Savings Transaction Limitations Suspended
This blog is posted on behalf of Lyle Kolosik, Regulatory Compliance Manager.
The Federal Reserve Board announced on Friday April 24th an interim final rule to amend Regulation D (Reserve Requirements of Depository Institutions) to delete the six-per-month limit on convenient transfers from the “savings deposit” definition. The interim final rule permits depository institutions to immediately suspend enforcement of the six-transfer per month limit and allow their customers to make an unlimited number of transfers and withdrawals from savings deposits at a time when financial needs stemming from the COVID-19 pandemic have made access more urgent.
History: Federal Reserve System and Regulation D
In January 2019, the FOMC announced its intention to implement monetary policy in an ample reserves regime. Reserve requirements do not play a role in this type of situation. As a result of this shift, the Board announced that effective March 26, 2020, reserve requirement ratios were reduced to zero percent. This action eliminated reserve requirements for thousands of depository institutions and helped to support lending to households and businesses.
The elimination of reserve requirements on all transaction accounts appropriately negates the necessity for the regulatory distinction in Regulation D between reservable “transaction accounts” and non-reservable “savings deposits.” In addition, financial disruptions arising in connection with the COVID-19 situation have caused many depositors to have a more urgent need for access to funds by remote means, especially in light of the unique closure of many depository institution branches and other in-person facilities. This action will provide relief for a good portion of the population.
Impact of the Interim Final Rule
This interim final rule includes deletion of the provisions in the “savings deposit” definition that require depository institutions either to prevent transfers and withdrawals in excess of the limit or to monitor savings deposits for violations of the limit. The interim final rule also makes conforming changes to other definitions in Regulation D that refer to “savings deposit” as necessary. The interim final rule also does not require any changes to the deposit reporting practices of depository institutions.
The Board anticipates the adoption of the interim final rule will result in questions from depository institutions and their customers as to access to funds, account agreements, reporting practices, and other related matters. A complete list of “frequently asked questions” (FAQs) with brief answers has been published on the Board’s existing “Savings Deposit Frequently Asked Questions” web page, located here. The page will be updated with FAQ revisions and additional FAQs as needed.
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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