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Reserves and the FR2900

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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Reserves and the FR2900

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  1. Reserves and the FR2900 Gina Manco

  2. 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

  3. 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

  4. Computation Period • Weekly reporters: 14 day average of FR2900 data reported • Quarterly reporters: 7 day average of FR2900 data from each quarterly report

  5. 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

  6. The Calculation of Reserves Weekly Reporters Computation Period Maintenance Period

  7. The Calculation of Reserves Quarterly Reporters Computation Period Maintenance Period

  8. 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

  9. Reserve Calculation Exercise

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. WE DID IT!!

  26. 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

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

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