[Federal Register Volume 65, Number 225 (Tuesday, November 21, 2000)]
[Rules and Regulations]
[Pages 69857-69859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29723]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Regulation D; Docket No. R-1088]


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 the reserve requirement exemption for 2001, and 
announces the annual indexing of the deposit reporting cutoff level 
that will be effective beginning in September 2001. The amendments 
decrease the amount of net transaction accounts subject to a reserve 
requirement ratio of three percent in 2001, as required by section 
19(b)(2)(C) of the Federal Reserve Act, from $44.3 million to $42.8 
million of transaction accounts. This adjustment is known as the low 
reserve tranche adjustment. The Board is increasing from $5.0 million 
to $5.5 million the amount of reservable liabilities of each depository 
institution that is subject to a reserve requirement of zero percent in 
2001. This action is required by section 19(b)(11)(B) of the

[[Page 69858]]

Federal Reserve Act, and the adjustment is known as the reservable 
liabilities exemption adjustment. The Board is also increasing the 
deposit cutoff level that is used in conjunction with the reservable 
liabilities exemption to determine the frequency of deposit reporting 
from $95.0 million to $101.0 million for nonexempt depository 
institutions. (Nonexempt institutions are those with total reservable 
liabilities exceeding the amount exempted from reserve requirements.) 
Thus, beginning in September 2001, nonexempt institutions with total 
deposits of $101.0 million or more will be required to report weekly 
while nonexempt institutions with total deposits less than $101.0 
million may report quarterly, in both cases on form FR 2900. In July 
2000, the Board eliminated the exempt deposit cutoff and discontinued 
the quarterly report associated with that cutoff (form FR 2910q). 
Exempt institutions with at least $5.5 million in total deposits may 
report annually on form FR 2910a.

DATES: Effective date: December 21, 2000.
    Compliance dates: For depository institutions that report weekly, 
the low reserve tranche adjustment and the reservable liabilities 
exemption adjustment will apply to the reserve computation period that 
begins Tuesday, November 28, 2000, and the corresponding reserve 
maintenance period that begins Thursday, December 28, 2000. For 
institutions that report quarterly, the low reserve tranche adjustment 
and the reservable liabilities exemption adjustment will apply to the 
reserve computation period that begins Tuesday, December 19, 2000, and 
the corresponding reserve maintenance period that begins Thursday, 
January 18, 2001. For all depository institutions, the deposit cutoff 
levels will be used to screen institutions in the second quarter of 
2001 to determine the reporting frequency for the twelve month period 
that begins in September 2001.

FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Counsel (202/452-
3565), Legal Division, or June O'Brien, Economist (202/452-3790), 
Division of Monetary Affairs; for the hearing impaired only, contact 
Janice Simms, Telecommunications Device for the Deaf (TDD) (202/872-
4984); Board of Governors of the Federal Reserve System, 20th and C 
Streets, N.W., 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 reservable liabilities,\1\ as prescribed by Board 
regulations. The required reserve ratio applicable to transaction 
account balances exceeding the low reserve tranche is 10 percent. 
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 percentage change in the tranche is 
required by law to equal 80 percent of the percentage change (increase 
or decrease) in net transaction accounts at all depository institutions 
over the one-year period ending on the most recent June 30.
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    \1\ Reservable liabilities include transaction accounts, 
nonpersonal time deposits, and Eurocurrency liabilities as defined 
in section 19(b)(5) of the Federal Reserve Act. The reserve ratio on 
nonpersonal time deposits and Eurocurrency liabilities is zero 
percent.
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    Net transaction accounts of all depository institutions decreased 
by 4.2 percent (from $645.7 billion to $618.4 billion) from June 30, 
1999, to June 30, 2000. In accordance with section 19(b)(2), the Board 
is amending Regulation D (12 CFR part 204) to decrease the low reserve 
tranche for transaction accounts for 2001 by $1.5 million, that is, 
from $44.3 million to $42.8 million.
    Section 19(b)(11)(A) of the Federal Reserve Act (12 U.S.C. 461 
(b)(11)(B)) provides that $2 million of reservable liabilities of each 
depository institution shall be subject to a zero percent reserve 
requirement. Each depository institution may, in accordance with the 
rules and regulations of the Board, designate the reservable 
liabilities to which this reserve requirement exemption is to apply. 
However, if net transaction accounts are designated, only those that 
would otherwise be subject to a three percent reserve requirement 
(i.e., net transaction accounts within the low reserve requirement 
tranche) may be so designated.
    Section 19(b)(11)(B) of the Federal Reserve Act provides that, 
before December 31 of each year, the Board shall issue a regulation 
adjusting for the next calendar year the dollar amount of reservable 
liabilities exempt from reserve requirements. The exemption amount 
changes only if the total reservable liabilities held at all depository 
institutions increase from one year to the next. In that case, the 
exemption amount increases by 80 percent of the increase in total 
reservable liabilities of all depository institutions as of the year 
ending June 30. Total reservable liabilities of all depository 
institutions increased by 12.3 percent (from $1,961.1 billion to 
$2,202.9 billion) from June 30, 1999, to June 30, 2000. Consequently, 
the reservable liabilities exemption amount for 2001 under section 
19(b)(11)(B) will be increased by $0.5 million from $5.0 million to 
$5.5 million.\2\
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    \2\ Consistent with Board practice, the tranche and exemption 
amounts have been rounded to the nearest $0.1 million.
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    For institutions that report weekly, the tranche adjustment and the 
reservable liabilities exemption adjustment will be effective for the 
reserve computation period beginning Tuesday, November 28, 2000, and 
for the corresponding reserve maintenance period beginning Thursday, 
December 28, 2000. For institutions that report quarterly, the tranche 
adjustment and the reservable liabilities exemption adjustment will be 
effective for the computation period beginning Tuesday, December 19, 
2000, and for the corresponding reserve maintenance period beginning 
Thursday, January 18, 2001. In addition, all institutions currently 
submitting form FR 2900 must continue to submit reports to the Federal 
Reserve under current reporting procedures.
    In order to reduce the reporting burden for small institutions, the 
Board has established deposit reporting cutoff levels to determine 
deposit reporting frequency. Institutions are screened during the 
second quarter of each year to determine reporting frequency beginning 
the following September. The cutoff level for nonexempt institutions 
determines whether they report (on form FR 2900) quarterly or weekly, 
and the deposit cutoff level for exempt institutions determines whether 
they report annually (on form FR 2910a) or quarterly (on form FR 
2910q). During the July 2000 review of deposit reports, however, the 
Board eliminated the exempt deposit cutoff and discontinued the 
quarterly report associated with that cutoff, the form FR 2910q. In 
addition, the Board raised the nonexempt deposit cutoff to $95.0 
million from the 2000 indexed level of $84.5 million, effective for the 
2000 deposit report screening process.
    From June 30, 1999, to June 30, 2000, total deposits increased 7.9 
percent, from $4,836.8 billion to $5,219.8 billion. Accordingly, the 
nonexempt deposit cutoff level will increase by $6.0 million from $95.0 
million in 2000 to $101.0 million in 2001. Based on the indexation of 
the reservable liabilities exemption, the cutoff level for total 
deposits above which reports of deposits must be filed will rise from 
$5.0 million to $5.5 million.
    Under the deposit reporting system, institutions are screened 
during each

[[Page 69859]]

year to determine their reporting category beginning in the September 
of that year. Thus, effective in September 2001, all U.S. branches and 
agencies of foreign banks and Edge and agreement corporations, 
regardless of size, and other institutions with total reservable 
liabilities exceeding $5.5 million (nonexempt institutions) and with 
total deposits at or above $101.0 million would be required to file 
weekly the Report of Transaction Accounts, Other Deposits and Vault 
Cash (form FR 2900). Nonexempt institutions with total deposits below 
$101.0 million could file the form FR 2900 quarterly. Institutions that 
obtain funds from non-U.S. sources or that have foreign branches or 
IBFs would continue to be required to file the Report of Certain 
Eurocurrency Transactions (forms FR 2950/FR 2951) at the same frequency 
as they file the form FR 2900. Institutions with reservable liabilities 
at or below the exemption amount of $5.5 million (exempt institutions 
and with at least $5.5 million in total deposits would be required to 
file the Annual Report of Total Deposits and Reservable Liabilities 
(form FR 2910a). Institutions with total deposits below the exemption 
level of $5.5 million would be excused from reporting if their deposits 
can be estimated from other data sources.
    Finally, the Board may require a depository institution to report 
on a weekly basis, regardless of the cutoff level, if the institution 
manipulates its total deposits and other reservable liabilities in 
order to qualify for quarterly reporting. Similarly, any depository 
institution that reports quarterly may be required to report weekly and 
to maintain appropriate reserve balances with its Reserve Bank if, 
during its computation period, it understates its usual reservable 
liabilities or overstates the deductions allowed in computing required 
reserve balances.
    Notice and public participation. The provisions of 5 U.S.C. 553(b) 
relating to notice and public participation have not been followed in 
connection with the adoption of these amendments because the amendments 
involve expected, ministerial adjustments prescribed by statute and by 
an interpretative statement reaffirming the Board's policy concerning 
reporting practices. In addition, the reservable liabilities exemption 
adjustment and the increases for reporting purposes in the deposit 
cutoff levels reduce regulatory burdens on depository institutions, and 
the low reserve tranche adjustment will have a de minimis effect on 
depository institutions with net transaction accounts exceeding $42.8 
million. Accordingly, the Board finds good cause for determining, and 
so determines, that notice and public participation is unnecessary, 
impracticable, or contrary to the public interest.

Regulatory Flexibility Analysis

    The Board certifies that these amendments will not have a 
substantial economic impact on small depository institutions. See 
``Notice and Public Participation'' above.

List of Subjects in 12 CFR Part 204

    Banks, banking, Reporting and recordkeeping requirements

    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)

    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.

    2. Section 204.9 is revised to read as follows:


Sec. 204.9  Reserve requirement ratios.

    (a) Reserve percentages. The following reserve ratios are 
prescribed for all depository institutions, Edge and Agreement 
corporations, and United States branches and agencies of foreign banks:

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                 Category                     Reserve  requirement \1\
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Net transaction accounts:
    $0 to $42.8 million...................  3 percent of amount.
    Over $42.8 million....................  $1,284,000 plus 10 percent
                                             of amount over $42.8
                                             million.
    Nonpersonal time deposits.............  0 percent.
    Eurocurrency liabilities..............  0 percent.
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\1\ Before deducting the adjustment to be made by the paragraph (b) of
  this section.

    (b) Exemption from reserve requirements. Each depository 
institution, Edge or agreement corporation, and U.S. branch or agency 
of a foreign bank is subject to a zero percent reserve requirement on 
an amount of its transaction accounts subject to the low reserve 
tranche in paragraph (a) of this section not in excess of $5.5 million 
determined in accordance with Sec. 204.3(a)(3).

    By order of the Board of Governors of the Federal Reserve 
System, November 16, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-29723 Filed 11-20-00; 8:45 am]
BILLING CODE 6210-01-P