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Federal R eserve Bank OF DALLAS WILLIAM H. WALLACE DALLAS. T E X A S 7 5 2 2 2 F IR S T V IC E P R E S ID E N T A N D C H IE F O P E R A T IN G O F F IC E R May 31, 1989 C i r c u l a r 89-36 TO: The Chief Operations O f f i c e r of a l l f i n a n c i a l i n s t i t u t i o n s in the Eleventh Federal Reserve D i s t r i c t SUBJECT Revised Regulation J and D pamphlets DETAILS Enclosed a re t he r e v i s e d Regulation J — C o l l e c t i o n of Checks and Other Items and Wire T r a n s f e r s of Funds and Regulation D - - Reserve Requirements of Depository I n s t i t u t i o n s . P le ase p lace t h e s e in your r e g u l a t i o n s bin de rs and remove any old c op ie s. ENCLOSURES The r e v i s e d r e g u l a t i o n J and D pamphlets are encl ose d. MORE INFORMATION For a d d i t i o n a l copi es of th e se r e g u l a t i o n s , p le a s e c o n t a c t J a c k i e Nicholson a t (214) 651-6289. S i n c e r e l y y ou r s , This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) For a dditional copies of any circular please conta c t the Public A ffairs D ep artm en t at (214) 6 51 -6 2 8 9 . Banks and others are encouraged to use the follow ing incom ing W A T S numbers in conta c ting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800) 5 2 7 -9 2 0 0 (interstate). Board of Governors of the Federal Reserve System Regulation D Reserve Requirements of Depository Institutions 12 C FR 204; as amended effective December 31, 1987 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the Federal Reserve District in which the inquiry arises. September 1988 Contents Page Section 204.1—Authority, purpose and scope .................................................... (a) Authority .................................... (b) Purpose........................................ (c) Scope........................................... Section 204.2—Definitions....................... (a) D eposit........................................ (b) (c) (d ) (e) (f) (g) (h ) (i) (j) (k) (/) (m ) (n ) (o) (p ) (q) (r) (s) (t) Demand d e p o s it............................. Time d e p o s it.................................... Savings d e p o s it................................ Transaction account....................... Nonpersonal time d e p o s it............ N atural p e r s o n ............................... Eurocurrency liab ilities................ Cash items in process of collection N et transaction ac co u n ts.............. V a u ltc a s h ........................................ Pass-through acco u n t..................... Depository institution .................. Member b a n k .................................. Foreign b a n k .................................... De novo depository institution . . . A ffiliate............................................ United States.................................... United States resident..................... Any deposit that is payable only at an office located outside the United S ta te s.................................. .............. Section 204.3—Computation and maintenance ............................................. (a) Maintenance of required reserves . (b) Form of reserves............................. (c) Computation of required reserves for institutions that report on a weekly basis....................................... (d ) Computation of required reserves for institutions that report on a quarterly b asis.................................. (e) Computation of transaction accounts ........................................... (f) Deductions allowed in computing reserv es............................................. (g) Availability of cash items as reserv es............................................. (h ) Carryover of excesses or deficiencies....................................... 1 1 1 1 1 1 4 5 6 7 8 9 9 10 10 11 11 11 11 11 11 11 12 12 12 12 12 14 14 14 14 14 15 15 Page (i) Pass-through r u le s ......................... 15 Section 204.4— Transitional adjustments . 17 (a) N onm em bers.................................... 17 (b) New m em bers.................................. 18 (c) De novo in stitu tio n s....................... 18 (d ) Nonmember depository institutions with offices in Hawaii . 19 (e) Mergers and consolidations.......... 19 Section 204.5— Emergency reserve requirem ent............................................... 20 (a) Finding by B o a rd ........................... 20 (b) T e r m ................................................. 20 (c) Reports to C ongress....................... 20 (d ) Reserve requirem ents..................... 20 Section 204.6— Supplemental reserve requirem ent............................................... 21 (a) Finding by B o a rd ........................... 21 (b) T e r m ................................................. 21 (c) Earnings participation account . . . 21 (d) Report to Congress......................... 21 (e) Reserve requirem ents..................... 21 Section 204.7— Penalties (a) Penalties for deficiencies ............... 21 (b) Penalties for violations................... 22 Section 204.8— International banking facilities...................................................... 22 (a) Definitions........................................ 22 (b) Acknowledgment of IB F deposits and extensions of c r e d it ................. 23 (c) Exemption from reserve requirem ents.................................... 23 (d) Establishment of an international banking facility ................................ 23 (e) Notification to Federal R eserve. . . 24 (f) Recordkeeping requirem ents........ 24 Section 204.9— Supplement: Reserve requirement ratio s.................................... 24 (a) Reserve percentages....................... 24 (b) Reserve ratios in effect during last computation period prior to September 1,1980............................ 24 Section 204.125—Foreign, international, and supranational entities whose deposits are exempt from reserves......... 26 Contents Page Page Section 25 ................................................. 34 Federal Reserve Act Section 19 ................................................. 27 Section 11(a), (c), and ( e ) ................... 33 Section 2 5 ( a ) ............................................. 34 International Banking Act STATUTORY PROVISIONS Section 7 ................................................... 35 Regulation D Reserve Requirements of Depository Institutions 12 C FR 204; as amended effective December 31, 1987 SECTION 204.1—Authority, Purpose and Scope (a) Authority. This part* is issued under the authority of section 19 (12 USC 461 et seq.) and other provisions of the Federal Reserve A ct and of section 7 of the International Banking A ct of 1978 (12 USC 3105). (b) Purpose. This part relates to reserves that depository institutions are required to main tain for the purpose of facilitating the imple mentation of monetary policy by the Federal Reserve System. (c) Scope. (1) The following depository in stitutions are required to maintain reserves in accordance with this part: (i) Any insured bank as defined in sec tion 3 of the Federal Deposit Insurance A ct (12 USC 1813(h)) or any bank that is eligible to apply to become an insured bank under section 5 of such act (12 USC 1815); (ii) Any savings bank or mutual savings bank as defined in section 3 of the Feder al Deposit Insurance A ct (12 USC 1813(f), (g )); (iii) Any insured credit union as defined in section 101 of the Federal Credit U n ion A ct (12 USC 1752(7)) or any credit union that is eligible to apply to become an insured credit union under section 201 of such act (12 USC 1781); (iv) Any member as defined in section 2 of the Federal Home Loan Bank A ct (12 USC 1422(4)); and (v) Any insured institution as defined in section 401 of the National Housing Act (12 USC 1724(a)) or any institution which is eligible to apply to become an insured institution under section 403 of such act (12 USC 1726). (2) Except as may be otherwise provided by the Board, a foreign bank’s branch or agency located in the United States is re *The words “ this part,” as used herein, mean Regulation D (Code o f Federal Regulations, title 12, chapter II, part 204). quired to comply with the provisions of this part in the same manner and to the same extent as if the branch or agency were a member bank, if its parent foreign bank (i) has total worldwide consolidated bank as sets in excess of $1 billion; or (ii) is con trolled by a foreign company or by a group of foreign companies that own or control foreign banks that in the aggregate have to tal worldwide consolidated bank assets in excess of $1 billion. In addition, any other foreign bank’s branch located in the United States that is eligible to apply to become an insured bank under section 5 of the Federal Deposit Insurance Act (12 USC 1815) is required to maintain reserves in accordance with this part as a nonmember depository institution. (3) Except as may be otherwise provided by the Board, an Edge corporation (12 USC 611 et seq.) or an agreement corpora tion (12 USC 601 et seq.) is required to comply with the provisions of this part in the same m anner and to the same extent as a member bank. (4) This part does not apply to any finan cial institution that (i) is organized solely to do business with other financial institu tions; (ii) is owned primarily by the finan cial institutions with which it does business; and (iii) does not do business with the gen eral public. (5) The provisions of this part do not ap ply to any deposit that is payable only at an office located outside the United States. SECTION 204.2—Definitions For purposes of this part, the following defini tions apply unless otherwise specified: (a) (1) “Deposit” means— (i) the unpaid balance of money or its equivalent received or held by a deposito ry institution in the usual course of busi ness and for which it has given or is obli gated to give credit, either conditionally or unconditionally, to an account, includ1 §204.2 ing interest credited, or which is evi denced by an instrument on which the depository institution is primarily liable; (ii) money received or held by a deposi tory institution, or the credit given for money or its equivalent received or held by the depository institution in the usual course of business for a special or specific purpose, regardless of the legal relation ships established thereby, including es crow funds, funds held as security for securities loaned by the depository insti tution, funds deposited as advance pay ment on subscriptions to United States government securities, and funds held to meet its acceptances; (iii) an outstanding draft, cashier’s check, money order, or officer’s check drawn on the depository institution and issued in the usual course of business for any purpose, including payment for ser vices, dividends, or purchases; (iv) any due bill or other liability or un dertaking on the part of a depository in stitution to sell or deliver securities to, or purchase securities for the account of, any customer (including another deposi tory institution), involving either the receipt of funds by the depository institu tion, regardless of the use of the pro ceeds, or a debit to an account of the cus tom er before the securities are delivered. A deposit arises thereafter, if after three business days from the date of issuance of the obligation, the depository institution does not deliver the securities purchased or does not fully collateralize its obliga tion with securities similar to the securi ties purchased. A security is similar if it is of the same type and if it is of com para ble m aturity to that purchased by the customer; (v) any liability of a depository institu tion’s affiliate that is not a depository in stitution, on any promissory note, ac knowledgment of advance, due bill, or similar obligation (written or oral), with a m aturity of less than one and one-half years, to the extent that the proceeds are used to supply or to maintain the avail ability of funds (other than capital) to the depository institution, except any Regulation D such obligation that, had it been issued directly by the depository institution, would not constitute a deposit. If an obli gation of an affiliate of a depository institution is regarded as a deposit and is used to purchase assets from the deposi tory institution, the maturity of the de posit is determined by the shorter of the maturity of the obligation issued or the remaining m aturity of the assets pur chased. If the proceeds from an affiliate’s obligation are placed in the depository in stitution in the form of a reservable de posit, no reserves need be maintained against the obligation of the affiliate since reserves are required to be maintained against the deposit issued by the deposi tory institution. However, the maturity of the deposit issued to the affiliate shall be the shorter of the m aturity of the affili ate’s obligation or the maturity of the deposit; (vi) credit balances; (vii) any liability of a depository institu tion on any promissory note, acknowl edgment of advance, banker’s accept ance, or similar obligation (written or oral), including mortgage-backed bonds, that is issued or undertaken by a deposi tory institution as a means of obtaining funds, except any such obligation that— (A ) is issued or undertaken and held for the account of— (1) an office located in the United States of another depository institu tion, foreign bank, Edge or agree ment corporation, or New York In vestment (article X II) Company; (2) the United States government or an agency thereof; or (3) the Export-Import Bank of the United States, Minbanc Capital Cor poration, the Government Develop ment Bank for Puerto Rico, a Feder al Reserve Bank, a Federal Home Loan Bank, or the National Credit Union Administration Central Li quidity Facility; (B) arises from a transfer o f direct ob ligations of, or obligations that are ful ly guaranteed as to principal and inter est by, the United States government Regulation D or any agency thereof that the deposi tory institution is obligated to repurchase; (C ) is not insured by a federal agency, is subordinated to the claims of deposi tors, has a weighted average maturity of seven years or more, and is issued by a depository institution with the ap proval of, or under the rules and regu lations of, its primary federal supervisor; (D ) arises from a borrowing by a de pository institution from a dealer in se curities, for one business day, of pro ceeds of a transfer of deposit credit in a Federal Reserve Bank or other imme diately available funds, (commonly re ferred to as “federal funds” ), received by such dealer on the date of the loan in connection with clearance of securi ties transactions; or (E ) arises from the creation, discount and subsequent sale by a depository in stitution of its banker’s acceptance of the type described in paragraph 7 of section 13 of the Federal Reserve Act (12 USC 372); (viii) any liability of a depository insti tution that arises from the creation after June 20, 1983, of a banker’s acceptance that is not of the type described in para graph 7 of section 13 of the Federal Re serve Act (12 U.S.C. 372) except any such liability held for the account of an entity specified in section 204.2(a)(1) (vii) (A ). (2) “Deposit” does not include— (i) trust funds received or held by the depository institution that it keeps prop erly segregated as trust funds and apart from its general assets or which it depos its in another institution to the credit of itself as trustee or other fiduciary. If trust funds are deposited with the commercial department of the depository institution or otherwise mingled with its general as sets, a deposit liability of the institution is created; (ii) an obligation that represents a con ditional, contingent or endorser’s liability; (iii) obligations, the proceeds of which §204.2 are not used by the depository institution for purposes of making loans, invest ments, or maintaining liquid assets such as cash or “due from” depository institu tions or other similar purposes. An obli gation issued for the purpose of raising funds to purchase business premises, equipment, supplies, or similar assets is not a deposit; (iv) accounts payable; (v) hypothecated “deposits” created by payments on an installment loan where (A ) the amounts received are not used immediately to reduce the unpaid bal ance due on the loan until the sum of the payments equals the entire amount of loan principal and interest; (B) and where such amounts are irrevocably as signed to the depository institution and cannot be reached by the borrower or creditors of the borrower; (vi) dealer reserve and differential ac counts that arise from the financing of dealer installment accounts receivable, and which provide that the dealer may not have access to the funds in the ac count until the installment loans are re paid, as long as the depository institution is not actually (as distinguished from contingently) obligated to make credit or funds available to the dealer; (vii) a dividend declared by a depository institution for the period intervening be tween the date of the declaration of the dividend and the date on which it is paid; (viii) an obligation representing a “pass through account,” as defined in this section; (ix) an obligation arising from the reten tion by the depository institution of no more than a 10 percent interest in a pool of conventional one- to four-family m ort gages that are sold to third parties; (x) an obligation issued to a state or m u nicipal housing authority under a loanto-lender program involving the issuance of tax exempt bonds and the subsequent lending of the proceeds to the depository institution for housing finance purposes; (xi) shares of a credit union held by the National Credit Union Administration or the National Credit Union Administra3 §204.2 tion Central Liquidity Facility under a statutorily authorized assistance pro gram; and (xii) any liability of a United States branch or agency of a foreign bank to an other United States branch or agency of the same foreign bank, or the liability of the United States office of an Edge corpo ration to another United States office of the same Edge corporation. (b) (1) “D em and deposit” means a deposit that is payable on demand, or a deposit is sued with an original m aturity or required notice period of less than seven days, or a deposit representing funds for which the de pository institution does not reserve the right to require at least seven days’ written notice of an intended withdrawal. Demand deposits may be in the form of— (i) checking accounts; (ii) certified, cashier’s and officer’s checks (including checks issued by the depository institution in payment of dividends); (iii) traveler’s checks and money orders that are primary obligations of the issu ing institution; (iv) checks or drafts drawn by, or on be half of, a non-United States office of a depository institution on an account maintained at any of the institution’s United States offices; (v) letters of credit sold for cash or its equivalent; (vi) withheld taxes, withheld insurance and other withheld funds; (vii) time deposits that have m atured or time deposits upon which the contractu ally required notice of withdrawal was given and the notice period has expired and which have not been renewed (either by action of the depositor or automatical ly under the terms of the deposit agree m ent); and (viii) an obligation to pay, on demand or within six days, a check (or other in strument, device, or arrangement for the transfer of funds) drawn on the deposito ry institution, where the account of the institution’s customer already has been debited. Regulation D (2) The term “demand deposit” also means deposits or accounts on which the depository institution has reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of any funds in the account and from which the deposi tor is authorized to make withdrawals or transfers in excess of the withdrawal or transfer limitations specified in section 204.2(d)(2) for such an account and the account is not a NOW account, or an ATS account or other account that meets the criteria specified in either section 204.2(b) (3) (ii) or (iii) below. (3) “Demand deposit” does not include— (i) any account that is a time deposit or a savings deposit under this part; (ii) any deposit or account on which the depository institution has reserved the right to require at least seven days’ writ ten notice prior to withdrawal or transfer of any funds in the account and either— (A ) is subject to check, draft, negotia ble order of withdrawal, share draft or similar item, such as an account autho rized by 12 USC 1832(a) ( “NOW A c count” ) and an M M D A as described in section 204.2(d) (2) (ii), provided that the depositor is eligible to hold a NOW account; or (B) from which the depositor is au thorized to make transfers by preau thorized transfer or telephonic (in cluding data transmission) agreement, order or instruction to another account or to a third party, provided that the depositor is eligible to hold a NOW account; (iii) any deposit or account on which the depository institution has reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of any funds in the account and from which withdrawals may be made automatically through payment to the depository institution itself or through transfer of credit to a demand deposit or other account in order to cover checks or drafts drawn upon the institution or to maintain a specified balance in, or to make periodic transfers to such other ac count, such as accounts authorized by 12 Regulation D USC 371a (autom atic transfer account or ATS account), provided that the de positor is eligible to hold an ATS account; (iv) any obligation that is a time deposit under section 204.2(c) (1) (iv); (v) checks or drafts drawn by the depos itory institution on the Federal Reserve or on another depository institution; or (vi) IBF time deposits meeting the re quirements of section 204.8(a)(2). (c) (1) “Tim e deposit” means— (i) a deposit that the depositor does not have a right and is not permitted to make withdrawals from within six days after the date of deposit unless the deposit is subject to an early withdrawal penalty of at least seven days’ simple interest on amounts withdrawn within the first six days after deposit.1 A time deposit from which partial early withdrawals are per mitted must impose additional early withdrawal penalties of at least seven 1 Accounts existing on M arch 31, 1986, may satisfy the early w ithdrawal penalties specified by this part by meeting the Depository Institutions D eregulation Committee’s ear ly w ithdrawal penalties in existence on M arch 31, 1986. A ccounts that otherwise meet the requirements for time deposits but that lack such penalties due to a lack o f a regulatory requirement for such a penalty, as in the case of federally chartered credit unions, may continue to be classi fied as time deposits; however, the penalty should be in cluded in time deposits opened, renewed o r to which addi tional deposits are made on o r after January 1, 1987. A time deposit, o r a portion thereof, may be paid before m aturity without imposing the early w ithdrawal penalties specified by this part— (a ) where the time deposit is maintained in an individu al retirement account established in accordance with 26 USC 408 and is paid within seven days after establishment of the individual retirement account pursuant to 26 C FR 1.408-6(d)(4), o r where it is maintained in a Keogh (H .R. 10) plan; provided that the depositor forfeits an am ount at least equal to the simple interest earned on the amount withdrawn; (b ) where the depository institution pays all o r a por tion of a time deposit representing funds contributed to an individual retirement account o r a Keogh (H .R . 10) plan established pursuant to 26 USC 408 or 26 USC 401 when the individual for whose benefit the account is maintained attains age 59^ or is disabled (as defined in 26 USC 7 2 (m ) (7 )) o r thereafter; (c ) where the depository institution pays that portion of a time deposit on which federal deposit insurance has been lost as the result o f the merger of two or more federally insured banks in which the depositor previously maintained separate time deposits, for a period o f one year from the date of the merger; (d ) upon the death o f any owner o f the time deposit funds; §204.2 days’ simple interest on amounts with drawn within six days after each partial withdrawal. If such additional early withdrawal penalties are not imposed, the account ceases to be a time deposit. The account may become a savings de posit if it meets the requirements for a saving deposit; otherwise it becomes a transaction account.2 “Time deposit” in cludes funds— (A ) payable on a specified date not less than seven days after the date of deposit; (B) payable at the expiration of a specified time not less than seven days after the date of deposit; (C ) payable only upon written notice that is actually required to be given by the depositor not less than seven days prior to withdrawal; (D ) held in “club” accounts (such as “Christmas club” accounts and “vaca tion club” accounts that are not main tained as “savings deposits” ) that are deposited under written contracts pro viding that no withdrawal shall be made until a certain number of period ic deposits have been made during a period of not less than three months even though some of the deposits may be made within six days from the end of the period; or (E ) share certificates and certificates of indebtedness issued by credit un ions, and certificate accounts and no tice accounts issued by savings and loan associations; (ii) a “savings deposit;” (iii) an “IBF time deposit” meeting the requirements of section 2 0 4.8(a)(2); and (iv) borrowings, regardless of maturity, represented by a promissory note, an acknowledgment of advance, or (e) when the owner of the time deposit is determined to be legally incompetent by a court or other administrative body o f competent jurisdiction; or (f) where a time deposit is w ithdraw n within ten days after a specified m aturity date even though the deposit con tract provided for autom atic renewal at the m aturity date. 2 A nonpersonal time deposit with a stated m aturity of one and one-half years or m ore may be treated as having an original m aturity o f one and one-half years or more for reserve requirement purposes only if it is subject to the minimum penalty described in section 204.2(f)(3). 5 §204.2 similar obligation described in section 2 0 4 .2 (a)(1) (vii) that is issued to, or any banker’s acceptance (other than the type described in 12 USC 372) of the deposi tory institution held by— (A ) any office located outside the United States of another depository in stitution or Edge or agreement corpo ration organized under the laws of the United States; (B) any office located outside the United States of a foreign bank; (C ) a foreign national government, or an agency or instrumentality thereof,3 engaged principally in activities which are ordinarily performed in the United States by governmental entities, (D ) an international entity of which the United States is a member, or (E ) any other foreign, international, or supranational entity specifically des ignated by the Board.4 (2) A time deposit may be represented by a transferable or nontransferable, or a nego tiable or nonnegotiable, certificate, instru ment, passbook, or statement, or by book entry or otherwise. (d )( 1 ) “Savings deposit” means a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the deposi tory institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit. The term “savings deposit” in cludes a regular share account at a credit union and a regular account at a savings and loan association. (2) The term “savings deposit” also means— (i) A deposit or account that otherwise meets the requirements of section 204.2(d)(1) and from which, under the terms of the account agreement, or by 3 O ther than states, provinces, municipalities, o r other regional or local governmental units or agencies o r instru mentalities thereof. 4 The designated entities are specified in 12 C FR 204.125 (page 26). 6 Regulation D practice of the depository institution, the depositor is permitted or authorized to make no more than three withdrawals per calendar month, or statement cycle (or similar period) of at least four weeks, for the purpose of transferring funds to another account of the depositor at the same institution (including a “transac tion account” ) or for making payment to a third party by means of a preauthorized or automatic transfer, or telephonic (in cluding data transmission) agreement, order or instruction, provided that no such withdrawals may be by check, draft or similar order (including debit card) drawn by the depositor to third persons. A “preauthorized transfer” includes any arrangement by the depository institution to pay a third party from the account of a depositor upon written or oral instruc tion (including an order received through an automated clearing house (A C H )) or any arrangement by a depos itory institution to pay a third party from the account of the depositor at a prede termined time or on a fixed schedule. Such an account is not a “transaction ac count” by virtue of an arrangement that permits transfers for the purpose of re paying loans and associated expenses at the same depository institution (as origi nator or servicer) or that permits trans fers of funds from the account to another account of the same depositor at the same institution or permits withdrawals (payments directly to the depositor) from the account when such transfers or withdrawals are made by mail, messen ger, automated teller machine or in per son or when such withdrawals are made by telephone (via check mailed to the de positor) regardless of the number of such transfers or withdrawals.5 (ii) A deposit or account, such as an ac count commonly known as a “money market deposit account” (M M D A ), that otherwise meets the requirements of sec5 In order to ensure th a t no more than the permitted num ber o f withdrawals or transfers are made, for an ac count to come within the definitions in section 2 0 4 .2 (d )(2 ), a depository institution m ust either— Continued Regulation D tion 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make no more than six transfers per cal endar month or statement cycle (or simi lar period) of at least four weeks to an other account (including a transaction account) of the depositor at the same in stitution or to a third party by means of a preauthorized or automatic transfer (see section 204.2 (d )( 2 ) (i)) , or telephonic (including data transmission) agree ment, order or instruction and no more than three of the six such transfers may be made by check, draft, debit card or similar order made by the depositor and payable to third parties. Such an account is not a “transaction account” by virtue of an arrangement that permits transfers for the purpose of repaying loans and as sociated expenses at the same depository institution (as originator or servicer) or that permits transfers of funds from this account to another account of the same depositor at the same institution or per mits withdrawals (payments directly to the depositor) from the account when such transfers or withdrawals are made by mail, messenger, automated teller m a chine or in person or when such with drawals are made by telephone (via check mailed to the depositor) regardless of the number of such transfers or withdrawals.6 (3) A deposit may continue to be classified as a savings deposit even if the depository Continued (a ) prevent w ithdrawals or transfers o f funds in this ac count that are in excess o f the limits established by sections 204.2(d) ( 2 ) (i) o r (ii) or (b ) adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the limits established by sections 204.2(d) ( 2 ) (i) o r 204.2(d) ( 2 ) (ii) on more than an occasional basis. For customers who continue to violate those limits after being contacted by the depository institution, the deposito ry institution must either close the account and place the funds in another account that the depositor is eligible to maintain o r take away the account’s transfer and draft capacities. A n account that authorizes w ithdrawals o r transfers in excess o f the perm itted num ber is a transaction account regardless o f whether the authorized num ber o f transac tions are actually made. §204.2 institution exercises its right to require no tice of withdrawal. (4) “Savings deposit” does not include funds deposited to the credit of the deposi tory institution’s own trust department where the funds involved are utilized to cover checks or drafts. Such funds are “transaction accounts.” (e) “Transaction account” means a deposit or account from which the depositor or ac count holder is permitted to make transfers or withdrawals by negotiable or transferable in strument, payment order of withdrawal, tele phone transfer, or other similar device for the purpose of making payments or transfers to third persons or others or from which the de positor may make third-party payments at an automated teller machine (A T M ) or a remote service unit, or other electronic device, includ ing by debit card, but the term does not in clude savings deposits or accounts described in section 2 0 4 .2 (d )(2 ) even though such ac counts permit third-party transfers. “Transac tion account” includes— (1) demand deposits; (2) deposits or accounts on which the de pository institution has reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of any funds in the account and that are subject to check, draft, negotiable order of with drawal, share draft, or other similar item, except accounts described in section 204.2(d) (2) (ii) (M M D A s), but including accounts authorized by 12 USC 1832(a) (NOW accounts). (3) Deposits or accounts on which the de pository institution has reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of any funds in the account and from which withdrawals may be made automatically through pay ment to the depository institution itself or through transfer of credit to a demand de posit or other account in order to cover checks or drafts drawn upon the institution 6 See footnote 5. F or accounts described in section 2 0 4 .2 (d )( 2 ) (ii), the institution at its option may use on a consistent basis either the date on the check, draft or simi lar item or the date the item is paid in applying the limits on such items. 7 §204.2 or to maintain a specified balance in, or to make periodic transfers to such accounts, except accounts described in section 2 0 4 .2 (d )(2), but including accounts autho rized by 12 USC 371a (autom atic transfer accounts or ATS accounts). (4) Deposits or accounts on which the de pository institution has reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of any funds in the account and under the terms of which, or by practice of the depository in stitution, the depositor is permitted or au thorized to make more than three with drawals per month or statement cycle (or similar period) of at least four weeks for purposes of transferring funds to another account of the depositor at the same institu tion (including a “transaction account” ) or for making payment to a third party by means of preauthorized transfer, or tele phonic (including data transmission) agreement, order or instruction, except ac counts described in section 204.2(d)(2). An account that authorizes more than three such withdrawals in a calendar month, or statement cycle (or similar period) of at least four weeks, is a “transaction account” whether or not more than three such trans fers are made during such period. A “preauthorized transfer” includes any ar rangement by the depository institution to pay a third party from the account of a de positor upon written or oral instruction (in cluding an order received through an auto mated clearing house (A C H )), or any arrangement by a depository institution to pay a third party from the account of the depositor at a predetermined time or on a fixed schedule. Such an account is not a “transaction account” by virtue of an ar rangement that permits transfers for the purpose of repaying loans and associated expenses at the same depository institution (as originator or servicer) or that permits transfers of funds from this account to an other account of the same depositor at the same institution or permits withdrawals (payments directly to the depositor) from the account when such transfers or with drawals are made by mail, messenger, auto mated teller machine or in person or when Regulation D such withdrawals are made by telephone (via check mailed to the depositor) regard less of the number of such transfers or withdrawals. (5) Deposits or accounts maintained in connection with an arrangement that per mits the depositor to obtain credit directly or indirectly through the drawing of a nego tiable or nonnegotiable check, draft, order or instruction or other similar device (in cluding telephone or electronic order or in struction) on the issuing institution that can be used for the purpose of making pay ments or transfers to third persons or oth ers, or to a deposit account of the depositor. (6) All deposits other than time and sav ings deposits. (f) (1) “Nonpersonal tim e deposit” means— (i) A time deposit, including an M M DA or any other savings deposit, representing funds in which any beneficial interest is held by a depositor which is not a natural person; (ii) A time deposit, including an M M D A or any other savings deposit, that represents funds deposited to the credit of a depositor that is not a natural person, other than a deposit to the credit of a trustee or other fiduciary if the entire beneficial interest in the deposit is held by one or more natural persons; (iii) a time deposit that is transferable, except a time deposit originally issued be fore October 1, 1980, to and held by one or more natural persons, including a de posit to the credit of a trustee or other fiduciary if the entire beneficial interest in the deposit is held by one or more natural persons; (iv) a time deposit that is transferable, issued on or after October 1, 1980, to and held by one or more natural persons, in cluding a deposit to the credit of a trustee or other fiduciary if the entire beneficial interest is held by one or more natural persons. A time deposit is transferable unless it contains a specific statement on the certificate, instrument, passbook, statement or other form representing the account that it is not transferable. A time deposit that contains a specific statement Regulation D that it is not transferable is not regarded as transferable even if the following transactions can be effected: a pledge as collateral for a loan; a transaction that occurs due to circumstances arising from death, incompetency, marriage, divorce, attachment or otherwise by operation of law or a transfer on the books or records of the institution; and (v) A time deposit represented by a promissory note, an acknowledgment of advance, or similar obligation described in section 2 0 4 .2 (a )(l)(v ii) that is issued to, or any banker’s acceptance (other than the type described in 12 USC 372) of the depository institution held by— (A ) any office located outside the United States of another depository in stitution or Edge or agreement corpo ration organized under the laws of the United States, (B) any office located outside the United States of a foreign bank, (C ) a foreign national government, or an agency or instrumentality thereof,7 engaged principally in activities which are ordinarily performed in the United States by governmental entities, (D ) an international entity of which the United States is a member, or (E ) any other foreign, international, or supranational entity specifically des ignated by the Board.8 (2) “Nonpersonal time deposit” does not include nontransferable time deposits to the credit of or in which the entire beneficial interest is held by an individual pursuant to an individual retirement account or Keogh (H. R. 10) plan under 26 USC (IR C 1954) 408, 401, or nontransferable time deposits held by an employer as part of an unfunded deferred-compensation plan established pursuant to subtitle D of the Revenue Act of 1978 (Pub. L. No. 95-600, 92 Stat. 2763). (3) Any nonpersonal time deposit with a stated maturity or notice period of one and one-half years or more that permits any ear7 O ther than states, provinces, municipalities, o r other regional or local governmental units o r agencies o r instru m entalities thereof. 8 The designated entities are specified in 12 C F R 204.125 (page 26). §204.2 ly withdrawal must be subject to a mini mum early withdrawal penalty equal to at least thirty days’ simple interest on the am ount withdrawn for any withdrawal that occurs more than six days but within one and one-half years after the date of deposit. Any such account not subject to this mini mum early withdrawal penalty will be re garded as a nonpersonal time deposit with an original m aturity or notice period of from seven days to less than one and onehalf years from the date of the deposit.9 (g) “N aturalperson” means an individual or a sole proprietorship. The term does not mean a corporation owned by an individual, a part nership or other association. (h ) “Eurocurrency liabilities” means— (1) For a depository institution or an Edge or agreement corporation organized under the laws of the United States, the sum, if positive, of the following: (i) net balances due to its non-United States offices and its international bank ing facilities ( “IBFs” ) from its United States offices; (ii) (A ) for a depository institution orga nized under the laws of the United States, assets (including participations) acquired from its United States offices and held by its non-U nited States offices, by its IBF, or by non-U nited States offices of an affiliated Edge or agreement corporation;10 or (B) for an Edge or agreement corpora tion, assets (including participations) acquired from its United States offices and held by its non-U nited States of fices, by its IBF, by non-U nited States offices of its U.S. or foreign parent insti tution, or by non-U nited States offices of an affiliated Edge or agreement corporation;10 and 9 See footnote 1 for treatm ent of accounts existing on M arch 31, 1986, and for exceptions to the imposition of the early w ithdrawal penalties imposed by this part. The penal ty required by this section 204.2(f)(3) and that required by section 2 0 4 .2 (c )(1 ) need not be aggregated. 10 This subparagraph does not apply to assets (1 ) that were acquired before O ctober 7, 1979, or (2) that were acquired by an IBF from its establishing entity before the end o f the second reserve com putation period after its establishment. 9 § 204.2 (iii) credit outstanding from its nonUnited States offices to United States res idents (other than assets acquired and net balances due from its United States offices), except credit extended (A ) from its non-United States offices in the aggre gate am ount of $100,000 or less to any United States resident, (B) by a nonUnited States office that at no time dur ing the computation period had credit outstanding to United States residents ex ceeding $1 million, (C ) to an interna tional banking facility, or (D ) to an insti tution that will be maintaining reserves on such credit pursuant to this part. Credit extended from non-United States offices or from IBFs to a foreign branch, office, subsidiary, affiliate, or other for eign establishment ( “foreign affiliate” ) controlled by one or more domestic cor porations is not regarded as credit ex tended to a United States resident if the proceeds will be used to finance the oper ations outside the United States of the borrower or of other foreign affiliates of the controlling domestic corporation (s). (2) For a United States branch or agency of a foreign bank, the sum, if positive, of the following: (i) net balances due to its foreign bank (including offices thereof located outside the United States) and its international banking facility after deducting an am ount equal to 8 percent of the follow ing: the United States branch’s or agen cy’s total assets less the sum of (A ) cash items in process of collection; (B) un posted debits; (C ) demand balances due from depository institutions organized under the laws of the United States and from other foreign banks; (D ) balances due from foreign central banks; and (E ) positive net balances due from its IBF, its foreign bank, and the foreign bank’s United States and non-United States of fices; and (ii) assets (including participations) ac quired from the United States branch or agency (other than assets required to be sold by federal or state supervisory au thorities) and held by its foreign bank (including offices thereof located outside Regulation D the United States), by its parent holding company, by non-United States offices or an IBF of an affiliated Edge or agreement corporation, or by its IBFs.11 (i) (1) “Cash item in process o f collection ” means— (i) checks in the process of collection, drawn on a bank or other depository in stitution that are payable immediately upon presentation in the United States, including checks forwarded to a Federal Reserve Bank in process of collection and checks on hand that will be presented for payment or forwarded for collection on the following business day; (ii) government checks drawn on the Treasury of the United States that are in the process of collection; and (iii) such other items in the process of collection, that are payable immediately upon presentation in the United States and that are customarily cleared or col lected by depository institutions as cash items, including— (A ) drafts payable through another depository institution; (B) redeemed bonds and coupons; (C ) food coupons and certificates; (D ) postal and other money orders, and traveler’s checks; (E ) amounts credited to deposit ac counts in connection with automated payment arrangements where such credits are made one business day pri or to the scheduled payment date to insure that funds are available on the payment date; (F ) commodity or bill of lading drafts payable immediately upon presenta tion in the United States; (G ) returned items and unposted deb its; and (H ) broker security drafts. (2) “Cash item in process of collection” does not include items handled as noncash collections and credit card sales slips and drafts. (j) “N et transaction accounts” means the to tal amount of a depository institution’s trans 11 See footnote 10. Regulation D action accounts less the deductions allowed under the provisions of section 204.3. (k) (1) “ Vault cash” means United States currency and coin owned and held by a de pository institution that may, at any time, be used to satisfy depostitors’ claims. (2) “Vault cash” includes United States currency and coin in transit to a Federal Reserve Bank or a correspondent deposito ry institution for which the reporting de pository institution has not yet received credit, and United States currency and coin in transit from a Federal Reserve Bank or a correspondent depository institution when the reporting depository institution’s ac count at the Federal Reserve or correspon dent bank has been charged for such shipment. (3) Silver and gold coin and other curren cy and coin whose numismatic or bullion value is substantially in excess of face value is not vault cash for purposes of this part. (/) “Pass-through account” means a balance maintained by a depository institution that is not a member bank, by a U.S. branch or agen cy of a foreign bank, or by an Edge or agree ment corporation, (1) in an institution that maintains required reserve balances at a Fed eral Reserve Bank, (2) in a Federal Home Loan Bank, (3) in the National Credit Union Administration Central Liquidity Facility, or (4) in an institution that has been authorized by the Board to pass through required reserve balances if the institution, Federal Home Loan Bank, or National Credit Union Admin istration Central Liquidity Facility maintains the funds in the form of a balance in a Federal Reserve Bank of which it is a member or at which it maintains an account in accordance with rules and regulations of the Board. (m ) (1) “Depository institution” means— (i) any insured bank as defined in sec tion 3 of the Federal Deposit Insurance Act (12 USC 1813(h)) or any bank that is eligible to apply to become an insured bank under section 5 of such act (12 USC 1815); (ii) any savings bank or mutual savings bank as defined in section 3 of the Feder § 204.2 al Deposit Insurance A ct (12 USC 1813(f), (g )); (iii) any insured credit union as defined in section 101 of the Federal Credit U n ion A ct (12 USC 1752(7)) or any credit union that is eligible to apply to become an insured credit union under section 201 of such act (12 USC 1781); (iv) any member as defined in section 2 of the Federal Home Loan Bank A ct (12 USC 1422(4)); and (v) any insured institution as defined in section 401 of the National Housing Act (12 USC 1724(a)) or any institution which is eligible to apply to become an insured institution under section 403 of such act (12 USC 1726). (2) “Depository institution” does not in clude international organizations such as the W orld Bank, the Inter-American D e velopment Bank, and the Asian Develop ment Bank. (n ) “M em ber bank” means a depository in stitution that is a member of the Federal Re serve System. (o) “Foreign b a n k” means any bank or other similar institution organized under the laws of any country other than the United States or organized under the laws of Puerto Rico, Guam, American Samoa, the Virgin Islands, or other territory or possession of the United States. (p) “De novo depository institution” means a depository institution that was not engaged in business on July 1, 1979, and is not the suc cessor by merger or consolidation to a deposi tory institution that was engaged in business prior to the date of merger or consolidation. (q) “ ffiliate” includes any corporation, as A sociation, or other organization— (1) of which a depository institution, di rectly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the numbers of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its di rectors, trustees, or other persons exercising similar functions; 11 § 204.2 (2) of which control is held, directly or in directly, through stock ownership or in any other manner, by the shareholders of a de pository institution or more than 50 percent of the number of shares voted for the elec tion of directors of such depository institu tion at the preceding election, or by trustees for the benefit of the shareholders of any such depository institution; (3) of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one deposito ry institution; or (4) which owns or controls, directly or in directly, either a majority of the shares of capital stock of a depository institution or more than 50 percent of the number of shares voted for the election of directors, trustees or other persons exercising similar functions of a depository institution at the preceding election, or controls in any man ner the election of a majority of the direc tors, trustees, or other persons exercising similar functions of a depository institution, or for the benefit of whose shareholders or members all or substantially all the capital stock of a depository institution is held by trustees. (r) “United States” means the states of the United States and the District of Columbia. (s) “United States resident” means (1) any individual residing (at the time of the transac tion) in the United States; (2) any corpora tion, partnership, association or other entity organized in the United States ( “domestic corporation” ); and (3) any branch or office located in the United States of any entity that is not organized in the United States. (t) “A ny deposit that is payable only at an of fice located outside the United States” means (1) a deposit of a United States resident12 that is in a denomination of $100,000 or more, and as to which the depositor is entitled, un der the agreement with the institution, to de 12 A deposit o f a foreign branch, office, subsidiary, affili ate or other foreign establishment ( “foreign affiliate” ) con trolled by one or more domestic corporations is not regard ed as a deposit o f a U nited States resident if the funds serve a purpose in connection with its foreign o r international business or that o f other foreign affiliates o f the controlling domestic corporation(s). 12 Regulation D mand payment only outside the United States or (2) a deposit of a person who is not a Unit ed States resident12 as to which the depositor is entitled, under the agreement with the insti tution, to demand payment only outside the United States. SECTION 204.3—Computation and Maintenance (a) M aintenance o f required reserves. A de pository institution, a U.S. branch or agency of a foreign bank, and an Edge or agreement corporation shall maintain reserves against its deposits and Eurocurrency liabilities in ac cordance with the procedures prescribed in this section and section 204.4 and the ratios prescribed in section 204.9. Penalties shall be assessed for deficiencies in required reserves in accordance with the provisions of section 204.7. Every depository institution, U.S. branch or agency of a foreign bank, and Edge or agreement corporation shall file reports of deposits in accordance with the instructions of the Board, based on the level of its deposits and reservable liabilities consistent with the Board’s need for data to carry out its responsi bility to monitor and control monetary and credit aggregates. For purposes of this part, the obligations of a majority-owned (50 per cent or more) U.S. subsidiary (except an Edge or agreement corporation) of a deposi tory institution shall be regarded as obliga tions of the parent depository institution. (1) United States branches and agencies o f foreign banks. (i) A foreign bank’s United States branches and agencies operating within the same state and within the same Fed eral Reserve District shall prepare and file a report of deposits on an aggregated basis. (ii) United States branches and agencies of the same foreign bank shall, if possible, assign the low reserve tranche on trans action accounts (§ 204.9(a)) to only one office or to a group of offices filing a sin gle aggregated report of deposits. If the low reserve tranche cannot be fully uti lized by a single office or by a group of offices filing a single report of deposits, Regulation D the unused portion of the tranche may be assigned to other offices of the same for eign bank until the amount of the tranche or net transaction accounts is exhausted. The foreign bank shall determine this as signment subject to the restriction that if a portion of the tranche is assigned to an office in a particular state, any unused portion must first be assigned to other of fices located within the same state and within the same Federal Reserve District, that is, to other offices included on the same aggregated report of deposits. If necessary in order to avoid underutiliza tion of the low reserve tranche, the allo cation may be changed at the beginning of a calendar month. U nder other cir cumstances, the low reserve tranche may be reallocated at the beginning of a calen dar year. (2) Edge and agreement corporations. (i) An Edge or agreement corporation’s offices operating within the same state and within the same Federal Reserve District shall prepare and file a report of deposits on an aggregated basis. (ii) An Edge or agreement corporation shall, if possible, assign the low reserve tranche on transaction accounts (§ 204.9(a)) to only one office or to a group of offices filing a single aggregated report of deposits. If the low reserve tranche cannot be fully utilized by a sin gle office or by a group of offices filing a single report of deposits, the unused por tion of the tranche may be assigned to other offices of the same institution until the amount of the tranche or net transac tion accounts is exhausted. A n Edge or agreement corporation shall determine this assignment subject to the restriction that if a portion of the tranche is assigned to an office in a particular state, any un used portion must first be assigned to other offices located within the same state and within the same Federal Reserve District, that is, to other offices included on the same aggregated report of depos its. If necessary in order to avoid under utilization of the low reserve tranche, the allocation may be changed at the begin ning of a calendar month. Under other §204.3 circumstances, the low reserve tranche may be reallocated at the beginning of a calendar year. (3) Allocation o f exemption fro m reserve requirements, (i) In determining the re serve requirements of a depository insti tution, the exemption provided for in sec tion 204.9(a) shall apply in the following order of priorities: (A ) first, to net transaction accounts that are first authorized by federal law in any state after April 1, 1980; (B) second, to other net transaction accounts; and (C ) third, to nonpersonal time depos its (including M M DAs and other savings deposits) and Eurocurrency li abilities, starting with those with the highest reserve ratio under section 204.9(a) and then to succeeding lower reserve ratios. (ii) A depository institution, United States branches and agencies of the same foreign bank, or an Edge or agreement corporation shall, if possible, assign the reserve requirement exemption of section 204.9(a) to only one office or to a group of offices filing a single aggregated report of deposits. If the reserve requirement ex emption cannot be fully utilized by a sin gle office or by a group of offices filing a single report of deposits, the unused por tion of the exemption may be assigned to other offices of the same institution until the am ount of the exemption or reservable liabilities is exhausted. A depository institution, foreign bank, or Edge or agreement corporation shall determine this assignment subject to the restriction that if a portion of the exemption is as signed to an office in a particular state, any unused portion must first be assigned to other offices located within the same state and within the same Federal Re serve District, that is, to other offices in cluded on the same aggregated report of deposits. The exemption may be reallo cated at the beginning of a calendar year, or, if necessary to avoid underutilization of the exemption, at the beginning of a calendar month. The am ount of the re serve requirement exemption allocated to 13 § 204.3 an office or group of offices may not ex ceed the amount of the low reserve tranche allocated to such office or offices under this paragraph. (b) Form o f reserves. Reserves shall be held in the form of (i) vault cash, (ii) a balance maintained directly with the Federal Reserve Bank in the District in which it is located, or (iii) a pass-through account. Reserves held in the form of a pass-through account shall be considered to be a balance maintained with the Federal Reserve. (c) Computation o f required reserves fo r insti tutions that report on a weekly basis. (1) Required reserves are computed on the basis of daily average balances of deposits and Eurocurrency liabilities during a 14day period ending every second Monday (the “computation period” ). Reserve re quirements are computed by applying the ratios prescribed in section 204.9 to the classes of deposits and Eurocurrency liabili ties of the institution. The reserve balance that is required to be maintained with the Federal Reserve shall be maintained during a 14-day period (the “maintenance peri od” ) which begins on a Thursday and ends on the second Wednesday thereafter. (2) A reserve balance shall be maintained during a given maintenance period, based— (i) on the daily average net transaction accounts held by the depository institu tion during the computation period that began immediately prior to the beginning of the maintenance period; and (ii) on the daily average nonpersonal time deposits and daily average Eurocur rency liabilities held by the depository in stitution during the computation period that ended 17 days prior to the beginning of the maintenance period. (3) In determining the reserve balance that is required to be maintained with the Feder al Reserve, the daily average vault cash held during the computation period that ended 17 days prior to the beginning of the maintenance period is deducted from the amount of the institution’s required reserves. (d ) Computation o f required reserves fo r insti14 Regulation D tutions that report on a quarterly basis. For a depository institution that is permitted to re port quarterly, required reserves are comput ed on the basis of the depository institution’s daily average deposit balances during a sevenday computation period that begins on the third Tuesday of March, June, September, and December. In determining the reserve balance that such a depository institution is required to maintain with the Federal Re serve, the daily average vault cash held during the computation period is deducted from the amount of the institution’s required reserves. The reserve balance that is required to be maintained with the Federal Reserve shall be maintained during a corresponding period that begins on the fourth Thursday following the end of the institution’s computation peri od and ends on the fourth Wednesday after the close of the institution’s next computation period. (e) Computation o f transaction accounts. Overdrafts in demand deposit or other trans action accounts are not to be treated as nega tive demand deposits or negative transaction accounts and shall not be netted since over drafts are properly reflected on an institution’s books as assets. However, where a customer maintains multiple transaction accounts with a depository institution, overdrafts in one ac count pursuant to a bona fide cash manage ment arrangement are permitted to be netted against balances in other related transaction accounts for reserve requirement purposes. (f) Deductions allowed in computing reserves. (1) In determining the reserve balance re quired under this part, the amount of cash items in process of collection and balances subject to immediate withdrawal due from other depository institutions located in the United States (including such amounts due from United States branches and agencies of foreign banks and Edge and agreement corporations) may be deducted from the amount of gross transaction accounts. The amount that may be deducted may not ex ceed the amount of gross transaction ac counts. However, if a depository institution maintains any transaction accounts that are first authorized under federal law after April 1, 1980, it may deduct from these bal Regulation D ances cash items in process of collection and balances subject to immediate with drawal due from other depository institu tions located in the United States only to the extent of the proportion that such newly authorized transaction accounts are of the institution’s total transaction accounts. The remaining cash items in process of collec tion and balances subject to immediate withdrawal due from other depository insti tutions located in the United States shall be deducted from the institution’s remaining transaction accounts. (2) United States branches and agencies of a foreign bank may not deduct balances due from another United States branch or agen cy of the same foreign bank, and United States offices of an Edge or agreement cor poration may not deduct balances due from another United States office of the same Edge corporation. (3) Balances “due from other depository institutions” do not include balances due from Federal Reserve Banks, pass-through accounts, or balances (payable in dollars or otherwise) due from banking offices located outside the United States. A n institution ex ercising fiduciary powers may not include in “balances due from other depository in stitutions” amounts of trust funds deposited with other banks and due to it as a trustee or other fiduciary. (g) Availability o f cash item s as reserves. Cash items forwarded to a Federal Reserve Bank for collection and credit shall not be counted as part of the reserve balance to be carried with the Federal Reserve until the expiration of the time specified in the appropriate time schedule established under Regulation J, “Collection of Checks and O ther Items and Transfers of Funds” (12 CFR 210). If a de pository institution draws against items before that time, the charge will be made to its re serve account if the balance is sufficient to pay it; any resulting impairment of reserve bal ances will be subject to the penalties provided by law and by this part. However, the Federal Reserve Bank may, at its discretion, refuse to permit the withdrawal or other use of credit given in a reserve account for any time for which the Federal Reserve bank has not re §204.3 ceived payment in actually and finally collect ed funds. (h ) Carryover o f excesses or deficiencies. Any excess or deficiency in a required reserve bal ance for any maintenance period that does not exceed the greater of 2 percent of the institu tion’s required reserves (including required clearing balances and net of the required clearing balance penalty-free band where ap plicable) or $25,000, shall be carried forward to the next maintenance period. A ny carry over not offset during the next period may not be carried forward to subsequent periods. (i) Pass-through rules. (1) Procedure (i) A nonmember depository institution required to maintain reserve balances ( “respondent” ) may select only one in stitution to pass through its required re serves. Eligible institutions through which respondent required reserve bal ances may be passed ( “correspondents” ) are Federal Home Loan Banks, the N a tional Credit Union Administration Cen tral Liquidity Facility, and depository in stitutions that maintain required reserve balances at a Federal Reserve office. In addition, the Board reserves the right to permit other institutions, on a case-bycase basis, to serve as pass-through corre spondents. The correspondent chosen must subsequently pass through the re quired reserve balances of its respondents directly to the appropriate Federal Re serve office. The correspondent placing funds with the Federal Reserve on behalf of respondents will be responsible for re serve account maintenance as described in subparagraphs (3) and (4) below. (ii) Respondent depository institutions or pass-through correspondents may in stitute, terminate, or change pass through arrangements for the mainte nance of required reserve balances by providing all documentation required for the establishment of the new arrange ment an d /o r termination of the existing arrangement to the Federal Reserve Bank in whose territory the respondent is located. The time period required for such a change to be effected shall be spec15 § 204.3 ified by each Reserve Bank in its operat ing circular. (iii) U.S. branches and agencies of for eign banks and Edge and agreement cor porations may (a) act as pass-through correspondents for any nonmember insti tution required to maintain reserves or (b) pass their own required reserve bal ances through correspondents. In accord ance with the provision set forth in subparagraph (3) below, the U.S. branches and agencies of a foreign bank or offices of an Edge and agreement corporation filing a single aggregated report of depos its may designate any one of the other U.S. offices of the same institution to serve as a pass-through correspondent for all of the offices filing such a single aggre gated report of deposits. (2) Reports (i) Every depository institution that maintains transaction accounts or non personal time deposits is required to file its report of deposits (or any other re quired form or statement) directly with the Federal Reserve Bank of its District, regardless of the manner in which it chooses to maintain required reserve balances. (ii) The Federal Reserve Bank receiving such reports shall notify the reporting de pository institution of its reserve require ments. Where a pass-through arrange ment exists, the Reserve Bank will also notify the correspondent passing respon dent reserve balances through to the Fed eral Reserve of its respondent’s required reserve balances. (iii) The Federal Reserve will not hold a correspondent responsible for guarantee ing the accuracy of the reports of depos its submitted by its respondents to their local Federal Reserve Banks. (3) Account maintenance (i) A correspondent that passes through required reserve balances of respondents whose main offices are located in the same Federal Reserve territory in which the main office of the correspondent is lo cated shall have the option of maintain ing such required reserve balances in one of two ways: (a) A correspondent may Regulation D maintain such balances, along with the correspondent’s own required reserve balances, in a single commingled account at the Federal Reserve Bank office in whose territory the correspondent’s main office is located, or (b) A correspondent may maintain its own required reserve balance in an account with the Federal Reserve Bank office in whose territory its main office is located. The correspondent, in addition, would maintain in a separate commingled account the required reserve balances passed through for respondents whose main offices are located in the same Federal Reserve territory as that of the main office of the correspondent. (ii) A correspondent that passes through required reserve balances of re spondents whose main offices are located outside the Federal Reserve territory in which the main office of the correspon dent is located shall maintain such re quired reserve balances in a separate commingled account at each Federal Re serve office in whose territory the main offices of such respondents are located. (iii) A Reserve Bank may, at its discre tion, require a pass-through correspon dent to consolidate in a single account the reserve balances of all of its respon dents whose main offices are located in any territory of that Federal Reserve District. (4) Responsibilities o f parties (i) Each individual depository institu tion is responsible for maintaining its re quired reserve balance with the Federal Reserve Bank either directly or through a pass-through correspondent. (ii) A pass-through correspondent shall be responsible for assuring the mainte nance of the appropriate aggregate level of its respondents’ required reserve bal ances. A Reserve Bank will compare the total reserve balance required to be main tained in each reserve account with the total actual reserve balance held in such reserve account for purposes of determin ing required reserve deficiencies, impos ing or waiving penalties for deficiencies in required reserves, and for other reserve maintenance purposes. A penalty for a § 204.4 Regulation D deficiency in the aggregate level of the re quired reserve balance will be imposed by the Reserve Bank on the correspondent maintaining the account. (iii) Each correspondent is required to maintain detailed records for each of its respondents in a manner that permits Re serve Banks to determine whether the respondent has provided a sufficient re quired reserve balance to the correspon dent. A correspondent passing through a respondent’s reserve balance shall main tain records and make such reports as the Federal Reserve System requires in order to insure the correspondent’s compliance with its responsibilities for the mainte nance of a respondent’s reserve balance. Such records shall be available to the Federal Reserve Banks as required. (iv) The Federal Reserve Bank may ter minate any pass-through relationship in which the correspondent is deficient in its recordkeeping or other responsibilities. (v) Interest paid on supplemental re serves (if such reserves are required un der section 204.6 of this part) held by respondent (s) will be credited to the commingled reserve account (s) main tained by the correspondent. (5) Services (i) A depository institution maintaining its reserve balances on a pass-through ba sis may obtain available Federal Reserve System services directly from its local Federal Reserve office. For this purpose, the pass-through account in which a re spondent’s required reserve balance is maintained may be used by the respon dent for the posting of entries arising from transactions involving the use of such Federal Reserve services, if the posting of these types of transactions has been authorized by the correspondent and the Federal Reserve. For example, access to the wire transfer, securities transfer, and settlement services that in volve charges to the commingled reserve account at the Reserve Bank will require authorization from the correspondent and the Reserve Bank for the type of transaction that is occurring. (ii) In addition, in obtaining Federal Reserve services, respondents maintain ing their required reserves on a pass through basis may choose to have entries arising from the use of Federal Reserve services posted to (a) with the prior au thorization of all parties concerned, the reserve account maintained by any insti tution at a Federal Reserve Bank, or (b) an account maintained for clearing pur poses at a Federal Reserve Bank by the respondent. (iii) Accounts at Federal Reserve Banks consisting only of respondents’ reserve balances that are passed through by a correspondent to a Federal Reserve Bank may be used only for transactions of re spondents. A correspondent will not be permitted to use such pass-through ac counts for purposes other than serving its respondents’ needs. (iv) A correspondent may not apply for Federal Reserve credit on behalf of a re spondent. Rather, a respondent should apply directly to its Federal Reserve Bank for credit. Any Federal Reserve credit obtained by a respondent may be credited, at the respondent’s option and with the approval of the parties con cerned, to the reserve account in which its required reserves are maintained by a correspondent, to a clearing account maintained by the respondent, or to any account to which the respondent is au thorized to post entries arising from the use of in Federal Reserve services. SECTION 204.4— Transitional Adjustments The following transitional adjustments for computing federal reserve requirements shall apply to all member and nonmember deposi tory institutions, except for reserves imposed under sections 204.5 and 204.6. (a) Nonmembers. Except as provided below, the required reserves of a depository institu tion that was engaged in business on July 1, 1979, but was not a member of the Federal 17 § 204.4 Regulation t> Reserve System on or after that date shall be determined by reducing the amount of required reserves computed under section 204.3 in accordance with the following schedule: Reserve maintenance periods occurring between Percentage that computed reserves will be reduced November 13, 1980 to September 2, 1981 87.5 September 3, 1981 to September 1, 1982 75 September 2, 1982 to August 31, 1983 62.5 September 1, 1983 to September 12, 1984 37.5 September 12, 1985 to September 10, 1986 25 September 11, 1986 to September 9, 1987 12.5 1 2 3 4 5 6 7 Percentage applied to difference to compute am ount to be added 12.5 25.0 37.5 50.0 62.5 75.0 87.5 100.0 50 September 13, 1984 to September 11, 1985 M aintenance periods occurring during successive quarters after becoming a m em ber bank September 10, 1987 forward 0 8 and succeeding (c) D e novo in stitu tio n s. ( 1 ) The required re serves of any depository institution that was not engaged in business on September 1, 1980, shall be computed under section 204.3 in accordance with the following schedule: M aintenance periods occurring during successive quarters after entering into business 1 2 3 4 5 6 7 8 and succeeding However, an institution shall not reduce the am ount of required reserves on any category of deposits or accounts that are first autho rized under federal law in any state after April 1, 1980. (b) New members. The required reserves of a nonmember depository institution that was engaged in business but was not a member bank during the period between July 1, 1979 and September 1, 1980, inclusive, and which becomes a member of the Federal Reserve System after September 1, 1980, shall be de termined under paragraph (a) as if it had re mained a nonmember and adding to this am ount an am ount determined by multiplying the difference between its required reserves computed using the ratios specified in section 204.9(a) and its required reserves computed as if it had remained a nonmember times the percentage specified below in accordance with the following schedule: 18 Percentage o f reserve requirement to be m aintained 40 45 50 55 65 75 85 100 This paragraph shall also apply to a United States branch or agency of a foreign bank if such branch or agency is the foreign bank’s first office in the United States. Additional branches or agencies of such a foreign bank shall be entitled only to the remaining phasein available to the initial office. (2) Notwithstanding subparagraph (1), the required reserves of any depository in stitution that— (i) was not engaged in business on No vember 18, 1981, and (ii) has $50 million or more in daily av erage total transaction accounts, nonper sonal time deposits and Eurocurrency lia bilities for any computation period after commencing business shall be 100 percent of the required reserves computed under section 204.3 starting with the maintenance period that begins 17 days §204.4 Regulation D after the computation period during which such institution has daily average total transaction accounts, nonpersonal time de posits and Eurocurrency liabilities of $50 million or more. (d ) Nonm ember depository institutions with offices in Hawaii. Any depository institution that, on August 1, 1978, (1) was engaged in business as a depository institution in Hawaii, and (2) was not a member of the Federal Re serve System at any time on or after such date shall not maintain reserves imposed under this part against deposits held or maintained at its offices located in Hawaii until January 2, 1986. Beginning January 2, 1986, the required reserves on deposits held or maintained at of fices located in Hawaii of such a depository institution shall be determined by reducing the amount of required reserves under section 204.3 in accordance with the following schedule: M aintenance periods occurring between Percentage that computed reserves will be reduced January 2 to December 31, 1986 87.5 January 1, 1987 to January 6, 1988 62.5 January 5, 1989 to January 3, 1990 50 January 4, 1990 to January 2, 1991 37.5 January 3, 1991 to January 1, 1992 25 January 2, 1992 to January 6, 1993 12.5 M aintenance periods occurring during quarterly periods following merger 1 2 3 4 5 6 7 8 and succeeding Percentage applied to difference to compute am ount to be subtracted 87.5 75.0 62.5 50.0 37.5 25.0 12.5 0 75 January 7, 1988 to January 4, 1989 preceding the merger, the surviving institu tion shall continue to compute its transi tional adjustment of required reserves un der such applicable paragraph, except that the am ount of reserves which shall be main tained shall be reduced by an amount deter mined by multiplying the am ount by which the required reserves during the com puta tion period immediately preceding the date of the merger (computed as if the deposito ry institutions had merged) exceed the sum of the actual required reserves of each de pository institution during the same compu tation period, times the appropriate per centage as specified in the following schedule: January 7, 1993 forward 0 (e) Mergers and consolidations. The follow ing rules concerning transitional adjustments apply to mergers and consolidations of deposi tory institutions: (1) Where all depository institutions in volved in a merger or consolidation are sub ject to the same paragraph of the transition al adjustment rules contained in paragraphs (a) through (d ) of this section during the reserve computation period immediately (2) (i) Where the depository institutions involved in a merger or consolidation are not subject to the same paragraph of the transitional adjustment rules contained in paragraphs (a) through (d ) of this sec tion and such merger or consolidation occurs— (A ) on or after July 1, 1979, between a nonmember bank and a bank that was a member bank on or after July 1, 1979, and the survivor is a nonmember bank; (B) on or after M arch 31, 1980, be tween a member bank and a nonmem ber bank and the survivor is a member bank; or (C ) on or after September 1, 1980, be tween any other depository institu tions, the required reserves of the surviving in stitution shall be computed by allocating its deposits, Eurocurrency liabilities, oth19 §204.4 er reservable claims, balances due from other depository institutions and cash items in process of collection to each de pository institution involved in the merg er transaction and applying to such amounts the transitional adjustment rule of paragraphs (a) through (d ) of this section to which each such depository in stitution was subject during the reserve computation period immediately prior to the merger or consolidation. (ii) The deposits of the surviving institu tion shall be allocated according to the ratio that daily average total required re serves of each depository institution in volved in the merger were to the sum of daily average total required reserves of all institutions involved in the merger or consolidation during the reserve compu tation period immediately preceding the date of the merger. (A ) If the merger occurs before N o vember 6, 1980, such ratio of daily av erage total required reserves shall be computed using the reserve require ment ratios in section 204.9(b). (B) If the merger occurs on or after November 6, 1980, such ratio of daily average total required reserves shall be computed using the reserve require ment ratios in section 204.9(a) with out regard to the transitional adjust ments of this section. (iii) The low reserve tranche on transac tion accounts (section 204.9(a)) shall be allocated to each institution involved in the merger or consolidation using the ra tio computed in paragraph ( e )(2 )(ii) and the reserve requirement tranches on demand deposits (section 204.9(b)) shall be allocated to member bank depos its using such ratio of daily average total required reserves. (iv) The vault cash of the surviving de pository institution also will be allocated to each institution involved in the merger or consolidation according to the ratio that daily average total required reserves of each depository institution involved in the merger was to the sum of daily average total required reserves of all in stitutions involved in the merger or con Regulation D solidation during the reserve com puta tion period immediately preceding the date of the merger. (v) The am ount of reserves which shall be maintained shall be reduced by an amount determined by multiplying the amount by which the required reserves during the computation period immedi ately preceding the date of the merger (computed as if the depository institu tions had merged) exceed the sum of the actual required reserves of each deposito ry institution during the same com puta tion period, times the appropriate per centage as specified in the following schedule: M aintenance periods occurring during quarterly periods following merger 1 2 3 4 5 6 7 8 and succeeding Percentage applied to difference to compute am ount to be subtracted 87.5 75.0 62.5 50.0 37.5 25.0 12.5 0 SECTION 204.5—Emergency Reserve Requirement (a) Finding by Board. The Board may im pose, after consulting with the appropriate committees of Congress, additional reserve re quirements on depository institutions at any ratio on any liability upon a finding by at least five members of the Board that extraordinary circumstances require such action. (b) Term. Any action taken under this sec tion shall be valid for a period not exceeding 180 days, and may be extended for further pe riods of up to 180 days each by affirmative action of at least five members of the Board for each extension. (c) Reports to Congress. The Board shall transm it promptly to Congress a report of any exercise of its authority under this paragraph and the reasons for the exercise of authority. (d ) Reserve requirements. A t present, there Regulation D are no emergency reserve requirements im posed under this section. SECTION 204.6—Supplemental Reserve Requirement (a) Finding by Board. Upon the affirmative vote of at least five members of the Board and after consultation with the Board of Directors of the Federal Deposit Insurance Corpora tion, the Federal Home Loan Bank Board, and the National Credit Union Administra tion Board, the Board may impose a supple mental reserve requirement on every deposito ry institution of not more than 4 percent of its total transaction accounts. A supplemental re serve requirement may be imposed if— (1) the sole purpose of the requirement is to increase the amount of reserves main tained to a level essential for the conduct of monetary policy; (2) the requirement is not imposed for the purpose of reducing the cost burdens result ing from the imposition of basic reserve requirements; (3) such requirement is not imposed for the purpose of increasing the amount of balances needed for clearing purposes; and (4) on the date on which supplemental re serve requirements are imposed, the total amount of basic reserve requirements is not less than the am ount of reserves that would be required on transaction accounts and nonpersonal time deposits under the initial reserve ratios established by the Monetary Control A ct of 1980 (Pub. L. 96-221) in effect on September 1, 1980. (b) Term (1) If a supplemental reserve requirement has been imposed for a period of one year or more, the Board shall review and deter mine the need for continued maintenance of supplemental reserves and shall transmit annual reports to the Congress regarding the need for continuing such requirement. (2) Any supplemental reserve requirement shall terminate at the close of the first 90day period after the requirement is imposed during which the average am ount of supple mental reserves required are less than the am ount of reserves which would be re § 204.7 quired if the ratios in effect on September 1, 1980, were applied. (c) Earnings participation account. A deposi tory institution’s supplemental reserve re quirement shall be maintained by the Federal Reserve Banks in an earnings participation ac count. Such balances shall receive earnings to be paid by the Federal Reserve Banks during each calendar quarter at a rate not to exceed the rate earned on the securities portfolio of the Federal Reserve System during the previ ous calendar quarter. Additional rules and regulations may be prescribed by the Board concerning the payment of earnings on earn ings participation accounts by Federal Re serve Banks. (d) Report to Congress. The Board shall transm it promptly to the Congress a report stating the basis for exercising its authority to require a supplemental reserve under this section. (e) Reserve requirements. A t present, there are no supplemental reserve requirements im posed under this section. SECTION 204.7—Penalties (a) Penalties fo r deficiencies. (1) Assessment o f penalties. Deficiencies in a depository institution’s required reserve balance, after application of the 2 percent carryover provided in section 204.3(f) are subject to penalties. Federal Reserve Banks are authorized to assess penalties for defi ciencies in required reserves at a rate of 2 percent per year above the lowest rate in effect for borrowings from the Federal Re serve Bank on the first day of the calendar month in which the deficiencies occurred. Penalties shall be assessed on the basis of daily average deficiencies during each main tenance period. Reserve Banks may, as an alternative to levying monetary penalties, after consideration of the circumstances in volved, permit a depository institution to eliminate deficiencies in its required reserve balance by maintaining additional reserves during subsequent reserve maintenance periods. (2) Waivers, (i) Reserve Banks may waive 21 §204.7 the penalty for reserve deficiencies except when the deficiency arises out of a depos itory institution’s gross negligence or conduct that is inconsistent with the principles and purposes of reserve re quirements. Each Reserve Bank has adopted guidelines that provide for waiv ers of small penalties. The guidelines also provide for waiving the penalty once dur ing a two-year period for any deficiency that does not exceed a certain percentage of the depository institution’s required reserves. Decisions by Reserve Banks to waive penalties in other situations are based on an evaluation of the circum stances in each individual case and the depository institution’s reserve mainte nance record. If a depository institution has demonstrated a lack of due regard for the proper maintenance of required re serves, the Reserve Bank may decline to exercise the waiver privilege and assess all penalties regardless of am ount or rea son for the deficiency. (ii) In individual cases, where a federal supervisory authority waives a liquidity requirement, or waives the penalty for failing to satisfy a liquidity requirement, the Reserve Bank in the District where the involved depository institution is lo cated shall waive the reserve requirement imposed under this part for such deposi tory institution when requested by the federal supervisory authority involved. (b) Penalties fo r violations. Violations of this part may be subject to assessment of civil money penalties by the Board under authority of section 19(1) of the Federal Reserve Act (12 USC 505) as implemented in 12 CFR 263. In addition, the Board and any other fed eral financial institution supervisory authority may enforce this part with respect to deposito ry institutions subject to their jurisdiction un der authority conferred by law to undertake cease-and-desist proceedings. SECTION 204.8— International Banking Facilities (a) Definitions. For purposes of this part, the following definitions apply: 22 Regulation D (1) “International banking fa c ility ” or “IB F ” means a set of asset and liability ac counts segregated on the books and records of a depository institution, United States branch or agency of a foreign bank, or an Edge or agreement corporation that in cludes only international banking facility time deposits and international banking fa cility extensions of credit. (2) “International banking facility tim e de posit” or “IB F tim e deposit” means a depos it, placement, borrowing or similar obliga tion represented by a promissory note, acknowledgment of advance, or similar in strument that is not issued in negotiable or bearer form, and (i) (A ) that must remain on deposit at the IBF at least overnight; and (B) that is issued to— (7) any office located outside the United States of another depository institution organized under the laws of the United States or of an Edge or agreement corporation; (2) any office located outside the United States of a foreign bank; (3) a United States office or a nonUnited States office of the entity es tablishing the IBF; (4) another IBF; or (J ) a foreign national government, or an agency or instrumentality thereof,13 engaged principally in ac tivities which are ordinarily per formed in the United States by gov ernmental entities; an international entity of which the United States is a member; or any other foreign inter national or supranational entity spe cifically designated by the Board;14 or (ii) (A ) that is payable— ( / ) on a specified date not less than two business days after the date of deposit; (2) upon expiration of a specified period of time not less than two 13 O ther than states, provinces, municipalities, or other regional o r local governmental units or agencies or instru mentalities thereof. 14 The designated entities are specified in 12 C FR 204.125 (page 26). Regulation D business days after the date of de posit; or ( J ) upon written notice that actual ly is required to be given by the de positor not less than two business days prior to the date of withdrawal; (B) that represents funds deposited to the credit of a non-U nited States resident or a foreign branch, office, subsidiary, affiliate, or other foreign es tablishment ( “foreign affiliate” ) con trolled by one or more domestic corpo rations provided that such funds are used only to support the operations outside the United States of the deposi tor or of its affiliates located outside the United States; and (C ) that is maintained under an agreement or arrangement under which no deposit or withdrawal of less than $100,000 is permitted, except that a withdrawal of less than $100,000 is permitted if such withdrawal closes an account. (3) “International banking facility exten sion o f credit” or “IB F loan ” means any transaction where an IBF supplies funds by making a loan, or placing funds in a deposit account. Such transactions may be repre sented by a promissory note, security, acknowledgment of advance, due bill, re purchase agreement, or any other form of credit transaction. Such credit may be ex tended only to— (i) any office located outside the United States of another depository institution organized under the laws of the United States or of an Edge or agreement corporation; (ii) any office located outside the United States of a foreign bank; (iii) a United States or a non-United States office of the institution establishing the IBF; (iv) another IBF; (v) a foreign national government, or an agency or instrumentality thereof,15 en gaged principally in activities which are ordinarily performed in the United States by governmental entities; an internation al entity of which the United States is a 15 See footnote 13. §204.8 member; or any other foreign interna tional or supranational entity specifically designated by the Board,16 or (vi) a non-U nited States resident or a foreign branch, office, subsidiary, affiliate or other foreign establishment (“foreign affiliate” ) controlled by one or more do mestic corporations provided that the funds are used only to finance the opera tions outside the United States of the bor rower or of its affiliates located outside the United States. (b) Acknowledgm ent o f use o f IB F deposits and extensions o f credit. A n IBF shall provide written notice to each of its customers (other than those specified in section 204.8(a)(2) (i)(B ) and section 2 0 4 .8 (a)( 3 ) (i) through (v )) at the time a deposit relationship or a credit relationship is first established that it is the policy of the Board of Governors of the Federal Reserve System that deposits received by international banking facilities may be used only to support the depositor’s operations out side the United States as specified in section 204.8(a) (2) (ii) (B) and that extensions of credit by IBFs may be used only to finance operations outside of the United States as specified in section 204.8(a) (3) (vi). In the case of loans to or deposits from foreign affili ates of U. S. residents, receipt of such notice must be acknowledged in writing whenever a deposit or credit relationship is first estab lished with the IBF. (c) Exem ption from reserve requirements. An institution that is subject to the reserve re quirements of this part is not required to maintain reserves against its IBF time depos its or IBF loans. Deposit-taking activities of IBFs are limited to accepting only IBF time deposits and lending activities of IBFs are re stricted to making only IBF loans. (d) Establishm ent o f an international bank ing facility. A depository institution, an Edge or agreement corporation or a United States branch or agency of a foreign bank may estab lish an IBF in any location where it is legally authorized to engage in IBF business. Howev er, only one IBF may be established for each reporting entity that is required to submit a ,6 See footnote 14. 23 § 204.8 Regulation D Report of Transaction Accounts, O ther De posits and Vault Cash (Form FR 2900). (e) Notification to Federal Reserve. At least 14 days prior to the first reserve computation period that an institution intends to establish an IBF it shall notify the Federal Reserve Bank of the District in which it is located of its intent. Such notification shall include a statement of intention by the institution that it will comply with the rules of this part con cerning IBFs, including restrictions on sourc es and uses of funds, and recordkeeping and accounting requirements. Failure to comply with the requirements of this part shall subject the institution to reserve requirements under this part or result in the revocation of the in stitution’s ability to operate an IBF. (f) Recordkeeping requirements. A deposito ry institution shall segregate on its books and records the asset and liability accounts of its IBF and submit reports concerning the opera tions of its IBF as required by the Board. (2) Exemption from reserve requirements. Each depository institution, Edge or agree ment corporation, and U.S. branch or agen cy of a foreign bank is subject to a zero percent reserve requirement on an amount of its transaction accounts subject to the low reserve tranche in paragraph (a )(1 ), nonpersonal time deposits, or Eurocurrency liabilities or any combination thereof not in excess of $3.2 million determined in accord ance with section 204.3(a)(3) of this part. (b) Reserve ratios in effect during last compu tation period prior to Septem ber 1, 1980. Category Reserve requirement N ET D E M A N D DEPOSITS Deposit tranche: $0-$2 million 7% (a) (1) Reserve percentages. The following re serve ratios are prescribed for all depository institutions, Edge and agreement corpora tions, and United States branches and agen cies of foreign banks: Category Reserve requirement NET TRANSACTION ACCOUNTS* $140,000 + 95% of amount over $2 million over $ 10 million$100 million S E C T IO N 204.9— S upplem ent: R eserve R e q u irem e n t R a tio s over $2 million$10 million $ 9 0 0 ,0 0 0 + ll|% of amount over $10 million over $100 million$400 million $11,475,000+ 12|% of amount over $ 100 million over $400 million $49,725,000+16i% of amount over $400 million SAVINGS DEPOSITS 3% T IM E DEPOSITS (subject to 3% minimum specified by law) By initial maturity: $0 to $40.5 million 3% of amount Over $40.5 million $1,215,000 plus 12% of amount over $40.5 million NO NPERSO NAL TIM E DEPOSITS By original maturity (or notice period): less than 1J years 3% 1j years or more 0% EUROCU RREN CY LIABILITIES 3% * D ollar amounts do not reflect the adjustment to be made by the next paragraph. less than 180 days $0-5 million over $5 million 3% 6% 180 days to four years 21% four years or more 1% Accounts authorized pursuant to section 303 of Pub. L. 96-221 offered by member banks located in states outside Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont 12% Club accounts 3% Regulation D § 204.9 For purposes of computing the reserves un der this part, that would have been required using the reserve ratios that were in effect on August 31, 1980, the reserve ratio on time de posits of a member bank shall be the average time deposit ratio of the member bank during the 14-day period ending August 6, 1980, ex cept that the reserve ratio on time deposits of a nonmember bank that was a member bank on or after July 1, 1979, but which became a nonmember bank before March 31, 1980, may be the average time deposit ratio of the non member during the 14-day period ending A u gust 27, 1980. 25 §204.125 SECTION 204.125—Foreign, International, and Supranational Entities Whose Deposits Are Exempt from Reserves The entities referred to in section 204.2(c) (1) (iv) (E ) are: Europe Bank for International Settlements European Atomic Energy Community European Coal and Steel Community The European Communities European Development Fund European Economic Community European Free Trade Association European Fund European Investment Bank Latin America Andean Development Corporation Andean Subregional Group Caribbean Development Bank Caribbean Free Trade Association Caribbean Regional Development Agency Central American Bank for Economic Integration The Central American Institute for Industrial Research and Technology Central American M onetary Stabilization Fund East Caribbean Common Market Regulation D Latin American Free Trade Association Organization for Central American States Permanent Secretariat of the Central American General Treaty of Economic Integration River Plate Basin Commission Africa African Development Bank Banque Centrale des Etats de l’Afrique Equatorial et du Cameroun Banque Centrale des Etats d ’Afrique del’Ouest Conseil de l’Entente East African Community Organisation Commune Africaine et Malagache Organization of African Unity Union des Etats de l’Afrique Centrale Union Douaniere et Economique de l’Afrique Centrale Union Douaniere des Etats de l’Afrique de l’Ouest Asia Asia and Pacific Council Association of Southeast Asian Nations Bank of Taiwan K orea Exchange Bank M iddle East Central Treaty Organization Regional Cooperation for Development Statutory Provisions FED ER A L RESERVE ACT SECTION 19—Bank Reserves (a) The Board is authorized for the purposes o f this section to define the terms used in this section, to determine what shall be deemed a payment of interest, to determine what types of obligations, whether issued directly by a member bank or indirectly by an affiliate of a member bank or by other means, shall be deemed a deposit, and to prescribe such regu lations as it may deem necessary to effectuate the purposes of this section and to prevent evasions thereof. (b) Reserve requirements. (1) Definitions. The following definitions and rules apply to this subsection, subsec tion (c), section 11A, the first paragraph of section 13, and the second, thirteenth, and fourteenth paragraphs of section 16: (A ) The term ‘depository institution’ means— (i) any insured bank as defined in sec tion 3 of the Federal Deposit Insur ance Act or any bank which is eligible to make application to become an in sured bank under section 5 of such Act; (ii) any mutual savings bank as de fined in section 3 of the Federal Depos it Insurance A ct or any bank which is eligible to make application to become an insured bank under section 5 of such Act; (iii) any savings bank as defined in section 3 of the Federal Deposit Insur ance Act or any bank which is eligible to make application to become an in sured bank under section 5 of such Act; (iv) any insured credit union as de fined in section 101 of the Federal Credit Union A ct or any credit union which is eligible to make application to become an insured credit union pursu ant to section 201 of such Act; (v) any member as defined in section 2 o f the Federal Home Loan Bank Act; (vi) any insured institution as defined in section 401 of the National Housing A ct or any institution which is eligible to make application to become an in sured institution under section 403 of such Act; and (vii) for the purpose of section 13 and the fourteenth paragraph of section 16, any association or entity which is wholly owned by or which consists only of institutions referred to in claus es (i) through (vi). (B) The term ‘bank’ means any insured or noninsured bank, as defined in section 3 of the Federal Deposit Insurance Act, other than a mutual savings bank or a savings bank as defined in such section. (C ) The term ‘transaction account’ means a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others. Such term includes de mand deposits, negotiable order of with drawal accounts, savings deposits subject to automatic transfers, and share draft accounts. (D ) The term ‘nonpersonal time depos its’ means a transferable time deposit or account or a time deposit or account rep resenting funds deposited to the credit of, or in which any beneficial interest is held by, a depositor who is not a natural person. (E ) In order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with the Board of Directors of the Federal Depos it Insurance Corporation, the Federal Home Loan Bank Board, and the N a tional Credit Union Administration Board, the Board of Governors of the 27 Statutory Provisions Federal Reserve System is authorized to determine, by regulation or order, that an account or deposit is a transaction ac count if such account or deposit may be used to provide funds directly or indirect ly for the purpose of making payments or transfers to third persons or others. (2) Reserve requirements. (A ) Each de pository institution shall maintain re serves against its transaction accounts as the Board may prescribe by regulation solely for the purpose of implementing monetary policy— (i) in the ratio of 3 per centum for that portion of its total transaction ac counts of $25,000,000 or less, subject to subparagraph (C ); and (ii) in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per cen tum and not less than 8 per centum, for that portion of its total transaction accounts in excess of $25,000,000, sub ject to subparagraph (C ). (B) Each depository institution shall maintain reserves against its nonpersonal time deposits in the ratio of 3 per cen tum, or in such other ratio not greater than 9 per centum and not less than zero per centum as the Board may prescribe by regulation solely for the purpose of implementing monetary policy. (C ) Beginning in 1981, not later than December 31 of each year the Board shall issue a regulation increasing for the next succeeding calendar year the dollar amount which is contained in subpara graph (A ) or which was last determined pursuant to this subparagraph for the purpose of such subparagraph, by an am ount obtained by multiplying such dollar amount by 80 per centum of the percentage increase in the total transac tion accounts of all depository institu tions. The increase in such transaction accounts shall be determined by subtract ing the am ount of such accounts on June 30 of the preceding calendar year from the am ount of such accounts on June 30 of the calendar year involved. In the case of any such 12-month period in which there has been a decrease in the total Regulation D transaction accounts of all depository in stitutions, the Board shall issue such a regulation decreasing for the next suc ceeding calendar year such dollar am ount by an am ount obtained by m ulti plying such dollar am ount by 80 per cen tum of the percentage decrease in the to tal transaction accounts of all depository institutions. The decrease in such trans action accounts shall be determined by subtracting the am ount of such accounts on June 30 of the calendar year involved from the amount of such accounts on June 30 of the previous calendar year. (D ) Any reserve requirement imposed under this subsection shall be uniformly applied to all transaction accounts at all depository institutions. Reserve require ments imposed under this subsection shall be uniformly applied to nonpersonal time deposits at all depository institu tions, except that such requirements may vary by the maturity of such deposits. (3) Waiver o f ratio lim its in extraordinary circumstances. Upon a finding by at least 5 members of the Board that extraordinary circumstances require such action, the Board, after consultation with the appropri ate committees of the Congress, may impose, with respect to any liability of depository institutions, reserve require ments outside the limitations as to ratios and as to types of liabilities otherwise pre scribed by paragraph (2) for a period not exceeding 180 days, and for further periods not exceeding 180 days each by affirmative action by at least 5 members of the Board in each instance. The Board shall promptly transm it to the Congress a report of any exercise of its authority under this para graph and the reasons for such exercise of authority. (4) Supplem ental reserves. (A ) The Board may, upon the affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution of not more than 4 per centum of its total transaction accounts. Such supplemental reserve requirement may be imposed only if— (i) the sole purpose of such require ment is to increase the am ount of re Regulation D serves maintained to a level essential for the conduct of monetary policy; (ii) such requirement is not imposed for the purpose of reducing the cost burdens resulting from the imposition of the reserve requirements pursuant to paragraph (2); (iii) such requirement is not imposed for the purpose of increasing the amount of balances needed for clearing purposes; and (iv) on the date on which the supple mental reserve requirement is imposed, except as provided in paragraph (11), the total am ount of reserves required pursuant to paragraph (2) is not less than the am ount of reserves that would be required if the initial ratios specified in paragraph (2) were in effect. (B ) The Board may require the supple mental reserve authorized under subpar agraph (A ) only after consultation with the Board of Directors of the Federal De posit Insurance Corporation, the Federal Home Loan Bank Board, and the N a tional Credit Union Administration Board. The Board shall promptly trans mit to the Congress a report with respect to any exercise of its authority to require supplemental reserves under subpara graph (A ) and such report shall state the basis for the determination to exercise such authority. (C ) The supplemental reserve autho rized under subparagraph (A ) shall be maintained by the Federal Reserve banks in an Earnings Participation Account. Except as provided in subsection ( c ) ( l ) ( A ) ( ii) , such Earnings Participa tion Account shall receive earnings to be paid by the Federal Reserve banks during each calendar quarter at a rate not more than the rate earned on the securities portfolio of the Federal Reserve System during the previous calendar quarter. The Board may prescribe rules and regu lations concerning the payment of earn ings on Earnings Participation Accounts by Federal Reserve banks under this paragraph. (D ) If a supplemental reserve under subparagraph (A ) has been required of Statutory Provisions depository institutions for a period of one year or more, the Board shall review and determine the need for continued mainte nance of supplemental reserves and shall transm it annual reports to the Congress regarding the need, if any, for continuing the supplemental reserve. (E ) Any supplemental reserve imposed under subparagraph (A ) shall terminate at the close of the first 90-day period af ter such requirement is imposed during which the average am ount of reserves re quired under paragraph (2) are less than the am ount of reserves which would be required during such period if the initial ratios specified in paragraph (2) were in effect. (5) Reserves related to foreign obligations or assets. Foreign branches, subsidiaries, and international banking facilities of non member depository institutions shall main tain reserves to the same extent required by the Board of foreign branches, subsidiaries, and international banking facilities of mem ber banks. In addition to any reserves oth erwise required to be maintained pursuant to this subsection, any depository institu tion shall maintain reserves in such ratios as the Board may prescribe against— (A ) net balances owed by domestic of fices of such depository institution in the United States to its directly related for eign offices and to foreign offices of non related depository institutions; (B) loans to United States residents made by overseas offices of such deposi tory institution if such depository institu tion has one or more offices in the United States; and (C ) assets (including participations) held by foreign offices of a depository in stitution in the United States which were acquired from its domestic offices. (6) Exem ption fo r certain deposits. The re quirements imposed under paragraph (2) shall not apply to deposits payable only out side the States of the United States and the District of Columbia, except that nothing in this subsection limits the authority of the Board to impose conditions and require ments on member banks under section 25 of this A ct or the authority of the Board under 29 Statutory Provisions section 7 of the International Banking Act of 1978 (12 U.S.C. 3105). (7) Discount and borrowing. Any deposito ry institution in which transaction accounts or nonpersonal time deposits are held shall be entitled to the same discount and bor rowing privileges as member banks. In the administration of discount and borrowing privileges, the Board and the Federal Re serve banks shall take into consideration the special needs of savings and other de pository institutions for access to discount and borrowing facilities consistent with their long-term asset portfolios and the sen sitivity of such institutions to trends in the national money markets. (8) Transitional adjustments. (A ) Any depository institution required to maintain reserves under this subsec tion which was engaged in business on July 1, 1979, but was not a member of the Federal Reserve System on or after that date, shall maintain reserves against its deposits during the first twelve-month period following the effective date of this paragraph in amounts equal to oneeighth of those otherwise required by this subsection, during the second such twelve-month period in amounts equal to one-fourth of those otherwise required, during the third such twelve-month peri od in amounts equal to three-eighths of those otherwise required, during the fourth twelve-month period in amounts equal to one-half of those otherwise re quired, and during the fifth twelve-month period in amounts equal to five-eighths of those otherwise required, during the sixth twelve-month period in amounts equal to three-fourths of those otherwise required, and during the seventh twelve month period in amounts equal to seveneighths of those otherwise required. This subparagraph does not apply to any cate gory of deposits or accounts which are first authorized pursuant to Federal law in any State after April 1, 1980. (B) W ith respect to any bank which was a member of the Federal Reserve System during the entire period beginning on July 1, 1979, and ending on the effective date of the Monetary Control A ct of 30 Regulation D 1980, the amount of required reserves imposed pursuant to this subsection on and after the effective date of such Act that exceeds the am ount of reserves which would have been required of such bank if the reserve ratios in effect during the reserve computation period immedi ately preceding such effective date were applied may, at the discretion of the Board and in accordance with such rules and regulations as it may adopt, be re duced by 75 per centum during the first year which begins after such effective date, 50 per centum during the second year, and 25 per centum during the third year. (C )(i) W ith respect to any bank which is a member of the Federal Reserve System on the effective date of the Monetary Control A ct of 1980, the am ount of reserves which would have been required of such bank if the re serve ratios in effect during the reserve computation period immediately pre ceding such effective date were applied that exceeds the am ount of required re serves imposed pursuant to this subsec tion shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective date, 50 per centum dur ing the second year, and 75 per centum during the third year. (ii) If a bank becomes a member bank during the four-year period beginning on the effective date of the Monetary Control A ct of 1980, and if the amount of reserves which would have been re quired of such bank, determined as if the reserve ratios in effect during the reserve computation period immedi ately preceding such effective date were applied, and as if such bank had been a member during such period, ex ceeds the am ount of reserves required pursuant to this subsection, the am ount of reserves required to be maintained by such bank beginning on the date on which such bank becomes a member of the Federal Reserve Sys tem shall be the amount of reserves Regulation D which would have been required of such bank if it had been a member on the day before such effective date, ex cept that the amount of such excess shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective date, 50 per centum dur ing the second year, and 75 per centum during the third year. ( D ) ( i) Any bank which was a member bank on July 1, 1979, and which with draws from membership in the Federal Reserve System during the period be ginning on July 1, 1979, and ending on March 31, 1980, shall maintain re serves during the first twelve-month period beginning on the date of enact ment of this clause in am ounts equal to one-half of those otherwise required by this subsection, during the second such twelve-month period in amounts equal to two-thirds of those otherwise re quired, and during the third such twelve-month period in am ounts equal to five-sixths of those otherwise required. (ii) Any bank which withdraws from membership in the Federal Reserve System on or after the date of enact ment of the Depository Institutions Deregulation and M onetary Control A ct of 1980 shall maintain reserves in the same amount as member banks are required to maintain under this subsec tion, pursuant to subparagraphs (B) and (C )(i). (E ) This subparagraph applies to any depository institution that, on August 1, 1978, (i) was engaged in business as a depository institution in a State outside the continental limits of the United States, and (ii) was not a member of the Federal Reserve System at any time on or after such date. Such a depository institu tion shall not be required to maintain re serves against its deposits held or main tained at its offices located in a State outside the continental limits of the U nit ed States until the first day of the sixth calendar year which begins after the ef Statutory Provisions fective date of the M onetary Control Act of 1980. Such a depository institution shall maintain reserves against its deposits during the sixth calendar year which begins after such effective date in an am ount equal to one-eighth of that otherwise required by paragraph (2 ), during the seventh such year in an am ount equal to one-fourth of that other wise required, during the eighth such year in an am ount equal to three-eighths of that otherwise required, during the ninth such year in an am ount equal to one-half of that otherwise required, dur ing the tenth such year in an amount equal to five-eighths of that otherwise re quired, during the eleventh such year in an am ount equal to three-fourths of that otherwise required, and during the twelfth such year in an am ount equal to seven-eighths of that otherwise required. (9) Exemption. This subsection shall not apply with respect to any financial institu tion which— (A ) is organized solely to do business with other financial institutions; (B) is owned primarily by the financial institutions with which it does business; and (C ) does not do business with the gener al public. (10) Waivers. In individual cases, where a Federal supervisory authority waives a li quidity requirement, or waives the penalty for failing to satisfy a liquidity requirement, the Board shall waive the reserve require ment, or waive the penalty for failing to satisfy a reserve requirement, imposed pur suant to this subsection for the depository institution involved when requested by the Federal supervisory authority involved. (11) Additional exemptions. ( A )(i) N ot withstanding the reserve requirement ratios established under paragraphs (2) and (5) of this subsection, a re serve ratio of zero per centum shall ap ply to any combination of reservable liabilities, which do not exceed $2,000,000 (as adjusted under subpar agraph (B )), of each depository institution. (ii) Each depository institution may 31 Statutory Provisions designate, in accordance with such rules and regulations as the Board shall prescribe, the types and amounts of reservable liabilities to which the re serve ratio of zero per centum shall ap ply, except that transaction accounts which are designated to be subject to a reserve ratio of zero per centum shall be accounts which would otherwise be subject to a reserve ratio of 3 per cen tum under paragraph (2). (iii) The Board shall minimize the re porting necessary to determine wheth er depository institutions have total re servable liabilities of less than $2,000,000 (as adjusted under subpar agraph (B )). Consistent with the Board’s responsibility to monitor and control monetary and credit aggre gates, depository institutions which have reserve requirements under this subsection equal to zero per centum shall be subject to less overall report ing requirements than depository insti tutions which have a reserve require ment under this subsection that ex ceeds zero per centum. (B) (i) Beginning in 1982, not later than December 31 of each year, the Board shall issue a regulation increas ing for the next succeeding calendar year the dollar amount specified in subparagraph (A ), as previously ad justed under this subparagraph, by an amount obtained by multiplying such dollar am ount by 80 per centum of the percentage increase in the total reserv able liabilities of all depository institutions. (ii) The increase in total reservable li abilities shall be determined by sub tracting the amount of total reservable liabilities on June 30 of the preceding calendar year from the amount of total reservable liabilities on June 30 of the calendar year involved. In the case of any such twelve-month period in which there has been a decrease in the total reservable liabilities of all deposi tory institutions, no adjustment shall be made. A decrease in total reservable liabilities shall be determined by sub Regulation D tracting the am ount of total reservable liabilities on June 30 of the calendar year involved from the am ount of total reservable liabilities on June 30 of the previous calendar year. (c)(l)R eserv es held by a depository institu tion to meet the requirements imposed pur suant to subsection (b) shall, subject to such rules and regulations as the Board shall prescribe, be in the form of— (A ) balances maintained for such pur poses by such depository institution in the Federal Reserve bank of which it is a member or at which it maintains an ac count, except that (i) the Board may, by regulation or order, permit depository in stitutions to maintain all or a portion of their required reserves in the form of vault cash, except that any portion so permitted shall be identical for all deposi tory institutions, and (ii) vault cash may be used to satisfy any supplemental re serve requirement imposed pursuant to subsection (b )(4 ), except that all such vault cash shall be excluded from any computation of earnings pursuant to sub section (b )( 4 )( C ) ; and (B) balances maintained by a depository institution which is not a member bank in a depository institution which main tains required reserve balances at a Fed eral Reserve bank, in a Federal Home Loan Bank, or in the National Credit Union Administration Central Liquidity Facility, if such depository institution, Federal Home Loan Bank, or National Credit Union Administration Central Li quidity Facility maintains such funds in the form of balances in a Federal Reserve bank of which it is a member or at which it maintains an account. Balances re ceived by a depository institution from a second depository institution and used to satisfy the reserve requirement imposed on such second depository institution by this section shall not be subject to the re serve requirements of this section im posed on such first depository institution, and shall not be subject to assessments or reserves imposed on such first depository institution pursuant to section 7 o f the Statutory Provisions Regulation D Federal Deposit Insurance A ct (12 U.S.C. 1817), section 404 of the National Housing A ct (12 U.S.C. 1727), or sec tion 202 of the Federal Credit Union Act (12 U.S.C. 1782). (2) The balances maintained to meet the reserve requirements of subsection (b) by a depository institution in a Federal Reserve bank or passed through a Federal Home Loan Bank or the National Credit Union Administration Central Liquidity Facility or another depository institution to a Fed eral Reserve bank may be used to satisfy liquidity requirements which may be im posed under other provisions of Federal or State law. [12 USC 461. As amended by acts o f June 21, 1917 (40 Stat. 239); Aug. 23, 1935 (49 Stat. 714); Sept. 21, 1966 (80 Stat. 823); Dec. 23, 1969 (83 Stat. 374, 375); Oct. 29, 1974 (88 Stat. 1557); M arch 31, 1980 (94 Stat. 133, 138); Aug. 13, 1981 (95 Stat. 433); and Oct. 15, 1982 (96 Stat. 1520, 1521, 1522, 1523, 1540).] * * * * * (f) The required balance carried by a mem ber bank with a Federal Reserve bank may, under the regulations and subject to such pen alties as may be prescribed by the Board of Governors of the Federal Reserve System, be checked against and withdrawn by such mem ber bank for the purpose of meeting existing liabilities. [12 USC 464. As amended by acts o f Aug. 15, 1914 (38 Stat. 691); June 21, 1917 (40 Stat. 239); Aug. 23, 1935 (49 Stat. 704); and July 7, 1942 (56 Stat. 648).] (g) In estimating the reserve balances re quired by this Act, member banks may deduct from the amount of their gross demand depos its the amounts of balances due from other banks (except Federal Reserve banks and for eign banks) and cash items in process of col lection payable immediately upon presenta tion in the United States, within the meaning of these terms as defined by the Board of Gov ernors of the Federal Reserve System. [12 USC 465. As amended by acts o f Aug. 15, 1914 (38 Stat. 691); June 12, 1917 (40 Stat. 239); and Aug. 23, 1935 (49 Stat. 714).] SECTION 11 — Powers of the Board of Governors of the Federal Reserve System The Board of Governors of the Federal Re serve System shall be authorized and empowered: (a) (1) To examine at its discretion the ac counts, books, and affairs of each Federal reserve bank and of each member bank and to require such statements and reports as it may deem necessary. The said board shall publish once each week a statement show ing the condition of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such statements shall show in detail the assets and liabilities of the Federal reserve banks, single and combined, and shall furnish full informa tion regarding the character of the money held as reserve and the amount, nature, and maturities of the paper and other invest ments owned or held by Federal reserve banks. (2) To require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such reports of its liabilities and assets as the Board may determine to be necessary or de sirable to enable the Board to discharge its responsibility to m onitor and control mone tary and credit aggregates. Such reports shall be made (A ) directly to the Board in the case of member banks and in the case of other depository institutions whose reserve requirements under section 19 of this Act exceed zero, and (B) for all other reports to the Board through the (i) Federal Deposit Insurance Corporation in the case of in sured State nonmember banks, savings banks, and mutual savings banks, (ii) N a tional Credit Union Administration Board in the case of insured credit unions, (iii) Federal Home Loan Bank Board in the case of any institution insured by the Federal Savings and Loan Insurance Corporation or which is a member as defined in section 2 of the Federal Home Loan Bank Act, and (iv) such State officer or agency as the Board may designate in the case of any other type of bank, savings and loan association, or credit union. The Board shall endeavor to avoid the imposition of unnecessary bur33 Statutory Provisions Regulation D dens on reporting institutions and the du plication of other reporting requirements. Except as otherwise required by law, any data provided to any department, agency, or instrumentality of the United States pur suant to other reporting requirements shall be made available to the Board. The Board may classify depository institutions for the purposes of this paragraph and may impose different requirements on each such class. * * * * * (c) To suspend for a period not exceeding thirty days, and from time to time to renew such suspensions for periods not exceeding fif teen days, any reserve requirements specified in this Act. * * * * * (e) To add to the number of cities classified as reserve cities under existing law in which national banking associations are subject to the reserve requirements set forth in section [nineteen] of this Act; or to reclassify existing reserve cities or to terminate their designation as such. [12 USC 248 (a ), (c ), and (e ). As amended by acts of June 12, 1945 (59 Stat. 237); July 28, 1959 (73 Stat. 264); M arch 18, 1968 (82 Stat. 50) and M arch 31, 1980 (94 Stat. 132).] S E C T IO N 25 — F o reig n B ranches Any national banking association possessing a capital and surplus of $1,000,000 or m ore may file application with the Board of Governors of the Federal Reserve System for permission to exercise, upon such conditions and under such regulations as may be prescribed by the said board, the following powers: First. To establish branches in foreign coun tries or dependencies or insular possessions of the United States for the furtherance of the foreign commerce of the United States, and to act if required to do so as fiscal agents of the United States. * * * * * [ 12 USC 601. As amended by act o f Sept. 7, 1916 (39 Stat. 755).] 34 S E C T IO N 2 5 ( a ) — B anking C o rp o ratio n s A u th o riz e d to D o F o reig n B anking B usiness * * * * * Each corporation so organized shall have power, under such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe: (a) To purchase, sell, discount, and negoti ate, with or without its indorsement or guar anty, notes, drafts, checks, bills of exchange, acceptances, including bankers’ acceptances, cable transfers, and other evidences of indebt edness; to purchase and sell with or without its indorsement or guaranty, securities, in cluding the obligations of the United States or of any State thereof but not including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restrictions as the Board of Governors of the Federal Re serve System may impose; to issue letters of credit; to purchase and sell coin, bullion, and exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the Board of Gover nors of the Federal Reserve System may pre scribe; to receive deposits outside of the U nit ed States and to receive only such deposits within the United States as may be incidental to or for the purpose of carrying out transac tions in foreign countries or dependencies or insular possessions of the United States; and generally to exercise such powers as are inci dental to the powers conferred by this A ct or as may be usual, in the determination of the Board of Governors of the Federal Reserve System, in connection with the transaction of the business of banking or other financial op erations in the countries, colonies, dependen cies, or possessions in which it shall transact business and not inconsistent with the powers specifically granted herein. Nothing contained in this section shall be construed to prohibit the Board of Governors of the Federal Re serve System, under its power to prescribe rules and regulations, from limiting the aggre gate amount of liabilities of any or all classes incurred by the corporation and outstanding Regulation D Statutory Provisions at any one time. Whenever a corporation or ganized under this section receives deposits in the United States authorized by this section it shall carry reserves in such amounts as the Board of Governors of the Federal Reserve System may prescribe for member banks of the Federal Reserve System. * * * * * [12 USC 615. As amended by acts o f Aug. 23, 1935 (49 Stat. 704) and Sept. 17, 1978 (92 Stat. 609).] I N T E R N A T IO N A L B A N K IN G A C T S E C T IO N 7— A u th o rity o f F ed eral R eserve System ( a ) (1 ) ( A ) Except as provided in paragraph (2) of this subsection, subsections (a), (b ), (c), (d ), ( 0 , (g), (i), (j), (k ), and the second sentence of subsection (e) of section 19 of the Federal Reserve Act shall apply to every Federal branch and Federal agency of a foreign bank in the same manner and to the same extent as if the Federal branch or Federal agency were a member bank as that term is de fined in section 1 of the Federal Reserve Act; but the Board either by general or specific regulation or ruling may waive the minimum and maximum reserve ra tios prescribed under section 19 of the Federal Reserve A ct and may prescribe any ratio, not more than 22 per centum, for any obligation of any such Federal branch or Federal agency that the Board may deem reasonable and appropriate, taking into consideration the character of business conducted by such institutions and the need to maintain vigorous and fair competition between and among such institutions and member banks. The Board may impose reserve requirements on Federal branches and Federal agen cies in such graduated manner as it deems reasonable and appropriate. (B) After consultation and in coopera tion with the State bank supervisory au thorities, the Board may make applicable to any State branch or State agency any requirement made applicable to, or which the Board has authority to impose upon, any Federal branch or agency un der subparagraph (A ) of this paragraph. (2) A branch or agency shall be subject to this subsection only if (A ) its parent for eign bank has total worldwide consolidated bank assets in excess of $1,000,000,000; (B) its parent foreign bank is controlled by a foreign company which owns or controls foreign banks that in the aggregate have to tal worldwide consolidated bank assets in excess of $1,000,000,000; or (C) its parent foreign bank is controlled by a group of for eign companies that own or control foreign banks that in the aggregate have total worldwide consolidated bank assets in ex cess of $1,000,000,000. * [12 USC 3105.] * * * *
