Final Rule Analysis: Reserve and Reporting Requirements for Depository Institutions

CUNA
October 19, 2007 | COMMENTS

The Federal Reserve Board published an amendment to Regulation D that includes annual adjustments for reserve requirements and reporting requirements for depository institutions, effective October 31, 2007. Regulation D determines how much depository institutions must keep on hand either in vault cash, deposits at Federal Reserve Banks or in pass-through accounts at correspondent institutions as reserves. The Federal Reserve bases its reserve requirements on net transaction accounts, which include share draft accounts and nonpersonal time deposits as defined in the Federal Reserve Act. Regulation D also assesses periodic reporting requirements based on an institution's deposit levels.

For 2008, the first $9.3 million in net transaction accounts will be exempt from the reserve requirements. This figure is the reservable liabilities exemption adjustment. Transaction account amounts between $9.3 million and $43.9 million will have a three percent reserve requirement. Transaction account amounts over $43.9 million will have a ten percent reserve requirement. This figure, $43.9 million, is known as the low reserve tranche.

The Federal Reserve requires depository institutions to file reports of their liabilities and assets. The Board screens depository institutions each year and assigns them to one of four deposit reporting panels – weekly reporters, quarterly, reporters, annual reporters, or nonreporters. Weekly and quarterly reports are filed on FR 2900, called the Report of Transaction Accounts, Other Deposits and Vault Cash. Annual reporting is filed on FR 2910a – Total Deposits and Reserveable Liabilities. See the chart below to determine your reporting requirements.

NET TRANSACTION ACCOUNTS (NTA) & TOTAL DEPOSITS	REPORTING REQUIREMENT
NTA: Less than $9.3 million Total deposits: Less than $9.3 million	Excused from reporting
NTA: At or below $9.3 million Total Deposits: Between $9.3 million and $1.211 billion	Annual Reporting on FR 2910a
NTA: over $9.3 million Total Deposits: Less than $216.2 million	Quarterly Reporting on FR 2900
NTA: over $9.3 million Total deposits: at or above $216.2 million OR NTA: $9.3 million or less Total Deposits: $1.211 billion or more	Weekly reporting FR 2900

The Board may require a depository institution to report on a weekly basis, regardless of the cutoff level, if the institution manipulates its total deposits and other reservable liabilities in order to qualify for quarterly reporting. Similarly, any depository institution that reports quarterly may be required to report weekly and to maintain appropriate reserve balances with its Reserve Bank if it understates reservable liabilities or overstates the deductions allowed.

The following compliance dates will apply for the new requirements. For depository institutions that report weekly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will apply to the 14-day reserve computation period that begins Tuesday, November 30, 2007, and the corresponding 14 day reserve maintenance period that begins Thursday, December 20, 2007. For institutions that report quarterly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will apply to the 7-day reserve computation period that begins Tuesday, December 18, 2007, and the corresponding reserve maintenance period that begins Thursday, January 17, 2008. For all depository institutions, the deposit cutoff level, the reserve requirement exemption amount, and the reduced reporting limit will be used for 2006 deposit report screening to determine reporting frequency for the twelve month period that begins in September 2008.

Please click here for a copy of the full notice. If you have questions or need a copy of the notice, feel free to contact SVP and Deputy General Counsel Mary Dunn by e-mail at mdunn@cuna.com or by telephone at (202) 508-6736 or contact Assistant General Counsel Lilly Thomas by e-mail at lthomas@cuna.com or by telephone at (202) 508-6733.