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F ederal

reserve

Bank

DALLAS, TEXAS

of

Dallas

75222

Circular No. 73-325
December 11, 1973

SU P P L E M E N T TO R E G U L A T IO N D

To All Member Banks in the
Eleventh Federal Reserve District:

There is quoted below the text of a press release issued
Friday, December 7? 1973 by the Board of Governors of the Federal
Reserve System announcing an amendment to Regulation D lowering the
marginal reserve requirement on large denomination time deposits and
related domestic instruments.
"The Board of Governors of the Federal Reserve
System today announced a reduction from 11 per
cent to 8 per cent in its marginal reserve
requirement on large denomination certificates
of deposit (CD’s). This action — which will
reduce the costs to banks of accommodating the
credit needs of their customers -- was taken
in recognition of the moderation in bank credit
growth achieved over recent months.
The announced reduction will take effect on de­
posits in the week beginning next Thursday, Dec­
ember 13, and will reduce required reserves two
weeks later, when there is a seasonal need to
provide reserves to the banking system. The net
effect of the Board’s action will be to reduce by
about $375 million the reserves required to support
member bank deposits.
A marginal reserve requirement (the regular 5 per
cent plus a supplemental 3 per cent) was first
announced by the Board on May 16 as part of a
series of actions designed to curb a rapid ex­
pansion in bank credit and help moderate inflation­
ary pressures. An additional 3 per cent marginal
reserve was announced by the Board on September 7j
thus raising the total reserve requirement on af­
fected deposits to 11 per cent.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

-2-

In recent months, the rate of growth in bank credit
has moderated, and the outstanding amount of large
denomination CD’s has dropped substantially. Busi­
ness loan expansion at banks has been at a much
slower pace than earlier this year, and extensions
of other forms of bank credit have also slowed.
The marginal reserve requirement applies to in­
creases (beyond the amount outstanding in the week
ended May 16 ) in the total of (a) time deposits
in denominations of $100,000 and over and (b) bankrelated commercial paper and finance bills with a
maturity of 30 days or more. In no case does the
supplemental reserve apply to banks whose obligations
of these types total less than $10 million.
The Board said the action also affects certain non­
member state banks and U. S. agencies and branches
of foreign banks which have been voluntarily holding
marginal reserves on large CD's at the request of
the Board. The special marginal reserve held by
these institutions will now be reduced from 6 per
cent to 3 per cent. The Board expressed its ap­
preciation to the nonmember institutions for their
continued cooperation."
The revised Supplement to Regulation D reflecting this change
is attached. This new Supplement effective December 13, 1973 should
be substituted for the Supplement (effective September 20, 1973) now
filed with your copy of Regulation D.
Yours very truly,
P. E. Coldwell
President
Attachment

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION D
As amended effective December 13,1973

SECTION 204.5 — RESERVE REQUIREMENTS
(a) Reserve percentages. Pursuant to the provi­
sions of section 19 of the Federal Reserve A ct and
§ 204.2 (a) and subject to paragraph (c) of this
section, the Board of Governors of the Federal
Reserve System hereby prescribes the following
reserve balances which each member bank of the
Federal Reserve System is required to maintain
on deposit with the Federal Reserve Bank of its
district:

(1) If not in a reserve city—
(i) 3 per cent of (A ) its savings deposits and
(B ) its time deposits, open account, that constitute
deposits of individuals, such as Christmas club ac­
counts and vacation club accounts, that are made
under written contracts providing that no with­
drawal shall be made until a certain number of
periodic deposits have been made during a period
of not less than 3 months; and
(ii) 3 per cent of its other time deposits up to
$5 million, plus 5 per cent of such deposits in
excess of $5 million: Provided, however, That a
member bank shall maintain a reserve balance
equal to 8 per cent of the amount by which the
daily average amount of time deposits of the types
hereinafter specified exceeds either the daily aver­
age amount of such time deposits outstanding
during the computation period ending May 16,
1973, or $10 million, whichever is greater, and
such 8 per cent reserve percentage shall apply
with respect to time deposits of the following
types:
(a) time deposits of $100,000 or more; and
(b) time deposits represented by promissory
notes, acknowledgments of advance, due bills,
or similar obligations issued by a member bank’s
affiliate, as provided in § 2 0 4 .1 (f); and
(c) time deposits represented by bank ac­
ceptances, as provided in § 2 0 4 .1 (f);

or less, (b) $160,000 plus IOV2 per cent of its net
demand deposits in excess of $2 million if its
aggregate net demand deposits are in excess of $2
million but less than $10 million, (c) $1,000,000
plus H V 2 per cent of its net demand deposits in
excess of $10 million if its aggregate net demand
deposits are in excess of $10 million but less than
$100 million, or (d) $12,250,000 plus 13 Vi per
cent of its net demand deposits in excess of $100
million.
(2 )
If in a reserve city (except as to any bank
located in such a city that is permitted by the
Board of Governors of the Federal Reserve Sys­
tem, pursuant to § 204.2(a) ( 2 ) , to maintain the
reserves specified in subparagraph (1) of this
paragraph)—
=*■
(i) 3 per cent of (A ) its savings deposits and
(B ) its time deposits, open account, that constitute
deposits of individuals, such as Christmas club
accounts and vacation club accounts, that are
made under written contracts providing that no
withdrawal shall be made until a certain number
of periodic deposits have been made during a
period of not less than 3 months; and
(ii) 3 per cent of its other time deposits up to
$5 million, plus 5 per cent of such deposits in
excess of $5 million: Provided, however, That a
member bank shall maintain a reserve balance
equal to 8 per cent of the amount by which the
daily average amount of time deposits of the types
hereinafter specified exceeds either the daily aver­
age amount of such time deposits outstanding
during the computation period ending May 16,
1973, or $10 million, whichever is greater, and
such 8 per cent reserve percentage shall apply
with respect to time deposits of the following
types:
(a) time deposits of $100,000 or more; and

Provided further, that in no event shall the
reserves required on its aggregate amount of time
and savings deposits exceed 10 per cent; and

(b) time deposits represented by promissory
notes, acknowledgments of advance, due bills,
or similar obligations issued by a member
bank’s affiliate, as provided in § 2 0 4 .1 (f); and

(iii) (a) 8 per cent of its net demand deposits if
its aggregate net demand deposits are $2 million

(c) time deposits represented by bank ac­
ceptances, as provided in § 2 0 4 .1 (f);

Provided further, that in no event shall the
reserves required on its aggregate amount of time
and savings deposits exceed 10 per cent; and
(iii)
$52,750,000 plus 18 per cent of its net
demand deposits in excess of $400 million.
(b) Currency and coin. The amount of a mem­
ber bank’s currency and coin shall be counted as
reserves in determining compliance with the re­
serve requirements of paragraph (a) of this section.
(c) Reserve percentages against certain deposits
by foreign banking offices. Deposits represented
by promissory notes, acknowledgments of ad­
vance, due bills, or similar obligations described
in § 2 0 4 .1 (f) to foreign offices of other banks,8 or
to institutions the time deposits of which are
exempt from the rate limitations of Regulation Q
pursuant to § 217.3(g ) thereof, shall not be sub­
ject to paragraph (a ) of this sectio n or to
§ 2 0 4 .3 (a )(1 ) and (2 ); but during each week of
the four-week period beginning June 21, 1973,
and during each successive four-week ( “main­
tenance”) period, a member bank shall maintain
with the Reserve Bank of its district a daily aver­
age balance equal to 8 per cent of the daily aver­
age amount of such deposits during the four-week
computation period ending on the Wednesday
fifteen days before the beginning of the main­
tenance period. An excess or deficiency in reserves

in any week of a maintenance period under this
paragraph shall be subject to § 2 0 4 .3 (a ) (3 ) , as if
computed under § 2 0 4 .3 (a ) (2 ) , and deficiencies
under this paragraph shall be subjected to
§ 2 0 4 .3 (b ):9
Provided, That any bank that, under the terms of
§ 2 04.5(c) of Regulation D as in effect prior to
June 21, 1973,10 was deducting for the com ­
putation period ending on May 9, 1973, an earlier
period’s corresponding daily average total of such
deposits (hereinafter called “reserve-free base”)
in calculating its reserve requirements shall con­
tinue to be entitled to do so in accordance with
the terms of such former section, but such reservefree base shall not exceed progressively lower ceil­
ings established hereunder by reducing the amount
of its reserve-free base for the computation period
ending on May 9, 1973, in ten increments, each
equal to 10 per cent of its base in such computa­
tion period ending on May 9, 1973, applied con­
secutively in each succeeding computation period
beginning with the period ending on August 1,
1973, until such reserve-free base is exhausted.
8A n y ban kin g office located outside the States o f the U n ite d
States and the D is tric t o f C o lu m b ia o f a b an k organized under
dom estic o r foreig n law .
8T h e term “ com pu tation p erio d ” in § 2 0 4 . 3 ( a ) ( 3 ) and
( b ) shall, fo r this purpose, be deem ed to re fe r to each w eek
o f a m aintenance period under this parag rap h.
1035 F ed eral Register 186S8.