[Federal Register Volume 85, Number 29 (Wednesday, February 12, 2020)]
[Rules and Regulations]
[Pages 7855-7857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02119]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-1695]
RIN 7100-AF 71
Regulation D: Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board of Governors of the Federal Reserve System
(``Board'') is amending Regulation D (Reserve Requirements of
Depository Institutions) to revise the rate of interest paid on
balances maintained to satisfy reserve balance requirements (``IORR'')
and the rate of interest paid on excess balances (``IOER'') maintained
at Federal Reserve Banks by or on behalf of eligible institutions. The
final amendments specify that IORR is 1.60 percent and IOER is 1.60
percent, a 0.05 percentage
[[Page 7856]]
point increase from their prior levels. The amendments are intended to
enhance the role of such rates of interest in maintaining the Federal
funds rate in the target range established by the Federal Open Market
Committee (``FOMC'' or ``Committee'').
DATES:
Effective date: This rule is effective February 12, 2020.
Applicability date: The IORR and IOER rate changes were applicable
on January 30, 2020.
FOR FURTHER INFORMATION CONTACT: Sophia H. Allison, Senior Special
Counsel (202-452-3565), or Justyna Bolter, Senior Attorney (202-452-
2686), Legal Division, or Francis Martinez, Senior Financial
Institution & Policy Analyst (202-245-4217), or Laura Lipscomb,
Assistant Director (202-912-7964), Division of Monetary Affairs; for
users of Telecommunications Device for the Deaf (TDD) only, contact
202-263-4869; Board of Governors of the Federal Reserve System, 20th
and C Streets NW, Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Background
For monetary policy purposes, section 19 of the Federal Reserve Act
(``the Act'') imposes reserve requirements on certain types of deposits
and other liabilities of depository institutions.\1\ Regulation D,
which implements section 19 of the Act, requires that a depository
institution meet reserve requirements by holding cash in its vault, or
if vault cash is insufficient, by maintaining a balance in an account
at a Federal Reserve Bank (``Reserve Bank'').\2\ Section 19 also
provides that balances maintained by or on behalf of certain
institutions in an account at a Reserve Bank may receive earnings to be
paid by the Reserve Bank at least once each quarter, at a rate or rates
not to exceed the general level of short-term interest rates.\3\
Institutions that are eligible to receive earnings on their balances
held at Reserve Banks (``eligible institutions'') include depository
institutions and certain other institutions.\4\ Section 19 also
provides that the Board may prescribe regulations concerning the
payment of earnings on balances at a Reserve Bank.\5\ Prior to these
amendments, Regulation D specified a rate of 1.55 percent for both IORR
and IOER.\6\
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\1\ 12 U.S.C. 461(b).
\2\ 12 CFR 204.5(a)(1).
\3\ 12 U.S.C. 461(b)(1)(A) & (b)(12)(A).
\4\ See 12 U.S.C. 461(b)(1)(A) & (b)(12)(C); see also 12 CFR
204.2(y).
\5\ See 12 U.S.C. 461(b)(12)(B).
\6\ See 12 CFR 204.10(b)(5).
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II. Amendments to IORR and IOER
The Board is amending Sec. 204.10(b)(5) of Regulation D to specify
that IORR is 1.60 percent and IOER is 1.60 percent, a 0.05 percentage
point increase in each rate. This decision was announced on January 29,
2020, with an effective date of January 30, 2020, in the Federal
Reserve Implementation Note that accompanied the FOMC's statement on
January 29, 2020. The FOMC statement stated that the Committee decided
to maintain the target range for the federal funds rate at 1\1/2\ to
1\3/4\ percent.
The Federal Reserve Implementation Note stated:
The Board of Governors of the Federal Reserve System voted
unanimously to set the interest rate paid on required and excess
reserve balances at 1.60 percent, effective January 30, 2020.
Setting the interest rate paid on required and excess reserve
balances 10 basis points above the bottom of the target range for
the federal funds rate is intended to foster trading in the federal
funds market at rates well within the FOMC's target range.
As a result, the Board is amending Sec. 204.10(b)(5) of Regulation
D to change IORR to 1.60 percent and IOER to 1.60 percent.
III. Administrative Procedure Act
In general, the Administrative Procedure Act (``APA'') \7\ imposes
three principal requirements when an agency promulgates legislative
rules (rules made pursuant to Congressionally-delegated authority): (1)
Publication with adequate notice of a proposed rule; (2) followed by a
meaningful opportunity for the public to comment on the rule's content;
and (3) publication of the final rule not less than 30 days before its
effective date. The APA provides that notice and comment procedures do
not apply if the agency for good cause finds them to be ``unnecessary,
impracticable, or contrary to the public interest.'' \8\ Section 553(d)
of the APA also provides that publication at least 30 days prior to a
rule's effective date is not required for (1) a substantive rule which
grants or recognizes an exemption or relieves a restriction; (2)
interpretive rules and statements of policy; or (3) a rule for which
the agency finds good cause for shortened notice and publishes its
reasoning with the rule.\9\
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\7\ 5 U.S.C. 551 et seq.
\8\ 5 U.S.C. 553(b)(3)(A).
\9\ 5 U.S.C. 553(d).
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The Board has determined that good cause exists for finding that
the notice, public comment, and delayed effective date provisions of
the APA are unnecessary, impracticable, or contrary to the public
interest with respect to these final amendments to Regulation D. The
rate changes for IORR and IOER that are reflected in the final
amendments to Regulation D were made with a view towards accommodating
commerce and business and with regard to their bearing upon the general
credit situation of the country. Notice and public comment would
prevent the Board's action from being effective as promptly as
necessary in the public interest and would not otherwise serve any
useful purpose. Notice, public comment, and a delayed effective date
would create uncertainty about the finality and effectiveness of the
Board's action and undermine the effectiveness of that action.
Accordingly, the Board has determined that good cause exists to
dispense with the notice, public comment, and delayed effective date
procedures of the APA with respect to these final amendments to
Regulation D.
IV. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (``RFA'') does not apply to a
rulemaking where a general notice of proposed rulemaking is not
required.\10\ As noted previously, the Board has determined that it is
unnecessary and contrary to the public interest to publish a general
notice of proposed rulemaking for this final rule. Accordingly, the
RFA's requirements relating to an initial and final regulatory
flexibility analysis do not apply.
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\10\ 5 U.S.C. 603, 604.
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V. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (``PRA'') of
1995,\11\ the Board reviewed the final rule under the authority
delegated to the Board by the Office of Management and Budget. The
final rule contains no requirements subject to the PRA.
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\11\ 44 U.S.C. 3506; see 5 CFR part 1320 Appendix A.1.
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List of Subjects in 12 CFR Part 204
Banks, Banking, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Board amends 12 CFR
part 204 as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
0
1. The authority citation for part 204 continues to read as follows:
Authority: 12 U.S.C. 248(a), 248(c), 461, 601, 611, and 3105.
0
2. Section 204.10 is amended by revising paragraph (b)(5) to read as
follows:
[[Page 7857]]
Sec. 204.10 Payment of interest on balances.
* * * * *
(b) * * *
(5) The rates for IORR and IOER are:
Table 1 to Paragraph (b)(5)
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Rate (percent)
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IORR.................................................... 1.60
IOER.................................................... 1.60
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* * * * *
By order of the Board of Governors of the Federal Reserve
System, January 30, 2020.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-02119 Filed 2-11-20; 8:45 am]
BILLING CODE 6210-01-P