Academic journal article Federal Reserve Bulletin

Annual Adjustments for Reserve Calculations and Deposit Reporting

Academic journal article Federal Reserve Bulletin

Annual Adjustments for Reserve Calculations and Deposit Reporting

Article excerpt

The Federal Reserve Board announced on October 4, 2005, the annual indexing of the low reserve tranche and of the reserve requirement exemption amount for 2006. These amounts are used in the calculation of reserve requirements of depository institutions. The Board also announced the annual indexing of the cutoff level for nonexempt deposit and the reduced reporting limit that will be used to determine deposit reporting panels, effective September 2006.

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 reserve requirements in 2006, the first $7.8 million of net transaction accounts (up from $7.0 million in 2005), will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts more than $7.8 million up to and including $48.3 million (up from $47.6 million in 2005). A 10 percent reserve ratio will be assessed on net transaction accounts in excess of $48.3 million.

The annual indexing of the low reserve tranche and the reserve requirement exemption amount is based on growth in net transaction accounts and total reservable liabilities, respectively, at all depository institutions between June 30, 2004, and June 30, 2005. …

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