12 U.S.C. § 461 : US Code - Section 461: Reserve requirements

Search 12 U.S.C. § 461 : US Code - Section 461: Reserve requirements

    (a) Establishment of applicable definitions, payment of interest,
      obligations as deposits, and regulations
      The Board is authorized for the purposes of this section (!1) to
    define the terms used in this section,(!1) to determine what shall
    be deemed a payment of interest, to determine what types of
    obligations, whether issued directly by a member bank or indirectly
    by an affiliate of a member bank or by other means, and, regardless
    of the use of the proceeds, shall be deemed a deposit, and to
    prescribe such regulations as it may deem necessary to effectuate
    the purposes of this section (!1) and to prevent evasions thereof.

    (b) Additional definitions; required amounts of reserves maintained
      against transaction accounts; waiver of ratio limits in
      extraordinary circumstances; supplemental reserves; reserves
      related to foreign obligations or assets; exemption for certain
      deposits; discount and borrowing; transitional adjustments;
      additional exemptions and waivers; earnings on balances
      (1) The following definitions and rules apply to this subsection,
    subsection (c) of this section, and sections 248-1, 248a, 342, 360,
    and 412 of this title:
        (A) The term "depository institution" means - 
          (i) any insured bank as defined in section 3 of the Federal
        Deposit Insurance Act [12 U.S.C. 1813] or any bank which is
        eligible to make application to become an insured bank under
        section 5 of such Act [12 U.S.C. 1815];
          (ii) 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;
          (iii) 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;
          (iv) any insured credit union as defined in section 1752 of
        this title or any credit union which is eligible to make
        application to become an insured credit union pursuant to
        section 1781 of this title;
          (v) any member as defined in section 1422 of this title;
          (vi) any savings association (as defined in section 3 of the
        Federal Deposit Insurance Act [12 U.S.C. 1813]) which is an
        insured depository institution (as defined in such Act [12
        U.S.C. 1811 et seq.]) or is eligible to apply to become an
        insured depository institution under the Federal Deposit
        Insurance Act; and
          (vii) for the purpose of sections 248-1, 342 to 347, 347c,
        347d, and 372 of this title, any association or entity which is
        wholly owned by or which consists only of institutions referred
        to in clauses (i) through (vi).

        (B) The term "bank" means any insured or noninsured bank, as
      defined in section 3 of the Federal Deposit Insurance Act [12
      U.S.C. 1813], other than a mutual savings bank or a savings bank
      as defined in such section.
        (C) The term "transaction account" means a deposit or account
      on which the depositor or account holder is permitted to make
      withdrawals by negotiable or transferable instrument, payment
      orders of withdrawal, telephone transfers, or other similar items
      for the purpose of making payments or transfers to third persons
      or others. Such term includes demand deposits, negotiable order
      of withdrawal accounts, savings deposits subject to automatic
      transfers, and share draft accounts.
        (D) The term "nonpersonal time deposits" means a transferable
      time deposit or account or a time deposit or account representing
      funds deposited to the credit of, or in which any beneficial
      interest is held by, a depositor who is not a natural person.
        (E) The term "reservable liabilities" means transaction
      accounts, nonpersonal time deposits, and all net balances, loans,
      assets, and obligations which are, or may be, subject to reserve
      requirements under paragraph (5).
        (F) In order to prevent evasions of the reserve requirements
      imposed by this subsection, after consultation with the Board of
      Directors of the Federal Deposit Insurance Corporation, the
      Comptroller of the Currency, and the National Credit Union
      Administration Board, the Board of Governors of the Federal
      Reserve System is authorized to determine, by regulation or
      order, that an account or deposit is a transaction account if
      such account or deposit may be used to provide funds directly or
      indirectly for the purpose of making payments or transfers to
      third persons or others.
      (2)(A) Each depository institution shall maintain reserves
    against its transaction accounts as the Board may prescribe by
    regulation solely for the purpose of implementing monetary policy -
    
        (i) in a ratio of not greater than 3 percent (and which may be
      zero) for that portion of its total transaction accounts of
      $25,000,000 or less, subject to subparagraph (C); and
        (ii) in the ratio of 12 per centum, or in such other ratio as
      the Board may prescribe not greater than 14 per centum (and which
      may be zero), for that portion of its total transaction accounts
      in excess of $25,000,000, subject to subparagraph (C).

      (B) Each depository institution shall maintain reserves against
    its nonpersonal time deposits in the ratio of 3 per centum, or in
    such other ratio not greater than 9 per centum and not less than
    zero per centum as the Board may prescribe by regulation solely for
    the purpose of implementing monetary policy.
      (C) Beginning in 1981, not later than December 31 of each year
    the Board shall issue a regulation increasing for the next
    succeeding calendar year the dollar amount which is contained in
    subparagraph (A) or which was last determined pursuant to this
    subparagraph for the purpose of such subparagraph, by an amount
    obtained by multiplying such dollar amount by 80 per centum of the
    percentage increase in the total transaction accounts of all
    depository institutions. The increase in such transaction accounts
    shall be determined by subtracting the amount of such accounts on
    June 30 of the preceding calendar year from the amount of such
    accounts on June 30 of the calendar year involved. In the case of
    any such 12-month period in which there has been a decrease in the
    total transaction accounts of all depository institutions, the
    Board shall issue such a regulation decreasing for the next
    succeeding calendar year such dollar amount by an amount obtained
    by multiplying such dollar amount by 80 per centum of the
    percentage decrease in the total transaction accounts of all
    depository institutions. The decrease in such transaction accounts
    shall be determined by subtracting the amount of such accounts on
    June 30 of the calendar year involved from the amount of such
    accounts on June 30 of the previous calendar year.
      (D) Any reserve requirement imposed under this subsection shall
    be uniformly applied to all transaction accounts at all depository
    institutions. Reserve requirements imposed under this subsection
    shall be uniformly applied to nonpersonal time deposits at all
    depository institutions, except that such requirements may vary by
    the maturity of such deposits.
      (3) Upon a finding by at least 5 members of the Board that
    extraordinary circumstances require such action, the Board, after
    consultation with the appropriate committees of the Congress, may
    impose, with respect to any liability of depository institutions,
    reserve requirements outside the limitations as to ratios and as to
    types of liabilities otherwise prescribed by paragraph (2) for a
    period not exceeding 180 days, and for further periods not
    exceeding 180 days each by affirmative action by at least 5 members
    of the Board in each instance. The Board shall promptly transmit to
    the Congress a report of any exercise of its authority under this
    paragraph and the reasons for such exercise of authority.
      (4)(A) The Board may, upon the affirmative vote of not less than
    5 members, impose a supplemental reserve requirement on every
    depository institution of not more than 4 per centum of its total
    transaction accounts. Such supplemental reserve requirement may be
    imposed only if - 
        (i) the sole purpose of such requirement is to increase the
      amount of reserves maintained to a level essential for the
      conduct of monetary policy;
        (ii) such requirement is not imposed for the purpose of
      reducing the cost burdens resulting from the imposition of the
      reserve requirements pursuant to paragraph (2);
        (iii) such requirement is not imposed for the purpose of
      increasing the amount of balances needed for clearing purposes;
      and
        (iv) on the date on which the supplemental reserve requirement
      is imposed, except as provided in paragraph (11), the total
      amount of reserves required pursuant to paragraph (2) is not less
      than the amount of reserves that would be required if the initial
      ratios specified in paragraph (2) were in effect.

      (B) The Board may require the supplemental reserve authorized
    under subparagraph (A) only after consultation with the Board of
    Directors of the Federal Deposit Insurance Corporation, the
    Comptroller of the Currency, and the National Credit Union
    Administration Board. The Board shall promptly transmit to the
    Congress a report with respect to any exercise of its authority to
    require supplemental reserves under subparagraph (A) and such
    report shall state the basis for the determination to exercise such
    authority.
      (C) If a supplemental reserve under subparagraph (A) has been
    required of depository institutions for a period of one year or
    more, the Board shall review and determine the need for continued
    maintenance of supplemental reserves and shall transmit annual
    reports to the Congress regarding the need, if any, for continuing
    the supplemental reserve.
      (D) Any supplemental reserve imposed under subparagraph (A) shall
    terminate at the close of the first 90-day period after such
    requirement is imposed during which the average amount of reserves
    required under paragraph (2) are less than the amount of reserves
    which would be required during such period if the initial ratios
    specified in paragraph (2) were in effect.
      (5) Foreign branches, subsidiaries, and international banking
    facilities of nonmember depository institutions shall maintain
    reserves to the same extent required by the Board of foreign
    branches, subsidiaries, and international banking facilities of
    member banks. In addition to any reserves otherwise required to be
    maintained pursuant to this subsection, any depository institution
    shall maintain reserves in such ratios as the Board may prescribe
    against - 
        (A) net balances owed by domestic offices of such depository
      institution in the United States to its directly related foreign
      offices and to foreign offices of nonrelated depository
      institutions;
        (B) loans to United States residents made by overseas offices
      of such depository institution if such depository institution has
      one or more offices in the United States; and
        (C) assets (including participations) held by foreign offices
      of a depository institution in the United States which were
      acquired from its domestic offices.

      (6) The requirements imposed under paragraph (2) shall not apply
    to deposits payable only outside the States of the United States
    and the District of Columbia, except that nothing in this
    subsection limits the authority of the Board to impose conditions
    and requirements on member banks under section 25 of this Act [12
    U.S.C. 601 et seq.] or the authority of the Board under section
    3105 of this title.
      (7) Any depository institution in which transaction accounts or
    nonpersonal time deposits are held shall be entitled to the same
    discount and borrowing privileges as member banks. In the
    administration of discount and borrowing privileges, the Board and
    the Federal Reserve banks shall take into consideration the special
    needs of savings and other depository institutions for access to
    discount and borrowing facilities consistent with their long-term
    asset portfolios and the sensitivity of such institutions to trends
    in the national money markets.
      (8)(A) Any depository institution required to maintain reserves
    under this subsection which was engaged in business on July 1,
    1979, but was not a member of the Federal Reserve System on or
    after that date, shall maintain reserves against its deposits
    during the first twelve-month period following the effective date
    of this paragraph in amounts equal to one-eighth of those otherwise
    required by this subsection, during the second such twelve-month
    period in amounts equal to one-fourth of those otherwise required,
    during the third such twelve-month period in amounts equal to three-
    eighths of those otherwise required, during the fourth twelve-
    month period in amounts equal to one-half of those otherwise
    required, and during the fifth twelve-month period in amounts equal
    to five-eighths of those otherwise required, during the sixth
    twelve-month period in amounts equal to three-fourths of those
    otherwise required, and during the seventh twelve-month period in
    amounts equal to seven-eighths of those otherwise required. This
    subparagraph does not apply to any category of deposits or accounts
    which are first authorized pursuant to Federal law in any State
    after April 1, 1980.
      (B) With respect to any bank which was a member of the Federal
    Reserve System during the entire period beginning on July 1, 1979,
    and ending on the effective date of the Monetary Control Act of
    1980, the amount of required reserves imposed pursuant to this
    subsection on and after the effective date of such Act that exceeds
    the amount of reserves which would have been required of such bank
    if the reserve ratios in effect during the reserve computation
    period immediately preceding such effective date were applied may,
    at the discretion of the Board and in accordance with such rules
    and regulations as it may adopt, be reduced by 75 per centum during
    the first year which begins after such effective date, 50 per
    centum during the second year, and 25 per centum during the third
    year.
      (C)(i) With respect to any bank which is a member of the Federal
    Reserve System on the effective date of the Monetary Control Act of
    1980, the amount of reserves which would have been required of such
    bank if the reserve ratios in effect during the reserve computation
    period immediately preceding such effective date were applied that
    exceeds the amount of required reserves imposed pursuant to this
    subsection shall, in accordance with such rules and regulations as
    the Board may adopt, be reduced by 25 per centum during the first
    year which begins after such effective date, 50 per centum during
    the second year, and 75 per centum during the third year.
      (ii) If a bank becomes a member bank during the four-year period
    beginning on the effective date of the Monetary Control Act of
    1980, and if the amount of reserves which would have been required
    of such bank, determined as if the reserve ratios in effect during
    the reserve computation period immediately preceding such effective
    date were applied, and as if such bank had been a member during
    such period, exceeds the amount of reserves required pursuant to
    this subsection, the amount of reserves required to be maintained
    by such bank beginning on the date on which such bank becomes a
    member of the Federal Reserve System shall be the amount of
    reserves which would have been required of such bank if it had been
    a member on the day before such effective date, except that the
    amount of such excess shall, in accordance with such rules and
    regulations as the Board may adopt, be reduced by 25 per centum
    during the first year which begins after such effective date, 50
    per centum during the second year, and 75 per centum during the
    third year.
      (D)(i) Any bank which was a member bank on July 1, 1979, and
    which withdrew from membership in the Federal Reserve System during
    the period beginning July 1, 1979, and ending on March 31, 1980,
    shall maintain reserves during the first twelve-month period
    beginning on October 15, 1982, in amounts equal to one-half of
    those otherwise required by this subsection, during the second such
    twelve-month period in amounts equal to two-thirds of those
    otherwise required, and during the third such twelve-month period
    in amounts equal to five-sixths of those otherwise required.
      (ii) Any bank which withdraws from membership in the Federal
    Reserve System after March 31, 1980, shall maintain reserves in the
    same amount as member banks are required to maintain under this
    subsection, pursuant to subparagraphs (B) and (C)(i).
      (E) This subparagraph applies to any depository institution that,
    on August 1, 1978, (i) was engaged in business as a depository
    institution in a State outside the continental limits of the United
    States, and (ii) was not a member of the Federal Reserve System at
    any time on or after such date. Such a depository institution shall
    not be required to maintain reserves against its deposits held or
    maintained at its offices located in a State outside the
    continental limits of the United States until the first day of the
    sixth calendar year which begins after the effective date of the
    Monetary Control Act of 1980. Such a depository institution shall
    maintain reserves against such deposits during the sixth calendar
    year which begins after such effective date in an amount equal to
    one-eighth of that otherwise required by paragraph (2), during the
    seventh such year in an amount equal to one-fourth of that
    otherwise required, during the eighth such year in an amount equal
    to three-eighths of that otherwise required, during the ninth such
    year in an amount equal to one-half of that otherwise required,
    during the tenth such year in an amount equal to five-eighths of
    that otherwise required, during the eleventh such year in an amount
    equal to three-fourths of that otherwise required, and during the
    twelfth such year in an amount equal to seven-eighths of that
    otherwise required.
      (9) This subsection shall not apply with respect to any financial
    institution which - 
        (A) is organized solely to do business with other financial
      institutions;
        (B) is owned primarily by the financial institutions with which
      it does business; and
        (C) does not do business with the general public.

      (10) In individual cases, where a Federal supervisory authority
    waives a liquidity requirement, or waives the penalty for failing
    to satisfy a liquidity requirement, the Board shall waive the
    reserve requirement, or waive the penalty for failing to satisfy a
    reserve requirement, imposed pursuant to this subsection for the
    depository institution involved when requested by the Federal
    supervisory authority involved.
      (11)(A)(i) Notwithstanding the reserve requirement ratios
    established under paragraphs (2) and (5) of this subsection, a
    reserve ratio of zero per centum shall apply to any combination of
    reservable liabilities, which do not exceed $2,000,000 (as adjusted
    under subparagraph (B)), of each depository institution.
      (ii) Each depository institution may designate, in accordance
    with such rules and regulations as the Board shall prescribe, the
    types and amounts of reservable liabilities to which the reserve
    ratio of zero per centum shall apply, except that transaction
    accounts which are designated to be subject to a reserve ratio of
    zero per centum shall be accounts which would otherwise be subject
    to a reserve ratio of 3 per centum under paragraph (2).
      (iii) The Board shall minimize the reporting necessary to
    determine whether depository institutions have total reservable
    liabilities of less than $2,000,000 (as adjusted under subparagraph
    (B)). Consistent with the Board's responsibility to monitor and
    control monetary and credit aggregates, depository institutions
    which have reserve requirements under this subsection equal to zero
    per centum shall be subject to less overall reporting requirements
    than depository institutions which have a reserve requirement under
    this subsection that exceeds zero per centum.
      (B)(i) Beginning in 1982, not later than December 31 of each
    year, the Board shall issue a regulation increasing for the next
    succeeding calendar year the dollar amount specified in
    subparagraph (A), as previously adjusted under this subparagraph,
    by an amount obtained by multiplying such dollar amount by 80 per
    centum of the percentage increase in the total reservable
    liabilities of all depository institutions.
      (ii) The increase in total reservable liabilities shall be
    determined by subtracting the amount of total reservable
    liabilities on June 30 of the preceding calendar year from the
    amount of total reservable liabilities on June 30 of the calendar
    year involved. In the case of any such twelve-month period in which
    there has been a decrease in the total reservable liabilities of
    all depository institutions, no adjustment shall be made. A
    decrease in total reservable liabilities shall be determined by
    subtracting the amount of total reservable liabilities on June 30
    of the calendar year involved from the amount of total reservable
    liabilities on June 30 of the previous calendar year.
      (12) Earnings on balances. - 
        (A) In general. - Balances maintained at a Federal Reserve bank
      by or on behalf of a depository institution may receive earnings
      to be paid by the Federal Reserve bank at least once each
      calendar quarter, at a rate or rates not to exceed the general
      level of short-term interest rates.
        (B) Regulations relating to payments and distributions. - The
      Board may prescribe regulations concerning - 
          (i) the payment of earnings in accordance with this
        paragraph;
          (ii) the distribution of such earnings to the depository
        institutions which maintain balances at such banks, or on whose
        behalf such balances are maintained; and
          (iii) the responsibilities of depository institutions,
        Federal Home Loan Banks, and the National Credit Union
        Administration Central Liquidity Facility with respect to the
        crediting and distribution of earnings attributable to balances
        maintained, in accordance with subsection (c)(1)(A), in a
        Federal Reserve bank by any such entity on behalf of depository
        institutions.

        (C) Depository institutions defined. - For purposes of this
      paragraph, the term "depository institution", in addition to the
      institutions described in paragraph (1)(A), includes any trust
      company, corporation organized under section 25A [12 U.S.C. 611
      et seq.] or having an agreement with the Board under section 25
      [12 U.S.C. 601 et seq.], or any branch or agency of a foreign
      bank (as defined in section 3101 of this title).
    (c) Promulgation of rules and regulations respecting maintenance of
      balances
      (1) Reserves held by a depository institution to meet the
    requirements imposed pursuant to subsection (b) of this section
    shall, subject to such rules and regulations as the Board shall
    prescribe, be in the form of - 
        (A) balances maintained for such purposes by such depository
      institution in the Federal Reserve bank of which it is a member
      or at which it maintains an account, except that (i) the Board
      may, by regulation or order, permit depository institutions to
      maintain all or a portion of their required reserves in the form
      of vault cash, except that any portion so permitted shall be
      identical for all depository institutions, and (ii) vault cash
      may be used to satisfy any supplemental reserve requirement
      imposed pursuant to subsection (b)(4) of this section, except
      that all such vault cash shall be excluded from any computation
      of earnings pursuant to subsection (b) of this section; and
        (B) balances maintained by a depository institution in a
      depository institution which maintains required reserve balances
      at a Federal Reserve bank, in a Federal Home Loan Bank, or in the
      National Credit Union Administration Central Liquidity Facility,
      if such depository institution, Federal Home Loan Bank, or
      National Credit Union Administration Central Liquidity Facility
      maintains such funds in the form of balances in a Federal Reserve
      bank of which it is a member or at which it maintains an account.
      Balances received by a depository institution from a second
      depository institution and used to satisfy the reserve
      requirement imposed on such second depository institution by this
      section shall not be subject to the reserve requirements of this
      section imposed on such first depository institution, and shall
      not be subject to assessments or reserves imposed on such first
      depository institution pursuant to section 7 of the Federal
      Deposit Insurance Act (12 U.S.C. 1817), section 404 of the
      National Housing Act (12 U.S.C. 1727),(!1) or section 202 of the
      Federal Credit Union Act (12 U.S.C. 1782).

      (2) The balances maintained to meet the reserve requirements of
    subsection (b) of this section by a depository institution in a
    Federal Reserve bank or passed through a Federal Home Loan Bank or
    the National Credit Union Administration Central Liquidity Facility
    or another depository institution to a Federal Reserve bank may be
    used to satisfy liquidity requirements which may be imposed under
    other provisions of Federal or State law.