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F E D E R A L R E S E R V E BAN K O F N EW YO R K r Circular No. 58 38 1 I July 22, 1966 J Interpretations Regarding Maximum Interest Rates on M ultiple Maturity Tim e Deposits Under Regulation Q To All M em ber Batiks, and Others Concerned, in the Second Federal Reserve D istrict: Quoted below is an explanatory statement prepared by the Legal Division of the Board of Governors of the Federal Reserve System regarding maximum interest rates on multiple maturity time deposits. The statement contains interpretations and applications of the Amendment and Supplement to Regulation Q sent to you with our Circular No. 5834, dated July 15, 1966. The amendments prescribe maximum rates o f 5 per cent or 4 per cent on “ multiple m aturity time deposits,” depending upon the maturities or terms o f withdrawal or repaym ent specified in the deposit contract. A multiple m aturity time deposit is a time deposit (whether a certificate or a time deposit, open account) that permits withdrawal by the depositor, at his option, at more than one date, including deposits payable on alternative specified dates, payable at any time after prior written notice, or providing fo r automatic renewal at maturity. A deposit with a single fixed date o f payment, such as one payable on ly on a specified date, is not a multiple m aturity deposit, and such a deposit may continue to bear interest up to a maximum rate o f 5 i/2 per cent. In determining whether the maximum rate on a m ultiple m aturity deposit is 5 per cent or 4 per cent, the test is the length o f the interval between the date o f any permissible withdrawal and the date o f the deposit or the last preceding date when withdrawal would have been permissible. I f the interval is 90 days or more, the maximum rate is 5 per cent; if it is less than 90 days, the maximum rate is 4 per cent. The amendments apply only to deposits received on or after July 20, 1966. They do not affect deposits made before that date even though the bank may have a right to terminate the deposit contract or to m odify the contract rate. Follow ing are some illustrative cases regarding the application o f the amendments: 1. A deposit is payable three months, six months, or nine months after the date o f deposit. The maximum rate is 5 per cent. 2. A certificate is payable one year after date or at any time prior thereto after 30 days’ written notice. The maximum rate is 4 per cent. 3. A six-months certificate provides fo r automatic renewal at m aturity fo r a further six months. The maximum rate is 5 per cent. 4. A certificate is payable one year after date and thereafter upon 30 days’ written notice. The maximum rate is 5 per cent fo r the one-year period and 4 per cent fo r any period after one year. 5. A deposit contract specifies no fixed maturity but permits withdrawal at any time after 30 days’ written notice. The maximum rate is 4 per cent. 6. A certificate issued prior to J u ly 20, 1966 provides fo r automatic renewal every 90 days and optional withdrawal at any time after 30 days’ notice. The new lower rates do not app ly; the maximum rate remains 5 y2 per cent. 7. A time deposit, open account, opened prior to July 20, 1966 permits withdrawals after 30 days’ notice. The maximum rate on deposits made in the account before J u ly 20 is 5y 2 per cent; the maximum rate on deposits made on or after July 20 is 4 per cent. 8. A deposit made by a foreign central bank is payable six months after date or on 30 days’ written notice. B y reason o f a special statutory provision, time deposits o f foreign governments and foreign central banks until October 15, 1968 are not subject to maximum rate limitations prescribed by the Board. Additional copies of this circular will be furnished upon request. A lfred H ayes, President.
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