[Federal Register Volume 64, Number 191 (Monday, October 4, 1999)]
[Rules and Regulations]
[Pages 53617-53620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25650]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1046]


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 reflect the annual indexing of the low 
reserve tranche and the reserve requirement exemption for 2000, and 
announces the annual indexing of the deposit reporting cutoff levels 
that will be effective beginning in September 2000. The amendments 
decrease the amount of transaction accounts subject to a reserve 
requirement ratio of three percent in 2000, as required by section 
19(b)(2)(C) of the Federal Reserve Act, from $46.5 million to $44.3 
million of net transaction accounts. This adjustment is known as the 
low reserve tranche adjustment. The Board is increasing from $4.9 
million to $5.0 million the amount of reservable liabilities of each 
depository institution that is subject to a reserve requirement of zero 
percent in 2000. 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

[[Page 53618]]

the deposit cutoff levels that are used in conjunction with the 
reservable liabilities exemption to determine the frequency of deposit 
reporting from $81.9 million to $84.5 million for nonexempt depository 
institutions and from $52.6 million to $54.3 million for exempt 
institutions. (Nonexempt institutions are those with total reservable 
liabilities exceeding the amount exempted from reserve requirements 
($5.0 million) while exempt institutions are those with total 
reservable liabilities not exceeding the amount exempted from reserve 
requirements.) Thus, beginning in September 2000, nonexempt 
institutions with total deposits of $84.5 million or more will be 
required to report weekly while nonexempt institutions with total 
deposits less than $84.5 million may report quarterly, in both cases on 
form FR 2900. Similarly, exempt institutions with total deposits of 
$54.3 million or more will be required to report quarterly on form FR 
2910q while exempt institutions with total deposits less than $54.3 
million may report annually on form FR 2910a.

DATES: Effective date: November 3, 1999.
    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, November 30, 1999, and the corresponding reserve 
maintenance period that begins Thursday, December 30, 1999. 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 21, 1999, and 
the corresponding reserve maintenance period that begins Thursday, 
January 20, 2000. For all depository institutions, the deposit cutoff 
levels will be used to screen institutions in the second quarter of 
2000 to determine the reporting frequency for the twelve month period 
that begins in September 2000.

FOR FURTHER INFORMATION CONTACT: Rick Heyke, Counsel (202/452-3688), 
Legal Division, or June O'Brien, Economist (202/452-3790), Division of 
Monetary Affairs; for the hearing impaired only, contact Diane Jenkins, 
Telecommunications Device for the Deaf (TDD)(202/452-3544); Board of 
Governors of the Federal Reserve System, 20th and C Streets, NW, 
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 required reserve 
ratio applicable to transaction account balances exceeding the low 
reserve tranche is 10 percent. Section 19(b)(2) also provides that, 
before December 31 of each year, the Board shall issue a regulation 
adjusting the low reserve tranche for the next calendar year. 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 
$46.5 million. Net transaction accounts of all depository institutions 
decreased by 6.0 percent (from $689.0 billion to $647.7 billion) from 
June 30, 1998, to June 30, 1999. 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 2000 by $2.2 million 
to $44.3 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 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 3.0 percent (from $1,905.9 billion 
to $1,962.3 billion) from June 30, 1998, to June 30, 1999. 
Consequently, the reservable liabilities exemption amount for 2000 
under section 19(b)(11)(B) will be increased by $0.1 million from $4.9 
million to $5.0 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, 1998, to June 
30, 1999, is to decrease the low reserve tranche to $44.3 million, to 
apply a zero percent reserve requirement on the first $5.0 million of 
transaction accounts, and to apply a three percent reserve requirement 
on the remainder of the low reserve tranche.
    For institutions that report weekly, the tranche adjustment and the 
reservable liabilities exemption adjustment will be effective for the 
reserve computation period beginning Tuesday, November 30, 1999, and 
for the corresponding reserve maintenance period beginning Thursday, 
December 30, 1999. For institutions that report quarterly, the tranche 
adjustment and the reservable liabilities exemption adjustment will be 
effective for the computation period beginning Tuesday, December 21, 
1999, and for the corresponding reserve maintenance period beginning 
Thursday, January 20, 2000. 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. The cutoff level for nonexempt institutions 
determines whether they report (on form FR 2900) quarterly or weekly, 
and the deposit cutoff level for exempt institutions determines whether 
they report annually (on form FR 2910a) or quarterly (on form FR 
2910q).
    In September 1999, the cutoff level for nonexempt institutions was 
raised to $81.9 million, and the cutoff level for exempt institutions 
was raised to $52.6

[[Page 53619]]

million. However, in order to help reduce the number and extent of 
modifications needed in the data processing systems of depository 
institutions close to the time of the century date change, the Board 
adjusted its usual category shift procedures for September 1999 (64 FR 
39142, July 21, 1999.) The Board determined that any nonexempt 
institution that would otherwise be required to begin filing on a 
weekly basis (including an institution that became nonexempt with the 
September 1999 panel shifts) would instead be allowed to file on a 
quarterly basis, and any exempt institution that would otherwise be 
required to begin filing quarterly would instead be allowed to file 
annually, with normal category shift procedures resuming in September 
2000.
    From June 30, 1998, to June 30, 1999, total deposits increased 3.9 
percent, from $4,654.3 billion to $4,837.9 billion. Accordingly, the 
nonexempt deposit cutoff level will increase by $2.6 million from $81.9 
million to $84.5 million and the exempt deposit cutoff level will 
increase by $1.7 million from 52.6 million to $54.3 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 $4.9 million to $5.0 million. Institutions with total 
deposits below $5.0 million will be excused from reporting if their 
deposits can be estimated from other data sources. The $84.5 million 
cutoff level for weekly versus quarterly form FR 2900 reporting for 
nonexempt institutions, the $54.3 million cutoff level for quarterly 
form FR 2910q versus annual form FR 2910a reporting for exempt 
institutions, and the $5.0 million level threshold for reporting will 
be used in the second quarter 2000 deposits report screening process, 
and the adjustments will be made when the new deposit reporting panels 
are implemented in September 2000.
    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 (form 
FR 2900). After the indexations become effective in 2000, all other 
institutions that have reservable liabilities in excess of the 
exemption level of $5.0 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 ($84.5 
million) will be required to file weekly the Report of Transaction 
Accounts, Other Deposits and Vault Cash (form FR 2900) for the twelve 
month period starting September 2000. However, nonexempt institutions 
with total deposits less than the nonexempt deposit cutoff level ($84.5 
million), will be able to file the form 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 (form FR 2950/2951) at the same 
frequency as they file the form FR 2900.
    Institutions with reservable liabilities at or below the exemption 
level ($5.0 million) (known as exempt institutions) will be required to 
file the Quarterly Report of Selected Deposits, Vault Cash, and 
Reservable Liabilities (form FR 2910q) if their total deposits equal or 
exceed the exempt deposit cutoff level ($54.3 million). Exempt 
institutions with total deposits less than the exempt deposit cutoff 
level ($54.3 million) but at least equal to the exemption amount ($5.0 
million) will be able to file the Annual Report of Total Deposits and 
Reservable Liabilities (form FR 2910a). Institutions that have total 
deposits less than the exemption amount ($5.0 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. 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 $44.3 
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.

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. Section 204.9 is revised to read as follows:


Sec. 204.9  Reserve requirement ratios.

    (a) 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 $44.3 million.....................  3 percent of amount.
  Over $44.3 million......................  $1,329,000 plus 10 percent
                                             of amount over $44.3
                                             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 (b) of
  this section.

    (b) 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) of this section not in excess of $5.0 million 
determined in accordance with Sec. 204.3(a)(3).


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    By order of the Board of Governors of the Federal Reserve 
System, September 28, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-25650 Filed 10-1-99; 8:45 am]
BILLING CODE 6210-01-P