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Feds Approve Final Rule Amending Reg D
Friday, June 19, 2015 6:45 AM

The Federal Reserve Board on Thursday announced the approval of a final rule amending Regulation D (Reserve Requirements of Depository Institutions) to make changes to the calculation of interest payments on excess balances maintained by depository institutions at Federal Reserve Banks. In their statement, the Feds said the final rule is a matter of prudent planning and has no implications for the near-term conduct of monetary policy.

Under the former rule, if the rate of interest paid on excess balances (the IOER rate) had changed in the middle of a two‑week reserve maintenance period, the change would not have been fully reflected in the interest payments to depository institutions until the beginning of a new maintenance period. The final rule bases interest payments to depository institutions with excess balances on the IOER rate in effect each day and the level of balances held each day, rather than on the average IOER rate and average level of excess balances over the maintenance period.

The changes are intended to enhance the effectiveness of changes in the IOER rate in moving the federal funds rate into the target range established by the Federal Open Market Committee when changes in those rates do not coincide with the beginning of a maintenance period.

The final rule is the same as the proposal that was published on April 13. It will become effective on July 23, 2015, the beginning of the first reserve maintenance period more than 30 days after publication in the Federal Register.

Review the Federal Reserve Board's notice.