Annual Adjustment For Reserve Calculations And Deposit Reporting - Brief Article

Federal Reserve Bulletin, Jan, 2001

The Federal Reserve Board announced on November 16, 2000, 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.

All depository institutions must retain a percentage of certain types of deposits in the form of vault cash, or as a deposit in a Federal Reserve Bank, or a pass-through account at a correspondent institution. Reserve requirements currently are assessed on the depository institution's net transaction accounts (mostly checking accounts).

For net transaction accounts in 2001, the first $5.5 million, up from $5 million in 2000, will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts over $5.5 million to and including $42.8 million, down from $44.3 million in 2000. A 10 percent reserve ratio will be applied to net transaction accounts above $42.8 million.

These annual adjustments, known as the low reserve tranche adjustment and the reservable liabilities exemption adjustment, are based on growth in net transaction accounts and total reservable liabilities respectively at all depository institutions between June 30, 1999, and June 30, 2000.

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 2001, depository institutions with total reservable liabilities greater than the exemption level ($5.5 million) are subject to detailed deposit reporting and are called nonexempt institutions. Those nonexempt institutions with total deposits greater than or equal to $101 million, up from the $95 million cutoff that became effective September 2000, must report their deposit levels weekly. Those with total deposits of less than $101 million must report their deposit levels quarterly.

Depository institutions with total reservable liabilities equal to or less than the exemption level of $5.5 million are not subject to detailed deposit reporting and are called exempt depository institutions. Exempt depository institutions with total deposits of $5.5 million or more file a less detailed deposit report once each year. Exempt depository institutions with total deposits of less than $5.5 million are not required to file deposit reports. In July 2000, the Board discontinued the quarterly report previously used by some exempt institutions (form FR 2910q).

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 28, 2000, and the corresponding reserve maintenance period that begins December 28, 2000.

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 19, 2000, and the corresponding reserve maintenance period that begins January 18, 2001.