[Federal Register Volume 86, Number 106 (Friday, June 4, 2021)]
[Rules and Regulations]
[Pages 29937-29939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11758]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Docket No. R-1737]
 RIN 7100-AG07


Regulation D: Reserve Requirements of Depository Institutions

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is adopting amendments to Regulation D (Reserve 
Requirements of Depository Institutions) to eliminate references to an 
``interest on required reserves'' rate and to an ``interest on excess 
reserves'' rate and replace them with a reference to a single 
``interest on reserve balances'' rate; and to simplify the formula used 
to calculate the amount of interest paid on balances maintained by or 
on behalf of eligible institutions in master accounts at Federal 
Reserve Banks, and to make other conforming amendments. The Board 
requested comment on the amendments and received one comment that 
addressed issues not raised by the proposed amendments. Accordingly, 
the Board is adopting the final rule as proposed without change.

DATES: Effective July 29, 2021.

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(b)(2) of the Federal Reserve Act (``Act'') \1\ requires 
each depository institution to maintain reserves against its 
transaction accounts, nonpersonal time deposits, and Eurocurrency 
liabilities within ratios prescribed by the Board for the purpose of 
implementing monetary policy.\2\ The Board's Regulation D (Reserve 
Requirements of Depository Institutions, 12 CFR part 204) implements 
the reserve requirements provisions of section 19. Effective March 24, 
2020, the Board amended Regulation D to set all reserve requirement 
ratios for transaction accounts to zero percent.\3\
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 461(b)(2).
    \2\ Reserve requirement ratios for nonpersonal time deposits and 
Eurocurrency liabilities have been set at zero percent since 1990. 
See Regulation D (Reserve Requirements of Depository Institutions), 
Final Rule, 55 FR 50540 (Dec. 7, 1990).
    \3\ Regulation D (Reserve Requirements of Depository 
Institutions), Final Rule, 86 FR 8853 (February 10, 2021); see 
Regulation D (Reserve Requirements of Depository Institutions), 
Interim Final Rule, 85 FR 16525 (March 24, 2020).
---------------------------------------------------------------------------

    Section 19(b)(12) of the Act provides that balances maintained by 
or on behalf of ``eligible institutions'' in accounts at Federal 
Reserve Banks may receive

[[Page 29938]]

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.\4\ Eligible institutions include depository institutions and 
certain other institutions as specified in the Act.\5\ Section 
19(b)(12) also provides that the Board may prescribe regulations 
concerning the payment of earnings on balances at a Reserve Bank.\6\
---------------------------------------------------------------------------

    \4\ 12 U.S.C. 461 (b)(12)(A).
    \5\ See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also 12 CFR 
204.2(y).
    \6\ See 12 U.S.C. 461(b)(12)(B).
---------------------------------------------------------------------------

    By notice published in the Federal Register on January 8, 2021, the 
Board requested comment on proposed amendments to Regulation D that 
would (1) eliminate references to an ``IORR'' (interest on required 
reserves) rate and to an ``IOER'' (interest on excess reserves) rate 
and replace them with references to a single ``interest on reserve 
balances'' (``IORB'') rate; and (2) simplify the formula used to 
calculate the amount of interest paid on balances maintained by or on 
behalf of eligible institutions in master accounts at Federal Reserve 
Banks and make other conforming changes.\7\ The public comment period 
closed on March 9, 2021.
---------------------------------------------------------------------------

    \7\ Regulation D (Reserve Requirements of Depository 
Institutions), Notice of Proposed Rulemaking, 86 FR. 1303 (Jan. 8, 
2021).
---------------------------------------------------------------------------

II. Comments and Final Rule

    The Board received one comment that addressed issues not raised by 
the proposed amendments. Accordingly, the Board is adopting the 
proposed amendments as a final rule without change.

III. Administrative Law Matters

A. Effective Date

    The Administrative Procedure Act (APA) generally requires that a 
final rule be published in the Federal Register no less than 30 days 
before its effective date.\8\ The Board has determined that the final 
rule will become effective on July 29, 2021. The selected effective 
date aligns the final rule with the first day following conclusion of 
the preceding maintenance period in order to facilitate operational 
implementation of the final rule's rate and rate calculation 
provisions.
---------------------------------------------------------------------------

    \8\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act \9\ generally requires an agency, in 
connection with a proposed rule, to prepare and make available for 
public comment an initial regulatory flexibility analysis that 
describes the impact of a proposed rule on small entities. The Small 
Business Administration has defined ``small entities'' to include 
banking organizations with total assets of less than or equal to $600 
million.
---------------------------------------------------------------------------

    \9\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    The Board did not receive any comments on its initial regulatory 
flexibility analysis. As discussed in the SUPPLEMENTARY INFORMATION 
above, the final rule applies to all eligible institutions regardless 
of size, does not impose any new recordkeeping, reporting, or 
compliance requirements, and does not duplicate, overlap, or conflict 
with any other Federal rules. In light of the foregoing, the Board 
certifies that the final rule will not have a significant economic 
impact on a substantial number of small entities.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 \10\ (PRA) prohibits an agency 
from conducting or sponsoring an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. The final rule contains no collections of information 
subject to the PRA.
---------------------------------------------------------------------------

    \10\ 44 U.S.C. 3506; see 5 CFR part 1320, appendix A.1.
---------------------------------------------------------------------------

D. Plain Language

    Section 772 of the Gramm-Leach-Bliley Act \11\ requires the Board 
to use ``plain language'' in all proposed and final rules published 
after January 1, 2000. The Board did not receive any comments with 
respect to making the proposed rule easier to understand and is 
adopting the final rule without change.
---------------------------------------------------------------------------

    \11\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 204

    Banks, Banking, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, 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.  204.2, paragraph (aa) is revised to read as follows:


Sec.  204.2   Definitions.

* * * * *
    (aa) Excess balance account means an account at a Reserve Bank 
pursuant to Sec.  204.10(d) of this chapter that is established by one 
or more eligible institutions through an agent and in which only 
balances of the participating eligible institutions may at any time be 
maintained. An excess balance account is not a ``pass-through account'' 
for purposes of this part.
* * * * *

0
3. In Sec.  204.10, paragraphs (b) introductory text, (b)(1) through 
(3), and (d)(1) through (4) are revised to read as follows:


Sec.  204.10   Payment of interest on balances.

* * * * *
    (b) Payment of interest. Interest on balances maintained at Federal 
Reserve Banks by or on behalf of an eligible institution is established 
as set forth in paragraphs (b)(1) and (2) of this section.
    (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 0.10 percent.
    (2) For term deposits, interest is:
    (i) The amount equal to the principal amount of the term deposit 
multiplied by a rate specified in advance by the Board, in light of 
existing short-term market rates, to maintain the federal funds rate at 
a level consistent with monetary policy objectives; or
    (ii) The amount equal to the principal amount of the term deposit 
multiplied by a rate determined by the auction through which such term 
deposits are offered.
    (3) For purposes of Sec.  204.10(b), a ``master account'' is the 
record maintained by a Federal Reserve Bank of the debtor-creditor 
relationship between the Federal Reserve Bank and a single eligible 
institution with respect to deposit balances of the eligible 
institution that are maintained with the Federal Reserve Bank. A 
``master account'' is not a ``term deposit,'' an ``excess balance 
account,'' a ``joint account,'' or any deposit account maintained with 
a Federal Reserve Bank governed by an agreement that states the account 
is not a master account.
* * * * *
    (d) * * *
    (1) A Reserve Bank may establish an excess balance account for 
eligible institutions under the provisions of this paragraph (d). 
Notwithstanding any other provisions of this part, the balances 
maintained by eligible institutions in an excess balance account 
represent a liability of the

[[Page 29939]]

Reserve Bank solely to those participating eligible institutions.
    (2) The participating eligible institutions in an excess balance 
account shall authorize another institution to act as agent of the 
participating institutions for purposes of general account management, 
including but not limited to transferring the balances of participating 
institutions in and out of the excess balance account. An excess 
balance account must be established at the Reserve Bank where the agent 
maintains its master account, unless otherwise determined by the Board. 
The agent may not commingle its own funds in the excess balance 
account.
    (3) Balances maintained in an excess balance account may not be 
used for general payments or other activities.
    (4) Interest on balances of eligible institutions maintained in an 
excess balance account is the amount equal to the IORB rate in effect 
on a day multiplied by the total balances maintained on that day.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021-11758 Filed 6-3-21; 8:45 am]
BILLING CODE 6210-01-P