The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federal R eserve Bank
OF DALLAS
ROBERT
AND
D. M c T E E R , J R .
PRESIDENT
CHIEF EXECUTIV E
16 , 1992
March
OFFICER
dallas,texas 7 5 2 2 2
Notice 92-23
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Final Amendment to Regulation D and Request for
Comments on Proposed Amendments to Regulation D
(Reserve Requirements of Depository Institutions)
DETAILS
The Federal Reserve Board has adopted a final amendment to Regula
tion D which reduces the required reserves on net transaction accounts from 12
percent to 10 percent. The effective date of the final amendment is April 2,
1992.
In addition, the Board has issued for public comment two proposed
amendments to Regulation D which would facilitate the computation and mainte
nance of reserves. The Board proposes to shorten by two weeks the lag in
counting vault cash toward required reserves in order to reduce the decline in
required reserve balances early in the year. The Board’s second proposal
would double the carryover allowance for reserve balances to the larger of
$50,000.00 or 4 percent of required reserves plus required clearing balances.
This would provide institutions with more flexibility in managing reserves
from one maintenance period to another.
T h e B o a r d must receive comments by April 6, 1992. Comments should
be addressed to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C.
20551. All comments should refer to Docket No. R-0750.
ATTACHMENT
Copies of the Board’s notices as they appear on pages 8059-60 and
pages 8096-98, Vol. 57, No. 45, of the Federal Register dated March 6, 1992,
is attached.
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 -
MORE INFORMATION
For more information, please contact this Bank’s Reserve Maintenance
Division at (214) 651-6407. Depository institutions in the Houston territory
should contact Reserve Maintenance in the Houston Office at (713) 652-1538.
For additional copies of this Bank’s notice, please contact the
Public Affairs Department at (214) 651-6289.
Sincerely yours,
8059
Rules and Regulations
Federal Register
Vol. 57. No. 45
Friday, March 6, 1992
This section of the FEDERAL REGISTER
contains regulatory documents having
general appiicabiiity and legal effect, most
of which are keyed to and codified in
the Code of Federal Regulations, which is
published under 50 titles pursuant to 44
U.S.C. 1510.
The Code of Federal Regulations is sold
by the Superintendent of Documents.
Prices of new books are listed in the
first FEDERAL REGISTER issue of each
week.
FEDERAL RESERVE SYSTEM
12 CFR Part 204
I Docket No. R-0749]
Regulation D—R eserve Requirement
of Depository Institutions
AGENCY: Board of Governors of the
Federal Reserve System.
a c t io n : Final rule.
s u m m a r y : The Board is amending its
Regulation D to reduce the reserves
required on net transaction account
balances over $42.2 million from the
current level of 12 percent to 10 percent,
based on a determ ination that the
current level of reserves required on
these liabilities is in excess of the level
necessary for the conduct of m onetary
policy, and that a reduction in the level
of required reserves will provide an
impetus for bank lending and overall
economic activity by freeing funds now
held as reserves and facilitating
depository institutions’ access to the
capital markets.
EFFECTIVE DATE: April 2,1992. For
depository institutions that report
deposits weekly, this reduction will
become operative for the reserve
m aintenance period beginning April 2,
1992. For depository institutions
reporting quarterly, the reduction will be
operative for the reserve m aintenance
period starting April 16,1992.
FOR FURTHER INFORMATION CONTACT:
Patrick McDivitt, Attorney (202/4523818), or L aw ranne Stewart, Attorney
(202/452-3513), Legal Division: or Joshua
Feinman, Economist (202/452-2841),
Division of M onetary Affairs. For the
hearing im paired only.
Telecommunications Device for the Deaf
("TDD"), Dorothea Thompson (202/4523544).
SUPPLEMENTARY INFORMATION: Section
19(b)(2) of the Federal Reserve Act, as
am ended by title I of the M onetary
Control Act of 1980 (Pub. L 96-221
(March 31,1980)), provides:
(A) Each depository institution shall
maintain reserves against its transaction
accounts as the Board may prescribe by
regulation solely for the purpose of
implementing m onetary policy—
(i) In the ratio of 3 per centum for that
portion of its total transaction accounts
of [$42,200,000 or less]; 1 and
(ii) In the ratio of 12 per centum, or in
such other ratio as the Board may
prescribe not greater than 14 per centum
and not less than 8 per centum, for that
portion of its total transaction accounts
in excess of [$42,200,000].
Currently, reserves on transaction
accounts balances over $42.2 million are
set at 12 percent under Regulation D. 12
CFR 204.9(a)(1).
The Board is exercising its authority
under section 19 to reduce the reserve
required against net transaction
balances in excess of $42.2 million from
12 percent to 10 percent. It is taking this
action b ased on a determ ination that the
current level of reserves required on
these liabilities is in excess of the level
necessary for the conduct of m onetary
policy, an d that a reduction in the level
of required reserves will provide an
impetus for bank lending and overall
economic activity by freeing funds now
held as reserves and facilitating
depository institutions' access to the
capital markets.
The last reductions to reserve
requirem ents w ere made in December
1990, at which time reserves for
nonpersonal time deposits and
Eurocurrency liabilities w ere reduced
from 3 percent to zero percent. These
reductions, which w ere p h ased in over
two reserve m aintenance periods in
December and January, resulted in a
brief period of increased volatility in the
federal funds rate and unpredictable
dem and for excess reserves. Depository
institutions generally experience
seasonal lows in required reserve
balances at the beginning of the year,
and the effect of the reductions w as to
decrease the reserve balances required
at this time of year to levels below those
1 U nder section 19(b)(2)(C). the am ount below
which reserves on net tran sactio n account b alances
are p ayable a t 3 percent, know n a s the low reserve
tranche, is ad ju sted annually in relation to the
grow th in total tran sactio n accounts a t all
depository institutions. The m ost recent ad justm ent
w as m ade on D ecem ber 17,1991 (56 FR 60054
(N ovem ber 27* 1991)).
needed for clearing purposes. As a
result, banks h ad difficulty adjusting to
the low er reserve requirements.
Although the current reduction in
reserve requirem ents for transaction
accounts is not expected to have simitar
effects, the reduction in transaction
account reserves will not be effective
until April in order to provide depository
institutions with adequate time to adjust
reserve m anagem ent strategies.
To assist the adjustm ent to lower
required reserve balances, the Board
also is proposing for comment two
am endm ents to Regulation D that are
intended to reduce the seasonal
variations in operating balance
requirem ents and to improve the ability
of depository institutions to m anage
their reserve balances. These
am endm ents would reduce lags in the
application of vault cash to reserve
requirem ents and would increase the
percentage of excesses or deficiencies
that may be carried over into the next
reserve m aintenance period.2
Notice and Public Participation
The provisions of the Administrative
Procedure Act relating to notice and
public participation (5 U.S.C. 553(b))
have not been followed in connection
with the adoption of this am endment. In
view of the current lack of credit
availability, the Board finds good cause
for determining, and so determines, that
notice and public participation are
unnecessary and contrary to the public
interest. The am endm ent will have the
affect of decreasing a regulatory burden
by lowering the reserves that depository
institutions are required to maintain
against transaction account. Banks have
adopted a more cautious approach to
lending, born in part out of concerns
about capital, that has had a restraining
effect on bank credit growth and a
damping influence on aggregate
economic actitivy. The announcem ent is
expected to have immediate, beneficial
effects on the ability of banks to raise
capital. To the extent that an
announcem ent of reserve requirem ent
reductions will provide banks with
easier access to capital markets, it
should help to improve credit
availability. Putting a proposed
reduction out for notice and comment is
2 See accom panying proposed rule published
elsew here in to day s issue of the Federal Register.
80S0
Federal Register / Vol. 57. No. 45 / Friday, March 6, 1992 / Rules and Regulations
likely to delay or dilute any beneficial
effects.
1 Dollar amounts do not reflect the adjustment to
be made in the next paragraph.
Regulatory Flexibility Act
Because the Board finds that no notice
of proposed rulemaking is required, a
statem ent concerning the effects of the
rule on small entities is also not required
under the Regulatory Flexibility Act. 5
U.S.C. 604. The Board notes, however,
that the am endm ent imposes no
additional reporting or recordkeeping
requirements. Reserve requirem ents for
depository institutions with net
transaction accounts in excess of $42.2
million will be reduced by the action,
and no other small entities should be
affected. The first $42.2 million of net
transaction accounts are subject a
reserve requirem ent of 3 per cent by
statute, and the Board does not have the
authority to reduce this requirement.
List of Subjects in 12 CFR Part 204
Banks, banking, Currency, Federal
Reserve System, Penalties, Reporting
and recordkeeping requirements.
For the reasons set out in the
preamble, and 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 to
read as follows:
PART 204—RESERVE REQUIREMENTS
OF DEPOSITORY INSTITUTIONS
1. The authority citation for p art 204
continues to read as follows:
Authority: S ectio n s 11(a), 11(c), 19, 25, 25(a)
o f the Federal R eserve A ct (12 U.S.C. 248(a),
248(c), 371a, 371b, 461, 601, 611); section 7 of
the International Banking A ct o f 1978 (12
U.S.C. 3105); and section 411 of the G a m StGermain D epository Institutions A ct o f 1982
(12 U.S.C. 461).
2. Section 204.9 is am ended by
revising paragraph (a)(1) to read as
follows:
§ 204.9 Reserve requirement ratios.
(a)(1) Reserve percentages. The
following reserve ratios are prescribed
for all depository institutions, Edge and
Agreement corporations, and United
States branches and agencies of foreign
banks:
Category
Net transaction
accounts: 1
$0 to $42.2 million.....
Over $42.2 million.....
Nonpersonal time
deposits.
Eurocurrency liabilities
Reserve requirement
3 percent of amount.
$1,266,000 plus 10
percent of amount
over $42.2 million.
0 percent.
0 percent.
By order o f the Board o f G overnors o f the
Federal R eserve System . M arch 2,1992.
W illiam W . W iles,
Secretary of the Board.
[FR Doc. 92-5218 Filed 3-5-92; 8:45 am]
BILLING CODE 6210-01-M
8096
Federal Register / Vol. 57, No. 45 / Friday, March 6, 1992 / Proposed Rules
FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-0750)
Regulation D - R eserve Requirements
of D epository Institutions
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking.
SUMMARY: The Board is publishing for
comment tw o am endm ents to it's
Federal Register / Vol. 57, No. 45 / Friday, March 6, 1992 / Proposed Rules
Regulation D to facilitate the
com putation and m aintenance of
reserves. The Board proposes to reduce
the lag in the application of vault cash to
reserve requirem ents in order to damp
the seasonal variations in required
reserve balances resulting from the
current lag in application and thereby
reduce the probability that reserve
balances will drop seasonally to levels
that would cause depository institutions
difficulty in managing their reserve
balances. The Board also proposes to
increase the am ount of excesses or
deficiencies in reserve b alances that
m ay be carried over from one reserve
m aintenance period to the next from the
greater of 2 percent or $25,000 to the
greater of 4 percent or $50,000.
d a t e s : Comments should be received by
April 6,1992.
a d d r e s s e s : Comments, which should
refer to Docket No. R-0750, m ay be
m ailed to the Board of G overnors of the
Federal Reserve System, 20th Street and
Constitution A venue NW., W ashington,
DC 20551, to the attention of Mr.
William W. Wiles, Secretary.
Comments ad dressed to the attention
of Mr. Wiles m ay be delivered to the
Board’s mail room betw een 8:45 a.m.
and 5:15 p.m., and to the security control
room outside of those hours. Both the
mail room an d the security control room
are accessible from the courtyard
entrance on 20th Street betw een
Constitution A venue and C Street NW.
Comments m ay be inspected in room B1122 betw een 9 a.m. and 5 p.m., except
as provided in § 261.8 of the Board’s
Rules Regarding the A vailability of
Information, 12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT:
Patick J. McDivitt, A ttorney (202/4523818), or Law ranne Stew art, Attorney
(202/452-3513), Legal Division; or Joshua
Feinman, Economist (202/452-2841),
Division of M onetary Affairs. For the
hearing im paired only.
Telecommunications Device for the Deaf
(“TDD”), Dorothea Thom pson (202/4523544).
SUPPLEMENTARY INFORMATION: The
Board is proposing for public comment
revisions to its Regulation D, Reserve
Requirements of Depository Institutions,
12 CFR p art 204, concerning the
com putation an d m aintenance of
reserves. The proposed changes, which
concern vault cash an d carryover of
reserve deficiencies an excesses, are
intended to improve the ability of
depository institutions to m anage their
reserve balances.
Vault Cash
The Board proposes to am end
Regulation D to reduce the lag in the
application of vault cash to reserve
requirem ents from two periods to one in
order to better synchronize movements
in required reserves and applied vault
cash. Currently, reserve requirem ents
for depository institutions that report
weekly are assessed against transaction
accounts on a contem poraneous
b a s is,1 but offsetting vault cash is
applied to the required reserves with a
two period lag. This asym m etric
treatm ent of required reserves and
applied vault cash often results in
potentially disruptive m ovements in
required balances, particularly early in
the year. In the m aintenance period
encom passing Christmas and year-end,
for example, both vault cash and
required reserves tend to reach their
respective seasonal peaks. Vault cash
applicable for meeting the enlarged
reserve requirem ents for this period,
however, is b a s e d on the much smaller
vault cash holdings from November. As
a result, the required reserve balances
n eeded to m eet reserve requirem ents
lend to peak around year-end. These
balances subsequently drop
precipitously, usually reaching a trough
in late January an d early February,
w hen reserve requirem ents have
typically fallen from their end-of-year
crest and the enlarged vault cash
holdings from year-end becom e
available for use in meeting those
requirem ents. This sharp drop in
required b alan ces often m akes it more
difficult for ban ks to m anage their
reserve accounts.
The Board believes that placing
required reserves and the vault cash
available for m eeting those
requirem ents in closer proximity would
offset some of the volatility in required
reserve balances an d help tem per the
seasonal drop in these balances in early
February w ithout significantly impairing
reserve forecasts. The Board requests
com ment as to w hether a reduction in
the lag in the application of vault cash
would improve the ability of depository
institutions to m anage their required
reserve b alan ces or w hether the
proposal w ould have any adverse
effects on their ability to predict
required reserve balances. The Board
also requests com ment as to the costs of
1 W eekly rep orters generally are depository
institutions w ith total deposits of $44.8 million or
more. Required reserv es for w eekly rep orters are
a ss e ss e d b a se d on d aily average b a la n ce s for a
p erio d beginning on a T uesday a n d ending on the
seco n d M onday thereafter. This period is know n as
the "com putation period.” R eserves ag ainst the
daily averag e b a la n ce s for the com putation period
m ust be m ain tain ed throughout the “m ainten ance
period,” w hich begins on the T h ursday following the
beginning of the com putation period a n d ends on
the seco n d W e d n e sd ay thereafter. See 12 CFR
204.3(c).
8097
implementing a shift in vault cash
application, and w hether these costs
would be considered significant in
relation to the benefits of the proposed
am endm ent to the depository institution.
If depository institutions believe that the
costs of implementing a shift are
prohibitive so that the shift should not
be implemented, the Board requests
comments as to w hether depository
institutions will be able to m anage their
reserve positions effectively at the
newly im plem ented level of reserve
requirem ents during the seasonal lows
in required reserve balances in January
and February.
Carryover of Excesses or Deficiencies
The Board proposes to increase the
am ount of carryover to the greater of 4
percent of required reserves and
clearing balances 2 or $50,000. Currently,
carryover of reserve surpluses or
deficiencies into the next m aintenance
period is perm itted up to the greater of 2
percent of the sum of required reserves
and required clearing balances or
$25,000. In either case, the carryover is
reduced by the am ount of an
institution’s required clearing balance
penalty-free band, if applicable.3
Reductions in reserve requirem ents have
resulted in a decline in the maximum
dollar value of the carryover, reducing
the ability of a depository institution to
cushion a given dollar shock to its
reserve position late in m aintenance
period. Doubling maximum carryover
perm itted should provide depository
institutions with more flexibility in
managing their reserve positions.
Additionally, the Board proposed to
am end the lanaguage of the carryover
provision to clarify and more accurately
reflect the method used to calculate the
maximum carryover permitted.
Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the
Regulatory Flexibility Act (Pub. L. No.
96-354, 5 U.S.C. 601 et seq.), the Board
certifies that the proposed am endm ent
will not have a significant economic
impact on a substantial num ber of small
entities. The Board does not believe that
the proposed am endm ents would
impose any additional reporting or
recordkeeping requirem ents. To the
2 Required clearing b a la n ce s a re set by agreem ent
b etw een a d epository institution an d its Federal
R eserve Bank, b a se d on clearing need s of the
depository an d its account o v erdraft record.
Inform ation on clearing b a la n ce requirem ents may
be o b tain ed from a depository institution’s local
R eserve Bank.
3 The required clearing b alan ce penalty-free b and
is currently equal to the greater o f $25,000 o r 2
p ercent of the depository institution’s required
clearing balan ce.
Federal Register / Vol. 57, No. 45 / Friday. March 6, 1992 / Proposed Rules
8098
extent changes in recordkeeping
procedures may be required by the vauit
cash proposal, this will affect only
weekly reporters, that is, depository
institutions with total deposits of $44.8
million or more, and should enable these
depository institutions to manage their
required reserves more efficiently.
Smaller institutions, which report only
quarterly, will not be affected by the
vault cash amendment.
List of Subjects in 12 CFR Part 204
Banks, banking, Currency, Federal
Reserve System, Penalties, Reporting
and recordkeeping requirements.
For the reasons set forth in the
preamble, and pursuant to the Board’s
authority under section 19 of the Federal
Reserve Act, 12 U.S.C. 461 et seq., the
Board is proposing to am end 12 CFR
p art 204 as follows:
PART 204—RESERVE REQUIREMENTS
OF DEPOSITORY INSTITUTIONS
1. The authority citation for part 204
continues to read as follows:
Authority: S ectio n s 11(a), 11(c), 19. 25, 25(a)
o f the Federal R eserve A ct (12 U.S.C. 248(a).
248(c), 371a, 371b, 461, 601, 611); section 7 of
the International Banking A ct of 1978 (12
U.S.C. 3105); and section 411 o f the G am StGermain D ep ository Institutions A ct o f 1982
(12 U.S.C. 461).
2. section 204.3 is am ended by revising
paragraphs (c)(3) and (h) to read as
follows:
§ 204.3 Computation and maintenance.
*
*
*
*
*
(c) * * *
(3) In determining the reserve balance
that is required to be m aintained with
the Federal Reserve, the daily average
vault cash held during the computation
period that ended 3 days prior to the
beginning of the m aintenance period is
deducted from the am ount of the
institution’s required reserves.
*
*
*
*
*
(h) Carryover o f excesses or
deficiencies. Any excess or deficiency
in a depository institution’s account that
is held directly or indirectly with a
Federal Reserve Bank shall be carried
over and applied to that account in the
next m aintenance period as specified in
this paragraph. The am ount of any such
excess or deficiency that is carried over
shall not exceed the greater of:
(1) The am ount obtained by
multiplying .04 times the sum of the
depository institution’s required
reserves and the depository institution’s
required clearing balance, if any, and
then substracting from this product the
depository institution’s required clearing
balance penalty-free bank, if any; or
(2) $50,000, minus the depository
institution’s required clearing balance
penalty-free band, if any.
Any carryover not offset during the
next period m ay not be carried over to
subsequent periods.
*
*
*
*
*
By order o f the Board of G overnors o f the
Federal R eserve System , March 2.1992.
William W. Wiles,
Secretary of the Board.
[FR Doc. 92-5219 Filed 3-5-92; 8:45 am)
BILLING CODE 6210-01-M
FEDERAL RESERVE BANK OF DALLAS
STATION K
DALLAS, TEXAS 7 5 2 2 2
@FedFRASER