On May 20, the Board of Governors of the Federal Reserve System (Federal Reserve) announced the approval of final amendments to Regulation D, Reserve Requirements of Depository Institutions.
The amendments are intended to make it easier for community banks that use correspondent banks to receive interest on excess balances held at Federal Reserve banks. In addition, with the adoption of the Regulation D amendments, the Federal Reserve “liberalized” restrictions on the types and number of transfers and withdrawals that may be made from savings deposits. According to the final amendments, six monthly transfers or withdrawals from savings deposits by check, debit card or similar order payable to third parties are now permitted (previously, the limit was three withdrawals monthly by such mechanisms). Finally, the Federal Reserve also authorized the establishment of “excess balance accounts” at Federal Reserve banks. “Excess balance accounts” are limited-purpose accounts for maintaining excess balances of one or more institutions that are eligible to earn interest on their Federal Reserve balances. According to the accompanying press release, such accounts have been authorized to alleviate pressures on correspondent-respondent business relationships in the current “unusual financial market environment” which has caused some respondents to hold their excess balance accounts in an account at the Federal Reserve rather than sell them through a correspondent in the federal funds market.
The final amendments will become effective 30 days after their publication in the Federal Register.