InfoSight Highlight: Reserve Requirements
Friday, January 12, 2018 10:35 AM

The Federal Reserve Board’s (FRB) Regulation D was established in 1980. It contains four primary provisions that affect depository institutions, including natural person credit unions.

  1. Credit unions may be required to maintain reserves. 
  2. Credit unions may have to place limits on certain deposit accounts in order to avoid having to reserve against those accounts.
  3. Credit unions are required to impose certain penalties for early withdrawal from time deposit accounts in order to avoid having to reserve against the time deposit.
  4. Credit unions may be required to report account information to the Federal Reserve.

Regulation D controls how credit unions define certain terms and conditions of deposit accounts, since the characteristics of the accounts determine whether the credit union must reserve against the accounts. The following accounts are subject to Regulation D reserve requirements: transaction accounts, time deposits, savings accounts, and Euro-currency deposits.

The Regulation D thresholds are annually adjusted to account generally for 80% of transaction accounts and overall deposit growth or decline. The percentage of actual reserving can be changed by the Federal Reserve Board in order to execute monetary policy that is to make currency more or less plentiful and to influence interest rates.