RPs 8.31 8.13 8.02 8.22 8.03 7.09 7.02 7.47 7.60 7.70 Other 4.19 4.64 5.31 5.22 5.07 5.03 5.37 6.19 6.92 7.88 Non-interest-bearing liabilities 20.56 19.80 18.45 17.62 17.07 16.75 17.50 18.22 20.26 20.12 Demand deposits in domestic offices 15.89 15.34 14.25 13.49 12.79 12.59 13.24 13.86 13.49 12.68 Revaluation losses on off-balance-sheet items3 . n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2.32 2.88 Other 4.67 4.46 4.20 4.13 4.27 4.16 4.27 4.37 4.45 4.57 Capital account 6.31 6.17 6.16 6.36 6.40 6.67 7.18 7.85 7.88 8.01 MEMO Commercial real estate loans n.a. n.a. n.a. n.a. n.a. 11.36 10.59 9.84 9.15 9.01 Other real estate owned .30 .35 .39 .39 .50 .75 .82 .63 .36 .19 Managed liabilities 35.07 35.13 35.74 35.69 34.24 30.99 28.65 28.23 29.57 32.06 Average net consolidated assets (billions of dollars) 2,775 2,922 3,048 3,187 3,338 3,379 3,442 3,567 3,863 4,149 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 497 A.2.—Continued A. All banks Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Effective interest rate (percent)4 Rates earned Interest-earning assets 9.95 9.43 10.06 11.13 10.66 9.54 8.29 7.61 7.62 8.35 Taxable equivalent 10.40 9.67 10.26 11.29 10.79 9.66 8.39 7.72 7.71 8.42 Loans and leases, gross 10.84 10.23 10.86 12.03 11.48 10.37 9.21 8.69 8.63 9.26 Net of loss provisions 9.47 8.08 9.80 10.44 9.93 8.68 7.88 7.87 8.13 8.75 Securities 8.45 8.10 8.38 8.73 8.79 8.16 7.06 6.08 5.97 6.55 Taxable equivalent 10.10 8.95 9.07 9.25 9.20 8.54 7.37 6.36 6.21 6.55 Investment account 8.51 7.95 8.07 8.56 8.66 8.23 7.14 6.07 5.80 6.36 U.S. government and other debt 9.15 8.19 8.25 8.80 8.92 8.40 7.21 6.08 5.81 6.43 State and local 7.20 7.27 7.39 7.45 7.37 7.25 6.83 6.26 5.88 5.82 Equity2 n.a. n.a. n.a. 7.74 7.33 6.19 5.32 4.79 4.80 5.52 Trading account 7.85 10.01 12.63 11.11 10.15 7.53 6.40 6.16 7.41 7.98 Gross federal funds sold and reverse RPs 6.73 6.57 7.52 9.17 8.06 5.67 3.59 3.04 4.26 5.63 Interest-bearing balances at depositories 7.94 7.55 8.71 10.59 9.96 8.44 7.32 6.61 5.71 6.84 Rates paid Interest-bearing liabilities 7.20 6.76 7.28 8.53 8.04 6.52 4.76 4.01 4.02 5.00 Interest-bearing deposits 6.96 6.38 6.86 7.87 7.56 6.32 4.52 3.65 3.54 4.47 In foreign offices 7.82 7.90 8.91 10.87 10.71 8.54 7.32 6.82 5.59 6.12 In domestic offices 6.78 6.05 6.44 7.32 7.01 5.97 4.09 3.14 3.15 4.11 Other checkable deposits n.a. 4.55 4.77 4.83 4.78 4.33 2.71 1.99 1.86 2.07 Savings (including MMDAs) n.a. 5.29 5.55 6.18 5.98 5.09 3.26 2.50 2.58 3.19 Large-denomination CDs 7.39 6.88 7.47 8.67 8.03 6.67 4.91 4.00 4.10 5.47 Other time deposits n.a. 6.99 7.34 8.29 7.96 6.89 5.17 4.19 4.18 5.45 Gross federal funds purchased and RPs 6.81 6.52 7.43 9.20 7.96 5.72 3.65 3.07 4.19 5.65 Income and expenses as a percentage of average net consolidated assets Gross interest income 8.61 8.39 9.00 9.95 9.59 8.58 7.47 6.87 6.66 7.30 Taxable equivalent 9.01 8.59 9.18 10.08 9.70 8.67 7.55 6.95 6.73 7.37 Loans 6.37 6.18 6.66 7.46 7.15 6.34 5.41 5.01 4.92 5.48 Securities 1.39 1.35 1.38 1.47 1.53 1.56 1.51 1.37 1.25 1.23 Gross federal funds sold and reverse RPs .33 .31 .35 .41 .38 .27 .17 .13 .17 .24 Other .53 .54 .61 .61 .54 .41 .37 .36 .33 .35 Gross interest expense 5.18 4.97 5.46 6.44 6.14 4.97 3.57 2.96 2.87 3.58 Deposits 4.26 3.96 4.28 4.94 4.83 4.11 2.88 2.23 2.05 2.54 Gross federal funds purchased and RPs .58 .55 .62 .78 .68 .42 .27 .24 .32 .44 Other .34 .46 .56 .71 .62 .43 .42 .50 .50 .59 Net interest income 3.44 3.42 3.54 3.51 3.46 3.61 3.90 3.90 3.79 3.73 Taxable equivalent 3.83 3.63 3.72 3.65 3.57 3.70 3.99 3.98 3.86 3.79 I Loss provisioning5 .81 1.30 .65 .98 .97 1.03 .78 .47 .28 .30 Noninterest income 1.31 1.43 1.50 1.62 1.67 1.79 1.95 2.13 2.00 2.02 Service charges on deposits .29 .30 .31 .32 .34 .38 .41 .42 .40 .39 Income from fiduciary activities .23 .24 .25 .26 .27 .28 .30 .31 .31 .31 9 Foreign-exchange gains and fees .06 .09 .07 .07 .08 .08 .10 .09 .05 .07 Trading income .05 .04 .05 .06 .06 .10 .09 .17 .11 .09 Other .69 .77 .82 .91 .91 .96 1.05 1.14 1.13 1.17 I Noninterest expense 3.28 3.35 3.38 3.42 3.49 3.73 3.87 3.94 3.75 3.64 1 Salaries, wages, and employee benefits 1.56 1.55 1.55 1.55 1.56 1.59 1.62 1.64 1.58 1.54 1 Expenses of premises and fixed assets .53 .53 .53 .52 .53 .53 .53 .52 .49 .48 1 Other 1.19 1.27 1.31 1.35 1.41 1.61 1.72 1.78 1.68 1.62 1 Net noninterest expense 1.97 1.91 1.88 1.80 1.82 1.94 1.92 1.81 1.76 1.62 1 Realized gains on investment account securities .. .14 .05 .01 .03 .01 .09 .11 .09 -.01 .01 1 Income before taxes and extraordinary items .80 .26 1.02 .76 .68 .73 1.32 1.70 1.74 1.81 Taxes .19 .19 .33 .30 .23 .25 .42 .56 .58 .63 Extraordinary items .01 .01 .03 .01 .02 .03 .01 .06 * * Net income .62 .08 .71 .47 .47 .51 .91 1.20 1.15 1.18 1 Cash dividends declared .33 .36 .44 .44 .42 .45 .4! .62 .73 .75 Retained income .29 -.29 .28 .02 .05 .07 .50 .59 .43 .43 MEMO: Return on equity 9.83 1.29 11.61 7.33 7.29 7.71 12.66 15.34 14.65 14.72 * In absolute value, less than 0.005 percent. n.a. Not available. MMDA Money market deposit account. RP Repurchase agreement. CD Certificate of deposit. 1. Includes allocated transfer risk reserve. 2. As in the Call Report, equity securities are combined with "other debt securities" before 1989. 3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest-bearing liabilities" if a loss. 4. Where possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Report. 5. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

498 Federal Reserve Bulletin • June 1996 A.2. Portfolio composition, interest rates, and income and expense, all insured domestic commercial banks and nondeposit trust companies, 1986-95 B. Ten largest banks by assets Item 1986 1987 J 1988 1989 1990 1991 1992 1993 1994 1995 Balance sheet items as a percentage of average net consolidated assets Interest-earning assets 85.08 85.14 85.22 85.16 84.85 85.41 85.16 84.79 76.97 77.02 Loans and leases, net 61.45 59.36 58.69 59.66 61.69 62.14 58.34 55.57 49.91 50.05 Commercial and industrial 26.68 24.53 23.36 22.61 22.91 22.42 20.32 18.65 16.43 16.16 U.S. addressees 13.74 13.31 13.01 13.18 13.39 13.44 12.00 10.75 9.16 8.66 Foreign addressees 12.95 11.22 10.36 9.43 9.53 8.97 8.32 7.90 7.27 7.50 Consumer 6.50 6.41 6.19 6.21 6.87 7.20 7.31 7.33 6.59 6.60 Credit card 2.46 2.34 2.08 1.99 2.20 2.53 2.61 2.50 2.28 1.96 Installment and other 4.03 4.07 4.10 4.22 4.67 4.67 4.70 4.83 4.31 4.65 Real estate 12.30 13.97 15.46 18.02 20.56 21.68 19.93 18.54 16.21 15.82 In domestic offices 10.22 11.69 12.80 15.05 17.36 18.37 17.07 15.99 13.80 13.48 Construction and land development 2.67 3.21 3.48 3.60 3.79 3.42 2.48 1.59 .84 .58 Farmland .07 .06 .06 .08 .08 .08 .07 .07 .06 .06 One- to four-family residential 4.76 5.17 5.83 7.45 9.31 10.34 10.08 10.29 9.69 9.62 Home equity n.a. n.a. .76 1.04 1.31 1.63 1.63 1.60 1.40 1.40 Other n.a. n.a. 5.07 6.41 8.00 8.71 8.46 8.68 8.29 8.22 Multifamily residential .48 .61 .65 .68 .68 .57 .58 .53 .41 .38 Nonfarm nonresidential 2.24 2.63 2.78 3.23 3.51 3.95 3.86 3.51 2.79 2.83 In foreign offices 2.07 2.28 2.66 2.97 3.20 3.32 2.85 2.55 2.41 2.35 Depository institutions 5.01 5.18 5.21 4.56 3.64 3.05 2.56 2.35 3.37 4.95 Foreign governments 3.77 3.64 3.63 3.34 2.76 2.88 2.75 2.46 1.27 .90 Agricultural production .42 .36 .33 .31 .31 .31 .28 .27 .25 .21 Other loans 6.85 6.51 6.23 6.36 6.05 5.61 6.05 6.82 6.44 5.85 Lease-financing receivables 1.37 1.38 1.44 1.49 1.60 1.68 1.51 1.30 1.14 1.14 LESS: Unearned income on loans -.39 -.41 -.43 -.45 -.39 -.35 -.27 -.21 -.16 -.14 LESS: Loss reserves' -1.06 -2.22 -2.74 -2.77 -2.63 -2.34 -2.08 -1.94 -1.63 -1.45 Securities 11.71 12.59 12.96 13.13 14.03 15.58 19.13 22.74 20.43 19.53 Investment account 6.91 8.19 8.67 9.05 9.22 9.38 10.70 12.45 11.68 10.65 Debt 6.91 8.19 8.67 8.83 8.98 9.08 10.36 12.08 11.30 10.27 U.S. Treasury 1.60 1.47 1.41 1.29 1.09 1.35 2.30 2.39 2.17 2.03 U.S. government agency and corporation obligations .68 1.54 1.94 2.29 2.91 3.46 4.45 6.14 5.16 4.46 Government-backed mortgage pools .59 1.47 1.84 2.07 2.24 2.26 2.43 3.30 2.79 2.89 Collateralized mortgage obligations — n.a. n.a. n.a. n.a. .55 1.12 1.97 2.76 2.31 1.50 Other .09 .07 .10 .22 .13 .08 .05 .08 .06 .08 State and local government 1.99 1.93 1.80 1.58 1.08 .77 .66 .59 .60 .49 Other 2.64 3.25 3.52 3.68 3.90 3.50 2.95 2.97 3.37 3.29 Equity2 n.a. n.a. n.a. .22 .24 .30 .33 .36 .38 .38 Trading account 4.80 4.40 4.29 4.08 4.81 6.19 8.43 10.30 8.74 8.88 Gross federal funds sold and reverse RPs 3.57 3.91 4.61 4.12 2.88 2.96 3.23 2.71 2.68 3.20 Interest-bearing balances at depositories 8.35 9.28 8.97 8.26 6.25 4.74 4.45 3.76 3.95 4.25 Non-interest-earning assets 14.92 14.86 14.78 14.84 15.15 14.59 14.84 15.21 23.03 22.98 Revaluation gains on off-balance-sheet items3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9.89 10.77 Other n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13.14 12.21 Liabilities 95.13 95.58 95.41 95.11 95.29 94.97 94.44 93.24 93.42 93.59 Interest-bearing liabilities 72.61 73.08 73.76 74.17 73.97 74.62 73.08 71.56 64.33 63.37 Deposits 56.56 57.46 57.67 57.56 57.95 57.67 55.73 52.91 48.20 47.49 In foreign offices 32.43 32.60 31.49 30.08 29.66 28.47 27.16 25.51 26.10 28.36 In domestic offices 24.14 24.86 26.18 27.49 28.28 29.19 28.56 27.41 22.10 19.12 Other checkable deposits 1.89 2.45 2.68 2.70 2.74 3.00 3.38 3.45 2.91 2.30 Savings (including MMDAs) 10.32 11.04 11.42 11.32 12.05 13.50 14.91 15.33 12.70 10.56 Small-denomination time deposits 4.59 4.55 5.03 5.64 6.16 6.55 5.72 5.09 3.98 4.04 Large-denomination time deposits 7.34 6.82 7.05 7.82 7.33 6.14 4.56 3.53 2.51 2.23 Gross federal funds purchased and RPs 8.08 6.89 6.40 6.72 6.90 6.80 6.19 6.70 5.83 6.17 Other 7.96 8.74 9.69 9.89 9.13 10.15 11.16 11.94 10.29 9.71 Non-interest-bearing liabilities 22.52 22.50 21.65 20.94 21.32 20.35 21.36 21.68 29.09 30.22 Demand deposits in domestic offices 12.55 12.64 11.93 11.60 10.93 10.36 11.05 11.27 10.15 8.88 Revaluation losses on off-balance-sheet items3 . n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8.75 10.68 Other 9.97 9.86 9.71 9.34 10.39 9.99 10.30 10.41 10.20 10.66 Capital account 4.87 4.42 4.59 4.89 4.71 5.03 5.56 6.76 6.58 6.41 MEMO Commercial real estate loans n.a. n.a. n.a. n.a. n.a. 8.48 7.43 5.92 4.24 4.02 Other real estate owned .18 .21 .22 .23 .42 .78 1.13 1.02 .58 .27 Managed liabilities 57.37 56.79 56.34 56.24 54.74 53.18 50.76 49.17 46.16 47.89 Average net consolidated assets (billions of dollars) 681 691 685 693 725 717 775 818 949 1,051 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 499 A.2.—Continued B. Ten largest banks by assets Item 1986 1987 | 1988 1989 1990 1991 1992 1993 1994 1995 1 Effective interest rate (percent)4 Rates earned Interest-earning assets 9.82 9.56 10.76 12.31 11.65 9.92 8.67 8.16 8.15 8.23 Taxable equivalent 10.05 9.59 10.88 12.31 11.70 9.95 8.72 8.20 8.18 8.25 Loans and leases, gross 10.53 10.13 11.35 13.19 12.29 10.46 9.36 9.07 8.89 8.84 Net of loss provisions 9.22 6.63 10.70 10.87 11.10 8.58 7.50 7.95 8.38 8.62 Securities 8.62 9.49 10.54 10.11 9.85 8.52 7.38 6.69 7.10 7.54 Taxable equivalent 9.62 9.65 11.06 10.08 10.00 8.63 7.54 6.77 7.19 7.53 Investment account 8.90 8.70 8.70 9.20 9.34 8.99 7.96 6.90 6.58 7.06 U.S. government and other debt 9.55 9.07 8.95 9.56 9.68 9.29 8.13 6.99 6.70 7.22 State and local 7.30 7.52 7.74 7.69 7.54 7.67 7.40 6.99 6.37 6.23 Equity2 n.a. n.a. n.a. 6.81 5.82 4.22 4.04 3.72 3.27 4.03 Trading account 8.22 10.96 14.33 12.13 10.75 7.84 6.69 6.45 7.79 8.11 Gross federal funds sold and reverse RPs 6.36 6.13 7.31 8.98 8.01 5.60 3.65 3.02 4.52 5.20 Interest-bearing balances at depositories 8.10 7.68 9.13 10.88 11.06 10.05 9.29 8.34 7.27 7.15 Rates paid Interest-bearing liabilities 7.75 7.83 8.75 10.74 10.18 7.71 6.17 5.60 5.44 5.92 Interest-bearing deposits 7.21 6.97 7.77 9.19 9.03 7.09 5.33 4.50 4.32 4.99 In foreign offices 7.92 8.00 9.00 10.96 11.11 8.76 7.55 6.87 6.04 6.07 In domestic offices 6.39 5.63 6.28 7.28 6.81 5.47 3.24 2.36 2.36 3.42 Other checkable deposits n.a. 3.26 4.43 4.40 4.35 3.93 1.96 1.28 1.11 1.29 Savings (including MMDAs) n.a. 5.13 5.55 6.49 6.21 5.09 2.95 2.14 2.35 3.11 Large-denomination CDs 7.51 7.29 7.75 8.87 7.96 6.50 4.66 3.55 3.14 3.73 Other time deposits n.a. 6.38 7.11 8.26 7.76 6.09 3.81 3.01 2.81 5.08 Gross federal funds purchased and RPs 6.97 6.52 7.43 9.27 7.75 5.98 4.04 3.26 4.05 5.22 Income and expenses as a percentage of average net consolidated assets Gross interest income 8.30 8.45 9.52 10.82 10.37 8.77 7.68 7.22 6.38 6.44 Taxable equivalent 8.50 8.47 9.63 10.83 10.43 8.80 7.72 7.25 6.40 6.46 Loans 6.37 6.23 6.93 8.23 7.96 6.77 5.65 5.22 4.49 4.44 Securities .62 .71 .75 .83 .86 .84 .85 .86 .77 .75 Gross federal funds sold and reverse RPs .26 .29 .40 .37 .25 .17 .14 .11 .15 .21 Other 1.06 1.22 1.44 1.39 1.30 .98 1.05 1.04 .97 1.03 Gross interest expense 5.56 5.77 6.51 8.01 7.65 5.81 4.54 4.06 3.52 3.76 Deposits 4.21 4.18 4.56 5.37 5.41 4.23 3.09 2.48 2.15 2.43 Gross federal funds purchased and RPs .61 .52 .58 .72 .64 .43 .28 .24 .24 .35 Other .75 1.07 1.37 1.92 1.60 1.15 1.17 1.35 1.13 .98 Net interest income 2.74 2.68 3.01 2.82 2.72 2.96 3.15 3.16 2.86 2.68 Taxable equivalent 2.93 2.71 3.12 2.82 2.77 2.99 3.18 3.19 2.88 2.70 Loss provisioning5 .79 2.15 .40 1.45 .77 1.21 1.12 .64 .26 .11 Noninterest income 1.61 1.94 2.07 2.19 2.27 2.40 2.59 2.99 2.33 2.16 Service charges on deposits .13 .16 .19 .22 .23 .26 .30 .30 .26 .25 Income from fiduciary activities .21 .23 .23 .27 .31 .33 .37 .39 .37 .30 Foreign-exchange gains and fees .20 .29 .26 .25 .30 .28 .36 .31 .15 .18 Trading income .09 .10 .15 .17 .21 .36 .30 .60 .39 .28 Other .98 1.16 1.24 1.29 1.21 1.16 1.27 1.38 1.18 1.15 Noninterest expense 2.99 3.20 3.29 3.43 3.55 . 3.83 3.86 4.13 3,56 3.32 Salaries, wages, and employee benefits 1.52 1.60 1.63 1.66 1.74 1.79 1.78 1.88 1.65 1.58 Expenses of premises and fixed assets .55 .58 .60 .62 .65 .66 .65 .66 .55 .50 Other .92 1.03 1.05 1.15 1.16 1.38 1.43 1.59 1.36 1.24 Net noninterest expense 1.39 1.26 1.21 1.24 1.28 1.44 1.27 1.14 1.23 1.16 Realized gains on investment account securities .. .13 .07 .03 .03 .02 .04 .11 .13 .02 .03 Income before taxes and extraordinary items .68 -.66 1.43 .16 .69 .34 .87 1.50 1.39 1.44 Taxes .22 .14 .44 .38 .27 .17 .26 .53 .48 .55 Extraordinary items * * .08 .03 .06 .03 * .16 * * Net income .47 -.80 1.07 -.19 .48 .21 .61 1.13 .91 .88 Cash dividends declared .21 .28 .38 .37 .26 .21 .18 .28 .58 .57 Retained income .25 -1.08 .69 -.57 .21 * .43 .85 .33 .31 MEMO: Return on equity 9.58 -18.11 23.30 -3.92 10.13 4.23 10.91 16.75 13.86 13.78 * In absolute value, less than 0.005 percent. n.a. Not available. MMDA Money market deposit account. RP Repurchase agreement. CD Certificate of deposit. 1. Includes allocated transfer risk reserve. 2. As in the Call Report, equity securities are combined with "other debt securities" before 1989. 3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest-bearing liabilities" if a loss. 4. Where possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Report. 5. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

500 Federal Reserve Bulletin • June 1996 A.2. Portfolio composition, interest rates, and income and expense, all insured domestic commercial banks and nondeposit trust companies, 1986-95 C. Banks ranked 11th through 100th by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Balance sheet items as a percentage of average net consolidated ass<; ts Interest-earning assets 85.64 86.20 87.23 86.91 86.81 86.88 87.97 88.36 88.16 88.31 Loans and leases, net 61.77 61.70 61.99 62.61 61.22 60.08 58.30 57.33 58.56 62.68 Commercial and industrial 24.13 23.72 23.45 22.75 21.76 20.53 18.83 18.03 18.03 19.26 U.S. addressees 21.21 21.22 21.43 21.23 20.44 19.30 17.78 17.05 16.99 18.10 Foreign addressees 2.92 2.50 2.02 1.53 1.33 1.24 1.05 .98 1.04 1.16 Consumer 11.80 11.73 12.20 12.97 12.25 11.66 11.72 11.46 12.62 14.23 Credit card 4.50 4.40 4.85 5.82 5.48 5.04 5.16 5.23 5.99 7.34 Installment and other 7.30 7.33 7.35 7.16 6.76 6.62 6.56 6.24 6.63 6.89 Real estate 13.94 16.05 17.94 19.09 20.21 21.51 21.89 22.11 22.26 23.25 In domestic offices 13.77 15.83 17.65 18.85 20.04 21.37 21.78 22.01 22.17 23.10 Construction and land development 4.79 5.24 5.27 5.25 4.91 4.00 3.02 2.08 1.63 1.50 Farmland .09 .10 .11 .12 .12 .12 .14 .13 .14 .13 One- to four-family residential 5.27 5.88 6.85 7.54 8.53 10.17 11.36 12.30 12.98 14.16 Home equity n.a. n.a. 1.17 1.41 1.67 2.07 2.50 2.54 2.33 2.19 Other n.a. n.a. 5.68 6.13 6.86 8.10 8.85 9.76 10.65 11.97 Multifamily residential .32 .39 .43 .45 .46 .54 .66 .71 .71 .77 Nonfarm nonresidential 3.30 4.22 4.99 5.49 6.01 6.53 6.61 6.79 6.72 6.54 In foreign offices .17 .22 .29 .24 .18 .14 .11 .10 .09 .15 Depository institutions 2.83 2.51 1.84 1.55 1.57 1.58 1.43 1.30 1.49 1.59 Foreign governments 1.65 1.53 1.22 .88 .52 .39 .33 .30 .28 .20 Agricultural production .36 .30 .29 .29 .28 .31 .31 .29 .29 .26 Other loans 7.26 6.25 5.54 5.17 4.82 4.55 4.28 4.05 3.47 3.32 Lease-financing receivables 1.33 1.52 1.69 1.73 1.67 1.53 1.49 1.47 1.60 1.96 LESS: Unearned income on loans -.49 -.40 -.37 -.34 -.26 -.22 -.17 -.11 -.07 -.07 LESS: Loss reserves' -1.03 -1.51 -1.80 -1.48 -1.60 -1.76 -1.79 -1.60 -1.41 -1.32 Securities 14.11 15.26 15.54 15.21 16.19 17.38 20.38 21.97 21.19 18.64 Investment account 13.02 14.45 14.73 14.38 15.32 16.25 19.24 20.60 19.82 17.88 Debt 13.02 14.45 14.73 14.16 15.14 16.02 18.99 20.34 19.50 17.51 U.S. Treasury 4.69 5.06 4.89 4.10 3.42 3.78 5.88 7.05 6.85 4.82 U.S. government agency and corporation obligations 2.05 3.13 3.58 5.01 7.42 8.43 9.26 9.55 9.28 9.40 Government-backed mortgage pools 1.40 2.36 2.96 4.03 5.32 5.38 5.22 5.21 5.30 5.06 Collateralized mortgage obligations n.a. n.a. n.a. n.a. 1.58 2.48 3.54 3.71 3.07 2.82 Other .65 .77 .61 .98 .53 .57 .50 .63 .91 1.52 State and local government 5.08 4.07 3.32 2.70 2.03 1.63 1.46 1.31 1.21 1.11 Other 1.20 2.18 2.94 2.35 2.27 2.19 2.39 2.43 2.15 2.17 Equity2 n.a. n.a. n.a. .22 .18 .22 .25 .26 .32 .37 Trading account 1.09 .81 .82 .83 .88 1.13 1.14 1.37 1.37 .76 Gross federal funds sold and reverse RPs 3.17 3.07 3.68 3.71 4.41 4.90 4.78 4.98 5.11 4.52 Interest-bearing balances at depositories 6.58 6.16 6.01 5.38 4.98 4.51 4.52 4.08 3.30 2.47 Non-interest-earning assets 14.36 13.80 12.77 13.09 13.19 13.12 12.03 11.64 11.84 11.69 Revaluation gains on off-balance-sheet items3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. .57 .50 Other n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11.28 11.18 Liabilities 94.36 94.56 94.77 94.45 94.35 93.93 93.13 92.56 92.47 92.23 Interest-bearing liabilities 71.54 73.01 75.34 76.23 77.02 76.07 74.66 73.38 72.86 74.05 Deposits 51.42 52.61 55.02 56.45 57.46 59.24 56.99 54.22 53.04 52.32 In foreign offices 10.45 10.14 9.68 8.63 7.84 6.69 6.20 6.78 8.05 8.12 In domestic offices 40.97 42.48 45.34 47.82 49.62 52.54 50.79 47.43 44.98 44.20 Other checkable deposits 3.84 4.42 4.68 4.67 4.75 5.36 6.26 7.21 6.91 5.62 Savings (including MMDAs) 15.17 16.02 15.67 14.58 15.50 17.62 20.21 20.60 20.13 18.78 Small-denomination time deposits 10.31 9.63 11.05 13.49 15.59 17.99 15.98 14.19 13.26 14.25 Large-denomination time deposits 11.65 12.40 13.95 15.08 13.78 11.56 8.34 5.44 4.68 5.55 Gross federal funds purchased and RPs 14.80 14.52 13.72 13.22 13.03 10.94 11.45 11.93 11.49 11.37 Other 5.31 5.87 6.59 6.57 6.53 5.89 6.22 7.23 8.34 10.36 Non-interest-bearing liabilities 22.82 21.55 19.44 18.22 17.33 17.87 18.47 19.18 19.62 18.18 Demand deposits in domestic offices 17.61 16.62 15.04 13.86 13.23 13.76 14.52 15.38 15.27 14.26 Revaluation losses on off-balance-sheet items3 . n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. .53 .49 Other 5.21 4.93 4.40 4.36 4.10 4.10 3.95 3.80 3.82 3.43 Capital account 5.64 5.44 5.23 5.55 5.65 6.07 6.87 7.44 7.53 7.77 MEMO Commercial real estate loans n.a. n.a. n.a. n.a. n.a. 11.28 10.43 9.58 8.98 8.65 Other real estate owned .17 .22 .31 .30 .46 .76 .70 .47 .25 .13 Managed liabilities 42.56 43.29 44.27 43.81 41.50 35.42 32.53 31.69 32.83 3355..6644 Average net consolidated assets (billions of dollars) 735 802 870 940 995 1,006 1,003 1,082 1,204 1,338 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 501 A.2.—Continued C. Banks ranked 11th through 100th by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Effective interest rate (percent)4 Rates earned Interest-earning assets 9.75 9.19 9.87 11.10 10.41 9.22 8.01 7.37 7.29 8.31 Taxable equivalent 10.26 9.40 10.07 11.27 10.50 9.32 8.11 7.46 7.37 8.37 Loans and leases, gross 10.49 9.78 10.48 11.74 11.04 9.87 8.77 8.26 8.22 9.10 Net of loss provisions 9.19 7.33 9.19 9.87 9.03 7.89 7.47 7.47 7.68 8.49 Securities 8.07 7.87 8.21 8.76 8.81 8.16 7.08 6.06 5.70 6.38 Taxable equivalent 10.13 8.67 8.92 9.36 9.12 8.49 7.38 6.34 5.92 6.39 Investment account 8.21 7.93 8.24 8.77 8.87 8.28 7.21 6.16 5.70 6.34 U.S. government and other debt 9.00 8.25 8.51 9.06 9.13 8.42 7.25 6.16 5.69 6.38 State and local 6.96 7.09 7.29 7.41 7.22 7.23 6.81 6.32 6.04 6.06 Equity2 n.a. n.a. n.a. 9.19 8.09 7.32 6.75 5.23 5.00 5.69 Trading account 6.55 6.99 7.68 8.66 8.01 6.46 4.73 4.74 5.75 7.27 Gross federal funds sold and reverse RPs 6.60 6.59 7.61 9.35 8.11 5.76 3.71 3.11 4.31 5.91 Interest-bearing balances at depositories 7.88 7.68 8.87 11.35 9.72 8.15 6.77 6.50 4.69 6.79 Rates paid Interest-bearing liabilities 7.13 6.75 7.34 8.66 7.93 6.34 4.45 3.76 3.72 4.94 Interest-bearing deposits 6.92 6.42 7.00 8.14 7.51 6.20 4.32 3.52 3.25 4.35 In foreign offices 7.67 7.78 8.92 11.08 10.08 8.38 7.26 7.37 4.60 6.30 In domestic offices 6.74 6.10 6.59 7.62 7.10 5.92 3.99 2.99 3.03 4.01 Other checkable deposits n.a. 4.44 4.53 4.57 4.64 4.16 2.45 1.70 1.62 1.89 Savings (including MMDAs) n.a. 5.27 5.63 6.42 6.03 4.98 3.08 2.33 2.46 3.11 Large-denomination CDs 7.45 7.02 7.65 8.75 8.09 6.72 5.13 4.31 4.21 5.70 Other time deposits n.a. 7.07 7.56 8.72 8.02 6.81 5.11 4.07 4.18 5.35 Gross federal funds purchased and RPs 6.85 6.63 7.50 9.35 8.11 5.68 3.57 3.04 4.28 5.86 Income and expenses as a percentage of average net consolidated assets Gross interest income 8.20 8.05 8.72 9.77 9.26 8.17 7.15 6.59 6.46 7.40 Taxable equivalent 8.63 8.23 8.90 9.91 9.34 8.24 7.22 6.65 6.51 7.46 Loans 6.37 6.19 6.69 7.51 6.97 6.09 5.24 4.85 4.91 5.79 Securities 1.07 1.14 1.21 1.26 1.36 1.35 1.39 1.27 1.13 1.13 Gross federal funds sold and reverse RPs .20 .20 .25 .36 .37 .28 .19 .15 .21 .27 Other .56 .51 .57 .65 .56 .45 .34 .32 .21 .21 Gross interest expense 4.96 4.85 5.45 6.50 6.06 4.75 3.28 2.74 2.67 3.62 Deposits 3.58 3.41 3.86 4.59 4.34 3.70 2.49 1.94 1.73 2.29 Gross federal funds purchased and RPs 1.01 .96 1.03 1.24 1.12 .67 .43 .38 .51 .67 Other .37 .48 .56 .66 .60 .38 .35 .43 .43 .66 Net interest income 3.24 3.19 3.27 3.28 3.21 3.42 3.87 3.85 3.79 3.79 Taxable equivalent 3.67 3.38 3.45 3.41 3.29 3.49 3.94 3.91 3.85 3.84 Loss provisioning3 .79 1.55 .82 1.20 1.27 1.23 .78 .47 .32 .39 Noninterest income 1.45 1.53 1.62 1.86 1.84 2.01 2.25 2.29 2.25 2.38 Service charges on deposits .27 .29 .30 .31 .34 .40 .45 .46 .45 .44 Income from fiduciary activities .34 .36 .35 .35 .33 .35 .38 .38 .39 .40 I Foreign-exchange gains and fees .03 .05 .04 .05 .06 .05 .05 .05 .04 .05 Trading income .05 .02 .03 .04 .03 .05 .04 .08 .04 .04 Other .75 .81 .89 1.12 1.08 1.16 1.33 1.32 1.33 1.45 1 1 Noninterest expense 3.17 3.23 3.29 3.34 3.43 3.72 3.99 3.95 3.86 3.79 Salaries, wages, and employee benefits 1.50 1.48 1.48 1.47 1.46 1.51 1.54 1.52 1.50 1.47 1 Expenses of premises and fixed assets .50 .49 .50 .50 .49 .50 .50 .48 .47 .47 | Other 1.17 1.26 1.31 1:37 1.48 1.72 1.96 1.95 1.89 1.84 1 Net noninterest expense 1.72 1.70 1.67 1.47 1.59 1.71 1.74 1.66 1.61 1.41 Realized gains on investment account securities .. .17 .05 * .04 .03 .14 .15 .09 -.01 .021 Income before taxes and extraordinary items .91 * .77 .65 .37 .62 1.51 1.82 1.85 2.01 Taxes .20 .09 .28 .18 .15 .19 .49 .56 .62 .71 Extraordinary items .01 * .02 * .01 .03 .03 * * * Net income .72 -.09 .51 .47 .23 .47 1.05 1.26 1.23 1.31 | Cash dividends declared .32 .34 .41 .40 .37 .47 .46 .76 .86 .85 Retained income .39 -.43 .09 .06 -.14 * .58 .49 .36 .46 MEMO: Return on equity 12.75 -1.70 9.72 8.41 4.07 7.71 15.21 16.91 16.28 16.87 * In absolute value, less than 0.005 percent. n.a. Not available. MMDA Money market deposit account. RP Repurchase agreement. CD Certificate of deposit. 1. Includes allocated transfer risk reserve. 2. As in the Call Report, equity securities are combined with "other debt securities" before 1989. 3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest-bearing liabilities" if a loss. 4. Where possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Report. 5. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Federal Reserve Bulletin • June 1996 A.2. Portfolio composition, interest rates, and income and expense, all insured domestic commercial banks and nondeposit trust companies, 1986-95 D. Banks ranked 101st through 1,000th by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Balance sheet items as a percentage of average net consolidated assets Interest-earning assets 87.92 88.34 88.88 88.98 88.84 88.91 89.02 89.53 90.09 90.13 Loans and leases, net 59.77 61.60 63.03 63.62 63.09 61.03 58.51 57.93 59.74 62.22 Commercial and industrial 18.47 18.12 17.83 17.68 16.69 15.05 13.33 12.19 12.07 12.68 U.S. addressees 18.22 17.87 17.67 17.53 16.56 14.89 13.15 12.03 11.90 12.52 Foreign addressees .25 .24 .16 .15 .13 .16 .18 .16 .16 .16 Consumer 14.69 15.34 15.91 15.49 15.48 15.11 14.22 14.82 15.85 16.39 Credit card 4.01 4.65 5.21 4.83 5.22 5.71 5.42 5.64 6.06 6.45 Installment and other 10.68 10.69 10.70 10.66 10.26 9.40 8.80 9.18 9.79 9.93 Real estate 19.79 22.25 24.28 25.97 27.01 27.53 28.10 28.61 29.42 30.77 In domestic offices 19.78 22.25 24.27 25.95 26.99 27.48 28.06 28.59 29.40 30.75 Construction and land development 4.18 4.57 4.73 4.82 4.37 3.67 2.86 2.26 2.08 2.21 Farmland .25 .26 .27 .27 .28 .28 .32 .34 .36 .40 One- to four-family residential 8.49 9.48 10.64 11.56 12.49 13.23 14.25 15.16 16.25 17.46 Home equity n.a. n.a. 1.73 2.08 2.31 2.53 2.56 2.50 2.33 2.36 Other n.a. n.a. 8.91 9.48 10.18 10.69 11.69 12.66 13.92 15.11 Multifamily residential .66 .68 .67 .70 .73 .80 .95 1.07 1.13 1.21 Nonfarm nonresidential 6.21 7.26 7.97 8.61 9.11 9.50 9.68 9.75 9.57 9.47 In foreign offices .01 .01 .01 .01 .03 .05 .04 .02 .03 .02 Depository institutions 1.36 1.13 1.01 .92 1.05 .93 .80 .43 .38 .34 Foreign governments .26 .25 .20 .16 .09 .07 .05 .03 .02 .02 Agricultural production .62 .48 .47 .45 .47 .49 .54 .56 .62 .69 Other loans 5.44 4.94 4.23 3.77 3.16 2.81 2.47 2.16 2.00 1.80 Lease-financing receivables .71 .72 .78 .82 .83 .85 .78 .76 .82 .90 LESS: Unearned income on loans -.71 -.61 -.60 -.56 -.50 -.40 -.30 -.21 -.15 -.12 LESS: Loss reserves' -.87 -1.01 -1.07 -1.07 -1.20 -1.42 -1.49 -1.44 -1.30 -1.23 Securities 19.28 18.72 18.52 18.75 19.34 21.28 24.12 25.90 25.71 23.06 Investment account 18.95 18.50 18.25 18.38 18.87 20.92 23.77 25.61 25.39 22.86 Debt 18.95 18.50 18.25 18.02 18.54 20.55 23.31 25.14 24.95 22.39 U.S. Treasury 7.58 7.14 6.52 5.91 5.44 6.16 7.75 8.62 8.26 6.47 U.S. government agency and corporation obligations 3.32 4.06 4.81 6.07 7.75 9.35 11.07 12.32 12.67 12.21 Government-backed mortgage pools 1.13 1.89 2.33 3.03 3.83 4.51 4.74 4.97 5.57 5.42 Collateralized mortgage obligations n.a. n.a. n.a. n.a. 1.74 2.33 3.95 4.82 4.39 3.55 Other 2.19 2.17 2.48 3.04 2.17 2.11 2.38 2.53 2.71 3.24 State and local government 6.48 5.03 4.10 3.50 3.11 2.65 2.27 2.26 2.29 2.13 Other 1.57 2.26 2.82 2.55 2.25 2.38 2.22 1.94 1.74 1.58 Equity2 n.a. n.a. n.a. .35 .32 .37 .46 .47 .44 .46 Trading account .33 .22 .28 .38 .48 .37 .35 .29 .32 .20 Gross federal funds sold and reverse RPs 5.66 4.94 4.45 4.11 4.51 4.71 4.92 4.50 3.64 3.91 Interest-bearing balances at depositories 3.22 3.08 2.87 2.49 1.90 1.90 1.47 1.20 1.00 .94 Non-interest-earning assets 12.08 11.66 11.12 11.02 11.16 11.09 10.98 10.47 9.91 9.87 Revaluation gains on off-balance-sheet items3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. .02 .05 Other n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9.90 9.83 Liabilities 93.33 93.28 93.34 93.28 93.07 92.89 92.47 91.86 91.62 91.36 Interest-bearing liabilities 73.01 73.92 75.59 76.42 77.04 77.25 75.98 74.43 74.77 75.02 Deposits 62.17 62.43 63.00 63.74 65.05 66.33 65.62 63.05 60.38 59.59 In foreign offices 2.07 1.96 2.04 2.09 1.65 1.76 1.56 1.43 1.69 1.71 In domestic offices 60.10 60.47 60.97 61.65 63.40 64.57 64.06 61.62 58.69 57.88 Other checkable deposits 6.25 7.27 7.39 7.14 7.31 7.83 9.14 9.94 9.70 8.53 Savings (including MMDAs) 22.37 22.83 21.27 19.52 19.69 20.79 23.33 24.05 22.92 20.72 Small-denomination time deposits 18.66 17.75 19.34 22.08 24.09 25.23 23.55 20.79 19.29 21.08 Large-denomination time deposits 12.83 12.62 12.96 12.91 12.31 10.73 8.06 6.84 6.78 7.55 Gross federal funds purchased and RPs 8.21 8.46 8.63 9.21 8.43 7.46 7.17 7.43 8.45 8.30 Other 2.63 3.03 3.96 3.47 3.56 3.46 3.19 3.95 5.94 7.14 Non-interest-bearing liabilities 20.33 19.36 17.74 16.85 16.03 15.64 16.49 17.43 16.85 16.34 Demand deposits in domestic offices 18.25 17.35 15.84 14.86 14.07 13.57 14.39 15.07 14.58 14.05 Revaluation losses on off-balance-sheet items3 . n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. .02 .05 Other 2.08 2.00 1.90 1.99 1.96 2.07 2.10 2.36 2.25 2.24 Capital account 6.67 6.72 6.66 6.72 6.93 7.11 7.53 8.14 8.38 8.64 MEMO Commercial real estate loans n.a. n.a. n.a. n.a. n.a. 13.84 12.95 12.31 11.92 11.97 Other real estate owned .30 .37 .42 .43 .52 .77 .80 .57 .28 .17 Managed liabilities 25.67 26.00 27.51 27.62 25.93 23.40 19.97 19.64 22.86 24.69 Average net consolidated assets (billions of dollars) 710 771 839 892 937 961 968 978 1,032 1,094 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 503 A.2.—Continued D. Banks Ranked 101st through 1,000th by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 | Effective interest rate (percent)4 Rates earned Interest-earning assets 9.93 9.47 9.92 10.75 10.44 9.54 8.17 7.44 7.61 8.45 Taxable equivalent j 10.49 9.82 10.16 10.96 10.60 9.68 8.29 7.56 7.70 8.54 Loans and leases, gross | 10.85 10.33 10.77 11.62 11.24 10.41 9.15 8.58 8.67 9.47 Net of loss provisions 9.60 9.05 9.62 10.45 9.50 8.70 7.87 7.77 8.14 8.78 Securities 1 8.30 7.68 7.84 8.34 8.54 8.10 6.91 5.79 5.71 6.25 Taxable equivalent I 10.10 8.76 8.58 8.98 9.02 8.53 7.22 6.11 5.96 6.26 Investment account I 8.31 7.71 7.85 8.36 8.51 8.12 6.93 5.80 5.72 6.25 U.S. government and other debt 8.99 7.96 8.05 8.62 8.77 8.29 6.97 5.77 5.70 6.30 State and local i 7.01 7.03 7.17 7.28 7.34 7.25 6.87 6.30 5.94 5.82 Equity2 I n.a. n.a. n.a. 6.90 6.94 6.02 5.06 4.95 5.34 6.06 Trading account 7.42 5.80 6.96 7.61 9.92 6.86 5.62 4.82 5.29 5.55 Gross federal funds sold and reverse RPs 6.86 6.64 7.47 9.05 7.98 5.63 3.49 3.02 4.07 5.45 Interest-bearing balances at depositories . | 7.52 7.04 7.82 9.21 8.52 6.82 4.61 3.50 4.29 6.09 Rates paid Interest-bearing liabilities 6.93 6.31 6.72 7.73 7.28 6.09 4.21 3.33 3.58 4.65 Interest-bearing deposits 6.76 6.10 6.50 7.36 7.07 6.05 4.18 3.26 3.32 4.26 In foreign offices 6.94 6.77 7.65 8.98 8.12 6.38 4.25 3.35 4.31 5.93 In domestic offices 6.77 6.08 6.46 7.31 7.04 6.04 4.18 3.26 3.29 4.22 Other checkable deposits n.a. 4.65 4.77 4.88 4.77 4.28 2.68 2.02 1.87 2.03 Savings (including MMDAs) n.a. 5.29 5.54 6.13 5.99 5.13 3.35 2.58 2.65 3.24 Large-denomination CDs 7.32 6.83 7.42 8.70 8.05 6.62 4.77 3.89 4.24 5.62 Other time deposits — n.a. 7.16 7.46 8.32 8.06 7.07 5.37 4.40 4.42 5.54 Gross federal funds purchased and RPs .. 6.61 6.35 7.40 9.01 7.87 5.61 3.47 2.95 4.13 5.61 Income and expenses as a percentage of average net consolidated assets Gross interest income 8.69 8.40 8.88 9.68 9.40 8.62 7.39 6.75 6.93 7.71 Taxable equivalent 9.18 8.72 9.10 9.86 9.53 8.74 7.49 6.85 7.02 7.79 Loans 6.49 6.45 6.89 7.52 7.23 6.50 5.48 5.07 5.28 6.01 Securities 1.57 1.43 1.43 1.54 1.61 1.70 1.65 1.48 1.45 1.43 Gross federal funds sold and reverse RPs .37 .31 .32 .38 .36 .27 .17 .14 .14 .21 Other .25 .22 .24 .25 .20 .15 .08 .06 .06 .07 Gross interest expense 4.95 4.59 5.03 5.84 5.55 4.67 3.17 2.46 2.66 3.46 Deposits 4.21 3.82 4.10 4.70 4.59 4.02 2.75 2.07 2.02 2.56 1 Gross federal funds purchased and RPs .55 .53 .64 .83 .67 .42 .25 .22 .35 .46 Other .19 .23 .29 .31 .29 .23 .17 .17 .29 .45 1 Net interest income 3.74 3.81 3.85 3.84 3.84 3.95 4.21 4.28 4.27 4.25 1 Taxable equivalent 4.23 4.13 4.07 4.02 3.98 4.07 4.32 4.38 4.36 4.33 1 Loss provisioning5 .75 .80 .74 .75 1.12 1.07 .77 .48 .32 •43 1 Noninterest income 1.30 1.36 1.36 1.38 1.50 1.64 1.70 1.84 1.86 1.84 Service charges on deposits .34 .34 .35 .36 .37 .40 .44 .45 .42 .42 a Income from fiduciary activities . .25 .25 .25 .25 .26 .27 .28 .29 .28 .27 1 Foreign-exchange gains and fees .01 .01 * .01 * .01 * .01 .01 .01 Trading income .04 .03 .03 .03 .02 .03 .02 .02 .01 .01 Other .67 .73 .74 .74 .84 .94 .95 1.08 1.13 j 12 1 Noninterest expense 3.51 3.54 3.50 3.45 3.51 3.75 3.89 3.93 3.79 3.69H Salaries, wages, and employee benefits 1.59 1.54 1.49 1.48 1.47 1.48 1.51 1.52 1.49 1 44 1 Expenses of premises and fixed assets . .53 .52 .50 .49 .49 .49 .50 .48 .47 .45 1 Other 1.38 1.47 1.51 1.49 1.55 1.79 1.88 1.93 1.83 1.79B Net noninterest expense 2.21 2.18 2.14 2.07 2.01 2.11 2.19 2.09 1.93 1.851 Realized gains on investment account securities . .12 .04 * .01 .01 .09 .10 .06 -.05 -.Oil Income before taxes and extraordinary items .90 .88 .98 1.02 .72 .86 1.35 1.78 1.97 1.961 Taxes .18 .27 .32 .32 .22 .29 .44 .61 .67 .68 B Extraordinary items .01 .02 .01 * * .03 * .04 * * Net income .73 .62 .67 .71 .51 .60 .92 1.21 1.29 1.281 Cash dividends declared .40 .44 .48 .48 .53 .58 .48 .79 .81 .871 Retained income .33 .18 .18 .23 -.02 .02 .43 .43 .48 .41 • MEMO: Return on equity 10.93 9.25 10.01 10.54 7.41 8.45 12.16 14.91 15.45 14.86 * In absolute value, less than 0.005 percent. n.a. Not available. MMDA Money market deposit account. RP Repurchase agreement. CD Certificate of deposit. 1. Includes allocated transfer risk reserve. 2. As in the Call Report, equity securities are combined with "other debt securities" before 1989. 3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest-bearing liabilities" if a loss. 4. Where possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Report. 5. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

504 Federal Reserve Bulletin • June 1996 A.2. Portfolio composition, interest rates, and income and expense, all insured domestic commercial banks and nondeposit trust companies, 1986-95 E. Banks not ranked among the 1,000 largest by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Balance sheet items as a percentage of average net consolidated assets Interest-earning assets 90.01 90.51 90.81 90.90 91.06 91.24 91.39 91.66 91.72 91.70 Loans and leases, net 52.83 52.82 53.88 54.84 54.74 54.05 53.03 52.95 54.64 56.61 Commercial and industrial 13.68 12.84 12.34 12.10 11.53 10.59 9.74 9.24 9.31 9.66 U.S. addressees 13.66 12.81 12.32 12.07 11.49 10.55 9.70 9.20 9.27 9.60 Foreign addressees .03 .03 .02 .03 .04 .04 .04 .04 .05 .06 Consumer 12.41 11.74 11.48 11.46 11.20 10.49 9.68 9.17 9.38 9.54 Credit card .68 .80 .86 .93 1.00 1.08 1.00 .92 .96 1.01 Installment and other 11.74 10.94 10.62 10.53 10.20 9.41 8.68 8.26 8.41 8.53 Real estate 21.94 24.07 26.02 27.36 28.35 29.31 30.15 31.10 32.19 33.54 In domestic offices 21.94 24.07 26.02 27.36 28.35 29.31 30.15 31.10 32.18 33.54 Construction and land development 2.21 2.19 2.22 2.29 2.37 2.18 1.98 1.93 2.14 2.38 Farmland 1.42 1.59 1.74 1.82 1.86 1.93 2.06 2.20 2.34 2.48 One- to four-family residential 11.62 12.80 14.06 14.81 15.37 15.99 16.44 16.82 16.94 17.45 Home equity n.a. n.a. .73 .94 1.16 1.29 1.34 1.27 1.21 1.20 Other n.a. n.a. 13.32 13.86 14.21 14.69 15.10 15.55 15.73 16.25 Multifamily residential .54 .60 .61 .62 .66 .71 .77 .84 .93 .95 Nonfarm nonresidential 6.15 6.90 7.40 7.82 8.09 8.50 8.91 9.30 9.83 10,27 In foreign offices * * # * * * * * ilfiftiilllS Depository institutions .25 .30 .31 .26 .23 .20 .13 .12 .13 .16 Foreign governments .01 .01 .02 .01 .01 .01 .01 .02 .01 * Agricultural production 3.76 3.30 3.25 3.28 3.30 3.48 3.54 3.58 3.89 3.95 Other loans 2.20 1.90 1.75 1.67 1.41 1.24 .99 .87 .81 .76 Lease-financing receivables .19 .19 .19 .19 .18 .17 .17 .18 .19 .22 LESS: Unearned income on loans -.83 -.67 -.61 -.60 -.58 -.51 -.43 -.36 -.31 -.30 LESS: Loss reserves' -.78 -.86 -.88 -.88 -.89 -.93 -.96 -.97 -.95 -.93 Securities 26.96 27.67 27.98 27.92 28.38 29.98 32.10 33.08 32.90 30.51 Investment account 26.91 27.59 27.93 27.85 28.28 29.92 32.04 33.01 32.86 30.47 Debt 26.91 27.59 27.93 27.45 27.92 29.55 31.60 32.57 32.42 30.02 U.S. Treasury 11.40 10.64 9.75 8.84 8.77 9.24 10.25 10.50 10.81 9.19 U.S. government agency and corporation obligations 6.45 8.18 9.80 11.37 12.43 13.81 15.04 15.80 15.35 15.12 Government-backed mortgage pools — 1.38 2.66 3.22 3.76 4.58 5.59 5.52 5.38 4.81 4.19 Collateralized mortgage obligations .... n.a. n.a. n.a. n.a. .92 1.55 2.66 3.33 3.11 2.75 Other 5.07 5.52 6.58 7.61 6.93 6.67 6.85 7.09 7.43 8.18 State and local government 8.01 6.63 5.65 4.94 4.56 4.26 4.29 4.70 5.01 4.69 Other 1.06 2.13 2.72 2.30 2.15 2.23 2.03 1.57 1.25 1.02 Equity2 n.a. n.a. n.a. .40 .36 .38 .44 .45 .44 .45 Trading account .05 .08 .05 .07 .10 .06 .05 .07 .04 .03 Gross federal funds sold and reverse RPs 7.09 6.66 5.76 5.74 6.13 5.64 5.10 4.66 3.42 3.92 Interest-bearing balances at depositories 3.13 3.36 3.19 2.40 1.81 1.57 1.16 .97 .77 .67 Non-interest-earning assets 9.99 9.49 9.19 9.10 8.94 8.76 8.61 8.34 8.28 8.30 Revaluation gains on off-balance-sheet items3 .... n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. * * Other n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8.28 8.30 Liabilities 91.81 91.74 91.61 91.44 91.40 91.38 91.07 90.63 90.43 90.03 Interest-bearing liabilities 75.62 76.39 76.94 77.13 77.83 78.40 77.83 76.89 76.19 75.73 Deposits 73.67 74.39 74.84 75.00 75.79 76.42 75.75 74.55 73.14 72.70 In foreign offices .06 .04 .04 .06 .07 .08 .07 .08 .09 .11 In domestic offices 73.61 74.35 74.81 74.93 75.72 76.34 75.68 74.47 73.05 72.59 Other checkable deposits 9.03 10.33 10.64 10.38 10.45 10.98 12.33 13.16 13.32 12.37 Savings (including MMDAs) 22.19 23.30 21.92 19.51 18.73 19.35 22.10 23.54 23.23 20.41 Small-denomination time deposits 30.90 29.56 30.98 33.66 35.37 35.86 32.85 30.11 28.83 30.92 Large-denomination time deposits 11.49 11.16 11.27 11.38 11.17 10.15 8.40 7.66 7.68 8.89 Gross federal funds purchased and RPs 1.29 1.27 1.35 1.35 1.36 1.31 1.36 1.44 1.89 1.78 Other .66 .73 .75 .78 .67 .67 .72 .90 1.16 1.25 Non-interest-bearing liabilities 16.18 15.34 14.67 14.31 13.57 12.98 13.24 13.74 14.24 14.30 Demand deposits in domestic offices 14.87 14.23 13.58 13.09 12.37 11.83 12.23 12.81 13.34 13.23 Revaluation losses on off-balance-sheet items3 . n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. * * Other 1.32 1.11 1.09 1.22 1.21 1.14 1.01 .93 .90 1.07 Capital account 8.19 8.26 8.39 8.56 8.60 8.62 8.93 9.37 9.57 9.97 MEMO Commercial real estate loans n.a. n.a. n.a. n.a. n.a. 11.03 11.08 11.37 12.10 12.76 Other real estate owned .55 .63 .65 .63 .61 .66 .65 .52 .35 .25 Managed liabilities 13.43 13.14 13.34 13.53 13.24 12.17 10.53 10.06 10.81 12.04 Average net consolidated assets (billions of dollars) 649 659 654 662 681 695 697 688 679 666 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profits and Balance Sheet Developments at U.S. Commercial Banks in 1995 505 A.2.—Continued E. Banks not ranked among the 1,000 largest by assets Item 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Effective interest rate (percent)4 Rates earned Interest-earning assets 10.29 9.54 9.76 10.50 10.32 9.64 8.43 7.61 7.58 8.40 Taxable equivalent 10.79 9.87 10.01 10.72 10.52 9.82 8.59 7.77 7.73 8.54 Loans and leases, gross 11.67 10.87 11.03 11.76 11.60 11.02 9.83 9.11 9.01 9.82 Net of loss provisions 9.98 9.60 9.99 10.86 10.65 10.08 9.05 8.61 8.67 9.41 Securities 8.73 7.93 7.93 8.37 8.42 8.03 6.99 5.92 5.61 6.11 Taxable equivalent 10.32 8.93 8.64 9.01 8.99 8.53 7.40 6.33 6.00 6.12 Investment account 8.73 7.92 7.92 8.36 8.41 8.03 6.99 5.92 5.61 6.11 U.S. government and other debt 9.24 8.05 8.01 8.51 8.59 8.19 7.06 5.91 5.60 6.19 State and local 7.52 7.53 7.57 7.57 7.46 7.17 6.71 6.09 5.70 5.64 Equity2 n.a. n.a. n.a. 8.19 8.34 7.13 5.63 5.16 5.52 6.31 Trading account 8.44 9.04 14.88 14.84 12.13 8.52 7.12 4.82 6.03 6.09 Gross federal funds sold and reverse RPs 6.91 6.82 7.68 9.25 8.12 5.66 3.51 2.95 4.09 5.97 Interest-bearing balances at depositories 8.07 7.38 8.07 9.13 8.55 7.36 5.60 4.52 4.64 5.93 Rates paid Interest-bearing liabilities 7.02 6.20 6.41 7.16 7.02 6.17 4.44 3.54 3.49 4.47 Interest-bearing deposits 6.97 6.13 6.36 7.10 6.97 6.15 4.44 3.52 3.45 4.40 In foreign offices 7.06 7.29 7.62 9.35 7.57 5.95 3.97 2.91 3.92 5.77 In domestic offices 6.97 6.13 6.36 7.10 6.97 6.15 4.44 3.52 3.44 4.39 Other checkable deposits n.a. 4.93 4.99 5.09 5.02 4.61 3.14 2.42 2.30 2.50 Savings (including MMDAs) n.a. 5.37 5.48 5.81 5.74 5.18 3.62 2.90 2.83 3.32 Large-denomination CDs 7.36 6.57 7.13 8.36 7.92 6.74 4.90 3.95 4.12 5.56 Other time deposits n.a. 6.97 7.17 8.03 7.88 6.98 5.36 4.38 4.29 5.52 Gross federal funds purchased and RPs 6.59 6.26 6.79 8.51 8.03 5.71 3.74 3.17 4.12 5.62 Income and expenses as a percentage of average net consolidated assets Gross interest income 9.33 8.72 8.95 9.65 9.51 8.91 7.79 7.05 7.02 7.79 Taxable equivalent 9.78 9.02 9.17 9.85 9.68 9.07 7.94 7.19 7.16 7.92 Loans 6.23 5.82 6.01 6.53 6.44 6.05 5.30 4.90 4.99 5.64 Securities 2.35 2.19 2.21 2.33 2.38 2.40 2.24 1.96 1.84 1.86 Gross federal funds sold and reverse RPs .50 .47 .47 .57 .53 .34 .18 .14 .15 .25 Other .25 .25 .26 .23 .17 .12 .07 .05 .04 .04 Gross interest expense 5.28 4.72 4.91 5.50 5.44 4.83 3.45 2.71 2.65 3.38 Deposits 5.14 4.58 4.76 5.32 5.28 4.71 3.36 2.63 2.52 3.20 Gross federal funds purchased and RPs .09 .08 .10 .12 .11 .07 .05 .04 .07 .10 Other .05 .06 .06 .06 .05 .05 .04 .04 .06 .08 Net interest income 4.06 4.01 4.04 4.15 4.07 4.09 4.34 4.33 4.37 4.41 Taxable equivalent 4.50 4.30 4.26 4.35 4.24 4.24 4.49 4.47 4.51 4.55 Loss provisioning5 .90 .68 .56 .50 .53 .51 .42 .27 .19 .23 Noninterest income .85 .88 .92 1.00 1.01 1.08 1.16 1.25 1.30 1.38 Service charges on deposits .42 .41 .41 .41 .42 .44 .45 .45 .44 .44 Income from fiduciary activities .10 .11 .12 .14 .14 .14 .16 .16 .17 .22 Foreign-exchange gains and fees * * * * . * * * * * Trading income * * * .01 .01 * # * .01 Other .33 .35 .39 .44 .44 .49 .55 .64 .69 .71 Noninterest expense 3.47 3.43 3.44 3.48 3.49 3.60 3.67 3.73 3.78 3.80 Salaries, wages, and employee benefits 1.63 1.62 1.62 1.65 1.64 1.65 1.69 1.72 1.75 1.80 Expenses of premises and fixed assets .53 .52 .51 .51 .49 .49 .49 .48 .49 .50 Other 1.30 1.30 1.32 1.33 1.36 1.47 1.49 1.52 1.55 1.51 Net noninterest expense 2.62 2.56 2.53 2.49 2.48 2.53 2.51 2.48 2.48 2.42 Realized gains on investment account securities .. .16 .03 .01 .01 * .06 .09 .07 -.03 * Income before taxes and extraordinary items .69 .81 .95 1.17 1.06 1.11 1.50 1.65 1.67 1.76 Taxes .15 .25 .29 .37 .34 .35 .47 .51 .51 .55 Extraordinary items .01 .02 .02 .02 .02 .01 .02 .05 * * Net income .55 .58 .68 .83 .74 .77 1.04 1.19 1.16 1.21 Cash dividends declared .40 .40 .46 .52 .49 .47 .51 .56 .57 .62 Retained income .16 .18 .21 .30 .24 .30 .53 .63 .58 .59 MEMO: Return on equity 6.74 6.99 8.09 9.65 8.61 8.95 11.64 12.69 12.08 12.13 * In absolute value, less than 0.005 percent. n.a. Not available. MMDA Money market deposit account. RP Repurchase agreement. CD Certificate of deposit. 1. Includes allocated transfer risk reserve. 2. As in the Call Report, equity securities are combined with "other debt securities" before 1989. 3. Before 1994, the netted value of off-balance-sheet items appeared in "trading account securities" if a gain and "other non-interest-bearing liabilities" if a loss. 4. Where possible, based on the average of quarterly balance sheet data reported on schedule RC-K of the quarterly Call Report. 5. Includes provisioning for allocated transfer risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

506 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes Treasury and System trade-weighted basis against other Group of Ten foreign exchange operations for the period from (G-10) currencies.2 The dollar strengthened in the January through March 1996. It was presented by first weeks of the new year, reaching its highs for the Peter R. Fisher, Executive Vice President, Federal quarter of DM1.4945 on January 25 and ¥107.57 on Reserve Bank of New York, and Manager for Foreign January 31. After briefly weakening in February, the Operations, System Open Market Account. Daniel dollar proceeded to trade in a narrow range, closing Katzive was primarily responsible for preparation of the quarter at DM1.4764 and ¥107.24. The U.S. the report.1 monetary authorities did not undertake any interven- During the first quarter of 1996, the dollar appreci- tion operations in the foreign exchange market during ated 3.9 percent against the Japanese yen, 3.0 percent the quarter. However, the U.S. Treasury's Exchange against the German mark, and 2.1 percent on a Stabilization Fund (ESF) and the Federal Reserve 1. The charts for the report are available on request from Publica- 2. The dollar's movements on a trade-weighted basis in terms of tions Services, Mail Stop 127, Board of Governors of the Federal other G-10 currencies are measured using an index developed by staff Reserve System, Washington, DC 20551. at the Board of Governors of the Federal Reserve System. 1. Foreign exchange holdings of U.S. monetary authorities, based on current exchange rates Millions of dollars Quarterly changes in balances by source BBaallaannccee,, BBaallaannccee,, IItteemm DDeecc.. 3311,, 11999955 Net purchases Impact of Investment Currency MMaarr.. 3311,, 11999966 and sales' sales2 income ad v j a u l s u t a m ti e o n n t s3 FEDERAL RESERVE Deutsche marks 13,514.7 0 0 137.4 -386.1 13,266.0 Japanese yen 6,872.4 0 0 6.2 -242.0 6,636.6 Mexican pesos4 601.9 -658.5 0 8.5 48.13 0 Interest receivables6 113.5 75.7 Other cash flow from investments7 -3.3 7.1 Total 21,099.1 19,985.4 U.S. TREASURY EXCHANGE STABILIZATION FUND Deutsche marks 6,838.4 0 0 72.4 -195.3 6,715.5 Japanese yen 10,088.1 0 0 5.2 -363.0 9,730.5 Mexican pesos4 11,150.0 -900.9 0 250.9 05 10,500.0 Interest receivables6 302.6 272.7 Other cash flow from investments7 -12.7 7.5 Total 28,366.4 27,226.2 NOTE. Figures may not sum to totals because of rounding. 5. Valuation adjustments on peso balances do not affect profit and loss 1. Purchases and sales include foreign currency sales and purchases related to because the effect is offset by the unwinding of the forward contract at the official activity, swap drawings and repayments, and warehousing. repayment date. Note that the ESF does not mark to market its peso holdings, 2. Calculated using marked-to-market exchange rates; represents the differ- but the Federal Reserve System does. ence between the sale exchange rate and the most recent revaluation exchange 6. Interest receivables for the ESF are revalued at month-end exchange rates. rate. Realized profits and losses on sales of foreign currencies, computed as the Interest receivables for the Federal Reserve System are carried at cost and are difference between the historic cost-of-acquisition exchange rate and the sale not marked to market until interest is paid. exchange rate, are shown in table 2. 7. Cash flow differences from payment and collection of funds between 3. Foreign currency balances are marked to market monthly at month-end quarters. exchange rates. 4. See table 4 for a breakdown of Mexican swap activities. Note that the investment income on Mexican swaps is sold back to the Bank of Mexico. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

507 System did receive final repayments from Mexico on CHANGES IN MONETARY POLICY the remaining balances of $650 million outstanding EXPECTATIONS AND THE DECLINE under each of their respective short-term swap OF THE DOLLAR arrangements. An additional $10.5 billion remains outstanding under the ESF's medium-term swap In February, bond markets in Germany and Japan facility. weakened amid a broad reassessment of interest rate expectations before recovering later in the quarter. At the same time, U.S. Treasury bond yields also rose. In the United States, credit markets were hurt by a shift in the budget debate. Negotiations on balancing STRENGTHENING OF THE DOLLAR the federal budget appeared unlikely to progress AT THE OUTSET OF THE NEW YEAR further, while the commencement of the 1996 presidential campaign focused attention on the pros- Early in the year the dollar appreciated against the pects for stronger economic growth. During February German mark and other European currencies because the yield on the benchmark thirty-year Treasury bond of the widespread perception that monetary easing in rose nearly 50 basis points. Weakness in the U.S. Europe would proceed at a faster pace than in the bond market contributed to a weakening of the United States. This expectation was bolstered by the dollar as market participants anticipated that the release of weak German economic data in January: bond market's performance would prompt foreign The seasonally adjusted west German unemploy- investors to liquidate positions in dollar-denominated ment rate for December rose to 8.6 percent, and securities. forecasts for 1996 real growth in German gross Meanwhile, in early February the German Bundesdomestic product began to be revised downward to bank announced that it would fix its repurchase rate below 2.0 percent. at 3.3 percent. The announcement suggested to Against the yen the dollar was supported by indica- some market participants that the Bundesbank might tions of a continued narrowing of the U.S.-Japan be at or near the end of its easing cycle. These current account imbalance. Trade statistics released concerns were magnified by widespread rumors that in Japan showed that Japan's November current February data would indicate that German M3 had account surplus had fallen 17.1 percent year over risen at a rate well above the Bundesbank's target year and confirmed that Japan's 1995 current account range in January. The prospect that German ecosurplus was the lowest in four years. Similarly, U.S. nomic growth would resume and that interest rates trade data indicated that in October 1995 the U.S. would not continue to fall prompted strengthening of trade deficit with Japan, although slightly higher than the mark. in September 1995, had fallen almost $2 billion from Also in early February a report of strong Japanese its year-ago level. housing starts and higher-than-expected Japanese Early in the quarter the dollar also benefited indi- industrial production prompted market participants rectly against the yen because of the market percep- to wonder whether Japan's accommodative monetary tion of a broad-based revival of investors' risk appe- policy stance might soon end, despite continued gentite and a demand for higher yields. This dynamic erous injections of liquidity by the Bank of Japan. On served to support the currencies and credit markets of February 15, Japanese Finance Minister Kubo made the higher-yielding European countries, including comments indicating that low interest rates were Italy, Sweden, and Spain, at the expense of lower- hurting senior citizens, and these comments were yielding currencies, such as the Japanese yen. The interpreted by market participants as confirming that generalized weakness in the yen helped support the Japan's official rates would soon rise. This sentiment dollar-yen exchange rate. contributed to a broad-based unwinding of short yen Investors also became more optimistic about the positions against the U.S. dollar and other major outlook for the dollar after the end of the U.S. govern- currencies. The dollar weakened against the yen and ment shutdown in December and after a subsequent the mark, reaching February lows of DM 1.4411 on easing of market concern about the budget impasse. February 19 and ¥103.35 on February 27. Against the Finally, comments made by German and other Group yen, the dollar was supported by widespread reports of Seven (G-7) officials around the time of the Janu- of intervention by the Japanese monetary authorities ary G-7 meeting of finance ministers and central bank and the subsequent perception that Japanese monegovernors suggested a preference for a stronger U.S. tary authorities did not wish to see renewed strength currency. of the yen. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

508 Federal Reserve Bulletin • June 1996 RECOVERY OF THE DOLLAR AND SUBSEQUENT States would move interest rate differentials between TRADING IN A TIGHT RANGE THROUGH THE the United States and Japan and between the United END OF THE QUARTER States and Germany in favor of the dollar. The combined effect of the data in the three mar- Concerns about an end to German monetary easing kets was to resurrect, at least partially, the relative began to diminish after the release of the January M3 growth scenarios that had been favorable to the dollar report, which, although above the Bundesbank's tar- early in the year. The dollar recovered against the get range, was lower than the market's worst fears. In mark and the yen and proceeded to trade in a narrow early March, the release of negative fourth-quarter range for the remainder of the quarter, firming against GDP figures and high February unemployment data the yen as trading thinned in the final week of the in Germany as well as continuing evidence of sub- Japanese fiscal year. The market consensus that Japadued inflationary pressures helped revive expecta- nese exporters had largely hedged their dollar revetions of further German interest rate reductions. nues well in advance of the conclusion of the Japa- Similarly, in Japan, the March 1 release of a some- nese fiscal year helped prevent the heavy dollar what weaker-than-expected Tankan survey by the selling that had been evident in March in recent Bank of Japan indicated that the Japanese economy years. was recovering more slowly than market participants had previously anticipated. This development served to unwind market expectations of a near-term change STABILITY IN NORTH AMERICAN MARKETS in Japanese monetary policy and caused yields implied by 1996 Euroyen futures contracts to fall as Canadian credit markets performed well during the much as 33 basis points. quarter, with the spread between Canadian and U.S. On March 8, it was reported that U.S. February nonfarm payrolls had grown 705,000, an increase 3. Currency arrangements more than twice as large as consensus expectations, Millions of dollars and that the unemployment rate had fallen to 5.5 per- Amount of Outstanding, cent. The strong data led to a reassessment of expec- facility Mar. 31, 1996 tations for future Federal Reserve policy and sug- FEDERAL RESERVE gested to many that stronger growth in the United RECIPROCAL CURRENCY ARRANGEMENTS Austrian National Bank 250 0 National Bank of Belgium 1,000 2. Net profits or losses (-) on U.S. Treasury Bank of Canada 2,000 and Federal Reserve foreign exchange operations, National Bank of Denmark 250 based on historical cost-of-acquisition exchange rates Bank of England 3,000 Bank of France 2,000 Millions of dollars Deutsche Bundesbank 6,000 Bank of Italy 3,000 Federal U. E S. x c T h r a e n a g su e r y B B a a n n k k o o f f J M ap e a x n ic o1 5 3 , , 0 0 0 0 0 0 Period and item Reserve Stabilization Netherlands Bank 500 Fund Bank of Norway 250 Bank of Sweden 300 Swiss National Bank 4,000 Valuation profits and losses on outstanding assets and liabilities. Bank for International Settlements Dec. 31, 1995 Dollars against Swiss francs 600 Deutsche marks 2,892.0 1,054.8 Dollars against other authorized Japanese yen 1,726.6 2,539.2 European currencies 1,250 Total 4,618.6 3,593.9 Total 32,400 IMiiliilN 0 Realized profits and losses U.S. TREASURY from foreign currency sales, EXCHANGE ST A BILIZATION FUND Dec. 31, 1995-Mar. 31, 1996 CURRENCY ARRANGEMENTS Deutsche marks 0 0 Japanese yen 0 0 Deutsche Bundesbank 1,000 0 Bank of Mexico1 Total 0 0 Regular swaps 3,000 0 United Mexican States1 Valuation profits and losses on outstanding assets and liabilities. Medium-term swaps 10,500 Mar. 31, 19961 Total1 10,500 Deutsche marks 2,505.9 859.5 Japanese yen 1,487.9 2,188.9 1. Facilities available to Mexico comprise short-term swaps between the Total 3,993.8 3,0483 Bank of Mexico and both the Federal Reserve and the ESF, as well as mediumterm swaps and government guarantees between the government of Mexico and NOTE. Figures may not sum to totals because of rounding. the ESF. The total amount available from both medium-term swaps and govern- 1. Valuation profits or losses are not affected by peso holdings, which are ment guarantees is $20 billion, less any outstanding drawings on the shortcanceled by forward contracts. term facilities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 509 government ten-year benchmark bond yields falling 4. Drawings/rollovers and repayments (-) by Mexican sharply amid favorable fiscal developments in Can- monetary authorities ada and diminished perceptions of political risk. The Millions of dollars Canadian dollar closed the quarter 0.5 percent Out- Outstronger against the U.S. dollar. Item standing, Jan. Feb. Mar. standing, Dec. 31, Mar. 31, Mexican markets also stabilized, largely ignoring 1995 1996 volatility in U.S. equity and credit markets. The Reciprocal currency Mexican peso appreciated 2.3 percent against the arrangements with the Federal Reserve dollar, despite weakening in February, and overnight Bank of Mexico Regular 650 -650 0 0 0 interest rates fell nearly 900 basis points to 35 percent. Shifting investor appetites—fueled by expecta- Currency arrangements with the U.S. Treasury tions for moderating inflation, signs of improving Exchange Stabilization Fund economic fundamentals, and increasing confidence in Bank of Mexico Mexican monetary policy—supported the peso. Regular 650 -650 0 0 0 Medium-term 10,500 0 0 0 10,500 NOTE. Data are on a value-date basis. THE RISE OF GOLD PRICES quarter, the current values of the reserve holdings of German marks and Japanese yen of the Federal Gold prices reached their highest levels in nearly six Reserve System and the ESF were $20 billion and years, trading as high as $418.40 per ounce. Three $16.5 billion respectively. The U.S. monetary authorifactors appear to have fueled the rally: strong demand ties invest all of their foreign currency balances in a from physical end-users in Asia, low opportunity variety of instruments that yield market-related rates costs for holding the metal as global interest rates of return and have a high degree of liquidity and declined, and reduced forward sales by producers. credit quality. A significant portion of these balances Later in the quarter, these price gains were partially is invested in German and Japanese government secureversed as high prices spurred additional sales. The rities held either directly or under repurchase agreeprice of the metal closed the quarter $8.35 higher, at ment. As of March 31, outright holdings of govern- $395.45 per ounce. ment securities by U.S. monetary authorities totaled $3.6 billion and included investments in Japanese treasury bills and German government bonds. MEXICAN SWAP ACTIVITY Japanese and German government securities are also held under repurchase agreement through trans- On January 29, Mexico made the final repayment on actions executed directly in the market or through its short-term swap arrangements with the U.S. moneagreements with official institutions. Government tary authorities. A total of $1.3 billion was repaid, securities held under repurchase agreements by the divided evenly between the Federal Reserve System U.S. monetary authorities totaled $14.3 billion. In and the ESF. On January 31, 1996, the special $3 biladdition to government securities, foreign currency lion swap facility established by the Federal Reserve reserves are also invested in deposits at the Bank for System on February 1, 1995, expired according to its International Settlements and in facilities at other original terms without being renewed. official institutions. In addition, the ESF held $10.5 billion equivalent in nonmarketable Mexican government securities TREASURY AND FEDERAL RESERVE in connection with the ESF's medium-term swap FOREIGN EXCHANGE RESERVES arrangement. • The U.S. monetary authorities did not undertake any intervention operations this quarter. At the end of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

510 Industrial Production and Capacity Utilization for April 1996 Released for publication May 15 cent in March and was unchanged in April. At 124.5 percent of its 1987 average, industrial produc- Industrial production advanced 0.9 percent in April tion in April was 2.6 percent higher than it was in after a decline of 0.5 percent in March, when a strike April 1995. caused the output of motor vehicles and parts to Capacity utilization rose 0.5 percentage point in plunge 14 percent. Excluding the decline and subse- April, to 83.0 percent. As indicated in the Notice at quent rebound in production of motor vehicles and the end of this article, the capacity utilization rates parts, the index of industrial production rose 0.3 per- have been revised beginning in January 1995. Revi- Industrial production indexes Twelve-month percent change Twelve-month percent change Materials 10 10 Durable manufacturing 5 5 + Products 0 5 1990 1991 1992 1993 1994 1995 1996 1990 1991 1992 1993 1994 1995 1996 Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production =100 — TotaHndustoy^ Capacity —' — 140 — Manufacturing rnpirity ~ " 140 120 120 100 - 100 ——^^ PPrroodduuccttiioonn 80 80 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 11 11 11 11 11 11 11 11 11 11 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 Utilization 90 80 80 70 70 J I I I L I I I I I J L J I L 1982 1984 1986 1988 1990 1992 1994 1996 1982 1984 1986 1988 1990 1992 1994 1996 All series are seasonally adjusted. Latest series, April. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

511 Industrial production and capacity utilization, April 1996 Industrial production, index, 1987=100 Percentage change CCaatteeggoorryy 11999966 1996' AApprr.. 11999955 ttoo Jan/ Feb/ Mar.' Apr. P Jan/ Feb/ Mar/ Apr/ AApprr.. 11999966 Total 122.5 123.9 123.4 124.5 1.2 -.5 2.6 Previous estimate 122.5 124.1 123.5 -.3 1.3 -.5 Major market groups Products, total2 118.6 120.4 119.9 121.2 -.4 1.5 -.5 1.1 2.9 Consumer goods ... 114.6 116.1 115.0 116.3 -1.0 1.3 -1.0 1.1 1.7 Business equipment 160.5 164.9 163.0 166.0 1.3 2.7 -1.2 1.8 7.1 Construction supplies 107.2 108.6 110.4 111.3 -3.0 1.3 1.6 .9 3.0 Materials 128.5 129.3 128.7 129.6 .1 .6 -.5 .7 2.0 Major industry groups Manufacturing 124.5 126.2 125.1 126.8 -.2 1.3 -.8 1.3 2.7 Durable 134.9 137.6 135.8 138.9 .1 2.0 -1.3 2.3 5.6 Nondurable 113.1 113.6 113.4 113.4 -.6 .5 -.2 .0 -1.0 Mining 97.1 97.6 100.3 99.5 -1.1 .5 2.8 -.8 -1.1 Utilities 125.6 125.7 126.5 124.3 .4 .1 .7 -1.8 4.6 Capacity utilization, percent 1995 1996 Average, Low, High, 1967-95 1982 1988-89 Apr. Jan. Feb.r Mar.1 Apr. P Total 82.1 71.8 84.9 84.0 82.4 83.1 82.5 83.0 3.8 Previous estimate 82.3 83.2 82.5 Manufacturing 81.4 70.0 85.2 83.4 81.4 82.2 81.2 82.0 4.3 Advanced processing 80.7 71.4 83.5 81.3 79.7 81.0 79.6 80.6 5.0 Primary processing . 82.6 66.8 89.0 88.2 85.4 85.0 85.2 85.3 2.6 Mining 87.4 80.6 86.5 89.9 86.8 87.3 89.7 89.0 -.1 Utilities 86.9 76.2 92.6 88.2 92.4 92.4 92.9 91.1 1.2 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. sions to the aggregate capacity indexes and utiliza- office equipment advanced 2.4 percent after even tion rates for total manufacturing, advanced- and more rapid gains in February and March. The output primary-processing, mining, and utilities were trivial. of industrial equipment, however, eased for a second When analyzed by market group, the data show month. that the output of consumer goods rose 1.1 percent in The output of construction supplies rose 0.9 per- April. The production of automotive products, which cent; the cumulative gain over the past three months had fallen nearly 10 percent in March, rebounded was larger than the 3 percent drop in January, leaving 12.5 percent. The production of other durable con- the level of output about 3A percent above its level in sumer goods increased nearly 1 percent, the third December. The production of materials increased successive monthly gain; this cumulative rise, how- 0.7 percent in April, with the strength concentrated in ever, merely offset the 4 percent drop in January. The the durable goods materials used to make motor output of consumer nondurable goods declined vehicles. The output of nondurable goods materials 0.2 percent, as utility output for residential use eased remained weak. The production of energy materials noticeably after a relatively cold March. The produc- decreased 1.3 percent, with declines in coal mining tion of clothing and chemical products declined fur- and electricity generation. ther, while the output of food changed little. When analyzed by industry group, the data show Apart from the effects of the strike at General that manufacturing output rose 1.3 percent after a Motors, which had caused large fluctuations in the loss of 0.8 percent in March; excluding motor vehioutput of transit equipment, the production of busi- cles and parts, production rose 0.3 percent in April ness equipment rose 0.2 percent in March and and 0.1 percent in March. Production in durable 0.4 percent in April. The production of computer and manufacturing jumped 2.3 percent, mainly because Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

512 Federal Reserve Bulletin • June 1996 of the rebound in the motor vehicle and parts indus- Updated estimates of capacity incorporate the data try. Production also increased 1 percent or more for on actual and planned investment by manufacturing computers, lumber and products, and primary metals. industries reported in the Bureau of the Census's The output of nondurables did not change; declines in Investment Plans Survey issued in late March, as well textiles and rubber and plastics products offset gains as more detailed, revised utilization rates from the elsewhere. Production in mining decreased 0.8 per- Census Bureau's Survey of Plant Capacity for 1993 cent, and the output at utilities fell 1.8 percent. and 1994. The revisions to the capacity indexes affect The factory operating rate, which had fallen the utilization rates reported in the G.17 release be- 1.0 percentage point in March, rebounded 0.8 per- cause monthly utilization equals the monthly index of centage point, to 82.0 percent. The utilization rate for production divided by the related monthly capacity motor vehicles and parts—included in the advanced- index. processing grouping—rebounded to 79.3 percent Industrial capacity grew 3.8 percent from Decemfrom the strike-depressed March level of 66.8 percent ber 1994 to December 1995, 0.1 percentage point less and accounted for the swing in utilization in manufac- than was previously estimated. Capacity in manufacturing. Among other advanced-processing industries, turing grew 4.3 percent, also 0.1 percentage point the changes in utilization were mixed. The utilization less than previously reported. Within manufacturing, rate for primary-processing industries edged up annual capacity growth for durable manufacturing 0.1 percentage point, to 85.3 percent, which is was revised up 0.5 percentage point, to 6.1 percent, 2.7 percentage points above its 1967-95 average. In with noticeable upward revisions for computers and mining, the utilization rate fell 0.7 percentage point, electrical machinery. Capacity growth for nondurable to 89 percent. Utilization in coal mining, which had manufacturing was revised down 0.8 percentage risen 5 percentage points in March, fell 4 percentage point, to 1.9 percent, with downward revisions for points, to 82.2 percent. The operating rate for utilities printing and publishing and for rubber and plastics declined 1.8 percentage points. • products. In electric and gas utilities, capacity grew 1.1 percent in 1995; in mining, capacity edged down. For 1996, overall industrial capacity is projected to grow 4.0 percent, 0.5 percentage point higher than NOTICE previously estimated. Revised indexes of industrial capacity and rates of Diskettes containing the revised data are available capacity utilization for 1995 and 1996 are included in from Publications Services, Board of Governors of the G.17 (419) monthly statistical release. Revisions the Federal Reserve System, Washington, DC 20551 begin as of January 1995. Revisions in total industry (202-452-3245). Data are also available through the are very small; utilization was 82.7 percent in the first Economic Bulletin Board of the Department of Comquarter of 1996, the same as previously reported. merce; for information, call 202-482-1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

513 Statements to the Congress Statement by Susan M. Phillips, Member, Board of acquisition price by the holding company or their Governors of the Federal Reserve System, before the book value as measured by the firm's balance sheet. Subcommittee on Capital Markets, Securities and Banking organizations already are involved in Government-Sponsored Enterprises of the Committee similar activities under provisions of existing law. on Banking and Financial Services, U.S. House of For example, under existing statute and regulation, Representatives, April 18, 1996 all bank holding companies have for some time been able to acquire passive equity investments in any I am pleased to appear before this subcommittee on company of up to 5 percent of the voting shares and behalf of the Federal Reserve Board to provide com- up to 24.9 percent of the total equity in a combination ments on the Entrepreneurial Investment Act of 1996, of voting and nonvoting stock. There are no limits on a bill proposed by Chairman Baker. At his request, the total amount of equity investments that can be the Board staff provided technical assistance in the made under these provisions. The bill before you also drafting of the bill. permits 25 percent of the equity of a company to be This bill would permit smaller bank holding com- purchased—although all could be voting—but there panies to provide limited equity capital to customers are prudential limits on the total amount of equity of the subsidiary banks. Specifically, bank holding purchases. companies of less than $1 billion in assets, all of Under existing interpretations of law, national whose subsidiary banks were well capitalized, could banks may—in addition—take so-called equity kickinvest in the equity of those of their customers with ers as part of loan agreements. That is, the bank may whom they have had a "significant" debt relationship take part or all of its interest on a loan in the form of for at least a year. The individual equity investments options or warrants for voting stock or profit sharing. in these firms could not exceed 25 percent of the There is no limit on the percentage of the borrowers' voting shares of the firm; the holding company could shares that may be the subject of these equity kickers. not take an active part in the management of the firm It is our understanding that such equity kickers are in which it held equity; and the subsidiary banks or increasingly being used, with the options or warrants other depository institution subsidiaries could not sold into the market or exercised by a nonbank affilihold any of the stock. The aggregate amount of this ate. In a number of states, state banks are permitted, equity investment could not exceed half of the under state law and the Federal Deposit Insurance amount by which the subsidiary banks' capital Act, to participate in real estate investments and exceeded the well-capitalized minimum. various types of equity securities through subsidiaries The bill prohibits joint marketing of the products of the bank. Moreover, a national bank itself or any of the banking organization and the firms in which bank holding company already can invest up to 5 perthe bank holding company invests. For prudential cent of its capital in a small business investment reasons, the Board would have to provide one-time company that, in turn, can own up to 49 percent of approval for a banking organization to initiate such the voting shares of any small business; the banking investments, and the Board could supervise and regu- organization can also make loans to those businesses. late this activity, as well as require divestiture if it In addition, national banks can invest up to 10 perconcluded such action was necessary to preserve the cent of their capital in Community Development safety and soundness of the insured depository sub- Corporations that also take equity positions in compasidiaries. Should the banks' capital decline, the Board nies designed to provide jobs in, or otherwise help could take action to preserve the safety and sound- improve, low- and moderate-income neighborhoods. ness of the subsidiary insured depository institutions, Finally, the Financial Services Competitiveness including requiring divestiture by the parent holding and Regulatory Relief Act of 1995 would permit any company of shares already held. The bank holding bank holding company with a securities subsidiary to company would be required quarterly to mark the purchase all of the equity of any company, so-called shares to market value, if possible, and if the shares merchant banking investments. This bill, sponsored are not traded, to mark them to the lower of their by Chairman Leach, would require such investments Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

514 Federal Reserve Bulletin • June 1996 to be passive, but there is no limit in the statute on the • Require that the parent holding company (as well aggregate amount of such investments. The bill this as all the subsidiary banks) be well capitalized before subcommittee is considering also requires the invest- it could make an equity investment. Such a provision ments to be passive but limits the amount of both the would have a significant effect on many quite small individual and aggregate equity investments. More- bank holding companies. The Federal Reserve does over, the bill does not require these small holding not apply risk-based standards to parent bank holding companies to have a securities subsidiary in the hold- companies with assets of less than $150 million. ing company as a prerequisite for engaging in limited Many of these parents borrow heavily to finance the equity financing activities. equity of the subsidiary banks. As a result of this Banking organizations are in the business of taking so-called double leverage, many of the parents do not risks; that is their economic purpose. But the Con- have very much, if any, capital in excess of the gress and the banking regulators have to be con- well-capitalized minimum. Note that adding this procerned about excessive risk. We thus support the vision would mean that minimum capital requireprovisions that require the Board of Governors to ments would be applied to small bank holding comsupervise and regulate this activity. But we should panies only for purposes of investing in stocks under be clear that the authority to require divestitures may the bill. not provide the relief anticipated because these • Limit the equity investments of eligible banking shares, as I noted, may not be readily marketable. We organizations to 50 percent of the capital in excess of would consider using our authority to take a close the well-capitalized minimum standard of the subsidlook at the desirability of limiting the sum of loans to, iary banks (as in the bill) or 50 percent of the capital and equity investments in, a single firm to guard in excess of the well-capitalized minimum standard against excessive concentration of risk in the banking for bank holding companies, whichever is smaller. organization. Our best estimate is that applying this and the previ- The provisions of the bill before you recognize the ous suggestion would reduce the permissible maxiinherent riskiness of equity investments by smaller mum aggregate equity investment quite sharply at the bank holding companies and call for the prudential smallest banking organizations whose parent holding limits I have summarized. But, in a spirit of caution, company capital is not as strong as at other small and in recognition of future business cycles, the banking organizations. Banking organizations with subcommittee might want to consider additional pru- more than $150 to $200 million of assets would not dential provisions: be affected very much. • Require that all the subsidiary banks not only be These suggestions are designed to minimize the well capitalized, but also rated CAMEL 1 or 2, as a risk that could occur with equity investments by prerequisite to equity purchases by the holding com- smaller bank holding companies. They may sound pany. Capital ratios generally are acceptable screens, excessively prudent but seem to us desirable because but asset quality, management, asset diversification, of the limited experience of equity purchases by and other factors also play a role. The addition of this smaller banking organizations. The Board believes provision would make very little difference in the that its suggestions for revisions would not be in number of bank holding companies that would be significant conflict with the purpose of the bill. eligible to purchase equity now, but it could in the future. Statement by Lawrence B. Lindsey, Member, Board issues concerning fees imposed on electronic fund of Governors of the Federal Reserve System, before transfers at automated teller machines (ATMs). ATM the Subcommittee on Financial Institutions and fees have received considerable attention recently Consumer Credit of the Committee on Banking and and are the subject of bills introduced in the House Financial Services, U.S. House of Representatives, by Representatives Charles E. Schumer and Bernard April 25, 1996 Sanders. This hearing is focusing on an examination of the The Board of Governors of the Federal Reserve Sys- existing ATM fee structure, the current regulatory tem appreciates this opportunity to comment on scheme regarding surcharges, and the potential Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 515 impact of these charges. The existing fee structure etary ATMs; the fees averaged $0.90. For savings has been, or will be, addressed by witnesses repre- associations in 1990, 40.3 percent charged their cussenting the industry, who are better able to provide tomers fees that averaged $0.85. current detailed information on the subject. I will tell In the past, ATM operators were limited to recoveryou about the regulatory scheme concerning fee dis- ing costs through network agreements; generally they closure under the Electronic Fund Transfer Act could not impose surcharges directly on ATM users. (EFTA), which the Board is responsible for imple- Until recently, Visa and MasterCard rules prohibited menting; provide some data about consumer com- surcharges at ATMs in the networks they operate. In plaints, the level of compliance with the EFTA found some areas the regional ATM network rules prohibin bank examinations, and the incidence and amount ited surcharges. A few states enacted limits on surof ATM transaction fees reported in Federal Reserve charges, without prohibiting them outright. ATM sursurveys; and make some observations about the legis- charges could be imposed in approximately fifteen lative proposals. states in which state law explicitly disallowed the Let me start by differentiating between two catego- prohibitions in network rules. ries of ATM fees: fees charged by a financial institu- Visa and MasterCard have now repealed their protion to its own customers for use of ATMs and fees hibitions on ATM surcharges, effective April 1. Thus, charged directly to a consumer by another ATM many financial institutions that could not previously owner or operator for use of its machines. This latter do so are now permitted to impose surcharges on type of fee is sometimes referred to as an ATM ATM users, and some institutions have opted to surcharge. impose such a fee. Because the consumer pays an The Federal Reserve does not have any direct ATM surcharge in addition to any fee imposed by the information on ATM surcharges; we do have data on consumer's own account-holding bank for use of ATM fees charged by institutions to their own cus- nonproprietary ATMs, a question has been raised tomers. Fees charged to a consumer by the account- about whether the fees are adequately disclosed to the holding institution can include fees charged for the consumer. use of the institution's own ATMs and fees charged The EFTA and Regulation E require debit card for use of ATMs operated by others. Our studies issuers to disclose fees they charge for ATM and show that a relatively small number of financial insti- other electronic transactions. Disclosures are given at tutions charge customers for use of the institution's the time a consumer opens an account or signs up for own ATMs. Data developed for the Board's Annual an EFT service and on periodic statements, typically Report to the Congress on Retail Fees and Services monthly, of account activity. If an institution later of Depository Institutions indicate that in 1995, increases the fees charged, it must provide a notice of 9.6 percent of banks charged their customers fees for the change twenty-one days in advance. Under Regucash withdrawals at the banks' own ATMs; the fee lation E, these disclosures must be provided in a amount averaged $0.61. Among savings associations, written, clear, and readily understandable form. 8.8 percent charged their customers, with a fee aver- An account-holding bank is not required to disaging $0.65. close ATM surcharges imposed by others because it The more common, and long-standing, practice is would be impractical to monitor and disclose the to charge customers for use of other institutions' dollar amount of a surcharge that might be imposed ATMs—so-called nonproprietary ATMs. ATM net- at any given time by some other financial institution works charge account-holding institutions for han- nationwide. However, the EFTA and Regulation E do dling transactions that their customers initiate at a require disclosure of a surcharge at the ATM. The nonproprietary ATM, and the institutions often pass surcharge must appear on a sign posted at the ATM. on to their customers all or a portion of the network Alternatively, the ATM operator has the option of charge or impose a flat fee for such transactions. displaying the fee on the terminal screen (instead of a Again referring to the Board's study of retail fees and sign) provided consumers are given the option to services, for cash withdrawals from nonproprietary cancel the transaction after having received notice of ATMs in 1995, the percentage of institutions that the fee. In addition, surcharges must also be disclosed charged their customers was higher: 85.3 percent for after the ATM transaction on the terminal receipt. banks, with fees averaging $1.03, and 83.1 percent Although the receipt disclosure generally comes after for savings associations, with fees averaging $0.97. the transaction has been completed, the sign or screen The trend in the incidence and level of charges has requirement is designed to give machine users generally been upward. In 1990, 61.7 percent of advance notice of the imposition of the fee and an banks charged their customers for use of nonpropri- opportunity to avoid the fee. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

516 Federal Reserve Bulletin • June 1996 The EFTA provides for civil liability for violations network. We believe that because Regulation E, netin the amount of actual damages plus punitive dam- work operating rules, and laws in a number of states ages of between $100 and $1,000 in an individual already require fee disclosures, the proposed legisaction, or up to $500,000 or 1 percent of the defen- lation may be unnecessary. As I mentioned, Reguladant's net worth in a class action, together with court tion E requires disclosure of a surcharge by the ATM costs and attorneys' fees. The act also provides for operator at the time of the transaction and requires criminal liability ($5,000 fine or one year imprison- disclosure of fees imposed by the account-holding ment, or both) for knowing and willful violations. institution in the initial disclosures, in periodic state- It is our understanding that in addition to the EFTA ments, and in notices of changes in terms for fee and Regulation E, a number of state laws, as well as increases. the MasterCard and Visa operating rules, require There is a real question whether it is operationally disclosure of ATM surcharges. feasible for an operator of an ATM to disclose fees Data on examinations of financial institutions show imposed by the thousands of account-holding institugeneral compliance with Regulation E. For each of tions whose customers have access to the ATM. Fees the years 1993, 1994, and 1995, for instance, the vary, and there is no practical way for the ATM five federal financial institution regulatory agencies operator to find out the fee amounts imposed by all reported that 90 percent of institutions examined institutions so as to comply with the proposed disclowere in full compliance with Regulation E. There sure requirements. The ability to access funds through appear to be few violations involving fee disclosures. ATMs in almost any location nationwide is a valuable The data for state member banks of the Federal benefit to consumers; the costs of compliance with Reserve System show that out of 1,943 banks exam- the requirements of the legislation, or the potential ined during the period January 1, 1993, to the present, liability for failure to comply, could tend to discourtwenty were cited for failing to disclose EFT fees in age expansion of this service. the initial disclosures; one institution failed to prop- H.R.3246 would require disclosure of fees not only erly disclose EFT fees on a periodic statement; and at ATMs operated by persons other than the consumfour institutions were cited for failing to comply with er's institution but also at ATMs of the consumer's the change-in-terms notice requirement (but it is not own institution. This latter type of transaction does clear that these occurrences involved a change in not, by definition, involve a surcharge, only a charge EFT fees). No institutions were cited for failure to imposed by the consumer's bank. As I mentioned provide the proper notices at their ATMs. earlier, this type of charge is imposed by relatively Consumer complaint data also suggest few prob- few banks and is not a new development. Consumers lems with electronic fund transfers generally. For are likely fully aware of the charge, given that discloexample, in 1994, the Federal Reserve System re- sure is required under Regulation E. ceived 1,177 complaints against state member banks; H.R.3221, the "Electronic Fund Transfer Fees Act of these, twenty-seven related to EFT services. One of 1996," introduced by Representative Sanders, of them involved EFT fees (but not at ATMs). Simi- would amend the EFTA to totally prohibit ATM larly, in 1995, the Federal Reserve System received a surcharges. In general, the Board believes that subtotal of 1,238 complaints against state member banks; stantive limitations on prices, if adopted at all, are thirty-nine dealt with EFT services. Again, only one better left to state legislatures, which can take into complaint concerned EFT fees (and the complaint did account local economic conditions in deciding what not concern use of an ATM). Of all consumer limits, if any, are necessary. A few states have, in complaints—involving both state member banks and fact, enacted limits on ATM surcharges. A prohibiother types of institutions—received by the Federal tion on surcharges might have the same effect as Reserve over the past five years, only ten involved added compliance costs for additional disclosure of EFT fees, and only four of these related specifically surcharges—a tendency to deter financial institutions to ATM fees. and other ATM operators from making ATMs widely The subcommittee has requested that we comment available to consumers. on the proposed legislation. H.R.3246, the "ATM Fee There is also the possibility that a surcharge prohi- Disclosure Act of 1996," has been introduced by bition may be ineffective in keeping costs to consum- Representative Schumer. The bill would amend the ers down. The network charge imposed on the EFTA to require disclosure at ATMs of all fees account-holding bank is generally shared by the netimposed in connection with a transaction by any work with the operator of the ATM. ATM operators, person, whether the ATM operator, the account- if unable to impose surcharges, may be able to negoholding institution, or a national, regional, or local tiate for an increase in the amounts received from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 517 networks, and such an increase could be passed on fees paid by consumers for bank services is a matter (via the account-holding bank) to consumers. of importance for consumers, competition in the In conclusion, the Board believes that consumers marketplace—when combined with clear and full benefit substantially from the availability of regional, disclosure to consumers of fees—should be sufficient nationwide, and worldwide ATM service. The Board to keep fees at a level commensurate with the value also believes that the current disclosure scheme pro- provided in return and to give consumers a range of vides adequate and straightforward information to choices. consumers about ATM fees. Although the level of Statement by Edward W. Kelley, Jr., Member, Board Each of these proposals raises complex matters of of Governors of the Federal Reserve System, before regulatory structure. Once these issues have been the Committee on Banking and Financial Services, resolved, then we will have a better idea of what U.S. House of Representatives, April 30, 1996 changes are needed in our supervisory system. In the meantime, it seems premature to make any far- I am pleased to be here today to discuss with you reaching decisions altering the structure of our bank issues concerning the supervision and regulation of and financial supervisory system. Such changes could the U.S. banking system. Let me begin by pointing easily prove to be a poor fit once industry restructurout that the overall condition of the American bank- ing takes place. In the interim, the existing regime ing system is very strong. At home and abroad, US. seems to be sufficiently effective so as not to require banks are viewed as highly competitive, extremely legislative changes. innovative, and financially sound. As a matter of principle, we should also guard The focus of these hearings, as I understand it, is against the unintended extension of the safety net, an the effectiveness of the current regulatory structure issue that has been of long-standing concern to the and the desirability of changing the regulatory and Board, the Congress, and many observers of, and supervisory structure for insured depository institu- participants in, the U.S. financial system. The Board tions, an issue considered by the Congress two years is of the view that the business risks from securities ago. You have asked several questions that I want to and most other financial activities are manageable for respond to, but first I would like to indicate that the banking organizations. However, we must not forget Board believes that it is important to keep certain a more subtle and corrosive risk. The federal safety principles in mind as we assess the need for changes net—deposit insurance, the discount window, and in the U.S. bank supervisory system. access to Fedwire—creates moral hazard, risk of First, the federal supervisory system should loss to taxpayers, and—importantly—a competitive complement market evolution, and adjustments to its advantage over firms that do not have safety net structure should follow, not precede, changes in the protection. That safety net reflects society's need to structure of the banking system that will result from reduce systemic risk and its desire to protect small statutory and regulatory proposals to alter substan- depositors, but the line at which that safety net is tially the powers of banking organizations. I need not drawn is important for minimizing moral hazard and explain to this committee how the forces of techno- maintaining both market discipline and competitive logical change and globalization of financial markets markets. The Board continues to believe that the are blurring traditional distinctions between financial holding company structure creates the best frameinstitutions that we all once took for granted. Thus work for limiting the transference of the subsidy there is an urgent need to modernize the U.S. banking provided by the safety net. We have concluded that structure. Among the more important modifications the further the separation of new activities from the in structure being considered, now that the Congress bank the better the insulation. The present regulatory has taken action to allow interstate banking and structure supports this notion. branching, are those dealing with a new charter for Another important principle is to preserve the dual thrift institutions and new activities for banking orga- banking system, which has served the United States nizations. Repeal of the Glass-Steagall Act's separa- so well. The current federal regulatory structure suptions of commercial and investment banking and ports the dual banking system by linking the federal authorization of insurance activities for banking orga- regulator to charter class. The dual system has facilinizations are the most important changes being con- tated diversity, inventiveness, and flexibility in sidered by the Congress. American banking, characteristics that are vital to a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

518 Federal Reserve Bulletin • June 1996 market economy subject to rapid change and chal- called shell holding companies thus have always lenge. It has also provided a safety valve to protect been subject to only minimal onsite supervision by against the potential for inflexible federal and state the Federal Reserve. If we remove the shell holding positions. The most recent example is the evolution companies from the statistics, the proportion of of interstate banking, an evolution that was begun by depository institutions supervised essentially by a the states in the mid-1970s and was well advanced by single federal regulator increases from about 40 perthe time federal laws were revised. Such state actions cent to more than 75 percent. Moreover, consolidated also provide arenas for limited experiments in finan- bank holding company organizations generally have cial reform, experiments that can provide valuable a quite small proportion of their depository instituinsights for designing policies at the federal level. tions' assets supervised by an agency other than the The Federal Reserve Board believes that any actions one responsible for their lead bank. In those remaintaken by the Congress to change the federal bank ing, one-fourth of institutions with multiple supersupervisory system must be designed in a way that visors (for example, a holding company with a preserves the vitality of the dual banking system. In national bank subsidiary supervised by the Office of the supervisory process, the Federal Reserve and the the Comptroller of the Currency, a state nonmember Federal Deposit Insurance Corporation (FDIC) have bank subsidiary supervised by the FDIC, a state already arranged in a large number of states extensive member bank supervised by the Federal Reserve, and sharing arrangements with state authorities, eliminat- a savings and loan association supervised by the ing examination duplication. Office of Thrift Supervision), the non-lead federal In considering the need to revise the current regula- bank supervisors, taken together, oversee, on avertory structure, it is important to clarify the nature of age, less than 10 percent of the consolidated instituthe concerns. The period of most vocal criticism of tion's banking and thrift assets. the regulatory structure by banks was exactly the The federal and state dual supervision of insured interval when those organizations were suffering the state-chartered banks is another area of potential most significant financial stress in more than fifty overlap and is not included in the above statistics. years. It is understandable that clashes between those However, as I noted earlier, the FDIC and the Federal responsible for safety and soundness and those expe- Reserve have worked out arrangements with most riencing financial reversals would result in criticism states in which either the appropriate federal authoriby each of the other. It is instructive to note that ties join the state supervisor in joint examinations or as banking conditions improved, criticisms of super- conduct the examinations in alternate years. In such visors and the supervisory structure have receded. cases, federal and state supervisors do not separately Nevertheless, the earlier period of conflict exposed a examine the bank in the same year. number of inefficiencies in the current regulatory No matter how small the proportion of bank and system. As I shall discuss in a moment, the regulatory thrift assets subject to multiple supervisors, every agencies have, in particular, attempted to address the effort should be made to reduce the resultant burden burden of regulatory overlap and to increase coordi- on depository organizations. Toward that end, the nation of efforts, major concerns highlighted in the agencies have for many years divided examination late 1980s and early 1990s. However, before doing responsibilities so that only one federal agency examso, it is important to clarify the dimensions of the ines a given depository institution. In supervising a existing overlap in bank supervision and to consider parent bank holding company, for example, the Fedwhether realignment of supervisory responsibilities eral Reserve relies principally on the evaluation of would in fact reduce the supervisory burden on subsidiary banks or thrift institutions by that subsiddepository institutions. iary's primary supervisor and does not attempt to About 40 percent of banking and thrift organiza- reexamine the bank or thrift institution. tions are subject to only one federal regulator: the In evaluating credit risk, the principal risk to banks, independent banks and thrift organizations and the the agencies have long had procedures designed to holding companies whose subsidiaries are state mem- enhance consistency and increase cooperation across ber banks. A significant proportion of the statistical the agencies. For large, syndicated loans—those measure of multiple supervision among the remain- involving credits of more than $20 million held by ing entities reflects the Federal Reserve's jurisdiction two or more banks—the agencies have the Shared over holding company parents with national or state National Credits Program in which supervisors from nonmember bank and thrift subsidiaries. However, all banking agencies agree annually on a single evalumost holding company parents do not engage in ation that all examiners use whenever they encounter significant, if any, nonbank activity, and these so- the credit. This program covers more than $700 bil- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 519 lion of unused commercial loan commitments and However, even if every banking and thrift organisome $400 billion of outstanding commercial loans zation were subject to the jurisdiction of only one of the U.S. banking system. The outstandings rep- agency, some of the inherent overlap in examiner resent roughly one-third of all commercial loans duties would still occur simply because of the size booked in U.S. offices of commercial banks, includ- and diversity of the institution's activities. The overing the U.S. branches and agencies of foreign banks. lap would be less apparent to the institution because For many years, a similar process has also existed for examiners would all be from the same agency and evaluating the so-called transfer risk inherent in loans any differences in supervisory judgments would be to borrowers in foreign countries that are not denomi- minimized. However, the number of inquiries and nated in the borrower's local currency. Once a rating onsite visitations might not decline materially. is determined for a specific country and for particular Even with one supervisor per organization, differtypes of credit extensions to that country, examiners ent laws and regulations apply to different elements of all agencies treat the credit uniformly. of an institution, and its diverse activities often I do not mean to imply that there is no burden for require examiners to have specialized expertise. those banking and thrift organizations dealing with Reviewing the adherence of a parent company to the more than one supervisor. One area, in particular, that provisions of the Bank Holding Company Act and its can present difficulties in coordinating supervisory implementing regulations requires different skills activities relates to larger and more complex banking than are necessary in reviewing the trading activities organizations. These institutions are often character- of a London subsidiary bank. More generally, at large ized by multiple bank and nonbank subsidiaries that organizations safety and soundness examinations manage and control their consolidated activities require a large number of individuals with special through risk management and operating policies and expertise in such diverse areas as credit evaluations, procedures developed and monitored at the parent with experts needed for each type of credit market; holding company level. Similarly, as bank activities securities trading; foreign exchange; risk manageand management practices have evolved in recent ment; evaluation of credit and market risk models; decades, these large financial institutions have struc- and compliance with safety and soundness laws and tured their daily activities increasingly along product regulations, such as lending to affiliates and loans to lines, with less regard to legal entities. For example, one borrower. To this list must be added specialty many large banking organizations control, hedge, and examinations for trust activities, the Community otherwise manage their investment securities and Reinvestment Act, and data processing. trading position across all of the subsidiary bank and Scheduling, training, and coordinating the personnonbank entities on a consolidated basis. nel to conduct these varied activities throughout the The banking agencies recognize that these trends organization and to communicate as necessary with in management practices can increase the potential each other would still be a complex task under a for overlapping supervisory efforts and have, accord- single agency. Moreover, some institutions—large ingly, sought to minimize the overlap that might and small—prefer that examiners not arrive simultaoccur. In June 1993, the federal banking and thrift neously because of the demands that would place on agencies adopted an interagency agreement under their resources. Thus, as now, a single regulatory which they would coordinate the timing, planning, agency would still spread out its examinations over and scope of examinations and holding company time, either because of limitations of agency staff or inspections; conduct joint examinations or inspec- because of the preferences of the institution. tions when necessary; hold joint meetings with bank You asked about the Federal Financial Institutions and bank holding company management related to Examination Council, established by the Congress examination findings; and coordinate information in 1979 to provide a facility through which the requests and enforcement actions. This agreement agencies could address policy and operating differdelineated the supervisory responsibilities of each ences, and thereby reduce the costs of their activities agency regarding particular entities within a consoli- to the supervised institutions and to the public. The dated organization. It also recognized that there are council has been largely successful in this by providlegitimate situations when an agency other than an ing a useful forum for both the principals and the entity's primary supervisor needs to participate in staffs to discuss issues of common concern. It has examinations or inspections to fulfill its regulatory facilitated consistency in regulations, accounting, responsibilities. Although this agreement is not a and information collection. It has also devised panacea, it has helped to reduce the burden of mul- ways to lessen regulatory burden and has sponsored tiple supervisors on banking organizations. extensive training and education for examiners and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

520 Federal Reserve Bulletin • June 1996 bankers. These are no small matters. However, can- is less than a cursory review of statistics might sugdor requires that I report that some substantive and gest. In addition, federal bank supervisors and the complex issues have proved to be difficult to resolve Congress have made substantial progress in recent by the council. years in improving our supervisory policies and pro- Outside the council framework, the three banking cedures for ensuring bank safety and soundness, and agencies have had success in developing guidelines also in reducing regulatory burden, reducing superto coordinate the planning, timing, and scope of visory overlap, and improving the consistency of our examinations when multiple agencies are involved. rules and regulations. While we can and should do Efforts continue to carry such guidelines further, par- more, and the agencies are working toward such ticularly by working to implement the concept of improvements, modifications and reforms should be unified examinations pursuant to section 305 of the evaluated against certain principles. First among Riegle Community Development and Regulatory these is that changes in regulatory structure should Improvement Act of 1994. This legislation requires follow, and not precede, adjustments to the basic the federal banking agencies to implement a system structure of our insured depository system and the by September 1996 that determines which one of modernization of its activities. Choices made by the them shall be the "lead" agency responsible for Congress on bank and thrift structure and authorized managing a unified examination of each banking powers should be fundamental determinants of the organization. In conclusion, the U.S. banking system regulatory structure. The Federal Reserve continues today is extremely healthy and competitive in both its to encourage the Congress to take legislative actions domestic and international operations. The degree of needed to further the evolution of our banking and actual multiple supervision of banking organizations financial system. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

521 Announcements REGULATION E: FINAL RULE AND AMENDMENT • Eliminating restrictions on the ability of broker- TO THE STAFF COMMENTARY dealers to arrange for credit • Increasing the type and number of domestic and foreign securities that may be bought on margin and The Federal Reserve Board announced on April 23, increasing the loan value of some securities that are 1996, a final rule to simplify and update its Regulaalready marginable tion E, which implements the Electronic Fund Trans- • Deleting Board rules regarding options transacfer Act. tions in favor of the rules of the options exchanges In keeping with the Board's Regulatory Planning and Review Program, the revisions primarily focus • Reducing restrictions on transactions involvon ways of easing the compliance burdens imposed ing foreign persons, foreign securities, and foreign on financial institutions without diminishing the con- currency. sumer protections established by the act. The revised rule contains some substantive amendments, includ- Also, technical changes have been made to provide ing changes to the existing exemptions for securities clarification, update references, or restore language and commodities transfers and for preauthorized inadvertently deleted. transfers to or from accounts at small financial insti- The proposed amendments would authorize the tutions. In conjunction with the amendments to the following: regulation, the Board also has amended the staff commentary to Regulation E. • Allow broker-dealers to extend good faith credit on any nonequity security rather than only those The revised rule and commentary are effective currently permitted in the Board's rules May 1, 1996, with mandatory compliance January 1, • Allow transactions involving nonequity securi- 1997. ties to be effected in an account not subject to the Separately, the Board had earlier issued proposed restrictions in Regulation T (Credit by Brokers and revisions to Regulation E addressing stored-value Dealers) regarding margin accounts products and electronic communications. Because of • Remove restrictions on the ability of brokera delay in the publication of that proposal in the dealers to calculate required margin for nonequity Federal Register, the Board has extended that public securities on a "portfolio" basis comment period from July 10 to August 1, 1996. • Relax the Board's collateral requirements for the borrowing and lending of securities • Exempt from Regulation T any credit extended abroad by a U.S. broker-dealer or foreign securities MARGIN REGULATIONS: FINAL RULE AND to foreign persons. PROPOSED AMENDMENT The proposal also seeks comment on whether the The Federal Reserve Board announced on April 26, Board should expand the number of equity securities 1996, a final rule along with a request for comment eligible for loan value under Regulation T and on a proposed rule amending the Board's margin whether the Board should amend Regulations G regulations. (Securities Credit by Persons Other Than Banks, The final rule is generally effective July 1, 1996, Brokers, or Dealers) and U (Credit by Banks for though certain provisions relating to options trans- Purchasing or Carrying Margin Stocks) to modify actions become effective June 1,1997. their method for determining which equity securities Comment on the proposed amendments is re- are eligible for loan value. quested by July 1, 1996. More broadly, the proposal seeks comment on any The final rule constitutes some of the most signifi- other steps the Board could take to reduce the burden cant reductions of regulatory burden on broker- imposed by Regulation T, including any steps to dealers since 1934 through the following provisions: reduce the accounting and recordkeeping aspects of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

522 Federal Reserve Bulletin • June 1996 the regulation that would be consistent with the those offices that can demonstrate that operational purposes and requirements of the Securities and limitations prevent them from doing so. Exchange Act of 1934. PROPOSED ACTION FINAL RULE REGARDING THE DEFINITION The Federal Reserve Board on April 26, 1996, re- OF CAPITAL STOCK AND SURPLUS quested comment on proposed amendments to Regulation O governing insider lending. The proposed The Federal Reserve Board announced on April 29, amendments would implement authority granted the 1996, a final rule to reduce the regulatory burden for Board by the Riegle Community Development and member banks and other insured depository institu- Regulatory Improvement Act of 1994. Comments tions that monitor lending to their affiliates. The rule were requested by June 17, 1996. is effective July 1, 1996. The final rule adopts a definition of capital stock and surplus for purposes of section 23A of the Fed- AVAILABILITY OF REVISED LISTS OF eral Reserve Act that conforms to the definition of OVER-THE-COUNTER STOCKS AND OF FOREIGN unimpaired capital and unimpaired surplus used by MARGIN STOCKS SUBJECT TO MARGIN the Board in calculating the limits in Regulation O REGULATIONS (Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks) for insider lending The Federal Reserve Board on April 26, 1996, puband by the Office of the Comptroller of the Currency lished a revised list of over-the-counter (OTC) stocks in calculating the limit on loans by a national bank to that are subject to its margin regulations (OTC list). a single borrower. Also published was a revised list of foreign equity securities (foreign list) that meet the margin criteria in Regulation T (Credit by Brokers and Dealers). APPROVAL OF A NEW CASH ACCESS POLICY These lists are published for the information of lend- FOR THE FEDERAL RESERVE BANKS ers and the general public. The lists became effective May 13, 1996, and The Federal Reserve Board on April 25, 1996, supersede the previous lists that were effective Februapproved a new cash access policy for the Federal ary 12, 1996. The next revision of the lists is sched- Reserve Banks. The new policy will provide greater uled to be effective August 1996. consistency in the cash service levels provided by the The changes that were made to the revised OTC Federal Reserve Banks to depository institutions. The list, which now contains 4,456 OTC stocks, are as new policy becomes effective on May 1, 1998. follows: The policy provides for a base level of free currency access to all depository institutions but restricts • Two hundred forty-five stocks have been the number of offices served and the frequency of included for the first time, 205 under National Market access. Under the new policy, each depository institu- System (NMS) designation. tion with a banking presence in a Federal Reserve • Forty stocks previously on the list have been Bank office territory can designate up to ten offices to removed for substantially failing to meet the requirereceive free cash access (deposit and order) service ments for continued listing. from the local Reserve Bank office. Besides the ten • Eighty-eight stocks have been removed for reaoffices, Reserve Bank offices will provide free cash sons such as listing on a national securities exchange access to offices whose volumes exceed a specified or involvement in an acquisition. threshold. Normal free access for each designated office of The OTC list is composed of OTC stocks that have the depository institution will continue to be once a been determined by the Board to be subject to margin week. Access more frequent than once a week will be requirements in Regulations G (Securities Credit by available to the designated offices whose volumes Persons Other Than Banks, Brokers, or Dealers), T, exceed a specified threshold. and U (Credit by Banks for Purchasing or Carrying Additional access, beyond the free service level, Margin Stocks). The list includes OTC stocks qualiwill be priced. The Board anticipates that all Reserve fying under Board criteria and also includes all OTC Bank offices will offer priced cash services except for stocks designated as NMS securities. Additional Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 523 NMS securities may be added in the interim between CHANGE IN BOARD STAFF quarterly Board publications; these securities are immediately marginable upon designation as NMS The Board of Governors announced the retirement, securities. effective May 31, 1996, of Don E. Kline, Associate The foreign list specifies those foreign equity secu- Director in the Division of Banking Supervision and rities that are eligible for margin treatment at broker- Regulation, after thirty-three years of service to the dealers. There were two additions, one name change, Federal Reserve System. • and three deletions from the foreign list; it now contains 700 foreign equity securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

525 Legal Developments FINAL RULE—AMENDMENT TO REGULATION E Appendix A to Part 205—Model Disclosure Clauses and Forms The Board of Governors is amending 12 C.F.R. Part 205, Appendix B to Part 205—Federal Enforcement its Regulation E (Electronic Fund Transfers). The amendments are a result of the Board's review of Regulation E Agencies under its Regulatory Planning and Review Program, which calls for the periodic review of all Board regulations. The Appendix C to Part 205—Issuance of Staff final rule contains some substantive amendments, includ- Interpretations ing changes to the existing exemptions for securities or commodities transfers. Primarily, the final amendments Supplement 1 to Part 205—Official Staff simplify the language and format of the regulation, and Interpretations delete obsolete provisions. Effective May 2, 1996, 12 C.F.R. Part 205 is amended as follows: 3. Sections 205.1 through 205.15 are revised to read as follows: Part 205—Electronic Fund Transfers Section 205.1—Authority and purpose. (Regulation E) (a) Authority. The regulation in this part, known as Regula- 1. The authority citation for Part 205 continues to read as tion E, is issued by the Board of Governors of the Federal follows: Reserve System pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.). The information-collection Authority. 15 U.S.C. 1693. requirements have been approved by the Office of Management and Budget under 44 U.S.C. 3501 et seq. and have 2. The table of contents for Part 205 is revised to read as been assigned OMB No. 7100-0200. follows: (b) Purpose. This part carries out the purposes of the Electronic Fund Transfer Act, which establishes the basic Section 205.1—Authority and purpose. rights, liabilities, and responsibilities of consumers who Section 205.2—Definitions. use electronic fund transfer services and of financial institu- Section 205.3—Coverage. tions that offer these services. The primary objective of the Section 205.4—General disclosure requirements; jointly act and this part is the protection of individual consumers offered services. engaging in electronic fund transfers. Section 205.5—Issuance of access devices. Section 205.6—Liability of consumer for unauthorized transfers. Section 205.2—Definitions. Section 205.7—Initial disclosures. Section 205.8—Change in terms notice; error resolution For purposes of this part, the following definitions apply: notice. (a)(1) Access device means a card, code, or other means of Section 205.9—Receipts at electronic terminals; periodic access to a consumer's account, or any combination statements. thereof, that may be used by the consumer to initiate Section 205.10—Preauthorized transfers. electronic fund transfers. Section 205.11—Procedures for resolving errors. (2) An access device becomes an accepted access device Section 205.12—Relation to other laws. when the consumer: Section 205.13—Administrative enforcement; record (i) Requests and receives, or signs, or uses (or authoretention. rizes another to use) the access device to transfer Section 205.14—Electronic fund transfer service provider money between accounts or to obtain money, propnot holding consumer's account. erty, or services; Section 205.15—Electronic fund transfer of government (ii) Requests validation of an access device issued on benefits. an unsolicited basis; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

526 Federal Reserve Bulletin • June 1996 (iii) Receives an access device in renewal of, or in Section 205.3—Coverage. substitution for, an accepted access device from either the financial institution that initially issued the device (a) General. This part applies to any electronic fund transor a successor. fer that authorizes a financial institution to debit or credit a (b)(1) Account means a demand deposit (checking), sav- consumer's account. Generally, this part applies to finanings, or other consumer asset account (other than an cial institutions. For purposes of sections 205.10(b), (d), occasional or incidental credit balance in a credit plan) and (e) and 205.13, this part applies to any person. held directly or indirectly by a financial institution and (b) Electronic fund transfer. The term electronic fund established primarily for personal, family, or household transfer means any transfer of funds that is initiated through purposes. an electronic terminal, telephone, computer, or magnetic (2) The term does not include an account held by a tape for the purpose of ordering, instructing, or authorizing financial institution under a bona fide trust agreement. a financial institution to debit or credit an account. The (c) Act means the Electronic Fund Transfer Act (title IX of term includes, but is not limited to: the Consumer Credit Protection Act, 15 U.S.C. 1693 (1) Point-of-sale transfers; et seq.). (2) Automated teller machine transfers; (d) Business day means any day on which the offices of the (3) Direct deposits or withdrawals of funds; consumer's financial institution are open to the public for (4) Transfers initiated by telephone; and carrying on substantially all business functions. (5) Transfers resulting from debit card transactions, (e) Consumer means a natural person. whether or not initiated through an electronic terminal. (f) Credit means the right granted by a financial institution (c) Exclusions from coverage. The term electronic fund to a consumer to defer payment of debt, incur debt and transfer does not include: defer its payment, or purchase property or services and (1) Checks. Any transfer of funds originated by check, defer payment therefor. draft, or similar paper instrument; or any payment made (g) Electronic fund transfer is defined in section 205.3. by check, draft, or similar paper instrument at an elec- (h) Electronic terminal means an electronic device, other tronic terminal. than a telephone operated by a consumer, through which a (2) Check guarantee or authorization. Any transfer of consumer may initiate an electronic fund transfer. The term funds that guarantees payment or authorizes acceptance includes, but is not limited to, point-of-sale terminals, of a check, draft, or similar paper instrument but that automated teller machines, and cash dispensing machines. does not directly result in a debit or credit to a consum- (i) Financial institution means a bank, savings association, er's account. credit union, or any other person that directly or indirectly (3) Wire or other similar transfers. Any transfer of funds holds an account belonging to a consumer, or that issues an through Fedwire or through a similar wire transfer sysaccess device and agrees with a consumer to provide tem that is used primarily for transfers between financial electronic fund transfer services. institutions or between businesses. (j) Person means a natural person or an organization, (4) Securities and commodities transfers. Any transfer including a corporation, government agency, estate, trust, of funds the primary purpose of which is the purchase or partnership, proprietorship, cooperative, or association, sale of a security or commodity, if the security or com- (k) Preauthorized electronic fund transfer means an elec- modity is: tronic fund transfer authorized in advance to recur at (i) Regulated by the Securities and Exchange Comsubstantially regular intervals. mission or the Commodity Futures Trading Commis- (1) State means any state, territory, or possession of the sion; United States; the District of Columbia; the Common- (ii) Purchased or sold through a broker-dealer reguwealth of Puerto Rico; or any political subdivision of the lated by the Securities and Exchange Commission or above in this paragraph (1). through a futures commission merchant regulated by (m) Unauthorized electronic fund transfer means an elec- the Commodity Futures Trading Commission; or tronic fund transfer from a consumer's account initiated by (iii) Held in book-entry form by a Federal Reserve a person other than the consumer without actual authority Bank or federal agency. to initiate the transfer and from which the consumer re- (5) Automatic transfers by account-holding institution. ceives no benefit. The term does not include an electronic Any transfer of funds under an agreement between a fund transfer initiated: consumer and a financial institution which provides that (1) By a person who was furnished the access device to the institution will initiate individual transfers without a the consumer's account by the consumer, unless the specific request from the consumer: consumer has notified the financial institution that trans- (i) Between a consumer's accounts within the finanfers by that person are no longer authorized; cial institution; (2) With fraudulent intent by the consumer or any per- (ii) From a consumer's account to an account of a son acting in concert with the consumer; or member of the consumer's family held in the same (3) By the financial institution or its employee. financial institution; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 527 (iii) Between a consumer's account and an account of Section 205.5—Issuance of access devices. the financial institution, except that these transfers remain subject to section 205.10(e) regarding compul- (a) Solicited issuance. Except as provided in paragraph (b) sory use and sections 915 and 916 of the act regarding of this section, a financial institution may issue an access civil and criminal liability. device to a consumer only: (6) Telephone-initiated transfers. Any transfer of funds (1) In response to an oral or written request for the that: device; or (i) Is initiated by a telephone communication between (2) As a renewal of, or in substitution for, an accepted a consumer and a financial institution making the access device whether issued by the institution or a transfer; and successor. (ii) Does not take place under a telephone bill- (b) Unsolicited issuance. A financial institution may dispayment or other written plan in which periodic or tribute an access device to a consumer on an unsolicited recurring transfers are contemplated. basis if the access device is: (7) Small institutions. Any preauthorized transfer to or (1) Not validated, meaning that the institution has not from an account if the assets of the account-holding yet performed all the procedures that would enable a financial institution were $100 million or less on the consumer to initiate an electronic fund transfer using the preceding December 31. If assets of the account-holding access device; institution subsequently exceed $100 million, the institu- (2) Accompanied by a clear explanation that the access tion's exemption for preauthorized transfers terminates device is not validated and how the consumer may one year from the end of the calendar year in which the dispose of it if validation is not desired; assets exceed $100 million. Preauthorized transfers (3) Accompanied by the disclosures required by secexempt under this paragraph (c)(7) remain subject to tion 205.7, of the consumer's rights and liabilities that section 205.10(e) regarding compulsory use and secwill apply if the access device is validated; and tions 915 and 916 of the act regarding civil and criminal (4) Validated only in response to the consumer's oral or liability. written request for validation, after the institution has verified the consumer's identity by a reasonable means. Section 205.4—General disclosure requirements; jointly offered services. Section 205.6—Liability of consumer for unauthorized transfers. (a) Form of disclosures. Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep. A financial institu- (a) Conditions for liability. A consumer may be held liable, tion may use commonly accepted or readily understandable within the limitations described in paragraph (b) of abbreviations in complying with the disclosure require- this section, for an unauthorized electronic fund transfer ments of this part. involving the consumer's account only if the financial (b) Additional information; disclosures required by other institution has provided the disclosures required by seclaws. A financial institution may include additional infor- tion 205.7(b)(1), (2), and (3). If the unauthorized transfer mation and may combine disclosures required by other involved an access device, it must be an accepted access laws (such as the Truth in Lending Act (15 U.S.C. 1601 device and the financial institution must have provided a et seq.) or the Truth in Savings Act (12 U.S.C. 4301 means to identify the consumer to whom it was issued. et seq.)) with the disclosures required by this part. (b) Limitations on amount of liability. A consumer's liabil- (c) [Reserved] ity for an unauthorized electronic fund transfer or a series (d) Multiple accounts and account holders. (1) Multiple of related unauthorized transfers shall be determined as accounts. A financial institution may combine the re- follows: quired disclosures into a single statement for a consumer (1) Timely notice given. If the consumer notifies the who holds more than one account at the institution. financial institution within two business days after learn- (2) Multiple account holders. For joint accounts held by ing of the loss or theft of the access device, the consumtwo or more consumers, a financial institution need er's liability shall not exceed the lesser of $50 or the provide only one set of the required disclosures and may amount of unauthorized transfers that occur before noprovide them to any of the account holders. tice to the financial institution. (e) Services offered jointly. Financial institutions that pro- (2) Timely notice not given. If the consumer fails to vide electronic fund transfer services jointly may contract notify the financial institution within two business days among themselves to comply with the requirements that after learning of the loss or theft of the access device, the this part imposes on any or all of them. An institution need consumer's liability shall not exceed the lesser of $500 make only the disclosures required by sections 205.7 or the sum of: and 205.8 that are within its knowledge and within the (i) $50 or the amount of unauthorized transfers that purview of its relationship with the consumer for whom it occur within the two business days, whichever is less; holds an account. and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

528 Federal Reserve Bulletin • June 1996 (ii) The amount of unauthorized transfers that occur applicable law or agreement, for unauthorized electronic after the close of two business days and before notice fund transfers. to the institution, provided the institution establishes (2) Telephone number and address. The telephone numthat these transfers would not have occurred had the ber and address of the person or office to be notified consumer notified the institution within that two-day when the consumer believes that an unauthorized elecperiod. tronic fund transfer has been or may be made. (3) Periodic statement; timely notice not given. A con- (3) Business days. The financial institution's business sumer must report an unauthorized electronic fund trans- days. fer that appears on a periodic statement within 60 days (4) Types of transfers; limitations. The type of electronic of the financial institution's transmittal of the statement fund transfers that the consumer may make and any to avoid liability for subsequent transfers. If the con- limitations on the frequency and dollar amount of transsumer fails to do so, the consumer's liability shall not fers. Details of the limitations need not be disclosed if exceed the amount of the unauthorized transfers that confidentiality is essential to maintain the security of the occur after the close of the 60 days and before notice to electronic fund transfer system. the institution, and that the institution establishes would (5) Fees. Any fees imposed by the financial institution not have occurred had the consumer notified the institu- for electronic fund transfers or for the right to make tion within the 60-day period. When an access device is transfers. involved in the unauthorized transfer, the consumer may (6) Documentation. A summary of the consumer's right be liable for other amounts set forth in paragraphs (b)(1) to receipts and periodic statements, as provided in secor (b)(2) of this section, as applicable. tion 205.9, and notices regarding preauthorized transfers (4) Extension of time limits. If the consumer's delay in as provided in sections 205.10(a) and 205.10(d). notifying the financial institution was due to extenuating (7) Stop payment. A summary of the consumer's right to circumstances, the institution shall extend the times stop payment of a preauthorized electronic fund transfer specified above to a reasonable period. and the procedure for placing a stop-payment order, as (5) Notice to financial institution. provided in section 205.10(c). (i) Notice to a financial institution is given when a (8) Liability of institution. A summary of the financial consumer takes steps reasonably necessary to provide institution's liability to the consumer under section 910 the institution with the pertinent information, whether of the act for failure to make or to stop certain transfers. or not a particular employee or agent of the institution (9) Confidentiality. The circumstances under which, in actually receives the information. the ordinary course of business, the financial institution (ii) The consumer may notify the institution in person, may provide information concerning the consumer's by telephone, or in writing. account to third parties. (iii) Written notice is considered given at the time the (10) Error resolution. A notice that is substantially simiconsumer mails the notice or delivers it for transmis- lar to Model Form A-3 as set out in Appendix A of this sion to the institution by any other usual means. part concerning error resolution. Notice may be considered constructively given when the institution becomes aware of circumstances lead- Section 205.8—Change in terms notice; error ing to the reasonable belief that an unauthorized transresolution notice. fer to or from the consumer's account has been or may be made. (a) Change in terms notice—(1) Prior notice required. A (6) Liability under state law or agreement. If state law or financial institution shall mail or deliver a written notice an agreement between the consumer and the financial to the consumer, at least 21 days before the effective institution imposes less liability than is provided by this date, of any change in a term or condition required to be section, the consumer's liability shall not exceed the disclosed under section 205.7(b) if the change would amount imposed under the state law or agreement. result in: (i) Increased fees for the consumer; (ii) Increased liability for the consumer; Section 205.7—Initial disclosures. (iii) Fewer types of available electronic fund transfers; or (a) Timing of disclosures. A financial institution shall make (iv) Stricter limitations on the frequency or dollar the disclosures required by this section at the time a con- amount of transfers. sumer contracts for an electronic fund transfer service or (2) Prior notice exception. A financial institution need before the first electronic fund transfer is made involving not give prior notice if an immediate change in terms or the consumer's account. conditions is necessary to maintain or restore the secu- (b) Content of disclosures. A financial institution shall rity of an account or an electronic fund transfer system. provide the following disclosures, as applicable: If the institution makes such a change permanent and (1) Liability of consumer. A summary of the consumer's disclosure would not jeopardize the security of the acliability, under section 205.6 or under state or other count or system, the institution shall notify the consumer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 529 in writing on or with the next regularly scheduled peri- (1) Transaction information. For each electronic fund odic statement or within 30 days of making the change transfer occurring during the cycle: permanent. (i) The amount of the transfer; (b) Error resolution notice. For accounts to or from which (ii) The date the transfer was credited or debited to the electronic fund transfers can be made, a financial institu- consumer's account; tion shall mail or deliver to the consumer, at least once (iii) The type of transfer and type of account to or each calendar year, an error resolution notice substantially from which funds were transferred; similar to the model form set forth in Appendix A of this (iv) For a transfer initiated by the consumer at an part (Model Form A-3). Alternatively, an institution may electronic terminal (except for a deposit of cash or a include an abbreviated notice substantially similar to the check, draft, or similar paper instrument), the terminal model form error resolution notice set forth in Appendix A location described in paragraph (a)(5) of this section; of this part (Model Form A-3), on or with each periodic and statement required by section 205.9(b). (v) The name of any third party to or from whom funds were transferred. Section 205.9—Receipts at electronic terminals; (2) Account number. The number of the account. periodic statements. (3) Fees. The amount of any fees assessed against the account during the statement period for electronic fund (a) Receipts at electronic terminals. A financial institution transfers, for the right to make transfers, or for account shall make a receipt available to a consumer at the time the maintenance. consumer initiates an electronic fund transfer at an elec- (4) Account balances. The balance in the account at the tronic terminal. The receipt shall set forth the following beginning and at the close of the statement period. information, as applicable: (5) Address and telephone number for inquiries. The (1) Amount. The amount of the transfer. A transaction address and telephone number to be used for inquiries or fee may be included in this amount, provided the amount notice of errors, preceded by "Direct inquiries to" or of the fee is disclosed on the receipt and displayed on or similar language. The address and telephone number at the terminal. provided on an error resolution notice under section (2) Date. The date the consumer initiates the transfer. 205.8(b) given on or with the statement satisfies this (3) Type. The type of transfer and the type of the requirement. consumer's account(s) to or from which funds are trans- (6) Telephone number for preauthorized transfers. A ferred. The type of account may be omitted if the access telephone number the consumer may call to ascertain device used is able to access only one account at that whether preauthorized transfers to the consumer's acterminal. count have occurred, if the financial institution uses the (4) Identification. A number or code that identifies the telephone-notice option under section 205.10(a)(l)(iii). consumer's account or accounts, or the access device (c) Exceptions to the periodic statement requirement for used to initiate the transfer. The number or code need not certain accounts—(1) Preauthorized transfers to accounts. exceed four digits or letters to comply with the require- For accounts that may be accessed only by preauthoments of this paragraph (a)(4). rized transfers to the account the following rules apply: (5) Terminal location. The location of the terminal where (i) Passbook accounts. For passbook accounts, the the transfer is initiated, or an identification such as a financial institution need not provide a periodic statecode or terminal number. Except in limited circumment if the institution updates the passbook upon stances where all terminals are located in the same city presentation or enters on a separate document the or state, if the location is disclosed, it shall include the amount and date of each electronic fund transfer since city and state or foreign country and one of the followthe passbook was last presented. ing: (ii) Other accounts. For accounts other than passbook (i) The street address; or accounts, the financial institution must send a periodic (ii) A generally accepted name for the specific locastatement at least quarterly. tion; or (iii) The name of the owner or operator of the terminal (2) Intra-institutional transfers. For an electronic fund if other than the account-holding institution. transfer initiated by the consumer between two accounts (6) Third party transfer. The name of any third party to of the consumer in the same institution, documenting the or from whom funds are transferred. transfer on a periodic statement for one of the two (b) Periodic statements. For an account to or from which accounts satisfies the periodic statement requirement. electronic fund transfers can be made, a financial institu- (3) Relationship between paragraphs (c)(1) and (c)(2) of tion shall send a periodic statement for each monthly cycle this section. An account that is accessed by preauthoin which an electronic fund transfer has occurred; and shall rized transfers to the account described in parasend a periodic statement at least quarterly if no transfer graph (c)(1) of this section and by intra-institutional has occurred. The statement shall set forth the following transfers described in paragraph (c)(2) of this section, information, as applicable: but by no other type of electronic fund transfers, quali- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

530 Federal Reserve Bulletin • June 1996 ties for the exceptions provided by paragraph (c)(1) of payment order ceases to be binding after 14 days if the this section. consumer fails to provide the required written confirma- (d) Documentation for foreign-initiated transfers. The fail- tion. ure by a financial institution to provide a terminal receipt (d) Notice of transfers varying in amount. for an electronic fund transfer or to document the transfer (1) Notice. When a preauthorized electronic fund transon a periodic statement does not violate this part if: fer from the consumer's account will vary in amount (1) The transfer is not initiated within a state; and from the previous transfer under the same authorization (2) The financial institution treats an inquiry for clarifi- or from the preauthorized amount, the designated payee cation or documentation as a notice of error in accor- or the financial institution shall send the consumer writdance with section 205.11. ten notice of the amount and date of the transfer at least 10 days before the scheduled date of transfer. (2) Range. The designated payee or the institution shall Section 205.10—Preauthorized transfers. inform the consumer of the right to receive notice of all varying transfers, but may give the consumer the option (a) Preauthorized transfers to consumer's account. of receiving notice only when a transfer falls outside a (1) Notice by financial institution. When a person inispecified range of amounts or only when a transfer tiates preauthorized electronic fund transfers to a condiffers from the most recent transfer by more than an sumer's account at least once every 60 days, the accountagreed-upon amount. holding financial institution shall provide notice to the (e) Compulsory use. (1) Credit. No financial institution or consumer by: other person may condition an extension of credit to a (i) Positive notice. Providing oral or written notice of consumer on the consumer's repayment by preauthothe transfer within two business days after the transfer rized electronic fund transfers, except for credit exoccurs; or tended under an overdraft credit plan or extended to (ii) Negative notice. Providing oral or written notice, maintain a specified minimum balance in the consumer's within two business days after the date on which the account. transfer was scheduled to occur, that the transfer did (2) Employment or government benefit. No financial not occur; or institution or other person may require a consumer to (iii) Readily-available telephone line. Providing a establish an account for receipt of electronic fund transreadily available telephone line that the consumer fers with a particular institution as a condition of emmay call to determine whether the transfer occurred ployment or receipt of a government benefit. and disclosing the telephone number on the initial disclosure of account terms and on each periodic statement. Section 205.11—Procedures for resolving errors. (2) Notice by payor. A financial institution need not provide notice of a transfer if the payor gives the consumer positive notice that the transfer has been initiated. (a) Definition of error. (1) Types of transfers or inquiries (3) Crediting. A financial institution that receives a covered. The term error means: preauthorized transfer of the type described in para- (1) An unauthorized electronic fund transfer; graph (a)(1) of this section shall credit the amount of the (ii) An incorrect electronic fund transfer to or from transfer as of the date the funds for the transfer are the consumer's account; received. (iii) The omission of an electronic fund transfer from (b) Written authorization for preauthorized transfers from a periodic statement; consumer's account. Preauthorized electronic fund trans- (iv) A computational or bookkeeping error made by fers from a consumer's account may be authorized only by the financial institution relating to an electronic fund a writing signed or similarly authenticated by the con- transfer; sumer. The person that obtains the authorization shall (v) The consumer's receipt of an incorrect amount of provide a copy to the consumer. money from an electronic terminal; (c) Consumer's right to stop payment. (1) Notice. A con- (vi) An electronic fund transfer not identified in accorsumer may stop payment of a preauthorized electronic dance with sections 205.9 or 205.10(a); or fund transfer from the consumer's account by notifying (vii) The consumer's request for documentation rethe financial institution orally or in writing at least three quired by sections 205.9 or 205.10(a) or for additional business days before the scheduled date of the transfer. information or clarification concerning an electronic (2) Written confirmation. The financial institution may fund transfer, including a request the consumer makes require the consumer to give written confirmation of a to determine whether an error exists under parastop-payment order within 14 days of an oral notifica- graphs (a)(l)(i) through (vi) of this section. tion. An institution that requires written confirmation (2) Types of inquiries not covered. The term error shall inform the consumer of the requirement and pro- does not include: vide the address where confirmation must be sent when (i) A routine inquiry about the consumer's account the consumer gives the oral notification. An oral stop- balance; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 531 (ii) A request for information for tax or other record- written confirmation within 10 business days of an keeping purposes; or oral notice of error; or (iii) A request for duplicate copies of documentation. (B) The alleged error involves an account that is (b) Notice of error from consumer—(1) Timing; contents. subject to Regulation T (Securities Credit by Bro- A financial institution shall comply with the require- kers and Dealers, 12 C.F.R. Part 220); ments of this section with respect to any oral or (ii) Informs the consumer, within two business days written notice of error from the consumer that: after the provisional crediting, of the amount and date (i) Is received by the institution no later than 60 days of the provisional crediting and gives the consumer after the institution sends the periodic statement or full use of the funds during the investigation; provides the passbook documentation, required by (iii) Corrects the error, if any, within one business day section 205.9, on which the alleged error is first after determining that an error occurred; and reflected; (iv) Reports the results to the consumer within three (ii) Enables the institution to identify the consumer's business days after completing its investigation (inname and account number; and cluding, if applicable, notice that a provisional credit (iii) Indicates why the consumer believes an error has been made final). exists and includes to the extent possible the type, (3) Extension of time periods. The applicable time peridate, and amount of the error, except for requests ods in this paragraph (c)(3) are 20 business days in place described in paragraph (a)(l)(vii) of this section. of 10 business days, and 90 days in place of 45 days, if a (2) Written confirmation. A financial institution may notice of error involves an electronic fund transfer that: require the consumer to give written confirmation of an (i) Was not initiated within a state; or error within 10 business days of an oral notice. An (ii) Resulted from a point-of-sale debit card transacinstitution that requires written confirmation shall in- tion. form the consumer of the requirement and provide the (4) Investigation. With the exception of transfers covaddress where confirmation must be sent when the con- ered by section 205.14, a financial institution's review of sumer gives the oral notification. its own records regarding an alleged error satisfies the (3) Request for documentation or clarifications. When requirements of this section if: a notice of error is based on documentation or clarifica- (i) The alleged error concerns a transfer to or from a tion that the consumer requested under paragraph third party; and (a)(l)(vii) of this section, the consumer's notice of error (ii) There is no agreement between the institution and is timely if received by the financial institution no later the third party for the type of electronic fund transfer than 60 days after the institution sends the information involved. requested. (d) Procedures if financial institution determines no error (c) Time limits and extent of investigation. or different error occurred. In addition to following the (1) Ten-day period. A financial institution shall investi- procedures specified in paragraph (c) of this section, the gate promptly and, except as otherwise provided in this financial institution shall follow the procedures set forth in paragraph (c), shall determine whether an error occurred this paragraph (d) if it determines that no error occurred or within 10 business days of receiving a notice of error. that an error occurred in a manner or amount different from The institution shall report the results to the consumer that described by the consumer: within three business days after completing its investiga- (1) Written explanation. The institution's report of the tion. The institution shall correct the error within one results of its investigation shall include a written explabusiness day after determining that an error occurred. nation of the institution's findings and shall note the (2) Forty-five day period. If the financial institution is consumer's right to request the documents that the instiunable to complete its investigation within 10 business tution relied on in making its determination. Upon redays, the institution may take up to 45 days from receipt quest, the institution shall promptly provide copies of of a notice of error to investigate and determine whether the documents. an error occurred, provided the institution does the fol- (2) Debiting provisional credit. Upon debiting a provilowing: sionally credited amount, the financial institution shall: (i) Provisionally credits the consumer's account in the (i) Notify the consumer of the date and amount of the amount of the alleged error (including interest where debiting; applicable) within 10 business days of receiving the (ii) Notify the consumer that the institution will honor error notice. If the financial institution has a reason- checks, drafts, or similar instruments payable to third able basis for believing that an unauthorized elec- parties and preauthorized transfers from the consumtronic fund transfer has occurred and the institution er's account (without charge to the consumer as a has satisfied the requirements of section 205.6(a), the result of an overdraft) for five business days after the institution may withhold a maximum of $50 from the notification. The institution shall honor items as specamount credited. An institution need not provisionally ified in the notice, but need honor only items that it credit the consumer's account if: would have paid if the provisionally credited funds (A) The institution requires but does not receive had not been debited. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

532 Federal Reserve Bulletin • June 1996 (e) Reassertion of error. A financial institution that has (iv) Requires initial disclosures, periodic statements, fully complied with the error resolution requirements has or receipts that are different in content from those no further responsibilities under this section should the required by the federal law except to the extent that consumer later reassert the same error, except in the case of the disclosures relate to consumer rights granted by an error asserted by the consumer following receipt of the state law and not by the federal law. information provided under paragraph (a)(l)(vii) of this (c) State exemptions—(1) General rule. Any state may section. apply for an exemption from the requirements of the act or this part for any class of electronic fund transfers within the state. The Board shall grant an exemption if it Section 205.12—Relation to other laws. determines that: (i) Under state law the class of electronic fund transfers is subject to requirements substantially similar to (a) Relation to Truth in Lending—(1) The Electronic Fund those imposed by the federal law; and Transfer Act and this part govern: (ii) There is adequate provision for state enforcement. (i) The addition to an accepted credit card, as defined (2) Exception. To assure that the federal and state courts in Regulation Z (12 C.F.R. 226.12(a)(2), footnote 21), continue to have concurrent jurisdiction, and to aid in of the capability to initiate electronic fund transfers; implementing the act: (ii) The issuance of an access device that permits (i) No exemption shall extend to the civil liability credit extensions (under a preexisting agreement beprovisions of section 915 of the act; and tween a consumer and a financial institution) only (ii) When the Board grants an exemption, the state when the consumer's account is overdrawn or to law requirements shall constitute the requirements of maintain a specified minimum balance in the consumthe federal law for purposes of section 915 of the act, er's account; and except for state law requirements not imposed by the (iii) A consumer's liability for an unauthorized elecfederal law. tronic fund transfer and the investigation of errors involving an extension of credit that occurs under an Section 205.13—Administrative enforcement; agreement between the consumer and a financial instirecord retention. tution to extend credit when the consumer's account is overdrawn or to maintain a specified minimum (a) Enforcement by federal agencies. Compliance with this balance in the consumer's account. part is enforced by the agencies listed in Appendix B of (2) The Truth in Lending Act and Regulation Z this part. (12 C.F.R. part 226), which prohibit the unsolicited issu- (b) Record retention. (1) Any person subject to the act and ance of credit cards, govern: this part shall retain evidence of compliance with the (i) The addition of a credit feature to an accepted requirements imposed by the act and this regulation for a access device; and period of not less than two years from the date disclo- (ii) Except as provided in paragraph (a)(1)(h) of this sures are required to be made or action is required to be section, the issuance of a credit card that is also an taken. access device. (2) Any person subject to the act and this part having (b) Preemption of inconsistent state laws—(1) Inconsistent actual notice that it is the subject of an investigation or requirements. The Board shall determine, upon its own an enforcement proceeding by its enforcement agency, motion or upon the request of a state, financial instituor having been served with notice of an action filed tion, or other interested party, whether the act and this under sections 910, 915, or 916(a) of the act, shall retain part preempt state law relating to electronic fund transthe records that pertain to the investigation, action, or fers. Only state laws that are inconsistent with the act proceeding until final disposition of the matter unless an and this part are preempted and then only to the extent of earlier time is allowed by court or agency order. the inconsistency. A state law is not inconsistent with the act and this part if it is more protective of consumers. (2) Standards for determination. State law is inconsis- Section 205.14—Electronic fund transfer service tent with the requirements of the act and this part if it: provider not holding consumer's account. (i) Requires or permits a practice or act prohibited by the federal law; (a) Provider of electronic fund transfer service. A person (ii) Provides for consumer liability for unauthorized that provides an electronic fund transfer service to a conelectronic fund transfers that exceeds the limits im- sumer but that does not hold the consumer's account is posed by the federal law; subject to all requirements of this part if the person: (iii) Allows longer time periods than the federal law (1) Issues a debit card (or other access device) that the for investigating and correcting alleged errors, or does consumer can use to access the consumer's account held not require the financial institution to credit the con- by a financial institution; and sumer's account during an error investigation in ac- (2) Has no agreement with the account-holding institucordance with section 205.1 l(c)(2)(i); or tion regarding such access. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 533 (b) Compliance by service provider. In addition to the vice provider shall promptly reimburse the accountrequirements generally applicable under this part, the holding institution in the amount of the overdraft, service provider shall comply with the following special (c) Compliance by account-holding institution. The rules: account-holding institution need not comply with this part (1) Disclosures and documentation. The service pro- of the act and this regulation with respect to electronic fund vider shall give the disclosures and documentation re- transfers initiated through the service provider except as quired by sections 205.7, 205.8, and 205.9 that are follows: within the purview of its relationship with the consumer. (1) Documentation. The account-holding institution shall The service provider need not furnish the periodic state- provide a periodic statement that describes each elecment required by section 205.9(b) if the following condi- tronic fund transfer initiated by the consumer with the tions are met: access device issued by the service provider. The (i) The debit card (or other access device) issued to account-holding institution has no liability for the failure the consumer bears the service provider's name and to comply with this requirement if the service provider an address or telephone number for making inquiries did not provide the necessary information; and or giving notice of error; (2) Error resolution. Upon request, the account-holding (ii) The consumer receives a notice concerning use of institution shall provide information or copies of docuthe debit card that is substantially similar to the notice ments needed by the service provider to investigate contained in Appendix A of this part; errors or to furnish copies of documents to the con- (iii) The consumer receives, on or with the receipts sumer. The account-holding institution shall also honor required by section 205.9(a), the address and tele- debits to the account in accordance with secphone number to be used for an inquiry, to give notice tion 205.1 l(d)(2)(ii). of an error, or to report the loss or theft of the debit card; (iv) The service provider transmits to the accountholding institution the information specified in section Section 205.15—Electronic fund transfer of 205.9(b)(1), in the format prescribed by the automated government benefits. clearinghouse system used to clear the fund transfers; (v) The service provider extends the time period for notice of loss or theft of a debit card, set forth in (a) Government agency subject to regulation. section 205.6(b)(1) and (2), from two business days to (1) A government agency is deemed to be a financial four business days after the consumer learns of the institution for purposes of the act and this part if directly loss or theft; and extends the time periods for report- or indirectly it issues an access device to a consumer for ing unauthorized transfers or errors, set forth in sec- use in initiating an electronic fund transfer of governtions 205.6(b)(3) and 205.1 l(b)(l)(i), from 60 days to ment benefits from an account. The agency shall comply 90 days following the transmittal of a periodic state- with all applicable requirements of the act and regulament by the account-holding institution. tion except as provided in this section. (2) Error resolution, (i) The service provider shall ex- (2) For purposes of this section, the term account means tend by a reasonable time the period in which notice an account established by a government agency for of an error must be received, specified in section distributing government benefits to a consumer electron- 205.1 l(b)(l)(i), if a delay resulted from an initial ically, such as through automated teller machines or attempt by the consumer to notify the account-holding point-of-sale terminals. institution. (b) Issuance of access devices. For purposes of this section, (ii) The service provider shall disclose to the con- a consumer is deemed to request an access device when the sumer the date on which it initiates a transfer to elfect consumer applies for government benefits that the agency a provisional credit in accordance with sec- disburses or will disburse by means of an electronic fund tion 205.1 l(c)(2)(ii). transfer. The agency shall verify the identity of the con- (iii) If the service provider determines an error oc- sumer receiving the device by reasonable means before the curred, it shall transfer funds to or from the consum- device is activated. er's account, in the appropriate amount and within the (c) Alternative to periodic statement. A government agency applicable time period, in accordance with sec- need not furnish the periodic statement required by section 205.1 l(c)(2)(i). tion 205.9(b) if the agency makes available to the con- (iv) If funds were provisionally credited and the ser- sumer: vice provider determines no error occurred, it may (1) The consumer's account balance, through a readily reverse the credit. The service provider shall notify available telephone line and at a terminal (such as by the account-holding institution of the period during providing balance information at a balance-inquiry terwhich the account-holding institution must honor minal or providing it, routinely or upon request, on a debits to the account in accordance with sec- terminal receipt at the time of an electronic fund transtion 205.1 l(d)(2)(ii). If an overdraft results, the ser- fer); and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

534 Federal Reserve Bulletin • June 1996 (2) A written history of the consumer's account transac- A-L—MODEL CLAUSES FOR UNSOLICITED ISSUANCE tions that is provided promptly in response to an oral or (§ 205.5(b)(2)) written request and that covers at least 60 days preceding the date of a request by the consumer, (d) Modified requirements. A government agency that does A-2—.MODEL CLAUSES FOR INITIAL DISCLOSURES not furnish periodic statements, in accordance with para- (§ 205.7(b)) graph (c) of this section, shall comply with the following special rules: (1) Initial disclosures. The agency shall modify the A-3—MODEL FORMS FOR ERROR RESOLUTION NOTICE (§§ 205.7(b)(10) and 205.8(b)) disclosures under section 205.7(b) by disclosing: (i) Account balance. The means by which the consumer may obtain information concerning the account A-4—MODEL FORM FOR SERVICE-PROVIDING balance, including a telephone number. The agency INSTITUTIONS (§ 205.14(b)(l)(ii)) provides a notice substantially similar to the notice contained in paragraph A-5 in Appendix A of this part. A-5—MODEL FORMS FOR GOVERNMENT AGENCIES (ii) Written account history. A summary of the con- (§ 205.15(d)(1) and (2)) sumer's right to receive a written account history upon request, in place of the periodic statement required by section 205.7(b)(6), and the telephone num- A-L—MODEL CLAUSES FOR UNSOUCITED ISSUANCE ber to call to request an account history. This disclo- (§ 205.5(b)(2)) sure may be made by providing a notice substantially similar to the notice contained in paragraph A-5 in (a) Accounts using cards. You cannot use the enclosed card Appendix A of this part. to transfer money into or out of your account until we have (iii) Error resolution. A notice concerning error reso- validated it. If you do not want to use the card, please lution that is substantially similar to the notice con- (destroy it at once by cutting it in half). tained in paragraph A-5 in Appendix A of this part, in [Financial institution may add validation instructions here.] place of the notice required by section 205.7(b)(10). (b) Accounts using codes. You cannot use the enclosed (2) Annual error resolution notice. The agency shall code to transfer money into or out of your account until we provide an annual notice concerning error resolution that have validated it. If you do not want to use the code, please is substantially similar to the notice contained in para- (destroy this notice at once). graph A-5 in Appendix A, in place of the notice required [Financial institution may add validation instructions here.] by section 205.8(b). (3) Limitations on liability. For purposes of section 205.6(b)(3), regarding a 60-day period for reporting A-2—MODEL CLAUSES FOR INITIAL DISCLOSURES any unauthorized transfer that appears on a periodic (§ 205.7(b)) statement, the 60-day period shall begin with transmittal (a) Consumer Liability (section 205.7(b)(1)). (Tell us AT of a written account history or other account information ONCE if you believe your [card] [code] has been lost or provided to the consumer under paragraph (c) of this stolen. Telephoning is the best way of keeping your possisection. ble losses down. You could lose all the money in your (4) Error resolution. The agency shall comply with the account (plus your maximum overdraft line of credit). If requirements of section 205.11 in response to an oral or you tell us within 2 business days, you can lose no more written notice of an error from the consumer that is than $50 if someone used your [card] [code] without your received no later than 60 days after the consumer obtains permission. (If you believe your [card] [code] has been lost the written account history or other account information, or stolen, and you tell us within 2 business days after you under paragraph (c) of this section, in which the error is learn of the loss or theft, you can lose no more than $50 if first reflected. someone used your [card] [code] without your permission.) If you do NOT tell us within 2 business days after you 4. Appendices A and B are revised and Appendix C is learn of the loss or theft of your [card] [code], and we can added to read as follows: prove we could have stopped someone from using your [card] [code] without your permission if you had told us, you could lose as much as $500. Appendix A to Part 205—Model Disclosure Also, if your statement shows transfers that you did not Clauses and Forms make, tell us at once. If you do not tell us within 60 days after the statement was mailed to you, you may not get back any money you lost after the 60 days if we can prove that we could have stopped someone from taking the (c) Table of Contents money if you had told us in time. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 535 If a good reason (such as a long trip or a hospital stay) amount] each [insert time period] for our [automated kept you from telling us, we will extend the time periods. teller machine service] [telephone bill-payment service] (b) Contact in event of unauthorized transfer (section [point-of-sale transfer service]. 205.7(b)(2)) If you believe your [card] [code] has been lost (3) Average or minimum balance charge. We will only or stolen or that someone has transferred or may transfer charge you for using our [automated teller machines] money from your account without your permission, call: [telephone bill-payment service] [point-of-sale transfer service] if the [average] [minimum] balance in your [Telephone number] [checking account] [savings account] [accounts] falls or write: below [insert dollar amount]. If it does, we will charge [Name of person or office to be notified] you [insert dollar amount] each [transfer] [insert time [Address] period]. (f) Confidentiality (section 205.7(b)(9)). We will disclose (c) Business days (section 205.7(b)(3)). For purposes of information to third parties about your account or the these disclosures, our business days are (Monday through transfers you make: Friday) (Monday through Saturday) (any day including (1) Where it is necessary for completing transfers, or Saturdays and Sundays). Holidays are (not) included. (2) In order to verify the existence and condition of your (d) Transfer types and limitations (section 205.7(b)(4))— account for a third party, such as a credit bureau or (1) Account access. You may use your [card] [code] to: merchant, or (i) Withdraw cash from your [checking] [or] [savings] (3) In order to comply with government agency or court account. orders, or (ii) Make deposits to your [checking] [or] [savings] (4) If you give us your written permission. account. (g) Documentation (section 205.7(b)(6))— (iii) Transfer funds between your checking and sav- (1) Terminal transfers. You can get a receipt at the time ings accounts whenever you request. you make any transfer to or from your account using one (iv) Pay for purchases at places that have agreed to of our [automated teller machines] [or] [point-of-sale accept the [card] [code]. terminals], (v) Pay bills directly [by telephone] from your [check- (2) Preauthorized credits. If you have arranged to have ing] [or] [savings] account in the amounts and on the direct deposits made to your account at least once every days you request. 60 days from the same person or company, (we will let Some of these services may not be available at all you know if the deposit is [not] made.) [the person or terminals. company making the deposit will tell you every time (2) Limitations on frequency of transfers— they send us the money] [you can call us at (insert (i) You may make only [insert number, e.g., 3] cash telephone number) to find out whether or not the deposit withdrawals from our terminals each [insert time pe- has been made]. riod, e.g., week]. (3) Periodic statements. You will get a [monthly] [quar- (ii) You can use your telephone bill-payment service terly] account statement (unless there are no transfers in to pay [insert number] bills each [insert time period] a particular month. In any case you will get the state- [telephone call]. ment at least quarterly). (iii) You can use our point-of-sale transfer service for (4) Passbook account where the only possible electronic [insert number] transactions each [insert time period], fund transfers are preauthorized credits. If you bring (iv) For security reasons, there are limits on the num- your passbook to us, we will record any electronic ber of transfers you can make using our [terminals] deposits that were made to your account since the last [telephone bill-payment service] [point-of-sale trans- time you brought in your passbook. fer service]. (h) Preauthorized payments (section 205.7(b)(6), (7) (3) Limitations on dollar amounts of transfers— and (8); section 205.10(d))— (i) You may withdraw up to [insert dollar amount] (1) Right to stop payment and procedure for doing so. If from our terminals each [insert time period] time you you have told us in advance to make regular payments use the [card] [code]. out of your account, you can stop any of these payments. (ii) You may buy up to [insert dollar amount] worth of Here's how: goods or services each [insert time period] time you Call us at [insert telephone number], or write us at use the [card] [code] in our point-of-sale transfer [insert address], in time for us to receive your request service. 3 business days or more before the payment is sched- (e) Fees (section 205.7(b)(5))—(1) Per transfer charge. uled to be made. If you call, we may also require you We will charge you [insert dollar amount] for each to put your request in writing and get it to us within 14 transfer you make using our [automated teller machines] days after you call. (We will charge you for each [telephone bill-payment service] [point-of-sale transfer stop-payment order you give.) service]. (2) Notice of varying amounts. If these regular payments (2) Fixed charge. We will charge you [insert dollar may vary in amount, [we] [the person you are going to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

536 Federal Reserve Bulletin • June 1996 pay] will tell you, 10 days before each payment, when it 10 business days after we hear from you and will correct will be made and how much it will be. (You may choose any error promptly. If we need more time, however, we instead to get this notice only when the payment would may take up to 45 days to investigate your complaint or differ by more than a certain amount from the previous question. If we decide to do this, we will credit your payment, or when the amount would fall outside certain account within 10 business days for the amount you think limits that you set.) is in error, so that you will have the use of the money (3) Liability for failure to stop payment of preauthorized during the time it takes us to complete our investigation. If transfer. If you order us to stop one of these payments 3 we ask you to put your complaint or question in writing business days or more before the transfer is scheduled, and we do not receive it within 10 business days, we may and we do not do so, we will be liable for your losses or not credit your account. damages. If we decide that there was no error, we will send you a (i) Financial institution's liability (section 205.7(b)(8)). If written explanation within three business days after we we do not complete a transfer to or from your account on finish our investigation. You may ask for copies of the time or in the correct amount according to our agreement documents that we used in our investigation, with you, we will be liable for your losses or damages. (b) Error resolution notice on periodic statements section However, there are some exceptions. We will not be liable, 205.8(b) for instance: (1) If, through no fault of ours, you do not have enough In Case of Errors or Questions About Your Electronic money in your account to make the transfer. Transfers (2) If the transfer would go over the credit limit on your Telephone us at [insert telephone number] or overdraft line. Write us at [insert address] (3) If the automated teller machine where you are making the transfer does not have enough cash. as soon as you can, if you think your statement or receipt is (4) If the [terminal] [system] was not working properly wrong or if you need more information about a transfer on and you knew about the breakdown when you started the the statement or receipt. We must hear from you no later transfer. than 60 days after we sent you the FIRST statement on (5) If circumstances beyond our control (such as fire or which the error or problem appeared. flood) prevent the transfer, despite reasonable precau- (1) Tell us your name and account number (if any). tions that we have taken. (2) Describe the error or the transfer you are unsure (6) There may be other exceptions stated in our agree- about, and explain as clearly as you can why you believe ment with you. it is an error or why you need more information. (3) Tell us the dollar amount of the suspected error. We will investigate your complaint and will correct any A-3—MODEL FORMS FOR ERROR RESOLUTION NOTICE (SECTIONS 205.7(b)(10) AND 205.8(b) error promptly. If we take more than 10 business days to do this, we will credit your account for the amount you think (a) Initial and annual error resolution notice sections is in error, so that you will have the use of the money 205.7(b)(10) and 205.8(b)) during the time it takes us to complete our investigation. In Case of Errors or Questions About Your Electronic Transfers Telephone us at [insert telephone number] or A-4—MODEL FORM FOR SERVICE-PROVIDING Write us at [insert address] INSTITUTIONS (SECTION 205.14(b)(1)(H)) as soon as you can, if you think your statement or receipt is ALL QUESTIONS ABOUT TRANSACTIONS MADE wrong or if you need more information about a transfer WITH YOUR (NAME OF CARD) CARD MUST BE listed on the statement or receipt. We must hear from you DIRECTED TO US (NAME OF SERVICE PROVIDER), no later than 60 days after we sent the FIRST statement on AND NOT TO THE BANK OR OTHER FINANCIAL which the problem or error appeared. INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. (1) Tell us your name and account number (if any). We are responsible for the [name of service] service and (2) Describe the error or the transfer you are unsure for resolving any errors in transactions made with your about, and explain as clearly as you can why you believe [name of card] card. it is an error or why you need more information. We will not send you a periodic statement listing transac- (3) Tell us the dollar amount of the suspected error. If tions that you make using your [name of card] card. The you tell us orally, we may require that you send us your transactions will appear only on the statement issued by complaint or question in writing within 10 business your bank or other financial institution. SAVE THE REdays. CEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME OF CARD] CARD, AND CHECK THEM We will tell you the results of our investigation within AGAINST THE ACCOUNT STATEMENT YOU RE- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 537 CEIVE FROM YOUR BANK OR OTHER FINANCIAL finish our investigation. You may ask for copies of the INSTITUTION. If you have any questions about one of documents that we used in our investigation. these transactions, call or write us at [telephone number If you need more information about our error resolution and address] [the telephone and address indicated below], procedures, call us at [telephone number] [the telephone IF YOUR [NAME OF CARD] CARD IS LOST OR number shown above]. STOLEN, NOTIFY US AT ONCE by calling or writing to us at [telephone number and address]. Appendix B to Part 205—Federal Enforcement Agencies A-5—MODEL FORMS FOR GOVERNMENT The following list indicates which Federal agency enforces AGENCIES (SECTIONS 205.15(d)(I)(i) & (ii)) Regulation E (12 C.F.R. Part 205) for particular classes of institutions. Any questions concerning compliance by a (1) Disclosure by government agencies of information particular institution should be directed to the appropriate about obtaining account balances and account histories enforcing agency. Terms that are not defined in the Federal section 205.15(d)(l)(i) and (ii) Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the You may obtain information about the amount of bene- meaning given to them in the International Banking Act of fits you have remaining by calling [telephone number]. 1978 (12 U.S.C. 3101). That information is also available [on the receipt you get when you make a transfer with your card at [(an ATM) National banks, and Federal branches and Federal agen- POS terminal)] [when you make a balance inquiry at an cies of foreign banks ATM] [when you make a balance inquiry at specified loca- District office of the Office of the Comptroller of the tions]. Currency where the institution is located. You also have the right to receive a written summary of transactions for the 60 days preceding your request by State member banks, branches and agencies of foreign calling [telephone number], [Optional: Or you may request banks (other than Federal branches, Federal agencies, and the summary by contacting your caseworker.] insured state branches of foreign banks), commercial lend- (2) Disclosure of error resolution procedures for govern- ing companies owned or controlled by foreign banks, and ment agencies that do not provide periodic statements organizations operating under section 25 or 25(a) of the section 205.15(d)(l)(iii) and (d)(2)) Federal Reserve Act Federal Reserve Bank serving the District in which the In Case of Errors or Questions About Your Electronic institution is located. Transfers Telephone us at [telephone number] or Nonmember insured banks and insured state branches of Write us at [address] foreign banks Federal Deposit Insurance Corporation regional director as soon as you can, if you think an error has occurred in for the region in which the institution is located. your [EBT] [agency's name for program] account. We must hear from you no later than 60 days after you learn of Savings institutions insured under the Savings Association the error. You will need to tell us: Insurance Fund of the FDIC and federally-chartered sav- • Your name and [case] [file] number. ings banks insured under the Bank Insurance Fund of the • Why you believe there is an error, and the dollar FDIC (but not including state-chartered savings banks amount involved. insured under the Bank Insurance Fund) • Approximately when the error took place. Office of Thrift Supervision Regional Director for the region in which the institution is located. If you tell us orally, we may require that you send us your complaint or question in writing within 10 business days. Federal Credit Unions We will generally complete our investigation within Division of Consumer Affairs, National Credit Union 10 business days and correct any error promptly. In some Administration, 1775 Duke Street, Alexandria, Virginia cases, an investigation may take longer, but you will have 22314-3428 the use of the funds in question after the 10 business days. If we ask you to put your complaint or question in writing Air Carriers and we do not receive it within 10 business days, we may Assistant General Counsel for Aviation Enforcement not credit your account during the investigation. and Proceedings, Department of Transportation, For errors involving transactions at point-of-sale termi- 400 Seventh Street, S.W., Washington, D.C. 20590. nals in food stores, the periods referred to above are 20 business days instead of 10 business days. Brokers and Dealers If we decide that there was no error, we will send you a Division of Market Regulation, Securities and Exchange written explanation within three business days after we Commission, Washington, D.C. 20549. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

538 Federal Reserve Bulletin • June 1996 Retailers, Consumer Finance Companies, Certain Other Part 220—Credit by Brokers and Dealers Financial Institutions, and all others not covered above (Regulation T) Federal Trade Commission, Electronic Fund Transfers, Washington, D.C. 20580. 1. The authority citation for Part 220 continues to read as follows: Appendix C to Part 205—Issuance of Staff Interpretations Authority. 15 U.S.C. 78c, 78g, 78h, 78q, and 78w. Official Staff Interpretations 2. Sections 220.1 through 220.18 are revised to read as follows: Pursuant to section 915(d) of the act, the Board has designated the director and other officials of the Division of Section 220.1—Authority, purpose, and scope. Consumer and Community Affairs as officials "duly authorized" to issue, at their discretion, official staff interpreta- (a) Authority and purpose. Regulation T (this part) is tions of this part. Except in unusual circumstances, such issued by the Board of Governors of the Federal Reserve interpretations will not be issued separately but will be System (the Board) pursuant to the Securities Exchange incorporated in an official commentary to this part, which Act of 1934 (the Act) (15 U.S.C. 78a et seq.). Its principal will be amended periodically. purpose is to regulate extensions of credit by and to brokers and dealers; it also covers related transactions within the Board's authority under the Act. It imposes, among Requests for Issuance of Official Staff Interpretations other obligations, initial margin requirements and payment rules on securities transactions. A request for an official staff interpretation shall be in (b) Scope. (1) This part provides a margin account and writing and addressed to the Director, Division of Con- eight special purpose accounts in which to record all sumer and Community Affairs, Board of Governors of the financial relations between a customer and a creditor. Federal Reserve System, Washington, D.C. 20551. The Any transaction not specifically permitted in a special request shall contain a complete statement of all relevant account shall be recorded in a margin account. facts concerning the issue, including copies of all pertinent (2) This part does not preclude any exchange, national documents. securities association, or creditor from imposing additional requirements or taking action for its own protection. Scope of Interpretations (3) This part does not apply to transactions between a customer and a broker or dealer registered only under No staff interpretations will be issued approving financial section 15C of the Act. institutions' forms or statements. This restriction does not apply to forms or statements whose use is required or Section 220.2—Definitions. sanctioned by a government agency. The terms used in this part have the meanings given them in section 3(a) of the Act or as defined in this section. FINAL RULE—AMENDMENT TO REGULATION T Cash equivalent means securities issued or guaranteed by the United States or its agencies, negotiable bank certifi- The Board of Governors is amending 12 C.F.R. Part 220, cates of deposit, bankers acceptances issued by banking its Regulation T (Securities Credit Transactions), the regu- institutions in the United States and payable in the United lation that covers extensions of credit by and to broker and States, or money market mutual funds. dealers. Major amendments include eliminating restrictions Covered option transaction means: on the ability of broker-dealers to arrange for credit; in- (1) In the case of a short call, the underlying asset (or a creasing the type and number of domestic and foreign security immediately convertible into the underlying assecurities that may be bought on margin and increasing the set, without the payment of money) is held in or purloan value of some securities that are already marginable; chased for the account on the same day, and the option deleting Board rules regarding options transactions in favor premium is held in the account until cash payment for of the rules of the options exchanges; and reducing restric- the underlying asset or convertible security is received; tions on transactions involving foreign persons, foreign or securities, and foreign currency. (2) In the case of a short put, the creditor obtains cash in Effective July 1, 1996, 12 C.F.R. Part 220 is amended as an amount equal to the exercise price or holds in the follows: account cash equivalents with a current market value at Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 539 least equal to the exercise price and, except in the case option) or accept from the creditor (in the case of a put of money market mutual funds, with one year or less to option) the underlying asset or required cash or cash equivmaturity; or alent against payment of the exercise price upon exercise (3) In the case of a short put or short call, the creditor of the call or put. verifies that the appropriate escrow agreement will be Examining authority means: delivered to the creditor promptly and the option pre- (1) The national securities exchange or national securimium is held in the account until such delivery is made; ties association of which a creditor is a member; or or (2) If a member of more than one self-regulatory organi- (4) Beginning June 1, 1997, any other transaction in- zation, the organization designated by the SEC as the volving options or warrants in which the customer's risk examining authority for the creditor. is limited and all elements of the transaction are subject Exempted securities mutual fund means any security issued to contemporaneous exercise if: by an investment company registered under section 8 of (i) The amount at risk is held in the account in cash, the Investment Company Act of 1940 (15 U.S.C. 80a-8), cash equivalents, or via an escrow receipt; and provided the company has at least 95 percent of its assets (ii) The transaction is eligible for the cash account by continuously invested in exempted securities (as defined in the rules of the registered national securities exchange section 3(a)(12) of the Act). authorized to trade the option or warrant or by the Foreign margin stock means a foreign security that is an rules of the creditor's examining authority in the case equity security and that appears on the Board's periodiof an unregistered option, provided that all such rules cally published List of Foreign Margin Stocks. have been approved or amended by the SEC. Foreign person means a person other than a United States Credit balance means the cash amount due the customer in person as defined in section 7(f) of the Act. a margin account after debiting amounts transferred to the Foreign security means a security issued in a jurisdiction special memorandum account. other than the United States. Creditor means any broker or dealer (as defined in sec- Good faith margin means the amount of margin which a tions 3(a)(4) and 3(a)(5) of the Act), any member of a creditor, exercising sound credit judgment, would customnational securities exchange, or any person associated with arily require for a specified security position and which is a broker or dealer (as defined in section 3(a)(18) of the established without regard to the customer's other assets or Act), except for business entities controlling or under com- securities positions held in connection with unrelated transmon control with the creditor. actions. Customer includes: In or at the money means, until June 1, 1997, the current (1) Any person or persons acting jointly: market price of the underlying security is not more than (i) To or for whom a creditor extends, arranges, or one standard exercise interval below (with respect to a call maintains any credit; or option) or above (with respect to a put option) the exercise (ii) Who would be considered a customer of the price of the option. creditor according to the ordinary usage of the trade; In the money means the current market price of the under- (2) Any partner in a firm who would be considered a lying asset or index is not below (with respect to a call customer of the firm absent the partnership relationship; option) or above (with respect to a put option) the exercise and price of the option. (3) Any joint venture in which a creditor participates and Margin call means a demand by a creditor to a customer which would be considered a customer of the creditor if for a deposit of additional cash or securities to eliminate or the creditor were not a participant. reduce a margin deficiency as required under this part. Debit balance means the cash amount owed to the creditor Margin deficiency means the amount by which the required in a margin account after debiting amounts transferred to margin exceeds the equity in the margin account. the special memorandum account. Margin excess means the amount by which the equity in Delivery against payment, Payment against delivery, or a the margin account exceeds the required margin. When the C.O.D. transaction refers to an arrangement under which a margin excess is represented by securities, the current creditor and a customer agree that the creditor will deliver value of the securities is subject to the percentages set forth to, or accept from, the customer, or the customer's agent, a in section 220.18 (the Supplement). security against full payment of the purchase price. Margin security means: Equity means the total current market value of security (1) Any registered security; positions held in the margin account plus any credit bal- (2) Any OTC margin stock; ance less the debit balance in the margin account. (3) Any OTC margin bond; Escrow agreement means any agreement issued in connec- (4) Any OTC security designated as qualified for trading tion with a call or put option under which a bank or any in the National Market System under a designation plan person designated as a control location under paragraph (c) approved by the Securities and Exchange Commission of SEC Rule 15c3-3 (17 C.F.R. 240.15c3-3(c)), holding (NMS security); the underlying asset or required cash or cash equivalents, is (5) Any security issued by either an open-end investobligated to deliver to the creditor (in the case of a call ment company or unit investment trust which is regis- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

540 Federal Reserve Bulletin • June 1996 tered under section 8 of the Investment Company Act of (ii) The issuer or guarantor (implicitly); or 1940 (15 U.S.C. 80a-8); (iii) Other outstanding unsecured long-term debt secu- (6) Any foreign margin stock; or rities issued or guaranteed by the government or en- (7) Any debt security convertible into a margin security. tity; or Money market mutual fund means any security issued by (5) A foreign security that is a nonconvertible debt an investment company registered under section 8 of the security that meets all of the following requirements: Investment Company Act of 1940 (15 U.S.C. 80a-8) that is (i) At the time of original issue, a principal amount of considered a money market fund under SEC Rule 2a-7 at least $100,000,000 was outstanding; (17 C.F.R. 270.2a-7). (ii) At the time of the extension of credit, the creditor Nonexempted security means any security other than an has a reasonable basis for believing that the issuer is exempted security (as defined in section 3(a)(12) of the not in default on interest or principal payments; and Act). (iii) At the time of the extension of credit, the issue is Nonmember bank means a bank that is not a member of the rated in one of the two highest rating categories by a Federal Reserve System. nationally recognized statistical rating organiza- Non-U.S. traded foreign security means a foreign security tion; or that is neither a registered security nor one listed on (6) Any nonconvertible debt security that meets all of NASDAQ. the following requirements: OTC margin bond means: (i) At the time of the extension of credit, the creditor (1) A debt security not traded on a national securities has a reasonable basis for believing that the issuer is exchange which meets all of the following requirements: not in default on interest or principal payments; and (i) At the time of the original issue, a principal amount (ii) At the time of the extension of credit, the issue is of not less than $25,000,000 of the issue was outstand- rated in one of the four highest rating categories by a ing; nationally recognized statistical rating organization. (ii) The issue was registered under section 5 of the OTC margin stock means any equity security traded over- Securities Act of 1933 (15 U.S.C. 77e) and the issuer the-counter that the Board has determined has the degree either files periodic reports pursuant to section 13(a) of national investor interest, the depth and breadth of or 15(d) of the Act or is an insurance company market, the availability of information respecting the secuwhich meets all of the conditions specified in sec- rity and its issuer, and the character and permanence of the tion 12(g)(2)(G) of the Act; and issuer to warrant being treated like an equity security (iii) At the time of the extension of credit, the creditor traded on a national securities exchange. An OTC stock is has a reasonable basis for believing that the issuer is not considered to be an OTC margin stock unless it appears not in default on interest or principal payments; or on the Board's periodically published list of OTC margin (2) A private pass-through security (not guaranteed by stocks. an agency of the U.S. government) meeting all of the Overlying option means: following requirements: (1) A put option purchased or a call option written (i) An aggregate principal amount of not less than against a long position in an underlying asset in the $25,000,000 (which may be issued in series) was specialist record in section 220.12(b); or issued pursuant to a registration statement filed with (2) A call option purchased or a put option written the SEC under section 5 of the Securities Act of 1933 against a short position in an underlying asset in the (15 U.S.C. 77e); specialist record in section 220.12(b). (ii) Current reports relating to the issue have been Payment period means the number of business days in the filed with the SEC; and standard securities settlement cycle in the United States, as (iii) At the time of the credit extension, the creditor defined in paragraph (a) of SEC Rule 15c6-l (17 C.F.R. has a reasonable basis for believing that mortgage 240.15c6-1(a)), plus two business days. interest, principal payments and other distributions Permitted offset position means, in the case of an option in are being passed through as required and that the which a specialist makes a market, a position in the underservicing agent is meeting its material obligations lying asset or other related assets, and in the case of other under the terms of the offering; or securities in which a specialist makes a market, a position (3) A mortgage related security as defined in sec- in options overlying the securities in which a specialist tion 3(a)(41) of the Act; or makes a market, provided the positions qualify as permit- (4) A debt security issued or guaranteed as a general ted offsets under the rules of the national securities exobligation by the government of a foreign country, its change with which the specialist is registered, and further provinces, states, or cities, or a supranational entity, if at provided all such rules have been approved or amended by the time of the extension of credit one of the following is the SEC. Until June 1, 1997, permitted offsets are deterrated in one of the two highest rating categories by a mined by reference to section 220.12(b)(6). nationally recognized statistical rating organization: Purpose credit means credit for the purpose of: (i) The issue; (1) Buying, carrying, or trading in securities; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 541 (2) Buying or carrying any part of an investment con- (e) Receipt of funds or securities. tract security which shall be deemed credit for the pur- (1) A creditor, acting in good faith, may accept as pose of buying or carrying the entire security. immediate payment: Registered security means any security that: (i) Cash or any check, draft, or order payable on (1) Is registered on a national securities exchange; or presentation; or (2) Has unlisted trading privileges on a national securi- (ii) Any security with sight draft attached. ties exchange. (2) A creditor may treat a security, check or draft as Short call or short put means a call option or a put option received upon written notification from another creditor that is issued, endorsed, or guaranteed in or for an account. that the specified security, check, or draft has been (1) A short call that is not cash-settled obligates the sent. customer to sell the underlying asset at the exercise price (3) Upon notification that a check, draft, or order has upon receipt of a valid exercise notice or as otherwise been dishonored or when securities have not been rerequired by the option contract. ceived within a reasonable time, the creditor shall take (2) A short put that is not cash-settled obligates the the action required by this part when payment or securicustomer to purchase the underlying asset at the exercise ties are not received on time. price upon receipt of a valid exercise notice or as other- (4) To temporarily finance a customer's receipt of secuwise required by the option contract. rities pursuant to an employee benefit plan registered on (3) A short call or a short put that is cash-settled obli- SEC Form S-8 or the withholding taxes for an employee gates the customer to pay the holder of an in the money stock award plan, a creditor may accept, in lieu of the long put or long call who has, or has been deemed to securities, a properly executed exercise notice, where have, exercised the option the cash difference between applicable, and instructions to the issuer to deliver the the exercise price and the current assigned value of the stock to the creditor. Prior to acceptance, the creditor option as established by the option contract. must verify that the issuer will deliver the securities Specialist joint account means an account which, by writ- promptly and the customer must designate the account ten agreement, provides for the commingling of the secu- into which the securities are to be deposited. rity positions of the participants and a sharing of profits (f) Exchange of securities—(1) To enable a customer to and losses from the account on some predetermined ratio. participate in an offer to exchange securities which is Underlying asset means: made to all holders of an issue of securities, a creditor (1) The security or other asset that will be delivered may submit for exchange any securities held in a margin upon exercise of an option; or account, without regard to the other provisions of this (2) In the case of a cash-settled option, the securities or part, provided the consideration received is deposited other assets which comprise the index or other measure into the account. from which the option's value is derived. (2) If a nonmargin, nonexempted security is acquired in exchange for a margin security, its retention, withdrawal, or sale within 60 days following its acquisition shall be treated as if the security is a margin security. Section 220.3—General provisions. (g) Valuing securities. The current market value of a security shall be determined as follows: (a) Records. The creditor shall maintain a record for each (1) Throughout the day of the purchase or sale of a account showing the full details of all transactions. security, the creditor shall use the security's total cost of (b) Separation of accounts. Except as provided for in the purchase or the net proceeds of its sale including any margin account and the special memorandum account, the commissions charged. requirements of an account may not be met by considering (2) At any other time, the creditor shall use the closing items in any other account. If withdrawals of cash or sale price of the security on the preceding business day, securities are permitted under the regulation, written en- as shown by any regularly published reporting or quotatries shall be made when cash or securities are used for tion service. If there is no closing price, the creditor may purposes of meeting requirements in another account. use any reasonable estimate of the market value of the (c) Maintenance of credit. Except as prohibited by this security as of the close of business on the preceding part, any credit initially extended in compliance with this business day. part may be maintained regardless of: (h) Innocent mistakes. If any failure to comply with this (1) Reductions in the customer's equity resulting from part results from a mistake made in good faith in executing changes in market prices; a transaction or calculating the amount of margin, the (2) Any security in an account ceasing to be margin or creditor shall not be deemed in violation of this part if, exempted; or promptly after the discovery of the mistake, the creditor (3) Any change in the margin requirements prescribed takes appropriate corrective action. under this part. (i) Foreign currency. Freely convertible foreign currency (d) Guarantee of accounts. No guarantee of a customer's may be treated at its U.S. dollar equivalent, provided the account shall be given any effect for purposes of this part. currency is marked-to-market daily. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

542 Federal Reserve Bulletin • June 1996 Section 220.4—Margin account. (ii) A margin account that is transferred from one customer to another as part of a transaction, not undertaken to avoid the requirements of this part, may be (a) Margin transactions—(1) All transactions not specifi- treated as if it had been maintained for the transferee cally authorized for inclusion in another account shall be from the date of its origin, if the creditor accepts in recorded in the margin account. good faith and keeps with the transferee account a (2) A creditor may establish separate margin accounts signed statement of the transferor describing the cirfor the same person to: cumstances for the transfer. (i) Clear transactions for other creditors where the (8) Credit denominated in foreign currency. A creditor transactions are introduced to the clearing creditor by may extend credit denominated in any freely convertible separate creditors; or foreign currency. (ii) Clear transactions through other creditors if the (9) Options. The following provisions are in force until transactions are cleared by separate creditors; or June 1, 1997. (iii) Provide one or more accounts over which the (i) Margin or cover for options on exempted debt creditor or a third party investment adviser has invest- securities, certificates of deposit, stock indices, or ment discretion. securities exchange traded options on foreign curren- (b) Required margin—(1) Applicability. The required mar- cies. The required margin for each transaction involvgin for each long or short position in securities is set ing any short put or short call on an exempted debt forth in section 220.18 (the Supplement) and is subject security, certificate of deposit, stock index, or foreign to the following exceptions and special provisions. currency (if the option is traded on a securities ex- (2) Short sale against the box. A short sale "against the change), shall be the amount or position in lieu of box" shall be treated as a long sale for the purpose of margin set forth in section 220.18 (the Supplement). computing the equity and the required margin. (ii) Margin for options on equity securities. The re- (3) When-issued securities. The required margin on a net quired margin for each transaction involving any short long or net short commitment in a when-issued security put or short call on an equity security shall be the is the margin that would be required if the security were amount set forth in section 220.18 (the Supplement). an issued margin security, plus any unrealized loss on (iii) Cover or positions in lieu of margin. No margin is the commitment or less any unrealized gain. required for an option written on an equity security (4) Stock used as cover, (i) When a short position held in position when the account holds any of the following: the account serves in lieu of the required margin for a (A) The underlying asset in the case of a short call, short put, the amount prescribed by paragraph (b)(1) or a short position in the underlying asset in the of this section as the amount to be added to the case of a short put; required margin in respect of short sales shall be (B) Securities immediately convertible into or exincreased by any unrealized loss on the position. changeable for the underlying asset without the (ii) When a security held in the account serves in lieu payment of money in the case of a short call, if the of the required margin for a short call, the security right to convert or exchange does not expire on or shall be valued at no greater than the exercise price of before the expiration date of the short call; the short call. (C) An escrow agreement for the underlying secu- (5) Accounts of partners. If a partner of the creditor has rity or foreign exchange (in the case of a short call) a margin account with the creditor, the creditor shall or cash (in the case of a short put); disregard the partner's financial relations with the firm (D) A long call on the same number of shares of the (as shown in the partner's capital and ordinary drawing same underlying asset if the long call does not accounts) in calculating the margin or equity of the expire before the expiration date of the short call, partner's margin account. and if the amount (if any), by which the exercise (6) Contribution to joint venture. If a margin account is price of the long call exceeds the exercise price of the account of a joint venture in which the creditor the short call is deposited in the account; participates, any interest of the creditor in the joint (E) A long put on the same number of shares of the account in excess of the interest which the creditor same underlying asset if the long put does not would have on the basis of its right to share in the profits expire before the expiration date of the short put, shall be treated as an extension of credit to the joint and if the amount (if any), by which the exercise account and shall be margined as such. price of the short put exceeds the exercise price of (7) Transfer of accounts, (i) A margin account that is the long put is deposited in the account; transferred from one creditor to another may be (F) A warrant to purchase the underlying asset, in treated as if it had been maintained by the transferee the case of a short call, if the warrant does not from the date of its origin, if the transferee accepts, in expire on or before the expiration date of the short good faith, a signed statement of the transferor (or, if call, and if the amount (if any), by which the that is not practicable, of the customer), that any exercise price of the short call is deposited in the margin call issued under this part has been satisfied. account. A warrant used in lieu of the required Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 543 margin under this provision shall contribute no (e) Withdrawals of cash or securities. (1) Cash or securities equity to the account. may be withdrawn from an account, except if: (iv) Straddles. When both a short put and a short call (i) Additional cash or securities are required to be are in a margin account on the same number of shares deposited into the account for a transaction on the of the same underlying security, the required margin same or a previous day; or shall be the margin on either the short put of the short (ii) The withdrawal, together with other transactions, call, whichever is greater, plus any unrealized loss on deposits, and withdrawals on the same day, would the other option. create or increase a margin deficiency. (v) Exclusive designation. The customer may desig- (2) Margin excess may be withdrawn or may be transnate at the time the option order is entered which ferred to the special memorandum account (secsecurity position held in the account is to serve in lieu tion 220.5) by making a single entry to that account of the required margin, if such service is offered by which will represent a debit to the margin account and a the creditor; or the customer may have a standing credit to the special memorandum account. agreement with the creditor as to the method to be (3) If a creditor does not receive a distribution of cash or used for determining on any given day which security securities which is payable with respect to any security position will be used in lieu of the margin to support in a margin account on the day it is payable and withan option transaction. Any security held in the ac- drawal would not be permitted under paragraph (e) of count which serves in lieu of the required margin for a this section, a withdrawal transaction shall be deemed to short put or a short call shall be unavailable to support have occurred on the day the distribution is payable. any other option transaction in the account. (f) Interest, service charges, etc. (1) Without regard to the (c) When additional margin is required—(1) Computing other provisions of this section, the creditor, in its usual deficiency. All transactions on the same day shall be practice, may debit the following items to a margin combined to determine whether additional margin is account if they are considered in calculating the balance required by the creditor. For the purpose of computing of such account: equity in an account, security positions are established (i) Interest charged on credit maintained in the margin or eliminated and a credit or debit created on the trade account; date of a security transaction. Additional margin is re- (ii) Premiums on securities borrowed in connection quired on any day when the day's transactions create or with short sales or to effect delivery; increase a margin deficiency in the account and shall be (iii) Dividends, interest, or other distributions due on for the amount of the margin deficiency so created or borrowed securities; increased. (iv) Communication or shipping charges with respect (2) Satisfaction of deficiency. The additional required to transactions in the margin account; and margin may be satisfied by a transfer from the special (v) Any other service charges which the creditor may memorandum account or by a deposit of cash, margin impose. securities, exempted securities, or any combination (2) A creditor may permit interest, dividends, or other thereof. distributions credited to a margin account to be with- (3) Time limits, (i) A margin call shall be satisfied within drawn from the account if: one payment period after the margin deficiency was (i) The withdrawal does not create or increase a created or increased. margin deficiency in the account; or (ii) The payment period may be extended for one or (ii) The current market value of any securities withmore limited periods upon application by the creditor drawn does not exceed 10 percent of the current to its examining authority unless the examining au- market value of the security with respect to which thority believes that the creditor is not acting in good they were distributed. faith or that the creditor has not sufficiently determined that exceptional circumstances warrant such Section 220.5—Special memorandum account. action. Applications shall be filed and acted upon prior to the end of the payment period or the expira- (a) A special memorandum account (SMA) may be maintion of any subsequent extension. tained in conjunction with a margin account. A single entry (4) Satisfaction restriction. Any transaction, position, or amount may be used to represent both a credit to the SMA deposit that is used to satisfy one requirement under this and a debit to the margin account. A transfer between the part shall be unavailable to satisfy any other requirement. two accounts may be effected by an increase or reduction (d) Liquidation in lieu of deposit. If any margin call is not in the entry. When computing the equity in a margin met in full within the required time, the creditor shall account, the single entry amount shall be considered as a liquidate securities sufficient to meet the margin call or to debit in the margin account. A payment to the customer or eliminate any margin deficiency existing on the day such on the customer's behalf or a transfer to any of the customliquidation is required, whichever is less. If the margin er's other accounts from the SMA reduces the single entry deficiency created or increased is $1000 or less, no action amount. need be taken by the creditor. (b) The SMA may contain the following entries: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

544 Federal Reserve Bulletin • June 1996 (1) Dividend and interest payments; (4) Use an escrow agreement in lieu of the cash, cash (2) Cash not required by this part, including cash depos- equivalents or underlying asset position if: ited to meet a maintenance margin call or to meet any (i) In the case of a short call or a short put, the creditor requirement of a self-regulatory organization that is not is advised by the customer that the required securities, imposed by this part; assets or cash are held by a person authorized to issue (3) Proceeds of a sale of securities or cash no longer an escrow agreement and the creditor independently required on any expired or liquidated security position verifies that the appropriate escrow agreement will be that may be withdrawn under section 220.4(e); and delivered by the person promptly; or (4) Margin excess transferred from the margin account (ii) In the case of a call issued, endorsed, guaranteed, under section 220.4(e)(2). or sold on the same day the underlying asset is purchased in the account and the underlying asset is to be Section 220.6—Government securities account. delivered to a person authorized to issue an escrow agreement, the creditor verifies that the appropriate In a government securities account, a creditor may effect escrow agreement will be delivered by the person and finance transactions involving government securities, promptly. provided the transaction is not prohibited by section 15C of (b) Time periods for payment; cancellation or liquidation. the Act or any rule thereunder. (1) Full cash payment. A creditor shall obtain full cash payment for customer purchases — Section 220.7—Arbitrage account. (i) Within one payment period of the date: (A) Any nonexempted security was purchased; In an arbitrage account a creditor may effect and finance (B) Any when-issued security was made available for any customer bona fide arbitrage transactions. For the by the issuer for delivery to purchasers; purpose of this section, the term "bona fide arbitrage" (C) Any "when distributed" security was distribmeans: uted under a published plan; (a) A purchase or sale of a security in one market together (D) A security owned by the customer has matured with an offsetting sale or purchase of the same security in a or has been redeemed and a new refunding security different market at as nearly the same time as practicable of the same issuer has been purchased by the cusfor the purpose of taking advantage of a difference in prices tomer, provided: in the two markets; or (1) The customer purchased the new security no (b) A purchase of a security which is, without restriction more than 35 calendar days prior to the date of other then the payment of money, exchangeable or convert- maturity or redemption of the old security; ible within 90 calendar days of the purchase into a second (2) The customer is entitled to the proceeds of security together with an offsetting sale of the second the redemption; and security at or about the same time, for the purpose of (3) The delayed payment does not exceed 103 taking advantage of a concurrent disparity in the prices of percent of the proceeds of the old security. the two securities. (ii) In the case of the purchase of a foreign security, within one payment period of the trade date or within Section 220.8—Cash account. one day after the date on which settlement is required to occur by the rules of the foreign securities market, (a) Permissible transactions. In a cash account, a creditor, provided this period does not exceed the maximum may: time permitted by this part for delivery against pay- (1) Buy for or sell to any customer any security or other ment transactions. asset if: (2) Delivery against payment. If a creditor purchases for (i) There are sufficient funds in the account; or or sells to a customer a security in a delivery against (ii) The creditor accepts in good faith the customer's payment transaction, the creditor shall have up to 35 agreement that the customer will promptly make full calendar days to obtain payment if delivery of the secucash payment for the security or asset before selling it rity is delayed due to the mechanics of the transaction and does not contemplate selling it prior to making and is not related to the customer's willingness or ability such payment; to pay. (2) Buy from or sell for any customer any security or (3) Shipment of securities, extension. If any shipment of other asset if: securities is incidental to consummation of a transaction, (i) The security is held in the account; or a creditor may extend the payment period by the number (ii) The creditor accepts in good faith the customer's of days required for shipment, but not by more than one statement that the security is owned by the customer additional payment period. or the customer's principal, and that it will be (4) Cancellation; liquidation; minimum amount. A credpromptly deposited in the account; itor shall promptly cancel or otherwise liquidate a trans- (3) Issue, endorse, or guarantee, or sell an option for any action or any part of a transaction for which the cuscustomer as part of a covered option transaction; and tomer has not made full cash payment within the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 545 required time. A creditor may, at its option, disregard accept the customer's statement in good faith, the creditor any sum due from the customer not exceeding $1000. shall be aware of the circumstances surrounding the exten- (c) 90 day freeze—(1) If a nonexempted security in the sion of credit and shall be satisfied that the statement is account is sold or delivered to another broker or dealer truthful. without having been previously paid for in full by the customer, the privilege of delaying payment beyond the Section 220.10—Omnibus account. trade date shall be withdrawn for 90 calendar days following the date of sale of the security. Cancellation of (a) In an omnibus account, a creditor may effect and the transaction other than to correct an error shall constifinance transactions for a broker or dealer who is registered tute a sale. with the SEC under section 15 of the Act and who gives (2) The 90 day freeze shall not apply if: the creditor written notice that: (i) Within the period specified in paragraph (b)(1) of (1) All securities will be for the account of customers of this section, full payment is received or any check or the broker or dealer; and draft in payment has cleared and the proceeds from (2) Any short sales effected will be short sales made on the sale are not withdrawn prior to such payment or behalf of the customers of the broker or dealer other than check clearance; or partners. (ii) the purchased security was delivered to another (b) The written notice required by paragraph (a) of this broker or dealer for deposit in a cash account which section shall conform to any SEC rule on the hypothecaholds sufficient funds to pay for the security. The tion of customers' securities by brokers or dealers. creditor may rely on a written statement accepted in good faith from the other broker or dealer that suffi- Section 220.11—Broker-dealer credit account. cient funds are held in the other cash account. (d) Extension of time periods; transfers. (1) Unless the (a) Permissible transactions. In a broker-dealer credit accreditor's examining authority believes that the creditor count, a creditor may: is not acting in good faith or that the creditor has not (1) Purchase any security from or sell any security to sufficiently determined that exceptional circumstances another creditor or person regulated by a foreign securiwarrant such action, it may upon application by the ties authority under a good faith agreement to promptly creditor: deliver the security against full payment of the purchase (i) Extend any period specified in paragraph (b) of this price. section; (2) Effect or finance transactions of any of its owners if (ii) Authorize transfer to another account of any transthe creditor is a clearing and servicing broker or dealer action involving the purchase of a margin or exowned jointly or individually by other creditors. empted security; or (3) Extend and maintain credit to any partner or stock- (iii) Grant a waiver from the 90 day freeze. holder of the creditor for the purpose of making a capital (2) Applications shall be filed and acted upon prior to contribution to, or purchasing stock of, the creditor, the end of the payment period, or in the case of the affiliated corporation or another creditor. purchase of a foreign security within the period specified (4) Extend and maintain, with the approval of the approin paragraph (b)(l)(ii) of this section, or the expiration priate examining authority: of any subsequent extension. (i) Credit to meet the emergency needs of any creditor; or Section 220.9—Nonsecurities credit and employee (ii) Subordinated credit to another creditor for capital stock ownership account. purposes, if the other creditor: (A) Is an affiliated corporation or would not be (a) In a nonsecurities credit account a creditor may: considered a customer of the lender apart from the (1) Effect and carry transactions in commodities; subordinated loan; or (2) Effect and carry transactions in foreign exchange; (B) Will not use the proceeds of the loan to increase (3) Extend and maintain secured or unsecured nonpur- the amount of dealing in securities for the account pose credit, subject to the requirements of paragraph (b) of the creditor, its firm or corporation or an affiliof this section; and ated corporation. (4) Extend and maintain credit to employee stock owner- (5) Effect transactions for a customer as part of a "prime ship plans without regard to the other sections of this broker" arrangement in conformity with SEC guidepart. lines. (b) Every extension of credit, except as provided in para- (b) Affiliated corporations. For purposes of paragraphs graphs (a)(1) and (a)(2) of this section, shall be deemed to (a)(3) and (a)(4) of this section "affiliated corporation" be purpose credit unless, prior to extending the credit, the means a corporation all the common stock of which is creditor accepts in good faith from the customer a written owned directly or indirectly by the firm or general partners statement that it is not purpose credit. The statement shall and employees of the firm, or by the corporation or holders conform to the requirements established by the Board. To of the controlling stock and employees of the corporation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

546 Federal Reserve Bulletin • June 1996 and the affiliation has been approved by the creditor's deficit. If the call is not met by noon of the following examining authority. business day, the creditor shall liquidate positions in the specialist's account. (5) Withdrawals. Withdrawals may be permitted to the extent that the equity exceeds the margin requirements Section 220.12—Market functions account. specified in paragraph (b)(2) of this section. (6) Permitted offset positions. Until June 1, 1997, a specialist in options may establish, on a share-for-share (a) Requirements. In a market functions account, a creditor basis, a long or short position in the securities underlymay effect or finance the transactions of market particiing the options in which the specialist makes a market, pants in accordance with the following provisions. A sepaand a specialist in securities other than options may rate record shall be kept for the transactions specified for purchase or write options overlying the securities in each category described in paragraphs (b) through (e) of which the specialist makes a market, if the account holds this section. Any position in a separate record shall not be the following permitted offset positions: used to meet the requirements of any other category. (i) A short option position which is "in or at the (b) Specialists—(1) Applicability. A creditor may clear or money" and is not offset by a long or short option finance specialist transactions and permitted offset posiposition for an equal or greater number of shares of tions for any specialist, or any specialist joint account, in the same underlying security which is "in the monwhich all participants, or all participants other than the ey"; creditor, are registered as specialists on a national securi- (ii) A long option position which is "in or at the ties exchange that requires regular reports on the use of money" and is not offset by a long or short option specialist credit from the registered specialists. position for an equal or greater number of shares of (2) Required margin. The required margin for a specialthe same underlying security which is "in the ist's transactions shall be: money"; (i) Good faith margin for: (iii) A short option position against which an exercise (A) Any long or short position in a security in notice was tendered; which the specialist makes a market; (iv) A long option position which was exercised; (B) Any wholly owned margin security or ex- (v) A net long position in a security (other than an empted security; or option) in which the specialist makes a market; or (C) Any permitted offset position. (vi) A net short position in a security (other than an (ii) The margin prescribed by section 220.18 (the option) in which the specialist makes a market. Supplement) when a security purchased or sold short (c) Underwriters and distributors. A creditor may effect or in the account does not qualify as a specialist or finance for any dealer or group of dealers transactions for permitted offset position. the purpose of facilitating the underwriting or distribution (3) Additional margin; restriction on "free-riding." of all or a part of an issue of securities with a good faith (i) Except as required by paragraph (b)(4) of this margin. section, the creditor shall issue a margin call on any (d) OTC marketmakers and third marketmakers. (1) A day when additional margin is required as a result of creditor may clear or finance with a good faith margin, specialist transactions. The creditor may allow the marketmaking transactions for a creditor who is a regisspecialist a maximum of one payment period to sattered NASDAQ marketmaker or a qualified third marketisfy a margin call. maker as defined in SEC Rule 3b-8 (17 C.F.R. 240.3b-8). (ii) If a specialist fails to satisfy a margin call within (2) If the credit extended to a marketmaker ceases to be the period specified in paragraph (b)(3) of this section for the purpose of marketmaking, or the dealer ceases to (and the creditor is required to liquidate securities to be a marketmaker for an issue of securities for which satisfy the call), the creditor shall be prohibited for a credit was extended, the credit shall be subject to the 15 calendar day period from extending any further margin specified in section 220.18 (the Supplement). credit to the specialist to finance transactions in non- (e) Odd-lot dealers. A creditor may clear and finance specialty securities. odd-lot transactions for any creditor who is registered as an (iii) The restriction on "free-riding" shall not apply odd-lot dealer on a national securities exchange with a to: good faith margin. (A) Any specialist on a national securities exchange that has an SEC-approved rule on "free-riding" by specialists; or Section 220.13—Arranging for loans by others. (B) The acquisition or liquidation of a permitted offset position. (4) Deficit status. On any day when a specialist's sepa- A creditor may arrange for the extension or maintenance of rate record would liquidate to a deficit, the creditor shall credit to or for any customer by any person, provided the not extend any further specialist credit in the account creditor does not willfully arrange credit that violates and shall issue a margin call at least as large as the parts 207, 221, or 224 of this chapter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 547 Section 220.14—Clearance of securities, options, other similar situations. Each borrowing shall be secured and futures. by a deposit of one or more of the following: cash, cash equivalents, foreign sovereign nonconvertible debt securi- (a) Credit for clearance of securities. The provisions of ties that are margin securities, collateral acceptable for this part shall not apply to the extension or maintenance of borrowings of securities pursuant to SEC Rule 15c3-3 any credit that is not for more than one day if it is (17 C.F.R. 240.15c3-3), or irrevocable letters of credit incidental to the clearance of transactions in securities issued by a bank insured by the Federal Deposit Insurance directly between members of a national securities ex- Corporation or a foreign bank that has filed an agreement change or association or through any clearing agency regis- with the Board on Form FR T-l, T-2. Such deposit made tered with the SEC. with the lender of the securities shall have at all times a (b) Deposit of securities with a clearing agency. The value at least equal to 100 percent of the market value of provisions of this part shall not apply to the deposit of the securities borrowed, computed as of the close of the securities with an options or futures clearing agency for the preceding business day. If a creditor reasonably anticipates purpose of meeting the deposit requirements of the agency a short sale, such borrowing may be made up to one if: standard settlement cycle in advance of trade date, (b) A creditor may lend non-U.S. traded foreign securities (1) The clearing agency: to a foreign person (or borrow such securities for the (i) Issues, guarantees performance on, or clears transpurpose of relending them to a foreign person) for any actions in, any security (including options on any purpose lawful in the country in which they are to be used. security, certificate of deposit, securities index or for- Each borrowing shall be secured with collateral having at eign currency); or all times a value at least equal to 100 percent of the market (ii) Guarantees performance of contracts for the purvalue of the securities borrowed, computed as of the close chase or sale of a commodity for future delivery or of the preceding business day. options on such contracts; (2) The clearing agency is registered with the Securities and Exchange Commission or is the clearing agency for Section 220.17—Requirements for the list of a contract market regulated by the Commodity Futures marginable OTC stocks and the list of foreign Trading Commission; and margin stocks. (3) The deposit consists of any margin security and complies with the rules of the clearing agency that have (a) Requirements for inclusion on the list of marginable been approved by the Securities and Exchange Commis- OTC stocks. Except as provided in paragraph (f) of this sion or the Commodity Futures Trading Commission. section, OTC margin stock shall meet the following requirements: Section 220.15—Borrowing by creditors. (1) Four or more dealers stand willing to, and do in fact, make a market in such stock and regularly submit bona (a) Restrictions on borrowing. A creditor may not borrow fide bids and offers to an automated quotations system in the ordinary course of business as a broker or dealer for their own accounts; using as collateral any registered nonexempted security, (2) The minimum average bid price of such stock, as except: determined by the Board, is at least $5 per share; (1) From or through a member bank of the Federal (3) The stock is registered under section 12 of the Act, is Reserve System; or issued by an insurance company subject to section- (2) From any nonmember bank that has filed with the 12(g)(2)(G) of the Act, is issued by a closed-end invest- Board an agreement as prescribed in paragraph (b) of ment management company subject to registration purthis section, which agreement is still in effect; or suant to section 8 of the Investment Company Act of (3) From another creditor if the loan is permissible under 1940 (15 U.S.C. 80a-8), is an American Depository Rethis part. ceipt (ADR) of a foreign issuer whose securities are (b) Agreements of nonmember banks. registered under section 12 of the Act, or is a stock of an (1) A nonmember bank shall file an agreement that issuer required to file reports under section 15(d) of the conforms to the requirements of section 8(a) of the Act Act; (See Form FR T-l, T-2). (4) Daily quotations for both bid and asked prices for the (2) Any nonmember bank may terminate its agreement stock are continuously available to the general public; if it obtains the written consent of the Board. (5) The stock has been publicly traded for at least six months; Section 220.16—Borrowing and lending securities. (6) The issuer has at least $4 million of capital, surplus, and undivided profits; (a) Without regard to the other provisions of this part, a (7) There are 400,000 or more shares of such stock creditor may borrow or lend securities for the purpose of outstanding in addition to shares held beneficially by making delivery of the securities in the case of short sales, officers, directors or beneficial owners of more than failure to receive securities required to be delivered, or 10 percent of the stock; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

548 Federal Reserve Bulletin • June 1996 (8) There are 1,200 or more holders of record, as defined foreign margin stocks. Except as provided in paragraph (f) in SEC Rule 12g5—1(17 C.F.R. 240.12g5-l), of the of this section, a foreign margin stock shall be a foreign stock who are not officers, directors or beneficial owners security deemed to have a "ready market" for purposes of of 10 percent or more of the stock, or the average daily SEC Rule 15c3-l (17 C.F.R. 240. 15c3-l) or meet the trading volume of such stock as determined by the following requirements: Board, is at least 500 shares; and (1) The security continues to meet the requirements (9) The issuer or a predecessor in interest has been in specified in paragraphs (c) (1) and (2) of this section; existence for at least three years. (2) The aggregate market value of shares, the ownership (b) Requirements for continued inclusion on the list of of which is unrestricted, is not less than $500 million; marginable OTC stocks. Except as provided in para- and graph (f) of this section, OTC margin stock shall meet the (3) The average weekly trading volume of such security following requirements: during the preceding six months is either at least 100,000 (1) Three or more dealers stand willing to, and do in shares or $500,000. fact, make a market in such stock and regularly submit (e) Removal from the lists. The Board shall periodically bona fide bids and offers to an automated quotations remove from the lists any stock that: system for their own accounts; (1) Ceases to exist or of which the issuer ceases to exist; (2) The minimum average bid price of such stocks, as or determined by the Board, is at least $2 per share; (2) No longer substantially meets the provisions of para- (3) The stock is registered as specified in para- graph (b) or (d) of this section or the definition of OTC graph (a)(3) of this section; margin stock. (4) Daily quotations for both bid and asked prices for the (f) Discretionary authority of Board. Without regard to stock are continuously available to the general public; other paragraphs of this section, the Board may add to, or (5) The issuer has at least $1 million of capital, surplus, omit or remove from the list of marginable OTC stocks and and undivided profits; the list of foreign margin stocks and equity security, if in (6) There are 300,000 or more shares of such stock the judgment of the Board, such action is necessary or outstanding in addition to shares held beneficially by appropriate in the public interest. officers, directors, or beneficial owners of more than (g) Unlawful representations. It shall be unlawful for any 10 percent of the stock; and creditor to make, or cause to be made, any representation (7) There continue to be 800 or more holders of record, to the effect that the inclusion of a security on the list of as defined in SEC Rule 12g5-l (17 C.F.R. 240.12g5-l), marginable OTC stocks or the list of foreign margin stocks of the stock who are not officers, directors, or beneficial is evidence that the Board or the SEC has in any way owners of 10 percent or more of the stock, or the passed upon the merits of, or given approval to, such average daily trading volume of such stock, as deter- security or any transactions therein. Any statement in an mined by the Board, is at least 300 shares. advertisement or other similar communication containing a (c) Requirements for inclusion on the list of foreign margin reference to the Board in connection with the lists or stocks stocks. Except as provided in paragraph (f) of this section, on those lists shall be an unlawful representation. a foreign margin stock shall be a foreign security deemed to have a "ready market" for purposes of SEC Rule Section 220.18—Supplement: Margin requirements. 15c3—1 (17 C.F.R. 240.15c3-l) or meet the following requirements: The required margin for each security position held in a (1) The security is listed for trading on or through the margin account shall be as follows: facilities of a foreign securities exchange or a recog- (a) Margin equity security, except for an exempted secunized foreign securities market and has been trading on rity, money market mutual fund or exempted securities such exchange or market for at least six months; mutual fund, warrant on a securities index or foreign (2) Daily quotations for both bid and asked or last sale currency or a long position in an option: 50 percent of the prices for the security provided by the foreign securities current market value of the security or the percentage set exchange or foreign securities market on which the by the regulatory authority where the trade occurs, whichsecurity is traded are continuously available to creditors ever is greater. in the United States pursuant to an electronic quotation (b) Exempted security, registered nonconvertible debt secusystem; rity, OTC margin bond, money market mutual fund or (3) The aggregate market value of shares, the ownership exempted securities mutual fund: The margin required by of which is unrestricted, is not less than $1 billion; the creditor in good faith or the percentage set by the (4) The average weekly trading volume of such security regulatory authority where the trade occurs, whichever is during the preceding six months is either at least 200,000 greater. shares or $1 million; and (c) Short sale of a nonexempted security, except for a (5) The issuer or a predecessor in interest has been in registered nonconvertible debt security or OTC margin existence for at least five years. bond: 150 percent of the current market value of the (d) Requirements for continued inclusion on the list of security, or 100 percent of the current market value if a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 549 security exchangeable or convertible within 90 calendar Part 250—Miscellaneous Interpretations days without restriction other than the payment of money into the security sold short is held in the account. (d) Short sale of an exempted security, registered noncon- 1. The authority citation for Part 250 will continue to read vertible debt security or OTC margin bond: 100 percent of as follows: the current market value of the security plus the margin required by the creditor in good faith. Authority: 12 U.S.C. 248(i) and 371c(e). (e) Nonmargin, nonexempted security: 100 percent of the current market value. Section 250.161—[Amended] (f) Put or call on a security, certificate of deposit, securities index or foreign currency or a warrant on a securities index or foreign currency: 2. In section 250.161, paragraph (d) is amended by remov- (1) In the case of puts and calls issued by a registered ing the words "loans to affiliates (12 U.S.C. 371c)," in the clearing corporation and listed or traded on a registered first sentence. national securities exchange or a registered securities association and registered warrants on a securities index Section 250.162—[Amended] or foreign currency, the amount, or other position (except in the case of an option on an equity security until June 1, 1997), specified by the rules of the registered 3. In section 250.162, paragraph (a) is amended by removnational securities exchange or the registered securities ing the words "Loans to affiliates (12 U.S.C. 371c), purassociation authorized to trade the option or warrant, chases" in the first sentence and adding "Purchases" in provided that all such rules have been approved or their place. amended by the SEC; or (2) In the case of all other puts and calls, the amount, or 4. A new section 250.242 is added to read as follows: other position, specified by the maintenance rules of the creditor's examining authority. Section 250.242—Section 23A of the Federal Reserve Act—definition of capital stock and surplus. Section 220.19—[Removed] (a) An insured depository institution's capital stock and surplus for purposes of section 23A of the Federal Reserve 3. Section 220.19 is removed. Act (12 U.S.C. 371c) is: (1) Tier 1 and Tier 2 capital included in an institution's risk-based capital under the capital guidelines of the Interpretations appropriate Federal banking agency, based on the institution's most recent consolidated Report of Condition and Income filed under 12 U.S.C. 1817(a)(3); and 4. The following sections are removed and reserved: (2) The balance of an institution's allowance for loan 220.106, 220.107, 220.109, 220.112, 220.114, 220.115, and lease losses not included in its Tier 2 capital for 220.116, 220.120, 220.125, 220.129, and 220.130. purposes of the calculation of risk-based capital by the appropriate Federal banking agency, based on the institution's most recent consolidated Report of Condition and Income filed under 12 U.S.C. 1817(a)(3). FINAL RULE—AMENDMENT TO REGULATION O (b) For purposes of this section, the terms appropriate Federal banking agency and insured depository institution The Board of Governors is amending 12 C.F.R. Part 250, are defined as those terms are defined in section 3 of the its Regulation O (Transactions with Affiliates). The Board Federal Deposit Insurance Act, 12 U.S.C. 1813. is adopting a definition of capital stock and surplus for purposes of section 23A of the Federal Reserve Act that conforms to the definition of unimpaired capital and unimpaired surplus used by the Board in calculating the limits in FINAL RULE-AMENDMENT TO UNIFORM RULES OF Regulation O for insider lending and by the Office of the PRACTICE AND PROCEDURE FOR ADMINISTRATIVE Comptroller of the Currency (OCC) in calculating the limit HEARINGS on loans by a national bank to a single borrower. The final rule will reduce the burden for member banks and other The Board of Governors is amending 12 C.F.R. Part 263, insured depository institutions monitoring lending to their its Uniform Rules of Practice and Procedure for Adminisaffiliates. trative Hearings ("Uniform Rules"). As a result of an Effective July 1, 1996, 12 C.F.R. Part 250 is amended as interagency review conducted by the Board, the Office of follows: the Comptroller of the Currency ("OCC"), the Office of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

550 Federal Reserve Bulletin • June 1996 Thrift Supervision ("OTS"), the Federal Deposit Insurance behalf of a party in the adjudicatory proceeding. The Corporation ("FDIC"), and the National Credit Union notice of appearance must include a written declaration Administration ("NCUA"), the Board is amending its im- that the individual is currently qualified as provided in plementation of the Uniform Rules. The Board's review of paragraph (a)(1) or (a)(2) of this section and is authothe Uniform Rules was conducted in accordance with rized to represent the particular party. By filing a notice section 303 of the Riegle Community Development and of appearance on behalf of a party in an adjudicatory Regulatory Improvement Act of 1994. The final rule is proceeding, the counsel agrees and represents that he or intended to clarify certain provisions and to increase the she is authorized to accept service on behalf of the efficiency and fairness of administrative hearings. represented party and that, in the event of withdrawal Effective June 5, 1996, 12 C.F.R. Part 263 is amended as from representation, he or she will, if required by the follows: administrative law judge, continue to accept service until new counsel has filed a notice of appearance or Part 263—Rules of Practice for Hearings until the represented party indicates that he or she will proceed on a pro se basis. 1. The authority citation for Part 263 is revised to read as follows: 4. In section 263.8, paragraph (b) is revised to read as Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, follows: 505, 1817(j), 1818, 1828(c), 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 3107, 3108, 3907, 3909, and 4717; Section 263.8—Conflicts of interest. 15 U.S.C. 21, 78o-4, 78o-5, and 78u-2; 31 U.S.C. 5321; and 42 U.S.C. 4012a. (b) Certification and waiver. If any person appearing as 2. In section 263.1, paragraph (e)(9) is amended by remov- counsel represents two or more parties to an adjudicatory ing "and" after the semicolon, new paragraphs (e)(ll) proceeding or also represents a non-party on a matter and (e)(12) are added, paragraph (f) is redesignated as relevant to an issue in the proceeding, counsel must certify paragraph (g), and revised, and new paragraph (f) is added in writing at the time of filing the notice of appearance to read as follows: required by section 263.6(a): (1) That the counsel has personally and fully discussed Section 263.1—Scope. the possibility of conflicts of interest with each such party and non-party; and (2) That each such party and non-party waives any right it might otherwise have had to assert any known con- (11) Any provision of law referenced in section 102(f) flicts of interest or to assert any non-material conflicts of of the Flood Disaster Protection Act of 1973 (42 U.S.C. interest during the course of the proceeding. 4012a(f)) or any order or regulation issued thereunder; and 5. In section 263.11, paragraphs (c)(2) and (d) are revised (12) Any provision of law referenced in 31 U.S.C. 5321 to read as follows: or any order or regulation issued thereunder; (f) Remedial action under section 102(g) of the Flood Section 263.11—Service of papers. Disaster Protection Act of 1973 (42 U.S.C. 4012a(g)); and (g) This subpart also applies to all other adjudications required by statute to be determined on the record after (c) ^ ^ opportunity for an agency hearing, unless otherwise specif- (2) If a party has not appeared in the proceeding in ically provided for in the Local Rules. accordance with section 263.6, the Board or the administrative law judge shall make service by any of the 3. In section 263.6, paragraph (a)(3) is revised to read as following methods: follows: (i) By personal service; (ii) If the person to be served is an individual, by Section 263.6—Appearance and practice in delivery to a person of suitable age and discretion at adjudicatory proceedings. the physical location where the individual resides or works; (cl) ^ ^ (iii) If the person to be served is a corporation or other (3) Notice of appearance. Any individual acting as coun- association, by delivery to an officer, managing or sel on behalf of a party, including the Board, shall file a general agent, or to any other agent authorized by notice of appearance with OFIA at or before the time appointment or by law to receive service and, if the that individual submits papers or otherwise appears on agent is one authorized by statute to receive service Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 551 and the statute so requires, by also mailing a copy to 7. Section 263.20 is revised to read as follows: the party; (iv) By registered or certified mail addressed to the Section 263.20—Amended pleadings. person's last known address; or (v) By any other method reasonably calculated to give (a) Amendments. The notice or answer may be amended or actual notice. supplemented at any stage of the proceeding. The respon- (d) Subpoenas. Service of a subpoena may be made: dent must answer an amended notice within the time (1) By personal service; remaining for the respondent's answer to the original no- (2) If the person to be served is an individual, by tice, or within ten days after service of the amended notice, delivery to a person of suitable age and discretion at the whichever period is longer, unless the Board or administraphysical location where the individual resides or works; tive law judge orders otherwise for good cause. (3) By delivery to an agent, which, in the case of a (b) Amendments to conform to the evidence. When issues corporation or other association, is delivery to an officer, not raised in the notice or answer are tried at the hearing by managing or general agent, or to any other agent autho- express or implied consent of the parties, they will be rized by appointment or by law to receive service and, if treated in all respects as if they had been raised in the the agent is one authorized by statute to receive service notice or answer, and no formal amendments are required. and the statute so requires, by also mailing a copy to the If evidence is objected to at the hearing on the ground that party; it is not within the issues raised by the notice or answer, the (4) By registered or certified mail addressed to the administrative law judge may admit the evidence when person's last known address; or admission is likely to assist in adjudicating the merits of (5) By any other method as is reasonably calculated to the action and the objecting party fails to satisfy the admingive actual notice. istrative law judge that the admission of such evidence would unfairly prejudice that party's action or defense upon the merits. The administrative law judge may grant a continuance to enable the objecting party to meet such 6. In section 263.12, paragraphs (a), (c)(1), (c)(2), evidence. and (c)(3) are revised to read as follows: 8. Section 263.24, paragraphs (a) and (b) are revised to Section 263.12—Construction of time limits. read as follows: (a) General rule. In computing any period of time pre- Section 263.24—Scope of document discovery. scribed by this subpart, the date of the act or event that commences the designated period of time is not included. (a) Limits on discovery. (1) Subject to the limitations set The last day so computed is included unless it is a Satur- out in paragraphs (b), (c), and (d) of this section, a party day, Sunday, or Federal holiday. When the last day is a to a proceeding under this subpart may obtain document Saturday, Sunday, or Federal holiday, the period runs until discovery by serving a written request to produce docuthe end of the next day that is not a Saturday, Sunday, or ments. For purposes of a request to produce documents, Federal holiday. Intermediate Saturdays, Sundays, and Fed- the term "documents" may be defined to include draweral holidays are included in the computation of time. ings, graphs, charts, photographs, recordings, data stored However, when the time period within which an act is to be in electronic form, and other data compilations from performed is ten days or less, not including any additional which information can be obtained, or translated, if time allowed for in paragraph (c) of this section, intermedi- necessary, by the parties through detection devices into ate Saturdays, Sundays, and Federal holidays are not in- reasonably usable form, as well as written material of all cluded. kinds. (2) Discovery by use of deposition is governed by section 263.53 of subpart B of this part. (c) ^ ^ (3) Discovery by use of interrogatories is not permitted. (1) If service is made by first class, registered, or certi- (b) Relevance. A party may obtain document discovery fied mail, add three calendar days to the prescribed regarding any matter, not privileged, that has material period; relevance to the merits of the pending action. Any request (2) If service is made by express mail or overnight to produce documents that calls for irrelevant material, that delivery service, add one calendar day to the prescribed is unreasonable, oppressive, excessive in scope, unduly period; or burdensome, or repetitive of previous requests, or that (3) If service is made by electronic media transmission, seeks to obtain privileged documents will be denied or add one calendar day to the prescribed period, unless modified. A request is unreasonable, oppressive, excessive otherwise determined by the Board or the administrative in scope or unduly burdensome if, among other things, it law judge in the case of filing, or by agreement among fails to include justifiable limitations on the time period the parties in the case of service. covered and the geographic locations to be searched, the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

552 Federal Reserve Bulletin • June 1996 time provided to respond in the request is inadequate, or material, is unreasonable, oppressive, excessive in scope, the request calls for copies of documents to be delivered to unduly burdensome, or repetitive of previous requests, or the requesting party and fails to include the requestor's seeks to obtain privileged documents, he or she may deny written agreement to pay in advance for the copying, in or modify the request, and may issue appropriate protective accordance with section 263.25. orders, upon such conditions as justice may require. The pendency of a motion to strike or limit discovery or to compel production is not a basis for staying or continuing the proceeding, unless otherwise ordered by the administra- 9. In section 263.25, paragraphs (a), (b), (e), and (g) are tive law judge. Notwithstanding any other provision in this revised to read as follows: part, the administrative law judge may riot release, or order a party to produce, documents withheld on grounds of privilege if the party has stated to the administrative law Section 263.25—Request for document discovery judge its intention to file a timely motion for interlocutory from parties. review of the administrative law judge's order to produce the documents, and until the motion for interlocutory re- (a) General rule. Any party may serve on any other party a view has been decided. request to produce for inspection any discoverable documents that are in the possession, custody, or control of the party upon whom the request is served. The request must identify the documents to be produced either by individual 10. In section 263.33, paragraph (a) is revised to read as item or by category, and must describe each item and follows: category with reasonable particularity. Documents must be produced as they are kept in the usual course of business or Section 263.33—Public hearings. must be organized to correspond with the categories in the request. (a) General rule. All hearings shall be open to the public, (b) Production or copying. The request must specify a unless the Board, in the Board's discretion, determines that reasonable time, place, and manner for production and holding an open hearing would be contrary to the public performing any related acts. In lieu of inspecting the docuinterest. Within 20 days of service of the notice or, in the ments, the requesting party may specify that all or some of case of change-in-control proceedings under section 7(j)(4) the responsive documents be copied and the copies delivof the FDIA (12 U.S.C. 1817(j)(4)), within 20 days from ered to the requesting party. If copying of fewer than 250 service of the hearing order, any respondent may file with pages is requested, the party to whom the request is adthe Board a request for a private hearing, and any party dressed shall bear the cost of copying and shipping charges. may file a reply to such a request. A party must serve on If a party requests 250 pages or more of copying, the the administrative law judge a copy of any request or reply requesting party shall pay for the copying and shipping the party files with the Board. The form of, and procedure charges. Copying charges are the current per-page copying for, these requests and replies are governed by section rate imposed by 12 C.F.R. Part 261 implementing the Free- 263.23. A party's failure to file a request or a reply constidom of Information Act (5 U.S.C. 552). The party to whom tutes a waiver of any objections regarding whether the the request is addressed may require payment in advance hearing will be public or private. before producing the documents. (e) Privilege. At the time other documents are produced, 11. In section 263.34, paragraphs (a) and (b)(1) are revised the producing party must reasonably identify all documents to read as follows: withheld on the grounds of privilege and must produce a statement of the basis for the assertion of privilege. When similar documents that are protected by deliberative pro- Section 263.34—Hearing subpoenas. cess, attorney-work-product, or attorney-client privilege are voluminous, these documents may be identified by (a) Issuance—(1) Upon application of a party showing category instead of by individual document. The adminis- general relevance and reasonableness of scope of the trative law judge retains discretion to determine when the testimony or other evidence sought, the administrative identification by category is insufficient. law judge may issue a subpoena or a subpoena duces tecum requiring the attendance of a witness at the hearing or the production of documentary or physical evi- (g) Ruling on motions. After the time for filing responses dence at the hearing. The application for a hearing pursuant to this section has expired, the administrative law subpoena must also contain a proposed subpoena specijudge shall rule promptly on all motions filed pursuant to fying the attendance of a witness or the production of this section. If the administrative law judge determines that evidence from any state, territory, or possession of the a discovery request, or any of its terms, calls for irrelevant United States, the District of Columbia, or as otherwise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 553 provided by law at any designated place where the 13. In section 263.37, the section heading and paragraph hearing is being conducted. The party making the appli- (a)(1) are revised to read as follows: cation shall serve a copy of the application and the proposed subpoena on every other party. (2) A party may apply for a hearing subpoena at any Section 263.37—Post-hearing filings. time before the commencement of a hearing. During a hearing, a party may make an application for a subpoena orally on the record before the administrative law judge. (a) Proposed findings and conclusions and supporting (3) The administrative law judge shall promptly issue briefs—(1) Using the same method of service for each any hearing subpoena requested pursuant to this section. party, the administrative law judge shall serve notice If the administrative law judge determines that the appli- upon each party, that the certified transcript, together cation does not set forth a valid basis for the issuance of with all hearing exhibits and exhibits introduced but not the subpoena, or that any of its terms are unreasonable, admitted into evidence at the hearing, has been filed. oppressive, excessive in scope, or unduly burdensome, Any party may file with the administrative law judge he or she may refuse to issue the subpoena or may issue proposed findings of fact, proposed conclusions of law, it in a modified form upon any conditions consistent and a proposed order within 30 days following service with this subpart. Upon issuance by the administrative of this notice by the administrative law judge or within law judge, the party making the application shall serve such longer period as may be ordered by the administrathe subpoena on the person named in the subpoena and tive law judge. on each party. (b) Motion to quash or modify—(1) Any person to whom a hearing subpoena is directed or any party may file a motion to quash or modify the subpoena, accompanied 14. Section 263.38 is revised to read as follows: by a statement of the basis for quashing or modifying the subpoena. The movant must serve the motion on each party and on the person named in the subpoena. Any Section 263.38—Recommended decision and filing party may respond to the motion within ten days of of record. service of the motion. (a) Filing of recommended decision and record. Within 45 days after expiration of the time allowed for filing reply briefs under section 263.37(b), the administrative law judge 12. In section 263.35, paragraph (a)(3) is redesignated as shall file with and certify to the Board, for decision, the paragraph (a)(4), a new paragraph (a)(3) is added, and record of the proceeding. The record must include the paragraph (b) is revised to read as follows: administrative law judge's recommended decision, recommended findings of fact, recommended conclusions of law, Section 263.35—Conduct of hearings. and proposed order; all prehearing and hearing transcripts, exhibits, and rulings; and the motions, briefs, memoranda, "fc sfc and other supporting papers filed in connection with the (3) Examination of witnesses. Only one counsel for each hearing. The administrative law judge shall serve upon party may conduct an examination of a witness, except each party the recommended decision, findings, concluthat in the case of extensive direct examination, the sions, and proposed order. administrative law judge may permit more than one (b) Filing of index. At the same time the administrative law counsel for the party presenting the witness to conduct judge files with and certifies to the Board for final determithe examination. A party may have one counsel conduct nation the record of the proceeding, the administrative law the direct examination and another counsel conduct re- judge shall furnish to the Board a certified index of the direct examination of a witness, or may have one coun- entire record of the proceeding. The certified index shall sel conduct the cross examination of a witness and include, at a minimum, an entry for each paper, document another counsel conduct the re-cross examination of a or motion filed with the administrative law judge in the witness. proceeding, the date of the filing, and the identity of the filer. The certified index shall also include an exhibit index containing, at a minimum, an entry consisting of exhibit (b) Transcript. The hearing must be recorded and tran- number and title or description for: Each exhibit introscribed. The reporter will make the transcript available to duced and admitted into evidence at the hearing; each any party upon payment by that party to the reporter of the exhibit introduced but not admitted into evidence at the cost of the transcript. The administrative law judge may hearing; each exhibit introduced and admitted into eviorder the record corrected, either upon motion to correct, dence after the completion of the hearing; and each exhibit upon stipulation of the parties, or following notice to the introduced but not admitted into evidence after the compleparties upon the administrative law judge's own motion. tion of the hearing. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

554 Federal Reserve Bulletin • June 1996 ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT The Board notes that Bank is currently in satisfactory financial condition and that the debt service projections, Orders Issued Under Section 3 of the Bank Holding pro forma debt-to-equity ratio projections, and growth Company Act statements are reasonable and consistent with the Board's guidelines. The Board has also reviewed these comments Butte Bank Shares, Inc. in light of reports of examination by the Federal Reserve Butte, Montana Bank of Minneapolis assessing the financial and managerial resources of Bank. Based on all the facts of record, the Order Approving Formation of a Bank Holding Company Board concludes that the financial and managerial resources and future prospects of Bank and Butte are consis- Butte Bank Shares, Inc. ("Butte"), has applied under sec- tent with approval, as are convenience and needs considertion 3 of the Bank Holding Company Act ("BHC Act") ations and other supervisory factors that the Board is (12 U.S.C. § 1842) for the Board's approval to become a required to consider under section 3 of the BHC Act.4 bank holding company by acquiring at least 80 percent of Based on the foregoing and all the facts of record, the the voting shares of First Citizens Bank of Butte ("Bank"), Board has determined that the application should be, and a state member bank, both in Butte, Montana. hereby is, approved.5 The Board's approval is expressly Notice of the application, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 1029 (1996)).1 The time for filing comthe exemption from registration for securities sold intrastate. This ments has expired, and the Board has considered the appli- commenter also challenges one shareholder's right to purchase certain cation and all comments received in light of the factors set shares and retain other shares previously purchased. Another comforth in section 3 of the BHC Act. menter contends that management withheld information from a minority shareholder in violation of Montana corporate law. One com- Butte is a nonoperating corporation formed for the purmenter also maintains that Butte's claim of confidentiality for portions pose of acquiring Bank. Bank is the 47th largest commerof the application improperly withholds information regarding the cial banking organization in Montana, controlling deposits proposal from minority shareholders. of approximately $28.2 million, representing less than The SEC is the federal agency with primary jurisdiction over 1 percent of total deposits in commercial banking organiza- matters dealing with registration of securities for sale, and the Board tions in the state.2 Based on all the facts of record, the has provided commenter's allegations to the SEC for consideration. Butte has committed to comply with all applicable federal and state Board concludes that consummation of this proposal would law requirements regarding the sale of its securities. The Board notes not have a significantly adverse effect on competition or on that the matters raised by commenters relating to the acquisition of the concentration of banking resources in any relevant Bank stock and access to corporate information under Montana law are currently pending in two separate lawsuits before state courts that banking market, and that competitive considerations are have the authority to grant the commenters relief if their allegations consistent with approval. can be substantiated. Neither the SEC nor any court has found any The Board has carefully considered comments opposing violation of securities law or Montana corporate law to date. The this proposal from current shareholders and a former em- Board retains the authority to consider these matters in connection ployee of Bank. These comments allege that Butte pro- with the evaluation of future applications by Butte or in the context of its general supervisory jurisdiction over Butte and Bank if any violavided insufficient and inaccurate financial information in tion of applicable laws is established. The confidential portions of its application, and lacks the financial resources to consum- Butte's application were reviewed for compliance with the provisions mate this proposal. Commenters also assert that managerial of the Freedom of Information Act ("FOIA") relating to confidential considerations are not consistent with approval.3 commercial information that is exempt from public disclosure, and no nonexempt information was found. The Board's FOIA procedures provide commenter the opportunity to challenge this determination of confidentiality. 1. The Board received comments from an individual who maintains 4. One commenter contends that minority shareholders were not that notice of this proposal was inadequate because notice was "un- offered a fair market value for their shares and that the proposal timely and not properly placed in Bank's place of business." The generally is not in the best interest of the minority shareholders. Butte Board's Rules of Procedure 12 C.F.R. 262.3(b)(l)(ii)(E) require an has responded that all shareholders residing in Montana will be applicant to publish notice in a newspaper of general circulation in the permitted to exchange their shares in Bank for shares in the bank community where the head offices of the largest subsidiary bank of the holding company, and shareholders residing outside Montana will be applicant, if any, or the applicant and each organization to be acquired offered the appraisal value of their shares. Courts have determined that are located. The head offices of Butte and Bank are in Butte, Montana. the Board does not have the authority to consider matters that are not Notice of the proposal, inviting public comment for a period of directly related to a factor in the BHC Act. See Western Bancshares, 31 days, was published on December 27, 1995, in The Montana Inc. v. Board of Governors, 480 F.2d 749 (10th Cir. 1973). Based on Standard, a daily newspaper of general circulation in the Butte com- all the facts of record, the Board concludes that commenter's community. In addition, as required by the Board's Rules of Procedure ments relating to the value received by the minority shareholders do 12 C.F.R. 262.3(i)(l), the Board published notice of this proposal in not reflect adversely on the factors the Board is required to consider the Federal Register inviting public comment for a period of 25 days. under section 3 of the BHC Act. Based on all the facts of record, the Board concludes that notice was 5. One commenter requested that the Board hold a public hearing or published in accordance with the Board's rules and that the public was meeting on this application. Section 3(b) of the BHC Act does not adequately notified of this proposal. require the Board to hold a public hearing or meeting on an applica- 2. Deposit data are as of September 30, 1995. tion unless the appropriate supervisory authority for the bank to be 3. One commenter alleges that Butte's exchange offer violates the acquired makes a timely written recommendation of denial. No superrules of the Securities and Exchange Commission ("SEC") regarding visory agency has recommended denial of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 555 conditioned on compliance with all the commitments made tory institution in New York, controlling deposits of apby Butte in connection with this application. The commit- proximately $5.4 billion, representing approximately ments and conditions relied on by the Board in reaching 1.6 percent of total deposits in commercial banking organithis decision are deemed to be conditions imposed in zations in New York.1 Queens County Bancorp, with conwriting by the Board in connection with its findings and solidated assets of approximately $1.2 billion, is the 44th decision, and, as such, may be enforced in proceedings largest commercial depository institution in New York, under applicable law. controlling approximately $887.8 million in deposits, rep- This transaction shall not be consummated before the resenting less than 1 percent of total deposits in commerfifteenth calendar day following the effective date of this cial banking organizations in the state. order or later than three months after the effective date of Queens County Bancorp has objected to this proposal on this order, unless such period is extended for good cause by the basis that Emigrant Bancorp may seek to control the Federal Reserve Bank of Minneapolis, acting pursuant Queens Savings Bank.2 As noted, Emigrant Bancorp proto delegated authority. poses to acquire up to 9.9 percent of the voting shares of By order of the Board of Governors, effective April 1, Queens County Bancorp. Emigrant Bancorp would own 1996. less than 25 percent of the voting shares of Queens County Bancorp, and thereby less than the threshold amount that Voting for this action: Chairman Pro Tempore Greenspan and the BHC Act deems to represent control. The Board previ- Governors Kelley, Lindsey, Phillips, and Yellen. ously has indicated that the acquisition of less than a controlling interest in a bank or bank holding company is JENNIFER J. JOHNSON not a normal acquisition for a bank holding company.3 The Deputy Secretary of the Board requirement in section 3(a)(3) of the BHC Act that the Board's approval be obtained before a bank holding com- Emigrant Bancorp, Inc. pany acquires more than 5 percent of the voting shares of a New York, New York bank, however, suggests that Congress contemplated the acquisition by bank holding companies of between 5 per- Order Approving Acquisition of Shares of a Bank cent and 25 percent of the voting shares of a bank or a bank Holding Company holding company.4 Nothing in section 3(c) of the BHC Act, moreover, requires the Board to deny an application solely Emigrant Bancorp, Inc., New York, New York ("Emigrant because a bank holding company proposes to acquire less Bancorp"), a bank holding company within the meaning of than a controlling interest in a bank or bank holding the Bank Holding Company Act ("BHC Act"), has applied company. Accordingly, the Board previously has approved for the Board's approval under section 3 of the BHC Act the acquisition by a bank holding company of less than a (12 U.S.C. § 1842) to acquire indirectly up to 9.9 percent controlling interest in a bank or bank holding company.5 of the outstanding common stock of Queens County Ban- Emigrant Bancorp has stated that it does not propose to corp, Inc. ("Queens County Bancorp"), a bank holding control Queens County Bancorp and will not control company that owns Queens County Savings Bank Queens County Bancorp without obtaining the prior ap- ("Queens Savings Bank"), Flushing, New York. proval of the Board. Emigrant Bancorp has made a number Notice of the application, affording interested persons an of commitments that are similar to commitments previopportunity to submit comments, has been published (61 ously relied on by the Board in determining that an invest- Federal Register 1759 (1996)). The time for filing coming bank holding company would not be able to exercise a ments has expired, and the Board has considered the applicontrolling influence over another bank holding company cation and all comments received in light of the factors set forth in section 3(c) of the BHC Act. Emigrant Bancorp, with consolidated assets of approximately $6 billion, is the 11th largest commercial deposi- 1. Asset data are as of September 30, 1995, and deposit data are as of June 30, 1995. 2. Queens County Bancorp contends that the Board should allow bank holding companies to acquire noncontrolling minority interests Generally, under its Rules of Procedure, the Board may, in its in other bank institutions only under extraordinary circumstances discretion, hold a public hearing or meeting on an application to when the applicant demonstrates compelling reasons that make such clarify factual issues related to the application and to provide an an investment opportunity unique and appropriate. opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 3. See, e.g., North Fork, Bartcorporation, Inc., 81 Federal Reserve 262.25(d). In the Board's view, the commenter in this case has had Bulletin 734 (1995) ("North Fork"); State Street Boston Corporation, ample opportunity to submit his views, and has, in fact, submitted 67 Federal Reserve Bulletin 862 (1981). substantial written comments that have been carefully considered in 4. 12 U.S.C. § 1842(a)(3); 12 C.F.R. 225.11(c). connection with the Board's decision. The commenter's request fails 5. See, e.g., North Fork (acquisition of 19.9 percent of the voting to demonstrate why its written comments do not adequately present its shares of a bank holding company); Mansura Bancshares, Inc., 79 allegations, or why a public hearing or meeting is otherwise war- Federal Reserve Bulletin 37 (1993) ("Mansura") (acquisition of ranted. Based on all the facts of record, the Board has determined that 9.7 percent of the voting shares of a bank holding company); and a public hearing or meeting is not necessary to clarify the factual SunTrust Banks, Inc., 76 Federal Reserve Bulletin 542 (1990) ("Sunrecord in this application. Accordingly, commenter's request for a Trust") (acquisition of up to 24.99 percent of the voting shares of a public hearing or meeting on this application is hereby denied. bank). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

556 Federal Reserve Bulletin • June 1996 or bank for purposes of the BHC Act.6 Emigrant Bancorp Queens County Bancorp and their respective subsidiary has committed not to exercise or attempt to exercise a banks, are consistent with approval, as are considerations controlling influence over the management or policies of relating to the convenience and needs of the communities Queens County Bancorp or any of its subsidiaries. Emi- to be served and other supervisory factors the Board must grant Bancorp also has committed not to attempt to influ- consider under section 3 of the BHC Act. ence the dividend policies, loan decisions or operations of The Board has noted that one company need not acquire Queens County Bancorp or any of its subsidiaries. More- control of another company in order to substantially lessen over, Emigrant Bancorp has recognized that it may not competition between them and that the specific facts of acquire additional shares of Queens County Bancorp or each case will determine whether a minority investment attempt otherwise to control Queens County Bancorp with- would have significant anticompetitive effects.8 It is possiout the Board's prior approval under the BHC Act. The ble, for example, that the acquisition of a substantial own- Board has adequate supervisory authority to monitor Emi- ership interest in a competitor or a potential competitor of grant Bancorp's compliance with its commitments, and the acquiring firm might alter the market behavior of both expressly retains authority to initiate a control proceeding firms in such a way as to weaken or eliminate independent against Emigrant Bancorp if facts presented later indicate action at each organization and increase the likelihood of that Emigrant Bancorp or any of its subsidiaries or affiliates cooperative operations.9 in fact controls Queens County Bancorp for purposes of Emigrant Bancorp and Queens County Bancorp compete the BHC Act. Based on these commitments and all other directly in the Metropolitan New York-New Jersey bankfacts of record, it is the Board's judgement that, for pur- ing market.10 Emigrant Bancorp is the 14th largest composes of the BHC Act, Emigrant Bancorp would not ac- mercial bank or thrift institution ("depository institution") quire control of Queens County Bancorp through consum- in the market, controlling deposits of approximately mation of this proposal. $5.7 billion, representing approximately 1.4 percent of Queens County Bancorp also contends that this proposal total deposits in depository institutions in the market would disrupt its operations and business strategies, and ("market deposits").11 Queens County Bancorp is the 61st would adversely affect its abilities to raise capital and to largest depository institution in the market, controlling retain employees and customers. As noted above, Emigrant deposits of approximately $879 million, representing less Bancorp has made commitments that it would not attempt than 1 percent of market deposits. As a combined organizato influence the operations, activities, or dividend, credit tion, Emigrant Bancorp would be the 13th largest deposiand investment policies of Queens County Bancorp. In tory institution in the Metropolitan New York-New Jersey addition, the record contains no support for the contention banking market, controlling deposits of approximately that this proposal would affect the ability of Queens County $6.6 billion, representing approximately 1.7 percent of market Bancorp to raise capital or to retain employees and custom- deposits. The Herfindahl-Hirschman Index ("HHI") would ers. The Board notes that other bank holding companies remain unchanged at 414.12 Numerous competitors would with similar minority shareholders have successfully raised capital and retained employees and customers.7 Based on the foregoing and all other facts of record, the 8. See, e.g., North Fork, Mansura; and SunTrust. 9. See Mansura at 38. Board concludes that the financial and managerial re- 10. The Metropolitan New York-New Jersey banking market insources and future prospects of Emigrant Bancorp and cludes New York City; Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, and Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, 6. See, e.g., Mansura at 39. The commitments provided by Emi- Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in grant Bancorp are set forth in the Appendix. New Jersey; Pike County in Pennsylvania; and portions of Fairfield 7. Queens County Bancorp also contends that the proposed transac- and Litchfield Counties in Connecticut. tion would cause Savings Bank to lose its rights under section 24(f)(2) 11. Market share data are as of June 30, 1994, and are based on of the Federal Deposit Insurance Act (the "FDI Act") to retain and to calculation in which the deposits of thrift institutions are included at make new equity investments in common or preferred stock listed on 50 percent. The Board previously has indicated that thrift institutions national securities exchanges or shares of registered investment com- have become, or have the potential to become, significant competitors panies, and thereby adversely affect its future prospects. See of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 12 U.S.C. § 1831a(f)(2). The FDIC's regulation on equity investments 788 (1990); National City Corporation, 70 Federal Reserve Bulletin provides that these grandfathered rights are terminated by a transac- 743 (1984). Thus, the Board has regularly included thrift deposits in tion subject to section 3 of the BHC Act. 12 C.F.R. 362.3(b)(4)(ii). the calculation of market share on a 50-percent weighted basis. See, The regulatory commentary accompanying the promulgation of this e.g., First Hawaiian Inc., 11 Federal Reserve Bulletin 52 (1991). regulation indicates, however, that the grandfathered rights would not 12. Under the revised Department of Justice Merger Guidelines, 49 be extinguished in transactions under section 3 or other transactions Federal Register 26,823 (June 29, 1984), a market in which the that do not involve a change in control of the grandfathered bank. See post-merger HHI is below 1000 is considered to be unconcentrated. 57 Federal Register 53,211 at 53,227 (November 9, 1992); 57 Federal The Justice Department has informed the Board that a bank merger or Register 30,435 at 30,444 (July 9, 1992). In light of this and after acquisition generally will not be challenged (in the absence of other consultation with FDIC staff, it appears that, as structured, this pro- factors indicating anticompetitive effects) unless the post-merger HHI posal would not cause Queens Savings Bank to lose its grandfathered is at least 1800 and the merger increases the HHI by more than 200 rights under section 24 of the FDI Act. Moreover, even if Queens points. The Justice Department has stated that the higher than normal Savings Bank were to lose its grandfathered rights, the financial HHI thresholds for screening bank mergers for anticompetitive effects resources and future prospects of Queens County Bancorp and Queens implicitly recognizes the competitive effect of limited-purpose lenders Savings Bank would be consistent with approval. and other non-depository financial entities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 557 remain in the market. Thus, if the Board were to conclude (7) Attempt to influence Queens County Bancorp's or any that Emigrant Bancorp would control Queens County Ban- of its subsidiaries' dividend policies or practices; loan, corp after consummation of this proposal, the elimination credit or investment decisions or policies; pricing of serof competition between the two entities would not substan- vices; personnel decisions; operations activities (including tially lessen competition in any relevant banking market. In the location of any offices or branches or their hours of light of all the facts of record, the Board concludes that operation, etc.); or any similar activities or decisions of competitive considerations are consistent with approval. Queens County Bancorp or any of its subsidiaries; Based on all the facts of record, the Board has deter- (8) Solicit or participate in soliciting proxies with respect mined that the application should be, and hereby is, ap- to any matter presented to the shareholders of Queens proved. The Board's approval is expressly conditioned on County Bancorp or any of its subsidiaries; Emigrant Bancorp's compliance with all the commitments (9) Dispose or threaten to dispose of shares of Queens made in connection with this application. The commit- County Bancorp or any of its subsidiaries in any manner as ments and conditions relied on by the Board in reaching a condition of specific action or nonaction by Queens this decision shall be deemed to be conditions imposed in County Bancorp or any of subsidiaries; and writing by the Board in connection with its findings and (10) Enter into any banking or nonbanking transaction with decision, and, as such, may be enforced in proceedings Queens County Bancorp or any of its subsidiaries, except under applicable law. that Emigrant Bancorp may establish and maintain deposit The transaction shall not be consummated before the accounts with Queens County Bancorp or its subsidiaries, fifteenth calendar day following the effective date of this provided that the aggregate balance of all such deposit order, or later than three months after the effective date of accounts does not exceed $500,000, and provided that the this order, unless such period is extended for good cause by accounts are maintained on substantially the same terms as the Board or by the Federal Reserve Bank of New York, those prevailing for comparable accounts or persons unafacting pursuant to delegated authority. filiated with Queens County Bancorp or any of its subsid- By order of the Board of Governors, effective April 1, iaries. 1996. Farmers State Corporation Voting for this action: Chairman Pro Tempore Greenspan and Mountain Lake, Minnesota Governors Kelley, Lindsey, Phillips, and Yellen. Bank Southwest Corporation JENNIFER J. JOHNSON Worthington, Minnesota Deputy Secretary of the Board Order Approving the Acquisition of a Bank Appendix Farmers State Corporation, Mountain Lake ("Farmers"), As part of its proposal, Emigrant Bancorp commits that it and its subsidiary, Bank Southwest Corporation ("BSC"), will not, directly or indirectly, without the Board's prior Worthington (collectively "FSC"), both bank holding approval: companies within the meaning of the Bank Holding Company Act ("BHC Act"), have applied for the Board's (1) Take any action that would cause Queens County approval under section 3 of the BHC Act Bancorp or any of its subsidiaries to become a subsidiary (12 U.S.C. § 1842) to acquire all the voting shares of First of Emigrant Bancorp or any of its subsidiaries; Security Bank-Madison, Madison, all in Minnesota (2) Seek or accept representation on the board of directors ("Bank").1 of Queens County Bancorp or any of its subsidiaries; Notice of the application, affording interested persons an (3) Have or seek to have any employee or representative of opportunity to submit comments, has been published (61 Emigrant Bancorp serve as an officer, agent, or employee Federal Register 3713 (1996)). The time for filing comof Queens County Bancorp or any of its subsidiaries; ments has expired, and the Board has considered the appli- (4) Exercise or attempt to exercise a controlling influence cation and all comments received in light of the factors set over the management or policies of Queens County Banforth in section 3 of the BHC Act. corp or any of its subsidiaries; FSC is the 31st largest bank holding company in Minne- (5) Acquire or retain shares of Queens County Bancorp sota, controlling total deposits of approximately $152 milthat would cause the combined interests of Emigrant Banlion, representing less than 1 percent of total deposits in corp or any of its subsidiaries, officers, directors, principal commercial banking organizations in the state.2 Bank is the shareholders, and affiliates to equal or exceed 10 percent of 253d largest commercial banking organization in Minnethe outstanding voting shares of Queens County Bancorp or any of its subsidiaries; (6) Propose a director or slate of directors in opposition to 1. Farmers owns approximately 51 percent of the shares of BSC. a nominee or slate of nominees proposed by the manage- Under the proposal, BSC would acquire all the outstanding common ment or board of directors of Queens County Bancorp or stock of Bank. any of its subsidiaries; 2. State deposit data are as of December 31, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

558 Federal Reserve Bulletin • June 1996 sota, controlling deposits of approximately $25 million, received CRA performance examinations ratings of "satisrepresenting less than 1 percent of total deposits in com- factory" in their most recent examinations for CRA performercial banking organizations in the state. After consum- mance. mation of this proposal, FSC would control deposits of Since the June 1995 examination of Mountain Lake approximately $177 million, representing less than 1 per- Bank, FSC has taken actions at the bank in response to the cent of total deposits in commercial banking organizations compliance issues identified by the FDIC. The Board has in the state. reviewed the bank's compliance programs in connection with this application and has consulted with the FDIC Competitive and Other Considerations about its evaluation of the adequacy of those measures to correct the weaknesses identified at the bank and to prevent FSC and Bank do not compete in any banking market. the recurrence of violations of the fair credit laws. The Based on all the facts of record, the Board concludes that Board also has considered other supervisory information consummation of this proposal would not result in any provided by the FDIC and FSC's record of addressing significantly adverse effect on competition or on the con- weaknesses identified in its CRA performance examinacentration of banking resources in any relevant banking tions. market. The Board also concludes, in light of all the facts Based on all the facts of record, the Board concludes that of record, that the financial and managerial resources and convenience and needs considerations, including considerfuture prospects of FSC and Bank are consistent with ations relating to FSC's record of performance under the approval, as are the other supervisory factors the Board CRA, are consistent with approval. The Board expects must consider under section 3 of the BHC Act. United Prairie Bank to fully implement all its initiatives, particularly those designed to address its compliance with Convenience and Needs Considerations fair credit laws. The Board will monitor FSC's progress in these areas in its supervision of FSC and take such record In acting on applications to acquire a depository institution, into account in its evaluation of future applications by FSC the Board must consider the convenience and needs of the for deposit facilities. communities to be served and take into account the records Based on the foregoing and all the facts of record, the of the relevant depository institutions under the Commu- Board has determined that the application should be, and nity Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). hereby is, approved. The Board's approval is expressly The CRA requires the federal financial supervisory agen- conditioned on FSC's compliance with all the commitcies to encourage financial institutions to help meet the ments made in connection with these applications. The credit needs of the local communities in which they oper- commitments and conditions relied on by the Board in ate, consistent with their safe and sound operation. To reaching this decision shall be deemed to be conditions accomplish this end, the CRA requires the appropriate imposed in writing by the Board in connection with its federal supervisory authority to "assess the institution's findings and decision and, as such, may be enforced in record of meeting the credit needs of its entire community, proceedings under applicable law. including low- and moderate-income neighborhoods, con- The acquisition shall not be consummated before the sistent with the safe and sound operation of such institu- fifteenth calendar day following the effective date of this tions," and to take that record into account in its evaluation order, or later than three months after the effective date of of these applications.3 this order, unless such period is extended for good cause by The Board has carefully considered that one of FSC's the Board or by the Federal Reserve Bank of Minneapolis, subsidiary banks, United Prairie Bank, Mountain Lake, acting pursuant to delegated authority. Minnesota ("Mountain Lake Bank"), received consecutive By order of the Board of Governors, effective April 8, "needs to improve" ratings from its primary federal super- 1996. visor, the Federal Deposit Insurance Corporation ("FDIC"), in its CRA performance examinations, as of Voting for this action: Chairman Pro Tempore Greenspan and October 1994 and June 1995. These ratings reflected defi- Governors Kelley, Phillips, and Yellen. Absent and not voting: Governor Lindsey. ciencies found by examiners in the bank's compliance with the Equal Credit Opportunity Act and the Board's Regulation B ("fair credit laws").4 FSB's other subsidiary banks, JENNIFER J. JOHNSON Deputy Secretary of the Board United Prairie Bank, Slay ton; United Prairie Bank, Jackson; and Green Lake State Bank, Spicer, all of Minnesota, Fleet Financial Group, Inc. Boston, Massachusetts 3. 12 U.S.C. § 2903. 4. After the 1994 examination, United Bank's board adopted a Order Approving the Acquisition of a Bank resolution designed to address the weaknesses found in this and other examinations, and the bank took steps to address these weaknesses. Fleet Financial Group, Inc., Boston, Massachusetts The June 1995 examination, however, noted other apparent violations of fair credit laws at one of United Bank's branches that had not been ("Fleet"), a bank holding company within the meaning of noted in the 1994 examination. the Bank Holding Company Act ("BHC Act"), has applied Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 559 for the Board's approval under section 3 of the BHC Act Interstate Analysis (12 U.S.C. § 1842) to acquire all the voting shares of Nat- West Bank National Association, Jersey City, New Jersey Section 3(d) of the BHC Act, as amended by Section 101 ("NatWestBank").1 of the Riegle-Neal Interstate Banking and Branching Effi- Notice of the proposal, affording interested persons an ciency Act of 1994, allows the Board to approve an appliopportunity to submit comments, has been published cation by a bank holding company to acquire control of a (61 Federal Register 6643 (1996)). The time for filing bank located in a state other than the home state of such comments has expired, and the Board has considered the bank holding company if certain conditions are met.4 These application and all comments received in light of the conditions are met in this case.5 In view of all the facts of factors set forth in section 3 the BHC Act.2 record, the Board is permitted to approve this proposal Fleet, with total consolidated assets of approximately under section 3(d) of the BHC Act.6 $85 billion, operates subsidiary banks in Rhode Island, Massachusetts, Connecticut, New York, New Hampshire, Competitive Considerations and Maine.3 Fleet is the sixth largest commercial banking organization in New York, controlling deposits of NatWest Bank and subsidiaries of Fleet compete directly in $11.2 billion, representing approximately 4.5 percent of the Metropolitan New York-New Jersey banking market.7 total deposits in commercial banking organizations in the Fleet is the 13th largest banking or thrift organization state ("state deposits"). NatWest Bank operates in New ("depository institution") in this market, controlling depos- York and New Jersey, with $7.4 billion in deposits in New its of $5.8 billion, representing approximately 1.7 percent York and $10.3 billion in deposits in New Jersey, repre- of total deposits in depository institutions in the market.8 senting approximately 3 percent and 11.8 percent of state deposits, respectively. After consummation of the pro- 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding posal, Fleet would become the fourth largest commercial company's home state is that state in which the operations of the bank banking organization in New York and would become the holding company's banking subsidiaries were principally conducted third largest commercial banking organization in New Jer- on July 1, 1966, or the date on which the company became a bank sey, with deposits of $18.6 billion in New York and holding company, whichever is later. For purposes of the BHC Act, $10.3 billion in New Jersey, representing approximately the home state of Fleet is Rhode Island. 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). 7.5 percent and 11.8 percent of state deposits in New York The Board notes that Fleet is adequately capitalized and adequately and New Jersey, respectively. In addition, Fleet would managed. In addition, after consummation of this proposal, Fleet and become the tenth largest commercial banking organization its affiliates would control less than 10 percent of the total amount of in the United States and would control approximately 2.3 deposits of insured depository institutions in the United States, and less than 30 percent of the total amount of deposits of insured percent of the total amount of deposits in banks or savings depository institutions in New York. Neither New York nor New associations insured by the Federal Deposit Insurance Cor- Jersey has state deposit limits or minimum age requirements that poration. apply to the acquisition of a bank by an out-of-state bank holding company. 6. One commenter contended that Fleet cannot merge Fleet Bank NA into NatWest Bank as proposed in its Bank Merger Act application to the OCC because Fleet Bank NA does not meet the five-year minimum age requirement in New York's interstate banking law. The Board notes that there are no minimum age requirements that apply to 1. As part of this proposal, Fleet would merge Fleet Bank of New the acquisition by a Rhode Island bank holding company of a bank York, National Association, Schenectady, New York ("Fleet Bank located in New Jersey with branches in New York. The merger of NA"), which was recently acquired from Shawmut National Corpora- NatWest Bank and Fleet Bank NA is subject to review by the OCC tion ("Shawmut"), with and into NatWest Bank. NatWest Bank under the Bank Merger Act. Staff of the New York Department of would survive the merger and be renamed Fleet Bank, National Banking has informally advised Board staff that this merger is permis- Association. This transaction is being reviewed by the Office of the sible under New York law. Comptroller of the Currency ("OCC") under section 18(c) of the 7. The Metropolitan New York-New Jersey banking market is Federal Deposit Insurance Act, 12 U.S.C. § 1828(c) ("FDI Act") approximated by New York City; Long Island, and Orange, Putnam, ("Bank Merger Act"). Rockland, Sullivan and Westchester Counties in New York; Bergen, 2. The Board received comments maintaining that Fleet's proposed Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, acquisition of certain subsidiaries of National Westminster Bancorp Passaic, Somerset, Sussex, Union, Warren and portions of Mercer Inc. requires a notice under section 4 of the BHC Act, and that these Counties in New Jersey; Pike County in Pennsylvania; and portions of subsidiaries would engage in impermissible nonbanking activities. Fairfield and Litchfield Counties in Connecticut. Each of these companies would become a subsidiary of a national 8. Market share data for the Metropolitan New York-New Jersey bank, operated and held in conformance with the regulations of the banking market are as of June 30, 1994. Market share data are based OCC. The OCC is reviewing notices for these subsidiaries to become on calculations in which the deposits of thrift institutions are included operating subsidiaries of Fleet Bank, National Association, and to on a 50-percent weighted basis. The Board previously has indicated engage in activities permissible under the OCC's regulations for that thrift institutions have become, or have the potential to become, operating subsidiaries. Under the Board's Regulation Y, such acquisi- significant competitors of commercial banks. See Midwest Financial tions do not require notice under section 4 of the BHC Act. See Group, 75 Federal Reserve Bulletin 386 (1989). Thus, the Board 12 C.F.R. 225.22(d)(1). regularly has included thrift deposits in the calculation of market share 3. Asset data are as of December 31, 1995. Deposit data are as of on a 50-percent weighted basis. See, e.g., Comerica Inc., 81 Federal June 30, 1994. All data have been revised to take into account all Reserve Bulletin 476, n.3 (1995); First Hawaiian Inc., 77 Federal transactions approved by the Board to date. Reserve Bulletin 52 (1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

560 Federal Reserve Bulletin • June 1996 NatWest Bank is the fifth largest depository institution in Board notes that Fleet and its subsidiary banks and Natthis market, controlling deposits of $17.3 billion, represent- West Bank are well capitalized, and would remain well ing approximately 5 percent of total deposits in depository capitalized after consummation of this transaction. The institutions in the market. After consummation of this Board also has reviewed Fleet's operational and manageproposal, this banking market would remain unconcen- ment structure for the organization after the acquisition of trated as measured by the Herfindahl-Hirschman Index NatWest Bank. Based on all of the facts of record, includ- ("HHI"),9 and numerous competitors would remain in the ing all comments that have been received relating to these market. factors, and a review of relevant reports of examination of The Board has sought comments from the Department of the companies and banks involved in this proposal, the Justice ("DOJ") on the competitive effects of this proposal Board concludes that the financial and managerial rein all of the banking markets in which Fleet and NatWest sources and future prospects of the companies and banks Bank compete. The DOJ has advised the Board that the concerned are consistent with approval, as are the other proposal is not likely to have a significantly adverse effect supervisory factors that the Board must consider under on competition in any relevant banking market. section 3 of the BHC Act.12 Based on all the facts of record, the Board concludes that consummation of this proposal is not likely to have a Convenience and Needs Considerations significantly adverse effect on competition or on the concentration of resources in the Metropolitan New York-New In acting on applications under section 3 of the BHC Act, Jersey banking market or any relevant banking market.10 the Board must consider the convenience and needs of the communities to be served and take into account the records Financial, Managerial and Future Prospects of the relevant depository institutions under the Commu- Considerations nity Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the financial supervisory agencies to In connection with this proposal, the Board has reviewed encourage financial institutions to help meet the credit the financial and managerial resources of the companies needs of the local communities in which they operate, and banks involved and the effect of the proposed acquisi- consistent with their safe and sound operation. To accomtion on the future prospects of these organizations.11 The plish this end, the CRA requires the appropriate federal supervisory authority to "assess the institution's record of meeting the credit needs of its entire community, including 9. The HHI for the Metropolitan New York-New Jersey banking low- to moderate-income neighborhoods, consistent with market would increase by 17 points to a level of 804 points. Under the the safe and sound operation of such institution," and to revised Department of Justice Merger Guidelines, 40 Federal Register take that record into account in its evaluation of applica- 26,823 (June 29, 1984), a market in which the post-merger HHI is less tions.13 than 1000 is considered to be unconcentrated. The Department of Justice has informed the Board that a bank merger or acquisition will The Board received comments related to the convenot be challenged (in the absence of other factors indicating anticom- nience and needs aspects of the proposal from approxipetitive effects) unless the post-merger HHI is at least 1800 and the mately 107 commenters. A substantial majority supported merger increases the HHI by more than 200 points. The Department the proposal or commented favorably about the CRA perof Justice has stated that the higher than normal HHI thresholds for formance records of Fleet or NatWest Bank. These comscreening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non- menters commended Fleet and NatWest Bank for sponsordepository financial entities. ing community development activities, participating in 10. The Board has considered comments expressing concern that the proposed transaction could have adverse effects on competition or the concentration of resources in the New York City area in general, and particularly in small business lending and services within the New this proposal. The Board has considered these comments carefully in York City area. The Board also has analyzed the competitive effects of light of all the facts of record, including the fact that the merger of this proposal in the smaller New York/New Jersey Ranally Metropoli- Fleet's five banks has already been consummated and in light of tan Area that includes New York City, and found that the resulting reports of examination from federal banking supervisors that assess increase in the HHI level in this market would not exceed the the financial and managerial resources of all the institutions involved threshold standard in the revised Department of Justice Merger Guide- in this proposal. lines. See Chemical Banking Corporation, 82 Federal Reserve Bulle- 12. One commenter maintained that Fleet's involvement in making tin 239 (1996)("Chemical Order"). For the reasons explained in the a campaign loan to a New York City official in 1992 should be Chemical Order, the Board finds that the cluster of banking products reassessed in light of a fine recently imposed on that official by the and services represents the appropriate line of commerce for analyz- New York Conflicts of Interest Board for improperly using her posiing the competitive effects of proposals under the BHC Act in this tion as Comptroller of New York City to obtain the loan. This matter region. has previously been reviewed by the Board in light of all the facts, 11. One commenter contended that Fleet's financial resources, and including confidential supervisory information from the state member the proposed method of financing this acquisition, as well as its bank that made the loan and an independent report issued by the New managerial resources are insufficient to support an acquisition as large York City Department of Investigation. The recent action by the as the NatWest Bank proposal particularly in light of Fleet's recent Conflicts of Interest Board addresses the action of the official under acquisition of Shawmut. This commenter also contended that a pend- New York's conflicts of interest rules but provides no new informaing lawsuit by the Connecticut Attorney General, which challenges tion regarding any involvement in this matter by Fleet, whose actions the OCC's approval of the merger of Fleet's five New England bank were outside of the jurisdiction of the Conflicts of Interest Board. subsidiaries into a single bank, could adversely affect the financing of 13. 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 561 programs providing home mortgage financing for low- to mut.17 This review carefully considered Fleet's record in moderate-income residents, and providing financial sup- all of its communities, including communities in New York port to non-profit organizations engaged in these activities. and Rhode Island, and considered in detail Fleet's policies, Seven commenters objected to this proposal or raised programs, and specific lending activities. concerns about Fleet's CRA performance record. Two All the subsidiary banks of Fleet and Shawmut received commenters criticized Fleet's record of CRA performance "outstanding" or "satisfactory" ratings at the most recent in certain low-income areas and areas with predominately examinations of their CRA performance by their primary minority residents in New York City.14 Another commenter federal supervisors.18 Examiners found no evidence of contended that Fleet has not responded to the credit needs prohibited discrimination or other illegal credit practices at of communities in Rhode Island and has exaggerated its any of Fleet's or Shawmut's subsidiary banks, and no record of performance in South Providence. In addition, evidence of practices intended to discourage applications comments have raised issues regarding branch closings for the types of credit listed in the banks' respective CRA that may result from this proposal.15 statements.19 The Board notes that NatWest Bank also The Board has carefully reviewed the CRA performance received a "satisfactory" rating from its primary federal records of Fleet and its subsidiary depository institutions; supervisor, the OCC, in its most recent examination of NatWest Bank; public comments filed on this proposal; CRA performance, as of June 1994, and no evidence of Fleet's responses to comments; and all other relevant facts illegal discrimination was noted in that examination. of record in light of the CRA, the fair lending laws and Fleet has implemented a variety of corporate programs other relevant credit-related laws, the Board's regulations, and policies to assist its subsidiary banks in helping to and the Statement of the Federal Financial Supervisory meet the credit needs of all their communities, including Agencies Regarding the Community Reinvestment Act low- to moderate-income areas, consistent with the CRA. ("Agency CRA Statement").16 For example, Fleet implemented a three-year, $8 billion INCITY series of initiatives ("INCITY"), that focus on A. Previous Review of Fleet's CRA Record of credit, economic revitalization and community develop- Performance ment, and provide a centrally coordinated set of programs and products focusing on low- to moderate-income individ- The Board recently reviewed Fleet's record of CRA perfor- uals and communities. The INCITY initiatives include mance in connection with its application to acquire Shaw- special affordable mortgage products, consumer and small business loan products and affordable housing development initiatives. Fleet Community Development Corporation also was established under these initiatives. 14. Two commenters maintained that Fleet should provide the type of support for financing multi-family rental housing projects in New York and community development projects in New Jersey as is currently being provided by NatWest Bank. The Board notes that the CRA does not require an institution to engage in any particular type of lending in order to assist in meeting the credit needs of its community, and that an institution can have a satisfactory record of performance without supporting a specific type of CRA-related activity. The Board has considered the complete record of performance of Fleet in helping 17. See Fleet Financial Group, Inc., 82 Federal Reserve Bulletin 50 to meet credit needs of its community in connection with this pro- (1996) ("Fleet/Shawmut Order"). Because a number of commenters posal. reiterate issues raised and considered in connection with the Fleet/ 15. Two commenters also raised issues regarding the lending and Shawmut Order, the Board incorporates in this order the reasons, debt collection practices in New Jersey of Fleet Finance, Inc. ("Fleet evidence and conclusions explained in the Fleet/Shawmut Order. Finance"), Fleet's nonbanking finance subsidiary. In connection with 18. The Agency CRA Statement provides that a CRA examination Fleet's recent acquisition of Shawmut, the Board considered a number is an important and often controlling factor in the consideration of an of steps Fleet and Fleet Finance have taken to address the issues raised institution's CRA record and that reports of these examinations will concerning Fleet Finance's lending practices. Those steps included be given great weight in the applications process. 54 Federal Register discontinuing the practice of purchasing individual loans from third at 13,745. One commenter alleged that the Board cannot rely on the parties (except for bulk loan packages from regulated financial institu- OCC to provide accurate CRA examination ratings because the OCC tions, certain institutional investors, or a federal agency) and making uniformly overrates the CRA performance of national banks. The significant changes in senior management and managerial practices, Board notes that under the CRA, the OCC has the authority to rate the including management review and oversight, at both the holding CRA performance of national banks and that the OCC has conducted company and the subsidiary. In connection with Fleet's proposal to on-site CRA performance examinations of each of the national banks acquire NatWest Bank and to address the concerns of commenters, involved in this proposal. Based on all the facts of record, the Board Fleet has started an outreach program in New Jersey that will include concludes that the commenter has not demonstrated that the OCC's providing notice to qualified Fleet Finance borrowers and inviting CRA examination or application review process is arbitrary, caprithem to call a toll-free number and speak with account representatives cious or otherwise unreliable. about their loans. 19. One commenter criticized Fleet's actions in connection with his Another commenter alleged that Fleet's actions in connection with eiforts to obtain financing for a housing development project in New the financing and sale of an apartment building in Providence raise Jersey. Those allegations are under review by the Federal Reserve fair housing issues. There is no evidence of wrongdoing by Fleet, and Bank of New York and involve a private dispute involving an individthe Board notes that the sale of the property in question is currently ual loan transaction. The Board has supervisory authority to take under the jurisdiction of the U.S. Bankruptcy Court. appropriate action if Fleet violated any laws or regulations in connec- 16. 54 Federal Register 13,742 (1989). tion with this transaction. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

562 Federal Reserve Bulletin • June 1996 B. Fleet's CRA Performance Record in New York lion in the New York Equity Fund, which purchases limited partnership interests in development projects orga- Fleet's CRA performance record in New York, including nized by community housing and development low-income and minority areas in New York City, has been organizations. Fleet also provided a $1.4 million construccarefully considered by the Board. Fleet Bank, Albany, tion line of credit and a $2.9 million permanent line of New York ("Fleet Albany"), Fleet's only New York sub- credit to the Community Lending Corporation, which seeks sidiary prior to Fleet's merger with Shawmut, received a to rehabilitate and construct affordable housing units in "satisfactory" rating at its most recent CRA performance upstate New York. Furthermore, Fleet provided over examination by the Federal Reserve Bank of New York as $21 million in 1994 to finance construction of 279 lowof January 1994.20 Examiners found that Fleet Albany had income housing units in Brooklyn and the Bronx. In 1993 undertaken significant efforts to meet the credit needs of its and 1994, Fleet Albany sponsored several affordable houscommunities through the development of a variety of spe- ing conferences in New York, including conferences orgacial loans products. Furthermore, an analysis of the 1993 nized by the Governor's Housing Conference, Neighborand 1994 data filed under the Home Mortgage Disclosure hood Preservation Coalition of New York State, and the Act ("HMDA") for all metropolitan statistical areas New York State Rural Housing Coalition. ("MSAs") in New York indicated that Fleet was providing Fleet has provided credit and technical assistance to housing-related loans to low- to moderate-income commu- small businesses in New York through support of regional nities and had been increasing its housing-related lending and local organizations, including working capital and to minorities in New York.21 grants to the Pace-Harlem Small Business Development Fleet assists in meeting the credit needs of low- to Corporation, which provides technical assistance to small moderate-income individuals in New York through several business owners in Harlem and East Harlem. In 1994, Fleet mortgage programs that provide flexible underwriting crite- committed $13 million to 23 projects sponsored by the ria for low- to moderate-income home buyers. Fleet also Long Island Development Corporation. Fleet also has offers home equity/home improvement and unsecured con- funded or co-sponsored conferences and workshops held sumer installment loan products designed specifically for by the Brooklyn Minority Business Development Center low- to moderate-income individuals. The credit needs of ("MBDC"), the Bronx MBDC, and the Nassau-Suffolk small businesses in New York are addressed through sev- MBDC that provide information to businesses owned by eral Fleet programs, including Small Business Administra- minorities and women regarding government and bank tion ("SBA") loan programs and a $3 million minority programs and contract opportunities. The most recent CRA contractor loan program that provides working capital performance of Fleet Albany also concluded that the bank loans at the bank's prime rate to businesses owned by had undertaken significant efforts to ascertain the credit women and minorities. Many of the small business loan needs of its community, and implemented adequate marketproducts offered by Fleet affiliates in other states, including ing and advertising programs to inform its communities the "easy business banking" and INCITY micro-loan pro- about the credit products it offered. grams, also are available in New York. Fleet Albany provides credit and technical assistance to small businesses in C. Fleet's CRA Performance Record in Rhode New York through its support of regional and local organi- Island zations. Fleet uses a variety of methods to promote affordable The Board has carefully considered Fleet's record of perforhousing and community development in New York, includ- mance in Rhode Island, including its CRA-related activiing cooperation with government, non profit and private ties in South Providence. The most recent CRA perforsector organizations.22 For example, Fleet invested $2 mil- mance examination found that Fleet-RI's community delineation was reasonable and did not exclude low- to moderate-income areas and that the bank affirmatively 20. A commenter has repeated concerns raised in the Shawmut solicited credit applications from all segments of its comapplication that Fleet Albany's CRA-related activities in New York munity, including low- to moderate-income census tracts City and Long Island have not been reviewed in the context of a performance examination since 1992. This matter was carefully con- and census tracts with predominately minority populations. sidered by the Board and addressed in the Fleet/Shawmut Order. 21. The Board also has taken into account Fleet's record of compliance with applicable state community reinvestment laws. Fleet Al- illegal pre-screening also was occurring in several census tracts in bany has been examined and rated for compliance under New York Brooklyn that showed high approval rates for loan applications to community reinvestment laws (N.Y. Banking Law § 28-b). The bank Fleet. The Board has considered these comments in light of all the received a "satisfactory" rating from the New York State Banking facts of record. As indicated in the Chemical Order, a large number of Department in its most recent assessment report, which takes into New York City banks provide loans in connection with NYCPaccount, among other things, the bank's affordable housing and com- sponsored projects. The program is administered, however, by NYCP. munity development activities and HMDA data and lending programs. The process for selecting eligible prospective home buyers appears to 22. One commenter reiterated allegations that Fleet's participation be controlled by NYCP and is substantially the same regardless of the in the New York City Housing Partnership ("NYCP"), a government- financial institution that is chosen to make construction or end loans. sponsored housing program in low- to moderate-income areas of New The Federal Reserve System has begun discussions with the NYCP York City, involves illegal pre-screening of potential loan applicants about its procedures and will continue those discussions to assure in violation of fair lending and other credit-related laws and that compliance with all federal fair lending and reporting laws. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 563 Fleet offers a number of mortgage loan programs to help imately $21.5 million and more than 300 community bankmeet housing-related credit needs in low- to moderate- ing loans totalling approximately $58.7 million. Examiners income communities in Rhode Island.23 In addition to also noted that Fleet led the state in SBA loans in 1993 and offering its portfolio mortgage loan program, Fleet partici- 1994, with 126 loans totalling $25.7 million. The 1995 pates in several programs sponsored by the Rhode Island performance examination concluded that Fleet-RI had a Housing and Mortgage Finance Corporation good record of activities to ascertain community credit ("RIHMFC").24 The 1995 performance examination of needs. Examiners also noted that Fleet-RI aggressively Fleet-RI characterized Fleet as a leader among Rhode publicized its products and services throughout its delin- Island financial institutions in originating loans through eated community, using a variety of media and other RIHMFC programs in 1994, with 406 such loans totalling means.27 In addition, the OCC's 1995 examination found $31.2 million, including 139 JumpStart loans totalling Fleet-RI's branches to be reasonably accessible to all segmore than $9.6 million. Examiners also noted that, during ments of its delineated community, including low- to 1993 and 1994, Fleet made 377 Federal Housing Adminis- moderate-income areas.28 tration loans totalling more than $39 million, and 178 Veterans Administration loans totalling almost $19 million D. Branch Closings in Rhode Island. Fleet-RI also provides financing for the construction and Fleet has identified 31 branches that may be closed or renovation of rental and owner-occupied housing units in consolidated after its acquisition of NatWest Bank.29 Four coordination with RIHMFC and local and national non of these branches are in low- to moderate-income census profit housing organizations. For example, OCC examiners noted that, since 1993, Fleet has provided $749,000 in financing to construct 43 units of affordable single-family 27. One commenter continues to criticize the fees Fleet's subsidiary housing in Providence and assisted RIHMFC in financing a banks charge for products and services, and has questioned whether 27-unit affordable housing project in South Providence.25 there has been an increase in fees or a reduction in interest rates paid on accounts as a result of the Shawmut acquisition. Fleet provides a In addition, Fleet-RI is one of four lenders participating in full range of banking services throughout its delineated communities, the Providence Plan Housing Corporation's Bank Lines including lending services to assist low- to moderate-income resi- Program, a $30 million mortgage program designed to dents, and it offers basic banking accounts with reduced charges in provide home ownership opportunities for low- to some states. The CRA does not require banks to limit the fees they moderate-income households in Providence.26 Fleet-RI charge for services. Furthermore, there is no evidence in the record of this case that the fees charged by Fleet's subsidiary banks for their also made a capitalizing deposit pledge of $200,000 to products and services are based in any manner on a factor prohibited Oasis Community Development Federal Credit Union, a under antidiscrimination laws. new credit union being formed to serve residents in South 28. A Rhode Island commenter alleges that Fleet has acted in bad Providence. faith by providing the Board with misleading information about its activities in South Providence. Fleet and this commenter have dis- Fleet-RI has provided small business loans through puted the identity of the census tracts that make up the neighborhood Fleet's "easy business banking" program and its commu- of South Providence and the number of branches that serve this nity banking program, which includes loans ranging from neighborhood. The Board has reviewed Fleet's activities in the census tracts identified by Fleet as well as those identified by the commenter. $100,000 to $500,000 to businesses with sales of less than The Board also analyzed in detail the CRA performance record of $5 million. The 1995 performance examination noted that Fleet in Rhode Island in reviewing the Fleet/Shawmut transaction. during 1994 and the first five months of 1995, Fleet-RI This commenter also contended that Fleet reneged on an agreement to made 465 "easy business banking" loans totalling approx- settle a complaint filed with the Department of Housing and Urban Development against Shawmut because commenter refused to agree to cease criticizing Fleet in applications before federal supervisory agencies, and that Fleet is not in compliance with its CRA agreements 23. In 1994, Fleet-RI made 152 loans, totalling $11 million, under with this commenter. The Board has previously noted that private its special portfolio loan program for low- to moderate-income bor- agreements between community-based organizations and institutions rowers. are not required under the CRA or the Agency Policy Statement and 24. These programs include the: that compliance with such agreements is not monitored by the Board. (1) First Home Program, which offers first mortgage loans with 29. A commenter also contended that branch closures would result below-market interest rates, low down payments, and flexible un- in a substantial loss of jobs. The BHC Act specifically enumerates the derwriting standards for first-time home buyers; and factors the Board may consider in reviewing a proposal under that (2) JumpStart program, which provides creditworthy low- to Act. These factors relate to the effect of the proposal on competition, moderate-income borrowers with down payment assistance and the financial and managerial resources of the institutions involved, mortgage financing at below-market interest rates for purchases of certain supervisory factors, and the convenience and needs of the family owner-occupied residences. communities served by the institutions involved. The effect of the 25. Fleet-RI also provided a $100,000 loan to the Stop Wasting proposed acquisition on employment in a community is not among the Abandoned Property Gallup Street Project to help rehabilitate four factors included in the BHC Act. The convenience and needs factor homes in South Providence to be sold to low-income residents. has consistently been interpreted by the federal banking agencies, the 26. Fleet-RI also has made a commitment to provide $750,000 in courts, and Congress to relate to the effect of a proposal on the financing for the East Providence Neighborhood Housing Service's availability and quality of banking services in the community. See affordable housing program. Under this program, the bank provides Wells Fargo & Company, 82 Federal Reserve Bulletin 445 (1996). first mortgage financing subject to flexible underwriting guidelines The Board notes that Fleet would provide support to displaced emand participates in a loan pool with other lenders for second-mortgage ployees and has taken or would take steps to minimize any adverse financing. effects of this proposal on employment, including initiating a hiring Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

564 Federal Reserve Bulletin • June 1996 tracts. Fleet has indicated that each of these branches have followed this policy in closing or consolidating would be consolidated or merged into another existing branches since the previous CRA performance examina- Fleet or NatWest Bank branch in the same neighborhood. tions,32 and no materially adverse effects on low- to In particular, two branches would be consolidated with a moderate-income neighborhoods from branch closings branch located within 1,000 feet; one closed branch would were identified in any performance examinations.33 be merged into a branch located within one-half mile; and the fourth closed branch would be merged into a branch E. Conclusion Regarding Convenience and Needs located slightly more than one-half mile away. Fleet also Factors has indicated that there would remain at least two competitors within one mile of each of the four branches to be The Board has carefully considered the entire record in closed in low- to moderate-income census tracts, and that reviewing the convenience and needs factors under the in each case, the branch to be closed would be consolidated relevant banking statutes.34 As noted above, the Board into a significantly larger branch. Fleet would effect these carefully reviewed the convenience and needs factors in closings consistent with its branch closing policy and the approving Fleet's applications to acquire Shawmut.35 Joint Agency Policy Statement on Branch Closings ("loint Policy Statement").30 Fleet's branch closing policy has been carefully consid- 32. This commenter alleged that comments made by community ered by the Board.31 Under this policy, each subsidiary groups to Fleet in connection with Fleet's decision to close branches as a result of the Fleet/Shawmut merger should be considered combank is required to assess and consider the impact of any ments under provisions in the FDI Act that require public notice of branch closures on the convenience and needs of the public branch closings. 12 U.S.C. § 1831r-l(d). This provision of the FDI in the communities in which the branches are located. The Act provides commenters with a process by which they may contact bank also is required under this policy to evaluate alterna- the relevant bank's primary federal supervisor if they have concerns about branches to be closed in low- to moderate-income areas by a tives to closure, such as changing services offered and bank with interstate branches. These comments have been referred to hours of service, upgrading facilities, and increasing autothe OCC, the relevant banks' primary federal supervisor. mation. Examiners have found the branch closing policy to 33. A commenter argued that branch closings could have a disparate be satisfactory and determined that Fleet's subsidiary banks impact on minorities if Fleet considers the type of customer that is served by a particular branch and the opportunity to cross-market products to the customers when making a decision to close the branch. The facts of record do not support a finding that branch closings under freeze and offering relocation assistance and severance packages. Fleet's policy have resulted in a disparate impact on minorities, and Fleet also would provide out-placement services to the employees. Fleet's policy specifically provides that decisions on branch closings 30. See section 228 of the Federal Deposit Insurance Corporation will be made without regard to such considerations as the race or age Improvement Act of 1991, which added a new section 42 to the FDI of its customer base or other individual characteristics prohibited by Act (12 U.S.C. § 183 lr-1). See also Joint Policy Statement, 58 Federal law. Register 49,083 (1993). 34. A commenter has requested that the Board deny or delay One commenter contended that Fleet has provided inadequate no- consideration of this proposal to permit more information to be tice to customers in connection with closing a branch in the West End obtained and considered by the Board, including results of a new CRA of Hartford, Connecticut. Fleet indicated that in light of community examination by the OCC of Fleet Bank NA and detailed information concern, it had decided not to close this branch but to reduce its hours on branch closings, as well as to give commenter more time to of operation. comment on this information and other information submitted by 31. One commenter contended that Fleet delayed the public an- Fleet. Commenter appealed the withholding of certain Fleet submisnouncement of branches to be closed as a result of the Shawmut sions that have been accorded confidential treatment under the Freeacquisition until after the Board acted on the application and that the dom of Information Act ("FOIA"). The Board is required under Board should consider the effect of those announced closings, particu- applicable law and its processing procedures to act on applications larly the closing of branches in Albany, under the convenience and submitted under the BHC Act within specified time periods. As needs factor in this application. The commenter also maintained that discussed above, the Board has carefully reviewed the record in this Fleet should provide to the public information on branch closures that case, including information provided by commenters about the CRA would result from the NatWest Bank acquisition. performance records of Fleet and NatWest Bank and information Fleet represented that it did not have a final branch closing plan at relating to the prospective effects of this acquisition on the convethe time the Board acted on the Shawmut acquisition. In this light, in nience and needs of the communities to be served. Based on all the reviewing the Fleet/Shawmut transaction, the Board carefully consid- facts of record, the Board concludes that the record is sufficient to act ered Fleet's branch closing policy, which requires Fleet to assess and on this proposal at this time, and that delay or denial of this proposal consider the impact of any branch closures on the banking conve- on the grounds of informational insufficiency is not warranted. The nience and needs of the public and evaluate alternatives to closure. In Board further notes that its rules regarding access to information the Fleet/Shawmut Order, the Board required Fleet to submit quarterly under the FOIA provide the appropriate framework for considering a reports regarding implementation of its branch closing decisions for a commenter's challenge to confidential treatment accorded an appliperiod of 18 months. The first report was filed at the end of last month cant's submissions, and that commenter's challenge here is being and contained no information that was inconsistent with the consider- reviewed under these rules. The Board's rules do not provide comations taken into account by the Board in assessing the convenience menter access to information that is otherwise exempt from disclosure and needs factor in the Shawmut case or any evidence that Fleet was under FOIA. Moreover, commenter has been provided with all nonout of compliance with its branch closing policy. confidential submissions by Fleet that respond to the particular issues In this case, Fleet provided information on the branches to be closed raised by commenter, as well as information on Fleet's proposed in low- to moderate-income areas as a result of the NatWest Bank branch closings in low- to moderate-income areas, and commenter has acquisition and the Board has considered these closures in light of all provided substantial comments on these submissions. the facts of record, including comments addressing these proposed 35. In considering the Fleet/Shawmut transaction, the Board careclosures. fully considered the potential fair lending law issues raised by Fleet's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 565 Based on a review of the entire record of performance, approved.38 The Board's approval is specifically condiincluding information provided by the commenters, Fleet's tioned on compliance by Fleet with all commitments made responses and the results of performance examinations of in connection with this application as well as the condi- NatWest Bank and Fleet's bank subsidiaries by their pri- tions discussed in this order. The commitments and condimary supervisors, and for the reasons explained in this tions relied on by the Board in reaching this decision are order and the Fleet/Shawmut Order, the Board believes that deemed to be conditions imposed in writing by the Board efforts by Fleet and NatWest Bank to help meet the credit in connection with its findings and decision, and as such needs of all segments of the communities served by these may be enforced in proceedings under applicable law. organizations, including low- to moderate-income neigh- The acquisition of NatWest Bank shall not be consumborhoods, are consistent with approval.36 The Board ex- mated before the fifteenth calendar day following the effecpects Fleet to continue to strengthen its CRA performance tive date of this order and shall not be consummated later through its CRA initiatives, and the Board will continue to than three months following the effective date of this order, monitor its progress in this regard in future applications to unless such period is extended for good cause by the Board expand its deposit-taking facilities.37 of by the Federal Reserve Bank of Boston, acting pursuant to delegated authority. Conclusion By order of the Board of Governors, effective April 15, 1996. Based on the foregoing, including the commitments made to the Board by Fleet in connection with this application, Voting for this action: Chairman Pro Tempore Greenspan and and in light of all the facts of record, the Board has Governors Kelley, Phillips, and Yellen. Absent and not voting: Goverdetermined that this application should be, and hereby is, nor Lindsey. JENNIFER J. JOHNSON Deputy Secretary of the Board National Bancshares Corporation of Texas loan pricing policy that permitted employees of a Fleet mortgage Laredo, Texas company to share with the mortgage company any excess in origination charges or interest rates above the company's base rates that the employee was able to charge the borrower. This practice is commonly Order Approving Acquisition of Shares of a Bank referred to in the industry as "overaging" and involves customers Holding Company who have been granted credit by the mortgage company. The Board identified concerns under the fair landing laws about the implementation of the overage policy at two of the mortgage company's offices National Bancshares Corporation of Texas, Laredo, Texas regarding loans to African Americans and Hispanics. After being ("NBT"), a bank holding company within the meaning of notified of these concerns, Fleet terminated this practice at all of the the Bank Holding Company Act ("BHC Act"), has reoffices of its mortgage subsidiary, and has cooperated with the Board's quested Board approval under section 3 of the BHC Act review of the matter. The Board has provided the DOJ with data and (12 U.S.C. § 1842), to acquire up to 24.9 percent of the analyses compiled by the Board, and the matter continues to be under review by the DOJ. voting shares of Corpus Christi Bancshares, Inc., Corpus 36. Two commenters requested that the Board hold a public hearing Christi, Texas ("CCB"). or meetings on this application. Section 3(b) of the BHC Act does not Notice of the application, affording interested persons an require the Board to hold a hearing on an application unless the opportunity to submit comments, has been published appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial. No supervisory agency has (61 Federal Register 4668 (1996)). The time for filing recommended denial of the proposal. comments has expired, and the Board has considered the Generally, under its Rules of Procedure, 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. 12 C.F.R. 262.3(e) and 38. Commenters have raised allegations of employment discrimina- 262.25(d). Commenters in this case have had ample opportunity to tion on the basis of two proceedings involving Fleet Albany. One submit their views, and have, in fact, submitted substantial written lawsuit was filed recently by several current and former employees of comments that have been carefully considered in connection with the Fleet Albany. Another case involves an administrative action brought Board's decision. Commenters' requests fail to demonstrate why by the Department of Labor ("DOL") and scheduled for a hearing written comments are inadequate in this case to present their views or next month. Fleet has denied any wrongdoing in either case and no resolve the issues raised by their comments as required by the Board's adjudication of wrongdoing has been made in either case. The Board rules. 12 C.F.R. 262.3(e). For these reasons, and based on all the facts fully supports laws requiring fair and nondiscriminatory hiring and of record, the Board has determined that a public hearing or meeting is employment practices, but does not have jurisdiction to determine not necessary to clarify the factual record in this application, or compliance with those laws. If a court or an administrative agency otherwise warranted in this case. Accordingly, commenters' requests determines that Fleet or Fleet Albany has engaged in illegal employfor a public hearing or meeting on this application is denied. ment activities, the Board will take such matters into account to the 37. One commenter alleged that Fleet has failed to improve its CRA extent appropriate and permitted under the federal banking laws. performance since the Fleet/Shawmut Order with respect to fair These commenters also have raised issues relating to a 1991 audit of lending compliance and CRA lending activities. The Board has con- Fleet Albany by the DOL regarding the bank's employment practices. sidered this comment in light of the relatively short period of time that This matter was resolved to the satisfaction of the DOL, with Fleet has elapsed since the consummation of the Fleet/Shawmut acquisition Albany making restitution to certain employees and terminating the at the end of November 1995. employment of the bank's Human Resource Officer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

566 Federal Reserve Bulletin • June 1996 application and all comments received in light of the purposes of the BHC Act.5 NBT has committed not to factors set forth in section 3 of the BHC Act. exercise or attempt to exercise a controlling influence over NBT, with consolidated assets of approximately $265.6 the management or policies of CCB or any of its subsidiarmillion, is the 66th largest commercial banking organiza- ies; not to seek or accept representation on the board of tion in Texas, controlling approximately $233.1 million in directors of CCB or any of its subsidiaries; and not to have deposits, representing less than 1 percent of total deposits any representative of NBT serve as an officer, agent, or in commercial banking organizations in the state.1 CCB, employee of CCB or any of its subsidiaries. NBT also has with total consolidated assets of approximately $223.9 committed not to attempt to influence the dividend polimillion, is the 87th largest commercial banking organiza- cies, loan decisions or operations of CCB or any of its tion in Texas, controlling approximately $200.9 million in subsidiaries. deposits, representing less than 1 percent of total deposits CCB alleges that NBT may attempt to force a sale of in commercial banking organizations in the state. CCB and thereby exercise a controlling influence over Control of CCB. CCB has objected to the proposal, CCB.6 This allegation raises two issues, one regarding the contending that, after consummation of the proposal, NBT ownership of voting shares, and a second regarding the would be able to exercise a controlling influence over potential that NBT may exceed the authority it is seeking CCB, and thereby force a sale of CCB. The Board notes in this case by exercising a controlling influence over CCB. that, although CCB objects to NBT attempting to control NBT has sought the requisite Board approval under the CCB, the BHC Act does not bar NBT from acquiring BHC Act to own and control up to 25 percent of the voting control of CCB, subject to obtaining prior Board approval. shares of CCB. This approval to own and control shares As noted above, however, NBT proposes to acquire less allows NBT to dispose of shares that it lawfully acquires. than 25 percent of the voting shares of CCB, and does not To address concerns that the sale of shares not be used by propose to control CCB. The Board previously has indi- NBT to exercise a controlling influence over CCB, in cated that the acquisition of less than a controlling interest addition to the commitments noted above, NBT has comin a bank or bank holding company is not a normal mitted not to dispose of the shares of CCB or threaten to acquisition for a bank holding company.2 Nonetheless, the dispose of those shares as a condition of specific action or requirement in section 3(a)(3) of the BHC Act that the non-action by CCB. In these circumstances, the Board Board's approval be obtained before a bank holding com- believes that retention by NBT of the right to sell the pany acquires more than 5 percent of the voting shares of a shares of CCB it proposes to acquire does not require a bank suggests that Congress contemplated the acquisition finding that NBT would exercise a controlling influence by bank holding companies of between 5 and 25 percent of over CCB. the voting shares of a bank or a bank holding company.3 The Board has adequate supervisory authority to monitor Nothing in section 3(c) of the BHC Act, moreover, requires NBT's compliance with its commitments, and expressly denial of an application solely because a bank holding retains authority to initiate a control proceeding against company proposes to acquire less than a controlling inter- NBT if facts presented later indicate that NBT or any of its est in a bank or a bank holding company. On this basis, the subsidiaries or affiliates in fact controls CCB for purposes Board has on numerous occasions approved the acquisition of the BHC Act.7 Based on these commitments and all by a bank holding company of less than a controlling other facts of record, it is the Board's judgment that the interest in a bank.4 record does not support a finding that NBT would acquire NBT has stated that it does not intend to control CCB control of CCB for purposes of the BHC Act through and has made a number of commitments designed to assure consummation of the proposal. that NBT will not exercise a controlling influence over CCB also maintains that NBT has acted in concert with CCB. The Board has relied on similar commitments in the largest shareholder of CCB (the "shareholder") to other cases to determine that an investing bank holding control and attempt to force the sale of CCB in violation of company would not be able to exercise a controlling influ- the Change in Bank Control Act (12 U.S.C. § 1817(j)) ence over another bank holding company or bank for ("CIBCA") and the BHC Act.8 NBT denies that it has 5. See, e.g., Mansura at 39. These commitments are set forth in the 1. Asset and deposit data are as of December 31, 1995. Appendix. 2. See, e.g., North Fork Bancorporation, Inc., 81 Federal Reserve 6. CCB states that allowing NBT to control 24.9 percent of voting Bulletin 734 (1995) ("North Fork"); State Street Boston Corporation, shares of CCB would give NBT, along with the largest shareholder of 67 Federal Reserve Bulletin 862, 863 (1981). CCB, the ability to control CCB by being able to offer a controlling 3. 12 U.S.C. § 1842(a)(3); 12 C.F.R. 225.11(c). block of shares of CCB to a potential buyer. 4. See, e.g., North Fork, (acquisition of up to 19.99 percent of the 7. CCB maintains that allowing NBT to own up to 24.9 percent of voting shares of a bank holding company); Mansura Bancshares, Inc., CCB shares would disrupt the management of CCB. The Board notes 79 Federal Reserve Bulletin 37 (1993) ("Mansura") (acquisition of that NBT has specifically committed not to exercise or attempt to 9.7 percent of the voting shares of a bank holding company); SunTrust exercise a controlling influence over the management or policies of Banks, Inc., 76 Federal Reserve Bulletin 542 (1990) ("SunTi'ust") CCB or any of its subsidiaries. (acquisition of up to 24.99 percent of the voting shares of a bank); and 8. CCB alleges that NBT has a longstanding relationship with this First State Corporation, 76 Federal Reserve Bulletin 376 (1990) shareholder, a broker-dealer who has expressed interest in the sale of (acquisition of 24.9 percent of the voting shares of a bank). CCB on numerous occasions. CCB contends that NBT's chief execu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 567 acted in concert with any shareholder. NBT states that managerial considerations,12 including the future prospects there are no agreements between NBT and the shareholder of NBT, CCB, and their respective subsidiaries are consisregarding the acquisition of shares or voting of shares. tent with approval, as are the other supervisory factors the NBT also denies that it provided the shareholder with a Board must consider under section 3 of the BHC Act.13 copy of NBT's application filed with the Board, any infor- Considerations relating to the convenience and needs of mation regarding this application, or any other information. the communities to be served also are consistent with NBT indicates that it began purchasing CCB stock in 1995 approval of this application. through a securities dealer located in New York. The Based on all the facts of record, the Board has detershareholder has owned shares in CCB for more than mined that this application should be, and hereby is, ap- 47 years. NBT maintains that its purchases of shares of proved. The Board's approval is specifically conditioned CCB were independent transactions, and that NBT does on compliance by NBT with all the commitments made in not know when the shareholder purchased shares of CCB. connection with this application, including the commit- In addition, NBT states that it has not received any advice ments set forth in the Appendix. For the purpose of this from the shareholder on the purchases of CCB shares nor action, the commitments and conditions relied on by the has NBT or its affiliates provided any financing to the Board in reaching its decision are deemed to be conditions shareholder to purchase shares of CCB, or for any other imposed in writing by the Board in connection with its purpose, since the new management of NBT was installed findings and decision and, as such, may be enforced in in 1992 and began purchasing shares in 1995. The Board proceedings under applicable law. previously has noted that shareholders may have similar The acquisition of shares of CCB's voting stock shall interests without being deemed to be making acquisitions not be consummated before the fifteenth calendar day of shares in violation of the CIBCA.9 These allegations following the effective date of this order, and not later than have been carefully considered in light of all the facts of three months after the effective date of this order, unless record, including the submissions of CCB and NBT. Based on this review, the Board does not believe that the record in this case indicates that NBT acted in conceit with on a passive basis, presents adverse financial considerations. The NBT another person or company to acquire shares of CCB in bankruptcy proceeding occurred under previous management, and violation of the CIBCA, or that NBT controls or has NBT emerged from this proceeding in 1992 with new management exercised a controlling influence over the management or and in an improved financial condition. NBT's consolidated capital policies of CCB in violation of the BHC Act. As noted, ratios, after deducting the proposed investment in CCB, remain well above the minimum capital ratios required by the Board. Based on all moreover, the passivity commitments made by NBT and the facts of record, including reports of examination assessing the the supervisory authority of the Board to enforce the comfinancial resources of NBT, the Board concludes that financial considmitments should address concerns relating to the ability of erations are consistent with approval. NBT to control CCB in the future. The Board notes that, as 12. CCB argues that NBT failed to disclose its prior eiforts to long as NBT does not violate its passivity commitments to purchase CCB and this alleged failure indicates a lack of candor that requires denial of the proposal. CCB also asserts that the Board should the Board, NBT retains the right as a shareholder to sell its not accept commitments from NBT at face value. The Board notes CCB shares. that NBT is not required to disclose its efforts to purchase shares of CCB as long as NBT obtains Board approval prior to acquiring more Other Factors. The Board previously has stated that one than 5 percent of the voting shares of CCB. As part of its evaluation of company need not acquire control of another company in the NBT's managerial record, the Board has reviewed relevant examiorder to substantially lessen competition between them, nation reports that, among other things, evaluate the record of its and that the specific facts of each case will determine management in complying with relevant legal and supervisory requirewhether a minority investment would have significant anti- ments. The Board has full authority to enforce the commitments made competitive effects.10 NBT and CCB do not compete di- by NBT. 13. The Board has carefully considered the fact that NBT has rectly in any relevant banking markets. Based on all the acquired approximately 5.2 percent of CCB's voting shares without facts of record, the Board concludes that the proposal the prior approval of the Board as required under the BHC Act. CCB would not result in any significantly adverse effects on contends that this level of ownership also violates certain filing competition or on the concentration of banking resources requirements of the Securities and Exchange Commission ("SEC"). NBT has responded that it made good faith efforts to assure that it in any relevant banking market. The Board also concludes, would not acquire in excess of 5 percent of the shares of CCB. NBT in light of all the facts of record, that the financial" and calculated compliance with the 5 percent threshold in the BHC Act by using a weighted average of the outstanding common stock and stock equivalents of CCB. NBT has indicated that it has reduced the level of its current shareholdings in CCB to 4.9 percent of common shares tive officer attended a meeting with the shareholder during which both outstanding without reliance on outstanding but unexercised stock parties urged CCB management to test the market for selling CCB. options. Based on all the facts of record, including reports of examina- CCB also maintains that NBT provided the shareholder with a copy of tion assessing NBT's managerial resources and compliance with applithe application that NBT filed with the Board. cable rules and regulations, the Board does not believe that this matter 9. See Letter, dated May 21, 1991, from William W. Wiles, Secre- indicates that managerial or supervisory considerations required to be tary of the Board, to H. Rodgin Cohen. considered under the BHC Act are inconsistent with approval. The 10. See e.g., North Fork, Mansura, and SunTrust. Board has referred CCB's complaint to the SEC, the federal agency 11. CCB contends that the fact that NBT recently emerged from a that administers and enforces federal securities laws, for review and bankruptcy proceeding, and that this proposed investment represents consideration. The Board also notes that NBT is preparing the approapproximately 13 percent of the equity of NBT that would be invested priate filing with the SEC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

568 Federal Reserve Bulletin • June 1996 such period is extended for good cause by the Board or by Wilson Bank Holding Company the Federal Reserve Bank of Dallas, acting pursuant to Lebanon, Tennessee delegated authority. By order of the Board of Governors, effective April 29, Order Approving the Acquisition of a Bank 1996. The Wilson Bank Holding Company, Lebanon, Tennessee Voting for this action: Chairman Pro Tempore Greenspan and ("Wilson"), a bank holding company within the meaning Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- of the Bank Holding Company Act ("BHC Act), has nor Lindsey. applied for the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire 50 percent of the JENNIFER J. JOHNSON voting shares of DeKalb Community Bank, Smithville, Deputy Secretary of the Board Tennessee, a de novo state chartered bank ("Bank").1 Notice of this application, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 5401 (1996)). The time for filing comments has expired, and the Board has considered the Appendi) application and all comments received in light of the factors set forth in section 3(c) of the BHC Act. Wilson, with total consolidated assets of approximately As part of this proposal, NBT has committed that it will $217.4 million, is the 27th largest commercial banking not, directly or indirectly: organization in Tennessee, controlling deposits of $188 million, representing less than 1 percent of total (1) Take any action to cause CCB or any of its subsidiaries deposits in commercial banking organizations in the state.2 to become a subsidiary of NBT. Bank's de novo entry into the Dekalb County, Tennessee (2) Acquire or retain shares of CCB that would cause the banking market would enhance competition in that market. combined interests of NBT, its affiliates, officers, and direc- Based on all the facts of record, the Board concludes that tors to equal or exceed 25 percent of the outstanding voting consummation of this proposal would not have any signifishares of CCB. cantly adverse effects on competition or the concentration (3) Exercise or attempt to exercise a controlling influence of banking resources in any relevant banking market. over the management or policies of CCB or any of its The Board has carefully considered comments from subsidiaries. Union Planters Corporation, Memphis, Tennessee ("Pro- (4) Seek or accept representation on the board of directors testant"), maintaining that Bank's name, "DeKalb Comof CCB or any of its subsidiaries. munity Bank," is substantially similar to the name Protes- (5) Serve, or have or seek to have any representative of tant's subsidiary bank previously used in Smithville, NBT serve, as an officer, agent, or employee of CCB or any "DeKalb County Bank & Trust Company" ("Trust Comof its subsidiaries. pany").3 Protestant contends that the similarity between (6) Propose a director or a slate of directors in opposition these names, and Bank's employment of former Trust to any nominee or slate of nominees proposed by manage- Company officers, would cause customer confusion and ment or the board of directors of CCB or its subsidiaries. enable Bank to compete unfairly for new customers.4 (7) Solicit or participate in soliciting proxies with respect In reviewing applications filed under section 3 of the to any matter presented to the shareholders of CCB or its BHC Act, the Board is limited to considering the specific subsidiaries. factors set forth in the BHC Act.5 Neither the language of (8) Attempt to influence CCB's or any of its subsidiaries': dividend policies; loan, credit, or investment decisions; pricing of services; personnel decisions; operations activi- 1. During the processing of this application, the proposed name of ties, including the location of any offices or branches or Bank was changed from "DeKalb Bank & Trust Company" to their hours of operation, etc.; or any similar activities or "DeKalb Community Bank." 2. Asset data are as of September 30, 1995. decisions of CCB or any of its subsidiaries. 3. Trust Company was merged with Union Planters Bank of the (9) Enter into any other banking or nonbanking transac- Cumberlands, Cookeville, Tennessee, in June 1995 as part of an tions with CCB or its subsidiaries, except that NBT may internal reorganization by Protestant and has since operated in Smithestablish and maintain deposit accounts with the bank ville as a branch of that bank using the name "Union Planters Bank." subsidiaries of CCB, provided that the aggregate balance 4. Protestant also maintains that Bank's name would violate Tennessee banking law, which requires the Commissioner of Financial Instiof all such deposit accounts does not exceed $500,000, and tutions ("Commissioner") to find that the name of a proposed bank provided that the accounts are maintained on substantially would not so closely resemble the name of a current or former bank the same terms as those prevailing for comparable ac- conducting business in the state as to cause confusion. TENN. CODE. counts of persons unaffiliated with CCB. ANN. § 45-2-205(b)(6) (1993). The Acting Commissioner approved Bank's application to establish a de novo bank to be known as (10) Dispose or threaten to dispose of shares of CCB in any "DeKalb Community Bank" on March 8, 1996. manner as a condition of specific action or non-action by 5. See Western Bancshares, Inc. v. Board of Governors, 480 F.2d CCB or any of its subsidiaries. 749 (8th Cir. 1973). The BHC Act requires the Board to consider the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 569 the BHC Act nor its legislative history indicates that the conditioned upon compliance with all the commitments similarity of names of banking organizations is a consider- made by Wilson in connection with this application. For ation under the BHC Act. Congressional action repealing purposes of this action, the commitments and conditions the authority of other federal banking agencies to approve relied on in reaching this decision shall be deemed to be the names of banks suggests that this issue should be conditions imposed in writing by the Board and, as such, addressed through laws that are not administered by fed- may be enforced in proceedings under applicable law. eral banking agencies.6 Based on all the facts of record, the This transaction should not be consummated before the Board concludes that Protestant's comments regarding fifteenth calendar day following the effective date of this Bank's name do not raise issues that would warrant denial order, or later than three months after the effective date of of this proposal under the factors required to be considered this order, and Bank shall be open for business within six in the BHC Act. months after the effective date of this order, unless such The Board also concludes that the financial and manage- periods are extended for good cause by the Federal Rerial resources and future prospects of Wilson and Bank are serve Bank of Atlanta, acting pursuant to delegated authorconsistent with approval, as are the convenience and needs ity. considerations and other supervisory factors that the Board By order of the Board of Governors, effective April 1, is required to consider under section 3 of the BHC Act.7 1996. Based on the foregoing and all the facts of record, the Board has determined that this application should be, and Voting for this action: Chairman Pro Tempore Greenspan and hereby is, approved.8 The Board's approval is specifically Governors Kelley, Lindsey, Phillips, and Yellen. JENNIFER J. JOHNSON competitive effects of a proposal, the financial and managerial re- Deputy Secretary of the Board sources and future prospects of the organizations involved, the convenience and needs of the communities to be served, and other supervi- Orders Issued Under Section 4 of the Bank Holding sory factors. Company Act 6. In repealing the statutory authority of the Office of the Comptroller of the Currency to approve the names of national banks in 1982, the Congress noted that "[a]ny confusion between bank names shall The Bessemer Group, Incorporated be resolved under other laws, including the federal Lanham Trade- Woodbridge, New Jersey mark Act and state statutory and common law principles of unfair competition." S. Rpt. No. 97-536, 97th Cong., 2d Sess. at 28. Order Conditionally Approving a Notice to Engage 7. The Board has considered Protestant's contentions that numerous competitors more than adequately serve the credit needs of the com- De Novo in Certain Nonbanking Activities munity and that an additional competitor could adversely affect the existing banks in this "over-banked" market. Protestant supports The Bessemer Group, Incorporated, Woodbridge, New Jerthese arguments with several Board orders denying applications in sey ("Bessemer"), a bank holding company within the part because the applicant had not demonstrated unserved banking meaning of the Bank Holding Company Act ("BHC Act"), needs in the community. See, e.g., The First Virginia Corp., 48 Federal Reserve Bulletin 1163 (1962); First Security Corp., 48 Fed- has applied for Board approval under section 4(c)(8) of the eral Reserve Bulletin 295 (1962). These decisions, however, predated BHC Act and section 225.23 of the Board's Regulation Y the 1966 Amendments to the BHC Act (P.L. 89-485; 80 Stat. 236), (12 C.F.R. 225.23) to engage de novo through a wholly which conformed the BHC Act's factors to the criteria in the Bank owned subsidiary, Bessemer Asset Management, Inc., New Merger Act (P.L. 89-356; 80 Stat. 7). Under these amendments, the York, New York ("BAM"), in establishing and serving as 1956 BHC Act's focus on whether adequate banking services were provided to the public was shifted to a focus on whether a proposal the general partner of limited partnerships ("Partnerwould substantially lessen competition or result in a monopoly. The ships")1 that would invest in a wide variety of commodi- Board previously has noted, moreover, that the establishment of a ties and exchange-traded and over-the-counter instruments, de novo bank would have a positive effect on competition in any including: banking market. See Adams Bank & Trust, 82 Federal Reserve Bulletin 275 (1996). The Board also notes that Wilson's existing subsidiary bank received a "satisfactory" rating for performance under the Community Reinvestment Act ("CRA") at its most recent examination for CRA performance from the Federal Deposit Insurance Corpocomments do not adequately present its allegations, or why a public ration, its primary federal supervisor. hearing or meeting is otherwise warranted. Based on all the facts of 8. Protestant has requested that the Board hold a public hearing or record, the Board has determined that a public meeting or hearing is meeting on this proposal. Section 3(b) of the BHC Act does not not necessary to clarify the factual record in this application, or require the Board to hold a public hearing or meeting on an applicaotherwise warranted in this case. Accordingly, Protestant's request for tion unless the appropriate supervisory authority for the bank to be a public hearing or meeting on this application is hereby denied. The acquired makes a timely written recommendation of denial. No super- Board also concludes that the record in this case is sufficient to visory agency has recommended denial of this proposal. warrant action on this application at this time. The Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). In the Board's view, all interested parties have had ample opportunity to 1. The Partnerships would not register as investment companies submit their views, and have, in fact, made written submissions that under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 have been considered by the Board in acting on this application. et seq.). Each Partnership would be limited to not more than Protestant's request fails to demonstrate why its substantial written 100 investors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

570 Federal Reserve Bulletin • June 1996 (1) All types of debt and equity securities, including Bessemer has proposed that the Partnerships finance options and warrants on securities and the securities of asset purchases with debt.6 Bessemer has indicated that foreign issuers; leverage employed by the Partnerships would include mar- (2) Interests in investment funds that invest in futures gin credit from broker-dealers, reverse repurchase transacand options on futures on financial and non-financial tions, and short sales. commodities ("commodity pools");2 (3) Distressed debt instruments; Closely related to banking analysis (4) Participations in loans; (5) Foreign exchange, including spot and forward con- Section 4(c)(8) of the BHC Act provides that a bank tracts; holding company may, with Board approval, engage in any (6) Money market instruments, including bankers' ac- activity that the Board determines to be "so closely related ceptances, commercial paper, money market mutual to banking or managing and controlling banks as to be a funds, certificates of deposit, and other deposit accounts proper incident thereto." An activity may be deemed to be in U.S. or foreign banks; closely related to banking if it is demonstrated that: (7) Palladium, platinum, gold, and silver coin and bul- (1) Banks generally provide the proposed services; lion. (2) Banks generally provide services that are operationally or functionally so similar to the proposed services as Notice of the proposal, affording interested persons an to equip them particularly well to provide the proposed opportunity to submit comments on the proposal, has been services; or published (60 Federal Register 40,111 (1995)). The time (3) Banks generally provide services that are so intefor filing comments has expired, and the Board has consid- grally related to the proposed services as to require their ered the notice and all comments received in light of the provision in a specialized form.7 public interest factors set forth in section 4(c)(8) of the BHC Act. The Partnerships would invest in debt and equity securi- Bessemer, with total consolidated assets of approxi- ties and distressed debt instruments.8 Bessemer has stated mately $468 million, operates subsidiary banks in New that investments in debt and equity securities and dis- Jersey and New York.3 BAM would register as a commod- tressed debt would be made in accordance with limitations ity pool operator ("CPO") with the Commodity Futures contained in the BHC Act and in previous Board deci- Trading Commission ("CFTC")4 and, therefore, a portion sions.9 of BAM's activities would be subject to the recordkeeping, The Partnerships also would invest in foreign exchange, reporting, fiduciary standards, and other requirements of precious metals, certificates of deposit and other instruthe Commodity Exchange Act (7 U.S.C. §2 et seq.), the ments. The Board previously has determined that it is CFTC and the National Futures Association. closely related to banking under the BHC Act for bank BAM would provide administrative services to the Part- holding companies to trade in all the instruments and nerships and would be the general partner of each Partner- commodities proposed for the Partnerships, except palladiship with a nominal equity interest in each Partnership. BAM would not provide investment advice directly to the Partnerships but would employ unaffiliated investment ad- 6. Bessemer has stated, however, that it would not permit any visers to manage the investments of the Partnerships pursu- Partnership that invests in distressed debt instruments to use borrowed ant to parameters set by BAM. Interests in the Partnerships funds to purchase or carry distressed debt instruments or to use would be privately placed with institutional customers5 by distressed debt instruments as collateral to acquire other assets. 7. See National Courier Association v. Board of Governors of the Bessemer's subsidiary banks. Bessemer's subsidiary banks Federal Reserve System, 516 F.2d 1229, 1237 (D.C. Cir. 1975). In also would provide certain services to the Partnerships, and addition, the Board may consider any other basis that may demoncertain officers of Bessemer's subsidiary banks would serve strate that the proposed activity has a reasonable or close connection as officers of BAM. or relationship to banking or managing or controlling banks. See Board Statement Regarding Regulation Y, 49 Federal Register 806 (1984); Securities Industry Association v. Board of Governors of the Federal Reserve System, 468 U.S. 207, 210-211 n. 5 (1984). 2. The Partnerships would purchase and sell derivative contracts on 8. The Board previously has permitted bank holding companies to precious metals and financial commodities, instruments and indices sponsor, organize and manage closed-end investment companies and for hedging purposes. unregistered limited partnerships that invest in securities. See 3. Asset data are as of December 31, 1995. 12 C.F.R. 225.25(b)(4); 12 C.F.R. 225.125; Meridian Bancorp, Inc., 4. Although the Partnerships would not directly invest in futures or 80 Federal Reserve Bulletin 736 (1994) ("Meridian"). options on futures contracts for other than hedging purposes, Besse- 9. See Meridian; Norwest Corporation, 81 Federal Reserve Bulletin mer has indicated that one or more of the Partnerships may invest a 1128 (1995) ("Norwest"). For example, the Partnerships, together substantial portion of its assets in commodity pools, which would with Bessemer and its other subsidiaries, would hold not more than require BAM to register as a CPO. See CFTC Interpretive Letter 5 percent of any class of voting securities of any issuer, and not more No. 93-57 (1993); CFTC Interpretive Letter No. 91-6 (1991). The than 25 percent of the total equity, including subordinated debt, of any interests purchased by the Partnerships would represent less than five issuer. In addition, no directors, officers, or employees of Bessemer or percent of the outstanding voting securities of any commodity pool its subsidiaries would serve as directors, officers, or employees of any and less than 10 percent of the total equity of any commodity pool. issuer of which Bessemer and its subsidiaries hold more than 5. See 12 C.F.R. 225.2(g). 10 percent of the total equity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 571 um.10 Banks currently are permitted to engage in palladium the Guidelines note that experience has shown that banking trading.11 Therefore, the Board has concluded that trading organizations stand behind affiliated institutions that have palladium coin and bullion is closely related to banking experienced losses in order to protect the reputation of the within the meaning of section 4(c)(8) of the BHC Act. organization as a whole. In some cases, this has led to In connection with the proposed activities, BAM may losses that have exceeded the bank holding company's become a CPO. The Board previously has found that a investment in the affiliate.16 subsidiary of a state member bank may serve as the CPO of The Guidelines provide for consolidation of an entity investment funds engaged in purchasing and selling futures into the parent company's financial statements for purposes and options on futures on certain commodities.12 In addi- of computing compliance with capital adequacy requiretion, the Board has permitted bank holding companies to ments when the parent's control over the entity makes the trade futures and options on futures on financial and non- entity the functional equivalent of a subsidiary. The Guidefinancial commodities.13 For these reasons, the Board has lines also provide alternatives to consolidation, such as concluded that serving as a CPO under the circumstances requiring that the bank holding company deduct its investof this case is closely related to banking. ment in the organization from its capital components, applying an appropriate risk weighting, or requiring that Proper Incident to Banking Analysis the organization operate with capital ratios above the minimum.17 The Board is required by section 4(c)(8) of the BHC Act to As noted above, Bessemer proposes that its wholly determine that the proposed activities "can reasonably be owned subsidiary, BAM, serve as the general partner to expected to produce benefits to the public, such as greater each Partnership. Bessemer has proposed to deduct its convenience, increased competition, or gains in efficiency, equity investment in BAM in calculating Bessemer's reguthat outweigh possible adverse effects, such as undue con- latory consolidated capital ratios, and argues that it should centration of resources, decreased or unfair competition, not be required to consolidate the assets and liabilities of conflicts of interest, or unsound banking practices."14 In the Partnerships with Bessemer for regulatory capital purorder to address potential adverse effects that could arise poses.18 Bessemer states that deducting its investment in from the proposed activities, Bessemer has made a number BAM from consolidated capital ratios would adequately of commitments regarding the manner in which it would address the exposure of the organization to the risks of the conduct the proposed activities, including several commit- proposed activities. While BAM is responsible for the ments previously relied on by the Board in evaluating obligations of the Partnerships, Bessemer argues that similar proposals.15 Bessemer would not be liable for the debts and obligations of BAM or the Partnerships and that Bessemer's exposure Capital treatment of the Partnerships to the proposed activities is limited to its investment in BAM.19 Bessemer argues that consolidation of financial Because a subsidiary of Bessemer would be the sole general partner for the Partnerships, with responsibility for managing and overseeing the Partnerships, and because 16. See 12 C.F.R. 225, Appendix A (II)(B)(2). 17. The Board's Capital Adequacy Guidelines state that, in consid- Bessemer proposes that the Partnerships be leveraged with ering the appropriate treatment, the Board will generally take into debt, the Board believes that it is particularly important in account whether: this case that Bessemer maintain sufficient capital to ac- (1) The parent banking organization has significant influence over count for the potential risks associated with its involve- the financial or managerial policies or operations of the subsidiary, ment with the Partnerships. The Board's Capital Adequacy joint venture, or associated company; (2) The banking organization is the largest investor in the affiliated Guidelines provide a framework for considering investcompany; or ments by bank holding companies in entities that the bank (3) Other circumstances prevail that appear to tie activities of the holding company may effectively control. In this regard, affiliated company to the parent banking organization. 12 C.F.R. 225, Appendix A (II)(B)(2). 18. As an alternative, Bessemer has proposed that the liabilities of the partnerships, except those liabilities that are nonrecourse as to 10. See 12 C.F.R. 225.25(b)(1); 12 C.F.R. 225.25(b)(16); The BAM, be treated as guarantees by Bessemer for purposes of calculat- Hongkong and Shanghai Banking Corporation, 75 Federal Reserve ing Bessemer's consolidated risk-based capital ratios but not Bessem- Bulletin 217 (1989) (trading foreign exchange in the spot and forward er's leverage ratio. In the calculation of risk-based capital ratios, the markets); The Hongkong and Shanghai Banking Corporation, 72 face amount of a guarantee, which constitutes an off-balance sheet Federal Reserve Bulletin 345 (1986) (trading money market instru- item, is converted at 100 percent to a credit equivalent amount, which ments, bankers' acceptances and certificates of deposits); Westpac is generally risk-weighted at 100 percent. Banking Corporation, 73 Federal Reserve Bulletin 61 (1987) (trading 19. Bessemer has committed that it will not: gold and silver bullion and coin); Swiss Bank Corporation, 81 Federal (1) Guarantee the obligations of BAM or the Partnerships or enter Reserve Bulletin 185 (1995) ("Swiss Bank"). into any guarantee or similar arrangement intended to protect an 11. See, e.g., OCC Interpretive letter No. 683 (1995). investor in a Partnership from losses associated with the investor's 12. See Chemical Banking Corporation, 82 Federal Reserve Bulle- interest in the Partnership; tin 239 (1996). See also OCC Interpretive Letter No. 496 (1989). (2) Provide funds to BAM or the Partnerships to repay creditors or 13. See Swiss Bank. investors in the Partnerships in the event of losses; 14. 12 U.S.C. § 1843(c)(8). (3) Purchase assets from or sell assets to the Partnerships; 15. See Norwest; Meridian. (4) Extend credit to the Partnerships; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • June 1996 statements is not required under Generally Accepted Ac- liabilities of the Partnerships with the financial statements counting Principles because BAM, while the only general of Bessemer for regulatory capital purposes.23 partner in the Partnerships, would own only a nominal investment in the Partnerships. Risk Management The Board does not believe that deduction of the nominal investment that Bessemer proposes to make in BAM In evaluating previous proposals to engage in trading activadequately addresses the risks of this proposal and the ities involving substantial risks, the Board has reviewed the potential exposure of Bessemer and BAM. BAM would risk management policies, procedures, systems and conserve as the sole general partner of the Partnerships and trols established or proposed by the applicant to ensure that would exercise exclusive control over the activities of the proposed trading activities could be conducted in a safe Partnerships. The Partnerships would be subsidiaries of and sound manner.24 Bessemer has not as yet established Bessemer for purposes of the BHC Act.20 In addition, the the risk management structure necessary to conduct the Partnerships would employ leverage to fund their activi- proposed activities, but has indicated that it would estabties. As general partner, BAM would be liable for all of the lish an appropriate risk management structure prior to liabilities of the Partnerships. The Partnerships, on the engaging in the proposed activities. This structure would other hand, would not be subject to any capital require- include investment and position limits for the Partnerships ments. and separate limits for each investment adviser. BAM Bessemer has stated that it would not provide financial would monitor compliance with trading limits through a support to BAM or the Partnerships in the event that the computer system that BAM would develop. The Board's Partnerships suffer losses. However, the Board does not action on this proposal is conditioned upon a future deterbelieve that Bessemer's commitments are an adequate sub- mination by the Board that Bessemer and BAM have stitute for capital in light of the significant pressure that the established computer, audit and accounting systems, interfailure of BAM and the Partnerships could have on the nal risk management controls, and an operational and reputation of Bessemer, which could give rise to unforesee- management infrastructure capable of monitoring and conable difficulties or motivate Bessemer to seek relief from trolling the risks inherent in the proposed activities.25 its commitments.21 These pressures could be particularly As part of the Board's evaluation of these factors, the acute in this case because Bessemer has stated that it Board considers the financial and managerial resources of expects that many of the investors in the Partnerships the notificant and its subsidiaries and the effect the transacwould be current customers of Bessemer's fiduciary busi- tion would have on such resources.26 Based on all the facts ness. In addition, capital requirements serve as an eco- of record, including the conditions described in this order, nomic constraint on the amount of leverage in a company the Board concludes that these financial and managerial and are therefore a sounder method of addressing potential considerations are consistent with approval of this notice. exposure than commitments that leave unlimited the The Board also expects that the conduct by Bessemer of amount of potential exposure a company may accept. The the proposed activities de novo would enhance market Board has adopted this approach in reviewing previous competition and provide greater convenience to Besseproposals to engage in similar activities.22 Based on a mer's customers. For the reasons discussed above, and in careful review of this case, the Board believes that it is reliance on commitments made by Bessemer and subject to appropriate in this case for Bessemer to consolidate the the conditions in this order, the Board concludes that the assets and liabilities of the Partnerships with the financial balance of public interest factors that the Board is required statements of Bessemer for regulatory capital purposes. Accordingly, the Board's action in this case is subject to the condition that Bessemer consolidate the assets and 23. Consolidation of the Partnerships could cause the investments of the limited partners to comprise a significant component of Bessemer's regulatory capital. However, the limited partners' investments (5) Purchase any limited partnership interests in the Partnerships. would not be available to absorb losses on the assets of most of 20. See 12 C.F.R. 225.2(n). Bessemer's operations. Contributions of the limited partners would 21. Bessemer's proposal to treat debts that are with recourse to only be available to absorb losses on the Partnerships' assets. Accord- BAM as guarantees for purposes of calculating Bessemer's consoli- ingly, in calculating its regulatory capital ratios, Bessemer must dedated risk-based capital ratios does not adequately address this con- duct the investments of the limited partners and a corresponding cern. Bessemer's proposal would permit unlimited growth of the amount of assets of the Partnerships from the numerator and denomi- Partnerships through nonrecourse debt without any increase in the nator, respectively, of Bessemer's consolidated capital ratios. This capital requirement of Bessemer. If the Partnerships were not able to capital treatment is appropriate whether or not the proposed investmeet their obligations on debt that is nonrecourse as to BAM, the ment vehicles would be leveraged. See Norwest at 1128 n.7. pressure on the reputation of Bessemer may not be materially different 24. See, e.g., Swiss Bank. from the pressure Bessemer would experience if BAM were not able 25. The Board believes that Bessemer must have in place approprito meet its obligations. In addition, Bessemer would not treat debts ate procedures to address potential conflicts of interest that may arise that are with recourse to BAM as guarantees for purposes of calculat- from the conduct of this activity. These procedures should include ing Bessemer's consolidated leverage ratio. The failure to include disclosures and a system, such as an oversight mechanism for investhese guarantees in the calculation of Bessemer's consolidated lever- tors to review specific conflicts of interest. age ratio would not adequately reflect the risks, other than the credit 26. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 risk, to which the Partnerships would be subject. Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 22. See e.g. Meridian. Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 573 to consider under section 4(c)(8) of the BHC Act is favor- BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of able. the Board's Regulation Y (12 C.F.R. 225.23) to acquire up On the basis of the foregoing and all the facts of record, to 80 percent of the voting shares of Mutual Money Investincluding the commitments furnished by Bessemer, the ments, Inc. (dba Tri-Star Financial), Houston, Texas Board has determined that the notice should be, and hereby ("Company"),1 and thereby engage through Company in is, approved, subject to all the terms and conditions of this the following nonbanking activities: order. The Board's approval of this proposal extends only (1) Providing securities brokerage services as permitted to activities conducted within the limitations of this order, under section 225.25(b)(15) of Regulation Y (12 C.F.R. including the Board's reservation of authority to establish 225.25(b)(15)); additional limitations to ensure that Bessemer's activities (2) Underwriting and dealing in government obligations are consistent with safety and soundness, conflicts of inter- and money market instruments ("bank-eligible securiests, and other relevant considerations under the BHC Act. ties") as permitted under section 225.25(b)(16) of Regu- Engaging in the proposed activities in any manner other lation Y (12 C.F.R. 225.25(b)(16)); than as approved in this order is not within the scope of the (3) Providing data processing services as permitted un- Board's approval and is not authorized for Bessemer. der section 225.25(b)(7) of Regulation Y (12 C.F.R. As stated above, the Board's action on this proposal is 225.25(b)(7)); and conditioned upon Bessemer and BAM establishing ade- (4) Purchasing and selling all types of securities on the quate controls and systems to manage and monitor the order of customers as a "riskless principal." risks associated with the proposed activities. On notification by the Board that this condition has been satisfied, Notice of this proposal, affording interested persons an Bessemer may immediately commence the proposed activ- opportunity to submit comments, has been published (61 ities. Federal Register 2832, 7520, and 10,581 (1996)). The time The Board's determination also is subject to all the terms for filing comments has expired, and the Board has considand conditions set forth in Regulation Y, including those in ered the proposal and all comments received in light of the sections 225.7 and 225.23(b), and to the Board's authority factors set forth in section 4(c)(8) of the BHC Act. to require modification or termination of the activities of a Woodforest, with total consolidated assets of approxibank holding company or any of its subsidiaries as the mately $271 million, is the 64th largest banking organiza- Board finds necessary to assure compliance with, and to tion in Texas and operates one subsidiary bank in the prevent evasion of, the provisions of the BHC Act, and the state.2 Company is, and will continue to be, a registered Board's regulations and orders issued thereunder. The broker-dealer with the Securities and Exchange Commis- Board's decision is specifically conditioned on compliance sion ("SEC"), and is a member of the National Associawith all of the commitments made by Bessemer in this tion of Securities Dealers, Inc. ("NASD"). Therefore, notice, including the commitments discussed in this order, Company is subject to the recordkeeping, reporting, fiduand the conditions set forth in this order and in the above- ciary standards of the Securities Exchange Act of 1934 noted Board regulations and orders. For purposes of this (15 U.S.C. § 78a et seq.), the SEC, and the NASD. action, these commitments and conditions are deemed to Section 4(c)(8) of the BHC Act provides that a bank be conditions imposed in writing by the Board in connec- holding company may, with Board approval, engage in any tion with its findings and decision, and, as such, may be activity that the Board determines to be "so closely related enforced in proceedings under applicable law. to banking or managing or controlling banks as to be a By order of the Board of Governors, effective April 24, proper incident thereto."3 As noted above, the proposed 1996. securities brokerage, underwriting and dealing in bankeligible securities, and data processing activities have been Voting for this action: Chairman Pro Tempore Greenspan and determined by regulation to be closely related to banking Governors Kelley, Lindsey, Phillips, and Yellen. for purposes of section 4(c)(8) of the BHC Act.4 Woodforest has committed that Company would conduct these JENNIFER J. JOHNSON activities in accordance with the limitations in Regula- Deputy Secretary of the Board tion Y and the Board's orders relating to these activities. Woodforest Bancshares, Inc. Houston, Texas Order Approving a Notice to Engage in 1. Woodforest initially would acquire approximately 33 percent of Securities-Related and Data Processing Activities the voting shares of Company and would have the option, exercisable over a five-year period commencing one year from the date of Woodforest Bancshares, Inc., Houston, Texas ("Woodfor- consummation of this transaction, to acquire additional voting shares to increase its ownership interest to 80 percent. est"), a bank holding company within the meaning of the 2. Asset data are as of December 31, 1995. Bank Holding Company Act ("BHC Act"), has filed a 3. 12 U.S.C. § 1843(c)(8). notice for the Board's approval under section 4(c)(8) of the 4. 12 C.F.R. 225.25(b)(15), (16), and (7). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • June 1996 Riskless Principal Activities Proper Incident to Banking Standard and Other Considerations "Riskless principal" is the term used in the securities business to refer to a transaction in which a broker-dealer, In order to approve this proposal, the Board must deterafter receiving an order from a customer to buy (or sell) a mine that the proposed activities are a proper incident to security, purchases (or sells) the security for its own ac- banking, that is, that the performance of the proposed count to offset a contemporaneous sale to (or purchase activities by Company "can reasonably be expected to from) the customer.5 "Riskless principal" transactions are produce benefits to the public, such as greater convenience, understood in the industry to include only transactions in increased competition, or gains in efficiency, that outweigh the secondary market. Thus, Company would not act as a possible adverse effects, such as undue concentration of "riskless principal" in selling securities on the order of a resources, decreased or unfair competition, conflicts of customer that is the issuer of the securities to be sold or in interests, or unsound banking practices."9 any transaction in which Company has a contractual agree- As part of its evaluation of these factors, the Board ment to place the securities as agent of the issuer. Company considers the financial and managerial resources of the also would not act as a "riskless principal" in any transac- notificant, its subsidiaries, and the company to be acquired, tion involving a security for which it makes a market. and the effect the transaction would have on those resourc- The Board has determined by order that, subject to a es.10 Based on all the facts of record, the Board concludes number of prudential limitations that address the potential that financial and managerial considerations are consistent for conflicts of interests, unsound banking practices, or with approval of this notice.11 other adverse effects, the proposed "riskless principal" The Board expects that the entry of Company into the activities are closely related to banking within the meaning market for the proposed services would provide added of section 4(c)(8) of the BHC Act.6 The Board also has convenience to Woodforest's customers and would indetermined that purchasing and selling securities on the crease the level of competition among existing providers of order of investors as a "riskless principal" does not consti- those services. For the reasons discussed above, and in tute underwriting or dealing in securities for purposes of reliance on all the commitments made in connection with section 20 of the Glass-Steagall Act (12 U.S.C. § 377), and this notice and the conditions discussed in this order, the that revenue derived from this activity is not subject to the Board believes that the proposal is not likely to result in 10-percent revenue limitation on underwriting and dealing decreased or unfair competition, conflicts of interests, unin securities that banks are not authorized to underwrite sound banking practices, undue concentration of resources, and deal in directly ("bank-ineligible securities").7 or other adverse effects not outweighed by the public Woodforest has committed that Company will conduct benefits. Accordingly, the Board has determined that the its "riskless principal" activities using the same methods performance of the proposed activities by Company can and procedures, and subject to the same prudential limita- reasonably be expected to produce public benefits that tions, as those established by the Board in Bankers Trust outweigh possible adverse effects under the proper incident and J.P. Morgan,8 including the comprehensive framework to banking standard of section 4(c)(8) of the BHC Act. of restrictions imposed by the Board in connection with underwriting and dealing in securities, which were designed to avoid potential conflicts of interests, unsound banking practices, and other adverse effects. 5. See SEC Rule 10b-10. 17 C.F.R. 249.10b-10(a)(8)(i). 9. 12 U.S.C. § 1843(c)(8). 6. See J.P. Morgan & Company Incorporated, 76 Federal Reserve 10. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Bulletin 26 (1990) ("J.P. Morgan")-, Bankers Trust New York Corpo- Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). Federal Reserve Bulletin 155 (1987). 1. See Bankers Trust at 831-833. 11. The Board previously has expressed concern that joint ventures 8. Among the prudential limitations detailed more fully in Bankers might lead to a matrix of relationships between co-venturers that Trust and J.P. Morgan are that Company will maintain specific records could break down the legally mandated separation of banking and that will clearly identify all "riskless principal" transactions, and that commerce. See, e.g., The Mayhaco Company and Equitable Bancor- Company will not engage in any "riskless principal" transactions for poration, 69 Federal Reserve Bulletin 375 (1983). The Board has any securities carried in its inventory. When acting as a "riskless stated that this concern is particularly acute where the joint venture principal," Company will engage only in transactions in the secondary involves a relationship between a bank holding company and a securimarket, and not on the order of a customer that is the issuer of the ties firm, and the potential exists for the mingling of permissible and securities to be sold, and will not act as "riskless principal" in any impermissible securities activities. See Amsterdam-Rotterdam Bank, transaction involving a security for which it makes a market, or hold N.V., 70 Federal Reserve Bulletin 835; The Chuo Trust and Banking itself out as making a market in the securities that it buys and sells as a Company, Limited, 78 Federal Reser\'e Bulletin 446 (1992). In this "riskless principal." Moreover, Company will not engage in "riskless case, Company engages only in securities and other nonbanking principal" transactions on behalf of any foreign affiliates that engage activities that are permissible for bank holding companies under in securities dealing activities outside the United States, and will not section 4(c)(8) of the BHC Act. Moreover, Woodforest would engage act as "riskless principal" for registered investment company securi- through Company in the proposed activities in a manner consistent ties. In addition, Company will not act as a "riskless principal" with with previously approved joint venture proposals, and has made a respect to any securities of investment companies that are advised by number of commitments similar to those the Board has relied on in Woodforest or any of its affiliates. prior joint venture cases. See Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 575 Conclusion Company or a co-venturer or its affiliates in determining whether to extend credit to that borrower. Based on all the facts of record, including the commit- (4) Company will observe the anti-tying provisions of the ments made by Woodforest, the Board has determined to, Bank Holding Company Act Amendments of 1970 and the and hereby does, approve this notice subject to all the anti-tying provisions of the Board's Regulation Y, as terms and conditions set forth in this order and in the amended, including the tying restrictions set forth in section regulations and orders referred to above that relate to the 225.7 (12 C.F.R. 225.7). Company will be treated as an proposed activities. The Board's approval is specifically affiliate for purposes of sections 23A and 23B of the Federal conditioned on compliance with all the commitments made Reserve Act and as a subsidiary of a bank holding company in connection with this proposal and the conditions re- within the meaning of the BHC Act (12 U.S.C. § 1841(d)). ferred to in this order. The Board's determination also is subject to all the terms and conditions set forth in the Orders Issued Under Sections 3 and 4 of the Bank Board's Regulation Y, including those in sections 225.7 Holding Company Act and 225.23(g) (12 C.F.R. 225.7 and 225.23(g)), and to the Board's authority to require such modification or termina- First Hawaiian, Inc. tion of the activities of a bank holding company or any of Honolulu, Hawaii its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the provisions Application to Establish Bank and Notice to Engage in of the BHC Act and the Board's regulations and orders Nonbanking Activity issued thereunder. These commitments and conditions shall be deemed to be conditions imposed in writing by the First Hawaiian, Inc., Honolulu, Hawaii ("First Hawai- Board in connection with its findings and decision, and, as ian"), a bank holding company within the meaning of the such, may be enforced in proceedings under applicable Bank Holding Company Act ("BHC Act"), has applied for law. the Board's approval under section 3 of the BHC Act This transaction shall not be consummated later than (12 U.S.C. § 1842) to establish a de novo bank, Pacific One three months after the effective date of this order, unless Bank, Portland, Oregon ("Oregon Bank").1 First Hawaiian such period is extended for good cause by the Board or by also has requested approval under section 4(c)(8) of the the Federal Reserve Bank of Dallas, acting pursuant to BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of delegated authority. the Board's Regulation Y (12 C.F.R. 225.23) of its notice By order of the Board of Governors, effective April 8, for its savings association subsidiary, Pioneer Federal Sav- 1996. ings Bank, Honolulu, Hawaii ("Pioneer") to acquire five branches of U.S. Bancorp, Portland, Oregon ("USB"), in Voting for this action: Chairman Pro Tempore Greenspan and Washington.2 Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- Notice of the proposal, affording interested persons an nor Lindsey. opportunity to submit comments, has been published (61 Federal Register 725 and 11,009 (1996)). The time for JENNIFER J. JOHNSON filing comments has expired, and the Board has considered Deputy Secretary of the Board the applications and notice and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Appendix Act. (1) Company will not engage in any additional activities without Woodforest's knowledge and consent, as well as prior authorization from the Federal Reserve System. If it is 1. First Hawaiian, through Oregon Bank, would acquire 26 branches determined that Company engages in any securities activity in Oregon and one branch in Idaho from bank and thrift subsidiaries of that is impermissible for a state member bank under the U.S. Bancorp, Portland, Oregon ("USB"). USB would sell these Glass-Steagall Act or any activities that are impermissible branches as part of its divestiture commitments in connection with its for bank holding companies under the BHC Act, Woodfor- acquisition of West One Bancorp, Boise, Idaho. See U.S. Bancorp, 82 Federal Reserve Bulletin 176 (1996) ("USB Order"). First Hawaiian est will cause Company to terminate such impermissible would acquire the Idaho branch by acquiring Idaho First Bank, Boise, activities or Woodforest will terminate its interest in Com- Idaho ("Idaho Bank"), from USB and immediately selling all the pany. bank's assets to another USB subsidiary bank. Idaho Bank then would (2) Woodforest will not solicit business on behalf of any acquire USB's Weiser, Idaho, branch and immediately merge with and into Oregon Bank. First Hawaiian has applied for the Board's apco-venturer or its affiliates (other than Company). proval under section 3 of the BHC Act to acquire Idaho Bank. (3) Woodforest and its subsidiaries will act at all times on an 2. Pioneer would acquire four branches currently operated by subarm's-length basis in deciding whether to extend credit to sidiary banks of USB and the physical facilities of a fifth branch in Company, any co-venturer or its affiliates, or competitors of Kennewick, Washington, where Pioneer would establish a de novo branch. The four full branches would be sold by USB as part of USB's Company or any co-venturer or its affiliates, and Woodfordivestiture commitments in Washington described in the USB Order. est and its banking subsidiaries will not take into account This acquisition is subject to the approval of Pioneer's primary federal the fact that a potential borrower could be a competitor of supervisor, the Office of Thrift Supervision ("OTS"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • June 1996 First Hawaiian, with total consolidated assets of approx- branches interstate and has concluded that such operation imately $7.4 billion, operates two banks and one savings is permitted under the existing branch authorization for association in Hawaii.3 First Hawaiian is the second largest federal savings associations and is consistent with the insured depository organization in Hawaii, controlling ap- regulatory framework applicable to savings associations proximately $4.8 billion in deposits, representing 27.8 per- under the BHC Act.6 cent of all deposits in insured depository organizations in the state ("state deposits"). After consummation of this Competitive and Other Considerations proposal, First Hawaiian would become the seventh largest insured depository organization in Oregon, controlling First Hawaiian currently does not operate an insured deposapproximately $541 million in deposits, representing itory institution in Oregon, Idaho, or Washington. Based on 2.1 percent of state deposits in Oregon. First Hawaiian also all the facts of record, the Board concludes that this prowould become the 15th largest insured depository organi- posal would not have an adverse effect on competition or zation in Idaho, controlling approximately $48 million in the concentration of banking resources in any relevant deposits, representing less than 1 percent of Idaho state banking market. The Board also has determined, in light of deposits, and the 46th largest insured depository institution all the facts of record, that the financial and managerial in Washington, controlling approximately $124 million in resources and the future prospects of First Hawaiian and its deposits, representing less than 1 percent of state deposits subsidiaries are consistent with approval, as are the other in Washington. supervisory factors the Board must consider under section 3 of the BHC Act.7 Interstate Analysis Convenience and Needs Considerations Section 3(d) of the BHC Act, as amended by section 101 of the Riegle-Neal Interstate Banking and Branching Effi- In acting on an application under section 3 of the BHC Act, ciency Act of 1994, allows the Board to approve an appli- the Board must consider the convenience and needs of the cation by a bank holding company to acquire control of a communities to be served and take into account the records bank located in a state other than the home state of such of the relevant depository institutions under the Commubank holding company, if certain conditions are met. For nity Reinvestment Act (12 U.S.C. § 2901 et seq.) purposes of the BHC Act, the home state of First Hawaiian ("CRA").8 The CRA requires the federal financial superviis Hawaii.4 As noted above, First Hawaiian, in the course of this transaction, would establish a de novo bank in Oregon and acquire a bank in Idaho. The conditions enu- 6. Section 4(c)(8) of the BHC Act and the Board's regulations do merated in section 3(d) for an interstate acquisition are met not prohibit the operation of interstate branches by a savings association owned by a bank holding company. See BankAmerica Corporain this case.5 In view of all the facts of record, the Board is tion, 78 Federal Reserve Bulletin 707 (1992). Section 5(r) of the permitted to approve this proposal under section 3(d) of the Home Owners Loan Act of 1933, enacted by the Garn-St. Germain BHC Act. Depository Institutions Act of 1982, permits a federal savings associa- As part of this transaction, Pioneer, which is a federal tion to operate branches outside the association's home state if the law of the host state would permit the branch to be established by a savings bank owned by First Hawaiian, would acquire five savings association chartered by the state where the home office of the branches of USB in Washington. The Board previously has federal savings association is located. 12 U.S.C. § 1464(r)(2)(C); see considered a proposal by a federal savings bank to operate also 57 Federal Register 12,206 n.12 (1992). The OTS has indicated that Pioneer's proposed Washington branches satisfy this test, and the OTS has approved Pioneer's application to establish a de novo branch and is considering Pioneer's application to acquire the other proposed 3. Asset data are as of September 30, 1995. Deposit data are as of branches in Washington. In addition, the Washington banking supervi- June 30, 1995. sor has advised the Board informally that this transaction is not 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding prohibited under state law. company's home state is the state in which the operations of the bank 7. A commenter asserted that First Hawaiian failed to divest certain holding company's banking subsidiaries were principally conducted branches as required by the Board and the Department of Justice on July 1, 1966, or the date on which the company became a bank ("DOJ") in connection with First Hawaiian's acquisition of First holding company, whichever is later. Interstate Bank of Hawaii, Honolulu, Hawaii. See First Hawaiian, 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Inc., 77 Federal Reserve Bulletin 52 (1991). This divestiture was First Hawaiian is adequately capitalized and adequately managed. All subject to court supervision. On March 5, 1996, the U.S. District Court banks from which Oregon Bank would acquire branches have been in for Hawaii, with the agreement of the DOJ, permitted First Hawaiian existence and have continuously operated for more than five years, to divest the three remaining branches to a finance company. The and the Oregon and Idaho banking supervisors have determined that Board also permitted First Hawaiian to modify its original divestiture Oregon Bank and Idaho Bank, respectively, would satisfy the mini- proposal to the extent necessary to comply with the district court's mum charter age requirements under applicable Oregon and Idaho orders. See Board letters dated May 1, 1991, and March 14, 1996, to law. In addition, on consummation of this proposal, First Hawaiian Lee Meyerson, Esq., and Howard Karr, respectively. First Hawaiian and its affiliates would control less than 10 percent of the total amount has completed its divestitures consistent with these proceedings. of deposits of insured depository institutions in the United States, and 8. The Board previously has determined that the CRA by its terms less than 30 percent of the total amount of deposits of insured generally does not apply to applications by bank holding companies to depository institutions in Oregon or Idaho. All other requirements of acquire nonbanking companies under section 4(c)(8) of the BHC Act. section 3(d) of the BHC Act also would be met on consummation of See The Mitsui Bank, Ltd., 76 Federal Reserve Bulletin 381 (1990). this proposal. The Board also has stated that, unlike other companies that may be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 577 sory agencies to encourage financial institutions to help Federal Deposit Insurance Corporation ("FDIC"), in its meet the credit needs of the local communities in which most recent examination for CRA performance, as of they operate, consistent with their safe and sound opera- March 1995 ("Hawaiian Bank Examination"). First tion. To accomplish this end, the CRA requires the appro- Hawaiian Creditcorp, Inc., Honolulu, Hawaii ("Creditpriate federal supervisory authority to "assess the institu- corp"), also received a CRA performance rating of "outtion's record of meeting the credit needs of its entire standing" from the FDIC in its most recent examination community, including low- and moderate-income neigh- for CRA performance as of May 1994, and Pioneer reborhoods, consistent with the safe and sound operations of ceived a CRA performance rating of "satisfactory" from such institution," and to take that record into account in the its primary federal supervisor, the OTS, in its most recent evaluation of bank expansion proposals.9 examination for CRA performance as of October 1995.13 The Board received comments from the Nation of Hawaii ("Protestant") generally alleging that First Hawai- B. HMD A Data and Lending Activities ian's lead subsidiary bank, First Hawaiian Bank, Honolulu, Hawaii ("Hawaiian Bank"), has failed to help meet the The Board has carefully reviewed data collected under the credit needs of low- and moderate-income ("LMI") resi- Home Mortgage Disclosure Act ("HMDA") for Hawaiian dents, and in particular, illegally discriminates in its lend- Bank, Pioneer, and Creditcorp during 1993 and 1994, in ing practices against Filipinos and native Hawaiians in the light of Protestant's allegations regarding Hawaiian Bank's Honolulu MSA.10 Protestant also contends that Hawaiian record of housing-related lending to LMI and minority Bank's marketing and efforts to reach Filipinos and native individuals. These data indicate that First Hawaiian is Hawaiians are inadequate. making efforts to help meet the credit needs of residents of The Board has carefully reviewed the CRA performance predominately Filipino and native Hawaiian areas and LMI records of the insured depository institutions controlled by areas in the Honolulu MSA. For example, in 26 census First Hawaiian, particularly the relevant reports of exami- tracts in the Honolulu MSA with majority Filipino or nation of CRA performance. The Board also has carefully native Hawaiian residents, which represent 15.2 percent of considered the comments received, First Hawaiian's re- the total population in the Honolulu MSA,14 Hawaiian sponses, and all other relevant facts of record in light of the Bank increased the percentage of its HMDA-reported loan CRA, the Board's regulations, and the Statement of the originations from 7.1 percent in 1992 to 12.1 percent in Federal Financial Supervisory Agencies Regarding the 1994. All of First Hawaiian's subsidiaries increased the Community Reinvestment Act ("Agency CRA State- percentage of their HMDA-reported loan originations in ment").11 these census tracts from 7.7 percent in 1992 to 13 percent in 1994.15 A. CRA Performance Evaluations of First Hawaiian In 49 LMI census tracts in the Honolulu MSA, representing 24.8 percent of the total population in the Honolulu The Agency CRA Statement provides that a CRA examina- MSA, Hawaiian Bank increased the percentage of its tion is an important and often controlling factor in the HMDA-reported loan originations from 7.7 percent in 1992 consideration of an institution's CRA record and that re- to 8.5 percent in 1994, and all First Hawaiian subsidiaries ports of these examinations will be given great weight in originated 10.2 percent of their HMDA-reported loans in the applications process.12 Hawaiian Bank, which controls LMI census tracts in both 1992 and 1994. First Hawaiian approximately 84 percent of the total consolidated assets of also increased the percentage of loan applications from First Hawaiian, received a CRA performance rating of LMI census tracts for which it originated loans from ap- "outstanding" from its primary federal supervisor, the proximately 65 percent in 1993 to approximately 79 percent in 1994. The Board also has carefully considered Protestant's acquired by bank holding companies under section 4(c)(8) of the BHC allegations of disparities in the rate of loan applications, Act, savings associations are depository institutions, as that term is originations, and denials in three census tracts in light of all defined in the CRA, and thus acquisitions of savings associations are the facts of record. The Board recognizes, however, that subject to review under the express terms of the CRA. See Norwest Corporation, 76 Federal Reserve Bulletin 873 (1990). 9. 12 U.S.C. § 2903. 10. Protestant provided data that compare Hawaiian Bank's record 13. All of USB's subsidiary banks involved in the sale of branches of providing home mortgage originations and refinancings from 1988 to First Hawaiian received "satisfactory" or "outstanding" CRA to 1994 in three census tracts in the Honolulu MSA with the highest performance ratings from their primary federal supervisors in their percentage Filipino or native Hawaiian population to the three census most recent examinations. tracts in the Honolulu MSA with the highest percentage Japanese or 14. Filipino and native Hawaiian populations were identified on the nonminority population. Protestant also provided 1993 and 1994 data basis of 1990 U.S. census data. These data, like the data provided by on loan applications, originations, and denials by Hawaiian Bank and the Protestant, focuses on loans to residents of these census tracts. all of First Hawaiian's subsidiaries in the three census tracts with the Under HMDA, loans made to Filipinos or native Hawaiians are highest percentage Filipino and native Hawaiian population and re- included in the category of Asian/Pacific Islander for reporting purported anecdotally that Hawaiian Bank's record of lending on native poses. Hawaiian homelands is inadequate. 15. This exceeds the percentage of HMDA-reported loan origina- 11. 54 Federal Register 13,742 (1989). tions for lenders in the aggregate in these census tracts during the 12. Id. at 13,745. same period which increased from 8.7 percent to 11.7 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Federal Reserve Bulletin • June 1996 HMDA data alone provide an incomplete measure of an Loan Program, first time home buyers may qualify for institution's lending in its community. The Board also reduced loan fees and easier qualifying guidelines for recognizes that HMDA data have limitations that make the adjustable rate mortgages. Hawaiian Bank has agreed to data an inadequate basis, absent other information, for provide financing for up to 70 single family homes on concluding that an institution has engaged in illegal dis- Oahu Island being constructed by first time home buyers, crimination in making lending decisions. and made eight loans under this program in 1994. Also in The Board has carefully reviewed Protestant's allega- 1994, in light of certain legal restrictions applicable to tions in light of information from the FDIC and the OTS, lending to residents residing on native Hawaiian home the primary supervisors of First Hawaiian's depository lands, Hawaiian Bank established home improvement and subsidiaries. The most recent examinations of these institu- downpayment loan programs in conjunction with the Detions found no practices that were intended to discourage partment of Hawaiian Homelands ("DHHL") and Office of credit applications, nor were there any findings of prohib- Hawaiian Affairs ("OHA") to assist in meeting the credit ited discrimination or illegal credit practices. All institu- needs of these residents.18 Moreover, Hawaiian Bank has a tions also were found to be in compliance with applicable second review program for all denied real estate loans to fair lending laws and regulations. In addition, in connec- determine if the application could be approved using addition with the Hawaiian Bank Examination, an analysis was tional information or, if not, whether the reasons for denial conducted of HMDA-reported loans in 36 census tracts are correct. located throughout Hawaii, representing 14 percent of all Hawaiian Bank also participates in many governmentcensus tracts in the state with majority Filipino or native supported loan programs. Under the Hawaii Small Busi- Hawaiian populations, based on 1990 U.S. census data. ness Loan Program, Hawaiian Bank and seven other finan- This analysis indicated a reasonable loan penetration in cial institutions participate with the state and the Small these census tracts and showed no evidence that Filipinos Business Administration ("SBA") to offer SBA loans in or native Hawaiians were subjected to disparate treatment. amounts up to $50,000. The bank also participates in Hawaiian Bank participates in a number of housing- SBA's Low Doc Program to reduce paperwork for small related financing programs designed to assist in meeting business loans in amounts up to $100,000.19 Federal Housthe housing needs of LMI individuals. For example, the ing Administration and Farmers Home Administration bank makes loans and equity investments in affordable Guaranteed Housing loans, offering 100 percent financing rental projects. Examiners noted that as of March 1995 for low- and moderate-income homes in rural areas, also Hawaiian Bank had funded three projects totalling are offered. $22.1 million for the construction of 235 rental units.16 The bank also actively supports the Hawaii Community Rein- C. Other Aspects of Hawaiian Bank's CRA vestment Corporation ("HCRC"), which manages a Performance $50 million revolving loan fund, funded by 18 financial institutions, to finance rental housing projects for LMI The Hawaiian Bank Examination found that the bank had tenants. Hawaiian Bank's commitment to this loan fund is effective methods of ascertaining the credit needs of its $11.9 million, which is 23.8 percent of the fund. During delineated community and creating products and services the period covered by the Hawaiian Bank Examination, the to assist in meeting those needs. Examiners also noted that bank funded $10.4 million for 14 loans through this pro- Hawaiian Bank engaged in extensive officer calling efforts gram. In addition to its commitment to the fund, Hawaiian directed to community organizations and public officials as Bank participated with eight other HCRC lenders in the well as business organizations and financial intermediaries. purchase of more than $18 million of loans from the In addition, demographic data related to mortgage lending, program to increase the loan fund's lending capacity.17 lending patterns by geographic areas, and loan denial ratios The Hawaiian Bank Examination also found that the for various ethnic groups are reviewed. Examiners found bank had implemented flexible lending criteria in its housing-related lending programs. For example, lending 18. The Hawaiian Homes Commission Act, 1920, 42 Stat. 108 guidelines for home mortgage loans have been modified to (1921), which was adopted as part of the Hawaii Constitution (Haw. allow applicants to use utility bills and rent payments to Const. Art. XII, et seq.), set aside certain areas designated as Hawaiestablish a credit history and to treat nontaxable income as ian home lands to be held in trust by the Hawaiian Homes Commisequivalent taxable income. Under the Affordable Home sion ("Commission") for occupation and use by native Hawaiians during their lifetimes. Lenders do not make conventional housingrelated loans in these areas because the native Hawaiian tenants can only mortgage or pledge their tenancy interest in their homes, subject 16. During the second quarter of 1995, the bank executed a subscrip- to approval by the Commission. Through OHA, Hawaiian Bank has tion of $5.5 million in the Hawaii Affordable Housing Fund I. This made 24 loans totalling $690,000 for home improvements. DHHL fund, with total subscriptions of $19.7 million from 11 financial guarantees the loans in event of default. Hawaiian Bank continues to institutions, invests in low-income rental housing projects qualifying work with state officials to develop additional loan programs for for low-income housing tax credits. Hawaiian home lands and to offer its downpayment loan program, 17. At the end of 1995, the bank had $3.7 million of loans outstand- which has not yet originated any loans. ing in the loan fund, and had committed $5.5 million to a second 19. Hawaiian Bank also offers Equity First Line of Credit, which revolving loan fund, managed by a subsidiary of HCRC, to finance provides small businesses with a line of credit as low as $10,000 that low-income rental housing projects. is secured by real property and may be drawn upon by check. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 579 that the bank's marketing was designed to reach all seg- Nonbanking Activities ments of its delineated community. Products and services were advertised in multi-lingual media to reach ethnic First Hawaiian also has requested Board approval under groups, including advertisements in Hawaiian, Filipino, section 4(c)(8) of the BHC Act to permit Pioneer to acquire Japanese, Korean, Vietnamese, and Chinese. The bank has five branches in Washington. The Board has determined also conducted a survey of the credit needs of native that the operation of a savings association is closely related Hawaiian home land residents. The bank's strategic plan, to banking and permissible for bank holding companies.22 which includes goals and objectives for product develop- In making this determination, the Board requires that savment and marketing under the CRA, is reviewed quarterly. ings associations acquired by bank holding companies Hawaiian Bank also has provided a grant to support conform their direct and indirect activities to those permis- Nanakuli Neighborhood Housing Services, Inc., which of- sible for bank holding companies under section 4 of the fers a home buyer education and credit management pro- BHC Act. First Hawaiian has committed to conform all gram for residents of one of the census tracts in Hawaii activities of the branches that Pioneer proposes to acquire with the highest proportion of native Hawaiian and Fili- to the requirements of section 4 of the BHC Act and pino residents. Directors of the bank are members of sev- Regulation Y. eral organizations designed to develop and rehabilitate the The Board finds that consummation of this proposal is community, including Habitat for Humanity, the Hawaii not likely to result in any significantly adverse effects, such Island Economic Development Board, and the Economic as undue concentration of resources, decreased or unfair Development Corporation of Honolulu. competition, conflicts of interest, or unsound banking practices that are not likely to be outweighed by the public D. Conclusion Regarding Convenience and Needs benefits, such as increased competition and added convenience, that are expected from this proposal. As part of the The Board has carefully considered all the facts of record, Board's evaluation of these factors, the Board considers including Protestant's comments, in reviewing the conve- the financial and managerial resources of the notificant and nience and needs factor under the BHC Act.20 Based on a its subsidiaries and the effect the transaction would have on review of First Hawaiian's entire record of performance, such resources.23 The Board also concludes in light of all including information submitted by First Hawaiian and the facts of record that the balance of public interest factors Protestant, the Board concludes that First Hawaiian's it must consider under section 4(c)(8) of the BHC Act is record of performance in helping to meet the credit needs favorable and consistent with approval of the application. of its community, including LMI neighborhoods, is consistent with approval of this proposal.21 Conclusion Based on the foregoing and all other facts of record, 20. Protestant has requested that the Board postpone consideration including all the commitments made by First Hawaiian in of this proposal to permit additional time to discuss the alleged connection with this proposal, the Board has determined adverse effect of this proposal on Protestant's constituency and LMI that the applications and notice should be, and hereby are, areas to be served by First Hawaiian. The Board is required under approved.24 The Board's approval is expressly conditioned applicable law and its processing procedures to act on applications submitted under the BHC Act within specified time periods. The on compliance by First Hawaiian with all the commitments Board notes, moreover, that Protestant and First Hawaiian have had ample opportunity to submit information for the record and have, in fact, submitted substantial materials. As discussed above, the Board record. Protestant has had ample opportunity to submit its views and has carefully reviewed the record in this case, including information has, in fact, submitted substantial materials that have been considered provided by Protestant and First Hawaiian about its CRA performance by the Board in acting on the applications and notice. Protestant does since the most recent performance examinations of its insured deposi- not indicate what, if any, additional views would be expressed at a tory subsidiaries and information relating to the possible effects of this public meeting or hearing, or why Protestant's written submission transaction on the convenience and needs of the communities to be does not adequately present its views. Based on all the facts of record, served. Based on all the facts of record, the Board concludes that the the Board has determined that public or private hearings or meetings record is sufficient to act on this proposal at this time, and that in Hawaii are not necessary to clarify the factual record or otherwise postponement of the Board's consideration is not warranted. warranted in this case, and, accordingly, the requests for public 21. Protestant requested that the Board hold public and private hearings or meetings on the application are denied. meetings in Hawaii, to permit numerous members of the public, 22. See 12 C.F.R. 225.25(b)(9). including native Hawaiian elders who traditionally address commu- 23. See 12 C.F.R. 225.24. nity matters orally, to comment on this proposal. Section 3(b) of the 24. Protestant also alleged that First Hawaiian does not have a BHC Act does not require the Board to hold a public hearing or sufficient number of Filipinos and native Hawaiians in senior managemeeting on an application unless the appropriate supervisory authority ment positions. First Hawaiian has indicated that 69 employees identifor the bank to be acquired makes a timely written recommendation of fying themselves as Filipino and 60 employees identifying themselves denial of the application. In this case, neither the FDIC nor any as having native Hawaiian ancestry occupy executive, managerial, appropriate state supervisory authority has recommended denial. and professional positions in its three depository institution subsidiar- Under the Board's rules, the Board may, in its discretion, hold a ies. public hearing or meeting on an application to clarify factual issues The Board also notes that First Hawaiian, because it employs more related to the application and to provide an opportunity for testimony, than 50 people, serves as a depository of government funds, and acts if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Board has as an agent in selling or redeeming U.S. savings bonds and notes, is carefully considered Protestant's request in light of all the facts of required by regulations of the Department of Labor to: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • June 1996 made by First Hawaiian in connection with this proposal sota.1 Norwest also has requested Board approval under and with the conditions referred to in this order. The section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) Board's determination on the proposed nonbanking activi- and section 225.23 of the Board's Regulation Y (12 C.F.R. ties also are subject to all the conditions set forth in 225.23) for its wholly owned subsidiary, Norwest Invest- Regulation Y, including those in sections 225.7 and ment Services, Inc., Minneapolis, Minnesota, to acquire 225.23(g) of Regulation Y, and to the Board's authority to the brokerage business of AmeriBank and thereby engage require such modification or termination of the activities of in full-service brokerage activities in conformance with a bank holding company or any of its subsidiaries as the section 225.25(b)(15) of Regulation Y (12 C.F.R. Board finds necessary to ensure compliance with, or to 225.25(b)(15)) and to act as agent in the sale of insurance prevent evasions of, the provisions of the BHC Act and the and annuities pursuant to section 4(c)(8)(G) of the BHC Board's regulations and orders issued thereunder. These Act and section 225.25(b)(8)(vii) of Regulation Y commitments and conditions shall be deemed to be condi- (12 C.F.R. 225.25(b)(8)(vii)). tions imposed in writing by the Board in connection with Notice of the proposal, affording interested persons an its findings and decisions, and, as such, may be enforced in opportunity to submit comments, has been published (61 proceedings under applicable law. Federal Register 3713 and 6376 (1996)). The time for The acquisition of Oregon Bank and Idaho Bank shall filing comments has expired, and the Board has considered not be consummated before the fifteenth calendar day the application and notice and all comments received in following the effective date of this order, and the banking light of the factors set forth in sections 3 and 4 of the BHC and nonbanking transactions shall not be consummated Act. later than three months after the effective date of this order, Norwest, with total consolidated assets of $72.1 billion, unless such period is extended for good cause by the Board operates subsidiary banks in Minnesota and fourteen other or by the Federal Reserve Bank of San Francisco, acting states.2 Norwest is the largest commercial banking organipursuant to delegated authority. zation in Minnesota, controlling approximately $10.3 bil- By order of the Board of Governors, effective April 8, lion in deposits, representing approximately 22.6 percent 1996. of the deposits in commercial banks in the state.3 Ameri- Group, with total consolidated assets of $160.4 million, is Voting for this action: Chairman Pro Tempore Greenspan, and the 39th largest commercial banking organization in the Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- state, controlling approximately $123.6 million in deposits, nor Lindsey. representing less than 1 percent of the deposits in commercial banking organizations in the state. On consummation JENNIFER J. JOHNSON of the proposal, Norwest would control approximately Deputy Secretary of the Board $10.5 billion in deposits, representing approximately 22.9 percent of the total deposits in commercial banks in Norwest Corporation the state. Minneapolis, Minnesota Competitive Considerations Order Approving Acquisition of a Bank Holding Company and Notice to Engage in Nonbanking Activities Under section 3(c) of the BHC Act, the Board may not approve a bank acquisition that would result in a monopoly Norwest Corporation, Minneapolis, Minnesota ("Noror further any combination or conspiracy to monopolize or west"), a bank holding company within the meaning of the attempt to monopolize the business of banking in any part Bank Holding Company Act ("BHC Act"), has requested of the United States.4 In addition, the Board may not Board approval under section 3 of the BHC Act approve a bank acquisition "whose effect in any section of (12 U.S.C. § 1842) to acquire all the voting shares of the country may be substantially to lessen competition, or AmeriGroup, Incorporated, Minnetonka, Minnesota tend to create a monopoly, or which in any other manner ("AmeriGroup"), and thereby indirectly acquire its wholly would be in restraint of trade," unless the Board finds that owned subsidiary bank, AmeriBank, Bloomington, Minne- "the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and (1) File annual reports with the Equal Employment Opportunity Commission ("EEOC"); and (2) Have in place a written affirmative action compliance program which states efforts and plans to achieve equal opportunity in the 1. Norwest proposes to merge AmeriBank with and into Norwest employment, hiring, promotion, and separation of personnel. Bank Minnesota, National Association, Minneapolis, Minnesota See 41 C.F.R. 60-1.7(a), 60-1.40. Pursuant to regulations of the ("Norwest Bank"), shortly after consummation of the proposal. This Department of Labor, First Hawaiian, as the parent company, is transaction is subject to the approval of the Office of the Comptroller required to file an annual report with the EEOC covering all employ- of the Currency ("OCC") under the Bank Merger Act (12 U.S.C. ees in its entire corporate structure. The EEOC has jurisdiction for § 1828(c)). determining whether companies are in compliance with the equal 2. Asset data are as of December 31, 1995. employment statutes. The Board is not aware of any finding or 3. State deposit and ranking data are as of June 30, 1995. adjudication of illegal employment practices by First Hawaiian. 4. 12 U.S.C. § 1842(c)(1)(A). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 581 needs of the community to be served."5 In evaluating the more than 35 percent of the workers that reside in the competitive factors in this case, the Board has carefully market's outlying counties (St. Croix County, Wisconsin, considered comments submitted by Independent Commu- and Carver, Chisago, Scott, Sherburne and Wright Counnity Bankers of Minnesota, Eagan, Minnesota ("Protes- ties, Minnesota) commute to work in one of the market's tant"), which maintain that consummation of the proposal five central counties (Hennepin, Anoka, Dakota, Ramsey would have significantly adverse effects on competition for and Washington Counties, Minnesota).10 Based on these banking services in the Minneapolis-St. Paul, Minnesota, and other facts of record, the Board concludes that the area.6 Minneapolis-St. Paul banking market is the relevant bank- Norwest and AmeriGroup compete directly in the ing market for assessing the competitive effects of the Minneapolis-St. Paul banking market.7 For the reasons proposal. explained in previous orders, the Board has found that the Norwest is the second largest commercial bank or thrift relevant banking market must reflect commercial and bank- institution ("depository institution") in the market, controling realities and must consist of the local area where ling deposits of $7.4 billion, representing 27.6 percent of customers practicably can turn for alternatives.8 The total deposits in depository institutions in the market Minneapolis-St. Paul banking market is based on the ("market deposits").11 AmeriGroup is the 25th largest Minneapolis-St. Paul Ranally Metro Area ("RMA"). An depository institution in the market, controlling deposits of RMA usually designates a defined geographic locality that $123.6 million, representing less than one percent of maris demographically and commercially integrated, and ket deposits. On consummation of the proposal, Norwest RMAs have been found by the Board to be useful as guides would remain the second largest depository institution in in defining relevant geographic banking markets.9 In addi- the market, controlling deposits of $7.5 billion, representtion, 1990 data from the U.S. Census Bureau indicate that ing 28.1 percent of market deposits. The Herfindahl- Hirschman Index ("HHI") would increase by 26 points to 1866.12 The Board previously has indicated that merger transac- 5. Id. at § 1842(c)(1)(B). 6. Protestant also contends that this proposal would have signifi- tions in the Minneapolis-St. Paul banking market involving cantly adverse effects on competition for correspondent bank and one of the two largest depository institutions in the market ATM services in this area. For the reasons explained in previous warrant close review because of the size of these instituorders, the Board believes that the cluster of banking products and tions relative to other market competitors.13 Considering services represents the appropriate line of commerce for analyzing the the competitive effect of this proposal on market concentracompetitive effects of bank expansion proposals under section 3 of the BHC Act. See, e.g., Chemical Banking Corporation, 82 Federal tion in light of previous acquisitions by the two largest Reserve Bulletin 239 (1996) ("Chemical Order"). As discussed in this depository organizations, however, consummation of this order, an analysis of this line of commerce shows that consummation of the proposal is not likely to result in significantly adverse competitive effects in any relevant banking market. The Board concludes, moreover, that this proposal would not have 10. The Board previously has recognized that commuting patterns significantly adverse competitive effects even if correspondent bank are a significant factor in the determination of a relevant geographic and ATM services were considered individually. AmeriGroup does banking market. See Crestar Bank, 81 Federal Reserve Bulletin 200, not provide correspondent bank services, and numerous providers of 201 n.5 (1995); St. Joseph Valley Bank, supra at 674. these services would remain after consummation of the proposal. In 11. Market share data are as of June 30, 1995, and are based on addition, AmeriGroup operates only two ATMs, which represent less calculations in which the deposits of thrift institutions are included at than one-half of one percent of all ATMs in the Minneapolis-St. Paul 50 percent. The Board previously has indicated that thrift institutions area. AmeriGroup does not provide ATM network access, ATM have become, or have the potential to become, significant competitors network services, or ATM processing services to third parties, and this of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin proposal would not affect competition among existing suppliers of 788 (1990); National City Corporation, 70 Federal Reserve Bulletin such services. See NBD Bancorp, Inc., 82 Federal Reserve Bulletin 143 (1984). Thus, the Board has regularly included thrift deposits in 93, 102(1996). the calculation of market share on a 50-percent weighted basis. See, 7. The Minneapolis-St. Paul banking market is comprised of Anoka, e.g., First Hawaiian Inc., 77 Federal Reserve Bulletin 52 (1991). Carver, Dakota, Hennepin, Ramsey, Scott and Washington Counties, 12. Under the revised Department of Justice Merger Guidelines, 49 and portions of Chisago, Le Seur, Sherburne and Wright Counties in Federal Register 26,823 (June 29, 1984), a market in which the Minnesota, and the town of Hudson in St. Croix County, Wisconsin. post-merger HHI is above 1800 is considered to be highly concen- Protestant maintains that community banks located in the eastern trated. In such markets, the Justice Department is likely to challenge a portion or along the periphery of the Minneapolis-St. Paul banking merger that increases the HHI by more than 50 points. The Justice market have little effect on the competitive behavior of depository Department has informed the Board that a bank merger or acquisition institutions located in Minnetonka or Bloomington, Minneapolis, generally will not be challenged (in the absence of other factors where AmeriGroup and AmeriBank are located. Protestant also con- indicating anticompetitive effects) unless the post-merger HHI is at tends that consummation of this proposal would have adverse compet- least 1800 and the merger increases the HHI by more than 200 points. itive effects in two areas of Minnetonka and Bloomington where The Justice Department has stated that the higher than normal HHI branches of Norwest and AmeriBank operate in close proximity. thresholds for screening bank mergers for anticompetitive effects 8. The Chemical Order discusses in detail the Board's methodology implicitly recognize the competitive effect of limited-purpose lenders and supporting court precedent for defining the appropriate geo- and other non-depository financial entities. graphic market in which competition for the supply and demand of the 13. See First Bank System, Inc., 79 Federal Reserve Bulletin 50 cluster of banking products and services is considered. See Chemical (1993). The Board has noted that acquisitions by either of these two Order at 241-42. banking organizations of a series of depository institutions with rela- 9. See, e.g., St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 tively small market shares could, on a cumulative basis, lead to (1982). significant anticompetitive effects. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Federal Reserve Bulletin • June 1996 proposal is not likely to have a significantly adverse com- cial and managerial resources and future prospects of the petitive effect in the market. The Minneapolis-St. Paul organizations involved are consistent with approval, as are banking market is a major urban area that is attractive to the other supervisory factors that the Board is required to entry and, in fact, has experienced both de novo entry and consider under the BHC Act.16 entry by acquisition in recent years.14 Since 1991, for In reviewing the convenience and needs of the commuexample, six depository institutions have entered the mar- nity to be served, the Board has considered Protestant's ket by acquisition, and three de novo banks have been contention that the services currently provided by Norwest chartered in the market. One commercial banking organiza- and AmeriBank are similar and that consummation of the tion that entered the market in 1987 has become the third proposal would not provide AmeriBank's customers with largest depository institution in the market. As a result of access to new banking products or services or improved this entry and other competitive forces, the Minneapolis-St. banking facilities. As noted above, Norwest proposes to Paul banking market recently has become less concen- merge AmeriBank with and into Norwest Bank shortly trated, and the HHI for the market has declined by more after consummation of this proposal. Norwest has indithan 300 points since January 1995.15 In addition, 93 cated that after this merger AmeriBank customers would competitors, including 87 commercial banks and 6 thrift have access to Norwest Bank's branches throughout the institutions, would remain in the market after consumma- Minneapolis-St. Paul area and, through contract and agency tion of the proposal. The proposed acquisition of Ameri- relationships, to the branches of Norwest's subsidiary Group, which controls less than 1 percent of market depos- banks located in other areas and states.17 Norwest also has its and is the 25th largest depository institution in the market, also is not likely to affect the availability of depository institutions in the market for acquisition by potential 16. Protestant alleges that Norwest's ATM network has refused to entrants in the Minneapolis-St. Paul banking market. enter into an interchange or "gateway" agreement with SHAZAM, Inc., an Iowa nonprofit corporation that operates a shared ATM As in other cases, the Board sought comments on the network in Minnesota and other states, and that this refusal constitutes competitive effects of the proposal from the United States an illegal restraint of trade under the antitrust laws. The interchange Attorney General and the Federal Deposit Insurance Cor- agreement sought by Protestant would grant SHAZAM direct access poration ("FDIC"). The Department of Justice ("DOJ") to Norwest's proprietary ATM network, without passing through a concluded that consummation of the proposal is not likely national ATM network. Norwest has denied any illegal actions and states that it is willing to negotiate the terms of an interchange to have significantly adverse effects on competition in any agreement with the SHAZAM network. relevant market. The FDIC did not object to the proposal. In reviewing applications under section 3 of the BHC Act, the On March 4, 1996, the OCC approved the merger of Board is limited to considering the specific factors set forth in the AmeriBank with Norwest Bank under the Bank Merger BHC Act, and the Board has carefully considered the effects of this proposal under the factors specified in the BHC Act. See Western Act. In light of all the facts of record, including the number Bancshares, Inc. v. Board of Governors, 480 F.2d 749 (10th Cir. of competitors remaining in the market and the size of 1973). For example, the Board has reviewed whether Norwest's AmeriGroup, the Board concludes that consummation of acquisition of ATMs owned by AmeriGroup would result in signifithe proposal is not likely to have a significantly adverse cantly adverse competitive effects. Protestant's allegations, however, effect on competition or the concentration of banking re- extend beyond the competitive effects of this acquisition and challenge Norwest's current operation of its proprietary ATM network sources in the Minneapolis-St. Paul banking market or any under the federal antitrust laws. The limited jurisdiction granted to the other relevant market. Board to review applications under the specific statutory factors set forth in the BHC Act does not authorize the Board to adjudicate Financial, Managerial, and Convenience and Needs disputes between a commenter and an applicant that arise under a statute administered and enforced by another agency. On the other Considerations hand, substantiated improper actions may be considered by the Board in light of all facts of record of an application under the BHC Act's The Board also has carefully reviewed the financial and factors or in the context of the Board's general supervisory authority managerial resources of the companies and banks involved over its regulated banking organizations. in the proposal in light of all the facts of record, including In this case, the practice to which Protestant objects is unrelated to the proposed acquisition of AmeriGroup. The DOJ has express statuconfidential examination reports assessing the managerial tory authority to investigate and prosecute the type of anticompetitive resources of Norwest and its bank subsidiaries. Based on practices alleged by Protestant, and the Board has provided Protesall the facts of record, the Board concludes that the finan- tant's comments to the DOJ for its review and consideration. DOJ staff has informally advised the Board that the DOJ does not intend to initiate an antitrust investigation of Protestant's allegations at this time. The Board also notes that the federal antitrust laws authorize 14. Based on 1990 census data, the Minneapolis-St. Paul metropoli- private persons to bring civil actions under the antitrust laws and that a tan area has a population of 2.5 million, which represents a court can provide Protestant with an adequate remedy if Protestant can 15.3 percent increase since 1980, and is the 16th largest metropolitan establish that it is entitled to relief. See 15 U.S.C. § 15 (authorizing area in the United States. private antitrust actions under the Clayton Act and Sherman Act). In 15. The HHI for the Minneapolis-St. Paul banking market was 2172 sum, the Board concludes that Protestant's allegations do not warrant after the January 1995 acquisition of Metropolitan Financial Corpora- denial of the proposal under the factors the Board must consider in tion by First Bank System, Inc., both of Minneapolis, Minnesota. See this case. First Bank System, Inc., 81 Federal Reserve Bulletin 169 (1995). As 17. See 12 U.S.C. § 1828(r) (authorizing bank subsidiaries of a bank noted above, the HHI for the market currently is 1840 and would holding company to receive deposits and perform certain other funcincrease to 1866 upon consummation of this proposal. tions as agent for a depository institution affiliate). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 583 stated that AmeriBank customers would gain access to numerous providers of the proposed nonbanking services, certain services, including investment banking services and and the record does not support a finding that consummamunicipal bond underwriting and brokerage services, that tion of this proposal is likely to result in any significantly are offered by Norwest or its affiliates and that are not adverse effects, such as undue concentration of resources, offered by AmeriGroup. The Board notes that Norwest decreased or unfair competition, conflicts of interests, or Bank received an "outstanding" rating in its most recent unsound banking practices that would outweigh the public performance examination under the Community Reinvest- benefits of this proposal. Accordingly the Board has determent Act (12 U.S.C. §2901 et seq.) ("CRA") from the mined that the balance of public interest factors it must OCC, as of September 28, 1994. Norwest has indicated consider under section 4(c)(8) of the BHC Act is favorable that AmeriBank would become subject to the CRA policies and consistent with approval.22 and programs of Norwest Bank after consummation of this proposal and the merger of AmeriBank and Norwest Conclusion Bank.18 Based on all the facts of record, the Board concludes that the convenience and needs factor also is consis- Based on the foregoing and all the facts of record, includtent with approval. ing all the commitments and representations made by Norwest in connection with this proposal, the Board has deter- Other Considerations mined that the application and notice should be, and hereby are, approved.23 The Board's approval is specifically condi- Norwest also has requested approval for its wholly owned tioned on Norwest's compliance with the commitments subsidiary, Norwest Investment Services, Inc. ("NISI"), to made by Norwest in connection with this application and acquire the securities and insurance brokerage business of AmeriBank.19 The Board previously permitted NISI to engage in full-service brokerage activities under sec- bonds, 1-4- family mortgage-related securities, commercial paper and consumer-receivable-related securities). tion 225.25(b)(15) of the Board's Regulation Y and to act 22. Protestant requests that the Board delay action on this proposal as agent in the sale of insurance and annuities under and investigate Protestant's allegations regarding Norwest's ATM section 4(c)(8)(G) of the BHC Act ("Exemption G") and network. The Board is required by the BHC Act and the Board's rules section 225.25(b)(8)(vii) of Regulation Y.20 Norwest pro- to act on applications submitted under sections 3 and 4 of the BHC poses to conduct these activities in accordance with the Act within specified time periods. Based on all the facts of record, and for the reasons discussed in this order, the Board concludes that the Board's regulations. record is sufficient for the Board to act on this proposal under the On consummation of the proposal, AmeriBank's broker- statutory factors in the BHC Act. Accordingly, the Board concludes age customers would have access to the 24 offices of NISI that delay or, in the alternative, denial on the grounds of informational in the Minneapolis-St. Paul area. In addition, AmeriBank's insufficiency of the proposal is not warranted. 23. Protestant requested the Board to arrange a private meeting brokerage customers would have direct access to the between Protestant and Norwest, or hold a public meeting on the broader range of securities-related services offered by proposal. The Federal Reserve Bank of Minneapolis offered to host a NISI.21 The record in this case indicates that there are private meeting between Protestant and Norwest to provide a forum for the resolution of their differences under the Board's policy statement regarding informal meetings, but Norwest declined to participate. See 12 C.F.R. 262.25(c). Section 3(b) of the BHC Act does not 18. Protestant also contends that Norwest may close three require the Board to hold a public meeting or hearing on an applica- AmeriBank branches after consummation of the proposal and that tion unless the appropriate supervisory authority for the bank to be such closings would adversely affect small businesses located near the acquired makes a timely written recommendation of denial of the branches and the convenience and needs of the community in general. application. No supervisory agency has recommended denial of this Norwest has stated that it plans to consolidate two Norwest Bank proposal. Under section 4 of the BHC Act, the Board may order a branches with two AmeriBank branches after the merger of Ameri- hearing on an application "if there are disputed issues of material fact Bank and Norwest Bank. Norwest also has stated that the branches that cannot be resolved in some other manner." 12 C.F.R. 225.23(f). In proposed for closure would be within two-tenths of a mile of the addition, under the Board's Rules of Procedure, the Board may, in its assuming branch and that the branch movements would not affect the discretion, hold a public meeting or hearing on an application to nature of the services offered to businesses or customers served by the clarify factual issues related to the application and to provide an branches. opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 19. AmeriBank makes available to its customers securities, life 262.25(d). Protestant has not challenged the acquisition by NISI of insurance and annuities through a contract with an independent AmeriBank's brokerage and insurance business under section 4 of the broker-dealer. BHC Act. The Board notes that Protestant has had ample opportunity 20. See Norwest Corporation, 80 Federal Reserve Bulletin 160 to submit its views and has, in fact, submitted comments on Norwest's (1994); Norwest Corporation, 76 Federal Reserve Bulletin 873 section 3 application. Protestant's request fails to demonstrate why its (1990). Exemption G is one of seven specific exemptions enacted by written submissions do not adequately present its allegations or why a Title VI of the Garn-St. Germain Depository Institutions Act of 1982 public hearing or meeting is otherwise warranted in this case. After a to the Gam Act's general prohibition on insurance activities by bank careful review of all the facts of record, moreover, the Board conholding companies. The exemption authorizes those bank holding cludes that Protestant disputes the weight that should be accorded to, companies that engaged in insurance agency activities prior to 1971 and the conclusions that may be drawn from, the facts of record, or with prior Board approval to engage or control a company engaged in disputes facts that are not material to the Board's decision. For these insurance agency activities. reasons, and based on all the facts of record, the Board has determined 21. See Norwest Corporation, 76 Federal Reserve Bulletin 79 that a public meeting or hearing is not necessary to clarify the factual (1990) (authorizing NISI to underwrite and deal in U.S. government record in the application, and is not warranted in this case. Accordand municipal obligations and, to a limited extent, municipal revenue ingly, Protestant's request for a public hearing or meeting is denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Federal Reserve Bulletin • June 1996 notice. The Board's determination on the proposed non- would be conditioned on a customer's maintaining a debanking activities is subject to all the conditions set forth in posit at Capital One FSB. Regulation Y, including those in sections 225.7 and Secured credit cards allow customers who do not qualify 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and for unsecured credit to receive a credit card. The customer 225.23(b)(3)), and to the Board's authority to require mod- is required to establish and maintain a deposit account, and ification or termination of the activities of a bank holding the deposit is held as collateral to secure all or some company or any of its subsidiaries as the Board finds portion of the line of credit available to the customer necessary to assure compliance with, and to prevent eva- through the card. Although the customer may thus receive sion of, the provisions of the BHC Act and the Board's little or no unsecured credit from the card issuer, the regulations and orders issued thereunder. The commit- customer is able to enjoy the convenience that a credit card ments and conditions relied on in reaching this decision affords while at the same time establishing a credit history shall be deemed to be conditions imposed in writing by the through repayment of card balances. Board in connection with its findings and decision and may The bank tying statute, section 106 of the Bank Holding be enforced in proceedings under applicable law. Company Act Amendments of 1970, generally prohibits a The banking acquisition shall not be consummated be- bank from restricting the availability or varying the terms fore the fifteenth calendar day following the effective date of one of its products on the condition that a customer of this order, and this proposal shall not be consummated obtain another product from the bank or any of its affiliates. later than three months after the effective date of this order, Although a credit card bank is not a "bank" for purposes unless such period is extended for good cause by the Board of section 106, section 4(h)(1) of the Bank Holding Comor by the Federal Reserve Bank of Minneapolis, acting pany Act, which was added by the Competitive Equality pursuant to delegated authority. Banking Act (CEBA) in 1987, provides that a credit card By order of the Board of Governors, effective April 29, bank and certain other entities "shall be treated as a bank, 1996. and a company that controls such institution shall be treated as a bank holding company, for purposes of section 106 ... and any regulation prescribed under such section." Voting for this action: Chairman Pro Tempore Greenspan and Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- 12 U.S.C. § 1843(h)(1). nor Lindsey. Section 106 contains a statutory "traditional bank product exception" that allows a bank to tie any of its products JENNIFER J. JOHNSON to any loan, discount, deposit or trust service offered by Deputy Secretary of the Board that bank. Under this exception, Capital One Bank could offer a secured credit card on the condition that a customer maintain a deposit at Capital One Bank. Last year, the Board extended the traditional bank product exception ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT across affiliate lines to permit a bank to discount any AMENDMENTS OF 1970 traditional bank product based on a customer's obtaining a traditional bank product from any affiliate. Under this Capital One Financial Corporation exception, Capital One Bank could offer a free credit card Falls Church, Virginia to customers of Capital One FSB. Neither exception, however, permits Capital One Bank to restrict the availability Order Approving an Exemption from the Anti-tying of its secured credit card to depositors of its affiliate, Provisions Capital One FSB.1 Capital One Financial Corporation, Falls Church, Virginia ("Capital One"), has requested that the Board permit its 1. The Home Owners' Loan Act (HOLA) allows a savings associacredit card bank subsidiary to offer a credit card secured by tion or its affiliate to restrict the availability of any product on the deposits at an affiliated savings bank. Capital One seeks a condition that a customer obtain a traditional bank product from the savings association or any affiliate. 12 U.S.C. §§ 1464(q) and Board interpretation that this arrangement is not covered 1467a(n). Because the exception runs between affiliates, it is broader by the anti-tying provisions of section 106 of the Bank than the statutory or regulatory traditional bank product exception Holding Company Act Amendments of 1970 applicable to banks and (through CEBA) credit card banks. (12 U.S.C. § 1972) or, if it is, an exemption from the statute Capital One argues that HOLA, which was enacted after CEBA, permitting Capital One's credit card bank subsidiary to allows Capital One Bank to condition the availability of its credit card once it becomes affiliated with a savings association, Capital One offer the secured credit card. FSB. The transaction is covered by the language of the HOLA Capital One and its credit card bank subsidiary, Capital exemption, but is also covered by section 4(h)(1) of the BHC Act, One Bank, are a spin-off of Signet Bank/Virginia's credit pursuant to CEBA. In other words, the BHC Act requires Capital One card operations. Capital One is currently in the process of Bank to be treated like a bank, but HOLA requires it to be treated like an affiliate of a savings association. Although the issue is debatable, organizing a federal savings bank subsidiary, Capital One the Board believes that the specific reference to credit card banks in FSB. Once the Office of Thrift Supervision approves the the BHC Act should govern over the general reference to savings new institution, Capital One proposes that Capital One association affiliates in HOLA, and therefore that credit card banks Bank offer a secured credit card, eligibility for which should be treated like banks. See Simpson v. United States, 435 U.S. 6, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 585 Nonetheless, like transactions currently exempt under Guaranty surviving the merger. As part of the transaction, the statutory and regulatory traditional bank product excep- Morgan Guaranty also has applied under section 9 of the tions, the proposed transaction presents benefits and raises Federal Reserve Act (12 U.S.C. § 321) to establish no competitive concerns. The secured credit card program branches at the current locations of Morgan Delaware's is pro-consumer and would not create an unfair competi- branches,1 and filed a notice under section 25 of the Fedtive advantage for Capital One FSB's deposit products. eral Reserve Act and section 211.3 of Regulation K Indeed, the legislative history of CEBA indicates that Con- (12 C.F.R. 211.3) to acquire the foreign branch of Morgan gress thought, contrary to the language of the provision, Delaware in the Cayman Islands. that such transactions would be exempt. See Competitive Notice of the proposal, affording interested persons an Equality Banking Act of 1987, Conference Report 261, opportunity to submit comments, has been given in accor- 100th Cong., 1st Sess. at 128-29 (July 31, 1987) ("[T]he dance with the Bank Merger Act and the Board's Rules of anti-tying restrictions would not be violated by tying [a] Procedure (12 C.F.R. 262.3(b)). As required by the Bank traditional banking service offered by a grandfathered non- Merger Act, reports on the competitive effects of the bank bank to another traditional banking service [offered] merger were requested from the United States Attorney by an affiliate."). General, the Federal Deposit Insurance Corporation Based on the above and all facts of record, and pursuant ("FDIC") and the Office of the Comptroller of the Curto its authority under section 106 of the Bank Holding rency. The time for filing comments has expired, and the Company Act Amendments of 1970, the Board hereby Board has considered the proposal and all the facts of grants an exemption to permit Capital One Bank to oifer a record in light of the factors set forth in the Bank Merger credit card secured by deposits maintained at Capital One Act and sections 9 and 25 of the Federal Reserve Act. FSB. The Board also delegates to the Board's General Morgan Guaranty and Morgan Delaware are wholly Counsel authority to grant further exemptions to section owned subsidiaries of J.P. Morgan & Co. Incorporated, 106 to allow secured credit card plans similar to that New York, New York ("Morgan & Co"). Morgan Guaroffered by Capital One. anty is the 11th largest banking organization in New York, This approval is based on the facts and circumstances controlling deposits of $5.4 billion, representing 2.2 perpresented by Capital One, and any material change in those cent of the total deposits in commercial banking organizafacts or circumstances could result in a different outcome. tions in New York.2 Morgan Delaware is the 20th largest The approval is subject to the Board's authority to modify commercial banking organization in Delaware, controlling or terminate the exemption. deposits of $242.5 million, representing less than 1 percent By order of the Board of Governors, effective April 11, of the total deposits in commercial banking organizations 1996. in Delaware. The proposal represents a reorganization of Morgan & Co.'s existing banking operations.3 Based on all Voting for this action: Chairman Pro Tempore Greenspan and the facts of record, the Board concludes that consummation Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- of the proposal would not have any significantly adverse nor Lindsey. effect on competition in any relevant banking market. WILLIAM W. WILES Convenience and Needs Considerations Secretary of the Board In acting on the applications under the relevant banking statutes, the Board must consider the convenience and ORDERS ISSUED UNDER BANK MERGER ACT needs of the communities to be served and take into account the records of the relevant depository institutions Morgan Guaranty Trust Company of New York under the Community Reinvestment Act (12 U.S.C. § 2901 New York, New York et seq.) ("CRA"). The CRA requires the federal financial supervisory agencies to encourage financial institutions to Order Approving the Merger of Banks and Establishment help meet the credit needs of the local communities in of Bank Branches which they operate, consistent with their safe and sound Morgan Guaranty Trust Company of New York, New York, New York ("Morgan Guaranty"), a state member 1. Branches of Morgan Delaware to be established by Morgan bank, has applied under section 18(c) of the Federal Guaranty are located at 902 N. Market Street, Wilmington, Delaware Deposit Insurance Act (12 U.S.C. § 1828(c)) (the "Bank 19801, and 500 Stanton Christiana Road, Newark, Delaware 19713. Merger Act") to merge with J.R Morgan Delaware, Wilm- 2. Deposit data are as of June 30, 1995. 3. After the merger of Morgan Guaranty and Morgan Delaware, ington, Delaware ("Morgan Delaware"), with Morgan Morgan Guaranty would be a New York state bank with branches in New York and Delaware. The office of the New York Superintendent of Banks has informally indicated that the proposal is consistent with 15 (1978) (citing "principle that gives precedence to the terms of the applicable state law, and the Delaware State Bank Commissioner has more specific statute where a general statute and a specific statute approved the proposal. The Board concludes that this proposed merger speak to the same concern, even if the general provision was enacted is consistent with applicable state law. Act of Feb. 6, 1996, §§5 later"). and 19, 1996 N.Y. ALS 9; Del. Code Ann. tit. 5, § 795F (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • June 1996 operation. To accomplish this end, the CRA requires the regulator, the Office of Thrift Supervision ("OTS"), at the appropriate federal supervisory authority to "assess the most recent examination of its CRA performance.8 institution's record of meeting the credit needs of its entire The most recent examinations of Morgan's depository community, including low- and moderate-income neigh- institutions found no evidence of illegal discrimination. In borhoods, consistent with the safe and sound operation of particular, the 1994 Morgan Guaranty Examination and the such institution," and to take that record into account in its 1995 Morgan Delaware Examination found no credit pracevaluation of an application for a deposit facility.4 tices that were inconsistent with the substantive provisions The Board has received comments on this proposal from of the anti-discrimination laws and regulations at Morgan Inner City Press/Community on the Move, Bronx, New Guaranty9 or Morgan Delaware.10 Examiners also con- York ("Protestant"), asserting that the CRA-related activi- cluded that neither Morgan Guaranty nor Morgan Delaties of Morgan Guaranty and Morgan Delaware do not adequately assist in meeting the credit needs of communities with predominately low- to moderate-income and mi- 8. Protestant cites criticisms by OTS examiners of aspects of Mornority residents, particularly in light of the amount of gan Florida's performance record in this examination as adverse considerations for the proposal. The Board notes that, although the assets controlled by these institutions. The Board has careexamination indicates areas for improvement in the institution's CRA fully reviewed the CRA performance records of Morgan performance, Morgan Florida's overall rating was "satisfactory." Guaranty and Morgan Delaware, all comments received OTS examiners also recognized that Morgan Florida is located in an regarding these applications, Morgan Guaranty's responses area with no low- to moderate-income census tracts, and encouraged Morgan Florida to consider strategies for improving its lending within to those comments, and all other relevant facts of record in the local community. Based on all the facts of record, including light of the CRA, the Board's regulations and the State- Morgan Florida's overall satisfactory record and the records of performent of the Federal Financial Supervisory Agencies Re- mance by the institutions involved in this proposal, Protestant's comgarding the Community Reinvestment Act ("Agency CRA ments on Morgan Florida do not present adverse CRA considerations Statement").5 for this proposal. 9. Protestant alleges, without providing supporting facts, that the mortgage-backed securities activities of Morgan Guaranty, J.P. Mor- Evaluation of CRA Performance gan Securities, Inc. ("Morgan Securities"), and J.P. Morgan Commercial Mortgage Finance Corp., all subsidiaries of Morgan & Co., have a A. Examination Record of CRA Performance negative effect on the availability of mortgage credit in low- and moderate-income neighborhoods and to minorities, and that these institutions disproportionately avoid mortgages from low- and The Agency CRA Statement provides that a CRA examina- moderate-income and minority individuals in their mortgage undertion is an important and often controlling factor in the writing, dealing and purchasing activities in violation of the Fair consideration of an institution's CRA record and that re- Housing Act (42 U.S.C. § 3601 et seq.) ("FHA"). Protestant also ports of these examinations will be given great weight in generally alleges, without providing supporting facts, that the other the applications process.6 The Board notes that Morgan asset-backed securities activities of these institutions avoid loans in Morgan Guaranty's delineated community and in low- to moderate- Guaranty received a "satisfactory" rating from the Federal income neighborhoods. Reserve Bank of New York ("Reserve Bank") at its most 10. Protestant contends that Morgan Delaware's 1994 and 1995 recent examination for CRA performance in July 1994 Loan Application Registers and the 1995 Loan Application Registers ("1994 Morgan Guaranty Examination"), and that Morgan for Morgan Guaranty and Morgan Florida show a lack of lending to minorities in violation of the Equal Credit Opportunity Act (15 U.S.C. Delaware received an "outstanding" rating from its pri- § 1691 et seq.) ("ECOA") and the FHA. Protestant alleges that all mary federal supervisor, the FDIC, at its most recent exam- three institutions violate ECOA and the Home Mortgage Disclosure ination for CRA performance in February 1995 ("1995 Act (12 U.S.C. § 2801 et seq.) ("HMDA") by prescreening mortgage Morgan Delaware Examination").7 Morgan & Co.'s re- loans. Protestant also alleges that Morgan Delaware has not complied maining depository institution, J.P. Morgan Florida Federal with the HMDA by failing to report the gender and race of borrowers receiving mortgage loans, and by failing to record census tract and Savings Bank, Palm Beach, Florida ("Morgan Florida"), other geographical data, and suggests, without providing supporting received a "satisfactory" rating from its primary federal evidence, that Morgan Delaware may not request race and gender information on its application forms. As noted, no evidence of illegal discrimination was found during the most recent examinations of Morgan & Co.'s depository institutions. These institutions, moreover, are not in the business of making residential mortgage loans and make a limited number of such loans as an accommodation for their private 4. 12 U.S.C. § 2903. banking clients and for the private banking clients of affiliates. Mor- 5. 54 Federal Register 13,742 (1989). gan & Co. has denied the allegations that Morgan Delaware does not 6. Id. at 13,745. comply with HMDA reporting requirements, indicating that most of 7. Protestant argues that the 1994 Morgan Guaranty Examination is Morgan Delaware's mortgage applications do not involve face-to-face unreliable because, among other things, it is almost two years old and meetings with a loan officer, but rather are submitted by mail or merely recites verbatim information contained in Morgan Guaranty's telephone, and that Morgan Delaware's application forms do request CRA Statement. The Board notes that the 1994 Morgan Guaranty information required for government monitoring purposes. Under Examination is the result of an on-site review of the activities and regulations implementing the HMDA and ECOA, a HMDA reporter is policies of Morgan Guaranty, and includes more information than that not required to report the race or gender of an applicant if this provided in Morgan Guaranty's CRA Statement. The Board has information is not provided by the applicant in the written application considered this performance evaluation and information provided by form received by mail. See 12 C.F.R. 203, Appendix A, § V(D)(2) Protestant and Morgan Guaranty relating to the bank's CRA perfor- and Appendix B, § 1(B)(4); Official Staff Commentary on Regulamance since the evaluation. tion B, F.R.R.S.4 6-197.6(3). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 587 ware discouraged credit applications for the types of credit affordable housing and minority enterprises,14 as a means it identified in its CRA statement. Both institutions have to assist in meeting the housing-related credit needs of its also adopted fair lending policies and conduct periodic delineated community. In 1995, MCDC committed to intraining on fair lending compliance. vest $3.6 million to Holland House for the conversion of a former single-room occupancy hotel in Times Square into B. Morgan Guaranty's Record of CRA Performance permanent housing with on-site social services for people with limited financial resources. MCDC modeled this in- Morgan Guaranty is a wholesale institution that specializes vestment on its $5 million commitment in 1993 to the in providing financial services to institutional customers Common Ground Community Housing Development Fund such as corporations and governmental entities and to high Corporation for the conversion of a 652 unit single-room net worth individuals. As a wholesale institution, Morgan occupancy hotel in Times Square. Guaranty does not engage in residential mortgage lending, The 1994 Morgan Guaranty Examination found that other than as an accommodation to its existing customers, Morgan Guaranty, through MCDC and the J.R Morgan or provide other traditional retail credit products, and it Charitable Trust ("Trust"), has also been a major investor does not hold itself out as a retail lender. Although the in efforts to develop and sustain affordable housing and to CRA does not require a bank to extend any particular type support economic development. The record indicates that of credit, a wholesale institution such as Morgan Guaranty approximately 75 percent of MCDC's community lending is not exempted from the CRA or exempted from having and investing creates and supports affordable housing. its CRA performance record assessed in an application for MCDC has provided almost $100 million in equity and a deposit facility.11 bridge loans to the Local Initiative Support Corporation Morgan Guaranty uses a variety of methods to help meet ("LISC") and the Enterprise Foundation, financial interthe credit needs of low- and moderate-income areas in its mediaries that directly fund organizations involved in prodelineated community,12 in the broader New York City viding affordable housing to low- to moderate-income indiarea, and nationally.13 Morgan Guaranty uses the J.R Mor- viduals.15 gan Community Development Corporation, New York, In addition, the 1994 Morgan Guaranty Examination New York ("MCDC"), a wholly owned community devel- noted that MCDC purchased a $5 million participation opment subsidiary of Morgan & Co., which provides finan- interest in a loan to a local housing partnership developcial assistance in the form of loans and investments for ment corporation. The loan proceeds were used in a construction loan pool designed to create 513 units of affordable housing. In partnership with the U.S. Department of Housing and Urban Development and 9 other entities, MCDC also committed $12 million to a national commu- 11. See Continental Bank Corporation, 75 Federal Reserve Bulletin nity development initiative organized to invest $87 million 304 (1989), and U.S. Trust Corporation, 81 Federal Reserve Bulletin 893 (1995). Protestant maintains that Morgan & Co.'s subsidiary in loans and grants to community development corporadepository institutions have been effectively and inappropriately ex- tions in 23 cities. Of the $87 million, approximately empted from the CRA because these banks are considered as "private $6.2 million in commitments were scheduled to be adbanks" by examiners. vanced between 1994 and 1996 to projects in New York 12. Protestant contends that Morgan Guaranty's delineation of its service community is arbitrary. The Board previously has stated that City and Los Angeles.16 an assessment of an institution's delineated community can be most effectively considered in an on-site examination by the institution's primary federal supervisor and that such an examination provides a 14. MCDC's total outstanding loans and commitments have inbetter opportunity to consider whether an institution's delineated creased from $62.9 million on December 31, 1992, to $184 million on community reflects illegal discrimination in light of all the institu- March 1, 1996. tion's lending activities. See North Fork Baneorporation, 82 Federal 15. In 1995, MCDC committed $20 million to the New York and Reserve Bulletin 338 (1996). The 1994 Morgan Guaranty Examina- national equity funds associated with LISC, and in 1996, MCDC has tion concluded that the bank's community delineation was reasonable committed $25 million to the New York, New York-Series II and and did not arbitrarily exclude low- to moderate-income neighbor- national equity funds. hoods. Morgan Guaranty also has indicated that it intends to designate 16. Protestant alleges that Morgan Guaranty's 1995 HMDA data all of New York City as its assessment area. indicate a lack of lending for multifamily housing in New York, and 13. Protestant maintains that Morgan Guaranty is required to be Delaware, and in low- to moderate-income areas; prescreening of loan evaluated only on its activities to assist low- to moderate-income applicants; and violations of the FHA because loans are not made for neighborhoods within its delineated community, and that if in fact multifamily housing located in neighborhoods with predominately Morgan Guaranty lends and invests city wide, then all of New York minority residents. Morgan Guaranty indicates that, although it ac- City should be included in its delineation. The 1994 Morgan Guaranty quires multifamily loans from unaffiliated institutions for the purpose Examination recognized that Morgan Guaranty's CRA-related efforts of having them pooled and securitized by an affiliate and sold to consisted of community development activities undertaken in its two investors, it reports them as originations for HMDA purposes because local communities with special efforts to reach low- to moderate- it provides the underwriting criteria and makes the credit decision on income areas in the five boroughs of New York City. The Board notes the applicants. Morgan Guaranty states that it has been unsuccessful in that banks may receive positive consideration for activities and pro- locating a broker in the New York City area to participate in this grams conducted outside the bank's delineated community in the activity, but will continue its attempts to do so. Morgan Guaranty context of the institution's overall CRA program if the institution has denies that it or any broker that it works with prescreens these loans, an adequate record of addressing credit needs within its delineated indicating that its fair lending policies apply to this activity and that a community. purchase of a loan is based solely on objective financial criteria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Federal Reserve Bulletin • June 1996 The 1994 Morgan Guaranty Examination also noted that in the Bronx, which owns or manages 26 buildings with Morgan Guaranty participated through MCDC in small more than 1,000 low- to moderate-income tenants. business lending and investment programs.17 Examiners Morgan Guaranty also provides services to large nonfound that MCDC supported the development and growth profit organizations. Morgan Guaranty's private banking of small businesses and promotes overall economic devel- unit helps nonprofit institutions manage their portfolios or opment of low- to moderate-income areas. For example, raise funds through private placements. In 1994, the pri- MCDC made a $100,000 loan to and a $300,000 capital vate banking unit helped 14 groups, including educational investment in a minority-owned sports and entertainment and health care organizations, raise $82 million through management and marketing firm. Since the 1994 Morgan private placements.18 Guaranty Examination, MCDC has participated in new Examiners also concluded in the 1994 Morgan Guaranty programs, including the creation of a small business invest- Examination that the bank's efforts to ascertain the credit ment company, New York Community Investment Com- needs of its community provided a strong foundation for pany ("CIC") in 1995. Morgan Guaranty worked with community development lending and equity capital investten member banks of the New York Clearing House Asso- ments.19 Examiners found that Morgan Guaranty's ascerciation to help create CIC, which is capitalized at tainment efforts were well coordinated and include ongo- $10 million, and which will provide capital and subordi- ing and meaningful contact with numerous and diverse nated debt to small businesses operating in low- to community-based organizations. Morgan Guaranty also moderate-income communities in New York City. MCDC distributes a number of publications to inform community also invested $250,000 in Sylvia Wood's Enterprises, a groups and public officials of its CRA activities. food products company in Harlem, to help recapitalize the business and to provide for its growth. C. Morgan Delaware's Record of CRA MCDC and Morgan Guaranty's Community Relations Performance and Public Affairs Department, through the Trust, support a number of nonprofit organizations engaged in housing, Morgan Delaware also specializes in wholesale banking community development, urban affairs and health care products and only offers consumer loan products to accomissues. Morgan Guaranty made a number of charitable modate its corporate customers. Morgan Delaware is recontributions through the Trust to organizations that pro- quired by the Delaware Financial Center Development Act vide health care services. In 1995, MCDC's health care ("FCD Act") to operate in a manner and at a location that grants included commitments of $390,00 to the Institute is not likely to attract customers from the general public, for Urban Family Health, $500,000 to the Brownsville and the bank is prohibited from soliciting business within Multi-Service Family Health Center and $351,000 to Ur- Delaware. Accordingly, the bank has focused its CRA ban Health Plan, organizations providing primary health activities on community development lending through concare in neighborhood settings in Brooklyn, Harlem, South sortia which are not prohibited by the FCD Act. Bronx and Manhattan. Other grants include a $40,000 The 1995 Morgan Delaware Examination cited a number grant in 1994 for the development of the South Bronx of examples of Morgan Delaware's participation in com- Family Learning Center; annual support in the amount of munity and affordable housing development programs. For $20,000 to the Mid-Bronx Desperados Community Hous- example, Morgan Delaware is a founding $1 million stocking Corporation, which develops and manages low- to holder in Delaware Community Investment Corporation moderate-income housing; and, since 1992, five grants ("DCIC"), a multi-bank owned corporation, which prototalling $160,000 to the Mount Hope Housing Company vides debt financing and equity funding for affordable housing development throughout Delaware.20 MCDC, on behalf of Morgan Delaware, arranged and structured a Morgan Guaranty also notes that approximately 30 percent of the multifamily mortgages it has acquired to date were made in low- to moderate-income areas, and approximately 53 percent were made in census tracts where 25 percent of more of the population were 18. Protestant contests whether the municipal bond activities of minority. The CRA does not require an institution to engage in any Morgan Guaranty's affiliates resulted in actual benefits to the public. particular type of lending in order to assist in meeting the credit needs The 1994 Morgan Guaranty Examination found that these activities of its community, and, as noted, an institution can have a satisfactory provided needed capital for local projects such as schools, hospitals, record of performance without conducting a specific type of CRA- and public power and transportation projects. related activity in its community. Thus, multifamily lending activities 19. Protestant disputes this conclusion because Morgan Guaranty have been considered in light of Morgan Guaranty's entire record of listed the same community contacts at the 1994 examination that it activities. identified at the 1992 examination. The Board notes that ongoing 17. Protestant criticizes the lack of small business lending reflected contacts with organizational, community and government leaders, as in the call reports filed by Morgan & Co.'s subsidiary banks. As noted well as established productive relationships with private, nonprofit above, neither the CRA nor the Agency CRA Statement requires an developers or financial intermediaries resulting in public/private partinstitution to engage in a particular type of lending in order to have a nership activities, can assist in an institution's ascertainment and satisfactory record of performance, and an institution has the flexibil- outreach efforts. ity to select the types of activities that would result in an effective 20. No fees were charged by Morgan Delaware or MCDC to CRA program in light of the institution's operations and business establish DCIC or for MCDC's services as administrative agent. In strategies. Morgan Guaranty has elected to provide small business addition, Morgan Delaware's in-house legal department drafted loan credit through MCDC. and security documents at no cost to DCIC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 589 $7.5 million bridge loan for DCIC's Equity Fund. MCDC nience and needs considerations, including the CRA perforacted as agent and lead lender, committing $2.4 million. mance records of Morgan Guaranty and Morgan Delaware, Morgan Delaware also is a member of several housing are consistent with approval of the applications. partnerships, including the Delaware State Housing Partnership and the Wilmington Housing Partnership, commit- Other Considerations ted to providing affordable housing for first-time buyers and low- to moderate-income individuals. Since 1991, The Board also has concluded that the financial and mana- Morgan Delaware has extended $7.35 million in credit gerial resources and future prospects of institutions incommitments for projects to increase the stock of quality, volved as well as other factors the Board must consider affordable housing in New Castle County, Delaware. under sections 9 and 25 of the Federal Reserve Act are Examiners found that Morgan Delaware made substan- consistent with approval in light of all the facts of record.23 tial contributions to a variety of charitable organizations. Based on the foregoing and all the facts of record, the The record indicates that in both 1994 and 1995, Morgan Board has determined that these applications and notice Delaware contributed approximately $400,000 to such or- should be and hereby are, approved.24 The Board's apganizations. Of its $2.9 million in grants to community- proval of the proposal is conditioned on compliance by based nonprofit organizations since 1981, Morgan Dela- Morgan Guaranty with the commitments made in connecware has contributed more than 60 percent of these funds tion with the proposal. For purposes of this action, the to organizations involved in housing, economic and com- commitments and conditions relied on in reaching this munity development. Morgan Delaware also has supported decision are deemed to be conditions imposed in writing programs that provide assistance to minority groups within by the Board and, as such, may be enforced in proceedings its local community. For example, Morgan Delaware has under applicable law. committed $150,000 to the University of Delaware College The merger of Morgan Guaranty with Morgan Delaware of Business and Economics Fortune 2000, a program that shall not be consummated before the fifteenth calendar day provides minority college students with academic, employ- following the effective date of this order, or later than three ment and financial assistance. Morgan Delaware also has months after the effective date of this order, unless such contributed $100,000 to Wilmington 2000, a public/private period is extended for good cause by the Board or the partnership to revitalize downtown Wilmington.21 Reserve Bank, acting pursuant to delegated authority. By order of the Board of Governors, effective April 29, D. Conclusion Regarding Convenience and Needs 1996. Considerations The Board has carefully considered the entire record, insubsidiaries engaged in any activities on a basis prohibited by law cluding the comments filed in this case, in reviewing the such as race or gender, and are not supported by the facts of record. convenience and needs factors under the relevant banking 23. Protestant states that one loan entry on Morgan Delaware's 1994 statutes. Based on a review of the entire record of perfor- Loan Application Register indicates insufficient income to support the mance, including information provided by Protestant and amount of the loan. The Board has considered this comment in light of all the facts of record, including reports of examination assessing the Morgan Guaranty, and the CRA performance examinafinancial and managerial resources of Morgan's subsidiary banks, and tions, the Board concludes that the efforts of Morgan has sufficient supervisory authority to address any substantiated un- Guaranty and Morgan Delaware to help meet the credit safe or unsound lending practices. Protestant also alleges that Morgan needs of all segments of the communities they serve, & Co.'s merger and acquisition advisory services have had a negative including low- to moderate-income neighborhoods, are effect on low- to moderate-income and minority neighborhoods consistent with approval.22 For these reasons, and based on through the loss of jobs and plant and branch closings. Protestant also believes that these advisory services may be anti-competitive when all the facts of record, the Board concludes that conveprovided to bank holding company clients. The record does not support the conclusion that these services are being provided in violation of any applicable banking regulations or that an adverse 21. Through the Delaware branches, Morgan Guaranty plans to effect on a community resulting from a transaction advised by Morgan continue the CRA-related activities of Morgan Delaware on consum- & Co. is related to a statutory factor required to be considered in the mation of the proposal. proposal. The Board also notes that it has considered all of Protes- 22. The Board also has received comments from a company alleg- tant's comments in assessing the relevant statutory factors and has ing that MCDC refused to invest in a community development prod- concluded that none of these comments warrants denial of the prouct created by the commenter and, in fact, expropriated the product for posal. its own use. This commenter also alleges that HMDA data filed by 24. Protestant requests that the Board delay action on the proposal one of Morgan's subsidiary banks may indicate illegal discrimination pending a review of Morgan Delaware's mortgage loan files, a deand that Morgan & Co.'s nonbanking 'Subsidiary, J.R Morgan Capital tailed inquiry into the mortgage-backed activities, including multifam- Corporation, illegally discriminates against companies owned by mi- ily housing activities, of Morgan Guaranty, Morgan Securities and J.P. norities and women. The commenter's business dealings with MCDC Morgan Commercial Mortgage Finance Corp., and the results of a involve an individual private transaction that does not reflect ad- new CRA examination of Morgan Guaranty. As discussed above, the versely on the record of CRA performance of Morgan Guaranty and Board has carefully reviewed the record in this case, including Protes- Morgan Delaware, The Board also notes that a court may provide tant's comments and Morgan Guaranty's responses. Based on all the commenter with an appropriate remedy if illegal use of the comment- facts of record, the Board concludes that the record is sufficient to act er's investment product can be substantiated. Commenter's allega- on the proposal at this time, and that delay or denial of the proposal on tions of illegal discrimination do not show that Morgan & Co.'s the grounds of informational insufficiency is not warranted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • June 1996 Voting for this action: Chairman Pro Tempore Greenspan and other factors that the Board is required to consider under Governors Kelley, Phillips, and Yellen. Absent and not voting: Gover- the Bank Merger Act and the Federal Reserve Act.4 nor Lindsey. Based on the foregoing and all the facts of record, the Board has determined that these applications should be, JENNIFER J. JOHNSON and hereby are, approved. The Board's approval of this Deputy Secretary of the Board proposal is conditioned on compliance by Signet VA with the commitments made in connection with these applica- Signet Bank tions. For purposes of this action, the commitments and Richmond, Virginia conditions relied on in reaching this decision are both conditions imposed in writing by the Board and, as such, Order Approving the Merger of Banks and Establishment may be enforced in proceedings under applicable law. of Bank Branches The merger of Signet NA with and into Signet VA may not be consummated before the fifteenth calendar day Signet Bank, Richmond, Virginia ("Signet VA"), a state following the effective date of this order, and this proposal member bank, has requested Board approval under section may not be consummated later than three months after the 18(c) of the Federal Deposit Insurance Act (12 U.S.C. effective date of this order, unless such period is extended § 1828(c)) (the "Bank Merger Act") to merge with Signet by the Board or by the Federal Reserve Bank of Richmond, Bank N.A., Falls Church, Virginia ("Signet NA"), with acting pursuant to delegated authority. Signet VA surviving the merger.1 Signet VA also has By order of the Board of Governors, effective April 29, requested Board approval under section 9 of the Federal 1996. Reserve Act (12 U.S.C. § 321) to establish branch offices at the current locations of the Signet NA branch offices.2 Voting for this action: Chairman Pro Tempore Greenspan and Notice of the applications, affording interested persons Governors Kelley, Phillips, and Yellen. Absent and not voting: Goveran opportunity to submit comments, has been given in nor Lindsey. accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by JENNIFER J. JOHNSON the Bank Merger Act, reports on the competitive effects of Deputy Secretary of Board the merger were requested from the United States Attorney General, the OCC, and the Federal Deposit Insurance Cor- Appendix poration. The time for filing comments has expired, and the Board has considered the applications and all the facts of Branch offices of Signet NA to be established by record in light of the factors set forth in the Bank Merger Signet VA: Act and section 9 of the Federal Reserve Act. Signet VA and Signet NA are wholly owned subsidiaries 1. 1510 K Street, NW, Washington, DC 20005 of Signet Banking Corporation, Richmond, Virginia ("Sig- 2. 2119 Bladensburg Road, NE, Washington, DC 20018 net"). Signet is the sixth largest commercial banking orga- 3. 1350 F Street, NW, Washington, DC 20045 nization in Virginia, controlling deposits of approximately 4. 1850 M Street, NW, Washington, DC 20036 $4.8 billion, representing 7.8 percent of the total deposits 5. 5025 Connecticut Avenue, NW, Washington, DC 20008 in commercial banking organizations in Virginia, and is the fifth largest commercial banking organization in the District of Columbia, controlling deposits of approximately 4. Section 9 of the FRA prohibits a state member bank from $441 million, representing 5 percent of the total deposits in establishing and operating a branch at any location unless a national commercial banking organizations in the District of Co- bank would be permitted to establish and operate a branch at that lumbia.3 This proposal represents a reorganization of Sig- location. 12 U.S.C. § 321. The OCC has determined that Signet NA may establish and operate branches in Virginia and the District of net's existing banking operations. Based on all the facts of Columbia after its relocation to Virginia and would permit two narecord, consummation of the proposal would not have any tional banks located in Virginia to merge and retain branches in significantly adverse effects on competition in any relevant Virginia and the District of Columbia. Section 9 of the FRA, therefore, would not prevent Signet VA from retaining Signet NA's banking market. branches in the District of Columbia. In addition, the establishment of The Board also concludes that the financial and managethese branches is permissible under the laws of the Commonwealth of rial resources and future prospects of Signet VA are consis- Virginia and has been approved by the Virginia State Corporation tent with approval of these applications, as are the conve- Commission. See Signet Bank, Certificate of Authority, case number: nience and needs of the communities to be served, and the BAN 19960053, April 17, 1996. The establishment of these branches also is permissible under the laws of the District of Columbia. Corporations engaged in and doing a banking business in the District of Columbia on March 4, 1933, may continue to engage in that business. 1. Signet NA relocated its main office from the District of Columbia D.C. Code Ann. § 26-103(a)(l) (1991 Repl. Vol.). Signet NA has to Falls Church, Virginia, a distance of less than 30 miles, after been continuously doing a banking business in the District of Columapproval by the Office of the Comptroller of the Currency ("OCC"). bia since prior to March 4, 1933. Furthermore, Signet VA may 2. The locations of the branches that Signet VA proposes to estab- establish these branches in the District of Columbia as the successor in lish are listed in the Appendix. interest to Signet NA. See Va. Code Ann. § 6.1-44 (Michie 1996); 3. Deposit data are as of June 30, 1995. D.C. Code Ann. § 29-370(4) (1991 Repl. Vol.). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 591 6. 215 Pennsylvania Avenue, SE, Washington, DC 20003 to assess adequately the application, is subject to compre- 7. 1130 Connecticut Avenue, NW, Washington, DC 20036 hensive supervision or regulation on a consolidated basis 8. 400 7th Street, NW, Washington, DC 20004 by its home country supervisor, and has provided adequate 9. 620 Michigan Avenue, NE, Washington, DC 20064 assurances of access to information on the operations of 10. 1287 4th Street, NE, Washington, DC 20002 the bank and its affiliates to determine compliance with 11. 4841 Massachusetts Avenue, NW, Washington, DC 20016 U.S. laws. (12 U.S.C. § 3107(a); 12 C.F.R. 211.24(d). The Board may also take into account additional standards as 12. 3940 Minnesota Avenue, NE, Washington, DC 20019 set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4)) and Reg- 13. 2801 Georgia Avenue, NW, Washington, DC 20001 ulation K (12 C.F.R. 211.24(c)). The Board previously has 14. 1400 Montana Avenue, NE, Washington, DC 20018 stated that the standards that apply to the establishment of a 15. 1850 K Street, NW, Washington, DC 20006 branch or agency need not in every case apply to the 16. 1532 Benning Road, NE, Washington, DC 20002 establishment of a representative office.1 Moreover, the Board also has determined that an application by a foreign bank to establish a representative office may be approved ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT if: (i) The bank commits that the proposed representative Cedel Bank, S.A. office will engage only in a limited set of activities Luxembourg considered to pose minimal risk to U.S. markets or U.S. counterparties and Order Approving Establishment of a Representative (ii) The bank is subject to a supervisory framework Office that is consistent with approval of the application, taking into account the limited activities of the pro- Cedel Bank, S.A. ("Bank"), Luxembourg, a foreign bank posed office and the operating record of the bank.2 within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IB A In this case, the activities of Bank's representative office (12 U.S.C. § 3107(a)) to establish a representative office in would be limited to those relating to Bank's business as a New York, New York. The Foreign Bank Supervision provider of clearing, settlement, and custody services for Enhancement Act of 1991, which amended the IBA, proinstitutional customers, including marketing and promovides that a foreign bank must obtain the approval of the tional activities, providing technical assistance to Bank's Board to establish a representative office in the United customers in North and South America, answering cus- States. tomer inquiries and engaging in research. The representa- Notice of the application, affording interested persons an tive office would not engage in activities such as making opportunity to submit comments, has been published in a credit decisions on behalf of Bank or soliciting business of newspaper of general circulation in New York, New York any kind from individuals acting in their personal capacity. (New York Times, November 23, 1994). The time for filing With respect to home country supervision of Bank, the comments has expired, and the Board has considered the Board has considered the following information. The Instiapplication and all comments received. tut Mon taire Luxembourgeois ("IML") is the primary As of December 31, 1994, Bank had total assets of supervisor of financial institutions in Luxembourg and, as approximately $2.5 billion. Bank, which is one of Europe's such, is the home country supervisor of Bank. The IML major securities clearing, settlement and custody organizaestablishes capital and liquidity requirements, evaluates the tions, converted to bank status under Luxembourg law as financial condition and performance of all Luxembourg of January 1, 1995. Prior to conversion, Bank was licensed financial institutions, and monitors all financial institutions as a non-bank financial institution authorized to conduct and their controlling companies for adherence to Luxembusiness as a financial advisor and a professional deposibourg laws and regulations. The IML, which has authotory of securities and other financial instruments. Bank rized Bank to establish the proposed representative office, continues to be engaged primarily in providing specialized supervises the foreign and domestic activities of Bank and services relating to securities clearing and settlement. The Parent. shares of Bank are held directly by Cedel International, The IML monitors the operations of Bank through the S.A. ("Parent"), which is a holding company separately review of periodic prudential reports from Bank, the relicensed as a professional depository of securities by the view of reports from the Bank's external auditor and the Luxembourg Ministry of the Treasury. Parent is owned by IML's own on-site inspections of Bank. Bank is required to approximately 100 banks, securities dealers, and other submit to the IML monthly balance sheets, foreign exfinancial institutions from around the world. None of Parchange position reports, and solvency and liquidity ratios. ent's shareholders owns more than 5 percent of its shares. In addition, Bank is required to submit quarterly income In acting on an application to establish a representative statements and reports on large exposures and on the office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages directly in the business of banking outside of the United 1. Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). States, has furnished to the Board the information it needs 2. Promstroybank of Russia, 82 Federal Reserve Bulletin 599 (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Bulletin • June 1996 maturity structure of Bank's assets and liabilities. The IML by Bank and Parent and other facts of record, and subject requires Bank to undergo annual external audits by ap- to the condition described below, the Board concludes that proved auditors and to forward the results of such audits, as Bank has provided adequate assurances of access to any well as any special audits, to the IML. Bank's external necessary information the Board may request. auditors are required, among other things, to review Bank's On the basis of all the facts of record, and subject to the accounting and risk management systems and to assess the commitments made by Bank, as well as the terms and reliability of Bank's periodic prudential reports to the IML. conditions set forth in this order, the Board has determined The IML is in the process of implementing an enhanced that Bank's application to establish a representative office supervision system for Bank in order to monitor the risks should be, and hereby is, approved. Should any restrictions associated with Bank's specialized services. on access to information on the operations or activities of Bank's operations are conducted primarily from its head- Bank and any of its affiliates subsequently interfere with quarters in Luxembourg. Bank's internal audit department the Board's ability to determine the compliance by Bank or performs comprehensive audits at least once a year, which its affiliates with applicable federal statutes, the Board may include reviews of management processes and practices, require termination of any of Bank's direct or indirect verification of accounting records, and operational proce- activities in the United States. Approval of this application dures and controls. The representative office would be is also specifically conditioned on compliance by Bank subject to a comprehensive internal audit at least annually, with the commitments made in connection with this applithe results of which would also be reviewed by Bank's cation and with the conditions in this order.3 The commitexternal auditors. ments and conditions referred to above are conditions Based on all the facts of record, the Board concludes that imposed in writing by the Board in connection with its factors relating to the supervision of Bank by its home decision, and may be enforced in proceedings under country supervisor are consistent with approval of the 12 U.S.C. § 1818 against Bank and its affiliates. proposed representative office. The Board also has deter- By order of the Board of Governors, effective April 24, mined that, for purposes of the IBA and Regulation K, 1996. Bank engages directly in the business of banking outside of the United States through its operations in Luxembourg. Voting for this action: Chairman Pro Tempore Greenspan and Bank has provided the Board with the information neces- Governors Kelley, Lindsey, Phillips, and Yellen. sary to assess the application through submissions that JENNIFER J. JOHNSON address relevant issues. Deputy Secretary of the Board The Board also has taken into account the additional standards set forth in section 7 of the IBA and Regula- Commercial Bank "Ion Tiriac", S.A. tion K (see 12 U.S.C. § 3105(d)(3),(4); 12 C.F.R. Bucharest, Romania 211.24(c)(2)). As noted above, the IML has authorized Bank to establish the proposed representative office. Order Approving Establishment of a Representative The Board also has determined that the financial and Office managerial factors are consistent with approval of the representative office. Bank appears to have the experience Commercial Bank "Ion Tiriac", S.A. ("Bank"), Bucharand capacity to support the proposed office and has estabest, Romania, a foreign bank within the meaning of the lished controls and procedures for the proposed representa- International Banking Act ("IBA"), has applied under sective office to ensure compliance with U.S. law. tion 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a Finally, with respect to access to information on Bank's representative office in New York, New York. The Foreign operations, the Board has reviewed the relevant provisions Bank Supervision Enhancement Act of 1991, which of law in Luxembourg and has communicated with approamended the IBA, provides that a foreign bank must obtain priate government authorities regarding access to informathe approval of the Board to establish a representative tion. Bank and Parent each have committed to make availoffice in the United States. able to the Board such information on the operations of Notice of the application, affording interested persons an Bank and any of its affiliates that the Board deems necesopportunity to submit comments, has been published in a sary to determine and enforce compliance with the IBA, newspaper of general circulation in New York, New York the Bank Holding Company Act of 1956, as amended, and (New York Times, June 6, 1995). The time for filing comother applicable Federal law. To the extent that the provision of such information to the Board may be prohibited or impeded by law, Bank and Parent have committed to 3. The Board's authority to approve the establishment of the procooperate with the Board to obtain any necessary consents posed representative office parallels the continuing authority of the or waivers that might be required from third parties in State of New York to license offices of a foreign bank. The Board's connection with disclosure of certain information. In addi- approval of this application does not supplant the authority of the tion, subject to certain conditions, the IML may share State of New York and its agent, the New York State Banking Department, to license the proposed representative office of Bank in information on Bank's operations with other supervisors, accordance with any terms or conditions that the New York State including the Board. In light of the commitments provided Banking Department may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 593 ments has expired, and the Board has considered the appli- With respect to supervision by home country authorities, cation and all comments received. Romania has taken steps to strengthen its system of bank Bank, with approximately $291 million in assets,1 is the supervision. Among other things, since 1991 Romania has second largest privately owned bank in Romania and the enacted laws to establish a framework for the supervision sixth largest bank overall in that country. Bank was of Romanian banks and to strengthen their operations. The founded in 1991 and operates through approximately National Bank of Romania ("NBR") is the licensing, 15 branches in Romania. Mr. Ion Tiriac and parties associ- regulatory, and supervisory authority for all banking instiated with him control approximately 32 percent of the total tutions in Romania and, as such, is the home country shares of Bank. The European Bank for Reconstruction supervisor of Bank. The NBR establishes capital and reand Development ("EBRD") owns 20 percent of Bank's serve requirements, defines permissible banking activities shares. No other single shareholder holds 10 percent or and operations, and establishes accounting and audit procemore of Bank's shares. dures for Romanian banks. The NBR supervises the activi- In acting on an application to establish a representative ties of Romanian banks both within Romania and abroad. office, the IBA and Regulation K provide that the Board The NBR has authorized Bank to establish the proposed shall take into account whether the foreign bank engages representative office. directly in the business of banking outside of the United The NBR monitors the operations of Bank through on- States, has furnished to the Board the information it needs site examinations, the review of periodic prudential reto assess adequately the application, and is subject to ports, and the review of external auditor's reports. The comprehensive supervision or regulation on a consoli- frequency of on-site examinations is at the discretion of the dated basis by its home country supervisor NBR but generally takes place annually. The scope of (12 U.S.C. § 3107(a)(2); 12 C.F.R. 211.24(d)). The Board on-site examinations is also in the discretion of the NBR, may also take into account additional standards as set forth but generally focuses on Bank's capitalization, asset qualin the IBA (12 U.S.C. § 3105(d)(3)-(4)) and Regulation K ity, risk provisions, large exposures, and verification of (12 C.F.R. 211.24(c)(2)). data provided in reports to the NBR. Bank is required to submit various periodic financial and regulatory reports to With respect to supervision by home country authorities, the NBR, including monthly reports of large loans; quarthe Board generally has required foreign banks that proterly balance sheets, income statements, and reports on pose to establish a representative office to be subject to a hard currency commitments and receivables; semiannual significant degree of supervision by their home country reports on classified loans; and annual audited financial supervisor, as determined with reference to a number of factors.2 The Board also has determined that, in appropri- statements. The NBR requires Bank to undergo annual external audits and requires the external auditors to take ate circumstances, an exception may be made to the geninto account the NBR's regulatory requirements and staneral representative office standard that would permit apdards. In this context, the external auditors review Bank's proval of an application by a foreign bank to establish a asset quality and internal controls. By agreement with the representative office, if: EBRD, Bank is required to be audited according to interna- (i) The bank commits that the proposed representative tional standards. office will engage only in a limited set of activities consid- The NBR has the authority to impose administrative ered to pose minimal risk to U.S. markets or U.S. countersanctions on any Romanian bank found to be in violation parties, and of the regulations issued by the NBR. The sanctions avail- (ii) The bank is subject to a supervisory framework that able to the NBR include limiting the bank's operations, is consistent with approval of the application, taking into imposing fines on the bank, and revoking the bank's liaccount the limited activities of the proposed office and the operating record of the bank.3 cense. Bank currently has no offices outside Romania. Bank's internal auditors review the valuation of securities held by In this application, Bank has committed that the activi- Bank monthly and review its financial statements quarterly. ties of its proposed representative office would be limited The proposed representative office would provide quarterly to general marketing or promotional activities, developing written reports to Bank's head office. and strengthening correspondent banking relationships, re- Based on all facts of record, the Board concludes that search and consulting activities, and certain loan solicitafactors relating to the supervision of Bank by its home tion activities. Bank has also committed that the represencountry supervisor are consistent with approval of the tative office would not make credit decisions on behalf of proposed representative office, taking into account its limthe parent bank, solicit deposits from other than instituited activities and Bank's operating record. The Board also tional investors, solicit business of any kind from individuhas determined that Bank engages directly in the business als acting in their personal capacity, or conduct any activiof banking outside of the United States through its banking ties related to trading. operations in Romania. Bank has provided the Board with information necessary to assess the application through submissions that address the relevant issues. 1. Data are as of September 30, 1995, unless otherwise noted. The Board also has taken into account the additional 2. Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). 3. Promstroybank of Russia, 82 Federal Reserve Bulletin 599 (1996). standards set forth in section 7 of the IBA and Regula- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Federal Reserve Bulletin • June 1996 tion K (12 U.S.C. § 3105(d)(3),(4); 12 C.F.R. Voting for this action: Chairman Pro Tempore Greenspan and 211.24(c)(2)). As noted above, the NBR has authorized Governors Kelley, Lindsey, Phillips, and Yellen. Bank to establish the proposed representative office. The Board has determined that the financial and manage- JENNIFER J. JOHNSON Deputy Secretary of the Board rial factors are consistent with approval of the representative office. Bank's financial and managerial resources indi- Creditanstalt-Bankverein cate that there is a reasonable degree of certainty Vienna, Austria concerning the financial stability of Bank, based on its operating record and financial standing within Romania. In Order Approving Establishment of a Branch addition, Bank's operating record indicates that it is capable of complying with applicable laws. Creditanstalt-Bankverein, Vienna, Austria ("Bank"), a for- Finally, with respect to access to information about eign bank within the meaning of the International Banking Bank's operations, the Board has reviewed the restrictions Act ("IBA"), has applied under section 7(d) of the IBA on disclosure under applicable law and has communicated (12 U.S.C. § 3105(d)) to relocate its existing federally liwith the relevant government authorities regarding access censed uninsured branch from New York, New York, to to information. Bank has committed to make available to Greenwich, Connecticut. The Foreign Bank Supervision the Board such information on the operations of Bank and Enhancement Act of 1991 ("FBSEA"), which amended any of its affiliates that the Board deems necessary to the IBA, provides that a foreign bank must obtain the determine and enforce compliance with the IBA, the Bank approval of the Board to establish a branch in the United Holding Company Act of 1956, as amended, and other States. applicable Federal law. To the extent that the provision of Notice of the application, affording interested persons an such information to the Board may be prohibited or imopportunity to comment, has been published in a newspapeded by law, Bank has committed to cooperate with the per of general circulation in Greenwich (The New York Board to obtain any necessary consents or waivers that Times, December 12, 1995). The time for filing comments might be required from third parties in connection with has expired, and the Board has considered the application disclosure of certain information. In light of these commitand all comments received. ments and other facts of record, and subject to the condi- Bank, with total consolidated assets of approximately tion described below, the Board concludes that Bank has $64 billion, is the second largest bank in Austria.1 The provided adequate assurances of access to any necessary Republic of Austria, which owns 69.5 percent of Bank's information the Board may request. voting shares, is Bank's largest shareholder. No other sin- On the basis of all the facts of record, and subject to the gle shareholder holds 5 percent or more of the outstanding commitments made by Bank, as well as the terms and voting shares of Bank. conditions set forth in this order, the Board has determined In addition to its network of domestic branches, Bank that Bank's application to establish a representative office operates various financial subsidiaries engaged in conshould be, and hereby is, approved. Should any restrictions sumer finance, leasing, trade finance, investment banking, on access to information on the operations or activities of risk management, and housing finance activities in Austria. Bank and any of its affiliates subsequently interfere with Bank also is the largest shareholder in three Austrian the Board's ability to determine the compliance by Bank or regional banks. International operations include branches, its affiliates with applicable federal statutes, the Board may representative offices, and banking and financial subsidiarrequire termination of any of Bank's direct or indirect ies located in Europe, Asia, Latin America, and the United activities in the United States. Approval of this application States. In the United States, Bank operates the branch in is also specifically conditioned on Bank's compliance with New York, New York, representative offices in Atlanta, the commitments made in connection with this application and with the conditions in this order.4 The commitments Georgia, and San Francisco, California, and numerous nonbank subsidiaries that are authorized to engage in leasand conditions referred to above are conditions imposed in ing, commercial lending, investment advisory activities, writing by the Board in connection with its decision, and loan acquisition and servicing, brokerage and permissible may be enforced in proceedings under 12 U.S.C. § 1818 securities activities, and the issuance of commercial paper. against Bank and its affiliates. Bank's current home state under the IBA and Regula- By order of the Board of Governors, effective April 22, tion K is New York. Upon relocation, Bank would change 1996. its home state to Connecticut.2 The proposed branch in Connecticut would conduct a wholesale commercial bank- 4. The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's 1. All data are as of September 30, 1995. approval of this application does not supplant the authority of the 2. Under Regulation K, a foreign bank may change its home state State of New York and its agent, the New York State Banking once provided domestic branches established and investments in banks Department, to license the proposed representative office of Bank in acquired in reliance on its original home state selection are conformed accordance with any terms or conditions that the New York State to those that would have been permissible had the new home state Banking Department may impose. been selected as its home state originally. (See 12 C.F.R. 211.22(b)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 595 ing business identical to the banking business currently In this case, with respect to the issue of supervision by engaged in by the New York branch, which would be home country authorities, the Board has considered the closed. Bank states that the relocation would result in following information. The Ministry has primary responsisubstantial savings with respect to real estate lease expendi- bility for regulating and supervising credit and financial tures, human resources, tax obligations, and other costs. institutions in Austria and their branches located abroad.4 Upon relocation, all assets of the New York branch would The Ministry has the authority to grant and revoke licenses be transferred to the Connecticut branch. for such institutions, authorize merger or affiliation of The Austrian Federal Ministry of Finance (the "Minis- credit institutions, authorize the establishment of foreign try") has no objection to the establishment of the proposed branches, approve new banking activities, and set capital branch. Bank has also received approval from the Office of standards.5 The Austrian National Bank ("Central Bank") the Comptroller of the Currency (the "OCC") to relocate also is closely involved in supervision; it receives and the New York branch to Connecticut. processes periodic reports from credit institutions, renders In order to approve an application by a foreign bank to opinions on certain reports to the Ministry, and may also establish a branch in the United States, the IBA and Regu- supervise foreign branches at the request of the Ministry. lation K require the Board to determine that the foreign While the Ministry has the authority to conduct on-site bank applicant engages directly in the business of banking examinations of Austrian credit institutions, it has not outside of the United States, and has furnished to the Board exercised its authority to do so. It primarily relies on the the information it needs to adequately assess the applica- review of periodic financial and regulatory reports, the tion. The Board also must determine that the foreign bank review of reports prepared by external auditors, and the is subject to comprehensive supervision or regulation on a appointment of state commissioners to certain banks.6 The consolidated basis by its home country supervisor Ministry may obtain any information required to assess a (12 U.S.C. § 3105(d)(2)). The Board may also take into credit institution's compliance with the Austrian Banking account additional standards as set forth in the IBA Act and other applicable laws. (12 U.S.C. § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. Bank is required to submit to both the Ministry and the 211.24(c)). Central Bank a number of monthly, quarterly, and annual Bank engages directly in the business of banking outside financial statements. Annual financial statements are preof the United States through its commercial banking opera- pared for the Ministry on a consolidated basis; Bank also tions in Austria. Bank also has provided the Board with the submits consolidated monthly reports to the Central Bank information necessary to assess the application through with respect to liquidity, capital, and major investments submissions that address the relevant issues. and holdings. Other monthly statements submitted to the Regulation K provides that a foreign bank will be con- Ministry include balance sheets and reports on liquidity, sidered to be subject to comprehensive supervision or own funds, asset quality, off-balance sheet transactions, regulation on a consolidated basis if the Board determines open foreign exchange positions, risk-based capital calculathat the bank is supervised and regulated in such a manner tions, large credit exposures, and certain major investthat its home country supervisor receives sufficient information on the foreign bank's worldwide operations, including the relationship of the foreign bank to any affiliate, to assess the overall financial condition of the foreign bank and its compliance with law and regulation (12 C.F.R. 211.24(c)(1)).3 Under Connecticut law, Bank must designate Connecticut as its home 4. A credit institution is an institution authorized to transact banking state. activities. A financial institution is a non-banking entity that may 3. In assessing this standard, the Board considers, among other engage in certain financial activities such as leasing, over-the-counter factors, the extent to which the home country supervisors: foreign exchange, and providing financial advice to companies and (i) Ensure that the bank has adequate procedures for monitoring individuals. and controlling its activities worldwide; 5. The Ministry has various enforcement powers available in its (ii) Obtain information on the condition of the bank and its supervision of Austrian banks, including, inter alia, levying of monesubsidiaries and offices through regular examination reports, tary fines, removal of individuals from office, and revocation of the audit reports, or otherwise; license of the bank. (iii) Obtain information on the dealings with and relationship 6. The Ministry appoints a state commissioner to serve at credit between the bank and its affiliates, both foreign and domestic; institutions whose balance sheet assets exceed ATS 5 billion (approxi- (iv) Receive from the bank financial reports that are consolidated mately $500 million), including Bank. The state commissioner has the on a worldwide basis, or comparable information that permits authority to participate in all general meetings of shareholders, all analysis of the bank's financial condition on a worldwide consol- sessions of the supervisory board, and all meetings of the supervisory idated basis; board subcommittees empowered to make decisions. If the state (v) Evaluate prudential standards, such as capital adequacy and commissioner determines that decisions adopted by any of these risk asset exposure, on a worldwide basis. bodies would result in a violation of law, he may enter an objection These are indicia of comprehensive, consolidated supervision. No which would delay the execution of the resolution to allow the single factor is essential and other elements may inform the Board's Ministry to express an opinion, and if deemed necessary, take approdetermination. priate action. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • June 1996 ments.7 Quarterly reports also are submitted to the Ministry subsidiaries. Audit reports of the parent bank and its with regard to earnings performance. branches are distributed to Bank's board of directors. With Bank states that its external auditor performs an annual respect to international operations, the local audit departaudit of its worldwide operations. The auditing firm is ment in each branch and major subsidiary reports directly responsible for reviewing Bank's annual financial state- to the internal audit department of the head office. The ments and certifying that they comply with statutory provi- head office audit department approves the annual audit sions of the Austrian Banking Act. The results of the plans of the local offices and receives all audit reports. In review are included in a separate report that is required to addition, head office auditors visit the foreign branches and be submitted to the Ministry. The annual audit also com- major subsidiaries at least annually and review certain prises a review of asset valuations, including whether areas of the local operations.9 required depreciation, value adjustments, and adequate pro- Bank also monitors and controls its worldwide operavisions have been made. The external auditor is under an tions by requiring the preparation and review of a variety obligation to inform the Ministry and Central Bank imme- of financial reports, which analyze product, customer, and diately if it finds that Bank's financial condition has deteri- unit performance. These reports are also forwarded to the orated such that it may not be able to meet its obligations external auditor. The internal auditors are required to veror that the credit institution is violating applicable laws or ify the accuracy of information supplied by subsidiaries to regulations.8 The external auditor also must inform the the parent company, the external auditors, the Ministry and Ministry if the management of Bank fails to provide re- the Central Bank. quested information. Based on all the facts of record, including the informa- Austian credit institutions, including Bank, are subject to tion described above, the Board concludes that Bank is certain restrictions with respect to transactions with affili- subject to comprehensive supervision on a consolidated ates and investments in other companies. Loans to compa- basis by its home country supervisor. nies that are managed or owned by a manager or owner of The Board has also taken into account the additional an Austrian credit institution may not be extended without standards set forth in section 7 of the IBA (see 12 U.S.C. the consent of the credit institution's supervisory board. §3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). Bank has pro- Furthermore, the supervisory board must receive a report vided the Board with the information necessary to assess of such loans each year. Austrian credit institutions also the application through submissions that address the relemay not have investments in other companies in excess of vant issues. As noted above, Bank has received the consent 15 percent of their capital unless the acquired company is a of the Ministry to establish the proposed federally-licensed credit or financial institution, engages in banking activities, uninsured branch. In addition, the Ministry may share or is an insurance company. With certain exceptions, the information on Bank's operations with other supervisors, aggregate investment in all companies other than those including the Board. noted above is limited to 60 percent of the bank's capital. Austria is a signatory to the Basle risk-based capital Any major investments of the bank require the express standards, and Austrian risk-based capital standards meet consent of the supervisory board and a report on each those established by the Basle Capital Accord and the major investment must be provided to the supervisory European Union. Bank's capital is in excess of the miniboard at least once each year. mum levels that would be required by the Basle Capital With respect to the monitoring of its worldwide opera- Accord and is considered equivalent to capital that would tions, Bank's internal audit department conducts regular be required of a US. banking organization. Managerial and audits of all its foreign and domestic offices and major other financial resources of Bank also are considered consistent with approval, and Bank appears to have the experience and capacity to support the proposed branch. Bank 7. Austrian banking law requires the consolidation of financial has established controls and procedures for the proposed information of all controlled domestic and foreign credit institutions branch in order to ensure compliance with U.S. law, as well as well as the major controlled domestic and foreign financial institu- as controls and procedures for its worldwide operations in tions. Control exists for these purposes if Creditanstalt directly or general. indirectly holds a majority of the institution's shares, a majority of the voting rights or the right to elect a majority of the management or Finally, the Board has reviewed the restrictions on dissupervisory board, or if it otherwise has the right to exercise a closure in relevant jurisdictions in which Bank operates controlling influence. Major investments are those whose book value and has communicated with relevant government authoriamounts to 7 million schillings (approximately $700,000) and exceeds ties about access to information. Bank has committed that 15 percent of the credit institution's capital. it will make available to the Board such information on the Although Bank is not required to consolidate line by line the accounts of the three regional Austrian banks in which it is the largest operations of Bank and any affiliate of Bank that the Board shareholder but holds less than 50 percent ownership, it presents a combination of its consolidated balance sheet with the three regional banks voluntarily in its annual report. 8. The appointment of the auditor must be reported to the Ministry 9. For example, an audit of selected credits is performed annually which has the authority to reject such appointment. The Ministry also by the audit manager of the U.S. branch, supported by a representative has established grounds for disqualification of auditors based on of the head office's internal audit division. This is in addition to the circumstances, such as lack of expertise or conflicts of interest, that audit performed annually by the external auditors in the U.S. under would suggest that an orderly audit would be unlikely. instructions from the head office. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 597 deems necessary to determine and enforce compliance with the IBA (12 U.S.C. § 3107(a)) to establish a representative the IBA, the Bank Holding Company Act of 1956, as office in New York, New York. The Foreign Bank Superviamended, and other applicable federal law. To the extent sion Enhancement Act of 1991 ("FBSEA"), which that the provision of such information is prohibited or amended the IBA, provides that a foreign bank must obtain impeded by law, Bank has committed to cooperate with the the approval of the Board to establish a representative Board to obtain any necessary consents or waivers that office in the United States. might be required from third parties in connection with Notice of the application, affording interested persons an disclosure of certain information. In addition, subject to opportunity to submit comments, has been published in a certain conditions, the Ministry may share information on newspaper of general circulation in New York, New York Bank's operations with other supervisors, including the (The New York Times, April 24, 1995). The time for filing Board. In light of these commitments and other facts of comments has expired and the Board has considered the record, and subject to the condition described below, the application and all comments received. Board concludes that Bank has provided adequate assur- Bank was established in 1990 to assume most of the ances of access to any necessary information the Board commercial banking operations of the former State Bank may request. of Czechoslovakia, and was converted to a joint stock On the basis of all the facts of record, and subject to the company in 1992. At present, the National Property Fund commitments made by Bank, as well as the terms and of the Czech Republic, a governmental entity established conditions set forth in this order, the Board has determined to administer and privatize the state's interest in state that Bank's application to establish a federally-licensed properties, owns 48.7 percent of Bank's shares. The reuninsured branch should be, and hereby is, approved. mainder of Bank's shares are widely held by various Should any restrictions on access to information on the investment privatization funds, pension funds, and private operations or activities of Bank and its affiliates subse- investors. quently interfere with the Board's ability to obtain informa- Bank is a universal bank that is principally engaged in tion to determine and enforce compliance by Bank or its commercial and retail banking, foreign exchange, trade affiliates with applicable federal statutes, the Board may finance, and investment banking. Bank operates approxirecommend termination of any of Bank's direct or indirect mately 380 offices throughout the Czech Republic, and activities in the United States. Approval of this application representative offices in the United Kingdom, Germany, is also specifically conditioned on Bank's compliance with and Russia. Bank also controls a subsidiary bank in the the commitments made in connection with this application Slovak Republic. Bank also has investments in nonbank and with the conditions in this order.10 The commitments companies engaged in activities such as insurance, real and conditions referred to above are conditions imposed in estate appraisal, investment management, bank security writing by the Board in connection with its decision, and and transportation services, building society lending, leasmay be enforced in proceedings under 12 U.S.C. § 1818 or ing, pension fund management, and other financial ser- 12 U.S.C. § 1847 against Bank, its offices, and its affiliates. vices. As of December 31, 1995, Bank had total assets of By order of the Board of Governors, effective April 22, $14.6 billion. 1996. In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board Voting for this action: Chairman Pro Tempore Greenspan, and shall take into account whether the foreign bank engages Governors Kelley, Lindsey, Phillips, and Yellen. directly in the business of banking outside of the United States and has furnished the Board with the information it JENNIFER J. JOHNSON needs to assess the application adequately. The Board also Deputy Secretary of the Board shall take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervi- Komercni Banka, a.s. sion or regulation on a consolidated basis by its home Prague, Czech Republic country supervisor as set forth in the IBA (12 U.S.C. § 3107(a)(2) and Regulation K (12 C.F.R. Order Approving Establishment of a Representative 211.24(d)). The Board also takes into account additional Office standards as set forth in the IBA (12 U.S.C. § 3105(d)(3)- (4)) and Regulation K (12 C.F.R. 211.24(c)). Komercni Banka, a.s. ("Bank"), Prague, Czech Republic, With respect to supervision by home country authorities, a foreign bank within the meaning of the International the Board has required foreign banks that propose to estab- Banking Act ("IBA"), has applied under section 10(a) of lish a representative office to be subject to a significant degree of supervision by their home country supervisor, as determined with reference to a number of factors.1 The 10. The Board's authority to approve establishment of the proposed Board also has determined that, in appropriate circumbranch office parallels the continuing authority of the OCC to license stances, an exception may be made to the general represenfederal offices of a foreign bank. The Board's approval of this application does not supplant the authority of the OCC to license the proposed branch office of Bank in accordance with any terms or conditions that the OCC may impose. 1. Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • June 1996 tative office standard that would permit approval of an institutions may not exceed specified limits without the application by a foreign bank to establish a representative prior consent of the CNB. The CNB limits Bank's loans to office, if: individual subsidiaries, affiliates, and major shareholders (i) The bank commits that the proposed representative of Bank. office will engage only in a limited set of activities The CNB monitors Bank's compliance with these pruconsidered to pose minimal risk to U.S. markets or dential requirements through review of periodic reports U.S. counterparties, and submitted by Bank, which must be reviewed by Bank's (ii) The bank is subject to a supervisory framework internal auditors. Bank submits monthly and annual balthat is consistent with approval of the application, ance sheets and income statements. Bank also submits, taking into account the limited activities of the pro- among other things, daily reports on foreign exchange posed office and the operating record of the bank.2 positions, and monthly reports on loans, deposits, net credit exposures, selected problem credits, interbank transactions, In this application, Bank has committed that the activi- investments in securities, and foreign exchange positions. ties of its proposed representative office would be limited Bank submits quarterly reports on liquidity, foreign reto general marketing or promotional activities, developing ceipts and payments, capital adequacy, asset quality, and and strengthening correspondent banking relationships, re- interest income and expenses. Bank also prepares an ansearch and consulting activities, and certain loan solicita- nual business plan for submission to the CNB. Consistent tion activities. Bank has also committed that the represen- with Czech accounting standards ("CAS"), regulatory retative office would not make credit decisions on behalf of ports generally are submitted to the CNB on an unconsolithe parent bank, solicit deposits from other than institu- dated basis for Bank only. Bank presently does not provide tional investors, solicit business of any kind from individu- the CNB with financial reports on its nonbank subsidiaries. als acting in their personal capacity, or conduct any activi- Bank is required to engage external auditors to verify ties related to trading of securities or foreign exchange. and report on Bank's condition and results for the fiscal With respect to supervision by home country authorities, year. The CNB may reject the firm that Bank selects as its the Czech Republic has taken steps to strengthen its system external auditor. The external auditors perform annual auof bank supervision by, among other things, enacting sev- dits of the balance sheets and income statements of Bank in eral laws to establish a framework for the supervision of accordance with CAS and adjust these financial statements Czech banks and to strengthen their operations. Bank's to reflect the requirements of international accounting stanprimary home country supervisor, the Czech National Bank dards. In addition, Bank's external auditors conduct opera- (the "CNB"), supervises Czech banks through a combina- tional audits of Bank (including reviews of accounting tion of on-site examinations, review of required regulatory systems, risk management, management information sysreports, and internal and external audits. tems, data processing, and internal controls), evaluate Comprehensive on-site examinations of banks that have Bank's compliance with CNB regulations, and present been determined to be in satisfactory condition through their findings to the CNB in a special report. oif-site supervision generally are conducted every three Bank supervises its domestic offices and subsidiaries years.3 Examinations generally cover all areas of a bank's through internal audits.4 The internal auditors report their operations, with particular emphasis on management infor- findings to Bank's senior management and to Bank's sumation systems and the credit function. Other specific pervisory board. Audit committees established at Bank's areas of review include credit administration, management board of directors and supervisory board monitor the activand control functions in the lending areas, internal controls ities of Bank's internal audit department and oversee reand the audit function, and asset quality. Examination ports and corrective actions. findings are discussed with bank management, and any Based on all facts of record, the Board concludes that identified problems that cannot be resolved internally by factors relating to the supervision of Bank by its home management are resolved through issuance of orders by the country supervisor are consistent with approval of the CNB and may be monitored further through supplemental proposed representative office, taking into account its limtargeted examinations. ited activities and Bank's operating record. The Board also The CNB also establishes various prudential require- has determined that Bank engages directly in the business ments relating to, among other things, Bank's capital ade- of banking outside the United States through its banking quacy, liquidity, credit exposure, foreign exchange posi- operations in the Czech Republic. Bank has provided the tions, asset quality, and investments in other companies. Board with information necessary to assess the application Information on Bank's transactions with affiliates is re- through submissions that address the relevant issues. ported to the CNB in Bank's quarterly report on loan The Board also has taken into account the additional classifications. Bank's investments in nonbank financial standards set forth in section 7 of the IBA and Regulation K (12 U.S.C. § 3105(d)(3),(4); 12 C.F.R. 211. 24(c)(2)). In this regard, the CNB has indicated that it 2. Promstroybank of Russia, 82 Federal Reserve Bulletin 599 (1996). 3. On-site examinations of banks that have had problems in the past may be conducted more frequently, generally every two years. 4. The internal auditors review Bank's foreign operations as needed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 599 does not object to the establishment of Bank's proposed Voting for this action: Chairman Pro Tempore Greenspan and representative office. Governors Kelley, Lindsey, Phillips, and Yellen. The Board has determined that financial and managerial JENNIFER J. JOHNSON factors are consistent with approval of the proposed repre- Deputy Secretary of the Board sentative office. Bank's financial and managerial resources indicate that there is a reasonable degree of certainty Promstroybank of Russia concerning the financial stability of Bank, based on its Moscow, Russian Federation operating record and financial standing within the country. In addition, Bank's operating record indicates that it is Order Approving Establishment of a Representative capable of complying with applicable laws. Office Finally, with respect to access to information about Bank's operations, the Board has reviewed the restrictions Promstroybank of Russia ("Bank"), Moscow, Russian on disclosure under applicable law and has communicated Federation, a foreign bank within the meaning of the with the relevant government authorities regarding access International Banking Act ("IBA"), has applied under secto information. Bank has committed to make available to tion 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a the Board such information on the operations of Bank and representative office in New York, New York. The Foreign its affiliates that the Board deems necessary to determine Bank Supervision Enhancement Act of 1991 ("FBSEA"), and enforce compliance with the IBA, the Bank Holding which amended the IBA, provides that a foreign bank must Company Act of 1956, as amended, and other applicable obtain the approval of the Board to establish a representa- Federal law. To the extent that the provision of such tive office in the United States. information to the Board may be prohibited or impeded by Notice of the application, affording interested persons an law, Bank has committed to cooperate with the Board in opportunity to submit comments, has been published in a obtaining any necessary consents or waivers that might be newspaper of general circulation in New York, New York required from third parties in connection with the disclo- {The New York Times, September 23, 1994). The time for sure of certain information. In light of these commitments filing comments has expired and the Board has considered and other facts of record, and subject to the conditions the application and all comments received. described below, the Board concludes that Bank has pro- Bank was established as a state-owned enterprise in vided adequate assurances of access to any necessary infor- 1922 and was privatized in 1991. No shareholder of Bank mation the Board may request. currently owns more than 2 percent of its shares. As of On the basis of all the facts of record, and subject to the July 1, 1995, Bank had assets of $1 billion. Bank engages commitments made by Bank, as well as the terms and in a broad range of banking activities and related financial conditions set forth in this order, the Board has determined services through a network of branches in Russia. In addithat Bank's application to establish a representative office tion, Bank has 11 bank subsidiaries in Russia.1 Bank also should be, and hereby is, approved. Should any restrictions maintains representative offices in London, England, and on access to information on the operations or activities of Geneva, Switzerland. Bank and any of its affiliates subsequently interfere with In acting on an application to establish a representative the Board's ability to determine the compliance by Bank or office, the IBA and Regulation K provide that the Board its affiliates with applicable federal statutes, the Board may shall take into account whether the foreign bank engages require termination of any of Bank's direct or indirect directly in the business of banking outside of the United activities in the United States. Approval of this application States and has furnished the Board the information it needs is also specifically conditioned on compliance by Bank to assess the application adequately. The Board also shall with the commitments made in connection with this application, and with the conditions in this order.5 The commit- take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervision or ments and conditions referred to above are conditions regulation on a consolidated basis by its home counimposed in writing by the Board in connection with its try supervisor (12 U.S.C. § 3107(a)(2); 12 C.F.R. decision, and may be enforced in proceedings under 211.24(d)(2)). The Board also takes into account additional 12 U.S.C. § 1818 against Bank and its affiliates. standards as set forth in the IBA (12 U.S.C. § 3105(d)(3)- By order of the Board of Governors, effective April 22, (4)) and Regulation K (12 C.F.R. 211.24(c)). 1996. The Board has discretion under FBSEA with regard to requirements it may impose in connection with approval of an application to establish a representative office (12 U.S.C. § 3107(a)(2); 12 C.F.R. 211.24(d)). The Board has stated 5. The Board's authority to approve the establishment of the proposed office parallels the continuing authority of the New York State previously that the standards that apply to the establish- Banking Department to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York and its agent, the New York State Banking Department, to license the proposed office of Bank in accordance with 1. Bank also has four nonbank subsidiaries that engage in marketany terms or conditions that the New York State Banking Department ing, securities activities, real estate and insurance, and equity investmay impose. ments (less than 20 percent) in seven other nonbank companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • June 1996 ment of a branch or agency need not in every case apply to Further, the number of employees of the representative the establishment of a representative office because repre- office would be restricted. sentative offices do not engage in a banking business and The financial and managerial resources of the bank cannot take deposits or make loans. In evaluating an appli- would be reviewed to determine that there was a reasoncation to establish a representative office under the IBA and able degree of certainty concerning the financial stability Regulation K, the Board will take into account the stan- of the bank, based on its operating record and financial dards that apply to establishment of branches and agencies, standing within the country. In addition, based on the subject to certain considerations. bank's operating record and other information obtained, a With respect to supervision by home country authorities, determination would be made that the bank's record indithe Board to date has required foreign banks that proposed cated that it was capable of complying with applicable to establish a representative office to be subject to a signif- laws. Finally, all foreign banks, whether operating through icant degree of supervision by their home country supervi- branches, agencies or representative offices, will continue sor as determined with reference to a number of factors.2 to be required to provide adequate assurances of access to This standard, however, is not mandated by law and may information on the operations of the bank and its affiliates not be necessary in instances in which the activities to be necessary to determine compliance with U.S. laws. conducted by the proposed representative office would be In this application, Bank has committed that the activilimited generally to traditional representative office activi- ties of its proposed representative office will be limited to ties, such as gathering information or activities of a gener- general marketing or promotional activities, developing ally promotional nature; the number of proposed employ- and strengthening correspondent banking relationships, reees would be limited; or there are other particular factors search and consulting activities, and certain loan solicitathat minimize the potential of such office to affect ad- tion activities. Bank has also committed that the represenversely U.S. customers or counterparties. tative office will not make credit decisions on behalf of the The Board has determined that, in appropriate circum- parent bank, solicit deposits from other than institutional stances, an exception may be made to the general represen- investors, solicit business of any kind from individuals tative office standard that would permit approval of an acting in their personal capacity, or conduct any activities application by a foreign bank to establish a representative related to trading of securities or foreign exchange. office, if: With respect to home country supervision of Bank, the (i) The bank commits that the proposed representative Russian Federation has taken steps to strengthen its system office will engage only in a limited set of activities of bank supervision by, among other things, enacting sevconsidered to pose minimal risk to U.S. markets or US. eral laws to establish a framework for the supervision of counterparties, and Russian banks and to strengthen their operations. The (ii) The bank is subject to a supervisory framework that Central Bank of Russia (the "CBR") is the primary home is consistent with approval of the application, taking into country supervisor of Russian banks. The CBR is impleaccount the limited activities of the proposed office and menting the new system of bank supervision, although the operating record of the bank. such supervision would not be conducted on a consolidated basis. In assessing whether a particular applicant would be Pursuant to its expanded authority, the CBR may issue eligible for this standard, a review of the home country bank licenses, set minimum capital standards and prudensupervisory system would be expected to indicate that the tial liquidity ratios, specify accounting standards, and libank's home country supervisor is taking definite action to cense bank auditors. Oversight of the banking operations implement a system of supervision containing the factors of Bank currently is carried out by the CBR primarily previously required in representative office applications.3 through review of required regulatory reports (submitted Permissible activities normally would include soliciting monthly, quarterly and annually), and the review of externew non-retail business, conducting research, acting as nal audit reports.4 None of the reports submitted to the liaison between the foreign bank's head office and custom- CBR presently consolidates the operations or financial ers in the United States, or other limited purpose functions. condition of Bank's subsidiaries. Monthly regulatory re- Among other things, the limited representative office would ports submitted by Bank to the CBR include balance sheets not be authorized to make loan decisions, solicit deposits for the head office, branches, and the head office consolifrom non-institutional sources, or engage in business of dated with branches. Quarterly reports include reports of any kind with individuals acting in their personal capacity. income, changes in balance sheet accounts, and certain asset quality information. Annual reports include audited financial statements, such as an income statement and 2. Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). balance sheet, and detailed reports on investments, cash, 3. These would include the extent to which there is a regular review and foreign currency. of a substantial portion of the bank's operations by the home country supervisor through examination, review of external audits, or a comparable method; submission of periodic reports relating to financial performance; and assurance that the bank has a system of internal monitoring and control that enables bank management to administer 4. The CBR also has conducted limited-scope on-site examinations properly the bank's operations. of certain of Bank's operations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 601 Bank also is subject to an annual external audit. The operations, the Board has reviewed the restrictions on external auditors are required to verify financial state- disclosure under applicable law and has communicated ments, and to report any negative or adverse findings. with the relevant government authorities regarding access External audit reports of banks are required to address the to information. Bank has committed that it will make accuracy of the bank's financial reports; the adequacy of available to the Board such information on the operations the bank's internal controls; compliance with the CBR's of Bank and its affiliates that the Board deems necessary to bookkeeping and accounting requirements; and the bank's determine and enforce compliance with the IBA, the Bank implementation of recommendations made in the previous Holding Company Act of 1956, as amended, and other audit. applicable federal law. To the extent that the provision of In addition to the off-site surveillance and external audit such information to the Board is prohibited or impeded by requirements described above, the CBR imposes certain law, Bank has committed to cooperate with the Board in prudential restrictions on Russian banking institutions, in- obtaining any necessary consents or waivers that might be cluding a requirement that loans to a single borrower in an required from third parties in connection with the discloamount equal to more than 20 percent of capital must be sure of certain information. In light of these commitments approved by the CBR.5 The CBR does not impose restric- and other facts of record, and subject to the conditions tions on transactions with affiliates. described below, the Board concludes that Bank has pro- Bank supervises its domestic branches through the ap- vided adequate assurances of access to any necessary inforpointment of managers and chief accountants and through mation the Board may request. internal reports, internal audits, and head office review of On the basis of all the facts of record, and subject to the branch financial plans. Bank monitors its subsidiary banks commitments made by Bank, as well as the terms and through its representatives on the boards of directors, re- conditions set forth in this order, the Board has determined view of activity reports, and biannual meetings with man- that Bank's application to establish a representative office agement of the subsidiaries. The head office conducts au- should be, and hereby is, approved. Should any restrictions dits of all branches, but does not audit Bank's subsidiaries. on access to information on the operations or activities of Based on all the facts of record, the Board concludes that Bank and its affiliates subsequently interfere with the factors relating to the supervision of Bank by its home Board's ability to determine the compliance by Bank or its country supervisor are consistent with approval of the affiliates with applicable federal statutes, the Board may proposed representative office, taking into account its lim- require termination of any of Bank's direct or indirect ited activities and Bank's operating record. The Board has activities in the United States. Approval of this application also found that Bank engages directly in the business of is also specifically conditioned on compliance by Bank banking outside of the United States through its banking with the commitments made in connection with this applioperations in Russia. Bank has provided the Board with the cation and with the conditions of this order.6 The commitinformation necessary to assess the application through ments and conditions referred to above are conditions submissions that address the relevant issues. imposed in writing by the Board in connection with its decision, and may be enforced in proceedings under The Board has also taken into account the additional 12 U.S.C. § 1818 against Bank and its affiliates. standards set forth in section 7 of the IBA and Regulation K (12 U.S.C. § 3105(d)(3),(4); 12 C.F.R. By order of the Board of Governors, effective April 8, 211.24(c)(2)). The Board notes that the CBR has approved 1996. the request by Bank to establish the proposed representative office. Voting for this action: Chairman Pro Tempore Greenspan and The Board has determined that financial and managerial Governors Kelley, Phillips, and Yellen. Absent and not voting: Governor Lindsey. factors are consistent with approval of the proposed representative office. Bank's managerial and financial resources JENNIFER J. JOHNSON indicate that there is a reasonable degree of certainty Deputy Secretary of the Board concerning the financial stability of Bank, based on its operating record and financial standing within the country. In addition, Bank's operating record indicates that it is 6. The Board's authority to approve the establishment of the procapable of complying with applicable laws. posed representative office parallels any authority of the New York State Banking Department to license offices of a foreign bank. The Finally, with respect to access to information on Bank's Board's approval of this application would not supplant the authority of the State of New York, and its agent, the New York State Banking Department, to license the proposed office of Bank in accordance with 5. Additionally, open foreign exchange positions are limited to not any terms or conditions that the New York State Banking Department more than 10 percent of the bank's capital. may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • June 1996 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 Compass Bancshares, Inc., Peoples Bancshares, Inc., April 17, 1996 Birmingham, Alabama Belton, Texas Compass Banks of Texas, Inc., Houston, Texas Compass Bancorporation of Texas, Inc. Wilmington, Delaware Compass Bancshares, Inc., Royall Financial Corporation, April 22, 1996 Birmingham, Alabama Palestine, Texas Compass Banks of Texas, Inc., Houston, Texas Compass Bancorporation of Texas, Inc. Wilmington, Delaware Section 4 Applicant(s) Nonbanking Activity/Company Effective Date Capital City Bank Group, Inc., First Financial Bancorp, Inc., April 1, 1996 Tallahassee, Florida Tallahassee, Florida 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 ABC Bancorp, Southland Bancorporation, Atlanta April 16, 1996 Moultrie, Georgia Dothan, Alabama Absarokee Bancorporation, United Bank of Columbus, N.A. Minneapolis April 17, 1996 Absarokee, Montana Columbus, Montana Am-First Financial Corp., American Federal Bank, Minneapolis April 9, 1996 Madison, South Dakota Madison, South Dakota Farmers and Merchants Investment Co., Omaha, Nebraska BancTenn Corp., Cornerstone Community Bank, Atlanta March 22, 1996 Kingsport, Tennessee Chattanooga, Tennessee Bank of Waunakee Employee Stock Bank of Waunakee, Chicago March 28, 1996 Ownership Plan, Waunakee, Wisconsin Waunakee, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 603 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Bastrop Holdings, Inc., The First National Bank of Bastrop, Dallas March 26, 1996 Wilmington, Delaware Bastrop, Texas Beach First National Bancshares, Beach First National Bank, Richmond April 17, 1996 Inc., Myrtle Beach, South Carolina Myrtle Beach, South Carolina Brazos Bancshares, Inc., Heritage Eagle Corp., Dallas April 22, 1996 Joshua, Texas Red Oak, Texas Fore Corporation, Wilmington, Delaware Heritage Bank, Red Oak, Texas BT Financial Corporation, The Armstrong County Trust Company, Philadelphia April 10, 1996 Johnstown, Pennsylvania Kittanning, Pennsylvania The Caddo Financial Corporation, The State National Bank of Caddo Dallas April 9, 1996 Caddo Mills, Texas Mills, Caddo Mills, Texas Carnegie Bancorp, Regent Bancshares Corp, Philadelphia April 16, 1996 Princeton, New Jersey Philadelphia, Pennsylvania Carter County Bancorp, Inc., Cornerstone Community Bank, Atlanta March 22, 1996 Elizabethton, Tennessee Chattanooga, Tennessee Central Coast Bancorp, Cypress Coast Bank, San Francisco April 24, 1996 Salinas, California Seaside, California City State Bancshares, The City State Bank of Palacios, Dallas April 4, 1996 Inc.-Delaware, Palacios, Texas Dover, Delaware City State Bancshares, Inc., City State Bancshares, Inc.-Delaware, Dallas April 4, 1996 Palacios, Texas Dover, Delaware The City State Bank of Palacios, Palacios, Texas ComBankshares, Inc., Community Bank, Kansas City April 1, 1996 Prairie Village, Kansas Chapman, Kansas Community Financial Group, Inc., The Bank of Nashville, Atlanta March 29, 1996 Nashville, Tennessee Nashville, Tennessee East Texas Financial Corporation, Gladewater National Bank, Dallas April 23, 1996 Kilgore, Texas Gladewater, Texas East Texas (Delaware) Holdings, Ltd., Wilmington, Delaware East Texas National, Inc., American Bank, Dallas March 22, 1996 Palestine, Texas Huntsville, Texas East Texas-Dover, Inc., Wilmington, Delaware FBT Bancorp, Equitable Trust Savings Bank, Atlanta April 17, 1996 Baton Rouge, Louisiana Baton Rouge, Louisiana First Capital Bankshares, Inc., First Capital Bank (In Organization), Chicago March 18, 1996 Peoria, Illinois Peoria, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Federal Reserve Bulletin • June 1996 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date First Commerce Bancshares, Inc., Bank of Bertrand, Kansas City April 12, 1996 Lincoln, Nebraska Bertrand, Nebraska The Stuart Family Partnership, Lincoln, Nebraska The Catherine Stuart Schmoker Family Partnership, Lincoln, Nebraska The James Stuart, Jr. Family Partnership, Lincoln, Nebraska The Scott Stuart Family Partnership, Lincoln, Nebraska First Commerce Bancshares, Inc., First State Bank, Kansas City April 12, 1996 Lincoln, Nebraska Randolph, Nebraska The Stuart Family Partnership, Lincoln, Nebraska The Catherine Stuart Schmoker Family Partnership, Lincoln, Nebraska The James Stuart, Jr. Family Partnership, Lincoln, Nebraska The Scott Stuart Family Partnership, Lincoln, Nebraska First Michigan Bank Corporation, Arcadia Financial Corporation, Chicago March 27, 1996 Holland, Michigan Portage, Michigan Arcadia Bank & Trust Company, Kalamazoo, Michigan First National Monahans Monahans Delaware Financial Dallas April 9, 1996 Bancshares, Inc., Corporation, Monahans, Texas Dover, Delaware First National Bank of Monahans, Monahans, Texas First State Bank of Rushmore KSOP First Rushmore Bancorporation, Minneapolis March 22, 1996 Plan and Trust, Worthington, Minnesota Worthington, Minnesota Forrest Bancshares, Inc., Erie Bancorp, Inc., Chicago April 11, 1996 Forrest, Illinois Erie, Illinois Fort Wayne National Corporation, Valley Financial Services, Inc., Chicago April 19, 1996 Fort Wayne, Indiana Mishawaka, Indiana Valley American Bank and Trust Company, South Bend, Indiana George Mason Bankshares, Inc., The Palmer National Bancorp, Inc. Richmond April 18, 1996 Fairfax, Virginia Washington, D.C. Mason Holding Corporation, The Palmer National Bank, Fairfax, Virginia Washington, D.C. Holcomb Bancorp, Inc. Employee Holcomb Bancorp, Inc., Chicago March 15, 1996 Stock Ownership Plan, Holcomb, Illinois Holcomb, Illinois International Bancorporation, Northern National Bank, Minneapolis April 17, 1996 Golden Valley, Minnesota Nisswa, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 605 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Kanbanc, Inc., Citizens Bank of Norborne, Kansas City April 24, 1996 Overland Park, Kansas Norborne, Missouri LeMars Bancorporation, Inc., Brunsville Bancorporation, Inc., Chicago April 12, 1996 LeMars, Iowa Brunsville, Iowa First State Bank, Brunsville, Iowa Merrill Bancorporation, Inc., Merrill, Iowa Farmers State Bank, Merrill, Iowa Medina Community Bancshares, Medina Community Bancshares of Dallas April 17, 1996 Inc., Delaware, Inc., Hondo, Texas Wilmington, Delaware Community National Bank, Hondo, Texas Medina Community Bancshares of Community National Bank, Dallas April 17, 1996 Delaware, Inc., Hondo, Texas Wilmington, Delaware Monahans Delaware Financial First National Bank of Monahans, Dallas April 9, 1996 Corporation, Monahans, Texas Dover, Delaware National Bankshares, Inc., Bank of Tazewell County, Richmond April 24, 1996 Blacksburg, Virginia Tazewell, Virginia Star Bancshares, Inc., Star Bancshares of Nevada, Inc., Dallas April 9, 1996 Austin, Texas Carson City, Nevada First State Bank, Austin, Texas Star Bancshares of Nevada, Inc., First State Bank, Dallas April 9, 1996 Carson City, Nevada Austin, Texas Valley Community Bancorp, Inc., Valley Community Bank, Chicago April 4, 1996 St. Charles, Illinois St. Charles, Illinois Valley Ridge Financial Corporation, Community Bank Corporation, Chicago April 19, 1996 Kent City, Michigan Grant, Michigan Grant State Bank, Grant, Michigan West wood Financial Corp., Westwood Savings Bank, New York April 5, 1996 Westwood, New Jersey Westwood, New Jersey Westside Financial Corporation, Eastside Holding Corporation, Atlanta March 29, 1996 Kennesaw, Georgia Snellville, Georgia West Texas Bancshares, Inc., Monahans Bancshares, Inc., Dallas March 19, 1996 Kermit, Texas Monahans, Texas White Pine Bancorp, Inc., Bankers Capital Corporation, Minneapolis April 17, 1996 Pine River, Minnesota Lusk, Wyoming Randall Bancorp, Inc., Pine River, Minnesota Norbanc Group, Inc., Pine River, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • June 1996 Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Capital Corp of the West, To engage de novo in: (i) furnishing San Francisco March 21, 1996 Merced, California general economic information and advice, general economic statistical forecasting services and industry studies; (ii) providing advice, including rendering fairness opinions and providing valuation services, in connection with mergers, acquisitions, divestitures, joint ventures, leveraged buyouts, recapitalizations, capital structurings, and financial transactions (including private and public financing and loan syndications); and (iii) conducting financial feasibility studies Community First Bankshares, Inc., Wheaton Insurance Agency, Inc., Minneapolis April 1, 1996 Fargo, North Dakota Wheaton, Minnesota Community Trust Financial Services Personal Finance Service, Inc., Atlanta March 26, 1996 Corporation, Rossville, Georgia Hiram, Georgia Rock City Enterprises, Inc., Rockmart, Georgia FCNB Corp, Harbor Investment Corporation, Richmond April 10, 1996 Frederick, Maryland Odenton, Maryland Odenton Federal Savings and Loan Association, Odenton, Maryland First Chicago NBD Corporation, Barrington Bancorp, Inc., Chicago April 1, 1996 Chicago, Illinois Barrington, Illinois First Federal Savings Bank, Barrington, Illinois Harris Financial, MHC, First Harrisburg Bancor, Inc., Philadelphia March 29, 1996 Harrisburg, Pennsylvania Harrisburg, Pennsylvania First Federal Savings and Loan Association of Harrisburg, Harrisburg, Pennsylvania Heritage Banc shares Group, Inc., To engage in making and servicing Chicago April 12, 1996 Minneapolis, Minnesota loans InterWest Bancorp, InterWest Mortgage, San Francisco April 9, 1996 Reno, Nevada Reno, Nevada Mid Am, Inc., Mid Am Credit Corp., Cleveland April 1, 1996 Bowling Green, Ohio Columbus, Ohio Midstates Bancshares, Inc., Midstates Financial Services, Chicago April 2, 1996 Harlan, Iowa Harlan, Iowa Pilot Bancshares, Inc., National Aircraft Finance Company, Atlanta March 22, 1996 Tampa, Florida Lakeland, Florida South Plains Financial, Inc., South Plains Financial Services, Inc., Dallas March 22, 1996 Lubbock, Texas Lubbock, Texas South Plains Delaware Financial Corporation, Dover, Delaware Texas Bancshares, Inc., To engage de novo in lending activities Dallas April 24, 1996 San Antonio, Texas The Tampa Banking Company, Florida Investment Advisors, Inc., Atlanta March 27, 1996 Tampa, Florida Tampa, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 607 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Mason Holding Corporation, Palmer National Mortgage, Inc., Richmond April 18, 1996 Fairfax, Virginia Rockville, Maryland George Mason Bankshares, Inc., Fairfax, Virginia 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 Citizens Commercial and Savings Bank, Second National Bank of Saginaw, April 11, 1996 Flint, Michigan Saginaw, Michigan National Bank of Royal Oak, Royal Oak, Michigan State Bank of Standish, Standish, Michigan Second National Bank of Bay City, Bay City, Michigan Grayling State Bank, Grayling, Michigan 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 Bank of Tazewell County, NBI Interim Bank, Richmond April 24, 1996 Tazewell, Virginia Blacksburg, Virginia Crestar Bank MD, Mellon Bank (MD), Richmond April 19, 1996 Bethesda, Maryland Rockville, Maryland Elkridge Bank, Odenton Federal Savings and Loan Richmond April 10, 1996 Elkridge, Maryland Association, Odenton, Maryland F & M Bank, Little Chute Branch of TCF Bank Chicago March 21, 1996 Kaukauna, Wisconsin Wisconsin fsb, Milwaukee, Wisconsin Johnstown Bank and Trust The Armstrong County Trust Company, Philadelphia April 10, 1996 Company, Kittanning, Pennsylvania Johnstown, Pennsylvania Marine Midland Bank, River Bank America, New York April 12, 1996 Buffalo, New York Valley Stream, New York Midland American Bank, Stanton National Bank, Dallas April 24, 1996 Midland, Texas Stanton, Texas Triangle Bank, Southern Bank and Trust Company, Richmond April 24, 1996 Raleigh, North Carolina Mount Olive, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • June 1996 Bank Merger Act—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Vectra Bank, Bank Land Company, Kansas City April 17, 1996 Denver, Colorado Denver, Colorado Southwest State Bank, Denver, Colorado PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Menick v. Greenspan, No. 95-CV-01916 (D. D.C., filed Octo- Federal Reserve Banks in which the Board of Governors is not ber 10, 1995). Complaint alleging sex, age, and handicap named a party. discrimination in employment. Kuntz v. Board of Governors, No. 95-1495 (D.C. Cir., filed Kuntz v. Board of Governors, No. 96-1079 (D.C. Cir., filed September 21, 1995). Petition for review of Board order March 7, 1996). Petition for review of a Board order dated dated August 23, 1995, approving the applications of The February 7, 1996, approving applications by The Fifth Fifth Third Bank, Cincinnati, Ohio, to acquire certain assets Third Bank, Cincinnati, Ohio, and The Firth Third Bank of and assume certain liabilities of 12 branches of PNC Bank, Columbus, Columbus, Ohio, to acquire certain assets and Ohio, N.A., Cincinnati, Ohio, and to establish certain assume certain liabilities of 25 branches of NBD Bank, branches. The Board's motion to dismiss was filed on Columbus, Ohio. Petitioner has moved to consolidate the October 26, 1995. case with Kuntz v. Board of Governors, No. 95-1495. On Lee v. Board of Governors, No. 95^1134 (2nd Cir., filed April 8, 1996, the Board filed a motion to dismiss the August 22, 1995). Petition for review of Board orders dated action. July 24, 1995, approving certain steps of a corporate reorga- Henderson v. Board of Governors, No. 96-1054 (D.C. Cir., nization of U.S. Trust Corporation, New York, New York, filed February 16, 1996). Petition for review of a Board and the acquisition of U.S. Trust by Chase Manhattan order dated January 17, 1996, approving the merger of First Corporation, New York, New York. On September 12, Citizens BancShares, Inc., Raleigh, North Carolina, with 1995, the court denied petitioners' motion for an emergency Allied Bank Capital, Inc., Sanford, North Carolina. Petition- stay of the Board's orders. The Board's brief was filed on ers' motion for a stay was denied on March 7, 1996. April 16, 1996. Research Triangle Institute v. Board of Governors, No. Beckman v. Greenspan, No. 95-35473 (9th Cir., filed May 4, 1:96CV00102 (M.D.N.C., filed February 12, 1996). Con- 1995). Appeal of dismissal of action against Board and tract dispute. others seeking damages for alleged violations of constitu- In re: Subpoena Duces Tecum, Misc. No. 96-MS-43(TPJ) tional and common law rights. The appellants' brief was (D. D.C., filed February 7, 1996). Motion to enforce a filed on June 23, 1995; the Board's brief was filed on subpoena issued to the Board seeking, among other things, July 12, 1995. bank examination material. On March 18, 1996, the matter Board of Governors v. Scott, Misc. No. 95-127 (LFO/PJA) was stayed pending the disposition of the application for a (D. D.C., filed April 14, 1995). Application to enforce an writ of certiorari from In re: Bankers Trust Co., 61 F.3d 465 administrative investigatory subpoena for documents and (6th Cir. 1996). testimony. On August 3, 1995, the magistrate judge issued Inner City Press!Community on the Move v. Board of Gover- an order granting in part and denying in part the Board's nors, No. 96-4008 (2nd Cir., filed January 19, 1996). Peti- application. On September 18, 1995, the intervenor moved tion for review of a Board order dated January 5, 1996, for reconsideration of a portion of the magistrate's ruling. approving the applications and notices by Chemical Bank- Money Station, Inc. v. Board of Governors, No. 95-1182 ing Corporation to merge with The Chase Manhattan Cor- (D.C. Cir., filed March 30, 1995). Petition for review of a poration, both of New York, New York, and by Chemical Board order dated March 1, 1995, approving notices by Bank to merge with The Chase Manhattan Bank, N.A., both Bank One Corporation, Columbus, Ohio; CoreStates Finanof New York, New York. Petitioners' motion for an emer- cial Corp., Philadelphia, Pennsylvania; PNC Bank Corp., gency stay of the transaction was denied following oral Pittsburgh, Pennsylvania; and KeyCorp, Cleveland, Ohio, argument on March 26, 1996. to acquire certain data processing assets of National City Hotchkiss v. Board of Governors, No. 3:96CV7033 (N.D. Corporation, Cleveland, Ohio, through a joint venture sub- Ohio, filed January 19, 1996). Appeal of order of bank- sidiary. On April 23, 1996, the court vacated the Board's ruptcy court granting Board's motion for summary judg- order. ment in adversary proceeding challenging dischargeability Jones v. Board of Governors, No. 95-1142 (D.C. Cir., filed of Board consent order. March 3, 1995). Petition for review of a Board order dated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 609 February 2, 1995, approving the applications by First Com- violated Section 3(a) and Section 4(a) of the Bank Holding merce Corporation, New Orleans, Louisiana, to merge with Company Act of 1956, as amended ("BHC Act");2 and City Bancorp, Inc., New Iberia, Louisiana, and First Bank- Section 11(a) and Section 21(a) of the Board's Regulation shares, Inc., Slidell, Louisiana. Oral argument was heard on Y.3 The Notice sought the entry of a cease and desist order February 27, 1996. On March 26, 1996, the court denied the against IAI, Ulrich and Rice, and also sought civil money petition for review. penalties in the amounts of $1,000,000 against IAI and In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed $10,000 against Ulrich.4 On February 16, 1995, Rice en- January 6, 1995). Action to enforce subpoena seeking pre- tered into a consent cease and desist order with the Board decisional supervisory documents sought in connection with pursuant to which he was dismissed from this proceeding.5 an action by Bank of New England Corporation's trustee in bankruptcy against the Federal Deposit Insurance Corpora- Administrative Hearing and Post-Hearing Matters tion. The Board filed its opposition on January 20, 1995. Oral argument on the motion was held July 14, 1995. After a week-long hearing, Administrative Law Judge Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New Walter J. Alprin issued his Recommended Decision on York, filed September 17, 1991). Action to freeze assets of September 14, 1995. In the Recommended Decision, Judge individual pending administrative adjudication of civil Alprin found that the Board had established by a preponmoney penalty assessment by the Board. On September 17, derance of the evidence its allegations against Respon- 1991, the court issued an order temporarily restraining the dents: that Respondents had violated the BHC Act and transfer or disposition of the individual's assets. Regulation Y by IAI's acquisition of control of the National Bank of Conroe ("NBC") and of Sun Belt Bancshares ("Sun Belt") without prior Board approval; that in FINAL ENFORCEMENT DECISION ISSUED BY THE BOARD so doing IAI had violated Section 3(a) of the BHC Act by OF GOVERNORS becoming a bank holding company without prior Board approval; and that Respondents had violated Section 4(a) In the Matter of of the BHC Act by engaging in non-banking businesses without Board approval through subsidiaries and affiliates Interamericas Investments Ltd. of IAI. Accordingly, Judge Alprin recommended the impo- Cayman Islands sition of civil money penalties in the amounts sought in the Notice: $10,000 against Ulrich and $1,000,000 against IAI. Docket Nos. Judge Alprin did not recommend the institution of a cease and desist order against Respondents. 94-064-B-HC The parties filed Exceptions to the Recommended Deci- 94-064-B-I1 sion on October 23, 1995. Respondents argued in their 94-064-CMP-HC exceptions primarily that they had committed no violations 94-064-CMP-I1 because IAI did not have "control" of NBC or of Sun Belt within the meaning of the BHC Act. Enforcement Counsel Final Decision and Order This is an administrative proceeding initiated by the Board 1818(i), are applicable with respect to bank holding companies by of Governors of the Federal Reserve System (the "Board") operation of 12 U.S.C. § 1818(b)(3), which provides that on August 8,1994, by the issuance of a "Notice of Charges 12 U.S.C. § 1818(b)-(s) and 12 U.S.C. § 1818(u) "shall apply to any bank holding company, ... in the same manner as they apply to a and of Hearing Issued Pursuant to Section 8(b) of the State member insured depository institution." Ulrich, as "ministerial Federal Deposit Insurance Act, as Amended ("FDI Act"), agent" in the United States for IAI, is therefore an "institutionand Notice of Assessment of Civil Money Penalty Issued affiliated party" of IAI and accordingly subject to these proceedings. Pursuant to Section 8(i) of the FDI Act and Section 8(b) of See In the Matter of James L. Magee, 78 Federal Reserve Bulletin 968 (1992) (order of prohibition under FDI Act against individual the Bank Holding Company Act, as Amended (the "BHC institution-affiliated party of bank holding company). Act")" (the "Notice") against Interamericas Investments, 2. 12 U.S.C. §§ 1842(a) and 1843(a). Ltd., a Cayman Islands corporation ("IAI"); Peter Ulrich, 3. 12 C.F.R. 225.11(a), 225.21(a). an institution-affiliated party of IAI ("Ulrich"); and Robert 4. The Notice did not seek civil money penalties against Rice. In 1992, Rice entered into a consent order of prohibition and a consent L. Rice, an institution-affiliated party of Sun Belt Bancorder of assessment of civil money penalties with the Office of the shares, Inc. ("Rice"). The Notice alleged that IAI, and Comptroller of the Currency to settle allegations of violations in Ulrich and Rice as institution-affiliated parties of IAI,1 connection with his role in the 1985 Notice of Change in Bank Control filed with the OCC concerning IAI's role in the acquisition of control of NBC. See In the Matter of Robert L. Rice, Order to Cease 1. "Institution-affiliated party" is defined in 12 U.S.C. § 1813(u) as and Desist Issued Upon Consent Pursuant to the Federal Deposit "any director, officer, employee, or controlling stockholder (other than Insurance Act, as Amended (February 16, 1995) (consent order); see a bank holding company) of, or agent for, an insured depository infra at B.l. (May 1985 Notice of Change in Bank Control) (1985 institution." 12 U.S.C. § 1813(u) (emphasis added). These proceed- Notice of Change in Bank Control). ings, instituted under Sections 8(b) (cease and desist order) and 8(i) 5. IAI and Ulrich are hereinafter collectively referred to as "Respon- (civil money penalties) of the FDI Act, 12 U.S.C. §§ 1818(b) and dents." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Federal Reserve Bulletin • June 1996 argued in their exceptions that the Administrative Law nonbank subsidiaries. Section 4(a) of the BHC Act pro- Judge should have recommended that the Board impose hibits, with certain specific exceptions, a bank holding cease and desist orders against Respondents. On Janu- company from acquiring or retaining the direct or indiary 19, 1996, the Secretary of the Board served notice rect ownership or control of voting shares "of any pursuant to Section 40 of the Uniform Rules of Practice company which is not a bank." Section 4(a)(2) of the and Procedure, 12 CFR Part 263 ("Uniform Rules"), that Act specifically prohibits a bank holding company from the record was deemed complete and submitted for final "engaging in any activities other than (A) those of decision. banking or of managing or controlling banks and other subsidiaries authorized under the Act . . . and (B) those Summary of Findings and Conclusions permitted under [section 4(c)(8) of the Act.]" Section 4(c)(8) of the BHC Act permits a bank holding company to acquire shares of any company where prior Board Upon review of the administrative record, including all approval has been obtained and the Board has deterpost-trial submissions of the parties, the Board hereby mined that the company's activities are closely related to makes its Final Decision, and adopts the Administrative banking. 12 U.S.C. § 1843(a)(l)-(2). Law Judge's Recommended Decision, Recommended Findings of Preliminary Fact and Recommended Conclu- Section 21(a) of the Board's Regulation Y implements sions of Law, except as specifically supplemented or modthis section by providing that a bank holding company or a ified herein. The Board accordingly determines that the subsidiary may not engage in activities that are not closely attached Final Assessment of Civil Money Penalty and related to banking, and that it may not engage in an activity Cease and Desist Order shall issue against IAI and against which is closely related to banking unless it obtains prior Ulrich. Board approval. 12 C.F.R. 225.21(a). A. Statutory and Regulatory Background B. Summary of Findings of Fact and Conclusions of Law 1. Becoming a Bank Holding Company Without Prior Board Approval by Acquiring Control of a Bank or of a 1. Factual Summary. Respondents' Plan to Acquire A Bank Holding Company Without Prior Board Approval. Bank. Ulrich is a Mexican national who settled in the Section 3(a) of the BHC Act requires prior Board ap- Conroe, Texas area in 1982. Ulrich began dealing with proval before a company becomes a bank holding commajor Houston banks, including Texas Commerce Bank pany. 12 U.S.C. § 1842(a). A "bank holding company" and First City Bank, on behalf of his family members is any company which has control over any bank or over and other wealthy Mexican nationals whom he knew.6 any company that is or becomes a bank holding com- During this time he became reacquainted with Helmut pany. 12 U.S.C. § 1841(a)(1). Eindorf ("Eindorf"), whom he had known from childhood in Mexico City and who had also moved to the Section 2(a)(2) of the BHC Act defines "control" as Conroe area. By late 1984, Ulrich and Eindorf began follows: Any company has control over a bank or over discussing various business investment opportunities any company if— with Mack Barnhill ("Barnhill"), a local State Farm (A) The company directly or indirectly or acting Insurance agent. Barnhill introduced Ulrich and Eindorf through one or more other persons owns, controls, to Rice, a local attorney, whom he described as an or has power to vote 25 per centum or more of any international lawyer with particular experience in orgaclass of voting securities of the bank or company; nizing offshore corporations. Rice's legal practice had in (B) The company controls in any manner the elec- fact consisted mostly of preparing loan documentation tion of a majority of the directors or trustees of the for residential real estate and simple commercial real bank or company; or estate transactions. By the beginning of 1985, Ulrich, (C) The Board determines, after notice and opportu- Eindorf, Barnhill and Rice decided to form or to acquire nity for hearing, that the company directly or indi- an as-yet-unidentified bank in the Conroe area. rectly exercises a controlling influence over the management or policies of the bank or company. 12 U.S.C. § 1841(a)(2). Section 11(a) of the Board's Regulation Y implements this statutory provision by 6. As Judge Alprin found in the Recommended Decision, the requiring a prior application to the Board for the formaevidence does not establish with any specificity the identities of the tion of a bank holding company. 12 C.F.R. 225.11(a). various wealthy Mexican nationals involved in this case or the precise role which each played. See, e.g., Recommended Decision at 70. 2. Engaging in Non-Banking Businesses Per Se and While the nationality of these individuals is relevant to the Board's determination in that it provided an incentive to disguise their involve- Without Prior Board Approval. Section 4 of the BHC ment in the violations, the Board does not find it necessary to Act contains two provisions that together limit the non- determine the precise actions of each person, since the evidence is banking activities of bank holding companies and their sufficient to support the Board's conclusions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 611 The Confidential Offering Memorandum. In order to course notes in favor of Langham Creek. Rice further finance this venture, the group decided that it would need arranged the funding of the loans by wealthy Mexican to obtain funds from wealthy Mexican nationals acquainted nationals, who deposited funds in 90-day certificates of with Ulrich or Eindorf. Enrique Pimienta ("Pimienta"), a deposit ("CDs") at Langham Creek. These CDs fully friend of Ulrich's, agreed in early 1985 to assist in gather- secured Langham Creek's nonrecourse loans to the Local ing investors. The group believed that it would be easier to Conroe Participants. The Local Conroe Participants were attract potential Mexican investors if they were promised told that they would have no personal liability on the loans anonymity. and that Mexican investors would purchase their personal Rice prepared a "Confidential Offering Memorandum" Langham Creek notes before any payments of principal or soliciting shareholder subscriptions of $5,100,000 for the interest became due. The Local Conroe Participants were formation of a Cayman Islands holding company. The not told, however, that the loans had been fully secured by Confidential Offering Memorandum stated that the propos- CDs whose funding had been arranged by IAI and its al's primary objective was "Acquisition of a United State agents. None of the Local Conroe Participants paid any of Bank and Trust at the Earliest Possible Date." their own funds for any shares of NBC stock, except for The Confidential Offering Memorandum stated that an the purchase by Rice and four other Local Conroe Partici- "executive committee" of the Cayman Islands holding pants of qualifying directors' shares. By the end of June company would choose the officers and directors of the 1985, each Local Conroe Participant executed an "irrevobank, and that a "representative" answerable to this "exec- cable" Voting Trust Agreement granting Rice the sole utive committee" would control the bank as chairman of power to vote that individual's shares. the bank's executive committee. The Confidential Offering May 1985 Notice of Change in Bank Control. On May 30, Memorandum stated that this "representative" would be 1985, Rice filed a Notice of Change in Bank Control with required to be a United States citizen in order to be on the the OCC ("CIBC Notice") in which he listed the acquiring bank's board of directors. parties of approximately 80 per cent of NBC's common The Creation oflAI. In February 1985, Rice arranged for a stock as himself, Barnhill, and the other 15 Local Conroe Cayman Islands accountant to organize Interamericas In- Participants. The CIBC Notice indicated that the purchase vestments Ltd. ("IAI"), a Cayman Islands company. IAI price was to be financed by loans from Langham Creek and issued two classes of shares: Class A voting shares, which that the only collateral for the loans was "bank stock were not entitled to dividends or other distributions; and purchased." The CIBC Notice did not refer to the CDs Class B nonvoting shares, which were entitled to all divi- pledged by IAI which fully secured the loans, nor did it dends and distributions. Ultimately, Pimienta became the refer to the nonrecourse status of the loans to the Local holder of all authorized and issued Class A shares of IAI. Conroe Participants. The CIBC Notice did not disclose any Rice also arranged for the creation of an IAI subsidiary facts relating to IAI, Ulrich, the Mexican investors who through which IAI was to pay Rice's expenses. funded the NBC acquisition, or to IAI's intention to ac- The Acquisition of NBC. In February or March 1985 Rice quire the Langham Creek notes before any payments beentered into negotiations on behalf of Ulrich, Eindorf, came due, and thereby to become the majority owner of Pimienta and himself for the acquisition of a majority of NBC. the common stock of the National Bank of Conroe The Schematic Chart. On approximately June 11, 1985, ("NBC"). By April 1985, however, Rice had met with Rice met with Ulrich and Pimienta in preparation for the representatives of the Office of the Comptroller of the closing of the NBC acquisition. At this meeting, Rice Currency ("OCC") and had learned that foreign nationals prepared a handwritten diagram showing the intended relawould have difficulty in obtaining regulatory approval to tionship between IAI and NBC (the "Schematic Chart"). control NBC. Rice stated to the sellers of NBC, on behalf Notwithstanding his knowledge that Mexican nationals of the group, that they were interested only in a majority could not control a bank, Rice used the Schematic Chart to interest in NBC and not in simply injecting additional show Ulrich (and, through him, wealthy Mexican nationcapital in the bank. An agreement for the acquisition and als) how those nationals could obtain control of NBC control of NBC was signed on May 8, 1985, by the sellers despite lack of regulatory approval. of NBC and by Rice as "Trustee." IAI posted the earnest The Schematic Chart showed IAI was to have control money deposit required under the agreement. over an "executive committee", which was to have control Local Conroe Participants/Voting Trusts. Ulrich and Pi- over a "voting trustee," who in turn would have control mienta raised all the funds necessary for the acquisition, over the board of directors of NBC. The Schematic Chart and recruited local Conroe individuals ("Local Conroe listed names of individuals who were to constitute NBC's Participants") to hold the NBC shares for IAI so that the directors, and these individuals were in fact subsequently Mexican investors could remain anonymous. Because Ul- elected to the board of directors of NBC. Among these rich told Rice that the Mexican investors would prefer to names was the name of the then-current chairman of capitalize NBC indirectly, Rice arranged to have the Local NBC's board, George Sowers ("Sowers"). Conroe Participants borrow funds to purchase the NBC The Acquisition of NBC: Closing and Election of NBC shares from Langham Creek National Bank in Houston Directors. When the NBC acquisition closed on July 12, ("Langham Creek") and in exchange for executing nonre- 1985, Rice and the Local Conroe Participants became Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Federal Reserve Bulletin • June 1996 record owners of a total of approximately 80 percent of the Sun Belt Acquires NBC. According to documents prepared outstanding shares of NBC. After the closing, Rice as by Rice, Sun Belt became a bank holding company through voting trustee elected a new slate of directors for NBC and the exchange of NBC shares by Rice and the Local Conroe made himself chairman of the board. Participants (as well as a few of NBC's original sharehold- The Formation of Sun Belt. During the time prior to and ers) for Series A voting shares of Sun Belt. All of the Local immediately after the closing of the NBC acquisition, Rice Conroe Participants executed new voting trust agreements began forming Sun Belt Bancshares ("Sun Belt") to be a granting Rice the power to vote all of Sun Belt's shares. holding company for NBC. Rice wrote to the Local Conroe Rice then elected himself to Sun Belt's board of directors. Participants shortly after the NBC acquisition, stating that Sun Belt's board then elected Rice as President. he was applying to the Federal Reserve Bank of Dallas IAI Acquires Sun Belt. Between January and July 1986, ("FRB-Dallas") for approval of formation of a one-bank Rice and IAI, with the assistance of Ulrich, arranged a holding company. Earlier, Rice had told some of the Local series of transactions through which IAI acquired Sun Belt. Conroe Participants that they would receive shares in Sun At the conclusion of this series of transactions, Rice as the Belt as a reward for their participation in the NBC/ agent of IAI held 100 per cent of Sun Belt's voting shares, Langham Creek stock loan transactions. Rice requested and IAI held Sun Belt's nonvoting shares. that the Local Conroe Participants agree to exchange their Between January and August 1986, IAI directly purvoting shares in NBC for non-voting preferred shares of chased additional nonvoting shares of Sun Belt so that IAI Sun Belt. owned approximately 97 percent of the equity of Sun Belt. FRB-Dallas returned Rice's first two bank holding com- Sun Belt contributed most of these funds as capital to NBC pany applications for Sun Belt as "substantially incom- to support NBC's increased volume of back-to-back loan plete" because, among other things, the proposed capital transactions7 with wealthy Mexican nationals associated structure did not meet FRB-Dallas requirements as to the with IAI. maximum permissible amount of equity in the form of Disputes Between IAI and Rice. Eventually the relationship preferred stock. These applications made no mention of between Rice and IAI (and, in particular, between Rice and IAI's relationship to Sun Belt, NBC or Rice. Ulrich) soured. Rice agreed to sell the voting shares of Sun In a third bank holding company application filed with Belt and sever his relationship with IAI, Sun Belt and FRB-Dallas, Rice proposed that he and the other Local NBC. Although Rice ultimately did sell his voting shares Conroe Participants would acquire Sun Belt shares in ex- to Ulrich, Rice initially requested $1,000,000, which Ulchange for NBC shares, and that the Local Conroe Partici- rich rejected as too high. On July 6, 1988, Rice and Ulrich pants would execute a Sun Belt voting trust agreement executed documents reflecting the sale of the Sun Belt substantially the same as the NBC voting trust agreement. voting shares, the placement of those shares into escrow In response to FRB-Dallas's concerns on the use of pre- pending approval of their sale to Ulrich, the severance of ferred stock, Rice's cover letter stated "PREFERRED Rice's relationships with all the IAI affiliates, and mutual SHARES WILL NOT BE USED TO ANY DEGREE IN THE releases. CONTEMPLATED EXCHANGE UNDER THIS APPLICA- Non-Banking Businesses. After July 25, 1985, and through- TION." (Capitals and underlining in original.) The third out the period relevant to these proceedings, IAI operated application accordingly did not contain any proposal con- various non-banking businesses through subsidiaries in cerning using preferred stock as part of the holding compa- which it had a voting interest of 50 percent or more, ny's equity. The third application, like the first two, failed including a restaurant franchise operation, an import/export to disclose any relationship or involvement between the trading concern, a mortgage investment and servicing operproposed bank holding company on the one hand, and IAI, ation, a real estate title insurance company, an automobile Ulrich or Pimienta on the other. The third application also repair facility; and a mortgage investing company. failed to disclose that Rice's indebtedness to Langham 1988-1989 Notices of Change in Bank Control. From July Creek was both nonrecourse and fully secured by an IAI- 1988 through August 1989 Ulrich submitted three Notices related CD. On the basis of the facts presented to it, of Change in Bank Control with FRB-Dallas regarding his FRB-Dallas approved the third application. proposed acquisition of the Sun Belt voting shares. Ulrich Sun Belt Issues Preferred Stock. Notwithstanding the repre- revealed to FRB-Dallas some but not all of the circumsentations to FRB-Dallas, Rice as president and sole direc- stances surrounding IAI's previously-undisclosed acquisitor of Sun Belt amended Sun Belt's articles of incorpora- tion of control of NBC and Sun Belt. When FRB-Dallas tion one week after the third Sun Belt application was returned the first Notice on August 2, 1988, it observed that approved to authorize the issuance of preferred shares and IAI appeared already to be a bank holding company in to create two series of common shares, Series A and violation of the BHC Act and recommended that IAI either Series B, where only Series A shares had voting rights. file a formal application or divest itself of ownership in FRB-Dallas was not notified of this action. This amendment of Sun Belt's articles of incorporation also provided that Sun Belt's board of directors could declare dividends 7. I.e., loans fully secured by certificates of deposit. See, e.g., Recommended Decision ("RD") at 14 (" 'back-to-back' certificates on any class or series of stock to the exclusion of any other of deposit to be pledged by IAI [to secure the Langham Creek loans to class of stock. the Local Conroe Participants]"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 613 Sun Belt to an acceptable limit. Ultimately, the Board of (a) The lack of evidence that Respondents ever exer- Governors issued a Notice of Intent to Disapprove on cised or attempted to exercise control; and March 14, 1990, indicating that IAI's ownership and con- (b) The existence of the July 1988 stock escrow. trol of Sun Belt and NBC was "inconsistent with the BHC Instead, Respondents argue that "[t]his was Rice's show Act" and stating that the Board of Governors expected that from the beginning" (Respondents' Exceptions at 3), con- IAI "will take all steps necessary to comply with the BHC tending that although Rice may have been their lawyer, he Act by year-end 1990." betrayed their trust and was not acting in their interests but After the March 14 Notice of Intent to Disapprove was rather on his own behalf. Respondents argue that this issued, Respondents requested a hearing under the Change independence prevented the existence of any control relain Bank Control Act. In lieu of pursuing this hearing, a tionship between IAI on the one hand, and NBC and Sun request for reconsideration was filed with the Board's staff, Belt on the other hand. which was delayed when the U.S. Customs Service began a. Respondents' "Exercise of Control or Attempts to Exeran investigation of money laundering allegations relating cise Control" Arguments Do Not Rebut the Finding of to NBC and IAI. That investigation did not result in any Indirect Control. Respondents contend that they could not money laundering charges against NBC, IAI or their prin- have exercised indirect control because there was no evicipals. A new divestiture plan was submitted to the Board dence of the exercise of control or of attempts to exercise in September 1992 pursuant to which Sun Belt would be control: "not one single witness testified to any efforts, dissolved and an IAI shareholder who was a relative of much less successful efforts, by Respondents to control the Ulrich's, together with other unidentified Mexican inves- activities of either the bank or the holding company." tors, would file a Notice of Change in Bank Control with (Respondents' Exceptions at 2) These arguments, however, the OCC. On August 8, 1994, the Notice of Charges are beside the point in that they do not address the Admininstituting these proceedings was issued. istrative Law Judge's finding that IAI indirectly controlled NBC and Sun Belt within the meaning of Section 2(a)(2)(A). Respondents' arguments instead address 2. Summary of Legal Conclusions and Adoption by Board. only an alternative statutory basis for finding control that In his Recommended Decision, which the Board adopts, was not relied upon by Enforcement Counsel or the Adthe Administrative Law Judge concludes that IAI was an ministrative Law Judge. illegal bank holding company because it had "control" Respondents' position, therefore, reflects a fundamental over NBC within the meaning of Section 2(a)(2)(A) of the misreading of the alternative bases for control under the BHC Act, "indirectly" and/or "acting through" Rice, by BHC Act. The Respondents would require that the Board virtue of IAI's role in the July 1985 acquisition of NBC ignore Section 2(a)(2)(A) entirely by making the control and by virtue of its relationship with Rice. The Administra- determination here turn on the alternate Section 2(a)(2)(C) tive Law Judge also concludes, and the Board adopts the that "the company directly or indirectly exercises a conconclusion, that IAI had "control" over Sun Belt within trolling influence over the management or policies of the the meaning of Section 2(a)(2)(A) of the BHC Act by bank or company" in order to find control under that virtue of its role in the acquisition of equity interests in Sun subsection. 12 U.S.C. § 1841(a)(2)(C) (emphasis added). Belt and by virtue of its relationship with Rice. The Admin- Section 2(a)(2)(A), an independent basis for a control istrative Law Judge further concludes, and the Board determination upon which the Recommended Decision readopts the conclusion, that IAI and Ulrich violated Section lies, requires no such showing. Since the definitions of 3(a) of the BHC Act and Section 11(a) of Regulation Y by control in Section 2(a)(2) of the BHC Act are disjunctive causing IAI to become a bank holding company without and not conjunctive, the Administrative Law Judge was not prior Board approval. required to make any findings under Section 2(a)(2)(C). The Administrative Law Judge also concludes, and the Respondents have based their exceptions upon disproving Board adopts the conclusion, that IAI violated Section 4(a) an evidentiary showing which is irrelevant to this case of the BHC Act and Section 21(a) of Regulation Y by while failing to rebut the applicable one. acquiring and retaining, after July 25, 1985, direct or The plain language of the statute does not permit the indirect ownership or control of voting shares of IAI Inc., a limitation that Respondents propose. The Supreme Court company engaged either directly or indirectly through sub- described the wide latitude of the control determination sidiaries and joint business agreements in non-approved provisions: "[E]ven before its scope was expanded in 1970 non-banking businesses. [by the addition of the "acting through ... persons" language], section 1842(a) was concerned with more than the literal 'acquisition' of stock: It took broad account of the C. Respondents' Exception Arguments are 'indirect' control of stock and the control of boards of Unfounded directors 'in any manner' by bank holding companies." United States v. Citizens & Southern Nat'I Bank, 422 U.S. 1. The Evidence Establishes Indirect Control. Respondents 86, 109 (1975). Either the "indirectly" phrase or the "actcontend that the Administrative Law Judge's finding of ing through one or more other persons" phrase, or both indirect control is contradicted by: taken together, would reach the situation here where an Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • June 1996 individual holds voting shares of a bank or a company, not added).) This Indemnification Agreement and other eviin his own right, but for the benefit of a company. The dence in the record clearly show that at the relevant time principle that attributes shares nominally held by an indi- both the Respondents on one hand and Rice on the other vidual (such as Rice) to a company (such as IAI) in hand acknowledged that Rice was and had been both the appropriate circumstances requires no semantic stretch, but attorney and the agent of IAI. Notwithstanding Rice's merely gives the language of the statute its plain meaning. testimony denying his agent status,9 therefore, there is Even if it were necessary to look past the plain language, simply no credible evidence to the contrary. Accordingly, an examination of the legislative history of the statute IAI cannot escape the attribution to it of Rice's activities as demonstrates that Congress intended "indirect control" to its agent. reach circumstances such as those presented here. As the c. IAI's Role in the Acquisition of NBC and Sun Belt Administrative Law Judge observed in the Recommended Supports the Finding of Indirect Control by IAI. The Decision, Congress in the 1966 amendments to the BHC evidence of Respondents' role in the NBC and Sun Belt Act has "because of indirect dominance deemed a com- acquisitions refutes Respondents' arguments that those pany to be in control of bank shares in order to avoid the roles were not sufficient to support a finding of indirect practical and procedural problems inherent in proving ac- control by IAI of NBC and Sun Belt. tual control." (RD at 58, citing Committee on Banking & (1) The Actions Taken to Control NBC Conform to Currency, 89 Cong., 1st Sess., Amendments to the Bank Respondents' Written Intentions. The Recommended holding Company Act of 1956: Analyses of S. 2353, Decision found that the Confidential Offering Memoran- S. 2418, and H.R. 7271 at 8-9)." Thus, the Administrative dum which Rice prepared in early 1985 (Board Exh. 1) Law Judge concluded, "Congress decided that under ap- ("Confidential Offering Memorandum") and the handpropriate circumstances a company may still be a bank written schematic chart presented by Rice to Ulrich and holding company on the basis of bank shares that the Pimienta in June 1985 (Board Exh. 11) ("Schematic company does not own directly and regardless of whether Chart") taken together demonstrated that Respondents actual control is proven, where an indirect control is shown intended to and did carry out a plan to obtain control by the entirety of the facts." (RD at 58.) The Board agrees over a United States bank and bank holding company. that this case presents those "appropriate circumstances" (RD at 42-46.) Respondents acknowledge that the Conwhere the entirety of the facts shows indirect control and fidential Offering Memorandum reflects an intent to conthat, therefore, the company exercising that indirect control trol a bank, but Respondents claim that they abandoned is to be deemed a bank holding company within the mean- this intent after Rice's meeting with the OCC in April ing of the BHC Act. 1985, where he was told that such control was not b. The Evidence Establishes Rice's Agency Relationship permissible. The Schematic Chart, however, was prewith IAI. Ample evidence supports the Administrative pared after Rice's April 1985 meeting with the OCC and Law Judge's conclusion that IAI, acting through its agents, "show[s] that Respondents knew that without obtaining exercised indirect control over NBC and Sun Belt through: authority they could not control NBC at that point but (1) The relationship between Rice and IAI; and nevertheless still planned and ultimately engineered the (2) The role of IAI and its agents in the NBC and Sun control of the bank." (RD at 46.)10 Furthermore, the fact Belt acquisitions. that the acquisition of NBC and Sun Belt did take place Recommended Decision ("RD") at 2, 63, 71-72. That virtually exactly as described in the Confidential Offerevidence refutes Respondents' argument that Rice was not ing Memorandum and in the Schematic Chart supports IAI's agent, but was acting on his own behalf and without the inference that those actions were undertaken pursu- IAI's authorization throughout the time prior to July 6, ant to and in furtherance of the plans set forth therein.11 1988.8 The record makes manifestly clear that both Re- Therefore, the evidence supports the Administrative Law spondents and Rice acknowledged and intended that from 1985 through at least July 6, 1988, Rice would act as the 9. For example, Rice refused at trial to acknowledge that he had agent of IAI and his actions as agent are attributable to IAI. even been IAI's attorney. See, e.g., Transcript at 1507, 1510. Among the abundant evidence of Rice's agency is a 10. The fact that Rice created the Schematic Chart does not preclude document drafted at the request of and with the approval of its attribution to Respondents because, as discussed supra, Rice was IAI, and executed by both Ulrich and Rice, which states acting as the agent of Respondents until at least July 1988, as that Rice was IAI's agent. The Indemnification Agreement Respondents and Rice together acknowledged. Furthermore, as noted in the Recommended Decision, this particular undertaking of Rice's ("Indemnification Agreement") which constituted part of was ratified by Ulrich because "the chart was utilized in indicating to the July 6, 1988 stock purchase and escrow agreement Ulrich and through him to the Mexican investors the conclusive intent package, stated in its first paragraph of recitals: "Rice has to violate the statute by obtaining control without authority." (RD at been serving . . . Interamericas [Investments, Ltd.] (the 46.) "Company") in various capacities, including those of at- 11. Where the government presents circumstantial evidence of an ongoing pattern of similar transactions, the finder of fact "may reasontorney and agent; . . ." (Board Exh. 105 I (emphasis ably infer from the pattern itself that evidence otherwise susceptible of innocent interpretation is plausibly explained only as part of the pattern." U.S. v. Kington, 875 F.2d 1091, 1100 (5th Cir. 1989) (convic- 8. Respondents contend that, after July 1988, IAI was insulated tions for failing to file required currency reports supported in part by from control by the escrow agreement. defendants' interests in hiding illicit dealings). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 615 Judge's rejection of the claim that Respondents aban- tion of NBC. (RD at 54.) Shortly after averting the supdoned the plan set forth in the Confidential Offering posed "impending crisis" by purchasing the Langham Memorandum. Creek notes, IAI gave these same "local investors" gifts of (2) Respondents' Explanations of Their Role in the Sun Belt Class B common stock and options. The Admin- Acquisitions Are Not Credible. Since at least the trial in istrative Law Judge concluded that "this was the quid pro this matter, and throughout the post-trial briefing, Re- quo for the use of the names, credit, and reputations of the spondents have proffered alternative explanations for nominees." (RD at 54.) Citing the testimony of an actual their actions in an attempt to rebut the conclusions that "local investor," the Administrative Law Judge found that their actions were undertaken to obtain and maintain "[t]hese local business people had a full understanding that IAI's control of NBC and Sun Belt. These alternative they were lending their names and legitimacy to a transacexplanations were thoroughly evaluated and rejected in tion that could not be achieved by the foreign investors the Recommended Decision. Respondents have pre- alone." (RD at 55.) IAI completely financed the acquisisented no new arguments as to why any of the conclu- tion13 which, according to the testimony of the loan officer sions of the Recommended Decision on these points at Langham Creek, had been IAI's expressed intent (exshould be overturned. In particular, Respondents have pressed through Rice) since before the time that the transadvanced no argument as to why the Administrative action was entered into. (RD at 55.) Respondents have Law Judge's determinations of credibility, to which the provided no argument which makes it any less "painfully Board gives special deference, should not be respected. clear that while Respondents continue to refer to 'local Cf. In the Matter of Preston J. Brooks, OCC No. AA- investors,' in truth and in fact these individuals were no EC-91-154 (Aug. 6, 1993) at 9-10 ("the Board gener- more than 'Nominal Investors' knowingly utilized to perally defers to an Administrative Law Judge's factual petuate a bogus transaction." (RD at 55.) findings, especially those based on the Administrative The Administrative Law Judge likewise dismissed Re- Law Judge's judgments as to the credibility of the wit- spondents' argument that their involvement in the acquisinesses, . . ."); In the Matter of James L. Magee, 78 Fed. tion of NBC was for the innocent purpose of trying to Res. Bull. 968, 969 (Dec. 1992) (adopting Administra- establish a suitable track record, finding instead that "Retive Law Judge's rejection of arguments and determina- spondents purposely formulated this seemingly irrational tion "based in large part on the Administrative Law business transaction" in order to obtain control of the Judge's credibility determinations,.. ."). bank, as shown through "clear documentary evidence of For example, Respondents contend that Rice never in- each of the involved steps." (RD at 59.) The Administraformed them of the details of IAI's participation in the tive Law Judge concluded, and Respondents have failed to acquisition of NBC. The Administrative Law Judge ex- rebut, that "a $3,000,000 'assistance' in a bank that Repressly found that Ulrich was not credible when he claimed spondents viewed as imminently unstable with people they to be uninformed, pointing out that Ulrich directed Rice to had never before conducted business seems like an unreaget a lower purchase price during the negotiations for the sonable venture in which to begin establishing a track acquisition of NBC. Ulrich could not have done so, the record." (RD at 60 n.14.) Administrative Law Judge observed, unless he knew what d. The Escrow Agreement. Respondents argue throughout he was paying for.12 their exceptions that, regardless of their relationship with The Recommended Decision also expressly rejects Re- Rice and their involvement in the acquisitions of NBC and spondents' contention that through the Langham Creek Sun Belt prior to July 1988, any finding of indirect control transaction they merely provided bridge loans for the Local by Respondents after July 1988 is precluded by the Escrow Conroe Participants. "If this had been the case, certainly Agreement between Rice and Ulrich, pursuant to which the Ulrich would have required documentation from the local voting shares of Sun Belt were placed into escrow pending investors, as beneficiaries of the supposed bridge loans, approval of their sale to Ulrich. Respondents contend that, and guarantees as to the repayment of bridge loans. Of from the time of the execution of the Escrow Agreement course, no such documentation exists, and the argument is until March 1995, neither Rice nor Ulrich had control over without credible basis." (RD at 54.) the voting stock by virtue of the existence of these escrow The Administrative Law Judge also found unpersuasive arrangements. The Administrative Law Judge did not ad- Respondents' argument that IAI ultimately purchased the dress these arguments in the Recommended Decision. The Langham Creek notes from the local investors to avoid "an Board, however, concludes that the Escrow Agreement was impending crisis," but found rather that it was part of and insufficient to preclude this finding. pursuant to a plan to complete the financing of the acquisi- The Escrow Agreement was contained in a package of documentation executed in July 1988 for the ostensible 12. "The only way for Ulrich, an experienced businessman, to analyze whether the price was too high would have at a minimum 13. IAI accomplished the complete financing of the NBC acquisibeen to determine what percentage of ownership he was getting, the tion by providing collateral for the loans (collateral whose existence condition of the bank, and the prices recently paid for similar banks. was not revealed to either the "local investors" or to the regulators) in And Ulrich was certainly too experienced and sophisticated to expend the form of CDs in the face amount of the loan and then later $3,000,000 without some assurance that he would receive what he purchased the outstanding notes before any payments thereon were was paying for." RD at 53. due. RD at 54. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • June 1996 purpose of severing Rice's relationships with Ulrich, NBC, The Board has in the past interpreted the BHC Act and Sun Belt, IAI and its affiliates. The entire package taken Regulation Y to mean that "individuals and bank holding together demonstrates that to the extent that the Escrow companies should not enter into escrow arrangements . . . Agreement and related documentation were actually suffi- without securing the prior approval of the Board, since cient to remove Rice as the agent of IAI's indirect control, such action could constitute a violation of the [BHC] Act." such control was either vested in another IAI agent, Ulrich, 12 C.F.R. 225.134. In that interpretation, the Board considor in Rice and Ulrich acting together. Thus, the Escrow ered an application to become a bank holding company Agreement could not have been effective to insulate Sun wherein shares of a bank were acquired and then placed in Belt and NBC from IAI's indirect control. If the Escrow escrow with an unaffiliated escrow agent prior to the Agreement had any effect at all, that effect was solely to Board's approval of the application. The escrow agreement prevent Rice from acting alone, since under the Escrow in that instance provided, among other things, that the Agreement anything could be done provided that both applicant could not exercise voting or any other voting Ulrich and Rice consented to it. rights with respect to those shares while the shares were The Escrow Agreement pursuant to its own terms was held in escrow. The Board concluded that the company had terminable upon either the performance or termination of violated the prior approval provisions of section 3 of the the "Purchase Agreement,"14 which was the central docu- BHC Act "and that, for purposes of the BHC Act, that ment in the July 1988 package between Rice and Ulrich. company continued to control those shares in violation of Under the Purchase Agreement, Ulrich was to buy Rice's the Act." 12 C.F.R. 225.134(b) (emphasis added). "beneficial interest" in the voting shares of Sun Belt and The escrow arrangements here militate even more NBC upon obtaining regulatory approval through filing a strongly in favor of a finding that they did not insulate Notice of Change in Bank Control.15 The terms of the Respondents from control within the meaning of the BHC Purchase Agreement granted Ulrich considerable control Act. Compared to the escrow arrangements at bar, the over both the initiation and the termination of the escrow escrow arrangements in the interpretation placed signifiand the Purchase Agreement underlying it.16 Most signifi- cantly greater protections between the shares and those cantly, the Purchase Agreement, Escrow Agreement and who were found to "control" them. The escrow arrangeother documents do not prohibit Rice and Ulrich from ment in the interpretation provided for an unaffiliated estaking any action they might agree upon, including termi- crow agent, while the escrow agent in the escrow arrangenation of the transfer to Ulrich. (Purchase Agree- ments here was NBC, a wholly owned subsidiary of Sun ment 1 6.03, Escrow Agreement ^ 7(a).) Thus the disposi- Belt. In addition, the escrow arrangement in the interpretation of the voting stock under this documentation was tion was not described as having all of the additional ultimately subject to IAI's indirect control, either through provisions described above granting the parties to the ar- Ulrich alone or through Ulrich and Rice together. rangement further disposition over the shares in escrow. Nonetheless, the escrow arrangements in the interpretation were found to be insufficient to preclude "control" within the meaning of the BHC Act. Accordingly, the Board finds 14. The escrow agent under the Escrow Agreement was NBC itself, that Respondents did not cease having indirect control with Sowers signing on behalf of NBC as its President. To the extent within the meaning of the BHC Act because of the executhat the Escrow Agreement prevented anyone from voting Sun Belt's tion of the Escrow Agreement. voting shares, it preserved the status quo wherein George Sowers 2. The Board's Authority to Impose Penalties and a Cease became the only remaining director of Sun Belt in addition to continuing to serve as NBC's president. The Administrative Law Judge and Desist Order is not Time-Barred. The Board rejects specifically found that Sowers was a credible witness and expressed Respondents' argument that the case should be dismissed his "concern" with Sowers' testimony concerning the "presence of as precluded by a five-year statute of limitations. Responownership of [IAI] in [Sun Belt]." (RD at 50.) The Recommended dents argued in a pre-hearing motion to dismiss that the Decision noted that Sowers in his testimony "certainly intimates a suspicion, if not a knowledge,... of at least indirect control by IAI of August 8, 1994, notices that initiated this prosecution were Sun Belt." (Id.) Thus, any status quo preserved by the Escrow predicated solely upon two discrete acts that took place Agreement was one where the president of the bank and the sole more than five years earlier: remaining director of Sun Belt was someone who was particularly (a) IAI's acquisition of control of NBC without prior cognizant of IAI's "ownership" of Sun Belt and therefore of NBC. approval of the Board on July 12, 1985; and 15. However, the terms of the Purchase Agreement permitted Ulrich to waive the requirement of regulatory approval prior to consumma- (b) IAI's unauthorized acquisition of control of Sun tion of the purchase transaction. See Purchase Agreement at H 7.02, Belt on January 13, 1985. 7.02(e). Enforcement Counsel opposed the motion on a variety of 16. For example, the Purchase Agreement provided: that Ulrich was grounds, arguing that the civil money penalties were not entitled to specific performance of the Purchase Agreement in the event of a breach by Rice (f 3.03); that Ulrich could substitute in any barred because the violations continued during the fiveother person in his place in the Purchase Agreement (1 8.02); that year period preceding the issuance of the notices and that Ulrich in his sole discretion could determine whether Rice had caused the cease and desist order was not barred because the an "adverse change" entitling Ulrich to terminate the Purchase Agree- statute of limitations does not by its terms apply to injuncment (If 7.02, 7.02(b)); and that Ulrich could waive the requirement tive relief. of regulatory approval prior to consummation of the purchase ((11 7.02, 7.02(e)). The Administrative Law Judge denied the motion to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 617 dismiss, finding that the Respondents were charged with cability of section 2462 is in doubt, however, the Board retention of control of NBC and Sunbelt in violation of the need not resolve that question because the imposition of BHC Act up to and including the time the Administrative penalties in these factual circumstances would be consis- Law Judge ruled on the motion. Since the allegations tent with the statute in any event. included violations extending throughout the five-year pe- It is axiomatic that the application of a statute of limitariod before the notices, the Administrative Law Judge tions against the United States must receive a strict confound that the allegations were not time-barred. In their struction in favor of the government. Badaracco v. Compost-hearing brief, the respondents renewed their statute of missioner of Internal Revenue, 464 U.S. 386, 391 (1984). limitations argument by reference. The Administrative Law Indeed, this axiom has been applied to section 2462. Ca- Judge again rejected the argument on the ground that the pozzi v. United States, 980 F.2d 872, 875 (2d Cir. 1992). In violations were continuing. RD at 67 n.22. Respondents contrast to a classic criminal offense, which is complete as except to that conclusion. Exceptions at 48. soon as each element of the crime has occurred, a continu- The Board concludes that its authority to impose civil ing offense is "an unlawful course of conduct that does money penalties and to enter a cease and desist order in perdure." U.S. v. McGoff, 831 F.2d 1071, 1078 (D.C. Cir. this case is not divested by the statute of limitations, 1987). Examples of continuing offenses include repeated 28 U.S.C. § 2462. Even to the extent that the statute applies failure to file reports and failure to register as required by to the entry of penalties under the BHC Act and the FDI statute. Id. at 1078 n.13, citing Toussie v. U.S., 397 U.S. Act, the statute would be inapplicable because the respon- 112, 134-36 (1970) (White, J., dissenting) (general discusdents engaged in violations throughout the five-year period sion of continuing offenses). Where a violation continues, a preceding the issuance of the notices. Furthermore, the claim accrues throughout the duration of the violation. limitations statute does not by its terms extend to injunc- Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 tive relief, such as the cease and desist order. U.S. 481, 502 n.15 (1967). The statute of limitations as to The limitations statute reads, in relevant part: "Except as prosecutions for continuing offenses runs from the last day otherwise provided by Act of Congress, an action, suit or of the continuing offense. U.S. v. McGoff, 831 F.2d 1071, proceeding for the enforcement of any civil fine, penalty, 1079 (D.C. Cir. 1987). or forfeiture, pecuniary or otherwise, shall not be enter- Applying these authorities to the facts of this case, it is tained unless commenced within five years from the date clear that the statute of limitations never began to run when the claim first accrued. ..." 28 U.S.C. § 2462. In because these were continuing violations that were not 3M Company (Minnesota Mining and Manufacturing) v. discontinued until after the notices were issued.18 The Browner, 17 F.3d 1453 (1994), the D.C. Circuit ruled in a continuing nature of the violations is supported by the case involving the imposition of penalties by the Environ- statutory scheme, which imposes penalties for violations mental Protection Agency that the limitations period ap- on a daily basis. See 12 U.S.C. § 1847(b)(1). Thus, each plies, not just to court cases to collect penalties already day that illegal control was maintained marked the accrual assessed by agencies, but also to the agency adjudications of a discrete maximum penalty increment of $25,000. themselves. The court noted, however, that the limitations Contrary to Respondents' assertions, the penalties are period might be tolled in cases of fraudulent concealment. based, not on Respondents' initial violations in the mid- 17 F.3d at 1461 n.15. 1980's, but on the perpetuation of those violations until The Board questions whether the holding of 3M applies to enforcement proceedings under the BHC Act and the FDI Act. Those statutes prohibit not just one-time events, but also continuing failures to bring an institution or practice into conformity with the law. Furthermore, Congress § 1818(i)(3). Because this provision is not by its terms a limitation, it has explicitly addressed in the banking context the degree does not directly displace the five-year limitation period of section of repose that a banking official can expect, in that Con- 2462. Yet, it displays a clear, recently-expressed Congressional intent gress authorized banking agencies to pursue penalties that the period of repose from administrative actions should not begin against bank insiders within six years after they have left for a banking insider until six years after he or she has left the institution. The five-year limitation on administrative action is also the institution—and therefore at least six years after they anomalous when juxtaposed with the 10-year limitations period applihave participated in banking violations.17 While the appli- cable to both a civil court suit brought by the Attorney General based on banking law violations (12 U.S.C. § 1833a(g)(adopted in 1990)) and to a criminal prosecution for bank fraud. 18 U.S.C. § 3293. While Congress might conceivably have intended to apply varying limita- 17. The application of the five-year limitation to administrative tions periods for administrative and judicial proceedings, there is actions by banking agencies would be inconsistent with the intent of nothing in the general policies of repose or prompt litigation invoked Congress manifested in a provision added to the FDI Act in 1989. The by the 3M court to justify a longer period of hazard for a criminal "Stoddard fix," so-called because the legislative history makes clear prosecution than for an administrative proceeding. In the case of the that it was enacted to overturn the ruling of the D.C. Circuit in banking agencies, therefore, it is by no means clear that section 2462 Stoddard v. Board of Governors, 868 F.2d 1308 (D.C. Cir. 1989), should apply to penalty assessments. states that the separation of an individual from a financial institution 18. While the 3M court expressed doubt about the application of a "shall not affect" the jurisdiction of the relevant banking agency to "continuing violation" theory in that case, it did not directly address bring a penalty proceeding against the individual for up to six years that theory since it was not relied upon by EPA. 3M, 17 F.3d at after he or she has separated from an institution. 12 U.S.C. 1455 n.2. 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618 Federal Reserve Bulletin • June 1996 early 1995.19 This is particularly true with respect to the violations), and that the Board in any event failed to violations of Section 4 of the BHC Act, which prohibits present any such evidence. Id. unauthorized retention of direct or indirect ownership or Respondents' arguments fail because both the statute control of companies engaging in non-banking businesses. and applicable case law make clear that the finding of past 12 U.S.C. § 1843(a)(2). Thus, the civil money penalties violations under the BHC Act supports the imposition of a may be sustained on the basis of violations within the cease and desist order as well as the assessment of civil limitations period.20 money penalties.21 Section 8(b) of the Federal Deposit Even if the civil money penalties were time-barred, the Insurance Act ("FDI Act") provides that the Board may cease-and-desist proceedings would not be. There is sim- issue and serve a notice of charges to determine whether a ply no textual basis for applying section 2462 to cease-and- cease and desist order should issue if, in its opinion, the desist orders, which do not fit within the scope of the bank holding company or institution-affiliated party: "fines, penalties or forfeitures" covered by section 2462. See Federal Election Commission v. Nat'I Republican Sen- is engaging, or has engaged, or the agency has reasonatorial Committee, 877 F. Supp. 15, 21 (D.D.C. 1995). able cause to believe that the [bank holding company] or any institution-affiliated party is about to engage, in an D. Enforcement Counsel's Exception Arguments unsafe or unsound practice ... or is violating, or has violated, or the agency has reasonable cause to believe ... is 1. Imposition of a Cease and Desist Order is Warranted by about to violate, a law, rule, or regulation .... the Evidence. Enforcement Counsel excepts to the Administrative Law Judge's failure to impose the requested case 12 U.S.C. § 1818(b)(1) (emphasis added).22 Thus, the statand desist order in the Recommended Decision. (Enforce- ute on its face makes clear that cease and desist proceedment Counsel's Exceptions at 2-3.) Respondents raise two ings under Section 8(b) of the FDI Act are appropriate in arguments in opposition: first, Respondents state that En- instances of past occurrences of unsafe or unsound pracforcement Counsel is not entitled to a cease and desist tices or when the respondent has violated a law, rule or order because it "failed to request a prophylactic cease and regulation and not merely in cases of suspected prospective desist order;" and second, Respondents state that "there violations. Therefore, Enforcement Counsel was not rewas no evidence [presented] to support a prophylactic quired to state in the Notice of Charges or to prove at the cease and desist." (Respondents' Exceptions at 2-3.) Upon hearing that it had reasonable cause to believe that Responconsideration of the record and the briefs submitted by the dents were about to engage in unsafe or unsound practices parties, the Board finds that the evidence presented sup- or violate a law, rule, or regulation. Instead, Respondents ports the imposition of a cease and desist order herein. have based their exceptions upon disproving an evidentiary Both of Respondents' exception arguments stem from a showing which is not necessary to this case but have failed fundamental misapprehension of the statute and the appli- to rebut an applicable one. cable law concerning cease and desist orders. This misap- As the Administrative Law Judge correctly observed in prehension, simply stated, is that the imposition of a cease the Recommended Decision, "it is well established law and desist order requires an evidentiary finding of "reason- that a Cease and Desist Order may be instituted for past able cause ... to believe Respondents are about to engage violations that have been corrected." (RD at 70.) See First in an unsafe or unsound practice or violate a law, rule or State Bank v. FDIC, 770 F.2d 81, 83 (8th Cir. 1985). regulation" before it may impose a cease and desist order. Respondents have failed to direct the Board's attention to (Respondents' Exceptions at 3 (emphasis added).) Based any reported cases holding that a finding of prospective on this misinterpretation, Respondents contend both that violations must be made in order to impose any cease and the Board's Notice of Charges failed to give them notice desist order 23 sufficient to prepare a defense (i.e., failed to inform them that the Board intended to show likelihood of prospective 21. Respondents suggest a distinction between "prophylactic" or "prospective" cease and desist orders on the one hand, and other cease and desist orders on the other hand. However, such a distinction does not appear in the statute, and the analysis herein does not depend 19. The total of penalties that could be assessed based solely on upon a construction which makes such a differentiation. continued violations over the five years preceding the notices easily 22. This provision, applicable on its face to "insured depository exceeds the penalties imposed here. institution[s]," applies to IAI because it is applicable to bank holding 20. Indeed, even if the continuing violation theory were not avail- companies by operation of 12 U.S.C. § 1818(b)(3). See n.l, supra. able here, the facts of this case would fall within the fraudulent The Board may then issue a cease and desist order if the party served concealment doctrine expressly recognized by 3M, and the statute of with the notice of charges consents thereto or if, upon the record made limitation period would thereby have been tolled. See 3M, 17 F.3d at at a hearing, the Board "shall find that any violation . . . has been 1461 n.15. The evidence in support of this conclusion would include established." 12 U.S.C. § 1818(b)(1). the misleading Notices of Change in Bank Control filed in July 1988 23. The Board's decision to impose a cease and desist order where (Recommended Decision at 33, f 98) and November 1989 (id. at the Recommended Decision did not propose one does not undermine 36, f 108); as well as Respondents's failure to disclose information the Board's adoption of the Administrative Law Judge's findings of relevant to the November 1989 Notice that was only discovered fact and conclusions of law. Rather, the choice of remedy for regulathrough a targeted examination of Sun Belt by FRB-Dallas and the tory violations found by the Administrative Law Judge is uniquely OCC in November-December 1989 (Id. at 36-37, n 109, 110). within the province of the agency charged with administering the law Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 619 In this case, the Administrative Law Judge found, and the clarification of the record.25 All other exceptions by the Board agrees, that more than sufficient evidence has Respondents and by Enforcement Counsel are hereby debeen presented to support the conclusion that Respondents nied. violated the BHC Act and that, accordingly, civil money penalties may be imposed. The Administrative Law Judge F. Non-Banking Businesses provided no legal or other explanation for the Board to review concerning his decision not to recommend a cease The Recommended Decision found that "[t]here is no and desist order. The Board in its final review of a recom- dispute that IAI, through its subsidiaries, has throughout mended decision is uniquely qualified to match the choice the relevant period engaged in non-banking activities that of remedies to the achievement of the objectives of the are either absolutely prohibited by the BHC Act for bank BHC Act. Based on the Recommended Decision and the holding companies, or require prior Board approval." (RD evidence presented, the Board finds that a cease and desist at 62 (footnotes omitted).) Respondents except only to the order shall issue under Section 8(b) of the FDI Act because finding that IAI is a bank holding company such that these Respondents have violated Section 3(a) and Section 4(a) of prohibitions apply to it. (Respondents' Exceptions at the BHC Act.24 44-45.) However, as discussed supra, the Board rejects 2. Failure to Find Control of Election of Majority of Respondents' argument that a Section 2(a)(2)(C) finding is Directors. Enforcement Counsel excepts to the Administra- a prerequisite to a Section 2(a)(2)(A) finding. Therefore, tive Law Judge's failure to find that Respondents "con- because the Board adopts the Recommended Decision's trol [led] in any manner the election of a majority of the conclusion that IAI was a bank holding company within directors or trustees of the bank or company" under Sec- the meaning of Section 2(a)(2)(A) of the BHC Act, it also tion 2(a)(2)(B) of the BHC Act. The Administrative Law adopts the Recommended Decision's conclusion that "the Judge apparently did not conclude that the evidence pre- violations of Section 4 of the BHC Act alleged in the sented would support such a conclusion, because although Notice follow automatically from the conclusion that IAI is it was requested by Enforcement Counsel the Recom- a bank holding company." (RD at 62-63.) mended Decision did not include proposed findings related to Section 2(a)(2)(B). Because Section 2(a)(2)(B) is only G. Request for Oral Argument one among alternative definitions of "control," and because "control" has already been shown within the mean- Respondents in their Exceptions requested oral argument. ing of Section 2(a)(2)(A), the Board need not reach this Oral argument is a discretionary procedure. See 12 C.F.R. issue and therefore denies Enforcement Counsel's excep- 263.29(c). The Board finds that the arguments have been tion to the Administrative Law Judge's failure to make a sufficiently presented in the pleadings before the Board. finding of control within the meaning of Section 2(a)(2)(B) The legal issues presented in this case are clearly and of the BHC Act. simply stated: whether or not the preponderance of the evidence established IAI's indirect control of NBC and E. All Exceptions are Denied Except to the Extent Sun Belt. Thus, this matter rests particularly upon the Granted Herein Administrative Law Judge's assessment of the weight of that evidence and especially the credibility of the wit- Respondents and Enforcement Counsel submitted detailed nesses, an area where the Board is inclined to defer to the exceptions to the Recommended Decision. Certain of those Administrative Law Judge's determinations. In this case, exceptions are necessarily granted or denied by the forego- then, there is no need for further argument, and the Board ing discussion. In addition, the Board finds that certain hereby denies the request for oral argument. specific exceptions should be and hereby are granted for and regulations in question. "[Wjhere Congress has entrusted an administrative agency with the responsibility of selecting the means of 25. In the Recommended Decision, the following paragraphs thereof achieving the statutory policy 'the relation of remedy to policy is are modified as follows: The citation at the end of If 11 is modified to peculiarly a matter for administrative competence.' " Butz v. Glover read "[Tr. 1137 [Ulrich]]"; the citation at the end of ^ 43 and 44 are Livestock Comm'n Co., 411 U.S. 182, 185 (1973). modified to read "[BD Ex. 11 at pg. 8]"; f 84 is modified to insert at 24. Although not necessary to the Board's conclusion here, the the end thereof, "IAI made gifts of Series B non-voting common Board notes that the Administrative Law Judge did specifically find stock of Sun Belt to the Local Conroe Participants, and also granted that " [t]he principals of IAI, . . . have shown their willingness and them options to acquire more Series B non-voting stock. [Tr. 1230-34 ability to obfuscate through the use of offshore corporations, and and 1259-60 [Ulrich]; BD Exs. 57, 57(a), 75, 75(a) and 79(a)]"; fl 92 except for their exposure to meaningful money penalties or criminal is modified to delete the words ", also an accountant," from the proceedings would no doubt attempt to make another attempt [sic] to second line; f 94 is modified to delete the words "the parent of NBC obtain unauthorized control of a United States banking institution." and" in the third line, and to delete the word "an" in the fourth line, RD at 70. The Administrative Law Judge did not express whether the and to delete the figure "$205,000" from the last line and replace it civil money penalties requested by Enforcement Counsel and imposed with the word "payments"; and f 101 is modified to delete the words in the Recommended Decision were sufficiently "meaningful money "of $205,000" in the fourth and fifth lines, and to delete the figure penalties" as to dissuade any future attempts to obtain unauthorized "$457,000" from the end and replace it with the words "an amount control. between $252,000 and $277,000". Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

620 Federal Reserve Bulletin • June 1996 Conclusion WHEREAS, after a hearing on the record pursuant to the Administrative Procedure Act, Chapter 5 of Title 5 of the United States Code, and Briefing of the Issues, the Admin- For the foregoing reasons, the Board orders that the at- istrative Law Judge issued a Recommended Decision on tached Final Assessment of Civil Money Penalties and September 14, 1995, recommending imposition of the civil Final Imposition of Cease and Desist Order issue against money penalties assessed, and recommending that no order IAI and against Ulrich. to cease and desist should issue; and By Order of the Board of Governors, this 9th day of WHEREAS, it is the Final Determination of the Board April, 1996. of Governors of the Federal Reserve System that the Rec- Board of Governors of the ommended Decision of the Administrative Law Judge shall Federal Reserve System be accepted as modified by the Final Decision issued concurrently herewith; and for other good cause shown, it WILLIAM W. WILES is hereby Secretary of the Board ORDERED, that a civil money penalty in the sum of $1,000,000 be, and it is hereby, assessed against Interamericas Investments Ltd., remittance of which must be Final Assessment of Civil Money Penalty and Final made forthwith, in immediately available funds payable to Imposition of Order to Cease and Desist the order of the Secretary of the Board of Governors, who shall make remittance of the same to the Treasury of the WHEREAS, this matter came before the Board upon the United States; and it is further issuance on August 8, 1994 of a Notice of Charges and of ORDERED, that a civil money penalty in the sum of Hearing, and Notice of Assessment of Civil Money Penalty $10,000 be, and it is hereby, assessed against Peter Ulrich, against remaining Respondents Interamericas Investments remittance of which must be made forthwith, in immedi- Ltd., and Peter Ulrich, pursuant to the provision of Sec- ately available funds payable to the order of the Secretary tions 8(b) and (i) of the Federal Deposit Insurance Act, of the Board of Governors, who shall make remittance of 12 U.S.C. §§ 1818(b) and 1818(0, and pursuant to Sec- the same to the Treasury of the United States; and it is tion 8 of the Bank Holding Company Act of 1956, as further amended, 12 U.S.C. § 1847(b), seeking civil money pen- ORDERED, that Interamericas Investments Ltd. and Pealty assessments in the amount of $1,000,000 against Inter- ter Ulrich shall cease and desist from any violations of the americas Investments Ltd. and $10,000 against Peter Ul- Bank Holding Company Act of 1956, as amended; and it is rich, upon charges of violating the Bank Holding Company further Act of 1956, 12 U.S.C. § 1841 et seq., and Regulation Y of ORDERED, that this Order shall become effective upon the Board of Governors of the Federal Reserve System, the expiration of sixty days after service hereof is made, 12 C.F.R. 225, by acquisition of the control of the National and that each provision hereof is and shall remain fully Bank of Conroe, Conroe, Texas, a National Bank, and Sun effective and enforceable until expressly stayed, modified, Belt Bancshares, Inc., of Conroe, Texas, a Bank Holding terminated or suspending in writing by the Board, or by a Company, without prior approval, in violation of Sec- duly authorized court. tion 3(a) of the Bank Holding Company Act, By Order of the Board of Governors, this 9th day of 12 U.S.C. § 1842(a); and further by engaging in non- April, 1996. banking businesses as a Bank Holding Company without prior Board approval, in violation of Section 4(a) of the Board of Governors of the Bank Holding Company Act, 12 U.S.C. § 1843(a); and Federal Reserve System seeking the issuance of an order requiring them to cease and desist from further violations of the Bank Holding WILLIAM W. WILES Company Act; and Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance A25 Federal fiscal and financing operations DOMESTIC FINANCIAL STATISTICS A26 U.S. budget receipts and outlays All Federal debt subject to statutory limitation Money Stock and Bank Credit All Gross public debt of U.S. Treasury— Types and ownership A4 Reserves, money stock, liquid assets, and debt A28 U.S. government securities measures dealers—Transactions A5 Reserves of depository institutions, Reserve Bank A29 U.S. government securities dealers— credit Positions and financing A6 Reserves and borrowings—Depository A30 Federal and federally sponsored credit institutions agencies—Debt outstanding A6 Selected borrowings in immediately available funds—Large member banks Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local governments and corporations A7 Federal Reserve Bank interest rates A32 Open-end investment companies—Net sales A8 Reserve requirements of depository institutions and assets A9 Federal Reserve open market transactions A32 Corporate profits and their distribution A33 Domestic finance companies—Assets and Federal Reserve Banks liabilities, and consumer, real estate, and business A10 Condition and Federal Reserve note statements credit All Maturity distribution of loan and security holdings Real Estate Monetary and Credit Aggregates A34 Mortgage markets A3 5 Mortgage debt outstanding A12 Aggregate reserves of depository institutions and monetary base Consumer Installment Credit A13 Money stock, liquid assets, and debt measures A15 Deposit interest rates and amounts outstanding— A36 Total outstanding commercial and BIF-insured banks A36 Terms A16 Bank debits and deposit turnover Flow of Funds Commercial Banking Institutions A37 Funds raised in U.S. credit markets All Assets and liabilities, Wednesday figures A39 Summary of financial transactions A40 Summary of credit market debt outstanding Weekly Reporting Commercial Banks— A41 Summary of financial assets and liabilities Assets and liabilities A19 Large reporting banks DOMESTIC NONFINANCIAL STATISTICS A21 Branches and agencies of foreign banks Selected Measures Financial Markets A42 Nonfinancial business activity— All Commercial paper and bankers dollar Selected measures acceptances outstanding A42 Labor force, employment, and unemployment All Prime rate charged by banks on short-term A43 Output, capacity, and capacity utilization business loans A44 Industrial production—Indexes and gross value A23 Interest rates—money and capital markets A46 Housing and construction A24 Stock market—Selected statistics A47 Consumer and producer prices Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • June 1996 DOMESTIC NONFINANCIAL STATISTICS- A56 Banks' own claims on unaffiliated foreigners CONTINUED A57 Claims on foreign countries— Combined domestic offices and foreign branches Selected Measures—Continued Reported by Nonbanking Business A48 Gross domestic product and income Enterprises in the United States A49 Personal income and saving A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners INTERNATIONAL STATISTICS Securities Holdings and Transactions Summary Statistics A60 Foreign transactions in securities A50 U.S. international transactions—Summary A61 Marketable U.S. Treasury bonds and A51 U.S. foreign trade notes—Foreign transactions A51 U.S. reserve assets A51 Foreign official assets held at Federal Reserve Interest and Exchange Rates Banks A52 Selected U.S. liabilities to foreign official A61 Discount rates of foreign central banks institutions A61 Foreign short-term interest rates A62 Foreign exchange rates Reported by Banks in the United States A52 Liabilities to and claims on foreigners A63 GUIDE TO STATISTICAL RELEASES AND A53 Liabilities to foreigners SPECIAL TABLES A55 Banks' own claims on foreigners A56 Banks' own and domestic customers' claims on foreigners A64 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 of include not fully guaranteed issues) as well as direct obligarounding. 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 NonfinancialS tatistics • June 1996 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1995 1996 1995 1996 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3 Q4 Q1 Nov. Dec. Jan. Feb. Mar. Reserves of depository institutions2 1 Total -7.5 -1.5 -6.9 -8.0 -10.7 .7 -16.1 -16.4 18.8 2 Required -6.6 -2.5 -7.7 -8.5 -7.9 -6.6 -21.0 -2.7 13.2 3 Nonborrowed -8.2 -2.4 -6.4 -6.5 -9.8 -.5 -11.5 -16.3 19.1 4 Monetary base3 5.8 1.7 2.7 1.4 1.3 5.0 .4 -4.2 8.8 Concepts of money, liquid assets, and debt4 5 Ml -.4 -1.5 -5.1 -2.8 -3.0 —4.4r -6.2 -2.1 9.8 6 M2 3.8 6.9 3.9 5.6 3.6 5.5 4.8 5.0 11.2 7 M3 6.3 8.0 4.4r 7.0 2.8r 3.6 1.6' 9.8 10.4 8 L 7.3 9.1 5.8 n.a. 1.2r 5.3 4.2r 6.3 n.a. 9 Debt 7.0 4.6 4.5 n.a. 6.2 3.6 2.5r 5.5 n.a. Nontransaction components 10 In M25 5.8 10.9 8.1 9.4 6.5 9.9 9.7 8.1 11.8 11 In M3 only6 16.9 12.1 6.3r 12.5 -.1 -3.9 18.3r 28.6r 7.5 Time and savings deposits Commercial banks 12 Savings, including MMDAs -6.5 9.0 13.1 22.6 10.2 23.2 28.2 16.6 25.2 13 Small time7 20.4 11.0 3.9 .7 4.6 1.7 4.6 -3.9 -7.5 14 Large time8,9 13.6 13.1 19.4 8.6 19.0 6.0 -6.7 20. r 26.3 Thrift institutions 15 Savings, including MMDAs -14.5 -7.3 -2.8 -.3 -6.3 -2.7 -3.0 6.4 5.7 16 Small time7 23.5 4.3 4.7 -2.0 6.1 3.7 -8.0 .7 -8.7 17 Large time8 16.7 13.7 8.0 6.6 4.8 4.8 16.0 3.2 -9.4 Money market mutual funds 18 Retail 14.2 36.9 16.5 14.7 13.5 13.0 9.0 15.6 32.6 19 Institution-only 30.5 27.6 10.3r 27.9 5.9 12.8' 18.0r 69.2r 21.6 Repurchase agreements and Eurodollars 20 Repurchase agreements10 7.4 -5.0 -14.9 2.7 -29.7 -51.2 49.4 15.0r -14.8 21 Eurodollars10 18.6 9.4 -6.2r 13.8 -27.1 7.9r 53.8 8.8 -41.2 Debt components4 22 Federal 5.4 4.6 2.3 n.a. 4.4 -.4 -3.3 7.2 n.a. 23 Nonfederal 7.6 4.7 5.3 n.a. 6.8 5.0 4.6r 4.9 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- amounts held by depository institutions, the U.S. government, money market funds, and ing during preceding month or quarter. foreign banks and official institutions. Seasonally adjusted M3 is calculated by summing large 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with time deposits, institutional money fund balances, RP liabilities, and Eurodollars, each regulatory changes in reserve requirements. (See also table 1.20.) seasonally adjusted separately, and adding this result to seasonally adjusted M2. 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency securities, commercial paper, and bankers acceptances, net of money market fund holdings of component of the money stock, plus (3) (for all quarterly reporters on the "Report of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference separately, and then adding this result to M3. between current vault cash and the amount applied to satisfy current reserve requirements. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial 4. Composition of the money stock measures and debt is as follows: sectors—the federal sector (U.S. government, not including government-sponsored enter- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of prises or federally related mortgage pools) and the nonfederal sectors (state and local depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all governments, households and nonprofit organizations, nonfinancial corporate and nonfarm commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and foreign banks and official institutions, less cash items in the process of collection and Federal corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of which are derived from the Federal Reserve Board's flow of funds accounts, are breakwithdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, adjusted (that is, discontinuities in the data have been smoothed into the series) and credit union share draft accounts, and demand deposits at thrift institutions. Seasonally month-averaged (that is, the data have been derived by averaging adjacent month-end levels). adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail OCDs, each seasonally adjusted separately. money fund balances, each seasonally adjusted separately. M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time 6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and money market mutual funds (money funds with minimum initial investments of less than term) of U.S. addressees, each seasonally adjusted separately. $50,000). Excludes individual retirement accounts (IRAs) and Keogh balances at depository 7. Small time deposits—including retail RPs—are those issued in amounts of less than institutions and money market funds. Seasonally adjusted M2 is calculated by summing $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions savings deposits, small-denomination time deposits, and retail money fund balances, each are subtracted from small time deposits. seasonally adjusted separately, and adding this result to seasonally adjusted Ml. 8. Large time deposits are those issued in amounts of $100,000 or more, excluding those M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more), (2) booked at international banking facilities. balances in institutional money funds (money funds with minimum initial investments of 9. Large time deposits at commercial banks less those held by money market funds, $50,000 or more), (3) RP liabilities (overnight and term) issued by all depository institutions, depository institutions, the U.S. government, and foreign banks and official institutions. and (4) Eurodollars (overnight and term) held by U.S. residents at foreign branches of U.S. 10. Includes both overnight and term. banks worldwide and at all banking offices in the United Kingdom and Canada. Excludes 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 1996 1996 Jan. Feb. Mar. Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 416,469 408,620 414,343 407,323 408,952 410,744 411,236 414,687 415,312 414,640 U.S. government securities2 2 Bought outright—System account 376,397 373,807 377,309 372,280 375,178 375,090 377,575 377,113 377,692 376,932 3 Held under repurchase agreements 1,810 215 2,398 0 0 890 0 2,591 2,724 3,077 Federal agency obligations 4 Bought outright 2,634 2,634 2,559 2,634 2,634 2,634 2,628 2,568 2,539 2,533 5 Held under repurchase agreements 590 26 417 0 0 109 0 314 403 560 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 76 27 10 7 8 69 10 5 6 10 8 Seasonal credit 5 7 10 8 8 8 8 7 10 13 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 2,461 1,139 615 628 1,382 1,834 585 1,270 747 204 11 Other Federal Reserve assets 32,496 30,764 31,025 31,767 29,742 30,110 30,430 30,819 31,190 31,312 12 Gold stock 11,051 11,053 11,053 11,052 11,053 11,053 11,053 11,053 11,053 11,053 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,043 24,104 24,164 24,095 24,109 24,123 24,137 24,151 24,165 24,179 ABSORBING RESERVE FUNDS 15 Currency in circulation 417,900 412,780 415,713 412,404 413,270 413,351 414,342 415,723 416,286 415,859 16 Treasury cash holdings 247 276 297 274 279 279 279 282 313 304 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,298 4,953 5,610 5,204 5,137 3,883 4,312 5,507 7,235 5,048 18 Foreign 191 220 186 177 220 279 198 181 171 194 19 Service-related balances and adjustments . . 5,997 6,005 5,992 5,835 5,784 5,592 5,763 6,429 5,743 6,035 20 Other 333 386 394 375 393 376 397 392 385 371 21 Other Federal Reserve liabilities and capital , 12,741 12,600 13,022 12,659 12,779 12,856 13,147 13,309 12,928 12,872 22 Reserve balances with Federal Reserve Banks 18,024 16,724 18,515 15,710 16,421 19,472 18,156 18,237 17,636 19,357 End-of-month figures Wednesday figures Jan. Feb. Mar. Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 413,136 409,894 415,997 409,636 412,823 416,515 411,179 423,455 413,340 421,052 U.S. government securities2 2 Bought outright—System account 378,208 376,519 377,056 374,081 375,706 376,928 377,404 377,459 378,383 376,787 3 Held under repurchase agreements 0 0 3,896 0 0 6,230 0 10,493 0 8,236 Federal agency obligations 4 Bought outright 2,634 2,634 2,526 2,634 2,634 2,634 2,589 2,539 2,539 2,526 5 Held under repurchase agreements 0 0 1,000 0 0 765 0 1,100 0 2,089 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 10 12 34 20 3 78 10 6 7 26 8 Seasonal credit 5 6 9 9 9 8 6 8 14 12 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 928 393 29 996 4,490 -749 547 447 1,331 -237 11 Other Federal Reserve assets 31,350 30,330 31,447 31,896 29,981 30,621 30,623 31,404 31,066 31,613 12 Gold stock 11,052 11,053 11,053 11,053 11,053 11,053 11,053 11,053 11,053 11,053 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,067 24,137 24,193 24,095 24,109 24,123 24,137 24,151 24,165 24,179 ABSORBING RESERVE FUNDS 15 Currency in circulation 412,652 413,951 416,204 413,386 414,066 414,253 415,930 416,969 416,594 417,452 16 Treasury cash holdings 273 279 314 278 280 279 277 313 313 314 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 8,210 5,632 7,021 5,177 5,192 4,700 4,254 5,205 4,444 4,593 18 Foreign 165 209 191 173 294 167 164 166 168 172 19 Service-related balances and adjustments . . 6,317 5,763 5,930 5,835 5,784 5,592 5,763 6,429 5,743 6,035 20 Other 406 318 348 378 368 320 386 376 375 375 21 Other Federal Reserve liabilities and capital , 11,832 13,062 12,714 12,610 12,642 12,692 12,892 12,968 12,664 12,695 22 Reserve balances with Federal Reserve Banks' 18,568 16,038 18,689 17,114 19,527 23,856 16,873 26,402 18,424 24,816 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 NonfinancialS tatistics • June 1996 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1993 1994 1995 1995 1996 Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Reserve balances with Reserve Banks2 29,374 24,658 20,440 20.519 20,055 20,066 20,440 17,763 16,792 18,404 2 Total vault cash3 36,818 40,378 42,117 40.652 40,564 40,576 42,117 44,790 42,205 40,968 3 Applied vault cash4 33,484 36,682 37,460 36,640 36,345 36,332 37,460 39,170 36,957 36,459 4 Surplus vault cash5 3,334 3,696 4,657 4.012 4,219 4,244 4,657 5,620 5,248 4,509 5 Total reserves6 62,858 61,340 57,900 57,159 56,400 56,397 57,900 56,934 53,749 54,863 6 Required reserves 61,795 60,172 56,622 56,209 55,319 55,454 56,622 55,449 52,898 53,750 7 Excess reserve balances at Reserve Banks7 1,063 1,168 1,278 950 1,081 943 1,278 1,485 851 1,113 8 Total borrowings at Reserve Banks8 82 209 257 278 245 204 257 38 35 21 9 Seasonal borrowings 31 100 40 252 199 73 40 7 7 10 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1995 1996 Dec. 6 Dec. 20 Jan. 3 Jan. 17 Jan. 31 Feb. 14 Feb. 28 Mar. 13r Mar. 27 Apr. 10 1 Reserve balances with Reserve Banks2 20.438 19,563 21,558 19,658 15,055 15,546 17,938 18,192 18,492 18,786 2 Total vault cash3 40,653 42,943 41,865 44,166 46,042 44,132 40,326 41,536 40,438 40,977 3 Applied vault cash4 36,274 38,053 37,353 39.104 39,626 38,455 35,468 36,845 36,011 36,775 4 Surplus vault cash5 4,379 4,890 4,513 5,062 6,416 5,677 4,858 4,691 4,428 4,202 5 Total reserves6 56,712 57,615 58,910 58.762 54,681 54,001 53,406 55,037 54,502 55,561 6 Required reserves 55,623 56,508 57.313 57,143 53,356 53,288 52,436 53,926 53,346 54,591 7 Excess reserve balances at Reserve Banks7 1,089 1,107 1,597 1.619 1,326 713 970 1,111 1,156 970 8 Total borrowings at Reserve Banks8 233 300 218 22 16 24 47 15 20 47 9 Seasonal borrowings 51 41 34 4 5 7 8 8 12 16 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 5. Total vault cash (line 2) less applied vault cash (line 3). ordering address, see inside front cover. Data are not break-adjusted or seasonally adjusted. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float and (line 3). includes other off-balance-sheet "as-of" adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. Total "lagged" vault cash held by depository institutions subject to reserve 8. Also includes adjustment credit. requirements. Dates refer to the maintenance periods during which the vault cash may be used 9. Consists of borrowing at the discount window under the terms and conditions estabto satisfy reserve requirements. The maintenance period for weekly reporters ends sixteen lished for the extended credit program to help depository institutions deal with sustained days after the lagged computation period during which the vault cash is held. Before Nov. 25, liquidity pressures. Because there is not the same need to repay such borrowing promptly as 1992, the maintenance period ended thirty days after the lagged computation period. with traditional short-term adjustment credit, the money market effect of extended credit is 4. All vault cash held during the lagged computation period by "bound" institutions (that similar to that of nonborrowed reserves. is, those whose required reserves exceed their vault cash) plus the amount of vault cash applied during the maintenance period by "nonbound" institutions (that is, those whose vault cash exceeds their required reserves) to satisfy current reserve requirements. 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks' Millions of dollars, averages of daily figures 1996r, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Jan. 1 Jan. 8 Jan. 15 Jan. 22 Jan. 29 Feb. 5 Feb. 12 Feb. 19 Feb. 26 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 78,477 84,184 83,771 84,683 79,608 89,298 88,072 85,953 82,749 2 For all other maturities 14,068 13,704 13,211 13,189 13,147 12,094 12,728 13,992 13,801 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 19,658 23,281 23,504 23,102 23,785 19,808 19,374 20,324 20,481 4 For all other maturities 19,908 18,768 19,861 19,558 18,911 18,516 18,016 17,783 18,461 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 18,932 21,283 20,264 22,225 21,598 23,815 23,082 24,885 25,606 6 For all other maturities 28,083 28,316 32.043 28,315 28,358 27,495 28,792 31,675 32,674 All other customers 7 For one day or under continuing contract 41,234 41,233 41.155 39,608 38,913 39,309 39,309 38,241 36,351 8 For all other maturities 15,225 15,369 15.691 16,552 15,665 14,547 14,716 14,135 14,061 MEMO Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 60,616 59,372 58,204 60,125 57,919 61,942 59,641 61,193 60,964 10 To all other specified customers2 29,037 30,104 29.055 29,222 30,887 33,460 27,534 27,535 23,729 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 banks Data in this table also appear in the Board's H.5 (507) weekly statistical release. For 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

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 5/ O 3/ n 9 6 Effective date Previous rate 5/ O 3/ n 9 6 Effective date Previous rate 5/ O 3 n /9 6 Effective date Previous rate Boston 5.00 2/1/96 5.25 5.30 4/25/96 5.30 5.80 4/25/96 5.80 New York 1/31/96 Philadelphia 1/31/96 Cleveland 1/31/96 Richmond 2/1/96 Atlanta 1/31/96 Chicago 2/1/96 St. Louis 2/5/96 Minneapolis 1/31/96 Kansas City 2/1/96 Dallas 1/31/96 San Francisco 5.00 1/31/96 5.25 5.30 4/25/96 5.30 5.80 4/25/96 5.80 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank level)—All of level)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 1988—Aug. 9 6-6.5 6.5 6 13 13 11 6.5 6.5 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1989—Feb. 24 6.5-7 7 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 27 7 7 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1990—Dec. 19 6.5 6.5 10 7.25 7.25 3 11 11 Aug. 21 7.75 7.75 16 10.5 10.5 1991—Feb. 1 6-6.5 6 Sept. 22 8 8 27 10-10.5 10 4 6 6 Oct. 16 8-8.5 8.5 30 10 10 Apr. 30 5.5-6 5.5 20 8.5 8.5 Oct. 12 9.5-10 9.5 May 2 5.5 5.5 Nov. 1 8.5-9.5 9.5 13 9.5 9.5 Sept. 13 5-5.5 5 3 9.5 9.5 Nov. 22 9-9.5 9 17 5 5 26 9 9 Nov. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3.5-4.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 21 11 11 1984—Apr. 9 8.5-9 9 1992—July 2 3-3.5 3 Oct. 8 11-12 12 13 9 9 7 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1994—May 17 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 18 3.5 3.5 19 13 13 Aug. 16 3.5^1 4 May 29 12-13 13 1985—May 20 7.5-8 7.5 18 4 4 30 12 12 24 7.5 7.5 Nov. 15 4-4.75 4.75 June 13 11-12 11 17 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 28 10-11 10 10 7 7 1995—Feb. 1 4.75-5.25 5.25 29 10 10 Apr. 21 6.5-7 6.5 9 5.25 5.25 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 13 Aug. 21 5.5-6 5.5 Feb. 5 5.00 5.00 8 13 13 22 5.5 5.5 1981—May 5 13-14 14 IInn eeffffeecctt MMaayy 33,, 11999966 5.00 5.00 14 14 1987—Sept. 4 5.5-6 6 11 6 6 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • June 1996 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirement TTyyppee ooff ddeeppoossiitt Percentage of Effective date deposits Net transaction accounts' 1 $0 million-$52.0 million3 33333 1111122222/////1111199999/////9999955555 2 More than $52.0 million4 1111100000 1111122222/////1111199999/////9999955555 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the Annual Report or the Federal accounts that would be subject to a 3 percent reserve requirement. Effective Dec. 19, 1995, Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions the exemption was raised from $4.2 million to $4.3 million. include commercial banks, mutual savings banks, savings and loan associations, credit 4. The reserve requirement was reduced from 12 percent to 10 percent on unions, agencies and branches of foreign banks, and Edge Act corporations. Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that 2. Transaction accounts include all deposits against which the account holder is permitted report quarterly. to make withdrawals by negotiable or transferable instruments, payment orders of with- 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits drawal, or telephone or preauthorized transfers for the purpose of making payments to third with an original maturity of less than 1 l/i years was reduced from 3 percent to 1 '/2 percent for persons or others. However, money market deposit accounts (MMDAs) and similar accounts the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that subject to the rules that permit no more than six preauthorized, automatic, or other transfers began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on per month, of which no more than three may be checks, are savings deposits, not transaction nonpersonal time deposits with an original maturity of less than 1 '/> years was reduced from 3 accounts. percent to zero on Jan. 17, 1991. 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts The reserve requirement on nonpersonal time deposits with an original maturity of 1 [/i against which the 3 percent reserve requirement applies be modified annually by 80 percent of years or more has been zero since Oct. 6, 1983. the percentage change in transaction accounts held by all depository institutions, determined 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero as of June 30 of each year. Effective Dec. 19, 1995, the amount was decreased from $54.0 in the same manner and on the same dates as was the reserve requirement on nonpersonal million to $52.0 million. time deposits with an original maturity of less than 1 x/i years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1995 1996 TTyyppee ooff ttrraannssaaccttiioonn 11999933 11999944 11999955 aanndd mmaattuurriittyy Aug. Sept. Oct. Nov. Dec. Jan. Feb. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,717 17,484 10,932 433 409 1,350 4,271 0 0 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 332,229 376,277 398,487 39,195 30,333 29,397 39,057 31,535 31,476 39,332 4 Redemptions 0 0 900 0 0 900 0 0 0 0 Others within one year 5 Gross purchases 1,223 1,238 390 0 0 0 0 390 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 31,368 0 0 7,805 0 1,745 6,108 0 2,048 2,746 8 Exchanges -36,582 -21,444 0 -5,599 0 -2,049 -4,937 0 -3,287 -7,575 9 Redemptions 0 0 0 0 485 0 0 0 1,228 0 One to five years 10 Gross purchases 10,350 9,168 4,966 0 100 0 0 2,317 0 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -27,140 -6,004 0 -3,379 0 -1,745 -5,292 0 -2,048 -1,908 13 Exchanges 0 17,801 0 4,905 0 2,049 3,237 0 3,287 5,175 Five to ten years 14 Gross purchases 4,168 3,818 1,239 0 0 0 400 0 0 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts 0 -3,145 0 -319 0 0 -816 0 0 -818 17 Exchanges 0 2,903 0 1,800 0 0 1,700 0 0 1,500 More than ten years 18 Gross purchases 3,457 3,606 3,122 0 100 0 0 1,884 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts 0 -918 0 -525 0 0 0 0 0 -20 21 Exchanges 0 775 0 1,100 0 0 0 0 0 900 All maturities 22 Gross purchases 36.915 35,314 20,649 433 609 1,350 4,671 4,591 0 0 23 Gross sales 0 0 0 0 0 0 0 0 0 0 24 Redemptions 767 2,337 2,376 0 0 1,385 0 0 1,228 0 Matched transactions 25 Gross purchases 1,475,941 1,700,836 2,197,736 179,571 195,830 216,755 226,340 227,858 260,425 274,290 26 Gross sales 1,475,085 1,701,309 2,202,030 185,711 198,587 213,161 228,419 228,071 259,186 275,979 Repurchase agreements 27 Gross purchases 475,447 309,276 331,694 4,130 43,286 28,825 44,569 34,325 16,040 6,230 28 Gross sales 470,723 311,898 328,497 1,075 39,896 32,980 39,876 28,546 28,802 6,230 29 Net change in U.S. Treasury securities 41.729 29,882 17,175 -2,651 - 1,241 -597 7,285 10,157 -12,751 -1,689 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 774 1,002 1,303 122 46 83 120 58 0 0 Repurchase agreements 33 Gross purchases 35,063 52,696 36,851 1,610 1,434 3,740 3,763 2,888 9,793 765 34 Gross sales 34,669 52,696 36,776 1,510 1,459 3,605 3,973 1,788 10,893 765 35 Net change in federal agency obligations -380 -1,002 -1,228 -22 -71 52 -330 1,042 -1,100 0 36 Total net change in System Open Market Account... 41,348 28,880 15,948 -2,673 1,170 -545 6,955 11,199 -13,851 -1,689 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

A10 Domestic Nonfinancial Statistics • June 1996 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month Account 1996 1996 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Jan. 31 Feb. 29 Mar. 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,053 11,053 11,053 11,053 11,053 11,052 11,053 11,053 Special drawing rights certificate account 10.168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 3 543 540 551 559 560 513 547 579 Loans 4 To depository institutions 86 16 14 20 38 15 18 43 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 2,634 2,589 2,539 2,539 2,526 2,634 22,,663344 22,,552266 8 Held under repurchase agreements 765 0 1,100 0 2,089 0 0 1,000 9 Total U.S. Treasury securities 383,158 377,404 387,952 378,383 385,023 378,208 376,519 380,952 10 Bought outright2 376,928 377,404 377,459 378,383 376,787 378,208 376,519 377,056 11 Bills 183,074 183,550 183,605 184,530 182,933 184,355 182,666 183,202 1? Notes 148,885 148,885 148,885 148,885 148,885 149,785 148,885 148,885 13 Bonds 44,969 44,969 44.969 44,969 44,969 44,069 44,969 44,969 14 Held under repurchase agreements 6,230 0 10,493 0 8,236 0 0 3,896 15 Total loans and securities 386,643 380,009 391,605 380,943 389,675 380,857 379,171 384,521 16 Items in process of collection 5,577 7,066 5,932 7,696 • 5,148 6,374 4,791 4,197 17 Bank premises 1,141 1,141 1,150 1,150 1,149 1,134 1,140 1,150 Other assets 18 Denominated in foreign currencies3 19,833 20,219 20,228 20,236 20,246 19,798 20,212 19,985 19 All other4 9,625 9,190 10,001 9,642 10,164 10,447 8,965 10,333 20 Total assets 444,582 439,385 450,688 441,447 448,163 440,344 436,048 441,986 LIABILITIES 21 Federal Reserve notes 390,952 392,609 393,681 393,301 394,146 389,371 390,640 392,903 22 Total deposits 35,524 27,710 38,630 29,955 36,115 33,903 28,135 32,301 23 Depository institutions 30,337 22,906 32,883 24,967 30,974 25,122 21,768 24,740 24 U.S. Treasury—General account 4,700 4,254 5,205 4,444 4,593 8,210 5,632 7,021 25 Foreign—Official accounts 167 164 166 168 172 165 209 191 26 Other 320 386 376 375 375 406 318 348 71 Deferred credit items 5,414 6,175 5,409 5,527 5,208 5,239 4,211 4,069 28 Other liabilities and accrued dividends' 4,185 4,074 4,481 4,152 4,206 4,181 4,158 4,261 29 Total liabilities 436,075 430,567 442,201 432,935 439,674 432,693 427,144 433,534 CAPITAL ACCOUNTS 30 Capital paid in 4,037 4,033 4,031 4,036 4,036 3,996 4,031 4,037 31 Surplus 3,945 3,945 3,966 3,966 3,966 3,654 3,945 3,966 32 Other capital accounts 525 840 490 510 486 1 928 449 33 Total liabilities and capital accounts 444,582 439,385 450,688 441,447 448,163 440,344 436,048 441,986 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 529,208 546,891 549,096 551,910 545,127 509,044 553366,,447766 555500,,449966 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 500,359 501,831 502,678 504,697 505,705 489,867 501,002 506,144 36 LESS: Held by Federal Reserve Banks 109,407 109,222 108,996 111,396 111,559 100,496 110,362 113,241 37 Federal Reserve notes, net 390,952 392,609 393,681 393,301 394,146 389,371 390,640 392,903 Collateral held against notes, net 38 Gold certificate account 11,053 11,053 11,053 11,053 11,053 11,052 11,053 11,053 39 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 369,730 371,388 372,461 372,080 372,925 368,150 369,419 371,682 42 Total collateral 390,952 392,609 393,681 393,301 394,146 389,371 390,640 392,903 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly statistical 3. Valued monthly at market exchange rates. release. For ordering address, see inside front cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged with bills maturing within ninety days. Federal Reserve Banks—and excludes securities sold and scheduled to be bought back under 5. Includes exchange-translation account reflecting the monthly revaluation at market matched sale-purchase transactions. exchange rates of foreign exchange commitments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1996 1996 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Jan. 31 Feb. 29 Mar. 31 1 Total loans 77 16 14 20 38 15 35 43 2 Within fifteen days1 75 12 12 18 33 15 32 36 3 Sixteen days to ninety days 2 4 2 2 5 3 7 4 Total U.S. Treasury securities 383,158 377,404 387,952 378,383 385,023 378,208 376,519 377,056 5 Within fifteen days' 20,393 12,275 18,050 16,491 23,309 20,294 4,962 8,963 6 Sixteen days to ninety days 87,722 94,924 95,348 87,488 87,710 84,103 87,722 99,039 7 Ninety-one days to one year 117,566 111,025 15,375 115,225 114,825 119,461 124,656 109,875 8 One year to five years 87,524 89,228 89,228 89,228 89,228 85,961 89,228 89,228 9 Five years to ten years 32,151 32,151 32,151 32,151 32,151 31,469 32,151 32,151 10 More than ten years 37,801 37,801 37,801 37,801 37,801 36,921 37,801 37,801 11 Total federal agency obligations 3,399 2,589 3,639 2,539 4,614 2,634 2,634 2,526 12 Within fifteen days' 1,180 50 1,113 293 2,369 141 415 280 13 Sixteen days to ninety days 510 842 849 569 569 660 510 569 14 Ninety-one days to one year 615 603 583 583 600 617 615 600 15 One year to five years 543 543 543 543 526 664 543 526 16 Five years to ten years 527 527 527 527 527 527 527 527 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 in NOTE. Total acceptances data have been deleted from this table because data are no longer accordance with maximum maturity of the agreements. available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic NonfinancialS tatistics • June 1996 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1995 1996 IItteemm DD 1199 ee 99 cc 22 .. DD 1199 ee 99 cc 33 .. DD 1199 ee 99 cc 44 .. DD 1199 ee 99 cc 55 .. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS22 11 TToottaall rreesseerrvveess33 54.37 60.52 59.36 56.36 57.50 57.34 56.84 56.33 56.36 55.61 54.85 55.71 22 NNoonnbboorrrroowweedd rreesseerrvveess44 54.24 60.44 59.16 56.11 57.22 57.07 56.59 56.13 56.11 55.57 54.81 55.69 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt55 54.24 60.44 59.16 56.11 57.22 57.07 56.59 56.13 56.11 55.57 54.81 55.69 44 RReeqquuiirreedd rreesseerrvveess 53.21 59.46 58.20 55.09 56.51 56.39 55.76 55.39 55.09 54.12 54.00 54.59 55 MMoonneettaarryy bbaassee66 351.24 386.88 418.72 435.01 430.81 431.69 432.74 433.21 435.01 435.15 433.62 436.79 Not seasonally adjusted 6 Total reserves7 56.06 62.37 61.13 58.02 56.94 57.30 56.56 56.57 58.02 56.95 53.80 54.95 7 Nonborrowed reserves 55.93 62.29 60.92 57.76 56.66 57.03 56.31 56.37 57.76 56.91 53.77 54.93 8 Nonborrowed reserves plus extended credit5 55.93 62.29 60.92 57.76 56.66 57.03 56.31 56.37 57.76 56.91 53.77 54.93 9 Required reserves8 54.90 61.31 59.96 56.74 55.96 56.35 55.48 55.63 56.74 55.47 52.95 53.84 10 Monetary base9 354.55 390.59 422.51 439.03 431.09 431.64 431.60 433.22 439.03 435.99 430.24 434.77 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 56.54 62.86 61.34 57.90 56.82 57.16 56.40 56.40 57.90 56.93 53.75 54.86 12 Nonborrowed reserves 56.42 62.78 61.13 57.64 56.54 56.88 56.15 56.19 57.64 56.90 53.72 54.84 13 Nonborrowed reserves plus extended credit5 56.42 62.78 61.13 57.64 56.54 56.88 56.15 56.19 57.64 56.90 53.72 54.84 14 Required reserves 55.39 61.80 60.17 56.62 55.83 56.21 55.32 55.45 56.62 55.45 52.90 53.75 15 Monetary base12 360.90 397.62 427.25 444.45 435.59 436.20 436.34 438.19 444.45 441.94 436.21 440.68 16 Excess reserves'3 1.16 1.06 1.17 1.28 .99 .95 1.08 .94 1.28 1.49 .85 1.11 17 Borrowings from the Federal Reserve .12 .08 .21 .26 .28 .28 .25 .20 .26 .04 .04 .02 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves 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. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus changes in reserve requirements. (See also table 1.10.) (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements in February requirements. 1984, currency and vault cash figures have been measured over the computation periods 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess ending on Mondays. 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

Monetary and Credit Aggregates A13 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1995 1996 1992 1993 1994 1995 IItteemm Dec. Dec. Dec. Dec. Dec. Jan. Feb. Mar. Seasonally adjusted Measures2 1 Ml 1,024.4 1,128.6 1,148.7 l,124.9r 1,124.9r 1,119.1 l,117.1r 1,126.2 2 M2 3,438.7 3,494.1 3,509.4 3,660.3r 3,660.3r 3,675.0 3,690.4r 3,724.9 3 M3 4,187.3 4,249.6 4,319.7 4,573.5r 4,573.5r 4,602.3r 4,639.7r 4,680.0 4 L 5,075.8 5,164.5 5,303.7 5,684.0r 5,684.0r 5,703.7r 5,733.7 n.a. 5 Debt 11,881.7 12,516.4 13,153.2 13,871.3 13,871.3 13,900.1r 13,963.4 n.a. MI components 6 Currency3 292.9 322.4 354.9 373.2 373.2 373.6 373.2r 375.2 7 Travelers checks4 - 8.1 7.9 8.5 8.9 8.9 8.9 8.9 8.9 8 Demand deposits5 339.1 384.3 382.4 389.8 389.8 393.5 397.4 407.1 9 Other checkable deposits6 384.2 414.0 402.9 353.0 353.0 343. r 337.5 335.0 Nontransaction components 10 In M27 2,414.3 2,365.4 2,360.7 2,535.4 2,535.4 2,556.0 2,573.3 2,598.6 11 In M3 only8 748.6 755.6 810.3 913.3r 913.3r 927.2' 949.3r 955.2 Commercial banks 12 Savings deposits, including MMDAs 754.1 785.0 751.9 775.0 775.0 793.2 804.2 821.1 13 Small time deposits9 509.3 470.4 505.4 576.2 576.2 578.4 576.5 572.9 14 Large time deposits10' 11 286.6 272.3 298.7 342.4 342.4 340.5 346.2r 353.8 Thrift institutions 15 Savings deposits, including MMDAs 433.0 433.8 397.0 359.5 359.5 358.6 360.5 362.2 16 Small time deposits9 361.9 317.6 318.2 359.5 359.5 357.1 357.3 354.7 17 Large time deposits10 67.1 61.5 64.8 75.0 75.0 76.0 76.2 75.6 Money market mutual funds 18 Retail 356.0 358.7 388.1 465.1 465.1 468.6 474.7 487.6 19 Institution-only 199.8 197.9 183.7 227.2r 227.2r 230.6r 243,9r 248.3 Repurchase agreements and Eurodollars 20 Repurchase agreements12 128.1 157.5 180.8 177.3 177.3 184.6 186.9r 184.6 21 Eurodollars12 66.9 66.3 82.3 91.4 91.4 95.5 96.2 92.9 Debt components 22 Federal debt 3,068.6 3,328.3 3,497.6 3,644.6 3,644.6 3,634.7 3,656.4 n.a. 23 Nonfederal debt 8,813.1 9,188.1 9,655.6 10,226.7 10,226.7 10,265.5r 10,307.1 n.a. Not seasonally adjusted Measures 24 Ml 1.046.0 1,153.7 1,174.2 1,150.7 1,150.7 l,128.0r 1,103.4 1.115.5 25 M2 3.455.1 3.514.1 3,529.8 3,680.0r 3,680.0r 3,676.8r 3,670.9r 3.717.6 26 M3 4,205.3 4,271.3 4,341.5 4,594.6r 4,594.6r 4,606.9r 4,620.9r 4,669.9 27 L 5,103.1 5.194.2 5,333.2 5,713.6r 5,713.6r 5,717.lr 5,723.0 n.a. 28 Debt 11,883.2 12,509.3 13,145.8 13,858.0 13,858.0 13,894.5r 13,946.7 n.a. MI components 29 Currency3 295.0 324.8 357.5 376.1 376.1 371.6r 370.8 374.2 30 Travelers checks4 7.8 7.6 8.1 8.5 8.5 8.5 8.5 8.6 31 Demand deposits5 354.4 401.8 400.1 407.9r 407.9r 399.0 388.3 397.5 32 Other checkable deposits6 388.9 419.4 408.4 358.1 358.1 348.8r 335.8 335.2 Nontransaction components 33 In M27 2,409.1 2,360.4 2,355.6 2,529.2 2,529.2 2,548.8 2,567.5 2,602.1 34 In M3 only8 750.2 757.1 811.7 914.7r 914.7r 930. lr 950.0r 952.3 Commercial banks 35 Savings deposits, including MMDAs. . . 752.9 784.3 751.6 775.0 775.0 789.5 799.0 819.1 36 Small time deposits9 507.8 468.2 502.5 572.3 572.3 576.1 575.6 574.1 37 Large time deposits10' " 286.2 272.1 298.5 342.3 342.3 337.8 344.6r 352.3 Thrift institutions 38 Savings deposits, including MMDAs. . . 432.4 433.4 396.9 359.5 359.5 356.9 358.2 361.4 39 Small time deposits9 360.9 316.1 316.4 357.0 357.0 355.6 356.7 355.4 40 Large time deposits10 67.0 61.5 64.8 75.0 75.0 75.4 75.8 75.2 Money market mutual funds 41 Retail 355.1 358.3 388.2 465.4 465.4 470.6 478.0 492.1 42 Institution-only 201.1 199.4 185.5 229.4r 229.4r 238.2r 249.6r 248.7 Repurchase agreements and Eurodollars 43 Repurchase agreements12 127.2 156.6 179.6 175.8 175.8 183.3 184.T 182.8 44 Eurodollars12 68.7 67.6 83.4 92.1 92.1 95.4 95.8 93.2 Debt components 45 Federal debt 3,069.8 3,329.5 3,499.0 3,645.9 3,645.9 3,634.4 3,655.5 n.a. 46 Nonfederal debt 8,813.4 9,179.8 9,646.8 10,212.1 10,212.1 10,260.2r 10,291.2 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic NonfinancialS tatistics • June 1996 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) weekly these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term statistical release. Historical data starting in 1959 are available from the Money and Reserves Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve separately, and then adding this result to M3. System, Washington, DC 20551. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial 2. Composition of the money stock measures and debt is as follows: sectors—the federal sector (U.S. government, not including government-sponsored enter- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of prises or federally related mortgage pools) and the nonfederal sectors (state and local depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all governments, households and nonprofit organizations, nonfinancial corporate and nonfarm commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and foreign banks and official institutions, less cash items in the process of collection and Federal corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of which are derived from the Federal Reserve Board's flow of funds accounts, are breakwithdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, adjusted (that is, discontinuities in the data have been smoothed into the series) and credit union share draft accounts, and demand deposits at thrift institutions. Seasonally month-averaged (that is, the data have been derived by averaging adjacent month-end levels). adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository OCDs, each seasonally adjusted separately. institutions. M2: Ml plus (1) savings deposits (including MMDAs), (2) small-denomination time 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. deposits (time deposits—including retail RPs—in amounts of less than $100,000), and (3) Travelers checks issued by depository institutions are included in demand deposits. balances in retail money market mutual funds (money funds with minimum initial invest- 5. Demand deposits at commercial banks and foreign-related institutions other than those ments of less than $50,000). Excludes individual retirement accounts (IRAs) and Keogh owed to depository institutions, the U.S. government, and foreign banks and official institubalances at depository institutions and money market funds. Seasonally adjusted M2 is tions, less cash items in the process of collection and Federal Reserve float. calculated by summing savings deposits, small-denomination time deposits, and retail money 6. Consists of NOW and ATS account balances at all depository institutions, credit union fund balances, each seasonally adjusted separately, and adding this result to seasonally share draft account balances, and demand deposits at thrift institutions. adjusted M1. 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds 8. Sum of (1) large time deposits, (2) institutional money fund balances. (3) RP liabilities with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term) (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S. term) of U.S. addressees. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United 9. Small time deposits—including retail RPs—are those issued in amounts of less than Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. govern- $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are ment, money market funds, and foreign banks and official institutions. Seasonally adjusted subtracted from small time deposits. M3 is calculated by summing large time deposits, institutional money fund balances. RP 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to booked at international banking facilities. seasonally adjusted M2. 11. Large time deposits at commercial banks less those held by money market funds, L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury depository institutions, the U.S. government, and foreign banks and official institutions. securities, commercial paper, and bankers acceptances, net of money market fund holdings of 12. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks' 1995 1996 IItteemm D 19 e 9 c 3 . D 19 e 9 c 4 . July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Interest rates (annual effective yields)' INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 1.86 1.96 1.93 1.93 1.94 1.93 1.95 1.92 1.92 1.93 1.87 2 Savings deposits3 2.46 2.92 3.13 3.12 3.14 3.11 3.13 3.10 3.01 2.98 2.90 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.79 4.17 4.10 4.10 4.11 4.12 4.11 4.01 4.00 4.03 4 92 to 182 days 2.91 4.44 4.77 4.77 4.75 4.75 4.74 4.69 4.57 4.47 4.50 5 183 days to 1 year 3.13 5.12 5.18 5.15 5.14 5.15 5.12 5.03 4.92 4.80 4.84 6 More than 1 year to 21/2 years 3.55 5.74 5.38 5.39 5.32 5.31 5.27 5.18 5.03 4.90 4.95 7 More than 2 Vi years 4.28 6.30 5.62 5.63 5.60 5.56 5.49 5.41 5.26 5.11 5.19 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 1.87 1.94 1.97 1.98 1.98 1.97 1.94 1.91 1.85 1.84 1.83 9 Savings deposits3 2.63 2.87 2.97 2.96 2.96 2.97 2.99 2.99 2.95 2.92 2.86 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.81 3.80 4.28 4.34 4.29 4.34 4.45 4.44 4.38 4.29 4.39 11 92 to 182 days 3.02 4.89 5.16 5.12 5.08 5.06 5.02 4.95 4.87 4.79 4.77 12 183 days to 1 year 3.31 5.52 5.47 5.45 5.35 5.32 5.28 5.19 5.07 4.93 4.90 13 More than 1 year to 2 Vi years 3.67 6.09 5.62 5.60 5.51 5.50 5.46 5.32 5.22 5.11 5.16 14 More than 2 Vz years 4.62 6.43 5.82 5.78 5.74 5.69 5.64 5.47 5.34 5.25 5.25 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,237 304,896 274,140 267,644 253,174 258,411 259,259 252,434 248,464 246,902 224,163 16 Savings deposits'1 767,035 737,068 726,697 735,930 744,839 747,943 767,431 793,168 774,748 798,354 841,368 17 Personal 598,276 580,438 570,299 575,204 584,239 587,235 599,787 628,372 617,570 634,470 674,638 18 Nonpersonal 168,759 156,630 156,398 160,726 160,600 160,707 167,644 164,796 157,177 163,885 166,730 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,362 32,265 33,142 30,937 29,804 29,940 31,083 32,807 34,275 36,286 36,008 20 92 to 182 days 109,050 96,650 91,975 90,796 92,220 94,418 97,401 96,902 96,811 100,011 100,432 21 183 days to 1 year 145,386 163,062 189,011 189,565 189,338 188,859 188,043 187,828 186,068 188,640 191,694 22 More than 1 year to 2'/2 years 139,781 164,395 202,467 204,453 203,548 206,993 211,169 211,388 214,093 214,396 213,429 23 More than 2 Vl years 180,461 192,712 195,623 201,306 200,182 200,201 202,357 203,227 200,849 202,363 202,803 24 IRA and Keogh plan deposits 144,011 144,097 150,426 150,648 149,570 151,094 151.869 152,390 152,984 155,305 155,791 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,191 11,175 11,147 10,999 11,408 11,317 11,613 12,727 11,410 11,984 12,106 26 Savings deposits3 80.376 70,082 66,409 66,478 69,752 69,636 70,265 71,402 67,540 71,006 70,571 27 Personal 77,263 67,159 63,194 63,149 66,403 66,193 66,688 67,919 64,172 67,679 67,275 28 Nonpersonal 3,113 2,923 3,215 3,329 3,349 3,443 3,577 3,482 3,369 3,327 3,296 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,746 2,144 1,769 1,856 1,739 1,768 1,903 2,115 1,988 2,226 2,233 30 92 to 182 days 12,974 11,361 11,030 11,079 11,258 11,231 11,848 12,754 12,581 14,018 14,253 31 183 days to 1 year 17,469 18,391 21,969 22,294 24,837 25,036 25,887 27,072 26,750 28,330 27,996 32 More than 1 year to 2'/I years 16,589 17,787 24,876 25,029 27,825 27,755 28,247 28,966 26,968 27,819 26,802 33 More than 2 Vi years 20,501 21,293 22,713 22,563 23,351 23,470 23,574 24,247 22,769 22,677 23,508 34 IRA and Keogh plan accounts 19,791 19,008 20,286 20,333 21,913 21,784 21,758 21,949 21,229 21,137 21,373 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 day 4. Includes both mutual and federal savings banks. 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

A16 Domestic NonfinancialS tatistics • June 1996 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 1996 BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt 1199993322 1199995522 Aug. Sept. Oct. Nov. Dec. Jan. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 334,784.1 369,029.1 397,649.3 407,389.4 397,843.6 413,927.0 409,460.9 397,538.3 430,510.0 2 Major New York City banks 171,224.3 191,168.8 201,161.4 206,835.9 207,576.7 210,336.6 204,484.0 203,977.5 229,379.8 3 Other banks 163,559.7 177,860.3 196,487.9 200,553.5 190,266.9 203,590.4 204,976.9 193,560.8 201,130.2 4 Other checkable deposits4 3,481.5 3,798.6 4,207.4 4,236.1 4,366.8 4,690.4 4,891.5 4,595.5 4,959.4 5 Savings deposits (including MMDAs)5 3,497.4 3,766.3 4,507.8 4,745.4 4,898.4 5,328.6 5,679.4 5,703.6 5,996.4 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 785.9 817.4 874.1 887.9 858.0 907.5 905.5 852.7 917.1 7 Major New York City banks 4,198.1 4,481.5 4,867.3 4,970.9 5,018.0 5,269.7 5,222.3 5,069.7 5,368.0 8 Other banks 424.6 435.1 475.2 480.7 450.5 489.2 496.3 454.4 471.3 9 Other checkable deposits4 11.9 12.6 15.4 15.5 16.3 18.0 19.1 18.6 20.8 10 Savings deposits (including MMDAs)" 4.6 4.9 6.1 6.5 6.6 7.1 7.5 7.4 7.7 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 334,899.2 369,121.8 397,657.8 421,875.3 395,203.2 413,547.6 398,219.1 411,802.7 429,301.9 12 Major New York City banks 171,283.5 191,226.0 201,182.6 213,958.6 207,994.2 212,506.0 202,744.5 210,780.0 227,293.7 13 Other banks 163,615.7 177,895.7 196,475.3 207,916.7 187,209.0 201,041.7 195,474.6 201,022.7 202,008.2 14 Other checkable deposits4 3,481.7 3,795.6 4,202.6 4,203.3 4,431.9 4,565.4 4,566.6 4,784.8 5,384.8 15 Savings deposits (including MMDAs)5 3,498.3 3,764.4 4,500.8 4,750.1 4,849.1 5,075.1 5,388.7 6,013.9 6,268.3 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 786.1 818.2 874.6 936.7 856.4 895.4 860.5 847.5 895.6 17 Major New York City banks 4,197.9 4,490.3 4,873.1 5,343.0 5,069.5 5,292.2 5,046.6 4,900.9 5,109.7 18 Other banks 424.8 435.3 475.4 506.7 445.3 476.7 462.5 453.9 464.5 19 Other checkable deposits4 11.9 12.6 15.3 15.6 16.7 17.7 17.8 19.0 22.0 20 Savings deposits (including MMDAs)5 4.6 4.9 6.1 6.5 6.6 6.8 7.1 7.8 8.0 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 automatic Publications Section, Division of Support Services, Board of Governors of the Federal transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) accounts, Reserve System, Washington, DC 20551. were expanded to include telephone and preauthorized transfer accounts. This change Data in this table also appear in the Board's G.6 (406) monthly statistical release. For 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

Commercial Banking Institutions A17 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1995 1995r 1996r 1996 Mar. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Mar. 6 Mar. 13 Mar. 20 Mar. 27 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,392.5 3,566.2 3,579.3 3,591.2 3,603.6 3,630.6 3,640.2 3,631.4 3,621.4 3,629.7 3,632.2 3,640.6 2 Securities in bank credit 941.6 984.2 986.2 987.0 988.8 988.8 993.4 977.4 977.1 979.9 977.6 982.8 3 U.S. government securities 712.0 708.3 713.3 714.6 710.9 702.9 715.7 705.1 703.7 704.7 705.6 708.7 4 Other securities 229.6 275.8 272.9 272.4 277.9 285.9 277.7 272.4 273.3 275.2 272.0 274.1 5 Loans and leases in bank credit2 . . . 2,450.9 2,582.0 2,593.1 2,604.2 2,614.8 2,641.7 2,646.8 2,654.0 2,644.4 2,649.8 2,654.6 2,657.9 6 Commercial and industrial 673.9 708.7 711.0 715.6 719.1 725.6 729.3 727.4 725.5 725.1 727.7 729.1 7 Real estate 1,029.0 1,072.0 1,075.8 1,077.8 1,078.8 1,085.7 1,088.4 1,093.1 1,092.5 1,093.5 1,094.1 1,092.9 8 Revolving home equity 76.1 78.4 78.5 78.8 79.1 79.6 79.9 79.9 79.9 79.9 79.9 80.0 9 Other 952.9 993.7 997.4 998.9 999.7 1,006.0 1,008.6 1,013.2 1,012.6 1,013.6 1,014.2 1,012.9 10 Consumer 464.3 489.4 490.0 493.1 496.2 500.9 500.9 504.2 503.2 502.9 504.6 504.1 11 Security3 76.0 86.6 86.9 86.9 83.6 84.8 85.6 85.0 82.8 86.2 83.5 85.4 12 Other 207.7 225.3 229.4 230.8 237.0 244.7 242.5 244.4 240.3 242.1 244.7 246.3 13 Interbank loans4 182.9 192.2 194.0 196.4 196.7 203.9 194.3 205.4 200.5 205.4 207.3 209.9 14 Cash assets5 210.8 214.9 222.3 216.2 223.7 233.1 219.1 215.7 212.5 217.1 212.5 218.8 15 Other assets6 232.6 225.4 228.1 231.4 239.9 236.4 242.9 241.9 246.5 243.4 239.0 238.6 16 Total assets7 3,962.4 4,141.9 4,166.9 4,178.7 4,207.5 4,247.1 4,239.9 4,237.7 4,2243 4,239.0 4,234.5 4,251.4 Liabilities 17 Deposits 2,549.4 2,629.5 2,644.2 2,642.1 2,659.2 2,686.9 2,680.8 2,701.4 2,695.7 2,695.9 2,698.2 2,704.9 18 Transaction 794.0 781.1 778.6 768.2 773.9 783.3 766.6 768.4 766.6 762.4 769.9 772.8 19 Nontransaction 1,755.4 1,848.4 1,865.6 1,873.9 1,885.3 1,903.6 1,914.2 1,933.0 1,929.1 1,933.5 1,928.3 1,932.1 20 Large time 381.7 415.6 422.8 423.3 421.4 422.2 426.1 428.4 426.8 427.3 428.5 428.6 21 Other 1,373.7 1,432.9 1,442.8 1,450.6 1,463.9 1,481.5 1,488.1 1,504.5 1,502.4 1,506.2 1,499.8 1,503.4 22 Borrowings 652.2 687.3 683.2 674.6 690.7 705.4 691.2 687.1 667.5 684.9 703.9 691.2 23 From banks in the U.S 187.6 198.0 198.9 198.4 198.3 208.0 195.5 207.6 204.3 212.2 215.2 204.4 24 From nonbanks in the U.S 464.7 489.3 484.3 476.2 492.5 497.5 495.7 479.5 463.2 472.7 488.7 486.8 25 Net due to related foreign offices 243.2 251.9 257.6 263.8 262.9 270.0 276.4 261.3 269.0 271.9 255.5 252.8 26 Other liabilities8 187.8 221.4 222.9 226.6 236.9 229.4 232.7 223.9 225.7 226.1 222.6 221.5 27 Total liabilities 3,632.6 3,790.1 3,807.9 3,807.1 3,849.6 3,891.8 3,881.1 3,873.6 3357.9 33783 3380.2 3370.4 28 Residual (assets less liabilities)9 329.8 351.8 359.0 371.6 357.8 355.3 358.8 364.1 366.4 360.2 354.3 381.0 Not seasonally adjusted Assets 29 Bank credit 3,388.4 3,570.9 3,581.0 3,597.5 3,611.4 3,621.4 3,631.9 3,625.8 3,623.3 3,627.5 3,625.2 3,622.6 30 Securities in bank credit 946.3 987.1 987.9 985.9 979.2 976.6 988.5 982.0 983.5 985.9 981.0 981.3 31 U.S. government securities 716.4 710.0 711.5 713.0 706.3 697.6 711.1 709.5 706.5 709.8 711.0 711.2 32 Other securities 229.9 277.1 276.4 273.0 272.9 279.0 277.4 272.5 277.1 276.1 270.0 270.1 33 Loans and leases in bank credit2 ... 2,442.1 2,583.8 2,593.1 2,611.6 2,632.2 2,644.8 2,643.4 2,643.9 2,639.8 2,641.7 2,644.1 2,641.3 34 Commercial and industrial 677.6 704.1 707.0 713.9 717.2 722.6 727.5 731.3 728.3 728.4 732.7 732.4 35 Real estate 1,023.9 1,074.0 1,079.0 1,083.4 1,083.6 1,085.5 1,085.3 1,087.5 1,087.4 1,088.4 1,087.4 1,087.1 36 Revolving home equity 75.3 78.9 79.1 79.3 79.2 79.5 79.4 79.1 79.3 79.2 79.1 79.1 37 Other 948.5 995.1 999.9 1,004.2 1,004.4 1,006.0 1,005.9 1,008.4 1,008.1 1,009.1 1,008.2 1,008.0 38 Consumer 460.4 490.7 490.6 493.9 502.0 505.5 501.4 500.0 499.7 498.8 500.3 499.5 39 Security3 76.0 86.3 85.5 88.2 87.6 86.7 88.5 84.8 85.6 88.5 84.6 82.1 40 Other 204.2 228.8 231.0 232.1 241.8 244.5 240.6 240.2 238.8 237.7 239.1 240.2 41 Interbank loans4 180.8 188.0 193.3 199.6 209.2 212.8 196.1 203.3 205.1 204.9 199.9 200.7 42 Cash assets5 204.0 215.8 223.3 220.3 238.4 240.5 219.9 208.4 206.2 211.3 205.3 207.7 43 Other assets6 231.1 226.5 228.5 231.0 239.6 237.1 242.3 240.4 246.9 241.5 236.0 236.9 44 Total assets7 3,947.6 4,144.2 4,169.5 4,191.7 4,241.8 4,255.4 4,233.7 4,221.2 4,224.6 4,228.4 4,209.5 4,2113 Liabilities 45 Deposits 2,537.7 2.628.3 2,644.2 2,658.1 2,690.4 2,693.7 2,671.8 2,687.7 2,692.2 2,686.5 2,674.0 2,672.8 46 Transaction 781.2 779.8 778.9 781.7 809.1 795.0 759.4 753.6 760.5 750.5 745.4 743.2 47 Nontransaction 1,756.5 1,848.5 1,865.4 1,876.3 1,881.2 1,898.7 1,912.4 1,934.1 1,931.7 1,936.0 1,928.6 1,929.6 48 Large time 383.1 414.6 421.3 424.3 420.3 419.2 426.7 429.9 428.2 429.8 430.2 430.2 49 Other 1,373.4 1,433.9 1,444.1 1,452.0 1,460.9 1,479.5 1,485.7 1,504.1 1,503.5 1,506.2 1,498.5 1,499.4 50 Borrowings 644.6 693.5 688.8 683.6 695.3 692.4 685.3 678.6 673.4 677.1 690.2 678.9 51 From banks in the U.S 183.4 190.3 194.0 200.6 211.3 215.0 197.2 202.6 204.4 204.2 199.2 200.0 52 From nonbanks in the U.S 461.3 503.2 494.8 483.1 484.1 477.4 488.1 476.0 469.0 472.9 491.0 478.9 53 Net due to related foreign offices 244.7 247.6 258.7 262.8 264.0 277.1 278.1 262.0 261.7 268.4 255.6 270.5 54 Other liabilities8 189.1 221.6 222.2 228.7 232.1 231.1 233.1 225.4 229.4 228.7 221.9 222.4 55 Total liabilities 3,616.1 3,790.9 3,814.0 3,833.2 3,881.8 3^943 3,8683 3353.7 3356.7 33603 3341.7 3344.6 56 Residual (assets less liabilities)9 331.5 353.3 355.5 358.5 360.1 361.0 365.4 367.4 367.8 367.6 367.9 366.7 Footnotes appear on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic NonfinancialS tatistics • June 1996 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures Account 1995 1995r 1996r 1996 Mar. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Mar. 6 Mar. 13 Mar. 20 Mar. 27 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 3,027.1 3,139.1 3,149.9 3,162.6 3,176.8 3,198.0 3,196.2 3,197.5 3,187.4 3,197.3 3,198.7 3,204.2 58 Securities in bank credit 856.0 852.8 852.7 854.5 855.1 854.5 853.0 843.4 840.8 845.3 843.8 848.6 59 U.S. government securities 649.2 642.7 647.0 647.5 644.0 640.1 643.2 635.4 632.6 634.7 636.3 640.3 60 Other securities 206.8 210.1 205.8 207.0 211.1 214.4 209.8 208.0 208.2 210.5 207.5 208.2 61 Loans and leases in bank credit2 2,171.0 2,286.3 2,297.1 2,308.1 2,321.7 2,343.5 2,343.2 2,354.1 2,346.6 2,352.0 2,354.9 2,355.7 62 Commercial and industrial 502.3 528.6 531.7 535.0 535.3 540.4 541.1 541.2 540.0 539.5 541.2 543.5 63 Real estate 989.0 1,035.1 1,038.4 1,040.8 1.042.6 1,050.5 1,054.3 1,060.0 1,059.1 1.060.1 1,061.1 1,060.1 64 Revolving home equity 76.1 78.3 78.4 78.8 79.1 79.6 79.9 79.8 79.9 79.9 79.9 80.0 65 Other 913.0 956.7 960.0 962.0 963.5 970.9 974.4 980.2 979.2 980.2 981.2 980.1 66 Consumer 464.3 489.4 490.0 493.1 496.2 500.9 500.9 504.2 503.2 502.9 504.6 504.1 67 Security3 46.5 51.7 51.6 53.5 56.2 55.6 52.3 51.5 50.4 53.9 50.2 49.2 68 Other 169.0 181.6 185.5 185.8 191.3 196.1 194.7 197.2 193.9 195.6 197.7 198.8 69 Interbank loans4 158.4 168.2 167.3 169.1 173.6 182.1 173.6 184.6 181.8 182.3 185.8 187.8 70 Cash assets5 184.3 187.9 194.2 186.2 193.6 202.0 189.8 188.3 185.2 189.3 185.1 191.8 71 Other assets6 173.2 171.5 174.5 177.7 184.5 182.7 186.1 186.7 190.5 185.3 185.5 185.1 72 Total assets7 3,486.5 3,609.9 3,629.2 3,639.1 3,672.1 3,707.9 3,689.2 3,700.6 3,688.4 3,697.6 3,698.7 3,712.5 Liabilities 73 Deposits 2,396.6 2,458.9 2,470.8 2,473.6 2,491.8 2,523.1 2,516.1 2,533.5 2,529.0 2,527.1 2,531.7 2,536.6 74 Transaction 783.9 772.1 769.4 758.3 763.4 772.6 755.9 758.6 756.7 752.3 760.4 763.1 75 Nontransaction 1,612.7 1,686.8 1,701.3 1,715.3 1,728.4 1,750.5 1,760.2 1,775.0 1,772.3 1,774.7 1.771.3 1,773.5 76 Large time 241.0 255.0 261.0 267.7 270.1 272.0 273.8 272.5 271.6 271.8 272.5 272.5 77 Other 1,371.7 1,431.8 1,440.3 1,447.6 1,458.3 1,478.5 1,486.3 1,502.5 1,500.7 1,503.0 1,498.8 1,501.0 78 Borrowings 538.8 569.6 567.3 565.6 577.7 591.2 573.6 575.3 553.9 576.7 590.9 577.8 79 From banks in the U.S 168.6 178.9 179.2 178.6 179.8 186.6 176.0 187.1 181.1 192.6 196.2 184.0 80 From nonbanks in the U.S 370.2 390.7 388.1 387.0 397.9 404.7 397.6 388.2 372.8 384.0 394.7 393.7 81 Net due to related foreign offices .... 86.5 92.2 92.6 89.6 91.0 93.0 90.4 81.2 86.0 83.9 76.9 81.2 82 Other liabilities8 138.3 141.8 143.5 148.2 155.4 153.6 155.8 149.8 151.6 149.7 149.0 148.0 83 Total liabilities 3,160.2 3,262.5 3,274.1 3,277.0 3,316.0 3360.9 3,335.9 3,339.9 3320.4 33373 3348.5 3343.6 84 Residual (assets less liabilities)9 326.4 347.4 355.1 362.1 356.1 347.0 353.3 360.8 368.0 360.3 350.2 368.9 Not seasonally adjusted Assets 85 Bank credit 3,021.3 3,142.8 3,154.5 3,172.3 3,182.7 3,186.3 3.188.2 3,190.4 3,186.6 3,191.0 3,188.9 3,189.7 86 Securities in bank credit 859.5 854.7 853.8 855.3 848.5 843.5 849.1 846.8 845.6 849.5 845.8 848.9 87 U.S. government securities 652.5 644.8 645.9 646.6 640.2 633.0 639.2 638.6 634.6 638.2 639.6 642.2 88 Other securities 207.0 209.9 207.8 208.7 208.3 210.5 209.9 208.2 211.0 211.2 206.2 206.7 89 Loans and leases in bank credit2 2,161.8 2,288.1 2,300.7 2,317.0 2,334.2 2,342.8 2,339.1 2,343.6 2,341.0 2,341.5 2,343.1 2,340.8 90 Commercial and industrial 505.1 524.7 529.2 533.9 533.3 537.3 540.3 544.3 542.5 541.8 545.0 546.0 91 Real estate 983.7 1,036.9 1,041.5 1,046.2 1,047.4 1,050.4 1,051.0 1,054.2 1,053.7 1,054.7 1,054.0 1,054.3 92 Revolving home equity 75.3 78.9 79.1 79.3 79.2 79.5 79.4 79.1 79.3 79.2 79.1 79.1 93 Other 908.4 958.0 962.5 967.0 968.2 970.9 971.6 975.2 974.4 975.5 974.9 975.2 94 Consumer 460.4 490.7 490.6 493.9 502.0 505.5 501.4 500.0 499.7 498.8 500.3 499.5 95 Security3 46.6 51.6 51.9 55.4 56.9 53.9 53.3 51.6 52.7 54.5 50.8 47.8 96 Other 165.9 184.3 187.6 187.5 194.6 195.7 193.0 193.5 192.5 191.7 192.9 193.2 97 Interbank loans4 157.1 163.1 164.8 173.2 184.6 189.8 177.3 183.2 188.3 182.7 180.3 177.2 98 Cash assets5 177.9 187.9 194.8 190.7 208.5 209.8 191.7 181.5 179.6 184.0 178.2 180.5 99 Other assets6 172.5 172.4 175.2 176.3 183.8 183.6 185.0 186.0 190.2 183.4 184.0 184.6 100 Total assets7 3,472.2 3,609.2 3,632.7 3,655.8 3,703.0 3,713.0 3,685.6 3,684.5 3,688.0 3,684.3 3,674.8 3,675.5 Liabilities 101 Deposits 2,384.4 2,457.9 2,472.4 2,488.5 2,522.1 2,529.0 2,507.3 2,519.4 2,526.7 2,517.2 2,506.3 2,502.5 102 Transaction 771.3 770.2 769.5 771.8 798.3 784.2 748.8 743.9 750.9 740.8 736.0 733.3 103 Nontransaction 1,613.1 1,687.7 1,702.9 1,716.8 1,723.8 1,744.7 1,758.6 1,775.5 1,775.7 1,776.5 1,770.2 1,769.2 104 Large time 241.3 254.7 260.8 267.4 265.8 269.3 275.2 273.0 273.4 272.8 272.7 271.8 105 Other 1,371.8 1,433.0 1,442.2 1,449.3 1,458.1 1,475.4 1,483.3 1,502.6 1,502.3 1,503.7 1,497.5 1,497.4 106 Borrowings 531.8 573.3 574.9 576.7 584.2 581.9 572.4 567.5 558.3 567.8 577.0 572.0 107 From banks in the U.S 164.4 171.1 175.6 181.1 191.7 193.5 178.5 182.0 181.6 183.8 180.5 180.8 108 From nonbanks in the U.S 367.4 402.2 399.3 395.6 392.5 388.4 393.9 385.5 376.7 384.0 396.5 391.1 109 Net due to related foreign offices .... 89.7 88.7 92.0 88.4 89.3 92.9 92.3 84.5 87.7 85.8 79.8 90.3 110 Other liabilities8 139.8 141.9 143.9 149.9 153.4 154.3 154.2 151.6 153.5 151.9 149.9 150.2 111 Total liabilities 3,145.6 3,261.7 3,283.2 3303.4 3349.1 3358.0 33263 3323.1 3326.2 3322.8 3313.0 3314.9 112 Residual (assets less liabilities)9 326.5 347.4 349.5 352.4 353.9 355.0 359.3 361.4 361.8 361.5 361.8 360.7 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 condition commercial banks in the United States. (large domestic); other domestically chartered commercial banks (small domestic); branches 5. Includes vault cash, cash items in process of collection, demand balances due from and agencies of foreign banks; New York State investment companies, and Edge Act and depository institutions in the United States, balances due from Federal Reserve Banks, and agreement corporations (foreign-related institutions). Excludes international banking facili- other cash assets. ties. Data are Wednesday values, or pro rata averages of Wednesday values. Large domestic 6. Excludes the due-from position with related foreign offices, which is included in lines banks constitute a universe; data for small domestic banks and foreign-related institutions are 25, 53, 81, and 109. estimates based on weekly samples and on quarter-end condition reports. Data are adjusted 7. Excludes unearned income, reserves for losses on loans and leases, and reserves for for breaks caused by reclassifications of assets and liabilities. transfer risk. Loans are reported gross of these items. 2. Excludes federal funds sold to, reverse repurchase agreements with, and loans to 8. Excludes the due-to position with related foreign offices, which is included in lines 25, commercial banks in the United States. 53, 81, and 109. 3. Consists of reserve repurchase agreements with broker-dealers and loans to purchase 9. This balancing item is not intended as a measure of equity capital for use in capital and carry securities. adequacy analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS Millions of dollars, Wednesday figures 1996 AAccccoouunntt Jan. 31r Feb. 7 Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 ASSETS 1 Cash and balances due from depository institutions 124,589 114,156 114,434 135,342 117,389' 108,667 113,510 109,275 110,535 2 U.S. Treasury and government securities 285,359 288,919 289,779 291,741 290,002 286,686 285,376 284,298 285,106 Trading account 21,443 22,743r 24,342' 26,874' 25,054' 25,868 27,040 26,792 26,624 4 Investment account 263,916 266,176r 265,438' 264,866' 264.948' 260,818 258,336 257,506 258,482 5 Mortgage-backed securities' 111,660 111,484' 111.805' 112,116' 111,935' 111,475 110,458 110,073 112,357 All others, by maturity 6 One year or less 38,582 39,396' 39,705' 38,961' 38,030' 37,007 36,418 36,436 35,878 7 One year through five years 65,061 65,518' 65,313' 63,467' 64,541' 62,630 61,496 61,495 61,452 8 More than five years 48,613 49,778' 48,615' 50,322' 50,442' 49,706 49,964 49,502 48,796 9 Other securities 124,963 126,331 125,351 123,731 122,220' 124,994 124,936 119,876 120,071 10 Trading account 1,544 1,472 1,512 1,496 1,493 1,477 1,469 1,539 1,667 II Investment account 65,269 65,097' 64,766' 64,055' 63,702' 64,834 64,907 64,121 63,839 12 State and local government, by maturity 18,998 18,920 18,894 18,847 18,885 18,952 18,968 18,899 18,905 n One year or less 4,424 4,344 4,341 4,309 4,291 4,246 4,231 4,205 4,193 14 More than one year 14,573 14,577 14,553 14,537 14,594 14,706 14,737 14,693 14,712 1 Other bonds, corporate stocks, and securities 46,271 46,176' 45,872' 45,209' 44,817' 45,882 45,939 45,222 44,934 16 Other trading account assets 58,149 59,762' 59,073' 58,179' 57,025' 58,683 58,560 54,216 54,564 17 Federal funds sold" 110,588 99,437 109,726 104,420 107,153 105,488 108,379 106,118 102,037 18 To commercial banks in the United States 74,149 62,420 69,746 67,806 70,082 70,120 71,352 72,224 70,932 19 To nonbank brokers and dealers in securities 29,894 28,656 32,119 29,421 29,951 29,310 31,365 28,658 26,064 20 To others3 6,546 8,361 7,862 7,192 7,119 6,058 5,661 5,236 5,040 21 Other loans and leases, gross 1,284,585 1,279,295' 1,282,062' 1,282,608' 1,282,712' 1,284,588 1,284,577 1,286,121 1,286,328 22 Commercial and industrial 352,606 351,252' 351,641' 351,892' 352,922' 353,981 353,280 355,450 356,291 23 Bankers acceptances and commercial paper 1,318 1,409 1,450 1,495 1,465 1,596 1,579 1,627 1,601 24 All other 351,288 349,842' 350,191' 350,397' 351,457' 352,385 351,700 353,823 354,690 25 U.S. addressees 348,518 347,060' 347,415' 347,625' 348,641' 349,588 348,901 351,065 351,955 26 Non-U.S. addressees 2,770 2,782 2,776 2,772 2,816 2,797 2,800 2,758 2,735 27 Real estate loans 506,283 507,327 507,318 504,417 505,117 508,683 508,792 507,282 506,562 28 Revolving, home equity 47,997 47,882 47,922 47,781 47,985 47,972 47,920 47,825 47,765 29 All other 458,286 459,445 459,396 456,635 457,132 460,711 460,872 459,457 458,796 30 To individuals for personal expenditures 251,145 250,140' 250,093' 250,209' 247,863' 247,903 246,948 247,608 247,337 31 To depository and financial institutions 68,578 68,122' 67,899' 68,931' 68,520' 69,075 70,405 70,823 71,316 32 Commercial banks in the United States 39,324r 38,671' 38,544' 39,467' 39,630' 39,645 40,523 39,792 39,904 33 . Banks in foreign countries 3,150 3,259' 3,204' 3,648' 2,783' 2,649 3,001 3,082 3,211 34 Nonbank depository and other financial institutions 26,104' 26,192' 26,151 25,816 26,107 26,781 26,881 27,949 28,202 35 For purchasing and carrying securities 17,490 14,857 17,063 17,445 19,657 16,741 17,006 16,207 15,923 36 To finance agricultural production 6,522 6,485 6,460 6,408 6,532 6,564 6,521 6,504 6,554 37 To states and political subdivisions 10,576 10,513 10,547 10,458 10,553 10,610 10,572 10,522 10,589 38 To foreign governments and official institutions 1,159 l,157r 1,233' 1,146' 1,286' 1,115 1,120 1,102 1,082 39 All other loans 27,535 26,597 26,522 28,321 26,754 25,940 25,538 26,064 26,083 40 Lease-financing receivables 42,691 42,847 43,286 43,382 43,509 43,975 44,396 44,559 44,592 41 LESS: Unearned income 1,734 1,721 1,770 1,770 1,778 1,764 1,803 1,793 1,791 42 Loan and lease reserve3 33,276 33,400 33,471 33,348 33,276 33,537 33,517 33,447 33,182 43 Other loans and leases, net 1,249,575 1,244,174' 1,246,821' 1,247,491' 1,247,658' 1,249,287 1,249,257 1,250,881 1,251,356 44 All other assets 142,304 139,531' 141,943' 140,643' 142,255' 147,131 142,484 144,909 143,543 45 Total assets 2,037,377 2,012,548 2,028,054 2,043,366 2,026,677r 2,022,253 2,023,941 2,015,357 2,012,648 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic NonfinancialS tatistics • June 1996 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1996 AAccccoouunntt Jan. 31R Feb. 7 Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 LIABILITIES 46 Deposits 1,211,596 1,203,600 1,208,803 1,212,020 1,194,293' 1,214,607 1,209,808 1,202,987 1,198,002 47 Demand deposits 316,332 299,712 304,213 314,317 298,488' 301,580 297,915 296,239 294,139 48 Individuals, partnerships, and corporations 266,036 253,049R 257,465' 261,837' 255,041' 258,736 257,055 251,947 250,720 49 Other holders 50,296 46,663' 46,748' 52,480' 43,447' 42,844 40,859 44,293 43,420 50 States and political subdivisions 10,171 8,475R 8,229' 9,147' 8,336' 7,895 7,473 8,641 8,212 51 U.S. government 2,401 1,999 1,949 1,494 1,709 2,160 1,698 1,959 1,691 52 Depository institutions in the United States 21,488 19,743 20,010 25,727 19,860' 20,260 19,412 20,459 20,140 53 Banks in foreign countries 5,615 4,929 5,300 5,410 5,842 4,998 5,019 5,750 5,468 54 Foreign governments and official institutions 709 524 693 607 553 680 678 695 604 55 Certified and officers' checks 9,911 10,993 10,567 10,095 7,147 6,851 6,580 6,788 7,304 56 Transaction balances other than demand deposits4 88,831 86,072 84,896 86,086 85,171 86,023 84,122 85,054 84,557 57 Nontransaction balances 806,433 817,817 819,695 811,617 810,634 827,004 827,771 821,694 819,305 58 Individuals, partnerships, and corporations 782,500R 793,128R 794,916' 786,998' 786,031' 801,769 802,876 796,780 794,426 59 Other holders 23,933R 24,688R 24,778' 24,618' 24,603' 25,235 24,895 24,914 24,880 60 States and political subdivisions 20,947R 21,602R 21,634' 21,599' 21,600' 22,275 22,034 22,103 21,980 61 U.S. government 829 862 894 730 739 785 781 747 728 62 Depository institutions in the United States l,868R L,935R 1,962' 2,001' 1,979' 1,889 1,776 1,752 1,879 63 Foreign governments, official institutions, and banks . . 290R 290' 289' 289' 285 286 305 312 292 64 Liabilities for borrowed money5 409,509 396,891 406,215 410,656 410,004 394,734 404,051 410,568 402,667 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 0 0 0 66 Treasury tax and loan notes 21,406 3,561R 5,234' 5,295' 21,229' 7 463 15,825 11,733 67 Other liabilities for borrowed money6 388,103 393,330R 400,981 405,360 388,774 394,727 403,588 394,743 390,934 68 Other liabilities (including subordinated notes and debentures) . . . 220,010 215,939 215,868 223,966 225,673' 215,840 212,309 204,359 214,807 69 Total liabilities 1,841,114 1,816,430 1,830,886 1,846,641 l,829,970r 1,825,181 1,826,167 1,817,914 1,815,476 70 Residual (total assets less total liabilities)7 196,263 196,118 197,168 196,724 196,707 197,072 197,774 197,443 197,172 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 L,692,022R 1,692,89 lr 1,698,628 1,695,227 1,692,375' 1,691,990 1,691,392 1,684,398 1,682,706 72 Time deposits in amounts of S100,000 or more 1 18,288R 120,284' 120,115' 119,109' 118,222' 118,768 117,990 117,728 116,262 73 Loans sold outright to affiliates9 1,215 1,208 1,196 1,187 1,177 1,168 1,151 1,136 1,125 74 Commercial and industrial 275 275 275 275 275 275 270 270 269 75 Other 940 933 921 912 902 892 880 866 856 76 Foreign branch credit extended to U.S. residents10 27,814 27,584 27,767 27,990 27,714 27,546 27,354 27,162 26,956 77 Net owed to related institutions abroad 83,845 82,637 78,912 92,098 92,665 82,191 80,559 73,999 85,122 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 of 3. Includes allocated transfer risk reserve. 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 (ATS) subsidiaries of the holding company. accounts, and telephone and preauthorized transfers of savings deposits. 10. Credit extended by foreign branches of domestically chartered weekly reporting banks 5. Includes borrowings only from other than directly related institutions. to nonbank U.S. residents. Consists mainly of commercial and industrial loans, but includes 6. Includes federal funds purchased and securities sold under agreements to repurchase. an unknown amount of credit extended to other than nonfinancial businesses. 7. This balancing item is not intended as a measure of equity capital for use in capitaladequacy analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.28 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities Millions of dollars, Wednesday figures 1996 AAccccoouunntt Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 ASSETS 1 Cash and balances due from depository institutions 18,636 17,402 18,058 16,949 16,736 16,242 16,694 16,500 16,611 2 U.S. Treasury and government agency securities 42,544 46,388 46,201 46,714 49,319 47,099 46,911 46,967 4455,,442299 3 Other securities 48,134' 45,564' 45,777' 44,251' 44,704' 44,099 43,329 42,717 42,555 4 Federal funds sold1 27,917 28,750 31,485 25,529 31,387 27,075 29,682 28,169 30,121 To commercial banks in the United States 7,602 6,251 6,845 4,414 7,963 5,202 7,274 5,948 7,812 A To others2 20,314 22,499 24,640 21,114 23,425 21,873 22,409 22,221 22,308 7 Other loans and leases, gross 181,613 181,988 184,179 184,096 185,298' 180,675 181,937 183,360 183,599 8 Commercial and industrial 118,802 120,234 120,731' 120,733' 120,912' 119,678 120,149 121,260 120,681 9 Bankers acceptances and commercial paper . 5,134 5,141 5,080 5,163 5,290' 5,155 5,048 5,149 5,188 in All other 113,668 115,093 115,651' 115,570' 115,622' 114,523 115,100 116,112 115,493 n U.S. addressees 107,765 109,132 109,630' 109,648' 109,699' 108,519 109,007 109,988 109,311 12 Non-U.S. addressees 5,903 5,961 6,021 5,921 5,923 6,004 6,093 6,123 6,182 13 Loans secured by real estate 21,165 2211,,332266 21,280 21,285 21,009 20,833 20,817 20,687 20,374 14 Loans to depository and financial institutions 30,063 28,888 29,382 29,575 29,673 28,376 28,907 29,314 30,067 15 Commercial banks in the United States 2,444 2,341 2,791 2,381 2,413 2,510 3,231 3,144 3,273 16 Banks in foreign countries 2,819 2,907 2,781 2,703 3,050 2,883 2,845 2,671 2,755 17 Nonbank financial institutions 24,800 23,640 23,809 24,491 24,210 22,984 22,830 23,500 24,039 18 For purchasing and carrying securities 4,888 4,891 5,768' 5,836' 7,014' 5,113 5,389 5,503 5,782 19 To foreign governments and official institutions 587 641 735 661 661 686 593 669 594 20 All other 4,211' 4,150' 4,340' 4,148' 4,166' 4,138 4,202 4,094 4,214 21 Other assets (claims on nonrelated parties) 39,161' 40,808' 40,477' 40,227' 40,848' 40,115 41,240 36,505 36,785 22 Total assets3 387,035r 388,151r 392,427r 385,692r 396,549r 386,611 387,969 384,985 384,098 LIABILITIES 23 Deposits or credit balances owed to other than directly related institutions 100,709 101,265 100,901 99,493 104,192' 103,864 105,992 105,042 105,989 24 Demand deposits4 4,483 4,280 4,910 4,247 3,887 3,778 3,896 3,623 3,954 25 Individuals, partnerships, and corporations .... 3,416 3,289 3,335 3,268 3,166 3,183 3,105 2,921 3,124 26 Other 1,067 991 1,576 980 721 595 791 702 830 27 Nontransaction accounts 96,226 96,985 95,991 95,246 100,306' 100,086 102,097 101,419 102,035 28 Individuals, partnerships, and corporations .... 65,759 66,191 64,697 65,020 68,847' 69,719 72,078 71,613 71,374 29 Other 30,466 30,794 31,294 30,226 31,458 30,366 30,018 29,807 30,661 30 Borrowings from other than directly related institutions 71,685 73,162 73,791 71,983 75,816 77,113 72,747 75,565 70,075 31 Federal funds purchased5 47,553 44,921 45,700 43,012 45,012 49,350 45,236 47,141 43,941 32 From commercial banks in the United States . . 11,188 7,831 9,046 7,648 10,198 11,755 10,305 8,850 8,730 33 From others 36,365 37,090 36,654 35,365 34,814 37,595 34,931 38,291 35,211 34 Other liabilities for borrowed money 24,132 28,240 28,091 28,971 30,803 27,764 27,511 28,424 26,133 35 To commercial banks in the United States 4,013 4,119 4,479 3,864 4,304 4,282 3,949 4,244 4,381 36 To others 20,119 24,122 23,612 25,107 26,500 23,482 23,562 24,181 21,753 37 Other liabilities to nonrelated parties 64,667 64,812 63,753 62,228 64,960 62,461 63,064 59,105 58,817 38 Total liabilities6 387,035r 388,151r 392,427r 385,692r 396,549r 386,611 387,969 384,985 384,098 MEMO 39 Total loans (gross) and securities, adjusted 290,162' 294,097' 298,005' 293,794' 300,334' 291,237 291,354 292,121 290,617 40 Net owed to related institutions abroad 120,944' 121,661' 127,731' 124,061' 123,325' 111,868 117,991 114,507 120,219 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 United 4. Includes other transaction deposits. States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • June 1996 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1995 1996 IItteemm 1991 1992 1993 1994 1995 Sept. Oct. Nov. Dec. Jan. Feb. Commercial paper (seasonally adjusted unless noted otherwise) 1111 AAAAllllllll iiiissssssssuuuueeeerrrrssss 528,832 545,619 555,075 595,382 674,903 670,642 673,241 669,656 674,903 685,795 687,668 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss1111 2222 DDDDeeeeaaaalllleeeerrrr----ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr2222,,,, ttttoooottttaaaallll 212,999 226,456 218,947 223,038 275,815 269,636 271,299 276,223 275,815 288,367 293,313 3333 DDDDiiiirrrreeeeccccttttllllyyyy ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr3333,,,, ttttoooottttaaaallll 182,463 171,605 180,389 207,701 210,828 215,179 215,982 213,574 210,828 208,164 208,046 4444 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss4444 133,370 147,558 155,739 164,643 188,260 185,827 185,960 179,859 188,260 189,264 186,309 Bankers dollar acceptances (not seasonally adjusted)5 5555 TTTToooottttaaaallll 43,770 38,194 32,348 29,835 BBBByyyy hhhhoooollllddddeeeerrrr 6666 AAAAcccccccceeeeppppttttiiiinnnngggg bbbbaaaannnnkkkkssss 11,017 10,555 12,421 11,783 7777 OOOOwwwwnnnn bbbbiiiillllllllssss 9,347 9,097 10,707 10,462 8888 BBBBiiiillllllllssss bbbboooouuuugggghhhhtttt ffffrrrroooommmm ooootttthhhheeeerrrr bbbbaaaannnnkkkkssss 1,670 1,458 1,714 1,321 FFFFeeeeddddeeeerrrraaaallll RRRReeeesssseeeerrrrvvvveeee BBBBaaaannnnkkkkssss6666 9999 FFFFoooorrrreeeeiiiiggggnnnn ccccoooorrrrrrrreeeessssppppoooonnnnddddeeeennnnttttssss 1,739 1,276 725 410 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11110000 OOOOtttthhhheeeerrrrssss 31,014 26,364 19,202 17,642 BBBByyyy bbbbaaaassssiiiissss 11111111 IIIImmmmppppoooorrrrttttssss iiiinnnnttttoooo UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 12,843 12,209 10,217 10,062 11112222 EEEExxxxppppoooorrrrttttssss ffffrrrroooommmm UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 10,351 8,096 7,293 6,355 11113333 AAAAllllllll ooootttthhhheeeerrrr 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 institutions. personal, and mortgage financing; factoring, finance leasing, and other business lending; The reporting group is revised every January. Beginning January 1995, data for Bankers insurance underwriting; and other investment activities. 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 for 3. As reported by financial companies that place their paper directly with investors. 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. 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans' Percent per year Date of change Rate Period Average Period Average Period Average rate rate rate 1993—Jan. 1 6.00 1993 6.00 1994—Jan 6.00 1995—Jan 8.50 1994 7.15 Feb 6.00 Feb 9.00 1994—Mar. 24 6.25 1995 8.83 Mar 6.06 Mar. 9.00 Apr. 19 6.75 Apr 6.45 Apr 9.00 May 17 7.25 1993—Jan 6.00 Mav 6.99 May 9.00 Aug. 16 7.75 Feb 6.00 June 7.25 June 9.00 Nov. 15 8.50 Mar. 6.00 July 7.25 July 8.80 Apr 6.00 Aug 7.51 Aug 8.75 1995—Feb. 1 9.00 Mav 6.00 Sept 7.75 Sept 8.75 July 7 8.75 June 6.00 Ocl 7.75 Oct 8.75 Dec. 20 8.50 July 6.00 Nov 8.15 Nov 8.75 6.00 Dec 88..5500 Dec 88..6655 1996—Feb. 1 8.25 Sept 6.00 Oct 6.00 1996—Jan 8 50 666...000000 Feb 888...222555 Dec 666...000000 888...222555 Apr. 888...222555 1. The prime rate is one of several base rates that banks use to price short-term business Report. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415) loans. The table shows the date on which a new rate came to be the predominant one quoted monthly statistical releases. For ordering address, see inside front cover. by a majority of the twenty-five largest banks by asset size, based on the most recent Call Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1995 1996 1996, week ending IItteemm 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Mar. 1 Mar. 8 Mar. 15 Mar. 22 Mar. 29 MONEY MARKET INSTRUMENTS 1 Federal funds1,2,3 3.02 4.21 5.83 5.60 5.56 5.22 5.31 5.31 5.57 5.24 5.36 5.22 2 Discount window borrowing2,4 3.00 3.60 5.21 5.25 5.24 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Commercial paper3-Sb 3 1-month 3.17 4.43 5.93 5.84 5.56 5.29 5.39 5.30 5.31 5.37 5.44 5.48 4 3-month 3.22 4.66 5.93 5.64 5.40 5.15 5.31 5.17 5.21 5.33 5.36 5.37 5 6-month 3.30 4.93 5.93 5.43 5.23 4.99 5.26 5.05 5.12 5.31 5.33 5.32 Finance paper, directly placed3,5,7 6 1-month 3.12 4.33 5.81 5.70 5.44 5.20 5.29 5.20 5.22 5.26 5.32 5.36 7 3-month 3.16 4.53 5.78 5.47 5.25 5.00 5.18 5.03 5.05 5.21 5.24 5.26 8 6-month 3.15 4.56 5.68 5.20 5.01 4.77 5.04 4.83 4.89 5.08 5.09 5.14 Bankers acceptances3,5,8 9 3-month 3.13 4.56 5.81 5.52 5.31 5.07 5.21 5.09 5.11 5.23 5.26 5.26 10 6-month 3.21 4.83 5.80 5.34 5.14 4.91 5.17 4.99 5.04 5.20 5.23 5.22 Certificates of deposit, secondary market3,9 11 1-month 3.11 4.38 5.87 5.75 5.47 5.23 5.31 5.23 5.24 5.30 5.34 5.36 12 3-month 3.17 4.63 5.92 5.62 5.39 5.15 5.29 5.16 5.19 5.31 5.33 5.34 13 6-month 3.28 4.96 5.98 5.49 5.28 5.03 5.30 5.12 5.18 5.33 5.36 5.37 14 Eurodollar deposits, 3-month3,10 3.18 4.63 5.93 5.64 5.40 5.14 5.28 5.14 5.18 5.31 5.31 5.33 U.S. Treasury bills Secondary market3,5 15 3-month 3.00 4.25 5.49 5.14 5.00 4.83 4.96 4.87 4.89 4.97 5.00 5.00 16 6-month 3.12 4.64 5.56 5.13 4.92 4.77 4.96 4.82 4.87 4.99 5.03 5.00 17 1-year 3.29 5.02 5.60 5.03 4.82 4.69 5.06 4.87 4.89 5.13 5.15 5.13 Auction average3,5,11 18 3-month 3.02 4.29 5.51 5.16 5.02 4.87 4.96 4.86 4.89 4.95 5.02 4.99 19 6-month 3.14 4.66 5.59 5.15 4.97 4.79 4.96 4.80 4.80 5.00 5.06 4.97 20 1-year 3.33 5.02 5.69 5.06 4.89 4.64 4.98 n.a. 4.98 n.a. n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 3.43 5.32 5.94 5.31 5.09 4.94 5.34 5.14 5.15 5.41 5.44 5.42 22 2-year 4.05 5.94 6.15 5.32 5.11 5.03 5.66 5.32 5.40 5.76 5.79 5.78 23 3-year 4.44 6.27 6.25 5.39 5.20 5.14 5.79 5.44 5.52 5.90 5.91 5.89 24 5-year 5.14 6.69 6.38 5.51 5.36 5.38 5.97 5.65 5.71 6.06 6.08 6.08 25 7-year 5.54 6.91 6.50 5.63 5.54 5.64 6.19 5.91 5.96 6.30 6.30 6.27 26 10-year 5.87 7.09 6.57 5.71 5.65 5.81 6.27 6.06 6.08 6.37 6.36 6.32 27 20-year 6.29 7.49 6.95 6.12 6.11 6.30 6.74 6.55 6.57 6.82 6.82 6.81 28 30-year 6.59 7.37 6.88 6.06 6.05 6.24 6.60 6.45 6.47 6.68 6.67 6.65 Composite 29 More than 10 years (long-term) 6.45 7.41 6.93 6.11 6.07 6.28 6.72 6.53 6.55 6.79 6.79 6.78 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 5.38 5.77 5.80 5.40 5.27 5.24 5.33 5.30 5.29 5.23 5.38 5.44 31 Baa 5.83 6.17 6.10 5.66 5.59 5.59 5.72 5.61 5.57 5.57 5.91 5.96 32 Bond Buyer series14 5.60 6.18 5.95 5.45 5.43 5.43 5.79 5.57 5.59 5.81 5.86 5.90 CORPORATE BONDS 33 Seasoned issues, all industries15 7.54 8.26 7.83 7.11 7.10 7.27 7.65 7.49 7.51 7.72 7.71 7.69 Rating group 34 Aaa 7.22 7.97 7.59 6.82 6.80 6.99 7.35 7.20 7.21 7.42 7.41 7.39 35 Aa 7.40 8.15 7.72 6.99 6.99 7.16 7.52 7.38 7.39 7.59 7.58 7.57 36 A 7.58 8.28 7.83 7.13 7.12 7.31 7.68 7.52 7.55 7.75 7.74 7.72 37 Baa 7.93 8.63 8.20 7.49 7.47 7.63 8.03 7.86 7.90 8.10 8.10 8.09 38 A-rated, recently offered utility bonds16 7.46 8.29 7.86 7.10 7.09 7.31 7.75 7.45 7.80 7.87 7.76 7.77 MEMO Dividend-price ratio17 39 Common stocks 2.78 2.82 2.56 2.30 2.31 2.22 2.22 2.23 2.21 2.25 2.21 2.21 1. The daily effective federal funds rate is a weighted average of rates on trades through 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Depart- New York brokers. ment 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 used 3. Annualized using a 360-day year for bank interest. in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' 4. Rate for the Federal Reserve Bank of New York. 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 selected 6. An average of offering rates on commercial paper placed by several leading dealers for long-term bonds. firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on recently 7. An average of offering rates on paper directly placed by finance companies. offered, A-rated utility bonds with a thirty-year maturity and five years of call protection. 8. Representative closing yields for acceptances of the highest-rated money center banks. Weekly data are based on Friday quotations. 9. An average of dealer offering rates on nationally traded certificates of deposit. 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in 10. Bid rates for Eurodollar deposits at approximately 11:00 a.m. London time. Data are the price index. for indication purposes only. NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and 11. Auction date for daily data; weekly and monthly averages computed on an issue-date G.13 (415) monthly statistical releases. For ordering address, see inside front cover. basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic NonfinancialS tatistics • June 1996 1.36 STOCK MARKET Selected Statistics 1995 1996 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 249,71 254.16 291.18 298.18 300.05 310.41 311.78 317.58 327.90 329.22 346.46 346.73 2 Industrial 300.10 315.32 367.40 379.13 379.79 390.42 389.63 398.66 412.11 413.05 435.92 439.55 3 Transportation 242.68 247.17 270.14 279.15 285.63 295.54 291.16 300.06 303.53 300.43 315.29 324.77 4 Utility 114.55 104.96 114.61 109.59 111.06 114.67 123.59 119.49 173.95 127.09 135.51 122.83 5 Finance 216,55 209.75 238.48 240.49 245.27 260.72 265.12 266.12 273.36 274.96 290.97 290.44 6 Standard & Poor's Corporation (1941-43 = 10)' 451,63 460.42 541.72 557.37 559.11 578.77 582.92 595.53 614.57 614.42 649.54 647.07 7 American Stock Exchange (Aug. 31, 1973 = 50)2 438.77 449.49 498.13 513.25 526.86 547.64 530.26 529.93 538.01 540.48 562.34 565.69 Volume of trading (thousands of shares) 8 New York Stock Exchange 263,374 290,652 345,729 363,780 309,879 352,184 365,108 360,199 384,310 416,048 434,607 426,198 9 American Stock Exchange 18,188 17,951 20,387 23,283 21,825 25,422 17,865 16,724 21,085 21,069 27,107 22,988 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 60,310 61,160 76,680 67,600 71,440 77,076 75,005 77,875 76,680 73,530 77,090 78,308 Free credit balances at brokers4 11 Margin accounts5 12,360 14,095 16,250 13,830 13,900 14,806 14,753 15,590 16,250 14,950 15,840 15,770 12 Cash accounts 27,715 28,870 34,340 28,600 29,190 29,796 29,908 30,340 34,340 32,465 34,700 33,113 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 added collateralized by securities. Margin requirements on securities other than options are the to the group of stocks on which the index is based. The index is now based on 400 industrial difference between the market value (100 percent) and the maximum loan value of collateral stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and as prescribed by the Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, 40 financial. effective May 1, 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Nov. 1, 1971. previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has initial margin required for writing options on securities, setting it at 30 percent of the current included credit extended against stocks, convertible bonds, stocks acquired through the market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the exercise of subscription rights, corporate bonds, and government securities. Separate report- required initial margin, allowing it to be the same as the option maintenance margin required ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in by the appropriate exchange or self-regulatory organization; such maintenance margin rules April 1984. must be approved by the Securities and Exchange Commission. Effective Jan. 31, 1986, the 4. Free credit balances are amounts in accounts with no unfulfilled commitments to SEC approved new maintenance margin rules, permitting margins to be the price of the option brokers and are subject to withdrawal by customers on demand. plus 15 percent of the market value of the stock underlying the option. 5. Series initiated in June 1984. Effective June 8, 1988, margins were set to be the price of the option plus 20 percent of the 6. Margin requirements, stated in regulations adopted by the Board of Governors pursuant market value of the stock underlying the option (or 15 percent in the case of stock-index to the Securities Exchange Act of 1934, limit the amount of credit that can be used to options). purchase and carry "margin securities" (as defined in the regulations) when such credit is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1995 1996 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. U.S. budget1 1 Receipts, total 1,153,535 1,257,745 1,355,213 95,593 90,008 138,271 142,922 89,349 89,011 2 On-budget 841,601 922,719 1,004,134 72,200 63,651 110,322 110,615 60,912 56,677 3 Off-budget 311,934 335,026 351,079 23,393 26,357 27,949 32,307 28,437 32,334 4 Outlays, total 1,408,205 1,460,914 1,519,133 118,352 128,458 132,984 123,647 133,644 136,286 5 On-budget 1,141,618 1,181,542 1,230,469 92,151 101,767 121,753 98,057 105,711 108,365 6 Off-budget 266,587 279,372 288,664 26,200 26,691 11,232 25,591 27,933 27,921 7 Surplus or deficit (—), total -255,670 -203,169 -163,920 -22,758 -38,450 5,286 19,274 -44,295 -47,275 8 On-budget -300,017 258,823 -226,335 -19,951 -38,116 -11,431 12,558 -44,799 -51,688 9 Off-budget 45,347 55,654 62,415 -2,807 -334 16,717 6,716 504 4,413 Source of financing (total) 10 Borrowing from the public 248,594 184,998 171,288 13,353 38,339 -18,358 -4,747 47,022 39,189 11 Operating cash (decrease, or increase (-)) 6,283 16,564 -2,007 16,755 -4,911 5,610 -16,959 6,297 9,283 12 Other2 429 1,540 -5,468 -7,350 5,022 7,462 2,432 -9,024 -197 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37,949 21,194 26,105 20,495 37,454 31,157 21,874 14 Federal Reserve Banks 17,289 6,848 8,620 7,018 5,703 5,979 8,210 5,632 7,021 15 Tax and loan accounts 35,217 29,094 29,329 14,176 20,402 14,515 29,243 25,525 14,853 1. Since 1990, off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic NonfinancialS tatistics • June 1996 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1994 1995 1996 11999944 11999955 HI H2 HI H2 Jan. Feb. Mar. RECEIPTS 1 All sources 1,257,737 1,355,213 652,234 625,557 710,542 656,400 142,922 89,349 89,011 2 Individual income taxes, net 543,055 590,244 275,052 273,474 307,498 292,393 86,192 40,327 22,523 3 Withheld 459,699 499,927 225,387 240,062 251,398 256,916r 5555,,335511 46,722 41,834 4 Presidential Election Campaign Fund 70 69 63 10 58 9 11 7 16 5 Nonwithheld 160,047 175,786 117,620 42,031 132,006 43,100 31,159 3,163 5,790 6 Refunds 76,761 85,538 68,325 9,207 7755,,995588 1100,,005588 319 99,,556655 2255,,111188 Corporation income taxes 7 Gross receipts 154,205 174,422 80,536 78,392 92,132 88,302 6,381 3,797 17,793 8 Refunds 13,820 17,418 6,933 7,331 10,399 7,518 1,223 2,105 2,332 9 Social insurance taxes and contributions, net . . . 461,475 484,473 248,301 220,141 261,837 224,269 42,197 38,960 41,763 10 Employment taxes and contributions2 428,810 451,045 228,714 206,613 228,663 211,323 40,742 36,011 41,086 11 Self-employment taxes and contributions3 . 24,433 27,127 20,762 4,135 23,429 3,557 2.188 278 1,006 12 Unemployment insurance 28,004 28,878 17,301 11.177 18,001 10,702 1,081 2,546 258 13 Other net receipts4 4,661 4,550 2,284 2,349 2,267 2,247 374 403 419 14 Excise taxes 55,225 57,484 26,444 30,062 27,452 30,014 4.241 4,308 4,133 13 Customs deposits 20,099 19,301 9,500 11,042 8,847 9,849 1,482 1,456 1,528 16 Estate and gift taxes 15,225 14,763 8,197 7,071 7,424 7,718 1.288 1,090 1,137 17 Miscellaneous receipts5 22,274 31,944 11,170 13,305 15,749 11,374 2,364 1,517 2,467 OUTLAYS 18 All types 1,460,841 1,519,133 710,620 752,151 760,824 752,511r 123,647 133,644 136,286 19 National defense 281,642 272,066 133,844 141,885 135,862 132,954 20,243 21,691 22,479 20 International affairs 17,083 16,434 5,800 11,889 4,791 6,994 1,089 2,604 1,391 21 General science, space, and technology 16,227 16,724 8,502 7,604 8,611 8,810 1.536 1,326 1,381 22 Energy 5,219 4,936 2,237 2,923 2.358 2,203 115 54 131 23 Natural resources and environment 21,064 22,105 10,111 11,911 10,272r 12,633 1,869 1,817 1,592 24 Agriculture 15,046 9,773 7,451 7,623 4,040 3,062 336 345 -62 25 Commerce and housing credit -5,118 -14,441 -4,962 -4,270 -13,936 -4,412 -2,014 -1,024 -1,443 26 Transportation 38,066 39,350 16,739 21,835 18,193 19,931 3,094 2,960 2,864 27 Community and regional development 10,454 10,641 4,571 6,283 4,858 6,085 11,,000099 396 11,,000077 28 Education, training, employment, and social services 46,307 54,263 19,262 27,450 25,738 24,820 5,418 4,498 4,270 29 Health 107,122 115,418 53,195 54,147 58,759 57,013 8,665 9,542 10,306 30 Social security and Medicare 464,312 495,701 232,777 236,817 251,975 251,387 42,786 42,950 43,239 31 Income security 214,031 220,449 109,080 101,806 117,638 104,214 17,188 23,812 25,968 32 Veterans benefits and services 37,642 37,938 16,686 19,761 19,268r 18,684 2,165 2,901 3,300 33 Administration of justice 15,256 16,223 7,718 7,753 8,062 8,118r 1,806 1,281 1,342 34 General government 11,303 13,835 5,084 7,355 5,798 7,623 391 1,575 766 35 Net interest6 202,957 232.173 99,844 109,434 116,170 119,350 20,765 19,771 20,244 3b Undistributed offsetting receipts7 -37,772 -44,455 -17,308 -20,066 -17,632 -26,994 -2,812 -2,855 -2,490 1. Functional details do not sum to total outlays for calendar year data because revisions to 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for receipts and 6. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budge! have not 7. Rents and royalties for the outer continental shelf, U.S. government contributions for been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the U.S. 3. Old-age, disability, and hospital insurance. Government, Fiscal Year 1997; monthly and half-year totals: U.S. Department of the Trea- 4. Federal employee retirement contributions and civil service retirement and sury, Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1994 1995 1996 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 4,602 4,673 4,721 4,827 4,891 4,978 5,001 5,017 n.a. 2 Public debt securities 4,576 4,646 4,693 4,800 4,864 4,951 4,974 4,989 5,1I18r 3 Held by public 3,434 3,443 3,480 3,543 3,610 3,635 3,653 3,684 • 4 Held by agencies 1,142 1,203 1,213 1,257 1,255 1,317 1,321 1,305 5 Agency securities 26 28 29 27 27 27 27 28 n.a. 6 7 H H e e l l d d b b y y a p g u e b n li c c i es 26 0 27 0 29 0 27 0 26 0 27 0 27 0 28 0 I 8 Debt subject to statutory limit 4,491 4,559 4,605 4,711 4,775 4,861 4,885 4,900 5,030r 9 Public debt securities 4,491 4,559 4,605 4,711 4,774 4,861 4,885 4,900 5,030r 10 Other debt' 0 0 0 0 0 0 0 0 0r MEMO 11 Statutory debt limit 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 5,500r 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCES. U.S. Department of the Treasury, Monthly Statement of the Public Debt of the participation certificates, notes to international lending organizations, and District of Colum- United States and Treasury Bulletin. bia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1995 1996 TTyyppee aanndd hhoollddeerr 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Q1 1 Total gross public debt 4,177.0 4,535.7 4,800.2 4,988.7 4,951.4 4,974.0 4,988.7 5,117.8 By type 2 Interest-bearing 4,173.9 4,532.3 4,769.2 4,964.4 4,947.8 4,950.6 4,964.4 5,083.0 3 Marketable 2,754.1 2,989.5 3,126.0 3,307.2 3,252.6 3,260.5 3.307.2 3,375.1 4 Bills 657.7 714.6 733.8 760.7 748.3 742.5 760.7 811.9 5 Notes 1,608.9 1,764.0 1,867.0 2,010.3 1,974.7 1,980.3 2,010.3 2,014.1 6 Bonds 472.5 495.9 510.3 521.2 514.7 522.6 521.2 534.1 7 Nonmarketable' 1,419.8 1,542.9 1,643.1 1,657.2 1,695.2 1,690.2 1,657.2 1,707.9 8 State and local government series 153.5 149.5 132.6 104.5 121.2 113.4 104.5 96.5 9 Foreign issues2 37.4 43.5 42.5 40.8 41.4 41.0 40.8 40.4 10 Government 37.4 43.5 42.5 40.8 41.4 41.0 40.8 40.4 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 155.0 169.4 177.8 181.9 180.1 181.2 181.9 183.0 13 Government account series3 1,043.5 1,150.0 1,259.8 1,299.6 1,322.0 1,324.3 1,299.6 1,357.7 14 Non-interest-bearing 3.1 3.4 31.0 24.3 3.6 23.3 24.3 34.8 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 1,047.8 1,153.5 1,257.1 1,304.5 1,316.6 1,320.8 1,304.5 16 Federal Reserve Banks 302.5 334.2 374.1 391.0 389.0 374.1 391.0 17 Private investors 2,839.9 3,047.4 3.168.0 3,294.9 3,245.0 3,279.5 3,294.9 18 Commercial banks 294.4 322.2 290.1 285.0 298.0 289.0 285.0 19 Money market funds 79.7 80.8 67.6 71.3 58.7 64.2 71.3 20 Insurance companies 197.5 234.5 240.1 252.0 248.6 250.5 252.0 21 Other companies 192.5 213.0 226.5 288.8 227.7 224.1 288.8 n.a. 22 State and local treasuries5,6 579.3 631.9 521.4 420.0 470.9 422.9 420.0 Individuals 23 Savings bonds 157.3 171.9 180.5 185.0 182.6 183.5 185.0 24 Other securities 131.9 137.9 150.7 162.7 161.6 162.4 162.7 25 Foreign and international7 549.7 623.0 688.6 861.8 784.1 848.1 861.8 26 Other miscellaneous investors6'8 657.5 632.3 802.5 768.3 812.8 834.8 768.3 1. Includes (not shown separately) securities issued to the Rural Electrification Administra- 7. Consists of investments of foreign balances and international accounts in the United tion, depository bonds, retirement plan bonds, and individual retirement bonds. States. 2. Nonmarketable series denominated in dollars, and series denominated in foreign cur- 8. Includes savings and loan associations, nonprofit institutions, credit unions, mutual rency 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 actual SOURCES. U.S. Treasury Department, data by type of security, Monthly Statement of the holdings; data for other groups are Treasury estimates. Public Debt of the United States; data by holder, Treasury Bulletin. 5. Includes state and local pension funds. 6. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic NonfinancialS tatistics • June 1996 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1995 1996 1996, week ending Item Dec. Jan. Feb. Jan, 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 54,313 53,618 65,579 56,939 66,365 56,382 63,493 75,724 65,246 58,612 52,050 45,640 Coupon securities, by maturity 2 Five years or less 84,303 103,365 126,691 121,484 124,315 97,119 139,440 149,129 123,253 140,482 94,691 82,167 3 More than five years 43,615 54,608 67,822 58,119 69,703 71,497 71,386 61,941 55,182 62,864 44,568 42,324 4 Federal agency 26,368 27,947 26,759 26,477 26,486 26,419 27,570 26,578 27,494 27,651 26,045 28,636 5 Mortgage-backed 33,205 37,009 40,769 28,703 49,268 47,660 34,847 30,067 41,011 62,577 35,464 28,483 By type of counterparty With interdealer broker 6 U.S. Treasury 104,651 123,512 148,665 139,201 148,974 129,505 155,082 164,587 137,632 152,717 113,332 101,779 7 Federal agency 672 954 1,107 1,200 1,367 1,377 945 799 650 702 621 739 8 Mortgage-backed 12,863 12,634 14,663 9,989 16,433 17,213 14,038 10,950 1144,,112244 24,033 13,603 1100,,552266 With other 9 U.S. Treasury 77,580 88,079 111,426 97,341 111,408 95,493 119,236 122,206 106,049 109,240 77,976 68,352 10 Federal agency 25,696 26,993 25,652 25,278 25,119 25,041 26,625 25,779 26,844 26,949 25,425 27,897 11 Mortgage-backed 20,342 24,375 26,106 18,714 32,835 30,447 20,809 19,117 26,887 38,543 21,861 17,956 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 603 451 346 675 203 358 524 305 492 567 591 410 Coupon securities, by maturity 13 Five years or less 2,045 1,592 2,269 1,513 1,206 1,153 3,664 3,186 2,990 2,524 1,845 1,385 14 More than five years 12,577 14,331 17,420 14,583 14,504 15,602 23,229 17,566 17,128 18,600 15,054 10,829 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 0 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 1,098 1,860 2,730 1,688 1,544 2,513 2,614 3,918 4,262 3,381 1,914 2,067 19 More than five years 3,898 4,109 4,580 4,345 4,066 3,874 7,542 3,653 3,476 3,967 2,366 2,547 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 862 860 1,341 685 972 1,159 2,476 909 1,720 1,600 792 459 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 of delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt primary dealers. Monthly averages are based on the number of trading days in the month. securities are included when the time to delivery is more than five business days. Forward Transactions are assumed evenly distributed among the trading days of the report week. contracts for mortgage-backed agency securities are included when the time to delivery is Immediate, forward, and futures transactions are reported at principal value, which does not more than thirty business days. include accrued interest; options transactions are reported at the face value of the underlying 3. Futures transactions are standardized agreements arranged on an exchange. All futures securities. 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 on 2. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. securities that settle on the issue date of offering. Transactions for immediate delivery of mortgage- Major changes in the report form filed by primary dealers induced a break in the dealer data backed agency securities include purchases and sales for which delivery is scheduled in thirty business series as of the week ending July 6, 1994. 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

Federal Finance A25 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1995 1996 1996, week ending IItteemm Dec. Jan. Feb. Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 Mar. 6 Mar. 13 Mar. 20 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 16,960 9,173 8,316 2,468 7,984 7,984 1,932 14,082 17,288 21,460 13,482 Coupon securities, by maturity 2 Five years or less 21,659 21,332 11,937 23,003 20,116 10,734 8,146 9,208 8,753 6,044 7,306 3 More than five years -11,698 -14,408 -14,139 -16,726 -12,740 -8,641 -14,695 -19,897 -18,223 -24,674 -25,707 4 Federal agency 22,446 23,115 23,424 18,084 25,297 23,052 21,080 24,586 21,197 30,359 27,515 5 Mortgage-backed 39,509 38,362 40,161 37,788 38,760 41,553 39,944 40,488 39,464 37,792 38,374 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -2,484 -2,787 -2,582 -2,663 -2,901 -2,652 -2,882 -2,059 -1,418 -2,106 -3,929 Coupon securities, by maturity 7 Five years or less -4,338 -2,534 -587 -1,878 -2,375 -2,704 1,241 1,327 551 1,211 460 8 More than five years -17,662 -12,781 -9,037 -11,649 -10,968 -16,809 -5,373 -3,348 -6,594 -2,425 -4,030 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 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less -1,439 -931 5 -1,808 -1,829 -850 1,112 1,463 887 613 1,100 13 More than five years 7,216 7,488 2,706 8,221 6,682 7,324 -2,341 -564 759 -1,562 -1,578 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed -90 638 3,052 640 1,686 1,777 3,410 5,191 4,048 5,614 5,403 Financing5 Reverse repurchase agreements 16 Overnight and continuing 240,460 258,137 264,519 291,013 261,033 272,198 269,437 255,386 264,678 264,903 262,954 17 Term 389,626 405,768 424,730 393,531 450,293 464,098 381,535 406,947 397,073 439,536 450,306 Securities borrowed 18 Overnight and continuing 154,078 171,843 166,781 172,495 164,331 159,871 171,620 169,882 176,708 177,763 176,291 19 Term 62,835 59,920 65,051 60,188 65,626 64,365 64,703 65,419 65,699 66,423 66,505 Securities received as pledge 20 Overnight and continuing 4,132 3,114 1,878 2,022 1,577 1,658 2,117 2,044 2,686 5,088 6,067 21 Term 69 53 126 58 315 68 77 51 66 90 57 Repurchase agreements 22 Overnight and continuing 535,088 553,719 562,396 573,013 557,489 566,822 572,853 552,013 565,231 576,134 565,550 23 Term 355,266 368,819 387,953 364,158 412,886 434,282 342,983 366,235 355,933 398,797 403,225 Securities loaned 24 Overnight and continuing 5,543 5,566 4,714 4,699 4,401 4,129 5,052 5,183 5,345 5,429 5,406 25 Term 1,916 1,578 2,409 1,600 1,780 2,670 2,655 2,509 2,552 2,470 2,178 Securities pledged 26 Overnight and continuing 34,010 34,769 33,230 34,040 32,277 29,935 35,183 34,748 38,677 39,007 42,694 27 Term 5,518 5,597 7,230 6,650 6,906 6,547 7,299 8,039 8,135 7,932 8,206 Collateralized loans 28 Overnight and continuing 12,694 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 29 Term 1,989 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 30 Total n.a. 17,606 14,667 17,275 18,124 14,891 12,828 13,054 13,062 10,210 11,300 MEMO: Matched book6 Securities in 31 Overnight and continuing 240,188 264,459 253,184 278,995 257,499 266,238 251,446 239,549 239,209 241,556 244,345 32 Term 391,284 403,403 426,185 388,620 449,324 460,794 388,695 409,045 404,360 442,808 445,405 Securities out 33 Overnight and continuing 311,005 334,864 333,340 350,865 338,919 341,946 341,216 312,477 324,965 331,758 339,704 34 Term 309,089 318,147 330,450 308,250 354,223 372,456 287,026 311,512 306,521 341,791 344,393 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 futures Reserve Bank of New York by the U.S. government securities dealers on its published list of positions are included regardless of time to delivery. primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar 5. Overnight financing refers to agreements made on one business day that mature on the days of the report week are assumed to be constant. Monthly averages are based on the next business day; continuing contracts are agreements that remain in effect for more than one number of calendar days in the month. business day but have no specific maturity and can be terminated without advance notice by 2. Securities positions are reported at market value. either party; term agreements have a fixed maturity of more than one business day. Financing 3. Net outright positions include immediate and forward positions. Net immediate posi- data are reported in terms of actual funds paid or received, including accrued interest. tions include securities purchased or sold (other than mortgage-backed agency securities) that 6. Matched-book data reflect financial intermediation activity in which the borrowing and have been delivered or are scheduled to be delivered in five business days or less and lending transactions are matched. Matched-book data are included in the financing break- "when-issued" securities that settle on the issue date of offering. Net immediate positions for downs given above. The reverse repurchase and repurchase numbers are not always equal mortgage-backed agency securities include securities purchased or sold that have been because of the "matching" of securities of different values or different types of collateralizadelivered or are scheduled to be delivered in thirty business days or less. tion. Forward positions reflect agreements made in the over-the-counter market that specify NOTE, "n.a." indicates that data are not published because of insufficient activity. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Major changes in the report form filed by primary dealers induced a break in the dealer data securities are included when the time to delivery is more than five business days. Forward series as of the week ending July 6, 1994. contracts for mortgage-backed agency securities are included when the time to delivery is more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • June 1996 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 1996 AAggeennccyy 11999922 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. 1 Federal and federally sponsored agencies 483,970 570,711 738,928 n.a. 811,182 n.a. n.a. n.a. n.a. 2 Federal agencies 41,829 45,193 39,186 37,347 38,030 38,237 39,207 37,347R 37,273 3 Defense Department' 7 6 6 6 6 6 6 6 6 4 Export-Import Bank2'3 7,208 5,315 3,455 2,050 2,512 2,512 2,512 2,050R 2,050 5 Federal Housing Administration4 374 255 116 97 87 88 93 97 31 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 10,660 9,732 8,073 5,765 7,265 7,265 7,265 5,765 5,765 8 Tennessee Valley Authority 23,580 29,885 27,536 29,429 28,160 28,366 29,331 29,429 29,421 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 442,141 523,452 699,742 n.a. 773,152 n.a. n.a. n.a. n.a. 11 Federal Home Loan Banks 114,733 139,512 205,817 243,194 236,851 234,192 239,034 243,194 234,664 12 Federal Home Loan Mortgage Corporation 29,631 49,993 93,279 119,961 111,610 115,626 115,603 119,961 120,868 13 Federal National Mortgage Association 166,300 201,112 257,230 299,174 277,192 280,582 289,768 299,174 297,657 14 Farm Credit Banks8 51,910 53,123 53,175 57,379 55,800 56,529 56,694 57,379 58,659 15 Student Loan Marketing Association9 39,650 39,784 50,335 47,529 51,672 51,906 50,535 47,529 n.a. 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 Corporation'" 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 154,994 128,187 103,817 78,681 84,297 82,622 81,693 78,681 78,512 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 7,202 5,309 3,449 2,044 2,506 2,506 2,506 2,044R 2,044 21 Postal Service6 10.440 9,732 8,073 5,765 7,265 7,265 7,265 5,765 5,765 22 Student Loan Marketing Association 4,790 4,760 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 6,975 6,325 3,200 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 lending14 25 Farmers Home Administration 42,979 38,619 33,719 21,015 26,845 26,210 21,015 21,015 21,015 26 Rural Electrification Administration 18,172 17,578 17,392 17,144 17,276 17,045 17,141 17,144 17,026 27 Other 64,436 45,864 37,984 29,513 27,205 26,396 30,566 29,513R 29,462 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 insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. 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. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation; therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated. whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is 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

Securities Market and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1995 1996 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11999933 11999944 11999955rr oorr uussee Aug.r Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 All issues, new and refunding1 279,945 153,950 143,101 12,467 9,750 13,898 16,839 16,978 11,340 11,598 15,244 By type of issue 2 General obligation 90,599 54,404 55,737 4,519 3,482 6,184 6,194 5,489 2,652 2,063 4,846 3 Revenue 189,346 99,546 86,555 7,789 6,268 7,714 10,645 11,489 8,688 9,535 10,398 By type of issuer 4 State 27,999 19,186 14,215 617 1,510 1,825 1,491 951 1,630 695 904 5 Special district or statutory authority2 178,714 95,896 91,419 7,491 5,807 8,155 10,736 11,678 6,909 7,820 10,141 6 Municipality, county, or township 73,232 38,868 36,658 4,200 2,433 3,918 4,612 4,349 2,801 3,083 4,199 7 Issues for new capital 91,434 105,972 94,412 6,252 6,095 7,868 11,415 11,070 6,399 6,383 10,621 By use of proceeds 8 Education 16,831 21,267 24,926 1,227 1,474 1,785 3,377 2,968 2,010 2,226 1,847 9 Transportation 9,167 10,836 11,887 870 447 367 1,469 1,178 566 359 1,417 10 Utilities and conservation 12,014 10,192 9,618 689 569 1,780 554 1,664 422 582 892 11 Social welfare 13,837 20,289 18,612 1,351 1,140 1,716 2,177 1,614 930 904 2,715 12 Industrial aid 6,862 8,161 6,566 256 654 227 650 1,325 316 110 785 13 Other purposes 32,723 35,227 26,518 1,859 1,811 1,993 3,188 2,321 2,155 2,202 2,965 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 1996 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999933 11999944 11999955 oorr iissssuueerr July Aug. Sept. Oct. Nov. Dec. Jan.r Feb. 1 All issues' 769,088 583,240r n.a. 36,621 50,163 57,262r 52,112r 55,349r 40,149r 46,808 59,652 2 Bonds2 646,634 498,039r n.a. 31,955 43,911 49,905 43,452 47,568 34,619 42,066 50,682 By type of offering 3 Public, domestic 487,029 365,222r 408 806 25,617 34,490 43,137 36,692 43,336 32,219 33,306 44,266 4 Private placement, domestic3 121,226 76,065 n a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 38,379 56,755 76,910 6,337 9,421 6,768 6,760 4,232 2,399 8,761 6,416 By industry group 6 Manufacturing 88,160 43,423 42,950 4,456 4,082 3,284 3,397 4,017 3,205 3,759 2,472 7 Commercial and miscellaneous 58,559 40,735 37,139 1,403 2,480 2,607 3,532 4,178 3,099 2,151 2,601 8 Transportation 10,816 6,867 5,727 10 133 908 187 225 1,240 664 354 9 Public utility 56,330 13,322r 11,974 540 640 911 1,241 485 685 1,921 955 10 Communication 31,950 13,340 18,158 1,520 1,240 2,829 2,389 3,333 648 748 2,691 11 Real estate and financial 400,820 380,352r 369,769 24,026 35,335 39,365 32,706 35,330 25,742 32,824 41,610 12 Stocks2 122,454 85,155 n.a. 4,666 6,252 7,357r 8,660r 7,781r 5,530r 4,742 8,970 By type of offering 13 Public preferred 18,897 12,570 10,964 768 1,261 1,035 836 2,210 890 2,167 3,240 14 Common 82,657 47,828 57,809r 3,836 5,005 6,322r 7,824r 5,571r 4,640r 2,575 5,730 15 Private placement3 20,900 24,800 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 22,271 17,798 1,306 n.a. 2,383r 1,815r 2,209r 68 lr 406 1,413 17 Commercial and miscellaneous 25,761 15,713 n a. 1,969 1,541 2,801r 4,628 3,274r 2,632r 2,404 2,649 18 Transportation 2,237 2,203 0 87 32 39 97 156r 38 129 19 Public utility 7,050 2,214 133 91 190 60 36 322 115 809 20 Communication 3,439 494 64 0 47 0 0 0 200 122 21 Real estate and financial 61,004 46,733 1,132 2,273 1,905 2,118 2,166r l,739r 1,579 3,681 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2. Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Monthly data are not available. exclude secondary offerings, employee stock plans, investment companies other than closed- SOURCES. Beginning July 1993, Securities Data Company and the Board of Governors of end, intracorporate transactions, equities sold abroad, and Yankee bonds. Stock data include the Federal Reserve System. ownership securities issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • June 1996 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1995 1996 IItteemm 11999933 11999944 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 Sales of own shares2 851,885 841,286 76,081 72,113 68,694 72,730 70,499 94,719 112,332 90,370 2 Redemptions of own shares 567,881 699,823 56,344 57,610 54,473 56,174 52,727 67,945 75,354 60,398 3 Net sales3 284,004 141,463 19,736 14,503 14,221 16,556 17,772 26,774 36,978 29,972 4 Assets4 1,510,209 1,550,490 1,880,754 1,908,525 1,962,817 1,963,496 2,032,958 2,067,337 2,143,185 2,181,711 5 Cash5 100,209 121,296 126,340 127,173 127,446 133,653 141,489 142,572 150,772 144,520 6 Other 1.409,838 1,429,195 1,754,415 1,781,352 1,835,371 1,829,843 1,891,470 1,924,765 1,992,414 2,037,191 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 market 5. Includes all U.S. Treasury securities and other short-term debt securities. 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 gains comprises substantially all open-end investment companies registered with the Securities and distributions and share issue of conversions from one fund to another in the same group. Exchange Commission. Data reflect underwritings of newly formed companies after their 3. Excludes sales and redemptions resulting from transfers of shares into or out of money initial offering of securities. 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 1994 1995 AAccccoouunntt 11999933 11999944 11999955 Qi Q2 Q3 Q4 Qi Q2 Q3 Q4 1 Profits with inventory valuation and capital consumption adjustment 464.5 526.5 588.6 455.9 531.5 549.8 568.9 559.6 561.1 614.9 618.6 2 Profits before taxes 464.3 528.2 600.8 471.7 523.2 547.5 570.4 594.1 588.4 609.6 611.0 3 Profits-tax liability 163.8 195.3 218.7 171.4 192.8 203.4 213.5 217.3 214.2 224.5 218.7 4 Profits after taxes 300,5 332.9 382.1 300.3 330.4 344.1 356.8 376.8 374.1 385.1 392.3 5 Dividends 197.3 211.0 227.4 204.4 208.8 212.5 218.5 221.7 224.6 228.5 234.7 6 Undistributed profits 103.3 121.9 154.7 95.9 121.7 131.6 138.3 155.1 149.6 156.6 157.6 7 Inventory valuation -6.6 -13.3 -28.1 -3.9 -9.8 -16.5 -22.8 -51.9 -42.3 -9.3 -8.8 8 Capital consumption adjustment 6.7 11.6 15.9 -11.8 18.1 18.8 21.3 17.4 15.0 14.6 16.5 SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A3 3 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1994 1995 AAccccoouunntt 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 ASSETS 1 Accounts receivable, gross2 482.8 551.0 614.6 511.3 524.1 551.0 568.5 586.9 594.7 614.6 2 Consumer 116.5 134.8 152.0 124.3 130.3 134.8 135.8 141.7 146.2 152.0 3 Business 294.6 337.6 375.9 313.2 317.2 337.6 351.9 361.8 362.4 375.9 4 Real estate 71.7 78.5 86.6 73.8 76.6 78.5 80.8 83.4 86.1 86.6 5 LESS; Reserves for unearned income 50.7 55.0 63.2 51.9 51.1 55.0 58.9 62.1 61.2 63.2 6 Reserves for losses 11.2 12.4 14.1 12.1 12.1 12.4 12.9 13.7 13.8 14.1 7 Accounts receivable, net 420.9 483.5 537.3 447.3 460.9 483.5 496.7 511.1 519.7 537.3 8 All other 170.9 183.4 211.9 174.6 177.2 183.4 194.6 198.1 198.1 211.9 9 Total assets 591.8 666.9 749.2 621.9 638.1 666.9 691.4 709.2 717.8 749.2 LIABILITIES AND CAPITAL 10 Bank loans 25.3 21.2 23.1 23.3 21.6 21.2 21.0 21.5 21.8 23.1 11 Commercial paper 159.2 184.6 184.5 171.2 171.0 184.6 181.3 181.3 178.0 184.5 Debt 12 Owed to parent 42.7 51.0 62.3 44.7 50.0 51.0 52.5 57.5 59.0 62.3 13 Not elsewhere classified 206.0 235.0 284.7 219.6 228.2 235.0 254.4 264.4 272.1 284.7 14 All other liabilities 87.1 99.5 105.1 89.9 95.0 99.5 102.5 102.1 102.4 105.1 15 Capital, surplus, and undivided profits 71.4 75.7 87.2 73.2 72.3 75.7 79.7 82.5 84.4 87.2 16 Total liabilities and capital 591.8 666.9 746.9 621.9 638.1 666.9 691.4 709.2 717.8 746.9 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period 1995 1996 TTyyppee ooff ccrreeddiitt 11999933 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Seasonally adjusted 1 Total 545,533 614,784 690,191 675,247 682,627 687,187 690,191 696,302 702,591 2 Consumer 160,349 176,198 198,860 193,555 194,620 197,303 198,860 199,175 201,125 3 Real estate2 71,965 78,770 86,944 86,121 87,266 87,699 86,944 88,109 88,236 4 Business 313,219 359,816 404,387 395,571 400,741 402,185 404,387 409,018 413,231 Not seasonally adjusted 5 Total 550,751 620,975 697,340 672,653 681,965 687,944 697,340 696,771 701,397 6 Consumer 162,770 178,999 202,101 193,615 194,931 198,072 202,101 201,070 200,991 7 Motor vehicles 56,057 61,609 70,061 68,857 70,816 68,167 70,061 70,847 72,658 8 Other consumer3 60,396 73,221 81,988 77,345 77,865 78,926 81,988 81,002 80,645 9 Securitized motor vehicles4 36,024 31,897 33,633 31,693 30,096 34,394 33,633 32,128 30,364 10 Securitized other consumer4 10,293 12,272 16,419 15,720 16,154 16,585 16,419 17,093 17,324 11 Real estate2 71,727 78,479 86,606 86,128 87,471 87,672 86,606 88,530 88,756 12 Business 316,254 363,497 408,633 392,910 399,563 402,200 408,633 407,171 411,650 13 Motor vehicles 95,173 118,197 133,277 125,053 129,216 129,708 133,277 131,792 132,000 14 Retail5 18,091 21,514 25,304 25,006 25,752 24,564 25,304 25,689 26,331 15 Wholesale6 31,148 35,037 36,427 29,313 32,209 33,519 36,427 34,166 33,329 16 Leasing 45,934 61,646 71,546 70,734 71,255 71,625 71,546 71,937 72,340 17 Equipment 145,452 157,953 177,297 171,239 172,657 173,183 177,297 176,159 176,951 18 Retail 35,513 39,680 48,843 42,823 43,697 44,194 48,843 49,109 49,165 19 Wholesale6 8,001 9,678 10,266 12,210 11.581 10,889 10,266 9,233 8,875 20 Leasing 101,938 108,595 118,188 116,206 117,379 118,100 118,188 117,817 118,911 21 Other business7 53,997 61,495 65,363 66,111 66,238 66,678 65,363 66,840 68,492 22 Securitized business assets4 21,632 25,852 32,696 30,507 31,452 32,631 32,696 32,380 34,207 23 Retail 2,869 4,494 4,723 4,818 4,586 4,974 4,723 4,467 4,252 24 Wholesale 10,584 14,826 21,327 19,773 20,390 21,208 21,327 21,130 23,460 25 Leasing 8,179 6,532 6,646 5,916 6,476 6,449 6,646 6,783 6,495 1. Includes finance company subsidiaries of bank holding companies but not of retailers 4. Outstanding balances of pools upon which securities have been issued; these balances and banks. Data are before deductions for unearned income and losses. Data in this table also are no longer carried on the balance sheets of the loan originator. appear in the Board's G.20 (422) monthly statistical release. For ordering address, see inside 5. Passenger car fleets and commercial land vehicles for which licenses are required. front cover. 6. Credit arising from transactions between manufacturers and dealers, that is, floor plan 2. Includes all loans secured by liens on any type of real estate, for example, first and junior financing. mortgages and home equity loans. 7. Includes loans on commercial accounts receivable, factored commercial accounts, and 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of receivable dealer capital; small loans used primarily for business or farm purposes; and consumer goods such as appliances, apparel, general merchandise, and recreation vehicles. wholesale and lease paper for mobile homes, campers, and travel trailers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic NonfinancialS tatistics • June 1996 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1995 1996 IItteemm 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 163.1 170.4 175.8 174.8 174.3 178.6 181.7 179.2 181.7 184.5 2 Amount of loan (thousands of dollars) 123.0 130.8 134.5 131.8 133.0 136.4 140.9 135.8 143.2 141.5 3 Loan-to-price ratio (percent) 78.0 78.8 78.6 78.1 77.8 78.9 79.1 77.3 80.3 77.8 4 Maturity (years) 26.1 27.5 27.7 28.0 26.6 27.7 27.6 27.7 27.8 26.4 5 Fees and charges (percent of loan amount)" 1.30 1.29 1.21 1.20 1.11 1.22 1.21 1.07 1.24 1.30 Yield (percent per year) 6 Contract rate1 7.03 7.26 7.65 7.50 7.39 7.27 7.20 7.15 7.00 7.25 7 Effective rate1'3 7.24 7.47 7.85 7.69 7.58 7.46 7.40 7.32 7.20 7.49 8 Contract rate (HUD series)4 7.37 8.58 8.05 7.78 7.62 7.46 7.30 7.23 7.56 7.97 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 7.46 8.68 8.18 8.03 7.61 7.51 7.52 7.11 7.57 8.09 10 GNMA securities6 6.65 7.96 7.57 7.26 7.16 7.01 6.82 6.71 6.85 7.40 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 190.861 222,057 253,511 241,378 246,234 249,928 253,511 255,619 257,970 262,014 12 FHAA'A insured 23,857 27,558 28,762 28,726 28,765 28,901 28,762 28,622 28,502 28,744 13 Conventional 167,004 194,499 224,749 212,652 217,469 221,027 224,749 226,997 229,468 233,270 14 Mortgage transactions purchased (during period) 92,037 62,389 56,598 5,002 7,443 6,148 6,243 4,810 5,371 7,681 Mortgage commitments (during period) 15 Issued7 92,537 54,038 56,092 6,019 6,732 6,038 4,765 5,750 7,013 6,293 16 To sell8 5,097 1,820 360 9 0 10 0 3 0 29 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 55,012 72,693 107,424 94,989 99,758 102,997 107,424 111,143 114,793 117,420 18 FHAA'A insured 321 276 267 281 276 271 267 226 223 220 19 Conventional 54,691 72,416 107,157 94,708 99,482 102,726 107,157 110,917 114,570 117,200 Mortgage transactions (during period) 20 Purchases 229,242 124,697 98,470 11,458 11,092 9,989 13,108 13,357 10,891 11.984 21 Sales 208,723 117,110 85,877 10,239 9,856 9,011 11,712 11,624 9.733 11.384 22 Mortgage commitments contracted (during period)9 274,599 136,067 118,659 12,469 10,388 11,339 14,609 12,765 10,378 14,520 1. Weighted averages based on sample surveys of mortgages originated by major institu- 6. Average net yields to investors on fully modified pass-through securities backed by tional lender groups for purchase of newly built homes; compiled by the Federal Housing mortgages and guaranteed by the Government National Mortgage Association (GNMA), 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 the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. 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 U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. 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

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1994 1995 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999922 11999933 11999944 Q4 Ql Q2 Q3 Q4P 1 All holders 4,092,984 4,268,919 4,475,242 4,475,242 4,516,816 4,584,661 4,660,895 4,724,076 By type of property 2 One- to four-family residences 3,037,408 3,227,633 3,432,165 3,432,165 3,466,026 3,524,474 3,591,013 3,640,099 3 Multifamily residences 274,234 270,796 275,304 275,304 276,398 280,390 284,237 289,187 4 Commercial 700,604 689,296 684,803 684,803 690,988 695,947 701,225 710,498 5 80,738 81,194 82,971 82,971 83,403 83,850 84,420 84,292 By type of holder 6 Major financial institutions 1,769,187 1,767,835 1,815,810 1,815,810 1,841,815 1,868,175 1,895,285 1,901,935 7 Commercial banks2 894,513 940,444 1,004,280 1,004,280 1,024,854 1,053,048 1,072,780 1,080,320 8 One- to four-family 507,780 556,538 611,697 611,697 625,378 648,705 662,126 665,044 9 Multifamily 38,024 38,635 38,916 38,916 39,746 40,593 43,003 43,522 10 Commercial 328,826 324,409 331,100 331,100 336,795 340,176 343,826 347,927 11 Farm 19,882 20,862 22,567 22,567 22,936 23,575 23,824 23,827 12 Savings institutions3 627,972 598,330 596,199 596,199 601,777 599,745 604,614 602,855 13 One- to four-family 489,622 469,959 477,499 477,499 483,625 482,005 489,150 488,234 14 Multifamily 69,791 67,362 64,400 64,400 63,778 64,404 63,569 62,171 15 Commercial 68,235 60,704 54,011 54,011 54,085 53,054 51,604 52,160 16 Farm 324 305 289 289 288 282 291 290 17 Life insurance companies 246,702 229,061 215,332 215,332 215,184 215,382 217,892 218,759 18 One- to four-family 11,441 9,458 7,910 7,910 7,892 7,911 8,006 8,038 19 Multifamily 27,770 25,814 24,306 24,306 24,250 24,310 24,601 24,700 20 Commercial 198,269 184,305 173,539 173,539 173,142 173,565 175,643 176,353 21 Farm 9,222 9,484 9,577 9,577 9,900 9,596 9,643 9,668 22 Federal and related agencies 286,263 328,598 323,491 323,491 319,770 315,208 314,358 310,408 23 Government National Mortgage Association 30 22 6 6 15 7 2 2 24 One- to four-family 30 15 6 6 15 7 2 2 25 Multifamily 0 7 0 0 0 0 0 0 26 Fanners Home Administration4 41,695 41,386 41,781 41,781 41,857 41,917 41,858 41,791 27 One- to four-family 16,912 15,303 13,826 13,826 13,507 13,217 12,914 12,643 28 Multifamily 10,575 10,940 11,319 11,319 11,418 11,512 11,557 11,617 29 Commercial 5,158 5,406 5,670 5,670 5,807 5,949 6,096 6,248 30 Farm 9,050 9,739 10,966 10,966 11,124 11,239 11,291 11,282 31 Federal Housing and Veterans' Administrations 12,581 12,215 10,964 10,964 10,890 10,098 9,535 9,497 32 One- to four-family 5,153 5,364 4,753 4,753 4,715 4,838 4,918 4,867 33 Multifamily 7,428 6,851 6,211 6,211 6,175 5,260 4,617 4,629 34 Resolution Trust Corporation 32,045 17,284 10,428 10,428 9,342 6,456 4,889 1.700 35 One- to four-family 12,960 7,203 5,200 5,200 4,755 2,870 2,299 761 36 Multifamily 9,621 5,327 2,859 2,859 2,494 1,940 1,420 515 37 Commercial 9,464 4,754 2,369 2,369 2,092 1,645 1,170 424 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 0 14,112 7,821 7,821 6,730 6,039 5,015 4,303 40 One- to four-lamily 0 2,367 1,049 1,049 840 731 618 492 41 Multifamily 0 1,426 1,595 1,595 1,310 1,135 722 428 42 Commercial 0 10,319 5,177 5,177 4,580 4,173 3,674 3,383 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 137,584 166,642 178,059 178,059 177,615 178,462 182,229 183,782 45 One- to four-family 124,016 151,310 162,160 162,160 161,780 162,674 166,393 168,122 46 Multifamily 13,568 15,332 15,899 15,899 15,835 15,788 15,836 15,660 47 Federal Land Banks 28,664 28,460 28,555 28,555 28,065 28,005 28,151 28,019 48 One- to four-family 1,687 1,675 1,671 1,671 1,651 1,648 1,656 1,652 49 Farm 26,977 26,785 26,885 26,885 26,414 26,357 26,495 26,367 50 Federal Home Loan Mortgage Corporation 33,665 48,476 45,876 45,876 45,256 44,224 42,678 41,315 51 One- to four-family 31,032 45,929 43,046 43,046 42,122 40,963 39,244 37,463 52 Multifamily 2,633 2,547 2,830 2,830 3,134 3,261 3,434 3,852 53 Mortgage pools or trusts5 1,434,264 1,563,453 1,716,209 1,716,209 1,731,272 1,759,314 1,797,162 1,849,640 54 Government National Mortgage Association 419,516 414,066 450,934 450,934 454,401 457,101 463,654 472,298 55 One- to four-family 410,675 404,864 441,198 441,198 444,632 446,855 453,114 461,453 56 Multifamily 8,841 9,202 9,736 9,736 9,769 10,246 10,540 10,845 57 Federal Home Loan Mortgage Corporation 407,514 446,029 486,480 486,480 488,723 496,139 503,457 517,609 58 One- to four-family 401,525 441,494 483,354 483,354 485,643 493,105 500,504 514,796 59 Multifamily 5,989 4,535 3,126 3,126 3,080 3,034 2,953 2,813 60 Federal National Mortgage Association 444,979 495,525 530,343 530,343 533,262 543,669 559,585 582,959 61 One- to four-family 435,979 486,804 520,763 520,763 523,903 533,091 548,400 569,724 62 Multifamily 9,000 8,721 9,580 9,580 9,359 10,578 11,185 13,235 63 Farmers Home Administration4 38 28 19 19 14 13 12 11 64 One- to four-family 8 5 3 3 2 2 2 2 65 Multifamily 0 0 0 0 0 0 0 0 66 Commercial 17 13 9 9 7 6 5 5 67 Farm 13 10 7 7 5 5 5 4 68 Private mortgage conduits 162,217 207,806 248,433 248,433 254,871 262,393 270,454 276,763 69 One- to four-family 140,718 173,635 196,733 196,733 201,314 205,018 209,713 208,354 70 Multifamily 6,305 8,701 14,925 14,925 15,743 17,281 18,903 22,436 71 Commercial 15,194 25,469 36,774 36,774 37,814 40,094 41,838 45,972 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others6 603,270 609,032 619,732 619,732 623,960 641,964 654,089 662.092 74 One- to four-family 447,871 455,709 461,297 461,297 464,252 480,834 491,954 498,452 75 Multifamily 64,688 65,397 69,602 69,602 70,305 71,049 71,896 72,763 76 Commercial 75,441 73,917 76,153 76,153 76,667 77,284 77,368 78,025 77 Farm 15,270 14,009 12,681 12,681 12,736 12,796 12,872 12,853 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 local 2. Includes loans held by nondeposit trust companies but not loans held by bank trust credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and departments. finance companies. 3. Includes savings banks and savings and loan associations. SOURCE. Based on data from various institutional and government sources. Separation of 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from nonfarm mortgage debt by type of property, if not reported directly, and interpolations and FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting extrapolations, when required for some quarters, are estimated in part by the Federal Reserve. changes by the Farmers Home Administration. Line 69 from Inside Mortgage Securities. 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

A36 Domestic NonfinancialS tatistics • June 1996 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1995 1996 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan.r Feb. Seasonally adjusted 1 Total 790,351 902,853 1,024,809 993,843 1,005,178 1,015,029 1,024,809 1,035,691 1,047,710 2 Automobile 280,566 317,237 353,326 341,155 344,671 349,138 353,326 356,261 359,316 3 Revolving 286,588 334,511 395,234 382,094 387,180 390,123 395,234 400,826 407,173 4 Other2 223,197 251,106 276,249 270,595 273,326 275,768 276,249 278,604 281,220 Not seasonally adjusted 5 Total 809,440 925,000 1,050,642 996,525 1,005,423 1,018,961 1,050,642 1,045,618 1,046,116 By major holder 6 Commercial banks 367,566 427,851 464,993 449,502 451,232 453,690 464,993 459,740 459,324 7 Finance companies 116,453 134,830 152,059 146,202 148,681 147,093 152,059 151,849 153,303 8 Credit unions 101,634 119,594 132,033 129,027 130,261 130,970 132,033 131,587 131,259 9 Savings institutions 37,855 38,468 38,500 38,894 38,500 38,500 38,500 38,500 38,500 10 Nonfinancial business3 55,296 60,957 57,497 54,177 54,607 53,139 57,497 54,702 52,940 11 Pools of securitized assets4 130,636 143,300 205,560 178,723 182,142 195,569 205,560 209,240 210,790 By major type of credit5 12 Automobile 281,458 318,213 354,395 344,401 347,513 351,024 354,395 354,520 356,777 13 Commercial banks 122,000 141,851 151,057 148,901 150,782 149,905 151,057 152,290 153,173 14 Finance companies 56,057 61,609 70,061 68,857 70,816 68,167 70,061 70,847 72,658 15 Pools of securitized assets4 39,481 34,918 43,666 37,476 36,453 43,240 43,666 41,901 41,495 16 Revolving 301,837 352,266 416,187 380,341 384,625 392,689 416,187 409,293 406,898 17 Commercial banks 149,920 180,183 198,076 185,572 186,463 189,405 198,076 189,317 186,974 18 Nonfinancial business3 50,125 55,341 51,971 48,968 49,358 47,839 51,971 49,267 47,577 19 Pools of securitized assets4 79,878 94,376 142,721 123,749 126,739 132,978 142,721 147,522 149,280 20 Other 226,145 254,521 280,060 271,845 273,285 275,248 280,060 281,805 282,441 21 Commercial banks 95,646 105,817 115,860 115,029 113,987 114,380 115,860 118,133 119,177 22 Finance companies 60,396 73,221 81,998 77,345 77,865 78,926 81,998 81,002 80,645 23 Nonfinancial business3 5,171 5,616 5,526 5,271 5,249 5,300 5,526 5,435 5,363 24 Pools of securitized assets4 11,277 14,006 19,173 17,498 18,950 19,351 19,173 19,817 20,015 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 3. Includes retailers and gasoline companies. extended to individuals that is scheduled to be repaid (or has the option of repayment) in two 4. Outstanding balances of pools upon which securities have been issued; these balances or more installments. Data in this table also appear in the Board's G.19 (421) monthly are no longer carried on the balance sheets of the loan originator. 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 CREDIT' Percent per year except as noted 1995 1996 IItteemm 11999933 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan. Feb. INTEREST RATES Commercial banks2 1 48-month new car 8.09 8.12 9.57 9.44 n.a. n.a. 9.36 n.a. 9.12 2 24-month personal 13.47 13.19 13.94 13.84 n.a. n.a. 13.80 n.a. n.a. 13.63 Credit card plan 3 All accounts n.a. 15.69 16.02 15.98 n.a. n.a. 15.81 n.a. 15.82 4 Accounts assessed interest n.a. 15.77 15.79 15.94 n.a. n.a. 15.71 n.a. n.a. 15.41 Auto finance companies 5 New car 9.48 9.79 11.19 10.85 10.75 10.89 10.84 10.52 9.74 9.86 6 Used car 12.79 13.49 14.48 14.23 14.12 14.06 13.98 13.83 13.27 13.28 OTHER TERMS3 Maturity (months) 1 New car 54.5 54.0 54.1 53.5 53.4 54.6 54.5 53.6 51.8 52.3 8 Used car 48.8 50.2 52.2 52.3 52.3 52.3 52.2 51.8 52.2 52.1 Loan-to-value ratio 9 New car 91 92 92 92 92 92 92 92 92 91 10 Used car 98 99 99 99 100 99 99 99 99 98 Amount financed (dollars) 11 New car 14,332 15,375 16,210 16.056 16,402 16,430 16,583 17,034 16,698 16,627 12 Used car 9,875 10,709 11,590 11,662 11,725 11,883 12,012 12,152 12,059 11,990 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 2. Data are available for only the second month of each quarter, extended to individuals that is scheduled to be repaid (or has the option of repayment) in two 3. At auto finance companies, or more installments. Data in this table also appear in the Board's G.19 (421) monthly statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A37 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS' Billions of dollars; quarterly data at seasonally adjusted annual rates 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q2 Q3 Q4 Ql Q2 Q3 Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 480.6 545.3 625.9 617.0 716.7 581.2 579.9 654.3 839.7 879.3 529.6 618.4 By sector and instrument 7 U.S. government 278.2 304.0 256.1 155.9 144.4 131.3 135.6 150.1 266.8 202.8 65.8 42.4 Treasury securities 292.0 303.8 248.3 155.7 142.9 126.6 132.8 155.7 268.0 201.2 65.4 37.2 4 Budget agency issues and mortgages -13.8 .2 7.8 .2 1.5 4.7 2.9 -5.7 -1.2 1.6 .4 5.1 5 Private 202.4 241.3 369.8 461.1 572.3 449.9 444.3 504.2 572.9 676.5 463.9 576.0 By instrument 6 Municipal securities 87.8 30.5 74.8 -29.3 -47.2 -20.7 -58.4 -53.8 -48.2 -9.5 -113.0 -18.0 7 Corporate bonds 78.8 67.6 75.2 23.3 75.0 37.4 15.4 6.2 55.3 99.0 60.7 84.8 8 Mortgages 158.4 130.9 157.2 196.5 243.5 194.2 203.9 213.5 217.7 236.1 278.2 242.0 9 Home mortgages 173.6 187.6 187.9 204.5 207.9 186.2 208.8 219.8 192.1 203.8 244.6 191.2 in Multifamily residential -5.5 -10.4 -6.0 1.3 12.1 4.0 5.6 -4.2 2.6 14.2 13.7 18.0 u Commercial -10.0 -47.8 -25.0 -11.1 22.1 1.1 -12.7 -3.4 21.2 16.3 17.6 33.4 17 Farm .4 1.4 .5 1.8 1.3 2.9 2.2 1.4 1.7 1.8 2.3 -.5 n Consumer credit -14.8 7.3 58.9 121.2 130.8 129.8 124.8 165.2 93.8 158.1 109.6 161.8 14 Bank loans n.e.c -40.9 -13.7 3.8 72.7 99.7 58.7 97.1 77.1 146.6 97.3 85.4 69.5 15 Commercial paper -18.4 8.6 10.0 21.4 18.1 9.7 26.4 23.5 23.1 37.5 16.0 -4.1 16 Other loans and advances -48.5 10.1 -10.2 55.4 52.4 40.8 35.1 72.4 84.5 58.0 26.9 40.0 By borrowing sector 17 Household 182.7 200.7 246.5 360.3 373.1 349.9 379.7 419.1 303.5 390.4 401.8 396.5 18 Nonfinancial business -61.9 19.5 61.0 144.3 250.8 139.4 130.0 153.6 316.8 302.4 178.3 205.5 19 Farm 2.1 1.3 2.0 2.8 1.7 7.8 2.4 -2.0 .9 3.6 4.3 -2.2 20 Nonfarm noncorporate -11.0 -16.0 7.0 12.1 37.9 10.0 8.8 16.5 51.3 34.4 29.8 36.2 21 Corporate -53.0 34.1 52.0 129.3 211.1 121.7 118.8 139.1 264.6 264.3 144.1 171.5 22 State and local government 81.6 21.1 62.3 -43.4 -51.5 -39.5 -65.4 -68.5 -47.5 -16.3 -116.2 -26.1 23 Foreign net borrowing in United States 14.8 22.6 68.8 -20.3 67.4 -34.2 19.6 33.5 61.4 40.4 97.5 70.1 24 Bonds 15.0 15.7 81.3 7.1 47.3 -17.4 20.8 27.7 13.5 49.9 55.0 70.8 25 Bank loans n.e.c 3.1 2.3 .7 1.4 8.3 -4.5 4.7 -.5 8.1 5.6 8.2 11.3 26 Commercial paper 6.4 5.2 -9.0 -27.3 13.6 -5.2 -8.1 5.9 37.9 -11.1 30.9 -3.4 27 Other loans and advances -9.8 -.6 -4.2 -1.6 -1.8 -7.1 2.2 .4 1.9 -4.0 3.4 -8.6 28 Total domestic plus foreign 495.4 568.0 694.7 596.6 784.1 546.9 599.5 687.8 901.1 919.7 627.2 688.5 Financial sectors 29 Total net borrowing by financial sectors 154.5 240.1 290.8 459.4 455.9 380.1 419.7 544.8 264.9 433.6 461.7 663.5 By instrument 3n U.S. government-related 145.7 155.8 164.2 284.3 213.6 264.5 245.7 317.5 93.0 197.7 230.1 333.5 31 Government-sponsored enterprises securities 9.2 40.3 80.6 176.9 108.5 146.6 152.1 249.0 62.9 127.2 101.5 142.2 32 Mortgage pool securities 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 33 Loans from U.S. government .0 .0 .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 34 8.7 84.3 126.6 175.2 242.4 115.5 174.0 227.3 172.0 236.0 231.6 329.9 35 Corporate bonds 68.8 82.8 119.8 113.4 180.8 96.4 99.5 96.5 155.7 174.2 170.2 223.1 36 Mortgages .5 .6 3.6 9.8 5.3 12.4 12.0 4.9 5.2 5.2 5.2 5.6 37 Bank loans n.e.c 8.8 2.2 -13.0 -12.3 8.0 -27.4 -11.7 1.9 -3.0 21.2 7.1 6.6 38 Open market paper -32.0 -.7 -6.2 41.6 42.6 4.3 41.3 85.9 38.5 34.0 43.3 54.6 39 Other loans and advances -37.3 -.6 22,4 22.6 5.7 29.8 32.8 38.1 -24.5 1.3 5.9 40.1 By borrowing sector 40 Government-sponsored enteiprises 9.1 40.2 80.6 172.1 108.5 146.6 152.1 249.0 62.9 127.2 101.5 142.2 41 Federally related mortgage pools 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 47 Private financial sectors 8.7 84.3 126.6 175.2 242.4 115.5 174.0 227.3 172.0 236.0 231.6 329.9 43 Commercial banks -10.7 7.7 4.6 9.9 9.7 10.6 23.9 4.1 6.3 18.2 9.6 4.5 44 Bank holding companies -2.5 2.3 8.8 10.3 15.3 10.1 11.5 16.0 13.3 23.8 25.2 -1.3 45 Funding corporations -6.5 13.2 2.9 24.2 45.2 -10.5 47.3 11.1 61.5 21.7 52.1 45.5 46 Savings institutions -44.7 -7.0 11.3 12.8 3.4 5.8 14.8 36.1 -18.9 -7.2 5.3 34.2 47 Credit unions .0 .0 .2 .2 -.1 .2 .5 .2 -.3 -.1 .1 .0 48 Life insurance companies .0 .0 .2 .3 -.1 .0 .0 1.3 .0 .1 -.1 -.4 49 Finance companies 17.7 -1.6 .2 50.2 51.6 63.6 16.3 57.3 83.1 57.2 6.5 59.6 50 Mortgage companies -2.4 8.0 .0 -11.5 2.9 -18.2 -7.0 1.1 -7.4 14.8 4.0 .0 51 Real estate investment trusts (REITs) 1.2 .3 3.4 13.7 5.4 15.3 18.8 6.3 5.2 5.2 5.2 6.0 52 Brokers and dealers 3.7 2.7 12.0 .5 -5.0 .3 -7.6 19.3 -29.5 -.1 2.1 7.7 53 Issuers of asset-backed securities (ABSs) 52.9 58.6 83.0 64.5 114.1 38.5 55.4 74.5 58.8 102.2 121.6 174.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • June 1996 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q2 Q3 Q4 QI Q2 Q3 Q4 All sectors 55554444 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 649.9 808.0 985.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 55555555 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 424.0 459.8 420.3 444.9 358.0 395.8 381.3 467.5 359.8 400.5 295.9 375.9 55556666 MMMMuuuunnnniiiicccciiiippppaaaallll sssseeeeccccuuuurrrriiiittttiiiieeeessss 87.8 30.5 74.8 -29.3 -47.2 -20.7 -58.4 -53.8 -48.2 -9.5 -113.0 -18.0 55557777 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 162.5 166.1 276.3 143.8 303.0 116.4 135.7 130.4 224.5 323.1 285.9 378.7 55558888 MMMMoooorrrrttttggggaaaaggggeeeessss 158.9 131.5 160.8 206.3 248.8 206.6 215.9 218.4 223.0 241.4 283.4 247.6 55559999 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt -14.8 7.3 58.9 121.2 130.8 129.8 124.8 165.2 93.8 158.1 109.6 161.8 66660000 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc -29.1 -9.3 -8.5 61.8 116.0 26.8 90.1 78.5 151.7 124.1 100.7 87.4 66661111 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr -44.0 13.1 -5.1 35.7 74.3 8.8 59.6 115.3 99.5 60.4 90.2 47.1 66662222 OOOOtttthhhheeeerrrr llllooooaaaannnnssss aaaannnndddd aaaaddddvvvvaaaannnncccceeeessss -95.6 8.9 8.0 71.7 56.2 63.5 70.2 111.0 61.8 55.4 36.2 71.5 Funds raised through mutual funds and corporate equities 66663333 TTTToooottttaaaallll nnnneeeetttt sssshhhhaaaarrrreeee iiiissssssssuuuueeeessss 209.4 294.9 442.1 150.8 157.1 263.9 113.2 -81.1 18.1 169.2 190.1 250.9 66664444 MMMMuuuuttttuuuuaaaallll ffffuuuunnnnddddssss 147.2 209.1 323.7 128.9 171.1 199.6 129.7 -12.6 65.1 174.1 195.7 249.7 66665555 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss 62.2 85.8 118.4 21.9 -14.1 64.3 -16.4 -68.5 -46.9 -4.9 -5.6 1.2 66666666 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 18.3 27.0 21.3 -44.9 -76.0 -2.0 -50.0 -118.0 -68.4 -59.6 -98.8 -77.2 66667777 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 13.3 28.1 36.6 24.1 14.2 20.4 10.5 16.3 8.7 17.7 11.2 19.0 66668888 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd bbbbyyyy UUUU....SSSS.... rrrreeeessssiiiiddddeeeennnnttttssss 30.7 30.7 60.5 42.7 47.8 45.9 23.1 33.2 12.8 37.0 82.0 59.4 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995R TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Q1 Q2 Q3 Q4 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 649.9 808.0 98S.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 2 Private domestic nonfinancial sectors 104.1 90.2 62.7 252.9 -105.1 255.5 205.1 252.0 .0 -158.5 -124.7 -137.1 3 Households 27.9 84.0 37.1 294.8 51.6 297.6 283.9 336.7 179.7 -99.4 131.5 -5.3 4 Nonfarm noncorporate business -5.3 -.1 .6 .7 -.9 1.5 .7 .9 .5 -1.0 -1.0 -2.2 5 Nonfinancial corporate business 30.7 27.8 21.3 51.9 -11.9 27.5 37.4 84.1 -85.2 47.5 -47.3 37.5 6 State and local governments 50.8 -21.5 3.7 -94.6 -143.9 -71.1 -117.0 -169.7 -94.9 -105.7 -207.9 -167.1 7 U.S. government 10.5 -11.9 -18.4 -24.2 -22.8 -14.6 -11.3 -24.4 -13.2 -24.3 -23.4 -30.1 8 Rest of the world 13.3 98.2 128.3 134.4 270.9 65.7 137.5 210.9 244.9 325.9 352.8 159.8 9 Financial sectors 522.0 631.5 812.8 693.0 1,097.0 620.4 687.9 794.0 934.3 1,210.2 884.2 1,359.3 10 Government sponsored enterprises 15.1 68.8 90.2 123.2 78.9 100.9 125.4 175.2 11.2 86.9 50.8 166.8 11 Federally related mortgage pools 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 12 Monetary authority 31.1 27.9 36.2 31.5 12.7 24.9 29.7 30.0 16.3 20.8 -11.1 24.7 13 Commercial banking 80.8 95.3 142.2 163.4 264.0 128.5 183.4 174.5 342.7 316.0 243.5 153.6 14 U.S. chartered banks 35.7 69.5 149.6 148.1 186.6 136.1 155.6 174.2 183.4 222.4 227.5 112.9 15 Foreign banking offices in United States 48.5 16.5 -9.8 11.2 75.3 -10.0 22.9 -5.6 158.8 83.9 24.1 34.3 16 Bank holding companies -1.5 5.6 .0 .9 .2 .2 2.7 -2.4 -2.0 5.7 -9.0 6.0 17 Banks in U.S. affiliated areas -1.9 3.7 2.4 3.3 1.9 2.1 2.2 8.3 2.4 4.0 1.0 .4 18 Funding corporations 8.2 17.7 -19.1 -27.4 -6.8 -35.6 -45.5 -11.4 47.1 -9.6 -22.0 -42.8 19 Thrift institutions -146.1 -61.3 -1.7 34.9 20.0 41.5 53.8 32.4 28.2 9.4 40.9 1.6 20 Life insurance companies 86.5 78.5 100.9 66.3 108.0 26.7 89.5 79.4 132.4 131.2 77.0 91.5 21 Other insurance companies 30.0 6.7 27.7 24.9 21.4 22.3 25.3 30.4 19.2 21.7 21.8 22.8 22 Private pension funds 35.4 41.1 45.9 47.0 56.3 49.9 42.5 74.7 58.9 57.2 47.5 61.6 23 State and local government retirement funds 41.1 23.0 19.8 29.0 32.7 46.4 -11.1 36.6 62.4 3.2 53.0 12.1 24 Finance companies —9.2 7.5 -9.0 68.2 63.1 61.2 63.1 80.4 91.8 70.1 42.9 47.3 25 Mortgage companies 11.2 .1 .0 -22.9 5.9 -36.3 -14.0 2.1 -14.4 29.9 7.3 .6 26 Mutual funds 80.1 126.2 159.5 -7.1 51.5 55.4 -29.3 -70.4 -28.8 21.6 51.3 162.0 27 Closed-end funds 12.8 18.2 11.0 -5.5 5.8 -11.6 -13.6 -10.0 3.5 6.4 8.4 5.0 28 Money market mutual funds 32.7 4.7 20.4 30.0 86.5 26.6 57.7 53.9 53.1 135.2 33.2 124.6 29 Real estate investment trusts (REITs) -.7 1.1 .6 4.7 1.8 6.6 5.5 .2 1.8 1.8 1.8 1.9 30 Brokers and dealers 17.5 -1.3 14.8 -44.2 87.9 -57.7 -21.9 -8.0 30.5 146.2 -1.8 177.0 31 Asset-backed securities issuers (ABSs) 48.9 53.8 80.5 57.8 100.8 42.8 46.3 54.3 46.7 89.8 109.7 156.9 32 Bank personal trusts 10.0 8.0 9.5 7.1 1.4 10.2 7.7 1.4 1.6 1.8 1.5 .8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 649.9 808.0 985.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 Other financial sources 34 Official foreign exchange -5.9 -1.6 .8 -5.8 8.8 -14.6 .2 -8.6 17.8 10.3 9.0 -1.9 35 Special drawing rights certificates .0 -2.0 .0 .0 2.2 .0 .0 .0 .0 .0 8.6 .0 36 Treasury currency .0 .2 .4 .7 .6 .6 .8 .7 .7 .7 .8 .0 37 Life insurance reserves 25.7 27.3 35.2 34.0 43.8 21.7 67.7 21.6 54.0 49.9 29.9 41.5 38 Pension fund reserves 198.2 238.6 247.3 248.0 248.4 220.7 238.0 293.4 302.5 310.7 214.2 166.2 39 Interbank claims -3.4 43.5 56.4 89.4 6.7 110.7 4.1 98.4 -17.4 28.7 -41.4 56.7 40 Checkable deposits and currency 86.3 113.5 117.3 -9.7 -12.6 -44.9 -66.0 -40.5 42.8 133.5 -150.5 -76.1 41 Small time and savings deposits 1.5 -57.2 -70.3 -40.0 89.5 -57.5 -51.8 -46.9 18.1 112.0 107.6 120.3 42 Large time deposits -58.5 -73.2 -23.5 19.6 80.5 -3.6 84.0 36.5 116.8 69.2 111.5 24.7 43 Money market fund shares 41.6 4.5 20.2 43.3 142.3 34.0 56.4 86.5 59.9 233.5 121.2 154.8 44 Security repurchase agreements -16.5 43.1 71.2 78.3 110.7 166.0 86.0 51.9 161.8 130.7 85.1 65.0 45 Foreign deposits -26.5 -3.5 -18.5 45.8 42.0 50.6 28.1 97.9 39.2 90.6 28.0 10.0 46 Mutual fund shares 147.2 209.1 323.7 128.9 171.1 199.6 129.7 -12.6 65.1 174.1 195.7 249.7 47 Corporate equities 62.2 85.8 118.4 21.9 -14.1 64.3 -16.4 -68.5 -46.9 -4.9 -5.6 1.2 48 Security credit 51.4 4.6 61.4 -.1 20.6 -20.7 -59.3 37.1 -10.7 30.8 35.4 26.9 49 Trade payables 31.0 46.6 37.8 111.9 101.5 114.4 95.4 156.3 112.1 32.5 184.2 77.1 50 Taxes payable -6.2 8.5 4.5 3.0 1.7 -13.1 10.1 4.3 15.5 -4.0 4.4 -9.3 51 Noncorporate proprietors' equity -.2 16.9 4.0 23.8 35.6 36.8 46.6 24.2 28.1 32.6 48.3 33.6 52 Investment in bank personal trusts 16.1 -7.1 1.6 18.8 20.5 24.7 23.6 11.9 21.0 22.3 20.8 18.0 53 Miscellaneous 277.4 287.2 296.3 265.9 409.8 129.4 269.0 372.1 366.0 467.2 289.2 516.6 54 Total financial sources 1,471.4 1,792.8 2,269.8 2,133.8 2,749.6 1,946.2 1,965.5 2,348.4 2,512.3 3,273.6 2,385.3 2,827.2 Floats not included in assets ( —) 55 U.S. government checkable deposits -13.1 .7 -1.5 -4.8 -6.0 .8 7.4 -24.4 13.2 -16.3 3.5 -24.3 56 Other checkable deposits 4.5 1.6 -1.3 -2.8 -3.8 -3.5 -3.3 -2.3 -3.7 -3.9 -3.5 -4.2 57 Trade credit 36.1 11.3 29.7 -3.0 -.5 20.3 16.0 -29.7 25.7 19.9 -6.0 -41.5 Liabilities not identified as assets (—) 58 Treasury currency -.6 -.2 -.2 -.2 -.4 -.2 -.2 -.2 -.2 -.4 -.3 -.9 59 Interbank claims 26.2 -4.9 4.2 -2.7 -3.2 5.4 10.1 -1.7 .8 8.2 7.6 -29.4 60 Security repurchase agreements -9.5 3.6 34.3 27.9 8.5 108.1 -47.3 83.0 73.5 -40.1 13.6 -12.9 61 Foreign deposits -24.0 -2.8 -7.1 36.9 35.4 56.1 39.5 55.8 46.0 81.7 -1.8 15.8 62 Taxes payable -1.0 10.8 10.4 8.5 5.3 6.2 10.8 -.8 -8.7 31.9 11.2 -13.1 63 Miscellaneous 8.9 .8 -48.8 -109.6 -97.5 -336.3 -73.1 14.8 -226.8 -125.1 -32.4 -5.9 64 Total identified to sectors as assets 1,443.8 1,772.0 2,250.0 2,183.7 2,811.8 2,089.3 2,005.7 2,254.0 2,592.5 3,317.5 2,393.5 2,943.7 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. 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

A40 Domestic NonfinancialS tatistics • June 1996 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1994 1995 iyyz tyyj Q2 Q3 Q4 Ql Q2 Q3 Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 11,896.7 12,537.4 13,160.6 13,877.3 12,808.0 12,962.6 13,160.6 13,338.7 13,544.3 13,686.8 13,877.3 By sector and instrument 2 3 U.S T . r e g a o s v u e r r y n m se e c n u t rities 3 3, , 0 0 6 8 1 0 . . 6 3 3 3 , , 3 3 3 0 6 9 . . 5 9 3 3 , , 4 4 6 9 5 2 . . 6 3 3 3, , 6 6 0 3 8 6 . . 5 7 3 3 , , 3 3 9 6 5 8 . . 4 0 3 3, , 4 4 0 3 4 2 . . 1 3 3 3, , 4 4 6 9 5 2 . . 6 3 3 3, , 5 5 3 5 1 7 . . 5 9 3 3 , , 5 5 5 8 6 3 . . 7 5 3 3, , 5 6 7 0 6 3 . . 5 4 3 3, , 6 6 0 3 8 6 . . 5 7 4 Budget agency issues and mortgages 18.8 26.6 26.7 28.2 27.4 28.2 26.7 26.4 26.8 26.9 28.2 5 Private 8,816.3 9,200.9 9,668.3 10,240.6 9,412.6 9,530.3 9,668.3 9,780.8 9,960.8 10,083.4 10,240.6 By instrument 6 ; C M o u r n p i o c r i a p t a e l b s o ec n u d r s i ties 1 1, , 1 3 5 0 4 2 . . 5 8 1 1, , 2 3 2 7 9 7 . . 7 5 1 1 , , 2 3 5 48 3 . . 2 0 1 1 , , 3 3 0 2 1 8 . . 1 0 1 1 , , 2 3 4 7 7 2 . . 6 2 1 1 , , 2 3 5 6 1 2 . . 5 6 1 1 , , 2 3 5 4 3 8 . . 0 2 1 1 , , 2 3 6 3 6 4 . . 8 8 1 1, , 3 2 2 9 9 1 . . 8 6 1 1 , , 3 3 0 0 6 6 . . 8 6 1 1, , 3 3 0 2 1 8 . . 1 0 8 Mortgages 4,088.7 4,260.0 4,456.5 4,700.0 4,345.8 4,401.9 4,456.5 4,496.8 4,563.3 4,638.2 4,700.0 9 Home mortgages 3,037.4 3,227.6 3,432.2 3,640.1 3,318.7 3,376.0 3,432.2 3,466.0 3,524.5 3,591.0 3,640.1 10 Multifamily residential 272.5 267.8 269.1 281.2 268.8 270.2 269.1 269.8 273.3 276.8 281.2 11 Commercial 698.1 683.4 672.3 694.4 676.3 673.1 672.3 677.6 681.6 686.1 694.4 12 Farm 80.7 81.2 83.0 84.3 82.1 82.6 83.0 83.4 83.9 84.4 84.3 13 Consumer credit 804.6 863.5 984.7 1,115.5 891.6 929.4 984.7 987.9 1,026.5 1,060.8 1,115.5 14 Bank loans n.e.c 672.2 676.0 748.6 848.3 705.3 724.7 748.6 781.8 810.3 826.0 848.3 15 Commercial paper 107.1 117.8 139.2 157.4 135.7 138.7 139.2 149.8 162.9 163.3 157.4 16 Other loans and advances 686.5 676.3 738.0 790.4 714.4 721.6 738.0 762.9 776.4 781.8 790.4 By borrowing sector 17 Household 4,023.6 4,272.4 4,632.3 5,005.4 4,407.5 4,511.8 4,632.3 4,675.1 4,780.3 4,890.0 5,005.4 18 Nonfinancial business 3,696.8 3,770.3 3,921.1 4,171.9 3,860.9 3,885.6 3,921.1 4,004.2 4,085.6 4,122.6 4,171.9 19 Farm 136.3 138.3 141.2 142.8 141.5 143.1 141.2 138.9 142.8 144.9 142.8 20 Nonfarm noncorporate 1,122.9 1,129.9 1,142.0 1,180.0 1,135.6 1,137.4 1,142.0 1,154.5 1,163.3 1,170.4 1,180.0 21 Corporate 2,437.6 2,502.0 2,638.0 2,849.1 2,583.7 2,605.0 2,638.0 2,710.7 2,779.4 2,807.3 2,849.1 22 State and local government 1,095.9 1,158.2 1,114.8 1,063.3 1,144.2 1,132.8 1,114.8 1,101.6 1,094.9 1,070.8 1,063.3 23 Foreign credit market debt held in United States 313.1 381.9 361.6 429.0 348.7 352.4 361.6 376.8 387.6 410.7 429.0 24 Bonds 146.2 227.4 234.6 281.9 222.4 227.6 234.6 237.9 250.4 264.2 281.9 25 Bank loans n.e.c 23.9 24.6 26.1 34.4 25.1 26.3 26.1 28.2 29.6 31.6 34.4 26 Commercial paper 77.7 68.7 41.4 55.0 42.0 39.9 41.4 50.9 48.1 55.8 55.0 27 Other loans and advances 65.3 61.1 59.6 57.7 59.2 58.6 59.6 59.8 59.5 59.1 57.7 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 12,209.7 12,919.3 13,522.2 14,306.3 13,156.7 13,315.0 13,522.2 13,715.5 13,931.9 14,097.5 14,306.3 Financial sectors 29 Total credit market debt owed by financial sectors 3,024.9 3,321.0 3,785.7 4,244.3 3,545.3 3,648.1 3,785.7 3,853.5 3,964.8 4,078.0 4,244.3 By instrument 3 30 1 US G . g o o v v er e n rn m m e e n n t t -s - p re o l n at s e o d r ed enterprises securities 1, 4 7 4 2 3 0 . . 1 0 1, 5 8 2 8 3 4. . 1 7 2, 7 1 0 68 0 . . 4 6 2,3 8 8 0 1 9 . . 9 1 2,0 6 3 0 0 0 . . 5 3 2,0 6 8 3 9 8 . . 8 3 2, 7 16 0 8 0 . . 4 6 2,1 7 9 1 2 6 . . 7 3 2,2 7 4 48 5 . . 1 0 2,3 7 0 7 0 3 . . 2 5 2,3 8 8 0 1 9 . . 9 1 32 Mortgage pool securities 1,272.0 1,355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 33 Loans from U.S. government 4.8 4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,304.9 1,436.9 1,617.3 1,862.3 1,514.9 1,558.3 1,617.3 1,660.8 1,719.8 1,777.7 1,862.3 35 Corporate bonds 738.2 858.0 969.0 1,149.8 920.0 944.8 969.0 1,007.9 1,051.4 1,094.0 1,149.8 36 Mortgages 5.4 8.9 18.7 24.0 14.5 17.5 18.7 20.0 21.3 22.6 24.0 37 Bank loans n.e.c 80.5 67.6 55.3 63.3 56.3 53.4 55.3 53.4 58.4 60.3 63.3 38 Open market paper 394.3 393.5 442.8 488.0 410.3 420.5 442.8 454.1 462.8 473.6 488.0 39 Other loans and advances 86.6 108.9 131.6 137.2 113.8 122.0 131.6 125.4 125.7 127.2 137.2 By harrowing sector 40 Government-sponsored enterprises 447.9 528.5 700.6 809.1 600.3 638.3 700.6 716.3 748.1 773.5 809.1 41 Federally related mortgage pools 1.272.0 1,355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 42 Private financial sectors 1.304.9 1,436.9 1,617.3 1,862.3 1,514.9 1,558.3 1,617.3 1,660.8 1,719.8 1,777.7 1,862.3 43 Commercial banks 80.0 84.6 94.5 104.1 86.7 92.6 94.5 95.0 99.9 102.2 104.1 44 Bank holding companies 114.6 123.4 133.6 148.9 126.8 129.6 133.6 137.0 142.9 149.2 148.9 45 Funding corporations 161.6 169.9 199.3 247.1 191.5 200.6 199.3 221.0 229.9 240.0 247.1 46 Savings institutions 88.4 99.6 112.4 115.8 99.7 103.4 112.4 107.7 105.9 107.2 115.8 47 Credit unions .0 .2 .5 .4 .3 .4 .5 .4 .3 .4 .4 48 Life insurance companies .0 .2 .6 .5 .3 .3 .6 .6 .6 .6 .5 49 Finance companies 390.4 390.5 440.7 492.3 414.2 420.9 440.7 456.7 467.2 471.9 492.3 50 Mortgage companies 30.2 30.2 18.7 21.6 20.2 18.5 18.7 16.9 20.6 21.6 21.6 51 Real estate investment trusts (REITs) 13.9 17.4 31.1 36.5 24.8 29.5 31.1 32.4 33.7 35.0 36.5 52 Brokers and dealers 21.7 33.7 34.3 29.3 31.3 29.4 34.3 26.9 26.8 27.4 29.3 53 Issuers of asset-backed securities (ABSs) . . . 404.2 487.2 551.6 665.8 519.2 533.0 551.6 566.3 591.9 622.3 665.8 All sectors 54 Total credit market debt, domestic and foreign.... 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 55 U.S. government securities 4,795.5 5,215.8 5,660.7 6,018.7 5,425.9 5,522.1 5,660.7 5,750.6 5,828.5 5,903.6 6,018.7 56 Municipal securities 1,302.8 1,377.5 1,348.2 1,301.1 1,372.2 1,362.6 1,348.2 1,334.8 1,329.8 1,306.6 1,301.1 57 Corporate and foreign bonds 2,038.9 2,315.2 2,456.5 2,759.6 2,390.0 2,423.9 2,456.5 2,512.7 2,593.4 2,664.9 2,759.6 58 Mortgages 4,094.1 4,269.0 4,475.2 4,724.1 4,360.3 4,419.4 4,475.2 4,516.8 4,584.7 4,660.9 4,724.1 59 Consumer credit 804.6 863.5 984.7 1,115.5 891.6 929.4 984.7 987.9 1,026.5 1,060.8 1,115.5 60 Bank loans n.e.c 776.6 768.2 830.0 946.0 786.7 804.3 830.0 863.3 898.2 917.9 946.0 61 Open market paper 579.0 580.0 623.5 700.4 587.9 599.2 623.5 654.7 673.8 692.7 700.4 62 Other loans and advances 843.1 851.1 929.1 985.4 887.4 902.2 929.1 948.1 961.7 968.1 985.4 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES' Billions of dollars except as noted, end of period 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 2 Private domestic nonfinancial sectors 2,673.7 2,729.3 3,012.5 2,903.4 2,824.7 2,893.9 3,012.5 2,983.7 2,929.5 2,916.3 2,903.4 3 Households 1,620.6 1,646.0 1,971.1 2,018.7 1,747.4 1,839.5 1,971.1 1,996.3 1,953.1 2,007.1 2,018.7 4 Nonfarm noncorporate business 38.1 38.8 39.5 38.6 39.1 39.3 39.5 39.6 39.4 39.1 38.6 Nonfinancial corporate business 257.8 283.7 335.6 323.7 298.5 306.8 335.6 307.2 319.0 306.4 323.7 6 State and local governments 757.2 760.8 666.3 522.4 739.8 708.3 666.3 640.6 618.1 563.7 522.4 7 U.S. government 235.0 230.7 206.5 183.8 215.4 212.6 206.5 203.2 197.1 191.3 183.8 8 Rest of the world 1,022.8 1,146.6 1,255.7 1,526.6 1,205.4 1,240.7 1,255.7 1,325.3 1,403.4 1,492.7 1,526.6 9 Financial sectors 11,303.1 12,133.7 12,833.2 13,936.9 12,456.6 12,615.9 12,833.2 13,056.9 13,366.6 13,575.1 13,936.9 10 Government-sponsored enterprises 457.8 548.0 671.2 750.1 596.0 627.5 671.2 673.3 695.8 708.5 750.1 11 Federally related mortgage pools 1,272.0 1,355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 12 Monetary authority 300.4 336.7 368.2 380.8 351.6 356.8 368.2 367.1 375.7 370.6 380.8 13 Commercial banking 2,948.6 3,090.8 3,254.3 3,518.2 3,155.9 3,203.9 3,254.3 3,327.7 3,409.8 3,472.9 3,518.2 14 U.S. chartered banks 2,571.9 2,721.5 2,869.6 3,056.1 2,780.3 2,822.3 2,869.6 2,906.5 2,963.7 3,023.7 3,056.1 15 Foreign banking offices in United States 335.8 326.0 337.1 412.4 330.8 335.5 337.1 373.6 396.0 401.1 412.4 16 Bank holding companies 17.5 17.5 18.4 18.6 18.3 19.0 18.4 17.9 19.3 17.0 18.6 17 Banks in U.S. affiliated areas 23.4 25.8 29.2 31.1 26.5 27.1 29.2 29.8 30.8 31.0 31.1 18 Funding corporations 162.5 149.5 129.8 125.6 138.7 130.5 129.8 140.2 135.7 134.0 125.6 19 Thrift institutions 1,134.5 1,132.7 1,167.6 1,187.7 1,146.1 1,160.4 1,167.6 1,173.4 1,177.3 1,188.1 1,187.7 20 Life insurance companies 1,309.1 1,420.6 1,487.0 1,595.0 1,449.0 1,470.7 1,487.0 1,523.1 1,557.1 1,575.5 1,595.0 21 Other insurance companies 389.4 422.7 446.4 471.9 433.1 439.1 446.4 451.8 458.5 464.4 471.9 22 Private pension funds 571.7 617.6 664.6 720.9 635.3 645.9 664.6 679.3 693.6 705.5 720.9 23 State and local government retirement funds 417.5 437.3 466.3 498.9 459.2 454.3 466.3 480.7 482.1 493.3 498.9 24 Finance companies 496.4 482.8 551.0 614.0 511.3 524.1 551.0 568.5 586.9 594.7 614.0 25 Mortgage companies 60.5 60.4 37.5 43.3 40.4 37.0 37.5 33.9 41.4 43.2 43.3 26 Mutual funds 566.4 725.9 718.8 770.3 747.8 741.8 718.8 715.9 721.5 735.6 770.3 27 Closed-end funds 67.7 78.6 73.1 78.9 79.0 75.6 73.1 74.0 75.6 77.7 78.9 28 Money market mutual funds 408.6 429.0 459.0 545.5 433.5 437.9 459.0 480.6 508.0 505.7 545.5 29 Real estate investment trusts (REITs) 8.1 8.6 13.3 15.1 11.9 13.3 13.3 13.8 14.2 14.7 15.1 30 Brokers and dealers 122.7 137.5 93.3 181.3 100.8 95.3 93.3 101.0 137.5 137.0 181.3 31 Asset backed securities issuers (ABSs) 377.9 458.4 516.1 616.9 491.0 502.6 516.1 527.8 550.3 577.7 616.9 32 Bank personal trusts 231.5 240.9 248.0 249.4 245.7 247.7 248.0 248.4 248.8 249.2 249.4 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 Other liabilities 34 Official foreign exchange 51.8 53.4 53.2 63.7 54.9 55.5 53.2 64.1 67.1 65.1 63.7 35 Special drawing rights certificates 8.0 8.0 8.0 10.2 8.0 8.0 8.0 8.0 8.0 10.2 10.2 36 Treasury currency 16.5 17.0 17.6 18.2 17.3 17.5 17.6 17.8 18.0 18.2 18.2 37 Life insurance reserves 433.0 468.2 502.2 546.0 479.9 496.8 502.2 515.7 528.1 535.6 546.0 38 Pension fund reserves 4,055.1 4,471.6 4,693.9 5,435.3 4,524.0 4,677.0 4,693.9 4,895.7 5,095.4 5,320.1 5,435.3 39 Interbank claims 132.6 189.3 279.7 287.0 237.5 250.1 279.7 271.7 265.5 267.4 287.0 40 Deposits at financial institutions 5,050.2 5,154.9 5,296.0 5,748.4 5,186.7 5,212.4 5,296.0 5,389.5 5,572.4 5,638.7 5,748.4 41 Checkable deposits and currency 1,134.4 1,251.7 1,242.0 1,229.5 1,229.9 1,205.0 1,242.0 1,193.9 1,246.3 1,200.7 1,229.5 42 Small time and savings deposits 2,293.5 2,223.2 2,183.3 2,272.7 2,214.4 2,199.1 2,183.3 2,200.1 2,222.4 2,247.0 2,272.7 43 Large time deposits 415.2 391.7 411.2 491.8 379.3 402.6 411.2 441.1 456.2 486.2 491.8 44 Money market fund shares 539.5 559.6 602.9 745.3 569.2 578.7 602.9 634.0 678.5 702.7 745.3 45 Security repurchase agreements 399.9 471.1 549.4 660.1 522.1 548.1 549.4 603.4 629.3 655.6 660.1 46 Foreign deposits 267.7 257.6 307.1 349.1 271.9 278.9 307.1 316.9 339.6 346.6 349.1 47 Mutual fund shares 992.5 1,375.4 1,477.3 1,865.0 1,445.4 1,515.8 1,477.3 1,552.8 1,664.4 1,789.6 1,865.0 48 Security credit 217.7 279.0 279.0 299.6 279.1 263.9 279.0 269.5 277.9 286.2 299.6 49 Trade payables 995.1 1,032.8 1,144.8 1,246.2 1,059.9 1,082.3 1,144.8 1,143.8 1,158.6 1,202.0 1,246.2 50 Taxes payable 79.7 84.2 87.3 88.9 82.0 86.3 87.3 93.5 88.6 91.4 88.9 51 Investment in bank personal trusts 660.6 691.3 699.4 841.7 680.0 701.1 699.4 736.3 774.6 817.0 841.7 52 Miscellaneous 4,791.2 5,102.9 5,363.9 5,724.6 5,239.7 5,322.2 5,363.9 5,437.9 5,510.4 5,586.2 5,724.6 53 Total liabilities 32,718.6 35,168.3 37,210.2 40,725.4 35,996.6 36,652.0 37,210.2 37,965.3 38,925.7 39,803.2 40,725.4 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 19.6 20.1 21.1 22.1 20.8 21.0 21.1 22.7 22.9 22.1 22.1 55 Corporate equities 5,462.9 6,278.5 6,293.4 8,345.4 5,965.8 6,228.7 6,293.4 6,835.8 7,393.0 8,013.8 8,345.4 56 Household equity in noncorporate business 2,458.3 2,476.3 2,564.6 2,635.6 2,523.9 2,550.9 2,564.6 2,576.8 2,608.5 2,622.2 2,635.6 Floats not included in assets (—) 57 U.S. government checkable deposits 6.8 5.6 3.4 3.1 .9 1.2 3.4 4.2 2.0 .6 3.1 58 Other checkable deposits 42.0 40.7 38.0 34.2 38.7 30.6 38.0 33.3 35.7 27.3 34.2 59 Trade credit -251.0 -215.1 -219.0 -219.5 -280.2 -282.3 -219.0 -258.1 -277.1 -283.9 -219.5 Liabilities not identified as assets (—) 60 Treasury currency -4.9 -5.1 -5.4 -5.8 -5.2 -5.3 -5.4 -5.4 -5.5 -5.6 -5.8 61 Interbank claims -9.3 -4.7 -6.5 -9.1 -7.4 -3.4 -6.5 -2.7 -2.9 .1 -9.1 62 Security repurchase agreements 43.0 77.3 105.2 113.7 99.3 98.0 105.2 131.6 115.0 130.4 113.7 63 Foreign deposits 217.6 218.3 258.7 294.1 231.4 241.3 258.7 270.2 290.6 290.2 294.1 64 Taxes payable 25.3 26.2 24.2 38.0 21.3 22.0 24.2 7.9 21.2 23.6 38.0 65 Miscellaneous -514.4 -589.8 -723.9 -785.0 -569.2 -612.4 -723.9 -782.6 -787.4 -802.6 -785.0 66 Total identified to sectors as assets 41,104.3 44,389.7 46,614.6 52,264.7 44,977.5 45,963.0 46,614.6 48,002.3 49,558.5 51,081.2 52,264.7 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. 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

A42 Domestic Nonfinancial Statistics • June 1996 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted 1995 1996 11999933 11999944 11999955 July Aug. Sept. Oct. Nov. Dec.' Jan.' Feb.' Mar. 1 Industrial production1 111.5 118.1 121.9 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.1 123.5 Market groupings 2 Products, total 110.0 115.6 118.3 118.0 119.2 119.4 118.3 118.8 119.2 118.6 120.6 119.9 3 Final, total 112.7 118.3 121.4r 121.2 122.4 122.6 121.3 121.9 122.1 121.8 124.2 123.2 4 Consumer goods 109.5 113.7 115.lr 114.6 115.9 116.0 114.9 115.9 115.7 114.3 116.2 115.1 5 Equipment 117.5 125.3 131.4 131.6 132.9 133.1 131.5 131.4 132.3 133.8 137.1 136.2 6 Intermediate 101.8 107.3 109.0 108.5 109.4 109.5 109.2 109.3 110.1 109.0 109.8 110.1 7 Materials 113.8 122.0 127.4 126.8 128.1 128.1 128.1 128.4 128.4 128.4 129.5 128.9 Industry groupings 112.3 119.7 123.9 123.3 124.2 124.9 124.4 124.5 124.8 124.5 126.4 125.4 8 Manufacturing 80.6 83.3 82.9 82.3 82.6 82.8 82.1 81.9 81.9 81.3 82.3 81.4 9 Capacity utilization, manufacturing (percent)' 10 Construction contracts3 105.2r 114.r 117.6r 119.0 124.0' 120.0 119.0 120.0 114.0 117.0 111.0 118.0 11 Nonagricultural employment, total4 1 9 0 4 8 . . 3 4 1 9 1 5 1 . . 6 3 1 9 1 8 4 . . 2 4 1 9 1 7 4 . . 9 3 1 9 1 7 4 . . 9 6 1 9 1 7 4 . . 9 7 1 9 1 7 4 . . 9 8 1 9 1 7 5 . . 8 0 1 9 1 8 5 . . 0 1 1 9 1 7 5 . . 7 0 1 9 1 8 5 . . 3 6 1 9 1 8 5. . 7 0 12 Goods-producing, total 94.8 95.1 96.9 96.6 96.6 96.4 96.3 96.2 96.4 96.0 96.1 95.8 13 Manufacturing, total 95.3 97.4 98.3 97.8 97.9 97.7 97.5 97.4 97.7 97.1 97.3 96.9 14 Manufacturing, production workers 112.9 116.3 119.5 119.6 119.9 120.1 120.1 120.4 120.6 120.5 121.1 121.4 15 Service-producing 141.3 148.3 157.4 157.9 158.0 158.8 159.6 160.1' 161.1 161.3 162.6 n.a. 16 Personal income, total 136.0 142.6 150.5 151.3 151.1 152.0 153.0 152.9 153.7 153.4 155.1 n.a. 17 Wages and salary disbursements 119.3 125.0 129.3 129.0 129.3 129.6 129.5 129.5 129.8 128.4 130.0 n.a. 18 Manufacturing 142.4 149.2 157.8 158.4 158.5 159.3 160.0' 160.6' 161.7 162.0 163.2 n.a. 2 1 0 9 Ret D a i il s p s o a s l a e b s5 l e personal income5 134.7 144.8r 152.2' 152.4' 153.4' 153.4' 153.0' 154.3' 155.3 155.3 158.2 158.3 Prices6 21 Consumer (1982-84=100) 144.5 148.2 152.4 152.5 152.9 153.2 153.7 153.6 153.5 154.4 154.9 155.7 22 Producer finished goods (1982=100) 124.7 125.5 127.9 128.2 128.1 127.9 128.7 128.7' 129.0 129.5 129.4 130.2 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 5. Based on data from U.S. Department of Commerce, Survey of Current Business. the ordering address, see the inside front cover. The latest historical revision of the industrial 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price production index and the capacity utilization rates was released in November 1995. See "A indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve Monthly Labor Review. Bulletin, vol. 82 (January 1996), pp. 16—25. For a detailed description of the industrial NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series production index, see "Industrial Production: 1989 Developments and Historical Revision," mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. Figures for industrial production for the latest month are preliminary, and many figures for 2. Ratio of index of production to index of capacity. Based on data from the Federal the three months preceding the latest month have been revised. See "Recent Developments in Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. 3. Index of dollar value of total construction contracts, including residential, nonresiden- 411-35. See also "Industrial Production Capacity and Capacity Utilization since 1987," tial, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. 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 1996 CCaatteeggoorryy 11999933 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 128,040 131,056 132,304 132,298 132,501 132,473 132,471 132,352 132,903 113333,,001188 113333,,665555 Employment 1 Nonagricultural industries' 116,232 119,651 121,460 121,483 121,701 121,810 121,739 121,656 121,698 122,143 122,664 3 Agriculture 3,074 3,409 3,440 3,376 3,335 3,434 3,323 3,325 3,529 3,519 3,487 Unemployment 4 Number 8,734 7,996 7,404 7,439 7,465 7,229 7,409 7,371 7,677 7,355 7,504 5 Rate (percent of civilian labor force) 6.8 6.1 5.6 5.6 5.6 5.5 5.6 5.6 5.8 5.5 5.6 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 110,525 113,423 116,597 116,838 116,932 117,000 117,212 117,357 117,211 117,835 117,975 7 Manufacturing 18,003 18,064 18,406 18,357 18,322 18,301 18,272 18,307 18,235 18,262 18,200 8 Mining 611 604 579 575 573 571 567 569 567 572 575 9 Contract construction 4,642 4,916 5,244 5,233 5,262 5,287 5,295 5,297 5,314 5,428 5,415 10 Transportation and public utilities 5,787 5,842 6,194 6,217 6,206 6,217 6,240 6,231 6,231 6,246 6,256 11 Trade 25,675 26,362 27,156 27,177 27,245 27,256 27,362 27,376 27,334 27,470 27,507 12 Finance 6,712 6,789 6,948 6,947 6,957 6,977 6,991 7,001 7,007 7,035 7,044 13 Service 30,278 31,805 32,788 32,986 33,047 33,076 33,185 33,248 33,232 33,495 33,626 14 Government 18,817 19,041 19,282 19,346 19,320 19,315 19,300 19,328 19,291 19,327 19,352 1. Beginning January 1994, reflects redesign of current population survey and population 4. Includes all full- and part-time employees who worked during, or received pay for, the controls from the 1990 census. pay period that includes the twelfth day of the month; excludes proprietors, self-employed 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample data collected during the calendar week that contains the twelfth adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; annual data are averages of monthly figures. By definition, seasonality does not exist in time. 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

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1995 1996 1995 1996 1995 1996 SSeerriieess Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 121.4 122.3 122.5 123.3 145.0 146.4 147.8 149.2 83.7 83.6 82.9 82.7 2 Manufacturing 123.3 124.1 124.6 125.4 148.7 150.3 152.0 153.5 82.9 82.6 82.0 81.7 3 Primary processing3 117.7 117.1 117.1 116.9 134.4 135.4 136.4 137.2 87.6 86.5 85.9 85.2 4 Advanced processing4 126.0 127.5 128.1 129.5 155.6 157.5 159.5 161.4 81.0 80.9 80.3 80.2 5 Durable goods 131.4 133.0 134.2 136.1 158.9 161.1 163.4 165.7 82.7 82.5 82.1 82.1 6 Lumber and products 102.9 104.6 105.8 105.3 118.0 118.6 119.2 119.7 87.2 88.2 88.7 88.0 7 Primary metals 119.1 118.2 118.8 120.1 127.5 128.0 128.6 129.2 93.4 92.3 92.4 93.0 8 Iron and steel 121.9 121.3 121.3 123.9 131.7 132.5 133.2 133.9 92.6 91.6 91.0 92.5 9 Nonferrous 115.1 113.9 115.3 115.0 121.9 122.2 122.5 122.8 94.5 93.2 94.1 93.7 10 Industrial machinery and equipme nt 174.4 178.9 186.8 195.4 199.6 204.5 209.7 215.1 87.4 87.5 89.1 90.8 11 Electrical machinery 171.2 178.4 182.9 186.2 197.6 203.9 210.4 217.0 86.7 87.5 86.9 85.8 12 Motor vehicles and parts 140.5 140.7 140.5 132.1 174.2 176.4 178.7 180.3 80.6 79.8 78.6 73.3 13 Aerospace and miscellaneous transportation equipment . . 88.7 86.9 79.0 83.6 132.2 132.1 132.1 132.0 67.1 65.8 59.8 63.3 14 Nondurable goods 114.4 114.3 113.9 113.7 137.5 138.4 139.4 140.2 83.2 82.6 81.8 81.1 15 Textile mill products 113.7 110.9 109.4 104.9 130.1 131.1 132.1 132.9 87.5 84.6 82.8 78.9 16 Paper and products 121.2 119.5 118.1 115.4 131.5 132.5 133.4 134.3 92.1 90.2 88.5 85.9 17 Chemicals and products 124.0 124.6 126.4 126.6 154.7 155.6 156.6 157.6 80.1 80.1 80.7 80.4 18 Plastics materials 122.9 118.3 123.1 133.8 135.4 137.1 91.9 87.3 89.7 19 Petroleum products 108.0 109.2 107.7 110.6 116.2 116.4 116.6 116.8 92.9 93.8 92.4 94.7 20 Mining 100.7 100.2 98.2 98.6 112.0 112.0 112.1 112.1 89.9 89.4 87.6 88.0 21 Utilities 120.7 124.7 124.1 125.0 134.8 135.2 135.6 135.9 89.5 92.3 91.5 92.0 22 Electric 120.4 125.0 123.7 125.1 132.1 132.5 133.0 133.3 91.1 94.3 93.1 93.9 1973 1975 Previous cycle5 Latest cycle6 1995 1996 High Low High Low High Low Mar. Oct. Nov. Dec/ Jan.r Feb. Mar.p Capacity utilization rate (percent)" 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 84.6 82.9 82.9 82.8 82.3 83.2 82.5 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 84.0 82.1 81.9 81.9 81.3 82.3 81.4 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 88.9 86.0 85.9 85.8 85.2 85.2 85.1 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.1 81.9 80.5 80.3 80.2 79.7 81.1 79.9 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 83.9 82.0 82.2 82.1 81.8 83.1 81.6 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.1 88.4 88.8 87.9 89.5 87.6 87.7 88.7 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.2 95.5 90.1 93.9 93.2 94.1 92.0 92.9 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.0 95.9 86.5 94.7 91.9 95.9 89.7 92.0 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.2 94.9 94.6 92.9 94.7 91.9 95.0 94.1 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 71.8 87.8 88.4 88.9 89.9 90.1 91.3 91.1 II Electrical machinery 87.8 63.8 89.4 71.1 84.9 77.0 87.5 87.6 87.2 86.0 84.7 86.9 85.8 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 56.6 85.4 78.5 78.7 78.7 75.2 78.2 66.4 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 78.8 67.7 60.6 58.8 60.1 62.3 63.5 64.2 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.3 84.1 82.2 81.6 81.5 80.7 81.3 81.2 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.8 89.8 84.3 82.5 81.8 78.2 78.8 79.8 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.7 92.5 90.0 87.1 88.4 85.4 85.7 86.7 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 79.0 81.1 81.1 80.5 80.6 80.7 80.4 80.0 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 93.3 89.4 90.3 89.6 90.8 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 84.6 94.0 91.8 92.1 93.3 93.4 95.5 95.1 20 Mining 94.4 88.4 96.6 80.6 86.5 86.1 89.6 87.6 87.7 87.6 86.5 87.9 89.6 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.1 88.6 89.8 92.5 92.2 92.6 91.4 92.0 22 Electric 99.0 82.7 88.3 78.7 94.8 86.7 90.7 93.1 93.0 93.1 94.2 93.7 93.6 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic the ordering address, see the inside front cover. The latest historical revision of the industrial materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; production index and the capacity utilization rates was released in November 1995. See "A primary metals; and fabricated metals. Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing Bulletin, vol. 82 (January 1996), pp. 16-25. For a detailed description of the industrial and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather production index, see "Industrial Production: 1989 Developments and Historical Revision," and products; machinery; transportation equipment; instruments; and miscellaneous manufac- Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. tures. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted 5. Monthly highs, 1978-80; monthly lows, 1982. 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

A44 Domestic Nonfinancial Statistics • June 1996 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1995 1996 pro- 1995 GGrroouupp por- avg. tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec/ Jan.r Feb. Mar.p Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 121.9 121.9 121.4 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.1 123.5 2 Products 60.6 118.3 118.5 117.7 117.5 117.9 118.0 119.2 119.4 118.3 118.8 119.2 118.6 120.6 119.9 Final products 46.3 121.4 121.5 120.9 120.6 121.1 121.2 122.4 122.6 121.3 121.9 122.1 121.8 124.2 123.2 4 Consumer goods, total 28.6 115.1 115.3 114.4 114.1 114.8 114.6 115.9 116.0 114.9 115.9 115.7 114.3 116.2 115.1 5 Durable consumer goods 5.6 124.2 126.0 124.9 121.6 122.3 121.4 124.0 125.8 123.4 124.9 126.3 120.1 124.5 117.5 6 Automotive products 2.5 130.7 134.4 131.7 127.1 129.1 125.3 130.7 132.9 128.5 130.5 132.8 125.8 132.6 118.2 7 Autos and trucks 1.6 131.4 137.5 132.8 127.4 129.5 123.9 132.0 133.1 128.6 129.8 132.1 123.9 133.2 111.0 8 Autos, consumer .9 103.1 111.2 105.5 99.4 99.2 101.0 100.6 102.6 100.2 100.2 99.5 92.8 99.7 77.0 y Trucks, consumer .7 181.7 183.6 180.9 177.1 183.6 163.9 188.2 187.7 179.1 182.8 190.6 179.9 193.6 172.9 10 Auto parts and allied goods .9 127.8 126.7 128.0 125.0 126.8 126.6 126.6 130.8 126.7 130.2 132.7 128.1 129.6 131.1 ii Other 3.0 118.6 118.6 119.0 116.7 116.3 118.1 118.1 119.6 118.9 119.9 120.5 115.1 117.4 116.9 12 Appliances, televisions, and air conditioners .7 135.5 132.2 131.6 131.2 131.4 132.2 135.8 139.4 140.1 145.3 141.9 131.6 134.9 133.8 13 Carpeting and furniture .8 105.8 106.1 109.1 103.0 101.8 107.9 104.4 106.9 105.6 104.1 107.4 100.5 103.5 104.0 14 Miscellaneous home goods 1.5 118.2 119.7 118.8 118.1 118.0 117.4 118.0 117.8 116.9 117.6 118.3 116.2 117.5 116.6 IS Nondurable consumer goods 23.0 112.9 112.7 111.8 112.4 113.1 113.0 113.9 113.7 112.9 113.8 113.2 113.0 114.2 114.6 16 Foods and tobacco 10.3 111.3 111.5 111.2 111.5 113.1 112.8 111.8 111.6 111.1 110.9 110.6 110.6 111.9 112.9 17 Clothing 2.4 94.8 98.7 96.9 96.7 94.6 93.6 93.9 93.4 92.9 91.5 89.7 88.0 90.2 89.7 18 Chemical products 4.5 131.3 129.7 126.9 127.3 128.6 128.6 132.6 134.0 135.7 135.0 136.5 136.7 137.0 136.6 19 Paper products 2.9 106.6 105.9 106.9 106.5 106.3 107.6 106.7 107.3 106.6 108.4 106.3 104.6 107.4 107.3 20 Energy 2.9 116.5 113.9 112.2 115.8 115.8 116.1 122.3 119.0 113.1 121.1 119.5 120.7 120.2 121.2 21 Fuels .9 108.8 110.4 108.8 108.2 108.8 108.2 108.4 111.4 107.3 108.2 108.6 108.6 112.8 111.8 22 Residential utilities 2.1 119.6 115.2 113.5 119.0 118.7 119.4 128.2 122.2 115.4 126.6 124.1 125.7 123.3 125.1 23 Equipment 17.7 131.4 131.4 131.3 130.8 131.2 131.6 132.9 133.1 131.5 131.4 132.3 133.8 137.1 136.2 24 Business equipment 13.7 155.7 155.1 155.0 154.3 155.1 155.7 157.5 158.2 156.5 156.9 158.4 160.6 164.7 162.9 25 Information processing and related 5.7 198.1 191.6 194.5 193.9 196.0 197.2 201.0 203.0 206.5 208.1 209.4 214.0 220.2 223.4 26 Computer and office equipment 1.4 373.5 343.6 356.4 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 447.3 463.3 477.1 27 Industrial 4.0 127.5 126.9 126.1 126.5 126.2 127.1 129.1 128.7 128.6 129.1 129.5 129.4 131.4 130.4 28 Transit 2.6 136.3 145.7 142.9 139.6 140.3 139.8 138.0 137.9 122.3 119.6 124.5 128.1 133.0 117.5 29 Autos and trucks 1.2 140.1 146.2 141.5 137.8 139.5 139.9 141.3 143.3 135.7 134.2 135.3 129.0 135.8 109.4 30 Other 1.4 123.2 126.3 123.2 122.7 122.6 122.6 122.2 123.3 120.9 121.4 121.7 121.9 123.3 123.5 31 Defense and space equipment 3.3 65.9 67.8 67.1 66.8 66.8 66.5 66.1 65.2 64.4 62.9 62.0 61.7 62.5 62.8 32 Oil and gas well drilling .6 87.1 87.2 89.3 90.5 86.8 88.4 89.5 88.3 83.5 83.1 83.8 85.1 89.7 96.3 33 Manufactured homes .2 152.7 145.8 146.6 148.3 149.6 148.6 155.9 158.0 158.9 161.8 164.4 158.1 157.8 34 Intermediate products, total 14.3 109.0 109.2 108.2 108.2 108.2 108.5 109.4 109.5 109.2 109.3 110.1 109.0 109.8 110.1 35 Construction supplies 5.3 108.2 109.2 108.0 106.6 107.2 107.3 107.0 108.4 108.3 108.7 110.5 108.0 110.3 110.7 36 Business supplies 9.0 109.6 109.3 108.5 109.4 109.1 109.5 111.0 110.3 109.9 109.9 110.0 109.8 109.6 110.0 37 Materials 39.4 127.4 127.2 127.0 127.2 126.8 126.8 128.1 128.1 128.1 128.4 128.4 128.4 129.5 128.9 38 Durable goods materials 20.8 141.5 140.3 139.8 139.8 139.7 140.2 142.3 144.1 143.9 145.3 144.8 145.6 147.5 145.8 39 Durable consumer parts 4.0 138.5 140.4 137.9 135.9 135.8 133.9 138.4 139.8 138.6 140.1 139.3 140.3 140.4 131.2 40 Equipment parts 7.5 163.0 157.3 158.9 160.3 161.7 164.4 167.1 169.1 169.4 171.0 170.8 171.7 177.0 177.8 41 Other 9.2 126.2 127.0 125.9 125.6 124.5 124.4 124.9 126.8 126.5 127.9 127.2 128.0 128.2 127.7 42 Basic metal materials 3.1 125.7 126.7 126.1 125.5 123.5 124.9 123.1 127.0 124.3 128.1 126.6 125.6 124.4 125.5 43 Nondurable goods materials 8.9 119.8 121.5 121.7 122.2 120.4 118.9 118.8 117.8 118.7 116.6 117.4 115.6 115.7 116.2 44 Textile materials 1.1 109.2 113.6 113.2 112.8 109.0 102.6 109.2 106.2 107.3 104.8 103.3 100.2 99.8 101.5 45 Paper materials 1.8 120.5 122.5 122.3 125.6 121.0 123.9 120.4 117.0 121.4 114.3 115.2 113.0 113.8 115.2 46 Chemical materials 3.9 124.4 125.6 125.6 126.2 125.2 124.4 123.1 123.3 122.9 122.7 121.9 121.7 121.3 120.9 47 Other 2.1 116.5 117.4 118.4 116.9 117.4 113.8 114.6 115.1 114.6 114.1 118.9 115.1 115.9 116.8 48 Energy materials 9.7 106.6 106.4 106.6 107.2 107.2 107.5 108.5 105.8 105.5 105.7 106.0 105.9 106.1 107.1 49 Primary energy 6.3 101.9 102.1 102.2 102.3 103.0 102.3 101.4 101.2 101.7 100.8 101.0 100.4 100.9 102.3 50 Converted fuel materials 3.3 116.0 114.9 115.5 116.9 115.5 118.1 122.8 115.0 113.1 115.4 116.2 116.9 116.5 116.8 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 121.5 121.3 120.9 121.0 121.1 121.2 122.3 122.4 121.9 122.3 122.5 122.4 123.8 123.9 52 Total excluding motor vehicles and parts 95.2 120.9 120.6 120.3 120.5 120.5 120.7 121.7 121.8 121.3 121.7 121.9 121.8 123.2 123.7 53 Total excluding computer and office equipment 98.2 118.2 118.5 117.9 117.8 117.8 117.8 118.9 118.9 118.1 118.4 118.5 118.0 119.4 118.6 54 Consumer goods excluding autos and trucks . 27.0 114.0 113.8 113.1 113.3 113.9 114.0 114.8 114.9 114.0 115.0 114.7 113.7 115.0 115.4 55 Consumer goods excluding energy 25.7 114.9 115.4 114.6 113.9 114.7 114.5 115.1 115.7 115.1 115.3 115.3 113.6 115.7 114.4 56 Business equipment excluding autos and trucks 12.5 157.0 155.8 156.2 155.8 156.5 157.2 158.9 159.5 158.4 159.0 160.5 163.7 167.4 168.2 5/ Business equipment excluding computer and office equipment 12.2 133.0 134.8 133.7 132.5 133.2 133.2 134.4 134.3 131.6 130.8 131.3 132.4 135.3 132.4 58 Materials excluding energy 29.7 134.9 134.6 134.3 134.4 133.8 133.7 135.1 136.1 136.2 136.6 136.4 136.4 137.8 136.7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 SICZ pro- 1995 Group code por- avg. tion Apr. May June July Aug. Sept, Nov. Dec. Jan.' Index (1987 = 100) MAJOR INDUSTRIES 59 Tola] index 100.0 121.9 121.9 121.4 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.1 123.5 60 Manufacturing 85.4 123.9 124.0 123.5 123.2 123.3 123.3 124.2 124.9 124.4 124.5 124.8 124.5 126.4 125.4 61 Primary processing 26.6 117.6 118.9 118.2 117.9 117.1 116.9 116.6 117.8 117.0 117.1 117.3 116.7 116.9 117.0 62 Advanced processing 58.9 126.8 126.5 126.0 125.7 126.3 126.3 127.8 128.2 127.9 128.0 128.4 128.2 130.8 129.4 63 Durable goods 45.0 132.5 132.2 131.6 131.1 131.5 131.5 133.2 134.4 133.5 134.3 134.8 134.9 137.6 135.7 64 Lumber and products " ' 24 2.0 104.5 103.9 103.9 101.7 103.0 103.7 103.7 106.2 105.7 104.8 106.9 104.7 104.9 106.3 65 Furniture and fixtures 25 1.4 111.6 113.4 111.4 110.8 111.3 111.1 110.9 112.0 110.9 109.8 109.3 108.5 110.3 110.3 66 Stone, clay, and glass products 32 2.1 104.1 104.7 103.4 104.1 103.8 103.2 103.0 103.8 104.5 104.9 104.3 105.2 104.7 104.0 67 Primary metals 33 3.1 119.2 121.3 120.2 119.5 117.5 118.3 115.4 121.0 115.7 120.8 120.0 121.4 118.8 120.1 68 Iron and steel 331,2 1.7 122.4 125.8 123.5 123.0 119.2 119.3 117.7 127.0 115.1 126.1 122.7 128.1 120.1 123.5 69 Raw steel 331PT .1 114.7 116.8 114.7 113.0 112.9 111.5 114.2 118.6 111.3 116.4 118.0 113.9 112.5 70 Nonferrous 333-6,9 1.4 114.8 115.4 115.7 114.8 114.9 116.5 111.9 113.2 115.8 113.8 116.2 112.8 116.6 115.5 71 Fabricated metal products.. . 34 5.0 113.9 114.3 112.3 113.7 113.7 112.4 114.3 115.1 114.0 114.5 115.0 115.4 117.0 115.9 72 Industrial machinery and equipment 35 8.0 177.8 172.4 174.3 174.6 174.4 176.0 179.5 181.3 183.8 186.5 190.1 192.1 196.3 197.6 73 Computer and office equipment 357 1.8 373.5 343.6 356.4 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 447.3 463.3 477.1 74 Electrical machinery 36 7.2 174.9 169.4 169.6 171.1 173.0 175.7 178.7 180.8 182.4 183.6 182.8 182.1 188.5 188.0 75 Transportation equipment. . . 37 9.5 113.3 118.0 115.7 113.2 113.4 111.6 114.1 114.1 109.3 108.6 109.7 108.3 111.9 102.0 76 Motor vehicles and parts . 371 4.8 141.9 147.6 143.0 138.8 139.7 136.7 142.1 143.3 139.7 140.7 141.2 135.4 141.0 120.0 77 Autos and light trucks . 371PT 2.5 131.3 137.9 132.9 127.3 129.2 124.3 131.6 132.8 128.4 129.6 131.5 123.3 132.6 109.8 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.7 85.8 89.5 89.4 88.5 88.1 87.6 87.2 85.9 80.0 77.7 79.4 82.3 8833..88 84.7 79 Instruments 38 5.4 110.7 110.9 111.2 109.6 110.9 110.2 111.4 111.3 111.4 111.5 109.7 110.8 113.0 113.7 80 Miscellaneous 39 1.3 122.7 123.3 122.7 122.3 123.1 121.4 122.4 122.9 122.2 123.3 123.5 122.1 124.2 124.6 81 Nondurable goods 40.5 114.3 115.1 114.6 114.4 114.3 114.3 114.3 114.4 114.3 113.7 113.8 113.0 114.0 114.0 82 Foods "20 9.4 115.3 115.0 115.1 115.9 116.1 115.3 115.5 115.5 115.4 114.8 114.8 115.0 116.4 117.1 83 Tobacco products 21 1.6 90.2 92.3 92.0 89.3 96.4 99.1 91.3 90.2 88.2 88.9 88.4 86.6 88.0 89.8 84 Textile mill products 22 1.8 112.6 116.2 117.2 113.6 110.4 109.9 112.4 110.5 111.1 108.9 108.3 103.8 104.7 106.1 85 Apparel products 23 2.2 95.7 99.3 97.4 97.5 95.5 94.8 94.5 94.5 93.3 92.4 91.5 89.2 91.1 90.2 86 Paper and products 26 3.6 119.8 121.1 121.2 122.4 119.9 121.3 118.6 118.5 119.7 116.2 118.2 114.4 115.1 116.7 87 Printing and publishing 27 6.8 99.4 99.3 99.2 99.0 98.6 99.0 100.5 99.8 98.9 99.3 98.8 98.0 99.3 98.6 88 Chemicals and products .... 28 9.9 125.0 125.0 123.5 124.0 124.4 124.0 124.4 125.3 126.7 126.0 126.5 126.8 126.7 126.3 89 Petroleum products 29 1.4 108.3 109.1 107.8 107.4 108.6 109.0 108.5 110.0 106.9 107.4 108.9 109.0 111.5 111.2 90 Rubber and plastic products . 30 3.5 139.4 141.1 140.8 138.2 137.8 137.7 138.7 139.8 139.7 140.3 139.3 139.0 139.9 138.7 91 Leather and products 31 .3 81.3 85.8 82.7 83.0 81.2 78.7 80.8 80.5 79.7 78.2 76.8 75.3 76.9 77.4 92 Mining 6.9 99.9 100.3 100.6 100.5 101.0 100.7 100.0 100.0 98.2 98.3 98.1 97.0 98.5 100.4 93 Metal "lO .5 169.3 164.5 164.6 164.3 166.8 172.2 172.1 170.8 178.3 175.9 172.8 160.0 157.7 157.3 94 Coal 12 1.0 112.9 114.0 112.3 110.8 112.2 117.0 109.7 116.2 112.3 109.5 108.5 103.3 108.0 114.8 95 Oil and gas extraction 13 4.8 91.9 92.2 93.1 93.4 93.6 91.9 92.4 91.2 89.2 90.1 90.1 90.6 91.2 92.5 96 Stone and earth minerals 14 .6 112.3 114.2 112.7 111.1 111.9 113.5 111.6 113.1 112.4 110.9 112.4 108.9 114.5 115.5 97 Utilities 7.7 122.0 119.2 118.8 122.1 121.0 122.7 128.8 122.7 121.6 125.4 125.1 125.7 124.3 125.1 98 Electric 491,493PT 6.1 122.1 119.5 118.9 121.2 121.2 122.2 130.0 122.7 123.7 123.6 123.9 125.5 125.0 124.8 99 Gas 492,493PT 1.6 121.7 118.0 118.4 125.5 120.6 124.5 124.3 122.4 113.6 132.5 129.9 126.3 121.4 126.1 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.6 122.8 122.6 122.3 122.2 122.3 122.5 123.1 123.8 123.4 123.6 123.9 123.8 125.5 112255..77 101 Manufacturing excluding office and computing machines... 83.7 119.5 120.1 119.3 118.9 119.1 118.9 119.8 120.3 119.6 119.6 119.7 119.2 120.8 119.7 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,002.9 2,245.6 2,252.0 2,236.5 2,231.5 2,239.1 2,238.8 2,257.8 2,268.1 2,240.3 2,255.8 2,265.7 2,250.1 2,293.3 2,267.1 103 Final 1,552.2 1,748.7 1,755.0 1,743.1 1,737.4 1,745.6 1,743.2 1,760.5 1,768.2 1,741.9 1,756.8 1,761.9 1,751.6 1,791.4 1,762.9 104 Consumer goods 1,033.4 1,130.5 1,135.5 1,125.2 1,122.3 1,128.4 1,124.0 1,135.7 1,141.1 1,125.1 1,139.3 1,139.0 1,122.5 1,146.5 1,128.5 105 Equipment 518.8 618.3 619.5 617.9 615.1 617.1 619.2 624.8 627.1 616.7 617.5 622.9 629.1 644.9 634.4 106 Intermediate 450.7 496.9 497.0 493.4 494.0 493.5 495.6 497.3 499.9 498.4 499.0 503.8 498.5 501.9 504.2 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For Bulletin, vol. 82 (January 1996), pp. 16-25. For a detailed description of the industrial the ordering address, see the inside front cover. The latest historical revision of the industrial production index, see "Industrial Production: 1989 Developments and Historical Revision," production index and the capacity utilization rates was released in November 1995. See "A Federal Reserve Bulletin, vol. 76, (April 1990), pp. 187-204. Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve 2. Standard industrial classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • June 1996 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1995 1996 IItteemm 11999933 11999944 11999955rr May June July Aug. Sept. Oct. Nov. Dec.' Jan.' Feb. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,199 1,372 1,331 1,243 1,275 1,355 1,368 1,405 1,384 1,448 1,478 1,372 1,411 2 One-family 987 1,068 997 930 958 1,011 1,044 1,073 1,051 1,069 1,110 1,050 1,082 3 Two-family or more 213 303 335 313 317 344 324 332 333 379 368 322 329 4 Started 1,288 1,457 1,354 1,300 1,301 1,450 1,401 1,401 1,351 1,458 1,425 1,453 1,505 5 One-family 1,126 1,198 1,076 1,005 1,036 1,125 1,135 1,130 1,109 1,129 1,150 1,146 1,175 6 Two-family or more 162 259 278 295 265 325 266 271 242 329 275 307 330 7 Under construction at end of period 680 762 776 755 755 762 772 783 781 790 800 807 805 8 One-family 543 558 547 537 533 539 547 555 560 562 569 571 571 y Two-family or more 137 204 229 218 222 223 225 228 221 228 231 236 234 10 Completed 1,193 1,347 1,313 1,324 1,256 1,332 1,247 1,267 1,320 1,360 1,225 1,389 1,299 II One-family 1,040 1,160 1,066 1,058 1,049 1,034 1,019 1,009 1,039 1,081 1,003 1,102 1,037 12 Two-family or more 153 187 247 266 207 298 228 258 281 279 222 287 262 13 Mobile homes shipped 254 304 340 335 333 337 344 352 354 355 352 352 341 Merchant builder activity in one-family units 14 Number sold 666 670 665 667 724 782 707 684 673 679 683' 729 727 15 Number for sale at end of period1 293 337 372 347 347 344 349 350 360 368 372' 373 363 Price of units sold (thousands of dollars)2 16 Median 126.1 130.4 133.4 133.9 133.7 131.0 134.9 130.0 135.2 137.0 138.6' 131.0 138.0 17 Average 147.6 153.7 157.6 158.0 160.2 154.2 162.0 155.6 156.2 160.7 165.6' 154.2 163.5 EXISTING UNITS (one-family) 18 Number sold 3,800 3,946 3,801 3,620 3,800 3,970 4,050 4,090 4,070 4,000 3,870 3,720 3,940 Price of units sold (thousands of dollars)' 19 Median 106.5 109.6 112.2 109.1 116.2 116.0 117.6 114.8 113.2 114.3 113.9 114.8 114.0 20 Average 133.1 136.4 138.4 135.5 143.3 142.5 144.5 140.2 138.7 139.5 138.7 141.2 138.7 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 464,504 506,904 526,597 514,515 518,934 528,673 528,397 535,106 534,488R 531,710R 535,143 539,841 534,909 22 Private 339,161 376,566 383,887 376,148 377,486 384,307 385,653 386,960 386,666r 390,266 392,191 390.579 23 Residential 210,455 238,884 236,114 231,342 228,388 231,002 233,982 237,618 237,74 lr 239,427r 241,950 241,488 241.432 24 Nonresidential 128,706 137,682 147,773 144,806 149,098 153,305 151,671 149,342 151,141r 147,239r 148,316 150,703 149,147 25 Industrial buildings 19,533 21,121 24,154 24,760 24,416 24,399 24,202 24,096 24,964r 24,579r 24,153 25,208 24.682 26 Commercial buildings 42,627 48,552 55,159 51,779 55,420 57,015 55,709 55,079 56,472r 55,482r 57,596 56,072 55.256 27 Other buildings 23,626 23,912 23,990 24,319 23,447 24,525 24,015 23,962 24,547r 23,753r 24,033 24,478 24,407 28 Public utilities and other. . . 42,920 44.097 44,470 43,948 45,815 47,366 47,745 46,205 45,158r 43,425r 42,534 44,945 44,802 29 Public 125,342 130,337 142,713 138,367 141,447 144,366 142,744 148,146 145,606r 145,044r 144,877 147,650 144.330 30 Military 2,454 2,319 2,905 2,442 2,569 3,124 3,010 3,090 2,527r 3,195r 3,216 3,116 3.243 31 Highway 37,431 39,882 42,221 38,657 40,875 44,274 42,902 42,942 44,35 lr 43,361r 43,914 44,157 48,115 32 Conservation and development 5.978 6,228 6,316 5,531 6,117 6,603 6,769 6,469 5,191r 6,048r 5,823 5,637 5,814 33 Other 79,479 81,908 91,271 91,737 91,886 90,365 90,063 95,645 93,537r 92,440r 91,924 94,740 87,158 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (I) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1995 1996 1995 1996 MMMaaarrr... 11999955 11999966 111999999666 111 MMaarr.. MMaarr.. June Sept. Dec. Mar. Nov. Dec. Jan. Feb. Mar. CONSUMER PRICES2 (1982-84=100) 1 All items 2.9 2.8 3.5 1.6 2.4 4.0 .1 .2 .4 .2 .4 155.7 2 Food 2.9 2.8 3.6 2.7 1.9 3.2 .0 .1 .1 .1 .6 151.6 3 Energy items 1.3 2.8 5.8 -10.5 1.9 15.8 -.9 1.1 1.9 .4 . 1.4 106.1 4 All items less food and energy 3.0 2.8 3.0 2.8 2.2 3.5 .1 .1 .3 .2 .3 164.9 Commodities 1.8 1.8 .9 2.0 1.7 2.6 .1 .1 .4 -.1 .4 141.9 6 Services 3.5 3.3 4.3 3.0 2.5 3.4 .2 .1 .3 .3 .2 178.1 PRODUCER PRICES (1982=100) 7 Finished goods 1.8 2.4 1.3 1.6 4.1 2.8 ,3r .5r .3 -.2 .5 130.2 8 Consumer foods .9 2.6 -2.5 8.8 4.4 .3 i.r .r -.2 -.3 .6 132.0 9 Consumer energy 2.8 4.3 1.5 -10.2 10.3 18.4 -1.0 3.7 2.7 -.7 2.4 80.1 10 Other consumer goods 1.8 2.2 2.9 2.3 3.1 .6 .3 ,lr -.1 .1 .1 144.2 11 Capital equipment 1.9 1.5 1.8 1.8 2.7 .0 ,4r -.r -.1 .1 -.1 138.3 Intermediate materials 12 Excluding foods and feeds 6.6 .4 3.9 -.6 -.9 -.6 -.2 ,i .1 -.3 .1 125.0 13 Excluding energy 7.3 -.1 4.2 1.5 -3.2 -2.9 -,3r -,3r -.3 -.2 -.2 134.2 Crude materials 14 Foods -9.6 12.6 4.0 34.8 20.4 -3.4 2.8r -,5r -.4 -.5 .1 116.2 15 Energy -3.6 13.7 14.6 -21.0 15.7 59.9 2.1 2.3 7.3 -1.1 5.9 78.6 16 Other 17.0 -11.0 3.9 -17.6 -19.6 -8.8 — 1.7r — 1.3r .0 -.5 -1.8 159.4 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 rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • June 1996 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 AAccccoouunntt 11999933 11999944 11999955rr Q4 Ql Q2 Q3 Q4r GROSS DOMESTIC PRODUCT 1 Total 6,550.2 6,931.4 7,245.8 7,080.0 7,147.8 7,196.5 7,298.5 7,340.4 By source 2 Personal consumption expenditures 4,454.1 4,698.7 4,924.3 4,796.0 4,836.3 4,908.7 4,960.0 4,992.3 3 Durable goods 530.7 580.9 606.4 602.7 593.0 604.0 615.8 612.8 4 Nondurable goods 1,368.9 1,429.7 1,486.1 1,459.0 1,471.6 1,486.9 1,491.4 1,494.8 3 Services 2,554.6 2,688.1 2,831.8 2,734.4 2,771.7 2,817.9 2,852.8 2,884.7 6 Gross private domestic investment 871.1 1,014.4 1,065.3 1,050.1 1,072.0 1,050.3 1,074.8 1,064.0 / Fixed investment 850.5 954.9 1,028.2 991.4 1,013.9 1,016.3 1,036.6 1,046.2 8 Nonresidential 598.8 667.2 738.5 697.9 723.6 734.4 746.3 749.7 9 Structures 171.8 180.2 199.7 188.8 194.5 197.6 202.5 204.0 10 Producers' durable equipment 427.0 487.0 538.8 509.1 529.0 536.8 543.8 545.7 11 Residential structures 251.7 287.7 289.8 293.5 290.4 281.9 290.3 296.5 12 Change in business inventories 20.6 59.5 37.0 58.7 58.1 34.0 38.2 17.8 13 Nonfarm 26.8 48.0 39.6 55.1 60.8 36.1 41.5 19.9 14 Net exports of goods and services -64.9 -96.4 -102.3 -99.7 -106.6 -122.4 -100.8 -79.3 15 Exports 660.0 722.0 804.5 763.6 778.6 796.9 812.5 829.9 16 Imports 724.9 818.4 906.7 863.3 885.1 919.3 913.3 909.2 17 Government consumption expenditures and gross investment 1,289.9 1,314.7 1,358.5 1,333.5 1,346.0 1,359.9 1,364.5 1,363.5 18 Federal 522.1 516.3 516.7 520.9 519.9 522.6 516.7 507.8 19 State and local 767.8 798.4 841.7 812.6 826.1 837.3 847.7 855.7 By major type of product 20 Final sales, total 6,529.7 6,871.8 7,208.8 7,021.3 7,089.7 7,162.5 7,260.3 7,322.6 21 Goods 2,400.9 2,534.2 2,660.3 2,600.9 2,617.3 2,642.3 2,684.5 2,697.1 22 Durable 1,013.8 1,085.9 1,144.9 1,113.3 1,118.6 1,134.0 1,162.5 1,164.5 23 Nondurable 1,387.2 1,448.3 1,515.4 1,487.6 1,498.7 1,508.3 1,522.1 1,532.6 24 Services 3,581.7 3,742.4 3,920.9 3,806.3 3,852.6 3,904.5 3,943.2 3,983.1 23 Structures 547.0 595.3 627.6 614.1 619.8 615.7 632.6 642.3 26 Change in business inventories 20.6 59.5 37.0 58.7 58.1 34.0 38.2 17.8 27 Durable goods 15.7 31.9 34.9 33.1 54.4 28.5 29.2 27.3 28 Nondurable goods 4.9 27.7 2.2 25.6 3.7 5.4 9.1 -9.4 MEMO 29 Total GDP in chained 1992 dollars 6,383.8 6,604.2 6,739.0 6,691.3 6,701.6 6,709.4 6,768.3 6,776.5 NATIONAL INCOME 30 Total 5,194.4 5,495.1 5,799.2 5,635.0 5,697.7 5,738.9 5,849.2 5,911.1 31 Compensation of employees 3,809.4 4,008.3 4,209.1 4,083.7 4,141.6 4,178.9 4,235.9 4,280.2 32 Wages and salaries 3,095.2 3,255.9 3,419.7 3,320.2 3,363.0 3,393.3 3,442.3 3,480.1 33 Government and government enterprises 584.2 602.5 621.7 608.3 616.3 619.6 624.1 626.9 34 Other 2,511.0 2,653.4 2,797.9 2,711.9 2,746.6 2,773.6 2,818.2 2,853.2 35 Supplement to wages and salaries 714.2 752.4 789.5 763.6 778.6 785.6 793.7 800.1 36 Employer contributions for social insurance 333.3 350.2 365.5 355.8 360.8 363.6 367.8 369.8 3/ Other labor income 380.9 402.2 424.0 407.8 417.7 422.0 425.9 430.2 38 Proprietors' income1 420.0 450.9 478.3 469.4 472.0 474.7 479.6 486.7 39 Business and professional1 388.1 415.9 449.3 437.1 443.5 447.1 451.5 454.9 40 Farm1 32.0 35.0 29.0 32.3 28.5 27.6 28.1 31.8 41 Rental income of persons* 102.5 116.6 122.2 121.9 120.6 121.6 120.9 125.8 42 Corporate profits' 464.5 526.5 588.6 568.9 559.6 561.1 614.9 618.6 43 Profits before tax3 464.3 528.2 600.8 570.4 594.1 588.4 609.6 611.0 44 Inventory valuation adjustment -6.6 -13.3 -28.1 -22.8 -51.9 -42.3 -9.3 -8.8 45 Capital consumption adjustment 6.7 11.6 15.9 21.3 17.4 15.0 14.6 16.5 46 Net interest 398.1 392.8 401.0 391.1 403.9 402.6 397.8 399.7 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

Selected Measures A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 AAccccoouunntt 11999933 11999944 11999955rr Q4 QI Q2 Q3 Q4r PERSONAL INCOME AND SAVING 1 Total personal income 5,479.2 5,750.2 6,101.7 5,893.9 5,995.5 6,061.9 6,135.6 6,213.9 7 Wage and salary disbursements 3,090.6 3,241.1 3,419.7 3,318.5 3,361.6 3,393.3 3,442.3 3,481.5 Commodity-producing industries 781.3 825.0 858.7 846.0 856.2 855.0 859.9 863.5 4 Manufacturing 593.1 621.3 642.8 636.0 643.4 640.5 642.9 644.5 Distributive industries 698.4 739.3 787.9 762.7 768.8 778.6 795.4 808.9 6 Service industries 1,026.6 1,074.3 1,151.3 1,101.6 1,120.2 1,140.0 1,162.8 1,182.2 7 Government and government enterprises 584.2 602.5 621.7 608.3 616.3 619.6 624.1 626.9 8 Other labor income 380.9 402.2 424.0 407.8 417.7 422.0 425.9 430.2 9 Proprietors' income1 420.0 450.9 478.3 469.4 472.0 474.7 479.6 486.7 10 Business and professional1 388.1 415.9 449.3 437.1 443.5 447.1 451.5 454.9 11 Farm1 32.0 35.0 29.0 32.3 28.5 27.6 28.1 31.8 \2 Rental income of persons2 102.5 116.6 122.2 121.9 120.6 121.6 120.9 125.8 N Dividends 186.8 199.6 214.8 206.7 209.5 212.2 215.8 221.7 14 Personal interest income 647.3 661.6 714.6 678.4 701.9 713.9 717.5 725.2 15 Transfer payments 910.7 956.3 1,022.6 974.7 1,002.4 1,016.8 1,029.9 1,041.4 16 Old-age survivors, disability, and health insurance benefits 444.4 472.9 507.4 482.1 497.6 505.1 510.7 516.1 17 LESS: Personal contributions for social insurance 259.6 278.1 294.5 283.5 290.2 292.7 296.2 298.8 18 EQUALS: Personal income 5,479.2 5,750.2 6,101.7 5,893.9 5,995.5 6,061.9 6,135.6 6,213.9 19 LESS: Personal tax and nontax payments 689.9 731.4 794.3 748.1 770.0 801.5 798.4 807.2 20 EQUALS: Disposable personal income 4,789.3 5,018.8 5,307.4 5,145.8 5,225.5 5,260.4 5,337.2 5,406.7 21 LESS: Personal outlays 4,572.9 4,826.5 5,066.7 4,927.9 4,972.2 5,049.0 5,104.6 5,140.9 22 EQUALS: Personal saving 216.4 192.4 240.8 217.8 253.3 211.4 232.6 265.8 MEMO Per capita (chained 1992 dollars) ?3 Gross domestic product 24,724.2 25,332.6 25,613.8 25,568.6 25,559.1 25,540.2 25,695.9 25,668.6 24 Personal consumption expenditures 16,807.5 17,150.4 17,402.1 17,280.5 17,280.3 17,391.7 17,465.5 17,477.7 25 Disposable personal income 18,075.0 18,320.0 18,757.0 18,544.0 18,672.0 18,634.0 18,794.0 18,926.0 26 Saving rate (percent) 4.5 3.8 4.5 4.2 4.8 4.0 4.4 4.9 GROSS SAVING 27 Gross saving 938.4 1,055.9 1,141.6 1,064.9 1,110.5 1,092.3 1,155.7 1,207.9 28 Gross private saving 964.5 1,006.0 1,062.5 1,012.8 1,039.9 1,007.3 1,076.1 1,126.6 7,9 Personal saving 216.4 192.4 240.8 217.8 253.3 211.4 232.6 265.8 30 Undistributed corporate profits' 103.4 120.2 142.5 136.8 120.6 122.3 162.0 165.2 31 Corporate inventory valuation adjustment -6.6 -13.3 -28.1 -22.8 -51.9 -42.3 -9.3 -8.8 Capital consumption allowances 3? Corporate 417.0 441.0 454.0 439.3 444.4 451.3 456.9 463.6 33 Noncorporate 223.1 237.7 225.2 217.3 220.2 222.4 224.7 233.4 34 Government surplus, or deficit (—), national income and product accounts -159.8 -90.2 -67.6 -91.1 -74.4 -61.5 -67.7 -66.8 35 Federal -254.7 -189.9 -162.6 -190.4 -173.3 -160.5 -161.6 -154.9 36 State and local 94.9 99.7 95.0 99.3 99.0 99.0 93.9 88.1 37 Gross investment 993.5 1,087.2 1,146.1 1,104.5 1,146.7 1,113.9 1,150.7 1,173.0 38 Gross private domestic investment 871.1 1,014.4 1,065.3 1,050.1 1,072.0 1,050.3 1,074.8 1,064.0 39 Net foreign investment -88.2 -139.6 -141.1 -161.9 -144.4 -160.1 -148.9 -111.0 40 Statistical discrepancy 55.1 31.3 4.5 39.7 36.2 21.6 -5.0 -34.9 1. With inventory valuation and capital consumption adjustments. SOURCE. US. 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

A50 International Statistics • June 1996 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1994 1995 IItteemm ccrreeddiittss oorr ddeebbiittss 11999933 11999944 11999955 Q4 Q1 Q2 Q3 Q4P 1 Balance on current account -99,925 -151,245 -152,915 -43,277 -38,454 -43,142 -40,250 -31,073 2 Merchandise trade balance2 -132,618 -166,099 -174,469 -43,488 -44,459 -48,654 -43,326 -38,030 3 Merchandise exports 456,823 502.485 574.879 133,926 138,325 142,667 145,050 148,837 44 Merchandise imports -589,441 -668,584 -749,348 -177,414 -182,784 -191,321 -188,376 -186,867 55 Military transactions, net 448 2,148 2,810 679 542 587 889 792 6 Other service transactions, net 57,328 57,739 60,242 15,342 15,013 14.726 15,130 15,369 / Investment income, net 9,000 -9,272 -11,402 -4,571 -2,030 -2,684 -5.163 -1.527 8 U.S. government grants -16,311 -15,814 -11,027 -6,245 -2,867 -2,284 -2,942 -2,934 y U.S. government pensions and other transfers -3,785 -4,247 -3,114 -1,063 -682 -889 -887 -656 10 Private remittances and other transfers -13,988 -15,700 -15,954 -3,931 -3,971 -3.944 -3,951 -4,087 n Change in U.S. government assets other than official reserve assets, net (increase, —) -330 -322 -326 -931 -152 -180 246 -240 12 Change in U.S. official reserve assets (increase, —) -1,379 5,346 -9,742 2,033 -5,318 -2,722 -1.893 191 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -537 -441 -808 -121 -867 -156 362 -147 15 Reserve position in International Monetary Fund -44 494 -2,466 -27 -526 -786 -991 -163 16 Foreign currencies -797 5,293 -6,468 2,181 -3,925 -1,780 -1,264 501 17 Change in U.S. private assets abroad (increase, —) -182,880 -130,875 -270,028 -56,258 -69,985 -97,453 -25,870 -76.720 18 Bank-reported claims" 29,947 915 -59,004 -16,651 -29,284 -39,982 14,631 --44,,336699 19 Nonbank-reported claims 1,581 -32,621 -20.358 -12,449 -11,518 -18,499 9,659 20 U.S. purchases of foreign securities, net -141,807 -49,799 -93,769 -15,238 -6,567 -21,731 -33,998 -31,473 21 U.S. direct investments abroad, net -72,601 -49,370 -96,897 -11,920 -22,616 -17,241 -16,162 -40,878 22 Change in foreign official assets in United States (increase, +) 72,146 39,409 110,483 -421 22,308 37,836 39,346 ' 10,993 23 U.S. Treasury securities 48,952 30,723 68,773 7,470 10,131 25,169 20,489 12,984 24 Other U.S. government obligations 4,062 6,025 3,734 1,228 1,126 1,326 518 764 25 Other U.S. government liabilities4 1,706 2,211 1,814 692 -154 506 89 1,373 26 Other U.S. liabilities reported by U.S. banks3 14,841 2,923 32,896 -9,856 10,940 7,886 18,478 -4,408 27 Other foreign official assets5 2,585 -2,473 3,266 45 265 2,949 -228 280 28 Change in foreign private assets in United States (increase, +) 176,382 251,956 315,842 85,136 72,533 86,496 77,198 79,616 29 U.S. bank-reported liabilities3 20,859 114,396 19,906 34,676 -531 12,239 -21,578 2299,,777766 30 U.S. nonbank-reported liabilities 10,489 -4,324 27,578 -5,242 10,113 10,527 6,938 31 Foreign private purchases of U.S. Treasury securities, net 24,063 33,811 99,081 25,929 29,910 30,315 37,192 1,664 32 Foreign purchases of other U.S. securities, net 79,864 58,625 94,576 10,195 15,816 20,549 30,977 27,234 33 Foreign direct investments in United States, net 41,107 49,448 74,701 19,578 17,225 12,866 23,669 20,942 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy 35,985 -14,269 6,684 13,718 19,068 19,165 -48,777 17,233 36 Due to seasonal adjustment 782 6,162 317 -7,076 600 3/ Before seasonal adjustment 35,985 -14,269 6,685 12,936 12,906 18,847 -41,702 16,633 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) -1,379 5,346 --99,,774422 2,033 --55,,331188 --22,,772222 --11,,889933 191 39 Foreign official assets in United States, excluding line 25 (increase, +) 70,440 37,198 108,669 -1,113 22,462 37,330 39,257 9,620 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -3,717 -1,184 4,482 1,120 -322 -11 6,278 -1,463 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^tO. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institutions as well as some brokers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1995 1996 IItteemm 11999933 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan. Feb.p 1 Goods and services, balance -74,842 -106,214 -111,505 -8,256 -8,070 -8,165 -6,837 -6,958 -9,878 -8,192 2 Merchandise -132,618 -166,101 -174,555 -13,453 -13,697 -13,692 -12,125 -12,306 -15,075 -13,786 3 Services 57,777 59,887 63,050 5,197 5,627 5,527 5,288 5,348 5,197 5,594 4 Goods and services, exports 644,579 701,200 783,705 66,545 67,574 66,652 67,393 68,109 66,793 68,096 3 Merchandise 456,824 502,484 574,877 49,023 49,717 48,920 49,523 50,398 49,011 49,721 6 Services 187,755 198,716 208,828 17,522 17,857 17,732 17,870 17,711 17,782 18,375 7 Goods and services, imports -719,421 -807,414 -895,210 -74,801 -75,644 -74,817 -74,230 -75,067 -76,671 -76,288 8 Merchandise -589,442 -668,585 -749,432 -62,476 -63,414 -62,612 -61,648 -62,704 -64,086 -63,507 9 Services -129,979 -138,829 -145,778 -12,325 -12,230 -12,205 -12,582 -12,363 -12,585 -12,781 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 1996 AAsssseett 11999922 11999933 11999944 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Total 71,323 73,442 74,335 86,648 87,152 86,224 85,755 85,832 82,717 84,270 84,212 2 Gold stock, including Exchange Stabilization Fund1 11,056 11,053 11,051 11,053 11,051 11,051 11,050 11,050 11,052 11,053 11,053 3 Special drawing rights2'3 8,503 9,039 10,039 11,146 11,035 10,949 11,034 11,037 10,778 11,106 11,049 4 Reserve position in International Monetary Fund2 11,759 11,818 12,030 14,470 14,681 14,700 14,572 14,649 14,312 14,813 15,249 5 Foreign currencies4 40,005 41,532 41,215 49,979 50,385 49,524 49,099 49,096 46,575 47,298 46,861 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international SDR holdings and reserve positions in the IMF also have been valued on this basis since July accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold 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 year 2. Special drawing rights (SDRs) are valued according to a technique adopted by the indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 million; 1979— International Monetary Fund (IMF) in July 1974. Values are based on a weighted average of $1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net transactions in SDRs. exchange rates for the currencies of member countries. From July 1974 through December 4. Valued at current market exchange rates. 1980, sixteen currencies were used; since January 1981, five currencies have been used. U.S. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1995 1996 AAsssseett 11999922 11999933 11999944 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Deposits 205 386 250 165 201 275 194 386 165 209 191 Held in custody 2 U.S. Treasury securities2 ' 314,481 379,394 441,866 502,737 506,572 507,075 522,950 522,170 532,776 559,741 573,435 3 Earmarked gold3 13,118 12,327 12,033 1 l,728r 11,728 11,709 11,702 11,702 11,702 11,689 11,590 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; not organizations. 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

A52 International Statistics • June 1996 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 Aug. Sept. Oct.r Nov. Dec. Jan. Feb.p 1 Total1 482,915 520,828 613,146r 619,71 lr 617,912 632,730r 630,22lr 644,567 670,394 By type 2 Liabilities reported by banks in the United States" 69.721 73,281 104,965r 110.245r 108,075 109,516r 106,704r 103,502 102,990 3 U.S. Treasury bills and certificates3 151.100 139,570 157.516 163,093 157,277 171,366 168,534 173,949 191,188 U.S. Treasury bonds and notes 4 Marketable 212,237 254.059 290,768 286,243 291,948 291,033 293,684 306,299 314,980 5 Nonmarketable4 5,652 6,109 6,329 6,366 6,407 6,449 6,491 6,534 6,576 6 U.S. securities other than U.S. Treasury securities5 44,205 47,809 53,568 53,764 54,205 54,366 54,808 54,283 54,660 By area 7 Europe1 207.034 215.274 221,130 222,869 222,003 228,180 221,923' 223,319 231,270 8 Canada 15,285 17,235 21.508 20,522 20,355 19,535 19,473 19,078 18,850 9 Latin America and Caribbean 55,898 41,492 63,557r 63,618r 61,534 62,344r 66,568' 70,538 70,761 10 Asia 197,702 236,819 297,343 303,809 305,025 311,638 310,955 320,502 339,018 11 Africa 4,052 4,179 4,433 4,684 4,761 6,086 6,296 6,924 6,574 12 Other countries 2.942 5.827 5.173 4.207 4,232 4,945 5,004 4,204 3,919 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April 2. Principally demand deposits, time deposits, hankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. S. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official U.S. corporate stocks and bonds. institutions of foreign countries. SOURCE. Based on U.S. Department of the Treasury data and on data reported to the 4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of department by banks (including Federal Reserve Banks) and securities dealers in the United zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning States, and on the 1989 benchmark survey of foreign portfolio investment in the United March 1988, 20-year maturity issue and beginning March 1990. 30-year maturity issue; States. 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 1995' IItteemm 11999922 11999933 11999944 Mar. June Sept. Dec. 1 Banks' liabilities 72,796 78.259 89,284 96,139 106,621 102,068 112,521 2.B anks' claims 62.799 62,017 60,689 72,732 77,138 69,450 74,874 3 Deposits 24,240 20.993 19,661 24,420 28,909 25,712 22,688 4 Other claims 38,559 41.024 41,028 48,312 48,229 43,738 52,186 5 Claims of banks' domestic customers" 4,432 12.854 10,878 8,879 10,244 6,624 6,145 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 Stales 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

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 11999955RR Aug. Sept. Oct. Nov. Dec.' Jan. Feb.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 926,672 1,018,472 1,095,400 1,076,427 l,074,039r l,098,512r l,104,705r 1,095,400 1,094,461 1,096,757 2 Banks' own liabilities 626,919 722,155 749,552 745,680 735,152R 762,723R 755,089' 749,552 743,062 727,297 3 Demand deposits 21,569 23,386 24,446 21,779 23,704 23,161 23,114 24,446 22,181 23,525 4 Time deposits2 175,106 186,512 193,219 197,101 188,154R 202,532 193,884' 193,219 198,708 192,873 3 Other1 111,971 116,699 139,347 139,335 136,550 146,456 154,115 139,347 141,678 147,613 b Own foreign offices4 318,273 395,558 392,540 387,465 386,744R 390,574R 383,976' 392,540 380,495 363,286 7 Banks' custodial liabilities5 299,753 296,317 345,848 330,747 338,887 335,789R 349,616' 345,848 351,399 369,460 8 U.S. Treasury bills and certificates6 176,739 162,857 197,066 118877,,331188 193,070 188,575R 201,845' 119977,,006666 220033,,447788 223,865 9 Other negotiable and readily transferable instruments7 36,289 42,532 52,249 45,175 47,279 47,91 R 49,969 52,249 46,973 43,404 10 Other 86,725 90,928 96,533 98,254 98,538 99,303R 97,802' 96,533 100,948 102,191 11 Nonmonetary international and regional organizations8.. . 10,936 8,606 10,838 10,319 13,011 10,294 9,794' 10,838 10,553 9,911 12 Banks' own liabilities 5,639 8,176 10,146 9,015 12,120 8,466 8,339' 10,146 9,559 9,116 13 Demand deposits 15 29 21 40 24 77 33 21 30 43 14 Time deposits2 2,780 3,298 4,656 4,642 4,315 3,901 3,631' 4,656 4,332 3,216 13 Other3 2,844 4,849 5,469 4,333 7,781 4,488 4,675 5,469 5,197 5,857 16 Banks' custodial liabilities5 5,297 430 692 1,304 891 1,828 1,455 692 994 795 17 U.S. Treasury bills and certificates6 4,275 281 350 826 354 11,,334422 962 350 764 555 18 Other negotiable and readily transferable instruments7 1,022 149 341 478 537 486 493 341 230 230 19 Other 0 0 1 0 0 0 0 1 0 10 20 Official institutions9 220,821 212,851 275,238 262,481 273,338R 265,352R 280,882' 275,238 277,451 294,178 21 Banks' own liabilities 64,144 59,830 82,759 83,566 86,192R 83,837' 85,551' 82,759 84,623 83,825 22 Demand deposits 1,600 1,564 2,098 1,547 1,362 1,646 1,690 2,098 1,522 1,687 23 Time deposits- 21,653 23,511 30,959 31,774 32,242R 30,634R 30,627' 30,959 27,921 29,723 24 Other3 40,891 34,755 49,702 50,245 52,588 51,557 53,234 49,702 55,180 52,415 25 Banks' custodial liabilities5 156,677 153,021 192,479 178,915 187,146 181,515' 195,331' 192,479 192,828 210,353 26 U.S. Treasury bills and certificates6 151,100 139,570 168,534 157,516 163,093 115577,,227777'' 117711,,336666 116688,,553344 117733,,994499 119911,,118888 27 Other negotiable and readily transferable instruments7 5,482 13,245 23,601 20,735 23,777 24,000' 23,610' 23,601 18,532 18,138 28 Other 95 206 344 664 276 238' 355 344 347 1,027 29 Banks10 592,171 681,051 687,403 684,091 670,370R 699,109' 687,415' 687,403 683,498 666,565 30 Banks' own liabilities 478,755 566,161 564,063 562,651 547,762R 575,678' 562,115' 564,063 555,049 537,259 31 Unaffiliated foreign banks 160,482 170,603 171,523 175,186 161,018R 185,104' 178,139' 171,523 174,554 173,973 32 Demand deposits 9,718 10,633 11,745 10,061 11,818 11,341 11,232 11,745 10,247 10,915 33 Time deposits2 105,262 111,171 103,837 108,681 98,668 114,401 105,401' 103,837 110,921 105,202 34 Other3 45,502 48,799 55,941 56,444 50,532 59,362 61,506 55,941 53,386 57,856 33 Own foreign offices4 318,273 395,558 392,540 387,465 386,744R 390,574' 383,976' 392,540 380,495 363,286 36 Banks' custodial liabilities5 113,416 114,890 123,340 121,440 122,608 123,431 125,300 123,340 128,449 129,306 37 U.S. Treasury bills and certificates6 10,712 11,240 15,634 1155,,448899 16,170 1166,,442299 16,687 1155,,663344 15,992 1177,,994477 38 Other negotiable and readily transferable instruments7 17,020 14,505 13,035 10,142 9,690 9,754 13,070 13,035 13,590 12,094 39 Other 85,684 89,145 94,671 95,809 96,748 97,248 95,543 94,671 98,867 99,265 40 Other foreigners 102,744 115,964 121,921 119,536 117,320 123,757' 126,614' 121,921 122,959 126,103 41 Banks' own liabilities 78,381 87,988 92,584 90,448 89,078 94,742 99,084 92,584 93,831 97,097 42 Demand deposits 10,236 11,160 10,582 10,131 10,500 10,097 10,159 10,582 10,382 10,880 43 Time deposits2 45,411 48,532 53,767 52,004 52,929 53,596 54,225 53,767 55,534 54,732 44 Other3 22,734 28,296 28,235 28,313 25,649 31,049 34,700 28,235 27,915 31,485 45 Banks' custodial liabilities5 24,363 27,976 29,337 29,088 28,242 29,015 27,530 29,337 29,128 29,006 46 U.S. Treasury bills and certificates6 10,652 11,766 12,548 1133,,448877 1133,,445533 1133,,552277 1122,,883300'' 1122,,554488 1122,,777733 1144,,117755 47 Other negotiable and readily transferable instruments7 12,765 14,633 15,272 13,820 13,275 13,671' 12,796' 15,272 14,621 12,942 48 Other 946 1,577 1,517 1,781 1,514 1,817 1,904' 1,517 1,734 1,889 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,567 17,895 9,099 10,409 9,938 10,290 9,837' 9,099 10,479 10,544 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official dealers. Excludes bonds and notes of maturities longer than one year. institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other negotia- 7. Principally bankers acceptances, commercial paper, and negotiable time certificates of ble and readily transferable instruments." 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 subsidiar- American Development Bank, and the Asian Development Bank. Excludes "holdings of ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory dollars" of the International Monetary Fund. agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists 9. Foreign central banks, foreign central governments, and the Bank for International principally of amounts owed to the head office or parent foreign bank, and to foreign Settlements. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. 10. Excludes central banks, which are included in "Official institutions." 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • June 1996 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1995 1996 IItteemm 11999933 11999944 11999955RR Aug. Sept. Oct. Nov. Dec.' Jan. Feb.p AREA 50 Total, all foreigners 926,672 1,018,472 1,095,400 1,076,427 l,074,039r l,098,512r l,104,705r 1,095,400 1,094,461 1,096,757 51 Foreign countries 915,736 1,009,866 1,084,562 1,066,108 l,061,028r l,088,218r l,094,911r 1,084,562 1,083,908 1,086,846 52 377,911 393,141 362,954 376,545 362,080 376,427' 384,013' 362,954 368,324 374,504 53 Austria 1,917 3,653 3,537 3,869 5,221 4,887 4,755 3,537 3,437 2,996 54 Belgium and Luxembourg 28,670 21,978 24,815 24,598 24,039R 25,192 28,357 24,815 24,881 27,182 55 Denmark 4,517 2,784 2,921 2,468 2,476 3,177 3,418 2,921 2,979 3,861 56 Finland 1,872 1,436 2,831 2,270 1,972 2,419 2,315 2,831 2,421 2,409 57 France 40,316 45,217 39,204 43,314 38,117 43,134 40,415 39,204 39,697 40,845 58 Germany 26,685 27,191 24,085 31,257 31,390 26,362 26,798 24,085 25,988 24,695 59 Greece 1,519 1,393 2,011 2,398 2,119 2,033 2,265 2,011 1,998 2,063 60 Italy 11,759 10,885 10,670 10,823 8,947 10,251 10,759 10,670 9,616 12,468 61 Netherlands 16,096 16,033 13,717 10,685 13,107 14,933' 15,317' 13,717 11,349 12,175 62 Norway 2,966 2,338 1,394 2,087 1,011 1,048 1,287 1,394 1,067 1,246 63 Portugal 3,366 2,846 2,761 2,933 3,033 2,902 2,718 2,761 3,055 2,931 64 Russia 2,511 2,714 7,950 7,265 6,367 7,338 8,979 7,950 7,858 9,180 65 Spain 20,496 14,675 10,012 10,000 10,100 13,467 10,809 10,012 11,838 11,657 66 Sweden 2,738 3,094 3,245 2,896 3,167 2,035 3,720 3,245 2,555 2,813 67 Switzerland 41,560 41,956 43,627 41,644 41,406 42,588 41,178 43,627 40,806 42,014 68 Turkey 3,227 3,341 4,124 3,523 3,936 4,067 4,010 4,124 4,350 4,559 69 United Kingdom 133,993 163,793 139,485 150,781 141,577 147,448 148,384 139,485 152,654 147,475 70 Yugoslavia11 372 245 177 146 215 210 171 177 163 163 71 Other Europe and other former U.S.S.R.12 33,331 27,769 26,388 23,588 23,880 22,936 28,358' 26,388 21,612 23,772 72 Canada 20,235 24,727 26,239 28,296 28,872 35,378' 27,450' 26,239 28,625 27,434 73 Latin America and Caribbean 362,238 423,797 440,159 447,521 434,353R 439,920' 436,580' 440,159 435,915 422,183 74 Argentina 14,477 17,203 12,236 11,541 11,180 11,539 13,031' 12,236 13,524 11,764 75 Bahamas 73,820 104,002 94,991 96,017 92,850 96,287 87,719 94,991 96,849 91,140 76 Bermuda 8,117 8,445 4,897 6,794 5,996 6,589 6,561 4,897 4,633 4,702 77 Brazil 5,301 9,145 23,790 26,743 27,592 27,366 27,364 23,790 22,708 21,876 78 British West Indies 193,699 229,525 239,026 244,305 234,643 236,053 240,353 239,026 233,603 227,513 79 Chile 3,183 3,126 2,825 2,890 2,698 2,574 2,696 2,825 2,978 2,772 80 Colombia 3,171 4,615 3,666 3,348 3,257 3,399 33,,444433 33,,666666 3,713 3,888 81 Cuba 33 13 8 3 4 13 88 88 7 7 82 Ecuador 880 875 1,315 1,160 1,130 1,311 1,307 1,315 1,236 1,201 83 Guatemala 1,207 1,121 1,275 1,122 1,197 1,068 1,210 1,275 1,058 1,075 84 Jamaica 410 529 481 444 484 430 447 481 500 495 85 Mexico 28,019 12,250 24,551 22,120 22,069 20,894' 20,993' 24,551 23,643 23,926 86 Netherlands Antilles 4,686 5,217 4,685 4,778 5,016 5,349 5,644 4,685 4,448 4,460 87 Panama 3,582 4,551 4,265 4,998 4,682 4,561 4,287 4,265 4,030 4,173 88 Peru 929 900 974 1,028 909 897 916 974 1,025 1,092 89 Uruguay 1,611 1,597 1,835 1,933 1,839 1,856 1,912 1,835 1,799 1,726 90 Venezuela 12,786 13,983 11,810 11,195 11,971 12,642 11,622' 11,810 12,662 12,628 91 Other 6,327 6,700 7,529 7,102 6,836R 7,092' 7,067' 7,529 7,499 7,745 92 Asia 144,527 155,642 240,791 199,624 223,096' 222222,,996677'' 223322,,222222'' 224400,,779911 223388,,116622 224499,,339988 China 93 People's Republic of China 4,011 10,066 33,750 13,208 22,273 22,341' 29,875' 33,750 35,733 32,200 94 Republic of China (Taiwan) 10,627 9,844 11,714 9,838 10,253 10,729 11,365 11,714 12,311 12,955 95 Hong Kong 17,132 17,102 20,333 24,152 21,866' 21,893' 20,287' 20,333 20,307 22,286 96 India 1,114 2,338 3,373 2,745 2,914 3,010 3,272 3,373 3,263 3,527 97 Indonesia 1,986 1,587 2,708 2,175 2,366 2,174 2,485 2,708 2,011 2,349 98 Israel 4,435 5,157 4,073 4,723 4,209 3,812 4,090' 4,073 4,348 5,780 99 Japan 61,466 64,284 109,192 89,117 104,315 104,566 105,546 109,192 106,728 113,326 100 Korea (South) 4,913 5,124 5,770 4,883 5,484 5,368 5,593 5,770 5,079 5,593 101 Philippines 2,035 2,714 3,089 2,793 2,786 2,839' 2,880' 3,089 2,394 2,366 102 Thailand 6,137 6,466 12,279 11,177 11,803 10,458 12,144 12,279 13,121 13,389 103 Middle Eastern oil-exporting countries13 15,822 15,489 15,582 15,779 16,895 17,350 16,238' 15,582 14,417 13,491 104 Other 14,849 15,471 18,928 19,034 17,932' 18,427' 18,447' 18,928 18,450 22,136 105 Africa 6,633 6,523 7,641 6,989 7,033 7,211 7,793 7,641 7,679 7,818 106 Egypt 2,208 1,879 2,136 1,924 2,127 1,948 1,907 2,136 1,848 2,375 107 Morocco 99 97 104 87 79 66 60 104 99 52 108 South Africa 451 433 739 746 467 934 1,206 739 1,217 665 109 Zaire 12 9 10 15 9 4 9 10 11 8 110 Oil-exporting countries'4 1,303 1,343 1,797 1,667 1,792 1,544 1,826 1,797 1,774 1,968 111 Other 2,560 2,762 2,855 2,550 2,559 2,715 2,785 2,855 2,730 2,750 112 Other 4,192 6,036 6,778 7,133 5,594 6,315 6,853 6,778 5,203 5,509 113 Australia 3,308 5,142 5,648 5,459 4,777 5,007 5,758 5,648 4,326 4,503 114 Other 884 894 1,130 1,674 817 1,308 1,095 1,130 877 1,006 115 Nonmonetary international and regional organizations. .. 10,936 8,606 10,838 10,319 13,011 10,294 9,794' 10,838 10,553 9,911 116 International" 6,851 7,537 9,099 8,303 11,279 8,458 8,470' 99,,009999 9,570 8,837 117 Latin American regional16 3,218 613 893 1,010 876 552 371 889933 349 332 118 Other regional17 867 456 846 1,006 856 1,284 953 846 634 742 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992, has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 17. Asian, African, Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1995 1996 AArreeaa oorr ccoouunnttrryy 11999933 11999944 11999955rr Aug. Sept. Oct. Nov. Dec. Jan. Feb.p 1 Total, all foreigners 488,497 483,242r 526,252 521,168r 515,573r 522,646r 533,906r 526,252r 522,811 515,143 2 Foreign countries 486,092 478,65lr 524,321 519,751r 512,746r 520,988r 532,485r 524,321r 520,538 513,010 3 Europe 123,741 123,380r 130,316 127,681 116,784r 131,519r 131,660r 130,316r 133,923 138,483 4 Austria 412 692 565 685 670 880 639 565 683 773 5 Belgium and Luxembourg 6,532 6,738 7,599 8,257 7,056 7,103 10,691 7,599r 8,365 8,519 6 Denmark 382 1,129r 403 428 572r 634 602 403r 541 599 7 Finland 594 512r 1,055 1,001 1,221 1,916 1,097 1,055 1,397 1,313 8 France 11,822 12,146r 14,799 15,200 13,956 14,807 15,259 14,799r 12,253 13,070 9 Germany 7,724 7,608 8,864 8,731 8,691 8,081 8,431 8,864r 8,072 8,774 10 Greece 691 604 449 386 385 404 378 449r 555 603 11 Italy 8,834 6,043 5,364 5,757 5,921 5,530r 5,390 5,364 5,010 4,839 12 Netherlands 3,063 2,959r 5,051 4,354 4,696 4,592r 4,909r 5,05 lr 4,305 4,722 13 Norway 396 504 665 1,047 1,392 1,457 1,376 665 1,098 1,408 14 Portugal 834 938 888 916 986 1,036 862 888 853 743 15 Russia 2,310 973r 660 506 421 696 949 660 678 775 16 Spain 3,717 3,530 2,166 3,494 3,520 3,162 3,191 2,166 3,811 4,040 17 Sweden 4,254 4,098 2,060 2,840 2,700 2,642 2,362 2,060 2,315 2,151 18 Switzerland 6,605 5,746r 7,074 7,362 7,246r 6,335 5,925 7,074 4,613 4,016 19 Turkey 1,301 878r 785 768 807r 830 926 785 732 707 20 United Kingdom 62,013 66,846r 67,388 64,607 54,522 69,015r 66,91 r 67,388r 75,147 78,040 21 Yugoslavia2 473 265 147 230 234 233 237 147 481 118 22 Other Europe and other former U.S.S.R.3 1,784 1,171' 4,334 1,112 1,788 2,166 1,525 4,334r 3,014 3,273 23 Canada 18,617 18,490r 16,115 17,306 18,811r 17,820' 17,010r 16,115r 15,690 13,834 24 Latin America and Caribbean 225,238 223,523r 257,384 250,220r 250,44 lr 251,325r 266,635' 257,384r 257,114 248,538 25 Argentina 4,474 5,844r 6,439 6,151 6,110r 6,003 6,090 6,439 6,185 6,057 26 Bahamas 63,353 66,410r 59,258 61,224 62,796r 55,788 60,030 59,258r 60,284 63,311 27 Bermuda 8,901 8,481 5,718 8,944 6,012r 5,537 8,096 5,718 5,011 4,742 28 Brazil 11,848 9,583r 13,297 12,962 13,073r 13,334 12,983 13,297 13,252 13,915 29 British West Indies 99,319 95,741r 123,914 117,919r 120,012r 123,700r 129,472r 123,914r 122,759 108,833 30 Chile 3,643 3,820r 5,024 4,663 4,388 4,660 4,775 5,024 4,996 4,593 31 Colombia 3,181 4,004 4,550 4,270 4,358 4,593 4,516 4,550 4,622 4,492 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 681 682r 825 725 805 846 847 825r 841 842 34 Guatemala 288 366 457 350 361 385 424 457 439 461 35 Jamaica 195 258 323 290 287 289 285 323 299 362 36 Mexico 15,879 17,749r 18,028 16,836r 16,990r 16,657 16,826 18,028 17,114 17,166 37 Netherlands Antilles 2,683 l,396r 9,229 6,313 5,533r 9,233 12,048 9,229 11,043 12,973 38 Panama 2,894 2,198r 3,003 2,503 2,594 2,846 3,049 3,003 2,813 2,805 39 Peru 657 997 1,829 1,368 1,464 1,501 1,577 1,829 1,762 1,928 40 Uruguay 969 503 466 424 386 441 434r 466r 422 463 41 Venezuela 2,910 1,831 1,661 1,596 1,480 1,826 l,695r l,661r 1,575 1,572 42 Other 3,363 3,660 3,363 3,682 3,792 3,686 3,488 3,363r 3,697 4,023 43 111,775 107,079r 115,312 118,264 120,225r 114,575 111,443r 115,312r 108,922 106,714 China 44 People's Republic of China 2,271 836 1,023 1,163 1,316 1,241 1,069 1,023 1,014 1,351 45 Republic of China (Taiwan) 2,625 l,448r 1,713 1,600 1,584 1,595 1,484 1,713 1,407 1,404 46 Hong Kong 10,828 9,161r 12,895 14,520 15,677 12,539 10,713 12,895 13,254 13,867 47 India 589 994 1,846 1,905 1,944 1,924 1,823 1,846 1,864 1,859 48 Indonesia 1,527 1,470 1,678 1,620 1,596 1,623 1,583 1,678 1,458 1,478 49 Israel 826 688 739 700 714r 886 728 739 668 683 50 Japan 60,032 59,15 lr 61,308 63,301 63,075 61,878 60,522 61,308r 55,897 55,077 51 Korea (South) 7,539 10,286 14,075 12,866 12,992 13,357 14,115r 14,075r 14,450 15,289 52 Philippines 1,410 662 1,350 623 725 673 789 1,350 814 779 53 Thailand 2,170 2,902 2,581 2,594 2,594 2,568 2,538 2,581 2,381 3,256 54 Middle Eastern oil-exporting countries4 15,115 13,748r 9,639 11,403 11,723 9,963 9,604 9,639r 8,053 6,410 55 Other 6,843 5,733 6,465 5,969 6,285r 6,328 6,475 6,465 7,662 5,261 56 Africa 3,861 3,050r 2,727 2,826 2,705 2,783 2,732 2,727 2,798 2,827 57 Egypt 196 225 210 194 202 224 268 210 208 237 58 Morocco 481 429 514 653 647 457 433 514 514 561 59 South Africa 633 671 465 544 454 604 462 465 483 520 60 Zaire 4 2 1 2 2 1 1 1 1 1 61 Oil-exporting countries5 1,129 856r 552 614 615 586 578 552 589 526 62 Other 1,418 867r 985 819 785 911 990 985 1,003 982 63 Other 2,860 3,129 2,467 3,454 3,780 2,966 3,005 2,467r 2,091 2,614 64 Australia 2,037 2,186 1,622 2,072 2,639 2,095 1,969 1,622 1,822 2,243 65 Other 823 943 845 1,382 1,141 871 1,036 845r 269 371 66 Nonmonetary international and regional organizations6... 2,405 4,591 1,931 1,417 2,827 1,658 1,421 1,931r 2,273 2,133 1. Reporting banks include all types of depository institutions as well as some brokers and 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 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 all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • June 1996 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 1995r 1996 TTyyppee ooff ccllaaiimm 11999933 11999944rr 11999955'' Aug. Sept. Oct. Nov. Dec. Jan. Feb.p 1 Total 575,613 599,256 649,019 645,193 649,019 2 Banks' claims 488,497 483,242 526,252 521,168 515,573 522,646 533,906 526,252 522,811 515,143 3 Foreign public borrowers 29,228 23,416 22,483 21,424 22,439 20,863 19,351 22,483 23,070 23,675 4 Own foreign offices2 285,510 283,183 303,867 296,613 298,241 303,573 308,664 303,867 300,634 290,493 5 Unaffiliated foreign banks 100,865 109,228 98,668 112,080 107,532 103,949 99,555 98,668 97,213 98,132 6 Deposits 49,892 59,250 37,346 57,734 50,767 47,103 42,905 37,346 35,520 37,565 7 Other 50,973 49,978 61,322 54,346 56,765 56,846 56,650 61,322 61,693 60,567 8 All other foreigners 72,894 67,415 101,234 91,051 87,361 94,261 106,336 101,234 101,894 102,843 9 Claims of banks' domestic customers' 87,116 116,014 122,767 129,620 122,767 10 Deposits 41,734 64,829 57,529 66,067 57,529 11 Negotiable and readily transferable instruments4 31,186 36,008 45,265 45,190 45,265 12 Outstanding collections and other claims 14,196 15,177 19,973 18,363 19,973 MEMO 13 Customer liability on acceptances 7,918 8,427 8,380 8,821 8,380 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 29,150 32,796 30,717 36,293 35,041 33,828 31,355 30,717 27,793 n.a. 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are principally of amounts due from the head office or parent foreign bank, and from foreign for quarter ending with month indicated. branches, agencies, or wholly owned subsidiaries of the head office or 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, bankers acceptances, and commercial 2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiar- paper. ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory 5. Includes demand and time deposits and negotiable and nonnegotiable certificates of agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists deposit denominated in U.S. dollars issued by banks abroad. 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 1995 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999922 11999933 11999944'' Mar.' June' Sept.' Dec.p 1 Total 195,119 202,566 200,048 200,908 220,205 217,010 222,101 By borrower 2 Maturity of one year or less 163,325 172,662 168,332 165,893 186,314 178,675 176,278 3 Foreign public borrowers 17,813 17,828 15,435 15,482 15,817 14,177 14,995 4 All other foreigners 145,512 154,834 152,897 150,411 170,497 164,498 161,283 5 Maturity of more than one year 31,794 29,904 31,716 35,015 33,891 38,335 45,823 6 Foreign public borrowers 13,266 10,874 7,838 8,164 7,892 8,220 7,492 7 All other foreigners 18,528 19,030 23,878 26,851 25,999 30,115 38,331 By area Maturity of one year or less 8 Europe 53,300 57,413 55,743 53,072 60,325 52,045 54,022 9 Canada 6,091 7,727 6,690 6,878 7,838 7,135 6,092 10 Latin America and Caribbean 50,376 60,490 58,877 61,946 68,630 71,319 72,413 11 45,709 41,418 39,851 37,605 43,945 42,542 40,090 12 Africa 1,784 1,820 1,376 1,227 1,447 1,261 1,272 13 All other3 6,065 3,794 5,795 5,165 4,129 4,373 2,389 Maturity of more than one year 14 Europe 5,367 5,310 4,204 5,629 4,240 4,594 4,733 15 Canada 3,287 2,581 3,505 4,014 3,694 3,589 2,654 16 Latin America and Caribbean 15,312 14,025 15,721 15,638 17,571 20,238 27,730 17 5,038 5,606 5,318 7,277 5,949 7,376 7,991 18 Africa 2,380 1,935 1,583 1,610 1,389 1,389 1,429 19 All other1 410 447 1,385 847 1,048 1,149 1,286 1. Reporting banks include all types of depository institutions as well as some brokers and 2. Maturity is time remaining until maturity, dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks' Billions of dollars, end of period 1993 1994 1995 AArreeaa oorr ccoouunnttrryy 11999911 11999922 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. 1 Total 343.5 344.7 407.7 476.81" 486.1r 486.4r 496.61" 539.7r 524.0r 524.5 549.1 2 G-10 countries and Switzerland 137.5 131.3 161.8 178.4r 173.3r 182.6r 190.6r 208.7' 200.5r 195.5r 200.3 3 Belgium and Luxembourg .0 5.6 7.4 8.0 8.6 9.6 7.0 8.3 7.3 3.5 12.1 4 France 11.3 15.3 12.0 16.6 18.6r 20.7r 19.T 19.8r 19.3 17.5 19.2 5 Germany 8.3 9.1 12.6 29.7r 24.7r 24.0r 24.7 31.2r 29.9 28.6 26.9 6 Italy 5.6 6.5 7.7 15.6 14.0 11.6 11.8 10.6 10.7 12.6 11.5 7 Netherlands .0 2.8 4.7 3.8r 3.4r 3.4r 3.6 3.5r 4.3 3.9 3.3 8 Sweden 1.9 2.3 2.7 2.9 3.0 2.6 2.7 3.1 3.0 2.7 2.7 9 Switzerland 3.4 4.8 5.9 4.5r 5.4r 5.5r 5.r 5.7r 6.2r 6.0 6.1 10 United Kingdom 68.4 59.7 84.3 69.9r 64.9r 78.4 85.7r 89.9 86.7 79.8 80.7 11 Canada 5.8 6.3 6.9 7.8 9.9r 10.2r 10.0r 10.5r 11.lr 11.9r 9.4 12 Japan 22.2 18.8 17.6 19.6 20.7 16.5 20.7r 25.9r 22.1 24.0 28.5 13 Other industrialized countries 22.8 24.0 25.6 42.2 42.6 42.6r 45.2R 44.0r 43.3r 49.8R 50.0 14 Austria .6 1.2 .4 1.0 1.0 1.0 1.1 .9 .7 1.2 .9 15 Denmark .9 .9 1.0 1.1 . 1.1 1.0r 1.3r 1.7r 1.1 1.8r 2.6 16 Finland .7 .7 .4 1.0 .8 .8 .9' 1.1 .5 .7 .8 17 Greece 2.6 3.0 3.2 3.8 4.6 4.3 4.5 4.9 5.0 5.1 5.7 18 Norway 1.4 1.2 1.7 1.6 1.6 1.6 2.0 2.4 1.8 2.3 3.2 19 Portugal .6 .4 .8 1.2 1.1 1.0 1.2 1.0 1.2 1.7 1.1 20 Spain 8.3 8.9 9.9 13.2 12.6 14.0 13.6 14.1 13.3 13.3 11.6 21 Turkey 1.4 1.3 2.1 2.4 2.1 1.8 1.6 1.4 1.4 2.0 1.9 22 Other Western Europe 1.8 1.7 2.6 3.1 2.8 1.0 2.7 2.5 2.6 3.0 4.7 23 South Africa 1.9 1.7 1.1 1.2 1.2 1.2 1.0 1.5r 1.4 1.3 1.2 24 Australia 2.7 2.9 2.3 12.7 13.7 15.0 15.4 12.6 14.3 17.4 16.4 25 OPEC2 14.5 15.8 17.4 22.9 21.6 21.7r 23.9 19.5 20.3 22.3 22.3 26 Ecuador .7 .6 .5 .6' .5 .4 .5 .5 .7 .7 .7 27 Venezuela 5.4 5.2 5.1 4.6r 4.4r 3.9 3.7 3.5 3.5 3.0 2.7 28 Indonesia 2.7 2.7 3.3 3.4 3.2 3.3 3.8 4.0 4.1 4.4 5.0 29 Middle East countries 4.2 6.2 7.4 13.2 12.4 13.0 15.0 10.7 11.4 13.5 13.3 30 African countries 1.5 1.1 1.2 1.1 1.1 l.lr .9 .7 .6 .6 .6 31 Non-OPEC developing countries 64.3 72.6 83.1 94.7r 94.8R 93.2R 96.0r 98.5r 103.6 103.6r 112.0 Latin America 32 Argentina 4.8 6.6 7.7 8.7 9.8r 10.5 11.2 11.4 12.3 10.9 12.9 33 Brazil 9.6 10.8 12.0 12.7 12.0 9.3 8.4 9.2 10.0 13.1 13.1 34 Chile 3.6 4.4 4.7 5.1 5.1 5.5 6.1 6.4 7.1 6.4 6.8 35 Colombia 1.7 1.8 2.1 2.2 2.4 2.4 2.6 2.6 2.6 2.9 2.9 36 Mexico 15.5 16.0 17.8 19.0 18.6 19.8 18.4 17.8 17.6 16.3 17.3 37 Peru .4 .5 .4 .6 .6 .6 .5 .6 .8 .7 .8 38 Other 2.1 2.6 3.1 2.9r 2.7 2.8 2.7 2.4 2.6 2.6 2.8 Asia China 39 People's Republic of China .3 .7 2.0 .8 .8 1.0 1.1 1.1 1.4 1.7 1.8 40 Republic of China (Taiwan) 4.1 5.2 7.3 7.6 7.1 6.9 9.2 8.5 9.0 9.0 9.4 41 India 3.0 3.2 3.2 3.4 3.7 3.9 4.2 3.8 4.0 4.4 4.4 42 Israel .5 .4 .5 .4 .4 .4 .4 .6 .1' .5 .5 43 Korea (South) 6.8 6.6 6.7 14.1 14.3 14.4 16.2 16.9 18.7 18.0 19.1 44 Malaysia 2.3 3.1 4.4 5.2 5.2 3.9 3.1 3.9 4.1 4.3 4.4 45 Philippines 3.7 3.6 3.1 3.4 3.2 2.9 3.3 3.0 3.6 3.3 4.1 46 Thailand 1.7 2.2 3.1 3.0 3.3 3.5 2.1 3.3 3.8 3.9 4.9 47 Other Asia 2.4 3.1 3.1 3.1 3.2 3.4 4.7 4.9 3.5 3.7r 4.5 Africa 48 Egypt .4 .2 .4 .4 .5 .3 .3 .4 .4 .4 .4 49 Morocco .7 .6 .7 ,8R .7 .7 .6 .6 .9 .9 .7 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .7 1.0 .8 l.lr 1.0r .9 .8 .7 .6 .7 .9 52 Eastern Europe 2.4 3.1 3.2 3.8r 3.2r 3.0 2.7 2.3 1.8 3.4 4.2 53 Russia4 .9 1.9 1.6 1.6r i.3r 1.1 .8 ,7r .4 .6 1.0 54 Yugoslavia5 .9 .6 .6 .5 .5 .5 .5 .4 .3 .4 .3 55 Other .7 .6 .9 1.6r 1.4 1.5 1.4 1.2 1.0 2.3 2.8 56 Offshore banking centers 53.8 58.1 73.0 78.6r 80.6 77.2 71.4r 84.4' 82. lr 86.0r 103.0 57 Bahamas 11.9 6.9 10.9 13.7 13.3 13.8 10.3r 12.5r 8.4 12.6 15.0 58 Bermuda 2.3 6.2 8.9 8.8R 6.5 6.0 8.4 8.6r 8.3r 6.1r 6.3 59 Cayman Islands and other British West Indies 15.5 21.5 18.0 17.8r 23.8 21.5 19.9 19.4 23.7 23.4 32.1 60 Netherlands Antilles 1.2 1.1 2.6 3.4r 2.5 1.7 1.3r .9 2.4r 5.5 9.9 61 Panama6 1.4 1.9 2.4 2.0 2.0r 1.9 1.3 1.1 1.3 1.3 1.4 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 14.3 13.9 18.7 19.7 21.8 20.3 19.9 22.5r 23.1 23.7 25.1 64 Singapore 7.1 6.5 11.2 13.0 10.6 11.8 10.1 19.2 14.8 13.3 13.1 65 Other' .0 .0 .1 .0 .0 .0 .1 .0 .0 .1 .1 66 Miscellaneous and unallocated8 47.9 39.7 43.4 55.9 69.7 65.8 66.7 82.0 72.1 63.7 57.0 1. The banking offices covered by these data include U.S. offices and foreign branches of 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 covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include Arab Emirates); and Bahrain and Oman (not formally members of OPEC). large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia. Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. 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 country 7. Foreign branch claims only. risk or exposure of U.S. banks. More complete data on the country risk exposure of U.S. banks 8. Includes New Zealand, Liberia, and international and regional organizations. 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

A58 International Statistics • June 1996 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1994 1995 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999922 11999933 11999944 Sept. Dec. Mar. June Sept. Dec.p 1 Total 45,511 50,597 54,309 57,630r 54,309r 50,187r 49,973r 47,673r 46,494 2 Payable in dollars 37,456 38,728 38,298 41,879r 38,298r 35,903r 34,281r 33,908r 33,949 3 Payable in foreign currencies 8,055 11,869 16,011 15,751 16,011 14,284 15,692r 13,765r 12,545 By type 4 Financial liabilities 23,841 29,226 32,954 36,440r 32,954' 29,775r 29,282r 26,237' 24,287 5 Payable in dollars 16,960 18,545 18,818 22,558r 18,818r 16,704r 15,028r 13,872r 12,949 6 Payable in foreign currencies 6,881 10,681 14,136 13,882 14,136 13,071 14,254r 12,365r 11,338 7 Commercial liabilities 21,670 21,371 21,355 21,190 21,355 20,412 20,691 21,436 22,207 8 Trade payables 9,566 8,802 10,005 9,550 10,005 9,844 10,527 10,061 11,013 9 Advance receipts and other liabilities 12,104 12,569 11,350 11,640 11,350 10,568 10,164 11,375 11,194 10 Payable in dollars 20,496 20,183 19,480 19,321 19,480 19,199 19,253 20,036 21,000 11 Payable in foreign currencies 1,174 1,188 1,875 1,869 1,875 1,213 1,438 1,400 1,207 By area or country Financial liabilities 12 Europe 13,387 18,810 21,703 25,288r 21,703r 17,541r 18,223r 16,401r 15,622 13 Belgium and Luxembourg 414 175 495 661 495 612 778 347 369 14 France 1,623 2,539 1,727 2,241 1,727 2,046 1,101 1,365 999 Ii Germany 889 975 1,961 1,467 1,961 1,755 1,589 1,670 1,974 16 Netherlands 606 534 552 648 552 633 530 474 466 17 Switzerland 569 634 688 633 688 883 1,056 948 895 18 United Kingdom 8,610 13,332 15,543 18,323r 15,543r 10,764r 12,138 10,518r 10,138 19 Canada 544 859 629 618 629 1,817 893 797 632 20 Latin America and Caribbean 4,053 3,359 2,034 l,977r 2,034r 2,065r l,950r l,904r 11,,882299 21 Bahamas 379 1,148 101 121r ior 135r 81r 79r 6688 22 Bermuda 114 0 80 15 80 149 138 144 152 23 Brazil 19 18 207 7 207 58 58 111 57 24 British West Indies 2,850 1,533 998 l,173r 998r 1,068r l,030r 930r 898 25 Mexico 12 17 0 15 0 10 3 3 12 26 Venezuela 6 5 5 5 5 5 4 3 2 27 Asia 5,818 5,956 8,403 8,405r 8,403r 8,156r 8,023r 6,947r 5,988 28 Japan 4,750 4,887 7,314 7,248 7,314 7,182 7,141r 6,308r 5,436 29 Middle Eastern oil-exporting countries' 19 23 35 31 35 27 25 25 27 30 Africa 6 133 135 133 135 156 151 149 150 31 Oil-exporting countries2 0 123 123 123 123 122 122 122 122 32 All other3 33 109 50 19 50 40 42 39 66 Commercial liabilities 33 Europe 7,398 6,827 6,773 6,868 6,773 6,642 6,776 7,263 7,700 34 Belgium and Luxembourg 298 239 241 287 241 271 311 349 331 35 France 700 655 728 744 728 642 504 528 481 36 Germany 729 684 604 552 604 482 556 660 767 37 Netherlands 535 688 722 674 722 536 448 566 500 38 Switzerland 350 375 327 391 327 327 432 255 413 39 United Kingdom 2,505 2,039 2,444 2,350 2,444 2,848 2,902 3,351 3,568 40 Canada 1,002 879 1,037 1,068 1,037 1,235 1,146 1,219 1,040 41 Latin America and Caribbean 1,533 1,658 1,857 1,783 1,857 11,,336688 1,836 11,,660077 11,,774400 42 Bahamas 3 21 19 6 19 88 3 11 11 43 Bermuda 307 350 345 200 345 260 397 219 205 44 Brazil 209 214 161 147 161 96 107 143 98 45 British West Indies 33 27 23 33 23 29 12 5 56 46 Mexico 457 481 574 672 574 356 420 357 416 47 Venezuela 142 123 276 189 276 273 204 175 221 48 Asia 10,594 10,980 10,741 10,370 10,741 10,151 9,978 10,275 10,421 49 Japan 3,612 4,314 4,555 4,128 4,555 4,110 3,531 3,475 3,315 50 Middle Eastern oil-exporting countries' 1,889 1,534 1,576 1,663 1,576 1,787 1,790 1,647 1,912 51 Africa 568 453 428 468 428 463 481 589 619 52 Oil-exporting countries2 309 167 256 264 256 248 252 241 254 53 Other3 575 574 519 633 519 553 474 483 687 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 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 11999922 11999933 11999944 Sept. Dec. Mar. June' Sept. Dec.p 1 Total 45,073 49,159 57,888 54,833 57,888 52,218 58,051 53,424r 52,483 2 Payable in dollars 42,281 45,161 53,805 50,460 53,805 48,425 54,138 49,696r 48,687 3 Payable in foreign currencies 2,792 3,998 4,083 4,373 4,083 3,793 3,913 3,728 3,796 By type 4 Financial claims 26,509 27,771 33,897 32,236 33,897 29,606 34,574 29,891r 27,398 5 Deposits 17,695 15,717 18,507 19,118 18,507 17,115 22,046 17,974r 15,133 6 Payable in dollars 16,872 15,182 18,026 18,502 18,026 16,458 21,351 17,393r 14,654 7 Payable in foreign currencies 823 535 481 616 481 657 695 581 479 8 Other financial claims 8,814 12,054 15,390 13,118 15,390 12,491 12,528 11,917 12,265 9 Payable in dollars 7,890 10,862 14,306 11,903 14,306 11,275 11,370 10,689 10,976 10 Payable in foreign currencies 924 1,192 1,084 1,215 1,084 1,216 1,158 1,228 1,289 11 Commercial claims 18,564 21,388 23,991 22,597 23,991 22,612 23,477 23,533r 25,085 12 Trade receivables 16,007 18,425 21,158 19,825 21,158 20,415 21,326 21,409r 22,973 13 Advance payments and other claims 2,557 2,963 2,833 2,772 2,833 2,197 2,151 2,124r 2,112 14 Payable in dollars 17,519 19,117 21,473 20,055 21,473 20,692 21,417 21,614r 23,057 15 Payable in foreign currencies 1,045 2,271 2,518 2,542 2,518 1,920 2,060 1,919 2,028 By area or country Financial claims 16 Europe 9,331 7,299 7,936 8,914 7,936 7,630 7,927 7,840 7,609 17 Belgium and Luxembourg 8 134 86 115 86 146 155 160 193 18 France 764 826 800 931 800 808 730 753 803 19 Germany 326 526 540 413 540 527 356 301 436 20 Netherlands 515 502 429 503 429 606 601 522 517 21 Switzerland 490 530 523 777 523 490 514 530 498 22 United Kingdom 6,252 3,585 4,649 5,023 4,649 4,040 4,790 4,924 4,303 23 Canada 1,833 2,032 3,581 3,812 3,581 3,848 3,705 3,526 2,851 24 Latin America and Caribbean 13,893 16,224 19,536 16,608 19,536 16,109 21,159 15,345r 14,500 25 Bahamas 778 1,336 2,424 1,121 2,424 940 2,355 1,552 1,965 26 Bermuda 40 125 27 52 27 37 85 35 81 27 Brazil 686 654 520 411 520 528 502 851 830 28 British West Indies 11,747 12,699 15,228 13,694 15,228 13,531 17,013 1 l,816r 10,393 29 Mexico 445 872 723 691 723 583 635 487 554 30 Venezuela 29 161 35 31 35 27 27 50 32 31 Asia 864 1,657 1,871 2,176 1,871 1,504 1,235 2,160 1,579 32 Japan 668 892 953 661 953 621 471 1,404 871 33 Middle Eastern oil-exporting countries' 3 3 141 19 141 4 3 4 3 34 Africa 83 99 373 197 373 141 138 188 276 35 Oil-exporting countries2 9 1 0 0 0 9 9 6 5 36 All other3 505 460 600 529 600 374 410 832 583 Commercial claims 37 Europe 8,451 9,105 9,540 8,810 9,540 8,947 9,200 8,862r 9,822 38 Belgium and Luxembourg 189 184 213 178 213 199 218 224 231 39 France 1,537 1,947 1,881 1,766 1,881 1,790 1,669 1,706 1,830 40 Germany 933 1,018 1,027 883 1,027 977 1,023 997 1,070 41 Netherlands 552 423 311 331 311 324 341 338 452 42 Switzerland 362 432 557 538 557 556 612 438 520 43 United Kingdom 2,094 2,377 2,556 2,505 2,556 2,388 2,469 2,479r 2,655 44 Canada 1,286 1,781 1,988 1,906 1,988 2,010 2,003 l,971r 1,950 45 Latin America and Caribbean 3,043 3,274 4,117 3,963 4,117 4,140 4,370 4,359r 4,348 46 Bahamas 28 11 9 34 9 17 21 26r 30 47 Bermuda 255 182 234 246 234 208 210 245 272 48 Brazil 357 460 612 471 612 695 777 745 897 49 British West Indies 40 71 83 49 83 55 83 66r 79 50 Mexico 924 990 1,243 1,137 1,243 1,106 1,109 1,026 985 51 Venezuela 345 293 348 388 348 295 319 325 285 52 Asia 4,866 6,014 6,982 6,679 6,982 6,200 6,516 6,826 7,307 53 Japan 1,903 2,275 2,655 2,591 2,655 1,911 2,011 1,998 1,868 54 Middle Eastern oil-exporting countries' 693 704 708 617 708 689 707 775 974 55 Africa 554 493 454 447 454 468 478 544 654 56 Oil-exporting countries2 78 72 67 61 67 71 60 74 87 57 Other3 364 721 910 792 910 847 910 971 1,004 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • June 1996 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1996 1995 1996 Transaction, and area or country 1994 1995 J F a e n b .- . Aug. Sept. Oct. Nov. Dec. Jan. Feb.p U.S. corporate securities STOCKS 1 Foreign purchases 350,593 462,884 95.836 41,908 44,450 41,492 41,937 46,479 43,574 52,262 2 Foreign sales 348,716 451,709 93,039 39,366 44,218 42,860 39,071 44,372 41,948 51,091 3 Net purchases, or sales (-) 1,877 11,175 2,797 2,542 232 -1,368 2,866 2,107 1,626 1,171 4 Foreign countries 1,867 11,380 2,923 2,565 295 -1,328 2,877 2,109 1,623 1,300 5 Europe 6,714 4,847 882 1,836 -1,319 1,647 954 1,028 1,954 -1,072 6 France -201 -1,099 3 17 -126 -54 -58 -382 164 -161 V Germany 2,110 -1,837 202 -104 -136 5 -131 -11 239 -37 8 Netherlands 2,251 3,507 680 431 197 528 230 373 660 20 9 Switzerland -30 -2,283 198 -847 9 449 227 191 639 -441 10 United Kingdom 840 8,001 -388 2,330 -1,114 878 543 1,277 -165 -223 11 Canada -1,160 -1,517 1,163 -10 -197 -74 405 -175 645 518 12 Latin America and Caribbean -2,111 5,814 2,201 1,811 752 -2,920 1,361 219 -487 2,688 13 Middle East' -1,142 -337 -792 -5 -77 -8 -63 148 -507 -285 14 Other Asia -1,234 2,503 -376 -961 1,048 61 342 883 -40 -336 15 Japan 1,162 -2,725 -37 -1,076 -598 56 -406 1,231 94 -131 16 Africa 29 2 -56 17 34 -17 -26 -1 6 -62 1/ Other countries 771 68 -99 -123 54 -17 -96 7 52 -151 18 Nonmonetary international and regional organizations 10 -205 -126 -23 -63 -40 -11 -2 3 -129 BONDS2 19 Foreign purchases 289,586 293,030r 59,130 24,790' 28,187r 26,424r 31,642 21,698 26,544 32,586 20 Foreign sales 229,665 206,951 41,404 16,741 17,759 19,199 20,741 21,117 17,726 23,678 21 Net purchases, or sales (—) 59,921 86,079r 17,726 8,049r 10,428r 7,225r 10,901 581 8,818 8,908 22 Foreign countries 59,036 86,533r 17,763 8,030r 10,406r 7,293r 10,948 553 8,776 8,987 23 Europe 37,065 69,815r 14.372 5,609r 7,934r 6,418r 9,759 1,309 5,577 8,795 24 France 242 1,143 1,153 538 63 732 101 137 839 314 25 Germany 657 5,806 1.833 1,163 916 113 894 236 -26 1,859 26 Netherlands 3,322 1,463 521 45 203 204 219 101 156 365 27 Switzerland 1,055 494 -30 -99 343 148 101 -381 56 -86 28 United Kingdom 31,642 57,220r 9,914 3,823r 5,486 4,599r 6,999 925 3,807 6,107 29 Canada 2,958 2,569 269 415 349 139 20 181 104 165 30 Latin America and Caribbean 5,442 6,141 1,383 754 1,719 -61 1,426 -848 2,096 -713 31 Middle East' 771 1,869 -528 281 241 -246 188 187 -194 -334 32 Other Asia 12,153 5,659 2,433 919 139 1,126 -705 -293 1,272 1,161 33 Japan 5,486 2,250 674 1,008 -371 645 -899 -904 338 336 34 Africa -7 234 -56 64 23 -223 240 86 -16 -40 35 Other countries 654 246 -110 -12 1 140 20 -69 -63 -47 36 Nonmonetary international and regional organizations 885 -454 -37 19 22 -68 -47 28 42 -79 Foreign securities 37 Stocks, net purchases, or sales ( —) -48,071 -50,786r -11,917 -5,956' -7,959 -5,769r -1,725 -6,830 -6,432 -5,485 38 Foreign purchases 386,106 345,498 70.887 30,867 28,712 29,382 30,307 32,366 33,481 37,406 39 Foreign sales 434,177 396,284r 82,804 36,823r 36,671 35,15lr 32,032 39,196 39,913 42,891 40 Bonds, net purchases, or sales (—) -9,224 -47,159r -5.492 -3,775r -5,483r —7,580 -6,235 -3,923r --44,,446677 -1,025 41 Foreign purchases 848,368 889,143r 179,599 71,216r 81,022r 76,889 78,563 80,310 8844,,550088 95,091 42 Foreign sales 857,592 936,302r 185,091 74,99 lr 86,505r 84,469 84,798 84,233r 88,975 96,116 43 Net purchases, or sales (-), of stocks and bonds .... -57,295 —97,945r -17,409 —9,731r -13,442r — 13,349r -7,960 — 10,753r -10,899 -6,510 44 Foreign countries -57,815 —97,140r -17,315 —9,558r — 13,497r — 13,240r -7,882 — 10,812r -10,930 -6,385 45 Europe -3,516 -47,905r -6,111 -2,591r -2,928 -7,249r -4,609 -6,033r -3,968 --22,,114433 46 Canada -7,475 -7,871 -2,561 -851 -3,471 1,311 -494 -14 -2,649 8888 47 Latin America and Caribbean -18,334 -7,071 -1.028 817 781 -3,883 -184 -802 -3 -1,025 48 Asia -24,275 -34,049r -7,242 -1,210' -7,810r —2,511r -2,001 -4,389 -4,685 -2,557 49 Japan -17,427 -25,070r -5,019 -5,519r -5,637r -849 -1,388 -3,685 -3,427 -1,592 50 Africa -467 -327 -257 34 -117 5 19 -44 -96 -161 51 Other countries -3,748 83 -116 303 48 -913 -613 470 471 -587 52 Nonmonetary international and regional organizations 520 -805 -94 -173 55 -109 -78 59 31 -125 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, 2. Includes state and local government securities and securities of U.S. government 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

Securities Holdings and Transactions!Interest and Exchange Rates A61 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1996 1995 1996 AArreeaa oorr ccoouunnttrryy 11999944 11999955 Jan.— Aug. Sept. Oct. Nov. Dec. Jan. Feb.p Feb. 1 Total estimated 78,801 133,991 29,459 26,082 -11,072 4,819 15,307 -9,454 14,008 15,451 2 Foreign countries 78,637 133,552 29,895 26,442 -11,002 4,650 14,936 -9,016 13,703 16,192 3 Europe 38,542 50,000 15,743 9,170 6,377 -4,608 821 -1,120 7,281 8,462 4 Belgium and Luxembourg 1,098 591 29 580 143 -25 81 171 149 -120 5 Germany 5,709 6,136 3,214 2,995 2,568 2,831 52 452 1,385 1,829 6 Netherlands 1,254 1,891 1,161 -1,468 -1,915 160 833 381 807 354 7 Sweden 794 358 758 100 61 92 -30 -285 -45 803 8 Switzerland 481 -472 160 -515 818 174 -568 -664 76 84 9 United Kingdom 23,365 34,778 2,811 7,950 5,570 -5,965 1,309 -4,377 1,167 1,644 10 Other Europe and former U.S.S.R 5,841 6,718 7,610 -472 -868 -1,875 -856 3,202 3,742 3,868 11 Canada 3,491 252 3,730 -825 -2,284 -1,864 -43 208 1,867 1,863 17 Latin America and Caribbean -10,383 48,609 -5,579 11,265 -5,299 17,453 13,496 3,762 -2,648 -2,931 13 Venezuela -319 -2 -235 -359 -524 -92 232 61 -142 -93 14 Other Latin America and Caribbean -20,493 25,152 7,026 5,364 1,171 3,033 3,723 4,710 8,922 -1,896 15 Netherlands Antilles 10,429 23,459 -12,370 6,260 -5,946 14,512 9,541 -1,009 -11,428 -942 16 47,317 32,319 15,536 7,322 -10,055 -6,879 -107 -11,843 6,920 8,616 17 Japan 29,793 16,863 5,688 5,430 -4,021 -10,115 1,316 -5,695 2,619 3,069 18 Africa 240 1,464 415 -130 108 501 458 252 515 -100 19 Other -570 908 50 -360 151 47 311 -275 -232 282 20 Nonmonetary international and regional organizations 164 439 -436 -360 -70 169 371 -438 305 -741 71 International 526 9 -98 -140 -196 2 368 -347 210 -308 22 Latin American regional -154 261 -299 -10 -6 185 -43 -115 -45 -254 MEMO 73 Foreign countries 78,637 133,552 29,895 26,442 -11,002 4,650 14,936 -9,016 13,703 16,192 74 Official institutions 41,822 39,625 21,296 -364 -4,525 5,705 -915 2,651 12,615 8,681 25 Other foreign 36,815 93,927 8,599 26,806 -6,477 -1,055 15,851 -11,667 1,088 7,511 Oil-exporting countries 76 Middle East2 -38 3,075 -536 1,890 -50 -624 -826 -1,085 -658 122 27 0 2 1 0 0 0 0 0 0 1 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 foreign 3. Comprises Algeria, Gabon, Libya, and Nigeria. countries. 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS' Percent per year, averages of daily figures Rate on Mar. 31, 1996 Rate on Mar. 31, 1996 Country Country Month effective Austria.. . 2.5 Apr. 1996 Germany ... 2.5 Belgium. . 3.0 Dec. 1995 Italy 9.0 Canada.. . 5.0 Apr. 1996 Japan .5 Denmark 3.75 Feb. 1996 Netherlands . 2.5 France2 .. 3.7 Apr. 1996 Switzerland . 1.5 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 banks or Treasury bills for seven to ten days, 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 RATES' Percent per year, averages of daily figures 1995 1996 TTyyppee oorr ccoouunnttrryy 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Eurodollars 3.18 4.63 5.93 5.81 5.75 5.64 5.40 5.14 5.28 5.36 2 United Kingdom 5.88 5.45 6.63 6.69 6.61 6.42 6.31 6.13 6.02 5.97 3 Canada 5.14 5.57 7.14 6.66 6.02 5.91 5.58 5.22 5.23 5.03 4 Germany 7.17 5.25 4.43 4.00 3.91 3.82 3.51 3.26 3.25 3.22 5 Switzerland 4.79 4.03 2.94 2.15 1.98 1.94 1.65 1.61 1.68 1.68 6 Netherlands 6.73 5.09 4.30 3.88 3.73 3.58 3.20 3.00 3.09 2.83 7 France 8.30 5.72 6.43 6.73 5.74 5.47 4.56 4.29 4.14 3.87 8 Italy 10.09 8.45 10.43 10.74 10.65 10.58 10.05 9.90 9.82 9.60 9 Belgium 8.10 5.65 4.73 4.14 3.87 3.74 3.47 3.23 3.25 3.23 10 Japan 2.96 2.24 1.20 .51 .54 .52 .55 .61 .60 .61 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

A62 International Statistics • June 1996 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1995 1996 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. 1 Australia/dollar2 67.993 73.161 74.073 74.534 74.053 74.171 75.557 77.136 78.566 2 Austria/schilling 11.639 11.409 10.076 9.974 10.142 10.296 10.321 10.391 10.580 3 Belgium/franc 34.581 33.426 29.472 29.154 29.615 30.081 30.115 30.371 30.902 4 Canada/dollar 1.2902 1.3664 1.3725 1.3534 1.3693 1.3669 1.3752 1.3656 1.3592 5 China, P.R./yuan 5.7795 8.6404 8.3700 8.3334 8.3350 8.3384 8.3338 8.3495 8.3583 6 Denmark/krone 6.4863 6.3561 5.5999 5.4923 5.5791 5.6618 5.6749 5.7074 5.9414 7 Finland/markka 5.7251 5.2340 4.3763 4.2489 4.3361 4.4510 4.5532 4.6066 4.7288 8 France/franc 5.6669 5.5459 4.9864 4.8882 4.9565 5.0117 5.0440 5.0583 5.1049 9 Germany/deutsche mark 1.6545 1.6216 1.4321 1.4173 1.4406 1.4635 1.4669 1.4776 1.5048 10 Greece/drachma 229.64 242.50 231.68 234.16 238.06 240.91 242.21 241.54 242.00 11 Hong Kong/dollar 7.7357 7.7290 7.7357 7.7338 7.7345 7.7329 7.7323 7.7325 7.7345 12 India/rupee 31.291 31.394 32.418 34.710 34.966 35.812 36.595 34.485 34.320 13 Ireland/pound" 146.47 149.69 160.35 160.54 159.18 158.18 158.10 157.21 156.51 14 Italy/lira 1,573.41 1,611.49 1,629.45 1,592.67 1,593.88 1,584.87 1,570.00 1,562.43 1,565.60 15 Japan/yen 111.08 102.18 93.96 101.94 101.85 105.75 105.79 105.94 107.20 16 Malaysia/ringgit 2.5738 2.6237 2.5073 2.5389 2.5399 2.5563 2.5487 2.5417 2.5113 17 Netherlands/guilder 1.8585 1.8190 1.6044 1.5877 1.6127 1.6388 1.6424 1.6540 1.6805 18 New Zealand/dollar2 54.127 59.358 65.625 65.224 64.996 66.195 67.495 68.079 68.242 19 Norway/krone 7.1009 7.0553 6.3355 6.2536 6.3579 6.4275 6.4103 6.4277 6.4901 20 Portugal/escudo 161.08 165.93 149.88 148.68 151.03 151.90 152.49 152.93 154.51 21 Singapore/dollar 1.6158 1.5275 1.4171 1.4128 1.4148 1.4211 1.4115 1.4095 1.4082 22 South Africa/rand 3.2729 3.5526 3.6286 3.6499 3.6632 3.6413 3.7420 3.9293 4.2130 23 South Korea/won 805.75 806.93 772.82 769.78 771.31 787.13 780.12 781.31 780.42 24 Spain/peseta 127.48 133.88 124.64 121.81 122.53 123.38 123.65 124.39 125.49 25 Sri Lanka/rupee 48.211 49.170 51.047 53.199 53.808 53.874 53.716 53.748 54.163 26 Sweden/krona 7.7956 7.7161 7.1406 6.6088 6.6393 6.7405 6.8775 6.7318 6.7141 27 Switzerland/franc 1.4781 1.3667 1.1812 1.1437 1.1631 1.1818 1.1967 1.1959 1.2180 28 Taiwan/dollar 26.416 26.465 26.495 27.257 27.315 27.406 27.485 27.400 27.188 29 Thailand/baht 25.333 25.161 24.921 25.166 25.164 25.298 25.250 25.251 25.290 30 United Kingdom/pound2 150.16 153.19 157.85 156.25 154.05 152.88 153.60 152.71 151.60 MEMO 31 United States/dollar3 93.18 91.32 84.25 84.14 85.07 86.23 86.41 86.57 87.46 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, industrial countries. The weight for each of the ten countries is the 1972-76 average world see inside front cover. trade of that country divided by the average world trade of all ten countries combined. Series 2. Value in U.S. cents. revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 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 June 1996 A72 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 May 1995 August 1995 A68 August 1995 November 1995 A68 November 1995 February 1996 A68 February 1996 May 1996 A68 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1995 October 1995 A68 June 30, 1995 November 1995 A72 September 30, 1995 February 1996 A72 December 31, 1995 May 1996 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1992 October 1992 A70 March 31, 1995 August 1995 A76 June 30, 1995 October 1995 A72 September 30, 1995 January 1996 A68 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

A64 Index to Statistical Tables References are to pages A3-A62 although the prefix ". " is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Deposits (See also specific types) Agricultural loans, commercial banks, 19, 20 Banks, by classes, 4, 17-21 Assets and liabilities (See also Foreigners) Federal Reserve Banks, 5, 10 Banks, by classes, 17-21 Interest rates, 15 Domestic finance companies, 33 Turnover, 16 Federal Reserve Banks, 10 Discount rates at Reserve Banks and at foreign central banks and Financial institutions, 25 foreign countries (See Interest rates) Foreign banks, U.S. branches and agencies, 21 Discounts and advances by Reserve Banks (See Loans) Automobiles Dividends, corporate, 32 Consumer installment credit, 36 Production, 44, 45 EMPLOYMENT, 42 Eurodollars, 23 BANKERS acceptances, 10, 11, 19-22, 23 FARM mortgage loans, 35 Bankers balances, 17-21. (See also Foreigners) Federal agency obligations, 5, 9, 10, 11, 28, 29 Bonds (See also U.S. government securities) Federal credit agencies, 30 New issues, 31 Federal finance Rates, 23 Debt subject to statutory limitation, and types and ownership Branch banks, 21 of gross debt, 27 Business activity, nonfinancial, 42 Receipts and outlays, 25, 26 Business loans (See Commercial and industrial Treasury financing of surplus, or deficit, 25 loans) Treasury operating balance, 25 Federal Financing Bank, 30 Federal funds, 6, 19, 20, 21, 23, 25 CAPACITY utilization, 43 Federal Home Loan Banks, 30 Capital accounts Federal Home Loan Mortgage Corporation, 30, 34, 35 Banks, by classes, 17 Federal Housing Administration, 30, 34, 35 Federal Reserve Banks, 10 Federal Land Banks, 35 Central banks, discount rates, 61 Certificates of deposit, 23 Federal National Mortgage Association, 30, 34, 35 Commercial and industrial loans Federal Reserve Banks Condition statement, 10 Commercial banks, 19, 20 Discount rates (See Interest rates) Weekly reporting banks, 19-21 U.S. government securities held, 5, 10, 11, 27 Commercial banks Federal Reserve credit, 5, 6, 10, 11 Assets and liabilities, 17-21 Federal Reserve notes, 10 Commercial and industrial loans, 17-21 Federally sponsored credit agencies, 30 Consumer loans held, by type and terms, 36 Finance companies Deposit interest rates of insured, 15 Loans sold outright, 20 Assets and liabilities, 33 Real estate mortgages held, by holder and Business credit, 33 Loans, 36 property, 35 Paper, 22, 23 Time and savings deposits, 4 Financial institutions, loans to, 19, 20, 21 Commercial paper, 22, 23, 33 Float, 5 Condition statements (See Assets and liabilities) Construction, 42, 46 Flow of funds, 37-41 Consumer installment credit, 36 Foreign banks, assets and liabilities of U.S. branches and Consumer prices, 42 agencies, 20, 21 Consumption expenditures, 49, 50 Foreign currency operations, 10 Corporations Foreign deposits in U.S. banks, 5, 20 Foreign exchange rates, 62 Profits and their distribution, 32 Foreign trade, 51 Security issues, 31, 61 Cost of living (See Consumer prices) Foreigners Credit unions, 36 Claims on, 52, 55, 56, 57, 59 Currency in circulation, 5, 13 Liabilities to, 20, 51, 52, 53, 58, 60, 61 Customer credit, stock market, 24 GOLD Certificate account, 10 DEBITS to deposit accounts, 16 Stock, 5, 51 Debt (See specific types of debt or securities) Government National Mortgage Association, 30, 34, 35 Demand deposits Gross domestic product, 48 Banks, by classes, 17-21 Ownership by individuals, partnerships, and HOUSING, new and existing units, 46 corporations, 20, 21 Turnover, 16 INCOME, personal and national, 42, 48, 49 Depository institutions Industrial production, 42, 44 Reserve requirements, 8 Installment loans, 36 Reserves and related items, 4, 5, 6, 12 Insurance companies, 27, 35 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A65 Interest rates Reserves Bonds, 23 Commercial banks, 17 Consumer installment credit, 36 Depository institutions, 4, 5, 6, 12 Deposits, 15 Federal Reserve Banks, 10 Federal Reserve Banks, 7 U.S. reserve assets, 51 Foreign central banks and foreign countries, 61 Residential mortgage loans, 34 Money and capital markets, 23 Retail credit and retail sales, 36, 42 Mortgages, 34 Prime rate, 22 SAVING International capital transactions of United States, 50-61 Flow of funds, 37—+1 International organizations, 52, 53, 55, 58, 59 National income accounts, 48 Inventories, 48 Savings institutions, 35, 36, 37 Investment companies, issues and assets, 32 Savings deposits (See Time and savings deposits) Investments (See also specific types) Securities (See also specific types) Banks, by classes, 17-21 Federal and federally sponsored credit agencies, 30 Commercial banks, 4, 17-21 Foreign transactions, 60 Federal Reserve Banks, 10. 11 New issues, 31 Financial institutions, 35 Prices, 24 Special drawing rights, 5, 10, 50, 51 LABOR force, 42 State and local governments Life insurance companies (See Insurance companies) Deposits, 19, 20 Loans (See also specific types) Holdings of U.S. government securities, 27 Banks, by classes, 17-21 New security issues, 31 Commercial banks, 17-21 Ownership of securities issued by, 19, 21 Federal Reserve Banks, 5, 6, 7, 10, 11 Rates on securities, 23 Financial institutions, 35 Stock market, selected statistics, 24 Insured or guaranteed by United States, 34, 35 Stocks (See also Securities) New issues, 31 MANUFACTURING Prices, 24 Capacity utilization, 43 Production, 43, 45 Student Loan Marketing Association, 30 Margin requirements, 24 Member banks (See also Depository institutions) TAX receipts, federal, 26 Federal funds and repurchase agreements, 6 Reserve requirements, 8 Thrift institutions, 4. (See also Credit unions and Savings Mining production, 45 institutions) Mobile homes shipped, 46 Time and savings deposits, 4, 13, 15, 17-21 Monetary and credit aggregates, 4, 12 Trade, foreign, 51 Money and capital market rates, 23 Treasury cash, Treasury currency, 5 Money stock measures and components, 4, 13 Treasury deposits, 5, 10, 25 Mortgages (See Real estate loans) Treasury operating balance, 25 Mutual funds, 32 UNEMPLOYMENT, 42 Mutual savings banks (See Thrift institutions) U.S. government balances Commercial bank holdings, 17-21 NATIONAL defense outlays, 26 Treasury deposits at Reserve Banks, 5, 10, 25 National income, 48 U.S. government securities Bank holdings, 17-21, 27 OPEN market transactions, 9 Dealer transactions, positions, and financing, 29 Federal Reserve Bank holdings, 5, 10, 11, 27 PERSONAL income, 49 Foreign and international holdings and Prices transactions, 10, 27, 61 Consumer and producer, 42, 47 Open market transactions, 9 Stock market, 24 Outstanding, by type and holder, 27, 28 Prime rate, 22 Rates, 23 Producer prices, 42, 47 U.S. international transactions, 50-62 Production, 42, 44 Utilities, production, 45 Profits, corporate, 32 VETERANS Administration, 34, 35 REAL estate loans Banks, by classes, 19, 20, 35 Terms, yields, and activity, 34 WEEKLY reporting banks, 17-21 Type of holder and property mortgaged, 35 Wholesale (producer) prices, 42, 47 Repurchase agreements, 6 Reserve requirements, 8 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 Federal Reserve Bulletin • June 1996 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman Pro Tempore EDWARD W. KELLEY, JR. 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 MICHAEL J. PRELL, Director SCOTT G. ALVAREZ, Associate General Counsel EDWARD C. ETTIN, Deputy Director RICHARD M. ASHTON, Associate General Counsel DAVID J. STOCKTON, Deputy Director OLIVER IRELAND, Associate General Counsel MARTHA BETHEA, Associate Director KATHLEEN M. O'DAY, Associate General Counsel WILLIAM R. JONES, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel MYRON L. KWAST, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel PATRICK M. PARKINSON, Associate Director THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director OFFICE OF THE SECRETARY MARTHA S. SCANLON, Deputy Associate Director WILLIAM W. WILES, Secretary PETER A. TINSLEY, Deputy Associate Director JENNIFER J. JOHNSON, Deputy Secretary FLINT BRAYTON, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman DAVID S. JONES, Assistant Director STEPHEN A. RHOADES, Assistant Director CHARLES S. STRUCKMEYER, Assistant Director DIVISION OF BANKING ALICE PATRICIA WHITE, Assistant Director SUPERVISION AND REGULATION JOYCE K. ZICKLER, Assistant Director RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director GLENN B. CANNER, Adviser WILLIAM A. RYBACK, Associate Director HERBERT A. BIERN, Deputy Associate Director DIVISION OF MONETARY AFFAIRS ROGER T. COLE, Deputy Associate Director JAMES I. GARNER, Deputy Associate Director DONALD L. KOHN, Director HOWARD A. AMER, Assistant Director DAVID E. LINDSEY, Deputy Director GERALD A. EDWARDS, JR., Assistant Director BRIAN F. MADIGAN, Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Assistant Director VINCENT R. REINHART, Assistant Director JACK P. JENNINGS, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON, Assistant Director RHOGER H PUGH, Assistant Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Assistant Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Assistant Director GRIFFITH L. GARWOOD, Director WILLIAM SCHNEIDER, Project Director, GLENN E. LONEY, Associate Director National Information Center DOLORES S. SMITH, Associate Director MAUREEN P. ENGLISH, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 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) LOUISE L. ROSEMAN, Associate Director DIVISION OF HUMAN RESOURCES CHARLES W. BENNETT, Assistant Director MANAGEMENT JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director DAVID L. SHANNON, Director JEFFREY C. MARQUARDT, Assistant Director JOHN R. WEIS, Associate Director JOHN H. PARRISH, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FLORENCE M. YOUNG, Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER BRENT L. BOWEN, Inspector General GEORGE E. LIVINGSTON, Controller DONALD L. ROBINSON, Assistant Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) BARRY R. SNYDER, Assistant Inspector General DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director DAY W. RADABAUGH, JR., 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

68 Federal Reserve Bulletin • June 1996 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman EDWARD G. BOEHNE LAWRENCE B. LINDSEY GARY H. STERN JERRY L. JORDAN ROBERT D. MCTEER, JR. JANET L. YELLEN EDWARD W. KELLEY, JR. SUSAN M. PHILLIPS ALTERNATE MEMBERS J. ALFRED BROADDUS, JR. MICHAEL H. MOSKOW ERNEST T. PATRIKIS JACK GUYNN ROBERT T. PARRY STAFF DONALD L. KOHN, Secretary and Economist DAVID E. LINDSEY, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary FREDERIC S. MISHKIN, Associate Economist JOSEPH R. COYNE, Assistant Secretary LARRY J. PROMISEL, Associate Economist GARY P. GILLUM, Assistant Secretary ARTHUR J. ROLNICK, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel HARVEY ROSENBLUM, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel CHARLES J. SIEGMAN, Associate Economist MICHAEL J. PRELL, Economist THOMAS D. SIMPSON, Associate Economist EDWIN M. TRUMAN, Economist MARK S. SNIDERMAN, Associate Economist RICHARD W. LANG, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL RICHARD G. TILGHMAN, President FRANK V. CAHOUET, Vice President WILLIAM M. CROZIER, JR., First District ROGER L. FITZSIMONDS, Seventh District WALTER V. SHIPLEY, Second District THOMAS H. JACOBSEN, Eighth District WALTER E. DALLER, JR., Third District RICHARD M. KOVACEVICH, Ninth District FRANK V. CAHOUET, Fourth District CHARLES E. NELSON, Tenth District RICHARD G. TILGHMAN, Fifth District CHARLES T. DOYLE, Eleventh District CHARLES E. RICE, Sixth District WILLIAM F. ZUENDT, 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

A69 CONSUMER ADVISORY COUNCIL KATHARINE W. MCKEE, Durham, North Carolina, Chairman JULIA M. SEWARD, Richmond, Virginia, Vice Chairman RICHARD S. AMADOR, LOS Angeles, California ERROL T. LOUIS, Brooklyn, New York THOMAS R. BUTLER, Riverwoods, Illinois WILLIAM N. LUND, Falmouth, Maine ROBERT A. COOK, Baltimore, Maryland RONALD A. PRILL, Minneapolis, Minnesota ALVIN J. COWANS, Orlando, Florida LISA RICE-COLEMAN, Toledo, Ohio ELIZABETH G. FLORES, Laredo, Texas JOHN R. RINES, Detroit, Michigan HERIBERTO FLORES, Springfield, Massachusetts MARGOT SAUNDERS, Washington, D.C. EMANUEL FREEMAN, Philadelphia, Pennsylvania ANNE B. SHLAY, Philadelphia, Pennsylvania DAVID C. FYNN, Cleveland, Ohio REGINALD J. SMITH, Kansas City, Missouri ROBERT G. GREER, Houston, Texas GEORGE P. SURGEON, Arkadelphia, Arkansas KENNETH R. HARNEY, Chevy Chase, Maryland GREGORY D. SQUIRES, Milwaukee, Wisconsin GAIL K. HILLEBRAND, San Francisco, California JOHN E. TAYLOR, Washington, D.C. TERRY JORDE, Cando, North Dakota LORRAINE VANETTEN, Troy, Michigan FRANCINE JUSTA, New York, New York THEODORE J. WYSOCKI, JR., Chicago, Illinois EUGENE I. LEHRMANN, Madison, Wisconsin LILY K. YAO, Honolulu, Hawaii THRIFT INSTITUTIONS ADVISORY COUNCIL E. LEE BEARD, Hazleton, Pennsylvania, President DAVID F. HOLLAND, Burlington, Massachusetts, Vice President BARRY C. BURKHOLDER, Houston, Texas CHARLES R. RINEHART, Irwindale, California MICHAEL T. CROWLEY, JR., Milwaukee, Wisconsin JOSEPH C. SCULLY, Chicago, Illinois GEORGE L. ENGELKE, JR., Lake Success, New York RONALD W. STIMPSON, Memphis, Tennessee DOUGLAS A. FERRARO, Englewood, Colorado 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

A70 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, Securities Credit Transactions Handbook. $75.00 per year. MS-127, Board of Governors of the Federal Reserve System, The Payment System Handbook. $75.00 per year. Washington, DC 20551 or telephone (202) 452-3244 or FAX Federal Reserve Regulatory Service. Four vols. (Contains all (202) 728-5886. When a charge is indicated, payment should four Handbooks plus substantial additional material.) $200.00 accompany request and be made payable to the Board of Gover- per year. nors of the Federal Reserve System or may be ordered via Rates for subscribers outside the United States are as follows Mastercard or Visa. Payment from foreign residents should be and include additional air mail costs: drawn on a U.S. bank. Federal Reserve Regulatory Service, $250.00 per year. Each Handbook, $90.00 per year. FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL BOOKS AND MISCELLANEOUS PUBLICATIONS COMPUTERS. Diskettes; updated monthly. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Standalone PC. $300 per year. 1994. 157 pp. Network, maximum 1 concurrent user. $300 per year. ANNUAL REPORT. Network, maximum 10 concurrent users. $750 per year. ANNUAL REPORT: BUDGET REVIEW, 1994-95. Network, maximum 50 concurrent users. $2,000 per year. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 Network, maximum 100 concurrent users. $3,000 per year. each in the United States, its possessions, Canada, and Subscribers outside the United States should add $50 to cover Mexico. Elsewhere, $35.00 per year or $3.00 each. additional airmail costs. ANNUAL STATISTICAL DIGEST: period covered, release date, num- THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTIber of pages, and price. COUNTRY MODEL, May 1984. 590 pp. $14.50 each. 1981 October 1982 239 pp. $ 6.50 INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1982 December 1983 266 pp. $ 7.50 440 pp. $9.00 each. 1983 October 1984 264 pp. $11.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1984 October 1985 254 pp. $12.50 December 1986. 264 pp. $10.00 each. 1985 October 1986 231 pp. $15.00 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1986 November 1987 288 pp. $15.00 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 1980-89 March 1991 712 pp. $25.00 EDUCATION PAMPHLETS 1990 November 1991 185 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1991 November 1992 215 pp. $25.00 available without charge. 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 1994 December 1995 190 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages Consumer Handbook to Credit Protection Laws A Guide to Business Credit for Women, Minorities, and Small SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF Businesses CHARTS. Weekly. $30.00 per year or $.70 each in the United Series on the Structure of the Federal Reserve System States, its possessions, Canada, and Mexico. Elsewhere, The Board of Governors of the Federal Reserve System $35.00 per year or $.80 each. The Federal Open Market Committee THE FEDERAL RESERVE ACT and other statutory provisions affect- Federal Reserve Bank Board of Directors ing the Federal Reserve System, as amended through August Federal Reserve Banks 1990. 646 pp. $10.00. Organization and Advisory Committees REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL A Consumer's Guide to Mortgage Lock-Ins A Consumer's Guide to Mortgage Settlement Costs RESERVE SYSTEM. A Consumer's Guide to Mortgage Refinancings ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— Home Mortgages: Understanding the Process and Your Right Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. to Fair Lending Vol. 11 (Irregular Transactions). 1969. 116 pp. Each volume How to File a Consumer Complaint $2.25. Making Deposits: When Will Your Money Be Available? GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. Making Sense of Savings FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated SHOP: The Card You Pick Can Save You Money monthly. (Requests must be prepaid.) Welcome to the Federal Reserve Consumer and Community Affairs Handbook. $75.00 per year. When Your Home is on the Line: What You Should Know Monetary Policy and Reserve Requirements Handbook. $75.00 About Home Equity Lines of Credit per year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 STAFF STUDIES: Only Summaries Printed in the 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- BULLETIN KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Studies and papers on economic and financial subjects that are of Ann Taylor. March 1992. 37 pp. general interest. Requests to obtain single copies of the full text or 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by to be added to the mailing list for the series may be sent to James T. Fergus and John L. Goodman, Jr. July 1993. Publications Services. 20 pp. 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF Staff Studies 1-157 are out of print. MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 1993. 18 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Dietrich Earnhart. September 1989. 23 pp. January 1994. Ill pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Donald Savage. February 1990. 12 pp. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- by Stephen A. Rhoades. July 1994. 37 pp. VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by 168. THE ECONOMICS OF THE PRIVATE EQUITY MARKET, by Gregory E. Elliehausen and John D. Wolken. September George W. Fenn, Nellie Liang, and Stephen Prowse. Novem- 1990. 35 pp. ber 1995. 69 pp. 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 169. BANK MERGERS AND INDUSTRYWIDE STRUCTURE, 1980-94, 1980-90, by Margaret Hastings Pickering. May 1991. by Stephen A. Rhoades. February 1996. 32 pp. 21pp. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 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 United 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

A73 Annual Annual Approximate Corresponding Period or date to Release number and title USPS fax release Bulletin rate rate days1 which data refer 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. 11. 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 n.a. End of March, January, April, June, July, and September, and October December E. 16. Country Exposure Lending $ 5.00 n.a. January, April, Previous quarter Survey July, and October Z. 1. Flow of Funds Accounts: $25.00 n.a. 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 15th 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

A74 Maps of the Federal Reserve System 1 BOSTON • 3 • ^ORK CLEVELAND JI^a DELPHIA 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 by number of Puerto Rico and the U.S. Virgin Islands; the San and Reserve Bank city (shown on both pages) and by letter Francisco Bank serves American Samoa, Guam, and the (shown on the facing page). Commonwealth of the Northern Mariana Islands. The In the 12th District, the Seattle Branch serves Alaska, Board of Governors revised the branch boundaries of the and the San Francisco Bank serves Hawaii. System most recently in December 1991. The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 1-A 2-B 3-C 4-D 5-E Pittsburgh Bavltitm^for e— M' D NY PO VA I CT \t wv wv NC •a Bu ffalo ' •Ctncicinin nati tte NY sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville KY Birmingham / sville MO ^ fT~ c • Memphis «LtiSSulNe, Rock ( MS ATLANTA CHICAGO ST. LOUIS 9-1 m- MINNEAPOLIS 10-J 12-L CO MO Oklahoma Cit\ KANSAS CITY 11-K bl 9M3 AZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 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 John C. Whitehead William J. McDonough Thomas W. Jones Ernest T. Patrikis Buffalo 14240 Joseph J. Castiglia Carl W. Turnipseed1 PHILADELPHIA 19105 Donald J. Kennedy Edward G. Boehne Joan Carter 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 John T. Ryan III Harold J. Swart1 RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland 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 Hugh M. Brown Jack Guynn Daniel E. Sweat, Jr. Patrick K. Barron James M. Mckee1 Birmingham 35283 Donald E. Boomershine Fred R. Herr1 Jacksonville 32231 Joan D. Ruffier James D. Hawkins1 Miami 33152 R. Kirk Landon James T. Curry III Nashville 37203 Paula Lovell Melvyn K. Purcell New Orleans 70161 Lucimarian Roberts Robert J. Musso CHICAGO* 60690 Robert M. Healey Michael H. Moskow Lester H. McKeever, Jr. William C. Conrad Detroit 48231 John D. Forsyth David R. Allardice1 ST. LOUIS 63166 John F. McDonnell Thomas C. Melzer Susan S. Elliott W. LeGrande Rives Little Rock 72203 Janet M. Jones Robert A. Hopkins Louisville 40232 John A. Williams Thomas A. Boone Memphis 38101 John V. Myers John P. Baumgartner MINNEAPOLIS 55480 Jean D. Kinsey Gary H. Stern David A. Koch Colleen K. Strand Helena 59601 Lane W. Basso John D.Johnson KANSAS CITY 64198 Herman Cain Thomas M. Hoenig A. Drue Jennings Richard K. Rasdall Denver 80217 Peter I. Wold Carl M. Gambs1 Oklahoma City 73125 Barry L. Eller Mark L. Mullinix Omaha 68102 LeRoy W. Thorn Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Helen E. Holcomb El Paso 79999 Patricia Z. Holland-Branch Sammie C. Clay Houston 77252 Issac 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 John F. Moore Los Angeles 90051 Anita E. Landecker Temporarily vacant 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 Werkema3 •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. 3. Executive Vice President. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of pam- Shop . . . The Card You Pick Can Save You Money is phlets covering individual credit laws and topics, as designed to help consumers comparison shop when pictured below. looking for a credit card. It contains the results of the Three booklets on the mortgage process are available: Federal Reserve Board's survey of the terms of credit A Consumer's Guide to Mortgage Lock-Ins, A Consum- card plans offered by credit card issuers throughout the er's Guide to Mortgage Refinancings, and A Consumer's United States. Because the terms can affect the amount Guide to Mortgage Settlement Costs. These booklets an individual pays for using a credit card, the booklet were prepared in conjunction with the Federal Home lists the annual percentage rate (APR), annual fee, grace Loan Bank Board and in consultation with other federal period, type of pricing (fixed or variable rate), and a agencies and trade and consumer groups. The Board telephone number for each card issuer surveyed. also publishes the Consumer Handbook to Credit Pro- Copies of consumer publications are available free tection Laws, a complete guide to consumer credit pro- of charge from Publications Services, Mail Stop 127, tections. This forty-four-page booklet explains how to Board of Governors of the Federal Reserve System, shop and obtain credit, how to maintain a good credit Washington, DC 20551. Multiple copies for classroom rating, and how to dispute unfair credit transactions. use are also available free of charge. Quids to Business Credit for Women, Minorities, and Small Businesses SHOP m The Card You Pick Can Save You Money Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE To promote public understanding of its regulatory func- The Payment System Handbook deals with expedited tions, the Board publishes the Federal Reserve Regu- funds availability, check collection, wire transfers, and latory Service, a four-volume loose-leaf service con- risk-reduction policy. It includes Regulations CC, J, and taining all Board regulations as well as related statutes, EE, related statutes and commentaries, and policy interpretations, policy statements, rulings, and staff statements on risk reduction in the payment system. opinions. For those with a more specialized interest in For domestic subscribers, the annual rate is $200 for the Board's regulations, parts of this service are pub- the Federal Reserve Regulatory Service and $75 for lished separately as handbooks pertaining to monetary each Handbook. For subscribers outside the United policy, securities credit, consumer affairs, and the pay- States, the price including additional air mail costs is ment system. $250 for the Service and $90 for each Handbook. These publications are designed to help those who The Federal Reserve Regulatory Service is also availmust frequently refer to the Board's regulatory materi- able on diskette for use on personal computers. For a als. They are updated monthly, and each contains cita- standalone PC, the annual subscription fee is $300. For tion indexes and a subject index. network subscriptions, the annual fee is $300 for 1 con- The Monetary Policy and Reserve Requirements current user, $750 for a maximum of 10 concurrent Handbook contains Regulations A, D, and Q, plus users, $2,000 for a maximum of 50 concurrent users, related materials. and $3,000 for a maximum of 100 concurrent users. The Securities Credit Transactions Handbook con- Subscribers outside the United States should add $50 tains Regulations G, T, U, and X, dealing with exten- to cover additional airmail costs. For further informasions of credit for the purchase of securities, together tion, call (202) 452-3244. with related statutes, Board interpretations, rulings, All subscription requests must be accompanied by a and staff opinions. Also included are the Board's list check or money order payable to the Board of Goverof marginable OTC stocks and its list of foreign margin nors of the Federal Reserve System. Orders should be stocks. addressed to Publications Services, mail stop 127, Board The Consumer and Community Affairs Handbook of Governors of the Federal Reserve System, Washingcontains Regulations B, C, E, M, Z, AA, BB, and DD, ton, DC 20551. and associated materials. GUIDE TO THE FLOW OF FUNDS ACCOUNTS A recent Federal Reserve publication, Guide to the Flow dures as seasonal adjustment, extrapolation, and of Funds Accounts, explains in detail how the U.S. interpolation. financial flow accounts are prepared. The accounts, The balance of the Guide contains explanatory tables which are compiled by the Division of Research and corresponding to the tables of financial flows data that Statistics, are published in the Board's quarterly Z.l appeared in the September 1992 Z.l release. These statistical release, "Flow of Funds Accounts, Flows and tables give, for each data series, the source of the data or Outstandings." The Guide updates and replaces Intro- the methods of calculation, along with annual data for duction to Flow of Funds, published in 1980. 1991 that were published in the September 1992 release. The 670-page Guide begins with an explanation of Guide to the Flow of Funds Accounts is available for the organization and uses of the flow of funds accounts $8.50 per copy from Publications Services, Board of and their relationship to the national income and Governors of the Federal Reserve System, Washington, product accounts prepared by the U.S. Department of DC 20551. Orders must include a check or money order, Commerce. Also discussed are the individual data in U.S. dollars, made payable to the Board of Governors series that make up the accounts and such proce- of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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