[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).
[[Page 53620]]
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