Business Glossary

Federal Reserve regulation providing the legal framework for collection of checks and other cash items, and net settlement of balances through the Federal Reserve System. It specifies terms and conditions under which reserve banks will receive checks for collection from depository institutions, and presentment to paying banks, and return of unpaid items. The regulation is supplemented by operating circulars issued by Federal Reserve banks.

Federal Reserve regulation governing international banking operations by bank holding companies and foreign banks in the United States. The regulation permits Edge Act corporations to engage in a range of international banking and financial activities. It also permits U.S. banks to own up to 100% of nonfinancial companies located outside the United States. The regulation also imposes reserve requirements on Edge Act corporations, as specified in Regulation D, and limits interstate activities of foreign banks in the United States.

1. Securities and Exchange Commission provision for simplified registration of small issues of securities. A Regulation A issue requires a shorter form of prospectus and carries lesser liability for officers and directors for false or misleading statements.
2. Federal Reserve Board statement of the means and conditions under which Federal Reserve banks make loans to member and other banks at what is called the discount window. See also rediscount.

Federal Reserve regulation governing transactions among Federal Reserve Banks, and transactions involving the Federal Reserve Banks and foreign banks and governments.

This regulation gives the board responsibility for approving in advance negotiations or agreements by Reserve Banks and foreign banks and governments. A Reserve Bank may, under the direction of the Federal Open Market Committee, undertake negotiations, agreements, or facilitate open market transactions. Reserve banks must report quarterly to the Board of Governors on accounts they maintain with foreign banks.

the Federal Reserve Bank's regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities.

Federal Reserve regulation extending the provisions of other securities related regulations-Regulation G, T, and U-to foreign persons or organizations who obtain credit outside the United States for the purchase of U.S. Treasury securities.

Federal Reserve regulation setting minimum down payments, maximum maturities, and other terms applicable to consumer credit, authorized by executive order during World War II and Congressional legislation in 1947-48. With the repeal of authorizing legislation in 1952, Regulation W was revoked.

Securities and Exchange Commission regulation that permits foreign sales to foreign investors by U.S. companies without registration.

Federal Reserve regulation that sets rules, liabilities, and procedures for electronic funds transfers (EFT), and establishes consumer protections using EFT systems. This regulation prescribes rules for solicitation and issuance of EFT debit cards, governs consumer liability for unauthorized transfers, and requires financial institutions to disclose annually the terms and conditions of EFT services. For example, the regulation sets up an error resolution procedure for errors on EFT related accounts.

Federal Reserve regulation prohibiting interlocking director arrangements in member banks or bank holding companies. A management official of a state member bank or bank holding company may not act simultaneously as a management official of another depository institution if both are not affiliated, are very large banks, or are located in the same local area. The regulation provides a ten-year grandfather period for certain interlocks, and allows some on an exception basis, such as organizations owned by women or minority groups, and newly chartered organizations, and in situations where implementing the regulation would endanger safety and soundness.

Federal Reserve regulation establishing procedures for handling consumer complaints about alleged unfair or deceptive practices by a state member bank. Complaints should be submitted in writing to the Director of the Division and Community Affairs at the Board of Governors in Washington, D.C.

Federal Reserve regulation implementing the consumer leasing provisions of the Truth in Lending Act, and covers leases on personal property for more than four months for family, personal, or household use. It requires leasing companies to disclose in writing the cost of a lease, including security deposit and monthly payments, taxes and other payments, and in the case of an open-end lease, whether a balloon payment may be applied. It also requires written disclosure of the terms of a lease, including insurance, guarantees, responsibility for servicing the property, and whether the lessee has an option to buy the property at lease termination.

1. Federal Reserve Board rule pertaining to the amount of reserves banks must maintain relative to deposits.
2. Securities and Exchange Commission (SEC) rules concerning private placements and defining related concepts such as accredited investor.

the federal regulation governing the amount of credit that may be advanced by a bank to its customers for the purchase of securities.

Federal Reserve regulation implementing the Community Reinvestment Act. Banks are required to make available to the public a statement indicating communities served, the type of credit the lender is prepared to extend, and public comments to its CRA statement.

Federal Reserve regulation prohibiting individuals who are engaged in securities underwriting, sale, and distribution from serving as a director, officer, or employee of a member bank. The regulation specifically exempts those involved in government securities trading, including securities of the Treasury, the International Bank for Reconstruction and Redevelopment, the Tennessee Valley Authority, and general obligations of states and municipalities.

Federal Reserve regulation defining membership requirements for state chartered banks that become members of the Federal Reserve System. The regulation sets forth the procedures for state chartered banks to become members of the Federal Reserve System, as well as privileges and requirements for membership. The regulation also requires state chartered banks acting as securities transfer agents to register with the board.

Federal Reserve Regulation implementing the expedited funds availability act of 1987, setting endorsement standards on checks paid by depository financial institutions. The endorsement standard is designed to facilitate the identification of the endorsing bank and prompt return of unpaid checks.

Federal Reserve regulation that sets minimum standards for security devices, such as bank vaults, and currency handling equipment, including automated teller machines. Amember bank must appoint a security officer to develop and administer a program to deter robberies, thefts, and larcenies, and file an annual compliance statement with its reserve bank.

Federal Reserve Board rule regulating lenders other than commercial banks, brokers or dealers who, in the ordinary course of business, extend credit to individuals to purchase or carry securities. Special provision is made for loans by corporations and credit unions to finance purchases under employee stock option and stock purchase plans.

Federal Reserve regulation implementing the truth in savings act

Federal Reserve regulation requiring banks to adopt internal guidelines limiting their risk in dealings with other financial institutions. Regulation F covers two types of activity: check collection and other banking services that large banks perform for smaller, or correspondent, banks; and financial market transactions such as interest rate swaps and repurchase agreements. The regulation requires banks to limit their credit exposure to other banks to a percentage of capital-25% of total capital for most banks. Higher levels are permitted for well capitalized banks.

Federal Reserve regulation requiring each member bankjoining the Federal Reserve System to purchase stock in its Federal Reserve Bank equal to 6% of its capital and surplus. Reserve bank stock, which pays dividends semiannually, is nontransferable and cannot be used as collateral. When a bank increases or decreases its capital base, it must adjust its ownership of Federal Reserve stock accordingly.

Federal Reserve Board regulation covering provisions of the consumer credit protection act of 1968, known as the Truth in Lending Act.

Federal Reserve regulation governing banking and nonbanking activities of bank holding companies and the divestiture of impermissible nonbank activities. The regulation spells out the procedures for forming a bank holding company and procedures to be followed by bank holding companies acquiring voting shares in bank or nonbank companies. The regulation also lists those nonbank activities that are deemed closely related to banking and therefore permissible for bank holding companies.

Federal Reserve regulation authorizing banks to settle mutual obligations at net value, rather than gross value, through bilateral or multilateral netting contracts. Securities brokers, dealers, and members of clearing organizations may also use contractual netting.

Federal Reserve regulation limiting the amount of credit member banks may extend to their own executive officers. Regulation O also implements the reporting requirements of the Financial Institutions Regulatory Act and Interest Rate Control Act of 1978 and the Garn-st Germain Depository Institutions Act of 1982. Each federally insured bank is required to include in its quarterly statement of income and condition the total amount of credit extensions to executive officers and principal shareholders, and the number of such individuals who have received loans equaling 5% of the bank's equity capital or $500,000, whichever is less.

the Federal Reserve Bank's regulation that sets deposit interest rate ceilings and regulates advertising of interest on savings accounts. This regulation applies to all commercial banks. It is a rule, first instituted in the Banking Act of 1933.

Federal Reserve regulation prohibiting discrimination against consumer credit applicants, and establishing guidelines for collecting and evaluating credit information. Regulation B prohibits creditors from discriminating on the basis of age, sex, race, color, religion, national origin, marital status, or receipt of public assistance. The regulation also requires creditors to give written notification of rejection, a statement of the applicant's rights under the Equal Credit Opportunity Act, and a statement listing reasons for rejection, or the applicant has the right to request the reasons. If an applicant was denied credit because of adverse information in a credit bureau report, the applicant is entitled to receive, at no cost, a copy of the bureau report. Creditors who furnish credit information when reporting information on married borrowers must report information in the name of each spouse.

Federal Reserve regulation implementing the Home Mortgage Disclosure Act of 1975, requiring depository institutions to make an annual disclosure of the location of certain residential loans, to determine whether depository institutions are meeting the credit needs of their local communities. Specifically exempted are institutions with assets of $10 million or less. Regulation C requires lenders of mortgages that are insured or guaranteed by a federal agency to disclose the number and total dollar amount of mortgage loans originated or purchased in the recent calendar year, itemized by census tract where the property is located.

Federal Reserve regulation dealing with financing of contractors, subcontractors and others involved in national defense work. The regulation spells out the authority granted to reserve banks under the Defense Production Act of 1950, to assist federal departments and agencies in making and administering loan guarantees to defense-related contractors, and sets maximum interest rates, guaranty fees, and commitment fees.