By: Mark A. Mangano and Charles D. Dunbar
On April 24, 2020, the Federal Reserve made significant changes to Regulation D (Reg D)1 treatment of “Savings Accounts”. The changes provide options for banks to reduce administrative burdens related to offering savings accounts while preserving the “reservation of right” provisions of Reg. D.
Regulation D relates to reserve requirements imposed on depository institutions for the purpose of facilitating the implementation of monetary policy. In the past, the reserve requirements have varied by account type. In January 2019, the FOMC announced its intention to move toward a monetary policy system that would no longer rely on bank reserve requirements.
On April 24, 2020, the Federal Reserve published interim final rule “Regulation D: Reserve Requirements of Depository Institutions.” (IFR).2 The IFR is effective immediately. The IFR removes required transaction limits on savings deposits while preserving banks’ options to maintain features and requirements of their savings account products. The IFR addresses three previous requirements for savings accounts: convenience transfer limits, reporting, and reservation of right.
Six-transfer limit
Prior to the IFR, banks were required enforce a limit of six transfers per month through “convenient” transfers or withdrawals through means such as: pre-authorized, automatic, or telephonic transfers; or transfers by check, debit card or similar order payable to third parties.
The six-transfer limit is no longer required by Reg. D. Banks have the options to continue to enforce the limit or suspend the limit on a temporary or permanent basis. Banks have discretion in adjusting account agreements.
Reporting
Banks are required to submit the FR 2900 report to the Federal Reserve with information on transaction accounts, time and savings deposits, vault cash, and other reservable obligations. On FR 2900, banks may continue to report internally designated savings accounts as savings accounts on the FR 2900. If the bank suspends the transfer limit, it may report savings accounts as transaction accounts.
Reservation of right
The IFR leaves unchanged the “reservation of right” provided in Reg. D.3 A savings deposit remains a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the depository institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit.
The IFR offers the option of regulatory relief without imposing new mandates or stripping traditional benefits associated with savings accounts. For more information the Federal Reserve has published Savings Deposits Frequently Asked Questions.4
1 12 CFR 204
2 https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200424a1.pdf
3 12 CFR 204.2(d)(1)
4 https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm