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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.

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