The Fed Aggregate Reserves of Depository Institutions and the Monetary Base H 3 September 17, 2020

Only if checks drawn by all participants in the arrangement exceed the total balance of funds available that day (i.e. funds from the time deposit that has matured that day as well as any deposits made to participating accounts during the day) is a time deposit withdrawn prior to maturity so as to incur an early withdrawal penalty. The arrangement may be marketed as providing the customer unlimited access to its funds with a high rate of interest. (b) Consistent with the Board’s intent, IBFs may purchase IBF-eligible assets[1] from, or sell such assets to, any domestic or foreign customer provided that the transactions are at arm’s length without recourse. (c) Cash items forwarded to a Federal Reserve Bank for collection and credit are not included in an institution’s balance maintained to satisfy its reserve balance requirement until the expiration of the time specified in the appropriate time schedule established under Regulation J, “Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers Through Fedwire” (12 CFR part 210).

The 3 percent not transferred to the larger depository institution is the amount of the larger depository institution’s deposit that the small depository institution must maintain as transaction account reserves. Because the larger depository institution books this second part of the transaction as a “fed funds” transaction, the larger depository institution does not maintain reserves on the funds that it receives back from the small depository institution. As a consequence, the larger depository institution has available for its use 97 percent of the amount transferred to the small depository institution. Had the larger depository institution not entered into the transaction, it would have maintained transaction account reserves of 10 percent on that amount, and would have had only 90 percent of that amount for use in its business. Depository institutions have asked for guidance as to when a depositor may maintain more than one savings deposit and be permitted to make all the transfers or withdrawals authorized for savings deposits under Regulation D from each savings deposit.

  1. A demand deposit account holds funds until they need to be withdrawn, such as with a checking or savings account.
  2. Under the Board’s regulations, as specified in § 204.8 of Regulation D, IBFs are limited, with respect to making loans and accepting deposits, to dealing only with certain customers, such as other IBFs and foreign offices of other organizations, and with the entity establishing the IBF.
  3. (iii) A depository institution will not be regarded as doing business with the general public if it meets two conditions.

(2) Depository institution does not include international organizations such as the World Bank, the Inter-American Development Bank, and the Asian Development Bank. The term does not mean a corporation owned by an individual, a partnership or other association. (3) Except as may be otherwise provided by the Board, an Edge Corporation (12 U.S.C. 611 et seq.) or an Agreement Corporation (12 U.S.C. 601 et seq.) is required to comply with the provisions of this part in the same manner and to the same extent as a member bank.

What Is a Reservable Deposit?

The 75 per cent or more ownership rule applies regardless of the type of depository institution. (i) A depository institution may be regarded as organized solely to do business with other depository institutions even if, as an incidental part to its activities, it does business to a limited extent with entities other than depository institutions. The extent to which the institution may do business with other entities and continue to be regarded as a bankers’ bank is specified in paragraph (a)(2)(iii) of this section. A depository institution shall segregate on its books and records the asset and liability accounts of its IBF and submit reports concerning the operations of its IBF as required by the Board.

Under section 19(a) of the Federal Reserve Act, the Board is authorized to define the terms used in section 19, and to prescribe regulations to implement and prevent evasions of the requirements of that section. (4) On the date on which supplemental reserve requirements are imposed, the total amount of basic reserve requirements is not less than the amount of reserves that would be required on transaction accounts and nonpersonal time deposits under the initial reserve ratios established by the Monetary Control Act of 1980 (Pub. L. 96–221) in effect on September 1, 1980. (2) For institutions that file a report of deposits quarterly, the balances maintained to satisfy reserve balance requirements shall be maintained during an interval of either six or seven consecutive 14-day maintenance periods, depending on when the interval begins and ends.

Board of Governors Total Reserves, Adjusted for Changes in Reserve Requirements (DISCONTINUED)

The Act further limits a national bank’s holdings of any one security to no more than an amount equal to 10 percent of the bank’s capital stock and surplus. However, these limitations do not apply to obligations issued by the United States, general obligations of any state and certain obligations of Federal agencies. In addition, generally a national bank is not permitted to purchase for its own account stock of any corporation. (ii) A depository institution will be regarded as being owned primarily by the institutions with which it does business if 75 per cent or more of its capital is owned by other depository institutions.

Reserves of Depository Institutions: Total/Total Assets, All Commercial Banks

The Bank of New York then delivers the ADRs to the broker who initially purchased them. The most common example of a depositary receipt is the American depositary receipt (ADR). Other examples include the global depositary receipt (GDR) and international depositary receipt (IDR).

Under section 19(a) of the Federal Reserve Act (12 U.S.C. 461(a)) the Board is authorized to define terms used in section 19, and to prescribe regulations to implement and to prevent evasions of the requirements of that section. Section 19(b)(2) establishes general reserve requirements on transaction accounts and nonpersonal time deposits. In addition to its authority to define terms under section 19(a), section 19(g) of the Federal Reserve Act also give the Board the specific authority to define terms relating to deductions allowed in reserve computation, including “balances due from other banks.” This interpretation is adopted under these authorities. (b) Because the expiration of the Depository Institutions Deregulation Act (title II of Pub. L. 96–221) on April 1, 1986, removed the authority to set interest rate ceilings on deposits, one of the purposes for adopting the interpretation was eliminated.

The reserve requirement ratio for nonpersonal time deposits has been set to zero percent for well over twenty years. An institution’s transaction accounts up to a specified amount–known as the exemption amount–are subject to a reserve requirement of zero percent. An institution’s transaction accounts that exceed the exemption amount but are at or beneath another amount–known as the low reserve tranche–are reserves of depository institutions subject to a reserve requirement of three percent. An institution’s transaction accounts that exceed the low reserve tranche are subject to a reserve requirement of ten percent. Regulation D implements the reserve requirements of section 19 of the FRA.3 Regulation D defines the institutions and the deposits that are subject to reserve requirements and sets forth how reserve requirements are calculated.

Reserve Balances Required; Bottom of Penalty-Free Band (DISCONTINUED)

For depository institutions, Eurocurrency liabilities are net balances due by a depository institution to its non-U.S. For U.S. branches and agencies of foreign banks, Eurocurrency liabilities are net balances due to its foreign bank after making certain deductions. Eurocurrency liabilities also include certain assets acquired from U.S. offices and held by non-U.S.

To assure the effectiveness of Regulation D and to prevent evasions thereof, the Board considers that such guaranteed foreign-branch deposits must be subject to that regulation. (2) For example, where a trust department engages in securities lending activities for trust accounts, overdrafts might occur because of the trust department’s attempt to “normalize” the effects of timing delays between the depository institution’s receipt of the cash collateral from the broker and the trust department’s posting of the transaction to the lending trust account. When securities are lent from a trust customer to a broker that pledges cash as collateral, the broker usually transfers the cash collateral to the depository institution on the day that the securities are made available. While the institution has the use of the funds from the time of the transfer, the trust department’s normal posting procedures may not reflect receipt of the cash collateral by the individual account until the next day. On the day that the loan is terminated, the broker returns the securities to the lending trust account and the trust customer’s account is debited for the amount of the cash collateral that is returned by the depository institution to the broker. The trust department, however, often does not liquidate the investment made with the cash collateral until the day after the loan terminates, a delay that normally causes a one day overdraft in the trust account.

Can a Bank Run Out of Reserves?

For each computation period, there is a linked “reserve maintenance period” over which the institution must satisfy its reserve requirement. A reservable deposit is any bank deposit that is subject to reserve requirements imposed by the U.S. Such a deposit may be used, in part, as a loan via the process of fractional reserve banking.

Torna in alto