[Federal Register Volume 69, Number 196 (Tuesday, October 12, 2004)]
[Rules and Regulations]
[Pages 60543-60545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22772]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1213]


Reserve Requirements of Depository Institutions

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, to reflect the annual indexing of the low 
reserve tranche and of the reserve requirement exemption amount for 
2005. The Board is also announcing the annual indexing of the nonexempt 
deposit cutoff level and the reduced reporting limit that will be 
effective beginning in September 2005. The Regulation D amendments 
increase the amount of net transaction accounts at each depository 
institution that is subject to a three percent reserve requirement in 
2005 from $45.4 million to $47.6 million. This amount is known as the 
low reserve tranche. The Regulation D amendments also increase the 
amount of total reservable liabilities of each depository institution 
that is subject to a zero percent reserve requirement in 2005 from $6.6 
million to $7.0 million. This amount is known as the reserve 
requirement exemption amount. The adjustments to both of these amounts 
are derived using statutory formulas specified in the Federal Reserve 
Act.
    The Board is also announcing increases in two other amounts, the 
nonexempt deposit cutoff level and the reduced reporting limit, that 
are used to determine the frequency with which depository institutions 
must submit deposit reports. The nonexempt deposit cutoff level is 
being increased from $161.2 million in 2004 to $169.8 million in 2005, 
and the reduced reporting limit is being increased from $1.074 billion 
in 2004 to $1.131 billion in 2005. These amounts are indexed annually 
in order to reduce reporting burden for smaller

[[Page 60544]]

depository institutions. Thus, beginning in September 2005, depository 
institutions will be required to file the FR 2900 report each week 
under the following conditions: If they have net transaction accounts 
over $7.0 million and have total deposits of at least $169.8 million; 
or if they have net transaction accounts of $7.0 million or less but 
have total deposits of at least $1.131 billion. Depository institutions 
will be required to file the FR 2900 report each quarter if they have 
net transaction accounts over $7.0 million but have total deposits of 
less than $169.8 million. Depository institutions will be required to 
file the FR 2910a report annually if they have net transaction accounts 
of $7.0 million or less but have total deposits greater than $7.0 
million but less than $1.131 billion. Depository institutions with $7.0 
million or less in total deposits are not required to file a deposit 
report.

DATES: Effective date: November 12, 2004.
    Compliance dates: For depository institutions that report weekly, 
the adjusted low reserve tranche and reserve requirement exemption 
amount will apply to the fourteen-day reserve computation period that 
begins Tuesday, November 23, 2004, and the corresponding fourteen-day 
reserve maintenance period that begins Thursday, December 23, 2004. For 
depository institutions that report quarterly, the adjusted low reserve 
tranche and reserve requirement exemption amount will apply to the 
seven-day reserve computation period that begins Tuesday, December 21, 
2004, and the corresponding seven-day reserve maintenance period that 
begins Thursday, January 20, 2005. For all depository institutions, the 
nonexempt deposit cutoff level, the reserve requirement exemption 
amount, and the reduced reporting limit will be used for 2005 deposit 
report screening to determine reporting frequency for the twelve-month 
period that begins in September 2005.

FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Senior Counsel 
(202/452-3565), Legal Division, or Gretchen Weinbach, Senior Economist 
(202/452-2841), Division of Monetary Affairs; for user 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: Section 19(b)(2) of the Federal Reserve Act 
(12 U.S.C. 461(b)(2)) requires each depository institution to maintain 
reserves against its transaction accounts and nonpersonal time 
deposits, as prescribed by Board regulations, for the purpose of 
implementing monetary policy. Section 11(a)(2) of the Federal Reserve 
Act (12 U.S.C. 248(a)(2)) authorizes the Board to require reports of 
liabilities and assets from depository institutions to enable the Board 
to conduct monetary policy. The Board's actions with respect to each of 
these provisions are discussed in turn below.

1. Reserve Requirements

    Pursuant to section 19(b)(2) of the Federal Reserve Act, 
transaction account balances maintained at each depository institution 
up to a certain amount, known as the low reserve tranche, are subject 
to a three percent reserve requirement. Net transaction account 
balances over the low reserve tranche are subject to a ten percent 
reserve requirement. Section 19(b)(2) also provides that, before 
December 31 of each year, the Board shall issue a regulation adjusting 
the low reserve tranche for the next calendar year. The adjustment in 
the low reserve tranche is to be 80 percent of the percentage increase 
or decrease in net transaction accounts at all depository institutions 
over the one-year period that ends on the June 30 prior to the 
adjustment.
    Currently, the low reserve tranche is $45.4 million. Net 
transaction accounts of all depository institutions rose 6.0 percent 
(from $654.4 billion to $693.8 billion) between June 30, 2003 and June 
30, 2004. Accordingly, the Board is amending Regulation D (12 CFR part 
204) to increase the low reserve tranche for net transaction accounts 
by $2.2 million, from $45.4 million in 2004 to $47.6 million in 2005.
    Section 19(b)(11)(A) of the Federal Reserve 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)(11)(B) provides that, before December 31 of each 
year, the Board shall issue a regulation adjusting the reserve 
requirement exemption amount for the next calendar year if total 
reservable liabilities held at all depository institutions increase 
from one year to the next. Unlike the low reserve tranche, which can be 
adjusted upward or downward, no adjustment is made to the reserve 
requirement exemption amount if total reservable liabilities held at 
all depository institutions should decrease during the applicable time 
period. The percentage increase in the reserve requirement exemption 
amount is to be 80 percent of the increase in total reservable 
liabilities at all depository institutions over the one-year period 
that ends on the June 30 prior to the adjustment.
    Total reservable liabilities of all depository institutions 
increased by 7.1 percent (from $2,786.0 billion to $2,983.8 billion) 
between June 30, 2003, and June 30, 2004. Accordingly, the Board is 
amending Regulation D to increase the reserve requirement exemption 
amount by $0.4 million, from $6.6 million in 2004 to $7.0 million in 
2005.\1\
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    \1\ Consistent with Board practice, the low reserve tranche and 
reserve requirement exemption amounts have been rounded to the 
nearest $0.1 million.
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    For depository institutions that report weekly, the adjusted low 
reserve tranche and reserve requirement exemption amount will be 
effective for the fourteen-day reserve computation period beginning 
Tuesday, November 23, 2004, and for the corresponding fourteen-day 
reserve maintenance period beginning Thursday, December 23, 2004. For 
depository institutions that report quarterly, the adjusted low reserve 
tranche and reserve requirement exemption amount will be effective for 
the seven-day reserve computation period beginning Tuesday, December 
21, 2004, and for the corresponding seven-day reserve maintenance 
period beginning Thursday, January 20, 2005.

2. Deposit Reports

    Section 11(b)(2) of the Federal Reserve Act authorizes the Board to 
require depository institutions to file reports of their liabilities 
and assets as the Board may determine to be necessary or desirable to 
enable it to discharge its responsibility to monitor and control the 
monetary and credit aggregates. The Board screens depository 
institutions each year to determine whether they must file deposit 
reports and, if so, how frequently they must file them (weekly, 
quarterly, or annually). These deposit reporting assignments become 
effective each September.
    The screening of depository institutions for assignment to one of 
the four deposit reporting categories is based on three amounts: the 
reserve requirement exemption amount, the nonexempt deposit cutoff 
level, and the reduced reporting limit. The annual adjustment to the 
first amount, the reserve requirement exemption amount, is described in 
Section 1 above. The other two amounts, the nonexempt deposit cutoff 
level and the reduced reporting limit, are also adjusted annually, by 
an amount equal to 80 percent of the increase, if any, in total

[[Page 60545]]

deposits at all depository institutions over the one-year period that 
ends on the June 30 prior to the adjustment.
    Total deposits at all depository institutions increased by 6.7 
percent (from $6,534.2 billion to $6,969.8 billion) between June 30, 
2003 and June 30, 2004. Accordingly, the Board is adjusting the 
nonexempt deposit cutoff level upward by $8.6 million, from its current 
level of $161.2 million in 2004 to $169.8 million in 2005. The Board is 
also adjusting the reduced reporting limit upward by $57 million, from 
its current level of $1.074 billion in 2004 to $1.131 billion in 
2005.\2\
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    \2\ Consistent with Board practice, the nonexempt deposit cutoff 
level has been rounded to the nearest $0.1 million, while the 
reduced reporting limit has been rounded to the nearest $1 million.
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    Beginning in September 2005, the boundaries of the four deposit 
reporting categories will be defined as follows. Those depository 
institutions with net transaction accounts over $7.0 million (the 
reserve requirement exemption amount) or total deposits greater than or 
equal to $1.131 billion (the reduced reporting limit) are subject to 
detailed reporting, and must file an FR 2900 report either weekly or 
quarterly. Of this group, those with total deposits greater than or 
equal to $169.8 million (the nonexempt deposit cutoff level) are 
required to file the FR 2900 report each week, while those with total 
deposits less than $169.8 million are required to file the FR 2900 
report each quarter. Those depository institutions with net transaction 
accounts less than or equal to $7.0 million (the reserve requirement 
exemption amount) and with total deposits less than $1.131 billion (the 
reduced reporting limit) are eligible for reduced reporting, and must 
either file a deposit report annually or not at all. Of this group, 
those with total deposits greater than $7.0 million (but less than 
$1.131 billion) are required to file the FR 2910a report annually, 
while those with total deposits less than or equal to $7.0 million are 
not required to file a deposit report. A depository institution that 
manipulates its reporting, however, in an attempt to qualify for less 
frequent reporting or to reduce its reserve requirement may be required 
to report the FR 2900 on a weekly basis and maintain appropriate 
reserve balances with its Reserve Bank, regardless of its most recent 
panel assignment.

Notice and Regulatory Flexibility Act.

    The provisions of 5 U.S.C. 553(b) relating to notice of proposed 
rulemaking have not been followed in connection with the adoption of 
these amendments. The amendments involve expected, ministerial 
adjustments prescribed by statute and by the Board's policy concerning 
reporting practices. The increases in the reserve requirement exemption 
amount, the low reserve tranche, the nonexempt deposit cutoff level, 
and the reduced reporting limit serve to reduce regulatory burdens on 
depository institutions. Accordingly, the Board finds good cause for 
determining, and so determines, that notice in accordance with 5 U.S.C. 
553(b) is unnecessary. Consequently, the provisions of the Regulatory 
Flexibility Act, 5 U.S.C. 601, do not apply to these amendments.

List of Subjects in 12 CFR Part 204

    Banks, banking, Reporting and recordkeeping requirements.

0
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. Section 204.9 is revised to read as follows:


Sec.  204.9  Reserve requirement ratios.

    The following reserve requirement ratios are prescribed for all 
depository institutions, banking Edge and agreement corporations, and 
United States branches and agencies of foreign banks:

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              Category                       Reserve requirement
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Net transaction accounts:
    $0 to $7.0 million.............  0 percent of amount.
    Over $7.0 million and up to      3 percent of amount.
     $47.6 million.
    Over $47.6 million.............  $1,218,000 plus 10 percent of
                                      amount over $47.6 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.

    October 5, 2004.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-22772 Filed 10-8-04; 8:45 a.m.]
BILLING CODE 6210-01-P