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federal reserve bank of

DALLAS. TEXAS

Dallas

75222

C ircular No. 82-144
N ovem ber 8, 1982

REGULATION Q
INTEREST ON DEPOSITS

TO ALL MEMBER BANKS
AND OTHERS CO N C E R N E D IN THE
ELEVENTH FED ERA L RESERVE DISTRICT:
T he B o ard o f G o v ern o rs o f th e F e d e r a l R e s e rv e S y stem has issued,
e f f e c tiv e S e p te m b e r 1, 1982, a m e n d m e n ts to R e g u la tio n Q in slip s h e e t form .
F or R e g u la tio n Q to be c o m p le te as am en d e d S e p te m b e r 1, 1982, r e ta in
in Volume II o f yo u r R e g u la tio n s B inder th e following:
- R e g u la tio n Q p a m p h le t d a te d M arch 1982 (see inside cover).
- T he en c lo se d slip sh e e ts .

A d d itio n al co p ies o f th is c irc u la r and th e en c lo su re w ill be fu rn ished
upon r e q u e s t to th e D e p a r tm e n t o f C o m m u n ic atio n s, F in an c ial and C o m m u nity
A ffa irs, E x te n sio n 6289.
S in ce re ly yours,

William H. W allace
F irs t Vice P re s id e n t

E n clo su re

Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (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

Amendments to Regulation Q
Interest on Deposits*
September 1982

/. Effective September 1,1982, section 217.1 is
amended by revising paragraph (b), by re­
moving paragraphs (c) and (d) and reserving
them, by removing footnotes 2 and 3 and
renumbering the remaining footnotes ac­
cordingly, and by revising paragraph (h). Ef­
fective August 23, 1982, section 217.1(f)(2)
is revised. The revised provisions read as
follows:

SECTION 217.1—Definitions
•

•

•

•

•

(b) (1) “Time deposit” means (i) a deposit
that tbe depositor does not have a right
to withdraw for a period of 14 days or
more after the date of deposit. "Time
deposit’* includes funds—
(A ) payable on a specified date not
less than 14 days after the date of
deposit;
(B) payable at the expiration of a
specified time not less than 14 days
after the date of deposit;
(C) payable upon written notice
which actually is required to be giv­
en by the depositor not less than 14
days before the date of repayment;1
or
(D ) such as “Christmas club" ac­
counts and “vacation club” ac­
counts, that are deposited under
written contracts providing that no
withdrawal shall be made until a
certain number of periodic deposits
have been made during a period of
not less than three months even
though some of the deposits may be

* For this regulation lo be complete, as amended effec­
tive September 1, 1982, retain—
* Regulation Q pamphlet dated March 1982 (>ee imide
cover) and
• th il ihp ih eet

made within 14 days from the end of
the period;
(ii) an “international banking facility
time deposit;” and
(iii) a deposit or account issued pur­
suant to 12 CFR 217.7(/) or 1204.121,
including those with an original matu­
rity or notice period of 7 to 13 days.
(2) A time deposit may be represented
by a transferable or nontransferable, cr a
negotiable or nonnegotiable, certificate,
instrument, passbook, statement or oth­
erwise. A time deposit evidenced by a
certificate or instrument is payable only
upon presentation of the certificate or in­
strument. A time deposit established in
statement, book-entry, or other form
must be evidenced by a written agree­
ment, and deposits must be confirmed by
issuance of a receipt or advice.
(c) [Reserved]
(d) [Reserved]

(0 * * *
(1)***
(2)
Evidences an indebtedness arising
from a transfer of direct obligations of, or
obligations that are fully guaranteed as to
principal and interest by, the United
States or any agency thereof that the
bank is obligated to repurchase;

(h) Obligations issued by the parent bank
holding company o f a member bank. (1)
For the purposes of this part, the “depos­
its” of a member bank also include an
obligation that is (i) issued in a denomi­
nation of less than $100,000; (ii) re­
quired to be registered with the Securities
and Exchange Commission under the Se-

1

Regulation Q

§217.1

that the contract will be renewed automati­
curities Act of 1933; (iii) issued or guar­
cally upon maturity, and indicating the
anteed in whole or in part as to principal
terms of such renewal, Provided, however,
or interest by the member bank’s parent
that a member bank may provide in any
which is a bank holding company under
time deposit contract that if the deposit, or
the Bank Holding Company Act of 1956,
any portion thereof, is withdrawn not more
as amended (12 USC 1841-1850), re­
than seven calendar days after a maturity
gardless of the use of the proceeds; and
(iv) issued with a stated maturity, notice
date (one business day for deposits autho­
rized by section 217.7(/)), interest will be
period or redemption period of less than
paid thereon at the originally specified con­
3£ years.
tract rate. • • •
(2 )(i) Effective April 1, 1983, this para­
graph is amended by striking the term
“3J years” wherever it appears and in­
serting in its place the term “2$ years”, 3. Effective September 1,1982, section 217.4 is
(ii) Effective April 1, 1984, this para­
amended by revising the first sentence in
graph is amended by striking the term
subparagraph (I)(iii) o f paragraph (d), by
“2$ years” wherever it appears and in­
revising subparagraphs (5) and (6) o f para­
serting in its place **1£ years”, (iii) Ef­
graph (d), and by revising paragraph (f) to
fective April 1, 1985, this paragraph is
read as follows:
amended by striking the term **1£
years” wherever it appears and insert­
SECTION 217.4— Payment ofTime
ing in its place “six months”, (iv) Ef­
Deposits Before Maturity
fective March 31. 1986, this paragraph
•
•
•
•
•
is amended by striking the term “six
months” wherever it appears and in­
(d) • • •
serting in its place “ 14 days”.
(I)***
(3) The term “deposits” does not in­
(iii) Except as provided in sections
clude those obligations of a bank holding
217.7(j) and 217.7(/), the following
company that are subject to interest rate
minimum early withdrawal penalty
limitations imposed pursuant to Public
shall apply to time deposit contracts
Law 89-597.
entered into, renewed, or extended on
•
•
•
•
•
or after June 2, 1980: • • •

•
2. Effective September 1, 1982, section 217.3 is
amended by revising the third sentence o f
paragraph (f) to read as follows:

SECTION 217.3— I t r s on Time
neet
and Savings Deposits
*

•

•

•

•

( 0 No interest after maturity or expiration
o f notice. * * * On each certificate, pass­
book, or other document representing a
time deposit, the bank shall have printed or
stamped a conspicuous statement indicating
that no interest will be paid on the deposit
after the maturity date or, in the case of a
time deposit that is automatically renew­
able, a conspicuous statement indicating

•

•

•

•

(5) Except for time deposits on which
no maximum interest rate limitation is
prescribed, any amendment of a time de­
posit contract that results in an increase
in the rate of interest paid or in a reduc­
tion in the maturity of the deposit consti­
tutes a payment of the time deposit be­
fore maturity.
(6) For purposes of computing the pen­
alty required to be imposed under this
paragraph, under a time deposit agree­
ment that provides that subsequent de­
posits reset the maturity of the entire ac­
count, each deposit maintained in the ac­
count for at least a period equal to the
original maturity of the deposit may be
regarded as having matured individually
and been redeposited at intervals equal to

Regulation Q
such period. Except as provided in sec­
tion 217.7(7) (4), when a time deposit is
payable only after notice, for funds on
deposit for at least the notice period, the
penalty for early withdrawal shall be im­
posed for at least the notice period.

(0 Loans upon security o f time deposits.
Except as provided in section 2I7.7(/)(3),
a member bank may make a loan to the
depositor upon the security of his time de­
posit provided that the rate of interest on
such loan shall be not less than 1 percent
per annum in excess of the rate of interest
on the time deposit.

4. Effective September 1,1982, section 217.6 is
amended by revising paragraph (i) to read as
follows:

SECTION 217.6—Advertising of
Interest on Deposits

§217.7
per annum payable by member banks of the
Federal Reserve System on time and sav­
ings deposits:
(a) Time deposits o f $100,000 or more and
IBF time deposits. Except for a time deposit
issued subject to all conditions of paragraph
(/) or 12 CFR 1204.121, there is no maxi­
mum rate of interest presently prescribed
on any time deposit of $100,000 or more
with a maturity of 14 days or more or on
IBF time deposits issued under section
217.1(7).
(b) Fixed-ceiling time deposits o f less than
$100,000. Except as provided in paragraphs
(a), (d), (e), (f), (g), (0 , (j), <k), and
(7), no member bank shall pay interest on
any time deposit at a rate in excess of the
applicable rate under the following
schedule:

Maturity

Maximum
percent

5
J

5. Effective September 1,1982, section 217.7 is
amended by revising paragraphs (a), (b),
(d), (e), (f), (g), and (h) and by adding new
paragraphs (j), (k), and (I). Section 217.7
now reads as follows:

SECTION 217.7—Supplement:
Maximum Rates of Interest Payable by
Member Banks on Time and Savings
Deposits
Pursuant to the provisions of section 19 of
the Federal Reserve Act and section 217.3
of this part, the Board of Governors of the
Federal Reserve System hereby prescribes
the following maximum rates1 of interest

*
§

8 years or more

(i) Any advertisement, announcement, or
solicitation relating to interest paid by a
member bank on a time deposit issued pur­
suant to section 217.7(f) or section
217.7(j) shall include a clear and conspicu­
ous notice that federal regulations prohibit
the compounding of interest during the
term of the deposit.

14 days or more but less
than 90 days
90 days or more but less
than 1 year
1 year or more but less
than 21 years
2{ years or more but less
tnu>4years
4 years or more but less
than 6 years
6 years or more but less
than 8 years

7
3

i
i
6

7
1
n

(c) Savings deposits. No member bank
shall pay interest at a rate in excess of 5£
percent on any savings deposit. No member
bank shall pay interest at a rate in excess of
5 i percent on any savings deposit that is
subject to negotiable orders of withdrawal,
the issuance of which is authorized by fed­
eral law.
(d) Governmental unit time deposits. Ex1 The limitation on rates of interest payable by member
banks of the Federal Reserve System on time and savings
deposits, as prescribed herein, are not applicable to any
deposit which is payable only at an office of ■ member bank
located outside the states of the United Stales and the Dis­
trict of Columbia

3

§217.7
cept as provided in paragraphs (a), (f).
(g). (j)> (^). and (/), and notwithstanding
paragraph (b), no member bank shall pay
interest on any time deposit which consists
of funds deposited to the credit of, or in
which the entire beneficial interest is held
by, the United States, any state of the Unit­
ed States, or any county, municipality or
politicial subdivision thereof, the District of
Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, American Samoa,
Guam, or political subdivision thereof, at a
rate in excess of 8 percent.2
(e) Individual retirement account and
Keogh (H.R. 10) plan deposits. Notwith­
standing paragraphs (a) and (g), a mem­
ber bank may pay interest at any rate as
agreed to by the depositor on any time de­
posit with a maturity of one and one-half
years or more, that consists of funds depos­
ited to the credit of, or in which the entire
beneficial interest is held by, an individual
pursuant to an individual retirement ac­
count agreement or Keogh (H.R. 10) plan
established pursuant to 26 USC (IRC
1954) 219, 401, 404, 408 and related provi­
sions. A member bank may permit addi­
tional deposits to be made to such a time
deposit at any time prior to its maturity
without extending the maturity of all or a
portion of the entire balance in the account.
(f) 26-week money market time deposits.
Except as provided in paragraph (a) and
notwithstanding paragraphs (b) and (d), a
member bank may pay interest on any non­
negotiable time deposit of $ 10,000 or more,
with a maturity of 26 weeks, at a rate not to
exceed the ceiling rates set forth below. The
ceiling rate shall be based on the higher of
either (1) the rate established and an­
nounced (auction average on a discount ba­
sis) for U.S. Treasury bills with maturities
of 26 weeks at the auction held immediately
prior to the date of deposit (“bill rate”), or
(2) the average of the four rates established
and announced (auction average on a dis­

Regulation Q
count basis) for U.S. Treasury bills with
maturities of 26 weeks at the four auctions
held immediately prior to the date of depos­
it (“four-week average bill rate”). Round­
ing any rate to the next higher rate is not
permitted and interest may not be com­
pounded during the term of this deposit.
Bill rate orfourweek average
bill rate
7.50 percent or
below
Above 7.50
percent

Interest rate ceiling
7.75 percent
One-quarter of one
percentage point plus the
higher of the bill rate or
four-week avenge bill
nte.

A member bank may offer this category of
time deposit to all depositors. However, a
member bank may pay interest on any non­
negotiable time deposit of $10,000 or more
with a maturity of 26 weeks which consists
of funds deposited to the credit of, or in
which the entire beneficial interest is held
by—
(1) the United States, any state of the
United States, or any county, municipali­
ty or political subdivision thereof, the
District of Columbia, the Common­
wealth of Puerto Rico;, the Virgin Is­
lands, American Samoa, Guam, or politi­
cal subdivision thereof; or
(2) an individual pursuant to an individ­
ual retirement account agreement or
Keogh (H.R. 10) plan established pursu­
ant to 26 USC (IRC 1954) 219,401,404,
408 and related provisions at a rate not to
exceed the ceiling rate payable on the
same category of deposit by any federally
insured savings and loan association or
mutual savings bank.3

1 The ceiling rate of interest payable for this category of
deposit by federally insured savings and loan associations
and mutual savings banks is 7.75 percent when the bill rate
or four-week avenge bill n te is 7.25 percent or lower, onehalf of 1 percent above the bill n ie or four-week average
bill n te when the bill n te or four-week avenge bill n te is
above 7.25 percent but below 8.50 percent, 9.00 percent
when the bUI n te or four-week avenge bill rate is 8.50
2 The ceiling rate on this category is the highest fixed percent or above but below 8.75 percent, and ooe-quaner of
1 percent above the bill n te or four-week avenge bill rate
ceiling n te that may be paid on time deposits under
when the bill n te or four-week avenge bill n te is 8.75
*100,000 by any federally insured commercial bank, mutu­
percent or above.
al savings bank, or savings and loan association.

4

§217.7

Regulation Q
(g) Time deposits with maturities o f 2j
years to less than
years. (1) Except as
provided in paragraphs (a) and (e) and
notwithstanding paragraphs (b) and
(d), a member bank may pay interest on
any nonnegotiable time deposit with an
original maturity of 2£ years to less than
3J years at a rate not to exceed the higher
of one-quarter of 1 percent below the av­
erage 2^-year yield for U.S. Treasury se­
curities as determined and announced by
the U.S. Department of the Treasury im­
mediately prior to the date of deposit, or
9.25 percent. Such announcement is
made by the U.S. Department of the
Treasury every two weeks. The average
2^-year yield will be rounded by the U.S.
Department of the Treasury to the near­
est S basis points. The rate paid on any
such deposit cannot exceed the ceiling
rate in effect on the date of deposit. A
member bank may offer this category of
time deposit to all depositors. However, a
member bank may pay interest on any
nonnegotiable time deposit with a matu­
rity of 2£ years to less than 3J years
which consists of funds deposited to the
credit of, or in which the entire beneficial
interest is held by the United States, any
state of the United States, or any county,
municipality or political subdivision
thereof, the District of Columbia, the
Commonwealth of Puerto Rico, the Vir­
gin Islands, American Samoa, Guam, or
political subdivision thereof at a rate not
to exceed the ceiling rate payable on the
same category of deposit by any federally
insured savings and loan association or
mutual savings bank.4
(2) Effective April 1, 1983, this para­
graph is amended by striking the term
“24 years to less than 3J years” wherever
it appears and inserting in its place “ 1J
years to less than 2£ years”, and by strik­
ing the term “average 2£-year yield”
wherever it appears and inserting in its
place “average l£-year yield."
(h) Obligations o f the parent bank holding
4 The ceiling rale of in ters! payable for this category of
deposit by federally insured savings and loan associations
and mutual savings banks is one-quarter of 1 percent above
the rate that may be paid by member banks.

company o f a member bank Interest may
be paid on a deposit as defined in section
217.1(h) at a rate not to exceed the maxi­
mum rate payable by a member bank on a
deposit of equal maturity and denomina­
tion. For purposes of this paragraph, the
maturity of an obligation of a parent bank
holding company is the lesser of the stated
maturity period, notice period, or redemp­
tion period.
(i) Tax-exempt savings certificate. (1) A
member bank may pay interest on a non­
negotiable tax-exempt savings certificate
(ASC) provided that the time deposit
has an original maturity of exactly one
year, is available in denominations of
$500 and any other denomination, at the
discretion of the member bank, and has
an annual investment yield to maturity
equal to 70 percent of the average invest­
ment yield for the most recent auction of
52-week U.S. Treasury bills prior to the
calendar week in which the ASC is
issued.5
(2) A member bank must provide each
depositor the following notice, in a form
that the depositor may retain at the time
of opening a deposit under this
paragraph:
s When institutions credit interest more frequently than
annually, the compulation of interest must be adjusted to
reflect the effects of compounding so that the annual invest­
ment yield to the depositor remains at the rate stipulated by
law. Specifically, the formula used to derive the nominal
interest rate at which interest can be credited is as follows:
I . [(1 - c/100 ) <***»] - 1
r - 100
where:

X

(365/d)

X

I

c -= the annual investment yield required to be
paid on the ASCs (in percent per annum)
D *= the avenge number of days in a com­
pounding period (363-day year)
I — the amount of interest earned during a
(365-day year) compounding period per
dollar in the account at the beginning of
the period
r

k

the corresponding nominal n te of interest
(36S-day basis, in percent per annum)

For institution! using continuous compounding, the nomi­
nal interest n te would be defined as: r » 100 [In (1 +
(e/1 0 0 ))], where “In" signifies the natural logarithm of
the expremon that follows it.

5

§217.7
The Economic Recovery Tax Act of 1981
authorizes a lifetime exclusion from gross in­
come for federal income tax purposes of up to
$1,000 ($2,000 in the case of a joint return)
for interest earned on tax-exempt savings cer­
tificates. Regardless of how much interest is
earned on this or any other tax-exempt savings
certificate, including interest earned on such
certificates from other institutions, and regard­
less of during which taxable years that interest
is earned, no more than a total of $1,000
($2,000 in the case of a joint return) can be
excluded from federal gross income for all tax­
able years. Furthermore, interest earned on a
specific certificate cannot be excluded from
federal gross income if (A) that certificate is
used as collateral for any loan, or (B) any part
of the principal of that certificate is redeemed
or disposed of prior to maturity.

(3 )(i) A member bank may not issue
ASCs after March 31, 1982, under this
paragraph unless an executive officer
of the member bank certifies, in a form
determined by the member bank, that
the member bank has complied with
the “qualified residential financing” re­
quirement set out in 26 USC 128. The
certification must be maintained by the
member bank in its files and must be
available to the member bank’s pri­
mary supervisory agency upon request.
The certification shall include appro­
priate supporting documentation, as
determined by the member bank.
(ii) A member bank issuing ASCs
during any calendar quarter must use
at least 75 percent of the lesser of—
(A ) the proceeds from ASCs issued
during a calendar quarter, or
(B) “qualified net savings,”
to provide “qualified residential financ­
ing” by the end of the subsequent cal­
endar quarter and may not issue addi­
tional ASCs until the 75 percent re­
quirement is satisfied.
(iii) For purposes of determining
compliance with the “qualified residen­
tial financing” requirement, the follow­
ing applies:
(A ) the term "qualified net sav­
ings” includes interest or dividends
credited to deposit accounts;
(B) the amount of “qualified resi­
dential financing” is to be deter­
mined net of repayment of principal

Regulation Q
and paydowns, but sales of such as­
sets may not be netted;
(C) the term “any loan for agricul­
tural purposes” is defined to have
the same meaning as items described
in the instructions to the Report of
Condition of all Insured Commer­
cial Banks, schedule A, item 4
“Loans to Finance Agricultural Pro­
duction and Other Loans to Farm­
ers,” and schedule A, item 1(b)
“Real Estate Loans Secured by
Farmland,” and
(D ) “qualified residential financ­
ing" includes a firm commitment to
purchase any assets eligible for such
investment.
(iv) If a member bank provides for
automatic renewal of an ASC, deposi­
tors must be notified in writing at least
15 days in advance of the maturity of
an ASC in the event the member bank
cannot renew the ASC because of its
failure to satisfy the residential financ­
ing requirement. Failure to give such
notice shall not result in automatic re­
newal of the ASC.
(v) This paragraph (i) expires Janu­
ary 1, 1983.
(j) 91-day time deposits. (1) Except as
provided in paragraph (a) and notwith­
standing paragraphs (b) and (d), a
member bank may pay interest on any
negotiable or nonnegotiable time deposit
of $7,500 or more, with a maturity of 91
days, at a rate not to exceed the ceiling
rates set forth below. Rounding any rate
upward is not permitted, and interest
may not be compounded during the term
of this deposit.
(2 )(i) Except as provided in subpara­
graphs (ii) and (iii) below, the ceiling
rate of interest payable by a member
bank shall be the rate established and
announced (auction average on a dis­
count basis) for U.S. Treasury bills
with maturities of 91 days at the auc­
tion held immediately prior to the date
of deposit ( “bill rate”) minus onequarter of 1 percentage point (25 basis
points).

Regulation Q
(ii) If the bill rate is 9 percent or be­
low at the four most recent auctions of
U.S. Treasury bills with maturities of
91 days held immediately prior to the
date of deposit, the ceiling rate of in­
terest payable by a member bank shall
be the bill rate.
(iii) Effective May 1, 1983, the ceiling
rate of interest payable by a member
bank on this category of deposit for de­
posits issued or renewed on or after
that date shall be the bill rate.
(3) Where all or any part of a time de­
posit issued under this paragraph is paid
before maturity, a depositor shall forfeit
an amount equal to at least all interest
earned on the amount withdrawn.
(k) Time deposits with original maturities
o f 3J years or more.
(1) Notwithstanding paragraphs (b)
and (d), a member bank may pay inter­
est at any rate as agreed to by the deposi­
tor on any time deposit with an original
maturity of 3J years or more that has no
minimum denomination but is made
available in a denomination of $500.
(2) Any time deposit with an original
maturity of 1J years or more issued pur­
suant to this paragraph may provide by
contract that additional deposits may be
made to the account for a period of one
year from the date that it is established
without extending the original maturity
date of the account. Deposits made to the
account more than one year after the
date that it is established shall extend the
maturity of the entire account for a peri­
od of time at least equal to the original
term o f the account.
(3) Any time deposit offered pursuant to
this paragraph may be issued in a nego­
tiable or nonnegotiable form.
(4 )(i) Effective April 1, 1983, this para­
graph is amended by striking the term
“3$ years” wherever it appears and in­
serting in its place the term “2£ years”.
(ii) Effective April 1, 1984, this para­
graph is amended by striking the term
“2J years” wherever it appears and in­
serting in its place “ 1J years”.
(iii) Effective April 1, 1985, this para­

§217.7
graph is amended by striking the term
"1$ years” wherever it appears in sub­
paragraph (1) and inserting in its
place “6 months”.
(/) 7- to 31-day time deposits o f S20,000 or
more. (1) Notwithstanding paragraphs (b)
and (d), a member bank may pay inter­
est on any nonnegotiable time deposit of
S20.000 or more, with a maturity or re­
quired notice period of not less than 7
days nor more than 31 days, at a rate not
to exceed the ceiling rates set forth be­
low. However, a member bank shall not
pay interest in excess of the ceiling rate
for regular savings deposits or accounts
on any day the balance in a time deposit
issued under this paragraph is less than
S20.000. Rounding any rate upward is
not permitted.
(2 )(i) For fixed-interest-rate, fixed-maturity time deposits issued under this
paragraph, the ceiling rate of interest
payable by a member bank shall be the
rate established and announced (auc­
tion average on a discount basis) for
U.S. Treasury bills with maturities of
91 days at the auction held immediate­
ly prior to the date of deposit or renew­
al ("bill rate”) minus one-quarter of 1
percentage point (25 basis points).
(ii) For variable-interest-rate, fixedmaturity time deposits and for all no­
tice accounts issued under this para­
graph, the ceiling rate of interest pay­
able by a member bank shall be the bill
rate in effect on the date of opening or
renewal of the account minus onequarter of 1 percentage point (25 basis
points). The interest rate on the ac­
count then may be adjusted to be not
in excess of the bill rate, minus 25 basis
points, established and announced at
the most recent subsequent auction
during the life of the deposit but not
less often than every 31 days.
(iii) Notwithstanding subparagraphs
(2 )(i) and 2(ii) of this paragraph, a
member bank may pay interest at a
rate not to exceed the bill rate on any
time deposit issued under this para­
graph which consists of funds deposit7

§ 2 1 7 .7

ed to the credit of, or in which the en­
tire beneficial interest is held by—
(A ) the United States, any state of
the United States, or any county,
municipality or political subdivision
thereof, the District of Columbia,
the Commonwealth of Puerto Rico,
the Virgin Islands, American Sa­
moa, Guam, or political subdivision
thereof; or
(B) an individual pursuant to an in­
dividual retirement account agree­
ment or Keogh (H.R. 10) plan es­
tablished pursuant to 26 USC (IRC
1954) 219,401,404,408 and related
provisions.
(iv) The ceiling rates in subpara­
graphs (2 )(i), (2 )(ii) and (2 )(iii) of
this paragraph shall not apply—
(A ) if the bill rate is 9 percent or
below at the four most recent auc­
tions of U.S. Treasury bills with ma­
turities of 91 days held prior to the
date of deposit or renewal. A mem­
ber bank may pay interest at any
rate as agreed to by the depositor on
this category of deposit for deposits
issued or renewed during such peri­
od; or
(B) effective May 1, 1983. A mem­
ber bank may pay interest at any
rate as agreed to by the depositor on
this category of deposit for deposits
issued or renewed on or after May 1,
1983.
(3) (i) A member bank is not permit­
ted—
(A ) to lend funds to a depositor
upon the security of a time deposit
that it has issued under this para­
graph, or
(B) to lend funds to a depositor to
meet or maintain the minimum de­
nomination requirement of a time
deposit issued under this paragraph.
(ii) The rate of interest and any other
charges imposed on an overdraft credit
arrangement to which withdrawals are
paid or to which payments upon matu­
rity or expiration of a required notice
period are made from an account is­
sued under this paragraph must be not

Regulation Q
less than those imposed on such over­
drafts for customers that do not pos­
sess an account issued under this para­
graph at the same institution.
(4 )(i) Where all or any part of a time
deposit issued under this paragraph is
paid before maturity or expiration of
the required notice period, a depositor
shall forfeit an amount at least equal to
the greater of—
(A ) all interest earned on the
amount withdrawn from the most
recent of the date of deposit, date of
maturity, or date on which notice
was given, or
(B) all interest that could have
been earned on the amount with­
drawn during a period equal to onehalf the maturity period or required
notice period.
(ii) Where all or any part of a time
deposit issued under this paragraph is
withdrawn within one business day af­
ter the maturity date of the deposit or
the date of expiration of notice of with­
drawal, no early withdrawal penalty is
required to be applied on the amount
withdrawn.
(5) Additional deposits to an account is­
sued under this paragraph with a fixed
maturity must be maintained in the ac­
count for a period at least equal to the
original term of the account and may be
regarded as having matured individually
and having been redeposited at intervals
equal to such period. For accounts issued
under this paragraph that are subject to a
notice period, additional deposits must
remain in the account for a period equal
to at least the notice period before such
funds may be withdrawn without the im­
position of an early withdrawal penalty.
(6) Deposits to any account issued un­
der this paragraph may not be made by
automatically transferring funds from an­
other account of the depositor at the
same institution where the transfer is ini­
tiated by the level of the balance in any
account.
(7 )(i) Withdrawals from any account
issued under this paragraph may not
be made (A ) by check, draft, or other

Regulation Q

§217.7

third party payment instrument or in­
struction drawn or issued by the de­
positor, or (B) by automatically trans­
ferring funds to another account of the
depositor where the transfer is initiated
by the level of balance in any account
held by the depositor.
(ii) Payments at maturity or with­
drawals may be paid by (A ) check or
cash to the depositor, (B) cash, draft,
or electronic transfer issued by the in­
stitution to a third party, or (C) trans­
fer to any other account held by the
depositor.
(iii) Notice of withdrawal of an ac­
count issued under this paragraph may
be delivered by the depositor to the in­
stitution by telephone or other tele­
communication, mail, messenger,
standing order, or by appearance in
person at the offices or premises of the
institution.

9