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FEDERAL R ESER VE BANK
O F N E W YO RK
r Circular No 8 4 5 7 1
L November 16, 1978 J
SUPPLEMENT TO R EG U LA TIO N D
Effective November 2, 1978
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and
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Our Circular No. 8446, dated November 1, 1978, announced actions by the Treasury and the
Federal Reserve to strengthen the dollar and thereby counter continuing domestic inflationary
pressures. Included among those actions was the establishment, by the Board of Governors of the
Federal Reserve System, of a new 2% supplementary reserve requirement on time deposits in
denominations of $100,000 or more and certain other member bank liabilities. The new reserve
requirement applies to deposits outstanding in the week beginning November 2, 1978 and there
after and affect reserves held by member banks in the week beginning November 16, 1978 and
thereafter.
Enclosed is a copy of a revised Supplement, effective November 2, 1978, to Regulation D,
''Reserves of Member Banks," which reflects the Board's action.
In addition, printed below is the text of a statement made by the Board of Governors in
submitting the changes for publication in the FfJcru/
The Board of Governors has amended its Regulation D to modify the reserve balances that member
banks are required to maintain against their deposits. The amendment imposes a 2 % supplementary reserve
requirement against member bank time deposits in denominations of $ 1 00 ,000 or more and certain other
member bank liabilities. This action is being taken to strengthen the dollar in exchange markets and thereby
counter continuing domestic inflationary pressures. The action will help to moderate recent relatively rapid
expansion in bank credit and will also increase the incentive for member banks to increase their borrowings
in the Eurodollar market and to decrease their domestic borrowings.
The supplementary 2 % reserve requirement will apply to a member bank's time deposits of the following
typ es:
a) Tim e deposits of $100 ,(XX) or m ore; and
b ) Tim e deposits of $ 1 0 0 ,000 or more represented by promissory notes, acknowledgements of advance,
due bills, or similar obligations (written or oral) as provided in § 2 0 4 .1 ( f ) of Regulation D ; and
c) Tim e deposits of any denomination represented by ineligible bankers' acceptances or obligations issued
by a member bank's affiliate with maturities of 7 years or less to the extent that the proceeds are
supplied to the member bank as provided in § 2 0 4 .1 ( f ) of Regulation D.
The supplementary 2 % reserve requirement will not apply to savings deposits and Christmas club-type deposits.
This action was taken pursuant to the Board's authority under § 19 of the Federal Reserve A ct (1 2 U S C
4 6 1 ) to establish reserve ratios for member banks. This amendment is effective on deposits outstanding during
the week beginning November 2, 1978, and affects reserves held by member banks during the week beginning
November 16, 1978.
In view of the current conditions in the foreign exchange markets, and in order to achieve the above
stated objectives as soon as possible, the Board for good cause finds that the notice, public procedure, and
deferral of effective date provisions of 5 U .S .C . § 5 5 3 (b ) with regard to the Board's action are impracticable
and contrary to the public interest.
As provided for in paragraph (a) of the Supplement, in no event shall the reserves required
on the aggregate of time and savings deposits be less than 3%. It should he noted that the deter
mination of this 3% minimum requirement shall be made after the application of the 2% supple
mentary reserve requirement referred to herein.
Additional copies of the enclosure will be furnished upon request.
PAUL
A.
VOLCKER,
Board of Governors of the Federal Reserve System
SUPPLEM ENT TO R E G U LA TIO N D
Effective November 2, 1978
SECTION 204.5— RESERVE REQUIREMENTS
( a ) Reserve percentages. Pursuant to the
provisions of section 19 of the Federal Reserve
A ct and § 2 0 4 .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 that each member
bank of the Federal Reserve System is required
to maintain on deposit with the Federal Reserve
Bank of its district:
(1 )
I f 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 accounts and vacation club ac
counts, 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
m onths; and
(ii) 1 per cent of its time deposits outstand
ing on or issued after October 16, 1975, that
have an initial maturity of 4 years or m o re; 2 %
per cent of its time deposits outstanding on or
issued after December 25, 1975, that have an
initial maturity of 180 days or more but less
than 4 y e a r s; 3 per cent of its time deposits up
to $5 million, outstanding on or issued after O c
tober 16, 1975, that have an initial maturity of
less than 180 days, plus 6 per cent of such
deposits in excess of $5 million :
AowThat in no event shall the reserves re
quired on its aggregate amount of time and sav
ings deposits be less than 3 per cent. In addi
tion, a member bank shall maintain a reserve
balance equal to 2 per cent of its time deposits
of the following ty p es:
(a )
Tim e deposits of $100 ,000 or m o r e ; and
(b ) Tim e deposits of $100 ,000 or more rep
resented by promissory notes, acknowledge
ments of advance, due bills, or similar obliga
tions as provided in §204.1 ( f ) ; and
(c ) Tim e deposits represented by ineligible
bankers' acceptances or obligations issued by a
member
bank's
affiliate,
as provided
in
§204.1 ( f ) .
How ever, the supplementary 2 per cent re
serve requirement shall not apply to a savings
deposit, or a time deposit, open account that
constitutes deposits of individuals, such as
Christmas club accounts and vacation club ac
counts, 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.
(iii)
7 per cent of its net demand depos
its if its aggregate net demand deposits are $2
million or less, (T,) $ 1 4 0 ,000 plus 9^4 per cent
of its net demand deposits in excess of $2 mil
lion if its aggregate net demand deposits are in
excess of $2 million but not more than $10 mil
lion, (TJ $900 ,000 plus 1124 per cent of its net
demand deposits in excess of $ 1 0 million if its
aggregate net demand deposits are in excess of
$ 1 0 million but not more than $100 million, or
A O $ 11,475,000 plus 12^4 per cent of its net
demand deposits in excess of $100 million.
(2 )
I f 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
System, pursuant to § 2 0 4 .2 (a ) ( 2 ) , to maintain
the reserves specified in paragraph ( a ) ( 1 ) of
this section) —
( 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 ac
counts, 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
m onths; and
(ii) 1 per cent of its time deposits out
standing on or issued after October 16, 1975,
that have an initial maturity of 4 years or m o r e ;
2^4 per cent of its time deposits outstanding on
or issued after December 25, 1975, that have an
initial maturity of 180 days or more but less
than 4 y ears; 3 per cent of its time deposits up
to $5 million, outstanding on or issued after
October 16, 1975, that have an initial maturity
of less than 180 days, plus 6 per cent of such
deposits in excess of $5 m illion: P r o v e d , AowThat in no event shall the reserves re
quired on its aggregate amount of time and
savings deposits be less than 3 per cent. In ad
dition, a member bank shall maintain a reserve
PR IN T E D IN N E W YO RK
[Enc. Cir. No. 8457]
(O V E R )
balance equal to 2 per cent of its time deposits
of the following ty p es:
(a ) T im e deposits of $1 0 0 ,0 0 0 or m o re; and
(b ) Tim e deposits of $1 0 0 ,0 0 0 or more rep
resented by promissory notes, acknowledge
ments of advance, due bills, or similar obliga
tions as provided in § 2 0 4 .1 ( f ) ; and
(c ) T im e deposits represented by ineligible
bankers' acceptances or obligations issued by a
member
bank's
affiliate,
as
provided
in
§ 2 0 4 .1 ( f ) .
H ow ever, the supplementary 2 per cent re
serve requirement shall not apply to a savings
deposit, or a time deposit, open account that
constitutes deposits of individuals, such as
Christmas club accounts and vacation club ac
counts, 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.
(iii)
$49,7 2 5 ,0 0 0 plus 1 6 % per cent of its
net demand deposits in excess of $4 0 0 million.
(b ) Currency and coin. The amount of a
member bank's currency and coin shall be
counted as reserves in determining compliance
with the reserve requirements of paragraph (a )
of this section.
(c )
Reserve percentages against certain de
posits by foreign banking offices. Deposits rep
resented by promissory notes, acknowledge
ments of advance, due bills, or similar obliga
tions described in §204.1 ( f ) to foreign offices
of other b a n k s/ or to institutions the time de
posits of which are exempt from the rate limita
tions of Regulation Q pursuant to §217.3 ( g )
thereof, shall not be subject to paragraph (a )
of this section or to § 2 0 4 . 3 ( a ) ( l ) and ( 2 ) ;
but during each week of the four-week period
beginning M ay 22, 1975, and during each suc
cessive four-week ("m ain ten an ce") period, a
member bank shall maintain with the Reserve
Bank of its district a daily average balance equal
to zero per cent of the daily average amount of
such deposits during the four-week computation
period ending on the W ednesday fifteen days
before the beginning of the maintenance period.
A n 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 subject to § 2 0 4 .3 ( b ) /
^ A ny banking office located outside the States of the
United States and the District of Columbia of a bank
organized under domestic or foreign law.
8 The term "computation period" in §204.3(a ) (3 )
and (b ) shall, for this purpose, be deemed to refer to
each week of a maintenance period under this para
graph.
@FedFRASER