[Federal Register Volume 66, Number 108 (Tuesday, June 5, 2001)]
[Notices]
[Pages 30205-30208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13979]


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FEDERAL RESERVE SYSTEM

[Docket No. R-1108]


Policy Statement on Payments System Risk; Daylight Overdraft 
Capacity for Foreign Banking Organizations

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Request for comment on policy.

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SUMMARY: The Board is requesting comment on proposed changes to its 
payments system risk (PSR) policy. The proposal would modify the 
criteria used to determine the U.S. capital equivalency for foreign 
banking organizations (FBOs). Specifically, the proposed policy would 
(1) eliminate the Basel Capital Accord (BCA) criteria used in the 
current policy to determine U.S. capital equivalency for FBOs, (2) 
replace the BCA criteria with the strength of support assessment (SOSA) 
rankings and financial holding company (FHC) status in determining U.S. 
capital equivalency for FBOs, and (3) raise the percentage of capital 
used in calculating U.S. capital equivalency for certain FBOs.

EFFECTIVE DATE: Comments must be received by August 6, 2001.

ADDRESSES: Comments, which should refer to Docket No. R-1108, may be 
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th and C Streets, NW, Washington, DC 20551 or 
mailed electronically to <a href="/cdn-cgi/l/email-protection#e597808296cb868a8888808b9196a58380818097848997809680979380cb828a93"><span class="__cf_email__" data-cfemail="c9bbacaebae7aaa6a4a4aca7bdba89afacadacbba8a5bbacbaacbbbface7aea6bf">[email protected]</span></a>. Comments 
addressed to Ms. Johnson also may be delivered to the Board's mailroom 
between 8:45 a.m. and 5:15 p.m. and to the security control room 
outside of those hours. Both the mailroom and the security control room 
are accessible from the courtyard entrance on 20th Street between 
Constitution Avenue and C Street, NW. Comments may be inspected in Room 
MP-500 between 9 a.m. and 5 p.m. weekdays, pursuant to Sec. 261.12, 
except as provided in Sec. 261.14, of the Board's Rules Regarding 
Availability of Information, 12 CFR 261.12 and 261.14.

FOR FURTHER INFORMATION CONTACT: Paul Bettge, Associate Director (202/
452-3174), Stacy Coleman, Manager (202/452-2934), Myriam Payne, Project 
Leader (202/452-3219), or Adam Minehardt, Financial Services Analyst 
(202/452-2796), Division of Reserve Bank Operations and Payment 
Systems, Board of Governors of the Federal Reserve System.

SUPPLEMENTARY INFORMATION: This is one of five notices regarding 
payments system risk that the Board is issuing for public comment 
today. Two near-term proposals concern modifications to the procedures 
for posting electronic check presentments to depository institutions' 
Federal Reserve accounts for purposes of measuring daylight overdrafts 
(Docket No. R-1109) and the book-entry securities transfer limit 
(Docket No. R-1110). In addition, the Board is requesting comment on 
the benefits and drawbacks to several potential longer-term changes to 
the Board's policy, including lowering self-assessed net debit caps, 
eliminating the two-week average caps, implementing a two-tiered 
pricing system for collateralized and uncollateralized daylight 
overdrafts, and rejecting payments with settlement-day finality that 
would cause an institution to exceed its daylight overdraft capacity 
level (Docket No. R-1111). The Board is also issuing today an interim 
policy statement and requesting comment on the broader use of 
collateral for daylight overdraft purposes (Docket No. R-1107). 
Furthermore, to reduce burden associated with the PSR policy, the Board 
recently rescinded the interaffiliate transfer (Docket No. R-1106) and 
third-party access policies (Docket No. R-1100).
    The Board requests that in filing comments on these proposals, 
commenters prepare separate letters for each proposal, identifying the 
appropriate docket number on each. This will facilitate the Board's 
analysis of all comments received.

I. Background

    In April 1985, the Board adopted a policy to reduce risk on large-
dollar payments systems (50 FR 21120, May 22, 1985). This policy 
established maximum amounts of uncollateralized daylight credit, or net 
debit caps, that depository institutions are permitted to incur in 
their Federal Reserve accounts. Net debit caps for U.S. branches and 
agencies of foreign banks are calculated in the same manner as for 
domestic banks, by applying cap multiples from one of the six cap 
classes to a capital measure.<SUP>1 2</SUP> A depository institution's 
cap class and associated cap multiple either are determined through a 
self-assessment or a board-of-directors resolution or are assigned by 
the Administrative Reserve Bank.\3\ All net debit caps, including those 
requested by an institution's board of directors, are granted at the 
discretion of the Federal Reserve. Under the current policy, the 
Federal Reserve Banks apply the cap multiple to 100 percent of domestic 
depository institutions' risk-based (or equivalent) capital. The 
capital measure used for an FBO, known as the U.S. capital equivalency, 
however, is substantially less than the FBO's total capital.
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    \1\ U.S. branches and agencies of foreign banks are entities 
contained within and controlled by a foreign banking organization. 
For the definition of ``branch'' and ``agency'', refer to 12 U.S.C. 
3101 and 12 CFR.
    \2\ The net debit cap classes and their associated single-day 
multiples are a zero cap (0), an exempt-from-filing cap (equal to 
the lesser of $10 million or 0.2 times a capital measure), a de 
minimis cap (0.4); and three self-assessed caps, average (1.125), 
above average (1.875), and high (2.25). A net debit cap is 
calculated for the FBO and then distributed among its U.S. branches 
and agencies at the discretion of the FBO and the Administrative 
Reserve Bank.
    \3\ The Administrative Reserve Bank is responsible for managing 
an institution's account relationship with the Federal Reserve.
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    In 1987, the Board considered and decided against changing the 
original definition of U.S. capital equivalency (52 FR 29255, August 6, 
1987). At the request of several FBOs, however, the Board requested 
comment again in June 1989 on alternatives for determining FBOs' U.S. 
capital equivalency used in calculating net debit caps for U.S. 
branches and agencies of foreign banks (54 FR 26108, June 21, 1989). 
After further analysis, in 1991, the Board adopted the current policy 
based on the BCA distinction (55 FR 22095, May 31, 1990).\4\
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    \4\ The BCA was developed by the Basel Committee on Banking 
Supervision and endorsed by the central bank governors of the Group 
of Ten countries. The BCA provides a framework for assessing the 
capital adequacy of a depository institution by risk weighting its 
assets and off-balance sheet exposures primarily based on credit 
risk.
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    FBOs from countries that adhere to the BCA are currently eligible 
to use as their U.S. capital equivalency the greater of 10 percent of 
their capital or 5 percent of their liabilities to nonrelated 
parties.\5\ FBOs from countries that do not adhere to the BCA may use 
as their U.S. capital equivalency the greater of 5 percent of

[[Page 30206]]

their liabilities to nonrelated parties or the amount of capital that 
would be required of a national bank being organized at each 
location.\6\ Under the current policy, if the home country supervisor 
of an FBO does not adhere to the BCA, the U.S. branch or agency of the 
FBO may still incur daylight overdrafts above its net debit cap up to a 
maximum equal to its cap multiple times 10 percent of its capital, 
provided that any overdrafts above the net debit cap are 
collateralized.
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    \5\ Liabilities to nonrelated parties include acceptances, but 
exclude accrued expenses and mounts due and other liabilities to 
offices, branches, and subsidiaries of the foreign bank of each 
agency or branch.
    \6\ The latter measure is not normally reported to the Federal 
Reserve. If an FBO desires to use this measure as its capital 
equivalency, the Administrative Reserve Bank must be notified to 
make special arrangements.
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    In 2000, as part of a broad review of the PSR policy, the Board 
again assessed the determination of U.S. capital equivalency for FBOs. 
The review included analysis of trends of daylight credit, 
consideration of supervisory issues, analysis of new or emerging 
payments system initiatives, and discussions with FBOs.

II. Discussion

A. FBO Liquidity Issues

    A few FBOs have indicated that their net debit caps constrain their 
business activity and place them at a competitive disadvantage to U.S. 
depository institutions. These FBOs assert that certain U.S. depository 
institutions hold a significant portion of their assets in foreign 
markets but are able to use 100 percent of their total risk-based 
capital in establishing their caps, while the PSR policy does not 
recognize the FBOs' worldwide financial strength. During 2000, 
approximately 35 percent of U.S. branches and agencies of foreign banks 
with nonzero net debit caps had cap utilization levels of 75 percent or 
more.\7\ In contrast, less than 5 percent of domestically chartered 
institutions use more than 50 percent of their net debit caps for their 
average daily peak daylight overdrafts.
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    \7\ In this context, cap utilization is equal to an FBO's 
average daily peak daylight overdraft divided by the FBO's net debit 
cap.
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    A number of FBOs have expressed concern over being able to meet the 
intraday liquidity requirements of the Continuous Linked Settlement 
(CLS) system and the new Clearing House Interbank Payments System with 
intraday finality (new CHIPS). CLS Bank is being designed as a multi-
currency facility for settling foreign exchange transactions. Under the 
proposed procedures, participating institutions will be required to 
make daily U.S. dollar payments to CLS Bank over Fedwire during the 
early hours of the Fedwire funds transfer operating day. Because U.S. 
financial money markets are not currently active during those hours, a 
number of CLS members assert that they will use Federal Reserve 
daylight credit to fund their CLS-related payment obligations and have 
requested that the Federal Reserve grant them additional intraday 
credit.\8\
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    \8\ For additional information on payment system initiatives, 
refer to the Payments Risk Committee's report entitled ``Intraday 
Liquidity Management in the Evolving Payment System: A Study of the 
Impact of the Euro, CLS Bank, and CHIPS Finality,'' New York, April 
2000. http://www.ny.frb.org/prc/intraday.html.
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    On January 22, 2001, the Clearing House Interbank Payments Company 
L.L.C. converted CHIPS from an end-of-day multilateral net settlement 
system to one that provides real-time final settlement for all payment 
orders as they are released.\9\ To accomplish real-time final 
settlement, each CHIPS participant must transfer (directly or through 
another participant) a predetermined amount into the CHIPS ``prefunded 
balance account'' on the books of the Federal Reserve Bank of New York. 
While new CHIPS settles all of the payment orders when they are 
released, some payment orders remain unreleased at the end of the day. 
These payment orders are netted and set off against one another on a 
multilateral basis, with each participant in a net debit closing 
position transferring the amount of its closing position requirement 
into the prefunded balance account. Many CHIPS participants use Federal 
Reserve daylight credit to pay their end-of-day closing position 
requirements on CHIPS. Some of these participants have stated that 
making these Fedwire payments has, on occasion, increased their demand 
for intraday credit.
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    \9\ CHIPCo is the affiliate of The New York Clearing House 
Association L.L.C. that owns and operates CHIPS.
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    In addition to the concerns raised by FBOs, the Board recognizes 
the continued globalization of the financial industry and that many 
FBOs have established substantial operations within the United States. 
Furthermore, FBOs might increase their U.S. activities with the 
business opportunities created by the Gramm-Leach-Bliley Act (Public 
Law 106-102) (GLB Act). As their U.S. business expands, FBOs could have 
a corresponding increase in their need for use of the U.S. payments 
system and daylight credit.

B. National Treatment Considerations

    While the Board understands the concerns of the foreign banking 
community, FBO participants in the payments system present risks that 
domestic depository institutions do not pose to the same extent and, 
accordingly, some differential treatment is warranted. Additional risks 
posed by FBOs include increased legal risk in pursuing claims against 
insolvent FBOs under the laws of various countries and increased 
supervisory risk in the monitoring of FBOs.
    FBOs present special legal risks to the Federal Reserve because of 
the differences in insolvency laws and public policy associated with 
the various FBOs' home countries. In international financial 
transactions, the overall risk borne by each party is affected not only 
by the governing law set out in the contract, but also by the law 
governing the possible insolvency of its counterparty. The insolvency 
of an international bank presents significant legal issues in enforcing 
particular provisions of a financial contract (such as close-out 
netting or irrevocability provisions) against third parties (such as 
the liquidator or supervisor of the failed bank). The insolvent party's 
national law also may permit the liquidator to subordinate other 
parties' claims (such as by permitting the home country tax authorities 
to have first priority in bankruptcy), may reclassify or impose a stay 
on the right the nondefaulting party has to collateral pledged by the 
defaulting party in support of a particular transaction, or may require 
a separate proceeding to be initiated against the head office in 
addition to any proceeding against the branch.
    It is not practicable for the Federal Reserve to undertake and keep 
current extensive analysis of the legal risks presented by the 
insolvency law(s) applicable to each FBO with a Federal Reserve account 
in order to quantify precisely the legal risk that the Federal Reserve 
incurs by providing intraday credit to that institution. It is 
reasonable, however, for the Federal Reserve to recognize that FBOs 
generally present additional legal risks to the payments system and, 
accordingly, limit its exposure to these institutions.
    In addition to the legal risks associated with FBO failures, the 
Federal Reserve faces elevated supervisory risks when monitoring FBOs. 
In some countries, supervisory information available to U.S. regulators 
may be less timely and not comparable to similar information used in 
the supervision of U.S. depository institutions. U.S. bank supervisors 
also lack a consolidated view of the FBO's risk management process and 
are unable to test its implementation on a global basis. Furthermore, 
FBO risk profiles differ due to varying industry and regulatory 
structures across countries.

[[Page 30207]]

III. Proposed Changes to PSR Policy

    The Board is requesting comment on the following policy changes 
related to the determination of FBOs' U.S. capital equivalency used in 
calculating net debit caps for their U.S. branches and agencies. 
Specifically, the proposed policy would allow
    1. FBOs that hold an FHC classification to use 35 percent of their 
capital as their U.S. capital equivalency. The Board believes that the 
capital and management requirements for FHCs and the heightened 
monitoring and supervision to which FHCs are subject justify permitting 
these FBOs to incur a higher level of daylight overdrafts.
    2. FBOs that are not FHCs and are ranked SOSA 1 to use 25 percent 
of capital as their U.S. capital equivalency. The Board believes that 
achieving the standards of the SOSA 1 ranking provide sufficient 
support for increasing the percentage of capital used for net debit cap 
calculations to 25 percent.\10\
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    \10\ The SOSA ranking is composed of four factors including the 
FBO's financial condition and prospects; the system of supervision 
in the FBO's home country; the record of the home country's 
government in support of the banking system or other sources of 
support for the FBO; and transfer risk concerns. Transfer risk 
relates to the FBO's ability to access and transmit U.S. dollars, 
which is an essential factor in determining whether an FBO can 
support its U.S. operations. The SOSA ranking is based on a scale of 
1 through 3 with 1 representing the lowest level of supervisory 
concern.
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    3. FBOs that are not FHCs and are ranked SOSA 2 to use 10 percent 
of their capital as their U.S. capital equivalency.
    4. FBOs that are not FHCs and are ranked SOSA 3 to use 5 percent of 
the FBO's ``net due to related depository institutions.'' \11\ 
Recognizing that net debit caps are granted at the discretion of the 
Federal Reserve, the Reserve Banks could require certain SOSA 3-ranked 
FBOs to fully collateralize their net debit caps.
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    \11\ The Reserve Banks may review other relevant information 
when considering whether to permit SOSA 3-ranked FBOs access to 
intraday credit. The PSR policy allows Reserve Banks to deny any 
depository institution access to Federal Reserve intraday credit 
based on any applicable information.
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    The Board believes its proposal to permit the use of higher 
percentages of capital for FBOs that hold an FHC classification or a 
SOSA 1-ranking will provide sufficiently larger daylight overdraft 
capacity to those institutions whose payment activity is currently 
constrained by their net debit caps. The Board believes that the 
benefits to the payments system of increasing the U.S. capital 
equivalency for FBOs that hold an FHC classification or a SOSA 1-
ranking outweigh the potential increase in credit risk to the Federal 
Reserve.
    In addition, an interim policy statement (Docket No. R-1107) that 
was published elsewhere in today's Federal Register allows depository 
institutions that have self-assessed net debit caps to pledge 
collateral to the Federal Reserve Banks in order to incur additional 
daylight overdrafts above their net debit cap levels. An FBO whose U.S. 
branch or agency has a self-assessed net debit cap and is in need of 
additional capacity may consult with its Administrative Reserve Bank on 
pledging collateral for this purpose.\12\
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    \12\ The interim policy statement expands the prior policy that 
permitted certain FBOs to pledge collateral to reach a maximum 
daylight overdraft capacity equal to their cap multiple times 10 
percent of their capital.
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A. Supervisory Rankings

    The Board considered how the SOSA rankings might alleviate some 
concerns about the timeliness and reliability of supervisory 
information. SOSA rankings reflect an assessment of an FBO's ability to 
provide financial, liquidity, and management support to its U.S. 
operations. In October 2000, SOSA rankings were made available to the 
FBOs' management and home country supervisor.\13\ Previously, SOSA 
rankings were used for internal Federal Reserve purposes only. SOSA 
rankings provide broader information about the condition of the FBO, 
its supervision, and the home country, whereas the BCA distinction 
provides information only about the home country treatment of bank 
capital adequacy. Furthermore, the BCA designation reflects the one-
time adoption of BCA standards by a country's supervisory authority, 
while U.S. bank supervisors update the SOSA rankings regularly.
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    \13\ For full text, see SR Letter 00-14 (SUP), Enhancements to 
the Interagency Program for Supervising the U.S. Operations of 
Foreign Banking Organizations, October 23, 2000.
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    The Board also considered the FHC status created by the GLB Act. 
The GLB Act authorizes bank holding companies (BHCs) and FBOs that are 
well capitalized and well managed, as those terms are defined in the 
statute and the Board's regulations, to elect FHC status and thereby 
engage in securities, insurance, and other activities that are 
financial in nature or incidental to a financial activity and that are 
otherwise impermissible for BHCs. FHCs must continue to meet the 
applicable capital and management standards in order to maintain their 
status and are subject to enhanced reporting requirements. The Board 
believes that, like the SOSA ranking, FHC status is preferable to the 
BCA distinction in determining the risk posed by FBOs to the U.S. 
payments system.\14\
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    \14\ While applying for FHC status is voluntary, the regulatory 
burden associated with applying is minimal for most institutions.
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    The Board, therefore, proposes to replace the current BCA 
distinction in the PSR policy with a combined SOSA-FHC structure and to 
increase the percentage of capital used in calculating net debit caps 
for certain U.S. branches and agencies of foreign banks. The Board 
believes that the SOSA ranking provides more specific, more 
comprehensive, and more timely information than the BCA distinction. As 
result, the Board believes that the definition of U.S. capital 
equivalency can be expanded further for FBOs that are FHCs or have a 
SOSA 1 ranking.

B. Alternative Measure of U.S. Capital Equivalency

    Under the current policy, an FBO from a country that does not 
adhere to the BCA must use an alternative measure for its U.S. capital 
equivalency that is not based on total capital. Currently, the 
alternative measure is 5 percent of ``liabilities to nonrelated 
parties'' or the amount of capital that would be required of a national 
bank being organized at a specific location. The Board believes that 
using an alternative measure of U.S. capital equivalency when an FBO's 
home country does not adhere to the BCA is appropriate given concerns 
over the potential lack of timely supervisory information regarding 
these FBOs and the Federal Reserve's inability to monitor each FBO's 
non-U.S. operations.
    While the Board proposes to eliminate the BCA criteria used in the 
current policy, the Board continues to support using an alternative 
measure of U.S. capital equivalency for U.S. branches and agencies of 
foreign banks that represent the greatest levels of supervisory 
concern. The Board believes that this alternative measure should be 
applied only to those FBOs that may exhibit significant financial or 
supervisory weaknesses, specifically SOSA 3-ranked FBOs under the 
proposed policy. In achieving this end, the Board believes that the 
alternative measure of U.S. capital equivalency for SOSA 3-ranked FBOs 
should reflect the capital investment of the FBO in its U.S. operations 
rather than its total capital.
    As an alternative measure for U.S. capital equivalency, the Board 
intends to replace the use of ``liabilities to nonrelated parties'' 
with ``net due to

[[Page 30208]]

related depository institutions.'' \15\ ``Liabilities to nonrelated 
parties'' may increase relative to assets when an institution becomes 
financially weaker and could unduly increase the institution's 
overdraft capacity. ``Net due to related depository institutions'' 
reflects the amounts owed to the parent by the branch and can be viewed 
as the capital investment by the FBO parent in its U.S. operations. In 
addition, the Board notes that this policy change would not affect any 
SOSA 3-ranked FBOs at this time.
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    \15\ Reporting Form FFIEC 002/002S. Report of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks. Schedule 
RAL--Assets and Liabilities: Liabilities: item 4--``Liabilities to 
nonrelated parties'' and item 5--``Net due to related depository 
institutions.''
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C. Capital Reporting

    In order to comply with the proposed policy changes, most U.S. 
branches and agencies of foreign banks requesting a net debit cap will 
need to complete the form ``Annual Daylight Overdraft Capital Report 
for U.S. Branches and Agencies of Foreign Banks'' (form FR 2225) to 
report capital that is used as the basis for their caps.\16\ Given that 
the form is short and does not require any calculations, the Board 
believes the cost of completing this form is not significant or 
burdensome. Currently, only five FBOs that have nonzero net debit caps 
do not file form FR 2225. These five FBOs would have to submit form FR 
2225 to comply with the revised policy.\17\
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    \16\ SOSA 3-ranked FBOs would not be required to file FR 2225 
because they would not be eligible to base their U.S. capital 
equivalency on capital.
    \17\ In 1998, the Board surveyed FBOs that filed FR 2225 to 
estimate the burden to the public of completing the form. As a 
result of the survey, the Board estimated the annual burden of 
completing FR 2225 to be one hour per FBO.
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IV. Request for Comment

    The Board requests comments on all aspects of the proposed policy 
changes outlined above. The Board is also requesting comments on the 
following questions:
    1. If the proposed policy changes are adopted, will the resulting 
net debit cap levels combined with the broader use of collateral 
outlined in the interim policy statement also published today for 
comment (Docket No. R-1107) provide a reasonable and prudent level of 
daylight overdraft capacity to address the liquidity needs of FBOs?
    2. Recognizing differences in risk between FBOs and domestic 
depository institutions, would the proposed policy provide FBOs 
appropriate access to the U.S. payments system?
    3. With regard to calculating U.S. capital equivalency, is ``net 
due to related depository institutions'' an appropriate proxy for SOSA 
3-ranked FBOs' U.S. capital equivalency?

V. Competitive Impact Analysis

    Under its competitive equity policy, the Board assesses the 
competitive impact of changes that have a substantial effect of 
payments system participants.\18\ The Board believes these 
modifications to its payments system risk program will have no adverse 
effect on the ability of other service providers to compete effectively 
with the Federal Reserve Banks in providing similar services.
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    \18\ These assessment procedures are described in the Board's 
policy statement entitled ``The Federal Reserve in the Payments 
System'' (55 FR 11648, March 29, 1990).
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VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
ch. 3506; 5 CFR 1320 appendix A.1), the Board has reviewed the request 
for comments under the authority delegated to the Board by the Office 
of Management and Budget. The collection of information pursuant to the 
Paperwork Reduction Act contained in the policy statement will not 
unduly burden depository institutions.

VII. Federal Reserve Policy Statement on Payments System Risk

    The Board proposes to replace section I.C.2. of the ``Federal 
Reserve Policy Statement on Payments System Risk'' as follows:

2. U.S. Branches and Agencies of Foreign Banks

    For U.S. branches and agencies of foreign banks, net debit caps on 
daylight overdrafts in Federal Reserve accounts are calculated by 
applying the cap multiples for each cap category to a foreign banking 
organization's (FBO's) U.S. capital equivalency.\10\
    <bullet> For FBOs that are financial holding companies (FHCs), U.S. 
capital equivalency is equal to 35 percent of capital.
    <bullet> For FBOs that are not FHCs and have a strength of support 
assessment ranking (SOSA) of 1, U.S. capital equivalency is equal to 25 
percent of capital.
    <bullet> For FBOs that are not FHCs and are ranked a SOSA 2, U.S. 
capital equivalency is equal to 10 percent of capital.
    <bullet> For FBOs that are not FHCs and are ranked a SOSA 3, U.S. 
capital equivalency is equal to 5 percent of the FBO's ``net due to 
related depository institutions.''
    Given the heightened supervisory concerns associated with SOSA 3-
ranked FBOs, a Reserve Bank may deny a SOSA 3-ranked FBO access to 
intraday credit. In the event a Reserve Bank grants a net debit cap to 
a SOSA 3-ranked FBO, the Reserve Bank may require the net debit cap to 
be fully collateralized.

______
    \10\ The term U.S. capital equivalency is used in this context 
to refer to the particular capital measure used to calculate 
daylight overdraft net debit caps and does not necessarily represent 
an appropriate capital measure for supervisory or other purposes.

    By order of the Board of Governors of the Federal Reserve 
System, May 30, 2001.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 01-13979 Filed 6-4-01; 8:45 am]
BILLING CODE 6210-01-P


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