Fed Finalizes Changes to Interest Payments on Reserves

The Federal Reserve Board today approved a final rule amending Regulation D to make changes to the calculation of interest payments on excess balances maintained by depository institutions at Federal Reserve Banks. Specifically, the amendments permit interest payments on certain balances to be based on a daily rate rather than on a maintenance period average rate.

The amendments are intended to enhance the role of such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee, particularly on occasions when changes in those rates do not coincide with the beginning of a maintenance period.

The final rule will become effective on July 23, 2015.