[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Rules and Regulations]
[Pages 57911-57913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28522]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-0901]
Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board is amending Regulation D, Reserve Requirements of
Depository Institutions, to decrease the amount of transaction accounts
subject to a reserve requirement ratio of three percent, as required by
section 19(b)(2)(C) of the Federal Reserve Act, from $54.0 million to
$52.0 million of net transaction accounts. This adjustment is known as
the low reserve tranche adjustment. The Board has increased from $4.2
million to $4.3 million the amount of reservable liabilities of each
depository institution that is subject to a reserve requirement of zero
percent. This action is required by section 19(b)(11)(B) of the Federal
Reserve Act, and the adjustment is known as the reservable liabilities
exemption adjustment. The Board is also increasing the deposit cutoff
levels that are used in conjunction with the reservable liabilities
exemption to determine the frequency of deposit reporting from $55.4
million to $57.0 million for nonexempt depository institutions and from
$45.1 million to $46.4 million for exempt institutions. (Nonexempt
institutions are those with total reservable liabilities exceeding the
amount exempted from reserve requirements while exempt institutions are
those with total reservable liabilities not exceeding the amount
exempted from reserve requirements.) Thus nonexempt institutions with
total deposits of $57.0 million or more will be required to report
weekly while nonexempt institutions with total deposits less than $57.0
million may report quarterly, in both cases on form FR 2900. Similarly,
exempt institutions with total deposits of $46.4 million or more will
be required to report quarterly on form FR 2910q while exempt
institutions with total deposits less than $46.4 million may report
annually on form FR 2910a.
DATES: Effective date.: December 19, 1995.
Compliance dates. For depository institutions that report weekly,
the low reserve tranche adjustment and the reservable liabilities
exemption adjustment will apply to the reserve computation period that
begins Tuesday, December 19, 1995, and on the corresponding reserve
maintenance period that begins Thursday, December 21, 1995. For
institutions that report quarterly, the low reserve tranche adjustment
and the reservable liabilities exemption adjustment will apply to the
reserve computation period that begins Tuesday, December 19, 1995, and
on the corresponding reserve maintenance period that begins Thursday,
January 18, 1996. For all depository institutions, the deposit cutoff
levels will be used to screen institutions in the second quarter of
1996 to determine the reporting frequency for the twelve month period
that begins in September 1996.
FOR FURTHER INFORMATION CONTACT: J. Ericson Heyke III, Attorney (202/
452-3688), Legal Division, or June O'Brien, Economist (202/452-3790),
Division of Monetary Affairs; for users of the Telecommunications
Device for the Deaf (TDD), Dorothea Thompson (202/452-3544); Board of
Governors of the Federal Reserve System, Washington, DC 20551.
[[Page 57912]]
SUPPLEMENTARY INFORMATION: Section 19(b)(2) of the Federal Reserve Act
(12 U.S.C. 461(b)(2)) requires each depository institution to maintain
reserves against its transaction accounts and nonpersonal time
deposits, as prescribed by Board regulations. The initial reserve
requirements imposed under section 19(b)(2) were set at three percent
for net transaction accounts of $25 million or less and at 12 percent
on net transaction accounts above $25 million for each depository
institution. Effective April 2, 1992, the Board lowered the required
reserve ratio applicable to transaction account balances exceeding the
low reserve tranche from 12 percent to 10 percent. Section 19(b)(2)
also provides that, before December 31 of each year, the Board shall
issue a regulation adjusting for the next calendar year the total
dollar amount of the transaction account tranche against which reserves
must be maintained at a ratio of three percent. The adjustment in the
tranche is to be 80 percent of the percentage increase or decrease in
net transaction accounts at all depository institutions over the one-
year period that ends on the June 30 prior to the adjustment.
Currently, the low reserve tranche on net transaction accounts is
$54.0 million. The decrease in the net transaction accounts of all
depository institutions from June 30, 1994, to June 30, 1995, was 4.7
percent (from $828.1 billion to $789.3 billion). In accordance with
section 19(b)(2), the Board is amending Regulation D (12 CFR Part 204)
to decrease the low reserve tranche for transaction accounts for 1996
by $2.0 million to $52.0 million.
Section 19(b)(11)(A) of the Federal Reserve Act (12 U.S.C. 461
(b)(11)(B)) provides that $2 million of reservable liabilities \1\ of
each depository institution shall be subject to a zero percent reserve
requirement. Each depository institution may, in accordance with the
rules and regulations of the Board, designate the reservable
liabilities to which this reserve requirement exemption is to apply.
However, if net transaction accounts are designated, only those that
would otherwise be subject to a three percent reserve requirement
(i.e., net transaction accounts within the low reserve requirement
tranche) may be so designated.
\1\ Reservable liabilities include transaction accounts,
nonpersonal time deposits, and Eurocurrency liabilities as defined
in section 19(b)(5) of the Federal Reserve Act. The reserve ratio on
nonpersonal time deposits and Eurocurrency liabilities is zero
percent.
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Section 19(b)(11)(B) of the Federal Reserve Act provides that,
before December 31 of each year, the Board shall issue a regulation
adjusting for the next calendar year the dollar amount of reservable
liabilities exempt from reserve requirements. Unlike the adjustment for
the low reserve tranche on net transaction accounts, which adjustment
can result in a decrease as well as an increase, the change in the
exemption amount is to be made only if the total reservable liabilities
held at all depository institutions increases from one year to the
next. The percentage increase in the exemption is to be 80 percent of
the increase in total reservable liabilities of all depository
institutions as of the year ending June 30. Total reservable
liabilities of all depository institutions from June 30, 1994, to June
30, 1995, increased by 3.6 percent (from $1,573.9 billion to $1,631.0
billion). Consequently, the reservable liabilities exemption amount for
1996 under section 19(b)(11)(B) will be increased by $0.1 million to
$4.3 million.\2\
\2\ Consistent with Board practice, the tranche and exemption
amounts have been rounded to the nearest $0.1 million.
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The effect of the application of section 19(b) of the Federal
Reserve Act to the change in the total net transaction accounts and the
change in the total reservable liabilities from June 30, 1994, to June
30, 1995, is to decrease the low reserve tranche to $52.0 million, to
apply a zero percent reserve requirement on the first $4.3 million of
transaction accounts, and to apply a three percent reserve requirement
on the remainder of the low reserve tranche.
The tranche adjustment and the reservable liabilities exemption
adjustment for weekly reporting institutions will be effective on the
reserve computation period beginning Tuesday, December 19, 1995, and on
the corresponding reserve maintenance period beginning Thursday,
December 21, 1995. For institutions that report quarterly, the tranche
adjustment and the reservable liabilities exemption adjustment will be
effective on the computation period beginning Tuesday, December 19,
1995, and on the reserve maintenance period beginning Thursday, January
18, 1995. In addition, all institutions currently submitting Form FR
2900 must continue to submit reports to the Federal Reserve under
current reporting procedures.
In order to reduce the reporting burden for small institutions, the
Board has established deposit reporting cutoff levels to determine
deposit reporting frequency. Institutions are screened during the
second quarter of each year to determine reporting frequency beginning
the following September. In July of 1988 the Board set a single cutoff
level for all depository institutions of $40 million plus an amount
equal to 80 percent of the annual rate of increase of total
deposits.\3\ In August of 1994, the Board replaced the single deposit
cutoff level that had applied to both nonexempt and exempt institutions
with separate cutoff levels. The cutoff level for nonexempt
institutions, which determines whether they report (on FR 2900)
quarterly or weekly, was raised from the indexed level of $44.8 million
to $55.0 million. The deposit cutoff level for exempt institutions,
which determines whether they report annually (on FR 2910a) or
quarterly (on FR 2910q), remained at the indexed level of $44.8
million.
\3\ ``Total deposits'' as used in determining the cutoff level
includes not only gross transaction deposits, savings accounts, and
time deposits, but also reservable obligations of affiliates,
ineligible acceptance liabilities, and net Eurocurrency liabilities.
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From June 30, 1994, to June 30, 1995, total deposits increased 3.7
percent, from $3,831.6 billion to $3,973.6 billion. Accordingly, the
nonexempt deposit cutoff level will increase by $1.6 million to $57.0
million and the exempt deposit cutoff level will increase by $1.3
million to $46.4 million. Based on the indexation of the reservable
liabilities exemption, the cutoff level for total deposits above which
reports of deposits must be filed will rise from $4.2 million to $4.3
million. Institutions with total deposits below $4.3 million are
excused from reporting if their deposits can be estimated from other
data sources. The $57.0 million cutoff level for weekly versus
quarterly FR 2900 reporting for nonexempt institutions, the $46.4
million cutoff level for quarterly FR 2910q versus annual FR 2910a
reporting for exempt institutions, and the $4.3 million level threshold
for reporting will be used in the second quarter 1996 deposits report
screening process, and the adjustments will be made when the new
deposit reporting panels are implemented in September 1996.
All U.S. branches and agencies of foreign banks and all Edge and
agreement corporations, regardless of size, are required to file weekly
the Report of Transaction Accounts, Other Deposits and Vault Cash (FR
2900). After the indexations become effective in 1996, all other
institutions that have reservable liabilities in excess of the
exemption level of $4.3 million prescribed by section 19(b)(11) of the
Federal Reserve Act (known as ``nonexempt institutions'') and total
deposits at least equal to the nonexempt
[[Page 57913]]
deposit cutoff level ($57.0 million) will be required to file weekly
the Report of Transaction Accounts, Other Deposits and Vault Cash (FR
2900) for the twelve-month period starting September 1996. However,
nonexempt institutions with total deposits less than the nonexempt
deposit cutoff level ($57.0 million) may file the FR 2900 quarterly.
Institutions that obtain funds from non-U.S. sources or that have
foreign branches or international banking facilities are required to
file the Report of Certain Eurocurrency Transactions (FR 2950/2951) at
the same frequency as they file the FR 2900.
Institutions with reservable liabilities at or below the exemption
level ($4.3 million) (known as exemptinstitutions) must file the
Quarterly Report of Selected Deposits, Vault Cash, and Reservable
Liabilities (FR 2910q) if their total deposits equal or exceed the
exempt deposit cutoff level ($46.4 million). Exempt institutions with
total deposits less than the exempt deposit cutoff level ($46.4
million) but at least equal to the exemption amount ($4.3 million) must
file the Annual Report of Total Deposits and Reservable Liabilities (FR
2910a). Institutions that have total deposits less than the exemption
amount ($4.3 million) are not required to file deposit reports if their
deposits can be estimated from other data sources.
Finally, the Board may require a depository institution to report
on a weekly basis, regardless of the cutoff level, if the institution
manipulates its total deposits and other reservable liabilities in
order to qualify for quarterly reporting. Similarly, any depository
institution that reports quarterly may be required to report weekly and
to maintain appropriate reserve balances with its Reserve Bank if,
during its computation period, it understates its usual reservable
liabilities or it overstates the deductions allowed in computing
required reserve balances.
Notice and public participation. The provisions of 5 U.S.C. 553(b)
relating to notice and public participation have not been followed in
connection with the adoption of these amendments because the amendments
involve expected, ministerial adjustments prescribed by statute and by
an interpretative statement reaffirming the Board's policy concerning
reporting practices. Moreover, the low reserve tranche adjustment and
the reservable liabilities exemption adjustment are required to be
effective for the next calendar year even though the data which they
are required to reflect are only available late in the prior year. In
addition, the reservable liabilities exemption adjustment and the
increases for reporting purposes in the deposit cutoff levels reduce
regulatory burdens on depository institutions, and the low reserve
tranche adjustment will have a de minimis effect on depository
institutions with net transaction accounts exceeding $52 million.
Accordingly, the Board finds good cause for determining, and so
determines, that notice and public participation is unnecessary,
impracticable, and contrary to the public interest.
The provisions of 5 U.S.C. 553(d) relating to notice of the
effective date of a rule have not been followed in connection with the
adoption of these amendments because the low reserve tranche adjustment
and the reservable liabilities adjustment are expected, ministerial
amendments prescribed by statute. Moreover, they are required to be
effective for the next calendar year even though the data which they
are required to reflect are only available late in the prior year. In
addition, the reservable liabilities adjustment and the increase in
deposit cutoff levels for reporting purposes relieve a restriction on
depository institutions, and the low reserve tranche will have a de
minimis effect on depository institutions with net transaction accounts
exceeding $52 million. Accordingly, there is good cause to determine,
and the Board so determines, that such notice is impracticable or
unnecessary.
List of Subjects in 12 CFR Part 204
Banks, banking, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Board is amending 12
CFR Part 204 as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
1. The authority citation for Part 204 continues to read as
follows:
Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and
3105.
2. In Sec. 204.9 paragraph (a) is revised to read as follows:
Sec. 204.9 Reserve requirement ratios.
(a)(1) Reserve percentages. The following reserve ratios are
prescribed for all depository institutions, Edge and Agreement
corporations, and United States branches and agencies of foreign banks:
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Category Reserve requirement \1\
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Net transaction accounts:
$0 to $52.0 million..................... 3 percent of amount.
over $52.0 million...................... $1,560,000 plus 10 percent
of amount over $52.0
million.
Nonpersonal time deposits................. 0 percent.
Eurocurrency liabilities.................. 0 percent.
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\1\ Before deducting the adjustment to be made by the paragraph (a)(2)
of this section.
(2) Exemption from reserve requirements. Each depository
institution, Edge or agreement corporation, and U.S. branch or agency
of a foreign bank is subject to a zero percent reserve requirement on
an amount of its transaction accounts subject to the low reserve
tranche in paragraph (a)(1) of this section not in excess of $4.3
million determined in accordance with Sec. 204.3(a)(3).
* * * * *
By order of the Board of Governors of the Federal Reserve
System, November 15, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-28522 Filed 11-22-95; 8:45 am]
BILLING CODE 6210-01-P
