[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Rules and Regulations]
[Pages 65506-65507]
From the Federal Register Online via the Government Printing 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.


0
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