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Circular Letters


Circular letters announce news, policy, and guidance from the Board of Governors.

2010

December 21, 2010
FOMC statement: Federal Reserve, European Central Bank, Bank of Japan, Bank of Canada, Bank of England, and Swiss National Bank announce extension of temporary U.S. dollar liquidity swap facilities

The Federal Open Market Committee has authorized an extension through August 1, 2011, of its temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The swap arrangements, established in May 2010, had been authorized through January 2011.

Information on the actions that will be taken by other central banks is available at the following websites:

Bank of Canada

Bank of England

European Central Bank

Bank of Japan

Swiss National Bank

U.S. Dollar Liquidity Swaps--Frequently Asked Questions (51 KB PDF)


December 15, 2010
Agencies Seek Comment on Market Risk and Basel II Advanced Approaches

Three federal bank regulatory agencies today announced they are seeking comment on a notice of proposed rulemaking that would revise the market risk capital rules for banking organizations with significant trading activity.

The proposed rule would implement changes approved by the Basel Committee on Banking Supervision to its market risk framework. The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) believe the proposed revisions would better capture positions for which the market risk capital rules are appropriate, reduce procyclicality in market risk capital requirements, enhance the rules' sensitivity to risks that are not adequately captured by the current regulatory measurement methodologies, and increase market discipline through enhanced disclosures.

The Federal Reserve, OCC, and FDIC request comments on the notice within 90 days of its publication in the Federal Register, which is expected soon.

Separately, the Federal Reserve, the OCC, and the FDIC are seeking comment on a notice of proposed rulemaking that would amend the advanced approaches capital adequacy framework known as Basel II to be consistent with certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. More specifically, a banking organization operating under the advanced approaches standards would be required to meet, on an on-going basis, the higher of the generally applicable and the advanced approaches minimum risk-based capital standards.

The Federal Reserve, OCC, and FDIC request comments on this notice within 60 days of its publication in the Federal Register, which is expected soon.

Attachment (373 KB PDF)
Attachment2 (114 KB PDF)

Media Contacts:
Federal Reserve Barbara Hagenbaugh (202) 452-2955
FDIC Greg Hernandez (202) 898-6984
OCC Kevin Mukri (202) 874-5770

December 15, 2010
Agencies Expand Scope of Community Reinvestment Act Regulations to Encourage Support for HUD Neighborhood Stabilization Program Activities

The federal bank and thrift regulatory agencies today announced changes to Community Reinvestment Act (CRA) regulations to support stabilization of communities affected by high foreclosure levels.

The final rule is substantially the same as the proposal published for comment on June 24, 2010. It encourages depository institutions to support eligible development activities in areas designated under the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD).

Under the NSP, HUD has provided funds to state and local governments and nonprofit organizations for the purchase and redevelopment of abandoned and foreclosed properties. The new rule encourages depository institutions to make loans and investments, and provide services to support NSP activities in areas with HUD-approved plans.

The final rule reflects the broad support expressed by public comments for the agencies' proposal to expand existing CRA consideration for neighborhood stabilization activities. NSP-eligible activities will receive favorable consideration under the new rule if conducted within two years after the date when NSP program funds are required to be spent.

Allowing banking institutions to receive CRA consideration for NSP-eligible activities in additional NSP-targeted areas serves the purposes of the CRA and creates an opportunity to build upon government programs in areas with high rates of foreclosure and vacancy. CRA consideration is not limited to activities actually receiving NSP funds and may include other eligible activities in NSP plan areas.

The final rule is attached. It is effective 30 days from the date of its publication in the Federal Register, which is expected shortly.

Attachment (124 KB PDF)

Media Contacts:
Federal Reserve Susan Stawick (202) 452-2955
FDIC LaJuan Williams-Young (202) 898-3876
OCC Kevin Mukri (202) 874-5770
OTS William Ruberry (202) 906-6677

December 14, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. In light of the improving economy, Mr. Hoenig was concerned that a continued high level of monetary accommodation would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.


December 13, 2010
Federal Reserve proposes expanded coverage of consumer protection regulations to credit transactions and leases of higher dollar amounts

The Federal Reserve Board on Monday proposed two rules that would expand the coverage of consumer protection regulations to credit transactions and leases of higher dollar amounts.

The proposed rules would amend Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) to implement a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Effective July 21, 2011, the Dodd-Frank Act requires that the protections of the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) apply to consumer credit transactions and consumer leases up to $50,000, compared with $25,000 currently. This amount will be adjusted annually to reflect any increase in the Consumer Price Index.

TILA requires creditors to disclose key terms of consumer loans and prohibits creditors from engaging in certain practices with respect to those loans. Currently, consumer loans of more than $25,000 are generally exempt from TILA. However, private education loans and loans secured by real property (such as mortgages) are subject to TILA regardless of the amount of the loan.

The CLA requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases. An automobile lease is the most common type of consumer lease covered by the CLA. Currently, a lease is exempt from the CLA if the consumer's total obligation exceeds $25,000.

The notices that will be published in the Federal Register are attached. Comments on the proposals must be submitted by the later of 30 days after publication in the Federal Register or February 1, 2011.


December 10, 2010
Board announces webcast of December 16 open Board meeting

The Federal Reserve Board announced on Friday that a live webcast of its December 16 open meeting will be available on the Board's website. At the meeting, which is scheduled to begin at 2:30 p.m. EST, the Board will discuss proposed rules governing debit card interchange fees and routing. This will be the first time the Board has webcast one of its meetings. The Board has previously webcast other public events such as Chairman Bernanke's town hall meeting with educators and a conference on addressing issues facing small businesses.
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December 08, 2010
Federal Reserve Study Shows More Than Three-Quarters of Noncash Payments Are Now Electronic

Cleveland, Ohio, December 8, 2010-- The Federal Reserve's 2010 study of noncash payments released today revealed that in 2009 more than three-quarters of all U.S. noncash payments were made electronically, a 9.3 percent annual increase since the Federal Reserve's last study in 2007. This growth and other statistics in the study emphasize consumers' increasing adoption of electronic alternatives for payments in the United States. The 2007 study revealed that in 2006 roughly two-thirds of the payments were made electronically.

From 2006 to 2009, the period covered by the study, all types of electronic payments included in the study grew with the exception of credit cards. (Wire transfers were not included in the study.) The number of noncash payments in the United States grew more slowly between 2006 and 2009 than in prior periods and the total value of noncash payments declined. As in previous years, check payments continued to decline and were eclipsed by debit cards as the most used noncash instrument in the United States.

"The results of the study clearly underscore this nation's efforts to move toward a more efficient electronic clearing system for all types of retail payments," noted Richard Oliver, executive vice president of the Federal Reserve Bank of Atlanta, which sponsored the study. "It is also likely that the results reflect changing consumer behavior during difficult economic times."

The number of noncash payments in the United States increased 4.6 percent per year since 2006, approximately the same pace as the previous three-year period, 4.5 percent. The value of noncash payments experienced an annual rate of decline of 1.6 percent over the last three years compared to an annual growth rate of 3.9 percent from 2003 to 2006. About 20 billion more electronic payments were made in 2009 than in 2006 which represented a 9.3 percent annual increase. In contrast, the number of checks paid fell by about 6 billion or 7.2 percent over the same period, while the number of checks written fell by about 5.7 billion, an average of 6.1 percent per year.

While checks written by consumers to businesses for household bill payments and point-of-sale transactions represented 44 percent of all checks written, both payments types declined by 4.9 billion or 10.6 percent annually, reflecting growing comfort of consumers with electronic options. The use of checks between businesses and between businesses and individuals experienced more modest declines. Checks written between individuals, which may include some very small businesses, actually increased slightly.

The annual use of debit cards increased by over 12.8 billion payments, the largest increase by any payment type during the survey period, reaching 37.9 billion payments in 2009, which represented a 14.8 percent annual growth rate. Debit card usage now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35 percent of total noncash payments. Over the same period, automated clearinghouse (ACH) payments grew to 19.1 billion, an increase of 4.5 billion payments. Credit card payments declined by 0.1 billion to 21.6 billion in 2009.

Prepaid card transactions had the lowest transaction volume of all noncash payments at 6 billion; however, these transactions represented the fastest growing payment type, increasing 21.5 percent annually from 2006 to 2009.

The check collection process continued to become increasingly electronic over the survey period. Approximately 96 percent of interbank checks--those drawn on a different depository institution than the one at which they were deposited--involved electronic clearing, compared to roughly 43 percent during the 2007 study. Approximately 13 percent of checks were deposited as images at the bank of first deposit.

"Not only does this study show the continued move from checks to electronic means of making payments, but we also see the extraordinary progress the industry has made in electronifying the clearing process for the 27.5 billion checks still being written," added Oliver.

The 2010 Federal Reserve Payments Study consists of three research efforts commissioned to estimate the annual number, dollar value, and composition of noncash retail payments in the United States. The Depository Institutions Payments Study included responses from approximately 1,300 financial institutions (commercial banks, savings institutions and credit unions). The Electronic Payments Study included responses from 94 of the largest payment networks, processors and card issuers. The Check Sample Study characterized check payments according to type of payer, payee and purpose. Study data are based on a random sample of checks processed by 11 banks that use the Viewpointe archive.

"The 2010 Payments Study is part of an ongoing effort by the Federal Reserve System to measure the changing nature of the nation's noncash payments system and share the results broadly as a means of better informing future investment decisions facing this country's payments industry," Oliver said. "Additionally, more detailed data resulting from this year's survey, including information about processing methods and emerging payment options, will be released early next year. We deeply appreciate the efforts of all the institutions that provided the data necessary to complete these studies."
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December 02, 2010
Agencies issue final appraisal and evaluation guidelines

The federal financial regulatory agencies issued final supervisory guidance today on sound practices by financial institutions for real estate appraisals and evaluations.

Financial institutions use reliable appraisals and evaluations to determine the value of collateral for mortgages and other loans; appraisals and evaluations are integral to institutions' real estate lending. Institutions base credit decisions primarily on borrowers' ability to repay, but institutions also consider the value of real estate collateral as a secondary source of repayment.

The Interagency Appraisal and Evaluation Guidelines, which replace 1994 guidelines, explain the agencies' minimum regulatory standards for appraisals. The guidelines incorporate the agencies' recent supervisory issuances on appraisal practices, address advancements in information technology used in collateral valuation practices, and clarify standards for the industry's appropriate use of analytical methods and technological tools in developing evaluations. Financial institutions should review their appraisal and evaluation programs to ensure they are consistent with the guidelines.

The guidelines emphasize that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience, and knowledge of the market and type of property being valued. Institutions should demonstrate the independence of their processes for obtaining property values, and adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations, according to the guidelines.

In promoting sound credit decisions, the guidelines emphasize the importance of institutions maintaining strong internal controls to ensure reliable appraisals and evaluations. Institutions also are responsible for monitoring and periodically updating valuations of collateral for existing real estate loans and for transactions, such as modifications and workouts, according to the guidelines.

The Dodd-Frank Wall Street Financial Reform and Consumer Protection Act of 2010 underscores the importance of sound real estate lending decisions; future revisions to the appraisal guidelines may be necessary after regulations are adopted to implement the Act.


December 01, 2010
Federal Reserve Releases Detailed Information About Transactions Conducted to Stabilize Markets During the Recent Financial Crisis

The Federal Reserve Board on Wednesday posted detailed information on its public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis, restore the flow of credit to American families and businesses, and support economic recovery and job creation in the aftermath of the crisis.

Many of the transactions, conducted through a variety of broad-based lending facilities, provided liquidity to financial institutions and markets through fully secured, mostly short-term loans. Purchases of agency mortgage-backed securities (MBS) supported mortgage and housing markets, lowered longer-term interest rates, and fostered economic growth. Dollar liquidity swap lines with foreign central banks helped stabilize dollar funding markets abroad, thus contributing to the restoration of stability in U.S. markets. Other transactions provided liquidity to particular institutions whose disorderly failure could have severely stressed an already fragile financial system.

As financial conditions have improved, the need for the broad-based facilities has dissipated, and most were closed earlier this year. The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down, and expects to incur no credit losses on the few remaining programs. These facilities were open to participants that met clearly outlined eligibility criteria; participation in them reflected the severe market disruptions during the financial crisis and generally did not reflect participants' financial weakness.

The Federal Reserve is committed to transparency and has previously provided extensive aggregate information on its facilities in weekly and monthly reports. As provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, transaction-level details now are posted from December 1, 2007, to July 21, 2010, in the following programs:

  • Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)
  • Term Asset-Backed Securities Loan Facility (TALF)
  • Primary Dealer Credit Facility (PDCF)
  • Commercial Paper Funding Facility (CPFF)
  • Term Securities Lending Facility (TSLF)
  • TSLF Options Program (TOP)
  • Term Auction Facility (TAF)
  • Agency MBS purchases
  • Dollar liquidity swap lines with foreign central banks
  • Assistance to Bear Stearns, including Maiden Lane
  • Assistance to American International Group, including Maiden Lane II and III

Additionally, discount window and open market operation transactions after July 21, 2010, will be posted with a two-year lag.

The data made available Wednesday can be downloaded in multiple formats, including Excel, at www.federalreserve.gov/newsevents/reform_transaction.htm. The Excel files allow users to search, sort, and filter the data for each program in multiple categories. The site also provides explanations of each program as well as definitions for the data elements.

In the case of broad-based facilities, details provided include the name of the borrower, the amount borrowed, the date the credit was extended, the interest rate charged, information about collateral, and other relevant credit terms. Similar information is provided for the draws of foreign central banks on their dollar liquidity swap lines with the Federal Reserve. For agency MBS transactions, details include the name of the counterparty, the security purchased or sold, and the date, amount, and price of the transaction.


November 30, 2010
Federal Reserve Announces Results of Auction of $5 Billion in 28-Day Term Deposits Held on November 29, 2010

On November 29, 2010, the Federal Reserve conducted an auction of $5 billion in 28-day term deposits through its Term Deposit Facility. Following are the results of the auction:

TDF Auction ID: A15
Competitive Amount Offered: $ 5,000,000,000
Competitive Amount Tendered: $ 14,664,090,000
Competitive Amount Awarded: $ 5,000,030,000
Non-Competitive Amount Awarded: $ 113,260,000
Total Amount Awarded: $ 5,113,290,000
   
Stop-Out Rate: 0.26000 percent
Bid-to-Cover Ratio (Competitive Auction): 2.93
   
Number of Bids Submitted: 88
Number of Participants Submitting Bids: 62

Bids at the stop-out rate were pro-rated at 71.83 percent. Resulting awards were rounded to the nearest $10,000 except that all awards below $10,000 were rounded up to $10,000.

The awarded deposits will settle on December 2, 2010, and will mature on December 30, 2010. The stop-out rate shown above will apply to all awarded deposits.


November 24, 2010
Federal Reserve Offers $5 Billion in 28-Day Term Deposits Through its Term Deposit Facility

On Monday, November 29, 2010, the Federal Reserve will offer $5 billion in 28-day term deposits through its Term Deposit Facility. Additional information regarding the auction is listed below; the auction will be conducted as specified in this announcement, Regulation D, and the terms and conditions of the Term Deposit Facility.

TDF Auction ID: A15
Offering Amount: $5,000,000,000
Term: 28 days
Auction Date: Monday, November 29, 2010
Opening Time: 10:00 a.m. ET
Closing Time: 2:00 p.m. ET
Notification Date: Tuesday, November 30, 2010
Settlement Date: Thursday, December 2, 2010
Maturity Date: Thursday, December 30, 2010
Competitive Auction Parameters
Maximum Number of Bids: 3
Minimum Bid Amount (per bid): $10,000
Bid Increment: $10,000
Maximum Bid Amount (per institution): $1,250,000,000
Maximum Bid Rate: 0.75000%
Incremental Bid Rate: 0.00100%
Award Minimum Amount: $10,000
Award Maximum Amount: $1,250,000,000

Competitive bids submitted at the stop-out rate will be pro-rated and will be rounded to multiples of $10,000. Normal rounding convention will be used, except that awards under $10,000 will be rounded to $10,000.

Non-Competitive bids are allowed in this auction. All non-competitive bids will be automatically awarded in full at the stop-out rate of the competitive auction. The minimum amount for a non-competitive bid is $10,000; the maximum amount is $5,000,000 and should be submitted in increments of $10,000. Non-Competitive bids must be submitted between 10:00 a.m. ET and 2:00 p.m. ET on the auction date.

Submission of Bids

Participants must submit bids by accessing the Term Deposit Facility application between the opening time and the closing time on the auction date.

Notification

Summary auction results will be published on the Board of Governors' website at approximately 12:00 p.m. (noon) ET on the notification date. Soon after, results will be posted on the Term Deposit Facility Resource Center page of the Central Bank Central website. Participant awards will be posted to the Term Deposit Facility application at approximately 12:00 p.m. ET on the notification date, and participants will be able to view their awards by accessing the Term Deposit Facility application.


November 17, 2010
Federal Reserve issues guidelines for capital action proposals by large bank holding companies

The Federal Reserve Board on Wednesday issued guidelines for evaluating proposals by large bank holding companies (BHCs) to undertake capital actions in 2011, such as increasing dividend payments or repurchasing or redeeming stock. The criteria provide a common, conservative approach to ensure that BHCs hold adequate capital to maintain ready access to funding, continue operations, and continue to serve as credit intermediaries, even under adverse conditions.

The criteria for evaluating capital distributions are outlined in a revised temporary addendum to Supervision and Regulation letter 09-4, "Dividend Increases and Other Capital Distributions for the 19 Supervisory Capital Assessment Program Firms." The guidelines state that any capital distribution plan will be evaluated on the basis of a number of criteria, with particular emphasis on:

  • the firm's ability to absorb losses over the next two years under several scenarios, including an adverse macroeconomic scenario specified by the Federal Reserve and adverse scenarios appropriate for a particular firm's business model and portfolios;
  • how the firm will meet Basel III capital requirements as they take effect in the United States, in the context of the proposed capital distributions as well as any anticipated impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the firm's business model or capital adequacy; and
  • the firm's plans to repay U.S. government investments, if applicable. BHCs are expected to complete the repayment or replacement of any U.S. government investments in the form of either preferred shares or common equity prior to increasing capital payouts through higher dividends or stock buybacks.

The Federal Reserve expects to respond to capital distribution requests beginning in the first quarter.

The Federal Reserve will evaluate requests for planned capital actions in the context of its broader process for assessing capital adequacy at the largest BHCs. As part of the regular supervisory process, the Federal Reserve is requesting that large U.S. BHCs submit comprehensive capital plans by early next year, regardless of whether a capital action is planned. The capital plan review is the latest step in the Federal Reserve's efforts to enhance supervision of banking organizations. As recognized by the Dodd-Frank Act and demonstrated by the Federal Reserve-led Supervisory Capital Assessment Program in 2009, regular, horizontal reviews across groups of firms provide regulators with both firm-specific and industry-wide perspectives of various issues and trends. The Federal Reserve plans to undertake these capital plan reviews on a regular basis and will consult with primary federal bank regulators.
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November 17, 2010
Federal Reserve issues proposal to implement Volcker Rule conformance period

The Federal Reserve Board on Wednesday requested comment on a proposed rule to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that give banking firms a defined period of time to conform their activities and investments to the so-called Volcker Rule.

The Volcker Rule generally prohibits banking entities from engaging in proprietary trading in securities, derivatives, or certain other financial instruments, and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund. The statute generally provides banking entities two years to bring their activities and investments into compliance with the Volcker Rule, and allows the Board to extend this conformance period for specified periods under certain conditions. The Dodd-Frank Act requires that the Board issue rules implementing the Volcker Rule's conformance period.

In developing the proposed rule, the Board consulted with the Department of the Treasury, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

Comments on the proposal must be submitted within 45 days after publication in the Federal Register, which is expected shortly.
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November 10, 2010
Federal Reserve Announces Online Publication on Credit Reports and Credit Scores

A new online resource from the Federal Reserve provides practical answers to questions about credit reports, credit scores, and the importance of protecting personal credit histories. The Consumer's Guide to Credit Reports and Credit Scores describes the content of a credit report, explains how a credit score is used, and discusses the role of credit bureaus in collecting and disseminating this information.

Mortgage lenders, banks, insurers, utilities, employers, and other businesses may obtain credit reports from credit bureaus to assess how an individual manages their financial responsibilities. Consumers need to know what's in their credit report and understand how negative information, such as late payments or a bankruptcy filing, might affect a lender's decision to grant credit. The guide answers questions ranging from "What is a credit score?" to "How can I get a free copy of my credit report?" to "How long does negative information stay on my credit report?" It contains tips to help consumers improve their credit scores and provides step-by-step instructions for correcting an error in a credit report.

The Consumer's Guide to Credit Reports and Credit Scores can be found at www.federalreserve.gov/creditreports. It is one of several online Federal Reserve publications, such as 5 Tips for Improving Your Credit Score and 5 Tips for Getting the Most from Your Credit Card. Many of these publications are available in Spanish.
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November 04, 2010
Federal Reserve establishes Office of Financial Stability Policy and Research

The Federal Reserve Board on Thursday established the Office of Financial Stability Policy and Research and appointed Board economist J. Nellie Liang as its director.

The office will bring together economists, banking supervisors, markets experts, and others in the Federal Reserve who will be dedicated to supporting the Board's financial stability responsibilities. The office will develop and coordinate staff efforts to identify and analyze potential risks to the financial system and the broader economy, including through the monitoring of asset prices, leverage, financial flows, and other market risk indicators; follow developments at key institutions; and analyze policies to promote financial stability. It will also support the supervision of large financial institutions and the Board's participation on the Financial Stability Oversight Council.

"The Office of Financial Stability Policy and Research brings together a skilled group of people with a wide range of expertise to focus solely on financial stability," Federal Reserve Chairman Ben S. Bernanke said. "The financial stability team will play an important role in implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, in our oversight of systemically important financial institutions, and in our overall surveillance of the financial markets and the economy. I am pleased that such a strong economist and leader as Nellie is leading this group."

Liang joined the Board in 1986, acting most recently as a senior associate director in the Division of Research and Statistics. In that role, she has led a group of economists focused on the intersection of economics and finance, including oversight of capital markets, financial institutions, consumer finance, and financial flows. Liang was a key participant in crafting the Federal Reserve's response to the financial crisis and helped lead the Supervisory Capital Assessment Program, or bank stress tests, which helped increase public confidence in the banking system in 2009. Liang has a Ph.D. in economics from the University of Maryland and an undergraduate degree in economics from the University of Notre Dame.
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November 03, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

Statement from Federal Reserve Bank of New York


November 01, 2010
Board announces approval of fee schedules for payment services the Federal Reserve Banks provide depository institutions

The Federal Reserve Board on Monday announced the approval of fee schedules, effective January 3, 2011, for payment services the Federal Reserve Banks provide to depository institutions (priced services). The Board has also approved maintaining the current earnings credit rate on clearing balances.

The Reserve Banks project that they will recover 102.0 percent of their priced services costs in 2011. The Reserve Banks expect to recover all of their actual and imputed expenses, and earn a profit that is above their targeted return on equity. Overall, the price level for Federal Reserve priced services will decrease about 3 percent in 2011 from 2010. Because an increasing proportion of checks collected through the Reserve Banks will be presented electronically, the effective fees paid to collect checks using the Reserve Banks' Check 21 services are expected to decline, on average, 14 percent. The average fee paid by depository institutions to return a check electronically will decline 20 percent. In addition, the fees for the Reserve Banks' FedACH® service, Fedwire® Funds and National Settlement Services, and Fedwire® Securities Service will increase approximately 3 percent.

The 2011 fee schedule for each of the priced services, except the check service, is included in the attached Federal Register notice. Fee schedules for all priced services will be available on the Federal Reserve Banks' financial services website at www.frbservices.org.

In addition, the Board approved the 2011 private-sector adjustment factor (PSAF) for Reserve Bank priced services of $39.5 million. The PSAF is an allowance for income taxes and other imputed expenses that would have been paid and profits that would have been earned if the Reserve Banks' priced services were provided by a private business. The Monetary Control Act of 1980 requires that the Federal Reserve establish fees to recover the costs of providing priced services, including the PSAF, over the long run, to promote competition between the Reserve Banks and private-sector service providers.
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October 26, 2010
Annual adjustments for reserve calculations and deposit reporting, Regulation D

The Federal Reserve Board on Tuesday announced the annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2011. These amounts are used in the calculation of reserve requirements of depository institutions.The Board also announced the annual indexing of the nonexempt deposit cutoff level and the reduced reporting limit that will be used to determine deposit reporting panels effective 2011.

All depository institutions must hold a percentage of certain types of deposits as reserves in the form of vault cash, as a deposit in a Federal Reserve Bank, or as a deposit in a pass-through account at a correspondent institution. Reserve requirements currently are assessed on the depository institution's net transaction accounts (mostly checking accounts). Depository institutions must also regularly submit deposit reports of their deposits and other reservable liabilities.

For net transaction accounts in 2011, the first $10.7 million, unchanged from its level in 2010, will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts over $10.7 million up to and including $58.8 million, up from $55.2 million in 2010. A 10 percent reserve ratio will be assessed on net transaction accounts in excess of $58.8 million.

These annual adjustments, known as the low reserve tranche adjustment and the reserve requirement exemption amount adjustment, are based on growth in net transaction accounts and total reservable liabilities, respectively, at all depository institutions between June 30, 2009 and June 30, 2010.

For depository institutions that report weekly, the low reserve tranche adjustment and the reserve requirement exemption amount adjustment will apply to the 14-day reserve computation period that begins Tuesday, November 30, 2010, and the corresponding 14-day reserve maintenance period that begins Thursday, December 30, 2010.

For depository institutions that report quarterly, the low reserve tranche adjustment and the reserve requirement exemption amount adjustment will apply to the seven-day reserve computation period that begins Tuesday, December 21, 2010, and the corresponding seven-day reserve maintenance period that begins Thursday, January 20, 2011.

The Board also announced changes in two other amounts, the nonexempt deposit cutoff level and the reduced reporting limit, that are used to determine the frequency with which depository institutions must submit deposit reports. The attached Federal Register notice contains a description of the new boundaries for deposit reporting that will be effective in 2011.
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October 19, 2010
Federal Reserve proposes amendments to Regulation Z to clarify rules pertaining to credit cards

The Federal Reserve Board on Tuesday proposed a rule amending Regulation Z (Truth in Lending) to clarify aspects of the Board's rules protecting consumers who use credit cards. The proposal is intended to enhance protections for consumers and to resolve areas of uncertainty so that card issuers fully understand their compliance obligations. In particular, the proposal would clarify that:

  • Promotional programs that waive interest charges for a specified period of time are subject to the same protections as promotional programs that apply a reduced rate for a specified period. For example, a card issuer that offers to waive interest charges for six months would be prohibited from revoking the waiver and charging interest during the six-month period unless the account becomes more than 60 days delinquent.
  • Application and similar fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account is opened. Because the total amount of these fees cannot exceed 25 percent of the account's initial credit limit, a card issuer that, for example, charges a $75 fee to apply for a credit card with a $400 credit limit generally would not be permitted to charge more than $25 in additional fees during the first year after account opening.
  • When evaluating a consumer's ability to make the required payments before opening a new credit card account or increasing the credit limit on an existing account, card issuers must consider information regarding the consumer's independent income, rather than his or her household income.

The proposal would clarify portions of the Federal Reserve's final rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009. The last of these rules went into effect on August 22, 2010.

The notice that will be published in the Federal Register is attached. Comments on the proposal must be submitted within 60 days after publication in the Federal Register.
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October 19, 2010
Federal Reserve announces final rule regarding effective dates for gift card rules

The Federal Reserve Board on Tuesday announced a final rule implementing recent legislation modifying the effective date of certain disclosure requirements applicable to gift cards under the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The rule finalizes an interim final rule published in the Federal Register on August 17, 2010. For gift certificates, store gift cards, and general-use prepaid cards produced prior to April 1, 2010, the legislation and interim final rule delay the August 22, 2010 effective date of these disclosures until January 31, 2011, provided that several specified conditions are met.
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October 18, 2010
Federal Reserve announces interim final rule on real estate appraisal

The Federal Reserve Board on Monday announced an interim final rule to ensure that real estate appraisers are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions. The rule also seeks to ensure that appraisers receive customary and reasonable payments for their services.

The interim final rule includes several provisions that protect the integrity of the appraisal process when a consumer's home is securing the loan. The interim final rule:

  • Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
  • Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
  • Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
  • Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
  • Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.

The interim final rule is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance will be mandatory on April 1, 2011. Public comments are due 60 days after the interim final rule is published in the Federal Register, which is expected soon.
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October 01, 2010
Federal Reserve Announces Formation of Community Depository Institutions Advisory Council

The Federal Reserve Board on Friday said it is forming an advisory council representing a broad group of insured community depository institutions. The Community Depository Institutions Advisory Council (CDIAC) will provide input to the Board on the economy, lending conditions, and other issues. Members will be selected from representatives of banks, thrift institutions, and credit unions serving on newly created local advisory councils at the 12 Federal Reserve Banks. One member of each of the Reserve Bank councils will be selected by the Board to serve on the CDIAC, which will meet twice a year with the Federal Reserve Board in Washington.

The CDIAC will replace the Thrift Institutions Advisory Council, which has provided the Board with useful information from the perspective of thrift institutions—including savings and loan associations and savings banks—and credit unions since 1981. In addition to representatives from thrift institutions and credit unions, the CDIAC will include people from community banks with different charters and regulators including state-chartered banks that are members of the Federal Reserve System, state-chartered nonmember banks, and nationally chartered banks to provide views from the broad array of community depository institutions that operate in local markets across the country.

The Reserve Bank advisory councils are expected to begin meeting in early 2011 with meetings of the CDIAC to follow later in the year.


September 30, 2010
Federal Reserve Announces Implementation Date for Changes to the Payment System Risk Policy

The Federal Reserve Board on Thursday announced that it will implement changes to its Payment System Risk (PSR) policy on March 24, 2011. The Board approved these revisions in late 2008 for implementation approximately two years later, following substantial changes to the Reserve Banks' credit risk management infrastructure.

The revised PSR policy explicitly recognizes the Reserve Banks' role in providing intraday credit to healthy depository institutions and establishes a zero fee for collateralized daylight overdrafts, a 50 basis point (annual rate) charge for uncollateralized daylight overdrafts, and a biweekly daylight overdraft fee waiver of $150. In addition, the Board changed other elements of the PSR policy dealing with daylight overdrafts, including adjusting net debit caps, streamlining max cap procedures for certain foreign banking organizations (implemented in March 2009), eliminating the deductible for daylight overdraft fees, and increasing the penalty daylight overdraft fee for institutions ineligible for intraday credit to 150 basis points (annual rate).

The Board encourages depository institutions to review documents explaining the implementation of the revised PSR policy. Versions of these documents that have been updated with information related to the revised policy will be available later this year on the Board's website at http://www.federalreserve.gov/paymentsystems/psr_relpolicies.htm and on the discount window and PSR website at http://www.frbdiscountwindow.org.
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September 30, 2010
Agencies Issue Final CRA Rule to Implement Provision of Higher Education Opportunity Act

The federal banking and thrift regulatory agencies today announced a final Community Reinvestment Act (CRA) rule to implement a provision of the Higher Education Opportunity Act.

The provision requires the agencies to consider low-cost higher education loans to low-income borrowers as a positive factor when assessing a financial institution's record of meeting community credit needs under the CRA.

The rule also incorporates a CRA statutory provision that allows the agencies to consider a financial institution's capital investment, loan participation, and other ventures with minority-owned financial institutions, women-owned institutions and low-income credit unions as factors in assessing the institution's CRA record. This provision was published on March 11, 2010, in the Interagency Questions and Answers Regarding Community Reinvestment.

The attached final rule, issued jointly by the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision, will be published shortly in the Federal Register. More information on CRA regulations and examination procedures is available on the Federal Financial Institutions Examination Council (FFIEC) website at: http://www.ffiec.gov/cra.
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September 21, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.

Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.

The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judged that the economy continues to recover at a moderate pace. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and will lead to future imbalances that undermine stable long-run growth. In addition, given economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from its securities holdings was required to support the Committee's policy objectives.


September 08, 2010
Board authorizes ongoing small-value offerings of term deposits under the Term Deposit Facility

The Federal Reserve Board on Wednesday announced that it has authorized ongoing small-value offerings of term deposits under the Term Deposit Facility (TDF).

These small-value offerings are designed to ensure the operational readiness of the TDF and to provide eligible institutions with an opportunity to gain familiarity with term deposit procedures. The development of the TDF and the ongoing small-value TDF offerings are a matter of prudent planning and have no implications for the near-term conduct of monetary policy.

The terms and frequency for these auctions may evolve over time, but the Board currently anticipates that TDF auctions will be held about every other month. Following this approach, two auctions will be conducted over the remainder of this year on October 4 and November 29; the corresponding settlements will occur on October 7 and December 2, respectively. Each of these auctions will offer $5 billion of 28-day deposits; the modest increase in the offering amount from the $2 billion offering amount at auctions held in June and July is intended to encourage broad participation by depository institutions at the upcoming auctions. The schedule, amounts, and other terms for small-value auctions to be conducted in 2011 will be announced at later dates.
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August 16, 2010
Federal Reserve proposes enhanced consumer protections and disclosures for home mortgage transactions

The Federal Reserve Board on Monday proposed enhanced consumer protections and disclosures for home mortgage transactions. The proposal includes significant changes to Regulation Z (Truth in Lending) and represents the second phase of the Board's comprehensive review and update of the mortgage lending rules in the regulation. The proposed changes reflect the results of consumer testing by the Board, which will begin accepting public comment. The latest proposal would:

  • Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information;
  • Prohibit certain unfair practices in the sale of financial products with reverse mortgages;
  • Improve the disclosures that explain a consumer's right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and
  • Ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.

Under the proposal, the timing, content, and format of reverse mortgage disclosures would be changed to make the disclosures more useful to consumers. Currently, consumers typically receive lengthy disclosures when applying that do not explain the particular features unique to reverse mortgages. Under the proposed rules, however, consumers would receive disclosures on or with the application form, using simple language to highlight the basic features and risks of reverse mortgages. Shortly after filling out the application, consumers would receive transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered.

In developing the proposal, the Board recognized that disclosures alone may not always be sufficient to protect consumers from unfair practices related to reverse mortgages. Reverse mortgages are complex products available to older consumers, some of whom may be more vulnerable to abusive practices. The proposed rules address concerns that in order to obtain a reverse mortgage, some consumers have been forced to buy financial products that can be costly or may not be beneficial, such as annuities or long-term care insurance. The Board's proposed rules for reverse mortgages would address these concerns by:

  • Prohibiting creditors from conditioning a reverse mortgage on the consumer's purchase of another financial or insurance product; and
  • Requiring that a consumer receive counseling about reverse mortgages before a creditor can impose nonrefundable fees for a reverse mortgage or close the loan.

In addition, the Board is proposing amendments pertaining to all types of mortgages that would:

  • Ensure that for all mortgage loans, consumers have time to review their loan cost disclosures before they become obligated for fees, by requiring lenders to refund the fees if the consumer decides to withdraw the application within three days after they receive the disclosures; and
  • Clarify that when a consumer requests information from their loan servicer about the owner of the loan, the servicer must provide the information within a reasonable time, which generally would be 10 business days.

The first phase of the Board's regulatory review of mortgage lending rules commenced with the publication of two proposals in August 2009 that would significantly improve the (more) disclosures for closed-end home mortgage loans and open-end home equity lines of credit. After considering the comments received on today's proposal, the Board plans to issue final rules that combine the 2009 and 2010 proposals.

The comment period ends 90 days after publication of the proposal in the Federal Register, which is expected shortly.
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August 16, 2010
Federal Reserve announces final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices

The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders.

Today, lenders commonly pay loan originators more compensation if the borrower accepts an interest rate higher than the rate required by the lender (commonly referred to as a "yield spread premium"). Under the final rule, however, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points. Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice.

The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. In consumer testing, the Board found that consumers generally are not aware of the payments lenders make to loan originators and how those payments can affect the consumer's total loan cost. The new rule seeks to ensure that consumers who agree to pay the originator directly do not also pay the originator indirectly through a higher interest rate, thereby paying more in total compensation than they realize.

Additionally, the final rule prohibits loan originators from directing or "steering" a consumer to accept a mortgage loan that is not in the consumer's interest in order to increase the originator's compensation. The rule will preserve consumer choice by ensuring that consumers can choose from loan options that include the loan with the lowest rate and the loan with the least amount of points and origination fees, rather than the loans that maximize the originator's compensation.

The Federal Register notice containing the final rules is attached. The final rules are effective April 1, 2011.
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August 16, 2010
Federal Reserve announces final rules regarding consumer notification of mortgage loan sales or transfers

The Federal Reserve Board on Monday announced final rules to implement a statutory amendment to the Truth in Lending Act requiring that consumers receive notice when their mortgage loan has been sold or transferred. The new disclosure requirement became effective in May 2009, upon enactment of the Helping Families Save Their Homes Act. Under that act, a purchaser or assignee that acquires a mortgage loan must provide the required disclosures in writing within 30 days.

To provide compliance guidance and greater certainty on the new requirements, the Board published interim rules in November 2009, which were effective immediately. To allow covered parties time to make any necessary operational changes, they may continue to follow the November 2009 interim rules until the mandatory compliance date for the final rules, which is January 1, 2011.

Consumers can learn more about mortgage transfer disclosures by accessing a new online publication, "What You Need to Know: New Rules for Mortgage Transfers." It explains what consumers can expect from their mortgage lenders regarding notification of mortgage transfers.
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August 16, 2010
Federal Reserve proposes rule to revise escrow account requirements for jumbo mortgages

The Federal Reserve Board on Monday proposed a rule to revise the escrow account requirements for higher-priced, first-lien "jumbo" mortgage loans. The proposed rule, which implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, would increase the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien jumbo mortgage loans. Jumbo loans are loans exceeding the conforming loan-size limit for purchase by Freddie Mac, as specified by the legislation.

In July 2008, the Board issued final rules requiring creditors to establish escrow accounts for first-lien loans if a loan's APR is 1.5 percentage points or more above the applicable prime offer rate. Under the Dodd-Frank Act, which amended the Truth in Lending Act (TILA), the escrow requirement will apply for jumbo loans only if the loan's APR is 2.5 percentage points or more above the applicable prime offer rate. The APR threshold for non-jumbo loans remains unchanged.

The Dodd-Frank Act incorporates into TILA the Board's regulatory requirement for escrow accounts and revises the APR threshold, but the act also includes other provisions, including new disclosure requirements. This proposal would implement only the act's change to the APR threshold. Other provisions of the act concerning escrow accounts will be implemented in a separate rulemaking.

The proposed change would not affect the APR threshold used to determine whether a jumbo loan is subject to the other consumer protections that the Board adopted for higher-priced loans in 2008. Those protections include requirements for determining consumers' repayment abilities and restrictions on prepayment penalties.

The Board is soliciting comment on the proposed rule, including the appropriate implementation date, for 30 days after publication in the Federal Register.
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August 16, 2010
Federal Reserve issues interim rule revising disclosure requirements for closed-end mortgages

The Federal Reserve Board on Monday issued an interim rule that revises the disclosure requirements for closed-end mortgage loans under Regulation Z (Truth in Lending). The interim rule implements provisions of the Mortgage Disclosure Improvement Act (MDIA) that require lenders to disclose how borrowers' regular mortgage payments can change over time.

The MDIA, which amended the Truth in Lending Act, seeks to ensure that mortgage borrowers are alerted to the risks of payment increases before they take out mortgage loans with variable rates or payments. Accordingly, under the interim rule, lenders' cost disclosures must include a payment summary in the form of a table, stating the following:

  • The initial interest rate together with the corresponding monthly payment;
  • For adjustable-rate or step-rate loans, the maximum interest rate and payment that can occur during the first five years and a "worst case" example showing the maximum rate and payment possible over the life of the loan; and
  • The fact that consumers might not be able to avoid increased payments by refinancing their loans.

The interim rule also requires lenders to disclose certain features, such as balloon payments, or options to make only minimum payments that will cause loan amounts to increase. All of the disclosures required in the interim rule were developed through several rounds of qualitative consumer testing, including one-on-one interviews with consumers around the country.

Lenders must comply with the interim rule for applications they receive on or after January 30, 2011, as specified in the MDIA. Lenders have the option, however, of providing disclosures that comply with the interim rule before that date. The Board is also soliciting comment on the interim rule for 60 days after publication in the Federal Register before considering the adoption of a permanent rule.
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August 10, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee's ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve's holdings of longer-term securities at their current level was required to support a return to the Committee's policy objectives.

 


1 The Open Market Desk will issue a technical note shortly after the statement providing operational details on how it will carry out these transactions.


July 30, 2010
Annual adjustment of fee-based trigger for additional mortgage loan disclosures

The Federal Reserve Board on Friday published its annual adjustment of the dollar amount of fees that triggers additional disclosure requirements under the Truth in Lending Act and the Home Ownership and Equity Protection Act of 1994 for home mortgage loans that bear rates or fees above a certain amount.

The dollar amount of the fee-based trigger has been adjusted to $592 for 2011 based on the annual percentage change reflected in the Consumer Price Index that was in effect on June 1, 2010.

The adjustment is effective January 1, 2011. This adjustment does not affect the rules for "higher-priced mortgage loans" adopted by the Board in July 2008. Coverage of mortgage loans under the July 2008 rules is determined using a different rate-based trigger.

The Home Ownership and Equity Protection Act restricts credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed the fee-based trigger (initially set at $400 and adjusted annually) or 8 percent of the total loan amount, whichever is larger.

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July 29, 2010
Federal Reserve Announces Agenda for August 5 Public Hearing on Home Mortgage Disclosure Act

The Federal Reserve Board announced the agenda and panelists for the second of four public hearings this year on potential revisions to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The event will be held Thursday, August 5 at the Federal Reserve Bank of San Francisco. Those who want to attend the hearing should register in advance online.

HMDA requires lenders to provide detailed annual reports of their mortgage lending to regulators and the public. The hearings will help the Board gather information about whether its current regulations are working as intended and what changes might be needed.

The full San Francisco hearing agenda is available online. Panelists include representatives from community and consumer organizations, mortgage lenders, researchers, and other interested parties. Members of the public are invited to express their opinions during an open-mike period. Sign-up for the open-mike will be on a first-come, first-served basis beginning at 8:00 a.m. on the day of the event, and remarks will be limited to five minutes. Written statements of any length may be submitted for the record.

Additional hearings will be held on the following dates:
Thursday, September 16, at the Federal Reserve Bank of Chicago
Friday, September 24, at the Federal Reserve Board

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July 28, 2010
Agencies issue final rules to implement requirements for registration of mortgage loan originators

Federal agencies issued final rules today requiring residential mortgage loan originators who are employees of national and state banks, savings associations, Farm Credit System institutions, credit unions, and certain of their subsidiaries (agency-regulated institutions) to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act). The final rules are being issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, Farm Credit Administration, and National Credit Union Administration (the agencies).

The S.A.F.E. Act requires residential mortgage loan originators who are employees of agency-regulated institutions to be registered with the Nationwide Mortgage Licensing System and Registry (registry). The registry is a database created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the states. As part of this registration process, residential mortgage loan originators must furnish to the registry information and fingerprints for background checks. The S.A.F.E. Act generally prohibits employees of agency-regulated institutions from originating residential mortgage loans unless they register with the registry.

The agencies' final rules establish the registration requirements for residential mortgage loan originators employed by agency-regulated institutions and requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the S.A.F.E. Act and final rules. As required by the S.A.F.E. Act, the final rules also require that each residential mortgage loan originator obtain a unique identifier through the registry that will remain with that residential mortgage loan originator, regardless of changes in employment. This will enable consumers to easily access employment and other background information about registered mortgage loan originators from the registry. Under the final rules, registered mortgage loan originators and agency-regulated institutions must provide these unique identifiers to consumers.

The final rules take effect on October 1, 2010. The agencies anticipate that the registry could begin accepting federal registrations as early as January 28, 2011. Employees of agency-regulated institutions must not register until the agencies instruct them to do so. The agencies will provide an advance announcement of the date when the registry will begin accepting federal registrations, and agency-regulated institutions and their applicable employees will have 180 days from that date to comply with the initial registration requirements.

The final rules appear in today's Federal Register.

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July 12, 2010
Federal Reserve announces agenda for July 15 public hearing on Home Mortgage Disclosure Act

The Federal Reserve Board on Friday announced the agenda and panelists for the first of four public hearings this year on potential revisions to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The event will be held July 15 at the Federal Reserve Bank of Atlanta.

HMDA requires lenders to provide detailed annual reports of their mortgage lending to regulators and the public. The hearings will help the Board gather information about whether its current regulations are working as intended and what changes might be needed.

The full Atlanta hearing agenda is available online at: http://www.federalreserve.gov/communitydev/hmda_agenda20100715.htm. Panelists include representatives from community and consumer organizations, mortgage lenders, researchers, and other interested parties. Members of the public are invited to express their opinions during an open-mike period. Sign up for the open-mike will be on a first-come, first-served basis the day of the event beginning at 8:00 a.m., and remarks will be limited to five minutes. Written statements of any length may be submitted for the record.

Additional hearings will be held on the following dates:

  • Thursday, August 5, at the Federal Reserve Bank of San Francisco
  • Thursday, September 16, at the Federal Reserve Bank of Chicago
  • Friday, September 24, at the Federal Reserve Board

More information about the hearings, including instructions for submitting written comments, is available at: http://www.federalreserve.gov/communitydev/hmda_hearings.htm. Hearing details will be posted to this site they become available.
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June 28, 2010
Federal Reserve to Implement Changes to Payment System Risk Policy in Early 2011

The Federal Reserve Board on Monday announced that it will implement changes to its Payment System Risk (PSR) policy in early 2011. A specific implementation date will be announced at least 90 days in advance. In December 2008, the Board adopted revisions to the policy and said that the Federal Reserve would implement these changes between late 2010 and early 2011.

The revised PSR policy explicitly recognizes the role of the central bank in providing intraday credit to healthy depository institutions predominantly through collateralized daylight overdrafts. The policy encourages institutions to pledge collateral to cover daylight overdrafts by providing collateralized daylight overdrafts at a zero fee and by raising the fee for uncollateralized daylight overdrafts to 50 basis points (annual rate).

In anticipation of depository institutions' changing needs for collateral management under the revised policy, the Federal Reserve, in collaboration with the industry, assessed and identified opportunities to improve System operational systems. The Reserve Banks have been implementing enhancements to their operational systems and processes that will improve the efficiency and effectiveness of pledging, withdrawing, and monitoring collateral. Many of these operational improvements will be available to institutions on or before the implementation date of the PSR policy changes.
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June 23, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee's flexibility to begin raising rates modestly.


June 21, 2010
Federal Reserve Announces Posting Rules for New Same-Day Automated Clearing House Service

The Federal Reserve Board on Monday announced posting rules for a new same-day automated clearing house (ACH) service.

The Federal Reserve Banks will be offering an opt-in, same-day settlement service for certain ACH debit payments through the FedACH service effective August 2, 2010. FedACH customers may opt-in to this service by completing a participation agreement. The service will be limited to transactions arising from consumer checks converted to ACH and consumer debit transfers initiated over the Internet and phone.

When new financial services are offered by the Reserve Banks, the Board determines the time that payments will post to an institution's Federal Reserve account so that it may manage and appropriately fund its account. The Board determined that SameDay forward debit transfers will post to institutions' Federal Reserve accounts at 5:00 p.m. ET and SameDay return debit transfers will post at 5:30 p.m. ET. Depository institutions seeking more detailed information about the FedACH SameDay service should contact their Federal Reserve Account Executive or visit www.frbservices.org.

The Federal Register notice is attached.

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June 21, 2010
Federal Reserve, OCC, OTS, FDIC Issue Final Guidance on Incentive Compensation

The Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Federal Deposit Insurance Corporation (FDIC) issued final guidance today to ensure that incentive compensation arrangements at financial organizations take into account risk and are consistent with safe and sound practices. The guidance was originally proposed by the Federal Reserve last year. The OCC, OTS, and FDIC are joining in issuing the final version.

The Federal Reserve, in cooperation with the other banking agencies, has completed a first round of in-depth analysis of incentive compensation practices at large, complex banking organizations as part of a so-called horizontal review, a coordinated examination of practices across multiple firms. Last month, the Federal Reserve delivered assessments to the firms that included analysis of current compensation practices and areas requiring prompt attention. Firms are submitting plans to the Federal Reserve outlining steps and timelines for addressing outstanding issues to ensure that incentive compensation plans do not encourage excessive risk-taking.

"Many large banking organizations have already implemented some changes in their incentive compensation policies, but more work clearly needs to be done," Federal Reserve Governor Daniel K. Tarullo said. "The Federal Reserve expects firms to make material progress this year on the matters identified as we work toward the ultimate goal of ensuring that incentive compensation programs are risk appropriate and are supported by strong corporate governance."

During the next stage, the banking agencies will be conducting additional cross-firm, horizontal reviews of incentive compensation practices at the large, complex banking organizations for employees in certain business lines, such as mortgage originators. The agencies will also be following up on specific areas that were found to be deficient at many firms, such as:

  • Many firms need better ways to identify which employees, either individually or as a group, can expose banking organizations to material risk;
  • While many firms are using or are considering various methods to make incentive compensation more risk sensitive, many are not fully capturing the risks involved and are not applying such methods to enough employees;
  • Many firms are using deferral arrangements to adjust for risk, but they are taking a "one-size-fits-all" approach and are not tailoring these deferral arrangements according to the type or duration of risk; and
  • Many firms do not have adequate mechanisms to evaluate whether established practices are successful in balancing risk.

In addition to the work with the large, complex banking organizations, the agencies are also working to incorporate oversight of incentive compensation arrangements into the regular examination process for smaller firms. These reviews are being tailored to take account of the size, complexity, and other characteristics of these banking organizations.

The guidance is designed to ensure that incentive compensation arrangements at banking organizations appropriately tie rewards to longer-term performance and do not undermine the safety and soundness of the firm or create undue risks to the financial system. Because improperly structured compensation arrangements for both executive and non-executive employees may pose safety and soundness risks, the guidance applies not only to top-level managers, but also to other employees who have the ability to materially affect the risk profile of an organization, either individually or as part of a group.

Federal Reserve staff will prepare a report, in consultation with the other federal banking agencies, after the conclusion of 2010 on trends and developments in compensation practices at banking organizations.

The guidance will become effective when published in the Federal Register, which is expected shortly.

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Media Contacts:
Federal Reserve Barbara Hagenbaugh 202-452-2955
FDIC Andrew Gray 202-898-6993
OCC Dean DeBuck 202-874-5770
OTS William Ruberry 202-906-6677

June 17, 2010
Agencies Propose to Expand Scope of Community Reinvestment Act Regulations

The federal bank and thrift regulatory agencies today announced a proposed change to the Community Reinvestment Act (CRA) regulations to support stabilization of communities affected by high foreclosure levels. The proposed change specifically would encourage depository institutions to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD).

Under the NSP, HUD has provided funds to state and local governments and nonprofit organizations for the purchase and redevelopment of abandoned and foreclosed properties. The agencies' proposal would encourage depository institutions to make loans and investments and provide services to support NSP activities in areas with HUD-approved plans.

The proposal would supplement existing CRA consideration for community development activities, including neighborhood stabilization activities. For example, for NSP areas identified in HUD-approved plans, the agencies would provide CRA consideration for activities that benefit individuals with incomes of up to120 percent of the area median and geographies with median incomes of up to120 percent of the area median. NSP-eligible activities would receive favorable consideration under the new rule only if conducted within two years after the date when NSP program funds are required to be spent.

Allowing banking institutions to receive CRA consideration for NSP-eligible activities in additional NSP-targeted areas creates an opportunity to leverage government funding targeted to areas with high foreclosure and vacancy rates and also serves the purposes of the CRA.

The proposed rule is attached. Comments on the proposed rule must be submitted no later than 30 days from the date of its publication in the Federal Register, which is expected shortly.

Separately, the agencies also announced today they will hold four hearings to consider public comment on all aspects of the CRA regulations during the summer of 2010.

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Media Contacts:
Federal Reserve Board Susan Stawick 202-452-2955
FDIC David Barr 202-898-6992
OCC Kevin Mukri 202-874-5770
OTS William Ruberry 202-906-6677

June 17, 2010
Agencies Announce Public Hearings on Community Reinvestment Act Regulations

The federal bank and thrift regulatory agencies today announced a series of upcoming public hearings on modernizing the regulations that implement the Community Reinvestment Act (CRA). Interested parties are invited to provide testimony and written comments.

The agencies (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the Office of Thrift Supervision) will consider how to update the regulations to reflect changes in the financial services industry, changes in how banking services are delivered to consumers today, and current housing and community development needs. The agencies also want to ensure that the CRA remains effective for encouraging institutions to meet the credit needs of communities. While the agencies recognize public comments may discuss matters requiring statutory changes, the agencies' focus is on potential regulatory changes.

The agencies encourage the public to provide oral or written testimony on potential changes to the CRA regulations at four hearings to be held around the country. The planned hearing dates and cities are as follows: July 19, 2010, Arlington, Virginia; August 6, 2010, Atlanta, Georgia; August 12, 2010, Chicago, Illinois; and August 17, 2010, Los Angeles, California.

Anyone wishing to submit testimony or attend the hearings must register five business days in advance on the website of the Federal Financial Institutions Examination Council (FFIEC) at http://www.ffiec.gov/cra/hearings.htm. Hearing details are available on that site and in the attached hearings notice, which will be published in the Federal Register. The agencies also strongly encourage individuals interested in testifying to provide their written testimony in advance. Presentation time and meeting space are limited and early registration is recommended.

In addition to offering an opportunity for testimony at the hearings, the agencies are encouraging any individual to provide written comments on the CRA regulations to any of the agencies through August 31, 2010. While the agencies encourage public comments on any CRA topic, they are particularly interested in receiving comments on the topics and questions listed in the notice excerpted in the attached document.

Separately, today the agencies announced that they are proposing a change to the CRA rules to encourage depository institutions to support the Neighborhood Stabilization Program funded by the U.S. Department of Housing and Urban Development. Comments on the proposed rule are due thirty days after its publication in the Federal Register, which is expected shortly.

Joint notice of public hearings (49 KB PDF) off-site image
Topics and questions excerpt from hearings notice (11 KB PDF) off-site image

Media Contacts:
Federal Reserve Board Susan Stawick 202-452-2955
FDIC David Barr 202-898-6992
OCC Kevin Mukri 202-874-5770
OTS William Ruberry 202-906-6677

June 15, 2010
Federal Reserve announces final rules to protect credit card users from certain practices

The Federal Reserve Board on Tuesday approved a final rule to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider interest rate increases imposed since the beginning of last year.

"The new rules require that late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers," said Federal Reserve Governor Elizabeth A. Duke. "Card issuers must also reevaluate recent interest rate increases and, if appropriate, reduce the rate."

Among other things, the final rule, which amends Regulation Z (Truth in Lending):

  • Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.
  • Prohibits credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer's violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
  • Bans "inactivity" fees, such as fees based on the consumer's failure to use the account to make new purchases.
  • Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
  • Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The final rule represents the third stage of the Federal Reserve's implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009, which was enacted in May 2009. The provisions of the Act addressed in this rule will generally go into effect on August 22, 2010.

Consumers can learn more about changes to their credit card accounts by accessing a new online publication, "What You Need to Know: New Credit Card Rules Effective Aug. 22." It explains key changes consumers can expect from their credit card companies as a result of the third phase of the new credit card rules. Additional information about credit cards can be found on the Board's website at: http://www.federalreserve.gov/creditcard/.
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May 28, 2010
Federal Reserve Announces Schedule for Small-Value Auctions of Term Deposits Through the Term Deposit Facility

The Federal Reserve has scheduled three small-value auctions of term deposits through its Term Deposit Facility (TDF) over the next two months. These auctions are a matter of prudent planning and have no implications for the near-term conduct of monetary policy.

All term deposit auctions will use a single-price format in which all winning bids will be awarded at the highest rate accepted at the auction. The first auction will offer $1 billion of 14-day term deposits; the auction will be conducted on June 14 with settlement on June 17, and the deposits offered will mature on July 1. Each participating institution may submit up to three competitive bids; the maximum award to any individual bidder will be set at $250 million and the maximum rate at the auction will be set at the primary credit rate. Depository institutions may submit noncompetitive bids; each individual noncompetitive bid will be filled up to a limit of $5 million at the highest rate accepted in the competitive auction. The amounts awarded to noncompetitive bidders will be added on to the $1 billion offered at the competitive auction.

The second auction will offer 28-day term deposits; the auction will be conducted on June 28 with settlement on July 1, and the deposits offered will mature on July 29. The third auction will offer 84-day term deposits; the auction will be conducted on July 12 with settlement on July 15, and the deposits offered will mature on October 7. The amount of term deposits offered along with other parameters for the second and third auctions will be announced at a later date.
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May 28, 2010
Federal Reserve Announces Clarifications to Regulation E and Regulation DD Final Rules Pertaining to Overdraft Services

The Federal Reserve Board announced final clarifications to aspects of its November 2009 final rule under Regulation E (Electronic Fund Transfers) and its December 2008 final rule under Regulation DD (Truth in Savings) pertaining to overdraft services.

The final clarifications address questions that have arisen and provide further guidance regarding compliance with certain aspects of the final overdraft rules. In particular, the final clarifications explain that the prohibition in Regulation E on assessing overdraft fees without the consumer's affirmative consent applies to all institutions, including those with a policy and practice of declining automated teller machine (ATM) and one-time debit card transactions when an account has insufficient funds. The final rules also make certain technical corrections and conforming amendments.
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May 24, 2010
Federal Reserve announces online database for consumer credit card agreements

Consumer credit card agreements from more than 300 credit card issuers are now online in a searchable database created by the Federal Reserve Board.

The agreements contain general credit terms and conditions along with pricing and fee information. The database will help consumers compare credit card agreements and find a card that best suits their personal finance needs.

The database (www.federalreserve.gov/creditcardagreements) will be updated quarterly; the next submission deadline is August 2, 2010.

Not all consumer credit card agreements are available in the database. For example, the Board's recent credit card rules exempted issuers with fewer than 10,000 open credit card accounts from submission because the overwhelming majority of credit card accounts are held by issuers that have more than 10,000 open accounts.

Additionally, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 requires credit card issuers to post account agreements on their websites as well as to make consumer's individual credit card agreement(s) available to them upon request.

More information on the Board's credit card rules can be found in the online publication "What You Need To Know: New Credit Card Rules," at: http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules.htm.
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May 11, 2010
Federal Reserve Releases Agreements with Foreign Central Banks to Reestablish Temporary Dollar Swap Facilities

The Federal Reserve publicly released the text of three agreements with foreign central banks to reestablish temporary dollar swap facilities and announced that, starting Thursday, it would disclose information weekly on use of the swap lines by each of the counterparty central banks.

The aim of both of these steps is to enhance transparency of the actions taken by the Federal Reserve to improve liquidity in global money markets and minimize the risk that strains abroad could spread to U.S. markets by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions.

The Federal Reserve Board and Federal Reserve Bank of New York posted on their websites the contracts detailing the swap arrangements with the Bank of England, the European Central Bank, and the Swiss National Bank. Agreements with the other foreign central banks—the Bank of Canada and the Bank of Japan—will be posted after they are finalized.

Starting Thursday, and weekly thereafter, swap activity by individual foreign central bank for the latest week, along with the total amount of swaps outstanding by individual central bank for the current and previous week, will be provided on the Federal Reserve Bank of New York's website. As was the case previously, swap activity will be reported on an aggregate basis each week in the Federal Reserve's H.4.1 statistical release and will be listed by individual central bank in the Federal Reserve System's Monthly Report on Credit and Liquidity Programs and the Balance Sheet.
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May 10, 2010
Board Authorizes Small-Value Offerings of Term Deposits Under the Term Deposit Facility

The Federal Reserve Board has authorized up to five small-value offerings of term deposits under the Term Deposit Facility (TDF) to be conducted in coming months. These small-value offerings are designed to ensure the effectiveness of TDF operations and to provide eligible institutions with an opportunity to gain familiarity with term deposit procedures. The development of the TDF and the small-value TDF offerings are a matter of prudent planning and have no implication for the near-term conduct of monetary policy.

The Board also approved a basic structure for the small-value TDF offerings. Similar to many money market instruments, the term deposits offered will be simple fixed-rate instruments with maturities of 84 days or less and will be issued primarily through competitive single-price auctions. TDF offerings will also include a noncompetitive bidding option to ensure access to term deposits for smaller institutions.

The first small-value TDF offering could be held as early as mid-June. More information about the timing and other details of these small-value TDF offerings will be announced at a later date.
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May 10, 2010
FOMC Authorizes Re-Establishment of Temporary U.S. Dollar Liquidity Swap Arrangement With the Bank of Japan

The Federal Open Market Committee has authorized re-establishment of its temporary U.S. dollar liquidity swap arrangement with the Bank of Japan. This arrangement is similar to the arrangements announced yesterday with the Bank of England, the European Central Bank, and the Swiss National Bank in that it will provide the Bank of Japan with the capacity to conduct tenders of U.S. dollars at fixed rates for the full allotment.

This arrangement, like those announced yesterday, has been authorized through January 2011.
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May 09, 2010
Central Banks Announce Re-establishment of Temporary U.S. Dollar Liquidity Swap Facilities

In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

Federal Reserve Actions
The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of U.S. dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously.

These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly.
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April 30, 2010
Federal Financial Regulatory Agencies Issue Final Guidance on Correspondent Concentration Risks

The federal financial regulatory agencies issued final guidance today to address the risks associated with funding and credit concentrations arising from correspondent relationships.

A correspondent relationship occurs when a financial organization provides another financial organization with services related to deposits, lending, or other activities.

The guidance highlights the need for institutions to identify, monitor, and manage correspondent concentration risk on a standalone and organization-wide basis. The guidance also reinforces the supervisory view that financial institutions should perform appropriate due diligence on all credit exposures to, and funding transactions with, other financial institutions as part of their risk management policies and procedures. The guidance does not supplant or amend applicable regulations such as Limitations on Interbank Liabilities (Regulation F).
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April 30, 2010
Federal Reserve Board Approves Amendments to Regulation D Authorizing Reserve Banks to Offer Term Deposits

The Federal Reserve Board has approved amendments to Regulation D (Reserve Requirements of Depository Institutions) authorizing the Reserve Banks to offer term deposits to institutions that are eligible to receive earnings on their balances at Reserve Banks. These amendments incorporate public comments on the proposed amendments to Regulation D that were announced on December 28, 2009.

Term deposits, which are deposits with specified maturity dates that are held by eligible institutions at Reserve Banks, will be offered through a Term Deposit Facility (TDF). Term deposits will be one of several tools that the Federal Reserve could employ to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy. The development of the TDF is a matter of prudent planning and has no implication for the near-term conduct of monetary policy.

The amendments approved by the Board are a necessary step in the implementation of the TDF. As noted in the attached Federal Register notice, the Federal Reserve anticipates that it will conduct small-value offerings of term deposits under the TDF in coming months to ensure the effective operation of the TDF and to help eligible institutions to become familiar with the term-deposit program. More detailed information about the structure and operation of the TDF, including information on the steps necessary for eligible institutions to participate in the program, will be provided later.

The amendments will be effective 30 days after publication in the Federal Register, which is expected shortly.
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April 28, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve. Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities; it closed on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee's flexibility to begin raising rates modestly.


March 23, 2010
Federal Reserve announces final rules to restrict fees and expiration dates on gift cards

The Federal Reserve Board announced final rules to restrict the fees and expiration dates that may apply to gift cards. The rules protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated.

The final rules prohibit dormancy, inactivity, and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board's rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The final rules are issued under Regulation E to implement the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The final rules are effective August 22, 2010.
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March 17, 2010
Federal Banking Agencies Issue Policy Statement on Funding and Liquidity Risk Management

The federal banking agencies, in conjunction with the Conference of State Bank Supervisors (CSBS), released a policy statement on their expectations for sound funding and liquidity risk management practices. This policy statement, adopted by each of the agencies, summarizes the principles of sound liquidity risk management issued previously and, when appropriate, supplements them with the "Principles for Sound Liquidity Risk Management and Supervision" issued in September 2008 by the Basel Committee on Banking Supervision.

Given the recent market turmoil, the agencies are reiterating the importance of effective liquidity risk management for the safety and soundness of financial institutions. This policy statement emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well-developed contingency funding plan as primary tools for measuring and managing liquidity risk. The agencies expect each financial institution to manage funding and liquidity risk using processes and systems that are commensurate with the institution's complexity, risk profile, and scope of operations.
Press Release


March 16, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.


March 09, 2010
Federal Reserve Announces Results of Auction of $25 Billion in 28-Day Credit Held on March 8, 2010

On March 8, 2010, the Federal Reserve conducted an auction of $25 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 0.500 percent
   
Total propositions submitted: $3.410 billion
Total propositions accepted: $3.410 billion
Bid/cover ratio: 0.14
   
Number of bidders: 53

The awarded loans will settle on March 11, 2010, and will mature on April 8, 2010. The stop-out rate shown above will apply to all awarded loans.

Institutions that submitted winning bids will be contacted by their respective Reserve Banks by 11:30 a.m. EST on March 9, 2010. Participants have until 12:30 p.m. EST on March 9, 2010, to inform their local Reserve Bank of any error.


March 08, 2010
Federal Reserve Offers $25 Billion in 28-Day Credit Through Its Term Auction Facility

On March 8, 2010, the Federal Reserve will offer $25 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed below; the auction will be conducted as specified in this announcement, Regulation A, and the terms and conditions of the Term Auction Facility (www.federalreserve.gov/monetarypolicy/taf.htm). As the Federal Reserve previously announced, today's auction is the final TAF auction, and the minimum bid rate has been increased by 1/4 percentage point to 1/2 percent, in line with the recent increase in the primary credit rate.

Description of Offering and Auction Parameters

Offering Amount: $25 billion
Term: 28-day loan
Bid Submission Date: March 8, 2010
Opening Time: 11:00 a.m. EST
Closing Time: 12:30 p.m. EST
Notification Date: March 9, 2010
Settlement Date: March 11, 2010
Maturity Date: April 8, 2010
Minimum Bid Amount (per bid): $5 million
Bid Increment: $100,000
Maximum Bid Amount (per institution): $2.5 billion (10% of Offering Amount)
Minimum Bid Rate: 0.50 percent
Incremental Bid Rate: 0.001 percent
Minimum Award: $10,000
Maximum Award: $2.5 billion (10% of Offering Amount)

Submission of Bids
Participants must submit bids by phone to their local Reserve Bank between the opening time and closing time on the bid submission date.

Notification
Summary auction results will be published on the website of the Board of Governors of the Federal Reserve System (www.federalreserve.gov/monetarypolicy/taf.htm) at approximately 10:00 a.m. EST on the notification date. Between 10:00 a.m. and 11:30 a.m. EST on the notification date, Reserve Banks will notify individual institutions in their districts that have submitted winning bids of their awards. Participants have until 12:30 p.m. EST on the notification date to inform their local Reserve Bank of any error.

Rounding Convention
Pro rata awards will be rounded to multiples of $10,000. Normal rounding convention will be used, except that awards under $10,000 will be rounded to $10,000.


March 03, 2010
Federal Reserve announces proposed rules to protect credit card users from certain practices

The Federal Reserve Board on Wednesday proposed a rule amending Regulation Z (Truth in Lending) to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider increases in interest rates.

"This proposal addresses two key costs of using a credit card--fees and interest rates," said Federal Reserve Governor Elizabeth A. Duke. "The rule would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to reevaluate rate increases imposed since the beginning of last year."

Among other things, the proposed rule would:

  • Prohibit credit card issuers from charging penalty fees (including late payment fees and fees for exceeding the credit limit) that exceed the dollar amount associated with the consumer's violation of the account terms. For example, card issuers would no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee could not exceed $20.
  • Ban inactivity fees, such as fees based on the consumer's failure to use the account to make new purchases.
  • Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
  • Require credit card issuers to inform consumers of the reasons for increases in rates.
  • Require issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The proposed rule represents the third stage of the Federal Reserve's implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009. The provisions of the Credit Card Act addressed in this proposal will go into effect on August 22, 2010. In July 2009, the Board issued a rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In January 2010, the Board issued a rule to implement the provisions of the Credit Card Act that went into effect on February 22, 2010.

The notice that will be published in the Federal Register is attached. Comments on the proposal must be submitted within 30 days after publication in the Federal Register, which is expected shortly.
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March 01, 2010
Vice Chairman Donald L. Kohn resigns from Board of Governors of the Federal Reserve System, effective June 23, 2010

Donald L. Kohn submitted his intent to resign Monday as a member of the Board of Governors of the Federal Reserve System, effective at the expiration of his term as Vice Chairman on June 23, 2010.

Mr. Kohn, who has been a member of the Board since August 2002 and served as its Vice Chairman since June 2006, submitted his letter to President Obama.

"The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service," Federal Reserve Chairman Ben S. Bernanke said. "Most recently, he brought his deep knowledge, experience, and wisdom to bear in helping to coordinate the Federal Reserve's response to the economic and financial crisis. In addition, Don helped lead the stress tests of major financial institutions; he directed the Board's ongoing efforts to increase the transparency of the Federal Reserve; and he has been leading an international effort within the Bank for International Settlements to help central banks focus on key issues and responses to the crisis. On a personal note, I would like to express my deep appreciation for Don's friendship and counsel during some very difficult times. He will be greatly missed."

Dr. Kohn is a veteran of the Federal Reserve System. Before becoming a member of the Board, he served on its staff as Adviser to the Board for Monetary Policy (2001–02), Secretary of the Federal Open Market Committee (1987–2002), Director of the Division of Monetary Affairs (1987–2001), and Deputy Staff Director for Monetary and Financial Policy (1983–87). He also held several positions in the Board's Division of Research and Statistics: Associate Director (1981–83), Chief of Capital Markets (1978–81), and Economist (1975–78). Dr. Kohn began his career as a Financial Economist at the Federal Reserve Bank of Kansas City (1970–75).
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February 09, 2010
Federal Reserve Announces Results of Auction of $50 Billion in 28-Day Credit Held on February 8, 2010

On February 8, 2010, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 0.250 percent


Total propositions submitted: $15.426 billion
Total propositions accepted: $15.426 billion
Bid/cover ratio: 0.31


Number of bidders: 103

The awarded loans will settle on February 11, 2010, and will mature on March 11, 2010. The stop-out rate shown above will apply to all awarded loans.

Institutions that submitted winning bids will be contacted by their respective Reserve Banks by 11:30 a.m. EST on February 9, 2010. Participants have until 12:30 p.m. EST on February 9, 2010, to inform their local Reserve Bank of any error.


February 08, 2010
Federal Reserve Offers $50 Billion in 28-Day Credit Through Its Term Auction Facility

On February 8, 2010, the Federal Reserve will offer $50 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed below; the auction will be conducted as specified in this announcement, Regulation A, and the terms and conditions of the Term Auction Facility (www.federalreserve.gov/monetarypolicy/taf.htm).

Description of Offering and Auction Parameters

Offering Amount: $50 billion
Term: 28-day loan
Bid Submission Date: February 8, 2010
Opening Time: 11:00 a.m. EST
Closing Time: 12:30 p.m. EST
Notification Date: February 9, 2010
Settlement Date: February 11, 2010
Maturity Date: March 11, 2010
Minimum Bid Amount (per bid): $5 million
Bid Increment: $100,000
Maximum Bid Amount (per institution): $5 billion (10% of Offering Amount)
Minimum Bid Rate: 0.25 percent
Incremental Bid Rate: 0.001 percent
Minimum Award: $10,000
Maximum Award: $5 billion (10% of Offering Amount)

Submission of Bids
Participants must submit bids by phone to their local Reserve Bank between the opening time and closing time on the bid submission date.

Notification
Summary auction results will be published on the website of the Board of Governors of the Federal Reserve System (www.federalreserve.gov/monetarypolicy/taf.htm) at approximately 10:00 a.m. EST on the notification date. Between 10:00 a.m. and 11:30 a.m. EST on the notification date, Reserve Banks will notify individual institutions in their districts that have submitted winning bids of their awards. Participants have until 12:30 p.m. EST on the notification date to inform their local Reserve Bank of any error.

Rounding Convention
Pro rata awards will be rounded to multiples of $10,000. Normal rounding convention will be used, except that awards under $10,000 will be rounded to $10,000.


January 27, 2010
FOMC Statement

Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.


January 21, 2010
Agencies Issue Final Rule for Regulatory Capital Standards Related to Financial Accounting Standards Nos. 166 and 167

The federal banking and thrift regulatory agencies announced the final risk-based capital rule related to the Financial Accounting Standards Board's adoption of Statements of Financial Accounting Standards Nos. 166 and 167. These new accounting standards make substantive changes to how banking organizations account for many items, including securitized assets, that had been previously excluded from these organizations' balance sheets.

Banking organizations affected by the new accounting standards generally will be subject to higher risk-based regulatory capital requirements. The rule better aligns risk-based capital requirements with the actual risks of certain exposures. It also provides an optional phase-in for four quarters of the impact on risk-weighted assets and tier 2 capital resulting from a banking organization's implementation of the new accounting standards.

The final rule, issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, will take effect 60 days after publication in the Federal Register, which is expected shortly. Banking organizations may choose to comply with the final rule as of the beginning of their first annual reporting period after November 15, 2009.
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January 20, 2010
Federal Reserve Banks Announce New Studies to Examine Nation's Check and Electronic Payments Usage

The Federal Reserve Banks announced plans to conduct another series of studies to determine the current volume and composition of check and electronic payments in the United States. These studies will build on information gained from similar studies conducted by the Reserve Banks in 2001, 2004 and 2007.

The 2010 Federal Reserve Payments Study consists of three research efforts commissioned to estimate the annual number, dollar value and composition of retail noncash payments in the United States. Together, the studies will provide aggregate estimates and current trends in the use of noncash payment instruments by U.S. consumers and businesses. Previous studies have revealed significant changes in the U.S. payments system over time, including a continuing decline in the use of checks and growing use of electronic payments, such as automated clearinghouse, electronic banking transactions, credit cards, debit cards and stored value cards. The Federal Reserve will work with the Global Concepts office of McKinsey & Company to conduct this research study. Preliminary results should be released by late 2010.
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January 12, 2010
Federal Reserve Approves Final Rules to Protect Credit Card Users From a Number of Costly Practices

The Federal Reserve Board has approved a final rule amending Regulation Z (Truth in Lending) to protect consumers who use credit cards from a number of costly practices. Credit card issuers must comply with most aspects of the rule beginning on February 22.

Among other things, the rule will:

  • Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.
  • Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.
  • Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.
  • Limit the high fees associated with subprime credit cards.
  • Ban creditors from using the "two-cycle" billing method to impose interest charges.
  • Prohibit creditors from allocating payments in ways that maximize interest charges.

Consumers can learn more about changes to their credit card accounts by accessing a new online publication. "What You Need to Know: New Credit Card Rules." It explains key changes consumers can expect from their credit card companies as a result of the new rules. The Board plans to release additional "What You Need to Know" publications in conjunction with other major rulemakings.
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January 12, 2010
Reserve Bank Income and Expense Data and Transfers to the Treasury for 2009

The Federal Reserve announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009.

Under the Board's policy, the Reserve Banks are required to transfer their net income to the U.S. Treasury after providing for the payment of statutory dividends to member banks and equating surplus to paid-in capital. In 2009, statutory dividends totaled $1.4 billion and approximately $4.6 billion of earnings were used to equate surplus to paid-in capital.

The Federal Reserve Banks' 2009 net earnings were derived primarily from $46.1 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions.

Operating expenses of the twelve Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $3.4 billion in 2009. In addition, the interest paid to depository institutions on reserve balances totaled $2.2 billion. The Reserve Banks were assessed for Board expenditures, including the cost of new currency, totaling $0.9 billion.

The preliminary results include valuation adjustments through September 30 for loans and consolidated LLCs. The final results, which will be presented in the Reserve Banks' annual financial reports and the Board of Governors' Annual Report, will reflect valuation adjustments through December 31.
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January 12, 2010
Federal Reserve Announces Results of Auction of $75 Billion in 28-Day Credit Held on January 11, 2010

On January 11, 2010, the Federal Reserve conducted an auction of $75 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 0.250 percent
Total propositions submitted: $38.531 billion
Total propositions accepted: $38.531 billion
Bid/cover ratio: 0.51
Number of bidders: 121

The awarded loans will settle on January 14, 2010, and will mature on February 11, 2010. The stop-out rate shown above will apply to all awarded loans.

Institutions that submitted winning bids will be contacted by their respective Reserve Banks by 11:30 a.m. EST on January 12, 2010. Participants have until 12:30 p.m. EST on January 12, 2010, to inform their local Reserve Bank of any error.


January 11, 2010
Federal Reserve Offers $75 Billion in 28-Day Credit Through Its Term Auction Facility

On January 11, 2010, the Federal Reserve will offer $75 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed below; the auction will be conducted as specified in this announcement, Regulation A, and the terms and conditions of the Term Auction Facility (www.federalreserve.gov/monetarypolicy/taf.htm).

Description of Offering and Auction Parameters

Offering Amount: $75 billion
Term: 28-day loan
Bid Submission Date: January 11, 2010
  Opening Time: 11:00 a.m. EST
  Closing Time: 12:30 p.m. EST
Notification Date: January 12, 2010
Settlement Date: January 14, 2010
Maturity Date: February 11, 2010
Minimum Bid Amount (per bid): $5 million
Bid Increment: $100,000
Maximum Bid Amount (per institution): $7.5 billion (10% of Offering Amount)
Minimum Bid Rate: 0.25 percent
Incremental Bid Rate: 0.001 percent
Minimum Award: $10,000
Maximum Award: $7.5 billion (10% of Offering Amount)

Submission of Bids
Participants must submit bids by phone to their local Reserve Bank between the opening time and closing time on the bid submission date.

Notification
Summary auction results will be published on the website of the Board of Governors of the Federal Reserve System (www.federalreserve.gov/monetarypolicy/taf.htm) at approximately 10:00 a.m. EST on the notification date. Between 10:00 a.m. and 11:30 a.m. EST on the notification date, Reserve Banks will notify individual institutions in their districts that have submitted winning bids of their awards. Participants have until 12:30 p.m. EST on the notification date to inform their local Reserve Bank of any error.

Rounding Convention
Pro rata awards will be rounded to multiples of $10,000. Normal rounding convention will be used, except that awards under $10,000 will be rounded to $10,000.


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