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FE D ERAL R E SE R V E BANK
OF N E W YORK

J" Circular No. 3 3 83~l

L September

REGULATION D OF THE BOARD OF GOVERNORS
OF THE FEDERAL R ESERVE SYSTEM AS AMENDED EFFEC TIV E
SEPTEM BER 16, 1948

To all Member B anks in the
Second F ederal Reserve D istrict:

Enclosed herewith is a printed copy of Regulation D of the Board
of Governors of the Fed eral R eserve System as amended effective
September 16, 1948, relating to reserves of member banks. This copy
of Regulation D incorporates all the presently effective changes in the
regulation since the last printing in the form as amended effective
Ju ly 14,1942. A printed copy of the current Supplement to Regulation D
was sent to you recently with our Circular No. 3372, dated Septem ­
ber 8, 1948.
Additional copies of Regulation D and Supplement will be fu r­
nished upon request.




A ld a n S p r o u l ,

P residen t.

28, 1948 J

BOARD OF GOVERNORS
of the
FED ER A L R E SE R V E SYSTEM

R E SE R V ES O F M EM BER BANKS

REGULATION D

This Regulation as printed herewith is in
the form as amended effective September 16, 1918.




IN Q U IRIES REGARDIN G T H IS REGULATION

Any inquiry relating to this regulation should be addressed
to the Federal Reserve Bank or Federal
Reserve branch bank of the district
in which the inquiry arises.




CONTENTS
Page

Authority for Regulation...........................................................................................

4

Sec. 1. Definitions .............................................................................................................
(a) Demand deposits ...................................................................................

4
4

(b) Time deposits .........................................................................................
(c) Time certificates of deposit ................................................................
(d) Time deposits, open account ............................................................

4
4
4

(e) Savings deposits .....................................................................................
(f) Gross demand deposits ..........................................................................
(g) Cash items in process of collection....................................................

5
6
6

(h) Net demand deposits ..........................................................................

6

Sec. 2. Com putation of R eserves ................................................................................
(a) Amounts of reserves to be maintained..........................................
(b) Deductions allowed in computing reserves......................................

6
6
7

(c) Availability of cash items as reserve..................................................

8

(d) Reserves against trust funds.............................................................
(e) Continuance of “time deposit” s t a t u s ....,....................................

8
8

Sec. 3. Deficiencies in R eserves .................................................................................
(a) Computation of deficiencies ................................................................

9
9

(b) Penalties ...................................................................................................
(c) Notice to directors of banks deficient in reserves..........................
(d) Continued deficiencies ............................................................................

9
9
10

Appendix .............................................................................................................................

11




3

REGULATION D

Amended effective September 16. 19.48.

RESERVES OF MEMBER BANKS
AUTHORITY FOR REGULATION

This regulation is issued under authority of provisions of section
19 of the Federal Reserve Act which, together with related provisions
of law, are published in the Appendix hereto.
SECTION 1. DEFINITIONS

(a) Demand deposits.—The term “demand deposits” includes all
deposits except “time deposits” as defined below.
(b ) Time deposits.—The term “time deposits” means “time cer­
tificates of deposit”, “time deposits, open account” and “savings de­
posits”, as defined below.,
(c) Time certificates of deposit.—-The term “time certificate of
deposit” means a deposit evidenced by a negotiable or non-negotiable
instrument which provides on its face that the amount of such deposit
is payable to bearer or to any specified person or to his order—
(1) On a certain date, specified in the instrument, not less
than thirty days after the date of the deposit, or
(2) At the expiration of a certain specified time not less than
thirty days after the date of the instrument, or
(3) Upon notice in writing which is actually required to be
given not less than thirty days before the date of repayment,1
and
(4) In all cases only upon presentation and surrender of the
instrument.
(d ) Time deposits, open account.—The term “time deposit, open
account” means a deposit, other than a “time certificate of deposit”
or a “savings deposit”, with respect to which there is in force a writ­
ten contract with the depositor that neither the whole nor any part of
such deposit may be withdrawn, by check or otherwise, prior to the
1 A deposit with respect to which the bank merely reserves the right to require notice of not
less than thirty days before any withdrawal is made is not a “ time certificate of deposit”
within the meaning of the above definition.
4




REGULATION D

5

date of maturity, which shall be not less than thirty days after the
date of the deposit,2 or prior to the expiration of the period of notice
which must be given by the depositor in writing not less than thirty
days in advance of withdrawal.3
(e) Savings deposits.—The term “savings deposit” means a de­
posit, evidenced by a pass book, consisting of funds (i) deposited to
the credit of one or more individuals, or of a corporation, association
or other organization operated primarily for religious, philanthropic,
charitable, educational, fraternal or other similar purposes and not
operated for profit/1 or (ii) in which the entire beneficial interest is
held by one or more individuals or by such a corporation, association
or other organization, and in respect to which deposit—
(1) The depositor is required, or may at any time be required,
by the bank to give notice in writing of an intended withdrawal
not less than thirty days before such withdrawal is made;
(2) Withdrawals are permitted in only two ways, either (i)
upon presentation of the pass book, through payment to the per­
son presenting the pass book, or (ii) without presentation of the
pass book, through payment to the depositor himself but not to
any other person whether or not acting for the depositor.8
The presentation by any officer, agent or employee of the bank of
a pass book or a duplicate thereof retained by the bank or by any
of its officers, agents or employees is not a presentation of the pass
book within the meaning of this regulation except where the pass
book is held by the bank as a part of an estate of which the bank
is a trustee or other fiduciary, or where the pass book is held by the
bank as security for a loan. If a pass book is retained by the bank,
it may not be delivered to any person other than the depositor for
the purpose of enabling such person to present the pass book in
order to make a withdrawal, although the bank may deliver the pass
- Deposits, such as Christmas club accounts and vacation club accounts, which are made under
written contracts providing that no withdrawal shall be made until a certain number of periodic
deposits have been made during a period cf not less than three months constitute "time deposits,
open account” even though some of the deposits are made within thirty days from the end of
such period.
3 A deposit with respect to which the bank merely reserves the right to require notice of not less
than thirty days before any withdrawal is made is not a ‘‘time deposit, open account” , within
the meaning of the above definition.
4 Deposits in joint accounts of two or more individuals may be classified as savings deposits
if they meet the •other requirements of the above definition, but deposits of a partnership
operated for profit may not be so classified. Deposits to the credit of an individual of funds
in which any beneficial interest is held by a corporation, partnership, association or other
organization operated for profit or not operated primarily for religious, philanthropic, charitable,
educational, fraternal or other similar purposes may not be classified as savings deposits.
5 Presentation of a pass book may be made over the counter or through the mails; and
payment may be made over the counter, through the mails or otherwise, subject to the limita­
tions of paragraph (2) above as to the person to whom such payment may be made.




6

REGULATION D

book to a duly authorized agent of the depositor for transmittal to
the depositor.
Every withdrawal made upon presentation of a pass book shall
be entered in the pass book at the time of the withdrawal, and every
other withdrawal shall be entered in the pass book as soon as prac­
ticable after the withdrawal is made.
(/) Gross demand deposits.— The term “gross demand deposits”
means the sum of all demand deposits, including demand deposits made
by other banks, the United States, States, counties, school districts
and other governmental subdivisions and municipalities, and all out­
standing certified and officers’ checks (including checks issued by the
bank in payment of dividends), letters of credit and travelers’ checks
sold for cash, and drafts drawn upon or other authorizations to charge
the member bank’s reserve account at the Federal Reserve bank.
(g) Cash items in process of collection.—The term “cash items in
process of collection” means—
(1) Checks in process of collection, drawn on a bank, private
bank, or any other banking institution, which are payable im­
mediately upon presentation in the United States, including
checks with a Federal Reserve bank in process of collection and
checks on hand which will be presented for payment or for­
warded for collection on the following business day;
(2) Government checks and warrants drawn on the Treasurer
of the United States which are in process of collection;
(3) Such other items in process of collection, payable immedi­
ately upon presentation in the United States, as are customarily
cleared or collected by banks as cash items.
Items handled as non-cash collections may not be treated as “cash
items in process of collection” within the meaning of this regulation.
(h ) Net demand deposits.—The term “net demand deposits” means
gross demand deposits as defined in subsection (f) of this section
less the deductions allowed under the provisions of subsection (b) of
section 2 of this regulation.
SECTION 2. COMPUTATION OF R E SE R V E S

(a)
Amounts of reserves to be maintained.—Every member bank
of the Federal Reserve System is required by law to maintain on
deposit with the Federal Reserve bank of its district an actual net
balance equal to three per cent of its time deposits plus—
Seven per cent of its net demand deposits if not in a reserve
or central reserve city.
' Ten per cent of its net demand deposits if in a reserve city.




REGULATION D

7

except that if located in an outlying district of a reserve city or
in territory added to such city by the extension of the city’s
corporate limits such bank may, upon the affirmative vote of five
members of the Board of Governors of the Federal Reserve Sys­
tem, be permitted to maintain seven per cent reserves against
its net demand deposits.
Thirteen per cent of its net demand deposits if located in a
central reserve city, except that if located in an outlying district
of a central reserve city or in territory added to such city by
the extension of the city’s corporate limits, such bank may, upon
the affirmative vote of five members of the Board of Governors
of the Federal Reserve System, be permitted to maintain seven
per cent or ten per cent reserves against its net demand deposits.
For the purposes of this subsection and of paragraph (1) of sub­
section (a) of section 3 of this regulation, a member bank shall be
considered to be in a central reserve city if the head office or any
branch of such bank is located in a central reserve city, and a member
bank shall be considered to be in a reserve city if the head office or
any branch thereof is located in a reserve city and neither the head
office nor any branch thereof is located in a central reserve city;
provided that, if a member bank is considered to be in a central re­
serve city or a reserve city under this paragraph solely by reason
of the location of an office of such bank in an outlying district of such
a city or in territory added to such city by the extension of the city’s
corporate limits, such bank may, upon the affirmative vote of five
members of the Board of Governors of the Federal Reserve System,
be permitted to maintain lower reserve balances as above provided
in this subsection.
Notwithstanding any other provision of this regulation, the actual
net balance which each member bank is required to maintain on
deposit with the Federal Reserve bank of its district in accordance
with the foregoing shall be changed by such percentage, within the
limitations prescribed by law,6 as the Board of Governors of the
Federal Reserve System shall prescribe from time to time pursuant
to section 19 of the Federal Reserve Act, as amended, in order to pre­
vent injurious credit expansion or contraction.
(6 )
Deductions allowed in computing reserves.— In determining
the reserve balances required under the terms of this regulation, mem­
ber banks may deduct from the amount of their gross demand de1 The amount of tlit* reserves required to he maintained by any such member bank as a result
1
of any such change may not be less than the amount of the reserves specified above nor more
than twice such amount, except that through June 30. 1949, the required reserves for time deposits
may be not more than 7Vz per cent and those for demand deposits of banks in central reserve
cities, reserve cities, and other places may he not more than 30 per cent, 24 per cent, and 18 per
cent, respectively.




8

REGULATION D

posits the amounts of balances subject to immediate withdrawal due
from other banks and cash items in process of collection as defined
in subsection (g) of section 1 of this regulation. Balances “due from
other banks” do not include balances due from Federal Reserve
banks, balances (payable in dollars or otherwise) due from foreign
banks or branches thereof wherever located, or balances due from
foreign branches of domestic banks. The word “banks” in the term
“due from other banks” refers to incorporated banks and does not
include private banks or bankers.7
(c)
Availability of cash items as reserve.—Cash items forwarded to
a Federal Reserve bank for collection and credit cannot be counted
as part of the minimum reserve balance to be carried by a member
bank with its Federal Reserve bank until the expiration of such time
as may be specified in the appropriate time schedule referred to in
Regulation .J. If a member bank draw against items before such
time, the draft will be charged against its reserve balance if such
balance be sufficient in amount to pay it; but any resulting impair­
ment of reserve balances will be subject to the penalties provided by
law and by this regulation: Provided, however, That the Federal
Reserve bank may, in its discretion, refuse at any time to permit
the withdrawal or other use of credit given in its reserve account for
any item for which the Federal Reserve bank has not received pay­
ment in actually and finally collected funds.
{d) Reserves against trust funds.—A member bank exercising trust
powers need not maintain reserves against trust funds which it keeps
properly segregated as trust funds and apart from its general assets
or which it deposits in another institution to the credit of itself as
trustee or other fiduciary. If, however, such funds are mingled with
the general assets of the bank, as permitted to national banks under
authority of section 11 (k) of the Federal Reserve Act, a deposit
liability thereby arises against which reserves must be maintained.
(e)
Continuance of “time deposit” status.—A deposit which at the
time of deposit was a “deposit evidenced by a time certificate of
deposit”, “time deposit, open account”, or “savings deposit” continues
to be a “time deposit” until maturity or the expiration of the period
of notice of withdrawal, although it has become payable within thirty
days. After the date of maturity of any time deposit, such deposit is
a demand deposit. After the expiration of the period of notice given
with respect to the repayment of any savings deposit or other time
deposit, such deposit is a demand deposit, except that, if the owner
1 A member bank exercising fiduciary powers may not include in balances “due from other
banks” amounts of trust funds deposited with other banks and due to it as trustee or other
fiduciary. If trust funds are deposited by the trust department of a member bank in its
commercial or savings department and are then redeposited in another bank subject to immediate
withdrawal they may be included by the member bank in balances “due from other banks” ,
subject to the provisions of subsection (b ) above.




REGULATION D

9

of such deposit advise the bank in writing that the deposit will not
be withdrawn pursuant to such notice or that the deposit will there­
after again be subject to the contract or requirements applicable to
such deposit, the deposit will again constitute a savings deposit or
other time deposit, as the case may be, after the date upon which such
advice is received by the bank.
SECTION 3.

D E FIC IE N C IE S IN R E S E R V E S

(а) Computation of deficiencies.
(1) Deficiencies in reserve balances of member banks in central
reserve cities and in reserve cities shall be computed on the basis
of average daily net deposit balances covering weekly periods.
Deficiencies in reserve balances of other member banks shall be
computed on the basis of average daily net deposit balances
covering semimonthly periods.8
(2) In computing such deficiencies the required reserve balance
of each member bank at the close of business each day shall be
based upon its net deposit balances at the opening of business on
the same day; and the weekly and semimonthly periods referred
to in paragraph ( 1 ) hereof shall end at the close of business on
days to be fixed by the Federal Reserve banks with the approval
of the Board of Governors of the Federal Reserve System.
(б) Penalties.
( 1 ) Penalties for such deficiencies will be assessed monthly on
the basis of average daily deficiencies during each of the reserve
computation periods ending in the preceding calendar month.
(2 ) Such penalties will be assessed at a rate of two per cent
per annum above the Federal Reserve bank rate applicable to
discounts of ninety day commercial paper for member banks, in
effect on the first day of the calendar month in which the defi­
ciencies occurred.
(c)
Notice to directors of banks deficient in reserves.—Whenever
it shall appear that a member bank is not paying due regard to the
maintenance of its reserves, the Federal Reserve bank shall address a
letter to each director of such bank calling attention to the situation
and advising him of the requirements of the law and of this regula­
tion regarding the maintenance of reserves.
8 Deficiencies in reserve balances of member banks in outlying sections of central reserve
and reserve cities which have been authorised by the Board of Governors of the Federal Reserve
System, under the provisions of subsection (a) of section 2 of this regulation, to maintain
seven per cent reserves against demand deposits, will also be computed on the basis of average
daily net deposit balances covering semimonthly periods.




10

REGULATION D

(d )
Continued deficiencies.— If, after the notice provided for in
subsection (c) of this section 3 has been given, it shall appear that
the member bank is continuing its failure to pay due regard to the
maintenance of its reserves, the Federal Reserve bank shall report
such fact to the Board of Governors of the Federal Reserve System
with a recommendation as to whether or not the Board should—
( 1 ) In the case of a national bank, direct the Comptroller of
the Currency to bring suit to forfeit the charter of such national
bank pursuant to section 2 of the Federal Reserve Act; or
(2 ) In the case of a State member bank, institute proceedings
to require such bank to surrender its stock in the Federal Reserve
bank and to forfeit all rights and privileges of membership pur­
suant to section 9 of the Federal Reserve Act; or
(3) In either case, take such other action as the Federal Re­
serve bank may recommend or the Board of Governors of the
Federal Reserve System may consider advisable.




REGULATION D

11

APPENDIX
STA TU TO RY PROVISIONS

Section 19 of the Federal Reserve Act provides in part as follows:
The Board of Governors of the Federal Reserve System is
authorized, for the purposes of this section, to define the terms
“demand deposits”, “gross demand deposits”, “deposits payable on
demand”, “time deposits”, “savings deposits”, and “trust funds”,
to determine what shall be deemed to be a payment of interest,
and to prescribe such rules and regulations as it may deem neces­
sary to effectuate the purposes of this section and prevent eva­
sions thereof: P rovided, That, within the meaning of the pro­
visions of this section regarding the reserves required of member
banks, the term “time deposits” shall include “savings deposits”
Every bank, banking association, or trust company which is or
which becomes a member of any Federal reserve bank shall estab­
lish and maintain reserve balances with its Federal reserve bank
as follows:
(a) If not in a reserve or central reserve city, as now or
hereafter defined, it shall hold and maintain with the Federal
reserve bank of its district an actual net balance equal to not
less than seven per centum of the aggregate amount of its
demand deposits and three per centum of its time deposits.
(b) If in a reserve city, as now or hereafter defined, it
shall hold and maintain with the Federal reserve bank of its
district an actual net balance equal to not less than ten per
centum of the aggregate amount of its demand deposits and
three per centum of its time deposits: Provided, however,
That if located in the outlying districts of a reserve city or
in territory added to such a city by the extension of its
corporate charter, it may, upon the affirmative vote of five
members of the Board of Governors of the Federal Reserve
System, hold and maintain the reserve balances specified in
paragraph (a) hereof.
(c) If in a central reserve city, as now or hereafter defined,
it shall hold and maintain with the Federal reserve bank of
its district an actual net balance equal to not less than thir­
teen per centum of the aggregate amount of its demand
deposits and three per centum of its time deposits: Provided,
however, That if located in the outlying districts of a central
reserve city or in territory added to such city by the exten­
sion of its corporate charter, it may, upon the affirmative
vote of five members of the Board of Governors of the Fed­
eral Reserve System, hold and maintain the reserve balances
specified in paragraphs (a) or (b) thereof.
Notwithstanding the other provisions of this section, the Board
of Governors of the Federal Reserve System, upon the affirmative
vote of not less than four of its members, in order to prevent




12

REGULATION D

injurious credit expansion or contraction, may by regulation
change the requirements as to reserves to be maintained against
demand or time deposits or both ( 1 ) by member banks in central
reserve cities or (2) by member banks in reserve cities or (3) by
member banks not in reserve or central reserve cities or (4) by
all member banks; but the amount of the reserves required to
be maintained by any such member bank as a result of any such
change shall not be less than the amount of the reserves required
by law to be maintained by such bank on the date of enactment
of the Banking Act of 1935 nor more than twice such amount.
Notwithstanding any other provision of law, the Board of Gov­
ernors of the Federal Reserve System, in order to prevent injurious
credit expansion, may by regulation change the requirements as
to reserves to be maintained pursuant to this section against demafid or time deposits or both ( 1 ) by member banks in central
reserve cities, or (2 ) by member banks in reserve cities, or (3)
by member banks not in reserve or central reserve cities, or
(4) by all member banks; but no such change shall have the
effect of requiring any such member bank to maintain a reserve
balance against its time deposits in an amount equal to more
than 7% per centum thereof, or a reserve balance against its
demand deposits in an amount equal to more than 30 per centum
thereof if such bank is in a central reserve city, 24 per centum
thereof if in a reserve city, or 18 per centum thereof if not in a
reserve or central reserve city. No change in reserve require­
ments made under authority of this paragraph shall continue in
effect after June 30, 1949.
The required balance carried by a member bank with a Federal
reserve bank may, under the regulations and subject to such
penalties as may be prescribed by the Board of Governors of the
Federal Reserve System, be checked against and withdrawn by
such member bank for the purpose of meeting existing liabilities.
In estimating the reserve balances required by this Act, member
banks may deduct from the amount of their gross demand deposits
the amounts of balances due from other banks (except Federal
Reserve banks and foreign banks) and cash items in process of
collection payable immediately upon presentation in the United
States, within the meaning of these terms as defined by the Board
of Governors of the Federal Reserve System.
»

»

»

*

*

»

*

»

Notwithstanding the provisions of the First Liberty Bond Act,
as amended, the Second Liberty Bond Act, as amended, and the
Third Liberty Bond Act, as amended, member banks shall be
required to maintain the same reserves against deposits of public
moneys by the United States as they are required by this section
to maintain against other deposits: Provided, That until six
months after the cessation of hostilities in the present war as
determined by proclamation of the President or concurrent reso­
lution of the Congress no deposit payable to the United States




REGULATION D

13

by any member bank arising solely as the result of subscriptions
made by or through such member bank for United States Govern­
ment securities issued under authority of the Second Liberty
Bond Act, as amended, shall be subject to the reserve require­
ments of this section.
[“Cessation of hostilities” was proclaimed by the President on
December 30, 1946; and, accordingly, the proviso in the above
paragraph expired six months after that date.]

Section 11 of the Federal Reserve Act provides in part as follows:
The Board of Governors of the Federal Reserve System shall
be authorized and empowered: * * * (c) To suspend for a period
not exceeding thirty days, and from time to time to renew such
suspension for periods not exceeding fifteen days, any reserve
requirements specified in this Act: Provided, That it shall estab­
lish a graduated tax upon the amounts by which the reserve
requirements of this Act may be permitted to fall below the level
hereinafter specified * * *.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102