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FEDERAL RESERVE BANK OF N E W YORK [-Circular N o. 5 8 5 2 1 L August 11, 1966 J PAYMENT OF INTEREST ON TIME AND SAVINGS DEPOSITS Revision of Operating Circular No. 15 To All Member Banks in the Second Federal Reserve District: Enclosed is a copy of Operating Circular No. 15, Revised August 11, 1966, entitled “ Payment of Interest on Time and Savings Deposits.” The circular has been revised to take into account (1) the Supple ment to Regulation Q of the Board of Governors of the Federal Reserve System, effective July 20,1966 (sent to you with our Circular No. 5834), which, in part, prescribes maximum interest rates on multiple maturity time deposits, and (2) conforming changes in General Regulation No. 3 of the Banking Board of the State of New York, effective August 10, 1966. Additional copies of the enclosure will be furnished upon request. A lfred H ayes, President. Federal of R N eserve ew Y B ank ork [ O perating Circular N o. 15 "I R evised A u g u s t 11, 196 6 J P A Y M E N T OF IN T E R E S T ON TIM E AND SAYINGS DEPOSITS To All Member Banks in the Second Federal Reserve District: This circular contains inform ation regarding the maximum rates of interest that 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 no member bank shall pay any interest on any deposit payable on demand, and that the B oard of Governors of the Federal Reserve System shall, by regulation, limit the rate o f interest that may be paid by member banks on time and savings deposits;1 and authorizes the Board of Governors to define certain terms used in the A ct, to determine what shall be deemed a payment o f interest, and to prescribe rules and regulations to effectuate the purposes of the section. Regulation Q 2. Under authority of the provisions of Section 19 o f the A ct, the Board of 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 of the prohibition against the payment o f interest on deposits payable on demand and the limitations upon the payment o f interest on time and savings deposits. Supplem ent to Regulation Q 3. The Supplement to Regulation Q, effective J u ly 20, 1966, prescribes the maximum rates o f interest that 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. M em ber banks lim ited to m aximum rate fo r State banks 4. Section 24 o f the A ct provides that the rate of interest that a national banking association may pay upon time deposits or upon savings deposits shall not exceed the maximum rate authorized by 1 The foregoing provisions are not applicable: (a ) to any deposit that is pay able only at an office of a member bank located outside of the States of the United States and the District of Columbia; and (b ) during the period commencing on October 15, 1962 and ending on October 15, 1968, to time deposits of foreign governments, monetary and financial authorities of foreign governments when acting as such, or international financial institutions of which the United States is a member. ( oyeb) law to be paid upon such deposits by State banks or trust companies organized under the laws o f the State in which such association is located. 5. Section 2 17 .3(c) o f Regulation Q provides that the rate o f 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 o f the State in which such mem ber bank is located, whichever may be less. Banks located in the State of New York 6. General Regulation No. 3 (Am endm ent) of the Banking Board of the State o f New Y ork, effective August 10, 1966, provides, among other things, fo r maximum rates o f interest that banks and trust companies organized under the laws of the State o f New Y ork may pay on time and savings deposits. The maximum rates o f interest prescribed by General Regulation No. 3 fo r time and savings deposits in commercial banks and trust companies organized under the laws of the State o f New Y ork are identical with those prescribed by the B oard o f Governors o f the Federal Reserve System in the current Supplement to its Regulation Q. Banks located in Connecticut and New Jersey 7. The States of Connecticut and New Jersey have not established maximum rates of interest on time and savings deposits payable by commercial banks and trust companies organized under the laws of those States. However, member banks in such States are subject to Regulation Q. Revision of this circular 8. 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 9. This circular supersedes our Operating Circular No. 15, Revised December 8, 1965. A lfred H ayes, President.
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