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Board of Governors of the Federal Reserve System
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Reserve Maintenance Manual

Glossary


Balance maintained to satisfy reserve balance requirements
That portion of the average end-of-day balance for a maintenance period that satisfies an institution's reserve balance requirement. The maximum value for an institution's balance maintained to satisfy reserve balance requirements is the top of the institution's penalty-free band.

Bottom of penalty-free band
The bottom of the penalty-free band is equal to the reserve balance requirement minus a dollar amount prescribed by the Board, not to fall below zero.

For a depository institution that maintains balances directly with the Federal Reserve, the dollar amount used to create the bottom of the penalty-free band is equal to the greater of $50,000 or 10 percent of the depository institution's reserve balance requirement.

For a pass-through correspondent, the dollar amount used to establish the bottom of the penalty-free band will be set as an amount that is equal to the greater of $50,000 or 10 percent of the aggregate reserve balance requirement of the correspondent (if any) and all of its respondents.

Computation period
The time span over which an institution's reserve requirement and vault cash is calculated. For weekly reporters, the computation period is a two-week period that begins on a Tuesday and ends on the second Monday thereafter, and consists of two reporting periods. For quarterly reporters, each computation period consists of a single reporting period that begins on the third Tuesday of March, June, September, and December and ends the following Monday.

Correspondent
For reserve maintenance purposes, an institution acting as a correspondent passes through balances maintained to satisfy reserve balance requirements for respondent institutions directly to the Federal Reserve. A correspondent holds pass-through balances in a single master account along with the correspondent's own reserve balance requirement, if any (see also respondent).

Excess balance
That portion of the average end-of-day balance for a maintenance period that exceeds the top of the penalty-free band.

Excess balance account
An account at a Reserve Bank that is established by one or more eligible institutions through an agent and in which only excess balances of the participating eligible institutions may at any time be maintained.

Exemption amount
The amount of reservable liabilities exempt from reserve requirements. The Federal Reserve indexes the exemption amount annually and uses it with the nonexempt deposit cutoff and the reduced reporting limit to determine each institution's reporting category. Institutions with total deposits less than or equal to the exemption amount are not required to submit an FR 2900 or FR 2910a report. Institutions that are required to submit an FR 2900 are subject to a zero percent reserve requirement on net transaction accounts up to the amount of the exemption (see also nonexempt deposit cutoff and reduced reporting limit).

Interest rate on excess balances
The interest rate determined by the Board of Governors that is used to calculate interest payments associated with an excess balance.

Interest rate on balances maintained to satisfy reserve balance requirements
The interest rate determined by the Board of Governors that is used to calculate interest payments associated with a balance maintained to satisfy reserve balance requirements.

Low reserve tranche
The amount of net transaction accounts subject to a reserve requirement of 3 percent. The amount of net transaction accounts in excess of the low reserve tranche is currently subject to a reserve requirement of 10 percent. The Federal Reserve indexes the low reserve tranche annually.

Maintained balance
The average end-of-day balance held in a depository institution's master account over a maintenance period.

Maintenance period
A maintenance period consists of fourteen consecutive days beginning on a Thursday and ending on the second Wednesday thereafter.

Master account
A record of financial transactions that reflects the financial rights and obligations of an account holder and of the Reserve Bank with respect to each other, and where opening and closing balances are determined. Reserve administration is managed through the master account, unless an institution has entered into a pass-through arrangement with a correspondent.

Net transaction accounts
Net transaction accounts are comprised of total transaction accounts (demand deposits, ATS accounts, NOW accounts/share drafts, and telephone and preauthorized transfers), plus ineligible acceptances and obligations issued by affiliates maturing in less than seven days, net of demand balances due from depository institutions in the U.S. and cash items in the process of collection. In terms of the FR 2900 report, net transaction accounts are calculated as the sum of line items A.3 and AA.1 less the sum of line items B.1 and B.2. The FR 2900 reporting instructions define all of these deposit types.

Nonexempt deposit cutoff
A measure of total transaction accounts, savings deposits, and small time deposits indexed annually by the Federal Reserve and used with the exemption amount and the reduced reporting limit to determine each institution's reporting category (see also exemption amount and reduced reporting limit).

Penalty-free band
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 top of the penalty-free band is equal to the reserve balance requirement plus a dollar amount prescribed by the Board. The bottom of the penalty-free band is equal to the reserve balance requirement minus a dollar amount prescribed by the Board.

Primary credit rate
The interest rate charged on borrowing from a Reserve Bank under the primary credit facility. Primary credit is available for very short terms as a backup source of liquidity to depository institutions that are in generally sound financial condition in the judgment of the lending Reserve Bank.

Reduced reporting limit
A measure of total transaction accounts, savings deposits, and small time deposits indexed annually by the Federal Reserve and used with the exemption amount and the nonexempt deposit cutoff to determine each institution's reporting category. Any institution with total transaction accounts, savings deposits, and small time deposits greater than or equal to the reduced reporting limit, regardless of the level of their net transaction accounts, must report the FR 2900 weekly. This measure was implemented in September 2003 (see also exemption amount and nonexempt deposit cutoff).

Reporting period
For the FR 2900, the reporting period consists of seven consecutive calendar days beginning on Tuesday and ending on the following Monday, during which an institution must record, for each day, its deposit and vault cash levels. For the FR 2910a, the reporting period consists of one day (June 30) during which an institution must record its levels of total transaction accounts, savings deposits, and small time deposits and reservable liabilities.

Reservable liabilities
Those liabilities subject to reserve requirements. Reservable liabilities consist of net transaction accounts, nonpersonal time deposits, and net Eurocurrency liabilities. Currently, reserve requirement ratios on nonpersonal time deposits and net Eurocurrency liabilities are zero.

Reserve balance deficiency
The shortfall between the average end-of-day balance maintained in an institution's master account during the reserve maintenance period and the bottom of the penalty-free band around the reserve balance requirement (see penalty-free band and bottom of the penalty-free band).

Reserve balance requirement
The portion of an institution's reserve requirement that is not satisfied by its vault cash and therefore must be maintained either directly with a Reserve Bank or in a pass-through arrangement.

Reserve maintenance cycle
A reserve maintenance cycle includes the computation period for reserves and the associated maintenance period or periods in which the reserves are maintained. When used in reference to weekly reporters, the reserve maintenance cycle consists of a fourteen-day computation period and its associated fourteen-day maintenance period, which begins seventeen days after the end of the computation period.

When used in reference to quarterly reporters, the reserve maintenance cycle consists of a seven-day computation period (in March, June, September, or December) and an interval of six or seven consecutive fourteen-day maintenance periods. The interval will begin on the fourth Thursday following the end of each quarterly reporting period if that Thursday is the first day of a two-week maintenance period. If the fourth Thursday following the end of a quarterly reporting period is not the first day of a two-week maintenance period, then the interval will begin on the fifth Thursday following the end of the quarterly reporting period.

Reserve requirement
The amount determined by applying the reserve ratios specified in Regulation D to an institution's reservable liabilities during the relevant computation period. The institution must satisfy its reserve requirement in the form of vault cash and/or balances maintained either directly with a Reserve Bank or in a pass-through arrangement.

Respondent
For reserve maintenance purposes, a respondent institution passes the balances maintained to satisfy a reserve balance requirement to a correspondent who then passes those balances to the Federal Reserve. A respondent's pass-through reserve balances are maintained in its correspondent's master account along with the correspondent's own reserve, if any (see also correspondent).

Subaccounts
Subsets of an institution's master account in which information on financial services can be segregated. Subaccounts have no opening or closing balances, but do contain totals of debits and credits that are settled in the institution's master account.

Top of penalty-free band
The top of the penalty-free band is equal to the reserve balance requirement plus a dollar amount prescribed by the Board.

For a depository institution that maintains balances directly with the Federal Reserve, the dollar amount used to create the bottom of the penalty-free band is equal to the greater of $50,000 or 10 percent of the depository institution's reserve balance requirement.

For a pass-through correspondent, the dollar amount used to establish the bottom of the penalty-free band will be set as an amount that is equal to the greater of $50,000 or 10 percent of the aggregate reserve balance requirement of the correspondent (if any) and all of its respondents.

Total deposits
Computed as the sum of total transaction accounts (FR 2900 report item A.3), total time and savings deposits (C.1 plus D.1), ineligible acceptances and obligations issued by affiliates (AA.1 plus BB.2), and net Eurocurrency liabilities (CC.1).

Vault cash
U.S. currency and coin owned by a depository institution. The average end-of-day holdings of vault cash over the computation period can be used to satisfy some or all of an institution's reserve requirement in the corresponding maintenance period.

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Last update: November 14, 2016