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Home > News & Events > Press Releases

Press Release
May 20, 2009

Board announces approval of final amendments
to Regulation D pertaining to transfers from
savings deposits and the establishment of excess
balance accounts at Federal Reserve Banks
For immediate release
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The Federal Reserve Board on Wednesday announced the approval of
final amendments to Regulation D (Reserve Requirements of Depository
Institutions) to liberalize the types of transfers consumers can make from
savings deposits and to make it easier for community banks that use
correspondent banks to receive interest on excess balances held at
Federal Reserve Banks.
The amendments would also ensure that correspondents that are not
eligible to receive interest on their own balances at Reserve Banks pass
back to their respondents any interest earned on required reserve
balances held on behalf of those respondents. The Board is also making
other clarifying changes to Regulation D and Regulation I (Issue and
Cancellation of Federal Reserve Bank Capital Stock).
The Board has revised Regulation D's restrictions on the types and
number of transfers and withdrawals that may be made from savings
deposits. The final amendments increase from three to six the
permissible monthly number of transfers or withdrawals from savings
deposits by check, debit card, or similar order payable to third parties.
Technological advancements have eliminated any rational basis for the
distinction between transfers by these means and other types of pre-

authorized or automatic transfers subject to the six-per-month limitation.
The Board also approved final amendments to Regulation D to authorize
the establishment of excess balance accounts at Federal Reserve
Banks. Excess balance accounts are limited-purpose accounts for
maintaining excess balances of one or more institutions that are eligible
to earn interest on their Federal Reserve balances. Each participant in
an excess balance account will designate an institution to act as agent
(which may be the participant's current pass-through correspondent) for
purposes of managing the account. The Board is authorizing excess
balance accounts to alleviate pressures on correspondent-respondent
business relationships in the current unusual financial market
environment, which has led some respondents to prefer holding their
excess balances in an account at the Federal Reserve, rather than
selling them through a correspondent in the federal funds market. A
correspondent could hold its respondents' excess balances in its own
account at the Federal Reserve Bank; however, doing so may adversely
affect the correspondent's regulatory leverage ratio. As market
conditions evolve, the Board will evaluate the continuing need for excess
balance accounts.
In October 2008, the Board adopted an interim final rule amending
Regulation D that directed Federal Reserve Banks to pay interest on
balances held by eligible institutions in accounts at Reserve Banks. The
final rule revises those provisions as they apply to balances of
respondents maintained by "ineligible" pass-through correspondents-that is, entities such as nondepository institutions that serve as
correspondents but are not eligible to receive interest on the balances
they maintain on their own behalf at the Federal Reserve. Specifically,
the final rule provides that only required reserve balances maintained in
an ineligible correspondent's account on behalf of its respondents will
receive interest. Ineligible correspondents will be required to pass back
that interest to their respondents. Both required reserve and excess
balances in the account of an eligible pass-through correspondent will
continue to receive interest and those correspondents are permitted, but
not required, to pass back that interest to their respondents.
The final amendments to Regulations D and I will become effective 30
days after publication in the Federal Register. Excess balance accounts
will be available for the reserve maintenance period beginning July 2,
2009.
The Board's notices are attached.
Federal Register notice: Regulation D, final rule: HTML | 83 KB PDF
Federal Register notice: Regulations D and I, final rule: HTML | 84 KB
PDF
Excess Balance Accounts FAQs

Last Update: May 20, 2009

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