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 /■Circular No. 58721 L September 21, 1966 J Maximum Rate of Interest Under Regulation Q on Time Deposits Under $100,000 Reduced from 53^2 Per Cent to 5 Per Cent Effective September 26, 1966 To All M em ber 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 Board o f Governors o f the Federal Reserve System reduced to 5 per cent from 5 % per cent the maximum rate o f interest that the System ’s member banks may pay on any time deposit under $100,000. The B oa rd ’s action, to become effective September 26, 1966, was taken under the new authority granted in the law signed by the President today, providing increased flexibility for establishing ceiling rates on time deposits and savings accounts at commercial banks and other depository institutions. The purpose o f the B oa rd ’s action is to limit further escalation o f interest rates paid in competition for consumer savings. The action will also help to keep the growth o f commercial bank credit to a moderate pace. The reduction in maximum rates on time deposits o f less than $100,000 does not, by itself, require any change in interest paid on certificates o f deposit and other time deposits outstanding on the effective date. I f a member bank has agreed to pay a specified rate o f interest on such a deposit, without any right to m odify its obligation, it may continue to pay the contract rate to maturity. I f the deposit is then renewed, the rate o f interest may not exceed the new ceiling. The B oa rd ’s action does not change the maximum rate payable by member banks on savings accounts, which remains at 4 per cent. The maximum rates payable on multiple m aturity time deposits, which are 4 per cent or 5 per cent, depending on maturity, are also unchanged. The ceiling rate on single m aturity time deposits o f over $100,000 remains at the present level o f 5^ per cent. T od a y ’s action is one o f a series o f measures taken by the Federal Reserve System in recent months to temper the aggressive competition for funds among commercial banks and other financial institutions, and at the same time to assure an orderly and moderate rate o f growth in bank credit in order to restrain inflationary pressures. Earlier actions included a lowering o f interest rate ceilings on time deposits with multiple maturities, two increases in the reserves that member banks must maintain against some o f their time deposits and, more recently, a statement to member banks concerning the need to adopt lending policies that will result in slowing the growth o f business loans. Enclosed is a copy of the amended Supplement to Regulation Q, implementing the Board’s action. Additional copies of this circular and the enclosure w ill be furnished upon request. A lfred H ayes, President. SUPPLEM ENT TO REGULATION Q SEC T IO N 217.6 MAXIM UM RATES OF INTEREST PAYABLE ON TIME AND SAVINGS DEPOSITS BY MEMBER BANKS Issu ed by t h e B o a rd o f G o v e rn o rs o f t h e F e d e r a l R e se r v e S y ste m Effective September 26, 1966 Pursuant to the provisions o f section 19 o f the Federal Reserve A ct and § 217.3, the Board o f Governors o f the Federal Reserve System hereby prescribes the follow ing maximum rates1 o f interest payable by member banks o f the Federal Reserve System on time and savings d eposits: (a) Maximum rate of 5y2 per cent.— No member bank shall pay interest at a rate in excess o f 5 % per cent per annum on any time deposit o f $100,000 or more, subject, however, to the provi sions o f (b ) (ii) and (c ) ( i ) , below. (b ) Maximum rate of 5 per cent.— No member bank shall pay interest at a rate in excess o f 5 per cent per annum (i) on any time deposit o f less than $100,000, subject, however, to the provi sions o f ( c ) ( i ) , below, or (ii) on any multiple maturity time deposit that is payable only 90 days or more after the date o f deposit or 90 days or more after the last preceding date on which it might have been paid. (c ) Maximum rate of 4 per cent.— No member bank shall pay interest at a rate in excess o f 4 per cent per annum (i) on any multiple m aturity time deposit that is payable less than 90 days after the date of deposit or less than 90 days after the last preced ing date on which it might have been paid, or (ii) on any savings deposit. In calculating the rate o f interest paid, the effects of com pounding of interest may be disregarded. A member bank that elects to compound interest— either at the maximum permissible rate or at a lower rate— shall state the basis o f com pounding (such as semiannually, quarterly, monthly, weekly, daily, or continuously) in every advertisement, an nouncement, solicitation, and agreement relating to the rate o f interest paid on a deposit. 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. PR IN T E D IN N E W YO RK
@FedFRASER