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federal R e s e r v e Ba n k DALLAS, TEXAS of Dallas 75222 Circular No. 7b-2b3 September 6, 197^- DECREASE IN MARGINAL RESERVE REQUIREMENT To All Member Banks in the Eleventh Federal Reserve District: There is quoted below the text of a press release issued Wednesday, September b, 197*+ by the Board of Governors of the Federal Reserve System announcing an amendment to Regulation D removing the marginal reserve require ment on large denomination time deposits and related domestic instruments with a maturity of four months or longer. "The Board of Governors of the Federal Reserve System announced today the removal of its 3 per cent marginal reserve requirement on large denomination certificates of deposit with an initial maturity of four months or longer. This regulatory action -will lower somewhat the cost to banks of issuing longer-term CD’s and should therefore encourage banks to lengthen the maturities of their large CD’s. Longerterm CD's of $100,000 and more and related instruments will continue to be subject to the regular 5 per cent reserve requirement on time deposits. Partial removal of the marginal reserve require ment will be effective on deposits outstanding in the week of September 5-H* Banks will be required to maintain reserves against these deposits two weeks later, in the week of September 19-25. The action will reduce total reserves by about $^00 million at a time when there is a seasonal need to provide reserves to the banking system. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - The full reserve requirement (the regular 5 per cent plus the marginal 3 per cent) will continue to apply to large CD’s with an initial maturity of less than four months. All large CD's out standing on September 5 with a remaining maturity of four months or longer and all CD's issued on September 5 or thereafter with initial maturities of four months or longer will be affected by today's action. A marginal reserve requirement (the regular 5 per cent plus a supplemental 3 per cent) was first announced by the Board on May l6, 1973. An additional 3 per cent marginal reserve was announced by the Board on September 7 raising the total reserve requirements on affected deposits to 11 per cent. This latter 3 per cent reserve was removed by the Board last December." A revised Supplement to Regulation D (Reserves of Member Banks) suitable for insertion in your binder of Bulletins and Regulations will be forwarded to you in the near future. Yours very truly, P. E. Coldwell President