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FED ER AL RESERVE BANK
O F NEW YORK
r Circular No. 6 1 6 4 "1
L

M ay 9, 1968

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 May 9,
1968, 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 April 19,1968 (sent to you with our'Circular No. 6154),
which prescribes maximum interest rates on time and savings deposits,
and (2) conforming changes in General Regulation No. 3 of the Bank­
ing Board of the State of New York, effective April 19, 1968.




Additional copies of the enclosure will be furnished upon request.
A

lfred

H

ayes,

President.

J

Federal
of

R eserve
N

ew

Y

Bank

ork

No.
Revised May 9,
J
[ Operating Circular196815 ~I

PAYM ENT OF INTEREST ON TIME AND
SAVINGS DEPOSITS
To All Member Banks in the
Second Federal Reserve District:

This circular contains information regarding the maximum rates
of interest that member banks in the Second Federal Reserve District
may lawfully pay on time and savings deposits.
Statutory provisions
1. Section 19 of the Federal Reserve Act (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 Board of Governors of the Federal Reserve System shall, by
regulation, limit the rate of interest that may be paid by member
banks on time and savings deposits ; 1 and authorizes the Board of
Governors to define the terms used in the section, to determine what
shall be deemed a payment of interest, and to prescribe regulations to
effectuate the purposes of the section.
Regulation Q
2. Under authority of the provisions of Section 19 of the Act, the
Board of Governors of the Federal Reserve System has issued Regula­
tion Q, entitled “ Payment of Interest on Deposits.” Reference is
made to the Regulation for the definitions of terms used in the section
and for details of the prohibition against the payment of interest on
deposits payable on demand and the limitations upon the payment of
interest on time and savings deposits.
Supplement to Regulation Q
3. The Supplement to Regulation Q, effective April 19, 1968,
prescribes the maximum rates of interest that member banks may pay
on time and savings deposits.1 -2 We will promptly notify our member
banks of any change in these rates.
1 The foregoin g provisions are not app lica b le: (a ) to any deposit that is pay­
able 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 Colum bia; and ( b ) during the period com m encing on
O ctober 15, 1962 and ending on October 15, 1968, to time deposits o f foreign
governments, m onetary and financial authorities o f foreign governm ents when
a cting as such, or international financial institutions o f which the United States
is a member.
2 The prescribed maximum rates o f interest are n ot applicable, a fter O cto­
ber 15, 1968, to the time deposits specified in ( b ) o f footn ote 1 that are received,
renewed, or extended, in the ordinary course o f business and fo r a specified period
not exceeding tw o years, prior to September 21, 1968.




( over)

Member banks limited to maximum rate for 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
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 217.3(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.
Banks located in the State of New York
6 . General Regulation No. 3 (Amendment) of the Banking Board
o f the State of New York, effective A pril 19, 1968, provides, among
other things, for maximum rates o f interest that banks and trust
companies organized under the laws of the State of New York may
pay on time and savings deposits. The maximum rates of interest
prescribed by General Regulation No. 3 for time and savings deposits
in commercial banks and trust companies organized under the laws
of the State of New York are identical with those prescribed by the
Board 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 of the provisions of this circular.

Effect of this circular on previous circular

9. This circular supersedes our Operating Circular No. 15, Revised
November 2, 1966.




A lfred H a y e s ,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102