Reed Smith Client Alerts

Recognizing that the unprecedented financial challenges brought about by the COVID-19 pandemic have caused many depositors to have an urgent need for access to their funds by remote means, the Federal Reserve Board has issued an interim final rule amending Regulation D – Reserve Requirements of Depository Institutions – to remove longstanding limitations on the number of transfers and withdrawals that customers can make from their savings accounts. The change is intended to give the banking public more convenient access to their funds while simplifying account administration for banks.
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Regulation D distinguishes between transaction accounts, against which reserves must be held, and savings deposits, which are free from any reserve requirement. Historically, the regulation has limited the number of transfers or withdrawals that an accountholder may make from a savings deposit, including by check, telephone, preauthorization or online instruction, to not more than six per month, commonly called the six-transfer limit. Furthermore, banks have been required to prevent transfers above the six-transfer limit or to monitor these accounts and discipline customers who, after being warned, continue to violate the limit. That limit has now been removed.

Since January 2019, the Federal Reserve Board has designed its monetary policy against the backdrop of plentiful reserves. Under this ample-reserves regime, on March 26th reserve requirement ratios were reduced to zero percent, which eliminated reserve requirements for thousands of banks and helped to support lending to households and businesses. It is this regulatory shift that makes the distinction between transaction accounts and savings deposits no longer necessary.

In addition to removing the six-transfer limit, the interim final rule permits, but does not require, banks to suspend enforcement of the six-transfer limit. Moreover, deposit reporting practices remain unchanged. Accompanying the interim final rule is a helpful list of FAQs from the Federal Reserve Board.

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Client Alert 2020-279