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FEDERAL RESERVE BAMBC OF MEW YORK [ Circular No. 10209 December 14, 1987 ~Jj J R E S E R V E R E Q U IR E M E N T S S u p p le m e n t to R e g u la tio n B , E ffe c tiv e D e c e m b e r I S , 19§>7 To All Depository Institutions, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has announced an increase in the amount o f net transaction accounts to which the 3 percent reserve requirement w ill apply in 1988 from $36.7 m illion to $40.5 m illion. The Board also increased the amount o f a depository institution’s reservable liabilities that are subject to a zero per centage reserve requirement from $2.9 m illion to $3.2 m illion o f total reservable liabilities. A dditionally, the Board increased the reporting cutoff level distinguishing weekly reporters from quarterly reporters from $28.6 m illion to $ 30.0 m illion o f total deposits and other reservable liabilities. These adjustments take effect beginning December 15, 1987. The Board made the changes in accordance w ith provisions o f the M onetary Control A ct. The A ct requires the Board to amend its Regulation D — Reserve Requirements o f Depository Institutions — annually to increase the amount of transaction accounts subject to a 3 percent reserve requirement. The annual adjustment must be 80 percent o f the annual percentage change in the transaction accounts held by all depository institutions. The growth in total net transaction ac counts o f all depository institutions from June 30, 1986 to June 30, 1987 was 13.0 percent. The statutory rule thus requires an increase o f $3.8 m illion over last year’s amount to $40.5 m illion. The Board is also required by the G am -St Germain Depository Institutions A ct o f 1982 to amend Regulation D to adjust the amount o f a depository institution’s total reservable liabilities that are exempt from reserve requirements for the upcoming year by 80 percent o f any annual percentage increase in total reservable liabilities for all depository institutions. Growth in total reservable liabilities was 12.6 percent from June 30, 1986 to June 30, 1987, requiring an increase in the reserve requirement exemption to $3.2 m illion. The Board is also increasing the reporting cutoff level distinguishing weekly reporters from quarterly reporters from $28.6 m illion to $30.0 m illion o f total deposits and other reservable liabilities. The cutoff level is indexed to 80 percent of the annual percentage increase in total deposits and other reservable liabilities for all depository institutions. The annual adjustment o f the cutoff level is computed as o f June 30 o f each year. Institutions w ith total deposits and other reservable liabilities below the reserve requirement exemption amount o f $ 3.2 m illion are excused from reporting even on a quarterly basis if their deposits can be estimated from other sources. Enclosed — for depository institutions and others maintaining sets of Board regulations — is a copy of a revised Supplement to Regulation D, effective December 15,1987. Printed on the following pages is the text of the Board’s notice in this matter, which has been reprinted from the F ed e ra l R eg ister of December 8. Questions regarding Regulation D may be directed to any of the following: Reporting R equirem ents: Nancy Bercovici, Assistant Vice President (Tel. No. 212-720-8227) Monica Goldberg, Chief, Deposit Reports Division (Tel. No. 212-720-8590) M aintenance Requirem ents: Donald R. Anderson, Manager, Accounting Department (Tel. No. 212-720-5250) Anthony Fressola, Chief, Accounting Control Division (Tel. No. 212-720-5803) Interp retation of Regulation D: Joyce E. M otylewski, Counsel (Tel. No. 212-720-5024) Eric K. Tarlow, Assistant Chief Examiner, Compliance Examinations Department (Tel. No. 212-720-5919) E. G e r a l d C o r r ig a n , P r e s id e n t. FEDERALRESERVE SYSTEM 12 cm Part 204 Dorothea Thompson (202/452-3544); Board of Governors of the Federal Reserve System, Washington, DC, 20551. [Regulation O; Doefeefi No. R-0623] Reserve Requirements ©f Depository Institutions; Reserve Requirement Ratios Board of Governors of the Federal Reserve System, agency: remoras Final rule. summary : The Board is amending 12 CFR Part 204 (Regulation D—Reserve Requirements of Depository Institutions): (1) To increase the amount of transaction accounts subject to a reserve requirement ratio of three percent, as required by section. 19(b)(2)(C) of the Federal Reserve Act (12 U.S.C, 461(b)(2)(C)), from $36.7 million to $40.5 million of net transaction accounts; (2) to increase the amount of reservable liabilities of each depository institution that is subject to a reserve requirement, of zero percent, as required by section 19(b)(ll)(B) of the Federal Reserve Act (12 U.S.C. 461(b)(ll)(B)), from $2.9 million to $3.2 million of reservable liabilities; and (3) to increase the reporting cutoff level which is used to separate weekly reporters from quarterly reporters from $28.6 million to $30.0 million of total deposits and other reservable liabilities. EFFECTIVE ©ate: December 15,1987. FOR FURTHER 0NF@RMAT8©N CONTACT: John Harry Jorgenson, Senior Attorney (202/452-3778), Legal Division, or Pat Mahoney, Economist (202/452-3827), Division of Monetary Affairs; for users of the Telecommunications Device for the Deaf (TDD), Eamestine Hill or SUPPLEMENTARY INFORMATION: Section 19(b)(2) of the Federal Reserve Act requires each depository institution to maintain with the Federal Reserve System reserves against its transaction accounts and nonpersonal time deposits, as prescribed by Board regulations. The initial reserve requirements imposed under section 19(b)(2) were set at three percent for each depository institution’s total transaction accounts of $25 million or less and at 12 percent on total transaction accounts above $25 million. Section 19(b)(2) further provides that, before December 31 of each year, the Board shall issue a regulation adjusting for the next calendar year the total dollar amount of the transaction account tranche against which reserves must be maintained at a ratio of three percent. The adjustment in the tranche is to be 80 percent of the percentage change in total transaction accounts for all depository institutions determined as of June 30 of each year. Currently, the amount of the low reserve tranche on transaction accounts is $36.7 million. The growth in the total net transaction accounts of all depository institutions from June 30, 1986, to June 30,1987, was 13.0 percent (from $518.1 billion to $585.4 billion). In accordance with section 19(b)(2), the Board is amending Regulation D to increase the amount of the low reserve tranche for transaction accounts for 1987 by $3.8 million to $40.5 million. Section 19(b)(ll)(A) of the Federal Reserve Act provides that $2 million cf 2 reservable liabilities1 of each depository institution shall be subject to a zero percent reserve requirement Section 19(b) (11)(A) permita each depository institution, in accordance with the rules and regulations of the Board, to designate the reservable liabilities to which this reserve requirement exemption is to apply. However, if transaction accounts are designated, only those that would otherwise be subject to a three percent reserve requirement f/.e.. transaction accounts within the low reserve requirement tranche) may be so designated. • Section 19(b)(ll)(B) of the Federal Reserve Act provides that, before December 31 of each year, the Board shall issue a regulation adjusting for the next calendar year the dollar amount of reservable liabilities exempt from reserve requirements. The change in the amount is to be made only if the total reservable liabilities held at all depository institutions increases from one year to the next. The percentage increase in the exemption is to be 80 percent of the percentage increase in total reservable liabilities o f all depository institutions determined as of June 30 each year. The growth in total reservable liabilities of all depository institutions for June 30,1986, to June 30, 1987, was 12.6 percent (from $1,046.2 billion to $1,177.9 billion). In accordance with section 19(b)(ll), the Board is amending Regulation D to increase the amount of the reserve requirement exemption for 1987 by $0.3 million to $3.2 million. 1 Reservable liabilities include transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities as defined in section 19(b)(5) of the Federal Reserve Act f As a result, the effect of these amendments is to modify the low reserve tranche (which is $40.5 million, effective December 29,1987) to apply a zero percent reserve requirement on the first $3.2 million of transaction accounts (effective December 29,1987). and a three percent reserve requirement on the remainder of the low reserve tranche. Any amount of this zero percent reserve requirement tranche remaining after applying it to transaction accounts will then be applied to nonpersonal time deposits with maturities of less than IV2 years or to Euroccurency liabilities, both of which are subject to a reserve requirement ratio of three percent. The tranche adjustment and the reservable liabilities exemption adjustment for weekly reporting institutions will be effective starting with the reserve computation period beginning on (Tuesday) December 29, 1987, and with the corresponding reserve maintenance periods beginning (Thursday) December 31,1987, for net transaction accounts, and on (Thursday) January 28,1987, for other reservable liabilities. For institutions that report quarterly, the tranche adjustment and the exemption will be effective with the computation period beginning on • (Tuesday) December 15,1987, and with the reserve maintenance-period beginning (Thursday) January 14,1988. In addition, all entities currently submitting Form FR 2900 will continue to submit reports to the Federal Reserve under current reporting procedures. In order to reduce the reporting burden for small institutions, the Board established a deposit reporting cutoff level (currently $28.6 million in total deposits and other reservable liabilities) to determine deposit reporting frequency. In March of 1985, the Board decided to index this reporting cutoff level equal to 80 percent of.the annual rate of increase of total deposits and other reservable liabilities.2 Institutions are screened during the second quarter of each year to determine reporting frequency beginning the following September. All U.S. branches and agencies of foreign banks and all Edge and Agreement Corporations, regardless of size, and all other institutions with reservable liabilities in excess of the exemption level amount prescribed by section 19(b)(ll) of the Federal Reserve Act and with at least $28.6 million in z Total deposits and other reservable liabilities is the sum of gross transaction deposits, savings accounts, and time deposits plus the sum of reservable obligations of affiliates, ineligible acceptance liabilities, and net Eurocurrency liabilities. total deposits and other reservable liabilities are required to file weekly the Report of Transaction Accounts, Other Deposits and Vault Cash (FR 2900). Depository institutions with reservable liabilities in excess of the exemption level amount but with total deposits and other reservable liabilities less than $28.6 million may file the FR 2900 quarterly. Institutions that obtain funds from non-U.S. sources or that have foreign branches or international banking facilities are required to file the Report of Certain Eurocurrency Transactions (FR 2950) on the same frequency. The reporting cutoff level is also used to determine whether an institution with reservable liabilities at or below the exemption level amount must file the Quarterly Report of Selected Deposits, Vault Cash, and Reservable Liabilities (FR 2910q) or the Annual Report of Total Deposits and Reservable Liabilities (FR 2910a). 5 From June.30,1986, to June 30,1987, total deposits and other reservable =. liabilities grew 6.0 percent, from $3.1 trillion to $3.3 trillion. This results in an increase in the cutoff level distinguishing weekly from quarterly reporters of $1.4 million from the current $28.6 million to $30.0 million. Based on the indexation of the reserve requirement exemption, the cutoff level for total deposits and other reservable liabilities above which reports of deposits must be filed rises $0.3 million to $3.2 million. Institutions with total deposits and other reservable liabilities below $3.2 million are excused from reporting if their deposits can be estimated from other sources. The $30.0 million cutoff level for weekly reports and the $3.2 million level threshold for reporting will be used in the second quarter 1988 deposits report screening process to identify weekly and quarterly reporters and the adjustments will be ;made when the new deposit reporting panels are implemented in September 1988. Finally, the Board may require a depository institution to report on a weekly basis regardless of the cutoff level, if the institution manipulates its total deposits and other reservable liabilities in order to qualify for quarterly reporting. Similarly, any depository institution that reports quarterly may be required to report weekly and to maintain appropriate reserve balances with its Reserve Bank if, during its computation period, it understates its usual reservable liabilities or it overstates the deductions allowed in computing required reserve balances. 3 Notice and Public Participation The provisions of 5 U.S.C. 553(b) relating to notice and public participation have not been followed in connection with the adoption of these amendments because the amendments involve adjustments prescribed by statute and an interpretative statement reaffirming the Board’s policy concerning reporting practices. The amendments also reduce regulatory burdens on depository institutions. Accordingly, the Board believes that notice and public participation is unnecessary and contrary to the public interest. Regulatory Flexibility Act Analysis. Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. L. 96354, 5 U.S.C 601 etseq.), the Board certifies that the proposed amendments will not have a significant economic impact on a substantial number of small entities. The proposed amendments reduce certain regulatory burdens for all depository institutions, reduce certain burdens for small depository institutions, and have no particular effect on other small entities. List of Subjects :in 12 CFR Part 204 Banks, Banking, Currency, Federal Reserve System, Penalties, reporting, and recordkeeping requirements. Pursuant to the Board’s authority under section 19 of the Federal Reserve Act, 12 U.S.C. 461 et seq., the Board is amending 12 CFR Part 204 as follows: PART 204—RESERVE'REQUIREMENTS ■ OF DEPOSITORY INSTITUTIONS 1. The authority citation for 12 CFR Part 204 is revised to read as follows: Authority: Secs. 11(a), 11(c), 19, 25, 25(a) of the Federal Reserve A ct (12 U.S.C. 248(a),f 248(c), 371a, 371b, 461, 601, 611): sec. 7 of the International Banking A ct of 1978 (12 U.S.C. 3105); and section 411 of the Gam-St Germain Depository Institutions A ct of 1982 (12 U.S.C. 461). § 2©4.§ [Amended] 2. In § 204.9—Reserve Requirement Ratios, paragraphs (a)(1) and (a)(2) are revised to read as follows: (a)(1) Reserve percentages. The following reserve ratios are prescribed for all depository institutions, Edge and Agreement Corporations, and United States branches and agencies of foreign banks: Category Reserve requirement Net transaction accounts •: SO to $40.5 million__________ 3 percent of amount. Over S40.5 million__________ $1,215,000 plus 12% of amount over $40.5 million. Nonpersonal tens deposits: By original maturity (or notice period): Less than 1V4 years__ ___ 3 percent 1 Vs years or more--- ---------- 0 percent. Eurocurrency liabilities..................... 3 percent 1 Dollar amounts do not reflect the adjustment to be made by the next paragraph. (2) E x e m p tio n fr o m re se rv e re q u irem e n ts. Each depository million determined in accordance with | 204.3(a)(3) of this Part. institution, Edge or Agreement Corporation, and U.S. branch or agency By order of the Board of Governors of the of a foreign bank is subject to a zero Federal Reserve System, December 2,1987. percent reserve requirement on an William W . W iles, amount of its transaction accounts subject to the low reserve tranche in paragraph (a)(1) of this section, Secretary of the Board. nonpersonal time deposits, or (FR Doc. 87-28072 Filed-12-7-87; 8:45 am] Eurocurrency liabilities or any combination thereof not in excess of $&2 BILUfSS CODE 6210- 01-K PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 52, NO. 235, p. 46450 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION D Reserve Requirement Ratios E ffe c tiv e D ecem ber 15, 1 98 7, pursuant to the B o a rd ’ s authority under section 19 o f the Federal Reserve A c t, 1 2 U .S . C . § 461 et seq., 12 C F R Part 2 0 4 is am ended by revising paragraph (a) o f section 2 0 4 .9 to read as follow s: S E C T IO N 2 0 4 .9 — R E S E R V E R E Q U IR E M E N T R A T IO S (a )(1 ) Reserve percentages. T h e fo llo w in g reserve ratios are prescribed fo r a ll depository institutions, Edge and A g reem ent C orpora tions, and U n ite d States branches and agencies o f foreign banks: CATEGORY Net transaction accounts* RESERVE REQUIREMENT $0 to $ 4 0 .5 m i l l i o n .............................. 3 % o f am ount O v e r $ 4 0 .5 m i l lio n .............................. $ 1 ,2 1 5 ,0 0 0 plus 12% o f am ount over $ 4 0 .5 m illio n Nonpersonal time deposits B y orig in al m atu rity (o r notice period): Less than 1 Vi y e a r s .............................. 3% 1 % years or m o r e .................................0 % Eurocurrency liabilities..........................3% (2 ) Exemption from reserve requirements. Each depository insti tution, Edge or A greem ent C orporation, and U . S . branch or agency o f a foreign bank is subject to a zero percent reserve requirem ent on an am ount o f its transaction accounts subject to the lo w reserve tranche in paragraph (a )(1 ), nonpersonal tim e deposits, or Eurocurrency liab ilities or any com bination thereo f not in excess o f $ 3 .2 m illio n determ ined in accordance w ith section 2 0 4 .3 (a )(3 ) o f this Part. * Dollar amounts do not reflect the adjustment to be made by paragraph (a)(2). [Enc. Cir. No. 10209]
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