[Federal Register Volume 68, Number 194 (Tuesday, October 7, 2003)]
[Rules and Regulations]
[Pages 57788-57790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25318]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1163]


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 of the reserve requirement exemption amount for 
2004. The Board is also announcing the annual indexing of the deposit 
cutoff level and the reduced reporting limit that will be effective 
beginning in September 2004. The Regulation D amendments increase the 
amount of net transaction accounts at each depository institution that 
are subject to a three percent reserve requirement in 2004 from $42.1 
million to $45.4 million. This amount is known as the low reserve 
tranche. The Regulation D amendments also increase the amount of total 
reservable liabilities of each depository institution that are subject 
to a zero percent reserve requirement in 2004 from $6.0 million to $6.6 
million. This amount is known as the reserve requirement exemption 
amount. The adjustments to both of these amounts are derived using 
statutory formulas specified in the Federal Reserve Act. The Board is 
also announcing increases in two other amounts, the deposit cutoff 
level and the reduced reporting limit, that are used to determine the 
frequency with which depository institutions must

[[Page 57789]]

submit deposit reports. The deposit cutoff level is being increased 
from $150.0 million in 2003 to $161.2 million in 2004, and the reduced 
reporting limit is being increased from $1.0 billion in 2003 to $1.074 
billion in 2004. These amounts are indexed annually in order to reduce 
reporting burden for smaller depository institutions. Thus, beginning 
in September 2004, depository institutions will be required to file the 
FR 2900 report each week under the following conditions: if they have 
net transaction accounts over $6.6 million and have total deposits of 
at least $161.2 million; or if they have net transaction accounts of 
$6.6 million or less but have total deposits of at least $1.074 
billion. Depository institutions will be required to file the FR 2900 
report each quarter if they have net transaction accounts over $6.6 
million but have total deposits of less than $161.2 million. Depository 
institutions will be required to file the FR 2910a report annually if 
they have net transaction accounts of $6.6 million or less but have 
total deposits greater than $6.6 million but less than $1.074 billion. 
Depository institutions with $6.6 million or less in total deposits are 
not required to file a deposit report.

DATES: Effective date: November 6, 2003.
    Compliance dates: For depository institutions that report weekly, 
the adjusted low reserve tranche and reserve requirement exemption 
amount will apply to the fourteen-day reserve computation period that 
begins Tuesday, November 25, 2003, and the corresponding fourteen-day 
reserve maintenance period that begins Thursday, December 25, 2003. For 
depository institutions that report quarterly, the adjusted low reserve 
tranche and reserve requirement exemption amount will apply to the 
seven-day reserve computation period that begins Tuesday, December 16, 
2003, and the corresponding seven-day reserve maintenance period that 
begins Thursday, January 15, 2004. For all depository institutions, the 
deposit cutoff level, the reserve requirement exemption amount, and the 
reduced reporting limit will be used to screen depository institutions 
in July of 2004 to determine reporting frequency for the twelve month 
period that begins in September 2004.

FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Counsel (202/452-
3565), Legal Division, or Gretchen Weinbach, Senior Economist (202/452-
2841), 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.

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, for the purpose of 
implementing monetary policy. Section 11(a)(2) of the Federal Reserve 
Act (12 U.S.C. 248(a)(2)) authorizes the Board to require reports of 
liabilities and assets from depository institutions to enable the Board 
to conduct monetary policy. The Board's actions with respect to each of 
these provisions are discussed in turn below.
    1. Reserve Requirements. Pursuant to section 19(b)(2) of the 
Federal Reserve Act, transaction account balances maintained at each 
depository institution up to a certain amount, known as the low reserve 
tranche, are subject to a three percent reserve requirement. Net 
transaction account balances over the low reserve tranche are subject 
to a ten percent reserve requirement. 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 low reserve 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 is $42.1 million. Net 
transaction accounts of all depository institutions rose 9.9 percent 
(from $611.5 billion to $671.9 billion) between June 30, 2002 and June 
30, 2003. Accordingly, the Board is amending Regulation D (12 CFR part 
204) to increase the low reserve tranche for net transaction accounts 
by $3.3 million, from $42.1 million in 2003 to $45.4 million in 2004.
    Section 19(b)(11)(A) of the Federal Reserve Act (12 U.S.C. 
461(b)(11)(A)) provides that a zero percent reserve requirement shall 
apply to total reservable liabilities at each depository institution 
that do not exceed a certain amount, known as the reserve requirement 
exemption amount. Section 19(b)(11)(B) provides that, before December 
31 of each year, the Board shall issue a regulation adjusting the 
reserve requirement exemption amount for the next calendar year if 
total reservable liabilities held at all depository institutions 
increase from one year to the next. Unlike the low reserve tranche, 
which can be adjusted upward or downward, no adjustment is made to the 
reserve requirement exemption amount if total reservable liabilities 
held at all depository institutions should decrease during the 
applicable time period. The percentage increase in the reserve 
requirement exemption amount is to be 80 percent of the increase in 
total reservable liabilities at all depository institutions over the 
one-year period that ends on the June 30 prior to the adjustment.
    Total reservable liabilities of all depository institutions 
increased by 12.9 percent (from $2,472.3 billion to $2,792.2 billion) 
between June 30, 2002, and June 30, 2003. Accordingly, the Board is 
amending Regulation D to increase the reserve requirement exemption 
amount by $0.6 million, from $6.0 million in 2003 to $6.6 million in 
2004.\1\
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    \1\ Consistent with Board practice, the low reserve tranche and 
reserve requirement exemption amounts have been rounded to the 
nearest $0.1 million.
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    For depository institutions that report weekly, the adjusted low 
reserve tranche and reserve requirement exemption amount will be 
effective for the fourteen-day reserve computation period beginning 
Tuesday, November 25, 2003, and for the corresponding fourteen-day 
reserve maintenance period beginning Thursday, December 25, 2003. For 
depository institutions that report quarterly, the adjusted low reserve 
tranche and reserve requirement exemption amount will be effective for 
the seven-day computation period beginning Tuesday, December 16, 2003, 
and for the corresponding seven-day reserve maintenance period 
beginning Thursday, January 15, 2004.
    2. Deposit Reports. Section 11(b)(2) of the Federal Reserve Act 
authorizes the Board to require depository institutions to file reports 
of their liabilities and assets as the Board may determine to be 
necessary or desirable to enable it to discharge its responsibility to 
monitor and control monetary and credit aggregates. The Board screens 
depository institutions each year to determine whether they must file 
deposit reports and, if so, how frequently they must file them (weekly, 
quarterly, or annually). These deposit reporting assignments become 
effective each September.
    The screening of depository institutions for assignment to one of 
the four deposit reporting categories is based on three amounts: The 
reserve requirement exemption amount, the deposit cutoff level, and the 
reduced reporting limit. The annual adjustment to the first amount, the 
reserve requirement exemption amount, is

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described in Section 1 above. The other two amounts, the deposit cutoff 
level and the reduced reporting limit, are also adjusted annually, by 
an amount equal to 80 percent of the increase, if any, in total 
deposits at all depository institutions over the one-year period that 
ends on the June 30 prior to the adjustment.
    Total deposits at all depository institutions increased by 9.3 
percent (from $5,959.5 billion to $6,513.9 billion) between June 30, 
2002 and June 30, 2003. Accordingly, the Board is adjusting the deposit 
cutoff level upward by $11.2 million, from its current level of $150.0 
million in 2003 to $161.2 million in 2004. The Board is also adjusting 
the reduced reporting limit upward by $74 million, from its current 
level of $1.0 billion in 2003 to $1.074 billion in 2004.\2\
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    \2\Consistent with Board practice, the deposit cutoff level has 
been rounded to the nearest $0.1 million, while the reduced 
reporting limit has been rounded to the nearest $1 million.
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    Beginning in September 2004, the boundaries of the four deposit 
reporting categories will be defined as follows. Those depository 
institutions with net transaction accounts over $6.6 million (the 
reserve requirement exemption amount) or total deposits greater than or 
equal to $1.074 billion (the reduced reporting limit) are subject to 
detailed reporting, and must file an FR 2900 report either weekly or 
quarterly. Of this group, those with total deposits greater than or 
equal to $161.2 million (the deposit cutoff level) are required to file 
the FR 2900 report each week, while those with total deposits less than 
$161.2 million are required to file the FR 2900 report each quarter. 
Those depository institutions with net transaction accounts less than 
or equal to $6.6 million (the reserve requirement exemption amount) and 
with total deposits less than $1.074 billion (the reduced reporting 
limit) are eligible for reduced reporting, and must either file a 
deposit report annually or not at all. Of this group, those with total 
deposits greater than $6.6 million (but less than $1.074 billion) are 
required to file the FR 2910a report annually, while those with total 
deposits less than or equal to $6.6 million are not required to file a 
deposit report. A depository institution that manipulates its 
reporting, however, in an attempt to qualify for less frequent 
reporting or to reduce its reserve requirement may be required to 
report the FR 2900 on a weekly basis and maintain appropriate reserve 
balances with its Reserve Bank, regardless of its most recent panel 
assignment.
    Notice and Regulatory Flexibility Act. 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. The increases in the 
reserve requirement exemption amount, the low reserve tranche, the 
deposit cutoff level, and the reduced reporting limit serve to reduce 
regulatory burdens on depository institutions. Accordingly, the Board 
finds good cause for determining, and so determines, that notice in 
accordance with 5 U.S.C. 553(b) is unnecessary. Consequently, the 
provisions of the Regulatory Flexibility Act, 5 U.S.C. 601, do not 
apply to these amendments.

List of Subjects in 12 CFR Part 204

    Banks, banking, Reporting and recordkeeping requirements.

0
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)

0
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.


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2. Section 204.9 is revised to read as follows:


Sec.  204.9  Reserve requirement ratios.

    The following reserve requirement ratios are prescribed for all 
depository institutions, banking 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 $6.6 million......................  0 percent of amount.
  Over $6.6 million and up to $45.4         3 percent of amount.
   million.
  Over $45.4 million......................  $1,164,000 plus 10 percent
                                             of amount over $45.4
                                             million.
Nonpersonal time deposits.................  0 percent.
Eurocurrency liabilities..................  0 percent.
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    By order of the Board of Governors of the Federal Reserve 
System, October 1, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03-25318 Filed 10-6-03; 8:45 am]
BILLING CODE 6210-01-P