Board of Governors of the Federal Reserve System

Aggregate Reserves of Depository Institutions and the Monetary Base - H.3

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Technical Q&As

This page provides additional information about data in the Board of Governorsí statistical release on Aggregate Reserves of Depository Institutions and the Monetary Base - H.3. Most of the information is of a technical nature and represents answers to questions that may be of interest to a range of analysts and researchers. The page will be updated as such questions arise.

Documentation for the statistics in the H.3 release is available on the About page on the Board's website.


Frequently Asked Questions on the Reporting of Balances Maintained by Entities Designated as Systemically Important Financial Market Utilities in the H.3 Release


1. What are designated financial market utilities (FMUs)?

Posted: 02/20/2014

A. On July 18, 2012, the Financial Stability Oversight Council designated eight FMUs as systemically important under Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act permits the Federal Reserve Board to authorize a Federal Reserve Bank to establish and maintain an account for such designated FMUs and to provide certain financial services to such entities. On December 5, 2013, the Federal Reserve Board promulgated provisions in the Board's Regulation HH that set out the conditions and minimum requirements for a Reserve Bank to open and maintain accounts for designated FMUs (12 CFR 234.6). These provisions became effective February 18, 2014.

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2. Did some of the entities that were designated by the Financial Stability Oversight Council have Federal Reserve accounts prior to February 18, 2014?

Posted: 02/20/2014

A. Yes. Some entities that became designated FMUs in July 2012 had pre-existing Reserve Bank accounts under other statutory authority.

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3. Where are balances maintained by designated FMUs with Federal Reserve Banks reported in the H.3 release?

Posted: 02/20/2014

A. Balances maintained in pre-existing Reserve Bank accounts prior to February 18, 2014, by entities that became designated FMUs are reported in "Total reserve balances maintained" and "Balances maintained that exceed the top of the penalty-free band" on table 1 and "Total balances maintained" on table 2 of the H.3 release.

Balances maintained in Reserve Bank accounts of designated FMUs on and after February 18, 2014, are not reported in the H.3 release. These balances are reported in the H.4.1 statistical release available at: http://www.federalreserve.gov/releases/h41/.

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4. Where can I find additional information on designated FMUs?

Posted: 02/20/2014

A. For more information on designated FMUs on the Federal Reserve Boardís website, please refer to: http://www.federalreserve.gov/paymentsystems/designated_fmu_about.htm

For more information regarding the Financial Stability Oversight Councilís designations, please refer to: http://www.gpo.gov/fdsys/pkg/FR-2011-07-27/pdf/2011-18948.pdf#page=11

For more information regarding the final rule on Regulation HH pertaining to designated FMU accounts and services, please refer to: http://www.gpo.gov/fdsys/pkg/FR-2013-12-20/html/2013-29711.htm

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Frequently Asked Questions about the July 11, 2013 changes

Table 1 Q&A


1. What is a penalty-free band?

Posted: 07/11/2013

A. A penalty-free band is a range on both sides of the reserve balance requirement within which an institution needs to maintain its average balance over the maintenance period in order to satisfy its reserve balance requirement.  The penalty-free band replaced carryover and routine penalty waivers.  For more information, see Regulation D and the Reserves Administration Enhancements Resource Center.

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2. How are the top and bottom of the penalty-free band calculated?

Posted: 07/11/2013

A. For each institution, the top of the penalty-free band is equal to the institution’s reserve balance requirement plus an amount that is the greater of 10 percent of the institution’s reserve balance requirement or $50,000.  For each institution, the bottom of the penalty-free band is equal to the institution’s reserve balance requirement less an amount that is the greater of 10 percent of the institution’s reserve balance requirement or $50,000.  For additional information, including how to calculate the penalty-free band for a pass-through correspondent, see the Reserves Maintenance Manual.

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3. What is "total reserve balances maintained"?

Posted: 07/11/2013

A. "Total reserve balances maintained" is the amount of balances institutions hold in accounts at Federal Reserve Banks that are available to satisfy reserve requirements.  Historically, this series excluded balances held in a reserve account for contractual clearing purposes.  Since the elimination of the contractual clearing balances program on July 11, 2012, "total reserve balances maintained" in table 1 in the H.3 statistical release is equivalent to "total balances maintained" in table 2 in the H.3 statistical release.

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4. Can "balances maintained that exceed the top of the penalty-free band" be derived by subtracting "reserve balances requirements" from "total reserve balances maintained"?

Posted: 07/11/2013

A. No. The reserve balance requirement is the midpoint of the penalty-free band.  "Balances maintained that exceed the top of the penalty-free band" reflects balances maintained that exceed the top, rather than the midpoint, of each institution's penalty-free band.

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5. Can "balances maintained that exceed the top of the penalty-free band" be derived by subtracting the "top of penalty-free band" from "total reserve balances maintained"?

Posted: 07/11/2013

A. No.  "Total reserve balances maintained" is calculated as the sum across all institutions, regardless of whether they are above or below the top of the penalty-free band.  "Top of penalty-free band" is derived by adding the top of the penalty-free band for each institution, regardless of the level of balances each institution maintains.  "Balances maintained that exceed the top of the penalty-free band" is the sum of balances maintained across institutions that maintain balances in excess of the top of their respective penalty-free bands and excludes institutions that maintain balances that fall below the top of their respective penalty-free bands.  For an explanation of how "balances maintained that exceed the top of the penalty-free band" is calculated, see question 7.

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6. How is "balances maintained to satisfy reserve balance requirements" calculated?

Posted: 07/11/2013

A. "Balances maintained to satisfy reserve balance requirements," which consist of those up to and including the top of the penalty-free band, is calculated separately for each institution and then aggregated.  If an institution maintains an average level of reserve balances over a maintenance period below the top of its penalty-free band, then balances maintained to satisfy reserve balance requirements is equal to the institution’s average level of reserve balances maintained over the maintenance period.  For all other institutions, balances maintained to satisfy reserve balance requirements is equal to the top of their penalty-free bands.

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7. How is "balances maintained that exceed the top of the penalty-free band" calculated?

Posted: 07/11/2013

A. "Balances maintained that exceed the top of the penalty-free band" is calculated separately for each institution and then aggregated.  If an institution maintains an average level of reserve balances over a maintenance period above the top of its penalty-free band, then balances maintained that exceed the top of the penalty-free band is equal to the institution’s average level of reserve balances maintained over a maintenance period less the top of its penalty-free band.  For all other institutions, balances maintained that exceed the top of the penalty-free band is zero.

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8. Why is the "excess reserves" series last published in the July 5, 2013, H.3 statistical release not included in the current H.3 statistical release?

Posted: 07/11/2013

A. The concept of "excess reserves," defined as total reserve balances less reserve balance requirements, no longer aligns with the remuneration structure following phase two of the simplification of reserves administration.  The purpose of the H.3 statistical release is to give the public insight into how depository institutions collectively manage their reserves within the current framework for the implementation of monetary policy.  Following phase two of the simplification of reserves administration, the Board of Governors determines the interest rate to be paid on "balances maintained to satisfy reserve balance requirements" up to and including the top of the penalty-free band.  The Board also separately determines the rate to be paid on "balances maintained that exceed the top of the penalty-free band."  For more information, see Regulation D.

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9. How do I get to the historical concept of "excess reserves" using the current H.3 statistical release?

Posted: 07/11/2013

A. The historical concept of "excess reserves" no longer has the same meaning following phase two of the simplification of reserves administration.  Nevertheless, to get at the historical concept of "excess reserves" using the current H.3 statistical release, take "total reserve balances maintained" (table 1, column 4) less "reserve balance requirements" (table 1, column 1).  Alternatively, one can view excess as the amount of balances maintained that satisfy the minimum requirements, which can be calculated by taking "total reserve balances maintained" (table 1, column 4) less "bottom of penalty-free band" (table 1, column 3).

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10. Where can I find a historical time series for "excess reserves"?

Posted: 07/11/2013

A. The historical time series of "excess reserves" last published in the July 5, 2013, H.3 statistical release will remain available through the Data Download Program.

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11. What is "interest rates paid on balances maintained"?

Posted: 07/11/2013

A. The Board of Governors determines the interest rates to be paid on balances maintained at the Federal Reserve.  "Balances maintained to satisfy reserve balance requirements" up to and including the top of the penalty-free band are remunerated at the rate paid on balances maintained up to the top of the penalty-free band.  "Balances maintained that exceed the top of the penalty-free band" are remunerated at the interest rate to be paid on excess balances.  For more information, see Regulation D.

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12. Where can I find the historical series associated with interest rates paid on reserve balances?

Posted: 07/11/2013

A. The historical data of interest rates paid on required and excess reserves prior to the simplified reserve requirement regime is available in the Interest on Reserves Archive and the Data Download Program, as part of the H.3 statistical release data package.

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Table 2 Q&A


13. Is "total balances maintained" in table 2 in the H.3 statistical release different from "total reserve balances maintained" in table 1 in the H.3 statistical release?

Posted: 07/11/2013

A. Yes, it is different historically.  "Total balances maintained" are balances that an institution holds in a reserve account directly at a Federal Reserve Bank.  Historically, these balances included "total reserve balances maintained" to satisfy reserve requirements and balances held for contractual clearing purposes, the latter of which was eliminated with phase one of the simplification of reserves administration.  Since the elimination of the contractual clearing balances program on July 11, 2012, "total balances maintained" in table 2 in the H.3 statistical release is equivalent to "total reserve balances maintained" in table 1 in the H.3 statistical release.

14. How does "total balances maintained" in table 2 in the H.3 statistical release and "total reserve balances maintained" in table 1 in the H.3 statistical release relate to "other deposits held by depository institutions" published in the H.4.1 statistical release?

Posted: 07/11/2013

A. "Total balances maintained" are balances that an institution holds in a reserve account directly at a Federal Reserve Bank and is equivalent to "other deposits held by depository institutions" published in the H.4.1 statistical release.  Historically, these balances included balances held for contractual clearing purposes.  Since the elimination of the contractual clearing balances program on July 11, 2012, with phase one of the simplification of reserves administration, "total reserve balances maintained" in table 1 in the H.3 statistical release is equivalent to "total balances maintained" in table 2 in the H.3 statistical release and "other deposits held by depository institutions" published in the H.4.1 statistical release.

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15. How does "currency in circulation" in table 2 in the H.3 statistical release relate to "currency in circulation" published in the H.4.1 statistical release?

Posted: 07/11/2013

A.  "Currency in circulation" in table 2 in the H.3 statistical release is calculated from the same data as "currency in circulation" published in the H.4.1 statistical release.  However, the former is calculated as a two-week average ending on Wednesday to align with the reserve maintenance periods whereas the latter is calculated as a Wednesday level and a one-week average ending on Wednesday.

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16. Why is the monetary base calculation in the current H.3 statistical release different from the monetary base calculation last published in the July 5, 2013, H.3 statistical release?

Posted: 07/11/2013

A. The simplification of reserves administration provides an opportunity to streamline the process of calculating the monetary base so that it reflects the fundamental concept of this measure.  The fundamental concept of the monetary base, or "high-powered money," is the sum of total balances maintained by depository institutions at the Federal Reserve plus currency in circulation.  Historically, the monetary base calculation included other steps, which are outlined in the answer to question 18.

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17. Is there a substantial difference between the historical time series for the monetary base published in the current H.3 statistical release and the monetary base last published in the July 5, 2013, H.3 statistical release?

Posted: 07/11/2013

A. No.  The levels and growth rates of the two series are nearly identical.

This chart depicts a time series comparison of the monetary base published in the current H.3 statistical release and the monetary base last published on July 5, 2013.  Data are in billions of dollars, at a monthly frequency, and not seasonally adjusted. The levels of the two series are nearly identical; they start at about $50 billion in 1959, gradually rise to $840 billion in 2007, and surpass $2.7 trillion by the end of 2012.

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18. What are the historical differences between the monetary base published in the current H.3 statistical release and the monetary base last published in the July 5, 2013, H.3 statistical release?

Posted: 07/11/2013

A. The formula of the monetary base last published on July 5, 2013, included (1) "as of" adjustments, which were eliminated with phase one of the simplification of reserves administration; (2) lagged accounting for the vault cash held at certain institutions; and (3) currency in circulation calculated as a two-week average, ending on Monday.  The historical time series of the simplified monetary base does not include as-of adjustments or lagged accounting for the vault cash held at certain institutions.  The simplified monetary base includes currency in circulation calculated as two-week averages, ending on Wednesdays, to align with the reserve maintenance periods.

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19. Where can I find a historical time series for the simplified monetary base published in the current H.3 statistical release?

Posted: 07/11/2013

A. The historical time series of the simplified monetary base is available through the Data Download Program.  The Board also maintains the availability of the historical data for the monetary base last published in the July 5, 2013, H.3 statistical release.

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20. Can I reconstruct the monetary base last published in the July 5, 2013, H.3 statistical release using data published in the current H.3 statistical release?

Posted: 07/11/2013

A. No.  However, the historical data of the monetary base last published in the July 5, 2013, H.3 statistical release will be made available through the Data Download Program

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21. Are the series published in the H.3 statistical release break-adjusted and seasonally adjusted?

Posted: 07/11/2013

A. No. Data in the H.3 statistical release, including the simplified monetary base, are not adjusted for regulatory changes in reserve requirements and are not seasonally adjusted.  The break-adjustment methodology formerly used relied on the assumption that excess reserves are tightly controlled.  Since 2008, excess reserves have expanded substantially, making the basis of that methodology no longer valid.  Nevertheless, the methodology by which these measures were once break-adjusted and seasonally adjusted is archived on the H.3 statistical release website.  Also, the Federal Reserve Bank of St. Louis publishes a break-adjusted and seasonally adjusted monetary base series.

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Table 3 Q&A


22. Table 3 in the current H.3 statistical release looks like table 1a last published in the July 5, 2013, H.3 statistical releaseóare they substantively the same?

Posted: 07/11/2013

A. Table 1a last published in the July 5, 2013, H.3 statistical release was renumbered as table 3 in the current H.3 statistical release, and the nonborrowed reserves series published in table 2 in the July 5, 2013, H.3 statistical release was moved to table 3 in the current H.3 statistical release.

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Last update: February 20, 2014