[Federal Register Volume 66, Number 203 (Friday, October 19, 2001)]
[Rules and Regulations]
[Pages 53076-53078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26197]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1113]


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 2002, and 
announces the annual indexing of the deposit reporting cutoff level 
that will be effective beginning in September 2002. The amendments 
decrease the amount of transaction accounts subject to a reserve 
requirement ratio of three percent in 2002, as required by section 
19(b)(2)(C) of the Federal Reserve Act, from $42.8 million to $41.3 
million of net transaction accounts. This adjustment is known as the 
low reserve tranche adjustment. The Board is increasing from $5.5 
million to $5.7 million the amount of reservable liabilities of each 
depository institution that is subject to a reserve requirement of zero 
percent in 2002. 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 level that is used in conjunction with the reservable 
liabilities exemption to determine the frequency of deposit reporting 
from $101.0 million to $106.9 million for nonexempt depository 
institutions. (Nonexempt institutions are those with total reservable 
liabilities exceeding the amount exempted from reserve requirements.) 
Thus, beginning in September 2002, nonexempt institutions with total 
deposits of $106.9 million or more will be required to report weekly 
while nonexempt institutions with total deposits less than $106.9 
million may report quarterly, in both cases on form FR 2900. Exempt 
institutions with at least $5.7 million in total deposits may report 
annually on form FR 2910a.

DATES: Effective date: November 19, 2001.
    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 27, 2001, and the corresponding reserve 
maintenance period that begins Thursday, December 27, 2001. 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 18, 2001, and 
the corresponding reserve maintenance period that begins Thursday, 
January 17, 2002. For all depository institutions, the deposit cutoff 
level will be used to screen institutions in the second quarter of 2002 
to determine the reporting frequency for the twelve month period that 
begins in September 2002.

[[Page 53077]]


FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Counsel (202/452-
3565), Legal Division, or June O'Brien, Economist (202/452-3790), 
Division of Monetary Affairs; for users of Telecommunications Device 
for the Deaf (TDD) only, please call 202/263-4869; 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 
$42.8 million. Net transaction accounts of all depository institutions 
decreased by 4.3 percent (from $619.3 billion to $592.8 billion) from 
June 30, 2000, to June 30, 2001. 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 2002 by $1.5 million 
to $41.3 million.
    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 5.1 percent (from $2,200.0 billion 
to $2,313.1 billion) from June 30, 2000, to June 30, 2001. 
Consequently, the reservable liabilities exemption amount for 2002 
under section 19(b)(11)(B) will be increased by $0.2 million from $5.5 
million to $5.7 million.\1\
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    \1\ 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, 2000, to June 
30, 2001, is to decrease the low reserve tranche to $41.3 million, to 
apply a zero percent reserve requirement on the first $5.7 million of 
net 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 
fourteen-day reserve computation period beginning Tuesday, November 27, 
2001, and for the corresponding fourteen-day reserve maintenance period 
beginning Thursday, December 27, 2001. For institutions that report 
quarterly, the tranche adjustment and the reservable liabilities 
exemption adjustment will be effective for the seven-day computation 
period beginning Tuesday, December 18, 2001, and for the corresponding 
seven-day reserve maintenance period beginning Thursday, January 17, 
2002.
    In order to reduce the reporting burden for small institutions, the 
Board has established deposit reporting cutoff levels to determine 
deposit reporting frequency. In July 2000, the Board specified that the 
annual percentage increase in the nonexempt deposit cutoff be set equal 
to 80 percent of the growth rate of total deposits at all depository 
institutions over the one-year period ending on the most recent June 
30.
    From June 30, 2000, to June 30, 2001, total deposits increased 7.3 
percent, from $5,216.0 billion to $5,596.6 billion. Accordingly, the 
nonexempt deposit cutoff level will increase by $5.9 million from 
$101.0 million in 2001 to $106.9 million in 2002. 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 $5.5 million to $5.7 million. Under the deposit reporting 
system, institutions are screened during each year to determine their 
reporting category beginning in the September of that year. Hence, the 
cutoff level would be used in the 2002 deposit report screening process 
and new deposit reporting panels will be implemented in September 2002.
    Thus, effective in September 2002, all U.S. branches and agencies 
of foreign banks and Edge and agreement corporations, regardless of 
size, and other institutions with total reservable liabilities 
exceeding $5.7 million (nonexempt institutions) and with total deposits 
at or above $106.9 million would be required to file weekly the Report 
of Transaction Accounts, Other Deposits and Vault Cash (form FR 2900). 
Nonexempt institutions with total deposits below $106.9 million could 
file the FR 2900 quarterly. Institutions that obtain funds from non-
U.S. sources or that have foreign branches or IBFs would continue to be 
required to file the Report of Certain Eurocurrency Transactions (forms 
FR 2950/FR 2951) at the same frequency as they file the form FR 2900. 
Institutions with reservable liabilities at or below the exemption 
amount of $5.7 million (exempt institutions) and with at least $5.7 
million in total deposits would be required to file the Annual Report 
of Total Deposits and Reservable Liabilities (form FR 2910a). 
Institutions with total deposits below the exemption level of $5.7 
million would be excused from reporting 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. The provisions of 5 U.S.C. 553(b) relating to notice of 
proposed rulemaking have not been followed in connection with the 
adoption of these amendments. The amendments involve expected, 
ministerial adjustments prescribed by statute and by 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 $41.3 million. Accordingly, the Board finds good cause for 
determining, and so determines, that

[[Page 53078]]

notice in accordance with 12 U.S.C. 552(b) is unnecessary.

Regulatory Flexibility Analysis

    The Board certifies that these amendments will not have a 
substantial economic impact on small depository institutions.

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 $41.3 million............  3 percent of amount.
    Over $41.3 million.............  $1,239,000 plus 10 percent of
                                      amount over $41.3 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 $5.7 million 
determined in accordance with Sec. 204.3(a)(3).

    By order of the Board of Governors of the Federal Reserve 
System, October 12, 2001.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 01-26197 Filed 10-18-01; 8:45 am]
BILLING CODE 6210-01-P