Fed Board Approves Final Rule Simplifying Reserve Requirements

The Federal Reserve approved a final rule that would simplify so-called Regulation D, which focuses on reserve requirements for banks.

The proposals are intended “to simplify the administration of reserve requirements and reduce administrative and operational costs for both depository institutions and Federal Reserve Banks (FDTR),” the Fed said today in a statement in Washington.

The measure was approved by a 5-0 vote of the Fed’s Board of Governors.

The rules would create a common two-week maintenance period for all depository institutions, set up a “penalty-free band” around reserve balance requirements and eliminate the contractual clearing balance program, the central bank said in its statement.

The Fed will also change the reference rate for computing charges for overnight overdrafts from the effective federal funds rate to the primary credit rate, the central bank said.

To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net