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F e d e r a l Re s e r v e Ba n k DALLAS. TEXAS of Dallas 75222 C i r c u l a r No. 76-92 J u l y 2, 1976 INTERPRETATION TO REGULATION D TO ALL MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e B o a r d o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e S y s te m h a s i s s u e d a n i n t e r p r e t a t i o n to R e g u l a ti o n D r e g a r d i n g t h e a b i l i t y of a m em b e r b a n k to in c l u d e c e r t a i n a u to m a te d p a y m e n t s in t h e a c c o u n t " c a s h item s in p r o c e s s of c o l l e c t i o n . " S u c h p a y m e n t s a r e r e g a r d e d a s c a s h item s a n d a r e p e r m i t t e d to b e d e d u c t e d from " g r o s s d e m a n d d e p o s i t s " u s e d in c o m p u tin g m e m b e r b a n k r e s e r v e s . T h e n e w i n t e r p r e t a t i o n to R e g u l a ti o n D is p r i n t e d o n t h e r e v e r s e of th i s c i r c u l a r . T h i s n e w i n t e r p r e t a t i o n , e ff e c tiv e J a n u a r y 16, 1976, s h o u l d b e file d w ith y o u r c o p y of R e g u l a ti o n D in y o u r R e g u l a ti o n s B i n d e r . If y o u h a v e a n y q u e s t i o n s r e g a r d i n g R e g u l a ti o n D, p l e a s e c o n ta c t A lla n Y . N eale a t (214) 651-6334 o r C . L. V ic k a t (214) 651-6333, o r t h e A c c o u n ti n g D e p a r tm e n t a t o u r El P a s o , H o u s to n , o r S a n A n to n io B ranches. A d d itio n a l c o p i e s o f t h e i n t e r p r e t a t i o n to R e g u l a ti o n D will b e f u r n i s h e d u p o n r e q u e s t to t h e S e c r e t a r y ' s Office o f t h i s B a n k (214) 651-6267. S in ce rely y o u r s , T. W. Plant First Vice President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RESERVES OF MEMBER BANKS IN T E R P R E T A T IO N O F R E G U L A T IO N D Automated Payment Arrangements and the U se o f Cash Items in the Process o f Collection Effective June 16, 1976, §204.118 is added to read as follows: SEC T IO N 2 0 4 .1 1 8 — C A SH ITE M S IN T H E PRO CESS O F C O L L E C T IO N (a) As a result of involvement in autom ated arrangem ents in w hich paym ent inform ation is contained on magnetic tape, paper listings, etc., rath er than checks, a num ber of m em ber banks have inquired as to the proper reserve require m ent treatm ent for payroll, F ederal recurring paym ents, and other items received for credit to a custom er’s account in such arrangem ents. (b) W here paym ent inform ation is sent to a m em ber b ank p rior to the date credit is passed for the item, some banks have been crediting their custom ers on the date p rior to th at paym ent date to ensure th a t such deposit is available to the depositor at opening o f business on the paym ent date. Such procedure, however, results in an in crease in reported m em ber bank deposits even though the m em ber bank does n o t itself receive credit for the funds until the next day. Some mem ber banks have inquired as to w hether the account “cash items in the process of collection” may be debited in an am ount equal to the am ount credited on the date prior to the paym ent date. (c) Section 19(g) o f the Federal Reserve A ct (12 U.S.C. 465) perm its a mem ber bank to deduct “cash items in the process of collection” as defined by the Board. Section 204.2(b) o f Regulation D provides that cash items m ay be deducted from gross dem and deposits, and §204.1(h)(3) defines cash items in the process o f collection as “those customarily cleared o r collected by banks as cash items.” The deduction was intended, in part, to avoid the “double counting” by m em ber banks of their deposits subject to reserves. Furtherm ore, due to the spread o f autom ated arrangem ents, it has become custom ary to treat such autom ated paym ents as “cash items.” Because double count ing would arise in circumstances described above, and in view of the fact th at autom ated arrange m ents are now custom ary practices, the Board believes th a t banks are perm itted to debit the account “cash items in th e process o f collection” in such amounts.
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