83 FR 28527 - Regulation D: Reserve Requirements of Depository Institutions

FEDERAL RESERVE SYSTEM

Federal Register Volume 83, Issue 119 (June 20, 2018)

Page Range		28527-28528
FR Document		2018-13267

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 1.95 percent and IOER is 1.95 percent, a 0.20 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 83 Issue 119 (Wednesday, June 20, 2018)

[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Rules and Regulations]
[Pages 28527-28528]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13267]


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FEDERAL RESERVE SYSTEM

12 CFR Part 204

[Docket No. R-1610]
RIN 7100-AF08


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 1.95 percent and IOER is 1.95 
percent, a 0.20 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: 
    Effective date: The amendments to part 204 (Regulation D) are 
effective June 20, 2018.
    Applicability date: The IORR and IOER rate changes were applicable 
on June 14, 2018.

FOR FURTHER INFORMATION CONTACT: Sophia Allison, Special Counsel (202-
452-3565), or Clinton Chen, Senior Attorney (202-452-3952), Legal 
Division, or Thomas Keating, Financial Analyst (202-973-7401), or 
Heather Wiggins, Section Chief (202-452-3674), Division of Monetary 
Affairs; for the hearing impaired, Telecommunications Device for the 
Deaf (TDD) 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.\1\ 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'').\2\ 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.\3\ 
Institutions that are eligible to receive earnings on their balances 
held at Reserve Banks (``eligible institutions'') include depository 
institutions and certain other institutions.\4\ Section 19 also 
provides that the Board may prescribe regulations concerning the 
payment of earnings on balances at a Reserve Bank.\5\ Prior to these 
amendments, Regulation D specified a rate of 1.75 percent for both IORR 
and IOER.\6\
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    \1\ 12 U.S.C. 461(b).
    \2\ 12 CFR 204.5(a)(1).
    \3\ 12 U.S.C. 461(b)(1)(A) & (b)(12)(A).
    \4\ See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also 12 CFR 
204.2(y).
    \5\ See 12 U.S.C. 461(b)(12)(B).
    \6\ 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 1.95 percent and IOER is 1.95 percent. This 0.20 
percentage point increase in the IORR and IOER was associated with an 
increase in the target range for the federal funds rate, from a target 
range of 1\1/2\ to 1\3/4\ percent to a target range of 1\3/4\ to 2 
percent, announced by the FOMC on June 13, 2018, with an effective date 
of June 14, 2018. The FOMC's press release on the same day as the 
announcement noted that:

    Information received since the Federal Open Market Committee met 
in May

[[Page 28528]]

indicates that the labor market has continued to strengthen and that 
economic activity has been rising at a solid rate. Job gains have 
been strong, on average, in recent months, and the unemployment rate 
has declined. Recent data suggest that growth of household spending 
has picked up, while business fixed investment has continued to grow 
strongly. On a 12-month basis, both overall inflation and inflation 
for items other than food and energy have moved close to 2 percent. 
Indicators of longer-term inflation expectations are little changed, 
on balance.
    Consistent with its statutory mandate, the Committee seeks to 
foster maximum employment and price stability. The Committee expects 
that further gradual increases in the target range for the federal 
funds rate will be consistent with sustained expansion of economic 
activity, strong labor market conditions, and inflation near the 
Committee's symmetric 2 percent objective over the medium term. 
Risks to the economic outlook appear roughly balanced.
    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\3/4\ to 2 percent. The stance of monetary 
policy remains accommodative, thereby supporting strong labor market 
conditions and a sustained 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 1.95 percent, effective June 14, 2018. Setting 
the interest rate paid on required and excess reserve balances 5 
basis points below the top of the target range for the federal funds 
rate is intended to foster trading in the federal funds market at 
rates well within the FOMC's target range.

As a result, the Board is amending Sec.  204.10(b)(5) of Regulation D 
to change IORR to 1.95 percent and IOER to 1.95 percent.

III. Administrative Procedure Act

    In general, the Administrative Procedure Act (``APA'') \7\ 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.'' \8\ Section 553(d) 
of the APA also provides that publication at least 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) a rule for which 
the agency finds good cause for shortened notice and publishes its 
reasoning with the rule.\9\
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    \7\ 5 U.S.C. 551 et seq.
    \8\ 5 U.S.C. 553(b)(3)(A).
    \9\ 5 U.S.C. 553(d).
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    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 these 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 these 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.\10\ 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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    \10\ 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,\11\ 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.
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    \11\ 44 U.S.C. 3506; see 5 CFR part 1320 Appendix A.1.
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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.......................................................         1.95
IOER.......................................................         1.95
------------------------------------------------------------------------

* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, June 15, 2018.
Ann Misback,
Secretary of the Board.
[FR Doc. 2018-13267 Filed 6-19-18; 8:45 am]
BILLING CODE 6210-01-P

Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Rules and Regulations 28527

charged on primary credit and § 201.51 Interest rates applicable to credit 452–3565), or Clinton Chen, Senior
secondary credit would permit insured extended by a Federal Reserve Bank.7 Attorney (202–452–3952), Legal
depository institutions to profit (a) Primary credit. The interest rate at Division, or Thomas Keating, Financial
improperly from the difference in the each Federal Reserve Bank for primary Analyst (202–973–7401), or Heather
current rate and the announced credit provided to depository Wiggins, Section Chief (202–452–3674),
increased rate. Finally, because delay institutions under § 201.4(a) is 2.50 Division of Monetary Affairs; for the
would undermine the Board’s action in percent. hearing impaired, Telecommunications
responding to economic data and (b) Secondary credit. The interest rate Device for the Deaf (TDD) 202–263–
conditions, the Board has determined at each Federal Reserve Bank for 4869; Board of Governors of the Federal
that ‘‘good cause’’ exists within the secondary credit provided to depository Reserve System, 20th and C Streets NW,
meaning of the APA to dispense with institutions under § 201.4(b) is 3.00 Washington, DC 20551.
the notice, public comment, and percent. SUPPLEMENTARY INFORMATION:
delayed effective date procedures of the * * * * *
I. Statutory and Regulatory Background
APA with respect to the final By order of the Board of Governors of the
amendments to Regulation A. Federal Reserve System, June 15, 2018. For monetary policy purposes, section
Ann Misback, 19 of the Federal Reserve Act (‘‘the
Regulatory Flexibility Analysis Act’’) imposes reserve requirements on
Secretary of the Board.
certain types of deposits and other
The Regulatory Flexibility Act [FR Doc. 2018–13270 Filed 6–19–18; 8:45 am]
liabilities of depository institutions.1
(‘‘RFA’’) does not apply to a rulemaking BILLING CODE P
Regulation D, which implements section
where a general notice of proposed
19 of the Act, requires that a depository
rulemaking is not required.5 As noted
FEDERAL RESERVE SYSTEM institution meet reserve requirements by
previously, a general notice of proposed
holding cash in its vault, or if vault cash
rulemaking is not required if the final
12 CFR Part 204 is insufficient, by maintaining a balance
rule involves a matter relating to loans.
in an account at a Federal Reserve Bank
Furthermore, the Board has determined [Docket No. R–1610]
(‘‘Reserve Bank’’).2 Section 19 also
that it is unnecessary and contrary to
RIN 7100–AF08 provides that balances maintained by or
the public interest to publish a general
on behalf of certain institutions in an
notice of proposed rulemaking for this Regulation D: Reserve Requirements account at a Reserve Bank may receive
final rule. Accordingly, the RFA’s of Depository Institutions earnings to be paid by the Reserve Bank
requirements relating to an initial and
AGENCY: Board of Governors of the at least once each quarter, at a rate or
final regulatory flexibility analysis do
Federal Reserve System. rates not to exceed the general level of
not apply.
ACTION: Final rule.
short-term interest rates.3 Institutions
Paperwork Reduction Act that are eligible to receive earnings on
SUMMARY: The Board of Governors of the their balances held at Reserve Banks
In accordance with the Paperwork Federal Reserve System (‘‘Board’’) is (‘‘eligible institutions’’) include
Reduction Act (‘‘PRA’’) of 1995,6 the amending Regulation D (Reserve depository institutions and certain other
Board reviewed the final rule under the Requirements of Depository Institutions) institutions.4 Section 19 also provides
authority delegated to the Board by the to revise the rate of interest paid on that the Board may prescribe regulations
Office of Management and Budget. The balances maintained to satisfy reserve concerning the payment of earnings on
final rule contains no requirements balance requirements (‘‘IORR’’) and the balances at a Reserve Bank.5 Prior to
subject to the PRA. rate of interest paid on excess balances these amendments, Regulation D
List of Subjects in 12 CFR Part 201 (‘‘IOER’’) maintained at Federal Reserve specified a rate of 1.75 percent for both
Banks by or on behalf of eligible IORR and IOER.6
Banks, Banking, Federal Reserve institutions. The final amendments
II. Amendments to IORR and IOER
System, Reporting and recordkeeping. specify that IORR is 1.95 percent and
IOER is 1.95 percent, a 0.20 percentage The Board is amending § 204.10(b)(5)
Authority and Issuance point increase from their prior levels. of Regulation D to specify that IORR is
The amendments are intended to 1.95 percent and IOER is 1.95 percent.
For the reasons set forth in the This 0.20 percentage point increase in
preamble, the Board is amending 12 enhance the role of such rates of interest
in moving the Federal funds rate into the IORR and IOER was associated with
CFR part 201 to read as follows: an increase in the target range for the
the target range established by the
Federal Open Market Committee federal funds rate, from a target range of
PART 201—EXTENSIONS OF CREDIT
(‘‘FOMC’’ or ‘‘Committee’’). 11⁄2 to 13⁄4 percent to a target range of
BY FEDERAL RESERVE BANKS
DATES: 13⁄4 to 2 percent, announced by the
(REGULATION A)
Effective date: The amendments to FOMC on June 13, 2018, with an
part 204 (Regulation D) are effective effective date of June 14, 2018. The
■ 1. The authority citation for part 201 FOMC’s press release on the same day
continues to read as follows: June 20, 2018.
Applicability date: The IORR and as the announcement noted that:
Authority: 12 U.S.C. 248(i)–(j) and (s), 343 IOER rate changes were applicable on Information received since the Federal
et seq., 347a, 347b, 347c, 348 et seq., 357, June 14, 2018. Open Market Committee met in May
374, 374a, and 461.
sradovich on DSK3GMQ082PROD with RULES

FOR FURTHER INFORMATION CONTACT:
1 12 U.S.C. 461(b).
■ 2. In § 201.51, paragraphs (a) and (b) Sophia Allison, Special Counsel (202–
2 12 CFR 204.5(a)(1).
are revised to read as follows: 7 The primary, secondary, and seasonal credit
3 12 U.S.C. 461(b)(1)(A) & (b)(12)(A).
4 See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also
rates described in this section apply to both
55 U.S.C. 603 and 604. advances and discounts made under the primary, 12 CFR 204.2(y).
6 44 5 See 12 U.S.C. 461(b)(12)(B).
U.S.C. 3506; see 5 CFR part 1320 Appendix secondary, and seasonal credit programs,
A.1. respectively. 6 See 12 CFR 204.10(b)(5).

VerDate Sep<11>2014 16:19 Jun 19, 2018 Jkt 244001 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 E:\FR\FM\20JNR1.SGM 20JNR1

Document Created: 2018-06-20 00:19:49
Document Modified: 2018-06-20 00:19:49

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		Effective date: The amendments to part 204 (Regulation D) are effective June 20, 2018.
Contact		Sophia Allison, Special Counsel (202- 452-3565), or Clinton Chen, Senior Attorney (202-452-3952), Legal Division, or Thomas Keating, Financial Analyst (202-973-7401), or Heather Wiggins, Section Chief (202-452-3674), Division of Monetary Affairs; for the hearing impaired, Telecommunications Device for the Deaf (TDD) 202-263-4869; Board of Governors of the Federal Reserve System, 20th and C Streets NW, Washington, DC 20551.
FR Citation		83 FR 28527
RIN Number		7100-AF08
CFR Associated		Banks; Banking and Reporting and Recordkeeping Requirements