Authorization for Foreign Currency Operations As Reaffirmed Effective January 26, 2021

Authorization for Foreign Currency Operations As reaffirmed effective January 26, 2021

IN GENERAL A. In a manner consistent with the obligations regarding exchange arrangements un- 1. The Federal Open Market Committee der Article IV of the Articles of Agreement (the “Committee”) authorizes the Federal Re- of the International Monetary Fund (IMF).1 serve Bank selected by the Committee (the B. In close and continuous cooperation “Selected Bank”) to execute open market trans- and consultation, as appropriate, with the actions for the System Open Market Account United States Treasury. as provided in this Authorization, to the extent C. In consultation, as appropriate, with necessary to carry out any foreign currency di- foreign monetary authorities, foreign central rective of the Committee: banks, and international monetary institu- A. To purchase and sell foreign currencies tions. (also known as cable transfers) at home and D. At prevailing market rates. abroad in the open market, including with the United States Treasury, with foreign mone- STANDALONE SPOT AND FORWARD tary authorities, with the Bank for Interna- TRANSACTIONS tional Settlements, and with other entities in the open market. This authorization to pur- 3. For any operation that involves chase and sell foreign currencies encom- standalone spot or forward transactions in for- passes purchases and sales through eign currencies: standalone spot or forward transactions and A. Approval of such operation is required through foreign exchange swap transactions. as follows: For purposes of this Authorization, foreign i. The Committee must direct the Se- exchange swap transactions are: swap trans- lected Bank in advance to execute the op- actions with the United States Treasury (also eration if it would result in the overall vol- known as warehousing transactions), swap ume of standalone spot and forward trans- transactions with other central banks under actions in foreign currencies, as defined in reciprocal currency arrangements, swap paragraph 3.C of this Authorization, ex- transactions with other central banks under ceeding $5 billion since the close of the standing dollar liquidity and foreign cur- most recent regular meeting of the Com- rency liquidity swap arrangements, and swap mittee. The Foreign Currency Subcommit- transactions with other entities in the open tee (the “Subcommittee”) must direct the market. Selected Bank in advance to execute the B. To hold balances of, and to have out- operation if the Subcommittee believes standing forward contracts to receive or to that consultation with the Committee is not deliver, foreign currencies. feasible in the time available. 2. All transactions in foreign currencies un- ii. The Committee authorizes the Sub- dertaken pursuant to paragraph 1 above shall, committee to direct the Selected Bank in unless otherwise authorized by the Committee, advance to execute the operation if it be conducted: would result in the overall volume of standalone spot and forward transactions

1 In general, as specified in Article IV, each derly economic growth with reasonable price sta- member of the IMF undertakes to collaborate with bility. These obligations also include avoiding ma- the IMF and other members to assure orderly ex- nipulating exchange rates or the international mon- change arrangements and to promote a stable sys- etary system in such a way that would impede ef- tem of exchange rates. These obligations include fective balance of payments adjustment or to give seeking to direct the member’s economic and finan- an unfair competitive advantage over other mem- cial policies toward the objective of fostering or- bers.

§ 3 Authorization for Foreign Currency Operations

in foreign currencies, as defined in para- provided in this Authorization and to the extent graph 3.C of this Authorization, totaling necessary to carry out any foreign currency di- $5 billion or less since the close of the rective of the Committee. most recent regular meeting of the Com- A. For reciprocal currency arrangements mittee. all drawings must be approved in advance by B. Such an operation also shall be: the Committee (or by the Subcommittee, if i. Generally directed at countering dis- the Subcommittee believes that consultation orderly market conditions; or with the Committee is not feasible in the time ii. Undertaken to adjust System bal- available). ances in light of probable future needs for B. For standing and temporary dollar li- currencies; or quidity swap arrangements all drawings iii. Conducted for such other purposes must be approved in advance by the Chair. as may be determined by the Committee. The Chair may approve a schedule of poten- C. For purposes of this Authorization, the tial drawings, and may delegate to the man- overall volume of standalone spot and for- ager, System Open Market Account, the au- ward transactions in foreign currencies is de- thority to approve individual drawings that fined as the sum (disregarding signs) of the occur according to the schedule approved by dollar values of individual foreign currencies the Chair. purchased and sold, valued at the time of the C. For standing foreign currency liquidity transaction. swap arrangements all drawings must be approved in advance by the Committee (or by WAREHOUSING the Subcommittee, if the Subcommittee believes that consultation with the Committee 4. The Committee authorizes the Selected is not feasible in the time available). Bank, with the prior approval of the Subcom- D. Operations involving standing and mittee and at the request of the United States temporary dollar liquidity swap arrange- Treasury, to conduct swap transactions with the ments and standing foreign currency liquid- United States Exchange Stabilization Fund es- ity swap arrangements shall generally be di- tablished by section 10 of the Gold Reserve rected at countering strains in financial mar- Act of 1934 under agreements in which the Se- kets in the United States or abroad, or reduc- lected Bank purchases foreign currencies from ing the risk that they could emerge, so as to the Exchange Stabilization Fund and the Ex- mitigate their effects on economic and finan- change Stabilization Fund repurchases the for- cial conditions in the United States. eign currencies from the Selected Bank at a E. For reciprocal currency arrangements, later date (such purchases and sales also known standing and temporary dollar liquidity swap as warehousing). arrangements, and standing foreign currency liquidity swap arrangements: RECIPROCAL CURRENCY ARRANGE- i. All arrangements are subject to an- MENTS, AND STANDING DOLLAR AND nual review and approval by the Commit- FOREIGN CURRENCY LIQUIDITY tee; SWAPS ii. Any new arrangements must be approved by the Committee; and 5. The Committee authorizes the Selected iii. Any changes in the terms of existing Bank to maintain reciprocal currency arrange- arrangements must be approved in ad- ments established under the North American vance by the Chair. The Chair shall keep Framework Agreement, standing dollar liquid- the Committee informed of any changes in ity swap arrangements, temporary dollar li- terms, and the terms shall be consistent quidity swap arrangements, and standing for- with principles discussed with and guid- eign currency liquidity swap arrangements as ance provided by the Committee.

§ 6 Authorization for Foreign Currency Operations

OTHER OPERATIONS IN FOREIGN CUR- and other deposit accounts at foreign insti- RENCIES tutions approved by the Board of Gover- nors under Regulation N. 6. Any other operations in foreign curren- C. The Subcommittee, in consultation cies for which governance is not otherwise with the Committee, may provide additional specified in this Authorization (such as foreign instructions to the Selected Bank regarding exchange swap transactions with private-sector holdings of foreign currencies. counterparties) must be authorized and directed in advance by the Committee. ADDITIONAL MATTERS

FOREIGN CURRENCY HOLDINGS 8. The Committee authorizes the Chair: A. With the prior approval of the Commit- 7. The Committee authorizes the Selected tee, to enter into any needed agreement or Bank to hold foreign currencies for the System understanding with the Secretary of the Open Market Account in accounts maintained United States Treasury about the division of at foreign central banks, the Bank for Interna- responsibility for foreign currency operational Settlements, and such other foreign insti- tions between the System and the United tutions as approved by the Board of Governors States Treasury; under Section 214.5 of Regulation N, to the ex- B. To advise the Secretary of the United tent necessary to carry out any foreign currency States Treasury concerning System foreign directive of the Committee. currency operations, and to consult with the A. The Selected Bank shall manage all Secretary on policy matters relating to for- holdings of foreign currencies for the System eign currency operations; Open Market Account: C. To designate Federal Reserve System i. Primarily, to ensure sufficient liquid- persons authorized to communicate with the ity to enable the Selected Bank to conduct United States Treasury concerning System foreign currency operations as directed by Open Market Account foreign currency op- the Committee; erations; and ii. Secondarily, to maintain a high de- D. From time to time, to transmit appro- gree of safety; priate reports and information to the National iii. Subject to paragraphs 7.A.i and Advisory Council on International Monetary 7.A.ii, to provide the highest rate of return and Financial Policies. possible in each currency; and 9. The Committee authorizes the Selected iv. To achieve such other objectives as Bank to undertake transactions of the type de- may be authorized by the Committee. scribed in this Authorization, and foreign B. The Selected Bank may manage such exchange and investment transactions that it foreign currency holdings by: may be otherwise authorized to undertake, i. Purchasing and selling obligations from time to time for the purpose of testing of, or fully guaranteed as to principal and operational readiness. The aggregate amount interest by, a foreign government or of such transactions shall not exceed $2.5 bil- agency thereof (“Permitted Foreign Secu- lion per calendar year. These transactions shall rities”) through outright purchases and be conducted with prior notice to the sales; Committee. ii. Purchasing Permitted Foreign Secu- 10. All Federal Reserve banks shall partici- rities under agreements for repurchase of pate in the foreign currency operations for Sys- such Permitted Foreign Securities and sell- tem Open Market Account in accordance with ing such securities under agreements for paragraph 3G(1) of the Board of Governors’ the resale of such securities; and Statement of Procedure with Respect to For- iii. Managing balances in various time eign Relationships of Federal Reserve Banks

§ 10 Authorization for Foreign Currency Operations dated January 1, 1944. be feasible to convene the Committee, to foster 11. Any authority of the Subcommittee pur- the Committee’s objectives by instructing the suant to this Authorization may be exercised by Selected Bank to engage in foreign currency the Chair if the Chair believes that consultation operations not otherwise authorized pursuant to with the Subcommittee is not feasible in the this Authorization. Any such action shall be time available. The Chair shall promptly report made in the context of the Committee’s discus- to the Subcommittee any action approved by sion and decisions regarding foreign currency the Chair pursuant to this paragraph. operations. The Chair, whenever feasible, will 12. The Committee authorizes the Chair, in consult with the Committee before making any exceptional circumstances where it would not instruction under this paragraph.