[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Rules and Regulations]
[Pages 16525-16526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05806]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-1702; RIN 7100-AF 76]
Regulation D: Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim final rule, request for public comment.
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SUMMARY: The Board of Governors of the Federal Reserve System
(``Board'') is amending its Regulation D (Reserve Requirements of
Depository Institutions, 12 CFR part 204) to lower reserve ratios on
transaction accounts maintained at depository institutions to zero
percent.
DATES:
Effective date: The amendments to part 204 (Regulation D) are
effective on March 24, 2020.
Applicability date: The changes to reserve requirement ratios are
applicable on March 26, 2020.
Comments: Comments must be received on or before May 26, 2020.
ADDRESSES: You may submit comments, identified by Docket Number R-1702;
RIN 7100-AF 76, by any of the following methods:
Agency Website: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include the
docket number and RIN in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
All public comments are available from the Board's website at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the commenter's request.
Accordingly, comments will not be edited to remove any identifying or
contact information. Public comments may also be viewed electronically
or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006,
between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Special
Counsel, (202-452-3565), Legal Division, or Matthew Malloy (202-452-
2416), Division of Monetary Affairs, or Heather Wiggins (202-452-3674),
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
Section 19 of the Federal Reserve Act (the ``Act'') imposes reserve
requirements on certain types of deposits and other liabilities of
depository institutions. Specifically, section 19(b)(2) of the Act (12
U.S.C. 461(b)(2)) requires each depository institution to maintain
reserves against its transaction accounts, nonpersonal time deposits,
and Eurocurrency liabilities, as prescribed by Board regulations, for
the purpose of implementing monetary policy. Reserve requirements for
nonpersonal time deposits and Eurocurrency liabilities have been set at
zero percent since 1990.
Depository institutions satisfy reserve requirements by maintaining
cash in their vault or, if vault cash is insufficient, by maintaining a
balance in an account at a Federal Reserve Bank. The amount that a
depository institution must maintain is known as the depository
institution's reserve requirement. See 12 CFR 204.4 (computation of
reserve requirements). The amount that a depository institution must
maintain in an account at a Reserve Bank over and above the amount of
its vault cash is known as the depository institution's reserve balance
requirement. 12 CFR 204.2(ee) (definition of ``reserve balance
requirement''). Currently, over 2,500 depository institutions maintain,
in aggregate, $150 billion in account balances to satisfy reserve
balance requirements.
Transaction account balances maintained at each depository
institution are subject to reserve requirement ratios of zero, three,
or ten percent. Section 19(b)(11)(A) of the Act (12 U.S.C.
461(b)(11)(A)) provides that a zero percent reserve requirement shall
apply at each depository institution to total reservable liabilities
that do not exceed a certain amount, known as the reserve requirement
exemption amount. Section 19(b)(2) of the Act (12 U.S.C. 461(b)(2))
provides that transaction account balances maintained at each
depository institution over the reserve requirement exemption amount
and up to a certain amount, known as the low reserve tranche, are
subject to a three percent reserve requirement. Transaction account
balances over the low reserve tranche are subject to a ten percent
reserve requirement. The reserve requirement exemption amount and the
low reserve tranche are adjusted annually pursuant to formulas set
forth in the Act.
The reserve requirement ratios implemented by the Board pursuant to
Section 19 of the Act are set forth in Section 204.4(f) of Regulation
D. Currently, the reserve requirement exemption amount is $16.9
million, and the low reserve tranche amount is $127.5 million.
II. Discussion
A. Recent Developments
For many years, reserve requirements played a central role in the
implementation of monetary policy by creating a stable demand for
reserves. In January 2019, the FOMC announced its intention to
implement monetary policy in an ample reserves regime. Reserve
requirements do not play a significant role in this operating
framework. In light of the shift to an ample reserves regime, the Board
has determined to reduce the reserve requirement ratios to zero percent
effective March 26, 2020. This action eliminates reserve requirements
for thousands of depository institutions and will help to support
lending to households and businesses.
III. Request for Comment
The Board seeks comment on all aspects of this interim final rule.
IV. Administrative Procedure Act
In accordance with the Administrative Procedure Act (``APA'')
section 553(b) (5 U.S.C. 553(b)), the Board finds, for good cause, that
providing notice and an opportunity for public comment before the
effective date of this rule would be contrary to the public interest.
In addition, pursuant to APA section 553(d) (5 U.S.C. 553(d)), the
Board finds good
[[Page 16526]]
cause for making this amendment effective without 30 days advance
publication. By improving the liquidity position of depository
institutions subject to reserve requirements, implementation of the
rule without 30 days advance publication could help alleviate pressures
in short-term funding markets as well as support depository
institutions' ability to provide financing to households and
businesses. The Board believes that any delay in implementing the rule
would prove contrary to the public interest. The Board is requesting
comment on all aspects of the rule and will make any changes that it
considers appropriate or necessary after review of any comments
received.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 605(b).
Pursuant to section 605(b), the Board certifies that this interim
final rule will not have a significant economic impact on a substantial
number of small entities. The interim final rule reduces reserve
requirement ratios for all depository institutions to zero percent. All
depository institutions, including small depository institutions, will
benefit from the elimination of reserve requirements. There are no new
reporting, recordkeeping, or other compliance requirements associated
with the interim final rule.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR 1320 Appendix A.1), the Board has reviewed the interim final rule
under authority delegated to the Board by the Office of Management and
Budget. The rule contains no collections of information pursuant to the
Paperwork Reduction Act.
VII. Plain Language
Section 772 of the Gramm-Leach-Bliley Act requires the Board to use
``plain language'' in all proposed and final rules. In light of this
requirement, the Board has sought to present the interim final rule in
a simple and straightforward manner. The Board invites comment on
whether the Board could take additional steps to make the rule easier
to understand.
List of Subjects in 12 CFR Part 204
Banks, Banking, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the preamble, the Board is amending 12
CFR part 204 as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
0
1. The authority citation for part 204 continues to read as follows:
Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and
3105.
0
2. In Sec. 204.4, paragraph (f) is revised to read as follows:
Sec. 204.4 Computation of required reserves.
* * * * *
(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 in table 1 to this paragraph (f) to net transaction accounts,
nonpersonal time deposits, and Eurocurrency liabilities of the
institution during the computation period.
Table 1 to Paragraph (f)
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Reservable liability Reserve requirement
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Net Transaction Accounts:
$0 to reserve requirement 0 percent of amount.
exemption amount ($16.9
million).
Over reserve requirement 0 percent of amount.
exemption amount ($16.9
million) and up to low
reserve tranche ($127.5
million).
Over low reserve tranche 0 percent of amount.
($127.5 million).
Nonpersonal time deposits..... 0 percent.
Eurocurrency liabilities...... 0 percent.
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By order of the Board of Governors of the Federal Reserve
System, March 16, 2020.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-05806 Filed 3-23-20; 8:45 am]
BILLING CODE 6210-01-P