On October 27, 2016, the US Board of Governors of the Federal Reserve System announced the annual indexing of the reserve requirement exemption amount and the low reserve tranche, two amounts used in determining reserve requirements of depository institutions under Regulation D.
All depository institutions must hold a percentage of certain types of deposits as reserves in the form of vault cash, as a deposit in a Federal Reserve Bank or as a deposit in a pass-through account at a correspondent institution. Reserve requirements currently are assessed on the depository institution's net transaction accounts (mostly checking accounts). Depository institutions must also regularly submit reports of their deposits and other reservable liabilities.
For net transaction accounts in 2017, the first $15.5 million, up from $15.2 million in 2016, will be exempt from reserve requirements. A three percent reserve ratio will be assessed on net transaction accounts over $15.5 million up to and including $115.1 million, up from $110.2 million in 2016. A ten percent reserve ratio will be assessed on net transaction accounts in excess of $115.1 million.
The new low reserve tranche and reserve requirement exemption amount will apply to the 14-day reserve maintenance period that begins January 19, 2017. The Federal Reserve Board also announced changes in two other amounts, the non-exempt deposit cut-off level and the reduced reporting limit, that are used to determine the frequency with which depository institutions must submit deposit reports.
The Federal Reserve Board final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20161027a1.pdf.
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