The FRB issued a final rule (the “Final Rule”) amending the FRB’s Regulation D to authorize the Federal Reserve Banks to offer terms deposits. A Notice of Proposed Rulemaking (the “NPR”) regarding these amendments was discussed in the January 5, 2010 Alert. The Final rule makes a few changes from the NPR to reflect public comment. Specifically, the FRB in the Final Rule: (1) determines not to adopt a sunset provision for amendments to Regulation D and allows term deposits to be used “as needed based on monetary policy objectives;” (2) changes the definition of “short term interest rates” to make it more consistent with market practices; (3) clarifies that the FRB may set conditions regarding the early withdrawal of term deposits and pledging term deposits as collateral; and (4) clarifies that term deposits may not be used for general payments or settlement activities. The Final Rule will take effect 30 days after publication in the Federal Register.
Alert May 04, 2010