Full text of Federal Reserve Bank of New York Circulars : 7831. Amendments to Regulation Q

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FED ER A L R E SER V E BANK
O F N EW YORK

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Circular No. 7 8 3 1 " !
March 5, 1976
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AM ENDM ENTS TO REGULATION Q
NOW Accounts Authorized in N ew Engiand States

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The Board of Governors of the Federal Reserve System has amended its Regulation Q,
"Interest on Deposits/' to permit member commercial banks to offer Negotiable Orders of W ith­
drawal (N O W ) accounts in States in which Federal law permits the establishment of such ac­
counts. In this connection, the Board of Governors issued the following statement on March 1:
The Board of Governors of the Federal Reserve System today amended its Regulation Q to permit mem­
ber commercial banks throughout New England to offer NOW accounts to their customers.
The action was taken in light of legislation effective February 27, 1976, authorizing NOW accounts in
four additional New England States. Congress previously authorized NO W accounts in Massachusetts and
New Hampshire on an experimental basis.
A customer holding a NO W account may write Negotiable Orders of Withdrawal (N O W s) against the
account and at the same time receive interest on the funds retained in the account.

In submitting the amendments for publication in the
made the following additional statement:

the Board of Governors

The Board of Governors of the Federal Reserve System has amended Regulation Q (12 CFR 217) in
light of recent legislation (P.L. 94-222) authorizing Negotiable Orders of Withdrawal (N O W ) accounts in the
States of Maine, Connecticut, Rhode Island, and Vermont. The amendments are technical in nature and are in­
tended only to extend the existing provisions of Regulation Q regarding the offering of NO W accounts to
member banks in those States in which Federal law permits such accounts. The amendments also clarify the
types of depositors that may be offered NO W accounts by member banks.
The first amendment adds a sentence to §217.1(e) (3) to make clear the fact that NO W accounts may not
be maintained where any beneficial interest is held by a corporation, partnership, association, or other organi­
zation operated for profit or not operated primarily for religious, philanthropic, charitable, educational, fraternal,
or other similar purposes. In addition, the provision relating to maintenance of NO W accounts established
prior to May 16, 1975, by certain governmental units has been eliminated because all such accounts were re­
quired to have been terminated by December 31, 1975 (see 40 FR 17885).
The second amendment eliminates the reference to the States of Massachussetts and New Hampshire con­
tained in § 217.5(c) (3) to provide that the restrictions relating to manner of payment of savings deposits do
not apply to deposits subject to negotiable orders of withdrawal, the issuance of which is authorized by Federal
law.
The final amendment modifies § 217.6(i) to limit NO W account advertising of member banks, to the ex­
tent practicable, to media directed toward residents of the States in which Federal law authorizes such ac­
counts and eliminates references to Massachusetts and New Hampshire. The provision also restricts all other
solicitations of NO W accounts, to the extent practicable, only to persons residing or employed in the States in
which Federal law authorizes such accounts and to persons who are customers of member banks in those States
on the effective date of this amendment.
This action was taken pursuant to the Board's authority under § 19 of the Federal Reserve Act (12 U.S.C.
371b) to prescribe rules governing the payment and advertisement of interest on deposits.
Because these amendments are technical in nature only and do not result in any substantive changes to the
provisions of Regulation Q, the Board finds that good cause exists for dispensing with notice and public partici­
pation referred to in § 553(b) of Title 5 of the United States Code with respect to these amendments. The




(OVER)

Board has determined that such procedures are unnecessary in view of the nature of the amendments. In addi­
tion, in view of the technical nature of the amendments and in order to enable member banks to offer NOW ac­
counts to the public as soon as possible, the Board finds good cause to make the amendments effective immedi­
ately.

Enclosed is a copy of the amendments to Regulation Q. You may address any questions
thereon to our Bank Regulations Department.
Additional copies of the enclosure will be furnished upon request.




PAUL

A.

VOLCKER,

Board of Governors of the Federal Reserve System
INTEREST ON DEPOSITS
A M E N D M E N T T O R E G U L A T IO N Q
Effective March 1, 1976, §§217.1(e)(3),
217.5(c)(3), and 217.6(i) are amended to
read as follows:
SECTION 217.1—D E FIN IT IO N S
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(e) Savings Deposits.
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(3)
In those States where banks are permit­
ted to offer deposits subject to negotiable orders
of withdrawal, such deposits may be maintained
if such deposits consist of funds deposited to
the credit of or in which the entire beneficial
interest is held by one or more individuals, or a
corporation, association, or other organization
operated primarily for religious, philanthropic,
charitable, educational, fraternal, or other simi­
lar purposes, and not operated for profit. De­
posits in which any 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 purposes
may not be classified as deposits subject to
negotiable orders of withdrawal.

SECTION 217.6—A D V ER TISIN G OF
IN T E R E ST ON D E PO SITS
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(i)
Negotiable orders of withdrawal. In ad­
dition to compliance with the other paragraphs
of this section, member banks offering accounts
subject to negotiable orders of withdrawal, to
the extent practicable, shall limit every adver­
tisement, announcement or solicitation made in
any newspaper, magazine, radio, television or
other media to such facilities directed toward
residents of the States in which Federal law
authorizes the issuance of such accounts. All
other advertisement, announcements and solici­
tations of such accounts, including direct mail­
ing, circulars, and notices, whether written or
oral, to the extent practicable, shall be directed
only to persons residing or employed in the
States in which Federal law authorizes the is­
suance of accounts subject to negotiable orders
of withdrawal and to persons who are customers
of member banks in those States on the effective
date of this amendment.

SECTION 217.5—W IT H D R A W A L OF
SAVINGS D E PO SITS
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(c) Manner of payment of savings deposits.
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(3)
The provisions of this paragraph do not
apply to deposits subject to negotiable orders of
withdrawal that are authorized by Federal law.
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P R IN T E D IN N E W YORK




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