[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Rules and Regulations]
[Pages 65506-65507]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26206]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-1334]
Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim final rule.
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SUMMARY: The Board is revising its interim final rule amending
Regulation D, Reserve Requirements of Depository Institutions, to alter
the formula by which earnings on excess reserves of depository
institutions are calculated. The remainder of the interim final rule,
including the period during which comments may be submitted, is
unchanged from the interim final rule as published on October 9, 2008.
DATES: Effective date is November 4, 2008; applicability date is
October 23, 2008.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Counsel
(202/452-3565), Legal Division, or Margaret Gillis DeBoer, Senior
Financial Analyst
[[Page 65507]]
(202/452-3139), Division of Monetary Affairs; for users of
Telecommunications Device for the Deaf (TDD) only, contact (202/263-
4869); Board of Governors of the Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
I. Background
On October 9, 2008, the Board published in the Federal Register an
interim final rule amending Regulation D (Reserve Requirements of
Depository Institutions) to direct the Federal Reserve Banks to pay
interest on balances held at Reserve Banks to satisfy reserve
requirements (``required reserve balances'') and balances held in
excess of required reserve balances and clearing balances (``excess
balances'') (73 FR 59482) (Oct. 9, 2008). At that time, the Board
announced two formulas by which the amount of earnings payable on
required reserve balances and excess balances will be calculated. For
required reserve balances, the Board set the initial rate of interest
to be the average federal funds rate target established by the Federal
Open Market Committee (FOMC) over the reserve maintenance period less
10 basis points. For excess balances, the Board set the initial rate of
interest to be the lowest federal funds rate target established by the
FOMC in effect during the reserve maintenance period minus 75 basis
points. The Board stated that it may adjust the formula for the
interest rate on excess balances in light of experience and evolving
market conditions.
The Board has judged that a narrower spread between the target
funds rate and the rate on excess balances at this time would help
foster trading in the funds market at rates closer to the target rate.
Accordingly, the Board is altering the formula so that the rate on
excess balances will be set equal to the lowest FOMC target rate in
effect during the reserve maintenance period less 35 basis points. This
change will become effective for the maintenance periods beginning
Thursday, October 23. The Board will continue to evaluate the
appropriate setting of the rate on excess balances in light of evolving
market conditions and make further adjustments as needed.
Administrative Procedure Act
In accordance with the Administrative Procedure Act (``APA'')
section 553(b) (5 U.S.C. 553(b)), the Board finds, for good cause, that
providing notice and an opportunity for public comment before the
effective date of this rule would be contrary to the public interest.
In addition, pursuant to APA section 553(d) (5 U.S.C. 553(d)), the
Board finds good cause for making this amendment effective without 30
days advance publication. The Board has adopted this rule in light of,
and to help address, the continuing unusual and exigent circumstances
in the financial markets. This rule provides tools for carrying out
monetary policy more effectively. Thus, the Board believes that any
delay in implementing the rule would prove contrary to the public
interest.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires an agency that is issuing a
final rule to prepare and make available a regulatory flexibility
analysis that describes the impact of the final rule on small entities.
5 U.S.C. 603(a). The Regulatory Flexibility Act provides that an agency
is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 605(b).
Pursuant to section 605(b), the Board certifies that this interim
final rule will not have a significant economic impact on a substantial
number of small entities. The rule implements a program for paying
interest on certain balances held by eligible institutions at the
Federal Reserve Banks and will benefit small institutions that receive
such interest. There are no new reporting, recordkeeping, or other
compliance requirements associated with this rule.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3506; 5
CFR 1320 Appendix A.1), the Board has reviewed the interim final rule
under authority delegated to the Board by the Office of Management and
Budget. The rule contains no collections of information pursuant to the
Paperwork Reduction Act.
List of Subjects in 12 CFR Part 204
Banks, banking, Reporting and recordkeeping requirements.
Authority and Issuance
0
For the reasons set forth in the preamble, the Board is amending 12 CFR
part 204 as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
0
1. The authority citation for part 204 continues to read as follows:
Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and
3105.
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2. In Sec. 204.10, paragraph (b)(2) is revised to read as follows:
Sec. 204.10 Payment of interest on balances.
* * * * *
(b) * * *
* * * * *
(2) For excess balances, at the lowest targeted federal funds rate
during the reserve maintenance period less 35 basis points.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, October 29, 2008.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. E8-26206 Filed 11-3-08; 8:45 am]
BILLING CODE 6210-01-P