Why did the Board of Governors decide to eliminate the imputed reserve requirement adjustment and the marginal reserve requirement adjustment from the calculation of earnings credits?
Prior to the payment of interest on required reserve balances, the earnings credits calculation used to include two adjustments that were meant to ensure that respondents viewed balances at the Federal Reserve Banks and balances at a private-sector correspondent as equivalent. One adjustment imputed a reserve requirement to the Federal Reserve Bank to treat it like a private-sector correspondent. The other adjustment accounted for the fact that a respondent could lower the amount of its reserve requirement by the amount of demand deposits due from its private-sector correspondent but not from its Federal Reserve Bank. When interest is paid on required reserve balances, such adjustments are no longer needed because the private-sector correspondent will receive interest on amounts held at the Federal Reserve Bank to satisfy reserve requirements. For a more detailed discussion of the rationale behind eliminating these adjustments, please see the discussion in the Federal Register notice.
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