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R es er v e Ba n k o f D a lla s

DALLAS, TEXAS

75222
C i r c u l a r No. 75J u n e 16, 1975

American Revolution Bicentennial

PROPOSED AMENDMENTS TO REGULATIONS D AND Q

TO ALL MEMBER BANKS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e r e is qu o ted below th e te x t of a p r e s s re l e a s e is s u e d
T h u r s d a y , J u n e 5, 1975, by the Board of G o v e rn o rs of th e F ed eral Re­
s e r v e System a n n o u n c in g p ro p o s e d am endm ents to R egulations D a n d Q
w hich would a u th o riz e m em ber b a n k s to acc e p t s a v in g s d e p o sits from
c o r p o r a tio n s , p a r t n e r s h i p s , an d o th e r p rofitm aking o r g a n iz a tio n s .
T h e Board of G o v e rn o rs of the Federal R e s e rv e System to­
d a y a n n o u n c e d it is c o n s id e r i n g am e n d in g th e definition of
s a v in g s d e p o sits in its R egulations D and Q to p e rm it c o r ­
p o ra tio n s , p a r t n e r s h i p s , an d o th e r pro fitm ak in g o r g a n i z a ­
tions to maintain s a v in g s a cc o u n ts a t m em ber b a n k s .
Comment will be r e c e iv e d b y th e Board th r o u g h J u l y 25.
S a v in g s a cc o u n ts h a v e not p r e v io u s ly b e e n a v a ila b le , in
g e n e r a l , a t m em ber b a n k s to profitm ak in g b u s i n e s s o r g a n i ­
z atio n s. T h e p ro p o s e d re v is e d r u le s would limit s a v in g s
a cco u n ts for profitm aking b u s i n e s s e s to $100,000 for each
o rg a n iz a tio n at a m em ber b a n k .
T h e Board s u g g e s te d a d o lla r c eilin g on s u c h a cc o u n ts to
make them a ttr a c tiv e chiefly to small b u s i n e s s e s th a t do
not h a v e a c c e s s to th e money m a rk e ts for te m p o ra rily idle
funds.
T h e Board said it is c o n s id e r i n g a m en din g the p ro v i s io n s
of R egulation D ( r e s e r v e r e q u i r e m e n t s ) , a n d Regulation Q
( in te r e s t on d e p o sits) to e n a b le m em ber b a n k s to compete
more effectively with s a v in g s a n d loan a ss o c ia tio n s and
o th e r t h r i f t in s titu tio n s . T h e s e in s titu tio n s a r e p erm itted
to a c c e p t s a v in g s d e p o sit s from b u s i n e s s e s .

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

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In M assa c h u se tts a n d New H a m p sh ire, w h e r e the law p e rm its
financial in stitu tion s to offer d e p o sits s u b je c t to n e go tia b le
o r d e r s of w ith d ra w a l (NOWs—c h e c k - li k e u s e of in te re s t b e a r ­
ing d e p o s i t s ) , s u ch a cc o u n ts will co n tin u e to be a v a i la b le only
to in d iv id u a ls an d o th e r q u a lify in g o rg a n iz a t io n s . B u s in e s s e s
a r e not e lig ib le to e s ta b lis h NOW a cc o u n ts .
If th e p ro p o s e d am endm ents a r e a d o p te d , m em ber b a n k s would
be a s k e d to c la ss ify t h e i r b u s i n e s s s a v in g s a cc o u n t d e p o sits
as a s e p a r a te item for re p o r ti n g p u r p o s e s .
T h e p ro p o sal is p r in t e d on th e following p a g e s for y o u r informa­
tion.
S in c e re ly y o u r s ,
T . W. Plant
F ir s t Vice P r e s i d e n t

TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[REG. D] AND [REG. Q]
PART 204— RESERVES OF MEMBER BANKS
PART 217— INTEREST ON DEPOSITS
Definition of Savings Deposits

The Board of Governors has been asked to consider amendments
to Regulations D and Q to permit member banks to classify funds of
corporations, associations, and other organizations operated for profit
as savings deposits.
Recent correspondence received by the Board indicates that
continuation of a rigid ban on the ability of member banks to accept
savings deposits from business organizations may be having an adverse
effect upon the ability of member banks to compete with other financial
institutions for deposits of business enterprises since, at present,
savings and loan associations and other thrift institutions are per­
mitted to accept savings from businesses.

In addition, the Board

is aware that corporations with large amounts of idle funds are able
to realize a return on their temporarily idle funds by investment
in short-term money market instruments.

Smaller business organizations

do not ordinarily have such access to money markets and are, therefore,

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precluded from realizing any short-term return on their funds.

Based

on a review of the original basis for imposition of the corporate
deposit restriction and the current competitive environment, the Board
has determined that a modification of its long-standing policy may
be appropriate.
The Board believes that the proposed amendments would help
to restore the competitive balance between financial institutions
and would help to eliminate any adverse effects application of the
present definition may have upon smaller business organizations.
In order to confine the effects of the proposed amendments to small
enterprises with limited liquidity alternatives and to limit the concen­
tration of any volatile funds in savings deposits, the proposed amend­
ments include a restriction of $100,000 on the amount that a business
enterprise may maintain in savings form at a member bank.

The Board

is interested in receiving comments from the public concerning the
proposed $100,000 per depositor limitation and whether some other
limitation, if any, would be more appropriate.

If the proposed amendment

is adopted by the Board, it is expected that member banks would be
asked to maintain savings deposits established by business organizations
as a separate deposit classification for reporting purposes.
In those states where member banks are permitted by law
to offer deposits subject to negotiable orders of withdrawal (NOW’s),
such accounts will continue to be available only to individuals and
other qualifying organizations as provided for by 12 CFR 217.1(e)(3),
which would remain unaffected by the proposed amendments.

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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 Reserve System, Washington,
D.C. 20551, to be received not later than July 25, 1975.

Such material

will be made available for inspection and copying upon request except
as provided in § 261.6(a) of the Board*s Rules Regarding Availability
of Information (12 CFR 261.6(a)).
Accordingly, pursuant to its authority under § 19 of the
Federal Reserve Act (12 U.S.C. 461) to define the terms used in that
section, the Board proposes to amend § 204.1(e)(1) of Regulation D
(12 CFR 204.1(e)(1)) and § 217.1(e)(1) of Regulation Q (12 CFR 217.1(e)(1))
to read as follows:

§ 204.1— DEFINITIONS
*

(e)

Savings deposits.

*

*

*

*

*

The term "savings deposit" means a deposit—

(1) which consists of funds deposited to the credit
of one or more individuals, or of a corporation,
association, or other organization operated primarily
for religious, philanthropic, charitable, educational,
fraternal, or other similar purposes and not operated

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*

for profitj

y

or in which the entire beneficial interest

is held by one or more individuals or by such a cor­
poration, association or other organization; or which
consists of funds deposited to the credit of or in
which the entire beneficial interest is held by, the
United States, any State of the United States, or any
county, municipality, or political subdivision thereof,
the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, American Samoa, Guam, or
political subdivision thereof; or which consists of
funds deposited to the credit of, or in which any
beneficial interest is held by a corporation, association,
or other organization not qualifying above to the
extent such funds do not exceed $100,000 per such
4a/
depositor at a member bank;
and
(New language underlined)
*

*

*

*

fn. 4/ Deposits in joint accounts of two or more individuals may be
classified as savings deposits if they meet the other requirements
of the above definition. Deposits of a partnership operated for profit
may be so classified to the extent such deposits do not exceed $100,000
per partnership at a member bank.
fn. 4a/ Where a deposit is to the credit of the bank’s own trust
department and the funds involved are utilized to cover checks,
such deposit may not be classified as a savings deposit.

*

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§ 217.1— DEFINITIONS
*

(e)

Savings deposits.

*

*

*

*

The term "savings deposit" means a deposit

(1) which consists of funds deposited to the credit
of one or more individuals, or of a corporation,
association, or other organization operated primarily
for religious, philanthropic, charitable, educational,
fraternal, or other similar purposes and not operated
for profit;

4/

or in which the entire beneficial interest

is held by one or more individuals or by such a cor­
poration, association, or other organization; or which
consists of funds deposited to the credit of, or in
which the entire beneficial interest is held by, the
United States, any State of the United States, or any
county, municipality, or political subdivision thereof,
the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, American Samoa, Guam, or
political subdivision thereof; or which consists of
funds deposited to the credit of, or in which any
beneficial interest is held by a corporation,
association, or other organization not qualifying
above to the extent such funds do not exceed $100,000
per such depositor at a member bank; and
(New language underlined)
*

*

*

*

*

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fn. 4/ Deposits in joint accounts of two or more individuals may be
classified as savings deposits if they meet the other requirements of
the above definition. Deposits of a partnership operated for profit
may be so classified to the extent such deposits do not exceed $100,000
per partnership at a member bank.
By order of the Board of Governors, June 5, 1975.

(Signed) Theodore E. Allison

Theodore E. Allison
Secretary of the Board

[SEAL]


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102