Announcements.

NOMINATIONS SOUGHT FOR CONSUMER ADVISORY COUNCIL 

The Federal Reserve Board announced on June 4, 2003, that it is seeking nominations for appointments to its Consumer Advisory Council. The Council advises the Board on the exercise of its responsibilities under various consumer financial services laws and on other matters on which the Board seeks its advice. The group meets in Washington, D.C., three times a year.

Nine new members will be appointed to serve three-year terms beginning in January 2004. Nominations should include a resume and the following information about nominees:

* complete name, title, address, telephone, e-mail address, and fax numbers;

* organization's name, brief description of organization, address, telephone and fax numbers, past and present positions;

* knowledge, interests, or experience related to community reinvestment, consumer protection regulations, consumer credit, or other consumer financial services; and

* positions held in community and banking associations, councils, and boards.

Nominations should also include the complete name, organization name, title, address, telephone, e-mail address, and fax numbers for the nominator.

Letters of nomination with complete information, including a resume for each nominee, must be received by August 15, 2003. Nominations not received by August 15 may not be considered.

Electronic nominations are preferred. The appropriate form can be accessed at: www.federalreserve.gov/forms/cacnominationform.cfm

If electronic submission is not feasible, the nominations can be mailed (not sent by facsimile) to Sandra F. Braunstein, Senior Associate Director, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, DC 20551.

AMENDMENT TO REGULATION CC

The Federal Reserve Board on May 20, 2003, announced a series of amendments to Appendix A of Regulation CC (Availability of Funds and Collection of Checks) that the Board will make later in 2003 through the end of 2004 to reflect the restructuring of the Federal Reserve's check processing operations. Appendix A provides a routing number guide that helps depository institutions determine the maximum permissible hold periods for most deposited checks.

Collectively, the amendments will reduce the number of check processing regions listed in Appendix A from 44 to 32, resulting in some nonlocal checks in the affected regions becoming local checks that are subject to faster availability schedules. The Board will publish each amendment in the Federal Register at least sixty days before the effective date to allow ample time for depository institutions to make necessary changes.

The Board on May 20, 2003, also approved a final rule that deletes obsolete numbers from and adds new numbers to the list of routing numbers in Appendix A for checks drawn on Federal Reserve Banks and Federal Home Loan Banks.

PUBLICATION OF TRANSITION RULES FOR COLLECTING AND REPORTING INFORMATION

The Federal Reserve Board on May 23, 2003, announced the publication of transition rules to provide lenders with guidance on collecting and reporting information when an application for a home mortgage loan is received before--and final action is taken after--January 1, 2004. The rules were published as an amendment to the official staff commentary that applies and interprets the requirements of Regulation C (Home Mortgage Disclosure Act).

In 2002, the Board substantially revised Regulation C, effective January 1, 2004. The revisions require lenders to report new data items, including information about loan pricing. To minimize the reporting burden, the transition rules generally will not require lenders to collect--pre-January 1, 2004--information that typically is obtained when an application is submitted. More specifically, the transition rules provide the following.

* Lenders will not have to indicate whether an application or loan involved a request for preapproval or were related to a manufactured home.

* Lenders may at their option continue to apply the current--instead of the revised--definitions for a home improvement loan and for refinancings.

* Lenders need hot report the rate spread for loans in which the rate lock occurs before January 1, 2004, given that their data collection systems may not be fully operational until the revisions take effect in January 2004.

The transition rules require lenders to report information available at the time of final action: purchaser type; whether a loan is subject to the Home Ownership and Equity Protection Act; and the lien status of applications and originated loans. The Board has also provided rules to convert information about applicants' race and ethnicity (collected under the current categories in 2003 and reported under the new categories in 2004).

PROPOSAL TO AMEND REGULATION K

The Federal Reserve Board on May 29, 2003, announced that it is seeking public comment on a proposal to amend Regulation K (International Banking Operations) to require Edge Act and agreement corporations and U.S. branches, agencies, and other offices of foreign banks supervised by the Board to establish and maintain procedures reasonably designed to ensure and monitor compliance with the Bank Secrecy Act and related regulations.

The Bank Secrecy Act generally requires a financial institution doing business in the United States to keep records and make reports that have a high degree of usefulness in criminal, tax, or regulatory proceedings. Domestic financial institutions, such as state member banks subject to the Board's Regulation H (Membership of State Banking Institutions in the Federal Reserve System), already have been required to establish and maintain such procedures. The Board's proposal to amend Regulation K is designed to require Edge Act and agreement corporations and U.S. branches, agencies, and other offices of foreign banks to implement and maintain similar compliance programs.

The Board's proposal is designed to be consistent with regulations recently issued by the U.S. Department of the Treasury under section 352 of the USA PATRIOT Act, which requires all financial institutions to maintain effective anti-money-laundering programs. The Board believes that the proposed regulation will not impose any material administrative burden for affected institutions because, in supervising these institutions to ensure safety and soundness, the Board has consistently expected such entities to maintain programs to ensure compliance with all applicable provisions of the Bank Secrecy Act.

PROPOSAL TO MODIFY METHOD FOR IMPUTING PRICED-SERVICE INCOME

The Federal Reserve Board on May 23, 2003, requested comment on a proposal to modify the method for imputing priced-service income from clearing balance investments. Federal Reserve Banks impute this income when setting fees and measuring actual cost recovery each year.

Clearing balances held at Reserve Banks are similar to compensating balances held by respondent banks at correspondent banks. Reserve Banks currently assume that all available clearing balances are invested in three-month Treasury bills. The Board proposes to impute the income from its clearing balance investments on the basis of a broader portfolio of investment instruments than used today. Imputed investments would be selected from instruments available to bank holding companies and would be subject to a risk-management framework that includes criteria consistent with those used by bank holding companies and regulators in evaluating investment risk.

The Monetary Control Act requires Federal Reserve Banks to establish fees for priced services provided to depository institutions at a level necessary to recover, over the long run, all direct and indirect costs actually incurred and imputed costs. The Reserve Banks also impute income that would have been earned on the investment of clearing balances that customers hold with the Reserve Banks had those balances been held by a private business firm.

LAUNCH OF SYSTEMWIDE FINANCIAL EDUCATION INITIATIVE

Federal Reserve Board Chairman Alan Greenspan stressed the benefits of economic and financial education in a public service announcement and during a visit to a Washington, D.C., school. The events are part of a broad initiative throughout the Federal Reserve System to provide consumers with more resources for making smart financial decisions.

An increasingly complex global financial system underscores the need for consumers to have a strong working knowledge of financial concepts. At a news conference today to launch the initiative, Federal Reserve Board Governor Edward M. Gramlich said, "Americans of every income and educational background want additional tools and training to address the complexities of personal finance. Educated consumers are one key to keeping our economy functioning well."

The Federal Reserve Board and the twelve Federal Reserve Banks have a long history as promoters and providers of financial education. The initiative builds upon existing efforts with the introduction of public service messages, a new brochure, enhancements to the System's financial education web site, and the announcement of upcoming System-sponsored programs and events.

Beginning in May, Chairman Greenspan has been featured in a public service announcement aired by major television and radio networks. His message: "No matter who you are, making informed decisions about what to do with your money will help build a more stable financial future for you and your family." An English and a Spanish version of the announcement were distributed.

On June 5, 2003, Chairman Greenspan and Richmond Federal Reserve Bank President J. Alfred Broaddus, Jr., spoke with students of John Philip Sousa Middle School in Washington, D.C., about how sound mathematical and problem-solving skills can promote good money management. The visit was intended to complement Operation HOPE's efforts to support the financial education of urban youth.

"We believe that this is a particularly good time to promote financial education because of the widespread availability of high-quality curricula programs, and training opportunities for consumers of all ages and backgrounds," Gramlich said. "Our hope is to encourage consumers to take advantage of the programs available in their communities, schools, and on the web."

The Federal Reserve education web site (www.FederalReserveEducation.org) is also being enhanced with links to additional educational resources including a brochure filled with tips for taking charge of personal finances. The brochure, "There's a Lot to Learn About Money," contains information on setting financial goals, budgeting, and using credit wisely. It is available online in English and Spanish.

In addition, an online repository for financial education and literacy research has been created on the Chicago Federal Reserve's Consumer and Economic Development Research and Information Center (CEDRIC) web site (www.chicagofed.org/cedric/ listing.cfm). CEDRIC provides researchers, community organizations, financial institutions, government agencies, and the public with a comprehensive source for abstracts and full texts of articles, reports, working papers, and other studies related to community development issues.

Expanding the availability of quality financial education opportunities to the public and to System employees is a high priority for the Federal Reserve Banks. Throughout 2003, the Banks will update existing programs and launch new ones. Some of these initiatives will involve partnerships with area financial institutions and private-sector organizations. A list of planned activities will be available on the Federal Reserve Education web site listed above.

EXPANSION OF OPERATING HOURS FOR ONLINE FEDWIRE[R] FUNDS SERVICE

The Federal Reserve Board on May 21, 2003, announced it will expand the operating hours for the online Fedwire Funds Service.

The Fedwire Funds Service will open three and one-half hours earlier (9:00 p.m. Eastern Time the prior calendar day) than the current opening time of 12:30 a.m. ET. The closing time for the service will remain 6:30 p.m. ET. The scheduled timeframe for full implementation of the expanded operating hours is the second quarter of 2004. Fedwire participants will be notified at least sixty days before the specific effective date of the new hours.

The impetus for the expansion of the Fedwire operating hours was industry requests to achieve greater overlap of U.S. wholesale payments system operating hours with those of the Asia-Pacific markets, including Australia, Hong Kong, Japan, and New Zealand.

The Fedwire Funds Service is a real-time, large-value electronic funds transfer service, which is provided by the Federal Reserve Banks. Depository institutions and other authorized participants use this service to send and receive large-value, time-critical payments. Each payment transaction is settled individually in central bank money and is final and irrevocable once processed.

FOMC ANNOUNCES MEETING SCHEDULE FOR 2004

The Federal Open Market Committee announced on June 10, 2003, its tentative meeting schedule for 2004.

* January 27-28 (Tuesday-Wednesday)

* March 16 (Tuesday)

* May 4 (Tuesday)

* June 29-30 (Tuesday-Wednesday)

* August 10 (Tuesday)

* September 21 (Tuesday)

* November 10 (Wednesday)

* December 14 (Tuesday)

UNVEILING OF NEW $20 NOTE

U.S. government officials on May 13, 2003, unveiled a new $20 note design with enhanced security features and subtle background colors. The new design is part of an ongoing effort to stay ahead of the counterfeiting of U.S. currency.

"The soundness of a nation's currency is essential to the soundness of its economy. And to uphold OUT currency's soundness, it must be recognized and honored as legal tender, and counterfeiting must be effectively thwarted," said Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System.

At the unveiling, U.S. Treasury Secretary John W. Snow and Chairman Greenspan were joined by U.S. Treasurer Rosario Marin; Tom Ferguson, Director of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency; and W. Ralph Basham, Director of the United States Secret Service, the law enforcement agency responsible for combating counterfeiting.

The new $20 note will be issued in the fall, with new designs for the $50 and $100 notes following in 2004 and 2005. Redesign of the $5 and $10 notes is under consideration, but the $1 and $2 notes will not be redesigned. Even after the new money is issued, older-design notes will remain legal tender.

"U.S. currency is a worldwide symbol of security and integrity. This new design will help us keep it that way, by protecting against counterfeiting and making it easier for people to confirm the authenticity of their hard-earned money," Snow said. "In addition to keeping our currency safe from counterfeiters, we are working to ensure that more of those dollars stay in the pockets of American families. The swift enactment of the President's Jobs and Growth package should do just that."

"This is The New Color of Money; it is safer because it is harder to fake and easier to check, smarter to stay ahead of tech-savvy counterfeiters, and more secure than ever," said the Bureau of Engraving and Printing's Ferguson. "The security features are easier than ever to use, and we want the public to learn how to use them, to protect its hard-earned money."

The New Color of Money

The most noticeable difference in the notes is the subtle green, peach, and blue colors featured in the background. Different colors will be used for different denominations, which will help everyone--particularly those who are visually impaired--to tell denominations apart.

While consumers should not use color to check the authenticity of their currency (relying instead on user-friendly security features--see below), color does add complexity to the note, making counterfeiting more difficult.

The new bills will remain the same size and use the same, but enhanced, portraits and historical images of Andrew Jackson on the face of the note and the White House on the back. The redesign also features symbols of freedom--a blue eagle in the background, and a metallic green eagle and shield to the right of the portrait in the $20 note.

Security Features

The new $20 design retains three important security features that were first introduced in the late 1990s and are easy for consumers and merchants alike to check.

* The watermark--the faint image similar to the large portrait, which is part of the paper itself and is visible from both sides when held up to the light.

* The security thread--also visible from both sides when held up to the light, this vertical strip of plastic is embedded in the paper. "USA TWENTY" and a small flag are visible along the thread.

* The color-shifting ink--the numeral "20" in the lower-right corner on the face of the note changes from copper to green when the note is tilted. The color shift is more dramatic and easier to see on the new-design notes.

Because these features are difficult for counterfeiters to reproduce well, they often do not try. Counterfeiters are hoping that cash-handlers and the public will not check their money closely.

Counterfeiting: Increasingly Digital

Counterfeiters are increasingly turning to digital methods, as advances in technology make digital counterfeiting of currency easier and cheaper. In 1995, for example, less than 1 percent of counterfeit notes detected in the United States was digitally produced. By 2002, that number had grown to nearly 40 percent, according to the U.S. Secret Service.

Yet despite the efforts of counterfeiters, U.S. currency counterfeiting has been kept at low levels, with current estimates putting the level of counterfeit notes in circulation worldwide at between 0.01 and 0.02 percent, or about 1-2 notes in every 10,000 genuine notes.

Secret Service Director Basham credits a combination of factors in keeping counterfeiting low: "Improved worldwide cooperation in law enforcement; improvements in currency design, like those in the new $20 notes unveiled today; and a better-informed public all contribute to our success in the fight against counterfeiting."

Public Education

Because the improved security features are more effective if the public knows about them, the U.S. government is undertaking a broad public education program. This program will ensure that people all over the world know the new currency is coming and help them recognize and use the security features. The outreach will include cash-handlers, merchants, business and industry associations, and the media. With roughly two-thirds of all U.S. currency held outside the United States, the public education program will extend worldwide.

"From Wall Street to Fleet Street, from St. Petersburg, Florida, to St. Petersburg, Russia, our goal is the seamless, smooth introduction of The New Color of Money," Treasurer Marin said.

To learn more about the new currency and to download an image of the new $20 design, visit www.moneyfactory.com/newmoney.

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 May 22, 2003, 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 June 24, 2002.

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 to 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.

FEDERAL RESERVE AND TREASURY HOST MEETING TO DISCUSS CREDIT MANAGEMENT

Federal Reserve Board Governor Edward M. Gramlich and Treasury Assistant Secretary for Financial Institutions Wayne A. Abernathy on May 22, 2003, convened a panel discussion on credit management with representatives of financial services organizations and companies. Judy Chapa, Treasury Deputy Assistant Secretary for Financial Education, moderated the discussion.

"We must take steps to educate all Americans about the importance of responsible credit management," said Assistant Secretary Abernathy. "A good credit rating is critical to the American family--opening the door to homeownership, entrepreneurial business loans, assistance with higher education costs, and many other goals. We welcome this exchange of ideas on how to best focus our efforts."

"Credit must be managed wisely," said Governor Gramlich. "People who understand the fundamentals of money management are more likely to make decisions that promote their own well-being and, on a broader scale, foster a more efficient economy. I hope that today's initiative will inspire additional research into the most effective credit management techniques and educational tools."

During the meeting, the participants planned to reach consensus on core principles that they would use as they work to strengthen American's understanding of credit management.

Participants in the panel discussion included representatives from the National Foundation for Credit Counseling, the Association for Financial Counseling and Planning Education, the In-Charge Institute, the American Bankers Association, America's Community Bankers, the Credit Union National Foundation, the Fannie Mae Foundation, Freddie Mac, American Express, MasterCard, Visa, the Community Financial Services Association of America, the Consumer Federation of America, the National Council of La Raza, the American Association of Retired Persons, and College Parents of America.

The issue of credit management is one of four areas of focus by the Treasury Department' s Office of Financial Education (OFE), established in 2002 and headed by Deputy Assistant Secretary Chapa. The OFE works to ensure that Americans have access to financial education programs and that they obtain the practical knowledge and skills that will enable them to make informed financial choices through various life stages. The OFE chairs the Federal Government Financial Education Coordinating Group.

As the agency with responsibility for the Truth in Lending Act regulations, the Federal Reserve has worked to promote access to credit and fair lending for under-served consumers and communities. In 2000, the Federal Reserve hosted a discussion on best practices in consumer credit education; and through its web site (www.FederalReserveEducation.org) and consumer education materials, it is working to make sure consumers know their rights and responsibilities in credit transactions.

FEDERAL FINANCIAL REGULATORY AGENCIES SEEK COMMENT ON INTERAGENCY EFFORT TO REDUCE REGULATORY BURDEN

The federal financial regulatory agencies announced on June 3, 2003, that they will publish a joint notice and request for comments on a plan to identify and eliminate outdated, unnecessary, or unduly burdensome regulations imposed on insured depository institutions.

The request from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision is being made pursuant to section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). The National Credit Union Administration will be issuing a separate notice and request for comments pursuant to EGRPRA.

Under the 1996 law, the agencies are required to review their regulations at least once every ten years. The publication of the notice and request for comments in a forthcoming issue of the Federal Register will mark the beginning of a three-year joint effort by the agencies to obtain suggestions from the industry and public on more-streamlined and less-burdensome ways to regulate. EGRPRA requires the agencies to categorize the regulations, publish the categories for comment, report to the Congress on any significant issues raised by the comments, and eliminate unnecessary regulations.

The agencies will publish the categories for which they are seeking comments twice a year. For this first publication, comments are requested for the following three categories of regulations: Applications and Reporting, Powers and Activities, and International Operations.

To encourage full participation in the EGRPRA review, the agencies have scheduled five roundtable discussions with bankers and other interested parties. The sessions will be held as follows.

* June 11, Orlando, Florida

* June 26, St. Louis, Missouri

* July 15, Denver, Colorado

* September 18, San Francisco, California

* October 15, New York, New York

MINUTES OF BOARD DISCOUNT RATE MEETINGS

The Federal Reserve Board on May 16, 2003, released the minutes of its discount rate meetings from February 10 to March 17, 2003.

MEETING OF THE CONSUMER ADVISORY COUNCIL

The Federal Reserve Board announced on June 4, 2003, that the Consumer Advisory Council would hold its next meeting on Thursday, June 26. The Council's function is to advise the Board on the exercise of its responsibilities under various consumer financial services laws and on other matters on which the Board seeks its advice.

ENFORCEMENT ACTIONS

The Federal Reserve Board on May 29, 2003, announced the execution of a written agreement by and among the NAB Bank, Chicago, Illinois, the Federal Reserve Bank of Chicago, and the State of Illinois Office of Banks and Real Estate.

The Federal Reserve Board also announced the execution of a written agreement by and between Brickyard Bancorp, Inc., Lincolnwood, Illinois, and the Federal Reserve Bank of Chicago.

The Federal Reserve Board on June 4, 2003, announced the issuance of a consent Order of Assessment of a Civil Money Penalty against the Citizens Bank and Trust Company, Van Buren, Arkansas, a state member bank. Citizens Bank and Trust Company, without admitting to any allegations, consented to the issuance of the order in connection with its alleged violations of the Board's Regulations implementing the National Flood Insurance Act.

The order requires Citizens Bank and Trust Company to pay a civil money penalty of $7,000, which will be remitted to the Federal Emergency Management Agency for deposit into the National Flood Mitigation Fund.

The Federal Reserve Board on June 13, 2003, announced the execution of a written agreement by and between The Marathon Bank, Winchester, Virginia, and the Federal Reserve Bank of Richmond.

The Federal Reserve Board also announced the issuance of a Cease and Desist Order against Lori H. Staples, a former vice president and an institution-affiliated party of The Marathon Bank, Winchester, Virginia.

TERMINATION OF ENFORCEMENT ACTIONS

The Federal Reserve Board on May 13, 2003, announced the termination of the following enforcement action.

* U.S. Trust Corporation and the United States Trust Company of New York, New York. Cease and Desist Order dated July 11, 2001.

STAFF CHANGES

Robert F. Taylor, Assistant Director in the Division of Information Technology, retired on Thursday, July 3, 2003, after more than thirty-two years at the Board and more than thirty-six years of government service.

David L. Williams, Associate Director in the Management Division, retired in July after more than thirty years of service to the Board.