(a) Payment of interest. The Federal Reserve Banks shall pay interest on balances
maintained at Federal Reserve Banks by or on behalf of an eligible institution as provided in this
section and under such other terms and conditions as the Board may prescribe.
(b) Rate. Except as provided in paragraph (c) of this section, Federal Reserve Banks
shall pay interest at the following rates—
(1) For required reserve balances, at 1/4 percent;
(2) For excess balances, at 1/4 percent; or
(3) For required reserve balances or excess balances, at any other rate or rates as
determined by the Board from time to time.
(c) Pass-through balances. A pass-through correspondent that is an eligible institution
may pass back to its respondent interest paid on balances held on behalf of that respondent. In
the case of balances held by a pass-through correspondent that is not an eligible institution, a
Reserve Bank shall pay interest only on the required reserve balances held on behalf of one or
more respondents, and the correspondent shall pass back to its respondents interest paid on
balances in the correspondent’s account. Any passing back of interest by a correspondent to a
respondent under this subsection is not a payment of interest on a demand deposit for purposes of
Part 217 of this chapter (Regulation Q).
(d) Excess balance accounts.
(1) A Reserve Bank may establish an excess balance account for eligible institutions
under the provisions of this subsection (d). Notwithstanding any other provisions of this part, the
excess balances of eligible institutions in an excess balance account represent a liability of the
Reserve Bank solely to those participating eligible institutions.
(2) The participating eligible institutions in an excess balance account shall authorize
another institution to act as agent of the participating institutions for purposes of general account
management, including but not limited to transferring the excess balances of participating
institutions in and out of the excess balance account. An excess balance account must be
established at the Reserve Bank where the agent maintains its master account, unless otherwise
determined by the Board. The agent may not commingle its own funds in the excess balance
account.
(3) No required reserve balances or clearing balances may be maintained at any time in
an excess balance account, and balances maintained in an excess balance account will not satisfy
any institution’s reserve balance requirement or contractual clearing balance.
(4) An excess balance account 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.
(5) Interest shall be paid on excess balances of eligible institutions maintained in an
excess balance account in accordance with § 204.10(b)(2) or § 204.10(b)(3).
(6) A Reserve Bank may establish additional terms and conditions consistent with this
part with respect to the operation of an excess balance account, including, but not limited to,
terms of and fees for services, conditions under which an institution may act as agent for an
account, restrictions on the agent with respect to account management, penalties for
noncompliance with this section or any terms and conditions, and account termination.
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