Fed Issues Final Rule Amending Regulation D

The Federal Reserve recently amended its Regulation D, Reserve Requirements of Depository Institutions. The amendment, which became effective July 23, 2021, revised the rate of interest paid on balances maintained to satisfy reserve balance requirements (IORR) and the rate of interest paid on excess balances (IOER) maintained at Federal Reserve Banks by or on behalf of eligible institutions.

Specifically, Regulation D now specifies that IORR is 0.15 percent and IOER is 0.15 percent, which represent a 0.05 percentage point increase in IORR and IOER. According to the Federal Reserve, this change is intended to foster trading in the federal funds market at rates well within the Federal Open Market Committee’s target range and to support the smooth functioning of short-term funding markets, with a view towards accommodating commerce and business and with regard to their bearing upon the general credit situation of the country.