The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK OF NEW YORK r Circular No. 5 3 5 8 "I L July 16, 1963 J Increases in Discount Rates of this Bank and Six Other Federal Reserve Banks Increases in Maximum Interest Rates on Time Deposits Under Regulation Q To All Member Banks, and Others Concerned, in the Second Federal Reserve D istrict: Following is the text of a statement issued today by the Board of Governors of the Federal Reserve System: The Federal Reserve System acted today on two fronts to aid in the United States’ efforts to combat its international balance of payments problem. The Board o f Governors approved actions by the directors of the Federal Reserve Banks o f Boston, New York, Cleveland, Richmond, St. Louis, Minneapolis, and Dallas, increasing the discount rates at those Banks from 3 per cent to 3 % per cent, effective W ednesday, J u ly 17, 1963. The change was the first since mid-1960, when Federal Reserve Bank discount rates were reduced in two steps from 4 per cent to 3 per cent. The Board o f Governors also increased to 4 per cent, effective W ednesday, July 17, the maxi mum rate of interest that member banks are permitted to pay on time deposits and certificates with maturities from 90 days to one year. Since January 1962, the permissible rate ceilings had been Sy2 per cent on time deposits and certificates with maturities of six months to one year, and 2*/2 per cent on those o f 90 days to six m onths’ duration. Payment of the higher rates was authorized by a revision of the Supplement to the B o a rd ’s Regulation Q. There were no changes in the maximum rates that member banks are permitted to pay on savings deposits. Neither were there any changes in the maximum rates on time deposits and cer tificates having maturities o f less than 90 days, which remain at 1 per cent, or on those o f one year or more, where the ceiling remains 4 per cent. Both actions are aimed at minimizing short-term capital outflows prompted by higher interest rates prevalent in other countries. Prelim inary inform ation indicates that short-term outflows con tributed materially to the substantial deficit incurred once again in the balance o f payments during the second quarter of this year. Recently, market rates on U. S. Treasury bills and other short-term securities have risen to levels well above the 3 per cent discount rate that had prevailed fo r nearly three years, making it less costly fo r member banks to obtain reserve funds by borrow ing from the Federal Reserve Banks rather than by selling short-term securities. The increased discount rates will reverse that circumstance, making it once again more advan tageous fo r member banks seeking reserve funds to obtain them by selling their short-term securities rather than by borrow ing from the Federal Reserve Banks. Sales so made should have a bolstering effect on short-term rates, keeping them more in line with rates in other world financial markets. Meanwhile, the increase in the maximum rates o f interest payable on time deposits and certifi cates with maturities from 90 days to one year will permit member banks to continue to compete effectively to attract or retain foreign and domestic funds fo r lending or investing. These actions to help in relieving the potential drain on United States monetary reserves asso ciated with the long-persistent deficit in the balance o f payments do not constitute a change in the System ’s policy o f maintaining monetary conditions conducive to fuller utilization of manpower and other resources in this country. Enclosed are copies of this Bank’s Operating Circular No. 13, setting forth this Bank’s new discount rates, and of the Supplement to Regulation Q. Additional copies of this circular and the enclosures will be furnished upon request. A lfred H ayes, P r e s id e n t. SU PPLEM ENT TO R E G U L A T IO N Q SECTION 217.6 M A X IM U M RA TE S OF IN TE R E ST P A Y A B L E ON TIM E AN D SAVINGS DEPOSITS B Y M EM BE R BANKS ISS U E D B Y T H E B OARD OF GO VE R N O RS OF T H E F E D E R A L R E SE R V E S Y S T E M Effective July 17, 1963 Pursuant to the provisions of section 19 of the Federal Reserve A ct and section 217.3, the B oard of Governors of the Federal Reserve System hereby prescribes the follow ing maximum rates1 of interest payable by member banks of the Federal Reserve System on time and savings deposits: (a) Maximum rate of 4 per cent.— No member bank shall pay inter est accruing at a rate in excess of 4 per cent per annum, compounded quarterly,2 regardless of the basis upon which such interest may be com puted: (1 ) On that portion of any savings deposit that has remained on deposit fo r not less than 12 months, (2 ) On any time deposit having a maturity date 90 days or more after the date o f deposit or payable upon written notice of 90 days or more, (3 ) On that portion of any Postal Savings deposit which con stitutes a time deposit that has remained on deposit fo r not less than 12 months. (b ) Maximum rate of Sl/2 per cent.— No member bank shall pay interest accruing at a rate in excess o f 3 per cent per annum, com pounded quarterly,2 regardless of the basis upon which such interest may be com puted: (1 ) On any savings deposit, except as otherwise provided in paragraph ( a ) ( 1 ) of this section, (2 ) On any Postal Savings deposit which constitutes a time deposit, except as otherwise provided in paragraph (a) (3) of this section. (c) Maximum rate of 1 per cent.— No member bank shall pay inter est accruing at a rate in excess o f 1 per cent per annum, compounded quarterly,2 regardless o f the basis upon which such interest may be com pu ted: (1) On any time deposit (except Postal Savings deposits which constitute time deposits) having a maturity date less than 90 days after the date of deposit or payable upon written notice of less than 90 days. 1 The maximum rates of interest payable by member banks of the Federal Reserve System on time and savings deposits as prescribed herein are not applicable to any deposit which is payable only at an office of a member bank located outside of the States of the United States and the District of Columbia. 2 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. PRINTED IN NEW YORK F ederal of R eserve N ew B ank York O perating C ircular N o. 13 R evised July 17, 1963 "1 J DISCOUNT RATES To All Member Banks, and Others Concerned, in the Second Federal Reserve District: 1. This Bank has established the follow ing new rates, effective July 17, 1963: A rate of 3^ per cent per annum on advances to, and discounts for, member banks under sections 13 and 13a o f the Federal Reserve Act. A rate of 4 per cent per annum on advances to member banks under section 1 0 (b ) of the Federal Reserve A ct. Shown below is a schedule o f rates now in effect at this Bank on advances and discounts made under the Federal Reserve Act. 2. This circular supersedes Revised August 12, 1960. our Operating Circular A lfred No. 13, H ayes. President. Rate Schedule, Effective July 17, 1963 Per Cent Per Annum A dvances to and discounts fo r m em ber banks: (a) Advances and discounts under sections 13 and 13a of the Federal Reserve Act .................................................... 3y2 (b) Advances under section 10(b) of the Federal Reserve Act 4 Advances to individuals, partnerships and corporations other than m em ber banks: Advances under last paragraph of section 13 of the Federal Reserve Act secured by direct obligations of the United States 4 i/2
@FedFRASER