[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Rules and Regulations]
[Pages 60171-60173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30148]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
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Federal Register / Vol. 61, No. 230 / Wednesday, November 27, 1996 /
Rules and Regulations
[[Page 60171]]
FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-0945]
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 $52.0 million to
$49.3 million of net transaction accounts. This adjustment is known as
the low reserve tranche adjustment. The Board is increasing from $4.3
million to $4.4 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 $57.0
million to $59.3 million for nonexempt depository institutions and from
$46.4 million to $48.2 million for exempt institutions. (Nonexempt
institutions are those with total reservable liabilities exceeding the
amount exempted from reserve requirements ($4.4 million) while exempt
institutions are those with total reservable liabilities not exceeding
the amount exempted from reserve requirements.) Thus nonexempt
institutions with total deposits of $59.3 million or more will be
required to report weekly while nonexempt institutions with total
deposits less than $59.3 million may report quarterly, in both cases on
form FR 2900. Similarly, exempt institutions with total deposits of
$48.2 million or more will be required to report quarterly on form FR
2910q while exempt institutions with total deposits less than $48.2
million may report annually on form FR 2910a.
DATES: Effective date. December 17, 1996.
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 31, 1996, and the corresponding reserve
maintenance period that begins Thursday, January 2, 1997. 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 17, 1996, and
the corresponding reserve maintenance period that begins Thursday,
January 16, 1997. For all depository institutions, the deposit cutoff
levels will be used to screen institutions in the second quarter of
1997 to determine the reporting frequency for the twelve month period
that begins in September 1997.
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.
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
$52.0 million. Net transaction accounts of all depository institutions
decreased by 6.5 percent (from $789.2 billion to $737.7 billion) from
June 30, 1995, to June 30, 1996. 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 1997 by $2.7 million
to $49.3 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.
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\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 increase from one year to the next.
The percentage
[[Page 60172]]
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 increased by 3.6 percent (from $1,632.3 billion to
$1,691.8 billion) from June 30, 1995, to June 30, 1996. Consequently,
the reservable liabilities exemption amount for 1997 under section
19(b)(11)(B) will be increased by $0.1 million to $4.4 million.2
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, 1995, to June 30,
1996, is to decrease the low reserve tranche to $49.3 million, to apply
a zero percent reserve requirement on the first $4.4 million of
transaction accounts, and to apply a three percent reserve requirement
on the remainder of the low reserve tranche.
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\2\ Consistent with Board practice, the tranche and exemption
amounts have been rounded to the nearest $0.1 million.
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The tranche adjustment and the reservable liabilities exemption
adjustment for weekly reporting institutions will be effective on the
reserve computation period beginning Tuesday, December 31, 1996, and on
the corresponding reserve maintenance period beginning Thursday,
January 2, 1997. For institutions that report quarterly, the tranche
adjustment and the reservable liabilities exemption adjustment will be
effective on the computation period beginning Tuesday, December 17,
1996, and on the reserve maintenance period beginning Thursday, January
16, 1997. 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. In 1996, these levels were increased to $57.0 million
and $46.4 million, respectively.
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\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, 1995, to June 30, 1996, total deposits increased 4.9
percent, from $3,975.5 billion to $4,172.0 billion. Accordingly, the
nonexempt deposit cutoff level will increase by $2.3 million to $59.3
million and the exempt deposit cutoff level will increase by $1.8
million to $48.2 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 $4.3 million to $4.4
million. Institutions with total deposits below $4.4 million will be
excused from reporting if their deposits can be estimated from other
data sources. The $59.3 million cutoff level for weekly versus
quarterly FR 2900 reporting for nonexempt institutions, the $48.2
million cutoff level for quarterly FR 2910q versus annual FR 2910a
reporting for exempt institutions, and the $4.4 million level threshold
for reporting will be used in the second quarter 1997 deposits report
screening process, and the adjustments will be made when the new
deposit reporting panels are implemented in September 1997.
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 1997, all other
institutions that have reservable liabilities in excess of the
exemption level of $4.4 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 deposit cutoff level ($59.3
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 1997. However, nonexempt institutions with
total deposits less than the nonexempt deposit cutoff level ($59.3
million), will be able to 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 ($4.4 million) (known as exempt institutions) will be required to
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 ($48.2 million). Exempt
institutions with total deposits less than the exempt deposit cutoff
level ($48.2 million) but at least equal to the exemption amount ($4.4
million) will be able to file the Annual Report of Total Deposits and
Reservable Liabilities (FR 2910a). Institutions that have total
deposits less than the exemption amount ($4.4 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 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 $49.3 million.
Accordingly, the Board finds good cause for determining, and so
determines, that notice and public participation is unnecessary,
impracticable, or contrary to the public interest.
[[Page 60173]]
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 $49.3 million. Accordingly, there is good cause to determine,
and the Board so determines, that such notice is impracticable or
unnecessary.
Regulatory Flexibility Analysis
The Board certifies that these amendments will not have a
substantial economic impact on small depository institutions. See
``Notice and public participation'' above.
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 $49.3 million..................... 3 percent of amount.
Over $49.3 million...................... $1,479,000 plus 10 percent
of amount over $49.3
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 $4.4
million determined in accordance with Sec. 204.3(a)(3).
* * * * *
By order of the Board of Governors of the Federal Reserve
System, November 21, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-30148 Filed 11-26-96; 8:45 am]
BILLING CODE 6210-01-P
