[Federal Register Volume 70, Number 194 (Friday, October 7, 2005)]
[Rules and Regulations]
[Pages 58603-58605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20299]



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 Rules and Regulations
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  Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Rules 
and Regulations  

[[Page 58603]]



FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1236]


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 
2006. The Regulation D amendments increase the amount of net 
transaction accounts at each depository institution that is subject to 
a three percent reserve requirement in 2006 from $47.6 million to $48.3 
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 is subject to a zero 
percent reserve requirement in 2006 from $7.0 million to $7.8 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 
nonexempt deposit cutoff level and the reduced reporting limit, that 
are used to determine the frequency with which depository institutions 
must submit deposit reports. These amounts are indexed annually in 
order to reduce reporting burden for smaller depository institutions.

DATES: Effective date: November 7, 2005.
    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 22, 2005, and the corresponding fourteen-day 
reserve maintenance period that begins Thursday, December 22, 2005. 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 20, 
2005, and the corresponding seven-day reserve maintenance period that 
begins Thursday, January 19, 2006. For all depository institutions, the 
nonexempt deposit cutoff level, the reserve requirement exemption 
amount, and the reduced reporting limit will be used for 2006 deposit 
report screening to determine reporting frequency for the twelve-month 
period that begins in September 2006.

FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Senior 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 (202/263-
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, 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. 
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 Act requires the adjustment in the low reserve tranche to be 
80 percent of the percentage increase or decrease in total transaction 
accounts of all depository institutions over the one-year period that 
ends on the June 30 prior to the adjustment.
    Currently, the low reserve tranche is $47.6 million. Net 
transaction accounts of all depository institutions rose 1.8 percent 
(from $700.4 billion to $713.1 billion) between June 30, 2004 and June 
30, 2005. Accordingly, the Board is amending Regulation D (12 CFR part 
204) to increase the low reserve tranche for net transaction accounts 
by $0.7 million, from $47.6 million for 2005 to $48.3 million for 2006.
    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 at each depository institution to total reservable liabilities 
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 Act requires the percentage increase in the reserve 
requirement exemption amount to be 80 percent of the increase in total 
reservable liabilities of 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 13.7 percent (from $2,946.2 billion to $3,350.0 billion) 
between June 30, 2004, and June 30, 2005. Accordingly, the Board is 
amending Regulation D to increase the reserve requirement exemption 
amount by $0.8 million, from

[[Page 58604]]

$7.0 million for 2005 to $7.8 million for 2006.\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 22, 2005, and for the corresponding fourteen-day 
reserve maintenance period beginning Thursday, December 22, 2005. For 
depository institutions that report quarterly, the adjusted low reserve 
tranche and reserve requirement exemption amount will be effective for 
the seven-day reserve computation period beginning Tuesday, December 
20, 2005, and for the corresponding seven-day reserve maintenance 
period beginning Thursday, January 19, 2006.
    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 the monetary and credit aggregates. The Board 
screens depository institutions each year and assigns them to one of 
four deposit reporting panels (weekly reporters, quarterly reporters, 
annual reporters, or nonreporters). An institution's panel assignment 
is effective with the annual deposit panel shifts in September of the 
screening year.
    In order to ease the reporting burden, the Board permits 
institutions with net transaction account above the reserve requirement 
exemption amount but with total deposits below a specified level (the 
``nonexempt deposit cutoff'') to report quarterly. The Board requires 
certain large depository institutions to report weekly regardless of 
the level of their net transaction accounts if their total deposits 
exceed a specified level (the ``reduced reporting limit''). The annual 
adjustment to the first amount, the reserve requirement exemption 
amount, is described in Section 1 above. The nonexempt 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 
of 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 8.3 percent 
(from $6,962.1 billion to $7,540.4 billion) between June 30, 2004 and 
June 30, 2005. Accordingly, the Board is adjusting the nonexempt 
deposit cutoff level upward by $11.3 million, from its current level of 
$169.8 million for 2005 to $181.1 million for 2006. The Board is also 
adjusting the reduced reporting limit upward by $75 million, from its 
current level of $1.131 billion for 2005 to $1.206 billion for 2006.\2\
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    \2\ Consistent with Board practice, the nonexempt 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 2006, the boundaries of the four deposit 
reporting panels will be defined as follows. Those depository 
institutions with net transaction accounts over $7.8 million (the 
reserve requirement exemption amount) or total deposits greater than or 
equal to $1.206 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 $181.1 million (the nonexempt deposit cutoff level) are 
required to file the FR 2900 report each week, while those with total 
deposits less than $181.1 million are required to file the FR 2900 
report each quarter. Those depository institutions with net transaction 
accounts less than or equal to $7.8 million (the reserve requirement 
exemption amount) and with total deposits less than $1.206 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 $7.8 million (but less than 
$1.206 billion) are required to file the FR 2910a report annually, 
while those with total deposits less than or equal to $7.8 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 
nonexempt 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.

0
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
----------------------------------------------------------------------------------------------------------------
Net transaction accounts:
    $0 to $7.8 million.....................  0 percent of amount.
    Over $7.8 million and up to $48.3        3 percent of amount.
     million.
    Over $48.3 million.....................  $1,215,000 plus 10 percent of amount over $48.3 million.
Nonpersonal time deposits..................  0 percent.
Eurocurrency liabilities...................  0 percent.
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[[Page 58605]]

    By order of the Board of Governors of the Federal Reserve 
System, October 4, 2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05-20299 Filed 10-6-05; 8:45 am]
BILLING CODE 6210-01-P