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[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 3615-3616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00430]

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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Docket No. R-1863; RIN 7100-AG90]

Regulation D: Reserve Requirements of Depository Institutions

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') has adopted final amendments to its Regulation D to revise 
the rate of interest paid on balances (``IORB'') maintained at Federal 
Reserve Banks by or on behalf of eligible institutions. The final 
amendments specify that IORB is 4.4 percent, a 0.25 percentage point 
decrease from its prior level. The amendment is intended to enhance the 
role of IORB in maintaining the federal funds rate in the target range 
established by the Federal Open Market Committee (``FOMC'' or 
``Committee'').

DATES: 
    Effective date: This rule (amendments to part 204 (Regulation D)) 
is effective January 15, 2025.
    Applicability date: The IORB rate change was applicable on December 
19, 2024.

FOR FURTHER INFORMATION CONTACT: M. Benjamin Snodgrass, Senior Counsel 
(202-263-4877), Legal Division, or Kristen Payne, Lead Financial 
Institution & Policy Analyst (202-306-9573); for users of telephone 
systems via text telephone (TTY) or any TTY-based Telecommunications 
Relay Services, please call 711 from any telephone, anywhere in the 
United States; Board of Governors of the Federal Reserve

[[Page 3616]]

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 
(``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 established IORB at 4.65 percent.\6\
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    \1\ 12 U.S.C. 461(b). In March 2020, the Board set all reserve 
requirement ratios to zero percent. See Interim Final Rule, 85 FR 
16525 (Mar. 24, 2020); Final Rule, 86 FR 8853 (Feb. 10, 2021).
    \2\ 12 CFR 204.5(a)(1).
    \3\ 12 U.S.C. 461(b)(1)(A) and (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)(1).
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II. Amendment to IORB

    The Board is amending Sec.  204.10(b)(1) of Regulation D to 
establish IORB at 4.4 percent. The amendment represents a 0.25 
percentage point decrease in IORB. This decision was announced on 
December 18, 2024, with an effective date of December 19, 2024, in the 
Federal Reserve Implementation Note that accompanied the FOMC's 
statement on December 18, 2024. The FOMC statement stated that the 
Committee decided to lower the target range for the federal funds rate 
to 4\1/4\ to 4\1/2\ percent.
    The Federal Reserve Implementation Note stated:

    The Board of Governors of the Federal Reserve System voted 
unanimously to lower the interest rate paid on reserve balances to 
4.4 percent, effective December 19, 2024.

    As a result, the Board is amending Sec.  204.10(b)(1) of Regulation 
D to establish IORB at 4.4 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 change for IORB that is reflected in the final amendment to 
Regulation D was 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 this final amendment to Regulation D.

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.

Authority and Issuance

    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)(1) to read as 
follows:

Sec.  204.10  Payment of interest on balances.

* * * * *
    (b) * * *
    (1) For balances maintained in an eligible institution's master 
account, interest is the amount equal to the interest on reserve 
balances rate (``IORB rate'') on a day multiplied by the total balances 
maintained on that day. The IORB rate is 4.4 percent.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2025-00430 Filed 1-14-25; 8:45 am]
BILLING CODE 6210-01-P
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