[Federal Register Volume 59, Number 227 (Monday, November 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29175]
[Federal Register: November 28, 1994]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-0857]
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 increase 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 $51.9 million to
$54.0 million of net transaction accounts. This adjustment is known as
the low reserve tranche adjustment. The Board has increased from $4.0
million to $4.2 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 $55.0
million to $55.4 million for nonexempt depository institutions and from
$44.8 million to $45.1 million for exempt institutions. (Nonexempt
institutions are those with total reservable liabilities exceeding $4.2
million while exempt institutions are those with total reservable
liabilities not exceeding $4.2 million.) Thus nonexempt institutions
with total deposits of $55.4 million or more will be required to report
weekly while nonexempt institutions with total deposits less than $55.4
million may report quarterly. Similarly, exempt institutions with total
deposits of $45.1 million or more will be required to report quarterly
while exempt institutions with total deposits less than $45.1 million
may report annually.
DATES: Effective date: December 20, 1994.
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 20, 1994, and on the corresponding reserve
maintenance period that begins Thursday, December 22, 1994. 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 20, 1994, and
on the corresponding reserve maintenance period that begins Thursday,
January 19, 1995. For all depository institutions, the deposit cutoff
level will be used to screen institutions in the second quarter of 1995
to determine the reporting frequency for the twelve month period that
begins in September 1995.
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 change 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
$51.9 million. The increase in the net transaction accounts of all
depository institutions from June 30, 1993, to June 30, 1994, was 5.0
percent (from $788.5 billion to $828.3 billion). In accordance with
section 19(b)(2), the Board is amending Regulation D (12 CFR Part 204)
to increase the low reserve tranche for transaction accounts for 1995
by $2.1 million to $54.0 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 liabilities1 of
each depository institution shall be subject to a zero percent reserve
requirement. Section 19(b)(11)(A) permits each depository institution,
in accordance with the rules and regulations of the Board, to 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 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, 1993, to June
30, 1994, increased by 5.0 percent (from $1,496.9 billion to $1,571.5
billion). Consequently, the reservable liabilities exemption amount for
1995 under section 19(b)(11)(B) will be increased by $0.2 million to
$4.2 million.2
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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 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, 1993, to June
30, 1994, is to increase the low reserve tranche to $54.0 million, to
apply a zero percent reserve requirement on the first $4.2 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 20, 1994, and on
the corresponding reserve maintenance period beginning Thursday,
December 22, 1994. For institutions that report quarterly, the tranche
adjustment and the reservable liabilities exemption adjustment will be
effective on the computation period beginning Tuesday, December 20,
1994, and on the reserve maintenance period beginning Thursday, January
19, 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 a deposit reporting cutoff level 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 the cutoff level
at $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.
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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, 1993, to June 30, 1994, total deposits increased 0.9
percent, from $3,793.3 billion to $3,828.9 billion. Accordingly, the
nonexempt deposit cutoff level will increase by $0.4 million to $55.4
million and the exempt deposit cutoff level will increase by $0.3
million to $45.1 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 $4.0 million to $4.2
million. Institutions with total deposits below $4.2 million are
excused from reporting if their deposits can be estimated from other
data sources. The $55.4 million cutoff level for weekly versus
quarterly FR 2900 reporting for nonexempt institutions, the $45.1
million cutoff level for quarterly FR 2910q versus annual FR 2910a
reporting for exempt institutions, and the $4.2 million level threshold
for reporting will be used in the second quarter 1995 deposits report
screening process, and the adjustments will be made when the new
deposit reporting panels are implemented in September 1995.
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). All other institutions that have reservable liabilities in
excess of the exemption level of $4.2 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 ($55.4 million) are also required to file weekly
the Report of Transaction Accounts, Other Deposits and Vault Cash (FR
2900). However, nonexempt institutions with total deposits less than
the nonexempt deposit cutoff level ($55.4 million), may file the FR
2900 quarterly for the twelve-month period starting September 1995.
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 ($4.2 million) (known as exempt institutions) 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 ($45.1 million). Exempt institutions with
total deposits less than the exempt deposit cutoff level ($45.1
million) but at least equal to the exemption amount ($4.2 million) must
file the Annual Report of Total Deposits and Reservable Liabilities (FR
2910a). Institutions that have total deposits less than the exemption
amount ($4.2 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 adjustments prescribed
by statute and by an interpretative statement reaffirming the Board's
policy concerning reporting practices. The amendments also reduce
regulatory burdens on depository institutions. Accordingly, the Board
finds good cause for determining, and so determines, that notice and
public participation are unnecessary 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 amendments relieve a
restriction on depository institutions, and for this reason there is
good cause to determine, and the Board so determines, that such notice
is not necessary.
Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), the Board certifies that the proposed amendments
will not have a significant economic impact on a substantial number of
small entities. The proposed amendments reduce certain regulatory
burdens for all depository institutions, reduce certain burdens for
small depository institutions, and have no particular effect on other
small entities.
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 $54.0 million.............. 3 percent of amount.
Over $54.0 million............... $1,620,000 plus 10 percent of
amount over $54.0 million.
Nonpersonal time deposits.......... 0 percent.
Eurocurrency liabilities........... 0 percent.
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\1\Before deducting the adjustment to be made by the next 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 $4.2
million determined in accordance with Sec. 204.3(a)(3).
* * * * *
By order of the Board of Governors of the Federal Reserve
System, November 21, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-29175 Filed 11-25-94; 8:45 am]
BILLING CODE 6210-01-P
