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FEDERAL RESERVE BANK OF N EW YORK I" C ircular No. 6 4 7 0 1 L January 20, 1970 J Revised Maximum Interest Rates on Time and Savings Deposits Under Regulation Q Proposed Amendment of Regulation D To All Member Banks, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued today by the Board of Governors of the Federal Reserve System : The B oard of Governors of the Federal Reserve System today announced an upw ard realignm ent of m aximum interest rates member commercial banks may pay on time and savings deposits. A t the same time, the B oard published for comment a proposed rule applying reserve requirem ents to certain types of bank-related commercial paper. The interest rate changes are effective J a n u a ry 21 while the proposed action on commercial paper, if adopted, would become effective F eb ru ary 26. The dual moves were taken w ithin the fram ework of continued overall credit re strain t and were based on these considerations: a rebalancing of the B o ard ’s regulatory stru ctu re in the light of recently expanded au th o rity in this field and developments in financial m arkets; a readjustm ent of stru ctu re of maxim um interest rates payable by commercial banks for deposits to bring it somewhat more in line w ith going yields on m arket securities; the need for greater equity in the rates th at m ay be paid for sm aller savings balances, and a desire to encourage longer-term savings in reinforcem ent of anti-inflationary measures. The revisions in the B o ard ’s Regulation Q ceiling rates were held to m oderate size, so as not to foster sudden and large movements of funds into the banking system th a t could cause distortions in trad itio n al financial flows or lead to an upsurge in bank lending. The revisions were made afte r consultation w ith the Federal Deposit Insurance C orporation and the Federal Home Loan B ank Board, which have parallel regulatory au th o rity over the maximum interest rates th a t m ay be paid by insured State nonmember banks, m utual savings banks, and savings and loan associations. In taking the actions announced, the Board of Governors expressed its belief th at higher rates paid to savers by institutions generally would increase the pool of savings for investm ent in mortgages. The change in the m aximum interest rates payable on time and savings deposits is the first since A pril 19, 1968, when maximum interest rates on deposits of $100,000 or more were increased. In to d ay ’s action, the B oard raised from 4 to 4.5 per cent the m aximum rate national and State member banks m ay pay on passbook savings, the first change in this rate since November 24, 1964. The B oard also approved the following maximum rate stru ctu re for other types of consum er-type deposits — those of less than $100,000: (over) M a tu rity New m axim um 30-89 days m ultiple m a tu rity 1 .................................. ...........4.50 90 days and over m ultiple m a tu rity 1 ....................... ........... 5.00 30 days-1 year single m a t u r i t y .................................. ...........5.00 1 year single m a t u r i t y ...............................................................5.50 2 year single m a t u r i t y ...............................................................5.75 Present m axim um 4.00 5.00 5.00 5.00 5.00 iMultiple maturity time deposits include deposits that are automatically renewable at maturity without action by the depositor and deposits that are payable after written notice of withdrawal. Previously, there was no provision in Regulation Q for an interest rate above 5 p er cent on con sum er-type deposits. The one-year and two-year instrum ents th a t may now be offered by member banks at the 5.50 per cent and 5.75 per cent maximum rates respectively m ust be single-dated m aturities. The Board also approved the following schedule of maximum rates th at member commercial banks may pay on time deposits of $100,000 or m o re: M aturity New m axim um 30-59 d a y s ................................................................................... 6.25 60-89 d a y s ......................................................................... .......... 6.50 90-179 d a y s ................................................................................. 6.75 180 days to 1 y e a r ............................................................ ...........7.00 1 year or m o r e ..............................................................................7.50 Present m axim um 5.50 5.75 6.00 6.25 6.25 In proposing to use new legislative au th o rity for the first time, the B oard said it is con sidering a 10 per cent reserve requirem ent on funds obtained by member banks through the issuance of commercial paper or sim ilar obligations by bank affiliates, or by a p aren t holding company. Sub sequently, the Act of December 23, 1969, explicitly authorized the B oard to apply reserve requirem ents to such obligations. Accordingly, the B oard has w ithheld action in applying interest rate ceilings to bank-related commercial paper while it is considering am ending its rules to apply reserve requirem ents to the same type paper. Comments on this proposal should be received by the B oard by F eb ru ary 16. Commercial paper issued by bank holding companies or their affiliates has grown substantially d u rin g the last several months, totaling about $4 billion a t the end of December com pared with a total commercial paper m arket of about $33 billion. Enclosed is a copy of the B oard’s Supplement, effective January 21, 1970, to Regulation Q, setting forth the maximum rates of interest payable on time and savings deposits. Comments on the proposed amendment of Regulation D, Reserves of Member Banks, should be submitted by February 16 and may be sent to our Bank Examinations Department. Additional copies of this circular and its enclosure will be forwarded upon request. A lfred H ayes, P resident. B oard o f G o v e r n o r s o f t h e F e d e r a l E e s e r v e S y s t e m SUPPLEMENT TO REGULATION Q Effective J a n u a ry 21, 1970 S E C T IO N 217.7—M AXIMUM R A T E S OF IN T E R E S T P A Y A B L E BY M EM B ER BANKS ON TIM E AND SAYIN GS D E P O S IT S P u rsu a n t to the provisions of section 19 of the F ederal Reserve A ct and § 217.3, the B oard of Governors of the F ederal Reserve System hereby prescribes the following maxim um rates1 of interest p er annum payable by member banks of the F ederal Reserve System on tim e and savings deposits: (a) Single maturity time deposits. (1) Deposits of $100,000 or more.—No member bank shall p ay interest on any single m atu rity time deposit of $100,000 or more a t a ra te in excess of the applicable rate un d er the following schedule: M a tu rity M axim um per cent 30 - 59 days 6 0 - 89 days 6% 6% 9 0 -1 7 9 days 180 days or more b u t less th an 1 year 6% 1 year or more 7^ 7 (2) Deposits of less than $100,000. — No member bank shall pay in terest on any single m atu rity time deposit of less th an $100,000 a t a ra te in excess of the applicable rate under the following schedule: M a tu rity M axim um per cent 30 days or more but less th an 1 year 5 1 year or more b u t less th an 2 years 2 years or more 5% 5% 1 The limitations on 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 a t an office of a member bank located outside the States of the United States and the District of Columbia. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis ...: P R IN T E D IN N E W YORK ( over) 7 • . (&) M u ltiple m a tu rity tim e deposits. (1) D eposits p ay ab le a t in te rv a ls o f a t le a st 9 0 days.—No member bank shall pay interest a t a ra te in excess of 5 per cent on a m ultiple m atu rity time deposit th a t is payable only 90 days or more afte r the date of deposit, or 90 days or more afte r the last preceding date on which it m ight have been paid. (2) D eposits p ay ab le a t in te rv a ls o f less th a n 9 0 days.—No member bank shall pay interest a t a ra te in excess of 4 ^ per cent on a m ultiple m atu rity tim e deposit th a t is payable less th an 90 days afte r the date of deposit, or less th an 90 days (b u t at least 30 days) afte r the last preceding date on which it m ight have been paid. (c) Savings d ep o sits.—No member bank shall pay interest at a ra te in excess of 4% per cent on any savings deposit.
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