The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RE SE R V E BANK OF NEW YORK r Circular No. 3 8 7 1 1 L June 24, 1952 J PAYMENT OF INTEREST ON DEPOSITS Amendment to Regulation Q Revision of Operating Circular No. 15 To all Member Banks in the Second Federal Reserve D istrict: The Board of Governors of the Federal Reserve System has amended its Regu lation Q, effective July 1, 1952, with respect to the allowance of days of grace in the computation by member banks of interest on savings deposits. A copy of the amend ment is transmitted herewith. The Federal Deposit Insurance Corporation has adopted an identical amendment, also effective July 1, 1952, to its regulations relating to the payment by insured nonmember banks of interest on deposits. Our Operating Circular No. 15, entitled “ Payment of Interest on Time and Sav ings Deposits,” has been revised to reflect changes made by General Regulation No. 3 (Amendment), adopted by the Banking Board of the State of New York, effective February 6, 1952, and also to reflect changes made by the above-mentioned amendment to Regulation Q. A copy of the revised circular is also enclosed. Additional copies of this circular and of the enclosures will be furnished upon request. A llan S proul, President. PAYM ENT OF INTEREST ON DEPOSITS AMENDMENT TO REGULATION Q ISSUED BY T H E BOARD OP GOVERNORS OF T H E FEDERAL RESERVE SYSTEM Regulation Q is hereby amended, effective July 1, 1952, by chang ing subsection (d ) of section 3 thereof to read as follows: (d) Grace periods in computing interest on savings deposits.— A member bank may pay interest on a savings deposit received during its first 10 business days of any calendar month commencing a regular quarterly or semiannual interest period and during its first 5 business days of any other calendar month at the applicable maximum rate prescribed pursuant to subsection (a) of this section calculated from the first day of such calendar month until such deposit is withdrawn or ceases to constitute a savings deposit under the provisions of this regulation, whichever shall first occur; and a member bank may pay interest on a savings deposit withdrawn during its last 3 business days of any calendar month ending a regular quarterly or semiannual interest period at the applicable maximum rate prescribed pursuant to subsection (a ) calculated to the end of such calendar month. P R IN T E D IN NEW YORK Federal of R N eserve ew Y Bank ork J" Operating: C ircular N o. 15 *1 L R evised J u ly 1, 1952 J PAYM ENT OF INTEREST ON TIME AND SAVINGS DEPOSITS To all Member Banks in the Second Federal Reserve D istrict: This circular contains inform ation regarding the maximum rates o f interest which member banks in the Second Federal Reserve District may law fu lly pay on time and savings deposits. Statutory provisions 1. Section 19 o f the Federal Reserve A ct (hereinafter referred to as the “ A c t ” ) provides generally, among other things, that 110 member bank shall pay any interest on any deposit payable 011 demand, and that the B oard o f Governors o f the Federal Reserve System shall, by regulation, limit the rate o f interest which may be paid by member banks on time and savings deposits;1 and authorizes the B oard of Governors to define certain terms used in the A ct, to determine what shall be deemed a paym ent o f interest, and to prescribe rules and regulations to effectuate the purposes o f the section. Regulation Q 2. Under authority o f the provisions o f Section 19 o f the A ct, the Board o f Governors o f the Federal Reserve System has issued Regula tion Q, entitled “ Payment o f Interest on D eposits.” Reference is made to the Regulation for the definitions o f terms used in the A ct and fo r details o f the prohibition against the paym ent o f interest 011 deposits payable on demand and the limitations upon the payment of interest 011 time and savings deposits. Supplement to Regulation Q 3. The latest Supplement to Regulation Q, effective January 1, 1936, prescribes the maximum rates o f interest which member banks may pay on time and savings deposits.1 W e will prom ptly n otify our member banks o f any change in these rates. 1 The fo re g o in g provisions are not applicable to any deposit that is payable only at an office o f a member bank located outside o f the States o f the United States and the D istrict o f Columbia. Member banks limited to maximum rate for State banks 4. Section 24 of the Act provides that the rate of interest which a national banking association may pay upon time deposits or upon savings 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 in which such association is located. 5. Section 3(c) of Regulation Q provides that the rate of interest paid by a member bank on a time deposit or savings deposit shall not exceed either the applicable maximum rate prescribed in the Supplement to Regulation Q, or the applicable maximum rate author ized by law to be paid upon such deposits by State banks or trust companies organized under the laws of the State in which such mem ber bank is located, whichever may be less. Grace periods in computing interest on savings deposits 6. Effective July 1, 1952, the Board of Governors of the Federal Reserve System has amended Section 3 ( d ) of Regulation Q. Under this amendment, a member bank may, in paying interest, allow a grace period of 10 business days at the beginning of any calendar month commencing a regular quarterly or semiannual interest period, a grace period of 5 business days at the beginning of any other calen dar month, and a grace period of 3 business days at the end of any calendar month ending a quarterly or semiannual interest period. Banks located in the State o f New York 7. The Banking Board of the State of New York adopted General Regulation No. 3 (Amendment), effective February 6, 1952. Section 2 of the General Regulation provides that the maximum rate of interest which banks and trust companies organized under the laws of the State of New York may pay on any special interest or thrift deposit2 account is 2]/> per cent per annum, compounded quarterly, on that part of any such deposit account not in excess of $10,000, and V /2 per cent per annum, compounded quarterly, on that part of any such deposit account in excess of $10,000. Section 4 of the General Regulation provides that those banks and trust companies may pay interest on any special interest or thrift deposit from the first day of the month in which such deposit is made, at the respective maximum interest rates specified in the General Regulation, if such deposit is received not later than (1) the tenth business day3 of any month commencing a regular quarterly or semiannual interest period; or (2) the fifth busi 2 The definition o f the term “ special interest or th rift d ep osit” contained in General Regulation N o. 3 (A m endm ent) is identical with the definition o f the term “ savings d e p o s it” contained in Regulation Q. The use o f the word “ sa v in g ” or “ savings” is restricted by statute in the State o f New York. 3 The term “ business d a y ” as used in the General Regulation means any day 0 11 which the banks or trust companies are open fo r business. ness day o f any one month in a semiannual interest period other than the month commencing such p eriod ; or (3 ) the third business day of any other month. Section 4 also provides that banks and trust com panies may credit interest on special interest or thrift deposits with drawn upon one of the last three business days o f any regular quarterly or semiannual interest period at the respective maximum interest rates specified in the General Regulation as if they had remained on deposit to the end o f such interest period. F or time deposits other than special interest or thrift deposits, the General Regulation now provides for a scale o f maximum interest rates graduated according to the term o f the deposit, similar to that prescribed by the B oard o f Governors o f the Federal Reserve System in the Supplement to Regulation Q, effective January 1, 1936. Extracts from the General Regulation are reprinted at the end o f this circular. 8. The Board o f Governors o f the Federal Reserve System has expressed its opinion that, in view o f the provisions o f General Regula tion No. 3 (Am endm ent) o f the State Banking B oard and the provi sions o f Section 24 o f the Federal Reserve A ct and o f Regulation Q, national banks, as well as State member banks, in the State o f New Y ork are prohibited by the General Regulation from paying interest on that part o f any savings deposit in excess o f $10,000 at a rate higher than IV 2 per cent per annum, com pounded q u a rterly; all other maxi mum rates prescribed by the General Regulation with respect to time4 and savings deposits are identical with those prescribed by Regulation Q. 9. The above-described provisions o f Section 3 (d ) o f Regulation Q, as amended effective July 1,1952, concerning the allowance o f grace periods in com puting interest on savings deposits, are similar to, but in some respects broader than, the provisions relative to the allowance of days o f grace on special interest or th rift deposits in Section 4 o f the General Regulation. To the extent that the General Regulation is more restrictive in this regard than Regulation Q, no national or other mem ber bank in the State o f New Y ork may pay interest 0 11 a savings deposit in an amount greater than would be payable at the maximum rate prescribed by the General Regulation with an allowance for days o f grace as authorized in Section 4 o f the General Regulation. Revision of this circular 10. The right is reserved to withdraw, add to, or amend at any time, any o f the provisions o f this circular. Effect of this circular on previous circular 11. This circular supersedes our Operating Circular No. 15, dated December 8, 1947. A llan S proul, President. 4 A s defined in Section 1 o f Regulation Q, ‘ ‘ time deposits ’ ’ means ‘ ‘ time certi ficates o f d ep o sit” and “ time deposits, open a ccou n t.’ -' Extracts from General Regulation No. 3 (Amendment) of the Banking Board of the State of New York, as adopted on February 6, 1952 Maxim un) rates on special interest, th rift, time and savings deposits 2. (a ) Effective im mediately, no bank, trust com pany, private banker o r industrial bank shall, directly o r indirectly, b y any device whatsoever, p a y any interest on any special interest o r th rift deposit account, at a rate in excess o f the fo llo w in g : ( 1 ) On that pa rt o f any deposit account not in excess o f $10,000, tw o and on e-half p er centum per annum, com pounded quarterly; ( 2 ) On that part o f any deposit account in excess o f $10,000, one and on e-half per centum p er annum, com pounded quarterly. (b ) Effective immediately, n o bank, trust com pany, private banker or industrial bank shall p a y any interest on any time deposit, other than a special interest or th rift deposit, at a rate in excess o f the fo llo w in g : ( 1 ) On any time deposit, having a m aturity date six months or m ore a fter the date o f deposit o r p a y able upon w ritten notice o f six months or m ore, or on any Postal Savings deposit which constitutes a time deposit, tw o and one-half p er centum per annum, com pounded qu arterly; ( 2 ) On any time deposit (ex cep t Postal Savings deposits which constitute time deposits) having a maturity date less than six months and not less than ninety days a fter the date o f deposit or payable upon written notice o f less than six months and not less than ninety days, tw o per centum per annum, com pounded quarterly. (3 ) On any time deposit (ex cep t Postal Savings deposits which constitute time deposits) having a m aturity date less than ninety days a fter the date o f deposit o r payable u pon written notice o f less than ninety days, one p er centum p er annum, com pounded quarterly. s s » o * (d ) Effective immediately, no savings bank shall pa y any dividend accruing on or after January 1, 1952, on any savings deposit at a rate in excess o f two and oneh a lf p er centum p er annum, com pounded quarterly, on any deposit account not in excess o f $10,000. 4 * «• * * * 4. ( a ) A bank, trust com pany, private banker or industrial bank may p a y interest fr o m the first day o f the month in which such deposits were made, at the respective maximum interest rates specified herein, on any special interest o r th rift deposit received not later than Grace periods (1 ) the tenth business day o f any month com mencing a regular quarterly o r semi-annual interest p e r io d ; or (2 ) the fifth business day o f any one month in a semi-annual interest period other than the month com mencing such p e r io d ; or (3 ) the third business day o f any other month. (b ) A bank, trust com pany, private banker o r indus trial bank m ay credit interest on special interest o r th rift deposits withdrawn upon one o f the last three business days o f any regular quarterly o r semi-annual interest period at the respective maximum rates specified herein as i f they had remained on deposit to the end o f such interest period. A s used herein, the term “ business day” shall mean any day on which the bank, trust com pany, private banker or industrial bank is open fo r business. 5. (a ) The term “ deposit account” , as used herein, shall mean and include, except as set forth in subdivisions ( b ) and ( c ) h ereof, the aggregate liability o f the bank, trust com pany, private banker, industrial bank o r sav ings bank f o r special interest o r th rift or savings deposits o r any sim ilar credit balances payable to a depositor, including the p r o rata share o f all amounts, in jo in t or several form , credited to such depositor and others. F or the pu rpose o f com puting such aggregate liability, interest o r dividends credited to any such deposit account o r sim ilar credit balance, which have not been with drawn, shall be excluded. (b ) D eposits credited to a depositor as trustee under a voluntary trust shall not be included in com puting the aggregate deposit account payable to such depositor, except in the event that the aggregate o f all such volun tary trust accounts is in excess o f $10,000; and in such event the excess shall be included in com puting such depositor’s aggregate deposit account. (c ) D eposit credited to any depositor as executor, administrator, trustee (except as specified in subdivision (b ) h e re o f), committee, guardian o r other fiduciary capacity shall not be included in the com putation o f such depositor’s deposit account. F o r the purposes o f this regulation, each such fiduciary deposit account shall be separately com puted. 5 D eposit accounts
@FedFRASER