[Federal Register Volume 68, Number 9 (Tuesday, January 14, 2003)]
[Rules and Regulations]
[Pages 1793-1794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-621]


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FEDERAL RESERVE SYSTEM

12 CFR Part 201

[Regulation A; Docket No. R-1141]


Extensions of Credit by Federal Reserve Banks

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors is publishing final amendments to 
Regulation A to reflect its approval of the initial interest rates for 
extensions of primary and secondary credit. The amendments also correct 
a typographical error. These amendments supersede the text of one 
section of the final rule that the Board approved on October 31, 2002, 
and published in the Federal Register on November 7, 2002. The new 
primary and secondary credit rates do not indicate a change in the 
stance of monetary policy.

EFFECTIVE DATE: January 9, 2003.

FOR FURTHER INFORMATION CONTACT: Brian Madigan, Deputy Director (202/
452-3828) or William Nelson, Senior Economist (202/452-3579), Division 
of Monetary Affairs; or Stephanie Martin, Assistant General Counsel 
(202/452-3198) or Adrianne Threatt, Counsel (202/452-3554), Legal 
Division; for users of Telecommunication Devices for the Deaf (TDD) 
only, contact 202/263-4869.

SUPPLEMENTARY INFORMATION: On October 31, 2002, the Board announced 
that it would eliminate the adjustment and extended credit programs and 
replace them with new primary and secondary credit programs, effective 
January 9, 2003 (67 FR 67777, November 7, 2002). Reserve Banks will 
offer primary credit for very short terms (usually overnight) as a 
backup source of liquidity to depository institutions that the Reserve 
Banks deem to be in generally sound financial condition. The Board 
expects that most depository institutions will qualify for primary 
credit. Under appropriate circumstances, Reserve Banks may extend 
secondary credit as a backup source of liquidity to depository 
institutions that do not qualify for primary credit.
    The preamble to the Board's final rule indicated the Board's 
expectation that the initial interest rate for primary credit would be 
100 basis points above the prevailing target federal funds rate of the 
Federal Open Market Committee (FOMC) and that the initial secondary 
credit rate would be 50 basis points above the primary credit rate. At 
the time it published its final rule, the Board did not know what the 
target federal funds rate would be on January 9, 2003, and thus could 
not determine the initial primary and secondary credit rates. Section 
201.51(a)-(b) of the October 2002 final rule therefore simply described 
the above-market rates for primary and secondary credit but did not 
list the actual rates to be in effect on January 9, 2003.
    On January 6, 2003, the Federal Reserve Board approved requests by 
each of the 12 Federal Reserve Banks to establish an initial interest 
rate for primary credit of 2.25 percent, which is 100 basis points 
above the current target federal funds rate. The Board also approved 
requests by the 12 Federal Reserve Banks to establish an initial 
secondary credit rate of 2.75 percent. These new primary and secondary 
credit rates will be listed in tables contained at Sec.  201.51(a)-(b). 
The Board also has amended Sec.  201.51(c) to correct a typographical 
error in the cross-reference to Sec.  201.4. These amendments supersede 
the text of Sec.  201.51(a)-(c) that appeared in the Board's October 
2002 final rule.
    The Board reiterates that the new primary and secondary credit 
rates simply implement the new, above-market lending programs and do 
not affect the stance of monetary policy, as

[[Page 1794]]

indexed by the FOMC's current target of 1.25 percent for the federal 
funds rate. The Reserve Banks will continue to establish rates on 
primary, secondary, and seasonal credit at least every two weeks, 
subject to review and determination of the Board of Governors, through 
the same procedures that have been used in the past to set the rates on 
adjustment, extended, and seasonal credit.

Regulatory Flexibility Act Certification

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 605(b)), the Board certifies that the new primary and secondary 
credit rates will not have a significant adverse economic impact on a 
substantial number of small entities because the final rule does not 
impose any additional requirements on entities affected by the 
regulation.

Administrative Procedure Act

    The Board did not follow the provisions of 5 U.S.C. 553(b) relating 
to notice and public participation in connection with the adoption of 
these amendments because the Board for good cause determined that 
delaying implementation of the new primary and secondary credit rates 
in order to allow notice and public comment would be impracticable, 
unnecessary, and contrary to the public interest in fostering price 
stability and sustainable economic growth. For these same reasons, the 
Board also has not provided 30 days prior notice of the effective date 
of the rule under section 553(d).

12 CFR Chapter II

List of Subjects in 12 CFR Part 201

    Banks, Banking, Federal Reserve System, Reporting and 
recordkeeping.

Authority and Issuance

    For the reasons set forth in the preamble, the Board is amending 12 
CFR chapter II to read as follows:

PART 201--EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS (REGULATION 
A)

    1. The authority citation for part 201 continues to read as 
follows:

    Authority: 12 U.S.C. 248(i)-(j), 343 et seq., 347a, 347b, 347c, 
348 et seq., 357, 374, 374a, and 461.


    2. Section 201.51 (a) through (c) is revised to read as follows:


Sec.  201.51  Interest rates applicable to credit extended by a Federal 
Reserve Bank.

    (a) Primary credit. The interest rates for primary credit provided 
to depository institutions under Sec.  201.4(a) are:

------------------------------------------------------------------------
       Federal Reserve Bank          Rate             Effective
------------------------------------------------------------------------
Boston...........................      2.25  January 9, 2003.
New York.........................      2.25  January 9, 2003.
Philadelphia.....................      2.25  January 9, 2003.
Cleveland........................      2.25  January 9, 2003.
Richmond.........................      2.25  January 9, 2003.
Atlanta..........................      2.25  January 9, 2003.
Chicago..........................      2.25  January 9, 2003.
St. Louis........................      2.25  January 9, 2003.
Minneapolis......................      2.25  January 9, 2003.
Kansas City......................      2.25  January 9, 2003.
Dallas...........................      2.25  January 9, 2003.
San Francisco....................      2.25  January 9, 2003.
------------------------------------------------------------------------

    (b) Secondary credit. The interest rates for secondary credit 
provided to depository institutions under 201.4(b) are:

------------------------------------------------------------------------
       Federal Reserve Bank          Rate             Effective
------------------------------------------------------------------------
Boston...........................      2.75  January 9, 2003.
New York.........................      2.75  January 9, 2003.
Philadelphia.....................      2.75  January 9, 2003.
Cleveland........................      2.75  January 9, 2003.
Richmond.........................      2.75  January 9, 2003.
Atlanta..........................      2.75  January 9, 2003.
Chicago..........................      2.75  January 9, 2003.
St. Louis........................      2.75  January 9, 2003.
Minneapolis......................      2.75  January 9, 2003.
Kansas City......................      2.75  January 9, 2003.
Dallas...........................      2.75  January 9, 2003.
San Francisco....................      2.75  January 9, 2003.
------------------------------------------------------------------------

    (c) Seasonal credit. The rate for seasonal credit extended to 
depository institutions under Sec.  201.4(c) is a flexible rate that 
takes into account rates on market sources of funds.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, January 8, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03-621 Filed 1-13-03; 8:45 am]
BILLING CODE 6210-02-P