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FED ER AL RESERVE BANK
O F NEW YORK
r Circular No. 6 1 5 7 1
L April 29, 1968
J

AMENDMENT TO REGULATION D
Changes in Computation of Reserve Requirements

To the Member Banks of 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 of Governors of the Federal Reserve System announced today adoption of an
amendment to its Regulation D, “ Reserves of Member Banks,” effecting several changes in
the computation of reserve requirements by member banks.
Except for clarification in language, the amendment, to become effective September 12,
was adopted as proposed by the Board last January 29. The changes made by the amend­
ment involve:
1. Establishing a one-week reserve period for the so-called “ country banks” instead
of their present two-week period, thus putting them on the same basis now used for
reserve city banks;
2. Using average deposits two weeks earlier in calculating the weekly average re­
quired reserves for the present period;
3. Using vault cash held two weeks earlier, together with average balances at the
Federal Reserve Bank for the current week, in the computation of weekly average re­
serves held in satisfaction of the requirements; and
4. Providing that either excesses or deficiencies averaging up to 2 per cent of re­
quired reserves may be carried forward to the next reserve week.
These new rules by which member banks will compute and comply with System reserve
requirements do not represent any change in Federal Reserve monetary policy, but are altera­
tions in a technical regulation and are designed to facilitate more efficient functioning of the
reserve mechanism. In combination, these changes are expected to reduce uncertainties,
both for member banks and the Federal Reserve, as to the amount o f reserves required dur­
ing the course of any reserve period. Their adoption should moderate some of the pressures
for reserve adjustments within the banking system that can occasionally develop near the
close of a reserve period and can produce sharp fluctuations in the availability o f day-to-day
funds.

Enclosed is a copy of the amendment to Regulation D referred to in the above
statement. Additional copies of the amendment will be furnished upon request.




A

lfred

H

ayes,

President.

RESERVES OF MEMBER BANKS
AMENDMENT TO REGULATION D
(12 CFR PART 204)
Issu e d

by

t h e B o a rd o f G o v e rn o rs o f t h e F e d e r a l R e se rv e S y ste m

Effective September 12, 1968, §204.3(a,) and (b ) are amended to
read as follow s:
SECTION 204.3— D E F IC IE N C IE S IN RESERVES
(a) Computation of deficiencies.— (1) Reserve requirements of all
member banks shall be determined on the basis of average daily net
deposit balances and average daily currency and coin covering 7-day
computation periods which shall end at the close of business on Wednes­
day o f each week.
( 2 ) In determining whether a member bank has maintained a re­
serve balance that is in excess or less than its required reserve balance
for any computation period:
(i) The required reserve balance of such bank shall be based
upon the average daily net deposit balances held by the member
bank at the close of business each day during the second computa­
tion period prior to the computation period for which the computa­
tion is made.
(ii) The reserve balance o f such bank shall consist of the aver­
age daily balance with the Federal Reserve bank of its district held
by the member bank at the close of business of each day during the
computation period for which the computation is made and the
average daily currency and coin held by the member bank at the
close o f business each day during the second computation period
prior to the computation period for which the computation is made.
(3) Any excess or deficiency in a member bank’s required reserve
balance for any computation period, determined as provided in subparagraph ( 2 ) above, will be carried forward to the next following
computation period to the extent that such excess or deficiency does
not exceed 2 per cent o f such required reserves, except that any por­
tion of such excess or deficiency not offset in the next period may not
be carried forward to additional computation periods.
(b ) Penalties.— (1) Deficiencies in reserve balances remaining
after the application o f subparagraph (3) of paragraph (a) above
will be subject to penalties, assessed monthly on the basis of average
daily deficiencies during each of the computation periods ending in the
preceding calendar month.
(2)
Any such penalty will be assessed at a rate of 2 per cent per
annum above the lowest rate applicable to borrowings by each member
bank from its Federal Reserve bank on the first day of the calendar
month in which the deficiencies occurred.




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