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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 9471 "1
March 23, 1983
AMENDMENT TO REGULATION D
Reserve Requirements on Nompersoeal Time Deposits
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:
F o llo w in g is th e t e x t o f a s ta te m e n t is s u e d b y th e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m :
The Federal Reserve Board has announced an amendment to Regulation D — Reserve Requirements of Depository
Institutions — modifying reserve requirements on nonpersonal time deposits, effective March 3 l, 1983.
Under the amendment, nonpersonal time deposits with original maturities of 2xh years or more will have no required
reserve. Nonpersonal time deposits with original maturities of less than 2% years will continue to be subject to a 3 percent
reserve requirement.
The existing reserve requirement for nonpersonal time accounts with original maturities of less than 2x/i years is 3
percent. The Board amended the rule to conform Regulation D to action by the Depository Institutions Deregulation
Committee (DIDC), creating a ceiling-free negotiable or nonnegotiable time deposit with an original maturity of 2Vi years
or more.
Nonpersonal time deposits are defined by the Monetary Control Act as time deposits that are transferable, regardless
of the nature of the holder, and time deposits in which any beneficial interest is held by a depositor who is not a natural
person.
The minimum maturity of the V-h year or more time deposit instrument is scheduled to decrease by one year annually
until March 31, 1986, at which time the minimum maturity will be that specified for any time deposit. However, the Board
stated that its action is not an indication that it will make further adjustments in the reserve requirements on nonpersonal
time deposits. The Board noted that reducing further the nonpersonal time deposit maturity break could have an adverse
effect on monetary and credit conditions by eroding the reserve base and loosening the linkage between reserves and
deposits in the money stock.
E n c lo s e d is th e t e x t o f th e a m e n d m e n t to R e g u la t io n D . Q u e s t io n s r e g a r d in g th a t r e g u la t io n m a y b e d ir e c t e d to
th e fo llo w in g :
R e p o r tin g R e q u ir e m e n t s :
R ic h a r d J . G e l s o n , V i c e P r e s id e n t ( T e l. N o . 2 1 2 - 7 9 1 - 8 2 2 5 )
N a n c y B e r c o v ic i, M a n a g e r , S ta tis tic s D e p a r tm e n t ( T e l. N o . 2 1 2 - 7 9 1 - 8 2 2 7 )
P a u la B . S c h w a r t z b e r g , C h ie f , D e p o s i t R e p o r ts D i v i s i o n ( T e l. N o . 2 1 2 - 7 9 1 - 8 5 9 0 )
M a in t e n a n c e R e q u ir e m e n t s :
J o h n M . E ig h m y , A s s is t a n t V ic e P r e s id e n t ( T e l. N o . 2 1 2 - 7 9 1 - 7 7 6 8 )
K a t h l e e n A . O ’N e i l , M a n a g e r , A c c o u n t i n g D e p a r t m e n t ( T e l . N o . 2 1 2 - 7 9 1 - 5 2 5 0 )
P a tr ic ia H i lt - L u p a c k , C h ie f , A c c o u n t in g C o n tr o l D i v i s i o n ( T e l. N o . 2 1 2 - 7 9 1 - 7 7 9 1 )
I n t e r p r e ta tio n o f R e g u la tio n D :
J o y c e E . M o t y le w s k i, A s s is ta n t C o u n s e l, L e g a l D e p a r tm e n t (T e l. N o . 2 1 2 - 7 9 1 - 5 0 2 4 )
A n n C a la b r e s e , C h ie f, R e g u la tio n s D iv is io n (T e l. N o . 2 1 2 -7 9 1 - 5 9 1 4 )
A nthony M . S o lo m o n ,
President.
FEDERAL RESERVE SYSTEM
Regulation D
[12 CFR Part 204]
[Docket No. R-0461]
RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
Reserve Requirements on Nonpersonal Time Deposits
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Final rule.
SUMMARY:
The Board of Governors has amended Regulation D— Reserve
Requirements of Depository Institutions (12 CFR Part 204) to modify the
reserve requirements on nonpersonal time deposits.
Under the amendment,
nonpersonal time deposits with original maturities of 2-1/2 years or more
will be subject to a reserve requirement ratio of zero percent. Nonpersonal
time deposits with original maturities of less than 2-1/2 years will
continue to be subject to a three percent reserve requirement ratio.
This
.action was taken in view of the change in the Depository Institutions
Deregulation Committee’s rules, effective April 1, 1983, to permit the
issuance of a ceiling-free time deposit with an original maturity of 2-1/2
years or more which may be offered by depository institutions in negotiable
form.
EFFECTIVE DATE: March 31, 1983.
The first reserve maintenance period to
which the amendment applies commences April 14, 1983.
FOR FURTHER INFORMATION CONTACT:
Gilbert T. Schwartz, Associate General
Counsel (202/452-3625) or Paul S. Pilecki, Senior Attorney (202/452-3281),
Legal Division, Board of Governors of the Federal Reserve System,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
The Monetary Control Act of 1980 (Title I of
P.L. 96-221; 94 Stat. 132) ("MCA") authorizes the Board to prescribe, solely
for the purpose of implementing monetary policy, reserve requirements
against nonpersonal time deposits within a reserve ratio range of zero to
nine percent.
The Monetary Control Act requires the reserve requirement
against nonpersonal time deposits to be applied uniformly to the deposits at
all depository institutions, except that such requirement may vary by
deposit maturity. Nonpersonal time deposits are defined by the MCA as time
deposits that are transferable, regardless of the nature of the holder, and
time deposits in which any beneficial interest is held by a depositor who is
For this Regulation to be complete, retain:
1) Regulation D pamphlet, amended effective December 31, 1981.
2) Amendments effective April 28, 1982, April 29, 1982, September 1, 1982,
October 28, 1982, December 9, 1982, December 14, 1982, December 30, 1982,
December 31, 1982, January 5, 1983, January 13, 1983, and February 2, 1984.
3) This slip sheet.
[Enc. Cir. No. 9471]
-2 -
not a natural person. Nontransferable time deposits in which the entire
beneficial interest is held solely by a natural person are not subject to
reserve requirements.
Regulation D— Reserve Requirements of Depository Institutions (12
CFR Part 204) currently imposes a three percent reserve requirement on
nonpersonal time deposits with original maturities or notice periods of less
than 3~l/2 years. Nonpersonal time deposits with maturities of 3-1/2 years
or more are subject to a zero percent reserve requirement.
The Depository Institutions Deregulation Committee ("DIDC"),
pursuant to its authority under the Depository Institutions Deregulation Act
of 1980 (Title II of Pub. L. 96-221; 12 U.S.C. § 3501 et se^.), authorized
Federally insured commercial banks, mutual savings banks, and savings and
loan associations to offer, effective May 1, 1982, a new category of
ceiling-free time deposit with an original maturity of 3-1/2 years or more.
Such time deposits may be issued in negotiable or nonnegotiable form at the
option of the issuer to any holder.
Effective April 1, 1983, the minimum
maturity of this deposit category will be reduced to 2-1/2 years.
This new instrument, if issued to an individual with an original
maturity of 2-1/2 to less than 3-1/2 years and in negotiable form (as well
as an instrument with that maturity issued to other than a natural person
regardless of negotiability) would be subject to a three percent reserve
requirement.
Thus, the existing reserve requirement structure presents a
disincentive for issuing the new instrument with maturities of 2-1/2 to less
than 3-1/2 years to individuals in negotiable form. At the time the 3-1/2
year or more instrument was first authorized, the Board modified the
maturity break for reserve requirements on nonpersonal time deposits from
four years to 3-1/2 years to facilitate the DIDC's objectives in authorizing
this instrument in negotiable form.
In this regard, a negotiable time
deposit was viewed as more attractive to depositors since it could be sold
as an alternative to incurring an early withdrawal penalty. To continue to
facilitate the DIDC's objectives, the Board has amended the reserve
requirements on nonpersonal time deposits so that, after the completion of
the transition periods set forth in the MCA, nonpersonal time deposits with
original maturities of 2-1/2 years or more will be subject to a zero percent
reserve requirement ratio and nonpersonal time deposits with original
maturities of less than 2-1/2 years will be subject to a three percent
reserve requirement ratio. The Board estimates that the amount of reserves
held on nonpersonal time deposits with maturities of 2-1/2 to 3-1/2 years is
small, and, thus, this action will not adversely affect monetary control.
According to the current deregulation schedule adopted by the DIDC
(12 CFR § 1204.119), the minimum maturity of the 2-1/2 year or more time
deposit instrument will decrease by one year annually until March 31, 1986,
at which time the minimum maturity will be that specified for any time
deposit. However, the Board indicated that its action is not an indication
that it will make further adjustments in the reserve requirements on
nonpersonal time deposits in line with the DIDC's currently announced
-3 schedule to decrease annually the minimum maturity of this ceiling-free time
deposit by one year. The Board notes that reducing further the nonpersonal
time deposit maturity break could have an adverse effect on monetary control
by eroding the reserve base and loosening the linkage between reserves and
deposits in the money stock.
Accordingly, any decision to shorten the
maximum time deposit maturity to which reserve requirements apply will be
considered by the Board as the DIDC implementation dates approach when
account can be taken of experience up to that point and monetary and credit
conditions at the time.
This action is effective for depository institutions that report
deposits and maintain reserves on a weekly basis with the reserve
computation period beginning March 31, 1983. The first reserve maintenance
period to which this action applies for these institutions commences
April 14, 1983.
For depository institutions that report deposits and
maintain reserves on a quarterly basis, the change in reserve requirements
on nonpersonal time deposits with maturities of 2-1/2 years to 3-1/2 years
will commence with the reserve maintenance period that begins on May 19,
1983, for such institutions that will submit a Report of Transaction
Accounts, Other Deposits and Vault Cash (Form FR 2900) for the computation
period of April 21-27, 1983. The change in reserve requirements for other
quarterly reporters will be effective with the reserves required to be
maintained based on deposit reports to be submitted in either May 1983 or
June 1983.
In view of the fact that commercial banks, mutual savings banks,
and savings and loan associations may offer this time deposit category with
a minimum maturity of 2-1/2 years as of April 1, 1983, the Board finds that
application of the notice and public participation provisions of 5 U.S.C.
§ 553 to this action would be contrary to the public interest, and that,
since this action relieves a restriction, good cause exists for making this
action effective March 31, 1983.
List of Subjects in 12 CFR Part 204
Banks, banking;
Reporting Requirements.
Currency,
Federal
Reserve
System;
Penalties;
Pursuant to its authority under sections 19, 25, and 25(a) of the
Federal Reserve Act (12 U.S.C. §§ 461, 601 et: seq., 611 £t seq.) and under
section 7 of the International Banking Act of 1978 (12 U.S.C. § 3105), the
Board amends Regulation D (12 CFR Part 204) effective March 31, 1983, by
revising paragraph (a) of section 204.9 to read as follows:
SECTION 204.9— RESERVE REQUIREMENT RATIOS
(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:
-4 -
Reserve Requirement
Category
Net Transaction Accounts
$0 - $26.3 million
Over $26.3 million
3% of amount
$789,000 plus 12% of
amount over $26.3 million
Nonpersonal Time Deposit
By original maturity
(or notice period):
3%
0%
less than 2-1/2 years
2-1/2 years or more
3%
Eurocurrency Liabilities
*
*
*
*
*
By order of the Board of Governors of the Federal Reserve System,
March 17, 1983.
(signed)
William W. Wiles
William W. Wiles
Secretary of the Board
[SEAL]
@FedFRASER