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Reserve requirements are imposed on
depository institutions for the purpose of facilitating the conduct
of monetary policy by the Federal Reserve. All depository institutions,
including commercial banks, savings banks, savings and loan associations,
credit unions, and agencies or branches of foreign banks located in
the United States are subject to reserve requirements. Reserves are
maintained in the form of vault cash or a non-interest-bearing balance
held with a Federal Reserve Bank directly or indirectly.
Regulation D imposes uniform reserve
requirements on all depository institutions with transaction accounts
or nonpersonal time deposits, defines those deposits, and requires
reports to the Federal Reserve. Transaction accounts are defined to
include checking accounts, NOW accounts, share draft accounts, savings
accounts that allow automatic transfers or third-party payments by
automated teller machines, and accounts that permit more than a limited
number of telephone or preauthorized payments or transfers each month.
At the end of 2001, the reserve requirement on transaction accounts
was 3 percent of the first $41.3 million of net transactions balances
and 10 percent of the rest. So that small depository institutions
are relieved of the burden of reserve requirements, each depository
institution is subject to a zero percent reserve requirement on the
first $5.7 million of its reservable liabilities (at the end of 2001).
Time deposits currently are subject to a zero reserve
requirement. Time deposits are deposits or certificates with original
maturities of at least seven days, and savings accounts (including
money market deposit accounts, regular share accounts at credit unions
and regular accounts at thrifts) that allow the institution to require
at least seven days’ notice by the depositor before withdrawal is
made. To be treated as a savings account, an account that permits
telephone or preauthorized payments or transfers to third parties
must limit such transfers to no more than six per month, of which
no more than three may be by check or share draft.
Section 204.3 of Regulation D sets out the
rules for computing the amount of reserves that must be held and the
methods for holding them. It also permits carryover of certain reserve
excesses and deficiencies and specifies pass-through rules. The Reserve Maintenance Manual also sets out the fundamental rules
of reserve calculation and account maintenance for institutions that
file the Report of Transaction Accounts, Other Deposits and Vault
Cash (FR 2900) either weekly or quarterly. This manual is available
on the Federal Reserve’s financial services web site (http://www.frbservices.org/accounting/CustomerReferenceGuide.cfm).
