Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25629 

(v) Clearing balance means the 

average balance held in an account at a 

Federal Reserve Bank by an institution 

over a reserve maintenance period to 

satisfy its contractual clearing balance 

with a Reserve Bank. 

* * * * * 

(y) Eligible institution means— 

(1) Any depository institution as 

described in § 204.1(c) of this part; 

(2) Any trust company; 

(3) Any corporation organized under 

section 25A of the Federal Reserve Act 

(12 U.S.C. 611 et seq.) or having an 

agreement with the Board under section 

25 of the Federal Reserve Act (12 U.S.C. 

601 et seq.); and 

(4) Any branch or agency of a foreign 

bank (as defined in section 1(b) of the 

International Banking Act of 1978, 12 

U.S.C. 3101(b)). 

(z) Excess balance means the average 

balance held in an account at a Federal 

Reserve Bank by or on behalf of an 

institution over a reserve maintenance 

period that exceeds the sum of the 

required reserve balance and any 

clearing balance. 

(aa) Excess balance account means an 

account at a Reserve Bank pursuant to 

§ 204.10(d) of this part that is 

established by one or more eligible 

institutions through an agent and in 

which only excess 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. 

(bb) Required reserve balance means 

the average balance held in an account 

at a Federal Reserve Bank by or on 

behalf of an institution over a reserve 

maintenance period to satisfy the 

reserve requirements of this part. 

(cc) Targeted federal funds rate means 

the federal funds rate established from 

time to time by the Federal Open Market 

Committee. 

■ 3. Revise § 204.10 to read as follows: 

§ 204.10 Payment of interest on balances. 

(a) Payment of interest. The Federal 

Reserve Banks shall pay interest on 

balances maintained at Federal Reserve 

Banks by or on behalf of an eligible 

institution as provided in this section 

and under such other terms and 

conditions as the Board may prescribe. 

(b) Rate. Except as provided in 

paragraph (c) of this section, Federal 

Reserve Banks shall pay interest at the 

following rates— 

(1) For required reserve balances, at 1⁄4

percent; 

(2) For excess balances, at 1⁄4 percent; 

or 

(3) For required reserve balances or 

excess balances, at any other rate or 

rates as determined by the Board from 

time to time. 

(c) Pass-through balances. A passthrough correspondent that is an eligible 

institution may pass back to its 

respondent interest paid on balances 

held on behalf of that respondent. In the 

case of balances held by a pass-through 

correspondent that is not an eligible 

institution, a Reserve Bank shall pay 

interest only on the required reserve 

balances held on behalf of one or more 

respondents, and the correspondent 

shall pass back to its respondents 

interest paid on balances in the 

correspondent’s account. Any passing 

back of interest by a correspondent to a 

respondent under this subsection is not 

a payment of interest on a demand 

deposit for purposes of Part 217 of this 

chapter (Regulation Q). 

(d) Excess balance accounts. (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 excess 

balances of eligible institutions in an 

excess balance account represent a 

liability of the 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 excess 

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) No required reserve balances or 

clearing balances may be maintained at 

any time in an excess balance account, 

and balances maintained in an excess 

balance account will not satisfy any 

institution’s reserve balance 

requirement or contractual clearing 

balance. 

(4) An excess balance account must be 

used exclusively for the purpose of 

maintaining the excess balances of 

participants and may not be used for 

general payments or other activities. 

(5) Interest shall be paid on excess 

balances of eligible institutions 

maintained in an excess balance 

account in accordance with paragraph 

(b)(2) or (b)(3) of this section. 

(6) A Reserve Bank may establish 

additional terms and conditions 

consistent with this part with respect to 

the operation of an excess balance 

account, including, but not limited to, 

terms of and fees for services, 

conditions under which an institution 

may act as agent for an account, 

restrictions on the agent with respect to 

account management, penalties for 

noncompliance with this section or any 

terms and conditions, and account 

termination. 

By order of the Board of Governors of the 

Federal Reserve System, May 22, 2009. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. E9–12432 Filed 5–28–09; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Parts 204 and 209 

[Regulations D and I; Docket No. R–1307] 

Reserve Requirements of Depository 

Institutions; Issue and Cancellation of 

Federal Reserve Bank Capital Stock 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board is amending 

Regulation D (Reserve Requirements of 

Depository Institutions) and Regulation 

I (Issue and Cancellation of Federal 

Reserve Bank Capital Stock) to make 

two substantive changes and other 

clarifying amendments. The first 

substantive amendment conforms 

Regulation D to Section 603 of the 

Financial Services Regulatory Relief Act 

of 2006 (Pub. L. 109–351, Oct. 13, 2006) 

by authorizing member banks of the 

Federal Reserve System to enter into 

pass-through arrangements. Previously, 

member banks were statutorily 

prohibited from passing required 

reserve balances through a 

correspondent institution. The second 

substantive amendment eliminates the 

provision in Regulation D’s definition of 

‘‘savings deposit’’ that limits certain 

kinds of transfers from savings deposits 

to not more than three per month. As a 

result, all transfers and withdrawals 

from a savings deposit that are subject 

to a monthly limit will be subject to the 

same limit of not more than six per 

month. The remaining clarifying 

amendments reorganize the provisions 

relating to deposit reporting and the 

calculation and maintenance of required 

reserves, clarify the definition of ‘‘vault 

cash,’’ and make other minor editorial 

changes. 

DATES: This final rule is effective July 2, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

Sophia H. Allison, Senior Counsel (202/ 


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25630 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

1Section 19(b)(1)(F) of the Federal Reserve Act, 

12 U.S.C. 461(b)(1)(F). 

2 12 U.S.C. 248(a). 3 12 CFR 204.2(c)(1). 

4Federal Reserve Board, Circular No. 6 (Series of 

1915) (Jan. 15, 1915). 

5Board Interpretation, 1950 Fed. Res. Bull. 44; 

Board Interpretation, 1959 Fed. Res. Bull. 1475. 

6 52 FR 47689, 47691 (Dec. 16, 1987). Section 

204.2(c)(1)(i)(C) states that ‘‘[t]ime deposit includes 

funds * * * payable only upon written notice that 

is actually required to be given by the depositor not 

less than seven days prior to withdrawal * * *’’ 

7 57 FR 38417, 38423–24 (Aug. 25, 1992) 

(declining to adopt ‘‘LIFO’’ rule for withdrawals 

from time deposits, in part because of potential 

452–3565), or Dena L. Milligan, 

Attorney (202/452–3900), Legal 

Division, Seth Carpenter, Deputy 

Associate Director (202/452–2385), or 

Margaret Gillis DeBoer, Section Chief 

(202/452–3139), 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 Background 

For monetary policy purposes, section 

19 of the Federal Reserve Act (the 

‘‘Act’’) imposes reserve requirements on 

certain types of deposits and other 

liabilities of depository institutions. 

Currently, reserve requirement ratios for 

‘‘transaction accounts’’ are graduated 

between three and ten percent. Reserve 

requirement ratios for ‘‘nonpersonal 

time deposits’’ and ‘‘Eurocurrency 

liabilities’’ are currently zero percent. 

Although section 19 expressly defines 

accounts with certain transfer 

characteristics as ‘‘transaction 

accounts,’’ section 19 authorizes the 

Board ‘‘to determine, by regulation or 

order, that an account or deposit is a 

transaction account if such account or 

deposit may be used to provide funds 

directly or indirectly for the purpose of 

making payments or transfers to third 

persons or others.’’ 1 Section 19 also 

authorizes the Board to define, by 

regulation, the terms used in the 

section. The Board implements the 

provisions of section 19 through 

Regulation D. 

Section 11(a)(2) of the Act authorizes 

the Board to require any depository 

institution ‘‘to make, at such intervals as 

the Board may prescribe, such reports of 

its liabilities and assets as the Board 

may determine to be necessary or 

desirable to enable the Board to 

discharge its responsibility to monitor 

and control monetary and credit 

aggregates.’’ 2 These provisions are 

specifically implemented in the 

computation and maintenance 

provisions of Regulation D (12 CFR 

204.3). 

Section 19(c)(1) of the Act provides 

that a depository institution’s required 

reserves shall be either in the form of a 

balance maintained for such purposes 

by such a depository institution in an 

account at a Federal Reserve Bank or in 

the form of vault cash. Prior to 2006, 

section 19(c)(1)(B) of the Act provided 

that non-member banks could maintain 

required reserves in an account at a 

depository institution that maintained 

required reserve balances at a Federal 

Reserve Bank, known as a ‘‘pass-through 

account.’’ The Financial Services 

Regulatory Relief Act of 2006 (Pub. L. 

109–351, Oct. 13, 2006), amended 

section 19(c)(1)(B) of the Act to remove 

the language restricting pass-through 

arrangements to non-member banks. 

Accordingly, the Act now permits all 

depository institutions to maintain 

required reserves in a pass-through 

account with a correspondent 

depository institution. 

II. Request for Public Comment and 

Summary of Comments Received 

The Board requested public comment 

on proposed changes to Regulations D 

and I on February 7, 2008 (73 FR 8009 

(Feb. 12, 2008)). In response, the Board 

received 27 comments on the proposal, 

consisting of comments from nine 

depository institutions, two financial 

holding companies on behalf of their 

depository institution subsidiaries, 

seven individuals, seven financial 

institution trade associations, one law 

firm, and one association of depository 

institutions. Of these, three commenters 

supported the proposal in its entirety, 

while the majority of the other 

comments received concerned (A) the 

proposed amendment to the definition 

of ‘‘savings deposit’’ describing the 

monthly numeric limits imposed on 

certain ‘‘convenient’’ types of transfers 

and withdrawals from savings deposits 

or (B) the proposed amendments to the 

definitions of ‘‘time deposit’’ and ‘‘vault 

cash.’’ Other comments addressed 

reserve requirements generally and 

other technical aspects of the proposal. 

III. Section-by-Section Analysis of 

Proposal and Comments 

A. Section 204.2(c) Definition of Time 

Deposit 

(1) Background of Proposed 

Amendment 

The current definition of ‘‘time 

deposit’’ in Regulation D provides that 

an early withdrawal penalty must be 

charged on any amount withdrawn from 

a time deposit ‘‘from within six days 

after the date of deposit.’’ 3 The 

definition contemplates that an early 

withdrawal might be an early 

withdrawal of the entire deposit amount 

or of a partial withdrawal, that is, a 

withdrawal of some amount that is not 

the entire deposit amount. In either 

case, if part or all of the time deposit is 

withdrawn within six days after the date 

of the initial deposit, the specified early 

withdrawal penalty must be imposed on 

the amount so withdrawn. The current 

definition further states that ‘‘[a] time 

deposit from which partial early 

withdrawals are permitted must impose 

additional early withdrawal penalties of 

at least seven days’ simple interest on 

amounts withdrawn within six days 

after each partial withdrawal.’’ This 

language has been subject to numerous 

inquiries as to the meaning of the terms 

‘‘additional’’ and ‘‘early.’’ 

(2) Proposed Amendment and 

Comments 

The Board proposed to amend the 

definition of ‘‘time deposit’’ to remove 

the references to ‘‘early’’ and 

‘‘additional’’ in the second sentence of 

the definition and to clarify that ‘‘early’’ 

withdrawals include withdrawals 

within six days after deposit as well as 

withdrawals within six days of the last 

withdrawal. The Board received two 

comments on the proposed amendments 

to the definition of ‘‘time deposit.’’ Both 

comments expressed concern that the 

proposed amendments, if adopted, 

would have the effect of precluding 

certain depository institutions from 

continuing to avail themselves of the 

deposit type referred to as a ‘‘time 

deposit open account,’’ or ‘‘TDOA.’’ 

From as early as 1915, ‘‘time deposit 

open account’’ was a separately defined 

term within the general category of 

‘‘time deposit’’ in Regulation D.4 Board 

interpretations in later decades 

described bank trust departments’ use of 

TDOAs for disposition of certain 

commingled uninvested trust and 

agency funds awaiting disbursement or 

further investment.5 ‘‘Time deposit 

open account,’’ however, ceased being a 

separately defined term under the 

general definition of ‘‘time deposit’’ in 

1980. Further, the Board interpretations 

discussing use of TDOAs by trust 

departments for trust and agency funds 

were rescinded in 1987 as having been 

incorporated into section 

204.2(c)(1)(i)(C) of Regulation D.6

Nevertheless, the Board referred to 

TDOAs by name in subsequent 

rulemakings as continuing to be viable, 

at least when used other than as a 

method of evading reserve 

requirements.7


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negative impact on operation of TDOAs; 

interpretation prohibiting linked time deposit 

accounts at 12 CFR 204.134 limited to its terms and 

does not necessarily apply to TDOA types of 

accounts operated by trust departments). 

8 12 CFR 204.2(d)(2) (definition of ‘‘savings 

deposit’’). 

(3) Comment Analysis and Final Rule 

The Board believes that adopting the 

proposed amendments would have no 

effect on the continued use of TDOAs in 

bona fide arrangements by trust 

departments for trust and agency funds. 

The final amendments, however, do not 

adopt revisions to the definition of 

‘‘time deposit’’ that were proposed in 

the Board’s request for public comment 

because the only two comments 

received on the proposed revisions 

indicated that the proposed revisions 

would create more confusion than 

clarity. 

B. Section 204.2(d) Transfers From 

Savings Deposits 

(1) Background of Proposed 

Amendment 

The Board’s criteria for distinguishing 

between ‘‘transaction accounts’’ and 

‘‘savings deposits’’ in Regulation D are 

based on the ease with which the 

depositor may make transfers (payments 

to third parties) or withdrawals 

(payments directly to the depositor) 

from the account. Generally, the more 

convenient making withdrawals or 

transfers from an account is, the more 

likely the account holder will use the 

account for making payments or 

transfers to third parties rather than for 

holding savings. Accordingly, 

Regulation D limits the number of 

certain convenient kinds of transfers or 

withdrawals that an account holder may 

make in a single month from an account 

if that account is to be classified as a 

‘‘savings deposit.’’ 8 ‘‘Convenient’’ 

transfers or withdrawals for this 

purpose include preauthorized or 

automatic transfers (such as overdraft 

protection transfers or arranging to have 

bill payments deducted directly from 

the depositor’s savings account), 

telephonic transfers (made by the 

depositor telephoning or sending a fax 

or online instruction to the bank and 

instructing the transfer to be made), and 

transfers by check, debit card, or similar 

order payable to third parties. 

Regulation D currently limits the 

number of ‘‘convenient’’ transfers and 

withdrawals from savings deposits to 

not more than six per month. Within 

this overall limit of six, not more than 

three transfers or withdrawals may be 

made by check, debit card, or similar 

order made by the depositor and 

payable to third parties (the ‘‘three’’ 

sublimit). Regulation D does not limit 

less convenient transfers and 

withdrawals from savings deposits. For 

example, an account holder may make 

transfers or withdrawals ‘‘by mail, 

messenger, automated teller machine, or 

in person or * * * made by telephone 

(via check mailed to the depositor)’’ 

from savings deposits without 

numerical limit. 

(2) Proposed Amendment and 

Comments 

The Board proposed to amend 

Regulation D’s definition of ‘‘savings 

deposit’’ to eliminate the ‘‘three’’ 

sublimit that applies to checks and 

drafts and simply limit all ‘‘convenient’’ 

transfers to not more than six per 

month. Fourteen commenters supported 

eliminating the ‘‘three’’ sublimit, eight 

commenters favored doing away with 

numeric transfer limits entirely, and five 

commenters favored raising the monthly 

numeric limit to some number higher 

than six. One commenter proposed 

allowing depository institutions to set 

their own monthly numeric limits on 

convenient transfers and withdrawals. 

One commenter opposed both raising 

the monthly numeric limit to a higher 

number and making all kinds of 

transfers and withdrawals unlimited in 

number. One commenter stated that 

eliminating only the ‘‘three’’ sublimit 

did not go far enough, but made no 

recommendations as to how the Board 

could improve the proposal to address 

that concern. Two commenters 

requested that, if the proposed 

amendment becomes final, then the 

Board should provide a sufficiently 

delayed effective date (either six months 

or one year) to allow depository 

institutions time to modify their systems 

and customer disclosures. 

(3) Comment Analysis and Final 

Amendment 

The Board has carefully considered 

the comments received and has adopted 

the amendment to the definition of 

‘‘savings deposit’’ as proposed. The 

sublimit in the definition of ‘‘money 

market deposit account’’ began in 1982 

with the enactment of the Garn-St 

Germain Depository Institutions Act and 

lapsed in 1986. The Board retained the 

distinction between transactions subject 

to the overall limit of six and those 

subject to the sublimit in Regulation D 

after the Depository Institutions Act 

lapsed in 1986. Technological 

advancements, however, have 

eliminated any rational basis for the 

distinction. 

The Board has determined neither to 

raise the monthly numeric limit on 

convenient transfers to a number higher 

than six, nor to eliminate monthly 

numeric limits on all convenient 

transfers and withdrawals (including 

online) from savings deposits generally. 

Section 19 of the Act requires the Board 

to impose reserve requirements on 

transaction accounts and not on other 

types of accounts. Accordingly, the 

Board must maintain the capacity to 

distinguish between transaction 

accounts and savings deposits. The sixper-month limitation on certain 

convenient transfers and withdrawals 

has existed, in one form or another, 

since 1982. Such types of transfers and 

withdrawals appear to have become 

even more convenient since that time 

due to technological advances, such as 

the ability to make transfers online, and 

the increased availability of debit-card 

transfers at point-of-sale terminals and 

elsewhere. The greater the number of 

convenient transfers and withdrawals 

permitted per month from a ‘‘savings 

deposit,’’ the greater the difficulty in 

distinguishing such an account from a 

transaction account. Therefore, the 

Board has determined that the final rule 

will neither increase the number of 

convenient transfers and withdrawals 

permitted per month from a savings 

deposit, nor eliminate such numeric 

limits entirely (on either online transfers 

or all convenient transfers and 

withdrawals). 

For similar reasons, the Board 

believes that it would not be appropriate 

to adopt a rule allowing depository 

institutions to set their own monthly 

numeric limits on convenient transfers 

and withdrawals that account holders 

may make from savings deposits. 

Allowing different limits at different 

depository institutions would erode any 

definitional distinction between 

‘‘transaction accounts’’ and ‘‘savings 

deposits.’’ Even if some depository 

institutions were to choose relatively 

low numeric limits, there likely would 

be broad variation among depository 

institutions in the numeric limits 

selected, creating significant 

discrepancies between accounts 

classified as ‘‘savings deposits.’’ In 

addition, the Board believes that 

depository institutions would have costavoidance and competitive incentives to 

set numeric limits as high as possible 

while still being able to report such 

deposits as nonreservable ‘‘savings 

deposits’’ that may bear interest. The 

Board is obligated by statute to maintain 

some regulatory distinction between 

‘‘transaction accounts’’ and ‘‘savings 

deposits’’ and to enforce such a 

distinction with consistency. 

Accordingly, the Board has determined 

not to adopt a final rule permitting 


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9 12 U.S.C. 461(b). 

10The Act of July 28, 1959 (73 Stat. 263). 

11S. Rep. No. 86–195, at 3 (1959); H. Rep. No. 86– 

403, at 3 (1959). 

12 Id. 

13Former 12 CFR 204.116 (1979). 

14 Id. 

15 Id. 

16See, e.g. FRRS ¶ 2–307.2 (rented vault); Staff 

Opinion of Aug. 9, 1982 (ATMs). 

depository institutions to select their 

own numeric limits on convenient 

transfers and withdrawals from savings 

deposits. 

The Board also believes that selecting 

a monthly numeric limit to apply to all 

types of transfers and withdrawals from 

‘‘savings deposits,’’ including those 

types that are currently unlimited in 

number per month, would not be 

appropriate. The Act provides that a 

‘‘transaction account’’ is one ‘‘on which 

the depositor or account holder is 

permitted to make withdrawals by 

negotiable or transferable instrument, 

payment orders of withdrawal, 

telephone transfers, or other similar 

items for the purpose of making 

payments or transfers to third persons or 

others.’’ 9 As such, the statutory 

definition specifically contemplates the 

kinds of transfers and withdrawals that 

are, or are most likely to be, transfers 

and withdrawals ‘‘for the purpose of 

making payments or transfers to third 

persons or others.’’ In contrast, 

withdrawals made in person or at an 

ATM are generally payments directly to 

the depositor, even if the depositor may 

subsequently provide those same funds 

to a third person or use them for a 

payment. Accordingly, the Board has 

determined that the final rule not 

impose numeric limits on all types of 

transfers and withdrawals that may be 

made from savings deposits, including 

those that are currently unlimited. 

Finally, the Board believes that 

delaying the effective date for the final 

rule eliminating the ‘‘three’’ sublimit 

from the definition of ‘‘savings deposit’’ 

is unnecessary because the final rule is 

permissive. Under the final rule, 

depository institutions may classify 

accounts subject to the ‘‘three’’ sublimit 

as ‘‘savings deposits’’ as long as 

necessary. Accordingly, the Board has 

determined not to delay the final rule’s 

effective date. 

C. Section 204.2(k) ‘‘Vault Cash’’ 

Definition 

(1) Background of Proposed 

Amendment 

From 1917 to 1959, the Act permitted 

member banks to satisfy reserve 

requirements solely with balances in 

their accounts at Federal Reserve Banks. 

In 1959, Congress amended section 19 

of the Act to provide that the Board, 

‘‘under such regulations as it may 

prescribe, may permit member banks to 

count all or part of their currency and 

coin as reserves required under this 

section.’’ 10 The history of the 1959 

legislation recognized that currency and 

coin in a member bank’s vault and a 

balance in a member bank’s account at 

a Federal Reserve Bank were 

‘‘interchangeable’’ as liabilities of the 

Reserve Banks.11 For operational 

reasons, however, ‘‘country banks’’ 

generally found it necessary to hold 

more currency and coin in their vaults 

than did ‘‘reserve city banks’’ or 

‘‘central reserve city banks.’’ 12

In 1970, the Board issued an 

interpretation of Regulation D relating to 

the eligibility of currency or coin held 

principally for numismatic value to 

satisfy member bank reserve 

requirements.13 The Board specified in 

the 1970 interpretation that in order for 

a member bank to count currency or 

coin towards reserve requirements, the 

member bank must have ‘‘the full and 

unrestricted right to use [such currency 

or coin] at any time to meet depositors’ 

claims. * * * ’’ 14 The 1970 

interpretation also specified that a bank 

does not have such a ‘‘full and 

unrestricted right’’ if the bank is 

prevented, legally or practically, * * * 

from using the currency or coin at any 

time to meet customer’s demands.’’ 15

The 1980 amendments to Regulation 

D, which implemented the Monetary 

Control Act of 1980, introduced ‘‘vault 

cash’’ as a defined term. The 1980 

amendments defined ‘‘vault cash’’ to 

mean ‘‘currency and coin owned and 

held by a depository institution that 

may, at any time, be used to satisfy 

depositors’ claims,’’ incorporating into 

the new definition the 1970 

interpretation’s principles of bank 

ownership and availability at any time 

to satisfy depositors’ claims. Subsequent 

Board guidance and staff opinions 

provided additional clarification of 

these requirements, including clarifying 

what vault cash is ‘‘owned and held’’ by 

the depository institution claiming it 

and the circumstances under which 

vault cash is ‘‘immediately available.’’ 

(2) Proposed Amendment and 

Comments 

The Board proposed amending the 

definition of ‘‘vault cash’’ to incorporate 

the substance of prior written staff 

guidance as to when currency and coin 

that the depository institution does not 

hold at its physical location may be 

considered ‘‘vault cash.’’ 16 Specifically, 

the Board proposed dividing the 

definition of ‘‘vault cash’’ into two 

subsections: one that addresses vault 

cash ‘‘held at a physical location of the 

depository institution * * * from which 

the institution’s depositors may make 

cash withdrawals,’’ and the other that 

addresses vault cash ‘‘held at an 

alternate physical location.’’ The 

amendments proposed by the Board 

expanded primarily the second 

proposed subsection to incorporate 

prior guidance. 

(3) Comment Analysis and Final 

Amendment 

The Board received two comments on 

the proposed amendments to the 

definition of ‘‘vault cash.’’ One 

commenter expressed support for the 

proposed amendments, and one 

commenter opposed the proposed 

amendments. The commenter opposing 

the amendments specifically opposed 

certain provisions relating to when vault 

cash at alternate physical locations may 

be considered to be ‘‘immediately 

available,’’ namely, that (1) the 

depository institution claiming the 

currency and coin as ‘‘vault cash’’ must 

receive it by 4 p.m. on the same day if 

requested by 10 a.m., and that (2) the 

depository institution must have a 

written contract in place for the delivery 

of the currency and coin claimed as 

‘‘vault cash.’’ This commenter stated 

that 4 p.m. should not be selected as a 

cut-off hour because some depository 

institutions conduct business after 4 

p.m., and because customers can 

usually obtain cash through an ATM or 

at POS (point of sale) terminals after 4 

p.m. The commenter proposed an 

amendment that would require the 

currency and coin to be received on the 

same calendar day that it is requested. 

The commenter also stated that 

requiring written contractual 

arrangements for delivery of currency 

and coin claimed as ‘‘vault cash’’ 

imposes unnecessary costs on 

depository institutions because 

contractual agreements ‘‘will likely 

never be used’’ and because updating 

the agreements as offices are opened 

and closed would be expensive. The 

commenter proposed ‘‘leav[ing] the 

particular details of the arrangement up 

to the institution.’’ 

The Board believes that the selection 

of 4 p.m. as a cut-off hour for 

characterizing currency and coin as 

‘‘vault cash’’ under Regulation D is 

appropriate. The Board believes that the 

rationale provided for an alternate 

‘‘same calendar day’’ rule would not 

justify such a significant departure from 

the consistent position taken in 

numerous Board staff opinions over the 

years on the issue. Furthermore, such a 


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17See final rule on payment of interest on 

balances and excess balance accounts in today’s 

Federal Register. 

rule would remove any nexus between 

the characterization of currency and 

coin as ‘‘vault cash’’ and having such 

currency and coin ‘‘immediately 

available,’’ because any such currency 

and coin received after a closing hour 

(no matter how late) would not be 

available to a customer until the next 

business day. While customers may be 

able, as a practical matter, to obtain cash 

from ATMs and from POS terminals at 

various hours, not all such cash is 

sought to be characterized as ‘‘vault 

cash’’ for Regulation D purposes: the 4 

p.m. requirement would apply only to 

currency and coin that an institution 

counts towards satisfying its reserve 

requirement. 

The Board also believes that the 

rationale provided for eliminating the 

requirement for written contractual 

arrangements to be in place for ‘‘vault 

cash’’ does not justify changing the 

long-standing position on this issue. As 

with the 4 p.m. cut-off, the requirement 

for written contractual arrangements in 

this context is the position the Board 

has consistently taken over the years in 

staff opinions. Moreover, the Board 

believes it would be difficult, if not 

impossible, for a depository institution 

to establish what currency and coin is 

physically subject to the retrieval plan 

without written delivery plan to that 

effect. Likewise, the Board believes that 

it would be difficult, if not impossible, 

for the depository institution to 

establish its ‘‘full and unrestricted 

right’’ to such currency and coin if it 

were subject only to an oral 

understanding for retrieval within the 

requisite time frame. Accordingly, the 

Board is adopting the ‘‘vault cash’’ 

amendments as proposed. 

D. Section 204.2(l) Definition of ‘‘Passthrough Account’’ 

The Board proposed to amend the 

definition of ‘‘pass-through account’’ to 

eliminate the language restricting passthrough account arrangements to nonmember banks in order to conform the 

definition to section 19(c)(1)(B) of the 

Act. The Board also proposed moving 

the provisions relating to pass-through 

accounts to paragraph (d) under 

proposed § 204.5, ‘‘Maintenance of 

Required Reserves.’’ The Board received 

five comments in support of the 

proposed amendments, and is adopting 

them as proposed. 

E. Section 204.2(w) Definition of 

‘‘Clearing Balance Allowance’’ 

The Board proposed (1) adding a new 

definition of ‘‘clearing balance 

allowance’’ to Regulation D to replace 

the undefined term ‘‘required chargefree band’’ used in provisions relating to 

carryovers of excess reserves and 

deficiencies in reserves and (2) moving 

the existing carryover provisions to a 

new paragraph (e) under proposed 

§ 204.5, ‘‘Maintenance of Required 

Reserves.’’ The Board received no 

comments on these amendments. The 

Board is setting forth the definition of 

‘‘clearing balance allowance’’ in new 

§ 204.2(w), and moving the carryover 

provisions to § 204.5, as proposed. 

F. Section 204.2(x) Definition of 

‘‘Contractual Clearing Balance’’ 

The Board proposed adding a new 

definition of ‘‘contractual clearing 

balance’’ to Regulation D to replace the 

undefined term ‘‘required clearing 

balance.’’ The Board proposed to define 

‘‘contractual clearing balance’’ as ‘‘the 

amount that a depository institution 

agrees or is required to maintain in its 

account at a Federal Reserve Bank in 

addition to balances the depository 

institution may hold to satisfy its 

required reserve balance.’’ Further, the 

definition specified that ‘‘[a] depository 

institution that has a required reserve 

balance of zero may still hold a 

contractual clearing balance.’’ The 

Board received no comments on the 

proposed amendment. 

The Board is revising the proposed 

definition of ‘‘contractual clearing 

balance’’ to provide consistency of 

usage of terms throughout Regulation D. 

When the Board proposed the new 

definition of ‘‘contractual clearing 

balance,’’ ‘‘required reserve balance’’ 

was an undefined term. New 

§ 204.2(bb), however, defines ‘‘required 

reserve balance’’ as ‘‘the average balance 

held in an account at a Federal Reserve 

Bank by or on behalf of an institution 

over a reserve maintenance period to 

satisfy the reserve requirements of this 

part.’’ 17 The proposed definition of 

‘‘contractual clearing balance’’ 

contemplated the contractual clearing 

balance to be in addition to the amount 

an institution is required to maintain as 

a balance at a Reserve Bank in order to 

satisfy its reserve requirements, and not 

in addition to those balances actually 

held to satisfy such requirements. 

Accordingly, the final rule defines 

‘‘contractual clearing balance’’ as ‘‘an 

amount that an institution agrees or is 

required to maintain in its account at a 

Federal Reserve Bank in addition to any 

reserve balance requirement.’’ For 

similar reasons, the Board is amending 

the last sentence in the definition of 

‘‘contractual clearing balance’’ to read: 

‘‘An institution that has a reserve 

balance requirement of zero may still 

have a contractual clearing balance.’’ 

G. Section 204.3 Reporting and Location 

(1) Proposed Amendment 

The Board proposed re-organizing the 

regulatory provisions governing the 

calculation of required reserves, the 

maintenance of required reserves, and 

the submission of reports of deposits 

(from which required reserves are 

calculated) into three separate 

subsections. The proposed amendments 

were not intended to make substantive 

changes to these provisions, but rather 

to reorganize them for greater ease of 

reference and to make minor editorial 

changes for clarity. 

The Board proposed a new § 204.3(a), 

consisting of the text of the first 

sentence of current § 204.3(a)(2)(i) with 

proposed amendments clarifying (1) the 

authority of the Board or a Federal 

Reserve Bank to require reports of 

deposits or any other form or statement 

from a depository institution relating to 

reserve requirements and (2) where 

reports of deposits are to be submitted 

in light of the account location 

provisions of the regulation. 

The Board proposed to relocate the 

text of the second sentence of current 

§ 204.3(a)(2)(i) (stipulating reporting 

requirements for a foreign bank’s U.S. 

branches and agencies and for an Edge 

or Agreement corporation’s offices 

operating within the same State and the 

same Federal Reserve District) to new 

§ 204.3(b). The Board proposed to 

relocate the text of the third sentence of 

current § 204.3(a)(1) (obligations of 

majority-owned U.S. subsidiaries of a 

depository institution) to new § 204.3(c). 

The Board proposed to relocate the 

text, with one technical amendment, of 

current § 204.3(a)(3) (governing 

assignment of low reserve tranche and 

reserve requirement exemption) to new 

§ 204.3(d). The Board proposed 

amending the text of current 

§ 204.3(a)(3) (new § 204.3(d)) to conform 

the section number reference to reserve 

requirement ratios (§ 204.9) to that 

section’s new section number 

(§ 204.4(f)). 

The Board did not propose any 

changes to current § 204.3(e), which 

addresses computation of transaction 

accounts for deposit reporting purposes. 

The Board proposed to relocate current 

§ 204.3(a)(2)(iii) (correspondent not 

responsible for guaranteeing the 

accuracy of reports submitted by 

respondents) to new § 204.3(f). 

Finally, the Board proposed to 

relocate the text of current § 204.3(b)(2) 

to new § 204.3(g) with two amendments. 

One amendment would conform 


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25634 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

internal references to other proposed 

amendments. The other amendment 

would provide that a depository 

institution is considered to be located at 

the location specified in the institution’s 

articles of incorporation or as specified 

by the institution’s primary regulator. 

The Board proposed the second 

amendment in light of the fact that an 

institution may move its head office or 

primary location from that specified in 

its charter or organizing certificate, but 

that the charter or organizing certificate 

may not reflect that move. In such cases, 

the move instead may be reflected in the 

institution’s revised articles of 

incorporation or otherwise as 

recognized by the institution’s primary 

regulator. 

(2) Comments Received 

The Board received one comment 

regarding proposed new § 204.3(a), 

asking that the Board ‘‘be judicious in 

the information requested’’ from 

reporting entities because ‘‘the 

collective burden of myriad reports and 

other information collections imposed 

by the bank regulators is enormous.’’ 

This commenter stated that ‘‘[w]hile the 

proposed additional text in section 

204.3(a) is not objectionable on its face, 

it nevertheless creates another 

opportunity for the Federal Reserve 

System to impose more regulatory 

burden in a way that evokes the image 

of ‘death by a thousand cuts.’ ’’ 

(3) Comment Analysis and Final Rule 

The Board is keenly aware of the 

burden imposed by regulatory reporting 

on depository institutions. The 

proposed amendment to section 204.3(a) 

was intended solely to express existing 

authority. The Board did not propose 

this amendment as an attempt to 

increase its authority to require 

regulatory reports, or to increase the 

number or extent of regulatory reports 

currently required. As required by other 

law, the Board re-evaluates its reporting 

requirements periodically in order to 

minimize or eliminate duplicative or 

otherwise burdensome reports. As also 

required by other law, the Board 

carefully evaluates any proposed new 

reporting requirements to avoid placing 

unnecessary additional costs on 

reporting entities. With these principles 

in mind, the Board is adopting 

§ 204.3(a) as proposed. 

The Board received no comments on 

proposed §§ 204.3(b)–(g) and is adopting 

those amendments as proposed. 

H. Section 204.4 Computation of 

Required Reserves 

The Board proposed moving the 

provisions relating to computation of 

required reserves to a new separate 

paragraph, proposed § 204.4, 

‘‘Computation of Required Reserves.’’ 

For some provisions, the Board 

proposed minor editorial amendments 

for clarity; for other provisions, the 

Board proposed no changes (apart from 

re-designation as § 204.4). The Board 

received one comment on these 

proposed amendments, suggesting that 

the words ‘‘or agreement corporation’’ 

should be added to the end of proposed 

§ 204.4(b) (providing that Edge and 

agreement corporations may not deduct 

balances due from another U.S. office of 

‘‘the same Edge or agreement 

corporation’’). The Board is adopting a 

final § 204.4(b) that incorporates this 

comment as the existing omission of ‘‘or 

Agreement corporation’’ was 

unintentional. The Board is also making 

an editorial change to § 204.4(a) to 

provide consistent usage of terms 

throughout Regulation D. The Board 

received no other comments on these 

proposed amendments and, apart from 

adopting the one suggestion proposed 

by the comment and the editorial 

change, is adopting the amendments as 

proposed. 

I. Section 204.5 Maintenance of 

Required Reserves 

The Board proposed moving the 

existing provisions regarding 

maintenance of required reserves, 

including the provisions on 

maintenance of required reserves 

pursuant to pass-through agreements, to 

a new § 204.5, ‘‘Maintenance of 

Required Reserves.’’ Specifically, the 

proposed amendments deleted 

references to ‘‘non-member institutions’’ 

in discussing pass-through 

arrangements, clarified that depository 

institutions that do not hold required 

reserve balances may serve as passthrough correspondents, conformed 

numeric references to other proposed 

amendments, and made other minor 

editorial amendments for clarity and to 

conform language to other proposed 

amendments and current usage. No 

substantive changes were intended. The 

Board received no comments on these 

proposed amendments and is adopting 

them as proposed. 

J. Section 204.6 Charges for Reserve 

Deficiencies 

(1) Proposed Amendment 

The Board proposed moving the 

existing provisions regarding charges for 

reserve deficiencies to a new § 204.6, 

‘‘Charges for Reserve Deficiencies.’’ The 

Board also proposed deleting provisions 

describing guidelines for waivers by 

Reserve Banks of small or infrequent 

charges. The Board proposed this 

deletion because the provision 

described only in part the extent of the 

discretion of the Reserve Banks with 

respect to waivers of deficiency charges. 

The deletion was intended to avoid the 

implication that Reserve Banks must 

waive charges in the circumstances 

described. 

(2) Comments Received 

The Board received two comments on 

these proposed amendments, both in 

opposition to the proposal to delete the 

provisions related to waivers. One 

commenter stated that it is 

‘‘inappropriate to eliminate this policy 

direction to Reserve Banks without 

acknowledging that its elimination 

represents a substantive change’’ from 

existing policy, which the commenter 

described as ‘‘sound policy [that] should 

not be eliminated nor changed.’’ The 

other commenter stated that the existing 

provision ‘‘simply incorporates the 

Reserve Banks’’ guidelines [that outline 

when waivers may be appropriate] and 

notes two instances where waivers are 

available.’’ This commenter also 

expressed concern that the proposal to 

delete the waiver provision ‘‘impli[es] 

that waivers may not be available in the 

circumstances identified in the current 

rule,’’ that is, ‘‘when the charge would 

be small or when the deficiency falls 

below a predetermined threshold.’’ The 

commenter stated that these two 

circumstances ‘‘seem appropriate 

situations for the Board to exercise its 

discretion not to impose a charge’’ and 

that the Board should ‘‘share its 

reasoning’’ if the Board intends for 

charges to be automatically imposed in 

those cases. The commenter urged the 

Board ‘‘to retain the current examples of 

when charges will be waived and 

simply note that they are illustrative.’’ 

(3) Comment Analysis and Final Rule 

The intent of the Board’s proposal 

was to eliminate references to obsolete 

guidelines and to avoid the implication 

that Reserve Banks must waive 

deficiency charges in certain 

circumstances. The Board did not 

intend the proposed amendments to be 

a substantive policy change, as the 

Reserve Banks retain the same 

discretion with respect to waivers of 

deficiency charges under the proposed 

amendment as under former section 

204.7(a)(2). Accordingly, the Board has 

decided to delete the reference to the 

obsolete guidelines, as proposed, and to 

add language to the provision clarifying 

the discretion of the Reserve Banks with 

respect to waiver of deficiency charges. 

The Board is retaining the current 

examples of when a Reserve Bank may 


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18See 73 FR 59482, 59484–85 (Oct. 9, 2008). 

19See final rule on payment of interest on 

balances elsewhere in today’s Federal Register. 

waive charges and clarifying that they 

are illustrative. As proposed, the 

language relating to charges for reserve 

deficiencies is moved from § 204.7 to 

§ 204.6. 

K. Section 204.7 Transitional 

Adjustments in Mergers 

The Board proposed re-designating 

the current provisions regarding 

transitional adjustments in mergers to a 

new section, § 204.7. No other changes 

were proposed. The Board received no 

comments on these proposed 

amendments. Since the Board proposed 

these amendments in February 2008, the 

Board has made adjustments to its 

clearing balance policy that 

discontinued practices related to reserve 

requirements that were no longer 

necessary in light of the amendments to 

Regulation D implementing the 

payments of interest on balances at 

Reserve Banks.18 At that time, the Board 

accordingly removed the provision in 

Regulation D regarding transitional 

adjustments in mergers. The Board has 

decided to retain the changes to its 

clearing balance policy and has 

confirmed that removal as part of the 

final rule on payment of interest on 

balances at Reserve Banks.19

L. Section 204.8 International Banking 

Facilities 

The Board did not propose any 

changes to § 204.8. 

M. Section 204.9 Emergency Reserve 

Requirement 

The Board proposed re-designating 

the current provisions related to 

emergency reserve requirements to a 

new section, § 204.9. No other changes 

to the section were proposed. The Board 

received no comments on these 

proposed amendments and is adopting 

them as proposed. 

N. Section 204.7 Supplemental Reserve 

Requirement 

The Board proposed re-designating 

the current provisions to a new section, 

§ 204.10. No other changes to the 

section were proposed. The Board 

received no comments on the proposed 

amendments. Since the proposal, 

§ 204.10 has been designated ‘‘Payment 

of interest on balances.’’ The Board, 

however, has removed the provisions 

relating to transitional adjustments in 

mergers that were proposed to be moved 

to § 204.7. In light of the designation of 

§ 204.10 as ‘‘Payment of interest on 

balances,’’ the Board is moving the 

provisions previously set forth in 

section 204.9 to new § 204.7. 

O. Section 209.2(c)(1) of Regulation I 

Location of Bank—General Rule 

The Board proposed amending 

section 209.2(c)(1) to conform that 

section to the proposed § 204.3(g) of 

Regulation D, which the Board has 

decided to adopt, discussed supra. The 

Board received no comments on these 

proposed amendments and is adopting 

them as proposed. 

IV. Solicitation of Comments Regarding 

Use of ‘‘Plain Language’’ 

Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to 

use ‘‘plain language’’ in all final rules. 

12 U.S.C. 1408. The Board has sought to 

present this amendment in a simple and 

straightforward manner. The Board 

received no comments on whether the 

proposed rule was clearly stated and 

effectively organized or on how the 

Board might make the proposed text 

easier to understand. 

V. Final Regulatory Flexibility Analysis 

An initial regulatory flexibility 

analysis (IRFA) was included in the 

Board’s proposed rule in accordance 

with the Regulatory Flexibility Act 

(RFA) (5 U.S.C. 601 et seq.). In the IRFA, 

the Board specifically solicited 

comment on whether the proposed rule 

would have a significant economic 

impact on a substantial number of small 

entities. The Board received no 

comments in response to its request. 

Section 4 of the RFA requires an agency 

either to provide a final regulatory 

flexibility analysis with a final rule or 

to certify that the final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Banks and other depository institutions 

are considered ‘‘small’’ if they have less 

than $165 million in assets. For the 

reasons stated below, the Board is 

certifying that the final rule will not 

have a significant impact on a 

substantial number of small entities. 

1. Statement of the need for and the 

objectives of the final rule. The Board is 

publishing final amendments to 

Regulations D and I to conform the 

regulations to provisions of the 

Financial Services Regulatory Relief Act 

of 2006, to modernize the regulations in 

light of technological developments, to 

reduce regulatory burden, and to 

simplify regulatory compliance. Section 

19 of the Act was enacted to impose 

reserve requirements on certain deposits 

and other liabilities of depository 

institutions for monetary policy 

purposes. Section 19 also authorizes the 

Board to promulgate such regulations as 

it may deem necessary to effectuate the 

purposes of the section. The Board 

believes that the final rule is within 

Congress’ broad grant of authority to the 

Board to adopt provisions that carry out 

the purposes of section 19 of the Act. 

2. Summary of significant issues 

raised by the public comments in 

response to the initial regulatory 

flexibility analysis. The Board received 

no comments on its initial regulatory 

flexibility analysis or on whether the 

proposed rule would have a significant 

economic impact on a substantial 

number of small entities. 

3. Small entities affected by the final 

rule. The final rule would affect all 

depository institutions currently subject 

to reserve requirements. The Board 

estimates that approximately 8,195 

depository institutions are subject to 

reserve requirements, of which 

approximately 3,800 could be 

considered ‘‘small’’ for purposes of RFA 

(entities with assets of $165 million or 

less). 

4. Description of projected reporting, 

recordkeeping and other compliance 

requirements of the final rule. The final 

rule does not alter any of the reporting 

or recordkeeping provisions that already 

apply to depository institutions. 

5. Significant alternatives to the 

revisions in the final rule. The Board 

received no comments suggesting 

significant alternatives to the proposed 

rule that would minimize the impact of 

the proposed rule on small entities. 

There are no significant alternatives to 

the revisions in the final rule that would 

minimize the impact on small entities. 

The final rule does not impose any 

additional burden on depository 

institutions, including small entities. 

Moreover, the final rule relieves 

depository institutions, including small 

entities, of any burdens associated with 

the ‘‘three’’ sublimit on certain 

convenient transfers from savings 

deposits, as well as any burdens 

associated with restricting pass-through 

account arrangements to non-member 

banks. Thus, the Board certifies that the 

final rule will not have a significant 

economic impact on small entities. 

VI. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3506; 

5 CFR Part 1320 Appendix A.1), the 

Board reviewed the final rule under the 

authority delegated to the Board by the 

Office of Management and Budget. No 

collections of information pursuant to 

the Paperwork Reduction Act are 

contained in the final rule. 


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25636 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

4 In order to ensure that no more than the 

permitted number of withdrawals or transfers are 

made, for an account to come within the definition 

of ‘‘savings deposit,’’ a depository institution must 

either: 

(a) Prevent withdrawals or transfers of funds from 

this account that are in excess of the limits 

established by paragraph (d)(2) of this section, or 

(b) Adopt procedures to monitor those transfers 

on an ex post basis and contact customers who 

exceed the established limits on more than 

occasional basis. For customers who continue to 

violate those limits after they have been contacted 

by the depository institution, the depository 

institution must either close the account and place 

the funds in another account that the depositor is 

eligible to maintain or take away the transfer and 

draft capacities of the account. An account that 

authorizes withdrawals or transfers in excess of the 

permitted number is a transaction account 

regardless of whether the authorized number of 

transactions is actually made. For accounts 

described in paragraph (d)(2) of this section, the 

institution at its option may use, on a consistent 

basis, either the date on the check, draft, or similar 

item, or the date the item is paid in applying the 

limits imposed by that section. 

List of Subjects in 12 CFR Parts 204 and 

209 

Banks, Banking, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Board is amending 12 

CFR parts 204 and 209 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. § 204.2 is amended by revising 

paragraphs (d)(2), (k) and (l), and adding 

new paragraphs (w) and (x) to read as 

follows: 

§ 204.2 Definitions. 

* * * * * 

(d) * * * 

(2) The term ‘‘savings deposit’’ also 

means: A deposit or account, such as an 

account commonly known as a 

passbook savings account, a statement 

savings account, or as a money market 

deposit account (MMDA), that 

otherwise meets the requirements of 

§ 204.2(d)(1) and from which, under the 

terms of the deposit contract or by 

practice of the depository institution, 

the depositor is permitted or authorized 

to make no more than six transfers and 

withdrawals, or a combination of such 

transfers and withdrawals, per calendar 

month or statement cycle (or similar 

period) of at least four weeks, to another 

account (including a transaction 

account) of the depositor at the same 

institution or to a third party by means 

of a preauthorized or automatic transfer, 

or telephonic (including data 

transmission) agreement, order or 

instruction, or by check, draft, debit 

card, or similar order made by the 

depositor and payable to third parties. A 

preauthorized transfer includes any 

arrangement by the depository 

institution to pay a third party from the 

account of a depositor upon written or 

oral instruction (including an order 

received through an automated clearing 

house (ACH)) or any arrangement by a 

depository institution to pay a third 

party from the account of the depositor 

at a predetermined time or on a fixed 

schedule. Such an account is not a 

transaction account by virtue of an 

arrangement that permits transfers for 

the purpose of repaying loans and 

associated expenses at the same 

depository institution (as originator or 

servicer) or that permits transfers of 

funds from this account to another 

account of the same depositor at the 

same institution or permits withdrawals 

(payments directly to the depositor) 

from the account when such transfers or 

withdrawals are made by mail, 

messenger, automated teller machine, or 

in person or when such withdrawals are 

made by telephone (via check mailed to 

the depositor) regardless of the number 

of such transfers or withdrawals.4

* * * * * 

(k)(1) Vault cash means United States 

currency and coin owned and booked as 

an asset by a depository institution that 

may, at any time, be used to satisfy 

claims of that depository institution’s 

depositors and that meets the 

requirements of paragraph (k)(2)(i) or 

(k)(2)(ii) of this section. 

(2) Vault cash must be either: 

(i) Held at a physical location of the 

depository institution (including the 

depository institution’s proprietary 

ATMs) from which the institution’s 

depositors may make cash withdrawals; 

or 

(ii) Held at an alternate physical 

location if— 

(A) The depository institution 

claiming the currency and coin as vault 

cash at all times retains full rights of 

ownership in and to the currency and 

coin held at the alternate physical 

location; 

(B) The depository institution 

claiming the currency and coin as vault 

cash at all times books the currency and 

coin held at the alternate physical 

location as an asset of the depository 

institution; 

(C) No other depository institution 

claims the currency and coin held at the 

alternate physical location as vault cash 

in satisfaction of that other depository 

institution’s reserve requirements; 

(D) The currency and coin held at the 

alternate physical location is reasonably 

nearby a location of the depository 

institution claiming the currency and 

coin as vault cash at which its 

depositors may make cash withdrawals 

(an alternate physical location is 

considered ‘‘reasonably nearby’’ if the 

depository institution that claims the 

currency and coin as vault cash can 

recall the currency and coin from the 

alternate physical location by 10 a.m. 

and, relying solely on ground 

transportation, receive the currency and 

coin not later than 4 p.m. on the same 

calendar day at a location of the 

depository institution at which its 

depositors may make cash withdrawals); 

and 

(E) The depository institution 

claiming the currency and coin as vault 

cash has in place a written cash delivery 

plan and written contractual 

arrangements necessary to implement 

that plan that demonstrate that the 

currency and coin can be recalled and 

received in accordance with the 

requirements of paragraph (k)(2)(ii)(D) 

of this section at any time. The 

depository institution shall provide 

copies of the written cash delivery plan 

and written contractual arrangements to 

the Federal Reserve Bank that holds its 

account or to the Board upon request. 

(3) ‘‘Vault cash’’ includes United 

States currency and coin in transit to a 

Federal Reserve Bank or a 

correspondent depository institution for 

which the reporting depository 

institution has not yet received credit, 

and United States currency and coin in 

transit from a Federal Reserve Bank or 

a correspondent depository institution 

when the reporting depository 

institution’s account at the Federal 

Reserve or correspondent bank has been 

charged for such shipment. 

(4) Silver and gold coin and other 

currency and coin whose numismatic or 

bullion value is substantially in excess 

of face value is not vault cash for 

purposes of this part. 

* * * * * 

(l) Pass-through account means a 

balance maintained by a depository 

institution with a correspondent 

institution under § 204.5(d). 

* * * * * 

(w) Clearing balance allowance means 

the greater of $25,000 or two percent of 

an institution’s contractual clearing 

balance. 

(x) Contractual clearing balance 

means an amount that an institution 

agrees or is required to maintain in its 

account at a Federal Reserve Bank in 

addition to any reserve balance 

requirement. An institution that has a 

reserve balance requirement of zero may 

still have a contractual clearing balance. 


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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25637 

■ 3. Amend § 204.3 by revising the 

heading, removing paragraphs (h) and 

(i), and revising paragraphs (a) through 

(d), (f), and (g) to read as follows: 

§ 204.3 Reporting and location. 

(a) Every depository institution, U.S. 

branch or agency of a foreign bank, and 

Edge or Agreement corporation shall file 

a report of deposits (or any other form 

or statement that may be required by the 

Board or by a Federal Reserve Bank) 

with the Federal Reserve Bank in the 

Federal Reserve District in which it is 

located, regardless of the manner in 

which it chooses to maintain required 

reserve balances. 

(b) A foreign bank’s U.S. branches and 

agencies and an Edge or Agreement 

corporation’s offices operating within 

the same State and the same Federal 

Reserve District shall prepare and file a 

report of deposits on an aggregated 

basis. 

(c) For purposes of this part, the 

obligations of a majority-owned (50 

percent or more) U.S. subsidiary (except 

an Edge or Agreement corporation) of a 

depository institution shall be regarded 

as obligations of the parent depository 

institution. 

(d) A depository institution, a foreign 

bank, or an Edge or Agreement 

corporation shall, if possible, assign the 

low reserve tranche and reserve 

requirement exemption prescribed in 

§ 204.4(f) to only one office or to a group 

of offices filing a single aggregated 

report of deposits. The amount of the 

reserve requirement exemption 

allocated to an office or group of offices 

may not exceed the amount of the low 

reserve tranche allocated to such office 

or offices. If the low reserve tranche or 

reserve requirement exemption cannot 

be fully utilized by a single office or by 

a group of offices filing a single report 

of deposits, the unused portion of the 

tranche or exemption may be assigned 

to other offices or groups of offices of 

the same institution until the amount of 

the tranche (or net transaction accounts) 

or exemption (or reservable liabilities) is 

exhausted. The tranche or exemption 

may be reallocated each year concurrent 

with implementation of the indexed 

tranche and exemption, or, if necessary 

during the course of the year to avoid 

underutilization of the tranche or 

exemption, at the beginning of a reserve 

computation period. 

* * * * * 

(f) The Board and the Federal Reserve 

Banks will not hold a pass-through 

correspondent responsible for 

guaranteeing the accuracy of the reports 

of deposits submitted by its 

respondents. 

(g)(1) For purposes of this section, a 

depository institution, a U.S. branch or 

agency of a foreign bank, or an Edge or 

Agreement corporation is located in the 

Federal Reserve District that contains 

the location specified in the institution’s 

charter, organizing certificate, license, 

or articles of incorporation, or as 

specified by the institution’s primary 

regulator, or if no such location is 

specified, the location of its head office, 

unless otherwise determined by the 

Board under paragraph (g)(2) of this 

section. 

(2) If the location specified in 

paragraph (g)(1) of this section, in the 

Board’s judgment, is ambiguous, would 

impede the ability of the Board or the 

Federal Reserve Banks to perform their 

functions under the Federal Reserve 

Act, or would impede the ability of the 

institution to operate efficiently, the 

Board will determine the Federal 

Reserve District in which the institution 

is located, after consultation with the 

institution and the relevant Federal 

Reserve Banks. The relevant Federal 

Reserve Banks are the Federal Reserve 

Bank whose District contains the 

location specified in paragraph (g)(1) of 

this section and the Federal Reserve 

Bank in whose District the institution is 

proposed to be located. In making this 

determination, the Board will consider 

any applicable laws, the business needs 

of the institution, the location of the 

institution’s head office, the locations 

where the institution performs its 

business, and the locations that would 

allow the institution, the Board, and the 

Federal Reserve Banks to perform their 

functions efficiently and effectively. 

■ 4. A new § 204.4 is added to read as 

follows: 

§ 204.4 Computation of required reserves. 

(a) In determining the reserve 

requirement under this part, the amount 

of cash items in process of collection 

and balances subject to immediate 

withdrawal due from other depository 

institutions located in the United States 

(including such amounts due from 

United States branches and agencies of 

foreign banks and Edge and Agreement 

corporations) may be deducted from the 

amount of gross transaction accounts. 

The amount that may be deducted may 

not exceed the amount of gross 

transaction accounts. 

(b) United States branches and 

agencies of a foreign bank may not 

deduct balances due from another 

United States branch or agency of the 

same foreign bank, and United States 

offices of an Edge or Agreement 

Corporation may not deduct balances 

due from another United States office of 

the same Edge or Agreement 

Corporation. 

(c) Balances ‘‘due from other 

depository institutions’’ do not include 

balances due from Federal Reserve 

Banks, pass-through accounts, or 

balances (payable in dollars or 

otherwise) due from banking offices 

located outside the United States. An 

institution exercising fiduciary powers 

may not include in balances ‘‘due from 

other depository institutions’’ amounts 

of trust funds deposited with other 

banks and due to it as a trustee or other 

fiduciary. 

(d) For institutions that file a report of 

deposits weekly, required reserves are 

computed on the basis of the 

institution’s daily average balances of 

deposits and Eurocurrency liabilities 

during a 14-day computation period 

ending every second Monday. 

(e) For institutions that file a report of 

deposits quarterly, required reserves are 

computed on the basis of the 

institution’s daily average balances of 

deposits and Eurocurrency liabilities 

during the 7-day computation period 

that begins on the third Tuesday of 

March, June, September, and December. 

(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 below to net 

transaction accounts, nonpersonal time 

deposits, and Eurocurrency liabilities of 

the institution during the computation 

period. 

Reservable liability Reserve requirement ratio 

NET TRANSACTION ACCOUNTS: 

$0 to reserve requirement exemption amount ($10.3 million) ............................................. 0 percent of amount. 

Over reserve requirement exemption amount ($10.3 million) and up to low reserve 

tranche ($44.4 million).

3 percent of amount. 

Over low reserve tranche ($44.4 million) ............................................................................. $1,023,000 plus 10 percent of amount over $44.4 

million. 

Nonpersonal time deposits .......................................................................................................... 0 percent. 


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25638 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

Reservable liability Reserve requirement ratio 

Eurocurrency liabilities ................................................................................................................. 0 percent. 

§ 204.9 [Removed] 

■ 5. Section 204.9 is removed. 

§ 204.5 [Redesignated as § 204.9] 

■ 6. Section 204.5 is redesignated as 

§ 204.9. 

■ 7. New § 204.5 is added to read as 

follows: 

§ 204.5 Maintenance of required reserves. 

(a)(1) A depository institution, a U.S. 

branch or agency of a foreign bank, and 

an Edge or Agreement corporation shall 

maintain required reserves in the form 

of vault cash and, if vault cash does not 

fully satisfy the institution’s required 

reserves, in the form of a balance 

maintained 

(i) Directly with the Federal Reserve 

Bank in the Federal Reserve District in 

which the institution is located, or 

(ii) With a pass-through 

correspondent in accordance with 

§ 204.5(d). 

(2) Each individual institution subject 

to this part is responsible for satisfying 

its reserve balance requirement, if any, 

either directly with a Federal Reserve 

Bank or through a pass-through 

correspondent. 

(b)(1) For institutions that file a report 

of deposits weekly, the balances that are 

required to be maintained with the 

Federal Reserve shall be maintained 

during a 14-day maintenance period 

that begins on the third Thursday 

following the end of a given 

computation period. 

(2) For institutions that file a report of 

deposits quarterly, the balances that are 

required to be maintained with the 

Federal Reserve shall be maintained 

during each of the 7-day maintenance 

periods during the interval that begins 

on the fourth Thursday following the 

end of the institution’s computation 

period and ends on the fourth 

Wednesday after the close of the 

institution’s next computation period. 

(c) Cash items forwarded to a Federal 

Reserve Bank for collection and credit 

shall not be counted as part of the 

reserve balance to be carried with the 

Federal Reserve until the expiration of 

the time specified in the appropriate 

time schedule established under 

Regulation J, ‘‘Collection of Checks and 

Other Items by Federal Reserve Banks 

and Funds Transfers Through Fedwire’’ 

(12 CFR Part 210). If a depository 

institution draws against items before 

that time, the charge will be made to its 

account if the balance is sufficient to 

pay it; any resulting impairment of 

reserve balances will be subject to the 

penalties provided by law and to the 

reserve-deficiency charges provided by 

this part. However, the Federal Reserve 

Bank may, at its discretion, refuse to 

permit the withdrawal or other use of 

credit given in an account for any time 

for which the Federal Reserve Bank has 

not received payment in actually and 

finally collected funds. 

(d)(1) A depository institution, a U.S. 

branch or agency of a foreign bank, or 

an Edge or Agreement corporation 

required to maintain reserve balances 

(‘‘respondent’’) may select only one 

pass-through correspondent institution 

to pass through its required reserve 

balances, unless otherwise permitted by 

the Federal Reserve Bank in whose 

District the respondent is located. 

Eligible pass-through correspondent 

institutions are Federal Home Loan 

Banks, the National Credit Union 

Administration Central Liquidity 

Facility, depository institutions, U.S. 

branches or agencies of foreign banks, 

and Edge and Agreement corporations 

that maintain required reserve balances, 

which may be zero, at a Federal Reserve 

Bank. In addition, the Board reserves 

the right to permit other institutions, on 

a case-by-case basis, to serve as passthrough correspondents. The 

correspondent chosen must 

subsequently pass through the required 

reserve balances of its respondents 

directly to a Federal Reserve Bank. The 

correspondent placing funds with a 

Federal Reserve Bank on behalf of 

respondents will be responsible for 

account maintenance as described in 

paragraph (d)(4) of this section. 

(2) Respondents or correspondents 

may institute, terminate, or change passthrough agreements for the maintenance 

of required reserve balances by 

providing all documentation required 

for the establishment of the new 

agreement or termination of the existing 

agreement to the Federal Reserve Banks 

involved within the time period 

provided for such a change by those 

Reserve Banks. 

(3) A correspondent that passes 

through required reserve balances of 

respondents shall maintain such 

balances, along with the 

correspondent’s own required reserve 

balances (if any), in a single 

commingled account at the Federal 

Reserve Bank in whose District the 

correspondent is located. The balances 

held by the correspondent in an account 

at a Reserve Bank are the property of the 

correspondent and represent a liability 

of the Reserve Bank solely to the 

correspondent, regardless of whether 

the funds represent the reserve balances 

of another institution that have been 

passed through the correspondent. 

(4)(i) A pass-through correspondent 

shall be responsible for assuring the 

maintenance of the appropriate 

aggregate level of its respondents’ 

required reserve balances. A Federal 

Reserve Bank will compare the total 

reserve balance required to be 

maintained with the total actual reserve 

balance held in such account for 

purposes of determining requiredreserve deficiencies, imposing or 

waiving charges for deficiencies in 

required reserves, and for other reserve 

maintenance purposes. A charge for a 

deficiency in the aggregate level of the 

required reserve balance will be 

imposed by the Reserve Bank on the 

correspondent maintaining the account. 

(ii) Each correspondent is required to 

maintain detailed records for each of its 

respondents in a manner that permits 

Reserve Banks to determine whether the 

respondent has provided a sufficient 

required reserve balance to the 

correspondent. A correspondent passing 

through a respondent’s required reserve 

balance shall maintain records and 

make such reports as the Board or 

Reserve Bank requires in order to ensure 

the correspondent’s compliance with its 

responsibilities for the maintenance of a 

respondent’s reserve balance. Such 

records shall be available to the Reserve 

Banks as required. 

(iii) The Federal Reserve Bank may 

terminate any pass-through agreement 

under which the correspondent is 

deficient in its recordkeeping or other 

responsibilities. 

(iv) Interest paid on supplemental 

reserves (if such reserves are required 

under § 204.7) held by a respondent will 

be credited to the account maintained 

by the correspondent. 

(e) Any excess or deficiency in an 

institution’s required reserve balance 

shall be carried over and applied against 

the balance maintained in the next 

maintenance period as specified in this 

paragraph. The amount of any such 

excess or deficiency that is carried over 

shall not exceed the greater of: 

(1) The amount obtained by 

multiplying 0.04 times the sum of 

depository institution’s required 


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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25639 

reserves and the depository institution’s 

contractual clearing balance, if any, and 

then subtracting from this product the 

depository institution’s clearing balance 

allowance, if any; or 

(2) $50,000, minus the depository 

institution’s clearing balance allowance, 

if any. Any carryover not offset during 

the next period may not be carried over 

to subsequent periods. 

§ 204.7 [Removed] 

■ 8. Section 204.7 is removed. 

§ 204.6 [Redesignated as § 204.7] 

■ 9. Section 204.6 is redesignated as 

§ 204.7. 

■ 10. New § 204.6 is added to read as 

follows: 

§ 204.6 Charges for reserve deficiencies. 

(a) Deficiencies in a depository 

institution’s required reserve balance, 

after application of the carryover 

provided in § 204.5(e), are subject 

reserve-deficiency charges. Federal 

Reserve Banks are authorized to assess 

charges for deficiencies in required 

reserves at a rate of 1 percentage point 

per year above the primary credit rate, 

as provided in § 201.51(a) of this 

chapter, in effect for borrowings from 

the Federal Reserve Bank on the first 

day of the calendar month in which the 

deficiencies occurred. Charges shall be 

assessed on the basis of daily average 

deficiencies during each maintenance 

period. Reserve Banks may, as an 

alternative to levying monetary charges, 

after consideration of the circumstances 

involved, permit a depository 

institution to eliminate deficiencies in 

its required reserve balance by 

maintaining additional reserves during 

subsequent reserve maintenance 

periods. 

(b) Reserve Banks may waive the 

charges for reserve deficiencies except 

when the deficiency arises out of a 

depository institution’s gross negligence 

or conduct that is inconsistent with the 

principles and purposes of reserve 

requirements. Decisions by Reserve 

Banks to waive charges are based on an 

evaluation of the circumstances in each 

individual case and the depository 

institution’s reserve maintenance 

record. For example, a waiver may be 

appropriate for a small charge or once 

during a two-year period for a 

deficiency that does not exceed a certain 

percentage of the depository 

institution’s required reserves. If a 

depository institution has demonstrated 

a lack of due regard for the proper 

maintenance of required reserves, the 

Reserve Bank may decline to exercise 

the waiver privilege and assess all 

charges regardless of amount or reason 

for the deficiency. 

(c) In individual cases, where a 

Federal supervisory authority waives a 

liquidity requirement, or waives the 

penalty for failing to satisfy a liquidity 

requirement, the Reserve Bank in the 

District where the involved depository 

institution is located shall waive the 

reserve requirement imposed under this 

part for such depository institution 

when requested by the Federal 

supervisory authority involved. 

(d) Violations of this part may be 

subject to assessment of civil money 

penalties by the Board under authority 

of Section 19(1) of the Federal Reserve 

Act (12 U.S.C. 505) as implemented in 

12 CFR part 263. In addition, the Board 

and any other Federal financial 

institution supervisory authority may 

enforce this part with respect to 

depository institutions subject to their 

jurisdiction under authority conferred 

by law to undertake cease and desist 

proceedings. 

PART 209—ISSUE AND 

CANCELLATION OF FEDERAL 

RESERVE BANK CAPITAL STOCK 

(REGULATION I) 

■ 10. The authority citation for part 209 

continues to read as follows: 

Authority: 12 U.S.C. 2222, 248, 282, 286– 

288, 321, 323, 327–328, 333, and 466. 

■ 11. § 209.2 is amended by revising 

paragraph (c)(1) to read as follows: 

§ 209.2 Banks desiring to become member 

banks. 

* * * * * 

(c) * * * 

(1) General rule. For purposes of this 

part, a national bank or a State bank is 

located in the Federal Reserve District 

that contains the location specified in 

the bank’s charter or organizing 

certificate, or as specified by the 

institution’s primary regulator, or if no 

such location is specified, the location 

of its head office, unless otherwise 

determined by the Board under 

paragraph (c)(2) of this section. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, May 22, 2009. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. E9–12431 Filed 5–28–09; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AD35 

Special Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: Pursuant to section 7(b)(5) of 

the Federal Deposit Insurance Act, 12 

U.S.C. 1817(b)(5), the FDIC is adopting 

a final rule to impose a 5 basis point 

special assessment on each insured 

depository institution’s assets minus 

Tier 1 capital as of June 30, 2009. The 

amount of the special assessment for 

any institution, however, will not 

exceed 10 basis points times the 

institution’s assessment base for the 

second quarter 2009 risk-based 

assessment. The special assessment will 

be collected on September 30, 2009. The 

final rule also provides that if, after June 

30, 2009, the reserve ratio of the Deposit 

Insurance Fund is estimated to fall to a 

level that the Board believes would 

adversely affect public confidence or to 

a level that shall be close to or below 

zero at the end of any calendar quarter, 

the Board, by vote, may impose 

additional special assessments of up to 

5 basis points on all insured depository 

institutions based on each institution’s 

total assets minus Tier 1 capital 

reported on the report of condition for 

that calendar quarter. Any single 

additional special assessment will not 

exceed 10 basis points times the 

institution’s assessment base for the 

corresponding quarter’s risk-based 

assessment. The earliest possible date 

for imposing any such additional 

special assessment under the final rule 

would be September 30, 2009, with 

collection on December 30, 2009. The 

latest possible date for imposing any 

such additional special assessment 

under the final rule would be December 

31, 2009, with collection on March 30, 

2010. Authority to impose any 

additional special assessments under 

the final rule terminates on January 1, 

2010. 

DATES: Effective Date: June 30, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Acting Chief, Fund 

Analysis and Pricing Section, Division 

of Insurance and Research, (202) 898– 

8967; Christopher Bellotto, Counsel, 

Legal Division, (202) 898–3801 or 

Sheikha Kapoor, Senior Attorney, Legal 

Division, (202) 898–3960; Donna 

Saulnier, Manager, Assessment Policy 

Section, Division of Finance (703) 562– 

6167. 


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