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Washington
CUs eligible for proposed excess balance accounts
WASHINGTON (2/2/09)—The Federal Reserve Board is proposing to establish limited-purpose “excess balance’ accounts (EBAs) from which eligible institutions, including credit unions, can earn interest. The Fed intends its authorization of EBAs to allow eligible institutions to earn interest on their excess balances at the excess balance rate. Under the proposal, eligible institutions will be able to earn this rate without having to open separate individual accounts at the Federal Reserve Banks by using accounts managed by a correspondent institution, who would manage the account on behalf of the eligible institution. The Fed believes this arrangement allows depository institutions to earn interest on excess reserve balances without disrupting existing correspondent relationships they may have with other institutions. The proposal would amend the Fed’s Regulation D, Reserve Requirements of Depository Institutions. The plan is being proposed to address current market disruptions and the use of EBAs will be reevaluated when normal market conditions are restored. Comments are due by March 2.
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