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F ed er a l R eserve Ba nk o f D allas
DALLAS, TEXAS

75222

C i r c u l a r No. 75-58
May 1, 1975

NOW ACCOUNTS FOR GOVERNMENTAL UNITS

TO ALL MEMBER BANKS AND OTHERS CONCERNED
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:

T h e Board of G o v e rn o rs of the Federal R e s e r v e System has
am ended its Regulation Q, " In te re s t on D e p o s its ," to p ro h ib it member
b a n k s from is su in g NOW a c c o u n ts (c h e c k - lik e w ith d ra w a ls from i n t e r e s t b e a r i n g s a v in g s accou nts) to gov e rn m e n ta l u n its effective May 16, 1975.
Such acco unts e s ta b lis h e d p r i o r to May 16, 1975 may be main­
tained th r o u g h December 31, 1975.
A copy of the a m endm ent to Regulation Q and a copy of the
Federal R e g is te r docum ent a r e a ttach ed for y o u r information.
Sincerely y o u rs,
T . W. P la n t

F ir s t Vice P r e s id e n t

Attachments

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

INTEREST ON DEPOSITS

AMENDMENT TO REGULATION Q

1.
Effective M ay 16, 1975, § 217.1(e)(3) is
am ended to read as follows:
S E C T IO N 2 1 7 .1 — D E FIN IT IO N S .
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(e) Savings D eposits.
*

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(3)
In those states w here banks are per­
m itted to offer deposits subject to negotiable
orders of w ithdrawal, such deposits may be
m aintained if such deposits consist of funds

deposited to the credit of or in which the
entire beneficial interest is held by one or
m ore individuals, or of a corporation, associ­
ation, or other organization operated pri­
marily for religious, philanthropic, charitable,
educational, fraternal, or other similar pur­
poses, and not operated for profit. Any
deposit account subject to negotiable orders
of withdraw al established prior to M ay 16,
1975, which consists of funds deposited to
the credit of or in which the entire beneficial
interest is held by a governm ental unit not
qualifying herein may be m aintained through
D ecem ber 31, 1975.

TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
SUBCHAPTER A— BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[REG. Q]
PART 217— INTEREST ON DEPOSITS
NOW Accounts for Governmental Units

By notice published in the Federal Register of December 31,
1974 (39 Federal Register 45301), the Board of Governors proposed to
amend Regulation Q to prohibit member banks from accepting deposits
subject to negotiable order of withdrawal (NOW) from governmental units.
The Board has approved an amendment to Regulation Q to prohibit NOW
accounts of governmental units effective May 16, 1975.

In addition,

the Board has determined that NOW accounts established prior to May 16,
1975 by governmental units may be maintained through December 31, 1975.
The December 31, 1974 proposal reflected the Board’s consideration
of requests that it review its action of November 26, 1974, amending
Regulation Q to authorize member banks to accept governmental unit NOW
accounts.

That action was taken in conjunction with P.L. 93-495 which

provides Federal deposit insurance up to $100,000 for time and savings
deposits of governmental units.

The amendment, effective November 27,

1974, included deposits of governmental units in the definition of the
term savings deposits (39 Federal Register 43056) .

Because NOW accounts

are permitted to be offered on an experimental basis solely in Massachusetts

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and New Hampshire (P.L. 93-100) and are included in the definition of the
term savings deposits in Regulation Q, the Board’s amendment also had the
effect of authorizing governmental unit NOW accounts in those two States.
After review and consideration of all comments received and of
all relevant matter presented, pursuant to its authority under § 19 of
the Federal Reserve Act (12 U.S.C. 461) to define terms used in that
section, the Board has approved an amendment to Regulation Q to prohibit
NOW accounts of governmental units effective May 16, 1975.

However, govern­

mental units which, based on the character of their activities, have
traditionally been permitted to maintain savings deposits» will continue
to be permitted to maintain NOW accounts.
This action is taken in light of the potentially disruptive
economic effects that authorization at this time of governmental unit NOW
accounts could have upon deposit relationships between financial institutions
and State and local governments in Massachusetts and New Hampshire.

The

Board will continue to monitor NOW accounts in these States and may review
the permissibility of these accounts for governmental units at some future
date.

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