Full text of Federal Reserve Bank of New York Circulars : 8341. Amendments to Regulations D and Q

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 BAN K
O F N EW Y O R K

Circular No. 8341
May 9, 1978

[

]

AMENDMENTS TO REGULATIONS D AND Q
Exempting Treasury Funds inMember Banks
From Reserve Requirements and Deposit Interest Rate Restrictions
To A ll Member Banks, and Others Concerned,
in the Second Federal Reserve District:

The following statement was issued by the Board of Governors of the Federal Reserve
System on May 1 in connection with amending its Regulation D, “Reserves of Member Banks,”
and Regulation Q, “Interest on Deposits” :
The Board of Governors of the Federal Reserve System today amended two of its regulations to facili­
tate the participation of member banks in a newly announced Treasury program for the handling of its funds
in commercial banks and other depositories.
The new Treasury Tax and Loan Investment Program is designed to permit the Treasury to earn
interest on its funds in commercial banks. Previously, these funds (which can be withdrawn at any time by
the Treasury) have been treated as demand deposits, which may earn no interest.
The Treasury Tax and Loan Investment Program will enable the Treasury to invest its non-interest-bear­
ing funds in interest-bearing notes of commercial banks.
The Board has amended its rules to provide that such notes will not be regarded as deposits subject to
Regulation D (reserve requirements) or to Regulation Q (interest on time and savings deposits).
The Board’s action will be effective with the effective date of the Treasury’s Tax and Loan Investment
Program, July 6, 1978.

Enclosed are copies of the amendments to Regulations D and Q. Questions thereon may be
directed to our Consumer Affairs and Bank Regulations Department (Tel. No. 212-791-5919).




P aul A. V olcker,

President.

Board of Governors of the Federal Reserve System
RESERVES OF MEMBER BANKS
AM ENDM ENT TO REGULATION D
(effective July 6,1978)
A G E N C Y : Board of Governors of the Fed­
eral Reserve System.
A C T IO N : Final rule.
S U M M A R Y : The Board of Governors of
the Federal Reserve System has amended
§ 204.1(f)(1) of Regulation D (12 C FR 204)
and § 217.1(f)(1) of Regulation Q (12 CFR
217) to exempt from deposit treatment a
member bank’s liability on its promissory note
that evidences an investment of funds by the
United States Treasury. Consequently, these
liabilities of member banks will not be subject
to the reserve requirements and interest rate
limitations imposed on member bank deposits.
E F F E C T IV E D A T E : July 6, 1978.
F O R F U R T H E R IN F O R M A T IO N C O N ­
T A C T : Allen L. Raiken, Associate General

Counsel, Legal Division, Board of Governors
of the Federal Reserve System. Washington,
D.C. 20551 [(202) 452-3625].
SU PPLEM EN TARY

IN F O R M A T IO N :

Regulations D and Q provide, in part, that a
member bank’s liability on its promissory note
will not be considered a “deposit” of the mem­
ber bank if the note is issued to a domestic
banking office of another bank, an agency of
the United States, or the Government Devel­
opment Bank for Puerto Rico. Under the
amendments adopted today, a note issued by
a member bank to evidence an investment of
funds by the United States Treasury will also
be exempt from deposit treatment.
This action is taken in recognition of Public
Law 95-147, which authorizes the Secretary
of the Treasury to invest operating cash in
obligations of depositaries maintaining Treas­
ury tax and loan accounts. The Board of Gov­
ernors believes that Congress intended that
these member bank obligations be exempt from
reserve requirements and interest rate limita­
tions. Accordingly, the amendments approved

today will promote Congress’ purpose in en­
acting this legislation to provide Treasury with
a direct means of obtaining interest on its cash
balances. The Treasury has issued rules re­
garding implementation of this legislation and
it is intended that the Board’s rules and the
Treasury’s rules take effect simultaneously on
July 6, 1978.
It should be noted that these amendments
do not affect the status of Treasury tax and
loan accounts as demand deposit accounts.
Funds placed in these accounts at member
banks will retain their status as demand de­
posits until such time as they are remitted to
the Treasury or until they are invested by
Treasury in obligations of the depositaries
pursuant to the rules adopted by Treasury.
Until such time, member banks will be re­
quired to maintain reserves against the Treas­
ury tax and loan demand deposits.
Because these amendments implement legis­
lation enacted by Congress and augment rules
published by Treasury, the Board believes that
significant public benefits will immediately re­
sult from their adoption. The immediate adop­
tion of the final rules will remove uncertainty
concerning the deposit status of promissory
notes issued to Treasury by member banks, and
thus will permit banks to begin preparing im­
mediately for participation in the Treasury pro­
gram. Consequently, the Board has determined
that notice and public participation with respect
to these amendments is unnecessary and would
be contrary to the public interest.
Pursuant to § 19(a) of the Federal Reserve
Act (12 U.S.C. 461), effective July 6, 1978,
§ 204.1(f) of Regulation D (12 C FR 204)
is amended to read as follows:
SECTION 204.1— DEFINITIONS
*

*

*

(f) Deposits as including certain promis-

For this Regulation to be complete, retain:
1) Regulation D pamphlet, effective November 9, 1972.
2) Amendments effective July 12, 1973, November 26, 1973, October 14, 1974, November 10,
1975, and July 26, 1976.
3) Supplement effective December 16,1976.
4) This slip sheet.
[Enc. Cir. No. 8341]




F E IN T E D IN N E W YOKE

( over)

sory notes and other obligations. For the pur­
poses of this Part, the term “deposits” also
includes a member bank’s liability on any pro­
missory note, acknowledgment of advance, due
bill, banker’s acceptance, or similar obligation
(written or oral) that is issued or undertaken
by a member bank as a means of obtaining
funds to be used in its banking business, ex­
cept any such obligation that:
(1)
Is issued to (or undertaken with re­
spect to) and held for the account of (i) a
domestic banking office6 of another bank, or




(ii) the United States or an agency thereof,
or the Government Development Bank for
Puerto Rico;
*

*

*

6Any banking office (i) in any State of the United
States or the District of Columbia of a bank organized
under domestic or foreign law or (ii) of a member
bank whose head office is located outside the States
of the United States or the District of Columbia pro­
vided reserves are required to be maintained by such
member bank under this P art against the deposit lia­
bilities of such office.

Board of Governors of the Federal Reserve System
INTEREST ON DEPOSITS

AM ENDM ENT TO REGULATION Q
( effective July 6, 1978)
A G E N C Y : Board of Governors of the Fed­
eral Reserve System.
A C T IO N : Final rule.
S U M M A R Y : The Board of Governors of
the Federal Reserve System has amended
§ 204.1(f)(1) of Regulation D (12 C FR 204)
and § 217.1(f)(1) of Regulation Q (12 CFR
217) to exempt from deposit treatment a
member bank’s liability on its promissory note
that evidences an investment of funds by the
United States Treasury. Consequently, these
liabilities of member banks will not be subject
to the reserve requirements and interest rate
limitations imposed on member bank deposits.
E F F E C T I V E D A T E : July 6, 1978.
F O R F U R T H E R IN F O R M A T IO N C O N ­
T A C T : Allen L. Raiken, Associate General

Counsel, Legal Division, Board of Governors
of the Federal Reserve System, Washington,
D.C. 20551 [(202) 452-3625].
SU PPLEM EN TARY

IN F O R M A T IO N :

Regulations D and Q provide, in part, that a
member bank’s liability on its promissory note
will not be considered a “deposit” of the mem­
ber bank if the note is issued to a domestic
banking office of another bank, an agency of
the United States, or the Government Devel­
opment Bank for Puerto Rico. Under the
amendments adopted today, a note issued by
a member bank to evidence an investment of
funds by the United States Treasury will also
be exempt from deposit treatment.
This action is taken in recognition of Public
Law 95-147, which authorizes the Secretary
of the Treasury to invest operating cash in
obligations of depositaries maintaining Treas­
ury tax and loan accounts. The Board of Gov­
ernors believes that Congress intended that
these member bank obligations be exempt from
reserve requirements and interest rate limita­
tions. Accordingly, the amendments approved

today will promote Congress’ purpose in en­
acting this legislation to provide Treasury with
a direct means of obtaining interest on its cash
balances. The Treasury has issued rules re­
garding implementation of this legislation and
it is intended that the Board’s rules and the
Treasury’s rules take effect simultaneously on
July 6, 1978.
It should be noted that these amendments
do not affect the status of Treasury tax and
loan accounts as demand deposit accounts.
Funds placed in these accounts at member
banks will retain their status as demand de­
posits until such time as they are remitted to
the Treasury or until they are invested by
Treasury in obligations of the depositaries
pursuant to the rules adopted by Treasury.
Until such time, member banks will be re­
quired to maintain reserves against the Treas­
ury tax and loan demand deposits.
Because these amendments implement legis­
lation enacted by Congress and augment rules
published by Treasury, the Board believes that
significant public benefits will immediately re­
sult from their adoption. The immediate adop­
tion of the final rules will remove uncertainty
concerning the deposit status of promissory
notes issued to Treasury by member banks, and
thus will permit banks to begin preparing im­
mediately for participation in the Treasury pro­
gram. Consequently, the Board has determined
that notice and public participation with respect
to these amendments is unnecessary and would
be contrary to the public interest.
Pursuant to § 19(a) of the Federal Reserve
Act (12 U.S.C. 461), effective July 6, 1978,
§ 217.1(f) of Regulation Q (12 CFR 217) is
amended to read as follows:
SECTION 217.1— DEFINITIONS
*

*

*

(f) Deposits as including certain promissory
notes and other obligations. For the purposes

For this Regulation to be complete, retain:
1) Regulation Q pamphlet, effective December 4, 1975.
2) Amendments effective March 1, 1976, July 26, 1976, November 8, 1976, March 24, 1977,
July 6, 1977, November 23, 1977, December 1, 1977, and November 1, 1978.
3) Supplement effective December 4, 1975.
4) This slip sheet.
[Enc. Cir. No. 8341]



P R IN T E D IN N E W YORK

( over)

of this Part, the term “deposits” also includes
any member bank’s liability on any promissory
note, acknowledgment of advance, due bill, or
similar obligation (written or oral) that is
issued or undertaken by a member bank prin­
cipally as a means of obtaining funds to be
used in its banking business except any such
obligation that:




(1)
Is issued to (or undertaken with re­
spect to) and held for the account of (i) a
bank or an institution the time deposits of
which are exempt from § 217.7 pursuant to
§ 217.3(g), or (ii) the United States or an
agency thereof, or the Government Develop­
ment Bank for Puerto Rico;
*

*

*