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 to
define the terms used in this section, 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 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
(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
Director of the Office of Thrift Supervision, 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 the ratio of 3 per centum 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 not
less than 8 per centum, 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
Director of the Office of Thrift Supervision, 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) The supplemental reserve authorized under subparagraph (A)
shall be maintained by the Federal Reserve banks in an Earnings
Participation Account. Except as provided in subsection
(c)(1)(A)(ii) of this section, such Earnings Participation Account
shall receive earnings to be paid by the Federal Reserve banks
during each calendar quarter at a rate not more than the rate
earned on the securities portfolio of the Federal Reserve System
during the previous calendar quarter. The Board may prescribe rules
and regulations concerning the payment of earnings on Earnings
Participation Accounts by Federal Reserve banks under this
paragraph.
(D) 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.
(E) 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.
(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)(4)(C) 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.