All in Regulation D

Federal Reserve Proposes Final Reg D Rule

Adam Witmer
Regulatory Update, Regulation D

On 12/22/2020, the Federal Reserve Board issued a notice of proposed rulemaking regarding proposed amendments under Regulation D. Under the proposal, references to an "interest on required reserves" ("IORR") rate and to an "interest on excess reserves" ("IOER") rate would be replaced with a single "interest on reserve balances" ("IORB") rate. The proposed amendments would make other conforming changes, such as simplifying the formula used to calculate the amount of interest paid on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks. Comments on the proposed rulemaking will be accepted for 60 days after publication in the Federal Register.

Concurrently, the Board announced that it is adopting as a final rule, without change, an interim final rule amending Regulation D to lower reserve requirement ratios on transaction accounts maintained at depository institutions to zero percent. The Board received no comments on the interim final rule.

Fed Updates Reg D FAQs

Adam Witmer
Regulation D, Regulatory Update, Regulation CC

On 5/13/2020, the Federal Reserve updated their Frequently Asked Questions regarding Regulation D and the recent changes to the rule. Among other things, the updates to the FAQs include the following clarifications:

  • Question 3 answers the question of whether or not the recent amendments to Regulation D are temporary or permanent. As explained in the answer, the Federal Reserve does not expect the changes to be “short term” and “does not have plans to re-impose transfer limits,” but could if future conditions warrant it.

  • Question 13 explains what we have been saying the last few weeks: that the recent Reg D changes do not cause savings deposits to be subject to Reg CC hold requirements.

VIDEO: Reg D Restrictions Lifted!

VIDEO: Reg D Restrictions Lifted!

Adam Witmer
Regulation D, Regulatory Update

In this Compliance Clip (video), Adam takes a brief look at the recent interim final rule from the Federal Reserve which lifts the requirement to monitor for excessive transactions on savings deposits. Adam even gives a brief overview of why this was done and explains the monetary policy behind all of these changes. While economics and compliance typically don’t mix, hold on for a slightly extended video of excitement and danger… or maybe just a good overview of the changes.

Fed Deletes 6-Per Month Limit on Savings Deposits

Adam Witmer
Regulatory Update, Regulation D

On April 24, 2020, the Federal Reserve Board announced an interim final rule that amends Regulation D to delete the six-per-month limit on convenient transfers from the “savings deposit” definition. The rule was published in the Federal Register on April 28, 2020 and allows depository institutions to immediately suspend enforcement of the six transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent. As justification for this change, the Fed explains that the Board’s recent action to reduce all reserve requirement ratios to zero has rendered this regulatory distinction unnecessary.

Reg D Excessive Transaction Monitoring

Reg D Excessive Transaction Monitoring

Adam Witmer
Regulatory Update, Regulation D

In this Compliance Clip (video), Adam answers a question many bankers have been asking: With COVID-19, do we still have to comply with the excessive transaction monitoring requirements of Regulation D? This video revisits the rules of Regulation D and reiterates what must be done for monitoring excessive transactions on savings accounts.

Federal Reserve Guidance for Regulation D

Adam Witmer
Regulation D, Regulatory Update

The Federal Reserve recently issued a series of FAQs regarding their announcement on March 15, 2020 of the elimination of reserve requirements. This announcement has resulted in many questions regarding the transaction restrictions on savings accounts under Regulation D. Specifically, many banks are seeing an increase of restricted transactions on Savings accounts due to customers following stay-at-home orders. The question bankers often have is this: Do we still need to follow Regulation D’s restrictions on Savings accounts, or can we allow customers to exceed those restrictions?

Fortunately, the Federal Reserve has provided guidance to financial institutions, which many comes down to this: the restrictions are still in place, but financial institutions can convert applicable accounts to transaction accounts.

Managing Reg D Excessive Transactions

Adam Witmer
Regulation D

Regulation D is an interesting regulation for compliance professionals as it isn’t a consumer protection rule, but rather was created by the Federal Reserve to help set monetary policy.  That said, compliance professionals typically focus on just a few elements of Regulation D such as ineligible entities on NOW accounts, waiving early withdrawal penalties, and, of course, monitoring for excessive transactions on savings accounts.

Regulation D Excessive Transaction Monitoring

Adam Witmer
Regulation D, Compliance Management

Regulation D sets transaction limitations on savings accounts where a customer is not permitted to make more than 6 restricted transaction from the account during the statement cycle (or calendar month).  If a customer repeatedly makes excessive withdrawals, Regulation D, by definition, changes the account type from a savings account to a transaction account. The result is that a converted account would be incorrectly reported on the Call report by the financial institution.  Therefore, Regulation D requires financial institutions to monitor restricted transactions and to take action if a consumer exceeds the maximum number of transactions permitted on a savings account.