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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
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
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
computation period
Computation Period
  • Weekly reporters: 14 day average of FR2900 data reported
  • Quarterly reporters: 7 day average of FR2900 data from each quarterly report
maintenance period
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
the calculation of reserves
The Calculation of Reserves

Weekly Reporters

Computation Period Maintenance Period

the calculation of reserves7
The Calculation of Reserves

Quarterly Reporters

Computation Period Maintenance Period

the calculation of reserves8
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
reserve calculation exercise10
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
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
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
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
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

reserve calculation exercise15
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
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
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
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
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
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
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
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
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
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
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
slide27
Gina Manco, Sr. Financial Analyst
    • 216-579-2952
    • gmanco@clev.frb.org
  • Customer Contact Center (Reserve Calc)
    • 888-333-7010
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