[Federal Register Volume 80, Number 245 (Tuesday, December 22, 2015)]
[Rules and Regulations]
[Pages 79460-79461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32099]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1527]
RIN 7100 AE-41


Reserve Requirements of Depository Institutions

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is amending Regulation D (Reserve Requirements of 
Depository Institutions) to revise the rate of interest paid on 
balances maintained to satisfy reserve balance requirements (``IORR'') 
and the rate of interest paid on excess balances (``IOER'') maintained 
at Federal Reserve Banks by or on behalf of eligible institutions. The 
final amendments specify that IORR is 0.50 percent and IOER is 0.50 
percent, a 0.25 percentage point increase from their prior levels. The 
amendments are intended to enhance the role of such rates of interest 
in moving the Federal funds rate into the target range established by 
the Federal Open Market Committee (``FOMC'' or ``Committee'').

DATES: The amendments to part 204 (Regulation D) are effective December 
22, 2015. The IORR and IOER rate changes were applicable on December 
17, 2015, as specified in 12 CFR 204.10(b)(5), as amended.

FOR FURTHER INFORMATION CONTACT: Clinton N. Chen, Attorney (202-452-
3952), or Stephanie Martin, Associate General Counsel (202-452-3198), 
Legal Division, or Thomas R. Keating, Financial Analyst (202-973-7401), 
or Laura Lipscomb, Section Chief (202-973-7964), 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 and Regulatory 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. Regulation D, which 
implements section 19 of the Act, requires that a depository 
institution meet reserve requirements by holding cash in its vault, or 
if vault cash is insufficient, by maintaining a balance in an account 
at a Federal Reserve Bank (``Reserve Bank'').\1\ Section 19 also 
provides that balances maintained by or on behalf of certain 
institutions in an account at a Reserve Bank may receive earnings to be 
paid by the Reserve Bank at least once each quarter, at a rate or rates 
not to exceed the general level of short-term interest rates. 
Institutions that are eligible to receive earnings on their balances 
held at Reserve Banks (``eligible institutions'') include depository 
institutions and certain other institutions.\2\ Section 19 also 
provides

[[Page 79461]]

that the Board may prescribe regulations concerning the payment of 
earnings on balances at a Reserve Bank.\3\ Prior to these amendments, 
Regulation D specified a rate of \1/4\ percent for both IORR and 
IOER.\4\
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    \1\ 12 CFR 204.5(a)(1).
    \2\ Section 19(b)(1)(A) defines ``depository institution'' as 
any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act or any bank which is eligible to make application to 
become an insured bank under section 5 of such Act; any mutual 
savings bank as defined in section 3 of the Federal Deposit 
Insurance Act or any bank which is eligible to make application to 
become an insured bank under section 5 of such Act; any savings bank 
as defined in section 3 of the Federal Deposit Insurance Act or any 
bank which is eligible to make application to become an insured bank 
under section 5 of such Act; any insured credit union as defined in 
section 101 of the Federal Credit Union Act or any credit union 
which is eligible to make application to become an insured credit 
union pursuant to section 201 of such Act; any member as defined in 
section 2 of the Federal Home Loan Bank Act; [and] any savings 
association (as defined in section 3 of the Federal Deposit 
Insurance Act) which is an insured depository institution (as 
defined in such Act) or is eligible to apply to become an insured 
depository institution under the Federal Deposit Insurance Act. See 
12 U.S.C. 461(b)(1)(A). Eligible institution also includes any trust 
company, corporation organized under section 25A or having an 
agreement with the Board under section 25, or any branch or agency 
of a foreign bank (as defined in section 1(b) of the International 
Banking Act of 1978). Federal Reserve Act section 19(b)(12)(C), 12 
U.S.C. 461(b)(12)(C), see 12 CFR 204.2(y) (definition of ``eligible 
institution'').
    \3\ See Federal Reserve Act section 19(b)(12), 12 U.S.C. 
461(b)(12).
    \4\ See Sec.  204.10(b)(5) of Regulation D, 12 CFR 204.10(b)(5).
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II. Amendments to IORR and IOER

    The Board is amending Sec.  204.10(b)(5) of Regulation D to specify 
that IORR is 0.50 percent and IOER is 0.50 percent. This 0.25 
percentage point increase in the IORR and IOER was associated with an 
increase in the target range for the federal funds rate, from a target 
range of 0 to \1/4\ percent to a target range of \1/4\ to \1/2\ 
percent, announced by the FOMC on December 16, 2015 with an effective 
date of December 17, 2015. A press release on the same day as the 
announcement noted that:

    The Committee judges that there has been considerable 
improvement in labor market conditions this year, and it is 
reasonably confident that inflation will rise, over the medium term, 
to its 2 percent objective. Given the economic outlook, and 
recognizing the time it takes for policy actions to affect future 
economic outcomes, the Committee decided to raise the target range 
for the federal funds rate to \1/4\ to \1/2\ percent. The stance of 
monetary policy remains accommodative after this increase, thereby 
supporting further improvement in labor market conditions and a 
return to 2 percent inflation.

    A Federal Reserve Implementation note released simultaneously with 
the announcement indicated that:

    The Board of Governors of the Federal Reserve System voted 
unanimously to raise the interest rate paid on required and excess 
reserve balances to 0.50 percent, effective December 17, 2015.
    As a result, section 204.10(b)(5) of Regulation D has been amended 
to change IORR to 0.50 percent and IOER to 0.50 percent.

III. Administrative Procedure Act

    The Board has determined that delaying implementation of the 
changes in the rates of interest to be paid in order to allow notice 
and public comment would be unnecessary and contrary to the public 
interest. Therefore, the Board has found good cause to not follow the 
provisions of 5 U.S.C. 553(b) relating to notice and public 
participation. The Board's revisions to these rates were taken with a 
view to accommodating commerce and business and with regard to their 
bearing upon the general credit situation of the country. Notice and 
public participation would prevent the Board's action from being 
effective as promptly as necessary in the public interest. A delay 
would permit speculators or others to reap unfair profits and could 
provoke other consequences contrary to the public interest. Seeking 
notice and comment on the rate changes would not aid the persons 
affected and would otherwise serve no useful purpose. For these same 
reasons, the Board also has found good cause not to provide 30 days 
prior notice of the effective date of the rule under 5 U.S.C. 553(d).

IV. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (``RFA'') does not apply to a 
rulemaking where a general notice of proposed rulemaking is not 
required.\5\ As noted previously, the Board has determined that it is 
unnecessary and contrary to the public interest to publish a general 
notice of proposed rulemaking for this final rule. Accordingly, the 
RFA's requirements relating to an initial and final regulatory 
flexibility analysis do not apply.
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    \5\ 5 U.S.C. 603 and 604.
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V. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (``PRA'') 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. The final rule contains no requirements subject 
to the PRA.

List of Subjects in 12 CFR Part 204

    Banks, Banking, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Board amends 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 204.10 is amended by revising paragraph (b)(5) to read as 
follows:


Sec.  204.10  Payment of interest on balances.

* * * * *
    (b) * * *
    (5) The rates for IORR and IOER are:

------------------------------------------------------------------------
                                          Rate (percent)     Effective
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IORR....................................            0.50      12/17/2015
IOER....................................            0.50      12/17/2015
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* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, December 17, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-32099 Filed 12-21-15; 8:45 am]
BILLING CODE 6210-01-P