PURPOSE: The Monetary Control Act of 1980 (Title I of H.R. 4986) and corresponding regulations impose, for the first time, reserve requirements which must be met by state nonmember banks. Those reserve requirements ignore and, in many cases, conflict with the reserve provisions of Missouri state law. Those conflicts render computation of reserves by state nonmember banks unduly burdensome and, in many cases, these conflicts place state nonmember banks at a disadvantage with member banks as to the amount of reserves which must be kept. This inequality suggests the need for an alteration in the interpretation of state policy on reserves. It is believed that this rule provides the alteration needed and that this proposal is justified on a number of grounds. Reserve requirements imposed by state law are not designed for monetary purposes and, therefore, have been commonly considered to be held for liquidity purposes. However, to the degree that they are needed to pay incoming cash letters and other obligations and to compensate for correspondent services, the demand balances due from other banks are, in reality, the least liquid assets of a commercial bank. Furthermore, balances would be maintained at fairly constant levels even in the absence of reserve requirements. The Monetary Control Act of 1980 and Regulations A and D suggest that a bank’s shortterm liquidity needs are to be satisfied through the money markets, established borrowing sources and the Federal Reserve discount window. A reduction in the officially required level of reserves will not adversely affect the liquidity of any bank. In addition, the inequality between state and national banks deriving from the Monetary Control Act suggests the need for action on the part of the commissioner of finance and the State Banking Board under section 362.105.3, RSMo to eliminate the disadvantage accruing to state nonmember banks. Some equality in the area of reserves appears to have been the intention of the general assembly as evidenced by sections 362.215 and 362.217, RSMo. Indeed, under the latter section, the treatment accorded by this rule appears to have been mandated by the general assembly since, for reserve purposes, all state-chartered banks have been inducted into the Federal Reserve System. Finally, although no express language is contained in the Monetary Control Act of 1980, the conflicts between that Act and the Missouri reserve requirements suggest the possibility that the state reserve requirements have been legally preempted and are of no further effect.

1. (1) A bank or trust company may satisfy the requirements of sections 362.210 and 362.215, RSMo by maintaining that amount of reserves and in the form as it is directed to keep by the Federal Reserve Bank located in the district in which the bank or trust company is located. For purposes of this rule and section 362.225.2, RSMo, the Federal Reserve Banks located in this state are designated as approved depositories for all banks and trust companies.

AUTHORITY: sections 361.105, RSMo 1986 and 362.105.3, RSMo Supp. 1992.* This rule originally filed as 4 CSR 140-2.020. Emergency rule filed Sept. 26, 1980, effective Nov. 1, 1980, expired Feb. 28, 1981. Original rule filed Sept. 26, 1980, effective Feb. 28, 1981. Moved to 20 CSR 1140-2.020, effective Aug. 28, 2006. *Original authority: 361.105, RSMo 1967 and 362.105.3, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992.