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F E D E R A L R E S E R V E B A NK O F N EW YORK r Circular No. 4817~1 L Novem ber 30, 1959 J Member Banks Permitted to Count Part of Vault Cash for Reserve Purposes To A ll M em ber Banks o f the Second Federal R eserve D is tr ic t: The follow in g statement was made public today b y the B oa rd o f G overnors o f the F ederal R eserve S ystem : The Board o f Governors o f the Federal Reserve System today amended its Regulation D so that member banks having large holdings o f vault cash in relation to their deposits will be permitted to count a part o f this cash in meeting their reserve requirements. Effective December 1, 1959, so-called “ co u n try ” banks (that is, banks not classified as reserve city or central reserve city banks) having vault cash in excess o f 4 percent o f their net demand deposits will be permitted to count the excess as part o f their required reserves. A lso, effective December 3, banks classified as reserve city and central reserve city banks will similarly be permitted to count vault cash in excess o f 2 percent o f their net demand deposits. On the basis o f average vault cash holdings for the past 12 months, it appears that almost half o f the 6,250 member banks will be in a position to count a part o f their vault cash in meeting their required reserves. A s a result, total member bank reserve balances at the Federal Reserve Banks may be lower than would otherwise be required by as much as $230 million, o f which $160 million would be at country banks and $70 million at reserve city banks. Total vault cash held by member banks has averaged about $2.2 billion. This Federal Reserve action was taken under the terms o f an A ct o f Congress in 1959 designed in part to remedy inequities that have arisen because many banks, particularly small country banks, find it necessary for operating purposes to hold relatively larger amounts o f vault cash than other banks do. No change in the System ’s general monetary or credit policy is involved. The beginning o f December is a logical time for this action inasmuch as the Federal Reserve System needs to make additional reserves available to the banking system each year at this season in order to meet the seasonal requirements o f the economy. A t the same time, the B oard adopted several amendments to technical provisions o f Regula tion D, including an amendment (effective December 31, 1959) whereby the reserve computation period for country banks will be biweekly instead o f semimonthly. R egulation D and its Supplem ent w ill be revised to reflect the changes referred to in the above statement. Copies will be sent to you as soon as they becom e avail able, probably tow ard the end o f December. A l fr e d H a y e s , President.
@FedFRASER