Liquidity

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 566

[No. 97-116]

RIN 1550-AA77

Liquidity

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is issuing a final rule

that updates, simplifies, and streamlines its liquidity regulation.

This final rule follows a detailed review of the regulation to

determine whether it is necessary, imposes the least possible burden

consistent with statutory requirements and safety and soundness, and is

written in a clear, straightforward manner. Today's final rule is made

pursuant to the Regulatory Reinvention Initiative of the Vice

President's National Performance Review and section 303 of the

Community Development and Regulatory Improvement Act of 1994.

EFFECTIVE DATE: November 24, 1997.

FOR FURTHER INFORMATION CONTACT: Francis Raue, Program Analyst, (202)

906-5750, Robyn Dennis, Manager, Thrift Policy, (202) 906-5751,

Supervision Policy, or Susan Miles, Attorney, (202) 906-6798, Karen

Osterloh, Assistant Chief Counsel, (202) 906-6639, Regulations and

Legislation Division, Chief Counsel's Office, Office of Thrift

Supervision, 1700 G Street, NW, Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

Section 6 of the Home Owners' Loan Act (HOLA) \1\ requires savings

associations to hold a prescribed amount of statutorily defined liquid

assets. The Director of the OTS may, by regulation, vary the amount of

the liquidity requirement, but only within pre-established statutory

limits. The requirement must be no less than four percent and no

greater than ten percent of ``the obligation of the institution on

withdrawable accounts and borrowings payable on demand or with

unexpired maturities of one year or less.'' \2\ The Director may issue

regulations defining the terms used in the statute, prescribing or

limiting the extent to which certain assets included on the statutory

liquidity list may be used to meet the liquidity requirement, and

prescribing how to calculate the liquidity requirement.

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\1\ 12 U.S.C. 1465.

\2\ 12 U.S.C. 1465(b)(2).

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Regulations implementing the Director's authority under section 6

of the HOLA appear at 12 CFR part 566 (1997). These rules define liquid

assets to include cash and certain securities with detailed maturity

limitations and marketability requirements.\3\ The rules currently

impose a liquidity requirement of five percent of an institution's

liquidity base and a separate, ``short-term'' liquidity requirement of

one percent of that base. The liquidity base in defined as net

withdrawable accounts plus short-term borrowings. Except for

institutions with less than $25,000,000 in assets, liquidity

requirements are based on the ``average daily balance'' of the

liquidity base during the preceding month. Institutions with less than

$25,000,000 in assets may calculate their liquidity base using month-

end figures.

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\3\ 12 CFR 566.1(g) (1997).

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On May 14, 1997, the OTS published a notice of proposed rulemaking

(NPR) seeking comment on its liquidity regulation.\4\ The OTS sought to

reduce the burden of compliance with the statutory liquidity

requirement to the maximum extent possible, consistent with statutory

requirements and safety and soundness considerations. Specifically, the

OTS proposed to: (1) reduce the liquidity requirement from five percent

of net withdrawable accounts and short-term borrowings to four percent;

(2) remove the one percent short-term liquidity requirement; (3) set

forth an explicit requirement that thrifts maintain a safe and sound

level of liquidity; (4) streamline the calculations used to measure

compliance with the liquidity requirement; (5) expand the categories of

liquid assets that may count toward satisfying a savings association's

liquidity requirement; and (6) reduce the liquidity base by excluding

withdrawable accounts payable in more than one year form the definition

of the term ``net withdrawable accounts.''

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\4\ 62 FR 26449.

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II. Summary of Comments and Description of the Final Rule

The public comment period on the proposed rule closed on July 14,

1997. The OTS received twelve comments on its proposal. Commenters

included eight savings associations, two trade associations, one

holding company, and one individual. Commenters generally concurred

that the statutory liquidity requirement imposes an unnecessary burden

on institutions and no longer serves any useful purpose. Seven

commenters specifically urged the OTS to continue to seek legislation

that would eliminate this requirement. Two of these commenters urged

the elimination of the requirement for institutions rated 1 or 2 under

the CAMELS system.

Eleven commenters supported the proposed rule. These commenters

generally concluded that the proposed rule would reduce the regulatory

burden to the extent permitted by the statute, while maintaining the

safety and soundness of institutions. Several commenters suggested

revisions to the proposed rule which are discussed below. One commenter

opposed the proposed rule.

Today's final rule is substantially similar to the May proposal,

but incorporates several changes and clarifications in response to

comments received. Specific comments are discussed where appropriate in

the analysis below.

A. Reducing the Liquid Asset Requirement From Five to Four Percent and

Removing the One Percent Short-Term Requirement

The OTS proposed to reduce the liquid asset requirement from five

percent of the liquidity base to four percent, the lowest percentage

permissible by statute. Additionally, the OTS proposed to eliminate the

one percent short-term liquidity requirement, which is not mandated by

statute. The agency believed that these changes were consistent with

safety and soundness and the goal of reducing unnecessary burdens on

the industry.

Commenters generally supported the reduction of the liquid asset

requirement and the elimination of the short term liquidity

requirement. One commenter noted that the OTS would retain sufficient

flexibility through its examination process to determine the proper

amount of liquid assets to support safe and sound operations. One

commenter expressed general concern about this change, but did not cite

specific reasons for its concern. These changes are adopted as

proposed.

B. Adding a General Safety and Soundness Requirement

The OTS proposed to incorporate a general requirement that a

savings

[[Page 62510]]

association must maintain sufficient liquidity to ensure its safe and

sound operation. This requirement reflects the OTS's position that the

statutory requirement is not necessarily indicative of a safe level of

liquidity. The OTS would determine the adequacy of an institution's

liquidity on a case-by-case basis.

Most commenters agreed that it is appropriate to determine

liquidity requirements based on factors unique to each association, and

supported this proposed requirement. One commenter, however, opposed

the general safety and soundness requirement, suggesting that the

proposed rule was vague. The OTS disagrees. The ``safe and sound

operation'' standard is commonly used in banking parlance and in OTS

regulations.\5\ Safety and soundness determinations are generally made

on a case-by-case basis in light of the particular circumstances of

each institution. In the context of liquidity, a thrift is generally

required to ensure that its current and prospective sources of

liquidity are sufficient to permit it to meet its obligations in a

timely manner and to fulfill the legitimate banking needs of its

community.\6\

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\5\ See 12 CFR 559.1, 560.1, 562.2, and 563.161 (1997).

\6\ For additional guidance, savings associations should refer

to the Thrift Activities Handbook, Liquidity-Asset/Liability

Management, Chapter 500.

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One commenter encouraged the OTS to consider latent sources of

liquidity when determining whether an association is maintaining

sufficient liquidity for safety and soundness purposes. When OTS

evaluates an institution's liquidity, examiners consider additional

sources of liquidity, not only those assets that meet the regulatory

definition of liquid assets. Examiners consider the institution's

visible liquidity position (i.e., liquid assets such as cash and

marketable securities) and the institution's invisible liquidity

position (i.e., available borrowing capacity).\7\

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\7\ See Section 530, Cash Flow and Liquidity Management, Thrift

Activities Handbook.

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C. Streamlining the Average Balance Calculations of Liquid Assets and

Liquidity Base

The current rule requires each savings association (except certain

small associations and mutual savings banks) to calculate monthly

average daily balances of liquid assets and the liquidity base. Thus, a

savings association must calculate liquid assets and the liquidity base

at the close of each business day, and then compute the average daily

balance of the liquid assets and liquidity base for each month.

The proposal would streamline these calculations. While an

institution would be required to continually satisfy the liquidity

requirement, it would be required to calculate the liquidity base only

on the last day of the preceding calendar quarter. This change would

eliminate the need to calculate the average daily balance of the

liquidity base for each month.

Commenters generally supported the proposed change to the liquidity

base calculation as less burdensome, but suggested certain

clarifications and modifications to further reduce the burden of

compliance. For example, one commenter noted that it may be difficult

or burdensome for some institutions to make the change to the new

liquidity base calculation. The OTS goal is to decrease, rather than

increase, regulatory burden connected with the statutory liquidity

calculation. Accordingly, the final rule permits institutions to choose

to use either the current or new method as set forth in the proposal of

calculating the liquidity base.

Several commenters asked OTS to clarify how the liquid asset amount

is to be calculated. For example, commenters asked whether liquid

assets would be based on the actual balance at the end of each business

day, the end of each calendar month, or the end of each quarter, and

whether liquid assets would be based on the average daily balance for

each month or quarter.

The final rule does not require a savings association to hold the

required amount of liquid assets every day. Such a requirement would

increase, rather than decrease, the regulatory burden imposed on

institutions under the current regulation. Conversely, while a

requirement that a savings association must hold the required amount of

liquid assets only on one day during a quarter or month would reduce

regulatory burden, such a requirement would, in effect, nullify the

statutory liquidity requirement, and would be contrary to the statutory

directive that liquid assets be maintained at a level specified by the

Director.\8\ Accordingly, the final rule continues to require savings

associations to calculate liquid assets based on an average daily

balance over a period of time. However, instead of determining the

average daily balance for each month, a savings association will now

determine the average daily balance for each quarter.

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\8\ See 12 U.S.C. 1465(b)(1).

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Under the final rule, a savings association may choose to calculate

its liquidity ratio in one of two ways. It can maintain an average

daily balance of liquid assets in each calendar quarter of not less

than four percent of either: (1) its liquidity base at the end of the

preceding quarter, or (2) the average daily balance of its liquidity

base during the preceding quarter. The method of calculating the

average daily balances for a period would be unchanged under the final

rule.

D. Expanding the Categories of Liquid Assets That Count Toward

Satisfaction of the Liquidity Requirement

Under sections 6(b)(1)(C) (vi) and (vii) of the HOLA,\9\ as added

by the Financial Institutions Reform, Recovery, and Enforcement Act of

1989 (FIRREA),\10\ certain mortgage-related securities and mortgage

loans qualify as liquid assets to the extent approved by the Director

of the OTS. The first category consists of mortgage-related securities

that are defined in section 3(a)(41) of the Securities Exchange Act of

1934. The second category consists of mortgage loans on the security of

a first lien on residential real property, if the mortgage loans

qualify as backing for mortgage-backed securities issued by the Federal

National Mortgage Association (FNMA) or the Federal Home Loan Mortgage

Corporation (FHLMC) or are guaranteed by the Government National

Mortgage Association (GNMA). The qualifying mortgage-related securities

and mortgage loans must have one year or less remaining until maturity,

or be subject to an agreement (including a repurchase agreement, put

option, right of redemption, or takeout commitment) that requires

another person to purchase the securities within a period that does not

exceed one year. In addition, the person that agrees to purchase the

securities must be an insured depository institution (as defined in

section 3 of the Federal Deposit Insurance Act) that is in compliance

with applicable capital standards, a primary dealer in United States

Government securities, or a broker or dealer registered under the

Securities Exchange Act of 1934.

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\9\ 12 U.S.C. 1465(b)(1)(C)(vi), (vii).

\10\ Pub. L. 101-73, 103 Stat. 183, 313-314 (1989).

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The OTS proposed to add the FIRREA categories to the definition of

liquid assets. Commenters generally supported the addition of these new

categories. Accordingly, these new categories are added in the final

rule.

The proposed rule text described the specific requirements for

loans and mortgage-related securities with cross-references to other

regulations and statutes. One commenter argued that the cross-

references are different to

[[Page 62511]]

understand and urged the OTS to restate all applicable requirements in

the rule text. The statutes and regulations cross-referenced by the

proposed rule are rather lengthy. The OTS believes that the benefit of

having a concise rule outweighs the inconvenience of having to look to

the HOLA, the statute governing most savings association activities.

Consequently, the cross-references are retained.

Another commenter recommended that the OTS should also include, in

the definition of liquid assets, adjustable rate mortgage-backed

securities issued by the FNMA, the FHLMC, or the GNMA. This commenter

pointed out that the definition of liquid assets in the regulation

suggests that an asset's final maturity always has a link to its price

sensitivity or liquidity. The commenter noted that over the years the

more common types of adjustable rate mortgage-backed securities have

developed significant secondary market liquidity, and have price

sensitivities that are lower than many of the currently qualifying

liquid asset alternatives.

Section 6(b)(1) of the HOLA describes the specific types of assets

that the OTS may consider to be liquid assets. The statutory listing

includes ``such obligations, including such special obligations, of the

United States, a State, any territory or possession of the United

States, or a political subdivision, agency or instrumentality of any

one or more of the foregoing, and bankers' acceptances, as the Director

may approve.'' \11\ The OTS, and its predecessor, the Federal Home Loan

Bank Board (FHLBB), have long included obligations of FNMA, GNMA, and

FHLMC among such special obligations.\12\ While section 6(b)(1)(c)(ii)

of the HOLA does not contain any maturity requirement for such

obligations, the current OTS regulation provides that, in order to

qualify as a liquid asset, such obligations must have five years or

less remaining until maturity. The ostensible basis for the imposition

of these liquidity requirements was to reduce the risk of loss on the

securities held as liquid assets.\13\

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\11\ 12 U.S.C. 1465(b)(1)(c)(ii).

\12\ See 12 CFR 566.1(g)(3) (1997).

\13\ See 39 FR 41263 (November 26, 1974).

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Upon review, the OTS believes that the maximum five-year maturity

requirement for these specific obligations under Sec. 566.1(g)(3) and

the related maturity requirement for obligations of the United States

under Sec. 566.1(g)(2) are outdated and unnecessary.\14\ In addition,

we note that the other federal banking agencies do not impose, for

liquidity purposes, a five-year maturity requirement for obligations.

The continuing imposition of this requirement is contrary to our

objectives of relieving unnecessary burden on the industry, and is

consistent with the treatment of these assets by the other federal

banking regulators in their safety and soundness examinations.

Therefore, the OTS has removed the maturity requirement for these

obligations.

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\14\ We note that the agency has adjusted this maturity

requirement in the past. See 39 FR 17219 (May 14, 1974).

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E. Excluding Accounts With Unexpired Maturities Exceeding One Year From

the Definition of ``Net Withdrawable Accounts''

A savings association must maintain liquid assets of not less than

a stated percentage of the amount of its liquidity base. The regulation

defines ``liquidity base'' as net withdrawable accounts plus short term

borrowings.\15\ It defines ``net withdrawable accounts'' as all

withdrawable accounts less the unpaid balance of all loans secured by

such accounts with certain exclusions.\16\ ``Short term borrowings'' is

defined as borrowings where any portion of the principal is payable on

demand or in one year or less.\17\

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\15\ 12 CFR 566.1(c) (1997).

\16\ 12 CFR 566.1(d) (1997).

\17\ 12 CFR 566.1(e) (1997).

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The OTS proposed to redefine ``net withdrawable accounts'' by

excluding accounts with unexpired maturities exceeding one year and by

deleting the word ``all'' from the phrase ``all withdrawable accounts''

in the first part of the definition. These changes would reduce a

savings association's liquidity base which would reduce the

association's liquid asset requirement.

Three commenters addressed this change. One commenter observed that

this change is consistent with the regulation's current exclusion from

the liquidity base of borrowings payable in more than one year. The

commenter also noted that the statute does not specify different

maturity requirements for withdrawable accounts and borrowings in the

liquidity base.

Another commenter agreed with the proposed exclusion, provided that

excluded accounts with maturities of more than one year are subject to

an effective early withdrawal penalty. The OTS has decided not to

impose an early withdrawal penalty requirement for excluded accounts

with maturities of more than one year. Such a requirement is

unnecessary and would place an additional burden on savings

associations, which is contrary to the spirit of this rulemaking.

Two commenters noted that associations would have to create new

reports in order to exclude deposits with unexpired maturities

exceeding one year from their liquidity bases. These commenters

requested that the final rule explicitly permit institutions to elect

to use either the proposed or the current, more stringent, method of

calculating the liquidity base.

The OTS agrees. Accordingly, the final rule provides a savings

association with the option to exclude deposits with unexpired

maturities exceeding one year from its liquidity base as proposed, or

to continue to use the more stringent method of calculating the

liquidity base. To implement this change, the OTS has amended the

current definition of net withdrawable accounts to give institutions

the option of either applying the current definition of net

withdrawable accounts or excluding withdrawable account deposits with

maturities exceeding one year from the computation of net withdrawable

accounts.

F. Technical Revisions

The OTS has made several technical revisions to Sec. 566.1. These

revisions include appropriate cross-references in paragraph (g)(8) to

new paragraphs (g)(12) and (g)(13) and punctuation and other minor

changes throughout paragraph (g).

III. Paperwork Reduction Act

The recordkeeping requirements contained in this final rule have

been submitted to and approved by the Office of Management and Budget

in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

3507(d)) under OMB control number 1550-0011.

Comments on all aspects of this information collection should be

sent to the Office of Management and Budget, Paperwork Reduction

Project (1550), Washington, DC 20503 with copies to the OTS, 1700 G

Street, NW., Washington, DC 20552.

Under the Paperwork Reduction Act of 1995, no persons are required

to respond to a collection of information unless it displays a valid

OMB control number. The valid OMB control number assigned to the

collection of information in this final rule is displayed at 12 CFR

506.1(b).

The recordkeeping requirements contained in this final rule are

found at 12 CFR 566.4 (1997). The information is needed by the OTS in

order to ensure that associations comply with a

[[Page 62512]]

statutory liquidity requirement. The likely recordkeepers are OTS-

regulated savings associations. Records are to be maintained in

accordance with basic business practices, but not less than a period of

three years.

IV. Executive Order 12866

The Director of the OTS has determined that this final rule does

not constitute a ``significant regulatory action'' for purposes of

Executive Order 12866.

V. Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub.

L. 96-354, 5 U.S.C. 601), the OTS certifies that this regulation will

not have a significant economic impact on a substantial number of small

entities. It reduces the liquidity requirement from five percent to

four percent, which should increase all savings associations' abilities

to manage their assets. Additionally, the final regulation should ease

the administrative burden of calculating compliance with liquidity

requirements for all savings associations, including small savings

associations.

VI. Unfunded Mandates Act of 1995

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.

104-4 (Unfunded Mandates Act), requires that an agency prepare a

budgetary impact statement before promulgating a rule that includes a

federal mandate that may result in expenditure by state, local, and

tribal governments, in the aggregate, or by the private sector, of $100

million or more in any one year. If a budgetary impact statement is

required, Section 205 of the Unfunded Mandates Act also requires an

agency to identify and consider a reasonable number of regulatory

alternatives before promulgating a rule. As discussed in the preamble,

this final rule reduces regulatory burden. The OTS has determined that

the final rule will not result in expenditures by state, local, or

tribal governments or by the private sector of $100 million or more.

Accordingly, this rulemaking is not subject to section 202 of the

Unfunded Mandates Act.

VII. Effective Date

Section 302 of the CDRIA requires that regulations that impose

additional reporting, disclosure, or other new requirements take effect

on the first day of the calendar quarter following publication of the

rule unless, among other things, the agency determines, for good cause,

that the regulations should become effective before that date. The OTS

believes that CDRIA does not apply because this final rule imposes no

new burden on thrifts. Further, the OTS believes that an immediate

effective date is appropriate since the final rule relieves regulatory

burden on savings associations. An immediate effective date would

permit savings associations to better manage their assets by reducing

the liquidity requirement from five to four percent and by eliminating

the short-term liquidity requirement. Additionally, the final rule

should ease administrative burden of computing compliance with

liquidity requirements. For these reasons, the OTS believes that an

immediate effective date is appropriate for this final rule.

Section 553(d) of the Administrative Procedure Act requires an

agency to publish a substantive rule at least 30 days before its

effective date. Section 553(d) of the APA permits waiver of the 30-day

delayed effective date requirement for, inter alia, good cause or where

a rule relieves a restriction. The OTS further finds that the 30-day

delayed effective date requirement may be waived because this final

rule relieves regulatory restrictions.

List of Subjects in 12 CFR Part 566

Liquidity, Reporting and recordkeeping requirements, Savings

associations.

Accordingly, the Office of Thrift Supervision hereby amends part

566, chapter V, title 12, Code of Federal Regulations, as set forth

below:

PART 566--LIQUIDITY

1. The authority citation for part 566 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1465, 1467a; 15

U.S.C. 1691, 1691a.

2. Section 566.1 is amended by:

a. Revising paragraph (d);

b. Revising paragraph (g)(2);

c. Revising paragraph (g)(3) introductory text;

d. Revising paragraphs (g)(4)(i)(A) and (g)(4)(i)(B);

e. Revising paragraphs (g)(8), (g)(9) and (g)(10);

f. In paragraph (g)(11)(i), removing ``(``Association member'').''

and adding ``(``Association member'') or'' in its place;

g. In paragraph (g)(11), removing the period at the end of the

concluding text and adding a semicolon in its place;

h. Adding paragraphs (g)(12) and (g)(13); and

i. Removing paragraph (h).

The additions and revisions read as follows:

Sec. 566.1 Definitions.

* * * * *

(d) Net withdrawable accounts. The term net withdrawable accounts

means withdrawable accounts less the unpaid balance of loans secured by

such accounts. In computing net withdrawable accounts, a savings

association may, at its option, exclude withdrawable accounts maturing

in more than one year. Tax and loan accounts, note accounts, accounts

to the extent that security has been given upon them pursuant to any

applicable regulations, U.S. Treasury General Accounts, and U.S. Time

Deposit Accounts are not withdrawable accounts.

* * * * *

(g) * * *

(2) Except as the Office may otherwise direct in a specific case,

obligations of the United States;

(3) Obligations issued or fully guaranteed as to principal and

interest, by:

* * * * *

(4) * * *

(i) * * *

(A) Negotiable and will mature in one year or less;

(B) Not negotiable and will mature in 90 days or less; or

* * * * *

(8) Shares or certificates in any open-end management investment

company registered with the Securities and Exchange Commission under

the Investment Company Act of 1940, while the portfolio of such company

is restricted by its investment policy, changeable only by vote of the

shareholders, to investments described in the other provisions of

paragraphs (g)(1) through (g)(7), (g)(9), (g)(12), and (g)(13) of this

section;

(9) Corporate debt obligations and commercial paper denominated in

dollars, Provided, That:

(i) Such corporate debt obligations:

(A) Continue to be rated in one of the four highest categories by

the most recently published rating of such obligations by a nationally

recognized investment rating service;

(B) Are marketable as defined by Sec. 541.7 of this chapter;

(C) Will mature in three years or less; and

(D) Are not convertible to common stock;

(ii) Such commercial paper:

(A) Continues to be rated in one of the two highest categories by

the most recently published rating of such paper by two nationally

recognized investment rating services, or, if unrated, is guaranteed by

a company having outstanding paper that is so rated; and

[[Page 62513]]

(B) Will mature in 270 days or less; and

(iii) An amount not in excess of one percent of such institution's

assets invested in eligible corporate debt obligations or commercial

paper of a single issuer shall be counted as a liquid asset;

(10) Reserves required to be maintained pursuant to title I of the

Depository Institution Deregulation and Monetary Control Act of 1980

(94 Stat. 132) and established pursuant to 12 CFR part 204, whether in

the form of:

(i) Vault cash, as defined in 12 CFR 204.2, provided that vault

cash shall be included only once in calculating the aggregate amount of

liquid assets;

(ii) Balances maintained directly with the Federal Reserve Bank in

the district in which the savings association is located; or

(iii) A pass through account as defined in 12 CFR 204.2;

* * * * *

(12) Mortgage-related securities as described in 12 U.S.C.

1465(b)(1)(C)(vi); and

(13) Mortgage loans on the security of a first lien on residential

real property as described in 12 U.S.C. 1465(b)(1)(C)(vii).

3. Section 566.2 is revised to read as follows:

Sec. 566.2 Requirements.

(a) Safety and soundness requirement. In addition to meeting the

minimum requirement under paragraph (b) of this section, each saving

association must maintain sufficient liquidity to ensure its safe and

sound operation.

(b) Minimum statutory liquidity requirement. (1) Except as

otherwise provided in paragraph (c) of this section, each savings

association shall maintain an average daily balance of liquid assets in

each calendar quarter of not less than 4 percent of:

(i) The amount of its liquidity base at the end of the preceding

calendar quarter; or

(ii) The average daily balance of its liquidity base during the

preceding quarter.

(2) The average daily balance of either liquid assets or liquidity

base in a quarter is calculated by adding the respective balance as of

the close of each business day in a quarter, and for any non-business

day, as of the close of the nearest preceding business day, and

dividing the total by the number of days in the quarter.

(c) Reduction and suspension of liquidity requirements. The Office

may, to the extent and under conditions it may prescribe, permit a

savings association to reduce its liquid assets below the minimum

amount required by paragraph (b) of this section to meet withdrawals or

pay obligations. The Office may suspend part or all of the liquidity

requirements of paragraph (b) of this section whenever it determines

that conditions of national emergency or unusual economic stress exist.

Any such suspension, unless sooner terminated by its terms or by the

Office, shall terminate after 90 days, but the Office may again suspend

part or all of such requirement at any time.

Dated: November 13, 1997.

By the Office of Thrift Supervision.

Ellen S. Seidman,

Director.

[FR Doc. 97-30431 Filed 11-21-97; 8:45 am]

BILLING CODE 6720-01-M