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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations

One supportive commenter noted that
all Board expenditures must be
approved by the Board members, who
represent the interests of different
regions and countries. Because the
Board is comprised of members from six
countries and the Commonwealth of
Puerto Rico, the ability of the Board to
come to a consensus on activities and
expenditures is valuable to the entire
mango industry. One comment cited the
geographic diversity of the Board as a
key reason for its success because a
wide variety of viewpoints are
represented by the Board members. The
fact that the assessment increase is
favored by a majority of Board members
demonstrates the breadth of support for
the increase from throughout the mango
industry.
Another commenter stated that the
proposed assessment increase has been
discussed with all mango industry
stakeholders, and is favored by
organizations in Mexico, Peru,
Guatemala, Haiti, Ecuador and Brazil. In
order to determine whether foreign
producers would support an assessment
increase, the Board held informational
meetings in each of the countries that
export mangos to the United States. At
these meetings, Board representatives
explained the activities conducted with
assessment funds and received positive
feedback from attendees on the
proposed assessment increase.
One of the comments in support of
the assessment increase was received
from a Mexican mango industry
organization. In addition to their own
comments, several commenters
submitted correspondence from foreign
agricultural organizations indicating
their support for the assessment
increase. Letters of support were
received on behalf of organizations in
Haiti, Peru, Guatemala, Ecuador, and
Brazil.
One commenter opposed the
assessment increase, stating that the
Board can fulfill its objectives at its
current funding level. As the Board
stated in its proposal, without an
increase in the assessment rate,
spending on mango research and
promotion programs would need to be
reduced. As stated previously, the 2010
econometric study concluded that
decreased spending on the Board’s
programs would correspond to declines
in mango purchases.
One commenter opposed the
assessment increase, stating that raising
the assessment rate would harm mango
importers already coping with higher
freight rates and poor currency
exchange rates. In response, another
commenter argued that the assessment
is an investment rather than an expense.

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This same commenter further stated that
the investment in the Board would be
used to improve market penetration,
thereby improving returns to growers
and shippers, and offsetting the higher
costs. Additionally, the 2010
econometric study found that increased
spending by the Board provides a large
increase in revenues to importers.
One commenter opposed the
assessment increase, stating that the
current assessment provides a negative
return on investment. Another
commenter also noted that the Board
should ensure that its investments are
yielding reasonable returns. One
commenter further stated that the
assessment rate needed to sufficiently
fund promotion programs would likely
be 20 times the proposed rate of three
quarters of a cent per pound. No
evidence was offered to support this
claim. According to the 2010
econometric study, every $1 currently
spent by the Board adds an additional
$7 to mango freight on board revenues.
The Department has considered all of
the comments and is not making any
changes to the proposed rule.
After consideration of all relevant
material presented, the Board’s
recommendation, public comments and
other information, it is hereby found
that this rule, as published in the
Federal Register on May 10, 2011 [76
FR 26946], is consistent with and will
effectuate the purpose of the Act.
List of Subjects in 7 CFR Part 1206
Administrative practice and
procedure, Advertising, Consumer
information, Marketing agreements,
Mango promotion, Reporting and
recordkeeping requirements.
For the reasons set forth in the
preamble, 7 CFR part 1206 is amended
as follows:
PART 1206—MANGO PROMOTION,
RESEARCH, AND INFORMATION
1. The authority citation for 7 CFR
part 1206 continues to read as follows:

■

Authority: 7 U.S.C. 7411–7425 and 7
U.S.C. 7401.

2. In § 1206.42, paragraph (b) is
revised to read as follows:

■

§ 1206.42

Assessments.

*

*
*
*
*
(b) The assessment rate shall be 3⁄4 of
a cent per pound on all mangos. The
assessment rate will be reviewed and
may be modified by the Board with the
approval of the Department, after the
first referendum is conducted as stated
in § 1206.71(b). The Department will

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amend this section if the assessment
rate is modified.
*
*
*
*
*
Dated: April 6, 2012.
David R. Shipman,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2012–8825 Filed 4–11–12; 8:45 am]
BILLING CODE P

FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R–1433]
RIN 7100–AD83

Reserve Requirements of Depository
Institutions: Reserves Simplification
Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
AGENCY:

The Board is amending
Regulation D, Reserve Requirements of
Depository Institutions, to simplify the
administration of reserve requirements.
The final rule creates a common twoweek maintenance period for all
depository institutions, creates a
penalty-free band around reserve
balance requirements in place of
carryover and routine penalty waivers,
discontinues as-of adjustments related
to deposit report revisions, replaces all
other as-of adjustments with direct
compensation, and eliminates the
contractual clearing balance program.
The amendments are designed to reduce
the administrative and operational costs
associated with reserve requirements for
depository institutions, the Board, and
Federal Reserve Banks.
DATES: Effective Date: This rule is
effective on July 12, 2012, except that
effective on January 24, 2013, the
following sections are further amended:
§ 204.2(z), (ff), (gg) and (hh); § 204.5
(b)(2), (d)(4)(i), and (e); § 204.6 (a) and
(b); § 204.10 (b)(1), (b)(3), and (c).
FOR FURTHER INFORMATION CONTACT: Kara
Handzlik, Senior Attorney (202) 452–
3852, Legal Division, or Margaret Gillis
DeBoer, Assistant Director (202) 452–
3139, or Heather Wiggins, Senior
Financial Analyst (202) 452–3674,
Division of Monetary Affairs, or for
questions regarding the Private Sector
Adjustment Factor, Gregory Evans,
Deputy Associate Director (202) 452–
3945, or Brenda Richards, Manager
(202) 452–2753, Division of Reserve
Bank Operations and Payment Systems;
for users of Telecommunications Device
for the Deaf (TDD) only, contact (202)
263–4869; Board of Governors of the
SUMMARY:

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Federal Reserve System, 20th and C
Streets NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
I. Background
Section 19 of the Federal Reserve Act
(Act) 1 authorizes the Board of
Governors of the Federal Reserve
System (Board) to impose reserve
requirements on certain deposits and
other liabilities of depository
institutions for the purpose of
implementing monetary policy. The
Board’s Regulation D (Reserve
Requirements of Depository Institutions,
12 CFR part 204) implements section 19
of the Act and establishes reserve
requirement ratios within the limits
mandated by the Act. Under Regulation
D currently, transaction account
balances maintained at each depository
institution are subject to reserve
requirement ratios of zero, three, or ten
percent, depending on the level of
transaction accounts at that institution.2
A depository institution satisfies its
reserve requirement by its holdings of
vault cash and, if vault cash is
insufficient to meet the requirement, by
maintaining balances in an account at a
Federal Reserve Bank (Reserve Bank).
An institution may maintain balances
either in the institution’s own account
at a Reserve Bank or in a pass-through
correspondent’s Reserve Bank account.
The amount of balances that an
institution must maintain if its reserve
requirement is not satisfied by vault
cash is referred to as the institution’s
reserve balance requirement. An
institution satisfies its reserve balance
requirement on average over a specified
period of time, referred to as a
maintenance period.
Currently, an institution may also
enter into an agreement with its Reserve
Bank under which the institution agrees
to maintain a specific minimum balance
in its account (referred to as a
contractual clearing balance).
Contractual clearing balances generate
earning credits that the institution can
use to offset service charges it incurs
through its use of Federal Reserve
priced services. In addition, an
institution may also maintain excess
balances. Excess balances are balances
maintained by an institution in its
account at a Reserve Bank that are in
excess of the balances maintained to
satisfy its reserve balance requirement
and the contractual clearing balance
requirement (if any).
Congress amended the Act in 2008 to
authorize the Reserve Banks to pay
interest on balances of eligible
1 12

U.S.C. 461.
2 12 CFR 204.4(f) (reserve requirement ratios).

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institutions at a rate or rates determined
by the Board and not to exceed the
general level of short-term interest
rates.3 The Board amended Regulation D
in 2008 to allow Reserve Banks to pay
interest on balances maintained to
satisfy reserve balance requirements and
excess balances. Both types of balances
currently earn interest at the rate of 25
basis points.4 Contractual clearing
balances generate earnings credits, as
noted above, but they do not earn
explicit interest payments.5
II. Request for Public Comment and
Summary of Comments Received
On October 18, 2011, the Board
requested public comment on proposed
amendments to Regulation D and on
several issues related to the
methodology used to create the Private
Sector Adjustment Factor (76 FR 64250
(Oct. 18, 2011)). One comment was
received on the Private Sector
Adjustment Factor; the comment will be
addressed in a future Federal Register
notice along with previous comments to
the Board’s proposal to replace the
current ‘‘correspondent bank model’’
with a model based on publicly traded
firms.6
The Board received 43 comments in
response to its request for comment on
the Regulation D amendments. The
responses consisted of comments from
4 depository institutions, 19 employees
of financial institutions, 12 financial
institution trade associations, and
8 individuals. Thirteen commenters
addressed the proposed amendments to
Regulation D; 8 of these 13 commenters
also addressed issues not raised by the
proposal. Thirty commenters addressed
only issues not raised by the proposal.
All but one of the 13 commenters on the
proposed Regulation D amendments
generally supported the proposal, but
suggested (sometimes conflicting)
amendments, provided support
contingent on certain conditions, or
requested that the Board delay the
implementation date(s) of one or more
of the proposed amendments. These
comments are discussed in more detail
below.
The majority of comments on issues
not raised by the proposal concerned
limits on the number of certain
convenient transfers that may be made
each month from savings deposit
3 Emergency Economic Stabilization Act of 2008,
Public Law 110–343, § 128, 122 Stat. 3765 (2008).
4 12 CFR 204.10(b) (rates of interest paid on
balances maintained by eligible institutions at
Reserve Banks).
5 Earnings credits currently are computed as 80
percent of the rolling 13-week average of the threemonth Treasury bill rate.
6 74 FR 15481 (April 6, 2009).

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accounts. The Board most recently
addressed this issue in its May 2009
Regulation D rulemaking (72 FR 25629,
25631 (May 29, 2009)) when it finalized
amendments to 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. As noted
in the May 2009 rulemaking, the Board
must impose reserve requirements on
transaction accounts and not on other
types of accounts, such as savings
deposits, pursuant to section 19 of the
Federal Reserve Act.7 The Board
believes the current numeric limitation
is necessary for the Board to maintain
the ability to distinguish between
reservable and non-reservable types of
deposit accounts.
III. Analysis of Proposed
Simplifications and Comments
The Board proposed amendments to
Regulation D that would implement the
following four simplifications related to
the administration of reserve
requirements:
1. Create a common two-week
maintenance period for all depository
institutions;
2. Create a penalty-free band around
reserve balance requirements in place of
using carryover and routine penalty
waivers;
3. Discontinue as-of adjustments
related to deposit report revisions and
replace all other as-of adjustments with
direct compensation; and
4. Eliminate the contractual clearing
balance program.
The Board also proposed to make
changes to various terms used
throughout Regulation D in order to
clarify the meaning, enhance the
accuracy, and ensure the consistent
application of those terms. These
proposed changes included replacing
the term ‘‘required reserve balance’’
with ‘‘balances maintained to satisfy the
reserve balance requirement,’’ adding a
definition of ‘‘reserve balance
requirement,’’ and making conforming
revisions throughout the regulation.
After consideration of the comments
received, the Board is adopting the
amendments to Regulation D
substantially as proposed, with minor
technical changes. The Board considers
the final amendments to Regulation D
appropriate given the current approach
to implementing monetary policy. If the
Federal Reserve changes its monetary
policy framework, which includes the
payment of interest on balances held
7 The Act requires the Board to impose reserve
requirements in a ratio from zero to fourteen
percent on reservable liabilities.

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with Reserve Banks, the entire
framework, including the provisions of
Regulation D, would be reassessed. As
a result of the Board’s adoption of these
final amendments to Regulation D,
related Federal Reserve Bank operating
circulars and manuals affected by the
final amendments to Regulation D will
be updated accordingly.

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Create a Common Two-Week
Maintenance Period for All Depository
Institutions
As noted above, a depository
institution satisfies its reserve balance
requirement on average over a period of
time that is known as a maintenance
period. Currently, Regulation D
provides for two types of maintenance
periods: a one-week maintenance period
and a two-week maintenance period.
The determination of which
maintenance period applies to an
institution depends primarily on the
frequency with which it is required to
report its deposits to the Federal
Reserve. The Board requires depository
institutions to submit deposit reports at
different frequencies depending on the
amount of their reservable liabilities
over the previous year. Depository
institutions that have reservable
liabilities above a certain amount
(exemption amount) are required to
submit deposit data either weekly or
quarterly. Regulation D currently
subjects weekly reporters to a two-week
maintenance period and quarterly
reporters to a one-week maintenance
period. Institutions that have reservable
liabilities below the exemption amount
either submit deposit reports annually
or are not required to report at all.
Annual reporters and nonreporters with
a contractual clearing balance are
currently subject to a one-week
maintenance period. Institutions that
have neither reserve requirements nor
clearing balance requirements receive
interest payments at the excess balance
rate because they do not maintain
balances to satisfy reserve balance
requirements.
From one year to another, some
depository institutions switch reporting
frequency because of changes in the
levels of the institution’s reservable
liabilities. Specifically, some depository
institutions may switch from a twoweek maintenance period to a one-week
maintenance period, or vice versa. In
certain instances, depository
institutions that become eligible to shift
to a quarterly instead of weekly
reporting frequency elect to remain at
the higher reporting frequency in order
to maintain the flexibility of satisfying
reserve requirements over a two-week

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maintenance period instead of a oneweek maintenance period.
The Board proposed to create a
common two-week maintenance period
for all depository institutions.
Accordingly, the Board proposed to
retain the two-week maintenance period
requirement for weekly reporters in
§ 204.5(b)(1) of Regulation D, but to
amend § 204.5(b)(2) to include quarterly
reporters in the two-week maintenance
period requirement. As set forth in the
proposal, the common two-week
maintenance period would tend to
benefit depository institutions, Reserve
Banks, and the Board by (1) providing
greater flexibility to depository
institutions that currently satisfy reserve
balance requirements over a one-week
maintenance period; (2) reducing
unnecessary complexity in the existing
maintenance period structure; (3)
reducing administrative and operational
costs for depository institutions that
may otherwise have had to change
maintenance periods when deposit
reporting categories (and therefore
length of maintenance period) changed;
and (4) reducing the operational and
administrative cost for Reserve Banks
and the Board by eliminating business
processes and controls associated with
maintaining two maintenance periods.
The Board received 12 comments on
the proposed common two-week
maintenance period. Of these
comments, 11 supported the creation of
a common two-week maintenance
period, and generally agreed that a
common two-week maintenance period
would reduce burden. One commenter
expressed concern that annual reporters
would face increased burden under the
common two-week maintenance period
if they were required to submit two
weeks of data rather than a single day
of data. The proposed common twoweek maintenance period, however,
does not change the frequency or the
amount of data an institution must
report, but rather changes the period of
time over which an institution would
satisfy its reserve balance requirement
(if any). Annual reporters will continue
to be required to report one day’s worth
of data, once a year, and have a reserve
requirement of zero.
The Board is adopting the common
two-week maintenance period as
proposed. As noted in the proposal, for
depository institutions that report their
deposits weekly, the relationship
between weekly reporting periods and
two-week maintenance periods will be
maintained in § 204.5(b)(1) of
Regulation D. For depository
institutions that report their deposits
quarterly, the quarterly reporting
periods will not change, but the

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relationship of quarterly reporting
periods to two-week maintenance
periods will be new. Revised
§ 204.5(b)(2) provides that, for quarterly
reporters, each quarterly report will be
used to calculate the reporter’s reserve
balance requirement for an interval of
either six or seven consecutive twoweek maintenance periods, depending
on when the interval begins and ends.
The interval will begin on the fourth
Thursday following the end of each
quarterly reporting period if that
Thursday is the first day of a two-week
maintenance period. If the fourth
Thursday following the end of a
quarterly reporting period is not the first
day of a two-week maintenance period,
then the interval will begin on the fifth
Thursday following the end of the
quarterly reporting period. The interval
will end on the fourth Wednesday
following the end of the subsequent
quarterly reporting period if that
Wednesday is the last day of a two-week
maintenance period. If the fourth
Wednesday following the end of the
subsequent quarterly reporting period is
not the last day of a two-week
maintenance period, then the interval
will conclude on the fifth Wednesday
following the end of the subsequent
quarterly reporting period.8
Annual reporters and nonreporters
will continue to receive interest on their
average balances maintained with
Reserve Banks; however, the interest
payments will be calculated on the
average balance maintained over a twoweek period at the excess balance rate
instead of a one-week period at the
excess balance rate.
Create a Penalty-Free Band Around
Reserve Balance Requirements in Place
of Carryover and Routine Penalty
Waivers
As noted above, Regulation D requires
a depository institution to satisfy its
reserve balance requirement on average
over that depository institution’s
maintenance period. Currently,
§ 204.5(e) of Regulation D permits a
depository institution that has a modest
deficiency in its balances maintained to
satisfy a reserve balance requirement
over a given maintenance period to
make up that deficiency by holding a
higher level of balances in the
subsequent maintenance period.
Correspondingly, § 204.5(e) also permits
8 The Board currently provides quarterly reporters
with reserve maintenance calendars that link
quarterly reporting periods to a group of one-week
maintenance periods. See http://
www.frbservices.org/centralbank/reservescentral/
index.html#rmc. The Board will update these
reserve maintenance calendars to reflect the new
rule.

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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations
a depository institution that has a
modest excess of balances maintained to
satisfy its reserve balance requirement
over a maintenance period to use that
excess by holding a lower level of
balances in the next maintenance
period. This ‘‘carryover’’ provision (the
ability to carry an excess or deficiency
from one maintenance period over to
the next) essentially prevents a Reserve
Bank from determining whether a
depository institution has satisfied its
reserve balance requirement, or is in an
excess or deficient position, until the
completion of the subsequent
maintenance period. As a result,
Reserve Banks must delay the payment
of interest and assessment of deficiency
charges on eligible institutions’
balances. Section 204.6(a) currently
authorizes Reserve Banks to assess
deficiency charges against depository
institutions that fail to satisfy their
reserve balance requirements. Section
204.6(b) currently permits Reserve
Banks to waive the imposition of these
charges under certain conditions
through the use of ‘‘routine penalty
waivers.’’
The Board proposed to create a
penalty-free band around each
depository institution’s reserve balance
requirement and to eliminate the
carryover and routine penalty waiver
provisions of Regulation D. Specifically,
proposed § 204.2(gg) defined the top of
the penalty-free band as an amount
equal to an institution’s reserve balance
requirement plus an amount that is the
greater of 10 percent of the institution’s
reserve balance requirement or $50,000.
Proposed § 204.2(hh) defined the bottom
of the penalty-free band as an amount
equal to an institution’s reserve balance
requirement less an amount that is the
greater of 10 percent of an institution’s
reserve balance requirement or $50,000.
For pass-through correspondents, the
Board proposed setting the dollar
amount used to establish the top and
bottom of the penalty-free band at an
amount that is equal to the greater of 10
percent of the aggregate reserve balance
requirement of the correspondent (if
any) and all of its respondents or
$50,000.
Proposed § 204.2(z) revised the
definition of ‘‘excess balance’’ to mean
the average balance maintained in a
Reserve Bank account by or on behalf of
an institution over a reserve
maintenance period that exceeds the top
of the penalty-free band, and proposed
§ 204.2(ff) defined ‘‘deficiency’’ as the
bottom of the penalty-free band less the
average balance maintained in a Reserve
Bank account by or on behalf of an
institution over a reserve maintenance
period. Under the proposed structure, a

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depository institution that maintained
balances that exceeded the reserve
balance requirement, but fell within the
band, would be remunerated at the
interest rate paid on balances
maintained to satisfy a reserve balance
requirement. Balances that exceeded the
top of the penalty-free band would be
remunerated at the interest rate paid on
excess balances. A depository
institution that maintained balances
below its reserve balance requirement
would not be assessed a deficiency
charge unless the balances fell below
the bottom of the penalty-free band. The
Board also proposed to remove
§ 204.5(e) and amend §§ 204.6(a) and (b)
to eliminate the application of carryover
and routine penalty waivers,
respectively. Reserve Banks would,
however, retain the authority to waive
charges for deficiencies based on an
evaluation of the circumstances in each
individual case. Finally, the Board
proposed conforming amendments to
§ 204.10(b)(1) and (b)(3), and (c) to
replace ‘‘required reserve balances’’
with ‘‘balances up to the top of the
penalty-free band.’’
Six commenters generally supported
the Board’s proposal to create a penaltyfree band around each depository
institution’s reserve balance
requirement and to eliminate the
carryover and routine waiver provisions
of Regulation D. However, two of the
commenters that supported this
simplification requested different dollar
amounts be used to establish the top
and bottom of the penalty-free band.
One commenter suggested a smaller
dollar amount equal to the greater of
$50,000 or 6 percent of a depository
institution’s reserve balance
requirement. This commenter stated
that institutions would be provided
with sufficient flexibility if the band
were defined in this manner. The other
commenter requested the dollar amount
be calculated similarly to the current
carryover amount, using the greater of
$50,000 or 4 percent of a depository
institution’s total reserve requirement
(as opposed to 10 percent of its reserve
balance requirement). This commenter
was concerned that a band based on a
reserve balance requirement may affect
the Federal Reserve’s ability to
implement monetary policy in the event
that all depository institutions’ reserve
balance requirements were zero.
The Board is adopting the penalty-free
band as proposed, with one technical
addition, and is eliminating the use of
carryover and routine penalty waivers
as proposed. The Board is clarifying that
in no case will the bottom of the
penalty-free band be less than zero. The
Board believes that the proposed width

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of the penalty-free band will roughly
replicate the amount of flexibility
currently provided under the carryover
provision. On average, reserve balance
requirements are just under half of total
reserve requirements. Therefore, the
flexibility provided by the existing
4 percent carryover provision, when
expressed in terms of reserve balance
requirements, equates to roughly
10 percent of the reserve balance
requirement for a typical depository
institution. In addition, the Board
believes a band constructed in terms of
reserve balance requirements (rather
than reserve requirements) is
appropriate. Reserve balance
requirements are more relevant than
reserve requirements for implementing
monetary policy and controlling the
federal funds rate, because reserve
balance requirements determine the
amount of balances depository
institutions are required to maintain in
Reserve Bank accounts. The Board also
acknowledges that the penalty-free band
is applicable only in monetary policy
frameworks where reserve balance
requirements are non-zero. If in the
future all reserve balance requirements
were zero, which could result from
either a significant change to the Federal
Reserve’s monetary policy framework or
from depository institutions’ limiting
the amount of their reservable liabilities,
the Board would reassess the penaltyfree band and other aspects of the
monetary policy framework accordingly.
The Board received four comments on
the proposed elimination of the
carryover provision. These commenters
supported the elimination provided that
interest is paid soon after a maintenance
period ends on balances maintained to
satisfy a reserve balance requirement
and excess balances. The Board
anticipates that the elimination of
carryover will allow for faster crediting
of interest payments.
Discontinue as-of Adjustments Related
to Deposit Report Revisions and Replace
All Other as-of Adjustments With Direct
Compensation
As-of Adjustments for Deposit Report
Revisions
Depository institutions are required to
submit revisions to past deposit reports
to correct for reporting errors. Currently,
when those revisions result in a change
in the depository institution’s reserve
balance requirement, an as-of
adjustment is used to correct the
depository institution’s level of balances
maintained. For example, if a reserve
balance requirement for a given period
is revised upwards, the as-of adjustment
is used so that the depository institution

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must hold a greater level of balances in
a future maintenance period in order to
meet its reserve balance requirement.
The Board proposed to eliminate the
use of as-of adjustments for deposit
report revisions. The payment of
interest on balances maintained to
satisfy reserve balance requirements
essentially eliminates the need for as-of
adjustments for deposit report revisions,
because the interest rate paid effectively
removes the implicit tax imposed by
reserve requirements. The Board
received no comments opposing the
elimination of as-of adjustments for
deposit report revisions and is adopting
this provision as proposed. The Board
notes that revisions to deposit reports to
correct for reporting errors will still be
required, because these reports are used
to calculate and publish the monetary
aggregates.
All As-of Adjustments Other Than
Those Related to Deposit Report
Revisions
In addition to use for deposit report
revisions, as-of adjustments are
currently used for other purposes as
well. These purposes include, but are
not limited to, correcting transaction
errors, recovering float, and penalizing
an institution for a reserve deficiency in
lieu of assessing monetary charges. An
as-of adjustment for a transaction-based
error corrects the average level of
balances maintained by the depository
institution to the level that would have
resulted had the error not occurred. An
as-of adjustment to recover float
compensates the Reserve Bank for the
float that is created by an institution’s
request to defer check and ACH charges
for days in which the institution is
closed. Finally, an as-of adjustment to
penalize an institution for a reserve
deficiency can be used instead of
imposing an explicit monetary charge to
the institution’s Reserve Bank account.
The Board proposed replacing as-of
adjustments for transaction-based errors
with direct compensation (that is, either
a debit or credit applied to an account
to offset the effect of an error). The
Board proposed replacing as-of
adjustments for recovering float with
explicit billing charges when float arises
from temporary institution closings.
Finally, the Board proposed eliminating
the use of as-of adjustments for reserve
deficiency penalties and relying solely
on the assessment of explicit deficiency
charges. The Board proposed to pay (or
charge) an institution in these situations
at a rate based on the federal funds rate.9
9 The federal funds rate is used in other instances
of direct compensation by Reserve Banks. See, e.g.,
§ 210.32(b)(1)(ii) of Regulation J (federal funds rate

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Three commenters supported the
replacement of as-of adjustments with
direct compensation for all as-of
adjustments other than those related to
deposit report revisions, provided that
institutions may continue to obtain
detailed information on the error that
occurred and the calculation of the
compensation amount. These
commenters stated that such detailed
information is needed to verify the
error, to reconcile accounts, and to
allocate charges (or payments) by
correspondents to the appropriate
respondents. Five commenters
supported the use of the federal funds
rate to compensate depository
institutions for transaction-based errors.
No alternative compensation rate was
suggested.
The Board is adopting the final rule
as proposed.10 The Board anticipates
that the Reserve Banks will make the
appropriate information and
documentation available to depository
institutions as may be needed to permit
institutions to reconcile accounts and
allocate charges or payments. For
example, information will be available
that helps describe the calculation of
direct compensation entries including
the error amount, the start and end date
of the error, and identification of the
originating service area. The Board also
anticipates that Reserves Banks will
provide institutions with contact
information for service areas processing
direct compensation entries so that
inquiries can be addressed.
Eliminate the Contractual Clearing
Balance Program
As noted above, a depository
institution may voluntarily agree with a
Reserve Bank to maintain a level of
balances in excess of the amount
necessary to satisfy its reserve balance
requirement. The actual amount that a
depository institution maintains under
such an agreement is known as a
clearing balance.11 Reserve Banks do
not pay explicit interest on clearing
balances. Instead, clearing balances
generate earnings credits that a
depository institution may then use to
pay for Reserve Bank priced services.
The Board proposed to eliminate the
contractual clearing balance program.
The Board proposed to amend
Regulation D to remove the definitions
applies if compensation interest rate not otherwise
determined by agreement or rule).
10 Consistent with these amendments to
Regulation D, elsewhere in the Federal Register the
Board is finalizing conforming changes to the
provisions in Regulation J that refer to as-of
adjustments.
11 12 CFR 204.2(v) (definition of clearing
balance).

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of ‘‘clearing balance’’ (§ 204.2(v)),
‘‘clearing balance allowance’’
(§ 204.2(w)), and ‘‘contractual clearing
balance’’ (§ 204.2(x)), along with the
removal of any other references to
clearing balances and contractual
clearing balances elsewhere in
Regulation D.
Commenters generally supported the
elimination of the contractual clearing
balance program. However, one
commenter stated that the elimination
of the program may increase the
possibility of overdrafts in depository
institutions’ Reserve Bank accounts if it
was ever the case that the rate paid on
balances held at Reserve Banks is below
the federal funds rate and trading in the
federal funds market is more active.
This commenter suggested the Board
announce its intent to continue the
payment of interest on such balances at
a rate equal to or greater than the federal
funds rate.
The Board is adopting the elimination
of the contractual clearing balance
program as proposed. The elimination
of the contractual clearing balance
program will enhance the Federal
Reserve’s ability to carry out monetary
policy by eliminating the complexities
associated with maintaining different
balance requirements for different kinds
of balances and different kinds and
levels of interest rates (explicit and
implicit). The elimination of the
contractual clearing balance program
will not have any effect on a Reserve
Bank’s ability to require institutions to
maintain a minimum level of balances
in their Reserve Bank accounts in order
for Reserve Banks to protect against
overdrafts.12 The Board established the
rate of interest paid on balances
maintained to satisfy reserve balance
requirements at a level that implements
monetary policy and that eliminates the
implicit tax imposed by reserve
requirements. The Board will continue
to evaluate the appropriate level of
interest rates to achieve these stated
objectives and will communicate
changes when necessary.
Effective Dates
The Board proposed to eliminate the
contractual clearing balance program
and the use of as-of adjustments no
earlier than the first quarter of 2012, and
to implement a common maintenance
period and the penalty-free band around
reserve balance requirements no earlier
than the third quarter of 2012. Four
commenters stated that the proposed
effective date for the elimination of
12 See Reserve Bank Operating Circulars at
http://www.frbservices.org/regulations/
operating_circulars.html.

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clearing balances and as-of adjustments
was too aggressive in light of other
regulatory changes, and suggested
implementation of these simplifications
no earlier than the beginning of the
third quarter of 2012, 90 days after
publication of the final rule, or a period
of nine months. Four other commenters
requested that the implementation of all
simplifications be delayed for either a
period of nine months or at least until
the first quarter of 2013. Additionally, a
subset of these commenters requested
that the Board provide for a staggered
implementation of the simplifications.
The Board will eliminate the
contractual clearing balance program
and the use of as-of adjustments earlier
than it will implement the common
maintenance period and the penalty-free
band. Given that commenters generally
noted that few operational changes
would be necessary to prepare for the
proposed amendments, the Board will
eliminate the contractual clearing
balance program on July 12, 2012. Also
on this date, as-of adjustments will no
longer be created and issuance of direct
compensation will begin. This date is
approximately 90 days after the
publication of the final rule and is
within the time period suggested by
some commenters as appropriate to
prepare for the amendments. The Board
will implement the common two-week
maintenance period, the penalty-free
band, and the elimination of carryover
and routine penalty waivers on January
24, 2013. The Board will provide public
notice no later than November 1, 2012,
if the January 24, 2013 date will be
delayed.
IV. Final Regulatory Flexibility
Analysis
The Regulatory Flexibility Act (the
‘‘RFA’’) (5 U.S.C. 601 et seq.) requires
agencies either to provide a final
regulatory flexibility analysis with a
final rule or to certify that the rule will
not have a significant economic impact
on a substantial number of small
entities. In accordance with the RFA,
the Board reviewed the final rule, which
would apply to all depository
institutions. Based on current
information, the Board believes that,
although a significant number of ‘‘small
banking organizations’’ will be affected
by the rule, the rule will not have a
significant economic impact on these
small entities because the Board expects
the amendments to decrease costs for all
institutions, including smaller
institutions. The Board prepared an
initial regulatory flexibility analysis in
accordance with 5 U.S.C. 603 of the
RFA in its notice of proposed
rulemaking and sought comment on the

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potential impact of the proposed rule on
small entities. The Board did not receive
any comments on the initial regulatory
flexibility analysis.
1. Statement of the need for,
objectives of, and legal basis for, the
final rule. The Board proposed to amend
Regulation D to simplify the
administration of reserve requirements.
Section 19 of the Federal Reserve Act
requires the Board to impose reserve
requirements on certain deposits and
other liabilities of depository
institutions solely for the purposes of
implementing monetary policy. The
Board’s Regulation D implements
section 19 of the Act. The Board
believes that the amendments to
Regulation D will reduce the
administrative and operational costs
associated with reserve requirements for
depository institutions.
2. Summary of significant issues
raised by public comment on the
Board’s initial analysis of issues, and a
statement of any changes made as a
result. The Board did not receive any
public comments on the proposed rule
addressing matters relating to the
Board’s initial regulatory flexibility
analysis.
3. Small entities affected by the final
rule. The final rule applies to all
depository institutions. Pursuant to
regulations issued by the Small
Business Administration (the ‘‘SBA’’)
(13 CFR 121.201), a ‘‘small banking
organization’’ includes a depository
institution with $175 million or less in
total assets. Based on data reported as of
December 31, 2011, the Board believes
that there are approximately 10,313
small depository institutions. Out of
these small depository institutions, the
Board believes that small institutions
affected by the final rule include
approximately 3,181 small depository
institutions that maintain balances to
satisfy reserve balance requirements
over a one-week maintenance period;
approximately 1,775 small depository
institutions with contractual clearing
balances; and approximately 197 small
depository institutions that received at
least one as-of adjustment in 2011.
4. Recordkeeping, reporting, and other
compliance requirements. Although the
final rule imposes certain compliance
requirements on depository institutions,
the Board believes that the overall effect
of the final rule on depository
institutions, including small depository
institutions, will be positive. Under new
§ 204.5(b)(2), small depository
institutions that satisfy their reserve
balance requirement on a one-week
maintenance period (approximately
3,181) will be subject to a two-week
maintenance period. A depository

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institution may choose, however, not to
change its internal systems accordingly,
because it could continue to satisfy its
requirement weekly within the twoweek maintenance period. The final rule
will also eliminate the contractual
clearing balance program, currently
used by approximately 1,775 small
depository institutions. Although the
contractual clearing program will be
eliminated, the Board does not
anticipate that small depository
institutions will be negatively affected
because small depository institutions
will receive explicit interest payments
on excess balances instead of earnings
credits on clearing balances. Small
depository institutions can then use this
explicit interest to pay for Reserve Bank
priced services or for other purposes,
providing them with increased
flexibility. In addition, the final rule
eliminates the use of as-of adjustments
for deposit revisions. The Board does
not believe the elimination of as-of
adjustments for deposit revisions will
negatively affect small depository
institutions because the interest rate
paid on balances maintained to satisfy
a reserve balance requirement
effectively removes the implicit tax
imposed by reserve requirements.
5. Identification of duplicative,
overlapping, or conflicting Federal
rules. The Board has not identified any
Federal rules that duplicate, overlap, or
conflict with the final rule. In a separate
rulemaking, the Board is finalizing
amendments to Regulation J to remove
references to as-of adjustments in order
to conform that regulation to this rule.
6. Significant alternatives to the
proposed rule. The Board designed the
reserve simplifications to reduce
administrative and operational burdens
on depository institutions. Commenters
did not suggest any alternatives to the
final rule that accomplish that objective.
V. Paperwork Reduction Act Analysis
In accordance with the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C.
3506; 5 CFR part 1320 Appendix A.1),
the Board reviewed the final rule under
the authority delegated to the Board by
the Office of Management and Budget
(OMB). Although the mandatory data
collected on the deposits reporting
forms 13 are used by the Federal Reserve
for administering Regulation D and for
constructing, analyzing, and monitoring
13 Report of Transaction Accounts, Other Deposits
and Vault Cash (FR 2900; OMB No. 7100–0087),
Annual Report of Total Deposits and Reservable
Liabilities (FR 2910a; OMB No. 7100–0175), Report
of Foreign (Non-U.S.) Currency Deposits (FR 2915;
OMB No. 7100–0237), and Allocation of Low
Reserve Tranche and Reservable Liabilities
Exemption (FR 2930; OMB No. 7100–0088).

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the monetary and reserve aggregates,
none of the revisions in this rulemaking
change the deposits reporting forms.
The rule contains no collections of
information under the PRA. See 44
U.S.C. 3502(3). Accordingly, no
paperwork burden is associated with the
rule. The Board received no comments
on this analysis.
List of Subjects in 12 CFR Part 204
Banks, banking, Federal Reserve
System, Reporting and recordkeeping
requirements.
For the reasons stated 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
continues to read as follows:

■

§ 204.2

2. Effective July 12, 2012, § 204.1
paragraph (b) is revised to read as
follows:

■

Authority, purpose and scope.

*

*
*
*
*
(b) Purpose. This part relates to
reserve requirements imposed on
depository institutions for the purpose
of facilitating the implementation of
monetary policy by the Federal Reserve
System.
*
*
*
*
*
■ 3. Effective July 12, 2012, § 204.2 is
amended by:
■ A. Removing and reserving
paragraphs (v) through (x);
■ B. Revising paragraphs (z) and (bb);
and
■ C. Adding paragraphs (ee) and (ff).
The additions and revisions read as
follows:
§ 204.2

Definitions.

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*

*
*
*
*
(z) Excess balance means the average
balance maintained in an account at a
Federal Reserve Bank by or on behalf of
an institution over a reserve
maintenance period that exceeds the
balance maintained to satisfy a reserve
balance requirement.
*
*
*
*
*
(bb) Balance maintained to satisfy a
reserve balance requirement means the
average balance held in an account at a
Federal Reserve Bank by or on behalf of
an institution over a reserve
maintenance period to satisfy a reserve
balance requirement of this part.
*
*
*
*
*
(ee) Reserve balance requirement
means the balance that a depository

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Definitions.

*

Authority: 12 U.S.C. 248(a), 248(c), 461,
601, 611, and 3105.

§ 204.1

institution is required to maintain on
average over a reserve maintenance
period in an account at a Federal
Reserve Bank if vault cash does not fully
satisfy the depository institution’s
reserve requirement imposed by this
part.
(ff) Deficiency means the reserve
balance requirement less the average
balance maintained in an account at a
Federal Reserve Bank by or on behalf of
an institution over a reserve
maintenance period.
*
*
*
*
*
■ 4. Effective January 24, 2013, § 204.2
is further amended by:
■ A. Revising paragraphs (z) and (ff);
and
■ B. Adding paragraphs (gg) and (hh).
The additions and revisions read as
follows:
*
*
*
*
(z) Excess balance means the average
balance maintained in an account at a
Federal Reserve Bank by or on behalf of
an institution over a reserve
maintenance period that exceeds the top
of the penalty-free band.
*
*
*
*
*
(ff) Deficiency means the bottom of
the penalty-free band less the average
balance maintained in an account at a
Federal Reserve Bank by or on behalf of
an institution over a reserve
maintenance period.
(gg) Top of the penalty-free band
means an amount equal to an
institution’s reserve balance
requirement plus an amount that is the
greater of 10 percent of the institution’s
reserve balance requirement or $50,000.
The top of the penalty-free band for a
pass-through correspondent is an
amount equal to the aggregate reserve
balance requirement of the
correspondent (if any) and all of its
respondents plus an amount that is the
greater of 10 percent of that aggregate
reserve balance requirement or $50,000.
(hh) Bottom of the penalty-free band
means an amount equal to an
institution’s reserve balance
requirement less an amount that is the
greater of 10 percent of the institution’s
reserve balance requirement or $50,000.
The bottom of the penalty-free band for
a pass-through correspondent is an
amount equal to the aggregate reserve
balance requirement of the
correspondent (if any) and all of its
respondents less an amount that is the
greater of 10 percent of that aggregate
reserve balance requirement or $50,000.
In no case will the penalty-free band be
less than zero.
■ 5. Effective July 12, 2012, in § 204.4
revise paragraphs (d) and (e), and the

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introductory text of paragraph (f), to
read as follows:
§ 204.4

Computation of required reserves.

*

*
*
*
*
(d) For institutions that file a report of
deposits weekly, reserve requirements
are computed on the basis of the
institution’s daily average balances of
deposits and Eurocurrency liabilities
during a 14-day computation period
ending every second Monday.
(e) For institutions that file a report of
deposits quarterly, reserve requirements
are computed on the basis of the
institution’s daily average balances of
deposits and Eurocurrency liabilities
during the 7-day computation period
that begins on the third Tuesday of
March, June, September, and December.
(f) For all depository institutions,
Edge and Agreement corporations, and
United States branches and agencies of
foreign banks, reserve requirements are
computed by applying the reserve
requirement ratios below to net
transaction accounts, nonpersonal time
deposits, and Eurocurrency liabilities of
the institution during the computation
period.
*
*
*
*
*
■ 6. Effective July 12, 2012, § 204.5 is
amended by revising paragraphs (a)(1),
(b), (c), (d), and (e) to read as follows:
§ 204.5

Maintenance of required reserves.

(a)(1) A depository institution, a U.S.
branch or agency of a foreign bank, and
an Edge or Agreement corporation shall
satisfy reserve requirements by
maintaining vault cash and, if vault cash
does not fully satisfy the institution’s
reserve requirement, in the form of a
balance maintained
(i) In the institution’s account at the
Federal Reserve Bank in the Federal
Reserve District in which the institution
is located, or
(ii) With a pass-through
correspondent in accordance with
§ 204.5(d).
*
*
*
*
*
(b)(1) For institutions that file a report
of deposits weekly, the balances
maintained to satisfy reserve balance
requirements shall be maintained
during a 14-day maintenance period
that begins on the third Thursday
following the end of a given
computation period.
(2) For institutions that file a report of
deposits quarterly, the balances
maintained to satisfy reserve balance
requirements shall be maintained
during each of the 7-day maintenance
periods during the interval that begins
on the fourth Thursday following the
end of the institution’s computation

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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations
period and ends on the fourth
Wednesday after the close of the
institution’s next computation period.
(c) Cash items forwarded to a Federal
Reserve Bank for collection and credit
are not included in an institution’s
balance maintained to satisfy its reserve
balance requirement until the expiration
of the time specified in the appropriate
time schedule established under
Regulation J, ‘‘Collection of Checks and
Other Items by Federal Reserve Banks
and Funds Transfers Through Fedwire’’
(12 CFR part 210). If a depository
institution draws against items before
that time, the charge will be made to its
account if the balance is sufficient to
pay it; any resulting deficiency in
balances maintained to satisfy the
institution’s reserve balance
requirement will be subject to the
penalties provided by law and to the
deficiency charges provided by this
part. However, the Federal Reserve Bank
may, at its discretion, refuse to permit
the withdrawal or other use of credit
given in an account for any time for
which the Federal Reserve Bank has not
received payment in actually and finally
collected funds.
(d)(1) A depository institution, a U.S.
branch or agency of a foreign bank, or
an Edge or Agreement corporation with
a reserve balance requirement
(‘‘respondent’’) may select only one
pass-through correspondent under this
section, unless otherwise permitted by
the Federal Reserve Bank in whose
District the respondent is located.
Eligible pass-through correspondents
are Federal Home Loan Banks, the
National Credit Union Administration
Central Liquidity Facility, and
depository institutions, U.S. branches or
agencies of foreign banks, and Edge and
Agreement corporations that maintain
balances to satisfy their own reserve
balance requirements which may be
zero, in an account at a Federal Reserve
Bank. In addition, the Board reserves
the right to permit other institutions, on
a case-by-case basis, to serve as passthrough correspondents.
(2) Respondents or correspondents
may institute, terminate, or change passthrough correspondent agreements by
providing all documentation required
for the establishment of the new
agreement or termination of or change to
the existing agreement to the Federal
Reserve Banks involved within the time
period specified by those Reserve
Banks.
(3) Balances maintained to satisfy
reserve balance requirements of a
correspondent’s respondents shall be
maintained along with the balances
maintained to satisfy a correspondent’s
reserve balance requirement (if any), in

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a single commingled account of the
correspondent at the Federal Reserve
Bank in whose District the
correspondent is located. Balances
maintained in the correspondent’s
account are the property of the
correspondent and represent a liability
of the Reserve Bank solely to the
correspondent, regardless of whether
the funds represent the balances
maintained to satisfy the reserve balance
requirement of a respondent.
(4)(i) A pass-through correspondent
shall be responsible for maintaining
balances to satisfy its own reserve
balance requirement (if any) and the
reserve balance requirements of all of its
respondents. A Federal Reserve Bank
will compare the total reserve balance
requirement to be satisfied by the
correspondent with the total balance
maintained to satisfy a reserve balance
requirement by the correspondent for
purposes of determining deficiencies,
imposing or waiving charges for
deficiencies and for other reserve
maintenance purposes. A charge for a
deficiency in the correspondent’s
account will be imposed by the Reserve
Bank on the correspondent maintaining
the account.
(ii) Each correspondent is required to
maintain detailed records for each of its
respondents that permit Reserve Banks
to determine whether the respondent
has provided a sufficient funds to the
correspondent to satisfy the reserve
balance requirement of the respondent.
The correspondent shall maintain such
records and make such reports as the
Board or Reserve Bank may requires in
order to ensure the correspondent’s
compliance with its responsibilities
under this section and shall make them
available to the Board or Reserve Bank
as required.
(iii) The Federal Reserve Bank may
terminate any pass-through agreement
under which the correspondent is
deficient in its recordkeeping or other
responsibilities.
(iv) Interest paid on supplemental
reserves (if such reserves are required
under § 204.7) held by a respondent will
be credited to the account maintained
by the correspondent.
(e) Any excess or deficiency in an
institution’s balance maintained to
satisfy its reserve balance requirement
shall be carried over and applied against
the balance maintained in the next
maintenance period as specified in this
paragraph. The amount of any such
excess or deficiency that is carried over
shall not exceed the greater of:
(1) The amount obtained by
multiplying 0.04 times the depository
institution’s reserve requirement; or

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21853

(2) $50,000. Any carryover not offset
during the next period may not be
carried over to subsequent periods.
■ 7. Effective January 24, 2013, § 204.5
is further amended by:
■ A. Revising paragraphs (b)(2) and
(d)(4)(i); and
■ B. Removing paragraph (e).
The additions and revisions read as
follows:
§ 204.5

Maintenance of required reserves.

*

*
*
*
*
(b) * * *
(2) For institutions that file a report of
deposits quarterly, the balances
maintained to satisfy reserve balance
requirements shall be maintained
during an interval of either six or seven
consecutive 14-day maintenance
periods, depending on when the
interval begins and ends. The interval
will begin on the fourth Thursday
following the end of each quarterly
reporting period if that Thursday is the
first day of a 14-day maintenance
period. If the fourth Thursday following
the end of a quarterly reporting period
is not the first day of a 14-day
maintenance period, then the interval
will begin on the fifth Thursday
following the end of the quarterly
reporting period. The interval will end
on the fourth Wednesday following the
end of the subsequent quarterly
reporting period if that Wednesday is
the last day of a 14-day maintenance
period. If the fourth Wednesday
following the end of the subsequent
quarterly reporting period is not the last
day of a 14-day maintenance period,
then the interval will conclude on the
fifth Wednesday following the end of
the subsequent quarterly reporting
period.
*
*
*
*
*
(d) * * *
(4)(i) A pass-through correspondent
shall be responsible for maintaining
balances to satisfy its own reserve
balance requirement (if any) and the
reserve balance requirements of all of its
respondents. A charge for any
deficiency in the correspondent’s
account will be imposed by the Reserve
Bank on the correspondent maintaining
the account.
*
*
*
*
*
■ 8. Effective July 12, 2012, § 204.6 is
amended by revising the section
heading and paragraphs (a) and (b), to
read as follows:
§ 204.6

Charges for deficiencies.

(a) Deficiencies in a depository
institution’s balance maintained to
satisfy its reserve balance requirement
after application of the carryover

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provided in § 204.5(e), are subject to
deficiency charges. Federal Reserve
Banks are authorized to assess charges
for deficiencies at a rate of 1 percentage
point per year above the primary credit
rate, as provided in § 201.51(a) of this
chapter, 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.
(b) Reserve Banks may waive the
charges for deficiencies except when the
deficiency arises out of a depository
institution’s gross negligence or conduct
that is inconsistent with the principles
and purposes of reserve requirements.
Decisions by Reserve Banks to waive
charges are based on an evaluation of
the circumstances in each individual
case and the depository institution’s
reserve maintenance record. For
example, a waiver may be appropriate
for a small charge or once during a twoyear period for a deficiency that does
not exceed a certain percentage of the
depository institution’s reserve
requirement. If a depository institution
has demonstrated a lack of due regard
for the proper maintenance of balances
to satisfy its reserve balance
requirement, the Reserve Bank may
decline to exercise the waiver privilege
and assess all charges regardless of
amount or reason for the deficiency.
*
*
*
*
*
■ 9. Effective January 24, 2013, § 204.6
is further amended by revising
paragraphs (a) and (b) to read as follows:

erowe on DSK2VPTVN1PROD with RULES

§ 204.6

Charges for deficiencies.

(a) Federal Reserve Banks are
authorized to assess charges for
deficiencies at a rate of 1 percentage
point per year above the primary credit
rate, as provided in § 201.51(a) of this
chapter, 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.
(b) Reserve Banks may waive the
charges for deficiencies based on an
evaluation of the circumstances in each
individual case.
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*
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*
*
■ 10. Effective July 12, 2012, § 204.10 is
amended by revising paragraphs (b)(1),
(b)(3), (c), (d)(3) and (e)(2) to read as
follows:
§ 204.10

*

Payment of interest on balances.

*
*
(b) * * *

VerDate Mar<15>2010

*

*

15:24 Apr 11, 2012

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(1) For balances maintained to satisfy
reserve balance requirements, at 1⁄4
percent;
*
*
*
*
*
(3) For balances maintained to satisfy
reserve balance requirements, excess
balances, and term deposits, at any
other rate or rates as determined by the
Board from time to time, not to exceed
the general level of short-term interest
rates. For purposes of this paragraph (b),
‘‘short-term interest rates’’ are rates on
obligations with maturities of no more
than one year, such as the primary
credit rate and rates on term federal
funds, term repurchase agreements,
commercial paper, term Eurodollar
deposits, and other similar instruments.
(c) Pass-through balances. A passthrough correspondent that is an eligible
institution may pass back to its
respondent interest paid on balances
maintained to satisfy a reserve balance
requirement of that respondent. In the
case of balances maintained by a passthrough correspondent that is not an
eligible institution, a Reserve Bank shall
pay interest only on the balances
maintained to satisfy a reserve balance
requirement of one or more
respondents, and the correspondent
shall pass back to its respondents
interest paid on balances in the
correspondent’s account.
(d) * * *
(3) Balances maintained in an excess
balance account will not satisfy any
institution’s reserve balance
requirement.
*
*
*
*
*
(e) * * *
(2) A term deposit will not satisfy any
institution’s reserve balance
requirement.
*
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*
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*
■ 11. Effective January 24, 2013,
§ 204.10 is further amended by revising
paragraphs (b)(1), (b)(3), and (c) to read
as follows:
§ 204.10

Payment of interest on balances.

*

*
*
*
*
(b) * * *
(1) For balances up to the top of the
penalty-free band, at 1⁄4 percent;
*
*
*
*
*
(3) For balances up to the top of the
penalty-free band, excess balances, and
term deposits, at any other rate or rates
as determined by the Board from time
to time, not to exceed the general level
of short-term interest rates. For purposes
of this subsection, ‘‘short-term interest
rates’’ are rates on obligations with
maturities of no more than one year,
such as the primary credit rate and rates
on term federal funds, term repurchase
agreements, commercial paper, term

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Eurodollar deposits, and other similar
instruments.
(c) Pass-through balances. A passthrough correspondent that is an eligible
institution may pass back to its
respondent interest paid on balances
maintained to satisfy a reserve balance
requirement of that respondent. In the
case of balances maintained by a passthrough correspondent that is not an
eligible institution, a Reserve Bank shall
pay interest only on the balances
maintained to satisfy a reserve balance
requirement of one or more respondents
up to the top of the penalty-free band,
and the correspondent shall pass back to
its respondents interest paid on
balances in the correspondent’s account.
*
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*
By order of the Board of Governors of the
Federal Reserve System, April 5, 2012.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 2012–8562 Filed 4–11–12; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 210
[Regulation J; Docket No. R–1434]
RIN 7100 AD 84

Collection of Checks and Other Items
by Federal Reserve Banks and Funds
Transfers Through Fedwire:
Elimination of ‘‘As-of Adjustments’’
and Other Clarifications
Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
AGENCY:

The Board is amending
Regulation J (Collection of Checks and
Other Items by Federal Reserve Banks
and Funds Transfers through Fedwire).
The final rule eliminates references to
‘‘as-of adjustments’’ consistent with the
Board’s final amendments to Regulation
D to simplify reserves administration;
clarifies that an institution’s
Administrative Reserve Bank is deemed
to have accepted deposit of a check or
other item even if the institution sends
the item directly to another Federal
Reserve Bank; further clarifies that
Regulation J continues to apply to a
Fedwire funds transfer even if the funds
transfer also meets the definition of
‘‘remittance transfer’’ under the
Electronic Fund Transfer Act; and
makes other conforming revisions.
DATES: This final rule is effective July
12, 2012.
FOR FURTHER INFORMATION CONTACT: Kara
Handzlik, Senior Attorney (202) 452–
SUMMARY:

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12APR1