[Federal Register Volume 67, Number 195 (Tuesday, October 8, 2002)]
[Rules and Regulations]
[Pages 62634-62636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25484]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1132]


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 2003, and 
announces the annual indexing of the deposit reporting cutoff level 
that will be effective beginning in September 2003. The amendments 
increase the amount of transaction accounts subject to a reserve 
requirement ratio of three percent in 2003, as required by section 
19(b)(2)(C) of the Federal Reserve Act, from $41.3 million to $42.1 
million of net transaction accounts. This adjustment is known as the 
low reserve tranche adjustment. The Board is increasing from $5.7 
million to $6.0 million the amount of reservable liabilities of each 
depository institution that is subject to a reserve requirement of zero 
percent in 2003. 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 $106.9 million to $112.3 million for nonexempt depository 
institutions. (Nonexempt institutions are those with total reservable 
liabilities exceeding the amount exempted from reserve requirements.) 
Thus, beginning in September 2003, nonexempt institutions with total 
deposits of $112.3 million or more will be required to report weekly 
while nonexempt institutions with total deposits less than $112.3 
million may report quarterly, in both cases on form FR 2900. Exempt 
institutions with at least $6.0 million in total deposits may report 
annually on form FR 2910a.

DATES: Effective Date: November 7, 2002.
    Compliance Dates: For depository institutions that report weekly, 
the low reserve tranche adjustment and the reservable liabilities 
exemption adjustment will apply to the fourteen-day reserve computation 
period that begins Tuesday, November 26, 2002, and the corresponding 
fourteen-day reserve maintenance period that begins Thursday, December 
26, 2002. For institutions that report quarterly, the low reserve 
tranche adjustment and the reservable liabilities exemption adjustment 
will apply to the seven-day reserve computation period that begins 
Tuesday, December 17, 2002, and the corresponding seven-day reserve 
maintenance period that begins Thursday, January 16, 2003. For all 
depository institutions, the deposit cutoff level will be used to 
screen institutions in July of 2003 to determine the reporting 
frequency for the twelve month period that begins in September 2003.

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 user of Telecommunications Device for 
the Deaf (TDD) only, contact (202/872-4984); Board of Governors of the 
Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551.

[[Page 62635]]


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 
$41.3 million. Net transaction accounts of all depository institutions 
rose by 2.5 percent (from $596.7 billion to $611.4 billion) from June 
30, 2001, to June 30, 2002. 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 2003 by $0.8 million to 
$42.1 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 7.1 percent (from $2,317.7 billion 
to $2,481.7 billion) from June 30, 2001, to June 30, 2002. 
Consequently, the reservable liabilities exemption amount for 2003 
under section 19(b)(11)(B) will be increased by $0.3 million from $5.7 
million to $6.0 million.\1\
    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, 2001, to June 
30, 2002, is to increase the low reserve tranche to $42.1 million, to 
apply a zero percent reserve requirement on the first $6.0 million of 
net transaction accounts, and to apply a three percent reserve 
requirement on the remainder of the low reserve tranche.
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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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    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 26, 
2002, and for the corresponding fourteen-day reserve maintenance period 
beginning Thursday, December 26, 2002. 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 17, 2002, and for the corresponding 
seven-day reserve maintenance period beginning Thursday, January 16, 
2003.
    In order to reduce the reporting burden for small institutions, the 
Board has established a deposit reporting cutoff level to determine 
deposit reporting frequency. The Board has 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, 2001, to June 30, 2002, total deposits increased 6.3 
percent, from $5,602.3 billion to $5,955.9 billion. Accordingly, the 
nonexempt deposit cutoff level will increase by $5.4 million from 
$106.9 million in 2002 to $112.3 million in 2003. 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 $5.7 million to $6.0 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 2003 deposit report screening process 
and new deposit reporting panels will be implemented in September 2003.
    Thus, effective in September 2003, 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 $6.0 million (nonexempt institutions) and with total deposits 
at or above $112.3 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 $112.3 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 $6.0 million (exempt institutions) and with at least $6.0 
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 $6.0 
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 level 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 $42.1 million. Accordingly, the Board finds good cause for 
determining, and so determines, that notice in accordance with 5 U.S.C. 
553(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.


[[Page 62636]]



    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.

    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
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Net transaction accounts:
    $0 to $6.0 million....................  0 percent of amount.
    Over $6.0 million and up to $42.1       3 percent of amount.
     million.
    Over $42.1 million....................  $1,083,000 plus 10 percent
                                             of amount over $42.1
                                             million.
    Nonpersonal time deposits.............  0 percent.
    Eurocurrency liabilities..............  0 percent.
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    Dated: October 2, 2002.
    By order of the Board of Governors of the Federal Reserve 
System.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 02-25484 Filed 10-7-02; 8:45 am]
BILLING CODE 6210-01-P