Full text of Federal Reserve Bank of New York Circulars : 8202. Regulation Q

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F E D E R A L R E S E R V E BA N K
O F N EW Y O R K

No. 8202*1
[ Circular
October 20, 1977 J

R EG U LA TIO N Q
— Temporary Suspension of Early Withdrawal Penalty for Kansas Flood Victims
— Delegation of Authority for Major Disaster Areas

T o A l l M e m b e r B a n k s , a n d O th e r s C o n ce rn ed ,
in th e S e c o n d F e d e r a l R e s e r v e D is tr ic t:

The Board of Governors of the Federal Reserve System has temporarily suspended, through
March 31, 1978, the Regulation Q penalty for the withdrawal of time deposits from member
banks prior to maturity by depositors affected by the recent storms and flooding in the State of
Kansas. The Board of Governors’ action is retroactive to September 20, 1977.
In a related action, the Board of Governors amended its Rules Regarding Delegation of Au­
thority to delegate to the Secretary of the Board authority to permit member banks to waive the
Regulation Q penalty for early withdrawal of time deposits in communities declared by the Presi­
dent to be major disaster areas.
Enclosed are copies of the Board’s Order in the State of Kansas matter and of the amend­
ment to the Board’s Rule. Any questions regarding the Board’s actions may be directed to our
Consumer Affairs Division (Tel. No. 212-791-5919).




P aul

A.

V olcker ,
President.

Board of Governors of the Federal Reserve System
R EG U LA TIO N Q
SECTION 217.4— P A Y M E N T O F TIM E DEPOSITS BEFORE M A T U R IT Y
Order Granting Temporary Suspension of Early Withdrawal Penalty

Effective September 20, 1977 through March 31, 1978
§ 217.4(d)—Penalty for early withdrawals.
The Board of Governors has suspended tem­
porarily the Regulation Q penalty for the with­
drawal of time deposits prior to maturity from
member banks (12 CFR § 217.4(d)) for de­
positors affected by the severe storms and flood­
ing beginning about September 12, 1977, in the
State of Kansas. On September 20, 1977, pur­
suant to section 301 of the Disaster Relief Act
of 1974 (42 U.S.C. §5141) and Executive
Order 11795 of July 11, 1974, the President
designated the following counties of the State
of Kansas a major disaster area: Atchison,
Brown, Doniphan, Jackson, Jefferson, Johnson,
Leavenworth, Nemaha, Shawnee and Wyan­
dotte. The Board regards the President’s action
as recognition by the Federal government that a
disaster of major proportions has occurred. The
President’s designation enables victims of the
disaster to qualify for special emergency finan­
cial assistance. The Board believes it appropri­
ate to provide an additional measure of assist­
ance to victims by temporarily suspending the
Regulation Q early withdrawal penalty.1 The
Board’s action permits a member bank whereever located to pay a time deposit before ma­
turity without imposing this penalty upon a
showing that the depositor has, in fact, suffered
property or other financial loss in the disaster
area as a result of the severe storms and flood­
ing. A member bank should obtain from a de­
positor seeking to withdraw a time deposit
pursuant to this action a signed statement de­
scribing fully the disaster-related loss. This
statement should be approved and certified by
an officer of the bank. This action will be retro­
active to September 20, 1977, and will remain
in effect until 12 midnight March 31, 1978.
Section 19(j) of the Federal Reserve Act
(12 U.S.C. § 371b) provides that no member

bank shall pay any time deposit before maturity
except upon such conditions and in accordance
with such rules and regulations as may be pre­
scribed by the Board. The Board has determined
it to be in the overriding public interest to
suspend the penalty provision in § 217.4(d) of
Regulation Q for the benefit of depositors suf­
fering disaster-related losses within those geo­
graphical areas of the State of Kansas offici­
ally designated a major disaster area by the
President. The Board, in granting this tempo­
rary suspension, encourages member banks to
permit penalty-free withdrawal before maturity
of time deposits for depositors who have suf­
fered disaster-related losses within the desig­
nated disaster area.
In view of the urgent need to provide im­
mediate assistance to relieve the financial hard­
ship being suffered by persons directly affected
by the severe damage and destruction occasioned
by the flooding in the designated counties of
Kansas, the Board finds that good cause
exists for dispensing with notice and public
participation referred to in section 553(b) of
Title 5 of the United States Code with respect
to this action and that public procedure with
regard to this action would be contrary to the
public interest. Because of the need to provide
assistance as soon as possible and because the
Board’s action relieves a restriction, the Board
finds that there is good cause to make the action
effective immediately.
1 Section 217.4(d) of Regulation Q provides that
where a time deposit, or any portion thereof, is paid
before maturity, a member bank may pay interest on
the amount withdrawn at a rate not to exceed that cur­
rently prescribed for a savings deposit and that the
depositor shall forfeit three months of interest payable
at such rate.

[Enc. Cir. No. 8202]




PRINTED IN NEW YORK

Board of Governors of the Federal Reserve System

RULES REG ARD IN G

D ELEG ATION

OF A U T H O R IT Y

AMENDMENT

AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
SUMMARY: In order to expedite and
facilitate the performance of certain of
its functions, the Board of Governors has
delegated to the Secretary of the Board
authority to permit member banks to
waive the penalty for early withdrawal
of a time deposit in § 217.4(d) of Regula­
tion Q for depositors suffering disasterrelated losses in areas declared a major
disaster area by the President.
EFFECTIVE DATE: September 27, 1977.
FOR FURTHER INFORMATION CON­
TACT:
Theodore E. Allison, Secretary, Board
of Governors of the Federal Reserve
System, Washington, D.C. 20551 (202452-3257).
SUPPLEMENTARY INFORMATION:
Section 217.4(d) of Regulation Q (12
CFR § 217.4(d)) provides that where a
time deposit, or any portion thereof, is
paid before maturity, a member bank
may pay interest on the amount with­
drawn at a rate not to exceed that cur­
rently prescribed for a savings deposit
and that the depositor shall forfeit three
months of interest payable at such rate.
The Board of Governors has amended its
Rules Regarding Delegation of Authority
to authorize the Secretary of the Board
to permit member banks to waive the
early withdrawal penalty in those situa­
tions in Which the President of the
United States, pursuant to section 301 of
the Disaster Relief Act of 1974 (42 U.S.C.
5141) and Executive Order No. 11795 of
July II, 1974, has designated an area a
major disaster area. The Board regards
a Presidential declaration of a major
disaster area as recognition by the Fed­
eral government that a disaster of major
proportions has occurred and under such
circumstances believes it appropriate to
provide an additional measure of assist­
ance to disaster victims by temporarily
suspending the Regulation Q early with­

drawal penalty. Pursuant to this delega­
tion, a waiver of the early withdrawal
penalty will be limited in effectiveness to
depositors suffering disaster-related
losses in a geographical area designated
a major disaster area by a Presidential
declaration.
The provisions of section 553 of Title
5, United States Code, relating to notice
and public participation and deferred ef­
fective date are not followed in connec­
tion with this amendment because the
change involved therein is procedural in
nature and does not constitute a sub­
stantive rule subject to the requirements
of such section.
Effective September 27, 1977, a new
paragraph 265.2(a) (18) is added to read
as follows:
§ 2 6 5 .2
Specific functions delegated to
Board employees and to Federal Re­
serve Banks.

(a) The Secretary of the Board (or, In
the Secretary’s absence, the Acting Sec­
retary) is authorized:
* * * * *
(18) Under the provisions of section
19 (j) of the Federal Reserve Act (12
U.S.C. 371b) and §§ 217.4(a) and (d) of
Regulation Q (12 CFR 217.4(a) and (d))
to permit member banks to waive the
penalty for early withdrawal of a time
deposit in § 217.4(d) if all of the follow­
ing conditions are met:
(i) The President of the United States
declares an area a major disaster area
pursuant to section 301 of the Disaster
Relief Act of 1974 (42 U.S.C. 5141) and
Executive Order No. 11795 of July 11,
1974.
(ii) A waiver is limited in effectiveness
to depositors suffering disaster-related
losses in the officially designated disaster
area.
(iii) The appropriate Reserve Bank
recommends approval.
(iv) All relevant divisions of the
Board’s staff recommend approval.

For this Regulation to be complete, retain:
1) Printed pamphlet, as amended effective September 1, 1977.
2) This slip sheet.
[Enc. Cir. No. 8202]




FEDERAL REGISTER, VOL. 42, NO. 192— TUESDAY, OCTOBER 4, 1977