Federal Reserve Bulletin, 1997-11

VOLUME 83 • NUMBER 11 • NOVEMBER 1997 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 859 OPEN MARKET OPERATIONS IN THE 1990S that can be used without security codes (sometimes referred to as "check cards" or "offline Open market operations—the purchase and sale debit cards") and says that it is in everyone's of Treasury and federal agency securities—are best interest to ensure that the public underthe Federal Reserve's principal tool for implestands the new risks inherent in transactions that menting monetary policy. The objectives and are not protected by a security code (personal conduct of open market operations have continidentification number) so that individual conued to evolve in the 1990s, partly in response to sumers can make an informed choice about the way the Federal Open Market Committee whether to assume that risk, before the Subcomimplements monetary policy and explains it to mittee on Financial Institutions and Consumer the public. Also shaping operations have been Credit of the House Committee on Banking and changes in financial markets, including develop- Financial Services, September 24, 1997. ments in the market for repurchase agreements and declines in the balances that depository institutions must hold at the Federal Reserve. 888 ANNOUNCEMENTS Amendments to Regulation J. 875 INDUSTRIAL PRODUCTION AND CAPACITY Delay in mandatory compliance with revisions UTILIZATION FOR SEPTEMBER 1997 to Regulation M. Boosted by a 4.4 percent jump in the output of Adoption of uniform amendments to the Riegleutilities, industrial production rose 0.7 percent in Neal Interstate Banking and Branching Effi- September, to 122.4 percent of its 1992 averciency Act of 1994. age. The utilization of industrial capacity rose Audit by the Government Accounting Office of to 84.4 percent—its highest rate since Februthe financial controls and reporting of cash at the ary 1995. Los Angeles Branch of the Federal Reserve Bank of San Francisco. 878 STATEMENTS TO THE CONGRESS Approval of a risk-focused consumer compli- Alice M. Rivlin, Vice Chair, Board of Goverance supervision program. nors, discusses the payments system and the Federal Reserve's role in it, and says that for the Implementation of a risk-focused process for next few years at least, the Federal Reserve can the examination of state-chartered community best meet the expectations of the Congress for a banks. safe and reliable payments system by continuing Policy statement by the Basle Committee on to provide check and automated clearinghouse Banking Supervision on Year 2000 issues. (ACH) services as efficiently as possible and Modification by the Basle Committee of the that the Federal Reserve needs to work more Amendment to the Capital Accord to incorpoclosely and collaboratively with the participants rate market risk. and users of the payments system, both to enhance the efficiency of current payment instru- Release of "Principles for the Management of ments (check and ACH) and to evolve strategies Interest Rate Risk" by the Basle Committee. for moving to the next generation of payment Release of the "Core Principles for Effective methodologies, before the Subcommittee on Banking Supervision" by the Basle Committee. Domestic and International Monetary Policy of the House Committee on Banking and Financial Publication of the Examination Manual for U.S. Services, September 16, 1997. Branches and Agencies of Foreign Banking Organizations. 884 Laurence H. Meyer, Member, Board of Governors, comments on issues concerning debit cards Changes in Board staff. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

893 LEGAL DEVELOPMENTS A63 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES Various bank holding company, bank service corporation, and bank merger orders; and pend- A76 INDEX TO STATISTICAL TABLES ing cases. A78 BOARD OF GOVERNORS AND STAFF A1 FINANCIAL AND BUSINESS STATISTICS A80 FEDERAL OPEN MARKET COMMITTEE AND These tables reflect data available as of STAFF; ADVISORY COUNCILS September 25, 1997. A82 FEDERAL RESERVE BOARD PUBLICATIONS A3 GUIDE TO TABULAR PRESENTATION A84 MAPS OF THE FEDERAL RESERVE SYSTEM A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A86 FEDERAL RESERVE BANKS, BRANCHES, A50 International Statistics AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s Cheryl L. Edwards, of the Board's Division of Mone- institutions maintain accounts at Federal Reserve tary Affairs, prepared this article. Gerard Sinzdak Banks that they use to make payments on behalf of provided research assistance. their customers or themselves. They use the end-ofday balances in these accounts to meet reserve and Open market operations are the Federal Reserve's other balance requirements (See box "Reserve Conprincipal tool for implementing monetary policy.1 cepts, Technical Factors, and Required Clearing Bal- These purchases and sales of U.S. Treasury and fed- ances.") If a depository institution anticipates that it eral agency securities largely determine the federal will end the day with a larger balance than it wants, it funds rate—the interest rate at which depository insti- can reduce that balance in several ways depending on tutions lend balances at the Federal Reserve to other how long it expects the surplus to persist. For examdepository institutions overnight. The federal funds ple, if it expects the surplus to be temporary, the rate, in turn, affects monetary and financial condi- institution often lends the excess balance overnight to tions, which ultimately influence employment, out- a depository institution that anticipates having a put, and the overall level of prices. smaller end-of-day balance than it wants. The market The objectives and conduct of open market opera- in which the lending of Federal Reserve balances tions have evolved over the years, partly in response takes place is the federal funds market, and the interto the way the Federal Open Market Committee—the est rate at which the loan is made is the federal funds Federal Reserve's primary monetary policymaking rate.2 The total supply of Federal Reserve balances body—implements policy and explains it to the pub- available to depository institutions is determined prilic. Also shaping the conduct of open market opera- marily by open market operations. Through these tions have been changes in financial markets, includ- operations, the Federal Reserve has considerable ing a move to arrange transactions in the market for influence over conditions in the federal funds market. repurchase agreements earlier in the day, prompted Open market operations can be directed at achievby the Federal Reserve's imposition of a fee on ing a desired quantity of balances, as specified by the daylight overdrafts in the accounts of depository Federal Open Market Committee (FOMC), or a institutions. Another important influence has been a desired price (federal funds rate), but they may not be decline in the balances that depository institutions are able to achieve both at once. The greater the empharequired to hold at the Federal Reserve stemming sis on a quantity objective, the more short-run from the widespread adoption of retail sweep pro- changes in the demand for balances will influence the grams, which transfer funds from deposit accounts federal funds rate; conversely, the greater the emphathat are subject to reserve requirements to deposit sis on a funds-rate objective, the more shifts in accounts that are not. demand will influence the quantity of Federal Reserve balances. Over the years, the Federal Reserve has used varia- FEDERAL RESERVE BALANCES tions of both approaches to open market operations.3 AND RESERVE OBJECTIVES Open market operations are a powerful tool in imple- 2. Federal funds lending is not collateralized; therefore, different depository institutions pay different rates for loans depending on their menting monetary policy because of their connection creditworthiness. Depository institutions can arrange transactions with the total supply of balances at the Federal directly between themselves, or for large transactions they can use a Reserve and the federal funds rate. Many depository federal funds broker. Typically, the term "federal funds rate" refers to the rate at which the most creditworthy institutions borrow and lend balances in the brokered market. 1. The other tools of monetary policy are reserve requirements and 3. Detailed discussions of the history of monetary policy can be the discount window, the Federal Reserve's lending facility. See found in Ann-Marie Meulendyke, U.S. Monetary Policy and Financial Joshua N. Feinman, "Reserve Requirements: History, Current Prac- Markets (New York: Federal Reserve Bank of New York, 1989), tice, and Potential Reform," Federal Reserve Bulletin, vol. 79 pp. 18—47, and in Ann-Marie Meulendyke, "A Review of Federal (June 1993), pp. 569-89, and James A. Clouse, "Recent Develop- Reserve Policy Targets and Operating Guides in Recent Decades," ments in Discount Window Policy," Federal Reserve Bulletin, vol. 80 Federal Reserve Bank of New York Quarterly Review, vol. 13 (November 1994), pp. 965-77. (Autumn 1988), pp. 6-17. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

860 Federal Reserve Bulletin • November 1997 Reserve Concepts, Technical Factors, and Required Clearing Balances Reserve Concepts cash held in excess of reserve requirements is not included in excess reserves or in total reserves. Total reserves equal vault cash used by depository institutions to meet reserve requirements (so-called applied vault cash) plus reserve balances held by depository institutions Supply of Reserves at their Federal Reserve Banks. Reserve balances, and thus The supply of reserves has two components, borrowed total reserves, exclude required clearing balances of deposireserves and nonborrowed reserves. tory institutions. Borrowed Reserves (BR). Borrowed reserves are balances provided to depository institutions through the Fed- Demand for Reserves eral Reserve's discount window lending facility. In general, The demand for reserves has two components, required a depository institution is expected to use the discount reserves and excess reserves. window to meet its liquidity needs only after drawing on all other reasonably available sources of funds. This adminis- Required Reserves (RR). Each depository institution trative criterion limits considerably the use of the window, must hold a percentage of certain of its deposit liabilities as even though the rate charged for discount window loans— reserves. Reserve requirements are currently applied to the the discount rate—is typically below the federal funds rate. average level of transaction deposits over a two-week com- Since the mid-1980s, depository institutions have become putation period and are specified as an average level to be quite reluctant to turn to the discount window because of maintained over a two-week reserve maintenance period.1 concerns that their borrowing might become known to A depository institution's reserve requirement is satisfied private market participants—even though the Federal first by its vault cash—currency held in its vault—and, if Reserve treats the identity of borrowers in a highly confivault cash is insufficient, by the end-of-day balances it dential manner—and that such borrowing might be viewed maintains during the reserve maintenance period in its as a sign of weakness.2 As a result, the volume of balances account at its Federal Reserve Bank. Holding required supplied through the discount window is generally a very reserve balances—the difference between required reserves small fraction of the total supply of reserves. and applied vault cash—is costly for a depository institution because the Federal Reserve does not pay interest on these Nonborrowed Reserves (NBR). Nonborrowed reserves balances. are reserves provided to depository institutions through means other than the discount window and include applied Excess Reserves (ER). A depository institution may vault cash. Over time, nonborrowed reserves are affected choose to hold balances at its Federal Reserve Bank in primarily by open market operations. They are also influaddition to those it must hold to meet reserve requirements; enced by changes in technical factors (described below). these balances are called excess reserves. Depository insti- Although the Federal Reserve does not have complete contutions hold excess reserves to avoid deficiencies in their trol over technical factors, it can offset fairly closely their required reserve balances and to avoid overnight overdrafts, effects on nonborrowed reserves through open market both of which are subject to charges. In general, depository operations, and thus it can exercise considerable control institutions hold few excess reserves because these holdings over the supply of reserves. do not earn interest. Most excess reserves are held by small depository institutions for whom the cost of very close In equation form, the reserve concepts are related as management of reserve balances would exceed the interest follows: they could earn by holding fewer excess reserves. Vault TR = RR + ER = BR + NBR. 1. Approximately 99 percent of all required reserves are held by depository institutions that meet their reserve requirements on a two-week average At equilibrium, the total demand for reserves must equal the basis. The computation and maintenance periods for these depository institu- total supply of reserves. tions are nearly contemporaneous. Small depository institutions hold the remaining required reserves. The computation and maintenance periods for these institutions are one-week long, but there is a lag between the two periods. 2. See Clouse, "Recent Developments in Discount Window Policy." During most of the 1970s, it targeted the federal Under this approach, market interest rates varied over funds rate. In October 1979, at a time when anti- a wide range, mainly in response to deviations in Ml inflationary restraint was called for, it began instead growth from the FOMC's objective. to target the quantity of reserves—specifically, non- By late 1982, it had become clear that financial borrowed reserves—to achieve greater control over innovation had weakened the historical link between Ml, the narrowest measure of the money stock. Ml and the economic objectives of monetary policy, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 861 Reserve Concepts, Technical Factors, and Required Clearing Balances—Continued Technical Factors the check is physically presented to it. Float temporarily Affecting Nonborrowed Reserves adds reserve balances to the depository system because, until the paying institution's account is debited, the two Technical factors are items on the Federal Reserve's baldepository institutions essentially are credited with the same ance sheet other than loans and holdings of domestic securireserve balances. Float is most volatile following inclement ties that can affect the supply of nonborrowed reserves to weather that disrupts the normal check-delivery process. depository institutions.3 The key factors are described here. Foreign Exchange. When the Federal Reserve purchases Currency. The Federal Reserve supplies currency to dollars, it does so by selling assets denominated in foreign depository institutions. When it does so, it debits the Fedcurrencies. It debits the account of the purchaser of the eral Reserve account of the depository institution receiving foreign currency asset (or the purchaser's depository instituthe currency, thus draining reserve balances from the tion if the purchaser is not a depository institution) for the depository system. The amount of currency demanded by dollar value of the transaction, so reserve balances decrease. the public, both in the United States and abroad, tends to Conversely, when the Federal Reserve sells dollars, it purgrow over time, in part reflecting increases in nominal chases assets denominated in foreign currencies. It credits spending. Consequently, an increasing volume of reserve the account of the seller's depository institution for the balances is drained from the depository system and must be dollar value of the transaction, and reserve balances replenished. The expansion of currency outstanding is the increase. The effects of these transactions on reserve balprimary reason the Desk conducts outright purchases of ances are sterilized, or offset, by open market operations. securities. Treasury Balance. The U.S. Treasury maintains an Required Clearing Balances account at the Federal Reserve. When a payment is made to the Treasury, the Federal Reserve account of the depository Depository institutions that use Federal Reserve priced serinstitution on which the payment is drawn is debited, and vices (such as check clearing or electronic payment serthe Federal Reserve account of the Treasury is credited. The vices) may establish required clearing balances at their Treasury is not a depository institution, so the transaction Federal Reserve Banks. When a depository institution estabdrains reserve balances from the depository system. The lishes a required clearing balance, it commits in advance Treasury's Federal Reserve balance is the most volatile to holding a specified balance, above its required reserve technical factor that affects nonborrowed reserves, espe- balance, on average over the reserve maintenance period. cially in the weeks following the April 15 deadline for Required clearing balances, like excess reserves, provide federal income tax payments. a cushion against overnight overdrafts; unlike excess reserves, however, required clearing balances earn implicit Federal Reserve Float. Federal Reserve float is created interest, in the form of earnings credits. If the depository when the account of the depository institution presenting a institution fails to satisfy its required clearing balance, the check for payment is credited before the account of the deficiency is subject to a charge. depository institution on which the check is drawn is deb- Although they are excluded from reserve measures ited. This situation can arise because credit is granted to the because they cannot be used to meet reserve requirements, presenting depositor}' institution on a preset schedule, required clearing balances play an important role in helping whereas the paying institution's account is not debited until depository institutions avoid overnight overdrafts. For the Desk's purposes, required clearing balances are included 3. A more detailed discussion of the factors affecting nonborrowed in nonborrowed reserves as a technical factor absorbing reserves can be found in Ann-Marie Meulendyke, U.S. Monetary Policy and Financial Markets, pp. 141-47. reserves. and the FOMC began to make more discretionary remaining need for reserves by borrowing at the decisions about money market conditions, using a discount window. The total amount borrowed is limwider array of economic and financial variables to ited, however, even though the discount rate is generjudge the need for an adjustment in short-term inter- ally below the federal funds rate, because access to est rates. In the day-to-day conduct of open market discount window credit is restricted. In particular, operations, this change was manifested in a shift of depository institutions are required to pursue all other focus from a nonborrowed reserve target to a bor- reasonably available sources of funds, including those rowed reserve target. The Federal Reserve routinely available in the federal funds market, before credit is supplies fewer reserves than the estimated demand, granted. During the time it was targeting borrowed thus forcing depository institutions to meet their reserves, the Federal Reserve influenced the level of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

862 Federal Reserve Bulletin • November 1997 the federal funds rate by controlling the extent to the seller's depository institution at the Federal which depository institutions had to turn to the dis- Reserve. Conversely, sales of securities decrease the count window. When it wanted to ease monetary quantity of Federal Reserve balances because the policy, it would reduce the borrowed reserve target Federal Reserve extinguishes balances when it debits and supply more nonborrowed reserves to meet esti- the account of the purchaser's depository institution mated demand. With less pressure to borrow from the at the Federal Reserve. In contrast, when financial discount window, depository institutions would bid institutions, business firms, or individuals conduct less aggressively for reserve balances at the Federal transactions among themselves, they simply redistrib- Reserve, and the federal funds rate would fall. ute existing balances held at the Federal Reserve Beginning in the mid-1980s, spreading doubts without changing the aggregate level of those about the financial health of some depository institu- balances.5 tions led to an increasing reluctance on the part of many institutions to borrow at the discount window, thus weakening the link between borrowing and the Domestic Securities Holdings federal funds rate.4 Consequently, the Federal Reserve increasingly sought to attain a specific level Open market operations are arranged by the Domesof the federal funds rate rather than a targeted quan- tic Trading Desk at the Federal Reserve Bank of tity of borrowed reserves. New York (the Desk) under authorization from the In early 1994, the FOMC was preparing to tighten FOMC, which was created by statute to direct open monetary policy for the first time in five years, and it market operations. Operations are conducted in wanted the public to understand its objectives as domestic securities, primarily U.S. Treasury and quickly and clearly as possible. For many years, the federal agency securities.6 Nearly all of the Federal FOMC did not announce changes in the stance of Reserve's domestic securities holdings are Treasury monetary policy. Instead, market participants had to securities, with roughly equal shares of Treasury bills infer changes from the type of open market operation and Treasury coupon securities—notes and bonds conducted and the level of the federal funds rate (table 1). Federal agency securities have accounted relative to their perceptions about the FOMC's target for only a small proportion of the domestic securities rate. The perceived change would then be publicized portfolio since the Federal Reserve began purchasing through wire service stories and other press accounts. such securities in 1971. The Desk has not added to This means of communicating could, and on a few the Federal Reserve's permanent holdings of agency occasions did, lead to misunderstandings about the securities through open market purchases since 1981; stance of policy or to delays in recognizing changes. moreover, when suitable replacements for maturing As a result, the FOMC in 1994 began announcing issues have not been offered, the Desk has had to changes in its policy stance, so that the public would allow existing holdings to mature without replacelearn of any change immediately. In 1995, it sought ment. As a result, the Federal Reserve's holdings of to make its announcements even clearer by explicitly federal agency securities have declined steadily, and stating its short-term objective for open market opera- recently the Desk stated that it will permit the remaintions, which is currently a target level for the federal der of these holdings to mature without replacement. funds rate. It continues, however, to acquire agency securities in temporary operations, which are discussed below. OPEN MARKET OPERATIONS: AN OVERVIEW 5. More detailed discussions of open market operations can be found in Meulendyke, U.S. Monetary Policy and Financial Markets, Open market operations affect the supply of Federal and in M.A. Akhtar, Understanding Open Market Operations (New York: Federal Reserve Bank of New York, 1997). Reserve balances to depository institutions. Purchases 6. The Desk is also authorized to conduct limited operations in of securities increase the quantity of Federal Reserve bankers' acceptances, and it was very active in that market until 1977, balances because the Federal Reserve creates the when the FOMC decided to discontinue outright purchases under ordinary circumstances. Outright transactions in bankers' acceptances balances to pay the seller by crediting the account of had not contributed materially to meeting reserve needs for a number of years, and the FOMC noted that the market had become mature and efficient and no longer needed support from Federal Reserve operations. Similar motivations prompted the FOMC to discontinue tempo- 4. See Clouse, "Recent Developments in Discount Window Pol- rary purchases of bankers' acceptances in 1984. icy." See also "Monetary Policy and Open Market Operations during The Federal Reserve also holds securities denominated in foreign 1988," Federal Reserve Bank of New York Quarterly Review, vol. 14 currencies. Purchases and sales of these securities are not considered (Winter-Spring 1989), pp. 83-102. open market operations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 863 1. Federal Reserve holdings of U.S. Treasury and federal 2. Average maturity of marketable U.S. Treasury securities, agency securities, September 24, 1997 selected years, 1975-97 Billions of dollars Months Type of security Holding Year Federal Reserve Holdings of holdings private investors Treasury bills' 209.6 Treasury coupon securities 216.5 1975 31 29 Notes 161.5 1980 54 45 Bonds ...... 55.0 1985 47 60 Federal agency .9 427.0 1990 39 71 1991 35 72 1992 36 70 1. Includes Treasury bills sold under matched sale-purchase transactions. 1993 38 68 1994 38 66 1995 39 63 The overall size of the Federal Reserve's portfolio 1996 41 63 of domestic securities is dictated by the FOMC's 1997 4422 6644 monetary policy objectives. The liquidity and matu- NOTE. End-of-year data except 1997; for 1997, end-of-June data. Federal Reserve holdings exclude the effects of securities acquired and sold in rity of that portfolio depend on the FOMC's prefertemporary transactions. ences, which have evolved over time. In the early SOURCE. Federal Reserve Bank of New York and Treasury Bulletin. 1980s, the average maturity of the portfolio was slightly more than four years, similar to the average Counterparties maturity of the public's holdings of marketable U.S. Treasury debt (table 2). In 1984, when Continental The FOMC's authorization to conduct open market Illinois National Bank faced a severe liquidity crisis, operations permits the Desk to conduct business with emphasis on the liquidity of the portfolio increased foreign official and international institutions that because the Desk had to offset the massive volume of maintain accounts at the Federal Reserve Bank of balances provided to Continental through the dis- New York and with securities dealers. The dealers count window. The Federal Reserve was able to with which the Desk transacts business are called maintain the desired level of reserve balances by primary dealers. For many years, primary dealers allowing Treasury bills to mature without replacewere expected to meet market share and capital ment and by selling them in a market that was receprequirements, to bid meaningfully for new securities tive to liquid short-term issues of the highest quality. at U.S. Treasury auctions, and to permit review of The crisis underscored the importance of having a their dealer activities by the Federal Reserve through liquid portfolio, one that could accommodate develstatistical and financial reporting and on-site visits.8 opments requiring large cuts in holdings over a short In addition to being invited to bid in open market period. Over the next seven years, the average matuoperations, primary dealers, unlike other dealers, rity trended down as the Desk purchased more Treawere allowed to bid on behalf of customers at all sury bills than Treasury coupon issues on balance.7 Treasury auctions and to bid at Treasury note and By the end of 1991, the average maturity of the bond auctions without first making a deposit or portfolio was just under three years. obtaining a guarantee. The practice of transacting In the spring of 1992, the FOMC reviewed the with a limited number of dealers was intended to maturity structure of the Federal Reserve's portfolio foster the development of active and liquid secondary holdings. It concluded that the portfolio was suffimarkets for Treasury debt, to promote vigorous bidciently liquid and directed the Desk to take steps to ding at Treasury auctions, and to ensure that the keep the average maturity from falling further. Fol- Federal Reserve had counterparties who could handle lowing a further review in September 1996, the its large orders efficiently and safely. FOMC confirmed its view that the primary objective In 1991, following disclosures of bidding irreguin managing the composition of the Federal Reserve's larities at Treasury auctions by Salomon Brothers, domestic securities portfolio was to ensure a high Inc., the Treasury, the Securities and Exchange Comdegree of liquidity. mission, and the Federal Reserve reviewed many aspects of the market for Treasury securities, includ- 7. The notable exception in this downtrend occurred in 1989, when the average maturity ticked up. Heavy purchases of foreign currency by the Federal Reserve injected more reserve balances into the deposi- 8. See also "Monetary Policy and Open Market Operations during tory system than were consistent with reserve objectives, and the Desk 1991," Federal Reserve Bank of New York Quarterly Review, vol. 17 absorbed the overabundance through sales of Treasury bills. (Spring 1992), pp. 1-24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

864 Federal Reserve Bulletin • November 1997 Estimating the Need for Open Market Operations The first step in estimating the need for open market opera- equation is used to construct the nonborrowed reserve tions is constructing the nonborrowed reserve objective. objective. For example, if required reserves are estimated at Rearranging the equation that defines reserve concepts, $47.5 billion, the demand for excess reserves is assumed to be $1 billion, and borrowed reserves are estimated at NBR = RR + ER- BR. $0.4 billion, then the nonborrowed reserve objective for the The demand for required reserves (RR) is estimated by staff period is $48.1 billion. at the Federal Reserve Bank of New York and at the Board The second step is forecasting the supply of nonborrowed of Governors on the basis of data on deposits reported by reserves in the absence of any additional open market depository institutions. The Desk assumes that the demand operations over the remainder of the maintenance period. for excess reserves (ER) will be $1 billion, but it sometimes These forecasts, which are provided to the Desk by staff at adjusts that figure as the maintenance period progresses on the New York Reserve Bank and the Board, include an the basis of econometric models and data on holdings of estimate of the amount of vault cash that depository instituexcess reserves by type of depository institution (for exam- tions will use to meet their reserve requirements. ple, large banks, small banks, thrift institutions, and U.S. The amount of reserve balances that must be added or branches of foreign banks). The supply of borrowed drained through open market operations each day, on averreserves (BR) is estimated by the Desk as the amount of age, over the entire reserve maintenance period is the differreserve balances to be supplied through the discount ence between the nonborrowed reserve objective and the window that is consistent with the difference between the projected supply of nonborrowed reserves. If the projected discount rate and the FOMC's target federal funds rate. supply exceeds the objective, the Desk must drain reserve Most discount window borrowing is done under the sea- balances during the period. If the objective exceeds the sonal program, and the interest rate charged is a floating, projected supply, the Desk must add reserve balances; for market-based rate; such borrowing rises in the spring (as example, if the staff estimates that the supply of nonborloans are extended during the planting season), peaks in the rowed reserves is $44.1 billion for the period and the summer, and tapers off in the fall (as loans are repaid after objective is $48.1 billion, then the Desk needs to add a daily the harvest). Once these three estimates are available, the average of $4 billion over the maintenance period. ing the primary dealer system.9 The review prompted primary dealers currently is close to its 1991 level: the Federal Reserve to establish a more open system Some dealers have been added to the list, while a few of trading relationships based primarily on the have either exited the business or merged with other value of the dealers as counterparties for the Federal primary dealers. Reserve and the Treasury. The Federal Reserve dropped the market share criterion, which was viewed by some market participants as a barrier, and THE DAILY CONDUCT discontinued its dealer surveillance function, in part OF OPEN MARKET OPERATIONS to emphasize that the Federal Reserve does not regulate primary dealers. As it always has, the Federal Each morning, the staff at the Domestic Trading Reserve does require that primary dealers be active Desk decide whether an open market operation is and competitive participants in open market operanecessary and, if so, whether it should be an outright tions and that they be consistent and meaningful or a temporary operation. participants in Treasury auctions. It also requires that primary dealers meet the capital standards of their primary regulators rather than a standard set by the Federal Reserve. In addition, primary dealers must Determining the Need for an Operation freely and candidly supply the Desk with information on market activity. The joint agency review also Staff at the Federal Reserve Bank of New York and at prompted the Treasury to change its auction proce- the Board of Governors provide the Desk with estidures, extending to other dealers the privileges once mates of the average supply of and demand for enjoyed only by primary dealers. The number of reserves for the current two-week reserve maintenance period (and two future periods), along with the daily estimates that underlie the averages for the 9. The findings of the review are reported in Joint Report on the current period. The estimates of period-average Government Securities Market (Washington, D.C.: Government Printreserve demand, less an allowance for discount wining Office, January 1992). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 865 dow borrowing consistent with the federal funds rate 3. Outright purchases in the market, 1990-97 target, yield an objective for nonborrowed reserves. (See box "Estimating the Need for Open Market Treasury bills Treasury coupon securities Operations.") This objective is modified as the main- YYeeaarr Volume Volume Number of Number of (billions of (billions of tenance period progresses to incorporate new infor- market entries dollars) market entries dollars) mation on reserve demand or borrowing. The objec- 1990 16.6 0 tive is compared with the projected supply of 1991 8.1 1 2.3 nonborrowed reserves absent any additional open 1 1 9 9 9 9 2 3 9 8 . . 7 6 4 3 1 1 2 6 . . 3 8 market operations during the maintenance period. 1994 7.7 4 17.0 The difference between the objective and the pro- 1995 8.2 5 9.1 1996 9.8 5 7.2 jected supply indicates the amount of reserve bal- 1997 4.0 13 17.4 ances that must be added or drained each day, on NOTE. Data for 1997 are through September 24. average, over the entire maintenance period: If the objective for nonborrowed reserves exceeds the projected supply, the Desk needs to add reserve bal- waiting. In November 1995, the Desk changed its ances; if the projected supply of nonborrowed approach to outright coupon purchases. It now reserves exceeds the objective, the Desk needs to divides up a purchase of coupon securities, focusing drain reserve balances. The points during the main- on only a portion of the maturity spectrum rather than tenance period at which reserve balances are added or on all maturities at once. This approach has further drained and the types of operations conducted depend decreased the turnaround time for such operations importantly on the expected duration and daily pat- and has likely resulted in better prices to the Desk. tern of the reserve need. The Desk still purchases all maturities of Treasury coupon issues, but it generally spreads its purchases over several weeks, in keeping with the size of esti- Outright Operations mated reserve needs. With this new procedure, the Desk is better able to tailor its purchases to reserve If staff projections indicate a large and persistent needs. In addition, the operations, which had been imbalance between reserve demand and supply, say conducted only in the early afternoon, can now be for a month or more, the Desk may conduct an conducted in the morning as well. outright purchase or sale of securities. (See box "Types of Open Market Operations.") Such transactions increase or decrease the size of the Federal Temporary Operations Reserve's portfolio (and thus add or drain reserve balances) permanently. The Desk conducts far more If staff projections indicate only a short-lived need outright purchases than outright sales, primarily to add or drain reserve balances, the Desk usually because it must offset the reserve drain resulting from conducts a temporary operation. Such operations are the public's increasing demand for currency. far more common than outright operations, partly Before 1995, the Desk entered the market to con- because daily fluctuations in technical factors alter duct outright operations only a few times each year. It reserve supply (as discussed in the box "Reserve would wait until reserve needs were large enough Concepts, Technical Factors, and Required Clearing to warrant a sizable transaction—on the order of Balances"). The daily demand for reserves is gener- $3 billion to $4 billion—in part because such opera- ally assumed to be equal to the period-average level, tions, especially coupon purchases, were time con- but the figure is informally adjusted on days on suming. For a coupon purchase, for example, the which reserve demand has historically appeared to be Desk had to review numerous offers on about two elevated, such as on days on which social security hundred securities. (The number and volume of out- payments are made. Although reserves are held on a right purchases in recent years are shown in table 3.) two-week average basis, a large imbalance between Automation of the bidding process in 1994 decreased demand and supply on any one day may cause the the time needed to evaluate offers, but dealers still federal funds rate to move significantly away from had to wait a significant amount of time between the FOMC's target. Temporary open market operasubmitting offers and learning whether their offers tions help to offset such large daily imbalances. The had been accepted. For that reason, dealers, in pricing Desk arranges repurchase agreements to add reserve their offers, took into account the risk that mar- balances temporarily and matched sale-purchase ket prices might move adversely while they were transactions to drain reserve balances temporarily. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

866 Federal Reserve Bulletin • November 1997 Types of Open Market Operations Most open market operations are conducted in the market Purchases from and Sales to Foreign and International with the thirty-nine securities dealers that are designated Accounts. Purchases from and sales to foreign and interna- "primary dealers;" some are conducted with foreign official tional accounts enable the Desk to make small adjustments and international institutions that maintain accounts at the to the Federal Reserve's securities holdings without for- Federal Reserve Bank of New York. All operations in the mally entering the market.2 Purchases from these accounts market are conducted as auctions, with all primary dealers were fairly common until 1996, when the Desk decided to invited to bid, and the bidding and bid evaluation processes make most of its purchases in the secondary market from are now automated. Since January 1997, the Desk has primary dealers so that its operations would be more transreported the par value of each of its open market operations parent. Also, the recent shift to purchasing securities in the with primary dealers at the conclusion of the operation. market in a particular portion of the maturity spectrum has given the Desk the flexibility to add to the Federal Reserve's portfolio more gradually, thus reducing the need to rely on Outright Operations transactions with foreign and international accounts for this The Desk may not add to the Federal Reserve's holdings of purpose. Sales to these accounts have been infrequent in the securities by purchasing new securities when they are first 1990s because of the strong demand for currency. The sizes auctioned because it has no authority to lend directly to the of purchases from and sales to foreign and international Treasury.1 Therefore, it must make any additions to hold- accounts are not explicitly reported to the public, though ings through purchases from primary dealers in the second- they can be inferred from changes in the Federal Reserve's ary market or directly from foreign official and international holdings of domestic securities.3 institutions. Redemptions. The Desk can choose to reduce the size of Purchases and Sales in the Market. When purchasing or the Federal Reserve's holdings by redeeming some of its selling securities in the secondary market, the Desk enter- maturing securities rather than exchanging all of them for tains from primary dealers bids on all securities of a particu- new securities. Such an approach makes it possible to lar type (Treasury bills or Treasury coupon securities) and, reduce the portfolio gradually without formally entering the for coupon securities, in a particular portion of the maturity market. When replacement securities are not available, the spectrum. In determining which bids to accept, the Desk Desk must redeem its maturing holdings. considers the bids that represent the highest yield (for purchases) or the lowest yield (for sales) relative to the Temporary Operations prevailing yield curve. To avoid holding too large a share of any one issue, the Desk also considers the size of its An operation is temporary if the transaction will, under the holdings of the particular issue relative to the total amount contract, unwind after a specified number of days. Tempooutstanding. rary open market operations help to offset short-lived imbal- Outright sales in the market are infrequent; the most ances between reserve supply and demand. The Desk recent one occurred in 1990. For many years, the Desk arranges repurchase agreements to add reserve balances often sold Treasury bills in late January to absorb a surfeit temporarily and matched sale-purchase transactions to drain of reserves resulting from seasonal declines in currency reserve balances temporarily. outstanding and in required reserves. In the 1990s, strong overseas demand for U.S. currency generally has offset the seasonal decline in currency outstanding, obviating the need 2. The price at which these transactions occur is the midpoint between the bid and the ask price in the secondary market. for outright sales. 3. Federal Reserve statistical release H.4.1, Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of F.R. Banks, which is published each Thursday, provides data on the Federal Reserve's domestic securities portfolio and other factors affecting the reserve balances 1. It may exchange its maturing holdings for new securities at auction, of depository institutions. These data are also provided monthly in tables however, and it does so routinely. 1.11 and 1.18 of the Federal Reserve Bulletin. For more than seventeen years, the Desk entered casts. Although the market for repurchase agreements the market to arrange temporary transactions between was somewhat more active earlier in the day, it was 11:30 a.m. and 11:45 a.m. This time was selected usually sufficiently active at this time to accommobecause it gave staff members at the Board and the date open market operations. Nonetheless, there was New York Reserve Bank time at the beginning of the a risk that the volume of offers on the operation business day to assemble data on factors affecting would not be sufficient to allow the Desk to inject the reserve supply and demand and to make their fore- desired amount of reserve balances into the deposi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 867 Types of Open Market Operations—Continued Repurchase Agreements arranged by the Desk with primary dealers on behalf of When the Desk arranges a repurchase agreement, it pur- foreign official and international institutions that maintain chases securities from a primary dealer (or the dealer's accounts at the Federal Reserve Bank of New York. customer) and agrees to resell the securities to the dealer (or These institutions maintain accounts at the New York customer) on a specified date. The Desk arranges two types Reserve Bank to help manage their U.S. dollar payments of repurchase agreements: System and customer-related. and receipts. The Federal Reserve provides a means by For both types, the Desk solicits offers from primary deal- which the cash balances in these accounts can be invested ers. The dealers may make offers on their own behalf or on overnight. The accounts purchase securities from the Fedbehalf of their customers. The offers set forth a rate and an eral Reserve's portfolio and simultaneously agree to resell amount of repurchase agreements that the dealer (or its the securities the next business day at prices that give the customer) is prepared to transact.4 The Desk ranks the bids accounts a market-based rate of return. Reserve balances in descending order of rate. It accepts the offer with the are drained when balances in these accounts rise. When the highest rate first and continues to accept lower rates until Desk wants to replenish reserve levels, it may decide to the total volume of offers equals the amount of reserve pass these accounts' purchase requests through to primary balances that the Desk wants to inject into the depository dealers as customer-related repurchase agreements. system. If a greater quantity is offered at the lowest rate Customer-related repurchase agreements were first used than is needed to attain the desired quantity, the offers at in 1974 and were quite common until recently. In December that rate are prorated. 1996, the Desk announced that it would no longer routinely conduct these operations, and it did not conduct any over System Repurchase Agreements. The Desk does not the first nine months of 1997. When the Desk did conduct announce the intended size of the operation when it solicits these transactions, it announced the intended size of the offers. The dealer (or customer) whose offer is accepted operation to dealers but usually did not report the final sends securities (Treasury or federal agency) to the Federal accepted amount. The operations were generally smaller Reserve Bank of New York, and the Bank pays for them by than operations involving System repurchase agreements; creating balances in the Federal Reserve account of the the maximum size was limited by the volume of purchase dealer's (or the dealer's customer's) clearing bank. requests. The maturity of these agreements was generally System repurchase agreements are conducted on an over- overnight because participation in the investment facility night or term basis. Term repurchase agreements may last changed each day. These operations were viewed as technino longer than fifteen days and may be either withdrawable cal in nature and as a signal of satisfaction with the level of or fixed term. If the agreement is withdrawable, the dealer the federal funds rate. has the option of asking, before 10:00 a.m. on any day before the agreement concludes, for the return of its securi- Matched Sale-Purchase Transactions ties; it usually does so if financing rates fall below the rate arranged with the Desk. If the repurchase agreement is fixed Matched sale-purchase transactions (which are akin to term, the dealer may not withdraw its securities early. reverse repurchase agreements) are the method by which Until February 1994, when the FOMC began announcing the Federal Reserve drains reserve balances temporarily. changes in its policy stance, overnight System repurchase They were first used in 1966. In these transactions, the agreements were often used to signal an easing of monetary Federal Reserve agrees to sell a short-dated Treasury bill at policy. Term System repurchase agreements, in contrast, a specified price, and the buyer simultaneously enters into were considered more technical, though the Desk generally another agreement to sell the bill back to the Federal refrained from such operations when the federal funds rate Reserve on a specific date. was noticeably below the FOMC's target, so as not to In a matched sale-purchase transaction, the Desk indimislead market participants about the stance of policy. cates the bill and the rate at which it will sell the bill. Dealers then submit offers for the amount of the bill they Customer-Related Repurchase Agreements. Customerwill buy and the rate at which they will resell it to the Desk. related repurchase agreements are a type of transaction The Desk accepts the highest rate first (so that it buys back the bill at the lowest price) and continues to accept lower 4. The price at which the Federal Reserve temporarily purchases the rates until the total of accepted offers equals the amount of securities is that day's market price. This price and the rate quoted by the reserve balances that it wants to drain. dealer determine the price at which the Federal Reserve resells the securities. tory system, particularly when reserve needs were tion time or might preannounce the operation on the large. At times when the risk was high, the Desk preceding afternoon to try to ensure that the volume might enter the market before its customary interven- of offers would be adequate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

868 Federal Reserve Bulletin • November 1997 In 1994, the Federal Reserve began charging a fee more than once to arrange repurchase agreements on for daylight overdrafts in depository institutions' Fed- only two days in the first nine months of 1997. eral Reserve accounts.10 Securities dealers, who now faced fees on the daylight overdrafts in their accounts with depository institutions, began arranging and set- CHANGES IN THE DEMAND FOR BALANCES tling more of their financing transactions earlier in AND THEIR IMPLICATIONS the day to reduce their daylight overdrafts. The Desk, in turn, sought to align its market entry more closely Innovations in the 1990s have reduced required with the period of greatest market activity, and reserve balances. Although depository institutions in January 1997, after an acceleration of Federal have increased the amount of balances they contract Reserve data flows and modifications to processing to hold in the form of required clearing balances, procedures, it moved its intervention time to around total required balances have dropped to historically 10:30 a.m. low levels. This development has implications for the Shifts in the short-run target for open market opera- conduct of open market operations and for the federal tions have influenced the number of times the Desk funds rate. enters the market each day to conduct temporary transactions and the role of reserve estimates in determining the amount of reserve balances to be sup- High Total Required Balances plied. In the 1970s, when the target was the federal funds rate, the Desk frequently entered the market Until the early 1990s, depository institution demand several times a day. Although reserve estimates gen- for balances at the Federal Reserve was high and erally guided decisions about the quantity of reserve relatively stable. This environment facilitated the balances to be supplied, the Desk responded to any conduct of open market operations. High required deviation of the federal funds rate from target, regard- reserves created a stable, predictable demand for less of the reserve estimates, up until its intervention reserve balances, so the Desk could more readily window closed in the early afternoon. During the achieve the FOMC's reserve market objective by 1979-82 period, when the target was nonborrowed manipulating the supply of reserve balances. Morereserves, the Desk entered the market at most once a over, high required reserve balances and the averagday. Estimates of reserve supply and demand were ing method used to satisfy them allowed depository essential in determining the quantity of reserve bal- institutions to manage their daily account balances ances to be supplied. At the time of this single market flexibly, thus helping to smooth the federal funds entry, the Desk typically conducted only one opera- rate.11 tion, although at times it conducted two operations The size of the balance that a depository institution with different terms, such as four- and seven-day wants to hold at the end of the day in most cases is repurchase agreements. Since late 1982, as proce- either its required reserve balance (plus perhaps a dures have evolved and the federal funds rate again desired amount of excess reserves) or the balance it has become the short-run target for open market chooses to hold to protect itself against unanticipated operations, the Desk has continued, generally, to enter debits that could leave its account overdrawn at the market at most once a day to conduct temporary the end of the day—its payment-related demand. transactions, and at times to conduct two operations When required reserve balances are high relative to with different terms. Estimates of reserve supply and payment-related balances, depository institutions demand continue to play a role in determining the have a great deal of flexibility in managing their daily amount of reserve balances to supply in order to keep account balances because they can substitute a balthe federal funds rate close to the FOMC's target ance held on one day for a balance held on another level. It is possible that the Desk will enter the market day.12 A depository institution that finds its balance at several times on any given day when reserve needs the Federal Reserve unexpectedly high on one day warrant, but multiple market entries are not expected (for instance, because a customer made an unexto become routine. The Desk entered the market pected deposit or an expected payment was not made) 11. A depository institution's required reserve balance is the differ- 10. For a discussion of the reasons for the Federal Reserve's ence between its required reserves and its applied vault cash. imposition of fees for daylight overdrafts and the response to these 12. The degree of substitutability is more limited on the final day fees, see Heidi Willmann Richards, "Daylight Overdraft Fees and the of the maintenance period because reserve carryover rules control the Federal Reserve's Payment System Risk Policy," Federal Reserve extent to which deficient or excess balances may be carried into the Bulletin, vol. 81 (December 1995), pp. 1065-77. next maintenance period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 869 does not have to offer to lend the extra balance at 1. Required balances at Federal Reserve Banks, 1984-97 very low rates; it can absorb the surplus by choosing Billions of dollars to hold lower balances over the remainder of the period and still meet its balance requirement.13 Hold- Required reserve balances ing a lower balance on a subsequent day of the period does not necessarily increase the likelihood that the depository institution will incur an overnight overdraft because its targeted balance is still high relative to its payment-related demand for balances. This flexibility in managing account balances buffers variations in reserve demand and supply that would otherwise put pressure on the federal funds rate. Before the early 1990s, the demand for balances to meet reserve requirements was well above the payment-related demand for balances. Imbalances between the daily supply of and demand for reserves Required clearing balances could be relatively sizable without affecting the federal funds rate as long as cumulative-average balances were close to period-average requirements. For example, unexpected deviations of reserve supply from projections generally did not create volatility in the federal funds market until near the end of the reserve maintenance period. Innovations Reducing Required Reserve Balances In recent years, the level of required reserve balances — 40 has been trending down (chart 1, top panel), for Total required balances several reasons. Cuts in Reserve Requirement Ratios Required reserve balances In the early 1990s, sharp declines in required reserve balances followed two cuts in reserve requirement Required clearing balances ratios by the Federal Reserve:14 In December 1990, the ratio for nontransaction deposits was reduced from 3 percent to zero, and in April 1992, the ratio NOTE. Maintenance-period averages, not seasonally adjusted; 1997 data through September 24. for transaction deposits was reduced from 12 percent 13. A depository institution's end-of-day balances during a reserve to 10 percent.15 The cuts had little effect on the maintenance period must at least average its balance requirement, and amount of vault cash held by depository institutions, any deficiency may be subject to a charge. The charge is 2 percentage points above the lowest discount rate in effect for borrowing from its which depends largely on customer needs for cur- Federal Reserve Bank on the first day of the month in which the rency, so most of the reductions in required reserves deficiency occurred. Reserve carryover rules permit the depository were reflected in lower required reserve balances. institution to carry over a deficiency (or surplus) of up to 4 percent of its required reserves into the next maintenance period. Any deficiency Each of the cuts trimmed required reserve balances that cannot be carried over is subject to charge immediately. If the about one-third. depository institution fails to cover the deficiency that was carried over to the subsequent period, the deficiency charge applies to that portion as well. 14. The subsequent rebounds in these balances reflected strong 15. The reasons these cuts were made and their implications are growth in transaction deposits due in part to falling market interest discussed in Feinman, "Reserve Requirements: History, Current Pracrates. tice, and Potential Reform." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

870 Federal Reserve Bulletin • November 1997 Initiation of Retail Sweep Programs programs reached an estimated $226 billion in August 1997.16 As a consequence, required reserves More recently, depository institutions have reduced declined nearly $21 billion, or one-third, between the amount of balances they must hold at the Federal December 1993 and August 1997. Sweep programs Reserve by instituting retail sweep programs. Under lower the balance a depository institution must hold such a program, a depository institution shifts funds to meet its reserve requirement; in some cases, they from a depositor's reservable transaction deposit (a lower the required reserve balance so much that it checking account) to that depositor's nonreservable falls to zero because the depository institution's vault account (in most cases a money market deposit cash is more than sufficient to satisfy its reserve account). (See box "Retail Sweep Programs.") By requirement. In the aggregate, required reserve baldoing so, the depository institution decreases the ances dropped nearly $20 billion, or 70 percent, level of its deposits subject to reserve requirements between December 1993 and August 1997. and, with no change in its vault cash holdings, its required reserve balance, on which it earns no interest. A sweep program is profitable because the depository institution can invest the balances for- The Response of Required Clearing Balances merly held as reserves in interest-earning assets. Retail sweep programs were first implemented For many depository institutions, the cuts in reserve in January 1994, and since then they have spread to requirement ratios and the introduction of sweep most large depository institutions. The total amount programs have brought their reserve-requirementof reservable deposits initially swept under such related demands for balances below their paymentrelated demands. For such an institution, setting a target end-of-day balance equal only to its required reserve balance would provide insufficient protection against overnight overdrafts, yet setting a target bal- Retail Sweep Programs ance equal to its payment-related demand would result in excess reserves, on which it earns no inter- In a retail sweep program, a depository institution sweeps est. The institution may have another alternative: amounts above a predetermined maximum level from a Any depository institution that uses Federal Reserve depositor's checking account (either a demand deposit or priced services (such as check clearing or electronic an interest-bearing checking account) into a specialpurpose money market deposit account (MMDA) created payment services) may establish a required clearing for the depositor. If the balance in the checking account balance at its Federal Reserve Bank. The institution falls below some minimum level, funds are moved from contracts with the Reserve Bank to hold a specified the MMDA back into the checking account to bring the level of balances on average during the reserve mainchecking account balance to the specified maximum tenance period.17 In return, the depository institution level. The maximum and minimum levels are set by the earns implicit interest, in the form of earnings credits, depository institution on the basis of the depositor's on balances held to satisfy its clearing balance pattern of activity. Regulations limit the number of autorequirement. It may use the earnings credits to defray matic transfers from an MMDA to six a month, so upon the cost of the Federal Reserve services it uses. If the the sixth transfer the remaining funds in the depositor's depository institution fails to maintain its contracted MMDA are swept back into the checking account. clearing balance, on average, over the maintenance Retail sweep programs, which were initiated in January 1994, differ from wholesale sweep programs, which have been in existence since the 1970s. In a wholesale sweep, a depository institution sweeps funds in a business's demand deposit account into one of several types 16. The Federal Reserve does not collect data on the actual amount of money market instruments, such as repurchase agree- of deposits swept each day. Nor does it officially collect information on the initiation of retail sweep programs. It learns about the initiation ments, Eurodollar deposits, or money market mutual of programs through notification by depository institutions and funds. For wholesale sweeps, the instruments into which through routine inspection of deposit data submitted by depository business deposits are swept may or may not be liabilities institutions. It obtains estimates of initial amounts swept directly from of the depository institution; for retail sweeps, on the the depository institutions or from the deposit data and then sums these estimates to arrive at a total. other hand, the swept funds remain on the books of the 17. The Federal Reserve will also impose a required clearing depository institution. balance on any depository institution that has a history of repeated overnight overdrafts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 871 period, the deficiency is subject to a charge.18 Re- The Current Environment: quired clearing balances are similar to required Low Total Required Balances reserve balances in that they establish an average balance that must be maintained over the reserve Low total required balances give depository institumaintenance period. For this reason, required clear- tions less flexibility in managing their daily balance ing and required reserve balances are often summed, positions and thus do not provide a buffer for the and that sum is referred to as total required balances. federal funds rate as high total required balances do. The use of required clearing balances has grown When its total required balance is low, a depository considerably since 1990 (chart 1, middle panel). institution is less able to substitute balances across These balances rose sharply in response to the 1990 days of the maintenance period. It is less likely to cut in reserve requirement ratios and the general hold a balance above its total required balance downtrend in market interest rates occurring at that because its ability to target lower balances on subsetime.19 More recently, depository institutions that quent days is constrained by the increased risk of an implemented sweep programs increased their overnight overdraft; therefore, it will actively seek to required clearing balances an estimated $3lA billion lend any extra balances, on which it earns no interest, between January 1994 and August 1997. The rise in even if the funds rate is already low. It is also less required clearing balances has not matched the likely to tolerate a balance below its total required decline in required reserve balances, however, in part balance because it is more likely to be close to an because depository institutions do not need as large a overdraft; therefore, it will seek to borrow balances, cushion to protect against overnight overdrafts as was and even a small shortfall can trigger aggressive once provided by their required reserve balance. bidding for balances at the Federal Reserve that can, Also, the growth of required clearing balances at in turn, push up the federal funds rate.21 some depository institutions is limited by the extent In addition, when a depository institution's total to which the institution uses Federal Reserve priced required balance is low, its targeted balance at the services.20 Thus, the drop in total required balances at Federal Reserve is likely to fluctuate more from day the Federal Reserve is smaller than the decline in to day. Its payment-related demand for balances may required reserve balances. However, total required more often exceed its demand for balances to meet its balances remain at historically low levels (chart 1, total balance requirement. Payment-related demand bottom panel) and are likely to decline somewhat is a precautionary demand for end-of-day balances further as additional depository institutions imple- that must be met each day, and the magnitude of that ment retail sweep programs. demand depends on the uncertainty about the size and timing of payments flowing through the institution's Federal Reserve account.22 The uncertainty appears to be related to the volume of the payments. This volume likely fluctuates considerably each day, as suggested by the aggregate data shown in chart 2. 18. The penalty for failing to meet the required clearing balance, With uncertainty varying from one day to the next, a after application of the so-called clearing balance band, is 2 percent per annum on any deficient amount that is 20 percent or less than the depository institution's payment-related demand and contracted clearing balance requirement and 4 percent per annum on any remaining deficiency. The clearing balance band exempts from charge 2 percent of the contracted clearing balance or $25,000, whichever is greater. 19. Required clearing balances are sensitive to the level of interest rates because the earnings credits generated from the clearing balance are calculated using the period-average effective federal funds rate. 21. An overnight overdraft is charged at an annual rate equal to the For a more detailed discussion of required clearing balances, see E.J. day's effective federal funds rate plus 4 percentage points. If the Stevens, "Required Clearing Balances," Federal Reserve Bank of depository institution incurs more than three overnight overdrafts in a Cleveland Economic Review, vol. 29 (1993 Quarter 4), pp. 1-14. moving twelve-month period, the spread over the funds rate rises by 20. A depository institution is better off holding excess reserves, 1 percentage point for each additional overdraft. which can be adjusted daily, than contracting to hold a required 22. At the end of the day, depository institutions still face some clearing balance that generates more credits than it can use. The uncertainty about their final balance. Responses to the Federal opportunity cost of holding excess reserves and excess clearing bal- Reserve's May 1996 Senior Financial Officer Survey indicated that ances is the interest forgone on those balances, but the clearing the posting of off-line transactions after the close of the electronic balance locks the depository institution into holding a specified funds transfer system and the possibility that corrections to earlier amount during the maintenance period and makes any deficiency entries might result in a lower balance were very important reasons for subject to a charge. Depository institutions have one year to use the not targeting a lower end-of-day balance in their Federal Reserve credits earned during a maintenance period. accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

872 Federal Reserve Bulletin • November 1997 2. Daily change in total volume of credits posted to the Federal Reserve accounts of all depository institutions, November 1996-January 1997 Billions of dollars " 1 • • - J n n J II n - Hi 1 nil n nil ,J rny u n j U U u u til 1 l j yti i II UUH U u L Ift^fpW i i i i I t t i f • i llli I i 11/18/96 11/25/96 12/02/96 12/09/96 12/16/96 12/23/96 12/30/96 1/6/97 1/13/97 its targeted balance at the Federal Reserve can vary determinant of the total demand for balances at the substantially each day as well. Federal Reserve. Data on credits posted to the Federal Reserve accounts of depository institutions suggest that payment flows are heaviest on the first Implications for Open Market Operations business day, the fifteenth calendar day, and the last business day of the month. On these days, depository The Desk attempts to attain a level of nonborrowed institutions face more uncertainty about their end-ofreserves over a reserve maintenance period that is day balances. Some depository institutions respond consistent with the FOMC's targeted federal funds by targeting a higher balance. The Desk seeks to rate. When planning open market operations, it has provide balances more generously on these days. always paid attention to the daily pattern of reserve However, the exact magnitude of payment-related needs. Now, with total required balances low, the demand is hard to measure and to estimate. Moredaily estimates are playing an even more important over, even if it were to supply a quantity of balances role in decisionmaking. The Desk now also reviews that exactly matched aggregate demand, the Desk* forecasts of the total amount of balances at the Fed- could not ensure that the supply to each institution eral Reserve for the day and for future days. During would exactly match its demand. For these reasons, maintenance periods when total required balances are the federal funds rate may exceed the FOMC's target especially low, the Desk conducts open market opera- on these days. Generally, however, the Desk is able to tions to smooth low points in the estimated daily keep the effective federal funds rate (the volumelevel of total balances. In addition, as it always has, it weighted average rate paid on all transactions during attempts to supply more reserve balances on days the day) close to the FOMC's target rate. when the payment-related demand for balances is expected to be elevated. These additional considerations have resulted in an increase in the number and 4. Temporary open market operations, 1990-97 volume of overnight repurchase agreements arranged in 1996 and thus far in 1997 (table 4).23 An overnight Overnight Term Matched operation is a more effective means of fine tuning the repurchase repurchase sale-purchase agreements agreements transactions daily level of balances than is a term or outright Year Number Volume Number Volume Number Volume operation and better addresses heightened payment- of (billions of (billions of (billions market of market of market of related demands. entries dollars) entries dollars) entries dollars) There is indirect evidence that on certain days 1990 .. 93 253.5 34 136.4 22 76.8 payment-related demand is an especially important 1991 .. 108 320.2 34 188.5 34 78.8 1992 .. 89 254.5 56 278.9 20 28.6 1993 .. 83 266.7 82 361.0 5 10.9 1994 .. 80 217.6 66 257.1 5 13.1 23. An overnight operation matures on the next business day. The 1995 .. 68 206.3 61 248.8 17 48.6 1996 .. 92 347.5 70 250.3 23 52.9 increased use of overnight repurchase agreements is also discussed in 1997 .. 91 351.5 59 296.5 0 "Open Market Operations during 1996," Federal Reserve Bulletin, vol. 83 (July 1997), pp. 565-74. NOTE. Data for 1997 are through September 24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations in the 1990s 873 Implications for the Federal Funds Rate bid the funds rate to very high levels rather than borrow at the window.25 Low total required balances, together with the diffi- The level at which total required balances can culty of gauging the size of payment-related demand, trigger a rise in funds rate volatility is not clear. Since can lead to greater volatility in the federal funds rate, late 1996, for example, total required balances have both during a day and across days.24 For example, been below their 1991 levels, yet funds rate volatility the 1990 cut in reserve requirement ratios brought has failed to rise significantly.26 Apparently, total required reserve balances below the payment-related required balances are sufficiently above the paymentdemand for balances, and funds rate volatility rose related demand for balances to keep the funds rate significantly (chart 3). The time between the announce- relatively stable. The payment-related demand for ment and implementation of the cut was quite short. balances is likely lower now than it was in 1991. Many large depository institutions had no experience Depository institutions have improved their own managing their end-of-day balances at the Federal internal information systems as well as their profi- Reserve with total required balances as low as they ciency in using real-time information on the balances were after the cut. Depository institutions responded in their Federal Reserve accounts available through by holding on to their balances until late in the day, the Federal Reserve's Account Balance Monitoring when their need for balances to avoid an overnight System. In addition, the imposition of fees for dayoverdraft became clearer. The funds rate would light overdrafts has encouraged depository instituremain above the FOMC's target until that time, and tions to manage their balances more closely during then, when depository institutions entered the market the day. In the future, the payment-related demand to try to lend their excess balances, it would drop for balances may continue to fall. Interstate branch sharply. At the same time, the acute reluctance of banking may contribute to lower payment-related depository institutions to borrow at the discount win- demand because separately chartered affiliate banks dow also contributed to the volatility. On days when of a single bank holding company are being merged balances were in short supply, depository institutions into a single interstate branched bank with one Fed- 25. Some of the bidding pressure also came from depository insti- 24. See James A. Clouse and Douglas W. Elmendorf, "Declining tutions that apparently had little or no collateral on deposit with Required Reserves and the Volatility of the Federal Funds Rate," a Federal Reserve Bank and therefore could not borrow readily. Finance and Economics Discussion Series Paper 1997-30 (Board of See "Monetary Policy and Open Market Operations during 1990," Governors of the Federal Reserve System, Divisions of Research and Federal Reserve Bank of New York Quarterly Review, vol. 16 Statistics and Monetary Affairs, June 1997). The authors present a (Spring 1991), pp. 52-78. model of a depository institution's demand for balances that distin- 26. See also Paul Bennett and Spence Hilton, "Falling Reserve guishes requirement-related demand from payment-related demand. Balances and the Federal Funds Rate," Federal Reserve Bank of They also explore the differing behavior of the funds rate in 1991 and New York Current Issues in Economics and Finance, vol. 3 1996. (April 1997), pp. 1-6. 3. Daily range for the federal funds rate, November 1990-April 1991 Percent 100 90 Daily high 35 • • Effective rate Daily low 30 25 * 20 15 10 T ~t ++ •• 5 11/28/90 12/12/90 12/26/90 1/9/91 1/23/91 2/6/91 2/20/91 3/6/91 3/20/91 4/3/91 NOTE. Effective rate is the volume-weighted average rate paid on all transactions during the day. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

874 Federal Reserve Bulletin • November 1997 5. Daily average volatility of the federal funds rate, ances to the point that payment-related demand is 1994-97 routinely larger than requirement-related demand. If Percentage points that does happen, the federal funds rate could become more volatile, and depository institutions may have Measure 1994 1995 1996 1997 to change the way they manage their account bal- Range 1.35 1.06 1.87 1.54 ances. Especially if that volatility is passed on to Intraday standard deviation ... .19 .15 .23 .19 Late range 1.16 .89 1.56 1.35 other market interest rates, the Federal Reserve might need to alter the way it operates in the funds market. NOTE. Values for 1997 are based on data through September 24. Range is the difference between the highest and lowest rate at which federal funds lending One way to forestall the need to make such changes took place in the brokers market. Intraday standard deviation is a volumewould be to pay interest on balances held at the weighted standard deviation of all rates paid in the brokers market. Late range is the difference between the highest and lowest rate at which federal funds Federal Reserve. Payment of a market rate of interest lending took place in the brokers market between the close of the New York on required reserve balances would virtually elimi- Clearing House Interbank Payments System (usually 4:30 p.m.) and the close of funds trading (usually 6:30 p.m.) nate the implicit current tax on depository institutions, likely encouraging some depository institutions to discontinue their sweep programs. However, the eral Reserve account. Before interstate branching, payment of interest on Federal Reserve balances each affiliate account had to end the day with a requires legislation. nonnegative balance; under interstate branching, the transactions of all affiliates (now branches) flow through only one account. SUMMARY The variability in the federal funds rate in recent years is summarized in table 5. In 1996, the daily Open market operations are the principal tool used by trading range for federal funds widened, on average, the Federal Reserve to implement monetary policy. as did an alternative measure, the intraday standard They are a powerful and flexible means of fostering deviation of the funds rate. However, both measures conditions in the federal funds market that are conindicate that volatility tapered off during the first nine sistent with policy objectives. The conduct of open months of 1997. Overall, the slight increase in the market operations in the 1990s has been shaped by a intraday variability of the funds rate has not had number of factors, including shifts in the way the adverse effects on the Desk's ability to attain the FOMC communicates changes in the stance of mone- FOMC's funds rate target; nor has the rise in vari- tary policy, developments in the market for repurability affected other market interest rates more chase agreements, and changes in the demand for generally. balances at the Federal Reserve. In the years ahead, Additional sweep programs are expected to be the Federal Reserve will undoubtedly continue to implemented, and it is not clear whether their prolif- adapt the way it conducts open market operations as eration might eventually lower total required bal- financial markets evolve. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

875 Industrial Production and Capacity Utilization for September 1997 Released for publication October 17 electricity rebounded after decreasing in August, when unseasonably cool weather held down the need Industrial production rose 0.7 percent in September, for air conditioning. Manufacturing output increased boosted by a 4.4 percent jump in the output of 0.4 percent, with substantial gains in the output of utilities. The growth of total output was revised light trucks, computers, commercial aircraft and upward for July, to 0.8 percent, and downward for parts, and semiconductors. The output at mines August, to 0.5 percent; these revisions were concen- decreased 0.5 percent. At 122.4 percent of its 1992 trated in the industrial sector producing materials average, industrial production in September was for further processing. In September the demand for 5.5 percent higher than in September 1996. The utili- Industrial production indexes Twelve-month percent change Twelve-month percent change 0 5 Materials Durable 10 manufacturing 10 5 + 0 Products 5 1991 1992 1993 1994 1995 1996 1997 1991 1992 1993 1994 1995 1996 1997 Capacity and industrial production Ratio scale, 1992 production = 100 Ratio scale, 1992 production = 100 ' Total industry 160 — Manufacturing - 160 Capacity 140 — Capacity 140 120 - —- 120 100 100 Production Production 80 80 1 1 1 1 I 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 — Utilization — 90 80 - 80 70 70 J I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1983 1985 1987 1989 1991 1993 1995 1997 1983 1985 1987 1989 1991 1993 1995 1997 All series are seasonally adjusted. Latest series, September. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

876 Federal Reserve Bulletin • November 1997 Industrial production and capacity utilization, September 1997 Industrial production, index, 1992=100 Percentage change Category 1997 19971 Sept. 1996 to Juner Julyr Aug. Sept. P Juner Julyr Aug.r Sept. p Sept. 1997 Total 119.9 120.9 121.5 122.4 .8 .5 .7 5.5 Previous estimate 119.9 120.4 121.3 .4 .7 Major market groups Products, total2 116.0 116.5 117.3 117.9 .1 .3 .8 .5 4.6 Consumer goods ... 112.3 112.6 113.2 114.0 -.2 .3 .5 .7 3.2 Business equipment 137.4 139.0 142.1 142.1 .9 1.2 2.2 .0 10.8 Construction supplies 120.6 119.8 120.9 121.0 .0 -.7 .9 .1 1.1 Materials 126.0 128.0 128.2 129.6 .6 1.6 .1 1.1 6.9 Major industry groups Manufacturing 121.6 122.7 123.6 124.2 .5 .9 .8 .4 5.8 Durable 134.1 135.5 137.5 138.0 1.0 1.1 1.5 .4 8.5 Nondurable 108.4 109.2 109.0 109.6 -.2 .7 -.1 .5 2.6 Mining 107.8 107.6 106.3 105.8 -.2 -.2 -1.1 -.5 2.3 Utilities 111.7 112.7 111.4 116.3 -.7 .9 -1.2 4.4 4.7 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1996 1997 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, SSSeeepppttt... 111999999666 11996677--9966 11998822 11998888--8899 Sept. Juner Julyr Aug.r Sept. P tttooo SSSeeepppttt... 111999999777 Total 82.1 71.1 85.3 83.1 83.5 83.9 84.1 84.4 3.9 Previous estimate 83.5 83.6 83.9 Manufacturing 81.2 69.0 85.7 82.1 82.5 82.9 83.3 83.4 4.2 Advanced processing 80.6 70.4 84.2 80.2 80.6 81.0 81.5 81.4 5.2 Primary processing . 82.3 66.2 88.9 86.6 86.9 87.3 87.3 87.7 2.3 Mining 87.5 80.3 86.8 91.0 94.2 93.8 92.6 92.0 1.1 Utilities 87.2 75.9 92.6 88.6 87.9 88.5 87.4 91.2 1.7 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. zation of industrial capacity rose to 84.4 percent—its tion supplies edged up. Durable materials advanced highest rate since February 1995. on the continued strength in semiconductors and a pickup in basic metals, mainly steel. Rebounds in paper, textiles, and chemicals restored the output of MARKET GROUPS nondurable materials to near its July level. The output of energy materials rose sharply, principally The output of consumer goods rose 0.7 percent. Much because of the rebound in electricity generation. of the gain resulted from heavier use of electricity by residential users and increased output of light trucks. Gains in the production of clothing, paper products, INDUSTRY GROUPS and chemical products for consumer use were partially offset by a decline in appliances. The output of The increase in manufacturing production of 0.4 perbusiness equipment was unchanged in September cent was about half the average pace of the previous after twelve months of steady increases. Further two months; the increase was evenly spread between advances in the production of computers and com- durables and nondurables. Among durables, the mercial aircraft boosted the growth rates for informa- strongest advances came in furniture, iron and steel, tion processing and transit equipment. However, the computers, semiconductors, and aerospace and misoutput of industrial and other equipment fell back cellaneous transportation equipment. The effect of after an unusually strong gain in August. these gains was blunted by a substantial loss in The production of business supplies and of materi- industrial machinery excluding computers and office als rose about 1 percent, and the output of construc- equipment and by small losses in instruments and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 877 miscellaneous manufacturing. Gains in paper, chemi- Manufactures and from selected 1996 Current Induscals, and petroleum refining boosted the output of the trial Reports both from the Bureau of the Census. nondurables. Annual data from the Department of the Interior on Capacity utilization for manufacturing rose 0.1 per- metallic and nonmetallic minerals (except fuels) for centage point, to 83.4 percent—its highest level since 1995 and 1996 will also be introduced. Revisions to April 1995. Utilization in primary processing rose the monthly indicators for each industry (physical 0.4 percentage point, while the rate in advanced product data, production-worker hours, or electric processing declined 0.1 percentage point. The utiliza- power usage) and revised seasonal factors will be tion rates in both the primary-processing and incorporated. Capacity and capacity utilization will advanced-processing groups have risen more than be revised to incorporate preliminary data from the 1.0 percentage point in the past twelve months. 1995/96 Survey of Plant Capacity from the Bureau of the Census. The statistics on the industrial use of electric power will incorporate more complete REVISION OF INDUSTRIAL PRODUCTION AND reports received from utilities for the past few years CAPACITY UTILIZATION as well as data from the 1995 Annual Survey of Manufactures. The Federal Reserve will publish revisions of its The revised data will be available on the Board's measures of industrial production (IP), capacity, World Wide Web site, http://www.bog.frb.fed.us, on capacity utilization, and industrial use of electric diskettes from the Board's Publications Services, power at the end of November. The revisions will 202-452-3245, and through the Economic Bulletin begin with data for 1992 and will incorporate updated Board of the Department of Commerce. For inforsource data for recent years. mation about the Bulletin Board, call 202-482-1986. The regular updating of source data for IP will For information on these revisions, call the Federal include annual data from the 1995 Annual Survey of Reserve's Industrial Output Section, 202-452-3197. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

878 Statements to the Congress Statement by Alice M. Rivlin, Vice Chair, Board of future. The process is ongoing, but I welcome the Governors of the Federal Reserve System, before the opportunity to share with you some of what we have Subcommittee on Domestic and International Mone- learned and some preliminary conclusions. tary Policy of the Committee on Banking and Finan- My testimony is in two parts. The first presents cial Services, U.S. House of Representatives, Septem- some background on the payments system and the ber 16, 1997 evolution of the Federal Reserve's role in it (a more detailed description of noncash payment instruments I welcome this opportunity to discuss the payments and their processing is given in Appendix l).1 The system and the Federal Reserve's role in it. A con- second part of the testimony discusses the work of venient, safe, reliable means of making payments is our committee, especially the scenarios we developed extremely important to all of us in our daily eco- and the reactions we received from participants in a nomic lives, but most of us do not think about it very series of forums on the payments system. often. We pay our bills by cash, check, credit card, In addition, Appendix 2 provides a description of a or debit card; we have our pay deposited directly small part of the Federal Reserve's check processing in our bank accounts and transfer funds by computer operation, the Interdistrict Transportation Service, in or telephone. We assume the money will get where which some members have expressed interest, as well it is supposed to go quickly and without complica- as our views on H.R.2119. tions. We do not spend time thinking about how that happens. Similarly, ensuring the efficiency, reliability, and integrity of the nation's payments system is a big PART I: THE FEDERAL RESERVE'S ROLE part of the responsibility the Congress has given to IN AN EVOLVING PAYMENTS SYSTEM the Federal Reserve, but neither the Congress nor the public usually devotes attention to the Federal A large and vibrant economy requires a staggering Reserve's role in the payments system. The Federal number of payments. In the United States, hundreds Reserve's monetary policy role tends to dominate the of millions of payments with a combined value of headlines and the hearings. about $1.7 trillion are made every day. Although a As this subcommittee is acutely aware, enormous majority of transactions are made in currency or coin, changes are occurring in the U.S. financial services cash actually accounts for only a tiny fraction—less industry. Breathtaking developments are taking place than 1 percent—of the value of payments. in computing and communications technology. Con- Noncash payments can be roughly divided into two solidation and interstate banking are changing the categories: (1) wholesale or large dollar transactions structure of the banking industry, and lines are blur- made primarily by banks, businesses, and governring between banking and other types of financial ments and (2) retail or smaller dollar payments made services. Because these changes could profoundly by individuals, businesses, and other participants in affect payments mechanisms in the future, it is a the economy. timely moment to reexamine the part the Federal Wholesale payments, which have been growing Reserve plays in payments and whether that role rapidly in recent years, move over two systems: the ought to be altered. With this in mind, last fall, Fedwire electronic funds transfer system operated by Chairman Greenspan asked me to chair the Committhe Federal Reserve and the Clearing House Intertee on the Federal Reserve in the Payments Mechabank Payments System (CHIPS) operated by the nism. Besides myself, the committee members are New York Clearing House. CHIPS is used primarily Governor Edward W. Kelley and Federal Reserve to make international interbank payments. The Fed Bank Presidents William McDonough of New York and Thomas Melzer of St. Louis. Our mandate is to examine how the payments system is evolving and 1. The attachments to this statement are available from Pulications what part the Federal Reserve might play in the Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

879 eral Reserve also operates the Fedwire book-entry and the average value of ACH transactions is higher securities service, which is used to transfer U.S. than that of checks. Treasury, federal agency, and mortgage-backed securities. The security and reliability of these large-value How the Federal Reserve Became Involved systems is crucial to the functioning and stability of the financial system, both national and international, Although most people now take a reliable payments but the role of the Federal Reserve, as the nation's system for granted, this was not always so. The central bank, in providing for wholesale payments severe financial crises that swept the nation periodiand final settlement is not controversial. Hence, this cally in the nineteenth and early twentieth centuries testimony, like the work of our committee, focuses typically disrupted the payments system. During the entirely on retail payments. financial panic of 1907, payments were largely suspended throughout the country because many banks and clearinghouses refused to clear checks drawn on Retail Payments: Check and ACH certain banks. The refusals led to the failure of otherwise solvent banks and greatly exacerbated the The most common noncash payment instrument impact of the crisis on businesses and individuals. in the United States is the paper check, used much The Congress's desire to avoid another 1907-type more widely here than in other industrial economies. failure of the national payments system was one Americans love checks. We wrote 64 billion of them of the important reasons for creating the Federal in 1996 with a total value of about $75 trillion Reserve System in 1913. The Federal Reserve Act dollars. Pundits have been predicting the replacement directed the Federal Reserve to provide an elastic of checks by electronic payments for several dec- currency—that is, to supply currency in the quantities ades, and, indeed, electronic transactions have been demanded by the public—and also gave it the authorincreasing much faster in recent years than checks. ity to establish a nationwide check clearing system. Nevertheless, the volume of checks has continued to The Congress was also concerned that some banks increase about 2 percent annually over the past five refused to pay the full amount of the check (nonpar years. Growing use of credit and debit cards has collection) and that some charged certain collecting slowed the increase in check volume but so far has banks fees to pay checks (presentment fees). In 1917, not reversed it. On-line home banking still accounts it amended the Federal Reserve Act to prohibit banks for a tiny fraction of payments. Moreover, the cus- from charging the Federal Reserve Banks presenttomer's bill paying instruction from a home computer ment fees. often simply results in the bank cutting a check to The Congress modified the Federal Reserve's role pay the customer's bill because many payees are not in the payments system through the Monetary Conequipped to receive funds electronically. Hence, trol Act of 1980 (MCA). A primary purpose of the while the volume of checks is likely to plateau and MCA was to promote an efficient nationwide payeventually decline as electronic payments become ments system by encouraging competition between increasingly convenient and familiar, checks are the Federal Reserve and the private-sector providers likely to remain a significant part of the payments of payment services. The MCA requires the Federal system for some years to come. Reserve Banks to charge fees for their payment ser- A rapidly growing number of retail payments are vices, which must, over the long run, be set to recover made by electronic funds transfers over an automated all direct and indirect costs of providing the services. clearinghouse (ACH) network. ACH is typically used In addition, the MCA requires the Federal Reserve for recurring payments, such as direct deposit of Banks to recover imputed costs, such as taxes and payroll and social security or direct payment of recur- the cost of capital, that would have been paid and ring bills, such as mortgage, insurance, and utility imputed profits that would have been earned if the bills. Almost every depository institution in the services were provided by a private firm. The MCA United States is equipped to receive ACH payments also subjected all banks, not just member banks, to for its customers, although not all are equipped reserve requirements and granted them equal access to send them. Although the number of ACH trans- to the Federal Reserve Banks' payment services. actions is small compared to the number of checks The Congress further expanded the role of the (4 billion transactions in 1996, compared to 64 bil- Federal Reserve in the payments system in 1987, lion checks) that number has been increasing much when it enacted the Expedited Funds Availability Act faster (about 15 percent annually for the past decade), (EFAA). For the first time, this act gave the Federal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

880 Federal Reserve Bulletin • November 1997 Reserve the authority to regulate check payments that mediary for the collection of about a third of interwere not processed by the Federal Reserve Banks. bank checks. Small banks, especially those in remote Thus, the EFAA significantly broadened the Federal locations, depend more heavily on the Federal Reserve's ability to ensure that the nation's check Reserve for check collection than do big banks in collection system is efficient and that all depository larger cities. institutions have equitable access to the system. The Over the years, competition among providers of act also limited the time that a bank may hold funds check services and advances in technology have before making them available to customers for with- made the check collection process much speedier and drawal and directed the Federal Reserve to speed the less costly. Many of us can remember when it took process of returning unpaid checks to banks of first quite a few days—often more than a week—for a deposit to reduce the risk that banks face when mak- check to clear, especially if drawn on a bank in a ing funds available to their depositors. remote location. Now the Federal Reserve is able to Thus, by a series of legislative actions, the Con- collect more than 90 percent of the value of all gress has clearly placed responsibility on the Federal checks deposited with it within one day after they are Reserve to ensure the following: deposited in the collecting bank. The Federal Reserve has used both its regulatory • The integrity of the payments system—its safety powers and its market presence to encourage technoand reliability logical advance and efficiency in the check market. • The accessibility of the payments system—that Since the early 1980s, Reserve Banks have been able it is available to all depository institutions so that to provide check presentment information to paying they can provide for the payments needs of their banks electronically, which enables their corporate customers customers to manage the funds in their accounts more • The efficiency of the system—that the cost of effectively. The Reserve Banks have recently been making payments is reduced as much as possible. working with many of their customers to increase the use of ECR The Federal Reserve has also invested in To accomplish these goals, the Congress has given this development of new techniques for using digital the Federal Reserve regulatory authority, as well as images in check processing. The Federal Reserve directed it to encourage efficiency by competing Banks are implementing an image-enhanced check fairly with private-sector suppliers of payment service for the U.S. Treasury and are offering this services. Thus, its payments system missions are a service to banks as well. complex and challenging part of the Federal Reserve's responsibilities. The Federal Reserve in the ACH Market The Federal Reserve's Role in Check Clearing While electronic technology offers some scope to make check presentment more efficient, fully elec- Of the roughly 64 billion checks written annually, tronic payments are both faster and cheaper. The about a third are "on-us" checks (the payor and ACH service, which the Federal Reserve began propayee have accounts at the same bank), but the rest viding in 1972 at the request of local ACH associamust be cleared and settled in the interbank check tions, is now a fully electronic system reaching nearly collection market. Most checks are physically trans- every depository institution in the United States. ported and presented to the paying bank for payment, There are currently four ACH operators that process although the use of electronic check presentment and transmit ACH transactions between depository (ECP) is growing. Under ECP, the information con- institutions—the Federal Reserve and three comtained on the check is transmitted to the paying bank, mercial providers. The Federal Reserve is by far the with the actual check often following by slower largest provider, processing about 80 percent of commeans. mercial ACH transactions in 1996 and all of the Some checks are presented directly by one bank to government ones. As with check collection, deposianother. About a quarter are presented in clearing- tory institutions rely on the Federal Reserve to house arrangements under which a group of banks deliver ACH transactions to small and remote banks. agree on rules for presenting checks to each other The commercial ACH providers serve a limited set of simultaneously. Another quarter of interbank checks institutions and rely on the Federal Reserve to deliver are collected by correspondent banks on behalf of ACH transactions to banks not served by their other banks. The Federal Reserve serves as an inter- networks. In 1996, the Reserve Banks implemented Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 881 a new consolidated ACH operating system, which service includes fixed fees, called cash letter fees, enables transactions to be processed on a flow basis for each bundle of checks deposited with a Federal and which operates twenty-four hours a day. This Reserve office and per-check or per-item fees. In new operating system has increased the efficiency of addition, all transaction fees are set to recover at least ACH processing and reduced operating costs signifi- the marginal or incremental cost of each transaction, cantly. These lower costs have been passed along to which precludes the Reserve Banks from engaging in customers in lower fees. predatory pricing and promotes competition. Allocating costs for the shared parts of the Federal Reserve's operations is a complex and difficult Prices and Costs matter, especially when large fixed costs have to be allocated among several activities. There is no perfect In passing the Monetary Control Act (MCA), the solution to this problem, but the Federal Reserve's Congress intended to promote the efficiency of methodology has been scrutinized by the General the payments system by encouraging competition Accounting Office and other experts and has been between the Federal Reserve and private-sector declared "reasonable." We stand ready to discuss our providers, and, indeed, private-sector providers have cost and pricing methodology with the committee or competed vigorously with the Federal Reserve. Open- with outside experts if the committee would like ing access to Federal Reserve payment services to all more detailed information.2 banks has also contributed to a more equitable payments system and has played a role in spurring competition. As a result, on average, the cost of payment services has declined, and the quality of payment PART II: THE COMMITTEE'S STUDY ON THE services has increased. FEDERAL RESERVE IN THE PAYMENTS SYSTEM Over the past ten years, the Federal Reserve has fully recovered the total costs of its priced services, As discussed earlier, Chairman Greenspan created a including imputed costs as required by the Monetary committee to examine the Fed's role in the payments Control Act. In 1996, the Federal Reserve recovered system. The committee believed that the rapid 103.4 percent of the total costs of its priced services. changes occurring in financial services called for a Moreover, because fees are set to recover not only all fundamental review of the role of the Federal Reserve actual costs but also imputed costs and a profit mar- in the payments system and a thorough discussion of gin, the revenues from the Federal Reserve's priced how alternative roles might enhance or undermine services have exceeded operating costs by almost the integrity, efficiency, and accessibility of the sys- $1 billion over the past decade. These net reve- tem. We decided to focus on retail payments because nues contribute to the amount the Federal Reserve they affect so many people and businesses directly transfers to the Treasury to the benefit of the U.S. and because the case for a continuing role of the taxpayers. central bank in retail payments is more controversial Shortly after the MCA was enacted, the Board of than the case for a role in wholesale payments. Governors adopted pricing principles that are more The committee did not regard the retail payments stringent than the requirements of the MCA and that system as "broken" or in any kind of crisis. Almost require the Federal Reserve Banks to recover priced all users and participants think it functions just fine. service costs, not just in the aggregate, but for Nevertheless, one anomaly is striking: Why does the each major service category. Our check service, for nation with the most advanced computers in the example, has fully recovered its costs over the past world rely so heavily on paper to make payments? ten years. Why do Americans write 64 billion paper checks a In setting fees, the Federal Reserve's staff applies year—checks that have to be trucked and flown to the principles of economic theory and considers the their destinations—when these payments could be practices of private-sector providers of payment made cheaper and faster by electronic means? How services. For instance, in most cases, the Reserve might different roles of the Federal Reserve acceler- Banks have implemented fee structures that resemble ate or retard movement to electronic payments? the cost structure of each priced service. Because the costs associated with payment services tend to be dominated by fixed costs, the Federal Reserve typi- 2. Appendix 2 discusses the Interdistrict Transportation System cally uses a combination of fixed and variable fees to and how its costs and fees are set. It also discusses the implications H.R.2119, "The Efficient Check Clearing Act of 1997," for the price its services. Thus, the fee schedule for the check Federal Reserve's check service. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

882 Federal Reserve Bulletin • November 1997 To spark discussion and analysis of these and other Under this scenario, the Federal Reserve would also payments system issues, the committee developed take steps to foster innovation by private-sector profive hypothetical scenarios for the future role of the viders. In the final scenario, called Leading Toward Federal Reserve in retail payments ranging from exit- Electronic Payments, the Federal Reserve would ing check and ACH services altogether to becoming a expedite the movement to an electronic retail paymore vigorous competitor and industry leader. These ments system. In this case, the Federal Reserve would scenarios were not designed to be actual policy fund research and development and make additional options but were intended to serve as catalysts for capital investments in payments system improvedebate both within the Federal Reserve and among ments; develop an expanded national payments infrapayments system participants. structure; provide access to the Federal Reserve's One scenario under which the Federal Reserve secure interbank communications network to deposiwould withdraw from the check and ACH services tory institutions at incremental cost; and work with was called the Liquidation scenario. In this scenario, providers and vendors to develop more flexible, conthe Federal Reserve would announce its intention to venient, and effective software and systems to faciliwithdraw from the provision of check and ACH tate electronic transactions. services as of a specified date. During the wind-down We asked experts at the Federal Reserve to analyze period, the Federal Reserve would take steps to pro- the impact of each scenario on the price, availability, vide for a smooth transition. It would assist its cus- and structure of payments services and then sought tomers in finding alternative private-sector suppliers input and reactions from a wide range of payments of payment services and would help potential private- system participants. sector providers evaluate the profitability of serving We discussed the scenarios during ten national various markets by providing market data to them. forums that were held in May and June 1997. The A second withdrawal scenario envisioned the national forums were moderated by an independent Federal Reserve's privatizing its check and ACH facilitator and attended by committee members. services. In the Privatization scenario, the Federal Nearly 100 organizations participated in these Reserve would first transfer its check and ACH forums, including representatives of banks, thrift operations to a newly chartered, special purpose institutions, and credit unions of all asset sizes; third- "Clearing Bank." The Clearing Bank would eventu- party service providers; clearing associations; trade ally be sold to a private-sector entity with no privi- associations representing banks, thrift institutions leged ties to the Federal Reserve nor any restrictions and credit unions, consumers, and retailers; and acaon the type of payment services that it could provide. demics and consultants among others. The discussion Three scenarios under which the Federal Reserve at these forums was focused on how the various would continue to provide retail payment services to scenarios would affect the price and availability of banks varied from the Federal Reserve's adopting a retail payment services and how they would affect passive role in providing check and ACH services to market and technological innovation and public conan active role in promoting the conversion of pay- fidence in the payments system. ments to electronic forms. In the scenario called In addition, each Federal Reserve Bank held a Continuity and Access, the Federal Reserve would series of regional forums as well as a number of merely ensure that all depository institutions had one-on-one meetings. Altogether, fifty-two regional access to its retail payment services. For the most forums, which were moderated by the senior Reserve part, the Federal Reserve would allow initiatives by Bank staff, were held. As in the case of the national private-sector providers to determine the future meetings, a wide range of payments system particicourse of the retail payments system, and competi- pants attended the regional forums, representing more tion among those providers of payment services than 350 institutions. would provide the primary catalyst for innovation. The discussions were varied and lively, but con- Because the Federal Reserve would not be an aggres- sistent themes emerged across the country. First, sive competitor in the retail payments market, adopt- although a few participants favored Federal Reserve ing this scenario would likely lead to the Federal withdrawal from the check or ACH markets (or both), Reserve's slowly exiting the retail payment services a large majority, including representatives from all over the long run. size classes of depository institutions, opposed the In the scenario called Promoting Efficiency, the Federal Reserve's exiting these markets. Federal Reserve would use its operational pres- Smaller banks and those located in remote areas ence, pricing strategies, and influence to enhance the were concerned that they would have difficulty efficiency of the interbank retail payments system. obtaining retail payment services, that the prices for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 883 those services would rise significantly, and that they of these participants indicated that they were curmight not be able to access new payment services rently faced with many competing priorities, includdeveloped in the private sector. Many participants ing dealing with mergers and acquisitions, addressing raised concerns about how they would obtain retail the operational issues raised by the federal governpayment services if there were a financial crisis. For ment's electronic payments initiative, and ensuring example, how would smaller institutions collect that they were compliant with the century date checks if their correspondent bank were to fail and change. how would they obtain services if their financial Almost all participants believed that check paycondition were deteriorating? ments would continue to play an important role in the Some large banks and clearinghouses expressed an U.S. payments system for the foreseeable future and interest in picking up new customers as a result of that the Federal Reserve and other industry partici- Federal Reserve withdrawal. Other large banks, how- pants should focus on achieving additional efficienever, had withdrawn from the correspondent role and cies in the check collection system through the use of were reluctant to resume what they regarded as a electronic check presentment and truncation. low-profit business. Some participants expressed With respect to the ACH, participants cited shortfears that the Federal Reserve's withdrawal would comings in the current system, which may be limiting mean heavier regulation of the check and ACH mar- its use. Participants noted that the ACH was a good kets as the Congress sought to protect the access of vehicle for recurring payments but that its use for small institutions to these services. purchases at the point of sale was limited. Moreover, Most participants believed that, in the long run, consumers are not generally familiar with how to there would be sufficient capacity in both the check make ACH payments. Participants also discussed the and ACH markets to absorb the transaction volumes problems that businesses receiving ACH payments processed by the Federal Reserve Banks. frequently experience in receiving the information A number of participants, however, were con- explaining the amount and purpose of payments from cerned that if the Federal Reserve withdrew from their banks. This issue, of course, is one of the issues check and ACH services, there would be short-term facing the banking industry as the federal governservice disruptions with few long-term benefits. ment implements its all electronic payments initiative Some participants supported the withdrawal sce- and is a critical issue facing the ACH service. At narios because they believed that private-sector the same time, a number of participants believed that providers of retail payment services were more effi- a properly funded public education and marketing cient than the Federal Reserve and that the Federal effort aimed at consumers and businesses could lead Reserve's withdrawal would enhance the efficiency to greater acceptance and use of the ACH. of the payments system over time. Some participants There was strong support among a wide variety of argued that the likely increases in the price of collect- participants for more "leadership" from the Federal ing checks that would follow the Federal Reserve's Reserve, especially in moving beyond current paywithdrawal might lead to a greater use of electronic ment instruments to more advanced electronic syspayment services, particularly in remote locations. A tems of the future. Not all participants, however, few expressed concern about the conflicts of interest had the same concept of what "leadership" implied. that could arise between the Federal Reserve's role as Community bankers generally supported a more a payment service provider and its role as regulator active, innovative Federal Reserve. Some indicated of the payments system. A few of these participants that the Federal Reserve's investment in technologystated that these perceived conflicts of interest had driven products enables them to take advantage of caused delays in addressing the disparity between electronic services without large, up-front investcheck presentment times for the Federal Reserve ments that they cannot easily afford. Participants Banks and private depository institutions. Some representing larger banks, however, questioned thought the Federal Reserve might have taken steps whether the Federal Reserve, as a provider of paysooner to improve its net settlement service if it did ment services, could spur the conversion of payments not provide payment services. to electronic forms as well as the private service At the same time, many participants believed that providers could. private-sector providers might be reluctant to expand Nevertheless, the majority of participants agreed their check collection services significantly because that the Federal Reserve should play a stronger leadof their desire to invest in new technologies, rather ership role in improving the efficiency of the check than legacy systems that are perceived to have mar- collection system and in bringing diverse players in ginal profitability and limited growth potential. Some retail payment services together in a collaborative Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

884 Federal Reserve Bulletin • November 1997 way to identify and to address the impediments pre- tions of the Congress for a safe and reliable payments venting a conversion to more economically efficient system by continuing to provide check and ACH retail payment services. Many participants urged the services as efficiently as possible. Given the concerns Federal Reserve to work with the payments industry expressed to us about the disruptions that would to establish standards for electronic payments, includ- likely occur if the Federal Reserve were to withdraw ing standards for the authentication of payment from the retail payment services, plus the many instructions, standards for privacy and security of changes that the banking industry must grapple with payment information, and standards addressing liabil- over the next several years, it seems prudent not to ity and risks in emerging payment services. In addi- impose additional disruptions on it that the industry tion, participants suggested that the Federal Reserve itself is not certain would lead to long-run benefits. could play an important role in sponsoring public Second, the Federal Reserve needs to work more education aimed at encouraging the use of end-to-end closely and collaboratively with the participants and electronic payment services. users of the payments system, both to enhance the The committee is still weighing what it has learned efficiency of current payment instruments (check and from the national and regional forums, analytical ACH) and to evolve strategies for moving to the next studies, and other sources. It has not yet brought generation of payment methodologies. We look forspecific policy options to the Board of Governors ward to working closely with the Congress as these or the Conference of Reserve Bank Presidents. Two strategies begin to unfold, with a continuing focus on general conclusions, however, have emerged from ensuring the integrity, efficiency, and accessibility of our deliberations. First, for the next few years at the payments system. least, the Federal Reserve can best meet the expecta- Statement by Laurence H. Meyer, Member, Board of (ATM) card used by consumers to make deposits, Governors of the Federal Reserve System, before the withdrawals, and transfers between deposit accounts. Subcommittee on Financial Institutions and Con- The cards require the use of a magnetic stripe reader sumer Credit of the Committee on Banking and (built into the ATM) and the consumer's security Financial Services, U.S. House of Representatives, code—a personal identification number (PIN). September 24, 1997 Because of the method of operation, these cards are sometimes characterized as "online" debit cards. The Board of Governors appreciates this opportunity That is, at the time of the transaction, the account to comment on issues concerning debit cards that can number, PIN, and account balance are verified; and be used without security codes (sometimes referred instructions for the funds transfer are communicated, to as "check cards" or "offline" debit cards). Users through the ATM network, to a database at the cardof these cards have some consumer protections issuing institution. related to liability, issuance, and disclosure under the At first, institutions issued cards that could be used Electronic Fund Transfer Act (EFTA) and the Board's only at their own ATMs. Over time, the development Regulation E. A bill introduced by Representatives of regional, nationwide, and internationally linked Schumer and Gonzalez, and another by Representa- networks has enabled consumers to access funds tive Barrett, would further limit a consumer's poten- using ATMs at institutions other than their own. The tial liability for the unauthorized use of debit cards subsequent linking of electronic point-of-sale (POS) and place restrictions on their issuance. The Board's terminals to these networks has allowed consumers to testimony discusses the existing statutory and regula- use their debit cards to pay for purchases at supermartory scheme concerning debit card liability and issu- kets, gas stations, and other sites by debiting their ance and provides comment on the legislative propos- deposit accounts. At merchant locations requiring the use of a PIN, the cards operate as "online" debit als. The testimony also provides comment on issues cards. The use of PIN-protected cards in these online related to unsolicited "loan checks," which are systems has increased substantially in the United addressed in proposed legislation introduced by Rep- States over the past several years, while until recently resentatives Hinchey and Gonzalez that would amend the use of "offline" debit cards has remained more the Truth in Lending Act (TILA). limited. Generally speaking, the oldest type of debit card in the United States is the automated teller machine Some financial institutions began issuing "offline" Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 885 debit cards more than a decade ago. Consumers have unlimited for unauthorized transactions occurring used these cards in place of credit cards at retail after the sixty days. Liability up to the sixtieth day is locations. Typically, the consumer signs a charge capped at $50 (or at $500, if the consumer knew slip, rather than entering a PIN, and the transactions about a debit card loss or theft and failed to report it are processed much like credit card transactions. within two business days). Indeed, early on, this largely "paper-based" mode of The explanation for the more complex rules in the operation generated questions about whether these EFTA can be gleaned from the history of the act, card transactions were covered by the EFTA and which followed a study completed in 1977 by the Regulation E. As a consequence, the Board amended National Commission on Electronic Fund Transfers. Regulation E in 1984 to make clear that debit card The commission's report on emerging EFT payment transactions are covered by the regulation, whether mechanisms, which responded to a congressional the transaction takes place at a terminal that captures directive, recommended legislative action to foster the transaction data electronically or is carried out the orderly development of EFT systems. At that manually and only later converted to electronic time, the banking industry had raised objections to form. having a $50 cap on consumer liability for debit Over the past year or so, card issuers have begun cards, the same as for credit cards. Industry represenmarketing offline debit cards aggressively, encour- tatives urged that a negligence standard should apply aging consumers to use them in place of writing if the consumer was negligent in handling the card checks. Besides just making them available, many and PIN. The industry believed that a $50 cap was an institutions have automatically replaced their custom- insufficient incentive for consumers to protect their ers' existing ATM cards, previously usable only with cards and security codes. In turn, the commission's PINs, with cards that can be used with a PIN at ATMs report recommended a negligence standard that and electronic POS terminals and without a PIN in would hold the consumer liable for acts such as the "offline" mode. This development has raised writing the PIN on the card. concerns about the potentially greater consumer The Congress considered and ultimately decided exposure to losses in the absence of PIN protection. against imposing a negligence standard. Instead, both Both the TILA and the EFTA—which govern the House and Senate agreed on the basic $50 liabilcredit cards and debit cards respectively—contain ity limit. But in addition, to encourage consumers to provisions on unauthorized use and unsolicited issu- protect debit cards and promptly report unauthorized ance. The TILA provisions were enacted in 1970, and use, the House favored holding a consumer liable for the EFTA provisions have been part of the act since it unauthorized transactions occurring a "reasonable became law in 1978. The TILA limits consumer time" after the consumer learned of the loss or theft liability for the unauthorized use of a credit card to of the card and failed to notify the card issuer. The $50. Under the EFTA, the rules are more complex. Senate bill provided for unlimited liability for the Liability for the unauthorized use of a debit card is failure to report any unauthorized transactions determined based on when the consumer notifies the appearing on a statement within sixty days after the financial institution of a lost or stolen card or an statement was sent. The law as finally enacted unauthorized transaction. blended the two exceptions, changing "reasonable If notice is provided within two business days of time" to two business days and adding the $500 cap learning of the loss, the consumer's liability is lim- for unauthorized transactions taking place within the ited to $50. For the consumer who fails to report the sixty days. loss or theft of a debit card within two business days As to disclosures, both the TILA and the EFTA of learning of the loss or theft, the potential liability require that, to impose liability, the card issuer disincreases to $500. This higher limit applies to unau- close the limits on consumer liability and give a thorized transactions taking place after the two- telephone number or address (both phone number business-day period. For example, if a $600 unautho- and address, in the case of the EFTA) for reporting rized debit card purchase takes place the same day loss or theft of the card or unauthorized transactions. the card is stolen, the consumer's maximum liability For issuance, the TILA prohibits outright the unsofor that transaction is $50 even if the consumer fails licited issuance of credit cards. The EFTA permits the to give notice within two business days after learning unsolicited issuance of debit cards but only if discloof the theft. If unauthorized transactions appear on sures are given and the card is not usable until after the consumer's account statement and the consumer the consumer has requested validation and the confails to report them within sixty days after the state- sumer's identity has been verified. Both laws permit ment is sent, the consumer's potential liability is issuing a new card to replace or substitute for an Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

886 Federal Reserve Bulletin • November 1997 existing card. Regulation Z (which implements the disputed amount must be recredited within ten busi- TILA) and Regulation E also permit an issuer to add ness days if an investigation cannot be completed features to a card at the time of substitution. Under within that time, and the investigation must then be these rules, it is thus permissible to send a debit card completed within forty-five days. For POS and forthat can be used without PIN protection to replace an eign transactions, Regulation E doubles the time "online" PIN-protected debit card, and these substi- periods: twenty business days to resolve a claim of tute cards can be sent validated or unvalidated. When error (or to recredit an account if the investigation a substitution is made, if there are adverse changes in takes longer); and ninety days to complete the investhe terms and conditions that were originally dis- tigation. The longer periods were adopted in 1984, at closed to the cardholder (such as higher liability the same time that Regulation E was amended to limits or higher fees), the issuer must disclose the cover paper-based debit card transactions. The longer revised terms. But adding the capability for offline times were deemed necessary for resolving claims use to a debit card does not, by itself, require a new that involved third-party merchants or remote institudisclosure under Regulation E. tions, and card issuers wanted to avoid having to Without doubt, the issuance of a card that does not provisionally recredit an account before the investigarequire a PIN increases the consumer's risk. The tion was complete. The Board is aware that VISA is consumer deserves to be informed about this in a changing its rules to provide for recrediting within very straightforward way. This risk may involve lia- five business days, and this suggests that technologibility for unauthorized transactions or it may simply cal improvements in payment systems may permit be the necessity of having to sort out unauthorized these consumer claims to be investigated more activity problems, even if there is no ultimate finan- quickly. We will reexamine the Board's rule in light cial loss. It also seems appropriate to apply a lower of these developments. liability limit than that which presently applies: H.R.2234, the Dual-Use Debit Cardholder Protec- Under current law, adding non-PIN-protected capa- tion Act, introduced by Representatives Schumer and bility to a card subjects the consumer to higher liabil- Gonzalez, addresses liability, disclosures, and issuity than applies to credit cards. Apart from what the ance. The bill limits a consumer's liability to $50 for law requires, both VISA and MasterCard have a debit card that is not PIN-protected and does not decided to voluntarily limit consumer liability for use some other unique identifier; a signature is unauthorized use of debit cards to $50 or less, and deemed not to be a unique identifier. It requires card this should deal with consumer concern about unwar- issuers, as a condition of imposing any liability on ranted financial risk, although the potential aggra- consumers, to disclose the importance of promptly vation of demonstrating unauthorized use may reporting loss or theft of the card. Under current law, remain. Therefore, it seems to us the question is this disclosure is optional. The Schumer-Gonzalez whether voluntary industry activity is sufficient to bill also prohibits issuing a debit card that can funcdeal with these concerns or whether legislation is tion without a PIN unless (1) the card is not activated necessary. when sent, (2) certain disclosures accompany the Now let me turn to the two proposed bills. card, and (3) the card is activated only upon the H.R.2319, the Consumer Debit Card Protection Act, consumer's request and after verification of the conintroduced by Representative Barrett, limits con- sumer's identity. These latter rules currently govern sumer liability to $50 or less for all unauthorized the initial issuance of a card on an unsolicited basis, debit card transactions, including those that require a but not a replacement card. PIN. The bill also calls for a warning notice for debit There is considerable merit to having card issuers cards that can be used without a PIN and would give provide a new offline debit card in unvalidated form consumers the option to reject such cards in favor of when they replace an online card and only validating PIN-protected cards. Each periodic statement would the card upon the consumer's request. Requiring valihave to include a detailed notice of the procedures for dation could be useful for ensuring that consumers notifying the card issuer of the loss or theft of the are not exposed to any additional risk or inconvedebit card or of unauthorized transactions. nience without their consent. It is our understanding For cards without PIN protection, the Barrett bill that in many cases card issuers already follow, or are would also require the card issuer to provisionally planning to adopt, a security procedure in which they reimburse consumers for claims of unauthorized use validate a renewal card for use only after the cardwithin three business days. Currently, the EFTA pro- holder has expressly confirmed receiving the card vides that claims of unauthorized use must be and has requested validation. However, this proceresolved within ten business days; alternatively, the dure may not generally include the step of confirming Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 887 the consumer's willingness to accept a debit card that fraud. Although the consumer would not ultimately is not PIN-protected. be liable for the forged instrument, the consumer is The question is whether current and evolving nevertheless exposed to risk that was not anticipated industry practices are sufficient or whether a statutory and inconvenience resulting from a loan check that requirement is needed. Given the positive steps being was not requested. taken by the industry to deal with consumer concerns H.R.2053, the Unsolicited Loan Consumer Protecon a voluntary basis, we are inclined to see how tion Act, introduced by Representatives Hinchey and things work before enacting new laws. However, the Gonzalez, prohibits the unsolicited mailing of loan industry should be on notice that it is in everyone's checks or other negotiable instruments. The bill also best interest to ensure that the public understands the provides that if a check or other negotiable instrunew risks inherent in transactions that are not PIN- ment is sent unsolicited, a consumer would not be protected and that individual consumers can make liable for the debt unless the creditor could prove that an informed choice about whether to assume that the consumer received and negotiated the instrument. risk. And whether or not the intended recipient received it, The subcommittee also requested information the creditor could not report any liability resulting about the tracking of a consumer's debit and credit from the unsolicited instrument to a consumer reportcard spending. Although both regulations—E for ing agency. debit cards and Z for credit cards—require card issu- Within the past two years, the Board has received a ers to capture transaction information such as transac- dozen or so complaints about unsolicited loan checks tion date, amount, and merchant name and location, that primarily relate to theft and fraud problems. This for reporting to the cardholder on the periodic state- is not a vast number of complaints, and the issuance ment, they are silent on the use of this information by of unsolicited loan checks is not as prevalent as the the card issuer. However, I think we all know, from issuance of unsolicited credit cards in the late 1960s our own experience, that for credit cards, and prob- that led to the TILA prohibition. But creditors are ably also for debit cards, at least some card issuers do increasingly making use of these checks, and the use this and other information about cardholders' question is whether they pose a significant enough purchasing patterns for marketing purposes. Industry problem to warrant legislation. In answering the queswitnesses can no doubt provide detailed information tion, it seems appropriate to balance any need for on this matter. consumer protection to combat fraud and other con- The Board has also been asked to comment on the cerns associated with unsolicited checks against mailing of unsolicited "loan checks" to consumers. unnecessary restrictions on the offering of financial These credit products are also referred to as "loans products. Some consumers may appreciate the conveby mail" or "live checks." The consumer need only nience of obtaining "instant credit" without having sign and cash or deposit the check to obtain the loan. to make a formal application. In addition, the The amount of these loan checks may be thousands intended recipient of a loan check generally will not of dollars. be held liable for the amount of a forged loan check, Federal law does not prohibit creditors from mail- although that may be small comfort to an individual ing unsolicited loan checks. The TIL A does mandate who must contend with proving the forgery of the that full disclosure of the credit terms, such as the check. While the Board is mindful of the appearance annual percentage rate and the payment schedule, be that consumers are exposed to risks they have not included with any mailing so that consumers can voluntarily assumed, we do not favor an outright make informed decisions about whether to accept the prohibition against sending these checks. Absent loan. Therefore, the primary concern should not be some evidence of a significant problem, we are disclosure but rather the potential for theft and fraud inclined to let the market work without the intervenand the consumer inconvenience of refuting a claim tion of new legislation. of liability. The unsolicited check could be inter- This hearing provides a useful forum for the induscepted in the mail by a thief who forges the consum- try, consumer representatives, and others to diser's name and cashes the check. The consumer's cuss with lawmakers these important policy matters rights in the case of a forged endorsement are gov- involving debit cards and loan checks, and we erned by state law, generally under the Uniform appreciate the opportunity to participate in the Commercial Code, which provides protection against discussion. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

888 Announcements REGULATION J: AMENDMENTS The Board approved the delay to ensure that consumers receive accurate and meaningful disclosures The Federal Reserve Board on September 11, 1997, through computer-generated programs when they announced amendments to Regulation J (Collection enter into lease transactions. of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire) to help ease the transition to interstate branching in the check ADOPTION OF UNIFORM AMENDMENTS TO THE collection area. The amendments are effective Janu- RIEGLE-NEAL INTERSTATE BANKING AND ary 2,1998. BRANCHING EFFICIENCY ACT OF 1994 Beginning January 2, 1998, the Federal Reserve Banks will implement a new account structure under The Federal Reserve Board along with the Office of which each depository institution will have a single the Comptroller of the Currency and the Federal Federal Reserve account relationship. The Regula- Deposit Insurance Corporation on September 5, 1997, tion J amendments will allow an institution to send issued a final rule that adopts uniform regulachecks to any Reserve Bank for collection, but all of tions implementing section 109 of the Riegle-Neal its check collection transactions through the Federal Interstate Banking and Branching Efficiency Act of Reserve will be reflected in a single account held 1994 (Interstate Act). The rule became effective at its "Administrative Reserve Bank" regardless of October 10, 1997. where the institution has its branches. As required by section 109, the rule prohibits any bank from establishing or acquiring a branch or branches outside its home state under the Interstate Act primarily for the purpose of deposit production. DELAY IN MANDATORY COMPLIANCE The rule also provides guidelines for determining WITH REVISIONS TO REGULATION M whether such a bank is reasonably helping to meet the credit needs of the communities served by the The Federal Reserve Board on September 25, 1997, interstate branches. delayed the date for mandatory compliance with revisions to Regulation M (Consumer Leasing) that apply to automobile leasing from October 1, 1997, to January 1, 1998. GAO AUDIT OF THE FINANCIAL CONTROLS The Board's revised regulation made a significant AND REPORTING OF CASH AT THE number of substantive changes to the regulation and Los ANGELES BRANCH established new disclosures to improve consumers' understanding of automobile and other lease trans- The General Accounting Office (GAO) has given a actions. The changes required the preparation of new clean bill of health to the financial controls and leasing forms and the reprogramming of the com- reporting of cash at the Los Angeles Branch of the puter software used to produce the consumer lease Federal Reserve Bank of San Francisco. disclosures at automobile dealerships. The GAO, in a September 1996 report on errors Representatives of leasing companies, automobile made by the L.A. Branch in cash statistical reports dealerships, and vendor support services requested a submitted to the Board, had called into question the delay in the date set by the Board for mandatory integrity of the Branch's internal controls and financompliance. Installation of new leasing software is cial accounting of cash. This GAO audit lays to rest still under way at many of the 22,500 new-car dealer- those concerns. ships that arrange leases through approximately 9,000 The GAO audit reviewed the work performed by leasing companies. As a result, many of the dealer- Coopers & Lybrand, which was retained by the Fedships are unable to produce computer-generated dis- eral Reserve Board to provide an independent perclosures by October 1. spective on the internal control structure over cash at Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

889 the L.A. Branch as well as that at other Federal The relationships between these two risk elements Reserve Banks that use the same cash automation will then be correlated to determine the level of system to manage the cash under their control. review necessary to verify a bank's compliance pos- This GAO audit confirms the Federal Reserve's ture. The primary advantage of this examination assessment that the Reserve Banks effectively control approach is that it targets examination resources to their cash operations and that the financial accounting higher risk areas without compromising the integrity of the cash positions has a high degree of integrity. of the examination process. It is consistent with the conclusion of the Board's The new program also places a greater emphasis Inspector General, who has also reviewed this matter. on outreach and monitoring activities. The outreach components of the program will be designed to foster compliance through regular contacts with state mem- APPROVAL OF A RISK-FOCUSED CONSUMER ber banks. These contacts will be conducted apart COMPLIANCE SUPERVISION PROGRAM from examination and supervisory activities and will include such items as training seminars and advisory The Federal Reserve Board has approved a risk- visits. Monitoring efforts will be performed between focused consumer compliance supervision program examinations and will be designed to alert examiners and extended the consumer examination frequency to any potential deterioration in a bank's consumer schedule for state member banks and foreign banking compliance posture. The conclusions drawn from organizations. Implementation of the new program the monitoring process will be considered when will be phased in during 1998. establishing the scope, timing, and staffing of future These actions will enhance the effectiveness of examinations. the Federal Reserve System's consumer compliance examination program, reduce the burden of examinations for supervised institutions, and more effec- IMPLEMENTATION OF A RISK-FOCUSED tively deploy Federal Reserve System examination PROCESS FOR THE EXAMINATION resources. OF STATE-CHARTERED COMMUNITY BANKS The new frequency guidelines extend the examination cycle from eighteen to twenty-four months to The Federal Reserve Board, the Federal Deposit thirty-six months for state member banks having an Insurance Corporation (FDIC), and the state banking exemplary compliance history and assets of less than departments will begin full implementation of a com- $250 million. An exemplary compliance history is mon risk-focused process for the examination of defined as two satisfactory or better ratings for both state-chartered community banks effective October 1, consumer compliance and the Community Reinvest- 1997. The process targets the activities posing the ment Act. Banks with assets of more than $250 mil- highest level of risk at each institution and enhances lion will be examined every twenty-four months, examiners' ability to diagnose emerging problems. while banks with performance problems will be Implementation of this process will provide greater examined once every twelve months. consistency in examinations conducted by the The consumer examinations performed under the Federal Reserve, the FDIC, and the states, and is new program will be conducted concurrently with expected to result in examinations that are more examinations for fair lending laws and the CRA, both efficient and effective and less burdensome on of which are covered under separate but compli- institutions. mentary programs that reflect the new frequency Critical to the implementation of the risk-focused schedule. approach is the exercise of examiner judgment in An essential component of the new examination determining the scope of the examination during the approach is the correlation of two risk elements: planning process. This allows examiners to customize, based on the bank's risk profile, procedures per- • Regulation risk, which involves an evaluation of formed on-site. the potential consequences to the consumer or the The Federal Reserve and the FDIC have developed bank of noncompliance with consumer protection examination procedure modules to assist examiners laws and regulations in their analysis of seven of the most important • Product risk, for which examiners will identify activities of community banks including loan portthe potential risks associated with financial products folio management, securities, management and interor services relative to a bank's market position, man- nal controls, earnings, and capital. Six supplemental agement expertise, and business orientation. modules are provided for the review of activities such Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

890 Federal Reserve Bulletin • November 1997 as electronic banking, mortgage banking, and interna- promoting awareness of the Year 2000 issue and tional banking. Both agencies have conducted exten- enforcing actions. sive field testing of the modules. The text of the Basle Committee document is avail- These modules emphasize evaluation of a bank's able on the Bank for International Settlements (BIS) ability to manage the risks associated with a particu- Web site at http://www.bis.org and on the Federal lar activity so that examiners can better diagnose Reserve Board Web site at http://www.bog.frb.fed.us/ emerging problems. The modules employ a tiered y2k. structure that permits an examiner to draw conclusions after completing a core analysis requiring a MODIFICATION BY THE BASLE COMMITTEE limited number of procedures. An expanded analysis OF THE AMENDMENT TO THE CAPITAL involving further procedures would be performed ACCORD TO INCORPORATE MARKET RISK only if the core analysis indicated more in-depth review is necessary. The Basle Committee on Banking Supervision has The modules have been automated for use on virincorporated market risk into the Amendment to the tually all laptop computers currently in field use Capital Accord that it issued in January 1996 and that through a standalone software program called ELVIS was subsequently adopted by the Federal Reserve (Examiner Laptop Visual Information System). Board for state member banks and bank holding ELVIS provides a documentation vehicle for work companies. The modified amendment is effective performed on an examination, as well as electronic January 1,1998. access to the two agencies' examination manuals. The modification has the effect of removing the Examiners at both agencies have been trained on so-called floor, which would have applied to banks the risk-focused examination process and the use of using internal models to assess specific risk as part ELVIS. of their overall modeling of market risk. Banks will The FDIC began work on developing a riskbenefit from the removal of the floor because its focused examination process in 1996 as part of a retention would have burdened them with dual Corporate Operating Plan project. When the FDIC calculations. examiners working on the project learned that the The text of the Basle Committee document is avail- Federal Reserve had undertaken a similar effort, the able on the BIS Web site at http://www.bis.org. two agencies decided to join in a cooperative effort. The state banking departments through the Conference of State Bank Supervisors (CSBS) provided RELEASE OF "PRINCIPLES FOR THE input to the development work. MANAGEMENT OF INTEREST RATE RISK" Training on the risk-based examination process has BY THE BASLE COMMITTEE included examiners from all of the fifty state banking The Basle Committee on Banking Supervision on departments. Since all three groups conduct examina- September 22, 1997, released a paper containing a set tions of state-chartered banks, implementation of of "Principles for the Management of Interest Rate the risk-focused approach is expected to improve the Risk." consistency of examination procedures applied to The document is a revised version of a consultastate-chartered institutions. tive paper issued in January 1997. It re-emphasizes the need for banks to maintain adequate riskmanagement practices in all their activities and iden- POLICY STATEMENT BY THE BASLE COMMITTEE tifies specific agreed-upon principles that supervisory ON YEAR 2000 ISSUES authorities will consider in evaluating banks' management of interest rate risk. The Basle Committee on Banking Supervision has The text of the Basle Committee document is availissued a policy statement entitled "The Year 2000: A able on the BIS Web site at http://www.bis.org. Challenge for Financial Institutions and Bank Supervisors," which addresses the need for financial institutions to check all their computer applications in RELEASE OF THE "CORE PRINCIPLES advance of the new millennium. FOR EFFECTIVE BANKING SUPERVISION" This paper sets out a strategic approach for the BY THE BASLE COMMITTEE development, testing, and implementation of system solutions as well as defining the role that central The Basle Committee on Banking Supervision has banks and other bank supervisors need to play in released the "Core Principles for Effective Banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 891 Supervision," a document that sets out the principles Updates will be available periodically at a cost to be that the committee believes must be in place for a determined at the time they become available. supervisory system to be effective. These twenty-five core principles are intended to serve as a basic reference for supervisory and other CHANGES IN BOARD STAFF public authorities worldwide to apply in the supervision of all the banks within their jurisdiction. The Board has approved the following changes in the Supervisory authorities throughout the world are official staff. invited to endorse them by October 1998. In the Division of International Finance, the Board The text of the core principles is available on the announced on September 15, 1997, the appointment BIS Web site at http://www.bis.org. to the official staff of Lewis S. Alexander as Associate Director; the promotions of Peter Hooper and Karen H. Johnson from Assistant Director to Associ- PUBLICATION OF THE EXAMINATION MANUAL ate Director; a reassignment for Thomas A. Connors, FOR US. BRANCHES AND AGENCIES Assistant Director; and a change in title from Senior OF FOREIGN BANKING ORGANIZATIONS Associate Director to Senior Adviser for Charles J. Siegman and Larry J. Promisel. The Examination Manual for U.S. Branches and In the Division of Supervision and Regulation, the Agencies of Foreign Banking Organizations, pub- Board announced on September 17, 1997, the followlished by the Board's Division of Banking Supervi- ing official staff promotions and appointments: the sion and Regulation in 1995, has been totally revised promotions of Herbert A. Biern and Roger T. Cole as of July 1997 and is now available for purchase by to the position of Associate Director; the promotions the public. The Manual serves as a primary reference of James V. Houpt, Jr., Gerald A. Edwards, Jr., source of uniform guidelines and procedures to be Molly S. Wassom, Stephen Hoffman, Jr., Michael G. used by examiners at U.S. state and federal banking Martinson, Sidney M. Sussan, and Jack P. Jennings agencies in conducting examinations of foreign bank to the position of Deputy Associate Director; the branches and agencies operating in the United States. appointments of Norah M. Barger, Betsy Cross, and The Manual provides a comprehensive overview Richard A. Small to the position of Assistant Direcof the broad range of banking activities that are tor; and the transfer of William A. Ryback to Associconducted by foreign bank branches and agencies ate Director for Supervision Operations. and specific guidance on how to evaluate these activi- Mr. Alexander first joined the Board's staff in ties at a branch and agency in the context of the 1985. He left the Board in 1993 to serve as Chief foreign banking organization of which it is an inte- Economist at the Department of Commerce and then gral part. It includes the ROCA (risk management, returned to the Board in 1996. He received his Ph.D. operational controls, compliance with U.S. laws and from Yale University. regulations, and asset quality) rating system that Ms. Barger joined the Board's staff in 1986. She examiners use to assess the condition of foreign bank holds an A.B. degree from Princeton University and branches and agencies and to identify and address an M.B.A. from Georgetown University. any of the unique supervisory issues raised by these Ms. Cross joined the Board's staff in 1982. She offices. holds a B.A. degree from DePauw University, an The Manual may be obtained from Publications M.A. from the University of Pennsylvania, and an Services, Mail Stop 127, Board of Governors of the M.B.A. from the University of Michigan. Federal Reserve System, Washington, DC 20551, at a Mr. Small joined the Board's staff in December cost of $40.00. Charge orders paid by Visa and 1989. He holds a B.S. degree from Rider College and Mastercard may be sent by fax to (202) 728-5886. a J.D. from Hofstra University's Law School. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

893 Legal Developments JOINT FINAL RULE—AMENDMENT TO RIEGLE-NEAL Subpart E—Prohibition Against Use of Interstate INTERSTATE BANKING AND BRANCHING EFFICIENCY Branches Primarily for Deposit Production ACT OF 1994 Sec. The Office of the Comptroller of the Currency, Treasury ("OCC"); Board of Governors of the Federal Reserve 25.61 Purpose and scope. System ("Board"); and Federal Deposit Insurance Corpo- 25.62 Definitions. ration ("FDIC") (colletively, "agencies") are adopting 25.63 Loan-to-deposit ratio screen. uniform regulations to implement section 109 ("section 25.64 Credit needs determination. 109") of the Riegle-Neal Interstate Banking and Branching 25.65 Sanctions. Efficiency Act of 1994 ("Interstate Act"). The final rule reflects comments received on the proposal and further Subpart E—Prohibition Against Use of Interstate internal consideration by the agencies. Branches Primarily for Deposit Production As required by section 109, the final rule prohibits any bank from establishing or acquiring a branch or branches Section 25.61—Purpose and scope. outside of its home state under the Interstate Act primarily for the purpose of deposit production, and provides guide- (a) Purpose. The purpose of this subpart is to implement lines for determining whether such bank is reasonably section 109 (12 U.S.C. 1835a) of the Riegle-Neal Interstate helping to meet the credit needs of the communities served Banking and Branching Efficiency Act of 1994 (Interstate by these branches. Act). Effective October 10, 1997, 12 C.F.R. Parts 25, 208, 211, (b) Scope. (1) This subpart applies to any national bank and 369 are amended as follows: that has operated a covered interstate branch for a period of at least one year, and any foreign bank that has Part 25—Community Reinvestment Act and operated a covered interstate branch that is a Federal Interstate Deposit Production Regulations branch for a period of at least one year. (2) This subpart describes the requirements imposed under 12 U.S.C. 1835a, which requires the appropriate 1. The part heading for Part 25 is revised to read as set Federal banking agencies (the OCC, the Board of Goverforth above. nors of the Federal Reserve System, and the Federal Deposit Insurance Corporation) to prescribe uniform 2. The authority citation for Part 25 is revised to read as follows: rules that prohibit a bank from using any authority to engage in interstate branching pursuant to the Interstate Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, Act, or any amendment made by the Interstate Act to 215a, 481, 1814, 1816, 1828(c), 1835a, 2901 through 2907, any other provision of law, primarily for the purpose of and 3101 through 3111. deposit production. Section 25.62—Definitions. 3. Section 25.11 is amended by revising paragraph (a)(1) to read as follows: For purposes of this subpart, the following definitions apply: Section 25.11—Authority, purpose, and scope. (a) Bank means, unless the context indicates otherwise: (1) A national bank; and (a) Authority and OMB control number — (1) Authority. (2) A foreign bank as that term is defined in 12 U.S.C. The authority for subparts A, B, C, D, and E is 12 U.S.C. 3101(7) and 12 C.F.R. 28.11(j). 21, 22, 26, 27, 30, 36, 93a, 161, 215, 215a, 481, 1814, (b) Covered interstate branch means any branch of a 1816, 1828(c), 1835a, 2901 through 2907, and 3101 national bank, and any Federal branch of a foreign bank, through 3111. that: (1) Is established or acquired outside the bank's home state pursuant to the interstate branching authority 4. Part 25 is amended by adding a new subpart E to read as granted by the Interstate Act or by any amendment made follows: by the Interstate Act to any other provision of law; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

894 Federal Reserve Bulletin • November 1997 (2) Could not have been established or acquired outside (1) Whether covered interstate branches were formerly of the bank's home state but for the establishment or part of a failed or failing depository institution; acquisition of a branch described in paragraph (b)(1) of (2) Whether covered interstate branches were acquired this section. under circumstances where there was a low loan-to- (c) Federal branch means Federal branch as that term is deposit ratio because of the nature of the acquired instidefined in 12 U.S.C. 3101(6) and 12 C.F.R. 28.1 l(i). tution's business or loan portfolio; (d) Home state means: (3) Whether covered interstate branches have a high (1) With respect to a state bank, the state that chartered concentration of commercial or credit card lending, trust the bank; services, or other specialized activities, including the (2) With respect to a national bank, the state in which extent to which the covered interstate branches accept the main office of the bank is located; and deposits in the host state; (3) With respect to a foreign bank, the home state of the (4) The CRA ratings received by the bank, if any; foreign bank as determined in accordance with 12 U.S.C. (5) Economic conditions, including the level of loan 3103(c) and 12 C.F.R. 28.1 l(o). demand, within the communities served by the covered (e) Host state means a state in which a bank establishes or interstate branches; acquires a covered interstate branch. (6) The safe and sound operation and condition of the (f) Host state loan-to-deposit ratio generally means, with bank;and respect to a particular host state, the ratio of total loans in (7) The OCC's CRA regulations (subparts A through D the host state relative to total deposits from the host state of this part) and interpretations of those regulations. for all banks (including institutions covered under the definition of "bank" in 12 U.S.C. 1813(a)(1)) that have that state as their home state, as determined and updated Section 25.65—Sanctions. periodically by the appropriate Federal banking agencies and made available to the public. (a) In general. If the OCC determines that a bank is not (g) State means state as that term is defined in 12 U.S.C. reasonably helping to meet the credit needs of the commu- 1813(a)(3). nities served by the bank in the host state, and that the (h) Statewide loan-to-deposit ratio means, with respect to a bank's statewide loan-to-deposit ratio is less than 50 perbank, the ratio of the bank's loans to its deposits in a state cent of the host state loan-to-deposit ratio, the OCC: in which the bank has one or more covered interstate (1) May order that a bank's covered interstate branch or branches, as determined by the OCC. branches be closed unless the bank provides reasonable assurances to the satisfaction of the OCC, after an oppor- Section 25.63—Loan-to-deposit ratio screen. tunity for public comment, that the bank has an acceptable plan under which the bank will reasonably help to (a) Application of screen. Beginning no earlier than one meet the credit needs of the communities served by the year after a bank establishes or acquires a covered inter- bank in the host state; and state branch, the OCC will consider whether the bank's (2) Will not permit the bank to open a new branch in the statewide loan-to-deposit ratio is less than 50 percent of the host state that would be considered to be a covered relevant host state loan-to-deposit ratio. interstate branch unless the bank provides reasonable (b) Results of screen. (1) If the OCC determines that the assurances to the satisfaction of the OCC, after an opporbank's statewide loan-to-deposit ratio is 50 percent or tunity for public comment, that the bank will reasonably more of the host state loan-to-deposit ratio, no further help to meet the credit needs of the community that the consideration under this subpart is required. new branch will serve. (2) If the OCC determines that the bank's statewide (b) Notice prior to closure of a covered interstate branch. loan-to-deposit ratio is less than 50 percent of the host Before exercising the OCC's authority to order the bank to state loan-to-deposit ratio, or if reasonably available data close a covered interstate branch, the OCC will issue to the are insufficient to calculate the bank's statewide loan-to- bank a notice of the OCC's intent to order the closure and deposit ratio, the OCC will make a credit needs determi- will schedule a hearing within 60 days of issuing the nation for the bank as provided in section 25.64. notice. (c) Hearing. The OCC will conduct a hearing scheduled under paragraph (b) of this section in accordance with the Section 25.64—Credit needs determination. provisions of 12 U.S.C. 1818(h) and 12 C.F.R. Part 19. (a) In general. The OCC will review the loan portfolio of the bank and determine whether the bank is reasonably Part 208—Membership of State Banking helping to meet the credit needs of the communities in the Institutions in the Federal Reserve System host state that are served by the bank. (Regulation H) (b) Guidelines. The OCC will use the following considerations as guidelines when making the determination pursu- 1. The authority citation for Part 208 is revised to read as ant to paragraph (a) of this section: follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 895 Authority: 12 U.S.C. 24, 248(a), 248(c), 321-338a, 371d, (4) Host state means a state in which a bank establishes 461, 481-486, 601, 611, 1814, 1820(d)(9), 1823(j), or acquires a covered interstate branch. 1828(o), 1831o, 1831p-l, 1835a, 3105, 3310, 3331-3351, (5) Host state loan-to-deposit ratio generally means, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o- with respect to a particular host state, the ratio of total 4(c)(5), 78q, 78q-l, and 78w; 31 U.S.C. 5318. loans in the host state relative to total deposits from the host state for all banks (including institutions 2. A new section 208.28 is added to subpart A to read as covered under the definition of "bank" in 12 U.S.C. follows: 1813(a)(1)) that have that state as their home state, as determined and updated periodically by the appropriate Federal banking agencies and made available to Section 208.28—Prohibition against use of the public. interstate branches primarily for deposit production. (6) State means state as that term is defined in 12 U.S.C. 1813(a)(3). (a) Purpose and scope — (1) Purpose. The purpose of this (7) Statewide loan-to-deposit ratio means, with respect section is to implement section 109 (12 U.S.C. 1835a) of to a bank, the ratio of the bank's loans to its deposits in a the Riegle-Neal Interstate Banking and Branching Effi- state in which the bank has one or more covered interciency Act of 1994 (Interstate Act). state branches, as determined by the Board. (2) Scope, (i) This section applies to any State member (c) Loan-to-deposit ratio screen — (1) Application of bank that has operated a covered interstate branch for screen. Beginning no earlier than one year after a bank a period of at least one year, and any foreign bank that establishes or acquires a covered interstate branch, the has operated a covered interstate branch licensed by a Board will consider whether the bank's statewide loan- State for a period of at least one year, to-deposit ratio is less than 50 percent of the relevant (ii) This section describes the requirements imposed host state loan-to-deposit ratio. under 12 U.S.C. 1835a, which requires the appropriate (2) Results of screen, (i) If the Board determines that the Federal banking agencies (the Board, the Office of the bank's statewide loan-to-deposit ratio is 50 percent or Comptroller of the Currency, and the Federal Deposit more of the host state loan-to-deposit ratio, no further Insurance Corporation) to prescribe uniform rules that consideration under this section is required, prohibit a bank from using any authority to engage in (ii) If the Board determines that the bank's statewide interstate branching pursuant to the Interstate Act, or loan-to-deposit ratio is less than 50 percent of the host any amendment made by the Interstate Act to any state loan-to-deposit ratio, or if reasonably available other provision of law, primarily for the purpose of data are insufficient to calculate the bank's statewide deposit production. loan-to-deposit ratio, the Board will make a credit (b) Definitions. For purposes of this section, the following needs determination for the bank as provided in paradefinitions apply: graph (d) of this section. (1) Bank means, unless the context indicates otherwise: (d) Credit needs determination — (1) In general. The (i) A State member bank as that term is defined in Board will review the loan portfolio of the bank and 12 U.S.C. 1813(d)(2); and determine whether the bank is reasonably helping to (ii) A foreign bank as that term is defined in 12 U.S.C. meet the credit needs of the communities in the host 3101(7) and 12 C.F.R. 211.21. state that are served by the bank. (2) Covered interstate branch means any branch of a (2) Guidelines. The Board will use the following consid- State member bank, and any uninsured branch of a erations as guidelines when making the determination foreign bank licensed by a State, that: pursuant to paragraph (d)(1) of this section: (i) Is established or acquired outside the bank's home (i) Whether covered interstate branches were formerly state pursuant to the interstate branching authority part of a failed or failing depository institution; granted by the Interstate Act or by any amendment (ii) Whether covered interstate branches were acmade by the Interstate Act to any other provision of quired under circumstances where there was a low law; or loan-to-deposit ratio because of the nature of the (ii) Could not have been established or acquired out- acquired institution's business or loan portfolio; side of the bank's home state but for the establishment (iii) Whether covered interstate branches have a high or acquisition of a branch described in paragraph concentration of commercial or credit card lending, (b)(2)(i) of this section. trust services, or other specialized activities, including (3) Home state means: the extent to which the covered interstate branches (i) With respect to a state bank, the state that chartered accept deposits in the host state; the bank; (iv) The Community Reinvestment Act ratings re- (ii) With respect to a national bank, the state in which ceived by the bank, if any, under 12 U.S.C. 2901 the main office of the bank is located; and et seq.; (iii) With respect to a foreign bank, the home state of (v) Economic conditions, including the level of loan the foreign bank as determined in accordance with demand, within the communities served by the cov- 12 U.S.C. 3103(c) and 12 C.F.R. 211.22. ered interstate branches; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

896 Federal Reserve Bulletin • November 1997 (vi) The safe and sound operation and condition of the Part 369—Prohibition Against Use of Interstate bank; and Branches Primarily for Deposit Production (vii) The Board's Regulation BB — Community Reinvestment (12 C.F.R. Part 228) and interpretations of Sec. that regulation. (e) Sanctions — (1) In general. If the Board determines 369.1 Purpose and scope. that a bank is not reasonably helping to meet the credit 369.2 Definitions. needs of the communities served by the bank in the host 369.3 Loan-to-deposit ratio screen. state, and that the bank's statewide loan-to-deposit ratio 369.4 Credit needs determination. is less than 50 percent of the host state loan-to-deposit 369.5 Sanctions. ratio, the Board: (i) May order that a bank's covered interstate branch Authority: 12 U.S.C. 1819 (Tenth) and 1835a. or branches be closed unless the bank provides reasonable assurances to the satisfaction of the Board, Section 369.1—Purpose and scope. after an opportunity for public comment, that the bank has an acceptable plan under which the bank will (a) Purpose. The purpose of this part is to implement reasonably help to meet the credit needs of the com- section 109 (12 U.S.C. 1835a) of the Riegle-Neal Interstate munities served by the bank in the host state; and Banking and Branching Efficiency Act of 1994 (Interstate (ii) Will not permit the bank to open a new branch in Act). the host state that would be considered to be a covered (b) Scope — (1) This part applies to any State nonmember interstate branch unless the bank provides reasonable bank that has operated a covered interstate branch for a assurances to the satisfaction of the Board, after an period of at least one year. opportunity for public comment, that the bank will (2) This part describes the requirements imposed under reasonably help to meet the credit needs of the com- 12 U.S.C. 1835a, which requires the appropriate Federal munity that the new branch will serve. banking agencies (the FDIC, the Office of the Comptrol- (2) Notice prior to closure of a covered interstate ler of the Currency, and the Board of Governors of the branch. Before exercising the Board's authority to order Federal Reserve System) to prescribe uniform rules that the bank to close a covered interstate branch, the Board prohibit a bank from using any authority to engage in will issue to the bank a notice of the Board's intent to interstate branching pursuant to the Interstate Act, or any order the closure and will schedule a hearing within amendment made by the Interstate Act to any other 60 days of issuing the notice. provision of law, primarily for the purpose of deposit (3) Hearing. The Board will conduct a hearing sched- production. uled under paragraph (e)(2) of this section in accordance with the provisions of 12 U.S.C. 1818(h) and 12 C.F.R. Section 369.2—Definitions. Part 263. For purposes of this part, the following definitions apply: (a) Bank means, unless the context indicates otherwise: Part 211—International Banking Operations (1) A State nonmember bank; and (Regulation K) (2) A foreign bank as that term is defined in 12 U.S.C. 3101(7) and 12 C.F.R. 346.1(a). 1. The authority citation for part 211 is revised to read as (b) Covered interstate branch means any branch of a State follows: nonmember bank, and any insured branch of a foreign bank licensed by a State, that: Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 etseq., (1) Is established or acquired outside the bank's home 3101 et seq., and 3901 et seq. state pursuant to the interstate branching authority granted by the Interstate Act or by any amendment made 2. In section 211.22, a new paragraph (d) is added to read by the Interstate Act to any other provision of law; or as follows: (2) Could not have been established or acquired outside of the bank's home state but for the establishment or acquisition of a branch described in paragraph (b)(1) of Section 211.22—Interstate banking operations of this section. foreign banking organizations. (c) Home state means: (1) With respect to a state bank, the state that chartered the bank; (d) Prohibition against interstate deposit production of- (2) With respect to a national bank, the state in which fices. A covered interstate branch of a foreign bank may the main office of the bank is located; and not be used as a deposit production office in accordance (3) With respect to a foreign bank, the home state of the with the provisions in section 208.28 of the Board's Regu- foreign bank as determined in accordance with 12 U.S.C. lation H (12 C.F.R. 208.28). 3103(c) and 12 C.F.R. 346. l(j). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 897 (d) Host state means a state in which a bank establishes or (5) Economic conditions, including the level of loan acquires a covered interstate branch. demand, within the communities served by the covered (e) Host state loan-to-deposit ratio generally means, with interstate branches; respect to a particular host state, the ratio of total loans in (6) The safe and sound operation and condition of the the host state relative to total deposits from the host state bank; and for all banks (including institutions covered under the (7) The FDIC's Community Reinvestment regulations definition of "bank" in 12 U.S.C. 1813(a)(1)) that have (12 C.F.R. Part 345) and interpretations of those regulathat state as their home state, as determined and updated tions. periodically by the appropriate Federal banking agencies and made available to the public. Section 369.5—Sanctions. (f) State means state as that term is defined in 12 U.S.C. 1813(a)(3). (a) In general. If the FDIC determines that a bank is not (g) Statewide loan-to-deposit ratio means, with respect to a reasonably helping to meet the credit needs of the commubank, the ratio of the bank's loans to its deposits in a state nities served by the bank in the host state, and that the in which the bank has one or more covered interstate bank's statewide loan-to-deposit ratio is less than 50 perbranches, as determined by the FDIC. cent of the host state loan-to-deposit ratio, the FDIC: (1) May order that a bank's covered interstate branch or Section 369.3—Loan-to-deposit ratio screen. branches be closed unless the bank provides reasonable assurances to the satisfaction of the FDIC, after an opportunity for public comment, that the bank has an (a) Application of screen. Beginning no earlier than one acceptable plan under which the bank will reasonably year after a bank establishes or acquires a covered interhelp to meet the credit needs of the communities served state branch, the FDIC will consider whether the bank's by the bank in the host state; and statewide loan-to-deposit ratio is less than 50 percent of the (2) Will not permit the bank to open a new branch in the relevant host state loan-to-deposit ratio. host state that would be considered to be a covered (b) Results of screen. (1) If the FDIC determines that the interstate branch unless the bank provides reasonable bank's statewide loan-to-deposit ratio is 50 percent or assurances to the satisfaction of the FDIC, after an more of the host state loan-to-deposit ratio, no further opportunity for public comment, that the bank will reaconsideration under this part is required. sonably help to meet the credit needs of the community (2) If the FDIC determines that the bank's statewide that the new branch will serve. loan-to-deposit ratio is less than 50 percent of the host (b) Notice prior to closure of a covered interstate state loan-to-deposit ratio, or if reasonably available data branch. Before exercising the FDIC's authority to order are insufficient to calculate the bank's statewide loan-tothe bank to close a covered interstate branch, the FDIC deposit ratio, the FDIC will make a credit needs determiwill issue to the bank a notice of the FDIC's intent to nation for the bank as provided in section 369.4. order the closure and will schedule a hearing within 60 days of issuing the notice. Section 369.4—Credit needs determination. (c) Hearing. The FDIC will conduct a hearing scheduled under paragraph (b) of this section in accordance with (a) In general. The FDIC will review the loan portfolio of the provisions of 12 U.S.C. 1818(h) and 12 C.F.R. the bank and determine whether the bank is reasonably Part 308. helping to meet the credit needs of the communities in the host state that are served by the bank. (b) Guidelines. The FDIC will use the following consider- FINAL RULE—AMENDMENT TO REGULATION J ations as guidelines when making the determination pursuant to paragraph (a) of this section: The Board of Governors is amending 12 C.F.R. Part 210, (1) Whether covered interstate branches were formerly its Regulation J (Collection of Checks and Other Items by part of a failed or failing depository institution; Federal Reserve Banks and Funds Transfers Through Fed- (2) Whether covered interstate branches were acquired wire). The Reserve Banks will begin to implement a policy under circumstances where there was a low loan-to- under which each depository institution may maintain only deposit ratio because of the nature of the acquired insti- a single funds account with the Federal Reserve. A single tution's business or loan portfolio; account will establish a single debtor-creditor relationship (3) Whether covered interstate branches have a high between each institution and a Federal Reserve Bank and concentration of commercial or credit card lending, trust will make account management more efficient for banks services, or other specialized activities, including the with interstate branches. The Board is adopting amendextent to which the covered interstate branches accept ments to subpart A of Regulation I to conform the Federal deposits in the host state; Reserve check collection rules to the single account struc- (4) The Community Reinvestment Act (CRA) ratings ture. received by the bank, if any, under 12 U.S.C. 2901 Effective January 2, 1998, 12 C.F.R. Part 210 is amended et seq.; as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

898 Federal Reserve Bulletin • November 1997 Part 210—Collection of Checks and Other Items by procedures for adjustments on a Reserve Bank's books, Federal Reserve Banks and Funds Transfers including amounts, waiver of expenses, and payment of Through Fedwire (Regulation J) interest by as-of adjustment. 1. The authority citation for Part 210 continues to read as follows: 4. Section 210.4 is revised to read as follows: Authority: 12 U.S.C. 248(i), (j), and (o), 342, 360, 464, and Section 210.4—Sending items to Reserve Banks. 4001-4010. (a) Sending of items. A sender, other than a Reserve Bank, 2. Section 210.2 is amended by redesignating paragraph (a) may send any item to any Reserve Bank, whether or not and paragraphs (b) through (p) as paragraph (b) and para- the item is payable within the Reserve Bank's District, graphs (d) through (r), respectively; adding new para- unless the sender's Administrative Reserve Bank directs graphs (a) and (c); and revising newly redesignated para- the sender to send the item to a specific Reserve Bank. graphs (d), (g) introductory text, and (g)(2) to read as (b) Handling of items. (1) The following parties, in the follows: following order, are deemed to have handled an item that is sent to a Reserve Bank for collection— Section 210.2—Definitions. (i) The initial sender; (ii) The initial sender's Administrative Reserve Bank; (iii) The Reserve Bank that receives the item from the (a) Account means an account with reserve or clearing initial sender (if different from the initial sender's balances on the books of a Federal Reserve Bank. A Administrative Reserve Bank); and subaccount is an informational record of a subset of trans- (iv) Another Reserve Bank, if any, that receives the actions that affect an account and is not a separate account. item from a Reserve Bank. (2) A Reserve Bank that is not described in paragraph (b)(1) of this section is not a party that handles an item (c) Administrative Reserve Bank with respect to an entity and is not a collecting bank with respect to an item. means the Reserve Bank in whose District the entity is (3) The identity and order of the parties under paragraph located, as determined under the procedure described in (b)(1) of this section determine the relationships and the section 204.3(b)(2) of this chapter (Regulation D), even if rights and liabilities of the parties under this subpart, the entity is not otherwise subject to that section. Part 229 of this chapter (Regulation CC), and the Uniform Commercial Code. An initial sender's Administrative Reserve Bank that is deemed to handle an item is (d) Bank means any person engaged in the business of also deemed to be a sender with respect to that item. The banking. A branch or separate office of a bank is a separate Reserve Banks that are deemed to handle an item are bank to the extent provided in the Uniform commercial deemed to be agents or subagents of the owner of the Code. item, as provided in section 210.6(a) of this subpart. (c) Checks received at par. The Reserve Banks shall receive cash items and other checks at par. (g) Cash item means— 5. In section 210.5, paragraphs (a)(1) and (c) and the first sentence of paragraph (d) are revised to read as follows: (2) Any other item payable on demand and collectible at par that the Reserve Bank that receives the item is Section 210.5—Sender's agreement; recovery by willing to accept as a cash item. Cash item does not Reserve Bank. include a returned check. (ct) ^ ^ (1) Authorizes the sender's Administrative Reserve 3. In section 210.3, the last sentence of paragraph (a) is Bank and any other Reserve Bank or collecting bank to revised to read as follows: which the item is sent to handle the item (and authorizes any Reserve Bank that handles settlement for the item to Section 210.3—General provisions. make accounting entries), subject to this subpart and to the Reserve Banks' operating circulars, and warrants its (a) General. * * * The circulars may, among other things, authority to give this authorization; classify cash items and noncash items, require separate sorts and letters, provide different closing times for the receipt of different classes or types of items, provide for (c) Methods of recovery. (1) The Reserve Bank may reinstructions by an Administrative Reserve Bank to other cover the amount stated in paragraph (b) of this section Reserve Banks, set forth terms of services, and establish by charging any account on its books that is maintained Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 899 or used by the sender (or by charging a Reserve Bank (2) The Reserve Bank also makes the warranties set sender), if— forth in section 229.34(c) of this chapter, subject to the (i) The Reserve Bank made reasonable written de- terms of Part 229 of this chapter (Regulation CC). The mand on the sender to assume defense of the action or Reserve Bank shall not have or assume any other liabilproceeding; and ity to the paying bank or other payor, except for the (ii) The sender has not made any other arrangement Reserve Bank's own lack of good faith or failure to for payment that is acceptable to the Reserve Bank. exercise ordinary care. (2) The Reserve Bank is not responsible for defending the action or proceeding before using this method of recovery. A Reserve Bank that has been charged under 7. In section 210.7, paragraph (c) introductory text and this paragraph (c) may recover from its sender in the paragraph (d) are revised to read as follows: manner and under the circumstances set forth in this paragraph (c). A Reserve Bank's failure to avail itself of the remedy provided in this paragraph (c) does not Section 210.7—Presenting items for payment. prejudice its enforcement in any other manner of the indemnity agreement referred to in paragraph (a)(3) of this section. (d) Security interest. When a sender sends an item to a (c) Presenting or sending direct. A Reserve Bank or subse- Reserve Bank, the sender and any prior collecting bank quent collecting bank may, with respect to an item that grant to the sender's Administrative Reserve Bank a secu- may be sent to the paying bank or nonbank payor in the rity interest in all of their respective assets in the posses- Reserve Bank's District— sion of, or held for the account of, any Reserve Bank to secure their respective obligations due or to become due to the Administrative Reserve Bank under this subpart or (d) Item sent to another district. A Reserve Bank receiving subpart C of part 229 of this chapter (Regulation CC). * * * an item that may be sent to a paying bank or nonbank payor in another District ordinarily sends the item to the 6. In section 210.6, paragraphs (a)(1) and (b) are revised to Reserve Bank of the other District, but with the agreement read as follows: of the other Reserve Bank, may present or send the item as if it were sent to a paying bank or nonbank payor in its own Section 210.6—Status, warranties, and liability of District. Reserve Bank. 8. Section 210.8 is revised to read as follows: (a)(1) Status and liability. A Reserve Bank that handles an item shall act as agent or subagent of the owner with respect to the item. This agency terminates when a Section 210.8—Presenting noncash items for Reserve Bank receives final payment for the item in acceptance. actually and finally collected funds, a Reserve Bank makes the proceeds available for use by the sender, and the time for commencing all actions against the Reserve (a) A Reserve Bank or a subsequent collecting bank may, if Bank has expired. A Reserve Bank shall not have or instructed by the sender, present a noncash item for accepassume any liability with respect to an item or its pro- tance in any manner authorized by law if— ceeds except— (1) The item provides that it must be presented for (i) For the Reserve Bank's own lack of good faith or acceptance; failure to exercise ordinary care; (2) The item may be presented elsewhere than at the (ii) As provided in paragraph (b) of this section; and residence or place of business of the payor; or (iii) As provided in subpart C of Part 229 of this (3) The date of payment of the item depends on presentchapter (Regulation CC). ment for acceptance. (b) Documents accompanying a noncash item shall not be delivered to the payor upon acceptance of the item unless (b) Warranties and liability. (1) By presenting or sending the sender specifically authorizes delivery. A Reserve Bank an item, a Reserve Bank warrants to a subsequent col- shall not have or assume any other obligation to present or lecting bank and to the paying bank and any other to send for presentment for acceptance any noncash item. payor— (i) That the Reserve Bank is a person entitled to 9. Section 210.9 is amended by redesignating paragraphs enforce the item (or is authorized to obtain payment (a) through (e) as paragraphs (b) through (f); adding a new of the item on behalf of a person who is either entitled paragraph (a); revising newly redesignated paragraphs (b) to enforce the item or authorized to obtain payment on and (c); and in newly redesignated paragraph (f) removing behalf of a person entitled to enforce the item); and the references "paragraphs (a), (b), and (c)" and adding in (ii) That the item has not been altered. their place "paragraphs (b), (c), and (d)". Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

900 Federal Reserve Bulletin • November 1997 Section 210.9—Settlement and payment. hour after it ordinarily would have received the item, 9:30 a.m. Eastern Time, or such later time as (a) Settlement through Administrative Reserve Bank. A provided in the Reserve Banks' operating circulars; paying bank shall settle for an item under this subpart with or its Administrative Reserve Bank, whether or not the paying (B) On the next day that is a banking day for both bank received the item from that Reserve Bank. A paying the paying bank and the Reserve Bank, settle for bank's settlement with its Administrative Reserve Bank is the item so that the proceeds of the settlement are deemed to be settlement with the Reserve Bank from available to its Administrative Reserve Bank by which the paying bank received the item. A paying bank 9:30 a.m. Eastern Time on that day or such later may settle for an item using any account on a Reserve time as provided in the Reserve Banks' operating Bank's books by agreement with its Administrative Re- circulars and compensate the Reserve Bank for the serve Bank, any other Reserve Bank holding the settlement value of the float associated with the item in accoraccount, and the account-holder. The paying bank remains dance with procedures provided in the Reserve responsible for settlement if the Reserve Bank holding the Bank's operating circular, settlement account does not, for any reason, obtain settle- (ii) If a paying bank closes voluntarily so that it does ment in that account. not receive a cash item on a day that is a banking day (b) Cash items — (1) Settlement obligation. On the day a for a Reserve Bank, and the Reserve Bank makes the paying bank receives2 a cash item from a Reserve Bank, cash item available to the paying bank on that day, the it shall settle for the item such that the proceeds of the paying bank is not considered to have received the settlement are available to its Administrative Reserve item until its next banking day, but it shall be subject Bank by the close of Fedwire on that day, or it shall to any applicable overdraft charges if it fails to settle return the item by the later of the close of its banking day for or return the item in accordance with paragraph or the close of Fedwire. If the paying bank fails to settle for (b)(3)(i) of this section. The settlement requirements or return a cash item in accordance with this paragraph of paragraphs (b)(1) and (b)(2) of this section do not (b)(1), it is accountable for the amount of the item as of apply to a paying bank that settles in accordance with the close of its banking day or the close of Fedwire on paragraph (b)(3)(i) of this section. the day it receives the item, whichever is earlier. (4) Reserve Bank closed, (i) If a paying bank receives a (2) Time of settlement, (i) On the day a paying bank cash item from a Reserve Bank on a banking day that receives a cash item from a Reserve Bank, it shall is not a banking day for the Reserve Bank, the paying settle for the item so that the proceeds of the settle- bank shall— ment are available to its Administrative Reserve Bank, (A) Settle for the item so that the proceeds of the or return the item, by the latest of— settlement are available to its Administrative Re- (A) The next clock hour that is at least one hour serve Bank by the close of Fedwire on the Reserve after the paying bank receives the item; Bank's next banking day, or return the item by (B) 9:30 a.m. Eastern Time; or midnight of the day it receives the item (if the (C) Such later time as provided in the Reserve paying bank fails to settle for or return a cash item Banks' operating circulars. in accordance with this paragraph (b)(4)(i)(A), it (ii) If the paying bank fails to settle for or return a shall become accountable for the amount of the cash item in accordance with paragraph (b)(2)(i) of item as of the close of its banking day on the day it this section, it shall be subject to any applicable receives the item); and overdraft charges. Settlement under paragraph (B) Settle for the item so that the proceeds of the (b)(2)(i) of this section satisfies the settlement require- settlement are available to its Administrative Rements of paragraph (b)(1) of this section. serve Bank by 9:30 a.m. Eastern Time on the (3) Paying bank closes voluntarily, (i) If a paying bank Reserve Bank's next banking day or such later time closes voluntarily so that it does not receive a cash as provided in the Reserve Bank's operating circuitem on a day that is a banking day for a Reserve lar, or return the item by midnight of the day it Bank, and the Reserve Bank makes the cash item receives the item. If the paying bank fails to settle available to the paying bank on that day, the paying for or return a cash item in accordance with this bank shall either— paragraph (b)(4)(i)(B), it shall be subject to any (A) On that day, settle for the item so that the applicable overdraft charges. Settlement under this proceeds of the settlement are available to its Ad- paragraph (b)(4)(i)(B) satisfies the settlement reministrative Reserve Bank, or return the item, by quirements of paragraph (b)(4)(i)(A) of this secthe latest of the next clock hour that is at least one tion. (ii) The settlement requirements of paragraphs (b)(1) and (b)(2) of this section do not apply to a paying 2. A paying bank is deemed to receive a cash item on its next bank that settles in accordance with paragraph banking day if it receives the item— (b)(4)(i) of this section. (1) On a day other than a banking day for it; or (5) Manner of settlement. Settlement with a Reserve (2) On a banking day for it, but after a "cut-off hour" established by it in accordance with state law. Bank under paragraphs (b)(1) through (4) of this section Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 901 shall be made by debit to an account on the Reserve which the Reserve Bank has not yet received payment in Bank's books, cash, or other form of settlement to which actually and finally collected funds. the Reserve Bank agrees, except that the Reserve Bank may, in its discretion, obtain settlement by charging the paying bank's account. A paying bank may not set olf 12. Section 210.12 is amended by revising paragraphs (a), against the amount of a settlement under this section the (b), and (c)(1), the first sentence of paragraph (d), paraamount of a claim with respect to another cash item, graphs (f) and (h), and the first sentence of paragraph (i); cash letter, or other claim under section 229.34(c) of this and by removing the last sentence of paragraph (g) to read chapter (Regulation CC) or other law. as follows: (6) Notice in lieu of return. If a cash item is unavailable for return, the paying bank may send a notice in lieu of Section 210.12—Return of cash items and handling return as provided in section 229.30(f) of this chapter of returned checks. (Regulation CC). (c) Noncash items. A Reserve Bank may require the paying (a) Return of items — (1) Return of cash items handled by or collecting bank to which it has presented or sent a Reserve Banks. A paying bank that receives a cash item noncash item to pay for the item in cash, but the Reserve from a Reserve Bank, other than for immediate payment Bank may permit payment by a debit to an account main- over the counter, and that settles for the item as provided tained or used by the paying or collecting bank on a in section 210.9(b) of this subpart, may, before it has Reserve Bank's books or by any of the following that is in finally paid the item, return the item to any Reserve a form acceptable to the collecting Reserve Bank: bank Bank (unless its Administrative Reserve Bank directs it draft, transfer of funds or bank credit, or any other form of to return the item to a specific Reserve Bank) in accorpayment authorized by State law. dance with subpart C of Part 229 of this chapter (Regulation CC), the Uniform Commercial Code, and the Reserve Banks' operating circulars. A paying bank that 10. Section 210.10 is revised to read as follows: receives a cash item from a Reserve Bank also may return the item prior to settlement, in accordance with Section 210.10—Time schedule and availability of section 210.9(b) of this subpart and the Reserve Banks' credits for cash items and returned checks. operating circulars. The rules or practices of a clearinghouse through which the item was presented, or a special collection agreement under which the item was pre- (a) Each Reserve Bank shall include in its operating circusented, may not extend these return times, but may lars a time schedule for each of its offices indicating when provide for a shorter return time. the amount of any cash item or returned check received by it is counted as reserves for purposes of Part 204 of this (2) Return of checks not handled by Reserve Banks. A chapter (Regulation D) and becomes available for use by paying bank that receives a check as defined in secthe sender or paying or returning bank. The Reserve Bank tion 229.2(k) of this chapter (Regulation CC), other than that holds the settlement account shall give either immedi- from a Reserve Bank, and that determines not to pay the ate or deferred credit to a sender, a paying bank, or a check, may send the returned check to any Reserve returning bank (other than a foreign correspondent) in Bank (unless its Administrative Reserve Bank directs it accordance with the time schedule of the receiving Reserve to send the returned check to a specific Reserve Bank) in Bank. A Reserve Bank ordinarily gives credit to a foreign accordance with subpart C of Part 229 of this chapter correspondent only when the Reserve Bank receives pay- (Regulation CC), the Uniform Commercial Code, and ment of the item in actually and finally collected funds, the Reserve Banks' operating circulars. A returning bank but, in its discretion, a Reserve Bank may give immediate may send a returned check to any Reserve Bank (unless or deferred credit in accordance with its time schedule. its Administrative Reserve Bank directs it to send the (b) Notwithstanding its time schedule, a Reserve Bank may returned check to a specific Reserve Bank) in accorrefuse at any time to permit the use of credit given by it for dance with subpart C of Part 229 of this chapter (Reguany cash item or returned check, and may defer availability lation CC), the Uniform Commercial Code, and the after credit is received by the Reserve Bank for a period of Reserve Banks' operating circulars. time that is reasonable under the circumstances. (b) Handling of returned checks. (1) The following parties, in the following order, are deemed to have handled a 11. In section 210.11, the last sentence of paragraph (b) is returned check sent to a Reserve Bank under paragraph revised to read as follows: (a) of this section— (i) The paying or returning bank; Section 210.11—Availability of proceeds of (ii) The paying bank's or returning bank's Adminisnoncash items; time schedule. trative Reserve Bank; (iii) The Reserve Bank that receives the returned check from the paying or returning bank (if different (b) * * * A Reserve Bank may, however, refuse at any time from the paying bank's or returning bank's Administo permit the use of credit given by it for a noncash item for trative Reserve Bank); and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

902 Federal Reserve Bulletin • November 1997 (iv) Another Reserve Bank, if any, that receives the sends a returned check to a Reserve Bank, the paying bank, returned check from a Reserve Bank. returning bank, and any prior returning bank grant to the (2) A Reserve Bank that is not described in paragraph paying bank's or returning bank's Administrative Reserve (b)(1) of this section is not a party that handles a Bank a security interest in all of their respective assets in returned check and is not a returning bank with respect the possession of, or held for the account of, any Reserve to a returned check. Bank, to secure their respective obligations due or to (3) The identity and order of the parties under paragraph become due to the Administrative Reserve Bank under this (b)(1) of this section determine the relationships and the subpart or subpart C of Part 229 of this chapter (Regularights and liabilities of the parties under this subpart, tion CC). * * * Part 229 of this chapter (Regulation CC), and the Uniform Commercial Code. (c) Paying bank's and returning bank's agreement. * * * ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT (1) Authorizes the paying or returning bank's Administrative Reserve Bank, and any other Reserve Bank or Orders Issued Under Section 3 of the Bank Holding returning bank to which the returned check is sent, to Company Act handle the returned check (and authorizes any Reserve Bank that handles settlement for the returned check to ANB Holding Company, Ltd., make accounting entries) subject to this subpart and to ANB Corporation the Reserve Banks' operating circulars; Terrell, Texas Order Approving Acquisition of Shares of a Bank (d) Warranties by Reserve Bank. By handling a returned Holding Company check under this subpart, a Reserve Bank makes the returning bank warranties as set forth in section 229.34 of this ANB Holding Company, Ltd. and ANB Corporation, both chapter, subject to the terms of Part 229 of this chapter in Terrell, Texas (collectively, "Applicant"), bank holding (Regulation CC). * * * companies within the meaning of the Bank Holding Company Act ("BHC Act"), have requested the Board's approval under section 3 of the BHC Act (12 U.S.C. 1842) to (f) Methods of recovery. (1) The Reserve Bank may re- acquire up to approximately 41 percent of the voting shares cover the amount stated in paragraph (d) of this section of Lakeside Bancshares, Inc. ("Bancshares"), and thereby by charging any account on its books that is maintained acquire its subsidiary bank, Lakeside National Bank, both or used by the paying or returning bank (or by charging in Rockwall, Texas ("Bank").1 another returning Reserve Bank), if— Notice of this proposal, affording interested persons an (i) The Reserve Bank made seasonable written de- opportunity to submit comments, has been published mand on the paying or returning bank to assume (62 Federal Register 42,130 (1997)). The time for filing defense of the action or proceeding; and comments has expired, and the Board has considered the (ii) The paying or returning bank has not made any proposal and all comments received in light of the factors other arrangement for payment that is acceptable to set forth in section 3 of the BHC Act. the Reserve Bank. Applicant is the 44th largest depository institution in (2) The Reserve Bank is not responsible for defending Texas, controlling approximately $413 million in deposits, the action or proceeding before using this method of representing less than 1 percent of total deposits in deposirecovery. A Reserve Bank that has been charged under tory institutions in the state.2 Bancshares, is the 638th paragraph (f) may recover from the paying or returning largest depository institution in Texas, controlling approxibank in the manner and under the circumstances set mately $23.4 million in deposits, representing less than forth in paragraph (f). A Reserve Bank's failure to avail 1 percent of total deposits in depository institutions in the itself of the remedy provided in paragraph (f) does not state. On consummation of this proposal, Applicant would prejudice its enforcement in any other manner of the become the 41st largest depository institution in Texas, indemnity agreement referred to in paragraph (c)(3) of controlling deposits of $436.4 million, representing less this section. than 1 percent of the total deposits in depository institutions in the state. (h) Settlement. A subsequent returning bank or depositary bank shall settle with its Administrative Reserve Bank for returned checks in the same manner and by the same time as for cash items presented for payment under this subpart. 1. Bancshares owns 94.5 percent of the voting shares of Bank. Settlement with its Administrative Reserve Bank is deemed Applicant also proposes to acquire less than 1 percent of the voting shares of Bank. to be settlement with the Reserve Bank from which the 2. Asset and deposit data are as of June 30, 1996. In this context, returning bank or depositary bank received the item. depository institutions include commercial banks, savings banks, and (i) Security interest. When a paying or returning bank savings associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 903 Competitive Considerations and other indicia of economic integration and transmission of competitive forces among depository institutions. The BHC Act provides that the Board may not approve a Census Bureau data for 1990 indicate that 56.3 percent proposal submitted under section 3 of the Act if the pro- of Rockwall County's residents commute to jobs in the posal would result in a monopoly or if the effect of the adjacent Dallas County. Rockwall County is connected to proposal may be to lessen competition substantially in any Dallas County by two highways,6 and the community of relevant market unless the Board finds that the anticompeti- Rockwall, where almost all of the county's banking offices tive effects of the proposed transaction are clearly out- are located, is approximately five miles from the Dallas weighed in the public interest by the probable effect of the County line. transaction in meeting the convenience and needs of the Rockwall and Dallas Counties also have a significant community to be served. In evaluating the competitive amount of common advertising media, including newspaeffects of this proposal, the Board has carefully considered pers, radio, and television. Of the approximately 11,000 Bank's contentions that consummation of this proposal households in Rockwall County, for example, 5,023 rewould result in significantly adverse effects on the concen- ceive the Dallas Morning News daily, and 8,304 receive tration of resources and competition for banking services. the newspaper on Sundays. This newspaper prints a survey Bank contends that the appropriate product market for of Dallas area lenders' mortgage rates every Friday and analyzing the competitive effects of this transaction is features regular advertisements by Dallas area banks and small business lending and that the appropriate geographic nonbanks for both loan and deposit products.7 market for analyzing these effects is Rockwall County, These demographic data are corroborated by the inclu- Texas.3 sion of Rockwall County in the definition of the Dallas The Board and the courts consistently have recognized Metropolitan Statistical Area ("MSA"). MSAs are defined that the appropriate product market for evaluating the by the Office of Management and Budget based on an competitive effects of bank mergers and acquisitions is the area's population and include surrounding counties with cluster of products (various kinds of credit) and services strong economic and social ties to the central county. (such as checking accounts and trust administration) of- Rockwall County also is included within the Dallas-Ft. fered by banking institutions.4 Bank presents no facts to Worth Ranally Metropolitan Area ("RMA"). An RMA is a support an alternative product market of small business privately defined geographic area that is compact, with loans in this case, and the institutions to be combined are relatively high population density that is linked by comboth commercial banks that offer a wide range of banking muting, retail and wholesale trade patterns. The Board products and services. Based on all the facts of record, the previously has used RMA designations as guides in defin- Board concludes that the appropriate product market in this ing relevant geographic banking markets.8 case is the cluster of banking products and services. Based on all the facts of record, and for the reasons The Board and the courts have found that the relevant discussed above, the Board concludes that the relevant geographic market for analyzing the competitive effect of a proposal must reflect commercial and banking realities and should consist of the local area where the banks involved 6. Bank maintains that Rockwall County is physically separated offer their services and where local customers can practica- from Dallas County by a lake and that two roads do not provide bly turn for alternatives.5 In making a determination on the sufficient access to Dallas County. Rockwall County and the Dallas area are connected by U.S. Interstate Highway 30 ("Interstate 30"), geographic market in this case, the Board has considered which runs south from Rockwall County to downtown Dallas, and worker commuting patterns (as indicated by census data) State Highway 66, which runs west from Rockwall County to the north Dallas area. Interstate 30 has been and continues to be widened to six lanes, and in some areas to eight lanes. Traffic count data show extensive driving activity between the two counties. 3. Bank states that Applicant's substantial ownership interest in a 7. Bank contends that the business focus of Applicant's Rockwall competitor could weaken or eliminate the independent actions of a County branches and Bank is local and that these banking offices only direct competitor. For purposes of the BHC Act, a company controls advertise their services in local newspapers. Bank also notes that its another company if that company owns more than 25 percent of designated service area under the Community Reinvestment Act the outstanding voting shares of another company. 12 U.S.C. (12 U.S.C. 2901 et seq.) ("CRA") is limited to Rockwall County. As § 1841(a)(2(A). In this light, the Board's analysis of the competitive discussed previously, the key question when identifying the relevant effects of the proposal assumes that Bank would not compete indepen- geographic market for analyzing the competitive effects of a transacdently with Applicant. tion is where will the eifect of the merger on competition be direct and 4. See United States v. Philadelphia National Bank, 374 U.S. 321, immediate within the area of competitive overlap rather than where 357 (1963). Accord United States v. Connecticut National Bank, 418 will the institutions actually do business. Economic and demographic U.S. 656 (1974); United States v. Phillipsburg National Bank, 399 U.S. factors in this case, including the availability of media sources for 350 (1969) ("U.S. v. Phillipsburg"). See also Chemical Banking information on competing banking products and the widespread com- Corporation, 82 Federal Reserve Bulletin 239 (1997). muting and travel in the area, show that customers of Rockwall 5. See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 County banks have access to competitors of and reasonable substitutes (1982). The key question to be considered in making this selection "is for these banks in an area much larger than Rockwall County. The not where the parties to the merger do business or even where they Board also has noted that a bank's delineated community under the compete, but where, within the area of competitive overlap, the eifect CRA does not necessarily represent the appropriate geographic marof the merger on competition will be direct and immediate." United ket for analyzing the competitive eifects of a proposal. See Flathead States v. Philadelphia Nat'l Bank, 374 U.S. 321, 374 (1963); United Holding Company, 82 Federal Reserve Bulletin 741, n.l 1 (1996). States v. Phillipsburg Nat'l Bank, 399 U.S. 350 (1969). 8. See St. Joseph Valley Bank, 68 Federal Reserve Bulletin at 647. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

904 Federal Reserve Bulletin • November 1997 banking market for assessing the competitive effects of this Other Factors proposal is the Dallas, Texas, banking market ("Dallas banking market") which is an area approximately equiva- The Board has carefully reviewed the financial and manalent to the Dallas-Ft. Worth RMA and includes Rockwall gerial resources and future prospects of Applicant and County.9 Bancshares, and their subsidiary banks, in light of all the Applicant is the 19th largest depository institution in the facts of record. The Board notes that Applicant, Banc- Dallas banking market, controlling deposits of approxi- shares and Bank are in satisfactory financial condition and mately $277 million, representing less than 1 percent of the would remain so after consummation of the proposal. In total deposits in depository institutions in the market addition, reports of examination assessing the managerial ("market deposits").10 Bank is the 79th largest depository resources of Applicant indicate this factor is consistent institution in the market, controlling deposits of approxi- with approval. mately $23.4 million, representing less than 1 percent of Based on all the facts of record, the Board concludes that market deposits. On consummation of this proposal, Appli- considerations related to the financial and managerial recant would become the 18th largest depository institution sources and future prospects of Applicant, Bancshares, and in the Dallas banking market, controlling deposits of ap- their subsidiary banks, are consistent with approval, as are proximately $300.4 million, representing less than 1 per- other supervisory factors the Board must consider.13 Concent of market deposits. The market, as measured by the siderations relating to the convenience and needs of the Herfindahl-Hirschman Index ("HHI"), would remain communities to be served also are consistent with approval moderately concentrated after consummation of this trans- of this application.14 action, and the HHI would remain unchanged at 1444 points.11 Approximately 100 depository institutions would Conclusion remain as competitors in the Dallas banking market. The Department of Justice has reviewed the proposal and ad- Based on all the facts of record, the Board has determined vised the Board that consummation of the proposal would that this application should be, and hereby is, approved.15 not likely have any significantly adverse competitive effects in the Dallas banking market or any other relevant banking market.12 13. Bank questions whether Applicant should be permitted to ac- In light of all the facts of record, and after carefully quire a minority interest in Bancshares without committing to be a considering the comments of Bank, the Board concludes passive investor. The BHC Act contemplates that a bank holding company may seek to acquire less than a majority interest in another that consummation of the proposal would not result in any bank holding company or bank, and does not require that these significantly adverse effects on competition or the concenless-than-majority investments be passive. To the contrary, the BHC tration of banking resources in the Dallas banking market, Act defines a bank holding company as controlling any company in or any other relevant banking market. which the bank holding company owns a greater than 25 percent voting interest. As noted above, the Board has analyzed this proposal in light of the BHC Act's definition that the acquisition would cause Applicant to control Bancshares and Bank. 14. The Board notes that the most recent performance evaluation of 9. The Dallas banking market is approximated by Dallas County, Applicant's subsidiary bank, American National Bank of Texas, Terthe southeastern quadrant of Denton County (including Denton and rell, Texas ("ANBT"), under the CRA by its primary federal supervi- Lewisville), the southwest quadrant of Collin County (including sor, the OCC, was "outstanding." Examiners found that the bank McKinney and Piano), Rockwall County, the communities of Forney offered a number of products to assist in meeting the credit needs of its and Terrell in Kaufman County, Midlothian, Waxahachie and Ferris in communities and stated that ANBT has an excellent record of lending Ellis County, and Grapevine and Arlington in Tarrant County. to small businesses. 10. Market share data are as of June 30, 1996. These data are based 15. Bank has requested a hearing on the proposal. Section 3(b) of on calculations in which the deposits of thrift institutions are included the BHC Act does not require the Board to hold a public hearing on an at 50 percent. The Board has previously indicated that thrift institu- application unless the appropriate supervisory authority for the bank tions have become, or have the potential to become, significant to be acquired makes a timely written recommendation of denial of competitors of commercial banks. See Midwest Financial Group, 75 the application. In this case, the Board has not received such a Federal Reserve Bulletin 386 (1989); National City Corporation, 70 recommendation from the OCC, Bank's primary federal supervisor. Federal Reserve Bulletin 743 (1984). Under its rules, the Board may also, in its discretion, hold a public 11. Under the revised Merger Guidelines, 49 Federal Register hearing or meeting on an application to clarify factual issues related to 26,823 (June 29, 1984), a market in which the post-merger HHI is the application and to provide an opportunity for testimony, if approbetween 1000 and 1800 is considered to be moderately concentrated, priate. 12 C.F.R. 225.16(e). The Board has carefully considered and a market above 1800 is considered to be highly concentrated. The Bank's request for a hearing in light of all the facts of record. In the Department of Justice has informed the Board that a bank merger or Board's view, Bank has had ample opportunity to submit its views, acquisition generally will not be challenged (in the absence of other and has submitted written comments that have been carefully considfactors indicating anticompetitive effects) unless the post-merger HHI ered by the Board in acting on this application. Bank's request fails to is at least 1800 and the merger increases the HHI by more than 200 demonstrate why its written presentations do not adequately present points. The Department of Justice has stated that the higher than its evidence, allegations and views. After a careful review of all the normal HHI thresholds for screening bank mergers for anticompeti- facts of record, moreover, the Board has concluded that Bank disputes tive eifects implicitly recognize the competitive effect of limited- the weight that should be accorded to, and the conclusions that the purpose lenders and other non-depository financial entities. Board should draw from, the facts of record, but does not identify 12. The Office of the Comptroller of the Currency ("OCC") and the disputed issues of fact that are material to the Board's decision. For Federal Deposit Insurance Corporation also have not objected to the these reasons, and based on all the facts of record, the Board has proposal. determined that a public hearing or meeting is not required or war- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 905 The Board's approval is specifically conditioned on com- Chase proposes to establish Chase Trust as part of a pliance by Applicant with all the commitments made in multi-step reorganization of existing businesses that Chase connection with this application. For the purpose of this currently conducts through two California-based nonbank action, the commitments and conditions relied on by the trust companies, and a branch in Los Angeles, California, Board in reaching its decision are deemed to be conditions of Chase Manhattan Private Bank, National Association, imposed in writing by the Board in connection with its Tampa, Florida ("Chase-Florida").2 Chase previously findings and decision and, as such, may be enforced in committed to the OCC and the California Superintendent proceedings under applicable law. of Banks that the business of the Los Angeles branch of The proposed acquisition of Bancshares shall not be Chase-Florida would be conducted by a subsidiary of consummated before the fifteenth calendar day following Chase headquartered in California by January 1, 1998, and the effective date of this order, and not later than three consummation of the proposal would fulfill these commitmonths after the effective date of this order, unless such ments.3 period is extended for good cause by the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to dele- Interstate Analysis gated authority. By order of the Board of Governors, effective Septem- Section 3(d) of the BHC Act, as amended by section 101 of ber 29, 1997. the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, allows the Board to approve an appli- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and cation by a bank holding company to acquire control of a Governors Kelley, Phillips, and Meyer. bank located in a state other than the home state of such bank holding company, if certain conditions are met.4 For WILLIAM W. WILES purposes of the BHC Act, Chase's home state is Secretary of the Board New York, and Chase would acquire a bank in California on consummation of the proposal. The conditions for an The Chase Manhattan Corporation interstate acquisition under section 3(d) are met in this Chase Holding Delaware Inc. case,5 and the Board is permitted to approve the proposal New York, New York under section 3(d) of the BHC Act. Order Approving the Acquisition of a Bank The Chase Manhattan Corporation ("Chase") and Chase Holding Delaware Inc., both of New York, New York, bank holding companies within the meaning of the Bank 2. The Chase Manhattan Trust Company of California, N.A. ("Na- Holding Company Act ("BHC Act"), have requested the tional Trust") and Chase Trust Company of California ("State Board's approval under section 3 of the BHC Act Trust"), both uninsured nonbank trust companies in San Francisco, California, would consolidate with and into a newly established (12 U.S.C. § 1842) to acquire all the voting shares of Chase nationally chartered trust association under the name of Chase Trust. Manhattan Bank and Trust Company, National Associa- Chase Trust would obtain full commercial banking powers from the tion, Los Angeles, California ("Chase Trust"), a de novo Office of the Comptroller of the Currency ("OCC") and deposit bank. insurance from the Federal Deposit Insurance Corporation ("FDIC"), Notice of the proposal, affording interested persons an thereby becoming a "bank" for purposes of the BHC Act. Chase Trust would then acquire the Los Angeles branch of Chase-Florida as opportunity to submit comments, has been published the last step of the reorganization. The OCC has approved Chase's (62 Federal Register 40,087 and 41,387 (1997)). The time applications to charter the new trust association, consolidate National for filing comments has expired, and the Board has consid- Trust and State Trust into the new trust association, and obtain full ered the application and all comments received in light of commercial banking powers for the new trust association. Chase Trust also has filed an application with the FDIC to obtain deposit insurthe factors set forth in section 3 of the BHC Act. ance. Chase, with total consolidated assets of approximately 3. Chase made the commitments in connection with the merger of $340.3 billion, is the largest commercial banking organiza- Chemical Bank FSB, Palm Beach, Florida, with and into Chasetion in the United States and controls 5.1 percent of the Florida in November 1996. The Los Angeles branch was a branch of total banking assets of insured commercial banks in the Chemical Bank FSB prior to the merger. nation.1 Chase's subsidiary banks operate in New York, 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding company's home state is the state in which the operations of the bank New Jersey, Connecticut, Delaware, Florida, and Califor- holding company's banking subsidiaries were principally conducted nia. Chase also engages in a number of permissible non- on July 1, 1966, or the date on which the company became a bank banking activities nationwide. holding company, whichever is later. 5. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Chase is adequately capitalized and adequately managed. On consummation of the proposal, Chase and its affiliates would control ranted to clarify the factual record in the application, or otherwise less than 10 percent of the total amount of deposits of insured warranted in this case. Accordingly, the request for a hearing on the depository institutions in the United States and less than 30 percent of proposal is hereby denied. the total amount of deposits of insured depository institutions in California. In addition, all other requirements of section 3(d) of the 1. Asset data are as of March 31,1997. BHC Act would be met on consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

906 Federal Reserve Bulletin • November 1997 Competitive Considerations includes a review of the records of the relevant depository institutions under the CRA. As provided in the CRA, the The BHC Act prohibits the Board from approving an Board has evaluated this factor in light of examinations by application under section 3 of the BHC Act if the proposal the primary federal supervisors of the CRA performance would result in a monopoly, or would substantially lessen records of the relevant institutions. An institution's most competition in any relevant banking market, unless the recent CRA performance evaluation is a particularly impor- Board finds that the anticompetitive effects of the proposal tant consideration in the application process because it are clearly outweighed in the public interest by the proba- represents a detailed on-site evaluation of the institution's ble effect of the proposal in meeting the convenience and overall record of performance under the CRA by its prineeds of the community to be served. The proposal repre- mary federal supervisor.6 sents a reorganization of Chase's existing banking and Chase's lead bank, The Chase Manhattan Bank, New related businesses in California. Based on all the facts of York, New York ("Chase Bank"), was formed by the record, the Board concludes that consummation of the merger of the lead banks of Chemical Banking Corporation proposal would not have any significantly adverse effects ("Old Chemical") and The Chase Manhattan Corporation on competition or on concentration of banking resources in ("Old Chase"), both of New York, New York, as part of any relevant banking market. the merger of Old Chemical and Old Chase approved by the Board in January 1996.7 Chase Bank has not been Other Factors Under the BHC Act publicly evaluated for CRA performance since the merger. Before the merger, Old Chemical's lead bank received The BHC Act also requires the Board, in acting on an an "outstanding" rating from the Federal Reserve Bank of application, to consider the financial and managerial re- New York ("Reserve Bank") at its most recent examinasources of the companies and banks involved, the conve- tion for CRA performance, as of March 13, 1995. Old nience and needs of the communities to be served, and Chase's lead bank and Chase-Florida also received "outcertain other supervisory factors. standing" ratings from the OCC, their primary federal supervisor, at their most recent examinations for CRA A. Financial, Managerial and other Supervisory performance, as of October 27, 1995.8 All of Chase's other Factors subsidiary banks have been examined for CRA performance after the merger of Old Chemical and Old Chase, The Board has carefully considered the financial and man- and have received an "outstanding" or "satisfactory" ratagerial resources and future prospects of Chase and Chase ing from their primary federal supervisors at their most Trust and other supervisory factors in light of all the facts recent examinations.9 of record. These facts include supervisory reports of exam- The Board previously reviewed Chase's record of CRA ination assessing the financial and managerial resources of performance in connection with approving the merger of the organizations and confidential financial information Old Chemical and Old Chase, and more recently in connecsubmitted by Chase. Based on these and all the facts of tion with approving Chase Bank's merger with Chemical record, the Board concludes that financial and managerial considerations, and all other supervisory factors that must be considered under section 3 of the BHC Act, are consistent with approval. 6. The Statement of the Federal Financial Supervisory Agencies B. Convenience and Needs Considerations Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consid- The Board also has carefully considered the effect of the eration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. proposed transaction on the convenience and needs of the See 54 Federal Register 13,742 and 13,745 (1989). communities to be served in light of all the facts of record. 7. See Chemical Banking Corporation, 82 Federal Reserve Bulletin Chase states that Chase Trust will provide certain commer- 239 (1996) ("Chemical/Chase Order"). cial banking services that currently are not offered by 8. Chemical Bank FSB also received a "satisfactory" rating from the Office of Thrift Supervision at its most recent CRA performance National Trust and State Trust, and that Chase Trust will examination, as of March 6, 1995, prior to its merger into Chasehire an officer to manage the programs and policies relating Florida. to the bank's performance under the Community Reinvest- 9. The following subsidiary banks of Chase have received the ment Act (12 U.S.C. § 2901 et seq.) ("CRA"). The Board indicated ratings from the OCC, their primary federal supervisor, since the merger of Old Chemical and Old Chase: Texas Commerce notes, moreover, that the proposal represents an internal Bank, Houston, Texas, rated "outstanding" as of September 9, 1996; reorganization of existing businesses that would allow Texas Commerce Bank-San Angelo, San Angelo, Texas, rated "satis- Chase to comply with commitments to federal and state factory" as of August 8, 1996; Chase Manhattan Bank USA, N.A., banking supervisors, and that consummation of the pro- Wilmington, Delaware ("Chase USA-Delaware"), rated "satisfactoposal would not result in an expansion of Chase's deposit- ry" as of October 8, 1996; and Chase Manhattan Bank USA, N.A., Jericho, New York ("Chase USA-New York"), rated "satisfactory" taking facilities in California. as of September 5, 1996. Following these examinations, Chase USA- CRA Performance Record of Chase. The Board has long New York merged with and into Chase USA-Delaware in December held that consideration of the convenience and needs factor 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 907 Bank, New Jersey, N.A., Morristown, New Jersey.10 In the closing a branch,14 but does not authorize the federal Chemical/Chase Order, the Board considered a number of regulators to prevent the closing of any branch. Furtheraspects of the CRA performance of both institutions, in- more, the BHC Act does not make approval of a proposal cluding their lending, marketing, and outreach activities, contingent on an applicant's commitment to keep open all the services provided through branches, branch closing branch offices of an acquired institution. The availability of policies, and initiatives to increase lending in low- to banking services and offices after an acquisition must be moderate-income ("LMI") areas.11 Furthermore, in the reviewed in the context of the effect of the acquisition on Chase Bank/CBNJ Order, the Board carefully reviewed the convenience and needs of communities served by the Chase Bank's record of closing branches after the merger institution and is only one of several factors the Board of Old Chemical and Old Chase, the policies and proce- must consider in assessing the effect of the acquisition on dures of Chase Bank and its predecessor institutions for the convenience and needs of the communities to be assuring compliance with the fair lending laws, and the served.15 community development activities of Chase Bank and its Four of the 18 branches identified by the commenter are predecessors. For the reasons set forth in detail in the in LMI census tracts. The Board notes that each of these Chemical/Chase Order and the Chase Bank/CBNJ order, branches is a middle market business office that does not and incorporated herein by reference, the Board concluded provide retail banking services. The other 14 branches that the CRA performance records of Chase's subsidiary identified by the commenter are in non-LMI areas.16 The banks and their predecessor institutions were consistent Board notes that Chase Bank would continue to operate with approval under the convenience and needs factor. approximately 428 consumer branches in New York, in- The Board also has considered supervisory information cluding 97 consumer branches in LMI census tracts in concerning Chase Bank's record of CRA performance New York, and approximately 46 consumer branches in which includes information assessing the following aspects Connecticut, including 12 consumer branches in LMI cenof the bank's CRA performance: sus tracts in Connecticut.17 In addition, the Board previ- (1) Lending record and geographic distribution of loans ously has noted that the branch closing policies of the throughout the bank's communities, including LMI predecessor institutions to Chase Bank required considerareas; ation of a number of factors prior to closing a branch, (2) Efforts designed to assist in meeting the credit needs including current market conditions, market potential, conof the bank's communities, including affordable mort- sumer satisfaction and product usage, demographics, and gage, government-sponsored and small business lending community needs. The most recent CRA examinations of programs; the two predecessor banks also concluded that their branch closing policies were satisfactory and that their records of (3) Community development activities; (4) Compliance record with fair lending laws, and fair lending law policies and programs; and 14. Section 42 of the Federal Deposit Insurance Act (12 U.S.C. (5) Branch closing policies and procedures, and record § 183 lr-1), as implemented by the Joint Policy Statement Regarding of closing branches since the merger of Old Chemical Branch Closing (58 Federal Register 49,083 (1993)), requires that a and Old Chase.12 bank provide the public with at least 30 days notice and the primary federal supervisor with at least 90 days notice before the date of the Comments on Proposal. The Board also has taken into proposed branch closing. The bank also is required to provide reasons and other supporting data for the closure, consistent with the instituaccount comments objecting to Chase Bank's decision to tion's written policy for branch closing. close 18 branches in New York and Connecticut. The 15. Two commenters also maintain that Chase Trust will not assist Board notes that these comments relate to Chase's branch in meeting the credit needs of its local community. As discussed in closings generally, and that Chase has not proposed to this order, the Board has considered these comments in light of close any branches as a result of this proposal.13 Federal Chase's overall record of CRA performance. 16. One commenter contends that Chase improperly failed to disbanking law, moreover, addresses branch closings by speclose the 18 branch closings in connection with the Chemical/Chase cifically requiring an insured depository institution to pro- merger. In connection with that merger, Chase announced that it vide notice to the appropriate regulatory agency prior to would close seven branches in LMI census tracts in New York City and provided the Board a preliminary list of branches in non-LMI areas that it expected to close. Chase previously has stated that its announcement regarding proposed branch closings in LMI census 10. See The Chase Manhattan Bank, 82 Federal Reserve Bulletin tracts did not include middle market business offices or other special- 1139 (1996) ("Chase Bank/CBNJ Order"). ized facilities, such as private banking and private access corporate 11. The Chemical/Chase Order also specifically discussed the CRA locations. As noted above, the four branches in LMI areas identified performance records of Chase-Florida and Chemical FSB, as well as by commenter are middle market business offices. The remaining the subsidiary banks of Old Chase and Old Chemical operating in 14 branches identified by commenter are in non-LMI census tracts New York, New Jersey, Connecticut, Texas and Delaware. and, as noted in the Chemical/Chase Order, Chase's list of proposed 12. This supervisory information includes information developed by branch closings in non-LMI census tracts was preliminary and subject the Reserve Bank during its regularly scheduled examination of Chase to change. Bank's record of CRA performance, which commenced in March 17. These data reflect all notices of proposed branch closings 1997. The Reserve Bank's report of this examination is not publicly received by the Federal Reserve System through August 18, 1997. available at this time. Consumer branches do not include limited access specialized facili- 13. Chase Trust would continue to operate the Los Angeles branch ties, such as private banking, middle market business offices, and of Chase-Florida. private access corporate locations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

908 Federal Reserve Bulletin • November 1997 opening and closing branches had not negatively affected In light of the limitations of HMDA data, the Board has their communities, including LMI communities. Finally, carefully reviewed other information, particularly examinathe Board has reviewed supervisory information that as- tion reports and other supervisory information that provide sesses Chase Bank's current branch closing policies and an on-site evaluation of compliance with the fair lending the effect of the bank's branch openings and closings on all laws by Chase. The most recent CRA examinations of the the bank's communities, including LMI communities.18 two banks that were merged to form Chase Bank found Comments also contend, primarily on the basis of 1996 that neither bank engaged in practices that would discourdata filed under the Home Mortgage Disclosure Act age individuals from applying for credit. In addition, fair (12 U.S.C. § 2801 et seq.) ("HMDA") by Chase and its lending reviews were conducted during such CRA examisubsidiaries, that Chase's lending in LMI neighborhoods nations, and examiners found no evidence of discriminaand to minority individuals in a variety of geographical tion or other illegal credit practices. Furthermore, no eviareas is inadequate and violates the fair lending laws.19 The dence of discrimination or other illegal credit practices was Board has reviewed 1995 and 1996 HMDA data reported found during the most recent CRA examinations of by Chase in light of the comments received on the propos- Chase's other subsidiary banks, including those that have al.20 These data show that Chase's ratio of denials of been examined for CRA performance since the merger of African-American and Hispanic credit applicants to white Old Chemical and Old Chase.22 The Board also has recredit applicants declined from 1995 to 1996 in each viewed supervisory information assessing Chase Bank's market reviewed by the Board. These data, however, also record of fair lending law compliance, current fair lending reflect some disparities in the rate of loan originations, law policies and programs, and initiatives to help meet the denials, and applications by racial group or income level in credit needs of all its communities, including LMI areas. certain markets. The Board also carefully reviewed the fair lending poli- The Board is concerned when the record of an institution cies and procedures of the two predecessor institutions to indicates such disparities in lending, and believes that all Chase Bank, as well as their affiliated banks in New Jersey, banks are obligated to ensure that their lending practices Delaware, Florida and Texas, in the Chemical/Chase and are based on criteria that ensure not only safe and sound Chase Bank/CBNJ Orders. The Board noted that the banks lending, but also equal access to credit by creditworthy that were merged to form Chase Bank maintained training, applicants regardless of race. The Board recognizes, how- second review and other programs that were designed to ever, that HMDA data alone provide an incomplete mea- ensure that the banks operate in compliance with the fair sure of an institution's lending in its community because lending laws.23 these data cover only a few categories of housing-related Conclusion on Convenience and Needs Considerations. lending. Moreover, HMDA data provide only limited infor- The Board has carefully considered all the facts of record, mation about the covered loans.21 HMDA data, therefore, including the public comments received, Chase's response have limitations that make the data an inadequate basis, to those comments, and the CRA performance records of absent other information, for concluding that an institution Chase's subsidiary banks, including relevant reports of has engaged in illegal lending discrimination. examination and other supervisory information.24 Based on a review of the entire record, and for the reasons discussed 18. One commenter contends that the preliminary branch closing 22. One commenter contends that the proposal will result in forecloinformation that Chase submitted in connection with the Chemical/ sures that will adversely affect the local community. This commenter Chase merger misled the Board because it did not categorize proposed also contends generally that banking institutions, including Chase, use branch closings in middle-income areas that are adjacent to LMI improper practices when foreclosing on properties. The commenter census tracts as closings in LMI census tracts. The branch closing does not provide, and the record does not otherwise contain, facts to information submitted by Chase was presented based on the census support these contentions. tract location of the branch proposed to be closed. No additional 23. One commenter reiterates the contention that Chase violates the categorization was required. Moreover, Chase continues to operate a fair lending laws and HMDA through its activities involving the number of branches in LMI census tracts, as discussed in this order. New York City Housing Partnership ("NYCHP"). The Board previ- 19. One commenter objects to Chase Trust's pending request to be ously addressed this issue in the Chase Bank/CBNJ Order, which designated as a wholesale bank under the CRA regulations jointly noted that, following discussions with the Reserve Bank, the NYCHP promulgated by the federal financial supervisory agencies. See 60 agreed to provide adverse action letters to applicants that are not Federal Register 22,156 (1995). The OCC, Chase Trust's primary eligible for NYCHP-sponsored programs. federal supervisor, is responsible for acting on the requested designa- 24. The Board notes that the Equal Employment Opportunity Comtion, and such actions are not reviewable by the Board. See 12 C.F.R. mission recently filed suit against Chase alleging that certain restric- 25.25(b). tions contained in the long-term disability plan offered to Chase 20. The Board's review includes 1995 and 1996 HMDA data employees violate the Americans with Disabilities Act (42 U.S.C. reported by all Chase subsidiaries for the New York City Metropolitan § 12101 et seq.). Private litigants also have filed an employment Statistical Area ("MSA") and several other MSAs in Chase Bank's discrimination lawsuit in Delaware against one of Chase's subsidiary assessment area, the Los Angeles MSA, and the MSAs in the service banks. Both of these lawsuits are pending adjudication, and no finding areas of Chase's subsidiary banks in Texas and Florida. of wrongdoing on the part of Chase has been made. The Board 21. These data, for example, do not provide a basis for an indepen- previously has stated that its limited jurisdiction to review applicadent assessment of whether an applicant who was denied credit was, tions under the BHC Act does not authorize the Board to adjudicate in fact, creditworthy. Credit history problems and excessive debt disputes involving an applicant that arise under statutes administered levels relative to income—reasons most frequently cited by a credit and enforced by another agency in areas such as employment discrimdenial—are not available from HMDA data. ination. The Board also retains sufficient supervisory authority to take Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 909 in this order, the Board has concluded that convenience and New Prague Bancshares, Inc. needs considerations, including the CRA records of perfor- New Prague, Minnesota mance of Chase's subsidiary banks, are consistent with approval of the proposal. Order Approving the Formation of a Bank Holding Company Conclusion New Prague Bancshares, Inc., New Prague, Minnesota Based on the foregoing and all the facts of record, the ("Bancshares"), has requested the Board's approval under Board has determined that the application should be, and section 3 of the Bank Holding Company Act (12 U.S.C. hereby is, approved.25 The Board's approval is expressly § 1842) ("BHC Act") to become a bank holding company conditioned on compliance by Chase with the commit- by acquiring all the voting shares of Community Security ments made in connection with the application. The com- Bank ("Bank"), a de novo state chartered bank also in mitments relied on by the Board in reaching this decision New Prague. shall be deemed to be conditions imposed in writing by the Notice of the application, affording interested persons an Board in connection with its findings and decision, and, as opportunity to submit comments, has been published (62 such, may be enforced in proceedings under applicable Federal Register 31,821 (1997)). The time for filing comlaw. ments has expired, and the Board has considered the appli- The transaction shall not be consummated before the cation and all comments received in light of the factors set fifteenth calendar day following the effective date of this forth in section 3(c) of the BHC Act. order, or later than three months after the effective date of Bancshares is a newly formed nonoperating corporation this order, unless such period is extended for good cause by that would acquire Bank, which is a de novo bank. The the Board or by the Reserve Bank, acting pursuant to addition of a new bank in the relevant banking market delegated authority. would increase the number of alternative sources of bank- By order of the Board of Governors, effective Septem- ing products and services available to customers in the ber 29, 1997. market and increase competition. The Board previously has stated that the promotion of competition through Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and de novo entry is a positive consideration in an application Governors Kelley, Phillips, and Meyer. under section 3 of the BHC Act.1 Accordingly, the Board concludes that consummation of the proposal would not WILLIAM w. WILES have a significantly adverse effect on competition or on the Secretary of the Board concentration of banking resources in any relevant banking market. The Board has carefully considered the financial and managerial resources and future prospects of Bancshares and Bank in light of all the facts of record. The Board received comments from a national bank that has a branch appropriate action if a lawsuit or an examination determines that in New Prague ("Commenter") that contend that the de- Chase is not in compliance with applicable laws and regulations. mographic and economic characteristics of Bank's pro- 25. One commenter has requested that the Board hold a public posed trade area show insufficient demand to support anhearing or meeting on the proposal. Section 3(b) of the BHC Act does other bank and that the projections by Bancshares for the not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired Bank's deposits and income are exaggerated. Bancshares makes a timely written recommendation of denial of the application. maintains that the ability of its organizers to raise approxi- In this case, the Board has not received such a recommendation from mately $2.8 million in capital from local area residents and the OCC, Chase Trust's primary federal supervisor. businessmen and the fact that Bank has been formed and Under its rules, the Board also may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues related to would be owned by local residents demonstrate a demand the proposal and to provide an opportunity for testimony, if appropri- for the bank's services. Bancshares supports its projections ate. 12 C.F.R 225.16(e). The Board has carefully considered comment- with a business plan. Bancshares also notes that Bank er' s request for a hearing or meeting in light of all the facts of record. would be located in a developing downtown area of In the Board's view, commenter has had ample opportunity to submit New Prague and would be managed by an experienced views and has, in fact, provided written submissions that have been considered by the Board in acting on the proposal. The request fails to chief executive officer and a board of directors composed demonstrate why these written submissions do not adequately present of local residents. commenter's evidence, allegations and views. After a careful review The Board also has considered the characteristics of the of all the facts of record, the Board has concluded that the commenter relevant market. The record shows that the population in disputes the weight that should be accorded to, and the conclusions that the Board should draw from, the facts of record and does not Bank's proposed trade area has increased from 1990 to identify disputed issues of fact that are material to the Board's decision. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted to clarify the factual record in the proposal, or otherwise warranted in this case. Accordingly, the request for a public hearing or 1. See Wilson Bank Holding Company, 82 Federal Reserve Bulletin meeting on the proposal is hereby denied. 568 (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

910 Federal Reserve Bulletin • November 1997 1995.2 The Board also has reviewed the growth and suc- Based on the foregoing and all the facts of record, the cess of other de novo banks in or near the Twin Cities Board has determined that this application should be, and MSA that were started within the last five years. Based on hereby is, approved. The Board's approval is expressly this review, the Board concludes that the projections of- conditioned on compliance with all the commitments made fered by Bank are reasonable. by New Prague, including those made by the principals of In reviewing the financial and managerial factors, the New Prague, in connection with the application. For pur- Board also has considered Bank's capital level in relation poses of this action, the commitments and conditions relied to its projections. Bank appears to have sufficient capital to on by the Board in reaching this decision are deemed to be operate for a significant time at levels below the projec- conditions imposed in writing by the Board in connection tions provided for Bank's pro forma operation. In addition, with its findings and decision, and, as such, may be en- Bancshares does not intend to incur significant amounts of forced in proceedings under applicable law. debt and appears to have the financial flexibility to act as a This transaction shall not be consummated before the source of strength for Bank. The Board also notes that the fifteenth calendar day following the effective date of this Minnesota Commissioner of Commerce, after a review of order, or later than three months following the effective the application, including the financial aspects of the pro- date of this order, and Bank shall be open for business posal, granted Bank's state charter request on July 14, within six months following the effective date of this order, 1997. unless such periods are extended for good cause by the For these reasons and based on all the facts of record, the Board or by the Federal Reserve Bank of Minneapolis, Board concludes that the record does not indicate that the acting pursuant to delegated authority. proposal would adversely affect the safety and soundness By order of the Board of Governors, effective Septemof Bancshares or Bank. ber 15, 1997. On this basis, the Board concludes that the financial factor and future prospects of Bancshares and Bank are Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and consistent with approval.3 In evaluating the managerial Governors Kelley, Phillips, and Meyer. resources, the Board has considered the experience of several of the organizers and reports of examination assess- JENNIFER J. JOHNSON Deputy Secretary of the Board ing their performance in other depository institutions. Based on all the facts of record, the Board concludes that the managerial resources,4 and the convenience and needs, Orders Issued Under Section 4 of the Bank Holding Company Act and other supervisory factors the Board is required to consider under section 3 of the BHC Act also are consistent with approval of the proposal.5 Associated Banc-Corp Green Bay, Wisconsin Order Approving Notice to Acquire a Savings 2. New Prague is a community on the southwestern edge of the Association and to Engage in Certain Nonbanking Minneapolis-St. Paul Metropolitan Statistical Area ("Twin Cities Activities MSA"). Bank's proposed trade area would encompass the area within approximately a seven-mile radius of New Prague. 3. Commenter argues that Bancshares's obligation under its share- Associated Banc-Corp, Green Bay ("Associated"), a bank holder agreement to redeem its stock adversely affects the bank holding company within the meaning of the Bank Holding holding company's permanent capital. Bancshares modified this provi- Company Act ("BHC Act"), has requested the Board's sion so that Bancshares is not obligated to purchase any offered shares approval under section 4(c)(8) of the BHC Act (12 U.S.C. for which it has a right of first refusal. Under these circumstances, the bank holding company's stock is considered permanent capital and § 1843(c)(8)) and section 225.24 of the Board's Regulawould be considered Tier 1 capital. tion Y (12 C.F.R. 225.24) to acquire First Financial Corpo- 4. Commenter argues that allegations raised in pending litigation ration ("FFC"),1 and its wholly owned subsidiary, First between Commenter and some of the organizers and directors of Bank Financial Bank, F.S.B. ("Thrift"), both in Stevens Point, and the fact that the lawsuit was not disclosed in the biographical information provided in the application reflect adversely on the managerial factor in this case. Commenter filed the lawsuit after these individuals left their employment with Commenter to form Banc- stock plan rewards the officer with additional compensation based on shares and Bank. The litigation is in its preliminary stages, and no the performance of the bank but terminates payments if the officer findings of wrongdoing on the part of the Bank's organizers and directly or indirectly solicits business in competition with Bank. The directors have been found. The Board previously has determined that stock option plan does not restrict the officer's ability to be employed its limited jurisdiction to review applications and notices under the by a competitor, but only terminates future bonus payments if he specific factors in the BHC Act does not authorize the Board to solicits business away from Bank. Commenter also contends that adjudicate disputes between a commenter and an applicant that arise because shareholders have a right to transfer Bancshares stock to a under state laws relating to corporate governance that may be en- trust, such trust may be deemed to be a "company" under the BHC forced by the courts. The Board also notes that a copy of the lawsuit Act. Shareholders proposing such transfers are responsible for comwas included in the application. plying with all applicable laws, and the Board has sufficient supervi- 5. Commenter maintains that certain contractual agreements in the sory authority to address the transfer of shares to a trust that does not proposal raise supervisory issues. Commenter argues, for example, qualify for an exemption under the BHC Act. that Bank's stock plan for its chief executive officer is a noncompete agreement that should have been disclosed in the application. The 1. Associated proposes to charter a wholly owned subsidiary, Badger Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 911 and all in Wisconsin, and engage in operating a savings requirements and to conduct all the proposed activities in association pursuant to section 225.28(b)(4) of Regulation accordance with Regulation Y Y (12 C.F.R. 225.28 (b)(4)). Associated also has requested the Board's approval under section 4(c)(8) of the BHC Act Competitive Considerations to acquire two wholly owned subsidiaries of Thrift and engage in performing appraisals of real estate and tangible In order to approve the proposal, the Board also must personal property pursuant to section 225.28(b)(2)(i) of determine that the performance of the proposed activities Regulation Y (12 C.F.R. 225.28 (b)(2)), and operating a are a proper incident to banking, that is, that the proposed credit card bank pursuant to section 225.28(b)(1) and (2) of transaction "can reasonably be expected to produce bene- Regulation Y (12 C.F.R. 225.28(b)(1) and (2)).2 fits to the public . . . that outweigh possible adverse effects, Notice of the proposal, affording interested persons an such as undue concentration of resources, decreased or opportunity to submit comments, has been published (62 unfair competition, conflicts of interests, or unsound bank- Federal Register 39,243 (1997)). The time for filing com- ing practices."5 As part of the Board's evaluation of these ments has expired, and the Board has considered the pro- factors, the Board has carefully considered the competitive posal and all comments received in light of the factors set effects of the proposed transaction in light of all the facts of forth in section 4 of the BHC Act. record. Associated, with total consolidated assets of approxi- Associated and FFC compete directly in 12 banking mately $4.5 billion operates 12 subsidiary banks in Wis- markets in Wisconsin. The Board has carefully reviewed consin and Illinois. Associated is the fourth largest deposi- the competitive effects of the proposal in these banking tory institution in Wisconsin, controlling deposits of markets in light of all the facts of record, including the $3.1 billion, representing approximately 4.9 percent of number of competitors that would remain in the markets, total deposits in depository institutions in Wisconsin.3 FFC the characteristics of the markets, the projected increase in is the fifth largest depository institution in Wisconsin, the concentration of total deposits in depository institutions controlling deposits of $2.4 billion in Wisconsin. On con- in the markets ("market deposits"),6 as measured by the summation of the proposal, Associated would become the Herfindahl-Hirschman Index ("HHI"), under the Departthird largest depository institution in Wisconsin, control- ment of Justice Merger Guidelines ("DOJ Guidelines").7 ling total deposits of $5.5 billion, representing approxi- Consummation of the proposal would not exceed the DOJ mately 8.8 percent of the total deposits in depository insti- Guidelines in 11 of the 12 banking markets in which tutions in Wisconsin. Associated and FFC compete and a number of competitors As noted, the Board previously has determined by regu- would remain in the markets.8 In the remaining banking lation that operating a savings association, providing real market of Manitowoc-Two Rivers ("Manitowoc-Two Rivestate and tangible personal property appraisals, and operating a credit card bank are closely related to banking for purposes of section 4(c)(8) of the BHC Act. The Board requires savings associations acquired by bank holding companies to conform their direct and indirect activities to 5. 12 U.S.C. § 1843(c)(8). those permissible for bank holding companies under sec- 6. Market share data before consummation are based on calculations tion 4 of the BHC Act and Regulation Y.4 Associated has in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have becommitted to conform all activities of Thrift with those come, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift Merger Corporation, Green Bay, Wisconsin, that would merge with deposits in the calculation of market share on a 50-percent weighted and into FFC with FFC as the surviving corporation. basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 2. The subsidiaries are: (1991). Because the deposits of Thrift would be acquired by a com- (1) Appraisal Services, Inc., Milwaukee (real estate and personal mercial banking organization under the proposal, those deposits are property appraisals); and included at 100 percent in the calculation of Associated's pro forma (2) First Financial Card Services Bank, N.A., Stevens Point (credit market share. See Norwest Corporation, 78 Federal Reserve Bulletin card bank), both in Wisconsin. 452 (1992). First Banks, Inc., 76 Federal Reserve Bulletin 669, 3. State and market data are as of June 30, 1996. In this context, the 670 n.9 (1990). term depository institutions includes commercial banks, savings 7. Under the revised DOJ Guidelines, 49 Federal Register 26,823 banks, and savings associations. (June 29, 1984), a market in which the post-merger HHI is more than 4. Associated has committed that all impermissible real estate 1800 is considered highly concentrated. The Department of Justice activities will be divested or terminated within two years of consum- has informed the Board that a bank merger or acquisition generally mation of the proposal, that no new impermissible projects or invest- will not be challenged (in the absence of other factors indicating ments will be undertaken during this period, and that capital adequacy anticompetitive effects) unless the post-merger HHI is at least 1800 guidelines will be met, excluding impermissible real estate invest- and the merger increases the HHI by more than 200 points. The ments. Associated also has committed that all impermissible insurance Department of Justice has stated that the higher than normal threshold activities conducted by FFC or its subsidiaries will cease within six for an increase in the HHI when screening bank mergers and acquisimonths of consummation of the proposal, and Associated has indi- tions for anticompetitive effects implicitly recognizes the competitive cated that the activities will be divested to an unaffiliated third party or effects of limited-purpose lenders and other non-depository financial transferred to an affiliated bank subsidiary that is authorized under entities. relevant state law to engage in the activities. 8. The banking markets are discussed in the Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

912 Federal Reserve Bulletin • November 1997 ers banking market"),9 consummation of the proposal consumer loan, and credit card services offered by FFC. would increase the HHI by 305 points to 2144, and Associ- Based on all the facts of record, the Board has determined ated would control 33 percent of the market deposits. that the proposal by Associated can reasonably be expected In considering the competitive eifects of the proposal, to produce public benefits that outweigh possible adverse the Board also has considered that, after consummation of effects under the proper incident to banking standard of the proposal, 12 depository institutions would remain in section 4(c)(8) of the BHC Act. Accordingly, the Board the Manitowoc-Two Rivers banking market. Two competi- has determined that the balance of public interest factors it tors, not including Associated, would each have market must consider under section 4(c)(8) of the BHC Act is shares of approximately 22 percent. The banking market favorable and consistent with approval. also has characteristics that make it attractive for entry for out-of-market firms. For example, the number of residents Conclusion per banking office, the average amount of deposits per banking office, and the per capita income in the Based on the foregoing and all the facts of record, the Manitowoc-Two Rivers banking market substantially ex- Board has determined that the notice should be, and hereby ceed the state average for these statistics in non-MSA is approved. The Board's approval of the notice is specifimarkets in Wisconsin. Two banking organizations have cally conditioned on compliance by Associated and FFC entered the banking market de novo since August 1994. with commitments made in connection with this notice. Wisconsin law, moreover, authorizes banks to branch statewide.10 The Board's determination also is subject to all the conditions in Regulation Y, including those in sections 225.7 and Based on these and all of the other facts of record, the 225.25(c) (12 C.F.R. 225.7 and 225.25(c)) and to the Board concludes that consummation of the proposal would Board's authority to require such modification or terminanot have a significantly adverse elfect on competition or on tion of the activities of a holding company or any of its the concentration of banking resources in the Manitowocsubsidiaries as the Board finds necessary to assure compli- Two Rivers banking market or in any other relevant bankance with, or to prevent evasion of, the provisions and ing market. purposes of the BHC Act and the Board's regulations and orders issued thereunder. The commitments and conditions Other Considerations relied on by the Board in reaching this decision shall be deemed to be conditions imposed in writing by the Board As part of its evaluation of the public interest factors, the in connection with its findings and decisions, and, as such, Board has carefully considered, in light of all the facts of may be enforced in proceedings under applicable law. record, the financial and managerial resources of Associ- This proposal shall not be consummated later than three ated, FFC, and their subsidiaries, and the eifect the transacmonths after the effective date of this order, unless such tion would have on such resources. The information conperiod is extended for good cause by the Board or by the sidered includes supervisory reports of examination Federal Reserve Bank of Chicago, acting pursuant to deleassessing the financial and managerial resources of the gated authority. organizations and recent pro forma financial information By order of the Board of Governors, effective Septemprovided by Associated. The Board notes that Associated ber 8, 1997. and FFC, and each of their insured depository institutions, meet or exceed the "well capitalized" thresholds under Voting for this action: Chairman Greenspan and Governors Kelley, applicable law, and FFC would continue to do so after Phillips, and Meyer. Absent and not voting: Vice Chair Rivlin. consummation of the proposal. Based on all the facts of record, the Board has concluded that the financial and JENNIFER J. JOHNSON managerial resources of the organizations involved in the Deputy Secretary of the Board proposal are consistent with approval. The record also indicates that the proposal would result in public benefits. Consummation of the proposal would Appendix result in a broader financial network through which Associated could serve its customers and the customers of Thrift. Banking markets where the depository institution subsid- Associated also would offer new financial services to cus- iaries of Associated and FFC compete, all in Wisconsin tomers of Thrift, including assistance in managing funds in unless indicated otherwise: IRA and Keogh accounts, specialized lending services to corporate customers, and comprehensive trust administration and investment management services. Associated's (1) Rhinelander—approximated by Vilas and Oneida customers also would have access to a variety of mortgage, Counties; Forest County, excluding Alvin and Popple River Townships; and the northern two-fifths of Lincoln County. After consummation of the proposal, Associated would 9. The Manitowoc-Two Rivers banking market is approximated by control 18.3 percent of the market deposits and would Manitowoc County, except for Schleswig, Eaton, and Cooperstown become the second largest depository institution in the townships, all in Wisconsin. 10. See Wis. Stat. Ann. § 221.032(1) (1995). market. The HHI would increase 63 points to 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 913 (2) Sheboygan—approximated by Sheboygan County, ex- would become the second largest depository institution in cluding Russell and Rhine Townships. After consumma- the market. The HHI would increase 171 points to 1481. tion of the proposal, Associated would control 6.3 percent (11) Appleton—approximated by Outagamie County, exof the market deposits and would become the fifth largest cluding Oneida township; Winchester, Claton, Neenah, and depository institution in the market. The HHI would not Menasha townships in Winnebago County; and Harrison, increase. Woodville, Brillion, and Rantoul townships in Calumet (3) Oshkosh—approximated by Winnebago County, ex- County. After consummation of the proposal, Associated cept for Winchester, Clayton, Menasha, and Neenah town- would control 15.6 percent of the market deposits and ships. After consummation of the proposal, Associated would remain the third largest depository institution in the would control 17 percent of the market deposits and would market. The HHI would increase 29 points to 1236. become the third largest depository institution in the market. The HHI would increase 50 points to 1829. BankAmerica Corporation (4) Green Bay—approximated by Brown County; Morgan, San Francisco, California Abrams, Pensaukee, Chase, and Little Suamico townships in Oconto County; Angelica and Maple Grove townships Order Approving Notice to Engage in Nonbanking in Shawano County; Oneida township in Outagamie Activities County; Cooperstown township in Manitowoc County, Wisconsin; and Red River, Luxemburg, and Montpelier BankAmerica Corporation, San Francisco, California townships in Kewaunee County. After consummation of ("BankAmerica"), a bank holding company within the the proposal, Associated would control 29.6 percent of the meaning of the Bank Holding Company Act ("BHC Act"), market deposits and would remain the largest depository has requested the Board's approval under section 4(c)(8) of institution in the market. The HHI would increase the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 94 points to 1685. of the Board's Regulation Y (12 C.F.R. 225.24) to acquire (5) Hurley-Ironwood—approximated by Iron County, and Robertson, Stephens & Company Group, L.L.C., ("Robert- Gogebic and Ontonagon Counties in Michigan. After con- son Group"), Robertson, Stephens & Company, Inc., summation of the proposal, Associated would control ("Robertson Stephens Co."), and all of their subsidiaries 15.5 percent of the market deposits and would remain the and affiliates (collectively, "Robertson"), all of San Franthird largest depository institution in the market. The HHI cisco, California.1 BankAmerica would thereby engage in would increase 37 points to 1563. the following nonbanking activities: (6) Wausau—approximated by the southern three-fifths of (1) Providing financial and investment advisory ser- Lincoln County; Marathon County, excluding, Holton, vices, pursuant to section 225.28(b)(6) of Regulation Y Hull, Brighton, Spencer, McMillan, and Day townships. (12 C.F.R. 225.28 (b)(6)); After consummation of the proposal, Associated would (2) Providing securities brokerage, private placement, control 9.8 percent of the market deposits and would and riskless principal services, pursuant to secbecome the third largest depository institution in the mar- tion 225.28(b)(7)(i), (ii), and (iii) of Regulation Y ket. The HHI would not increase. (12 C.F.R. 225.28(b)(7)(i), (ii), and (iii)); (7) Beloit-Janesville—approximated by Rock County. Af- (3) Underwriting and dealing in obligations of the United ter consummation of the proposal, Associated would con- States, general obligations of states and their political trol 3.5 percent of the market deposits and would become subdivisions, and other obligations that state member the eighth largest depository institution in the market. The banks of the Federal Reserve System may be authorized HHI would not increase. to underwrite and deal in under 12 U.S.C. §§ 24 and 335, (8) Milwaukee—approximated by Milwaukee, Waukesha, pursuant to section 225.28(b)(8) of Regulation Y and Ozaukee Counties, and portions of Jefferson, Racine, (12 C.F.R. 225.28(b)(8)); Walworth, and Washington Counties. After consummation (4) Underwriting and dealing, to a limited extent, in all of the proposal, Associated would control 8.8 percent of types of debt and equity securities, other than ownership the market deposits and would become the fourth largest interests in open-end investment companies ("mutual depository institution in the market. The HHI would not funds"); increase. (9) Wood—approximated by Wood County, and Spencer, McMillan, and Day townships in Marathon County. After consummation of the proposal, Associated would control 21.3 percent of the market deposits and would become the 1. Robertson Group owns 99 percent of Robertson, Stephens & Company, L.L.C ("Robertson Sub"). Robertson Stephens Co. owns largest depository institution in the market. The HHI would the remaining 1 percent membership interest in Robertson Sub and is increase 158 points to 1375. the managing member. (10) Watertown—approximated by the southern two tiers BankAmerica proposes to merge Robertson into Ladder Merger of townships in Dodge County,and the northern two tiers Corporation, a newly formed Delaware corporation, wholly owned by BankAmerica ("BAC Sub"). Simultaneously, BankAmerica would of townships in Jefferson County, excluding Ixonia townmerge the principal subsidiary of Robertson Sub with and into Bankship. After consummation of the proposal, Associated America Securities, Inc., San Francisco, California, ("BASI"), a would control 21.9 percent of the market deposits and subsidiary of BankAmerica. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

914 Federal Reserve Bulletin • November 1997 (5) Providing administrative and other services to invest- to engage in most of these activities.6 BankAmerica would ment companies, including mutual funds;2 conduct the activities in accordance with the BankAmerica Order, Regulation Y, and the relevant Board interpretations Notice of the proposal, affording interested persons an and orders pertaining to each of the activities.7 opportunity to submit comments, has been published (62 Bank-Ineligible Securities Underwriting and Dealing Federal Register 45,255 (1997)). The time for filing com- Activities. As noted above, BASI currently is engaged in ments has expired, and the Board has considered the notice limited underwriting and dealing activities that the Board and all comments received in light of the factors set forth previously has determined are permissible under section 20 in section 4(c)(8) of the BHC Act. of the Glass-Steagall Act (12 U.S.C. § 377).8 Robertson BankAmerica, with total consolidated assets of Sub also is engaged in underwriting and dealing in securi- $258 billion, is the third largest commercial banking orga- ties. The Board has concluded that conduct of securities nization in the United States.3 BankAmerica operates five underwriting and dealing is consistent with section 20, subsidiary banks in 13 states and engages, directly and provided that the company derives no more than 25 percent through its subsidiaries, in a broad range of permissible of its total gross revenue from underwriting and dealing in nonbanking activities in the United States and throughout securities over any two-year period.9 BankAmerica has the world. Robertson, with combined consolidated assets committed that, following acquisition of Robertson, BASI of $455 million, engages worldwide in a broad range of will continue to conduct its bank-ineligible securities uninvestment advisory, securities brokerage, securities under- derwriting and dealing subject to the 25-percent revenue writing, and related activities.4 limitation and the prudential limitations previously estab- BankAmerica engages through BASI in a wide range of lished by the Board with respect to bank-ineligible securisecurities activities, including engaging, to a limited ex- ties underwriting and dealing.10 tent, in underwriting and dealing in all types of debt and equity securities (other than securities issued by open-end Other Considerations investment companies) in which a state member bank may not underwrite or deal ("bank-ineligible securities").3 In order to approve this notice, the Board must determine BASI is, and will continue to be, a broker-dealer registered that the proposed activities are a proper incident to bankwith the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and a member of the National Association of 6. See BankAmerica, 79 Federal Reserve Bulletin 1163 (1993); and BankAmerica Order. Securities Dealers ("NASD"). Accordingly, BASI is, and 7. BankAmerica would engage in the proposed mutual fund adviwould remain, subject to the recordkeeping and reporting sory and administrative activities in a manner consistent with previous obligations, fiduciary standards, and other requirements of orders. See Commerzbank AG, 83 Federal Reserve Bulletin 678 the Securities Exchange Act of 1934, the SEC, and the (1997) {"Commerzbank")', and Bankers Trust New York Corporation, NASD. 83 Federal Reserve Bulletin 780 (1997) ("Bankers Trust"). An independent distributor would distribute shares of the mutual funds that BankAmerica advises and administers. See Bankers Trust, p. 782 Activities Previously Approved by the Board n. 13. 8. See BankAmerica Order. The Board previously has determined by regulation or 9. See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board order that the proposed activities are closely related to of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. banking within the meaning of section 4(c)(8) of the BHC 1990); Citicorp, et al, 73 Federal Reserve Bulletin 473 (1987), aff'd Act and the Board previously has authorized BankAmerica sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, denied, 486 U.S. 1059 (1988); as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the 2. A list of the administrative services that BankAmerica would Purchase and Sale of Financial Assets Between a Section 20 Subsidprovide is included in the Appendix. iary and an Affiliated Bank or Thrift, 61 Federal Register 57,679 3. Asset and ranking data are as of June 30, 1997. (1996) (collectively, "Section 20 Orders"). See also Revenue Limit on 4. Robertson currently controls several private investment funds. Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies BankAmerica has committed to conform, within two years of acquir- Engaged in Underwriting and Dealing in Securities, 61 Federal ing Robertson, all activities and investments of Robertson and its Register 68,750 (1996). Compliance with the 25-percent revenue subsidiaries, including its involvement with various investment funds, limitation shall be calculated in accordance with the method stated in to those permissible for bank holding companies under section 4 of the Section 20 Orders, as modified by the Order Approving Modificathe BHC Act and Regulation Y. BankAmerica also has committed tions to the Section 20 Orders, 75 Federal Reserve Bulletin 751 that, upon the acquisition of Robertson by BankAmerica, Robertson (1989); and 10 Percent Revenue Limit on Bank-Ineligible Activities of Sub will cease acting as a distributor of mutual funds. Subsidiaries of Bank Holding Companies Engaged in Underwriting After the merger, BAC Sub would acquire from Robertson Sub two and Dealing Securities, 61 Federal Register 57,679 (1996) (collectivesubsidiaries engaged in oifshore broker-dealer activities. The activities ly, "Modification Orders"). of these two subsidiaries are within BankAmerica's existing authority 10. See Section 20 Orders and Modification Orders. BASI may and are permissible under Regulation K. The subsidiaries may be provide services that are necessary incidents to the proposed underacquired under the general consent authority in Regulation K. See writing and dealing activities. Unless BASI receives specific approval 12 C.F.R. 211.5(c)(1), (d). under section 4(c)(8) of the BHC Act to conduct the activities indepen- 5. See BankAmerica, 80 Federal Reserve Bulletin 1104 (1994) dently, any revenues from the incidental activities must be treated as ("BankAmerica Order"). ineligible revenues subject to the Board's revenue limitation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 915 ing, that is, that the performance of the activities "can relationship between BankAmerica and the Funds.15 reasonably be expected to produce benefits to the public ... BankAmerica also has indicated that the proposed transacthat outweigh possible adverse effects, such as undue con- tion would result in operational efficiencies that would centration of resources, decreased or unfair competition, allow it to become a more effective competitor and thereby conflicts of interests, or unsound banking practices."11 provide improved services at a lower cost to its customers. As part of its review of these factors, the Board consid- The Board also has carefully considered the competitive ered the financial and managerial resources of Bank- effects of this proposal. BankAmerica operates nonbanking America and its subsidiaries and the effect the transaction subsidiaries that compete with certain nonbanking subsidwould have on such resources.12 The Board also has re- iaries of Robertson. In each case, the markets for the viewed the capitalization of BankAmerica and BASI in nonbanking services are unconcentrated, and there are nuaccordance with the standards set forth in the Section 20 merous providers of the services. As a result, consumma- Orders and finds the capitalization of each to be consistent tion of this proposal would have a de minimis effect on with approval.13 The determination about the capitalization competition for the services, and the Board has concluded of BASI is based on all the facts of record, including that the proposal would not result in a significantly adverse BankAmerica's projections of the volume of BASI's un- effect on competition in any relevant market. derwriting and dealing activities in bank-ineligible securi- Under the framework established in this and prior decities. sions, including the prudential limitations established by Effective October 27, 1997, the Board substantially the Board in the Section 20 Orders, the Board has deterrevised the prudential limitations with respect to bank- mined that consummation of the proposal is not likely to ineligible securities underwriting and dealing.14 Bank- result in any significantly adverse effects, such as undue America has committed that BASI will conduct its bank- concentration of resources, decreased or unfair competiineligible underwriting and dealing activities subject to the tion, conflicts of interests, or unsound banking practices Board's new operating standards on October 27, 1997. that would outweigh the public benefits of the proposal. On the basis of its supervisory experience with Bank- Accordingly, based on all the facts of record, the Board America and BASI, the commitments provided in this case, has determined that the balance of public benefits that it and the proposed management of BASI, the Board also has must consider under the proper incident to banking standetermined that BankAmerica and BASI have established dard of section 4(c)(8) of the BHC Act is favorable and policies and procedures to ensure compliance with this consistent with approval of the proposal. order and the Section 20 Orders, including computer, audit, and accounting systems, internal risk management con- Conclusion trols, and the necessary operational and managerial infrastructure. The Board also has reviewed other aspects of the On the basis of all the facts of record, including all the managerial resources of the entities involved in this pro- commitments and representations made by BankAmerica, posal, including the expected effect of this proposal on the Board has determined to, and hereby does, approve this such resources. On the basis of the foregoing and all the notice subject to all the terms and conditions discussed in facts of record, the Board has concluded that financial and this order and in the Section 20 Orders, as modified by the managerial considerations are consistent with approval of Modification Orders. The Board's approval of this prothis proposal. posal extends only to activities conducted within the limita- The Board expects that the proposed acquisition would tions of those orders and this order, including the Board's provide added convenience to customers of BankAmerica reservation of authority to establish additional limitations and Robertson, including Robertson's current mutual fund to ensure that activities of BankAmerica and BASI are clients. The Board previously has determined that the consistent with safety and soundness, avoiding conflicts of provision of advisory and administrative services to mutual interests, and other relevant considerations under the BHC funds within certain parameters is not likely to result in the Act. Underwriting and dealing in any manner other than as types of subtle hazards at which the Glass-Steagall Act is approved in this order and the Section 20 Orders, as modified by the Modification Orders, is not authorized for aimed or in any other adverse effects. As required by the BASI. Board's regulations, for example, BankAmerica would provide to its customers disclosures designed to alert them to The Board's determination also is subject to all the terms the relationships between BankAmerica and the Funds. and conditions set forth in Regulation Y, including those in These disclosures include those required by the Board's interpretive rule on investment advisory activities to address conflicts of interests that may be presented by the 15. See 12 C.F.R. 225.125. The interpretive rule requires a bank holding company that recommends to customers shares of a mutual fund that the bank holding company advises to caution customers to read the fund prospectus before investing and to advise customers in 11. 12 U.S.C. § 1843(c)(8). writing that the fund's shares are not insured by the Federal Deposit 12. See 12 C.F.R. 225.26. Insurance Corporation, and are not deposits, obligations of, or en- 13. The Board notes that, as a registered broker-dealer, BASI must dorsed or guaranteed in any way, by any bank, unless that happens to comply with the SEC's net capital rule. See 15 C.F.R. 240.15c3-l. be the case. The holding company also must disclose in writing to the 14. See Amendments to Restrictions in the Board's Section 20 customer the role of the company or its affiliate as investment advisor Orders, 62 Federal Register 45,295 (1997). to the fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

916 Federal Reserve Bulletin • November 1997 sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 11. Reviewing and arranging for payment of expenses of 225.25(c)), and to the Board's authority to require modifi- the Funds. cation or termination of the activities of a bank holding 12. Providing communication and coordination services company or any of its subsidiaries as the Board finds with regard to the Funds' investment advisor, transfer necessary to assure compliance with and to prevent eva- agent, custodian, distributor and other service organizasion of the provisions of the BHC Act and the Board's tions that render recordkeeping or shareholder communicaregulations and orders issued thereunder. The Board's deci- tion services. sion is specifically conditioned on BankAmerica's compli- 13. Reviewing and providing advice to the distributor, the ance with all the commitments made in connection with fund and the investment advisor regarding sales literature this notice, including the commitments discussed in this and marketing plans for the Funds. order and the conditions set forth in the Board regulations 14. Providing information to the distributor's personnel and orders noted above. The commitments and conditions concerning performance and administration of the Funds. shall be deemed to be conditions imposed in writing by the 15. Providing marketing support with respect to sales of Board in connection with its findings and decisions, and the Funds through financial intermediaries, including parmay be enforced in proceedings under applicable law. ticipating in seminars, meetings and conferences designed This transaction shall not be consummated later than to present information concerning the operations of the three months after the effective date of this order unless Funds. such period is extended for good cause by the Board or by 16. Providing reports to the directors of the Funds with the Federal Reserve Bank of San Francisco, acting pursu- regard to the activities of the Funds. ant to delegated authority. 17. Providing telephone shareholder services through a By order of the Board of Governors, effective Septem- toll-free 800 number. ber 17, 1997. Barnett Banks, Inc. Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Jacksonville, Florida Governors Kelley, and Phillips. Absent and not voting: Governor Meyer. Order Approving Notice to Acquire a Savings Association JENNIFER J. JOHNSON Deputy Secretary of the Board Barnett Banks, Inc., Jacksonville ("Barnett"), a bank holding company within the meaning of the Bank Holding Appendix Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. List of Administrative Services § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire First of America Bank-Florida, FSB, Tampa, both in Florida ("Thrift"), and 1. Maintaining and preserving the records of the Funds, thereby engage in operating a savings association pursuant including financial and corporate records. to section 225.28(b)(4) of Regulation Y (12 C.F.R. 2. Computing net asset value, dividends, performance data 225.28 (b)(4)). and financial information regarding the Funds. Notice of the proposal, affording interested persons an 3. Furnishing statistical and research data. opportunity to submit comments, has been published (62 4. Preparing and filing with the SEC and state securities Federal Register 39,243 (1997)). The time for filing comregulators registration statements, notices, reports, and ments has expired, and the Board has considered the proother materials required to be filed under applicable laws. posal and all comments received in light of the factors set 5. Preparing reports and other informational materials re- forth in section 4 of the BHC Act. garding the Funds, including proxies and other shareholder Barnett, with total consolidated assets of approximately communications. $42 billion, operates four subsidiary banks in Florida and 6. Providing legal and other regulatory advice to the Funds Georgia. Barnett is the largest depository institution in in connection with their other administrative functions. Florida, controlling deposits of $34.2 billion, representing 7. Providing office facilities and clerical support for the approximately 19.2 percent of total deposits in depository Funds. institutions in the state.1 Thrift is the 23d largest depository 8. Developing and implementing procedures for monitor- institution in Florida, controlling deposits of $953.7 miling compliance with regulatory requirements and compli- lion, representing less than 1 percent of total deposits in the ance with the Funds' investment objectives, policies and state. On consummation of the proposal, Barnett would restrictions as established by the board of directors/trustees of the Funds. 9. Providing routine fund accounting services and liaison 1. Asset data are as of March 31, 1997, and state deposit data are as of June 30, 1996. These data have been updated to account for with outside auditors. structural changes as of July 25,1997. In this context, the term 10. Preparing and filing tax returns, and monitoring tax depository institutions includes commercial banks, savings banks, and compliance. savings associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 917 remain the largest depository institution in Florida, control- In the Punta Gorda banking market, consummation of ling total deposits of $35.2 billion, representing approxi- the proposal would exceed the DOJ Guidelines.8 The HHI mately 19.7 percent of the total deposits in depository would increase by 653 points to 2143 points, and Barnett institutions in Florida. would become the largest depository institution in the The Board previously has determined by regulation that market, controlling approximately 36 percent of market operating a savings association is closely related to bank- deposits. ing for purposes of section 4(c)(8) of the BHC Act.2 The In evaluating the competitive effects of the proposal in Board requires savings associations that are acquired by the Punta Gorda banking market, the Board has considered bank holding companies to conform their direct and indi- that, after consummation of the proposal, 12 depository rect activities to those permissible for bank holding compa- institutions would remain in the market. Three of the nies under section 4 of the BHC Act and Regulation Y. competitors, other than Barnett, are large multi-state com- Barnett has committed to conform all of Thrift's activities mercial banking organizations that would each control of Thrift to those requirements.3 more than 10 percent of market deposits. The Punta Gorda banking market also has characteristics that make it attrac- Competitive Considerations tive for entry for out-of-market firms. The rates of increase in population for the Punta Gorda Metropolitan Statistical In order to approve the proposal, the Board also must Area ("MSA") and in deposits in depository institutions determine that the performance of the proposed activities is for the Punta Gorda banking market have exceeded the a proper incident to banking, that is, that the proposed averages for these statistics for Florida MSAs and for the transaction "can reasonably be expected to produce bene- state of Florida. Since 1991, three commercial banks have fits to the public . . . that outweigh possible adverse effects, entered the Punta Gorda banking market de novo, and four such as undue concentration of resources, decreased or depository institutions have entered through acquisitions.9 unfair competition, conflicts of interests, or unsound bank- In the De Soto County banking market, consummation ing practices."4 As part of the Board's evaluation of these of the proposal would exceed the DOJ Guidelines, and the factors, the Board has carefully considered the competitive HHI would increase by 299 points to 3241 points.10 Bareffects of the proposed transaction in light of all the facts of nett would become the third largest depository institution record. in the De Soto County banking market, controlling approx- Barnett and Thrift compete directly in nine banking imately 24 percent of market deposits. Four depository markets in Florida. The Board has carefully reviewed the institutions, including two large multi-state commercial competitive effects of the proposal in these banking mar- banking organizations, would remain in the banking markets5 in light of all the facts of record, including the ket. Two competitors would have market shares larger than number of competitors that would remain in the markets, Barnett's, one controlling approximately 43 percent of the characteristics of the markets, and the projected in- market deposits and one, a large multi-state commercial crease in the concentration of total deposits in depository banking organization, controlling approximately 28 perinstitutions in the markets ("market deposits"),6 as mea- cent of market deposits. The market also has characteristics sured by the Herfindahl-Hirschman Index ("HHI"), under that make it attractive for entry for out-of-market firms. In the Department of Justice Merger Guidelines ("DOJ De Soto County, deposits statewide and in non-MSAs have Guidelines").7 increased at a higher rate than the average for deposit growth. De Soto County's population per branch office and deposits per branch office also are higher than the average 2. See 12 C.F.R. 225.28(b)(4). for other non-MSAs. Since 1991, two depository institu- 3. Thrift currently does not engage in any impermissible activities. tions have entered the banking market through acquisi- 4. 12 U.S.C. § 1843(c)(8). tions. 5. These banking markets are discussed in the Appendix. Based on these and all the other facts of record, the 6. Market share data are as of June 30, 1996. Market share data before consummation are based on calculations in which the deposits Board concludes that consummation of the proposal would of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National has stated that the higher than normal threshold for an increase in the City Corporation, 70 Federal Reserve Bulletin 743 (1984). Because HHI when screening bank mergers and acquisitions for anticompeti- Thrift is currently affiliated with and would be acquired by a commer- tive effects implicitly recognizes the competitive effects of limitedcial banking organization, Thrift's deposits are included at 100 per- purpose lenders and other non-depository financial entities. cent in the calculations of market share. See Norwest Corporation, 78 8. The Punta Gorda, Florida, banking market is approximated by Federal Reserve Bulletin 452 (1992). First Banks, Inc., 76 Federal Charlotte County excluding the towns of Cape Haze, Englewood, Reserve Bulletin 669, 670 n.9 (1990). Englewood Beach, Grove City, New Point Comfort, Placida, and 7. Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, Rotonda West, and including the town of North Port in Sarasota 1984), a market in which the post-merger HHI is more than 1800 is County. considered highly concentrated. The Justice Department has informed 9. The Board notes that if Thrift's deposits were weighted at the Board that a bank merger or acquisition generally will not be 50 percent on a pre-merger basis, the HHI in the De Soto banking challenged (in the absence of other factors indicating anticompetitive market would increase by only 42 points to 3241. effects) unless the post-merger HHI is at least 1800 and the merger 10. The De Soto County, Florida, banking market is approximated increases the HHI by more than 200 points. The Justice Department by De Soto County, Florida. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

918 Federal Reserve Bulletin • November 1997 not have a significantly adverse effect on competition or on purposes of the BHC Act and the Board's regulations and the concentration of banking resources in the Punta Gorda orders issued thereunder. The commitments and conditions or the De Soto County banking markets. Consummation of relied on by the Board in reaching this decision are deemed the proposal would not exceed the DOJ Guidelines in the to be conditions imposed in writing by the Board in conseven other banking markets in which Barnett and Thrift nection with its findings and decision, and, as such, may be compete and numerous competitors would remain in these enforced in proceedings under applicable law. markets. Accordingly, consummation of the proposal This proposal shall not be consummated later than three would not have a significantly adverse effect on competi- months after the effective date of this order, unless such tion in any other relevant banking market. period is extended for good cause by the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to dele- Other Considerations gated authority. By order of the Board of Governors, effective September As part of its evaluation of the public interest factors, the 15, 1997. Board has carefully considered the financial and managerial resources of Barnett, its subsidiaries and Thrift, and the Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and effect the transaction would have on such resources in light Governors Kelley, Phillips, and Meyer. of all the facts of record. These facts of record include supervisory reports of examination assessing the financial JENNIFER J. JOHNSON Deputy Secretary of the Board and managerial resources of the organizations and recent pro forma financial information provided by Barnett. The Board notes that Barnett, Thrift, and Barnett's insured Appendix depository institutions, meet or exceed the "well capitalized" thresholds under applicable law, and Barnett would Local banking markets where Barnett and Thrift's subsidcontinue to do so after consummation of the proposal. iary depository institutions compete, all in Florida: Based on all the facts of record, the Board has concluded that the financial and managerial resources of the organiza- (1) Beverly Hills—approximated by Citrus County, excludtions involved in the proposal are consistent with approval. ing the town of Citrus Springs. After consummation of the The record also indicates that consummation of the proposal, Barnett would control 21.3 percent of the market proposal would result in public benefits. Barnett intends to deposits and would remain the second largest depository offer Thrift's current and potential customers an expanded institution in the market. The HHI would increase branch network and a broader array of banking products 43 points to 1731. and services. Thrift customers would gain access to con- (2) Fort Myers—approximated by Lee County, excluding sumer and commercial investment services, consumer leas- the town of Boca Grande, but including the town of Iming services, commercial lending services, cash manage- mokalee in Collier County. After consummation of the ment services, international banking services, and proposal, Barnett would control 18.5 percent of the market electronic banking services and products. Based on all the deposits and would remain the third largest depository facts of record, the Board has determined that the proposal institution in the market. The HHI would increase by Barnett can reasonably be expected to produce public 40 points to 1677. benefits that outweigh possible adverse effects under the (3) Jacksonville—approximated by Baker, Clay, Duval and proper incident to banking standard of section 4(c)(8) of Nassau Counties, and the towns of Fruit Cove, Ponte the BHC Act. Accordingly, the Board has determined that Vedra, and Ponte Vedra Beach in St. Johns County, plus the balance of public interest factors it must consider under the city of Folkston in Charlton County, Georgia. After section 4(c)(8) of the BHC Act is favorable and consistent consummation of the proposal, Barnett would control with approval. 23.4 percent of the market deposits and would remain the second largest depository institution in the market. The Conclusion HHI would remain unchanged. (4) Orlando—approximated by Orange, Osceola and Semi- Based on the foregoing and all the facts of record, the nole Counties, plus the western half of Volusia County and Board has determined that the notice should be, and hereby the towns of Clermont and Groveland in Lake County. is, approved. The Board's approval of the notice is specifi- After consummation of the proposal, Barnett would control cally conditioned on compliance by Barnett and Thrift with 21 percent of the market deposits and would remain the commitments made in connection with the notice. The second largest depository institution in the market. The Board's determination also is subject to all the conditions HHI would increase by 1 point to 1618. in Regulation Y, including those in sections 225.7 and (5) Sarasota—approximated by Sarasota and Manatee 225.25(c) (12 C.F.R. 225.7 and 225.25(c)) and to the Counties, excluding the town of North Port in Sarasota Board's authority to require such modification or termina- County, and including the towns of Cape Haze, Engletion of the activities of a holding company or any of its wood, Englewood Beach, Grove City, New Point Comfort, subsidiaries as the Board finds necessary to assure compli- Placida, and Rotonda West in Charlotte County, and the ance with, or to prevent evasion of, the provisions and town of Boca Grande in Lee County. After consummation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 919 of the proposal, Barnett would control 25.1 percent of the (3) Providing leasing services, pursuant to section market deposits and would remain the largest depository 225.28(b)(3) of Regulation Y (12 C.F.R. 225.28(b)(3)); institution in the market. The HHI would increase by (4) Providing financial and investment advisory ser- 195 points to 1590. vices, pursuant to section 225.28(b)(6) of Regulation Y (6) Tampa Bay—approximated by Hernando, Hillsbor- (12 C.F.R. 225.28(b)(6)); ough, Pinellas and Pasco Counties. After consummation of (5) Providing securities brokerage, riskless principal, the proposal, Barnett would control 25.5 percent of the private placement and other transactional services, purmarket deposits and would remain the largest depository suant to section 225.28(b)(7)(i), (ii), (iii) and (v) of institution in the market. The HHI would increase by Regulation Y (12 C.F.R. 225.28(b)(7)(i), (ii), (iii) and 44 points to 1485. (v)); and (7) West Palm Beach—approximated by Palm Beach (6) Underwriting and dealing in government obligations County east of Loxahatchee and the towns of Indiantown and money market instruments in which state member and Hobe Sound in Martin County. After consummation of banks may underwrite and deal under 12 U.S.C. §§ 335 the proposal, Barnett would control 18.3 percent of the and 24(7) ("bank-eligible securities"), and engaging in market deposits and would remain the second largest de- investing and trading activities, pursuant to secpository institution in the market. The HHI would increase tion 225.28(b)(8)(i) and (ii) of Regulation Y (12 C.F.R. by 7 points to 1036. 225.28(b)(8)(i) and (ii)). Concurring Statement of Governor Meyer Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 42,130 (1997)). The time for filing com- I believe that the proposed acquisition presents a close case ments has expired, and the Board has considered the probecause of the concentration results in two markets: Punta posal and all comments received in light of the factors set Gorda and DeSoto. forth in section 4(c)(8) of the BHC Act. In the Punta Gorda market, there will be a very large BB&T, with total consolidated assets of $23 billion, is increase in the HHI of 653 points, which in itself raises the 35th largest banking organization in the United States.1 concerns about the potential competitive effects. Further- BB&T controls five banking subsidiaries and one thrift more, following the merger, the market will be in the subsidiary that operate in North Carolina, South Carolina, highly concentrated range based on the Department of and Virginia, and engages in a broad range of permissible Justice merger guidelines. The DeSoto market is already so nonbanking activities throughout the United States. Comhighly concentrated that the more modest but still substanpany, with consolidated assets of $76 million, engages in tial increase in the HHI resulting from the merger raises investment advisory, securities brokerage, securities underconcerns about the potential competitive effects. writing, and related activities. Company is, and following Were it not for unusually strong mitigating factors in the proposed acquisition will continue to be, a brokerboth of these markets, I could not support approval of this dealer registered with the Securities and Exchange Comacquisition without appropriate divestiture. mission ("SEC") under the Securities and Exchange Act of 1934 ("1934 Act") (15 U.S.C. § 78a et seq.) and a BB&T Corporation member of the National Association of Securities Dealers Winston-Salem, North Carolina ("NASD"). Accordingly, Company is, and will remain, subject to the recordkeeping and reporting obligations, Order Approving Notice to Engage in Nonbanking fiduciary standards, and other requirements of the 1934 Activities Act, the SEC, and the NASD. BB&T Corporation, Winston-Salem, North Carolina Underwriting and Dealing Activities ("BB&T"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has The Board has determined—subject to the framework of requested the Board's approval under section 4(c)(8) of the prudential limitations to address the potential for conflicts BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of of interests, unsound banking practices, or other adverse the Board's Regulation Y (12 C.F.R. 225.24) to acquire all effects—that the proposed activities of underwriting and the voting securities of Craigie Incorporated, Richmond, dealing in bank-ineligible securities are so closely related Virginia ("Company"), and thereby engage in the follow- to banking as to be a proper incident thereto within the ing nonbanking activities: meaning of section 4(c)(8) of the BHC Act.2 (1) Underwriting and dealing in, to a limited extent, all types of debt and equity securities other than interests in open-end investment companies ("bank-ineligible secu-~ 1. Asset and ranking data are as of June 30, 1997. rities"); 2. See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industries Ass'n v. (2) Extending credit and servicing loans, pursuant to Board of Governors of the Federal Reserve System, 900 F.2d 360 section 225.28(b)(1) of Regulation Y (12 C.F.R. (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Bulletin 473 225.28(b)(1)); (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Gover- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

920 Federal Reserve Bulletin • November 1997 The Board also has determined that conduct of the BB&T has proposed to conduct its underwriting and proposed activities is consistent with section 20 of the dealing activities in bank-ineligible securities in accor- Glass-Steagall Act (12 U.S.C. § 377), provided that the dance with the framework of prudential limitations estabcompany engaged in underwriting and dealing activities lished by the Board in the Section 20 Orders. After conderives no more than 25 percent of its gross revenues from cluding that a narrower set of restrictions is fully consistent underwriting and dealing in bank-ineligible securities over with safety and soundness, should improve the operating a two-year period.3 BB&T has committed that Company efficiencies of section 20 subsidiaries, and should increase will conduct its bank-ineligible securities underwriting and options for customers of section 20 subsidiaries, the Board dealing activities subject to the Board's 25 percent revenue recently modified the prudential limitations it had establimit.4 lished in the Section 20 Orders.7 The Board's action in this case is conditioned on compliance by BB&T and its sub- Other Activities Approved by Regulation sidiaries, including Company, with the prudential limitations established in the Section 20 Orders, as recently The Board previously has determined by regulation that revised. As noted above, BB&T and Company also will the proposed credit and loan servicing activities; leasing conduct the other proposed activities in accordance with activities; financial and investment advisory services; secu- the limitations set forth in Regulation Y, and the Board's rities brokerage, riskless principal, private placement and orders and interpretations relating to each of these activiother transactional activities; bank-eligible underwriting ties. and dealing, and investment and trading activities to be As part of its evaluation of the proper incident to bankconducted by BB&T after its acquisition of Company are ing factors, the Board also considers the financial and closely related to banking within the meaning of section managerial resources of the notificant and its subsidiaries 4(c)(8) of the BHC Act.5 BB&T has committed to conduct and the effect the transaction would have on such resourceach of these activities in accordance with Regulation Y es.8 The Board has reviewed the capitalization of BB&T and relevant Board interpretations and orders. and Company in accordance with the standards set forth in the Section 20 Orders and finds the capitalization of each Proper Incident to Banking Standard to be consistent with the approval. The determination about the capitalization of Company is based on all the facts of In order to approve this proposal, the Board also must record, including BB&T's projections of the volume of determine that the proposed activities are a proper incident Company's underwriting and dealing activities in bankto banking, that is, that the proposed transaction "can ineligible securities. reasonably be expected to produce benefits to the public ... On the basis of its supervisory experience with BB&T, that outweigh possible adverse effects, such as undue con- the results of a recent infrastructure review of Company, centration of resources, decreased or unfair competition, the commitments provided in this case, and the proposed conflicts of interests, or unsound banking practices."6 management of Company, the Board has determined that BB&T and Company have established policies and procedures to ensure compliance with this order and the Section 20 Orders, including computer, audit, and accounting sysnors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, tems, internal risk management controls, and the necessary denied, 486 U.S. 1059 (1988); as modified by Review of Restrictions operational and managerial infrastructure. The Board also on Director, Officer and Employee Interlocks, Cross-Marketing Activihas reviewed other aspects of the managerial resources of ties, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 Federal Register the entities involved in the proposal, including the ex- 57,679 (1996) and Amendments to Restrictions in the Board's Section pected effect of the proposal on such resources. On the 20 Orders, 62 Federal Register 45,295 (1997) (collectively, the "Sec- basis of the foregoing and all the facts of record, the Board tion 20 Orders"). has concluded that financial and managerial considerations 3. Compliance with the revenue limitation shall be calculated in accordance with the method stated in the Section 20 Orders, as are consistent with approval of the proposal. modified by the Order Approving Modifications to the Section 20 The Board also has carefully considered the competitive Orders, 75 Federal Reserve Bulletin 751 (1989), and 10 Percent effects of this proposal. BB&T operates a subsidiary that Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank competes with Company. The markets for the nonbanking Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996), and Revenue Limit on Bank- services offered by BB&T and Company are unconcen- Ineligible Activities of Subsidiaries of Bank Holding Companies En- trated, and there are numerous providers of the nonbanking gaged in Underwriting and Dealing in Securities, 61 Federal Register services that BB&T and Company offer. As a result, con- 68,750 (1996) (collectively, "Modification Orders"). summation of this proposal would have a de minimis effect 4. Company may provide services that are necessary incidents to the on competition for these services, and the Board has conproposed underwriting and dealing activities. Unless Company receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, Company must treat any revenues from the incidental activities as ineligible revenues subject to the Board's revenue limitation. 5. See 12 C.F.R. 225.28(b)(1), (3). (6), (7)(i), (7)(ii), (7)(iii), (7)(v), 7. See Amendments to Restrictions in the Board's Section 20 Or- (8)(i) and (8)(ii). ders, 62 Federal Register 45,295 (1997). 6. See 12 U.S.C. § 1843(c)(8). 8. See 12 C.F.R. 225.26. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 921 eluded that the proposal would not result in a significantly regulations and orders issued thereunder. The Board's deciadverse effect on competition in any relevant market. sion specifically is conditioned on BB&T's compliance The Board expects that the proposed acquisition would with all the commitments made in connection with this provide added convenience to customers of both BB&T notice, including the commitments discussed in this order and Company and lead to improved methods of meeting and the conditions set forth in the Board regulations and customer financing needs. BB&T notes that the proposed orders noted above. The commitments and conditions shall acquisition would give Company greater access to capital be deemed to be conditions imposed in writing by the and enhanced marketing and administrative support that Board in connection with its findings and decisions, and would make Company a stronger competitor. Additionally, may be enforced in proceedings under applicable law. following consummation of the proposed acquisition, This transaction shall not be consummated later than BB&T would be able to offer to its customers the under- three months after the effective date of this order unless writing and dealing services of Company. such period is extended for good cause by the Board or by Based on all the facts of record, the Board has deter- the Federal Reserve Bank of Richmond, acting pursuant to mined that consummation of the proposal by BB&T can delegated authority. reasonably be expected to produce public benefits. Under By order of the Board of Governors, effective Septemthe framework and conditions established in this order and ber 17, 1997. the Section 20 Orders (as revised), and based on all the facts of record, the Board concludes that Company's pro- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and posed underwriting and dealing activities in bank-ineligible Governors Kelley and Phillips. Absent and not voting: Governor securities are not likely to result in significantly adverse Meyer. effects that would outweigh the public benefits. Similarly, JENNIFER J. JOHNSON the Board finds no evidence that Company's proposed Deputy Secretary of the Board riskless principal, private placement, and other nonbanking activities—conducted under the framework and conditions established in this order and Regulation Y— would likely KeyCorp result in any significantly adverse effects, such as undue Cleveland, Ohio concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public benefits of the proposal. Order Approving Notice to Engage in Underwriting and Accordingly, the Board has determined that performance Dealing in All Types of Debt and Equity Securities on a of the proposed activities by BB&T are a proper incident to Limited Basis and Certain Other Nonbanking Activities banking for purposes of section 4(c)(8) of the BHC Act. KeyCorp, Cleveland, Ohio ("KeyCorp"), a bank holding Conclusion company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's ap- On the basis of all the facts of record, including all the proval under section 4(c)(8) of the BHC Act (12 U.S.C. commitments and representations made by BB&T, the § 1843(c)(8)) and section 225.24 of the Board's Regula- Board has determined to, and hereby does, approve this tion Y (12 C.F.R. 225.24) to engage in the following notice subject to all the terms and conditions discussed in nonbanking activities through its wholly owned subsidiary, this order and in the Section 20 Orders, as modified by the Key Capital Markets, Inc., Cleveland, Ohio ("KCMI"): Modification Orders. The Board's approval of this pro- (1) Underwriting and dealing in, to a limited extent, all posal extends only to activities conducted within the limita- types of debt and equity securities except ownership tions of those orders and this order, including the Board's interests in open-end investment companies; reservation of authority to establish additional limitations (2) Providing investment and financial advice, as deto ensure that Company's activities are consistent with scribed in section 225.28(b)(6) of Regulation Y safety and soundness, avoiding conflicts of interests, and (12 C.F.R. 225.28(b)(6)); other relevant considerations under the BHC Act. Under- (3) Conducting securities brokerage activities, buying writing and dealing in any manner other than as approved and selling all types of securities on the order of customin this order and the Section 20 Orders, as modified by the ers as a "riskless principal," acting as agent in the Modification Orders, is not within the scope of the Board's private placement of all types of securities, acting as a approval and is not authorized for Company. futures commission merchant in the execution, clear- The Board's determination also is subject to all the terms ance, and execution and clearance of futures contracts and conditions set forth in Regulation Y, including those in and options on futures contracts, and providing other sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and transactional services, all as described in section 225.25(c)), and to the Board's authority to require modifi- 225.28(b)(7) of Regulation Y (12 C.F.R. 225.28(b)(7)); cation or termination of the activities of a bank holding and company or any of its subsidiaries as the Board finds (4) Underwriting and dealing in government obligations necessary to assure compliance with and to prevent eva- and money market instruments, engaging in investing sion of the provisions of the BHC Act and the Board's and trading activities, and buying and selling bullion and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

922 Federal Reserve Bulletin • November 1997 related activities, all as described in section 225.28(b)(8) The Board also has determined that the conduct of the of Regulation Y (12 C.F.R. 225.28(b)(8). proposed activities is consistent with section 20 of the Glass-Steagall Act, provided that the company engaged in KeyCorp seeks approval for KCMI to conduct the activi- the underwriting and dealing activities derives no more ties listed above worldwide. than 25 percent of its gross revenues from underwriting Notice of the proposal, affording interested persons an and dealing in bank-ineligible securities over a two-year opportunity to submit comments, has been published period.5 KeyCorp has committed that KCMI will conduct (62 Federal Register 38,308 and 40,088 (1997)). The time its underwriting and dealing activities in bank-ineligible for filing comments has expired, and the Board has consid- securities subject to this revenue limit.6 ered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Other Activities Approved by Regulation KeyCorp, with total consolidated assets of approximately $68 billion, is the 14th largest commercial banking As noted above, KeyCorp proposes to engage in providing organization in the United States.1 KeyCorp operates sub- investment and financial advice, agency transactional sersidiary banks in 14 states, and engages in a broad range of vices for customer investments, and investment and trading permissible nonbanking activities through its subsidiaries. services. The Board previously has determined by regula- KCMI currently engages in limited underwriting and deal- tion that each of the proposed activities is closely related to ing in bank-ineligible securities2 as permitted under sec- banking for purposes of section 4(c)(8) of the BHC Act.7 tion 20 of the Glass-Steagall Act (12 U.S.C. § 377).3 KCMI is, and will continue to be, registered as a broker- Proper Incident to Banking Standard dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 To approve this notice, the Board also must consider (15 U.S.C. § 78a et seq.) and is a member of the National whether performance of the proposed activities is a proper Association of Securities Dealers, Inc. ("NASD"). KCMI, incident to banking, that is, whether the proposed activities therefore, is subject to the recordkeeping and reporting "can reasonably be expected to produce benefits to the obligations, fiduciary standards, and other requirements of public . . . that outweigh possible adverse effects, such as the Securities Exchange Act of 1934, the SEC, and the undue concentration of resources, decreased or unfair com- NASD. petition, conflicts of interests, or unsound banking practices."8 KeyCorp has proposed to conduct its underwriting Underwriting and Dealing in Bank-Ineligible Securities and dealing activities in accordance with the framework of prudential limitations established by the Board in the Sec- The Board has determined that, subject to the prudential tion 20 Orders to address potential adverse effects. The framework of limitations established in previous decisions Board recently modified several of the prudential limitato address the potential for unsound banking practices or tions established in the Section 20 Orders ("Section 20 other adverse effects, the proposed activities of underwrit- firewalls") after concluding that a narrower set of restricing and dealing in bank-ineligible securities are so closely tions is fully consistent with safety and soundness, should related to banking as to be proper incidents thereto within improve the operating efficiencies of section 20 subsidiarthe meaning of section 4(c)(8) of the BHC Act.4 ies, and increases options for customers of section 20 subsidiaries.9 The Board's action in this case is based on compliance by KeyCorp and its subsidiaries, including 1. Asset and ranking data are as of March 31, 1997. KCMI, with the prudential limitations established by the 2. As used in this order, "bank-ineligible securities" refers to all types of debt and equity securities that a national bank may not underwrite or deal in directly under section 16 of the Glass-Steagall 5. See Section 20 Orders. Compliance with the revenue limitation Act (12 U.S.C. § 24(7)). shall be calculated in accordance with the method stated in the Section 3. KCMI has authority to underwrite and deal in, to a limited extent, 20 Orders, as modified by Order Approving Modifications to the certain municipal revenue bonds, 1^4 family mortgage-related securi- Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) and ties, commercial paper, and consumer-receivable-related securities. 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries See KeyCorp, 82 Federal Reserve Bulletin 359 (1996). of Bank Holding Companies Engaged in Underwriting and Dealing in 4. See Canadian Imperial Bank of Commerce, et al., 76 Federal Securities, 61 Federal Register 48,953 (1996) and Revenue Limit on Reserve Bulletin 158 (1990); J.P. Morgan & Co., Incorporated, et al., Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Engaged in Underwriting and Dealing in Securities, 61 Federal Industries Ass'n v. Board of Governors of the Federal Reserve System, Register 68,750 (1996) (collectively "Modification Orders"). 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve 6. KCMI may provide services that are necessary incidents to the Bulletin 473 (1987), aff'd sub nom. Securities Industiy Ass'n v. Board proposed underwriting and dealing activities. Unless KCMI receives of Governors of the Federal Reseri'e System, 839 F.2d 47 (2d Cir. specific approval under section 4(c)(8) of the BHC Act to provide the 1988), cert, den., 486 U.S. 1059 (1988); as modified by Review of activities independently, any revenues from the incidental activities Restrictions on Director, Officer and Employee Interlocks, Cross- must be treated as ineligible revenues that are subject to the revenue Marketing Activities, and the Purchase and Sale of Financial Assets limit. Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 7. See 12 C.F.R. 225.28(b)(6), (7), and (8). Federal Register 57,679 (1996), and Amendments to Restrictions in 8. 12 U.S.C. § 1843(c)(8). the Board's Section 20 Orders, 62 Federal Register 45,295 (1997) 9. See Amendments to Restrictions in the Board's Section 20 Or- (collectively, "Section 20 Orders"). ders, 62 Federal Register 45,295 (1997). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 923 Board in the Section 20 Orders, as recently revised by the serve Bank") in connection with the notice. The infrastruc- Board.10 KeyCorp and KCMI also will conduct the pro- ture review considered the operational and managerial posed activities in accordance with the limitations set forth infrastructure of KeyCorp and KCMI for underwriting and in Regulation Y and the Board's orders and interpretations dealing in all types of debt securities, including computer, relating to each of the activities. audit, and accounting systems and internal risk manage- As part of its evaluation of these factors, the Board also ment controls. The Board has determined on the basis of considers the financial condition and managerial resources the infrastructure review that KeyCorp and KCMI have of the notificant and its subsidiaries and the effect the established policies and procedures to ensure compliance transaction would have on such resources.11 The Board has with the Section 20 firewalls and other requirements of this reviewed the capitalization of KeyCorp and KCMI in ac- order and the Section 20 Orders for underwriting and cordance with the standards set forth in the Section 20 dealing in debt securities. As discussed below, a satisfac- Orders and finds the capitalization of each to be consistent tory infrastructure review of KeyCorp and KCMI related to with approval. With respect to KCMI, this determination is underwriting and dealing in all types of equity securities based on all the facts of record, including KeyCorp's must be completed before KCMI may engage in these projections of the volume of KCMI's underwriting and activities. dealing activities in bank-ineligible securities. On the basis Based on all the facts of record, including ICP's comof all the facts of record, including the foregoing, the ments, and for the reasons discussed above, and subject to Board concludes that financial considerations are consis- the completion of a satisfactory infrastructure review of tent with approval of the notice. KeyCorp and KCMI related to underwriting and dealing in The Board also has considered the managerial resources all types of equity securities, the Board concludes that of KeyCorp and its subsidiaries in light of all the facts of considerations relating to the managerial resources of Keyrecord, including comments from Inner City Press/ Corp and its subsidiaries, including KCMI, are consistent Community on the Move ("ICP") contending that KCMI with approval of the proposal.13 should not be permitted to expand its section 20 activities The Board expects that the expansion of the underwrituntil it has gained additional experience in operating under ing and dealing services to be provided by KCMI under the its current section 20 powers and further demonstrated its proposal would provide added convenience to KeyCorp's operational and compliance capabilities.12 The facts also customers, lead to improved methods of meeting custominclude KCMI's record of satisfactory operations to date as ers' financing needs, and increase the level of competition reflected in supervisory reports of examination and the among existing providers of these services. In addition, results of a recent infrastructure review of KCMI per- there are public benefits to be derived from permitting formed by the Federal Reserve Bank of Cleveland ("Re- bank holding companies to engage in potentially profitable activities when those activities are consistent, as in this 10. The Board's order authorizes KeyCorp to use the revised Section 20 firewalls on consummation of the proposal. 11. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 13. ICP also raises issues related to KeyCorp's record of perfor- Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 mance under the Community Reinvestment Act (12 U.S.C. 2901 Federal Reserve Bulletin 155 (1987). et seq.) ("CRA"). ICP cites the number of branches of KeyCorp's 12. ICP also asserts that KeyCorp operates its nonbank lending subsidiary banks that have been closed or are projected to be closed. subsidiaries pursuant to a strategy to illegally "steer" low- and The Board previously has determined, however, that the CRA by its moderate-income and minority borrowers to higher interest rate loans, terms does not apply in applications by bank holding companies to which ICP alleges would reflect adversely on managerial consider- acquire nonbank subsidiaries like KCMI that are not insured deposiations. ICP has provided no facts, however, to show violations of fair tory institutions. See The Mitsui Bank, Limited, 76 Federal Reserve lending laws. The Board notes, moreover, that examiners found no Bulletin 381 (1990). Contrary to ICP's contentions. CRA factors, evidence of illegal discrimination or other practices that discourage including branch closings, will be considered only in applications to applications for credit on a prohibited basis at the most recent exami- acquire an insured depository institution under sections 3 or 4 of the nations that considered fair lending law compliance at KeyCorp's BHC Act, consistent with the Board's statement in the KeyCorp subsidiary banks. KeyCorp's subsidiary banks account for a substan- Order. tial majority of the organization's total consolidated assets, total ICP also maintains that the recent acquisition of Champion Mortconsolidated net income, and total consolidated loans. KeyCorp's gage Company ("Champion") by KeyBank USA, National Associanonbank lending subsidiaries, on the other hand, account for less than tion ("KeyBank USA"), raises adverse CRA performance and con- 1 percent of its total consolidated net income and consolidated loans, sumer law compliance issues, and that KeyBank USA was improperly and less than 5 percent of its total consolidated assets. The Board has designated by the Office of the Comptroller of the Currency ("OCC") broad supervisory authority under the banking laws to require bank as a "limited purpose" institution for purposes of evaluating the holding companies and their nonbank subsidiaries to comply with all bank's CRA compliance. ICP also contends that KeyCorp did not applicable laws in the event that facts or an examination show that provide ICP with information on the approval process for the Cham- KeyCorp's nonbank lending subsidiaries are not in compliance with pion acquisition or on branch closings by its lead subsidiary bank, fair lending laws. KeyBank National Association. The Board has provided a copy of ICP also maintains that KeyCorp's subsidiary banks have an inade- ICP's comments to the OCC for consideration. KeyBank USA's quate record of complying with laws and regulations, including the acquisition of Champion, which engages in lending activities that a reporting requirements of the Home Mortgage Disclosure Act national bank is authorized to engage in under the National Bank Act (12 U.S.C. 2801 et seq.). The Board previously has considered these (12 U.S.C. § 24(7)), was consistent with the Board's Regulation Y allegations. See KeyCorp, 82 Federal Reserve Bulletin 946 (1996) and did not require prior Board approval. See 12 C.F.R. 225.22(e)(1). ("KeyCorp Order"), the relevant portions of which are incorporated As previously discussed, furthermore, branch closings are not relevant herein by reference. to the proposal under consideration by the Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

924 Federal Reserve Bulletin • November 1997 case, with the relevant considerations under the BHC Act. The Board's determination is subject to all the terms and As noted above, KeyCorp has committed that KCMI will conditions set forth in Regulation Y, including those in conduct its bank-ineligible securities underwriting and sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. dealing activities in accordance with the prudential frame- 225.7 and 225.25(c)), and to the Board's authority to work established by the Board's Section 20 Orders. Under require such modification or termination of the activities of the framework and conditions established in this order and a bank holding company or any of its subsidiaries as the the Section 20 Orders, the Board concludes that KCMI's Board finds necessary to ensure compliance with, and proposed limited conduct of underwriting and dealing in prevent evasion of, the provisions of the BHC Act and the bank-ineligible securities is not likely to result in signifi- Board's regulations and orders issued thereunder. In apcantly adverse effects, such as undue concentration of proving the proposal, the Board has relied on all the facts resources, decreased or unfair competition, conflicts of of record and all the representations and commitments interests, or unsound banking practices that would out- made by KeyCorp in connection with the proposal, and the weigh the public benefits. Similarly, the Board finds no Board's determination is specifically conditioned thereon. evidence that KCMI's proposal to provide investment and These commitments and conditions are deemed to be confinancial advice, agency transactional services for cus- ditions imposed in writing by the Board in connection with tomer investments, and investment and trading services its findings and decisions, and, as such, may be enforced in would likely result in any significantly adverse effects that proceedings under applicable law. would outweigh the public benefits of the proposal. Ac- The proposal shall not be consummated later than three cordingly, the Board has determined that performance of months after the eifective date of this order, unless such the proposed activities by KeyCorp can reasonably be period is extended for good cause by the Board or by the expected to produce public benefits that outweigh possible Federal Reserve Bank of Cleveland, acting pursuant to adverse effects under the proper incident to banking stan- delegated authority. dard of section 4(c)(8) of the BHC Act. By order of the Board of Governors, effective Septem- For the reasons set forth in this order, the Section 20 ber 8, 1997. Orders, and the Modification Orders, the Board has concluded that KeyCorp's proposal to engage through KCMI Voting for this action: Chairman Greenspan and Governors Kelley, in the proposed activities is consistent with the Glass- Phillips, and Meyer. Absent and not voting: Vice Chair Rivlin. Steagall Act and that the proposed activities are so closely related to banking as to be proper incidents thereto within JENNIFER J. JOHNSON Deputy Secretary of the Board the meaning of section 4(c)(8) of the BHC Act, provided that KeyCorp limits KCMI's activities as specified in this NationsBank Corporation order, the Section 20 Orders, and the Modification Orders. Charlotte, North Carolina Based on the foregoing and all other facts of record, the Board has determined to, and hereby does, approve this Order Approving Notice to Engage in Certain notice subject to all terms and conditions discussed in this Nonbanking Activities order, the Section 20 Orders and the Modification Orders. The Board's approval of the proposal extends only to NationsBank Corporation, Charlotte, North Carolina ("Naactivities conducted within the limitations of this order and tionsBank"), a bank holding company within the meaning those orders, including the Board's reservation of authority of the Bank Holding Company Act ("BHC Act"), has to establish additional limitations to ensure that KCMI's requested the Board's approval under section 4(c)(8) of the activities are consistent with safety and soundness, avoid- BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of ance of conflicts of interests, and other relevant considerthe Board's Regulation Y (12 C.F.R. 225.24) to acquire all ations under the BHC Act. Underwriting and dealing in the assets and assume all the liabilities of two related any manner other than as approved in this order, the companies, Montgomery Securities and The Pyramid Com- Section 20 Orders, and the Modification Orders is not pany, both of San Francisco, California (together, "Montauthorized for KCMI. gomery").1 NationsBank would thereby engage in the fol- The Board's approval of the proposed underwriting and lowing activities: dealing in all types of equity securities is conditioned on a (1) Underwriting and dealing, to a limited extent, in all future determination by the Board that KeyCorp and KCMI types of debt and equity securities, other than ownership have established policies and procedures for equity underinterests in open-end investment companies; writing and dealing to ensure compliance with the requirements of this order, the Section 20 Orders, and the Modification Orders, including computer, audit, and accounting systems, internal risk management controls, and the necessary operational and managerial infrastructure. After notifi- 1. The acquisition would be structured as a simultaneous merger of cation by the Board that this condition has been satisfied, Montgomery Securities and The Pyramid Company into Acquisition KCMI may commence the proposed equity underwriting Co., a newly created, wholly owned subsidiary of NationsBank. Immediately following the acquisition, Acquisition Co. would be and dealing activities, subject to the other conditions of this merged with and into NationsBanc Capital Markets, Inc., Charlotte, order, the Section 20 Orders, and the Modification Orders. North Carolina ("NCMI"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 925 (2) Underwriting and dealing in government obligations to engage in each of the activities.4 NationsBank would and money market instruments in which state member continue to conduct the activities in accordance with the banks may underwrite and deal under 12 U.S.C. §§ 335 NationsBank Order, Regulation Y, and the relevant Board and 24(7) ("bank-eligible securities"), pursuant to sec- interpretations and orders pertaining to each of the activition 225.28(b)(8)(i) of Regulation Y (12 C.F.R. ties. 225.28(b)(8)(i)); As noted above, NationsBank engages, through NCMI, (3) Providing financial and investment advisory ser- in limited underwriting and dealing activities that the Board vices, pursuant to section 225.28(b)(6) of Regulation Y previously has determined to be permissible under section (12 C.F.R. 225.28(b)(6)); and 20 of the Glass-Steagall Act (12 U.S.C. § 377). Montgom- (4) Providing securities brokerage, private placement, ery also is engaged in underwriting and dealing activities. and riskless principal services, pursuant to section The Board has concluded that conduct of the proposed 225.25(b)(7)(i), (ii), and (iii) of Regulation Y (12 C.F.R. activities is consistent with section 20,5 provided that 225.25(b)(7)(i), (ii), and (iii)). NMSI derives no more than 25 percent of its gross revenues from underwriting and dealing in bank-ineligible se- Notice of the proposal, affording interested persons an curities over a two-year period.6 NationsBank has commitopportunity to submit comments, has been published (62 ted that, following the acquisition of Montgomery, NMSI Federal Register 39,243 (1997)). The time for filing com- will continue to conduct its bank-ineligible underwriting ments has expired, and the Board has considered the notice and dealing activities subject to the 25-percent revenue and all comments received in light of the factors set forth limitation and the prudential limitations previously estabin section 4(c)(8) of the BHC Act. lished by the Board with respect to bank-ineligible securi- NationsBank, with total consolidated assets of ties underwriting and dealing.7 $239 billion, is the fourth largest commercial banking organization in the United States.2 NationsBank operates bank subsidiaries in 17 states and the District of Columbia. NationsBank also engages through its subsidiaries in a broad range of permissible nonbanking activities. Montgomery, with total consolidated assets of $2.5 billion, 4. See NationsBank Order. engages in investment advisory, securities brokerage, secu- 5. See J.P. Morgan & Co. Incorporated, et al„ 75 Federal Reserve rities underwriting, and related activities. Bulletin 192 (1989), aff'd sub nom. Securities Industries Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 NationsBank proposes to merge Montgomery with and (D.C. Cir. 1990); Citicorp, et al, 73 Federal Reserve Bulletin 473 into NCMI, a subsidiary of NationsBank that engages in a (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Goverwide range of securities activities, including engaging to a nors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, limited extent in underwriting and dealing in all types of den., 486 U.S. 1059 (1988); as modified by Review of Restrictions on debt and equity securities in which a state member bank Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 may not underwrite or deal ("bank-ineligible securities").3 Subsidiary and an Affiliated Bank or Thrift, 61 Federal Register Following consummation, NCMI would be renamed 57,679 (1996), and Amendments to the Restrictions in the Board's NationsBanc Montgomery Securities, Inc. ("NMSI"). Section 20 Orders, 62 Federal Register 45,295 (1997) (collectively, NCMI is, and NMSI would continue to be, a broker-dealer "Section 20 Orders"). 6. See Section 20 Orders. Effective March 6, 1997, the Board registered with the Securities and Exchange Commission increased from 10 to 25 percent the amount of total revenue that a ("SEC") and a member of the National Association of section 20 subsidiary may derive from underwriting and dealing in Securities Dealers, Inc. ("NASD"). Accordingly, NCMI is, bank-ineligible securities. Revenue Limit on Bank-Ineligible Activities and NMSI would remain, subject to the recordkeeping and of Subsidiaries of Bank Holding Companies Engaged in Underwriting reporting obligations, fiduciary standards, and other re- and Dealing in Securities, 61 Federal Register 68,750 (1996). Compliance with the revenue limitation shall be calculated in accordance quirements of the Securities Exchange Act of 1934 with the method stated in the Section 20 Orders, as modified by the (15 U.S.C. § 78a et seq.), the SEC, and the NASD. Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), and 10 Percent Revenue Limit on Bank- Activities Previously Approved by the Board Ineligible Activities of Subsidiaries of Bank Holding Companies Engage in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996) (collectively, "Modification Orders"). The Board previously has determined by order or regula- 7. Effective October 27, 1997, the Board substantially revised the tion that the activities NationsBank proposes to conduct prudential limitations with respect to bank-ineligible securities underafter its acquisition of Montgomery are closely related to writing and dealing. See Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997). NationsBank banking within the meaning of section 4(c)(8) of the BHC has committed that NMSI will conduct its bank-ineligible underwrit- Act, and the Board previously has authorized NationsBank ing and dealing activities subject to the Board's new operating standards on the effective date. NMSI may provide services that are necessary incidents to the proposed underwriting and dealing activities. Unless NMSI receives specific approval under section 4(c)(8) of the BHC Act to conduct the 2. Asset and ranking data are as of March 31, 1997. activities independently, any revenues from the incidental activities 3. See NationsBank Corporation, 79 Federal Reserve Bulletin 892 must be treated as ineligible revenues subject to the Board's revenue (1993) ("NationsBank Order"). limitation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

926 Federal Reserve Bulletin • November 1997 Financial Factors, Managerial Resources, and Other effects of NationsBank's acquisition of Boatmens,12 and Considerations published articles about NationsBank's underwriting and dealing activities. The Board has considered this informa- In order to approve this notice, the Board also must con- tion in light of examination reports, supervisory informasider whether performance of the proposed activities is a tion, and its supervisory experience with NationsBank and proper incident to banking, that is, whether the activities NCMI. The Board also has considered that NationsBank proposed "can reasonably be expected to produce benefits has established policies and procedures to ensure complito the public . . . that outweigh possible adverse effects, ance with this order and the Section 20 Orders, including such as undue concentration of resources, decreased or computer, audit, and account systems, internal risk manunfair competition, conflicts of interests, or unsound bank- agement controls, and the necessary operational and manaing practices."8 As part of its evaluation of these factors, gerial infrastructure. On the basis of these and all the facts the Board considers the financial condition and managerial of record — including the Board's review of the manageresources of the notificant and its subsidiaries and the effect rial resources of the entities, the commitments provided in the transaction would have on such resources.9 The review this case, and the proposed managerial structure and risk has included supervisory reports of examination assessing management systems of NMSI — the Board has concluded the financial and managerial resources of the organizations that financial and managerial considerations are consistent and pro forma financial information provided by Na- with approval of the notice. tionsBank. Competitive Effects. The Board has carefully considered Financial and Managerial Resources. In considering the the competitive effects of the proposed acquisition. financial resources of the notificant, the Board has re- NationsBank operates certain nonbanking subsidiaries, inviewed the capitalization of NationsBank and NMSI in cluding NCMI, that compete with Montgomery. Protesaccordance with the standards set forth in the Section 20 tants are concerned that the transaction will reduce compe- Orders. The Board finds the capitalization of each to be tition because NationsBank has stated that NCMI and consistent with approval of the proposal. With respect to Montgomery offer their services to the same customers. NMSI, the Board's determination is based on all the facts NationsBank represents that there are few overlaps in the of record, including NationsBank's projections of the vol- services provided by NationsBank and Montgomery to ume of NMSI's underwriting and dealing activities in those customers. NationsBank states that Montgomery spebank-ineligible securities. cializes in underwriting and trading equity securities, while The Board also has reviewed the managerial resources NationsBank's securities business is focused almost excluof each of the entities involved in this proposal. As part of sively on underwriting debt securities. To the extent that that review, the Board has carefully examined comments NationsBank and Montgomery offer different products, the submitted by Inner City Press/Community on the Move proposed acquisition would result in no loss of competiand the New Mexico Alliance ("Protestants"). Protestants tion. raise concerns regarding the managerial resources of Na- There are some overlaps in the securities brokerage, tionsBank, Montgomery, and NCMI, and contend that the underwriting and dealing, and financial advisory products proposed acquisition would have adverse competitive ef- that NationsBank and Montgomery offer. In those markets fects on the markets currently served by Montgomery and in which Montgomery's and NationsBank's product offer- NCMI. Protestants further raise concerns regarding certain adverse effects that they allege have arisen from the consummation of NationsBank's acquisition of Boatmen's The Board has carefully reviewed Protestants' comments in light of Bancshares, Inc., St. Louis, Missouri ("Boatmens"), which all the facts of record, including confidential information received the Board approved on December 16, 1996.10 from the DOL. The Board notes that none of the actions cited by Protestants' concerns about the managerial resources of Protestants has resulted in adjudications of wrongdoing on the part of NationsBank or Montgomery. The DOL administrative case is at a NationsBank and Montgomery include concerns arising preliminary stage, and NationsBank has not yet responded to the out of litigation involving the two parties,11 alleged adverse allegations, and each of the class actions cited by Protestants were settled without determinations of wrongdoing. 12. Protestants raise concerns about various alleged adverse effects of NationsBank's acquisition of Boatmens and NationsBank's fair 8. 12 U.S.C. § 1843(c)(8). lending record. Protestants allege that the effects of NationsBank's 9. See 12 C.F.R. 225.26. acquisition of Boatmens differ from the expected effects that Na- 10. See NationsBank Corporation, 83 Federal Reserve Bulletin 148 tionsBank's management presented to the Board when it sought (1997). approval for the acquisition. There is no evidence that NationsBank's 11. Protestants cite: management misrepresented the probable effects of the Boatmens (a) An administrative complaint filed by the Department of Labor transaction or that the Boatmens transaction will not result in the ("DOL") alleging that NationsBank engaged in discriminatory public benefits that the Board reasonably expected when it approved hiring practices in Charlotte, North Carolina, in 1993; the transaction. In raising these concerns, Protestants have largely (b) Two settled class-action lawsuits against NationsBank in which reiterated allegations that the Board carefully considered when it allegations of improper sales practices of nondeposit investment approved the acquisition of Boatmens by NationsBank. See Naproducts were raised; and tionsBank Corporation, 83 Federal Reserve Bulletin 148 (1997). (c) A class-action lawsuit settled by Montgomery involving allega- Under the Board's Rules of Procedure, Protestants may not now seek tions of price fixing and other impermissible market-making activi- a reconsideration of the Board's determination in that case. See ties. 12 C.F.R. 262.3(k). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 927 ings do overlap, there are numerous existing and potential orders and this order, including the Board's reservation of competitors. Consummation of the proposal, therefore, authority to establish additional limitations to ensure that would have a de minimis effect on competition in the NMSI's activities are consistent with safety and soundness, market for these services, and the Board has concluded that avoidance of conflicts of interests, and other relevant conthe proposal would not result in any significantly adverse siderations under the BHC Act. Underwriting and dealing competitive effects in any relevant market. in any manner other than as approved in this order and the Public Benefits. The Board expects that the proposed Section 20 Orders (as modified by the Modification Oracquisition would provide added convenience to customers ders) is not within the scope of the Board's approval and is of both NationsBank and Montgomery and lead to im- not authorized for NMSI. proved methods of meeting customer financing needs. The Board's determination is subject to all the terms and NationsBank has indicated that the acquisition would ex- conditions set forth in Regulation Y, including those in pand the range of products and services available to both sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. its customers and those of Montgomery. Following con- 225.7 and 225.25(c)), and to the Board's authority to summation of the proposed acquisition, NationsBank's require such modification or termination of the activities of customers would have better access to equity financing, in a bank holding company or any of its subsidiaries as the which Montgomery specializes, and Montgomery's cus- Board finds necessary to ensure compliance with, and to tomers would have better access to debt financing and the prevent evasion of, the provisions of the BHC Act and the risk management products now offered by NCMI. Board's regulations and orders issued thereunder. The Based on all the facts of record, the Board has deter- Board's decision is specifically conditioned on compliance mined that performance of the proposed activities by with all the commitments made in connection with this NationsBank can reasonably be expected to produce public notice, including the commitments discussed in this order, benefits. As noted above, NationsBank has committed that and the conditions set forth in this order and the above- NMSI will conduct its bank-ineligible securities underwrit- noted Board regulations and orders. These commitments ing and dealing activities in accordance with the prudential and conditions are deemed to be conditions imposed in framework established by the Board's Section 20 Orders. writing by the Board in connection with its findings and Under the framework and conditions established in this decision, and, as such, may be enforced in proceedings order and the Section 20 Orders, and based on all the facts under applicable law. of record, including Protestants' comments, the Board con- The proposal shall not be consummated later than three cludes that NMSI's proposed underwriting and dealing months after the effective date of this order, unless such activities in bank-ineligible securities are not likely to period is extended for good cause by the Board or by the result in significantly adverse effects that would outweigh Federal Reserve Bank of Richmond, acting pursuant to the public benefits. Similarly, the Board finds no evidence delegated authority. that NMSI's proposed riskless principal, private place- By order of the Board of Governors, effective Septemment, and other nonbanking activities—conducted under ber 10, 1997. the framework and conditions established in this order and Regulation Y—would likely result in any significantly Voting for this action: Chairman Greenspan and Governors Kelley, adverse effects, such as undue concentration of resources, Phillips, and Meyer. Absent and not voting: Vice Chair Rivlin. decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public JENNIFER J. JOHNSON Deputy Secretary of the Board benefits of the proposal. Accordingly, the Board has determined that performance of the proposed activities by NationsBank is a proper incident to banking for purposes of section 4(c)(8) of the BHC Act. Conclusion On the basis of all the facts of record, the Board has Under its rules, the Board may also, in its discretion, hold a public determined that the notice should be, and hereby is, aphearing or meeting on an application or notice to clarify factual issues proved, subject to all the terms and conditions in this order related to the notice and to provide an opportunity for testimony, if and the Section 20 Orders, as modified by the Modification appropriate. See 12 C.F.R. 262.3(e) and 262.25(d). The Board has Orders.13 The Board's approval of the proposal extends carefully considered Protestants' request for a hearing in light of all the facts of record. In the Board's view, Protestants have had ample only to activities conducted within the limitations of those opportunity to present their views, and they have submitted written comments that have been carefully considered by the Board in acting on the proposal. Protestants' request fails to demonstrate why their 13. Protestants have requested a hearing or a public meeting on the written presentations do not adequately present their evidence, allegaproposal. Section 4 of the BHC Act and the Board's rules thereunder tions, and views. For these reasons, and based on all the facts of provide for a hearing on an application to acquire a savings associa- record, the Board has determined that a public hearing or meeting is tion if there are disputed issues of material fact that cannot be resolved not required or warranted to clarify the factual record in the proposal, in some other manner. See 12 U.S.C. § 1843(c)(8). This case does not or otherwise warranted in this case. Accordingly, the request for a hearing on the proposal is hereby denied. involve the acquisition of a savings association. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

928 Federal Reserve Bulletin • November 1997 Union Planters Corporation The Board previously has determined by regulation that Memphis, Tennessee the operation of a savings association by a bank holding company and the activities of extending credit, servicing Order Approving Acquisition of a Savings Association loans, and providing services related to extending credit are closely related to banking for purposes of section Union Planters Corporation, Memphis, Tennessee ("Union 4(c)(8) of the BHC Act.6 The Board requires that savings Planters"), a bank holding company within the meaning of associations acquired by a bank holding company conform the Bank Holding Company Act ("BHC Act") has re- their direct and indirect activities to those permissible for a quested the Board's approval under section 4(c)(8) of the bank holding company under section 4 of the BHC Act and BHC Act (12 U.S.C. § 1843(c)(8)) to acquire Magna Regulation Y. Union Planters has committed that it will Bancorp, Inc. ("Magna"), and thereby acquire Magnolia conduct the proposed activities in accordance with the Federal Bank for Savings ("Savings Bank"), and Magna Board's regulations. Mortgage Company ("Magna Mortgage"), all of Hattiesburg, Mississippi.1 Magna Mortgage engages in originating Competitive Considerations and servicing mortgage loans, pursuant to section 225.28(b)(1) of the Board's Regulation Y (12 C.F.R. In order to approve the proposal, the Board also must 225.28(b)(1)), and in providing real estate appraisal and determine that the performance of the proposed activities is inspection services, pursuant to section 225.28(b)(2) of a proper incident to banking, that is, that the proposed Regulation Y (12 C.F.R. 225.28(b)(2)). transaction "can reasonably be expected to produce bene- Notice of the proposal, affording interested persons an fits to the public . . . that outweigh possible adverse effects, opportunity to submit comments, has been published (62 such as undue concentration of resources, decreased or Federal Register 39,243 (1997)). The time for filing com- unfair competition, conflicts of interests, or unsound bankments has expired, and the Board has considered the notice ing practices."7 As part of the Board's evaluation of these and all comments received in light of the factors set forth factors, the Board has carefully considered the competitive in section 4(c)(8) of the BHC Act. effects of the proposed transaction. Union Planters, with total consolidated assets of approx- Union Planters and Savings Bank compete directly in imately $14.9 billion, is the 46th largest commercial bank- nine banking markets, all in Mississippi. The Board has ing organization in the United States, controlling less than carefully reviewed the competitive effects of the proposal 1 percent of total banking assets in the United States.2 in those markets in light of all the facts of record, including Union Planters operates subsidiary banks in Alabama, Ar- the number of competitors that would remain in the markansas, Kentucky, Louisiana, Mississippi, Missouri, and kets, the projected increase in the concentration of total Tennessee. Magna operates offices in Mississippi and Ala- deposits in depository institutions in the markets ("market bama. On consummation, Union Planters would become deposits"),8 as measured by the Herfindahl-Hirschman the third largest depository institution3 in Mississippi, con- Index ("HHI") under the Department of Justice Merger trolling $2.8 billion in deposits, representing approxi- Guidelines ("DOJ Guidelines"),9 and commitments made mately 11.5 percent of total deposits in the state.4 Union Planters also would remain the tenth largest depository institution in Alabama, controlling $542.7 million in depos- controlling $124 million in deposits, representing less than 1 percent of total deposits in depository institutions in the state. its, representing approximately 1.2 percent of total deposits 6. 12 C.F.R. 225.28(b)(4)(ii) (savings association) and 225.28(b)(1) in depository institutions in the state.5 and (2) (extensions of credit and related activities). 7. 12 U.S.C. § 1843(c)(8). 8. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. 1. Union Planters plans to merge Savings Bank with and into one of The Board previously has indicated that thrift institutions have be- Union Planters's state-chartered subsidiary banks. The merger is come, or have the potential to become, significant competitors of subject to the approval of the Federal Deposit Insurance Corporation commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 788 (1990); National City Corporation, 70 Federal Reserve Bulletin § 1828(c)) (the "Bank Merger Act"). 743 (1984). Thus, the Board has regularly included thrift deposits in 2. All asset data are as of March 31, 1997. All deposit data are as of the calculation of market share on a 50-percent weighted basis. See, June 30, 1996. e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). 3. In this context, depository institutions include commercial banks, Because the deposits of Savings Bank would be controlled by a savings banks, and savings associations. commercial banking organization after consummation of the proposal, 4. In Mississippi, Union Planters currently is the fourth largest those deposits are included at 100 percent in the calculation of Union depository institution, controlling total deposits of $2.1 billion, repre- Planters' pro forma market share. See Norwest Corporation, 78 Fedsenting approximately 8.5 percent of total deposits in depository eral Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal institutions in that state, and Magna is the seventh largest depository Reserve Bulletin 669 (1990). institution, controlling total deposits of $739.1 million, representing 9. Under the revised DOJ Guidelines, 49 Federal Register 26,823 approximately 3 percent of total deposits in depository institutions in (June 29, 1984), a market in which the post-merger HHI is between that state. 1000 and 1800 is considered moderately concentrated, and a market in 5. In Alabama, Union Planters currently is the tenth largest deposi- which the post-merger HHI exceeds 1800 is considered highly concentory institution, controlling total deposits of $418.7 million, represent- trated. The Justice Department has informed the Board that a bank ing less than 1 percent of total deposits in depository institutions in the merger or acquisition generally will not be challenged (in the absence state, and Magna is the 34th largest depository institution in Alabama, of other factors indicating anticompetitive effects) unless the post- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 929 by Union Planters to divest branches in certain markets to organizations and recent pro forma financial information address potential anticompetitive effects.10 provided by Union Planters. The Board notes that Union As described in more detail in the Appendix, and consid- Planters, Magna, and each of their insured depository instiering the eifect of proposed divestitures, consummation of tutions meet or exceed the "well capitalized" thresholds the proposal would exceed the DOJ Guidelines in only one under applicable law, and that Union Planters would conbanking market. In the Washington County, Mississippi tinue to meet those thresholds after consummation of the ("Washington County"), banking market," the HHI would proposal. Based on all the facts of record, the Board has increase by 280 points to 2053. Union Planters would concluded that the financial and managerial resources of remain the largest depository institution in the banking the organizations involved in the proposal are consistent market, controlling 31.2 percent of market deposits. with approval. In analyzing the competitive effects of the proposal on The record also indicates that consummation of the this market, the Board also has considered that the Wash- proposal would result in public benefits. The proposal ington County banking market is a rural banking market would result in a broader financial network through which and that seven commercial banking organizations would Magna's customers would have access to the increased remain in the market after consummation of the proposal. services offered at Union Planters's subsidiary banks. Ad- Four competitors other than Union Planters would have ditionally, there are public benefits from permitting capital market shares of 9.9 percent or more, including two of the markets to operate so that bank holding companies may largest bank holding companies in Mississippi, which make potentially profitable investments in nonbanking would have market shares of 22 percent and 19 percent. companies when those investments are consistent, as in Based on the number and size of the remaining competi- this case, with the relevant considerations under the BHC tors, the characteristics of the market, and all other facts of Act, and from permitting banking organizations to allocate record, the Board concludes that consummation of this their resources in the manner they believe is most efficient. proposal would not have a significantly adverse effect on As discussed above, the proposal is not expected to result competition in the Washington County banking market. in any significantly adverse competitive effects, and finan- Similarly, based on all the facts of record, including the cial and managerial factors are consistent with approval. proposed divestitures, the Board concludes that consumma- Based on all the facts of record, the Board has determined tion of the proposal would not have a significantly adverse that the Union Planters proposal can reasonably be exeffect on competition or on the concentration of banking pected to produce public benefits that outweigh possible resources in any other relevant banking market. adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act. Accordingly, the Other Considerations Board has determined that the balance of public interest factors it must consider under section 4(c)(8) of the BHC As part of its consideration of the public interest factors, Act is favorable and consistent with approval. the Board has carefully considered, in light of all the facts of record, the financial and managerial resources of Union Conclusion Planters and Magna and their subsidiaries and the effect the transaction would have on such resources. Information Based on the foregoing and all the facts of record, the considered included supervisory reports of examination Board has determined that the notice should be, and hereby assessing the financial and managerial resources of the is, approved. The Board's approval of the proposal is specifically conditioned on compliance by Union Planters with the commitments made in connection with this notice, merger HHI is at least 1800 and the merger increases the HHI by more including the divestiture commitments discussed in the than 200 points. The Justice Department has stated that the higher order. The Board's determination also is subject to all the than normal HHI thresholds for screening bank mergers for anticomconditions set forth in Regulation Y, including those in petitive effects implicitly recognize the competitive effect of limitedpurpose lenders and other non-depository financial institutions. sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. 10. In each market in which Union Planters has committed to divest 225.7 and 225.25(c)), and to the Board's authority to offices to mitigate the anticompetitive effects of the proposal, Union require such modification or termination of the activities of Planters has committed to execute sales agreements with a competia bank holding company or any of its subsidiaries as the tively suitable purchaser prior to consummation of the acquisition of Board finds necessary to ensure compliance with, and to Magna and to complete the divestitures within 180 days of consummation of the acquisition. Union Planters also has committed that, in the prevent evasion of, the provisions of the BHC Act and the event it is unsuccessful in completing any divestiture within 180 days Board's regulations and orders issued thereunder. The comof consummation of the proposal, Union Planters will transfer the mitments and conditions relied on by the Board in reaching unsold branch(es) to an independent trustee that is acceptable to the this decision shall be deemed to be conditions imposed in Board and that will be instructed to sell the branches promptly. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); writing by the Board in connection with its findings and United New Mexico Financial Corporation, 77 Federal Reserve Bulle- decision, and, as such, may be enforced in proceedings tin 484 (1991). Union Planters has further committed to submit to the under applicable law. Board, prior to consummation, an executed trust agreement acceptable This transaction shall not be consummated later than to the Board stating the terms of these divestitures. three months after the effective date of this order, unless 11. The Washington County banking market consists of Washington County, Mississippi. such period is extended for good cause by the Board or the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

930 Federal Reserve Bulletin • November 1997 Federal Reserve Bank of St. Louis, acting pursuant to B. Banking markets in Mississippi in which consumdelegated authority. mation of the proposal would not exceed the DOJ By order of the Board of Governors, eifective Septem- Guidelines with divestitures: ber 10, 1997. (1) Covington County—Approximated by Covington Voting for this action: Chairman Greenspan and Governors Kelley. County. With the proposed divestiture, Union Planters Phillips, and Meyer. Absent and not voting: Vice Chair Rivlin. would control 33.2 percent of the market deposits and would remain the largest depository institution in the mar- JENNIFER J. JOHNSON ket. The HHI would not increase and four depository Deputy Secretary of the Board institutions would remain in the market after consummation of the proposal. (2) Grenada County—Approximated by Grenada County. Appendix With the proposed divestiture, Union Planters would control 53.6 percent of the market deposits and would remain A. Banking markets in Mississippi in which consum- the largest depository institution in the market. The HHI mation of the proposal would not exceed the DOJ would not increase and five depository institutions would Guidelines without divestitures: remain in the market after consummation of the proposal. Orders Issued Under Sections 3 and 4 of the Bank (1) Biloxi—Approximated by Hancock and Harrison Holding Company Act Counties, plus the city of Ocean Springs in Jackson County. Union Planters would control 9.9 percent of the Huntington Bancshares Incorporated market deposits and would become the third largest depos- Columbus, Ohio itory institution in the market. The HHI would not increase and ten depository institutions would remain in the market Order Approving Acquisition of a Bank Holding after consummation of the proposal. Company (2) Hattiesburg—Approximated by Forrest and Lamar Counties. Union Planters would control 25 percent of the Huntington Bancshares Incorporated, Columbus, Ohio market deposits and would remain the largest depository ("Huntington"), a bank holding company within the meaninstitution in the market. The HHI would increase ing of the Bank Holding Company Act ("BHC Act"), has 147 points to 2077. Eight depository institutions would requested the Board's approval under section 3 of the BHC remain in the market after consummation of the proposal. Act (12 U.S.C. § 1842) to acquire First Michigan Bank (3) Indianola—Approximated by the southern half of Sun- Corporation, Holland, Michigan ("FMB"), and thereby flower County. Union Planters would control 12.7 percent acquire the subsidiary banks of FMB listed in the appenof the market deposits and would remain the third largest dix.1 Huntington also has requested the Board's approval depository institution in the market. The HHI would not under section 4(c)(8) of the BHC Act (12 U.S.C. increase and three depository institutions would remain in § 1843(c)(8)) and section 225.24 of the Board's Regulathe market after consummation of the proposal. tion Y (12 C.F.R. 225.24) to acquire the nonbanking sub- (4) Jackson—Approximated by Hinds, Madison and sidiaries of FMB also listed in the appendix, and thereby Rankin Counties, plus Copiah County excluding the town engage in certain trust, securities brokerage, and credit life of Wesson, and including the town of Mendenhall in Simp- insurance activities. son County. Union Planters would control 9.9 percent of Notice of the proposal, affording interested persons an the market deposits and would remain the third largest opportunity to submit comments, has been published depository institution in the market. The HHI would not (62 Federal Register 33,871 (1997)). The time for filing increase and 17 depository institutions would remain in the comments has expired, and the Board has considered the market after consummation of the proposal. proposal and all comments received in light of the factors (5) Leflore County—Approximated by Leflore County. set forth in sections 3 and 4 of the BHC Act. Union Planters would control 17.9 percent of the market Huntington, with total consolidated assets of approxideposits and would remain the fourth largest depository mately $21.6 billion, is the 37th largest commercial bankinstitution in the market. The HHI would increase ing organization in the United States, controlling less than 26 points to 2338. Five depository institutions would remain in the market after consummation of the proposal. 1. Huntington intends to merge FMB's subsidiary banks with and (6) Pascagoula—Approximated by Jackson County, less into its lead subsidiary bank, The Huntington National Bank. Columthe town of Ocean Springs, and George County. Union bus, Ohio ("Huntington Bank"). The merger is subject to the approval Planters would control 9.4 percent of the market deposits of the Office of the Comptroller of the Currency ("OCC"), the and would become the fourth largest depository institution primary federal supervisor of Huntington Bank, under the Bank Merger Act (12 U.S.C. § 1828(c)). Huntington also has requested the in the market. The HHI would not increase and eight Board's approval to exercise an option to purchase up to 19.9 percent depository institutions would remain in the market after of the voting shares of FMB. The option would terminate on consumconsummation of the proposal. mation of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 931 1 percent of the total banking assets of insured commercial The BHC Act also requires the Board to consider the banks ("total banking assets").2 Its two subsidiary banks financial and managerial resources of the companies and operate in Ohio, Florida, Indiana, Kentucky, Michigan, and banks involved, the convenience and needs of the commu- West Virginia. After consummation of the proposal, Hun- nities to be served, and certain other supervisory factors. tington would remain the 37th largest commercial banking The Board has carefully considered the financial and manorganization and control less than 1 percent of total bank- agerial resources and future prospects of Huntington, FMB, ing assets. and each of their respective subsidiaries, and other supervi- In Michigan, Huntington is the 10th largest depository sory factors, in light of all the facts of record. These facts institution, controlling $1.8 billion in deposits, represent- include supervisory reports of examination assessing the ing 1.8 percent of total deposits in depository institutions in financial and managerial resources of the organizations and the state.3 FMB is the ninth largest depository institution in recent pro forma financial information provided by Hun- Michigan, controlling $2.9 billion in deposits, representing tington. The Board notes that Huntington, FMB, and each approximately 2.8 percent of all deposits in depository of their respective subsidiary banks meet or exceed the institutions in the state. On consummation of the proposal, "well capitalized" thresholds under applicable law and are Huntington would become the seventh largest commercial expected to continue to do so after consummation of the or thrift organization in Michigan, controlling deposits of proposal. Based on all the facts of record, the Board has $4.7 billion, representing approximately 4.6 percent of all concluded that the financial and managerial considerations, deposits in depository institutions in the state. and all other supervisory factors that must be considered are consistent with approval of the proposal. Interstate Banking Analysis The Board also has considered the effect of the proposal on the convenience and needs of the communities to be Section 3(d) of the BHC Act, as amended by section 101 of served in light of all the facts of record. The Board has the Riegle-Neal Interstate Banking and Branching Effi- long held that consideration of the convenience and needs ciency Act of 1994, allows the Board to approve an appli- factor includes a review of the records of the relevant cation by a bank holding company to acquire a bank depository institutions under the Community Reinvestment located in a state other than the home state of such bank Act (12 U.S.C. 2901 et seq.) ("CRA"). As provided in the holding company if certain conditions are met.4 Hunting- CRA, the Board evaluates the convenience and needs ton's home state is Ohio, and Huntington proposes to factor in light of examinations of the CRA performance acquire FMB's subsidiary banks in Michigan. The condi- records of the relevant institutions by their primary federal tions for an interstate acquisition under section 3(d) are supervisor. An institution's most recent CRA performance met in this case.5 In view of all the facts of record, the evaluation is a particularly important consideration in the Board is permitted to approve the proposal under sec- applications process because it represents a detailed, ontion 3(d) of the BHC Act. site evaluation of an institution's overall record of performance under the CRA by its primary federal supervisor.6 BHC Act Factors Huntington's lead subsidiary bank, Huntington Bank, received a "satisfactory" rating in its most recent CRA Huntington and FMB do not compete with each other in performance examination by the OCC, as of October 17, any geographic banking market. Based on all the facts of 1996.7 All of FMB's subsidiary banks received either record, the Board has concluded that consummation of the "outstanding" or "satisfactory" ratings for CRA perforproposal would not have a significantly adverse effect on mance in their most recent evaluations by their primary competition or on the concentration of banking resources federal supervisor. in any relevant banking market. The Board has carefully reviewed comments from a city councilman in Cleveland ("Commenter") regarding the operations of two Huntington Bank branches in the Cleve- 2. National asset and ranking data are as of March 31, 1997. land area.8 One branch is in the Church Square shopping 3. In this context, depository institutions include commercial banks, savings banks, and savings associations. State deposit and ranking data are as of June 30, 1996. 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding 6. The Statement of the Federal Financial Supervisory Agencies company's home state is the state in which the operations of the bank Regarding the Community Reinvestment Act ("Agency CRA Stateholding company's banking subsidiaries were principally conducted ment") (54 Federal Register 13,742, 13,745 (1989)) provides that a on luly 1, 1966, or the date on which the company became a bank CRA examination is an important and often controlling factor in holding company, whichever is later. consideration of an institution's CRA record and that reports of these 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). examinations will be given great weight in the applications process. Huntington is adequately capitalized and adequately managed. In 7. Huntington's other subsidiary bank. Huntington State Bank, addition, on consummation of the proposal, Huntington would control Alexandria, Ohio, received an "outstanding" rating from the Federal less than 10 percent of the total amount of deposits of insured Reserve Bank of Cleveland, as of August 24, 1994. Examiners found depository institutions in the United States and less than 30 percent of no evidence of illegal discrimination or practices to discourage applithe total amount of deposits of insured depository institutions in cations for credit on a prohibited basis at either of the Huntington Michigan. Michigan does not have a statewide concentration limit or a subsidiary banks. minimum age requirement. All other requirements of section 3(d) of 8. Commenter also contends that Huntington's failure to close its the BHC Act also would be met on consummation of the proposal. Cleveland offices in observance of Martin Luther King Day creates an Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

932 Federal Reserve Bulletin • November 1997 center, a neighborhood with predominately minority resi- Nonbanking Considerations dents, and is the only branch of Huntington Bank that is closed on Wednesdays. The other branch is in Randall Huntington also has filed notice, under section 4(c)(8) of Mall, a mall with a predominately minority clientele, and it the BHC Act, to acquire the nonbanking subsidiaries of offers banking services only to merchants ("merchant-only FMB and thereby engage in trust, securities brokerage, and services"). Commenter contends that these aspects of the credit life insurance activities. The Board has determined branches' operations affect and treat minorities in an ille- by regulation that each of these activities is closely related gally disparate manner.9 to banking, and Huntington has committed to conduct the Huntington states that although the Church Square nonbanking activities in accordance with Regulation Y.13 branch is closed on Wednesdays, it is open on Saturday In order to approve the proposal, the Board also must mornings from 9:00 a.m. until 12:00 p.m. unlike approxi- determine that the proposed activities are a proper incident mately one-third of Huntington Bank's full-service branch- to banking, that is, that the proposed transaction "can es10 and that the branch operates a full-service ATM that is reasonably be expected to produce benefits to the public ... available 24 hours a day. Huntington also notes that its that outweigh possible adverse effects, such as undue con- Randall Mall branch provides needed services to the mall's centration of resources, decreased or unfair competition, merchants and that mall patrons are served by cash- conflicts of interests, or unsound banking practices."14 As dispensing ATMs on the upper and lower levels of the part of the Board's evaluation of these factors, the Board mall.11 considers the financial and managerial resources of the The Board has carefully considered all the facts of notificant and its subsidiaries, including any company to be record including the comments and responses discussed acquired, and the effect the transaction would have on such above, the CRA performance examinations of the institu- resources.13 For the reasons noted above, and based on all tions involved, and management's record of compliance the facts of record, the Board has concluded that financial with applicable rules and regulations. Based on a review of and managerial considerations are consistent with approval the entire record, the Board concludes that convenience of the proposal. and needs considerations, including the CRA performance The Board also has considered the competitive effects of records of both organizations' subsidiary banks, are consis- the proposed acquisition of FMB's nonbanking subsidiartent with approval of the proposal.12 ies. Huntington operates subsidiaries engaged in nonbanking activities that compete with certain nonbanking subsidiaries of FMB. In each case, the markets for these nonbanking services are unconcentrated, and there are numerous providers of these services. As a result, consummaatmosphere that is hostile to African Americans. Huntington states that, despite the closing of government offices, Martin Luther King tion of the proposal would have a de minimis effect on Day is an active business day in Cleveland and that its holiday closing competition for these services, and the Board has conpolicy is adjusted in other cities to reflect Huntington Bank's percep- cluded that the proposal would not result in a significantly tion of customer demand, local custom, and competitive consideradverse effect on competition in any relevant market. In ations, and includes input from community groups. Huntington also notes that Huntington Bank treats Martin Luther King Day the same addition, the Board expects that the acquisition would as other holidays such as President's Day and Veteran's Day, and provide added convenience to FMB's customers and the offers its employees the opportunity to take the day otf or receive public. Huntington states that FMB customers would have compensatory time. a wider variety of banking products and fiduciary services 9. Commenter notes that Huntington Bank has erroneously designated two limited-service branches as full-service branches in its CRA and would be able to take advantage of innovative delivery public file. Huntington has amended its description in the public CRA systems for banking services developed by Huntington. file of branch services to reflect the limited nature of these two Accordingly, based on all the facts of record, the Board has branches. Commenter also asserts that these branches are in determined that the balance of public benefits that the controlled-access buildings which makes it difficult for area residents, Board must consider under the proper incident to banking who predominately are minorities, to obtain banking services. Huntington responds that the branches are located in privately owned standard of section 4(c)(8) of the BHC Act is favorable and nursing and retirement centers to provide banking services to residents consistent with approval of the proposal. and staff on a part-time basis. Huntington has a nondiscrimination policy for establishing such facilities. Huntington also notes that a Conclusion full-service branch of Huntington Bank is located within walking distance of the two limited-access branches. 10. Huntington states that its experience shows that the Saturday Based on the foregoing and all the other facts of record, the morning business hours are advantageous to individuals who do not Board has determined that the application and notice work in the area and can only bank and shop on Saturdays. should be, and hereby are, approved. The Board's approval 11. Huntington's Randall Mall branch office was opened at the is specifically conditioned on compliance by Huntington request of mall management after the departure of another bank that had reduced its original full-service presence to a merchant-only office. The branch office is located in the interior of the mall and lacks the design features necessary to function as a full-service branch, such 13. See 12 C.F.R. 225.28(b)(5), (7)(i), and (11 )(i). as access to the mall exterior, a drive-through facility, and an exterior 14. See 12 U.S.C. § 1843(c)(8). drive-up ATM. 15. See 12 C.F.R. 225.26; see also The Fuji Bank, Limited, 75 12. The Board has provided a copy of Commenter's submission to Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 the OCC, the primary federal supervisor of Huntington Bank. Federal Resen<e Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 933 with all the commitments made in connection with the (1) FMB-Trust, and thereby engage in trust company funcproposal and with the conditions stated or referred to in tions, pursuant to section 225.28(b)(5) of Regulation Y this order, and on receipt by Huntington of all necessary (12 C.F.R. 225.28(b)(5)); approvals from state and federal regulators and other au- (2) FMB Brokerage Services, Inc., and thereby engage in thorities. securities brokerage services, pursuant to section The Board's determination on the nonbanking activities 225.28(b)(7)(i) of Regulation Y (12 C.F.R. 225.28(b)(7)(i)); is also subject to all the terms and conditions set forth in and Regulation Y, including those in sections 225.7 and (3) First Michigan Life Insurance Company, and thereby 225.25(c) of Regulation Y (12 C.F.R. 225.7 and 225.25(c)), engage in underwriting and brokering life, health, and and to the Board's authority to require such modification or accident insurance directly related to extensions of credit termination of the activities of a bank holding company or made by Huntington or any of its subsidiaries, pursuant to any of its subsidiaries as the Board finds necessary to section 225.28(b)(ll)(i) of Regulation Y (12 C.F.R. ensure compliance with, and to prevent evasion of, the 225.28(b)(ll)(i)). provisions of the BHC Act and the Board's regulations and orders issued thereunder. The commitments and conditions Orders Issued Under Bank Merger Act relied on by the Board in reaching this decision are deemed to be conditions imposed in writing by the Board in con- Citizens Commercial Bank & Trust Company nection with its findings and decision, and, as such, may be Celina, Ohio enforced in proceedings under applicable law. The acquisition of FMB's subsidiary banks shall not be Order Approving Acquisition and Establishment of consummated before the fifteenth calendar day following Branches the effective date of this order, and the proposal shall not be consummated later than three months after the effective Citizens Commercial Bank & Trust Company, Celina date of this order, unless such period is extended for good ("Citizens"), a state member bank, has requested the cause by the Board or by the Reserve Bank of Cleveland Board's approval under section 18(c) of the Federal Deacting pursuant to delegated authority. posit Insurance Act (12 U.S.C. § 1828(c)) (the "Bank By order of the Board of Governors, effective Septem- Merger Act") to acquire 11 branches from KeyBank, N.A., ber 2, 1997. Cleveland ("KeyBank"), both in Ohio, and under section 9 of the Federal Reserve Act (12 U.S.C. § 321) to establish Voting for this action: Vice Chair Rivlin and Governors Kelley, branches at the locations of the former KeyBank branches.1 Phillips, and Meyer. Absent and not voting: Chairman Greenspan. Notice of the applications, affording interested persons an opportunity to submit comments, has been given in JENNIFER J. JOHNSON accordance with the Bank Merger Act and the Board's Deputy Secretary of the Board Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of Appendix the proposal were requested from the United States Attorney General ("Justice Department"), the Office of the A. FMB subsidiary banks to be acquired by Hunting- Comptroller of the Currency ("OCC"), and the Federal ton, all in Michigan: Deposit Insurance Corporation ("FDIC"). The time for filing comments has expired, and the Board has considered the application and all the facts of record in light of the (1) FMB-First Michigan Bank, Zeeland; factors set forth in the Bank Merger Act and section 9 of (2) FMB-First Michigan Bank-Grand Rapids, the Federal Reserve Act. Grand Rapids; First Financial is the 11th largest commercial banking (3) FMB-Lumberman's Bank, Muskegon; organization in Ohio, controlling deposits of $1.1 billion, (4) FMB-Northwestern Bank, Boyne City; representing 1.1 percent of the total deposits in commercial (5) FMB-State Savings Bank, Lowell; banking organizations in Ohio.2 The KeyBank branches to (6) FMB-Commercial Bank, Greenville; be acquired control deposits of $230.8 million, represent- (7) FMB-Sault Bank, Sault St. Marie; ing less than 1 percent of the total deposits in commercial (8) FMB-Security Bank, Manistee; banking organizations in Ohio. On consummation of the (9) FMB-Community Bank, Dowagiac; proposal, First Financial would remain the 11th largest (10) FMB-Oceana Bank, Hart; commercial banking organization in Ohio, controlling de- (11) FMB-Reed City Bank, Reed City; posits of $1.3 billion, representing 1.3 percent of the total (12) FMB-Maynard Allen Bank, Portland; deposits in commercial banking organizations in the state. (13) FMB-Old State Bank, Fremont; and (14) FMB-Arcadia Bank, Kalamazoo. 1. Citizens is a wholly owned subsidiary bank of First Financial Bancorp, Hamilton, Ohio ("First Financial"). The locations of the B. FMB nonbanking subsidiaries to be acquired by KeyBank branches to be acquired are set forth in the Appendix. Huntington, all in Holland, Michigan: 2. All data are as of June 30, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

934 Federal Reserve Bulletin • November 1997 Competitive Considerations cent, are large multistate bank holding companies. In addition, two other competitors have announced plans to open The Bank Merger Act prohibits the Board from approving branches in the banking market in the near future. Coman application if the proposal would result in a monopoly mercial banks in Ohio, moreover, may branch de novo or if the effect of the proposal may be to substantially statewide.7 lessen competition in any relevant market, unless the Board As in other cases, the Board has sought comments from finds that the anticompetitive effects of the proposal are the Justice Department, the OCC, and the FDIC on the clearly outweighed in the public interest by the probable competitive effects of the proposal. The Justice Department effect of the proposal in meeting the convenience and has advised the Board that consummation of the proposal needs of the community to be served.3 would not be likely to have any significantly adverse Citizens and KeyBank compete in the Celina-St. Mary's, competitive effects in the Celina-St. Mary's banking mar- Ohio, banking market.4 Citizens is the largest depository ket or in any other relevant banking markets. The OCC and institution in the market, controlling $178.3 million in FDIC did not object to consummation of the proposal or deposits, representing 18.7 percent of total deposits in indicate it would have any significantly adverse competidepository institutions in the market ("market deposits").5 tive effects in the Celina-St. Mary's banking market or in Citizens proposes to acquire eight KeyBank branches in any other relevant banking markets. the banking market that control deposits of $164.9 million, Based on these and all the other facts of record, the representing 17.2 percent of market deposits. On consum- Board concludes that consummation of the proposal would mation, Citizens would remain the largest depository insti- not have a significantly adverse effect on competition or on tution in the Celina-St. Mary's banking market, controlling the concentration of banking resources in any relevant $343.3 million in deposits, representing 35.9 percent of banking market. market deposits. Concentration in the banking market, as measured by the Herfindahl-Hirschman Index ("HHI") Other Considerations under the Department of Justice Merger Guidelines ("DOJ Guidelines"), would increase 645 points to 1908.6 The Bank Merger Act also requires the Board to consider In evaluating the effect on competition, the Board also the financial and managerial resources and future prospects has considered that the Celina-St. Mary's banking market of the institutions involved in the proposal, and the conveis a relatively small rural banking market near the Ohio and nience and needs of the communities to be served. Based Indiana border and would continue to be served by ten on all the facts of record, including supervisory reports of depository institutions after consummation of the proposal. examination assessing the financial and managerial re- Five competitors, not including Citizens, would each con- sources of the organizations and financial information protrol a market share of more than 5 percent, and three of vided by Citizens, the Board concludes that financial and these competitors would each control a market share of managerial resources and future prospects considerations more than 10 percent. Two competitors, including a com- are consistent with approval as are considerations relating petitor that controls a market share of more than 10 per- to the convenience and needs of the communities to be served. The Board also concludes that factors required to be considered under the Federal Reserve Act are consistent 3. 12 U.S.C. § 1828(c)(5). with approval. 4. The Celina-St. Mary's banking market is approximated by Mercer County; the townships of German, Jackson, Noble, St. Mary's and Washington in Auglaize County; and the townships of Allen, Mississi- Conclusion nawa, Patterson, Wabash, and York in Darke County, all in Ohio. 5. In this context, depository institution includes commercial banks, Based on the foregoing and all the facts of record, the savings banks and savings associations. Market share data are based Board has determined that the applications should be, and on calculations in which the deposits of thrift institutions are included hereby are, approved. The Board's approval of the applicaat 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant tions is conditioned on compliance by Citizens with all the competitors of commercial banks. See Midwest Financial Group, 75 commitments made in connection with the applications. Federal Reserve Bulletin 386 (1989); National City Corporation, 70 For purposes of this action, the commitments and condi- Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly tions relied on in reaching this decision are both conditions included thrift deposits in the calculation of market share on a 50percent weighted basis. See e.g. First Hawaiian, Inc., 77 Federal imposed in writing by the Board and, as such, may be Reserve Bulletin 52 (1991). enforced in proceedings under applicable law. 6. Under the revised DOJ Guidelines, 49 Federal Register 26,823 The acquisition of the KeyBank branches may not be (June 29, 1984), a market in which the post-merger HHI is above 1800 consummated before the fifteenth day following the date of is considered highly concentrated. The Justice Department has inthis order, or later than three months after the effective date formed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompeti- of this order, unless such period is extended by the Board tive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non- 7. Ohio Rev. Code Ann. § 1117.01 (Anderson 1996). 12 U.S.C. depository financial institutions. § 36(c). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 935 or by the Federal Reserve Bank of Cleveland, acting pursu- Orders Issued Under International Banking Act ant to delegated authority. By order of the Board of Governors, effective Septem- Housing & Commercial Bank ber 9, 1997. Seoul, Korea Voting for this action: Chairman Greenspan and Governors Kelley, Order Approving Establishment of a Branch Phillips, and Meyer. Absent and not voting: Vice Chair Rivlin. Housing & Commercial Bank, Seoul, Korea ("Bank"), a JENNIFER J. JOHNSON foreign bank within the meaning of the International Bank- Deputy Secretary of the Board ing Act ("IBA"), has applied under section 7(d) of the IB A (12 U.S.C. § 3105(d)) to establish a state-licensed branch in New York, New York. The Foreign Bank Supervision Enhancement Act of 1991 ("FBSEA"), which amended Appendix the IBA, provides that a foreign bank must obtain the approval of the Board to establish a branch in the United States. Locations of KeyBank Branches to be Acquired and Estab- Notice of the application, affording interested persons an lished as Branches of Citizens, all in Ohio opportunity to submit comments, has been published in a newspaper of general circulation in New York (The New (1) 327 South Main Street, Bryan York Times, September 30, 1996). The time for filing (2) 128 West Market, Celina comments has expired, and the Board has considered the (3) 810 North Main Street, Celina application and all comments received. (4) 730 East Main Street, Coldwater Bank, with total assets of approximately $35 billion as of (5) 202 North Main Street, Delphos year-end 1996, is the ninth largest bank in Korea. Founded (6) Jackson and Main Street, Paulding by the Korean government in 1967 to support funding for (7) 166 South Main Street, Rockford low- and medium-income housing, Bank now engages in a (8) 1210 Celina Road, St. Mary's wide range of commercial banking activities. In addition to (9) 153 East Spring Street, St. Mary's its network of more than 400 domestic branches, Bank has (10) 11230 State Route 364, St. Mary's six domestic subsidiaries involved in construction, leasing, (11) 228 East South Street, St. Mary's investment management, loan financing, and real estate management and brokerage. Outside of Korea, Bank operates a branch in Tokyo and seven representative offices. Concurring Statement of Governor Meyer Bank would be a "qualifying foreign banking organization" under Regulation K after establishment of the proposed branch (12 C.F.R. 211.23(b)). I believe that the proposed acquisition presents a close Bank seeks to upgrade its existing representative office case. The Celina/St. Mary's banking market, as measured in New York to a state-licensed branch that would offer a by the Herfindahl-Hirschman Index ("HHI"), would bewide range of wholesale banking services, including accepcome highly concentrated; and, under the Department of tance of wholesale deposits, commercial lending, trade Justice merger guidelines, the amount of change in market finance, and mortgage finance. concentration raises concerns about the potential competi- In order to approve an application by a foreign bank to tive effects of this proposal. establish a branch in the United States, the IBA and Regu- A divestiture of one office in the market would have lation K require the Board to determine that the foreign substantially reduced the change in the HHI and the market bank applicant engages directly in the business of banking would have remained moderately concentrated after conoutside of the United States and has furnished to the Board summation under the DOJ guidelines. Such a divestiture the information it needs to assess the application would have substantively improved the competitive considadequately. The Board also generally must determine that erations for this proposal, and a future application that the foreign bank is subject to comprehensive superpresents such a large change in the HHI in a more highly vision or regulation on a consolidated basis by its home concentrated post-acquisition banking market or where country supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. there are fewer remaining competitors, may well require a 211,24(c)( 1 )(i)).1 The Board also may take into account divestiture. The change in the HHI resulting from this proposal is at the upper limits of an acquisition that should be approved 1. Regulation K provides that a foreign bank will be considered to without a divestiture in my view. be subject to comprehensive supervision or regulation on a consolidated basis if the Board determines that the bank is supervised and September 10, 1997 regulated in such a manner that 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

936 Federal Reserve Bulletin • November 1997 additional standards set forth in the IBA and Regulation K also has a supervisory role in relation to Bank. In addition, (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). Bank is under the supervision of the Board of Audit and The IBA recently was amended to include a limited Inspection ("BAI"), an independent agency of the Korean exception to the general requirement relating to compre- government that examines the records of certain hensive, consolidated supervision (12 U.S.C. § 3105(d)(6)). government-invested institutions. The Board previously This exception provides that, if the Board is unable to find has determined, in connection with an application involvthat a foreign bank seeking to establish a branch, agency, ing another specially chartered Korean bank, that this bank or commercial lending company is subject to comprehen- was subject to home country supervision on a comprehensive supervision or regulation on a consolidated basis by sive, consolidated basis.2 Bank is supervised by the Korean the appropriate authorities in its home country, the Board authorities on substantially the same terms and conditions may nevertheless approve an application by such foreign as the other Korean bank.3 bank if: Recently, however, the Korean financial system has ex- (i) The appropriate authorities in the home country of perienced difficulties arising primarily from large credit the foreign bank are actively working to establish exposures to certain business conglomerates. The Korean arrangements for the consolidated supervision of such authorities have concluded that these difficulties were, at bank; and least in part, the result of gaps in the supervisory system, (ii) All other factors are consistent with approval primarily relating to credit assessment and approval pro- (12 U.S.C. § 3105(d)(6)(A)). cesses. The Korean government and supervisory authorities have taken steps to seek to close these gaps by, among In deciding whether to exercise its discretion to approve an other things, setting new limits on exposures to the largest application under authority of this exception, the Board Korean business conglomerates and requiring that Korean shall also consider whether the foreign bank has adopted banks establish credit committee systems to diversify auand implements procedures to combat money laundering thority for credit decisions. In addition, the Korean govern- (12 U.S.C. § 3105(d)(6)(B)). The Board also may take into ment is considering the proposal of new legislation that account whether the home country of the foreign bank is would transfer supervisory authority for all Korean finandeveloping a legal regime to address money laundering or cial institutions to a new entity. is participating in multilateral efforts to combat money With regard to measures to prevent money laundering, laundering (12 U.S.C. § 3105(d)(6)(B)). although the Korean government has not formally adopted Bank engages directly in the business of banking outside the recommendations of the Financial Action Task Force the United States through its banking operations in Korea. ("FATF") regarding the prevention and detection of money Bank also has provided the Board with the information laundering, certain Korean laws and regulations contain necessary to assess the application through submissions provisions that parallel certain of the FATF recommendathat address the relevant issues. tions. The Emergency Presidential Order on Real Name With respect to supervision by Bank's home country Financial Transactions and the Protection of Confidentialauthorities, the Board has considered the following infor- ity, for example, which became effective in August 1993, mation. Under the current legislative regime, Bank is char- requires banks to conduct all financial transactions with tered under the Korea Housing Bank Act which designates the Ministry of Finance and Economy ("Ministry") as Bank's primary supervisor. The Ministry often delegates 2. Korea Development Bank, 82 Federal Reserve Bulletin 969 its supervisory powers to the Office of Bank Supervision (1996) (bank under supervision of Ministry, OBSE, and BAI). The and Examination ("OBSE") of the Bank of Korea, which Board also has considered the application of another specially chartered bank that was under the primary supervision of the Ministry, which also delegated its supervisory authority with regard to that bank to the OBSE. However, because it was a privately owned bank, that with law and regulation (12 C.F.R. 211.24(c)(l)(ii)). In assessing this bank was not supervised by the BAI. See Korea Long Term Credit standard, the Board considers, among other factors, the extent to Bank, 82 Federal Reserve Bulletin 767 (1996). which the home country supervisors: 3. In brief, Bank is currently required to submit periodic reports and (i) Ensure that the bank has adequate procedures for monitoring financial statements to the Ministry or the OBSE providing informaand controlling its activities worldwide; tion on, among other things, capital adequacy, credit exposures, ade- (ii) Obtain information on the condition of the bank and its quacy of internal controls, and the operations of subsidiaries and subsidiaries and offices through regular examination reports, foreign offices. Bank is also subject to examination of head office and audit reports, or otherwise; branches by both the OBSE and the BAI. The Ministry, the OBSE, (iii) Obtain information on the dealings with and relationship and the BAI each have enforcement powers over Bank. In addition, between the bank and its affiliates, both foreign and domestic; Bank's annual internal audit reports are forwarded to the Korean (iv) Receive from the bank financial reports that are consolidated authorities, and external audits also are conducted of its operations. on a worldwide basis, or comparable information that permits Recent legislation in Korea provides that Bank will be treated as a analysis of the bank's financial condition on a worldwide consol- commercial bank and become subject to the supervision of the OBSE. idated basis; and This action is expected by year-end. The Board also has previously (v) Evaluate prudential standards, such as capital adequacy and determined, in connection with applications involving other Korean risk asset exposure, on a worldwide basis. banks subject to supervision by the OBSE, that these banks were These are indicia of comprehensive, consolidated supervision. No subject to supervision on a comprehensive, consolidated basis. See, single factor is essential and other elements may inform the Board's e.g., Shinhan Bank, 82 Federal Reserve Bulletin 951 (1996); Dongdetermination. hwa Bank, 81 Federal Reserve Bulletin 744 (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 937 customers on a real-name basis and to confirm customers' has provided adequate assurances of access to any necesidentity before engaging in any transactions. In addition, in sary information the Board may request. September 1994, the OBSE issued guidelines ("OBSE On the basis of all the facts of record, and subject to the Guidelines") which, among other things, prohibit Korean commitments made by Bank, as well as the terms and financial institutions from participating in or aiding money conditions set forth in this order, the Board has determined laundering. Under the OBSE Guidelines, Korean financial that Bank's application to establish a state-licensed branch institutions are required to establish internal policies and should be, and hereby is, approved. Should any restrictions procedures to prevent money laundering and to review on access to information on the operations or activities of these controls as part of the internal audit. Bank and its affiliates subsequently interfere with the Bank has implemented policies and procedures to ensure Board's ability to obtain information to determine and compliance with Korean law and the OBSE Guidelines. enforce compliance by Bank or its affiliates with applicable Bank's employees are prohibited from conducting any federal law, the Board may require termination of any of banking transaction without verifying the true identity of Bank's direct or indirect activities in the United States. the customer. In addition, Bank's branch managers are Approval of this application is also specifically conditioned required to report any breach of the OBSE Guidelines to on Bank's compliance with the commitments made in Bank's auditing department which must report any mate- connection with this application and with the conditions in rial breach of the OBSE Guidelines to the OBSE and the this order.4 The commitments and conditions referred to above are conditions imposed in writing by the Board in BAI. Furthermore, employees with knowledge or suspicion connection with its decision, and may be enforced in of the use of funds for illicit activities are required to report proceedings under applicable law against Bank, its offices, in writing to a public prosecutor's office. and its affiliates. Based on all the facts of record, the Board has determined that Bank's home country authorities are actively By order of the Board of Governors, effective Septemworking to establish arrangements for the consolidated ber 17, 1997. supervision of Bank, and that considerations relating to the steps taken by Bank and its home country to combat Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and money laundering are consistent with approval under this Governors Kelley and Phillips. Absent and not voting: Governor Meyer. standard. The Board also has taken into account the additional JENNIFER J. JOHNSON standards set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4); Deputy Secretary of the Board 12 C.F.R. 211.24(c)(2)). Bank has received the consent of the Ministry to establish the proposed branch. Managerial Siidwestdeutsche Landesbank Girozentrale and financial considerations are consistent with approval, Stuttgart and Mannheim, Federal Republic of and Bank appears to have the experience and capacity to Germany support the proposed branch. Bank must comply with the minimum capital standards Order Approving Establishment of a Branch of the Basle Capital Accord ("Accord"), as implemented by Korea. Bank's capital is in excess of the minimum Siidwestdeutsche Landesbank Girozentrale ("Bank"), Stutlevels that would be required by the Accord and is considtgart and Mannheim, Germany, a foreign bank within the ered equivalent to capital that would be required of a U.S. meaning of the International Banking Act ("IBA"), has banking organization. applied under section 7(d) of the IBA (12 U.S.C. § 3105(d)) With regard to access to information, the Board has to establish a state-licensed branch in New York, New reviewed the restrictions on disclosure in relevant jurisdic- York. The Foreign Bank Supervision Enhancement Act of tions in which Bank operates and has communicated with 1991 ("FBSEA"), which amended the IBA, provides that a relevant government authorities about access to informaforeign bank must obtain the approval of the Board to tion. Bank has committed to make available to the Board establish a branch in the United States. such information on the operations of Bank and any affili- Notice of the application, affording interested persons an ate of Bank that the Board deems necessary to determine opportunity to submit comments, has been published in a and enforce compliance with the IBA, the Bank Holding newspaper of general circulation in New York, New York Company Act, and other applicable federal law. To the [The New York Times, October 28, 1996). The time for extent that the provision of such information may be profiling comments has expired, and all comments have been hibited or impeded by law or otherwise, Bank has commitconsidered. ted to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties in connection with disclosure of certain informa- 4. The Board's authority to approve establishment of the proposed tion. In addition, subject to certain conditions, the Ministry office parallels the continuing authority of the State of New York to may share information on Bank's operations with other 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 supervisors, including the Board. In light of these commitagent, the New York State Banking Department, to license the proments and other facts of record, and subject to the condiposed office of Bank in accordance with any terms or conditions that tion described below, the Board has concluded that Bank the New York State Banking Department may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

938 Federal Reserve Bulletin • November 1997 Bank, with assets equivalent to approximately $134 bil- and its compliance with law and regulation (12 C.F.R. lion, is the 14th largest bank in Germany.1 The Savings 211.24(c)(1)).2 Bank Association of Baden ("BSGV") and the Savings With respect to supervision by home country authorities, Bank Association of W rttemberg ("WSGV") hold a 15 the Board has considered the following information. The percent and 33 percent interest in Bank, respectively. The FBSO and the Deutsche Bundesbank share responsibility remaining interest in Bank is held by 82 German savings as Bank's home country supervisors. Generally, the FBSO banks. reviews periodic financial reports and information pro- Bank operates three branches in Germany, two foreign vided by external and internal auditors, has authority to branches (Singapore and London) and four representative carry out on-site audits, has enforcement powers with offices (New York, Hong Kong, Beijing, and Hanoi). In regard to bank regulation and supervision, and works addition, Bank owns a subsidiary bank in Luxembourg, closely with the Deutsche Bundesbank in supervising and operates several nonbank subsidiaries in Germany Bank. engaged in various activities, including factoring, invest- The Board has determined, in connection with a previment services, and real estate development and manage- ous application,3 that Bank is subject to comprehensive ment activities. consolidated supervision. No material changes have oc- Bank's primary purpose for establishing the proposed curred in the manner of Bank's supervision since that time branch is to provide trade financing, treasury, and advisory that would alter the Board's previous determination. services primarily to corporate clients based in the State of The Board also has taken into account the additional Baden-Wiirttemberg with offices in the United States. In standards set forth in section 7 of the IBA (see 12 U.S.C. addition, the proposed branch would participate in syndi- § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). As noted above, cated loans and issue commercial paper and other debt Bank's home country authorities have no objection to instruments. Bank does not engage directly or indirectly in establishment of the proposed state-licensed branch. any nonbanking activities in the United States, and, after Germany is a signatory to the Basle risk-based capital establishing the proposed branch, would be a qualifying standards, and German risk-based capital standards meet foreign banking organization within the meaning of Regu- those established by the Basle Capital Accord ("Accord"). lation K (12 C.F.R. 211.23(b)). Bank's capital is in excess of the minimum levels that The Federal Banking Supervisory Office ("FBSO") and would be required by the Accord and can be considered the Deutsche Bundesbank, Bank's primary home country equivalent to capital that would be required of a U.S. supervisors, have indicated no objection to the establish- banking organization. Managerial and other financial rement of Bank's proposed branch. sources of Bank also are considered consistent with ap- In order to approve an application by a foreign bank to proval, and Bank appears to have the experience and establish a branch in the United States, the IBA and Regu- capacity to support the proposed branch. Bank has establation K require the Board to determine that the foreign lished controls and procedures for the proposed branch in bank applicant engages directly in the business of banking order to ensure compliance with U.S. law, as well as outside of the United States, and has furnished to the Board controls and procedures for its worldwide operations generthe information it needs to assess the application ade- ally. quately. The Board also must determine that the foreign The Board has reviewed the restrictions on disclosure in bank is subject to comprehensive supervision or regulation relevant jurisdictions in which Bank operates and has comon a consolidated basis by its home country supervisor municated with relevant authorities about access to infor- (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24)). The Board mation. Bank and WSGV have committed to make availalso may take into account additional standards as set forth able to the Board such information on the operations of in the IBA and Regulation K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)). 2. In assessing this standard, the Board considers, among other As noted above, Bank engages directly in the business of factors, the extent to which the home country supervisors: banking outside the United States. Bank also has provided (i) Ensure that the bank has adequate procedures for monitoring the Board with the information necessary to assess the and controlling its activities worldwide; application through submissions that address the relevant (ii) Obtain information on the condition of the bank and its subsidiaries and offices through regular examination reports, issues. audit reports, or otherwise; Regulation K provides that a foreign bank will be con- (iii) Obtain information on the dealings with and relationship sidered to be subject to comprehensive supervision or between the bank and its affiliates, both foreign and domestic; regulation on a consolidated basis if the Board determines (iv) Receive from the bank financial reports that are consolidated that the bank is supervised and regulated in such a manner on a worldwide basis, or comparable information that permits analysis of the bank's financial condition on a worldwide consolthat its home country supervisor receives sufficient inforidated basis; mation on the foreign bank's worldwide operations, includ- (v) Evaluate prudential standards, such as capital adequacy and ing the relationship of the foreign bank to any affiliate, to risk asset exposure, on a worldwide basis. assess the overall financial condition of the foreign bank These are indicia of comprehensive, consolidated supervision. No single factor is essential and other elements may inform the Board's determination. 3. West Merchant Bank Limited, 81 Federal Reserve Bulletin 519 1. All data are as of December 31, 1996, unless otherwise noted. (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 939 Bank and any affiliate of Bank that the Board deems Bank's direct or indirect activities in the United States. necessary to determine and enforce compliance with the Approval of the application also is specifically conditioned IBA, the Bank Holding Company Act of 1956, as amended, on compliance by Bank and WSGV with the commitments and other applicable federal law. To the extent that the made in connection with this application, and with the provision of such information is prohibited or impeded by conditions in this order.4 The commitments and conditions law, Bank and WSGV have committed to cooperate with referred to above are conditions imposed in writing by the the Board to obtain any consents or waivers that might be Board in connection with its decision, and may be enforced required from third parties in connection with disclosure of in proceedings under 12 U.S.C. § 1818 or 12 U.S.C. § 1847 such information. In addition, subject to certain conditions, against Bank, its offices, and its affiliates. the FBSO and the Deutsche Bundesbank may share infor- By order of the Board of Governors, effective Septemmation on Bank's operations with other supervisors, in- ber 17, 1997. cluding the Board. In light of these commitments and other facts of record, and subject to the condition described Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and below, the Board concludes that Bank has provided ade- Governors Kelley and Phillips. Absent and not voting: Governor quate assurances of access to any necessary information Meyer. the Board may request. On the basis of all the facts of record, and subject to the JENNIFER J. JOHNSON commitments made by Bank and WSGV, and the terms and Deputy Secretary of the Board conditions set forth in this order, the Board has determined that Bank's application to establish a branch should be, and hereby is, approved. Should any restrictions on access to 4. The Board's authority to approve the establishment of the proinformation on the operations or activities of Bank or any posed office parallels the continuing authority of the New York State of its affiliates subsequently interfere with the Board's Banking Department to license offices of a foreign bank. The Board's approval of the application does not supplant the authority of the State ability to obtain information to determine and enforce of New York and the New York State Banking Department ("Departcompliance by Bank or its affiliates with applicable federal ment") to license the proposed office of Bank in accordance with any statutes, the Board may require termination of any of terms or conditions that the Department may impose. 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 FirstBank Holding Company of Colorado FirstBank of Parker, September 24, 1997 Employee Stock Ownership Plan, Parker, Colorado Lakewood, Colorado FirstBank Holding Company of Colorado, Lakewood, Colorado Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

940 Federal Reserve Bulletin • November 1997 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 Bloomer Bancshares, Inc., Peoples State Bank, Minneapolis September 11, 1997 Bloomer, Wisconsin Bloomer, Wisconsin Buffalo Bancorp, Inc., Citizens State Bank, Dallas September 11, 1997 Buffalo, Texas Buffalo, Texas Buffalo Corp., Citizens State Bank, Dallas September 11, 1997 Dover, Delaware Buffalo, Texas Cabot Bankshares, Inc., The Capital Bank, St. Louis August 14, 1997 Cabot, Arkansas Little Rock, Arkansas Calvin B. Taylor Bankshares, Inc., Calvin B. Taylor Bank of Delaware, Richmond September 19, 1997 Berlin, Maryland Ocean View, Delaware Century Bancorp, MHC, Century Savings Bank, Philadelphia August 22, 1997 Bridgeton, New Jersey Bridgeton, New Jersey Century Bancorp, Inc., Bridgeton, New Jersey Citizens Bancshares of Woodville, Investors Bancorporation, Inc., Minneapolis September 4, 1997 Inc., Hudson, Wisconsin Woodville, Wisconsin Citizens National Corporation, Josephine Bancshares, Cleveland September 15, 1997 Paintsville, Kentucky Prestonsburg, Kentucky The Bank of Josephine, Prestonsburg, Kentucky The Colonial BancGroup, Inc., Dadeland Bancshares, Inc., Atlanta August 27, 1997 Montgomery, Alabama Miami, Florida Dadeland Bank, Miami, Florida Commercial Bancshares, Inc., Citizens State Bank, St. Louis August 20, 1997 Texarkana, Arkansas Hempstead, Texas Community Financial Corp., Egyptian Bancshares, Inc., St. Louis August 27, 1997 Olney, Illinois Carrier Mills, Illinois The Egyptian State Bank, Carrier Mills, Illinois Saline County State Bank, Stonefort, Illinois Community Financial Corp., Mid-America Bank of St. Clair County, St. Louis September 18, 1997 Olney, Illinois O'Fallon, Illinois Dean Financial Services, Inc., The First National Corporation of Minneapolis September 9, 1997 St. Paul, Minnesota Aitkin, Inc., Aitkin, Minnesota Mid-Continent Financial Services, Inc., Bloomington, Minnesota The First State Bank of Eden Prairie, Eden Prairie, Minnesota First State Bancorp of Monticello, First State Bancorp of Monticello, Inc., Chicago September 17, 1997 Inc. Employee Stock Ownership Monticello, Illinois Plan, Monticello, Illinois First State Bancshares, Inc., First State Bank, Chicago August 27, 1997 Ida Grove, Iowa Ida Grove, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 941 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date F.N.B. Corporation, Indian Rocks State Bank, Cleveland September 5, 1997 Hermitage, Pennsylvania Largo, Florida FSB Bancorp, MHC, Franklin Savings Bank, Boston September 12, 1997 Farmington, Maine Farmington, Maine FSB Bancorp, Farmington, Maine Gold Banc Corporation, Inc., Farmers Bancshares of Oberlin, Inc. Kansas City September 5, 1997 Leawood, Kansas Oberlin, Kansas Heartland Bancshares, Inc., Heartland Community Bank, Chicago September 17, 1997 Franklin, Indiana Franklin, Indiana International Bancorporation, Northern National Bank, Minneapolis September 23, 1997 Golden Valley, Minnesota Nisswa, Minnesota Anderson Financial Group, Inc. Golden Valley, Minnesota Landmark Bancorp Inc., Sunniland Bank, Atlanta September 24, 1997 Margate, Florida Fort Lauderdale, Florida Maries County Bancorp., Inc., Progress Bancshares, Inc., St. Louis August 27, 1997 Vienna, Missouri Sullivan, Missouri Progress Bank of Sullivan, Sullivan, Missouri MidCity Financial Corporation, Abrams Centre Bancshares, Inc., Chicago September 3, 1997 Chicago, Illinois Dallas, Texas Abrams Centre National Bank, Dallas, Texas Midwest Community Bancshares, Bank of Marion, St. Louis September 5, 1997 Inc., Marion, Illinois Marion, Illinois Murfreesboro Bancorp, Inc., Bank of Murfreesboro, Atlanta August 27, 1997 Murfreesboro, Tennessee Murfreesboro, Tennessee NationsBank Corporation, NationsBank, National Association, August 28, 1997 Charlotte, North Carolina Brunswick, Georgia First Federal Savings Bank of Brunswick, Brunswick, Georgia New Broadway, Inc., Broadway Bancshares, Inc., Dallas September 9, 1997 San Antonio, Texas San Antonio, Texas Nichols Bancshares, Inc., First-Nichols National Bank, Dallas September 10, 1997 Kenedy, Texas Kenedy, Texas J. M. Nichols, Inc., Dover, Delaware North Fork Bancorporation, Inc., Branford Savings Bank, New York September 25, 1997 Melville, New York Branford, Connecticut Norwest Corporation, First Valley Bank Group, Inc., Minneapolis September 5, 1997 Minneapolis, Minnesota Los Fresnos, Texas Norwest Corporation, Packers Management Company, Inc., Minneapolis September 5, 1997 Minneapolis, Minnesota Omaha, Nebraska O.A.K. Financial Corporation, Caledonia Financial Corporation, Chicago August 21, 1997 Byron Center, Michigan Caledonia, Michigan State Bank of Caledonia, Caledonia, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

942 Federal Reserve Bulletin • November 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Pathfinder Bancorp, MHC, Oswego City Savings Bank, New York August 29, 1997 Oswego, New York Oswego, New York Pathfinder Bancorp, Oswego, New York Peoples Financial Corp., Inc., Elderton State Bank, Cleveland September 18, 1997 Ford City, Pennsylvania Elderton, Pennsylvania Premier Financial Bancorp, Inc., The Sabina Bank, Cleveland September 17, 1997 Georgetown, Kentucky Sabina, Ohio Rockdale National Bancshares, Inc. Rockdale National Bank, Atlanta September 19, 1997 Conyers, Georgia Conyers, Georgia Saehan Bancorp, Saehan Bank, San Francisco September 24, 1997 Los Angeles, California Los Angeles, California Santander Holding Internacional, Banco Santander Puerto Rico, New York September 15, 1997 S.A., Hato Rey, Puerto Rico Madrid, Spain Santusa Holding, S.L., Madrid, Spain Union Bancshares, Inc., Union State Bank of Fargo, Minneapolis September 18, 1997 Fargo, North Dakota Fargo, North Dakota Union Planters Corporation, First Acadian Bancshares, Inc., St. Louis August 22, 1997 Memphis, Tennessee Thibodaux, Louisiana Acadian Bank, Thibodaux, Louisiana Valley National Corporation, Valley National Bank of Lanett, Atlanta September 10, 1997 Lanett, Alabama Lanett, Alabama Western Bancshares, Albuquerque, Western Bancshares of Albuquerque, Kansas City August 26, 1997 New Mexico ESOP & Trust, Albuquerque, New Mexico Albuquerque, New Mexico Western Bank, Albuquerque, New Mexico Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Banc One Corporation, Fitzgerald, Davis & Associates, L.P., Cleveland September 12, 1997 Columbus, Ohio Chicago, Illinois Banc One Capital Corporation, Columbus, Ohio Bank of Granite Corporation, GLL & Associates, Inc., Richmond September 22, 1997 Granite Falls, North Carolina Winston-Salem, North Carolina Bank of Montreal, Cash Station, Inc., Chicago September 3, 1997 Montreal, Canada Chicago, Illinois Bankmont Financial Corp., Chicago, Illinois Harris Bankcorp, Inc., Chicago, Illinois Harris Bankmont, Inc., Chicago, Illinois Harris Trust and Savings Bank, Chicago, Illinois Carolina First Corporation, First Southeast Financial Corporation, Richmond, September 19, 1997 Greenville, South Carolina Anderson, South Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 943 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date CB&T, Inc., CBT Insurance, Inc., Atlanta August 27, 1997 McMinnville, Tennessee Smithville, Tennessee The Colonial BancGroup, Inc., Dadeland Software Services, Inc., Atlanta August 27, 1997 Montgomery, Alabama Miami, Florida Community Holding Company, Inez Deposit Bank, Cleveland September 12, 1997 Inez, Kentucky FSB, Louisa, Kentucky CPB Inc., Trans-Pacific Mortgage Group LLC, San Francisco September 16, 1997 Honolulu, Hawaii Honolulu, Hawaii Crestar Financial Corporation, American National Bancorp, Inc., Richmond August 22, 1997 Richmond, Virginia Baltimore, Maryland Emprise Financial Corporation, Mid Continent Bancshares, Inc., Kansas City September 9, 1997 Wichita, Kansas El Dorado, Kansas Mid Continent Federal Savings Bank, El Dorado, Kansas Firstbank of Illinois Co., Geneva Capital Corp., Chicago August 29, 1997 Springfield, Illinois Springfield, Illinois Hardin County Bancshares, Inc., Majors Insurance Agency, Inc., St. Louis August 29, 1997 Savannah, Tennessee Adamsville, Tennessee Norwest Corporation, Integrion Financial Network, LLC, Minneapolis August 21, 1997 Minneapolis, Minnesota Atlanta, Georgia VISA Interactive, Inc., Foster City, California Norwest Corporation, International Bancorporation, Minneapolis September 17, 1997 Minneapolis, Minnesota Golden Valley, Minnesota NSB Holding Corp., Check Depot, New York August 29, 1997 Staten Island, New York Stanten Island, New York Pioneer Bankcorp, Inc., Development Investments, Inc., Atlanta September 4, 1997 Clewiston, Florida Clewiston, Florida Preferred Bancshares, Inc., Preferred Lenders, LLC, Minneapolis September 10, 1997 Big Lake, Minnesota Big Lake, Minnesota Prestige Financial Corporation, PFC Financial Services, Inc., New York September 19, 1997 Flemington, New Jersey Flemington, New Jersey Regions Financial Corporation, Griffin Federal Savings Bank, Atlanta September 18, 1997 Birmingham, Alabama Griffin, Georgia Union Planters Corporation, Sho-Me Financial Corporation, St. Louis September 12, 1997 Memphis, Tennessee Mount Vernon, Missouri 1st Savings Bank, f.s.b., Mount Vernon, Missouri UST Corp., Firestone Financial Corp., Boston September 12, 1997 Boston, Massachusetts Newton, Massachusetts Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date 1867 Western Financial Corporation, Capital Corp of the West, San Francisco September 18, 1997 Stockton, California Merced, California Town and Country Finance and Thrift Company, Turlock, California Capital West Group, Inc., Merced, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

944 Federal Reserve Bulletin • November 1997 Sections 3 and 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date ALBANK Financial Corporation, ALBANK Commercial, New York September 17, 1997 Albany, New York Albany, New York ALBANK, FSB, Albany, New York First Financial Caribbean Doral Federal Savings Bank, New York August 26, 1997 Corporation, San Juan, Puerto Rico San Juan, Puerto Rico Doral Mortgage Corporation, Hato Rey, Puerto Rico APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date The Citizens Commercial Bank & Van Wert National Bank, Cleveland August 22, 1997 Trust Company, Van Wert, Ohio Celina, Ohio Crestar Bank, American National Savings Bank, Richmond, September 8, 1997 Richmond, Virginia F.S.B., Baltimore, Maryland F&M Bank-Fennimore, F&M Bank-Potosi, Chicago September 3, 1997 Fennimore, Wisconsin Potosi, Wisconsin F&M Bank-Lancaster, Lancaster, Wisconsin F&M Bank-Portage County, Security Bank, S.S.B., Chicago September 11, 1997 Stevens Point, Wisconsin Milwaukee, Wisconsin First Bank of Hennessey, The Peoples National Bank of Kansas City August 28, 1997 Hennessey, Oklahoma Kingfisher, Kingfisher, Oklahoma First Community Bank, Inc., The Huntington National Bank, Richmond September 4, 1997 Buckhannon, West Virginia Columbus, Ohio First Sterling Bank, Prime Bank, Philadelphia September 17, 1997 Devon, Pennsylvania Philadelphia, Pennsylvania First Virginia Bank-Clinch Valley, Premier Bank, Richmond September 23, 1997 Richlands, Virginia National Association, Tazewell, Virginia First Virginia Bank-Mountain Premier Bank-Central, N.A., Richmond September 23, 1997 Empire, Honaker, Virginia Damascus, Virginia Johnstown Bank and Trust Laurel Bank, Philadelphia September 17, 1997 Company, Ebensburg, Pennsylvania Johnstown, Pennsylvania Fayette Bank, Uniontown, Pennsylvania Le Sueur State Bank, TCF National Bank Minnesota, Minneapolis August 28, 1997 Le Sueur, Minnesota Minneapolis, Minnesota Mercantile Bank, Roosevelt Bank, Kansas City September 11, 1997 Overland Park, Kansas Chesterfield, Missouri Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 945 PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the August 15, 1997, the court granted the Board's motion to Federal Reserve Banks in which the Board of Governors is not dismiss the action. On September 12, 1997, plaintiff filed a named a party. notice of appeal. Pharaon v. Board of Governors, No. 97-1114 (D.C. Cir., filed Artis v. Greenspan, No. 97-5234 (D.C. Cir., filed Septem- February 28, 1997). Petition for review of a Board order ber 19, 1997). Appeal of district court order dismissing dated January 31, 1997, imposing civil money penalties and employment discrimination action. an order of prohibition for violations of the Bank Holding Artis v. Greenspan, No. 97-5235 (D.C. Cir., filed Septem- Company Act. Oral argument is scheduled for December 8, ber 19, 1997). Appeal of district court order dismissing 1997. Research Triangle Institute v. Board of Governors, class complaint alleging race discrimination in employ- No. 97-1282 (4th Cir., filed February 24, 1997). Appeal of ment. district court's dismissal of contract claim. Oral argument is Branch v. Board of Governors, No. 97-5229 (D.C. Cir., filed scheduled for October 30, 1997. Jones v. Board of Gover- September 12, 1997). Appeal of district court order denying nors, No. CV97-0198 (W.D. Louisiana, filed January 30, motion to compel production of pre-decisional supervisory 1997). Complaint alleging violations of the Fair Housing documents and testimony sought in connection with an Act. action by Bank of New England Corporation's trustee in The New Mexico Alliance v. Board of Governors, No. 96bankruptcy against the Federal Deposit Insurance Corpora- 9552 (10th Cir., filed December 24, 1996). Petition for tion. review of a Board order dated December 16, 1996, approv- Clarkson v. Greenspan, No. 97-CV-2035 (D.D.C., filed Seping the acquisition by NationsBank Corporation and NB tember 5, 1997). Freedom of Information Act case. Holdings Corporation, both of Charlotte, North Carolina, of Banking Consultants of America v. Board of Governors, No. Boatmen's Bancshares, Inc., St. Louis, Missouri. Also on 97-2791 (W.D. Tenn., filed September 2, 1997). Action to December 24, 1996, petitioners moved for an emergency enjoin investigation by the Board, the Office of the Comp- stay of the Board's order. The motion for a stay was denied troller of the Currency, and the Department of Labor. by the 10th Circuit on January 3, 1997; on January 6, 1997, Bettersworth v. Board of Governors, No. 97-CA-624 (W.D. petitioners' application for emergency stay was denied by Tex., filed August 21, 1997). Privacy Act case. the Supreme Court. Eliopulos v. Board of Governors, No. 97-1442 (D.C. Cir., American Bankers Insurance Group, Inc. v. Board of Goverfiled July 17, 1997). Petition for review of a Board order nors, No. 96-CV-2383-EGS (D.D.C., filed October 16, dated June 23, 1997, approving the application of First 1996). Action seeking declaratory and injunctive relief in- Bank System, Inc., Minneapolis, Minnesota, to acquire U.S. validating a new regulation issued by the Board under the Bancorp, Portland, Oregon, and thereby acquire U.S. Ban- Truth in Lending Act relating to treatment of fees for debt corp's banking and nonbanking subsidiaries. On Septemcancellation agreements. On October 18, 1996, the district ber 12, 1997, the Board filed a motion to dismiss the court denied plaintiffs' motion for a temporary restraining petition. order. On January 17, 1997, the parties filed cross-motions Greeff v. Board of Governors, No. 97-1976 (4th Cir., filed for summary judgment. June 17, 1997). Petition for review of a Board order dated May 19, 1997, approving the application of by Allied Irish Leuthe v. Board of Governors, No. 96-5725 (E.D. Pa., filed Banks, pic, Dublin, Ireland, and First Maryland Bancorp, August 16, 1996). Action against the Board and other Baltimore, Maryland, to acquire Dauphin Deposit Corpora- Federal banking agencies challenging the constitutionality of the Office of Financial Institution Adjudication. On Seption, Harrisburg, Pennsylvania, and thereby acquire Dautember 10, 1997, the court granted the agencies' motion to phin's banking and nonbanking subsidiaries. dismiss the action. Inner City Press/Community on the Move v. Board of Governors, No. 97-1394 (D.C. Cir., filed June 12, 1997). Petition Inner City Press/Community on the Move v. Board of Goverto review a Board order dated May 14, 1997, approving the nors, No. 96-4008 (2nd Cir., filed January 19, 1996). Petiapplication of Banc One Corporation, Inc., Columbus, Ohio, tion for review of a Board order dated January 5, 1996, to merge with First USA, Inc., Dallas, Texas. On June 16, approving the applications and notices by Chemical Bank- 1997, petitioners moved for a stay pending appeal. The ing Corporation to merge with The Chase Manhattan Cormotion was denied on June 27, 1997. On August 11, 1997, poration, both of New York, New York, and by Chemical the Board filed a motion to dismiss the petition. Bank to merge with The Chase Manhattan Bank, N.A., both Vickery v. Board of Governors, No. 97-1344 (D.C. Cir., filed of New York, New York. Petitioners' motion for an emer- May 9, 1997). Petition for review of a Board order dated gency stay of the transaction was denied following oral April 14, 1997, prohibiting Charles R. Vickery, Jr., from argument on March 26, 1996. The Board's brief on the further participation in the banking industry. merits was filed July 8, 1996. The case was consolidated for Wilkins v. Board of Governors, No. 3:97CV331 (E.D. Va„ oral argument and decision with Lee v. Board of Governors, filed May 2, 1997). Customer dispute with bank. On No. 95-4134 (2d Cir.); oral argument was held on Janu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

946 Federal Reserve Bulletin • November 1997 ary 13, 1997. On July 2, 1997, the court of appeals dis- 1991, the court issued an order temporarily restraining the missed the petition for review. transfer or disposition of the individual's assets. Lee v. Board of Governors, No. 95-4134 (2nd Cir., filed August 22, 1995). Petition for review of Board orders dated FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD July 24, 1995, approving certain steps of a corporate reorga- OF GOVERNORS nization of U.S. Trust Corporation, New York, New York, and the acquisition of U.S. Trust by Chase Manhattan Skandinaviska Enskilda Banken Corporation, New York, New York. On September 12, Stockholm, Sweden 1995, the court denied petitioners' motion for an emergency stay of the Board's orders. The Board's brief was filed on The Federal Reserve Board announced on September 17, April 16, 1996. Oral argument, consolidated with Inner City 1997, the joint issuance with the New York State Banking Press/Community on the Move v. Board of Governors, took Department of a Consent Order against Skandinaviska place on January 13, 1997. On July 2, 1997, the court of Enskilda Banken, Stockholm, Sweden, a foreign bank, and appeals dismissed the petition for review. Skandinaviska Enskilda Banken's New York branch and Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New New York State-chartered Article XII corporation. The York, filed September 17, 1991). Action to freeze assets of Board also issued an Order of Assessment of a Civil individual pending administrative adjudication of civil Money Penalty of $2.5 million against the bank and its money penalty assessment by the Board. On September 17, New York branch and Article XII corporation. 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—Continued All Federal debt subject to statutory limitation DOMESTIC FINANCIAL STATISTICS All Gross public debt of U.S. Treasury— Types and ownership Money Stock and Bank Credit A28 U.S. government securities A4 Reserves, money stock, liquid assets, and debt dealers—Transactions measures A29 U.S. government securities dealers— A5 Reserves of depository institutions, Reserve Bank Positions and financing credit A30 Federal and federally sponsored credit A6 Reserves and borrowings—Depository agencies—Debt outstanding institutions Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local A7 Federal Reserve Bank interest rates governments and corporations A8 Reserve requirements of depository institutions A3 2 Open-end investment companies—Net sales A9 Federal Reserve open market transactions and assets A32 Corporate profits and their distribution Federal Reserve Banks A32 Domestic finance companies—Assets and liabilities A10 Condition and Federal Reserve note statements A33 Domestic finance companies—Consumer, real estate, A11 Maturity distribution of loan and security and business credit holdings Real Estate Monetary and Credit Aggregates A34 Mortgage markets All Aggregate reserves of depository institutions A35 Mortgage debt outstanding and monetary base A12 Money stock, liquid assets, and debt measures Consumer Credit A14 Deposit interest rates and amounts outstanding— commercial and BIF-insured banks A3 6 Total outstanding A36 Terms Commercial Banking Institutions— Assets and Liabilities Flow of Funds A15 All commercial banks A37 Funds raised in U.S. credit markets A16 Domestically chartered commercial banks A39 Summary of financial transactions A17 Large domestically chartered commercial banks A40 Summary of credit market debt outstanding A19 Small domestically chartered commercial banks A41 Summary of financial assets and liabilities A20 Foreign-related institutions DOMESTIC NONFINANCIAL STATISTICS Financial Markets All Commercial paper and bankers dollar Selected Measures acceptances outstanding A42 Nonfinancial business activity— All Prime rate charged by banks on short-term Selected measures business loans A42 Labor force, employment, and unemployment A23 Interest rates—money and capital markets A43 Output, capacity, and capacity utilization A24 Stock market—Selected statistics A44 Industrial production—Indexes and gross value A46 Housing and construction Federal Finance A47 Consumer and producer prices A25 Federal fiscal and financing operations A48 Gross domestic product and income A26 U.S. budget receipts and outlays A49 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • November 1997 INTERNATIONAL STATISTICS Securities Holdings and Transactions A60 Foreign transactions in securities Summary Statistics A61 Marketable U.S. Treasury bonds and A50 U.S. international transactions—Summary notes—Foreign transactions A51 U.S. foreign trade A51 U.S. reserve assets Interest and Exchange Rates A51 Foreign official assets held at Federal Reserve A61 Discount rates of foreign central banks Banks A61 Foreign short-term interest rates A52 Selected U.S. liabilities to foreign official A62 Foreign exchange rates institutions A63 GUIDE TO STATISTICAL RELEASES AND Reported by Banks in the United States SPECIAL TABLES A52 Liabilities to and claims on foreigners A53 Liabilities to foreigners SPECIAL TABLES A55 Banks' own claims on foreigners A56 Banks' own and domestic customers' claims on A64 Assets and liabilities of commercial banks, foreigners June 30, 1997 A56 Banks' own claims on unaffiliated foreigners A68 Terms of lending at commercial banks, A57 Claims on foreign countries— August 1997 Combined domestic offices and foreign branches A72 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1997 Reported by Nonbanking Business Enterprises in the United States A76 INDEX TO STATISTICAL TABLES A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners 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. Minus signs are used to indicate (1) a decrease, (2) a negative "State and local government" also includes municipalities, figure, or (3) an outflow. special districts, and other political 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 • November 1997 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1996 1997 1997 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q3 Q4 Ql Q2 Apr. May June Julyr Aug. Reserves of depository institutions2 1 Total -16.4 -17.2 -8.3 -14.3 -21.9 -9.7 1.5 -5.7 13.5 2 Required -16.5 -18.5 -8.4 -15.0 -18.6 -15.8 .5 -3.8 12.6 3 Nonborrowed -17.6 -16.2 -7.2 -16.0 -24.5 -9.3 -1.6 -6.8 8.8 4 Monetary base3 5.3 5.1 5.6 3.3 1.6 3.6 4.7 7.3 5.9 Concepts of money, liquid assets, and debtA 5 Ml -6.5 -7.3 -.7 -5.5 — 11,4r -2.7 ,5r -1.2 8.4 6 M2 3.4 5.1 6.1 4.3 6.1 — .2' 4.6 3.6 11.0 7 M3 5.5 8.2 8.2 7.1 9.6r 2.0 5.4r 10.9 12.7 8 L 6.5 7.2 6.9r 7.8r 10.6r 3.5r 4.7r 7.1 n.a. 9 Debt 5.T 4.7r 4.3r 4.6r 5.7r 3.6r 2.1r 4.4 n.a. Nontransaction components 10 In M25 7.7 10.3 8.7 8.1 12.7 ,8r 6.2 5.5 12.0 11 In M3 only6 13.4 19.6 15.5r 16.7r 21.5r 9.4r 8.0r 35.0 18.1 Time and savings deposits Commercial banks 12 Savings, including MMDAs 12.0 17.0 14.0 10.7 17.6 -3.2 5.7 6.7 14.2 13 Small time7 3.7 4.7 2.9 5.9 5.6 6.2 11.6 12.4 3.3 14 Large time8'9 19.1 22.9 12.8 23.3r 35. r 4.6 23.r 45.6 18.5 Thrift institutions 15 Savings, including MMDAs .2 .8 2.7 5.8 9.7 7.7 .0 -2.6 .6 16 Small time7 -.3 3.0 .1 -3.1 -4.1 3.4 -4.1 -13.3 -1.7 17 Large time8 9.0 9.1 12.8 5.1 7.3 -1.5 11.7 21.6 4.3 Money market mutual funds 18 Retail 16.3 17.2 16.3 14.7 24.5 -4.2 12.1 12.6 33.2 19 Institution-only 20.7 19.8 15.5 12.5 -.8 .0 28.1 19.6 18.9 Repurchase agreements and Eurodollars 20 Repurchase agreements10 -4.0 3.0 8.5 3.9r 16.2 3.6 —23.1r 56.2 17.3 21 Eurodollars10 9.7 48.2 40.2r 33.4r 48.3r 65.4r -42.2r 11.2 24.9 Debt components4 22 Federal 3.9r 3.4r 1.8 ,4r 2.1r -4.2r —4.2r 1.0 n.a. 23 Nonfederal 5.6r 5.2r 5.r 6.1r 7.0r 6.3r 4.3r 5.6 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 Factor 1997 1997 June July Aug. July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 449,169 448,800 449,743 450,680 446,383 447,439 447,580 449,586 449,017 450,750 U.S. government securities2 2 Bought outright—System account3 407,635 410,681 409,254 411,118 410,818 409,823 408,573 410,183 408,976 408,991 3 Held under repurchase agreements 7,801 3,618 6,571 5,039 1,713 3,315 5,059 4,795 5,774 8,692 Federal agency obligations 4 Bought outright 1,563 1,220 1,035 1,222 1,209 1,209 1,069 1,039 1,030 1,030 5 Held under repurchase agreements 862 814 1,333 1,096 163 350 538 809 1,981 1,369 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 94 105 205 10 27 216 102 8 704 74 8 Seasonal credit 243 330 387 303 347 378 376 365 385 407 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 474 497 398 197 566 127 455 617 430 278 11 Other Federal Reserve assets 30,497 31,534 30,559 31,694 31,540 32,021 31,408 31,770 29,736 29,909 12 Gold stock 11,050 11,050 11,051 11,049 11,049 11,050 11,051 11,051 11,051 11,051 13 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,311 25,369 25,431 25,363 25,377 25,391 25,405 25,419 25,433 25,447 ABSORBING RESERVE FUNDS 15 Currency in circulation 451,823 456,114 456,739 456,881 455,217 454,417 455,403 456,691 456,663 456,478 16 Treasury cash holdings 343 336 296 345 334 321 310 305 301 283 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 8,848 4,750 4,855 4,919 5,212 4,877 5,196 4,965 4,444 4,866 18 Foreign 182 175 201 190 168 172 189 170 226 197 19 Service-related balances and adjustments 7,185 7,309 7,073 7,251 7,293 7,361 7,135 7,090 7,005 7,080 20 Other 366 319 357 321 311 316 350 352 372 365 21 Other Federal Reserve liabilities and capital 15,497 15,354 15,437 15,359 15,343 15,670 14,818 15,063 15,455 15,952 22 Reserve balances with Federal Reserve Banks4 .. . 10,487 10,063 10,466 11,026 8,130 9,947 9,835 10,620 10,235 11,226 End-of-month figures Wednesday figures June July Aug. July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 463,676 448,944r 453,815 450,131 446,018 453,652 449,131 457,796 451,262 459,555 U.S. government securities2 2 Bought outright—System account3 410,914 407,839 409,409 411,733 409,877 408,992 411,153 411,365 408,893 408,873 3 Held under repurchase agreements 15,456 6,326 10,547 4,840 1,650 8,927 3,751 10,943 4,750 16,113 Federal agency obligations 4 Bought outright 1,496 1,209 1,030 1,209 1,209 1,209 1,045 1,030 1,030 1,030 5 Held under repurchase agreements 1,117 743 2,622 500 190 975 218 2,005 1,681 2,350 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 1,587 14 55 4 1 1,286 43 0 4,863 26 8 Seasonal credit 307 398 412 328 365 392 371 375 399 412 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 461 957r -85 128 948 -585 1,082 -174 244 276 11 Other Federal Reserve assets 32,338 31,459 29,824 31,388 31,778 32,456 31,468 32,251 29,401 30,475 12 Gold stock 11,050 11,051 11,050 11,049 11,050 11,051 11,051 11,051 11,051 11,051 13 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,335 25,405 25,461 25,363 25,377 25,391 25,405 25,419 25,433 25,447 ABSORBING RESERVE FUNDS 15 Currency in circulation 453,624 455,103 459,526 456,880 455,703 455,465 457,063 457,600 457,170 458,387 16 Treasury cash holdings 343 311 278 336 323 311 305 304 284 278 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 16,368 5,014 4,700 6,562 4,942 5,153 5,947 4,678 4,863 5,200 18 Foreign 178 175 169 265 163 170 187 191 512 162 19 Service-related balances and adjustments 7,559 7,135r 7,057 7,251 7,293 7,361 7,135 7,090 7,005 7,080 20 Other 321 325 327 317 308 316 349 359 363 375 21 Other Federal Reserve liabilities and capital 15,517 14,785 16,144 15,167 15,138 15,540 14,732 15,299 15,365 15,816 22 Reserve balances with Federal Reserve Banks4 15,350 ll,753r 11,326 8,965 7,777 14,979 9,070 17,945 11,385 17,955 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Includes compensation that adjusts for the effects of inflation on the principal of 2. Includes securities loaned—fully guaranteed by U.S. government securities inflation-indexed securities. with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back 4. Excludes required clearing balances and adjustments to compensate for float. under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • November 1997 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1994 1995 1996 1997 Dec. Dec. Dec. Feb. Mar. Apr. May June July1" Aug. 1 Reserve balances with Reserve Banks" 24,658 20,440 13,395 11,455 11,515 12,308 10,916 10,291 9,851 10,491 2 Total vault cash3 40,378 42,094 44,426 43,375 42,116 41,381 41,111 42,398 43,129 42,363 3 Applied vault cash4 36.682 37,460 37,848 36,588 36,029 35,571 35,081 36,319 36,529 36,153 4 Surplus vault cash5 3,696 4,634 6,578 6,788 6,087 5,810 6,030 6,079 6,600 6,210 5 Total reserves6 61,340 57,900 51,243 48,043 47,543 47,879 45,997 46,610 46,380 46,644 6 Required reserves 60,172 56.622 49,819 47,012 46,383 46,869 44,757 45,330 45,179 45,392 7 Excess reserve balances at Reserve Banks7 1,168 1,278 1,424 1,031 1,160 1,010 1,240 1,280 1,201 1,253 8 Total borrowings at Reserve Banks8 209 257 155 42 156 261 243 367 409 598 9 Seasonal borrowings 100 40 68 21 37 88 173 243 330 385 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 1997 May 7 May 21 June 4 June 18 July 2 July 16 July 30 Aug. 13r Aug. 27 Sept. 10 1 Reserve balances with Reserve Banks2 11,493 10,547 11,030 9,782 10,639 10,560 9,003r 10,226 10,754 10,435 2 Total vault cash3 41,838 40,879 40,929 43,447 41,664 42,756 43,703 43,250 41,480 42,573 3 Applied vault cash4 35,551 34,780 35,176 36,911 36,009 36,565 36,559 36,650 35,596 36,488 4 Surplus vault cash" 6,288 6,099 5,753 6,536 5,655 6,191 7,144 6,600 5,884 6,085 5 Total reserves6 47,043 45,326 46,205 46,693 46,648 47,125 45,562r 46,876 46,350 46,923 6 Required reserves 45,619 44,280 44,821 45,417 45,398 45,739 44,561 45,562 45,153 45,679 7 Excess reserve balances at Reserve Banks7 1,424 1,046 1,384 1,276 1,250 1,386 l,001r 1,314 1,197 1.244 8 Total borrowings at Reserve Banks8 219 189 336 222 547 314 484 426 785 503 9 Seasonal borrowings 127 169 210 205 300 299 363 371 396 392 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A 7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit FFeeddeerraall RReesseerrvvee BBaannkk 10 O /3 n /9 7 Effective date Previous rate 10 O /3 n /9 7 Effective date Previous rate 10 O /3 n /9 7 Effective date Previous rate Boston 5.00 2/1/96 5.25 5.55 9/25/97 5.60 6.05 9/25/97 6.10 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 5.55 9/25/97 5.60 6.05 9/25/97 6.10 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 ,evel)—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 3.5^1.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 Oct. 21 8 11 1 - 1 1 2 1 11 2 1984—Apr. 1 9 3 8.5 9 - 9 9 9 1992—July 7 2 3- 3 3 .5 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 11999944——MMaayy 1177 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 1188 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 1 1 3 6 111-112 1111 1986—Mar. 7 7-7.5 7 17 4.75 4.75 July 2 2 9 8 10 1 - 0 1 1 1100 Apr. 2 1 1 0 6.5 7 - 7 7 6 .5 1995—Feb. 9 1 4.7 5 5 . - 2 5 5 . 25 5 5 . . 2 2 5 5 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 22 5.5 5.5 1981—May 5 13-14 In effect Oct. 3, 1997 5.00 5.00 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: Bunking 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 NonfinancialS tatistics • November 1997 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Type of deposit Net transaction accounts 1 SO milhon-$49.3 million-' 1/2/97 2 More than $49.3 million4 1/2/97 3 Nonpersonal time deposits 12/27/90 4 Eurocurrency liabilities6. . 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve 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 with the reserve Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions maintenance period beginning January 2, 1997, for depository institutions that report weekly, include commercial banks, mutual savings banks, savings and loan associations, credit and with the period beginning January 16, 1997, for institutions that report quarterly, the unions, agencies and branches of foreign banks, and Edge Act corporations. exemption was raised from $4.3 million to $4.4 million. 2. Transaction accounts include all deposits against which the account holder is permitted 4. The reserve requirement was reduced from 12 percent to 10 percent on to make withdrawals by negotiable or transferable instruments, payment orders of with- Apr. 2. 1992, for institutions that report weekly, and on Apr. 16. 1992, for institutions that drawal, or telephone or preauthorized transfers for the purpose of making payments to third report quarterly. persons or others. However, accounts subject to the rules that permit no more than six 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits preauthorized. automatic, or other transfers per month (of which no more than three may be with an original maturity of less than 1 '/i years was reduced from 3 percent to 1 '/2 percent for by check, draft, debit card, or similar order payable directly to third parties) are savings the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that deposits, not transaction accounts. began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts nonpersonal time deposits with an original maturity of less than 1 '/2 years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17. 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on nonpersonal time deposits with an original maturity of 1 '/2 as of June 30 of each year. Effective with the reserve maintenance period beginning January 2. years or more has been zero since Oct. 6, 1983. 1997, for depository institutions that report weekly, and with the period beginning January 16, 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero 1997, for institutions that report quarterly, the amount was decreased from $52.0 million to in the same manner and on the same dates as the reserve requirement on nonpersonal time $49.3 million. deposits with an original maturity of less than 1 '/2 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 TRANSACTIONS' Millions of dollars 1997 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,484 10,932 9,901 0 0 0 4,006 0 596 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 380,327 405,296 426,928 40,346 33.997 31.720 33.160 47,456 33.022 41,643 4 For new bills 380.327 405,296 426,928 40.346 33,647 31,720 33.160 47.456 33,022 41,643 5 Redemptions 0 900 0 0 0 0 0 0 0 0 Others within one year 6 Gross purchases 733 390 524 0 818 0 0 383 494 0 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 0 43,574 30,512 2,481 5.086 3,143 2,006 5,666 1,476 4,359 9 Exchanges -31.949 -35,407 -41,394 -550 -2.864 -1.534 -2,100 -4.229 -2.250 -1.087 10 Redemptions 2,337 1,776 2,015 607 0 0 376 0 0 598 One to five years 11 Gross purchases 9,916 5,366 3,898 0 1.125 2,861 1,924 1.102 2.797 0 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -6,004 -34,646 -25,022 -2,481 -4.926 -3,143 -2.006 -4.685 -1,476 -4.359 14 Exchanges 26,458 26,387 31,459 550 1.874 1,534 1.700 2.479 2,250 1,087 Five to ten years 15 Gross purchases 3,575 1.432 1,116 0 0 0 0 734 499 0 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3,145 -3,093 -5,469 0 1,236 0 0 -981 0 0 18 Exchanges 4,717 7,220 6.666 0 890 0 400 1,750 0 0 More than ten years 19 Gross purchases 3,606 2,529 1,655 0 0 1,117 0 988 906 0 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -918 -2,253 -20 0 -1,396 0 0 0 0 0 22 Exchanges 775 1,800 3,270 0 450 0 0 0 0 0 All maturities 23 Gross purchases 35,314 20,649 17,094 0 1.943 3.978 5.930 3.206 5,292 0 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,337 2,676 2,015 607 0 0 376 0 0 598 Matched transactions 26 Gross purchases 1,700,836 2,197,736 3,092,399 285,667 250,867 288.373 303.056 287.229 293,506 307.101 27 Gross sales 1,701,309 2,202,030 3,094,769 283,240 254,741 288,073 301,177 287,826 293,008 309,578 Repurchase agreements 28 Gross purchases 309,276 331,694 457,568 74,422 48,805 60,425 102.578 46.552 60.286 44,503 29 Gross sales 311,898 328,497 450,359 86,673 45,747 60,718 62,685 89,477 47,070 53,217 30 Net change in U.S. Treasury securities 29,882 16.875 19,919 -10,430 1,127 3.984 47,326 -40.316 19,006 -11,789 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 0 0 0 32 Gross sales 0 0 0 0 0 0 0 0 0 0 33 Redemptions 942 1,003 409 187 27 17 24 0 474 287 Repurchase agreements 34 Gross purchases 52,696 36,851 75,354 17,668 9,795 14,300 10,178 7.954 9,228 9,262 35 Gross sales 52.696 36,776 74,842 17,995 9,454 14,830 10.285 7.096 9,131 10.811 36 Net change in federal agency obligations -942 -928 103 -514 314 -547 -131 858 -377 -1,836 37 Total net change in System Open Market Account . .. 28,940 15,948 20,021 -10,944 1,441 3,437 47,195 -39,458 18,629 -13,625 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the effects of inflation on the principal Account; all other figures increase such holdings. of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • November 1997 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1997 1997 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 June 30 July 31 Aug. 31 Consolidated condition statement ASSETS 1 Gold certificate account 11.051 11.051 11,051 11,051 11,051 11,050 11,051 11,050 2 Special drawing rights certificate account 9,200 9.200 9,200 9,200 9,200 9,200 9,200 9,200 3 Coin 477 480 493 500 492 492 484 485 Loans 4 To depository institutions 1,679 414 375 5,262 438 1,894 411 468 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 1,209 1.045 1.030 1,030 1,030 1,496 1,209 1,030 8 Held under repurchase agreements 975 218 2,005 1,681 2,350 1,117 743 2,622 9 Total U.S. Treasury securities 417,919 414,904 422,308 413,643 424,986 426,370 414,165 419,956 10 Bought outright" 408,992 411,153 411,365 408,893 408,873 410,914 407,839 409,409 11 Bills 194.207 196,367 196,579 194.107 194,086 195,531 193,053 194,623 17 160,524 160,524 160,525 159,795 159,795 161,122 160,524 159,795 13 Bonds 54,261 54,261 54,261 54.991 54,991 54.261 54,261 54,991 14 Held under repurchase agreements 8.927 3,751 10,943 4,750 16,113 15,456 6,326 10,547 15 Total loans and securities 421,782 416,581 425,719 421,616 428,804 430,878 416,529 424,076 16 Items in process of collection 5.733 7,854 6,051 6,374 6,543 2,400 4,833 4,252 17 Bank premises 1,258 1,260 1.262 1,266 1,266 1,251 1,257 1,265 Other assets 18 Denominated in foreign currencies1 17,999 17,209 17.216 17,222 17,229 17,970 17,204 17,320 19 All other4 13.074 13,031 13,852 10,975 11,946 13,295 12,976 11,302 20 Total assets 480,574 476,666 484,842 478,204 486,529 486,536 473,534 478,950 LIABILITIES 21 Federal Reserve notes 430,862 432,442 432.978 432.521 433,709 429,124 430,492 434,827 22 Total deposits 28,624 22,878 30,734 24,538 30,903 40,087 23,646 23,693 23 Depository institutions 22,984 16,395 25,506 18,800 25,169 23,219 18,132 18,497 24 U.S. Treasury—General account 5,153 5.947 4,678 4,863 5,200 16,368 5,014 4,700 25 Foreign—Official accounts 170 187 191 512 162 178 175 169 26 Other 316 349 359 363 375 321 325 327 7.7 Deferred credit items 5,549 6,615 5,832 5.781 6,101 1,808 4.611 4,286 28 Other liabilities and accrued dividends" 4,929 4,728 4,786 4,639 5,037 5,029 4,919 5,005 29 Total liabilities 469,963 466,662 474,330 467,478 475,750 476,048 463,667 467,811 CAPITAL ACCOUNTS 30 Capital paid in 5,087 5,103 5,138 5,140 5,150 5,050 5,087 5,150 31 4,496 4,415 4,496 4,496 4,496 4.496 4,317 4,496 32 Other capital accounts 1,028 485 879 1,090 1,133 943 462 1,493 33 Total liabilities and capital accounts 480,574 476,666 484,842 478,204 486,529 486,536 473,534 478,950 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 631,119 631,975 636.115 645,170 643,568 632,925 634,814 642,699 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 541.296 542,206 542,935 544,126 544,930 542,199 541,783 546,295 36 LESS: Held by Federal Reserve Banks 110,434 109.764 109,957 111,606 111,221 113,075 111,291 111,467 37 Federal Reserve notes, net 430,862 432,442 432,978 432,521 433,709 429,124 430,492 434,827 Collateral held against notes, net 38 Gold certificate account 11,051 11,051 11.051 11.051 11,051 11,050 11,051 11,050 39 Special drawing rights certificate account 9,200 9.200 9.200 9,200 9,200 9,200 9,200 9,200 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 410,611 412.191 412.727 412.270 413,458 408,874 410,241 414,577 42 Total collateral 430,862 432,442 432,978 432,521 433,709 429,124 430,492 434,827 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 US. Treasury securities pledged with bills maturing within ninety days. Federal Reserve Banks—and includes compensation that adjusts for the effects of inflation on 5. Includes exchange-translation account reflecting the monthly revaluation at market the principal of inflation-indexed securities. Excludes securities sold and scheduled to be exchange rates of foreign exchange commitments. bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks/Monetary and Credit Aggregates 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 1997 1997 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 June 30 July 31 Aug. 31 1 Total loans 1,677 414 375 5,262 438 1,894 412 468 2 Within fifteen days' 1,610 130 90 5,198 417 1,726 193 294 3. Sixteen days to ninety days 73 285 285 64 21 169 218 174 4 Total U.S. Treasury securities2 417,919 414,904 422,308 413,643 424,986 426,370 414,165 419,956 5 Within fifteen days' 16,820 21,622 28,411 19,642 25,050 23,839 9,419 12,146 6 Sixteen days to ninety days 92,691 84,589 84,139 91,107 90,752 94,494 88,758 91,288 7 Ninety-one days to one year 131,377 132.492 133,557 129,881 136,171 129,694 139,787 143,510 8 One year to five years 94,004 93,174 93,174 90,614 90,614 95,315 93,174 90,614 9 Five years to ten years 39,017 39,016 39,016 37,657 37,657 39,016 39,016 37,657 10 More than ten years 44,011 44,011 44,011 44,741 44,741 44,011 44,011 44,741 11 Total federal agency obligations 2,961 1,263 3,035 2,711 3,380 2,613 2,130 3,757 12 Within fifteen days' 1,154 233 2,005 1,752 2,455 1,392 922 2,727 13 Sixteen days to ninety days 185 211 211 141 106 281 185 106 14 Ninety-one days to one year 130 104 154 154 154 210 130 154 15 One year to five years 401 401 351 351 351 416 401 351 16 Five years to ten years 290 290 290 290 290 290 290 290 17 More than ten years 25 25 25 25 25 25 25 25 I. Holdings under repurchase agreements are classified as maturing within fifteen days in 2. Includes compensation that adjusts for the effects of inflation on the principal of accordance with maximum maturity of the agreements. inflation-indexed securities. 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE' Billions of dollars, averages of daily figures 1997 IItteemm DD 1199 ee 99 cc 33 .. DD 1199 ee 99 cc 44 .. DD 1199 ee 99 cc 55 .. DD 1199 ee 99 cc 66 .. Jan. Feb. Mar. Apr. May June July Aug. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS-- 11 TToottaall rreesseerrvveess33 60.55 59.40 56.39 50.06 49.52 49.01 48.31 47.43 47.05 47.11 46.89 47.41 22 NNoonnbboorrrroowweedd rreesseerrvveess44 60.46 59.20 56.13 49.91 49.47 48.97 48.16 47.17 46.81 46.74 46.48 46.82 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt55 60.46 59.20 56.13 49.91 49.47 48.97 48.16 47.17 46.81 46.74 46.48 46.82 44 RReeqquuiirreedd rreesseerrvveess 59.48 58.24 55.11 48.64 48.29 47.98 47.15 46.42 45.81 45.83 45.68 46.16 55 MMoonneettaarryy bbaassee66 386.88 418.48 434.52 452.67 454.14 456.28 457.62 458.24 459.60 461.40 464.22R 466.50 Not seasonally adjusted 6 Total reserves7 62.37 61.13 58.02 51.52 50.67 48.12 47.69 48.09 46.26 46.93 46.76 47.08 7 Nonborrowed reserves 62.29 60.92 57.76 51.37 50.62 48.08 47.53 47.83 46.02 46.56 46.35 46.49 8 Nonborrowed reserves plus extended credit5 62.29 60.92 57.76 51.37 50.62 48.08 47.53 47.83 46.02 46.56 46.35 46.49 9 Required reserves8 61.31 59.96 56.74 50.10 49.44 47.09 46.53 47.08 45.02 45.65 45.56 45.83 10 Monetary base9 390.59 422.51 439.03 456.72 455.55 452.56 455.26 458.17 458.29 461.81 465.56 467.29 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves " 62.86 61.34 57.90 51.24 50.64 48.04 47.54 47.88 46.00 46.61 46.38 46.64 12 Nonborrowed reserves 62.78 61.13 57.64 51.09 50.60 48.00 47.39 47.62 45.75 46.24 45.97 46.05 13 Nonborrowed reserves plus extended credit5 62.78 61.13 57.64 51.09 50.60 48.00 47.39 47.62 45.75 46.24 45.97 46.05 14 Required reserves 61.80 60.17 56.62 49.82 49.42 47.01 46.38 46.87 44.76 45.33 45.18 45.39 15 Monetary base12 397.62 427.25 444.45 463.49 462.71 459.64 462.22 465.06 465.22 468.78 472.59 474.05 16 Excess reserves'" 1.06 1.17 1.28 1.42 1.22 1.03 1.16 1.01 1.24 1.28 1.20 1.25 17 Borrowings from the Federal Reserve .08 .21 .26 .16 .05 .04 .16 .26 .24 .37 .41 .60 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

A12 DomesticN onfinancialS tatistics • November 1997 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES' Billions of dollars, averages of daily figures 1997 1993 1994 1995 1996 Dec. Dec. Dec. Dec. May June July Aug. Seasonally adjusted Measures' 1 Ml 1.129.8 1.150.7 1,129.0 1,081.r l,062.8r 1,063.2 1,062.1' 1.069.5 2 M2 3,486.6 3,502.1 3,655.0 3,834.5r 3,904.7 3,919.8 3,931.7r 3,967.9 3 M3 4,254.4 4.327.3 4,592.5 4,933.2r 5,076.3r 5,099.2r 5,145.5r 5,200.0 4 L 5,167.8 5.308.4 5,697.6 6,098.8r 6,280.3r 6,305,0r 6,342.2 n.a. 5 Debt 12,457.3r 13,072. r 13,768.lr 14,485.7r 14,759.6' 14,785.9r 14,840.0 n.a. Ml components 6 Currency3 322.2 354.4 372.6 395.2 406.1 407.7 410.3 412.2 7 Travelers checks4 7.9 8.5 8.9 8.6 8.2 8.0 8.2 8.3 8 Demand deposits5 385.2 384.1 391.1 402.6r 395.7r 397.3 396.4 401.7 9 Other checkable deposits6 414.5 403.8 356.5 274.8 252.8 250.1 247.3 247.3 Nontransaction components in In NIT 2,356.8 2,351.4 2,526.0 2,753.3 2,841.9' 2,856.6 2,869.6 2,898.4 11 In M3 only8 767.8 825.3 937.5 1,098.7 l,171.6r 1,179.4' l,213.8r 1,232.1 Commercial banks 12 Savings deposits, including MMDAs 785.2 752.4 776.0 903.9 945.4 949.9 955.2 966.5 13 Small time deposits9 468.3 503.2 576.0 592.0 602.0 607.8 614.1r 615.8 14 Large time deposits'0, " 271.9 298.4 344.7 412.3 441,3r 449.8' 466.9' 474.1 Thrift institutions 15 Savings deposits, including MMDAs 434.0 397.2 361.1 367.1 375.5 375.5 374.7 374.9 16 Small time deposits9 314.3 314.3 357.7 353.7 351.8 350.6 346.7 346.2 17 Large time deposits10 61.5 64.7 75.1 79.2 82.4 83.2 84.7 85.0 Monex market mutual funds 18 Retail 354.9 384.3 455.2 536.6 567.2 572.9 578.9 594.9 19 Institution-only 209.5 198.5 246.9 299.3 311.6 318.9 324.1 329.2 Repurchase agreements and Eurodollars 20 Repurchase agreements'" 158.6 182.9 182.1 194.0 202.7 198.7 208.0r 211.0 21 Eurodollars'- 66.4 80.8 88.7 113.9 133.5r I28.8r 130.0' 132.7 Debt components 22 Federal debt 3,322.9r 3,491.9r 3,638.5r 3,780.0r 3,789.7r 3,776.4r 3,779.4 n.a. 23 Nonfederal debt 9,134.4r 9,580.2r 10,129.6r I0,705.7r 10,969.9r 11,009.4r 11,060.6 n.a. Not seasonally adjusted Measures~ 24 Ml 1,153.7 1,174.4 1,152.8 l,103.1r 1,051.9' 1,062.5 1,063.7 1.067.4 25 M2 3.506.6 3,522.5 3,675.3 3,852.9r 3,887.2 3,917.2r 3.936.6 3,971.4 26 M3 4,274.8 4,347.4 4.612.0 4,950.2r 5,058.2r 5,095.3' 5,143.2r 5.202.0 27 L 5,197.7 5.338.8 5.729.5 6,128.2r 6,256.7r 6,289.4r 6,332.1 n.a. 28 Debt 12,459.4r 13,073.9' 13,768.5r 14,485.1' 14,719.0r 14,748.4r 14.789.7 n.a. Ml components 29 Currency3 324.8 357.5 376.2 397.9 406.1 408.4 411.3 413.4 30 Travelers checks4 7.6 8.1 8.5 8.3 8.2 8.2 8.7 8.8 31 Demand deposits5 401.8 400.3 407.3 418.9r 387.4' 396.3 398.1 400.3 32 Other checkable deposits'' 419.4 408.6 360.8 278.0 250.2 249.5 245.6 244.8 Nontransaction components 33 In M27 2,352.9 2,348.1 2,522.6 2,749.8 2.835.4 2.854.8 2.872.9 2,904.0 34 In M3 only8 768.2 824.9 936.6 1,097.2 l,170.9r 1,178.1' 1,206.6r 1,230.6 Commercial banks 35 Savings deposits, including MMDAs 784.3 751.7 775.3 902.9 943.7 952.7 958.5 969.9 36 Small time deposits9 466.8 501.5 573.8 589.8 603.2 608.2 614.8 615.8 37 Large time deposits10' " 272.0 298.9 345.7 413.7 443.6 450.1 464.4r 472.9 Thrift institutions 38 Savings deposits, including MMDAs 433.4 396.8 360.8 366.7 374.8 376.6 376.0 376.1 39 Small time deposits9 313.3 313.2 356.3 352.4 352.5 350.8 347.1 346.2 40 Laree time deposits10 61.5 64.8 75.4 79.5 82.8 83.3 84.2 84.8 Money market mutual funds 41 Retail 355.0 385.0 456.3 538.1 561.1 566.5 576.5 596.0 A~> Institution-only 210.6 199.8 248.2 300.5 307.0 313.1 321.0 328.3 Repurchase agreements and Eurodollars 43 Repurchase agreements'" 156.6 179.6 178.0 188.8 205.3 203.8 208.7r 213.0 44 Eurodollars'" 67.6 81.8 89.4 114.7 132.3' 127.9r 128.3r 131.6 Debt components 45 Federal debt 3.329.5 3.499.0 3.645.9 3.787.9 3,781.3 3,766.2 3,759.9 n.a. 46 Nonfederal debt 9.129.9r 9,574.9r 10,I22.6r 10,697. r 10,937.7r 10,982.2r 11,029.8 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 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 (US. government, not including government-sponsored enter- Ml: (I) 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 (I) 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 Ml. 7. Sum of (I) 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

A14 Domestic Nonfinancial Statistics • November 1997 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks' 1996 1997 1995 1996 Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July Aug. Interest rates (annual effective yields) INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts" 1.91 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2 Savings deposits"3 3.10 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 4.10 4.03 4.03 4.03 4.05 4.02 4.01 4.07 4.09 4.08 4.10 4 92 to 182 days 4.68 4.63 4.63 4.63 4.62 4.67 4.72 4.77 4.79 4.76 4.79 5 183 days to 1 year 5.02 5.00 5.00 5.01 5.02 5.08 5.13 5.15 5.16 5.15 5.14 6 More than 1 year to 2'/2 years 5.17 5.22 5.22 5.25 5.27 5.36 5.46 5.45 5.44 5.41 5.41 / More than 2vi years 5.40 5.46 5.46 5.49 5.51 5.60 5.69 5.68 5.69 5.63 5.67 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts" 1.91 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9 Savings deposits"'3 2.98 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 4.43 4.66 4.66 4.75 4.73 4.80 4.83 4.81 4.82 4.87 4.78 II 92 to 182 days 4.95 5.02 5.02 5.05 5.04 5.06 5.13 5.15 5.13 5.13 5.09 12 183 days to 1 year 5.18 5.28 5.28 5.31 5.31 5.37 5.43 5.45 5.47 5.44 5.44 13 More than 1 year to 2 '/> years 5.33 5.53 5.53 5.58 5.59 5.69 5.75 5.77 5.72 5.74 5.69 14 More than 2vi years 5.46 5.72 5.72 5.77 5.78 5.84 5.91 5.91 5.90 5.89 5.85 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts2 . . 248,417 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Savings deposits2'3 776,466 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 Personal 615,113 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 18 Nonpersonal 161,353 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 32,170 32,931 32,931 32,799 32,796 34,853 34,485 32,561 31,369r 30,106r 30,406 20 92 to 182 days 93,941 92,301 92,301 94,955 95,235 93,804 92,432 91,234 91,246r 90,480r 90,231 21 183 days to 1 year 183,834 201,449 201,449 201,491 202,329 203,336 207,006 209,296 211,256r 211,331r 212,011 22 More than 1 year to 2Vi years 208,601 213,198 213,198 213,875 212,970 214,066 226,159 220,795 228,065r 231,836' 234,349 23 More than 2fe years 199,002 199,906 199,906 198,077 197,958 200,282 199,147 198,694 197,163r 195,713r 195,511 24 IRA and Keoeh plan deposits 150,067 151,275 151,275 150,442 150,356 151,931 151,105 151,192 !51,938r 151,380r 150,561 BIF-INSURED SAVINGS BANKS4 < 25 Negotiable order of withdrawal accounts" . 11,918 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26 Savings deposits"" 68,643 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 27 Personal 65,366 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 Nonpersonal 3,277 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances Of less than $100,000, by maturity 29 7 to 91 days 2,001 2,428 2,428 2,542 2,535 2,656 2,698 2,738 2,679r 2.591' 2,538 30 92 to 182 days 12,140 13,013 13,013 13,112 13,099 13,377 13,463 13,731 13,721r 13.603' 13,470 31 183 days to 1 year 25,686 28,792 28,792 29,503 29.510 30,002 30,076 29.661 29.7521" 29.796' 29,287 32 More than 1 year to 2 '/2 years 27,482 29,095 29.095 29,163 29,699 31,028 31,616 31,664 32,101r 32.702' 33,178 33 More than 2Vi years 22,866 22,254 22,254 21.828 21.877 21,731 21,640 21,391 21,439r 21,137' 20,893 34 IRA and Keogh plan accounts 21,408 21,365 21,365 20,405 20,423 20,860 20,860 20,683 20,654r 20,616' 20,649 1. BIF, Bank Insurance Fund. Data in this table also appear in the Board's H.6 (508) 2. Owing to statistical difficulties associated in part with the implementation of sweep Special Supplementary Table monthly statistical release. For ordering address, see inside accounts, estimates for NOW and savings accounts are not available beginning December front cover. Estimates are based on data collected by the Federal Reserve System from a 1996. stratified random sample of about 425 commercial banks and 75 savings banks on the last day 3. Includes personal and nonpersonal money market deposits. of each month. Data are not seasonally adjusted and include IRA and Keogh deposits and 4. Includes both mutual and federal savings banks. 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

Commercial Banking Institutions—Assets and Liabilities A15 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities' A. All commercial banks Billions of dollars Monthly averages Wednesday figures Account 1996 1997r 1997 Aug. Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Seasonally adjusted 1 Bank credit 3,677.9 3,840.4 3,860.1 3,900.9 3,909.3 3,931.6 3,960.1 3,971.9 3,987.5 3,957.0 3,970.3 3,969.6 2 Securities in bank credit 974.3 1,020.2 1,014.3 1,034.1 1,015.9 1,012.7 1,032.7 1,026.5 1,048.2 1,015.9 1,014.3 1,027.7 3 U.S. government securities 703.5 703.6 708.4 723.7 723.5 726.7 727.6 715.2 721.4 707.5 706.7 721.2 4 Other securities 270.8 316.5 305.9 310.4 292.4 286.0 305.1 311.2 326.8 308.4 307.5 306.5 5 Loans and leases in bank credit2 . . . 2,703.6 2,820.2 2,845.8 2,866.8 2,893.4 2,918.9 2,927.4 2,945.5 2,939.3 2,941.1 2,956.0 2,941.9 6 Commercial and industrial 746.6 793.2 797.5 804.6 810.3 815.8 817.8 827.1 821.3 823.7 829.0 830.3 7 Real estate 1.109.7 1,140.4 1,154.0 1,167.1 1,178.0 1,187.4 1,192.0 1,197.7 1,198.1 1,196.3 1,197.3 1,197.0 8 Revolving home equity 81.0 86.5 87.9 89.7 90.9 92.4 93.3 94.1 93.7 93.9 94.1 94.2 9 Other 1,028.7 1,053.9 1,066.1 1,077.4 1,087.1 1,095.1 1,098.7 1,103.6 1,104.4 1,102.4 1,103.2 1,102.8 10 Consumer 514.0 520.5 518.1 516.2 519.1 521.7 521.4 522.0 523.7 522.5 521.7 520.6 11 Security3 72.1 83.9 88.2 89.7 89.1 94.0 95.3 95.1 93.4 97.5 99.8 90.5 12 Other loans and leases 261.3 282.3 288.0 289.2 296.9 299.9 300.9 303.7 302.7 301.1 308.2 303.5 13 Interbank loans 198.1 204.7 220.0 215.9 218.6 191.7 186.1 192.8 181.7 190.0 198.0 198.7 14 Cash assets4 225.2 233.4 240.0 246.5 244.1 248.3 245.0 262.6 246.6 258.0 257.1 281.6 15 Other assets5 252.7 265.0 272.7 277.2 277.7 282.5 277.3 280.5 271.5 277.9 284.6 285.6 16 Total assets6 4,296.5 4,487.4 4,536.6 4,584.0 4,593.0 4,597.2 4,611.2 4,650.6 4,629.9 4,6255 4,652.7 4,6783 Liabilities 17 Deposits 2,753.6 2,892.6 2,916.1 2,949.6 2,937.0 2,971.1 2,992.5 3,018.3 3,010.0 3,003.3 3,012.0 3,028.9 18 Transaction 733.9 705.1 699.7 701.8 689.9 693.8 688.7 695.8 687.8 690.5 690.0 711.8 19 Nontransaction 2,019.6 2,187.6 2,216.3 2,247.9 2,247.2 2,277.3 2,303.7 2,322.4 2,322.2 2,312.8 2,322.0 2,317.2 20 Large time 452.7r 542.5 548.8 568.1 563.5 580.9 600.2 606.6 603.4 596.4 610.5 608.8 21 Other l,567.0r 1,645.0 1,667.6 1,679.8 1,683.6 1,696.4 1,703.5 1,715.9 1,718.8 1,716.4 1,711.5 1,708.4 22 Borrowings 705.4 735.3 748.0 763.8 767.0 737.2 733.1 746.9 731.1 746.3 757.1 750.4 23 From banks in the U.S 290.6 304.9 313.0 312.8 302.5 270.6 262.9 275.7 266.1 271.4 284.2 276.4 24 From others 414.8 430.4 435.0 451.1 464.6 466.6 470.3 471.3 465.0 475.0 472.9 473.9 25 Net due to related foreign offices 247.4 217.7 209.1 211.5 233.7 229.5 215.7 206.6 207.7 201.2 212.1 205.1 26 Other liabilities 219.9 286.2 277.6 270.3 262.5 263.2 277.2 283.1 293.1 280.6 278.4 282.3 27 Total liabilities 3,9263 4,131.8 4,150.8 4,1953 4,2003 4,201.0 4,218.5 4,255.0 4,241.9 4,2313 4,259.6 4,266.8 28 Residual (assets less liabilities)7 370.2 355.6 385.8 388.7 392.7 396.2 392.7 395.6 388.0 394.2 393.1 411.5 Not seasonally adjusted Assets 29 Bank credit 3,679.1 3,833.2 3,850.5 3,900.4 3,913.9 3,935.3 3,955.8 3,973.2 3,989.7 3,959.9 3,972.3 3,962.8 30 Securities in bank credit 978.7 1,016.8 1,016.9 1,036.6 1,024.9 1,019.2 1,030.0 1,031.8 1,051.1 1,022.4 1,021.2 1,030.3 31 U.S. government securities 705.8 702.3 713.0 726.4 725.9 726.5 723.5 718.0 722.6 711.0 710.7 722.3 32 Other securities 272.9 314.4 304.0 310.2 299.0 292.7 306.5 313.8 328.4 311.4 310.5 308.0 33 Loans and leases in bank credit2 . . . 2,700.4 2,816.5 2,833.6 2,863.8 2,888.9 2,916.1 2,925.8 2,941.5 2,938.7 2,937.5 2,951.1 2,932.4 34 Commercial and industrial 742.7 792.8 800.1 811.9 817.1 819.3 819.1 822.8 821.1 821.1 825.0 821.9 35 Real estate 1,111.2 1,137.3 1,148.1 1,162.6 1,173.6 1,185.8 1,192.1 1,199.4 1,198.6 1,198.9 1,198.5 1,198.9 36 Revolving home equity 81.2 86.1 87.1 88.9 90.7 92.4 93.3 94.4 93.8 94.1 94.4 94.6 37 Other 1,029.9 1,051.3 1,061.0 1,073.7 1,083.0 1,093.4 1,098.7 1,105.0 1,104.8 1,104.8 1,104.1 1,104.3 38 Consumer 514.4 521.2 513.5 513.7 517.0 518.9 519.1 522.4 522.1 521.9 522.5 522.6 39 Security3 70.6 85.0 87.8 90.2 89.5 93.6 93.8 93.2 92.6 95.6 97.2 87.9 40 Other loans and leases 261.6 280.1 284.1 285.3 291.7 298.6 301.8 303.7 304.3 300.0 308.0 301.1 41 Interbank loans 193.4 209.1 216.4 214.3 214.1 189.2 183.9 188.4 182.7 186.2 193.9 185.2 42 Cash assets4 214.3 234.5 230.8 241.8 241.9 245.0 241.3 249.0 237.3 240.6 240.7 255.2 43 Other assets5 255.6 264.9 268.1 274.9 280.0 282.7 279.3 283.8 277.7 280.7 284.7 286.5 44 Total assets6 4,284.9 4,485.8 4,509.7 4,574.8 4,593.2 4,595.1 4,6033 4,637.0 4,630.0 4,610.0 4,634.2 4,6323 Liabilities 45 Deposits 2,743.0 2,877.6 2,904.8 2,947.1 2,928.4 2,966.3 2,983.8 3,008.2 3,012.8 2,993.1 2,996.6 2,990.7 46 Transaction 721.0 698.1 687.5 705.0 680.0 688.1 682.5 683.3 684.9 676.4 672.6 676.8 47 Nontransaction 2,022.0 2,179.5 2,217.3 2,242.1 2,248.4 2,278.2 2.301.3 2,324.9 2,327.9 2,316.7 2,324.0 2,313.9 48 Large time 452.2r 542.1 548.8 563.7 568.4 580.7 595.8 605.7 602.3 595.6 610.6 609.3 49 Other 1,569.8r 1,637.4 1,668.4 1,678.4 1,680.0 1,697.5 1,705.5 1,719.2 1,725.6 1,721.1 1,713.4 1,704.6 50 Borrowings 711.1 719.8 728.5 764.8 776.8 756.3 746.5 751.4 739.3 747.5 768.7 746.8 51 From banks in the U.S 295.8 293.1 301.3 311.6 310.5 283.4 270.9 280.1 269.0 273.2 294.2 278.1 52 From others 415.3 426.7 427.2 453.2 466.3 472.9 475.6 471.3 470.2 474.3 474.5 468.7 53 Net due to related foreign offices 243.1 228.6 218.3 210.1 236.7 220.0 211.9 202.2 195.5 196.7 200.0 218.2 54 Other liabilities 219.3 288.1 275.8 270.6 266.2 265.5 275.5 282.1 291.8 279.7 275.8 281.9 55 Total liabilities 3,916.5 4,114.2 4,127.4 4,192.6 4,208.0 4,208.2 4,217.7 4,243.9 4,239.4 4,216.9 4,241.1 4,237.7 56 Residual (assets less liabilities)7 368.4 371.6 382.3 382.2 385.2 386.9 385.6 393.1 390.6 393.1 393.0 394.6 MEMO 57 Revaluation gains on off-balance-sheet items8 n.a. 101.8 90.4 90.1 81.4 76.1 84.3 86.1 99.4 85.4 84.7 79.1 58 Revaluation losses on off-balancesheet items8 n.a. 98.5 86.9 88.0 85.7 80.7 88.4 90.1 104.3 89.4 88.2 82.4 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • November 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued B. Domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1996 1997 1997 Aug. Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Seasonally adjusted Assets 1 Bank credit 3.212.4 3.309.8 3,334.8 3.367.2 3.369.3 3.388.9 3,414.2 3,430.3 3,438.1 3,422.2 3,435.2 3,426.7 Securities in bank credit 824.9 843.2 841.4 856.1 840.3 835.2 847.8 843.6 855.7 841.6 843.0 839.9 3 U.S. government securities 622.2 618.2 624.8 635.8 633.5 634.4 634.0 626.6 628.8 625.7 625.5 626.8 4 Other securities 202.7 225.0 216.6 220.2 206.8 200.9 213.8 217.0 226.9 215.8 217.5 213.1 5 Loans and leases in bank credit- 2,387.5 2.466.6 2,493.4 2,511.2 2.529.0 2,553.6 2,566.4 2.586.7 2,582.4 2,580.6 2,592.2 2,586.8 6 Commercial and industrial 552.7 576.2 581.6 588.2 590.8 595.7 597.8 605.7 601.2 602.6 606.7 608.8 7 Real estate 1,076.8 1,108.4 1.122.5 1.135.7 1.147.4 1.157.8 1,163.4 1,169.5 1,169.6 1.167.9 1,169.1 1,168.9 8 Revolving home equitv 81.0 86.5 87.9 89.7 90.9 92.4 93.3 94.1 93.7 93.9 94.1 94.2 9 Other 995.8 1,021.9 1,034.6 1.046.1 1.056.5 1,065.4 1,070.2 1.075.4 1,075.9 1,074.0 1,075.0 1,074.8 10 Consumer 514.0 520.5 518.1 516.2 519.1 521.7 521.4 522.0 523.7 522.5 521.7 520.6 11 Security1 42.4 44.1 48.4 46.5 45.6 48.0 50.4 51.4 51.3 52.4 53.1 49.5 12 Other loans and leases 201.7 217.4 222.7 224.5 226.1 230.4 233.3 238.1 236.6 235.2 241.6 239.0 13 Interbank loans 181.1 183.8 197.2 197.0 197.9 171.8 166.5 174.2 163.2 168.5 181.1 179.1 14 Cash assets4 196.2 200.5 207.6 213.8 210.1 212.6 211.0 228.1 212.3 224.2 223.1 246.1 15 Other assets' 214.1 223.9 231.7 238.1 238.9 241.3 234.2 237.4 230.0 235.9 242.5 240.5 16 Total assets6 3,746.5 3,862.2 3,915.4 3,959.8 3,959.8 3,957.9 3,969.0 4,013.0 3,986.5 3,993.8 4,024.8 4,035.6 Liabilities 17 Deposits 2.574.2 2.654.7 2.673.4 2.691.8 2.684.9 2.712.8 2,721.1 2.746.2 2,735.9 2.735.5 2.740.1 2,757.7 18 Transaction 723.6 695.4 689.3 691.0 678.6 682.7 677.5 683.8 675.4 678.9 677.8 699.9 19 Nontransaction 1.850.6 1.959.3 1.984.1 2,000.8 2,006.3 2.030.1 2.043.6 2,062.4 2,060.5 2,056.7 2,062.4 2.057.9 20 Large time 285.8r 318.3 320.1 323.6 325.2 336.2 342.7 349.3 344.3 342.8 353.4 352.0 21 Other 1.564.8r 1.641.0 1,664.0 1.677.1 1,681.1 1.693.9 1.700.9 1,713.1 1.716.2 1,713.8 1,709.0 1,705.8 22 Borrowings 575.8 592.1 608.0 623.8 623.2 595.7 595.5 607.3 597.8 604.5 615.1 608.9 23 From banks in the U.S 256.6 271.0 278.2 280.0 269.3 239.5 232.6 244.9 237.4 241.6 250.0 246.9 24 From others 319.1 321.1 329.8 343.8 353.9 356.2 362.9 362.4 360.4 362.9 365.1 362.0 25 Net due to related foreign offices 74.2 78.2 68.0 77.1 85.1 80.8 85.6 79.1 74.7 74.8 83.9 83.8 26 Other liabilities 154.9 186.4 183.7 178.3 173.2 173.1 180.6 185.5 192.4 186.9 185.0 182.6 27 Total liabilities 3,379.0 3,511.4 3,533.1 3,571.0 3,566.4 3,562.3 3,582.9 3,618.1 3,600.8 3,601.7 3,624.1 3,632.9 28 Residual (assets less liabilities)1 367.5 350.8 382.3 388.8 393.4 395.6 386.1 394.9 385.8 392.0 400.7 402.7 Not seasonally adjusted Assets 29 Bank credit 3.210.2 3.302.1 3.325.4 3.366.6 3.371.3 3.392.2 3,409.5 3.427.5 3.436.7 3.419.1 3,431.6 3,418.9 30 Securities in bank credit 826.1 838.9 843.4 858.0 844.4 841.1 846.2 845.3 855.9 843.2 844.9 840.5 31 U.S. government securities 623.0 615.2 626.4 639.0 635.4 635.5 632.6 627.8 629.8 627.0 626.3 627.3 32 Other securities 203.0 223.7 217.0 219.0 209.0 205.6 213.6 217.5 226.2 216.1 218.6 213.2 33 Loans and leases in bank credit2 2.384.1 2,463.2 2,482.0 2.508.6 2,526.9 2.551.1 2,563.3 2,582.3 2.580.7 2,575.9 2.586.6 2.578.5 34 Commercial and industrial 548.8 575.9 584.6 594.8 597.4 598.4 597.9 601.3 600.0 598.8 602.0 601.7 35 Real estate 1,078.2 1,105.3 1.116.6 1.131.7 1.143.2 1.156.2 1,163.6 1,171.1 1.170.2 1,170.5 1.170.2 1,170.8 36 Revolving home equitv 81.2 86.1 87.1 88.9 90.7 92.4 93.3 94.4 93.8 94.1 94.4 94.6 37 Other 997.0 1.019.2 1.029.5 1,042.7 1.052.6 1.063.9 1,070.3 1.076.7 1,076.4 1,076.4 1,075.8 1,076.2 38 Consumer 514.4 521.2 513.5 513.7 517.0 518.9 519.1 522.4 522.1 521.9 522.5 522.6 39 Security' 40.9 45.2 48.1 47.0 46.0 47.6 48.9 49.5 50.5 50.6 50.5 46.9 40 Other loans and leases 201.9 215.6 219.3 221.3 223.2 230.0 233.8 237.9 237.9 234.1 241.5 236.4 41 Interbank loans 176.4 188.2 193.7 195.3 193.5 169.3 164.3 169.8 164.1 164.7 177.0 165.6 42 Cash assets4 185.2 202.4 199.1 209.9 207.8 208.5 207.1 214.6 202.9 206.5 206.6 220.2 43 Other assets1 216.2 223.0 227.7 237.2 240.1 241.6 237.1 239.9 235.6 237.9 242.0 240.3 44 Total assets6 3,730.6 3,859.9 3,890.0 3,952.8 3,956.3 3,954.7 3,961.2 3,994.6 3,982.1 3,971.2 4,000.0 3,987.9 Liabilities 45 2.565.0 2,642.8 2,662.3 2.695.6 2.675.7 2.707.6 2,715.4 2,738.3 2,741.6 2,728.3 2,726.6 2,719.9 46 Transaction 710.9 688.2 677.3 694.6 669.2 677.1 671.2 671.6 672.9 665.1 660.8 665.2 47 Nontransaction 1.854.1 1.954.7 1.985.0 2.000.9 2.006.5 2.030.5 2.044.2 2.066.7 2,068.7 2.063.2 2,065.8 2,054.7 48 Large time 286.5r 321.1 320.1 325.1 329.0 335.5 341.4 350.4 345.7 344.7 354.9 352.6 49 Other 1.567.6r 1,633.5 1.664.9 1.675.8 1.677.5 1.695.0 1,702.9 1,716.4 1,723.0 1,718.6 1.710.9 1,702.1 50 Borrowings 576.4 583.2 594.4 622.3 633.1 609.8 599.8 606.3 593.2 600.1 621.3 605.5 51 From banks in the U.S 261.4 261.5 268.1 278.6 277.8 250.6 238.9 248.7 238.2 242.2 259.9 249.8 52 From others 315.1 321.7 326.2 343.7 355.3 359.2 360.9 357.6 355.1 357.9 361.4 355.7 53 Net due to related foreign offices 71.9 79.9 72.5 78.8 92.3 79.6 83.0 76.6 70.0 68.5 80.2 89.6 54 Other liabilities 153.9 185.8 182.0 178.8 174.2 174.4 181.1 184.1 190.8 184.9 182.6 181.6 55 Total liabilities 3,367.3 3,491.8 3,511.2 3,575.5 3,575.3 3,571.4 3,579.3 3,605.3 3,595.6 3,581.9 3,610.7 3,596.6 56 Residual (assets less liabilities)7 363.4 368.1 378.7 377.4 381.0 383.4 381.9 389.3 386.5 389.3 389.4 391.3 MEMO 57 Revaluation gains on off-balance-sheet items8 n.a. 55.9 49.0 49.5 42.0 38.5 44.3 45.1 53.6 44.5 46.5 40.0 58 Revaluation losses on off-balancesheet items* n.a. 50.9 43.2 44.6 43.4 40.2 45.7 46.5 55.3 45.9 47.9 41.2 59 Mortgage-backed securities9 n.a. 243.5 245.3 248.8 249.0 250.2 251.8 253.5 254.2 253.8 252.1 253.6 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A17 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1997r 1997 Aug. Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Seasonally adjusted Assets 1 Bank credit l,880.5r 1,942.0 1,954.0 1,972.3 1,964.2 1,974.8 1,992.5 1,996.0 2,007.4 1,991.2 1.999.4 1,990.2 i Securities in bank credit 424.5' 443.5 437.9 448.9 432.4 428.5 441.4 437.0 449.0 435.3 435.8 433.5 U.S. government securities 301.4r 298.2 302.5 311.8 308.6 309.9 309.2 301.7 303.5 301.2 300.1 302.4 4 Trading account 20.3 16.2 18.3 20.3 19.4 23.1 24.9 21.8 22.5 20.5 21.0 22.3 5 Investment account 281 .Cf 282.0 284.2 291.5 289.2 286.8 284.3 279.9 281.0 280.7 279.1 280.1 6 Other securities 123.2 145.2 135.4 137.1 123.8 118.6 132.2 135.3 145.5 134.1 135.7 131.1 7 Trading account 56.9 80.0 69.4 72.0 58.4 51.8 64.2 63.7 73.9 62.8 63.7 59.1 X Investment account 66.3 65.3 66.0 65.1 65.4 66.8 68.0 71.6 71.6 71.3 72.0 72.1 9 State and local government. . 20.5 21.1 20.8 20.8 21.1 21.7 22.1 22.3 22.3 22.2 22.3 v> 1 10 Other 45.8 44.1 45.2 44.3 44.3 45.1 45.8 49.4 49.3 49.1 49.7 49.8 1 1 Loans and leases in bank credit2 . . . 1,455.9' 1,498.5 1,516.1 1,523.4 1,531.8 1,546.2 1,551.1 1,558.9 1.558.4 1,555.8 1.563.6 1,556.7 12 Commercial and industrial 386.4' 402.2 406.3 411.8 412.7 416.0 416.0 421.8 418.2 419.5 422.7 424.1 13 Bankers acceptances 1.7 1.6 1.7 1.6 1.6 1.6 1.6 1.5 1.4 1.5 1.5 1.5 14 Other 384.8r 400.6 404.5 410.2 411.2 414.4 414.4 420.3 416.8 418.0 421.1 422.6 IS Real estate 595.7r 601.1 607.1 610.4 617.0 621.8 621.0 621.2 622.5 620.8 620.8 619.8 16 Revolving home equity 57.3r 59.7 60.5 61.1 62.0 63.2 64.0 64.6 64.2 64.4 64.6 64.6 17 Other 538.4r 541.5 546.7 549.3 555.0 558.6 557.1 556.7 558.3 556.5 556.3 555.2 IS Consumer 295.4r 301.6 300.3 298.8 300.2 300.5 300.9 298.5 301.2 300.0 297.1 296.7 19 Security3 37.8 39.4 43.5 41.9 40.9 43.3 45.7 46.5 46.5 47.5 48.3 44.5 20 Federal funds sold to and repurchase agreements with broker-dealers 23.9 24.0 27.1 23.8 23.3 26.5 28.6 30.0 30.0 30.6 3300..44 28.6 71 Other 13.9 15.3 16.5 18.1 17.6 16.9 17.1 16.5 16.5 16.8 17.9 15.9 22 State and local government 11.7 11.6 11.5 11.2 11.1 11.2 11.2 11.3 11.2 11.3 11.3 11.2 23 Agricultural 8.9 8.7 8.7 8.7 8.9 8.8 8.7 8.7 8.7 8.8 8.7 8.7 24 Federal funds sold to and repurchase agreements with others 5.0 5.3 6.3 7.4 5.8 6.3 7.3 6.3 8.5 5.1 6.2 6.5 25 All other loans 60.7 62.8 65.0 64.0 64.7 66.2 66.0 68.6 65.9 67.1 72.5 68.9 26 Lease-financing receivables 54.3 65.8 67.4 69.1 70.5 72.2 74.3 76.1 75.7 75.8 76.1 76.3 27 Interbank loans 140.0 133.8 143.4 148.9 149.6 121.5 115.2 121.0 110.7 113.6 129.7 126.1 28 Federal funds sold to and repurchase agreements with commercial banks 93.3' 84.0 92.1 96.8 93.3 69.8 69.5 73.7 63.8 6655..99 82.2 78.9 79 Other 46.7 49.9 51.3 52.1 56.3 51.7 45.7 47.3 46.8 47.7 47.6 47.1 30 Cash assets4 136.6 135.5 140.5 145.3 143.1 142.9 142.0 155.5 142.9 152.2 151.9 171.2 31 Other assets5 167.8r 173.4 174.4 179.6 181.4 179.1 172.3 173.5 167.4 170.4 176.6 177.2 32 Total assets6 2,286.8r 2,348.3 2375.8 2,409.3 2,401.8 2381.7 23853 2,409.4 2391.7 2390.7 2,421.0 2,4283 Liabilities Deposits 1.417.6r 1,444.7 1,452.6 1,464.8 1.454.8 1,470.5 1,464.8 1,478.4 1.473.8 1,468.0 1.474.8 1.486.1 34 Transaction 420.7r 392.5 385.5 385.3 374.8 377.9 372.0 376.6 373.8 371.7 372.4 385.9 35 Nontransaction 996.9r 1,052.2 1,067.0 1,079.5 1.079.9 1,092.5 1,092.8 1.101.9 1.100.0 1.096.2 1.102.5 1,100.2 36 Large time 145.6r 163.1 163.9 168.2 168.4 176.6 181.2 186.7 182.2 180.6 190.5 189.8 37 Other 851.3r 889.0 903.2 911.2 911.5 915.9 911.6 915.1 917.8 915.7 911.9 910.3 38 Borrowings 426.7 439.5 453.2 466.3 466.9 438.2 435.1 444.5 434.6 441.6 452.1 446.4 39 From banks in the U.S 173.1 187.4 193.9 195.1 183.9 159.9 157.1 168.4 159.8 163.8 174.3 171.2 40 From others 253.6r 252.1 259.2 271.2 282.9 278.2 277.9 276.0 274.8 277.8 277.8 275.2 41 Net due to related foreign offices 69.8 74.2 64.1 72.7 80.9 77.0 80.8 74.6 70.4 70.5 79.0 79.3 42 Other liabilities 129.7r 162.0 157.9 152.8 146.9 145.9 154.1 158.0 165.2 159.6 157.5 155.0 43 Total liabilities 2,043.8r 2,120.4 2,127.8 2,156.6 2,149.4 2,131.5 2,134.9 2,155.5 2,144.0 2,139.6 2,163.4 2,166.7 44 Residual (assets less liabilities)7 243.0r 228.0 248.0 252.7 252.4 250.1 250.5 253.9 247.7 251.1 257.6 261.6 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic NonfinancialS tatistics • November 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1997r 1997 Aug. Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Not seasonally adjusted Assets 45 Bank credit 1.8" 8.6r 1,939.7 1,949.1 1,971.3 1.966.4 1,977.2 1,987.3 1,993.5 2,006.7 1,988.2 1,997.4 1,981.5 46 Securities in bank credit 427.6r 440.7 438.6 447.4 434.7 432.6 440.6 440.4 451.5 438.4 440.6 434.6 47 U.S. government securities 303,9r 296.6 303.0 311.9 309.0 309.2 308.6 304.5 306.6 303.9 303.5 303.3 48 Trading account 21.0 16.4 19.4 20.5 19.6 21.6 23.8 22.5 23.3 21.4 22.5 21.4 49 Investment account 282.9r 280.1 283.7 291.4 289.4 287.6 284.8 282.0 283.3 282.4 281.0 281.9 50 Mortgage-backed securities. • 182.0 183.8 186.3 186.2 186.5 187.8 187.3 188.8 187.9 185.8 187.5 51 Other 98.0 99.7 104.9 103.0 100.9 96.8 94.6 94.5 94.6 95.2 94.4 52 One year or less n.a. 26.4 26.7 29.1 27.6 27.5 25.9 25.8 26.2 26.4 25.9 25.1 53 Between one and five years 56.5 56.6 57.7 57.0 54.6 50.6 48.1 47.9 48.3 48.5 48.3 54 More than five years .... 15.1 16.4 18.0 18.5 18.8 20.4 20.6 20.4 19.9 20.8 20.9 55 Other securities 123.7 144.2 135.5 135.6 125.7 123.4 132.0 135.9 144.9 134.6 137.1 131.4 56 Trading account 57.8 78.8 69.8 70.8 60.6 57.0 64.9 64.8 73.8 63.8 65.6 59.7 57 Investment account 65.9 65.4 65.7 64.8 65.1 66.4 67.1 71.2 71.1 70.8 71.5 71.6 58 State and local government . . 20.3 21.1 20.8 20.9 21.2 21.8 21.7 22.0 21.9 22.0 22.1 22.2 59 Other 45.7 44.2 44.9 43.8 43.9 44.6 45.3 49.1 49.2 48.8 49.4 49.5 60 Loans and leases in bank credit2 . . 1,451.(7 1,498.9 1,510.6 1,523.8 1,531.6 1,544.6 1,546.8 1,553.0 1,555.2 1,549.8 1,556.8 1,546.9 61 Commercial and industrial 383.7r 402.2 408.7 417.2 417.9 417.5 416.1 418.6 417.9 416.8 419.2 418.5 62 Bankers acceptances 1.7 1.6 1.6 1.5 1.5 1.6 1.5 1.5 1.4 1.5 1.5 1.5 63 Other 382.(7 400.6 407.1 415.6 416.3 415.9 414.6 417.1 416.5 415.3 417.7 417.0 64 Real estate 596.0r 600.6 604.2 609.0 614.3 620.4 620.8 621.7 623.0 622.3 620.7 619.6 65 Revolving home equity 57.4 59.5 59.9 60.6 61.9 63.2 64.0 64.7 64.3 64.5 64.8 64.9 66 Other n.a. 329.6 331.7 339.2 341.6 344.8 344.8 345.7 348.0 346.9 345.3 343.9 67 Commercial n.a. 210.9 212.0 208.6 210.2 211.8 211.5 210.6 210.7 210.9 210.7 210.8 68 Consumer 295.8r 301.5 297.5 296.7 298.5 299.4 298.7 299.0 299.5 299.6 298.1 298.6 69 Security1 36.4 40.4 43.2 42.4 41.6 43.0 44.3 44.7 4455..55 4455..77 45.8 4422..33 70 Federal funds sold to and repurchase agreements with broker-dealers 22.8r 24.3 26.8 24.8 24.1 26.0 27.9 28.5 29.9 29.5 28.3 26.0 7711 Other 13.6 16.1 16.4 17.6 17.4 17.0 16.5 16.2 15.7 16.1 17.5 16.2 72 State and local government 11.8 11.5 11.5 11.2 11.1 11.2 11.2 11.3 11.3 11.4 11.4 11.3 73 Agricultural 9.1 8.4 8.5 8.6 8.9 8.9 8.9 9.0 9.0 99..11 9.0 99..00 74 Federal funds sold to and repurchase agreements with others 4.9 6.1 6.2 7.1 5.9 6.5 7.5 6.2 8.3 4.8 6.2 6.2 75 All other loans 59.7 61.8 63.1 62.7 63.1 65.7 65.3 67.4 65.8 65.4 71.3 66.1 76 Lease-financing receivables .... 53.7 66.4 67.8 68.9 70.4 72.0 73.8 75.2 74.8 74.9 75.1 75.3 77 Interbank loans 136.3r 136.1 139.8 146.8 148.6 121.8 115.6 117.6 108.7 111111..00 127.1 111177..88 78 Federal funds sold to and repurchase agreements with commercial banks 9.9 86.0 90.1 96.8 94.2 71.2 68.9 70.6 61.6 64.2 79.9 71.1 7799 Other 46.4 50.2 49.7 50.0 54.3 50.6 46.6 47.0 47.2 46.8 47.2 46.7 80 Cash assets4 128.0r 138.2 134.1 142.8 141.1 140.2 138.6 144.4 134.7 138.0 138.7 150.7 81 Other assets5 169.8 171.1 171.4 179.7 183.2 181.4 175.2 175.8 171.4 172.9 177.5 178.5 82 Total assets6 2.274.6r 2348.8 2,358.0 2,404.1 2,402.7 2,383.9 2,380.1 2,394.6 234.7 2373.4 2,404.0 2391.9 Liabilities 83 Deposits 1.411.4r 1,442.7 1,446.4 1,4664 1.448.1 1,467.2 1,462.5 1,473.2 1,475.0 1,465.2 1.467.0 1,461.3 84 Transaction 411.4r 389.1 377.8 388.7 368.8 373.9 367.9 367.5 369.1 362.7 361.1 362.1 85 Nontransaction l,000.0r 1,053.5 1,068.6 1,077.7 1.079.4 1.093.2 1.094.6 1,105.6 1,106.0 1,102.5 1.105.9 1,099.1 86 Large time 146.6r 165.3 163.0 168.7 171.4 176.4 180.7 188.0 183.5 182.6 192.4 190.7 87 Other 853.4r 888.2 905.6 909.0 908.0 916.8 914.0 917.6 922.4 920.0 913.6 908.5 88 Borrowings 429.3r 431.8 445.0 467.3 472.9 448.6 439.4 445.1 434.0 439.7 458.2 442.8 89 From banks in the U.S 178.0 179.7 187.6 194.5 190.0 168.0 161.9 172.3 162.2 165.7 182.4 173.4 90 From nonbanks in the U.S 251.3r 252.1 257.4 272.8 282.9 280.6 277.5 272.8 271.7 274.0 275.9 269.3 91 Net due to related foreign offices .... 67.5 76.0 68.6 744 88.1 75.8 78.2 72.1 65.6 64.2 75.3 85.1 92 Other liabilities 128.5r 161.0 155.9 153.1 148.1 147.7 154.4 156.4 163.6 157.2 155.0 153.7 93 Total liabilities 2,036.8r 2,1115 2,115.9 2,161.1 2,157.2 2,1393 2,134.5 2,146.7 2,138.2 2,126-3 2,155.5 2,142.9 94 Residual (assets less liabilities)7 237.8r 237.3 242.0 243.0 245.5 244.6 245.6 247.9 246.5 247.1 248.5 249.0 MEMO 95 Revaluation gains on off-balancesheet items8 55.9 49.0 49.5 42.0 38.5 44.3 45.1 53.6 44.5 46.5 40.0 96 Revaluation losses on off-balancesheet items8 50.9 43.2 44.6 43.4 40.2 45.7 46.5 55.3 45.9 47.9 41.2 97 Mortgage-backed securities9 201.8 202.5 204.2 203.7 203.7 2011 203.8 204.9 204.6 202.7 204.0 98 Pass-through securities n.a. 138.0 139.0 140.4 140.9 141.8 142.3 141.5 142.5 141.7 140.3 142.2 99 CMOs, REMICs, and other mortgage-backed securities . . . 63.8 63.4 63.8 62.9 61.9 61.7 62.3 62.4 62.8 62.4 61.8 100 Net unrealized gains (losses) on available-for-sale securities10 . . . 2.7 2.7 1.8 2.1 2.6 3.1 3.7 3.8 3.7 3.7 3.6 101 Offshore credit to U.S. residents" . . . 28.4 32.1 32.9 33.3 33.6 33.4 33.7 34.0 34.4 33.7 33.7 33.7 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A19 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued D. Small domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1996 1997r 1997 Aug.r Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Seasonally adjusted Assets 1 Bank credit 1,331.9 1,367.9 1,380.8 1,394.9 1,405.1 1,414.1 1,421.7 1,434.4 1,430.7 1,431.0 1,435.8 1,436.5 2 Securities in bank credit 400.4 399.8 403.5 407.1 407.9 406.7 406.4 406.6 406.7 406.2 407.2 406.4 U.S. government securities 320.8 320.0 322.3 324.0 324.9 324.4 324.8 324.9 325.2 324.6 325.4 324.5 4 Other securities 79.5 79.8 81.2 83.2 83.0 82.3 81.6 81.8 81.4 81.7 81.8 82.0 Loans and leases in bank credit2 931.6 968.1 977.3 987.8 997.2 1,007.4 1,015.3 1,027.7 1,024.0 1,024.8 1,028.6 1,030.1 6 Commercial and industrial 166.3 174.0 175.3 176.4 178.1 179.7 181.8 183.9 182.9 183.1 184.1 184.7 7 Real estate 481.1 507.3 515.4 525.3 530.4 536.0 542.4 548.2 547.1 547.1 548.2 549.2 8 Revolving home equity 23.7 26.8 27.4 28.6 28.9 29.2 29.3 29.5 29.5 29.5 29.5 29.6 9 Other 457.4 480.4 488.0 496.8 501.6 506.9 513.1 518.7 517.6 517.6 518.7 519.6 in Consumer 218.6 218.9 217.8 217.4 219.0 221.3 220.5 223.5 222.6 222.6 224.7 223.9 11 Security3 4.5 4.7 4.9 4.6 4.7 4.7 4.8 4.9 4.9 5.0 4.8 4.9 12 Other loans and leases 61.1 63.2 63.8 64.1 65.1 65.7 65.8 67.2 66.6 67.1 66.8 67.4 n Interbank loans 41.1 50.0 53.9 48.1 48.3 50.3 51.3 53.2 52.5 54.9 51.4 53.1 14 Cash assets4 59.6 65.0 67.1 68.5 67.0 69.7 69.0 72.6 69.5 72.0 71.2 74.9 15 Other assets5 46.3 50.5 57.3 58.4 57.4 62.2 61.9 64.0 62.6 65.5 65.9 63.3 16 Total assets6 1,459.7 1,513.9 1,539.6 1,550.4 1,558.0 1,5763 1,583.6 1,603.6 1,594.8 1,603.0 1,603.8 1,6073 Liabilities 17 Deposits 1,156.6 1,210.0 1,220.8 1,227.0 1,230.1 1,242.3 1,256.3 1,267.8 1,262.1 1,267.6 1,265.3 1,271.6 18 Transaction 302.9 302.9 303.8 305.7 303.8 304.8 305.5 307.3 301.6 307.1 305.4 314.0 19 Nontransaction 853.6 907.1 917.0 921.3 926.3 937.5 950.8 960.5 960.5 960.4 959.9 957.7 70 Large time 140.2 155.1 156.2 155.4 156.8 159.6 161.5 162.6 162.1 162.3 162.8 162.2 21 Other 713.5 752.0 760.8 765.9 769.5 777.9 789.3 797.9 798.4 798.2 797.1 795.5 22 Borrowings 149.0 152.7 154.8 157.5 156.3 157.5 160.4 162.8 163.2 162.9 163.0 162.5 23 From banks in the U.S 83.5 83.6 84.3 84.9 85.3 79.5 75.5 76.5 77.5 77.8 75.7 75.7 24 From others 65.5 69.1 70.5 72.6 71.0 78.0 85.0 86.3 85.6 85.1 87.2 86.8 25 Net due to related foreign offices 4.4 4.0 3.9 4.4 4.2 3.8 4.8 4.5 4.3 4.3 4.9 4.5 26 Other liabilities 25.2 24.4 25.7 25.5 26.3 27.1 26.5 27.5 27.2 27.4 27.5 27.6 27 Total liabilities 1,335.2 1,39U 1,4053 1,414.4 1,417.0 1,430.8 1,448.0 1,462.6 1,456.7 1,462.1 1,460.7 1,466.2 28 Residual (assets less liabilities)7 124.5 122.9 134.3 136.0 141.0 145.5 135.6 141.0 138.1 140.9 143.1 141.1 Not seasonally adjusted Assets 29 Bank credit 1,331.5 1,362.4 1,376.3 1,395.3 1,404.9 1,415.0 1,422.2 1,434.1 1,430.0 1,430.9 1,434.2 1,437.4 30 Securities in bank credit 398.5 398.1 404.8 410.6 409.7 408.5 405.6 404.8 404.5 404.8 4M.3 405.8 31 U.S. government securities 319.2 318.6 323.4 327.2 326.4 326.3 324.0 323.3 323.2 323.2 322.8 324.0 37. Other securities 79.3 79.5 81.4 83.4 83.3 82.2 81.6 81.5 81.3 81.6 81.5 81.8 33 Loans and leases in bank credit2 933.1 964.2 971.4 984.7 995.2 1,006.5 1,016.5 1,029.2 1,025.5 1,026.1 1,029.8 1,031.6 34 Cor Tiercial and industrial 165.1 173.7 175.9 177.6 179.5 180.9 181.8 182.7 182.1 182.0 182.8 183.3 35 Real estate 482.2 504.7 512.4 522.6 528.9 535.9 542.8 549.4 547.2 548.2 549.4 551.3 36 Revolving home equity 23.8 26.6 27.2 28.3 28.8 29.2 29.3 29.6 29.5 29.6 29.6 29.8 37 Other 458.4 478.1 485.2 494.3 500.2 506.7 513.5 519.8 517.7 518.7 519.8 521.5 38 Consumer 218.6 219.7 216.0 217.0 218.5 219.4 220.3 223.4 222.6 222.4 224.4 224.0 39 Security3 4.5 4.8 4.9 4.7 4.5 4.5 4.6 4.9 5.0 4.9 4.7 4.6 40 Other loans and leases 62.7 61.3 62.3 62.8 63.8 65.7 66.9 68.8 68.7 68.6 68.4 68.4 41 Interbank loans 40.1 52.1 53.8 48.5 44.9 47.4 48.7 52.2 55.4 53.7 49.9 47.8 4? Cash assets4 57.2 64.2 64.9 67.2 66.8 68.3 68.5 70.2 68.2 68.6 67.9 69.5 43 Other assets5 46.4 51.9 56.3 57.5 56.9 60.2 61.9 64.0 64.1 65.0 64.6 61.8 44 Total assets6 1,456.1 1,511.2 1332.0 1,548.8 1,553.6 1,570.9 1,581.0 1,600.0 1,597.4 1,597.8 1,596.1 1,596.0 Liabilities 45 Deposits 1,153.6 1,200.2 1,215.9 1,229.2 1,227.6 1,240.4 1,252.9 1,265.2 1.266.6 1,263.1 1,259.6 1,258.6 46 Transaction 299.5 299.0 299.5 305.9 300.5 303.2 303.3 304.0 303.9 302.4 299.7 303.1 47 Nontransaction 854.2 901.1 916.4 923.3 927.1 937.2 949.6 961.1 962.7 960.7 959.9 955.5 48 Large time 139.9 155.8 157.1 156.4 157.6 159.1 160.7 162.3 162.1 162.1 162.5 161.9 49 Other 714.3 745.3 759.3 766.8 769.5 778.1 788.9 798.8 800.6 798.6 797.3 793.6 50 Borrowings 147.1 151.4 149.4 155.0 160.3 161.2 160.4 161.3 159.3 160.4 163.1 162.7 51 From banks in the U.S 83.3 81.8 80.5 84.1 87.8 82.6 77.0 76.4 75.9 76.5 77.5 76.3 57 From others 63.8 69.6 68.8 70.9 72.4 78.6 83.4 84.9 83.3 83.9 85.5 86.4 53 Net due to related foreign offices 4.4 4.0 3.9 4.4 4.2 3.8 4.8 4.5 4.3 4.3 4.9 4.5 54 Other liabilities 25.4 24.8 26.1 25.8 26.1 26.7 26.7 27.6 27.3 27.7 27.6 27.9 55 Total liabilities 133(1.5 1380.4 13953 1,414.4 1,418.1 1,432.1 1,444.8 1,458.6 1,457.4 1,455.6 1,455.2 1,453.7 56 Residual (assets less liabilities)7 125.6 130.8 136.7 134.4 135.5 138.8 136.2 141.4 140.0 142.2 140.9 142.3 MEMO 57 Mortgage-backed securities9 n.a. 41.7 42.8 44.6 45.3 46.5 47.7 49.7 49.3 49.3 49.4 49.6 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • November 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 1996 1997 1997 Aug. Feb. Mar. Apr. May June July Aug. Aug. 6 Aug. 13 Aug. 20 Aug. 27 Seasonally adjusted Assets 1 Bank credit 465.5 530.5 525.3 533.7 540.0 542.7 545.9 541.6 549.3 534.8 535.1 542.8 2 Securities in bank credit 149.4 176.9 172.9 178.0 175.6 177.5 185.0 182.8 192.5 174.3 171.3 187.8 3 U.S. government securities 81.3 85.4 83.6 87.9 90.0 92.4 93.6 88.6 92.6 81.7 81.3 94.4 4 Other securities 68.1 91.5 89.3 90.2 85.6 85.1 91.3 94.2 99.9 92.6 90.0 93.4 5 Loans and leases in bank credit2 . . . 316.1 353.6 352.4 355.7 364.4 365.2 361.0 358.8 356.9 360.4 363.8 355.1 6 Commercial and industrial 193.9 217.0 215.9 216.4 219.5 220.1 220.0 221.4 220.1 221.2 222.3 221.6 7 Real estate 32.9 32.0 31.5 31.4 30.6 29.6 28.6 28.2 28.5 28.4 28.2 28.0 8 Security3 29.7 39.8 39.7 43.2 43.5 46.0 44.9 43.6 42.1 45.0 46.7 41.0 9 Other loans and leases 59.6 64.9 65.3 64.7 70.8 69.5 67.6 65.5 66.1 65.9 66.6 64.5 10 Interbank loans 17.0 20.9 22.7 18.9 20.6 19.9 19.6 18.7 18.6 21.4 16.9 19.6 11 Cash assets4 29.1 32.9 32.4 32.7 34.0 35.7 34.0 34.5 34.2 33.9 34.0 35.5 12 Other assets5 38.6 41.1 41.0 39.1 38.9 41.2 43.0 43.0 41.5 41.9 42.1 45.1 13 Total assets6 550.1 625.2 621.2 624.2 633.2 639.2 6423 637.6 643.4 631.7 627.9 642.7 Liabilities 14 Deposits 179.4 238.0 242.7 257.9 252.1 258.3 271.4 272.1 274.1 267.7 27/1.8 271.2 15 Transaction 10.3 9.7 10.4 10.8 11.2 11.1 11.3 12.0 12.4 11.6 ,12.2 11.9 16 Nontransaction 169.1 228.2 232.2 247.1 240.9 247.2 260.1 260.0 261.7 256.1 ;-259.7 259.3 17 Large time 166.9 224.3 228.7 244.5 238.4 244.7 257.5 257.2 259.1 253.5 / 257.1 256.8 18 Other 2.2 4.0 3.6 2.6 2.5 2.5 2.6 2.8 2.6 2.6 • 2.5 2.5 19 Borrowings 129.7 143.2 140.0 140.0 143.8 141.5 137.6 139.7 133.3 141.9 142.0 141.5 20 From banks in the U.S 33.9 33.9 34.8 32.8 33.2 31.1 30.2 30.8 28.7 29.8 34.2 29.5 21 From others 95.7 109.3 105.3 107.3 110.7 110.4 107.4 108.9 104.6 112.1 107.9 112.0 22 Net due to related foreign offices 173.2 139.4 141.0 134.4 148.6 148.7 130.1 127.5 133.0 126.3 128.2 121.4 23 Other liabilities 65.0 99.8 94.0 92.0 89.3 90.1 96.6 97.6 100.7 93.7 93.4 99.8 24 Total liabilities 547.3 620.4 617.7 6243 633.9 638.6 635.7 636.8 641.1 629.6 635.5 633.9 25 Residual (assets less liabilities)7 2.7 4.8 3.5 -0.1 -0.7 0.6 6.6 0.8 2.2 2.1 -7.6 8.8 Not seasonally adjusted Assets 26 Bank credit 469.0 531.2 525.1 533.8 542.6 543.1 546.3 545.7 553.1 540.8 540.7 543.8 27 Securities in bank credit 152.6 177.9 173.5 178.5 180.5 178.1 183.8 186.5 195.1 179.2 176.3 189.9 28 U.S. government securities 82.7 87.2 86.6 87.3 90.5 91.0 90.9 90.2 92.8 84.0 84.4 95.0 29 Trading account n.a. 21.4 20.0 18.6 18.8 18.8 18.2 19.2 19.1 14.7 15.5 23.1 30 Investment account n.a. 65.8 66.6 68.8 71.7 72.3 72.7 71.0 73.7 69.2 69.0 71.9 31 Other securities 69.9 90.7 87.0 91.2 90.0 87.1 92.9 96.3 102.3 95.2 91.9 94.9 32 Trading account n.a. 65.2 60.4 61.1 59.7 58.2 60.9 62.3 68.7 61.2 57.9 60.6 33 Investment account n.a. 25.5 26.6 30.0 30.3 28.9 32.0 34.0 33.5 34.1 34.0 34.3 34 Loans and leases in bank credit2 . . . 316.4 353.3 351.6 355.2 362.1 365.0 362.5 359.2 357.9 361.6 364.5 354.0 35 Commercial and industrial 194.0 216.9 215.6 217.2 219.7 220.9 221.2 221.6 221.1 222.3 222.9 220.1 36 Real estate 32.9 32.1 31.5 30.9 30.4 29.5 28.5 28.2 28.4 28.4 28.3 28.1 37 Security' 29.7 39.8 39.7 43.2 43.5 46.0 44.9 43.6 42.1 45.0 46.7 41.0 38 Other loans and leases 59.8 64.5 64.8 64.0 68.5 68.6 68.0 65.8 66.4 65.9 66.5 64.7 39 Interbank loans 17.0 20.9 22.7 18.9 20.6 19.9 19.6 18.7 18.6 21.4 16.9 19.6 40 Cash assets4 29.0 32.1 31.8 31.9 34.0 36.5 34.2 34.4 34.4 34.1 34.0 35.1 41 Other assets5 39.3 41.9 40.4 37.7 39.9 41.1 42.2 43.9 42.1 42.8 42.7 46.2 42 Total assets6 5543 625.8 619.8 622.0 636.9 6403 642.1 64Z4 647.9 638.8 634.1 644.4 Liabilities 43 Deposits 177.9 234.8 242.5 251.5 252.6 258.7 268.3 269.8 271.2 264.8 270.0 270.8 44 Transaction 10.1 9.9 10.2 10.4 10.7 11.1 11.3 11.7 12.0 11.3 11.8 11.6 45 Nontransaction 167.8 224.9 232.3 241.1 241.9 247.7 257.1 258.1 259.2 253.5 258.3 259.2 46 Large time 165.7 221.0 228.7 238.6 239.4 245.1 254.5 255.3 256.6 250.9 255.7 256.7 47 Other 2.2 3.9 3.6 2.6 2.5 2.5 2.6 2.8 2.6 2.5 2.5 2.5 48 Borrowings 134.7 136.6 134.1 142.5 143.6 146.5 146.7 145.0 146.0 147.3 147.4 141.3 49 From banks in the U.S 34.5 31.7 33.2 33.0 32.7 32.8 31.9 31.3 30.9 30.9 34.3 28.3 50 From others 100.2 105.0 101.0 109.5 110.9 113.7 114.8 113.7 115.2 116.4 113.1 113.0 51 Net due to related foreign offices 171.2 148.6 145.7 131.3 144.3 140.4 128.9 125.6 125.6 128.2 119.9 128.6 52 Other liabilities 65.4 102.3 93.8 91.8 92.0 91.1 94.4 98.1 100.9 94.8 93.2 100.3 53 Total liabilities 549.2 622.4 616.2 617.1 632.6 636.8 638.4 638.6 643.8 635.0 6303 641.1 54 Residual (assets less liabilities)7 5.1 3.5 3.6 4.8 4.2 3.5 3.7 3.8 4.1 3.8 3.7 3.3 MEMO 55 Revaluation gains on off-balance-sheet items8 n.a. 45.9 41.4 40.5 39.4 37.6 40.0 41.1 45.7 41.0 38.2 39.1 56 Revaluation losses on off-balancesheet items8 n.a. 47.6 43.7 43.4 42.3 40.5 42.7 43.6 49.0 43.5 40.3 41.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A21 NOTES TO TABLE 1.26 NOTE. Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8 group that contained the acquired bank and put into past data for the group containing the statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, ratio procedure is used to adjust past levels. "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks being published in the Bulletin. Instead, abbreviated balance sheets for both large and small in the United States, all of which are included in "Interbank loans." domestically chartered banks have been included in table 1.26, parts C and D. Data are both 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. securities. branches and agencies of foreign banks have been replaced by balance sheet estimates of all 4. Includes vault cash, cash items in process of collection, balances due from depository foreign-related institutions and are included in table 1.26, part E. These data are break- institutions, and balances due from Federal Reserve Banks. adjusted. 5. Excludes the due-from position with related foreign offices, which is included in "Net The not-seasonally-adjusted data for all tables now contain additional balance sheet items, due to related foreign offices." which were available as of October 2, 1996. 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for 1. Covers the following types of institutions in the fifty states and the District of transfer risk. Loans are reported gross of these items. Columbia: domestically chartered commercial banks that submit a weekly report of condition 7. This balancing item is not intended as a measure of equity capital for use in capital (large domestic); other domestically chartered commercial banks (small domestic); branches adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related seasonal patterns estimated for total assets and total liabilities. institutions). Excludes International Banking Facilities. Data are Wednesday values or pro 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and rata averages of Wednesday values. Large domestic banks constitute a universe; data for equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. small domestic banks and foreign-related institutions are estimates based on weekly samples 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications government-sponsored enterprises, and private entities. of assets and liabilities. 10. Difference between fair value and historical cost for securities classified as available- The data for large and small domestic banks presented on pp. A17-19 are adjusted to for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are remove the estimated effects of mergers between these two groups. The adjustment for restated to include an estimate of these tax effects. mergers changes past levels to make them comparable with current levels. Estimated 11. Mainly commercial and industrial loans but also includes an unknown amount of credit quantities of balance sheet items acquired in mergers are removed from past data for the bank extended to other than nonfinancial businesses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic NonfinancialS tatistics • November 1997 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1997 IItteemm 1992 1993 1994 1995 1996 Feb. Mar. Apr. May June July Dec. Dec. Dec. Dec. Dec. Commercial paper (seasonally adjusted unless noted otherwise) 1111 AAAAllllllll iiiissssssssuuuueeeerrrrssss 545,619 555,075 595,382 674,904 775,371 813,168 836,979 838,366 855,178 864,758 889,494 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss'''' 2222 DDDDeeeeaaaalllleeeerrrr----ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr2222,,,, ttttoooottttaaaallll 226,456 218,947 223,038 275,815 361.147 387,164 402,291 404,727 413,776 414,475 440,262 3333 DDDDiiiirrrreeeeccccttttllllyyyy ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr3333,,,, ttttoooottttaaaallll 171,605 180,389 207,701 210,829 229,662 239,509 246,215 248,920 252,856 256,165 253,971 4444 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss4444 147,558 155,739 164,643 188,260 184,563 186,495 188,473 184,719 188,546 194,119 195,260 Bankers dollar acceptances (not seasonally adjusted)5 5555 TTTToooottttaaaallll 38,194 32,348 29,835 29,242 25,754 BBBByyyy hhhhoooollllddddeeeerrrr 6666 AAAAcccccccceeeeppppttttiiiinnnngggg bbbbaaaannnnkkkkssss 10,555 12,421 11,783 7777 OOOOwwwwnnnn bbbbiiiillllllllssss 9,097 10,707 10,462 8888 BBBBiiiillllllllssss bbbboooouuuugggghhhhtttt ffffrrrroooommmm ooootttthhhheeeerrrr bbbbaaaannnnkkkkssss 1,458 1,714 1,321 FFFFeeeeddddeeeerrrraaaallll RRRReeeesssseeeerrrrvvvveeee BBBBaaaannnnkkkkssss6666 9999 FFFFoooorrrreeeeiiiiggggnnnn ccccoooorrrrrrrreeeessssppppoooonnnnddddeeeennnnttttssss 1,276 725 410 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11110000 OOOOtttthhhheeeerrrrssss 26,364 19,202 17,642 BBBByyyy bbbbaaaassssiiiissss 11111111 IIIImmmmppppoooorrrrttttssss iiiinnnnttttoooo UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 12,209 10,217 10,062 11112222 EEEExxxxppppoooorrrrttttssss ffffrrrroooommmm UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 8,096 7,293 6,355 11113333 AAAAllllllll ooootttthhhheeeerrrr 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 are 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 Average Average rate rate 6.25 1994 7.15 1995—Jan. . 8.50 1996—Jan. . 6.75 1995 8.83 Feb. 9.00 Feb. 7.25 1996 8.27 Mar. 9.00 Mar. 7.75 Apr. 9.00 Apr. 8.50 1994—Jan. 6.00 May 9.00 May Feb. 6.00 June 9.00 June 9.00 Mar 6.06 July . 8.80 July .. 8.75 Apr. 6.45 Aug. 8.75 Aug. 8.50 May 6.99 Sept. 8.75 Sept. June 7.25 Oct. . 8.75 Oct. . 8.25 July 7.25 Nov. 8.75 Nov. Aug 7.51 Dec. 8.65 Dec. 8.50 Sept. 7.75 Oct. 7.75 1997—Jan. . Nov 8.15 Feb. Dec. 8.50 Mar. Apr. May- June July . Aug. Sept. 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 1997 1997, week ending IItteemm 11999944 11999955 11999966 May June July Aug. Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 MONEY MARKET INSTRUMENTS 1 Federal funds1'2'3 4.21 5.83 5.30 5.50 5.56 5.52 5.54 5.57 5.62 5.45 5.59 5.56 2 Discount window borrowing"'4 3.60 5.21 5.02 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Commercial paper'"5'6 3 1-month 4.43 5.93 5.43 5.61 5.60 5.56 5.55 5.57 5.55 5.57 5.53 5.55 4 3-month 4.66 5.93 5.41 5.69 5.65 5.57 5.56 5.57 5.56 5.57 5.55 5.55 5 6-month 4.93 5.93 5.42 5.78 5.69 5.60 5.59 5.57 5.58 5.61 5.58 5.58 Finance paper, directly placed3'5'7 6 1-month 4.33 5.81 5.31 5.53 5.53 5.49 5.49 5.49 5.50 5.50 5.48 5.49 7 3-month 4.53 5.78 5.29 5.61 5.57 5.50 5.49 5.48 5.49 5.51 5.49 5.49 8 6-month 4.56 5.68 5.21 5.66 5.57 5.50 5.50 5.47 5.48 5.52 5.48 5.51 Bankers acceptances^ ^8 9 3-month 4.56 5.81 5.31 5.62 5.59 5.53 5.53 5.51 5.53 5.53 5.52 5.53 10 6-month 4.83 5.80 5.31 5.71 5.63 5.54 5.56 5.50 5.56 5.58 5.56 5.55 Certificates of deposit, secondary marker' 9 11 1-month 4.38 5.87 5.35 5.58 5.57 5.54 5.54 5.53 5.53 5.55 5.53 5.55 12 3-month 4.63 5.92 5.39 5.70 5.66 5.60 5.60 5.58 5.60 5.61 5.58 5.60 13 6-month 4.96 5.98 5.47 5.87 5.78 5.70 5.71 5.66 5.70 5.73 5.69 5.72 14 Eurodollar deposits. 3-month310 4.63 5.93 5.38 5.69 5.66 5.61 5.58 5.56 5.56 5.63 5.56 5.56 U.S. Treasury bills Secondary market3,5 15 3-month 4.25 5.49 5.01 5.05 4.93 5.05 5.14 5.11 5.15 5.17 5.12 5.13 16 6-month 4.64 5.56 5.08 5.30 5.13 5.12 5.19 5.14 5.21 5.21 5.15 5.18 17 1-year 5.02 5.60 5.22 5.54 5.38 5.24 5.27 5.19 5.25 5.29 5.24 5.29 Auction average3'5'" 18 3-month 4.29 5.51 5.02 5.13 4.92 5.07 5.13 5.12 5.15 5.17 5.08 5.12 19 6-month 4.66 5.59 5.09 5.35 5.14 5.12 5.17 5.15 5.20 5.23 5.12 5.14 20 1-year 5.02 5.69 5.23 5.64 5.35 5.26 5.28 n.a. n.a. n.a. 5.28 n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 5.32 5.94 5.52 5.87 5.69 5.54 5.56 5.48 5.55 5.59 5.54 5.59 22 2-year 5.94 6.15 5.84 6.28 6.09 5.89 5.94 5.81 5.94 5.95 5.90 5.98 23 3-year 6.27 6.25 5.99 6.42 6.24 6.00 6.06 5.90 6.06 6.08 6.01 6.11 24 5-year 6.69 6.38 6.18 6.57 6.38 6.12 6.16 6.00 6.15 6.17 6.12 6.22 25 7-year 6.91 6.50 6.34 6.66 6.46 6.20 6.29 6.08 6.25 6.33 6.26 6.35 26 10-year 7.09 6.57 6.44 6.71 6.49 6.22 6.30 6.11 6.26 6.33 6.27 6.36 27 20-year 7.49 6.95 6.83 7.02 6.84 6.56 6.65 6.44 6.59 6.70 6.65 6.71 28 30-year 7.37 6.88 6.71 6.94 6.77 6.51 6.58 6.38 6.52 6.61 6.57 6.63 Composite 29 More than 10 years (long-term) 7.41 6.93 6.80 7.00 6.82 6.55 6.64 6.42 6.57 6.68 6.63 6.69 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 5.77 5.80 5.52 5.48 5.33 5.24 5.25 5.27 5.19 5.31 5.25 5.25 31 Baa 6.17 6.10 5.79 5.67 5.53 5.39 5.37 5.39 5.31 5.41 5.37 5.37 32 Bond Buyer series14 6.18 5.95 5.76 5.70 5.53 5.35 5.41 5.23 5.33 5.42 5.43 5.45 CORPORATE BONDS 33 Seasoned issues, all industries15 8.26 7.83 7.66 7.86 7.68 7.42 7.48 7.29 7.42 7.51 7.47 7.52 Rating group 34 Aaa 7.97 7.59 7.37 7.58 7.41 7.14 7.22 7.01 7.15 7.26 7.22 7.28 35 Aa 8.15 7.72 7.55 7.80 7.62 7.36 7.40 7.24 7.36 7.42 7.38 7.46 36 A 8.28 7.83 7.69 7.86 7.68 7.42 7.46 7.29 7.42 7.48 7.44 7.52 37 Baa 8.63 8.20 8.05 8.20 8.02 7.75 7.82 7.62 7.76 7.86 7.85 7.82 38 A-rated, recently offered utility bonds16 8.29 7.86 7.77 8.01 7.85 7.62 7.67 7.54 7.71 7.64 7.74 7.68 MEMO Dividend-price ratio17 39 Common stocks 2.82 2.56 2.19 1.85 1.77 1.66 1.65 1.62 1.60 1.67 1.64 1.69 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 sevyn 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. Al 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 • November 1997 1.36 STOCK MARKET Selected Statistics 1996 1997 IInnddiiccaattoorr 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May June July Aug. Prices and trading volume (averages of daily figures)1 Common stock prices (indexes) 1 New York Slock Exchange (Dec. 31, 1965 = 50) 254.16 291.18 357.98 391.61 403.58 418.57 416.72 401.00 433.36 457.07 480.94 482.39 2 Industrial 315.32 367.40 453.57 494.38 509.18 524.30 523.08 506.69 549.65 578.57 610.42 609.54 3 Transportation 247.17 270.14 327.30 352.28 359.40 364.15 372.37 366.67 395.50 410.93 433.75 439.71 4 Utility 104.96 110.64 126.36 128.55 131.95 142.88 132.38 126.66 140.52 140.24 144.25 143.82 5 Finance 209.75 238.48 30.3.94 350.01 361.45 388.75 387.19 364.25 392.32 419.12 441.59 446.93 6 Standard & Poor's Corporation (1941 —43 = 10): 460.42 541.72 670.49 743.25 766.22 798.39 792.16 763.93 833.09 876.29 925.29 927.74 7 American Stock Exchange (Aug. 31, 1973 = 50T 449.49 498.13 570.86 582.96 585.09 593.29 593.64 554.1.3 584.06 619.94 635.28 645.59 Volume of trading (thousands of shares) 8 New York Stock Exchange 290,652 345.729 409,740 431.538 526,631 508,199 496.241 473,094 479,907 516,241 543,006 506.205 9 American Stock Exchange 17,951 20,387 22,567 23,648 24.019 21,250 19,232 19,122 19,634 23,277 25,562 24,095 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 61,160 76,680 97,400 97,400 99,460 100,000 100,160 98,870 106,010 113,440 116,190 119,810 Free credit balances at brokers5 11 Margin accounts6 14,095 16.250 22,540 22,540 22.870 22.200 22.930 22,700 22,050 23,860 24.290 23,375 12 Cash accounts 28,870 34,340 40,430 40.430 41,280 40.090 41,050 37,560 39,400 41.840 43,985 42,975 Margin requirements (percent of market value and effective date)7 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. Daily data on prices are available upon request to the Board of Governors. For ordering 6. Series initiated in June 1984. address, see inside front cover. 7. Margin requirements, stated in regulations adopted by the Board of Governors pursuant 2. In July 1976 a financial group, composed of banks and insurance companies, was added to the Securities Exchange Act of 1934, limit the amount of credit that can be used to to the group of stocks on which the index is based. The index is now based on 400 industrial purchase and carry "margin securities" (as defined in the regulations) when such credit is stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60). and collateralized by securities. Margin requirements on securities are the difference between the 40 financial. market value (100 percent) and the maximum loan value of collateral as prescribed by the 3. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1. previous readings in half. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971. 4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the included credit extended against stocks, convertible bonds, stocks acquired through the initial margin required for writing options on securities, setting it at 30 percent of the current exercise of subscription rights, corporate bonds, and government securities. Separate report- market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in required initial margin, allowing it to be the same as the option maintenance margin required April 1984. by the appropriate exchange or self-regulatory organization; such maintenance margin rules 5. Free credit balances are amounts in accounts with no unfulfilled commitments to must be approved by the Securities and Exchange Commission. brokers and are subject to withdrawal by customers on demand. 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 Calenc ar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1997 11999944 11999955 11999966 Mar. Apr. May June July Aug. U.S. budget1 1 Receipts, total 1.258,627 1,351,830 1,453,062 108,099 228,588 94,493 173.361 109,178 103.483 2 On-budget 923.601 1,000,751 1,085,570 73,869 187,997 63,146 135,922 79.599 70.902 3 Off-budget 335.026 351,079 367,492 34.230 40,591 31,347 37.439 29,579 32,581 4 Outlays, total 1,461.731 1.515,729 1.560,330 129,422 134,650 142,988 118.726 134.802 138.086 5 On-budget 1,181,469 1.227.065 1,259,872 100,427 107.842 112.625 105,267 107,049 109.223 6 Off-budget 279,372 288,664 300,458 28,996 26,807 30.362 13.459 27.753 28,862 7 Surplus or deficit (-), total -203,104 -163.899 -107,268 -21,323 93,939 -48,494 54.635 -25,624 -34.603 8 On-budget -258,758 -226.314 -174,302 -26,558 80,155 -49,479 30.655 -27,450 -.38,321 9 Off-budget 55,654 62,415 67,034 5.234 13,784 985 23,980 1,826 3,719 Source of financing (total) 10 Borrowing from the public 185,344 171,288 129,712 28.833 -39,001 -19,054 -11.147 -1.408 30.348 11 Operating cash (decrease, or increase (-)) 16,564 -2,007 -6,276 -18,274 -55,908 72,532 -34,387 23,748 15.435 12 Other 2 1,196 -5,382 -16,168 10.764 970 -4,984 -9.101 3,284 - 11.180 MEMO 13 Treasury operating balance (level, end of period) 35,942 37,949 44,225 33,496 89,404 16,872 51,259 27,511 12,076 14 Federal Reserve Banks 6,848 8,620 7,700 5,945 52,215 5.174 16.368 5.014 4,700 15 Tax and loan accounts 29,094 29,329 36,525 27,551 37,189 11,698 34,891 22.496 7.376 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 Nonfinancial Statistics • November 1997 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1995 1996 1997 1997 11999955 11999966 H2 HI H2 HI June July Aug. RECEIPTS 1 All sources 1,351,830 1,453,062 656,865 767,099 707,551 845,552 173,361 109,178 103,483 2 Individual income taxes, net 590,244 656,417 292,393 347,285 323,884 400,435 74.381 53,868 45,669 3 Withheld 499,927 533.080 256,916 264,177 279,988 292,252 44,802 51,812 43,156 4 Nonwithheld 175,855 212,168 45,521 162,782 53,491 191,050 31,395 4,003 4,244 5 Refunds 85,538 88,897 10,058 79,735 9,604 82,926 1,825 1,950 1,732 Corporation income taxes 6 Gross receipts 174,422 189,055 88,302 96,480 95,364 106,451 40,541 5,442 3,854 7 Refunds 17,418 17,231 7,518 9,704 10,053 9,635 1,169 1,739 1,575 8 Social insurance taxes and contributions, net . . . 484,473 509,414 224,269 277,767 240,326 288,251 48,612 40,572 46,201 y Employment taxes and contributions2 451,045 476,361 211,323 257,446 227,777 268,357 47,933 38,066 41,861 10 Unemployment insurance 28,878 28,584 10,702 18,068 10,302 17,709 343 2,081 4,002 n Other net receipts3 4,550 4,469 2,247 2,254 2,245 2,184 336 425 338 12 Excise taxes 57,484 54,014 30,014 25,682 27,016 28,084 5,185 5,369 4,593 13 Customs deposits 19,301 18,670 9,849 8,731 9,294 8,619 1,522 1,799 1,749 14 Estate and gift taxes 14,763 17,189 7,718 8,775 8,835 10,477 1,494 1,552 1,655 15 Miscellaneous receipts4 28,561 25,534 11,839 12,087 12,888 12,866 2,793 2.315 1,338 OUTLAYS 16 All types 1,515,729 1,560,330 752,856 785,368 800,184 797,443 118,726 134,802 138,086 17 National defense 272,066 265,748 132,887 132,599 138.351r 131,525 20,613 22,944 24,259 18 International affairs 16,434 13.496 6,908 8,076 8,895 5,779 472 1,541 494 19 General science, space, and technology 16,724 16,709 7,970 8,897 9,498 8,939 1,565 1,763 1,643 20 Energy 4,936 2,836 1,992 1,356 806 801 -5 238 48 21 Natural resources and environment 22,078 21,614 11,392 10,254 11,642 9,688 1,622 1,909 1,555 22 Agriculture 9,778 9,159 3,065 73 10,698r 1,433 -255 -35 121 23 Commerce and housing credit -17,808 -10,646 -3,947 -6,885 -5,866r -7,575 779 -415 -1,917 24 Transportation 39,350 39,565 20,725 18,290 21,205 18,046 3,224 3,667 3.730 25 Community and regional development 10,641 10,685 5,569 5,245 6,192 5,699 1,207 958 865 26 Education, training, employment, and social services 54,263 52,001 26,212 25,979 26,033' 25,227 3,702 3,542 4,055 27 Health 115,418 119,378 57,128 59,989 61,466 61,808 10,595 9,821 10,024 28 Social security and Medicare 495,701 523,901 251,388 264,647 269,410 278,817 47,558 47,860 48,683 29 Income security 220,493 225,989 104,847 121,186 107,182 123,874 11,298 17,921 19,702 30 Veterans benefits and services 37,890 36,985 18,678 18,140 21,107 17,697 1,583 3,409 4,806 31 Administration of justice 16,216 17,548 8,091 9,015 9,595 10,643 1,883 1,863 1,484 32 General government 13,835 11,892 7,601 4,641 6,544 6,574 1.897 366 747 33 Net interest5 232,169 241,090 119,348 120,576 122,568 122,701 19,543 21,046 21,049 34 Undistributed offsetting receipts6 -44,455 -37,620 -26,995 -16,716 — 25,140r -24,234 -8,556 -3,594 -3,262 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. 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 5. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 6. 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. Federal employee retirement contributions and civil service retirement and Government. Fiscal Year 1998\ monthly and half-year totals: U.S. Department of the Treadisability fund. sury, Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A21 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1995 1996 1997 IItteemm June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding 4,978 5,001 5,017 5,153 5,197 5,260 5,357 5,415 5,410 9 Public debt securities 4,951 4,974 4,989 5,118 5,161 5,225 5.323 5,381 5,376 3 Held by public 3,635 3,653 3,684 3,764 3,739 3,778 3,826 3,874 n.a. 4 Held by agencies 1,317 1,321 1,305 1,354 1,422 1,447 1,497 1,507 n.a. 5 Agency securities 27 27 28 36 36 35 34 34 34 6 Held by public 27 27 28 28 28 27 27 26 n.a. 7 Held by agencies 0 0 0 8 8 8 8 8 n.a. 8 Debt subject to statutory limit 4,861 4,885 4,900 5,030 5,073 5,137 5,237 5,294 5,290 9 Public debt securities 4,861 4,885 4,900 5,030 5,073 5,137 5,237 5,294 5,290 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,900 4,900 4,900 5,500 5,500 5,500 5,500 5,500 5,500 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCE. 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 1996 1997 TTyyppee aanndd hhoollddeerr 11999933 11999944 11999955 11999966 Q3 Q4 Q1 Q2 1 Total gross public debt 4,535.7 4,800.2 4,988.7 5,323.2 5,224.8 5,323.2 5,380.9 5,376.2 By type 2 Interest-bearing 4,532.3 4,769.2 4.964.4 5,317.2 5,220.8 5,317.2 5,375.1 5,370.5 3 Marketable 2,989.5 3,126.0 3,307.2 3,459.7 3,418.4 3,459.7 3,504.4 3,433.1 4 Bills 714.6 733.8 760.7 777.4 761.2 777.4 785.6 704.1 5 Notes 1,764.0 1,867.0 2,010.3 2,112.3 2,098.7 2,112.3 2,131.0 2,132.6 6 Bonds 495.9 510.3 521.2 555.0 543.5 555.0 565.4 565.4 7 Inflation-indexed notes' n.a. n.a. n.a. n.a. n.a. n.a. 7.4 15.9 8 Nonmarketable2 1,542.9 1,643.1 1,657.2 1,857.5 1,802.4 1,857.5 1,870.8 1,937.4 9 State and local government series 149.5 132.6 104.5 101.3 95.7 101.3 104.8 107.9 10 Foreign issues3 43.5 42.5 40.8 37.4 37.5 37.4 36.8 35.4 11 Government 43.5 42.5 40.8 47.4 37.5 47.4 36.8 35.4 17 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 169.4 177.8 181.9 182.4 184.2 182.4 182.6 182.7 14 Government account series4 1,150.0 1,259.8 1,299.6 1,505.9 1,454.7 1,505.9 1,516.6 1.581.5 15 Non-interest-bearing 3.4 31.0 24.3 6.0 4.0 6.0 5.8 5.7 By holder5 16 U.S. Treasury and other federal agencies and trust funds 1,153.5 1,257.1 1,304.5 1,497.2 1,447.0 1,497.2 1,506.8 17 Federal Reserve Banks 334.2 374.1 391.0 410.9 390.9 410.9 405.6 18 Private investors 3,047.4 3,168.0 3,294.9 3,411.2 3,386.2 3,411.2 3,451.7 19 Commercial banks 322.2 290.4 278.7 261,7r 274.8 261.7r 275.0 20 Money market funds 80.8 67.6 71.5r 91.6r 85.2 91,6r 83.9 21 Insurance companies 234.5 240.1 241.5 235.9r 235.6r 235.9r 236.5 22 Other companies 213.0 224.5r 228.8 258.5 249.1 258.5 262.5 n.a. 23 State and local treasuries6,7 609.2r 540.2r 421.5r 358.0r 382.3r 358.0r 353.0 Individuals 24 Savings bonds 171.9 180.5 185.0 187.0 186.8 187.0 186.5 25 Other securities 137.9 150.7 162.7 169.6 167.0 169.6 168.9 26 Foreign and international8 623.0 688.6 862.2 l,131.8r 1,030.9 l,131.8r 1,199.1 27 Other miscellaneous investors7-9 655.0r 785.5r 843.0r 717.1r 774.5' 717.1' 686.4 1. The U.S. Treasury first issued inflation-indexed notes during the first quarter of 1997. 8. Consists of investments of foreign balances and international accounts in the United 2. Includes (not shown separately) securities issued to the Rural Electrification Administra- States. tion, depository bonds, retirement plan bonds, and individual retirement bonds. 9. Includes savings and loan associations, nonprofit institutions, credit unions, mutual 3. Nonmarketable series denominated in dollars, and series denominated in foreign cur- savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury rency held by foreigners. deposit accounts, and federally sponsored agencies. 4. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. SOURCE. U.S. Treasury Department, data by type of security, Monthly Statement of the 5. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual Public Debt of the United Slates; data by holder, Treasury Bulletin. holdings; data for other groups are Treasury estimates. 6. Includes state and local pension funds. 7. 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 • November 1997 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1997 1997, week ending Item May June July July 2 July 9 July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 42,017 40,559 34,285 35,964 30,635 32,509 38,791 33,065 37,984 36,968 42,911 35,643 Coupon securities, by maturity 2 Five years or less 107,517 112,860 102,092 112,630 92,504 98,686 109,764 95.979 128,597 126,523 104,348 113,125 3 More than five years 57,216 56,041 61,251 51.414 59,006 56,905 56,563 70,380 89.426 83,774 58,763 49,205 4 Federal agency 41,103 39,498 39,871 47.604 39,648 36,876 36,051 43,617 40,633 36,008 51,925 40.040 5 Mortgage-backed 39,712 48,439 50,317 40.589 68,903 54,575 38.158 45,711 57,973 63,852 41,189 34,619 By type of counterparty With interdealer broker 6 U.S. Treasury 120,714 118,504 110,830 108,794 100,433 105,229 116,955 113,020 142,913 141.650 117,316 115,088 7 Federal agency 1,003 1,378 1,460 1,389 2.053 1,253 1,063 1,710 1,006 909 1,234 1,859 8 Mortgage-backed 12,677 15.552 15.503 13,294 17,621 17,207 11,992 15,535 20,322 18.527 13,321 11,840 With other 9 U.S. Treasury 86,036 90,956 86.798 91,213 81.713 82,870 88,162 86,404 113,095 105,615 88.705 82,886 10 Federal agency 40,100 38,120 38,411 46,215 37,595 35,623 34,989 41,907 39,628 35,098 50,692 38,181 11 Mortgage-backed 27,035 32,887 34,815 27,295 51,283 37,368 26,166 30,176 37,651 45,325 27,868 22,778 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 217 352 188 n.a. n.a. 103 339 135 125 197 254 166 Coupon securities, by maturity 13 Five years or less 2,014 2.430 1,399 2,433 1,082 1.354 1,196 1,425 1,700 2.322 1,550 2,812 14 More than five years 14,506 15,048 14.693 11,864 13,024 14,384 16.056 15,123 19,607 22,420 15,800 17,445 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 3,570 3,103 2,231 3,095 2,362 2.494 2,000 1.725 2,352 2,482 1,514 2,436 19 More than five years 5,024 4,018 6,038 4,271 8,238 4,791 6,506 5.726 6,224 6,146 4,922 7,981 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 560 408 576 304 887 290 557 711 715 473 634 555 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 live 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 o rcorpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A21 1.43 US. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1997 1997. week ending IItteemm May June July July 2 July 9 July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Positions' NET OUTRIGHT POSITIONS1 By type of security 1 U.S. Treasury bills -5,335 -1,305 -2,696 -7,425 -5,265 -3,117 -1,038 -1,960 10,935 5,179 2,701 Coupon securities, by maturity 2 Five vears or less -22,394 -20,661 -15,429 -23,790 -18,706 -17,720 -12,025 -10,780 -16,112 -28,997 -35,270 3 More than five years -18,077 -20,191 -21,652 -25,420 -21,965 -22,963 -20,857 -20,958 -13,167 -14,483 -18,062 4 Federal agency 29,451 31,556 36,617 29,693 31,388 42,158 36,535 38,716 34,147 32.110 33,278 5 Mortgage-backed 35,472 35,836 33,661 35,866 31,276 35,337 35,484 32,553 29,220 35,890 36,928 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -974 633 303 1,355 1,535 1,311 -252 -1,461 -1,236 -669 -544 Coupon securities, by maturity 7 Five years or less 3,100 2,705 3.187 3,676 3,119 3,740 2,769 2,751 4,797 7,946 7,678 8 More than five years -11,685 -13,430 -17,588 -12,348 -15,715 -17,546 -18,512 -19,708 -20,172 -17,848 -15,650 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 vears or less 848 2,660 2,361 1,621 2,506 2,273 2,448 2,572 1,344 -904 -137 13 More than five years -671 2,466 4,960 2,857 3,643 1,833 7,081 7.709 6,198 6,003 6,814 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 2,210 240 470 439 249 43 521 955 1,325 636 1,565 Financing5 Reverse repurchase agreements 16 Overnight and continuing 293,697 290,312 296,334 299,419 304,295 295,803 285,438 296,772 311,349 283,101 318,142 17 Term 552,156 592,367 601,067 542,271 574,692 584,084 626,375 630,423 639,511 677,434 606,312 Securities borrowed 18 Overnight and continuing 216,864 213,510 213,183 219,116 214,131 214,489 214,679 207,173 217.146 209,796 213,882 19 Term 78,569 87,422 91,863 83,907 91,447 92,001 95,797 89,853 96,254 95,296 94,625 Securities received as pledge 20 Overnight and continuing 4,104 8,826 8,712 10.706 9,885 8,501 8,092 7,940 7,730 8,374 8,217 21 Term 188 163 121 156 137 116 117 104 107 99 89 Repurchase agreements 22 Overnight and continuing 602,889 626,329 642.431 623,786 634,318 651,834 638.716 645,874 672,600 646,334 672,755 23 Term 500,610 538,571 550,542 492,997 516,923 532,333 582,543 581,231 589,607 635,022 554,278 Securities loaned 24 Overnight and continuing 6,399 6.774 7,843 7,330 7,473 7.812 8,524 7,692 7.954 7,752 8,580 25 Term 4,352 4,574 4,688 4,497 4,394 4,293 4,990 4,980 5,750 6,150 4,979 Securities pledged 26 Overnight and continuing 62,667 61.239 54,921 59.623 58.453 55,283 52,747 52,033 53,696 52,199 53,276 27 Term 2,956 1,736 1,904 2,009 2,052 2,025 1,858 1.646 1,943 2,554 2,242 Collateralized loans 28 Overnight and continuing n.a n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 29 Term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 30 Total 12.391 13,374 14,547 11,757 13,272 13,790 13.679 17,811 17,590 16,535 17,595 MEMO: Matched book6 Securities in 31 Overnight and continuing 298,289 290,345 291.783 298,739 305,482 294,008 281,480 282,362 304.460 276,360 293,653 32 Term 531,303 575,636 587,039 527,780 565,779 569,975 610,930 613,564 620.921 656,596 590,223 Securities out 33 Overnight and continuing 363,061 380,179 381.031 370,136 384,736 383,121 376,160 379,418 407,652 377,356 396,674 34 Term 432,788 461,838 474,771 425,473 446,662 453.947 500,175 507,676 507,726 549,360 461,382 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 • November 1997 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1997 AAggeennccyy 11999933 11999944 11999955 11999966 Feb. Mar. Apr. May June 1 Federal and federally sponsored agencies 570,711 738,928 844,611 925,823 927,400 929,809 960,491 974,331 972,731 2 Federal agencies 45,193 39,186 37,347 29,380 29,303 28,989 27,762 28,011 27,646 3 Defense Department1 6 6 6 6 6 6 6 6 6 4 Export-Import Bank2 3 5,315 3,455 2,050 1,447 1,437 1,363 1,357 1,357 1,357 5 Federal Housing Administration4 255 116 97 84 146 26 31 32 37 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. I Postal Service6 9,732 8,073 5,765 n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Valley Authority 29,885 27,536 29,429 27,853 27,714 27,594 27,756 28,005 27,640 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 523,452 699,742 807,264 896,443 898,097 900,820 932,729 946,320 945,085 II Federal Home Loan Banks 139,512 205,817 243,194 263,404 255,407 266,456 277,880 284,861 290,028 12 Federal Home Loan Mortgage Corporation 49,993 93,279 119,961 156,980 161,532 153,621 162,872 167,407 161,900 13 Federal National Mortgage Association 201,112 257,230 299,174 331,270 332,046 336,174 341,789 344,350 345,462 14 Farm Credit Banks8 53,123 53,175 57,379 60,053 60,075 60,884 60,945 61,384 62,075 15 Student Loan Marketing Association9 39,784 50,335 47,529 44,763 48,707 43,105 48,515 47,620 44,841 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 53,243 29,996 29,996 MEMO 19 Federal Financing Bank debt13 128,187 103,817 78,681 58,172 57,625 53,688 n.a. 51,866 50,962 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 5,309 3,449 2,044 1,431 1,431 1,357 1,357 1,357 1,357 21 Postal Service6 9,732 8,073 5,765 n.a. n.a. n.a. n.a. n.a. n.a. 22 Student Loan Marketing Association 4,760 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 6,325 3,200 3,200 n.a. n.a. n.a. n.a. n.a. n.a. 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 38,619 33,719 21,015 18,325 17,875 16,675 16,675 16,505 15,455 26 Rural Electrification Administration 17,578 17,392 17,144 16,702 16,710 15,696 15,696 15,674 15,679 27 Other 45,864 37,984 29,513 21,714 21,609 21,317 23,919 18,330 18,471 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 Markets and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1997 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June1 Julyr Aug. 1 AH issues, new and refunding' 153,950 145,657 171,222 10,340 12,052 13,701 15,741 15,447 19,376 16,134 15,302 B\ txpe of issue 2 General obligation 54,404 56.980 60.409 4.160 4.287 5,491 6.224 5.741 6,145 7,446 5.098 3 Revenue 99,546 88,677 110,813 6,180 7.765 8,210 9.517 9.706 13,231 8.688 10.204 Bx type of issuer 4 State 19,186 14.665 13,651 728 713 4,037 1,126 1,219 1,197 1.985 1.385 5 Special district or statutory authority" 95,896 93,500 113.228 6,306 8.341 7,206 11,124 9,666 13,810 10,182 9.243 6 Municipality, county, or township 38,868 37,492 44,343 3.306 2,998 2.458 3,491 4,562 4.369 3.967 4.674 7 Issues for new capital 105,972 102,390 112,298 6,106 8,409 8,736 ll,835r 10,507 14,536 9,169 8,702 B\ use of proceeds Education 21,267 23,964 26,851 1.974 1,924 2,330 3.264 2,844 3.498 2.689 2,742 9 Transportation 10,836 11,890 12.324 808 639 393 1,873 1.225 638 666 1,233 10 Utilities and conservation 10,192 9,618 9,791 749 901 954 425 1,608 1.615 1,429 591 11 Social welfare 20,289 19,566 24,583 1,265 1,281 2.644 1,929 1,291 4,438 1,777 1,654 12 Industrial aid 8,161 6,581 6,287 231 481 317 765 462 637 282 787 13 Other purposes 35,227 30,771 32,462 1.079 3.183 2.098 3,220 3.077 3,710 2,326 1,695 1. Par amounts of long-term issues based on date of sale. SOURCE. Securities Data Company beginning January 1990; Investment Dealer's 2. Includes school districts. Digest before then. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1996 1997 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, oorr iissssuueerr 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May June July 1 All issues' 583,240 n.a. n a. 48,747 57,186 53,027 62,411 43,956 54,750r 82,558 64,439 2 Bonds2 498,039 573,206 n.a. 39,585 44,027 44,980 54,632 37,672 46,738r 71,588 55,420 By type of offering 3 Public, domestic 365.222 408,804 386,280 37,108 35,449 35.245 45,886 29.797 38.594R 59,621 4433,,666666 4 Private placement, domestic 76.065 87.492 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 56,755 76,910 74,793 2,477 8,577 9,735 8,746 7,875 8.144 11.967 11,755 By industry qroup 6 Manufacturing 43,423 61,070 41.959 5,096 4,088 4,791 3.060 2.276 2,355 3.748 7.780 7 Commercial and miscellaneous 40.735 50,689 34,076 1,727 4,926 2,004 1.641 6,201 2,104' 2,771 4,579 8 Transportation 6,867 8,430 5,111 341 366 100 324 257 6,566R 424 544 9 Public utility 13,322 13,751 8,161 680 858 1,476 1,185 47 653 1.377 3,674 10 Communication 13,340 22,999 13,320 628 1,210 405 2.802 500 300 576 1.304 11 Real estate and financial 380,352 416,269 358,446 31,113 32.578 36,204 45.619 28.391 34.76 lr 62,692 37.540 12 Stocks2 85,155 100,573 n a. 9,162 13,159 8,047 7,779 6,284 8,012 10,970 9,019 By type of offering 13 Public preferred 12,570 10.917 33,208 5.452 8.048 1,510 2,740 1.952 22,,005555 3,846 664499 14 Common 47,828 57,556 83,052 3,710 5.111 6.537 5,039 4,332 5,957 7,124 9.668 15 Private placement3 24,800 32.100 n.a. n.a. n.a. n.u. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 17,798 21.545 899 608 2,008 1,136 847 1,594 968 1.344 17 Commercial and miscellaneous 15,713 27,844 n a. 2,922 1,827 3.041 1,923 1,181 1.912 2.938 2,804 18 Transportation 2,203 804 54 250 258 0 0 35 272 563 19 Public utility 2,214 1.936 103 1.847 96 841 570 200 1.046 483 20 Communication 494 1,077 23 0 28 0 25 0 374 120 21 Real estate and financial 46,733 47,367 5,161 8.292 2,575 3,879 3,661 4,219 5.384 3.828 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- SOURCE. 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 Financial Statistics • November 1997 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1997 IItteemm 11999955 11999966 Jan. Feb. Mar. Apr. May Juner July Aug. 1 Sales of own shares" 871,415 1,149,918 134,460 102,169 101,390 110,721 103,470 112,318 125,710 115,444 Redemptions of own shares 699.497 853,460 96.243 73.871 79.976 100,188 76,337 86.759 90.095 85,503 3 Net sales3 171,918 296,458 38.218 28.298 21,413 10,532 27.133 25,559 35,615 29,941 4 Assets4 2,067,337 2,637,398 2,752,273 2,772,715 2,700,474 2,782,077 2,952,609 3,067,565 3,279,535 3,199,871 5 Cash 142.572 139.396 152.297 153,525 160.570 177,979 182,004 180,552 182,122 180,624 6 Other 1,924.765 2.498.002 2.599.976 2.619,189 2.539,906 2.604.098 2,770.606 2.887,013 3,097,413 3,019,247 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 1995 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2r 1 Profits with inventory valuation and capital consumption adjustment 570.5 650.0 735.9 672.8 685.7 717.7 738.5 739.6 747.8 779.6 795.1 2 Profits before taxes 535.1 622.6 676.6 630.6 634.1 664.9 682.2 679.1 680.0 708.4 719.8 3 Profits-tax liabilitv 186.6 213.2 229.0 218.8 215.3 226.2 232.2 231.6 226.0 241.2 244.5 4 Profits after taxes 348.5 409.4 447.6 411.8 418.8 438.7 450.0 447.5 454.0 467.2 475.3 5 Dividends 216.2 264.4 304.8 266.8 274.4 300.7 303.7 305.7 309.1 326.8 333.0 6 Undistributed profits 132.3 145.0 142.8 145.0 144.5 138.0 146.4 141.8 144.9 140.3 142.3 7 Inventory valuation -16.1 -24.3 -2.5 -9.3 .4 -5.1 -5.4 -2.7 3.3 3.5 5.9 8 Capital consumption adjustment 51.4 51.6 61.8 51.5 51.1 57.9 61.6 63.2 64.4 67.7 69.4 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1995 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q4 Ql Q2 Q3 Q4 Ql Q2 ASSETS 1 Accounts receivable, gross" 543.7 607.0 637.1 607.0 613.7 626.7 628.1 637.1 647.2 650.7 2 Consumer 201.9 233.0 244.9 233.0 235.9 240.6 244.4 244.9 248.6 254.3 3 Business 274.9 301.6 309.5 301.6 303.5 305.7 301.4 309.5 315.2 311.7 4 Real estate 66.9 72.4 82.7 72.4 74.3 80.4 82.2 82.7 83.4 84.8 5 LESS: Reserves for unearned income 52.9 60.7 55.6 60.7 58.9 57.2 54.8 55.6 51.3 57.0 6 Reserves for losses 11.3 12.8 13.1 12.8 12.8 12.7 12.9 13.1 12.8 13.3 7 Accounts receivable, net 479.5 533.5 568.3 533.5 542.0 556.7 560.5 568.3 583.1 580.4 8 All other 216.8 250.9 290.0 250.9 255.0 258.7 268.7 290.0 289.9 308.1 9 Total assets 696.3 784.4 858.3 784.4 796.9 815.4 829.2 858.3 873.0 888.6 LIABILITIES AND CAPITAL 10 Bank loans 14.8 15.3 19.7 15.3 15.4 17.7 18.3 19.7 18.4 18.9 11 Commercial paper 171.6 168.6 177.6 168.6 168.2 169.6 173.1 177.6 185.3 193.8 Debt 12 Owed to parent 41.8 51.1 60.3 51.1 50.5 56.3 57.9 60.3 61.0 61.4 13 Not elsewhere classified 247.4 300.0 332.5 300.0 .307.5 319.0 322.3 332.5 324.4 344.6 14 All other liabilities 146.2 163.6 174.7 163.6 165.6 163.2 164.8 174.7 189.1 170.9 15 Capital, surplus, and undivided profits 74.6 85.9 93.5 85.9 89.7 89.7 92.8 93.5 94.8 98.8 16 Total liabilities and capital 696.3 784.4 858.3 784.4 796.9 815.4 829.2 858.3 873.0 888.6 1. Includes linance 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 arc not on the books. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A33 1.52 DOMESTIC FINANCE COMPANIES Owned and Managed Receivables' Billions of dollars, amounts outstanding 1997 TTyyppee ooff ccrreeddiitt 11999944 11999955 11999966 Feb. Mar. Apr. May June July Seasonally adjusted 1 Total 607.3 682.4 762.4 767.7 773.8 775.6 775.9 782.9r 788.0 2 Consumer. 244.4 281.9 306.6 311.3 312.5 318.2 318.5 320.8r 323.6 3 Real estate 66.9 72.4 111.9 112.8 115.5 116.9 118.0 120.1' 121.8 4 Business . . 295.9 328.1 343.8 343.5 345.8 340.5 339.3 342.0 342.5 Not seasonally adjusted 5 Total 613.5 689.5 769.7 766.2 775.0 776.6 777.8 786.9r 782.2 6 Consumer 248.0 285.8 310.6 309.9 311.0 315.6 317.5 320.9' 322.6 7 Motor vehicles loans 70.2 81.1 86.7 87.1 85.8 83.2 85.1 87.0 88.8 8 Motor vehicle leases 67.5 80.8 92.5 94.3 95.6 96.7 97.3 98.5 99.5 9 Revolving" 25.9 28.5 32.5 32.2 33.2 34.3 34.4 34.0' 33.1 10 Other1 38.4 42.6 33.2 34.0 34.0 34.3 34.7 34.8' 34.7 Securitized assets4 1 1 Motor vehicle loans 32.8 34.8 36.8 34.2 34.5 38.3 36.8 37.8' 38.0 12 Motor vehicle leases 2.2 3.5 8.7 8.5 8.4 9.4 9.3 9.2' 9.0 13 Revolving n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14 Other 11.2 14.7 20.1 19.7 19.6 19.3 19.9 19.7 19.5 15 Real estate 66.9 72.4 111.9 112.8 115.5 116.9 118.0 120.1' 121.8 16 One- to four-family n.a. n.a. 52.1 53.8 53.3 55.0 54.9 54.5' 56.8 17 Other n.a. n.a. 30.5 30.2 30.1 30.3 30.3 30.3 30.3 Securitized real estate assets4 18 One- to four-family n.a. n.a. 28.9 28.5 31.8 31.3 32.5 35.0 34.4 19 Other n.a. n.a. 0.4 0.3 0.4 0.3 0.3 0.3 0.3 20 Business 298.6 331.2 347.2 343.4 348.5 344.1 342.2 345.9 337.8 21 Motor vehicles 62.0 66.5 67.1 71.0 73.8 71.7 70.4 70.7 63.6 22 Retail loans 18.5 21.8 25.1 25.0 25.1 24.6 24.4 25.2 24.4 23 Wholesale loans' 35.2 36.6 33.0 36.9 39.6 37.9 36.6 36.3 29.9 24 Leases 8.3 8.0 9.0 9.1 9.1 9.2 9.3 9.3 9.3 25 Equipment 8.3 8.0 9.0 190.8 192.1 189.9 188.0 188.8 188.3 26 Loans 8.3 8.0 9.0 54.5 55.0 53.8 52.3 52.6 51.7 27 Leases 8.3 8.0 9.0 136.3 137.1 136.1 135.6 136.2 136.6 28 Other business receivables6 8.3 8.0 9.0 48.3 49.3 49.6 50.3 52.2 51.6 Securitized assets4 29 Motor vehicles 8.3 8.0 9.0 20.7 20.5 20.3 21.1 21.3 19.9 30 Retail loans 8.3 8.0 9.0 2.4 2.2 2.1 2.6 2.5 2.4 31 Wholesale loans 8.3 8.0 9.0 18.3 18.2 18.2 18.5 18.7 17.4 32 Leases 8.3 8.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 33 Equipment 8.3 8.0 9.0 10.3 10.3 9.9 9.9 10.4 12.0 34 Loans 8.3 8.0 9.0 4.2 4.0 3.8 4.0 3.9 4.2 35 Leases 8.3 8.0 9.0 6.0 6.3 6.2 5.9 6.5 7.8 36 Other business receivables6 8.3 8.0 9.0 2.4 2.5 2.6 2.5 2.5 2.5 NOTE. This table has been revised to incorporate several changes resulting from the before deductions for unearned income and losses. Components may not sum to totals benchmarking of finance company receivables to the June 1996 Survey of Finance Compa- because of rounding. nies. In that benchmark survey, and in the monthly surveys that have followed, more detailed 2. Excludes revolving credit reported as held by depository institutions that are subsidiarbreakdowns have been obtained for some components. In addition, previously unavailable ies of finance companies. data on securitized real estate loans are now included in this table. The new information has 3. Includes personal cash loans, mobile home loans, and loans to purchase oilier lypes of resulted in some reclassification of receivables among the three major categories (consumer, consumer goods such as appliances, apparel, boats, and recreation vehicles. real estate, and business) and in discontinuities in some component series between May and 4. Outstanding balances of pools upon which securities have been issued; these balances June 1996. are no longer carried on the balance sheets of the loan originator. Includes finance company subsidiaries of bank holding companies but not of retailers and 5. Credit arising from transactions between manufacturers and dealers, that is. floor plan banks. Data in this table also appear in the Board's G.20 (422) monthly statistical release. For financing. ordering address, see inside front cover. 6. Includes loans on commercial accounts receivable, factored commercial accounts, and 1. Owned receivables are those carried on the balance sheet of the institution. Managed receivable dealer capital; small loans used primarily for business or farm purposes; and receivables are outstanding balances of pools upon which securities have been issued; these wholesale and lease paper for mobile homes, campers, and travel trailers. balances are no longer carried on the balance sheets of the loan originator. Data are shown Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Financial Statistics • November 1997 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1997 Feb. Mar. Apr. May June July Aug. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 170.4 175.8 182.4 166.6 169.2 172.5 177.6 181.4 181.4 191.2 2 Amount of loan (thousands of dollars) 130.8 134.5 139.2 130.9 132.1 134.8 137.7 140.6 142.7 148.2 3 Loan-to-price ratio (percent) 78.X 78.6 78.2 80.9 80.8 81.1 80.0 79.9 81.2 79.8 4 Maturity (vears) 27.5 27.7 27.2 28.2 28.0 27.8 28.2 28.0 28.7 28.2 5 Fees and charges (percent of loan amount)- 1.29 1.21 1.21 1.03 0.99 1.04 1.00 1.04 1.05 1.06 Yield Ipercent per year) 6 Contract rate1 7.26 7.65 7.56 7.61 7.72 7.86 7.85 7.79 7.62 7.42 7 Effective rate1'3 7.47 7.85 7.77 7.78 7.88 8.03 8.01 7.95 7.78 7.59 8 Contract rate (HUD series)4 8.58 8.05 8.03 7.94 8.25 8.19 8.08 7.82 7.62 7.67 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.68 8.18 8.19 8.08 8.55 8.56 8.05 8.02 7.61 8.02 10 GNMA securities6 7.96 7.57 7.48 7.37 7.69 7.80 7.59 7.37 7.04 7.16 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 1 1 Total 222,057 253,511 287.052 288,951 292.115 295,804 297.023 297,471 300.439 304.528 12 FHA/VA insured 27,558 28,762 30.592 30,119 30.100 30,839 31.437 31,198 31.065 31,193 13 Conventional 194,499 224,749 256.460 258,832 262,015 264,965 265.586 266,273 269.374 273,335 14 Mortgage transactions purchased (during period) 62,389 56,598 68.618 3,029 5,839 6,683 4.148 3,594 6,417 7,606 Mortgage commitments (during period) 15 Issued' 54.038 56.092 65.859 4.407 8,299 3.898 1,704 6,196 6.956 5.960 16 To sell8 1.820 360 130 0 1 0 23 115 75 219 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings tend of period)* 17 Total 72,693 107,424 137.755 139,925 144,558 147.190 148,698 149,250 151,582 155,169 18 FHA/VA insured 276 267 220 213 208 205 210 210 210 210 19 Conventional 72.416 107.157 137.535 139,712 144,350 146,985 148,488 149,040 151,372 154,959 Mortgage transactions 1during period) :'o Purchases 124,697 98,470 128.566 8.204 7,403 8.981 8,195 8.884 8.374 9,917 21 Sales 117.110 85.877 119.702 10,271 6.796 8.269 7,596 8,321 7,757' 9,187 22 Mortgage commitments contracted (during period)9 136.067 118,659 128.995 7.537 7,595 9,746 7,408 9.099 9.054 9.913 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 1996 1997 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2P 1 All holders 4,261,151r 4,462,816r 4,691,812r 4,861,363r 4,940,700r 5,022,445r 5,080,199 5,162,447 By type of property 2 One- to four-family residences 3,225,01 lr 3,424,018' 3,616,440' 3,719,650' 3,792,425' 3,850,579' 3,898,042 3,955,964 3 Multifamily residences 270,380 275,287' 287,593' 301,063' 305,081' 312,984' 315,578 321,955 4 Nonfarm, nonresidential 685,02 lr 680,540' 703,218' 754,457' 756,462' 771,749' 778,940 795,708 5 Farm 80,739r 82,971' 84,561' 86,193' 86,732' 87,134' 87,639 88,821 Bv type of holder 6 Major financial institutions l,763,410r 1,811,018' 1,884,714' 1,919,622 1,945,088 1,968,859' 1,983,813 2.021,318 7 Commercial banks2 940,603r 1,003,923' 1,080,483' 1,099,643 1,112.914 1,135,133' 1,149,721 1,186,255 8 One- to four-family 556,660 611,092' 663,715' 670,756 678,565' 692,180' 702,553 727,211 9 Multifamily 38,657 39,346' 43,837' 45,368 46,410' 46,676' 47,620 48,752 10 Nonfarm, nonresidential 324,420r 330,934' 349,101' 358,956 363,124' 371,394' 374,317 384,232 11 Farm 20,866 22,551' 23,830' 24,563 24,815 24,883 25,231 26,060 12 Savings institutions" 598,435r 596,191 596,763' 611,735 628,037 628,335' 627,564 629,045 13 One- to four-family 470,000 477,626 482,353' 498,219 513,794' 513,712' 514,575 516,699 14 Multifamily 67,366r 64,343 61,987' 60,680 61,308' 61,570' 60,645 60,102 15 Nonfarm, nonresidential 60,764r 53,933 52,135' 52,522 52,614' 52,723' 52,007 51,906 16 Farm 305 289 288 315 320 331 336 338 17 Life insurance companies 224,372 210,904 207,468 208,244 204,138 205,390' 206,529 206,018 18 One- to four-family 8,593 7,018 7,316 7,270 6,190 6,772' 6,799 6,684 19 Multifamily 25,376 23,902 23,435 23,534 23,155 23,197' 23,320 23,251 20 Nonfarm, nonresidential 180,934 170,421 167,095 167,800 165,096 165,399' 166,277 165,779 21 Farm 9,469 9,563 9,622 9,640 9,697 10,022' 10,133 10,304 22 Federal and related agencies 326,040r 315,580' 306,774' 305,963' 302,793' 300,935' 295,203 292,966 23 Government National Mortgage Association 22 6 2 2 2 2 6 7 24 One- to four-family 15 6 2 2 2 9 6 7 25 Multifamily 7 0 0 0 0 0 0 0 26 Farmers Home Administration4 41,386 41,781 41,791 41,547 41,575 41,596 41,485 41,400 27 One- to four-family 18,030r 18,098' 17,705' 17,396' 17,374' 17,303' 17,175 17,239 28 Multifamily 10,940 11,319 11,617 11,645 11,652 11,685 11,692 11,706 29 Nonfarm, nonresidential 5,406 5,670 6,248 6,552 6,681 6,841 6,969 7,135 30 Farm 7,012r 6,694' 6,221' 5,954' 5,869' 5,768' 5,649 5,321 31 Federal Housing and Veterans' Administrations 12,215 10,964 9,809 8,052 6,627 6,244 4,330 4,200 32 One- to four-family 5,364 4,753 5,180 3,861 3,190 3,524 2,335 2,299 33 Multifamily 6,851 6,211 4,629 4,191 3,438 2,719 1,995 1,900 34 Resolution Trust Corporation 17,284 10,428 1,864 0 0 0 0 0 35 One- to four-family 7,203 5,200 691 0 0 0 0 0 36 Multifamily 5,327 2,859 647 0 0 0 0 0 37 Nonfarm, nonresidential 4,754 2,369 525 0 0 0 0 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 14,112 7,821 4,303 5,016 4,025 2,431 2,217 1,816 40 One- to four-family 2,367 1,049 492 840 675 365 333 272 41 Multifamily 1,426 1,595 428 955 766 413 377 309 42 Nonfarm, nonresidential 10,319 5,177 3,383 3,221 2,584 1,653 1,508 1,235 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 165,668r 174,312' 176,824' 176,692' 175,472' 174,556' 172,829 170,386 45 One- to four-family 150,336' 158,413' 161,322' 161,407' 160,541' 160,205' 159,056 157,167 46 Multifamily 15,332 15,899 15,502' 15,285' 14,931' 14,351' 13,773 13,219 47 Federal Land Banks 28,460 28,555 28.428 29,362 29,579 29,602 29,668 29,963 48 One- to four-family 1,675 1,671 1,673 1,728 1,740 1,742 1,746 1,763 49 Farm 26,785 26,885 26,755 27,634 27,839 27,860 27,922 28,200 50 Federal Home Loan Mortgage Corporation 46,892 41,712 43,753' 45,292' 45,513' 46,504' 44,668 45,194 51 One- to four-family 44,345 38,882 39,901' 41,095' 41,149' 41,758' 39,640 40,092 52 Multifamily 2,547 2,830 3,852 4,197 4,364 4,746 5,028 5,102 53 Mortgage pools or trusts5 1,570,691' 1,726,365' 1,861,489' 1,963.345' 2,008,356' 2,056,276' 2,099,448 2,134,311 54 Government National Mortgage Association 414,066 450,934 472,283' 485,316' 497,018' 506,340' 513,471 520,938 55 One- to four-family 404,864 441,198 461,438' 473,825' 485,073' 494,158' 500,591 507,618 56 Multifamily 9,202 9,736 10,845 11,491 11,945 12,182 12,880 13,320 57 Federal Home Loan Mortgage Corporation 447,147 490,851 515,051 536,671 545,608 554,260 562,894 567,187 58 One- to four-family 442,612 487,725 512,238 534,238 543,341 551,513 560,369 564,445 59 Multifamily 4,535 3,126 2,813 2,433 2,267 2,747 2,525 2,742 60 Federal National Mortgage Association 495,525 530,343 582,959 621,285 636,362 650,780 663,668 673,931 61 One- to four-family 486,804 520,763 569,724 606,271 619,869 633,210 645,324 654,826 62 Multifamily 8,721 9,580 13,235 15,014 16,493 17,570 18,344 19,105 63 Farmers Home Administration4 28 19 11 9 7 3 3 2 64 One- to four-family 5 3 2 1 0 0 0 0 65 Multifamily 0 0 0 0 0 0 0 0 66 Nonfarm, nonresidential 13 9 5 4 4 0 0 0 67 Farm 10 7 4 4 3 3 3 2 68 Private mortgage conduits 213,925' 254,218' 291,185' 320,064' 329,360' 344,894' 359,413 372,253 69 One- to four-family6 179,755' 202,519' 222,526' 238,715' 244,884' 247,740' 256,834 259,950 70 Multifamily 8,701 14,925 21,279 26,809 28,141 33,689 35,498 39,461 71 Nonfarm, nonresidential 25,469 36,774 47,380 54,541 56,336 63,464 67,081 72,842 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 601,010' 609,853' 638,836' 672,433' 684,462' 696,375' 701,735 713,853 74 One- to four-family 446,383' 448,002' 470,163' 464,027' 476,038' 486,395' 490,708 499,692 75 Multifamily 65,393 69,615 73,486' 79,462' 80,212' 81,438' 81,880 82,987 76 Nonfarm, nonresidential 72,943 75,253' 77,345' 110,862' 110,023' 110,275' 110,781 112,579 77 Farm 16,292' 16,983' 17,841' 18,083' 18,190' 18,268' 18,366 18,595 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfarm mortgage debt by type of property, if not reported directly, and interpolations and changes by the Farmers Home Administration. extrapolations, when required for some quarters, are estimated in part by the Federal Reserve. 5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by Line 69 from Inside Mortgage Securities and other sources. the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic NonfinancialS tatistics • November 1997 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1997 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999944 11999955 11999966 Feb. Mar. Apr. May Juner July Seasonally adjusted 11 TToottaall 964,568 1,100,712 1,184,022 l,202,838r 1,205,508r l,215,133r l,217,846r 1,218,616 1,225,127 22 AAuuttoommoobbiillee 326,356 362,097 390,308 390,823 390,450 394,260 394,399 395,315 398,921 33 RReevvoollvviinngg 364,616 441,862 497,977 510,617 509,476 512,381 514,126 516,508 521,905 44 OOtthheerr22 273,596 296,753 295,738 301,398r 305,583r 308,492r 309,322r 306,793 304,301 Not seasonally adjusted 5 Total 988,079 1,128,618 1,214,882 l,197,129r l,193,945r l,203,255r l,207,669r 1,212,982 1,218,078 By major holder 6 Commercial banks 462,923 507,753 529,417 518,557r 51 l,535r 517,261r 518,762r 517,048 521,286 7 Finance companies 134,421 152,123 152,391 153,275 152,995 151,897 154,177 155,805 156,623 8 Credit unions 119,594 131,939 144,148 143,788 144,415 146,265 147,558 148,674 150,121 9 Savings institutions 38,468 40,106 44,711 45,478 45,860 46,243 46,626 47,009 47,392 10 Nonfinancial business3 86,621 85,061 77,745 70,599 69,954 69,346 67,744 68,039 67,625 11 Pools of securitized assets4 146,052 211,636 266,470 265,432 269,186 272,243 272,802 276,407 275,031 By major type of credit5 12 Automobile 328,576 364,726 393,189 387,539 386,713 389,844 391,259 394,429 399,004 13 Commercial banks 141,895 149,094 153,983 151,826 150,458 150,937 151,203 149,029 115511,,446655 14 Finance companies 70,157 81,073 86,690 87,064 85,754 83,230 85,106 86,979 8888,,880099 15 Pools of securitized assets4 36,689 44,635 52,363 48,195 49,334 53,504 51,505 53,731 52,823 16 Revolving 383,187 464,134 522,860 508,559 502,850 504,916 509,207 513,257 516,758 17 Commercial banks 182,021 210,298 228,615 215,772 207,251 209,031 212,796 215,342 219,649 18 Finance companies 25,880 28,460 32,493 32,206 33,225 34,345 34,411 34,011 33,076 19 Nonfinancial business3 56,790 53,525 44,901 39,813 39,433 38,953 37,078 37,283 36,791 20 Pools of securitized assets4 96,130 147,934 188,712 192,332 194,549 193,798 195,800 196,906 196,779 21 Other 276,316 299,758 298,833 301,03 r 304,382r 308,495r 307,203r 305,296 302,316 22 Commercial banks 139,007 148,361 146,819 150,959r 153,826r 157,293r 154,763r 152,677 150,172 23 Finance companies 38,384 42,590 33,208 34,005 34,016 34,322 34,660 34,815 34,738 24 Nonfinancial business3 29,831 31.536 32,844 30,786 30,521 30,393 30,666 30,756 30,834 25 Pools of securitized assets4 13,233 19,067 25,395 24,905 25,303 24,941 25,497 25,770 25,429 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. Data in this table also appear in the Board's G.19 (421) monthly 4. Outstanding balances of pools upon which securities have been issued; these balances statistical release. For ordering address, see inside front cover. are no longer carried on the balance sheets of the loan originator. 2. Comprises mobile home loans and all other loans that are not included in automobile or 5. Totals include estimates for certain holders for which only consumer credit totals are revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be available. secured or unsecured. 1.56 TERMS OF CONSUMER CREDIT1 Percent per year except as noted 1997 IItteemm 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July INTEREST RATES Commercial banks2 1 48-month new car 8.12 9.57 9.05 n.a. 8.92 n.a. n.a. 9.20 n.a. n.a. 2 24-month personal 13.19 13.94 13.54 n.a. 13.46 n.a. n.a. 13.81 n.a. n.a. Credit card plan 3 All accounts 15.69 16.02 15.63 n.a. 15.88 n.a. n.a. 15.75 n.a. n.a. 4 Accounts assessed interest 15.77 15.79 15.50 n.a. 15.13 n.a. n.a. 15.72 n.a. n.a. Auto finance companies 5 New car 9.79 11.19 9.84 7.17 7.44 8.08 8.56 7.80 7.64 6.71 6 Used car 13.49 14.48 13.53 12.93 13.08 13.18 13.29 13.48 13.55 13.51 OTHER TERMS3 Maturity (months) 1 New car 54.0 54.1 51.6 55.1 54.6 53.5 52.8 53.2 53.3 54.6 8 Used car 50.2 52.2 51.4 51.5 51.1 51.1 51.2 51.3 51.3 51.4 Loan-to-value ratio 9 New car 92 92 91 92 92 90 91 93 93 94 10 Used car 99 99 100 99 99 99 99 99 99 99 Amount financed (dollars) 11 New car 15,375 16,210 16,987 17,090 16,837 17,198 17,620 18,060 18,171 18,281 12 Used car 10,709 11,590 12,182 12,362 12,202 12,194 12,195 12,261 12,239 12,283 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. Data in this table also appear in the Board's G.19 (421) monthly 3. At auto finance companies, 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 US. CREDIT MARKETS' Billions of dollars; quarterly data at seasonally adjusted annual rates 1995 1996r 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q4r Q1 Q2 Q3 Q4 Qlr Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 539.9R 619.6R 594.0 698.2 715.3 586.6 855.1 694.0 680.8 631.2 686.2 544.7 By sector and instrument ? Federal government 304.0 256.1 155.9 144.4 145.0 64.9 227.3 62.7 163.2 126.9 81.2 -97.1 Treasury securities 303.8 248.3 155.7 142.9 146.6 59.7 229.6 60.5 166.3 130.2 82.6 -97.3 4 Budget agency securities and mortgages .2 7.8 .2 1.5 -1.6 5.1 -2.3 2.2 -3.1 -3.3 -1.4 .2 5 Nonfederal 235.9r 363,4r 438.1 553.7 570.3 521.7 627.8 631.3 517.6 504.4 605.0 641.7 By instrument Commercial paper 8.6 10.0 21.4 18.1 -.9 14.1 25.7 9.1 -14.2 -24.4 7.8 21.4 7 Municipal securities and loans 30.5 74.8 -35.9 -48.2 1.3 -38.9 -4.1 30.2 -65.2 44.2 23.2 76.5 8 Corporate bonds 67.6 75.2 23.3 73.3 72.5 82.0 60.9 71.5 67.8 89.9 79.4 86.1 9 Bank loans n.e.c - 12.3r 5.1r 75.0 100.4 69.9 89.6 41.5 69.7 132.2 36.3 142.0 125.2 in Other loans and advances 5.7r — 18.9r 37.3 46.5 22.0 53.5 20.4 38.0 45.6 -15.8 1.2 -7.1 V II Mo H rt o g m ag e e s ! I 3 8 1 9 . . 5 T r 1 1 8 5 4 5 . . 1 3 r r 1 1 9 9 9 1 . . 0 9 2 1 2 9 3 2 . . 1 4 2 3 6 1 7 9 . . 8 2 2 1 0 7 1 1 . . 3 6 3 31 5 6 9 . . 1 9 3 25 2 5 3 . . 4 7 2 24 6 8 1 . . 3 6 3 25 3 1 1 . . 6 6 2 2 6 4 5 0 . . 4 3 2 2 0 8 3 7 . . 9 2 n Multifamily residential -10.7 —6.0r 1.7 10.4 17.9 13.3 14.7 18.3 11.8 26.9 5.1 20.9 14 Commercial -47.4r —23.9 -11.0 18.8 30.9 15.2 27.5 45.1 -.6 51.5 18.0 57.7 15 Farm .5r 1.0r 2.2 1.6 2.6 1.0 1.6 4.9 2.2 1.6 2.0 4.7 16 Consumer credit 4.2r 62.0r 125.1 140.5 86.3 120.1 123.5 89.0 89.9 42.6 85.9 52.4 By borrowing sector 17 Household 191.2' 246.3r 343.7 354.9 363.8 329.7 443.0 376.5 348.8 286.8 335.5 229911..11 18 Nonfinancial business 23.6r 54.9r 140.8 241.8 193.9 226.3 177.2 216.8 219.7 161.8 234.5 266.4 19 Corporate 39.6r 49. r 135.3 213.7 148.1 200.8 132.9 172.1 192.9 94.4 179.3 190.9 20 Nonfarm noncorporate - 16.4r 3.2r 2.2 26.6 43.4 26.4 44.2 38.5 29.2 61.5 54.4 72.0 ?l Farm ,5r 2.6r 3.3 1.5 2.4 -.9 .1 6.2 -2.5 6.0 .8 3.6 22 State and local government 21.1 62.3 -46.4 -42.9 12.7 -34.2 7.7 38.0 -50.8 55.8 35.0 84.2 Foreign net borrowing in United States 23.7 70.4 -15.2 71.2 70.1 81.3 53.2 35.4 106.0 85.7 27.2 50.7 74 Commercial paper 5.2 -9.0 -27.3 13.6 10.9 -3.9 -5.4 8.9 37.8 2.2 16.2 10.0 ?5 Bonds 16.8 82.9 12.2 49.7 49.4 76.1 47.7 11.2 60.2 78.5 11.0 29.7 26 Bank loans n.e.c 2.3 .7 1.4 8.5 9.1 11.9 8.7 15.1 4.7 7.8 -.6 11.0 27 Other loans and advances -.6 -4.2 -1.5 -.5 .8 -2.8 2.3 .1 3.4 -2.7 .7 .1 28 Total domestic plus foreign 563.6R 690.0R 578.7 769.3 785.4 667.9 908.3 729.4 786.8 716.9 713.4 595.4 Financial sectors 29 Total net borrowing by financial sectors 241.41" 293.4R 465.9 449.0 530.6 598.4 341.2 707.1 432.7 641.4 281.9 629.4 By instrument 30 Federal government-related 155.8 165.3 287.5 204.1 231.5 306.8 148.8 301.4 222.9 252.8 105.7 286.2 31 Government-sponsored enterprise securities 40.3 80.6 176.9 105.9 90.4 132.1 31.4 126.9 80.0 123.3 -8.9 198.1 32 Mortgage pool securities 115.6 84.7 115.4 98.2 141.1 174.7 117.4 174.5 142.9 129.6 114.6 8888..11 33 Loans from U.S. government .0 .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 ..00 34 85.6r 128.21" 178.4 244.9 299.2 291.6 192.4 405.7 209.9 388.6 176.2 343.2 35 Open market paper -.7 -6.2 41.6 42.6 92.7 57.0 16.1 106.1 84.2 164.3 175.4 78.1 36 Corporate bonds 85.6r 122.8r 118.1 188.8 151.1 196.3 150.6 219.6 76.3 157.8 -6.1 173.9 37 Bank loans n.e.c ,7r — 14.4r -13.7 4.2 16.8 -1.5 23.4 20.6 2.6 20.4 7.0 10.4 38 Other loans and advances -.6 22.4 22.6 3.4 27.2 32.0 -5.5 48.6 33.9 31.8 -16.1 66.8 39 Mortgages .6 3.6 9.8 5.9 11.4 7.7 7.7 10.8 12.9 14.3 16.0 14.0 By borrowing sector 40 Commercial banking 10.0 13.4 20.1 22.5 11.7 -7.9 -34.2 40.5 14.7 25.7 1166..11 8833..00 41 Savings institutions -7.0 11.3 12.8 2.6 26.0 31.5 11.0 42.1 26.4 24.7 -14.6 33.9 42 Credit unions .0 .2 .2 -.1 .1 .0 -.1 -.2 .3 .3 -.2 .2 43 Life insurance companies .0 .2 .3 -.1 1.1 -.4 2.5 .3 -.4 2.0 .8 .1 44 Government-sponsored enterprises 40.2 80.6 172.1 105.9 90.4 132.1 31.4 126.9 80.0 123.3 -8.9 198.1 45 Federally related mortgage pools 115.6 84.7 115.4 98.2 141.1 174.7 117.4 174.5 142.9 129.6 114.6 88.1 46 Issuers of asset-backed securities (ABSs) 57.3r 82.8r 68.8 132.9 132.4 186.7 138.9 162.8 88.2 139.6 58.1 86.3 47 Finance companies -2.3r -,8r 49.1 50.8 43.2 61.7 41.5 56.8 30.7 43.8 6.4 124.3 48 Mortgage companies 8.0 .0 -11.5 .4 12.4 -10.0 20.0 16.0 1.7 12.1 5.9 10.0 49 Real estate investment trusts (REITs) .3 3.4 13.7 6.0 12.8 8.3 8.2 11.5 13.7 17.7 19.1 18.6 50 Brokers and dealers 2.7 12.0 .5 -5.0 -2.0 7.7 -31.8 13.2 5.7 4.9 -2.9 42.4 51 Funding corporations 16.6r 5.7r 24.2 34.9 61.5 13.9 36.3 62.9 28.8 118.0 87.5 -55.6 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • November 1997 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1995 1996' 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944rr 11999955rr 11999966rr Q4r Q1 Q2 Q3 Q4 Qlr Q2 All sectors 55552222 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 805.0r 983.4r 1,044.7 1,218.3 1,316.0 1,266.3 1,249.5 1,436.5 1,219.6 1,358.4 995.3 1,224.7 55553333 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr 13.1 -5.1 35.7 74.3 102.6 67.2 36.4 124.2 107.7 142.1 199.4 109.4 55554444 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 459.8 421.4 448.1 348.5 376.5 371.7 376.1 364.1 386.1 379.7 186.9 189.1 55555555 MMMMuuuunnnniiiicccciiiippppaaaallll sssseeeeccccuuuurrrriiiittttiiiieeeessss 30.5 74.8 -35.9 -48.2 1.3 -38.9 -4.1 30.2 -65.2 44.2 23.2 76.5 55556666 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 169.9r 280.8r 153.6 311.8 273.0 354.4 259.3 302.4 204.2 326.2 84.3 289.7 55557777 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc -9.3 -8.6 62.8 113.0 95.7 100.1 73.5 105.4 139.5 64.5 148.3 146.6 55558888 OOOOtttthhhheeeerrrr llllooooaaaannnnssss aaaannnndddd aaaaddddvvvvaaaannnncccceeeessss 4.6r -,8r 53.6 49.3 50.0 82.7 17.2 86.7 82.9 13.2 -14.2 59.8 55559999 MMMMoooorrrrttttggggaaaaggggeeeessss 132.T 158.9r 201.7 229.0 330.6 209.0 367.6 334.5 274.5 346.0 281.4 301.2 66660000 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt 4.2r 62.0r 125.1 140.5 86.3 120.1 123.5 89.0 89.9 42.6 85.9 52.4 Funds raised through mutual funds and corporate equities 66661111 TTTToooottttaaaallll nnnneeeetttt iiiissssssssuuuueeeessss 293.9r 422. lr 124.8 145.1 241.3 223.4 319.1 386.6 78.4 181.2 194.4 205.7 66662222 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss 103.4 130.1 24.1 -2.3 3.8 -4.7 21.5 82.1 -93.5 4.9 -59.0 -36.1 66663333 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 27.0 21.3 -44.9 -58.3 -64.2 -58.4 -73.6 .4 -127.6 -56.0 -86.2 -83.6 66664444 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd bbbbyyyy UUUU....SSSS.... rrrreeeessssiiiiddddeeeennnnttttssss 32.4 63.4 48.1 50.4 58.8 55.9 90.1 70.1 32.7 42.3 47.0 55.6 66665555 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 44.0 45.4 20.9 5.6 9.2 -2.2 5.1 11.6 1.5 18.6 -19.8 -8.1 66666666 MMMMuuuuttttuuuuaaaallll ffffuuuunnnndddd sssshhhhaaaarrrreeeessss 190.5r 292.0r 100.6 147.4 237.6 228.1 297.6 304.5 171.9 176.3 253.4 241.8 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.4. 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 TRANSACTIONS' Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996' 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 11999966rr Q4R 01 Q2 Q3 Q4 Qlr Q2 NUT LENDING IM CREDIT MARKETS2 1 Total net lending in credit markets 805.0r 983.4r l,044.7r l,218.3r 1,316.0 1,266.3 1,249.5 1,436.5 1,219.6 1,358.4 995.3 1,224.7 2 Domestic nonfederal nonfinancial sectors 117.2'' 80.0' 257.1'" -86.5r -8.9 -167.4 -40.9 305.7 -183.8 -116.7 -300.7 -90.2 3 Household 87.8'' 39.3r 293.9' — 2.1r 31.7 -79.4 -76.5 277.9 -43.3 -31.5 -241.2 -63.8 4 Nonlinancial corporate business 27.8 9.1 17.7 -2.4 15.3 -5.2 29.2 31.7 9.5 -9.4 42.3 -14.4 5 Nonfarm noncorporate business -.1 -1.1 ,6r .3 .4 .3 .4 .4 .4 .4 .5 6 State and local governments 1.7 32.6 -55.0 -82.4' -56.2 -83.1 6.0 -4.4 -150.4 -76.2 -102.2 - 12.5 7 Federal government — 10.4r -17.2' -22.6' -20.4' -20.9 -22.7 -19.9 -14.3 -25.0 -24.3 -18.7 -12.9 8 Rest of the world 98.4 129.3 132.3 273.9r 409.1 160.2 350.0 268.9 485.4 532.2 366.3 306.3 9 Financial sectors 599.8r 791.3r 677.9r 1.051.3' 936.7 1,296.2 960.3 876.2 943.0 967.1 948.4 1.021.6 10 Monetary authority 27.9 36.2 31.5 12.7 12.3 23.2 17.5 1 1.7 11.5 8.4 37.4 47.2 11 Commercial banking 95.3 142.2 163.4 265.9 187.8 176.5 126.0 179.7 196.1 249.4 319.6 330.1 12 U.S.-chartered banks 69.5 149.6 148.1 186.5 119.6 126.0 78.3 121.9 119.5 158.9 212.3 321.9 13 Foreign banking offices in United States 16.5 -9.8 11.2 75.4 63.3 38.5 50.8 50.7 71.1 80.5 97.3 1.1 14 Bank holding companies 5.6 .0 .9 -.3 3.9 4.6 -5.1 5.4 4.8 10.5 2.2 5.1 15 Banks in U.S.-affiliated areas 3.7 2.4 3.3 4.2 1.0 7.4 2.1 1.7 .7 -.6 7.8 2.0 16 Savings institutions -79.0 -23.3 6.7 -7.6' 19.9 -68.4 34.1 44.7 49.7 -48.8 -3.0 21.1 17 Credit unions 17.7 21.7 28.1 16.2 25.5 19.0 23.6 33.0 21.1 24.3 14.0 18.9 18 Bank personal trusts and estates 8.0 9.5 7.1 -18.8 3.9 -20.2 -3.5 4.2 7.8 7.2 8.2 8.9 19 Life insurance companies 79.5 100.9 66.7 99.2 72.5 51.7 47.6 .9 123.2 1 18.1 94.3 84.4 20 Other insurance companies 6.7 27.7 24.9 21.5 21.5 22.3 13.6 30.5 14.2 27.7 3.9 1 1.4 21 Private pension funds 37.5 49.5 47.7 63.1 46.6 81.3 69.5 45.4 41.9 29.5 57.5 57.8 2' State and local government retirement funds 5.9 21.1 30.7 22.7 34.5 20.1 54.9 47.9 19.0 16.1 38.7 21.1 23 Money market mutual funds 4.7 20.4 30.0 86.5 88.8 130.4 164.1 27.0 83.0 81.3 65.2 19.7 ~>4 Mutual lunds 126.2 159.5 -7.1 52.5 48.9 146.0 88.5 54.3 27.5 25.3 61.9 108.1 25 Closed-end funds 18.2 14.4 -3.3 13.3 9.3 13.2 10.9 9.8 9.0 7.5 6.7 5.3 26 Government-sponsored enterprises 68.8 87.8r 117.8' 84.7' 92.0 185.1 33.9 114.7 81.2 138.1 45.1 119.0 ">1 Federally related mortgage pools 115.6 84.7 115.4 98.2 141.1 174.7 117.4 174.5 142.9 129.6 114.6 88.1 ">8 Asset-backed securities issuers (ABSs) 53. r 80.2' 61.7r 111.1' 102.1 137.1 119.7 135.7 62.0 91.1 34.5 71.3 79 Finance companies ,4r -20.9' 48.3' 49.9' 18.4 45.1 30.4 36.3 13.1 -6.3 41.4 1.8 30 Mortgage companies .1 .0 -24.0 -3.4 8.2 -36.4 51.8 -26.8 3.4 4.1 -8.2 .0 31 Real estate investment trusts (REITs) 1.1 .6 4.7 2.2 3.0 3.4 3.4 3.4 3.4 2.0 2.0 3.4 37 Brokers and dealers -1.3 14.8 -44.2 90.1 -17.1 189.3 -109.0 -72.0 35.5 77.0 -12.8 23.0 33 Funding corporations 13.3 -35.6 -28.4R -8.6r 17.5 3.0 65.9 21.1 -2.4 -14.5 27.2 -19.1 RELATION OF LIABILITIES TO FINANCIAL. ASSETS 34 Net flows through credit markets 805.0r 983.4r l,044.7r l,218.3r 1,316.0 1,266.3 1,249.5 1,436.5 1,219.6 1,358.4 995.3 1,224.7 Other financial sources 35 Official foreign exchange -1.6 .8 -5.8 8.8 -6.3 -1.9 -.9 1.6 -26.6 .7 -17.6 .4 36 Special drawing rights certificates -2.0 .0 .0 2.2 -.5 .0 .0 .0 -1.8 .0 -2.1 .0 37 Treasury currency .2 .4 .7 .6 .0 .0 .0 .0 2.3 -2.3 .4 .2 38 Foreign deposits -3.4r -18.5 52.9r 35.3' 82.0 21.1 100.8 3.0 119.7 104.5 188.6 79.0 39 Net interbank transactions 49.4 50.5 89.8 9.9 -52.6 57.0 -78.6 -51.8 -102.5 22.3 -85.2 -33.9 40 Checkable deposits and currency 113.5 117.3 -9.7 -12.8 15.8 -40.4 6.8 3.9 105.9 -53.4 81.3 54.0 41 Small time and savings deposits -57.2 -70.3 -40.0 96.5 97.1 110.2 207.7 -3.2 92.7 91.2 165.0 30.2 42 Large time deposits -73.2 -23.5 19.6 65.6 113.9 -1.5 57.4 83.1 181.8 133.2 48.1 177.4 43 Monev market fund shares 4.5 20.2 43.3 142.3 145.8 148.9 227.6 23.1 145.1 187.5 182.4 58.5 44 Security repurchase agreements 43.1 71.2 78.3 110.7 38.7 56.7 -4.7 98.5 -15.9 77.0 51.8 217.3 45 Corporate equities 103.4 130.1 24.1 -2.3' 3.8 -4.7 21.5 82.1 -93.5 4.9 -59.0 -36.1 46 Mutual fund shares 190.5' 292.0r 100.6' 147.4r 237.6 228.1 297.6 304.5 171.9 176.3 253.4 241.8 47 Trade payables 46.6 52.0' 93.7r 105.2' 75.4 93.6 77.7 120.4 -4.3 107.6 90.3 66.3 48 Security credit 4.6 61.4 -.1 26.7 52.4 42.8 114.0 -34.8 5.3 125.1 117.6 114.4 49 Life insurance reserves 28.0 36.0 34.5 44.9 43.6 38.3 19.0 32.5 56.6 66.3 44.0 66.4 50 Pension fund reserves 230.3r 254.7' 253.2R 241.2' 235.7 189.5 236.1 196.2 231.9 278.5 287.0 278.9 51 Taxes payable 9.7 5.2 1.5' 1.6' 3.2 -7.2 4.5 4.7 -.1 3.5 -9.3 -1 1.4 52 Investment in bank personal trusts -7.1 .9 17.8 -49.7 12.5 -39.2 -.6 11.8 19.2 19.8 23.5 26.3 53 Noncorporate proprietors' equity 37.7' 14.2' 43.7r 28.0' 5.7 26.9 2.2 6.4 27.5 -15.6 -12.3 -6.7 54 Miscellaneous 246.3' 336.6' 243.1' 466.0r 454.8 765.1 506.5 431,0 348.0 533.7 604.8 63 1.1 55 Total financial sources l,768.0r 2,314.6r 2,086.0r 2,686.4' 2,874.4 2,949.4 3,044.1 2,749.4 2,482.8 3,219.1 2,948.0 3,179.0 Liabilities not identified as assets (—) 56 Treasury currency -.2 -.2 -.2 -.5 -1.0 -1.0 -1.1 -1.0 1.3 -3.1 -.3 -.6 57 Foreign deposits -2.7' -5.7' 43.0' 25.7R 58.1 18.0 73.2 26.6 91.3 41.3 179.0 54.5 58 Net interbank liabilities -4.9 4.2 -2.7 -3.1 -3.3 -32.5 9.3 -22.5 -4.4 4.2 26.5 -24.9 59 Security repurchase agreements 4.7 46.1 57.3 55.1 24.2 29.9 27.7 124.8 -133.3 77.6 -102.1 166.7 60 Taxes payable 11.9 9.6r 15.6' 14.8R 5.5 9.4 -14.6 20.4 7.7 8.5 -27.5 15.1 61 Miscellaneous -68.8R —201.7R -178.8R -98.2R -99.2 104.4 -149.4 -134.8 -156.2 43.6 -112.4 -378.1 Floats not included in assets ( —) 62 Federal government checkable deposits .7 -1.5 —4.8 -6.0 .5 -13.9 2.7 -6.6 27.1 -21.4 -9.4 16.1 63 Other checkable deposits 1.6 -1.3 — 2.8 -3.8 -4.0 -4.7 -2.8 -5.0 -4.7 -3.7 -2.6 -4,8 64 Trade credit 11.8' -4.T .1' — 30.5r -32.0 -114.4 6.5 -9.8 -101.5 -23.4 28.4 -57.4 65 Total identified to sectors as assets i,8i4.r 2,469. Jr 2,158.7r 2,732.9r 2,925.8 2,954.2 3,092.6 2,757.3 2,755.7 3,095.5 2,968.5 3,392.3 1. Data in this table also appear in the Board's Z. I (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F. I and F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 DomesticN onfinancial Statistics • November 1997 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1995 1996r 1997 Q4r Qi Q2 Q3 Q4 Qlr Q2 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 12,486.9r 13,087.1 13,785.2 14,500.5 13,785.2 13,980.9 14,134.3 14,308.4 14,500.5 14,658.4 14,769.2 Bx sector and instrument 9 3,336.5 3,492.3 3.636.7 3,781.8 3,636.7 3,717.2 3 693 8 3,733 1 3,781 8 3,829 8 3,760 6 3 Treasury securities 3.309.9 3,465.6 3,608.5 3,755.1 3,608.5 3.689.6 3,665.5 3.705.7 3,755.1 3.803.5 3.734.3 4 Budget agency securities and mortgages 26.6 26.7 28.2 26.6 28.2 27.6 28.2 27.4 26.6 26.3 26.3 5 Nonfederal 9,150.4r 9,594.8 10,148.5 10.718.8 10.148.5 10,263.7 10.440.6 10,575.3 10,718.8 10,828.6 11,008.6 Bx instrument 6 Commercial paper 117.8 139.2 157.4 156.4 157.4 174.2 181.7 173.0 156.4 168.7 179.3 / Municipal securities and loans 1,377.5 1,341.7 1.293.5 1.294.8 1,293.5 1,290.3 1,296.1 1.279.8 1.294.8 1,298.8 1,315.5 8 Corporate bonds 1,229.7 1.253.0 1,326.3 1,398.8 1,326.3 1,341.5 1,359.4 1.376.4 1.398.8 1,418.7 1,440.2 y Bank loans n.e.c 680.8! 755.7 856.1 926.0 856.1 864.4 887.0 915.5 926.0 962.1 998.4 10 Other loans and advances 629.3' 673.0 719.4 741.4 719.4 728.8 737.4 745.1 741.4 746.2 743.3 Mortgages 4,252.2r 4,444.1 4,667.2 4,986.4 4,667.2 4.744.0 4,832.2 4,908.3 4,986.4 5,040.2 5.118.9 Home 3.225.0r 3,424.0 3.616.4 3.850.6 3,616.4 3,682.3 3.719.7 3.792.4 3,850.6 3,898.0 3,956.0 Multifamily residential 267.4 269.1 279.5 301.1 279.5 283.2 291.4 294.4 301.1 302.4 307.6 Commercial 679.0 668.0 686.8 747.6 686.8 693.6 734.9 734.7 747.6 752.1 766.6 Farm 80.7r 83.0 84.6 87.1 84.6 85.0 86.2 86.7 87.1 87.6 88.8 16 Consumer credit 863.0r 988.1 1,128.6 1,214.9 1,128.6 1,120.5 1,146.9 1.177.3 1,214.9 1,193.9 1,213.0 Bx borrowing sector 17 Household 4,203.5r 4,550.0 4.910.1 5,244.7 4,910.1 4,969.5 5.043.5 5,148.5 5.244.7 5.275.0 5,362.8 18 Nonfinancial business 3.785.0r 3,929.4 4,165.9 4.388.9 4.165.9 4,221.2 4,316.5 4,358.9 4.388.9 4,460.7 4,534.5 19 Corporate 2.528.6r 2,667.5 2.875.9 3.053.1 2,875.9 2,922.9 3,003.6 3.038.7 3,053.1 3,113.8 3,165.3 20 Nonfarm noncorporate 1,118.5r 1.120.7 1,147.3 1.190.7 1.147.3 1,158.3 1.167.9 1,174.6 1,190.7 1,204.2 1,222.2 21 Farm 137.9' 141.2 142.7 145.1 142.7 140.0 145.0 145.5 145.1 142.7 147.0 22 State and local government 1,161.8' 1,115.4 1.072.5 1.085.1 1,072.5 1,073.1 1.080.6 1.068.0 1.085.1 1.093.0 1.111.3 23 Foreign credit market debt held in United States 385.7r 370.6 441.7 511.8 441.7 452.7 461.5 489.1 511.8 516.4 528.8 24 Commercial paper 68.7 41.4 55.0 65.8 55.0 51.5 53.4 64.8 65.8 67.9 69.8 25 Bonds 230.1 242.3 291.9 341.3 291.9 303.8 306.7 321.7 341.3 344.1 351.5 26 Bank loans n.e.c 24.6 26.1 34.6 43.7 34.6 36.8 40.5 41.7 43.7 43.5 46.2 27 Other loans and advances 62.3r 60.8 60.2 61.0 60.2 60.6 60.9 61.0 61.0 61.0 61.2 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 12,872.6r 13,457.6 14,227.0 15,012.3 14,227.0 14,433.6 14,595.9 14,797.5 15,012.3 15,174.8 15,298.0 Financial sectors 29 Total credit market debt owed by financial sectors 3,327.0r 3,800.7 4,252.3 4,782.9 4,252.3 4,333.0 4,511.9 4,623.1 4,782.9 4,848.5 5,008.7 By instrument 30 Federal government-related 1.885.2 2,172.7 2,376.8 2.608.3 2,376.8 2,414.0 2,489.4 2.545.1 2,608.3 2,634.7 2,706.2 31 Government-sponsored enterprise securities 523.7 700.6 806.5 896.9 806.5 814.4 846.1 866.1 896.9 894.7 944.2 32 Mortgage pool securities 1.356.8 1,472.1 1,570.3 1,711.4 1,570.3 1.599.7 1.643.3 1,679.0 1.711.4 1,740.0 1,762.1 33 Loans from U.S. government 4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,441.8' 1.627.9 1.875.4 2,174.6 1.875.4 1.919.0 2.022.5 2,078.1 2,174.6 2.213.8 2,302.5 35 Open market paper 393.5 442.8 488.0 580.7 488.0 491.9 518.5 539.6 580.7 624.5 644.0 36 Corporate bonds 867.9r 985.9 1.174.7 1,325.8 1,174.7 1,208.5 1.265.2 1,287.6 1,325.8 1.319.9 1.365.8 3/ Bank loans n.e.c 62.6r 48.9 53.1 69.8 53.1 58.6 63.9 64.2 69.8 71.3 74.3 38 Other loans and advances 108.9 131.6 135.0 162.2 135.0 133.6 145.8 154.2 162.2 158.2 174.9 39 Mortgages 8.9 18.7 24.6 36.0 24.6 26.5 29.2 32.4 36.0 40.0 43.5 Bx borrowing sector 40 Commercial banks 84.6 94.5 102.6 112.3 102.6 100.5 103.6 106.7 112.3 114.5 125.2 41 Bank holding companies 123.4 133.6 148.0 150.0 148.0 141.4 148.4 149.1 150.0 151.7 161.7 42 Savings institutions 99.6 112.4 115.0 141.1 115.0 117.8 128.3 134.9 141.1 137.4 145.9 43 Credit unions .2 .5 .4 .4 .4 .4 .3 .4 .4 .4 .4 44 Life insurance companies .2 .6 .5 1.6 .5 1.1 1.2 1.1 1.6 1.8 1.8 45 Government-sponsored enterprises 528.5 700.6 806.5 896.9 806.5 814.4 846.1 866.1 896.9 894.7 944.2 46 Federally related mortgage pools 1.356.8 1,472.1 1,570.3 1.711.4 1,570.3 1.599.7 1,643.3 1,679.0 1,711.4 1,740.0 1,762.1 4/ Issuers of asset-backed securities (ABSs) 485.3r 554.1 687.0 819.5 687.0 717.3 756.7 781.3 819.5 829.0 849.5 48 Brokers and dealers 33.7 34.3 29.3 27.3 29.3 21.4 24.6 26.1 27.3 26.6 37.2 49 Finance companies 386.7r 435.8 486.6 529.8 486.6 493.8 506.3 513.7 529.8 528.2 557.7 50 Mortgage companies 30.2 18.7 19.1 31.5 19.1 24.1 28.1 28.5 31.5 33.0 35.5 51 Real estate investment trusts (REITs) 17.4 31.1 37.1 49.9 37.1 39.1 42.0 45.4 49.9 54.6 59.3 52 Funding corporations I80.3r 212.3 249.8 311.3 249.8 262.2 283.0 290.7 311.3 336.7 328.2 All sectors 53 Total credit market debt, domestic and foreign. . . . 16,199.6r 17,258.3 18,479.2 19,795.2 18,479.2 18,766.6 19,107.8 19,420.7 19,795.2 20,023.4 20,306.7 54 Open market paper 580.0 623.5 700.4 803.0 700.4 717.6 753.6 777.4 803.0 861.1 893.1 55 U.S. government securities 5,216.9 5.665.0 6,01.3.6 6.390.0 6,013.6 6,131.2 6,183.1 6.278.2 6.390.0 6.464.5 6,466.8 56 Municipal securities 1,377.5 1,341.7 1,293.5 1.294.8 1,293.5 1,290.3 1,296.1 1,279.8 1,294.8 1.298.8 1,315.5 5/ Corporate and foreign bonds 2,327.6' 2,481.2 2,793.0 3,066.0 2,793.0 2,853.8 2.931.3 2.985.7 3,066.0 3.082.6 3,157.5 58 Bank loans n.e.c 768.0 830.8 943.8 1.039.5 943.8 959.7 991.4 1,021.3 1,039.5 1,076.9 1,118.9 59 Other loans and advances 805.3r 865.3 914.6 964.6 914.6 923.0 944.1 960.3 964.6 965.3 979.4 60 Mortgages 4.26 l.2r 4,462.8 4.691.8 5.022.4 4,691.8 4,770.5 4,861.4 4.940.7 5,022.4 5,080.2 5,162.4 61 Consumer credit 863.0r 988.1 1,128.6 1.214.9 1.128.6 1,120.5 1.146.9 1.177.3 1.214.9 1,193.9 1,213.0 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 A 41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999933 11999944 11999955 11999966'' Q4 Ql Q2 Q3 Q4' QL' Q2 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 16,199.6r I7,258.3r 18,479.2r 19,795.2 18,479.2r 18,766.6r 19,107.8r 19,420.7r 19,795.2 20,023.4 20,306.7 1 Domestic nonfederal nonfinancial sectors 2.795.8' 3.085.7'' 2.964. lr 3.000.3 2.964. IR 2,928.4' 3.013.5' 2,982.4'' 3,000.3 2.899.1 2,855.3 3 Household L,702.4R 2,029. lr L,991.8R 2,068.6 1.991.8' 1.970.0' 2.040.5R 2.047.5' 2,068.6 2.007.8 1.961.4 4 Nonfinancial corporate business 271.5 289.2 286.8 302.1 286.8 273.6 285.7 286.8' 302.1 289.6 291.6 5 Nonfarm noncorporate business 37.0 37.6' 37.9R 38.3 37.9' 38.0' 38.1' 38.2R 38.3 38.4 38.6 6 State and local governments 784.9 729.9 647.5' 591.3 647.5' 646.8R 649.1 609.9' 591.3 563.3 563.7 7 Federal government 234.7' 2l2.0r 191.6' 170.7 191.6' 186.6' 183.0' 176.8' 170.7 166.0 162.8 8 Rest of the world 1,147.8 1.254.8R 1.563.1' 1,953.5 1.563.1' 1,656.5' 1,722.0' I.844.6R 1.953.5 2.050.7 2.125.X 9 Financial sectors 12,021.3r 12.705.7' 13,760.4' 14.670.7 13.760.4' 13,995.1' 14,189.3' 14.416.8' 14,670.7 14,907.5 15.162.9 10 Monetary authority 336.7 368.2 380.8 393.1 380.8 379.6 386.3 386.2 393.1 397.1 412.4 11 Commercial banking 3.090.8 3.254.3 3.520.1 3.707.9 3.520.1 3,541.6 3,590.8 3.643.3 3.707.9 3.780.5 3.866.8 12 U.S.-chartered banks 2,721.5 2.869.6 3.056.1 3.175.8 3.056.1 3.068.8 3,101.3 3.135.3 3.175.8 3.222.2 3,304.5 13 Foreign banking offices in United States 326.0 337.1 412.6 475.8 412.6 422.2 437.1 454.2 475.8 499.5 501.8 14 Bank holding companies 17.5 18.4 18.0 22.0 18.0 16.8 18.1 19.3 22.0 22.5 23.8 15 Banks in U.S.-affiliated areas 25.8 29.2 33.4 34.4 33.4 33.9 34.3 34.5 34.4 36.3 36.8 16 Savings institutions 914.1 920.8 913.3 933.2 913.3 921.8 933.0' 945.4 933.2 932.4 9.37.7 17 Credit unions 218.7 246.8 263.0 288.5 263.0 267.0 276.9 282.6 288.5 290.1 296.4 18 Bank personal trusts and estates 240.9 248.0 229.2 233.1 229.2 228.3 229.4 231.3 233.1 235.2 237.4 19 Life insurance companies 1,416.0 1.482.6 1.581.8 1.654.3 1,581.8 1,596.2 1.596.7 1.627.0 1,654.3 1.680.2 1.701.5 20 Other insurance companies 422.7 446.4 468.7 490.2 468.7 472. r 479.7' 483.2R 490.2 491.2 494.0 21 Private pension funds 611.4 659.2 722.3 768.8 722.3 739.6 751.0 761.4 768.8 783.2 797.7 22 State and local government retirement funds 423.4 454.1 476.8 511.3 476.8 491.9 505.0 506.3 511.3 522.5 529.1 23 Money market mutual funds 429.0 459.0 545.5 634.3 545.5 595.6 594.7 606.6 634.3 659.0 656.5 24 Mutual funds 725.9 718.8 771.3 820.2 771.3 795.9 809.0 818.3 820.2 838.3 864.7 25 Closed-end funds 82.0 78.7 92.0 101.3 92.0 94.8 97.2 99.5 101.3 103.0 104.3 26 Government-sponsored enterprises 545.5r 663.3' 748.0' 813.6 748.0' 755.8R 758.9' 779.3' 813.6 824.3 854.8 27 Federally related mortgage pools 1.356.8 1.472.1 1.570.3 1,711.4 1,570.3 1,599.7 1.643.3' 1,679.0r 1.711.4 1./40.0 1.762.1 28 Asset-backed securities issuers (ABSs) 455. r 516.8r 627.9r 730.0 627.9r 653.3' 686.0' 704.1' 730.0 733.7 750.5 29 Finance companies 427,9r 476.2' 526.2' 544.5 526.2r 530.3' 539.9r 538,3' 544.5 551.6 552.3 30 Mortgage companies 60.4 36.5 33.0 41.2 33.0 46.0 39.3 40.2 41.2 39.2 39.2 31 Real estate investment trusts (REITs) 8.6 13.3 15.5 18.5 15.5 16.3 17.2 18.0 18.5 19.0 19.9 32 Brokers and dealers 1.37.5 93.3 183.4 166.3 183.4 156.2 138.2 147.1 166.3 163.1 168.9 33 Funding corporations 117.9 97.3' 91.3' 108.8 91.3r 113.2' 116.8' 119.8' 108.8 124.1 116.9 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 16,199.6r 17,258.3r I8,479.2r 19,795.2 18,479.2r 18,766.6r 19,107.8r 19,420.7r 19,795.2 20,023.4 20,306.7 Other liabilities 35 Official foreign exchange 53.4 53.2 63.7 53.7 63.7 62.1 61.4 54.3 53.7 46.3 46.7 36 Special drawing rights certificates 8.0 8.0 10.2 9.7 10.2 10.2 10.2 9.7 9.7 9.2 9.2 37 Treasury currency 17.0 17.6 18.2 18.2 18.2 18.2 18.2 18.8 18.2 18.3 18.3 38 Foreign deposits 271.8 324.6 359.2R 438.1 359.2' 384.4' 385.2' 415.1' 438.1 485.2 505.0 39 Net interbank liabilities 189.3 280.1 290.7 239.7 290.7 266.0 249.1 223.6 239.7 210.1 199.4 40 Checkable deposits and currency 1.251.7 1,242.0 1.229.3 1.245.1 1.229.3 1,183.3 1.212.3 1,220.8 1.245.1 1.219.0 1.261.8 41 Small time and savings deposits 2,223 2 2.183.3 2,279.7 2,376.8 2.279.7 2.342.3 2.340.1 2.357.4 2.376.8 2.428.7 2.435.3 42 Large time deposits 391.7 411.2 476.9 590.7 476.9 493.6 511.1 557.6 590.7 605.4 646.4 43 Money market fund shares 559.6 602.9 745.3 891.1 745.3 816.9 809.5 838,1 891,1 950.8 952.4 44 Securitv repurchase agreements 471.1 549.4 660.1 698.8 660.1 666.1 692.1 687.6 698.8 716.6 774.3 45 Mutual fund shares 1,375.4 1,477.3 1,852.8 2.342.4 1.852.8 1.997.0 2.129.9 2,211.6 2.342.4 2.411.5 2.731.1 46 Security credit 279.0 279.0 305.7 358.0 305.7 326.9 318.6 317.8 358.0 380.0 409.1 47 Life insurance reserves 470.8 505.3 550.2 593.8 550.2 555.0 563.1 577.2 593.8 604.8 621.4 48 Pension fund reserves 4,663.3' 4.871.8r 5,597.3' 6.257.7 5.597.3' 5,753.0' 5.874.0' 5.989.4r 6.257.7 6.339.9 6.789.1 49 Trade payables 1.047.8R 1.141.5' L,246.7R 1,322.1 1.246.7' 1.235.5' 1.271.5R 1.267.7' 1.322.1 1.313.8 1.336.1 50 Taxes payable 84.8R 86.3' 88.0r 91.1 88.0' 93.0' 89.2' 91.1' 91.1 93.0 85.0 51 Investment in bank personal trusts 691.3 699.4 767.4 872.0 767.4 793.7 811.7 829.0 872.0 890.4 969.7 52 Miscellaneous 5,109.8' 5.379. lr 5.783.0' 6.135.1 5,783.0' 5,951.7' 5.948.9' 6,027.7' 6.135.1 6.327.6 6,267.5 53 Total liabilities 35,358.5r 37,370.5r 40,803.4r 44,329.3 40,803.4r 41,715.4r 42,403.7r 43,115..V 44,329.3 45,074.0 46,364.4 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 20.1 21.1 22.1 21.4 22.1 22.1 22.0 21.2 21.4 20.9 21.1 55 Corporate equities 6,257.6' 6,237.9r 8,331,3r 10.061.1 8.331.3' 8,809.7' 9.105.0' 9,340.5' 10.061.1 10,072.3 11,719.8 56 Household equity in noncorporate business 3,219.2' 3,416.3' 3.620.8' 3.850.3 3,620.8' 3.664.6' 3.731.0' 3.797.3' 3.850.3 3.908.2 3,901.6 Liabilities not identijied as assets (— ) 57 Treasury currency -5.1 -5.4 -5.8 -6.8 -5.8 -6.1 -6.3 -6.0 -6.8 -6.9 -7.0 58 Foreign deposits 233.2' 276.2' 301.2' 356.4 301.2' 319.5' 326.1' 348.9' 356.4 401.1 414.7 59 Net interbank transactions -4.7 -6.5 -9.0 -10.6 -9.0 -2.6 -8.0 -11.6 -10.6 -1.7 -8.3 60 Security repurchase agreements -1.6 55.7 110.9 135.1 110.9 121.7 149.2r 126.5' 135.1 110.8 150.3 61 Taxes payable 26.8 33.7r 42.8' 44.3 42.8r 22.6' 36.9' 40.9' 44.3 30.5 28.6 62 Miscellaneous -887.6' -988.6' — 1.081.0R -1,354.7 - 1.08! ,0R - 1.098.4' -1.213.2' — 1,246.8r -1,354.7 - 1.295.8 - 1.364.8 Floats not included in assets (-) 63 Federal government checkable deposits 5.6 3.4 3.1 -1.6 3.1 .0 -3.4 -1.7 -1.6 -9.7 -6.8 64 Other checkable deposits 40.7 38.0 34.2 30.1 34.2 29.6 31.8 23.1 30.1 25.6 27.9 65 Trade credit — 247.5r -247.7' -278.21 -310.2 -278.2' -332.0' -343.4' -383.6' -310.2 -361.2 -381.5 66 Total identified to sectors as assets 45,695.7r 47,887.0r 53,659.6r 59,380.2 53,659.6r 55,157.5r 56,292. lr 57,384.6r 59,380.2 60,182.7 63,153.8 I. Data in this table also appear in the Board's Z. I (780i quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L.I and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • November 1997 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted Apr. May Julyr 1 Industrial production Market groupings 2 Products, total 106.8 109.3 112.0 114.3 114.2 114.8 115.3 115.4 115.9 116.1 116.3 3 Final, total 107.1 109.9 I 12.8 115.3 115.1 115.6 116.3 116.6 117.1' 117.5 117.9 4 Consumer goods 107.4 108.9 110.5 112.7 111.7 111.6 112.1 112.1 112.6r 112.5 112.8 5 Equipment 106.6 111.6 116.8 119.6 120.8 122.6 123.5 124.3 124.9r 126.3 126.7 6 Intermediate 106.1 107.5 109.4 111.3 111.6 112.0 112.1 112.0 112.2r 111.7 111.3 7 Materials 111.3 116.6 120.3 123.1 123.4 124.1 124.5 125.5 125.2 125.9 127.0 Industry groupings 109.4 121.6 8 Manufacturing 83.1 82.6 82.5 9 Capacity utilization, manufacturing (percent)' 1 i 7 6' 121.9' 130.5' 128.0 131.0' 131.0 133.0 138.0' 138.0r 133.0 10 Construction contracts' 1 1 2 1 No G n o ag o r d i s c - u p l r tu o r d a u l ci e n m g, p l t o o y ta m l ent, total4 1 9 9 1 6 2 6 . . 9 0 4 I 9 9 1 8 7 5 . . 1 2 .0 1 9 9 1 6 8 7 . . . 2 3 3 1 9 9 1 7 9 8 . . . 1 5 3 1 9 9 9 7 18 . . 6 2 .6 1 9 9 1 7 9 8 . . . 2 9 8 1 1 9 1 0 7 9 0 . . . 3 0 0 1 1 9 1 0 7 9 0 . . . 4 3 0 1 1 9 0 1 7 9 0 . . . 4 5 1 1 1 9 0 1 7 0 9 . . . 5 2 7 1 1 9 0 2 7 0 0 . . . 1 4 1 13 Manufacturing, total 97.5 98.7 97.5 98.4 98.5 98.5 98.6 98.6 98.7 98.8 98.7 14 Manufacturing, production workers 116.8 120.3 123.3 124.4 124.6 124.9 125.1 125.5 125.7 126.0 126.5 15 Service-producing 148.9 158.2 167.0 171.4 172.3 173.6 174.6 174.9 175.5 176.5 176.7 1 1 6 7 Per W so a n g a e l s i a n n c d o m sa e l , ar to y ta d l isbursements 1 1 4 2 2 4 . . 6 9 1 13 5 0 0 . . 4 9 1 13 5 5 9 . . 7 8 1 1 3 6 8 5 . . 9 2 1 1 6 3 5 8 . . 2 9 1 1 3 6 9 7 . . 5 2 1 1 6 4 8 0 . . 1 5 1 14 6 0 8 . . 7 2 1 1 4 6 0 8. . 7 9 1 1 7 4 0 1 . . 1 0 1 1 7 4 0 1 . . 1 2 18 Manufacturing 149.7 158.7 166.2 169.7 170.6 171.7 172.5 172.7 173.1 174.0 174.1 2 1 0 9 Ret D ai i l s p s o a s l a e b s' l e personal income'1 144.6 151.2 158.5 161.3 163.9 166.1 165.6 163.7 163.3 164.5 166.0 Prices6 21 Consumer (1982-84= 100) 148.2 152.4 156.9 158.6 159.1 159.6 160.0 160.2 160.1 160.3 160.5 22 Producer finished goods (1982 = 100) 125.5 127.9 131.3 132.7 132.6 132.2 132.1 131.6 131.5 131.6 131.3 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers the ordering address, see the inside front cover. The latest historical revision of the industrial employees only, excluding personnel in the armed forces. production index and the capacity utilization rates was released in January 1997. See 5. Based on data from U.S. Department of Commerce. Survey of Current Business. "Industrial Production and Capacity Utilization: Historical Revision and Recent Develop- 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price ments." Federal Resene Bulletin, vol. 83 (February 1997). pp. 67-92. The article contains a indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics. description of the new aggregation system for industrial production and capacity utilization. Monthly Labor Review. For a detailed description of the industrial production index, see "Industrial Production: 1989 NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series Developments and Historical Revision." Federal Reserve Bulletin, vol. 76 (April 1990), pp. mentioned in notes 3 and 6, can also be found in the Survey of Current Business. 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 Capacitv Utilization since 1987," tial. and heavy engineering, from McGraw-Hill Information Systems Company. F.W. Dodge Federal Resen e Bulletin, vol. 79 (June 1993), pp. 590-605. Division. 2.11 LABOR FORCE. EMPLOYMENT. AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1997 CCaatteeggoorryy 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June' July' Aug. HOUSEHOLD SURVEY DATA1 1 Civilian labor force- 131.056 132.304 1.33,943 135.848 135.634 136.319 136,098 136,173 136.200 136,290 136,480 Employment 1 Nonagricultural industries' 119.651 121.460 123,264 125.112 125.138 125,789 125,887 126,209 125.973 126.226 126,421 3 Agriculture 3.409 3,440 3,443 3.468 3.292 3.386 3,497 3.430 3,391 3,482 3,383 Unemployment 4 Number 7,996 7,404 7.236 7.268 7.205 7,144 6,714 6,534 6,836 6,583 6,677 -"> Rate (percent of civilian labor force) 6.1 5.6 5.4 5.4 5.3 5.2 4.9 4.8 5.0 4.8 4.9 ESTABLISHMENT SURVEY DATA 6 Nonagricultural pavroll employment4 114,172 117,203 119,549 120,909 121,162 121,344 121,671 121,834 122,056 122,421 122,470 7 Manufacturing 18.321 18,468 18,282 18.465 18,475 18.489 18,495 18,498 18.518 18,501 18,548 8 Mining 601 580 570 574 574 572 573 576 574 573 571 9 Contract construction 4,986 5.158 5.405 5.542 5,604 5,609 5,599 5,628 5.622 5,622 5,632 10 Transportation and public utilities 5.993 6.165 6,318 6.351 6.376 6,405 6.421 6,431 6.434 6.453 6,293 1 1 Trade 26,670 27.585 28,178 28.487 28.515 28,556 28,651 28.656 28,713 28.814 28,853 12 Finance 6.896 6,830 6,977 6.971 6.980 6,992 7,019 7,029 7,034 7,054 7,065 13 Service 31.579 33.107 34.360 34.990 35.091 35.176 35,334 35,451 35,522 35,677 35,709 14 Government 19.128 19.310 19.459 19,529 19,547 19,545 19,579 19,565 19.639 19,727 19,799 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 av erages 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 1996 1997 1996 1997 1996 1997 SSeerriieess Q3 Q4 Ql Q2r Q3 Q4 Ql Q2 Q3 Q4 Ql Q2r Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 115.8 117.0 118.3 119.6 139.2 140.5 141.8 143.2 83.2 83.3 83.5 83.5 2 Manufacturing 117.2 118.4 120.0 121.2 142.5 143.9 145.3 146.9 82.3 82.3 82.5 82.5 3 Primary processing3 113.2 113.9 114.7 115.7 130.7 131.5 132.2 132.9 86.6 86.6 86.8 87.0 4 Advanced processing4 119.1 120.7 122.6 123.8 148.2 150.0 151.9 153.8 80.4 80.4 80.7 80.5 5 Durable goods 127.2 128.1 130.7 133.0 154.5 156.9 159.3 161.8 82.3 81.7 82.0 82.2 6 Lumber and products 110.5 110.1 111.3 114.0 129.1 130.0 131.0 132.0 85.6 84.7 84.9 86.3 7 Primary metals 118.6 119.8 119.7 122.3 129.8 131.0 132.1 133.3 91.4 91.5 90.6 91.8 8 Iron and steel 117.9 118.6 118.3 121.1 131.9 133.5 134.9 136.0 89.4 88.9 87.7 89.0 9 Nonferrous 119.4 121.1 121.3 123.7 127.1 127.8 128.6 129.8 93.9 94.8 94.3 95.3 10 Industrial machinery and equipment 158.9 161.5 166.2 171.3 176.3 181.3 186.5 192.3 90.1 89.1 89.1 89.1 11 Electrical machinery 164.5 167.2 172.1 178.8 200.6 208.5 216.3 224.2 82.0 80.2 79.6 79.8 12 Motor vehicles and parts 131.3 126.0 130.2 125.6 176.1 177.3 178.2 178.7 74.5 71.0 73.0 70.2 13 Aerospace and miscellaneous transportation equipment 86.7 90.4 93.5 96.5 120.2 119.8 119.7 120.5 72.2 75.5 78.1 80.1 14 Nondurable goods 106.5 108.1 108.6 108.6 129.6 130.1 130.6 131.1 82.2 83.0 83.1 82.8 15 Textile mill products 107.9 107.4 107.1 108.3 130.1 130.8 131.3 131.4 82.9 82.1 81.6 82.4 16 Paper and products 109.0 109.8 111.2 112.1 122.9 123.3 123.6 123.9 88.7 89.0 89.9 90.5 17 Chemicals and products 109.2 112.4 112.8 112.7 139.2 140.3 141.5 142.6 78.4 80.1 79.8 79.1 18 Plastics materials 125.3 125.3 127.0 127.8 131.8 134.0 136.2 138.1 95.1 93.5 93.3 92.6 19 Petroleum products 106.7 107.7 108.1 111.4 113.7 113.8 113.9 114.2 93.9 94.6 94.9 97.5 20 Mining 103.7 103.8 105.8 107.2 113.7 113.7 113.8 114.3 91.2 91.3 93.0 93.8 21 Utilities 110.5 113.0 110.9 112.7 125.2 125.9 126.5 127.0 88.2 89.8 87.7 88.8 22 Electric 110.8 112.4 111.5 111.8 123.6 124.4 125.1 125.6 89.6 90.4 89.1 89.0 1973 1975 Previous cycle5 Latest cycle6 1996 1997 High Low High Low High Low Aug. Mar. Apr. Mayr Juner July Aug.p Capacity utilization rate (percent)2 I Total industry 89.2 72.6 87.3 71.1 85.3 78.1 83.2 83.6 83.6 83.5 83.5 83.6 83.9 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 82.3 82.7 82.6 82.4 82.5 82.6 83.1 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.8 86.5 87.3 87.1 87.1 86.9 86.9 87.3 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 80.4 80.7 80.6 80.3 80.6 80.7 81.3 5 Durable goods 89.2 68.9 87.7 63.9 84.5 73.2 82.5 82.3 82.2 82.0 82.4 82.3 83.2 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 86.3 86.3 86.3 86.3 86.3 85.5 85.3 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 91.2 91.5 90.5 92.5 92.3 91.0 92.7 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 89.6 87.7 87.9 90.8 88.2 88.3 89.8 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 93.2 96.3 93.7 94.8 97.5 94.5 96.5 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.4 90.5 88.8 90.0 88.7 88.5 89.3 90.0 II Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.1 82.0 80.1 79.8 79.4 80.0 80.8 80.6 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 75.4 72.3 70.2 69.2 71.3 68.7 73.0 13 Aerospace and miscellaneous transportaUon equipment 78.4 67.6 81.9 66.6 87.3 79.2 72.0 79.1 79.5 80.0 80.9 81.7 82.6 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 82.0 83.1 83.0 82.9 82.6 82.9 83.0 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 82.7 82.4 82.7 81.7 82.9 82.7 82.7 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 88.0 90.6 90.6 91.1 89.8 92.4 92.0 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 78.1 79.0 79.6 79.0 78.6 78.9 78.8 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 94.9 93.0 93.3 92.5 92.0 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 94.8 94.9 97.0 98.2 97.4 96.2 97.3 20 Mining 94.3 88.2 96.0 80.3 86.8 86.1 91.9 94.3 92.9 94.6 93.9 93.2 92.2 21 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 88.5 86.8 89.6 88.5 88.2 88.5 87.4 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 90.2 88.1 90.6 88.0 88.4 89.4 88.0 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 January 1997. See primary metals; and fabricated metals. "Industrial Production and Capacity Utilization: Historical Revision and Recent Develop- 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing ments," Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. The article contains a and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather description of the new aggregation system for industrial production and capacity utilization. and products; machinery; transportation equipment; instruments; and miscellaneous manufac- For a detailed description of the industrial production index, see "Industrial Production: 1989 tures. Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 5. Monthly highs, 1978-80; monthly lows, 1982. 187-204. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted index of industrial production to the corresponding index of capacity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • November 1997 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1996 1997 pro- 1996 GGrroouupp por- avg. tion Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Mayr Juner July Aug.p Index (1992 = 100) MAJOR MARKETS 1 Total index 100.0 115.2 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.5 119.9 120.4 121.3 2 Products 60.5 112.0 112.2 112.7 112.8 114.1 114.3 114.2 114.8 115.3 115.4 115.9 116.1 116.3 117.2 3 Final products 46.3 112.8 113.0 113.3 113.6 114.8 115.3 115.1 115.6 116.3 116.6 117.1 117.5 117.9 119.1 4 Consumer goods, total 29.1 110.5 110.1 110.5 110.8 112.3 112.7 111.7 111.6 112.1 112.1 112.6 112.5 1 12.8 113.5 Durable consumer goods 6.1 126.2 128.0 127.1 124.5 127.1 128.4 127.3 129.2 131.0 126.9 128.4 130.5 129.1 131.8 61 Automotive products 2.6 125.8 128.7 127.7 122.0 127.4 127.2 129.6 131.0 131.7 124.4 126.4 128.4 122.9 130.5 a Autos and trucks 1.7 132.6 138.7 134.6 125.7 133.8 135.5 138.7 138.9 138.9 127.1 130.0 132.6 123.5 137.7 Autos, consumer .9 120.2 132.5 129.9 112.3 123.5 115.9 120.1 122.3 123.3 116.0 117.7 114.9 118.0 125.7 y Trucks, consumer .7 147.2 152.3 146.6 147.4 152.4 164.9 167.0 165.0 163.8 146.1 150.5 159.5 135.8 158.3 10 Auto parts and allied goods .9 114.5 113.5 116.2 114.4 116.4 114.0 115.5 118.1 119.7 118.0 118.8 120.1 118.8 118.7 II Other 3.5 126.3 127.5 126.6 126.2 126.8 129.1 125.5 127.8 130.4 128.6 129.7 131.8 133.3 132.5 12 Appliances, televisions, and air conditioners 1.0 173.0 175.9 174.2 176.5 176.9 181.1 171.2 179.5 183.6 179.0 181.1 186.9 193.2 193.8 13 Carpeting and furniture .8 109.9 111.1 110.5 108.6 110.7 109.3 106.0 106.9 111.6 108.6 111.7 114.2 110.3 111.2 14 Miscellaneous home goods 1.6 107.9 108.0 107.6 106.5 106.4 109.6 109.2 109.2 109.9 110.0 109.6 109.6 111.6 109.4 15 Nondurable consumer goods 23.0 106.5 105.6 106.3 107.3 108.5 108.7 107.8 107.2 107.4 108.3 108.6 108.0 108.7 109.0 16 Foods and tobacco 10.3 106.1 105.4 106.1 106.6 107.2 108.2 107.7 108.0 108.7 107.8 107.6 107.0 107.9 108.2 17 Clothing 2.4 95.5 95.4 95.1 95.5 95.0 94.9 94.0 93.8 94.2 94.4 94.8 94.3 94.0 94.0 18 Chemical products 4.5 112.7 111.3 113.5 115.5 117.3 118.8 117.9 116.2 114.9 117.2 118.0 117.3 118.0 118.3 19 Paper products 2.9 101.1 101.8 101.9 102.9 102.9 103.0 101.1 101.5 102.3 102.6 103.4 104.5 105.3 106.2 20 Energy 2.9 112.0 109.4 109.4 110.7 115.3 111.8 110.4 107.6 107.5 113.0 113.5 111.6 112.2 112.2 21 Fuels .8 106.6 107.7 105.4 108.1 107.8 106.0 105.1 106.2 108.5 110.1 111.9 111.8 110.4 112.9 22 Residential utilities 2.1 114.3 110.0 110.9 111.7 118.5 114.2 112.6 108.0 106.8 114.1 114.0 111.2 112.7 111.6 23 Equipment 17.2 116.8 117.9 118.1 118.4 119.0 119.6 120.8 122.6 123.5 124.3 124.9 126.3 126.7 128.7 24 Business equipment 13.2 126.6 127.7 128.3 128.8 129.8 130.7 132.1 133.8 134.3 135.5 136.1 137.5 139.0 141.7 25 Information processing and related 5.4 143.2 144.6 146.3 147.4 147.1 148.5 149.6 152.4 153.6 155.1 156.5 159.6 161.5 163.3 26 Computer and office equipment 1.1 292.0 306.2 314.3 318.8 323.5 327.1 335.7 343.0 349.9 358.6 366.5 376.6 388.9 402.5 27 Industrial 4.0 126.9 126.7 126.3 127.0 127.1 127.3 127.9 128.2 127.5 130.3 129.3 129.0 131.1 133.4 28 Transit 2.5 100.0 103.0 103.8 101.9 106.6 107.2 109.8 111.8 113.1 110.1 112.1 113.5 114.3 119.2 29 Autos and trucks 1.2 115.3 120.9 117.7 109.4 115.9 113.7 117.2 118.7 118.3 110.0 111.7 112.0 110.6 116.8 30 Other 1.3 116.4 116.1 115.5 118.7 119.9 121.4 123.4 124.4 125.1 128.8 128.2 129.2 129.2 131.1 31 Defense and space equipment 3.3 77.0 77.9 77.7 77.0 76.1 76.2 74.7 75.4 75.6 75.2 75.6 76.1 74.9 75.3 32 Oil and gas well drilling .6 120.5 122.6 117.5 120.2 120.7 123.6 130.8 140.7 153.4 152.5 154.2 161.4 149.6 146.8 33 Manufactured homes .2 162.0 167.4 165.6 165.3 159.8 156.3 163.5 160.9 168.0 166.4 163.1 166.3 34 Intermediate products, total 14.2 109.4 110.0 110.6 110.2 111.9 111.3 111.6 112.0 112.1 112.0 112.2 111.7 111.3 111.5 35 Construction supplies 5.3 116.8 119.2 119.8 117.7 120.7 117.8 117.0 120.0 121.8 120.1 120.6 120.3 118.8 119.2 36 Business supplies 8.9 105.1 104.6 105.3 105.8 106.8 107.4 108.4 107.3 106.5 107.2 107.3 106.6 106.9 106.9 37 Materials 39.5 120.3 121.5 121.2 121.7 122.2 123.1 123.4 124.1 124.5 125.5 125.2 125.9 127.0 127.8 38 Durable goods materials 20.8 134.0 136.2 135.5 135.8 136.5 137.8 138.4 139.2 140.2 141.7 141.7 143.3 144.4 146.6 39 Durable consumer parts 4.0 128.8 133.9 128.3 126.6 129.7 130.3 132.1 129.7 129.8 130.5 127.2 130.2 129.8 132.3 40 Equipment parts 7.6 159.2 161.7 162.6 163.4 165.3 167.9 169.4 172.6 175.6 178.1 180.4 183.2 186.7 190.0 41 Other 9.2 118.2 119.2 119.2 120.0 119.1 119.9 119.3 119.8 120.0 121.0 121.0 121.2 121.4 122.8 42 Basic metal materials 3.1 113.1 113.6 114.7 117.2 114.4 115.7 114.9 116.4 116.4 116.7 118.4 118.8 117.7 120.0 43 Nondurable goods materials 8.9 106.4 106.5 106.9 108.0 108.4 109.5 109.6 110.5 110.6 111.3 109.8 109.9 111.1 110.7 44 Textile materials 1.1 106.3 107.4 107.1 108.4 108.5 105.9 106.8 107.7 104.9 109.5 105.4 107.7 108.5 107.9 45 Paper materials 1.8 107.4 108.2 107.0 108.0 110.9 112.5 111.5 113.2 113.8 114.4 114.8 111.1 116.2 115.5 46 Chemical materials 3.9 105.9 106.2 106.8 109.3 107.7 110.2 111.1 111.2 111.2 111.7 109.7 109.6 110.7 110,1 47 Other 2.1 106.1 104.7 106.2 103.9 106.8 106.3 105.3 107.5 108.4 107.8 107.4 109.7 108.3 109.0 48 Energy materials 9.7 103.9 104.0 103.9 103.9 104.0 103.9 103.8 104.0 103.5 103.8 104.1 103.6 104.4 103.4 49 Primary energy 6.3 102.6 103.2 102.2 102.0 101.6 102.6 101.6 102.8 102.3 101.7 102.5 101.7 103.5 102.3 50 Converted fuel materials 3.3 106.2 105.4 107.0 107.5 108.5 106.3 108.0 106.2 105.9 107.6 107.0 107.1 106.2 105.7 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 114.9 115.4 115.7 116.1 116.9 117.4 117.4 118.0 118.5 119.3 119.4 119.8 120.4 121.1 52 Total excluding motor vehicles and parts 95.1 114.6 115.0 115.4 115.9 116.6 117.2 117.1 117.8 118.3 119.0 119.3 119.5 120.2 120.8 53 Total excluding computer and office equipment 98 2 112.9 113.4 113.5 113.7 114.6 115.1 115.1 115.6 116.0 116.4 116.5 116.8 117.3 118.0 54 Consumer goods excluding autos and trucks . 27.4 109.2 108.6 109.2 109.9 111.0 111.4 110.3 110.1 110.7 111.1 111.5 111.3 112.0 112.2 55 Consumer goods excluding energy 26.2 110.2 110.2 110.6 110.8 111.8 112.8 1 11.9 112.1 112.7 111.9 112.4 112.6 112.9 113.7 56 Business equipment excluding autos and trucks 12.0 127.7 128.3 129.3 130.7 131.2 132.4 133.6 135.3 135.9 138.0 138.5 140.1 141.9 144.2 57 Business equipment excluding computer and office equipment 12.1 115.8 116.1 116.3 116.6 117.5 118.2 119.2 120.5 120.7 121.5 121.7 122.7 123.7 125.8 58 Materials excluding energy 29.8 125.4 127.0 126.6 127.1 127.8 129.0 129.4 130.3 131.0 132.2 131.8 132.8 134.0 135.3 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 sic- pro- 1996 Group code por- avg. tion Aug. Sept. Oct. Apr. Mayr Juner July Aug Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 100.0 115.2 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.5 119.9 120.4 121.3 60 Manufacturing 85.4 116.3 117.2 117.4 117.6 118.5 119.2 119.3 120.1 120.6 120.9 121.0 121.6 122.2 123.4 61 Primaiy processing 26.5 112.2 113.1 113.5 113.8 113.8 114.0 113.8 114.8 115.6 115.6 115.8 115.7 116.0 116.7 62 Advanced processing 58.9 118.4 119.2 119.3 119.5 120.8 121.7 122.0 122.6 123.0 123.5 123.6 124.5 125.2 126.7 63 Durable goods 45.0 125.7 127.5 127.2 127.1 128.4 128.8 129.5 130.8 131.7 132.3 132.7 134.1 134.7 136.8 64 Lumber and products 24 2.0 109.7 111.4 110.7 109.2 113.1 108.0 108.6 112.0 113.3 113.6 114.0 114.3 113.4 113.6 65 Furniture and fixtures 25 1.4 108.9 108.8 108.8 110.4 110.5 110.5 109.7 110.3 111.0 112.7 113.9 114.5 113.3 114.3 66 Stone, clay, and glass products 32 2.1 111.0 111.8 113.1 111.7 111.8 111.3 112.7 112.5 113.5 113.8 112.8 113.2 113.6 113.9 67 Primary metals 33 3.1 117.2 118.3 119.5 122.1 118.5 118.8 117.8 120.0 121.3 120.2 123.4 123.4 122.0 124.7 68 Iron and steel 331.2 1.7 116.4 118.2 117.4 123.2 115.9 116.7 118.0 118.2 118.7 119.3 123.6 120.3 120.8 123.3 69 Raw steel 331PT .1 112.2 113.6 112.6 111.5 108.7 112.5 111.7 112.3 114.2 115.5 115.8 115.1 115.4 118.5 70 Nonferrous 333-6.9 1.4 118.0 118.5 121.8 120.7 121.4 121.2 117.6 122.1 124.2 121.3 123.1 126.9 123.3 126.3 71 Fabricated metal products. . . 34 5.0 118.6 119.4 119.3 119.3 119.1 119.5 119.2 119.5 120.4 120.8 121.1 120.7 121.0 121.8 72 Industrial machinery and equipment 35 8.0 156.4 159.6 159.4 159.9 161.7 162.9 164.7 166.6 167.4 171.3 170.5 171.9 175.3 178.4 73 Computer and office equipment 357 1.8 296.9 310.8 319.0 323.6 328.3 332.5 340.3 347.8 354.7 363.8 371.8 382.0 394.4 408.2 74 Electrical machinery 36 7.3 163.3 164.6 165.2 165.6 167.2 168.8 168.6 172.5 175.2 176.7 178.1 181.7 185.5 187.4 75 Transportation equipment. . . 37 9.5 106.1 109.3 107.3 105.3 109.5 109.6 111.9 111.5 111.9 110.6 110.2 112.8 111.3 115.7 76 Motor vehicles and parts . 371 4.9 126.9 132.8 127.0 121.2 128.9 127.9 132.0 129.6 128.9 125.3 123.7 127.6 123.1 130.8 77 Autos and light trucks . 371PT 2.6 124.6 131.0 127.4 117.3 125.7 125.6 128.8 129.4 129.5 119.1 121.6 123.1 116.9 129.1 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 85.6 86.5 87.9 89.4 90.3 91.5 92.2 93.5 94.8 95.5 96.4 97.7 98.9 100.3 79 Instruments 38 5.4 102.8 103.0 103.0 103.4 103.0 104.1 103.3 104.6 104.7 104.4 105.2 105.8 105.3 106.1 80 Miscellaneous 39 1.3 112.9 112.9 113.0 113.0 114.1 116.6 116.3 117.1 116.3 116.9 117.0 117.5 118.8 118.5 81 Nondurable goods 40.4 106.3 106.2 106.9 107.4 107.9 108.8 108.5 108.6 108.7 108.7 108.7 108.4 109.0 109.3 82 Foods 20 9.4 106.3 105.5 106.2 107.1 107.6 108.2 108.2 108.4 109.2 108.3 108.1 107.9 108.6 108.7 83 Tobacco products 21 1.6 105.6 104.1 104.9 104.0 105.4 108.9 104.6 105.7 106.9 105.5 104.2 102.8 104.2 106.0 84 Textile mill products 22 1.8 106.6 107.7 107.2 107.6 108.2 106.3 106.3 106.9 108.2 108.6 107.3 109.0 108.8 108.8 85 Apparel products 23 2.2 98.2 98.5 98.2 97.8 97.3 97.2 96.2 95.8 96.3 96.1 96.4 96.6 96.1 95.2 86 Paper and products 26 3.6 108.0 108.1 108.8 107.6 110.1 111.6 110.3 111.1 112.1 112.2 112.8 111.4 114.7 114.3 87 Printing and publishing 27 6.7 98.4 97.9 99.1 99.7 100.0 99.8 100.5 100.6 99.7 99.6 99.8 99.3 99.5 100.0 88 Chemicals and products .... 28 9.9 108.9 108.7 109.7 111.3 111.8 114.0 113.7 112.8 112.0 113.3 112.7 112.3 113.2 113.2 89 Petroleum products 29 1.4 106.5 107.8 106.9 108.4 107.4 107.3 107.4 108.6 108.1 110.7 112.1 111.3 110.1 111.4 90 Rubber and plastic products . 30 3.5 120.5 122.0 122.8 121.4 121.7 122.6 121.1 123.1 124.0 122.3 123.4 124.0 123.7 125.3 91 Leather and products 31 .3 80.0 79.5 79.4 78.4 77.3 80.1 78.3 77.6 78.4 78.8 77.0 75.5 74.9 75.6 92 Mining 6.9 102.9 104.5 103.4 103.4 103.5 104.5 103.6 106.3 107.5 106.0 108.1 107.4 106.8 105.8 93 Metal 10 .5 102.0 104.0 105.3 105.6 102.5 106.3 105.7 105.7 104.8 103.5 104.2 105.6 104.3 104.3 94 Coal 12 1.0 105.9 109.6 106.2 107.5 108.8 109.5 106.4 109.6 105.2 104.1 115.9 107.4 114.1 109.8 95 Oil and gas extraction 13 4.8 100.3 101.1 100.5 100.0 100.2 100.7 100.8 103.1 105.4 104.5 105.0 105.5 103.8 103.3 % Stone and earth minerals 14 .6 118.7 121.7 118.5 120.0 120.2 122.9 117.2 125.0 128.8 122.3 121.3 123.0 118.9 119.1 97 Utilities 7.7 112.8 110.8 111.1 111.9 114.5 112.6 112.7 110.2 109.9 113.6 112.4 112.1 112.7 1 11.4 98 Electric 491.493PT 6.2 112.7 111.5 110.9 112.0 112.7 112.6 113.2 110.9 110.3 113.6 110.5 111.1 112.6 111.0 99 Gas 492.493PT 1.6 113.2 108.5 111.8 111.3 120.9 112.7 110.9 107.6 108.7 113.2 119.0 115.6 112.7 112.7 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 115.7 116.3 116.8 117.3 117.9 118.6 118.6 119.5 120.0 120.6 120.8 121.2 122.1 122.9 101 Manufacturing excluding office and computing machines . . . 83.6 113.7 114.4 114.5 114.7 115.5 116.1 116.2 116.9 117.3 117.5 117.6 118.0 118.5 119.6 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,001.9 2,258.7 2,272.9 2,273.4 2,270.7 2,303.5 2,301.1 2,302.9 2,315.3 2,327.5 2,324.7 2,337.5 2,340.7 2,340.5 2,367.3 103 Final 1.552.1 1,760.9 1,773.6 1,771.6 1,771.8 1.795.1 1,796.8 1,798.4 1,808.8 1,819.6 1,816.4 1,827.8 1,833.6 1,835.7 1,862.2 104 Consumer goods 1,049.6 1.162.2 1.165.5 1,163.0 1,164.7 1,182.2 1,182.3 1,176.3 1,177.7 1,184.7 1,179.4 1,187.3 1,186.7 1,186.0 1,199.0 105 Equipment 502.5 598.0 607.4 607.8 606.3 612.1 613.7 621.4 630.4 634.2 636.4 639.9 646.3 649.2 662.8 106 Intermediate 449.9 498.2 499.7 502.1 499.3 508.6 504.9 505.1 507.2 508.7 508.9 510.5 508.2 506.1 507.0 1. Data in this table also appear in the Board's G. 17 (419) monthly statistical release. For ments," Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. For a detailed the ordering address, see the inside front cover. The latest historical revision of the industrial description of the industrial production index, see "Industrial Production: 1989 Developproduction index and the capacity utilization rates was released in January 1997. See ments and Historical Revision," Federal Reserve Bulletin, vol. 76, (April 1990), pp. 187-204. "Industrial Production and Capacity Utilization: Historical Revision and Recent Develop- 2. Standard industrial classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • November 1997 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1996 1997 item t9y4 1993 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,372 1,333 1,426 1,349 1,391 1,405 1,395 1,438 1,457 1,442 1,432 1,402 1,414 2 One-family 1,069 997 1,070 1,003 1,016 999 1,052 1,069 1,034 1,060 1,053 1,049 1,030 3 Two-family or more 303 335 356 346 375 406 343 369 423 382 379 353 384 4 Started 1,457 1,354 1,477 1,407 1,486 1,353 1,375 1,554 1,479 1,483 1,402 1,503 1,432 5 One-family 1,198 1,076 1,161 1,104 1,133 1,024 1,125 1,237 1,142 1,133 1,098 1,134 1,128 6 Two-family or more 259 278 316 303 353 329 250 317 337 350 304 369 304 7 Under construction at end of period1 755 775 819 825 828 815 818 821 814 812 815 828 837 8 One-family 584 554 584 588 584 571 573 574 566 563 564 566 571 9 Two-family or more 171 221 235 237 244 244 245 247 248 249 251 262 266 10 Completed 1,346 1,319 1,407 1,375 1,431 1,484 1,362 1,572 1,471 1,460 1,388 1,311 1,294 11 One-family 1,161 1,073 1,124 1,129 1.151 1,177 1,109 1,267 1,156 1,158 1,101 1,090 1,040 12 Two-family or more 185 246 283 246 280 307 253 305 315 302 287 221 254 13 Mobile homes shipped 305 341 362 364 354 338 339 353 353 372 356 356 358 Merchant builder activity in one-family units 14 Number sold 670 667 757 706 788 794 822 826 825 765r 770 810 817 15 Number for sale at end of period1 340 374 326 330 327 322 308 300 287 291T 288 287 287 Price of units sold (thousands of dollars)' 16 Median 130.0 133.9 140.0 143.8 143.5 144.9 145.0 143.0 148.0 150.0 139.9 143.8 146.7 17 Average 154.5 158.7 166.4 168.4 172.0 171.8 171.9 171.1 172.7 179.5r 168.3 178.5 176.4 EXISTING UNITS (one-family) 18 Number sold 3,967 3,812 4,087 4,000 4,060 3,950 3,910 4,230 4,160 4,060 4,250 4,150 4,180 Price of units sold (thousands of dollars)2 19 Median 109.9 113.1 118.2 116.6 117.4 118.8 120.6 117.5 120.0 120.7 123.1 127.2 126.5 20 Average 136.8 139.1 145.5 143.6 144.1 147.1 149.6 144.7 147.5 150.4 153.1 158.4 157.6 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 518,644 534,463 567,179 584,140 586,226 579,109 577,116 592,365 593,908 596,241 595,182 595,847 598,730 22 Private 398,646 407,370 435,929 448,951 448,907 447,045 444,391 452,037 452,728 456,944 459,330 458,277 462,183 23 Residential 238,423 231,230 246,659 247,901 248,259 247,899 246,661 251,402 253,974 259,964 260,165 257,524 259,852 24 Nonresidential 160,223 176,140 189,271 201,050 200,648 199,146 197,730 200,635 198,754 196,980 199,165 200,753 202,331 25 Industrial buildings 28,893 32,505 31,997 34,738 33,244 30,752 31,871 32,161 30,520 29,450 30,531 31,902 34,072 26 Commercial buildings 59,480 68,223 74,593 79,864 80,144 78,395 81,979 83,107 81,015 76,488 78,854 79,802 79,323 2/ Other buildings 26,988 27,089 30,525 32,024 33,454 34,409 34,257 35,561 36,012 38,216 37,692 36,457 36,280 28 Public utilities and other 44,862 48,323 52,156 54,424 53,806 55,590 49,623 49,806 51,207 52,826 52,088 52,592 52,656 29 Public 119,998 127,092 131,250 135,188 137,319 132,064 132,725 140,328 141,180 139,297 135,851 137,570 136,547 30 Military 2,310 2,983 2,541 2,531 2,365 2,241 2,542 2,564 2,232 2,433 2,559 2,583 2,679 31 Highway 36,933 36,319 37,898 38,367 38,610 39,585 37,869 41,060 41,473 42,410 40,655 41,874 40,442 32 Conservation and development 6,459 6,391 5,807 5,573 5,710 5.223 5,807 5,727 6,114 5,069 5,237 5,013 5,053 33 Other 74,297 81,399 85,005 88,717 90,634 85,015 86,507 90,977 91,361 89,385 87,400 88,100 88.373 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) 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 1996 1997 1997 AAAuuuggg... 11999966 11999977 111999999777 111 AAuugg.. AAuugg.. Sept. Dec. Mar. June Apr. May June July Aug. CONSUMER PRICES2 (1982-84=100) 1 All items 2.9 2.2 3.1 3.3 1.8 1.0 .1 .1 .1 .2 .2 160.8 ? 3.6 2.5 5.3 3.4 .3 1.5 -.2 .4 .2 .3 .4 157.6 3 Energy items 3.9 .8 1.1 16.2 -2.8 -14.7 -1.5 -2.4 .0 -.1 1.7 112.5 4 All items less food and energy 2.6 2.3 2.7 2.4 2.4 2.4 .3 .2 .1 .2 ..11 169.6 5 Commodities 1.0 .6 1.1 .9 1.1 .6 .3 .1 -.2 -.1 --..33 141.2 6 Services 3.3 3.0 3.4 3.1 2.7 3.5 .3 .3 .3 .3 .2 185.8 PRODUCER PRICES (1982=100) 7 Finished goods 3.0 -.2 2.5 4.3 -3.3 -3.6 -.5 -.3 -.1 -.1 .3 131.7 8 Consumer foods 5.0 -.4 4.6 2.4 -2.0 -3.5 -.4 .4 -.9 -.2 .3 134.8 9 Consumer energy 6.5 -.7 7.0 26.2 -16.9 -15.1 -3.2r - 1.6r .7 .1 1.4 84.0 10 Other consumer goods 1.6 .2 .6 .6 .6 -.6 .0 -.3 .1 -.1 ..11 144.5 11 Capital equipment 1.2 -.4 1.2 -.6 .0 -1.2 -.1 -,3r .1 -.1 ..00 137.7 Intermediate materials 12 Excluding foods and feeds -.7 -.1 1.0 2.2 -1.9 -1.9 -.4 -.2 .2 -.2 .2 112255..66 13 Excluding energy -1.8 .4 .0 -.3 .6 .3 .0 .0 .1 .0 .1 134.2 Crude materials 14 23.6 -13.7 -9.4 -28.5 -2.8 -10.1 3.1r -.2r -5.4 .3 -.1 111.7 15 Energy 27.7 -4.5 18.7 235.2 -75.5 10.2 — ,9r 6.5r -2.9 -.4 1.7 80.0 16 Other -12.1 3.3 -2.6 -1.3 15.7 -3.5 -2.3r 1.0r .4 -.5 .8 157.9 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 • November 1997 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q2 Q3 Q4 Ql Q2R GROSS DOMESTIC PRODUCT 1 Total 6,947.0 7,265.4 7,636.0 7.607.7 7,676.0 7,792.9 7,933.6 8,034.3 By source 2 Personal consumption expenditures 4,717.0 4.957.7 5.207.6 5.189.1 5.227.4 5,308.1 5.405.7 5,432.1 3 Durable goods 579.5 608.5 634.5 638.6 634.5 638.1 658.4 644.5 4 Nondurable goods 1.428.4 1.475.8 1.534.7 1.532.3 1.538.3 1.560.1 1,587.4 1,578.9 Services 2.709.1 2.873.4 3.038.4 3,018.2 3,054.6 3.109.8 3,159.9 3,208.7 6 Gross private domestic investment 1.007.9 1.038.2 1,116.5 1.105.4 1.149.2 1,151.1 1,193.6 1.242.0 / Fixed investment 946.6 1.008.1 1,090.7 1,082.0 1,1 P.O 1,119.1 1.127.5 1.160.8 8 Nonresidential 660.6 723.0 781.4 769.3 798.6 807.2 811.3 836.3 9 Structures 184.5 200.6 215.2 210.6 117.7 227.0 227.4 226.8 IU Producers durable equipment 476.1 522.4 566.2 558.7 580.9 580.2 583.9 609.5 11 Residential structures 286.0 285.1 309.2 312.7 313.5 312.0 316.2 324.6 12 Change in business inventories 61.1 30.1 25.9 23.4 37.1 31.9 66.1 81.1 13 Nontarm 50.5 38.1 23.0 17.2 31.3 28.7 62.2 74.9 14 Net exports of goods and services -90.9 -86.0 -94.8 -93.8 -1 14.0 -88.6 -98.8 -88.7 1.1 721.2 818.4 870.9 865.0 863.7 904.6 9^2.2 960.3 lb Imports 812.1 904.5 965.7 958.7 977.6 993.2 1.021.0 1.049.0 17 Government consumption expenditures and gross investment 1.313.0 1.355.5 1.406.7 1,407.0 1,413.5 1.422.3 1.433.1 1.449.0 18 Federal 510.2 509.6 520.0 524.6 .HI.6 517.6 516.1 526.1 19 State and local 802.8 846.0 886.7 882.4 891.9 904.7 917.0 923.0 By major t\pe of product 20 Final sales, total 6.885.7 7.235.3 7.610.2 7.584.3 7.638.9 7,761.0 7.867.4 7,953.2 21 2.520.2 2.637.9 2.759.3 2.759.3 1.760.7 ">,795.0 2.838.4 2,854.9 22 Durable 1.072.5 1.133.9 1.212.0 1.214.8 1.216.3 1.233.5 1.248.0 1,275.3 Nondurable 1.447.6 1.503.9 1.547.3 1.544.5 1.544.4 1.561.5 1.590.4 1.579.6 24 Services 3.772.4 3.980.7 4.187.3 4.162.2 4.208.1 4.182.7 4.338.2 4,400.1 23 Structures 593.2 616.8 663.6 662.8 670.1 683.3 690.8 698.2 26 Change in business inventories 61.2 30.1 25.9 23.4 37.1 31.9 66.1 81.1 2/ Durable goods 33.6 29.1 16.9 18.1 33.3 -1.1 31.8 46.8 28 Nondurable goods 27.7 I.I y.o 5.3 3.9 33.0 34.3 34.4 MEMO 2y Total GDP in chained 1992 dollars 6,610.7 6,742.1 6,928.4 6,926.0 6,943.8 7,017.4 7,101.6 7,159.6 NATIONAL INCOME 30 Total 5,590.7 5,912.3 6,254.5 6,229.4 6,303.3 6,376.5 6,510.0 6,599.0 31 Compensation of employees 4.012.0 4.215.4 4.426.9 4,403.9 4.461.0 4,520.7 4,606.3 4,663.4 32 Wages and salaries 3.254.0 3.442.6 3,633.6 3,612.3 3.664.0 3,718.0 3.792.7 3,842.7 33 Government and government enterprises 602.2 623.0 642.6 640.3 645.5 648.9 657.8 662.0 34 Other 2.651.8 2.819.6 2,991.0 2,972.0 3,018.4 3,069.0 3,134.9 3,180.8 33 Supplement to wages and salaries 758.0 772.9 793.3 791.5 797.0 802.7 813.6 820.7 36 Employer contributions for social insurance 353.0 366.0 385.7 383.6 388.6 393.6 401.3 405.6 37 Other labor income 405.0 406.8 407.6 407.9 408.4 409.1 412.3 415.1 3 3 8 y Pro B p u r s ie in to e r s s s ' a i n n d c o p m ro e1 f essional1 4 43 7 4 1 . . 7 6 4 4 6 8 5 9 . . 5 0 4 5~ 8 > 3 0 .1 .3 4 5 8 2 3 0 . . 5 0 4 5 8 T 3 V .7 8 5 4 2 8 8 7 . . 3 9 4 5 9 3 4 4 . . 4 6 5 5 4 0 3 0 . . 6 0 40 Farm' 36.9 23.4 37.2 36.5 40.1 40.4 40.2 43.6 41 Rental income of persons" 124.4 132.8 146.3 144.6 148.0 149.2 149.0 148.7 42 Corporate profits1 570.5 650.0 735.9 738.5 739.6 747.8 779.6 795.1 43 Profits before tax' 535.1 622.6 676.6 682.2 679.1 680.0 708.4 719.8 44 Inventory valuation adjustment - 16.1 -24.3 -2.5 -.5.4 -2.7 3.3 3.5 5.9 45 Capital consumption adjustment 51.4 51.6 61.8 61.6 63.2 64.4 67.7 69.4 46 Net interest 412.3 425.1 425.1 422.5 430.9 430.6 440.5 448.1 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 Busines. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A 49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q2 Q3 Q4 Ql Q2' PERSONAL INCOME AND SAVING 1 Total personal income 5,791.8 6,150.8 6,495.2 6,461.3 6,541.9 6,618.4 6,746.2 6,829.1 2 Wage and salary disbursements 3.240.7 3.429.5 3.632.5 3,611.2 3.662.8 3,716.9 3.791.5 3.841.6 3 Commodity-producing industries 824.4 864.4 909.1 906.3 917.2 927.8 942.9 952.8 4 Manufacturing 620.8 648.4 674.7 674.1 680.1 685.6 694.1 700.3 Distributive industries 741.4 783.1 823.3 819.2 829.0 840.6 856.8 867.0 6 Service industries 1,072.7 1.159.0 1,257.5 1.245.3 1.271.1 1,299.5 1,334.1 1.359.8 7 Government and government enterprises 602.2 623.0 642.6 640.3 645.5 648.9 657.8 662.0 8 Other labor income 405.0 406.8 407.6 407.9 408.4 409.1 412.3 415.1 9 Proprietors' income1 471.6 489.0 520.3 520.0 523.8 528.3 534.6 543.6 in Business and professional' 434.7 465.5 483.1 483.5 483.7 487.9 494.4 500.0 11 Farm' 36.9 23.4 37.2 36.5 40.1 40.4 40.2 4.3.6 1? Rental income of persons2 124,4 132.8 146.3 144.6 148.0 149.2 149.0 148.7 13 Dividends 204.8 251.9 291.2 290.0 292.0 295.2 312.5 318.3 14 Persona] interest income 668.1 718.9 735.7 727.8 742.7 749.8 757.2 766.1 15 Transfer payments 954.7 1.015.0 1,068.0 1.064.8 1.072.4 1,081.5 1,107.2 1.117.0 16 Old age survivors, disability, and health insurance benefits 473.0 507.8 537.6 535.4 540.0 545.6 558.9 564.4 17 LESS; Personal contributions for social insurance 277.5 293.1 306.3 305.0 308.2 311.5 318.2 321.3 18 EQUALS: Personal income 5,791.8 6,150.8 6,495.2 6,461.3 6.541.9 6,618.4 6.746.2 6.829.1 19 LESS: Personal tax and nontax payments 739.1 795.1 886.9 887.8 897.3 922.6 955.7 979.2 20 EQUALS: Disposable personal income 5.052.7 5,355.7 5,608.3 5.573.5 5.644.6 5.695.8 5.790.5 5.849.9 21 LESS: Personal outlays 4.842.1 5,101.1 5,368.8 5.347.8 5.390.6 5.475.4 5,574.6 5.602.8 22 EQUALS: Personal saving 210.6 254.6 239.6 225.7 254.0 220.4 215.9 247.0 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 25.357.0' 25,615.9r 26.085.8 26,106.3' 26,114.3' 26,331.7' 26,597.8 26.764.9 24 Personal consumption expenditures 17.207.2' I7,459.3r 17.748.9' 17.761.8 17,744.3' 17.847.7' 18.045.3' 18.053.8 25 Disposable personal income 18,431.0 18,861.0 19.116.0 19,081.0 19.161.0 19,152.0 19,331.0 19,439.0 26 Saving rate (percent) 4.2 4.8 4.3 4.1 4.5 3.9 3.7 4.2 GROSS SAVING 27 Gross saving 1,079.2 1,165.5 1,267.8 1,256.3 1,295.9 1,303.0 1,332.9 1,396.9 28 Gross private saving 1.030.2 1.093.1 1,125.5 1.106.3 1,145.1 1.131.4 1.(34.0 1.178.1 79 Personal saving 210.6 254.6 239.6 225.7 254.0 "20.4 215.9 247.0 30 Undistributed corporate profits' 167.6 172.4 202.1 202.6 202.3 212.6 21 1.5 217.6 31 Corporate inventory valuation adjustment -16.1 -24.3 -2.5 -5.4 -2.7 3.3 3.5 5.9 Capital consumption allowances 32 Corporate 412.3 428.9 452.3 448.5 455.5 462.0 467.4 472.6 33 Noncorporate 226.3 224.1 230.5 228.3 232.2 235.2 238.0 239.7 34 Gross government saving 49.0 72.4 142.3 150.0 150.8 171.6 198.9 218.8 35 Federal -117.2 -103.6 -39.3 -40.2 -28.3 -5.9 15.9 34.7 36 Consumption of fixed capital 69.5 70.9 71.2 71.4 71.2 71.3 71.4 71.5 37 Current surplus or deficit ( —), national accounts -186.7 -174.4 -110.5 -111.6 -99.5 -77.1 -55.5 -36.8 38 State and local 166.2 176.0 181.5 190.2 179.1 177.5 182.9 184.1 39 Consumption of fixed capital 69.4 72.9 76.2 75.8 76.5 77.2 78.2 79.2 40 Current surplus or deficit (-), national accounts 96.8 103.1 105.3 114.4 102.6 100.4 104.7 104.9 41 Gross investment 1,093.8 1,137.2 1,207.9 1,206.0 1,216.4 1,243.5 1,268.6 1,323.4 42 Gross private domestic investment 1.007.9 1,038.2 1.116.5 1,105.4 1,149.2 1.151.1 1.193.6 1.242.0 43 Gross government investment 206.0 213.4 224.3 226.3 223.6 225.3 223.3 227.4 44 Net foreign investment -120.0 -114.4 -132.9 -125.6 -156.4 -132.9 -148.4 -146.0 45 Statistical discrepancy 14.6 -28.2 -59.9 -50.2 -79.5 -59.5 -64.3 -73.5 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce. Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 International Statistics • November 1997 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1996 1997 IItteemm ccrreeddiittss oorr ddeebbiittss 11999944 11999955 11999966 Q2 Q3 Q4 Ql Q2P 1 Balance on current account -133,538 -129.095 -148.184 -35,585 -42,833 -36,874 -39.972 -39.030 7 Merchandise trade balance" -166,192 -173,560 -191.170 -47.562 -52.493 -48.190 -49.787 -46,903 3 Merchandise exports 502.398 575.871 612,069 153,411 150,764 157.846 162.527 171.489 4 Merchandise imports -668,590 -749.431 -803.239 -200,973 -203.257 -206,036 -212.314 -218.392 5 Military transactions, net 1,874 3.866 3.786 1,214 792 1,295 437 782 6 Other service transactions, net 59.902 67.837 76.344 18,569 19,185 20,697 20.050 19,708 7 Investment income, net 9.723 6.808 2,824 883 -1.370 1,250 -1,990 -3,554 8 U.S. government grants -15.671 -11.096 -14.933 -2.423 -2.690 -5.499 -2,109 -2,255 9 U.S. government pensions and other transfers -4.544 — 3.420 -4.331 -1.081 -1.064 -1.050 -1,083 -1,128 10 Private remittances and other translers -18.630 -19.530 -20,704 -5,185 -5,193 -5.377 -5,490 -5,680 11 Change in U.S. government assets other than official reserve assets, net (increase. —) -352 -549 -690 -358 162 -284 -21 -238 12 Change in U.S. official reserve assets (increase. —) 5.346 -9.742 6,668 -523 7,489 -315 4,480 -236 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -441 -808 370 -133 848 -146 72 - 133 15 Reserve position in International Monetary Fund 494 -2.466 -1.280 -220 -183 -28 1.055 54 16 Foreign currencies 5,293 -6.468 7,578 -170 6,824 -141 3,353 -157 17 Change in U.S. private assets abroad (increase. —) -165,510 -296.916 -358,422 -48.817 -85,193 -153,837 -132,428 -95.018 18 Bank-reported claims' -4,200 -75.108 -98.186 192 -33,589 -66,657 -62.026 -29.612 19 Nonbank-reported claims -31,739 -34,997 -64,234 -5.047 -17,294 -26,115 -29.466 20 U.S. purchases of foreign securities, net -60.309 - 100.074 -108,189 -20,328 -23,206 -30.200 -14.510 -21,325 21 U.S. direct investments abroad, net -69.262 -86.737 -87.813 -23.634 -11,104 -30.865 -26.426 -29,081 22 Change in foreign official assets in United States (increase. +) 40.385 110,729 122,354 13,154 24.089 33,097 28,891 -3,719 23 U.S. Treasury securities 30.750 68.977 111.253 -3,383 25,472 33,564 23.289 -8.444 24 Other U.S. government obligations 6.077 3.735 4.381 1.258 1.217 1,854 651 644 25 Other U.S. government liabilities4 2.366 744 720 -204 907 160 478 804 26 Other U.S. liabilities reported by U.S. banks" 3.665 34.008 4,722 14.198 -1,922 -4,270 7.698 2,346 27 Other foreign official assets3 -2.473 3,265 1.278 1.285 -1,585 1,789 -3,225 931 28 Change in foreign private assets in United States (increase, +) 256.952 340.505 425.201 92.960 134,540 161,482 153.347 155.368 29 U.S. bank-reported liabilities3 104.338 30,176 9,784 2.319 2,040 38,960 17,387 27.143 30 U.S. nonbank-reported liabilities -7.710 34,588 31.786 7.288 20.610 -2.912 15,210 31 Foreign private purchases of U.S. Treasury securities, net 34.274 99,548 155.578 31,212 43.402 67.338 32 Foreign purchases of other U.S. securities, net 56.971 96.367 133.798 29,761 35.115 32.447 38.820 51,537 33 Foreign direct investments in United States, net 45.679 67.526 76.955 17.440 25,977 17,661 30.641 28,872 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -3,283 -14.931 -46.927 -20,831 -38,254 -3,269 -14.297 -17,127 36 Due to seasonal adjustment -1.076 -7,830 2,669 7,059 -1,768 37 Before seasonal adjustment -3,284 -14.931 -46,926 - 19.755 -30,424 -5,938 -21,356 -15.359 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) 5.346 -9.742 6.668 -523 7.489 -315 4,480 -236 39 Foreign official assets in United States, excluding line 25 (increase, +) 38.019 109.985 121.634 13.358 23.182 32,937 28,413 -4,523 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) - 1,529 4,239 12.278 5.239 5.263 3.315 9,272 2,563 1. Seasonal factors are not calculated for lines 12-16. 18-20. 22-34. and 38-40. 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 TRADE' Millions of dollars; monthly data seasonally adjusted 1997 IItteemm 11999944 11999955 11999966 Jan.r Feb.r Mar.r Apr/ Mayr June Julyp 1 Goods and services, balance -104.416 -101,857 -111,040 -11,610 -9,856 -7,831 -8,794 -9,557 -8,293 -10,344 2 Merchandise -166,192 -173,560 -191,170 -18,148 -16,761 -14,877 -15,527 -16,363 -15,244 -17,108 Services 61,776 71,703 80,130 6,538 6,905 7,046 6,733 6,806 6,951 6,764 4 Goods and services, exports 699.646 794,610 848,833 71,848 74,282 78,124 77,791 77,742 78,515 77,381 5 Merchandise 502.398 575,871 612,069 51,686 53,687 57,155 57,162 56,871 57,378 56,451 6 Services 197.248 218,739 236,764 20,162 20,595 20,969 20,629 20,871 21,137 20,930 7 Goods and services, imports -804.062 -896,467 -959,873 -83,458 -84,138 -85,955 -86,585 -87,299 -86,808 -87,725 8 Merchandise -668,590 -749,431 -803,239 -69,834 -70,448 -72,032 -72,689 -73,234 -72,622 -73,559 9 Services -135.472 -147,036 -156,634 -13,624 -13,690 -13,923 -13,896 -14,065 -14,186 -14,166 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 1997 AAsssseett 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July Aug.p 1 Total 74,335 85,832 75,090 68,200 67,482 67,222 65,873 68,054 67,813 66,120 66,641 2 Gold stock, including Exchange Stabilization Fund' 11,051 11,050 11,049 11,048 11,051 11,050 11,051 11,051 11,050 11,051 11,051 3 Special drawing rights2'3 10,039 11,037 10,312 9,793 9,866 9,879 9,726 10,050 10,023 9,810 9,985 4 Reserve position in International Monetary Fund2 12,030 14,649 15,435 14,372 14,037 13.846 13,660 13,805 13,805 13,677 13,959 5 Foreign currencies4 41,215 49,096 38,294 32,987 32,528 32,447 31,436 32,935 32,935 31,582 31,646 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 BANKS' Millions of dollars, end of period 1997 AAsssseett 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July Aug." 1 Deposits 250 386 167 167 229 16 169 176 178 175 169 Held in custody 2 U.S. Treasury securities' 441,866 522,170 638,049 646,130 662,375 672,059 668,536 662,747 652,077 653,157 660,461 3 Earmarked gold" 12,033 11,702 11,197 11,197 11,175 11,034 10,944 10,868 10,794 10,793 10,793 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 • November 1997 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1997 IItteemm 11999955 11999966 Jan.r Feb/ Mar.r Apr.r Mayr June Julyp 1 Total1 630,918 759,065 769,763 778,771 786,483 781,661 785,858 781,036 781,251 By type 2 Liabilities reported by banks in the United States' 107,394 113,098 120,945 118,026 120,616 118,824 127,075 125,064 129,047 3 U.S. Treasury bills and certificates' 168,534 198,921 193.621 196,555 196,219 186,432 178,366 163,949 161,454 U.S. Treasury bonds and notes 4 Marketable 293,690 380,565 388,396 398,519 405,625 413,007 416,383 426,757 424,258 5 Nonmarketable4 6,491 5.968 6,007 6,043 6,084 5,692 5.730 5,767 5,804 6 U.S. securities other than U.S. Treasury securities3 54,809 60,513 60,794 59,628 57,939 57,706 58,304 59,499 60,688 By area 7 Europe' 222.406 257,480 266,645 265,441 269,222 268,321 268,538 272,923 270,648 8 Canada 19,473 21,343 21.151 21,237 21.997 19,677 20,196 20,577 21,009 9 Latin America and Caribbean 66,721 81.887 77,543 79,543 81,088 77,369 82,662 90,238 94,809 10 Asia 311,016 385,048 392,930 401,423 401,345 403,832 402,491 382,297 380,334 11 Africa 6.296 7,379 6,717 7,411 7,908 7,765 8,643 8,890 8,882 12 Other countries 5,004 5,926 4,775 3,714 4,921 4,695 3,326 6,109 5,567 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue: Argentina, beginning April 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. 5. 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 1996 1997 IItteemm 11999933 11999944 11999955 Sept. Dec. Mar. June 1 Banks' liabilities 78,259 89,258 109,713 111,140 103,383 109,238 109,433 2 Banks' claims 62,017 60,711 74,016 68,120 66.018 72,589 84,665 3 Deposits 20,993 19,661 22,696 24,026 22.467 24,542 26,503 4 Other claims 41,024 41,050 51,320 44,094 43,551 48,047 58,162 5 Claims of banks' domestic customers" 12,854 10.878 6,145 7.390 10,978 9.357 11,292 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States' Payable in U.S. dollars Millions of dollars, end of period 1997 IItteemm 11999944 11999955 11999966RR Jan.r Feb.r Mar.r Apr.1" Mayr June Julyp BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,014,996 1,099,549 1,161,993 1,157,115 1,179,323 1,173,370 1,181,658 1,192,659 1,184,108 1,191,399 2 Banks' own liabilities 718,591 753,461 758,998 765,290 782,753 782,904 796,583 812,038 801,609 805,275 3 Demand deposits 23,386 24,448 27,034 26,228 25,086 28,063 29,745 26.494 29,802 27,756 4 Time deposits- 186,512 192,558 187,956 187.265 190,257 189,873 183,860 184.347 186.166 186,729 5 Other3 113.215 140,165 142,464 158,386 161,323 151,428 161,353 161,705 167,062 177,994 6 Own foreign offices4 395,478 396,290 401,544 393,411 406,087 413,540 421,625 439,492 418,579 412,796 7 Banks' custodial liabilities' 296,405 346,088 402,995 391,825 396,570 390,466 385,075 380,621 382,499 386,124 8 U.S. Treasury bills and certificates5 162,938 197,355 236,874 228,855 231,280 230,074 221,387 207,894 205,791 205,548 9 Other negotiable and readily transferable instruments7 42,539 52,200 72,011 70,156 66.809 63,102 67,074 72,716 75,236 78,348 10 Other 90,928 96.533 94,110 92,814 98,481 97,290 96,614 100,011 101,472 102,228 11 Nonmonetary international and regional organizations8. . . 8,606 11,039 13,972 14,957 14,714 12,212 13,059 12,347 13,952 11,145 12 Banks' own liabilities 8,176 10,347 13,355 14,170 14,297 11,793 12,787 12,132 13,496 10,733 13 Demand deposits 29 21 29 55 51 49 30 16 775 86 14 Time deposits2 3,298 4,656 5,784 5,792 5,035 6,952 5,238 4,857 6,669 4,699 15 Other3 4,849 5,670 7,542 8,323 9,211 4,792 7,519 7,259 6.052 5,948 16 Banks' custodial liabilities5 430 692 617 787 417 419 272 215 456 412 17 U.S. Treasury bills and certificates6 281 350 352 494 307 246 174 122 65 47 18 Other negotiable and readily transferable instruments7 149 341 265 293 NO 158 98 88 383 365 19 Other 0 1 0 0 0 15 0 5 8 0 20 Official institutions9 212,957 275,928 312,019 314,566 314,581 316,835 305,256 305,441 289,013 290,501 21 Banks' own liabilities 59,935 83,447 79,406 88.190 87,317 90,701 86,794 92,847 96,959 101,811 22 Demand deposits 1,564 2,098 1,511 1,290 1,378 2,390 2,345 1,857 1,559 1,714 23 Time deposits" 23,511 30,717 33,336 32,646 34,457 32,691 33,428 36,627 39,693 41,936 24 Other3 34,860 50,632 44,559 54,254 51,482 55,620 51,021 54,363 55,707 58,161 25 Banks' custodial liabilities5 153,022 192,481 232,613 226,376 227,264 226.134 218,462 212,594 192,054 188,690 26 U.S. Treasury bills and certificates6 139,571 168,534 198,921 193,621 196,555 196,219 186,432 178,366 163,949 161,454 27 Other negotiable and readily transferable instruments7 13,245 23,603 33,266 32,595 30,362 29,532 31,883 33,976 27,676 26,683 28 Other 206 344 426 160 347 383 147 252 429 553 29 Banks10 678,532 691,412 694,835 679,921 693,210 697,208 710,687 718,551 728,817 732,053 30 Banks' own liabilities 563.617 567.834 562,898 553,645 562,657 567,845 580,231 591,296 576,978 575,459 31 Unaffiliated foreign banks 168,139 171.544 161,354 160,234 156,570 154,305 158.606 151,804 158,399 162,663 32 Demand deposits 10,633 11,758 13.692 12,898 11,642 13,360 14,909 12,957 14,954 13,761 33 Time deposits" 111,171 103,471 90,811 90,123 89,723 88,784 83,540 81,585 80,347 81,126 34 Other3 46,335 56,315 56,851 57,213 55,205 52.161 60,157 57,262 63,098 67,776 35 Own foreign offices4 395,478 396,290 401,544 393,411 406,087 413,540 421,625 439,492 418,579 412,796 36 Banks' custodial liabilities5 114,915 123,578 131.937 126,276 130,553 129,363 130,456 127,255 151.839 156,594 37 U.S. Treasury bills and certificates6 11,264 15,872 23,106 20,962 19,499 19,088 19,567 14,127 27,115 29,917 38 Other negotiable and readily transferable instruments7 14,506 13,035 17,027 14,850 15.063 15,318 16,693 18,918 28,867 30,201 39 Other 89.145 94,671 91,804 90,464 95,991 94,957 94.196 94,210 95,857 96,476 40 Other foreigners 114,901 121,170 141,167 147,671 156,818 147,115 152,656 156,320 152,326 157,700 41 Banks' own liabilities 86,863 91,833 103.339 109,285 118,482 112,565 116,771 115,763 114,176 117,272 42 Demand deposits 11,160 10,571 11,802 11,985 12.015 12,264 12,461 11,664 12.514 12,195 43 Time deposits" 48,532 53.714 58,025 58,704 61,042 61,446 61,654 61,278 59,457 58,968 44 Other3 27,171 27,548 33,512 38.596 45,425 38,855 42.656 42,821 42,205 46,109 45 Banks' custodial liabilities5 28,038 29,337 37,828 38,386 38,336 34,550 35,885 40,557 38,150 40,428 46 U.S. Treasury bills and certificates6 11,822 12,599 14,495 13,778 14,919 14,521 15,214 15,279 14,662 14,130 47 Other negotiable and readily transferable instruments7 14,639 15,221 21,453 22.418 21,274 18,094 18,400 19,734 18,310 21,099 48 Other 1,577 1,517 1,880 2,190 2,143 1,935 2,271 5,544 5,178 5,199 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,895 9,103 14,573 13,043 12,904 13,927 15,130 15,030 15,771 15.419 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 • November 1997 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1995 1996r Jan.' Feb.1 Mar.' Apr.r Mayr June July1 AREA 50 Total, all foreigners 1,014,996 1,099,549 1,161,993 1,157,115 1,179,323 1,173,370 1,181,658 1,192,659 1,184,108 1,191,399 51 Foreign countries 1,006,390 1,088,510 1,148,021 1,142,158 1,164,609 1,161,158 1,168,599 1,180,312 1,170,156 1,180,254 52 Europe 390,869 362,819 376,590 386,732 386,958 382,048 381,047 381,953 397,372 408,238 53 Austria 3,588 3,537 5,128 4,818 4,034 4,606 3,083 3,354 3,254 3,258 54 Belgium and Luxembourg 21,877 24,792 24,084 22,988 24,111 22,327 19,266 21,269 41,306 41,522 55 Denmark 2,884 2,921 2,565 2,323 1,594 1,827 1,782 2,112 2,098 2,289 56 Finland 1,436 2,831 1,958 2,658 2,663 2,422 3,149 1,868 1,851 1,814 57 France 44,365 39,218 35,078 34,921 35,940 35,389 40,791 38,888 41,269 43,465 58 Germany 27,109 24,035 24,660 25,048 24,269 25,517 25,819 26,083 26,687 26,024 59 Greece 1,400 2,014 1,835 2,102 1,951 2,419 1,740 2,296 1,701 1,726 60 Italy 10,885 10,868 10,946 10,619 10,810 8,844 9,502 9,693 10,191 9,493 61 Netherlands 16,033 13,745 11,110 9,854 11,005 11,076 12,008 8,702 8,298 8,440 62 Norway 2,338 1,394 1,288 1,860 1.538 1,896 1.357 1,121 841 846 63 Portugal 2,846 2,761 3,562 3,610 3,493 3,022 3,010 2,712 2,583 2,075 64 Russia 2,726 7,948 7,623 7,281 6,991 7,859 7,863 9,582 12,302 13,604 65 Spain 14,675 10,011 17,707 21,164 18,238 18,854 17,697 15,027 16,274 15,158 66 Sweden 3,094 3,246 1,623 2,357 1,529 2,119 2,216 1,658 1,518 1,925 67 Switzerland 40,724 43,625 44,538 43,577 47,013 43,635 42,137 44,031 39,127 44,332 68 Turkey 3,341 4,124 6,738 7,066 6,763 7,191 6,585 6,757 6,545 6,594 69 United Kingdom 163,733 139,183 153,420 158,767 158,389 155,943 158,225 162,600 157,037 161,430 70 Yugoslavia11 245 177 206 212 384 248 266 324 228 267 71 Other Europe and other former U.S.S.R.12 27,770 26,389 22,521 25,507 26,243 26,854 24,551 23,876 24,262 23,976 72 Canada 24,768 30,468 38,920 35,552 34,564 38,057 40,335 38,435 37,976 30,430 73 Latin America and Caribbean 423,847 440,213 467,374 457,339 474,500 467,254 479,347 494,584 494,326 496,812 74 Argentina 17,203 12,235 13,877 16,610 17,232 16,907 14,224 16,486 18,298 17,100 75 Bahamas 104,014 94,991 88,895 91,104 98,799 90,075 105,465 100,804 90,171 92,156 76 Bermuda 8,424 4,897 5,527 5,334 9,060 8,416 7,202 6,334 5,359 5,897 77 Brazil 9,145 23,797 27,701 22,493 23,888 23,723 23,408 25,452 26,059 28,340 78 British West Indies 229,599 239,083 251,310 245,221 249,127 254,811 251,752 268,415 270,462 261,600 79 Chile 3,127 2,826 2,915 2,987 3,484 3,309 3,117 3,239 3,371 3,440 80 Colombia 4,615 3,659 3,256 2,791 2,855 2,807 3,165 2,776 2,836 2,652 81 Cuba 13 8 21 18 18 18 52 54 55 54 82 Ecuador 875 1,314 1,767 1,617 1,633 1,484 1,469 1,608 1,466 1,640 83 Guatemala 1,121 1,276 1,282 1,348 1,410 1.378 1,514 1,457 1,497 1,455 84 Jamaica 529 481 628 576 576 585 525 472 465 532 85 Mexico 12,227 24,560 31,240 27,149 27,455 27,299 27,855 28,224 32,617 34,579 86 Netherlands Antilles 5,217 4,673 6,099 6,609 6,176 3,590 5,486 3,755 6,134 10,986 87 Panama 4,551 4,264 4,099 3,871 4,156 3,868 3,711 4,026 3,991 4,424 88 Peru 900 974 834 967 917 926 881 1,117 919 958 89 Uruguay 1,597 1,836 1.890 1,917 1,859 1,842 1,753 2,062 2,153 2,392 90 Venezuela 13,986 11,808 17,363 18,121 18,128 18,456 18,968 18,899 19,187 19,095 91 Other 6,704 7,531 8,670 8,606 7,727 7,760 8,800 9,404 9,286 9,512 92 Asia 154,346 240,595 249,083 247,069 254,022 257,794 250,097 249,134 222,673 226,939 China 93 Mainland 10,066 33,750 30,438 27,914 31,631 31,366 28,575 29,429 7,283 9,480 94 Taiwan 9,844 11,714 15,995 16,686 15,623 15,803 14,664 12,442 12,364 13,464 95 Hong Kong 17,104 20,197 18,789 19,869 20,064 20,107 18,941 19,397 20,231 18,735 96 India 2,338 3,373 3,930 4,323 4,746 5,428 4,755 4,367 4,241 4,554 97 Indonesia 1,587 2,708 2,298 2,160 2,474 2,679 2,430 2,770 2.531 2,818 98 Israel 5,157 4,041 6,051 6,608 6,208 5,963 6,097 6,416 5,751 5,180 99 Japan 62,981 109,193 117,316 114,826 115,979 122,760 122.218 118,923 118,407 118,410 100 Korea (South) 5,124 5,749 5,949 6,056 6,259 6,555 7,158 7,866 7,658 8,928 101 Philippines 2,714 3,092 3,378 2,340 2,437 2,389 2,340 2,387 2,469 2,908 102 Thailand 6,466 12,279 10,912 9,873 10,752 9,394 10,361 7,808 6,160 5,262 103 Middle Eastern oil-exporting countries13 15,494 15,582 16,285 15,065 14,920 13,686 14,217 14,426 12,947 13,502 104 Other 15,471 18,917 17,742 21,349 22,929 21,664 18,341 22,903 22,631 23,698 105 Africa 6,524 7,641 8,116 8,498 8,171 8,597 9,012 9,872 10,083 9,752 106 Egypt 1,879 2,136 2,012 1,943 2,043 2,010 2,056 2,257 1,986 1,921 107 Morocco 97 104 112 111 97 107 130 91 66 112 108 South Africa 433 739 458 610 720 827 784 2,004 1,770 1,698 109 Zaire 9 10 10 5 7 9 4 9 39 8 110 Oil-exporting countries14 1,343 1,797 2,626 3,103 2,481 2,945 3,344 2,731 3,153 2,991 111 Other 2,763 2,855 2,898 2,726 2,823 2,699 2,694 2,780 3,069 3,022 112 Other 6,036 6,774 7,938 6,968 6,394 7,408 8,761 6,334 7,726 8,083 113 Australia 5,142 5,647 6,479 5,739 5,170 6,066 7,546 4,991 6,432 6,782 114 Other 894 1,127 1,459 1,229 1,224 1,342 1,215 1,343 1,294 1,301 115 Nonmonetary international and regional organizations.. . 8,606 11,039 13,972 14,957 14,714 12,212 13,059 12,347 13,952 11,145 116 International15 7,537 9,300 12,099 13,338 13,088 10,292 11,691 10,673 12,297 9,690 117 Latin American regional16 613 893 1,339 1,103 1,220 1,459 1,050 1,435 1,071 794 118 Other regional17 456 846 534 516 406 461 318 239 584 661 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 States' Payable in U.S. Dollars Millions of dollars, end of period 1997 AArreeaa oorr ccoouunnttrryy 11999944 11999955 11999966 Jan. Feb. Mar. Apr. Mayr June July'' 1 Total, all foreigners 485,432 532,444 600,619r 607,456r 633,624r 636,599r 641,01 lr 632,224 651,453 677,177 2 Foreign countries 480,841 530,513 598,015r 605,684r 631,369r 635,093r 638,723r 629,892 649,523 676,024 3 Europe 124.124 132,150 166,489 178.480 193,227 204,786' 183,012r 195,964 192,446 186.520 4 Austria 692 565 1,662 1,643 1,284 1,911 1,541 1,440 1,394 1.690 Belgium and Luxembourg 6.923 7,624 6,727 7.611 6,855 8,439 8,054 8.017 8,159 8.089 6 Denmark 1,129 403 492 678 571 546 888 924 981 806 7 Finland 512 1,055 971 1,144 976 1,684 1,194 (.121 1.414 1.247 8 France 12,149 15,033 15.246 18.1 11 20,576 24,929 15,306 17.492 16,764 18.694 9 Germany 7.623 9,263 8.472 9,659 9,077 11.971 9,532' 9.054 10.075 8.404 10 Greece 604 469 568 636 530 755 453 477 630 461 11 Italy 6,044 5,370 6.457 5,419 5,587 6.427 6,166 6.478 7,865 7,443 12 Netherlands 2,960 5,346 7.080 8,119 8,658 7,612r 8,866 8,190 10.687 12.050 13 Norway 504 665 808 1.058 766 1.226 846 1,199 750 745 14 Portugal 938 888 418 420 310 421 326 306 468 439 15 Russia 973 660 1,669 1,673 1,704 2,028 1.799 1,881 2,020 2.098 16 Spain 3,536 2.166 3.211 6,507 5,407 6.633 6,301 5,854 6.811 6.583 17 Sweden 4.098 2.080 2,673 2.013 2.314 2,311 1,942 1,870 2,539 1,740 18 Switzerland 5,747 7,474 19.798 21.457 25,258 20,855 21,301 24,574 22,500 24,883 19 Turkey 878 803 1,109 1.029 1,221 1,236 1,216 1.306 1,392 1,362 20 United Kingdom 66,863 67,784 85.057 86.711 96,988 99,129 90.821 101.240 94,070 84,176 21 Yugoslavia2 265 147 115 108 107 87 78 79 75 75 22 Other Europe and other former U.S.S.R.3 1,686 4,355 3,956 4,484 5,038 6,586 6.382 4,462 3.852 5.535 23 Canada 18.490 20.874 26.436 26,348 27,881 35,782 33,579 31,486 35,916 26.371 24 Latin America and Caribbean 224,229 256,944 274.127 271.654 275,255 261,155 282,475'' 264.375 281,227 300.544 25 Argentina 5,854 6.439 7.400 6,987 6,952 6.995 6,884r 7.251 7,293 7.088 26 Bahamas 66.410 58,818 71,871 62,679 66,771 67.728 68,219 65,546 66.804 69,819 27 8,533 5.741 4,103 4,444 5.980 6.216 8,132' 6.603 7,086 8.226 28 Brazil 9,583 13.297 17,259 17,620 17,758 17.752 17,590 18.588 18,757 18,915 29 British West Indies 96,373 124.037 105.510 108,643 110.143 98.778 111.276r 106.895 122,079 134,119 30 Chile 3.820 4,864 5,136 5.509 5,602 5.784 5.636 5.745 5,599 6.192 31 Colombia 4.004 4,550 6,247 6.166 6.033 6,099 6.026 6.041 6,324 6,432 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 682 825 1,031 1.079 1,134 1,155 995 1.092 1,132 1,165 34 Guatemala 366 457 620 612 634 629 633 619 651 679 35 Jamaica 258 323 345 336 336 366 325 328 336 359 36 Mexico 17,749 18.024 18.425 18.323 18,297 19,516 20,292 19.168 19.201 19,578 37 Netherlands Antilles 1,404 9.229 25.209 27.675 24.250 18,926 25,235 14.759 14.016 15.766 38 Panama 2,198 3.008 2.786 2,796 2.911 3,110 3.243 3,347 3.183 3.272 39 Peru 997 1.829 2.720 2,867 2,944 2,510 2.473 2,580 2,597 2.697 40 Uruguay 503 466 589 623 766 741 682 735 705 778 41 Venezuela 1,832 1,661 1.702 1.599 1.452 1,516 1.558 1.710 1.794 1.722 42 Other 3,663 3.376 3,174 3.696 3.292 3,334 3.276 3,368 3.670 3.737 43 107,800 115,336 122,478r 121,327r 127.042r 124,292' 129,537'' 128.708 129,739 124,429 China 44 Mainland 836 1,023 1,401 2.035 1,766 1,456 2,201 2.168 2,023 2,389 45 Taiwan 1.448 1,713 1,894 1.249 1,201 1,709 1,532 1,500 1,851 1,534 46 Hong Kong 9,222 12.821 12,802 11.764 11.877 14,143 13.389 14,969 16,014 13,878 47 India 994 1,846 1,946 1.824 1,957 2,194 2,147 2,257 2,342 2,184 48 Indonesia 1.472 1.696 1,762 1.749 1.896 2,081 2,206 2,435 2,536 2,523 49 Israel 688 739 633 692 617 612 586 909 631 855 50 Japan 59.569 61.468 59,967 59.843 64,199 56,483 59,083 56,484 59,679 55,660 51 Korea (South) 10.286 13.975 18,901r 20.176' 19,993r 19,901r 20,802' 20,864 20,601 21,427 52 Philippines 663 1,318 1,697 1,492 1.794 1,600 1.746 1,937 2,115 1,723 53 Thailand 2,902 2,612 2,679 3,003 3,092 3,429 3.233 3.069 3.187 2,848 54 Middle Eastern oil-exporting countries4 13,982 9,639 10,424 8,582 8,889 10,078 11,315 10.590 9,105 9.750 55 Other 5,738 6.486 8.372 8,918r 9,761 10,606 11.297 11.526 9,655 9,658 56 Africa 3,053 2,742 2,776 2,731 2.772 2,735 3,282 2.847 3.269 3,125 57 Egypt 225 210 247 246 245 244 231 270 312 267 58 Morocco 429 514 524 489 522 473 478 463 465 463 59 South Africa 674 465 584 572 564 470 452 569 602 493 60 Zaire 2 1 0 0 0 0 1 0 0 0 61 Oil-exporting countries3 856 552 420 408 474 605 1.177 679 1,129 1.134 62 Other 867 1.000 1,001 1,016 967 943 943 866 761 768 63 Other 3,145 2.467 5.709 5.144 5.192 6,343 6.838 6,512 6,926 35,035 64 Australia 2,192 1,622 4,577 3.743 3,176 4,101 4.918 4,088 5,042 33,253 65 Other 953 845 1,132 1.401 2.016 2,242 1.920 2,424 1,884 1,782 66 Nonmonetary international and regional organizations6. . . 4,591 1,931 2,604 1.772 2.255 1,506 2,288 2,332 1,930 1,153 1. Reporting hanks 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 • November 1997 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 1997 TTyyppee ooff ccllaaiimm 11999944 11999955 11999966 Jan. Feb.' Mar.' Apr/ Mayr June JulyP 1 Total 601,814 655,211 744.634r 798,571 813,669 2 Banks' claims 485,432 532.444 600.619r 607.456' 633.624 636,599 641,011 632,224 651,453 677,177 3 Foreign public borrowers 23,416 22.518 22,241 26.061 24,755 28.864 29,176 27,264 29,265 26,807 4 Own foreign offices" 283,015 307,427 342,508 330,261 360.541 360.340 362,790 367,977 379,421 371,168 5 Unaffiliated foreign banks 110,410 101,595 113,505 121,201' 118.091 118.444 116,071 113,013 119,530 147.814 6 Deposits 59.368 37.771 33.826 39,266 38,155 37.284 34,592 34,581 35.782 66,112 7 Other 51.042 63.824 79.679 8l,935r 79.936 81,160 81,479 78.432 83,748 81.702 8 All other foreigners 68,591 100,904 122.365' 129.933' 130.237 128.951 132,974 123,970 123,237 131.388 9 Claims of banks' domestic customers ' 116.382 122.767 144.015 161.972 162.216 10 Deposits 64,829 58,519 77.673 95,147 94,591 11 Negotiable and readily transferable instruments4 36,111 44,161 51,207 49,518 50,301 12 Outstanding collections and other claims 15.442 20.087 15.135 17,307 17.324 MEMO 13 Customer liabilitv on acceptances 8,427 8.410 10.437 11.247 11,442 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States'' 32,796 30,717 42.679 43,452 47,270 38.815 42,719 44.870 38.358 39.664 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 includc 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 1996 1997 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa"" 11999933 11999944 11999955 Sept. Dec. Mar. Junep 1 Total 202,566 202,282 224,932 232,997 257,924 276,080 271,822 11 \ borrower 2 Maturity of one year or less 172,662 170.411 178,857 189,047 211.740 223,817 211,120 3 Foreign public borrowers 17.828 15.435 14,995 16,003 15.411 19,910 17,849 4 All other foreigners 154.834 154,976 163,862 173,044 196.329 203,907 193,271 5 Maturity of more than one year 29,904 31.871 46,075 43,950 46,184 52,263 60,702 6 Foreign public borrowers 10,874 7.8.38 7,522 6.922 6,815 8,861 11,215 7 All other foreigners 19,030 24.033 38,553 37.028 39,369 43,402 49,487 B\ area Maturity of one year or less 8 Europe 57.413 56,381 55.622 58,545 55,513 75,011 69,261 9 Canada 7,727 6.690 6,751 8,811 8,339 10,404 10,322 10 Latin An erica and Caribbean 60,490 59,583 72.504 79,622 103.254 96,867 87.059 11 Asia 41.418 40.567 40,296 37,199 38,135 36,495 38,384 1? Africa 1,820 1,379 1,295 1.320 1,316 1,451 1,899 13 All other3 3.794 5,811 2.389 3,550 5,183 3,589 4,195 Maturity of more than one year 14 Europe 5,310 4.358 4,995 7.117 6,928 9,478 11,828 15 Canada 2,581 3,505 2.751 3,533 2,645 2.953 3,152 16 Latin America and Caribbean 14,025 15.717 27,681 21,382 24,917 26,771 30,970 17 Asia 5,606 5.323 7.941 9,808 9,392 10,773 12,508 18 Africa 1.935 1.583 1.421 1,349 1,361 1.204 1,264 19 All other3 447 1,385 1.286 761 941 1,084 980 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

Bank-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 1995 1996 1997 AArreeaa oorr ccoouunnttrryy 11999933 11999944 June Sept. Dec. Mar. June Sept. Dec. Mar. Junep 1 Total 409.5 499.5 531.9 535.3 551.9 574.6 612.7 586.0 645.0 647.7 678.7 G-10 countries and Switzerland 161.9 191.2 206.5 203.0 206.0 203.4 226.9 220.0 228.1 231.5 249.9 3 Belgium and Luxembourg 7.4 7.2 9.7 11.0 13.6 11.0 11.4 11.3 11.7 14.1 9.3 4 France 12.0 19.1 19.9 18.0 19.4 17.9 18.0 17.4 16.6 19.9 17.9 5 Germany 12.6 24.7 30.0 27.5 27.3 31.5 31.4 33.9 29.8 32.1 34.1 6 Italy 7.7 11.8 10.7 12.6 11.5 13.2 14.9 15.2 16.0 14.4 20.2 7 Netherlands 4.7 3.6 4.3 4.5 3.7 3.0 4.7 5.9 3.9 4.5 6.4 8 Sweden 2.7 2.7 3.1 2.9 2.7 3.3 2.7 3.0 2.6 3.4 3.6 9 Switzerland 5.9 5.1 6.2 6.6 6.7 5.2 6.3 6.3 5.3 6.0 5.4 10 United Kingdom 84.4 85.8 87.1 80.4 82.4 84.7 101.6 90.5 104.6 99.2 109.7 11 Canada 6.9 10.0 11.3 12.9 10.3 10.8 12.2 14.8 14.0 16.3 15.8 12 Japan 17.6 21.1 24.4 26.6 28.5 22.7 23.6 21.7 23.6 21.7 27.4 13 Other industrialized countries 26.5 45.7 43.3 50.5 50.2 61.3 55.5 62.1 65.7 66.4 71.8 14 Austria .7 I.I .7 1.2 .9 1.3 1.2 1.0 1.1 1.9 1.5 15 Denmark 1.0 1.3 1.1 1.8 2.6 3.4 3.3 1.7 1.5 1.7 2.8 16 Finland .4 .9 .5 .7 .8 .7 .6 .6 .8 .7 1.4 17 Greece 3.2 4.5 5.0 5.1 5.7 5.6 5.6 6.1 6.7 6.3 6.1 18 Norwav 1.7 2.0 1.8 2.3 3.2 2.1 2.3 3.0 8.0 5.3 4.7 19 Portugal .8 1.2 1.2 1.9 1.3 1.6 1.6 1.4 .9 1.0 1.1 20 Spain 9.9 13.6 13.0 13.3 11.6 17.5 13.6 16.1 13.2 14.4 15.4 21 Turkey 2.1 1.6 1.4 2.0 1.9 2.0 2.3 2.8 2.7 2.7 3.5 22 Other Western Europe 3.2 3.2 2.9 3.3 4.7 3.8 3.4 4.8 4.7 6.3 5.5 23 South Africa 1.1 1.0 1.4 1.3 1.2 1.7 2.0 1.7 2.0 1.9 1.9 24 Australia 2.3 15.4 14.3 17.4 16.4 21.7 19.6 22.8 24.0 24.4 27.8 25 OPEC2 17.6 24.1 20.3 2° 7 22.1 21.2 20.1 19.2 19.7 21.8 22 2 26 Ecuador .5 .5 .7 .7 .7 .8 .9 .9 1.1 1.1 .9 27 Venezuela 5.1 3.7 3.5 3.0 2.7 2.9 2.3 2.3 2.4 1.9 2.1 28 Indonesia 3.3 3.8 4.1 4.4 4.8 4.7 4.9 5.4 5.2 4.9 5.6 29 Middle East countries 7.6 15.3 11.5 13.9 13.3 12.3 1 1.5 10.1 10.6 13.2 12.4 30 African countries 1.2 .9 .6 .6 .6 .6 .5 .4 .4 .7 1.2 31 Non-OPEC developing countries 83.2 96.0 103.7 104.1 112.6 1 18.6 126.4 124.1 130.1 128.1 140.7 Latin America .32 Argentina 7.7 11.2 12.3 10.9 12.9 12.7 14.1 15.0 14.3 14.3 16.4 33 Brazil 12.0 8.4 10.0 13.6 13.7 18.3 21.7 17.8 20.7 22.0 27.6 .34 Chile 4.7 6.1 7.1 6.4 6.8 6.4 6.7 6.6 7.0 6.8 7.6 35 Colombia 2.1 2.6 2.6 2.9 2.9 2.9 2.8 3.1 4.1 3.7 3.3 36 Mexico 17.9 18.4 17.6 16.3 17.3 16.1 15.4 16.1 16.2 17.2 16.6 .37 .4 .5 .8 .7 .8 .9 1.2 1.3 1.6 1.6 1.4 38 Other 3.1 2.7 2.6 2.6 2.8 3.1 3.0 3.0 3.3 3.4 3.4 Asia China .39 Mainland 2.0 I.I 1.4 1.7 1.8 3.3 2.9 2.6 2.5 2.7 3.6 40 Taiwan 7.3 9.2 9.0 9.0 9.4 9.7 9.8 10.3 10.2 10.5 10.6 41 3.2 4.2 4.0 4.4 4.4 4.7 4.2 3.8 4.3 4.9 5.3 42 .5 .4 .7 .5 .5 .5 .6 .5 .5 .6 .8 43 Korea (South) 6.7 16.2 18.7 18.0 19.1 19.3 21.7 21.9 21.5 14.6 16.3 44 Malaysia 4.4 3.1 4.1 4.3 4.4 5.2 5.3 5.5 5.9 6.5 6.2 45 Philippines 3.1 3.3 3.6 3.3 4.1 3.9 4.7 5.4 5.8 6.0 7.0 46 Thailand 3.1 2.1 3.8 3.9 4.9 5.2 5.4 4.8 5.7 6.8 7.3 47 Other Asia 3.1 4.7 3.5 3.7 4.5 4.3 4.8 4.1 4.1 4.3 4.7 Africa 48 Egypt .4 .3 .4 .4 .4 .5 .5 .6 .7 .9 1.1 49 Morocco .7 .6 .9 .9 .7 .7 .8 .7 .7 .6 .6 50 .0 .0 .0 .0 .0 .0 .0 .0 .1 .0 .0 51 Other Africa' .8 .8 .6 .8 .9 .8 .8 1.0 .9 .9 .9 52 Eastern Europe 3.2 2.7 1.8 3.4 4.2 6.3 5.1 5.3 6.9 8.9 7.1 53 Russia4 1.6 .8 .4 .6 1.0 1.4 1.0 1.8 3.7 3.5 4.2 54 Other 1.6 1.9 1.3 2.8 3.2 4.9 4.1 3.5 3.2 5.4 2.9 55 Offshore banking centers 73.5 72.9 83.8 87.5 99.2 101.3 106.2 105.3 134.9 131.3 128.9 56 Bahamas 10.9 10.2 8.4 12.6 11.0 13.9 17.3 14.2 20.3 20.9 16.0 57 Bermuda 8.9 8.4 8.4 6.1 6.3 5.3 4.1 4.0 4.5 6.7 7.7 58 Cayman Islands and other British West Indies 18.4 21.4 25.3 25.1 32.4 28.8 26.1 32.0 37.2 32.8 35.2 59 Netherlands Antilles 2.8 1.6 2.8 5.7 10.3 11.1 13.2 11.7 26.1 19.9 15.8 60 Panama5 2.4 1.3 1.2 1.3 1.4 1.6 1.7 1.7 2.0 2.0 2.6 61 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 62 Hong Kong. China 18.8 20.0 23.1 23.7 25.0 25.3 27.8 26.2 28.1 30.8 35.3 6.3 Singapore J 1.2 10.1 14.8 13.3 13.1 15.4 15.9 15.4 16.7 17.9 16.1 64 Other6 .1 .1 .0 .1 .1 .1 .1 .1 .1 .1 .3 65 Miscellaneous and unallocated7 43.6 66.9 72.6 64.2 57.6 62.6 72.7 50.0 59.5 59.6 58.1 1. The banking offices covered bv 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. Includes Canal Zone. branch of the same banking institution. 6. Foreign branch claims only. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Includes New Zealand. Liberia, and international and regional organizations. risk or exposure of U.S. banks. More complete data on the country risk exposure of US. banks are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • November 1997 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1995 1996 1997 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Dec. Mar. June Sept. Dec. Mar. 1 Total 50,597 54,309 46,448 46,448 49,907 48,990 51,651r 54,822 54,616 2 Payable in dollars 38,728 38,298 33,903 33,903 36,273 35,385 36,42 T 39,003 39,361 3 Payable in foreign currencies 11,869 16,011 12,545 12,545 13,634 13,605 15,230 15,819 15,255 By type 4 Financial liabilities 29,226 32,954 24,241 24,241 26,570 24,844 25,492 26,089 25,499 5 Payable in dollars 18,545 18,818 12,903 12,903 13,831 12,212 11,319 11,374 11,264 6 Payable in foreign currencies 10,681 14,136 11,338 11,338 12,739 12,632 14,173 14,715 14,235 7 Commercial liabilities 21,371 21,355 22,207 22,207 23,337 24,146 26,159r 28,733 29,117 8 Trade payables 8,802 10,005 11,013 11.013 10,815 11,081 11,791 12,720 11,515 9 Advance receipts and other liabilities 12,569 11,350 11,194 11,194 12,522 13,065 14,368r 16,013 17,602 10 Payable in dollars 20,183 19.480 21,000 21,000 22,442 23,173 25,102r 27,629 28,097 11 Payable in foreign currencies 1,188 1,875 1,207 1,207 895 973 1,057 1,104 1,020 By area or country Financial liabilities 12 Europe 18,810 21,703 15,622 15,622 16,950 16,434 16,133 16,242 15,970 13 Belgium and Luxembourg 175 495 369 369 483 498 547 632 769 14 France 2,539 1,727 999 999 1.679 1,011 1,220 1,091 1,205 15 Germany 975 1,961 1,974 1,974 2,161 1,850 2,276 1,834 1,589 lb Netherlands 534 552 466 466 479 444 519 556 507 1/ Switzerland 634 688 895 895 1,260 1,156 830 699 694 18 United Kingdom 13,332 15,543 10.138 10,138 10,246 10,790 9,884 10,224 9,752 19 Canada 859 629 632 632 1,166 951 973 1,401 602 20 Latin America and Caribbean 3,359 2,034 1,783 1,783 1,876 969 1,169 1,668 1,876 21 Bahamas 1,148 101 59 59 78 31 50 236 293 22 Bermuda 0 80 147 147 126 28 25 50 27 23 Brazil 18 207 57 57 57 8 52 78 75 24 British West Indies 1.533 998 866 866 946 826 764 1,030 965 25 Mexico 17 0 12 12 16 11 13 17 16 26 Venezuela 5 5 2 2 2 1 I 1 1 27 Asia 5,956 8,403 5,988 5,988 6,390 6.351 6,969 6,400 6,347 28 Japan 4,887 7,314 5,436 5,436 5,980 6,051 6,602 5,846 5,771 29 Middle Eastern oil-exporting countries' 23 35 27 27 26 26 25 25 72 30 Africa 133 135 150 150 131 72 153 38 29 31 Oil-exporting countries" 123 123 122 122 122 61 121 0 0 32 All other3 109 50 66 66 57 67 95 340 675 Commercial liabilities 33 Europe 6,827 6,773 7,700 7,700 8,425 7,916 8,680r 9,767 9,551 34 Belgium and Luxembourg 239 241 331 331 370 326 427 479 643 35 France 655 728 481 481 648 678 657 680 680 36 Germany 684 604 767 767 867 839 949r 1,002 1.047 37 Netherlands 688 722 500 500 659 617 668 766 553 38 Switzerland 375 327 413 413 428 516 405r 624 481 39 United Kingdom 2,039 2,444 3,568 3,568 3,525 3,266 3,663r 4,303 4,165 40 Canada 879 1,037 1,040 1,040 959 998 l,144r 1,090 1,068 41 Latin America and Caribbean 1,658 1,857 1,740 1,740 2,110 2,301 2,386r 2,574 2,563 42 Bahamas 21 19 1 1 28 35 33 63 43 43 Bermuda 350 345 205 205 570 509 355 297 479 44 Brazil 214 161 98 98 128 119 198r 196 201 45 British West Indies 27 23 56 56 10 10 15 14 14 46 Mexico 481 574 416 416 468 475 446' 665 633 4/ Venezuela 123 276 221 221 243 283 341 328 318 48 Asia 10,980 10,741 10,421 10,421 10,474 11,389 12,227r 13,422 13,968 49 Japan 4,314 4,555 3,315 3,315 3,725 3,943 4,149r 4,614 4,502 50 Middle Eastern oil-exporting countries' 1,534 1,576 1,912 1.912 1,747 1,784 1,951 2,168 2,495 51 Africa 453 428 619 619 708 924 1,020 1,040 1,037 52 Oil-exporting countries- 167 256 254 254 254 462 490 532 479 53 Other3 574 519 687 687 661 618 702 840 930 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 1995 1996 1997 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Dec. Mar. June Sept. Dec. Mar. 1 Total 49,159 57,888 52,509 52,509 55,406 60,195 59,092r 63,642r 64,343r 2 Payable in dollars 45,161 53,805 48,711 48,711 51,007 55,350 55,014r 58,630r 60,111' 3 Payable in foreign currencies 3,998 4,083 3,798 3,798 4,399 4,845 4,078r 5,012 4,166r By type 4 Financial claims 27,771 33,897 27,398 27,398 30,772 35,251 34,200 35,268 36,788r 5 Deposits 15,717 18,507 15,133 15,133 17,595 19,507 19,877 21,404 19,628r 6 Payable in dollars 15,182 18,026 14,654 14,654 17,044 19,069 19,182 20,631 18,548r 7 Payable in foreign currencies 535 481 479 479 551 438 695 773 1,080r 8 Other financial claims 12,054 15,390 12,265 12,265 13,177 15,744 14,323 13,864 17,160 9 Payable in dollars 10,862 14,306 10,976 10,976 11,290 13,347 12,234 12,069 15,383 10 Payable in foreign currencies 1,192 1,084 1,289 1,289 1,887 2,397 2,089 1,795 1,777 11 Commercial claims 21,388 23,991 25,111 25,111 24,634 24,944 24,892r 28,374r 27,555r 12 Trade receivables 18,425 21,158 22,998 22,998 22,123 22,353 22,454r 25,75 lr 24,80 r 13 Advance payments and other claims 2,963 2,833 2,113 2,113 2,511 2,591 2,438 2,623 2,754r 14 Payable in dollars 19,117 21,473 23,081 23,081 22,673 22,934 23,598r 25,930r 26,246r 15 Payable in foreign currencies 2,271 2,518 2,030 2,030 1,961 2,010 1,294r 2,444 1,309r By area or country Financial claims 16 Europe 7,299 7,936 7,609 7,609 8,929 10,498 9,777 9,282 9,317 17 Belgium and Luxembourg 134 86 193 193 159 151 126 185 119 18 France 826 800 803 803 1,015 679 733 694 761 19 Germany 526 540 436 436 320 296 272 276 324 20 Netherlands 502 429 517 517 486 488 520 493 567 21 Switzerland 530 523 498 498 470 461 432 474 570 22 United Kingdom 3,585 4,649 4,303 4,303 5,568 7,426 6,603 6,119 6,075 23 Canada 2,032 3,581 2,851 2,851 5,269 4,773 4,502 3,445 4,917r 24 Latin America and Caribbean 16,224 19,536 14,500 14,500 13,827 17,644 17,241 19,577 19,742r 25 Bahamas 1,336 2,424 1,965 1,965 1,538 2,168 1,746 1,452 1,894 26 Bermuda 125 27 81 81 77 84 113 140 157 27 Brazil 654 520 830 830 1,019 1,242 1,438 1,468 1,404 28 British West Indies 12,699 15,228 10,393 10,393 10,100 13,024 12,809 15,182 15,l66r 29 Mexico 872 723 554 554 461 392 413 457 517 30 Venezuela 161 35 32 32 40 23 20 31 22 31 Asia 1,657 1,871 1,579 1,579 1,890 1,571 1,834 2,221 2,068 32 Japan 892 953 871 871 1,171 852 1,001 1,035 831 33 Middle Eastern oil-exporting countries' 3 141 3 3 13 9 13 22 12 34 Africa 99 373 276 276 277 197 177 174 182r 35 Oil-exporting countries2 1 0 5 5 5 5 13 14 14 36 All other1 460 600 583 583 580 568 669 569 562 Commercial claims 37 Europe 9,105 9,540 9,824 9,824 9,776 9,842 9,288r 10,443r 9,863r 38 Belgium and Luxembourg 184 213 231 231 247 239 213 226r 364 39 France 1,947 1,881 1,830 1,830 1,803 1,659 1,532 1,644 1,514 40 Germany 1,018 1,027 1,070 1,070 1,410 1,335 l,250r l,337r l,364r 41 Netherlands 423 311 452 452 442 481 424 562' 582 42 Switzerland 432 557 520 520 579 602 594r 642 418r 43 United Kingdom 2,377 2,556 2,656 2,656 2,607 2,658 2,516r 2,946 2,626r 44 Canada 1,781 1,988 1,951 1,951 2,045 2,074 2,083r 2,165 2,38 r 45 Latin America and Caribbean 3,274 4,117 4,364 4,364 4,151 4,347 4,409r 5,276r 5,067r 46 Bahamas < 11 9 30 30 30 28 14 35 40 47 Bermuda 182 234 272 272 273 264 290 275 159 48 Brazil 460 612 898 898 809 838 968r 1,303r 1,216r 49 British West Indies 71 83 79 79 106 103 119 190 127 50 Mexico 990 1,243 993 993 870 1,021 936r 1,128 1,102r 51 Venezuela 293 348 285 285 308 313 316 357 330 52 Asia 6,014 6,982 7,312 7,312 7,100 6,939 7,289r 8,376r 8,348r 53 Japan 2,275 2,655 1,870 1,870 2,010 1,877 l,919r 2,003 2,065r 54 Middle Eastern oil-exporting countries 704 708 974 974 1,024 903 945 971 1,078 55 Africa 493 454 654 654 667 688 731 746r 718' 56 Oil-exporting countries2 72 67 87 87 107 83 142 166 100 57 Other3 721 910 1,006 1,006 895 1,054 1,092 l,368r l,178r 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 • November 1997 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1997 1997 Transaction, and area or country 1995 1996 J J a u n ly .- Jan. Feb. Mar. Apr. May June JulyP U.S. corporate securities STOCKS 1 Foreign purchases 462,950 623,760 543,739 73,036 73,051 68,450 70,267 82,604 87,060 89,271 2 Foreign sales 451,710 611.832 502,844 70,132 69.191 68,153 64,433 75,674r 76,826 78,435 3 Net purchases, or sales (—) 11,240 11,928 40,895 2,904 3,860 297 5,834 6,930r 10,234 10,836 4 Foreign countries 11,445 12,002 40,927 2,905 3,860 289 5,854 6,949r 10,245 10,825 5 Europe 4,912 5.046 31,691 3.271 5,486 2,116 6,686 2,440 5.571 6,121 6 France -1,099 -2.354 2,153 532 427 -309 679 238 -602 1,188 / Germany -1,837 1,104 5,930 959 1,086 699 648 601 857 1,080 Netherlands 3,507 1.389 1.332 322 -334 378 378 382 126 80 9 Switzerland -2,283 2.710 4,327 289 784 304 810 184 1.036 920 10 United Kingdom 8,066 4.119 10,545 -134 2,950 492 3,274 218 2,565 1,180 11 Canada -1,517 2,221 824 422 308 373 141 27 35 -482 12 Latin America and Caribbean 5,814 5.563 8,009 1,364 405 -1.433 -1,982 2.912r 2.380 4,363 13 Middle East1 -337 -1.598 105 -1 26 10 203 -246 164 -51 14 Other Asia 2,503 906 -418 -2.175 -2,549 -894 729 l,541r 2,246 684 15 Japan -2,725 -372 2,715 -1,559 -500 -253 1,294 1,763 1.121 849 16 Africa 2 -81 323 -8 58 96 -7 4 81 99 1 / Other countries 68 -55 393 32 126 21 84 271 -232 91 18 Nonmonetary international and regional organizations -205 -74 -32 -1 0 8 -20 -19 -11 11 BONDS2 19 Foreign purchases 29.3,533 422,249 350.220 48,955 48,818 43,455 42,663 44,729r 58,904 62,696 20 Foreign sales 206,951 294.636 274,429 37,135 36,424 38,104 31,726 36,358 47,673 47,009 21 Net purchases, or sales (—) 86,582 127,613 75,791 11,820 12,394 5,351 10,937 8,37 lr 11,231 15,687 22 Foreign countries 87,036 127,442 75,718 11,824 12,381 5,337 10,941 8,463r 11,099 15,673 23 Europe 70,318 75.722 47,350 6,088 9.612 4,572 5,377 5,58 r 7.117 9,003 24 France 1,143 5.124 1,663 73 290 340 602 -4 90 272 25 Germany 5,938 5.164 1,592 -274 184 493 30 145 -250 1,264 26 Netherlands 1,463 2.440 1,626 337 125 105 67 978 154 -140 II Switzerland 494 1,053 -388 -58 -189 98 189 -54 4 -378 28 United Kingdom 57,591 57.590 39,265 5,911 9,229 2,849 4,313 3,868r 6.522 6,573 29 Canada 2,569 4,197 2,987 379 1.055 390 512 446 -98 303 30 Latin America and Caribbean 6,141 22.901 9,682 3,189 -627 -2,434 2,550 1,569 1.964 3,471 31 Middle East1 1,869 1.637 1,495 480 691 480 16 -179 16 -9 32 Other Asia 5,659 22,715 12,615 1,661 1.231 2,165 2,185 874 1.800 2.699 33 Japan 2,250 13.644 8,475 1,597 535 1.213 1,229 399 1,618 1.884 34 Africa 234 600 778 89 243 47 190 44 61 104 35 Other countries 246 -330 811 -62 176 117 111 128 239 102 36 Nonmonetary international and regional organizations -454 171 73 -4 13 14 -4 -92 132 14 Foreign securities 37 Stocks, net purchases, or sales (-) -50,291 -57.122 -33,263 -3,646 -4,353 -3,827 -4,089 — 3,705r -6.334 -7.309 38 Foreign purchases 345,540 456,826 386,376 47,084 50.139 47.780 49,725 57,612 64,345 69,691 39 Foreign sales 395,831 513,948 419,639 50.730 54,492 51,607 53.814 61,317r 70,679 77,000 40 Bonds, net purchases, or sales ( —) -48,405 -48,793 -23,695 -710 -1.626 -2,979 5,720 -1,328 -13,006 -9,766 41 Foreign purchases 889,541 1,118,678 860.590 109.567 110.510 131,453 117.761 127,985 123,406 139,908 42 Foreign sales 937,946 1.167,471 884.285 110,277 112,136 134,432 112,041 129,313 136,412 149,674 43 Net purchases, or sales (-), of stocks and bonds .... -98,696 -105,915 -56,958 -4,356 -5,979 -6,806 1,631 —5,033r -19,340 -17,075 44 Foreign countries -97,891 -105,044 -57,278 -4,404 -6,061 -6,872 1,617 —5,090r -19,356 -17,112 45 Europe -48,125 -55,948 -10,033 740 -2,030 -3.005 5,732 377' -2,001 -9,846 46 Canada -7,812 -6.279 -2,793 525 1,855 -110 -239 -841 -2,169 -1,814 47 Latin America and Caribbean -7,634 -9.503 -19,470 -2,264 -3.417 -1.574 -1,240 -1,286 -8,473 -1,216 48 Asia -34,056 -27,745 -23.646 -2,830 -2,284 -1.517 -3,650 -3,570 -5.885 -3.910 49 Japan -25,072 -5.888 -15,797 -332 -2.269 -674 -2,349 -2,878 -4.945 -2,350 50 Africa -327 -1.529 -820 34 -7 -74 -121 15 -588 -79 51 Other countries 63 -4.040 -516 -609 -178 -592 1,135 215 -240 -247 52 Nonmonetary international and regional organizations -805 -871 320 48 82 66 14 57 16 37 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 Transactions' Millions of dollars; net purchases, or sales (—) during period 1997 1997 AArreeaa oorr ccoouunnttrryy 11999955 11999966 Jan.— Jan. Feb. Mar. Apr. May June Julyp July 1 Total estimated 134,115 244,725 137,140 20,791 30,615 22,076 25,587 7,751r 25,114 5,206 2 Foreign countries 133,676 246,567 135.384 21,257 29,707 22,386 25,127 7,908r 24.164 4.835 3 Europe 49,976 118,345 76,937 3.403 17,117 13,473 10.625 9.688 10,393 12,238 4 Belgium and Luxembourg 591 1.486 2.403 48 657 83 937 309' -37 406 5 Germany 6.136 17,647 3,390 556 -1.227 -3.124 -1.480 721 1.417 6.527 6 Netherlands 1,891 -582 1,784 -671 546 343 1.412 194 -408 368 7 Sweden 358 2,343 -1.035 -255 -346 -581 -86 90 141 2 8 Switzerland -472 327 1.078 241 992 -1,431 1,029 -223 329 141 9 United Kingdom 34,754 65.381 50,994 1.936 13,423 14,242 6.482 6,951 4.922 3.038 10 Other Europe and former U.S.S.R 6,718 31.743 18,323 1.548 3.072 3,941 2.331 1,646r 4.029 1.756 11 Canada 252 2,389 2,367 667 -402 -317 17 348 1.278 776 1? Latin America and Caribbean 48,609 25,379 -4,362 9,813 -762 -3,336 1,381 -9,495 1.585 -3.548 13 Venezuela —"> -69 863 -3 69 10 -8 93 635 67 14 Other Latin America and Caribbean 25,152 13,026 14,348 6,031 1.577 3,763 -2,657 2,004 3,106 524 15 Netherlands Antilles 23,459 12.422 -19,573 3.785 -2.408 -7,109 4,046 -11,592 -2.156 -4.139 16 Asia 32.467 98,001 60.914 8,593 14,217 12.227 13.200 7.536' 8.406 -3,265 17 Japan 16.979 41,390 35,183 4,264 6.326 1.747 6.604 7.657 5.972 2,613 18 Africa 1,464 1,085 608 29 57 -22 -16 27 340 193 19 Other 908 1.368 -1,080 -1.248 -520 361 -80 -196 2,162 -1,559 20 Nonmonetary international and regional organizations 439 -1.842 1,756 -466 908 -310 460 -157 950 371 21 International 9 -1.390 1,142 -484 530 -384 467 -172 1,068 117 22 Latin American regional 261 -779 388 -1 362 80 24 -2 -145 70 MEMO ?3 Foreign countries 133,676 246.567 135.384 21.257 29.707 22,386 25,127 7,908' 24.164 4.835 ?4 Official institutions 39,631 86.875 43,693 7,831 10.123 7,106 7,382 3,376' 10.374 -2,499 25 Other foreign 94,045 159,692 91.691 13,426 19,584 15,280 17,745 4,532 13,790 7,334 Oil-exporting countries 26 Middle East" 3,075 10,227 5.878 1,307 2,604 2,533 2.879 541' -1.735 -2,251 27 Africa3 2 1 -6 0 -1 0 1 -6 0 0 1. Official and private transactions in marketable U.S. Treasury securities having an 2. Comprises Bahrain, Iran. Iraq, Kuwait. Oman. Qatar. Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of 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 Sept. 30, 1997 Rate on Sept. 30, 1997 Country Country Month effective Austria. . 2.5 Apr. 1996 Germany . . . 2.5 Belgium. 2.5 Apr. 1995 Italy 6.25 Canada. . 3.5 June 1997 Japan Denmark 3.25 Nov. 1996 Netherlands . France" .. 3.1 Jan. 1997 Switzerland . 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 1997 TTyyppee oorr ccoouunnttrryy 11999944 11999955 11999966 Mar. Apr. May June July Aug. Sept. 1 Eurodollars 4.63 5.93 5.38 5.50 5.70 5.69 5.66 5.61 5.58 5.59 2 United Kingdom 5.45 6.63 5.99 6.17 6.35 6.41 6.63 6.93 7.12 7.19 3 Canada 5.57 7.14 4.49 3.25 3.49 3.35 3.30 3.57 3.67 3.66 4 Germany 5.25 4.43 3.21 3.16 3.14 3.09 3.05 3.06 3.19 3.24 5 Switzerland 4.03 2.94 1.92 1.77 1.76 1.51 1.25 1.43 1.39 1.36 6 Netherlands 5.09 4.30 2.91 3.12 3.15 3.15 3.14 3.17 3.33r 3.35 7 France 5.72 6.43 3.81 3.26 3.28 3.37 3.30 3.27 3.31 3.29 8 Italy 8.45 10.43 8.79 7.40 7.09 6.82 6.85 6.87 6.85 6.65 9 Belgium 5.65 4.73 3.19 3.40 3.22 3.22 3.23 3.39 3.55 3.55 10 Japan 2.24 1.20 .58 .55 .55 .58 .60 .67 .58 .55 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 • November 1997 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1997 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999944 11999955 11999966 Apr. May June July Aug. Sept. 1 Australia/dollar2 73.161 74.073 78.283 77.868 77.510 75.422 74.199 74.036 72.310 2 Austria/schilling 11.409 10.076 10.589 12.050 11.998 12.158 12.620 12.946 12.568 3 Belgium/franc 33.426 29.472 30.970 35.328 35.188 35.651 37.040 38.011 36.876 4 Canada/dollar 1.3664 1.3725 1.3638 1.3942 1.3804 1.3843 1.3775 1.3905 1.3872 5 China, P.R./yuan 8.6397 8.3700 8.3389 8.3257 8.3229 8.3224 8.3162 8.3187 8.3171 6 Denmark/krone 6.3561 5.5999 5.8003 6.5226 6.4926 6.5804 6.8317 7.0109 6.8001 7 Finland/markka 5.2340 4.3763 4.5948 5.1375 5.1444 5.1794 5.3164 5.5046 5.3455 8 France/franc 5.5459 4.9864 5.1158 5.7672 5.7482 5.8293 6.0511 6.2010 6.0031 9 Germany/deutsche mark 1.6216 1.4321 1.5049 1.7119 1.7048 1.7277 1.7939 1.8400 1.7862 10 Greece/drachma 242.50 231.68 240.82 270.58 271.95 273.83 281.43 288.41 281.69 11 Hong Kong/dollar 7.7290 7.7357 7.7345 7.7483 7.7431 7.7445 7.7454 7.7436 7.7440 12 India/rupee 31.394 32.418 35.506 35.828 35.825 35.820 35.747 36.009 36.476 13 Ireland/pound" 149.69 160.35 159.95 155.05 151.11 150.60 149.45 145.34 148.06 14 Italy/lira 1,611.49 1,629.45 1,542.76 1.694.52 1,684.33 1,694.54 1,745.91 1,797.12 1,743.22 15 Japan/yen 102.18 93.96 108.78 125.64 119.19 114.29 115.38 117.93 120.89 16 Malaysia/ringgit 2.6237 2.5073 2.5154 2.5028 2.5070 2.5167 2.5815 2.7589 3.0254 17 Netherlands/guilder 1.8190 1.6044 1.6863 1.9256 1.9173 1.9438 2.0201 2.0709 2.0116 18 New Zealand/dollar 59.358 65.625 68.765 69.220 69.097 68.713 66.097 64.211 63.604 19 Norway/krone 7.0553 6.3355 6.4594 6.9932 7.0797 7.2240 7.4545 7.6224 7.3008 20 Portugal/escudo 165.93 149.88 154.28 171.77 171.72 174.56 181.20 186.50 181.49 21 Singapore/dollar 1.5275 1.4171 1.4100 1.4417 1.4368 1.4271 1.4521 1.4977 1.5164 22 South Africa/rand 3.5526 3.6284 4.3011 4.4417 4.4668 4.5005 4.5611 4.6856 4.6890 23 South KoreaAvon 806.93 772.69 805.00 895.57 894.67 891.40 893.09 898.71 912.50 24 Spain/peseta 133.88 124.64 126.68 144.48 143.93 145.98 151.33 155.51 150.75 25 Sri Lanka/rupee 49.170 51.047 55.289 58.826 58.862 58.531 58.732 59.189 59.713 26 Sweden/krona 7.7161 7.1406 6.7082 7.6942 7.6856 7.7506 7.8188 7.9886 7.6887 27 Switzerland/franc 1.3667 1.1812 1.2361 1.4618 1.4331 1.4424 1.4824 1.5128 1.4702 28 Taiwan/dollar 26.465 26.495 27.468 27.629 27.791 27.903 28.032 28.824 28.731 29 Thailand/baht 25.161 24.921 25.359 26.064 25.751 24.534 30.274 32.399 35.256 30 United Kingdom/pound" 153.19 157.85 156.07 162.93 163.22 164.49 166.94 160.35 160.13 MEMO 31 United States/dollar3 91.32 84.25 87.34 96.39 95.29 95.42 97.48 99.96 98.29 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 1997 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks September 30, 1996 February 1997 A64 December 31, 1996 May 1997 A64 March 31, 1997 September 1997 A64 June 30, 1997 November 1997 A64 Terms of lending at commercial banks November 1996 February 1997 A68 February 1997 May 1997 A68 May 1997 October 1997 A64 August 1997 November 1997 A68 Assets and liabilities of U.S. branches and agencies of foreign banks September 30, 1996 February 1997 A72 December 31, 1996 May 1997 All March 31, 1997 August 1997 A64 June 30, 1997 November 1997 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1996 October 1996 A64 September 30, 1996 January 1997 A64 March 31, 1997 July 1997 A64 June 30, 1997 October 1997 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 1995 September 1996 A68 1996 September 1997 A68 Disposition of applications for private mortgage insurance 1996 September 1997 A76 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • November 1997 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, June 30, 1997 Millions of dollars except as noted Banks with domestic Banks with foreign offices' offices only- IItteemm TToo a! Total Fore gn Domestic Over 100 Under 100 1 Total assets3 4,738,520 3,068,968 798,841 2,376,836 1,371,482 298,069 2 Cash and balances due from depository institutions 324,632 240,322 82,456 157,866 69.352 14+,958 3 Cash items in process of collection, unposted debits, and currency and coin 120,135 3.114 117,022 37,518 4 Cash items in process of collection and unposted debits n.a. n.a. 92,541 25,459 T 1 5 Currency and coin n.a. n.a. 24,481 12,058 6 Balances due from depository institutions in the United States 30,057 11,063 18,994 19,360 n.a. 7 Balances due from banks in foreign countries and foreign central banks n.a. 75,627 68.171 7,456 4,563 1 8 Balances due from Federal Reserve Banks 1144,,550033 108 1144,,339944 7,912 T MEMO 9 Non-interest-bearing balances due from commercial banks in the United States (included in balances due from depository institutions in the United States) n.a. n.a. 10,610 15,468 6,111 10 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 810,507 405,251 51,735 353,516 319,624 85,631 11 U.S. Treasury securities 161,267 71.427 2,359 69,068 68.266 21,574 12 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 136.204 34,458 95 34.363 70,568 3311,,117788 13 Issued by U.S. government agencies 6,096 2,921 n.a. n.a. 2.225 951 14 Issued by U.S. government-sponsored agencies 130,108 31,538 n.a. n.a. 68,343 30,227 15 Securities issued by states and political subdivisions in the United States 75,012 22,012 213 21,799 39,060 13,940 16 General obligations 56,181 15.655 n.a. n.a. 30,322 10,204 17 Revenue obligations 18,208 6,007 n.a. n.a. 8,511 3,691 18 Industrial development and similar obligations 623 350 n.a. n.a. 227 46 19 Mortgage-backed securities (MBS) 342,641 201,952 4,737 197,215 124,481 16,209 20 Pass-through securities 233.891 143.115 4,594 138,521 80,773 10,002 21 Guaranteed by GNMA 77,674 53,974 n.a. n.a. 20,576 3,124 22 Issued by FNMA and FHLMC 153,993 87,508 n.a. n.a. 59,648 6,837 23 Privately issued 2,224 1,634 9 1,625 549 41 24 Other mortgage-backed securities (includes CMOs. REMICs. and stripped MBS) 108,751 58,836 142 58,694 43,708 6.207 25 Issued or guaranteed by FNMA, FHLMC or GNMA 8 8,460 46,163 0 46,163 36.462 5,835 26 Collateralized by MBS issued or guaranteed bv FNMA. FHLMC. or GNMA 2.331 929 n.a. n.a. 1,161 242 27 All other mortgage-backed securities 17,959 11,744 n.a. n.a. 6,085 130 28 Other debt securities 71.268 61,220 43,069 18,151 8,680 1,369 29 Other domestic debt securities n.a. 15,033 991 14,043 8.302 n.a. 30 Foreign debt securities n.a. 46.186 42,078 4,108 377 n.a. 31 Equity securities 24,114 14,183 1,263 12,920 8,570 1,361 37 Investments in mutual funds and other equity securities with readilv determinable fair value 8,841 5,377 532 4.845 3,048 415 33 All other equity securities 15,273 8,805 731 8,075 5,522 946 34 Federal funds sold and securities purchased under agreements to resell 244.290 195,190 79,011 116,179 38,097 11.003 35 Total loans and lease-financing receivables, gross 2,851,666 1.783,044 274,677 1,508,367 890,813 177.809 36 LESS: Unearned income on loans 4,635 2,112 881 1,230 1,809 714 37 Total loans and leases (net of unearned income) 2,847,031 1,780,932 273,796 1,507,136 889,004 177,095 38 LESS: Allowance for loan and lease losses 54,159 34,058 n.a. n.a. 17,534 2,566 39 LESS: Allocated transfer risk reserves 39 39 n.a. n.a. 0 0 40 EQUALS: Total loans and leases, net 2.792,833 1.746,835 n.a. n.a. 871,469 174,528 Total loans and leases, gross, by category' 41 Loans secured by real estate 1.18 6,598 662299,,992277 28.620 601,307 456,609 110000,,006622 42 Construction and land development F F 36,986 37,508 7,386 43 Farmland 3,148 11,556 11,356 44 One- to four family residential properties 1 1 388,025 245,537 51,832 45 Revolving, open-end loans, extended under lines of credit n.a. n.a. n.a. 61,162 28,790 2,552 4 4 6 7 Mu A lt ll i fa o m th i e l r y lo (f a i n v s e or more) residential properties 11 11 3 2 2 0 6 , , 5 8 2 6 5 3 21 1 6 6 , , 7 8 4 7 6 5 49 2 . , 2 2 8 2 1 7 48 Nonfarm nonresidential properties T T 1 152,622 145,133 27,261 49 Loans to depository institutions 91,349 87,045 24,576 62,470 4,190 113 50 Commercial banks in the United States n.a. 51,336 1,756 49.580 3,541 n.a. 51 Other depository institutions in the United States n.a. 8.003 55 7,949 422 n.a. 52 Banks in foreign countries n.a. 27,706 22,765 4,941 228 n.a. 53 Loans to finance agricultural production and other loans to farmers 43,490 9,376 5 8,495 15,293 18,821 54 Commercial and industrial loans 750,944 574,162 147.387 426,775 146,994 29,788 55 U.S. addressees (domicile) n.a. 450,382 28.425 421,957 146,477 n.a. 56 Non-US. addressees (domicile) n.a. 123,780 118,963 4,818 517 n.a. 57 Acceptances of other banks 1,912 1,630 937 693 224 57 58 U.S. banks n.a. 295 2 293 n.a. n.a. 59 Foreign banks n.a. 1,336 935 401 n.a. n.a. 60 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 551,494 282,660 35,152 247,508 242,249 26,585 61 Credit cards and related plans 224.372 102,936 n.a. n.a. 119,844 1,592 62 Other (includes single payment and installment) 327,122 179,724 n.a. n.a. 122,405 24,993 63 Obligations (other than securities) of states and political subdivisions in the United States (includes nonrated industrial development obligations) 17.866 10,172 5 10,167 6,831 886633 64 All other loans 120.237 111,088 33,216 77,872 8,290 859 65 Loans to foreign governments and official institutions n.a. 8,066 7,376 690 35 n.a. 66 Other loans n.a. 103,022 25,839 77,182 8,254 n.a. 67 Loans for purchasing and carrying securities n.a. n.a. n.a. 19,825 1,557 n.a. 68 All other loans (excludes consumer loans) n.a. n.a. n.a. 57,357 6,697 n.a. 69 Lease-financing receivables 87,776 76,983 3,903 73,079 10,132 661 70 Assets held in trading accounts 270.792 269,640 F 1,117 1 71 Premises and fixed assets (including capitalized leases) 65.088 38,871 1 20,785 5,433 72 Other real estate owned 4.993 2,931 n.a. 1,623 440 73 Investments in unconsolidated subsidiaries and associated companies 5,297 4,863 n.a. I 398 35 74 Customers' liability on acceptances outstanding 19,138 18.906 i 222 11 75 Net due from own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. n.a. 29,267 n.a. n.a. 76 Intangible assets 56,562 42,389 n.a. 13,396 777 77 Other assets 144,387 103,770 n.a. 35,399 5,218 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A65 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities—Continued Consolidated Report of Condition, June 30, 1997 Millions of dollars except as noted Banks with domestic Banks with foreign offices' offices only" IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 78 Total liabilities, limited-iife preferred stock, and equity capital 4,738,520 3,068,968 n a. n.a. 1,371,482 298,069 79 Total liabilities 4,338,213 2,830,184 798,841 2,138,052 1,241,587 266,442 80 Total deposits 3,257,978 1.983.361 503,758 1.479.603 1,018,550 256.068 81 Individuals, partnerships, and corporations 2,88<t .365 1.709.863 324.311 1,385,553 944,605 231.896 82 U.S. government n.a. n a. n.a. 4.630 1,092 241 83 States and political subdivisions in the United States n.a. n.a. n.a. 42,993 54,373 20.139 84 Commercial banks in the United States 66,036 57,390 32,220 25,170 7,764 881 8? Other depository institutions in the United States n.a. n.a. n.a. 2,647 1,102 1,177 86 Banks in foreign countries n.a. 99,498 91,809 7,690 313 n.a. 87 Foreign governments and official institutions n.a. 46.656 45.268 1,388 30 n.a. 88 Certified and official checks 19.074 10,374 1.283 9,091 6,980 1.719 89 Residual4 286.504 59.578 8 868 n.a. n.a. 14 90 Total transaction accounts 428,118 258,454 73,499 91 Individuals, partnerships, and corporations 371,377 226,541 64.032 92 U.S. government 1,795 753 144 93 States and political subdivisions in the United States 16,217 17,339 7.154 94 Commercial banks in the United States 19,286 5.627 337 95 Other depository institutions in the United States 1,877 895 101 96 Banks in foreign countries 7,690 313 n.a. 97 Foreign governments and official institutions 784 7 n.a. 9X Certified and official checks 9.091 6,980 1.719 99 Residual4 n.a. n.a. 12 100 Demand deposits (included in total transaction accounts) 381,727 173.184 37.845 101 Individuals, partnerships, and corporations 331,121 153,121 34,085 102 U.S. government 1,754 711 132 103 States and political subdivisions in the United States 10,126 5,536 1.466 104 Commercial banks in the United States 19,286 5.626 33S 105 Other depository institutions in the United States 1,877 890 97 106 Banks in foreign countries n.a. n.a. n.a. 7.690 313 n.a. 107 Foreign governments and official institutions 783 7 n.a. 108 Certified and official checks 9,091 6,980 1,719 109 Residual4 n.a. n.a. 11 1 10 Total nontransaction accounts 1,051,485 760,096 182,569 III Individuals, partnerships, and corporations 1,014,176 718.065 167.864 1 12 U.S. government 2.835 339 97 113 Stales and political subdivisions in the United States 26,776 37.034 P,985 114 Commercial banks in the United States 5,884 2,137 544 115 U.S. branches and agencies of foreign banks 0 0 n.a. 116 Other commercial banks in the United States 0 0 n.a. 117 Other depository institutions in the United States 770 2,269 1.076 118 Banks in foreign countries 441 228 n.a. 1 19 Foreign branches of other U.S. banks 0 0 n.a. 120 Other banks in foreign countries 0 0 n.a. 121 Foreign governments and official institutions 603 23 n.a. 122 Residual n.a. n.a. 3 123 Federal funds purchased and securities sold under agreements to repurchase 380.461 297.095 66.003 231,092 79,730 3.637 124 Demand notes issued to the U.S. Treasury 31,550 26,854 0 26,854 4,478 217 125 Trading liabilities 166,248 166,094 n.a. n.a. 154 1 126 Other borrowed money 318,466 201,231 40.371 160.860 113,330 3.905 127 Banks' liability on acceptances executed and outstanding 19,195 .963 4,128 14.835 222 11 128 Notes and debentures subordinated to deposits 54,086 50.131 n.a. 3,932 24 129 Net due to own foreign offices. Edge Act and agreement subsidiaries, and IBFs n.a. n.a. 77,442 n.a. n.a. 130 All other liabilities 110,229 86,456 n.a. 21,193 2.580 131 Total equity capital 400,307 238,784 n.a. 129.895 31,627 MEMO 132 Total individual retirement (IRA) and Keogh plan accounts 75,274 62,601 14,232 133 Total brokered deposits 32,549 21,317 1,314 134 Fully insured brokered deposits n.a. 23,408 19,247 1,187 135 Issued in denominations of less than $100,000 44,,444488 33,,226655 937 1.36 Issued in denominations of $100,000, or in denominations greater than $100,000 and participated out by the broker in shares of $ 100,000 or less 18,960 15,982 250 137 Money market deposit accounts (MMDAs) 390,359 174,776 25,750 138 Other savings deposits (excluding MMDAs) 180,058 129,237 26,556 139 Total time deposits of less than $100,000 304,851 326.286 98.691 140 Total time deposits of $100,000 or more 176,217 129,797 31,573 141 All negotiable order of withdrawal (NOW) accounts 45.995 83.571 34.796 142 Number of banks 9,293 173 n.a. 2,875 6,245 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • November 1997 4.22 DOMESTIC OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, June 30, 1997 Millions of dollars except as noted Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 1 4,046,387 3,192,657 2,359,867 832,790 853,731 2 Cash and balances due from depository institutions 242,176 201,045 148,543 52,502 41,131 3 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 405,255 219,107 166,028 53,079 186,149 4 U.S. Treasury securities 89,840 46,518 33,394 13,124 43,323 5 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 101,746 48,485 36,659 11,827 53,261 6 Securities issued bv states and political subdivisions in the United States 53,000 27,619 20,241 7,378 25,381 7 Mortgage-backed securities (MBS) 140,690 85,473 66,869 18,603 55.217 8 Pass-through securities 90,775 56,457 44,473 11,984 34,318 9 Issued or guaranteed by FNMA, FHLMC, or GNMA 90,185 56,129 44,317 11,813 34,056 10 Other pass-through securities 590 327 156 171 262 11 Other mortgage-backed securities (includes CMOs, REMICs, and stripped MBS) 49,914 29,016 22,397 6,619 20,899 12 Issued or guaranteed by FNMA, FHLMC. or GNMA 42,297 25,541 19,964 5,577 16,756 13 All other mortgage-backed securities 7,617 3,475 2,433 1,042 4,143 14 Other debt securities 10,048 5,400 4,404 996 4,648 15 Equity securities 9,931 5,612 4,461 1,151 4,319 16 Investments in mutual funds and other equity securities with readily determinable fair values 3,464 1,468 1,198 270 1,995 17 All other equity securities 6,468 4,144 3,263 881 2,324 18 Federal funds sold and securities purchased under agreements to resell 165,279 142,238 83,719 58,519 23,041 19 Total loans and lease-financing receivables, gross 2,576,989 2,027,764 1,576,185 451.579 549,225 20 LESS: Unearned income on loans 3,754 2,167 1,776 391 1,587 21 Total loans and leases (net of unearned income) 2,573,235 2,025,597 1,574,409 451,188 547,638 Total loans and leases, gross, by category 22 Loans secured by real estate 1,157,978 864,388 669,080 195,308 293,589 23 Construction and land development 81,880 56,254 44,097 12,156 25,626 24 Farmland 26,060 12,429 9,616 2,813 13,631 25 One- to four-family residential properties 685,394 536,109 411,659 124,449 149,285 26 Revolving, open-end loans, extended under lines of credit 92,504 77,005 62,392 14,612 15,499 27 All other loans 592,890 459,104 349,267 109,837 133,786 28 Multifamily (five or more) residential properties 39,627 28,366 22,367 5,999 11,262 29 Nontarm nonresidential properties 325,016 231,231 181,340 49,891 93,785 30 Loans to depository institutions 66,773 65,421 60,510 4,911 1,352 31 Loans to finance agricultural production and other loans to farmers 42,609 22,833 18,644 4,189 19,776 .32 Commercial and industrial loans 603,557 504,653 377,079 127,574 98,904 33 Acceptances of other banks 975 677 356 322 297 34 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 516,342 397,267 333,268 63,998 119,075 35 Obligations (other than securities) of states and political subdivisions in the United States 17,861 14,769 11,415 3.354 3,092 .36 All other loans 87,021 81,633 49,537 32,095 5,388 37 Lease-financing receivables 83.873 76,122 56,294 19,828 7,751 38 Net due from own foreign offices, Edge Act and agreement subsidiaries, and IBFs 29,267 27,141 9,000 18,141 2,126 39 Remaining assets 631,175 577,529 378,168 199,361 53,646 40 Total liabilities 3,646,081 2,876,200 2,127,168 749,032 769,881 41 Total deposits 2,754,220 2,103,133 1,580,976 522,157 651,087 42 Individuals, partnerships, and corporations 2,562,054 1,961,126 1,475,746 485,380 600,928 43 U.S. government 5,963 5,271 4,757 514 692 44 States and political subdivisions in the United States 117,504 79,770 57,764 22,005 37,735 45 Commercial banks in the United States 33,816 30,204 24.777 5,426 3,612 46 Other depository institutions in the United States 4,926 3,271 2,411 860 1,655 47 Certified and official checks 17,790 13,168 9,843 3,325 4,623 48 Banks in foreign countries, foreign governments, and foreign official institutions 10,104 9,155 4,610 4,544 949 49 Total transaction accounts 760,070 591,959 440,409 151,549 168.112 50 Individuals, partnerships, and corporations 661,950 514,478 383,600 130,878 147,471 51 U.S. government 2,692 2,284 1,816 468 409 52 States and political subdivisions in the United States 40,710 28,200 21,106 7,095 12,509 53 Commercial banks in the United States 25,250 23,471 18,624 4,847 1,779 54 Other depository institutions in the United States 2,873 2,329 1,710 620 543 55 Certified and official checks 17,790 13,168 9,843 3,325 4,623 56 Banks in foreign countries, foreign governments, and foreign official institutions 8,805 8,028 3,711 4,318 777 57 Demand deposits (included in total transaction accounts) 592,756 487,638 361,403 126,235 105,118 58 Individuals, partnerships, and corporations 518,326 424,916 315,359 109,556 93,411 59 U.S. government 2,597 2,230 1,776 454 367 60 States and political subdivisions in the United States 17,128 13,502 10,384 3,117 3,626 61 Commercial banks in the United States 25,247 23.470 18,624 4,846 1,776 62 Other depository institutions in the United States 2,864 2,327 1,707 620 538 63 Certified and official checks 17,790 13,168 9,843 3.325 4,623 64 Banks in foreign countries, foreign governments, and foreign official institutions 8,804 8,027 3,709 4,318 777 65 Total nontransaction accounts 1,994,150 1,511,175 1,140,567 370,607 482,975 66 Individuals, partnerships, and corporations 1,900,105 1,446,648 1,092.146 354,502 453,457 67 U.S. government 3,270 2,987 2,941 47 283 68 States and political subdivisions in the United States 76,795 51,569 36,659 14,911 25,225 69 Commercial banks in the United States 8,566 6,733 6,153 580 1,833 70 Other depository institutions in the United States 4,116 2,110 1,769 341 2,006 71 Banks in foreign countries, foreign governments, and foreign official institutions 1,298 1,126 900 227 172 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A67 4.22 DOMESTIC OFFICES Insured Commercial Bank Assets and Liabilities—Continued Consolidated Report of Condition, June 30, 1997 Millions of dollars except as noted Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 7I2i Federal funds purchased and securities sold under agreements to repurchase 314,458 277,345 193,589 83,756 37.113 Demand notes issued to the U.S. Treasury 31,550 29,030 16,547 12,484 2,520 74 Other borrowed money 278,095 224,323 172,235 52,088 53,772 75 Banks liability on acceptances executed and outstanding 15,067 14,816 10,353 4,463 252 7I6I Net due to own foreign offices. Edge Act and agreement subsidiaries, and IBFs 77,442 66,877 49,200 17,677 10,566 Remaining liabilities 175,248 160,676 104,268 56,408 14,572 MEMO 78 Trading assets at large banks5 77,033 76,789 38,034 38,755 244 79 U.S. Treasury securities (domestic offices) 13,251 13,186 8,813 4,374 65 80 U.S. government agency corporation obligations 2.224 2,198 1,761 437 26 81 Securities issued by states and political subdivisions in the United States 1,096 1,089 835 254 7 82 Mortgage-backed securities 7,104 7,071 940 6,132 33 83 Other debt securities 10,284 10,283 7,257 3.026 1 84 Certificates of deposit 1,597 1,597 528 1,069 0 85 Commercial paper 272 222 222 0 50 86 Bankers acceptances 1,378 1,347 946 401 30 87 Other trading assets 5,634 5,615 1,965 3,650 19 88 Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity contracts 34,193 34,180 14,769 19,411 13 89 Total individual retirement (IRA) and Keogh plan accounts 152,107 113,963 88,773 25,189 38,144 90 Total brokered deposits 55,180 39,117 26,226 12,891 16,063 91 Fully insured brokered deposits 43,842 30,986 21,510 9,477 12,856 92 Issued in denominations of less than $100,000 8.649 66,,220033 33,,005544 33,,114499 22,,444477 93 Issued in denominations of $100,000, or in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 35,193 24,783 18,456 6,328 10,409 94 Money market deposit accounts (MMDAs) 590,884 493,944 384,653 109,291 96,940 95 Other savings deposits 335,852 263,394 191,172 72,222 72,458 96 Total time deposits of less than $100,000 729,828 511,818 398.983 112,835 218,009 9/ Total time deposits of $100,000 or more 337,587 242,019 165,759 76,259 95,568 98 All negotiable order of withdrawal (NOW) accounts 164,362 102,763 77.663 25,100 61,599 99 Number of banks 9,293 3,654 2,663 991 5,639 NOTE. The notation "n.a." indicates the lesser detail available from banks that don't have 2. "Over 100" refers to banks whose assets, on June 30 of the preceding calendar year, foreign offices, the inapplicability of certain items to banks that have only domestic offices or were $100 million or more. (These banks file the FFIEC 032 or FFIEC 033 Call Report.) the absence of detail on a fully consolidated basis for banks that have foreign offices. "Under 100" refers to banks whose assets, on June 30 of the preceding calendar year, were 1. All transactions between domestic and foreign offices of a bank are reported in "net due less than $100 million. (These banks file the FFIEC 034 Call Report.) from" and "net due to" lines. All other lines represent transactions with parties other than the 3. Because the domestic portion of allowances for loan and lease losses and allocated domestic and foreign offices of each bank. Because these intraoffice transactions are nullified transfer risk reserves are not reported for banks with foreign offices, the components of total by consolidation, total assets and total liabilities for the entire bank may not equal the sum of assets (domestic) do not sum to the actual total (domestic). assets and liabilities respectively of the domestic and foreign offices. 4. "Residual" equals the sum of the "n.a." categories listed above it. Foreign offices include branches in foreign countries, Puerto Rico, and U.S. territories and 5. Components of "Trading assets at large banks" are reported only by banks with either possessions; subsidiaries in foreign countries; all offices of Edge Act and agreement corpora- total assets of $1 billion or more or with $2 billion or more in the par/notional amount of their tions wherever located; and IBFs. off-balance-sheet derivative contracts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • November 1997 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, August 4-8, 1997 A. Commercial and industrial loans made by all commercial banks1 Weighted- Amount of loans (percent) W e a f e v f i e e g r c h a t t i g e v e d e - Am lo o a u n n s t of Avera si g z e e loan m a a v t e u r r a i g ty e " ( l p o e a r n c e r n a t t ) e " o ( f m d il o l l i l o a n r s s ) (tho d u o s l a la n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd e e n r t LOAN RISK' 1 All consumer and industrial loans 6.81 141,231 882 266 29.5 19.9 31.8 73.4 2 Minimal risk 6.08 11,788 1,359 66 22.6 35.2 62.9 74.9 3 Low risk 6.29 36,602 1.867 193 18.1 12.5 29.9 60.3 4 Moderate risk 6.94 52,807 784 303 31.3 26.7 29.6 81.6 5 Acceptable risk 7.46 22,337 556 332 42.8 15.8 28.2 By maturity/repricing interval6 6 Zero interval 8.16 27,561 332 614 41.2 15.3 18.2 80.3 7 Minimal risk 7.58 339 127 458 47.2 17.0 7.3 95.9 8 Low risk 7.81 3,895 534 561 22.1 30.5 5.1 96.0 9 Moderate risk 8.37 9,870 261 867 46.9 15.7 3.7 92.2 10 Acceptable risk 8.87 5,179 205 576 56.4 20.4 31.1 96.8 11 Daily 6.22 64,941 4.053 39 19.7 25.6 33.8 62.6 12 Minimal risk 5.94 9,850 22,644 17 22.2 40.7 69.2 72.7 13 Low risk 6.01 21,489 8,415 23 14.1 12.0 28.1 41.9 14 Moderate risk 6.36 22,911 4.281 44 22.6 39.9 33.8 75.5 15 Acceptable risk 6.60 5,485 1.979 79 18.5 8.2 8.8 55.2 16 2 to 30 days 6.72 21.527 1.254 239 30.7 15.9 33.9 81.0 17 Minimal risk 6.48 678 2,457 157 23.1 7.7 45.3 78.0 18 Low risk 6.12 5,050 2.887 283 24.4 6.7 36.4 78.0 19 Moderate risk 6.72 8,681 1,244 132 24.4 27.1 36.3 84.9 20 Acceptable risk 7.34 5,446 896 263 46.4 9.9 29.3 79.8 21 31 to 365 days 6.70 23,616 795 387 35.6 12.7 44.3 91.4 22 Minimal risk 6.58 856 202 376 13.9 2.1 30.4 90.0 23 Low risk 6.33 5,443 900 370 24.7 6.5 52.6 90.8 24 Moderate risk 6.70 9,492 794 356 32.5 8.3 45.4 92.2 25 Acceptable risk 7.04 5,797 1,744 405 48.2 23.5 44.6 89.3 26 More than 365 days 8.44 2,686 240 65.5 3.3 3.6 35.0 27 Minimal risk . . . 7.72 55 57 44.2 6.8 .5 62.3 28 Low risk 7.54 650 378 17.7 3.1 3.4 58.0 29 Moderate risk 8.72 1,593 348 84.4 2.5 3.8 18.3 30 Acceptable risk. . 8.91 268 174 1.7 5.1 68.9 Weighted- Weighted- average average risk maturity/ rating3 repricing interval6 Days SIZE OF LOAN 31 1-99 9.73 2,594 141 83.0 30.8 5.2 74.9 32 100-999 8.74 10.518 79 68.1 24.0 15.1 86.4 33 1,000-9,999 7.23 33,639 3.0 46 40.2 13.8 31.4 78.8 34 10,000+ 6.37 94,481 2.5 19.9 21.3 34.5 70.0 BASE RATE OF LOAN"* 35 Prime' 9.06 24,187 3.1 104 60.0 21.6 9.5 73.7 36 Fed funds 6.02 50,391 2.4 7 19.7 29.6 41.0 56.4 37 Other domestic 6.13 13,315 2.6 23 6.3 37.0 34.8 75.0 38 Foreign 6.67 39,020 33 33.0 6.3 42.4 92.9 39 Other'. 6.82 14,078 103 24.6 4.6 4.2 77.7 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A69 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, August 4-8, 1997 B. Commercial and industrial loans made by large domestic banks' Weighted- Amount of loans (percent) Weighted- Amount of Average loan average average loans size maturity3 ( l e p o f e a f r n e c c e t r n i a v t t ) e e " o ( f m d il o l l i l o a n r s s ) (tho d u o s l a la n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd e e n r t LOAN RISK3 1 All consumer and industrial loans 7.05 57,683 1,057 392 31,4 19.0 8.9 65.3 2 Minimal risk 6.23 1.019 1,798 401 10.2 .8 59.7 97.0 3 Low risk 6.47 11,676 3,302 453 23.7 34.8 15.9 70.1 4 Moderate risk 7.05 22,244 1,022 441 37.0 24.4 7.8 66.3 5 Acceptable risk 7.46 12,548 611 324 39.1 7.2 6.1 69.1 By maturity/repricing interval 6 Zero interval 8.18 15,246 492 591 39.0 15.1 3.7 68.4 7 Minimal risk 7.15 93 350 746 31.4 4.0 25.9 99.9 8 Low risk 7.47 2,740 1,833 496 14.5 34.3 3.7 98.0 9 Moderate risk 8.02 5,099 394 694 50.6 15.3 4.3 92.0 10 Acceptable risk 8.90 2,559 195 680 60.1 16.9 7.5 96.2 1 I Daily 6.36 20,442 2,196 107 26.3 33.6 4.1 52.6 12 Minimal risk 6.52 311 2,747 327 1.6 1.5 50.3 90.4 13 Low risk 6.00 4,210 5,135 151 39.7 59.6 5.9 38.7 14 Moderate risk 6.45 8,466 2,646 110 32.8 43.9 3.8 47.9 15 Acceptable risk 6.71 3,619 2,104 104 17.2 4.9 .4 38.9 16 2 to 30 days 6.80 11,709 1,460 270 25.5 9.1 16.5 75.4 17 Minimal risk 5.88 406 4,590 208 10.4 .0 71.2 99.9 18 Low risk 6.18 2,516 4.282 399 21.2 11.3 34.1 80.9 19 Moderate risk 6.78 4,229 1,361 163 21.5 15.3 9.2 75.6 20 Acceptable risk 7.35 3,652 1,074 314 37.6 3.6 10.6 72.7 21 31 to 365 days 6.70 7,887 2,168 538 29.8 21.7 84.9 22 Minimal risk 6.08 182 2.152 627 15.1 75.9 100.0 23 Low risk 6.23 1.661 3,052 724 9.4 17.7 38.2 88.1 24 Moderate risk 6.71 3,002 1,776 649 25.8 6.8 25.0 84.7 25 Acceptable risk 7.09 2,428 2,617 273 49.3 2.2 6.6 78.5 26 More than 365 days 1,908 27 Minimal risk . . . 28 Low risk 7.20 513 8.597 .7 65.3 29 Moderate risk . . 8.61 1,376 2,754 83.2 13.6 30 Acceptable risk. . 8.56 183 444 57.1 73.7 Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN 31 1-99 9.40 950 3.5 82.2 36.5 6.0 89.1 32 100-999 8.77 5,354 3.4 66.1 21.3 9.6 87.5 33 1,000-9,999 7.46 16,844 3.1 39.3 13.2 10.8 70.7 34 10,000+ 6.51 34,535 2.9 20.7 21.1 8.0 58.5 BASE RATE OF LOAN4 35 Prime7 8.91 14,831 3.2 149 57.0 18.1 5.2 67.0 36 Fed funds 6.19 11,359 3.0 14 32.4 40.0 2.6 40.4 37 Other domestic 6.10 9,890 2.6 14 6.4 31.8 21.6 67.8 38 Foreign 6.69 9,882 3.1 52 35.0 5.1 14.7 73.9 39 Other 6.62 11,721 3.0 69 15.9 2.7 3.8 77.8 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • November 1997 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, August 4-8, 1997 C. Commercial and industrial loans made by small domestic banks' Weighted- Weighted- Amount of loans (percent) e a f v f e e r c a t g iv e e Am l o o u an n s t of Avera si g z e e loan m av at e u ra ri g t e y 3 ( l p o e a r n c e r n a t t ) e " o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd en er t LOAN RISK3 1 All consumer and industrial loans 8.10 12,910 136 531 56.4 18.7 29.2 64.0 2 Minimal risk 7.71 668 86 238 65.5 18.3 7.1 63.6 3 Low risk 7.22 2,966 219 477 33.7 9.4 36.7 50.0 4 Moderate risk 8.20 5,268 126 612 57.6 20.3 26.1 68.1 5 Acceptable risk 8.85 1,999 119 638 78.7 12.0 30.0 77.8 By maturity/repricing intervalb 6 Zero interval 9.12 4,810 98 74.0 24.8 6.6 87.4 7 Minimal risk 8.60 140 59 82.2 27.4 .4 90.1 8 Low risk 8.93 741 137 55.8 24.1 3.6 87.3 9 Moderate risk 8.97 2,544 106 71.9 23.4 3.9 85.8 10 Acceptable risk 9.63 995 90 93.4 15.3 18.6 92.7 11 Daily 6.87 3,226 694 134 26.1 1.4 82.2 16.1 12 Minimal risk 5.97 170 1.040 306 58.6 1.2 12.1 87.9 13 Low risk 6.00 1,063 1,169 29 1.5 .2 90.6 7.5 1 1 4 5 A M c o c d e e p r t a a t b e l e r is r k is k 6 6 . . 2 8 4 6 1, 3 0 1 6 0 6 7 3 6 8 5 3 23 9 . . 0 3 1 1 . . 0 7 7 8 0 5 . . 3 5 2 1 7 2 . . 6 8 16 2 to 30 days 7.64 1,904 260 250 58.0 23.4 17.1 75.8 17 Minimal risk 7.84 205 1,471 16 52.1 25.5 3.4 50.8 18 Low risk 6.86 486 785 288 50.9 1.3 11.8 65.6 19 Moderate risk 8.10 632 200 254 70.4 35.7 29.1 88.5 20 Acceptable risk 8.47 287 129 510 75.6 13.5 10.7 76.1 21 31 to 365 days 7.75 2,198 98 500 50.2 21.4 19.5 75.2 22 Minimal risk 8.63 115 28 175 73.9 15.4 16.9 25.3 23 Low risk 7.32 510 108 598 36.6 7.1 8.2 71.7 24 Moderate risk 8.11 656 74 300 52.8 13.6 26.9 69.2 25 Acceptable risk 8.41 286 215 1113 6.9 56.4 85.3 26 More than 365 days 9.41 507 91.1 14.0 37.0 27 Minimal risk . . . 9.29 29 83.5 12.9 28.9 28 Low risk 127 80.6 15.9 25.0 29 Moderate risk . . 9.43 207 96.4 11.4 1.8 45.7 30 Acceptable risk. . 9.82 72 96.2 6.0 7.3 51.5 Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN 31 1-99 9.98 1,583 3.0 205 84.4 27.3 65.5 32 100-999 9.14 3,571 3.0 139 78.9 27.3 80.4 33 1,000-9,999 8.09 3,740 2.9 55 65.3 17.8 31.7 70.5 34 10,000+ 6.44 4,016 2.6 22 16.9 8.4 55.0 42.9 BASE RATE OF LOAN4 35 Prime7 9.48 6,091 3.0 35 79.5 24.6 14.2 76.2 36 Fed funds 5.98 2,894 2.7 17 6.6 7.6 84.6 16.1 37 Other domestic 7.14 411 2.2 310 36.8 52.5 78.3 38 Foreign 6.98 1,621 2.8 61 48.5 9.1 28.6 92.1 39 Other 8.05 1,894 2.6 343 69.1 17.5 2.6 71.3 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A71 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, August 4-8, 1997 D. Commercial and industrial loans made by U.S. branches and agencies of foreign banks' Weighted- Weighted- Amount of loans (percent) e a f v f e e r c a ti g v e e Am lo o a u n n s t of Aver s a i g z e e loan m av at e u r r a i g ty e 3 ( l p o e a r n c e r n a t t ) e 2 o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p e b a n je y a c m lt t y e t n o t c M om ad m e it u m nd en er t LOAN RISK3 1 All consumer and industrial loans 6.38 70,639 6,558 126 23.0 20.8 50.6 81.7 2 Minimal risk 5.95 10,101 32,950 22 21.0 39.8 66.9 73.4 3 Low risk 6.07 21,960 8,731 37 13.0 1.0 36.5 56.5 4 Moderate risk 6.58 25,295 6,427 131 20.8 30.0 49.6 97.8 5 Acceptable risk 7.11 7,791 2,719 273 39.6 30.8 63.3 98.6 By maturity/repricing interval6 6 Zero interval 7,505 2,593* 7 Minimal risk 8 Low risk 8.05 414 1,125 783 11.6 16.9 16.9 98.6 9 Moderate risk 8.46 2,227 2,370 1735 10.0 7.9 2.1 100.0 10 Acceptable risk 8.34 1,626 1,570 393 27.9 29.0 75.9 100.0 11 Daily 6.11 41,273 19,978 4 15.9 23.6 44.1 71.2 12 Minimal risk 5.92 9,369 59,072 2 22.3 42.8 70.9 71.8 13 Low risk 6.01 16,216 19,655 1 8.3 .4 29.7 44.9 14 Moderate risk 6.32 13,379 17,641 11 17.2 40.5 48.6 97.9 15 Acceptable risk 6.28 1,557 6,385 4 20.7 17.2 16.1 16 2 to 30 days 6.39 7,914 4,340 189 31.8 24.2 63.5 90.6 17 Minimal risk 5.96 67 1,394 171 10.8 16.7 28.3 18 Low risk 5.85 2,049 3,776 123 22.1 2.4 45.0 77.4 19 Moderate risk 6.42 3,820 5,418 80 20.1 38.8 67.6 94.7 20 Acceptable risk 7.11 1,508 3,308 104 62.1 24.6 78.1 97.9 21 31 to 365 days 6.53 13,531 3,752 283 36.7 61.3 97.8 22 Minimal risk 6.32 559 6,994 336 1.3 18.4 100.0 23 Low risk 6.23 3,272 4,240 155 30.5 .7 66.8 95.2 24 Moderate risk 6.54 5,834 4,049 212 33.6 8.5 58.0 98.6 25 Acceptable risk 6.87 3,084 2,881 440 44.1 41.8 73.3 98.2 26 More than 365 days 27 Minimal risk . . . 28 Low risk 29 Moderate risk . . 30 Acceptable risk. . Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN 31 1-99 8.61 61 3.2 56.5 32.9 30.7 96.4 32 100-999 7.75 1,593 3.2 50.4 25.5 47.5 96.6 33 1,000-9,999 6.69 13,055 3.0 34.1 13.4 57.6 91.7 34 10,000+ 6.27 55,930 2.4 19.6 22.4 49.0 78.9 BASE RATE OF LOAN4 35 Prime7 8.98 3,265 3.0 37.1 31.7 20.5 99.8 36 Fed funds 5.97 36,139 2.2 16.8 28.4 48.7 64.6 37 Other domestic 6.09 3,015 2.5 2.1 52.2 82.9 98.2 38 Foreign 6.65 27,517 2.8 31.4 6.6 53.1 99.7 39 Other 6.88 463 2.9 64.2 19.6 100.0 NOTE. This table has been revised to reflect several changes in the E.2 statistical release. 5. A complete description of these risk categories is available from the Banking and First, business loan pricing information is now disaggregated by risk categories for most Money Market Statistics Section, Mail Stop 81, Board of Governors of the Federal Reserve loans. Second, the previous disaggregation of loans by maturity categories has been replaced System, Washington, DC 20551. The category "Moderate risk" includes the average loan, by a "maturity/repricing interval," which measures the period from the day the loan is made under average economic conditions, at the typical lender. The category "Acceptable risk" may until it is next scheduled to reprice (for loans that reprice), or the period from the day the loan include a small volume of special mention or classified loans. The weighted-average risk is made until it is scheduled to mature (for loans that do not reprice). Third, information on ratings published for loans in rows 31-39 are calculated by assigning a value of "I" to whether loans are callable or subject to prepayment penalties is now being collected and minimal risk loans; "2" to low risk loans; "3" to moderate risk loans, "4" to acceptable risk published. In addition to these new loan characteristics, the survey now includes gross loans; and "5" to special mention and classified loans. These values are weighted by loan business loan extensions of U.S. branches and agencies of foreign banks. amount and exclude loans with no risk rating. Some of the loans in lines 1, 6, 11, 16, 21, 26, 1. As of December 31, 1996, assets of most of the large banks were at least $7.0 billion. and 31-39 are not rated for risk. Median total assets for all insured banks were roughly $62 million. Assets at all U.S. branches 6. The maturity/repricing interval measures the period from the date the loan is made until it and agencies averaged 1.3 billion. first may reprice or it matures. For floating-rate loans that are subject to repricing at any 2. Effective (compounded) annual interest rates are calculated from the stated rate and time—such as many prime-based loans—the maturity/repricing interval is zero. For floating-rate other terms of the loans and weighted by loan amount. The standard error of the loan rate for loans that have a scheduled repricing interval, the maturity/repricing interval measures the number all commercial and industrial loans in the current survey (line 1, column 1) is 0.11 percentage of days between the date the loan is made and the date on which it is next scheduled to reprice. For points. The chances are about two out of three that the average rate shown would differ by less loans having rates that remain fixed until the loan matures (fixed-rate loans), the maturity/repricing than this amount from the average rate that wouid be found by a complete survey of the interval measures the number of days between the date the loan is made and the date on which it universe of all banks. matures. Loans that reprice daily mature or reprice on the business day after they are made. Owing 3. Average maturities are weighted by loan amount and exclude loans with no stated to weekends and holidays, such loans may have maturity/repricing intervals in excess of one day; maturities. such loans are not included in the "2 to 30 day" category. 4. The most common base pricing rate is that used to price the largest dollar volume of 7. For the current survey, the average reported prime rate, weighted by the amount of loans. Base pricing rates include the prime rate (sometimes referred to as a bank's "base" or loans priced relative to a prime base rate, was 8.54 percent for all banks; 8.50 percent for "reference" rate); the federal funds rate; domestic money market rates other than the prime large domestic banks, 8.62 percent for small domestic banks; and 8.50 percent for US. Digitized for rFatRe aAndS tEheR fe deral funds rate; foreign money market rates; and other base rates not included branches and agencies of foreign banks. http://fraser.sint ltoheu fiosrfeegodin.og rcgla/s sifications. Federal Reserve Bank of St. Louis

A72 Special Tables • November 1997 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, June 30, 1997'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l ' n ' g " o I n B l F y s inc T I l B o u t F d a s i l n g " I o B n F ly s inc T I l B o u t F d a i s l n g I o B n F ly s inc T I l B o u t F d a s i l n g " I o B n F ly s 1 'l'otal assets4 907,189 285,366 720,618 236,358 63,746 19,985 75,018 17,760 2 Claims on nonrelated parties 770.964 144,245 603.611 118,970 60,062 8,712 66.736 9,197 3 Cash and balances due from depository institutions 115,628 81,168 102.955 71,028 2,338 1,616 8,538 7,521 4 Cash items in process of collection and unposted debits 3,655 0 3,511 0 13 0 57 0 3 Currency and coin (US. and foreign) 22 n.a. 15 n.a. 2 n.a. 1 n.a. 6 Balances with depository institutions in United States 62,718 37,497 5577,,006677 3333,,881199 11,,665500 11,,001100 33,,226600 22,,440022 / U.S. branches and agencies of other foreign banks (including IBFs) 57,651 36,274 52,733 32,767 1.374 962 3.015 1.289 8 Other depository institutions in United States (including IBFs).... 5,067 1,224 4,334 1.052 276 48 245 113 9 Balances with banks in foreign countries and with foreign central banks 48,327 43,670 41,610 37,209 630 607 5,181 5,118 10 Foreign branches of U.S. banks 1.107 758 900 580 0 0 176 176 Ii Other banks in foreign countries and foreign central banks 47.220 42.912 40,710 36.629 630 607 5,005 4,94i 12 Balances with Federal Reserve Banks 905 n.a. 752 n.a. 43 n.a. 39 n.a. 13 Total securities and loans 484,622 53,431 349,317 39,008 53,270 6,748 44,703 1,448 14 Total securities, book value 117,710 7.922 108,741 6,857 2,988 687 5,312 340 1.1 U.S. Treasurv 31,858 n.a. 30,340 n.a. 596 n.a. 813 n.a. lb Obligations ot U.S. government agencies and corporations 39.722 n.a. 38,809 n.a. 349 n.a. 386 n.a. 1 / Other bonds, notes, debentures, and corporate stock (including state and local securities) 46.130 7.922 39,591 6.857 2.044 687 4,113 340 18 Securities ot foreign governmental units 16.591 3.797 15.533 3,385 511 204 476 193 19 All Other 29,539 4.126 24,058 3,472 1,533 483 3,637 147 20 Federal funds sold and securities purchased under agreements to resell 65,367 7,132 58,020 6,800 686 165 5,881 116 21 U.S. branches and agencies of other foreign banks 13,485 5,099 12,372 4,884 448 165 330 50 22 Commercial banks in United States 8,597 26 7.797 26 92 0 336 0 23 Other 43,285 2,007 37,851 1,890 147 0 5,214 66 24 Total loans, gross 367,166 45.539 240.743 32,174 50,331 6,062 39,397 1.108 2.1 I.I SS: Unearned income on loans 254 30 166 23 49 1 5 0 26 EQUALS: Loans, net 366.913 45,509 240,577 32.151 50,282 6,060 39.392 1.108 Total loans, gross, bv category 2/ Real estate loans 27,662 294 18,759 203 6,648 91 1,144 0 28 Loans to depository institutions 39.832 27,649 26,196 17,482 6,087 4.764 1,106 727 29 Commercial banks in United States (including IBFs) 13.087 7.663 7,853 4,153 4,262 3,171 336 156 30 U.S. branches and agencies of other foreign banks 11,880 7,540 6,778 4,040 4,207 3.161 270 156 31 Other commercial banks in United States 1,207 123 1,075 113 56 10 66 0 32 Other depository institutions in United States (including IBFs) 14 0 14 0 0 0 0 0 33 Banks in foreign countries 26,731 19,986 18,329 13,328 1,824 1,594 770 572 34 Foreign branches of U.S. banks 1,016 880 830 699 0 0 0 0 3.1 Other banks in foreign countries 25,716 19,106 17,499 12,629 1,824 11,,559944 770 57i 36 Loans to other financial institutions 49.211 696 41,768 492 2,976 4488 3,767 46 37 Commercial and industrial loans 229,436 14,722 136,480 11,963 33,625 1,124 32.342 332 38 U.S. addressees (domicile) 194,134 108 110,468 91 30,652 15 30,864 0 39 Non-U.S. addressees (domicile) 35,302 14,614 26,012 11,872 2,973 1,109 1.478 332 40 Acceptances of other banks 532 46 326 46 74 0 113 0 41 U.S. banks 23 0 13 0 4 0 0 0 42 Foreign banks 510 46 314 46 70 0 113 0 43 Loans to foreign governments and official institutions (including foreign central banks) 3,268 1.946 2.736 1,818 266 35 75 44 Loans for purchasing or carrying securities (secured and unsecured) . . . 11.032 75 9,995 75 212 0 78 0 41 All other loans 5,847 111 4.190 94 444 0 721 0 46 Lease financing receivables (net of unearned income) 345 0 294 0 0 0 5i 0 47 U.S. addressees (domicile) 341 0 289 0 0 0 S2 0 48 Non-U.S. addressees (domicile) 4 0 4 0 0 0 0 0 49 Trading assets 70,837 242 64,791 239 202 1 5.841 10 All other assets 34.510 2,272 28,528 1,894 3,565 183 1.774 1 10 11 Customers' liabilities on acceptances outstanding 9,506 n.a. 6.435 n.a. 2,392 n.a. 469 n.a. 32 U.S. addressees (domicile) 6,995 n.a. 4,421 n.a. 2,198 n.a. 275 33 Non-U.S. addressees (domicile) 2,511 n.a. 2,014 n.a. 193 n.a. 194 n.a. 14 Other assets including other claims on nonrelated parties 25,003 2.272 22,093 1,894 1,173 183 1,305 110 33 Net due from related depository institutions5 136,224 141,121 117,008 117.388 3,684 11,272 8,282 8.563 36 Net due from head office and other related depository institutions' . . . 136.224 n.a. 117,008 n.a. 33,,668844 n.a. 88,,228822 37 Net due from establishing entity, head office, and other related depository institutions5 n.a. 141,121 n.a. 117,388 n.a. 11,272 n.a. 8,563 58 Total liabilities4 907,189 285,366 720,618 236,358 63,746 19,985 75,018 17,760 59 Liabilities to nonrelated parties 756.062 252,820 651.532 213.810 35,948 18,123 47.141 13,112 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A73 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, June 30, 1997'—Continued Millions of dollars except as noted All states- New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s 60 Total deposits and credit balances 260,876 189,733 229.504 175,711 5,890 2.527 14,802 5,975 61 Individuals, partnerships, and corporations 197,744 12.948 171,203 8 472 4,179 613 13,056 104 67 U.S. addressees (domicile) 183.217 354 163,671 349 2,100 2 12,420 0 63 Non-U.S. addressees (domicile) 14,527 12,594 7,532 8.123 2,080 611 636 104 64 Commercial banks in United States (including IBFs) 33,543 40.197 30,488 38,686 700 527 1,348 84 65 U.S. branches and agencies of other foreign banks 18 632 37.056 17,304 35.749 400 471 627 760 66 Other commercial banks in United States 14,911 3,141 13,185 2.936 301 56 721 124 67 Banks in foreign countries 11,342 94,358 10,068 89.671 770 794 346 2,823 68 Foreign branches of U.S. banks 1,912 4.964 1,269 4,459 547 143 95 363 69 Other banks in foreign countries 9,430 89,394 8,800 85,212 223 652 251 2,460 70 Foreign governments and official institutions (including foreign central banks) 5,688 42,108 5,294 38,762 212 592 33 2,163 71 All other deposits and credit balances 12,230 122 12,164 121 11 0 43 1 72 Certified and official checks 330 287 18 7 73 Transaction accounts and credit balances (excluding IBFs) 10.125 8,333 422 337 74 Individuals, partnerships, and corporations 8,053 6,555 362 325 75 U.S. addressees (domicile) 5.767 5,139 212 321 76 Non-U.S. addressees (domicile) 2,286 1,415 151 4 77 Commercial banks in United States (including IBFs) 76 71 1 0 78 U.S. branches and agencies of other foreign banks 6 5 0 0 79 Other commercial banks in United States 70 67 1 0 80 Banks in foreign countries 1,134 975 26 2 81 Foreign branches of U.S. banks 3 2 0 0 82 Other banks in foreign countries 1,131 972 26 2 83 Foreign governments and official institutions (including foreign central banks) 396 324 3 3 84 All other deposits and credit balances 137 121 11 1 85 Certified and official checks 330 287 18 7 86 Demand deposits (included in transaction accounts and credit balances) 9.593 8.055 364 326 87 Individuals, partnerships, and corporations 7,672 6.411 316 313 88 U.S. addressees (domicile) 5,641 5,070 180 309 89 Non-U.S. addressees (domicile) 2,031 1,341 136 4 90 Commercial banks in United States (including IBFs) 69 65 0 0 91 U.S. branches and agencies of other foreign banks 6 n.a. 5 n a. 0 n.a. 0 n a. 92 Other commercial banks in United States 63 60 0 0 93 Banks in foreign countries 1,059 902 25 2 94 Foreign branches of U.S. banks 3 2 0 0 95 Other banks in foreign countries 1,056 899 25 2 96 Foreign governments and official institutions (including foreign central banks) 371 305 3 3 97 All other deposits and credit balances 92 86 2 1 98 Certified and official checks 330 287 18 7 99 Nontransaction accounts (including MMDAs, excluding IBFs) 250.751 221,170 5.468 14,464 100 Individuals, partnerships, and corporations 189,691 164.648 3,817 12.731 101 U.S. addressees (domicile) 177.450 158,532 88 12,099 102 Non-U.S. addressees (domicile) 12.241 6,116 1,929 632 103 Commercial banks in United States (including IBFs) 33,467 30,417 699 1,347 104 U.S. branches and agencies of other foreign banks 18,625 17,299 400 627 105 Other commercial banks in United States 14,841 13,1 18 299 720 106 Banks in foreign countries 10,208 9,094 744 343 107 Foreign branches of U.S. banks 1,908 1,266 547 95 108 Other banks in foreign countries 8,299 7,827 197 248 109 Foreign governments and official institutions (including foreign central banks) 5,292 4,969 209 0 110 All other deposits and credit balances 12,093 12,042 0 42 111 1BF deposit liabilities 189.733 175.711 2,527 5,975 112 Individuals, partnerships, and corporations 12 948 8.472 613 104 IK U.S. addressees (domicile) 354 349 0 1 14 Non-U.S. addressees (domicile) 12.594 8.123 611 104 115 Commercial banks in United States (including IBFs) 40.197 38 686 527 884 116 U.S. branches and agencies of other foreign banks 37,056 35,749 471 760 1 17 Other commercial banks in United States n.a. 3,141 n.a. 2 936 n a. 56 n a. 124 118 Banks in foreign countries 94,358 89,671 794 2,823 1 19 Foreign branches of U.S. banks 4,964 4,459 143 363 120 Other banks in foreign countries 89,394 85.212 652 2,460 121 Foreign governments and official institutions (including foreign central banks) 42,108 38.762 592 2,163 122 All other deposits and credit balances 122 121 0 1 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • November 1997 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, June 30, 1997'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s m Federal funds purchased and securities sold under agreements to repurchase 106,905 18,562 94,596 14,448 4,442 2,582 7,419 1,324 124 U.S. branches and agencies of other foreign banks 15,195 4,694 11,923 2,760 1,713 1,110 1,366 704 175 Other commercial banks in United States 12,840 280 10,770 187 1,200 92 812 0 P6 Other 78,870 13, >88 71,903 11,502 1,529 1,380 5,242 620 127 Other borrowed money 107,041 41,704 69,157 21,119 19,744 12,862 13,849 5,726 178 Owed to nonrelated commercial banks in United States (including IBFs) 23,572 10,006 12,480 4,152 7.610 3,983 1,935 1,22751 129 Owed to U.S. offices of nonrelated U.S. banks 8,245 1,332 5,182 544 2,372 687 205 130 Owed to U.S. branches and agencies of nonrelated foreign banks 15,327 8,674 7,298 3,607 5,238 3,296 1,729 1,248 131 Owed to nonrelated banks in foreign countries 29,864 27.015 16,227 13,649 8,501 8,333 4,122 4,104 13? Owed to foreign branches of nonrelated U.S. banks 1,766 1,584 834 676 701 }89 169 169 133 Owed to foreign offices of nonrelated foreign banks 28,098 25,431 15,393 12,973 7,799 7,644 3,952 3,935 134 Owed to others 53.605 4,682 40,450 3,319 3,633 545 7,793 346 135 All other liabilities 91,506 2,821 82,564 2,531 3,345 152 5,095 88 136 Branch or agency liability on acceptances executed and outstanding 10,008 n.a. 66,,990011 n.a. 22,,339988 n.a. 447700 n.a. 137 Trading liabilities 59,712 127 55,939 124 175 1 3,593 1 138 Other liabilities to nonrelated parties 21,787 2,694 19,725 2,406 772 51 1,032 86 139 Net due to related depository institutions5 151,127 32,545 69,087 22,548 27,798 1,862 27,877 4,647 140 Net due to head office and other related depository institutions5 .... 151,127 n.a. 69,087 n a. 27,798 n.a. 27,877 n.a. 141 Net due to establishing entity, head office, and other related depository institutions5 n.a. 32,545 n.a. 22,548 n.a. 1,862 n.a. 4,647 MEMO 147. Non-interest-bearing balances with commercial banks in United States 1,087 0 832 0 112 0 70 0 143 Holding of own acceptances included in commercial and industrial loans 4,376 3,067 1,084 110077 144 Commercial and industrial loans with remaining maturity of one year or less (excluding those in nonaccrual status) 127,177 75,287 19,282 18,631 145 Predetermined interest rates 76,948 47,130 10,191 13,978 146 Floating interest rates 50,229 n.a. 28,157 n a. 9,091 n.a. 4,653 n.a. 147 Commercial and industrial loans with remaining maturity of more than one year (excluding those in nonaccrual status) 101,542 60,847 14,263 13,438 148 Predetermined interest rates 22,122 14,900 2,308 3,680 149 Floating interest rates 79,420 45,947 11,954 9,758 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A75 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, June 30, 1997'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm ex I T c B l o u F t d a s i l 3 n g o IB nl F y s 3 ex T c IB l o u t F d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u t F d a s i l n g I o B n F ly s 111155550000 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ttttoooottttaaaallll ddddeeeeppppoooossssiiiittttssss aaaannnndddd ccccrrrreeeeddddiiiitttt bbbbaaaallllaaaannnncccceeeessss ooooffff nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, eeeexxxxcccclllluuuuddddiiiinnnngggg IIIIBBBBFFFFssss 244,292 n.a. 217,405 n.a. 3,471 n.a. 14,557 n.a. 111155551111 TTTTiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 237,904 n.a. 212,041 n.a. 3,359 n.a. 14,021 n.a. 111155552222 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff SSSS 111100000000....000000000000 oooorrrr mmmmoooorrrreeee wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 6,388 n.a. 5,364 n.a. 112 n.a. 537 n.a. All states" New York California Illinois inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s 111155553333 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 58,143 n.a. 34.235 n.a. 16,444 n.a. 4,729 n.a. 111155554444 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd6666 475 0 241 0 101 0 38 0 1. Data are aggregates of categories reported on the quarterly form FF1EC 002, "Report of either because the item is not an eligible IBF asset or liability or because that level of detail is Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks." The form was first not reported for IBFs. From December 1981 through September 1985, IBF data were used for reporting data as of June 30, 1980, and was revised as of December 31, 1985. From included in all applicable items reported. November 1972 through May 1980, U.S. branches and agencies of foreign banks had filed a 4. Total assets and total liabilities include net balances, if any, due from or owed to related monthly FR 886a report. Aggregate data from that report were available through the Federal banking institutions in the United States and in foreign countries (see note 5). On the former Reserve monthly statistical release G. 11, last issued on July 10, 1980. Data in this table and in monthly branch and agency report, available through the G.U monthly statistical release. the G. 11 tables are not strictly comparable because of differences in reporting panels and in gross balances were included in total assets and total liabilities. Therefore, total asset and total definitions of balance sheet items. liability figures in this table are not comparable to those in the G. 11 tables. 2. Includes the District of Columbia. 5. Related depository institutions includes the foreign head office and other U.S. and 3. Effective December 1981, the Federal Reserve Board amended Regulations D and Q to foreign branches and agencies of a bank, a bank's parent holding company, and majoritypermit banking offices located in the United States to operate international banking facilities owned banking subsidiaries of the bank and of its parent holding company (including (IBFs). Since December 31, 1985, data for IBFs have been reported in a separate column. subsidiaries owned both directly and indirectly). These data are either included in or excluded from the total columns as indicated in the 6. In some cases two or more offices of a foreign bank within the same metropolitan area headings. The notation "n.a." indicates that no IBF data have been reported for that item, file a consolidated report. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Index to Statistical Tables References are to pages A3-A75 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) EMPLOYMENT, 42 Assets and liabilities (See also Foreigners) Eurodollars, 23, 61 Commercial banks. 15-21, 64-67 Domestic finance companies, 32, 33 FARM mortgage loans, 35 Federal Reserve Banks, 10 Federal agency obligations, 5, 9, 10, 11, 28, 29 Foreign banks, U.S. branches and agencies. 72-75 Federal credit agencies, 30 Foreign-related institutions. 20 Federal finance Automobiles Debt subject to statutory limitation, and types and ownership Consumer credit, 36 of gross debt, 27 Production. 44, 45 Receipts and outlays, 25, 26 Treasury financing of surplus, or deficit, 25 Treasury operating balance, 25 BANKERS acceptances, 5, 10, 22, 23 Federal Financing Bank, 30 Bankers balances, 15-21, 72-75. (See also Foreigners) Federal funds, 23, 25 Bonds (See also U.S. government securities) Federal Home Loan Banks, 30 New issues, 31 Federal Home Loan Mortgage Corporation, 30, 34, 35 Rates, 23 Federal Housing Administration, 30, 34, 35 Business activity, nonfinancial, 42 Federal Land Banks, 35 Business loans (See Commercial and industrial loans) Federal National Mortgage Association, 30, 34, 35 Federal Reserve Banks CAPACITY utilization, 43 Condition statement, 10 Capital accounts Discount rates (See Interest rates) Commercial banks, 15-21, 64-67 U.S. government securities held, 5, 10, 11, 27 Federal Reserve Banks, 10 Federal Reserve credit, 5, 6, 10, 11 Central banks, discount rates, 61 Federal Reserve notes, 10 Certificates of deposit, 23 Federally sponsored credit agencies, 30 Commercial and industrial loans Finance companies Commercial banks. 15-21, 64-67, 68-71 Assets and liabilities, 32 Weekly reporting banks, 17, 18 Business credit, 33 Commercial banks Loans, 36 Assets and liabilities, 15-21, 64-67 Paper. 22. 23 Commercial and industrial loans, 15-21, 64-67, 68-71 Float. 5 Consumer loans held, by type and terms, 36, 68-71 Flow of funds, 37-41 Deposit interest rates of insured, 14 Foreign banks, U.S. branches and agencies, 71, 72-75 Number, by classes, 64-67 Foreign currency operations, 10 Real estate mortgages held, by holder and property, 35 Foreign deposits in U.S. banks, 5 Terms of lending, 68-71 Foreign exchange rates, 62 Time and savings deposits, 4 Foreign-related institutions, 20 Commercial paper, 22, 23, 32 Foreign trade, 51 Condition statements (See Assets and liabilities) Foreigners Construction, 42, 46 Claims on, 52, 55, 56, 57, 59 Consumer credit, 36 Liabilities to, 51, 52, 53, 58, 60, 61 Consumer prices, 42 Consumption expenditures, 48. 49 GOLD Corporations Certificate account, 10 Profits and their distribution, 32 Stock. 5. 51 Security issues, 31,61 Government National Mortgage Association, 30, 34, 35 Cost of living (See Consumer prices) Gross domestic product, 48, 49 Credit unions, 36 Currency in circulation, 5, 12 HOUSING, new and existing units, 46 Customer credit, stock market, 24 INCOME, personal and national, 42, 48, 49 DEBT (See specific types of debt or securities) Industrial production, 42, 44 Demand deposits, 15-21 Insurance companies, 27, 35 Depository institutions Interest rates Reserve requirements, 8 Bonds, 23 Reserves and related items, 4, 5, 6, 11, 64-67 Commercial banks, 68-71 Deposits (See also specific types) Consumer credit, 36 Commercial banks, 4, 15-21, 64-67 Deposits, 14 Federal Reserve Banks, 5, 10 Federal Reserve Banks, 7 Interest rates, 14 Foreign banks, U.S. branches and agencies, 71 Discount rates at Reserve Banks and at foreign central banks and Foreign central banks and foreign countries, 61 foreign countries (See Interest rates) Money and capital markets, 23 Discounts and advances by Reserve Banks (See Loans) Mortgages, 34 Dividends, corporate, 32 Prime rate, 22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All International capital transactions of United States, 50-61 Residential mortgage loans, 34, 35 International organizations, 52, 53, 55, 58, 59 Retail credit and retail sales, 36, 42 Inventories, 48 Investment companies, issues and assets, 32 SAVING Investments (See also specific types) Flow of funds, 37-41 Commercial banks, 4, 15-21, 64-67 National income accounts, 48 Federal Reserve Banks, 10, 11 Savings institutions, 35, 36, 37^11 Financial institutions, 35 Savings deposits (See Time and savings deposits) Securities (See also specific types) LABOR force, 42 Federal and federally sponsored credit agencies, 30 Life insurance companies (See Insurance companies) Foreign transactions, 60 Loans (See also specific types) New issues, 31 Commercial banks, 15-21, 64-67, 68-71 Prices, 24 Federal Reserve Banks, 5, 6, 7. 10, 11 Special drawing rights, 5, 10, 50, 51 Financial institutions, 35 State and local governments Foreign banks, U.S. branches and agencies, 71 Holdings of U.S. government securities, 27 Insured or guaranteed by United States. 34, 35 New security issues, 31 Rates on securities, 23 MANUFACTURING Stock market, selected statistics, 24 Capacity utilization, 43 Stocks (See also Securities) Production, 43, 45 New issues, 31 Margin requirements, 24 Prices, 24 Member banks (See also Depository institutions) Reserve requirements, 8 Student Loan Marketing Association, 30 Mining production, 45 Mobile homes shipped, 46 Monetary and credit aggregates, 4, 11 TAX receipts, federal, 26 Money and capital market rates, 23 Thrift institutions, 4. (See also Credit unions and Savings Money stock measures and components, 4, 12 institutions) Mortgages (See Real estate loans) Time and savings deposits, 4, 12, 14, 15-21, 64-67 Mutual funds, 12, 32 Trade, foreign, 51 Mutual savings banks (See Thrift institutions) Treasury cash, Treasury currency, 5 Treasury deposits, 5, 10, 25 NATIONAL defense outlays, 26 Treasury operating balance, 25 National income, 48 UNEMPLOYMENT, 42 U.S. government balances OPEN market transactions, 9 Commercial bank holdings, 15-21 Treasury deposits at Reserve Banks, 5, 10, 25 PERSONAL income, 49 U.S. government securities Prices Bank holdings, 15-21, 27 Consumer and producer, 42, 47 Dealer transactions, positions, and financing, 29 Stock market, 24 Federal Reserve Bank holdings, 5, 10, 11, 27 Prime rate, 22 Foreign and international holdings and Producer prices, 42, 47 transactions, 10, 27, 61 Production, 42, 44 Open market transactions, 9 Profits, corporate, 32 Outstanding, by type and holder, 27, 28 Rates, 23 REAL estate loans U.S. international transactions, 50-62 Banks, 15-21, 35 Utilities, production, 45 Terms, yields, and activity, 34 Type of holder and property mortgaged, 35 VETERANS Administration, 34, 35 Reserve requirements, 8 Reserves Commercial banks, 15-21 WEEKLY reporting banks, 17, 18 Depository institutions, 4, 5, 6, 11 Wholesale (producer) prices, 42, 47 Federal Reserve Banks, 10 U.S. reserve assets, 51 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALICE M. RIVLIN, Vice Chair SUSAN M. PHILLIPS 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 Adviser THEODORE E. ALLISON, Assistant to the Board for Federal CHARLES J. SIEGMAN, Senior Adviser Reserve System Affairs LEWIS S. ALEXANDER, Associate Director LYNN S. FOX, Deputy Congressional Liaison DALE W. HENDERSON, Associate Director WINTHROP P. HAMBLEY, Special Assistant to the Board PETER HOOPER III, Associate Director BOB STAHLY MOORE, Special Assistant to the Board KAREN H. JOHNSON, Associate Director DIANE E. WERNEKE, Special Assistant to the Board DAVID H. HOWARD, Senior Adviser PORTIA W. THOMPSON, Equal Employment Opportunity DONALD B. ADAMS, Assistant Director Programs Adviser THOMAS A. CONNORS, Assistant Director CATHERINE L. MANN, 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 DAVID S. JONES, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman STEPHEN A. RHOADES, Assistant Director CHARLES S. STRUCKMEYER, Assistant Director DIVISION OF BANKING ALICE PATRICIA WHITE, Assistant Director JOYCE K. ZICKLER, Assistant Director SUPERVISION AND REGULATION GLENN B. CANNER, Senior Adviser RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director WILLIAM A. RYBACK, Associate Director for Supervision DIVISION OF MONETARY AFFAIRS Operations HERBERT A. BIERN, Associate Director DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director ROGER T. COLE, Associate Director BRIAN F. MADIGAN, Associate Director GERALD A. EDWARDS, JR., Deputy Associate Director RICHARD D. PORTER, Deputy Associate Director STEPHEN M. HOFFMAN, JR., Deputy Associate Director VINCENT R. REINHART, Assistant Director JAMES V. HOUPT, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board JACK P. JENNINGS, Deputy Associate Director MICHAEL G. MARTINSON, Deputy Associate Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Deputy Associate Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Deputy Associate Director HOWARD A. AMER, Assistant Director GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Associate Director NORAH M. BARGER, Assistant Director BETSY CROSS, Assistant Director DOLORES S. SMITH, Associate Director RICHARD A. SMALL, Assistant Director MAUREEN P. ENGLISH, Assistant Director WILLIAM SCHNEIDER, Project Director, IRENE SHAWN MCNULTY, Assistant Director National Information Center Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 LAURENCE H. MEYER OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PA YMENT 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 PAUL W. BETTGE, 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 FLORENCE M. YOUNG, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER BRENT L. BOWEN, Inspector General DONALD L. ROBINSON, Assistant Inspector General GEORGE E. LIVINGSTON, Controller BARRY R. SNYDER, Assistant Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director DAY W. RADEBAUGH, 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

80 Federal Reserve Bulletin • November 1997 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman J. ALFRED BROADDUS, JR. LAURENCE H. MEYER SUSAN M. PHILLIPS JACK GUYNN MICHAEL H. MOSKOW ALICE M. RIVLIN EDWARD W. KELLEY, JR. ROBERT T. PARRY ALTERNATE MEMBERS THOMAS M. HOENIG THOMAS C. MELZER ERNEST T. PATRIKIS JERRY L. JORDAN CATHY E. MINEHAN STAFF DONALD L. KOHN, Secretary' and Economist ROBERT A. EISENBEIS, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary MARVIN S. GOODFRIEND, Associate Economist JOSEPH R. COYNE, Assistant Secretary WILLIAM C. HUNTER, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID E. LINDSEY, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel STEPHEN G. CECCHETTI, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel LARRY J. PROMISEL, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist LAWRENCE SLIFMAN, Associate Economist JACK BEEBE, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL WALTER V. SHIPLEY, President CHARLES E. NELSON. 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 ROBERT W. GILLESPIE, Fourth District CHARLES E. NELSON, Tenth District KENNETH D. LEWIS, Fifth District CHARLES T. DOYLE, Eleventh District STEPHEN A. HANSEL, 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

A81 CONSUMER ADVISORY COUNCIL JULIA W. SEWARD, Richmond, Virginia, Chairman WILLIAM N. LUND, Augusta, Maine, Vice Chairman RICHARD S. AMADOR, LOS Angeles, California ERROL T. LOUIS, Brooklyn, New York WAYNE-KENT A. BRADSHAW, LOS Angeles, California PAUL E. MULLINGS, McLean, Virginia THOMAS R. BUTLER, Riverwoods, Illinois CAROL PARRY, New York, New York ROBERT A. COOK, Crofton, Maryland PHILIP PRICE, JR., Philadelphia, Pennsylvania HERIBERTO FLORES, Springfield, Massachusetts RONALD A. PRILL, Minneapolis, Minnesota EMANUEL FREEMAN, Philadelphia, Pennsylvania LISA RICE, Toledo, Ohio DAVID C. FYNN, Cleveland, Ohio JOHN R. RINES, Detroit, Michigan ROBERT G. GREER, Houston, Texas MARILYN ROSS, Omaha, Nebraska KENNETH R. HARNEY, Chevy Chase, Maryland MARGOT SAUNDERS, Washington, D.C. GAIL K. HILLEBRAND, San Francisco, California GAIL SMALL, Lame Deer, Montana TERRY JORDE, Cando, North Dakota YVONNE S. SPARKS, St. Louis, Missouri FRANCINE C. JUSTA, New York, New York GREGORY D. SQUIRES, Milwaukee, Wisconsin JANET C. KOEHLER, Jacksonville, Florida GEORGE P. SURGEON, Chicago, Illinois EUGENE I. LEHRMANN, Madison, Wisconsin THEODORE J. WYSOCKI, JR., Chicago, Illinois THRIFT INSTITUTIONS ADVISORY COUNCIL DAVID F. HOLLAND, Burlington, Massachusetts, President CHARLES R. RINEHART, Irwindale, California, Vice President BARRY C. BURKHOLDER, Houston, Texas STEPHEN D. HAILER, Akron, Ohio DAVID E. A. CARSON, Bridgeport, Connecticut EDWARD J. MOLNAR, Harleysville, Pennsylvania MICHAEL T. CROWLEY, JR., Milwaukee, Wisconsin GUY C. PINKERTON, Seattle, Washington DOUGLAS A. FERRARO, Englewood, Colorado TERRY R. WEST, Jacksonville, Florida WILLIAM A. FITZGERALD, Omaha, Nebraska FREDERICK WILLETTS, III, Wilmington, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, The Payment System Handbook. $75.00 per year. MS-127, Board of Governors of the Federal Reserve System, Federal Reserve Regulatory Service. Four vols. (Contains all Washington, DC 20551 or telephone (202) 452-3244 or FAX four Handbooks plus substantial additional material.) $200.00 (202) 728-5886. You may also use the publications order per year. form available on the Board's World Wide Web site Rates for subscribers outside the United States are as follows (http://www.bog.frb.fed.us). When a charge is indicated, payment and include additional air mail costs: should accompany request and be made payable to the Board of Federal Reserve Regulatory Service, $250.00 per year. Governors of the Federal Reserve System or may be ordered via Each Handbook, $90.00 per year. Mastercard or Visa. Payment from foreign residents should be FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL drawn on a U.S. bank. COMPUTERS. Diskettes; updated monthly. Standalone PC. $300 per year. Network, maximum 1 concurrent user. $300 per year. Network, maximum 10 concurrent users. $750 per year. BOOKS AND MISCELLANEOUS PUBLICATIONS Network, maximum 50 concurrent users. $2,000 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Network, maximum 100 concurrent users. $3,000 per year. 1994. 157 pp. Subscribers outside the United States should add $50 to cover ANNUAL REPORT. additional airmail costs. ANNUAL REPORT: BUDGET REVIEW, 1995-96. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION —1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1984 October 1985 254 pp. $12.50 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1985 October 1986 231 pp. $15.00 578 pp. $25.00 each. 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 EDUCATION PAMPHLETS 1980-89 March 1991 712 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1990 November 1991 185 pp. $25.00 available without charge. 1991 November 1992 215 pp. $25.00 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1994 December 1995 190 pp. $25.00 Consumer Handbook to Credit Protection Laws 1990-95 November 1996 404 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF The Board of Governors of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United The Federal Open Market Committee States, its possessions, Canada, and Mexico. Elsewhere, $35.00 per year or $.80 each. Federal Reserve Bank Board of Directors Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Organization and Advisory Committees RESERVE SYSTEM. A Consumer's Guide to Mortgage Lock-Ins ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Settlement Costs Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. A Consumer's Guide to Mortgage Refinancings Vol. II (Irregular Transactions). 1969. 116 pp. Each volume Home Mortgages: Understanding the Process and Your Right $5.00. to Fair Lending GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. How to File a Consumer Complaint FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated Making Deposits: When Will Your Money Be Available? monthly. (Requests must be prepaid.) Making Sense of Savings Consumer and Community Affairs Handbook. $75.00 per year. SHOP: The Card You Pick Can Save You Money Monetary Policy and Reserve Requirements Handbook. $75.00 Welcome to the Federal Reserve per year. When Your Home is on the Line: What You Should Know Securities Credit Transactions Handbook. $75.00 per year. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 STAFF STUDIES: Only Summaries Printed in the 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF BULLETIN MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September Studies and papers on economic and financial subjects that are of general interest. Requests to obtain single copies of the full text or 1993. 18 pp. to be added to the mailing list for the series may be sent to 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Publications Services. January 1994. Ill pp. 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- Staff Studies 1-157 are out of print. ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- by Stephen A. Rhoades. July 1994. 37 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 168. THE ECONOMICS OF THE PRIVATE EQUITY MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of George W. Fenn, Nellie Liang, and Stephen Prowse. Novem- Dietrich Earnhart. September 1989. 23 pp. ber 1995. 69 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 169. BANK MERGERS AND INDUSTRYWIDE STRUCTURE, 1980-94, ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and by Stephen A. Rhoades. February 1996. 32 pp. Donald Savage. February 1990. 12 pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September REPRINTS OF SELECTED Bulletin ARTICLES 1990. 35 pp. Some Bulletin articles are reprinted. The articles listed below are 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, those for which reprints are available. Beginning with the Janu- 1980-90, by Margaret Hastings Pickering. May 1991. ary 1997 issue, articles are available on the Board's World Wide 21 pp. Web site (http://www.bog.frb.fed.us) under Publications, Federal 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- Reserve Bulletin articles. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Limit of ten copies 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, FAMILY FINANCES IN THE U.S.: RECENT EVIDENCE FROM THE Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary SURVEY OF CONSUMER FINANCES. January 1997. Ann Taylor. March 1992. 37 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 Maps of the Federal Reserve System 1 ~ BOSTON MINNEAPOLIS • IBllilllllllllSl IIKSS 2 • I S I I S I S S S K* I S I I IS W II P ^ • NEW YORK CHICAGO • 12 CLEVELAND P'LADELPHIA • SAN FRANCISCO 10 KANSAS CITY • G 4H n • 2 RICHMOND ST. LOUIS 5 fiMMM^iri ) • A ATLANTA 11 • DALLAS .\1.\SKA 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 num- of Puerto Rico and the U.S. Virgin Islands; the San Franber and Reserve Bank city (shown on both pages) and by cisco Bank serves American Samoa, Guam, and the Comletter (shown on the facing page). monwealth of the Northern Mariana Islands. The Board of In the 12th District, the Seattle Branch serves Alaska, Governors revised the branch boundaries of the System and the San Francisco Bank serves Hawaii. most recently in February 1996. 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

A85 1-A 2-B 3-C 4-D 5-E Pittsburgh Baltimore MD ( I CT ^ V -i \ ' NH •Cincinnati MA I Buffalo B| / NY sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville KY Y Birmingham »L ) IN ^ Detroit • J Louisville MO IA Jacksonville ' AAARRR KPP 1J • Memph T i N s New Orleans y FL LLiittttllee)) Rock ( MS Miami ATLANTA CHICAGO ST Louis 9-1 MINNEAPOLIS 10-J 12-L WY CO Omaha« KS Deiwer WA Seattle Oklahoma City OK KANSAS CITY 11-K Salt Lake City •Los Angeles San Antonio DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 William C. Brainard Cathy E. Minehan Frederick J. Mancheski Paul M. Connolly NEW YORK* 10045 John C. Whitehead William J. McDonough Thomas W. Jones Ernest T. Patrikis Buffalo 14240 Bal Dixit Carl W. Turnipseed1 PHILADELPHIA 19105 Donald J. Kennedy Edward G. Boehne Joan Carter William H. Stone, Jr. CLEVELAND* 44101 G. Watts Humphrey, Jr. Jerry L. Jordan David H. Hoag Sandra Pianalto Cincinnati 45201 George C. Juilfs Charles A. Cerino1 Pittsburgh 15230 John T. Ryan, III Robert B. Schaub RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland Walter A. Varvel Baltimore 21203 Rebecca Hahn Windsor William J. Tignanelli1 Charlotte 28230 Dennis D. Lowery Dan M. Bechter1 ATLANTA 30303 Hugh M. Brown Jack Guynn David R. Jones Patrick K. Barron James M. Mckee Birmingham 35283 D. Bruce Carr FredR. Herr1 Jacksonville 32231 Patrick C. Kelly James D. Hawkins1 Miami 33152 Kaaren Johnson-Street James T. Curry III Nashville 37203 James E. Dalton, Jr. Melvyn K. Purcell New Orleans 70161 Jo Ann Slaydon Robert J. Musso CHICAGO* 60690 Lester H. McKeever, Jr. Michael H. Moskow Arthur C. Martinez William C. Conrad Detroit 48231 Florine Mark David R. Allardice1 ST. LOUIS 63166 John F. McDonnell Thomas C. Melzer Susan S. Elliott W. LeGrande Rives Little Rock 72203 Robert D. Nabholz, Jr. Robert A. Hopkins Louisville 40232 John A. Williams Thomas A. Boone Memphis 38101 John V. Myers Martha L. Perine MINNEAPOLIS 55480 Jean D. Kinsey Gary H. Stern David A. Koch Colleen K. Strand Helena 59601 Matthew J. Quinn John D. Johnson KANSAS CITY 64198 A. Drue Jennings Thomas M. Hoenig Jo Marie Dancik Richard K. Rasdall Denver 80217 Peter I. Wold Carl M. Gambs1 Oklahoma City 73125 Barry L. Eller Kelly J. Dubbert Omaha 68102 Arthur L. Shoener Bradley C. Cloverdyke DALLAS 75201 Roger R. Hemminghaus Robert D. McTeer, Jr. Cece Smith Helen E. Holcomb El Paso 79999 Alvin T. Johnson Sammie C. Clay Houston 77252 I. H. Kempner, III Robert Smith, III1 San Antonio 78295 H. B. Zachry, Jr. James L. Stull1 SAN FRANCISCO 94120 Judith M. Runstad Robert T. Parry Gary G. Michael John F. Moore Los Angeles 90051 Anne L. Evans Mark L. Mullinix1 Portland 97208 Carol A. Whipple Raymond H. Laurence1 Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 Richard R. Sonstelie Gordon R. G. Werkema2 *Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; 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. 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. 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. 1 Flow of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis