Financial Update (January-March 1997)

The Docket

The following is a summary of recent Federal Reserve actions. To obtain a copy of any of these announcements, contact the Atlanta Fed Service Department at (404) 498-8474. Please give the docket number or circular letter number (if applicable) when calling to request a copy.

On Feb. 20, the Federal Reserve Board announced revisions to Regulation Y that are intended to improve the competitiveness of bank holding companies by eliminating unnecessary regulatory burden and operating restrictions and by streamlining the application and notice process. The revisions are effective April 21, 1997. The revisions include:

  • a streamlined and expedited review process for bank and nonbanking proposals by well-run bank holding companies;
  • reorganizing and expanding the regulatory list of nonbanking activities and removing a number of restrictions on those activities that are outmoded, have been superseded by Board order, or are unnecessary restrictions that would not apply to insured banks that conduct the same activity;
  • amendments to the tying restrictions, including removal of the regulatory extensions of those restrictions to bank holding companies and their nonbank subsidiaries; and
  • other changes to eliminate unnecessary regulatory burden and to streamline and modernize Regulation Y, including changes to the provisions implementing the Change in Bank Control Act and section 914 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
This final rule reflects a number of revisions in response to concerns, suggestions, and information provided by commenters. In particular, the Board has changed in several respects the procedure governing bank acquisitions and has adopted a number of measures designed to broaden and improve public notice of acquisition proposals. The changes focus on assuring that interested persons will have a meaningful opportunity to provide the Board with information regarding acquisition proposals. 12 CFR Part 225 [Regulation Y; Docket Nos. R-0935; R-0936]: Bank Holding Companies and Change in Bank Control (Regulation Y).

The Federal Reserve Board has published an interim rule that amends its Regulation C, Home Mortgage Disclosure. The amendment increases the asset-size exemption threshold for depository institutions from $10 million to $28 million. The rule is effective as of Jan. 1, 1997. Circular letter: 515-97.

The Office of Foreign Assets Control (OFAC) has published a notice regarding an Executive Order blocking assets of Narcotics Traffickers and a listing of Specially Designated Individuals and Entities, updated as of Jan. 15, 1997. Circular letter: 104-97.

The Board has made available for public inspection transcripts of meetings of the Federal Open Market Committee held in 1991. The package includes transcripts of eight regularly scheduled meetings and eleven telephone conference calls. Copies of the transcripts are available from the Board's Freedom of Information Office, Room MP-500, Board of Governors of the Federal Reserve System, Washington, D.C. 20551 (telephone 202-452-3684), or from your local Federal Reserve library.

The Federal Financial Institutions Examination Council (FFIEC) has issued interim guidance regarding the applicability of FAS 125, effective Jan. 1, 1997, to the treatment of servicing assets and related interest-only strips receivable for regulatory accounting purposes. Circular letter 507-97 and press release dated Dec. 18, 1996.

On Jan. 2, the Federal Reserve Board announced an increase in the amount of revenue that a section 20 subsidiary may derive from underwriting and dealing in securities from 10 percent to 25 percent of its total revenue. The increase is effective March 6, 1997. Section 20 subsidiaries will therefore be allowed to employ the 25 percent limit for the first quarter of 1997. Circular letter: 101-97.

On Jan. 24, the Federal Reserve Board, along with the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, issued an interim rule on a proposal to expand the examination frequency cycle for certain financial institutions. The interim rule became effective Jan. 30, 1997. Implementation of this ruling will expand the eligibility for the 18-month examination cycle for "2"-rated, well-managed banks from the current asset size limit of $100 million to a new limit of $250 million. The ruling will implement section 306 of the Riegle Community Development and Regulatory Improvement Act of 1994 and section 2221 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996. Circular letter: 105-97.

On Jan. 8, the Federal Reserve Board announced that it is eliminating immediately a firewall requiring bank holding companies to seek approval prior to providing funds to their section 20 companies. Federal Reserve System [Docket No. R-0958]: Review of Restrictions in the Board's Section 20 Orders, Firewall 2 (Prior approval requirement for investments in subsidiary).

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