[Federal Register Volume 80, Number 245 (Tuesday, December 22, 2015)]
[Rules and Regulations]
[Pages 79460-79461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32099]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Regulation D; Docket No. R-1527]
RIN 7100 AE-41
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 0.50 percent and IOER is 0.50
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 December
22, 2015. The IORR and IOER rate changes were applicable on December
17, 2015, as specified in 12 CFR 204.10(b)(5), as amended.
FOR FURTHER INFORMATION CONTACT: Clinton N. Chen, Attorney (202-452-
3952), or Stephanie Martin, Associate General Counsel (202-452-3198),
Legal Division, or Thomas R. 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
[[Page 79461]]
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 \1/4\ 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). Federal Reserve Act section 19(b)(12)(C), 12
U.S.C. 461(b)(12)(C), see 12 CFR 204.2(y) (definition of ``eligible
institution'').
\3\ See Federal Reserve Act section 19(b)(12), 12 U.S.C.
461(b)(12).
\4\ See Sec. 204.10(b)(5) of Regulation D, 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 0.50 percent and IOER is 0.50 percent. This 0.25
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 0 to \1/4\ percent to a target range of \1/4\ to \1/2\
percent, announced by the FOMC on December 16, 2015 with an effective
date of December 17, 2015. A press release on the same day as the
announcement noted that:
The Committee judges that there has been considerable
improvement in labor market conditions this year, and it is
reasonably confident that inflation will rise, over the medium term,
to its 2 percent objective. Given the economic outlook, and
recognizing the time it takes for policy actions to affect future
economic outcomes, the Committee decided to raise the target range
for the federal funds rate to \1/4\ to \1/2\ percent. The stance of
monetary policy remains accommodative after this increase, thereby
supporting further improvement in labor market conditions and a
return to 2 percent inflation.
A Federal Reserve Implementation note released simultaneously with
the announcement indicated 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 0.50 percent, effective December 17, 2015.
As a result, section 204.10(b)(5) of Regulation D has been amended
to change IORR to 0.50 percent and IOER to 0.50 percent.
III. Administrative Procedure Act
The Board has determined that delaying implementation of the
changes in the rates of interest to be paid in order to allow notice
and public comment would be unnecessary and contrary to the public
interest. Therefore, the Board has found good cause to not follow the
provisions of 5 U.S.C. 553(b) relating to notice and public
participation. The Board's revisions to these rates were taken with a
view to accommodating commerce and business and with regard to their
bearing upon the general credit situation of the country. Notice and
public participation would prevent the Board's action from being
effective as promptly as necessary in the public interest. A delay
would permit speculators or others to reap unfair profits and could
provoke other consequences contrary to the public interest. Seeking
notice and comment on the rate changes would not aid the persons
affected and would otherwise serve no useful purpose. For these same
reasons, the Board also has found good cause not to provide 30 days
prior notice of the effective date of the rule under 5 U.S.C. 553(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:
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Rate (percent) Effective
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IORR.................................... 0.50 12/17/2015
IOER.................................... 0.50 12/17/2015
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* * * * *
By order of the Board of Governors of the Federal Reserve
System, December 17, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-32099 Filed 12-21-15; 8:45 am]
BILLING CODE 6210-01-P