Fed adjusts Reg D indexing for 2021 but reiterates zero reserve requirements still in effect

Zero reserve requirements remain in effect for all depository institutions, but the Federal Reserve nevertheless on Monday announced the annual indexing of the reserve requirement exemption amount and the low reserve tranche for 2021 under revisions to Regulation D.

The Fed set reserving requirements to zero in March by interim final rule, and so far it has indicated no plan to reinstate reserving. The change was part of a number of steps taken to ensure a flow of credit to households and businesses amid the COVID-19 pandemic and is in keeping with the conduct of monetary policy in an “ample reserves” regime, it said at the time.

The adjustments announced Monday to the reserve requirement exemption amount and the low reserve tranche, required by statute to be carried out annually, are based on growth in total reservable liabilities and net transaction accounts, respectively, at all depository institutions between June 30, 2019, and June 30, 2020, the Fed said.

The adjustments are as follows:

• For all net transaction accounts in 2021, the reserve requirement ratio was set to 0% in March 2020; therefore, all net transaction accounts are exempt from reserve requirements.
• The reserve requirement exemption amount will be set at $21.1 million, up from $16.9 million in 2020, and is the amount of a depository institution’s reservable liabilities that will always be exempt from reserve requirements.
• The low reserve tranche will be set at $182.9 million, up from $127.5 million in 2020, and is the amount of a depository institution’s net transaction accounts that may be subject to a reserve requirement ratio of not greater than 3% (and which may be zero).
• A depository institution’s net transaction accounts greater than the low reserve tranche may be subject to a reserve requirement ratio of not greater than 14% (and which may be zero).

Also Monday, the Fed Board announced the annual indexing of the nonexempt deposit cutoff level and the reduced reporting limit that are used to determine the frequency with which depository institutions must submit deposit reports.

Federal Reserve Board announces annual indexing of reserve requirement exemption amount and of low reserve tranche for 2021

RR: Fed sets 0% reserve requirement ratio, urges banks to use capital, liquidity buffers to bolster lending in face of coronavirus (March 15, 2020)