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 section provides a summary of policy actions in 2013, 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 Information on the actions is also 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 section 8, "Minutes of Federal Open Market Committee Meetings."

Rules and Regulations

Regulation H (Membership of State Banking Institutions in the FRS), Regulation Q (Capital Adequacy of Bank Holding Companies, Savings and Loan Holding Companies, and State Member Banks), and Regulation Y (Bank Holding Companies and Change in Bank Control)

On July 2, 2013, the Board approved a final rule (Docket No. R-1442), issued jointly with the Office of the Comptroller of the Currency, to implement in the United States the capital reforms popularly known as Basel III and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).² Among other provisions, the final rule increases the minimum requirements for both the quality and quantity of banking organizations' capital by establishing a new minimum common equity tier 1 capital ratio and implementing a capital conservation buffer. The rule also includes (1) a number of macroprudential features that apply only to large, internationally active banking organizations and (2) other features to reduce the complexity and regulatory burden for smaller and community banks. The final rule is effective January 1, 2014, with later compliance dates for certain provisions. The phase-in period for smaller, less complex banking organizations begins in January 2015, and savings and loan holding companies that have significant commercial or insurance underwriting activities are not subject to the final rule.

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

On December 3, 2013, the Board approved a final rule (Docket No. R-1459) making conforming changes to its market risk capital rule in order to align that rule with the Basel III revised capital framework adopted in July 2013.³ The Board also approved a final rule (Docket No. R-1442) making minor modifications to the Basel III revised capital framework in order to clarify the criteria for subordinated debt instruments that may be counted as tier 2 capital.⁴ The technical changes to the market risk rule are effective April 1, 2014, and the Basel III modifications are effective January 1, 2014.

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

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

On November 12, 2013, the Board approved final rules (Docket Nos. R-1469 and R-1470) to increase the dollar threshold for exempt consumer credit and lease transactions from $53,000 to $53,500, in accordance with the Dodd-Frank Act.⁵ The final rules were published jointly with the Consumer Financial Protection Bureau (CFPB). The dollar threshold is adjusted to reflect the annual percentage increase in the consumer price index. Transactions at or below the threshold are subject to the protections of the regulations. Although the Dodd-Frank Act generally transferred rulemaking authority under the Consumer Leasing Act and the Truth in Lending Act to the CFPB, the Board retains authority to issue rules for certain motor vehicle dealers. The final rules are effective January 1, 2014.

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

Regulation Y (Bank Holding Companies and Change in Bank Control) and Regulation YY (Enhanced Prudential Standards)

On September 24, 2013, the Board approved two interim final rules (Docket Nos. R-1463 and R-1464) to clarify how financial institutions should incorporate the recent Basel III regulatory capital reforms into their capital and business projections during the cycle of capital plan submissions and stress tests that begin October 1, 2013.⁶ The planning horizon for this capital plan and stress test cycle runs from the October 1 start date through the fourth quarter of 2015 and thus overlaps with the implementation of the Basel III capital reforms. The first interim final rule, which applies to bank holding companies with $50 billion or more in total consolidated assets, clarifies that in this capital planning and stress test cycle, these companies must incorporate the revised capital framework into their capital planning projections and into the stress tests required under the Dodd-Frank Act using the transition paths established in the Basel III final rule. The second interim final rule provides a one-year transition period for most banking organizations with between $10 billion and $50 billion in total consolidated assets. These companies are conducting their first Dodd-Frank Act company-run stress tests and will be required to calculate their stress test projections using the Board's current regulatory capital rules so that the companies have time to adjust their internal systems to the revised Basel III capital framework. The interim final rules also include other clarifying provisions--such as when, for a given capital planning and stress test cycle, a company is required to use the Board's advanced approaches capital rules. The interim final rules are effective September 30, 2013.

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

Note: On February 20, 2014, the Board approved a final rule (Docket Nos. R-1463 and 1464) to further clarify the Board's stress testing and capital planning requirements, including requirements for bank holding companies using the advanced approaches capital rules.⁷

Regulation Z (Truth in Lending)

On January 11, 2013, the Board approved a final rule (Docket No. R-1443) to establish appraisal requirements for "higher-priced mortgage loans," in accordance with the Dodd-Frank Act.⁸ The Board issued the final rule jointly with the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NCUA), Consumer Financial Protection Bureau (CFPB), and Federal Housing Finance Agency (FHFA). Under the act, a "higher-priced mortgage loan" is secured by a consumer's home and has an annual percentage rate that exceeds certain thresholds. The final rule requires creditors to obtain an appraisal by a licensed or certified appraiser, disclose to applicants information about the purpose of the appraisal, and provide a free copy of any appraisal report. Second appraisals are required in some circumstances to address fraudulent property flipping. The final rule also provides exemptions for certain types of loans, including qualified mortgages and loans for new manufactured homes, and exemptions to facilitate loans in rural areas. The final rule is effective January 18, 2014.

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

On December 5, 2013, the Board approved a final rule (Docket No. R-1443) to establish additional exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans.⁹ The final rule, issued jointly with the FDIC, OCC, NCUA, CFPB, and FHFA, provides that loans of $25,000 or less and certain "streamlined" refinancings are exempt from specified appraisal requirements for higher-priced mortgages. Loans secured by an existing manufactured home and land will not be subject to the appraisal requirements for 18 months, and the rule includes other special provisions relating to loans for manufactured homes. The final rule is effective January 18, 2014, and the provisions on manufactured home loans are effective July 18, 2015.

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

Regulation HH (Designated Financial Market Utilities)

On December 2, 2013, the Board approved a final rule (Docket No. R-1455) to set out the standards, restrictions, and guidelines for the establishment and maintenance of an account at, and for the provision of financial services from, a Reserve Bank for financial market utilities that are designated as systemically important by the Financial Stability Oversight Council.¹⁰ In addition, the final rule would authorize a Reserve Bank to pay interest on these account balances, in accordance with the Dodd-Frank Act and other terms and conditions as the Board may prescribe. The final rule is effective February 18, 2014.

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

Regulation KK (Margin and Capital Requirements for Covered Swap Entities)

On June 4, 2013, the Board approved an interim final rule (Docket No. R-1458) clarifying the treatment of uninsured U.S. branches and agencies of foreign banks under section 716 of the Dodd-Frank Act, commonly referred to as the swaps push-out provision.¹¹ Section 716 generally prohibits the provision of certain kinds of federal assistance, such as discount window lending and deposit insurance, to insured depository institutions and other institutions that engage in swaps activities, subject to specified exceptions. Insured depository institutions that are swaps entities are eligible for certain statutory exceptions and a transition period of up to 24 months to comply with the requirements of section 716. For purposes of section 716, the interim final rule provides that uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutions. The interim final rule also establishes the process for state member banks and uninsured state branches or agencies of foreign banks to apply to the Board for a transition period of up to 24 months. The Board also requested comment on the interim final rule, which is effective June 10, 2013.

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

On December 20, 2013, the Board approved a final rule (Docket No. R-1458) adopting without change the interim final rule approved in June 2013.¹² The final rule is effective January 31, 2014.

Voting for this action: Chairman Bernanke, Vice Chair Yellen, and Governors Tarullo, Stein, and Powell. Abstaining: Governor Raskin.

Regulation NN (Retail Foreign Exchange Transactions)

On April 1, 2013, the Board approved a final rule (Docket No. R-1428) to establish standards for banking organizations regulated by the Federal Reserve that engage in certain types of foreign exchange transactions with retail customers.¹³ Foreign exchange transactions covered by the rule include futures or options on futures, over-the-counter options on foreign currency, and so-called rolling spot transactions. The rule establishes requirements for risk disclosures to customers and business conduct, recordkeeping, and documentation requirements. Banking organizations that engage in covered transactions are also expected to notify the Federal Reserve and to be well capitalized. The final rule is issued in accordance with the Dodd-Frank Act and is effective May 13, 2013.

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

Regulation PP (Definitions Relating to Title I of the Dodd-Frank Act)

On March 28, 2013, the Board approved a final rule (Docket No. R-1405) to establish the requirements for determining whether a company is "predominantly engaged in financial activities."¹⁴ Under the Dodd-Frank Act, the Financial Stability Oversight Council may subject a nonbank financial company to supervision by the Board and to consolidated prudential standards. The act defines a nonbank financial company to include a company (other than a bank holding company and certain other specified types of entities) that is predominantly engaged in financial activities. Under the final rule, the computation of assets and revenues for purposes of determining if a company meets the statutory threshold would be based on the relevant company's annual financial revenues in, or financial assets at the end of, either of its two most recent fiscal years. The final rule lists in an appendix the activities that will be defined as financial for the purposes of determining whether a company is predominantly engaged in financial activities. As required by the Dodd-Frank Act, the final rule defines the terms "significant nonbank financial company" and "significant bank holding company." The rule specifies that such a company will be considered "significant" if it has $50 billion or more in total consolidated assets or has been designated by the Council as systemically important. The final rule is effective May 6, 2013.

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

Regulation TT (Supervision and Regulation Assessments of Fees)

On August 14, 2013, the Board approved a final rule (Docket No. R-1457) to establish annual assessment fees to implement section 318 of the Dodd-Frank Act.¹⁵ Under section 318, the Board is directed to collect assessments equal to the expenses it estimates are necessary or appropriate to supervise and regulate bank holding companies and savings and loan holding companies with $50 billion or more in total consolidated assets and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve. The final rule describes how the Board estimates applicable expenses and determines each company's assessment fee, as well as the process for billing and collecting the fees. The final rule is effective October 25, 2013.

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

Regulation VV (Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds)

On December 10, 2013, the Board approved a final rule (Docket No. R-1432), developed jointly with the FDIC, OCC, CFTC, and SEC, to implement section 619 of the Dodd-Frank Act, the so-called Volcker rule.¹⁶ Under the final rule, insured depository institutions and their affiliates (banking entities) are (1) prohibited from short-term proprietary trading in certain instruments for their own account, (2) limited in their investments in and relationships with hedge funds and private equity funds (covered funds), and (3) subject to certain compliance requirements that include establishing a detailed compliance program if the entities engage in significant covered activities or investments. In addition, the final rule implements the statute and provides exemptions for certain activities, such as market making, underwriting, hedging, and acquiring or retaining an ownership interest as part of organizing and offering a covered fund. The final rule also limits compliance and other requirements for smaller, less-complex banking entities. The final rule is effective April 1, 2014. The Board also approved an order extending the conformance period for banking entities subject to the final rule for an additional year until July 21, 2015.¹⁷

Voting for these actions: Chairman Bernanke, Vice Chair Yellen, and Governors Tarullo, Raskin, Stein, and Powell.

Note: On January 14, 2014, the Board approved an interim final rule (Docket No. R-1480) that is a companion rule to the December 2013 final rule.¹⁸ The interim final rule would permit banking entities to retain investments in certain pooled investment vehicles that invested their offering proceeds primarily in certain securities issued by community banking organizations of the type grandfathered under section 171 of the Dodd-Frank Act. The interim final rule was developed jointly and also approved by the FDIC, OCC, CFTC, and SEC.

Bank Secrecy Act Regulations

On July 18, 2013, the Board approved a final rule (RIN 1506-AB20), issued jointly with the Department of the Treasury's Financial Crimes Enforcement Network, amending the definitions of "funds transfer" and "transmittal of funds" in the regulations implementing the Bank Secrecy Act.¹⁹ The final rule maintains the current scope of funds transfers and transmittals of funds subject to the act in light of Dodd-Frank Act amendments to the Electronic Fund Transfer Act. The rule is effective January 3, 2014.

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

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Policy Statements and Other Actions

Term Asset-Backed Securities Loan Facility

On January 15, 2013, the Board approved eliminating the Department of the Treasury's (Treasury) remaining obligation to cover potential losses from the Term Asset-Backed Securities Loan Facility (TALF) using funds from the Troubled Asset Relief Program.²⁰ The Board and Treasury agreed that the credit protection was no longer necessary because the accumulated fees collected through the TALF program exceeded the amount of TALF loans outstanding. The TALF program closed in June 2010, and most loans have been repaid or matured. The Treasury's original $20 billion in credit protection for the TALF was reduced to $4.3 billion in June 2010 and to $1.4 billion in June 2012.

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

Leveraged Lending

On March 7, 2013, the Board approved final guidance (Docket No. OP-1438), issued jointly with the FDIC and OCC, on leveraged lending.²¹ The guidance, which applies to all financial institutions supervised by these agencies that engage in leveraged lending activities, covers transactions with borrowers whose degree of financial leverage significantly exceeds industry norms. The guidance outlines high-level principles for safe and sound leveraged lending, including underwriting, monitoring, and reporting practices for these loans, and replaces existing guidance issued in April 2001. The guidance is effective on March 22, 2013 (the compliance date is May 21, 2013).

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

Community Reinvestment Act

On September 30, 2013, the Board approved final new and revised Interagency Questions and Answers Regarding Community Reinvestment (Docket No. OP-1456), issued jointly with the FDIC and OCC, to provide additional guidance to financial institutions and the public regarding the agencies' Community Reinvestment Act regulations.²² The questions and answers clarify several community development matters, including how the agencies consider community development activities that benefit a broader statewide or regional area that includes an institution's assessment area and how they consider certain community development services. The questions and answers are effective November 20, 2013.

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

Stress Testing Scenarios

On November 5, 2013, the Board approved a final policy statement (Docket No. OP-1452) describing its processes for developing the scenarios to be used in the annual supervisory and company-run stress tests required under the Board's Dodd-Frank Act stress test rules and capital plan rule.²³ The policy statement is effective January 1, 2014.

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

Social Media and Financial Institutions

On November 12, 2013, the Board approved final guidance (Docket No. FFIEC-2013-0002) to help financial institutions understand and manage potential consumer compliance, legal, reputational, and operational risks associated with their use of social media.²⁴ The guidance also provides considerations that financial institutions may find useful when conducting risk assessments and developing and evaluating policies and procedures related to social media. The Federal Financial Institutions Examination Council, on behalf of its member agencies, issued the guidance on December 11, 2013. The guidance is effective immediately.

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

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Discount Rates for Depository Institutions in 2013

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 the primary credit rate, which is set above the usual level of short-term market interest rates. 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 2013, 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 2013, the spread was set at 50 basis points resulting in a secondary credit rate of 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 0.15 percent.²⁵

Votes on Changes to Discount Rates for Depository Institutions

About every two weeks during 2013, the Board approved proposals by the 12 Reserve Banks to maintain the formulas for computing the secondary and seasonal credit rates. In 2013, the Board did not approve any changes in the primary credit rate.

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References

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