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Rule

Extensions of Credit by Federal Reserve Banks

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Information about this document as published in the Federal Register.

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AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Final rule.

SUMMARY:

The Board of Governors of the Federal Reserve System (Board) has adopted final amendments to its Regulation A to reflect the Board's approval of an increase in the primary credit rate at each Federal Reserve Bank. Start Printed Page 9094The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Board's primary credit rate action.

DATES:

The amendments to part 201 (Regulation A) are effective March 1, 2010. The rate changes for primary and secondary credit were effective on the dates specified in 12 CFR 201.51, as amended.

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FOR FURTHER INFORMATION CONTACT:

Jennifer J. Johnson, Secretary of the Board (202-452-3259); for users of Telecommunication Devices for the Deaf (TDD) only, contact 202-263-4869.

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SUPPLEMENTARY INFORMATION:

The Federal Reserve Banks make primary and secondary credit available to depository institutions as a backup source of funding on a short-term basis, usually overnight. The primary and secondary credit rates are the interest rates that the twelve Federal Reserve Banks charge for extensions of credit under these programs. In accordance with the Federal Reserve Act, the primary and secondary credit rates are established by the boards of directors of the Federal Reserve Banks, subject to the review and determination of the Board.

Like the closure of a number of extraordinary credit programs earlier this month, the changes to the primary and secondary credit rates discussed below are intended as a further normalization of the Federal Reserve's lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Board approved requests by the Reserve Banks to increase by 25 basis points the primary credit rate in effect at each of the twelve Federal Reserve Banks, thereby increasing from 1/2 percent to 3/4 percent the rate that each Reserve Bank charges for extensions of primary credit. As a result of the Board's action on the primary credit rate, the rate that each Reserve Bank charges for extensions of secondary credit automatically increased from 1.00 percent to 1.25 percent under the secondary credit rate formula. The final amendments to Regulation A reflect these rate changes.

The Board's action widens the spread between the primary credit rate and the top of the FOMC's 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. As indicated in the Board's press release announcing this action, the changes to the primary credit discount window facility are intended as a further normalization of the Federal Reserve's lending facilities in light of continued improvement in financial market conditions. In addition, the Board announced that effective on March 18, the typical maximum maturity for primary credit loans will be reduced from 28 days to overnight.[1] A press release announcing these actions noted that:

The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve's primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the ½ percentage point spread.

Regulatory Flexibility Act Certification

Pursuant to 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 significantly 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 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).

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List of Subjects in 12 CFR Part 201

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Authority and Issuance

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

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

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

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

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2. In § 201.51, paragraphs (a) and (b) are revised to read as follows:

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Interest rates applicable to credit extended by a Federal Reserve Bank.[1]

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

Federal Reserve BankRateEffective
Boston0.75February 19, 2010.
New York0.75February 19, 2010.
Philadelphia0.75February 19, 2010.
Cleveland0.75February 19, 2010.
Richmond0.75February 19, 2010.
Atlanta0.75February 19, 2010.
Chicago0.75February 19, 2010.
St. Louis0.75February 19, 2010.
Minneapolis0.75February 19, 2010.
Kansas City0.75February 19, 2010.
Dallas0.75February 19, 2010.
San Francisco0.75February 19, 2010.

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

Federal Reserve BankRateEffective
Boston1.25February 19, 2010.
New York1.25February 19, 2010.
Philadelphia1.25February 19, 2010.
Cleveland1.25February 19, 2010.
Richmond1.25February 19, 2010.
Atlanta1.25February 19, 2010.
Chicago1.25February 19, 2010.
St. Louis1.25February 19, 2010.
Minneapolis1.25February 19, 2010
Kansas City1.25February 19, 2010.
Dallas1.25February 19, 2010.
San Francisco1.25February 19, 2010.
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Start Printed Page 9095

By order of the Board of Governors of the Federal Reserve System, February 23, 2010.

Jennifer J. Johnson,

Secretary of the Board.

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Footnotes

1.  The maximum maturity of primary credit loans was extended from overnight to 30 days on August 17, 2007, and further extended to 90 days on March 16, 2008. The Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days effective January 14, 2010.

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1.  The primary, secondary, and seasonal credit rates described in this section apply to both advances and discounts made under the primary, secondary, and seasonal credit programs, respectively.

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[FR Doc. 2010-4086 Filed 2-26-10; 8:45 am]

BILLING CODE 6210-02-P