[Federal Register Volume 71, Number 205 (Tuesday, October 24, 2006)]
[Rules and Regulations]
[Pages 62201-62204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-17737]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-1268]
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 reserve
requirement exemption amount and the low reserve tranche for 2007. The
Regulation D amendments set the amount of total reservable liabilities
of each depository institution that is subject to a zero percent
reserve requirement in 2007 at $8.5 million, up from $7.8 million in
2006. This amount is known as the reserve requirement exemption amount.
The Regulation D amendment also sets the amount of net
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transaction accounts at each depository institution that is subject to
a three percent reserve requirement in 2007 at $45.8 million, down from
$48.3 million in 2006. This amount is known as the low reserve tranche.
The adjustments to both of these amounts are derived using statutory
formulas specified in the Federal Reserve Act.
The Board is also announcing changes in two other amounts, the
nonexempt deposit cutoff level and the reduced reporting limit, that
are used to determine the frequency at which depository institutions
must submit deposit reports.
DATES: Effective date: November 24, 2006.
Compliance dates: For depository institutions that report deposit
data weekly, the new low reserve tranche and reserve requirement
exemption amount will apply to the fourteen-day reserve computation
period that begins Tuesday, November 21, 2006, and the corresponding
fourteen-day reserve maintenance period that begins Thursday, December
21, 2006. For depository institutions that report deposit data
quarterly, the new low reserve tranche and reserve requirement
exemption amount will apply to the seven-day reserve computation period
that begins Tuesday, December 19, 2006, and the corresponding seven-day
reserve maintenance period that begins Thursday, January 18, 2007. For
all depository institutions, these new values of the nonexempt deposit
cutoff level, the reserve requirement exemption amount, and the reduced
reporting limit will be used to determine the frequency at which a
depository institution submits deposit reports effective in either June
or September 2007.
FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Senior Counsel
(202/452-3565), Legal Division, or Margaret Gillis, Financial Analyst
(202/452-3139), 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) of the Federal Reserve Act (Act),
transaction account balances maintained at each depository institution
are subject to reserve requirement ratios of zero, three, or ten
percent. Section 19(b)(11)(A) of the 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. 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 grew by
10.4 percent (from $3,361.8 billion to $3,712.7 billion) between June
30, 2005, and June 30, 2006. Accordingly, the Board is amending
Regulation D to increase the reserve requirement exemption amount by
$0.7 million, from $7.8 million for 2006 to $8.5 million for 2007.\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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Pursuant to Section 19(b)(2) of the Act (12 U.S.C. 461(b)(2)),
transaction account balances maintained at each depository institution
over the reserve requirement exemption amount and 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 $48.3 million. Net
transaction accounts of all depository institutions declined 6.4
percent (from $714.9 billion to $669.1 billion) between June 30, 2005
and June 30, 2006. Accordingly, the Board is amending Regulation D (12
CFR part 204) to decrease the low reserve tranche for net transaction
accounts by $2.5 million, from $48.3 million for 2006 to $45.8 million
for 2007.
For depository institutions that file deposit reports weekly, the
new low reserve tranche and reserve requirement exemption amount will
be effective for the fourteen-day reserve computation period beginning
Tuesday, November 21, 2006, and for the corresponding fourteen-day
reserve maintenance period beginning Thursday, December 21, 2006. For
depository institutions that report quarterly, the new low reserve
tranche and reserve requirement exemption amount will be effective for
the seven-day reserve computation period beginning Tuesday, December
19, 2006, and for the corresponding seven-day reserve maintenance
period beginning Thursday, January 18, 2007.
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). The panel assignment for annual reporters
is effective in June of the screening year; the panel assignment for
weekly and quarterly reporters is effective in September of the
screening year.
In order to ease reporting burden, the Board permits smaller
depository institutions to submit deposit reports less frequently than
larger depository institutions. In the past, the Board used the level
of a depository institution's total deposits as one of the measures for
determining the frequency at which a depository institution files
deposit reports. With the elimination of M3, the Board announced in
July 2006 that it
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would use a measure of deposits based on M2 instead of total deposits.
That measure of deposits is the sum of total transaction accounts,
savings deposits, and small time deposits.\2\
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\2\ This measure also includes ineligible acceptances and
obligations issued by affiliates maturing in less than seven days.
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The Board permits depository institutions with net transaction
accounts above the reserve requirement exemption amount but with a sum
of total transaction accounts, savings deposits, and small time
deposits below a specified level (the ``nonexempt deposit cutoff'') to
report deposit data quarterly. The Board requires certain large
depository institutions to report weekly regardless of the level of
their net transaction accounts if the sum of total transaction
accounts, savings deposits, and small time deposits exceeds a specified
level (the ``reduced reporting limit''). The nonexempt deposit cutoff
level and the reduced reporting limit are adjusted annually, by an
amount equal to 80 percent of the increase, if any, in the sum of total
transaction accounts, savings deposits, and small time deposits of all
depository institutions over the one-year period that ends on the June
30 prior to the adjustment. In the past, the Board has adjusted the
nonexempt deposit cutoff level and the reduced reporting limit above
their indexed levels as a part of its triennial review of the reports
of deposit.
From June 30, 2005 to June 30, 2006, the sum of total transaction
accounts, savings deposits, and small time deposits at all depository
institutions increased 4.8 percent (from $5,598.0 billion to $5,867.1
billion). Accordingly, the Board is adjusting the nonexempt deposit
cutoff level to $207.7 million for 2007. The Board is also adjusting
the reduced reporting limit to $1.163 billion for 2007.\3\
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\3\ Consistent with Board practice, the nonexempt deposit cutoff
level has been rounded to the nearest $0.1 million, and the reduced
reporting limit has been rounded to the nearest $1 million.
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Beginning in September 2007, the boundaries of the four deposit
reporting panels will be defined as follows. Those depository
institutions with net transaction accounts over $8.5 million (the
reserve requirement exemption amount) or with the sum of total
transaction accounts, savings deposits, and small time deposits greater
than or equal to $1.163 billion (the reduced reporting limit) are
subject to detailed reporting, and must file a Report of Transaction
Accounts, Other Deposits and Vault Cash (FR 2900 report) either weekly
or quarterly. Of this group, those with the sum of total transaction
accounts, savings deposits, and small time deposits greater than or
equal to $207.7 million (the nonexempt deposit cutoff level) are
required to file the FR 2900 report each week, while those with the sum
of total transaction accounts, savings deposits, and small time
deposits less than $207.7 million are required to file the FR 2900
report each quarter. Those depository institutions with net transaction
accounts less than or equal to $8.5 million (the reserve requirement
exemption amount) and with the sum of total transaction accounts,
savings deposits, and small time deposits less than $1.163 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 $8.5 million (but less than
$1.163 billion) are required to file the Annual Report of Deposits and
Reservable Liabilities (FR 2910a) report annually, while those with
total deposits less than or equal to $8.5 million are not required to
file a deposit report. A depository institution that adjusts reported
values on its FR 2910a report in order to qualify for reduced reporting
will be shifted to an FR 2900 reporting panel.
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 adjustments 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
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Net transaction accounts:
$0 to $8.5 million................. 0 percent of amount.
Over $8.5 million and up to $45.8 3 percent of amount.
million.
Over $45.8 million................. $1,119,000 plus 10 percent of
amount over $45.8 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 18, 2006.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E6-17737 Filed 10-23-06; 8:45 am]
BILLING CODE 6210-01-P