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FEDERAL RESERVE BANK OF NEW YORK r Circular No. 7 5 1 7 1 L December 4, 1974 J REGULATIONS D AND Q Amendments Relating to Governmental Time Deposits at Member Banks T o A ll M em ber Banks, and O thers Concerned, in the Second Federal R eserve D istrict: Our Circular No. 7513, dated November 27, 1974, contained the text of a statement by the Board of Governors of the Federal Reserve System, announcing amendments to its Regulation D, “ Reserves of Member Banks,” and Regulation Q, “ Interest on Deposits,” to permit governmental units to hold savings deposits at member commercial banks and to create a separate ceiling for in terest rates on governmental time deposits. Enclosed are amendments to Regulations D and Q, and a revised Supplement to Regulation Q, all effective November 27, 1974, reflecting the Board of Governors’ action. In submitting the amendments and Supplement for publication in the Federal Register, the Board of Governors made the following statement: In conjunction with P.L. 93-495 which, effective November 27, 1974, provides Federal deposit insurance up to $100,000 for time and savings deposits of governmental units, the Board of Governors has amended Regu lation D (12 C FR 204) and Regulation Q (12 C F R 217) to include deposits o f governmental units in the definition of savings deposits. The principal effect of the amendments approved by the Board is to permit member banks to accept savings deposits from governmental units. The Board has also amended Regulation Q to establish an additional interest rate limitation on time deposits of governmental units as a separate category of deposits. Under this new deposit classification, member banks may pay interest on governmental unit time deposits of less than $ 100,000, regardless of maturity or denomination, at an annual rate not to exceed the highest of any of the permissible rates that can be paid on time deposits under $ 100,000 by any Federally insured commercial bank, mutual savings bank or savings and loan association, currently 7.5 per cent. Under the amendment to the definition of savings deposit in Regulation D. savings deposits of governmental units will be subject to the current 3 per cent reserve requirement. The amendment to the Board’s interest rate schedule does not change the present maximum rates of interest that may be paid by member banks on savings deposits or on other classes of deposits as prescribed by existing regulations. Member banks are currently permitted to pay interest on savings deposits at an annual rate not to exceed 5 per cent; savings and loan associations and mutual savings banks may pay interest on such deposits at a rate of 5% per cent. In addition, no interest rate limitation applies to gov ernmental unit time deposits in excess of $ 100,000. Since 1936 the Board’s definition of “ savings deposits” has excluded deposits o f governmental units In light of the recent legislation, the Board has determined that it is appropriate under present circumstances (over) to permit deposits of such governmental units at a member bank to be eligible for classification as savings deposits. The Board’s action was taken after consultation with the Federal Deposit Insurance Corporation, the Federal Home Loan Bank Board and the Department o f the Treasury. Similar action with regard to savings deposit eligibility and creation of a new interest rate limitation on time deposits of governmental units is being taken by the Federal Deposit Insurance Corporation. Similar action with regard to the new interest rate limitation is being taken by the Federal Home Loan Bank Board. * * * Additional copies of the enclosures will be furnished upon request. A lfred H a y e s , President. Board of Governors of the Federal Reserve System RESERVES OF M EM BER BANKS A M E N D M E N T TO R E G U L A T IO N D Effective November 27, 1974, section 2 0 4 .1 (e )(1 ) is amended to read as follows: S E C T IO N 204.1— D E F IN IT IO N S * * * (e ) Savings deposits. The term “ savings deposit” means a deposit— ( 1) which consists of funds deposited to the credit of one or more individuals, or of a corporation, association, or other organization operated primarily for religious, philanthropic, charitable, educational, fraternal, or other sim ilar purposes and not operated for profit;4 or in which the entire beneficial interest is held by one or more individuals or by such a corpo ration, association or other organization, or which consists of funds deposited to the credit o f, or in which the entire beneficial interest is held by, the United States, any State of the United States, or any county, municipality, or political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, or political subdivision thereof, except where the deposit is to the credit of the bank’s own trust department and the funds involved are utilized to cover checks; and =t= * * 4 Deposits in joint accounts of two or more indi viduals may be classified as savings deposits if they meet the other requirements o f the above definition, but deposits of a partnership operated for profit may not be so classified. Deposits to the credit o f an indi vidual or a governmental unit o f funds in which the beneficial interest is held by a corporation, partnership, association, or other organization operated for profit or not operated primarily for religious, philanthropic, charitable, educational, fraternal, or other similar pur poses may not be classified as savings deposits unless permitted elsewhere within this subsection. PR IN T E D IN N E W YO RK Board of Governors of the Federal Reserve System INTEREST ON DEPOSITS A M E N D M E N T TO R E G U L A T IO N Q Effective November 27, 1974, section 2 1 7 .1 (e )(1 ) is amended to read as follow s: S E C T IO N 217.1— D E F IN IT IO N S * * * (e ) Savings deposits. The term “ savings deposit” means a deposit— ( 1) which consists of funds deposited to the credit of one or more individuals, or of a corporation, association, or other organization operated primarily for religious, philanthropic, charitable, educational, fraternal, or other sim ilar purposes and not operated for p rofit;4 or in which the entire beneficial interest is held by one or more individuals or by such a corpo ration, association or other organization, or which consists of funds deposited to the credit of, or in which the entire beneficial interest is held by, the United States, any State of the United States, or any county, municipality, or political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, or political subdivision thereof; and * * * 4 Deposits in joint accounts of tw o or more indi viduals may be classified as savings deposits if they meet the other requirements of the above definition, but deposits of a partnership operated for profit may not be so classified. Deposits to the credit of an indi vidual or a governmental unit o f funds in which the beneficial interest is held by a corporation, partnership, association, or other organization operated for profit or not operated primarily for religious, philanthropic, charitable, educational, fraternal, or other similar pur poses may not be classified as savings deposits unless permitted elsewhere within this subsection. PR IN T E D IN N E W YORK Board of Governors of the Federal Reserve System SUPPLEMENT TO REGULATION Q Effective November 27, 1974 SECTION 217.7— M A X IM U M RATES OF IN T E R E S T P A Y A B L E B Y M EM BER BANKS ON TIM E AN D SAVINGS DEPOSITS Pursuant to section 19 of the Federal R e serve A ct and § 217.3 hereof, the Board of Governors of the Federal Reserve System hereby prescribes the following maximum rates1 of interest per annum payable by member banks of the Federal Reserve System on time and savings deposits: (a ) Tim e deposits o f $100,000 or more. There is no maximum rate of interest presently prescribed on any time deposit of $ 100,000 or more. (b ) Tim e deposits o f less than $100,000. (1 ) Except as provided in paragraphs (a ) and (d ) and subpart ( 2 ) of this paragraph, no member bank shall pay interest on any time deposit at a rate in excess of the applicable rate under the following schedule : Maturity 30 days or more but less than 90 days 90 days or more but less than 1 year 1 year or more but less than 30 months 30 months or more Maximum per cent 5 S/l 2 6 6 y2 l The limitations on rates of interest payable by member banks o f 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 o f a member bank located outside the States of the United States and the D istrict o f Columbia. (2) Member banks may pay interest on any time deposit of $ 1,000 or more, with a maturity o f four years or more, at a rate not to exceed 7/ 1\. per cent. ( c ) Savings deposits. N o member bank shall pay interest at a rate in excess of 5 per cent on any savings deposit including savings deposits that are subject to negotiable orders of with drawal, the issuance of which is authorized by Federal law. (d ) Governmental unit time deposits of less than $100,000. Except as provided in para graph ( a ), no member bank shall pay interest on any time deposit which consists of funds deposited to the credit of, or in which the entire beneficial interest is held by, the United States, any State of the United States, or any county, municipality, or political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, or political subdivision thereof, at a rate in excess of the highest o f any of the permissible rates that can be paid on time de posits under $100,000 by any Federally insured commercial bank, mutual savings bank or sav ings and loan institution.2 2 The highest permissible rate is currently 7.5 per cent per annum (12 C F R 329.7 and 12 C F R 526,5). PR IN T E D IN N E W YORK
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