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federal Reserv e Bank o f Dallas DALLAS, TEXAS 75222 Circular No. 80-141 July 21, 1980 REVISION OF PROPOSED REGULATION D RESERVES OF DEPOSITORY INSTITUTIONS (Including U. S. Branches and Agencies of Foreign Banks And Edge Act and Agreement Corporations That Have Transaction Accounts or Nonpersonal Time Deposits) TO ALL BANKS, BANK HOLDING COMPANIES, AND OTHER FINANCIAL INSTITUTIONS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Printed on the following pages is a press release and a portion of the proposed Regulation D which has been amended effective July 11, 1980. The amendment to the proposed Regulation changes the date on which a depository institution would be required to include a specific statement on the face of a time deposit instrument issued to and held by a natural person that it is not transferable in order for the time deposit to be regarded as a personal time deposit exempt from reserve requirements. This date has been changed from July 15 1980 to September 1, 1980. This action is the result of a significant number of comments from depository institutions that they are unable to indicate on their time deposits for July 15, 1980 that they are not transferable. Consequently, in order to avoid any undue hardships to depository institutions in meeting this requirement, the Board is revising its proposed definition of nonpersonal time deposits by changing the date on or after which a statement that a time deposit issued to and held by a natural person must include a statement that it is not transferable in order to be exempt from reserve requirements on nopersonal time deposits from July 15, 1980 to September 1, 1980. Additional copies of this revision will be furnished upon request to the Bank and Public Information Department, Ext. 6266. Questions regarding the proposed Regulation D changes may be directed to Richard D. Ingram, Assistant Vice President, Ext. 6333, or the officer in charge of the Accounting Department at the El Paso, Houston, or San Antonio Branches. Sincerely yours, Robert H. Boykin First Vice President Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE press release For immediate release July 11, 1980 The Federal Reserve Board today announced a revision of its proposed Regulation D — Reserve Requirements of Depository Institutions — affecting a notice that may be placed on certain time deposits. The revision changes the date — from July 15 to September 1, 1980 -- on which, for reserve requirement purposes, a depository institution issuing a time deposit agreement to and for the benefit of a natural person must affix to the agreement a legend that the time deposit instrument is not transferable. Such a legend has the effect of making the deposit a personal time deposit exempt from the reserve requirements applying to nonpersonal time deposits. In proposals made in early June for the general overhaul of reserve requirement rules under the Monetary Control Act of 1980, the Board proposed that time deposits issued to natural persons before July 15 in amounts less than $100,000 would be regarded as personal time deposits even if they were transferable. At the request of depositories for more time to alter the face of their time deposit agreements, the Board has extended this period to September 1. The period for comment on the Board's reserve requirement proposals remains through July 15. Attachment. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [12 CFR Part 204] (Docket No. R-0306) Revision of Notice of Proposed Rulemaking RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS AGENCY: Board of Governors of the Federal Reserve System. ACTION: Revision to proposed rulemaking. SUMMARY: The Board of Governors has revised its proposed Regulation D, Reserve Requirements of Depository Institutions (12 CFR Part 204) (45 Fed. Reg. 38388) to change the date on which a depository institution would be required to include a specific statement on the face of a time deposit instrument issued to and held by a natural person that it is not transferable in order for the time deposit to be regarded as a per sonal time deposit exempt from reserve requirements. This date has been changed from July 15, 1980 to September lf 1980. DATE: The proposed regulation is amended effective July llf 1980; how ever, the public comment period on proposed Regulation D shall terminate on July 15f 1980. FOR FURTHER INFORMATION CONTACT: Gilbert T. Schwartz, Assistant General Counsel (202/452-3625), or Paul S. Pilecki, Attorney (202/452-3281), Legal Division, Board of Governors of the Federal Reserve System, Wash ington, D. C. 20551. SUPPLEMENTARY INFORMATION: On June 4, 1980, the Board published for public comment a proposed Regulation D— Reserve Requirements of Depository Institutions (12 CFR Part 204) (45 Fed. Reg. 38388) to implement the reserve requirement provisions of the Monetary Control Act of 1980 (Title I of P. L. 96-221). The Act imposes Federal reserve requirements on all depository institutions that maintain transaction accounts or nonpersonal time deposits. The Act defines "nonpersonal time deposit" as a transferable time deposit or a time deposit representing funds deposited to the credit of or in which any beneficial interest is held by a depositor which is not a natural person. A nontransferable time deposit in which the entire beneficial interest is held by and is deposited solely to the credit of a natural person would not be subject to reserve requirements. Accordingly, time deposits, including credit union share certificates, that are issued in transferable form could be regarded as nonpersonal time deposits because of the transferability feature. - 2 - Since the provision in the Act was intended to prevent the evasion of reserve requirements through the transfer of time deposits from individuals to organizations or governmental units, the Board pro posed to exclude from the definition of nonpersonal time deposits a time deposit issued to a natural person on or after July 15, 1980, only if it includes on the face of the deposit instrument a specific statement that it is not transferable. A time deposit issued before July 15, 1980, to a natural person in a denomination of less than $100,000 would be regarded as a personal time deposit even if it were transferable. The Board has received a significant number of comments from depository institutions that they are unable to indicate on their time deposits by July 15, 1980, that they are not transferable. Consequently, in order to avoid any undue hardships to depository institutions in meeting this requirement, the Board is revising its proposed definition of nonpersonal time deposits by changing the date on or after which a statement that a time deposit issued to and held by a natural person must include a statement that it is not transferable in order to be exempt from reserve requirements on nonpersonal time deposits from July 15, 1980 to September 1, 1980. In addition, the Board has received questions concerning the definition of "transferable" for purposes of Regulation D. At the time final action is taken on the proposed regulation, the Board will clarify the specific types of transactions that would be regarded as transfers under Regulation D. Pursuant to authority under section 19 of the Federal Reserve Act (12 U.S.C. § 461 et seq.) as amended by the Monetary Contol Act of 1980 (Title I, P. L. 96-221; 94 Stat. 132), the Board revises Federal Register Doc. No. 80-17449 which appeared in the edition for Tuesday, June 9, 1980, as follows: 1. At vol. 45, page 38390, in the second column at the bottom by striking out "July 15, 1980" in both places that it appears and inserting in lieu thereof "September 1, 1980". 2. At vol. 45, page 38396, in the third column, by striking out in §§ 204.2(f) (3) and (4) of proposed Regulation D "July 15, 1980" in both places that it appears and inserting in lieu thereof "September 1, 1980". By order of the Board of Governors, July 11, 1980. (Signed) Griffith L. Garwood Griffith L. Garwood Deputy Secretary of the Board [SEAL]