Interest on Reserve Balances (IORB) Frequently Asked Questions
Prior to the implementation of the IORB rate, did the Federal Reserve pay interest on the balances of eligible institutions in master accounts at Federal Reserve Banks?
Did the Board amend any other provisions of Regulation D in conjunction with the IORB rate amendment?
How is the amount of interest calculated using the IORB rate?
When will interest be paid on balances maintained in a depository institution’s account at the Federal Reserve?
Are the amendments to Regulation D replacing the IORR and IOER rates with the IORB rate temporary or permanent?
What is the IORB rate?
Posted: July 29, 2021
The IORB rate, or interest on reserve balances rate, is the rate of interest that, effective July 29, 2021, is paid by the Federal Reserve on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks. The interest rate is set by the Board of Governors, and it is an important tool of monetary policy.
Prior to the implementation of the IORB rate, did the Federal Reserve pay interest on the balances of eligible institutions in master accounts at Federal Reserve Banks?
Posted: July 29, 2021
Yes, the Federal Reserve has paid interest on the balances of eligible institutions in master accounts at Federal Reserve Banks since October 6, 2008. Up to and including July 28, 2021, interest was paid at an IORR (interest on required reserves) rate and at an IOER (interest on excess reserves) rate. The IORR rate was paid on balances maintained to satisfy reserve balance requirements, and the IOER rate was paid on excess balances. Effective March 24, 2020, the Board amended Regulation D to set all reserve requirement ratios for transaction accounts to 0 percent, eliminating all reserve requirements. As a result, there is no longer a need to describe interest rates based on whether the balance satisfies a reserve balance requirement. To account for those changes, the Board approved a final rule amending Regulation D to replace references to an IORR rate and to an IOER rate with references to a single IORB rate. The IORB rate is specified in the Board’s Regulation D.
Did the Board amend any other provisions of Regulation D in conjunction with the IORB rate amendment?
Posted: July 29, 2021
Yes, the Board made amendments to simplify the formula used to calculate the amount of interest paid on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks and made other minor conforming amendments.
How is the amount of interest calculated using the IORB rate?
Posted: July 29, 2021
Interest will be calculated as the amount equal to the IORB rate on a day multiplied by the total balances maintained on that day.
For more information on the calculation of the interest paid on reserve balances, see the Reserves Administration Application FAQs.
When will interest be paid on balances maintained in a depository institution’s account at the Federal Reserve?
Posted: June 2, 2021
Interest payments for days in a maintenance period will continue to be credited to a depository institution’s account at the Federal Reserve one business day after the end of a maintenance period. A maintenance period consists of 14 consecutive days beginning on a Thursday and ending on the second Wednesday thereafter.
Are the amendments to Regulation D replacing the IORR and IOER rates with the IORB rate temporary or permanent?
Posted: June 2, 2021
The Board does not have plans to re-impose reserve requirements in the foreseeable future. Accordingly, there will be no need in the foreseeable future to describe different interest rates for balances that satisfy a reserve balance requirement and excess balances. The Board may re-impose reserve requirement ratios in the future if conditions warrant.