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FEDERAL RESERVE BANK OF N EW YORK r C ir c u la r N o. 7 4 5 1 * 1 L S ep te m b er S, 1974 J REGULATION D Reduction in Reserve Requirement on Certain Large-Denomination Certificates of Deposit T o A ll M em b er Banks, and O thers Concerned, in the Second Federal R eserve D istrict: Following is the text of a statement issued September 4 by the Board of Governors of the Federal Reserve System: T h e B oard o f G overnors o f the Federal R eserve System announced today the removal o f its 3 percent m arginal reserve requirement on large-denom ination certificates o f deposit with an initial maturity o f four m onths or longer. T h is regulatory action will low er somewhat the cost to banks o f issuing longer-term C D s and should therefore encourage banks to lengthen the maturities o f their large C D s. L onger-term C D s of $100,000 and m ore and related instruments will continue to be subject to the regular 5 percent reserve requirement on time deposits. Partial removal o f the marginal reserve requirement will be effective on deposits outstanding in the week o f September 5-11. Banks w ill be required to maintain reserves against these deposits tw o later, in the w eek of Septem ber 19-25. weeks T h e action will reduce required reserves by about $400 m illion at a time when there is a seasonal need to provide reserves to the banking system. T h e full reserve requirement (the regular 5 percent plus the marginal 3 percent) will continue to apply to large C D s with an initial maturity o f less than four months. A ll large C D s outstanding on Septem ber 5 with a remaining maturity o f fou r months or longer and all large C D s issued on September 5 or thereafter with initial maturities o f fou r months or longer w ill be affected by today’s action. A marginal reserve requirement (the regular 5 percent plus a supplemental 3 percent) was first announced by the B oard on M ay 16, 1973. A n additional 3 percent marginal reserve was announced by the B oard on Septem ber 7 raising the total reserve requirements on affected deposits to 11 percent. T his latter 3 percent reserve was rem oved by the B oard last Decem ber. T echnically, the marginal reserve requirement applies to increases (b eyon d the amount outstanding in the week ended M ay 16, 1973) in the total o f ( a ) time deposits in denominations o f $100,000 and over and ( b ) bank-related com m ercial paper and finance bills with a maturity of 30 days or longer. In n o case does the supplemental reserve apply to banks w hose large C D s total less than $10,000,000. T o d a y ’s action also affects certain nonm em ber State banks and U . S. agencies and branches o f foreign banks that have been voluntarily holding marginal reserves on large C D s at the request o f the Board. A copy of a revised Supplement to Regulation D, “ Reserves of Member Banks,” of the Board of Governors, reflecting this change, will be sent to you shortly. A lfred H ayes , President.
@FedFRASER