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F ederal r e ser v e Bank o f Dallas
DALLAS, TEXAS

75222

C i r c u l a r No. 78-57
May 15, 1978

TREASURY TAX AND LOAN INVESTMENT PROGRAM

TO THE CHIEF EXECUTIVE OFFICER, EACH BANK
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed a r e the final r u l e s , d e p o s i t a r y ' s m an u al, maximum b alan ce
form, a n d option form c o v e r in g the new T r e a s u r y T a x a n d Loan Investm ent P r o ­
gram w hic h will be implemented J u l y 6, 1978. Your staff involved in this p r o ­
gra m sh ou ld re v ie w the en clo se d material c lo s e ly , a n d all q u e s tio n s should be
d i r e c t e d to th e officer a t the Federal R e s e r v e Bank s e r v i c i n g the a r e a in whic h
you a r e located:
Dallas Office
El Paso B ra n c h
Houston B ra n c h
San Antonio B ra n c h

J a c k A.
Joel L.
Sammie
Thom as

C lym er
Koonce
C. Clay
C. Cole

Ext.
(915)
(713)
(512)

6340
544-4730
659-4433
224-2141

In o r d e r to allow suffic ie nt p r o c e s s i n g time, the e n closed Election of
Option Form sh o uld be completed a n d r e t u r n e d to the Fiscal A g e n cy D epartm ent at
the Dallas Office by J u n e 1 . If the form is not r e c e iv e d by the d e a d l in e , y o u r b a n k
will be p la c ed in th e Remittance Option. All late forms in dicating the Note Option
will be effected th e n e x t r e p o r t i n g cycle b e g i n n i n g A u g u s t 3.
S hould y o u r b a n k e le ct th e Note Option u n d e r the new p ro g r a m , the
en clo se d form FA-1038, "Maximum Balance Limitation," sh o u ld be completed a nd
r e t u r n e d with th e Election of Option Form. Banks w hich s ele c t the Note Option b ut
fail to r e t u r n form FA-1038 will h a v e th e ir d e p o s it c e i lin g s set a c c o r d in g to th e ir
collate ral p le d g e d . Deposits in e x c e s s of collateral shall be w ith d ra w n without
p r i o r notice.
N umerous m eetin g s ha ve be en c o nd u cted in the Eleventh D istrict c o n ­
c e r n i n g th e In v e stm e n t P r o g ra m , a n d many q u e s tio n s ha ve b e en r a is e d by b a n k e r s
c o n c e r n in g diff e r e n t a p p lic a t io n s . In o r d e r to g iv e all b a n k s the benefit of t h e s e
q u e s t i o n s a n d a n s w e r s , a c i r c u l a r le tter will be d i s t r i b u t e d in J u n e o u tlin in g the
s u b je c ts c o n c e r n e d .

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800 -492 -440 3 (intrastate) and 1-8 00-527-4970 (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)

-

2

-

It sho u ld be noted th a t th e J u l y 6 implementation d a te is effective only if
C o n g r e s s has a p p r o p r i a t e d fu n d s to c o v e r th e pa y m e n t of fees for s e r v i c e s r e n ­
d e r e d a s p r o v i d e d in the r e g u l a t i o n s . If C o n g r e s s does not a p p r o p r i a t e fu n d s for
fee p a y m e n ts by J u n e 16, 1978, we will notify you of the p o stp o nem en t.
S in c e r e ly y o u r s ,
R obert H . Boykin
F ir st Vice P r e s i d e n t
E n c lo s u re s

DEPARTMENT OF THE TREASURY
FISCAL SERVICE
BUREAU OF GOVERNMENT FINANCIAL OPERATIONS
WASHINGTON, D C 20226

O FFIC E
OF THE
C O M M ISSIO N ER

TREASURY FISCAL REQUIREMENTS MANUAL FOR
GUIDANCE OF FEDERAL RESERVE BANKS AND DEPOSITARIES
BULLETIN NO.

78-03

RETENTION:

Until Further Notice

TO FEDERAL RESERVE BANKS, DEPOSITARIES AND OTHERS CONCERNED:

1.

PURPOSE

These Procedural In stru ctio n s fo r
Depositaries supplement the provisions
and Loan D epositaries, and 31 CFR 214,
and should be read in conjunction with
2.

Treasury Tax and Loan
o f 31 CFR 203, Treasury Tax
Depositaries fo r Federal T axes,.
those reg u la tio n s.

INTEREST O N
N OTE BALANCES

This supplements the provisions of 31 CFR 203.9(e) and 203.13 to
provide guidelines concerning the computation of i n t e r e s t on note
balances as follows:
A.
The amount o f i n t e r e s t due w ill be determined by
applying the weekly i n t e r e s t r a te fa c to r to the average
amount o f the note balance for each week o f the reporting
cycle. These c a lc u la tio n s will be completed by the Federal
Reserve bank on the 20th o f each month (or
the p rio r
business day i f the 20th i s a non-business
day) for
tran sac tio n s o f the just-completed reporting cycle.
B.
The average amount o f the note balance fo r each week
w ill be determined by dividing the to ta l o f the d a ily closing
note balances by seven (7 ). The weekly period begins on
Thursday and ends on the following Wednesday. The balance
a t the close o f business on Friday will bec a rrie d forward
fo r Saturday and Sunday. For o th er Federal Reserve bank
non-business days, the previous business day's balance will
be c a rrie d forward as the balance fo r the non-business day.
C.
The i n t e r e s t will be computed using the following
formula: the average Federal funds r a te fo r the corresponding
weekly period quoted as a percentage to two decimal places,
le s s 25 basis points (1/4 of 1%), x (times) the applicable
number o f days fo r which i n t e r e s t is being computed, *
(divided by) 360 days. The fin al fa c to r w ill be rounded to
f iv e decimal places. The f i f t h number to the rig h t o f the
decimal point will be rounded to the next higher number i f
the six th number to the r ig h t of the decimal p oint i s 6, 7,
, 307

T R A N S M IT T A L L E T T E R NO.

-2-

•

8, or 9, or to the next lower number i f the six th number to
the rig h t of the decimal point is 1, 2, 3, 4, or 5.
D.
W
hen the average note balance for a week is $25,000 or
l e s s , the f i r s t $5,000 will be exempt from the i n te r e s t
computation.

3.

LATE FEE

This supplements the provisions o f 31 CFR 203-10(b)(1 ) ( i i ) to
provide guidelines concerning the computation of the l a t e fee as
follows:
A.
The amount o f the l a t e fee will be determined by multiplying
the amount o f each l a t e advice of c re d it by the rela te d daily
i n te r e s t ra te fa c to r for each day the advice of c r e d i t is l a t e .
The d a ily i n t e r e s t r a te fa c to r shall be determined in accordance
with the formula sta te d a t Section 2(C) of these procedural
in s tru c tio n s .
B.
Calculation of the amount of l a t e fees due w ill be performed
by the Federal Reserve bank on the 20th of each month (or the
p rio r business day i f the 20th is a non-business day) for
tran sactio n s which occurred during the just-completed reporting
cycle.
4.

ANALYSIS CREDIT

This supplements the provisions o f 31 CFR 2 0 3 .1 0 ( b )( 2 )( ii) to
provide guidelines concerning the computation of the analy sis c re d it
as follows:
A.
The Federal Reserve bank will determine fo r each week o f a
reporting cycle the average d a ily volume o f the amount of funds
in t r a n s i t between the Remittance Option - Class 2 depositary
and the Federal Reserve bank which is in excess of one business
day.
B.
The Federal Reserve bank will m ultiply th a t average balance
by the i n t e r e s t ra te fa c to r fo r the corresponding week. The
weekly i n t e r e s t ra te fa c to r will be determined in accordance
with the formula stated a t Section 2(C) o f these procedural
in stru c tio n s .

-3 -

C.
The analysis c re d it fo r each week o f the reporting cycle
will be to ta le d fo r the reporting cycle.
D.
Analysis c re d it c alcu la tio n s w ill be performed by the Federal
Reserve bank on the 20th o f each month (or the p r io r business day
i f the 20th is a non-business day) fo r the just-completed reporting
cycle.
5.

COM
PENSATION TO THE DEPOSITARY

This supplements the provisions o f 31 CFR 203.14 and 214.6(b) to
provide guidelines concerning the determination o f the amount o f
compensation due each depositary and the method o f payment.
On the 20th o f each month (or the p r io r business day i f the 20th
is a non-business day) the Federal Reserve bank w ill compute the
amount o f compensation due to the depositary and Include th a t amount
In a monthly statement to be Issued t h a t day. Compensation due
Note Option and Remittance Option - Class 1 d e p o sita rie s w ill be
computed by m ultiplying the number of Federal tax deposit forms
processed by the depositary and received and f u l ly processed by the
Internal Revenue serv ice center during a calendar month by the fee of
$.50 ( f i f t y c e n ts ) . The amount o f compensation due Remittance Option Class 2 d e p o sita rie s w ill be computed by multiplying the number o f
Federal tax deposit forms processed by the depositary and received and
f u l ly processed by the Internal Revenue service c en ter during a calendar
month by $.50 ( f i f t y cents) and reducing the r e s u l t by the analysis
c r e d it described in Section 4 of these procedural in s t r u c t i o n s . I f the
t o ta l amount of the analysis c re d it i s g re a te r than the compensation
due fo r services rendered, no compensation w ill be paid and no charge
w ill be made to the depositary.
On the 25th o f each month (or the next business day i f the 25th Is
a non-business day) the Federal Reserve bank w ill make payment through
a d e p o sita ry 's reserve account or the reserve account o f a member^bank
correspondent.
Compensation to q u a lifie d agents fo r the issuance o f U.S. Savings
Bonds, Series E and the redemption of U.S. Savings Bonds and Notes will
be handled sep arately under procedures e stablished by the Bureau of the
Public Debt, Department o f the Treasury.

-4-

The monthly statement will include the following information
concerning the compensation to be paid: the number o f Federal tax
deposit forms upon which the compensation i s based; the fee f a c t o r ; and,
the t o t a l compensation to be p aid. The monthly statement prepared
fo r Remittance Option - Class 2 d e p o s i ta r i e s w ill specify the to ta l of
the a n a ly s is c r e d i t assessed and the amount of any compensation due to
the deposita ry by Treasury a f t e r applying the a n a ly s is c r e d i t .
6.

PAYM
ENTS TO THE TREASURY
This supplements the provisions of 31 CFR 203.9(e) and 203.10(b)

(1 ) ( 11).

Payments by a dep o s ita ry to the Treasury will be c o ll e c te d through
the Federal Reserve bank.
On the 20th of each month (or the p r i o r business day i f the 20th
is a non-business day) the Federal Reserve bank w ill compute payments
due the Treasury and in c lu d e information supporting the payments due
in the monthly statement to be issued t h a t day. Payments due by a
Note Option d e p o s ita ry will be computed as s p e c i f ie d in Section 2 of
these procedural i n s t r u c t i o n s ; a Remittance Option - Class 1 d e p o s ita ry ,
Section 3.
On the 25th o f each month (or the next business day i f the 25th
i s a non-business day) the Federal Reserve bank w ill e f f e c t the pay­
ments due the Treasury. The Federal Reserve bank will e f f e c t the pay­
ments through a d e p o s i t a r y ' s reserve account o r the reserve account o f
a member-bank correspondent.
7.

DIRECT INVESTMENTS
(Reserved f o r f u t u r e u s e .)

8.

CLASSIFICATION OF NOTE OPTION DEPOSITARIES

This supplements the provisions o f 31 CFR 203 to provide gu id elin es
concerning the c l a s s i f i c a t i o n o f d e p o s i t a r i e s .
Note Option d e p o s i t a r i e s will be placed in to Classes A, B, or C,
depending upon the t o t a l c r e d i t s to the Treasury tax and loan account
during the preceding calendar y e a r . The c l a s s i f i c a t i o n c r i t e r i a
a p p lic a b le a t the p r e se n t time are based upon the t o t a l c r e d i t s to a
d e p o s i ta r y 's tax and loan account during calendar y e a r 1977 and are as
follows:

-5-

1.
Class C - D epositaries which had $80,000,000 or more
in c r e d i t s and whose t o t a l d ep o s it l i a b i l i t i e s (both demand
and time) exceeded $60,000,000 a t ca le n d a r-y e a r end.
2.
Class B - D epositaries which had $7,500,000 or more
but l e s s than $80,000,000 in c r e d i t s , and d e p o s i t a r i e s
which had $80,000,000 o r more in c r e d i t s but whose t o t a l
l i a b i l i t i e s (both demand and time) were $60,000,000 o r l e s s
a t calendar-year end.
3.
Class A - D epositaries which had l e s s than $7,500,000 in
credits.
A newly-designated dep o s ita ry will be placed in to Class A i f i t
s e l e c t s the Note Option.
9.

BASIS FOR DETERMINING REM
ITTANCE OPTION CATEGORIES

This supplements the provisions of 31 CFR 203.10(b) to provide
additional g u id e lin e s concerning the subdivision o f Remittance Option
d e p o s i ta r i e s .
As o f the e f f e c t i v e date o f the tax and loan investment program,
Remittance Option d e p o s i t a r i e s w ill be placed in t o Class 1 or Class 2
depending upon the t o t a l c r e d i t s to the Treasury tax and loan account
during the preceding calendar y e a r . The c l a s s i f i c a t i o n c r i t e r i a for
the Remittance Option C lasses, to be a p p lic a b le as o f the e f f e c t i v e
d a te , a re based upon the t o t a l c r e d i t s to a d e p o s i t a r y ' s tax and loan
account during calendar y ear 1977 and a re as follows:
1.
Class 1 - D epositaries which had $1,500,000 o r more in
credits.
2.
Class 2 - D epositaries which had le s s than $1,500,000 in
credits.
A newly-designated d e p o s ita ry will be placed in to Class 2 i f i t
s e l e c t s the Remittance Option.
10.

REM
ITTANCE OPTION - CLASS 2 DEPOSIT FLO
W
This supplements the p rovisio ns of 31 CFR 2 0 3 . 1 0 ( b ) ( 2 ) ( i i i ) .

-6

I f a t any time during the year a d e p o sita ry 's r a te o f flow of
deposits to i t s tax and loan account during the preceding th ree
reporting cycles exceeds, on an annualized b a s is , $3 m illio n , the
depositary w ill autom atically be tra n s fe rre d out of Remittance Option Class 2.
The Federal Reserve bank w ill issue on or about the 20th o f the
month a notice to the depositary advising o f the need fo r the change
in sta tu s and requesting the depositary to in d icate whether i t wishes
to e le c t the Note Option in lie u of tra n s fe rrin g to the Remittance
Option - Class 1. I f the Federal Reserve bank does not receive the
d e p o sita ry 's response by the 20th of the following month (or the
preceding business day i f the 20th i s a non-business day), the
depositary w ill autom atically be considered subject to the provisions
applicable to the Remittance Option - Class 1, as of the f i r s t day of
the next reporting cycle.
11.

CHANGES OF OPTION

This supplements the provisions of 31 CFR 203.12 to provide
guidelines concerning changes in options by d e p o sita rie s.
A depositary may change from one option to another a f t e r providing
due notice to the Federal Reserve bank of the d i s t r i c t . A change in
option w ill become e ffe c tiv e as of the f i r s t day of the next reporting
cycle following re c e ip t of such notice provided t h a t notice is received
by the Federal Reserve bank of the d i s t r i c t not l a t e r than the 20th o f
month. The depositary is subject to the provisions of the ex istin g
option u n til i t receives formal n o tif ic a tio n from the Federal Reserve
bank o f the change in o ptions. All changes w ill be e ffe c tiv e as o f
the beginning of a reporting cycle. This provision is intended to
afford d ep o sita ries the opportunity to change options on an occasional
b a s is . Frequent changes of option are not acceptable. The s p e c ific
guidelines are as follows:
A.
When a Note Option depositary wishes to convert to a
Remittance Option depositary, the following procedures w ill apply:
1.

The depositary will submit to the Federal Reserve bank
of i t s d i s t r i c t w ritte n n o tif ic a tio n requesting the
change in option by the 2Qth of any month fo r the change
to be e ffe c tiv e the next reporting cycle.

-7 -

2.

The Federal Reserve bank w ill provide the depositary
notice of the e ffe c tiv e date of the change in option.

3.

On the e ffe c tiv e date o f the change to the Remittance
Option, the balance in the note as recorded on the books
of the Federal Reserve bank w ill be withdrawn (including
a l l funds which have been called fo r payment on a date
l a t e r than the e ffe c tiv e date of the change in option
but not y e t p a id ).

4.

A depositary w ill be placed in Class 1 or Class 2 on the
basis o f the to ta l c r e d its to i t s Treasury tax and loan
account during the preceding calendar year as specified
in Section 9 of these procedural in s tr u c tio n s .

5.

All advices of c re d it received by the Federal Reserve
bank on and a f t e r the e ffe c tiv e date will be processed
in accordance with the provisions of the Remittance
Option.

B.
When a Remittance Option depositary wishes to convert to a Note
Option depositary, the following procedures w ill apply:
1.

The depositary w ill submit to the Federal Reserve bank
of i t s d i s t r i c t w ritten n o tific a tio n requesting the
change in option by the 20th of any month fo r the change
to be e ffe c tiv e the next reporting cycle.

2.

The Federal Reserve bank will provide the depositary
notice o f the e ffe c tiv e date of the change in option.

3.

On and a f t e r the e ffe c tiv e date of the change to the
Note Option, a ll advices of c re d it received by the Federal
Reserve bank and dated on or a f t e r the e ffe c tiv e date
will be processed in accordance with the provisions of
the Note Option.

4.

Each advice of c re d it dated p r io r to the e ffe c tiv e d a te ,
but received a f t e r the e ffe c tiv e date, w ill be subject
to the Remittance Option requirements f o r the period
of time from the date o f the advice o f c r e d it u n til the
e ffe c tiv e date of the change in option. Therefore, i f
m assessment of l a t e charges is in order, the charges
will be assessed fo r the period of time p r io r to the
e ffe c tiv e date of the change in option. The amount of
such advices w ill be added to the note account as of the
e ffe c tiv e date o f the change in options.

-8-

5.The depositary will be placed in
the appropriate Class,
A, B, or C, based upon the to ta l c re d its to i t s Treasury
tax and loan account during the preceding calendar year
and prevailin g c la s s if i c a t io n c r i t e r i a specified in
Section 8 of these procedural in s tru c tio n s .
12.

DATING A D FORW IN
N
ARD G

This supplements the provisions of 31 CFR 214.6 to provide
guidelines fo r dating and forwarding Federal tax deposits received by
d e p o sita rie s a f t e r normal banking hours and on Saturday.
I f a depositary on a week day has established a c u to ff time a f t e r
which accounting fo r items or deposits of money received are dated as of
the d e p o sita ry 's next business day, the following procedures will apply
f o r the dating and forwarding of tax deposits:
A.
I f the c u to ff time i s no e a r l i e r than 2:00 p.m. (local time)
the depositary may date the tax deposit as o f the following business
day o f the depositary and include the deposit in advices of c r e d i t
rem itted to the Federal Reserve bank on
t h a t day.
B.
I f a depositary is able to include a deposit received a f t e r
i t s normal c u to f f hour in i t s c u rrent calendar day's remittance
to the Federal Reserve bank, i t may date such tax deposit with the
c u rren t date and include i t in i t s c u rrent day's advices of c r e d i t .
I f a depositary is open on Saturday but uses the following business
day as an accounting d a te , the same guidelines apply; i . e . , the tax
deposits may be dated with Saturday's date i f the depositary is able to
send an advice of c r e d i t forward th a t day. Otherwise, the deposit may be
dated as o f the d e p o sita ry 's following business day and included in th a t
business day's remittance.
In every instance, the date placed on the Treasury Form 2284,
Advice o f C red it, and the date placed on each Federal tax deposit form
will be the same.
13.

INQUIRIES

Inquiries concerning operating procedures contained in these
procedural in s tru c tio n s should be d irected to the Federal Reserve bank
o r branch in whose t e r r i t o r y the depositary is located.

-9-

Inquiries concerning operating procedures t h a t require
c l a r i f i c a t i o n from Treasury should be directed to:
Special Financing S ta ff
Bureau of Government Financial Operations
Department o f the Treasury
Treasury Annex No. 1
Washington, D.C.
20226
(Telephone: 202-566-5125)
14.

APPENDIX

Appendix No. 1 to these procedural in s tru c tio n s provides the
s p e c ific dates fo r the reporting cycles through December 1979.

D. A.
Conmi

Appendix No. 1

REPORTING CYCLES - TT& INVESTM
L
ENT PR G A
ORM
JULY - D
ECEM
BER 1978
JANUARY - DECEM
BER 1979

Year
1978

Reporting Cycle
Nunber and
Month

Dates of
F irs t
Week

Dates o f
Second
Week

Dates of
Third
Week

Dates of
Fourth
Week

1
2
3
4
5
6

-

JULY
A G ST
UU
SEPT.
OCT.
NOV. DEC.

7/6-12
8/3-9
9/7-13
10/5-11
11/2-8
12/7-13

7/13-19
8/10-16
9/14-20
10/12-18
11/9-15
12/14-20

7/20-26
8/17-23
9/21-27
10/19-25
11/16-22
12/21-27

7/27-8/2
8/24-30
9/28-10/4
10/26-11/1
11/23-29
12/28-1/3/79

1
2
3
4
5
6
7
8
9
10
11
12

-

JAN.
FEB.
MRH
AC
APRIL
MY
A
JUNE
JULY
A U
UG ST
SEP.
OCT.
NOV.
DEC.

1/4-10
2/1-7
3/1-7
4/5-11
5/3-9
6/7-13
7/5-11
8/2-8
9/6-12
10/4-10
11/1-7
12/6-12

1/11-17
2/8-14
3/8-14
4/12-18
5/10-16
6/14-20
7/12-18
8/9-15
9/13-19
10/11-17
11/8-14
12/13-19

1/18-24
2/15-21
3/15-21
4/19-25
5/17-23
6/21-27
7/19-25
8/16-22
9/20-26
10/18-24
11/15-21
12/20-26

1/25-31
2/22-28
3/22-28
4/26-5/2
5/24-30
6/28-7/4
7/26-8/1
8/23-29
9/27-10/3
10/25-31
11/22-28
12/27-1/2/80

Dates of
Fifth
Week
8/31-9/6
11/30-12/6

1979
3/29-4/4
5/31-6/6
8/30-9/5
11/29-12/5

INSTRUCTIONS FOR THE ELECTION OF OPTION FORM
1. Tax and loan depositaries wishing to continue to participate in
the Treasury tax and loan account system should check the appropriate box
for the option selected, i.e., the Note Option O R the Remittance Option.
Financial institutions wishing to withdraw from the Treasury tax and loan
account system should check the appropriate box, i.e., Termination.
Unless
it indicates that it wishes to terminate its authority to maintain a
Treasury tax and loan account, a depositary which submits an executed
Election of Option Form to the Federal Reserve Bank thereby affirms both
its intent to be bound by its depositary contracts with the Treasury and
its understanding that the terms of those contracts are the provisions of
31 CFR Parts 203 and 214, and any instructions or supplements issued there­
under, together with any amendments to such regulations, instructions or
supplements hereafter made.
2.
Form and
acccount
Treasury
Option.

N.B.:
A designated depositary which does not complete this
which continues to credit deposits to its Treasury tax and loan
will be deemed to (a) wish to continue its participation in the
tdx and loan account system, and (b) have chosen the Remittance
(See 31 CFR 203.11(b)).

3. An original and two copies of the Election of Option Form (the
face of the Form) should be executed by a depositary.
The depositary
should retain for its files one copy, and send to the Federal Reserve Bank
of the District the original and other copy.
After receipt and processing
of an executed Form, choosing either the Note Option or the Remittance
Option, the Federal Reserve Bank will complete and return to the depositary
the notice letter on the obverse of the original of the Form thereby advising
the depositary of the effective date of the Option elected.
The Federal
Reserve Bank will retain the other copy. After receipt and processing of
an executed Form choosing Termination, the Federal Reserve Bank will by a
separate notice letter notify the depositary of the effective date of the
Termination.
The Federal Reserve Bank will retain a copy of the notice letter
4. Depositaries electing the Remittance Option will be subdivided into
Class 1 and Class 2 depending upon the volume of deposits credited to their
Treasury tax and loan accounts during the previous calendar year.
Deposi­
taries which during the prior calendar year processed credits of $1.5
million or more to their tax and loam accounts will be placed in Remittance
Option - Class 1. Tax and loan depositaries which during the prior
calendar year processed credits to their tax and loan accounts of less
than $1.5 million will be placed in Remittance Option - Class 2.
(See 31
C FR 203.10).
5. A depositary may change from one option to another after due
notice to the Federal Reserve Bank of the District by means of executing
a new Election of Option Form.
The depositary will be subject to the
provisions of the existing option until it receives formal notification
from that Federal Reserve Bank that the change has been effected.
(See 31
CFR 203.12) .

ELECTION OF OPTION
TO:

The Federal Reserve Bank of ____ ___________________________ #
acting as Fiscal Agent of the United States.

The undersigned financial institution, a Treasury tax and
loan depositary designated in accordance with 31 CFR Part 203,
hereby elects, pursuant to 31 CFR Part 203 and as of the effective
date of the Treasury tax and loan account investment program, to
administer a Treasury tax and loan account under the option
checked below, or hereby elects to have its designation revoked.
In addition, by the signature affixed below, the undersigned
financial institution expressly agrees to function its Treasury
tax and loan account in accord with the provisions of 31 CFR
Parts 203 and 214, the provisions of any instructions or supple­
ments issued thereunder, and with any amendments hereafter made
to such regulations, instructions or supplements.
/~~7 Note Option (under which funds debited to a depositary's
Treasury tax and loan account are added by the Treasury
to its investment in obligations of the depositary, as
evidenced by open-ended interest-bearing notes; (
See 31
CFR 203.2(h) and 203.9).
OR

.—j Remittance Option (under which funds equivalent to the
L-J amount of deposits credited by a Treasury tax and loan
depositary to its Treasury tax and loan account will be
withdrawn by the Federal Reserve Bank of its district
immediately upon receipt by the Federal Reserve Bank of
the advices of credit supporting such deposits; (
See 31
CFR 203.2 (
j) and 203.10).
OR
/~7 Termination (See 31 CFR 203.16(b)).
IN WITNESS WHEREOF The undersigned has caused the signature of its
officer below-named and its corporate seal, duly attested, to be
affixed hereto this ____________________ day of ___________ > 19__
intending to be legally bound hereby.
(Name of Financial Institution)
*

By
(Signature)
SEAL

_____
(Typed Name)

(Title)
Attestation:

I hereby attest that ________________ __________ » the
(Typed Name)
___________________ of the said
_______________ __ ____
• has
(Title)
(Name of Financial Institution)
full authority to execute this form and fully to bind the said
(Name of Financial Institution)
(Name of Financial Institution)
DATE:
(Signature)
(Typed Name)
(Title)

*The officer signing here shall not be the officer signing
the Attestation.

LETTER FROM THE FEDERAL RESERVE BANK OF THE D IST R IC T
NOTIFYING A DEPOSITARY OF THE EFFECTIVE DATE OF THE OPTION SELECTED

Date:

Dear
We have received your "Election of Option" form dated
You are hereby notified that
effective as of the opening of business on __________________
1978, your institution will be considered to be administering
its Treasury tax and loan account, pursuant to its depositary
contracts under 31 CFR Parts 203 and 214, and instructions
and supplements issued thereunder, and in accordance with the
________________ Option Class______ 1/(31 CFR part 203._____ 2/)

Federal Reserve Bank of
Acting as Fiscal Agent of the
United States

By_
(Signature)

(Type d Name)

(Title)

TO:

1/ Insert either "Note" or "Remittance," as appropriate.
If
"Remittance" is appropriate, also insert "Class 1" or "Class 2
2/

In se r t e ith e r

9 fo r

N o te O p tio n ,

or

10

fo r

R e m itta n c e O p tio n

election of option

TO:

The Federal Reserve Bank of
____________
acting as Fiscal Agent of the United States.

The undersigned financial institution, a Treasury tax and
loan depositary designated in accordance with 31 CFR Part 203,
hereby elects, pursuant to 31 CFR Part 203 and as of the effective
date of the Treasury tax and loan account investment program, to
administer a Treasury tax and loan account under the option
checked below, or hereby elects to have its designation revoked.
In addition, by the signature affixed below, the undersigned
financial institution expressly agrees to function its Treasury
tax and loan account in accord with the provisions of 31 CFR
Parts 203 and 214, the provisions of any instructions or supple­
ments issued thereunder, and with any amendments hereafter made
to such regulations, instructions or supplements.

/~7

Note Option (under which funds debited to a depositary's
Treasury tax and loan account are added by the Treasury
to its investment in obligations of the depositary, as
evidenced by open-ended interest-bearing notes; (
See 31
CFR 203.2(h) and 203.9).
OR

.—j
< >
—

Remittance Option (under which funds equivalent to the
amount of deposits credited by a Treasury tax and loan
depositary to its Treasury tax and loan account will be
withdrawn by the Federal Reserve Bank of its district
immediately upon receipt by the Federal Reserve Bank of
the advices of credit supporting such deposits; (
See 31
CFR 203.2(j) and 203.10).
'
OR

/~7

Termination (See 31 CFR 203.16(b)).

IN WITNESS WHEREOF The undersigned has caused the signature of its
officer below-named and its corporate seal, duly attested, to be
___________ . 19_
#
_
affixed hereto this _____________________ day of _
intending to be legally bound hereby.
(Nome of Financial Institution)
«

By
(Signature)
SEAL
(Typed Name)
(Title)
Attestation:

I hereby attest t h a t ____________________ _______ * the
(Typed Name)
_______
_______ of the said_____________________
_ * has
_
(Title)
(Name of Financial Institution)

full authority to execute this form and fully to bind the said
(Name of Financial Institution)
(Name of Financial Institution)
DATE:
(Signature)
(Typed Name)
---------------(Title)
*The officer signing here shall not be the officer signing
the Attestation.

LETTER FROM THE FEDERAL RESERVE BANK OF THE D IST R IC T
NOTIFYING A DEPOSITARY OF THE EFFECTIVE DATE OF THE OPTION SELECTED

Date:
Dear
We have received your "Election of Option" form dated
You are hereby notified that
effective as of the opening of business on __________________
1978, your institution will be considered to be administering
its Treasury tax and loan account, pursuant to its depositary
contracts under 31 CFR Parts 203 and 214, and instructions
and supplements issued thereunder, and in accordance with the
________________ Option Class______ 1/(31 CFR part 203._____ 2/)

Federal Reserve Bank of
Acting as Fiscal Agent of the
United States

By_
(Signature)
(Typed Name)

(Title)

TO:

1/ Insert either "Note" or "Remittance," as appropriate.
If
"Remittance" is appropriate, also insert "Class 1" or "Class 2
2/

In sert

e ith e r

9 fo r

N o te O p tio n ,

or

10

fo r

R e m itta n c e O p tio n

ELECTION OF OPTION
TO:

The Federal Reserve Bank of _______________________________
acting as Fiscal Agent of the United States.

>

The undersigned financial institution, a Treasury tax and
loan depositary designated in accordance with 31 CFR Part 203,
hereby elects, pursuant to 31 CFR Part 203 and as of the effective
date of the Treasury tax and loan account investment program, to
administer a Treasury tax and loan account under the option
checked below, or hereby elects to have its designation revoked.
In addition, by the signature affixed below, the undersigned
financial institution expressly agrees to function its Treasury
tax and loan account in accord with the provisions of 31 CFR
Parts 203 and 214, the provisions of any instructions or supple­
ments issued thereunder, and with any amendments hereafter made
to such regulations, instructions or supplements.

/~~7

Note Option (under which funds debited to a depositary's
Treasury tax and loan account are added by the Treasury
to its investment in obligations of the depositary, as
evidenced by open-ended interest-bearing notes; (See 31
CFR 203.2(h) and 203.9).
OR

t— '

Remittance Option (under which funds equivalent to the
amount of deposits credited by a Treasury tax and loan
depositary to its Treasury tax and loan account will be
withdrawn by the Federal Reserve Bank of its district
immediately upon receipt by the Federal Reserve Bank of
the advices of credit supporting such deposits; (See 31
CFR 203.2 (j) and 203.10).
OR

/~7 Termination (See 31 CFR 203.16(b)).
IN WITNESS WHEREOF The undersigned has caused the signature of its
officer below-named and its corporate seal, duly attested, to be
affixed hereto this ________________
day of ____________ , 19__
intending to be legally bound hereby.
(Name of Financial Institution)

By____________________ _

____________ r-

(Signature)

SEAL
(Typed Name)

(Title)
Attestation;

I hereby attest t h a t __________________ .
_______ • the
(Typed Name)
____________________ of the said ___________________________ __ » has
_
(Title)
(Name of Financial Institution)
full authority to execute this form and fully to bind the said
(Name of Financial Institution)
(Name of Financial Institution)
DATE:

(Signature)
(Typed Name)
________________
(Title)
•The officer signing here shall not be the officer signing
the Attestation.

LETTER FROM THE FEDERAL RESERVE BANK OF THE D IST R IC T
NOTIFYING A DEPOSITARY OF THE EFFECTIVE DATE OF THE OPTION SELECTED

Date:
Dear
We have received your "Election of Option" form dated
You are hereby notified that
effective as of the opening of business on __________________
1978, your institution will be considered to be administering
its Treasury tax and loan account, pursuant to its depositary
contracts under 31 CFR Parts 203 and 214, and instructions
and supplements issued thereunder, and in accordance with the
________________ Option Class______ 1/ (31 CFR part 203._____ 2/)

Federal Reserve Bank of______
Acting as Fiscal Agent of the
United States

By_
(Signature)

(Typed Name)
(Title)

TO:

1/ Insert either "Note" or "Remittance," as appropriate.
If
"Remittance" is appropriate, also insert "Class 1" or "Class 2
2/

In se r t e ith e r

9 fo r

N o te O p tio n ,

or

10

fo r

R e m itta n c e O p tio n

U. S. G O V E R N M E N T P R IN T IN G O F F I C E : 1978 O - 2 6 4 -2 5 8

DEPARTMENT O F THE TREASURY
FISCAL SERVICE
O FFICE OF
FISCAL ASSISTANT SECRETARY

WASHINGTON, D.C. 20220

April 27, 1978
MEMORANDUM TO TREASURY TAX AND LOAN DEPOSITARIES

Treasury Tax and Loan Investment Program

Enclosed are the final rules implementing the investment authority
provisions of Public Law 95-147 of October, 1977. These rules were
issued as proposed rules as Part V of the Federal Register of December 9,
1977. A copy of the proposed rules was sent to your institution by the
Federal Reserve Bank of your district shortly thereafter.
As a result of comments and suggestions received during the proposed
rulemaking period, certain changes have been made and are incorporated
in these rules. Each of the significant changes are discussed in detail
in the preamble.
There are also enclosed (1) a copy of the "Procedural Instructions
for Treasury Tax and Loan Depositaries," which supplement certain sections
of the regulations, and (2) "Election of Option" forms.
It would be helpful if, as soon as your institution makes the
determination as to which option it will select, you would send a com­
pleted "Election of Option" form to the Federal Reserve Bank of your
district so as to allow adequate time to effect the necessary preliminary
arrangements. Your assistance will be appreciated.
Should you have questions or comments regarding the revised tax and
loan system, you may contact personnel in my office at the Treasury as
stated in the preamble of the enclosed rules, or you may contact the
Federal Reserve Bank of your district. In a separate letter, each Federal
Reserve Bank will provide you with the telephone numbers of the people to
contact within the Federal Reserve Bank. Also, the Federal Reserve Bank
of your district will provide additional instructions either with this
package or at a later date.
We hope that your institution will continue to participate in the
Treasury Tax and Loan Account System.

Deputy Fiscal Assistant Secretary

TUESDAY, MAY 2, 1978
PART III

DEPARTMENT OF
THE TREASURY
Fiscal Service

TREASURY TAX AND
LOAN ACCOUNTS

RULES AND REGULATIONS

18960

[4810-40]
Title 31—Money and Finance:
Treasury
CHAPTER II—FISCAL SERVICE;
DEPARTMENT OF TREASURY
TREASURY TAX AND LOAN
ACCOUNTS
Final Rule and Interim Rule
AGENCY: Fiscal Service, Department
of the Treasury.
ACTION: Final rule and interim rule.
SUMMARY: The Treasury Depart­
ment is amending its regulations to
implement the investment provisions
of Pub. L. 95-147 of October 28, 1977.
The intent of that law is to permit the
Treasury to earn interest by the in­
vestment of its operating cash bal­
ances and, at the same time, pay fees
for certain services which have not
heretofore been compensable. The law
and these regulations also make cer­
tain savings and loan associations and
credit unions eligible to participate in
the Treasury tax and loan account
system. Previously, only incorporated
banks and trust companies were eligi­
ble. The interim regulations contain
the standards for review of State-spon­
sored insurance arrangements. Such
review will be made in order to deter­
mine if particular insurance arrange­
ments are adequate to justify reduc­
tion of the amounts of collateral secu­
rity required of a depositary to secure
the balance in its Treasury tax and
loan account.
EFFECTIVE DATES: The provisions
of both the final and interim rules are
effective July 6. 1978, provided the
Congress has appropriated funds to
cover the payment of fees for services
rendered as provided in these regula­
tions. If the Congress does not appro­
priate funds for fee payments by June
16, 1978, a notice will be published in
the F e d e r a l R e g i s t e r postponing the
effective date.
FOR FURTHER INFORMATION
CONTACT:
Mr. John Kilcoyne, Assistant Fiscal
Assistant
Secretary
(Banking),
Office of the Fiscal Assistant Secre­
tary, Department of the Treasury,
Washington, D.C. 20220, 202-566­
2849. Additionally, financial institu­
tions having questions as to operat­
ing procedures may direct such ques­
tions to the Federal Reserve Bank or
Branch serving the geographical
area in which the institution is locat­
ed.
SUPPLEMENTARY INFORMATION:
Notice of proposed rulemaking was
published in the F e d e r a l R e g i s t e r on
December 9, 1977 (42 FR 62308), (a) to

revise regulations: 31 CFR part 203,
Special Depositaries of Public Money,
and 31 CFR part 214, Depositaries for
Federal Taxes; and (b) to amend: 31
CFR part 317, Regulations Governing
Agencies for Issue of U.S. Savings
Bonds of Series E and U.S. Savings
Notes, and 31 CFR part 321, Payments
by Banks and Other Financial Institu­
tions of U.S. Savings Bonds and U.S.
Savings Notes (Freedom Shares).
A public hearing was held on Janu­
ary 12, 1978, during which testimony
was given by trade associations repre­
senting banks and savings and loan as­
sociations and by individual financial
institutions. In addition. 106 written
responses were received during the
comment period which ended on Janu­
ary 19, 1978. The Treasury wishes to
express its appreciation to all who pro­
vided their views.
Many of the comments received are
similar in nature and have been
grouped into categories by subject
matter. The Department’s responses
to the substantive public comments re­
ceived appear below. Numerous minor
changes have been made in the regula­
tions some of which are editorial in
nature while others are in response to
public comment and will not be dis­
cussed herein.
C o m m e n t s R e c e iv e d a n d T r e a s u r y
R espo n ses
I 31 CFR PARTS 203 A N D 214
.
INTEREST r a t e

(a) Rate of interest Section 203.14 of
the proposed rules stated that the rate
of interest to be used in connection
with the Note Option and the Remit­
tance Option would be a “* * * weight­
ed average rate of repurchase agree­
ments with a one-day maturity in U.S.
Government securities, which are
transacted in a national money market
by a sample of money center banks
and non-bank primary dealers in Gov­
ernment securities.”
Many respondents took issue with
the proposed rate of interest for a
wide variety of reasons. The most sig­
nificant negative factors cited were:
(1) the high degree of instability in
the spread between the proposed rate
and the Federal funds rate, (2) a gen­
eral uncertainty about the pattern of
fluctuations in the proposed rate over
time under all money market condi­
tions, and (3) the general unfamiliar­
ity of the banking and thrift industry
with the proposed rate.
Upon reconsideration, the Treasury
is of the view that a rate of interest
which is equivalent to the Federal
funds rate, less a fixed spread of 25
basis points (1/4 of 1 percent), would
be a more appropriate rate. A rate of
interest based upon this formula satis­
fies the prerequisites the Treasury
had established from its own perspec­
tive for an earning rate on its invest­

ments in obligations of depositaries
while at the same time introducing the
elements of stability and relative cer­
tainty for depositaries.
Accordingly, the proposed §203.14,
now § 203.13, has been amended.
N o t e .—S e v e ra l o f t h e s e c tio n s o f t h e p r o ­
p o se d 31 C F R p a r t 203 h a v e b e e n r e n u m ­
b e r e d d u e to t h e d e le tio n o f t h e M a x im u m
B a la n c e s p ro v isio n s a p p e a r in g a s p ro p o se d
§ 203.4.

(b) Use of a retroactive rate. Several
financial institutions recommended
that the rate of interest applicable to
note balances during a given period of
time be based upon a market rate
which prevailed during a prior speci­
fied period. The intent of such recom­
mendation was that the rate to be ap­
plied would be known in advance.
The adoption of this suggestion
would sever the relationship for depo­
sitaries between the cost of Treasury
funds held and the earning value of
such funds. At times when money
market rates move sharply up or
down, while at the same time the
amount of note balances moves in the
opposite direction, depositaries could
sustain substantial losses or gains
thereby injecting a highly speculative
element which the Treasury and, no
doubt, most depositaries could consid­
er to be undesirable. The Treasury is,
therefore, retaining the concept under
which the rate of interest on the notes
is based upon market rates during the
same period.
collateral

Many comments were received on
specific, and general, issues involving
the pledge of collateral for Treasury
tax and loan account balances an for
note balances. These comments have
been categorized as follows:
(a) Availability of collateral. Several
respondents, particularly large money
center banks, expressed concern about
their capacity to pledge collateral in
amounts sufficient to cover balances
in their note accounts during periods
when Treasury operating cash is at
peak levels. At this time the Treasury
is not able to quantify the scarcity of
collateral and is, therefore, developing
additional data to determine the
extent of the problem. At the same
time, the Treasury is considering what
action it can take to expand categories
of eligible collateral. Treasury consid­
erations involve an analysis of what
assets financial institutions hold in
significant amounts that would meet
the basic requirements Treasury feels
good collateral should have. If it is de­
cided eligible collateral should be
broadened, an amendment to part 203
will be issued.
(b) Need for collateral Two respon­
dents suggested that the requirements
for collateral security be eliminated,
and another suggested that collateral

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

18961

RULES AND REGULATIONS

requirements be established at less
than 100 percent of a depositary’s li­
ability to the Treasury.
Pub. L. 95-147 provides that invest­
ments by the Treasury in obligations
or depositaries maintaining Treasury
tax and loan accounts shall be secured
by a pledge of collateral acceptable to
the Treasury as security for tax and
loan accounts. While the statute
allows wide discretion to the Secretary
as to the particular type of collateral
that may be required, the Department
is of the opinion that there is substan­
tial doubt whether, under the present
law, the Secretary has the authority
to eliminate altogether the require­
ment that collateral security be
pledged. Furthermore, even if there
were no such doubt, the Department is
of the opinion that a number of other
considerations make it unwise to elimi­
nate or reduce the collateral require­
ments for Treasury tax and loan ac­
counts.
(c) Conventional mortgages as eligi­
ble collateral. The suggestion was
made to include conventional residen­
tial mortgages among the categories of
collateral eligible to secure tax and
loan funds.
The Treasury has carefully consid­
ered this suggestion and has concluded
that conventional residential mort­
gages do not, at this time, meet the
standards of liquidity that are re­
quired of eligible collateral. The sec­
ondary market for conventional resi­
dential mortgages is not sufficiently
developed to provide the degree of li­
quidity required.
(d) Custodians of collateral. Com­
ments were received indicating that
§ 203.16(c) of the proposed regulations
is not clear as to what custodian ar­
rangements will be permitted or that
custodian arrangements will be uni­
form among all the Federal Reserve
Districts.
The acceptable type of custodian ar­
rangement involves the designation of
a custodian by the Federal Reserve
Bank of the District in which the de­
positary pledging the collateral is lo­
cated, and the issue by that custodian
to the Federal Reserve Bank of a re­
ceipt indicating that it holds, subject
to the order of the Federal Reserve
Bank, collateral pledged by the deposi­
tary. Federal Reserve Banks will be
expected to exercise judgment in the
approval of custodians and in estab­
lishing limits on the amounts of collat­
eral a given custodian may hold. Addi­
tionally, for those categories of collat­
eral requiring detailed analysis of at­
tached documents or resolution of
legal questions. Federal Reserve Banks
may require that the pledge of such
collateral be made directly with the
Federal Reserve Bank. Other than for
securities involving these judgments,
custodian arrangements will be in
effect in all Federal Reserve Districts
under similar conditions.

(e) Federal Home Loan Banks as
custodians of collateral Representa­
tives of the savings and loan industry
suggested that regional Federal Home
Loan Banks be permitted to act as cus­
todians of the collateral to be pledged
by savings and loan associations.
The Treasury favors such an ar­
rangement, and the Federal Reserve
Banks may designate Federal Home
Loan Banks as custodians subject to,
of course, the development of mutual­
ly acceptable custodian arrangements.
(f) Uniformity among Federal Re­

serve Banks in accepting eligible col­
lateral One financial institution asked

if all Federal Reserve Banks will
accept any of the classes of collateral
that are eligible for pledging.
The ability of Federal Reserve
Banks to accept the various classes of
eligible collateral may be limited by
such considerations as vault capacity.
Because of such limitations, the use of
third-party custodian receipts may be
fostered wherever appropriate. Also,
the Treasury will expect Federal Re­
serve Banks to work with depositaries
in their Districts to reduce the pledge
of those types of collateral requiring
large amounts of vault space and sub­
stantial servicing costs when deposi­
taries have adequate eligible collateral
in their portfolios of types with lesser
space and servicing requirements.
(g) IRS views concerning interest

paid deductions under section 265(2)
of the Internal Revenue Code for car­
rying tax exempt municipals pledged
to collateralize borrowed funds ( i.e
TT&L Note Balance). A number of re­
spondents indicated that historically,
the Internal Revenue Service has at­
tempted to deny interest-paid deduc­
tions under section 265(2) of the Inter­
nal Revenue Code whenever there ap­
peared to be some relationship be­
tween the funds borrowed and the car­
rying of tax exempt obligations. The
respondents requested the Treasury
(Fiscal Service) to seek a ruling of the
Internal Revenue Service to ensure
that the election of the note option is
not inhibited by a Section 265(2) tax
problem. The Fiscal Service has made
such a request of the Internal Rev­
enue Service. The Internal Revenue
Service has concluded that section
265(2) of the Internal Revenue Code
would not apply to disallow interest
deductions in connection with the in­
vestment by the Treasury in obliga­
tion of Treasury tax and loan deposi­
taries notwithstanding the fact that
the note accounts are collateralized by
tax exempt securities. The Internal
Revenue Service is proposing to
amend Rev. Proc. 70-20 in a manner
consistent with the foregoing.
(h) Operations of the TT&L System
upon implementation. If at the begin­
ning of the new program there is still
a concern about the over-all adequacy
of collateral, the Treasury may use

moderation in reducing its balances at
Federal Reserve Banks and increasing
its investments in obligations of depo­
sitaries.
M A X I M U M BALANCES

(a) Maximum note balances. Several
suggestions were made to the effect
that depositaries should be permitted
to set a maximum limitation on their
note balances so that any additions to
the notes in excess of that limitation
would be withdrawn immediately by
the Federal Reserve Bank upon re­
ceipt of advices of credit creating the
excess.
The Treasury favors the adoption of
this suggestion and the Federal R e­
serve Banks have been asked to alter
their administrative procedure to pro­
vide for the establishment of such
maximum balances. The Federal Re­
serve System has advised that all R e­
serve Banks will not be able to com­
plete such changes before the effec­
tive date of the investment program
inasmuch as this capability is a recent
change which was introduced during
the proposed rulemaking period. As
each Reserve Bank completes its
changes, it will notify depositaries in
its District and give each depositary
an opportunity to set a maximim bal­
ance. It is expected that all Reserve
Banks will have completed the neces­
sary changes within 6 months after
the date of publication of the final
regulations.
(b) Imposition of maximum balances
by Federal Reserve Banks. Several re­
spondents questioned the proposed
§203.4, which provides that each Re­
serve Bank may establish a maximum
balance for the tax and loan or note
account of any depositary in its Dis­
trict. The questions were based upon
lack of specifics as to the circum­
stances under which such maximum
would be established and the concern
that the application of the section
woud not be uniform among the Fed­
eral Reserve Districts.
The wording of § 203.4 as proposed
was similar to the wording of § 203.3 of
existing regulations which have been
in effect since 1967. Prior to 1967, the
regulations limited a depositary’s
maximum balance to a specified per­
centage of its capital or deposits. Sec­
tion 203.3 has not been invoked since
1967 and we agree the comparable sec­
tion of the proposed regulations,
§ 203.4, should be deleted. Collateral
pledged by the depositary limits the
funds that a depositary may hold and,
as indicated above, depositaries will be
permitted to establish self-imposed
ceilings on the amount of Treasury
funds held. Section 203.4 has, there­
fore, been eliminated from the final
rules.
DIRECT I N V E S T M E N T S

Several comments were made that
the regulations should specifically

FEDERAL REGISTER, VOL 43, NO. 85— TUESDAY, MAY 2, 197S

RULES AND REGULATIONS

18962

(b) Announce calls earlier in the day.
Several respondents suggested that
the calls on class “C” depositaries
should be announced earlier in the
day. It is very unlikely that the proce­
dures involved in determining the
Treasury’s daily cash needs, the time
required for consultation with the
Federal Reserve’s Open Market Com­
mittee staff, and the process of com­
municating the call to class “C” depo­
sitaries, can be accelerated enough to
allow an earlier announcement of a
call action.
(c) Wednesday calls. Several respon­
dents suggested that the Wednesday
calls on class “C” depositaries be made
not later than 10 a.m. The problems
involved are the same as those men­
tioned in (b) above. Treasury recog­
nizes the particular problems faced by
member banks on Wednesdays due to
reserve settlement requirements and,
to the extent feasible, will, in consulta­
tion with the Federal Reserve Open
Market Committee staff, indicate in
advance the probable calls payable on
Wednesdays.
(d) Effecting withdrawals through
reserve accounts. Some respondents
questioned the provisions of the rules
which require that withdrawals are to
CALLS A N D CALL P R O C E D U R E S
be effected through the reserve ac­
(a) Make calls on a regular basis and count of the depositary or the reserve
provide advance notice. Several re­ account of a member bank correspon­
spondents objected to the proposed dent. Some suggested such alterna­
§ 203.10(c) which states “* * * the tives as the wiring of Federal funds
amount of the note will be payable on upon receipt of a call notice.
demand without previous notice.” Sug­
For many years, banks which were
gestions were made to the effect that not members of the Federal Reserve
the withdrawal of funds be made on a System have been required to arrange
regularized basis and that calls be an­ for the payment of calls on the pay­
nounced a specified number of days in ment dates specified in the calls by a
advance of the date of withdrawal. charge to the reserve account of a
Treasury expects that the timing and member bank correspondent so as not
amount of the calls against note bal­ to put the Treasury in the position of
ances will evidence a regular pattern, waiting for the funds to be made avail­
reflecting the intramonthly and able for its use. The Treasury must
monthly seasonal patterns to which
the Treasury’s cash flows are subject. have the capability of withdrawing
Thus, larger percentages of note bal­ and using its operating cash when it is
ances will be called earlier in the needed. Alternatives which require
month than later; and, therefore, note communications from the depositary
balances will tend to increase in the in order to effect the withdrawal or
latter half of most months. It is be­ place the depositary in the position of
lieved that depositaries will, within a controlling the time of release of the
relatively short period, recognize a funds are not acceptable.
(e) Effecting calls for the withdrawal
regular pattern of call actions.
As to whether advance notice of of funds from savings and loan associ­
calls can be provided, it is expected ations through their accounts with
that calls against class “A” and class Federal Home Loan Banks. Several re­
“B ” depositaries will normally be spondents suggested that withdrawal
made for definite amounts for pay­ of funds from savings and loan associ­
ment on a definite day in the future. ations be made through their accounts
However, the Treasury cannot guaran­ maintained with their respective Fed­
tee that circumstances will not arise eral Home Loan Banks. If the savings
which will require calls for immediate and loan associations and the Federal
payment of note balances from class Home Loan Banks can establish a pro­
“A” and class "B” depositaries in order cedure whereby the Treasury would
to adequately fund Treasury balances have as immediate access to funds
at Federal Reserve Banks. To the called as would be the case if charges
extent feasible, advance notice will be were made to a member bank's ac­
given of the periods during which the count at a Federal Reserve Bank, then
regular pattern of calls might be the Treasury would be agreeable to
varied.
such a procedure.

state which Note Option depositaries
would receive funds directly from the
Treasury as described in § 203.10(b)(2).
The number of depositaries which
will receive direct investments will
necessarily be limited by the capacity
of Federal Reserve Banks to communi­
cate daily by telephone with each of
such depositaries in order to: (1)
inform the depositary of the amounts
being directly invested with the depo­
sitary, and (2) to call funds from the
depositary to replenish Treasury bal­
ances at Federal Reserve Banks.
Initially, the direct investments will
be made only with those Class “C” de­
positaries willing to participate. Even­
tually, however, the Treasury may
expand the number of participating
depositaries to include 100 or so other
Note Option depositaries having the
largest capacity to receive direct in­
vestments. Capacity is defined as the
amount of collateral the depositary is
willing and able to pledge, less its note
balance as generated by credits to its
tax and loan account. The establish­
ment of precise procedures for making
direct investments is being deferred
until the adequacy of collateral has
been more clearly determined.

NOT E OPTION

•

Certain characteristics of the Note
Option elicited questions or responses
as follows:
(a) Characterization of the Note

Option as a “
purchase” of funds from
the Treasury (§ 203.2(g) and § 203.10(a)
and (b)(2)). Section 203.2(g) of the

proposed rules defined the Note
Option to mean the “• * * choice avail­
able to depositaries under which a tax
and loan depositary credits deposits to
its Treasury Tax and loan account,
purchases funds from the Treasury in
the amount of such deposits to be evi­
denced by open-ended interest-bearing
notes.” [Emphasis added.] Two trade
associations and a number of banking
institutions requested that the word
“purchases” be replaced by the word
“retain” or “retains.”
The Treasury is persuaded that the
use of the term "purchases” may not
have universal application. According­
ly, proposed § 203.2(g) has been modi­
fied to describe additions to a deposi­
tary’s note account as additions to
Treasury’s investments in obligations
of the depositary. A conforming
change has been made to proposed
§ 203.10(a) and § 203.10(b)(2) (now
§ 203.9(a) and § 203.9(c)(2)).
(b) Elimination of Tax and Loan Ac­
counts. One respondent suggested that
in lieu of requiring funds to be placed
in the tax and loan account for one
day, depositaries be required to pur­
chase funds from the Treasury on the
day the tax and loan deposits are cred­
ited so that the “note” is created on
that day. The purpose of the sugges­
tion was to alleviate a potential prob­
lem under State law for some Statechartered thrift institutions in being
able to function the tax and loan ac­
count. Another element of the sugges­
tion was that no interest would be due
on the note for the day of the deposit.
The Treasury feels that the adop­
tion of the suggestion would not accu­
rately describe the Treasury/deposi­
tary relationship, particularly for Re­
mittance Option depositaries, and that
it would not, therefore, be reasonable
to adopt the suggestion.
DEL I V E R Y R E Q U I R E M E N T S

(a) Delivery requirements for Remit­
tance Option—Class 2 Depositaries
(§203.11(b)(2)(i)). One respondent sug­

gested that the wording of proposed
§203.11(b)(2)(i), which permitted a Re­
mittance Option—Class 2 depositary
to “* * * forward its advices of credit
to the Federal Reserve Bank of the
district via the most expeditious
means available” created too strict a
standard. The respondent stated that
the section implies, for example, that
if light aircraft were available, other
means such as the U.S. mail would not
be acceptable. The Treasury considers
the use of the U.S. Postal Service to be
an acceptable means of delivery for

FEDERAL REGISTER, VOL. 43, NO. 85—TUESDAY, MAY 2, 1978

18963

RULES AND REGULATIONS

Remittance Option—Class 2 depositar­
ies. Accordingly, §203.10(b)(2)(i) of the
final rule reads, in part, as follows:
“• * * via an available expeditious
means, which includes the U.S. Postal
Service.”
(b) Delivery requirements for Note
Option banka. The Treasury inadver­
tently omitted a subsection entitled
“Delivery” from $203.10 of the pro­
posed rules. Such subsection is includ­
ed as S203.9(b). The subsequent sub­
sections are relettered accordingly.
(c) Delivery requirements for Remit­

tance Option—Class 1 depositaries.

Many respondents took issue with the
delivery requirements for Class 1 de­
positaries stated at §203.11(b)(l)(i) of
the proposed rule. The rule requires a
Remittance Option—Class 1 deposi­
tary to “• * • establish procedures to
ensure the delivery of its advices of
credit at the Federal Reserve Bank of
the District prior to the Federal Re­
serve Bank’s cut-off time for process­
ing such credits the next business day
after the date of credit. • * •” Some,
citing their own experience with the
U.S. Postal Service, stated that timely
delivery at the Federal Reserve Bank
would not be possible if they were to
use the mail service. Many of the re­
spondents suggested as a solution that
timeliness be based upon the postmark
of the remittance under the theory
that if a postmark were timely, no
penalty would be assessed.
The Treasury had given a great deal
of thought to the delivery require­
ments of the Remittance O p tio n Class 1 depositaries before issuing the
proposed rules. It was concluded that
in order for the system to function
properly, and in order to maintain
equity within the system, it was neces­
sary to limit the interest-free time to
one business day. Otherwise, deposi­
taries electing the Note Option would
be required to pay interest as of the
first business day after receipt of a de­
posit while a Remittance O p tio n Class 1 depositary could benefit from
two, three or more interest-free days
merely by using the mails. If the use
of postmarks were permitted, the Note
Option would not be selected in num­
bers to make the tax and loan system
work.
There are certain options that may
be available to depositaries to reason­
ably assure next day delivery of ad­
vices of credit to the Federal Reserve
Bank of the District. These include
the following:
(a) At any depositary location where
the Federal Reserve Bank delivers
checks by courier, depositaries can, at
their discretion, arrange with such
couriers to deliver advices of credit on
their return trips to the Federal Re­
serve Bank.
(b) Federal Reserve Banks of the
Districts may, at their discretion,
permit Regional Check Processing

Centers (RCPC’s) within the Districts
to serve as pick-up or trans-shipping
points for the tax and loan system.
(c) All Federal Reserve Banks will
permit Federal Reserve Branches not
now serving as points of pick-up for
tax and loan account advices of credit
to do so under the investment pro­
gram from Remittance Option—Class
1 depositaries.
(d) Any depositary may utilize the
services of a correspondent in a Feder­
al Reserve Bank or Branch city to pre­
pare advices of credit and deliver such
advices to the reserve bank or branch
on its behalf. This would involve sup­
plying the correspondent with blank
originals of its advices of credit forms
and communicating the amount to be
entered by phone or wire.
FEES

Numerous comments were received
concerning the fee of 50 cents for each
Federal tax deposit form forwarded by
the depositary and processed by the
Internal Revenue Service Center cov­
ering the administration of the Trea­
sury tax and loan account as well as
the handling of Federal tax deposits.
The comments are summarized as fol­
lows:
(a) It is unreasonable to base 1978
fees on a survey using 1972-1973 data
which have not been adjusted for in­
flation.
(b) No indication has been given of
the method used to determine the ini­
tial fee structure for compensable ser­
vices.
(c) The final regulations should
state the criteria for the establish­
ment of fees and when such fees are to
be reviewed to ensure they remain cur­
rent.
Other comments received indicated
that the proposed payments are ade­
quate.
The schedule of fee payments is
based on the findings presented in a
Report of a Study of Tax and Loan
Accounts, dated June 1974. The con­
clusions of that Report are based upon
a survey of approximately 600 com­
mercial banks specifically selected as
representative of all depositaries in
the Treasury tax and loan system. The
fees as determined in that study are
being adopted initially because they
represent the product of the best and
most comprehensive study on the sub­
ject available at this time. The m eth­
odology, rationale, and findings of the
study are presented in detail in that
Report. The findings of the study
were publicly disclosed in that a copy
of the Report was distributed during
July 1974 to each of the tax and loan
depositaries at the time.
The Treasury recognizes the defi­
ciencies of that Report and is proceed­
ing to restudy the Federal tax deposit
per item fee as follows:
(a) Treasury staff will complete the
review now underway of procedures in­

volved in processing Federal tax de­
posits in financial institutions and es­
tablishing one or more models for effi­
cient handling. The number of model
systems will depend on the need to
provide different systems for different
categories of institutions. For exam­
ple, it might be necessary to have sig­
nificantly different procedures for an
institution doing business at one loca­
tion as compared to an institution
with branches or offices spread over a
wide geographical area.
The model systems will be reviewed
with trade associations of the several
classes of financial institutions func­
tioning as depositaries in order to (a)
determine if there are any reasons
why the proposed systems are not
workable, and (b) receive any sugges­
tions for improvement.
(b) Once the model systems have
been detailed, the Treasury will com­
mission an independent study to deter­
mine the cost involved in operating
the systems. The goal of the study will
be to determine the unit cost for pro­
cessing Federal tax deposits and to es­
tablish fees based upon costs and rea­
sonable profit. If clear, simple guide­
lines for applying different fees for
different institutions can be estab­
lished, a multiple fee schedule may be
created. If not, a unitary fee will be es­
tablished based upon average costs.
(c) The fee schedule established as a
result of the study will be reviewed
from time to time for appropriate ad­
justment, taking into consideration
changes in the depositaries’ costs and
any changes in regulations effecting
the procedures followed by depositar­
ies in processing Federal tax deposits.
C O M P E N S A T I O N F O R O T H E R SERVICES
P ROVID ED B Y FINANCIAL INST ITUTIONS

Several comments were made that
the schedule of fees does not cover
other types of services that financial
institutions provide for the Govern­
ment. Specific services mentioned in­
clude the reporting of interest and
dividends to the Internal Revenue Ser­
vice on Form 1099, the cashing of Gov­
ernment checks, and the custody and
sale of food stamps. The Treasury’s
analyses and conclusions regarding
each of these services, and others not
mentioned in the comments received,
but performed by commercial banks
are discussed in detail in the “Report
on a Study of Treasury Tax and Loan
Accounts” dated June 1974.
POSITIONS O F B A N K I N G R E G U L A T O R S

(a) Comptroller of the Currency. Sev­
eral of the respondents inquired as to
whether the note balances retained by
national banks under the Note Option
will be included in computing the limi­
tation on bank indebtedness under 12
U.S.C. 82. The Comptroller of the Cur­
rency has indicated that the notes will
not be subject to the aggregate indebt­
edness limitation of 12 U.S.C. 82.

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

RULES AND REGULATIONS

18964

(b) Federal Reserve Board. Numer­
ous respondents questioned whether
the note balances will be subject to re­
serve requirements. As indicated in
the preamble to the proposed rules, at
the present time, regulations of the
Board of Governors of the Federal Re­
serve System and the Federal Deposit
Insurance Corporation define “depos­
its” as including promissory notes and
other obligations of banks not specifi­
cally exempted. The Treasury has
been advised that the Board of Gover­
nors of the Federal Reserve System
has taken formal action to exempt
notes issued by banks to the Treasury
from the definition of deposits. There
appears today, or will appear in the
next few days, in the F e d e r a l R e g i s ­
ter
notice of the Federal Reserve
Board's final rulemaking effecting this
change. The action of the Board of
Governors of the Federal Reserve
System exempts notes issued by
member banks to the Treasury from
the provisions of Regulations D and Q.
(c) Federal Deposit Insurance Corpo­
ration. The Board of Directors of the
Federal Deposit Insurance Corpora­
tion has amended FDIC’s interest rate
regulations (12 CFR Part 329) so as to
exempt from rate restrictions general­
ly, an insured nonmember bank’s li­
ability on its promissory notes that
evidence a short-term purchase of
funds from the U.S. Treasury. The
FDIC’s amendments to its interest
rate regulations were published on
page 9789 of the F e d e r a l R e g i s t e r of
March 10, 1978 (43 FR 9789).
re qu ire me nts for designation

Several of the respondents com­
menting on behalf of thrift institu­
tions took issue with the wording of
the proposed § 203.3(b)(l)(ii) which re­
quired a financial institution to have
under its charter and regulations
issued by its chartering authority
either general or specific authority
permitting the maintenance of the tax
and loan account as a demand account
in order to be eligible for designation.
The Department’s paramount con­
cern is its ability to draw on its operat­
ing cash accounts as needed to meet
disbursing needs. The Treasury con­
siders it essential for funds on deposit
in tax and loan accounts or invested in
note accounts to be subject to with­
drawals which are payable immediate­
ly (i.e., on demand) without previous
notice. Thus Treasury’s basic concern
is to be assured that all financial insti­
tutions, including the thrift institu­
tions, possess the authority to func­
tion these accounts under the condi­
tion stated above.
Another respondent indicated that
the use of the word “demand account”
is imprecise in that several quite dif­
ferent legal meanings have been at­
tached to that term. In view of the
comments received. § 203.3(b)(l)(ii) is

amended to require only "general or
specific authority permitting the
maintenance of the tax and loan ac­
count as an account the balance in
which is payable on demand without
previous notice of intended withdraw­
al.”
Several of the respondents indicated
that currently certain State-chartered
thrift institutions may not be autho­
rized under State law to maintain tax
and loan accounts. Some of the same
respondents further stated that in
their opinion the Federal law (Pub. L.
95-147) superseded State law and car­
ried with it the extension of any au­
thority necessary for both Federally
and State-chartered institutions to be
tax and loan depositaries. Neither
Pub. L. 95-147 nor its legislative histo­
ry specifically address the matter of
Federal preemption. The question is
one which the courts will ultimately
have to resolve. Treasury takes no
final position on the issue at this time,
however, the final rule is premised on
no Federal preemption.
insurance provisions

One respondent representing the
credit union industry requested that
the regulations expressively describe
the standards of review for account in­
surance to be undertaken by the Sec­
retary of the Treasury. Accordingly,
the Secretary’s regulations concerning
the adequacy of insurance arrange­
ments are issued at 31 CFR Part 226.
Such regulations are published here
as interim rules in order to avoid delay
in implementing the revised Treasury
tax and loan program.
The Department is of the view that,
because the interim regulations set
standards for programs of insurance
which cover depositaries’ tax and loan
accounts, and thereby affect the
amounts of collateral which such de­
positaries are required to pledge to
secure public funds in such accounts,
they involve a matter relating to
“public property” within the meaning
of 5 U.S.C. 553(a)(2). In addition, it is
believed that the interim regulations
involve a matter relating to “con­
tracts,” as that term is used in 5 U.S.C.
553(a)(2). Each Treasury Tax and
Loan Depositary enters into a deposi­
tary contract as stated at § 203.6 and
§ 214.4.
Consequently, it has been deter­
mined that the regulations are not
subject to the rulemaking require­
ments, including notice of proposed
rulemaking, which are contained in 5
U.S.C. 553. Nevertheless, in accordance
with 5 U.S.C. 553, interested persons
may submit written comments, sugges­
tions, data or arguments to Mr. John
Kilcoyne, Assistant Fiscal Assistant
Secretary (Banking), Office of the
Fiscal Assistant Secretary, Depart­
ment of the Treasury, Washington,
D.C. 20220, 202-566-2849. Material

thus submitted will be evaluated and
acted upon in the same manner as if
these interim regulations were a pro­
posal. However, the interim regula­
tions shall become effective as speci­
fied in the “EFFECTIVE DATE” sec­
tion of this preamble and shall remain
in effect until such time as changes
are made.
T H E A B S O R P T I O N OF F L O A T B Y
DEPOSITARIES

Several of the respondents com­
mented upon § 214.6(a)(1) by which de­
positaries are required to accept from
a taxpayer “* * * a check or draft
drawn on and to the order of the depo­
sitary * *
That section further
states that “* * * A depositary may at
its discretion accept a check drawn on
another financial institution, but it
does so purely on a voluntary basis
and absorbs for its own account any
float involved.” The substance of such
comments was to request the Treasury
to make allowances for uncollected
funds in the accounts after the first
business day after deposit.
As a matter of policy, the Treasury
does not recognize uncollected funds
in the tax and loan system. That
policy and the provisions of 31 CFR
Part 214 implementing that policy are
not new to the regulations in question,
but have been in effect for more than
25 years. The Treasury has concluded
that the policy of not making
allowances for uncollected funds in
the tax and loan account system
should remain in effect.
E X T E N D T H E INTEREST-FREE P ERIOD T O
M O R E T H A N O N E BUSINESS D A Y

Several respondents suggested for a
variety of reasons that interest and
late fees not be imposed until the
second or third business day after de­
posit. The Treasury has concluded
that any extension of the interest-free
period beyond the one business day al­
ready provided would not be in the
best interest of the Federal govern­
ment or the tax and loan system.
T I M I N G O F C H A N G E S IN O P T I O N S

The wording of § 203.13 of the pro­
posed rules and paragraph No. 4 of the
Synopsis of the Manual of Instruc­
tions and Procedures for Treasury Tax
and Loan Depositaries is not explicit
as to when a requested change in op­
tions will become effective. According­
ly, the wording of that section of the
Procedural Instructions concerned
with changes in options has been re­
vised to include the following:
A d e p o s ita ry m a y c h a n g e f ro m o n e
o p tio n to a n o th e r a f t e r d u e n o tic e t o t h e
F e d e r a l R e se rv e B a n k o f t h e D is tric t. A
c h a n g e in o p tio n w ill b e c o m e e ffe c tiv e a s o f
t h e f ir s t d ay o f t h e n e x t r e p o r tin g cy c le fo l­
lo w in g r e c e ip t o f s u c h n o tic e p ro v id e d t h a t
n o tic e is re c e iv e d b y t h e F e d e r a l R e se rv e
B a n k o f t h e D is tr ic t n o t l a t e r t h a n t h e 2 0 th
o f a n y m o n th .

FEDERAL REGISTER, VOL. 43, NO. 85— TUESOAY, MAY 2, 1978

18965

RULES AND REGULATIONS

A number of respondents expressed
the desire for changes in options to be
permitted on a daily or a weekly basis.
For reasons of an operational and an
administrative nature, all changes in
options will be effected only as of the
first day of a reporting cycle.
T E R M I N A T I O N OF C O N T R A C T NOTICE

Proposed § 203.17(b) and § 214.5(b)
stated that a depositary may termi­
nate its contract by submitting a
notice, in writing, to the Federal Re­
serve Bank of the District 30 days
before the date of the intended termi­
nation. Proposed § 203.17(a) and
§ 214.5(a) stated that the Secretary of
the Treasury may terminate the con­
tract of a Treasury tax and loan depo­
sitary at any time upon notice to that
effect to that depositary. Upon recon­
sideration, the Treasury is of the view
that the 30-day advance notice stated
in § 203.17(b) and § 214.5(b) should be
deleted. Accordingly, § 203.16(b) and
§ 214.5(b) do not require a 30-day ad­
vance notice by the depositary.
M A N U A L OF INSTRUCTIONS A N D PROCE­
DURES FOR T R E A S U R Y T A X A N D L O A N DE­
POSITARIES

Several respondents expressed the
desire to review the Manual before it
is published in final form.
In view of the relatively short time
period remaining before the effective
date of the investment program, the
Treasury is issuing at this time
through the Federal Reserve Banks a
final version of the “Procedural
Instructions for Treasury Tax and
Loan Depositaries” (previously re­
ferred to as “Manual of Instructions
and Procedures for Treasury Tax and
Loan Depositaries”), with the under­
standing that the depositaries are free
to comment on the provisions of that
Procedural Instruction at any time.
SUGGESTIO N T O ESTABLISH A N A R R A N G E ­
M E N T W H E R E B Y T H E T A X DEPOSITS O F A
R E M I T T A N C E O P T I O N DE PO S I T A R Y ARE
ADDED DIRECTLY T O T H E N O T E A C C O U N T
O F A C O R R E S P O N D E N T D E POSI TARY

One respondent suggested that in
view of the potentially large number
of depositaries that would be electing
the Remittance Option, the Treasury
should give consideration to a tri-party
arrangement involving (a) the Federal
Reserve Bank, (b) a Note Option depo­
sitary bank serving as a correspondent
for the Remittance Option depositary,
and (c) the remittance Option deposi­
tary. Under the suggested arrange­
ment, the Note Option depositary
bank serving as correspondent for the
Remittance Option depositary would,
in effect, add to its note amounts
which otherwise would be withdrawn
from the Remittance Option corre­
spondents. In other words, the Federal
Reserve Bank, instead of withdrawing

funds representing tax deposits re­
ceived by a Remittance Option deposi­
tary would add those amounts to the
note of the correspondent bank.
The treasury believes the suggestion
has merit and may be beneficial in sev­
eral respects. In particular, it offers an
alternative to depositaries wishing to
participate as Remittance O p tio n Class 1 depositaries and precluded
from doing so because of the pre­
scribed delivery requirements. The
Treasury is actively studying the sug­
gestion. Adoption of the suggestion
would also give the Treasury better
control of increases in the Federal R e­
serve Bank balance which is one of the
objectives of the new system.
If it is decided to adopt the sugges­
tion, the decision will be reflected in
the F e d e r a l R e g i s t e r . Sufficient lead
time will be required to permit pro­
gramming changes by the Federal Re­
serve Banks.
SEASONAL B O R R O W I N G B Y M E M B E R BANKS
O F T H E FEDERA L RE S E R V E S Y S T E M

One respondent representing the
banking industry suggested that Fed­
eral Reserve Regulation ‘A’ should in­
dicate that country banks borrowing
seasonally at the discount window may
simultaneously “sell” Note Option
funds in the Federal funds market.
This issue has been referred to the
Federal Reserve Board and is under
consideration by that Agency.
R egulations C overing F ees fo r
Is s u i n g a n d R e d e e m i n g S a v i n g s B o n d s
II.

31 CFR P ARTS 317 A N D 321

DISC USSION O F M A J O R C O M M E N T S
GENERAL STATEMENT

Financial institutions and others act
as agents for the issue and payment of
savings bonds under the provisions of
application-agreements they execute
and certificates of qualification issued
by the Federal Reserve Banks, acting
as fiscal agents of the United States,
and subject to the applicable regula­
tions governing such agents. The com­
pensation to be paid to agents applies
solely to the specific issuing and
paying functions they perform under
the terms of their agreements and the
regulations. The regulations that
govern issuing agents are set out in
Department of the Treasury Circular,
Public Debt Series No. 4-67 (31 CFR
Part 317). The regulations that govern
paying agents are set out in Depart­
ment of the Treasury Circular No. 750
(31 CFR Part 321). The fee schedules
will be incorporated into each of these
circulars.
SAVINGS B O N D R E M I T T A N C E P R O C E D U R E S

31 CFR, Part 203 contemplates that
the interest and penalty provisions of
the investment program will apply
both to tax and loan deposits repre­

senting tax receipts and tax and loan
deposits representing savings bond
sales proceeds. However, as an interim
measure, to facilitate implementation
of the investment program, remit­
tances of savings bond sales proceeds
by credit to tax and loan accounts will
initially be functioned as follows:
Note Option depositaries. T h e a m o u n t of
credits covering savings bond sales proceeds
will be added to notes as of the dates of pro­
cessing of the credit advices by the Federal
Reserve Banks.
Remittance Option—Class 1 depositaries.
Penalty provisions will not be applied to
savings bond sales proceeds remittances.

Remittance Option—Class 2 depositaries.
For purposes of computing the analysis
credit, the a m o u n t of credits covering sav­
ings bond sales proceeds will be added to the
balances in the depositaries’ tax and loan
accounts as of the dates of processing by the
Federal Reserve Banks.

About three months after implemen­
tation of the investment program, the
Treasury will prescribe definitive pro­
cedures under which credit advices for
savings bond sales proceeds will be
handled on the same basis as credit
advices for tax deposits. Before the de­
finitive procedures are put into effect,
a notice of their effective date will be
published in the F e d e r a l R e g i s t e r
and depositaries will be notified
through the Federal Reserve Bank of
the District.
A D E Q U A C Y O F FEE S C H E D U L E

A number of the organizations com­
mented that the proposed fees for is­
suing and redeeming savings bonds
were generally too low. Others specifi­
cally referred to the redemption fee
and the over-the-counter issue fee as
being too low. Reasons usually given
for questioning the fee schedule were
that (1) it was based on outdated data
and did not consider the impact of in­
flation on salary and other processing
costs, and (2) the compensable activi­
ties were to narrowly defined and did
not consider costs of counseling time,
postage, record-keeping, accounting
and liability for stock.
The fees for over-the-counter issues
and for redemptions were based essen­
tially on a research study conducted in
1974. The fees for payroll issues were
based essentially on the alternative
costs of such issues by Federal agen­
cies and Federal Reserve Banks.
The issue fees relate strictly to costs
associated with obtaining and control­
ling bond stock and inscribing and de­
livering bonds to purchasers, exclusive
of postage which is paid by the Trea­
sury.
Counseling services relating to sav­
ings bonds, like counseling on other fi­
nancial matters, have traditionally
been provided to customers by finan­
cial institutions without compensa­
tion. These services are viewed essen­
tially as customer services. Their value
to the Savings Bond Program is clear­

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

18966

RULES AND REGULATIONS

ly recognized and appreciated. Howev­
er, services outside the issuing and
paying agency regulations are not
compensable; in addition, there is no
practical way of measuring the ser­
vices provided by individual institu­
tions as the basis for establishing a
standard fee.
In response to the comments men­
tioned above, a review of the fee
schedule will be undertaken. It is nec­
essary, however, to initiate the fee
program on the basis of the proposed
schedule to avoid further substantial
delays in implementation. Funds for
the payment of fees must be obtained
through the appropriation process,
and a funding request based on the
original schedule has been submitted
to and is under consideration by the
Congress.
C O M P E N S A T I O N F O R REISSUE
TRANSACTIONS

Several respondents commented
that agents should be compensated for
handling reissue cases, which must be
forwarded to the Federal Reserve
Bank for processing.
Servicing applications for reissue is
not one of the functions covered by
the issuing and paying agent agree­
ments referred to above. Historically,
the Treasury has viewed such services
as being within the scope of customer
services provided by the institution.
This is the principal reason no provi­
sion has been made to pay a fee for
such services. A further reason is the
difficulty in administering such a fee,
inasmuch as Treasury would have no
means of determining how much assis­
tance, if any, had been provided by a
financial institution on a reissue case.
COMPENSATION FOR EXCHANGE
TRANSACTIONS

It was also suggested that agents
should be compensated for handling
exchanges of Series E for Series H
bonds. In these transactins, all of the
Series H bonds are issued by Federal
Reserve Banks or the Treasury. How­
ever, the regulations governing such
exchanges provide that paying agents
may elect to redeem the Series E
bonds and send the exchange applica­
tion (Form PD 3253) to a Federal Re­
serve Bank for issue of the Series H
bonds. If the transaction is handled in
this manner, the agent receives a fee
for each Series E bond that is re­
deemed. If the agent does not redeem
the bonds, the entire transaction is
forwarded to a Federal Reserve Bank
and no fee is paid.
It is recognized that in a limited
number of cases agents are not autho­
rized to redeem Series E bonds submit­
ted for exchange because of eviden­
tiary requirements. A review will be
made to determine whether it is feasi­
ble to amend the regulations to pro­
vide procedures under which agents

might qualify for fees in handling
these cases.
M I S C E L L A N E O U S PROVISIONS F O R FEE
CH A R G E S

Other proposals concerning fees in­
cluded establishing regional fee sched­
ules; basing fees on the percentage of
dollar amounts handled in addition to
per item fees; reexamining the fee dif­
ference between manual and comput­
erized handling of payroll issues to
provide more incentive to automate;
and, compensating agents for the ver­
ification of the issuance of bonds later
reported missing.
Regional fee schedules would create
difficult administrative problems.
There appears to be no justification
for basing a fee on dollar amounts, as
well as item charges. Paying agents
incur no risk of liability for erroneous
payments if they follow the Treasury’s
identification guidelines (Form PD
3900).
The spread between the fees for
bonds inscribed by computers and by
other means recognized a cost differ­
ential between the two processing
methods. This appeared to be equita­
ble, although it might conceivable op­
erate as a disincentive to the further
automation of payroll issues. Decisions
to automate are typically made on the
basis of equipment availability, oper­
ational priorities and considerations of
space, personnel and productivity. It is
estimated that about half of the pay­
roll issues by financial institutions are
computer-inscribed. The number of
issues that would be automated if the
10 cent fee per bond was raised is a
matter of conjecture, as many of the
payroll accounts are too small to justi­
fy automation, or the agent may not
have access to a computer. In the sub­
sequent review of the fee schedule,
however, this matter will be further
considered.
The verification by issuing agents of
their issuance of bonds reported lost
or stolen is limited to bonds not re­
ceived by owners. Claims cases involv­
ing loss or theft after receipt are not
referred to the issuing agents for ver­
ification. The number of non-receipt
cases is about 10,000 a year. About
half of all bonds are issued by finan­
cial institutions, so the number of re­
ferrals to an individual agent should
be minimal. No fee for this service ap­
pears to be warranted, but the Trea­
sury will review its procedures to de­
termine whether the cases requiring
referral to agents can be further re­
duced.
R E V I E W O F FEE S C H E D U L E

As mentioned, various respondents
expressed the opinion that the Trea­
sury study made in 1974, on which the
fee schedule is largely based, has been
outdated by inflation and that the
study should be updated or a new
study conducted.

Various proposals were made con­
cerning the method to be used in con­
ducting such a study. It was suggested
that a new study consider the fully al­
located costs of each functional and
procedural element of issuing, redeem­
ing and otherwise handling bonds;
that the regulations provide for a peri­
odic review of the fee schedule and the
scope of compensable services; and
that the regulations express the stan­
dards for establishing fees and the cri­
teria for evaluating readjustments.
The Treasury recognizes the desir­
ability of reexamining the adequacy of
the fee schedule and will initiate such
a review promptly. The review will in­
clude a reexamination of some of the
proposals discussed elsewhere in this
response. Provisions for the regular
review of the schedule should be a
part of any plan that is developed. It
should be recognized, however, that
any review will deal primarily with
over-the-counter issues and redemp­
tions. Fees for payroll issues will be
governed largely by the alternative
costs of such issues by Federal agen­
cies and Federal Reserve Banks.
There is no assurance that savings
bond fees can (or should) be based
purely on costs. It may be necessary or
advisable to establish fees for issuing
and redeeming bonds that financial in­
stitutions would be free to accept or
reject. In their comments on the
schedule, agents reported costs as high
as $2.66 for issuing bonds and $1.50 for
redeeming bonds. The issue of a bond
purchased for $18.75 does not justify
fees of these amounts. Moreover, the
question of recompense must be con­
sidered in the context of the effect on
the Savings Bond Program as a whole.
The Treasury cannot implement
changes in the fee schedule without
first seeking Congressional approval
through the regular appropriation
process.
Any changes, including an explana­
tion of their basis, will be published as
revisions of the regulations.
CREDITS A N D C H A R G E S T O T A X A N D L O A N
ACCOUNTS

Two respondents questioned the
statement in the regulations that
funds would be deposited into the tax
and loan accounts in accordance with
the instructions of the Federal Re­
serve Bank of the District. Both felt
that instructions should be uniform
throughout the country. Another re­
spondent felt that if funds collected
from the issuance of savings bonds are
to be placed in interest-bearing tax
and loan accounts, funds used to
redeem bonds should be disbursed
from those accounts.
The rules for depositing savings
bond sale proceeds in tax and loan ac­
counts are uniform. Instructions to is­
suing and paying agents are customar­
ily issued by the qualifying Federal

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

RULES AND REGULATIONS

Reserve Banks, and the practice in­
cludes such activities as crediting sales
proceeds. Except for minor local vari­
ations, the Instructions Issued by each
Reserve Bank are standard.
The disbursement of tax and loan
funds by depositaries in payment of
savings bonds and notes would not be
feasible because of the control and ac­
counting problems such a procedure
would create.
CHARGES TO CUSTOMERS

Questions were also raised about the
collection of fees from customers.
No fee may be imposed by agents on
bondowners for the redemption of
bonds or on purchasers for the issue of
bonds over-the-counter or through
bond-a-month plans.
In the case of payroll issues by fi­
nancial Institutions for customers
which operate payroll savings plans,
the Department recognizes that the
parties have often entered into com­
pensatory arrangements, particularly
when the bond issuance function is an
interrelated part of a package of
varied financial services, or when the
issuing agent must perform preparato­
ry work prior to inscribing the bonds.
The regulations prohibit the accep­
tance of dual compensation for obtain­
ing and controlling bond stock and in­
scribing and delivering bonds. Howev­
er, the regulations do not prohibit fi­
nancial institutions from electing to
continue compensatory arrangements
with customers, in lieu of accepting a
fee from the Treasury for bond issu­
ance functions; nor do they prohibit
such institutions from obtaining sup­
plemental compensation for services
not immediately concerned with in­
scribing and delivering bonds, such as
converting data from hard copy to
magnetic tape for bond inscription
purposes.
P A Y M E N T O F FEES

One respondent indicated that the
regulations did not address the way in
which fees will be paid and stated that
the reserve account should be used for
fee payment, as well as penalty
charges.
Given the diversity of issuing and
paying agents, fees will be paid by
checks issued quarterly by the Divi­
sion of Disbursement, Bureau of Gov­
ernment Financial Operations, on the
basis of data prepared by the Bureau
of the Public Debt. Each agent eligible
for a fee has been furnished with a
pamphlet that explains, among other
things, the calculation and payment of
fees.

In consideration of all of the forego­
ing, 31 CFR Chapter II is amended as
follows:

18967

tax and loan account after the effec­
tive date of this Part.
(d) “Federal funds rate” means the
1.
31 CFR Part 203 (Department Cir­
weekly Federal funds rate as pub­
cular No. 92) is revised to read as fol­ lished in the Federal Reserve Bulletin
in Table A-27 entitled ‘‘Interest Rates,
lows:
Money and Capital Markets”.
S u b p art A— G en eral Inform ation
(e) ‘‘Federal Reserve Bank of the
district” means the Federal Reserve
Sec.
Bank which services the geographical
203.1 S c o p e o f r e g u la tio n s .
area in which the tax and loan deposi­
203.2 D e fin itio n s .
tary is located. Tax and loan deposi­
203.3 D e s ig n a tio n o f fin a n c ia l in s titu tio n s
taries located in Puerto Rico, the
a s T r e a s u r y t a x a n d lo a n d e p o s ita rie s .
203.4 S o u rc e s o f d e p o s it.
Virgin Islands, and the Panama Canal
203.5 D ire c tiv e s re g a r d in g c r e d its (d e p o s­
Zone are included in the Second Fed­
its ) to T r e a s u r y t a x a n d lo a n a c c o u n ts .
eral Reserve District.
203.6 P a r tie s to t h e C o n tr a c t.
(f) “Federal tax deposit form” means
203.7 O b lig a tio n s o f t h e d e p o s ita ry .
a preinscribed form supplied to a tax­
payer by the Treasury Department to
S ubpart B— Option*
accompany deposits of Federal taxes.
203.8 G e n e r a l r e q u ire m e n t.
(g) “Federal taxes” means those
203.9 N o te O p tio n .
Federal taxes specified by the Secre­
203.10 R e m itta n c e O p tio n .
tary of the Treasury or the Secretary’s
203.11 E le c tio n o f o p tio n b y p re v io u sly a u ­
delegate as eligible for payment
t h o r iz e d d e p o s ita rie s .
through the procedure prescribed in
203.12 C h a n g e o f o p tio n s.
this part and Part 214.
S u b p art C— In te rs il a n d C om pensation
(h) ‘‘Note Option” means that choice
available to a tax and loan depositary
203.13 R a te o f In te re s t.
under which funds debited to its Trea­
203.14 C o m p e n s a tio n f o r se rv ic e s r e n d e r e d .
sury tax and loan account are added
by the Treasury to its investments in
S u b p art D— C ollateral Socurity
obligations of the depositary. The
203.15 C o lla te r a l s e c u r ity re q u ire m e n ts .
amount of such investments will be
evidenced by an open-ended interestS u b p art E— M iicollanooui Provisions
bearing note maintained at the Feder­
203.16 T e r m in a tio n o f c o n tr a c t.
al Reserve Bank of the district.
203.17 I m p le m e n tin g in s tr u c tio n s .
(i) “Recognized Insurance Coverage”
203.18 E ffe c tiv e d a te .
means the insurance provided by the
A u t h o r i t y : S ec. 8, A ct o f S e p t. 24, 1917,
Federal Deposit Insurance Corpora­
C h a p te r 56, 40 S t a t. 291, a s a m e n d e d (31
tion, the Federal Savings and Loan In­
U .S .C . 771); S ec. 6302(c), I n t e r n a l R e v e n u e
surance Corporation, the National
C ode o f 1954; a n d S ecs. 1, 2, a n d 3, P u b . L.
Credit Union Share Insurance Fund,
95-147, 91 S t a t. 1227 (31 U .S .C . 1038); u n le s s
and the insurance provided by insur­
o th e rw is e n o te d .
ance organizations specifically quali­
Subpart A—General Information
fied by the Secretary of the Treasury
pursuant to 31 CFR Part 226.
§ 203.1 Scope of regulations.
(j) “Remittance Option” means that
The regulations in this part govern choice available to a tax and loan de­
the designation of Treasury tax and positary under which funds equivalent
loan depositaries and their contract to the amount of deposits credited by
with the Treasury Department to the depositary to its Treasury tax and
maintain and administer separate ac­ loan account will be withdrawn by the
counts to be known as Treasury tax Federal Reserve Bank immediately
and loan accounts in which funds rep­ upon receipt by the Federal Reserve
resenting payments for certain United Bank of the advices of credit support­
States obligations and payments of ing such deposits.
Federal taxes are credited.
(k) “Reporting cycle” means the
time period established for reporting
§ 203.2 Definitions.
and computation purposes. A report­
ing cycle begins on the first Thursday
As used in this part:
(a) “Advices of credit” means those of each month and ends on the
Treasury forms, which are supplied to Wednesday preceding the first Thurs­
tax and loan depositaries to be used in day of the following month.
(1) “Reserve account” means that ac­
supporting credits to Treasury tax and
count every member of the Federal
loan accounts.
(b) “Business day” means any day Reserve System maintains at the Fed­
on which the Federal Reserve Bank of eral Reserve Bank of its district for re­
serve purposes pursuant to 12 CFR
the district is open to the public.
(c) “Election of Option form” means Part 204.
(m) “Special depositary” means a de­
a document, preprinted and supplied
by the Federal Reserve Bank of each positary that had been designated
district, on which a tax and loan depo­ under the provisions of 31 CFR Part
sitary indicates the option under 203 prior to the effective date of this
which it will administer its Treasury revision. A depositary thereafter desig­

PART 203—TREASURY TAX AND
LOAN DEPOSITARIES

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

18968

RULES A ND REGULATIONS

nated under this Part shall be known
as a Treasury tax and loan depositary.
§203.3 Designation of financial institu­
tions as Treasury tax loan depositaries.

(a) Previously authorized depositar­
ies. Every special depositary which, at

the close of business on July 5, 1978,
was authorized to maintain a Treasury
tax and loan account is hereby rede­
signated as a Treasury tax and loan
depositary. The agreements under
which they were heretofore autho­
rized as Special Depositaries of Public
Money are continued in effect without
further action, but subject to the pro­
visions of the current Part 203.
(b) New designations—(1) Require­
ments.—(i) Eligible institutions. The
following classes of financial institu­
tions are eligible to be designated as
Treasury tax and loan depositaries:
(A) Every incorporated bank and
trust company in the United States,
Puerto Rico, the Virgin Islands, the
Panama Canal Zone, and every United
States branch of a foreign banking
corporation authorized by the State in
which it is located to transact commer­
cial banking business.
(B) Every institution insured by the
Federal Savings and Loan Insurance
Corporation.
(C) Every credit union insured by
the Administrator of the National
Credit Union Administration.
(D) Savings and loan, building and
loan, homestead associations, and
credit unions, created under the laws
of any State, the deposits or accounts
of which are insured by a State or
agency thereof, or by a corporation
chartered by a State for the sole pur­
pose of insuring deposits or accounts
of such financial institutions.
(ii) Other requirements. In order to
meet Treasury requirements for desig­
nation, each financial institution is re­
quired to possess under its charter and
regulations issued by its chartering au­
thority either general or specific au­
thority permitting the maintenance of
the tax and loan account as an ac­
count, the balance in which is payable
on demand without previous notice of
intended withdrawal. Each financial
institution is required to also possess
the authority to pledge collateral to
secure Treasury tax and loan funds.
(2) Application procedures. Any eli­
gible financial institution seeking des­
ignation as a Treasury tax and loan
depositary and, thereby, the authority
to maintain a Treasury tax and loan
account shall file with the Federal Re­
serve Bank of the district an “Offer to
Contract and Application” accompa­
nied by a resolution of its board direc­
tors authorizing the "Offer to Con­
tract and Application” (both on f o r m s
prescribed and available on request
from the Federal Reserve Bank).
(3) Designation. Each financial insti­
tution satisfying the eligibility re­

quirements and the application proce­
dures will receive from the Federal
Reserve Bank of the district notifica­
tion of its specific designation as a
Treasury tax and loan depositary. A fi­
nancial institution is not authorized to
maintain a Treasury tax and loan ac­
count until it has been designated as a
Treasury tax and loan depositary by
the Federal Reserve Bank of the dis­
trict.
§ 203.4 Sources o f deposit.

A tax and loan depositary shall
credit to its Treasury tax and loan ac­
count payments of such Federal taxes
as the Secretary of the Treasury may
from time to time by regulation autho­
rize to be paid through Treasury tax
and loan accounts, and may credit to
its Treasury tax and loan account
funds representing:
(a) Payments for United States Sav­
ings Bonds issued by the tax and loan
depositary, in its issuing agent capac­
ity;
(b) Payments for United States Sav­
ings Bonds subscribed for through the
tax and loan depositary on behalf of
its customers, but which may be issued
only by Federal Reserve Banks and
the United States Treasury Depart­
ment.
§ 203.5 Directives regarding credits (de­
posits) to Treasury tax and loan ac­
counts.

(a) Payments for United States Sav­
ings Bonds shall be credited in accor­
dance with instructions prescribed by
the Federal Reserve Bank of the dis­
trict.
(b) Federal tax payments shall be
credited in accordance with Part 214
of this Chapter and any instructions
issued pursuant to that Part.
§ 203.6 Parties to the contract.

A financial institution which is des­
ignated as a Treasury tax and loan de­
positary enters into a depositary con­
tract with the Department of the
Treasury. The parties to this contract
are the Treasury, acting through the
Federal Reserve Banks as Fiscal
Agents of the United States, and each
financial institution designated under
§ 203.3. The terms of the contract in­
clude all of the provisions of this part.
§ 203.7

Obligations o f the depositary.

A Treasury tax and loan depositary
shall:
(a) Administer a Treasury tax and
loan account in accordance with this
Part and any amendments or supple­
ments thereto, and instructions issued
pursuant thereto, including the Proce­
dural Instructions for Treasury Tax
and Loan Depositaries;
(b) Comply with the requirements of
section 202 of Executive Order 11246,
entitled “Equal Employment Opportu­
nity” (30 FR 12319) as amended by Ex­

ecutive Order 11375, entitled “Equal
Employment Opportunity Clause,”
which is incorporated herein by refer­
ence, and the regulations issued there­
under at 41 CFR Chapter 60, as
amended. The Secretary of the Trea­
sury may terminate the contract with
a tax and loan depositary for failure to
comply with the terms of the contract
set forth in this subsection, relating to
equal employment opportunity, after
following the procedures specified by
the U.S. Department of Labor at 41
CFR Part 60-30, as amended.
(c) Comply with the requirements of
section 503 of the Rehabilitation Act
of 1973, 29 U.S.C. 793, and the regula­
tions issued thereunder at 20 CFR
Part 741, which are incorporated
herein by reference, requiring Govern­
ment contractors to take affirmative
action to employ qualified handi­
capped individuals, and
(d) Comply with requirements of
section 503 of the Veterans Employ­
ment and Readjustment Act of 1972,
38 U.S.C. 2012, Executive Order 11701,
and the regulations issued thereunder
at 41 CFR Subpart 1-12.11, which are
incorporated herein by reference, for
the promotion of employment of dis­
abled and Vietnam era veterans.

Subpart B—Options
§ 203.8 General requirement.

A Treasury tax and loan depositary
shall administer its Treasury tax and
loan account under either the Note
Option or the Remittance Option.
§ 203.9 Note Option.

(a) Additions. The Treasury will
invest funds in obligations of deposi­
taries selecting the Note Option. Such
obligations shall be in the form of
open-ended notes and additions and
reductions will be reflected on the
books of the Federal Reserve Bank of
the district. A depositary electing the
Note Option shall, as of the first busi­
ness day after crediting deposits to its
tax and loan account, debit its tax and
loan account in the amount of such
deposits and simultaneously credit the
note thereby reflecting an increase in
like amount in Treasury^ investment
in obligations of the depositary.
(b) Delivery. A depositary adminis­
tering its tax and loan account under
the Note Option shall forward at the
close of business each day its advices
of credit for that day to the Federal
Reserve Bank of the district via the
most expeditious means reasonably
available including the U.S. Postal
Service in instances where more posi­
tive delivery systems, in terms of date
of delivery, are not being utilized by
the depositary for other documents
(e.g., checks) being remitted to the
Federal Reserve Bank or Branch city.
(c) Other Additions. (1) A tax and
loan depositary may be given the

FEDERAL REGISTER, V O L 43, NO. 85— TUESDAY, MAY 2, 1978

18969

RULES AND REGULATIONS

(b)
Remittance Option Classes. D e­
option of adding directly to its note
the amounts of payments made by, or positaries electing this option will be
through, it for allotments on tenders subdivided into Remittance Option
and subscriptions for United States se­ Class 1 or Class 2 depending upon the
curities issued under the Second Liber­ volume of deposits credited to their
ty Bond Act, 40 Stat. 268, as amended tax and loan accounts during the pre­
when such method of payment is pro­ vious calendar year, as specified in the
vided for under the terms of the Trea­ Procedural Instructions for Treasury
sury's offering circulars. The amounts Tax and Loan Depositaries. Each de­
of payments shall be added to the positary shall be subject to the provi­
amount of the note on the dates of sions applicable to the class into which
settlement.
it is placed.
(2) In addition, other funds from the (1) Remittance Option—Class 1 reTreasury’s operating cash may be of­ Quirements.—(i) Delivery. A Remit­
fered from time to time to certain tance Option—Class 1 depositary shall
Note Option depositaries. Each such establish and maintain procedures to
Note Option depositary shall have the ensure timely delivery of its advices of
opportunity to decide whether it credit at the Federal Reserve Bank of
wishes to receive from the Treasury the district prior to the Federal R e­
such additional investments in its serve Bank’s cutoff time for processing
notes.
such credits the next business day
(d) Withdrawals. The amount of the after the date of credit. If a deposi­
note shall be payable on demand with­ tary, whose volume of credits is higher
out previous notice. Calls for pay­ than the amount specified in the Pro­
ments on the note will be by direction cedural Instructions for Treasury Tax
of the Secretary of the Treasury and Loan Depositaries, does not ar­
through the Federal Reserve Banks. A range to forward its advices of credit
depositary shall arrange for the pay­ so that they regularly arrive at the
ment of calls on the payment dates Federal Reserve Bank prior to the des­
specified in the calls by a charge to ignated cutoff hour, it should elect the
the reserve account of a depositary or Note Option.
the reserve account of a member bank
(ii) Late fee. If an advice of credit
correspondent.
does not arrive at the Federal Reserve
(e) Interest. A note shall bear inter­ Bank before the designated cutoff
est at the rate specified in § 203.13. hour for receipt of such advices, a late
Such interest is payable monthly by a fee in the form of interest at the rate
charge to the reserve account of the
depositary or through the reserve ac­ specified at § 203.13 will be assessed
count of a member bank correspon­ for each day’s delay in receipt of such
dent. Specific details about the compu­ advice. Such late fee assessments will
tation of the amount of interest due, be effected on a monthly basis
the means of payment, payment dates, through a depositary’s reserve account
Federal Reserve Bank responsibilities, or the reserve account of a member
and other related details are described bank correspondent. Specific details
in the Procedural Instructions for and procedures are included in the
Procedural Instructions for Treasury
Treasury Tax and Loan Depositaries.
(f) Maximum Balance. As of the Tax and Loan Depositaries.
(2) Remittance Option—Class 2 re­
date specified by each Federal Reserve
Bank, each depositary selecting the quirements.—(i) Delivery. A depositary
Note Option may establish a maxi­ administering its tax and loan account
mum balance for its note account by under the Remittance Option—Class 2
providing notice to that effect in writ­ shall forward its advices of credit to
ing to the Federal Reserve Bank of the Federal Reserve Bank of the dis­
the district. That portion of any trict via an available expeditious
advice of credit when posted at the means, which includes the U.S. Postal
Federal Reserve Bank which would Service.
cause the note balance to exceed the
(ii) Analysis credit All tax and loan
amount specified by the depositary balances which are in excess of a cur­
will be automatically withdrawn by rent day’s credits will be subject to an
the Federal Reserve Bank.
analysis credit, as explained in § 203.14
and the Procedural Instructions for
§203.10 Remittance Option.
Treasury Tax and Loan Depositaries.
(a) Withdrawals. For a depositary se­ (iii) Excessive flow. A depositary
lecting the Remittance Option, funds may continue as a Class 2 depositary if
equivalent to the amount of deposits the rate of flow of deposits it accepts
credited by a depositary to its Trea­ does not exceed the limitation pre­
sury tax and loan account will be with­ scribed therefor in the Procedural
drawn by the Federal Reserve Bank Instructions for Treasury Tax and
upon receipt by the Federal Reserve Loan Depositaries. If a depositary’s
Bank of the advices of credit support­ flow exceeds that limitation, it shall
ing such deposits. A depositary shall administer its tax and loan account as
arrange for the payment of withdraw­ a R em ittance Option—Class 1, or a
als by an immediate charge to its re­ Note Option depositary. Specific de­
serve account or the reserve account tails and procedures concerning the
of a member bank correspondent.
excessive flow of deposits are de­

scribed in the Procedural Instructions
for Treasury Tax and Loan Depositar­
ies.
§203.11 Election of option by previously
authori zed depositaries.
(a) General A depositary which, as
of the clase of business on July 5,
1978, was authorized to maintain a tax
and loan account and which wishes to
administer a tax and loan account
under the Note Option or the Remit­
tance Option shall file with the Feder­
al Reserve Bank of the district an
Election of Option form signed by an
official authorized to act on behalf of
the depositary. The depositary will re­
ceive from the Federal Reserve Bank
notice as to the effective date of that
election. Until July 6, 1978, each au­
thorized depositary shall continue to
administer its tax and loan account
under its authorization prior to that
date.
(b) Depositaries not filing an Elec­

tion of Option form, yet accepting tax
deposits. A depositary authorized prior

to July 6, 1978, to administer a Trea­
sury tax and loan account, but which
has not filed an Election ■ of Option
form by that date, or having filed that
form, has not received from the Feder­
al Reserve Bank prior to that date
notice as to the effective date of that
election shall on and after July 6,
1978, if it continues to credit deposits
to the Treasury tax and loan account
by entering such credits, be presumed
to have assented to all terms and pro­
visions of this part and to be adminis­
tering the tax and loan account under
the Remittance Option.
(c) Inactive depositaries. The au­
thority of a depositary, authorized
prior to July 6, 1978, to administer a
Treasury tax and loan account, which
depositary has not filed an Election of
Option form and whose tax and loan
account has had no credits for six
months after July 6, 1978, will be re­
voked automatically. Thereafter, to
accept deposits for credit to a Trea­
sury tax and loan account, the finan­
cial institution shall seek new designa­
tion in accordance with § 203.3.
§ 203.12 Change of options.
A depositary is subject to the provi­
sions of the option it has selected until
such time as it provides notice to the
Federal Reserve Bank requesting a
change in option and receives formal
notification from the Federal Reserve
Bank of the effective date of the
change of option. Specific details re­
garding changes in option are included
in the Procedural Instructions for
Treasury Tax and Loan Depositaries.

Subpart C—Interest and
Compensation
§ 203.13 Rate of interest.
The rate of interest to be used in
connection with the Note Option and

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

2 6 4 - 2 5 8 0 - 78 - 2

18970

RULES AND REGULATIONS

the Remittance Option will be equal
to the Federal funds rate less twentyfive basis points (i.e., V of 1 percent).
i
Details about the computation are in­
cluded in the Procedural Instructions
for Treasury Tax and Loan Depositar­
ies.
§ 203.14 Compensation for services ren­
dered.

(a) General. Depositaries will not be
separately compensated for servicing
the tax and loan account, but the
bookkeeping costs of maintaining that
account are considered in establishing
the per-item fee for each Federal tax
deposit, as prescribed at § 214.6(b) of
this chapter.
(b) Remittance Option—Class 2 de­
positaries. Fees payable to Remittance
Option—Class 2 depositaries for Feder­
al tax deposits will be reduced by an
analysis credit representing the value
of the balances in tax and loan ac­
counts in excess of a current day’s
credits. Specific details regarding the
determination of the amount of com­
pensation due are discussed in the Pro­
cedural Instructions for Treasury Tax
and Loan Depositaries.

Subpart D—Collateral Security
§ 203.15 Collateral security requirements.

(a) Note Option. Prior to crediting
deposits to its Treasury tax and loan
account, a Note Option depositary
shall pledge collateral security in ac­
cordance with the requirements and
valuations of paragraph (d) of this sec­
tion, to cover 100 percent of the
amount of the note balance and the
closing balance in its Treasury tax and
loan account which exceeds recognized
insurance coverage.
(b) Remittance Option. Prior to
crediting deposits to its Treasury tax
and loan account, a Remittance
Option depositary shall pledge collat­
eral security in accordance with the
requirements and valuations of para­
graph (d) of this section in an amount
which is sufficient to cover the maxi­
mum balance in the tax and loan ac­
count at the close of business each
day, less recognized insurance cover­
age.
(c) Deposit of securities. Collateral
security required under paragraphs (a)
and (b) of this section shall be deposit­
ed with the Federal Reserve Bank of
the district, or with a custodian or cus­
todians within the United States desig­
nated by the Federal Reserve Bank,
under terms and conditions prescribed
by the Federal Reserve Bank.
(d) Acceptable securities. Unless oth­
erwise specified by the Secretary of
the Treasury, collateral security
pledged under this section may be
transferable securities of any of the
following classes:
(1)
Obligations issued or fully in­
sured or guaranteed by the United

States or any U.S. Government
agency, and obligations of Govern­
ment-sponsored corporations which
under specific statute may be accepted
as security for public funds: At face
value.
(2) Obligations issued or fully guar­
anteed by the International Bank for
Reconstruction and Development, the
Inter-American Development Bank or
the Asian Development Bank: At face
value.
(3) Obligations partially insured or
guaranteed by any U.S. Government
agency: At a value equal to the
amount of the insurance or guaranty.
(4) Notes representing loans to stu­
dents in colleges or vocational schools
which are insured either by Federal
insurance or by a State agency or pri­
vate nonprofit institution or organiza­
tion administering a student loan in­
surance program in accordance with a
formal agreement with the Commis­
sioner of Education under the provi­
sions of the Higher Education Act of
1965 or the National Vocational Stu­
dent Loan Insurance Act of 1965: At
face value.
(5) Obligations issued by States of
the United States: At 90 percent of
face value.
(6) Obligations of Puerto Rico: At 90
percent of face value.
(7) Obligations of counties, cities,
and other governmental authorities
and instrumentalities which are not in
default as to payments on principal or
interest: At 80 percent of face value.
(8) Obligations of domestic corpora­
tions which may be purchased by
banks as investment securities under
the limitations established by Federal
bank regulatory agencies: At 80 per­
cent of face value.
(9) Commercial and agricultural
paper and bankers’ acceptances ap­
proved by the Federal Reserve Bank
of the district and having a maturity
at the time of pledge of not to exceed
one year: At 90 percent of face value.
(e)
Assignment of securities. A tax
and loan depositary that pledges secu­
rities which are not negotiable without
its endorsement or assignment may, in
lieu of placing its unqualified endorse­
ment on each security, furnish and ap­
propriate resolution and irrevocable
power of attorney authorizing the
Federal Reserve Bank to assign the se­
curities. The resolution and power of
attorney shall conform to such terms
and conditions as the Federal Reserve
Bank shall prescribe.

(b) Termination by the tax and loan
depositary. A tax and loan depositary

may terminate its depositary contract
b y submitting notice to that effect in
writing to the Federal Reserve Bank
ol’ the district effective at a prospec­
tive date set forth in the notice.
§ 203.17

Im p le m e n tin g in s tr u c tio n s .

Each Federal Reserve Bank is autho­
rized to issue implementing instruc­
tions consistent with this part, which
instructions shall be binding upon tax
and loan depositaries located in its dis­
trict.
§ 203.18

E ffe c tiv e d a te .

This revision of this part is effective
on July 6, 1978.
2.
31 CFR Part 214 (Department Cir­
cular No. 1079) is revised to read as
follows:

PART 214—DEPOSITARIES FOR
FEDERAL TAXES
S ec.
214.1 S c o p e o f r e g u la tio n s .
214.2 D e fin itio n s .
214.3 D e s ig n a tio n .
214.4 D e p o s ita ry C o n tr a c t.
214.5 T e r m in a tio n o f c o n tr a c t.
214.6 D e p o s its o f F e d e r a l ta x e s w ith d e p o ­
s ita rie s .
214.7 D e p o s its o f F e d e r a l ta x e s w ith F e d e r ­
a l R e se rv e B a n k s.
214.8 A d d itio n a l in s tr u c tio n s .
214.9 E ffe c tiv e d a te .
A u t h o r i t y : S ec. 10, 5 6 S t a t. 356, as
a m e n d e d (12 U .S .C . 265); sec. 15, 38 S ta t.
265 (12 U .S.C . 391); sec. 8, 40 S ta t . 291, as
a m e n d e d (31 U .S .C . 771); sec. 6302(c), I n t e r ­
n a l R e v e n u e C o d e o f 1954, a s a m e n d e d ; secs.
1, 2 a n d 3, P u b . L. 95-147, 91 S t a t. 1227 (31
U .S .C . 1038).

§214.1

S c o p e o f r e g u la tio n s .

The regulations in this revision of
this part govern the designation of fi­
nancial institutions as depositaries for
Federal taxes and the handling of de­
posits of Federal taxes by such deposi­
taries and by Federal Reserve Banks.
§ 214.2

D e fin itio n s .

As used in this part:
(a) "Depositary” means a depositary
for Federal taxes.
(b) “Federal Reserve Bank of the
district” means the Federal Reserve
Bank serving the geographical area in
which the financial institution is locat­
ed. For this purpose, depositaries lo­
cated in Puerto Rico, the Virgin Is­
lands and the Panama Canal Zone are
Subpart E—Miscellaneous Provisions
included in the Second Federal Re­
serve District.
§ 203.16 Termination o f contract.
(c) "Federal tax deposit form”
(a)
Termination by the Treasury. means a preinscribed form supplied to
The Secretary of the Treasury may a taxpayer by the Treasury Depart­
terminate the contract of a Treasury ment to accompany deposits of Feder­
tax and loan depositary at any time al taxes made under the procedure
upon notice to that effect to that de­ prescribed by this part.
positary effective at a prospective date
(d) "Federal taxes” means those
set forth in the notice.
Federal taxes specified by the Secre­

FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

RULES A ND REGULATIONS

18971

(3) Regardless of the form of pay­
ment, in every instance place in the
space provided on the face of each
Federal tax deposit form a stamp im­
pression reflecting the date on which
the tax deposit was received by the de­
positary, by reference to which the
timeliness of the tax payment will be
determined, and the name and loca­
tion of the depositary.
(4) Credit on the date of receipt all
deposits of Federal taxes to the trea­
sury tax and loan account and admin­
ister that account pursuant to the pro­
visions of Part 203 of this Chapter.
(5) Forward each day to the Internal
Revenue Service Center servicing the
geographical area in which the deposi­
§ 214.3 Designation.
tary is located, the Federal tax deposit
forms for all tax deposits received that
(a) Previously designated, depositar­
day. Each submission of deposit infor­
ies. (1) The designation of each quali­
mation shall be on the prescribed
fied depositary for Federal taxes
Treasury form and in the aggregate
which, at the close of business on July
amount of the Federal tax deposit
5, 1978, was authorized to maintain a
forms.
Treasury tax and loan account under
(6) Establish, prior to transmittal to
the provisions of the former Part 203
the Internal Revenue Service Center,
of this chapter is hereby extended.
an adequate record of all deposits of
The agreements under which they
Federal taxes so that it will be able to
were heretofore authorized as Special
identify deposits in the event tax de­
Depositaries of Public Money are con­
posit forms are lost in shipment be­
tinued in effect without further
tween it and the Internal Revenue
action, but subject to the provisions of
Service Center. For this purpose, a
the current Part 203 of this chapter.
record shall be made of each deposit
(b) New designations.—(1) Eligibil­
showing as a minimum the date of de­
ity. Each financial institution desig­
posit, the taxpayer’s identifying
nated as a Treasury tax and loan depo­
number, and the amount of the depos­
sitary under the provisions of Part 203 § 214.5 Termination o f contract.
it. The depositary’s copies of transmit­
of this chapter is eligible for designa­
(a) By Treasury. The Secretary of tal letters may be used to provide the
tion as a depositary for Federal taxes.
(2) Application for designation. Any the Treasury may terminate the con­ necessary information if individual de­
eligible financial institution seeking tract with any depositary at any time posits are listed separately showing
designation as a depositary for Federal upon notice to that effect to be effec­ date, taxpayer’s identifying number,
taxes shall file with the Federal Re­ tive at a prospective date set forth in and amount.
(7) Not accept compensation from
serve Bank of the district an “Offer to the notice.
(b) By depositary. A depositary
Contract and Application” accompa­ terminate its depositary contractmay taxpayers for accepting deposits of
by Federal taxes and handling them as
nied by a resolution of its Board of Di­ submitting a notice to that effect, in
required by this section.
rectors authorizing the “Offer to Con­
to the Federal
(b) Compensation for services. The
tract and Application,” both on forms writing,district effective Reserve Bank
of the
at a prospec­ Treasury will compensate depositaries
preinscribed by and available on re­ tive date set forth in the notice.
for Federal taxes at a uniform fee of
quest from the Federal Reserve Bank.
Any financial institution not already § 214.6 Deposits of Federal taxes with de­ 50 cents for each Federal tax deposit
form forwarded by the depositary and
designated as a Treasury tax and loan
positaries.
processed by the Internal Revenue
depositary may make simultaneous ap­
(a) Deposits with depositaries. A de­ Service Center. This fee covers the
plication with the Federal Reserve
Bank for such designation as provided positary shall, through any of its of­ bookkeeping costs of maintaining the
fices that accept deposits:
Treasury tax and loan account as well
in § 203.3 of this part.
(1) Accept from a taxpayer cash, a as the handling of Federal tax depos­
(3) Designations. Each financial in­
postal money order drawn to the order its. Fees payable may be reduced by
stitution satisfying the eligibility re­ of the depositary, or a check or draft
quirements and the application proce­ drawn on and to the order of the depo­ the analysis credits described in
dures will receive from the Federal sitary, covering an amount to be de­ § 203.14 of this chapter.
Reserve Bank of the district notifica­ posited as Federal taxes when accom­
tion of its specific designation as a de­ panied by a Federal tax deposit form § 214.7 Deposits of Federal taxes with
Federal Reserve Banks.
positary for Federal taxes.
on which the amount of the deposit
A Federal Reserve Bank shall,
has been properly entered in the space
§ 214.4 Depositary Contract.
provided. A depositary may at its dis­ through any of its offices:
(a) Accept a tax deposit directly
The designation of a depositary cretion accept a check drawn on an­
under this part creates a contract be­ other financial Institution, but it does from a taxpayer when such tax depos­
tween the depositary and the Trea­ so purely on a voluntary basis and ab­ it is:
sury Department, acting through the sorbs for its own account any float in­
(1) Mailed or delivered by a taxpayer
Federal Reserve Bank as Fiscal Agent volved.
located within that Bank’s territorial
of the United States. The terms of this
(2) When requested to do so by a boundaries: and
contract include:
(2) In the form of cash, a check
taxpayer who makes a deposit of Fed­
(a) All of the provisions of this part eral taxes in cash over the counter, drawn to the order of that Bank and
except § 214.7.
issue a counter receipt.
considered to be an immediate credit

tary of the Treasury or the Secretary’s
delegate as eligible for payment
through the procedure prescribed by
this part.
(e) “Immediate credit item” means a
check or other payment instrument
for which immediate credit is given in
accordance with the check collection
schedule of the receiving Federal Re­
serve Bank or Branch of the district.
(f) “Qualified depositary for Federal
taxes” means a previously designated
depositary for Federal taxes that, at
the close of business July 5, 1978, was
qualified by the Federal Reserve Bank
of the district under the provisions of
the former Part 214 of this chapter.

(b) Any instructions issued pursuant
to this part by the Treasury or by Fed­
eral Reserve Banks as Fiscal Agents of
the United States.
(c) The provisions prescribed in sec­
tion 202 of Executive Order 11246, en­
titled “Equal Employment Opportuni­
ty” (30 FR 12319) as amended by Ex­
ecutive Order 11375, entitled “Equal
Employment Opportunity Clause.”
(d) The requirements of section 503
of the Rehabilitation Act of 1973, 29
U.S.C. 793, and the regulations issued
thereunder at 20 CFR Part 741, which
are incorporated herein by reference,
requiring Government contractors to
take affirmative action to employ
qualified handicapped individuals,
except that depositaries which under
this Part receive on an annual basis
fee payments of less than $2,500 are
exempt from compliance with these
regulations.
(e) The requirements of section 503
of the Veterans Employment and Re­
adjustment Act of 1972, 38 U.S.C.
2012, Executive Order 11701, and the
regulations issued thereunder at 41
CFR Subpart 1-12.11, which are incor­
porated herein by reference, for the
promotion of employment of disabled
and Vietnam era veterans, except that
depositaries which under this part re­
ceive on an annual basis fee payments
of less than $10,000 are exempt from
compliance with these regulations.

FEDERAL REGISTER, VOL. 43, NO. 85—TUESDAY, MAY 2, 1978

18972

RULES A ND REGULATIONS

item by that Bank, a postal money
order drawn to the order of that Bank,
or Treasury bills, as authorized in Part
309 of this Chapter, covering an
amount to be deposited as Federal
taxes; and,
(3) Accompanied by a Federal tax
deposit form on which the amount of
the tax deposit has been properly en­
tered in the space provided.
(b) When requested to do so by a
taxpayer who makes a deposit of Fed­
eral taxes in cash over the counter,
issue a counter receipt.
(c) When a deposit of Federal taxes
is made in accordance with the re­
quirements of paragraph (a) of this
section, a Bank shall place in the
space provided on the face of each
Federal tax deposit form accepted di­
rectly from a taxpayer, a stamp im­
pression reflecting the name of the
Bank and the date on which the tax
deposit was received by the Bank so
that the timeliness of the Federal tax
payment can be determined. However,
if such a deposit is mailed to a Bank, it
shall be subject to the “Timely mail­
ing treated as timely filing and
paying” clause of section 7502 of the
Internal Revenue Code (26 U.S.C.
7502).
(d) When a deposit of Federal taxes
is not in accordance with the require­
ments governing form of payment set
forth in paragraph (a) of this section,
a Bank shall place in the space pro­
vided on the face of each Federal tax
deposit form a stamp impression re­
flecting th name of the Bank and the
date on which the proceeds of the ac­
companying payment instrument are
collected by the Bank. This date shall
be used for the purpose of determin­
ing the timeliness of the Federal tax
payment.
§214.8 Additional instructions.
Federal Reserve Banks are autho­
rized to issue instructions consistent
with these regulations for carrying out
the requirements of this part.
§ 214.9 Effective date.
The provisions of this part, as re­
vised, become effective as of July 6,
1978.

of the Treasury or the Federal R e­
serve Banks concerning the sale, in­
scription, dating, validation and issue
of the bonds, and disposition of the
issue records. No issuing agent shall
have authority to sell bonds other
than as provided in the offering circu­
lars and the governing regulations.1
(b) Fees. Issuing agents, other than
Federal agencies which for the pur­
pose of this section Include Govern­
ment corporations and independent es­
tablishments, will be paid for each sav­
ings bond issued during a calendar
quarter as follows:
70 c e n ts f o r e a c h b o n d iss u e d o n s a le b y a
f in a n c ia l i n s titu tio n o n t h e b a sis o f a n a p p li­
c a tio n re c e iv e d o v e r -th e - c o u n te r o r b y m ail,
o r u n d e r a b o n d -a -m o n th p la n :
30 c e n ts f o r e a c h b o n d iss u e d o n s a le b y a
f in a n c ia l in s titu tio n u n d e r a p a y r o ll p la n , if
t h e b o n d Is in s c rib e d b y a n y m e a n s o t h e r
t h a n a c o m p u te r;
10 c e n ts f o r e a c h b o n d iss u e d o n s a le b y a
f in a n c ia l in s titu tio n u n d e r a p a y r o ll p la n , if
t h e b o n d is In sc rib e d b y c o m p u te r:
10 c e n ts f o r e a c h b o n d iss u e d o n sa le b y a
n o n -fin a n c ia l I n s titu tio n ; a n d
5 c e n ts f o r e a c h b o n d re is s u e d to e f fe c t
d is tr ib u tio n to a p a r t ic i p a n t in a p e n s io n , r e ­
tir e m e n t, sav in g s, v a c a tio n o r s im ila r p la n .

(c) Basis for payment of fees. A fee
will be paid for each Series E savings
bond issue included in transmittals of
registration stubs or magnetic tape to
the Bureau of the Public Debt for the
account of an eligible agent during
each calendar quarter, based on the
transfer dates assigned to the trans­
mittals by a Federal Reserve Bank.
(d) No charge to customers. Finan­
cial institutions accepting fees from
the Treasury for issuing savings bonds
shall not make any charge to custom­
ers for the same service.
(e) The provisions of this section, as
amended, are effective as of July 6,
1978.

PART 321—PAYMENTS BY BANKS
AND OTHER FINANCIAL INSTITU­
TIONS OF UNITED STATES SAV­
INGS BONDS AND UNITED STATES
SAVINGS
NOTES
(FREEDOM
SHARES)

bursement at the rate of 30 cents for
each bond or note paid hereunder
which is received by a Federal Reserve
Bank and forwarded for the agent’s
account to the Department of the
Treasury during each calendar quar­
ter.
(b) No charge to oumers. Paying
agents shall not make any charge
whatever to owners of savings bonds
and savings notes in connection with
payments hereunder.
(c) The provisions of this section, as
amended, are effective as of July 6,
1978.
5.
31 CFR Chapter II is revised to
add a new Part 226 to read as follows:
I n t e r im R

ule

PART 226—RECOGNITION OF INSUR­
ANCE COVERING TREASURY TAX
AND LOAN DEPOSITARIES
S ec.
2 2 6 .1
2 2 6 .2
2 2 6 .3
2 2 6 .4

S co p e.
G e n e r a l.
A p p lic a tio n —te r m in a tio n .
A d e q u a c y o f s e c u rity —h o w c o m p u t­

ed.
2 2 6 .5
2 2 6 .6
2 2 6 .7

E x a m in a tio n s .
F in a n c ia l r e p o rts .
E ffe c tiv e d a te .

A u t h o r i t y : S ecs. 2 a n d 3 , P u b . L . 9 5 - 1 4 7 .
9 1 S ta t . 1 2 2 7 ( 3 1 U .S .C . 1 0 3 8 ) .

§ 226.1 Scope.
The regulations in this part apply to
insurance covering public money of
the United States held by banks, sav­
ings banks, savings and loan associ­
ations, building and loan associations,
homestead associations, or credit
unions designated as Treasury tax and
loan depositaries under 31 CFR Part
203. Approval of the adequacy of the
insurance coverage provided to Trea­
sury tax and loan funds shall be gov­
erned by the regulations contained
herein, which will be supplemented by
guidelines issued by the Treasury and
updated from time to time to meet
changing conditions in the industry.

§ 226.2 General.
(a) Deposit or account insurance
4.
31 CFR Part 321 (Department Cir­provided by the Federal Deposit Insur­
cular No. 750, Second Revision) is ance Corporation, the Federal Savings
PART 317—REGULATIONS GOVERN­ amended by revising § 321.5 to read as and Loan Insurance Corporation, and
the National Credit Union Share In­
ING AGENCIES FOR ISSUE OF U.S. follows:
surance Fund, is hereby recognized.
SAVINGS BONDS OF SERIES E AND
Deposits or accounts which are in­
•
•
•
•
•
U.S. SAVINGS NOTES
sured by a State or agency thereof, or
Subpart B—Authority To Act
by a corporation chartered by a State
3.
31 CFR Part 317 (Department Cir­
for the sole purpose of insuring depos­
cular, Public Debt Series No. 4-67) is § 321.5 Paying agent fees and charges.
its or accounts of financial institutions
amended by revising § 317.5 to read as
(a) Scale or rate and procedures. eligible to be Treasury tax and loan
follows:
Each paying agent shall receive reim­ depositaries (hereinafter referred to as
Insurance Arrangement), shall be ap­
§ 317.5 Issuance of bonds.
proved as provided herein. Such ap­
1D e p a r tm e n t o f t h e T r e a s u r y C irc u la rs
(a) General. Issuing agents shall N o. 5 3 0 , c u r r e n t re v isio n ( 3 1 C F R P a r t 3 1 5 ) , proval constitutes recognition for the
comply with all regulations and a n d N o. 6 5 3 , c u r r e n t re v isio n ( 3 1 C F R P a r t purpose of reducing the amount of col­
instructions issued by the Department 3 1 6 ) .
lateral required of a tax and loan de­
FEDERAL REGISTER, VOL. 43, NO. 85— TUESDAY, MAY 2, 1978

18973

RULES AND REGULATIONS

positary by the amount of recognized vides adequate security or that it is
insurance coverage pursuant to 31 not complying with the regulations of
this part, the Secretary will notify the
CFR 203.15.
(b) Generally, these regulations and Insurance Organization of the facts or
their associated guidelines require conduct which cause him to make
that an organization providing insur­ such determination, and in those cases
ance maintain a corpus of sufficient where the safety of the Government’s
value and liquidity, and/or that it funds allows, provide the Insurance
have sufficient State borrowing au­ Organization with an opportunity to
thority, in relation to its liabilities and correct the deficiency. When any defi­
total insured savings (or deposits) to ciency has not been corrected to his
provide adequate security to the Gov­ satisfaction or, where the safety of
ernment’s deposits and that adequate Government funds makes immediate
monitoring of the financial condition revocation imperative, the Secretary
of the insured institutions is conduct­ will revoke the recognition previously
ed.
granted.
§ 226.3 Application—termination.

(a) Every Insurance Organization
applying for recognition as a qualified
insurer of financial institutions desig­
nated as Treasury tax and loan deposi­
taries shall address a written request
to the Assistant Comptroller for Au­
diting, Bureau of Government Finan­
cial Operations, Department of the
Treasury, Washington, D.C. 20226,
who will notify the applicant of the
data which is necessary to make appli­
cation. If the Secretary of the Trea­
sury is satisfied that (1) one or more
institutions insured by the applicant
otherwise meet the Secretary’s re­
quirements for designation as a Trea­
sury tax and loan depositary or Feder­
al tax depositary, (2) the insurance
provided by the applicant covers
public money of the United States,
and (3) the insurance coverage pro­
vided affords adequate security to the
Government’s deposits, the Secretary
shall recognize the applicant as a
qualified insurer of financial institu­
tions designated as Treasury tax and
loan depositaries.
(b) If and when the Secretary of the
Treasury determines that a qualified
insurance organization's financial con­
dition is such that it no longer pro­

§226.4 Adequacy of security—how com­
puted.

(a) In qualifying Insurance Organi­
zations, the Treasury will use a ratio
(equity (net worth) of the insurance
organization divided by insured ac­
counts or deposits) to determine if the
security is adequate. The ratio will be
computed as determined by the Trea­
sury, and is required to equal 0.0045 or
greater for an Insurance Organization
to be recognized (i.e., net worth is re­
quired to equal 0.45 of 1 percent of in­
sured accounts or deposits).
(b) If, in the judgment of the Secre­
tary of the Treasury, any of the Insur­
ance Organization’s assets which
cannot be liquidated promptly or are
subject to restriction, encumbrance, or
discredit, all or part of the value of
such assets may be deducted from
equity in making the computation.
The Secretary of the Treasury may
value the assets and liabilities in his
discretion.
(c) An Insurance Organization’s un­
qualified borrowing authority from its
sponsoring State will be added to its
equity in making the computation be­
cause such authority is equivalent to
additional capitalization. An Insurance
Organization’s commercial borrowing

authority and its reinsurance will be
disregarded in making the computa­
tion, because these are not adequate
substitutes for undercapitalization.
§ 226.5

Examinations.

(a) Examinations by State regula­
tory authorities or audits by CPA
firms of Insurance Organizations shall
be performed in accordance with, and
at intervals prescribed by, State regu­
latory procedures. Copies of the re­
ports shall be submitted to the Trea­
sury.
(b) Examinations by State regula­
tory authorities or audits by CPA
firms of insured financial institutions
shall be performed in accordance with,
and at intervals prescribed by, State
regulatory procedures. In addition, an
adequate monitoring system shall be
employed to detect those institutions
with financial problems.
§226.6

Financial reports.

Financial reports of Insurance Orga­
nizations shall be submitted to the
Treasury at the same intervals they
are submitted to State regulatory au­
thorities. However, they need not be
submitted more frequently than quar­
terly but, as a minimum, shall be sub­
mitted annually. The Treasury may
prescribe the format of such reports.
§ 226.7

Effective date.

The provisions of this part become
effective as of July 6, 1978.
•
•
•
•
•
The foregoing revisions and/or
amendments are effective as of July 6,
1978.
Dated: April 27,1978.
P

aul

H . T aylor,

Acting Fiscal
Assistant Secretary.

[ F R D oc. 78-11814 F ile d 5-1 -7 8 ; 8:45 a m ]

FEDERAL REGISTER, V O L 43, NO. 85— TUESDAY, MAY 2, 1978

‘ F A -1 03 8 A2 (5-78) NCR

MAXIMUM BALANCE LIMITATION
OPEN-ENDED NOTE OPTION
TREASURY TAX AND LOAN ACCOUNT
To: Fiscal Agency Dept.
Federal Reserve Bank
Sitat ion K
Dallas, Texas 75222

____

In accordance with 31 CFR Part 203.9(f) (43 Federal Register 18960 dated May 2 ,1 9 7 8 ), all depositaries
selecting the Note Option may establish a maximum balance for its Note Account by providing notice in w nting to
the Federal Reserve Bank. Indicated below is the ceiling to be established for this institution.

I~1 All deposits in excess o f collateral pledged shall be withdrawn w ithout prior
notice.
□

All deposits in excess o f $___________________________________________
shall be withdrawn w ithout prior notice.

NAM E OF DEPOSITARY

LOCATION

SIG NATURE & TITLE OF O FFICER

FRB USE ONLY

EFFECTIVE DATE

DISTRIBUTION:

WHITE - Federal Reserve Bank's Copy

CANARY-Depositary Bank’s Copy


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102