Allocation of Low Reserve Tranche and Reservable Liabilities Exemption

FR 2930
Page 1

ALLOCATION OF LOW RESERVE TRANCHE AND RESERVABLE LIABILITIES EXEMPTION
(FR 2930)
INSTRUCTIONS
Public reporting burden for this collection of information is estimated to average 0.25 hour, including the time to gather and maintain data in the required
form and to review instructions and complete the information collection. Send
comments regarding this burden estimate or any other aspect of this collection
of information, including suggestions for reducing this burden, to: Secretary,
Board of Governors of the Federal Reserve System, 20th & C Streets, N.W.,
Washington, DC 20551; and to the Office of Management and Budget, Paperwork Reduction Project (7100-0088), Washington, DC 20503.

A. SCOPE
Federal Reserve Regulation D, “Reserve Requirements
of Depository Institutions,” requires that (1) all U.S.
branches of foreign banks, (2) all U.S. agencies of
foreign banks with total consolidated worldwide banking
assets in excess of $1 billion, (3) all banking Edge and
agreement corporations, and (4) domestic depository
institutions having transaction accounts, nonpersonal
time deposits, or certain Eurocurrency liabilities, satisfy
Federal Reserve requirements on such liabilities. Pursuant to the Monetary Control Act of 1980, the amount of
net transaction accounts subject to a reserve requirement
ratio of 3 percent was set at $25 million. This so-called
low-reserve tranche is adjusted each year.1 The Garn-St
Germain Act of 1982 established a zero percent reserve
requirement on the first $2 million of reservable liabilities from reserve requirements for each institution.2
While the Act permits institutions, in accordance with
the rules and regulations of the Board of Governors, to
designate the reservable liabilities to which the zero
percent reserve requirement exemption applies, the
amount of the reserve requirement exemption may not
exceed the amount of the low reserve tranche.
Only a single low reserve tranche and a single reservable
liabilities exemption is allowed for (1) all U.S. branches
and agencies of the same foreign parent bank, (2) all U.S.
offices (that is the head office and all U.S. branches) of a
single banking Edge or agreement corporation, and (3)
all offices of a single domestic depository institution.
The Report of Transaction Accounts, Other Deposits and
Vault Cash (FR 2900) is used by the Federal Reserve for

1

The amount of the low reserve tranche is adjusted annually based on the
change in total transaction accounts at all depository institutions.
2

The amount of the reservable liabilities exemption is adjusted annually based
on the change in total reservable liabilities at all depository institutions. No
adjustment is made to the exemption amount if there is a decrease in total
reservable liabilities at all depository institutions.

the calculation of federal required reserves. In most
cases, all offices of an institution must file a consolidated
FR 2900; however, there are some exceptions. A
foreign bank’s U.S. branches and agencies located in
different states or in different Federal Reserve Districts
must report deposits separately to their respective
Reserve Banks. The same requirement also applies to
offices of a banking Edge or agreement corporation
located in different states or in different Federal Reserve
Districts. Domestic depository institutions may file
separate FR 2900 reports for the surviving and
nonsurviving entities of a merger only while operating
under operational convenience3 under Federal Reserve
approval.
The low reserve tranche and the reservable liabilities
exemption must be allocated among the following listed
reporting offices that file separate FR 2900 reports:
1) A foreign bank that has U.S. branches and agencies
located in more than one state or in more than one
Federal Reserve District;
2) A banking Edge or agreement corporation that has
offices located in more than one state or in more than
one Federal Reserve District; and
3) Any office of a domestic depository institution
operating under operational convenience, where the
surviving entity of a merger has requested, and the
Reserve Bank has approved, to file separate FR 2900
reports after the merger date.
The FR 2930 report form is used to notify the Federal
Reserve of those allocations.

3

The Federal Reserve offers transitional, multiple account arrangements to
support organizational and operational restructuring after a merger. During
the one-year period following a merger, the surviving entity has two options
for FR 2900 reporting and for reserve administration. Under the first option
for operational convenience FR 2900 reports are filed separately for the
surviving entity and the nonsurviving entity. Separate reserve requirements
are calculated for the survivor and the nonsurvivor based on the separate
FR 2900 reports; however, the combined institution receives only one
exemption amount and one low reserve tranche. Required reserve balances
are maintained in separate master accounts for the survivor and the
nonsurvior. For more detailed information on operational convenience
please refer to the Reserve Maintenance Manual, which may be accessed via
the Federal Reserve Board’s website.

FR 2930
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B. WHO MUST REPORT
This report is required from U.S. branches and agencies
of foreign banks, and banking Edge and agreement
corporations that have offices located in more than one
state or in more than one Federal Reserve District, and
from domestic depository institutions operating under
operational convenience that file more than one FR 2900
report. The report is filed in order to establish or change
the allocation of the low reserve tranche or reservable
liabilities exemption among reporting offices. Each
foreign bank, banking Edge or agreement corporation, or
domestic depository institution should designate one of
its reporting offices to be responsible for submitting this
allocation report.

C. HOW THE TRANCHE SHOULD BE
ALLOCATED
Regulation D requires that, if possible, the low reserve
tranche should be allocated to a single office or group of
offices filing an aggregated Report of Transaction
Accounts, Other Deposits and Vault Cash (FR 2900), but
only if the tranche can be fully utilized by such office or
group of offices. If the low reserve tranche cannot be
fully utilized by a single office or group of offices filing
an aggregated report, the unused portion of the tranche
may be assigned to other offices of the same foreign
bank, of the same banking Edge or agreement corporation, or of the same domestic depository institution until
the amount of the tranche or net transaction accounts is
exhausted. The low reserve tranche should be allocated
so as to maximize its utilization by a foreign bank, by a
banking Edge or agreement corporation, or by a domestic
depository institution. For example, if a foreign bank
with more than one reporting office has total net transaction balances in excess of the low reserve tranche, the
amount allocated to a particular office or group of offices
filing an aggregated report should not exceed the anticipated minimum amount of net transaction balances at
that office or group of offices. If, on the other hand, a
foreign bank with more than one reporting office has
total net transaction balances of less than the amount of
the low reserve tranche, the tranche allocation among
reporting offices should reflect the maximum amount of
such balances anticipated for each reporting office. The
amount of the low reserve tranche allocated to a reporting office may not fluctuate on a weekly basis. Rather,
the allocation of the tranche is fixed by the amounts
reported on this form and may be changed only as
described below.

D. HOW THE RESERVABLE LIABILITIES
EXEMPTION SHOULD BE ALLOCATED
The rules governing the allocation of the reservable
liabilities exemption are equivalent to those governing
the allocation of the low reserve tranche; therefore, the
procedure outlined in the above section should be
followed in allocating the reservable liabilities exemption. To ensure that the reservable liabilities exemption
is first applied to net transaction accounts, two further
rules govern the allocation of such exemption. First, for
each individual office, the exemption allocation may not
exceed the tranche allocation. Second, the amount
allocated to a particular office or group of offices should
not exceed the anticipated amount of net transaction
deposits at that office or group of offices.

E. UNDER WHAT CIRCUMSTANCES THE
REPORT MUST BE FILED
1. To establish the initial allocation of the low
reserve tranche and reservable liabilities exemptions.
(a) This report must be filed at the time a U.S.
branch or agency of a foreign bank or a branch of a
banking Edge or agreement corporation is first
established outside a single state or a single Federal
Reserve District. The report must be filed even if the
new office will not be allocated any portion of the
tranche or the exemption.
(b) This report must be filed at the time a surviving
entity of a merger elects, and is approved by the
Federal Reserve, to operate under operational
convenience where FR 2900 reports are filed separately for the survivor and the nonsurvivor and
separate reserve requirements are calculated based
on the separate FR 2900 reports.
2. To change the allocation of the low reserve
tranche or reservable liabilities exemption. Changes
in the allocation of the low reserve tranche or reservable
liabilities exemption are permitted only in the following
circumstances:
(a) An institution may change the allocation of the
low reserve tranche or reservable liabilities exemption among reporting offices effective at the beginning of each calendar year.

FR 2930
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(b) When a new branch or agency of a foreign bank
or a new branch of a banking Edge or agreement
corporation is established, the tranche allocation for
any or all of the reporting offices of a foreign bank or
banking Edge or agreement corporation may be
changed effective the first reserve computation
period beginning in any calendar month.
(c) If, under the existing allocation, the low reserve
tranche or the reservable liabilities exemption is not
being fully utilized by an institution during each
reserve computation period, or if the existing allocation of the low reserve tranche is having an adverse
affect on operations of the institution, the allocation
may be changed effective the first reserve computation period beginning in any calendar month.

F. WHERE TO FILE THE REPORT
In each of the situations described above, a copy of the
report for allocation of the low reserve tranche and
reservable liabilities exemption must be submitted to
each Federal Reserve District in which an office or a
group of offices that will be allocated a portion of the
low reserve tranche is located or in which an office or a
group of offices that is currently allocated a portion of
the low reserve tranche is located. A list of the Federal
Reserve Bank addresses can be found at
http://www.federalreserve.gov/fraddress.htm.

G. WHEN TO FILE THE REPORT
The report must be submitted at least one week prior to
the beginning of the reserve computation period in which
the low reserve tranche or reservable liabilities exemption allocation reported on this form is to be effective.