The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK OF NEW YORK Circular No. 8 8 4 0 May [ 29, 1980 '] DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE Adoption of Rules Relating to Time Deposits To All Commercial Banks, Mutual Savings Banks, and Savings and Loan Associations in the Second Federal Reserve District: Y e ste r d a y th e D ep o sito ry I n stitu tio n s D e r e g u la tio n C o m m ittee (D ID C ) a d o p ted ru les r e la tin g to ra te s o f in te r e st p a y a b le on ce rta in s m a ll sa v e r s ’ c e r tific a te s and on m on ey m a r k e t c e r tific a te s, an d oth er ru les r e g a r d in g ea r ly w ith d r a w a l p e n a ltie s a p p lica b le to tim e d ep osits. F o llo w in g is a b r ie f d escr ip tio n o f th e n ew rules: 2 l/ r y e a r f ix e d rate, v a ria b le ceilin g tim e d ep o sits Effective June 2, 1980, a minimum rate of 9.25 percent payable by commercial banks, and 9.50 percent payable by thrift institutions, has been established with regard to 2%-year fixed rate, variable ceiling time deposits. The present ceiling rates of 11.75 percent for commercial banks and 12.00 percent for thrift institutions remain unchanged. Between the minimum and the ceiling, commercial banks may pay a rate equal to the 2%-year Treasury rate less 25 basis points, while thrift institutions may pay a rate exactly equal to the 2%-year Treasury rate. The Treasury rate will be set every two weeks, rather than monthly as is currently the practice, and will be announced on Monday to be effective the following Thursday. With continuous compounding, the effective yield on the 9.25 percent rate for commercial banks is 9.83 percent, and the effective yield on the 9.50 percent rate for thrift institutions is 10.11 percent. (Institutions may pay less than the ceiling rates.) Money m arket certificates Effective June 5, 1980, based upon the six-month Treasury bill auction to be held June 2,1980, the following schedule of rates has been established for six-month money market certificates: Bill Rate Commercial Bank Ceiling Thrift Ceiling Differential 8.75% and above bill rate + 25 basis points (bp) bill rate + 25 bp 0 8.50% to 8.75% bill rate + 25 bp 9.00% 0 to 25 bp 7.50% to 8.50% bill rate + 25 bp bill rate + 50 bp 25 bp 7.25% to 7.50% 7.75% bill rate + 50 bp 25 bp to 0 below 7.25% 7.75% 7.75% 0 (Over) E a r ly u rith draw al pen a lties For time deposits with maturities of one year or less, the minimum penalty for early withdrawal will be a forfeiture of three months’ simple, nominal interest. For time deposits with maturities of over one year, the minimum penalty will be six months’ simple, nominal interest. The new rule requires financial institutions to reduce the principal amount of the deposit in the event the forfeiture exceeds the interest earned up to the date of withdrawal. The rule is effective June 2, 1980. T h e se D ID C ru les, to th e e x te n t in d ica ted by th eir con ten t, su p e rsed e th e re la te d p ortion s o f R e g u la tio n Q (“In te r e st on D e p o sits”) o f th e B oard o f G overnors o f th e F e d e r a l R e se rv e S y ste m . M ore sp e c ific in fo rm a tio n r e g a r d in g th e n e w ru les w ill be sen t to you as soon as it is a v a ila b le. S o m e tim e la ter , th e B o a rd o f G overn ors w ill is su e te ch n ica l a m e n d m e n ts to R eg u la tio n Q to con form th e re g u la tio n to th e D ID C ’s ru les, an d th e s e a m e n d m e n ts also w ill b e se n t to you. Q u estion s r e g a r d in g th e D ID C 's n ew ru les m a y be d ir ected to our R eg u la tio n s D iv isio n (T el. N o. 212-791-5914). A nthony M. Solomon, President.
@FedFRASER