By Brandon Moseley
Alabama Political Reporter
On Friday, the Federal Reserve Board announced that they were delaying the implementation of the second phase of its program to simplify the administration of reserve requirements for banking institutions.
In a written statement the Fed said that the delay will give it time for further development and testing of automated systems to ensure that there is a smooth transition for affected institutions.
The Federal Reserve Board issued their final new rule on April 4, 2012. This amended its Regulation D to simplify the reserve administration program in two phases. The first phase took effect on July 12, 2012. It discontinued as-of adjustments related to deposit report revisions and eliminated clearing balance requirements.
The second phase of the amendments will introduce a common two-week maintenance period and a penalty-free band around reserve balance requirements to eliminate carryover and routine penalty waivers. The second phase of amendments was supposed to go into effect on January 24, 2013. The delay will move the new effective date of the new rule to June 27, 2013.
According to the Federal Reserve’s written statement, the purpose of the simplification is to reduce administrative and operational costs for depository institutions, as well as for the Federal Reserve Board, and the Federal Reserve Banks. This project will not affect the stance of monetary policy.
Chairman Ben Bernanke voted for the delay as did Vice Chairman Janet Yellen and Governors Powell, Tarullo, Duke, and Stein. Governor Raskin abstained. The Board’s notice will be published shortly in the Federal Register.