Effective July 25, 2013, the Federal Reserve Banks are amending Operating Circular 9, Federal Tax Payments and Treasury Tax and Loan Depositaries, and are retiring Operating Circular 8, Collateral.
Operating Circular 9 (OC 9) has been retitled Treasury Investments and Collateral Securing Public Funds and Financial Interests of the Government to reflect the full scope of its coverage, and OC 9 has reorganized policies and procedures related to programs under Treasury regulations found in 31 CFR parts 202, 203, and 225 without substantive changes to applicable Treasury policies and procedures. OC 9 now contains three main sections: securing public funds and investments (31 CFR parts 202 and 203); Treasury investments (31 CFR part 203); and pledges of collateral under 31 CFR part 225.
Any obligor, including any financial institution acting as agent or subagent of an obligor under 31 CFR part 225, should pay particular attention to section 6 of revised OC 9. Section 6 sets out the representations, warranties, and covenants made by each obligor and by each financial institution acting as agent or subagent of an obligor.
Other key changes made by this amendment include the following:
- Section 4 on Treasury investments describes procedures under which Federal Reserve Banks assist Treasury with investments of Treasury’s operating cash. Section 4 includes provisions applicable to the direct and term investment programs, as well as procedures by which a financial institution applies to become an investor.
- Section 5 describes the terms and conditions for collateral pledged to secure public funds and Treasury investments under Treasury regulations in 31 CFR parts 202 and 203. Section 5.3 sets out the representations and warranties made by each financial institution that has pledged collateral under 31 CFR part 202 or 203. Certain covenants made by each financial institution that has pledged collateral under 31 CFR part 202 or 203 are listed in section 5.4.
- Section 6 describes the terms and conditions for collateral pledged under Treasury regulations in 31 CFR Part 225. Specifically, section 6.2 sets out the representations and warranties made by each obligor and by each financial institution acting as agent or subagent of an obligor that has pledged collateral under 31 CFR part 225. Covenants made by each obligor and by each financial institution acting as agent or subagent of an obligor that has pledged collateral under 31 CFR part 225 are listed in section 6.3.
- Sections 5.5 and 6.4 provide that any item of collateral may be collected, sold, assigned, or transferred, and the proceeds therefrom applied, to satisfy any obligation that a pledgor owes to a federal government department, agency, or instrumentality to which collateral has been pledged.
- Section 7 covers debits and credits related to Treasury investments and collateral administration and authorizes the Federal Reserve Banks to debit or credit master accounts in accordance with OC 9.
This amendment incorporates a number of other changes. The definitive text of revised OC 9 is posted on FRBservices.org.
Your continued use of Federal Reserve Bank services in connection with Treasury programs under 31 CFR part 202, 203, or 225 on or after the effective date of July 25, 2013, constitutes agreement to the new terms of OC 9.
Operating Circular 8 (OC 8), Collateral, which discussed the purposes for which Federal Reserve Banks held collateral, will be simultaneously retired when the changes to OC 9 take effect. OC 8 is being retired because all relevant provisions have been or will be incorporated into other operating circulars, as follows: (i) provisions relating to collateral to secure obligations owed to Federal Reserve Banks are found in Operating Circular 10, Lending; (ii) additional provisions relating to collateral maintained in the Fedwire® Securities Service are found in Operating Circular 7, Book-Entry Securities Account Maintenance and Transfer Services; and (iii) provisions relating to collateral to secure Treasury investments, public funds and investments, and collateral under 31 CFR part 225 are consolidated in revised OC 9. The incorporation of the terms of former OC 8 into other operating circulars does not change Federal Reserve Bank procedures.
- The forms and agreements formerly found in appendixes to OC 8 and OC 9 will no longer be included in revised OC 9. Financial institutions may obtain current forms or agreements directly from the Federal Reserve Banks or from the Treasury.
See the link below on the Federal Reserve Financial Services website for the official version of revised OC 9. To request a paper copy of any operating circular, contact your Customer Contact Center.
“Fedwire” is a registered service mark of the Federal Reserve Banks. A complete list of marks owned by the Federal Reserve Banks is available at FRBservices.org.