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F

ederal

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Ban

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OF DALLAS

Dallas, Texas, Decembei’ 12, 1961

INTERPRETATIONS OF SUPPLEMENT, EFFECTIVE JANUARY 1, 1962, TO REGULATION Q

To All Member Banks in the
Eleventh Federal Reserve District:
A number of inquiries have been received regarding interpretations of the Board’s action, announced
December 1, 1961, increasing the maximum permissible rates of interest that may be paid by member
banks on time and savings deposits effective January 1, 1962. The following comments are intended to
clarify questions that have been raised.
Although the maximum rate on savings deposits will depend upon the length of time that the deposit
has remained with the bank, the maximum rate on time deposits (certificates and time open accounts)
will continue, as heretofore, to be dependent upon the stated maturity of the certificate or the prescribed
period of notice of withdrawal and not upon the length of time the deposit has remained in the bank.
For example, the maximum permissible rate on a 6-months certificate of deposit would be 3% per cent,
even though, because of renewals, the deposit remains in the bank 12 months or more.
Time certificates issued prior to January 1, 1962, may be amended, if desired, to bear interest up
to the applicable increased maximum rates for the period subsequent to that date. Thus, a certificate
dated July 1, 1961, maturing July 1, 1962, may be amended to bear interest up to 4 per cent for the
period subsequent to January 1, 1962.
Any savings deposit that has remained on deposit continuously for 12 months or more prior to
January 1, 1962, may bear interest at any rate up to 4 per cent for the period following that date but
not for any period prior thereto. After any savings deposit, whether made before or after January 1,
1962, has remained continuously on deposit for 12 months, interest may be paid at any rate up to
4 per cent for the period subsequent to January 1, 1962. Where interest is paid at a rate of 31 per cent
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or less for a period subsequent to January 1, 1962, when the deposit has been in the bank for less than
12 months, but where the deposit continues in the bank for 12 months, the bank may then pay such
additional interest for the period subsequent to January 1, 1962, as will not cause the rate for such
period to exceed 4 per cent. For example, if $1000 is deposited March 1, 1962, and the bank thereafter
credits 31 per cent interest, and if that amount remains on deposit until March 1, 1963, the bank may
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then credit an additional Y of 1 per cent on that amount from March 1, 1962, so that interest for the
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12 months would be at the rate of 4 per cent.
In determining the maximum permissible rate on savings deposits, the portion of any such deposit
that has “ remained on deposit for not less than 12 months” is the minimum balance in the account at
any time during such period.
Your attention is called to the fact that the revision of the rates of interest does not preclude
member banks from paying less than the maximum interest by reason of lower rates or computation
procedures. It also should be borne in mind that State member banks, as well as national banks under
Section 24 of the Federal Reserve Act, may not pay interest on time or savings deposits at any rate in
excess of that authorized by or pursuant to State law for State chartered banks or trust companies.
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)


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