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F ederal Reserve Bank D A LLAS, T E X A S of Dallas 75222 Circular No. 70-77 March 25, 1970 REPRINT OF REGULATION D To All Member Banks in the Eleventh Federal Reserve District: Enclosed are the new larger size reprints of Regulation D, as amended effective February 12, 1970, and the Supplement to Regulation D as amended effective February 12, 1970. The small size Regulation D with applicable amendments should be removed from your binder and may be destroyed. * . Yours very truly, . P. E. Coldwell ' President Enclosures (2) 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 SUPPLEMENT TO REGULATION D As amended effective February 12, 1970 SE C T IO N 204.5— S U P P L E M E N T (a) Reserve percentages. P ursuant to the provi sions of section 19 of the Federal Reserve A ct and § 204.2(a) and subject to paragraphs (b) and (c) of this section, the Board of G overnors of the F ed eral Reserve System hereby prescribes the follow ing reserve balances which each m em ber bank of the Federal Reserve System is required to m ain tain on deposit with the Federal Reserve Bank of its district: (1) If not in a reserve city— (1) 3 per cent of (a) its savings deposits and (b) its time deposits, open account, th at constitute de posits of individuals, such as Christm as club ac counts and vacation club accounts, that are m ade under w ritten contracts providing that no w ith draw al shall be m ade until a certain num ber of periodic deposits have been m ade during a period of not less than 3 months; plus (ii) 3 per cent of its other time deposits up to $5 million, plus 6 per cent of such deposits in ex cess of $5 million; plus (iii) 12Vi per cent of its net dem and deposits up to $5 million, plus 13 per cent of such deposits in excess of $5 million. (2) If in a reserve city (except as to any bank located in such a city which is perm itted by the Board of G overnors of the Federal Reserve Sys tem, pursuant to § 204.2(a)(2), to m aintain the reserves specified in subparagraph (1) of this p ara graph)— (i) 3 per cent of (a) its savings deposits and (b) its tim e deposits, open account, that constitute de posits of individuals, such as Christm as club ac counts and vacation club accounts, that are m ade under w ritten contracts providing th at no w ith draw al shall be m ade until a certain num ber of periodic deposits have been m ade during a period of not less than 3 months; plus (ii) 3 per cent of its other time deposits up to $5 million, plus 6 per cent of such deposits in ex cess of $5 million; plus (iii) 17 per cent of its net dem and deposits up to $5 million, plus 17Vi per cent of such deposits in excess of $5 million. (b) Currency and coin. T he am ount of a m em ber bank’s currency and coin shall be counted as reserves in determ ining com pliance w ith the re serve requirem ents of paragraph (a) of this section. (c) Reserve percentages against certain deposits by foreign banking offices. Deposits represented by promissory notes, acknowledgm ents of ad vance, due bills, or similar obligations described in § 2 0 4 .1 (f) to foreign offices o f other banks,8 or institutions the time deposits of which are exempt from the rate limitations of Regulation Q pursu ant to § 217.3(g) thereof, shall not be subject to paragraph (a) of this section or to § 204.3(a)(1) and (2); but during each week of the four-week period beginning O ctober 16, 1969, and during each week of each successive four-week (“m ainte nance”) period, a m em ber bank shall m aintain with the Reserve Bank of its district a daily aver age balance equal to 10 per cent of the daily aver age am ount of such deposits during the four-week (“com putation”) period ending on the W ednesday fifteen days before the beginning of the m ainte nance period; except that only 3 per cent need be so m aintained against such deposits which are time deposits 9 aggregating n ot m ore than 4 per cent of such m em ber bank’s daily average deposits sub ject to paragraph (a) of this section during the com putation period. A n excess or deficiency in reserves in any week of a m aintenance period u n der this pargraph shall be subject to § 204.3(a)(3), as if com puted under § 204.3(a)(2), and deficien cies under this paragraph shall be subject to § 2 0 4 .3 (b ).1 0 8 I.e., offices of other banks not covered by § 204.1(f)(1). 9 For the purposes of this paragraph, “time deposits” means any deposit having a maturity of one day or more. 1 The term “computation period” in § 204.3(a)(3) and 0 (b) shall, for this purpose, be deemed to refer to each week of a maintenance period under this paragraph. BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM RESERVES OF MEMBER BANKS REGULATION D (12 CFR 204) As amended effective February 12, 1970 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the Federal Reserve District in which the inquiry arises. CONTENTS Page Page Se c . 2 0 4 .1 — D e f in it io n s ..................................... 3 (a) D em and deposits .................................. 3 (b) Tim e deposits ....................................... 3 (c) Tim e certificates of d e p o s i t ............... 3 (d ) Tim e deposits, open a c c o u n t .............. 3 (e) Se c . 2 0 4 .2 — C o m p u t a t io n . . 4 (a) A m ounts of reserves to be m aintained (b) Deductions allowed in com puting reserves ............................................... (c) Availability of cash items as reserve (d) Reserves against trust f u n d s .............. (e) C ontinuance of “tim e deposit” status 4 of R eserves 3 Savings deposits ..................................... S e c . 2 0 4 .3 — D (f) D eposits as including certain prom is sory notes and other obligations . . 4 (g) Gross dem and deposits ....................... 4 (h ) Cash items in process of collection . . 4 (i). N et dem and deposits ........................... 4 (j) Currency and coin .............................. 4 . . 6 (a) C om putation of deficiencies .............. ............................................... (b) Penalties (c) N otice to directors of banks deficient in reserves .......................................... (d) C ontinued deficiencies .......................... 6 6 Statutory A e f ic ie n c ie s pp e n d ix in R eserves 5 5 5 5 ............................................. 6 6 7 REGULATION D (12 CFR 204) As amended effective February 12, 1970 RESERVES OF MEMBER BANKS* (d) Time deposits, open account. T he term “time deposit, open account” means a deposit, other than a “time certificate of deposit”, with re spect to which there is in force a w ritten contract with the depositor th a t neither the whole no r any part of such deposit m ay be w ithdraw n, by check or otherwise, prior to the date of m aturity, which shall be not less than 30 days after the date of the deposit,2 or prior to the expiration of the period of notice which m ust be given by the depositor in writing not less th an 30 days in advance of w ith draw al.3 (e) Savings deposits. T he term “savings deposit” m eans a deposit— (1) which consists of funds deposited to the credit of one or m ore individuals, or of a corpora tion, association, or other organization operated prim arily for religious, philanthropic, charitable, educational, fraternal, or other similar purposes and n ot operated for p ro fit;4 or in w hich the en SE C T IO N 204.1— D E F IN IT IO N S (a) Demand deposits. The term “dem and depos its” includes all deposits except “time deposits” as defined below. (b) Time deposits. T he term “time deposits” means “time certificates of deposit”, “time depos its, open account”, and “savings deposits”, as de fined below; except that for the purposes of § 2 04 .5 (c) “time deposits” shall have the meaning set forth therein. (c) Time certificates of deposit. T he term “time certificate of deposit” means a deposit evidenced by a negotiable o r nonnegotiable instrum ent which provides on its face that the am ount of such deposit is payable to bearer or to any specified person or to his order: (1) On a certain date, specified in the instru ment, not less than 30 days after the date of de posit, or 2 Deposits, such as Christmas club accounts and vaca tion club accounts, which are made under written con tracts providing that no withdrawal shall be made until a certain number of periodic deposits have been made dur ing a period of not less than 3 months constitute “time deposits, open account” even though some of the deposits are made within 30 days from the end of the period. 3 A deposit with respect to which the bank merely re serves the right to require notice of not less than 30 days before any withdrawal is made is not a “time deposit, open account”, within the meaning of the above definition. 4 Deposits in joint accounts of two or more individuals may be classified as savings deposits if they meet the other requirements of the above definition, but deposits of a partnership operated for profit may not be so classified. Deposits to the credit of an individual of funds in which any beneficial interest is held by a corporation, partner ship, association, or other organization operated for profit or not operated primarily for religious, philanthropic, char itable, educational, fraternal, or other similar purposes may not be classified as savings deposits. (2) A t the expiration of a certain specified time not less than 30 days after the date of the instru ment, or (3) U pon notice in writing which is actually re quired to be given not less than 30 days before the date of repaym ent,1 and (4) In all cases only upon presentation and sur render of the instrum ent. * The text corresponds to the Code of Federal Regula tions, Title 12, Chapter II, Part 204; cited as 12 CFR 204. The words “this Part”, as used herein, mean Regulation D. X deposit with respect to which the bank merely re A serves the right to require notice of not less than 30 days before any withdrawal is made is not a “time certificate of deposit”. 3 R E G U L A TIO N D § 204.2 tire beneficial interest is held by one or m ore indi viduals or by such a corporation, association, or other organization; and (2) with respect to which the depositor is not required by the deposit contract but m ay at any time be required by the bank to give notice in writing of an intended w ithdraw al not less than 30 days before such w ithdraw al is m ade 5 and which is not payable on a specified date or at the expira tion of a specified time after the date of deposit. (f) Deposits as including certain promissory notes and other obligations. F o r the purposes of this Part, the term “deposits” also includes a m em ber b an k ’s liability on any prom issory note, ac know ledgm ent of advance, due bill, or similar obligation (written or oral) that is issued or u nder taken by a m em ber bank principally as a means of obtaining funds to be used in its banking busi ness, except any such obligation that: (1) is issued to (or undertaken with respect to) and held for the account of (i) a domestic banking office 5a of another bank o r (ii) an agency of the U nited States or the G overnm ent D evelopm ent Bank for Puerto Rico; (2) evidences an indebtedness arising from a transfer of direct obligations of, or obligations that are fully guaranteed as to principal and interest by, the U nited States or any agency thereof that the bank is obligated to repurchase; (3) has an original m aturity of m ore than two years, is unsecured, and states expressly that it is subordinated to the claims of depositors; or (4) arises from a borrow ing by a m em ber bank from a dealer in securities, for one business day, of proceeds of a transfer of deposit credit in a Federal Reserve Bank (or other im mediately avail able funds), com m only referred to as “Federal funds”, received by such dealer on the date of the loan in connection with clearance of securities transactions. This p aragraph shall not, however, affect (i) any instrum ent issued before June 27, 1966, (ii) any instrum ent th at evidences an indebtedness arising from a transfer of assets under repurchase agree m ent issued before July 25, 1969, or (iii) any in strum ent issued to a foreign office of another bank before June 27, 1969. (g) Gross demand deposits. T he term “gross de m and deposits” m eans the sum of all dem and de 5The exercise by the bank of its right to require such notice shall not cause the deposit to cease to be a savings deposit. 5a Any banking office in any State of the United States or the District of Columbia of a bank organized under domestic or foreign law. 4 posits, including dem and deposits to the credit of other banks, the U nited States, States, counties, school districts, and other governm ental subdivi sions and municipalities, and all outstanding certi fied and officers’ checks (including checks issued by the bank in paym ent of dividends and checks or drafts draw n by or on behalf of a foreign branch of a m em ber bank on an account m ain tained by such a branch with a domestic office of the parent bank), and letters of credit and travel ers’ checks sold for cash. (h) Cash items in process of collection. T he term “cash items in process of collection” means: (1) Checks in process of collection, draw n on a bank, private bank, or any other banking institu tion, which are payable im mediately upon presen tation in the U nited States, including checks with a Federal Reserve Bank in process of collection and checks on hand which will be presented for paym ent or forw arded for collection on the fol lowing business day; (2) G overnm ent checks and w arrants draw n on the T reasurer of the U nited States w hich are in process of collection; (3) Such other items in process of collection, payable im m ediately upon presentation in the U nited States, as are customarily cleared or col lected by banks as cash items. Item s handled as noncash collections m ay not be treated as “cash items in process of collection” within the meaning of this Part. (i) N et demand deposits. The term “net dem and deposits” m eans gross dem and deposits as defined in paragraph (g) of this section less the deductions allowed under the provisions of § 204.2(b). (j) Currency and coin. The term “currency and coin” m eans U nited States currency and coin owned and held by a m em ber bank, including cur rency and coin in transit to or from a Federal Reserve Bank. SEC T IO N 204.2— C O M P U T A T IO N O F RESERV ES (a) Amounts of reserves to be maintained. (1) Every m em ber bank shall m aintain on deposit with the F ederal Reserve B ank of its district an actual net balance equal to 3 per cent of its time deposits, plus 7 per cent of its net dem and depos its if it is not located in a reserve city or 10 per cent of its net dem and deposits if it is located in a reserve city, or such different percentages of its time deposits and net dem and deposits as the Board of G overnors of the Federal Reserve Sys § 204.2 R E G U L A T IO N D tem, pursuant to and within the limitations con tained in section 19 of the Federal Reserve Act, m ay prescribe from time to time in § 204.5 (the S upplem ent to this P a r t ) : Provided, T h at a m em ber b an k ’s currency and coin shall be counted as reserves in determ ining com pliance with such re quirem ents to such extent as the Board of G ov ernors of the Federal Reserve System, pursuant to section 19 of the Federal Reserve Act, m ay p er mit from time to time in § 204.5. (2) N otw ithstanding the provisions of subpara graph (1) of this paragraph, a m em ber bank lo cated in a reserve city m ay hold and m aintain the reserve balances which are in effect for m em ber banks no t located in reserve cities if, upon appli cation to the Board of G overnors, the Board grants permission for the holding and m aintaining of such lower reserve balances after consideration of all factors relating to the character of such b an k ’s business, including, but not limited to, the am ount of such m em ber bank ’s total assets, the am ount of its total deposits, the am ount of its total dem and deposits, the am ount of its dem and deposits owing to banks, the nature of its depos itors and borrow ers, the rate of activity of its dem and deposits, its geographical location within the city, and its com petitive position w ith relation to other banks in the city. A ny such permission shall be subject to revocation by the Board at any tim e in the light of changed circumstances, and all such grants of permission m ay be subject to annual review by the Board. (3 ) F o r the purposes of this P art, a m em ber bank shall be considered to be in a reserve city if the head office or any branch thereof is located in a reserve city. (b) Deductions allowed in computing reserves. In determ ining the reserve balances required u n der the term s of this Part, m em ber banks m ay deduct from the am ount of their gross dem and deposits the am ounts of balances subject to im m ediate w ithdraw al due from other banks and cash items in process of collection as defined in § 204.1(h). Balances “due from other banks” do not include balances due from Federal Reserve Banks, balances (payable in dollars or otherwise) due from foreign banks or branches thereof wherever located, or balances due from foreign branches of domestic banks.6 6 A member bank exercising fiduciary powers may not include in balances “due from other banks” amounts of trust funds deposited with other banks and due to it as trustee or other fiduciary. If trust funds are deposited by 5 (c) Availability of cash items as reserve. Cash items forw arded to a Federal Reserve Bank for collection and credit cannot be counted as part of the m inim um reserve balance to be carried by a m em ber bank w ith its F ederal Reserve Bank until the expiration of such time as m ay be specified in the appropriate time •schedule referred to in P art 210 of this chapter. If a m em ber bank draws against items before such time, the draft will be charged against its reserve balance if such balance be sufficient in am ount to pay it; but any result ing im pairm ent of reserve balances will be subject to the penalties provided by law and by this P art: Provided, however, T h at the F ederal Reserve Bank may, in its discretion, refuse at any time to perm it the withdrawal or other use of credit given in its reserve account for any item for which the F ed eral Reserve Bank has not received paym ent in actually and finally collected funds. (d) Reserves against trust funds. A m em ber bank exercising trust powers need not m aintain reserves against trust funds which it keeps p rop erly segregated as trust funds and apart from its general assets or which it deposits in another insti tution to the credit of itself as trustee or other fiduciary. If, however, such funds are mingled with the general assets of the bank, a deposit lia bility thereby arises against which reserves must be m aintained. (e) Continuance of “time deposit” status. A de posit which at the time of deposit was a “deposit evidenced by a tim e certificate of deposit” , “time deposit, open account”, or “savings deposit” con tinues to be a “time deposit” until m aturity or the expiration of the period of notice of withdrawal, although it has become payable within 30 days. A fter the date of m aturity of any time deposit, such deposit is a dem and deposit. A fter the expi ration of the period of notice given with respect to the repaym ent of any savings deposit or other time deposit, such deposit is a dem and deposit, except that, if the owner of such deposit advise the bank in writing th a t the deposit will not be w ithdraw n pursuant to such notice or that the deposit will thereafter again be subject to the con tract or requirem ents applicable to such deposit, the deposit will again constitute a savings deposit or other time deposit, as the case m ay be, after the trust department of a member bank in its commercial or savings department and are then redeposited in another bank subject to immediate withdrawal they may be in cluded by the member bank in balances “due from other banks”, subject to the provisions of § 204.2(b).