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Reserves and the FR2900. Gina Manco. Reserve Requirements. Reserve Requirements are… Based on Net Transaction Accounts (NTA) Monies to be held or set aside In the form of vault cash At the Federal Reserve In a correspondent pass through account. Key Definitions.

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Reserve requirements l.jpg
Reserve Requirements

  • Reserve Requirements are…

    • Based on Net Transaction Accounts (NTA)

    • Monies to be held or set aside

      • In the form of vault cash

      • At the Federal Reserve

      • In a correspondent pass through account


Key definitions l.jpg
Key Definitions

  • Reserve balance requirement: Total required reserves – vault cash

  • Clearing balance requirement: Contracted balance to be maintained at the Federal Reserve

  • Total requirement: Reserve balance requirement + clearing balance requirement

  • Computation period: FR2900 report weeks from which total required reserves are calculated

  • Maintenance period: The period of time for which reserve requirements are held


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Computation Period

  • Weekly reporters: 14 day average of FR2900 data reported

  • Quarterly reporters: 7 day average of FR2900 data from each quarterly report


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Maintenance Period

  • Weekly reporters: 14 day period starting Thursday and ending on Wednesday four weeks after the computation period

  • Quarterly reporters: 7 day period starting Thursday and ending on Wednesday four weeks after the computation period and continuing for thirteen consecutive weeks


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The Calculation of Reserves

Weekly Reporters

Computation Period Maintenance Period


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The Calculation of Reserves

Quarterly Reporters

Computation Period Maintenance Period


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The Calculation of Reserves

  • How are reserves calculated?

    • Compute 14 day average of A3, AA1, B1, and B2 from two 2900 reports

    • Compute average NTA  A3+AA1-B1-B2

    • First $7.8M  multiply by 0%

    • Next $40.5M  multiply by 3%

    • Remaining balance  multiply by 10%

    • Add steps 3-5 results  required reserves



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Reserve Calculation Exercise

Weekly Reporters

(1)

Total first Week

(2)

Total second week

(3)

Computation period total

(4)

14-day average

FR 2900 ITEMS

527,366

+

543,667

=

1,071,033

 14 =

76,502

A . 3 Total transaction accounts

AA . 1 Ineligible acceptances and obligations issued be affiliates maturing in less than 7 days

B.1 Demand balances due from depository institutions in the U.S.

B.2 Cash Items in process of collection

E .1 Vault Cash

0

+

0

=

0

0

 14 =

10,000

70,000

+

70,000

=

140,000

 14 =

35,000

+

35,000

70,000

5,000

=

 14 =

+

21,000

21,000

=

42,000

 14 =

3,000


Reserve calculation exercise11 l.jpg
Reserve Calculation Exercise

Weekly Reporters

(1)

Total first Week

(2)

Total second week

(3)

Computation period total

(4)

14-day average

FR 2900 ITEMS

527,366

+

543,667

=

1,071,033

 14 =

76,502

A . 3 Total transaction accounts

AA . 1 Ineligible acceptances and obligations issued be affiliates maturing in less than 7 days

B.1 Demand balances due from depository institutions in the U.S.

B.2 Cash Items in process of collection

E .1 Vault Cash

0

+

0

=

0

0

 14 =

10,000

70,000

+

70,000

=

140,000

 14 =

35,000

+

35,000

70,000

5,000

=

 14 =

+

21,000

21,000

=

42,000

 14 =

3,000


Reserve calculation exercise12 l.jpg
Reserve Calculation Exercise

Weekly Reporters

(1)

Total first Week

(2)

Total second week

(3)

Computation period total

(4)

14-day average

FR 2900 ITEMS

527,366

+

543,667

=

1,071,033

 14 =

76,502

A . 3 Total transaction accounts

AA . 1 Ineligible acceptances and obligations issued be affiliates maturing in less than 7 days

B.1 Demand balances due from depository institutions in the U.S.

B.2 Cash Items in process of collection

E .1 Vault Cash

0

+

0

=

0

0

 14 =

318

2,082

+

2,375

=

4,457

 14 =

35,000

+

35,000

70,000

5,000

=

 14 =

+

21,000

21,000

=

42,000

 14 =

3,000


Reserve calculation exercise13 l.jpg
Reserve Calculation Exercise

Weekly Reporters

(1)

Total first Week

(2)

Total second week

(3)

Computation period total

(4)

14-day average

FR 2900 ITEMS

527,366

+

543,667

=

1,071,033

 14 =

76,502

A . 3 Total transaction accounts

AA . 1 Ineligible acceptances and obligations issued be affiliates maturing in less than 7 days

B.1 Demand balances due from depository institutions in the U.S.

B.2 Cash Items in process of collection

E .1 Vault Cash

0

+

0

=

0

0

 14 =

318

2,082

+

2,375

=

4,457

 14 =

31,307

+

36,546

67,853

4,847

=

 14 =

+

21,000

21,000

=

42,000

 14 =

3,000


Reserve calculation exercise14 l.jpg
Reserve Calculation Exercise

Weekly Reporters

(1)

Total first Week

(2)

Total second week

(3)

Computation period total

(4)

14-day average

FR 2900 ITEMS

527,366

+

543,667

=

1,071,033

 14 =

76,502

A . 3 Total transaction accounts

AA . 1 Ineligible acceptances and obligations issued be affiliates maturing in less than 7 days

B.1 Demand balances due from depository institutions in the U.S.

B.2 Cash Items in process of collection

E .1 Vault Cash

0

+

0

=

0

0

 14 =

318

2,082

+

2,375

=

4,457

 14 =

31,307

+

36,546

67,853

4,847

=

 14 =

+

25,150

24,249

=

49,399

 14 =

3,529


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Reserve Calculation Exercise

14-day average

A. Gross transaction accounts

A. 3 Total transaction accounts

AA. 1 Ineligible acceptances and obligations issued by affiliates maturing in less than seven days

B. 1 Demand balances due from depository institution in the U.S.

B.2 Cash items in process of collection

76,502

Net transaction accounts

+

=

76,502

0

=

85,000

(If negative set to zero)

B. Total deductions

10,000

=

15,000

+

5,000


Reserve calculation exercise16 l.jpg
Reserve Calculation Exercise

14-day average

A. Gross transaction accounts

A. 3 Total transaction accounts

AA. 1 Ineligible acceptances and obligations issued by affiliates maturing in less than seven days

B. 1 Demand balances due from depository institution in the U.S.

B.2 Cash items in process of collection

76,502

Net transaction accounts

+

=

76,502

0

=

85,000

(If negative set to zero)

B. Total deductions

318

=

5,165

+

4,847


Reserve calculation exercise17 l.jpg
Reserve Calculation Exercise

14-day average

A. Gross transaction accounts

A. 3 Total transaction accounts

AA. 1 Ineligible acceptances and obligations issued by affiliates maturing in less than seven days

B. 1 Demand balances due from depository institution in the U.S.

B.2 Cash items in process of collection

76,502

Net transaction accounts

+

=

76,502

0

-

=

71,337

(If negative set to zero)

B. Total deductions

318

=

5,165

+

4,847


Reserve calculation exercise18 l.jpg
Reserve Calculation Exercise

Net transaction accounts

Exemption NTA > Exemption

Net transaction accounts > low reserve trance

Application of tranche

Low reserve tranche

48,300

Exemption

7,800

Adjusted tranche

40,500

Net transaction accounts > exemption

Net transaction accounts < adjusted tranche

Exemption

_

71,337

-

7,800

=

63,537

40,500

=

23,037


Reserve calculation exercise19 l.jpg
Reserve Calculation Exercise

A. On transaction accounts < adjusted tranche

A. Amount < adjusted tranche

Total reserve requirement

40,500

x .03 =

1, 215

+

4,885

=

B. On transaction accounts > low reserve tranche

B. Amount > low reserve tranche

x .10 =

3,670

36,700


Reserve calculation exercise20 l.jpg
Reserve Calculation Exercise

A. On transaction accounts < adjusted tranche

A. Amount < adjusted tranche

Total reserve requirement

40,500

x .03 =

1, 215

+

4,885

=

B. On transaction accounts > low reserve tranche

B. Amount > low reserve tranche

x .10 =

2,304

23,037


Reserve calculation exercise21 l.jpg
Reserve Calculation Exercise

A. On transaction accounts < adjusted tranche

A. Amount < adjusted tranche

Total reserve requirement

40,500

x .03 =

1, 215

+

3,519

=

B. On transaction accounts > low reserve tranche

B. Amount > low reserve tranche

x .10 =

2,304

23,037


Reserve calculation exercise22 l.jpg
Reserve Calculation Exercise

1. Total reserve requirement

2. Less: Vault cash (FR 2900 Item E.1, Section 1, Column 4)

3. Equals: Reserve balance requirement

3,519

-

3,000

=

1,885


Reserve calculation exercise23 l.jpg
Reserve Calculation Exercise

1. Total reserve requirement

2. Less: Vault cash (FR 2900 Item E.1, Section 1, Column 4)

3. Equals: Reserve balance requirement

3,519

-

3,529

=

1,885


Reserve calculation exercise24 l.jpg
Reserve Calculation Exercise

1. Total reserve requirement

2. Less: Vault cash (FR 2900 Item E.1, Section 1, Column 4)

3. Equals: Reserve balance requirement

3,519

-

3,529

=

0



References l.jpg

Reserve Maintenance Manual

www.frbservices.org/Accounting/pdf/rmm.pdf

Reserve Calc

www.federalreserve.org/reserves/reserves/home.do

Credit Risk Department

(888)719-4636

References


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