Financial Update (October-December 1996)

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 Oct. 10 the Board of Governors adopted a final rule to simplify and clarify the disclosures for car leasing and other types of consumer lease transactions required by Regulation M, Consumer Leasing. The new version, which carries out the provisions of the Consumer Leasing Act, is effective Oct. 1, 1997, but voluntary compliance is acceptable at any time prior to that date. Circular letter: 555-96.

On Nov. 8 the Board of Governors announced the amendment of three of the prudential limitations established in its decisions under the Bank Holding Company Act and the Glass Steagall Act permitting a nonbank subsidiary of a bank holding company to underwrite and deal in securities. The Board is easing or eliminating the following restrictions (or firewalls) on these so-called section 20 subsidiaries: the prohibition on director, officer, and employee interlocks between a section 20 subsidiary and its affiliated banks or thrifts (the interlocks restriction); the restriction on a bank or thrift acting as agent for, or engaging in marketing activities on behalf of, an affiliated section 20 subsidiary (the cross-marketing restriction); and the restriction on the purchase and sale of financial assets between a section 20 subsidiary and its affiliated bank or thrift (the financial assets restriction). The amendments are effective Jan. 7, 1997. Circular letter: 129-96.

On Oct. 30 the Board of Governors approved Dec. 8, 1997 as the effective date to open the Fedwire funds transfer service at 12:30 a.m. ET. The current operating hours of the Fedwire funds transfer service are 8:30 a.m. to 6:30 p.m. ET. The closing time of the Fedwire funds transfer service remains unchanged.

Previously, the Board determined that expansion of the Fedwire funds transfer service to 18 hours per day could be a useful component of private-sector initiatives to reduce settlement risk in the foreign exchange markets and to eliminate an operational barrier to potentially important innovation in privately provided payment and settlement services. Participation in the earlier Fedwire operating hours is voluntary for depository institutions.

In conjunction with the expansion of the Fedwire operating hours, the Board also approved a modification to the daylight overdraft posting times that fixes the posting time at 8:30 a.m. ET for certain nonwire transactions that are tied to the current opening time of the Fedwire funds transfer service.

On Nov. 1 the Board of Governors announced approval of the use of certain cumulative preferred stock instruments in tier 1 capital for bank holding companies. These instruments are issued out of a special-purpose subsidiary that is wholly owned by the parent company. The proceeds are lent to the parent in the form of a very long-term, deeply subordinated note. The Board has defined the parameters for when such instruments may be used as tier 1 capital. Circular letter: 127-96.

On Nov. 1 the Federal Financial Institutions Examination Council (FFIEC) announced publication of Interagency Questions and Answers Regarding Community Reinvestment, a comprehensive reference document on the Community Reinvestment Act (CRA) regulation. Circular letter: 128-96.

On Nov. 4 the Board of Governors announced the appointment of chairmen and deputy chairmen of the 12 Federal Reserve Banks for 1997. The Board renamed as Atlanta Fed chairman Hugh M. Brown, president and chief executive officer of BAMSI Inc., an engineering and technical services company located in Titusville, Fla. David R. Jones, president and chief executive officer of AGL in Atlanta, Ga., was named deputy chairman.

On Nov. 6 the Atlanta Fed announced the results of the election for directors to succeed James B. Williams and André M. Rubenstein, whose terms of office ended on Dec. 31, 1996. The results are as follows: Howard L. McMillan Jr., president and chief operating officer, Deposit Guaranty National Bank, Jackson, Miss., has been elected as a Class A director by member banks in Group 1. Juanita P. Baranco, executive vice president and co-owner, Baranco Pontiac GMC, Lilburn, Ga., has been elected as a Class B director by member banks in Group 2. McMillan and Baranco were elected for three-year terms beginning Jan. 1, 1997. Circular letter: 131-96.

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