To the Chief Operations Officer of Each Depository
Institution in the Second Federal Reserve District:
Operating Circular No. 10 has been revised, to be effective, October 15, 2006 ("Revised OC-10").
See the operating circulars page of the Federal Reserve Services website for the official version of Revised OC-10 and summary of changes.
The following summarizes some of the more significant substantive differences between Revised OC-10 and Current OC-10:
• A number of new Appendices have been added and existing Appendices have been revised and/or reorganized. Appendix 1 provides a new broad collateral description that Borrowers now authorize, pursuant to Section 7.5, the Reserve Banks to include in UCC-1 financing statements filed against the Borrower. Appendix 2 recites the terms of a new agreement—a control agreement among the Reserve Banks, which will ensure that each Reserve Bank will have a perfected security interest in any account maintained by any Borrower who has signed the Reserve Bank’s OC-10 at any other Reserve Bank (for example, a transition account). Each Borrower that agrees to OC-10 agrees to this control agreement. Appendix 3 and 4 are the Application Packages for U.S. banks and non-U.S. banks. Appendix 5 includes the "Ancillary Documents:" a revised form of third party custodian agreement and the correspondent agreement, which has not been changed. Note that the "BIC Agreement," in Current OC-10 has been deleted and replaced by the addition of relevant provisions from that agreement to the text of Revised OC-10 (for example, new Section 7.3, 7.6).
• Some definitions have been revised. Most notably, the definition of "Collateral " has been revised to get rid of some of the circularity of the definition in Current OC-10. In particular, the definition now includes most of the general asset category types listed in revised Article 9 of the UCC, as well as the asset categories that are described in and pledged under Section 6.2 of Current OC-10.
• Consistent with the definition of “obligation” as including any liability of the Borrower to any Reserve Bank, the granting clause (Section 6.0) has been revised to provide that the Borrower is pledging collateral to the Reserve Bank for itself and as agent of each other Reserve Bank to whom the Borrower owes any obligation. This clarifies that the collateral pledged to the local Reserve Bank under OC-10 is actually securing every obligation that the Borrower has to any and every Reserve Bank.
• Events of Default (Definition), Representations and Warranties (Section 9) and Covenants (Section 10) have been revised to be more comprehensive.
• Standard of care (Section 13). Under Current OC-10, a Borrower indemnified the Reserve Bank for losses, other than losses due to the Reserve Bank’s failure to exercise reasonable care. Revised OC-10 changes that standard to the Reserve Bank’s gross negligence or willful misconduct. This is consistent with standard commercial lending documentation.