Financial Update (Third Quarter 2009)

Policy Report to Congress, Guidance on Liquidity Risk, Reg Z Amendments Among Recent Federal Reserve Actions

Fed Actions update graphicThe Federal Reserve chairman's testimony before Congress, proposed guidance on sound practices for the management of funding and liquidity risks, the publication of the minutes from the most recent meeting of the Federal Open Market Committee, and the approval of an interim final rule on Regulation Z (the Truth in Lending Act) are among recent actions taken by the Federal Reserve.

  • In late July, Federal Reserve Chairman Ben Bernanke gave his semiannual monetary policy report to Congress. In his remarks, he discussed how the Fed's actions—and those of other central banks—worked to avert an even more severe economic collapse. "Aggressive policy actions taken around the world last fall may well have averted the collapse of the global financial system, an event that would have had extremely adverse and protracted consequences for the world economy," he said.
    Transcript of Chairman Bernanke's report to Congress off-site image
    Federal Register notice about proposed guidance on funding and liquidity risk management (PDF) off-site image
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    Minutes from the FOMC's June 23–24 meeting (PDF) off-site image
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    Information about the amendment to Regulation Z off-site image
    Notice about Regulation Z amendment to be published in the Federal Register off-site image
    Highlights of proposed rules regarding home-secured credit off-site image
    Key questions to ask about HELOCs off-site image

  • On June 30, the federal bank, thrift, and credit union regulatory agencies began seeking comment on proposed guidance on funding and liquidity risk management. The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration are issuing this guidance to communicate consistent expectations on sound practices for the management of funding and liquidity risks and to strengthen liquidity risk–management practices. The agencies are requesting comment on all aspects of the proposed guidance.

  • The Federal Reserve Board and the Federal Open Market Committee (FOMC) recently released the minutes of the FOMC meeting held on June 23–24 and of the conference call held on June 3. A summary of economic projections made by Federal Reserve Board members and Reserve Bank presidents for the June 23–24 meeting is also included as an addendum to these minutes.

  • The Federal Reserve Board has approved an interim final rule amending Regulation Z (the Truth in Lending Act) to require creditors to increase the amount of notice consumers receive before the rate on a credit card account is increased or a significant change is made to the account's terms. The amendment also allows consumers to reject such increases and changes by informing the creditor before the increase or change goes into effect.

In other Reg Z news, in late July the Fed proposed significant changes to Reg Z intended to improve the disclosures consumers receive in connection with closed-end mortgages and home equity lines of credit (HELOCs). These changes, which are open for public comment, reflect the result of consumer testing conducted as part of the Board's comprehensive review of the rules for credit secured by homes. The amendments would also provide new consumer protections for all home-secured credit.

July 30, 2009