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F E D E R AL R E S E R V E BANK OF N E W YORK C ircular No. 6517 A p ril 3, 1970 PRO PO SED AMENDMENT TO REGULATION D T ra n s fe rs from Time D e p o sits to C over C h eck s To A ll M em ber B a n k s, and O th e rs C on cern ed, in the S e c o n d F e d era l R e s e r v e D is tr ic t: P r i n t e d b e lo w i s a n e x c e r p t f r o m th e F e d e r a l R e g i s t e r o f A p r i l 1, c o n ta in in g th e t e x t o f a p r o p o s e d a m e n d m e n t to R e g u la tio n D t h a t i s d e s i g n e d to p r e v e n t th e u s e o f a s a v i n g s o r a n y o t h e r t i m e d e p o s i t in ta n d e m w ith a c h e c k in g a c c o u n t, p u r s u a n t to a n e x p r e s s o r i m p li e d a g r e e m e n t , s o a s to v i t i a t e th e e f f e c t o f th e d e m a n d d e p o s i t r e s e r v e r e q u i r e m e n t s u n d e r th e r e g u l a t i o n . C o m m e n ts on th e p r o p o s e d a m e n d m e n t s h o u ld b e s u b m i tt e d b y A p r il 27 a n d m a y b e s e n t to th e B o a r d o f G o v e r n o r s th r o u g h o u r B a n k E x a m in a tio n s D e p a r t m e n t . A d d itio n a l c o p i e s o f t h i s c i r c u l a r w ill b e f u r n i s h e d u p o n r e q u e s t . A lfre d H ay es, P re s id e n t. FEDERAL RESERVE SYSTEM [ 1 2 CFR Part 204 1 RESERVES OF MEMRER BANKS Transfers From Time Deposits to Cover Checks The Board of Governors is consider ing changing the present definition of “time deposits” in this pan, (Regulation D) to exclude from the scope o f th?t term any funds which are regularly uti lized by the depositary bark itself, pur suant to an express o r implied agree ment with the depositor, to cover checks drawn on the bank by fhe depositor. Deposits so utilized would be “demand deposits" for purposes of the r e s e r ’3 re quirements imposed by this part. The proposal being considered is to amend § 204.1 (b* to read as follows: § 204.1 * and “savings deposits”, as defined below, but shall not include any deposit repre senting funds which are regularly uti lized. by action of the depositary bank itself pursuant to an express or implied agreement with the depositor, to cover checks drawn on the bank by the depositor.1 * * * * * Recent evidence indicates that some member banks have accepted in their commercial departments noninterestbearing savings accounts from their own trust departments. Each day a transfer is made to the trust depart ment’s checking account to cover checks drawn that day by the trust department. The obvious purpose of this procedure is to avoid the higher demand deposit reserve requirements with respect to funds which in practical effect are sub ject to check. The intent of the amend D efinition s. * • * • 1 For example, funds deposited by the trust department of a bank in its own commercial (b) T im e d e p o s its .—The term “time department are not “tim e deposits” if regu deposits” means “time certificates of larly utilized to cover checks drawn by the deposit”, “time deposits, open account”. trust department. ment is to prevent the use of a savings or any other time deposit in tandem with a checking account, pursuant to an express or implied agreement, so as to vitiate the effect of the demand deposit reserve requirements in this part. To aid in the consideration of this matter by the Board, interested persons are invited to submit relevant data, views, or arguments. Any such material should be submitted in writing to the Secretary^ Board of Governors of the Federal Re serve System, Washington, D.C. 20551, to be received not later than April 27, 1970. Under the Board’s rules regard ing availability of information (12 CFR Part 261), such materials will be made available for inspection and copying upon request unless the person submit ting the material asks that it be considered confidential. By order of the Board of Governors, March 24, 1970. [ seal ] K en neth A. K e n y o n , D e p v ty S ecretary. IF.R. Doc. 70-3900; Filed, Mar. 31, 1970; 8:46 a.m.]
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