WASHINGTON (4/2/08)--The Credit Union National Association (CUNA) took the opportunity of a comment letter to the Federal Reserve Board on its Regulation D proposal to urge that agency to reduce reserve requirements to zero. The Fed’s proposed amendments to Regulation D, which governs reserve requirements of depository institutions, include two substantive changes as well as certain clarifications. They do not address the Fed’s statutory authority, beginning in 2011, to reduce reserve requirements on transaction accounts to zero. However, CUNA pushed the agency to begin now to work with the financial institution sector to transition to zero reserve requirements as soon as possible. The Fed was granted that authority under the Financial Services Regulatory Relief Act of 2006. That law achieved “a very positive outcome given the fact that Regulation D reserves are not important for monetary policy purposes,” wrote Assistant General Counsel Lilly Thomas in CUNA’s letter. Regarding the Fed’s Reg D plan, CUNA made the following observations:
* The Fed should provide additional clarification that, when more than one partial early withdrawal is made from a time deposit account and an additional penalty is not charged, the deposits could still be classified as a savings deposit not subject to reserve requirements: * Amendments to the definition of savings deposit would make the withdrawal limitations less confusing for consumers and would facilitate the broader use of developing electronic payment technologies: and * The Fed should additionally specify in its definition of savings deposit that permitting no more than six “convenient” withdrawals per month would not subject the account to reserve requirements.
Regarding CUNA’s comments on withdrawal limitations, the letter noted that change would make the transfer and withdrawal limitations on savings accounts somewhat easier to understand and less confusing for consumers, as well as less burdensome for financial institutions. “Credit unions have responded to ongoing member inquiries regarding the inability to complete certain transfers or withdrawals. “A simpler ‘six withdrawals per month’ rule for all types of transfers and withdrawals would enable credit unions to clarify the limits set on their members’ savings accounts,” CUNA said. For more a detailed view of the letter, use the resource link below.