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Federal Reserve bank of Da l l a s DALLAS, TEXAS 7 5 2 2 2 Circular No. 69-152 June 23, 1969 AMENDMENTS TO REGULATION Q “PAYMENT OF INTEREST ON DEPOSITS” To All Member Banks in the Eleventh Federal Reserve District: Effective August 1, 1969, the Board of Governors of the Federal Reserve System has amended its Regulation Q to im plement the authority granted to the Board by Congress in the Act of Septem 21, 1968 (P.L. 90-505). The ber action adopts regulations governing the advertising of interest paid on deposits in m ber banks of the Federal Reserve System. em A copy of the am endments is enclosed together with a copy of the press release of June 17, 1969. M ber banks are requested to insert the amend em ments in the ring binder containing the Regulations of the Board of Governors and the Bulletins of this Bank. Yours very truly, P. E. Coldwell President Enclosures (2) This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) PAYMENT OF INTEREST ON DEPOSITS AMENDMENTS TO REGULATION Q ( 1 2 CFR P A R T 2 1 7 ) IS S U E D BY T H E BO ARD O F G O V ER N O R S O F T H E F E D E R A L R E S E R V E SY ST E M Advertising of Interest on Deposits Effective August 1, 1969, Part 217 (Regulation Q) is amended in the following respects: a. The heading of the Part is am ended to read as follows: PART 217 —INTEREST ON DEPOSITS b. The last two sentences of section 217.6 are revoked and the rem ainder of that section redesignated as section 217.7. c. The heading of section 217.3 and subsections (a) and (e) thereof are amended to read as follows : SECTION 217.3 —INTEREST ON TIME AND SAVINGS DEPOSITS. (a) Maximum rate. Except as provided in this section, no member bank shall, directly or indirectly, by any device whatsoever, pay interest on any time or savings deposit at a rate in excess of such applicable maximum rate as the Board of Governors of the Federal Reserve System shall prescribe from time to time in section 217.7. In ascertaining the rate of interest paid, the effects of compounding of interest m be disregarded. ay * * * (e) Technical grace periods in computing interest on certain time deposits. W here a time deposit m atures in 30 days, 90 days, 180 days, 360 days, or even multiples of these periods, or where a time deposit matures in one month, three months, six m onths, twelve m onths, or even multiples of these periods, m ber banks m pay interest for such periods at one twelfth em ay of the maximum rate, one quarter of the maximum rate, one half of the maximum rate, or at the maximum rate, or even multiples thereof, respectively. In the case of any other time deposit no m ember bank shall pay interest at the maximum rate based on m days than the num of days the funds ore ber are actually on deposit. d. In section 217.3(g) the reference to “section 217.6” is amended to refer to “section 217.7”. e. A new section 217.6 is added to read as follows: (OVER) SECTION 217.6 —ADVERTISING OF INTEREST ON DEPOSITS. Every advertisement, announcem or solicitation relating to the inter ent, est paid on deposits in m ember banks shall be governed by the following rules : (a Annual rate of simple interest. Interest rates shall be stated in ) term of the annual rate of sim interest. In no case shall a rate be advertised s ple that is in excess of the applicable maximum rate for the particular deposit. (b Percentage yields based on one year. Where a percentage yield ) achieved by compounding interest during one year is advertised, the annual rate of simple interest shall be stated with equal prominence, together with a reference to the basis of compounding. No m ber bank shall advertise a em percentage yield based on the effect of grace periods permitted in section 217.3. (c) Percentage yields based on periods in excess of one year. No advertisement shall include any indication of a total percentage yield, com pounded or simple, based on a period in excess of a year, or an average annual percentage yield achieved by compounding during a period in excess of a year. ( d) Time or amount requirements. If an advertised rate is payable only on deposits that meet tim or amount requirem e ents, such requirements shall be clearly and conspicuously stated. W here the time requirem for ent an advertised rate is in excess of a year, the required num of years for ber the rate to apply shall be stated with equal prom inence, together with an indication of any lower rate or rates that will apply if the deposit is withdrawn at an earlier m aturity. (e) Profit. The term “profit” shall not be used in referring to interest paid on deposits. (f) Accuracy of Advertising. No member bank shall make any adver tisement, announcem or solicitation relating to the interest paid on deposits ent, that is inaccurate or misleading or that misrepresents its deposit contracts. (g) Solicitation of deposits for banks. Any person or organization that solicits deposits for a m ber bank shall be bound by the rules contained em in this section with respect to any advertisement, announcement, or solicitation relating to such deposits. No such person or organization shall advertise a percentage yield on any deposit it solicits for a m ber bank that is not em authorized to be paid and advertised by such bank. f. Sections 217.104 and 217.145 are revoked. FEDERAL RESERVE release p r e s s For immediate release. June 17, 1969. T he Board of Governors of the Federal Reserve S y s t e m today adopted re gulations deposits gove rning the a d v e r t i s i n g of interest paid on in m e m b e r banks of the Federal R e serve System. w h i c h w i l l b e c o m e effecti ve A u g u s t The action, 1, amends Federal Res erve Re gula t i o n Q, "Payment of Interest on Dep osi t s , " and implements the au thority granted to the Boar d by Congress in the A c t of S e p t e m b e r 21, 1968 (P.L. Sim ilar regulations are b e i n g issued by the Federal D e pos it 90-505). Insurance C o r p o r a t i o n a nd by the Federal Home L o a n B a n k Board w i t h respect to institutions under their jurisdictions. The re gula t i o n sets out rules go verning b a n k a d vertisi ng of interest rates and yields on deposits. by the B o a r d on M a r c h 28, guidelines set 1969. It was first issued for comment The new rules supersede advertisin g forth in a 1966 statement of policy. U n d e r the r e g u l a tion, any State m e m b e r bank or national b a n k that advertises a percentage yield on deposits b a s e d o n one year is required to include a n equally prominent Btatement of the simple interest rate, to gether w i t h a r e f e r ence to the method of compounding. based on periods A d v e r t i s i n g of percenta ge yields in excess of one year, w h i c h w o u l d have b e e n perm issible in c e r tain circumstances under the re gulation as publishe d for comment, is prohibit ed by the r e g u l a t i o n as adopted, in the interests of greater clarity. A copy of the new regulations is attached.