[Federal Register Volume 65, Number 225 (Tuesday, November 21, 2000)]
[Rules and Regulations]
[Pages 69857-69859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29723]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-1088]
Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board is amending Regulation D, Reserve Requirements of
Depository Institutions, to reflect the annual indexing of the low
reserve tranche and the reserve requirement exemption for 2001, and
announces the annual indexing of the deposit reporting cutoff level
that will be effective beginning in September 2001. The amendments
decrease the amount of net transaction accounts subject to a reserve
requirement ratio of three percent in 2001, as required by section
19(b)(2)(C) of the Federal Reserve Act, from $44.3 million to $42.8
million of transaction accounts. This adjustment is known as the low
reserve tranche adjustment. The Board is increasing from $5.0 million
to $5.5 million the amount of reservable liabilities of each depository
institution that is subject to a reserve requirement of zero percent in
2001. This action is required by section 19(b)(11)(B) of the
[[Page 69858]]
Federal Reserve Act, and the adjustment is known as the reservable
liabilities exemption adjustment. The Board is also increasing the
deposit cutoff level that is used in conjunction with the reservable
liabilities exemption to determine the frequency of deposit reporting
from $95.0 million to $101.0 million for nonexempt depository
institutions. (Nonexempt institutions are those with total reservable
liabilities exceeding the amount exempted from reserve requirements.)
Thus, beginning in September 2001, nonexempt institutions with total
deposits of $101.0 million or more will be required to report weekly
while nonexempt institutions with total deposits less than $101.0
million may report quarterly, in both cases on form FR 2900. In July
2000, the Board eliminated the exempt deposit cutoff and discontinued
the quarterly report associated with that cutoff (form FR 2910q).
Exempt institutions with at least $5.5 million in total deposits may
report annually on form FR 2910a.
DATES: Effective date: December 21, 2000.
Compliance dates: For depository institutions that report weekly,
the low reserve tranche adjustment and the reservable liabilities
exemption adjustment will apply to the reserve computation period that
begins Tuesday, November 28, 2000, and the corresponding reserve
maintenance period that begins Thursday, December 28, 2000. For
institutions that report quarterly, the low reserve tranche adjustment
and the reservable liabilities exemption adjustment will apply to the
reserve computation period that begins Tuesday, December 19, 2000, and
the corresponding reserve maintenance period that begins Thursday,
January 18, 2001. For all depository institutions, the deposit cutoff
levels will be used to screen institutions in the second quarter of
2001 to determine the reporting frequency for the twelve month period
that begins in September 2001.
FOR FURTHER INFORMATION CONTACT: Heatherun Allison, Counsel (202/452-
3565), Legal Division, or June O'Brien, Economist (202/452-3790),
Division of Monetary Affairs; for the hearing impaired only, contact
Janice Simms, Telecommunications Device for the Deaf (TDD) (202/872-
4984); Board of Governors of the Federal Reserve System, 20th and C
Streets, N.W., Washington, DC 20551.
SUPPLEMENTARY INFORMATION: Section 19(b)(2) of the Federal Reserve Act
(12 U.S.C. 461(b)(2)) requires each depository institution to maintain
reserves against its reservable liabilities,\1\ as prescribed by Board
regulations. The required reserve ratio applicable to transaction
account balances exceeding the low reserve tranche is 10 percent.
Section 19(b)(2) also provides that, before December 31 of each year,
the Board shall issue a regulation adjusting the low reserve tranche
for the next calendar year. The percentage change in the tranche is
required by law to equal 80 percent of the percentage change (increase
or decrease) in net transaction accounts at all depository institutions
over the one-year period ending on the most recent June 30.
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\1\ Reservable liabilities include transaction accounts,
nonpersonal time deposits, and Eurocurrency liabilities as defined
in section 19(b)(5) of the Federal Reserve Act. The reserve ratio on
nonpersonal time deposits and Eurocurrency liabilities is zero
percent.
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Net transaction accounts of all depository institutions decreased
by 4.2 percent (from $645.7 billion to $618.4 billion) from June 30,
1999, to June 30, 2000. In accordance with section 19(b)(2), the Board
is amending Regulation D (12 CFR part 204) to decrease the low reserve
tranche for transaction accounts for 2001 by $1.5 million, that is,
from $44.3 million to $42.8 million.
Section 19(b)(11)(A) of the Federal Reserve Act (12 U.S.C. 461
(b)(11)(B)) provides that $2 million of reservable liabilities of each
depository institution shall be subject to a zero percent reserve
requirement. Each depository institution may, in accordance with the
rules and regulations of the Board, designate the reservable
liabilities to which this reserve requirement exemption is to apply.
However, if net transaction accounts are designated, only those that
would otherwise be subject to a three percent reserve requirement
(i.e., net transaction accounts within the low reserve requirement
tranche) may be so designated.
Section 19(b)(11)(B) of the Federal Reserve Act provides that,
before December 31 of each year, the Board shall issue a regulation
adjusting for the next calendar year the dollar amount of reservable
liabilities exempt from reserve requirements. The exemption amount
changes only if the total reservable liabilities held at all depository
institutions increase from one year to the next. In that case, the
exemption amount increases by 80 percent of the increase in total
reservable liabilities of all depository institutions as of the year
ending June 30. Total reservable liabilities of all depository
institutions increased by 12.3 percent (from $1,961.1 billion to
$2,202.9 billion) from June 30, 1999, to June 30, 2000. Consequently,
the reservable liabilities exemption amount for 2001 under section
19(b)(11)(B) will be increased by $0.5 million from $5.0 million to
$5.5 million.\2\
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\2\ Consistent with Board practice, the tranche and exemption
amounts have been rounded to the nearest $0.1 million.
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For institutions that report weekly, the tranche adjustment and the
reservable liabilities exemption adjustment will be effective for the
reserve computation period beginning Tuesday, November 28, 2000, and
for the corresponding reserve maintenance period beginning Thursday,
December 28, 2000. For institutions that report quarterly, the tranche
adjustment and the reservable liabilities exemption adjustment will be
effective for the computation period beginning Tuesday, December 19,
2000, and for the corresponding reserve maintenance period beginning
Thursday, January 18, 2001. In addition, all institutions currently
submitting form FR 2900 must continue to submit reports to the Federal
Reserve under current reporting procedures.
In order to reduce the reporting burden for small institutions, the
Board has established deposit reporting cutoff levels to determine
deposit reporting frequency. Institutions are screened during the
second quarter of each year to determine reporting frequency beginning
the following September. The cutoff level for nonexempt institutions
determines whether they report (on form FR 2900) quarterly or weekly,
and the deposit cutoff level for exempt institutions determines whether
they report annually (on form FR 2910a) or quarterly (on form FR
2910q). During the July 2000 review of deposit reports, however, the
Board eliminated the exempt deposit cutoff and discontinued the
quarterly report associated with that cutoff, the form FR 2910q. In
addition, the Board raised the nonexempt deposit cutoff to $95.0
million from the 2000 indexed level of $84.5 million, effective for the
2000 deposit report screening process.
From June 30, 1999, to June 30, 2000, total deposits increased 7.9
percent, from $4,836.8 billion to $5,219.8 billion. Accordingly, the
nonexempt deposit cutoff level will increase by $6.0 million from $95.0
million in 2000 to $101.0 million in 2001. Based on the indexation of
the reservable liabilities exemption, the cutoff level for total
deposits above which reports of deposits must be filed will rise from
$5.0 million to $5.5 million.
Under the deposit reporting system, institutions are screened
during each
[[Page 69859]]
year to determine their reporting category beginning in the September
of that year. Thus, effective in September 2001, all U.S. branches and
agencies of foreign banks and Edge and agreement corporations,
regardless of size, and other institutions with total reservable
liabilities exceeding $5.5 million (nonexempt institutions) and with
total deposits at or above $101.0 million would be required to file
weekly the Report of Transaction Accounts, Other Deposits and Vault
Cash (form FR 2900). Nonexempt institutions with total deposits below
$101.0 million could file the form FR 2900 quarterly. Institutions that
obtain funds from non-U.S. sources or that have foreign branches or
IBFs would continue to be required to file the Report of Certain
Eurocurrency Transactions (forms FR 2950/FR 2951) at the same frequency
as they file the form FR 2900. Institutions with reservable liabilities
at or below the exemption amount of $5.5 million (exempt institutions
and with at least $5.5 million in total deposits would be required to
file the Annual Report of Total Deposits and Reservable Liabilities
(form FR 2910a). Institutions with total deposits below the exemption
level of $5.5 million would be excused from reporting if their deposits
can be estimated from other data sources.
Finally, the Board may require a depository institution to report
on a weekly basis, regardless of the cutoff level, if the institution
manipulates its total deposits and other reservable liabilities in
order to qualify for quarterly reporting. Similarly, any depository
institution that reports quarterly may be required to report weekly and
to maintain appropriate reserve balances with its Reserve Bank if,
during its computation period, it understates its usual reservable
liabilities or overstates the deductions allowed in computing required
reserve balances.
Notice and public participation. The provisions of 5 U.S.C. 553(b)
relating to notice and public participation have not been followed in
connection with the adoption of these amendments because the amendments
involve expected, ministerial adjustments prescribed by statute and by
an interpretative statement reaffirming the Board's policy concerning
reporting practices. In addition, the reservable liabilities exemption
adjustment and the increases for reporting purposes in the deposit
cutoff levels reduce regulatory burdens on depository institutions, and
the low reserve tranche adjustment will have a de minimis effect on
depository institutions with net transaction accounts exceeding $42.8
million. Accordingly, the Board finds good cause for determining, and
so determines, that notice and public participation is unnecessary,
impracticable, or contrary to the public interest.
Regulatory Flexibility Analysis
The Board certifies that these amendments will not have a
substantial economic impact on small depository institutions. See
``Notice and Public Participation'' above.
List of Subjects in 12 CFR Part 204
Banks, banking, Reporting and recordkeeping requirements
For the reasons set forth in the preamble, the Board is amending 12
CFR part 204 as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
1. The authority citation for part 204 continues to read as
follows:
Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and
3105.
2. Section 204.9 is revised to read as follows:
Sec. 204.9 Reserve requirement ratios.
(a) Reserve percentages. The following reserve ratios are
prescribed for all depository institutions, Edge and Agreement
corporations, and United States branches and agencies of foreign banks:
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Category Reserve requirement \1\
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Net transaction accounts:
$0 to $42.8 million................... 3 percent of amount.
Over $42.8 million.................... $1,284,000 plus 10 percent
of amount over $42.8
million.
Nonpersonal time deposits............. 0 percent.
Eurocurrency liabilities.............. 0 percent.
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\1\ Before deducting the adjustment to be made by the paragraph (b) of
this section.
(b) Exemption from reserve requirements. Each depository
institution, Edge or agreement corporation, and U.S. branch or agency
of a foreign bank is subject to a zero percent reserve requirement on
an amount of its transaction accounts subject to the low reserve
tranche in paragraph (a) of this section not in excess of $5.5 million
determined in accordance with Sec. 204.3(a)(3).
By order of the Board of Governors of the Federal Reserve
System, November 16, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-29723 Filed 11-20-00; 8:45 am]
BILLING CODE 6210-01-P