The Federal Reserve Board ("FRB") adopted amendments to Regulation D ("Reserve Requirements of Depository Institutions") to (i) create a new single "interest on reserve balances" rate and (ii) simplify the formula for payment of interest on balances. The FRB adopted the amendments as proposed without any modifications.
The amendments replace the current "interest on required reserves" (or "IORR") rate of 0.10 percent and "interest on excess reserves" (or "IOER") rate of 0.10 percent, with a single "interest on reserve balances" ("IORB") rate of 0.10 percent. Additionally, the amendments simplify the current definition of "excess balances" (i.e., balances maintained in "excess balance accounts") to "balances" and apply the proposed IORB rate to this balance.
The amendments go into effect on July 29, 2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
