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federal Reserve Bank DALLAS, TEXAS of Dallas 75222 Circular No. 68-10 January 11, 1968 RESERVES OP MEMBER BANKS (Revision of Bulletin No. 4) To All Member Banks in the Eleventh Federal Reserve District: Reference is made to my Circular Letter No. 67-265 of December 28, 1967, trans mitting a statement made public December 27, 1967, by the Board of Governors of the Federal Reserve System concerning an increase in the reserves that member banks are required to maintain against demand deposits in excess of $5 million. A revised Supplement to Regulation D, reflecting the change, was furnished you at that time. In accordance with the amendment to Regulation D, there is attached a revised Bul letin No. 4 of the Federal Reserve Bank of Dallas entitled “Reserves of Member Banks.” A revised Form FR-414, “Computation of Reserve to Be Carried with the Federal Reserve Bank by Member Banks,” page 4 of this Bulletin, reflects necessary changes arising from the recent amendment to Regulation D specifying differential reserve requirements on demand deposits up to $5 million and in excess of $5 million. The form has also been changed to provide more explicit directions on the treatment of Christmas savings, vaca tion club, and similar accounts. This revision of Bulletin No. 4 does not require any changes in your reporting procedures. A t the appropriate time, the enclosed Bulletin should be filed in place of the super seded Bulletin No. 4 in the ring binder of bulletins and regulations furnished by this Bank. Please acknowledge receipt of this Bulletin by signing and returning the enclosed postal card. Yours very truly, Watrous H. Irons President Enclosures (2) This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BULLETIN NO. 4 Jan u ary 11, 1968 FEDERAL RESERVE BANK OF DALLAS (Superseding Bulletin No. 4, dated July 14, 1966) RE SE R V E S OF MEMBER B A N K S To all Member Banks in the Eleventh Federal Reserve District: Unless otherwise stated, all references to the Federal Reserve Bank of Dallas include the head office and all of its branches. Under Section 19 of the Federal Reserve Act, as amended, every member bank is required to establish and maintain a reserve balance as prescribed by the Board of Governors of the Federal Reserve System within the limitations set forth in the section mentioned. The percentages applicable, respectively, to banks not in reserve cities and those in reserve cities will be found in the current Supplement to Regulation D issued by the Board of Governors of the Federal Reserve System which also includes current instructions regarding the counting of currency and coin as reserves. DEFINITIONS For the determination of the reserve status of member banks, the Board of Governors of the Federal Reserve System defines the various classes of deposits, cash items in process of collection, balances subject to immediate withdrawal due from other banks, and currency and coin, which includes currency and coin in transit to or from a Federal Reserve Bank. The Board’s definitions will be found in Sections 204.1 and 204.2 (b) of Regulation D as amended. REPORTS OF DEPOSITS AND RELATED DATA At the close of business on each Wednesday, each member bank should send to the Federal Reserve Bank a report of deposits and related data on forms to be furnished. At the close of the reserve computation period (every Wednes day for reserve city banks and every other Wednesday for nonreserve city banks), these reports will be used in determining whether reserves have been maintained as required by law. ( See Schedule of Biweekly Reserve Computa tion Periods which is issued each year as a supplement to this Bulletin.) It is important that the completed reports be sent to the Federal Reserve Bank as quickly as possible. In many instances early receipt of a report makes it possible to advise a member bank how it may ofifset a deficiency, under certain circumstances, with a minimum of inconvenience. Since as noted below the balances for a given day are the balances at the opening of business, it should be possible to send the report each Wednesday evening, even though the practice of “delayed posting” is followed. The cooperation of member banks in sending the reports each Wednesday evening will be greatly appreciated. — 2 — BU L L E T IN NO. 4 Amounts reported for each date on the report of deposits and related data, including amounts reported as currency and coin, should be the balances at the O PEN IN G of business on that date. Accordingly, balances for Sunday and Monday will be identical and will be those at the close of business on Saturday. If Saturday is a nonbusiness day, balances for Saturday, Sunday, and Monday will be identical and will be those at the close of Friday. Balances reported for a holiday will be those at the close of the preceding business day, and they will be repeated for the next business day. The amount of the reserve balance maintained at the Federal Reserve Bank is computed at the close of business each business day and repeated for each next subsequent nonbusiness day. It will be observed that at the top of each column of the form provided for reporting deposits and related data, there is inserted a reference to the corresponding items and schedules in the call reports of condition. It is believed that the use of these references will assist you in the proper preparation of your reports. It should be noted that the figures for U. S. Government demand deposits (column 2) should include balances in the Treasury tax and loan account and the Series E bond account, as well as all demand deposits of public moneys made by or for the account of the United States or some department, bureau, or official thereof. Amounts reportable as currency and coin (column 9) should include currency and coin in transit to and from the Federal Reserve Bank. For complete definitions of U. S. Government demand deposits and of currency and coin, attention is directed to the instructions for preparation of reports of condition issued by the banking supervisory authorities. COMPUTATION OF RESERVES A formula is provided on page 4 of this Bulletin as a guide to use in the determination of the amount of reserves required. As indicated by parenthetical references, the various items in this formula correspond to certain items and schedules in the call reports of condition. Each member bank is urged to make its own computation of reserves required and maintained so as to keep in close touch with its reserve position on a current basis. A form of worksheet for this purpose will be supplied upon request. It will be noted that the report form for nonreserve city banks provides a copy for the reporting bank’s file showing all of the deposit and other figures which are reported. It is hoped that this copy, together with the formula men tioned above and the explanation in the following paragraph, will aid member banks in making their own reserve computations. (If they care to do so, reserve city banks may make a copy of the report for their files using an additional form.) Attention is directed to the provisions of Section 204.3(a)(2) of Regula tion D with respect to computation periods that end with a nonbusiness day, or two or more consecutive nonbusiness days, of a member bank or its Federal Reserve Bank. In such cases the nonbusiness day or days may, at the option of the member bank, and whether or not it had a reserve deficiency in such computation period, be included in the next reserve computation period. This will not change the usual reporting procedure; however, the member bank should advise this bank as soon as possible of its option to transfer the non business day, or days, to the following reserve computation period. —3 — BU L L E T IN NO. 4 PENALTIES FOR DEFICIENCIES IN RESERVES As provided in Section 204.3 (a) (1) of Regulation D, deficiencies in reserve balances will be computed on the basis of average daily net deposit balances and average daily currency and coin during the reserve computation period. A member bank will be notified of any deficiency that may have occurred in its reserve account. Penalties for deficiencies will be assessed monthly on the basis of average daily deficiencies during any reserve computation period ending in the preceding calendar month. The penalty for deficiencies in reserves has been fixed by the Board of Governors of the Federal Reserve System at a rate 2 percent per annum above the Reserve Bank rate applicable to discounts of 90-day commercial paper for member banks, in effect on the first day of the calendar month in which the computation period ends. WAIVER OF PENALTIES The Board of Governors has given the Federal Reserve Banks authority, in their discretion, to waive the assessment of penalties for deficiencies in the reserves of member banks in the following circumstances: When a member bank is deficient in reserves during any reserve computation period, the penalty for the deficiency may be waived to the extent that the deficiency is offset by excess reserves during the immediately following reserve computation period, provided that such deficiency does not exceed 2 percent of the member bank’s required reserve. This rule was adopted with the definite objective of reducing the number of occasions on which member banks might otherwise incur deficient reserve penalties. However, the law contemplates that member banks should make reasonable efforts to hold and maintain the prescribed reserve balances from day to day, making allowance for unforeseen fluctuations in deposits and re serves, even though penalties are assessed on daily average deficiencies over prescribed periods. The right is reserved to withdraw, add to, or amend at any time, any of the provisions of this Bulletin. Yours very truly, Watrous H. Irons President FO R T H E FORM ULA FOR “CO M PUTA TION O F RE SER V E TO BE CARRIED W IT H T H E FED ERA L R ESERV E BANK BY MEMBER BANKS” SEE T H E FO LLO W IN G PAGE. B U LLETIN N O . 4 — 4 — Form F . R. 414 (Rev. 1-68) COMPUTATION OF RESERVE TO BE CARRIED WITH THE FEDERAL RESERVE BANK BY MEMBER BANKS (For definitions of the terms gross demand deposits, deductions allowed in computing reserves, cash items in process o f collection, net demand deposits, tim e deposits, and currency and coin, see Regulation D o f the Board o f Governors of the Federal Reserve System. Reference to call report item numbers, shown below, are to those in th e forms used at the December 1967 call.) 1. GROSS DEMAND D E PO SIT S: (a) Demand deposits o f banks1 (opening of business) (Corresponds to items 1, 8, and 9 in Schedule E o f call report o f condition) (b) TJ. S. Government demand deposits2 (opening of business) (Corresponds to item 5 in Schedule E o f call report o f condition) $________ ________ (c) Other demand deposits (opening of business) ________ (Corresponds to items 2, 3, 6, 7, and 10 in Schedule E of call report of condition) < 2. DEDUCTIONS ALLOW ED IN COMPUTING R E SE R V E S: (a) Cash items in process o f collection, except to the e x ten t included in item 2-b (including checks w ith Federal Reserve Banks in process of collection and checks on hand which will be presented for paym ent or forwarded for col lection on the follow ing business day) (opening o f business) (Corresponds to item 1 in Schedule D of call report of condition) (b) Balances subject to immediate withdrawal due from other banks (including cash items forwarded to a correspondent bank for collection and credit and charged to “Due from banks,” but excluding balances due from Federal Re serve Banks, from foreign banks or branches thereof, from foreign branches of domestic banks.1 (opening of business) (Corresponds to item 2 in Schedule D of call report of condition) 3. N E T DEMAND DEPOSITS (item 1 minus item 2) 4. TOTAL TIME D EPOSITS (opening - - - - of business)3 - - - - (a) Savings deposits (opening of business) (Corresponds to item 1 in Schedule F of call report o f condition) (b) Other time deposits (opening of business) (Corresponds to items 3, 4, 5, 7, 8, 9, 10, and 11 of Schedule F o f call report o f condition) - - - 5. R ESERV ES REQUIRED4 : (a) On net demand deposits (item 3 above) : (1) U p to 5 m illio n ,................... percent - - - - - (2) In excess of 5 m illio n ,................ percent (b) On all savings deposits (item 4a above) ,* and on other tim e deposits up to 5 million, .................percent - . (c) On all other time deposits,................ percent - (d) Total reserves required to be maintained - - - - - - 6. Currency and Coin (opening o f business) (Corresponds to item 5 in Schedule D o f call report of condition) 7. Reserve to be maintained with Federal Reserve Bank (Item 5d minus item 6) - - R ecip rocal interbank demand deposits with banks in the U nited States, except American branches of foreign banks, must be reported net. in c lu d e s deposits in Treasury tax and loan account and Series E bond account. :,Christmas savings, vacation club, and sim ilar types of tim e deposit accounts should be included w ith s a v in g s deposits (item 4a) and excluded from Other tim e deposits (item 4b) for purposes o f this report. E x c e p t for this difference item references noted apply. 4For current required reserve percentage against the deposit totals for banks in reserve cities and for banks located elsewhere, see latest supplement to Regulation D.
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