[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Rules and Regulations]
[Pages 59924-59926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24272]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-1684; RIN 7100-AF 64]
Regulation D: Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
[[Page 59925]]
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 1.55 percent and IOER is 1.55
percent, a 0.25 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 November 7, 2019.
Applicability date: The IORR and IOER rate changes are applicable
beginning October 31, 2019.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Special
Counsel (202-452-3565), or Justyna Bolter, Senior Attorney (202-452-
2686), 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 1.80 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 1.55 percent and IOER is 1.55 percent. This 0.25
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
1\3/4\ to 2 percent to a target range of 1\1/2\ to 1\3/4\ percent,
announced by the FOMC on October 30, 2019, with an effective date of
October 31, 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 September 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 remain weak. 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\1/2\ to 1\3/4\ 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. The
Committee will continue to monitor the implications of incoming
information for the economic outlook as it assesses the appropriate
path of the target range for the federal funds rate.
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 1.55 percent, effective October 31, 2019.
As a result, the Board is amending Sec. 204.10(b)(5) of Regulation
D to change IORR to 1.55 percent and IOER to 1.55 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) 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.
[[Page 59926]]
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........................................................ 1.55
IOER........................................................ 1.55
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* * * * *
By order of the Board of Governors of the Federal Reserve
System, November 1, 2019.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2019-24272 Filed 11-6-19; 8:45 am]
BILLING CODE 6210-01-P