[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Rules and Regulations]
[Pages 52753-52754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21346]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Docket No. R-1675]
RIN 7100-AF 58


Regulation D: 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 1.80 percent and IOER is 1.80 
percent, a 0.30 percentage point decrease 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: 
    Effective date: The amendments to part 204 (Regulation D) are 
effective October 3, 2019.
    Applicability date: The IORR and IOER rate changes were applicable 
on September 19, 2019.

FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Special 
Counsel (202-452-3565), Legal Division, or Francis Martinez, Senior 
Financial Institution & Policy Analyst (202-245-4217), or Laura 
Lipscomb, Assistant Director (202-912-7964), 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.\1\ 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'').\2\ 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.\3\ 
Institutions that are eligible to receive earnings on their balances 
held at Reserve Banks (``eligible institutions'') include depository 
institutions and certain other institutions.\4\ Section 19 also 
provides that the Board may prescribe regulations concerning the 
payment of earnings on balances at a Reserve Bank.\5\ Prior to these 
amendments, Regulation D specified a rate of 2.10 percent for both IORR 
and IOER.\6\
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    \1\ 12 U.S.C. 461(b).
    \2\ 12 CFR 204.5(a)(1).
    \3\ 12 U.S.C. 461(b)(1)(A) & (b)(12)(A).
    \4\ See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also 12 CFR 
204.2(y).
    \5\ See 12 U.S.C. 461(b)(12)(B).
    \6\ See 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 1.80 percent and IOER is 1.80 percent. This 0.30 
percentage point decrease in each rate was associated with a decrease 
in the target range for the federal funds rate, from a target range of 
2 to 2\1/4\ percent to a target range of 1\3/4\ to 2 percent, announced 
by the FOMC on September 18, 2019, with an effective date of September 
19, 2019. The FOMC's press release on the same day as the announcement 
noted that:

    Information received since the Federal Open Market Committee met 
in July indicates that the labor market remains strong and that 
economic activity has been rising at a moderate rate. Job gains have 
been solid, on average, in recent months, and the unemployment rate 
has remained low. Although household spending has been rising at a 
strong pace, business fixed investment and exports have weakened. On 
a 12-month basis, overall inflation and inflation for items other 
than food and energy are running below 2 percent. Market-based 
measures of inflation compensation remain low; survey-based measures 
of longer-term inflation expectations are little changed.
    Consistent with its statutory mandate, the Committee seeks to 
foster maximum employment and price stability. In light of the 
implications of global developments for the economic outlook as well 
as muted inflation pressures, the Committee decided to lower the 
target range for the federal funds rate to 1\3/4\ to 2 percent. This 
action supports the Committee's view that sustained expansion of 
economic activity, strong labor market conditions, and inflation 
near the Committee's symmetric 2 percent objective are the most 
likely outcomes, but uncertainties about this outlook remain. As the 
Committee contemplates the future path of the target range for the 
federal funds rate, it will continue to monitor the implications of 
incoming information for the economic outlook and will act as 
appropriate to sustain the expansion, with a strong labor market and 
inflation near its symmetric 2 percent objective.

    A Federal Reserve Implementation note released simultaneously with 
the announcement stated:

    The Board of Governors of the Federal Reserve System voted 
unanimously to lower the interest rate paid on required and excess 
reserve balances to 1.80 percent, effective September 19, 2019. 
Setting the interest rate paid on required and excess reserve 
balances 20 basis points below the top of the target range for the 
federal funds rate is intended to foster trading in the federal 
funds market at rates well within the FOMC's target range.

    As a result, the Board is amending Sec.  204.10(b)(5) of Regulation 
D to change IORR to 1.80 percent and IOER to 1.80 percent.

III. Administrative Procedure Act

    In general, the Administrative Procedure Act (``APA'') \7\ imposes 
three principal requirements when an agency promulgates legislative 
rules (rules made pursuant to Congressionally-delegated authority): (1) 
Publication with adequate notice of a proposed rule; (2) followed by a 
meaningful opportunity for the public to comment on the rule's content; 
and (3)

[[Page 52754]]

publication of the final rule not less than 30 days before its 
effective date.
    The APA provides that notice and comment procedures do not apply if 
the agency for good cause finds them to be ``unnecessary, 
impracticable, or contrary to the public interest.'' \8\ Section 553(d) 
of the APA also provides that publication at least 30 days prior to a 
rule's effective date is not required for (1) a substantive rule which 
grants or recognizes an exemption or relieves a restriction; (2) 
interpretive rules and statements of policy; or (3) a rule for which 
the agency finds good cause for shortened notice and publishes its 
reasoning with the rule.\9\
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    \7\ 5 U.S.C. 551 et seq.
    \8\ 5 U.S.C. 553(b)(3)(A).
    \9\ 5 U.S.C. 553(d).
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    The Board has determined that good cause exists for finding that 
the notice, public comment, and delayed effective date provisions of 
the APA are unnecessary, impracticable, or contrary to the public 
interest with respect to these final amendments to Regulation D. The 
rate changes for IORR and IOER that are reflected in the final 
amendments to Regulation D were made with a view towards accommodating 
commerce and business and with regard to their bearing upon the general 
credit situation of the country.
    Notice and public comment would prevent the Board's action from 
being effective as promptly as necessary in the public interest and 
would not otherwise serve any useful purpose. Notice, public comment, 
and a delayed effective date would create uncertainty about the 
finality and effectiveness of the Board's action and undermine the 
effectiveness of that action.
    Accordingly, the Board has determined that good cause exists to 
dispense with the notice, public comment, and delayed effective date 
procedures of the APA with respect to these final amendments to 
Regulation 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.\10\ 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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    \10\ 5 U.S.C. 603, 604.
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V. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (``PRA'') of 
1995,\11\ 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.
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    \11\ 44 U.S.C. 3506; see 5 CFR part 1320, appendix A.1.
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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), 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:

                       Table 1 to Paragraph (b)(5)
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                                                                 Rate
                                                               (percent)
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IORR........................................................        1.80
IOER........................................................        1.80
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* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, September 25, 2019.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019-21346 Filed 10-2-19; 8:45 am]
 BILLING CODE 6210-01-P