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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Proposed Rules
In addition, the Board is proposing to amend Regulation D to refer to balances maintained in excess balance accounts 11 EBAs as balances rather than as excess balances and to apply the proposed IORB rate and proposed interest calculation to such balances.
II. Discussion A. Section-by-Section Analysis 1. Section 204.2aa Section 204.2aa currently defines an EBA as an account at a Reserve Bank pursuant to 204.10d of this part that is established by one or more eligible institutions through an agent and in which only excess balances of the participating eligible institutions may at any time be maintained. An excess balance account is not a pass-through account for purposes of this part. 12
The Board proposes to amend section 204.2aa to delete the word excess from the first sentence of this definition.
As revised, the first sentence of section 204.2aa would define an EBA as an account at a Reserve Bank pursuant to 204.10d of this part that is established by one or more eligible institutions through an agent and in which only balances of the participating eligible institutions may at any time be maintained.
2. Section 204.10b Section 204.10b establishes the interest paid on different types of balances maintained by or on behalf of eligible institutions at Reserve Banks.
Sections 204.10b13 describe how the IORR and IOER rates apply to balances of eligible institutions above and below the top of the penalty-free band and how interest is calculated on those balances. Section 204.10b5 sets forth the current IORR and IOER rates.
Section 204.10b4 addresses term deposits; the Board is not proposing any amendments to this section other than the redesignation discussed below.

tkelley on DSKBCP9HB2PROD with PROPOSALS

a. Proposed Section 204.10b1
The Board proposes to delete current 204.10b1 through 3 and replace them with a new section 204.10b1
that would establish interest on balances maintained in a master account at a Reserve Bank by or on behalf of an 11 See 12 CFR 204.2aa definition of excess balance account.
12 The Board authorized excess balance accounts in 2009 to permit eligible institutions to maintain established correspondent-respondent relationships while mitigating the implications for the correspondents balance sheet and its leverage ratio for capital adequacy purposes. Proposed Rule, 74
FR 5628, 5629 Jan. 30, 2009; see Final Rule, 74
FR 25620, 2562525628 May 29, 2009.

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eligible institution and describe how that interest is calculated. The Board proposes to establish interest on such balances as the amount equal to the IORB rate on a day multiplied by the total balances maintained on that day.13
Finally, proposed section 204.10b1
would establish the IORB rate.
Section 204.10b5 of Regulation D
currently sets forth the IORR rate and the IOER rate. In light of the proposed replacement of such rates with a proposed IORB rate set forth in proposed section 204.10b1, the Board proposes to delete current section 204.10b5 in its entirety.
b. Proposed Section 204.10b2
The Board proposes to redesignate current section 204.10b4, dealing with term deposits, as proposed section 204.10b2. No changes to the content of current section 204.10b4 are proposed.
a. Proposed Section 204.10b3
The Board proposes to add a new section 204.10b3 defining master account for purposes of section 204.10
as the record maintained by a Federal Reserve Bank of the debtor-creditor relationship between the Federal Reserve Bank and a single eligible institution with respect to deposit balances of the eligible institution that are maintained with the Federal Reserve Bank. A master account is not a term deposit, an excess balance account, a joint account, 14 or any deposit account maintained with a Federal Reserve Bank governed by an agreement that states the account is not a master account.
3. Section 204.10d a. Current Section 204.10d Current section 204.10d1
authorizes the establishment of EBAs and specifies that balances in an EBA
represent a liability of the Reserve Bank holding the EBA solely to the participating eligible institutions.
Current section 204.10d2 requires eligible institutions participating in an EBA to authorize another institution to act as agent of the participating institutions for purposes of general account management including transferring balances in and out of the EBA, and requires an EBA to be established at the Reserve Bank holding the agents master account. Current section 204.10d2 also prohibits the agent from maintaining any of its own 13 The amount of a balance in an account maintained by or on behalf of an eligible institution at a Reserve Bank is determined at the close of the Reserve Banks business day. 12 CFR 204.10a2.
14 See Final Guidelines for Evaluating Joint Account Requests, 82 FR 41951 Sep. 5, 2017.

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balances in the EBA. Current section 204.10d3 provides that balances in an EBA do not satisfy any institutions reserve balance requirement, and current section 204.10d4 provides that EBAs are solely for the purpose of maintaining excess balances of participating institutions and may not be used for general payments or other activities. Current section 204.10d5
establishes interest on balances in an EBA as the amount equal to the IOER
rate in effect each day multiplied by the total balances maintained on that day for each day of the maintenance period. Current section 204.10d6
authorizes Reserve Banks to establish additional terms and conditions with respect to the operation of EBAs.
b. Proposed Section 204.10d Proposed section 204.10d would remove references to excess balances when describing the balances in an EBA
and replace them with references to balances. The Board proposes to retain the name excess balance account. Specifically, the second sentence of proposed section 204.10d1 would delete the reference to excess balances of eligible institutions in an EBA and replace it with a reference to balances maintained by eligible institutions in an EBA. Proposed section 204.10d2
would delete the word excess from the reference to transferring the excess balances of participating institutions in and out of an EBA.
Current section 204.10d3 provides that balances maintained in an excess balance account will not satisfy any institutions reserve balance requirement. The Board proposes to delete current section 204.10d3 and redesignate current section 204.10d4
as section 204.10d3. Current section 204.10d4 provides that an EBA
must be used exclusively for the purpose of maintaining the excess balances of participants and may not be used for general payments or other activities. Proposed section 204.10d3
would provide that balances maintained in an EBA may not be used for general payments or other activities. Finally, proposed section 204.10d4 would delete the references in current section 204.10d5 to the IOER rate in establishing interest paid on EBAs and replace it with a reference to the IORB rate. Proposed section 204.10d4 would also revise the reference to the rate in effect each day and to total balances maintained on that day for each day of the maintenance period to provide that interest on balances in an EBA is the amount equal to the IORB rate in effect on a day
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