Full text of Federal Reserve Bank of New York Circulars : 9022. Regulation Q

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FEDERAL RESERVE BANK
OF NEW YORK
Circular No. 9022
February 24, 1981

REGULATION Q
Revised Pamphlet Incorporating the Rules of the DIDC
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:

The Board o f Governors o f the Federal Reserve System has revised its Regulation Q pamphlet,
“ Interest on Deposits,” in order to incorporate the rules o f the Depository Institutions Deregulation C om ­
mittee (D ID C), adopted pursuant to the Depository Institutions Deregulation Act o f 1980. Enclosed is a
copy o f the new pamphlet, together with a copy o f a revised Supplement to Regulation Q, both o f which are
amended effective January 15, 1981. The revised pamphlet supersedes the previous printing o f Regulation
Q, dated December 6, 1978, together with all amendments and supplements thereto. Additional copies o f
the enclosures will be furnished upon request.
Printed below is the text o f the notice issued by the Board o f Governors in adopting the D ID C ’ s rules,
which has been reprinted from the Federal Register, and which summarizes the Regulation Q revisions.
Questions regarding the regulation may be directed to our Regulations Division (Tel.
212-791-5914).

N o.

A N TH O N Y M. SOLOM O N ,

President.

FEDERAL RESERVE SYSTEM

FO R FU R T H ER IN FORM ATION C O N T A C T:

12CFR Part 217
[Regulation Q; (Docket No. R-0348)]

Interest on Deposits; Technical
Amendments
AGENCY: Board of Governors of the

Federal Reserve System.
Technical amendments;
rescission of interpretations.
A C TIO N :

s u m m a r y : Pursuant to its authority
under section 19 of the Federal Reserve
Act, as amended, the Board has
amended Regulation Q (Interest on
Deposits) to incorporate the rules o f the
Depository Institutions Deregulation
Committee (“ DIDC"), adopted pursuant
to the Depository Institutions
Deregulation Act of 1980. The
amendments to Regulation Q are
technical in nature.
e f f e c t iv e

D ATE:

January 15,1981.




Gilbert T. Schwartz, Assistant General
Counsel (202/452-3625), Anthony F.
Cole, Senior Attorney (202/452-3612) or
John Harry Jorgenson, Attorney (202/
452-3778). Legal Division. Board of
Governors of the Federal Reserve
System, Washington, D.C. 20551.
S U P P LEM EN T A R Y IN FORM ATIO N: The
Depository Institutions Deregulation Act
of 1980 (Title II o f Pub. L. 96-221)
transfers to the DIDC the authority
conferred by section 19(j) of the Federal
Reserve Act (12 U.S.C. 37lb) upon the
Board (and the similar authority o f the
Federal Deposit Insurance Corporation
and the Federal Home Loan Bank Board)
to prescribe rules relating to the
payment of interest on deposits. The
DIDC has issued final regulations
concerning: (1) withdrawal of interest
from a time deposit (12 CFR 1204.101; 45
FR 31710); (2) payment o f interest on a
time deposit after maturity (12 CFR
1204.102; 45 FR 31711); (3) penalty for
early withdrawals on time deposits (12

PRINTED IN NEW YORK, FROM

F E D E R A L R E G IS T E R ,

CFR 1204.103; 45 FR 37801 and 40109)
and the penalty for early withdrawals
from an IRA or a Keogh Plan account
within seven days of opening the
account (12 CFR 1204.113; 45 FR 84987);
(4) interest rate ceilings on 26-week
money market time deposits (12 CFR
1204.104) and on 2 V2 year small saver
certificates (12 CFR 1204.106; 45 FR
37803): (5) interest rate ceiling on NOW
accounts (12 CFR 1204.108; 45 FR 68644):
and (6) premiums not considered
payment o f interest (12 CFR 1204.109),
finders fees (12 CFR 1204.110),
prepayment o f interest and payment of
interest in merchandise (12 CFR
1204.111; 45 FR 68641). In view of these
actions by the DIDC, the Board is
amending Regulation Q to incorporate
these changes. The Board’s
interpretations concerning the use of
premiums by member banks (12 CFR
217.147), the prepayment o f interest by
member banks (12 CFR 217.149) and the
withdrawal of interest by depositors
prior to maturity (12 CFR 219.154) also

VOL. 46, NO. 22

are being rescinded in view o f the
provisions adopted by the DIDC.
The Board has also rescinded section
217.6(i) of Regulation Q, which limits the
advertising o f negotiable order of
withdrawal (NOW) accounts to
residents of States in which NOW
accounts are authorized. This provision
is no longer necessary because NOW
accounts may be issued by all
depository institutions nationwide
pursuant to the Consumer Checking
Account Equity Act o f 1980 (Title 111 of
Pub. L. 96-221).
The following table presents the
provisions of Regulation Q that have
been amended by the DIDC’s actions.

DlDC rule

Regulation
Q provision
amended

1204.101— Withdrawal of interest.......................
1204.102—
Payment of interest after maturity.
120 4.1 03 — Penalty for early withdrawals..........
1 20 4 .1 0 4 — Interest rate ceilings on 26-week
money market certificates......................................
1204.106— Interest rale ceilings on 2 Vb-year
small saver certificates.................................
1204 108— Interest rate ceilings on NO W ac­
counts..................................................................
1204.109—
Premiums not considered payment
of interest....... ............................................................
1204.110—
Firiders fe e s .........................................
1204.111—
Prepayment ,of interest and pay­
ment of interest in merchandise......'...................
1204 1013— Penalty for early withdrawal IRA
and Keogh Plan accounts within 7 days of
opening the account........... ..........

217.4(d)
217.3(f)
217.4(d)
2 17 7(f)
217.7(g)
217.7(c)
217.147
217.147
'

217 147

217.4(d) *

'S u persedes board interpretations 217 149 and 217.154.

Because these amendments are
necessary to conform the Board's rules
to those of the DIDC, the Board for good
cause finds that the notice, public
procedure, and deferral o f effective date
provisions of 5 U.S.C. 553(b) with regard
to these actions are unnecessary and
contrary to the public interest.
Pursuant to the Board’s authority
under section 19 of the Federal Reserve
Act (12 U.S.C. 461, 371b) to prescribe
rules to effectuate the purposes o f that
section and to prevent evasions thereof.
Regulation Q (12 CFR Part 217) is
amended as follows:
1. Section 217.3(f) of Regulation Q (12
CFR Part 217.3(f)) is amended by adding
the following sentences:
§217.3
*

*

fAmendedl
*

*

*

(f) N o interest after maturity or
expiration o f notice.
Provided, how ever, that a member

bank may provide in any time deposit
contract that if the deposit, or any
portion thereof, is withdrawn not more
than seven days after a maturity date,
interest will be paid thereon at the
originally specified contract rale. A
member bank may specify in the time
deposit contract that interest will be




paid at any other lower rate. However,
in no event may the rate specified be
less than the current rate paid on
savings deposits by the member bank.
2. Section 217.4(d) (12 CFR Part
217.4(d)) is revised to read as follows:
§ 217.4
*

*

[Amended]
*

*

*

(d) Penalty fo r early withdrawals.
(l)(i) For time deposit contracts
entered into before July 1,1979, that
have not been renewed or extended on
or after July 1,1979, the following
minimum early withdrawal penalty shall
apply. W'here 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 prescribed in § 217.7 for a
savings deposit and, in addition, the
depositor shall forfeit three months of
interest payable at such rate. If,
however, the amount withdrawn has
remained on deposit for three months or
less, all interest shall be forfeited.
(ii) For time deposit contracts entered
into, renewed, or extended on or after
July 1,1979, but prior to June 2,1980, that
have not been renewed or extended on
or after June 2,1980, the following
minimum early withdrawal penalty shall
apply:
(A) Where a time deposit with an
original maturity or required notice
period o f one year or less, or any portion
♦hereof, is paid before maturity or before
the expiration of the required notice
period, a depositor shall forfeit at least
three months of interest on the amount
withdrawn at the rate being paid on the
deposit. If the amount withdrawn has
remained on deposit for less than three
months, all interest on the amount
withdrawn shall be forfeited.
(B) Where a time deposit with an
original maturity or required notice
period o f more than one year, or any
portion thereof, is paid before maturity
or before the expiration o f the required
notice period, a depositor shall forfeit at
least six months o f interest on the
amount withdrawn at the rate being
paid on the deposit. If the amount has
remained on deposit for less than six
months, all interest on the amount
withdrawn shall be forfeited. (The
provisions of this subparagraph (ii) may
be applied, with the consent o f the
depositor, to time deposits specified in
paragraph (d)(l)(vi) of this section.)
(iii) For time deposit contracts entered
into, renewed, or extended on or after
June 2,1980, the following minimum
early withdrawal penalty shall apply:
(A) Where a time deposit with an
original maturity or required notice
period of less than three months, or any
’portion thereof, is paid before maturity,

a depositor shall forfeit an amount at
least equal to the amount o f interest that
could'have been earned on the amount
withdrawn at the nominal (simple
interest) rate being paid on the deposit
had the funds remained on deposit until
maturity.
(B) Where a time deposit with an
original maturity or required notice
period o f three months or more to one
year, or any portion thereof, is paid
before maturity, a depositor shall forfeit
an amount at least equal to three
months of interest earned, or that could
have been earned, on the amount
withdrawn at the nominal (simple
interest) rate being paid on the deposit,
regardless of the length of time the funds
withdrawn have remained on deposit.
(C) Where a time deposit with an
original maturity or required notice
period of more than one year, or any
portion thereof, is paid before maturity
a depositor shall forfeit an amount at
least equal to six months of interest
earned, or that could have been earned,
on the amount withdrawn at the
nominal (simple interest) rate being paid
on the deposit, regardless of the length
of time the funds withdrawn have
remained on deposit.
(2) Notwithstanding the provisions of
paragraph (d)(1), where a time deposit,
or any portion thereof, maintained in an
Individual Retirement Account
established in accordance with 26 U.S.C
408 is paid before maturity within seven
days after the establishment o f the
Individual Retirement Account pursuant
to the provisions of 26 CFR 1.40&(l)(d](4), or where a time deposit, or any
portion thereof, maintained in a Keogh
(H.R. 10) Plan account established in
accordance with 26 U.S.C. 401 is paid
before maturity within seven days after
the establishment of the Keogh (H.R. 10)
Plan, a depositor shall forfeit an amount
at least equal to the interest earned on
the amount withdrawn at the nominal
(simple interest) rate being paid on the
deposit.
(3) A member bank, with the
depositor’s consent, may compute the
minimum penalty required to be
imposed on withdrawals from time
deposits opened prior to June 2,1980, on
the basis o f the nominal (simple interest)
rate.
(4) Where necessary to comply with
the requirements of this paragraph, any
interest already paid to or for the
account o f the depositor shall be
deducted from the amount requested to
be withdrawn.
(5) Any amendment of a time deposit
contract that results in an increase in
the rate of interest paid or in a reduction
in the maturity of the deposit constitutes

a payment of the time deposit before
maturity.
(6) For purposes of computing the
penalty required to be imposed under
this paragraph, under a time deposit
agreement that provides that subsequent
deposits reset the maturity of the entire
account, each deposit maintained in the
account for at least a period equal to the
original maturity of the deposit may be
regarded as having matured individually
and been redeposited at intervals equal
to such period. When a time deposit is
payable only after notice, for funds on
deposit for at least the notice period, the
penalty for early withdrawal shall be
imposed for at least the notice period.
(7) A member bank may permit a
depositor to withdraw interest credited
to a time deposit during any term at any
time during such term without penalty. If
the deposit or account is automatically
renewed on the same terms (including at
the same rate of interest), interest
credited during the preceding term or
terms as well as the renewal term may
be paid at any time during the renewal
term without penalty, unless the deposit
agreement specifically provides
otherwise. If the rate of interest paid
during the renewal term or the maturity
period of the renewal term is different,
interest in the account at the
commencement of the renewal term
shall be treated as principal, and only
interest for the renewal term may be
paid at any time without penalty during
such term.
(8) A time deposit, or a portion
thereof, may be paid before maturity
without a forfeiture of interest as
prescribed by this paragraph in the
following circumstances:
(i) Where a member bank pays all or a
portion of a time deposit representing
funds contributed to an Individual
Retirement Account or a Keogh (H.R. 10)
Plan established pursuant to 26 U.S.C.
(IRC 1954) 408, 401 when the individual
for whose benefit the account is
maintained attains age 59 Va or is
disabled (as defined in 26 U.S.C. (IRC
1954) 72(m)(7)) or thereafter; or
(ii) Where a member bank pays that
portion of a time deposit on which
Federal deposit insurance has been lost
as the result of the merger of two or
more Federally insured banks in which
the depositor previously maintained
separate time deposits, for a period of
one year from the date o f the merger.
(9) A time deposit, or the portion
thereof requested, must be paid before
maturity without a forfeiture of interest
as prescribed by this paragraph in the
following circumstances:




(i) Where requested, upon the death of
any owner 115
*of the time deposit funds:
or
(ii) Where requested, when the
o w n e r '1of the time deposit is
determined to be legally incompetent by
a court or other administrative body of
competent jurisdiction.
§ 217.6

[Amended]

3. Section 217.6 of Regulation Q (12
CFR Part 217.6) is amended by removing
paragraph (i) and redesignating
paragraph (j) as paragraph (i).
4. Section 217.7 o f Regulation Q (12
CFR Part 217.7) is amended by revising
paragraphs (c), (f) and (g) to read as
follows:
§ 217.7 Maximum rates of interest payable
by member banks on time and savings
deposits.
*
*
*
*
*

(c) Savings deposits. No member bank
shall pay interest at a rate in excess of
5 Vi per cent on any savings deposit. No
member bank shall pay interest at a rate
in excess of 5 Vi percent on any savings
deposit that is subject to negotiable
orders o f withdrawal, the issuance of
which is authorized by Federal law.
*
*
*
*
*
(f) 26-w eek m o n e y market time
deposits o f less than $100,000. Except as
provided in paragraphs (a), (b) and (d)
of this section, a member bank may pay
interest on any nonnegotiable time
deposit o f $10,000 or more, with a
maturity o f 26 weeks at a rate not to
exceed the rates set forth below:
Bill r a te '

7.50 percent or b e lo w ............................... ..................
Above 7 50 p e rce n t.................................... ...................

Maximum
percent
7.75
( 2)

■Rate established (auction average on a discount basis)
tor U.S Treasury bills with maturities of 26 weeks issued on
or immediately prior to the date of deposit ( “Bill Rate").
* Bill rate plus V4 of 1 percent.

Rounding rates to the next higher rate is
not permitted and interest may not be
compounded during the term of this
deposit. A member bank may offer this
category of time deposit to all
depositors. However, a member bank
may pay interest on any nonnegotiable
time deposit of $10,000 or more with a
maturity of 26 weeks which consists of
funds deposited to the credit of, or in

11For the purposes of this provision, an “owner”
of time deposit funds is any individual who died or
was determined to be incompetent on or after
August 1.1979. and who at the time of his or her
death or determination of incompetence had full
legal and beneficial title to all or a portion of such
funds or. at the time of his or her death or
determination of incompetence, had beneficial title
to all or a portion of such funds and full power of
disposition and alienation with respect thereto.

which the entire beneficial interest is
held by:
(1) The United States, any State o f the
United States, or any county,
municipality or political subdivision
thereof, the District of Columbia, the
Commonwealth of Puerto Rico, the
Virgin Islands, American Samoa, Guam,
or political subdivision thereof; or
(2) An individual pursuant to an
Individual Retirement Account
agreement or Keogh (H.R. 10) Plan
established pursuant to 26 U.S.C. (IRC
1954) 408, 401,
at a rate not to exceed the ceiling rate
payable on the same category o f deposit
by an Federally insured savings and
loan association or mutual savings
bank.3
(g)
Time deposits o f less than $100,000
with maturities o f 2 Vz y ea rs or more.

Except as provided in paragraphs (a),
(b), (d) and (e) of this section, a member
bank may pay interest on any
nonnegotiable time deposit with a
maturity of ZV2 years or more that is
issued on or after Thursday o f every
other week at a rate not to exceed the
higher of one-quarter o f one per cent
below the average ZV2 year yield for
United States Treasury securities as
determined and announced by the
United States Department of the
Treasury immediately prior to such
Thursday, or 9.25 per cent. The average
2 V2 year yield will be rounded by the
United States Department of the
Treasury to the nearest 5 basis points.
Except as provided below , in no event
shall the rate of interest paid exceed
11.75 per cent. A member bank may
offer this category o f time deposit to all
depositors. However, a member bank
may pay interest on any nonnegotiable
time deposit with a maturity of 2 V2 years
or more which consists of funds
deposited to the credit of, or in which
the entire beneficial interest is held by:
(1) The United States, any State of the
United States, or any county,
municipality or political subdivision
thereof, the District o f Columbia, the
Commonwealth o f Puerto Rico, the
Virgin Islands, American Samoa, Guam,
or political subdivision thereof; or
(2) An individual pursuant to an
Individual Retirement Account
agreement of Keogh (H.R. 10) Plan
established pursuant to 26 U.S.C. (I.R.C.
1954) 408, 401,
5The ceiling rate of interest payable for this
category of deposit by Federally insured savings
and loan associations and mutual savings banks is
7.75 per cent when the Bill Rate is 7.25 per cent or
lower, one-half of one per cent above the Bill Rate
when the Bill Rate is above 7.25 per cent but below
8.50 per cent, 9.00 per cent when the Bill Rate is 8.50
per cent or above but below 8.75 per cent, and onequarter of one per cent above thie Bill Rate when the
Bill Rate is 8.75 per cent of above.

at a rate not to exceed the ceiling rate
payable on the same category of deposit
by any Federally insured savings and
loan association or mutual savings
bank.4
*

*

*

*

*

5. Section 217.147 of Regulation Q (12
CFR Part 217.147) is revised to read as
follows:
§ 217.147 Premiums, Finders Fees,
Prepayment of Interest and Payment of
Interest in Merchandise.

For regulatory provisions relating to
premiums, finders fees, prepayment of
interest and payment of interest in
merchandise refer to 12 CFR 1204.109,
1204.110, 1204.111 and 1204.114.
§§217.149,217.154

[Removedl

6. Sections 217.149 and 217.154 of
Regulation Q (12 CFR §§ 217.149 and
217.154 are hereby removed.
B y o r d e r o f the B o a r d o f G o v e r n o r s o f the
F e d e ra l R e s e r v e S y s te m , J an uary 1 5 ,1 9 8 1 .
T h e o d o r e E. A llis o n ,

Secretary o f the Board.
|KR Doc. 81-4028 Filed 2-2-81; 8:45 am|
BILLING CODE 6210-01-M




BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION Q t
A s a m en d ed e ffectiv e J a n u a ry 15, 1981

SEC TIO N 217.7 — M A X IM U M RATES OF
IN TER EST P A Y A B L E BY M E M B E R B A N K S ON
T IM E A N D S A V IN G S DEPOSITS
Pursuant to the provisions o f Section 19 o f the
Federal Reserve A ct and § 217.3 o f this Part, the
Board o f Governors o f the Federal Reserve System
hereby prescribes the fo llo w in g m axim um rates' o f
interest per annum payable by member banks o f the
Federal Reserve System on time and savings de­
posits:
(a) T im e d e p osits o f $ 1 0 0 ,0 0 0 o r m o r e . There
is no m axim um rate o f interest presently prescribed
on any time deposit o f $100,000 or more.
(b) F ix e d c e ilin g tim e d e p o s its o f less than
$ 1 0 0 ,0 0 0 . Except as provided in paragraphs (a),
(d), (e), (f), and (g), no member bank shall pay
interest on any time deposit at a rate in excess o f
the applicable rate under the fo llo w in g schedule:

draw al. the issuance o f w hich is authorized by Fed­
eral law.
(d) G o v e r n m e n t a l u n it tim e d e p o s its o f less
th an $ 1 0 0 ,0 0 0 . Except as provided in paragraphs
(a), (f). and (g), no member bank shall pay interest
on any time deposit w hich consists o f funds depos­
ited to the credit of, or in w hich the entire benefi­
cial interest is held by, the United States, any State
o f the United States, or any county, m unicipality or
p o litic a l subdivision thereof, the D istrict o f Co­
lu m bia , the C om m onw ealth o f Puerto R ico, the
V irg in Islands, Am erican Samoa, Guam, or p o litic ­
al subdivision thereof, at a rate in excess o f 8 per
cent.1
2
(e) In d iv id u a l R etirem en t A c co u n t and K eogh
(H .R .

10) Plan d ep osits o f less than $ 1 0 0 ,0 0 0 .

Except as provided in paragraphs (a) and (g), a
member bank may pay interest on any time deposit
w ith a m aturity o f three years or more that consists

2Vz

6 '/ 2

4 years or more but
less than 6 years

VA

o f funds deposited to the credit o f, or in which the
entire beneficial interest is held by, an individual
pu rsua nt to an In d iv id u a l R e tire m e n t A cco u n t
agreement or Keogh (H .R . 10) Plan established
pursuant to 26 U .S .C . (I.R .C . 1954) §§ 408, 401,
at a rate not in excess o f 8 per cent.2
( f) 2 6 - w e e k m o n e y m a r k e t tim e d e p o s it s o f
less th a n $ 1 0 0 ,0 0 0 . E xcept as p ro vid e d in para­
graphs (a), (b) and (d ), a m em ber bank may pay
in te re s t on any n o n n e g o tia b le tim e d e p o s it o f
$10,000 o r m ore, w ith a m aturity o f 26 weeks at a
rate not to exceed the rates set forth below:

6 years or more but less
than 8 years

IV z

R a te e s ta b lis h e d (a u c tio n

8 years o r more

VA

M a tu rity

14 days o r more but less
than 90 days
90 days or more but less
than 1 year
1

year or more but less
than V h years
years o r more but
less than 4 years

M a x im u m p e r cen t
5 '/ 4

5 3/4

6

a vera ge
b a s is ) f o r

on

a

d is c o u n t

U.S.

T rea su ry

M a x im u m P e r C e n t

b i l ls w ith m a t u r it i e s o f 2 6
w e ek s issu ed on o r im m e ­

(c) S a v in g d e p o s its . No member bank shall pay
interest at a rate in excess o f 5 ‘/4 per cent on any
savings deposit. N o member bank shall pay interest
at a rate in excess o f 5 ‘A per cent on any savings
deposit that is subject to negotiable orders o f w ith ­

d ia te ly p r i o r to th e d a te o f
d e p o s it

( ‘ 'B ill

R a te’ ’ )

7.50 per cent o r below

7.75

Above 7.50 per cent

B il l Rate p lu s on eq u a rte r o f one pe r
cent

1
T he lim itation on rates o f interest payable b y m em ber
banks o f the Federal R eserv e S ystem on tim e and savings
2
T h e c e ilin g rate o n this ca t e g o r y is the highest fix e d
d ep osits, as p rescribed herein, are not a p p lica b le to any
c e i l i n g ra te that m a y b e p a id o n tim e d e p o s i t s u n d e r
d ep osit w h ich is p ayable o n ly at an o ff i c e o f a m em ber
$ 1 0 0 ,0 0 0 b y any F ed era lly insured c o m m e rcia l ban k, m u­
bank loca ted ou tsid e the States o f the U nited States and
tual sav in gs b an k , o r sav in gs and loan a sso cia tio n .
the District o f C olu m b ia .




JANUARY 1981
t D estroy any prev iou s S upplem ents.

R o un din g rates to*the next hig h e r rate is not per­
m itted and interest may not be compounded during
the term o f this deposit. A member bank may o ffe r
th is c a te g o ry o f tim e d e p o s it to a ll d e p o s ito rs .
H ow ever, a m em ber bank may pay interest on any
n o n n e g o tia b le tim e d e p o s it o f $ 1 0 ,0 0 0 o r m ore
w ith a m a tu r ity o f 26 w eeks w h ic h c o n s is ts o f
funds deposited to the credit o f, o r in w hich the en­
tire beneficial interest is held by:
(1) the U nited States, any State o f the U nited
States, or any county, m u n icip a lity or p o litica l sub­
d iv is io n th e re o f, the D is tr ic t o f C o lu m b ia , the
C om m onw ealth o f Puerto R ico, the V irg in Islands,
A m e ric a n Sam oa, G ua m , o r p o litic a l su b d iv is io n
thereof; or
(2) an in d ivid u a l pursuant to an In d ivid u a l Re­
tirem e nt A cco u n t agreement o r Keogh (H . R. 10)
Plan established pursuant to 26 U .S .C . (IR C 1954)
§§ 408. 401,

(1) the U nited States, any State o f the United
States, o r any county, m u n icip a lity o r p o litica l sub­
d iv is io n th e re o f, the D is tr ic t o f C o lu m b ia , the
C om m onw ealth o f Puerto R ico, the V irg in Islands,
A m e rica n Sam oa, G uam , o r p o litic a l su b d ivisio n
thereof; o r
(2) an in d ivid u a l pursuant to an Ind ivid ual Re­
tire m e n t A cco u n t agreement o r Keogh (H . R. 10)
P lan e s ta b lis h e d p u rsu a n t to 26 U .S .C . ( I.R .C .
1954) §§ 408, 401,
at a rate not to exceed the ceilin g rate payable on the
same category o f deposit by any Federally insured
savings and loan association or m utual savings bank.4
(h)

O b lig a t io n s o f th e p a r e n t b a n k

h o ld in g

c o m p a n y o f a m e m b e r b a n k . Notw ithstanding the

above, interest may be paid on a deposit as defined
in § 2 1 7 .1(h) o f this Part at a rate not to exceed the
fo llo w in g schedule:

at a rate not to exceed the c e ilin g rate payable on the
O rig in a l
same category o f deposit by any Federally insured
M a tu rity o r
savings and loan association o r m utual savings bank.3
R e d em p tio n
(g)
T im e d e p o s it s o f less th a n $ 1 0 0 ,0 0 0 w ith P e r io d
m a tu r itie s o f 2Vz y e a r s o r m o r e . E xcept as p ro­
vided in paragraphs (a), (b), (d) and (e), a member
2Vz to
bank m ay pay in te rest on any nonnegotiable tim e
4 years
deposit w ith a m aturity o f 2Vz years o r more that is
issued on o r after Thursday o f every other week at
a rate not to exceed the h ig h e r o f on e -q u a rte r o f
one per cent b e lo w the average 2Vz year y ie ld fo r
U nited States Treasury securities as determined and
announced by the U n ited States Departm ent o f the
T reasu ry im m e d ia te ly p rio r to such T h u rsd a y, o r
9.25 per cent. The average 2Vz year y ie ld w ill be
ro u n d e d by the U n ite d States D e p a rtm e n t o f the
T reasu ry to the nearest 5 basis p o in ts. E xcept as
provided be lo w , in no event shall the rate o f inter­
est p a id exceed 11.75 pe r cent. A m em ber bank
m ay o ffe r th is cate gory o f tim e deposit to a ll de­
positors. H o w eve r, a m em ber bank may pay inter­
est on any nonnegotiable tim e deposit w ith a matu­
r ity o f 2V z years o r m ore w h ic h consists o f funds
de po sited to the c re d it o f, o r in w h ic h the en tire
beneficial interest is held by:

M a x im u m P e r C en t

For an obligation that is not redeem­
able p rior to m aturity, interest may be
paid at the rate established for 2Vz
year variable c e ilin g tim e deposits
p u rs u a n t to the p ro v is io n s o f §
217.7(g) in effect at the time the o b li­
gation is issued. For an obligation
that is redeemable prio r to m aturity,
the m axim um rate o f interest that may
be paid from the date o f issuance until
the first date on w hich the obligation
may be redeemed shall not exceed the
rate established fo r 2 V i year variable
ceiling tim e deposits pursuant to the
provisions o f § 217.7(g) in effect at
the time the obligation is issued. For a
successive period thereafter, interest
may be paid during such period until
the next date on w hich the obligation
may be redeemed at a rate not to ex­
ceed the rate that w ould be in effect
on the first day o f such period fo r 2Vz
year variable c e ilin g tim e deposits
established pursuant to the provisions
o f § 217.7(g) in effect at the time the
obligation was issued.

3
The ceilin g rate o f interest payable for this category o f d e ­
posit by Federally insured savings and loan associations and
mutual savings banks is 7 .7 5 per cent when the Bill Rate is
7 .2 5 per cent o r low er, on e-h alf o f one per cent above the Bill
Rate when the Bill Rate is abov e 7 .25 per cent but below 8.50
4
T he ceiling rate o f interest payable for this category o f d e ­
per cen t. 9 .0 0 per cent when the Bill Rate is 8 .5 0 per cent or
posit by Federally insured savings and loan associations and
a b ov e but b e lo w 8 .7 5 per cen t, and one-quarter o f one per
mutual savings banks is one-quarter o f one per cent a oove the
cent abov e the Bill Rate when the Bill Rate is 8.75 per cent or
rate that m ay be paid by m em ber banks.
a bove.




26 weeks or
more but
less than
2'/: years
($10,000
m inim um
denomina­
tion
required)

O rigin a l
M aturin ' o r
R ed em p tion
P e rio d

14 days or
more but
less than
2 1/: years
(No m in i­
mum de­
nomination
required)
less than
14 days




For an obligation that is not redeemable prio r to m aturity, interest may be
paid at the rate established for 26week money market time deposits
p u rsu a n t to the p ro v is io n s o f §
217.7(f) in effect at the time the o b li­
gation is issued. For an obligation
that is redeemable pnor to m aturity,
the m axim um rate o f interest that may
be paid from the date o f issuance until
the First date on which the obligation
may be redeemed shall not exceed the
rate established fo r 26-week money
market time deposits pursuant to the
provisions o f § 217.7(f) in effect at
the time the obligation is issued. For a
successive period thereafter interest
may be paid during such period until
the next date on which the obligation
may be redeemed at a rate not to ex­
ceed the rate that would be in effect
on the first day o f such period for

M a x im u m P e r C en t

26-week money market time deposits
established pursuant to the provisions
o f § 217.7(0 in effect at the time the
obligation was issued.

Interest may be paid at the ceilings
established pursuant to the provisions
o f § 217.7(b) in effect at the time the
obligation is issued.

No interest may be paid.




BOARD OF GOVERNORS
of the

FEDERAL RESERVE SYSTEM

INTEREST ON DEPOSITS

REGULATION Q
(12 CFR 217)
A s a m e n d e d e ffe ctiv e J a n u a ry 15, 1981

A n y in q u iry rela tin g to this regu lation sh ou ld be ad dressed to the F ederal
R eserv e B a n k o f the F ed era l R eserv e D istrict in w h ich the in q u iry arises.

JANUARY 1981

CONTENTS1

Page

Page

S ec . 217.0 — S cope of Pa r t ..........................
S ec . 217.1 — D efinitions ................................
(a) Demand d e p o sits..........................
(b) Time deposits................................
(c) Time certificates of deposit.........
(d) Time deposits, open account---(e) Savings deposits............................
(0 Deposits as including certain
promissory notes........................
(g) Multiple maturity time deposit ..
(h) Obligations issued by the parent
bank holding company of a
member b a n k ............................
(i) Credit balances..............................
(j) Foreign bank..................................

3
3
3
3
3
3
4

S ec . 217.2 — Demand Deposits .....................
(a) Interest prohibited..........................
(b) Meaning of in terest.....................

6
6
6

4
5

5
5
5

S ec . 217.3 — Interest on T ime and
S avings De p o sit s .........................................
(a) Maximum r a t e ..............................
(b) Modification of contracts to contorm to regulation.....................
(c) Member banks limited to maximum rate for State banks . . . .
(d) Grace periods in computing interest on savings deposits.........
(e) Computation of interest...............
(0 No interest after maturity or expiration of n o tice .....................
(g) Time deposits of foreign governmental entities and international organizations.................

6
6
6
6
6
6
7

S ec. 217.4 — Payment of T ime D eposits
Before M a t u r it y ...................................

[S ec. 217.7— S upplement, M aximum Rates
S avings D eposits, is printed separately.)




7

of

(a) Time deposits payable on a
specified d a te ............................
(b) Time deposits payable after a
specified p e rio d .......................
(c) Time deposits payable after a
specified notice..........................
(d) Penalty for early withdrawals . . .
(e) Disclosure of early withdrawal
penaltv.........................................
(f) Loans upon security of time deposits...........................................
S ec . 217.5— Withdrawal of S avings
Deposits ..........................................................
(a) Requirements regarding notice of
w ithdrawal................................
(b) Loans on security of savings deposits...........................................
(c) Manner of payment of savings
deposits.......................................
S ec . 217.6— A dvertising of Interest on
D eposits...........................................................

(a) Annual rate of simple interest. . .
(b) Percentage yields based on one
y ear.............................................
(c) Percentage yields based on periods in excess of one year . . . .
(d) Time or amount requirements . . .
(e) Penalty for early withdrawals . . .
(f) Profit...............................................
(g) Accuracy of advertising...............
(h) Solicitation of deposits for
banks .......................................
(i) Money market time deposits . . . .
Statutory A ppendix

7
7
7
7
9
9
9
9
9
9

10
10
10
10
10
10
11
11
11
11

11

Interest Payable by M ember B anks on T ime and

REGULATION Q

(12 CFR 217)
As amended effective January 15, 1981

INTEREST ON DEPOSITS*
SECTION 217.0— SCOPE OF PART
(a) T his Part is issued under authority o f p ro v i­
sio ns o f s e c tio n 19 o f the F e d e ra l Reserve A c t
w h ich, together w ith related provisions o f law , are
cited in the Appendix.
(b) T his Part relates to the paym ent o f deposits
and interest thereon by m em ber banks o f the Fed­
era l Reserve System and not to the c o m p u ta tio n
and m ainten ance o f the reserves w h ic h m em ber
banks are re q u ire d to m a in ta in against deposits.
The rules concerning reserves o f member banks are
contained in Part 204 o f this chapter.
(c) U n d e r a u th o rity o f the p ro v is io n s o f sec­
tio n 7 o f the In te rn a tio n a l B a n k in g A c t o f 1978
(12 U .S .C . § 3105), the provisions o f this Part ap­
ply to a Federal branch o r agency o f a foreign bank
and to a State uninsured branch o r agency o f a fo r­
eign bank in the same manner and to the same ex­
te n t as i f the b ra n ch o r ag en cy w e re a m em ber
bank, except as may be otherwise provided by the
Board, i f (i) its parent foreign bank has total w o rld ­
w ide consolidated bank assets in excess o f SI b il­
lio n ; ( ii) its parent fo re ig n bank is con tro lled by a
fo re ig n com pany w h ic h owns o r con tro ls fo re ig n
banks that in the aggregate have to ta l w o rld w id e
consolidated bank assets in excess o f SI b illio n ; or
( iii) its parent foreign bank is controlled by a group
o f fo re ig n com panies that o w n o r c o n tro l fo re ig n
banks tha t in the aggregate have to ta l w o rld w id e
consolidated bank assets in excess o f SI b illio n .
(d) The p ro visio n s o f this Part do not ap ply to
any deposit that is payable on ly at an o ffice located
outside o f the States o f the U n ite d States and the
D istrict o f C olum bia o f a member bank o r o f a fo r­
eign bunk.

SECTION 217.1— DEFINITIONS
(a) Demand deposits. The term “ any deposit
w h ich is payable on demand” , hereinafter referred




3

to as a “ demand deposit” , includes every deposit
w h ic h is not a “ tim e d e p o s it” o r “ savings de­
po sit” , as defined in this section.
(b) Time deposits. The term “ tim e de po sits”
means “ tim e certificates o f deposit” and “ tim e de­
posits, open account” , as defined in this section.
(c ) Time certificates of deposit. T he term
“ tim e certifica te o f deposit” means a deposit e vi­
denced by a n e go tiab le o r non-n ego tiab le in s tru ­
ment w hich provides on its face that the amount o f
such deposit is payable to bearer o r to any specified
person o r to his o rd e r
(1) On a certain date, specified in the instru­
m ent, not less than 14 days a fte r date o f the de­
posit, or
(2 ) A t the e x p ira tio n o f a c e rta in sp e c ifie d
tim e not less than 14 days after the date o f the in­
strument, or
(3) U pon notice in w ritin g w h ich is actu ally
required to be given not less than 14 days before
the date o f repaym ent,1 and
(4 ) In a ll cases o n ly upon pre sen ta tion and
surrender o f the instrument.
(d ) Time deposits, open account. The term
“ tim e d e p o sit, open a cc o u n t” means a de po sit,
other than a “ tim e certificate o f deposit” , w ith re­
spect to w h ich there is in force a w ritte n contract
w ith the de po sitor that ne ithe r the w hole no r any
part o f such deposit may be w ith d ra w n , by check
o r otherw ise, p rio r to the date o f m a tu rity, w hich
shall be not less than 14 days after the date o f the
deposit,*1
2 or p rio r to the expiration o f the period o f

* The text corresponds to the C ode o f Federal R e fla t io n s .
Title 12, Chapter II. Pan 217; cited as 12 CFR 217. The words
“ this Pan” , as used herein, mean Regulation Q.

1A deposit with respect to which the bank merely reserves the
right to require notice of not less than 14 days, before any with­
drawal is made is not a “ tune certificate of deposit” within the
meaning of the above definition.
2 Deposits, such as Chnstmas club accounts and vacation club
accounts, which are made under wntten contracts providing that

§ 21 7 .1

R E G U L A T IO N Q

n o tic e w h ic h m ust be g iv e n by the d e p o s ito r in
w ritin g not less than 30 days in advance o f w ith ­
dra w a l.*3
(e> S a v in g d e p o s its . T he term “ savings d e ­
posits” means a deposit—
(1 ) T h a t co n sists o f funds de po sited to the
credit o f o r in w hich the entire beneficial interest is
held by one o r m ore in d iv id u a ls , o r o f a corpora­
tion, association, o r other organization operated p ri­
m a rily fo r religious, philanthropic, charitable, edu­
c a tio n a l, fra te rn a l, o r oth e r s im ila r purposes and
not operated fo r p r o fit;4 o r that consists o f funds
de po sited to the c re d it o f o r in w h ic h the entire
beneficial interest is held by the United States, any
State o f the U n ited States, o r any county, m u n ici­
p a lity, o r p o litic a l subdivision thereof, the D istrict
o f C o lu m b ia , the C om m onw ealth o f Puerto R ico,
the V irg in Islands. .American Samoa, Guam, or po­
litic a l subdivision thereof; o r that consists o f funds
deposited to the cred it o f, o r in w hich any benefi­
cial interest is held by a corporation, association, or
other organization not q u a lify in g above to the ex­
tent such funds do not exceed 5150,000 per such
depositor at a member bank; and
(2) W ith respect to w hich the depositor is not
re q u ire d b y the d e p o sit c o n tra c t but m ay at any
tim e be required by the bank to give notice in w rit­
ing o f an intended w ithdraw al not less than 14 days
before such w ith d ra w a l is made5 and w hich is not
payable on a specified date or at the expiration o f a
specified tim e after the date o f deposit.
(3) In those States where banks are permitted
to o ffe r d e po sits su b je ct to n e g o tia b le orders o f
w ith d ra w a l, such deposits m ay be m a intained i f
such d e p o sits c o n s is t o f fu n d s d e p o site d to the
credit o f o r in w hich the entire beneficial interest is
held by one o r more in d ivid u a ls, o r a corporation,
association, o r other organization operated prim ar­

no withdrawal shall be made until a certain number o f periodic
deposits have been made during a p eriod o f not less than 3
months constitute “ time deposits, open account” , even though
some o f the deposits are made within 14 days from the end o f
the period.
3 A deposit with respect to which the bank merely reserves the
right to require notice o f not less than 14 days before any with­
drawal is made is not a “ time deposit, open account” , within the
meaning o f the above definition.
4 Deposits in joint accounts o f two or mote individuals may be
classified as savings deposits if they meet the other requirements
o f the above definition. Deposits o f a partnership operated for
profit may also be classified as savings to the extent such de­
posits do not exceed S I50,000 per partnership at a member bank.
5 The exercise by the bank o f its rights to require such notice
shall not cause the deposit to cease to be a savings deposit.




4

ily fo r re lig io u s , ph ila n th ro p ic, charitable, educa­
tio n a l, fraternal, o r other s im ila r purposes and not
operated fo r p ro fit. Deposits in w hich any benefi­
cia l interest is held by a corp ora tion, partnership,
association o r other organization operated fo r pro fit
o r no t op era te d p r im a r ily f o r re lig io u s , p h ila n ­
th ro p ic, charitable, educational, fraternal, o r other
s im ila r purposes may not be classified as deposits
subject to negotiable orders o f withdrawal.

(f)
Deposits as including certain promissory
notes and other obligations. For the purposes o f
this Part, the term “ de po sits” also includes any
m em ber b a n k’ s lia b ility on any prom issory note,
a ckn o w le d g m e n t o f advance, due b ill, o r s im ila r
ob lig a tio n (w ritte n o r oral) that is issued or under­
taken by a member bank prin cip a lly as a means o f
obtaining funds to be used in its banking business,
except any such obligation that:
(1) Is issued to (or undertaken w ith respect to)
and held fo r the account o f (i) a bank o r an institu­
tio n the tim e deposits o f w h ich are exem pt from
§ 21 7.7 pursuant to §2 17 .3 (g ), o r ( ii) the U nited
States o r an agency thereof, o r the Government De­
velopm ent Bank fo r Puerto Rico:
(2) Evidences an indebtedness arising from a
transfer o f direct obligations o f. o r obligations that
are fu lly guaranteed as to principal and interest by,
the U n ite d States o r any agency th e re o f that the
bank is obligated to repurchase, and
(a) is issued in denom inations o f 5100,000
o r more; or
(b) is issued in denom inations o f less than
5100,000, matures in less than 90 days and is not
autom atically renewable o r extended:5*
(3) (i) Bears on its face, in bold-face type the
fo llo w in g :

“ This obligation is not a deposit and is not in­
sured by the Federal Deposit Insurance Cor­
poration’*;
is subordinated to the claims o f depositors, is unse­
cured, and is in e lig ib le as collate ral fo r a loan by
the issuing bank and also expressly states said pro­
visions on its face; has an o rig in a l m a tu rity o f at
least seven years, or. in the case o f an obligation or
issue that provides fo r any type o f scheduled repay5* A member bank with such ob<ig?cions issued in denomina­
tions o f less than S 100.000 with maturities o f 90 days or more
may continue to issue such obligations until August 1. 1982.
without regard to this subparagraph. H ow ever, the aggregate
amount o f such obligations outstanding on a member bank's
books may not exceed the total o f such obligations outstanding
on its books on August I. 1979.

§ 217.1

R E G U L A T IO N Q

ments o f p rin cip a l, has an average m a tu rity6 o f at
least seven years7 and provides that once any such
repayment o f principal begins, all scheduled repay­
m ents s h a ll be m ade at least a n n u a lly and the
am ount repaid in each year is no less than in the
p rio r year; is issued subject to a requirem ent that
no repayment (other than a regularly scheduled re­
paym ent already approved by the appropriate Fed­
eral bank regulatory agency), including but not lim ­
ite d to a p a ym e n t p u rsu a n t to a c c e le ra tio n o f
m a tu rity , m ay be made w ith o u t the p rio r w ritte n
approval o f the appropriate Federal bank regulatory
agency;8 is in an amount o f at least $500, E x c e p t,
T h a t the a p p ro p ria te F ede ral bank re g u la to ry
agency m ay approve the issuance o f an ob lig atio n
that is less than $500 i f such lesser amount is nec­
essary (a) to satisfy the preemptive rights o f share­
holders in the case o f a convertible debt obligation,
(b) to m aintain a ratable unit offerin g to holders o f
preem ptive rig h ts in the case o f an o b lig a tio n is­
sued exclusive ly as part o f a u n it in clud in g shares
o f sto ck w h ic h are s u b je c t to such p re e m p tiv e
rights, o r (c) to satisfy shareholders’ ratable claims
in the case o f an obligation issued w h o lly o r parti­
a lly in exchange fo r shares o f voting stock or assets
pursuant to a plan o f m erger, con solida tion , reor­
g a n iz a tio n , o r o th e r transa ction where the issuer
w ill acquire either a m ajority o f such shares o f vot­
ing stock or all o r substantially all o f the assets o f
the entity whose assets are being acquired; and has
been approved by the appropriate Federal bank reg­
ula to ry agency as an a d dition to the capital struc­
ture o f the issuing bank; o r (i) meets all o f the re­
q u ire m e n ts in the p re c e d in g clause exce pt the
m aturity requirement or the requirement that sched­
uled repayments shall be in amounts at least equal
to those made in a previous year; and w ith respect
to w h ich the appropriate Federal bank reg ulatory
agency has determ ined that exigent circumstances
require the issuance o f such obligations w ithout re­
gard to the p ro visio n s o f this Part; o r ( ii) was is­
sued or p u b licly offered before June 30. 1970, w ith
an origin al m aturity o f more than tw o years; or
(4 ) A ris e s fro m a b o rro w in g by a m em b er
"T h e “ average maturity" o f an obligation or issue repayable
in scheduled periodic payments shall be the weighted average o f
the maturities o f all such scheduled repayments.
7 In a serial issue the member bank may offer no note with
maturity o f less than five years.
8 For the purposes o f this Part, the "appropriate Federal bank
regulatory a gen cy” is the Com ptroller o f the Currency in the
case o f a national bank and the Board o f Governors in the case
o f a State member bank




5

bank fro m a dealer in securities, fo r one business
day, o f proceeds o f a transfer o f deposit credit in a
Federal Reserve Bank (or other im m ediately availa­
b le fu n d s ), c o m m o n ly re fe rre d to as “ Federal
funds” , received by such dealer on the date o f the
lo a n in c o n n e c tio n w ith cle ara nce o f se c u ritie s
transactions.
T h is paragraph shall n o t. how ever, affe ct (i) any
instrum ent issued before June 27, 1966, or (ii) any
in stru m en t that evidences an indebtedness arising
fro m a transfer o f assets under a repurchase agree­
ment issued before July 25, 1969.
(g) M u lt ip le m a tu rity tim e d e p o s it. The term
“ m u ltip le m a tu rity tim e deposit” means any tim e
deposit (1) that is payable at the depositor's option
on more than one date, whether on a specified date
o r at the e x p ira tio n o f a sp e cifie d tim e afte r the
date o f deposit (e .g ., a deposit payable at the op­
tio n o f the d e p o s ito r e ith e r three m onths o r six
m onths afte r the date o f deposit), (2) that is pay­
able after w ritten notice o f w ithdraw al, or (3) w ith
respect to w h ich the underlying instrument o r con­
tract o r any in fo rm a l understanding o r agreement
provides fo r automatic renewal at m aturity.
(h ) O b l i g a t i o n s is s u e d b y th e p a r e n t b a n k
h o ld in g c o m p a n y o f a m e m b e r b a n k . For the pur­
poses o f th is P art, the “ d e p o sits” o f a m em ber
bank also includes an o b lig a tio n that is (1) issued
in a d e n o m in a tio n o f less than $100,000; (2) re ­
quired to be registered w ith the Securities and Ex­
change C o m m is s io n u n de r the S ecu ritie s A c t o f
1933; (3) issued o r guaranteed in whole or in part
as to p rin c ip a l o r in te rest by the m em ber b a n k’ s
parent w hich is a bank holding company under the
Bank H o ld in g Com pany A c t o f 1956, as amended
(12 U .S .C . §§ 1841-1850), regardless o f the use o f
the proceeds; and (4) issued w ith an original matu­
r ity o f 4 years o r less, o r w h ich is redeemable at
in te rv a ls o f 4 years o r less at the o p tio n o f the
holder. The term “ deposits” does not include those
o b lig a tio n s o f a ba nk h o ld in g com pany tha t are
subject to interest rate lim itations imposed pursuant
to P .L. 89-597.
(i) C r e d it b a la n c e s . F or purposes o f this Part,
the term “ de po sits” also includes the cred it bal­
ances o f a United States branch or agency o f a fo r­
eign bank.
(j) F o r e ig n b a n k . “ F oreign bank” means any
bank organized under the laws o f any country other
than the United States (in clud in g its States and the
D istrict o f C olum bia), or organized under the iaws

§ 2 1 7 .2

R E G U L A T IO N Q

o f Puerto R ico. G uam . A m erican Samoa, the V ir ­
gin Islands, or a territory o f the United States.
S E C T IO N 2 1 7 .2 — D E M A N D D EPO SITS
(a) In te re st p r o h ib it e d . Except as provided by
section 19 o f the Federal Reserve A c t, no member
bank o f the Federal Reserve System shall, directly
o r in d ire c tly , by any device whatsoever, pay any
interest on any demand deposit.
(b) M e a n in g o f in te r e s t. W ith in this Pan, any
paym ent to o r fo r the account o f any depositor as
compensation fo r the use o f funds constituting a de­
posit shall be considered interest.
S E C T IO N 2 1 7 .3 — IN T E R E S T O N T LM E A N D
S A V IN G S D E P O S ITS
(a) M a x im u m r a te . Except as provided in this
se ctio n , no m em ber bank sh a ll, d ire c tly o r in d i­
re c tly , by any device whatsoever, pay interest on
any tim e o r savings deposit at a rate in excess o f
such a p p lic a b le m a x im u m rate as the B o a rd o f
Governors o f the Federal Reserve System shall pre­
scribe fro m tim e to tim e in § 217.7. In ascertaining
the rate o f interest paid, the effects o f compounding
o f interest may be disregarded. The m axim um rate
o f interest that may be paid by a member bank on
an a d d itio n a l deposit to any e xistin g tim e deposit
sha ll no t exceed the m a x im u m rate that may be
paid in accordance w ith § 21 7 .7 on the date the
additional deposit is made.
(b ) M o d i f i c a t i o n o f c o n t r a c t s to c o n f o r m to
r e g u la t io n . N o c e rtifica te o f deposit or other con­
tra c t s h a ll be re n e w e d o r e xte n d e d unless it be
m o d ifie d to con form to the provisions o f this Part,
and every m em ber bank shall take such action as
may be necessary, as soon as possible consistently
w ith its con tra ctual o b lig a tio n s, to bring all o f its
outstanding certificates o f deposit o r other contracts
into co n fo rm ity w ith the provisions o f this Part.
(c ) M e m b e r b a n k lim it e d to m a x im u m r a te
f o r S t a t e b a n k s . T he rate o f in te re s t p a id by a
m em ber bank upon a tim e deposit o r savings de­
posit shall not in any case exceed (1) the applicable
m axim um rate prescribed pursuant to the provisions
o f paragraph (a) o f this section, o r (2) the applica­
ble m a x im u m rate a u th o riz e d by la w to be paid
upon such deposits by State banks o r tru st com ­
panies o rg a n iz e d u n d e r the law s o f the State in
w h ic h such m em b er bank is lo ca te d , w h ich e ve r
may be less.




6

(d ) G r a c e p e r io d s in c o m p u t in g in te r e s t on
sa vin gs d ep osits. A member bank may pay interest
on a savings deposit received d u rin g the firs t 10
calendar days o f any calendar month at the applica­
ble m axim um rate prescribed pursuant to paragraph
(a) o f this section calculated from the firs t day o f
such ca le n d a r m o n th u n til such de po sit is w ith ­
drawn o r ceases to constitute a savings deposit un­
der the provisions o f this Pan, whichever shall first
occur; and a m em ber bank may pay interest on a
savings deposit withdraw n during its last 3 business
days o f any calendar month ending a regular quar­
terly or semiannual interest period at the applicable
m axim um rate prescribed pursuant to paragraph (a)
o f this section calculated to the end o f such calen­
dar month.
(e) C o m p u ta tio n o f in terest. In the computation
o f sim ple d a ily interest, the tim e factor should be
expressed as a fraction in which the actual number
o f days the funds earn interest is the num erator,
and the d e n o m in a to r is e ith e r 360. 365, o r, in a
leap year, 366. H ow ever, when a deposit matures
in one m onth (o r m ultiples thereof), the bank may
use 30 days in the n u m e ra to r (o r co rre sp o n d in g
m ultiples thereof).
(f) N o in terest a fte r m a tu rity o r ex p ira tion o f
n o tic e . A fte r the date o f m aturity o f any tim e de­
posit, such deposit is a demand deposit, and no in­
terest may be paid on such deposit fo r any period
subsequent to such date. A fte r the expiration o f the
perio d o f notice g iven w ith respect to the repay­
ment o f any tim e deposit o r savings deposit, such
deposit is a demand deposit and no interest may be
paid on such deposit fo r any period subsequent to
the e x p ira tio n o f such n o tice , except that, i f the
ow ner o f such deposit advises the bank in w ritin g
that the deposit w ill not be w ith dra w n pursuant to
such notice o r that the deposit w ill thereafter again
be subject to the contract o r requirements applica­
ble to such deposit, the deposit w ill again constitute
a tim e deposit o r savings deposit, as the case may
be, a fte r the date upon w h ic h such advice is re­
ceived by the bank. On each certificate, passbook,
o r other document representing a tim e deposit, the
bank shall have printed o r stamped a conspicuous
statement indicating that no interest w ill be paid on
the deposit after the m aturity date or. in the case o f
a tim e deposit tha t is a u to m a tic a lly renew able, a
conspicuous statement in d ica tin g that the contract
w ill be renewed au tom atica lly upon m aturity, and
indicating the terms o f such renewal.
P ro v id e d , h o w e v e r, tha t a m em ber bank may

§ 2 1 7 .4

R E G U L A T IO N Q

provide in any tim e deposit contract that i f the de­
p o s it. o r any p o rtio n th e re o f, is w ith d ra w n not
more than seven days after a m aturity date, interest
w ill be paid thereon at the orig in a lly specified con­
tract rate. A member bank may specify in the time
de po sit c o n tra ct tha t in te rest w i ll be paid at any
o th e r lo w e r rate. H o w e v e r, in no event m ay the
rate specified be less than the current rate paid on
savings deposits by the member bank.
(g)
T im e d ep os its o f fo r e ig n g o v e rn m e n ta l en ­
titie s a n d in t e r n a t io n a l o r g a n iz a t i o n s . Section
2 1 7 .7 does not a p p ly to the rate o f in te rest that
may be paid by a m em ber bank on a tim e deposit
having a m aturity o f 2 years or less and represent­
ing funds deposited and owned by (1) a foreign na­
tion al governm ent, o r an agency o r instrum entality
thereof9 engaged p rin c ip a lly in activities w hich are
o rd in a rily perform ed in the U nited States by gov­
ern m e n ta l e n titie s , (2) an in te rn a tio n a l e n tity o f
w h ic h the U n ite d States is a m em ber, o r (3) any
other foreign , international, o r supranational entity
s p e c ific a lly d e sig nate d by the B oa rd as exem pt
from § 217.7. A ll certificates o f deposit issued by
m em ber banks to such en tities on w h ich the con­
tra c t rate o f in te re s t exceeds the m a xim u m p re­
scribed under §217.7 shall provide that (1) in the
event o f transfer, the date o f transfer, attested to in
w ritin g by the transferor, shall appear on the c e rtif­
ic a te , and (2 ) the m a x im u m rate lim ita tio n s o f
§217.7 in effect at the date o f issuance o f the cer­
tifica te shall apply to the certificate fo r any period
d u rin g w h ich it is held by a person other than an
e n tity exem pt the re from under the fo reg oing sen­
tence. 10 U pon the presentment o f such a certificate
fo r payment, the bank may pay the holder the con­
tract rate o f interest on the deposit fo r the time that
the ce rtific a te was actu ally owned by an e n tity so
exempt.
S E C T IO N 217.4— P A Y M E N T O F T IM E
D E P O S IT S B E F O R E M A T U R IT Y
(a) T im e d e p o s its p a y a b le o n a sp e cifie d da te.
No member bank shall pay any time deposit, which
9 Other than States, provinces, municipalities or other regional
or local governm ental units, or agencies or instrumentalities
thereof.
10 A new certificate not maturing prior to the maturity date o f
the original certificate may be issued by the member bank to the
transferee, in which event the original must be retained by the
bank. The new certificate may not provide for interest after the
date o f transfer at a rate in excess o f the applicable maximum
rate authorized by § 217.7 as o f the date o f issuance o f the origi­
nal certificate.




7

is payable on a specified date, before such speci­
fie d date, except as p ro vid ed in paragraph (d) o f
this section.
(b) T im e d e p o s it s p a y a b le a ft e r a s p e c if ie d
p e r i o d . N o m em ber bank shall pay any tim e de­
po sit, w h ic h is payable at the e xp ira tio n o f a cer­
tain specified period, before such specified period
has expired, except as provided in paragraph (d) o f
this section.
(c) T im e d ep osits p a y a b le a fter a sp ecified no­
tice . N o member bank shall pay any tim e deposit,
w ith respect to w hich notice is required to be given
a certain specified period before any w ithdraw al is
m ade, u n til such req uire d notice has been given
and the specified period thereafter has expired, ex­
cept as provided in paragraph (d) o f this section.
(d) P en alty fo r early w ith d ra w a ls.
(1)
(i) For tim e deposit contracts entered into
before July 1, 1979, that have not been renewed or
extended on o r a fter Ju ly 1, 1979, the fo llo w in g
m in im um early w ithdraw al penalty shall apply:
W here a tim e deposit, o r any portion thereof, is
paid before m a tu rity, a member bank may pay in ­
terest on the amount w ithdraw n at a rate not to ex­
ceed that prescribed in § 217.7 fo r a savings de­
p o sit and, in a d d itio n , the d e po sitor shall fo rfe it
three m onths o f interest payable at such rate. I f,
how ever, the am ount w ith d ra w n has rem ained on
deposit fo r three months o r less, ail interest shall be
forfeited.
( ii)
For tim e deposit contracts entered into,
renewed, o r extended on or after July 1, 1979, but
p rio r to June 2,- 1980, that have not been renewed
o r extended on or after June 2. 1980, the fo llo w in g
m in im um early w ithdraw al penalty shall apply:
(A ) W here a tim e deposit w ith an o rig i­
nal m a tu rity o r required notice period o f one year
o r less, o r any portion thereof, is paid before matu­
rity o r before the expiration o f the required notice
p e rio d , a d e p o s ito r s h a ll f o r f e it at least three
months o f interest on the amount w ithdraw n at the
rate being paid on the deposit. I f the amount w ith ­
draw n has remained on deposit fo r less than three
months, all interest on the amount w ithdraw n shall
be forfeited.
(B) Where a time deposit w ith an original
m aturity or required notice period o f more than one
year, o r any portion thereof, is paid before m aturity
o r before the expiration o f the required notice per­
iod, a depositor shall fo rfe it at least six months o f
interest on the amount w ithdraw n at the rate being
paid on the deposit. I f the amount has remained on

§ 2 1 7 .4

R E G U L A T IO N Q

deposit fo r less than six months, ail interest on the
am ount w ith d ra w n shall be fo rfe ite d . (The p ro v i­
sions o f this subparagraph (ii) may be applied, w ith
the consent o f the depositor, to time deposits speci­
fied in subparagraph (i) above.)
( iii)
For tim e deposit contracts entered
renewed, o r extended on o r after June 2, 1980, the
fo llo w in g m in im u m early w ith dra w al penalty shall
apply:
(A ) W here a tim e deposit w ith an o rig i­
nal m a tu rity o r required notice period o f less than
three months, or any portion thereof, is paid before
m aturity, a depositor shall fo rfe it an amount at least
equal to the amount o f interest that could have been
earned on the am ount w ith d ra w n at the n o m in a l
(sim ple interest) rate being paid on the deposit had
the funds remained on deposit un til m aturity.
(B ) Where a tim e deposit w ith an original
m aturity o r required notice period o f three months
o r more to one year, o r any portion thereof, is paid
before m aturity, a depositor shall fo rfe it an amount
at least equal to three months o f interest earned, or
that could have been earned, on the amount w ith ­
draw n at the n o m in a l (sim p le interest) rate being
paid on the deposit, regardless o f the length o f time
the funds w ith dra w n have remained on deposit,
(C) W here a tim e deposit w ith an original
m aturity o r required notice period o f more than one
year, o r any p o rtio n the re of, is paid before m atu­
r it y , a d e p o s ito r sh a ll fo r fe it an am ount at least
equal to six months o f interest earned, or that could
have been earned, on the amount w ithdraw n at the
nom inal (sim ple interest) rate being paid on the de­
p o s it, regardless o f the le n g th o f tim e the funds
withdraw n have remained on deposit.
(2) N o tw ith s ta n d in g the p ro visio n s o f para­
graph (d )(1 ), where a tim e deposit, o r any portion
thereof, maintained in an Ind ivid ual Retirement A c­
count
e s ta b lis h e d
in
accordance
w ith
26 U .S .C . § 408 is p a id b e fore m a tu rity w ith in
seven days after the establishment o f the Individual
R etirem ent A cco u n t pursuant to the pro visio ns o f
26 CFR § 1.4081 l)(d )(4 ), o r where a time deposit,
o r any p o rtio n th e re o f, m a in ta in e d in a K eo gh
(H .R . 10) Plan account established in accordance
w ith 26 U .S .C . § 401 is p a id b e fo re m a tu rity
w ith in seven days a fte r the esta blishm en t o f the
Keogh (H .R . 10) Plan, a depositor shall fo rfe it an
amount at least equal to the interest earned on the
amount w ith dra w n at the nom inal (sim ple interest)
rate being paid on the deposit.
(3) A member bank, w ith the depositor’ s con­




8

sent. may com pute the m in im um penalty required
to be im posed on w ithdraw als from tim e deposits
opened p rio r to June 2, 1980, on the basis o f the
nominal (sim ple interest) rate.
(4) W here necessary to co m p ly w ith the re­
quirem ents o f this paragraph, any interest already
into,
paid to o r fo r the account o f the depositor shall be
deducted fro m the am ount requested to be w ith ­
drawn.
(5) A n y amendment o f a tim e deposit contract
that results in an increase in the rate o f interest paid
or in a reduction in the m aturity o f the deposit con­
stitutes a payment o f the time deposit before matu­
rity.
(6) For purposes o f com puting the penalty re­
quired to be imposed under this paragraph, under a
tim e deposit agreem ent that provides that subse­
quent deposits reset the m a tu rity o f the entire ac­
count, each deposit maintained in the account fo r at
least a period equal to the o rig in a l m aturity o f the
deposit may be regarded as having matured in d ivid ­
u a lly and been redeposited at in te rv a ls equal to
such period. W hen a tim e deposit is payable only
a fte r n o tice , fo r funds on deposit fo r at least the
notice period, the penalty fo r early withdrawal shall
be imposed fo r at least the notice period.
(7) A member bank may perm it a depositor to
w ith dra w interest credited to a time deposit during
any term at any tim e during such term w ithout pen­
a lty. I f the deposit o r account is autom atically re­
newed on the same terms (in c lu d in g at the same
rate o f interest), interest credited during the preced­
ing term o r terms as w e ll as the renewal term may
be paid at any tim e du rin g the renewal term w ith ­
out penalty, unless the deposit agreement sp e cifi­
cally provides otherwise. I f the rate o f interest paid
d u rin g the renew al term o r the m a tu rity period o f
the renewal term is different, interest in the account
at the commencement o f the renewal term shall be
treated as p rin c ip a l, and o n ly interest fo r the re­
newal term may be paid at any tim e w ith o u t pen­
alty during such term.
(8) A tim e deposit, o r a portion thereof, may
be paid before m a tu rity w ith o u t a fo rfe itu re o f in ­
terest as prescribed by this paragraph in the fo llo w ­
ing circumstances:
(i)
Where a member bank pays ail o r a por­
tion o f a tim e deposit representing funds c o n trib ­
uted to an In d iv id u a l R e tire m e n t A c c o u n t o r a
K e o g h (H . R . 10) Plan e sta b lish e d pu rsua nt to
26 U .S .C . (I.R .C . 1954) §§ 408. 401 when the in di­
v id u a l f o r w hose b e n e fit the acco un t is m a in ­

§ 2 1 7 .5

R E G U L A T IO N Q

be r ba n k s h a ll re q u ire o r w a ive n o tice o f w ith ­
tained attains age 59*/: or is disabled (as defined in
26 U .S .C . (I.R .C . 1954) § 72(m )(7)) or thereafter,
d ra w a l as to any a m o u n t o r percentage o f the
or
_______
savings deposit o f any depositor unless it shall sim ­
ila rly require o r w aive such notice as to the same
(ii)
Where a member bank pays that portion
am ount o r percentage o f the savings deposits o f
o f a tim e deposit on w h ich Federal deposit insur­
every other depositor w hich are subject to the same
ance has been lo st as the re su lt o f the m erger o f
c o n tra c tu a l p ro v is io n s w ith respect to n o tice o f
tw o o r more Federally insured banks in w hich the
w ith d ra w a l. I f a m em ber bank, w ith o u t re q u irin g
de po sitor p re vio u sly m aintained separate tim e de­
notice o f w ithdraw al, pays interest that has accrued
posits, fo r a period o f one year from the date o f the
merger.
on a savings deposit du rin g the preceding interest
period, it shall, upon request and w ithout requiring
(9)
A tim e deposit, o r the portion thereof re­
such n o tice , pay interest that has accrued d u rin g
quested, m ust be paid before m a tu rity w ith o u t a
said period on the savings deposits o f every other
forfeiture o f interest as prescribed by this paragraph
depositor. No mem ber bank shall change its prac­
in the fo llo w in g circumstances:
tice w ith respect to the requiring or w aiving o f no­
(i) W here requested, upon the death o f any
tice o f w ith dra w al o f savings deposits fo r the pur­
ow ner11 o f the tim e deposit funds: or
pose o f d is c rim in a tin g in fa v o r o f o r against any
( ii) W here requested, when the o w n e r11 o f
d e p o s ito r o r d e p o s ito rs , and no such change o f
the tim e deposit is determined to be legally incom ­
practice shall be made except pursuant to du ly re­
petent by a co u rt o r other a d m in istra tive body o f
competent ju ris d ictio n .
corded action o f the bank’ s board o f directors or a
(e) D isclo s u re o f ea rly w ith d ra w a l p en a lty. A t
properly authorized committee thereof.
(b) L o a n s o n se cu rity o f sa vings d ep osits. I f it
the tim e a depositor enters into a time deposit con­
is not the practice o f a member bank to require no­
tract w ith a member bank, the bank shall provide a
tice o f w ith d ra w a l o f savings deposits, no restric­
w ritte n statement o f the effe ct o f the penalty pre­
scribed in paragraph (d) o f this section, w hich shall
tions are imposed by this Part upon loans by such
(1) state clearly that the customer has contracted to
bank to its depositors upon the security o f such de­
keep his funds on deposit fo r the stated m a tu rity,
posits. I f it is the practice o f a member bank to re­
and (2) describe fu lly and clearly how such penalty
q u ire no tice o f w ith d ra w a l o f a savings de po sit,
pro visio ns apply to tim e deposits in such bank, in
such bank may make loans to a depositor upon the
the event the bank, n o tw ith s ta n d in g the contract
security o f such deposit, but the rate o f interest on
provisions, permits payment before m aturity. Such
such loans shall be not less than 1 per cent per an­
statements shall be expressly called to the attention
num in excess o f the rate o f interest paid on such
o f the customer.
deposit.
( f) L o a n s u p o n s e c u r it y o f tim e d e p o s it s . A
(c) M a n n e r o f p a ym en t o f savings deposits.
m em ber bank m ay m ake a loan to the d e p o sito r
(1) Subject to the provisions o f subparagraphs
upon the security o f his tim e deposit provided that
(2) and (3) o f this paragraph, a member bank may
the rate o f interest on such loan shall be not less
perm it w ith dra w als to be made from a savings de­
than 1 per cent per annum in excess o f the rate o f
posit o n ly through paym ent12 to the depositor him ­
interest on the tim e deposit.
self (but not to any other person whether or not act­
ing fo r the depositor), except
( i) w here the d e p o sit is represented by a
S E C T IO N 2 1 7 .5 — W IT H D R A W A L O F
passbook, to any person presenting the passbook;12
S A V IN G S D E P O S ITS
( ii) to any executor, adm inistrator, trustee,
(a)
R e q u ir e m e n t s r e g a r d in g n o t ic e o f w ith * o r oth er F iduciary h o ld in g the savings deposit as
d r a w a l. W hether o r not interest is paid, no mem­
part o f a Fiduciary estate, or to a person, other than
the b a n k , h o ld in g a ge ne ral p o w e r o f a tto rn e y
11
For the purposes o f this provision, an “ owner” o f time de­ granted by the depositor;
posit funds is any individual who died or was determined to be
( iii) to any person, including the bank, that
incompetent on or after August 1, 1979. and who at the time o f
his or her death or determination o f incompetence had full legal
and beneficial title to all or a portion o f such funds or, at the
time o f his or her death or determination o f incompetence, had
beneficial title to all or a portion o f such funds and full power o f
disposition and alienation with respect thereto




9

12 Payment from a savings deposit or presentation o f a pass­
book may be made over the counter, through the maiis. or other­
wise.

§ 2 1 7 .6

R E G U L A T IO N Q

has extended credit to the depositor on the security
o f the sa vin g s d e p o s it, w here such pa ym en t is
made in order to enable the creditor to realize upon
such security:
(iv ) pursuant to the order o f a court o f com­
petent ju risd ictio n ;
(v) upon the death o f the depositor, to any
person authorized by law to receive the deposit;
(v i) interest paid to a th ird person pursuant
to w ritte n in stru ction or assignment by the deposi­
to r acce pted b y the b a n k , and place d on file
therein; or
(v ii) pursuant to nontransferable withdrawal
orders o r authorizations received from a depositor
by a m em b er bank fo r the pa ym en t o f am ounts
fro m such deposits to th ird parties, in c lu d in g the
bank (except as prohibited by subparagraph 2), pe­
rio d ica lly or otherwise. A ny such w ithdraw al order
o r a u th o riz a tio n tha t m ay be honored as a w ith ­
drawal request fo r payment to a third party may, if
so authorized by the th ird pa rty, be honored as a
tra n s fe r to an a cco u n t o f such th ird p a rty . A n y
fo rm fo r such w ith d ra w a l ord e r o r a u th o riz a tio n
shall contain language in boldface type o f reason­
able size to the e ffe c t that it is not negotiable or
transferable.
(2) N otw ithstanding the provisions o f subpara­
graph (1) o f th is paragraph, w ith d ra w a ls may be
perm itted by a member bank to be made automati­
cally or as a normal practice from a savings deposit
that consists on ly o f funds in w hich the entire bene­
fic ia l in te rest is held by one o r more in d iv id u a ls
through payment to the bank its e lf or through trans­
fe r o f cred it to a demand deposit o r other account
pursuant to w ritten authorization from the depositor
to m ake such p a ym e n ts o r tra n sfe rs in o rd e r to
cover checks o r drafts draw n upon the bank o r to
m aintain a specified balance in o r to make periodic
tra n s fe rs to such a cco u n ts. In accordance w ith
§ 217.1(e)(2) o f this Part, a member bank must re­
serve the rig h t to require the depositor to give no­
tice in w ritin g o f an intended w ith d ra w a l not less
than 14 days before such w ithdraw al is made. Such
notice shall be p ro m in e n tly disclosed and sp e cifi­
cally brought to the depositor’ s attention at the time
the a u to m a tic tra n s fe r se rv ic e is a u th o riz e d . A
m e m b e r ba nk m ay no t re q u ire a d e p o s ito r to
authorize such autom atic transfer to be made from
savings deposits.
(3) A mem ber bank may pe rm it depositors to
m aintain deposits subject to negotiable orders o f
w ithdraw al where authorized by Federal law.




10

(4)
Where a savings deposit is evidenced by a
passbook, every w ith d ra w a l made upon presenta­
tio n o f the passbook shall be entered in the pass­
book at the tim e o f w ith d ra w a l, and every other
w ith d ra w a l fo r such a deposit shall be entered in
the passbook as soon as p ra c tic a b le a fte r w ith ­
drawal is made.

SECTION 217.6— ADVERTISING OF
INTEREST ON DEPOSITS
Every advertisement, announcement, or solicita­
tio n re la tin g to the in te re s t p a id on de po sits in
member banks shall be governed by the fo llo w in g
rules:
(a) A n n u a l r a t e o f s im p le in t e r e s t . Intere st
rates shall be stated in terms o f the annual rate o f
simple interest. In no case shall a rate be advertised
that is in excess o f the applicable m axim um rate for
the particular deposit.
(b ) P e r c e n t a g e y ie ld s b a s e d o n o n e y e a r .
W here a percentage yie ld achieved by com pound­
ing interest d u rin g one year is advertised, the an­
nual rate o f sim p le in te re st sha ll be stated w ith
equal prom inence, together w ith a reference to the
basis o f com pounding. N o member bank shall ad­
vertise a percentage y ie ld based on the e ffe c t o f
grace periods permitted in § 217.3(d).
(c) P e r ce n ta g e y ie ld s b a sed on p e r io d s in ex­
ce ss o f o n e y e a r . N o advertisem ent shall include
any in d ic a tio n o f a to ta l percentage y ie ld , co m ­
pounded o r sim ple, based on a period in excess o f
a ye a r, o r an average annu al percentage y ie ld
achieved by com pounding during a period in excess
o f a year.
(d) T im e o r a m o u n t re q u irem en ts. I f an adver­
tised rate is payable only on deposits that meet time
or amount requirements, such requirements shall be
cle a rly and conspicuously stated. W here the tim e
requirement fo r ai> advertised rate is in excess o f a
year, the required num ber o f years fo r the rate to
a p ply shall be stated w ith equal prom inence, to­
gether w ith an indication o f any low er rate or rates
tha t w i ll a p p ly i f the de po sit is w ith d ra w n at an
earlier m aturity.
(e) P en a lty f o r e a rly w ith d ra w a ls . A ny adver­
tisem ent. announcement, o r solicitatio n relating to
interest paid by a m em ber bank on tim e deposits
shall include clear and conspicuous notice that the
bank is prohibited from allow in g payment o f a time
deposit before m aturity unless substantial interest is
forfeited. Such notice may state that.

S T A T U T O R Y A P P E N D IX

R E G U L A T IO N Q

“ Substantial interest penalty is required fo r early
w ith d ra w a l.’ ’
(f) P r o fit. The term “ p ro fit” shall not be used
in referring to interest paid on deposits.
(g) A c c u ra c y o f a d v e rtis in g . No member bank
shall make any advertisem ent, announcem ent, or
so licita tio n relating to the interest paid on deposits
that is inaccurate o r m islead in g o r that m isrepre­
sents its deposit contracts.
(h) Solicitation o f deposits for banks. A ny per­
son o r organization that solicits deposits fo r a mem­
ber bank shall be bound by the rules contained in
this section w ith respect to any advertisement, an­
no un cem en t, o r s o lic ita tio n re la tin g to such de­
posits. N o such person o r organization shall adver­
tise a percentage yie ld on any deposit it solicits fo r
a m em ber bank that is not au thorized to be paid
and advertised by such bank.

(i)
M o n e y m a rk e t tim e deposits. A ny adver­
tisem ent, announcement, o r solicitatio n relating to
interest paid by a member bank on a tim e deposit
o f 510,000 o r more w ith a m aturity o f 26 weeks at
a rate not in excess o f the rate established (auction
average on a discount basis) fo r United States Trea­
sury b ills w ith m a tu ritie s o f six m onths shall in ­
clude a cle ar and conspicuous notice that Federal
re g u la tio n s p ro h ib it the co m p o u n d in g o f interest
during the term o f the deposit.

(S E C T IO N 217.7— M A X IM U M RATES OF IN ­
TEREST P A Y A B L E B Y M E M B E R BA N K S ON
T IM E A N D S A V IN G S DEPOSITS, is printed sep­
arately.)

STATUTORY APPENDIX

Section 19 o f the Federal Reserve A c t provides
in part as follow s:
(a)
The Board is authorized fo r the purposes o f
this section to define the terms used in this section,
to determ ine w hat shall be deemed a paym ent o f
in te re st, to de term in e w hat types o f o b lig a tio n s ,
whether issued d ire ctly by a member bank or in d i­
rectly by an a ffilia te o f a member bank or by other
means, and, regardless o f the use o f the proceeds,
shall be deemed a deposit, and to prescribe such
regulations as it may deem necessary to effectuate
the purposes o f this section and to prevent evasions
thereof.

this paragraph as soon as possible consistently w ith
its contractual ob lig atio ns: P r o v i d e d f u r t h e r , That
th is paragraph sh a ll n o t ^ p p ly to any de po sit o f
such b a n k w h ic h is p a ya b le o n ly at an o ffic e
the re of located outside o f the States o f the U nited
States and the D is tric t o f C olum bia: P r o v id e d f u r ­
ther, That u n til the expiration o f two years after the
date o f enactment o f the Banking A ct o f 1935 this
paragraph shall not apply (1) to any deposit made
by a savings bank as defined in section 12B o f this
A c t, as amended, or by a mutual savings bank, or
(2) to any deposit o f p u b lic funds made by o r on
behalf o f any State, county, school district, o r other
s u b d iv is io n o r m u n ic ip a lity , o r to any deposit o f
(U.S.C.. title 12. sec. 461]
* « *
trust funds i f the payment o f interest w ith respect to
such deposit o f public funds o r o f trust funds is re­
(i)
No member bank shall, directly or indirectly, quired by State law. So much o f existing law as re­
by any device whatsoever, pay any interest on any
quires the paym ent o f interest w ith respect to any
d e p o sit w h ic h is payable on dem and: P r o v i d e d ,
ftmds deposited by the United States, by any T e rri­
That nothing herein contained shall be construed as
to ry , D is tric t, o r possession thereof (in clu d in g the
p ro h ib itin g the paym ent o f interest in accordance
P hilip pine Islands), o r by any public instrum ental­
w ith the terms o f any certificate o f deposit or other
ity , agency, o r o ffice r o f the foregoing, as is incon­
contract entered into in good faith which is in force
s is te n t w ith the p ro v is io n s o f th is se ctio n as
on the date on w hich the bank becomes subject to
amended, is hereby repealed.
the provisions o f this paragraph: but no such c e rtifi­
[U.S.C.. title 12. sec. 371s.]
cate o f deposit o r other contract shall be renewed
or extended unless it shall be m odified to conform
(j)
The Board may from time to tim e, after con­
to th is paragraph, and every m em ber bank shall
sulting w ith the Board o f D irectors o f the Federal
take such action as may be necessary to conform to
D e p o s it In su ra n ce C o rp o ra tio n and the Federal




11

S T A T U T O R Y A P P E N D IX

Home Loan Bank Board, prescribe rules governing
the paym ent and advertisem ent o f interest on de­
posits, in clud in g lim itation s on the rates o f interest
w h ich may be paid by member banks on tim e and
savings deposits. The Board may prescribe different
rate lim itations fo r different classes o f deposits, fo r
deposits o f diffe re nt amounts o r w ith different ma­
tu ritie s o r subject to d iffe re n t conditions regarding
w ith d ra w a l o r repaym ent, according to the nature
o r location o f member banks or their depositors, or
a c c o rd in g to such o th e r reasonable bases as the
Board may deem desirable in the p u b lic interest.
N o member bank shall pay any time deposit before
its m aturity except upon such conditions and in ac­
cordance w ith such rules and regulations as may be
prescribed by the said Board, or waive any require­
ment o f notice before paym ent o f any savings de­
posits except as to all savings deposits having the
same requirem ents: P r o v i d e d , That the provisions
o f th is parag raph sh a ll not a p p ly to any deposit
w h ic h is pa yab le o n ly at an o ffic e o f a m em ber
bank lo cated o u tsid e o f the States o f the U n ite d
States and the D is tr ic t o f C o lu m b ia . D u rin g the
period comm encing on October 15, 1962, and end­
ing on O ctober 15, 1968, the provisions o f this par­
agraph shall not apply to the rate o f interest which
may be paid by member banks on tim e deposits o f
fo re ig n governm ents, m onetary and fin a n cia l au­
th o ritie s o f fo re ig n govern m ents w hen acting as
such, o r international financial institutions o f which
the United States is a member.

[U.S.C.. title 12. sec. 371b. The first two sentences of this paragraph
are. in part, temporary. Unless section 7 of the Act of September 21,
1966 (as amended by the Act of December 31. 1975) is modified, on De­
cember 15, 1978, such sentences will read as follows: "The Board of Gov­
ernors of the Federal Reserve System shall from time to time prescribe
rules governing the payment and advertisement of interest on deposits, in­
cluding limitations on the rate of interest which may be paid by member
banks on tune and savings deposits, and shall prescribe different rates for
such payment on ome and savings deposits having different maturities, or
subtect to different conditions respecting withdrawal or repayment, or sub­
ject to different conditions by reason of different locations, or according to
the varying discount rates of member banks in the several Federal Reserve
districts. ” ]




R E G U L A T IO N Q

The D epository Institutions D eregulation A ct o f
1980 provides in part as follow s:
Sec . 203. (a) The authorities conferred by sec­
tio n 19(j) o f the Federal Reserve A c t (12 U .S .C .
371b), section 18(g) o f the Federal Deposit Insur­
ance A ct (12 U .S .C . 1828(g)), and section 5B(a) o f
the F ede ral H o m e Lo a n B a n k A c t (12 U . S . C .
1425b(a)) o r by any other provision o f Federal law,
other than section 117 o f the Federal C redit Union
A ct (12 U .S .C . 1763). to prescribe rules governing
the paym ent o f interest and dividends and the es­
tablishm ent o f classes o f deposits or accounts, in ­
clu din g lim ita tio n s on the m axim um rates o f inter­
est and dividends w h ich may be paid on deposits
and accounts, and the a u th o rity conferred by the
p ro v is io n s o f section 102 o f P u b lic L a w 9 4 -2 0 0
(12 U .S .C . 461 note) are hereby transferred to the
D e p o s ito ry In s titu tio n s D e re g u la tio n C o m m itte e
(hereinafter in this title referred to as the “ Deregu­
lation C om m ittee” ).
(b) The Deregulation Com m ittee shall consist o f
the Secretary o f the Treasury, the Chairman o f the
Board o f Governors o f the Federal Reserve System,
the Chairman o f the Board o f Directors o f the Fed­
eral D eposit Insurance C o rpo ra tion , the Chairman
o f the Federal H om e Lo a n B ank B oa rd, and the
Chairman o f the National Credit Union Adm inistra­
tion Board, who shall be voting members, and the
C om ptroller o f the Currency who shall be a nonvot­
ing m em ber o f the D e reg ula tion C om m ittee. The
Deregulation Com m ittee shall hold public meetings
at least quarterly. A ll meetings o f the Deregulation
C om m ittee shall be conducted in c o n fo rm ity w ith
the p ro visio n s o f section 522b o f T itle 5. U nited
States Code. The Deregulation Committee may not
take any action unless such action is approved by a
m ajority vote o f the voting members o f the Deregu­
lation Committee.
(c) The authorities conferred by this title on the
Deregulation C om m ittee and its members may not
be delegated.
[U.S.C., title 12, sec. 3502.)