Allocation of Low Reserve Tranche and Reservable Liabilities Exemption

Board of Governors of the Federal Reserve System

Instructions for Preparation of

Allocation of Low Reserve Tranche and
Reservable Liabilities Exemption
Reporting Form FR 2930
Effective September 2012

INSTRUCTIONS FOR PREPARATION OF

Allocation of Low Reserve Tranche and
Reservable Liabilites Exemption

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.
FR 2930
General Instructions

September 2012

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. 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.

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General Instructions

(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.

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.

How the Tranche Should Be Allocated
Regulation D requires that, if possible, the low reserve
tranche should be allocated to a single offıce or group of
offıces 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
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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.

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.

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 offıce 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.
General Instructions

FR 2930
September 2012

General Instructions

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.
(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

FR 2930
General Instructions

September 2012

first reserve computation period beginning in any
calendar month.

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.

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.

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