April 8, 2002 News Archive

Derivative Contracts Hedging Trust Preferred Stock
The Board issued an SR letter to address hedging trust preferred stock with certain derivative contracts. Some derivative contracts, such as interest rate swaps, being offered to bank holding companies to hedge trust preferred stock could jeopardize the eligibility of that trust preferred stock for Tier 1 capital. These derivative contracts require that - during a deferral period - the BHC continue to pay interest to the derivative counterparty even though the counterparty would defer swap payments back to the BHC. Any FRS supervised banking organization that has hedged trust preferred stock with an interest rate derivative contract that is asymmetrical with regard to deferral terms should immediately contact its Reserve Bank. SR Letter 02-10 provides further guidance.

Updated List of Securities Underwriting and Dealing Subsidiaries
The Board released an updated list of section 4(k)(4)(E) securities subsidiaries and financial subsidiaries of state member banks as well as section 20 subsidiaries as of December 31, 2001.

FFIEC Publishes Fourth Quarter 2001 Country Exposure Report
The Federal Financial Institutions Examination Council (FFIEC) released the December 31, 2001 statistical results of the country exposure lending survey (PDF), which details transfer risk claims on foreign borrowers held by U.S. banks. Claims on borrowers from developed countries generally represent over two-thirds of all claims. At the end of the fourth quarter claims on borrowers from Latin America and the Caribbean represented 12.1% of all claims. Claims from Argentina totaled $9.1 billion, down 24% from $11.9 billion in Q4 `00. Claims from Eastern Europe, Asia and Africa were minimal.

Please contact Dave Lingo at (312) 322-4738 for information on transfer risk claims and the lending survey.

The Evolution of the Federal Reserve's Intraday Credit Policies
An article (PDF) in the Federal Reserve Bulletin discusses the history of the Board's intraday credit policies and trends in daylight overdrafts and payment activities as well as the implications for possible future policy direction.