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F ed er a l R eser ve Ba n k
DALLAS, TEXAS
of
Dallas
75222
Circular No. 80-117
June 12, 1980
TECHNICAL AMENDMENT TO RULE REGARDING EARLY
WITHDRAWAL OF FUNDS FROM TIME ACCOUNTS
TO ALL MEMBER BANKS AND
OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Depository Institutions Deregulation Committee adopted a technical
amendment to its rule announced last week regarding the penalty for early withdrawal
of funds from time accounts.
The rule adopted by the Committee requires in part forfeiture of an amount
equal to three months of interest where funds are withdrawn prior to the maturity of
a time deposit of one year original maturity or less even though that much interest
may not have been earned at the time of the withdrawal.
The technical amendment announced today clarifies the intent of the
Committee that, with respect to time deposits with a maturity of less than three
months, the minimum required penalty for early withdrawal may not exceed interest
that could have been earned if the deposit were held to maturity.
The Committee's notice is attached. Questions regarding this matter should
be directed to the Consumer Affairs Section of our Bank Supervision and Regulations
Department, ext. 6171.
Sincerely yours,
Robert H. Boykin
First Vice President
Attachment
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)
DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE PRESS RELEASE
COMPTROLLER OF THE CURRENCY
FEDERAL RESERVE BOARD
FEDERAL DEPOSIT INSURANCE CO RPO RA TIO N
N ATIO NA L CREDIT U NIO N ADM INISTRATION
FEDERAL H OM E LOAN BANK BOARD
TREASURY DEPARTMENT
For immediate release
June 6, 1980
The Depository Institutions Deregulation Committee today adopted
a technical amendment to its rule announced last week regarding the penalty
for early withdrawal of funds from time accounts.
The rule adopted by the Comnittee requires in part forfeiture of
an amount equal to three months of interest where funds are withdrawn prior
to the maturity of a time deposit of one year original maturity or less
even though that much interest may not have been earned at the time of the
withdrawal.
The technical amendment announced today clarifies the intent of
the Comnittee that, with respect to time deposits with a maturity of less
than three months, the minimum required penalty for early withdrawal may not
exceed interest that could have been earned if the deposit were held to
maturity.
The Committee's notice in this matter is attached.
TITLE 12— BANKS AND BANKING
CHAPTER XII— DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE
[Docket No. D-0009]
PART 1204— INTEREST ON DEPOSITS
Penalty for Early Withdrawals of Time Deposits Funds
AGENCY:
Depository Institutions Deregulation Committee.
ACTION:
Technical amendment to final rule.
SUMMARY: This technical amendment clarifies the application of the
early withdrawal penalty rule adopted by the Depository Institutions
Deregulation Committee ("Committee”) on May 28, 1980, to withdrawals
from time deposits with original maturities of less than three months.
The rule provides that where a time deposit with an original maturity
of less than three months, or any portion thereof, is paid before maturity,
a depositor shall forfeit an amount at least equal to the amount of
interest that could have been earned on the amount withdrawn at the
nominal contract rate if the funds had remained on deposit until maturity.
EFFECTIVE DATE:
June 2, 1980.
FOR FURTHER INFORMATION CONTACT: John Hall, Attorney, Federal Home
Loan Bank Board (202/377-6466), Debra Chong, Attorney, Office of the
Comptroller of the Currency (202/447-1632), F. Douglas Birdzell, Senior
Attorney, Federal Deposit Insurance Corporation (202/389-4324), Anthony
F. Cole, Senior Attorney, Federal Reserve Board (202/452-3612), or Allan
Schott, Attorney-Advisor, Treasury Department (202/566-6798).
SUPPLEMENTARY INFORMATION: On May 28, 1980, the Committee adopted a
final rule, effective June 2, 1980, concerning the penalty for early
withdrawals of time deposit funds. The rule provides for a minimum
required penalty of a forfeiture of an amount equal to three months
of interest earned or that could have been earned, at the nominal contract
rate, on the funds withdrawn where the time deposit has an original
maturity of one year or less and six months of interest earned or that
could have been earned, at the nominal contract rate, on the funds withdrawn
where the time deposit has an original maturity of more than one year,
regardless of the length of time the funds have remained on deposit.
This amendment is intended to clarify the intent of the Committee
that where funds are withdrawn prior to maturity from a time deposit
with an original maturity of less than three months, the minimum required
penalty is the amount of interest that could have been earned at the
-2-
naninal contract rate i£ the time deposit funds had remained on deposit
to maturity. Thus, for example, where funds are withdrawn prior to
maturity from a time deposit with an original maturity of 45 days, the
minimum required penalty is the forfeiture of an amount equal to the
amount of interest at the nominal contract rate that could have been
earned on such funds for 45 days.
In view of the fact that this is a technical amendment that
clarifies the intent of the Committee's earlier action, the Committee
finds that application of the notice and public participation provisions
of 5 U.S.C. § 553 to this action would be contrary to the public interest,
and that good cause exists for making this action effective June 2,
1980.
Pursuant to its authority under Title II of Public Law 96
221, 94 Stat. 142 (12 U.S.C. 3501 et seq.), to prescribe rules governing
the payment of interest and dividends on deposits of federally insured
commercial banks, savings and loan associations and mutual savings banks,
effective June 2, 1980, the Committee amends section 1204.103 of 12
CFR Part 1204 as follows:
PART 1204— INTEREST ON DEPOSITS
§ 1204.103— Penalty for Early Withdrawals
Where a time deposit with an original maturity of three months
or more to one year, or any portion thereof, is paid before maturity,
a depositor shall forfeit an amount at least equal to three months of
interest earned, or that could have been earned, on the amount withdrawn
at the nominal (simple interest) rate being paid on the deposit, regardless
of the length of time the funds withdrawn have remained on deposit.
Where a time deposit with an original maturity of less than three months,
or any portion thereof, is paid before maturity, a
depositor shall
forfeit
an amount at least equal to the amount of interest
that could have
been
earned on the amount withdrawn at the nominal (simple interest) rate
being paid on the deposit had the funds remained on deposit until maturity.
Where a time deposit with an original maturity of more than one year,
or any portion thereof, is paid before maturity, a
depositor shall
forfeit
an amount at least equal to six months of interest
earned, or that
could
have been earned, on the amount withdrawn at the nominal (simple interest)
rate being paid on the deposit, regardless of the length of time the
funds withdrawn have remained on deposit.
By order of the Committee, June 6, 1980.
(Signed)
Normand R. V. Bernard
Normand R. V. Bernard
Executive Secretary of the Committee
[SEAL]
