Announcements.

EASING OF THE STANCE OF MONETARY POLICY BY THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Committee decided on September 29, 1998, to ease the stance of monetary policy slightly, expecting the federal funds rate to decline 1/4 percentage point to around 5 1/4 percent.

The action was taken to cushion the effects on prospective economic growth in the United States of increasing weakness in foreign economies and of less accommodative financial conditions domestically. The recent changes in the global economy and adjustments in U.S. financial markets mean that a slightly lower federal funds rate should now be consistent with keeping inflation low and sustaining economic growth going forward.

The discount rate remains unchanged at 5 percent.

TENTATIVE SCHEDULE FOR MEETINGS OF THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Committee (FOMC) has released the following schedule for its meetings in 1999: February 2-3; March 30; May 18; June 29-30; August 24; October 5; November 16; and December 21. The schedule is tentative in light of the Committee's practice of confirming the date for each meeting at the preceding meeting. FOMC meetings are held on Tuesdays unless otherwise noted.

The FOMC is composed of the seven members of the Board of Governors and five of the twelve Reserve Bank presidents. The president of the Federal Reserve Bank of New York is a permanent member; the other presidents serve one-year terms on a rotating basis.

The FOMC oversees open market operations, which is the main tool used by the Federal Reserve to influence money market conditions and the growth of money and credit. In addition, the FOMC directs operations undertaken by the Federal Reserve in foreign exchange markets.

The Federal Reserve Bank Presidents voting in 1999 will be the following: William J. McDonough, New York; Edward G. Boehne, Philadelphia; Michael H. Moskow, Chicago; Robert D. McTeer, Jr., Dallas; and Gary H. Stem, Minneapolis.

MEETING OF THE CONSUMER ADVISORY COUNCIL 

The Federal Reserve Board announced on September 17, 1998, that the Consumer Advisory Council would meet on Thursday, October 22, in a meeting open to the public. The Council's function is to advise the Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its advice.

AMENDMENT TO REGULATION C

The Federal Reserve Board on September 25, 1998, published a final rule amending Regulation C (Home Mortgage Disclosure). The rule requires a lender to report dates on the loan-application register using four digits for the year, rather than two, to bring reporting under the Home Mortgage Disclosure Act into compliance with Year 2000 data system standards.

Other amendments make several technical changes to the regulation, including clarifying the coverage of nondepository institutions and deleting the requirement to provide the name and address of the reporting institution's parent company on the transmittal sheet.

AMENDMENTS TO REGULATION E, REGULATION DD, AND REGULATION M

The Federal Reserve Board, on September 24, 1998, published a final rule amending Regulation E (Electronic Fund Transfers), to revise the time periods for investigating errors involving point-of-sale (POS) debit cards, foreign transactions, and new accounts.

* For POS and foreign transactions, the rule requires a financial institution to provisionally credit an account within ten business days (rather than twenty) and leaves in place the ninety-calendar-day period to complete the investigation.

* For new accounts, the rule allows a financial institution twenty business days to resolve an alleged error before it must provisionally credit the consumer's account and up to ninety calendar days to complete the investigation.

The Board is also publishing final amendments to Regulation DD (Truth in Savings) and Regulation M (Consumer Leasing). The revisions to Regulation DD implement minor changes to the Truth in Savings Act concerning lobby signs and certain disclosures for automatically renewable time accounts, such as certificates of deposit. The Regulation M revisions clarify rules on lease payments, advertisements, and rounding calculations.

ISSUANCE OF A SUPERVISORY LETTER ON INTERNAL CREDIT RATING SYSTEMS

The Federal Reserve on September 21, 1998, issued a supervisory letter that emphasizes the importance of developing and implementing effective internal credit rating systems and stresses the important role such systems should play in credit risk management, especially at large banking organizations.

The letter instructs examiners to evaluate the adequacy of such systems as an element of the normal supervisory process and tells examiners to consider the results of that evaluation in assessing an institution's risk management, capital adequacy, and asset quality. To assist examiners in their evaluation, the letter describes sound practices in the design of risk-rating systems and in the internal processes by which banks assign and validate risk ratings. The letter also addresses current and emerging practices in the application of risk ratings to several key areas of large banks' overall risk-management processes.

Internal credit risk ratings are used by large banking institutions to identify gradations in credit risk among their business loans. The supervisory letter grows out of a Federal Reserve staff analysis of internal credit risk rating systems and exposures at large institutions. The long-term goal of this analysis is to encourage broader adoption of sound practices in the use of such ratings and to promote further innovation and enhancements by the industry in this area.

ISSUANCE BY THE BASLE COMMITTEE OF A PAPER ON INTERNAL CONTROL SYSTEMS

As part of its ongoing work to improve risk-management standards in banks, the Basle Committee on Banking Supervision (Basle Committee) issued a paper on September 22, 1998, entitled Framework for Internal Control Systems of Banking Organisations. In this paper, the Basle Committee presents the first internationally accepted framework for supervisors to use in evaluating the effectiveness of the internal controls over all on- and off-balance-sheet activities of banking organizations. The paper describes elements that are essential to a sound internal control system, recommends principles that supervisors can apply in evaluating such systems, and discusses the role of bank supervisors and external auditors in this assessment process. It also comments on the lessons learned from recent internal control failures.

The internal control framework described in the paper is designed for international banking organizations. The guidance is broadly consistent with the document of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled Internal Control-Integrated Framework that is extensively used by larger U.S. banks. The paper is being distributed to supervisory authorities around the world, to banks, and to other interested parties.

The paper was previously issued as a proposal for public comment in January 1998. Before this proposal, the Basle Committee's guidance had discussed internal controls in specific areas of bank activities, such as interest rate risk and trading and derivatives activities.

The Basle Committee's press release and the paper can be obtained from the Internet (http:// www.bis.org) or from the Basle Committee Secretariat at the Bank for International Settlements.

ISSUANCE BY THE BASLE COMMITTEE OF PAPERS ON RISK-MANAGEMENT STANDARDS IN BANKS

The Basle Committee on Banking Supervision (Basle Committee) issued on September 22, 1998, two papers entitled Enhancing Bank Transparency and Operational Risk Management as part of its ongoing work to improve risk-management standards in banks.

The paper on bank transparency gives guidelines to banks and bank supervisors on public disclosures in bank financial reports. It recommends that banks make meaningful disclosure in six broad areas: financial performance; financial position (including capital, solvency, and liquidity); risk-management strategies and practices; risk exposures (including credit risk, market risk, liquidity risk, and operational, legal, and other risks); accounting policies; and basic business, management, and corporate governance information. The Basle Committee strongly recommends that banks address these categories in their financial reports and in other disclosures to the public. Within each broad area, significant detail in disclosures may be required, depending in part on the institution's activities.

The paper on operational risk management makes public the results of recent interviews with major banks in the Group of Ten countries on their management of operational risk. The purpose of these interviews was to assess the current state of the art of operational risk management. The survey results indicate that, while senior management's awareness of operational risk has been increasing, most banks are only in the early stages of developing a framework for measuring and monitoring operational risk. The Basle Committee intends to continue monitoring developments in this area.

The text of these reports can be obtained from the Bank for International Settlements (BIS) web site on the Internet (http://www.bis.org). They are also available from the Basle Committee's Secretariat at the BIS and from the Basle Committee member bank supervisory authorities and central banks.

STATEMENT BY CHAIRMAN GREENSPAN ON THE NOMINATION OF EDWIN M. TRUMAN AS ASSISTANT SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS

Chairman Greenspan, on behalf of the Federal Reserve Board, on October 7, 1998, issued the following statement on the announcement of President Clinton's intention to nominate Edwin M. Truman, Staff Director, Division of International Finance, as Assistant Secretary of the Treasury for International Affairs:

Our valued associate and good friend Ted Truman has been an integral fixture of the Federal Reserve for twenty-six years. His influence has been both pervasive and beneficial and while we will miss him, we wish him well in his new association and expect the continuing benefit of his wisdom.

CHANGES IN BOARD STAFF

The Federal Reserve Board on October 7, 1998, announced the appointments of Karen H. Johnson as Director of the Division of International Finance and Lewis S. Alexander and Peter Hooper as Deputy Directors, all effective October 17, 1998.

Ms. Johnson joined the Board's staff in 1979, was promoted to Assistant Director in 1985, and has been Associate Director since 1997.

Mr. Alexander first joined the Board's staff in 1985, left to become the Chief Economist of the Department of Commerce in 1993, rejoined the staff in 1996, and was promoted to Associate Director in 1997.

Mr. Hooper joined the Board's staff in 1973, was promoted to Assistant Director in 1984, and has been Associate Director since 1997.

Effective October 17, 1998, Edwin M. Truman became Senior Adviser. President Clinton has announced his intention to nominate Mr. Truman as Assistant Secretary of the Treasury for International Affairs.