Regulation MM, also known as the “Customer Protection – Reserves for Deposits and Collections,” is a regulation issued by the Federal Reserve Board in the United States. It establishes minimum reserve requirements for depository institutions that hold transaction accounts (such as checking accounts) and nonpersonal time deposits (such as certificates of deposit).
The scope of the Regulation MM is the depositaries institutions holding transaction accounts, such as checking accounts and nonpersonal time deposits, such as certificates of deposit. This regulation is applicable to all banks, thrifts, and credit unions that are members of the Federal Reserve System. It applies to all forms of deposit accounts, including demand deposit accounts, NOW accounts, and ATS accounts, as well as all types of nonpersonal time deposits, such as certificates of deposit and cashier’s checks.
It’s important to note that the regulation does not impose any additional requirements on depository institutions beyond the minimum reserve requirements; it only establishes the minimum amount of funds that institutions must hold in reserve in order to ensure that they have sufficient funds available to meet customer withdrawal demands.
The main provisions of Regulation MM include:
- Reserve requirements: Depository institutions must hold a certain percentage of their transaction accounts and nonpersonal time deposits in reserve, as established by the Federal Reserve. These reserve requirements are set to help ensure that depository institutions have sufficient funds available to meet customer withdrawal demands.
- Exemptions: Some types of accounts, such as certain government accounts, are exempt from reserve requirements.
- Calculation of reserve requirements: Depository institutions must calculate their reserve requirements on a daily basis, based on the average level of their transaction accounts and nonpersonal time deposits over a two-week period.
- Reporting requirements: Depository institutions must report their reserve balances to the Federal Reserve on a regular basis.