Full text of District Notices (Federal Reserve Bank of Dallas) : Revised Regulation Q, Circular No. 79-34

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F ederal

reserve

Ba n k

DALLAS. TEXAS

of

Dallas

75222
C irc u la r No. 79-34
M arch 1, 1979

REVISED REGULATION Q
In te re st on Deposits

TO A L L MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE D IS T R IC T :
Th e Board of G overnors of the Federal Reserve System has
re p rin te d its Regulation Q — In te re st on Deposits— in corporating amend­
ments issued through December 6, 1978.
Enclosed is a copy of the revised Regulation Q . Member banks
and others that m aintain Regulations B inders should file the enclosed
pam phlet in th e ir b in d e rs . T h e corresponding pam phlet, as amended
effective December 4, 1975, and subsequent amendments should be re ­
moved and d estro yed . Please retain the Supplem ent to Regulation Q ,
effective June 1, 1978, as it does not app ear in the re p rin te d pam phlet.
A ny questions concerning Regulation Q should be d irected to the Con­
sumer A ffa irs Section of our Bank Supervisio n and Regulations D e p art­
m ent, E x t. 6171 o r 6269.
A dditional copies of the re p rin te d pam phlet w ill be fu rn ish ed
upon request to the S e c re ta ry 's O ffice of this B ank, E x t. 6267.
S in c e re ly y o u rs ,
Robert H . Boykin
F irs t V ic e President
Enclosure

Banks and others are encouraged to use the follow ing incoming W A T S numbers in contacting this Bank:
1-8 0 0 -4 9 2 -4 4 0 3 (intrastate) and 1 -8 0 0 -5 2 7 -4 9 7 0 (interstate). F or calls placed locally, please use 651 plus
the extention 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

I N T E R E S T O N D E P O S IT S

REGULATION Q

(12 CFR 217)
As amended effective December 6, 1978

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Bank of the Federal Reserve District in which the inquiry arises.
DECEMBER 1978

CONTENTS

Page

Page
Se c . 217.0— S c o p e

Part

of

.......................

3

Sec. 217.4— P a y m e n t o f T im e D e p o s its
B e f o r e M a t u r i t y ........................................

S e c . 217.1— D

................................

3

d e p o s it s ...........................

3

e f i n i t io n s

date
(a )

Dem and

(b )

Tim e

................................

3

(c )

Tim e certificates o f d e p o s it .............

deposits

3

( d ) Tim e deposits, open account . . . .

3

(e )

Savings d e p o s its ................................

4

(f)

Deposits as including certain
.......................

4

(g )

M ultiple maturity time deposit . . . .

5

promissory

notes

S e c . 217.2— D e m a n d D

5

(a )

Interest p r o h ib ite d ............................

5

(b )

M eaning o f in t e r e s t .......................

5

S e c . 217.3— I n t e r e s t
S a v in g s D

e p o s it s

on

T im e

M axim u m

rate

(b )

Modification

of

................................
contracts to con­

fo r m to r e g u la t io n .........................
(c )

5

M em ber banks limited to maximum
rate fo r State b a n k s ...................

(d )

(c )

Tim e deposits payable after a spe­
cified n o t ic e ..................................

7

(d )

Penalty fo r early w ith d ra w a ls .........

7

................................

of

early

7

withdrawal

p e n a lt y ..........................................
(f)
S ec.

Loans upon security of time deposits

217.5— W i t h d r a w a l

p osits

of

Savin gs

D e­

(a )

Requirements

regarding

notice

(b )

Loans on security o f savings deposits

(c )

M anner
deposits

of

payment

8
8

saving

........................................

217.6— A d v e r t is in g

D e p o s its

of

8

of

w it h d r a w a l....................................

Sec.

8
8

.............................................................

5
5

7

Tim e deposits payable after a spe­
cified period

and

........................................

(a )

..............................................

(b )

( e ) Disclosure

...................

e p o s it s

7

( a ) Tim e deposits payable on a specified

of

In te re s t

8

on

.......................................................

9

( a ) A nnual rate o f simple interest . . . .

9

( b ) Percentage yields based on one year

9

6

(c )

Percentage yields based on periods
in excess o f one y e a r ...................

9

on savings d e p o s it s .....................

6

(d )

Tim e or amount requirements . . . .

9

6

G race periods in computing interest

(e )

Computation o f in te r e s t .................

(f)

No

(g )

Tim e

interest after maturity o r ex­

piration o f n o t i c e .......................
deposits

of

foreign

6

govern­

mental entities and international
organizations ................................

[S e c . 21 7.7 — S u p p le m e n t ,

M a x im u m

6

(e )

Penalty fo r early withdrawals . . . .

(f)

Profit

................................................

10

9

(g )

A ccu racy o f a d v e rtis in g .................

10

(h )

Solicitation o f deposits fo r banks . .

10

(i)

Negotiable orders o f withdrawal . . .

10

S t a t u t o r y A p p e n d i x ......................................

11

R a t e s o f I n t e r e s t P a y a b le b y M e m b e r B a n k s o n T im e

an d S a v in g s D e p o s its , is p rin ted separately.]

REGULATION Q
(12 CFR 217)
A s amended effective December 6, 1978

IN T E R E S T O N D E P O S IT S *

S E C T I O N 217.0— S C O P E O F P A R T
( a ) This Part is issued under authority o f pro­
visions o f section 19 o f the Federal Reserve A ct
which, together with related provisions o f law,
This Part relates to the payment o f de­

posits and interest thereon by mem ber banks o f
the Federal Reserve System and not to the com ­
putation and maintenance o f the reserves which
m em ber banks are required to maintain against
deposits. T h e rules concerning reserves o f member
banks are contained in Part 204 o f this chapter.
(c )

O n a certain date, specified in the instru­

deposit, or
(2 )

A t the expiration o f a certain specified

time not less than 30 days after the date o f the

are cited in the Appendix.
(b )

(1 )

ment, not less than 30 days after date o f the

The provisions o f this Part do not apply

to any deposit which is payable only at an office
o f a m em ber bank located outside o f the States o f
the U nited States and the District o f Colum bia.

instrument, or
(3 )

U p o n notice in writing which is actually

required to be given not less than 30 days before
the date o f repayment,1 and
(4 )

In all cases only upon presentation and

surrender o f the instrument.
(d)

Time

deposits,

open account. T he

term

“ time deposit, open account” means a deposit,
other than a “ time certificate o f deposit” , with
respect to which there is in force a written con­
tract with the depositor that neither the whole
nor any part o f such deposit may be withdrawn,

S E C T IO N 217.1— D E F I N I T I O N S
(a ) Demand deposits. The term “any deposit
which is payable on dem and”, hereinafter referred

by check or otherwise, prior to the date o f matu­
rity, which shall be not less than 30 days after
the date o f the deposit,2 or prior to the expira­

to as a “ demand deposit” , includes every deposit
which is not a “time deposit” or “savings deposit” ,
as defined in this section.
(b ) Time deposits. The term “ time deposits”
means “time certificates o f deposit” and “time
deposits, open account”, as defined in this section.
(c) Time certificates of deposit. The term “ time
certificate o f deposit” means a deposit evidenced
by

a

negotiable

or

non-negotiable

instrument

which provides on its face that the amount o f
such deposit is payable to bearer or to any speci­
fied person or to his order:

*
The text corresponds to the Code o f Federal Regula­
tions, Title 12, Chapter II, Part 217; cited as 12 C F R 217.
The words “ this Part” , as used herein, mean Regulation Q.
1A deposit with respect to which the bank merely re­
serves the right to require notice o f not less than 30 days,
before any withdrawal is made is not a “ time certificate
o f deposit" within the meaning o f the above definition.
3 Deposits, such as Christmas club accounts and vaca­
tion club accounts, which are made under written con­
tracts providing that no withdrawal shall be made until a
certain number o f periodic deposits have been made
during a period o f not less than 3 months constitute “ time
deposits, open account", even though some o f the deposits
are made within 30 days from the end o f the period.

REGULATION Q

§ 217.1

tion o f the period o f notice which must be given

primarily fo r religious, philanthropic, charitable,

b y the depositor in writing not less than 30 days

educational, fraternal, or other similar purposes

in advance o f withdrawal.3

and not operated fo r profit. Deposits in which

Savings deposits. T h e

(e)

term

“savings

de­ any

posit” means a deposit—
(1 ) That

consists

interest

is

held

by

a

corpo­

deposited to the

tion operated fo r profit or not operated primarily

credit o f or in which the entire beneficial interest

fo r religious, philanthropic, charitable, educational,

is held

fraternal, or other similar purposes m ay not be

by

one

corporation,
operated

or

of

beneficial

ration, partnership, association o r other organiza­

more

association,

primarily

funds

fo r

individuals,
or

other

religious,

or

of

a

organization
philanthropic,

charitable, educational, fraternal, or other similar

classified as deposits subject to negotiable orders
o f withdrawal.

purposes and not operated for profit; 4 o r that

(f)
Deposits as including certain promissory
notes and other obligations. F o r the purposes o f

consists o f funds deposited to the credit o f or

this Part, the term “deposits” also includes any

in which the entire beneficial interest is held by

member bank’s liability on any promissory note,

the United States, any State o f the United States,

acknowledgment o f advance, due bill, or similar

or

any

county,

municipality,

or

political

sub­

division thereof,

the District o f Colum bia,

Com m onwealth

of

Islands,

Am erican

subdivision
deposited

Samoa,

thereof;
to

the

Puerto
or

credit

Rico,
G uam ,

the
or

that consists
of,

or

in

the

Virgin
political

of

funds

which

any

obligation (written or o ra l) that is issued or un­
dertaken by

a

member bank

principally

as

a

means o f obtaining funds to be used in its banking
business, except any such obligation that:
( 1 ) Is issued to (o r undertaken with respect
to) and held fo r the account o f ( i ) a bank or an

beneficial interest is held by a corporation, asso­

institution the time deposits o f which are exempt

ciation,

from § 217.7 Pursuant to § 217.3(g), or (ii) the

or

other

organization

not

qualifying

above to the extent such funds do not exceed

United

$150,000 per such depositor at a mem ber bank;

Governm ent Developm ent Bank fo r Puerto Rico;

and

States

or

an

agency

thereof,

or

the

(2 ) Evidences an indebtedness arising from a

( 2 ) W ith respect to which the depositor is not

transfer o f direct obligations of, or obligations

required by the deposit contract but m ay at any

that are fully guaranteed as to principal and in­

time be required by the bank to give notice in

terest by, the United States or any agency thereof

writing o f an intended withdrawal not less than

that the bank is obligated to repurchase;

30 days before such withdrawal is m a d e 5 and
which is not payable on a specified date or at the
expiration o f a specified time after the date o f
deposit.
(3 )

In those States where banks are permitted

to offer deposits subject to negotiable orders of

(3 )

(i)

Bears on its face, in bold-face type

the following:

“This obligation is not a deposit and is not
insured by the Federal Deposit Insurance Cor*
poration”;

withdrawal, such deposits m ay be maintained if

is subordinated to the claims o f depositors, is un­

such deposits consist o f funds deposited to the

secured, and is ineligible as collateral fo r a loan

credit o f or in which the entire beneficial interest

by the issuing bank and also expressly states said

is held by one or more individuals, or a corpo­

provisions on its face; has an original maturity o f

ration, association, or other organization operated

at least seven years, or, in the case o f an obliga­
tion or issue that provides fo r any type o f sched­

• A deposit with respect to which the bank merely re­
serves the right to require notice o f not less than 30 days
before any withdrawal is made is not a “ time deposit,
open account” , within the meaning o f the above definition.
* Deposits in joint accounts o f two or more individuals
may be classified as savings deposits if they meet the
other requirements o f the above definition. Deposits o f a
partnership operated fo r profit may also be classified as
savings to the extent such deposits do not exceed $150,000
per partnership at a member bank.
* The exercise by the bank o f its rights to require such
notice shall not cause the deposit to cease to be a savings
deposit.

uled

repayments

of

principal,

has

an

average

m aturity' o f at least seven y e a rs ' and provides
that once any such repayment o f principal be­
gins,

all

scheduled

repayments

shall

be

made

at least annually and the amount repaid in each
•T h e “ average maturity” o f an obligation or issue re­
payable in scheduled periodic payments shall be the
weighted average o f the maturities o f all such scheduled
repayments.
1 In a serial issue the member bank may offer no note
with maturity o f less than five years.

REGULATION Q

§§ 217.1-217.2— 217.3

year is no less than in the prior year; is issued

This paragraph shall not, however, affect ( i ) any

subject to a requirement that no repayment (other

instrument issued before June 27, 1966, or (ii )

than a regularly scheduled repayment already ap­

any instrument that evidences

proved by the appropriate Federal bank regula­

arising from a transfer o f assets under repurchase

tory agency), including but not limited to a pay­

agreement issued before July 25, 1969.

ment pursuant to acceleration o f maturity, may
be made without the prior written approval o f the

an

indebtedness

Multiple maturity time deposit. The term

(g)

“multiple maturity time deposit” means any time

appropriate Federal bank regulatory agency; 8 is in

deposit

an amount o f at least $500, Except, That the ap­

option o n

(1 )

propriate Federal bank regulatory

that is payable

at the depositor’s

more than one date, whether on a

agency m ay

specified date or at the expiration o f a specified

approve the issuance o f an obligation that is less

time after the date o f deposit (e.g., a deposit pay­

than $500 if such lesser amount is necessary ( a )

able at the option o f the depositor either three

to satisfy the preemptive rights o f shareholders in

months or six months after the date o f deposit),

the case o f a convertible debt obligation, (b ) to

(2 )

maintain a ratable unit offering to holders o f pre­

drawal, or ( 3 ) with respect to which the under­

emptive rights in the case o f an obligation issued

lying instrument or contract or any inform al un­

exclusively as part o f a unit including shares o f

derstanding or agreement provides fo r automatic

stock which are subject to such preemptive rights,

renewal at maturity.

or (c )

that is payable after written notice o f with­

to satisfy shareholders’ ratable claims in

the case o f an obligation issued wholly or partially

S E C T I O N 217.2— D E M A N D D E P O S IT S

in exchange fo r shares o f voting stock or assets
pursuant to a plan o f merger, consolidation, re­

(a) Interest prohibited. Except as provided by

organization, or other transaction where the issuer

section 19 o f the Federal Reserve Act, no member

will acquire either a majority o f such shares o f

bank o f the Federal Reserve System shall, directly

voting stock or all or substantially all o f the assets

or indirectly, by any device whatsoever, pay any

o f the entity whose assets are being acquired; and

interest on any demand deposit.

has been approved by the appropriate Federal
bank regulatory agency as

an addition to the

(b ) Meaning of interest. W ithin this Part, any
payment to or fo r the account o f any depositor

capital structure o f the issuing bank; or ( i ) meets

as compensation fo r the use o f funds constituting

all o f the requirements in the preceding clause

a deposit shall be considered interest.

except the maturity requirement or the require­
ment

that

scheduled

repayments

shall

be

in

amounts at least equal to those made in a previous
year; and with respect to which the appropriate

S E C T IO N 217.3— I N T E R E S T O N T I M E
A N D S A V I N G S D E P O S IT S

Federal bank regulatory agency has determined
that exigent circumstances require the issuance
o f such obligations without regard to the provi­
sions o f this Part; o r (ii) was issued o r publicly
offered before June 30, 1970, with an original

Arises from a borrowing by a member bank

from a dealer in securities, fo r one business day,
o f proceeds o f a transfer o f deposit credit in a
Federal

Reserve

Bank

(o r

other

directly, by any device whatsoever, pay interest
on any time or savings deposit at a rate in excess
o f such applicable m aximum rate as the Board o f

maturity o f more than two years; or
(4)

(a ) Maximum rate. Except as provided in this
section, no member bank shall, directly or in­

immediately

available fu n d s), commonly referred to as “F ed ­
eral funds” , received by such dealer on the date
o f the loan in connection with clearance o f securi­
ties transactions.
’ For the purposes o f this Part, the “ appropriate Fed­
eral bank regulatory agency” is the Comptroller o f the
Currency in the case o f a national bank and the Board
o f Governors in the case o f a State member bank.

Governors o f the Federal Reserve System shall
prescribe from time to time in § 217.7. In as­
certaining the rate o f interest paid, the effects
o f compounding o f interest may be disregarded.
(b ) Modification of contracts to conform to
regulation. N o certificate o f deposit or other con­
tract shall be renewed or extended unless it be
modified to conform to the provisions o f this Part,
and every member bank shall take such action
as may be necessary, as soon as possible con­
sistently with its contractual obligations, to bring
all o f its outstanding certificates o f deposit or

REGULATION Q

§ 217.3

other contracts into conformity with the provi­

deposit will thereafter again be subject to the

sions o f this Part.

contract or requirements applicable to such de­

(c) Member banks limited to maximum rate for

State banks. T he rate o f interest paid by a member

posit,

the deposit

will

again constitute a time

deposit or savings deposit, as the case may be,

bank upon a time deposit or savings deposit shall

after the date upon which such advice is received

not in any case exceed ( 1 ) the applicable m axi­

by the bank. O n each certificate, passbook, or

mum rate prescribed pursuant to the provisions

other document representing a time deposit, the

o f paragraph (a) o f this section, or (2) the appli­

bank shall have printed or stamped a conspicuous

cable maximum rate authorized by law to be paid

statement indicating that no interest will be paid

upon such deposits b y State banks or trust com ­

on the deposit after the maturity date or, in the

panies organized under the laws o f the State in

case o f a time deposit that is automatically re­

which such mem ber bank is located, whichever

newable, a conspicuous statement indicating that

may be less.

the contract will be renewed automatically upon

(d) Grace periods in computing interest on sav­

ings deposits. A member bank may pay interest
on a savings deposit received during the first 10
calendar

days

of

any

calendar month

at the

applicable maximum rate prescribed pursuant to

maturity,

and

indicating

the

terms

of

such

renewal.

Time deposits of foreign governmental en­

(g)

tities

and

international

organizations.

Section

217.7 does not apply to the rate o f interest that

paragraph ( a ) o f this section calculated from the

may be paid by a member bank on a time deposit

first day o f such calendar month until such de­

having a maturity o f 2 years or less and repre­
funds

deposited

and

owned

by

(1 )

a

posit is withdrawn or ceases to constitute a savings

senting

deposit under the provisions o f this Part, which­

foreign national government, or an agency o r in­

ever shall first occur; and a mem ber bank may

strumentality thereof 9 engaged principally in ac­

pay interest on a savings deposit withdrawn dur­

tivities

ing its last 3 business days o f any calendar month

United States by governmental entities, ( 2 )

ending a regular quarterly or semiannual interest

international entity o f which the United States is a

period at the applicable maximum rate prescribed

member, or ( 3 ) any other foreign, international,

pursuant to paragraph

or supranational entity specifically designated by

(a )

o f this section cal­

culated to the end o f such calendar month.

which

are

ordinarily

perform ed

in the
an

the Board as exempt from § 217.7. A ll certificates

(e) Computation of interest. In the computation

of deposit issued by mem ber banks to such enti­

o f simple daily interest, the time factor should be

ties on which the contract rate o f interest exceeds

expressed as a fraction in which the actual number

the maximum prescribed under § 217.7 shall p ro­

o f days the funds earn interest is the numerator,

vide that ( 1 ) in the event o f transfer, the date o f

and the denominator is either 360, 365, or, in a

transfer, attested to in writing by the transferor,

leap year, 366. H owever, when a deposit matures

shall appear on the certificate, and ( 2 ) the maxi­

in one month (o r multiples th ereof), the bank

mum rate limitations o f § 217.7 in effect at the

m ay use 30 days in the numerator

date o f issuance o f the certificate shall apply to

(o r corre­

sponding multiples th ereof).
(f) N o interest after maturity or expiration of
notice. A fte r the date o f maturity o f any time
deposit, such deposit is a demand deposit, and
no interest m ay be paid on such deposit for any

the certificate fo r any period during which it is
held by a person other than an entity exempt
therefrom under the foregoing sentence.10 U p o n
the presentment o f such a certificate for payment,
the bank may pay the holder the contract rate

period subsequent to such date. A fte r the expira­
tion o f the period o f notice given with respect
to the repayment o f any time deposit or savings
deposit, such deposit is a demand deposit and no
interest m ay

be paid on such deposit fo r any

period subsequent to the expiration o f such notice,
except that, if the owner o f such deposit advise
the bank in writing that the deposit will not be
withdrawn pursuant to such notice or that the

9 Other than States, provinces, municipalities or other
regional or local governmental units, or agencies or in­
strumentalities thereof.
' “ A new certificate not maturing prior to the maturity
date o f the original certificate may be issued by the mem­
ber bank to the transferee, in which event the original
must be retained by the bank. The new certificate may not
provide fo r interest after the date o f transfer at a rate in
excess o f the applicable maximum rate authorized by
§ 217.7 as o f the date o f issuance o f the original certifi­
cate.

REGULATION Q

§§ 217.3-217.4

o f interest on the deposit for the time that the

maturity o f the deposit constitutes a payment o f

certificate was actually owned by an entity so
exempt.

the time deposit before maturity. Provided fur­
ther,

That

Investment

Certificates

issued

in

negotiable form by a mem ber bank pursuant to
S E C T I O N 217.4— P A Y M E N T O F T I M E

subpart 3 o f § 217.7(b) m ay not be paid before

D E P O S IT S B E F O R E M A T U R I T Y

maturity. This provision does not prevent a mem­
ber bank from arranging the sale or purchase o f

(a) Tim e deposits payable on a specified date.
No

member bank

shall pay any time deposit,

such a certificate
prospective

on behalf o f the holder or

purchaser

( d ) o f this section.

not prevent a mem ber bank from arranging the
after

a

specified

mem ber

issued

not be paid before maturity. This provision does

payable

A

certificate

which is payable on a specified date, before such

deposits

subpart.

a

specified date, except as provided in paragraph
(b ) Tim e

that

of

under

bank

may

sale or purchase o f such a certificate on behalf o f

time

the holder or prospective purchaser o f a certificate

deposit, which is payable at the expiration o f a

issued under that subpart. A m em ber bank may

certain

period.

No

member bank

shall

pay

any

specified

not, however, repurchase such certificates fo r its

period has expired, except as provided in para­

ow n account. Provided further, That a time de­

graph ( d ) o f this section.

posit may be paid before maturity without a re­

specified

(c) Tim e
notice.

No

period,

before

deposits

payable

member

bank

such

after

shall

a

pay

specified
any

time

duction o r forfeiture o f interest as prescribed by
this paragraph in the following circumstances:

deposit, with respect to which notice is required

(1 ) W h ere a member bank pays all or a portion

to be given a certain specified period before any

o f a time deposit upon the death o f any ow ner o f

withdrawal is made, until such required notice

the time deposit fu n d s ;llR

has been given and the specified period thereafter

(2) W h ere a member bank pays all o r a por­

has expired, except as provided in paragraph ( d )

tion o f a time deposit representing funds con­

o f this section.

tributed to an Individual Retirement Account or
a

a K eogh (H .R . 10) plan established pursuant to

time deposit, or any portion thereof, is paid be­

26 U .S .C . (I.R .C . 1954) § § 401, 408 when the

(d ) Penalty

fo r

early

withdrawals.

W h ere

fo re maturity, a mem ber bank may pay interest

individual

on the amount withdrawn at a rate not to exceed

maintained attains age 59Vi

fo r

whose

benefit

the

account

is

that currently prescribed in § 217.7 fo r a savings

defined in 26 U .S .C . (I.R .C . 1954) § 72 (m )(7 ) or

deposit: Provided, That the depositor shall forfeit

thereafter; or

or is disabled (as

three months o f interest payable at such rate If,

(3) W h ere a member bank pays that portion of

however, the amount withdrawn has remained on

a time deposit on which Federal deposit insurance

deposit fo r three months or less, all interest shall

has been lost as the result o f the merger o f two

be forfeited. W h ere necessary to comply with the

o r more Federally insured banks in which the

requirements o f this paragraph, any interest al­

depositor previously maintained separate time de­

ready paid to or fo r the account o f the depositor

posits, for a period o f one year from the date of

shall be deducted from the amount requested to

the merger.

be w ith d raw n .11 A n y amendment o f a time de­
posit contract that results in an increase in the
rate o f interest paid o r in a reduction in the
" T h e provisions o f this paragraph apply to all time
deposit contracts entered into after July 5, 1973, and to
all existing time deposit contracts that are extended or re­
newed (whether by automatic renewal or otherwise) after
such date, and to all. time deposit contracts that are
amended after such date so as to increase the rate o f
interest paid. A ll contracts not subject to the provisions
o f this paragraph shall be subject to the restrictions o f
§ 217.4(d) in effect prior to July 5, 1973, which permitted
payment o f a time deposit before maturity only in an
emergency where necessary to prevent great hardship to

the depositor, and which required the forfeiture of
accrued and unpaid interest for a period o f not less than
3 months on the amount withdrawn if an amount equal to
the amount withdrawn had been on deposit for 3 months
or longer, and the forfeiture o f all accrued and unpaid
interest on the amount withdrawn if an amount equal to
the amount withdrawn had been on deposit less than 3
months.
” • F o r the purposes o f this provision, an “ owner” o f
time deposit funds is any individual who at the time o f
his or her death has full legal and beneficial title to all or
a portion o f such funds or, at the time o f his or her death,
has beneficial title to all or a portion o f such funds and
full power o f disposition and alienation with respect
thereto.

REGULATION Q

§§ 217.4-217.5

U n d e r a time deposit agreement where subsequent

o f withdrawal. I f a mem ber bank, without requir­

deposits reset the maturity o f the entire account,

ing notice o f withdrawal, pays interest that has

each deposit maintained in the account fo r at least

accrued on a savings deposit during the preceding

a period equal to the original maturity o f the de­

interest period, it shall, upon request and without

posit may be regarded as having matured indi­

requiring such notice, pay interest that has ac­

vidually and been redeposited at intervals equal to

crued during said period on the savings deposits

such period. W h en a time deposit is payable only

o f every other depositor. N o m em ber bank shall

after notice, fo r funds on deposit fo r at least the

change its practice with respect to the requiring

notice period, the penalty fo r early withdrawal

or waiving o f notice o f withdrawal o f savings

shall be imposed fo r at least the notice period.

deposits

fo r

the

purpose

of

discriminating

in

(e) Disclosure of early withdrawal penalty. A t

favor o f or against any depositor or depositors,

the time a depositor enters into a time deposit

and no such change o f practice shall be made

contract with a m em ber bank, the bank shall p ro ­

except pursuant to duly recorded action o f the

vide

a written

statement

o f the effect o f the

penalty prescribed in paragraph (d ) o f this sec­

bank’s board o f directors or a properly authorized
committee thereof.

state clearly that the cus­

(b ) Loans on security o f savings deposits. I f it

tomer has contracted to keep his funds on deposit

is not the practice o f a mem ber bank to require

tion, which shall ( 1 )

fo r the stated maturity, and (2 ) describe fully

notice

and clearly h o w such penalty provisions apply to

restrictions are imposed by this Part upon loans

of

withdrawal

of

savings

deposits,

no

time deposits in such bank, in the event the bank,

by such bank to its depositors upon the security

notwithstanding the contract provisions, permits

o f such deposits. I f it is the practice o f a mem ber

payment before maturity. Such statements shall be

bank to require notice o f withdrawal o f a savings

expressly called to the attention o f the customer.

deposit, such bank m ay make loans to a depositor

Written statements m ade with respect to negoti­

upon the security o f such deposit, but the rate o f

able Investment Certificates issued by a member

interest o n such loans shall b e not less than 1 per

bank pursuant to subpart 3 o f § 2 1 7 .7 (b ) shall

cent per annum in excess o f the rate o f interest

state clearly that no payment before maturity will

paid on such deposit.

be permitted under any circumstances. Such state­
ments shall be expressly called to the attention o f

(c) Manner of payment of savings deposits.
( 1 ) Subject to the provisions o f subparagraphs

the customer. In addition, every negotiable Invest­

(2 )

ment Certificate shall state conspicuously on its

may permit withdrawals to be m ade from a sav­

face that, “This time deposit cannot be paid prior

ings deposit only through paym ent12 to the deposi­

to maturity.”

tor himself (but not to any other person whether

(f) Loans upon security of time deposits. A
m em ber bank may make a loan to the depositor
upon the security o f his time deposit provided

and ( 3 )

o f this paragraph, a mem ber bank

or not acting for the depositor), except
(i)

where the deposit is represented by a pass­

book, to any person presenting the p assbo o k ;12

that the rate o f interest on such loan shall be not

( i i ) to any executor, administrator, trustee, or

less than 1 per cent per annum in excess o f the

other fiduciary holding the savings deposit as part
o f a fiduciary estate, or to a person, other than

rate o f interest on the time deposit.

the bank, holding a general pow er o f attorney
granted by the depositor;
(iii) to any person, including the bank, that

S E C T I O N 217.5— W I T H D R A W A L
O F S A V I N G S D E P O S IT S
(a )

Requirements

regarding

notice

of

with­

drawal. W hether or not interest is paid, no mem­
b er bank shall require o r waive notice o f with­
draw al as to any amount or percentage o f the sav­
ings deposit o f any depositor unless it shall simi­
larly require o r w aive such notice as to the same

has extended credit to the depositor on the secu­
rity o f the savings deposit, w here such payment
is made in order to enable the creditor to realize
upon such security;
(i v )

pursuant to the order o f a court o f com­

petent jurisdiction;

amount or percentage o f the savings deposits o f
every other depositor which are subject to the
same contractual provisions with respect to notice

13Payment from a savings deposit or presentation o f a
passbook may be made over the counter, through the
mails, or otherwise.

REGULATION Q
(v )

§§ 217.5-217.6

upon the death o f the depositor, to any

withdrawal for such a deposit shall be entered

person authorized by law to receive the deposit;

in the passbook as soon as practicable after with­

(v i)

interest paid to a third person pursuant to

drawal is made.

written instruction o r assignment by the depositor
accepted by the bank, and placed on file therein;

S E C T I O N 217.6— A D V E R T I S I N G

or

O F I N T E R E S T O N D E P O S IT S
(v ii ) pursuant to nontransferable withdrawal

orders o r authorizations received from a depositor

E very advertisement, announcement, or solici­

b y a m em ber bank fo r the payment o f amounts

tation relating to the interest paid on deposits in

from such deposits to third parties, including the

mem ber banks shall be governed by the following

bank (except as prohibited by subparagraph 2),

rules:

periodically or otherwise. A n y such withdrawal

(a) Annual rate of simple interest. Interest rates

order or authorization that m ay be honored as a

shall be stated in terms o f the annual rate o f

withdrawal request fo r payment to a third party

simple interest. In no case shall a rate be adver­

may,

tised that is in excess o f the applicable maximum

if

so authorized

by

the third party,

be

honored as a transfer to an account o f such third
party. A n y form fo r such withdrawal order or
authorization shall contain language in boldface
type o f reasonable size to the effect that it is not
negotiable or transferable.
(2) Notwithstanding

(b ) Percentage yields based on one year. W here
a percentage yield achieved by compounding in­
terest during one year is advertised, the annual
rate o f simple interest shall be stated with equal

sub­

prominence, together with a reference to the basis

withdrawals

o f compounding. N o mem ber bank shall advertise

may be permitted by a member bank to be made

a percentage yield based on the effect o f grace

automatically or as a normal practice from a sav­

periods permitted in § 2 1 7 .3 (d ).

paragraph

(1 )

of

this

the

rate for the particular deposit.

provisions

paragraph,

of

ings deposit that consists only o f funds in which
the entire beneficial interest is held by one or
more individuals through payment to the bank
itself or through transfer o f credit to a demand
deposit

or

other

account

pursuant

to

written

authorization from the depositor to make such
payments or transfers in order to cover checks or
drafts draw n upon the bank or to maintain a
specified balance in or to make periodic transfers
to such accounts. In accordance with § 2 1 7 .1 (e)
( 2 ) o f this Part, a member bank must reserve the
right to require the depositor to give notice in
writing o f an intended withdrawal not less than
30 days before such withdrawal is made. Such
notice shall be prominently disclosed and specifi­
cally brought to the depositor’s attention at the time
the automatic transfer service is authorized. A
m em ber bank m ay not require

a depositor to

(c) Percentage yields based on periods in excess

of one year. N o advertisement shall include any
indication o f a total percentage yield, compounded
o r simple, based on a period in excess o f a year,
or an average annual percentage yield achieved by
compounding during a period in excess o f a year.
(d ) Time or amount requirements. I f an adver­
tised rate is payable only on deposits that meet
time or amount requirements, such requirements
shall be clearly and conspicuously stated. W h ere
the time requirement fo r an advertised rate is in
excess o f a year, the required num ber o f years
fo r the rate to apply shall be stated with equal
prominence, together with an indication o f any
lower rate or rates that will apply if the deposit
is withdrawn at an earlier maturity.
(e) Penalty for early withdrawals. A n y adver­

authorize such automatic transfer to be made

tisement,

from savings deposits.

to interest paid by a mem ber bank on time de­

( 3 ) A m em ber bank m ay permit depositors to
maintain deposits subject to negotiable orders o f
withdrawal where authorized by Federal law.
(4 )

W h ere a savings deposit is evidenced by a

passbook, every withdrawal m ade upon presenta­

announcement,

or solicitation relating

posits shall include clear and conspicuous notice
that Federal law and regulation prohibit the bank
from allowing payment o f a time deposit before
maturity unless substantial interest is forfeited.
Such notice m ay state that,

tion o f the passbook shall be entered in the pass­

“Federal law and regulation prohibit the

book at the time o f withdrawal, and every other

payment o f a time deposit prior to maturity

REGULATION Q

§§ 217.6-217.7

unless three months o f the interest thereon

shall advertise a percentage yield on any deposit

is forfeited and interest on the amount with­

it solicits fo r a member bank that is not author­

drawn is reduced to the passbook rate.”

ized to be paid and advertised by such bank.

announce­

(i) Negotiable orders o f withdrawal. In addition

ment, or solicitation made by television or radio,

to compliance with the other paragraphs o f this

the required notice o f penalty m ay be stated in a

section, m em ber banks offering accounts subject

W ith

respect to

any

advertisement,

form such as “Substantial interest penalty is re­

to negotiable orders o f withdrawal, to the extent

quired fo r early withdrawal.” A n y advertisement,

practicable, shall limit every advertisement, an­

announcement or solicitation relating to interest

nouncement or solicitation made in any news­

paid by a mem ber bank on negotiable Investment

paper, magazine, radio, television o r other media

Certificates

issued

of

to such facilities directed toward residents o f the

§ 2 1 7 .7 (b )

shall include clear and conspicuous

States in which Federal law authorizes the issu­

notice that Federal law and regulation prohibit

ance o f such accounts. A ll other advertisement,

pursuant

to

subpart

3

the payment o f such certificate prior to maturity.
(f) Profit. The term “profit” shall not be used
in referring to interest paid on deposits.

announcements and solicitations o f such accounts,
including direct mailing, circulars, and notices,
whether written or oral, to the extent practicable,

(g) Accuracy of advertising. N o mem ber bank

shall be directed only to persons residing or em­

shall make any advertisement, announcement, or

ployed in the States in which Federal law author­

solicitation relating to the interest paid on deposits

izes the issuance o f accounts subject to negotiable

that is inaccurate or misleading or that misrep­

orders o f withdrawal

resents its deposit contracts.

customers o f member banks in those States on the

(h) Solicitation of deposits for banks. A n y per­

and to persons w ho

are

effective date o f this amendment.

son or organization that solicits deposits fo r a
m em ber bank shall be bound by the rules con­

(S E C T IO N

217.7— M A X I M U M

RATES

OF

tained in this section with respect to any adver­

IN T E R E S T P A Y A B L E B Y M E M B E R B A N K S

tisement, announcement, or solicitation relating to

ON

such deposits. N o

printed separately.)

such person or organization

T IM E

AND

S A V IN G S

D E P O S IT S ,

is

REGULATION Q

STATUTORY APPENDIX

S T A T U T O R Y A P P E N D IX

agency, or officer o f the foregoing, as is incon­

Section 19 o f the Federal Reserve A c t provides
in part as follow s:
(a )

sistent

with

the

provisions

of

this

section

as

amended, is hereby repealed.
[U.S.C., title 12, sec. 371a.]

The Board is authorized fo r the purposes

(j)

The Board m ay from time to time, after

o f this section to define the terms used in this

consulting with the Board o f Directors o f the

section, to determine what shall be deemed a

Federal Deposit Insurance Corporation and the

payment o f interest, to determine what types o f

Federal H om e Loan Bank Board, prescribe rules

obligations, whether issued directly by a member

governing the payment and advertisement o f in­

bank or indirectly by an affiliate o f a member

terest on

bank o r by other means, and, regardless o f the use

rates o f interest which may be paid by member

deposits, including limitations o n the

o f the proceeds, shall be deemed a deposit, and to

banks on time and savings deposits. T h e Board

prescribe such regulations as it may deem neces­

m ay prescribe different rate limitations fo r d if­

sary to effectuate the purposes o f this section and

ferent classes o f deposits, fo r deposits o f different

to prevent evasions thereof.

amounts or with different maturities o r subject

[U.S.C., title 12, sec. 461]

to different conditions regarding withdrawal or

*•*

(i)

No

m em ber bank shall, directly or indi­

rectly, by any device whatsoever, pay any interest
on

any

deposit which is payable on demand:

Provided, That nothing herein contained shall be
construed as prohibiting the payment o f interest
in accordance with the terms o f any certificate o f
deposit or other contract entered into in good
faith which is in force on the date on which the
bank becomes subject to the provisions o f this
paragraph; but no such certificate o f deposit or
other contract shall be renewed or extended un­
less it shall be modified to conform to this para­
graph, and every mem ber bank shall take such
action as may be necessary to conform to this
paragraph as soon as possible consistently with its
contractual

obligations:

Provided further,

That

this paragraph shall not apply to any deposit o f
such bank

which is payable

only at an office

thereof located outside o f the States o f the United
States and the District o f Colum bia:

Provided

repayment, according to the nature or location
o f mem ber banks o r their depositors, or accord­
ing to such other reasonable bases as the Board
may deem desirable in the public interest. N o
mem ber bank shall pay any time deposit before
its maturity except upon such conditions and in
accordance with such rules

and

regulations as

may be prescribed by the said Board, or waive
any requirement o f notice before

payment o f

any savings deposits except as to all savings de­
posits having the same requirements:

Provided,

That the provisions o f this paragraph shall not
apply to any deposit which is payable only at an
office o f a mem ber bank located outside o f the
States o f the United States and the District o f
Colum bia.
October

D u rin g

15,

commencing

on

1962, and ending on October

the

period

15,

1968, the provisions o f this paragraph shall not
apply to the rate o f interest which m ay be paid
by

m em ber banks on time deposits o f foreign

further, That until the expiration o f two years

governments, monetary and financial authorities

after the date o f enactment o f the Banking A ct o f

o f foreign governments when acting as such, or

1935 this paragraph shall not apply ( 1 ) to any

international financial institutions o f which the

deposit made by a savings bank as defined in sec­

United States is a member.

tion 12B o f this Act, as amended, or by a mutual
savings bank, or

(2 )

to any deposit o f public

funds made by or on behalf o f any State, county,
school district, or other subdivision or municipal­
ity, or to any deposit o f trust funds if the pay­
ment o f interest with respect to such deposit o f
public funds or o f trust funds is required by State
law. So much o f existing law as requires the pay­
ment o f interest with respect to any funds de­
posited by the United States, by any Territory,
District, or possession thereof (including the Phil­
ippine Islan ds), or by any public instrumentality,

[U.S.C., title 12, sec. 371b. The first two sentences o f this
paragraph are, in part, temporary. Unless section 7 o f the A ct
o f September 21, 1966 (as amended by the A ct o f
December 31, 1975) is modified, on December 15, 1978,
such
sentences will
read as follows: “ The Board o f
Governors o f the Federal Reserve System shall from time to
time prescribe rules governing the payment and advertisement
o f interest on deposits, including limitations on the rate o f
interest which may be paid by member banks on time and
savings deposits, and shall prescribe different rates fo r such
payment on time and savings deposits having different maturi­
ties, or subject to different conditions respecting withdrawal or
repayment, or subject to different conditions by reason o f
different locations, or according to the varying discount rates
o f member banks in the several Federal Reserve districts.” ]