82 FR 7636 - Regulation D: Reserve Requirements of Depository Institutions

FEDERAL RESERVE SYSTEM

Federal Register Volume 82, Issue 13 (January 23, 2017)

Page Range		7636-7637
FR Document		2017-00613

The Board of Governors of the Federal Reserve System (``Board'') is amending Regulation D (Reserve Requirements of Depository Institutions) to revise the rate of interest paid on balances maintained to satisfy reserve balance requirements (``IORR'') and the rate of interest paid on excess balances (``IOER'') maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORR is 0.75 percent and IOER is 0.75 percent, a 0.25 percentage point increase from their prior levels. The amendments are intended to enhance the role of such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee (``FOMC'' or ``Committee'').

Federal Register, Volume 82 Issue 13 (Monday, January 23, 2017)

[Federal Register Volume 82, Number 13 (Monday, January 23, 2017)]
[Rules and Regulations]
[Pages 7636-7637]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-00613]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Docket No. R-1559]
RIN 7100 AE-67


Regulation D: Reserve Requirements of Depository Institutions

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is amending Regulation D (Reserve Requirements of 
Depository Institutions) to revise the rate of interest paid on 
balances maintained to satisfy reserve balance requirements (``IORR'') 
and the rate of interest paid on excess balances (``IOER'') maintained 
at Federal Reserve Banks by or on behalf of eligible institutions. The 
final amendments specify that IORR is 0.75 percent and IOER is 0.75 
percent, a 0.25 percentage point increase from their prior levels. The 
amendments are intended to enhance the role of such rates of interest 
in moving the Federal funds rate into the target range established by 
the Federal Open Market Committee (``FOMC'' or ``Committee'').

DATES: The amendments to part 204 (Regulation D) are effective January 
23, 2017. The IORR and IOER rate changes were applicable on December 
15, 2016, as specified in 12 CFR 204.10(b)(5), as amended.

FOR FURTHER INFORMATION CONTACT: Clinton Chen, Attorney (202-452-3952), 
or Sophia Allison, Special Counsel (202-452-3198), Legal Division, or 
Thomas Keating, Financial Analyst (202-973-7401), or Laura Lipscomb, 
Section Chief (202-973-7964), 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. Statutory and Regulatory Background

    For monetary policy purposes, section 19 of the Federal Reserve Act 
(``the Act'') imposes reserve requirements on certain types of deposits 
and other liabilities of depository institutions. Regulation D, which 
implements section 19 of the Act, requires that a depository 
institution meet reserve requirements by holding cash in its vault, or 
if vault cash is insufficient, by maintaining a balance in an account 
at a Federal Reserve Bank (``Reserve Bank'').\1\ Section 19 also 
provides that balances maintained by or on behalf of certain 
institutions in an account at a Reserve Bank may receive earnings to be 
paid by the Reserve Bank at least once each quarter, at a rate or rates 
not to exceed the general level of short-term interest rates. 
Institutions that are eligible to receive earnings on their balances 
held at Reserve Banks (``eligible institutions'') include depository 
institutions and certain other institutions.\2\ Section 19 also 
provides that the Board may prescribe regulations concerning the 
payment of earnings on balances at a Reserve Bank.\3\ Prior to these 
amendments, Regulation D specified a rate of 0.50 percent for both IORR 
and IOER.\4\
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    \1\ 12 CFR 204.5(a)(1).
    \2\ Section 19(b)(1)(A) defines ``depository institution'' as 
any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act or any bank which is eligible to make application to 
become an insured bank under section 5 of such Act; any mutual 
savings bank as defined in section 3 of the Federal Deposit 
Insurance Act or any bank which is eligible to make application to 
become an insured bank under section 5 of such Act; any savings bank 
as defined in section 3 of the Federal Deposit Insurance Act or any 
bank which is eligible to make application to become an insured bank 
under section 5 of such Act; any insured credit union as defined in 
section 101 of the Federal Credit Union Act or any credit union 
which is eligible to make application to become an insured credit 
union pursuant to section 201 of such Act; any member as defined in 
section 2 of the Federal Home Loan Bank Act; [and] any savings 
association (as defined in section 3 of the Federal Deposit 
Insurance Act) which is an insured depository institution (as 
defined in such Act) or is eligible to apply to become an insured 
depository institution under the Federal Deposit Insurance Act. See 
12 U.S.C. 461(b)(1)(A). Eligible institution also includes any trust 
company, corporation organized under section 25A or having an 
agreement with the Board under section 25, or any branch or agency 
of a foreign bank (as defined in section 1(b) of the International 
Banking Act of 1978). 12 U.S.C. 461(b)(12)(C); see 12 CFR 204.2(y) 
(definition of ``eligible institution'').
    \3\ See 12 U.S.C. 461(b)(12).
    \4\ See 12 CFR 204.10(b)(5).
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II. Amendments to IORR and IOER

    The Board is amending Sec.  204.10(b)(5) of Regulation D to specify 
that IORR is 0.75 percent and IOER is 0.75 percent. This 0.25 
percentage point increase in

[[Page 7637]]

the IORR and IOER was associated with an increase in the target range 
for the federal funds rate, from a target range of \1/4\ to \1/2\ 
percent to a target range of \1/2\ to \3/4\ percent, announced by the 
FOMC on December 14, 2016 with an effective date of December 15, 2016. 
The FOMC's press release on the same day as the announcement noted 
that:

    Information received since the Federal Open Market Committee met 
in November indicates that the labor market has continued to 
strengthen and that economic activity has been expanding at a 
moderate pace since mid-year. Job gains have been solid in recent 
months and the unemployment rate has declined. Household spending 
has been rising moderately but business fixed investment has 
remained soft. Inflation has increased since earlier this year but 
is still below the Committee's 2 percent longer-run objective, 
partly reflecting earlier declines in energy prices and in prices of 
non-energy imports. Market-based measures of inflation compensation 
have moved up considerably but still are low; most survey-based 
measures of longer-term inflation expectations are little changed, 
on balance, in recent months.
    Consistent with its statutory mandate, the Committee seeks to 
foster maximum employment and price stability. The Committee expects 
that, with gradual adjustments in the stance of monetary policy, 
economic activity will expand at a moderate pace and labor market 
conditions will strengthen somewhat further. Inflation is expected 
to rise to 2 percent over the medium term as the transitory effects 
of past declines in energy and import prices dissipate and the labor 
market strengthens further. Near-term risks to the economic outlook 
appear roughly balanced. The Committee continues to closely monitor 
inflation indicators and global economic and financial developments.
    In view of realized and expected labor market conditions and 
inflation, the Committee decided to raise the target range for the 
federal funds rate to \1/2\ to \3/4\ percent. The stance of monetary 
policy remains accommodative, thereby supporting some further 
strengthening in labor market conditions and a return to 2 percent 
inflation.

    A Federal Reserve Implementation note released simultaneously with 
the announcement stated that:

    The Board of Governors of the Federal Reserve System voted 
unanimously to raise the interest rate paid on required and excess 
reserve balances to 0.75 percent, effective December 15, 2016.

    As a result, the Board is amending Sec.  204.10(b)(5) of Regulation 
D to change IORR to 0.75 percent and IOER to 0.75 percent.

III. Administrative Procedure Act

    In general, the Administrative Procedure Act (12 U.S.C. 551 et 
seq.) (``APA'') imposes three principal requirements when an agency 
promulgates legislative rules (rules made pursuant to congressionally 
delegated authority): (1) Publication with adequate notice of a 
proposed rule; (2) followed by a meaningful opportunity for the public 
to comment on the rule's content; and (3) publication of the final rule 
not less than 30 days before its effective date. The APA provides that 
notice and comment procedures do not apply if the agency for good cause 
finds them to be ``unnecessary, impracticable, or contrary to the 
public interest.'' 12 U.S.C. 553(b)(3)(A). Section 553(d) of the APA 
also provides that publication not less than 30 days prior to a rule's 
effective date is not required for (1) a substantive rule which grants 
or recognizes an exemption or relieves a restriction; (2) interpretive 
rules and statements of policy; or (3) an agency finding good cause for 
shortened notice and publishing its reasoning with the rule. 12 U.S.C. 
553(d).
    The Board has determined that good cause exists for finding that 
the notice, public comment, and delayed effective date provisions of 
the APA are unnecessary, impracticable, or contrary to the public 
interest with respect to the final amendments to Regulation D. The rate 
increases for IORR and IOER that are reflected in the final amendments 
to Regulation D were made with a view towards accommodating commerce 
and business and with regard to their bearing upon the general credit 
situation of the country. Notice and public comment would prevent the 
Board's action from being effective as promptly as necessary in the 
public interest, and would not otherwise serve any useful purpose. 
Notice, public comment, and a delayed effective date would create 
uncertainty about the finality and effectiveness of the Board's action 
and undermine the effectiveness of that action. Accordingly, the Board 
has determined that good cause exists to dispense with the notice, 
public comment, and delayed effective date procedures of the APA with 
respect to the final amendments to Regulation D.

IV. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (``RFA'') does not apply to a 
rulemaking where a general notice of proposed rulemaking is not 
required.\5\ As noted previously, the Board has determined that it is 
unnecessary and contrary to the public interest to publish a general 
notice of proposed rulemaking for this final rule. Accordingly, the 
RFA's requirements relating to an initial and final regulatory 
flexibility analysis do not apply.
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    \5\ 5 U.S.C. 603 and 604.
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V. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (``PRA'') of 1995 
(44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the 
final rule under the authority delegated to the Board by the Office of 
Management and Budget. The final rule contains no requirements subject 
to the PRA.

List of Subjects in 12 CFR Part 204

    Banks, banking, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Board amends 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. Section 204.10 is amended by revising paragraph (b)(5) to read as 
follows:


Sec.  204.10   Payment of interest on balances.

* * * * *
    (b) * * *
    (5) The rates for IORR and IOER are:

------------------------------------------------------------------------
                                                          Rate (percent)
------------------------------------------------------------------------
IORR....................................................            0.75
IOER....................................................            0.75
------------------------------------------------------------------------

* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, January 9, 2017.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2017-00613 Filed 1-19-17; 8:45 am]
 BILLING CODE 6210-01-P

7636 Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations

responding to economic data and institutions under § 201.4(a) is 1.25 SUPPLEMENTARY INFORMATION:
conditions. For these reasons, the Board percent.
(b) Secondary credit. The interest rate I. Statutory and Regulatory Background
has determined that ‘‘good cause’’
within the meaning of the APA exists to at each Federal Reserve Bank for For monetary policy purposes, section
dispense with the notice, public secondary credit provided to depository 19 of the Federal Reserve Act (‘‘the
comment, and delayed effective date institutions under § 201.4(b) is 1.75 Act’’) imposes reserve requirements on
procedures of the APA with respect to percent. certain types of deposits and other
the final amendments to Regulation A. * * * * * liabilities of depository institutions.
By order of the Board of Governors of the
Regulation D, which implements section
Regulatory Flexibility Analysis 19 of the Act, requires that a depository
Federal Reserve System, January 9, 2017.
The Regulatory Flexibility Act institution meet reserve requirements by
Robert deV. Frierson,
(‘‘RFA’’) does not apply to a rulemaking holding cash in its vault, or if vault cash
Secretary of the Board.
where a general notice of proposed is insufficient, by maintaining a balance
rulemaking is not required.2 As noted [FR Doc. 2017–00612 Filed 1–19–17; 8:45 am]
in an account at a Federal Reserve Bank
previously, a general notice of proposed BILLING CODE 6210–01–P
(‘‘Reserve Bank’’).1 Section 19 also
rulemaking is not required if the final provides that balances maintained by or
rule involves a matter relating to loans. on behalf of certain institutions in an
Furthermore, the Board has determined FEDERAL RESERVE SYSTEM
account at a Reserve Bank may receive
that it is unnecessary and contrary to 12 CFR Part 204 earnings to be paid by the Reserve Bank
the public interest to publish a general at least once each quarter, at a rate or
notice of proposed rulemaking for this [Docket No. R–1559] rates not to exceed the general level of
final rule. Accordingly, the RFA’s RIN 7100 AE–67 short-term interest rates. Institutions
requirements relating to an initial and that are eligible to receive earnings on
final regulatory flexibility analysis do Regulation D: Reserve Requirements their balances held at Reserve Banks
not apply. of Depository Institutions (‘‘eligible institutions’’) include
Paperwork Reduction Act AGENCY: Board of Governors of the depository institutions and certain other
Federal Reserve System. institutions.2 Section 19 also provides
In accordance with the Paperwork that the Board may prescribe regulations
Reduction Act (‘‘PRA’’) of 1995 (44 ACTION: Final rule.
concerning the payment of earnings on
U.S.C. 3506; 5 CFR part 1320 Appendix SUMMARY: The Board of Governors of the balances at a Reserve Bank.3 Prior to
A.1), the Board reviewed the final rule Federal Reserve System (‘‘Board’’) is these amendments, Regulation D
under the authority delegated to the amending Regulation D (Reserve specified a rate of 0.50 percent for both
Board by the Office of Management and Requirements of Depository Institutions) IORR and IOER.4
Budget. The final rule contains no to revise the rate of interest paid on
requirements subject to the PRA. II. Amendments to IORR and IOER
balances maintained to satisfy reserve
List of Subjects in 12 CFR Part 201 balance requirements (‘‘IORR’’) and the The Board is amending § 204.10(b)(5)
rate of interest paid on excess balances of Regulation D to specify that IORR is
Banks, banking, Federal Reserve 0.75 percent and IOER is 0.75 percent.
(‘‘IOER’’) maintained at Federal Reserve
System, Reporting and recordkeeping. This 0.25 percentage point increase in
Banks by or on behalf of eligible
Authority and Issuance institutions. The final amendments
1 12 CFR 204.5(a)(1).
For the reasons set forth in the specify that IORR is 0.75 percent and 2 Section 19(b)(1)(A) defines ‘‘depository
preamble, the Board is amending 12 IOER is 0.75 percent, a 0.25 percentage institution’’ as any insured bank as defined in
CFR Chapter II to read as follows: point increase from their prior levels. section 3 of the Federal Deposit Insurance Act or
The amendments are intended to any bank which is eligible to make application to
12 CFR CHAPTER II enhance the role of such rates of interest become an insured bank under section 5 of such
Act; any mutual savings bank as defined in section
in moving the Federal funds rate into
PART 201—EXTENSIONS OF CREDIT 3 of the Federal Deposit Insurance Act or any bank
the target range established by the which is eligible to make application to become an
BY FEDERAL RESERVE BANKS
Federal Open Market Committee insured bank under section 5 of such Act; any
(REGULATION A) savings bank as defined in section 3 of the Federal
(‘‘FOMC’’ or ‘‘Committee’’).
Deposit Insurance Act or any bank which is eligible
■ 1. The authority citation for part 201 DATES: The amendments to part 204 to make application to become an insured bank
continues to read as follows: (Regulation D) are effective January 23, under section 5 of such Act; any insured credit
Authority: 12 U.S.C. 248(i)–(j), 343 et seq., 2017. The IORR and IOER rate changes union as defined in section 101 of the Federal
were applicable on December 15, 2016, Credit Union Act or any credit union which is
347a, 347b, 347c, 348 et seq., 357, 374, 374a, eligible to make application to become an insured
and 461. as specified in 12 CFR 204.10(b)(5), as credit union pursuant to section 201 of such Act;
amended. any member as defined in section 2 of the Federal
■ 2. In § 201.51, paragraphs (a) and (b)
FOR FURTHER INFORMATION CONTACT: Home Loan Bank Act; [and] any savings association
are revised to read as follows: (as defined in section 3 of the Federal Deposit
Clinton Chen, Attorney (202–452–3952), Insurance Act) which is an insured depository
§ 201.51 Interest rates applicable to credit or Sophia Allison, Special Counsel institution (as defined in such Act) or is eligible to
extended by a Federal Reserve Bank.3 (202–452–3198), Legal Division, or apply to become an insured depository institution
(a) Primary credit. The interest rate at Thomas Keating, Financial Analyst under the Federal Deposit Insurance Act. See 12
U.S.C. 461(b)(1)(A). Eligible institution also
each Federal Reserve Bank for primary (202–973–7401), or Laura Lipscomb, includes any trust company, corporation organized
mstockstill on DSK3G9T082PROD with RULES

credit provided to depository Section Chief (202–973–7964), Division under section 25A or having an agreement with the
of Monetary Affairs; for users of Board under section 25, or any branch or agency of
25U.S.C. 603 and 604. Telecommunications Device for the Deaf a foreign bank (as defined in section 1(b) of the
3 The
primary, secondary, and seasonal credit International Banking Act of 1978). 12 U.S.C.
(TDD) only, contact 202–263–4869; 461(b)(12)(C); see 12 CFR 204.2(y) (definition of
rates described in this section apply to both
advances and discounts made under the primary,
Board of Governors of the Federal ‘‘eligible institution’’).
secondary, and seasonal credit programs, Reserve System, 20th and C Streets 3 See 12 U.S.C. 461(b)(12).

respectively. NW., Washington, DC 20551. 4 See 12 CFR 204.10(b)(5).

VerDate Sep<11>2014 18:54 Jan 19, 2017 Jkt 241001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\23JAR1.SGM 23JAR1

Document Created: 2017-01-20 01:29:53
Document Modified: 2017-01-20 01:29:53

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Final rule.
Dates		The amendments to part 204 (Regulation D) are effective January 23, 2017. The IORR and IOER rate changes were applicable on December 15, 2016, as specified in 12 CFR 204.10(b)(5), as amended.
Contact		Clinton Chen, Attorney (202-452-3952), or Sophia Allison, Special Counsel (202-452-3198), Legal Division, or Thomas Keating, Financial Analyst (202-973-7401), or Laura Lipscomb, Section Chief (202-973-7964), 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.
FR Citation		82 FR 7636
RIN Number		7100 AE67
CFR Associated		Banks; Banking and Reporting and Recordkeeping Requirements