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LIBRARY FEDE~lt fii?ERVE statistical release .- FEDERAL RESERVE BANK OF PHILADELPHIA For release at 4:30 PM EST May 4, 1989 H.3 (502) SPECIAL NOTICE Aggregate data for reserves and the monetary base have been revised to reflect the latest annual indexations of the low reserve tranche and the reserve requirement exemption, and new estimates of seasonal factors. 1 In addition, a change has been made in the break- adjustment method for these indexations. In the past, the break adjustment for each indexation of the low reserve tranche or the exemption has been carried out in the same manner as adjustments for regulatory changes in reserve requirements. A separate break-adjustment ratio, defined as required reserves measured using the post-indexation values of the tranche and exemption divided by required reserves measured using the pre-indexation values, was estimated for the first affected maintenance period of each year since 1982 for required reserves against each of transaction and nontransaction deposits for each of five entity types: member banks, 1. The Monetary Control Act of 1980 established a reserve ratio of 3 percent against the first $25 million in transaction deposits (low reserve tranche) at each depository institution. Since 1982, the low reserve tranche has been indexed each January by 80 percent of the previous year's (June 30 to June 30) growth rate of net transaction deposits at all depository institutions. Under the Garn-St Germain Depository Institution Act of 1982, the first $2 million of reservable liabilities of each depository institution are exempted from reserve requirements. Since 1983, this exemption amount has been indexed each year by 80 percent of the rate of increase of total reservable liabilities at all depository institutions over the preceding year (June 30 to June 30) . Both of these indexations take effect each year in the reserve computation periods containing January 1. -2- nonmember banks, Edge Act Corporations, U.S. branches a;nd ag~?-R~e~ .pf. '•'. foreign banks, and thrift institutions. In addition, similar break- adjustment ratios were computed for applied vault cash at bound and nonbound depository institutions separately. 2 ' 3 These ratios were then each applied to the associated required reserves and applied vault cash data for all maintenance periods back to 1959. The result was break-adjusted series that, going back in time, fell increasingly short of actual reserves and the monetary base. The new break-adjustment method adjusts required reserves and applied vault cash only for the maintenance periods between each annual indexation and the previous indexation. Actual and break-adjusted series are then essentially equal for all maintenance periods in which the indexation has occurred over past years. 4 For maintenance periods between any two annual indexation dates, the new procedure assumes, in effect, that the indexation is phased in at a constant rate throughout the year. Thus, for maintenance periods during the year preceding each indexation date, the break-adjustment ratios follow constant growth paths from 1.0 in the maintenance period of the year-earlier indexation to (usually smaller) break-adjustment ratios for the more recent 2. These break adjustments of applied vault cash also are used to compute the break-adjustment series for surplus vault cash, a component of the monetary base. 3. A depository institution is bound (nonbound) if its required reserves equal or exceed (are less than) its total vault cash that can be used to satisfy reserve requirements. 4. The break-adjusted and unadjusted required reserve series do still differ because the former excludes reserves held against net Eurocurrency liabilities. This exclusion has been made because of technical difficulties in constructing break-adjusted reserves against this particular item. -3- . d exatJ.on . d ate. 5 J.n This is done for each set of ratios, namely, for required reserves against both transaction and nontransaction deposits for each of the five entity types noted above, as well as for applied vault cash. Under this technique, in order to put current-year data on a comparable basis with the historical data, it is also necessary for the data in the current year to be adjusted, using estimates of the low reserve tranche and reserve requirement exemption to take effect next January. Based on data for net transactions deposits and total reservable liabilities from June 1988 through March 1989, and extrapolated through June 1989, the break-adjusted data for 1989 will be constructed assuming the levels of the low reserve tranche and the reserve requirement exemption do not change at the start of next year. Revised historical data will be available shortly from the Money and Reserves Projection Section, Division of Monetary Affairs, Stop 75, Board of Governors of the Federal Reserve System, Washington, D.C. 20051. 5. For the more recent indexation date, the break-adjustment ratios would be the ratios of, for example, required reserves on the new basis (that is, post-indexation) to required reserves on the old basis (that is, pre-indexation) . FEDERAL RESERVE statistical release H.3 15021 Table 1 For Release at 4:30 p.m. Eastern Time ~?u~~dE~~l~n~~~nE~Ye~~ ~~i~e~~~~ITORY INSTITUT_IONS AND THE MONETARY BASE MAY Averages of daily figures, seasonally adjusted unless noted otherw1se Millions of dollars Borrowings of depository institutions from the Federal Reserve, NSA Reserves of depository institutions nonborrowed plus exte~ded credit required 4 , 1989 exce~s NSA Monetary base 6 total seasonal extended credit4 59503 59382 59688 859 1040 888 265631 266761 268205 2993 2578 3083 146 246 311 2624 2107 2554 60157 60316 60043 60051 59950 59852 1007 953 972 270308 270979 272420 3440 3241 2839 376 423 421 2538 2653 2059 58562 57991 58990 60343 60314 60234 59800 59733 59666 1062 1119 1040 273659 274380 275501 2299 2861 1716 332 186 130 1781 2322 1244 60370 60260 59854 58708 58773 58041 59754 59822 59376 59226 59106 58896 1145 1154 957 276784 277553 278615 1662 1487 1813 76 97 139 1046 1050 1334 59484 57195 58902 58687 797 278862 2289 213 1707 8 22 60333 59557 58533 57971 59783 59135 59376 58822 957 735 278481 278285 1800 1586 116 136 1250 1164 5 19p 59890 58600 57714 56018 59389 57988 58585 58380 1305 220 279249 277437 2177 2582 167 190 1675 1970 60426 58457 59844 59124 1301 280500 1969 265 1387 Date total 2 1988-APR. MAY JUNE 60363 60422 60576 57369 57845 57493 59993 59951 60047 JULY AUG. SEP. 61058 60903 60824 57618 57663 57985 OCT. NOV. DEC. 60862 60853 60706 1989-JAN. FEB. MAR. APR. pe nonborrowed 3 Two weeks ending 1989-MAR. APR. MAY 3pe p--preliminary pe--preliminary estimate Reserves and monetary base figures incorporate adjustments for discontinuities, or "breaks", associated with regulatory changes in reserve requirements. (for more information, see Table 3. l Seas 11nally adjusted, break-adjusted total reserves equal seasonally adjusted, break-adjusted required reserves plus unadjusted excess resetves. I Also, see footnote 2 on Table 2 and footnote 2 on Table 3. J 3. Seaspnally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, break-adjusted total reserves less unadjusted total Digitized forborrowings FRASER of depository inst1tutions from the Federal Reserve. 4. Extended credit consists of borrowing at the discount window under the terms and conditions established for the extended credit program to http://fraser.stlouisfed.org/ ~~l~h~~~o~! t~r~..._ Federal Reserve Bank of St. Louisi'i~!~~~E~~~ ~::~!~ wi~~-- s':I~~CI ~';led J iquiqHY P.ressures. Be~a~:~s~ ther:-e ~s not the same need to repav such borrow ina oromn+ 1" 1. 2. Vault cashs Reserves of depository institutions total 2 Date nonborrowed required base Reserve balances with F.R. Banks4 total reserves 6 surplus 7 Moneta~y used to satisfy require~ Net carryover of reservw balances 1988-APR. MAY JUNE 62064 60681 61991 59071 58103 58908 61205 59641 61103 268127 268899 272654 38429 36509 37907 25208 25882 25730 23636 24172 24084 1573 1710 1646 JULY AUG. SEP. 62756 61965 62153 59316 58724 59314 61749 61012 61181 275591 275033 274874 37992 36911 37213 26459 26895 26727 24763 25054 24940 1696 1841 1787 OCT. NOV. DEC. 61915 62407 63739 59616 59546 62023 60853 61287 62699 275775 278653 283176 36421 36997 37830 27198 26745 27197 25494 25410 25909 1705 1335 1288 1989-JAN. FEB. MAR. 63468 60693 60212 61806 59206 58400 62323 59539 59255 281312 277655 278943 36475 32834 34623 28376 29776 27059 26993 27859 25589 1383 1917 1470 61309 59021} 60512 281699 35851 26746 25458 1288 8 22 60446 60034 58647 58448 59490 59299 277715 279336 34485 34702 27581 26738 25962 25332 1620 1406 48 85 5 19p 60282 61416 58106 58834 58977 61196 279427 282592 34623 36243 27095 26339 25659 25173 1436 1167 15 307 61641 59672 60339 281597 35910 27106 25731 1375 -163 APR. pe Two weeks ending 1989-MAR. APR. MAY 3pe p--preliminary 1. 2. 3. 4. 5. 6. 7. 8. pe--preliminary estimate Reflects actual required reserves, with no adjustments to eliminate the effects of discontinuities, or "breaks", associated with regulatory changes in reserve requirements. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve requirements. The monetary base, not break-adjusted and not seasonally adjusted, consists of total reserves plus required clearing balances and adjustments to compensate for float at Federal Reserve Banks plus the currency component of the money stock plus, for institutions whose vault cash exceeds their required reserves, the excess of current vault cash over the amount applie~ to satisfy current reserve requirements. After the introduction of CRR, currency and vault cash figures are measured over computation periods ending on Mondays. Excludes required clearing balances and adjustments to compensate for float and includes other off-balance sheet "as-of" adjustments. Dates refer to the maintenance periods in which the vault cash can be used to satisfy reserve requirements. Under contemporaneous reserve reguirements, maintenance periods end 30 days after the lagged computation periods in which the balances are held. All vault cash held during the lagged computation period by "bound" institutions I i.e., those whose reguired reserves exceed their vault cashl plus the amount of vault cash applied during the maintenance period by "nonbound" institutions (i.e., those whose vault cash exceeds their required reserves) to satisfy current reserve requirements. Total vault cash held by depository institutions minus the amount applied to satisfy reserve requirements. Consists of carryover only at depository institutions maintaining reserves on the basis of two-week maintenance periods. Reflects excess (+)or deficit 1-l reserves elig1ble to be carried forward into the two-week reserve maintenance period ending on the date shown. H.3 I 502 J Table 3 AGGREGATE RESERVES OF DEPO~ITORY INSTITUTIONS AND THE MONETARY BASE Adjusted for changes in reserve requirements Averages of daily figures, not seasonally adjusted Millions of dollars , Reserves of depository institutions total 2 Date nonborrowed required 3 Monetary base4 1988-APR. MAY JUNE 60889 59381 60585 57896 56803 57503 60030 58340 59698 264958 265668 269362 JULY AUG. SEP. 61353 60461 60506 57914 57220 57666 60346 59508 59534 272314 271620 271439 OCT. NOV. DEC. 60372 60963 62213 58073 58102 60497 59310 59844 61173 272293 275317 279710 1989-JAN. FEB. MAR. 62067 59371 58938 60405 57884 57125 60922 58217 57980 277923 274363 275625 60033 57743 59235 278302 8 22 59205 58714 57406 57128 58249 57979 274599 275879 5 19p 59048 60200 56872 57618 57743 59980 276143 279095 60267 58299 58966 278276 APR. pe Two weeks ending 1989-MAR. APR. MAY 3pe p--preliminary 1. 2. 3. 4. pe--preliminary estimate Figures reflect adjustments for discontinuities, or "breaks", associated with regulatory changes in reserve requirements. Break-adjusted total reserves equal break-adjusted required reserves ITable 3, column 3) plus excess reserves NSA (Table 1, column 51. To adjust required reserves for discontinuities due to regulatory changes in reserve requirements, a multiplicative procedure is used to estimate what required reserves would have been in past periods had current reserve requirements been in effect. Break-adJusted required reserves includes required reserves against transactions deposits and nonpersonal time and sav1ngs deposits lbut not reservable nondeposit liabilit1es. J Break-adjusted monetary base equals Ill breaK-adjusted total reserves plus 121 the (unadjusted) currency component of the money stock plus 131, for institutions whose vault cash exceeds their required reserves, the break-adjusted excess of current vault cash over the amount applied to satisfy current reserve requirements. Note: Historical data are available from the Money and Reserves Projections Section, Division of Monetary Affairs, Board of Governors of The Federal Reserve System, Hashington, D.C. 20551
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