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F ederal

reserve bank of
DALLAS, TE X A S

Dallas

75222

Circular No. 68-27
February 1,1968

PROPOSED AMENDMENT TO REGULATION D
R E S E R V E S OF MEMBER BANKS”

To All Member Banks
in the Eleventh Federal Reserve D istrict:

There are attached a Press Release of the Board of Governors of the
Federal Reserve System dated January 29, 1968, and proposed amend­
m ents to § 204.3 (a) and (b) of Regulation D and related material as it
will be published in the Federal Register.
You will note the Board of Governors has invited interested persons to
subm it in writing relevant data, views, or arguments. Such material should
be sent to the Secretary, Board of Governors of the Federal Reserve Sys­
tem, Washington, D. C. 20551, to be received not later than March 1, 1968.

Yours very truly,
P. E. Coldwell
President

Attachm ents

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERAL
press

RESERVE

release

Rt^*

January 29, 1968.
For immediate release.
The Board of Governors of the Federal Reserve System
proposed today an amendment to its Regulation D, "Reserves of
Member Banks," effecting several changes in the computation of
reserve requirements by member banks.
The proposed changes, on which the Board invited comment
from interested persons by March 1, 1968, would involve:

1.

establishment of coincident one-week reserve
periods for reserve city banks and so-called
"country banks";

2.

calculation of weekly average required reserves
based upon average deposits two weeks earlier;

3.

calculation of weekly average reserves held in
satisfaction for requirements based upon average
vault cash held two weeks earlier;

4.

provision for carrying forward to the next reserve
week of either excesses or deficiencies averaging
up to 2 per cent of required reserves.

These proposed changes do not represent any change in
Federal Reserve monetary policy, but are alterations in a technical
regulation and are designed to facilitate more efficient functioning

-

of the reserve mechanism.

2-

In combination, these changes are

expected to reduce uncertainties, both for member banks and the
Federal Reserve, as to the amount of reserves required during
the course of any reserve period.

Their adoption should moderate

pressures for reserve adjustments within the banking system that
sometimes develop near the close of a reserve period and can
produce sharp fluctuations in the availability of day-to-day funds.
The text of the amendment in the form that it was
forwarded for publication in the Federal Register is attached.

0

FEDERAL RESERVE SYSTEM
[12 CFR Part 204]
[Reg. D]
RESERVES OF MEMBER BANKS
Computation of Reserve Requirements

The Board of Governors is considering amending § 204.3(a)
and (b) to read as follows:
§ 204,3

Deficiencies 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 Wednesday
of each week.
(2) In determining whether a member bank has a deficiency or an
excess in its required reserve balance for any computation period, the
required reserve balance of such bank shall be based upon the average
daily net deposit balances and average daily currency and coin held by the
member bank at the close of business of each day during the second compu­
tation 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 of such required reserves, except that any portion of such excess
or deficiency not offset in the next period may not be carried forward to
additional computation periods.

2

(b)

Penalties,

(1) Deficiencies in reserve balances remaining

after the application of subparagraph (3) of paragraph (a) above will be
subject to penalties, assessed monthly on the basis of average dally
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,
*

*

*

*

*

The proposed changes are designed to provide for (1) establish­
ment of coincident one-week reserve periods for reserve city and country
banks; (2 ) calculation of weekly average required reserves based upon
average deposits two weeks earlier; (3) calculation of weekly average
reserves held in satisfaction for requirements based upon average vault
cash held two weeks earlier; and (4) carrying forward to the next reserve
week of either excesses or deficiencies averaging up to 2 per cent of
required reserves.

The changes are expected to reduce uncertainties as

to the amount of reserves required during the course of any reserve
period and to moderate pressures for reserve adjustments within the bank­
ing system that sometimes develop near the close of a reserve period and
can produce sharp fluctuations in the availability of day-to-day funds.
This notice is published pursuant to section 553(b) of Title 5,
United States Code, and § 262,2(a) of the Rules of Procedure of the Board
of Governors of the Federal Reserve System (12 CFR 262.2(a)),

To aid in the consideration of this matter by the Board,
interested persons are invited to submit, in writing, relevant data,
views or arguments*

Such material should be sent to the Secretary,

Board of Governors of the Federal Reserve System, Washington, D. C.
20551, to be received not later than March 1, 1968*

Under the Board's

Rules Regarding Availability of Information (12 CFR 261), such
materials will be made available for inspection and copying to any
person upon request unless the person submitting the material asks that
it be considered confidential.
Dated at Washington, D. C., this 29th day of January 1968.
By order of the Board of Governors.

(signed) Robert P. Forrestal
Robert P. Forrestal,
Assistant Secretary*

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