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Federal

reserve

Bank

DALLAS, TEXAS

of

Dallas

75222

C ir c u l a r No. 78-16
F e b r u a r y 9, 1978

PROPOSED AMENDMENT TO REGULATION Q
Automatic T r a n s f e r of F u n d s From an I n d iv id u a l's
S a v i n g s A ccount to th e D e p o sito r's C h e c k in g Account

TO ALL MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e B o ard of G o v e rn o rs of th e F e d e ra l R e s e r v e System h a s is s u e d for
comment a r e v i s e d p ro p o sa l to p e rm it th e autom atic t r a n s f e r of fu n d s from an in d i­
v i d u a l 's s a v in g s a c c o u n t to th e d e p o s i t o r 's c h e c k in g a c c o u n t to c o v e r c h e c k s d ra w n
b y th e d e p o s ito r o r to i n s u r e a minimum b a la n c e in th e d e p o s i t o r 's c h e c k in g
a c c o u n t.
T h e p r o p o s a l, w h ic h w ould am end Section 2 1 7 .5 (c ) of R egulation Q,
r e v i s e s a n e a r l i e r p ro p o sa l made in M arch of 1976 in two main r e s p e c t s . F i r s t ,
th e minimum fo r fe i tu re of i n t e r e s t w o uld b e th e am ount a c tu a lly e a r n e d d u r i n g th e
p r e v i o u s 30 d a y s on th e a m ount t r a n s f e r r e d . T h i s w ould in c lu d e i n t e r e s t a c c r u e d
b u t not y e t p a id o r c r e d ite d to an a c c o u n t. If no in t e r e s t h a d b e e n e a r n e d d u r i n g
th a t 30 d a y s , no in t e r e s t w o u ld b e fo rfe ite d . If th e fu n d s h ad b e e n on d e p o s it for
le ss th a n 30 d a y s , th e i n t e r e s t forfeited w ould b e no m ore th a n t h e am ount e a r n e d
d u r i n g th e time th e fu n d s w e re on d e p o s it .
S e c o n d , th e p ro p o s a l d o e s not r e q u i r e a minimum am ount fo r t r a n s f e r .
T h e e a r l i e r p ro p o s a l w ould h a v e p e rm itt e d t r a n s f e r s o n ly of $100 o r m ultiples
th e re o f.
T h e p r o p o s e d am en d m en t w o u ld allow s u c h t r a n s f e r s to b e made a v a i l ­
ab le only to in d iv id u a ls a n d not to b u s i n e s s e s o r g o v e r n m e n ts . F u r t h e r , d e p o s ito rs
c o u ld not b e r e q u i r e d to e n t e r into autom atic t r a n s f e r a g r e e m e n t s , n o r c o u ld s u c h
t r a n s f e r s b e made u n le s s p r e v i o u s l y a u th o r iz e d b y th e d e p o s it o r .
Comment on th e p r o p o s e d am en d m en t s h o u ld b e su b m itte d in w ritin g to
th e S e c r e t a r y , B oard of G o v e rn o rs of th e F e d e ra l R e s e r v e S y s te m , W ash in g to n ,
D .C . 20551 . All comments m u s t b e re c e iv e d b y M arch 20, 1978, a n d s h o u ld r e f e r to
Docket No. R-0027. In a d d itio n , th e B oard a n tic ip a te s d e f e r r i n g th e effective d ate
of th e p r o p o s e d a m en dm en t fo r 60 d a y s a f te r th e d a te of a d o p tio n . T h e B oard h a s
a ls o r e q u e s t e d comment as to w h e t h e r 60 d a y s is s u ffic ie n t tim e fo r m em ber b a n k s
to a d v e r t i s e th is new s e r v i c e a n d make o p e ra tio n a l a d ju s t m e n t s .

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-8 00 -492 -440 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus
the extension referred to above.

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

- 2 T h e com plete te x t of th e B o a r d 's p ro p o s a l is p r i n t e d on th e following
p a g e s . Q u e stio n s r e g a r d i n g t h e p ro p o s a l s h o u ld b e d i r e c t e d to M r. A llen L . R aik en ,
A sso c ia te G en era l C o u n s e l, Legal D iv isio n , B o ard of G o v e rn o rs of th e F e d e ra l Re­
s e r v e S y s te m , W as h in g to n , D .C . 20551, te le p h o n e (202) 452-3625. Q u estion s r e ­
g a r d i n g th is p ro p o s a l o r a n y o th e r a s p e c t o f R egulation Q may b e d i r e c te d to o u r
C o n su m e r A ffairs S e c tio n , Ext. 6171.
S in c e r e ly y o u r s ,
R o b e rt H. Boykin
F i r s t Vice P r e s i d e n t

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12 CFR P a r t 217
(REG. Q; DOCKET NO. R-0027)
INTEREST ON DEPOSITS
Automatic T r a n s f e r s of S a v in g s D eposits

AGENCY:

B oard of G o v e rn o rs of th e F e d e ra l R e s e r v e S y s t e m .

ACTION:

P ro p o s e d r u l e .

SUMMARY: T h i s p r o p o s e d r u l e w ould p e rm it m em b er b a n k s to a r r a n g e with t h e i r d e p o s ito rs
for th e autom atic t r a n s f e r of fu n d s from d e p o s i t o r s ' s a v in g s a c c o u n ts to t h e i r d e m a n d d e p o s it
(c h e c k in g ) a c c o u n ts to c o v e r c h e c k s d r a w n b y d e p o s ito r s o r to r e p le n is h d e p o s it o r s ' c h e c k ­
ing a c c o u n ts . S u c h t r a n s f e r s a r e now p r o h ib i te d b y B oard r e g u la t io n s . T h e p ro p o s e d t r a n s ­
fe r s e r v i c e r u l e is e n t i r e l y v o lu n ta r y ; m e m b e r b a n k s could not r e q u i r e d e p o s ito rs to a c c e p t
th e s e r v i c e , a n d autom atic t r a n s f e r s could not b e made u n le s s p r e v io u s ly a u th o riz e d b y th e
d e p o s it o r . T h e p r o p o s e d autom atic t r a n s f e r s e r v i c e w o u ld b e a v a ila b le o n ly to in d iv id u a ls
a n d not to b u s i n e s s o rg a n iz a t io n s o r g o v e rn m e n ta l u n i t s . Comments on the p ro p o s a l may be
s u b m itte d u n til M arch 20, 1978. T h e p r o p o s e d am e n d m en t is in te n d e d to in c r e a s e th e effi­
c ie n c y of th e F ed eral R e s e r v e 's c h e c k c le a r i n g o p e ra tio n s a n d p r o v id e d e p o s ito r s with a d d e d
c u s to m e r c o n v e n ie n c e .
DATE:

Comments m u st be re c e iv e d b y M arch 20, 1978.

ADDRESS: S e c r e t a r y , B oard of G o v e rn o rs of th e F e d e ra l R e s e r v e S y s te m , W ash in g to n , D .C .
20551. All m aterial s u b m itte d sh o u ld in c lu d e th e Docket N u m b er R-0027.
FOR FURTHER INFORMATION, CONTACT: Allen L. R a ik e n , A sso c ia te G eneral C o u n se l,
Legal D iv isio n , B oard of G o v e rn o rs of t h e F e d e ra l R e s e rv e S y s te m , W ash in g to n , D .C . 20551,
te le p h o n e (202) 452-3625.
SUPPLEMENTARY INFORMATION: In M arch 1976, th e B oard s o lic ite d comments on a p r o ­
p o s e d am en d m en t to R egulation Q to p e rm it m em ber b a n k s to p r o v id e t h e i r d e p o s ito rs w ith th e
autom atic t r a n s f e r of s a v in g s d e p o s its to c o v e r c h e c k s d r a w n b y d e p o s ito r s on t h e i r d em and
d e p o s it (c h e ck in g ) a c c o u n ts o r to r e p le n is h t h e i r d e m a n d d e p o s it a c c o u n ts (41 FR 12039) .
T h e F e d e ra l Deposit I n s u r a n c e C o rp o ra tio n p r o p o s e d a s im ila r a m en d m en t to its r e g u la tio n s
a p p lic a b le to F e d e ra lly i n s u r e d b a n k s th a t a r e not m e m b e rs of th e F e d e ra l R e s e r v e S y s te m .
On A p ril 29, 1976, t h e B oard is s u e d a cla rific a tio n of th e p ro p o sa l in d ic a tin g th a t
th e autom atic t r a n s f e r s e r v i c e w ould b e com pletely v o lu n ta r y a n d th a t d e p o s ito rs could not
b e r e q u i r e d to ob tain th e s e r v i c e (41 FR 18523) . S im ila rly , m em b er b a n k s w o u ld not be
a u th o r iz e d to t r a n s f e r a d e p o s i t o r 's f u n d s from a s a v in g s a c c o u n t u n l e s s th e d e p o s ito r vol­
u n t a r ily h ad e n t e r e d into a n a g re e m e n t p r e v io u s ly w ith th e b a n k s p ec ifica lly a u th o r iz in g
th e t r a n s f e r s e r v i c e . T h i s p r o v i s i o n , h o w e v e r , w o u ld not affect th e a b ility of a m ember

- 2 b a n k to u s e a d e p o s i t o r 's s a v in g s d e p o s it in satisfa c tio n of a d e b t w h e r e th e b a n k is
a u th o r iz e d to do so u n d e r local law.
T h e autom atic t r a n s f e r s e r v i c e is in te n d e d to i n c r e a s e th e efficiency of th e F e d e ra l
R e s e r v e 's c h e c k c le a rin g o p e ra tio n s b y r e d u c in g th e n u m b e r of r e t u r n items p r o c e s s e d b y
th e System a s w ell a s to p r o v i d e d e p o s it o r s w ith th e c o n v e n ie n c e of a d e p o s it t r a n s f e r s e r v i c e
th a t would b e a v a ila b le in a d d itio n to th e te le p h o n e a n d bill p a y m e n t t r a n s f e r s e r v i c e s that
m em b er b a n k s c u r r e n t l y a r e a u th o r iz e d to offer to d e p o s i t o r s . T h is s e r v i c e w o u ld p r o v id e
a n a lte r n a tiv e to e x is t in g p r o c e d u r e s w h e r e t h e r e a r e in su ffic ie n t fu n d s in d e p o s it o r s ' c h e c k ­
ing a c c o u n ts . G e n e ra lly , if a c u s t o m e r 's c h e c k is p r e s e n t e d to th e b a n k a n d t h e r e a r e in ­
su ffic ie n t f u n d s in th e c u s to m e r 's c h e c k in g a c c o u n t, th e c h e c k is r e t u r n e d to t h e p a y e e w ith
th e te rm "in s u ffic ie n t fu n d s " in d ic a te d on th e c h e c k . As a r e s u l t , t h e b a n k u s u a ll y c h a r g e s
a fee to th e c u sto m e r w h e n it is n e c e s s a r y to r e t u r n t h e s e c h e c k s . As an a lte r n a tiv e to r e ­
t u r n i n g c h e c k s , m any b a n k s c u r r e n t l y a d v a n c e fu n d s to c u sto m e rs in a c c o r d a n c e w ith o v e r ­
d r a f t loan a g r e e m e n ts . U n d e r s u c h o v e r d r a f t loan a g r e e m e n t s , d e p o s ito rs u s u a ll y in c u r
in te r e s t c h a r g e s on th e fu n d s a d v a n c e d .
T h e B oard is of th e view th a t th e costs i n c u r r e d b y c o n s u m e r s , b a n k s , m e r c h a n t s ,
o t h e r b u s i n e s s m e n , a n d th e F e d e ra l R e s e r v e S y s te m , b e c a u s e of th e e x is te n c e of r e t u r n
ite m s, c an b e r e d u c e d a s a r e s u l t of th e p ro p o s e d autom atic t r a n s f e r a m e n d m en t. B ec a u se
of th e sp ecial h a n d lin g p r o c e d u r e s r e q u i r e d to p r o c e s s c u sto m e r o v e r d r a f t s , many b anks
impose a s u b s ta n tia l c h a r g e to t h e i r c u sto m e rs for c h e c k s a n d d r a f ts th a t m ust b e r e t u r n e d
b e c a u s e of in su ffic ie n t fu n d s . T h e e x is t e n c e of r e t u r n items a lso h a s a s u b s ta n tia l effect
upon th e s p e e d a n d efficien cy of th e c h e c k c le a rin g o p e ra tio n s of th e F e d e ra l R e s e r v e S y s te m .
As a r e s u l t , th e F e d e ra l R e s e r v e System in c u r s a s u b s ta n tia l e x p e n s e in th e h a n d lin g of r e ­
t u r n e d c h e c k s a n d d r a f t s . T h e B o a r d 's p r o p o s e d am e n d m en t is in te n d e d to p e r m it an a l t e r ­
n a tiv e to th e e x is tin g p r a c tic e of r e t u r n i n g c h e c k s a n d d r a f ts d ra w n on in s u ffic ie n t fu n d s .
T h e B oard b e lie v e s th a t th e p ro p o s e d am en d m en t r e p r e s e n t s a re a s o n a b le accommodation th a t
may b e offered b y m em b er b a n k s to t h e i r d e p o s it o r s in o r d e r to r e d u c e th e likelihood th a t
d e p o s i t o r s ' c h e c k s will b e r e t u r n e d to th e p r e s e n t i n g p a r tie s b e c a u s e of in su ffic ie n t fu n d s in
d e p o s it o r s ' c h e c k in g a c c o u n ts . It is a n tic ip a te d th a t th e p r o p o s e d s e r v i c e would r e d u c e th e
n u m b e r of c h e c k s th a t a r e r e t u r n e d th r o u g h th e c h e c k clearing o p e ra tio n s of th e b a n k in g
s y ste m , t h e r e b y re s u ltin g in s u b s ta n tia l s a v in g s fo r all p a r t i e s c o n c e r n e d .
T h is p r o p o s e d am endm ent w ould not affect e x is tin g a r r a n g e m e n t s w h e r e b y a t h r i f t
in stitu tio n h a s a g r e e d w ith its c u sto m e r to t r a n s f e r fu n d s au tom atically o r o th e rw is e to th e
c u s to m e r 's d e m a n d d e p o s it a c c o u n t a t a com m ercial b a n k in a c c o rd a n c e w ith a p r e a u th o r iz e d
a g r e e m e n t. T r a n s f e r s of f u n d s from a t h r i f t in s titu tio n to a commercial b a n k w o u ld not be
s u b je c t to th e p r o p o s e d minimum i n t e r e s t p e n a lty fo r fe itu re p r o v is i o n .
In view of th e comments r e c e iv e d in r e s p o n s e to th e B o a r d 's p r e v io u s automatic
t r a n s f e r p r o p o s a l, t h e B o ard h a s modified th e p r o p o s e d am en d m en t a n d a g a in r e q u e s t s p u b ­
lic comment on th e p r o p o s e d autom atic t r a n s f e r s e r v i c e . U n d e r th e p r o p o s e d a m e n d m en t,
m em b er b a n k s could make t h e p r o p o s e d t r a n s f e r s e r v i c e a v a ila b le o n ly to in d i v i d u a l s , a n d
not to b u s i n e s s o r g a n iz a t io n s , g o v e rn m e n ta l u n i t s , o r o th e r o r g a n iz a t io n s .
T h e p r o p o s e d a m en d m en t re fle c ts two a d d ition al m odifications from th e p ro p o sa l
o r ig i n a ll y a n n o u n c e d b y th e B o a r d . T h e p ro p o s a l d o es not r e q u i r e a minimum denom ination

- 3 for f u n d s th a t may b e t r a n s f e r r e d p u r s u a n t to th is p ro p o s e d a m e n d m e n t. A s o r ig in a lly
p r o p o s e d , th e am en d m en t would h a v e r e q u i r e d t h a t t r a n s f e r s b e m ade in m u ltip les of no less
th a n $100. T h e B oard b e lie v e s th a t a minimum t r a n s f e r am ount r e q u ir e m e n t may u n d u ly
p e n a liz e d e p o s it o r s t h a t may i n c u r o v e r d r a f t s in a m o u n ts le ss th a n th e r e q u i r e d minimum d e ­
nomination r e s u l tin g in a t r a n s f e r from s a v in g s of m ore th a n th e am ount n e e d e d to c o v e r th e
c h e c k o r to r e p l e n i s h th e a c c o u n t. T h e B oard b e l i e v e s , t h e r e f o r e , t h a t it may b e in a p p r o ­
p r i a t e to e s ta b li s h a r e q u ir e m e n t th a t could r e s u l t in a t r a n s f e r of m ore th a n th e am ount
n e c e s s a r y to c o v e r th e c h e c k , e s p e c ia lly s in c e m em ber b a n k s w ould b e r e q u i r e d to im pose
a n in t e r e s t p e n a lty a s d e s c r i b e d b elo w . Nothing in th e p r o p o s a l, h o w e v e r , w o u ld p r o h ib i t
a m em ber b a n k from e s ta b lis h in g minimum t r a n s f e r am ounts if th e y so d e s i r e d in view of
in te rn a l b a n k o p eration al p r o c e d u r e s .
T h e sec o n d modification r e la te s to the minimum am ount of i n t e r e s t th a t m ust be
forfeited b y th e d e p o s ito r on f u n d s t r a n s f e r r e d . As o r ig in a lly p r o p o s e d , a d e p o s ito r would
h a v e b e e n r e q u i r e d to fo rfeit a minimum of 30 d a y s ' in t e r e s t on th e fu n d s t r a n s f e r r e d . De­
p o s i t o r s , t h e r e f o r e , w ould h a v e i n c u r r e d a n i n t e r e s t p e n a lty e v e n if no in t e r e s t a c tu a lly had
b e e n e a r n e d d u r i n g th e p r e v io u s 30 d a y s on th e fu n d s t r a n s f e r r e d . T h e B oard b e lie v e s it
is u n n e c e s s a r y to r e q u i r e a minimum i n t e r e s t p e n a lty th a t may r e s u l t in fo r fe itu re of an
a m ount th a t is more th a n th e am ount of i n t e r e s t a c tu a lly e a r n e d on t h e f u n d s t r a n s f e r r e d
d u r i n g th e p r e v io u s 3 0 -d ay p e r i o d . C o n s e q u e n tly , th e a m en d m en t p ro p o s e d b y th e B oard
w ould r e q u i r e a fo r fe itu re of in t e r e s t in an amount n o less th a n th e am ount of in te r e s t a c tu a lly
e a r n e d d u r i n g th e p r e v io u s 30 d a y s on th e fu n d s th a t a r e t r a n s f e r r e d from s a v in g s to c h e c k ­
in g . P u b lic comment also is r e q u e s t e d on w h e t h e r a n y i n t e r e s t fo r fe itu re s h o u ld b e r e q u i r e d .
I n t e r e s t a c tu a lly e a r n e d d u r i n g th e p r e v io u s 30 d a y s w ould in c lu d e i n t e r e s t th a t
h a s b e e n a c c r u e d b u t not y e t p a id ( c r e d ite d to th e a c c o u n t o r paid to th e d e p o s ito r o r o th e r
p a r ty ) as well a s in te r e s t th a t h ad b e e n p a id on th e fu n d s t r a n s f e r r e d .
Member b a n k s w ould c o n tin u e to b e r e q u i r e d to r e s e r v e th e r i g h t to impose a t
lea st a 3 0 -d a y notice p e rio d on in te n d e d w ith d r a w a ls of s a v in g s d e p o s its a s p r e s e n t l y r e ­
q u i r e d in § 2 1 7 .1(e) o f R egulation Q.
U n d e r th e te rm s of th e p r o p o s e d a m e n d m en t, if, in a c c o rd a n c e with th e b a n k 's
u s u a l m ethods of com puting i n t e r e s t , no in te r e s t h a s b e e n e a r n e d on th e f u n d s on d e p o s it
d u r i n g the p r e v io u s 3 0-day p e r i o d , no in te r e s t n e e d b e fo rfeited if fu n d s a r e t r a n s f e r r e d
autom atically to c o v e r c h e c k s . S im ila r ly , if th e f u n d s t r a n s f e r r e d h ad be en on d e p o s it fo r
less th a n 30 d a y s , on ly th e a m o u n t of in t e r e s t e a r n e d for th e p e rio d of tim e th e f u n d s had
b e e n on d e p o s it n e e d b e fo r fe ite d . It is r e c o g n iz e d th a t a p p lic atio n of th is fo r fe itu re r e q u i r e ­
ment may r e s u l t in fo r fe itu re of v a r y i n g am o u n ts of i n t e r e s t b a s e d on d iff e r e n c e s in b a n k
r u l e s r e g a r d i n g com puting a n d c a lc u la tin g i n t e r e s t . F o r e x a m p le , a b a n k 's u s e of th e la stin , f i r s t - o u t method in d e te rm in in g w h ic h d e p o s its a r e b e i n g t r a n s f e r r e d could a l t e r th e m ini­
mum p e n a lty am ount th a t m ust b e im p o sed . T h e following a r e e x a m p le s of how th e r e q u i r e d
p e n a lty p r o v is io n may b e a p p lie d :
Example 1.
B ank p a y s in te r e s t on s a v in g s d e p o s its a t an a n n u a l r a t e of 5 p e r c e n t from d a y of
d e p o s it to d a y of w it h d r a w a l. I n te r e s t is c r e d ite d q u a r t e r l y . D ep o sito r e s ta b li s h e s a new

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s a v in g s a c c o u n t a n d d e p o s its $500 on J a n u a r y 1. On F e b r u a r y 28, b a n k t r a n s f e r s $100 from
s a v i n g s to d e m a n d to c o v e r d e p o s i t o r 's o v e r d r a f t . T h e minimum i n t e r e s t f o r fe itu re r e q u i r e d
is $ .4 2 , w h ic h r e p r e s e n t s 30 d a y s ' i n te r e s t e a r n e d on th e f u n d s t r a n s f e r r e d .
Exam ple 2 .
Same fac ts a s Exam ple 1 e x c e p t b a n k t r a n s f e r s $100 on J a n u a r y 15 to c o v e r o v e r ­
d r a f t . Minimum fo r f e i tu r e r e q u i r e d is $ .2 1 , w h ic h r e p r e s e n t s 15 d a y s ' i n t e r e s t e a r n e d on
th e f u n d s t r a n s f e r r e d .
E xam ple 3 .
Same fac ts a s Example 1 e x c e p t b a n k com putes i n t e r e s t q u a r t e r l y , a n d no i n t e r e s t
is p a id on f u n d s w ith d r a w n p r i o r to th e e n d of a c a l e n d a r q u a r t e r . No i n t e r e s t f o r fe itu re is
r e q u i r e d s in c e u n d e r th e b a n k 's r u le s no i n t e r e s t w a s a c tu a lly e a r n e d d u r i n g th e p r e v io u s
30 d a y s on th e fu n d s t r a n s f e r r e d .
Example 4 .
B an k p a y s in t e r e s t a t an a n n u a l r a t e of 5 p e r c e n t from d a y of d e p o s it to d a y of
w ith d ra w a l a n d u s e s th e l a s t - i n , f i r s t - o u t method in c o m p u tin g i n t e r e s t . T h e d e p o s ito r d e ­
p o s its $500 into th e s a v i n g s a c c o u n t on J a n u a r y 1 a n d d e p o s its an a d d itio n al $100 on F e b r u ­
a r y 1. B an k t r a n s f e r s $200 from th e d e p o s i t o r 's s a v in g s a c c o u n t to h is c h e c k in g a c c o u n t to
c o v e r o v e r d r a f ts on F e b r u a r y 15. T h e minimum i n t e r e s t fo r fe itu re r e q u i r e d is $ .6 3 , w hich
is d e te rm in e d as follows: S in c e th e $100 d e p o s it of F e b r u a r y 1 h ad on ly b e e n on d e p o sit for
15 d a y s , th e d e p o s i t o r n e e d only fo rfeit a minimum of $ .2 1 , w h ic h r e p r e s e n t s th e actual
i n te r e s t e a r n e d on th e $100 d u r i n g th e 15-day p e r io d it re m a in e d on d e p o s it . T h e d e p o s ito r
is r e q u i r e d to fo rfeit a t least $.42 on th e re m a in in g $100 t h a t h a s b e e n t r a n s f e r r e d . T h is
a m ount r e p r e s e n t s 30 d a y s ' in te r e s t e a r n e d on th o s e fu n d s .
Example 5 .
Same facts a s Example 4. H o w e v e r, b a n k u s e s f i r s t - i n , f i r s t - o u t method in com­
p u tin g i n t e r e s t . U n d e r tho se c i r c u m s t a n c e s , th e d e p o s it o r is r e q u i r e d to forfeit minimum
i n te r e s t of $ .8 4 , w h ic h is co m p u ted a s follows: S in c e th e fu n d s t r a n s f e r r e d a r e deem ed to be
th o s e th a t w e r e d e p o site d f i r s t , th e d e p o s it o r a c tu a lly e a r n e d i n t e r e s t on th e $200 t r a n s f e r r e d
for th e e n t i r e 30 d a y s p r i o r to th e d a te of t r a n s f e r . C o n s e q u e n tly , th e d e p o s ito r is r e q u i r e d
to fo rfeit a minimum of $ .8 4 , w h ic h r e p r e s e n t s th e actu al i n te r e s t e a r n e d on th e fu n d s t r a n s ­
f e r r e d d u r i n g th e p r e v i o u s 30 -d a y p e r i o d .
Member b a n k s w ould b e r e q u i r e d to m aintain d ata on fund t r a n s f e r s via th e a u to ­
matic t r a n s f e r s e r v i c e in a m a n n e r th a t will facilitate d ata collection b y th e B o a rd .
To aid in th e c o n s id e ra tio n of th is m a tte r b y th e B o a r d , i n te r e s te d p e r s o n s a r e
in v ite d to s u b m it r e le v a n t d a t a , v ie w s , o r co m m en ts. A ny s u c h m aterial s h o u ld b e su b m itte d
in w ritin g to th e S e c r e t a r y , B oard of G o v e rn o rs of t h e F e d e ra l R e s e rv e S y ste m , W ash in g to n ,
D .C . 20551, to b e re c e iv e d b y March 20, 1978. All m aterial s u b m itte d sh o u ld in c lu d e th e
Docket N u m ber R-0027. S u c h m aterial will b e made a v a ila b le for insp ec tio n a n d co pying

- 5 up o n r e q u e s t e x c e p t a s p r o v id e d in sectio n 2 6 1 .6 (a ) of th e B o a r d 's R u les R e g a rd in g
A v a ila b ility of Information (12 CFR § 2 6 1 .6 ( a ) ) .
If, a f te r c o n s id e ra tio n of th e comments r e c e i v e d , th e B o ard a d o p ts th e p ro p o s e d
amendment, it is a n tic ip a te d th a t it would not become effective for a p e r io d of a t le a st 60
d a y s following a d o p tio n . P u b lic comment is r e q u e s t e d on w h e t h e r a 6 0 -d a y d e f e r r e d effec­
tiv e d a te is su ffic ie n t to p r o v id e m em ber b a n k s w ith time to im plem ent o p e ra tio n a l a n d
m a rk e tin g p r o c e d u r e s n e c e s s a r y to o ffer th e s e r v i c e to d e p o s it o r s .
P u r s u a n t to its a u th o r ity u n d e r §19 of th e F e d e ra l R e s e r v e Act (12 U . S . C . §§461,
3 7 1 b ), th e B oard of G o v e rn o rs p r o p o s e s to am end §2 1 7 .5(c) of R egulation Q (12 CFR 2 1 7 .5 (c ))
a s follows:
§217.5 — W ithdraw al of S a v in g s D eposits
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(c)

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M anner of p ay m e n t of s a v i n g s d e p o s i t s .
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(2)
***H ow ever, w ith d r a w a ls may b e p e rm itt e d b y a m em ber b a n k to b e made
autom atically from a s a v in g s d e p o sit t h a t c o n s is ts of fu n d s d e p o s ite d to t h e c r e d i t of a n d in
w h ic h th e e n t i r e beneficial i n t e r e s t is held b y one o r m ore i n d iv id u a ls th r o u g h p a y m e n t to
th e b a n k itself o r th r o u g h t r a n s f e r of c r e d i t to a d e m a n d o r o th e r d e p o s it a c c o u n t of th e
same d e p o s it o r p u r s u a n t to an a g re e m e n t b e tw e e n a m em ber b a n k a n d its d e p o s it o r th a t
a u th o r i z e s s u c h p ay m e n ts o r t r a n s f e r s in o r d e r to c o v e r c h e c k s o r d r a f ts d r a w n b y th e
d e p o s ito r u po n th e b a n k ; p r o v i d e d , th e d e p o s ito r s h a ll fo rfeit an am ount no less th a n th e
a m ount of in te r e s t a c tu a lly e a r n e d d u r i n g th e p r e v i o u s 30 d a y s on th e f u n d s w ith d ra w n a n d
t r a n s f e r r e d from a s a v in g s d e p o s it in th e m a n n e r d e s c r i b e d . In a c c o rd a n c e w ith § 2 1 7 .1(e) (2)
of th is P a r t , a m em ber b a n k m u st r e s e r v e th e r i g h t to r e q u i r e th e d e p o s ito r to g i v e notice in
w r iti n g of a n in te n d e d w ith d ra w a l not less th a n 30 d a y s b e fo re s u c h w ith d ra w a l is made a n d
may not r e q u i r e a d e p o s ito r to e n t e r into an a g re e m e n t p ro v id i n g fo r s u c h autom atic t r a n s f e r
o f s a v i n g s d e p o s it s .
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By o r d e r of t h e B oard of G o v e r n o r s , J a n u a r y 27, 1978.

(sig n ed ) T h e o d o re E. A llison
T h e o d o re E. A llison
S e c r e t a r y o f th e B oard
(SEAL)

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