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Federal Reserve Bank OF DALLAS ROBERT D. M c T E E R , J R . P R E S ID E N T and c h ie f e x e c u tiv e _ o ffic e r - - J u ly 19, 1991 DALLA S, T E X A S 75222 Notice 91-61 TO: The Chief Executive Officer of each financial institution in the Eleventh Federal Reserve District SUBJECT Amendments to Regulation D (Reserve Requirements of Depository Institutions) DETAILS The Board of Governors of the Federal Reserve System has published amendments in slip-sheet form to Regulation D, effective April 1991. The new slip sheet should be inserted in your Regulations binder. ENCLOSURE The new slip sheet is enclosed. MORE INFORMATION For more information, please contact this B a n k ’s Reserve Maintenance Division at (214) 651-6407. For additional copies of this notice or the slip sheet, please contact the Public Affairs Department at (214) 651-6289. Sincerely yours, 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) Board of Governors of the Federal Reserve System Amendments to Regulation D Reserve Requirements April 1991* 1. Effective April 24, 1991, section 204.2(b) (3) (ii) (A) is amended to read as follows: (b) * * * ( 3) * * * (ii) * • • (A ) is subject to check, draft, nego tiable order of withdrawal, share draft, or similar item, such as an ac count authorized by 12 USC 1832(a) ( “NOW account” ) and a savings deposit described in section 204.2(d)(2), provided that the de positor is eligible to hold a NOW ac count; or 401 o r to a “ 401 ( k ) plan” established p u rsu an t to 26 U SC 401 ( k ) w hen the individual for w hose benefit the ac co u n t is m aintained attains age 59 Vi o r is disabled (as defined in 26 U SC 7 2 ( m ) ( 7 ) ) o r thereafter; ( c ) w here the depository institution pays th a t portion o f a tim e deposit on w hich federal deposit insurance has been lost as a result o f the m erg er o f tw o o r m ore federally insured banks in w hich th e depositor previ ously m a in ta in ed s ep arate tim e deposits, for a period o f one year from the d ate o f th e m erger; ( d ) upon th e d ea th o f any ow ner o f the tim e deposit funds; ( e ) w hen any ow ner o f th e tim e deposit is determ ined to be legally incom petent by a co u rt o r o th e r adm inis tra tiv e body o f co m petent jurisdiction; or ( 0 w here a tim e deposit is w ith d ra w n w ithin 10 days after a specified m a tu rity date even th o u g h the deposit co n tra c t provided for auto m atic renew al at the m a tu ri ty date. 4. Effective April 24, 1991, section 204.2(d)(2) is amended to read as follows: 2. Effective April 24, 1991, section 204.2(b)(3) is amended by removing subparagraph (iv) and redesignating subparagraph (v) and (vi) as (iv) and (v), respectively. 3. Effective April 24, 1991, footnote 1 to sec tion 204.2(c)(1) is am ended to read as follows: 1 A tim e deposit, o r a p o rtion thereof, m ay be paid before m a tu rity w ith o u t im posing the early w ithdraw al penalties specified by this part: ( a ) w here th e tim e deposit is m aintained in an individ ual retirem en t acco u n t established in acco rd an ce with 26 U SC 408 an d is paid w ithin seven days after estab lishm ent o f th e individual retirem ent account pursuant to 26 C F R 1 .4 0 8 -6 (d )(4 ), w here it is m aintained in a K eogh (H .R . 10) plan, o r w here it is m a in ta in ed in a “ 401 ( k ) p la n ” u n d er 26 U SC 401 ( k ) ; provided th a t th e d ep o sito r forfeits an am o u n t at least equal to the sim ple interest earn ed on the am o u n t w ithdraw n; (b ) w h ere th e d epository institution pays all o r a p o r tion o f a tim e deposit representing funds co n tribute d to an individual retirem en t account o r a K eogh ( H R. 10) plan established p u rsu an t to 26 U SC 408 o r 26 U SC • A com plete R egulation D , as am ended effective A p n l 24, 1991, consists o f— • th e pam phlet d ated Septem ber 1988 (see inside cover) and • th is slip sheet. Item s 1 th ro u g h 8 an d item 10 are new. Ite m s 9 a n d 11 appeared in th e previous slip sheet, d ated Jan u ary 1991. (d ) * * * (2) The term "savings deposit” also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account ( “ M M D A ” ), that otherwise meets the requirements of section 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, and no more than three of the six such transfers may be made by check, draft, debit card, or similar order made by the depositor 1 Regulation D and payable to third parties. A “preau thorized transfer” includes any arrange ment by the depository institution to pay a third party from the account of a de positor upon written or oral instruction (including an order received through an automated clearinghouse (A C H )) or any arrangement by a depository institu tion to pay a third party from the ac count of the depositor at a predetermined time or on a fixed schedule. Such an ac count is not a “transaction account” by virtue of an arrangement that permits transfers for the purpose of repaying loans and associated expenses at the same depository institution (as originator or servicer) or that permits transfers of funds from this account to another ac count of the same depositor at the same institution or permits withdrawals (pay ments directly to the depositor) from the account when such transfers or with drawals are made by mail, messenger, au tomated teller machine, or in person or when such withdrawals are made by tele phone (via check mailed to the deposi tor) regardless of the number of such transfers or withdrawals.5' 6 5 In o rd er to en su re th at n o m o re th a n the p erm itted n u m b e r o f w ithdraw als o r transfers are m ade, for an account to com e w ithin the definition in section 2 0 4 .2 ( d ) ( 2 ) , a depository institution m ust eith er— ( a ) prevent w ithdraw als o r transfers o f funds from this a cco u n t th at are in excess o f the lim its established by section 2 0 4 .2 ( d ) ( 2 ) , or ( b ) ad o p t pro ced u res to m o n ito r those transfers on an ex post basis an d co n tact cu stom ers w ho exceed the established lim its on m o re th a n an occasional basis. F o r cu sto m ers w ho co n tin ue to violate those limits after they have been co n tacted by the depository insti tu tio n , th e depository institution m ust either close the acco u n t a n d place th e funds in a n o th e r account that th e d ep o sito r is eligible to m aintain, or take aw ay the tran sfer an d draft capacities o f the account. A n acco u n t th a t auth o rizes w ithdraw als or transfers in excess o f th e p erm itted n u m b e r is a transaction ac count regardless o f w h eth er the auth o rize d n u m ber of tra n sa ctio n s arc actually made. F o r accounts described in section 2 0 4 .2 ( d ) ( 2 ) , the institution at its option m ay use, on a consistent basis, eith er th e date on the check, draft, or sim ilar item, or the date the item is paid in applying th e limits im posed by th a t section. 6 Reserved. 5. Effective April 24, 1991, section 204.2(e)(2) is amended to read as follows: 2 (e) ‘ * * (2) Deposits or accounts on which the depository institution has reserved the right to require at least seven days’ writ ten notice prior to withdrawal or transfer of any funds in the account and that are subject to check, draft, negotiable order of withdrawal, share draft, or other simi lar item, except accounts described in section 204.2(d)(2) (savings deposits), but including accounts authorized by 12 USC 1832(a) (NOW accounts). * * * * * (4) Deposits or accounts on which the depository institution has reserved the right to require at least seven days’ writ ten notice prior to withdrawal or transfer of any funds in the account and under the terms of which, or by practice of the depository institution, the depositor is permitted or authorized to make more than six withdrawals per month or state ment cycle (or similar period) of at least four weeks for the purposes of transfer ring funds to another account of the de positor at the same institution (including “transaction account” ) or for making payment to a third party by means of a preauthorized transfer, or telephonic (in cluding data-transmission) agreement, order or instruction, except accounts de scribed in section 204.2(d)(2). An ac count that authorizes more than six such withdrawals in a calendar month, or statement cycle (or similar period) of at least four weeks, is a “transaction ac count” whether or not more than six such transfers are made during such period. * * * (0 * * * (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 ac count or Keogh (H.R. 10) plan under 26 USC 408, 401, or nontransferable time deposits held by an employer as part of an unfunded deferred-compensation plan Regulation D established pursuant to subtitle D of the Revenue Act of 1978. 6. Effective April 24, 1991, section 204.2(e)(4) is am ended by changing the word "three” to "six” wherever it appears. 7. Effective April 24, 1991, section 204.2(f)(2) is amended by deleting the period at the end o f the sentence and adding ", or a '401 (k) p la n ’ under 26 USC 401 (k). ” 8. Effective April 24, 1991, the heading to sec tion 204.7, and subsection (a) are revised to read as follows: SEC TIO N 204.7— Reserve Deficiencies (a) Charges fo r deficiencies. (1) Assessment o f charges. Deficiencies in a depository institution’s required re serve balance, after application of the 2 percent carryover provided in section 204.3(h) are subject to reserve-deficiency charges. Federal Reserve Banks are au thorized to assess charges for deficiencies in required reserves at a rate of 2 percent per year above the lowest rate in effect for borrowings from the Federal Reserve Bank on the first day of the calendar month in which the deficiencies occurred. Charges shall be assessed on the basis of daily average deficiencies during each maintenance period. Reserve Banks may, as an alternative to levying monetary charges, after consideration of the cir cumstances involved, permit a depository institution to eliminate deficiencies in its required reserve balance by maintaining additional reserves during subsequent re serve maintenance periods. (2) Waivers. (i) Reserve Banks may waive the charges for reserve deficiencies except when the deficiency arises out of a de pository institution’s gross negligence or conduct that is inconsistent with the principles and purposes of reserve re quirements. Each Reserve Bank has adopted guidelines that provide for waivers of small charges. The guide lines also provide for waiving the charge once during a two-year period for any deficiency that does not exceed a certain percentage of the depository institution’s required reserves. Deci sions by Reserve Banks to waive charges in other situations are based on an evaluation of the circumstances in each individual case and the deposi tory institution’s reserve maintenance record. If a depository institution has demonstrated a lack of due regard for the proper maintenance of required re serves, the Reserve Bank may decline to exercise the waiver privilege and as sess all charges regardless of amount or reason for the deficiency. (ii) In individual cases, where a feder al supervisory authority waives a li quidity requirement, or waives the penalty for failing to satisfy a liquidity requirement, the Reserve Bank in the District where the involved depository institution is located shall waive the re serve requirement imposed under this part for such depository institution when requested by the federal supervi sory authority involved. 9. Effective December 13, 1990, section 204.9(a) is amended to read as follows: (a )(1 ) Reserve percentages. The following reserve ratios are prescribed for all de pository institutions, Edge and agree ment corporations, and United States branches and agencies of foreign banks: Category N ET TRANSACTION ACCOUNTS* $0 to $41.1 million Over $41.1 million Reserve requirement 3% of amount $1,233,000 plus 12% of amount over $41.1 million NONPERSONAL TIME DEPOSITS 0% EUROCURRENCY LIABILITIES 0% * D o lla r a m o u n ts do not reflect the adjustm ent to be m ade by the next paragraph. 3 Regulation D (2) Exemption from reserve require ments. Each depository institution, Edge or agreement corporation, and U.S. branch or agency of a foreign bank is subject to a zero percent reserve require ment on an amount of its transaction ac counts subject to the low reserve tranche in paragraph (a )(1 ) not in excess of $3.4 million determined in accordance with section 204.3(a)(3) of this part. 10. Effective April 24, 1991, the heading and introductory clause o f section 204.125 are amended to read as follows: SEC TIO N 204.125— Foreign, International, and Supranational Entities Referred to in Sections 2 0 4 . 2 ( c ) ( l ) ( i v ) ( E ) and 20 4 .8 (a ) (2 ) (i) ( B ) ( 5 ) The entities referred to in section 2 0 4 .2 (c)(1 )(E ) and 2 0 4 .8 (a )(2 )(i)(B ) (5) are: 11. Section 19(b) o f the Federal Reserve Act was amended by the Financial Institutions Reform, Recovery, and Enforcement Act o f 1989 to read as follows: (b )(1 ) * • * (A ) The term “depository institu tion” means— * * * * * (vi) any savings association (as defined in section 3 of the Federal Deposit Insurance Act) which is an insured depository institution (as defined in such Act) or is eli gible to apply to become an in sured depository institution under the Federal Deposit Insurance Act; and * * * * * (F ) In order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with the Board of Directors of the Federal Deposit Insurance Corpora tion, the Director of the Office of Thrift Supervision, and the National Credit Union Administration Board, the Board of Governors of the Fed eral Reserve System is authorized to determine, by regulation or order, that an account or deposit is a trans action account if such account or deposit may be used to provide funds directly or indirectly for the purpose of making payments or transfers to third persons or others. * (4) * * * * * * * (B) The Board may require the supplemental reserve authorized un der subparagraph (A ) only after consultation with the Board of Di rectors of the Federal Deposit Insur ance Corporation, the Director of the Office of Thrift Supervision, and the National Credit Union Adminis tration Board. The Board shall promptly transmit to the Congress a report with respect to any exercise of its authority to require supple mental reserves under subparagraph (A ) and such report shall state the basis for the determination to exer cise such authority. * * * * *
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