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Federal R eserve Bank OF DALLAS TONY J. SALVAGGIO FIR S T V IC E PR ES ID EN T December 20, 1993 DALLAS, TE X A S 7 5 2 6 5 -5 9 0 6 Notice 93-130 TO: All depository institutions in the Eleventh Federal Reserve District SUBJECT Amendment to Regulation D (Reserve Requirements of Depository Institutions) DETAILS The Board of Governors of the Federal Reserve System has amended Regulation D to increase from $46.8 million to $51.9 million in the net transaction accounts to which a three-percent reserve requirement will apply in 1994. (This adjustment is the low reserve tranche adjustment.) The Board also increased from $3.8 million to $4.0 million the amount of reservable liabilities of each depository institution that is subject to a zero-percent reserve requirement. Additionally, the Board maintained at $44.8 million the deposit cutoff level that is used in conjunction with the reservable liabilities exemption amount to determine the frequency of deposit reporting. The low reserve tranche adjustment and the reservable liabilities exemption adjustment will be effective for weekly reporting institutions starting with the reserve computation period beginning Tuesday, December 21, 1993, and with the corresponding reserve maintenance period beginning Thurs day, December 23, 1993. For institutions that report quarterly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will be effective with the computation period beginning Tuesday, December 21, 1993, and with the corresponding reserve maintenance period beginning Thurs day, January 20, 1994. ATTACHMENT A copy of the Board’s notice (Federal Reserve System Docket No. R-0816) is attached. MORE INFORMATION For more information, please contact this Bank’s Reserve and Risk Management Division at (214) 922-5646. Depository institutions in the El Paso territory should contact the Reserve Maintenance Division in the El Paso Office at (915) 521-8212. Depository institutions in the Houston territory For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - should contact the Reserve Maintenance Division in the Houston Office at (713) 652-1538. Depository institutions in the San Antonio territory should contact the Reserve Maintenance Division in the San Antonio Office at (210) 978-1443. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely, FEDERAL RESERVE SYSTEM 12 CFR Part 204 [Regulation D; Docket No. R-0816] Reserve R e t i r e m e n t s of Depository Institutions Reserve Requirement Ratios AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board is amending Regulation D, Reserve Requirements of Depository Institutions, to increase the amount of transaction accounts subject to a reserve requirement ratio of three percent, Reserve Act, as required by section 19( b ) (2)(C) of the Federal from $46.8 million to $51.9 million of net transaction accounts. This adjustment is known as the low reserve tranche adjustment. The $3.8 million to $4.0 million the Board has increased from amount of reservable liabilities of each depository institution that is subject to a reserve requirement of zero percent. This action is required by section 1 9 ( b ) (11)(B) of the Federal Reserve Act, and the adjustment is known as the reservable liabilities exemption adjustment. The Board is also leaving unchanged at $44.8 million the deposit cutoff level that is used in conjunction with reservable liabilities exemption amount to determine the frequency of deposit reporting. DATES: Effective D a t e : December 21, Compliance D a t e s : report weekly, 1993. For depository institutions that the low reserve tranche adjustment and thp the 2 reservable liabilities exemption adjustment will be effective on the reserve computation period that begins Tuesday, 1993, December 21, and on the corresponding reserve maintenance period that begins Thursday, quarterly, December 23, 1993. For institutions that report the low reserve tranche adjustment and the reservable liabilities exemption adjustment will be effective on the reserve computation period that begins Tuesday, December 21, 19 93, and on the corresponding reserve maintenance period that begins Thursday, January 20, 1994. For all depository institutions, the deposit cutoff level will be used to screen institutions in the second quarter of 1994 to determine the reporting frequency for the twelve mon th period that begins in September 1994. FOR FURTHER INFORMATION CONTACT: Patrick J. McDivitt, (202/452-3818), Legal Division, (202/452-3790), Division of Monetary Affairs, of the Federal Reserve System. or June O'Brien, Board of Governors (TDD) , Dorothea Thompson Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, SUPPLEMENTARY INFORMATION: Reserve Act Economist For the hearing impaired o n l y . Telecommunications Device for the Deaf (202/452-3544), Attorney (12 U.S.C. DC 20551. Section 19(b)(2) of the Federal 4 6 1 ( b ) (2)) requires each depository institution to maintain reserves against its transaction accounts and nonpersonal time deposits, regulations. as prescribed by Board The initial reserve requirements imposed under section 1 9 ( b ) (2) were set at three percent for net transaction accounts of $25 million or less and at 12 percent on net transaction accounts above $25 million for each depository institution. Effective April 2, 1992, the Board lowered the required reserve ratio applicable to transaction account balances exceeding the low reserve tranche from 12 percent to 10 percent. Section 19(b)(2) also provides that, before December 31 of each year, the Board shall issue a regulation adjusting for the next calendar year the total dollar amount of the transaction account tranche against which reserves must be maintained at a ratio of three percent. The adjustment in the tranche is to be 80 percent of the percentage change in net transaction accounts at all depository institutions over the one-year period that ends on the June 30 prior to the adjustment. Currently, the low reserve tranche on net transaction accounts is $46.8 million. The increase in the net transaction accounts of all depository institutions from June 30, 1992, June 30, 1993 was 13.5 percent $789.3 billion). (from $695.4 billion to In accordance with section 19(b)(2), is amending Regulation D to (12 CFR Part 204) the Board to increase the low reserve tranche for transaction accounts for 1994 by $5.1 million to $51.9 million. Section 1 9 ( b ) (11)(A) of the Federal Reserve Act (12 U.S.C. 461 (b)(11)(B)) provides that $2 million of reservable liabilities!7 of each depository institution shall be subject to Reservable liabilities include transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities as defined in section 19(b)(5) of the Federal Reserve Act. The reserve ratio on nonpersonal time deposits and Eurocurrency liabilities is zero percent. 4 a zero percent reserve requirement. each depository institution, regulations of the Board, Section 19(b) (11) (A) permits in accordance with the rules and to designate the reservable liabilities to which this reserve requirement exemption is to apply. However, if net transaction accounts are designated, only those that would otherwise be subject to a three percent reserve requirement (i .e .. net transaction accounts within the- low reserve requirement tranche) may be so designated. Section 19(b)(11)(B) of the Federal Reserve Act provides that, before December 31 of each year, the Board shall issue a regulation adjusting for the next calendar year the dollar amount of reservable liabilities exempt from reserve requirements. Unlike the adjustment for net transaction accounts, which adjustment can result in a decrease as well as an increase, the change in the exemption amount is to be made only if the total reservable liabilities held at all depository institutions increases from one year to the next. The percentage increase in the exemption is to be 80 percent of the increase in total reservable liabilities of all depository institutions as of the year ending June 30. Total reservable liabilities of all depository institutions from June 30, increased by 7.4 percent $1,493.8 billion). 1992, to June 30, 1993, (from $1,390.6 billion to Under section 1 9 (b) (11) (B) , the reservable liabilities exemption amount will be increased by $0.2 million. Consequently, the reservable liabilities exemption amount for 1994 will increase to $4.0 million. 5 The effect of the application of section 19(b) of the Federal Reserve Act to the change in the total net transaction accounts and the change in the total reservable liabilities from June 30, 1992 to June 30, tranche to $51.9 million, 1993 is to increase the low reserve to apply a zero percent reserve requirement on the first $4.0 million of transaction accounts, and to apply a three percent reserve requirement on the remainder of the low reserve tranche. The tranche adjustment and the reservable liabilities exemption adjustment for weekly reporting institutions will be effective on the reserve computation period beginning Tuesday, December 21, 1993, and on the corresponding reserve maintenance period beginning Thursday, that report quarterly, December 23, 1993. For institutions the tranche adjustment and the reservable liabilities exemption adjustment will be effective on the computation period beginning Tuesday, December 21, 1993, and on the reserve maintenance period beginning Thursday, 1994. In addition, January 20, all institutions currently submitting Form FR 2900 must continue to submit reports to the Federal Reserve under current reporting procedures. In order to reduce the reporting burden for small institutions, the Board has established a deposit reporting cutoff level to determine deposit reporting frequency. Institutions are screened during the second quarter of each year to determine reporting frequency beginning the following September. In July of 1988 the Board set the cutoff level at $40 million plus an amount equal to 80 percent of the annual rate of increase of total deposits.-’ The current reporting cutoff level is $44.8 million. From June 30, 1992, fell 0.02 percent, to June 30, 1993, total deposits from $3,794.2 billion to $3,793.5 billion. This results in no change in the deposit cutoff level that determines the frequency of reporting. Consequently, cutoff level will remain at $44.8 million. the deposit Based on the indexation of the reservable liabilities exemption, the cutoff level for total deposits above which reports of deposits must be filed will rise from $3.8 million to $4.0 million. Institutions with total deposits below $4.0 million are excused from reporting if their deposits can be estimated from other data sources. The $44.8 million cutoff level for weekly versus quarterly FR 2900 reporting and for quarterly FR 2910q versus annual FR 2 910a reporting, and the $4.0 million level threshold for reporting will be used in the second quarter 1994 deposits report screening process, and the adjustments will be made when the new deposit reporting panels are implemented in September 1994. All U.S. branches and agencies of foreign banks and all Edge and Agreement Corporations, regardless of size, to file weekly the Report of Transaction Accounts, and Vault Cash (FR 2900). are required Other Deposits All other institutions that have "Total deposits" as used in determining the cutoff level includes not only gross transaction deposits, savings accounts, and time deposits, but also reservable obligations of affiliates, ineligible acceptance liabilities, and net Eurocurrency liabilities . - 7 reservable liabilities in excess of the exemption level prescribed by section 1 9 ( b ) (11) of the Federal Reserve Act as "nonexempt institutions") the deposit cutoff level and total deposits at least equal to ($44.8 million) are also required to file weekly the Report of Transaction Accounts, and Vault Cash (FR 2900). (known Other Deposits However, nonexempt institutions with total deposits less than the deposit cutoff level ($44.8 million), may file the FR 2900 quarterly for the twelve month period starting September 1994. Institutions that obtain funds from non-U.S. sources or that have foreign branches or international banking facilities are required to file the Report of Certain Eurocurrency Transactions (FR 2950/2951) at the same frequency as they file the FR 2900. Institutions with reservable liabilities at or below the exemption level institutions") ($4.0 million) (known as "exempt must file the Quarterly Report of Selected Deposits, Vault Cash, and Reservable Liabilities (FR 2910q) if their total deposits are not below the deposit cutoff level ($44.8 million). Exempt institutions with total deposits less than the deposit cutoff level but more than the exemption amount must file the Annual Report of Total Deposits and Reservable Liabilities (FR 2910a). Institutions that have total deposits less than the exemption amount ($4.0 million) are not required to file deposit reports if their deposits can be estimated from other data sources. 8 Finally, the Board may require a depository institution to report on a weekly basis, regardless of the cutoff level, if the institution manipulates its total deposits and other reservable liabilities in order to qualify for quarterly reporting. Similarly, any depository institution that reports quarterly may be required to report weekly and to maintain appropriate reserve balances with its Reserve Bank if, during its computation period, it understates its usual reservable liabilities or it overstates the deductions allowed in computing required reserve balances. Notice and Public Participation. 5 U.S.C. 553(b) The provisions of relating to notice and public participation have not been followed in connection with the adoption of these amendments because the amendments involve adjustments prescribed by statute and by an interpretative statement reaffirming the Board's policy concerning reporting practices. The amendments also reduce regulatory burdens on depository institutions. Accordingly, determines, the Board finds good cause for determining, and so that notice and public participation are unnecessary and contrary to the public interest. The provisions of 5 U.S.C. 553(d) relating to notice of the effective date of a rule have not been followed in connection with the adoption of these amendments because the amendments relieve a restriction on depository institutions, reason there is good cause to determine, determines, and for this and the Board so that such notice is not necessary. 9 Regulatory Flexibility Act Analysis. Section 605(b) 5 U.S.C. of the Regulatory Flexibility Act Pursuant to (Pub. L. 96-354, 601 et s e q .), the Board certifies that the proposed amendments will 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 certain burdens for small depository institutions, and have no particular effect on other small entities. List of Subjects in 12 CFR Part 204 Banks, banking, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Board is amending 12 CFR Part 204 as follows: PART 204 -- RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D) 1. The authority citation for Part 204 is revised to read as follows: AUTHORITY: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and 3105. 2. In § 204.9 paragraph (a) is revised to read as follows: § 2 04.9 Reserve requirement ratios. (a)(1) Reserve p e rcentages. The following reserve ratios are prescribed for all depository institutions, Edge and 10 Agreement Corporations, and United States branches and agencies of foreign banks: Category Reserve requirement Net transaction accounts!7 $0 to $51.9 million 3 percent of amount. over $51.9 million $1,437,000 plus 10 percent of amount over $51.9 million. Nonpersonal time deposits 0 percent. Eurocurrency liabilities 0 percent. Dollar amounts do not reflect the adjustment to be made by the next paragraph. - (a)(2) Exemption from reserve requirements. Each depository institution, Edge or agreement corporation, and U.S. branch or agency of a foreign bank is subject to a zero percent reserve requirement on an amount of its transaction accounts subject to the low reserve tranche in paragraph (a)(1) of this section not in excess of $4.0 million determined in accordance with § 204.3(a)(3) of this part. ★ ★ ★ ★ ★ By order of the Board of Governors of the Federal Reserve System, November 17, 1993. (signed) William W. Wiles William W. Wiles Secretary of the Board
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