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Circular Letters

Circular Letter 5550

October 24, 2001

To: All Depository Institutions and Others Concerned in the Third Federal Reserve District

Attention: Chief Operating Officers and Accounting Officers

Subject: REGULATION D - ANNUAL ADJUSTMENTS FOR THE CALCULATION OF RESERVE REQUIREMENTS

Summary:

The Federal Reserve Board has announced the annual adjustments in the amount of net transaction accounts used in the calculation of reserve requirements and the cutoff levels used to determine the detail and frequency of deposit reporting.

For net transaction accounts in 2002, the first $5.7 million, up from $5.5 million in 2001, will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts over $5.7 million to and including $41.3 million, down from $42.8 million in 2001. A 10 percent reserve ratio will be applied above $41.3 million.

Additionally, the Board increased the deposit cutoff level that is used with the exemption level to determine the frequency and detail of deposit reporting.

Effective September 1, 2002, depository institutions with total reservable liabilities greater than the exemption level ($5.7 million) will be subject to detailed deposit reporting and will be called nonexempt institutions. Those nonexempt institutions with total deposits greater than or equal to $106.9 million, up from the $101.0 million cutoff that became effective September 1, 2001, must report their deposit levels weekly. Those with total deposits less than $106.9 million must report their deposit levels quarterly.

Depository institutions with total reservable liabilities equal to or less than the exemption level of $5.7 million are not subject to detailed deposit reporting and are called exempt depository institutions. Exempt depository institutions with total deposits of $5.7 million or more file a less detailed deposit report once each year. Exempt depository institutions with total deposits less than $5.7 million are not required to file deposit reports.

U.S. branches and agencies of foreign banks and Edge and agreement corporations must file deposit reports weekly, regardless of size.

For depository institutions that report weekly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will apply to the reserve computation period that begins November 27, 2001, and the corresponding reserve maintenance period that begins December 27, 2001.

For institutions that report quarterly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will apply to the reserve computation period that begins December 18, 2001, and the corresponding reserve maintenance period that begins January 17, 2002.

Additional Information: For further information, contact Heatherun Allison, Counsel, Legal Division (202/452-3565), or June O'Brien, Economist, Division of Monetary Affairs (202/452-3790), Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., Washington, DC 20551.