[Federal Register Volume 73, Number 222 (Monday, November 17, 2008)]
[Rules and Regulations]
[Pages 67713-67714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26727]
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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; request for public comment.
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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 required reserve balances and on
excess balances of eligible 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: The amendments to Regulation D are effective on November 17,
2008. The rate changes for earnings on required reserve balances and on
excess balances are applicable beginning on November 6, 2008. As
provided in the Federal Register notice published on October 9, 2008,
comments must be received on or before November 21, 2008.
ADDRESSES: You may submit comments, identified by Docket No. R-1334, by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
E-mail: [email protected]. Include the docket number
in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information.
Public comments may also be viewed electronically or in paper in
Room MP-500 of the Board's Martin Building (20th and C Streets, NW.)
between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Counsel
(202/452-3565), Legal Division, or Margaret Gillis DeBoer, Senior
Financial Analyst (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 adjusted the rate of interest for excess
balances from the lowest federal funds rate target in effect during the
reserve maintenance period minus 75 basis points to the lowest federal
funds rate target minus 35 basis points on October 21, 2008. The change
to the rate for excess balances was effective for the reserve
maintenance periods beginning on Thursday, October 23, 2008.
The Board has judged that trading in the federal funds market at
rates closer to the target federal funds rate will be fostered by
setting the rate on excess balances at the lowest targeted federal
funds rate during the reserve maintenance period. For the same reason,
the Board has judged that the rate on required reserve balances should
be set equal to the average target rate over the maintenance period.
Accordingly, the Board is amending Regulation D to make the foregoing
changes. These rate changes will be effective with the reserve
maintenance periods beginning Thursday, November 6, 2008. 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
[[Page 67714]]
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 increases the interest paid on
certain balances held by eligible institutions at the Federal Reserve
Banks and will benefit all institutions, small and large, that receive
such interest. There are no new reporting, record-keeping, 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.
0
2. In Sec. 204.10, paragraphs (b)(1) and (b)(2) are revised to read as
follows:
Sec. 204.10 Payment of interest on balances.
* * * * *
(b) * * *
(1) For required reserve balances, at the average targeted federal
funds rate over the reserve maintenance period; and
(2) For excess balances, at the lowest targeted federal funds rate
during the reserve maintenance period.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, November 5, 2008.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. E8-26727 Filed 11-14-08; 8:45 am]
BILLING CODE 6210-01-P