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October 30, 1979
Enclosed is a copy of the revised Supplement to Regulation D
("Reserves of Member Banks") of the Board of Governors of the Federal
Reserve System reflecting the newly established 8 percent marginal reserve
requirement on increases in "managed liabilities."
Additional copies are available upon request.
Circulars Division
FEDERAL RESERVE BANK OF NEW YORK
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
RESERVES OF MEMBER BANKS
SUPPLEMENT TO REGULATION D t
As amended effective October 6,
1979
SECTION 204.5—RESERVE REQUIREMENTS
(a) Reserve percentages. Pursuant to the provi
sions of section 19 of the Federal Reserve Act, sec
tion 7 of the International Banking Act of 1978 and §
204.2(a) and subject to paragraphs (b) through (f) of
this section, the Board of Governors of the Federal
Reserve System hereby prescribes the following re
serve balances that each member bank of the Federal
Reserve System is required to maintain on deposit
with the Federal Reserve Bank of its district.
(A) Time deposits of $100,000 or more; and
(B) Time deposits of $100,000 or more repre
sented by promissory notes, acknowledge
ments of advance, due bills, or similar obliga
tions as provided in § 204.1(f); and
(C) Time deposits represented by ineligible
bankers’ acceptances or obligations issued by
a member bank’s affiliate, as provided in §
204.1(f).
(1) If not a reserve city—
(i) 3 per cent of (A) its savings deposits and (B) its
time deposits, open accounts that constitute deposits
of individuals, such as Christmas club accounts and
vacation club accounts, 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; and(i)
(ii) 1 per cent of its time deposits outstanding on or
issued after October 16, 1975, that have an initial
maturity of 4 years or more; 2Vi 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 years; 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 million: Provided, however. That in
no event shall the reserves required on its aggregate
amount of time and savings deposits be less than 3 per
cent. In addition, a member bank shall maintain a
reserve balance equal to 2 per cent of its time deposits
of the following types:
However, the supplementary 2 per cent reserve re
quirement shall not apply to a savings deposit, or a
time deposit, open account that constitutes deposits of
individuals, such as Christmas club accounts and va
cation club accounts, 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)
(a) 7 per cent of its net demand deposits if its
aggregate net demand deposits are $2 million or less,
(b) $140,000 plus 9l/ i per cent of its net demand
deposits in excess of $2 million if its aggregate net
demand deposits are in excess of $2 million but not
more than $10 million, (c) $900,000 plus l \ 3A per
cent of its net demand deposits in excess of $10 mil
lion if its aggregate net demand deposits are in excess
of $10 million but not more than $100 million, or (d)
$11,475,000 plus 12% per cent of its net demand
deposits in excess of $100 million.
(2) If 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
t For this Regulation to be complete retain:
1) Printed Regulation pamphlet dated July 6, 1978.
2) This Supplement.
OCTOBER 1979
to § 204.2(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 accounts, 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; and
(ii) 1 per cent of its time deposits outstanding on or
issued after October 16, 1975, that have an initial
maturity of 4 years or more; 2Vz 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 years; 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 million: Provided, however, That in
no event shall the reserve required on its aggregate
amount of time and savings deposits be less than 3 per
cent. In addition, a member bank shall maintain a
reserve balance equal to 2 per cent of its time deposits
of the following types:
(A) Time deposits of $100,000 or more; and
(B) Time deposits of $100,000 or more repre
sented by promissory notes, acknowledge
ments of advance, due bills, or similar obliga
tions as provided in § 204.1(f); and
(C) Time deposits represented by ineligible
bankers’ acceptance or obligations issued by a
member bank’s affiliate, as provided in §
204.1(f).
However, the supplementary 2 per cent reserve re
quirement shall not apply to a savings deposit, or time
deposit, open account that constitutes deposits of in
dividuals, such as Christmas club accounts and vaca
tion club accounts, that are made under written con
tracts 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) $49,725,000 plus 16‘/4 per cent of its net de
mand deposits in excess of $400 million.
(b) Currency and coin. The United States cur
rency and coin of a member bank or a United States
branch or agency of a foreign bank shall be counted
as reserves in determining compliance with the re
serve requirements of this section.
(c) Reserve percentages against certain deposits
by foreign banking offices. Deposits represented by
promissory notes, acknowledgements of advance,
due bills, or similar obligations described in § 204.1
(f) to foreign offices of other banks," or to institu
tions the time deposits of which are exempt from the
rate limitations of Regulation Q pursuant to §
217.3(g) thereof, shall not be subject to paragraph (a)
of this section or to § 204.3 (a)(1) and (2); but during
each week of the four-week period beginning May
22, 1975, and during each successive four-week
(“ maintenance” ) period, a member bank shall main
tain with the Reserve Bank of its district a daily aver
age balance equal to zero per cent of the daily average
amount of such deposits during the four-week compu
tation period ending on the Wednesday fifteen days
before the beginning of the maintenance period. An
excess or deficiency in reserves in any week of a
maintenance period under this paragraph shall be sub
ject to § 204.3 (a)(3), as if computed under §
204.3(a)(2), and deficiencies under this paragraph
shall be subject to § 204.3(b).12
(d) Foreign branch transactions with parent
bank. During each week of the four-week period be
ginning May 22, 1975, and during each week of each
successive four-week (“ maintenance” ) period, a
member bank having one or more foreign branches
shall maintain with the Reserve Bank of its district, as
a reserve against its foreign branch deposits, a daily
average balance equal to zero per cent of the daily
average total of—
(i) net balances due from its domestic offices such
branches, and
(ii) assets (including participations) held by such
branches which were acquired from its domestic of
fices (other than assets representing credit extended to
persons not residents of the United States), during the
four-week computation period ending on the Wednes
day fifteen days before the beginning of the mainte
nance period.
(e) Foreign branch credit extended to United
States residents. During each week of the four-week
period beginning May 22, 1975, and during each
week of each successive four-week maintenance pe
riod, a member bank having one or more foreign
branches shall maintain with the Reserve Bank of its
district, as a reserve against its foreign branch de
posits, a daily average balance, equal to zero per cent
" Any banking office located outside the States of the
United States and the District of Columbia of a bank or
ganized under domestic or foreign law.
12 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 paragraph.
of the daily average credit outstanding from such
branches to United States residents13(other than assets
acquired and net balances due from its domestic of
fices) during the four-week computation period end
ing on the Wednesday fifteen days before the begin
ning of the maintenance period: Provided, That this
paragraph does not apply to credit extended (1) in the
aggregate amount of $100,000 or less to any United
States resident, (2) by a foreign branch which at no
time during the computation period had credit out
standing to United States residents exceeding $1 mil
lion, (3) to enable the borrower to comply with the
requirements of the Office of Foreign Direct Invest
ments, Department of Commerce,14(4) under binding
commitments entered into before May 17, 1973, or
(5) to an institution that will be maintaining reserves
on such credit under subsection (c) of this section or §
211.3(g) of Regulation K.
(i)
(A) time deposits of $100,000 or more with
original maturities of less than one year;
(B) time deposits of $100,000 or more with origi
nal maturities of less than one year representing bor
rowings in the form of promissory notes, acknowl
edgements of advance, due bills, or similar obliga
tions as provided in § 204.1(f); and
(f)
Marginal Reserve Requirements. (1) Mem
ber banks. During the seven-day reserve mainte
nance period beginning October 25, 1979, and dur
ing each seven-day reserve maintenance period
thereafter, a member bank shall maintain a daily
average reserve balance against its time deposits
equal to 8 per cent of the amount by which the
daily average of its total managed liabilities during
the seven-day computation period ending eight days
prior to the beginning of the corresponding sevenday reserve maintenance period exceeds the mem
ber bank’s managed liabilities base. For a member
bank that, on a daily average basis, is a net bor
rower of total managed liabilities during the fourteen-day base period ending September 26, 1979,
its managed liabilities base shall be the daily aver
age of its total managed liabilities during the base
period or $100 million, whichever is greater. For a
member bank that, on a daily average basis, is a
net lender of total managed liabilities during the
fourteen-day base period ending September 26,
1979, its managed liabilities base shall be the sum
of its negative total managed liabilities and $100
million. A member bank’s managed liabilities are
the total of the following:
13(a) Any individual residing (at the time the credit is
extended) in any State of the United States or the District of
Columbia; (b) any corporation, partnership, association or
other entity organized therein of any other entity wherever
organized. Credit extended to a foreign branch, office, sub
sidiary, affiliate or other foreign establishment (“ foreign
affiliate’’) controlled by one or more such domestic corpora
tions will not be deemed to be credit extended to a United
States resident if the proceeds will be used in its foreign
business or that of other foreign affiliates of the controlling
domestic corporation(s).
14 The branch may in good faith rely on the borrower’s
certification that the funds will be so used.
(C) time deposits with remaining maturities of less
than one year represented by ineligible bankers’ ac
ceptances or obligations issued by a member bank’s
affiliate, as provided in § 204.1(f). However,
managed liabilities do not include savings deposits,
or time deposits, open account that constitute deposits
of individuals, such as Christmas club accounts and
vacation club accounts 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;
(ii) any obligation with an original maturity of less
than one year that is issued or undertaken as a means
of obtaining funds to be used in its banking business
in the form of a promissory note, acknowledgement
of advance, due bill, ineligible bankers’ acceptance,
repurchase agreement (except on a U.S. or agency
security), or similar obligation (written or oral) issued
to and held for the account of a domestic banking
office or agency15of another commercial bank or trust
company that is not required to maintain reserves pur
suant to this Part, a savings bank (mutual or stock), a
building or savings and loan association, a coopera
tive bank, a credit union, or an agency of the United
States, the Export-Import Bank of the United States,
Minbanc Capital Corporation and the Government
Development Bank for Puerto Rico;
(iii) any obligation with an original maturity of
less than one year that is issued or undertaken as a
means of obtaining funds to be used in its banking
business in the form of a repurchase agreement aris
ing from a transfer of direct obligations of, or obliga
tions that are fully guaranteed as to principal and
interest by, the United States or any agency thereof
that the institution is obligated to repurchase (except
repurchase agreements issued to a domestic banking
office or agency of a member bank, or other organiza
tion that is required to maintain reserves under this
15 Any banking office or agency in any State of the
United States or the District of Columbia of a bank or
ganized under domestic or foreign law.
3
be maintaining reserves on such credit under para
graphs (c) or (f) of this section or under Regulation
K.
Part pursuant to the Federal Reserve A ct,16 or to a
Federal Reserve Bank17) to the extent that the amount
of such repurchase agreements exceeds the total
amount of United States and agency securities held by
the member bank in its trading account;
Provided, however, That in no event shall the re
serves required on a member bank’s aggregate time
and savings deposits be more than 10 per cent.
(iv) any obligation that arises from a borrowing by
a member bank from a dealer in securities that is not a
member bank or other organization that is required to
maintain reserves pursuant to this Part,16for one busi
ness day, of proceeds of a transfer of deposit credit in
a Federal Reserve Bank (or other immediately availa
ble funds), received by such dealer on the date of the
loan in connection with clearance of securities trans
actions;
(2)
United States branches and agencies offoreign
banks. During the seven-day reserve maintenance pe
riod beginning November 8, 1979, a United States
branch or agency of a foreign bank with worldwide
banking assets in excess of $1 billion shall maintain a
daily average reserve balance against its liabilities
equal to 8 per cent of the amount by which the daily
average of its total managed liabilities during the
three seven-day computation periods beginning Octo
ber 11, 18 and 25, 1979, exceeds the total of the
institution’s managed liabilities base. During the
seven-day reserve maintenance period beginning No
vember 15, 1979, and during each seven-day reserve
maintenance period thereafter, a United States branch
or agency of a foreign bank with worldwide banking
assets in excess of $1 billion shall maintain a daily
average reserve balance against its liabilities equal to
8 per cent of the amount by which the daily average
of its total managed liabilities during the seven-day
computation period ending eight days prior to the
beginning of the corresponding seven-day reserve
maintenance period exceeds the institution’s managed
liabilities base. In determining managed liabilities of
United States branches and agencies, the managed
liabilities of all United States branches and agencies
of the same foreign parent bank and of its majorityowned (greater than 50 per cent) foreign banking sub
sidiaries (the “ family” ) shall be consolidated. Asset
and liability amounts that represent intra- family trans
actions between United States branches and agencies
of the same family shall not be included in computing
the managed liabilities of the family. United States
branches and agencies of the same family shall desig
nate one U.S. office to be the reporting office for
purposes of filing consolidated family reports re
quired for determination of the family’s marginal re
serve requirements. The reporting office shall file re
ports and maintain marginal reserves required under
this section for the family at the Federal Reserve
Bank of the district in which the reporting office is
located. For a family of United States branches and
agencies that, on a daily average basis, is a net bor
rower of total managed liabilities during the fourteenday base period ending September 26, 1979, the
managed liabilities base for the family shall be the
daily average of the family’s total managed liabilities
during the base period or $100 million, whichever is
greater. For a family of United States branches and
(v) borrowings with an original maturity of less
than one year from foreign offices of other banks and
from institutions that are exempt from interest rate
limitations pursuant to § 217.3(g) of Regulation Q;
(vi) net balances due from the member bank’s do
mestic offices to its foreign branches;
(vii) assets (including participations) held by the
member bank’s foreign branches that were acquired
from the member bank’s domestic offices; and
(viii) credit outstanding from its foreign branches
to U.S. residents18 (other than assets acquired and net
balances due from its domestic offices). Provided,
That this paragraph does not apply to credit extended
(1) in the aggregate amount of $100,000 or less to any
United States resident, (2) by a foreign branch which
at no time during the computation period had credit
outstanding to United States residents exceeding $1
million, (3) under binding commitments entered into
before May 17, 1973, or (4) to an institution that will
16 Edge Corporations engaged in banking, Agreement
Corporations, operations subsidiaries of member banks, and
U.S. branches and agencies of foreign banks with world
wide banking assets in excess of $1 billion.
17 Repurchase agreements entered into with nonexempt
entities, such as nonmember banks and nonbank dealers, are
not subject to marginal reserve requirements if such agree
ments are intended to provide collateral to such nonexempt
entities in order to engage in repurchase transactions with
the Federal Reserve System Open Market Account.
18(a) Any individual residing (at the time the credit is
extended) in any State of the United States or the District of
Columbia; (b) any corporation, partnership, association or
other entity organized therein (“ domestic corporation’’);
and (c) any branch or office located therein of any other
entity wherever organized. Credit extended to a foreign
branch, office, subsidiary, affiliate or other foreign estab
lishment (“ foreign affiliate” ) controlled by one or more
such domestic corporations will not be deemed to be credit
extended to a United States resident if the proceeds will be
used in its foreign business or that of other foreign affiliates
of the controlling domestic corporation(s).
4
agencies that, on a daily average basis, is a net lender
of total managed liabilities during the fourteen-day
base period ending September 26, 1979, the managed
liabilities base for the family shall be the sum of the
family’s negative total managed liabilities and $100
million. The total managed liabilities of a family are
the total of each branch’s and agency’s:
office or agency of a member bank, or other organiza
tion that is required to maintain reserves under this
Part pursuant to the Federal Reserve Act,16 or to a
Federal Reserve Bank17) to the extent that the amount
of such repurchase agreements exceeds the total
amount of United States and agency securities held by
the institution in its trading account;
(i)
(A) time deposits of $100,000 or more with
(iv) any obligation that arises from a borrowing
original maturities of less than one year;
from a dealer in securities that is not a member bank
or other organization that is required to maintain re
(B) time deposits of $100,000 or more with origi
serves pursuant to this Part,16for one business day, of
nal maturities of less than one year representing bor
proceeds of a transfer of deposit credit in a Federal
rowings in the form of promissory notes, acknowl
Reserve Bank (or other immediately available funds),
edgements of advance, due bills, or similar obliga
received by such dealer on the date of the loan in
tions as provided in § 204.1(f);
connection with clearance of securities transactions;
(C) obligations with remaining maturities of less
than one year represented by ineligible bankers’
acceptances.
(v) borrowings with an original maturity of less
than one year from foreign offices of other banks and
from institutions that are exempt from interest rate
limitations pursuant to § 217.3(g) of Regulation Q;
(D) credit balances of $100,000 or more with an
original maturity of 30 days or more but less than one
year. However, managed liabilities do not include
savings deposits, or time deposits, open account that
constitute deposits of individuals, such as Christmas
club accounts and vacation club accounts that are
made under written contracts providing that no with
drawal shall be made until a certain number of peri
odic deposits have been made during a period of not
less than 3 months;
(vi) assets (including participations) held by the
foreign parent bank (including branches and agencies
located outside the States of the United States and the
District of Columbia) and by the foreign parent’s ma
jority-owned (greater than 50 per cent) foreign subsi
diaries (including branches and agencies located out
side the States of the United States and the District of
Columbia) or parent holding company that were ac
quired from the U.S. branch or agency (other than
assets required to be sold by the Federal supervisory
authority of the branch or agency); and
(ii) any obligation with an original maturity of less
than one year that is issued or undertaken as a means
of obtaining funds to be used in its banking business
in the form of a promissory note, acknowledgement
of advance, due bill, ineligible bankers’ acceptance,
repurchase agreement (except on a U.S. or agency
security), or similar obligation (written or oral) issued
to and held for the account of a domestic banking
office or agency15of another commercial bank or trust
company that is not required to maintain reserves pur
suant to this Part, a savings bank (mutual or stock), a
building or savings and loan association, a coopera
tive bank, a credit union, or an agency of the United
States, the Export-Import Bank of the United States,
Minbanc Capital Corporation and the Government
Development Bank for Puerto Rico;
(vii) net balances due to the family’s foreign par
ent bank (including branches and agencies located
outside the States of the United States and the District
of Columbia) and to the foreign parent’s majorityowned (greater than 50 per cent) foreign banking sub
sidiaries (including branches and agencies located
outside the States of the United States and the District
of Columbia) or parent holding company, after de
ducting an amount equal to 8 per cent of the U.S.
branch and agency family’s total assets (not including
cash, cash items in the process of collection, or bal
ances due from the foreign parent bank (including
branches and agencies located outside the States of
the United States and the District of Columbia), the
parent’s majority-owned (greater than 50 per cent)
subsidiaries (including branches and agencies located
outside the States of the United States and the District
of Columbia) or parent holding company, and bal
ances due from unrelated banks).
(iii) any obligation with an original maturity of
less than one year that is issued or undertaken as a
means of obtaining funds to be used in its banking
business in the form of a repurchase agreement aris
ing from a transfer of direct obligations of, or obliga
tions that are fully guaranteed as to principal and
interest by, the United States or any agency thereof
that the institution is obligated to repurchase (except
repurchase agreements issued to a domestic banking
Any excess or deficient in the marginal reserve bal
ances required under this paragraph shall be subject to
§ 204.3 of this Part.
5
@FedFRASER