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LeoGlossary: Top of Penalty-Free Band

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The top of the penalty-free band is equal to the reserve balance requirement plus a dollar amount prescribed by the Board.

For a depository institution that maintains balances directly with the Federal Reserve, the dollar amount used to create the bottom of the penalty-free band is equal to the greater of $50,000 or 10 percent of the depository institution's reserve balance requirement.

For a pass-through correspondent, the dollar amount used to establish the bottom of the penalty-free band will be set as an amount that is equal to the greater of $50,000 or 10 percent of the aggregate reserve balance requirement of the correspondent and all of its respondents.

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