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FEDERAL RESERVE BANK OF NEW YORK rCircular No. 5 8 5 7 1 August 17, 1966 J L Reserve Requirements Increased From 5% to 6°/o on Certain Time Deposits To All Member Banlcs, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued today by the Board of Governors of the Federal Reserve System: The Board o f Governors o f the Federal Reserve System announced today an increase from 5 per cent to the statutory ceiling o f 6 per cent in reserve requirements against time deposits (other than savings deposits) in excess o f $5 million at each member bank. To permit orderly adjustments by banks, the effective date o f the increase will be the reserve computation period beginning September 8, 1966 fo r reserve city banks, and the period beginning September 15 for other member banks. It is estimated that the action will increase required reserves by about $450 million — approxim ately $370 million at reserve city banks and $75 million at other member banks. This increase is expected to affect mainly the few hundred larger banks issuing savings certificates and other certificates o f deposit (C D ’s) in substantial volume. This action by the Board follows a similar increase, from 4 per cent to 5 per cent, in reserve require ments on these categories o f deposit that was announced at midyear. Like that earlier measure, tod ay’s action is designed to exert a tempering influence on bank issuance o f time certificates o f deposit, and to apply some additional restraint upon the expansion o f bank credit to businesses and other borrowers. M onetary actions already taken have resulted in some moderation o f the rate o f bank credit growth thus far this year. However, in view o f increasing pressures on prices stemming from recent developments in the economy, tod ay’s action is being taken to reinforce the anti-inflationary effects o f overall monetary restraint. The Board recognizes that in the period ahead some banks may be faced with unusual pressures, and in such circumstances Federal Reserve discount facilities will be available to assist member banks while they are making an orderly adjustment in their positions. However, such adjustments will be expected to emphasize increased restraint in lending policies and maintenance o f an appropriate degree o f liquidity on the part o f borrow ing banks. Enclosed are copies of the Supplement to Regulation D, giving effect to the increase in reserve requirements. Additional copies of this circular and the enclosure will be furnished upon request. A lfeed H ayes, President. SUPPLEMENT TO REGULATION D Section 204.5— Supplement ISSUED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Effective as to member banks in reserve cities at the opening of business on September 8, 1966, and as to all other member banks at the opening o f business on September 15, 1966. (a ) Reserve percentages.— Pursuant to the provisions o f section 19 o f the Federal Reserve A ct and § 204.2(a) and subject to paragraph (&) o f this section, the Board o f Governors o f the Federal Reserve System hereby prescribes the follow ing reserve balances which each member bank o f the Federal Reserve System is required to maintain on deposit with the Federal Reserve bank o f its d istrict: (1 ) I f not in a reserve city— ( i) 4 per cent o f its savings deposits, plus ( ii) 4 per cent o f its other time deposits up to $5 million and 6 per cent o f such deposits in excess o f $5 million, plus (iii) 12 per cent o f its net demand deposits. (2 ) I f in a reserve city (except as to any bank located in such a city which is permitted by the Board o f Governors o f the Federal Reserve System, pursuant to § 204.2(a) (2 ), to maintain the reserves specified in subparagraph (1 ) o f this paragraph) — ( i) 4 per cent o f its savings deposits, plus ( ii) 4 per cent o f its other time deposits up to $5 million and 6 per cent o f such deposits in excess o f $5 million, plus (iii) 16y2 per cent o f its net demand deposits. ( b ) Counting o f currency and coin.— The amount o f a member bank’s currency and coin shall be counted as reserves in determining compliance with the reserve requirements o f paragraph (a ) o f this section. P R IN T E D IN N E W YO RK
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