[Federal Register Volume 68, Number 133 (Friday, July 11, 2003)]
[Rules and Regulations]
[Pages 41266-41267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17531]


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DEPARTMENT OF THE TREASURY

Fiscal Service

Bureau of the Public Debt

31 CFR Part 348


Regulations Governing Depositary Compensation Securities

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: The Bureau of the Public Debt (Public Debt) is issuing 
regulations governing Depositary Compensation Securities that will be 
used to compensate financial agents for work performed on behalf of the 
Department of the Treasury.

EFFECTIVE DATE: July 11, 2003.

ADDRESSES: You can download this final rule at the following World Wide 
Web address: http://www.publicdebt.treas.gov. You may also inspect and 
copy this rule at: Treasury Department Library, Room 1428, Main 
Treasury Building, 1500 Pennsylvania Ave., NW., Washington, DC 20220. 
Before visiting the library, you must call (202) 622-0990 for an 
appointment.

FOR FURTHER INFORMATION CONTACT: For information contact Ann Fowler in 
the Office of the Chief Counsel, Bureau of the Public Debt, at 304-480-
8692, or at [email protected].

SUPPLEMENTARY INFORMATION: The former 31 CFR part 348 is being 
reinstituted and revised to provide for

[[Page 41267]]

the issuance of Depositary Compensation Securities in book-entry form, 
and for their automatic reinvestment at maturity.
    These special issue securities, formerly known as 2-Percent 
Depositary Bonds, were first offered in 1941 as a means to compensate 
depositaries and financial agents of the Government for essential 
banking services provided in support of the day-to-day operations of 
the Government, including the collection and deposit of all Treasury 
receipts. The securities were phased out when other methods of 
compensation were used. Hence, the offering was terminated in 1994.
    The former 31 CFR part 348 is now being reinstituted and revised 
because we have determined that the use of Depositary Compensation 
Securities to compensate financial agents is in the public interest.
    Financial agents will purchase Depositary Compensation Securities 
with funds placed by the United States Treasury in a non-interest 
bearing time balance account at the financial agent equal to the 
principal amount of the security. The interest earned from Depositary 
Compensation Securities will serve to compensate financial agents for 
services performed on behalf of the Treasury. Some financial agents 
have inquired regarding the proper accounting of this transaction and 
the potential impact on their balance sheet. The transaction, as more 
fully described in agreements between Treasury and its Financial 
Agents, is structured so that the principal amount of the security and 
the time balance will be set-off at maturity consistent with the 
criteria described in Financial Accounting Standards Board (FASB) 
Interpretation No. 39. Financial agents should consult with their 
auditors regarding the applicability of FASB Interpretation 39 to this 
transaction.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866. Therefore, the 
regulatory review procedures contained therein do not apply.
    This final rule relates to matters of public contract and 
procedures for United States securities. The notice and public 
procedures requirements and delayed effective date requirements of the 
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 
553(a)(2).
    As no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.) does not apply. We ask for no 
new collections of information in this final rule. Therefore, the 
Paperwork Reduction Act (44 U.S.C. 3507) does not apply.

List of Subjects in 31 CFR Part 348

    Banks, Banking, Electronic funds transfer, Government securities.


0
Accordingly, for the reasons set out in the preamble, 31 CFR Chapter 
II, Subchapter B, is amended by adding Part 348 to read as follows:

PART 348--REGULATIONS GOVERNING DEPOSITARY COMPENSATION SECURITIES

Sec.
348.0 Offering of securities.
348.1 Description of securities.
348.2 Redemption/call/reinvestment.
348.3 Reservations.

    Authority: 31 U.S.C. 3121; 5 U.S.C. 301.


Sec.  348.0  Offering of securities.

    The Secretary of the Treasury (the Secretary) under authority of 
Title 31, Chapter 31, offers, at par, Depositary Compensation 
Securities (securities) to financial agents of the Department of the 
Treasury. The securities are offered to financial agents of the 
Department of the Treasury designated under federal law (including, but 
not limited to: 12 U.S.C. 90, 265-266, 1464(k), and 1789a; 31 U.S.C. 
3303) which have executed a Depositary, Financial Agency, and 
Collateral Agreement satisfactory to the Secretary, and are authorized 
to provide essential banking services to the Department of the 
Treasury. The securities will be issued in an amount not to exceed, in 
any case, the amount for which the financial agents are authorized. The 
securities are non-marketable Treasury securities that will be utilized 
to compensate financial agents, in whole or in part, for services 
performed on behalf of the Department of the Treasury. The financial 
agents will be compensated from the interest earned on the securities. 
This offering will continue until terminated by the Secretary. The 
Fiscal Assistant Secretary is authorized to act on behalf of the 
Secretary upon all matters contained in these regulations.


Sec.  348.1  Description of securities.

    (a) General. The securities will be issued in book-entry form on 
the books of the Department of the Treasury, Bureau of the Public Debt, 
Parkersburg, WV.
    (b) Terms and rate of interest. The securities will be issued as 
notes or bonds, depending on their maturity, under such terms and at 
such rates as determined and announced by the Secretary. The Secretary 
will set a given rate of interest that will apply to all securities 
issued while the rate is in effect. The interest will be payable on a 
monthly basis. The securities will be issued in a minimum of $1,000 
each.
    (c) Nontransferability. The securities are not transferable, but 
they will be acceptable to secure compensating balances with financial 
agents (as described in Sec.  348.0) and may not be used for any other 
purpose.


Sec.  348.2  Redemption/call/reinvestment.

    (a) Redemption by financial agents. The securities may be redeemed 
prior to maturity by financial agents only under such terms and 
conditions as set forth in agreements between the financial agents and 
the Department of the Treasury, Financial Management Service, 
Washington, DC.
    (b) Call by the Treasury. The securities are subject to call before 
maturity. The Secretary will announce such call by any means the 
Secretary deems appropriate.
    (c) Reinvestment at maturity. The securities shall be automatically 
redeemed at maturity and the principal amount reinvested in new 
securities having the same description in all material respects as the 
ones redeemed, except that the Secretary shall have the authority to 
modify the rate of interest for the re-issued securities. The 
securities shall be automatically redeemed and re-invested unless the 
agent certifies in writing, to the Treasury, Financial Management 
Service, Washington, DC, that it declines automatic reinvestment within 
seven calendar days prior to maturity date.


Sec.  348.3  Reservations.

    The Secretary reserves the right to reject any application for the 
purchase of securities hereunder, in whole or in part, and to refuse to 
issue or permit to be issued any such securities in any case if the 
Secretary deems such action to be in the public interest, and the 
Secretary's action in any such respect shall be final. The Secretary 
may also at any time, supplement or amend the terms of these 
regulations, or of any amendments or supplements thereto.

    Dated: July 7, 2003.
Donald V. Hammond,
Fiscal Assistant Secretary.
[FR Doc. 03-17531 Filed 7-10-03; 8:45 am]
BILLING CODE 4810-39-P