[Federal Register Volume 85, Number 239 (Friday, December 11, 2020)]
[Rules and Regulations]
[Pages 79821-79823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27083]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1733]
RIN 7100-AG 03


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 reserve 
requirement exemption amount and the low reserve tranche for 2021. The 
annual indexation of these amounts is required notwithstanding the 
Board's action in March 2020 setting all reserve requirement ratios to 
zero. The Regulation D amendments set the reserve requirement exemption 
amount for 2021 at $21.1 million of reservable liabilities (up from 
16.9 million in 2020). The Regulation D amendments also set the amount 
of net transaction accounts at each depository institution (over the 
reserve requirement exemption amount) that could be subject to a 
reserve requirement ratio of not more than 3 percent (and which may be 
zero) in 2021 at $182.9 million (up from $127.5 million in 2020). This 
amount is known as the low reserve tranche. The adjustments to both of 
these amounts are derived using statutory formulas specified in the 
Federal Reserve Act (the ``Act''). The annual indexation of the reserve 
requirement exemption amount and low reserve tranche, though required 
by statute, will not affect depository institutions' reserve 
requirements, which will remain zero. The Board is also announcing 
changes in two other amounts, the nonexempt deposit cutoff level and 
the reduced reporting limit, that are used to determine the frequency 
at which depository institutions must submit deposit reports.

DATES: Effective date: January 11, 2021.
    Compliance dates: The new low reserve tranche and reserve 
requirement exemption amount will apply to the fourteen-day reserve 
maintenance period that begins January 14, 2021. For depository 
institutions that report deposit data weekly, this maintenance period 
corresponds to the fourteen-day computation period that begins December 
15, 2020. For depository institutions that report deposit data 
quarterly, this maintenance period corresponds to the seven-day 
computation period that begins December 15, 2020. The new values of the 
nonexempt deposit cutoff level, the reserve requirement exemption 
amount, and the reduced reporting limit will be used to determine the 
frequency at which a depository institution submits deposit reports 
effective in either June or September 2021.

FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Special 
Counsel (202-452-3565), or Justyna Bolter, Senior Attorney (202/452-
2686), Legal Division, or Kristen Payne, Senior Financial Institution 
and Policy Analyst (202-452-2872), or Francis A. Martinez, Lead 
Financial Institution and Policy Analyst (202-245-4217), 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: 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 and nonpersonal time deposits, as 
prescribed by Board regulations, for the purpose of implementing 
monetary policy. Section 11(a)(2) of the 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.

I. Reserve Requirements

    Section 19(b) of the Act authorizes different ranges of reserve 
requirement ratios depending on the amount of transaction account 
balances at a depository institution. Section 19(b)(11)(A) of the Act 
(12 U.S.C. 461(b)(11)(A)) provides that a zero percent reserve 
requirement ratio shall apply at each depository institution to total 
reservable liabilities that do not exceed a certain amount, known as 
the

[[Page 79822]]

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. 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 Act requires the 
percentage increase in the reserve requirement exemption amount to be 
80 percent of the increase in total reservable liabilities of 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 31.0 percent, from $8,321 billion to $10,902 billion, 
between June 30, 2019, and June 30, 2020. Accordingly, the Board is 
amending Regulation D (12 CFR part 204) to set the reserve requirement 
exemption amount for 2021 at $21.1 million, an increase of $4.2 million 
from its level in 2020.\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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    Pursuant to Section 19(b)(2) of the Act (12 U.S.C. 461(b)(2)), 
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, may be subject to a reserve 
requirement ratio of not more than 3 percent (and which may be zero). 
Transaction account balances over the low reserve tranche may be 
subject to a reserve requirement ratio of not more than 14 percent (and 
which may be zero). 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 Act requires 
the adjustment in the low reserve tranche to be 80 percent of the 
percentage increase or decrease in total transaction accounts of all 
depository institutions over the one-year period that ends on the June 
30 prior to the adjustment.
    Net transaction accounts of all depository institutions increased 
54.3 percent, from $2,505 billion to $3,866 billion, between June 30, 
2019, and June 30, 2020. Accordingly, the Board is amending Regulation 
D to set the low reserve tranche for net transaction accounts for 2021 
at $182.9 million, an increase of $55.4 million from 2020.
    The new low reserve tranche and reserve requirement exemption 
amount will be effective for all depository institutions for the 
fourteen-day reserve maintenance period beginning January 14, 2021. For 
depository institutions that report deposit data weekly, this 
maintenance period corresponds to the fourteen-day computation period 
that begins December 15, 2020. For depository institutions that report 
deposit data quarterly, this maintenance period corresponds to the 
seven-day computation period that begins December 15, 2020.
    Effective March 26, 2020, the Board reduced reserve requirement 
ratios on all net transaction accounts to zero percent, eliminating 
reserve requirements for all depository institutions. The annual 
indexation of the reserve requirement exemption amount and the low 
reserve tranche for 2021 is required by statute but will not affect 
depository institutions' reserve requirements, which will remain zero.

II. Deposit Reports

    Section 11(b)(2) of the 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 
and assigns them to one of four deposit reporting panels (weekly 
reporters, quarterly reporters, annual reporters, or nonreporters). The 
panel assignment for annual reporters is effective in June of the 
screening year; the panel assignment for weekly and quarterly reporters 
is effective in September of the screening year.
    In order to ease reporting burden, the Board permits smaller 
depository institutions to submit deposit reports less frequently than 
larger depository institutions. The Board permits depository 
institutions with net transaction accounts above the reserve 
requirement exemption amount but total transaction accounts, savings 
deposits, and small time deposits below a specified level (the 
``nonexempt deposit cutoff'') to report deposit data quarterly. 
Depository institutions with net transaction accounts above the reserve 
requirement exemption amount and with total transaction accounts, 
savings deposits, and small time deposits greater than or equal to the 
nonexempt deposit cutoff are required to report deposit data weekly. 
The Board requires certain large depository institutions to report 
weekly regardless of the level of their net transaction accounts if the 
depository institution's total transaction accounts, savings deposits, 
and small time deposits exceeds or is equal to a specified level (the 
``reduced reporting limit''). The nonexempt deposit cutoff level and 
the reduced reporting limit are adjusted annually, by an amount equal 
to 80 percent of the increase, if any, in total transaction accounts, 
savings deposits, and small time deposits of all depository 
institutions over the one-year period that ends on the June 30 prior to 
the adjustment.
    From June 30, 2019, to June 30, 2020, total transaction accounts, 
savings deposits, and small time deposits at all depository 
institutions increased 24.0 percent, from $13,053 billion to $16,191 
billion. Accordingly, the Board is increasing the nonexempt deposit 
cutoff level by $203.5 million to $1.262 billion for 2021 (up from 
$1.058 billion in 2020). The Board is also increasing the reduced 
reporting limit by $424.6 million to $2.633 billion for 2021 (up from 
$2.208 billion in 2020).\2\
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    \2\ Consistent with Board practice, the nonexempt deposit cutoff 
level and the reduced reporting limit have been rounded to the 
nearest $1 million.
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    Beginning in 2021, the boundaries of the four deposit reporting 
panels will be defined as follows. Those depository institutions with 
net transaction accounts over $21.1 million (the reserve requirement 
exemption amount) or with total transaction accounts, savings deposits, 
and small time deposits greater than or equal to $2.633 billion (the 
reduced reporting limit) are subject to detailed reporting, and must 
file a Report of Transaction Accounts, Other Deposits and Vault Cash 
(FR 2900 report) either weekly or quarterly. Of this group, those with 
total transaction accounts, savings deposits, and small time deposits 
greater than or equal to $1.262 billion (the nonexempt deposit cutoff 
level) are required to file the FR 2900 report each week, while those 
with total transaction accounts, savings deposits, and small time 
deposits less than $1.262 billion are required to file the FR 2900 
report each quarter. Those depository institutions with net transaction 
accounts less than or equal to $21.1 million (the reserve requirement 
exemption amount) and with total transaction accounts, savings 
deposits, and small time deposits less than $2.633 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 $21.1 million (but with total transaction 
accounts, savings deposits, and small time deposits less than $2.633 
billion) are required to file the Annual

[[Page 79823]]

Report of Deposits and Reservable Liabilities (FR 2910a) report 
annually, while those with total deposits less than or equal to $21.1 
million are not required to file a deposit report. A depository 
institution that adjusts reported values on its FR 2910a report in 
order to qualify for reduced reporting will be shifted to an FR 2900 
reporting panel.

III. Regulatory Analysis

Administrative Procedure 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 adjustments 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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\3\ As 
noted previously, the Board has determined that it is unnecessary 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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    \3\ 5 U.S.C. 603 and 604.
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Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\4\ the 
Board reviewed this final rule. No collections of information pursuant 
to the Paperwork Reduction Act are contained in the final rule.
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    \4\ 44 U.S.C. 3506; 5 CFR part 1320.
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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), 461, 601, 611, and 3105.

0
2. Section 204.4 is amended by revising paragraph (f) 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 exemption amount   0 percent of amount.
 ($21.1 million).
Over reserve requirement exemption amount    0 percent of amount.
 ($21.1 million) and up to low reserve
 tranche ($182.9 million).
Over low reserve tranche ($182.9 million)..  $0 plus 0 percent of amount
                                              over $182.9 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, acting through the Director of the Division of Monetary 
Affairs under delegated authority.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-27083 Filed 12-10-20; 8:45 am]
BILLING CODE 6210-01-P