Announcements - United States Federal Reserve Board - policy decisions, personnel changes, disciplinary actions - Statistical Data Included

Federal Reserve Bulletin, August, 2001

FEDERAL OPEN MARKET COMMITTEE DIRECTIVE AND DISCOUNT RATE ACTION

The Federal Open Market Committee at its meeting on June 27, 2001, decided to lower its target for the federal funds rate by 25 basis points to 3 3/4 percent. In a related action, the Board of Governors approved a 25 basis point reduction in the discount rate to 3 1/4 percent. The action by the FOMC brings the decline in the target federal funds rate since the beginning of the year to 275 basis points.

The patterns evident in recent months--declining profitability and business capital spending, weak expansion of consumption, and slowing growth abroad--continue to weigh on the economy. The associated easing of pressures on labor and product markets is expected to keep inflation contained.

Although continuing favorable trends bolster long-term prospects for productivity growth and the economy, the Committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Atlanta, Chicago, Dallas, and San Francisco.

Subsequently, the Federal Reserve Board approved on June 28, 2001, actions by the boards of directors of the Federal Reserve Banks of Cleveland, Richmond, Minneapolis, and Kansas City, decreasing the discount rate at those banks from 3 1/2 percent to 3 1/4 percent, effective immediately.

The Federal Reserve Board also approved action by the board of directors of the Federal Reserve Bank of St. Louis, decreasing the discount rate at that bank from 3 1/2 percent to 3 1/4 percent, effective Friday, June 29, 2001.

BANKING AGENCIES ISSUE HOST STATE LOAN-TO-DEPOSIT RATIOS

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued on June 28, 2001, the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on March 23, 2000.

In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.

Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank's statewide loan-to-deposit ratio with the host state loan-to-deposit ratio for banks in a particular state.

A second step is conducted if a bank's statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank's interstate branches.

A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.

JOINT AGENCY LETTER TO SEC ON BROKER-DEALER EXEMPTIONS

The Federal Reserve Board on July 2, 2001, joined the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation in a letter to the Securities and Exchange Commission (SEC) concerning the SEC's interim final rules to implement provisions of the Gramm-Leach-Bliley Act that provide specific exemptions from the broker and dealer definitions that permit banks to continue providing trust and fiduciary, as well as other specified traditional banking, products and services.

FOMC MEETING SCHEDULE FOR 2002

The Federal Open Market Committee announced on July 16, 2001, its tentative meeting schedule for 2002. It is as follows: January 29-30 (Tuesday-Wednesday), March 19 (Tuesday), May 7 (Tuesday), June 25-26 (Tuesday-Wednesday), August 13 (Tuesday), September 24 (Tuesday), November 6 (Wednesday), and December 10 (Tuesday).

ENFORCEMENT ACTIONS

The Federal Reserve Board announced on June 21, 2001, the issuance of an order of prohibition against Nelly Kann de Gouverneur, a former employee and institution-affiliated party of Banco Mercantil, C.A., S.A.C.A., New York Agency, New York.

Ms. Kann, without admitting to any allegations, consented to the issuance of the order based on her alleged violations of law and unsafe and unsound practices in connection with the structuring of deposits of cash and monetary instruments by private banking customers of Mercantil resulting in violations of the Currency and Foreign Transactions Report Act (31 U.S.C. [sections] 5311 et seq.)