Full text of Federal Reserve Bank of New York Circulars : 8318. Prepayment of Interest on Deposits in the Form of Merchandise

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

F E D E R A L R E S E R V E BANK
O F N EW YORK

E

ircular No. 8318
April 11, 1978

PREPAYMENT OF INTEREST ON DEPOSITS IN THE FORM OF MERCHANDISE

To A ll Member B anks, and O thers Concerned,
in the Second F ed era l R e se rv e D istrict:
Enclosed
Board of Governors
the prepayment
to a r e q u e s t

of

for y o u r
of the
interest

"interest

bank may pay must be
amount

Federal Reserve

from the bank,

its R e g u l a t i o n Q,

is p r e p a i d

i n f o r m a t i o n is a c o p y o f a l e t t e r

on deposits
the Board

System to a member b a n k regarding

in t h e

form of merchandise.

of Governors has

on Deposits,"

the amount

d i s c o u n t e d t o it s p r e s e n t v a l u e

in t h e

form of m erchandise

Division




(Tel.

No.

In response

determined that under

of interest
regardless

that a member
of w h e t h e r

the

o r cas h.

Questions regarding this matter m a y be directed
Affairs

f r o m the

to o u r

Consumer

212-791-5919).

P aul A. V olcker,

President.

BOARD

OF GOVERNORS
□ F THE

FEDERAL RESERVE SYSTEM
W A S H IN G T O N ,

D.

C.

20551
AOORCII

arriCIAL C a N R C I P O N O C N C C
TO t h e i o a m d

March

29,

1978

Dear
The
the

Board

prepayment

y o u r b a n k has
interest

to

the m a x i m u m
to

compute
the

to

amount
the
its

inability
to

Board

in

to
the

that

in

of

is

m a x i m u m amount

of

be

217.149)
prepaid

interest
at

th e

that

the

amount
not

the

less

the

the

In d e t e r m i n i n g

discounting

the

Board's

permission

is b a s e d ,

in part,

th e

merchandise

to
on

received

th e
The

t he

Board

paid

Board's
cannot

paid

rate.
receives

actually

of p r e p a i d
the

on

The

amount

interest

the

deposit

placed with
interest)

l i f e of

the

has

costs

of

it m a y

is p r e p a i d

determined
a nd

sales

tax

the

Interpretations
of

interest

aggregate

th e

indicates
time

deposit.

at

of

computed
that

deposit

(the

interest

tha t

amount

at m a t u r i t y

the b a n k

plus

217),

R e g u l a t i o n Q.

interpretation

at m a t u r i t y

letter,

(12 C F R

in d e t e r m i n i n g

Published

t he

Q

amount

also

under

exceed

of

the

shipping

the m a x i m u m

bank

for

amount

consideration
be

in y o u r

Regulation

of w h e t h e r

cash.

into

been

amount
rate

that

th e b a n k w i s h e s

expressed

under

discount

that

a member

amount

sell

the v i e w s
that

t ha t m a y

of

depositor

applicable maximum




3365

could have

exceed

of

or

taken

provides

by

request

associated with

applicable maximum

may

amount

to

interest

Paragraph
(12 C F R

the

concerning

the b a n k p r e p a y s

prepaid,

request

readily

regardless

expenses
be

in w h i c h

paid without

This

opinion

value

generally need not

may

the

f o r m of m e r c h a n d i s e

reasonable

request

indicates

proceeds.

required

present

be
You

to

your

letter

f o r m of m e r c h a n d i s e .

that ma y

consideration
of

Your

that m a y be

value.

the

considered

programs

the

a depositor

remains

it s

in

this manner.

reinvest

a member bank
pay

amount

has

deposits.

interest

present

After
the

of

on

deposit

depositor

interest

in or d e r

of G o v e r n o r s

interest

sponsored

the

calculate

interest

of

face
t he

BOARD

O r

GOVERNORS

T H E FE D E R A L R E S E R V E SY ST EM

OF

2-

The
regardless

Board

merchandise.
that
in

To

exceeds

the b a n k

Regulation

the

Q

interest

at

interest

had

or

cash.

If

competitive
interest

in

merchandise
actually
basis
As

the

time

been

such

interest
the

prepaid

for

between

in

the

f o r m of
has

such

prepayment

provide

for

discounting

and




the

we

are

cash

future

the

In order

of
of

all

result

of

be

receiving

The

prepaid

as
in

the F e d e r a l

to

that
could

provide

interest

that

finds

reasonable

no

by

your

bank

its

present

for

all

Insurance

Garwood

Garwood
of

the

programs.
that
should

value.

Corporation

truly youts,

Secretary

is

commercial

determination.

G r i f f i t h L.

that

prepays

of

G r i f f i t h L.
Deputy

bank

Deposit
this

basis

a substantial

f o r m of m e r c h a n d i s e

payable

Very
(signed)

earned

for m e r c h a n d i s e

a uniform position

the C u r r e n c y

have

f o r m of m e r c h a n d i s e

bank

conducted

the

amount

no v a l i d

have

the

by

same

a member

Board

exception

programs

interest

the

institution

the

the

sees

could

than

permitted

he w o u l d

Board

authorized,

in

or

interest would

the m a x i m u m

the m e m b e r

interest

apply

cash

future
of

cash value

a special

should
of

amount

financial
since

form

in an

Accordingly,

to p r o m o t e

informing

Comptroller

a

the

interest

is m a d e

interest

principle

in

to p a y

at m a t u r i t y .

a higher

in c a s h.
the

this

f o r m of m e r c h a n d i s e

over

involve

banks,

the

a distinction were
in

permitting

a result,

of

in e x c e s s

the d e p o s i t

paid

advantage
that

bank

the d e p o s i t o r w o u l d

distinguishing

prepays

value

interest

that

is p r e p a i d

a member

present

since

if

the v i e w

interest

permit

paying

of
for

is o f

of w h e t h e r

Board

FEDERAL RESERVE BANK
of N ew York

Appendix £ to
Operating Circular No. 21
April 12, 1978

AGENCY SECURITIES AVAILABLE
IN BOOK-ENTRY FORM ONLY
To All Banking Institutions, and Others Concerned,
in the Second Federal Reserve District:

This appendix lists the Federal agencies that have issued regulations
providing for the issuance of certain securities in book-entry form only.
To date, the Farm Credit Administration, the Federal Home Loan
Bank Board, and the Federal National Mortgage Association have
issued such regulations. Printed below is a citation of the applicable
book-entry regulations, together with the effective date of the availability
of each agency’s securities in book-entry form only.
Farm Credit Administration (12 C.F.R. 615) :

(a) Consolidated systemwide bonds— effective for all new issues
as of September 1, 1977;
(b) All consolidated bonds issued by The Twelve Federal Land
Banks, by The Twelve Federal Intermediate Credit Banks, and
by The Thirteen Banks for Cooperatives — effective for all new
issues as of January 1, 1978;
(c) Consolidated systemwide notes, issued under the Discount
Note Program, will continue to be issued in definitive form only.
Federal Home Loan Bank Board (12 C.F.R. 506)— effective
for all new issues as of November 25, 1977; with the exception of
consolidated discount notes, which will continue to be issued in
definitive form only.
Federal National Mortgage Association (24 C.F.R. 81)— effec­
tive for all new issues as of March 10, 1978; with the exception of
discount notes, which will continue to be issued in definitive form
only.




P aul A. V olcker,
President.