F e d e r a l R e s e r v e B a n k OF DALLAS
ROBERT D. MCTEER, JR. p r e s id e n t DALLAS TEXAS ANP CHIEF EXECUTIVE OFFICER JUIle 30, 1994 7 5 2 6 5 -5 9 0 6
Notice 94-63
TO: The Chief Executive Officer of each financial institution in the Eleventh Federal Reserve District
SUBJECT Revised Pamphlets for Regulation DD (Truth in Savings), Regulation F (Limitations on Interbank Liabilities), and Regulation D (Reserve Requirements of Depository Institutions) DETAILS The Board of Governors of the Federal Reserve System revised Regulation DD, effective September 21, 1992, Regulation F, effective December 19, 1992, and Regulation D, effective December 22, 1992. Due to a limited supply, this Bank was unable to distribute the pamphlets earlier. We regret any inconvenience this may have caused. Amendments to Regulation DD were distributed in Notice 93-40 and in slip-sheet form in Notice 93-95. No amendments to Regulation F and Regulation D have been distributed. The amendments should be retained in your Regulations binder along with the revised pamphlet. ENCLOSURES The revised pamphlets are enclosed.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library ([email protected]) - 2 -
MORE INFORMATION For more information on Regulation DD, please contact Eugene Coy at (214) 922-6201. For more infor mation regarding Regulation F, please contact Jane Anne Schmoker at (214) 922-5101. For more information regarding Regulation D, please contact the Reserve and Risk Management Division at (214) 922-5646. For additional copies of this Bank’s notice or the pamphlets, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Board of Governors of the Federal Reserve System
Regulation DD Truth in Savings
12 CFR 230; effective September 21, 1992 Any inquiry relating to this regulation should be addressed to the District in which the inquiry arises.
November 1992 Contents
Page Page Section 230.1—Authority, purpose, Section 230.8—Advertising...... 6 coverage, and effect on state la w s ...... 1 (a) Misleading or inaccurate (a) Authority ...... 1 advertisements ...... 6 (b) Purpose...... 1 (b) Permissible rates...... 6 (c) Coverage...... 1 (c) When additional disclosures are (d) Effect on state laws...... 1 required...... 6 Section 230.2—Definitions ...... 1 (d) Bonuses...... 7 Section 230.3—General disclosure (e) Exemption for certain requirements...... 2 advertisements ...... 7 (a) F orm ...... 2 Section 230.9—Enforcement and record (b) General...... 2 retention...... 7 (c) Relation to Regulation E ...... 3 (a) Administrative enforcement...... 7 (d) Multiple consumers...... 3 (b) Civil liability...... 7 (e) Oral response to inquiries...... 3 (c) Record retention...... 7 (f) Rounding and accuracy rules for Appendix A—Annual-percentage- rates and y ield s...... 3 yield calculation...... 7 Section 230.4— Account disclosures...... 3 Appendix B—Model clauses and sample (a) Delivery of account disclosures...... 3 form s...... 12 (b) Content of account disclosures...... 3 Appendix C—Effect on state laws...... 19 (c) Notice to existing account holders .. 4 Appendix D—Issuance of staff Section 230.5—Subsequent disclosures...... 4 interpretations ...... 19 (a) Change in term s...... 4 (b) Notice before maturity for time accounts longer than one month TRUTH IN SAVINGS ACT that renew automatically...... 5 Section (c) Notice for time accounts one 261 Short t it le ...... 21 month or less that renew 262 Findings and purpose...... 21 automatically ...... 5 263 Disclosure of interest rates and (d) Notice before maturity for time terms of accounts...... 21 accounts longer than one year 264 Account schedule...... 22 that do not renew automatically . . . 5 265 Disclosures requirements for Section 230.6—Periodic-statement certain accounts...... 23 disclosures...... 5 266 Distribution of schedules...... 23 (a) General rule ...... 5 267 Payment of interest ...... 24 (b) Special rule for average-daily- 268 Periodic statem ents...... 24 balance method...... 6 269 Regulations...... 24 Section 230.7—Payment of interest...... 6 270 Administrative enforcement...... 25 (a) Permissible methods...... 6 271 Civil liability...... 25 (b) Compounding and crediting 272 Credit unions ...... 27 policies ...... 6 273 Effect on state law ...... 27 (c) Date interest begins to accru e...... 6 274 Definitions...... 27
Regulation DD Truth in Savings 12 CFR 230; effective September 21, 1992; compliance optional until March 21, 1993
SECTION 230.1—Authority, Purpose, drawal accounts. For purposes of the Coverage, and Effect on State Laws advertising requirements in section 230.8 of this part, the term also includes an account at a (a) Authority. This regulation, known as depository institution that is held by or on be Regulation DD, is issued by the Board of half of a deposit broker, if any interest in the Governors of the Federal Reserve System to account is held by or offered to a consumer. The implement the Truth in Savings Act of 1991 term does not include an existing account held (the act), contained in the Federal Deposit by an unincorporated nonbusiness association Insurance Corporation Improvement Act of of natural persons prior to March 21, 1993, 1991 (12 USC 4301 et seq., Pub. L. 102-242, unless the association notifies the institution 105 Stat. 2236). Information-collection re that it meets the definition of “consumer.” quirements contained in this regulation have been approved by the Office of Management (b) Advertisement means a commercial mes and Budget under the provisions of 44 USC sage, appearing in any medium, that promotes 3501 et seq. and have been assigned OMB No. directly or indirectly the availability of, or a 7100-0255. deposit in, an account.
(b) Purpose. The purpose of this regulation (c) Annual percentage yield means a percent is to enable consumers to make informed deci age rate reflecting the total amount of interest sions about accounts at depository institu paid on an account, based on the interest rate tions. The regulation requires depository and the frequency of compounding for a 365- institutions to provide disclosures so that con day period and calculated according to the sumers can make meaningful comparisons rules in appendix A of this part. among depository institutions. (d) Average-daily-balance method means the (c) Coverage. This regulation applies to de application of a periodic rate to the average pository institutions except for credit unions. daily balance in the account for the period. In addition, the advertising rules in section The average daily balance is determined by 230.8 of this part apply to any person who adding the full amount of principal in the ac advertises an account offered by a depository count for each day of the period and dividing institution, including deposit brokers. that figure by the number of days in the (d) Effect on state laws. State law require period. ments that are inconsistent with the require ments of the act and this regulation are (e) Board means the Board of Governors of preempted to the extent of the inconsistency. the Federal Reserve System. Additional information on inconsistent state (f) Bonus means a premium, gift, award, or laws and the procedures for requesting a pre other consideration worth more than S10 emption determination from the Board are set (whether in the form of cash, credit, mer forth in appendix C of this part. chandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing SECTION 230.2—Definitions an account balance. The term does not in For purposes of this regulation, the following clude interest, other consideration worth $10 definitions apply: or less given during a year, the waiver or re duction of a fee, or the absorption of expenses. (a) Account means a deposit account at a depository institution that is held by or of (g) Business day means a calendar day other fered to a consumer. It includes time, de than a Saturday, a Sunday, or any of the legal mand, savings, and negotiable order of with public holidays specified in 5 USC 6103(a). 1 § 230.2 Regulation DD
(h) Consumer means a natural person who or other document' in which the institution holds an account primarily for personal, fami records transactions on the account. ly, or household purposes, or to whom such (q) Periodic statement means a statement set an account is offered. The term also includes ting forth information about an account (oth an unincorporated nonbusiness association of er than a time account or passbook savings natural persons. The term does not include a account) that is provided to a consumer on a natural person who holds an account for an regular basis four or more times a year. other in a professional capacity. (r) State means a state, the District of Co (i) Daily-balance method means the applica lumbia, the Commonwealth of Puerto Rico, tion of a daily periodic rate to the full amount and any territory or possession of the United of principal in the account each day. States. (j) Depository institution and institution mean (s) Stepped-rate account means an account an institution defined in section 19(b)(1) that has two or more interest rates that take (A )(i)-(v i) of the Federal Reserve Act (12 effect in succeeding periods and are known USC 461), except credit unions defined in sec when the account is opened. tion 19(b) (1) (A) (iv). (t) Tiered-rate account means an account (k) Deposit broker means any person who is a that has two or more interest rates that are deposit broker as defined in section 29(g) of applicable to specified balance levels. the Federal Deposit Insurance Act (12 USC 1831f(g)). (u) Time account means an account with a maturity of at least seven days in which the (I) Fixed-rate account means an account for consumer generally does not have a right to which the institution contracts to give at least make withdrawals for six days after the ac 30 calendar days’ advance written notice of count is opened, unless the deposit is subject decreases in the interest rate. to an early withdrawal penalty of at least sev en days’ interest on amount withdrawn. (m) Grace period means a period following the maturity of an automatically renewing (v) Variable-rate account means an account time account during which the consumer may in which the interest rate may change after withdraw funds without being assessed a the account is opened, unless the institution penalty. contracts to give at least 30 calendar days’ ad vance written notice of rate decreases. (n) Interest means any payment to a consum er or to an account for the use of funds in an account, calculated by application of a period SECTION 230.3—General Disclosure ic rate to the balance. The term does not in Requirements clude the payment of a bonus or other consid eration worth $10 or less given during a year, (a) Form. Depository institutions shall make the waiver or reduction of a fee, or the absorp the disclosures required by sections 230.4 tion of expenses. through 230.6 of this part, as applicable, clearly and conspicuously in writing and in a (o) Interest rate means the annual rate of in form the consumer may keep. Disclosures for terest paid on an account which does not re each account offered by an institution may be flect compounding. For the purposes of the presented separately or combined with disclo account disclosures in section 230.4(b) (1) (i) sures for the institution’s other accounts, as of this part, the interest rate may, but need long as it is clear which disclosures are appli not, be referred to as the “annual percentage cable to the consumer’s account. rate” in addition to being referred to as the “interest rate.” (b) General. The disclosures shall reflect the terms of the legal obligation of the account (p) Passbook savings account means a savings agreement between the consumer and the de account in which the consumer retains a book pository institution. Disclosures may be made 2 Regulation DD § 230.4 in languages other than English, provided the the institution when the account is opened disclosures are available in English upon or the service is provided and has not al request. ready received the disclosures, the institu tion shall mail or deliver the disclosures no (c) Relation to Regulation E. Disclosures re later than 10 business days after the ac quired by and provided in accordance with count is opened or the service is provided, the Electronic Fund Transfer Act (15 USC whichever is earlier. 1601) and its implementing Regulation E (2) Requests, (i) A depository shall pro (12 CFR 205) that are also required by this vide account disclosures to a consumer regulation may be substituted for the disclo upon request. If the consumer is not pres sures required by this regulation. ent at the institution when a request is (d) Multiple consumers. If an account is held made, the institution shall mail or deliver by more than one consumer, disclosures may the disclosures within a reasonable time be made to any one of the consumers. after it receives the request. (ii) In providing disclosures upon re (e) Oral response to inquiries. In an oral re quest, the institution may— sponse to a consumer’s inquiry about interest (A ) specify an interest rate and annu rates payable on its accounts, the depository al percentage yield that were offered institution shall state the annual percentage within the most recent seven calendar yield. The interest rate may be stated in addi days; state that the rate and yield are tion to the annual percentage yield. No other accurate as of an identified date; and rate may be stated. provide a telephone number consumers (f) Rounding and accuracy rules for rates and may call to obtain current rate yields. information. (1) Rounding. The annual percentage (B) state the maturity of a time ac yield, the annual percentage yield earned, count as a term rather than a date. and the interest rate shall be rounded to the nearest one-hundredth of one percentage (b) Content o f account disclosures. Account point (.01%) and expressed to two decimal disclosures shall include the following, as places. For account disclosures, the interest applicable: rate may be expressed to more than two (1) Rate information, (i) Annual percent decimal places. age yield and interest rate. The “annual (2) Accuracy. The annual percentage yield percentage yield” and the “interest rate,” (and the annual percentage yield earned) using those terms, and for fixed-rate ac will be considered accurate if not more that counts the period of time the interest rate one-twentieth of one percentage point will be in effect. (.05%) above or below the annual percent (ii) Variable rates. For variable-rate age yield (and the annual percentage yield accounts: earned) determined in accordance with the (A ) the fact that the interest rate and rules in appendix A of this part. annual percentage yield may change; (B) how the interest rate is determined; (C) the frequency with which the in SECTION 230.4— Account Disclosures terest rate may change; and (a) Delivery o f account disclosures. (D ) any limitation on the amount the (1) Account opening. A depository institu interest rate may change. tion shall provide account disclosures to a (2) Compounding and crediting, (i) Fre consumer before an account is opened or a quency. The frequency with which inter service is provided, whichever is earlier. An est is compounded and credited. institution is deemed to have provided a (ii) Effect of closing an account. If con service when a fee required to be disclosed sumers will forfeit interest if they close is assessed. If the consumer is not present at the account before accrued interest is 3 § 230.4 Regulation DD
credited, a statement that interest will after maturity if the consumer does not not be paid in such cases. renew the account must be stated. (3) Balance information, (i) Minimum- (7) Bonuses. The amount or type of any balance requirements. Any minimum bonus, when the bonus will be provided, balance required to— and any minimum balance and time re (A ) open the account; quirements to obtain the bonus. (B) avoid the imposition of a fee; or (c) Notice to existing account holders. (C) obtain the annual percentage (1) Notice of availability of disclosures. yield disclosed. Depository institutions shall provide a no Except for the balance to open the ac tice to consumers who receive periodic count, the disclosure shall state how the statements and who hold existing accounts balance is determined for these purposes. of the type offered by the institution on (ii) Balance-computation method. An March 21, 1993. The notice shall be includ explanation of the balance-computation ed on or with the first periodic statement method specified in section 230.7 of this sent on or after March 21, 1993 (or on or part used to calculate interest on the with the first periodic statement for a state account. ment cycle beginning on or after that date). (iii) When interest begins to accrue. A The notice shall state that consumers may statement of when interest begins to ac request account disclosures containing crue on noncash deposits. terms, fees, and rate information for their (4) Fees. The amount of any fee that may account. In responding to such a request, be imposed in connection with the account institutions shall provide disclosures in ac (or an explanation of how the fee will be cordance with paragraph (a)(2) of this determined) and the conditions under section. which the fee may be imposed. (2) Alternative to notice. As an alternative (5) Transaction limitations. Any limita to the notice described in paragraph (c) (1) tions on the number or dollar amount of of this section, institutions may provide ac withdrawals or deposits. count disclosures to consumers. The disclo (6) Features of time accounts. For time sures may be provided either with a period accounts: ic statement or separately, but must be sent (i) Time requirements. The maturity no later than when the periodic statement date. described in paragraph (c) (1) is sent. (ii) Early withdrawal penalties. A state ment that a penalty will or may be im posed for early withdrawal, how it is cal SECTION 230.5—Subsequent culated, and the conditions for its Disclosures assessment. (iii) Withdrawal of interest prior to ma (a) Change in terms. turity. If compounding occurs during the (1) Advance notice required. A depository term and interest may be withdrawn pri institution shall give advance notice to af or to maturity, a statement that the annu fected consumers of any change in a term al percentage yield assumes interest re required to be disclosed under section mains on deposit until maturity and that 230.4(b) of this part if the change may re a withdrawal will reduce earnings. duce the annual percentage yield or ad (iv) Renewal policies. A statement of versely affect the consumer. The notice whether or not the account will renew shall include the effective date of the automatically at maturity. If it will, a change. The notice shall be mailed or deliv statement of whether or not a grace peri ered at least 30 calendar days before the ef od will be provided and, if so, the length fective date of the change. of that period must be stated. If the ac (2) No notice required. No notice under count will not renew automatically, a this section is required for— statement of whether interest will be paid (i) Variable-rate changes. Changes in Regulation DD § 230.6
the interest rate and corresponding when they will be determined, and a changes in the annual percentage yield in telephone number the consumer may variable-rate accounts. call to obtain the interest rate and the (ii) Check-printing fees. Changes in fees annual percentage yield that will be assessed by third parties for check paid for the new account); and printing. (C) any difference in the terms of the (iii) Short-term time accounts. Changes new account as compared with the in any term for time accounts with ma terms required to be disclosed under turities of one month or less. section 230.4(b) of this part for the ex isting account. (b) Notice before maturity for time accounts (c) Notice for time accounts one month or less longer than one month that renew automati that renew automatically. For time accounts cally. For time accounts with a maturity long with a maturity one month or less that renew er than one month that renew automatically automatically at maturity, institutions shall at maturity, institutions shall provide the dis disclose any difference in the terms of the new closures described below before maturity. The account as compared with the terms required disclosures shall be mailed or delivered at to be disclosed under section 230.4(b) of this least 30 calendar days before maturity of the part for the existing account, other than a existing account. Alternatively, the disclo change in the interest rate and corresponding sures may be mailed or delivered at least 20 change in the annual percentage yield. The calendar days before the end of the grace peri notice shall be mailed or delivered within a od on the existing account, provided a grace reasonable time after the renewal. period of at least five calendar days is allowed. (1) Maturities of longer than one year. If (d) Notice before maturity for time accounts the maturity is longer than one year, the longer than one year that do not renew auto institution shall provide account disclosures matically. For time accounts with a maturity set forth in section 230.4(b) of this part for longer than one year that do not renew auto the new account, along with the date the matically at maturity, institutions shall dis existing account matures. If the interest close to consumers the maturity date and rate and annual percentage yield that will whether interest will be paid after maturity. be paid for the new account are unknown The disclosures shall be mailed or delivered at when disclosures are provided, the institu least 10 calendar days before maturity of the tion shall state that those rates have not yet existing account. been determined, the date when they will be determined, and a telephone number con SECTION 230.6—Periodic-Statement sumers may call to obtain the interest rate Disclosures and the annual percentage yield that will be paid for the new account. (a) General rule. If a depository institution (2) Maturities of one year or less but long mails or delivers a periodic statement, the er than one month. If the maturity is one statement shall include the following year or less but longer than one month, the disclosures: institution shall either— (1) Annual percentage yield earned. The (i) provide disclosures as set forth in “annual percentage yield earned” during paragraph (b )(1) of this section; or the statement period, using that term, cal (ii) disclose to the consumer— culated according to the rules in appendix (A) the date the existing account ma A of this part. tures and the new maturity date if the (2) Amount of interest. The dollar amount account is renewed; of interest earned during the statement (B) the interest rate and the annual period. percentage yield for the new account if (3) Fees imposed. Fees required to be dis they are known (or that those rates closed under section 230.4(b)(4) of this have not yet been determined, the date part that were debited to the account dur- 5 § 230.6 Regulation DD
ing the statement period. The fees shall be SECTION 230.8—Advertising itemized by type and dollar amounts. (a) Misleading or inaccurate advertisements. (4) Length of period. The total number of An advertisement shall not be misleading or days in the statement period, or the begin inaccurate and shall not misrepresent a depos ning and ending dates of the period. itory institution’s deposit contract. An adver (b) Special rule for average-daily-balance tisement shall not refer to or describe an ac method. In making the disclosures described count as “free” or “no cost” (or contain a in paragraph (a) of this section, institutions similar term) if any maintenance or activity that use the average-daily-balance method fee may be imposed on the account. The word and that calculate interest for a period other “profit” shall not be used in referring to inter than the statement period shall calculate and est paid on an account. disclose the annual percentage yield earned and amount of interest earned based on that (b) Permissible rates. If an advertisement period rather than the statement period. The states a rate of return, it shall state the rate as information in paragraph (a)(4 ) of this sec an “annual percentage yield” using that term. tion shall be stated for that period as well as (The abbreviation “APY” may be used pro for the statement period. vided the term “annual percentage yield” is stated at least once in the advertisement.) The advertisement shall not state any other rate, SECTION 230.7—Payment of Interest except that the “interest rate,” using that (a) Permissible methods. term, may be stated in conjunction with, but (1) Balance on which interest is calculat not more conspicuously than, the annual per ed. Institutions shall calculate interest on centage yield to which it relates. the full amount of principal in an account for each day by use of either the daily- (c) When additional disclosures are required. balance method or the average-daily- Except as provided in paragraph (e) of this balance method.1 section, if the annual percentage yield is stated (2) Determination of minimum balance to in an advertisement, the advertisement shall earn interest. An institution shall use the state the following information, to the extent same method to determine any minimum applicable, clearly and conspicuously: balance to earn interest as it uses to deter (1) Variable rates. For variable-rate ac mine the balance on which interest is calcu counts, a statement that the rate may lated. An institution may use an additional change after the account is opened. method that is unequivocally beneficial to (2) Time annual percentage yield is of the consumer. fered. The period of time the annual per (b) Compounding and crediting policies. This centage yield will be offered, or a statement section does not require institutions to com that the annual percentage yield is accurate pound or credit interest at any particular as of a specified date. frequency. (3) Minimum balance. The minimum bal ance required to obtain the advertised an (c) Date interest begins to accrue. Interest nual percentage yield. For tiered-rate ac shall begin to accrue not later than the busi counts, the minimum balance required for ness day specified for interest-bearing ac each tier shall be stated in close proximity counts in section 606 of the Expedited Funds and with equal prominence to the applica Availability Act (12 USC 4005 et seq.) and ble annual percentage yield. implementing Regulation CC (12 CFR 229). (4) Minimum opening deposit. The mini Interest shall accrue until the day funds are mum deposit required to open the account, withdrawn. if it is greater than the minimum balance necessary to obtain the advertised annual 1 Institutions shall calculate interest by use of a daily rate of at least Vies of the interest rate. In a leap year a daily percentage yield. rate of '/s66 of the interest rate may be used. (5) Effect of fees. A statement that fees 6 Regulation DD Appendix A
could reduce the earnings on the account. tains the provisions relating to civil liability (6) Features of time accounts. For time for failure to comply with the requirements of accounts: the act and this regulation. (i) Time requirements. The term of the (c) Record retention. A depository institution account. shall retain evidence of compliance with this (ii) Early withdrawal penalties. A state regulation for a minimum of two years after ment that a penalty will or may be im the date disclosures are required to be made posed for early withdrawal. or action is required to be taken. The adminis (d) Bonuses. Except as provided in para trative agencies responsible for enforcing the graph (e) of this section, if a bonus is stated regulation may require depository institutions in an advertisement, the advertisement shall under their jurisdiction to retain records for a state the following information, to the extent longer period if necessary to carry out their applicable, clearly and conspicuously: enforcement responsibilities under section 270 (1) the “annual percentage yield,” using of the act. that term; (2) the time requirement to obtain the bonus; APPENDIX A—Annual-Percentage- (3) the minimum balance required to ob Yield Calculation tain the bonus; (4) the minimum balance required to open The annual percentage yield measures the to the account, if it is greater than the mini tal amount of interest paid on an account mum balance necessary to obtain the bonus; based on the interest rate and the frequency of and compounding.1 The annual percentage yield is (5) when the bonus will be provided. expressed as an annualized rate, based on a 365-day year.2 Part I of this appendix discuss (e) Exemption for certain advertisements. If es the annual percentage yield calculations for an advertisement is made through one of the account disclosures and advertisements, while following media, it need not contain the infor part II discusses annual-percentage-yield- mation in paragraphs (c)(1 ), (c )(2 ), (c)(4 ), eamed calculations for periodic statements. (c)(5), (c)(6)(h), (d)(4), and (d)(5) of this section: (1) broadcast or electronic media, such as Part I. Annual Percentage Yield for television or radio; Account Disclosures and Advertising (2) outdoor media, such as billboards; Purposes. (3) telephone response machines; or In general, the annual percentage yield for ac (4) lobby boards inside a depository insti count disclosures under sections 230.4 and tution or deposit broker (provided they 230.5 and for advertising under section 230.8 contain a notice advising consumers to con is an annualized rate that reflects the relation tact an employee for further information). ship between the amount of interest that would be earned by the consumer for the term of the account and the amount of principal used to calculate that interest. Special rules SECTION 230.9—Enforcement and apply to accounts with tiered and stepped in Record Retention terest rates. (a) Administrative enforcement. Section 270 1 The annual percentage yield reflects only interest and of the act contains the provisions relating to does not include the value of any bonus (or other consider administrative sanctions for failure to comply ation worth $10 or less) that may be provided to the con with the requirements of the act and this regu sumer to open, maintain, increase, or renew an account. Interest or other earnings are not to be included in the lation. Compliance is enforced by the agencies annual percentage yield if such amounts are determined by listed in that section. circumstances that may or may not occur in the future. 2 Institutions may calculate the annual percentage yield (b) Civil liability. Section 271 of the act con based on a 365-day or a 366-day year in a leap year. 7 Appendix A Regulation DD
A. General Rules APY = 100 (Interest/Principal) The annual percentage yield shall be calculat Examples: ed by the formula shown below. Institutions (1) If an institution pays $61.68 in interest shall calculate the annual percentage yield for a 365-day year on $1,000 deposited based on the actual number of days in the into a NOW account, using the general term of the account. For accounts without a formula above, the annual percentage stated maturity date (such as a typical savings yield is 6.17 percent: or transaction account), the calculation shall APY = 100 be based on an assumed term of 365 days. In [(1 + 61.68/1,000) (365/365) __ I J determining the total interest figure to be used APY = 6.17%. in the formula, institutions shall assume that all principal and interest remain on deposit for Or, using the simple formula above (since, the entire term and that no other transactions as an account without a stated term, the (deposits or withdrawals) occur during the term is deemed to be 365 days): term.3 For time accounts that are offered in APY = 100 (61.68/1,000) multiples of months, institutions may base the APY = 6.17% number of days on either the actual number of days during the applicable period, or the num (2) If an institution pays $30.37 in interest ber of days that would occur for any actual on a $1,000 six-month certificate of depo sequence of that many calendar months. If in sit (where the six-month period used by stitutions choose to use the latter rule, they the institution contains 182 days), using must use the same number of days to calculate the general formula above, the annual the dollar amount of interest earned on the percentage yield is 6.18 percent: account that is used in the annual percentage APY = 100 yield formula (where “Interest” is divided by [(1 + 30.37/1,OOO)'365'182' - 1] “Principal”). APY = 6.18% The annual percentage yield is calculated by use of the following general formula ( “APY” is used for convenience in the B. Stepped-Rate Accounts (Different rates formulas): apply in succeeding periods.) APY = 100 For accounts with two or more interest rates [(1 + Interest/Principal)(565/D">"ln ,crm> applied in succeeding periods (where the rates - 1] are known at the time the account is opened), “Principal” is the amount of funds assumed an institution shall assume each interest rate is to have been deposited at the beginning of in effect for the length of time provided for in the account. the deposit contract. “Interest” is the total dollar amount of in Examples: terest earned on the principal for the term (1) If an institution offers a $1,000 six-month of the account. certificate of deposit on which it pays a 5 “Days in term” is the actual number of percent interest rate, compounded daily, days in the term of the account. When the for the first three months (which contain “days in term” is 365 (that is, where the 91 days), and a 5.5 percent interest rate, stated maturity is 365 days or where the compounded daily, for the next three account does not have a stated maturity), months (which contain 92 days), the to the annual percentage yield can be calculat tal interest for six months is $26.68 and, ed by use of the following simple formula: using the general formula above, the an nual percentage yield is 5.39 percent: 3 This assumption shall not be used if an institution re quires, as a condition of the account, that consumers with APY = 100 draw interest during the term. In such a case, the interest (and annual percentage yield calculation) shall reflect that [(1 + 26.68/1,000) (365/183) __ requirement. APY = 5.39% Regulation DD Appendix A
(2) If an institution offers a $1,000 two-year APY = 100 (56.52/1,000) certificate of deposit on which it pays a 6 APY = 5.65% percent interest rate, compounded daily, for the first year, and a 6.5 percent inter est rate, compounded daily, for the next D. Tiered-Rate Accounts (Different rates year, the total interest for two years is apply to specified balance levels.) $133.13, and, using the general formula For accounts in which two or more interest above, the annual percentage yield is 6.45 rates paid on the account are applicable to percent: specified balance levels, the institution must APY = 100 calculate the annual percentage yield in ac [(1 + 133.13/1,000) C3**™»_ 1] cordance with the method described below APY = 6.45% that it uses to calculate interest. In all cases, an annual percentage yield (or a range of an nual percentage yields, if appropriate) must C. Variable-Rate Accounts be disclosed for each balance tier. For purposes of the examples discussed be For variable-rate accounts without an intro low, assume the following: ductory premium or discounted rate, an insti Interest tution must base the calculation only on the rate Deposit balance required to earn rate initial interest rate in effect when the account 5.25% up to but not exceeding $2,500 is opened (or advertised), and assume that 5.50% above $2,500 but not exceeding $15,000 this rate will not change during the year. 5.75% above $15,000 Variable-rate accounts with an introductory premium (or discount) rate must be calculat Tiering Method A ed like a stepped-rate account. Thus, an insti Under this method, an institution pays on the tution shall assume that (1) the introductory full balance in the account the stated interest interest rate is in effect for the length of time rate that corresponds to the applicable deposit provided for in the deposit contract; and (2) tier. For example, if a consumer deposits the variable interest rate that would have been $8,000, the institution pays the 5.50 percent in effect when the account is opened or adver interest rate on the entire $8,000. tised (but for the introductory rate) is in ef When this method is used to determine in fect for the remainder of the year. If the vari terest, only one annual percentage yield will able rate is tied to an index, the index-based apply to each tier. Within each tier, the annu rate in effect at the time of disclosure must be al percentage yield will not vary with the used for the remainder of the year. If the rate amount of principal assumed to have been is not tied to an index, the rate in effect for deposited. existing consumers holding the same account For the interest rates and deposit balances (who are not receiving the introductory inter assumed above, the institution will state three est rate) must be used for the remainder of annual percentage yields—one corresponding the year. to each balance tier. Calculation of each annu For example, if an institution offers an ac al percentage yield is similar for this type of count on which it pays a 7 percent interest account as for accounts with a single interest rate, compounded daily, for the first three rate. Thus, the calculation is based on the to months (which, for example, contain 91 tal amount of interest that would be received days), while the variable interest rate that by the consumer for each tier of the account would have been in effect when the account for a year and the principal assumed to have was opened was 5 percent, the total interest been deposited to earn that amount of for a 365-day year for a $1,000 deposit is interest. $56.52 (based on 91 days at 7 percent fol lowed by 274 days at 5 percent). Using the First tier. Assuming daily compounding, the simple formula, the annual percentage yield is institution will pay $53.90 in interest on a 5.65 percent: $1,000 deposit. Using the general formula, for 9 Appendix A Regulation DD the first tier, the annual percentage yield is al percentage yields—one figure for the first 5.39 percent: tier and two figures stated as a range for the other two tiers. APY = 100[(1 +53.90/1,000)(365/365> - 1] APY = 5.39% First tier. Assuming daily compounding, the institution would pay $53.90 in interest on a Using the simple formula: $1,000 deposit. For this first tier, using the APY = 100(53.90/1,000) simple formula, the annual percentage yield is APY = 5.39% 5.39 percent: Second tier. The institution will pay $452.29 APY = 100(53.90/1,000) in interest on a $8,000 deposit. Thus, using APY = 5.39% the simple formula, the annual percentage Second tier. For the second tier, the institution yield for the second tier is 5.65 percent: would pay between $134.75 and $841.45 in APY = 100(452.29/8,000) interest, based on assumed balances of APY = 5.65% $2,500.01 and $15,000, respectively. For $2,500.01, interest would be figured on $2,500 Third tier. The institution will pay $1,183.61 at 5.25 percent interest rate plus interest on $.01 in interest on a $20,000 deposit. Thus, using at 5.50 percent. For the low end of the second the simple formula, the annual percentage tier, therefore, the annual percentage yield is yield for the third tier is 5.92 percent: 5.39 percent, using the simple formula: APY = 100(1,183.61/20,000) APY = 100(134.75/2,500) APY = 5.92% APY = 5.39% For $15,000, interest is figured on $2,500 at Tiering Method B 5.25 percent interest rate plus interest on Under this method, an institution pays the $12,500 at 5.50 percent interest rate. For the stated interest rate only on that portion of the high end of the second tier, the annual per balance within the specified tier. For example, centage yield, using the simple formula, is if a consumer deposits $8,000, the institution 5.61 percent: pays 5.25 percent on $2,500 and 5.50 percent on $5,500 (the difference between $8,000 and APY = 100(841.45/15,000) the first tier cut-off of $2,500). APY = 5.61% The institution that computes interest in Thus, the annual percentage yield range for this manner must provide a range that shows the second tier is 5.39 percent to 5.61 percent. the lowest and the highest annual percentage yields for each tier (other than for the first Third tier. For the third tier, the institution tier, which, like the tiers in method A, has the would pay $841.45 in interest on the low end same annual percentage yield throughout). of the third tier (a balance of $15,000.01). The low figure for an annual percentage yield For $15,000.01, interest would be figured on range is calculated based on the total amount $2,500 at 5.25 percent interest rate, plus inter of interest earned for a year assuming the est on $12,500 at 5.50 percent interest rate, minimum principal required to earn the inter plus interest on $.01 at 5.75 percent interest est rate for that tier. The high figure for an rate. For the low end of the third tier, there annual percentage yield range is based on the fore, the annual percentage yield (using the amount of interest the institution would pay simple formula) is 5.61 percent: on the highest principal that could be deposit APY = 100(841.45/15,000) ed to earn that same interest rate. If the ac APY = 5.61% count does not have a limit on the maximum amount that can be deposited, the institution Since the institution does not limit the ac may assume any amount. count balance, it may assume any maximum For the tiering structure assumed above, amount for the purposes of computing the an the institution would state a total of five annu- nual percentage yield for the high end of the 10 Regulation DD Appendix A third tier. For an assumed maximum balance “Balance” is the average daily balance in amount of 3100,000, interest would be figured the account for the period. on $2,500 at 5.25 percent interest rate, plus “Interest earned” is the actual amount of interest on $12,500 at 5.50 percent interest interest earned on the account for the rate, plus interest on $85,000 at 5.75 percent period. interest rate. For the high end of the third tier, therefore, the annual percentage yield, “Days in period” is the actual number of using the simple formula, is 5.87 percent: days for the period.
APY = 100(5,871.79/100,000) Examples: APY = 5.87% (1) Assume an institution calculates interest Thus, the annual percentage yield range that for the statement period (and uses either would be stated for the third tier is 5.61 per the daily-balance or the average-daily- cent to 5.87 percent. balance method), and the account has a If the assumed maximum balance amount is balance of $1,500 for 15 days and a bal $1,000,000 instead of $100,000, the institution ance of $500 for the remaining 15 days or would use $985,000 rather than $85,000 in the a 30-day statement period. The average last calculation. In that case, for the high end daily balance for the period is $1,000. The interest earned (under either bal- of the third tier the annual percentage yield, using the simple formula, is 5.91 percent: ance-computation method) is $5.25 dur ing the period. The annual percentage APY = 100(59134.22/1,000,000) yield earned (using the formula above) is APY = 5.91% 6.58 percent:
Thus, the annual percentage yield range that APY earned = 100 would be stated for the third tier is 5.61 per [1 + 5 .2 5 /l,0 0 0 )(3 (3) Assume an institution calculates interest with an annual percentage yield o f ____%. on the average daily balance for a quarter You will be paid this rate [for (for example, the calendar months of (time period) /until (date)/(or at least September through November), and pro 30 calendar days]. vides monthly periodic statements cover (ii) Variable-rate accounts ing calendar months. The account has a The interest rate on your account is ____% balance of $1,000 throughout the 30 days with an annual percentage yield o f____%. of September, a balance of $2,000 throughout the 31 days of October, and a Your interest rate and annual percentage balance of $3,000 throughout the 30 days yield may change. of November. The average daily balance Determination of rate for the quarter is $2,000, which results in $21 in interest earned for the quarter. The interest rate on your account is based on (name of index) [plus/minus a The annual percentage yield earned margin o f______]. would be shown on the periodic state ment for November. The annual percent or age yield earned (using the formula At our discretion, we may change the inter above) is 4.28 percent: est rate on your account. APY earned = 100 Frequency of rate changes [1 + 21/ 2,000) <365/9'> - 1] We may change the interest rate on your account [every (time period) /a t any APY earned = 4.28% time]. Limitations on rate changes APPENDIX B—Model Clauses and The interest rate for your account will nev Sample Forms er change by more than ____% each (time period) . B -l—Model Clauses for Account Disclosures (§ 230.4(b)) The interest rate will never be [less/more] th a n ___ %. B-2—Model Clauses for Change in Terms (§ 230.5(a)) or B-3—Model Clauses for Pre-Maturity Notices The interest rate will never [exceed____% for Time Accounts (§ 230.5(b)(2) and above/drop more than ___ % below] the 230.5(d)) interest rate initially disclosed to you. B-4— Sample Form (Multiple Accounts) B-5—Sample Form (NOW Account) (iii) Stepped-rate accounts B-6— Sample Form (Tiered-Rate Money The initial interest rate for your account is Market Account) __%. You will be paid this rate [for B-7—Sample Form (Certificate of Deposit) (time period) /until (date) ]. After B-8—Sample Form (Certificate of Deposit that time, the interest rate for your account Advertisement) will b e ___ %, and you will be paid this rate [for (time period) /until (date) ]. The B-9—Sample Form (Money Market Account annual percentage yield for your account is Advertisement) ____%. (iv) Tiered-rate accounts B-l—Model Clauses for Account Tiering Method A Disclosures • If your [daily balance/average daily bal (a) Rate information ance] is $___ or more, the interest rate (i) Fixed-rate accounts paid on the entire balance in your account will b e ___ % with an annual percentage The interest rate on your account is____% yield o f____%. 12 Regulation DD Appendix B • If your [daily balance/average daily bal ance is calculated by adding the principal in ance] is more than $____, but less than the account for each day of the period and $____ , the interest rate paid on the entire dividing that figure by the number of days balance in your account will be ____% in the period. with an annual percentage yield o f____%. • If your [daily balance/average daily bal (iii) To obtain the annual percentage yield ance] is $____or less, the interest rate paid on the entire balance will b e __% with disclosed an annual percentage yield o f____%. You must maintain a minimum balance of $____in the account each day to obtain Tiering Method B the disclosed annual percentage yield. • An interest rate of___ % will be paid only You must maintain a minimum average for that portion of your [daily balance/av daily balance of $____to obtain the dis erage daily balance] that is greater than closed annual percentage yield. The aver $____ . The annual percentage yield for this age daily balance is calculated by adding tier will range from ____% t o ____%, de the principal in the account for each day of pending on the balance in the account. the period and dividing that figure by the • An interest rate o f____% will be paid only number of days in the period. for that portion of your [daily balance/av erage daily balance] that is greater than (d) Balance-computation method $____, but less than $____. The annual percentage yield for this tier will range (i) Daily-balance method from ___ % t o ____%, depending on the We use the daily-balance method to calcu balance in the account. late the interest on your account. This meth • If your [daily balance/average daily bal od applies a daily periodic rate to the princi ance] is $____or less, the interest rate paid pal in the account each day. on the entire balance will b e ____ % with an annual percentage yield o f______%. (ii) Average-daily-balance method (b ) Compounding and crediting We use the average-daily-balance method to calculate interest on your account. This (i) Frequency method applies a periodic rate to the average Interest will be compounded [on a _ daily balance in the account for the period. basis/every (time period) ]. The average daily balance is calculated by adding the principal in the account for each Interest will be credited to your account [on a day of the period and dividing that figure by _basis/every (time period) ). the number of days in the period. (ii) Effect of closing an account (e) Accrual o f interest on noncash deposits If you close your account before interest is Interest begins to accrue no later than the credited, you will not receive the accrued business day we receive credit for the deposit interest. of noncash items (for example, checks). (c) Minimum-balance requirements or (i) To open the account Interest begins to accrue on the business day You must deposit $___ to open this account. you deposit noncash items (for example, checks) (ii) To avoid imposition of fees A minimum balance fee of $___ will be (f) Fees imposed every (time period)__if the bal The following fees may be assessed against ance in the account falls below $______any your account: day of the (time period) . ______$ ____ A minimum balance fee of $____ will be ______$ ____ imposed every (time period) if the av ______$ ____ erage daily balance for the (time period) (conditions for imposing fee) $ _____ falls below $____. The average daily bal ______% o f ______13 Appendix B Regulation DD (g) Transaction limitations maturity of this account to withdraw funds without penalty. The minimum amount you may [withdraw/ write a check for] is $____. (2) Non-automatically renewable time You may make___ [deposits into/withdraw accounts als from] your account each (time period) . This account will not renew automatical You may not make [deposits into/withdraw- ly at maturity. If you do not renew the als from] your account until the maturity account, your deposit will be placed in date. [an interest-bearing/a non-interest-bear- ing] account. (h) Disclosures relating to time accounts (i) Bonuses (1) Time requirements You will [be paid/receive] [$____/ Your account will mature on (date) . (description of item) ] as a bonus [when you open the account/on (date) ]. Your account will mature in (time period) . You must maintain a minimum [daily bal (ii) Early withdrawal penalties ance/average daily balance] of $____to obtain We [will/may] impose a penalty if you the bonus. withdraw [any/all] of the [deposited To earn the bonus, [$____/your entire princi funds/principal] before the maturity date. pal] must___ remain on deposit [for The fee imposed will equal ____ days/ (time period) /until (date) ]. weeks[s]/months[s] of interest. or We [will/may] impose a penalty of $__ B-2—Model Clauses for Change in if you withdraw [any/all] of the [deposited Terms funds/principal] before the maturity date. On (date) , the cost of (type of fee) will increase to $__ . If you withdraw some of your funds before maturity, the interest rate for the remaining On (date) , the interst rate on your account will funds in your account will b e ____ % with decrease to ___ % with an annual percentage yield an annual percentage yield of %. o f______%. On (date) , the minimum [daily balance/aver (iii) Withdrawal of interest prior to age daily balance] required to avoid imposition of a maturity fee will increase to S The annual percentage yield assumes interest will remain on deposit until maturity. A withdrawal will reduce B-3—Model Clauses for Pre-Maturity earnings. Notices for Time Accounts (iv) Renewal policies (a) Automatically renewable time accounts (1) Automatically renewable time with maturities of one year or less but longer accounts than one month This account will automatically renew at Your account will mature on (date) . maturity. If the account renews, the new maturity date will be You will have [____calendar/business] (date) . days after the maturity date to withdraw The interest rate for the renewed account will be funds without penalty. __ % with an annual percentage yield o f____%. or or There is no grace period followii ihe The interest rate and annual percentage yield have 14 Regulation DD Appendix B not yet been determined. They will be available on late the interest on your account. This (date) . Please call (phone number) method applies a daily periodic rate to the to leam the interest rate and annual percent principal in the account each day. age yield for your new account. Additional disclosures for your account are (b) Non-automatically renewable time ac included on the attached sheets. counts with maturities longer than one year Your account will mature on (date) . _ Money Market Account If you do not renew the account, interest [will/will • Your interest rate and annual percentage not] be paid after maturity. yield may change. At our discretion, we may change the interest rate on your ac count daily. The interest rate on your ac B-4— Sample Form (Multiple Accounts) count will never be less than 3.00% • You may make six (6) transfers from your account, but only three (3) may be pay BANK ABC ments by check to third parties. DISCLOSURE OF ACCOUNT TERMS • Interest begins to accrue on the business day you deposit noncash items (for exam This disclosure contains information about ple, checks). your: • Interest is compounded daily and credited on the last day of each month. If you close X NOW Account your account before interest is credited, you • Your interest rate and annual percentage will not receive the accrued interest. yield may change. At our discretion, we • We use the daily-balance method to calcu may change the interest rate on your ac late the interest on your account. This count daily. The interest rate for your ac method applies a daily periodic rate to the count will never be less than 2.00%. principal in the account each day. • Interest begins to accrue on the business _ Certificates of Deposit day you deposit noncash items (for exam • The interest rate for your account will be ple, checks). paid until the maturity date of your certifi • Interest is compounded daily and credited cate (______). on the last day of each month. If you close • Interest is compounded daily and will be your account before interest is credited, you credited to your account monthly. will not receive the accrued interest. • Interest begins to accrue on the business • We use the daily-balance method to calcu day you deposit noncash items (for exam late the interest on your account. This ple, checks). method applies a daily periodic rate to the • This account will automatically renew at principal in the account each day. maturity. You will have ten ( 10) calendar days from the maturity date to withdraw _ Passbook Savings Account your funds without beng charged a penalty. • The interest rate on your account will be • After the account is opened, you may not paid for at least 30 days. make deposits into or withdrawals from this • Interest begins to accrue on the business account until the maturity date. day you deposit noncash items (for exam • We use the daily-balance method to calcu ple, checks). late the interest on your account. This • Interest is compounded daily and credited method applies a daily periodic rate to the on the last day of each month. If you close principal in the account each day. your account before interest is credited, you • If any of the deposit is withdrawn before will not receive the accrued interests. the maturity date, a penalty as shown below • We use the daily-balance method to calcu will be imposed: 15 Appendix B Regulation DD Term Early Withdrawal Penalty • You may make three (3) withdrawals per 3-month CD 30 days interest quarter. 6-month CD 90 days interest Each subsequent withdrawal...... $ 2.00 1-year CD 120 days interest 2-year CD 180 days interest Money Market Account Additional disclosures for your account are • Monthly minimum-balance fee if the daily included on the attached sheets. balance drops below $1,000 any day of m on th ...... $ 5.00 [Fee Schedule Insert] Other Account Fees • Deposited checks returned...... $ 5.00 BANK ABC • Balance inquiries (at a branch or at an FEE SCHEDULE ATM)...... $ 1.00 • Check printing*...... (Fee depends on NOW Account style of check ordered) • Monthly minimum-balance fee if the daily • Your check returned for insufficient funds balance drops below $500 any day of the (per check)*...... $16.00 m on th ...... $ 7.50 • Stop-payment request (per request)* $12.50 • Certified check (per check)*...... $10.00 Passbook Savings Account * Fee does not apply to passbook savings ac • Monthly minimum-balance fee if the daily counts or certificates of deposit. balance drops below $100 any day of the Additional disclosures for your account are m on th ...... $ 6.00 included on the attached sheet. (Rate Sheet Insert) BANK ABC RATE SHEET Minimum Balance* Annual Account Minimum Deposit to Obtain Annual Interest Percentage Type to Open Account Percentage Yield Rate Yield N O W ...... $2,500 4.00% 4.08% Passbook Savings ...... $ 100 $ 500 3.50% 3.56% Money Market...... $1,000 $1,000 4.15% 4.24% 3-Month C D ...... $1,000 $1,000 4.20% 4.29% 6-Month C D ...... $1,000 $1,000 4.25% 4.34% 1-Year C D ...... $1,000 $1,000 5.20% 5.34% 2-Year C D ...... $1,000 $1,000 5.80% 5.97% *Daily balance (the amount of principal in the account each day) 16 Regulation DD Appendix B B-5—Sample Form (NOW Account) day you deposit noncash items (for exam ple, checks). BANK XYZ DISCLOSURE OF INTEREST, FEES, AND ACCOUNT TERMS NOW ACCOUNT B-6—Sample Form (Tiered-Rate Money Fee schedule Market Account) • Monthly minimum-balance fee if the daily BANK ABC balance drops below $1,000 any day of the DISCLOSURE OF INTEREST, FEES, m on th ...... $ 7.00 AND ACCOUNT TERMS • Fee to stop payment of a check...... $12.50 MONEY MARKET ACCOUNT • Fee for check returns (insufficient Fee schedule funds—per c h e c k )...... $16.00 • Certified check (per check)...... $10.00 • Check returned for insufficient • Fee for initial check printing funds (per check)...... $16.00 (per 2 0 0 )...... $12.00 • Stop-payment request (per request) .$12.50 (Cost for check printing varies depending • Certified check (per check)...... $10.00 on the style of checks ordered.) • Check printing . . . (Fee depends on style of checks ordered) Rate information Rate information • The interest rate for your account is • If your daily balance is $15,000 or more, 4.00 % with an annual percentage yield of the interest rate paid on the entire balance 4.08 % . Your interest rate and annual in your account will be 5.75% with an an percentage yield may change. At our discre nual percentage yield of 5.92%. tion, we may change the interest rate for • If your daily balance is more than $2,500, your account at any time. The interest rate but less than $15,000, the interest rate paid for your account will never be less than 2% on the entire balance in your account will each year. be 5.50% with an annual percentage yield Minimum-balance requirements of 5.65%. • You must deposit $500 to open this • If your daily balance is $2,500 or less, the account. interest rate paid on the entire balance will be 5.25% with an annual percentage yield •Y o u must maintain a minimum balance of of 5.39%. $2,500 in the account each day to obtain the • Your interest rate and annual percentage annual percentage yield listed above. yield may change. At our discretion, we Balance-computation method may change the interest rate for your ac count at any time. The interest rate for your • We use the daily-balance method to calcu account will never be less than 2.00%. late the interest on your account. This • Interest begins to accrue on the business method applies a daily periodic rate to the day you deposit noncash items (for exam principal in the account each day. ple, checks). • Interest is compounded daily and credited Compounding and crediting on the last day of each month. • Interest for your account will be com Minimum-balance requirements pounded daily and credited to your account • You must deposit $1,000 to open this on the last day of each month. account. Accrual of interest on deposits other than • A minimum balance fee of $5.00 will be im cash posed every month if the balance in your account falls below $1,000 any day of the • Interest begins to accrue on the business month. 17 Appendix B Regulation DD Balance-computation method Early withdrawal penalty • We use the daily-balance method to calcu • If you withdraw any principal before the ma late the interest on your account. This turity date, a penalty equal to three months’ method applies a daily periodic rate to the interest will be charged to your account. principal in the account each day. Renewal policy Transaction limitations • This account will be automatically renewed •Y o u may make six (6) transfers from your at maturity. You have a grace period of ten account, but only three (3) may be pay (10) calendar days after the maturity date ments by check to third parties. to withdraw the funds without being charged a penalty. B-7— Sample Form (Certificate of D eposit) B-8— Sample Form (Certificate of Deposit Advertisement) XYZ SAVINGS BANK 1-YEAR CERTIFICATE OF DEPOSIT BANK XYZ Always Offers You Competitive CD Rates!! Rate information • The interest rate for your account is 5.20% ANNUAL CERTIFICATES PERCENTAGE with an annual percentage yield of 5.34%. OF DEPOSIT YIELD (APY) You will be paid this rate until the maturity date of the certificate. Your certificate will 5 Year 6.31% mature on September 30, 1993. The annual 4 Year 6.07% percentage yield assumes interest remains 3 Year 5.72% on deposit until maturity. A withdrawal 2 Year 5.52% will reduce earnings. 1 Year 4.54% • Interest for your account will be com 6 Month 4.34% pounded daily and credited to your account 90 Day 4.21% on the last day of each month. • Interest begins to accrue on the business APYs are offered on accounts opened from 5/9/93 day you deposit any noncash item (for ex through 5/18/93. ample, checks). The minimum balance to open an account and obtain the APY is $1,000. Minimum-balance requirements A penalty may be imposed for early withdrawal. •Y o u must deposit $1,000 to open this For more information call: account. 202-123-1234 •Y o u must maintain a minimum balance of $1,000 in your account every day to obtain the annual percentage yield listed above. Balance-computation method • We use the daily-balance method to calcu late the interest on your account. This method applies a daily periodic rate to the principal in the account each day. Transaction limitations • After the account is opened, you may not make deposits into or withdrawals from the account until the maturity date. 18 Regulation DD Appendix C B-9—Sample Form (Money Market nation shall be in writing and addressed to the Account Advertisement) Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551. No BANK XYZ tice that the Board intends to make a determi Always Offers You Competitive Rates!! nation (either on request or on its own mo tion) will be published in the Federal Register, MONEYANNUAL with an opportunity for public comment un MARKET PERCENTAGE ACCOUNTS YIELD (APY) less the Board finds that notice and opportuni ty for comment would be impracticable, un Accounts with a balance 5.07% * necessary, or contrary to the public interest of $5,000 or less and publishes its reasons for such decision. Notice of a final determination will be pub Accounts with a balance lished in the Federal Register and furnished to over $5,000 5.57% * the party who made the request and to the APYs are accurate as of April 30, 1993. appropriate state official. * The rates may change after the account is opened. (c) Effect of preemption determinations. Af Fees could reduce the earnings on the account. ter the Board determines that a state law is For more information call: inconsistent, a depository institution may not 202-123-1234 make disclosures using the inconsistent term or take actions relying on the inconsistent law. (d) Reversal of determination. The Board APPENDIX C—Effect on State Laws reserves the right to reverse a determination (a) Inconsistent requirements. State law re for any reason bearing on the coverage or ef quirements that are inconsistent with the re fect of state or federal law. Notice of reversal quirements of the act and this regulation are of a determination will be published in the preempted to the extent of the inconsistency. Federal Register and a copy furnished to the A state law is inconsistent if it requires a de appropriate state official. pository institution to make disclosures or take actions that contradict the requirements of the federal law. A state law is also contra APPENDIX D—Issuance of Staff dictory if it requires the use of the same term Interpretations to represent a different amount or a different Officials in the Board’s Division of Consumer meaning than the federal law, requires the use and Community Affairs are authorized to is of a term different from that required in the sue official staff interpretations of this regula federal law to describe the same item, or per tion. These interpretations provide the protec mits a method of calculating interest on an tions afforded under section 271 (f) of the act. account different from that required in the Except in unusual circumstances, interpreta federal law. tions will not be issued separately but will be (b) Preemption determinations. A deposito incorporated in an official commentary to the ry institution, state, or other interested party regulation, which will be amended periodical may request the Board to determine whether a ly. No staff interpretations will be issued ap state law requirement is inconsistent with the proving depository institutions’ forms, state federal requirements. A request for a determi ments, or calculation tools or methods. Truth in Savings Act 12 USC 4301 et seq.; 105 Stat. 2334; Publ. L. 102-242, title II, subtitle F (December 19, 1991) Section peting claims of depository institutions with 261 Short title regard to deposit accounts. 262 Findings and purpose [12 u s e 4301.] 263 Disclosure of interest rates and terms of accounts 264 Account schedule 265 Disclosure requirements for certain SECTION 263—Disclosure of Interest accounts Rates and Terms of Accounts 266 Distribution schedule (a) In general. Except as provided in subsec 267 Payment of interest tions (b) and (c), each advertisement, an 268 Periodic statements nouncement, or solicitation initiated by any 269 Regulations depository institution or deposit broker relat 270 Administrative enforcement ing to any demand or interest-bearing account 271 Civil liability offered by an insured depository institution 272 Credit unions which includes any reference to a specific rate 273 Effect on state law of interest payable on amounts deposited in 274 Definitions such account, or to a specific yield or rate of earnings on amounts so deposited, shall state the following information, to the extent appli SECTION 261—Short Title cable, in a clear and conspicuous manner: (1) The annual percentage yield. This subtitle may be cited as the “Truth in (2) The period during which such annual Savings Act”. percentage yield is in effect. [12 USC 4301 note.] (3) All minimum account balance and time requirements which must be met in or der to earn the advertised yield (and, in the case of accounts for which more than 1 SECTION 262—Findings and Purpose yield is stated, each annual percentage yield (a) Findings. The Congress hereby finds that and the account minimum balance require economic stability would be enhanced, com ment associated with each such yield shall petition between depository institutions would be in close proximity and have equal be improved, and the ability of the consumer prominence). to make informed decisions regarding deposit (4) The minimum amount of the initial de accounts, and to verify accounts, would be posit which is required to open the account strengthened if there was uniformity in the in order to obtain the yield advertised, if disclosure of terms and conditions on which such minimum amount is greater than the interest is paid and fees are assessed in con minimum balance necessary to earn the ad nection with such accounts. vertised yield. (5) A statement that regular fees or other (b) Purpose. It is the purpose of this subtitle conditions could reduce the yield. to require the clear and uniform disclosure (6) A statement that an interest penalty is of— required for early withdrawal. (1) the rates of interest which are payable on deposit accounts by depository institu (b) Disclosure required for on-premises tions; and displays. (2) the fees that are assessable against de (1) The disclosure requirements contained posit accounts, so that consumers can make in this section shall not apply to any sign a meaningful comparison between the com (including a rate board) disclosing a rate or 21 §263 Truth in Savings Act rates of interest which is displayed on the SECTION 264— Account Schedule premises of the depository institution if such sign contains— (a) In general. Each depository institution (A ) the accompanying annual percent shall maintain a schedule of fees, charges, in age yield; and terest rates, and terms and conditions applica (B) a statement that the consumer ble to each class of accounts offered by the should request further information from depository institution, in accordance with the an employee of the depository institution requirements of this section and regulations concerning the fees and terms applicable which the Board shall prescribe. The Board to the advertised account. shall specify, in regulations, which fees, (2) For purposes of paragraph (1), a sign charges, penalties, terms, conditions, and ac shall only be considered to be displayed on count restrictions must be included in a the premises of a depository institution if schedule required under this subsection. A de the sign is designed to be viewed only from pository institution need not include in such the interior of the premises of the deposito schedule any information not specified in such ry institution. regulation. (b) Information on fees and charges. The (c) Broadcast and electronic media and out schedule required under subsection (a) with door advertising exception. The Board may, by respect to any account shall contain the fol regulation, exempt advertisements, announce lowing information: ments, or solicitations made by any broadcast (1) A description of all fees, periodic serv or electronic medium or outdoor advertising ice charges, and penalties which may be display not on the premises of the depository charged or assessed against the account (or institution from any disclosure requirements against the account holder in connection described in paragraph (4) or (5) of subsec with such account), the amount of any tion (a) if the Board finds that any such dis such fees, charge, or penalty (or the meth closure would be unnecessarily burdensome. od by which such amount will be calculat (d) Misleading descriptions of free or no-cost ed), and the conditions under which any accounts prohibited. No advertisement, an such amount will be assessed. nouncement, or solicitation made by any de (2) All minimum balance requirements pository institution or deposit broker may refer that affect fees, charges, and penalties, in to or describe an account as a free or no-cost cluding a clear description of how each account (or words of similar meaning) if— such minimum balance is calculated. (1) in order to avoid fees or service (3) Any minimum amount required with charges for any period— respect to the initial deposit in order to (A ) a minimum balance must be main open the account. tained in the account during such period; or (c) Information on interest rates. The sched (B) the number of transactions during ule required under subsection (a) with respect such period may not exceed a maximum to any account shall include the following number; or information: (2) any regular service or transaction fee is (1) Any annual percentage yield. imposed. (2) The period during which any such an nual percentage yield will be in effect. (d) Misleading or inaccurate advertisements, (3) Any annual rate of simple interest. etc., prohibited. No depository institution or (4) The frequency with which interest will deposit broker shall make any advertisement, be compounded and credited. announcement, or solicitation relating to a de (5) A clear description of the method used posit account that is inaccurate or misleading to determine the balance on which interest or that misrepresents its deposit contracts. is paid. [12 USC 4302. As amended by act of Oct. 28, 1992 (6) The information described in para (§ 957).] graphs (1) through (4) with respect to any 22 Truth in Savings Act §266 period after the end of the period referred (1) accounts with respect to which deter to in paragraph (2) (or the method for mination of annual percentage yield is computing any information described in based on an annual rate of interest that is any such paragraph), if applicable. guaranteed for a period of less than 1 year; (7) Any minimum balance which must be (2) variable rate accounts; maintained to earn the rates and obtain the (3) accounts which, pursuant to law, do yields disclosed pursuant to this subsection not guarantee payment of a stated rate; and a clear description of how any such (4) multiple rate accounts; and minimum balance is calculated. (5) accounts with respect to which deter (8) A clear description of any minimum mination of annual percentage yield is time requirement which must be met in or based on an annual rate of interest that is der to obtain the yields disclosed pursuant guaranteed for a stated term. to this subsection and any information de [12 USC 4304.] scribed in paragraph (1), (2), (3), or (4) that will apply if any time requirement is not met. SECTION 266—Distribution of (9) A statement, if applicable, that any in Schedules terest which has accrued but has not been credited to an account at the time of a with (a) In general. A schedule required under drawal from the account will not be paid by section 264 for an appropriate account shall the depository institution or credited to the be— account by reason of such withdrawal. (1) made available to any person upon (10) Any provision or requirement relat request; ing to the nonpayment of interest, including (2) provided to any potential customer be any charge or penalty for early withdrawal, fore an account is opened or a service is and the conditions under which any such rendered; and charge or penalty may be assessed. (3) provided to the depositor, in the case of any time deposit which is renewable at (d) Other information. The schedule required maturity without notice from the depositor, under subsection (a) shall include such other at least 30 days before the date of maturity. disclosures as the Board may determine to be necessary to allow consumers to understand (b) Distribution in case of certain initial de and compare accounts, including frequency of posits. If— interest rate adjustments, account restrictions, (1) a depositor is not physically present at and renewal policies for time accounts. an office of a depository institution at the time an initial deposit is accepted with re (e) Style and format. Schedules required un spect to an account established by or for der subsection (a) shall be written in clear such person; and and plain language and be presented in a for (2) the schedule required under section mat designed to allow consumers to readily 264(a) has not been furnished previously to understand the terms of the accounts offered. such depositor, [12 USC 4303.] the depository institution shall mail the sched ule to the depositor at the address shown on the records of the depository institution for SECTION 265—Disclosure such account no later than 10 days after the Requirements for Certain Accounts date of the initial deposit. The Board shall require, in regulations which (c) Distribution o f notice o f certain changes. the Board shall prescribe, such modification If— in the disclosure requirements under this Act (1) any change is made in any term or relating to annual percentage yield as may be condition which is required to be disclosed necessary to carry out the purposes of this Act in the schedule required under section in the case of— 264(a) with respect to any account; and 23 §266 Truth in Savings Act (2) the change may reduce the yield or ad est on accounts that are subject to this Act versely affect any holder of the account, shall begin to accrue not later than the busi all account holders who may be affected by ness day specified for interest-bearing ac such change shall be notified and provided counts in section 606 of the Expedited Funds with a description of the change by mail at Availability Act, subject to subsections (b) least 30 days before the change takes effect. and (c) of such section. (d) Distribution in case of accounts estab [12 USC 4306.] lished by more than 1 individual or by a group. If an account is established by more than 1 individual or for a person other than an indi SECTION 268—Periodic Statements vidual, any distribution described in this sec tion with respect to such account meets the Each depository institution shall include on or requirements of this section if the distribution with each periodic statement provided to each is made to 1 of the individuals who established account holder at such institution a clear and the account or 1 individual representative of conspicuous disclosure of the following infor the person on whose behalf such account was mation with respect to such account: established. (1) The annual percentage yield earned. (2) The amount of interest earned. (e) Notice to account holders as of the effec (3) The amount of any fees or charges tive date o f regulations. For any account for imposed. which the depository institution delivers an (4) The number of days in the reporting account statement on a quarterly or more fre period. quent basis, the depository institution shall in clude on or with any regularly scheduled [12 USC 4307.] mailing posted or delivered within 180 days after publication of regulations issued by the Board in final form, a statement that the ac SECTION 269—Regulations count holder has the right to request an ac count schedule containing the terms, charges, (a) In general. and interest rates of the account, and that the (1) Before the end of the 9-month period account holder may wish to request such an beginning on the date of the enactment of account schedule. this Act, the Board, after consultation with each agency referred to in section 270(a) [12 USC 4305.] and public notice and opportunity for com ment, shall prescribe regulations to carry out the purpose and provisions of this Act. (2) The regulations prescribed under para SECTION 267—Payment of Interest graph (1) shall take effect not later than 9 (a) Calculated on full amount of principal. months after publication in final form. Interest on an interest-bearing account at any (3) The regulations prescribed under para depository institution shall be calculated by graph (1) may contain such classifications, such institution on the full amount of princi differentiations, or other provisions, and pal in the account for each day of the stated may provide for such adjustments and ex calculation period at the rate or rates of inter ceptions for any class of accounts as, in the est disclosed pursuant to this Act. judgment of the Board, are necessary or proper to carry out the purposes of this (b) No particular method of compounding in Act, to prevent circumvention or evasion of terest required. Subsection (a) shall not be the requirements of this Act, or to facilitate construed as prohibiting or requiring the use compliance with the requirements of this of any particular method of compounding or Act. crediting of interest. (4) The provisions of this Act shall not ap (c) Date by which interest must accrue. Inter- ply with respect to any depository institu 24 Truth in Savings Act §270 tion before the effective date of regulations agency (as defined in section 3(q) of the prescribed by the Board under this subsec Federal Deposit Insurance Act) in the tion (or by the National Credit Union Ad case of insured depository institutions (as ministration Board under section 12(b), in defined in section 3(c)(2 ) of such Act); the case of any depository institution de (B) by the Federal Deposit Insurance scribed in clause (iv) of section Corporation in the case of depository in 19(b )(1)(A ) of the Federal Reserve Act). stitutions described in clause (i), (ii), or (iii) of section 19(b)(1)(A) of the Fed (b) Model forms and clauses. eral Reserve Act which are not insured (1) The Board shall publish model forms depository institutions (as defined in sec and clauses for common disclosures to facil tion 3 (c)(2 ) of the Federal Deposit In itate compliance with this Act. In devising surance Act); and such forms, the Board shall consider the (C) by the Director of the Office of use by depository institutions of data pro Thrift Supervision in the case of deposi cessing or similar automated machines. tory institutions described in clause (v) (2) Nothing in this Act may be construed and or (vi) of section 19(b )(1)(A ) of to require a depository institution to use the Federal Reserve Act which are not any such model form or clause prescribed insured depository institutions (as de by the Board under this subsection. A de fined in section 3 (c)(2 ) of the Federal pository institution shall be deemed to be in Deposit Insurance Act); and compliance with the disclosure provisions (2) the Federal Credit Union Act, by the of this Act if the depository institution— National Credit Union Administration (A ) uses any appropriate model form or Board in the case of depository institutions clause as published by the Board; or described in clause (iv) of section (B) uses any such model form or clause 19(b )(1)(A ) of the Federal Reserve Act. and changes it by— (i) deleting any information which is not required by this Act; or (b) Additional enforcement powers. (ii) rearranging the format, (1) For purposes of the exercise by any if in making such deletion or rearranging agency referred to in subsection (a) of such the format, the depository institution agency’s powers under any Act referred to does not affect the substance, clarity, or in such subsection, a violation of a require meaningful sequence of the disclosure. ment imposed under this Act shall be (3) Model disclosure forms and clauses deemed to be a violation of a requirement shall be adopted by the Board after duly imposed under that Act. given notice in the Federal Register and an (2) In addition to the powers of any agen opportunity for public comment in accord cy referred to in subsection (a) under any ance with section 553 of title 5, United provision of law specifically referred to in States Code. such subsection, each such agency may ex ercise, for purposes of enforcing compliance [12 USC 4308.] with any requirement imposed under this Act, any other authority conferred on such agency by law. SECTION 270—Administrative (c) Regulations by agencies other than the Enforcement board. The authority of the Board to issue regulations under this Act does not impair the (a) In general. Compliance with the require authority of any other agency referred to in ments imposed under this Act shall be en subsection (a) to make rules regarding its forced under— own procedures in enforcing compliance with (1) section 8 of the Federal Deposit Insur the requirements imposed under this Act. ance Act— (A ) by the appropriate Federal banking [12 USC 4309.) 25 §271 Truth in Savings Act SECTION 271—Civil Liability (c) Bona fide errors. (1) A depository institution may not be (a) Civil liability. Except as otherwise pro held liable in any action brought under this vided in this section, any depository section for a violation of this Act if the de institution which fails to comply with any re pository institution demonstrates by a pre quirement imposed under this Act or any reg ponderance of the evidence that the viola ulation prescribed under this Act with respect tion was not intentional and resulted from a to any person who is an account holder islia bona fide error, notwithstanding the main ble to such person in an amount equal to the tenance of procedures reasonably adapted sum of— to avoid any such error. (2) Examples of a bona fide error include (1) any actual damage sustained by such clerical, calculation, computer malfunction person as a result of the failure; and programming, and printing errors, ex (2) (A ) in the case of an individual action, cept that an error of legal judgment with such additional amount as the court may respect to a depository institution’s obliga allow, except that the liability under this tion under this Act is not a bona fide error. subparagraph shall not be less than $100 nor greater than $1,000; or (d) No liability for overpayment. A deposito (B) in the case of a class action, such ry institution may not be held liable in any amount as the court may allow, except action under this section for a violation of this that— Act if the violation has resulted in— (1) an interest payment to the account (i) as to each member of the class, no holder in an amount greater than the minimum recovery shall be applicable; amount determined under any disclosed and rate of interest applicable with respect to (ii) the total recovery under this sub- such payment; or paragraph in any class action or series (2) a charge to the consumer in an amount of class actions arising out of the same less than the amount determined under the failure to comply by the same deposi disclosed charge or fee schedule applicable tory institution shall not be more than with respect to such charge. the lesser of $500,000 or 1 percent of the net worth of the depository institu (e) Jurisdiction. Any action under this sec tion involved; and tion may be brought in any United States dis (3) in the case of any successful action to trict court, or in any other court of competent enforce any liability under paragraph (1) jurisdiction, within 1 year after the date of the or (2), the costs of the action, together with occurrence of the violation involved. a reasonable attorney’s fee as determined by (f) Reliance on board rulings. No provision the court. of this section imposing any liability shall ap ply to any act done or omitted in good faith in (b) Class action awards. In determining the conformity with any regulation or order, or amount of any award in any class action, the any interpretation of any regulation or order, court shall consider, among other relevant of the Board, or in conformity with any inter factors— pretation or approval by an official or employ (1) the amount of any actual damages ee of the Board duly authorized by the Board awarded; to issue such interpretation or approval under (2) the frequency and persistence of fail procedures prescribed by the Board, notwith ures of compliance; standing, the fact that after such act or (3) the resources of the depository omission has occurred, such regulation, order, institution; interpretation, or approval is amended, re (4) the number of persons adversely affect ed; and scinded, or determined by judicial or other au thority to be invalid for any reason. (5) the extent to which the failure of com pliance was intentional. (g) Notification o f and adjustment for errors. Truth in Savings Act §273 A depository institution shall not be liable un the continuing failure of any depository in der this section or section 270 for any failure stitution to disclose any particular term re to comply with any requirement imposed un quired to be disclosed under this Act with der this Act with respect to any account if— respect to a particular account shall be (1) before— treated as a single violation for purposes of (A ) the end of the 60-day period begin determining the amount of any liability of ning on the date on which the depository such institution under subsection (a) for institution discovered the failure to such failure to disclose. comply; (2) The continuing failure of any deposito (B) any action is instituted against the ry institution to disclose any particular depository institution by the account term required to be disclosed under this Act holder under this section with respect to with respect to a particular account after such failure to comply; and judgment has been rendered in favor of the (C) any written notice of such failure to account holder in connection with a prior comply is received by the depository in failure to disclose such term with respect to stitution from the account holder, such account shall be treated as a subse the depository institution notifies the ac quent violation for purposes of determining count holder of the failure of such institu liability under subsection (a). tion to comply with such requirement; and (3) This subsection shall not limit or oth (2) the depository institution makes such erwise affect the enforcement power under adjustments as may be necessary with re section 270 of any agency referred to in sub spect to such account to ensure that— section (a) of such section. (A ) the account holder will not be liable [12 USC 4310.] for any amount in excess of the amount actually disclosed with respect to any fee or charge; (B) the account holder will not be liable SECTION 272—Credit Unions for any fee or charge imposed under any (a) In general. No regulation prescribed by condition not actually disclosed; and the Board under this Act shall apply directly (C) interest on amounts in such account with respect to any depository institution de will accrue at the annual percentage scribed in clause (iv) of section 19(b)(1)(A ) yield, and under the conditions, actually of the Federal Reserve Act. disclosed (and credit will be provided for interest already accrued at a different an (b) Regulations prescribed by the NCUA. nual percentage yield and under different Within 90 days of the effective date of any conditions than the yield or conditions regulation prescribed by the Board under this disclosed). Act, the National Credit Union Administra tion Board shall prescribe a regulation sub (h) Multiple interests in 1 account. If more stantially similar to the regulation prescribed than 1 person holds an interest in any ac by the Board taking into account the unique count— nature of credit unions and the limitations un (1) the minimum and maximum amounts der which they may pay dividends on member of liability under subsection (a) (2) (A ) for accounts. any failure to comply with the requirements of this Act shall apply with respect to such [12 USC 4311.] account; and (2) the court shall determine the manner in which the amount of any such liability SECTION 273—Effect on State Law with respect to such account shall be dis The provisions of this Act do not supersede tributed among such persons. any provisions of the law of any State relating (i) Continuing failure to disclose. to the disclosure of yields payable or terms for (1) Except as provided in paragraph (2), accounts to the extent such State law requires 27 §273 Truth in Savings Act the disclosure of such yields or terms for ac (A ) means the annualized rate of inter counts, except to the extent that those laws est paid with respect to each compound are inconsistent with the provisions of this ing period, expressed as a percentage; Act, and then only to the extent of the incon and sistency. The Board may determine whether (B) may be referred to as the “annual such inconsistencies exist. percentage rate”. (4) The term “Board” means the Board of [12 USC 4312.] Governors of the Federal Reserve System. (5) The term "deposit broker”— (A ) has the meaning given to such term SECTION 274— Definitions in section 29(f)(1) of the Federal Depo sit Insurance Act; and For the purposes of this Act— (B) includes any person who solicits any (1) The term “account” means any ac amount from any other person for depo count offered to 1 or more individuals or an sit in an insured depository institution. unincorporated nonbusiness association of (6) The term “depository institution” has individuals by a depository institution into the meaning given such term in clauses (i) which a customer deposits funds, including through (vi) of section 19(b )(1)(A ) of the demand accounts, time accounts, negotiable Federal Reserve Act. order of withdrawal accounts, and share (7) The term “interest” includes dividends draft accounts. paid with respect to share draft accounts (2) The term “annual percentage yield” which are accounts within the meaning of means the total amount of interest that paragraph (3). would be received on a $100 deposit, based (8) The term “multiple rate account” on the annual rate of simple interest and the means any account that has 2 or more an frequency of compounding for a 365-day nual rates of simple interest which take ef period, expressed as a percentage calculated fect at the same time or in succeeding peri by a method which shall be prescribed by ods and which are known at the time of the Board in regulations. disclosure. (3) The term “annual rate of simple interest”— [12 USC 4313.] Board of Governors of the Federal Reserve System Regulation F Limitations on Interbank Liabilities 12 CFR 206; effective December 19, 1992 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the District in which the inquiry arises. February 1993 Contents Page Page Section 206.1—Authority, purpose, and (f) Definitions...... 3 scope...... 1 Section 206.5—Capital levels of Section 206.2—Definitions...... 1 correspondents ...... 4 Section 206.3—Prudential standards. . . . 1 (a) Adequately capitalized (a) G eneral...... 1 correspondents...... 4 (b) Standards for selecting (b) Frequency of monitoring capital correspondents...... 2 le v els...... 4 (c) Internal limits on exposure...... 2 (c) Foreign banks...... 4 (d) Review by board of directors .... 2 (d) Reliance on information...... 4 Section 206.4— Credit exposure...... 2 (e) Definitions...... 4 (a) Limits on credit exposure...... 2 (f) Calculation of capital ratios...... 4 (b) Calculation of credit exposure . . . 3 Section 206.6—W aiver...... 4 (c) Netting...... 3 Section 206.7—Transition provisions . . . 5 (d) Exclusions...... 3 (e) Credit exposure of subsidiaries .. 3 STATUTORY PROVISIONS...... 7 Regulation F Limitations on Interbank Liabilities 12 CFR 206; effective December 19, 1992 SECTION 206.1—Authority, Purpose, (d) Exposure means the potential that an ob and Scope ligation will not be paid in a timely manner or in full. “Exposure” includes credit and liquid (a) Authority and purpose. This part (Regu ity risks, including operational risks, related lation F, 12 CFR 206) is issued by the Board to intraday and interday transactions. of Governors of the Federal Reserve System (Board) to implement section 308 of the Fed (e) Foreign bank means an institution that— eral Deposit Insurance Corporation Improve (1) is organized under the laws of a coun ment Act of 1991 (act), Pub. L. 102-242. The try other than the United States; purpose of the regulation is to limit the risks (2) engages in the business of banking; that the failure of a depository institution (3) is recognized as a bank by the bank would pose to insured depository institutions. supervisory or monetary authorities of the country of the bank’s organization; (b) Scope. This regulation applies to all de (4) receives deposits to a substantial extent pository institutions insured by the Federal in the regular course of business; and Deposit Insurance Corporation. (5) has the power to accept demand deposits. SECTION 206.2—Definitions (f) Primary federal supervisor has the same meaning as the term “appropriate federal As used in this part, unless the context re banking agency” in section 3(q) of the Feder quires otherwise: al Deposit Insurance Act (12 USC 1813(q)). (a) Bank means an insured depository insti (g) Total capital means the total of a bank’s tution, as defined in section 3 of the Federal tier 1 and tier 2 capital under the risk-based Deposit Insurance Act (12 USC 1813), and capital guidelines provided by the bank’s pri includes an insured national bank, state bank, mary federal supervisor. For an insured District bank, or savings association, and an branch of a foreign bank organized under the insured branch of a foreign bank. laws of a country that subscribes to the princi (b) Commonly controlled correspondent ples of the Basle Capital Accord, “total capi means a correspondent that is commonly con tal” means total tier 1 and tier 2 capital as trolled with the bank and for which the bank calculated under the standards of that coun is subject to liability under section 5(e) of the try. For an insured branch of a foreign bank Federal Deposit Insurance Act. A correspon organized under the laws of a country that dent is considered to be commonly controlled does not subscribe to the principles of the Ba with the bank if— sle Capital Accord, “total capital” means to (1) 25 percent or more of any class of vot tal tier 1 and tier 2 capital as calculated under ing securities of the bank and the corre the provisions of the accord. spondent are owned, directly or indirectly, (h) U.S. depository institution means a by the same depository institution or com bank, as defined in section 206.2(a) of this pany; or part, other than an insured branch of a foreign (2) either the bank or the correspondent bank. owns 25 percent or more of any class of voting securities of the other. (c) Correspondent means a U.S. depository SECTION 206.3—Prudential Standards institution or a foreign bank, as defined in this part, to which a bank has exposure, but does (a) General. A bank shall establish and not include a commonly controlled corre maintain written policies and procedures to spondent. prevent excessive exposure to any individual 1 § 206.3 Regulation F correspondent in relation to the condition of monitoring of exposure and the financial the correspondent. condition of the correspondent. Different limits may be set for different forms of ex (b) Standards fo r selecting correspondents. posure, different products, and different (1) A bank shall establish policies and pro maturities. cedures that take into account credit and (2) A bank shall structure transactions liquidity risks, including operational risks, with a correspondent or monitor exposure in selecting correspondents and terminating to a correspondent, directly or through an those relationships. other party, to ensure that its exposure or (2) Where exposure to a correspondent is dinarily does not exceed the bank’s internal significant, the policies and procedures shall limits, including limits established for credit require periodic reviews of the financial exposure, except for occasional excesses re condition of the correspondent and shall sulting from unusual market disturbances, take into account any deterioration in the market movements favorable to the bank, correspondent’s financial condition. Factors increases in activity, operational problems, bearing on the financial condition of the or other unusual circumstances. Generally, correspondent include the capital level of monitoring may be done on a retrospective the correspondent, level of nonaccrual and basis. The level of monitoring required de past-due loans and leases, level of earnings, pends on— and other factors affecting the financial con (i) the extent to which exposure ap dition of the correspondent. Where public proaches the bank’s internal limits; information on the financial condition of (ii) the volatility of the exposure; and the correspondent is available, a bank may (iii) the financial condition of the base its review of the financial condition of correspondent. a correspondent on such information, and is (3) A bank shall establish appropriate pro not required to obtain nonpublic informa cedures to address excesses over its internal tion for its review.1 limits. (3) A bank may rely on another party, such as a bank rating agency or the bank’s (d) Review by board of directors. The policies holding company, to assess the financial and procedures established under this section condition of or select a correspondent, pro shall be reviewed and approved by the bank’s vided that the bank’s board of directors has board of directors at least annually. reviewed and approved the general assess ment or selection criteria used by that party. SECTION 206.4— Credit Exposure (c) Internal limits on exposure. (a) Limits on credit exposure. (1) Where the financial condition of the (1) The policies and procedures on expo correspondent and the form or maturity of sure established by a bank under section the exposure create a significant risk that 206.3(c) of this part shall limit a bank’s payments will not be made in full or in a interday credit exposure to an individual timely manner, a bank’s policies and proce correspondent to not more than 25 percent dures shall limit the bank’s exposure to the of the bank’s total capital, unless the bank correspondent, either by the establishment can demonstrate that its correspondent is at of internal limits or by other means. Limits least adequately capitalized, as defined in shall be consistent with the risk undertaken, section 206.5(a) of this part.2 considering the financial condition and the (2) Where a bank is no longer able to dem form and maturity of exposure to the corre onstrate that a correspondent is at least ad spondent. Limits may be fixed as to amount equately capitalized for the purposes of sec- or flexible, based on such factors as the 2 As used in this final rule, the term “adequately capital 1 A bank will be required to obtain nonpublic informa ized” is similar but not identical to the definition of that tion for its review for those foreign banks for which there is term as used for the purposes of the prompt-corrective-ac- no public source of financial information. tion standards. 2 Regulation F § 206.4 tion 206.4(a) of this part, including where dent is secondarily liable, or obligations of the bank cannot obtain adequate informa the correspondent on which a creditworthy tion concerning the capital ratios of the cor obligor in addition to the correspondent is respondent, the bank shall reduce its credit available, including but not limited to— exposure to comply with the requirements (i) loans to third parties secured by of section 206.4(a)(1) of this part within stock or debt obligations of the 120 days after the date when the current correspondent; Report of Condition and Income or other (ii) loans to third parties purchased relevant report normally would be from the correspondent with recourse; available. (iii) loans or obligations of third parties backed by standby letters of credit issued (b) Calculation of credit exposure. Except by the correspondent; or as provided in sections 206.4(c) and (d) of (iv) obligations of the correspondent this part, the credit exposure of a bank to a backed by standby letters of credit issued correspondent shall consist of the bank’s as by a creditworthy third party; sets and off-balance-sheet items that are (4) exposure that results from the merger subject to capital requirements under the with or acquisition of another bank for one capital adequacy guidelines of the bank’s year after that merger or acquisition is con primary federal supervisor, and that involve summated; and claims on the correspondent or capital in (5) the portion of the bank’s exposure to struments issued by the correspondent. For the correspondent that is covered by federal this purpose, off-balance-sheet items shall deposit insurance. be valued on the basis of current exposure. The term “credit exposure” does not in (e) Credit exposure of subsidiaries. In calcu clude exposure related to the settlement of lating credit exposure to a correspondent un transactions, intraday exposure, transac der this part, a bank shall include credit expo tions in an agency or similar capacity where sure to the correspondent of any entity that losses will be passed back to the principal or the bank is required to consolidate on its Re other party, or other sources of exposure port of Condition and Income or Thrift Fi that are not covered by the capital adequa nancial Report. cy guidelines. (f) Definitions. As used in this section: (c) Netting. Transactions covered by netting (1) Government securities means obliga agreements that are valid and enforceable un tions of, or obligations fully guaranteed as der all applicable laws may be netted in calcu to principal and interest by, the United lating credit exposure. States government or any department, agency, bureau, board, commission, or es (d) Exclusions. A bank may exclude the fol tablishment of the United States, or any lowing from the calculation of credit exposure corporation wholly owned, directly or indi to a correspondent: rectly, by the United States. (1) transactions, including reverse repur (2) Readily marketable collateral means fi chase agreements, to the extent that the nancial instruments or bullion that may be transactions are secured by government se sold in ordinary circumstances with reason curities or readily marketable collateral, as able promptness at a fair market value de defined in paragraph (f) of this section, termined by quotations based on actual based on the current market value of the transactions on an auction or a similarly collateral; available daily bid- and ask-price market. (2) the proceeds of checks and other cash (3) Quality asset means an asset— items deposited in an account at a corre (i) that is not in a nonaccrual status; spondent that are not yet available for (ii) on which principal or interest is not withdrawal; more than 30 days past due; and (3) quality assets, as defined in paragraph (iii) whose terms have not been renego (f) of this section, on which the correspon tiated or compromised due to the deterio- 3 § 206.4 Regulation F rating financial condition of the addition to the minimum leverage ratio required under al obligor; except that paragraph (a)(3) of this section. (iv) an asset is not considered a “quality (d) Reliance on information. A bank may asset” if any other loans to the primary rely on information as to the capital levels of a obligor on the asset have been classified correspondent obtained from the correspon as “substandard,” “doubtful,” or “loss,” dent, a bank rating agency, or other party that or treated as “other loans specially men it reasonably believes to be accurate. tioned” in the most recent report of ex amination or inspection of the bank or an (e) Definitions. For the purposes of this affiliate prepared by either a federal or a section: state supervisory agency. (1) Total risk-based capital ratio means the ratio of qualifying total capital to weighted risk assets. (2) Tier 1 risk-based capital ratio means SECTION 206.5—Capital Levels of the ratio of tier 1 capital to weighted-risk Correspondents assets. (3) Leverage ratio means the ratio of tier 1 (a) Adequately capitalized correspondents. capital to average total consolidated assets, For the purpose of this part, a correspondent as calculated in accordance with the capital is considered adequately capitalized if the cor adequacy guidelines of the correspondent’s respondent has— primary federal supervisor. (1) a total risk-based capital ratio, as de fined in paragraph (e) (1) of this section, of (f) Calculation o f capital ratios. 8.0 percent or greater; (i) For a correspondent that is a U.S. de (2) a Tier 1 risk-based capital ratio, as de pository institution, the ratios shall be fined in paragraph (e) (2) of this section, of calculated in accordance with the capital 4.0 percent or greater; and adequacy guidelines of the correspondent’s (3) a leverage ratio, as defined in para primary federal supervisor. graph (e)(3 ) of this section, of 4.0 percent (ii) For a correspondent that is a foreign or greater. bank organized in a country that has adopt ed the risk-based framework of the Basle (b) Frequency o f monitoring capital levels. A Capital Accord, the ratios shall be calculat bank shall obtain information to demonstrate ed in accordance with the capital adequacy that a correspondent is at least adequately guidelines of the appropriate supervisory capitalized on a quarterly basis, either from authority of the country in which the corre the most recently available Report of Condi spondent is chartered. tion and Income, Thrift Financial Report, fi (iii) For a correspondent that is a foreign nancial statement, or bank rating report for bank organized in a country that has not the correspondent. For a foreign bank corre adopted the risk-based framework of the spondent for which quarterly financial state Basle Capital Accord, the ratios shall be ments or reports are not available, a bank calculated in accordance with the provi shall obtain such information on as frequent a sions of the Basle Capital Accord. basis as such information is available. Infor mation obtained directly from a correspon dent for the purpose of this section should be SECTION 206.6—Waiver based on the most recently available Report of Condition and Income, Thrift Financial Re The Board may waive the application of Sec port, or financial statement of the corre tion 206.4(a) of this part to a bank if the pri spondent. mary federal supervisor of the bank advises the Board that the bank is not reasonably able (c) Foreign banks. A correspondent that is a to obtain necessary services, including pay foreign bank may be considered adequately ment-related services and placement of funds, capitalized under this section without regard without incurring exposure to a correspon 4 Regulation F § 206.7 dent in excess of the otherwise applicable (b) Beginning on June 19, 1994, a bank shall limit. comply with the limit on credit exposure to an individual correspondent required under Sec tion 206.4(a) of this part, but for a period of SECTION 206.7—Transition Provisions one year after this date the limit shall be 50 percent of the bank’s total capital. (a) Beginning on June 19, 1993, a bank shall comply with the prudential standards pre scribed under Section 206.3 of this part. 5 Statutory Provisions Section 308 of the Federal Deposit Insurance behalf of the other depository Corporation Improvement Act o f 1991 (105 institution; Stat. 2362) added a new section 23 to the Fed (B) all purchases of or investments in eral Reserve Act, effective December 19, 1992, securities issued by the other depository and authorized the Board to “prescribe reason institution; able transition rules to facilitate compliance (C) all securities issued by the other de with section 23 o f the Federal Reserve Act. ” pository institution accepted as collateral for an extension of credit to any person; and (D ) all similar transactions that the FEDERAL RESERVE ACT Board by regulation determines to be ex posure for purposes of this section. SECTION 23—Interbank Liabilities (2) The Board may, at its discretion, by (a) The purpose of this section is to limit the regulation or order, exempt transactions risks that the failure of a large depository in from the definition of “exposure” if it finds stitution (whether or not that institution is an the exemptions to be in the public interest insured depository institution) would pose to and consistent with the purpose of this insured depository institutions. section. (3) For purposes of this section, any trans (b) Aggregate limits on insured depository in action by an insured depository institution stitutions’ exposure to other depository institu with any person is a transaction with anoth tions. The Board shall, by regulation or order, er depository institution to the extent that prescribe standards that have the effect of lim the proceeds of the transaction are used for iting the risks posed by an insured depository the benefit of, or transferred to, that other institution’s exposure to any other depository depository institution. institution. (d) “Insured depository institution” defined. (c) “Exposure” defined. (1) For purposes of For purposes of this section, the term “in subsection (b), an insured depository insti sured depository institution” has the same tution’s “exposure” to another depository meaning as in section 3 of the Federal Deposit institution means— Insurance Act. (A ) all extensions of credit to the other depository institution, regardless of name (e) Rulemaking authority; enforcement. The or description, including— Board may issue such regulations and orders, (i) all deposits at the other depository including definitions consistent with this sec institution; tion, as may be necessary to administer and (ii) all purchases of securities or other carry out the purpose of this section. The ap assets from the other depository insti propriate Federal banking agency shall en tution subject to an agreement to re force compliance with those regulations under purchase; and section 8 of the Federal Deposit Insurance (iii) all guarantees, acceptances, or Act. letters of credit (including endorse [12 use 371b-2. As added by act of Dec. 19, 1991 (105 ments or standby letters of credit) on Stat. 2362).] Board of Governors of the Federal Reserve System Regulation D Reserve Requirements of Depository Institutions 12 CFR 204; as amended effective December 22, 1992 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the Federal Reserve District in which the inquiry arises. April 1993 Contents Page Page Section 204.1—Authority, purpose and (g) Availability of cash items as scope ...... 1 reserves...... 14 (a) Authority...... 1 (h) Carryover of excesses or (b) Purpose...... 1 deficiencies...... 15 (c) Scope...... 1 (i) Pass-through rules...... 15 ction 204.2—Definitions...... 1 Section 204.4— Transitional (a) Deposit...... 1 adjustments...... 17 (b) Demand deposit...... 4 (a) Nonmembers...... 17 (c) Time deposit...... 5 (b) New members ...... 17 (d) Savings deposit...... 6 (c) De novo institutions ...... 18 (e) Transaction account...... 7 (d) Nonmembers depository institutions with offices in (f) Nonpersonal time deposit . . . . 8 Hawaii ...... 18 (g) Natural person...... 9 (e) Mergers and consolidations . . . 18 (h) Eurocurrency liabilities...... 9 Section 204.5—Emergency reserve (i) Cash item in process of collection...... 10 requirement ...... 20 (a) Finding by Board...... 20 (j) Net transaction accounts...... 10 (k) Vault cash...... 10 (b) Term ...... 20 (c) Reports to Congress ...... 20 (1) Pass-through account...... 10 (m) Depository institution...... 10 (d) Reserve requirements...... 20 (n) Member bank...... 11 Section 204.6—Supplemental reserve requirement ...... 20 (o) Foreign b an k ...... 11 (a) Finding by Board...... 20 (P) De novo depository institution 11 (b) Term ...... 20 (q) Affiliate ...... 11 (c) Earnings participation account. 21 (r) United S tates...... 11 (d) Report to Congress...... 21 (s) United States resident...... 11 (e) Reserve requirements...... 21 (t) Any deposit that is payable only at an office located outside the Section 204.7—Reserve deficiencies .. .21 United S tates...... 11 (a) Charges for deficiencies...... 21 (u) Teller’s check...... 1? (b) Penalties for violations...... 21 Section 204,3—Computation and Section 204.8—International banking maintenance...... 12 facilities...... 22 (a) Maintenance of required (a) Definitions...... 22 reserves...... 12 (b) Acknowledgment of use of IBF (b) Form of reserves...... 13 deposits and extensions of (c) Computation of required reserves credit...... 23 for institutions that report on a (c) Exemption from reserve weekly b asis...... 13 requirements ...... 23 (d) Computation for required reserves (d) Establishment of an international for instutions that report on a banking facility ...... 23 quarterly b asis...... 14 (e) Notification to Federal (e) Computation of transaction Reserve...... 23 accounts...... 14 (f) Recordkeeping requirements .. 23 (f) Deductions allowed in computing Section 204.9—Supplement: Reserve reserves...... 14 requirement ratios...... 23 Contents Page Page (a) Reserve percentages...... 23 STATUTORY PROVISIONS Federal Reserve Act (b) Reserve ratios in effect during last Section 1 9 ...... 27 computation period prior to Section 11(a), (c), and ( e ) ...... 33 September 1, 1980 ...... 24 Section 2 5 ...... 34 Section 204.125—Deposits of Exempt Section 25A ...... 34 Foreign, International, and International Banking Act Supranational Entities...... 25 Section 7 ...... 35 Regulation D Reserve Requirements of Depository Institutions 12 CFR 204; as amended effective December 22, 1992 SECTION 204.1—Authority, Purpose quired to comply with the provisions of this and Scope part in the same manner and to the same extent as if the branch or agency were a (a) Authority. This part* is issued under the member bank, if its parent foreign bank (i) authority of section 19 (12 USC 461 et seq.) has total worldwide consolidated bank as and other provisions of the Federal Reserve sets in excess of $1 billion; or (ii) is con Act and of section 7 of the International trolled by a foreign company or by a group Banking Act of 1978 (12 USC 3105). of foreign companies that own or control (b) Purpose. This part relates to reserves that foreign banks that in the aggregate have to depository institutions are required to main tal worldwide consolidated bank assets in tain for the purpose of facilitating the imple excess of $1 billion. In addition, any other mentation of monetary policy by the Federal foreign bank’s branch located in the United Reserve System. States that is eligible to apply to become an insured bank under section 5 of the Federal (c) Scope. (1) The following depository in Deposit Insurance Act (12 USC 1815) is stitutions are required to maintain reserves required to maintain reserves in accordance in accordance with this part: with this part as a nonmember depository (i) Any insured bank as defined in sec institution. tion 3 of the Federal Deposit Insurance (3) Except as may be otherwise provided Act (12 USC 1813(h)) or any bank that by the Board, an Edge corporation (12 is eligible to apply to become an insured USC 611 et seq.) or an agreement corpora bank under section 5 of such act (12 tion (12 USC 601 et seq.) is required to USC 1815); comply with the provisions of this part in (ii) Any savings bank or mutual savings the same manner and to the same extent as bank as defined in section 3 of the Feder a member bank. al Deposit Insurance Act (12 USC (4) This part does not apply to any finan 1813(f), (g)); cial institution that (i) is organized solely (iii) Any insured credit union as defined to do business with other financial institu in section 101 of the Federal Credit Un tions; (ii) is owned primarily by the finan ion Act (12 USC 1752(7)) or any credit cial institutions with which it does business; union that is eligible to apply to become and (iii) does not do business with the gen an insured credit union under section 201 eral public. of such act (12 USC 1781); (5) The provisions of this part do not ap (iv) Any member as defined in section 2 ply to any deposit that is payable only at an of the Federal Home Loan Bank Act (12 office located outside the United States. USC 1422(4)); and (v) Any insured institution as defined in SECTION 204.2—Definitions section 401 of the National Housing Act (12 USC 1724(a)) or any institution For purposes of this part, the following defini which is eligible to apply to become an tions apply unless otherwise specified: insured institution under section 403 of (a)(1) ‘ ‘Deposit ’ ’ means— such act (12 USC 1726). (i) the unpaid balance of money or its (2) Except as may be otherwise provided equivalent received or held by a deposito by the Board, a foreign bank’s branch or ry institution in the usual course of busi agency located in the United States is re ness and for which it has given or is obli gated to give credit, either conditionally *The words “this part,” as used herein, mean Regulation D (Code of Federal Regulations, title 12, chapter II, part or unconditionally, to an account, includ 204). ing interest credited, or which is evi- 1 §204.2 Regulation D denced by an instrument on which the such obligation that, had it been issued depository institution is primarily liable; directly by the depository institution, (ii) money received or held by a deposi would not constitute a deposit. If an obli tory institution, or the credit given for gation of an affiliate of a depository money or its equivalent received or held institution is regarded as a deposit and is by the depository institution in the usual used to purchase assets from the deposi course of business for a special or specific tory institution, the maturity of the depo purpose, regardless of the legal relation sit is determined by the shorter of the ships established thereby, including es maturity of the obligation issued or the crow funds, funds held as security for remaining maturity of the assets pur securities loaned by the depository insti chased. If the proceeds from an affiliate’s tution, funds deposited as advance pay obligation are placed in the depository in ment on subscriptions to United States stitution in the form of a reservable depo government securities, and funds held to sit, no reserves need be maintained meet its acceptances; against the obligation of the affiliate since (iii) an outstanding teller’s check, or an reserves are required to be maintained outstanding draft, certified check, cash against the deposit issued by the deposi ier’s check, money order, or officer’s tory institution. However, the maturity check drawn on the depository institu of the deposit issued to the affiliate shall tion, issued in the usual course of busi be the shorter of the maturity of the affili ness for any purpose, including payment ate’s obligation or the maturity of the for services, dividends, or purchases; deposit; (iv) any due bill or other liability or un (vi) credit balances; dertaking on the part of a depository in (vii) any liability of a depository institu stitution to sell or deliver securities to, or tion on any promissory note, acknowl purchase securities for the account of, edgment of advance, banker’s accept any customer (including another deposi ance, or similar obligation (written or tory institution), involving either the oral), including mortgage-backed bonds, receipt of funds by the depository institu that is issued or undertaken by a deposi tion, regardless of the use of the pro tory institution as a means of obtaining ceeds, or a debit to an account of the cus funds, except any such obligation that— tomer before the securities are delivered. (A ) is issued or undertaken and held A deposit arises thereafter, if after three for the account of— business days from the date of issuance of (1) an office located in the United the obligation, the depository institution States of another depository institu does not deliver the securities purchased tion, foreign bank, Edge or agree or does not fully collateralize its obliga ment corporation, or New York In tion with securities similar to the securi vestment (article XII) Company; ties purchased. A security is similar if it (2) the United States government is of the same type and if it is of compara or an agency thereof; or ble maturity to that purchased by the (3) the Export-Import Bank of the customer; United States, Minbanc Capital Cor (v) any liability of a depository institu poration, the Government Develop tion’s affiliate that is not a depository in ment Bank for Puerto Rico, a Feder stitution, on any promissory note, ac al Reserve Bank, a Federal Home knowledgment of advance, due bill, or Loan Bank, or the National Credit similar obligation (written or oral), with Union Administration Central Li a maturity of less than one and one-half quidity Facility; years, to the extent that the proceeds are (B) arises from a transfer of direct ob used to supply or to maintain the avail ligations of, or obligations that are ful ability of funds (other than capital) to ly guaranteed as to principal and inter the depository institution, except any est by, the United States government Regulation D §204.2 or any agency thereof that the de for purposes of making loans, invest pository institution is obligated to ments, or maintaining liquid assets such repurchase; as cash or “due from” depository institu (C) is not insured by a federal agency, tions or other similar purposes. An obli is subordinated to the claims of deposi gation issued for the purpose of raising tors, has a weighted average maturity funds to purchase business premises, of five years or more, and is issued by a equipment, supplies, or similar assets is depository institution with the approv not a deposit; al of, or under the rules and regula (iv) accounts payable; tions of, its primary federal supervisor; (v) hypothecated “deposits” created by (D ) arises from a borrowing by a de payments on an installment loan where pository institution from a dealer in se (A ) the amounts received are not used curities, for one business day, of pro immediately to reduce the unpaid bal ceeds of a transfer of deposit credit in a ance due on the loan until the sum of the Federal Reserve Bank or other imme payments equals the entire amount of diately available funds, (commonly re loan principal and interest; (B) and ferred to as “federal funds”), received where such amounts are irrevocably as by such dealer on the date of the loan signed to the depository institution and in connection with clearance of securi cannot be reached by the borrower or ties transactions; or creditors of the borrower; (E) arises from the creation, discount (vi) dealer reserve and differential ac and subsequent sale by a depository in counts that arise from the financing of stitution of its banker’s acceptance of dealer installment accounts receivable, the type described in paragraph 7 of and which provide that the dealer may section 13 of the Federal Reserve Act not have access to the funds in the ac (12 USC 372); count until the installment loans are re (viii) any liability of a depository insti paid, as long as the depository institution tution that arises from the creation after is not actually (as distinguished from June 20, 1983, of a banker’s acceptance contingently) obligated to make credit or that is not of the type described in para funds available to the dealer; graph 7 of section 13 of the Federal Re (vii) a dividend declared by a depository serve Act (12 U.S.C. 372) except institution for the period intervening be any such liability held for the account tween the date of the declaration of the of an entity specified in section dividend and the date on which it is paid; 204.2(a)(1) (vii) (A). (viii) an obligation representing a “pass (2) “Deposit” does not include— through account,” as defined in this (i) trust funds received or held by the section; depository institution that it keeps prop (ix) an obligation arising from the reten erly segregated as trust funds and apart tion by the depository institution of no from its general assets or which it depos more than a 10 percent interest in a pool its in another institution to the credit of of conventional one- to four-family mort itself as trustee or other fiduciary. If trust gages that are sold to third parties; funds are deposited with the commercial (x) an obligation issued to a state or mu department of the depository institution nicipal housing authority under a loan- or otherwise mingled with its general as to-lender program involving the issuance sets, a deposit liability of the institution is of tax exempt bonds and the subsequent created; lending of the proceeds to the depository (ii) an obligation that represents a con institution for housing finance purposes; ditional, contingent or endorser’s (xi) shares of a credit union held by the liability; National Credit Union Administration or (iii) obligations, the proceeds of which the National Credit Union Administra are not used by the depository institution tion Central Liquidity Facility under a 3 §204.2 Regulation D statutorily authorized assistance pro depository institution has reserved the right gram; and to require at least seven days’ written notice (xii) any liability of a United States prior to withdrawal or transfer of any funds branch or agency of a foreign bank to an in the account and from which the deposi other United States branch or agency of tor is authorized to make withdrawals or the same foreign bank, or the liability of transfers in excess of the withdrawal or the United States office of an Edge corpo transfer limitations specified in section ration to another United States office of 204.2(d)(2) for such an account and the the same Edge corporation. account is not a NOW account, or an ATS account or other account that meets the (b)(1) “Demand deposit” means a deposit criteria specified in either section that is payable on demand, or a deposit is 204.2(b) (3) (ii) or (iii) below. sued with an original maturity or required (3) “Demand deposit” does not include— notice period of less than seven days, or a (i) any account that is a time deposit or deposit representing funds for which the de a savings deposit under this part; pository institution does not reserve the (ii) any deposit or account on which the right to require at least seven days’ written depository institution has reserved the notice of an intended withdrawal. Demand right to require at least seven days’ writ deposits may be in the form of— ten notice prior to withdrawal or transfer (i) checking accounts; of any funds in the account and either— (ii) certified, cashier’s, teller’s and offi (A ) is subject to check, draft, negotia cer’s checks (including such checks is ble order of withdrawal, share draft, or sued in payment of dividends); similar item, such as an account autho (iii) traveler’s checks and money orders rized by 12 USC 1832(a) (“NOW ac that are primary obligations of the issu count”) and a savings deposit de ing institution; scribed in section 204.2(d) (2), provid (iv) checks or drafts drawn by, or on be ed that the depositor is eligible to hold half of, a non-United States office of a a NOW account; or depository institution on an account (B) from which the depositor is au maintained at any of the institution’s thorized to make transfers by preau United States offices; thorized transfer or telephonic (in (v) letters of credit sold for cash or its cluding data transmission) agreement, equivalent; order or instruction to another account (vi) withheld taxes, withheld insurance or to a third party, provided that the and other withheld funds; depositor is eligible to hold a NOW (vii) time deposits that have matured or account; time deposits upon which the contractu (iii) any deposit or account on which ally required notice of withdrawal was the depository institution has reserved given and the notice period has expired the right to require at least seven days’ and which have not been renewed (either written notice prior to withdrawal or by action of the depositor or automatical transfer of any funds in the account and ly under the terms of the deposit agree from which withdrawals may be made ment); and automatically through payment to the (viii) an obligation to pay, on demand depository institution itself or through or within six days, a check (or other in transfer of credit to a demand deposit or strument, device, or arrangement for the other account in order to cover checks or transfer of funds) drawn on the deposito drafts drawn upon the institution or to ry institution, where the account of the maintain a specified balance in, or to institution’s customer already has been make periodic transfers to such other ac debited. count, such as accounts authorized by 12 (2) The term “demand deposit” also USC 371a (automatic transfer account means deposits or accounts on which the or ATS account), provided that the de Regulation D § 204.2 positor is eligible to hold an ATS ac action account.2 “Time deposit” includes count; or funds— (iv) IBF time deposits meeting the re (A) payable on a specified date not quirements of section 204.8(a)(2). less than seven days after the date of deposit; (B) payable at the expiration of a (c)(1 ) “Time deposit” means— specified time not less than seven days (i) a deposit that the depositor does not after the date of deposit; have a right and is not permitted to make (C) payable only upon written notice withdrawals from within six days after that is actually required to be given by the date of deposit unless the deposit is the depositor not less than seven days subject to an early withdrawal penalty of prior to withdrawal; at least seven days’ simple interest on (D ) held in “club” accounts (such as amounts withdrawn within the first six “Christmas club” accounts and “vaca days after deposit.1 A time deposit from tion club” accounts that are not main which partial early withdrawals are per tained as “savings deposits”) that are mitted must impose additional early deposited under written contracts pro withdrawal penalties of at least seven viding that no withdrawal shall be days’ simple interest on amounts with made until a certain number of period drawn within six days after each partial ic deposits have been made during a withdrawal. If such additional early period of not less than three months withdrawal penalties are not imposed, even though some of the deposits may the account ceases to be a time deposit. be made within six days from the end The account may become a savings depo of the period; or sit if it meets the requirements for a sav (E) share certificates and certificates ing deposit; otherwise it becomes a trans of indebtedness issued by credit un ions, and certificate accounts and no *A time deposit, or a portion thereof, may be paid before tice accounts issued by savings and maturity without imposing the early withdrawal penalties loan associations; specified by this part— (a) where the time deposit is maintained in an individu (ii) a “savings deposit;” al retirement account established in accordance with 26 (iii) an “IBF time deposit” meeting the USC 408 and is paid within seven days after establishment requirements of section 204.8(a)(2); and of the individual retirement account pursuant to 26 CFR 1.408-6(d)(4), where it is maintained in a Keogh (H.R. (iv) borrowings, regardless of maturity, 10) plan; or where it is maintained in a “401 (k) plan” represented by a promissory note, under 26 USC 401 (k); provided that the depositor forfeits an amount at least equal to the simple interest earned on an acknowledgment of advance, or the amount withdrawn; similar obligation described in section (b) where the depository institution pays all or a por 204.2(a)(1) (vii) that is issued to, or any tion of a time deposit representing funds contributed to an individual retirement account or a Keogh (H.R. 10) plan banker’s acceptance (other than the type established pursuant to 26 USC 408 or 26 USC 401 or to a described in 12 USC 372) of the deposi “401 (k) plan” established pursuant to 26 USC 401 (k) tory institution held by— when the individual for whose benefit the account is main tained attains age 59^ or is disabled (as defined in 26 USC (A) any office located outside the 72(m)(7)) or thereafter; United States of another depository in (c) where the depository institution pays that portion of a time deposit on which federal deposit insurance has been stitution or Edge or agreement corpo lost as the result of the merger of two or more federally ration organized under the laws of the insured banks in which the depositor previously maintained United States; separate time deposits, for a period of one year from the date of the merger; (B) any office located outside the (d) upon the death of any owner of the time deposit United States of a foreign bank; funds; (e) when any owner of the time deposit is determined to be legally incompetent by a court or other administrative 2 A nonpersonal time deposit with a stated maturity of body of competent jurisdiction; or one and one-half years or more may be treated as having an (f) where a time deposit is withdrawn within ten days original maturity of one and one-half years or more only if after a specified maturity date even though the deposit con it is subject to the minimum penalty described in section tract provided for automatic renewal at the maturity date. 204.2(0(3). 5 §204.2 Regulation D (C) a foreign national government, or automatic transfer, or telephonic (including an agency or instrumentality thereof,3 data transmission) agreement, order or in engaged principally in activities which struction, and no more than three of the six are ordinarily performed in the United such transfers may be made by check, draft, States by governmental entities, debit card, or similar order made by the de (D ) an international entity of which positor and payable to third parties. A the United States is a member, or “preauthorized transfer” includes any ar (E) any other foreign, international, rangement by the depository institution to or supranational entity specifically des pay a third party from the account of a de ignated by the Board.4 positor upon written or oral instruction (in (2) A time deposit may be represented by cluding an order received through an auto a transferable or nontransferable, or a nego mated clearing house (ACH )) or any ar tiable or nonnegotiable, certificate, instru rangement by a depository institution to ment, passbook, or statement, or by book pay a third party from the account of the entry or otherwise. depositor at a predetermined time or on a fixed schedule. Such an account is not a (d)(1) “Savings deposit” means a deposit or “transaction account” by virtue of an ar account with respect to which the depositor rangement that permits transfers for the is not required by the deposit contract but purpose of repaying loans and associated may at any time be required by the deposi expenses at the same depository institution tory institution to give written notice of an (as originator or servicer) or that permits intended withdrawal not less than seven transfers of funds from this account to an days before withdrawal is made, and that is other account of the same depositor at the not payable on a specified date or at the same institution or permits withdrawals expiration of a specified time after the date (payments directly to the depositor) from of deposit. The term “savings deposit” in the account when such transfers or with cludes a regular share account at a credit drawals are made by mail, messenger, auto union and a regular account at a savings mated teller machine, or in person or when and loan association. such withdrawals are made by telephone (2) The term “savings deposit” also means: (via check mailed to the depositor) regard A deposit or account, such as an account less of the number of such transfers or commonly known as a passbook savings ac withdrawals.5’ 6 count, a statement savings account, or as a money market deposit account 5 In order to ensure that no more than the permitted ( “MMDA”), that otherwise meets the re number of withdrawals or transfers are made, for an ac quirements of section 204.2(d)(1) and count to come within the definitions in section from which, under the terms of the deposit 204.2(d)(2), a depository institution must either— (a) prevent withdrawals or transfers of funds from this contract or by practice of the depository in account that are in excess of the limits established by sec stitution, the depositor is permitted or au tions 204.2(d)(2) or thorized to make no more than six transfers (b) adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the estab and withdrawals, or a combination of such lished limits on more than an occasional basis. transfers and withdrawals, per calendar For customers who continue to violate those limits after they have been contacted by the depository institution, the month or statement cycle (or similar peri depository institution must either close the account and od) of at least four weeks, to another ac place the funds in another account that the depositor is count (including a transaction account) of eligible to maintain or take away the transfer and draft capacities of the account. the depositor at the same institution or to a An account that authorizes withdrawals or transfers in third party by means of a preauthorized or excess of the permitted number is a transaction account regardless of whether the authorized number of transac tions are actually made. For accounts described in section 3 Other than states, provinces, municipalities, or other 204.2(d)(2), the institution at its option may use, on a regional or local governmental units or agencies or instru- consistent basis, either the date on the check, draft, or simi mentalities thereof. lar item, or the date the item is paid in applying the limits 4 The designated entities are specified in 12 CFR 204.125 imposed by that section. (page 25). 6 Reserved. Regulation D §204.2 (3) A deposit may continue to be classified 204.2(d) (2), but including accounts autho as a savings deposit even if the depository rized by 12 USC 371a (automatic transfer institution exercises its right to require no accounts or ATS accounts). tice of withdrawal. (4) Deposits or accounts on which the de (4) “Savings deposit” does not include pository institution has reserved the right to funds deposited to the credit of the deposi require at least seven days’ written notice tory institution’s own trust department prior to withdrawal or transfer of any funds where the funds involved are utilized to in the account and under the terms of cover checks or drafts. Such funds are which, or by practice of the depository in “transaction accounts.” stitution, the depositor is permitted or au thorized to make more than six withdraw (e) “Transaction account” means a deposit als per month or statement cycle (or similar or account from which the depositor or ac period) of at least four weeks for purposes count holder is permitted to make transfers or of transferring funds to another account of withdrawals by negotiable or transferable in the depositor at the same institution (in strument, payment order of withdrawal, tele cluding a “transaction account”) or for phone transfer, or other similar device for the making payment to a third party by means purpose of making payments or transfers to of preauthorized transfer, or telephonic (in third persons or others or from which the de cluding data transmission) agreement, or positor may make third-party payments at an der or instruction, except accounts de automated teller machine (ATM) or a remote scribed in section 204.2(d)(2). An account service unit, or other electronic device, includ that authorizes more than six such with ing by debit card, but the term does not in drawals in a calendar month, or statement clude savings deposits or accounts described cycle (or similar period) of at least four in section 204.2(d)(2) even though such ac weeks, is a “transaction account” whether counts permit third-party transfers. “Transac or not more than six such transfers are tion account” includes— made during such period. A “preauthorized (1) demand deposits; transfer” includes any arrangement by the (2) deposits or accounts on which the de depository institution to pay a third party pository institution has reserved the right to from the account of a depositor upon writ require at least seven days’ written notice ten or oral instruction (including an order prior to withdrawal or transfer of any funds received through an automated clearing in the account and that are subject to house (AC H )), or any arrangement by a check, draft, negotiable order of withdraw depository institution to pay a third party al, share draft, or other similar item, except from the account of the depositor at a pre accounts described in section 204.2(d)(2) determined time or on a fixed schedule. (savings deposits), but including accounts Such an account is not a “transaction ac authorized by 12 USC 1832(a) (NOW count” by virtue of an arrangement that accounts). permits transfers for the purpose of repay (3) Deposits or accounts on which the de ing loans and associated expenses at the pository institution has reserved the right to same depository institution (as originator require at least seven days’ written notice or servicer) or that permits transfers of prior to withdrawal or transfer of any funds funds from this account to another account in the account and from which withdrawals of the same depositor at the same institu may be made automatically through pay tion or permits withdrawals (payments di ment to the depository institution itself or rectly to the depositor) from the account through transfer of credit to a demand de when such transfers or withdrawals are posit or other account in order to cover made by mail, messenger, automated teller checks or drafts drawn upon the institution machine or in person or when such with or to maintain a specified balance in, or to drawals are made by telephone (via check make periodic transfers to such accounts, mailed to the depositor) regardless of the except accounts described in section number of such transfers or withdrawals. 7 § 204.2 Regulation D (5) Deposits or accounts maintained in as transferable even if the following connection with an arrangement that per transactions can be effected: a pledge as mits the depositor to obtain credit directly collateral for a loan; a transaction that or indirectly through the drawing of a nego occurs due to circumstances arising from tiable or nonnegotiable check, draft, order death, incompetency, marriage, divorce, or instruction or other similar device (in attachment or otherwise by operation of cluding telephone or electronic order or in law or a transfer on the books or records struction) on the issuing institution that of the institution; and can be used for the purpose of making pay (v) A time deposit represented by a ments or transfers to third persons or oth promissory note, an acknowledgment of ers, or to a deposit account of the depositor. advance, or similar obligation described (6) All deposits other than time and sav in section 204.2(a)(1) (vii) that is issued ings deposits, including those accounts that to, or any banker’s acceptance (other are time and savings deposits in form but than the type described in 12 USC 372) that the Board has determined, by rule or of the depository institution held by— order, to be transaction accounts. (A ) any office located outside the United States of another depository in (f)(1 ) “Nonpersonal time deposit” means— stitution or Edge or agreement corpo (i) A time deposit, including an MMDA ration organized under the laws of the or any other savings deposit, representing United States, funds in which any beneficial interest is (B) any office located outside the held by a depositor which is not a natural United States of a foreign bank, person; (C) a foreign national government, or (ii) A time deposit, including an an agency or instrumentality thereof,7 MMDA or any other savings deposit, engaged principally in activities which that represents funds deposited to the are ordinarily performed in the United credit of a depositor that is not a natural States by governmental entities, person, other than a deposit to the credit (D ) an international entity of which of a trustee or other fiduciary if the entire the United States is a member, or beneficial interest in the deposit is held by (E) any other foreign, international, one or more natural persons; or supranational entity specifically des (iii) a time deposit that is transferable, ignated by the Board.8 except a time deposit originally issued be (2) “Nonpersonal time deposit” does not fore October 1, 1980, to and held by one include nontransferable time deposits to the or more natural persons, including a de credit of or in which the entire beneficial posit to the credit of a trustee or other interest is held by an individual pursuant to fiduciary if the entire beneficial interest in an individual retirement account or Keogh the deposit is held by one or more natural (H.R. 10) plan under 26 USC 408, 401, or persons; nontransferable time deposits held by an (iv) a time deposit that is transferable, employer as part of an unfunded deferred- issued on or after October 1, 1980, to and compensation plan established pursuant to held by one or more natural persons, in subtitle D of the Revenue Act of 1978 (Pub. cluding a deposit to the credit of a trustee L. No. 95-600, 92 Stat. 2763), or a “401 (k) or other fiduciary if the entire beneficial plan” under 26 USC 401 (k). interest is held by one or more natural (3) Any nonpersonal time deposit with a persons. A time deposit is transferable stated maturity or notice period of one and unless it contains a specific statement on one-half years or more that permits any ear the certificate, instrument, passbook, statement or other form representing the 7 Other than states, provinces, municipalities, or other account that it is not transferable. A time regional or local governmental units or agencies or instru mentalities thereof. deposit that contains a specific statement 8 The designated entities are specified in 12 CFR 204.125 that it is not transferable is not regarded (page 25). Regulation D §204.2 ly withdrawal must be subject to a mini (iii) credit outstanding from its non- mum early withdrawal penalty equal to at United States offices to United States res least thirty days’ simple interest on the idents (other than assets acquired and amount withdrawn for any withdrawal that net balances due from its United States occurs more than six days but within one offices), except credit extended (A) from and one-half years after the date of deposit. its non-United States offices in the aggre Any such account not subject to this mini gate amount of $100,000 or less to any mum early withdrawal penalty will be re United States resident, (B) by a non- garded as a nonpersonal time deposit with United States office that at no time dur an original maturity or notice period of ing the computation period had credit from seven days to less than one and one- outstanding to United States residents ex half years from the date of the deposit.9 ceeding $1 million, (C) to an interna tional banking facility, or (D ) to an insti (g) “Natural person ” means an individual or tution that will be maintaining reserves a sole proprietorship. The term does not mean on such credit pursuant to this part. a corporation owned by an individual, a part Credit extended from non-United States nership or other association. offices or from IBFs to a foreign branch, office, subsidiary, affiliate, or other for (h) “Eurocurrency liabilities” means— eign establishment (“foreign affiliate”) (1) For a depository institution or an Edge controlled by one or more domestic cor or agreement corporation organized under porations is not regarded as credit ex the laws of the United States, the sum, if tended to a United States resident if the positive, of the following: proceeds will be used to finance the oper (i) net balances due to its non-United ations outside the United States of the States offices and its international bank borrower or of other foreign affiliates of ing facilities (“IBFs”) from its United the controlling domestic corporation(s). States offices; (ii) (A ) for a depository institution orga (2) For a United States branch or agency nized under the laws of the United of a foreign bank, the sum, if positive, of the States, assets (including participa following: tions) acquired from its United States (i) net balances due to its foreign bank offices and held by its non-United (including offices thereof located outside States offices, by its IBF, or by non- the United States) and its international United States offices of an affiliated banking facility after deducting an Edge or agreement corporation;!0 or amount equal to 8 percent of the follow (B) for an Edge or agreement corpo ing: the United States branch’s or agen ration, assets (including participa cy’s total assets less the sum of (A ) cash tions) acquired from its United States items in process of collection; (B) un offices and held by its non-United posted debits; (C) demand balances due States offices, by its IBF, by from depository institutions organized non-United States offices of its U.S. or under the laws of the United States and foreign parent institution, or by from other foreign banks; (D ) balances non-United States offices of an affiliated due from foreign central banks; and (E) Edge or agreement corporation;10 and positive net balances due from its IBF, its foreign bank, and the foreign bank’s 9 See footnote 1 for treatment of accounts existing on United States and non-United States of March 31, 1986, and for exceptions to the imposition of the early withdrawal penalties imposed by this part. The penal fices; and ty required by this section 204.2(f)(3) and that required (ii) assets (including participations) ac by section 204.2(c)(1) need not be aggregated. 10 This subparagraph does not apply to assets (1) that quired from the United States branch or were acquired before October 7, 1979, or (2) that were agency (other than assets required to be acquired by an IBF from its establishing entity before the end of the second reserve computation period after its sold by federal or state supervisory establishment. authorities) and held by its foreign bank 9 §204.2 Regulation D (including offices thereof located outside collections and credit card sales slips and the United States), by its parent holding drafts. company, by non-United States offices or an IBF of an affiliated Edge or agreement (j) “Net transaction accounts” means the to corporation, or by its IBFs.11 tal amount of a depository institution’s trans action accounts less the deductions allowed ( i) ( l) “Cash item in process of collection” under the provisions of section 204.3. means— (i) checks in the process of collection, (k ) (l) “Vault cash” means United States currency and coin owned and held by a de drawn on a bank or other depository in stitution that are payable immediately pository institution that may, at any time, upon presentation in the United States, be used to satisfy depostitors’ claims. including checks forwarded to a Federal (2) “Vault cash” includes United States Reserve Bank in process of collection and currency and coin in transit to a Federal checks on hand that will be presented for Reserve Bank or a correspondent deposito ry institution for which the reporting de payment or forwarded for collection on the following business day; pository institution has not yet received (ii) government checks drawn on the credit, and United States currency and coin Treasury of the United States that are in in transit from a Federal Reserve Bank or a correspondent depository institution when the process of collection; and (iii) such other items in the process of the reporting depository institution’s ac collection, that are payable immediately count at the Federal Reserve or correspon dent bank has been charged for such upon presentation in the United States shipment. and that are customarily cleared or col lected by depository institutions as cash (3) Silver and gold coin and other curren items, including— cy and coin whose numismatic or bullion (A ) drafts payable through another value is substantially in excess of face value depository institution; is not vault cash for purposes of this part. (B) matured bonds and coupons (in (/) “Pass-through account” means a balance cluding bonds and coupons that have maintained by a depository institution that is been called and are payable on not a member bank, by a U.S. branch or agen presentation); cy of a foreign bank, or by an Edge or agree (C) food coupons and certificates; ment corporation, (1) in an institution that (D ) postal and other money orders, maintains required reserve balances at a Fed and traveler’s checks; eral Reserve Bank, (2) in a Federal Home (E) amounts credited to deposit ac Loan Bank, (3) in the National Credit Union counts in connection with automated Administration Central Liquidity Facility, or payment arrangements where such (4) in an institution that has been authorized credits are made one business day pri by the Board to pass through required reserve or to the scheduled payment date to balances if the institution, Federal Home insure that funds are available on the Loan Bank, or National Credit Union Admin payment date; istration Central Liquidity Facility maintains (F) commodity or bill of lading drafts the funds in the form of a balance in a Federal payable immediately upon presenta Reserve Bank of which it is a member or at tion in the United States; which it maintains an account in accordance (G ) returned items and unposted deb with rules and regulations of the Board. its; and (H ) broker security drafts. (m )(l) “Depository institution” means— (2) “Cash item in process of collection” (i) any insured bank as defined in sec does not include items handled as noncash tion 3 of the Federal Deposit Insurance Act (12 USC 1813(h)) or any bank that 11 See footnote 10. is eligible to apply to become an insured 10 Regulation D § 204.2 bank under section 5 of such act (12 the preceding election, or controls in any USC 1815); manner the election of a majority of its di (ii) any savings bank or mutual savings rectors, trustees, or other persons exercising bank as defined in section 3 of the Feder similar functions; al Deposit Insurance Act (12 USC (2) of which control is held, directly or in 1813(f), (g)); directly, through stock ownership or in any (iii) any insured credit union as defined other manner, by the shareholders of a de in section 101 of the Federal Credit Un pository institution or more than 50 percent ion Act (12 USC 1752(7)) or any credit of the number of shares voted for the elec union that is eligible to apply to become tion of directors of such depository institu an insured credit union under section 201 tion at the preceding election, or by trustees of such act (12 USC 1781); for the benefit of the shareholders of any (iv) any member as defined in section 2 such depository institution; of the Federal Home Loan Bank Act (12 (3) of which a majority of its directors, USC 1422(4)); and trustees, or other persons exercising similar (v) any insured institution as defined in functions are directors of any one deposito section 401 of the National Housing Act ry institution; or (12 USC 1724(a)) or any institution (4) which owns or controls, directly or in which is eligible to apply to become an directly, either a majority of the shares of insured institution under section 403 of capital stock of a depository institution or such act (12 USC 1726). more than 50 percent of the number of (2) “Depository institution” does not in shares voted for the election of directors, clude international organizations such as trustees or other persons exercising similar the World Bank, the Inter-American De functions of a depository institution at the velopment Bank, and the Asian Develop preceding election, or controls in any man ment Bank. ner the election of a majority of the direc tors, trustees, or other persons exercising (n) “Member bank” means a depository in similar functions of a depository institution, stitution that is a member of the Federal Re or for the benefit of whose shareholders or serve System. members all or substantially all the capital (o) “Foreign bank” means any bank or other stock of a depository institution is held by similar institution organized under the laws of trustees. any country other than the United States or organized under the laws of Puerto Rico, (r) “United States” means the states of the Guam, American Samoa, the Virgin Islands, United States and the District of Columbia. or other territory or possession of the United (s) “United States resident” means (1) any States. individual residing (at the time of the transac (p) “De novo depository institution” means a tion) in the United States; (2) any corpora depository institution that was not engaged in tion, partnership, association or other entity business on July 1, 1979, and is not the suc organized in the United States (“domestic cessor by merger or consolidation to a deposi corporation”); and (3) any branch or office tory institution that was engaged in business located in the United States of any entity that prior to the date of merger or consolidation. is not organized in the United States. (q) “Affiliate” includes any corporation, as (t) “Any deposit that is payable only at an of sociation, or other organization— fice located outside the United States” means (1) of which a depository institution, di (1) a deposit of a United States resident12 rectly or indirectly, owns or controls either that is in a denomination of $100,000 or more, a majority of the voting shares or more than 50 percent of the numbers of shares voted 12 A deposit of a foreign branch, office, subsidiary, affili for the election of its directors, trustees, or ate or other foreign establishment (“foreign affiliate”) con- other persons exercising similar functions at Continued 11 §204.2 Regulation D and as to which the depositor is entitled, un (1) United States branches and agencies of der the agreement with the institution, to de foreign banks. mand payment only outside the United States (i) A foreign bank’s United States or (2) a deposit of a person who is not a Unit branches and agencies operating within ed States resident12 as to which the depositor the same state and within the same Fed is entitled, under the agreement with the insti eral Reserve District shall prepare and tution, to demand payment only outside the file a report of deposits on an aggregated United States. basis. (ii) United States branches and agencies (u) Teller’s check means a check drawn by a of the same foreign bank shall, if possible, depository institution on another depository assign the low reserve tranche on trans institution, a Federal Reserve Bank, or a Fed action accounts (§ 204.9(a)) to only one eral Home Loan Bank, or payable at or office or to a group of offices filing a sin through a depository institution, a Federal gle aggregated report of deposits. If the Reserve Bank, or a Federal Home Loan Bank, low reserve tranche cannot be fully uti and which the drawing depository institution lized by a single office or by a group of engages or is obliged to pay upon dishonor. offices filing a single report of deposits, the unused portion of the tranche may be assigned to other offices of the same for SECTION 204.3—Computation and eign bank until the amount of the tranche Maintenance or net transaction accounts is exhausted. (a) Maintenance o f required reserves. A de The foreign bank shall determine this as pository institution, a U.S. branch or agency signment subject to the restriction that if of a foreign bank, and an Edge or agreement a portion of the tranche is assigned to an corporation shall maintain reserves against its office in a particular state, any unused deposits and Eurocurrency liabilities in ac portion must first be assigned to other of cordance with the procedures prescribed in fices located within the same state and this section and section 204.4 and the ratios within the same Federal Reserve District, prescribed in section 204.9. Reserve-deficiency that is, to other offices included on the charges shall be assessed for deficiencies in re same aggregated report of deposits. If quired reserves in accordance with the provi necessary in order to avoid underutiliza sions of section 204.7. Every depository insti tion of the low reserve tranche, the allo tution, U.S. branch or agency of a foreign cation may be changed at the beginning bank, and Edge or agreement corporation of a calendar month. Under other cir shall file reports of deposits in accordance cumstances, the low reserve tranche may with the instructions of the Board, based on be reallocated at the beginning of a calen the level of its deposits and reservable liabili dar year. ties consistent with the Board’s need for data (2) Edge and agreement corporations. to carry out its responsibility to monitor and (i) An Edge or agreement corporation’s control monetary and credit aggregates. For offices operating within the same state purposes of this part, the obligations of a ma and within the same Federal Reserve jority-owned (50 percent or more) U.S. sub District shall prepare and file a report of sidiary (except an Edge or agreement corpo deposits on an aggregated basis. ration) of a depository institution shall be re (ii) An Edge or agreement corporation garded as obligations of the parent depository shall, if possible, assign the low institution. reserve tranche on transaction accounts (§ 204.9(a)) to only one office or to a Continued group of offices filing a single aggregated trolled by one or more domestic corporations is not regard report of deposits. If the low reserve ed as a deposit of a United States resident if the funds serve tranche cannot be fully utilized by a sin a purpose in connection with its foreign or international business or that of other foreign affiliates of the controlling gle office or by a group of offices filing a domestic corporation (s). single report of deposits, the unused por 12 Regulation D § 204.3 tion of the tranche may be assigned to to other offices located within the same other offices of the same institution until state and within the same Federal Re the amount of the tranche or net transac serve District, that is, to other offices in tion accounts is exhausted. An Edge or cluded on the same aggregated report of agreement corporation shall determine deposits. The exemption may be reallo this assignment subject to the restriction cated at the beginning of a calendar year, that if a portion of the tranche is assigned or, if necessary to avoid underutilization to an office in a particular state, any un of the exemption, at the beginning of a used portion must first be assigned to calendar month. The amount of the re other offices located within the same state serve requirement exemption allocated to and within the same Federal Reserve an office or group of offices may not ex District, that is, to other offices included ceed the amount of the low reserve on the same aggregated report of depos tranche allocated to such office or offices its. If necessary in order to avoid under under this paragraph. utilization of the low reserve tranche, the (b) Form o f reserves. Reserves shall be held allocation may be changed at the begin in the form of (i) vault cash, (ii) a balance ning of a calendar month. Under other maintained directly with the Federal Reserve circumstances, the low reserve tranche Bank in the District in which it is located, or may be reallocated at the beginning of a (iii) a pass-through account. Reserves held in calendar year. the form of a pass-through account shall be (3) Allocation of exemption from reserve considered to be a balance maintained with requirements, (i) In determining the re the Federal Reserve. serve requirements of a depository insti tution, the exemption provided for in sec (c) Computation of required reserves for insti tion 204.9(a) shall apply in the following tutions that report on a weekly basis. order of priorities: (1) Required reserves are computed on the (A ) first, to net transaction accounts basis of daily average balances of deposits that are first authorized by federal law and Eurocurrency liabilities during a 14- in any state after April 1, 1980; and day period ending every second Monday (B) second, to other net transaction (the “computation period”). Reserve re accounts. quirements are computed by applying the (ii) A depository institution, United ratios prescribed in section 204.9 to the States branches and agencies of the same classes of deposits and Eurocurrency liabili foreign bank, or an Edge or agreement ties of the institution. The reserve balance corporation shall, if possible, assign the that is required to be maintained with the reserve requirement exemption of section Federal Reserve shall be maintained during 204.9(a) to only one office or to a group a 14-day period (the “maintenance peri of offices filing a single aggregated report od”) which begins on a Thursday and ends of deposits. If the reserve requirement ex on the second Wednesday thereafter. emption cannot be fully utilized by a sin (2) A reserve balance shall be maintained gle office or by a group of offices filing a during a given maintenance period based on single report of deposits, the unused por the daily average net transaction accounts tion of the exemption may be assigned to held by the depository institution during other offices of the same institution until the computation period that began immedi the amount of the exemption or reserva- ately prior to the beginning of the mainte ble liabilities is exhausted. A depository nance period. institution, foreign bank, or Edge or (3) In determining the reserve balance that agreement corporation shall determine is required to be maintained with the Feder this assignment subject to the restriction al Reserve, the daily average vault cash that if a portion of the exemption is as held during the computation period that signed to an office in a particular state, ended 3 days prior to the beginning of the any unused portion must first be assigned maintenance period is deducted from the 13 §204.3 Regulation D amount of the institution’s required counts. However, if a depository institution reserves. maintains any transaction accounts that are first authorized under federal law after (d) Computation of required reserves for insti April 1, 1980, it may deduct from these bal tutions that report on a quarterly basis. For a ances cash items in process of collection depository institution that is permitted to re and balances subject to immediate with port quarterly, required reserves are comput drawal due from other depository institu ed on the basis of the depository institution’s tions located in the United States only to daily average deposit balances during a seven- the extent of the proportion that such newly day computation period that begins on the authorized transaction accounts are of the third Tuesday of March, June, September, institution’s total transaction accounts. The and December. In determining the reserve remaining cash items in process of collec balance that such a depository institution is tion and balances subject to immediate required to maintain with the Federal Re withdrawal due from other depository insti serve, the daily average vault cash held during tutions located in the United States shall be the computation period is deducted from the deducted from the institution’s remaining amount of the institution’s required reserves. transaction accounts. The reserve balance that is required to be (2) United States branches and agencies of maintained with the Federal Reserve shall be a foreign bank may not deduct balances due maintained during a corresponding period from another United States branch or agen that begins on the fourth Thursday following cy of the same foreign bank, and United the end of the institution’s computation peri States offices of an Edge or agreement cor od and ends on the fourth Wednesday after poration may not deduct balances due from the close of the institution’s next computation another United States office of the same period. Edge corporation. (e) Computation of transaction accounts. (3) Balances “due from other depository Overdrafts in demand deposit or other trans institutions” do not include balances due action accounts are not to be treated as nega from Federal Reserve Banks, pass-through tive demand deposits or negative transaction accounts, or balances (payable in dollars or accounts and shall not be netted since over otherwise) due from banking offices located drafts are properly reflected on an institution’s outside the United States. An institution ex books as assets. However, where a customer ercising fiduciary powers may not include maintains multiple transaction accounts with in “balances due from other depository in a depository institution, overdrafts in one ac stitutions” amounts of trust funds deposited count pursuant to a bona fide cash-manage- with other banks and due to it as a trustee ment arrangement are permitted to be netted or other fiduciary. against balances in other related transaction accounts for reserve requirement purposes. (g) Availability o f cash items as reserves. Cash items forwarded to a Federal Reserve Bank (f) Deductions allowed in computing reserves. for collection and credit shall not be counted (1) In determining the reserve balance re as part of the reserve balance to be carried quired under this part, the amount of cash with the Federal Reserve until the expiration items in process of collection and balances of the time specified in the appropriate time subject to immediate withdrawal due from schedule established under Regulation J, other depository institutions located in the “Collection of Checks and Other Items and United States (including such amounts due Transfers of Funds” (12 CFR 210). If a de from United States branches and agencies pository institution draws against items before of foreign banks and Edge and agreement that time, the charge will be made to its re corporations) may be deducted from the serve account if the balance is sufficient to pay amount of gross transaction accounts. The it; any resulting impairment of reserve bal amount that may be deducted may not ex ances will be subject to the penalties provided ceed the amount of gross transaction ac by law and to the reserve-deficiency charges 14 Regulation D §204.3 provided by this part. However, the Federal of respondents will be responsible for re Reserve Bank may, at its discretion, refuse to serve account maintenance as described permit the withdrawal or other use of credit in subparagraphs (3) and (4) below. given in a reserve account for any time for (ii) Respondent depository institutions which the Federal Reserve bank has not re or pass-through correspondents may in ceived payment in actually and finally collect stitute, terminate, or change pass ed funds. through arrangements for the mainte (h) Carryover o f excesses or deficiencies. Any nance of required reserve balances by excess or deficiency in a depository institu providing all documentation required for tion’s account that is held directly or indirect the establishment of the new arrange ly with a Federal Reserve Bank shall be car ment and/or termination of the existing ried over and applied to that account in the arrangement to the Federal Reserve next maintenance period as specified in this Bank in whose territory the respondent is paragraph. The amount of any such excess or located. The time period required for deficiency that is carried over shall not exceed such a change to be effected shall be spec the greater of— ified by each Reserve Bank in its operat (1) the amount obtained by multiplying ing circular. .04 times the sum of the depository institu (iii) U.S. branches and agencies of for tion’s required reserves and the depository eign banks and Edge and agreement cor institution’s required clearing balance, if porations may (a) act as pass-through any, and then subtracting from this product correspondents for any nonmember insti the depository institution’s required clear- tution required to maintain reserves or ing-balance penalty-free band, if any; or (b) pass their own required reserve bal (2) $50,000, minus the depository institu ances through correspondents. In accord tion’s required clearing-balance penalty-free ance with the provision set forth in sub- band, if any. Any carryover not offset dur paragraph (3) below, the U.S. branches ing the next period may not be carried over and agencies of a foreign bank or offices to subsequent periods. of an Edge and agreement corporation filing a single aggregated report of depos (i) Pass-through rules. its may designate any one of the other (1) Procedure U.S. offices of the same institution to (i) A nonmember depository institution serve as a pass-through correspondent for required to maintain reserve balances all of the offices filing such a single aggre (“respondent”) may select only one in gated report of deposits. stitution to pass through its required re (2) Reports serves. Eligible institutions through which respondent required reserve bal (i) Every depository institution that ances may be passed ( “correspondents”) maintains transaction accounts or non are Federal Home Loan Banks, the Na personal time deposits is required to file tional Credit Union Administration Cen its report of deposits (or any other re tral Liquidity Facility, and depository in quired form or statement) directly with stitutions that maintain required reserve the Federal Reserve Bank of its District, balances at a Federal Reserve office. In regardless of the manner in which it addition, the Board reserves the right to chooses to maintain required reserve permit other institutions, on a case-by- balances. case basis, to serve as pass-through corre (ii) The Federal Reserve Bank receiving spondents. The correspondent chosen such reports shall notify the reporting de must subsequently pass through the re pository institution of its reserve require quired reserve balances of its respondents ments. Where a pass-through arrange directly to the appropriate Federal Re ment exists, the Reserve Bank will also serve office. The correspondent placing notify the correspondent passing respon funds with the Federal Reserve on behalf dent reserve balances through to the Fed- 15 § 204.3 Regulation D eral Reserve of its respondent’s required quired reserve balance with the Federal reserve balances. Reserve Bank either directly or through a (iii) The Federal Reserve will not hold a pass-through correspondent. correspondent responsible for guarantee (ii) A pass-through correspondent shall ing the accuracy of the reports of depos be responsible for assuring the mainte its submitted by its respondents to their nance of the appropriate aggregate level local Federal Reserve Banks. of its respondents’ required reserve bal (3) Account maintenance ances. A Reserve Bank will compare the (i) A correspondent that passes through total reserve balance required to be main required reserve balances of respondents tained in each reserve account with the whose main offices are located in the total actual reserve balance held in such same Federal Reserve territory in which reserve account for purposes of determin the main office of the correspondent is lo ing required reserve deficiencies, impos cated shall have the option of maintain ing or waiving penalties for deficiencies ing such required reserve balances in one in required reserves, and for other reserve of two ways: (a) A correspondent may maintenance purposes. A penalty for a maintain such balances, along with the deficiency in the aggregate level of the re correspondent’s own required reserve quired reserve balance will be imposed by balances, in a single commingled account the Reserve Bank on the correspondent at the Federal Reserve Bank office in maintaining the account. whose territory the correspondent’s main (iii) Each correspondent is required to office is located, or (b) A correspondent maintain detailed records for each of its may maintain its own required reserve respondents in a manner that permits Re balance in an account with the Federal serve Banks to determine whether the Reserve Bank office in whose territory its respondent has provided a sufficient re main office is located. The correspondent, quired reserve balance to the correspon in addition, would maintain in a separate dent. A correspondent passing through a commingled account the required reserve respondent’s reserve balance shall main balances passed through for respondents tain records and make such reports as the whose main offices are located in the Federal Reserve System requires in order same Federal Reserve territory as that of to insure the correspondent’s compliance the main office of the correspondent. with its responsibilities for the mainte (ii) A correspondent that passes nance of a respondent’s reserve balance. through required reserve balances of re Such records shall be available to the spondents whose main offices are located Federal Reserve Banks as required. outside the Federal Reserve territory in (iv) The Federal Reserve Bank may ter which the main office of the correspon minate any pass-through relationship in dent is located shall maintain such re which the correspondent is deficient in its quired reserve balances in a separate recordkeeping or other responsibilities. commingled account at each Federal Re (v) Interest paid on supplemental re serve office in whose territory the main serves (if such reserves are required un offices of such respondents are located. der section 204.6 of this part) held by (iii) A Reserve Bank may, at its discre respondent(s) will be credited to the tion, require a pass-through correspon commingled reserve account(s) main dent to consolidate in a single account tained by the correspondent. the reserve balances of all of its respon (5) Services dents whose main offices are located in (i) A depository institution maintaining any territory of that Federal Reserve its reserve balances on a pass-through ba District. sis may obtain available Federal Reserve (4) Responsibilities ofparties System services directly from its local (i) Each individual depository institu Federal Reserve office. For this purpose, tion is responsible for maintaining its re the pass-through account in which a re Regulation D § 204.4 spondent’s required reserve balance is SECTION 204.4— Transitional maintained may be used by the respon Adjustments dent for the posting of entries arising The following transitional adjustments for from transactions involving the use of computing federal reserve requirements shall such Federal Reserve services, if the apply to all member and nonmember deposi posting of these types of transactions has tory institutions, except for reserves imposed been authorized by the correspondent under sections 204.5 and 204.6. and the Federal Reserve. For example, access to the wire transfer, securities (a) Nonmembers. Except as provided below, transfer, and settlement services that in the required reserves of a depository institu volve charges to the commingled reserve tion that was engaged in business on July 1, account at the Reserve Bank will require 1979, but was not a member of the Federal authorization from the correspondent Reserve System on or after that date shall be and the Reserve Bank for the type of determined by reducing the amount of re transaction that is occurring. quired reserves computed under section 204.3 (ii) In addition, in obtaining Federal in accordance with the following schedule: Reserve services, respondents maintain ing their required reserves on a pass Reserve maintenance Percentage that periods occurring computed reserves through basis may choose to have entries between will be reduced arising from the use of Federal Reserve services posted to (a) with the prior au November 13, 1980 thorization of all parties concerned, the to September 2, 1981 87.5 reserve account maintained by any insti September 3, 1981 tution at a Federal Reserve Bank, or (b) to September 1, 1982 75 an account maintained for clearing pur September 2, 1982 to August 31, 1983 62.5 poses at a Federal Reserve Bank by the September 1, 1983 respondent. to September 12, 1984 50 (iii) Accounts at Federal Reserve Banks September 13, 1984 to September 11, 1985 37.5 consisting only of respondents’ reserve September 12, 1985 balances that are passed through by a to September 10, 1986 25 correspondent to a Federal Reserve Bank September 11, 1986 may be used only for transactions of re to September 9, 1987 12.5 spondents. A correspondent will not be September 10, 1987 permitted to use such pass-through ac forward 0 counts for purposes other than serving its respondents’ needs. However, an institution shall not reduce the amount of required reserves on any category (iv) A correspondent may not apply for of deposits or accounts that are first autho Federal Reserve credit on behalf of a re rized under federal law in any state after April spondent. Rather, a respondent should 1, 1980. apply directly to its Federal Reserve Bank for credit. Any Federal Reserve (b) New members. The required reserves of a credit obtained by a respondent may be nonmember depository institution that was credited, at the respondent’s option and engaged in business but was not a member with the approval of the parties con bank during the period between July 1, 1979 cerned, to the reserve account in which and September 1, 1980, inclusive, and which its required reserves are maintained by a becomes a member of the Federal Reserve correspondent, to a clearing account System after September 1, 1980, shall be de maintained by the respondent, or to any termined under paragraph (a) as if it had re account to which the respondent is au mained a nonmember and adding to this thorized to post entries arising from the amount an amount determined by multiplying use of in Federal Reserve services. the difference between its required reserves 17 §204.4 Regulation D computed using the ratios specified in section sonal time deposits and Eurocurrency lia 204.9(a) and its required reserves computed bilities for any computation period after as if it had remained a nonmember times the commencing business percentage specified below in accordance with shall be 100 percent of the required reserves the following schedule: computed under section 204.3 starting with the maintenance period that begins 17 days after the computation period during which Maintenance periods occurring during Percentage applied such institution has daily average total successive quarters to difference transaction accounts, nonpersonal time de after becoming to compute amount a member bank to be added posits and Eurocurrency liabilities of $50 million or more. 1 12.5 2 25.0 (d) Nonmember depository institutions with 3 37.5 offices in Hawaii. Any depository institution 4 50.0 5 62.5 that, on August 1, 1978, (1) was engaged in 6 75.0 business as a depository institution in Hawaii, 7 87.5 and (2) was not a member of the Federal Re 8 and succeeding 100.0 serve System at any time on or after such date shall not maintain reserves imposed under this (c) De novo institutions. (1) The required re part against deposits held or maintained at its serves of any depository institution that was offices located in Hawaii until January 2, not engaged in business on September 1, 1986. Beginning January 2, 1986, the required 1980, shall be computed under section reserves on deposits held or maintained at of 204.3 in accordance with the following fices located in Hawaii of such a depository schedule: institution shall be determined by reducing the amount of required reserves under section Maintenance periods 204.3 in accordance with the following occurring during schedule: successive quarters Percentage of after entering reserve requirement into business to be maintained Percentage that Maintenance periods computed reserves occurring between will be reduced 1 40 2 45 3 50 January 2 4 55 to December 31, 1986 87.5 5 65 January 1, 1987 6 75 to January 6, 1988 75 7 85 8 and succeeding 100 January 7, 1988 to January 4, 1989 62.5 January 5, 1989 This paragraph shall also apply to a United to January 3, 1990 50 States branch or agency of a foreign bank if January 4, 1990 such branch or agency is the foreign bank’s to January 2, 1991 37.5 first office in the United States. Additional January 3, 1991 branches or agencies of such a foreign bank to January 1, 1992 25 shall be entitled only to the remaining January 2, 1992 to January 6, 1993 12.5 phase-in available to the initial office. (2) Notwithstanding subparagraph (1), January 7, 1993 forward 0 the required reserves of any depository in stitution that— (i) was not engaged in business on No (e) Mergers and consolidations. The follow vember 18, 1981, and ing rules concerning transitional adjustments (ii) has $50 million or more in daily av apply to mergers and consolidations of deposi erage total transaction accounts, nonper- tory institutions: 18 Regulation D §204.4 (1) Where all depository institutions in tween any other depository institu volved in a merger or consolidation are sub tions, ject to the same paragraph of the transition the required reserves of the surviving in al adjustment rules contained in paragraphs stitution shall be computed by allocating (a) through (d) of this section during the its deposits, Eurocurrency liabilities, oth reserve computation period immediately er reservable claims, balances due from preceding the merger, the surviving institu other depository institutions and cash tion shall continue to compute its transi items in process of collection to each de tional adjustment of required reserves un pository institution involved in the merg der such applicable paragraph, except that er transaction and applying to such the amount of reserves which shall be main amounts the transitional adjustment rule tained shall be reduced by an amount deter of paragraphs (a) through (d) of this mined by multiplying the amount by which section to which each such depository in the required reserves during the computa stitution was subject during the reserve tion period immediately preceding the date computation period immediately prior to of the merger (computed as if the deposito the merger or consolidation. ry institutions had merged) exceed the sum (ii) The deposits of the surviving institu of the actual required reserves of each de tion shall be allocated according to the pository institution during the same compu ratio that daily average total required re tation period, times the appropriate per serves of each depository institution in centage as specified in the following volved in the merger were to the sum of schedule: daily average total required reserves of all institutions involved in the merger or Maintenance periods Percentage applied consolidation during the reserve compu occurring during to difference tation period immediately preceding the quarterly periods to compute amount following merger to be subtracted date of the merger. (A ) If the merger occurs before No 1 87.5 vember 6, 1980, such ratio of daily av 2 75.0 3 62.5 erage total required reserves shall be 4 50.0 computed using the reserve require 5 37.5 ment ratios in section 204.9(b). 6 25.0 7 12.5 (B) If the merger occurs on or after 8 and succeeding 0 November 6, 1980, such ratio of daily average total required reserves shall be (2 )(i) Where the depository institutions computed using the reserve require involved in a merger or consolidation are ment ratios in section 204.9(a) with not subject to the same paragraph of the out regard to the transitional adjust transitional adjustment rules contained in ments of this section. paragraphs (a) through (d) of this sec (iii) The low reserve tranche on transac tion and such merger or consolidation tion accounts (section 204.9(a)) shall be occurs— allocated to each institution involved in (A) on or after July 1, 1979, between the merger or consolidation using the ra a nonmember bank and a bank that tio computed in paragraph (e) (2) (ii) was a member bank on or after July 1, and the reserve requirement tranches on 1979, and the survivor is a nonmember demand deposits (section 204.9(b)) bank; shall be allocated to member bank depos (B) on or after March 31, 1980, be its using such ratio of daily average total tween a member bank and a nonmem required reserves. ber bank and the survivor is a member (iv) The vault cash of the surviving de bank; or pository institution also will be allocated (C) on or after September 1, 1980, be to each institution involved in the merger 19 §204.4 Regulation D or consolidation according to the ratio (c) Reports to Congress. The Board shall that daily average total required reserves transmit promptly to Congress a report of any of each depository institution involved in exercise of its authority under this paragraph the merger was to the sum of daily and the reasons for the exercise of authority. average total required reserves of all in (d) Reserve requirements. At present, there stitutions involved in the merger or con are no emergency reserve requirements im solidation during the reserve computa posed under this section. tion period immediately preceding the date of the merger. (v) The amount of reserves which shall be maintained shall be reduced by an SECTION 204.6—Supplemental Reserve amount determined by multiplying the Requirement amount by which the required reserves (a) Finding by Board. Upon the affirmative during the computation period immedi vote of at least five members of the Board and ately preceding the date of the merger after consultation with the Board of Directors (computed as if the depository institu of the Federal Deposit Insurance Corpora tions had merged) exceed the sum of the tion, the Federal Home Loan Bank Board, actual required reserves of each deposito and the National Credit Union Administra ry institution during the same computa tion Board, the Board may impose a supple tion period, times the appropriate per mental reserve requirement on every deposito centage as specified in the following ry institution of not more than 4 percent of its schedule: total transaction accounts. A supplemental re serve requirement may be imposed if— Maintenance periods Percentage applied (1) the sole purpose of the requirement is occurring during to difference quarterly periods to compute amount to increase the amount of reserves main following merger to be subtracted tained to a level essential for the conduct of monetary policy; 1 87.5 2 75.0 (2) the requirement is not imposed for the 3 62.5 purpose of reducing the cost burdens result 4 50.0 ing from the imposition of basic reserve 5 37.5 6 25.0 requirements; 7 12.5 (3) such requirement is not imposed for 8 and succeeding 0 the purpose of increasing the amount of balances needed for clearing purposes; and (4) on the date on which supplemental re serve requirements are imposed, the total SECTION 204.5—Emergency Reserve amount of basic reserve requirements is not Requirement less than the amount of reserves that would (a) Finding by Board. The Board may im be required on transaction accounts and pose, after consulting with the appropriate nonpersonal time deposits under the initial committees of Congress, additional reserve re reserve ratios established by the Monetary quirements on depository institutions at any Control Act of 1980 (Pub. L. 96-221) in ratio on any liability upon a finding by at least effect on September 1, 1980. five members of the Board that extraordinary (b) Term. circumstances require such action. (1) If a supplemental reserve requirement (b) Term. Any action taken under this sec has been imposed for a period of one year tion shall be valid for a period not exceeding or more, the Board shall review and deter 180 days, and may be extended for further pe mine the need for continued maintenance of riods of up to 180 days each by affirmative supplemental reserves and shall transmit action of at least five members of the Board annual reports to the Congress regarding for each extension. the need for continuing such requirement. 20 Regulation D §204.7 (2) Any supplemental reserve requirement stances involved, permit a depository insti shall terminate at the close of the first 90- tution to eliminate deficiencies in its re day period after the requirement is imposed quired reserve balance by maintaining addi during which the average amount of supple tional reserves during subsequent reserve mental reserves required are less than the maintenance periods. amount of reserves which would be re (2) Waivers, (i) Reserve Banks may waive quired if the ratios in effect on September 1, the charges for reserve deficiencies except 1980, were applied. when the deficiency arises out of a depos itory institution’s gross negligence or (c) Earnings participation account. A deposi conduct that is inconsistent with the tory institution’s supplemental reserve re principles and purposes of reserve re quirement shall be maintained by the Federal quirements. Each Reserve Bank has Reserve Banks in an earnings participation ac adopted guidelines that provide for waiv count. Such balances shall receive earnings to ers of small charges. The guidelines also be paid by the Federal Reserve Banks during provide for waiving the charge once dur each calendar quarter at a rate not to exceed ing a two-year period for any deficiency the rate earned on the securities portfolio of that does not exceed a certain percentage the Federal Reserve System during the previ of the depository institution’s required ous calendar quarter. Additional rules and reserves. Decisions by Reserve Banks to regulations may be prescribed by the Board waive charges in other situations are concerning the payment of earnings on earn based on an evaluation of the circum ings participation accounts by Federal Re stances in each individual case and the serve Banks. depository institution’s reserve mainte (d) Report to Congress. The Board shall nance record. If a depository institution transmit promptly to the Congress a report has demonstrated a lack of due regard for stating the basis for exercising its authority to the proper maintenance of required re require a supplemental reserve under this serves, the Reserve Bank may decline to section. exercise the waiver privilege and assess all charges regardless of amount or rea (e) Reserve requirements. At present, there son for the deficiency. are no supplemental reserve requirements im (ii) In individual cases, where a federal posed under this section. supervisory authority waives a liquidity requirement, or waives the penalty for failing to satisfy a liquidity requirement, SECTION 204.7—Reserve Deficiencies the Reserve Bank in the District where (a) Charges for deficiencies. the involved depository institution is lo (1) Assessment o f charges. Deficiencies in a cated shall waive the reserve requirement depository institution’s required reserve imposed under this part for such deposi balance, after application of the 2 percent tory institution when requested by the carryover provided in section 204.3(h) are federal supervisory authority involved. subject to reserve-deficiency charges. Feder al Reserve Banks are authorized to assess (b) Penalties for violations. Violations of this charges for deficiencies in required reserves part may be subject to assessment of civil at a rate of 2 percent per year above the money penalties by the Board under authority lowest rate in effect for borrowings from the of section 19(1) of the Federal Reserve Act Federal Reserve Bank on the first day of the (12 USC 505) as implemented in 12 CFR calendar month in which the deficiencies 263. In addition, the Board and any other fed occurred. Charges shall be assessed on the eral financial institution supervisory authority basis of daily average deficiencies during may enforce this part with respect to deposito each maintenance period. Reserve Banks ry institutions subject to their jurisdiction un may, as an alternative to levying monetary der authority conferred by law to undertake charges, after consideration of the circum cease-and-desist proceedings. 21 §204.8 Regulation D SECTION 204.8—International Banking two business days after the date of Facilities deposit; (2) upon expiration of a specified (a) Definitions. For purposes of this part, the period of time not less than two following definitions apply: business days after the date of depo (1) “International banking facility” or sit; or “IBF” means a set of asset and liability ac (3) upon written notice that actual counts segregated on the books and records ly is required to be given by the de of a depository institution, United States positor not less than two business branch or agency of a foreign bank, or an days prior to the date of withdrawal; Edge or agreement corporation that in (B) that represents funds deposited to cludes only international banking facility the credit of a non-United States time deposits and international banking fa resident or a foreign branch, office, cility extensions of credit. subsidiary, affiliate, or other foreign es (2) “International banking facility time de tablishment ( “foreign affiliate”) con posit” or “IBF time deposit” means a depo trolled by one or more domestic corpo sit, placement, borrowing or similar obliga rations provided that such funds are tion represented by a promissory note, used only to support the operations acknowledgment of advance, or similar in outside the United States of the deposi strument that is not issued in negotiable or tor or of its affiliates located outside bearer form, and the United States; and (i)(A ) that must remain on deposit at (C) that is maintained under an the IBF at least overnight; and agreement or arrangement under (B) that is issued to— which no deposit or withdrawal of less (7) any office located outside the than $100,000 is permitted, except that United States of another depository a withdrawal of less than $100,000 is institution organized under the laws permitted if such withdrawal closes an of the United States or of an Edge or account. agreement corporation; (3) “International banking facility exten (2) any office located outside the sion o f credit” or “IBF loan” means any United States of a foreign bank; transaction where an IBF supplies funds by (3) a United States office or a non- making a loan, or placing funds in a deposit United States office of the entity es account. Such transactions may be repre tablishing the IBF; sented by a promissory note, security, (4) another IBF; or acknowledgment of advance, due bill, re (5) a foreign national government, purchase agreement, or any other form of or an agency or instrumentality credit transaction. Such credit may be ex thereof,13 engaged principally in ac tended only to— tivities which are ordinarily per (i) any office located outside the United formed in the United States by gov States of another depository institution ernmental entities; an international organized under the laws of the United entity of which the United States is a States or of an Edge or agreement member; or any other foreign inter corporation; national or supranational entity spe (ii) any office located outside the United cifically designated by the Board;14 States of a foreign bank; or (iii) a United States or a non-United (ii) (A ) that is payable— States office of the institution establishing (1) on a specified date not less than the IBF; (iv) another IBF; 13 Other than states, provinces, municipalities, or other regional or local governmental units or agencies or instru (v) a foreign national government, or an mentalities thereof. agency or instrumentality thereof,15 en- 14 The designated entities are specified in 12 CFR 204.125 (page 25). 15 See footnote 13. 22 Regulation D §204.9 gaged principally in activities which are lish an IBF in any location where it is legally ordinarily performed in the United States authorized to engage in IBF business. Howev by governmental entities; an internation er, only one IBF may be established for each al entity of which the United States is a reporting entity that is required to submit a member; or any other foreign interna Report of Transaction Accounts, Other De tional or supranational entity specifically posits and Vault Cash (Form FR 2900). designated by the Board,16 or (e) Notification to Federal Reserve. At least (vi) a non-United States resident or a 14 days prior to the first reserve computation foreign branch, office, subsidiary, affiliate period that an institution intends to establish or other foreign establishment (“foreign an IBF it shall notify the Federal Reserve affiliate”) controlled by one or more do Bank of the District in which it is located of mestic corporations provided that the its intent. Such notification shall include a funds are used only to finance the opera statement of intention by the institution that it tions outside the United States of the bor will comply with the rules of this part con rower or of its affiliates located outside cerning IBFs, including restrictions on sourc the United States. es and uses of funds, and recordkeeping and (b) Acknowledgment of use of IBF deposits accounting requirements. Failure to comply and extensions of credit. An IBF shall provide with the requirements of this part shall subject written notice to each of its customers (other the institution to reserve requirements under than those specified in section 204.8(a)(2) this part or result in the revocation of the in (i)(B ) and section 204.8(a) (3) (i) through stitution’s ability to operate an IBF. (v)) at the time a deposit relationship or a (f) Recordkeeping requirements. A deposito credit relationship is first established that it is ry institution shall segregate on its books and the policy of the Board of Governors of the records the asset and liability accounts of its Federal Reserve System that deposits received IBF and submit reports concerning the opera by international banking facilities may be used tions of its IBF as required by the Board. only to support the depositor’s operations out side the United States as specified in section 204.8(a) (2) (ii)(B ) and that extensions of credit by IBFs may be used only to finance SECTION 204.9—Supplement: Reserve operations outside of the United States as Requirement Ratios specified in section 204.8(a) (3) (vi). In the case of loans to or deposits from foreign affili (a)(1) Reserve percentages. The following re ates of U.S. residents, receipt of such notice serve ratios are prescribed for all depository must be acknowledged in writing whenever a institutions, Edge and agreement corpora deposit or credit relationship is first estab tions, and United States branches and agen lished with the IBF. cies of foreign banks: (c) Exemption from reserve requirements. An Category Reserve requirement institution that is subject to the reserve re NET TRANSACTION quirements of this part is not required to ACCOUNTS* maintain reserves against its IBF time depos $0 to $46.8 million 3% of amount its or IBF loans. Deposit-taking activities of Over $46.8 million $1,404,000 plus IBFs are limited to accepting only IBF time 10% of amount over deposits and lending activities of IBFs are re $46.8 million stricted to making only IBF loans. NONPERSONAL (d) Establishment of an international bank TIME DEPOSITS 0% ing facility. A depository institution, an Edge EUROCURRENCY or agreement corporation or a United States LIABILITIES 0% branch or agency of a foreign bank may estab * Dollar amounts do not reflect the adjustment to be 16 See footnote 14. made by the next paragraph. 23 §204.9 Regulation D (2) Exemption from reserve requirements. Category Reserve requirement Each depository institution, Edge or agree TIME DEPOSITS ment corporation, and U.S. branch or agen (subject to 3% cy of a foreign bank is subject to a zero minimum specified percent reserve requirement on an amount by law) of its transaction accounts subject to the By initial maturity: low reserve tranche in paragraph (a)(1) of less than 180 days this section not in excess of $3.8 million $0-5 million 3% over $5 million 6% determined in accordance with section 180 days to four years 2i% 204.3(a)(3) of this part. four years or more 1% (b) Reserve ratios in effect during last compu Accounts authorized tation period prior to September 1, 1980. pursuant to section 303 of Pub. L. 96-221 offered by member banks Category Reserve requirement located in states outside Connecticut, NET DEMAND Maine, Massachusetts, DEPOSITS New Hampshire, New Jersey, New York, Deposit tranche: Rhode Island and $0-$2 million 7% Vermont 12% over $2 million- Club accounts 3% $10 million $ 140,000 + 9J% of amount over $2 million For purposes of computing the reserves un der this part, that would have been required over $10 million- $100 million $900,000+112% using the reserve ratios that were in effect on of amount over August 31, 1980, the reserve ratio on time de $10 million posits of a member bank shall be the average over $100 million- $11,475,000+122% time deposit ratio of the member bank during $400 million of amount over the 14-day period ending August 6, 1980, ex $ 100 million cept that the reserve ratio on time deposits of over $400 million $49,725,000+ \6\% of amount over a nonmember bank that was a member bank $400 million on or after July 1, 1979, but which became a nonmember bank before March 31, 1980, may SAVINGS DEPOSITS 3% be the average time deposit ratio of the non- member during the 14-day period ending Au gust 27, 1980. Regulation D §204.125 SECTION 204.125—Deposits of Exempt Organization for Central American States Foreign, International, and Permanent Secretariat of the Central Supranational Entities American General Treaty of Economic Integration The entities referred to in section 204.2(c) River Plate Basin Commission (1 )(iv)(E ) and 204.8(a)(2 )(i)(B )(5 ) are: Africa Europe African Development Bank Bank for International Settlements Banque Centrale des Etats de l’Afrique European Atomic Energy Community Equatorial et du Cameroun European Coal and Steel Community Banque Centrale des Etats d’Afrique The European Communities del’Ouest European Development Fund Conseil de l’Entente European Economic Community East African Community European Free Trade Association Organisation Commune Africaine et European Fund Malagache European Investment Bank Organization of African Unity Union des Etats de l’Afrique Centrale Latin America Union Douaniere et Economique de Andean Development Corporation l’Afrique Centrale Andean Subregional Group Union Douaniere des Etats de l’Afrique de Caribbean Development Bank l’Ouest Caribbean Free Trade Association Caribbean Regional Development Agency Asia Central American Bank for Economic Asia and Pacific Council Association of Southeast Asian Nations Integration Bank of Taiwan The Central American Institute for Korea Exchange Bank Industrial Research and Technology Central American Monetary Stabilization Fund Middle East East Caribbean Common Market Central Treaty Organization Latin American Free Trade Association Regional Cooperation for Development Statutory Provisions FEDERAL RESERVE ACT (v) any member as defined in section 2 of the Federal Home Loan Bank Act; SECTION 19—Bank Reserves (vi) any savings association (as de fined in section 3 of the Federal Depo (a) The Board is authorized for the purposes sit Insurance Act) which is an insured of this section to define the terms used in this depository institution (as defined in section, to determine what shall be deemed a such Act) or is eligible to apply to be payment of interest, to determine what types come an insured depository institution of obligations, whether issued directly by a under the Federal Deposit Insurance member bank or indirectly by an affiliate of a Act; and member bank or by other means, shall be (vii) for the purpose of section 13 and deemed a deposit, and to prescribe such regu the fourteenth paragraph of section 16, lations as it may deem necessary to effectuate any association or entity which is the purposes of this section and to prevent wholly owned by or which consists evasions thereof. only of institutions referred to in claus (b) Reserve requirements. es (i) through (vi). (B) The term “bank” means any in (1) Definitions. The following definitions sured or noninsured bank, as defined in and rules apply to this subsection, subsec section 3 of the Federal Deposit Insur tion (c), section 11 A, the first paragraph of ance Act, other than a mutual savings section 13, and the second, thirteenth, and bank or a savings bank as defined in such fourteenth paragraphs of section 16: section. (A ) The term “depository institution” (C) The term “transaction account” means— means a deposit or account on which the (i) any insured bank as defined in sec depositor or account holder is permitted tion 3 of the Federal Deposit Insur to make withdrawals by negotiable or ance Act or any bank which is eligible transferable instrument, payment orders to make application to become an in of withdrawal, telephone transfers, or sured bank under section 5 of such other similar items for the purpose of Act; making payments or transfers to third (ii) any mutual savings bank as de persons or others. Such term includes de fined in section 3 of the Federal Depo mand deposits, negotiable order of with sit Insurance Act or any bank which is drawal accounts, savings deposits subject eligible to make application to become to automatic transfers, and share draft an insured bank under section 5 of accounts. such Act; (D ) The term “nonpersonal time depos (iii) any savings bank as defined in its” means a transferable time deposit or section 3 of the Federal Deposit Insur account or a time deposit or account rep ance Act or any bank which is eligible resenting funds deposited to the credit of, to make application to become an in or in which any beneficial interest is held sured bank under section 5 of such by, a depositor who is not a natural Act; person. (iv) any insured credit union as de (E) The term “reservable liabilities” fined in section 101 of the Federal means transaction accounts, nonpersonal Credit Union Act or any credit union time deposits, and all net balances, loans, which is eligible to make application to assets, and obligations which are, or may become an insured credit union pursu be, subject to reserve requirements under ant to section 201 of such Act; paragraph (5). 27 Statutory Provisions Regulation D (F) In order to prevent evasions of the tions. The increase in such transaction reserve requirements imposed by this accounts shall be determined by subtract subsection, after consultation with the ing the amount of such accounts on June Board of Directors of the Federal Depo 30 of the preceding calendar year from sit Insurance Corporation, the Director the amount of such accounts on June 30 of the Office of Thrift Supervision, and of the calendar year involved. In the case the National Credit Union Administra of any such 12-month period in which tion Board, the Board of Governors of there has been a decrease in the total the Federal Reserve System is authorized transaction accounts of all depository in to determine, by regulation or order, that stitutions, the Board shall issue such a an account or deposit is a transaction ac regulation decreasing for the next suc count if such account or deposit may be ceeding calendar year such dollar used to provide funds directly or indirect amount by an amount obtained by multi ly for the purpose of making payments or plying such dollar amount by 80 per cen transfers to third persons or others. tum of the percentage decrease in the to (2) Reserve requirements. (A ) Each de tal transaction accounts of all depository pository institution shall maintain re institutions. The decrease in such trans serves against its transaction accounts as action accounts shall be determined by the Board may prescribe by regulation subtracting the amount of such accounts solely for the purpose of implementing on June 30 of the calendar year involved monetary policy— from the amount of such accounts on (i) in the ratio of 3 per centum for June 30 of the previous calendar year. that portion of its total transaction ac (D ) Any reserve requirement imposed counts of $25,000,000 or less, subject under this subsection shall be uniformly to subparagraph (C); and applied to all transaction accounts at all (ii) in the ratio of 12 per centum, or depository institutions. Reserve require in such other ratio as the Board may ments imposed under this subsection prescribe not greater than 14 per cen shall be uniformly applied to nonpersonal tum and not less than 8 per centum, time deposits at all depository institu for that portion of its total transaction tions, except that such requirements may accounts in excess of $25,000,000, sub vary by the maturity of such deposits. ject to subparagraph (C). (3) Waiver of ratio limits in extraordinary (B) Each depository institution shall circumstances. Upon a finding by at least 5 maintain reserves against its nonpersonal members of the Board that extraordinary time deposits in the ratio of 3 per cen circumstances require such action, the tum, or in such other ratio not greater Board, after consultation with the appropri than 9 per centum and not less than zero ate committees of the Congress, may per centum as the Board may prescribe impose, with respect to any liability of by regulation solely for the purpose of depository institutions, reserve require implementing monetary policy. ments outside the limitations as to ratios (C) Beginning in 1981, not later than and as to types of liabilities otherwise pre December 31 of each year the Board scribed by paragraph (2) for a period not shall issue a regulation increasing for the exceeding 180 days, and for further periods next succeeding calendar year the dollar not exceeding 180 days each by affirmative amount which is contained in subpara action by at least 5 members of the Board in graph (A ) or which was last determined each instance. The Board shall promptly pursuant to this subparagraph for the transmit to the Congress a report of any purpose of such subparagraph, by an exercise of its authority under this para amount obtained by multiplying such graph and the reasons for such exercise of dollar amount by 80 per centum of the authority. percentage increase in the total transac (4) Supplemental reserves. (A) The Board tion accounts of all depository institu may, upon the affirmative vote of not less Regulation D Statutory Provisions than 5 members, impose a supplemental during the previous calendar quarter. reserve requirement on every depository The Board may prescribe rules and regu institution of not more than 4 per centum lations concerning the payment of earn of its total transaction accounts. Such ings on Earnings Participation Accounts supplemental reserve requirement may be by Federal Reserve banks under this imposed only if— paragraph. (i) the sole purpose of such require (D ) If a supplemental reserve under ment is to increase the amount of re subparagraph (A ) has been required of serves maintained to a level essential depository institutions for a period of one for the conduct of monetary policy; year or more, the Board shall review and (ii) such requirement is not imposed determine the need for continued mainte for the purpose of reducing the cost nance of supplemental reserves and shall burdens resulting from the imposition transmit annual reports to the Congress of the reserve requirements pursuant regarding the need, if any, for continuing to paragraph (2); the supplemental reserve. (iii) such requirement is not imposed (E) Any supplemental reserve imposed for the purpose of increasing the under subparagraph (A ) shall terminate amount of balances needed for clearing at the close of the first 90-day period af purposes; and ter such requirement is imposed during (iv) on the date on which the supple which the average amount of reserves re mental reserve requirement is imposed, quired under paragraph (2) are less than except as provided in paragraph (11), the amount of reserves which would be the total amount of reserves required required during such period if the initial pursuant to paragraph (2) is not less ratios specified in paragraph (2) were in than the amount of reserves that would effect. be required if the initial ratios specified (5) Reserves related to foreign obligations in paragraph (2) were in effect. or assets. Foreign branches, subsidiaries, (B) The Board may require the supple and international banking facilities of non mental reserve authorized under subpar member depository institutions shall main agraph (A) only after consultation with tain reserves to the same extent required by the Board of Directors of the Federal De the Board of foreign branches, subsidiaries, posit Insurance Corporation, the Direc and international banking facilities of mem tor of the Office of Thrift Supervision, ber banks. In addition to any reserves oth and the National Credit Union Adminis erwise required to be maintained pursuant tration Board. The Board shall promptly to this subsection, any depository institu transmit to the Congress a report with tion shall maintain reserves in such ratios as respect to any exercise of its authority to the Board may prescribe against— require supplemental reserves under sub- (A) net balances owed by domestic of paragraph (A) and such report shall fices of such depository institution in the state the basis for the determination to United States to its directly related for exercise such authority. eign offices and to foreign offices of non (C) The supplemental reserve autho related depository institutions; rized under subparagraph (A ) shall be (B) loans to United States residents maintained by the Federal Reserve banks made by overseas offices of such deposi in an Earnings Participation Account. tory institution if such depository institu Except as provided in subsection tion has one or more offices in the United (c )(l)(A )(ii), such Earnings Participa States; and tion Account shall receive earnings to be (C) assets (including participations) paid by the Federal Reserve banks during held by foreign offices of a depository in each calendar quarter at a rate not more stitution in the United States which were than the rate earned on the securities acquired from its domestic offices. portfolio of the Federal Reserve System (6) Exemption for certain deposits. The re- 29 Statutory Provisions Regulation D quirements imposed under paragraph (2) gory of deposits or accounts which are shall not apply to deposits payable only out first authorized pursuant to Federal law side the States of the United States and the in any State after April 1, 1980. District of Columbia, except that nothing in (B) With respect to any bank which was this subsection limits the authority of the a member of the Federal Reserve System Board to impose conditions and require during the entire period beginning on ments on member banks under section 25 of July 1, 1979, and ending on the effective this Act or the authority of the Board under date of the Monetary Control Act of section 7 of the International Banking Act 1980, the amount of required reserves of 1978 (12 U.S.C. 3105). imposed pursuant to this subsection on (7) Discount and borrowing. Any deposito and after the effective date of such Act ry institution in which transaction accounts that exceeds the amount of reserves or nonpersonal time deposits are held shall which would have been required of such be entitled to the same discount and bor bank if the reserve ratios in effect during rowing privileges as member banks. In the the reserve computation period immedi administration of discount and borrowing ately preceding such effective date were privileges, the Board and the Federal Re applied may, at the discretion of the serve banks shall take into consideration Board and in accordance with such rules the special needs of savings and other de and regulations as it may adopt, be re pository institutions for access to discount duced by 75 per centum during the first and borrowing facilities consistent with year which begins after such effective their long-term asset portfolios and the sen date, 50 per centum during the second sitivity of such institutions to trends in the year, and 25 per centum during the third national money markets. year. (8) Transitional adjustments. (C) (i) With respect to any bank which (A) Any depository institution required is a member of the Federal Reserve to maintain reserves under this subsec System on the effective date of the tion which was engaged in business on Monetary Control Act of 1980, the July 1, 1979, but was not a member of amount of reserves which would have the Federal Reserve System on or after been required of such bank if the re that date, shall maintain reserves against serve ratios in effect during the reserve its deposits during the first twelve-month computation period immediately pre period following the effective date of this ceding such effective date were applied paragraph in amounts equal to one- that exceeds the amount of required re eighth of those otherwise required by this serves imposed pursuant to this subsec subsection, during the second such tion shall, in accordance with such twelve-month period in amounts equal to rules and regulations as the Board may one-fourth of those otherwise required, adopt, be reduced by 25 per centum during the third such twelve-month peri during the first year which begins after od in amounts equal to three-eighths of such effective date, 50 per centum dur those otherwise required, during the ing the second year, and 75 per centum fourth twelve-month period in amounts during the third year. equal to one-half of those otherwise re (ii) If a bank becomes a member bank quired, and during the fifth twelve-month during the four-year period beginning period in amounts equal to five-eighths of on the effective date of the Monetary those otherwise required, during the Control Act of 1980, and if the amount sixth twelve-month period in amounts of reserves which would have been re equal to three-fourths of those otherwise quired of such bank, determined as if required, and during the seventh twelve the reserve ratios in effect during the month period in amounts equal to seven- reserve computation period immedi eighths of those otherwise required. This ately preceding such effective date subparagraph does not apply to any cate were applied, and as if such bank had Regulation D Statutory Provisions been a member during such period, ex Federal Reserve System at any time on or ceeds the amount of reserves required after such date. Such a depository institu pursuant to this subsection, the tion shall not be required to maintain re amount of reserves required to be serves against its deposits held or main maintained by such bank beginning on tained at its offices located in a State the date on which such bank becomes outside the continental limits of the Unit a member of the Federal Reserve Sys ed States until the first day of the sixth tem shall be the amount of reserves calendar year which begins after the ef which would have been required of fective date of the Monetary Control Act such bank if it had been a member on of 1980. Such a depository institution the day before such effective date, ex shall maintain reserves against its cept that the amount of such excess deposits during the sixth calendar year shall, in accordance with such rules which begins after such effective date in and regulations as the Board may an amount equal to one-eighth of that adopt, be reduced by 25 per centum otherwise required by paragraph (2), during the first year which begins after during the seventh such year in an such effective date, 50 per centum dur amount equal to one-fourth of that other ing the second year, and 75 per centum wise required, during the eighth such during the third year. year in an amount equal to three-eighths (D )(i) Any bank which was a member of that otherwise required, during the bank on July 1, 1979, and which with ninth such year in an amount equal to draws from membership in the Federal one-half of that otherwise required, dur Reserve System during the period be ing the tenth such year in an amount ginning on July 1, 1979, and ending on equal to five-eighths of that otherwise re March 31, 1980, shall maintain re quired, during the eleventh such year in serves during the first twelve-month an amount equal to three-fourths of that period beginning on the date of enact otherwise required, and during the ment of this clause in amounts equal to twelfth such year in an amount equal to one-half of those otherwise required by seven-eighths of that otherwise required. this subsection, during the second such (9) Exemption. This subsection shall not twelve-month period in amounts equal apply with respect to any financial institu to two-thirds of those otherwise re tion which— quired, and during the third such (A) is organized solely to do business twelve-month period in amounts equal with other financial institutions; to five-sixths of those otherwise (B) is owned primarily by the financial required. institutions with which it does business; (ii) Any bank which withdraws from and membership in the Federal Reserve (C) does not do business with the gener System on or after the date of enact al public. ment of the Depository Institutions (10) Waivers. In individual cases, where a Deregulation and Monetary Control Federal supervisory authority waives a li Act of 1980 shall maintain reserves in quidity requirement, or waives the penalty the same amount as member banks are for failing to satisfy a liquidity requirement, required to maintain under this subsec the Board shall waive the reserve require tion, pursuant to subparagraphs (B) ment, or waive the penalty for failing to and (C )(i). satisfy a reserve requirement, imposed pur (E) This subparagraph applies to any suant to this subsection for the depository depository institution that, on August 1, institution involved when requested by the 1978, (i) was engaged in business as a Federal supervisory authority involved. depository institution in a State outside (11) Additional exemptions. (A )(i) Not the continental limits of the United withstanding the reserve requirement States, and (ii) was not a member of the ratios established under paragraphs 31 Statutory Provisions Regulation D (2) and (5) of this subsection, a re reservable liabilities on June 30 of the serve ratio of zero per centum shall ap calendar year involved. In the case of ply to any combination of reservable any such twelve-month period in liabilities, which do not exceed which there has been a decrease in the $2,000,000 (as adjusted under subpar total reservable liabilities of all deposi agraph (B )), of each depository tory institutions, no adjustment shall institution. be made. A decrease in total reservable (ii) Each depository institution may liabilities shall be determined by sub designate, in accordance with such tracting the amount of total reservable rules and regulations as the Board liabilities on June 30 of the calendar shall prescribe, the types and amounts year involved from the amount of total of reservable liabilities to which the re reservable liabilities on June 30 of the serve ratio of zero per centum shall ap previous calendar year. ply, except that transaction accounts which are designated to be subject to a (c)(l)R eserves held by a depository institu reserve ratio of zero per centum shall tion to meet the requirements imposed pur be accounts which would otherwise be suant to subsection (b) shall, subject to subject to a reserve ratio of 3 per cen such rules and regulations as the Board tum under paragraph (2). shall prescribe, be in the form of— (iii) The Board shall minimize the re (A) balances maintained for such pur porting necessary to determine wheth poses by such depository institution in er depository institutions have total re the Federal Reserve bank of which it is a servable liabilities of less than member or at which it maintains an ac $2,000,000 (as adjusted under subpar count, except that (i) the Board may, by agraph (B )). Consistent with the regulation or order, permit depository in Board’s responsibility to monitor and stitutions to maintain all or a portion of control monetary and credit aggre their required reserves in the form of gates, depository institutions which vault cash, except that any portion so have reserve requirements under this permitted shall be identical for all deposi subsection equal to zero per centum tory institutions, and (ii) vault cash may shall be subject to less overall report be used to satisfy any supplemental re ing requirements than depository insti serve requirement imposed pursuant to tutions which have a reserve require subsection (b )(4), except that all such ment under this subsection that ex vault cash shall be excluded from any ceeds zero per centum. computation of earnings pursuant to sub (B )(i) Beginning in 1982, not later section (b )(4)(C ); and than December 31 of each year, the (B) balances maintained by a depository Board shall issue a regulation increas institution which is not a member bank ing for the next succeeding calendar in a depository institution which main year the dollar amount specified in tains required reserve balances at a Fed subparagraph (A ), as previously ad eral Reserve bank, in a Federal Home justed under this subparagraph, by an Loan Bank, or in the National Credit amount obtained by multiplying such Union Administration Central Liquidity dollar amount by 80 per centum of the Facility, if such depository institution, percentage increase in the total reserv Federal Home Loan Bank, or National able liabilities of all depository Credit Union Administration Central Li institutions. quidity Facility maintains such funds in (ii) The increase in total reservable li the form of balances in a Federal Reserve abilities shall be determined by sub bank of which it is a member or at which tracting the amount of total reservable it maintains an account. Balances re liabilities on June 30 of the preceding ceived by a depository institution from a calendar year from the amount of total second depository institution and used to Regulation D Statutory Provisions satisfy the reserve requirement imposed of these terms as defined by the Board of Gov on such second depository institution by ernors of the Federal Reserve System. this section shall not be subject to the re [12 USC 465. As amended by acts of Aug. 15, 1914 (38 serve requirements of this section im Stat. 691); June 12, 1917 (40 Stat. 239); and Aug. 23, 1935 posed on such first depository institution, (49 Stat. 714).] and shall not be subject to assessments or reserves imposed on such first depository institution pursuant to section 7 of the SECTION 11 —Powers of the Board of Federal Deposit Insurance Act (12 Governors of the Federal Reserve System U.S.C. 1817), section 404 of the National The Board of Governors of the Federal Re Housing Act (12 U.S.C. 1727), or sec serve System shall be authorized and tion 202 of the Federal Credit Union Act empowered: (12 U.S.C. 1782). (2) The balances maintained to meet the (a)(1) To examine at its discretion the ac reserve requirements of subsection (b) by a counts, books, and affairs of each Federal depository institution in a Federal Reserve reserve bank and of each member bank and bank or passed through a Federal Home to require such statements and reports as it Loan Bank or the National Credit Union may deem necessary. The said board shall Administration Central Liquidity Facility publish once each week a statement show or another depository institution to a Fed ing the condition of each Federal reserve eral Reserve bank may be used to satisfy bank and a consolidated statement for all liquidity requirements which may be im Federal reserve banks. Such statements posed under other provisions of Federal or shall show in detail the assets and liabilities State law. of the Federal reserve banks, single and combined, and shall furnish full informa [12 USC 461(a)-(c). As amended by acts of June 21, 1917 (40 Stat. 239); Aug. 23, 1935 (49 Stat. 714); Sept. 21, 1966 tion regarding the character of the money (80 Stat. 823); Dec. 23, 1969 (83 Stat. 374, 375); Oct. 29, held as reserve and the amount, nature, and 1974 (88 Stat. 1557); March 31, 1980 (94 Stat. 133, 138); maturities of the paper and other invest Aug. 13, 1981 (95 Stat. 433); Oct. 15, 1982 (96 Stat. 1520, 1521, 1522, 1523, 1540); and Aug. 9, 1989 (103 Stat. ments owned or held by Federal reserve 439).] banks. (2) To require any depository institution ***** specified in this paragraph to make, at such (f) The required balance carried by a mem intervals as the Board may prescribe, such ber bank with a Federal Reserve bank may, reports of its liabilities and assets as the under the regulations and subject to such pen Board may determine to be necessary or de alties as may be prescribed by the Board of sirable to enable the Board to discharge its Governors of the Federal Reserve System, be responsibility to monitor and control mone checked against and withdrawn by such mem tary and credit aggregates. Such reports ber bank for the purpose of meeting existing shall be made (A) directly to the Board in liabilities. the case of member banks and in the case of other depository institutions whose reserve [12 USC 464. As amended by acts of Aug. 15, 1914 (38 requirements under section 19 of this Act Stat. 691); June 21, 1917 (40 Stat. 239); Aug. 23, 1935 (49 Stat. 704); and July 7, 1942 (56 Stat. 648).] exceed zero, and (B) for all other reports to the Board through the (i) Federal Deposit (g) In estimating the reserve balances re Insurance Corporation in the case of in quired by this Act, member banks may deduct sured State nonmember banks, savings from the amount of their gross demand depos banks, and mutual savings banks, (ii) Na its the amounts of balances due from other tional Credit Union Administration Board banks (except Federal Reserve banks and for in the case of insured credit unions, (iii) eign banks) and cash items in process of col Federal Home Loan Bank Board in the case lection payable immediately upon presenta of any institution insured by the Federal tion in the United States, within the meaning Savings and Loan Insurance Corporation or 33 Statutory Provisions Regulation D which is a member as defined in section 2 of act if required to do so as fiscal agents of the the Federal Home Loan Bank Act, and (iv) United States. such State officer or agency as the Board ***** may designate in the case of any other type of bank, savings and loan association, or [12 USC 601. As amended by act of Sept. 7, 1916 (39 Stat. 755).] credit union. The Board shall endeavor to avoid the imposition of unnecessary bur dens on reporting institutions and the du SECTION 25A*—Banking Corporations plication of other reporting requirements. Authorized to Do Foreign Banking Except as otherwise required by law, any Business data provided to any department, agency, ***** or instrumentality of the United States pur suant to other reporting requirements shall Each corporation so organized shall have be made available to the Board. The Board power, under such rules and regulations as the may classify depository institutions for the Board of Governors of the Federal Reserve purposes of this paragraph and may impose System may prescribe: different requirements on each such class. (a) To purchase, sell, discount, and negoti ***** ate, with or without its indorsement or guar (c) To suspend for a period not exceeding anty, notes, drafts, checks, bills of exchange, thirty days, and from time to time to renew acceptances, including bankers’ acceptances, such suspensions for periods not exceeding fif cable transfers, and other evidences of indebt teen days, any reserve requirements specified edness; to purchase and sell with or without in this Act. its indorsement or guaranty, securities, in cluding the obligations of the United States or ***** of any State thereof but not including shares (e) To add to the number of cities classified of stock in any corporation except as herein as reserve cities under existing law in which provided; to accept bills or drafts drawn upon national banking associations are subject to it subject to such limitations and restrictions the reserve requirements set forth in section as the Board of Governors of the Federal Re [nineteen] of this Act; or to reclassify existing serve System may impose; to issue letters of reserve cities or to terminate their designation credit; to purchase and sell coin, bullion, and as such. exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes [12 USC 248 (a), (c), and (e). As amended by acts of under such general conditions as to security June 12, 1945 (59 Stat. 237); July 28, 1959 (73 Stat. 264); March 18, 1968 (82 Stat. 50) and March 31, 1980 (94 Stat. and such limitations as the Board of Gover 132).] nors of the Federal Reserve System may pre scribe; to receive deposits outside of the Unit ed States and to receive only such deposits SECTION 25 —Foreign Branches within the United States as may be incidental to or for the purpose of carrying out transac Any national banking association possessing a tions in foreign countries or dependencies or capital and surplus of $1,000,000 or more may insular possessions of the United States; and file application with the Board of Governors generally to exercise such powers as are inci of the Federal Reserve System for permission dental to the powers conferred by this Act or to exercise, upon such conditions and under as may be usual, in the determination of the such regulations as may be prescribed by the Board of Governors of the Federal Reserve said board, the following powers: System, in connection with the transaction of First. To establish branches in foreign coun the business of banking or other financial op tries or dependencies or insular possessions of erations in the countries, colonies, dependen the United States for the furtherance of the * Previously section 25(a), this section was redesignated foreign commerce of the United States, and to by act of Dec. 19, 1991 (105 Stat. 2281). 34 Regulation D Statutory Provisions cies, or possessions in which it shall transact the minimum and maximum reserve ra business and not inconsistent with the powers tios prescribed under section 19 of the specifically granted herein. Nothing contained Federal Reserve Act and may prescribe in this section shall be construed to prohibit any ratio, not more than 22 per centum, the Board of Governors of the Federal Re for any obligation of any such Federal serve System, under its power to prescribe branch or Federal agency that the Board rules and regulations, from limiting the aggre may deem reasonable and appropriate, gate amount of liabilities of any or all classes taking into consideration the character of incurred by the corporation and outstanding business conducted by such institutions at any one time. Whenever a corporation or and the need to maintain vigorous and ganized under this section receives deposits in fair competition between and among the United States authorized by this section it such institutions and member banks. The shall carry reserves in such amounts as the Board may impose reserve requirements Board of Governors of the Federal Reserve on Federal branches and Federal agen System may prescribe for member banks of cies in such graduated manner as it the Federal Reserve System. deems reasonable and appropriate. ***** (B) After consultation and in coopera tion with the State bank supervisory au [12 USC 615. As amended by acts of Aug. 23, 1935 (49 thorities, the Board may make applicable Stat. 704) and Sept. 17, 1978 (92 Stat. 609).] to any State branch or State agency any requirement made applicable to, or which the Board has authority to impose INTERNATIONAL BANKING ACT upon, any Federal branch or agency un der subparagraph (A) of this paragraph. OF 1978 (2) A branch or agency shall be subject to SECTION 7—Authority of Federal this subsection only if (A ) its parent for eign bank has total worldwide consolidated Reserve System bank assets in excess of $1,000,000,000; (B) (a )(1 )(A ) Except as provided in paragraph its parent foreign bank is controlled by a (2) of this subsection, subsections (a), foreign company which owns or controls (b), (c), (d), (0, (g), (i), (j), (k), and foreign banks that in the aggregate have to the second sentence of subsection (e) of tal worldwide consolidated bank assets in section 19 of the Federal Reserve Act excess of $1,000,000,000; or (C) its parent shall apply to every Federal branch and foreign bank is controlled by a group of for Federal agency of a foreign bank in the eign companies that own or control foreign same manner and to the same extent as if banks that in the aggregate have total the Federal branch or Federal agency worldwide consolidated bank assets in ex were a member bank as that term is de cess of $1,000,000,000. fined in section 1 of the Federal Reserve ***** Act; but the Board either by general or specific regulation or ruling may waive [12 USC 3105.]