Federal Reserve Board announces annual indexing of reserve requirement exemption amount and low reserve tranche for 2024

The Board of Governors of the Federal Reserve System (FED) has announced its upcoming amendments to statutory instrument 12 CFR Part 204, § 204.4 to adjust the amounts of reservable liabilities, including net transaction accounts, exempt from reserve requirements for 2024. Because the reserve ratio was set to zero at the onset of Covid-19 in 2020 (even beyond the limits), the new boundaries are actually of no direct relevance.
Specifically, the FED will adjust the reserve requirement exemption amount and the low reserve tranche for 2024 as follows:
– the exemption amount will remain as is at $36.1 million and
– the low reserve tranche will be reduced to $644.0 million (from a previous $691.7 million in 2023).
The low reserve tranche thereby represents the maximum amount of reservable liabilities above the exemption amount towards which the FED may apply a reserve ratio of 3%. For all amounts above the low reserve tranche, the FED may apply a reserve ratio of up to 14%. This staged approach represents the liquidity risks involved in transaction accounts which increases as balances in transaction accounts increase.
A yearly adjustment is made (indexing) based on the total reservable liabilities of all credit institutions.