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Record of Policy Actions of the Board of Governors
Regulation D
Reserve Requirements of Depository Institutions
[Docket No. R-1236] (37 KB PDF)
On October 4, 2005, the Board approved amendments to reflect the annual indexing of the low reserve tranche and of the reserve requirement exemption for use in 2006 reserve requirement calculations. The amendments increase the 3 percent low reserve tranche for net transaction accounts to $48.3 million (from $47.6 million in 2005) and the reserve requirement exemption to $7.8 million (from $7 million in 2005).
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Regulation E
Electronic Fund Transfers
[Docket Nos. R-1210, R-1234 (207 KB PDF), and R-1247] (144 KB PDF)
On December 30, 2005, the Board approved amendments to clarify the responsibilities of parties in transactions involving electronic check conversion and to require that consumers receive written notification in advance of these transactions. The Board also revised the regulation's official staff commentary to provide guidance on preauthorized transfers from consumers' accounts, error resolutions, and disclosures at ATMs. The amendments are effective February 9, 2006, and compliance is mandatory by January 1, 2007.
In addition, the Board approved an interim final rule with request for comment that applies the regulation to payroll card accounts established to distribute employee salaries, wages, or other compensation on a recurring basis. The interim final rule is effective July 1, 2007.
Votes for these actions: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Regulation H
Membership of State Banking Institutions in the Federal Reserve System
Regulation Y
Bank Holding Companies and Change in Bank Control
[Docket No. R-1193] (194 KB PDF)
On February 28, 2005, the Board approved amendments to the risk-based capital standards for bank holding companies to allow the continued inclusion of trust preferred securities in tier 1 capital, under stricter quantitative limits and qualitative standards. The amendments also revise (1) quantitative limits for the aggregate amount of trust preferred securities and other restricted core capital elements included in tier 1 capital and (2) qualitative standards for capital instruments included in regulatory capital. The amendments are effective April 11, 2005, with a transition period for the new quantitative limits ending March 31, 2009.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn.
[Docket No. OP-1155] (475 KB PDF)
On March 21, 2005, the Board, acting with the other federal banking and thrift regulatory agencies, approved the Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and for Customer Notice. The guidance, which builds on the Interagency Guidelines Establishing Information Security Standards, provides that financial institutions should implement a response program for security breaches involving customer information. As part of their response program, institutions should notify their customers when they determine that misuse of customer information has occurred or is reasonably possible. The guidance is effective March 29, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn.
Regulation J
Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire
Regulation CC
Availability of Funds and Collection of Checks
[Docket No. R-1226] (72 KB PDF)
On November 21, 2005, the Board approved amendments defining "remotely created checks"--checks created by a seller or creditor with the account holder's authorization but without the account holder's handwritten signature on the check. Such checks are typically used to purchase goods or pay bills by telephone. The Board also approved amendments shifting liability for unauthorized remotely created checks from the paying bank to the depositary bank (in most cases the bank for the seller or creditor that created and deposited the check). The amendments are effective July 1, 2006.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies and Olson. Absent and not voting: Governor Kohn.
Regulation V
Fair Credit Reporting
Regulation FF
Obtaining and Using Medical Information in Connection with Credit
[Docket No. R-1188] (300 KB PDF)
On November 14, 2005, the Board, acting with the other federal bank, thrift, and credit union regulatory agencies, approved interagency rules implementing restrictions in the Fair and Accurate Credit Transactions Act on creditors' use and sharing of medical information. The rules permit creditors (1) to obtain and use consumers' medical information in connection with credit determinations when necessary and appropriate for legitimate purposes, consistent with congressional intent to restrict the use of such information for inappropriate purposes, and (2) to share medical information among affiliates under limited circumstances without becoming credit reporting agencies. The amendments, which are substantially similar to interim final rules published by the agencies on June 10, 2005, are effective April 1, 2006.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Regulation BB
Community Reinvestment
[Docket No. R-1205]
On March 2, 2005, the Board, acting with the other federal bank and thrift regulatory agencies, approved interagency amendments to conform with changes by the Office of Management and Budget in the standards for defining metropolitan and micropolitan statistical areas, by the U.S. Bureau of the Census in designating census tracts, and by the Board in Regulation C (Home Mortgage Disclosure). The amendments, which are identical to the interim final rules published by the agencies on July 8, 2004, are effective March 28, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn.
[Docket No. R-1225] (1.2 MB PDF)
On July 18, 2005, the Board approved amendments under the Community Reinvestment Act (CRA) to reduce regulatory burden on intermediate small banks (banks with assets between $250 million and $1 billion) and to more effectively encourage bank investment in community development. The amendments exempt intermediate small banks from certain data collection and reporting requirements and provide for the evaluation of those banks' CRA performance under the small-bank lending test and a new, flexible community development test. The amendments also expand the definition of "community development" to include bank activities in underserved or distressed middle-income rural areas as well as in designated disaster areas. Finally, they clarify the effect of illegal credit practices on a bank's CRA performance rating. The amendments, which are identical to amendments to their regulations adopted by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, are effective September 1, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, and Kohn.
Regulation DD
Truth in Savings
[Docket No. R-1197] (234 KB PDF)
On May 19, 2005, the Board approved amendments to the regulation and its official staff commentary to improve the uniformity and adequacy of information provided to consumers when they overdraw their deposit accounts. The amendments, in part, address a specific service, commonly referred to as "bounced-check protection" or "courtesy overdraft protection," that pays checks and allows other transactions in accounts that have insufficient funds. They also (1) expand the regulation's prohibition against misleading advertisements, to address concerns about the marketing of this service, and (2) require additional disclosures about fees and other terms for overdraft services in such materials as advertisements and periodic account statements. The amendments are effective July 1, 2006.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn.
Post-Employment Restrictions for Senior Examiners
[Docket No. R-1230] (193 KB PDF)
On November 10, 2005, the Board, acting with the other federal bank and thrift regulatory agencies, approved new interagency rules implementing post-employment restrictions on certain senior examiners contained in the Intelligence Reform and Terrorism Prevention Act. The rules provide that a senior examiner employed by one of the agencies or a Federal Reserve Bank may not knowingly accept compensation, as an employee, officer, director, or consultant, from a depository institution or holding company that he or she examined, or from certain related entities, for one year after leaving the employment of the agency or Reserve Bank. The rules are effective December 17, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Rules Regarding Equal Opportunity
[Docket No. OP-1239] (71 KB PDF)
On November 2, 2005, the Board approved an interim final rule with request for comment to clarify the limitations on access to sensitive information by employees who are not U.S. citizens. The interim final rule is effective November 8, 2005.
Votes for this action: Chairman Greenpan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Policy Statements and Other Actions
Overdraft Protection Programs
[Docket No. OP-1198] (227 KB PDF)
On February 17, 2005, the Board, acting with the other federal bank and credit union regulatory agencies, approved joint guidance on overdraft protection programs to help depository institutions in the disclosure and administration of their overdraft-protection services.
Votes for this action: Chairman Greenspan and Governors Gramlich, Bies, Olson, Bernanke, and Kohn. Absent and not voting: Vice Chairman Ferguson.
Reserve Bank Withdrawal from Noncash Collection Service
[Docket No. OP-1214] (112 KB PDF)
On February 28, 2005, the Board approved the withdrawal of the Federal Reserve Banks from the noncash collection service, which involves collecting and processing definitive municipal securities issued by state and local governments. The service was terminated in light of declining volume, expected under-recovery of costs in future years, and the availability of alternative service providers and substitutable services. Withdrawal is effective December 30, 2005; items will be accepted for deposit until September 30.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn.
Information Security Standards
[Interagency Compliance Guide] (3.3 MB PDF)
On November 29, 2005, the Board, acting with the other federal bank and thrift regulatory agencies, approved publication of a Small-Entity Compliance Guide to help financial institutions comply with the Interagency Guidelines Establishing Information Security Standards. The guide summarizes in plain language the obligations of financial institutions to protect customer information and illustrates how certain provisions of the interagency security guidelines apply in specific situations.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn.
Discount Rates in 2005
Under the Federal Reserve Act, the boards of directors of the Federal Reserve Banks must establish rates on loans to depository institutions at least every fourteen days, subject to review and determination by the Board of Governors.
Primary Credit Rate
Primary credit is the Federal Reserve's main lending program. Primary credit is made available with minimal administration for very short terms as a backup source of liquidity to depository institutions that, in the judgment of the lending Federal Reserve Bank, are in generally sound financial condition. Primary credit is extended at a rate above the federal funds rate target set by the Federal Open Market Committee (FOMC).
During 2005, the Board approved eight increases in the primary credit rate, bringing the rate from 3-1/4 percent to 5-1/4 percent. The Board reached its determinations on the primary credit rate recommendations of the Reserve Bank boards of directors in conjunction with the FOMC's decisions to raise the target federal funds rate from 2-1/4 percent to 4-1/4 percent and related economic and financial developments. The U.S. economy delivered a solid performance in 2005 despite a further sharp increase in energy prices and devastating hurricanes. The increase in GDP in 2005 was sufficient to further reduce slack in labor and product markets. Core consumer price inflation picked up early in the year, but it subsequently eased and totaled less than 2 percent over the year as a whole. In light of these conditions, the Board and FOMC raised the structure of policy rates at a measured pace. Monetary policy developments are reviewed more fully in other parts of this report (see the section "Monetary Policy and Economic Developments" and the minutes of FOMC meetings held in 2005).
Secondary and Seasonal Credit Rates
Secondary credit is available in appropriate circumstances to depository institutions that do not qualify for primary credit. The secondary credit rate is set at a spread above the primary credit rate. In 2005, the spread was set at 50 basis points.
Seasonal credit is available to smaller depository institutions to meet liquidity needs that arise from regular swings in their loans and deposits. The rate on seasonal credit is calculated every two weeks as an average of selected money-market yields, typically resulting in a rate close to the federal funds rate target.
At year-end, the secondary and seasonal credit rates were 5-3/4 percent and 4.35 percent, respectively.
Votes on Discount Rate Changes
About every two weeks during 2005, the Board approved proposals by the twelve Reserve Banks to maintain the formulas for computing the secondary and seasonal credit rates. Details on the eight actions by the Board to approve changes in the primary credit rate are provided below.
February 2, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 3-1/2 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective February 3, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn. Votes against this action: None.
March 22, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 3-3/4 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective March 23, 2005. The Board also approved identical actions subsequently taken by the directors of the Federal Reserve Banks of Kansas City, effective March 23, 2005, and Dallas, effective March 24, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, Bernanke, and Kohn. Votes against this action: None.
May 3, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 4 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective May 4, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, and Kohn. Votes against this action: None.
June 30, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 4-1/4 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective July 1, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Gramlich, Bies, Olson, and Kohn. Votes against this action: None.
August 9, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 4-1/2 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective August 10, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn. Votes against this action: None.
September 20, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Chicago, Minneapolis, Kansas City, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 4-3/4 percent. The Board also approved identical actions subsequently taken by the directors of the Federal Reserve Banks of St. Louis, effective September 21, 2005, and Cleveland, Atlanta, and Dallas, effective September 22, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn. Votes against this action: None.
November 1, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 5 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective November 2, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn. Votes against this action: None.
December 13, 2005. Effective this date, the Board approved actions taken by the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco to raise the rate on discounts and advances under the primary credit program by 1/4 percentage point, to 5-1/4 percent. The same increase was approved for the Federal Reserve Bank of St. Louis, effective December 14, 2005.
Votes for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Bies, Olson, and Kohn. Votes against this action: None.
Note: Full texts of the policy actions are available via the " Reading Rooms " on the Board's FOIA web page and on request from the Board's Freedom of Information Office.