Alert November 01, 2011

FRB Issues Final Rule Amending Regulation D - Reserve Requirements of Depository Institutions

As a result of the increase in total reserve liabilities and net transaction accounts of all depository institutions between June 30, 2010 and June 30, 2011, the FRB issued a final rule (the “Final Rule”) amending Regulation D, Reserve Requirements of Depository Institutions.  The Final Rule reflects the annual indexing of the reserve requirement exemption amount and the low reserve tranche for 2012.  Specifically, the Final Rule sets the reserve requirement exemption amount for 2012, the amount of total reservable liabilities of each depository institution that is subject to a 0% percent reserve requirement, at $11.5 million (up from $10.7 million in 2011).  The Final Rule also sets the low reserve tranche for 2012, the amount of net transaction accounts at each depository institution that is subject to a 3% reserve requirement, at $71.0 million (up from $58.8 million in 2011).  Thus, a net transaction account balance of $11.5 million or less will be exempt from reserve requirements, while a net transaction account balance above $11.5 million and up to and including $71.0 million will be subject to a 3% reserve requirement and a net transaction account balance above $71.0 million will be subject to a 10% reserve requirement.  The Final Rule also increases the nonexempt deposit cutoff level (to $271.5 million for 2012, up from $252.6 million in 2011) and the reduced reporting limit (to $1.521 billion in 2012, up from $1.415 billion for 2011). 

For depository institutions that report deposit data weekly, the new low reserve tranche and reserve requirement exemption amount will apply to the fourteen-day reserve computation period that begins Tuesday, November 29, 2011, and the corresponding fourteen-day reserve maintenance period that begins Thursday, December 29, 2011.  For depository institutions that report deposit data quarterly, the new low reserve tranche and reserve requirement exemption amount will apply to the seven-day reserve computation period that begins Tuesday, December 20, 2011, and the corresponding seven-day reserve maintenance period that begins Thursday, January 19, 2012.   The Final Rule notes that for all depository institutions, the new values of the nonexempt deposit cutoff level, the reserve requirement exemption amount, and the reduced reporting limit will be used to determine the frequency at which a depository institution submits deposit reports.  The Final Rule will become effective 30 days after its date of publication in the Federal Register.