CUNA Regulatory Comment Call

October 7, 2008

FED To Pay Interest On Reserves

EXECUTIVE SUMMARY

Please feel free to send your comments to CUNA SVP & Deputy General Counsel Mary Dunn at mdunn@cuna.com or to Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of the full rule.

BACKGROUND

The Federal Reserve Act imposes reserve requirements on certain types of deposits and other liabilities of depository institutions. Currently, reserve requirement ratios for “transaction accounts” are graduated between three and ten percent. Reserve requirement ratios for “nonpersonal time deposits” are zero percent.

Depository institutions must maintain required reserves in the form of a balance maintained in a non- interest bearing account at a Federal Reserve Bank or in the form of vault cash. Non-member banks could maintain required reserves in an account at a depository institution that itself maintained required reserve balances at a Federal Reserve Bank, known as a “pass-through account.”

The Financial Services Regulatory Relief Act of 2006 (Regulatory Relief Act) originally authorized the Federal Reserve to begin paying interest on balances held by or on behalf of depository institutions beginning October 1, 2011. The effective date was moved up to October 1, 2008, by the Emergency Economic Stabilization Act of 2008.

DISCUSSION

ANNUAL ADJUSTMENT FOR RESERVE REQUIREMENTS

NET TRANSACTION ACCOUNTS (NTA) & TOTAL DEPOSITS REPORTING REQUIREMENT
NTA: At or less than $10.3 million
Total deposits: At or less than $10.3 million
Excused from reporting
NTA: At or less than $10.3 million
Total Deposits: Between $10.3 million and $1.258 billion
Annual Reporting on FR 2910
NTA: Over $10.3 million
Total Deposits: Between $1.258 billion and $224.6 million
Quarterly Reporting on FR 2900
NTA: Over $10.3 million
Total deposits: At or above $224.6 million
OR
NTA: $10.3 million or less
Total Deposits: $1.258 billion or more
Weekly reporting FR 2900
Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
Luke Martone • Senior Regulatory Counsel • (202) 508-6743 • lmartone@cuna.com