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FED ER A L R ESER VE BANK
OF NEW YORK
November 18, 1980
RESERVE REQUIREM ENTS
Questions and Answers — Fifth Series
To the Chief Executive Officers of All Depository Institutions
in the Second Federal Reserve District:
Printed on the following pages is the fifth series of questions and answers regarding Regu
lation D , “ Reserve Requirements of Depository Institutions.” (T h e first, second, third and fourth
series were sent to you on September 29, and October 8, 17 and 28, 1980.) These questions and
answers were prepared by the legal staff of the Board of Governors of the Federal Reserve System
and by the legal staff of the Federal Reserve Bank of New York in consultation with Board staff.
Institutions should note the following changes from previously published questions and answers:
( 1 ) The answer to Question 23 under Transferability changes the answer to Question 20
in the third series. The reason for the change is that the option to give a depositor a copy of the
deposit agreement with the nontransferability legend vitiates the need for the exception contained
in Question 20.
( 2 ) The answer to Question 30 under Transaction Accounts allows ex post monitoring of
savings accounts subject to the three-transfers-per-month limitation.
( 3 ) The answer to Question 13 under Eurocurrency: Balances and Borrowings of Foreign
Offices reverses the answer to Question 6 in the third series to allow foreign banks to include bal
ances due from Federal Reserve Banks in calculating their capital adequacy deduction.
( 4 ) The answer to Question 13 under Balances Due to/Due From Depository Institutions
requires checks drawn by institutions on zero balance accounts at other institutions to be reserved
against as transaction accounts.
( 5 ) The answer to Question 6 under Calculations and Reporting, concerning bona fide cash
management accounts, reverses the answer to Question 18 under Transaction Accounts in the
third series.
Additional questions regarding this material or other matters relating to Regulation D , reserve
maintenance, or reporting requirements should be directed to the following:
Reporting Requirements
(212) 791-7904
(21 2) 791-6625
(212) 791-5794
Richard J. Gelson, Assistant Vice President
Patricia H. Kuwayama, Manager, Statistics Department
Nancy Bercovici, Chief, Domestic Reports Division
Reserve Maintenance and Pass-Through Procedures
Thomas J. Campbell, Accounting
Jane L. Katz, Chief, Accounting
Patricia Lupack, Assistant Chief,
Robert J. McDonnell, Operations
Officer
Control Division
Accounting Control Division
Officer (Buffalo Branch)
(21 2)
(212)
(212)
(716)
791-7769
791-5250
791-5249
849-5022
Interpretation of Regulation D
Bradley K. Sabel, Assistant Counsel
Raleigh M. Tozer, Senior Attorney
Joyce E. Motylewski, Attorney
(212) 791-5033
(21 2) 791-5009
(212) 791-5037
A n t h o n y M . S olomon ,
President.
R E GU LA TI ON D
Q ue st i on s
and A n s w e r s — Fifth Series
Transferability
22.
23.
Q:
If a time or savings d e po si t is not ev id enced by a c e r
tificate or passbook, m a y the n o n t r a n s f e r a b i l i t y legend
appear on a di s c lo s u r e statement g iv en to the depositor
by the insti tut io n at the time of opening the account?
A:
Yes, under such c i rc u m st anc es the n o nt r a n s f e r a b i l i t y
legend m a y appear in a di sc lo s ur e sta te men t required by
Federal or State law or re gu lation that sets forth the
terms of the d ep os it account.
Q:
Personal savings and time accounts for which d e p o s i
tors receive only m o n t h l y st at ements rather than
passb oo ks or ce r t if i c at e s of d e po si t are required to
include the legend concerning n o n t r a n s f e r a b i l i t y on
the pe riodic st ate ment if no contract, a g ree me nt or
d is cl os ure stat eme nt required by law is given to the
de positor carrying the n o n t r a n s f e r a b i l i t y legend.
Instead of placing the legend on the statement itself,
ma y the legend appear in a separate piece of paper
mai le d to the de po sitor along with the m o n th l y st at e
ment?
A:
No, the n o n t r a n s f e r a b i l i t y legend must appear on a
doc ume nt re pre se nt ing the account such as a c e r t i f i
cate, passbook, contract, d i s c l o su r e statement, or
periodic statement.
A separate piece of paper
enclosed with the m o n t h l y stat em ent would not be a
do cu me n t repre sen ti ng the account.
T r a n s a c t i o n Acc oun ts
25.
Q:
Checks dr awn by a foreign office of a bank on a d o m e s
tic office of that bank must be included in the amount
of officers' checks ou ts tanding from the United States
office.
The amounts of such checks are reservable as
trans act io n accounts.
Many fo reign banks do not have
a c o m m un i ca ti o ns system in place that would allow them
to d et er m in e on a timely basis whether foreign branches
have wr itten checks on the United States office.
Is
there any de m i n i m i s amount of such checks ou ts tanding
that need not be reported in order that banks rarely
having such checks outst an din g need not set up such a
co m m u n i c a t i o n system?
- 2 -
26.
27.
28.
A:
No.
In order to enforce do mestic reserve requirements,
it is n ec es s ar y to require that these checks be reported
and reserved against on the same basis as checks drawn
by the United States office on itself.
Q:
Many in sti tutions allow Ho li day and Club accounts to be
opened by d e po s it or s in the name of another person.
The
purpose of this is that the other perso n is the one who
will receive the funds in the account as a gift.
Also,
the account ma y be opened in the name of the depositor
with an in str uction that pa ym ent be m ad e at m a t u r i t y to
another person.
Does the fact that that other pe rson is
named on the account at the time of the opening of the
account, or d es ig na ted to receive payment, m ea n that the
acc ount is a trans ac ti on account?
A:
No.
Q:
Many cr edit unions receive pay me nts from their sh are
holders' e mpl oy ers in two portions.
One por ti on goes
into the e mpl oy ee' s own share account.
The other p o r
tion is depo sit ed in the credit union's co mm ingled
bil l s- pa y ab le account.
The b i l l s -p a y a bl e account is
used to pay bills of d e po si to rs on a pr e au t h o ri z e d
basis.
For example, for all d e po s i t o r s whose Con Edison
bills are paid by the credit union, the bills are paid
from the funds in that account.
These pr ea uth o r i ze d
transfers would make the share ac count a trans ac tio n
account if the transfers were made from that account
directly.
Does this pra ct ice require the treatment of
those share accounts as t r an sa ct io n accounts?
A:
Yes.
The use of a co mm ingled ac co unt is the functional
equiv al ent of makin g those transfers from the share
accounts directly; the credit union is retaining those
funds until pay men t is made to the creditors.
To allow
share ac counts to avoid treatment as t ra nsa ct ion
accounts by the use of such a c om min gl ed account would
create a large loophole in reserve coverage.
Q:
Re gu lat io n E— Electronic Funds Tr an s f er s (12 C.F.R.
Part 205)— requires that am en dm e nt s to ce rtain account
ag re em ent s cannot be effe ct ive unless the customer is
gi ven 21 days' wri tte n notice.
If a d e p o s i t o r y in sti
tution de sires to amend its ac co unt ag re e m en t to limit
the number of p re au t ho riz ed or te le phone transfers to
-3three or less per calendar m on th and the account is
subject to the R eg ula ti on E no tice requirement, when
is the account agree me nt change e f fec ti ve for R e g u la
tion D reserve re qui re men t purposes?
29.
30.
A:
For p ur pos es of reserve requirements, an amendment to
an account a gr ee me nt is regarded as eff ec tiv e when sent
by the d e p o s i t o r y institution.
Ac co rdingly, an account
for which a R e gu la t i o n E change of terms notice has
been sent m a y be regarded as exempt from the d ef ini tio n
of "t ran s ac ti o n account" even though more than three
transfers could be effected during the interim period
until the R e gu l at i o n E notice becomes effective.
Q:
Is n ot if i c a t i o n to cu st omers required if a de p o s it o r y
insti tut io n d es ire s to es tablish a limit on p r e a u t h o
rized and te lephone transfers of three per calendar
month?
A:
As a general matter, the Board has had a longstanding
p os iti on that cu st omers should be notified in writing
of any change in the terms of a d e po si t ac count that
is adverse to the customer (12 C.F.R. § 217.148).
The
nec e s si ty of notifying customers of a limit imposed on
telephone and pr ea ut h o ri z e d transfers d e pe nd s on a nu m
ber of factors, including other re gu la t or y requirements
such as R e g ul at i on s E and Q and those imposed under
state law.
A d ep o s i t o r y insti tu tio n that has not
ex p l ic it l y p ro vid ed in its d e po si t a g ree me nt or other
re p re s ent at ion s the right of its d e p o s i to r s to make
w i t hd ra w al s by telephone m a y not n e c e s sa r i l y have to
send notice to its customers that such service will be
limited in the future.
However, a d e p o s i t o r y in st itu
tion that p ro vi des by written c o ntr ac t or ag reement
that te lephone or p r ea ut hor iz ed orders m a y be made
would be required to notify each customer in writing
of the change in terms.
This notice, however, m a y be
required by local law and di s cl o s u re requir em ent s of
other Federal and state regu la tor y requirements, not
by Re gul a ti on D.
Q:
If under the te rms of an account, a de po sitor is not
perm itt ed to ma ke more than three telephone or preautho
rized transfers per calendar month, what steps must a
d ep os i t o r y inst itution take to p r ev en t more than three
transfers?
Is a fourth transfer in a calendar month
ab so lu t el y proh ibited?
-4-
A:
As stated in the Federal Register preamble to R e g u l a
tion D, "A de p o si to r y institution is required to
es tablish a system or other proc ed ure to insure that no
more than three [telephone or preauthorized] transfers
are made during any calendar mo nth from such accounts."
(45 F e d . R e g . 56009)
The purpose to be served by a
mo nit ori ng system is to establish that it is not the
pr actice of the de pos it o r y institution (12 C.F.R.
§ 204.2(e)(6)) to allow more than three telephone or
pr ea ut ho r iz ed transfers, notwith st and in g a de posit con
tract term to that effect.
A system under w hi ch a
dep os i to ry institution can identify prior to ma king a
requested transfer whether the limit is being adhered
to would m eet this requirement.
An institution also is perm it ted to monitor on an ex
post basis its accounts that have limited telephone and
pre a ut ho r iz ed transfer privileges.
Under this p r o c e
dure, an institution ma y det er min e which accounts made
more than three transfers in a particular month.
If
the institution contacts the customer and informs him
that the contract terms were violated and/or that the
institution has other account services available if the
customer desires an account for transaction purposes,
this would indicate that it is not the pra ct ice of the
institution to allow more than three transfers.
Other
factors that would be relevant in de te rmining whether
it is the practi ce of the institution to allow m or e than
three telephone or p r ea uth o r i ze d transfers per m on th
under an e x post mo ni to r in g system would be the number
of accounts that have restricted transfer pr i vi l e g es and
the relative number that exceed the estab li she d limit.
It also is pe rm i ss ib l e for an institution to pr ovide by
cont ra ct that a fourth transfer in a calendar m on th will
con stitute an ag reem ent by the customer to accept a new
type of de posit account that allows unlimited telephone
or pr ea u th or i ze d transfers.
In this regard, a change in
pricing in the new account ma y serve as a di si nc e n t iv e
to customers ma king the fourth transfer.
At the time
the fourth transfer is made and into the future, the
account would then be cl as sified as a trans ac tio n
account.
(An institution may not establish an a r r an g e
ment wh e r eb y a tr ans action account is converted to a
no n t ra ns a ct io n account because three or less transfers
are made in a pa rtic ular month.)
As an al ter na tiv e ap proach to satisfy the three transfer
per mo nth rule, institutions m a y use a p r oce du re of re
class if yin g as transa ct ion accounts those accounts that
-5incur m ore than three telephone or pr ea u t ho r i z ed trans
fers in a calendar month.
Once an ac count is classified
as a tr an s ac ti o n account, then it m a y not revert to no n
t ran sa cti on ac count status.
Personal
and N on pe r so na l A c c ou nt s
26.
Q:
Many in sti tu tio ns often have a neg at ive balance for a
particular m or tg a g or in their m o rt g a g e escrow account.
This comes about when taxes or other expenses must be
paid by the insti tu tio n on m o r t g ag e d p r op e r t y and the
mort ga go r is d el i n q u e n t in makin g p a ym en t to the ins ti
tution.
May such a ne gative bal an ce reduce the amount
of an i ns tit ut ion 's escro w account?
A:
No.
If an in sti tu ti on has such nega ti ve amounts for
individual m ort ga go rs, it must raise each of the n e g a
tive amounts to zero each day for p u rpo se s of reserve
reporting.
Q:
If an i ns ti tu tio n ma rks on its records that a personal
savings or time account has been used as collateral,
can the ac cou nt continue to be treated as a personal
one?
A:
Yes.
The depo sit or cont in ues to have the beneficial
interest of the de p os i t while it is serving as c o l
lateral.
This is so even if the insti tu tio n changes
the name on the account to that of the lender; such
a transfer m us t occur in the case of savings accounts
because o th er w is e the funds could be w i th d r a wn from
the account by the borrower.
W hi le the name is
changed for this purpose, the ac count is transferred
to the lender only as collateral, and a c co rd in gl y it
conti nu es to be to the be ne ficial interest of the
original owner unless foreclosed in the event of
default.
Q:
The ex cep t io ns to n o n t r a n s f e r a b i l i t y include a p e r
sonal ac count used as collateral for a loan.
Can
these accounts also be used as c ol lat er al for non-loan
transac ti on s?
For example, such acc ou nts m a y be used
to c o l l at er a li ze an o b l i g a ti o n to act as surety on a
contract.
Also, such accounts ma y be transferred to
bail bondsmen.
27.
28.
- 6 -
29.
30.
Yes.
So long as the
transfer an interest
gation, he co ntinues
underlying funds and
treated as personal.
Q:
May a n o n t r a ns fe r ab l e de po sit be used as colla te ral to
secure a loan made to someone other than the owner of
the deposit?
A:
Yes.
Q:
Are time d ep os its issued to the Bu reau of Indian Affairs
as cu sto di a n for an Indian tribe holding the entire b e n e
ficial interest in the funds personal or nonpersonal?
A:
Such d ep os its are no np ersonal since an Indian tribe
considered to be an o r g a n i za t i o n or association.
Bala nce s Due
11.
12.
intent of the de po sitor is to
solely as co ll ateral for an oblito hold beneficial interest in
the account m a y co ntinue to be
A:
to/Due
is
From De po s i to r y Instit ut ion s
Q:
What is the proper treatment of a r e spo nd ent d e p o s i to r y
instit uti on 's reserves that are p a ss e d - t h r o u g h to a
Federal Reserve Bank by the p a ss - t h r o u g h c o r r es p o n de n t
but are in excess of the amount required to satisfy
reserve re qui rements?
A:
As noted in the de tailed reporting instructions, all
reserve ba lances passed through to the Federal Reserve
by a c o r r e s po nd e nt on behalf of a r e sp on de nt must be
exc luded from Item 8, "Demand Bal an ces Due from D e p o s i
tory Institutions," of the re sp ond en t's FR 2900, even
if a po rti on of the amount passed through on behalf
of the respo nde nt was in excess of the re sp ondent's
required reserves.
On the other hand, a resp on den t ma y
include as a "due from" any demand ba lances that it
has at a c o r r es po n de n t that were not passed through
by a c o r r e s po nd e nt to the Federal Reserve.
Q:
Are "c hecking-type" accounts that a cr edit union m a i n
tains at a corp ora te central to be included as a d e d u c
tion under Item 8, "Demand Ba lances Due from De po si t or y
Institutions," on the FR 2900?
-7-
Only those accounts in the form of demand deposi ts (i .e .,
pay abl e on demand or with less than 14 days notice) that
are due from a cor porate central are to be included as a
d ed uc t io n under Item 8.
If the cor po rat e central reserves
the right to require at least 14 days wri tt en notice be
fore an intended withdrawal, regardless of whether or not
the cor por at e central act ua lly ex er c i se s this right and
regardless of how the credit union uses the account, such
accounts do not m e et the d e f i n i ti o n of demand deposits
and, therefore, m a y not be included in Item 8.
13.
Q:
What is the proper treatment of a check dr awn by a
d e p o s i t o r y in sti tut io n on a zero ba lance account at a
c or re s pon de nt?
A:
If a credit union, savings and loan a s so ci at io n or other
d e p o s i t o r y insti tu ti on draws checks on a zero balance
account at a c o r r e sp o n d en t bank and remits funds when
advised that the checks have been presented, then the
amount of the checks represents an amount due to another
d e p o s i t o r y institution.
Alt ho ugh Re g ul a t i on D (12 C.F.R,
§ 204.2(b)(2)) pro vi de s that a check or dr aft drawn by a
d e p o s i t o r y i nst itu ti on on another d e p o s i t o r y institution
are not de man d deposits, such rule applies only where
the check or dr aft is drawn against a posi ti ve balance
at another insti tu ti on and would p r o p e r l y re pr esent a
redu cti on in an asset account.
In the case of checks
drawn on a zero balance account, a d e p o s i t o r y ins ti tu
tion is regarded as having issued a reser va ble liability,
Federal
3.
Funds
Q:
Is the p ur cha se of funds by a d e p o s i t o r y
a n o n d e p o s i t o r y instit ut ion reservable?
in st itution from
A:
Yes, excep t for purch as es from A r ti cl e XII investment co m
panies and other entities listed in Se ct ion 204.2(a)(1)
(vii)(A) of R eg ul a t i o n D and in the G l o s s a r y to the
in str uc tio ns under "Exempt entities."
In st itutions such
as private banks and Ame ri can Express International B a n k
ing C or p o r a t i o n m a y not sell r e se rv e-f re e Federal funds.
Due Bills
3.
Q:
The s ecu ri tie s col la te r al i z i ng an o ut sta nd ing due bill
must be of c om pa r a b l e m a t u r i t y to the securi ty covered
-8-
by the due bill.
purpose?
A:
What
is a comp ar abl e m a t u r i t y for
this
All T re asu ry bills ma y be treated as of c om par ab le m a t u
rity to each other.
Other ob li g a ti o n s that have m a t u r i
ties withi n a range of time that is no r ma l l y referred
to as a common gr oup m a y be subst it ute d for each other.
In this regard, o bl i ga tio ns that are referred to as "long
term," for example, m a y be subst it ute d for each other
even though they mi gh t have m a t u r i t i e s that v ar y by as
m uc h as ten years.
This ma y be de t e r mi n e d by common
usage in the m a r k e t place.
Shorter term securities would
have a narrower time range for the pu rpose of deter mi ni ng
co m pa r a b i l i t y of maturity.
In d e t e rm i n i ng the m a t u ri t y
co m pa r a b i l i t y of two securities, m a t u r i t y m a y be d e t e r
mined on the basis of the time remaining to m a t u r i t y of
a particular obligation.
In d et er mi nin g common groups for this purpose, insti
tutions ma y use the following as ranges of time that
compl y with the a bo ve- de scr ib ed standard.
In the case
of T r e as ur y notes and Tr e as u r y bonds, the co mp arable
m a t u r i t y range for T r eas ur y notes is three years, and
com parable m a t u r i t y range for Tr e as u r y bonds is five
years.
Institutions are pe rm itted to use the remaining
period of time to m a t u r i t y as the valid period of c om
parison.
Thus, if an institution has co nt racted to p u r
chase a twenty-year bond with six years to run until
maturity, it m a y use a thirty-year bond with four years
remaining to m a t u r i t y as collateral; the periods of time
remaining to m a t u r i t y are four years and six years
respectively, and the two-year span is thus within the
five-year time period.
For mu ni ci p a l and corporate
securities, the compa ra ble m a t u r i t y range is five years.
P as s- Th ro ug h s
4.
5.
Q;
May a former member bank that is required to m a i n t a in
reserves at the same level as a me mber bank pass the
reserves through a corresp on den t?
A:
Yes.
Such a bank m a y m a i n ta i n its reserve account
d i r e ct ly with the R eserve Bank or it m a y pass its
reserves through a correspondent.
Q;
If an institution
through basis and
is m a in t a i ni n g reserves on a p a s s
is closed by r e g u l a to r y authorities,
-9-
is the c o r r e s p o n d e n t bank respo ns ibl e for m a in ta in in g
reserves for two weeks following that closing?
A:
No.
If the r es po nde nt is no longer capable of p r o v i d
ing reserves to be ma in tained, the co rr e s po n d e nt is not
liable for the amount of those reserves.
In most cases,
a closed i ns tit ut ion 's assets and liabi li tie s are taken
over by another institution, and as of that day during a
c o m pu ta t io n period the new bank would be re sp onsible for
deposit s that thereafter are on its books.
In such a
case, the m a i n t e n a n c e of reserves for two weeks fo l lo w
ing the closing of a bank is not pos si ble and reserves
are not expected.
Eurocurre ncy:
11.
12.
B al an ces
and B or row in gs
from Foreign Offices
Q:
A head office of a foreign bank opens a letter of credit
for a customer.
That customer draws a dr aft under the
letter, and the foreign bank's United States branch
accepts it.
The United States branch books an a c ce p
tance ou tst anding, which is a l i ab i l i ty account, and a
due from pa re n t account because the cu st om e r' s o b l i g a
tion is to the head office and not to the United States
office.
This would give a foreign bank an ad va ntage in
that the ac cep t an c e l i abi li ty would not be reservable
if the ac cep t an ce is eligible and the "due from" account
would serve to reduce reservable "due to parent" accounts.
Are these bo okk ee pin g entries p e rm is si bl e?
A:
No.
Such en tries would give a doubl e be ne fit on the
t ran sa cti on to foreign banks.
The United States bran ch
should show an en try due to customer, or it should show
some kind of ac cou nt due from its parent not reported
in Column 3 of Form 2951.
In addition, such an accou nt
should not be d ed uc te d from total assets in Column 4.
Q:
Many United States offices of foreign banks set aside
an amount each year for city, state and Federal taxes.
The amount is set aside from the pr of it that is c a l c u
lated by the of fice each year.
Rather than remitting
this am ount to the pa rent as a profit, the amount is
retained on the books of the United States office for
pur pos es of paying these taxes, wh ich are payable
p e r i o d i c a l l y during the following year.
Must this
account be treated as an amount due to parent?
A:
Yes.
The pa ren t could have chosen to have those funds
remitted to it and then transfer those amounts back to
the United States office at the time that taxes became
due.
By leaving those amounts on d e po s i t at the United
States office, it has allowed funds to remain available
to the United States office during the time prior to
their payment.
Accordingly, for m o n e t a r y p o l i cy p u r
poses it is n ec es s ar y to impose reserves on these funds.
13.
Q:
Are balanc es due from a Federal Reserve Bank to be sub
tracted from total assets in c al cul at ing a foreign bank's
United States off ice 's capital a d equ ac y deduction?
A:
No.
Mis cel la ne ou s
4.
Q:
Redeemed savings bonds are allowed to be treated as a
cash item in process of co l l e ct i o n if they are for
warded for co lle c ti on at least e ve ry other day.
Many
institutions do not forward redeemed savings bonds
until the end of a week.
May they take a cash item
ded uc ti o n re gardless of this?
A:
No.
If in stitutions do not follow the pra ct ice outlined
in Re g u la ti o n D, they m a y not take these items as a cash
item d ed uc t io n at any time.
The de mand de posits remain
U.S. G ov er n m e n t dep os it s until remitted.
fO
•
1.
Q:
If the low reserve tranche is not being fully utilized
by a foreign bank or an Edge or A g r e e me n t C o rp or at io n
during each reserve c o m p ut ati on period or is ot herwise
having an adverse impact on operations, can the a l l o ca
tion of the tranche be changed?
A:
Yes.
In such a case, a foreign bank or Edge or Ag re em e nt
Co rp or at i on m a y change its tranche al lo ca t io n effective
the reserve co mp u ta ti o n period be ginning the first T h u r s
day of any month.
A request for a change in al lo cation
must be filed (on a form that will be av ailable from
Reserve Banks) at least one week prior to the beginning
of any such reserve co mp u t a ti o n period.
The form should
be filed with Reserve Banks in all d i st r i c ts in wh ich the
foreign bank or Edge or A g re e m e nt C o r p o ra t i o n operates.
lO
A l l o c a t i o n by Foreign Banks and Edge
C o rp or at i on s of Low Re serve Tranche
Can the first of the annual changes in a ll oca ti on of the
$25 m il l i o n low reserve tranche on t ra nsa ct ion accounts
for bra nch es and agencies of a single foreign bank or
for of fices of an Edge or A g re e m e nt C o r p o ra t i o n be made
at the beginning of the 1981 calendar year?
-1 1 -
Yes.
The al lo ca t i on can be changed
the first T h u r s d a y in J a nu ar y 1981.
3.
If an of fice (or g ro up of offices filing a single agg re
gated report of deposits) now has net tr an saction
accounts in excess of $25 mi l l i on but it is anticipated
that this amount will drop be low $25 m i l li o n during some
reserve c o m p ut at io n periods, is it ne ce ss a r y to allocate
the entire low reserve tranche to this office?
A:
No.
In such a case, the initial a ll oca ti on of the
tranche should take into account the an ti cipated m i ni mum
amount of net trans ac tio n accounts at each office during
the year in order to avoid losing any po r t i on of the low
reserve tranche.
C a l c ul at i on s
1.
2.
effe ct ive Jan ua ry 1,
and Repo rti ng
Q:
Does Item 2, "U.S. Go v er n m e nt Demand Deposits," apply
only to those institutions that have been de si gnated
as T r ea s ur y tax and loan d e po si tor ie s?
A:
No.
Regar dle ss of whether or not an in st itution has
been de s i gn at e d as a depository, any in st itution that
has d ep os i t ac counts subject to wi th dr a wa l on demand
that are due to, or subject to control or regulation
by, the U.S. G o v e r n me n t m us t report such balances in
Item 2.
For example, any insti tu tio n that withholds
Federal income taxes, social sec ur ity taxes, or other
Federal tax p ay men ts from the salaries of its e m p l o y
ees must report the unremitted balance of such deposits
in Item 2.
However, TT&L note bala nc es are not to be
reported as de po s i ts in this item or el se where on the
report.
Q:
How are time d e p o s i t ratios for old reserve r e qu i r e
me nts to be c al cu la te d for member banks (and former
member banks) that are involved in m e r g e r s subsequent
to Au gust 6, 1980?
A:
The time d ep osi t ratios for a combi na tio n of member banks
(or former member banks) will be calculated as a weighted
average of the individual ratios.
The weights are to be
based on the da il y average amount of time de posits for
each of the institutions involved over the reserve co m p u
tation period imm ediately pr ec eding the merger.
- 1 2 -
For example, suppose that two member banks that had total
time deposits of $15 mi l l i on and $35 mi l l i on and ratios
of .0325 and .0340, respectively, me rg e s ub seq ue nt to
Aug us t 6, 1980.
The required reserve ratio on time
de posits for the me rge d bank would be (0.0325 x (15/50))
+ (0.0340 x (35/50)) = 0.03355.
3.
4.
Q:
Wh at is the d ef in it ion of total deposits to be used to
de te rmi ne d whether qu ar t e r ly reporters have exceed ed $15
mil lion?
A:
Gross deposits, the sum of Items 7, 12, and 15 on the
FR 2900, will be used to d e ter mi ne the continuing
eli gi b i li ty of qu art er ly reporters as set forth in Sec
tion 204.3(d)(3) of Reg u l a ti o n D.
Q:
For c[e novo institutions, how will the amount of total
deposit s be d et er min ed for purposes of qu ar t e rl y re p or t
ing?
A:
All c3e novo nonmember institutions or ga nized after
December 31, 1979, will be co ns idered to be under $15
m i l l i o n in total deposits and therefore el igible for
qu a r t er ly reporting.
All such institutions will be
required to report in J a nu ar y 1981, along with all
q ua rt e rl y reporters.
In order that those (3e novo no n
member in stitutions whose total deposits are less than
$2 m i l l io n would not have to complete the entire deposits
report for a week, we will try to work out an alternate
reporting scheme for those institutions.
Those c3e novo
nonmember institutions that have less than $2 m i ll i o n
in da ily average gross deposi ts at that time will have
reporting and reserve requirements deferred until May
1981.
Other c3e novo nonmember institutions will c o n
tinue to report qu ar t e r l y until such time as da ily a ve r
age gross de posits are $15 mi l l i on or above for two
co n s e cut iv e qu ar t er ly reporting periods, at which time
they would become we ekly reporters.
De novo member banks orga ni zed after December 31, 1979,
and before September 1, 1980, should already be r e p o rt
ing we ek l y on the Report of Deposits and will continue
reporting we ek ly until Jan ua ry 1981.
De n ovo member
banks or ganized be tween September 1, 1980, and October 30,
1980, will begin reporting w e e k ly as of October 30, 1980,
and co ntinue reporting we ek ly until J a nu ar y 1981.
De
novo member banks or ga nized after October 30, 1980, will
begin reporting we ek ly as of the date of or g a n iz a t i on and
will continue reporting w e e k ly until Ja nu ary 1981.
Those
de novo member banks that have daily average gross
-13-
deposits of less than $15 m i ll i o n as of the first report
ing pe riod in J an u a ry 1980, m a y begin reporting qu ar terly
at that time; those that have daily average gross deposits
of $15 m il l i o n or more must continue to report weekly.
5.
Q:
If a co rp o ra ti o n pr esents a credit union with a check
drawn on another de p os i t o ry institution for the purpose
of depos iti ng in the credit union the c o rp or at io n e m p l oy
ee's w it hhe ld savings from a payroll but does not provide
the credit union with a listing showing the d i st ri bu ti on
of such w it hhe ld savings, how should the credit union
report this tr ans act io n on the FR 2900?
A:
The credit union should report the liability for the
de posited payroll savings in Item 3 (Other Demand) of
the FR 2900 unless it dete rm ine s from its past experience
that all or a port io n of such funds usually are treated
otherwise.
Thus, if a credit union finds that all such
funds u su all y are credited to regular share accounts of
natural persons, then the funds ma y be reported as p e r
sonal savings de posits and reserves are not required
(note that funds credited to regular share accounts that
are t ra ns ac tio n accounts must be reported as transaction
accounts).
If the credit union found that its historical
exper ien ce had be en that twenty pe rcent of such funds go
to share dr aft accounts and the remainder to personal
share accounts, then it may treat twenty p e rc en t of such
funds each day as share draft accounts and the remainder
as personal share accounts.
If the credi t union does not use the a b ove -d esc ri bed
option, then the amount reported in Item 3 may be offset
by the d ed uc t io n for cash items in process of co ll ection
during the time required for the check to clear.
After
the check clears, the credit union is not entitled to the
cash items in process of c ol lec ti on d ed uct io n from those
funds.
The payroll de po sit remains in Other Demand and
reserves must be held against the deposit until the funds
are d is tr i bu te d to the proper members' accounts.
6.
Q:
The in str uctions to FR 2900 indicate that a bona fide
cash m a n a g e m e n t a r ra ng em en t must be ev idenced by a prior
written ag ree me n t be tween the reporting de p os i t o ry insti
tution and the customer authorizing transfers between
t ran sa cti on ac counts of the customer.
Does this mean
that there m u s t actua ll y be a redu ct ion on the books of
the in sti tution in order to reduce the ba lance by the
ove rd ra f t am ount for pu rposes of reserves?
A:
An actual transfer on the books of the institution is
not n e c e ss ar i ly required.
Bona fide cash ma n ag e m e nt
-14-
pur poses can be de mon s t ra t e d in a number of situations.
The fact that a d e po s i to r y insti tu tio n has the ability
to offset an over dra ft with funds in another account
is s uff ic ien t to serve the p u rp os es of Re gu la t io n D.
A wr it t en agre eme nt co ntinues to be required in order
to use the exception; however, the pu rpose of the
agree me nt is simply to indicate the d e po s i t or ' s intent
to serve a cash m an ag e m e n t pu rpose in having mo r e than
one demand account.
Accordingly, the ag reement need onl]
state that (1) the mu l ti p l e ac counts are estab li she d to
serve a cash m a n a g e m e n t function and (2) the depositor
ack no wl edg es that the bank has the right of set-off
against the p os it ive balance in another demand account
in the amount of the o v erd ra ft wh enever an ove rd raf t
arises.
Many instit utions c u r r e n t l y do not have ag r e e
me nts in place with de po si t or s with cash m a na g e m e n t
programs; institutions m a y continue to de du ct o v e r
drafts from po si ti v e balanc es of such de p o s it o r s but
must have an agre eme nt in place by the end of this year.
7.
Q:
How are "loans in process" to be
of reporting on the FR 2900?
A;
"Loans in process"
texts .
arise
treated
in at least
for purposes
two di ff e r en t c o n
(1)
Wh ere a d ep os i t o r y institution issues a cashier's
check re pre senting mo r tg a g e or other loan procee ds and
del iv ers the check to a sett le men t agent in advance of
the loan closing, the cash ie r's check re pr esents a
demand d ep osi t and the amount of the check is reservable from time of issuance as a t r an sa ct io n account.
(2)
Th rift in sti tutions co m mo n l y have a liab il ity
"contra" ac count entited "loans in process" that
represents unadvanced portio ns of c o ns t r u c t i o n loan
commitments.
Such commi tm en ts are co nt in g en t lia
bilitie s of the d e po si t o r y i ns tit ut ion and are not
subject to reserves.
When a po rtion of the loan c o m
m i t me n t is advanced, a reservable liability would be
created if d i sb u rs em en t were made by issuance of an
offic er 's check or by credit to a deposit account.
8.
Q:
A de po s i t o r y institution ("seller") sells m o n e y orders
on c on si gn men t from a second de p os i t o ry institution
("issuer").
Funds are not remitted to the issuer
until it notifies the seller that the mo n e y orders
have been received for pay me nt and the funds are then
remitted by the seller.
How are the funds r e pr e s e nt
ing the pro cee ds of the mo n e y order sale to be
reported?
A
-15-
9.
A:
The m on e y order pr oceeds are a deposit of the selling
institution until remitted to the issuer.
If the
issuer is a d e po si t o r y institution, then the unremitted
amount held by the seller represents a balance due to
a de po si t or y institution.
Q:
The in str uctions to Form FR 2900
vides under "Record-keeping":
for credit unions p r o
"Note:
If, according to your standard a c co u n t
ing practices, closing balances for accounts
reported on this report are not available on a
daily basis, you ma y report the same closing
bal ance for subs eq uen t days provided that your
closing ba lances for these accounts are updated
at least once a week.
For example, a credit
union that uses a we ek ly batch system ma y have
closing balances only as of each Friday.
In
this case, the balances for the preceding Fr i
day should be reported for T h ur sd ay of the
cu rrent co mp ut a t i on week; the balances for
Friday of the current compu ta tio n week should
be reported not only for Friday but also for
the following Saturday, Sunday, Monday, T u e s
day, and We dn esday, and for the first Th u rs d a y
of the next c o mp u ta ti on period."
Does this reporting p ri nci pl e apply to other
situated d ep os i t o r y institutions?
10.
similarly
A:
Yes.
If a d e po s i t o r y institution posts its general
ledger da ily or gener at es a daily balance sheet, then
all amounts reported for reserve requirements purposes
on the FR 2900 must be updated daily.
However, as indi
cated above, if it is the accepted accounting practi ce
and standard for a pa rt icular segment of the industry to
post the general ledger less frequently than daily, then
w e e kl y up dating is permitted.
Q:
Are d e po s it or y institutions that have zero reserve
re qui rements required to report deposit and other data
to the Federal Reserve?
A:
Yes.
All d ep os i t o r y institutions, including "bankers'
banks," are required to submit data on From FR 2900 in
accor da nc e with Reg ul at i o n D.
@FedFRASER