Full text of District Notices (Federal Reserve Bank of Dallas) : Amendment to Regulation D Relating to Low Reserve Tranche and Exemption, Circular No. 87-91

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December 11, 1987
Circular 87-91

TO:

All depository institutions in the
Eleventh Federal Reserve District
SUBJECT
Amendment to Regulation D relating to low reserve tranche and

exemption
DETAILS
The Board of Governors of the Federal Reserve System has announced
amendments to Regulation D increasing the amount of net transaction accounts
to which the 3 percent reserve requirement will apply in 1988 from $36.7
million to $40.5 million. The Board also increased the amount of a depository
institution's reservable liabilities that are subject to a zero percentage
reserve requirement from $2.9 million to $3.2 million of total
reservable
liabilities and increased the reporting cutoff level distinguishing weekly
reporters from quarterly reporters from $28.6 million to $30.0
million to
total deposits and other reservable liabilities.
These changes will be effective for weekly reporting institutions
starting with the reserve computation period beginning on Tuesday, December
29, 1987, and with the corresponding reserve maintenance period beginning
Thursday, December 31, 1987, for net transactions accounts, and on Thursday,
January 28, 1988, for other reservable liabilities. For institutions that
report quarterly, the tranche adjustment and the exemption will be effective
with the computation period beginning on Tuesday, December 15, 1987, and with
the reserve maintenance period beginning Thursday, January 14, 1988.
ATTACHMENTS
The Board's press release and the related Federal Register document
are attached.
MORE INFORMATION
For more information, please contact the Reserve Maintenance Division
at (214) 651-6407.
Sincerely yours,

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

For immediate release

December 3, 1987

The Federal Reserve Board today announced an increase
in

the

amount

3 percent

of

reserve

net

transaction

requirement

accounts

will

apply

to
in

which
1988

the
from

$36.7 million to $40.5 million.
The Board also increased the amount

of

a depository

institution's reservable liabilities that are subject to a zero
percentage

reserve

requirement

from

$2.9 million

to

$3.2 million of total reservable liabilities.
Additionally, the Board increased the reporting cutoff
level distinguishing weekly reporters

from quarterly reporters

from $28.6 million to $30.0 million of total deposits and other
reservable liabilities.
These adjustments

take

effect

beginning

December 15,

1987.
The

Board

made

the

changes

provisions of the Monetary Control Act.
Board

to amend

Depository

its

Regulation D —

institutions —

in

accordance

with

The Act requires

Reserve

Requirements

the
of

annually to increase the amount of

transaction accounts subject to a 3 percent reserve

-2requirement.

The annual adjustment must be 80 percent of the

annual percentage change

in the

all depository institutions.
transaction
June 30,

accounts

1986

of

transaction

accounts

held by

The growth in total net

all

depository

institutions

to June 30, 1987 was 13.0 percent.

from

The statutory

«

rule thus requires an increase of $3.8 million over last year's
amount to $40.5 million.
The
Depository
adjust

Board

is also

required

Institutions Act of

the

amount

reservable

of

a

liabilities

by

1982

are

Garn-St

to amend

depository
that

the

Regulation D to

institution's

exempt

Germain

from

total

reserve

requirements for the upcoming year by 80 percent of any annual
percentage

increase

in

total

depository

institutions.

liabilities

was

1987,

requiring

reservable

Growth

12.6

percent

an

increase

in

from
in

liabilities
total

June 30,
the

for

all

reservable

1986

reserve

to June 30,

requirement

exemption to $3.2 million.
The

Board

is also

increasing

level distinguishing weekly reporters

the

reporting

cutoff

from quarterly reporters

Jrom $28.6 million to $30.0 million of total deposits and other
reservable

liabilities.

The

cutoff

80 percent of the annual percentage
and

other

reservable

institutions.

The

liabilities

annual

adjustment

computed as of June 30 of each year.

level

increase
for
of

all
the

is

indexed

to

in total deposits
depository
cutoff

level

institutions with

is

total

-3deposits

and

other

reservable

liabilities

below

the

reserve

requirement exemption amount of $3.2 million are excused
reporting

even

on a quarterly basis

estimated from other sources.

Attachment

from

if their deposits can be

FEDERAL RESERVE SYSTEM
12 C.F.R. Part 204
[Regulation D; Docket No. R-0623]
RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
Reserve Requirement Ratios

AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Final rule.

SUMMARY:
Reserve

The Board is amending 12 CFR Part 204
Requirements

of

Depository

(Regulation D —

Institutions):

(1)

to

increase the amount of transaction accounts subject to a reserve
requirement

ratio

section 19(b)(2)(C)
§ 461(b)(2)(C)),
transaction

of

three

of

the

from

accounts;

percent,

Federal

$36.7 million

as

Reserve
to

reserve

percent,

requirement

of

section 1 9 ( b ) (11) (B)

of

zero
the

from

reservable liabilities;

reporters

(12 U.S.C.

(2) to increase the amount of
institution

level which is used

Act

Federal

$2.9 million
and

as

net

reservable

required

Reserve
to

of

that is subject to a

Act

by

(12 U.S.C.

$3.2 million

of

(3) to increase the reporting cutoff

to separate weekly reporters

from $28.6 million

by

$40.5 million

liabilities of each depository

§ 461 (b) (11) (B) ) ,

required

from quarterly

to $30.0 million of total deposits

and other reservable liabilities.
EFFECTIVE DATE:

December 15, 198 7.

FOR FURTHER INFORMATION CONTACT:
Attorney

(202/452-3778),

Legal

John Harry Jorgenson,
Division,

or

Pat

Senior

Mahoney,

-2-

Economist
users

(202/452-3827),

of

the

Earnestine
Governors

Division

Telecommunications

Hill
of

of

Device

or Dorothea Thompson

the

Federal

Monetary Affairs;

Reserve

for

the

Deaf

(TDD),

(202/452-3544);

System,

for

Board of

Washington,

D.C.,

20551.
SUPPLEMENTARY
Reserve Act
with

the

requires

Federal

transaction
prescribed

for

accounts

of

transaction

and

reserves

nonpersonal

under

depository

$25 million or
accounts

provides

System

above

that,

the

The

Federal

to maintain

against

time

its

deposits,

initial

as
reserve

section 19(b) (2) were set at three
institution's
less

and

total

$25 million.

before

transaction

at 12 percent

on

total

Section 19(b)(2)

December 31 of each

Board shall issue a regulation adjusting
year

Of

institution

regulations.

imposed
each

depository

Reserve

byBoard

percent

Section 19(b)(2)

each

accounts

requirements

further

INFORMATION:

year,

the

for the next calendar

the total dollar amount of the transaction account tranche

against which reserves must be maintained at a ratio of three
percent.

The adjustment

the percentage

change

in

in the tranche
total

is to be 80 percent of

transaction

accounts

for

all

depository institutions determined as of June 30 of each year.
Currently,
transaction

accounts

the amount of the
is $36.7 million.

low reserve

tranche

on

The growth in the total

net transaction accounts of all depository institutions from
June 30, 1986,
$518.1 billion to

to June 30, 1987, was 13.0
$585.4 billion).

percent

Inaccordance

(from
with

-3section

19(b)(2),

the

Board isamending

Regulation D

to

increase the amount of the low reserve tranche for transaction
accounts for 1987 by $3.8 million to $40.5 million.
Section 1 9 ( b ) (11)(A)
provides

that $2 million

depository
reserve

institution

of

liabilities
apply.
those

the

However,
that

would

liabilities^/

be subject

in

accordance

Board,

to which

Federal Reserve

to

Section 1 9 ( b ) (11)(A)

institution,

regulations

the

reservable

shall

requirement.

depository

of

of

to

the
the

otherwise

be

subject

(i.e., transaction

Section 1 9 ( b ) (11)(B)

to

a

a regulation

requirements.
the

total

of

adjusting

reservable

The change

reservable

institutions

rules

and

reservable

three

is

increases

only

the low

may be so designated.
of

the

for

Federal Reserve

liabilities

liabilities
one

Act

the Board shall

the next calendar year

in the amount

from

to

percent

accounts within

provides that, before December 31 of each year,

amount

each

this reserve requirement exemption

reserve requirement tranche)

dollar

percent

if transaction accounts are designated,

reserve requirement

issue

of each

permits

with

designate

a zero

Act

held
year

exempt

from

the

reserve

is to be made only if
at
to

all
the

depository
next.

The

percentage increase in the exemption is to be 80 percent of the
percentage increase in total reservable liabilities of all

1/
Reservable liabilities
include transaction accounts,
nonpersonal time deposits, and Eurocurrency liabilities as
defined in section 1 9 ( b ) (5) of the Federal Reserve Act.

-4-

depository

institutions

The

in

growth

total

determined

as of

from

June 30,

12.6 percent

(from

$1,046.2 billion

with

year.

reservable liabilities of all depository

institutions

accordance

June 30 each

1986,

to

1987,

was

to $1,177.9 billion).

section 19(b)(11),

Regulation D to increase

June 30,

the

Board

is

in

amending

the amount of the reserve requirement

exemption for 1987 by $0.3 million to $3.2 million.
As
modify

a result,

the

effective

low

reserve

December 29,

requirement on
(effective

of

1987)

December 29,

this

zero

these

(which

percent

amendments

is

$3.2 million of
1987)

applying

of

is

to

$40.5 million,

to apply a zero percent reserve

and

the remainder of

remaining after
be applied

effect

tranche

the first

requirement on
amount

the

a

transaction

three

percent

the low reserve

reserve

reserve

tranche.

requirement

it to transaction

accounts

Any

tranche

accounts will

then

to nonpersonal time deposits with maturities of less

than 1-1/2 years or to Eurocurrency liabilities,

both of which

are subject to a reserve requirement ratio of three percent.
The tranche adjustment and
exemption adjustment
effective

starting

beginning

on

corresponding
December 31,
(Thursday)
For

the reservable liabilities

for weekly reporting
with

(Tuesday)'

the

reserve

December 29,

institutions will be

computation
1987,

and

with

reserve maintenance periods beginning
1987,

for

January 28,

institutions

net
1987,

transaction
for other

that report quarterly,

period

accounts,

the

(Thursday)
and

on

reservable liabilities.
the tranche adjustment

-5-

and the exemption will be effective with the computation period
beginning on
maintenance
addition,
continue

(Tuesday)
period

December 15,

beginning

1987,

and with

the reserve

(Thursday) January 14,

all entities currently submitting Form

1988.

FR 2900

In
will

to submit reports to the Federal Reserve under current

reporting procedures.
In

order

institutions,
level

to reduce

reporting

burden

for

small

the Board established a deposit reporting cutoff

(currently

$28.6 million

reservable

liabilities)

frequency.

In March of 1985,

reporting cutoff
of

the

increase

to

total

total

determine

level equal

of

in

deposits
deposit

and other

reporting

the Board decided to index this
to 80 percent of the annual rate

deposits

other

screened

reservable

liabilities .2/

institutions

quarter

year to determine reporting frequency beginning

of each

are

and

dur ing

the

second

the following September.
All

U.S.

branches

and

agencies of foreign banks and

all Edge and Agreement corporations,
all other

regardless

of

size,

and

institutions with reservable liabilities in excess of

the exemption

level amount prescribed by

section 19(b)(11)

of

the Federal Reserve Act and with at least $28.6 million in

2/
Total deposits and other reservable liabilities is the sum
of gross transaction deposits, savings accounts, and time
deposits plus the sum of reservable obligations of affiliates,
ineligible
acceptance
liabilities,
and net Eurocurrency
liabilities.

-6-

total deposits and other reservable liabilities are required to
file weekly the Report of Transaction Accounts, Other Deposits
and

Vault

Cash

(FR

2900).

reservable liabilities
but with
than

Institutions

required

to

with

level

file

branches or
file

Transactions
cutoff

may

that obtain

foreign

the

reservable liabilities

the FR

2900

on

Certain

sources

The reporting

to determine whether an institution

liabilities

at or

the Quarterly

below

file

Vault Cash,

and Reservable Liabilities

the exemption level

Report of

Selected

Deposits,

(FR 29l0q) or the Annual

Report of Total Deposits and Reservable Liabilities

other

reservable

or that

Eurocurrency

thesame frequency.

amount must

and

less

quarterly.

fundsfrom non-U.S.

Report of

is also used

From June 30,

with

international banking facilities are

(FR 2950)

reservable

institutions

in excess of the exemption level amount

total deposits and other

$28.6 million

have

Depository

1986,

to June 30, 1987,

liabilities

$3.1 trillion to $3.3 trillion.

grew

(FR 2910a).

total deposits

6.0 percent,

from

This results in an increase in

the cutoff level distinguishing weekly

from quarterly reporters

of

$28.6 million

$1.4 million

$30.0 million.

from
Based

requirement exemption,
other

the
on

current

the

indexation

of

the

reservable liabilities

total

deposits

$3 .2 million

reserve

the cutoff level for total deposits and
above

which

reports

must be filed rises $0.3 million to $3.2 million,
with

to

and

are excused

other

reservable

from reporting

of

deposits

institutions

liabilities

below

if their deposits can

-7-

be

estimated

level

for

from

weekly

threshhold

for

other

sources.

reporters

reporting

and

will

be

The

$30.0 million

the

$3.2 million

used

in the second quarter

1988 deposits report screening process
quarterly reporters and

cutoff
level .

to identify weekly

and

the adjustments will be made when

the

new deposit reporting panels are implemented in September 1988.
Finally,
institution

to

cutoff level,
and

other

quarterly

the

Board

report

on

may

require

a weekly

basis

a

depository

regardless

of

the

if the institution manipulates its total deposits

reservable

liabilities

in

Similarly,

any

reporting.

order

to

qualify

depository

that reports quarterly may be required

for

institution

to report weekly and

to

maintain appropriate reserve balances with its Reserve Bank

if,

during

its

computation

period,

reservable liabilities or

it

understates

it overstates

its

usual

the deductions allowed

in computing required reserve balances.
Notice and Public participation
The provisions of 5 U.S.C. § 553(b)
and
with

public participation have not been
the adoption of these

amendments

relating

followed
because

to notice

in connection

the

amendments

involve adjustments prescribed by statute and an interpretative
statement reaffirming the Board's
practices.
depository

The

amendments

institutions.

also

reduce

Accordingly,

notice and public participation
the public interest.

policy

concerning

reporting

regulatory burdens on
the Board believes

that

is unnecessary and contrary to

-8-

Regulatory
section

605(b)

No. 96-354,

of

Flexibility
the

Act

Regulatory

Analysis.

Pursuant

Flexibility Act

(Pub.

5 U.S.C. § 601 et se q.), the Board certifies

the proposed

amendments

will

to
L.
that

not have a significant economic

impact on a substantial number of small entities.

The proposed

amendments reduce certain regulatory burdens for all depository
institutions,

reduce

institutions,

and

certain

burdens

have no particular

for

small

effect on

depository
other

small

entities.
List of Subjects in 12 CFR Part 204
Banks,

banking;

Currency;

Federal

Reserve

System;

Penalties and Reporting requirements.
Pursuant to the Board's authority under section 19 of
the Federal Reserve Act, 12 U.S.C.

§ 461 et seq., the Board is

amending 12 CFR Part 204 as follows:
Part 204 —

RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS

1.

The

authority

citation

for

12 CFR Part

204

is

revised to read as follows:
Authority:
the

Federal

371b,
Act

Reserve

461, 601,

of 1978

St-Germain

(12

Sections
Act

611);

(12 U.S.C.

section 7 of

U.S.C.

Depository

11(a),

§ 3105);

11(c),

19,

§§ 248(a),
the

Act of

25 (a)

248 (c),

International

and section

institutions

25,

of

371a,
Banking

411 of the Garn

1982

(12 U.S.C.

§

461) .
2.
paragraphs

In

section

204.9 -

Reserve

Requirement

Ratios,

(a)(1) and (a)(2) are revised to read as follows:

-9-

(a)(1)

Reserve

percentages.

The

following

reserve

ratios are prescribed for all depository institutions,
Agreement Corporations,

Edge and

and United States branches and agencies

of foreign banks:

Category

Reserve Requirement

Net transaction accountsV
$0 to $40.5 million

3 percent of amount

over $40.5 million

$1,215,000 plus 12% of amount
over $40.5 million

Nonpersonal time deposits
By original maturity
(or notice period):
Less than 1-1/2 years
1-1/2 years or more

0%

3%

Eurocurrency liabilities

3%

U

Dollar amounts do not reflect
the next paragraph.

(2)
depository

Exemption

institution,

from

the adjustment to be made by

reserve

requirements.

Each

Edge or Agreement Corporation, and U.S.

branch or agency of a foreign bank is subject to a zero percent
reserve

requirement

on

subject

to

reserve

nonpersonal

the
time

low

an

deposits,

amount of
tranche

its transaction
in

paragraph

accounts
(a) (1),

or Eurocurrency liabilities or any

-10-

comb ination thereof not in excess of $3 .2 million determined in
accordance with section 204.3(a)(3) of this Part.
*

By

order

of

*

the

*

Board

*

of

*

Governors

of

the Federal

Reserve System, December 2, 1987.

william W. Wiles
Secretary of the Board