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FEDERAL RESERVE BANK
OF NEW YORK
Circular No. 14 9 3 "I
. December 18, 1934 J
REGULATION Q OF THE FEDERAL RESERVE BOARD, AS
AMENDED, RELATING TO PAYMENT OF DEPOSITS
AND INTEREST THEREON BY MEMBER BANKS
To all Member Banks in the
Second Federal Reserve District:
I transmit herewith copy of Regulation Q, Series of 1935, of the
Federal Reserve Board, relating to the payment of deposits and
interest thereon by member banks of the Federal Reserve System
containing amendments referred to in my circular No. 1491, dated
December 15, 1934, to subsection (c) of section III and footnote 6,
relating to interest on time deposits, and to subsection (c) of section V,
and footnote 9, relating to interest on savings deposits.
Additional copies of Regulation Q, as amended, will be furnished
upon request.
J. H. CASE,
Federal Reserve Agent.
FEDERAL RESERVE BOARD
PAYMENT OF INTEREST ON DEPOSITS
REGULATION Q
This Regulation is in the form as amended,
effective February 1, 1935
PRINTED IN NEW YORK CITY, N . Y.
REGULATION Q, SERIES OP 1935
(Superseding Regulation Q, Series of 1933)
PAYMENT OF INTEREST ON DEPOSITS
SCOPE OF REGULATION
This regulation relates to the payment of deposits and interest
thereon by member banks of the Federal Reserve System and not to
the computation and maintenance of the reserves which member
banks are required to maintain against deposits. The rules concerning
reserves of member banks are contained in the Federal Reserve Board's
Regulation D.
SECTION I. STATUTORY PROVISIONS
Section 19 of the Federal Reserve Act, as amended by the Banking
Act of 1933, provides in part as follows:
SEC. 19. Demand deposits within the meaning of this Act shall comprise all
deposits payable within thirty days, and time deposits shall comprise all deposits
payable after thirty days, all savings accounts and certificates of deposit which
are subject to not less than thirty days* notice before payment, and all postal
savings deposits.
*
*
*
*
*
*
*
No member bank shall, directly or indirectly by any device whatsoever, pay
any interest on any deposit which is payable on demand: Provided, That nothing
herein contained shall be construed as prohibiting the payment of interest in
accordance with the terms of any certificate of deposit or other contract heretofore entered into in good faith which is in force on the date of the enactment of
this paragraph; but no such certificate of deposit or other contract shall be renewed or extended unless it shall be modified to conform to this paragraph, and
every member bank shall take such action as may be necessary to conform to
this paragraph as soon as possible consistently with its contractual obligations:
Provided, however, That this paragraph shall not apply to any deposit of such
bank which is payable only at an office thereof located in a foreign country, and
shall not apply to any deposit made by a mutual savings bank, nor to any deposit
of public funds made by or on behalf of any State, county, school district, or
other subdivision or municipality, with respect to which payment of interest is
required under State law.
The Federal Reserve Board shall from time to time limit by regulation the
rate of interest which may be paid by member banks on time deposits, and may
prescribe different rates for such payment on time and savings deposits having
different maturities or subject to different conditions respecting withdrawal or
repayment or subject to different conditions by reason of different locations.
No member bank shall pay any time deposit before its maturity, or waive any
requirement of notice before payment of any savings deposit except as to all
savings deposits having the same requirement.
Section 24 of the Federal Reserve Act, as amended by the act of
February 25, 1927, provides in part as follows:
Such banks may continue hereafter as heretofore to receive time and savings
deposits and to pay interest on the same, but the rate of interest which such
banks may pay upon such time deposits or upon savings or other deposits shall
not exceed the maximum rate authorized by law to be paid upon such deposits
by State banks or trust companies organized under the laws of the State wherein
such national banking association is located.
REG. Q
KKflULATIONS OF THE FEDERAL RESERVE BOARD
SECTION II.
3
DEPOSITS PAYABLE ON DEMAND
(a) Interest prohibited.—Except as hereinafter stated, no member
bank of the Federal Reserve System shall, directly or indirectly, by
any device whatsoever, pay any interest on any deposit which is
payable on demand.
(b) Exceptions.—This prohibition does not apply to—
(1) Any deposit which is payable only at an office of such bank
which is located in a foreign country.1
(2) Any deposit made by a mutual savings bank.
(3) Any deposit of public funds * made by or on behalf of
any State, county, school district, or other subdivision or municipality, with respect to which payment of interest is required
under State law.
(4) Payment of interest in accordance with the terms of any
certificate of deposit or other contract which was lawfully
entered into in good faith before June 16, 1933, and in force on
that date and which may not be terminated or modified by such
bank at its option or without liability; but no such certificate
of deposit or other contract may be renewed or extended unless it
be modified to eliminate any provision for the payment of interest
on deposits payable on demand; and every member bank shall
take such action as may be necessary, as soon as possible consistently with its contractual obligations, to eliminate from any
such certificate of deposit or other contract any provision for the
payment of interest on deposits payable on demand.
SECTION III.
INTEREST ON TIME DEPOSITS
(a) Time deposits.—The term "time deposits", for the purposes of
this section, includes ''time certificates of deposit", "time deposits.
open accounts", and "postal savings deposits", as defined below* :s
(1) Time certificates of deposit.—The term "time certificate
of deposit" means an instrument evidencing the deposit with a
bank of a certain sum specified on the face of the instrument
payable to bearer or to any specified person or to his order—
(i) On a certain date, specified in the instrument, not less
than 30 days after the date of the deposit, or
(ii) At the expiration of a certain specified time subsequent
to the date of the instrument, in no case less than 30 days, or
1
The Philippine Islands, Puerto Rico, Canal Zone, Hawaii, and other Territories, de
pendencies, or insular possessions of the United States are not foreign countries, within the
meaning of the above provision
8
Deposits of moneys paid into State courts by private parties pending the outcome of
litigation are not deposits of "public funds" made by or on behalf of any State, county, school
district, or other subdivision or municipality, within the meaning of the above provision.
3
Under the provisions of section 19 of the Federal Reserve Act, time deposits include savings deposits; but, for convenience, savings deposits are dealt with separately in this regulation.
4
REGULATIONS OF THE FEDERAL RESERVE BOARD
BKG. Q
(Hi) Upon notice in writing which is actually required * to
be given a certain specified number of days, not less than 30
days, before the date of repayment, and
(iv) In all cases only upon presentation and surrender of
the instrument.
(2) Time deposits, open accounts.—The term "time deposits,
open accounts" means deposits, other than "time certificates of
deposit", "postal savings deposits", and "savings deposits", in
respect to which a written contract has been entered into with the
depositor at the time the deposit is made that neither the whole
nor any part of such deposit may be withdrawn, by check or
otherwise, prior to the date of maturity, which shall be not less
than 30 days after the date of the deposit, or on written notice
which must be given by the depositor a certain specified number
of days in advance, in no case less than 30 days.5
(3) Postal savings deposits.—The term "postal savings deposi t s " means deposits in banks which consist of postal savings
funds deposited under the terms of the Postal Savings Act,
approved June 25, 1910, as amended by the Banking Act of
1933, and which comply with the requirements of paragraph
1 or 2 of this subsection.
(&) Payment of interest.—Except in accordance with the provisions of this section, no member bank shall pay interest on any time
deposit in any manner, directly or indirectly, or by any method,
practice or device whatsoever.
(c) Maximum rate of interest.—
(1) No member bank shall pay interest, accruing after January 31, 1935, on any time deposit or any part thereof at a rate
in excess of 21/2 percent per annum, compounded quarterly,0 regardless of the basis upon which such interest may be computed,
except as otherwise provided in this subsection.
(2) A member bank may pay interest on time deposits in
accordance with the terms of any certificate of deposit or other
contract which was lawfully entered into in good faith prior to
December 18, 1934, and in force on that date and which may not
legally be terminated or modified by such bank at its option or
4
Under the provisions of Regulation D, a certificate of deposit with respect to which the
batik merely reserves the right to require written notice of not less than 30 days may be
classified as a time deposit for the purpose of computing reserves; but interest may not be
paid on such a certificate of deposit, because it is in fact payable on demand unless prior to
such payment the notice of not less than 30 days is actually required, and because the prohibition in the law upon the payment by a member bank of any time deposit before its maturity
clearly contemplates that time deposits (other than savings deposits), upon which interest
is payable, must have a definite maturity for at least 30 days prior to payment.
6
A deposit, with respect to which the bank merely reserves the right to require notice of
not less than 30 days before any withdrawal is made is not a "time deposit, open account",
within the meaning of the above definition.
• This limitation is not to be interpreted as preventing the compounding of interest at other
than quarterly intervals provided that the aggregate amount of such interest so compounded
does not exceed the aggregate amount of interest at the rate above prescribed when compounded quarterly.
REG. Q
REGULATIONS OF THE FEDERAL RESERVE BOARD
5
without liability; but no such certificate of deposit or other contract shall be renewed or extended unless it be modified to conform
to the provisions of this regulation, and every member bank shall
take such action as may be necessary, as soon as possible consistently with its contractual obligations, to bring all such certificates of deposit or other contracts into conformity with the
provisions of this regulation.
(3) The rate of interest paid by a member bank upon a time
deposit shall not in any case exceed (i) the maximum rate
prescribed in paragraph 1 of this subsection, or (u) the maximum
rate authorized by law to be paid upon such deposits by State
banks or trust companies organized under the laws of the State
in which such member bank is located, whichever may be less.
(4) A member bank may pay interest on a time deposit
received during the first five days of any calendar month at the
maximum rate prescribed in paragraph 1 of this subsection
calculated from the first day of such calendar month until such
deposit is withdrawn or ceases to constitute a time deposit under
the provisions of this regulation, whichever shall first occur.
(5) A member bank may pay interest on a time deposit which
is payable only at an office of such bank located outside of the
States of the United States and of the District of Columbia at a
rate not exceeding the maximum rate prescribed in paragraph 1
of this subsection or such higher maximum rate as may be prescribed by the Federal Reserve Board from time to time for payment in the locality in which such office is located.
(d) Deposits payable within 30 days.—Interest at a rate not
exceeding that prescribed in subsection (c) of this section may be
paid until maturity upon deposits which were bona fide time deposits
at the time of deposit, although they have since become payable within
30 days. On time deposits with respect to which notice of "withdrawal shall have been given to the bank, interest may be paid until
the expiration of the period of such notice at a rate not exceeding that
prescribed in subsection (c) of this section. No interest shall be
paid by a member bank on any amount which, by the terms of any
certificate or other contract or agreement or otherwise, the bank may
be required to pay within 30 days from the date on which such
amount is deposited in such bank.
(e) No interest after maturity or expiration of notice.—After the
date of maturity of any time deposit, such deposit is a deposit payable on demand, and no interest may be paid on such deposit for any
period subsequent to such date. After the expiration of the period
of notice given with respect to the repayment of any time deposit,
such deposit is a deposit payable on demand and no interest may be
paid on such deposit for any period subsequent to the expiration of
such notice.
6
REGULATIONS OF THE FEDERAL RESERVE BOARD
SECTION IV.
KEG. Q
PAYMENT OF TIME DEPOSITS BEFORE MATURITY
(a) No member bank shall pay any time deposit except in accordance with the provisions of this section, even though no interest is
paid on such deposit.7
• (&) No member bank shall pay any time deposit, which is payable
on a specified date, before such specified date.
(c) No member bank shall pay any time deposit, which is payable
at the expiration of a certain specified period, before such specified
period has expired.
(d) No member bank shall pay any time deposit, with respect to
which notice is required to be given a certain specified period before
any withdrawal is made, until such required notice has been given
and the specified period thereafter has expired.
SECTION V. INTEREST ON SAVINGS DEPOSITS
(a) Definition.—The term "savings deposit" means a deposit
which consists of funds accumulated for bona fide thrift purposes *
and in respect to which—
(1) The pass book or other form of receipt, evidencing such
deposit, must be presented to the bank whenever a withdrawal
is made.
(2) The depositor is required, or may at any time be required,
by the bank to give notice in writing of an intended withdrawal
not less than 30 days before a withdrawal is made, and
(3) The above requirements are included in the bank's
printed regulations accepted by the depositor or in some other
written contract with the depositor.
(6) Payment of interest.—Except in accordance with the provisions
of this section, no member bank shall pay interest on any savings
deposit in any manner, directly or indirectly, or by any method,
practice, or device whatsoever.
(c) Maximum rate of interest.—
(1) No member bank shall pay interest, accruing after January 31, 1935, on any savings deposit or any part thereof at a
' The making of a loan to the owner of a time deposit in a member bank by such bank,
or by any other bank, person, partnership or corporation in accordance with any agreement,
arrangement or understanding with such bank, for the purpose of evading any prohibition of
sec. IV above, will, to the extent of such loan, be deemed to be a payment of such deposit in
violation of such prohibition; and, in any case in which a loan is made to the owner of a
time deposit in a member bank by such bank or in accordance with any agreement, arrangement or understanding with such bank, the member bank must be prepared to show clearly
that it was made in good faith and not for the purpose of evading any such prohibition.
8
If by reason of the amount of the deposit, the business of the depositor or otherwise, a
question arises whether a deposit is properly classified by a bank as a savings deposit, the bank
must be prepared to show clearly that it is a deposit consisting of funds accumulated for
bona fide thrift purposes and that it otherwise complies with the above definition.
KEG. Q
REGULATIONS OF THE FEDERAL RESERVE BOARD
7
rate in excess of 2V£ percent per annum, compounded quarterly,"
regardless of the basis upon which such interest may be computed,
except as otherwise provided in this subsection.
(2) A member bank may pay interest on savings deposits in
accordance with the terms of any contract, which was lawfully
entered into in good faith prior to December 18, 1934, and in
force on that date and which may not legally be terminated or
modified by such bank at its option or without liability; but no
such contract shall be renewed or extended unless it be modified
to conform to the provisions of this regulation, and every member
bank shall take such action as shall be necessary, as soon as
possible consistently with its contractual obligations, to bring
all such contracts into conformity with the provisions of this
regulation.
(3) The rate of interest paid by a member bank upon a savings
deposit shall not in any case exceed (») the maximum rate
prescribed in paragraph 1 of this subsection, or (ii) the maximum
rate authorized by law to be paid upon such deposits by State
banks or trust companies organized under the laws of the State
in which such member bank is located, whichever may be less.
(4) A member bank may pay interest on a savings deposit
received during the first five days of any calendar month at the
maximum rate prescribed in paragraph 1 of this subsection
calculated from the first day of such calendar month until such
deposit is withdrawn or ceases to constitute a savings deposit
under the provisions of this regulation, whichever shall first
occur.
(5) A member bank may pay interest on a savings deposit
which is payable only at an office of such bank located outside
of the States of the United States and of the District of Columbia
at a rate not exceeding the maximum rate prescribed in paragraph 1 of this subsection or such higher maximum rate as may
be prescribed by the Federal Reserve Board from time to time
for payment in the locality in which such office is located.
(d) Deposits upon which notice of withdrawal is not given.—
Interest at a rate not exceeding that prescribed in subsection (c) of
this section may be paid upon savings deposits as defined above with
respect to which notice of intended withdrawal has not actually been
required or given.
(e) Deposits upon which notice of withdrawal has been given.—
Interest at a rate not exceeding that prescribed in subsection (c) of
this section may be paid upon savings deposits, with respect to which
notice of intended withdrawal may have been given to the bank, until
the expiration of the period of such notice.
(/) No interest after expiration of period of notice.—After the
expiration of the period of notice given with respect to the intended
withdrawal of any savings deposit, such deposit is a deposit payable
9
This limitation is not to be interpreted as preventing the compounding of interest at other
than quarterly intervals provided that the aggregate amount of such interest so compounded
does not exceed the aggregate amount of interest at the rate above prescribed when compounded quarterly.
8
REGULATIONS OF THE FEDERAL RESERVE BOARD
REG. Q
on demand and no interest may be paid on such deposit for any
period subsequent to the expiration of such notice, unless the owner
of such deposit advise the bank in writing that the deposit will not
be withdrawn pursuant to such notice or that the deposit will thereafter again be subject to the requirements applicable to savings
deposits, in which event the deposit again constitutes a savings
deposit after the date upon which such advice is received by the bank.
SECTION VI. NOTICE OF WITHDRAWAL OF SAVINGS DEPOSITS
(a) A member bank must observe the requirements set forth below
in requiring notice of intended withdrawal of any savings deposit, or
in waiving such notice, or in repaying any savings deposit, or part
thereof, without requiring such notice, whether such notice of intended withdrawal is required to be given in each case by the terms of
the bank's contract with the depositor or may, under such contract, be
required by the bank at any time at its option.
(1) If a member bank waive such notice of intended withdrawal as to any portion or percentage of the savings deposits
of any depositor, it shall waive such notice as to the same portion or percentage of the savings deposits of every other depositor which are subject to the same requirement.
(2) If a member bank pay any portion or percentage of the
savings deposits of any depositor, without requiring such notice,
it shall, upon request and without requiring such notice, pay
the same portion or percentage of the savings deposits of every
other depositor which are subject to the same requirement.
(3) If a member bank require such notice before the payment of any portion or percentage of the savings deposits of
any depositor, it shall require such notice before the payment
of the same portion or percentage of the savings deposits of any
other depositor which are subject to the same requirement.
(&) No member bank shall change its practice with respect to the
requiring or waiving of notice of intended withdrawal of savings
deposits except after duly recorded action of its board of directors
or of its executive committee properly authorized, and no practice
in this respect shall be adopted which does not conform to the
requirements of paragraphs 1, 2, or 3 of subsection (a) of this section.
(c) No change in the practice of a member bank with respect to
the requiring or waiving of notice of intended withdrawal of savings
deposits subject to the same requirement shall be made until a
reasonable time following the last preceding change in the practice
with respect to savings deposits subject to the same requirement
shall have elapsed.
(d) A member bank must observe the requirements of this section
with respect to savings deposits even though no interest be paid on
such deposits.10
FR0I.-1 FEDERAL RESERVE FJLLETIN - NOVEMBER 1955
(Page 708)
Forms of time certificates of deposit
There are printed below forms of certificates of deposit which, in the
opinion of the Federal Reserve Board, comply with the definition of time certificates of deposit contained in the Board's Regulation Q,« No particular form of time
certificate of deposit is required, however, and a deposit evidenced by any form
which complies in all respects with the definition of time certificates of deposit
set forth in Regulation Q may, of course, bo treated as a time deposit for the purposes of the regulation*
(Form No. 1)
Tlie First National Bank of
Place
No,
(Date)
has deposited not subject to check
Dollars (§
___) payable to the order of
in
current funds on
19
, upon surrender of this
(Not less than 30 days hone©)
certificate properly endorsed, with interest at the rate of 3 per cent por
annum from date to maturity only. The rate of interest payable hereunder is subject to change by the bank to such extent as may be necessary to comply with requirements of the Federal Reserve Board made
from time to time pursuant to the Federal Reserve Act.
(Casiiier)
(Form No. 2)
The First National Bank of
Place
No,
(Date)
has deposited not subject to check
Dollars (0
) payable to the order of
in
current funds
__after date, upon surrender of this certificate
(Not less than 30 days)
properly endorsod, with interest at the rate of 3 per cent per annum from
dato to maturity only. The rate of interest payable hereundcr is subject to change by the banJi to such extent as may be necessary to couply
with requirements of tlie Federal Reserve Boai*d r.iade from tine to
time pursuant to the Federal Reserve Act*
(Cashier)
(Form Ko. 3)
The Zirst National Bank of
Place
No
(Date)
has deposited not subject to check
Dollars Q
) payable to the order of
in
current funds
days after notice in writing of intended rjith(Not less than 30 days)
drav/al shall have been given to the bank and upon surrender of this
certificate properly endorsed, with interest as herein provided. Interest
payable for full months only at
per cent per annum if left
(days or months]
or
per cent if left more than
• No interest aftor expira*
(days or months)
tion of notice of withdrawal• The rate of interest payable hereunder is
subject to change by the bank to such extent as may be necessary to
comply with requirements of the Federal Reserve Board irnde from
time to time "pursuant to the Federal Reserve Act.
(Cashier)
(Form No. 4)
The First National Bank of
Place
No.
(Date)
has deposited not subject to check
Dollars {$
) payable to the order of
in
current funds only upon the expiration of a period of
days
(Not less than 30 days)
after notice in writing of intended withdrawal shall have been given to
the bank and upon surrender of this certificate properly endorsed, with
interest as herein provided. Interest payable for full months only
at
per cent per annum if left
or -^______ per cent if left more
(days or months"]
than
»
No interest after expiration of notice of withdrawal.
(days or months)
The rate of interest payable hereunder is subject to change by the bank
to such extent as may be necessary to comply with requirements of the
Federal Reserve Board made from tine to time pursuant to the Federal
Reserve Act.
(Cashier)
FEDERAL RESERVE BANK
OF NEW YORK
December 22, 1934.
NEW COUNTERFEIT
To Member Banks in the Second Federal
Reserve District and others concerned:
At the request of the Secret Service Division of the Treasury Department,
New York District, we are forwarding to all member banks in the Second Federal
Reserve District and others concerned the following information which we have received from the Secret Service Division describing a counterfeit Federal Reserve
note now appearing in circulation:
COUNTERFEIT $10 FEDERAL RESERVE NOTE:
On the FEDERAL RESERVE BANK OF NEW YORK; 1928 B Series;
Check Letter f F T ; Face Plate No. 16 or 18; Back Plate No. 8.
This counterfeit is believed to be a re-issue of the countea>
feit $10 Federal Reserve Note on the FEDERAL RESERVE BANK OF
KANSAS CITY, MISSOURI, which bears Check Letter fF,f Face
Plate No. 41, and the same Back Plate No. 8. The note is
particularly well executed, but bears the same defects as
shown in our description of the Kansas City bill, the most
noticeable of which is the heavy black line which appears
at your left on the portrait of HAMILTON,
Detecting one of these counterfeits you should forward
it with all available information to the office of the U. S.
Secret Service having jurisdiction in your territory.
Offices
are located in Syracuse, Buffalo and New York, N. Y., and in
Newark, N. -J.
George L. Harrison,
Governor,
@FedFRASER