To calculate required reserves for a U.S. depository institution, apply the three Regulation D ratios to the matching slices of net transaction accounts, add the three products together, and subtract eligible vault cash. What remains is the reserve balance requirement the institution must hold at its Federal Reserve Bank. Learning how to calculate required reserves still matters in 2026 even though every tier’s ratio has been zero percent since March 26, 2020: the Fed continues to index the thresholds annually, and the framework would reactivate the moment ratios move above zero.1Federal Register. Regulation D: Reserve Requirements of Depository Institutions
The Three Tiers and 2026 Thresholds
Regulation D, codified at 12 CFR Part 204, sorts net transaction accounts into three tiers, each with its own ratio. The dollar breakpoints between tiers adjust every year under Section 19(b) of the Federal Reserve Act, based on changes in aggregate transaction accounts across all depository institutions. For 2026 the breakpoints are:1Federal Register. Regulation D: Reserve Requirements of Depository Institutions
- Exemption tier: the first $39.2 million in net transaction accounts (up from $37.8 million in 2025). The ratio on this tier has always been zero.
- Low reserve tranche: amounts above $39.2 million up to $674.1 million (up from $645.8 million in 2025). Currently zero percent; was 3 percent before March 2020.
- Upper tier: amounts above $674.1 million. Currently zero percent; was 10 percent before March 2020.
Nonpersonal time deposits and eurocurrency liabilities also exist as regulated deposit categories, but both have carried a zero percent requirement since the early 1990s, so in practice only net transaction accounts drive the calculation.2eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
What Counts as Net Transaction Accounts
The whole calculation starts with one figure: total net transaction accounts. Under Regulation D, that category covers deposits a customer can access on demand or through check-writing, drafts, or automatic transfers. Specifically included are demand deposits, NOW accounts (negotiable order of withdrawal), ATS accounts (automatic transfer service), and share draft accounts at credit unions.2eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
Savings deposits are excluded as long as the institution complies with Regulation D’s transfer limitations. Time deposits are excluded entirely because they require at least seven days before withdrawal. Most institutions pull the figures they need from their Consolidated Reports of Condition and Income, known as Call Reports, which break down assets and liabilities as of a specific date.3Federal Deposit Insurance Corporation (FDIC). Current Quarter Call Report Forms, Instructions, and Related Materials This is where most compliance errors originate. Misclassifying a savings product as a transaction account, or missing a product that qualifies, throws off every number downstream.
Working the Formula
Once you have net transaction accounts, slice that total across the three tiers and multiply each slice by its ratio. Add the three products. That total is the required reserve before any offset for vault cash.
Here is the calculation for a hypothetical institution with $800 million in net transaction accounts, using the pre-2020 ratios (0 percent, 3 percent, and 10 percent) so the math produces real numbers:
- Exemption tier: $39.2 million × 0% = $0
- Low reserve tranche: $634.9 million (the amount from $39.2 million to $674.1 million) × 3% = $19,047,000
- Upper tier: $125.9 million (the amount above $674.1 million) × 10% = $12,590,000
- Total required reserve: $31,637,000
Under the current zero percent policy on all three tiers, the same institution’s required reserve works out to zero regardless of deposit volume. The tiered structure is still the live legal framework; the Fed can restore positive ratios without new rulemaking, so running the arithmetic with current thresholds is useful preparation.
Subtracting Vault Cash
The required reserve figure is not what the institution has to park at the Fed. From that total, subtract eligible vault cash: U.S. currency and coin the institution owns, books as an asset, and holds at locations where depositors can make withdrawals, including the institution’s own ATMs. Currency in transit to or from a Federal Reserve Bank also counts. Silver and gold coins whose collector or bullion value significantly exceeds face value do not.2eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
If eligible vault cash equals or exceeds the required reserve, the reserve balance requirement at the Fed is zero. If vault cash falls short, the gap must be held as a balance in the institution’s account at its district Federal Reserve Bank or with a pass-through correspondent.4Federal Reserve Board. Calculation of Reserve Balance Requirements That remainder is what the Fed calls the reserve balance requirement, and it is the number the maintenance period is measured against.
The requirement is satisfied on a daily average basis across a 14-day maintenance period, not a single-day snapshot. An institution can run below the figure on some days and above on others as long as the average over the full period meets the target.5eCFR. 12 CFR 204.5 – Maintenance of Required Reserves
Interest on the Balance You Hold
Every dollar an institution holds at the Fed earns interest, whether the balance is required or voluntary. The interest rate on reserve balances (IORB) was 3.65 percent as of December 11, 2025.6Federal Reserve Board. Interest on Reserve Balances It applies to all depository institutions that maintain balances at a Federal Reserve Bank, including commercial banks, savings institutions, and credit unions. Because the rate is competitive with other short-term options, many institutions voluntarily hold substantial balances at the Fed even with the required reserve sitting at zero.
What Happens If the Balance Falls Short
If positive reserve ratios return and an institution misses its reserve balance requirement, Regulation D assesses a deficiency charge at one percentage point above the primary credit rate in effect on the first day of the month when the deficiency occurred. The charge is applied to the daily average deficiency across the maintenance period.2eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
A small cushion softens the edge. The penalty-free band lets an institution fall short by the greater of 10 percent of its reserve balance requirement or $50,000 without incurring the deficiency charge. Only the amount below the band draws a penalty. Beyond the interest-based charge, the Board can impose civil money penalties under Section 19(l) of the Federal Reserve Act for Regulation D violations, though those are reserved for more serious or repeated noncompliance.
One boundary worth marking: the current zero percent ratio does not switch off the reporting obligation. Deposit data still has to be filed accurately and on time on Form FR 2900, because the Fed uses the data to build the monetary aggregates and to index the thresholds. Administrative consequences for late or inaccurate filings exist independently of the reserve ratio.