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FEDERAL RESERVE BANK OF DALLAS
DALLAS, TEXAS

November 9, 1960

INTERPRETATION RELATIVE TO ABSORPTION OF
EXCHANGE CHARGES AS PAYMENT OF
INTEREST ON DEPOSITS

To All Member Banks in the
Eleventh Federal Reserve District:
Reference is made to our letter of August 5, 1960, enclosing
an interpretation issued by the Board of Governors of the Federal
Reserve System on August 4, 1960, relating to the absorption of
exchange charges as payment of interest on deposits. In this con­
nection there is attached an interpretation issued by the Board
on November 8, 1960, which permits member banks to disregard
and absorb, as trivial, exchange charges in amounts aggregating
not more than $2.00 for any one depositor in any calendar month
or any regularly established period of thirty days. The interpre­
tation will be published in the Federal Reserve Bulletin and Fed­
eral Register.
You will note that a survey is being undertaken jointly by
the Board, the Comptroller of the Currency, and. the Federal De­
posit Insurance Corporation, to obtain additional information on
various aspects of the relation between exchange charges and the
payment of interest on deposits. As you will also note, the inter­
pretation is a tentative authorization, to be applicable only during
the study and until a final determination can be made. Member
banks will be expected to conform to the August 4, 1960, ruling
as modified by the enclosed interpretation.
Member banks are requested to insert this interpretation
under Regulation Q in their ring binders containing the Regula­
tions of the Board of Governors and the Bulletins of this bank.
Yours very truly,
Watrous H. Irons
President

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

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

PAYMENT OF INTEREST ON DEPOSITS — ABSORPTION
OF EXCHANGE CHARGES

In an interpretation of August 4, 1960, published at p. 858 of the
August 1960 Federal Reserve Bulletin, the Board expressed the opinion
that any absorption by member banks of exchange charges would consti­
tute the payment of interest on demand deposits, including an arrange­
ment whereby a member bank maintained a balance with another bank
in return for which such other bank directly or indirectly absorbed for it
exchange charges made by drawee banks.
The Board has been asked to reconsider the application of the inter­
pretation in certain situations said to involve relatively small amounts of
exchange charges and those where the cost of collection is said to exceed
the amount of the charges. The Board of Governors, the Comptroller of
the Currency, and the Federal Deposit Insurance Corporation have de­
cided to undertake a study to obtain additional information. In connection
therewith, a survey will be made of a number of institutions in each Fed­
eral Reserve District on a spot-check basis.
Further consideration will be given the subject in the light of the
findings of the survey. In the meantime, and as a tentative authorization,
to be applicable only during the pendency of the study and the reaching
of a final determination, member banks are authorized to absorb exchange
charges in amounts aggregating not more than $2 for any one depositor
in any calendar month or any regularly established period of 30 days.
Member banks, both State and national, will be expected to conform
to the August 4, 1960 interpretation as herein modified.

November 8, 1960

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