Announcements.

FOMC 2003 MEETING SCHEDULE

The Federal Open Market Committee announced on July 5, 2002, its tentative meeting schedule for 2003. It is as follows:

* January 28-29 (Tuesday-Wednesday)

* March 18 (Tuesday)

* May 6 (Tuesday)

* June 24-25 (Tuesday-Wednesday)

* August 12 (Tuesday)

* September 16 (Tuesday)

* October 28 (Tuesday)

* December 9 (Tuesday).

INTERAGENCY PROPOSAL ON CUSTOMER IDENTIFICATION FOR FINANCIAL ACCOUNTS

The Department of the Treasury and seven federal financial regulators issued on July 17, 2002, proposed rules that would require certain financial institutions to establish minimum procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Written comments on the proposed rules may be submitted within forty-five days of their publication in the Federal Register.

These proposed rules implement section 326 of the USA Patriot Act, which directs the issuance of regulations requiting financial institutions to implement reasonable procedures for (1) verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the information used to verify the person's identity; and (3) determining whether the person appears on any list of known or suspected terrorists or terrorist organizations. Final rules implementing section 326 must be effective by October 25, 2002.

The proposed rules seek to protect the U.S. financial system from money laundering and terrorist financing. Additionally, by requiting identity verification procedures for all new accounts opened after the effective date of the final rules, the rules could also protect consumers against various forms of fraud, including identity theft.

The proposed rules were developed jointly by the Treasury Department, Treasury's Financial Crimes Enforcement Network, and seven federal financial regulators, including the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission.

The proposed rules outline requirements for the following financial institutions: banks and trust companies, savings associations, credit unions, securities brokers and dealers, mutual funds, futures commission merchants, and futures-introducing brokers.

The financial institutions subject to the proposed rules would be required to establish programs specifying procedures for obtaining identifying information from customers seeking to open new accounts. This identifying information would be essentially the same information currently obtained by most financial institutions and for individual customers generally, including the customer's name, address, date of birth, and an identification number (for U.S. persons, a social security number, and for non-U.S. persons, a similar number from a government-issued document). Customers with signature authority over business accounts would furnish substantially similar information.

A financial institution's program would also have to contain procedures to verify the identity of customers within a reasonable period of time. The proposed rules contemplate that financial institutions will generally use the same forms of identity verification that are already in place, such as examining driver's licenses, passports, credit reports, and other similar means.

While every program must meet these minimum elements, the proposed rules give financial institutions the flexibility to tailor their procedures as appropriate, taking into consideration an individual institution's size, location, and type of business. In developing these regulations, the importance of many factors was taken into account, including the need to guard the U.S. financial system against terrorist financing and money laundering, the legitimate privacy interests of customers, and the need for these regulations to be effectively integrated into the daily operations of financial institutions.

INTERAGENCY DRAFT OF GUIDANCE ON CREDIT CARD LENDING

Under the auspices of the Federal Financial Institutions Examination Council, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision announced on July 22, 2002, that they have developed guidance on account management and loss allowances for credit card lending. The agencies intend to issue this draft of interagency guidance on August 16, 2002.

The draft guidance would apply to all institutions under the agencies' supervision that offer credit card programs. It describes the agencies' expectations for prudent risk-management practices for credit card activities, particularly with regard to credit line management, over-limit accounts, and workouts. The draft guidance also addresses income recognition and loss allowance practices for credit card lending.

The agencies recognize that some institutions may require time to implement changes in policies, practices, and systems to achieve full consistency with the credit card guidance. Such institutions would be expected to work with their primary federal regulator to ensure implementation of needed changes as promptly as possible after the issuance of the guidance. With respect to those elements of the guidance that reflect existing, long-standing regulatory reporting requirements, the agencies expect, as always, continued and ongoing compliance.

As the agencies complete their review of the draft document, they are interested in the views of affected institutions and other interested parties as to whether the draft provides clear guidance concerning the agencies' expectations in the areas of credit card account management, risk management, and loss allowance practices or, instead, has "fatal flaws" in these areas. Institutions and other parties that chose to respond were to provide their views electronically no later than 5:00 p.m. on August 9, 2002. Responses to the agencies were to be submitted electronically to the FFIEC web site: www.FFIEC.gov.

MINUTES OF BOARD DISCOUNT RATE MEETINGS

The Federal Reserve Board released on July 10, 2002, the minutes of its discount rate meetings from April 1 to May 6, 2002.

PUBLICATION OF THE JUNE 2002 UPDATE TO THE BANK HOLDING COMPANY SUPERVISION MANUAL

The June 2002 update to the Bank Holding Company Supervision Manual, Supplement No. 22, has been published and is now available. The Manual comprises the Federal Reserve System's bank holding company supervisory and inspection guidance. The supplement includes new or revised supervisory information and examiner guidance on the following.

1. The Nonbanking Activities of Foreign Banking Organizations. The update includes changes resulting from the Board's October 16, 2001, revision of Regulation K (effective November 26, 2001). An existing section has been revised that addresses two statutory exemptions from the nonbanking restrictions of the BHC Act (found in sections 2(h) and 4(c)(9) of the BHC Act). The exemptions are available to "qualifying foreign banking organizations" (QFBOs). Under this authority, the Board has exempted, among other things, all foreign activities of a QFBO from the nonbanking restrictions of the BHC Act. Regulation K's multi-part QFBO test is discussed as well as an alternate means of satisfying that test. The QFBO test and its modified form are used to determine when a foreign banking organization (FBO) primarily engages in banking activities worldwide. To qualify as a QFBO, an FBO must demonstrate that more than half of its business is banking and that more than half of its banking business is outside the United States.

2. Investments and Activities Abroad. The investment provisions involving section 4(c)(13) of the BHC Act and the Board's 2001 revision of subpart A of Regulation K are discussed, primarily in sections 211.8, 211.9, and 211.10. In general, an "investor" under Regulation K may make investments, directly or indirectly, in a subsidiary or joint venture or may make portfolio investments subject to certain limits. Such limits are higher where any investor parent--insured bank or investor parent--holding company are well capitalized and well managed. The conduct of activities abroad by a bank holding company, member bank, or Edge and agreement corporation, whether conducted directly or indirectly, must be confined to the activities of a banking or financial nature and to those activities that are necessary to carry on such activities. Section 211.10 of Regulation K lists those activities the Board considers to be usual in connection with the transaction of banking or other financial operations abroad. At all times, investors must act in accordance with the high standards of banking or financial prudence, having due regard for diversification of risks, suitable liquidity, and capital adequacy. See Supervision and Regulation (SR) Letters 02-3 and 02-2.

3. Supervision Procedures for Smaller Bank Holding Companies. The supervision procedures for bank holding companies have been changed to incorporate the revised supervision program detailed in SR Letter 02-1. The revised procedures principally affect the supervision of holding companies having total consolidated assets of less than $1 billion, and they discuss the requirements for the frequency and type of on-site or off-site inspections (or reviews). The procedures also discuss the requirements for the scope of inspections, meetings with the directors and senior management, rating assignments and documentation, communication requirements, and report submittal time frames. The procedures promote more effective use of targeted on-site reviews to fulfill inspection requirements. Reserve Banks are directed to use surveillance and other information to focus their attention and resources on holding companies that warrant increased supervision. See SR Letter 02-1.

4. Surveillance Program for Small Bank Holding Companies. The update includes the new surveillance program for small bank holding companies with total consolidated assets of less than $1 billion. The surveillance program is tied to the supervision program for smaller bank holding companies, as discussed above and in SR Letter 02-1.

5. Tie-in Considerations of the BHC Act. A May 16, 2001, staff interpretation is discussed regarding a proposal involving the anti-tying provisions of section 106(b) of the BHC Amendments of 1970 (12 U.S.C. 1972) and the Board's safe harbor for combined-balance discounts (12 CFR 225.7(b)(2)). The interpretation confirms that (1) financial products offered by a bank or its affiliates, including insurance products, may properly be included among eligible products in a bank's combined-balance discount program and (2) the principal amount of an annuity may be counted in determining the size of a customer's balance in eligible products, as may the premiums paid on non-annuity insurance products.

6. Merchant Banking. A December 21, 2001, staff opinion is included regarding the provision in the Gramm-Leach-Bliley Act that generally prohibits a financial holding company (FHC) from routinely managing and operating a portfolio company, the shares of which are owned by the FHC under the act's merchant banking authority (12 U.S.C. 1843(k)(4)(H)). The staff opinion provides examples of permissible covenants between an FHC and a portfolio company that would not involve an FHC in the routine management or operation of a company, consistent with the act and the Board's Regulation Y (12 CFR 225.171 (d)).

A more detailed summary of changes is included with the update package. The Manual and updates, including pricing information, are available from Publications Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washington, DC 20551 (or charge by facsimile: 202-728-5886). The Manual is also available on the Board's public web site: www.federalreserve.gov/boarddocs/ supmanual.

ENFORCEMENT ACTIONS

The Federal Reserve Board announced on July 29, 2002, the execution of a written agreement by and among the Community First Bank and Trust, Celina, Ohio, the Federal Reserve Bank of Cleveland, and the Ohio Division of Financial Institutions.

The Board of Governors of the Federal Reserve System and the U.S. Securities and Exchange Commission (SEC)jointly announced on July 18, 2002, the issuance of administrative actions addressing bank supervisory and securities law-related matters against The PNC Financial Services Group, Inc., Pittsburgh, Pennsylvania, a bank holding company.

Under the agencies' respective statutory authorities, the Federal Reserve Bank of Cleveland executed a written agreement with The PNC Financial Services Group, Inc., and the SEC issued an order instituting public administrative proceedings pursuant to section 8A of the Securities Act of 1933 and section 21C of the Securities Exchange Act of 1934 against The PNC Financial Services Group, Inc.

The Federal Reserve Board announced on July 10, 2002, the execution of a written agreement by and among Rurban Financial Corp., Defiance, Ohio; The State Bank and Trust Company, Defiance, Ohio; the Federal Reserve Bank of Cleveland; and the Ohio Division of Financial Institutions.

The Federal Reserve Board announced on July 8, 2002, the execution of a written agreement by and among First American Bancorp, Inc., Stonewall, Oklahoma, the First American Bank, Stonewall, Oklahoma, the Federal Reserve Bank of Kansas City, and the Oklahoma State Banking Department.

The Federal Reserve Board announced on July 8, 2002, the issuance of orders of restitution against William Chiang, Paul Lee, Joseph C.C. Kuo, Lih Yuh Kuo, and Ching-Tseh Yao, all former directors of the Great Eastern Bank, Flushing, New York. The five individuals, without admitting to any allegations, consented to the issuance of the orders for alleged breaches of fiduciary duties, violations of law and regulations, and unsafe and unsound banking practices. The orders require each individual to pay restitution in the amount of $50,000 to Great Eastern Bank.