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Federal reserve bank OF DALLAS Dallas, Texas, October 19,1962 RESERVE REQUIREMENTS ON SAVINGS AND TIME DEPOSITS REDUCED FROM 5% TO 4% To All Member Banks of the Eleventh Federal Reserve District: The following statement was made public October 18, 1962, by the Board of Governors of the Federal Reserve System: The Board of Governors of the Federal Reserve System acted today to reduce from 5 per cent to 4 per cent the reserves against savings and time deposits that member banks are required to maintain with Federal Reserve Banks. The reduction in requirements will become effective at the beginning of the next reserve computation periods, October 25, 1962, in the case of reserve city banks and November 1, 1962, for all other member banks. This action will reduce member bank required reserves by an estimated $767 million, $410 million at reserve city banks and $357 million at all other member banks. The release of these reserves, coming at this time, will assist in meeting the heavy seasonal needs for reserves that the banking system experiences in the closing months of the year. In addition, the reserves thus supplied will help in providing for the longer term growth in bank deposits needed to facilitate the expansion of economic activity and trade. Reserves supplied in this manner substitute for a corresponding amount of reserves supplied through Federal Reserve purchases of Government securities in the open market, most of which, because of the characteristics of the market, would necessarily be in short term securities. Thus, this method of supplying reserves will minimize downward pressures from System purchases upon short-term market rates, which is desirable in the present circumstances in order to keep incentives for short-term capital flows abroad from becom ing stronger. In addition, the reduction in the requirement will make reserves available directly to banks throughout the country, to be used by them as their own local circum stances dictate to support seasonal or other changes in earning assets and deposits. In taking this action, the Board took into account the character deposits at commercial banks this past year. Net increases in savings during 1962 have been comparatively large, in response to widespread of higher rates of interest for such deposits. In these circumstances, the requirement behind these deposits would be appropriate. of the growth in and time deposits offering by banks Board felt a lower The Supplement to Regulation D has been revised to reflect the changes referred to in the above statement. A copy of the revised Supplement is attached and should be substituted for the Supple ment now filed with your copy of Regulation D in the ring binder furnished you for this purpose. Additional copies of this circular and of the enclosed Supplement will be furnished upon request. Yours very truly, Watrous H. Irons President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) SUPPLEMENT T O REGULATION D Section 204.5— Supplem ent I ssued by the B oard of G overnors of the F ederal R eserve System Effective as to member banks in reserve cities at the opening o f business on October 25, 1962, and as to all other member banks at the opening of business on November 1, 1962. ( a ) Reserve percentages.— Pursuant to the provisions o f section 19 o f the Federal Reserve A ct and § 204.2 (a) and subject to paragraph (b) o f this section, the Board o f Governors o f the Federal Reserve System hereby prescribes the following reserve balances which each member bank o f the Federal Reserve System is required to maintain on deposit with the Federal Reserve Bank o f its district : (1 ) I f not in a reserve city— ( i) 4 per cent o f its time deposits, plus (ii) 12 per cent o f its net demand deposits. (2 ) I f in a reserve city (except as to any bank located in such a city which is permitted by the Board o f Governors o f the Federal Reserve System, pursuant to § 204.2 (a) ( 2 ) , to maintain the reserves specified in subparagraph (1 ) o f this paragraph)— ( i) 4 per cent o f its time deposits, plus (ii) 16y2 per cent o f its net demand deposits. ( b ) Counting o f currency and coin.— The amount o f a member bank’s currency and coin shall be counted as reserves in determining com pliance with the reserve requirements o f paragraph (a) o f this section.