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FEDERAL RESERVE BANK
OF DALLAS
Dallas, Texas, December 7,1935
REVISED REGULATIONS D AND Q, EFFECTIVE JANUARY 1, 1936
To the Member Bank Addressed:
The Board of Governors of the Federal Reserve System has revised its
Regulation D, governing the reserves of member banks, and also its Regu
lation Q, governing the payment of interest on deposits, and in each case
the revised Regulation will become effective January 1, 1936. Printed copies
of the revised Regulations are enclosed for your guidance. They supersede
Regulation D, Series of 1930, and Regulation Q, Series of 1935, respectively.
There is also enclosed a supplement to Regulation Q, effective January 1,
1936, governing the maximum rates of interest which member banks of the
Federal Reserve System may pay on time and savings deposits after said
date.
Yours very truly,
Federal Reserve Agent
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
BOARD OF GOVERNORS
of
TH E FEDERAL RESERVE SYSTEM
PAYMENT OF INTEREST ON DEPOSITS
REGULATION Q
This regulation as printed herewith is in the form as revised,
effective January 1, 1936
Printed and Distributed by
THE FEDERAL RESERVE BANK OF DALLAS
INQUIRIES REGARDING THIS REGULATION
Any inquiry relating to this regulation should be addressed to the Federal
Reserve bank o f the district in which the inquiry arises.
SUPPLEMENT TO REG ULATIO N Q
ISSUED BY THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
Effective January 1,1936.
Printed and Distributed by
THE FEDERAL RESERVE BANK OF DALLAS
M A XIM U M RATES OF IN TER EST PAYABLE ON T IM E
AND SAYINGS DEPOSITS BY MEMBER BANKS
OF TH E FEDERAL RESERVE SYSTEM
Pursuant to the provisions o f section 19 o f the Federal Reserve Act
and section 3 o f its Regulation Q, the Board o f Governors o f the Federal
Reserve System hereby prescribes the follow in g maximum rates1 o f in
terest payable by member banks o f the Federal Reserve System on time
and savings deposits:
(1 ) M axim u m ra te o f 2 l/z p e r cen t.— No member bank shall pay
interest accruing after January 31, 1935, at a rate in excess o f 2 ^ Per cent
per annum, com pounded quarterly,2 regardless o f the basis upon which
such interest may be computed,—
(A ) On any savings deposit,
(B ) On any time deposit having a maturity date six months or
more after the date o f deposit or payable upon written notice o f six
months or more,
(C ) On any Postal Savings deposit which constitutes a time
deposit,
except that a member bank may pay interest on any such deposits in ac
cordance with the terms o f any certificate o f deposit or other contract
which was law fully entered into in good faith before December 18, 1934
(or, if the bank became a member o f the Federal Reserve System there
after, before the date upon which it became a m em b er), which was in force
on such date and which may not legally be terminated or m odified by
such bank at its option or without liability.
(2 ) M axim u m ra te of 2 p e r cen t.— No member bank shall pay in
terest accruing after January 1, 1936, at a rate in excess o f 2 percent
per annum, com pounded quarterly, regardless o f the basis upon which
such interest may be computed,—
(A ) On any time deposit (except Postal Savings deposits which
constitute time deposits) having a maturity date less than six months
and not less than 90 days after the date o f deposit or payable upon
written notice o f less than six months and not less than 90 days,
except that a member bank may pay interest on such deposits in accord
ance with the terms o f any certificate o f deposit or other contract which
was law fully entered into in good faith before December 1, 1935 for,
1 The maximum rates of interest payable by member banks o f 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 a member bank located outside of the States of the United States
and the District o f Columbia.
2 This limitation is not to be interpreted as preventing the compounding of interest at
other than quarterly intervals, provided that the aggregate amount of such interest so com
pounded does not exceed the aggregate amount of interest at the rate above prescribed when
compounded quarterly.
2
if the bank became a member of the Federal Reserve System thereafter,
before the date upon which it became a m em ber), which was in force on
such date and which may not legally be terminated or m odified by such
bank at its option or without liability.
(3 )
M axim u m ra te o f 1 p er cen t.— No member bank shall pay
interest accruing after January 1, 1936, at a rate in excess o f 1 per cent
per annum, com pounded quarterly, regardless o f the basis upon which such
interest may be computed,—
(A ) On any time deposit (except Postal Savings deposits which
constitute time deposits) having a maturity date less than 90 days
after the date o f deposit or payable upon written notice o f less than
90 days.
except that a member bank may pay interest on such deposits in accord
ance with the terms o f any certificate o f deposit or other contract which
was law fully entered into in g o o d faith before December 1, 1935 (or, if
the bank became a member o f the Federal Reserve System thereafter,
before the date upon which it became a m em ber), which was in force
on such date and which may not legally be terminated or m odified by
such bank at its option or without liability.
3
CONTENTS
Page
Authority For and Scope of Regulation.....................................................................
4
1. DEFINITIONS ..............................................................................................
4
(a) Demand deposits................................................................................
4
S ec .
(b) Time deposits.....................................................................................
4
(c) Time certificates of deposit................................................................
4
(d) Time deposits, open account............................................................
4
(e) Savings deposits..................................................................................
5
(f) Interest ..................................................
S ec .
6
2. DEMAND DEPOSITS ..................................................................................
6
(a) Interest prohibited..............................................................................
6
(b) Exceptions .........................................................................................
6
S ec . 3.
MAXIMUM RATE OF INTEREST ON TIME AND SAVINGS
DEPOSITS ................................................................................................
7
(a)
7
Maximum rate prescribed from time to time.................................
(,b) Modification of contracts to conform to regulation..........................
7
(c) Member banks limited to maximum rate for State banks...............
7
(d) Savings deposits received during first five daysof month.................
8
(e) Continuance of time deposit status...................................................
8
(f) No interest after maturity or expiration of notice............................
8
4. PAYMENT OF TIME DEPOSITS BEFORE MATURITY..........................
8
(a) Time deposits payable on a specified date........................................
8
(b) Time deposits payable after a specified date...................................
8
(c) Time deposits payable after a specified notice.................................
9
(d) Payment in emergencies...................................................................
9
(e) Loans upon security of time deposits................................................
9
Sec 5. NOTICE OF WITHDRAWAL OF SAVINGS DEPOSITS............................
9
(a) Requirements regarding notice.........................................................
9
S ec .
(b) Requirements regarding change of practice..................................... 10
(c) Change of practice for purpose of discrimination............................ 10
(d) Requirements applicable although no interest paid........................ 10
(e) Loans upon security of savings deposits............................................ 10
Appendix .................................................................................................................... 11
REGULATION Q
Revised effective January 1, 1936.
(Superseding Regulation Q, Series of 1935)
PAYM ENT OF IN TER EST ON DEPOSITS
AUTHORITY FOR AND SCOPE OF REGULATION
This regulation is issued under authority o f provisions o f section 19
o f the Federal Reserve Act which, together with related provisions o f
law, are published in the Appendix hereto.
This regulation relates to the payment o f deposits and interest thereon
by member banks o f the Federal Reserve System and not to the com puta
tion and maintenance o f the reserves which member banks are required
to maintain against deposits. The rules concerning reserves o f member
banks are contained in Regulation D.
The provisions o f this regulation do not apply to any deposit which
is payable only at an office o f a member bank located outside o f the
States o f the United States and the District o f Columbia.
SECTION 1. DEFINITIONS
(а ) D em and deposits.— The term “ any deposit which is payable on
demand” , hereinafter referred to as a “ demand deposit” , includes every
deposit which is not a “ time deposit” or “ savings deposit” , as defined
below.
( б ) T im e deposits.— The term “ time deposits” means “ time certificates
o f deposit” and “ time deposits, open account” , as defined below.
(c ) T im e certificates o f deposit.— The term “ time certificate o f de
posit” means a deposit evidenced by a negotiable or non-negotiable in
strument which provides on its face that the amount o f such deposit is
payable to bearer or to any specified person or to his order—
(1 ) On a certain date, specified in the instrument, not less than
30 days after the date o f the deposit, or
(2 ) At the expiration o f a certain specified time not less than 30
days after the date o f the instrument, or
(3 ) U pon 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 ) T im e deposits, open a cc o u n t.— The term “ time deposit, open ac
count” means a deposit, other than a “ time certificate o f deposit” or a
1 A deposit with respect to which the bank merely reserves the_ right to require notice of
not less than 30 days before any withdrawal is made is not a "time certificate o f deposit”
within the meaning of the above definition.
4
“ savings deposit” , with respect to which there is in force a written contract
with the depositor that neither the whole nor any part o f such deposit
may be withdrawn, by check or otherwise, prior to the date o f maturity,
which shall be not less than 30 days after the date of the deposit,2 or prior
to the expiration o f the period o f notice which must be given b y the
depositor in writing not less than 30 days in advance o f withdrawal.3
(e )
Savings deposits.— The term “ savings deposit” means a deposit,
evidenced by a pass book, consisting o f funds (i) deposited to the credit
o f one or more individuals, or o f a corporation, association or other
organization operated prim arily for religious, philanthropic, charitable,
educational, fraternal or other similar purposes and not operated for
profit4, or (ii) in which the entire beneficial interest is held b y one or
m ore individuals or by such a corporation, association or other organ
ization, and in respect to which deposit—
(1 ) The depositor is required, or may at any time be required,
by the bank to give notice in writing o f an intended withdrawal not
less than 30 days before such withdrawal is m ade;
(2 ) Withdrawals are permitted in on ly two ways, either (i)
upon presentation o f the pass book, through payment to the person
presenting the pass book, or (ii) without presentation o f the pass
book, through payment to the depositor him self but not to any
other person whether or not acting for the depositor.56
The presentation by any officer, agent or employee o f the bank o f a
pass book or a duplicate thereof retained by the bank or by any o f its
officers, agents or em ployees is not a presentation o f the pass b ook within
the meaning o f this regulation except where the pass b ook is held by the
bank as a part o f an estate o f which the bank is a trustee or other fiduciary,
or where the pass book is held by the bank as security fo r a loan. I f a pass
book is retained by the bank, it may not be delivered to any person other
than the depositor for the purpose o f enabling such person to present
the pass book in order to make a withdrawal, although the bank may
deliver the pass b ook to a duly authorized agent o f the depositor for
transmittal to the depositor.
2 Deposits, such as Christmas club accounts and vacation club accounts, which are made
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 3 months constitute
“ time deposits, open account” even though some o f the deposits are made within 30 days
from the end o f such period.
3 A deposit with respect to which the bank merely reserves the right to_ require notice of
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 of two or more individuals may be classified as savings de
posits if they meet the other requirements o f the above definition, but deposits o f a partner
ship operated for profit may not be so classified. Deposits to the credit o f an individual of
funds in which any beneficial interest is held by a corporation, partnership, association or
other organization operated for profit or not operated primarily for religious, philanthropic,
charitable, educational, fraternal or other similar purposes may not be classified as savings
deposits.
6 Presentation o f a pass book may be made over the counter or through the m ails; and
payment may be made over the counter, through the mails or otherwise, subject to the lim
itations o f paragraph (2) above as to the person to whom such payment may be made.
5
Every withdrawal made upon presentation o f a pass book shall be
entered in the pass book at the time o f the withdrawal, and every other
withdrawal shall be entered in the pass book as soon as practicable after
the withdrawal is made.
(/) Interest.— The- term “ interest” means a payment, credit, service
or other thing o f value which is made or furnished by a bank as considera
tion for the use o f the funds constituting a deposit and which involves
the payment or absorption by the bank o f out-of-pocket expenses (i. e.,
expenses arising out o f specific transactions for specific customers and
definitely attributable to such transactions as distinguished from overhead
and general operating expenses), regardless o f whether such payment,
'credit, service or other thing o f value varies with or bears a substantially
direct relation to the amount o f the depositor’s balance.
The term “ interest” includes the payment or absorption of exchange
and collection charges which involve out-of-pocket expenses, but does not
include the payment or absorption o f taxes upon deposits whether levied
against the bank or the depositor nor the payment or absorption of
premiums on bonds securing deposits where such bonds are required by
or under authority o f law.
Notwithstanding the foregoing, the payment or absorption o f isolated
items o f out-of-pocket expense in trivial amounts and not o f a regularly
recurrent nature, where the charging o f such items to customers would
cause undue friction or misunderstanding, w ill not be deemed to be a
payment o f interest, provided that the bank acts in good faith and does
not utilize the absorption o f such items as a basis fo r soliciting accounts
or obtaining an advantage over competitors and provided further that
the bank maintains and makes available to the examiners authorized
to examine the bank a record showing the amounts o f such items paid
or absorbed by it, the dates o f such payment or absorption, and the
names o f the customers fo r whom such items were paid or absorbed.
SECTION 2. DEMAND DEPOSITS
(a ) Interest prohibited.— Except as hereinafter provided, no member
bank o f the Federal Reserve System shall, directly or indirectly, by any
device whatsoever, pay any interest on any demand deposit.
( b ) Exceptions.— The prohibition stated in subsection (a ) above does
not apply to—
(1 ) Payment o f interest accruing before August 24, 1937, on any
deposit made b y a savings bank as defined in section 12B o f the
Federal Reserve Act, as amended,6 or by a mutual savings bank;
(2 ) Payment o f interest accruing before August 24, 1937, on any
deposit o f public funds7 made by or on behalf o f any State, county,
• Section 12B(c) (7) o f the Federal Reserve A ct which defines the term “ savings bank" is
quoted in the Appendix hereto (page 17).
6
school district, or other subdivision or municipality, or on any de
posit o f trust funds, if the payment o f interest with respect to such
deposit o f public funds or o f trust funds is required by State law
when such deposits are made in State banks;
(3 )
Payment o f interest in accordance with the terms o f any
certificate o f deposit or other contract which was law fully entered
into in good faith before June 16, 1933 (or, if the bank became a
member o f the Federal Reserve System thereafter, before the date
upon which it became a m em ber), which was in force on such date,
and which may not legally be terminated or m odified by such bank
at its option or without lia b ility; but no such certificate o f deposit
or other contract may be renewed or extended unless it be modified
to eliminate any provision fo r the payment o f interest on demand
deposits, and every member bank shall take such action as may be
necessary, as soon as possible consistently with its contractual obliga
tions, to eliminate from any such certificate o f deposit or other con
tract any provision fo r the payment o f interest on demand deposits.
SECTION 3. MAXIMUM RATE OF INTEREST ON TIME AND SAVINGS
DEPOSITS
(a) Maximum rate prescribed from time to time.— Except in accord
ance with the provisions o f this regulation, no member bank shall pay
interest on any time deposit or savings deposit in any manner, directly
or indirectly, or by any method, practice, or device whatsoever. No mem
ber bank shall pay interest on any time deposit or savings deposit at a
rate in excess o f such applicable maximum rate as the Board o f Governors
o f the Federal Reserve System shall prescribe from time to time; and any
rate or rates which may be so prescribed by the Board w ill be set forth in
supplements to this regulation, which w ill be issued in advance o f the
date upon which such rate or rates becom e effective.
( b ) Modification of contracts to conform to regulation.— N o cer
tificate o f deposit or other contract shall be renewed or extended unless
it be m odified to conform to the provisions o f this regulation, and every
member bank shall take such action as may be necessary, as soon as
possible consistently with its contractual obligations, to bring all o f its
outstanding certificates o f deposit or other contracts into conform ity with
the provisions o f this regulation.
(c ) Member banks limited to maximum rate for State banks.— The
rate of interest paid by a member bank upon a time deposit or savings
deposit shall not in any case exceed (i ) the applicable maximum rate
prescribed pursuant to the provisions o f subsection (a ) o f this section,
or (ii) the applicable maximum rate authorized by law to be paid upon
such deposits by State banks or trust companies organized under the
laws o f the State in which such member bank is located, whichever may
be less.
_1 Deposits o f moneys paid into State courts by private parties pending the outcome of
litigation are not deposits of "public funds” , within the meaning of the above provision.
7
(d) Savings deposits received during first five days of month.— A
member bank may pay interest on a savings deposit received during the
first five days o f any calendar month at the applicable maximum rate
prescribed pursuant to the provisions o f subsection (a ) o f this section
calculated from the first day o f such calendar month until such deposit
is withdrawn or ceases to constitute a savings deposit under the provisions
o f this regulation, whichever shall first occur.
(e ) Continuance of time deposit status.— A deposit which was a time
deposit at the date o f deposit continues to be such until maturity although
it has becom e payable within 30 days, and interest at a rate not exceeding
that prescribed pursuant to the provisions o f subsection (a ) o f this section
may be paid until maturity upon such deposit. A time deposit or a
savings deposit with respect to which notice o f withdrawal has been given
continues to be such until the expiration o f the period o f such notice,
and interest may be paid upon such deposit until the expiration o f the
period o f such notice at a rate not exceeding that prescribed pursuant to
the provisions o f subsection (a ) o f this section. Interest at a rate not
exceeding that prescribed pursuant to the provisions o f subsection (a)
o f this section may be paid upon savings deposits with respect to which
notice o f intended withdraAval has not actually been required or given.
N o interest shall be paid by a member bank on any amount which, b y the
terms o f any certificate or other contract or agreement or otherwise, the
bank may be required to pay Avithin 30 days from the date on which such
amount is deposited in such bank.8
(/) No interest after maturity or expiration of notice.— After the
date of maturity of any time deposit, such deposit is a demand deposit, and
no interest may be paid on such deposit for any period subsequent to such
date. After the expiration of the period of notice given with respect to
the repayment of any time deposit or savings deposit, such deposit is a
demand deposit and no interest may be paid on such deposit for any
period subsequent to the expiration of such notice, except that, if the
oAvner of such deposit advise the bank in writing that the deposit will not
be Avithdrawn pursuant to such notice or that the deposit will thereafter
again be subject to the contract or requirements applicable to such deposit,
the deposit Avill again constitute a time deposit or savings deposit, as the
case may be, after the date upon which such advice is received by the bank.
SECTION 4. PAYMENT OF TIME DEPOSITS BEFORE MATURITY
(a) Time deposits payable on a specified date.— N o member bank
shall pay any time deposit, which is payable on a specified date, before
such specified date, except as provided in subsection (d ) o f this section.
( b ) Time deposits payable after a specified period.— No member
bank shall pay any time deposit, Avhich is payable at the expiration o f
a certain specified period, before such specified period has expired,
except as provided in subsection (d ) o f this section.
* Deposits, such as Christmas club accounts and vacation club accounts, which are made
under written contracts providing that no withdrawal shall be made until a certain number
of 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 such period.
8
(c )
T im e deposits p a y a b le a fte r a specified n otice.— N o member
bank shall pay any time deposit, with respect to which notice is required
to be given a certain specified period before any withdrawal is made,
until such required notice has been given and the specified period there
after has expired, except as provided in subsection (d ) o f this section.
{d) P aym en t in em ergencies.— In an emergency where it is necessary
to prevent great hardship to the depositor, a member bank may pay before
maturity a time deposit or the portion thereof necessary to meet such
emergency, provided that before making such payment the depositor shall
sign an application describing fu lly the circumstances constituting the
emergency which is deemed to justify the payment o f the deposit before
maturity, which application shall be approved by an officer o f the bank
who shall certify that, to the best o f his knowledge and belief, the state
ments in the application are true. Such application shall be retained in
the bank’s files and made available to the examiners authorized to ex
amine the bank. Where a time deposit is paid before maturity the depositor
shall forfeit accrued and unpaid interest fo r a period o f not less than
three months on the amount withdrawn if an amount equal to the amount
withdrawn has been on deposit three months or longer, and shall forfeit all
acccrued and unpaid interest on the amount withdrawn if an amount
equal to the amount withdrawn has been on deposit less than three months.
When a portion o f a time certificate o f deposit is paid before maturity,
the certificate shall be canceled and a new certificate shall be issued for
the unpaid portion o f the deposit with the same terms, rate, date and
maturity as the original deposit.
(e )
Loans u p on se cu rity o f tim e deposits.— A member bank may
make a loan to the depositor upon the security o f his time deposit p ro
vided that the rate o f interest on such loan shall be not less than 2 percent
per annum in excess o f the rate o f interest on the time deposit.
SECTION 5. NOTICE OF WITHDRAWAL OF SAYINGS DEPOSITS
(a )
R equirem ents re g a rd in g n otice.— A member bank shall observe
the requirements set forth below in requiring notice o f intended with
drawal o f any savings deposit, or in waiving such notice, or in repaying
any savings deposit, or part thereof, without requiring such notice, whether
such notice o f intended withdrawal is required to be given in each case
by the terms o f the bank’ s contract with the depositor or may, under such
contract, be required by the bank at any time at its option.
(1 ) I f a member bank waive such notice o f intended
as to any amount or percentage o f the savings deposits
positor, it shall waive such notice as to the same amount
age o f the savings deposits o f every other depositor
subject to the same requirement.
withdrawal
o f any de
or percent
which are
(2 ) If a member bank pay any amount or percentage o f the sav
ings deposits o f any depositor, without requiring such notice, it shall,
upon request and without requiring such notice, pay the same amount
or percentage o f the savings deposits o f every other depositor which
are subject to the same requirement.
9
(3 )
If a member bank require such notice before the payment o f
any amount or percentage o f the savings deposits of any depositor,
it shall require such notice before the payment of the same amount
or percentage o f the savings deposits o f any other depositor which
are subject to the same requirement.
A member bank is not prevented from paying during the next succeed
ing interest period, without requiring notice of withdrawal, interest on a
savings deposit which has accrued during the preceding interest period,
provided that it shall, Upon request and without requiring such notice,
pay in the same manner interest which has accrued during the preceding
interest period on the savings deposits of every other depositor.
( b ) Requirements regarding change of practice.— N o member bank
shall change its practice with respect to the requiring
o f intended withdrawal o f savings deposits except
action o f its board o f directors or o f its executive
authorized, and no practice in this respect shall be
not conform to the requirements o f paragraphs ( 1 ) ,
section (a ) o f this section.
or waiving o f notice
after duly recorded
committee properly
adopted which does
( 2 ) , or (3 ) o f sub
(c ) Change of practice for purpose of discrimination.— No change
in the practice o f a member bank with respect to the requiring or waiving
o f notice o f intended withdrawal o f savings deposits shall be made for
the purpose o f discriminating in favor o f or against any particular de
positor or depositors.
(d ) Requirements applicable although no interest paid.— A member
bank shall observe the requirements o f this section with respect to savings
deposits even though no interest be paid on such deposits.
(e ) Loans upon security of savings deposits.— If it is not the practice
o f a member bank to require notice o f intended withdrawal o f savings
deposits, no restrictions are im posed by this regulation upon loans by
such bank to its depositors upon the security o f such deposits. I f it is
the practice o f a member bank to require notice o f intended withdrawal
o f savings deposits or any amount or percentage thereof, such bank may
make loans to its depositors upon the security o f such deposits and, in
each such case, the rate o f interest on such loan shall be not less than 2
percent per annum in excess o f the rate o f interest on the savings deposit.
10
A PPEN D IX
STATUTORY PROVISIONS
Section 19 o f the Federal Reserve Act, as amended by the Banking Act
o f 1933 and the Banking Act o f 1935, provides in part as fo llo w s:
Sec. 19. The Board of Governors of the Federal Reserve System is authorized,
for the purposes of this section, to define the terms “ demand deposits”, “ gross
demand deposits” , “ deposits payable on demand” , “time deposits” , “ savings de
posits” , and “ trust funds” , to determine what shall be deemed to be a payment of
interest, and to prescribe such rules and regulations as it may deem necessary to
effectuate the purposes of this section and prevent evasions thereof:***.
*
*
*
*
*
*
*
No member bank shall, directly or indirectly, 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 of interest in accordance
with the terms of any certificate of deposit or other contract entered into in good
faith which is in force on the date on which the bank becomes subject to the pro
visions of this paragraph; but no such certificate of deposit or other contract shall
be renewed or extended unless it shall be modified to conform to this paragraph,
and every member 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 of such bank
which is payable only at an office thereof located outside of the States of the
United States and the District of Columbia: Provided further, That until the ex
piration of two years after the date of enactment of the Banking Act of 1935 this
paragraph shall not apply (1) to any deposit made by a savings bank as defined in
section 12B of this Act, as amended, or by a mutual savings bank, or (2) to any
deposit of public funds made by or on behalf of any State, county, school district,
or other subdivision or municipality, or to any deposit of trust funds if the pay
ment of interest with respect to such deposit of public funds or of trust funds is
required by State law. So much of existing law as requires the payment of interest
with respect to any funds deposited by the United States, by any Territory, Dis
trict, or possession thereof (including the Philippine Islands), or by any public
instrumentality, agency or officer of the foregoing, as is inconsistent with the pro
visions of this section as amended, is hereby repealed.
The Board of Governors of the Federal Reserve System shall from time to time
limit by regulation the rate of interest which may be paid by member banks on
time and savings deposits, and shall prescribe different rates for such payment on
time and savings deposits having different maturities, or subject to different con
ditions respecting withdrawal or repayment, or subject to different conditions by
reason of different locations, or according to the varying discount rates of member
banks in the several Federal Reserve districts. No member bank shall pay any
time deposit before its maturity except upon such conditions and in accordandce with such rules and regulations as may be prescribed by the said Board,
or waive any requirement of notice before payment of any savings deposit except
as to all savings deposits having the same requirement: Provided, That the pro
visions of this paragraph shall not apply to any deposit which is payable only at
an office of a member bank located outside of the States of the United States and
the District of Columbia.
Section 24 o f the Federal Reserve Act, as amended by the Act o f Feb
ruary 25, 1927, and the Banking Act o f 1935, provides with respect to
national banking associations in part as follow s:
Any such association may continue hereafter as heretofore to receive time and
savings deposits and to pay interest on the same, but the rate of interest which such
association may pay upon such time deposits or upon savings or other deposits
11
shall not exceed the maximum rate authorized by law to be paid upon such de
posits by State banks or trust companies organized under the laws of the State in
which such association is located.
Section 1 2 B (c) (7 ) o f the Federal Reserve Act, as amended by the
Banking Act o f 1935, provides as fo llo w s:
(c ) As used in this section—
*
*
*
*
*
*
*
(7) The term “ savings bank” means a bank (other than a mutual savings
bank) which transacts its ordinary banking business strictly as a savings bank
under State laws imposing special requirements on such banks governing the man
ner of investing their funds and of conducting their business: Provided, That the
bank maintains, until maturity date or until withdrawn, all deposits made with it
(other than funds held by it in a fiduciary capacity) as time savings deposits of
the specific term type or of the type where the right is reserved to the bank to
require written notice before permitting withdrawal: Provided further, That such
bank to be considered a savings bank must elect to become subject to regulations
of the Corporation with respect to the redeposit of maturing deposits and prohibit
ing withdrawal of deposits by checking except in cases where such withdrawal is
permitted by law on the effective date from specifically designated deposit accounts
totaling not more than 15 per centum of the bank’s total deposits.
12
BOARD OF GOVERNORS
of
T H E FEDERAL RESERVE SYSTEM
RESERVES OF MEMBER BANKS
REGULATION D
This regulation as printed herewith is in the form as revised,
effective January I , 1936
Printed and Distributed by
THE FEDERAL RESERVE BANK OF DALLAS
INQUIRIES REGARDING THIS REGULATION
A ny inquiry relating to this regulation should be addressed to the Federal
Reserve bank o f the district in which the inquiry arises.
CONTENTS
Page
AUTHORITY FOR REGULATION........................................................................... 5
Sec. 1. DEFINITIONS ..............................................................................................
5
(a) Demand deposits .................................................„...........................
5
(b) Time deposits ....................................................................................
5
(c) Time certificates of deposit................................................................
5
(d) Time deposits, open account..............................................................
5
(e) Savings deposits .................. - ............................................................
6
(f) Gross demand deposits.......................................................................
6
(g) Cash items in process of collection...................................................
7
(h) Net demand deposits.................................................... ...................
7
Sec. 2. COMPUTATION OF RESERVES................................................................
7
(a) Amounts of reserves to be maintained..............................................
7
(b) Deductions allowed in computing reserves......................................
8
(c) Availability of cash items as reserve.................................................
8
(d) Reserves against trust funds..............................................................
8
(e) Continuance of “ time deposit” status................................................ 8
Sec. 3. DEFICIENCIES IN RESERVES..................................................................
9
(a) Computation of deficiencies..............................................................
9
(b) Penalties .....................................................
9
(c) Notice to directors of banks deficient in reserves............................
9
(d) Continued deficiencies .....................................................................
9
Sec. 4. LOANS AND DIVIDENDS WHILE RESERVES ARE DEFICIENT..... 10
APPENDIX
11
REGULATION D
Revised effective January 1, 1936
(Superseding Regulation D, Series of 1930)
RESERVES OF MEMBER BANKS
AUTHORITY FOR REGULATION
This regulation is issued under authority o f provisions o f section 19
o f the Federal Reserve Act which, together with related provisions o f law,
are published in the A ppendix hereto.
SECTION 1. DEFINITIONS
(а ) Demand deposits.— The term “ demand deposits” includes all de
posits except “ time deposits” as defined below.
(б ) Time deposits.— The term “ time deposits” means “ time certificates
o f deposit” , “ time deposits, open account” and “ savings deposits” , as
defined below.
(c ) Time certificates of deposit.— The term “ time certificate o f de
posit” means a deposit evidenced by a negotiable or non-negotiable instru
ment which provides on its face that the amount o f such deposit is payable
to bearer or to any specified person or to his order—
(1 ) On a certain date, specified in the instrument, not less than
thirty days after the date o f the deposit, or
(2 ) At the expiration o f a certain specified time not less than thirty
days after the date o f the instrument, or
(3 ) Upon notice in writing which is actually required to be
given not less than thirty days before the date o f repayment,1 and
(4 ) In all cases only upon presentation and surrender o f the in
strument.
( d )
Time deposits, open account.— The term “ time deposit, open ac
count” means a deposit, other than a “ time certificate o f deposit” or a
“ savings 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, by check or otherwise, prior to the date o f maturity,
which shall be not less than thirty days after the date o f the deposit,2 or
prior to the expiration o f the period o f notice which must be given by
the depositor in writing not less than thirty days in advance o f with
drawal.3*
1 A deposit with respect to which the bank merely reserves the right to require notice of
not less than 30 days before any withdrawal is made is not a “ time certificate o f deposit”
within the meaning of the above definition.
2 Deposits, such as Christmas club accounts and vacation club accounts, which are made
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 3 months constitute
“ time deposits, open account” even though some o f the deposits are made within 30 days
from the end o f such period.
3 A deposit with respect to which the bank merely reserves the right to require notice of
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.
5
(e) Savings deposits.— The term “ savings deposit” means a deposit,
evidenced by a pass book, consisting o f funds (i ) deposited to the credit
of one or m ore individuals, or o f a corporation, association or other
organization operated prim arily for religious, philanthropic, charitable,
educational, fraternal or other similar purposes and not operated for
profit,4 or (ii) in which the entire beneficial interest is held by one or
more individuals or b y such a corporation, association or other organiza
tion, and in respect to which deposit—
(1 ) The depositor is required, or may at any time be required,
by the bank to give notice in writing o f an intended withdrawal not
less than thirty days before such withdrawal is m ade;
(2 ) Withdrawals are permitted in on ly two ways, either (i) upon
presentation o f the pass book, through payment to the person pre
senting the pass book, or (ii) without presentation o f the pass book,
through payment to the depositor him self but not to any other person
whether or not acting for the depositor.5
The presentation by an officer, agent or employee of the bank o f a pass
book or a duplicate thereof retained by the bank or by any o f its officers,
agents or em ployees is not a presentation o f the pass book within the
meaning o f this regulation except where the pass book is held by the bank
as a part o f an estate o f which the bank is a trustee or other fiduciary,
or where the pass b ook is held b y the bank as security for a loan. If a
pass book is retained by the bank, it may not be delivered to any person
other than the depositor for the purpose o f enabling such person to
present the pass book in order to make a withdrawal, although the bank
may deliver the pass book to a duly authorized agent o f the depositor for
transmittal to the depositor.
Every withdrawal made upon presentation o f a pass book shall be
entered in the pass book at the time o f the withdrawal, and every other
withdrawal shall be entered in the pass book as soon as practicable after
the withdrawal is made.
( / ) Gross dem and deposits.— The term “ gross demand deposits” means
the sum o f all demand deposits, including demand deposits made by other
banks, the United States, States, counties, school districts and other gov
ernmental subdivisions and municipalities, and all outstanding certified
and officers’ checks (including checks issued by the bank in payment o f
dividen ds), letters o f credit and travelers’ checks sold fo r cash, and drafts
drawn upon or other authorizations to charge the member bank’s reserve
account at the Federal Reserve bank.*6
* Deposits in joint accounts of two or more individuals may be classified as savings de
posits if they meet the other requirements o f the above definition, but deposits o f a partner
ship operated for profit may not be so classified. Deposits to the credit of an individual of
funds in which any beneficial interest is held by a corporation, partnership, association or
other organization operated for profit or not operated primarily for religious, philanthropic,
charitable, educational, fraternal or other similar purposes may not be classified as savings
deposits.
6 Presentation o f a pass book may be made over the counter or through the m ails; and
payment may be made over the counter, through the mails or otherwise, subject to the lim
itations of paragraph (2) above as to the person to whom such payment may be made.
6
(g) Cash item s in process o f c o lle ctio n .— The term “ cash items in
process o f collection ” means—
(1 ) Checks in process o f collection, drawn on a bank, private
bank, or any other banking institution, which are payable imme
diately upon presentation in the United States, including checks with
a Federal Reserve bank in process o f collection and checks on hand
which w ill be presented fo r payment or forwarded for collection on
the follow in g business day;
(2 ) Government checks and warrants drawn on the Treasurer o f
the United States which are in process o f collection ;
(3 ) Such other items in process o f collection, payable immediately
upon presentation in the United States, as are customarily cleared
or collected by banks as cash items.
Items handled as non-cash collections may not be treated as “ cash
items in process o f collection” within the meaning o f this regulation.
( h ) N e t dem and deposits.— Tire term “ net demand deposits” means
gross demand deposits as defined in subsection ( f ) of this section less the
deductions allowed under the provisions o f subsection (b ) o f section 2
o f this regulation.
SECTION 2. COMPUTATION OF RESERVES
(a ) A m ou n ts o f reserves t o be m aintained.— Every member bank o f
the Federal Reserve System is required by law to maintain on deposit with
the Federal Reserve bank o f its district an actual net balance equal to
three percent o f its time deposits plus—
Seven percent o f its net demand deposits if not in a reserve or
central reserve city.
Ten percent o f its net demand deposits if in a reserve city, except
that if located in an outlying district o f a reserve city or in territory
added to such city by the extension o f the city’ s corporate limits such
bank may, upon the affirmative vote o f five members o f the Board
o f Governors o f the Federal Reserve System, be permitted to maintain
seven percent reserves against its net demand deposits.
Thirteen percent o f its net demand deposits if located in a central
reserve city, except that if located in an outlying district o f a central
reserve city or in territory added to such city by the extension o f
the city’s corporate limits, such bank may, upon the affirmative vote
o f five members o f the Board o f Governors o f the Federal Reserve
System, be permitted to maintain seven percent or ten percent re
serves against its net demand deposits.
Notwithstanding any other provision o f this regulation, the actual net
balance which each member bank is required to maintain on deposit with
the Federal Reserve bank o f its district in accordance with the foregoing
shall be changed by such percentage, within the limitations prescribed by
7
law.0 as the Board o f Governors o f the Federal Reserve System shall
prescribe from time to time pursuant to the sixth paragraph o f section 19
o f the Federal Reserve Act, as amended by the Banking Act o f 1935, in
order to prevent injurious credit expansion or contraction.
( b ) Deductions allowed in computing reserves.— In determining the
reserve balances required under the terms o f this regulation, member
banks may deduct from the amount o f their gross demand deposits the
amounts of balances subject to immediate withdrawal due from other
banks and cash items in process of collection as defined in subsection
(g ) o f section 1 of this regulation. Balances “ due from other banks” do
not include balances due from Federal Reserve banks, balances (payable
in dollars or otherwise) due from foreign banks or branches thereof
wherever located, or balances due from foreign branches o f domestic
banks. The word “ banks” in the term “ due from other banks” refers to
incorporated banks and does not include private banks or bankers.7
(c ) Availability o f cash items as reserve.— Cash items forwarded to
a Federal Reserve bank for collection and credit cannot be counted as
part o f the minimum reserve balance to be carried by a member bank
with its Federal Reserve bank until the expiration of such time as may
be specified in the appropriate time schedule referred to in Regulation J.
If a member bank draw against checks before such time, the draft will be
charged against its reserve balance if such balance be sufficient in amount
to pay it; but any resulting impairment o f reserve balances will be subject
to the penalties provided by law and by this regulation.
( d ) Reserves against trust funds.— A member bank exercising trust
powers need not maintain reserves against trust funds which it keeps
properly segregated as trust funds and apart from its general assets or
which it deposits in another institution to the credit of itself as trustee
or other fiduciary. If, however, such funds are mingled with the general
assets o f the bank, as permitted to national banks under authority of
section 11 (k ) o f the Federal Reserve Act, a deposit liability thereby arises
against which reserves must be maintained.
(e) Continuance of "tim e deposit” status.— A deposit which at the
time o f deposit was a “ deposit evidenced by a time certificate o f deposit” ,
“ time deposit, open account” , or “ savings deposit” continues to be a
“ time deposit” until maturity or the expiration o f the period o f notice of
withdrawal, although it has become payable within thirty days. After the
date o f maturity o f any time deposit, such deposit is a demand deposit.
After the expiration o f the period o f notice given with respect to the re
payment of any savings deposit or other time deposit, such deposit is a
demand deposit, except that, if the owner of such deposit advise the bank
6 The amount of the reserves required to be maintained by any such member bank as a
result o f any such change may not be less than the amount of the reserves specified above
nor more than twice such amount.
1 A member bank exercising fiduciary powers may not include in balances “ due from
other banks” amounts of trust funds deposited with other banks and due to it as trustee or
other fiduciary. If trust funds are deposited by the trust department of a member bank in
Its commercial or savings department and are then redeposited in another bank subject to
immediate withdrawal they may be included by the member bank in balances “ due from other
banks” , subject to the provisions o f subsection (b) above.
8
in writing that the deposit w ill not be withdrawn pursuant to such notice
or that the deposit will thereafter again be subject to the contract or re
quirements applicable to such deposit, the deposit w ill again constitute
a savings deposit or other time deposit, as the case may be, after the date
upon which such advice is received by the bank.
SECTION 3. DEFICIENCIES IN RESERVES
(a ) C om p u tation o f D eficiencies.—
(1 ) Deficiencies in reserve balances of member banks in cities
where Federal Reserve banks or branches thereof are located and in
such other reserve cities as the Board o f Governors o f the Federal
Reserve System may designate from time to time shall be computed
on the basis o f average daily net deposit balances covering semi
weekly periods. Deficiencies in reserve balances o f member banks in
all other reserve cities shall be computed on the basis o f average daily
net deposit balances covering weekly periods. Deficiencies in reserve
balances o f other member banks shall be computed on the basis o f
average daily net deposit balances covering semimonthly periods.8
(2 ) In com puting such deficiencies the required reserve balance
o f each member bank at the close o f business each day shall be
based upon its net deposit balances at the opening o f business on the
same day; and the semiweekly, weekly, and semimonthly periods
referred to in paragraph (1 ) hereof shall end at the close o f business
on days to be fixed by the Federal Reserve banks with the approval
o f the Board o f Governors o f the Federal Reserve System.
( b ) Penalties.—
(1 ) Penalties for such deficiencies w ill be assessed monthly on
the basis o f average daily deficiencies during each o f the reserve
computation periods ending in the preceding calendar month.
(2 ) Such penalties w ill be assessed at a rate o f twro percent per
annum above the Federal Reserve bank rate applicable to discounts
o f ninety day com m ercial paper fo r member banks, in effect on the
first day o f the calendar month in which the deficiencies occurred.
(c ) Notice to directors of banks deficient in reserves.— Whenever it
shall appear that a member bank is not paying due regard to the main
tenance o f its reserves, the Federal Reserve bank shall address a letter
to each director o f such bank calling attention to the situation and advising
him o f the requirements o f the law and o f this regulation regarding the
maintenance o f reserves and the personal liability o f the directors per
mitting violations o f the laws.
(d) C on tin u ed deficiencies.— If, after the notice provided fo r in sub
section (c ) o f this section 3 has been given, it shall appear that the mem
8 Deficiencies in reserve balances o f member banks in outlying sections of central reserve
and reserve cities which have been authorized by the Board o f Governors of the Federal
Reserve System, under the provisions o f subsection (a) o f section 2 of this regulation, to
maintain seven per cent reserves against demand deposits, will also be computed on the basis
of average daily net deposit balances covering semimonthly periods.
9
ber bank is continuing its failure to pay due regard to the maintenance
o f its reserves, the Federal Reserve bank shall report such fact to the
Board o f Governors o f the Federal Reserve System with a recommenda
tion as to whether or not the Board should—
(1 ) In the case o f a national bank, direct the Com ptroller o f the
Currency to bring suit to forfeit the charter o f such national bank
pursuant to section 2 o f the Federal Reserve A ct; or
(2 ) In the case o f a State member bank, institute proceedings to
require such bank to surrender its stock in the Federal Reserve bank
and to forfeit all rights and privileges o f membership pursuant to
section 9 o f the Federal Reserve A ct; or
(3 ) In either case, take such other action as the Federal Reserve
bank may recommend or the Board o f Governors o f the Federal
Reserve System may consider advisable.
SECTION 4. LOANS AND DIVIDENDS WHILE RESERVES ARE DEFICIENT
It is unlawful for any member bank the reserves o f which are deficient
to make any new loans or pay any dividends unless and until the total
reserves required by law are fu lly restored, and the payment o f penalties
for deficiencies in reserves does not exempt member banks from this p ro
hibition o f law. As provided in section 3 o f this regulation, penalties for
deficiencies in reserves are computed on the basis of the average reserve
balances for semiweekly, weekly, or semimonthly periods; but this p ro
hibition o f law applies whenever the reserves are deficient fo r one day or
more, regardless o f whether or not the average reserve balances fo r the
semiweekly, weekly, or semimonthly period are deficient.
10
A P PEN D IX
STATUTORY PROVISIONS
Section 19 o f the Federal Reserve Act provides in part as fo llo w s:
The Board of Governors of the Federal Reserve System is authorized, for the
purposes of this section, to define the terms “ demand deposits” , “ gross demand
deposits”, “ deposits payable on demand” , “ time deposits”, “savings deposits” , and
“ trust funds” , to determine what shall be deemed to be a payment of interest, and
to prescribe such rules and regulations as it may deem necessary to effectuate the
purposes of this section and prevent evasions thereof: Provided, That, within the
meaning of the provisions of this section regarding the reserves required of mem
ber banks, the term “ time deposits” shall include “ savings deposits”.
Every bank, banking association, or trust company which is or which becomes a
member of any Federal reserve bank shall establish and maintain reserve balances
with its Federal reserve bank as follows:
(a) If not in a reserve or central reserve city, as now or hereafter defined,
it shall hold and maintain with the Federal reserve bank of its district an
actual net balance equal to not less than seven per centum of the aggregate
amount of its demand deposits and three per centum of its time deposits.
(b) If in a reserve city, as now or hereafter defined, it shall hold and
maintain with the Federal reserve bank of its district an actual net balance
equal to not less than ten per centum of the aggregate amount of its demand
deposits and three per centum of its time deposits: Provided, however, That
if located in the outlying districts of a reserve city or in territory added to such
a city by the extension of its corporate charter, it may, upon the affirmative
vote of five members of the Board of Governors of the Federal Reserve System,
hold and maintain the reserve balances specified in paragraph (a) hereof.
(c) If in a central reserve city, as now or hereafter defined, it shall hold
and maintain with the Federal reserve bank of its district an actual net balance
equal to not less than thirteen per centum of the aggregate amount of its de
mand deposits and three per centum of its time deposits: Provided, however,
That if located in the outlying districts of a central reserve city or in territory
added to such city by the extension of its corporate charter, it may, upon the
affirmative vote of five members of the Board of Governors of the Federal
Reserve System, hold and maintain the reserve balances specified in para
graphs (a) or (b) thereof.
Notwithstanding the other provisions of this section, the Board of Governors of
the Federal Reserve System, upon the affirmative vote of not less than four of its
members, in order to prevent injurious credit expansion or contraction, may by
regulation change the requirements as to reserves to be maintained against demand
or time deposits or both by member banks in reserve and central reserve cities or
by member banks not in reserve or central reserve cities or by all member banks;
but the amount of the reserves required to be maintained by any such member
bank as a result of any such change shall not be less than the amount of the
reserves required by law to be maintained by such bank on the date of enactment
of the Banking Act of 1935 nor more than twice such amount.
*
*
*
*
*
*
The required balance carried by a member bank with a Federal reserve bank
may, under the regulations and subject to such penalties as may be prescribed by
the Board of Governors of the Federal Reserve System, be checked against and
withdrawn by such member bank for the purpose of meeting existing liabilities:
Provided, however, That no bank shall at any time make new loans or shall pay any
dividends unless and until the total balance required by law is fully restored.
11
In estimating the reserve balances required by this Act, member banks may de
duct from the amount of their gross demand deposits the amounts of balances due
from other banks (except Federal Reserve banks and foreign banks) and cash
items in process of collection payable immediately upon presentation in the United
States, within the meaning of these terms as defined by the Board of Governors
of the Federal Reserve System.
*
*
*
*
*
*
Notwithstanding the provisions of the First Liberty Bond Act, as amended, the
Second Liberty Bond Act, as amended, and the Third Liberty Bond Act, as
amended, member banks shall be required to maintain the same reserves against
deposits of public moneys by the United States as they are required by this section
to maintain against other deposits.
Section 11 o f the Federal Reserve A ct provides in part as fo llo w s:
The Board of Governors of the Federal Reserve System shall be authorized and
empowered: * * * * * (c) To suspend for a period not exceeding thirty days, and
from time to time to renew such suspension for periods not exceeding fifteen days,
any reserve requirements specified in this Act: Provided, That it shall establish a
graduated tax upon the amounts by which the reserve requirements of this Act
may be permitted to fall below the level hereinafter specified ***.
12
@FedFRASER