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F ederal reserve Ba n k DALLAS, TEXAS D allas of 75222 Circular No. 81-87 April 29, 1981 AMENDMENT TO REGULATION D (Exempting C ertain Kinds of Time Deposits Representing Funds of D eferred Compensation Plans From Reserve Requirements) TO THE CHIEF EXECUTIVE OF ALL FINANCIAL INSTITUTIONS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Printed on the following pages is the te x t of a press release issued April 10, 1981, by the Board of Governors of the Federal Reserve System and the Federal R egister document announcing an am endm ent to its rules to exem pt from reserve requirem ents certain kinds of tim e deposits representing funds of deferred compensation plans. The exemption is for nontransferable tim e deposits held by an employer as p a rt of an unfunded deferred compensation plan established in conformity with Subtitle D of the Internal Revenue Act of 1978. Under the Board's ruling, effectiv e April 30, 1981, such tim e deposits will be regarded as personal tim e deposits and will consequently be free of reserve require ments. A copy of all cu rren t am endments to Regulation D is included in the enclosed slip sheet dated April 1981. This slip sheet and the current index should be filed in Volume 2 of the Regulations and Bulletins Binders furnished by this Bank, and the slip sheet dated January 1981 should be destroyed. Additional copies of the amendm ents will be furnished upon request to the D epartm ent of Communications, Financial and Community Affairs, Ext. 6266. Sincerely yours, William H. Wallace F irst Vice President Enclosure Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) F E D E R A L R E S E R V E p re s s re le a s e j^ ^ For immediate release April 10, 1981 The Federal Reserve Board has amended its rules to exempt from reserve requirements certain kinds of time deposits representing funds of deferred compensation plans. Deferred compensation plans allow delayed receipt of presently earned income to a future time and the Board's action is thus expected to result in more even application of reserve requirements to time deposits representing retirement income. The exemption is for nontransferable time deposits held by an employer as part of an unfunded deferred compensation plan established in conformity with Subtitle D of the Internal Revenue Act of 1978. Under the Board's ruling, such time deposits will be regarded as personal time deposits and will consequently be free of reserve requirements. Previously, time deposits representing unfunded deferred compensation plans had been regarded as nonpersonal time deposits subject to reserve requirements. An unfunded deferred compensation plan is one in which the deposits are held by the employer rather than being placed in a trust or being similarly "funded." The Board's action amended its Regulation D — of Depository Institutions. 1981, is attached. Attachment Reserve Requirements The text of the amendment, effective April 30, TITLE 12 — CHAPTER II — SUBCHAPTER A — BANKS AND BANKING FEDERAL RESERVE SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [Regulation D] [Docket No. R-0355] Part 204 — RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS Time Deposits of Deferred Compensation Plans AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board of Governors of the Federal Reserve System has amended its Regulation D — Reserve Requirements of Depository Institutions (12 CFR Part 204), which imposes federal reserve requirements on depository institutions that maintain transaction accounts or nonpersonal time deposits. Under the amendment, nontransferable time deposits representing funds of deferred compensation plans established pursuant to subtitle D of the Revenue Act of 1978, Pub. L. No. 95-600, 92 Stat. 2763 (1978), will be regarded as personal time deposits, and thus will not be subject to reserve requirements. EFFECTIVE DATE: April 30, 1981. Depository institutions may begin reporting time deposits of deferred compensation accounts as personal time deposits during the computation period beginning that date. FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Associate General Counsel (202/452-3625), Paul S. Pilecki, Senior Attorney (202/452-3281), or Joseph R. Alexander, Attorney (202/452-2489), Legal Division, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. SUPPLEMENTARY INFORMATION: The Monetary Control Act of 1980 (Title I of Pub. L. No. 96-221, 94 Stat. 132) (the "Act"), authorizes the Federal Reserve to impose reserve requirements solely for the purpose of con ducting monetary policy on all depository institutions that maintain transaction accounts or nonpersonal time deposits. Under Regulation D - Reserve Requirements of Depository Institutions (12 CFR Part 204), which implements the provisions of the Act, "nonpersonal time deposits" are defined as transferable time deposits or accounts, or time deposits or accounts which represent funds deposited to the credit of, or in which any beneficial interest is held by, a depositor that is not a natural person. In adopting Regulation D to implement the Act, the Board determined that IRA and Keogh Plan time deposits and time deposits held by trustees and other fiduciaries should be regarded as personal time deposits where the entire beneficial interest is held by natural - 2- persons, even though the funds technically may be held in the name of a trustee who is not a natural person (12 CFR § 204.2(f)). The Board has determined that time deposit accounts held pursuant to unfunded deferred compensation plans of state and local governments and certain private employers authorized by subtitle D of the Revenue Act of 1978, Pub. L. No. 95-600, 92 Stat. 2763 (1978), also should be regarded as personal time deposits for purposes of Regulation D, notwithstanding the IRS requirement that such funds remain solely the property of the sponsoring organization subject only to the claims of its general creditors. Therefore, the Board is amending Regulation D to exempt such accounts from the definition of nonpersonal time deposits. It should be noted that nontransferable time deposits of funded deferred compensation plans generally are regarded as personal time deposits under Regulation D at present as funds held by a trustee or other fiduciary. The Board believes that this amendment will result in more even application of reserve requirements on time deposits of various types of retirement income arrangements. Consequently, the Board, for good cause, finds that the notice and public procedure provisions of 5 U.S.C. § 553(b) with regard to this action are contrary to the public interest, and that deferral of the effective date pursuant to 5 U.S.C. S 553(d) is not necessary. Effective April 30, 1981, pursuant to the Board's authority under section 19 of the Federal Reserve Act, 12 U.S.C. § 461 et seq., section 204.2(f), subparagraph (2) of Regulation D (12 CFR Part 204) is amended to read as follows: SECTION 204.2 — * (f) * * DEFINITIONS * * (2) "Nonpersonal time deposit” does not include nontransferable time deposits to the credit of or in which the entire beneficial interest is held by an individual pursuant to an Individual Retirement Account or Keogh (H.R. 10) Plan under 26 U.S.C. (I.R.C. 1954) §§ 408, 401, or nontransferable time deposits held by an employer as part of an unfunded deferred compensation plan established pursuant to subtitle D of the Revenue Act of 1978 (Pub. L. No. 95-600, 92 Stat. 2763). * * K By order of the Board of Governors, April 10, 1981. (Signed) James McAfee James McAfee Assistant Secretary of the Board [SEAL] BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS AMENDMENTS TO REGULATION D t As amended effective April 10, 1981 Effective N ovem ber 13. 1980, sections 204.2, 204.3, and 204.4 are amended as follows: 1. In section 204.2, paragraph (h)(1) is revised to read as follows: SECTION 204.2— DEFINITIONS * * * * * (h) ‘‘Eurocurrency liabilities” means the sum o f the following: (1) Transactions with related offices outside the United Stares. (i) * * * (A) * * * (B) assets (including participations) held by its non-United States offices or by non-United States offices o f an affiliated Edge or Agreement C o rp o ration that were acquired after O ctob er 6. 1979, from its United States offices. (ii) * * * (A) * * * (B) assets (including participations) held by its foreign bank (including offices thereof lo cated outside the United States), by its parent hold ing company, or by non-United States offices of an affiliated Edge or Agreement Corporation that were acquired after O cto ber 6, 1979, from the United States branch or agency (other than assets required to be sold by Federal or State supervisory authori ties). * * * * * 2. In section 204.3, paragraph (d) is rev ised to read as follows: SECTION 204.3— COMPUTATION AND MAINTENANCE * * * * * (d) Special rule for depository institutions that have total deposits of less than $15 million. (1) A depository institution with total deposits o f less than S15 million shall file a report o f d e posits once each calendar quarter for a seven-day computation period that begins on the third Thurs day of a given month during the calendar quarter. Each Reserve Bank shall divide the depository in stitutions in its District that qualify under this para graph into three substantially equal groups and as sign each group a different month to report during each calendar quarter. (2 ) * * * (3) A depository institution that has less than $15 million in total deposits as o f D ecem ber 31. 1979. shall qualify under this paragraph until it re ports total deposits o f S15 million or more for two consecutive calendar quarters. * * * * * 3. In section 2 0 4 .4 , paragraph (g) is revised to read as follows: SECTION 204.4— TRANSITIONAL ADJUSTMENTS * * * * * (g) Mergers and consolidations. The following rules concerning transitional adjustments apply to m ergers and consolidations o f depository institu tions. (1) Where all depository institutions involved in a merger or consolidation are subject to the same paragraph of the transitional adjustment rules con tained in paragraphs (a) through (f) o f this section during the reserve computation period immediately preceding the merger, the surviving institution shall continue to com pute its transitional adjustment of required reserves under such applicable paragraph. t For this Regulation to be complete retain: 1) Printed Regulation pamphlet dated November 13. 1980. 2) Supplement slip sheet dated August 1980. 3) This slip sheet. (Destroy slip sheet dated January 1981.) APRIL 1981 of daily average total required reserves of all insti tutions involved in the merger or consolidation dur ing the reserve com putation period im m ediately preceding the date of the merger. (A) If the m erger occurs before N o vem ber 6. 1980, such ratio of daily average total required reserves shall be computed using the re serve requirement ratios in section 204.8(b). (B) If the m erger occurs on or after November 6, 1980, such ratio of daily average total required reserves shall be computed using the re serve requirement ratios in section 204.8(a) without Maintenance periods occurring Percentage applied to regard to the transitional adjustments of this sec during quarterly periods difference to compute tion. following merger amount to be subtracted (iii) The low reserve tranche on transaction 1 87.5 accounts (section 204.8(a)) shall be allocated to 2 75.0 each institution involved in the merger or consoli 3 62.5 dation using the ratio com puted in subparagraph 4 50.0 (2)(ii) and the reserve requirement tranches on de 5 37.5 mand deposits (section 204.8(b)) shall be allocated 6 25.0 to member bank deposits using such ratio of daily 7 12.5 average total required reserves. 8 and succeeding 0 (iv) The vault cash of the surviving deposi tory institution also will be allocated to each institu tion involved in the merger or consolidation accord (2) (i) W here the depository institutions in to the ratio that daily average vault cash of ing volved in a merger or consolidation are not subject each depository institution involved in the merger to the same paragraph of the transitional adjustment was to the sum o f daily average vault cash of all rules contained in paragraphs (a) through (f) of this institutions involved in the merger or consolidation section and such merger or consolidation occurs during the reserve computation period immediately (A) on or after July 1, 1979, between a preceding the date of the merger. nonm em ber bank and a bank that was a member (v) The amount of reserves which shall be bank on or after July 1, 1979, and the survivor is a m aintained shall be reduced by an amount deter nonmember bank; mined by multiplying the amount by which the re (B) on or after March 31, 1980, between quired reserves during the computation period im a m em ber bank and a n o nm em ber bank and the m e d iately p rec ed in g the date of the m erger survivor is a member bank; or (com pu ted as if the d ep o sito ry in stitutio n s had (C) on or after Septem ber 1, 1980, be merged) exceeds the sum of the actual required re tween any other depository institutions serves o f each dep o sito ry institution during the the required reserves o f the surviving institution sam e com putation period, times the appropriate shall be computed by allocating its deposits. Euro percentage as specified in the following schedule: currency liabilities, other reservable claim s, bal ances due from other depository institutions and Maintenance periods occurring Percentage applied to cash items in process of collection to each deposi during quarterly periods difference to compute tory institution involved in the merger transaction following merger amount to be subtracted and applying to such amounts the transitional ad 1 87.5 justm ent rule o f paragraphs (a) through ( 0 of this 2 75.0 section to which each such depository institution 62.5 3 was subject during the reserve computation period 50.0 4 immediately prior to the merger or consolidation. 5 37.5 (ii) The deposits o f the surviving institution 25.0 6 shall be allocated according to the ratio that daily 12.5 7 average total required reserves of each depository 8 and succeeding 0 institution involved in the merger were to the sum except that the amount of reserves which shall be m aintained shall be reduced by an amount deter mined by multiplying the amount by which the re quired reserves during the computation period im m e d iately p rec ed in g the date o f the m erger (co m p u ted as if the dep o sito ry in stitu tio ns had merged) exceeds the sum of the actual required re serves o f each d ep osito ry institution during the same com putation p erio d, times the appropriate percentage as specified in the following schedule: E ffective D ecem ber I, 1980 sections 2 0 4 .2 , 204.3. 204.4 and 204.6 are amended as follows: 1. In section 204.2(e)(6), the second sentence is amended to read as set forth below: SECTIO N 204.2— DEFINITIONS * * * * * (e) “ T ran sactio n account” * * * * * * * * (6) * * * An account that permits or autho rizes more than three such withdrawals in a calen dar month, or statement cycle (or similar period) of at least four w eeks, is a "tra n sac tio n ac co u n t” whether or not more than three such withdrawals actually are made during such period. * * * >|< sje sje sje $ 2. In section 20 4.2 (b )( I )(vii), by inserting the word “ which” after the words “ withdrawal period has expired and” and before the words “ have not been renewed.” stances, the low reserve tranche may be reallocated at the beginning of a calendar year. (2) Edge and Agreement Corporations. (j) * * * (ii) * * * [f the low reserve tranche cannot be fully utilized by a single office or by a group of offices filing a single report of deposits, the unused portion of the tranche may be assigned to other of fices of the same institution until the amount of the tranche is exhausted. An Edge or Agreement Cor poration shall determine this assignment subject to the restriction that if a portion of the tranche is as signed to an office in a particular State, any unused portion must first be assigned to other offices lo cated within the same State and within the same Federal Reserve District, that is, to other offices in cluded on the same aggregated report of deposits. If necessary in order to avoid under-utilization of the low reserve tran c h e, the allo cation may be changed at the beginning of a calendar month. Un der other circum stances, the low reserve tranche may be reallocated at the beginning of a calendar year. * * * * * 3. In section 204.3(a), the third sentence is revised by deleting “ $5 million” and inserting in its place “ $15 million.” 5. In sections 204.4(b)(l)(ii) and (2)(ii), by delet ing the word “ exceeds” and inserting in its place “ exceed.” 4. In section 204.3(a), subparagraphs (l)(ii) and (2)(ii) are revised to read as follows: 6. In section 204.4(b)(2), by deleting the paren theses that appear around the phrase “ than its re quired reserves computed using the reserve ratios in effect on August 31, 1980.” SECTIO N 2 04.3— CO M PU TA TIO N AND M A IN TEN AN C E (a) M aintenance o f required reserves. * * * (1) U nited States branches and agencies foreign banks. ^ *** (ii) * * * If the low reserve tranche cannot be fully utilized by a single office or by a group of offices filing a single report of deposits, the unused portion of the tranche may be assigned to other of fices o f the same foreign bank until the amount of the tranche is exhausted. The foreign bank shall de termine this assignm ent subject to the restriction that if a portion of the tranche is assigned to an of fice in a particular State, any unused portion must first be assigned to other offices located within the same State and within the same Federal Reserve D istrict, that is, to other offices included on the same aggregated report of deposits. If necessary in order to avoid under-utilization of the low reserve tranche, the allocation may be changed at the be ginning of a calendar month. Under other circum 7. In sectio n 2 0 4 .4 (g )(2 )(iv ), by deleting the phrase “ daily average vault ca sh ” and inserting of “ daily average total required rese rv e s” in both places that it appears. 8. In section 2 0 4 .6 (b )(1 ), by deleting the word “ o n ” which appears after the word “ imposed” and before the word “ for.” Effective December 11, 1980, section 204.2 is amended to read as follows: In section 204.2, paragraph (h) is revised to read as follows: SEC TIO N 20 4.2— DEFINITIONS * * * * * (h) “ E u ro cu rren cy liabilities” means: (1) For a depository institution or an Edge or Agreement Corporation organized under the laws of the United States, the sum, if positive, of the fol lowing: (i) net balances due to its non-United States offices from its United States offices, (ii) assets (including participations) held by its n o n-U n ited S tates o ffices or by non-U nited States offices of an affiliated Edge or Agreement C orporation that were acquired after O ctober 6, 1979, from its United States offices, and (iii) credit outstanding from its non-United States offices to United States residents (other than assets acq uired and net b alances due from its United States offices), except credit extended (i) in the aggregate am ount o f $100,000 or less to any United States resident, (ii) by a non-United States office that at no time during the computation period had credit outstanding to United States residents ex ceeding $1 m illion, or (iii) to an institution that will be maintaining reserves on such credit pursuant to this Part. Credit extended to a foreign branch, office, subsidiary, affiliate or other foreign estab lishment (“ foreign affiliate” ) controlled by one or more d o m estic c o rp o ratio n s is not regarded as credit extended to a United States resident if the proceeds will be used in its foreign business or that of other foreign affiliates of the controlling domes tic corporation(s). (2) For a United States branch or agency of foreign bank, the sum, if positive, of the following: (i) net balances due to its foreign bank (in cluding offices thereof located outside the United States) after deducting an amount equal to 8 per cent of the following: the United States branch’s or agency’s total assets less the sum of United States currency and coin, cash items in process of collec tion, unposted debits, balances due from depository ■institutions organized under the laws of the United States, balances due from other foreign banks, bal ances due from foreign central banks, and net bal ances due from its foreign bank and the foreign bank’s United States and non-United States offices, and (ii) assets (including participations) held by its foreign bank (including offices thereof located outside the United States), by its parent holding company, or by non-United States offices of an af filiated Edge or Agreement Corporation that were acquired after O ctober 6, 1979, from the United States branch or agency (other than assets required to be sold by Federal or State supervisory authori ties). Effective January 15, 1981, section 204.3 (d) is am ended by revising subparagraph (2) to read as follows: SECTIO N 204 .3 — C O M PU TA TIO N AND M A IN T E N A N C E * * * * * (d) Special ru le for depository institutions that have total deposits o f less th a n $15 million. * * * * * (2) R equired reserves are com puted on the basis of the depository institution’s daily average deposit balances during the seven-day computation period. In determining the reserve balance that a depository institution is required to maintain with the Federal Reserve, the average daily vault cash held d uring the co m putation period is deducted from the am ount of the institution’s required re serves. The reserve balance that is required to be maintained with the Federal Reserve shall be main tained during a corresponding period that begins on the fou rth T h ursday fo llo w in g the end of the institu tion ’s com putation period and ends on the third Wednesday after the close of the institution’s next computation period. Such reserve balance shall be maintained in the amount required on a daily av a erage basis during each week of the quarterly re serve maintenance period. * * * * * E ffectiv e A pril 30, 1981, section 2 0 4.2 (f) is amended by revising subparagraph (2) to read as fol lows: S E C T IO N 2 0 4 .2 — D E F IN IT IO N S * * * * * (0 *** (2) “ Nonpersonal time deposit” does not in clude nontransferable time deposits to the credit of or in which the entire beneficial interest is held by an individual pursuant to an Individual Retirement Account or Keogh (H.R. 10) Plan under 26 U.S.C. (I.R.C. 1954) §§ 408, 401, or nontransferable time deposits held by an employer as part of an unfunded deferred compensation plan established pursuant to subtitle D of the Revenue Act of 1978 (Pub. L. No. 95-600, 92 Stat. 2763). INDEX TO REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Regulation Date A - EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS 9-1-80 B - EQUAL CREDIT OPPORTUNITY Amendments to Reg B 3-23-77 February 1981 C - HOME MORTGAGE DISCLOSURE Amendments to Reg C 6-28-76 12-5-80 D - RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS Supplement to Reg D Amendments to Reg D 11-13-80 August 1980 April 1981 E - ELECTRONIC FUND TRANSFERS Amendment to Reg E Amendment to Reg E As amended 5-10-80 May 1980 January 1981 F - SECURITIES OF MEMBER STATE BANKS* Amendment to Reg F 1-29-79 November 1979 G - See SECURITIES CREDIT TRANSACTIONS H - MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM Amendments to Reg H 3-18-69 January 1980 I - ISSUE AND CANCELLATION OF CAPITAL STOCK OF FEDERAL RESERVE BANKS 2-1-63 J - COLLECTION OF CHECKS AND OTHER ITEMS AND TRANSFERS OF FUNDS Information Contained in C ircular 80-202 9-1-77 K - INTERNATIONAL BANKING OPERATIONS Amendments to Reg K 6-14-79 D ecember 1980 L - MANAGEMENT OFFICIAL INTERLOCKS As amended 5-9-80 M - (RESCINDED) N - RELATIONS WITH FOREIGN BANKS AND BANKERS 2-13-62 O - LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS 12-31-79 P - MINIMUM SECURITY DEVICES AND PROCEDURES FOR FEDERAL RESERVE BANKS AND STATE MEMBER BANKS* Amendment to Reg P 1-13-69 March 1981 ♦R egulations F and P and re la te d forms will be furnished only upon request. / Q - INTEREST ON DEPOSITS Supplement to Reg Q Information Contained in the Following Circulars: 80-98, 80-110, 80-117, 80-199, 81-3, 81-58, 81-70 R - RELATIONSHIPS WITH DEALERS IN SECURITIES UNDER SECTION 32 OF THE BANKING ACT OF 1933 S - REIMBURSEMENT TO FINANCIAL INSTITUTIONS FOR ASSEMBLING OR PROVIDING FINANCIAL RECORDS 1-15-81 January 1981 1-1-70 10-1-79 T - See SECURITIES CREDIT TRANSACTIONS U - See SECURITIES CREDIT TRANSACTIONS V - LOAN GUARANTEES FOR DEFENSE PRODUCTION* W - (TERMINATED MAY 7, 1952) X - See SECURITIES CREDIT TRANSACTIONS Y - BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL Amendments to Reg Y 4-5-78 December 1980 Z - TRUTH IN LENDING Amendments to Reg Z Amendment to Reg Z Information Contained in Circular 80-142 As amended 3-23-77 May 1980 Septem ber 1980 SECURITIES CREDIT TRANSACTIONS Regulation X -RULES GOVERNING BORROWERS WHO OBTAIN SECURITIES CREDIT Regulation G -SECURITIES CREDIT BY PERSONS OTHER THAN BANKS, BROKERS, OR DEALERS Regulation T - CREDIT BY BROKERS AND DEALERS Regulation U - CREDIT BY BANKS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCKS June 1977 Supplement to Reg G Supplement to Reg U Supplement to Reg T Amendments to Reg T Amendments to Reg T 11-1-71 8-20-76 6-1-77 6-1-77 6-15-78 6-15-78 10-30-78 August 1980 Septem ber 1980 AA - UNFAIR OR DECEPTIVE ACTS OR PRACTICES 9-27-76 BB - COMMUNITY REINVESTMENT Amendment to Reg BB 11-6-78 4-26-79 ♦N o t currently furnished in binders. April 1981
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