Regulation D – Reserve Requirements

The Federal Reserve Board’s (FRB) Regulation D was established in 1980. It contains four primary provisions that affect depository institutions, including natural person credit unions.

  1. Credit unions may be required to maintain reserves.
  2. Credit unions may have to place limits on certain deposit accounts in order to avoid having to reserve against those accounts.
  3. Credit unions are required to impose certain penalties for early withdrawal from time deposit accounts in order to avoid having to reserve against the time deposit.
  4. Credit unions may be required to report account information to the Federal Reserve.

Regulation D controls how credit unions define certain terms and conditions of deposit accounts, since the characteristics of the accounts determine whether the credit union must reserve against the accounts. The Regulation requires all depository institutions, including credit unions, to maintain reserves against transaction deposits, which include demand deposits, negotiable order of withdrawal accounts, as well as other types of liquid deposits. Reserves against these deposits can take the form either of currency on hand (vault cash) or balances at the Federal Reserve. Each year, the Federal Reserve is required to adjust the exemption thresholds which are published under Regulation D and recently the annual adjustments for 2015 were announced.
According to a recent Federal Reserve’s press release,

“For net transaction accounts in 2015, the first $14.5 million, up from $13.3 million in 2014, will be exempt from reserve requirements. A 3 percent reserve ratio will be assessed on net transaction accounts over $14.5 million up to and including $103.6 million, up from $89.0 million in 2014. A 10 percent reserve ratio will be assessed on net transaction accounts in excess of $103.6 million.” The effective dates of these changes follow, “The new low reserve tranche and reserve requirement exemption amount will apply to the 14-day reserve maintenance period that begins January 22, 2015. For depository institutions that report deposit data weekly, this maintenance period corresponds to the 14-day computation period that begins Tuesday, December 23, 2014. For depository institutions that report deposit data quarterly, this maintenance period corresponds to the seven-day computation period that begins Tuesday, December 16, 2014.”

This channel in InfoSight provides detailed requirements regarding Regulation D. Click here for the topic.

Click here to access the Federal Reserve’s press release.

Review the information today to help your credit union remain in compliance.


CUNA Mutual Group Breaks Down the Difference between Payment Card Breaches and Cyber Breaches to Help Credit Unions Protect Themselves

In 2013, the financial industry had the second highest per capita data breach cost and racked up more than $11.3 billion in card fraud expenses. What’s driving these breaches? Two major categories: payment card and cyber breaches. Although both types of breaches are time-consuming and expensive to resolve, there are some critical differences between them.


This is defined as a compromise of the payment card data and is the type of breach that’s made the news with depressing regularity over the past 12 months. The uptick in attacks started with Target in late 2013 and since that time has included Home Depot, Neiman Marcus, and Supervalu, among many, many others. The two most common methods of payment card data theft are skimming and database compromise.

  • Skimming occurs when the thief installs a card reader device on a point of sale (POS) terminal or ATM. When the consumer uses their card, the skimming device reads and saves the magnetic stripe data. The thief retrieves the information and voila!, they’re ready to create a counterfeit card. Historically, this type of skimming required a thief to physically affix a device to the POS or ATM terminal. Now clever thieves are doing it via Bluetooth and malware—which is how experts believe the 70 million+ Target thefts occurred.
  • Database compromise occurs in one of two ways: when a thief thwarts a merchant/third-party processor’s security tools or a merchant/third-party processor stores magnetic stripe data, which is subsequently stolen. This second method contributed to the TJ Maxx breach back in 2007. Although the card association’s data security policies prohibit this data storage, not all merchants/processors follow their lead.


A cyber breach involves the theft or loss of sensitive information or internal records. This could include everything from credit union financial data and personnel files to personally identifiable member data.
Common access points include:

  • The cloud. As the recent hacking of celebrity photos illustrates, the cloud is not as secure as we might like to think.
  • Public wi-fi. This can be a huge point of data vulnerability, especially in conjunction with the next item.
  • Personal mobile devices. Most companies let employees use their personal devices at work, but don’t necessarily have security protocols in place to make that a smart choice. Plus, although consumers may be relatively diligent when it comes to protecting their computers or laptops from spyware, viruses and malware, few take the same precautions with their phones and tablets.
  • Active employee theft. Much as we hate to admit it, a certain percentage of employees are active data thieves. Credit unions that don’t follow best practices in data protection could be vulnerable.
  • Human error and system problems. According to Symantec, a data security company, two-thirds of data breaches were caused by human error and system problems. Human errors could include transferring data outside the credit union or not deleting data on an appropriate schedule; system errors include inadvertent data dumps, errors in data transfer and identity and authentication failures. Employees can also cause problems by clicking on malicious links that allow malware/spyware/viruses to enter the system.
  • Operating system “holes.” Most system patches resolve security issues. If you skip the update, your system is exposed.
  • Physical data theft. Although we tend to focus on electronic theft, paper data is also vulnerable.

Protect your credit union from data breaches!

Source: CUNA Mutual


CUNA Seeks Input on NCUA’s Proposed Corporate Rule 

CUNA is asking credit unions to send us input on NCUA’s pending corporate credit union proposal. The proposed rule would make numerous changes to the definition section of part 704 and makes other more substantive changes to several sections. According to NCUA, it is meant to “streamline and clarify” the corporate credit union rule while adding a measure of regulatory relief. Click here for CUNA’s Regulatory Comment Call on the proposal; NCUA is accepting comments until January 5.

CFPB Issues Proposed Rule for Prepaid Cards and Products

Last week, the CFPB issued a proposed rule that applies to prepaid products (including general purpose reloadable cards) that are offered to consumers. Prepaid products are amongst the fastest growing types of consumer financial products in the U.S.; the total dollar value loaded onto general purpose reloadable cards is expected to grow to nearly $100 billion through 2014. The CFPB also included a related blog post and press release.

CUNA supports the goals of safe and transparent disclosures and appropriate consumer protections on prepaid cards and products, which offer many benefits for consumers, including a higher proportion of the underserved. The CFPB will be accepting comments for 90 days after publication in the Federal Register, which is expected shortly. Some highlights of the proposal:

  • Prepaid Protections: The proposed rule would extend many consumer protections under the Electronic Fund Transfer Act to similar to checking account protections and include:

Easy and free access to account information: Financial institutions would be required to either provide periodic statements or make account information easily accessible online and for free. Consumers would be able to review their account balances and a history of their transactions and fees.

Error resolution rights: Financial institutions would be required to work with consumers who encounter errors with their account. This includes investigating and resolving errors in a timely manner. If the financial institution cannot resolve an alleged error within a certain period of time, it would be required to temporarily credit the disputed amount to the consumer to use while the institution finishes its investigation.

Fraud and lost-card protection: The proposed rule would protect consumers against unauthorized, erroneous, or fraudulent withdrawals or purchases, including when registered prepaid cards are lost or stolen. If consumers lose their card or find erroneous or fraudulent charges, the rule would limit their responsibility for unauthorized transactions and create a timely method for the return of funds associated with such transactions. The consumer’s responsibility for unauthorized charges would be limited to $50 if the consumer promptly notifies their financial institution.

  • Prepaid Disclosures: The proposed rule also includes new “Know Before You Owe” proposed prepaid disclosures that would provide consumers with standard, easy-to-understand information. The proposed disclosures include two required forms, a Short Form and a Long Form. Prepaid issuers would be required to post their account agreements on their websites, and would be required to submit those agreements to the CFPB for posting on a public website.
  • Credit Protections: The proposed rule also includes protections in connection with credit products that allow consumers to spend more than they have deposited into the prepaid account. Under the proposed rule, if consumers choose to use a credit product related to their prepaid account, they would have the same protections that credit card consumers receive today. Further, the proposed rule includes some additional protections to ensure that the prepaid account and credit product are distinct. These include a thirty-day waiting period before a consumer with a prepaid card would be offered credit, and a “wall” between prepaid funds and credit repayment.
  • Pass-through Insurance: The proposed rule would require financial institutions to disclose a statement if a prepaid account is not set up to be eligible for pass-through deposit or share insurance. CUNA has supported clear disclosures regarding pass-through insurance, and has urged the agency to not require that all prepaid cards have pass-through insurance.


Regulatory Advocacy Report

The CUNA Regulatory Advocacy Report keeps you on top of the most important changes in Washington for credit unions--and what CUNA is doing to monitor, analyze, and influence government agencies and federal law. You can view the current report and past reports from the archive.

Compliance eNEWSLETTER

November 21, 2014
Vol. 8, Issue 45

Created in partnership with the

Credit Union National Association

Escrow Disclosures
As a part of the integrated mortgage requirements form the CFPB an Escrow Closing Disclosure must also be provided to members prior to their escrow account being closed. For a review of the disclosures and provision requirements please attend this CU Compliance Connection presentation.

Click here for the video.

November, 2014
  • November 27th, 2014: Thanksgiving Day - Federal Holiday
December, 2014 January, 2015


CUNA Enterprise Risk Management Certification Institute
December 8-11, 2014 • Las Vegas, NV

CUNA Webinars
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IT Examination Hot Spots and Examination Focus webinar 11-21-2014

Electronic Discovery in Litigation webinar 12-05-2014

IT Compliance and Enterprise Risk Management webinar 12-12-2014

Managing Credit Risk webinar (2014) 12-18-2014