The Board of Governors of the Federal Reserve System has proposed changes to Regulation D, which affects how banks manage reserve balances. They aim to simplify the process by removing separate rates for required and excess reserves and introducing a single rate called "interest on reserve balances." The proposed changes also include revising how interest is calculated on reserves and excess balance accounts. The Board is seeking public comments on these proposed amendments until March 9, 2021.
Simple Explanation
The government wants to change how banks earn interest when they keep money safely with the big bank in charge. They're making it simpler by having just one rule for paying interest instead of two, but they still need to figure out how this change will make everything fair and easy for all banks, big or small.