What does Regulation D (Part 204) specifically address?

Regulation D (Part 204) specifically addresses reserve requirements for depository institutions, which are the amounts that banks and similar deposit-taking entities must hold as reserves against deposits. These reserves can be held either in cash in the bank or as deposits with the Federal Reserve. The regulation aims to manage liquidity and ensure that institutions maintain enough assets to meet withdrawal demands, promoting the overall stability of the banking system.

By imposing reserve requirements, Regulation D helps to control the money supply in the economy and implement monetary policy. It is also critical for preventing bank runs, where a large number of customers withdraw their deposits simultaneously, potentially leading to bank failure.

The other choices relate to different aspects of financial regulation. Orderly Liquidation Authority deals with the process through which the government can liquidate failing financial firms; limitations on interbank liabilities focus on the amount of liabilities banks can owe each other; and credit risk retention pertains to rules that require entities to retain a portion of the credit risk they package and sell. None of these areas fall under the specific purview of Regulation D.