[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Rules and Regulations]
[Pages 25629-25639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-12431]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 204 and 209
[Regulations D and I; Docket No. R-1307]
Reserve Requirements of Depository Institutions; Issue and
Cancellation of Federal Reserve Bank Capital Stock
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) and Regulation I (Issue and Cancellation of
Federal Reserve Bank Capital Stock) to make two substantive changes and
other clarifying amendments. The first substantive amendment conforms
Regulation D to Section 603 of the Financial Services Regulatory Relief
Act of 2006 (Pub. L. 109-351, Oct. 13, 2006) by authorizing member
banks of the Federal Reserve System to enter into pass-through
arrangements. Previously, member banks were statutorily prohibited from
passing required reserve balances through a correspondent institution.
The second substantive amendment eliminates the provision in Regulation
D's definition of ``savings deposit'' that limits certain kinds of
transfers from savings deposits to not more than three per month. As a
result, all transfers and withdrawals from a savings deposit that are
subject to a monthly limit will be subject to the same limit of not
more than six per month. The remaining clarifying amendments reorganize
the provisions relating to deposit reporting and the calculation and
maintenance of required reserves, clarify the definition of ``vault
cash,'' and make other minor editorial changes.
DATES: This final rule is effective July 2, 2009.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Counsel
(202/
[[Page 25630]]
452-3565), or Dena L. Milligan, Attorney (202/452-3900), Legal
Division, Seth Carpenter, Deputy Associate Director (202/452-2385), or
Margaret Gillis DeBoer, Section Chief (202/452-3139), Division of
Monetary Affairs; for users 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:
I. Statutory Background
For monetary policy purposes, section 19 of the Federal Reserve Act
(the ``Act'') imposes reserve requirements on certain types of deposits
and other liabilities of depository institutions. Currently, reserve
requirement ratios for ``transaction accounts'' are graduated between
three and ten percent. Reserve requirement ratios for ``nonpersonal
time deposits'' and ``Eurocurrency liabilities'' are currently zero
percent. Although section 19 expressly defines accounts with certain
transfer characteristics as ``transaction accounts,'' section 19
authorizes the Board ``to determine, by regulation or order, that an
account or deposit is a transaction account if such account or deposit
may be used to provide funds directly or indirectly for the purpose of
making payments or transfers to third persons or others.'' \1\ Section
19 also authorizes the Board to define, by regulation, the terms used
in the section. The Board implements the provisions of section 19
through Regulation D.
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\1\ Section 19(b)(1)(F) of the Federal Reserve Act, 12 U.S.C.
461(b)(1)(F).
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Section 11(a)(2) of the Act authorizes the Board to require any
depository institution ``to make, at such intervals as the Board may
prescribe, such reports of its liabilities and assets as the Board may
determine to be necessary or desirable to enable the Board to discharge
its responsibility to monitor and control monetary and credit
aggregates.'' \2\ These provisions are specifically implemented in the
computation and maintenance provisions of Regulation D (12 CFR 204.3).
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\2\ 12 U.S.C. 248(a).
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Section 19(c)(1) of the Act provides that a depository
institution's required reserves shall be either in the form of a
balance maintained for such purposes by such a depository institution
in an account at a Federal Reserve Bank or in the form of vault cash.
Prior to 2006, section 19(c)(1)(B) of the Act provided that non-member
banks could maintain required reserves in an account at a depository
institution that maintained required reserve balances at a Federal
Reserve Bank, known as a ``pass-through account.'' The Financial
Services Regulatory Relief Act of 2006 (Pub. L. 109-351, Oct. 13,
2006), amended section 19(c)(1)(B) of the Act to remove the language
restricting pass-through arrangements to non-member banks. Accordingly,
the Act now permits all depository institutions to maintain required
reserves in a pass-through account with a correspondent depository
institution.
II. Request for Public Comment and Summary of Comments Received
The Board requested public comment on proposed changes to
Regulations D and I on February 7, 2008 (73 FR 8009 (Feb. 12, 2008)).
In response, the Board received 27 comments on the proposal, consisting
of comments from nine depository institutions, two financial holding
companies on behalf of their depository institution subsidiaries, seven
individuals, seven financial institution trade associations, one law
firm, and one association of depository institutions. Of these, three
commenters supported the proposal in its entirety, while the majority
of the other comments received concerned (A) the proposed amendment to
the definition of ``savings deposit'' describing the monthly numeric
limits imposed on certain ``convenient'' types of transfers and
withdrawals from savings deposits or (B) the proposed amendments to the
definitions of ``time deposit'' and ``vault cash.'' Other comments
addressed reserve requirements generally and other technical aspects of
the proposal.
III. Section-by-Section Analysis of Proposal and Comments
A. Section 204.2(c) Definition of Time Deposit
(1) Background of Proposed Amendment
The current definition of ``time deposit'' in Regulation D provides
that an early withdrawal penalty must be charged on any amount
withdrawn from a time deposit ``from within six days after the date of
deposit.'' \3\ The definition contemplates that an early withdrawal
might be an early withdrawal of the entire deposit amount or of a
partial withdrawal, that is, a withdrawal of some amount that is not
the entire deposit amount. In either case, if part or all of the time
deposit is withdrawn within six days after the date of the initial
deposit, the specified early withdrawal penalty must be imposed on the
amount so withdrawn. The current definition further states that ``[a]
time deposit from which partial early withdrawals are permitted must
impose additional early withdrawal penalties of at least seven days'
simple interest on amounts withdrawn within six days after each partial
withdrawal.'' This language has been subject to numerous inquiries as
to the meaning of the terms ``additional'' and ``early.''
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\3\ 12 CFR 204.2(c)(1).
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(2) Proposed Amendment and Comments
The Board proposed to amend the definition of ``time deposit'' to
remove the references to ``early'' and ``additional'' in the second
sentence of the definition and to clarify that ``early'' withdrawals
include withdrawals within six days after deposit as well as
withdrawals within six days of the last withdrawal. The Board received
two comments on the proposed amendments to the definition of ``time
deposit.'' Both comments expressed concern that the proposed
amendments, if adopted, would have the effect of precluding certain
depository institutions from continuing to avail themselves of the
deposit type referred to as a ``time deposit open account,'' or
``TDOA.''
From as early as 1915, ``time deposit open account'' was a
separately defined term within the general category of ``time deposit''
in Regulation D.\4\ Board interpretations in later decades described
bank trust departments' use of TDOAs for disposition of certain
commingled uninvested trust and agency funds awaiting disbursement or
further investment.\5\ ``Time deposit open account,'' however, ceased
being a separately defined term under the general definition of ``time
deposit'' in 1980. Further, the Board interpretations discussing use of
TDOAs by trust departments for trust and agency funds were rescinded in
1987 as having been incorporated into section 204.2(c)(1)(i)(C) of
Regulation D.\6\ Nevertheless, the Board referred to TDOAs by name in
subsequent rulemakings as continuing to be viable, at least when used
other than as a method of evading reserve requirements.\7\
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\4\ Federal Reserve Board, Circular No. 6 (Series of 1915) (Jan.
15, 1915).
\5\ Board Interpretation, 1950 Fed. Res. Bull. 44; Board
Interpretation, 1959 Fed. Res. Bull. 1475.
\6\ 52 FR 47689, 47691 (Dec. 16, 1987). Section
204.2(c)(1)(i)(C) states that ``[t]ime deposit includes funds * * *
payable only upon written notice that is actually required to be
given by the depositor not less than seven days prior to withdrawal
* * *''
\7\ 57 FR 38417, 38423-24 (Aug. 25, 1992) (declining to adopt
``LIFO'' rule for withdrawals from time deposits, in part because of
potential negative impact on operation of TDOAs; interpretation
prohibiting linked time deposit accounts at 12 CFR 204.134 limited
to its terms and does not necessarily apply to TDOA types of
accounts operated by trust departments).
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[[Page 25631]]
(3) Comment Analysis and Final Rule
The Board believes that adopting the proposed amendments would have
no effect on the continued use of TDOAs in bona fide arrangements by
trust departments for trust and agency funds. The final amendments,
however, do not adopt revisions to the definition of ``time deposit''
that were proposed in the Board's request for public comment because
the only two comments received on the proposed revisions indicated that
the proposed revisions would create more confusion than clarity.
B. Section 204.2(d) Transfers From Savings Deposits
(1) Background of Proposed Amendment
The Board's criteria for distinguishing between ``transaction
accounts'' and ``savings deposits'' in Regulation D are based on the
ease with which the depositor may make transfers (payments to third
parties) or withdrawals (payments directly to the depositor) from the
account. Generally, the more convenient making withdrawals or transfers
from an account is, the more likely the account holder will use the
account for making payments or transfers to third parties rather than
for holding savings. Accordingly, Regulation D limits the number of
certain convenient kinds of transfers or withdrawals that an account
holder may make in a single month from an account if that account is to
be classified as a ``savings deposit.'' \8\ ``Convenient'' transfers or
withdrawals for this purpose include preauthorized or automatic
transfers (such as overdraft protection transfers or arranging to have
bill payments deducted directly from the depositor's savings account),
telephonic transfers (made by the depositor telephoning or sending a
fax or online instruction to the bank and instructing the transfer to
be made), and transfers by check, debit card, or similar order payable
to third parties.
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\8\ 12 CFR 204.2(d)(2) (definition of ``savings deposit'').
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Regulation D currently limits the number of ``convenient''
transfers and withdrawals from savings deposits to not more than six
per month. Within this overall limit of six, not more than three
transfers or withdrawals may be made by check, debit card, or similar
order made by the depositor and payable to third parties (the ``three''
sublimit). Regulation D does not limit less convenient transfers and
withdrawals from savings deposits. For example, an account holder may
make transfers or withdrawals ``by mail, messenger, automated teller
machine, or in person or * * * made by telephone (via check mailed to
the depositor)'' from savings deposits without numerical limit.
(2) Proposed Amendment and Comments
The Board proposed to amend Regulation D's definition of ``savings
deposit'' to eliminate the ``three'' sublimit that applies to checks
and drafts and simply limit all ``convenient'' transfers to not more
than six per month. Fourteen commenters supported eliminating the
``three'' sublimit, eight commenters favored doing away with numeric
transfer limits entirely, and five commenters favored raising the
monthly numeric limit to some number higher than six. One commenter
proposed allowing depository institutions to set their own monthly
numeric limits on convenient transfers and withdrawals. One commenter
opposed both raising the monthly numeric limit to a higher number and
making all kinds of transfers and withdrawals unlimited in number. One
commenter stated that eliminating only the ``three'' sublimit did not
go far enough, but made no recommendations as to how the Board could
improve the proposal to address that concern. Two commenters requested
that, if the proposed amendment becomes final, then the Board should
provide a sufficiently delayed effective date (either six months or one
year) to allow depository institutions time to modify their systems and
customer disclosures.
(3) Comment Analysis and Final Amendment
The Board has carefully considered the comments received and has
adopted the amendment to the definition of ``savings deposit'' as
proposed. The sublimit in the definition of ``money market deposit
account'' began in 1982 with the enactment of the Garn-St Germain
Depository Institutions Act and lapsed in 1986. The Board retained the
distinction between transactions subject to the overall limit of six
and those subject to the sublimit in Regulation D after the Depository
Institutions Act lapsed in 1986. Technological advancements, however,
have eliminated any rational basis for the distinction.
The Board has determined neither to raise the monthly numeric limit
on convenient transfers to a number higher than six, nor to eliminate
monthly numeric limits on all convenient transfers and withdrawals
(including online) from savings deposits generally. Section 19 of the
Act requires the Board to impose reserve requirements on transaction
accounts and not on other types of accounts. Accordingly, the Board
must maintain the capacity to distinguish between transaction accounts
and savings deposits. The six-per-month limitation on certain
convenient transfers and withdrawals has existed, in one form or
another, since 1982. Such types of transfers and withdrawals appear to
have become even more convenient since that time due to technological
advances, such as the ability to make transfers online, and the
increased availability of debit-card transfers at point-of-sale
terminals and elsewhere. The greater the number of convenient transfers
and withdrawals permitted per month from a ``savings deposit,'' the
greater the difficulty in distinguishing such an account from a
transaction account. Therefore, the Board has determined that the final
rule will neither increase the number of convenient transfers and
withdrawals permitted per month from a savings deposit, nor eliminate
such numeric limits entirely (on either online transfers or all
convenient transfers and withdrawals).
For similar reasons, the Board believes that it would not be
appropriate to adopt a rule allowing depository institutions to set
their own monthly numeric limits on convenient transfers and
withdrawals that account holders may make from savings deposits.
Allowing different limits at different depository institutions would
erode any definitional distinction between ``transaction accounts'' and
``savings deposits.'' Even if some depository institutions were to
choose relatively low numeric limits, there likely would be broad
variation among depository institutions in the numeric limits selected,
creating significant discrepancies between accounts classified as
``savings deposits.'' In addition, the Board believes that depository
institutions would have cost-avoidance and competitive incentives to
set numeric limits as high as possible while still being able to report
such deposits as nonreservable ``savings deposits'' that may bear
interest. The Board is obligated by statute to maintain some regulatory
distinction between ``transaction accounts'' and ``savings deposits''
and to enforce such a distinction with consistency. Accordingly, the
Board has determined not to adopt a final rule permitting
[[Page 25632]]
depository institutions to select their own numeric limits on
convenient transfers and withdrawals from savings deposits.
The Board also believes that selecting a monthly numeric limit to
apply to all types of transfers and withdrawals from ``savings
deposits,'' including those types that are currently unlimited in
number per month, would not be appropriate. The Act provides that a
``transaction account'' is one ``on which the depositor or account
holder is permitted to make withdrawals by negotiable or transferable
instrument, payment orders of withdrawal, telephone transfers, or other
similar items for the purpose of making payments or transfers to third
persons or others.'' \9\ As such, the statutory definition specifically
contemplates the kinds of transfers and withdrawals that are, or are
most likely to be, transfers and withdrawals ``for the purpose of
making payments or transfers to third persons or others.'' In contrast,
withdrawals made in person or at an ATM are generally payments directly
to the depositor, even if the depositor may subsequently provide those
same funds to a third person or use them for a payment. Accordingly,
the Board has determined that the final rule not impose numeric limits
on all types of transfers and withdrawals that may be made from savings
deposits, including those that are currently unlimited.
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\9\ 12 U.S.C. 461(b).
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Finally, the Board believes that delaying the effective date for
the final rule eliminating the ``three'' sublimit from the definition
of ``savings deposit'' is unnecessary because the final rule is
permissive. Under the final rule, depository institutions may classify
accounts subject to the ``three'' sublimit as ``savings deposits'' as
long as necessary. Accordingly, the Board has determined not to delay
the final rule's effective date.
C. Section 204.2(k) ``Vault Cash'' Definition
(1) Background of Proposed Amendment
From 1917 to 1959, the Act permitted member banks to satisfy
reserve requirements solely with balances in their accounts at Federal
Reserve Banks. In 1959, Congress amended section 19 of the Act to
provide that the Board, ``under such regulations as it may prescribe,
may permit member banks to count all or part of their currency and coin
as reserves required under this section.'' \10\ The history of the 1959
legislation recognized that currency and coin in a member bank's vault
and a balance in a member bank's account at a Federal Reserve Bank were
``interchangeable'' as liabilities of the Reserve Banks.\11\ For
operational reasons, however, ``country banks'' generally found it
necessary to hold more currency and coin in their vaults than did
``reserve city banks'' or ``central reserve city banks.'' \12\
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\10\ The Act of July 28, 1959 (73 Stat. 263).
\11\ S. Rep. No. 86-195, at 3 (1959); H. Rep. No. 86-403, at 3
(1959).
\12\ Id.
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In 1970, the Board issued an interpretation of Regulation D
relating to the eligibility of currency or coin held principally for
numismatic value to satisfy member bank reserve requirements.\13\ The
Board specified in the 1970 interpretation that in order for a member
bank to count currency or coin towards reserve requirements, the member
bank must have ``the full and unrestricted right to use [such currency
or coin] at any time to meet depositors' claims. * * * '' \14\ The 1970
interpretation also specified that a bank does not have such a ``full
and unrestricted right'' if the bank is prevented, legally or
practically, * * * from using the currency or coin at any time to meet
customer's demands.'' \15\
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\13\ Former 12 CFR 204.116 (1979).
\14\ Id.
\15\ Id.
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The 1980 amendments to Regulation D, which implemented the Monetary
Control Act of 1980, introduced ``vault cash'' as a defined term. The
1980 amendments defined ``vault cash'' to mean ``currency and coin
owned and held by a depository institution that may, at any time, be
used to satisfy depositors' claims,'' incorporating into the new
definition the 1970 interpretation's principles of bank ownership and
availability at any time to satisfy depositors' claims. Subsequent
Board guidance and staff opinions provided additional clarification of
these requirements, including clarifying what vault cash is ``owned and
held'' by the depository institution claiming it and the circumstances
under which vault cash is ``immediately available.''
(2) Proposed Amendment and Comments
The Board proposed amending the definition of ``vault cash'' to
incorporate the substance of prior written staff guidance as to when
currency and coin that the depository institution does not hold at its
physical location may be considered ``vault cash.'' \16\ Specifically,
the Board proposed dividing the definition of ``vault cash'' into two
subsections: one that addresses vault cash ``held at a physical
location of the depository institution * * * from which the
institution's depositors may make cash withdrawals,'' and the other
that addresses vault cash ``held at an alternate physical location.''
The amendments proposed by the Board expanded primarily the second
proposed subsection to incorporate prior guidance.
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\16\ See, e.g. FRRS ] 2-307.2 (rented vault); Staff Opinion of
Aug. 9, 1982 (ATMs).
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(3) Comment Analysis and Final Amendment
The Board received two comments on the proposed amendments to the
definition of ``vault cash.'' One commenter expressed support for the
proposed amendments, and one commenter opposed the proposed amendments.
The commenter opposing the amendments specifically opposed certain
provisions relating to when vault cash at alternate physical locations
may be considered to be ``immediately available,'' namely, that (1) the
depository institution claiming the currency and coin as ``vault cash''
must receive it by 4 p.m. on the same day if requested by 10 a.m., and
that (2) the depository institution must have a written contract in
place for the delivery of the currency and coin claimed as ``vault
cash.'' This commenter stated that 4 p.m. should not be selected as a
cut-off hour because some depository institutions conduct business
after 4 p.m., and because customers can usually obtain cash through an
ATM or at POS (point of sale) terminals after 4 p.m. The commenter
proposed an amendment that would require the currency and coin to be
received on the same calendar day that it is requested. The commenter
also stated that requiring written contractual arrangements for
delivery of currency and coin claimed as ``vault cash'' imposes
unnecessary costs on depository institutions because contractual
agreements ``will likely never be used'' and because updating the
agreements as offices are opened and closed would be expensive. The
commenter proposed ``leav[ing] the particular details of the
arrangement up to the institution.''
The Board believes that the selection of 4 p.m. as a cut-off hour
for characterizing currency and coin as ``vault cash'' under Regulation
D is appropriate. The Board believes that the rationale provided for an
alternate ``same calendar day'' rule would not justify such a
significant departure from the consistent position taken in numerous
Board staff opinions over the years on the issue. Furthermore, such a
[[Page 25633]]
rule would remove any nexus between the characterization of currency
and coin as ``vault cash'' and having such currency and coin
``immediately available,'' because any such currency and coin received
after a closing hour (no matter how late) would not be available to a
customer until the next business day. While customers may be able, as a
practical matter, to obtain cash from ATMs and from POS terminals at
various hours, not all such cash is sought to be characterized as
``vault cash'' for Regulation D purposes: the 4 p.m. requirement would
apply only to currency and coin that an institution counts towards
satisfying its reserve requirement.
The Board also believes that the rationale provided for eliminating
the requirement for written contractual arrangements to be in place for
``vault cash'' does not justify changing the long-standing position on
this issue. As with the 4 p.m. cut-off, the requirement for written
contractual arrangements in this context is the position the Board has
consistently taken over the years in staff opinions. Moreover, the
Board believes it would be difficult, if not impossible, for a
depository institution to establish what currency and coin is
physically subject to the retrieval plan without written delivery plan
to that effect. Likewise, the Board believes that it would be
difficult, if not impossible, for the depository institution to
establish its ``full and unrestricted right'' to such currency and coin
if it were subject only to an oral understanding for retrieval within
the requisite time frame. Accordingly, the Board is adopting the
``vault cash'' amendments as proposed.
D. Section 204.2(l) Definition of ``Pass-through Account''
The Board proposed to amend the definition of ``pass-through
account'' to eliminate the language restricting pass-through account
arrangements to non-member banks in order to conform the definition to
section 19(c)(1)(B) of the Act. The Board also proposed moving the
provisions relating to pass-through accounts to paragraph (d) under
proposed Sec. 204.5, ``Maintenance of Required Reserves.'' The Board
received five comments in support of the proposed amendments, and is
adopting them as proposed.
E. Section 204.2(w) Definition of ``Clearing Balance Allowance''
The Board proposed (1) adding a new definition of ``clearing
balance allowance'' to Regulation D to replace the undefined term
``required charge-free band'' used in provisions relating to carryovers
of excess reserves and deficiencies in reserves and (2) moving the
existing carryover provisions to a new paragraph (e) under proposed
Sec. 204.5, ``Maintenance of Required Reserves.'' The Board received
no comments on these amendments. The Board is setting forth the
definition of ``clearing balance allowance'' in new Sec. 204.2(w), and
moving the carryover provisions to Sec. 204.5, as proposed.
F. Section 204.2(x) Definition of ``Contractual Clearing Balance''
The Board proposed adding a new definition of ``contractual
clearing balance'' to Regulation D to replace the undefined term
``required clearing balance.'' The Board proposed to define
``contractual clearing balance'' as ``the amount that a depository
institution agrees or is required to maintain in its account at a
Federal Reserve Bank in addition to balances the depository institution
may hold to satisfy its required reserve balance.'' Further, the
definition specified that ``[a] depository institution that has a
required reserve balance of zero may still hold a contractual clearing
balance.'' The Board received no comments on the proposed amendment.
The Board is revising the proposed definition of ``contractual
clearing balance'' to provide consistency of usage of terms throughout
Regulation D. When the Board proposed the new definition of
``contractual clearing balance,'' ``required reserve balance'' was an
undefined term. New Sec. 204.2(bb), however, defines ``required
reserve balance'' as ``the average balance held in an account at a
Federal Reserve Bank by or on behalf of an institution over a reserve
maintenance period to satisfy the reserve requirements of this part.''
\17\ The proposed definition of ``contractual clearing balance''
contemplated the contractual clearing balance to be in addition to the
amount an institution is required to maintain as a balance at a Reserve
Bank in order to satisfy its reserve requirements, and not in addition
to those balances actually held to satisfy such requirements.
Accordingly, the final rule defines ``contractual clearing balance'' as
``an amount that an institution agrees or is required to maintain in
its account at a Federal Reserve Bank in addition to any reserve
balance requirement.'' For similar reasons, the Board is amending the
last sentence in the definition of ``contractual clearing balance'' to
read: ``An institution that has a reserve balance requirement of zero
may still have a contractual clearing balance.''
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\17\ See final rule on payment of interest on balances and
excess balance accounts in today's Federal Register.
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G. Section 204.3 Reporting and Location
(1) Proposed Amendment
The Board proposed re-organizing the regulatory provisions
governing the calculation of required reserves, the maintenance of
required reserves, and the submission of reports of deposits (from
which required reserves are calculated) into three separate
subsections. The proposed amendments were not intended to make
substantive changes to these provisions, but rather to reorganize them
for greater ease of reference and to make minor editorial changes for
clarity.
The Board proposed a new Sec. 204.3(a), consisting of the text of
the first sentence of current Sec. 204.3(a)(2)(i) with proposed
amendments clarifying (1) the authority of the Board or a Federal
Reserve Bank to require reports of deposits or any other form or
statement from a depository institution relating to reserve
requirements and (2) where reports of deposits are to be submitted in
light of the account location provisions of the regulation.
The Board proposed to relocate the text of the second sentence of
current Sec. 204.3(a)(2)(i) (stipulating reporting requirements for a
foreign bank's U.S. branches and agencies and for an Edge or Agreement
corporation's offices operating within the same State and the same
Federal Reserve District) to new Sec. 204.3(b). The Board proposed to
relocate the text of the third sentence of current Sec. 204.3(a)(1)
(obligations of majority-owned U.S. subsidiaries of a depository
institution) to new Sec. 204.3(c).
The Board proposed to relocate the text, with one technical
amendment, of current Sec. 204.3(a)(3) (governing assignment of low
reserve tranche and reserve requirement exemption) to new Sec.
204.3(d). The Board proposed amending the text of current Sec.
204.3(a)(3) (new Sec. 204.3(d)) to conform the section number
reference to reserve requirement ratios (Sec. 204.9) to that section's
new section number (Sec. 204.4(f)).
The Board did not propose any changes to current Sec. 204.3(e),
which addresses computation of transaction accounts for deposit
reporting purposes. The Board proposed to relocate current Sec.
204.3(a)(2)(iii) (correspondent not responsible for guaranteeing the
accuracy of reports submitted by respondents) to new Sec. 204.3(f).
Finally, the Board proposed to relocate the text of current Sec.
204.3(b)(2) to new Sec. 204.3(g) with two amendments. One amendment
would conform
[[Page 25634]]
internal references to other proposed amendments. The other amendment
would provide that a depository institution is considered to be located
at the location specified in the institution's articles of
incorporation or as specified by the institution's primary regulator.
The Board proposed the second amendment in light of the fact that an
institution may move its head office or primary location from that
specified in its charter or organizing certificate, but that the
charter or organizing certificate may not reflect that move. In such
cases, the move instead may be reflected in the institution's revised
articles of incorporation or otherwise as recognized by the
institution's primary regulator.
(2) Comments Received
The Board received one comment regarding proposed new Sec.
204.3(a), asking that the Board ``be judicious in the information
requested'' from reporting entities because ``the collective burden of
myriad reports and other information collections imposed by the bank
regulators is enormous.'' This commenter stated that ``[w]hile the
proposed additional text in section 204.3(a) is not objectionable on
its face, it nevertheless creates another opportunity for the Federal
Reserve System to impose more regulatory burden in a way that evokes
the image of `death by a thousand cuts.' ''
(3) Comment Analysis and Final Rule
The Board is keenly aware of the burden imposed by regulatory
reporting on depository institutions. The proposed amendment to section
204.3(a) was intended solely to express existing authority. The Board
did not propose this amendment as an attempt to increase its authority
to require regulatory reports, or to increase the number or extent of
regulatory reports currently required. As required by other law, the
Board re-evaluates its reporting requirements periodically in order to
minimize or eliminate duplicative or otherwise burdensome reports. As
also required by other law, the Board carefully evaluates any proposed
new reporting requirements to avoid placing unnecessary additional
costs on reporting entities. With these principles in mind, the Board
is adopting Sec. 204.3(a) as proposed.
The Board received no comments on proposed Sec. Sec. 204.3(b)-(g)
and is adopting those amendments as proposed.
H. Section 204.4 Computation of Required Reserves
The Board proposed moving the provisions relating to computation of
required reserves to a new separate paragraph, proposed Sec. 204.4,
``Computation of Required Reserves.'' For some provisions, the Board
proposed minor editorial amendments for clarity; for other provisions,
the Board proposed no changes (apart from re-designation as Sec.
204.4). The Board received one comment on these proposed amendments,
suggesting that the words ``or agreement corporation'' should be added
to the end of proposed Sec. 204.4(b) (providing that Edge and
agreement corporations may not deduct balances due from another U.S.
office of ``the same Edge or agreement corporation''). The Board is
adopting a final Sec. 204.4(b) that incorporates this comment as the
existing omission of ``or Agreement corporation'' was unintentional.
The Board is also making an editorial change to Sec. 204.4(a) to
provide consistent usage of terms throughout Regulation D. The Board
received no other comments on these proposed amendments and, apart from
adopting the one suggestion proposed by the comment and the editorial
change, is adopting the amendments as proposed.
I. Section 204.5 Maintenance of Required Reserves
The Board proposed moving the existing provisions regarding
maintenance of required reserves, including the provisions on
maintenance of required reserves pursuant to pass-through agreements,
to a new Sec. 204.5, ``Maintenance of Required Reserves.''
Specifically, the proposed amendments deleted references to ``non-
member institutions'' in discussing pass-through arrangements,
clarified that depository institutions that do not hold required
reserve balances may serve as pass-through correspondents, conformed
numeric references to other proposed amendments, and made other minor
editorial amendments for clarity and to conform language to other
proposed amendments and current usage. No substantive changes were
intended. The Board received no comments on these proposed amendments
and is adopting them as proposed.
J. Section 204.6 Charges for Reserve Deficiencies
(1) Proposed Amendment
The Board proposed moving the existing provisions regarding charges
for reserve deficiencies to a new Sec. 204.6, ``Charges for Reserve
Deficiencies.'' The Board also proposed deleting provisions describing
guidelines for waivers by Reserve Banks of small or infrequent charges.
The Board proposed this deletion because the provision described only
in part the extent of the discretion of the Reserve Banks with respect
to waivers of deficiency charges. The deletion was intended to avoid
the implication that Reserve Banks must waive charges in the
circumstances described.
(2) Comments Received
The Board received two comments on these proposed amendments, both
in opposition to the proposal to delete the provisions related to
waivers. One commenter stated that it is ``inappropriate to eliminate
this policy direction to Reserve Banks without acknowledging that its
elimination represents a substantive change'' from existing policy,
which the commenter described as ``sound policy [that] should not be
eliminated nor changed.'' The other commenter stated that the existing
provision ``simply incorporates the Reserve Banks'' guidelines [that
outline when waivers may be appropriate] and notes two instances where
waivers are available.'' This commenter also expressed concern that the
proposal to delete the waiver provision ``impli[es] that waivers may
not be available in the circumstances identified in the current rule,''
that is, ``when the charge would be small or when the deficiency falls
below a predetermined threshold.'' The commenter stated that these two
circumstances ``seem appropriate situations for the Board to exercise
its discretion not to impose a charge'' and that the Board should
``share its reasoning'' if the Board intends for charges to be
automatically imposed in those cases. The commenter urged the Board
``to retain the current examples of when charges will be waived and
simply note that they are illustrative.''
(3) Comment Analysis and Final Rule
The intent of the Board's proposal was to eliminate references to
obsolete guidelines and to avoid the implication that Reserve Banks
must waive deficiency charges in certain circumstances. The Board did
not intend the proposed amendments to be a substantive policy change,
as the Reserve Banks retain the same discretion with respect to waivers
of deficiency charges under the proposed amendment as under former
section 204.7(a)(2). Accordingly, the Board has decided to delete the
reference to the obsolete guidelines, as proposed, and to add language
to the provision clarifying the discretion of the Reserve Banks with
respect to waiver of deficiency charges. The Board is retaining the
current examples of when a Reserve Bank may
[[Page 25635]]
waive charges and clarifying that they are illustrative. As proposed,
the language relating to charges for reserve deficiencies is moved from
Sec. 204.7 to Sec. 204.6.
K. Section 204.7 Transitional Adjustments in Mergers
The Board proposed re-designating the current provisions regarding
transitional adjustments in mergers to a new section, Sec. 204.7. No
other changes were proposed. The Board received no comments on these
proposed amendments. Since the Board proposed these amendments in
February 2008, the Board has made adjustments to its clearing balance
policy that discontinued practices related to reserve requirements that
were no longer necessary in light of the amendments to Regulation D
implementing the payments of interest on balances at Reserve Banks.\18\
At that time, the Board accordingly removed the provision in Regulation
D regarding transitional adjustments in mergers. The Board has decided
to retain the changes to its clearing balance policy and has confirmed
that removal as part of the final rule on payment of interest on
balances at Reserve Banks.\19\
---------------------------------------------------------------------------
\18\ See 73 FR 59482, 59484-85 (Oct. 9, 2008).
\19\ See final rule on payment of interest on balances elsewhere
in today's Federal Register.
---------------------------------------------------------------------------
L. Section 204.8 International Banking Facilities
The Board did not propose any changes to Sec. 204.8.
M. Section 204.9 Emergency Reserve Requirement
The Board proposed re-designating the current provisions related to
emergency reserve requirements to a new section, Sec. 204.9. No other
changes to the section were proposed. The Board received no comments on
these proposed amendments and is adopting them as proposed.
N. Section 204.7 Supplemental Reserve Requirement
The Board proposed re-designating the current provisions to a new
section, Sec. 204.10. No other changes to the section were proposed.
The Board received no comments on the proposed amendments. Since the
proposal, Sec. 204.10 has been designated ``Payment of interest on
balances.'' The Board, however, has removed the provisions relating to
transitional adjustments in mergers that were proposed to be moved to
Sec. 204.7. In light of the designation of Sec. 204.10 as ``Payment
of interest on balances,'' the Board is moving the provisions
previously set forth in section 204.9 to new Sec. 204.7.
O. Section 209.2(c)(1) of Regulation I Location of Bank--General Rule
The Board proposed amending section 209.2(c)(1) to conform that
section to the proposed Sec. 204.3(g) of Regulation D, which the Board
has decided to adopt, discussed supra. The Board received no comments
on these proposed amendments and is adopting them as proposed.
IV. Solicitation of Comments Regarding Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the
Board to use ``plain language'' in all final rules. 12 U.S.C. 1408. The
Board has sought to present this amendment in a simple and
straightforward manner. The Board received no comments on whether the
proposed rule was clearly stated and effectively organized or on how
the Board might make the proposed text easier to understand.
V. Final Regulatory Flexibility Analysis
An initial regulatory flexibility analysis (IRFA) was included in
the Board's proposed rule in accordance with the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.). In the IRFA, the Board specifically
solicited comment on whether the proposed rule would have a significant
economic impact on a substantial number of small entities. The Board
received no comments in response to its request. Section 4 of the RFA
requires an agency either to provide a final regulatory flexibility
analysis with a final rule or to certify that the final rule will not
have a significant economic impact on a substantial number of small
entities. Banks and other depository institutions are considered
``small'' if they have less than $165 million in assets. For the
reasons stated below, the Board is certifying that the final rule will
not have a significant impact on a substantial number of small
entities.
1. Statement of the need for and the objectives of the final rule.
The Board is publishing final amendments to Regulations D and I to
conform the regulations to provisions of the Financial Services
Regulatory Relief Act of 2006, to modernize the regulations in light of
technological developments, to reduce regulatory burden, and to
simplify regulatory compliance. Section 19 of the Act was enacted to
impose reserve requirements on certain deposits and other liabilities
of depository institutions for monetary policy purposes. Section 19
also authorizes the Board to promulgate such regulations as it may deem
necessary to effectuate the purposes of the section. The Board believes
that the final rule is within Congress' broad grant of authority to the
Board to adopt provisions that carry out the purposes of section 19 of
the Act.
2. Summary of significant issues raised by the public comments in
response to the initial regulatory flexibility analysis. The Board
received no comments on its initial regulatory flexibility analysis or
on whether the proposed rule would have a significant economic impact
on a substantial number of small entities.
3. Small entities affected by the final rule. The final rule would
affect all depository institutions currently subject to reserve
requirements. The Board estimates that approximately 8,195 depository
institutions are subject to reserve requirements, of which
approximately 3,800 could be considered ``small'' for purposes of RFA
(entities with assets of $165 million or less).
4. Description of projected reporting, recordkeeping and other
compliance requirements of the final rule. The final rule does not
alter any of the reporting or recordkeeping provisions that already
apply to depository institutions.
5. Significant alternatives to the revisions in the final rule. The
Board received no comments suggesting significant alternatives to the
proposed rule that would minimize the impact of the proposed rule on
small entities. There are no significant alternatives to the revisions
in the final rule that would minimize the impact on small entities.
The final rule does not impose any additional burden on depository
institutions, including small entities. Moreover, the final rule
relieves depository institutions, including small entities, of any
burdens associated with the ``three'' sublimit on certain convenient
transfers from savings deposits, as well as any burdens associated with
restricting pass-through account arrangements to non-member banks.
Thus, the Board certifies that the final rule will not have a
significant economic impact on small entities.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the final rule
under the authority delegated to the Board by the Office of Management
and Budget. No collections of information pursuant to the Paperwork
Reduction Act are contained in the final rule.
[[Page 25636]]
List of Subjects in 12 CFR Parts 204 and 209
Banks, Banking, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, the Board is amending 12 CFR
parts 204 and 209 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. Sec. 204.2 is amended by revising paragraphs (d)(2), (k) and (l),
and adding new paragraphs (w) and (x) to read as follows:
Sec. 204.2 Definitions.
* * * * *
(d) * * *
(2) The term ``savings deposit'' also means: A deposit or account,
such as an account commonly known as a passbook savings account, a
statement savings account, or as a money market deposit account (MMDA),
that otherwise meets the requirements of Sec. 204.2(d)(1) and from
which, under the terms of the deposit contract or by practice of the
depository institution, the depositor is permitted or authorized to
make no more than six transfers and withdrawals, or a combination of
such transfers and withdrawals, per calendar month or statement cycle
(or similar period) of at least four weeks, to another account
(including a transaction account) of the depositor at the same
institution or to a third party by means of a preauthorized or
automatic transfer, or telephonic (including data transmission)
agreement, order or instruction, or by check, draft, debit card, or
similar order made by the depositor and payable to third parties. A
preauthorized transfer includes any arrangement by the depository
institution to pay a third party from the account of a depositor upon
written or oral instruction (including an order received through an
automated clearing house (ACH)) or any arrangement by a depository
institution to pay a third party from the account of the depositor at a
predetermined time or on a fixed schedule. Such an account is not a
transaction account by virtue of an arrangement that permits transfers
for the purpose of repaying loans and associated expenses at the same
depository institution (as originator or servicer) or that permits
transfers of funds from this account to another account of the same
depositor at the same institution or permits withdrawals (payments
directly to the depositor) from the account when such transfers or
withdrawals are made by mail, messenger, automated teller machine, or
in person or when such withdrawals are made by telephone (via check
mailed to the depositor) regardless of the number of such transfers or
withdrawals.\4\
---------------------------------------------------------------------------
\4\ In order to ensure that no more than the permitted number of
withdrawals or transfers are made, for an account to come within the
definition of ``savings deposit,'' a depository institution must
either:
(a) Prevent withdrawals or transfers of funds from this account
that are in excess of the limits established by paragraph (d)(2) of
this section, or
(b) Adopt procedures to monitor those transfers on an ex post
basis and contact customers who exceed the established limits on
more than occasional basis. For customers who continue to violate
those limits after they have been contacted by the depository
institution, the depository institution must either close the
account and place the funds in another account that the depositor is
eligible to maintain or take away the transfer and draft capacities
of the account. An account that authorizes withdrawals or transfers
in excess of the permitted number is a transaction account
regardless of whether the authorized number of transactions is
actually made. For accounts described in paragraph (d)(2) of this
section, the institution at its option may use, on a consistent
basis, either the date on the check, draft, or similar item, or the
date the item is paid in applying the limits imposed by that
section.
---------------------------------------------------------------------------
* * * * *
(k)(1) Vault cash means United States currency and coin owned and
booked as an asset by a depository institution that may, at any time,
be used to satisfy claims of that depository institution's depositors
and that meets the requirements of paragraph (k)(2)(i) or (k)(2)(ii) of
this section.
(2) Vault cash must be either:
(i) Held at a physical location of the depository institution
(including the depository institution's proprietary ATMs) from which
the institution's depositors may make cash withdrawals; or
(ii) Held at an alternate physical location if--
(A) The depository institution claiming the currency and coin as
vault cash at all times retains full rights of ownership in and to the
currency and coin held at the alternate physical location;
(B) The depository institution claiming the currency and coin as
vault cash at all times books the currency and coin held at the
alternate physical location as an asset of the depository institution;
(C) No other depository institution claims the currency and coin
held at the alternate physical location as vault cash in satisfaction
of that other depository institution's reserve requirements;
(D) The currency and coin held at the alternate physical location
is reasonably nearby a location of the depository institution claiming
the currency and coin as vault cash at which its depositors may make
cash withdrawals (an alternate physical location is considered
``reasonably nearby'' if the depository institution that claims the
currency and coin as vault cash can recall the currency and coin from
the alternate physical location by 10 a.m. and, relying solely on
ground transportation, receive the currency and coin not later than 4
p.m. on the same calendar day at a location of the depository
institution at which its depositors may make cash withdrawals); and
(E) The depository institution claiming the currency and coin as
vault cash has in place a written cash delivery plan and written
contractual arrangements necessary to implement that plan that
demonstrate that the currency and coin can be recalled and received in
accordance with the requirements of paragraph (k)(2)(ii)(D) of this
section at any time. The depository institution shall provide copies of
the written cash delivery plan and written contractual arrangements to
the Federal Reserve Bank that holds its account or to the Board upon
request.
(3) ``Vault cash'' includes United States currency and coin in
transit to a Federal Reserve Bank or a correspondent depository
institution for which the reporting depository institution has not yet
received credit, and United States currency and coin in transit from a
Federal Reserve Bank or a correspondent depository institution when the
reporting depository institution's account at the Federal Reserve or
correspondent bank has been charged for such shipment.
(4) Silver and gold coin and other currency and coin whose
numismatic or bullion value is substantially in excess of face value is
not vault cash for purposes of this part.
* * * * *
(l) Pass-through account means a balance maintained by a depository
institution with a correspondent institution under Sec. 204.5(d).
* * * * *
(w) Clearing balance allowance means the greater of $25,000 or two
percent of an institution's contractual clearing balance.
(x) Contractual clearing balance means an amount that an
institution agrees or is required to maintain in its account at a
Federal Reserve Bank in addition to any reserve balance requirement. An
institution that has a reserve balance requirement of zero may still
have a contractual clearing balance.
[[Page 25637]]
0
3. Amend Sec. 204.3 by revising the heading, removing paragraphs (h)
and (i), and revising paragraphs (a) through (d), (f), and (g) to read
as follows:
Sec. 204.3 Reporting and location.
(a) Every depository institution, U.S. branch or agency of a
foreign bank, and Edge or Agreement corporation shall file a report of
deposits (or any other form or statement that may be required by the
Board or by a Federal Reserve Bank) with the Federal Reserve Bank in
the Federal Reserve District in which it is located, regardless of the
manner in which it chooses to maintain required reserve balances.
(b) A foreign bank's U.S. branches and agencies and an Edge or
Agreement corporation's offices operating within the same State and the
same Federal Reserve District shall prepare and file a report of
deposits on an aggregated basis.
(c) For purposes of this part, the obligations of a majority-owned
(50 percent or more) U.S. subsidiary (except an Edge or Agreement
corporation) of a depository institution shall be regarded as
obligations of the parent depository institution.
(d) A depository institution, a foreign bank, or an Edge or
Agreement corporation shall, if possible, assign the low reserve
tranche and reserve requirement exemption prescribed in Sec. 204.4(f)
to only one office or to a group of offices filing a single aggregated
report of deposits. The amount of the reserve requirement exemption
allocated to an office or group of offices may not exceed the amount of
the low reserve tranche allocated to such office or offices. If the low
reserve tranche or reserve requirement exemption cannot be fully
utilized by a single office or by a group of offices filing a single
report of deposits, the unused portion of the tranche or exemption may
be assigned to other offices or groups of offices of the same
institution until the amount of the tranche (or net transaction
accounts) or exemption (or reservable liabilities) is exhausted. The
tranche or exemption may be reallocated each year concurrent with
implementation of the indexed tranche and exemption, or, if necessary
during the course of the year to avoid underutilization of the tranche
or exemption, at the beginning of a reserve computation period.
* * * * *
(f) The Board and the Federal Reserve Banks will not hold a pass-
through correspondent responsible for guaranteeing the accuracy of the
reports of deposits submitted by its respondents.
(g)(1) For purposes of this section, a depository institution, a
U.S. branch or agency of a foreign bank, or an Edge or Agreement
corporation is located in the Federal Reserve District that contains
the location specified in the institution's charter, organizing
certificate, license, or articles of incorporation, or as specified by
the institution's primary regulator, or if no such location is
specified, the location of its head office, unless otherwise determined
by the Board under paragraph (g)(2) of this section.
(2) If the location specified in paragraph (g)(1) of this section,
in the Board's judgment, is ambiguous, would impede the ability of the
Board or the Federal Reserve Banks to perform their functions under the
Federal Reserve Act, or would impede the ability of the institution to
operate efficiently, the Board will determine the Federal Reserve
District in which the institution is located, after consultation with
the institution and the relevant Federal Reserve Banks. The relevant
Federal Reserve Banks are the Federal Reserve Bank whose District
contains the location specified in paragraph (g)(1) of this section and
the Federal Reserve Bank in whose District the institution is proposed
to be located. In making this determination, the Board will consider
any applicable laws, the business needs of the institution, the
location of the institution's head office, the locations where the
institution performs its business, and the locations that would allow
the institution, the Board, and the Federal Reserve Banks to perform
their functions efficiently and effectively.
0
4. A new Sec. 204.4 is added to read as follows:
Sec. 204.4 Computation of required reserves.
(a) In determining the reserve requirement under this part, the
amount of cash items in process of collection and balances subject to
immediate withdrawal due from other depository institutions located in
the United States (including such amounts due from United States
branches and agencies of foreign banks and Edge and Agreement
corporations) may be deducted from the amount of gross transaction
accounts. The amount that may be deducted may not exceed the amount of
gross transaction accounts.
(b) United States branches and agencies of a foreign bank may not
deduct balances due from another United States branch or agency of the
same foreign bank, and United States offices of an Edge or Agreement
Corporation may not deduct balances due from another United States
office of the same Edge or Agreement Corporation.
(c) Balances ``due from other depository institutions'' do not
include balances due from Federal Reserve Banks, pass-through accounts,
or balances (payable in dollars or otherwise) due from banking offices
located outside the United States. An institution exercising fiduciary
powers may not include in balances ``due from other depository
institutions'' amounts of trust funds deposited with other banks and
due to it as a trustee or other fiduciary.
(d) For institutions that file a report of deposits weekly,
required reserves are computed on the basis of the institution's daily
average balances of deposits and Eurocurrency liabilities during a 14-
day computation period ending every second Monday.
(e) For institutions that file a report of deposits quarterly,
required reserves are computed on the basis of the institution's daily
average balances of deposits and Eurocurrency liabilities during the 7-
day computation period that begins on the third Tuesday of March, June,
September, and December.
(f) For all depository institutions, Edge and Agreement
corporations, and United States branches and agencies of foreign banks,
required reserves are computed by applying the reserve requirement
ratios below to net transaction accounts, nonpersonal time deposits,
and Eurocurrency liabilities of the institution during the computation
period.
------------------------------------------------------------------------
Reservable liability Reserve requirement ratio
------------------------------------------------------------------------
NET TRANSACTION ACCOUNTS:
$0 to reserve requirement exemption 0 percent of amount.
amount ($10.3 million).
Over reserve requirement exemption 3 percent of amount.
amount ($10.3 million) and up to low
reserve tranche ($44.4 million).
Over low reserve tranche ($44.4 $1,023,000 plus 10 percent
million). of amount over $44.4
million.
Nonpersonal time deposits................. 0 percent.
[[Page 25638]]
Eurocurrency liabilities.................. 0 percent.
------------------------------------------------------------------------
Sec. 204.9 [Removed]
0
5. Section 204.9 is removed.
Sec. 204.5 [Redesignated as Sec. 204.9]
0
6. Section 204.5 is redesignated as Sec. 204.9.
0
7. New Sec. 204.5 is added to read as follows:
Sec. 204.5 Maintenance of required reserves.
(a)(1) A depository institution, a U.S. branch or agency of a
foreign bank, and an Edge or Agreement corporation shall maintain
required reserves in the form of vault cash and, if vault cash does not
fully satisfy the institution's required reserves, in the form of a
balance maintained
(i) Directly with the Federal Reserve Bank in the Federal Reserve
District in which the institution is located, or
(ii) With a pass-through correspondent in accordance with Sec.
204.5(d).
(2) Each individual institution subject to this part is responsible
for satisfying its reserve balance requirement, if any, either directly
with a Federal Reserve Bank or through a pass-through correspondent.
(b)(1) For institutions that file a report of deposits weekly, the
balances that are required to be maintained with the Federal Reserve
shall be maintained during a 14-day maintenance period that begins on
the third Thursday following the end of a given computation period.
(2) For institutions that file a report of deposits quarterly, the
balances that are required to be maintained with the Federal Reserve
shall be maintained during each of the 7-day maintenance periods during
the interval that begins on the fourth Thursday following the end of
the institution's computation period and ends on the fourth Wednesday
after the close of the institution's next computation period.
(c) Cash items forwarded to a Federal Reserve Bank for collection
and credit shall not be counted as part of the reserve balance to be
carried with the Federal Reserve until the expiration of the time
specified in the appropriate time schedule established under Regulation
J, ``Collection of Checks and Other Items by Federal Reserve Banks and
Funds Transfers Through Fedwire'' (12 CFR Part 210). If a depository
institution draws against items before that time, the charge will be
made to its account if the balance is sufficient to pay it; any
resulting impairment of reserve balances will be subject to the
penalties provided by law and to the reserve-deficiency charges
provided by this part. However, the Federal Reserve Bank may, at its
discretion, refuse to permit the withdrawal or other use of credit
given in an account for any time for which the Federal Reserve Bank has
not received payment in actually and finally collected funds.
(d)(1) A depository institution, a U.S. branch or agency of a
foreign bank, or an Edge or Agreement corporation required to maintain
reserve balances (``respondent'') may select only one pass-through
correspondent institution to pass through its required reserve
balances, unless otherwise permitted by the Federal Reserve Bank in
whose District the respondent is located. Eligible pass-through
correspondent institutions are Federal Home Loan Banks, the National
Credit Union Administration Central Liquidity Facility, depository
institutions, U.S. branches or agencies of foreign banks, and Edge and
Agreement corporations that maintain required reserve balances, which
may be zero, at a Federal Reserve Bank. In addition, the Board reserves
the right to permit other institutions, on a case-by-case basis, to
serve as pass-through correspondents. The correspondent chosen must
subsequently pass through the required reserve balances of its
respondents directly to a Federal Reserve Bank. The correspondent
placing funds with a Federal Reserve Bank on behalf of respondents will
be responsible for account maintenance as described in paragraph (d)(4)
of this section.
(2) Respondents or correspondents may institute, terminate, or
change pass-through agreements for the maintenance of required reserve
balances by providing all documentation required for the establishment
of the new agreement or termination of the existing agreement to the
Federal Reserve Banks involved within the time period provided for such
a change by those Reserve Banks.
(3) A correspondent that passes through required reserve balances
of respondents shall maintain such balances, along with the
correspondent's own required reserve balances (if any), in a single
commingled account at the Federal Reserve Bank in whose District the
correspondent is located. The balances held by the correspondent in an
account at a Reserve Bank are the property of the correspondent and
represent a liability of the Reserve Bank solely to the correspondent,
regardless of whether the funds represent the reserve balances of
another institution that have been passed through the correspondent.
(4)(i) A pass-through correspondent shall be responsible for
assuring the maintenance of the appropriate aggregate level of its
respondents' required reserve balances. A Federal Reserve Bank will
compare the total reserve balance required to be maintained with the
total actual reserve balance held in such account for purposes of
determining required-reserve deficiencies, imposing or waiving charges
for deficiencies in required reserves, and for other reserve
maintenance purposes. A charge for a deficiency in the aggregate level
of the required reserve balance will be imposed by the Reserve Bank on
the correspondent maintaining the account.
(ii) Each correspondent is required to maintain detailed records
for each of its respondents in a manner that permits Reserve Banks to
determine whether the respondent has provided a sufficient required
reserve balance to the correspondent. A correspondent passing through a
respondent's required reserve balance shall maintain records and make
such reports as the Board or Reserve Bank requires in order to ensure
the correspondent's compliance with its responsibilities for the
maintenance of a respondent's reserve balance. Such records shall be
available to the Reserve Banks as required.
(iii) The Federal Reserve Bank may terminate any pass-through
agreement under which the correspondent is deficient in its
recordkeeping or other responsibilities.
(iv) Interest paid on supplemental reserves (if such reserves are
required under Sec. 204.7) held by a respondent will be credited to
the account maintained by the correspondent.
(e) Any excess or deficiency in an institution's required reserve
balance shall be carried over and applied against the balance
maintained in the next maintenance period as specified in this
paragraph. The amount of any such excess or deficiency that is carried
over shall not exceed the greater of:
(1) The amount obtained by multiplying 0.04 times the sum of
depository institution's required
[[Page 25639]]
reserves and the depository institution's contractual clearing balance,
if any, and then subtracting from this product the depository
institution's clearing balance allowance, if any; or
(2) $50,000, minus the depository institution's clearing balance
allowance, if any. Any carryover not offset during the next period may
not be carried over to subsequent periods.
Sec. 204.7 [Removed]
0
8. Section 204.7 is removed.
Sec. 204.6 [Redesignated as Sec. 204.7]
0
9. Section 204.6 is redesignated as Sec. 204.7.
0
10. New Sec. 204.6 is added to read as follows:
Sec. 204.6 Charges for reserve deficiencies.
(a) Deficiencies in a depository institution's required reserve
balance, after application of the carryover provided in Sec. 204.5(e),
are subject reserve-deficiency charges. Federal Reserve Banks are
authorized to assess charges for deficiencies in required reserves at a
rate of 1 percentage point per year above the primary credit rate, as
provided in Sec. 201.51(a) of this chapter, in effect for borrowings
from the Federal Reserve Bank on the first day of the calendar month in
which the deficiencies occurred. Charges shall be assessed on the basis
of daily average deficiencies during each maintenance period. Reserve
Banks may, as an alternative to levying monetary charges, after
consideration of the circumstances involved, permit a depository
institution to eliminate deficiencies in its required reserve balance
by maintaining additional reserves during subsequent reserve
maintenance periods.
(b) Reserve Banks may waive the charges for reserve deficiencies
except when the deficiency arises out of a depository institution's
gross negligence or conduct that is inconsistent with the principles
and purposes of reserve requirements. Decisions by Reserve Banks to
waive charges are based on an evaluation of the circumstances in each
individual case and the depository institution's reserve maintenance
record. For example, a waiver may be appropriate for a small charge or
once during a two-year period for a deficiency that does not exceed a
certain percentage of the depository institution's required reserves.
If a depository institution has demonstrated a lack of due regard for
the proper maintenance of required reserves, the Reserve Bank may
decline to exercise the waiver privilege and assess all charges
regardless of amount or reason for the deficiency.
(c) In individual cases, where a Federal supervisory authority
waives a liquidity requirement, or waives the penalty for failing to
satisfy a liquidity requirement, the Reserve Bank in the District where
the involved depository institution is located shall waive the reserve
requirement imposed under this part for such depository institution
when requested by the Federal supervisory authority involved.
(d) Violations of this part may be subject to assessment of civil
money penalties by the Board under authority of Section 19(1) of the
Federal Reserve Act (12 U.S.C. 505) as implemented in 12 CFR part 263.
In addition, the Board and any other Federal financial institution
supervisory authority may enforce this part with respect to depository
institutions subject to their jurisdiction under authority conferred by
law to undertake cease and desist proceedings.
PART 209--ISSUE AND CANCELLATION OF FEDERAL RESERVE BANK CAPITAL
STOCK (REGULATION I)
0
10. The authority citation for part 209 continues to read as follows:
Authority: 12 U.S.C. 2222, 248, 282, 286-288, 321, 323, 327-328,
333, and 466.
0
11. Sec. 209.2 is amended by revising paragraph (c)(1) to read as
follows:
Sec. 209.2 Banks desiring to become member banks.
* * * * *
(c) * * *
(1) General rule. For purposes of this part, a national bank or a
State bank is located in the Federal Reserve District that contains the
location specified in the bank's charter or organizing certificate, or
as specified by the institution's primary regulator, or if no such
location is specified, the location of its head office, unless
otherwise determined by the Board under paragraph (c)(2) of this
section.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, May 22, 2009.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. E9-12431 Filed 5-28-09; 8:45 am]
BILLING CODE 6210-01-P