[Federal Register Volume 73, Number 222 (Monday, November 17, 2008)]
[Rules and Regulations]
[Pages 67713-67714]
From the Federal Register Online via the Government Printing 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: regs.comments@federalreserve.gov. 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