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F

ederal

Re s e r v e Ba n k
DALLAS, TEXAS

of

Dallas

75222
C i r c u l a r No. 76-107
J u l y 30, 1976

A m e ric a n R e v o lu tio n B ic e n te n n ia l

INDIVIDUAL RETIREMENT ACCOUNTS
Notice Concerning Pending Rulemaking Proceeding

TO THE CHIEF EXECUTIVE OFFICER,
EACH BANK IN THE ELEVENTH
FEDERAL RESERVE DISTRICT:
Quoted below is the text of a statement issued Ju ly 23, 1976, by the
Board of G overnors of the Federal Reserve System:
The Board of Governors of the Federal R eserve System said
today it will give fu rth e r consideration early next y e a r to the q u e s ­
tion w hether commercial b anks should be perm itted to pay the same
ceiling rate of interest on Individual Retirement Accounts as thrift
institutions.
F u rth e r consideration of possible action to perm it member banks
to offer IRAs on a fully competitive b asis with th rift institutions will
be ap pro p riate in e a rly 1977 when C ongress is considering an exten­
sion of interest rate ceilings for financial institutions, the Board
ad ded.
T h ere is some evidence, as yet inconclusive, indicating that
member b an ks may be at a competitive disad vantag e in competing with
thrift institutions for IRA dep o sits, the Board sa id . Saving institu­
tions generally may pay rates of interest on such deposits one q u a rte r
of a p e rc e n t h ig h er than commercial b a n k s . T he Board will continue
to monitor the grow th of IRA accounts at all financial institutions.
The Board indicated that u n d e r the provisions of Public Law
94-200, p assed in December 1975, any action by the Board to eliminate
or reduce an interest rate differential for any category of deposit that
was in effect on December 10, 1975, would re q u ire approval by Cong­
re ss before it could become effective.
Individual Retirement Accounts a re retirem ent sav in gs deposits
that may be established u n d e r the Employee Retirement Income S e c u r ­
ity Act of 1974 by individuals not covered by an employer retirem ent
plan. Individuals may deposit up to $1,500 a y e a r , or 15 p ercen t of

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

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g r o s s income, w hich ev er is le s s, u n d e r special tax arrang em ents in
IRAs. Member bank s may pay up to 7i p ercen t in terest on such d e­
posits if they a r e made as four-year time deposits o r up to 7 i p ercen t
if they a re made as time deposits of six y e a r s or more. T h rift insti­
tutions may pay one q u a r t e r of one p ercen t more.
In J u n e 1975 the Board requ ested public comment on the question
w heth er th e re should continue to be a differential in interest rates
paid on IRAs by member bank s and thrift institutions. A s u rv e y
early this y e a r of IRA accounts at all F ed e ra lly -in s u re d commercial
b a n k s , sa ving s and loan associations, and mutual sav ing s banks
showed g en erally that thrift institutions held more IRA accounts than
commercial b a n k s .
A copy of the B oard's statem ent, as submitted for publication in the
FEDERAL REGISTER, will be fu rn ish ed upon requ est to the S e c r e ta ry 's Office of
this Bank (214) 651-6267.
Sincerely y o u r s ,
E rnest T . Baughman
P re sid e n t

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