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federal R eserve Ba n k of Dallas DALLAS. TEXAS 75222 C ircu lar No. 77-138 December 8, 1977 REGULATION Q—INTEREST ON DEPOSITS Loans Upon Security of Depositor's Time and Savings Deposits TO ALL MEMBER BANKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors of the Federal Reserve System has lowered the minimum rate of interest that must be paid on a loan se cu red by a dep o sito r's time or savings deposit at a member bank. The Regulation Q rule for such loans has r e q u ire d that the interest rate on loans using as collateral a time deposit, or a savings deposit for which p rio r notice of withdrawal is re q u ire d , may not be less than 2 p ercen t above the rate being paid on the deposit. Effective November 23, 1977, Regulation Q has been amended to provide that the minimum rate such b o rro w e rs must pay is 1 p e rc e n t above the rate being paid on the deposit. A minimum borrowing rate is set on such loans to avoid the use of loans to in effect withdraw time deposits before maturity without in c u r rin g the penalty for early withdrawal (loss of 90 d ay s' interest and reduction of interest on the amount w ithdrawn to the passbook r a te —5 p ercen t at commercial b a n k s —for the period the amount was held in the time deposit) . The reduced minimum applies to future interest payments on outstanding loans, as well as to new loans. Printed on the r e v e rs e of this c ir c u la r is a copy of the amendment for insertion in your Regulations B inder. Any questions concerning Regulation Q may be directed to our Examination Department, Consumer Affairs Section, at Ext. 6169 or Ext. 6171. Additional copies of the amendment will be furn ish ed upon req uest to the S e c re ta ry 's Office, Ext. 6267. Sincerely y o u r s , Robert H . Boykin F irst Vice P resident Banks and others are encouraged to use the fo llo w in g incoming WATS numbers in contacting this Bank: 1-800-492-4403 (intrastate) and 1-800-527-4970 (interstate). For calls placed locally, please use 651 plus the extension referred to above. 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 AMENDMENTS TO REGULATION Qt 1. Effective N ovem ber 23, 1977, Section 217.4 (f) is am ended to read as follows: S E C T IO N 217.4— P A Y M E N T O F T IM E D E PO SIT S B E F O R E M A T U R IT Y * * * * * (f) Loans upon security of time deposits. A m em ber bank, may m ake a loan to the depositor upon the security of his time deposit provided that the rate of interest on such loan shall be not less than 1 percent per annum in excess of the rate o f interest on the time deposit. 2. Effective N ovem ber 23, 1977, Section 217.5 (b) is am ended to read as follows: S EC T IO N 217.5— W IT H D R A W A L O F S A V IN G S D EPO SITS * * * * * (b) Loans on security of savings deposits. *** If it is the practice of a member bank to require notice of withdrawal of a savings deposit, such bank may make loans to a depositor upon the security of such deposit, but the rate of interest on such loans shall be not less than 1 percent per annum in excess of the rate of interest paid on such deposit. * * * * * t For this Regulation to be complete as amended effective December 1, 1977, retain: 1) Printed Regulation pamphlet as amended December 4, 1975; 2) Amendments effective March 1, 1976, to Sections 217.1(e)(3), 217.5(c)(3), and 217.6(i); 3) Amendment effective July 26, 1976, to Section 217.1 ( f ) ( 3 ) ( i) ; 4) Supplement effective July 6, 1977; 5) Amendments effective December 1, 1977, to Section 217.4(d) and 4(d) (i); and 6) This slip sheet. 11-23-77
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