Record of Policy Actions of the Board of Governors

Policy actions of the Board of Governors are presented pursuant to section 10 of the Federal Reserve Act. That section provides that the Board shall keep a record of all questions of policy determined by the Board and shall include in its annual report to Congress a full account of such actions. This chapter provides a summary of policy actions in 2011, as implemented through (1) rules and regulations, (2) policy statements and other actions, and (3) discount rates for depository institutions. Policy actions were approved by all Board members in office, unless indicated otherwise.¹ More information on the actions is available from the "Reading Rooms" on the Board's Freedom of Information (FOI) Act web page or on request from the Board's FOI Office.

For information on Federal Open Market Committee policy actions relating to open market operations, see "Minutes of Federal Open Market Committee Meetings."

Rules and Regulations

Regulation B (Equal Credit Opportunity)

On September 14, 2011, the Board approved a final rule (Docket No. R-1426) to specify that motor vehicle dealers temporarily are not required to comply with new requirements for data collection in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).² Under the act, creditors are required to collect information about credit applications made by women- or minority-owned businesses and by small businesses. The Consumer Financial Protection Bureau (CFPB) will implement this provision for all creditors except certain motor vehicle dealers subject to the Board's jurisdiction. The CFPB had previously announced that creditors were not obligated to comply with the data collection requirements until implementing rules were issued. Therefore, the Board amended Regulation B to apply the same approach to motor vehicle dealers. The final rule is effective September 26, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation B (Equal Credit Opportunity) and Regulation V (Fair Credit Reporting)

On July 1, 2011, the Board, acting with the Federal Trade Commission, approved final rules (Docket Nos. R-1408 and R-1407) to implement the credit score disclosure requirements of the Dodd-Frank Act.³ Under the act, creditors are required to disclose credit scores and related information to consumers if their credit scores are used in setting credit terms or taking an adverse action. Regulation V is amended to revise the content requirements for risk-based pricing notices, and Regulations V and B are amended to add or revise related model forms or notices that reflect the new disclosure requirements. The final rules are effective August 15, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation H (Membership of State Banking Institutions in the Federal Reserve System) and Regulation Y (Bank Holding Companies and Change in Bank Control)

On June 9, 2011, the Board, acting with the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC), approved a final rule (Docket No. R-1402) amending their (1) advanced approaches risk-based capital rules to establish a floor for the capital requirements applicable to the largest and internationally active banking organizations and (2) general risk-based capital rules to provide limited flexibility to establish capital requirements for certain low-risk assets generally not held by insured depository institutions.⁴ The final rule is consistent with provisions of the Dodd-Frank Act and is effective July 28, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation M (Consumer Leasing) and Regulation Z (Truth in Lending)

On March 22, 2011, the Board approved final rules (Docket Nos. R-1400 and R-1399) that increase the coverage of consumer protection regulations to credit transactions and leases of higher dollar amounts.⁵ Specifically, the rules increase the thresholds for exempt consumer credit transactions and consumer leases (including automobile leases) from $25,000 to $50,000, in accordance with the Dodd-Frank Act. This amount will be adjusted annually to reflect increases in the consumer price index. Private education loans and loans secured by real property (such as mortgages) remain subject to certain disclosure requirements and prohibitions regardless of the loan amount. The final rules are effective July 21, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin. Absent and not voting: Governor Warsh.

On June 11, 2011, the Board approved final rules (Docket Nos. R-1423 and R-1424) to increase the dollar threshold for exempt consumer credit and lease transactions from $50,000 to $51,800.⁶ The new threshold reflects the annual percentage increase in the consumer price index, in accordance with the Dodd-Frank Act. The final rules are effective January 1, 2012.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation Q (Prohibition Against the Payment of Interest on Demand Deposits)

On July 12, 2011, the Board approved a final rule (Docket No. R-1413) to repeal Regulation Q.⁷ Regulation Q implemented section 19(i) of the Federal Reserve Act, which prohibited the payment of interest on demand deposits by institutions that are members of the Federal Reserve System. The Dodd-Frank Act repealed section 19(i) of the Federal Reserve Act, effective July 21, 2011. Accordingly, the Board's final rule implements the repeal of section 19(i). The final rule also rescinds the Board's published interpretations of Regulation Q and removes references to Regulation Q in other regulations, such as in Regulation D (Reserve Requirements of Depository Institutions) and Regulation DD (Truth in Savings). The final rule is effective July 21, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation Y (Bank Holding Companies and Change in Bank Control)

On February 7, 2011, the Board approved a final rule (Docket No. R-1397) to implement the provisions of section 619 of the Dodd-Frank Act that grant banking entities a period of time to conform their activities and investments with the prohibitions and restrictions on proprietary trading or hedge fund or private equity fund activities imposed by the section (the so-called Volcker Rule).⁸ The act generally provides these institutions with a two-year conformance period, which the Board may extend under certain conditions. The rule is effective April 1, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Warsh, Duke, Tarullo, and Raskin.

On June 11, 2011, the Board approved the following amendments (Docket No. R-1356) to its capital adequacy guidelines for bank holding companies: (1) a final rule to permit bank holding companies that are organized as S-corporations or in mutual form to include in tier 1 capital subordinated debt issued to the Department of the Treasury (Treasury) under the Troubled Asset Relief Program and to allow those companies to exclude such debt for purposes of certain provisions of the Board's Small Bank Holding Company Policy Statement and (2) an interim final rule with request for comment to allow small bank holding companies that are organized as S-corporations or in mutual form to exclude subordinated debt issued to Treasury under the Small Business Lending Fund from treatment as "debt" for purposes of certain provisions of the policy statement.⁹ The final rule and interim final rule are effective June 21, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

On November 17, 2011, the Board approved a final rule (Docket No. R-1425) to require large bank holding companies (those with $50 billion or more of total consolidated assets) to submit capital plans to the Federal Reserve annually and to require these companies to obtain approval under certain circumstances before making a capital distribution.¹⁰ Under the final rule, the Federal Reserve evaluates institutions' capital adequacy, internal capital adequacy processes, and plans to make capital distributions, including dividend payments or stock repurchases. The Federal Reserve approves capital distributions only when a company's capital plan is satisfactory and the company can demonstrate sufficient financial strength to operate successfully as a financial intermediary under stress scenarios, even after making the desired distribution. The final rule is effective December 30, 2011, and institutions are required to submit their initial capital plans by January 9, 2012.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation Z (Truth in Lending)

On January 28, 2011, the Board approved an announcement that it does not expect to finalize three pending mortgage rulemakings (Docket Nos. R-1366, R-1367, and R-1390) before the transfer of rulemaking authority to the CFPB in July 2011.¹¹ The proposals had been issued in 2009 and 2010 as part of the Board's comprehensive review of its mortgage regulations under the Truth in Lending Act.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Warsh, Duke, Tarullo, and Raskin.

On February 22, 2011, the Board approved a final rule (Docket No. R-1392) to increase from 1.5 percent to 2.5 percent the annual percentage rate 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, in accordance with the Dodd-Frank Act.¹² Jumbo loans are loans exceeding the conforming-loan size limit for purchase by Freddie Mac. The rule is effective for covered loans for which the creditor receives an application on or after April 1, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Warsh, Duke, Tarullo, and Raskin.

On March 16, 2011, the Board approved a final rule (Docket No. R-1393) to clarify aspects of Board rules for open-end (not home-secured) credit plans that were issued in 2010 to implement the Credit Card Accountability Responsibility and Disclosure Act.¹³ Among other provisions, the rule states that credit card applications cannot request a consumer's "household income" because that term is too vague to allow credit card issuers to properly evaluate a consumer's ability to make payments on the account, which issuers are required to do under the act. Instead, issuers must consider a consumer's individual income or salary. The final rule is effective October 1, 2011.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke and Raskin. Absent and not voting: Governors Warsh and Tarullo.

Regulation II (Debit Card Interchange Fees and Routing)

On June 29, 2011, the Board approved a final rule (Docket No. R-1404) to implement provisions of the Dodd-Frank Act that require the Board to establish standards for assessing whether a debit card interchange fee is reasonable and proportional to an issuer's costs and to prohibit network-exclusivity arrangements and routing restrictions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. The Board also approved an interim final rule (Docket No. R-1404) with request for comment that permits an upward adjustment of no more than 1 cent to an issuer's debit card interchange fee if the issuer meets the rule's fraud-prevention standards.¹⁴ The Board will reevaluate this adjustment in light of comments received.

In accordance with the act, the interchange fee standards in the final rule do not apply to issuers that have total consolidated assets of less than $10 billion, debit cards issued pursuant to government-administered payment programs, and general-use reloadable prepaid cards. In addition, the final rule prohibits issuers and networks from (1) directly or indirectly restricting the number of payment card networks over which an electronic debit transaction may be processed to fewer than two unaffiliated networks and (2) inhibiting a merchant's ability to route transactions over any network that an issuer has enabled to process them. The final rule and interim final rule are effective October 1, 2011. For most debit cards, issuers must comply with the network-exclusivity provisions by April 1, 2012. However, issuers of certain health-related and other benefit cards and general-use prepaid cards have a delayed effective date of April 1, 2013, or later in certain circumstances.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Tarullo and Raskin. Voting against this action: Governor Duke.

On September 12, 2011, the Board approved the issuance of a small-entity compliance guide for Regulation II.¹⁵

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation LL (Savings and Loan Holding Companies) and Regulation MM (Mutual Holding Companies)

On August 8, 2011, the Board approved an interim final rule with request for comment (Docket No. R-1429) establishing regulations for savings and loan holding companies (SLHCs).¹⁶ On July 21, 2011, the responsibility for supervision and regulation of SLHCs transferred from the Office of Thrift Supervision (OTS) to the Board, in accordance with the Dodd-Frank Act. The interim final rule provides for the corresponding transfer of the OTS regulations necessary for the Board to administer the statutes governing SLHCs. The interim final rule, which also made technical amendments to other Board regulations to reflect the new authority over SLHCs, is effective September 13, 2011. The Board approved additional technical amendments to its regulations delegating certain actions regarding SLHCs by order dated August 12, 2011.¹⁷

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulation QQ (Resolution Plans)

On October 13, 2011, the Board approved a final rule (Docket No. R-1414) to implement the resolution-plan requirement of the Dodd-Frank Act. The rule, which was promulgated jointly with the FDIC, requires bank holding companies with total consolidated assets of $50 billion or more and nonbank financial firms designated by the Financial Stability Oversight Council for supervision by the Federal Reserve to annually submit resolution plans ("living wills") to the Board and FDIC.¹⁸ The plans must describe a company's strategy for rapid and orderly resolution in bankruptcy during times of financial distress. Among other components, the plans must include a description of the range of specific actions a company proposes to take in resolution and a description of the company's organizational structure, material entities, interconnections and interdependencies, and management information systems. The final rule is effective November 30, 2011. Companies must submit their initial resolution plans on a staggered basis from July 1, 2012, through December 31, 2013, starting with companies that generally have $250 billion or more in total nonbank assets.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

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Policy Statements and Other Actions

S.A.F.E. Act Initial Registration Period

On January 28, 2011, the Board, acting with the FDIC, OCC, OTS, National Credit Union Administration (NCUA), and Farm Credit Administration (FCA), approved a notice (Docket No. R-1357) announcing the initial registration period under the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act).¹⁹ During this initial registration period (from January 31 through July 29, 2011), residential mortgage loan originators employed by agency-regulated institutions were required to register with the Nationwide Mortgage Licensing System and Registry, in accordance with the S.A.F.E. Act. The Board, along with the other agencies, had issued final rules implementing the act on July 28, 2010. Pursuant to those rules, agency-regulated mortgage loan originators must register with the registry, obtain a unique identifier from the registry, and maintain their registrations.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Warsh, Duke, Tarullo, and Raskin.

American International Group, Inc.

On March 29, 2011, the Board approved a process for the disposition of assets held by Maiden Lane II, LLC, a special-purpose vehicle established to alleviate funding and liquidity pressures on American International Group, Inc. (AIG) during the financial crisis.²⁰ Maiden Lane II had used the proceeds of a loan from the Federal Reserve Bank of New York and the acquisition of a subordinated interest by AIG to purchase residential mortgage-backed securities from several of AIG's regulated U.S. insurance subsidiaries. Under the approved disposition process, the Reserve Bank subsequently disposed of all the securities in the Maiden Lane II portfolio individually and in segments over time as warranted by market conditions through a competitive sales process. (Note: The disposition of the assets in 2011 and 2012 resulted in full repayment of the Reserve Bank's loan to Maiden Lane II and generated a net gain for the benefit of the public of approximately $2.8 billion.)

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin. Absent and not voting: Governor Warsh.

Guidance on Authentication in an Internet Banking Environment

On June 11, 2011, the Board approved interagency guidance, issued through the Federal Financial Institutions Examination Council (FFIEC), addressing customer authentication and security in Internet banking.²¹ The guidance supplements FFIEC guidance issued in 2005, in light of the heightened and evolving threats facing online banking and other activities. The guidance reinforces the original risk-management framework for Internet and electronic banking and updates the agencies' expectations for supervised financial organizations regarding customer authentication, layered security, and other controls.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Interagency Questions and Answers Regarding Flood Insurance

On September 29, 2011, the Board, acting with the FDIC, OCC, NCUA, and FCA, approved revisions (Docket No. OP-1431) to the Interagency Questions and Answers Regarding Flood Insurance that were most recently issued in July 2009.²² The revised guidance, which was published on October 14, 2011, finalized two questions and answers that related to insurable value and the force placement of flood insurance. An additional proposed question on insurable value was withdrawn. (Note: The guidance also requested comment on three additional proposed updates to questions and answers relating to flood insurance.)

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Policies for Directors of Federal Reserve Banks and Branches

On December 1, 2011, the Board approved revisions to its Eligibility, Qualifications, and Rotation Policy for Reserve Bank and Branch directors.²³ The revisions extend director stockholding and affiliation restrictions to institutions that were brought under the Federal Reserve System's supervisory authority by the Dodd-Frank Act. Other revisions address eligibility requirements for Board-appointed Branch directors and prescribe a standard annual certification for Class B and Class C directors.

The Board also revised its Guide to Conduct for Reserve Bank and Branch directors to formalize standards for director conduct regarding access to Board and Reserve Bank officials and staff and to prescribe a standard certification form to implement an existing requirement that directors certify their lack of financial interest in Reserve Bank procurements. In addition, the Guide to Conduct was revised to implement recommendations from the October 2011 Government Accountability Office Report on Federal Reserve Bank Governance, including recommendations to direct each Reserve Bank to clearly document, in its bylaws, the roles and responsibilities of directors and to adopt a process for requesting waivers to the Guide to Conduct.

The Board also adopted a new policy to implement the Dodd-Frank Act provision that excludes Class A directors from the appointment process for Reserve Bank presidents and first vice presidents. The new policy extends this exclusion to Class B directors affiliated with firms supervised by the Federal Reserve. The Board also formalized the existing prohibition on directors' access to confidential supervisory information and limited the involvement of Class A and some Class B directors in selecting and compensating Reserve Bank officers whose primary responsibilities involve supervisory matters.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

Regulatory Reports for Savings and Loan Holding Companies

On December 22, 2011, the Board approved a two-year phase-in period for most SLHCs to file Federal Reserve regulatory reports and an exemption for some SLHCs from initially filing reports.²⁴ Under the Dodd-Frank Act, supervisory and regulatory authority for SLHCs and their nondepository subsidiaries transferred from the OTS to the Board on July 21, 2011. The phase-in approach is intended to allow SLHCs to develop reporting systems over a period of time and will begin with the March 31, 2012, reporting period.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Duke, Tarullo, and Raskin.

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Discount Rates for Depository Institutions in 2011

Under the Federal Reserve Act, the boards of directors of the Federal Reserve Banks must establish rates on discount window loans to depository institutions at least every 14 days, subject to review and determination by the Board of Governors.

Primary, Secondary, and Seasonal Credit

Primary credit, the Federal Reserve's main lending program for depository institutions, is extended at a rate above the federal funds rate target set by the Federal Open Market Committee. It is made available, with minimal administration and 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. Throughout 2011, the primary credit rate was 3/4 percent.

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. Throughout 2011, the spread was set at 50 basis points; therefore, the secondary credit rate was 1-1/4 percent.

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 seasonal credit rate was 0.30 percent.²⁵

Votes on Changes to Discount Rates for Depository Institutions

About every two weeks during 2011, the Board approved proposals by the 12 Reserve Banks to maintain the formulas for computing the secondary and seasonal credit rates. In 2011, the Board did not approve any changes in the primary credit rate.

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References

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