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Federal Reserve Board of Governors

Regulations

Compliance Guide to Small Entities

Regulation D: Reserve Requirements of Depository Institutions
12 CFR 204

This description should not be interpreted as a comprehensive statement of the regulation. Rather, it is intended to give a broad overview of the regulation's requirements. The full regulation is available on the Government Printing Office web site.

Regulation D imposes uniform reserve requirements on all depository institutions with transaction accounts or nonpersonal time deposits, defines such deposits, and requires reports to the Federal Reserve.

A general description of the regulation, by section, follows.

Section 204.1 Authority, purpose, and scope
States that reserve requirements are imposed on depository institutions for the purpose of facilitating the conduct of monetary policy by the Federal Reserve. All depository institutions, including commercial banks, savings banks, savings and loan associations, credit unions, and agencies or branches of foreign banks located in the United States, are subject to reserve requirements.

Section 204.2 Definitions
Defines key terms used in the regulation.

Section 204.3 Computation and maintenance
Sets forth rules for computing the amount of reserves that must be held and the methods for holding them. Also permits carryover of certain reserve excesses and deficiencies and specifies pass-through rules.

Section 204.4 Transitional adjustments in mergers
Points out that a merger eliminates the low reserve tranche and reservable liabilities exemption of the nonsurviving depository institution. Thus, the surviving institution faces higher reserve requirements. These higher requirements must be phased in within seven quarters following a merger.

Section 204.5 Emergency reserve requirement
Outlines the procedures for imposing reserve requirements under extraordinary circumstances.

Section 204.6 Supplemental reserve requirement
Permits the Federal Reserve Board to impose a supplemental reserve requirement of not more than 4 percent on transaction accounts, if deemed essential for the conduct of monetary policy.

Section 204.7 Penalties
Establishes a charge of 2 percentage points over the discount rate for deficiencies in a depository institution's required reserves. Also authorizes the Federal Reserve Board to impose civil money penalties.

Section 204.8 International banking facilities
Defines the rules for international banking facilities (IBFs) and sets forth recordkeeping requirements for them.

Section 204.9 Supplement: Reserve requirement ratios
Specifies the reserve ratios for net transaction accounts, nonpersonal time deposits, and eurocurrency liabilities. Also identifies the amount of net transaction deposits reservable at 3 percent and the amounts of reservable liabilities that are exempt from reserve requirements. These amounts are subject to adjustment every year to reflect changes in the monetary aggregates.

To compute required reserves, refer to the Reserve Maintenance Manual (1.99 MB PDF) Leaving the Board.

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Last update: August 2, 2013