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FEDERAL RESERVE BANK
OF NEW YORK
r
Circular No. 9168
October 22, 1981
~
|
D EPO SITO R Y INSTITUTIO NS D ER EG U LA T IO N C O M M IT T E E
Proposals Regarding New Deregulation Schedule and
New Short-Term Deposit Instrum ents
To All Commercial Banks, Mutual Savings Banks,
and Savings and Loan Associations in the Second Federal Reserve District:
The D epository Institutions D eregulation C om m ittee (D ID C ) has invited co m
ment on (a) a new proposed schedule for progressively deregulating tim e deposits,
starting with a new 3V i-year (or over) deposit categ o ry, and (b) the desirability o f
authorizing a new short-term deposit instrument that would enable fed erally insured
com m ercial banks, mutual savings banks, and savings and loan associations to
com pete more effectiv ely for short-term deposits.
Printed on the follow ing pages is the text o f the proposals. C om m ents on the
deregulation schedule should be submitted by N ovem ber 6 , 1 9 81; com m ents on the
short-term deposits should be submitted by N ovem ber 16, 1981. All com m ents may
be sent to our C onsum er A ffairs and Bank R egulations D epartm ent.
A
nthony
M. S olom on,
P resid en t.
DEPOSITORY INSTITUTION S
DEREGULATION C O M M ITTEE
12 CFR Part 1204
(Docket No. D-0022]
Time Deposits of Less Than $100,000
With Original Maturities of 3 % Years or
More
agency : Depository Institutions
Deregulation Committee.
a c t io n :
Proposed rulemaking.
s u m m a r y : The Depository Institutions
Deregulation Committee (the
‘‘Committee”) is considering amending
its rules to establish a new category of
time deposit that could be offered by
federally-insured commercial banks,
mutual savings banks, and savings and
loan associations. The Committee
requests comment on an account that
would have the following principal
characteristics: (1) Minimum original
maturity of 3 lh years of more; (2) no
interest rale limitation; (3) permitting
additional deposits to be made during
the first year of the account without
extending its maturity; and (4) a
minimum denomination of $250. The
Committee also requests comments on a
schedule that would each year reduce
the minimum maturity of this new
deposit category by one year, and the
creation of two additional new desposit
categories to be effective in 1984 and
1935, respectively.
date : Comments must be received by
November 0,1901.
ADDRESS: Interested parties are invited
to submit written data, views, or
arguments concerning the proposed
rules to Steven L. Skancke, Executive
Secretary, Depository Institutions
Deregulation Committee, Room 1054,
Department of the Treasury, 15th Street
and Pennsylvania Avenue, NW.,
Washington, D.C. 20220. All material
submitted should include the Docket
Number D-0022 and will be available
for inspection and copying upon request,
except as provided in § 1202.5 of the
Committee’s Rules Regarding
Availability of Information (12 CFR
1202.5).
FOR FURTHER INFORMATION CONTACT:
Paul S. Pilecki, Senior Attorney, Board
of Governors of the Federal Reserve
System (202/452-3281); Allan Schott,
Attorney-Adviser, Treasury Department
(202/580-2914); F. Douglas Birdzell,
Counsel, Federal Deposit Insurance
Corporation (202/389—
4201); Rebecca
Laird, Senior Associate General
Counsel, Federal Home Loan Bank
Board (202/377-6448); or David Ansell,
Attorney, Office of the Comptroller of
the Currency (202/447-1880).
SUPPLEMENTARY INFORMATION: The
Depository Institutions Deregulation Act
of 1980 (Title II of Pub. L. 96-221; 12
U.S.C. 3501 et s e q .) ("Act”) was enacted
to provide for the orderly phaseout and
the utimate elimination of the limitations
on the maximum rates of interest and
dividends that may be paid on deposit
accounts by depository institutions. In
adopting the Act, Congress determined
that rate ceilings have: (1) Discouraged
savings; (2) created inequities for
depositors; (3) impeded competition
among depository institutions; and (4)
not provided an even flow of funds for
home mortgage lending. The Congress
also found that all depositors,
particularly those with modest savings,
are entitled to receive a market rate-ofretum as soon as it is economically
feasible for institutions to pay such
rates.
Under the Act, authority to administer
deposit rate ceilings has been given to
the Committee. The Act also provides
that the Committee can phase out rate
ceilings by an y or all of the following
methods:
(1) Gradually increase ceilings
applicable to a ll account categories
(however when increasing rates on a ll
existing accounts, the DIDC may not
exceed market rates);
(2) Complete elimination of limitations
applicable to particular account
categories;
(3) Creation of new account categories
subject to limits or with limits set at
current market rates;
(4) By any combination of the above
methods; and
(5) By any other method.
In accordance with its responsiblities,
the Committee is requesting public
comment on a proposal to meet the
objectives of the Act. The Committee
proposes to create a new category of
time deposit that would not be subject
to an interest rate ceiling. The new
category (1) would require a minimum
maturity of 3Vz years or more, (2) would
permit additional deposits to be made
during the first year of the life of the
deposit without extending the maturity
date of the account, (3) could be issued
in negotiable or nonnegotiable form, (4)
could be discounted, (5) would be issued
in a minimum denomination of $250, and
(8) would be subject to an early
withdrawal penalty of at least nine
months’ forfeiture of interest. In
addition, all other provisions of the
Committee’s rules and the rules of the
other agencies would continue to apply.
The Committee and the agencies have
taken actions in the past that have been
regarded as the establishment of n ew
categories of deposit accounts. These
accounts include 20-week money market
time deposits (MMCs), small saver
certificates (SSCs), and the 3-year time
deposit available only to IRA and Keogh
Plan depositors. These accounts have
been regarded as new accounts by
2
virtue of particular characteristics such
as maturity, method of determination of
ceiling rates, and availability limited to
certain classes of depositors. The
Committee believes that the proposed
3Vi year or more time deposit would be
a new category of deposit account for
purposes of both the Act and Pub. L. 94200.1
The Committee expects that the new
3V2-year time deposits could be offered
by depository institutions on a fixed or
variable rate basis. For variable rate
time deposits, it is expected that the
method of determining how the rate
would fluctuate would be readily
ascertainable and disclosed in writing at
the opening of the deposit contract. For
example, the rate could be pegged to the
rate based on the yield for a particular
category of U.S. Treasury securities or
any other market based or
independently determined yield.
The Committee also requests
comment on a proposed schedule under
which each year the mininum maturity
of the new deposit category would be
reduced by one year. Under the
schedule, the maturity range and method
of determining the rate ceiling of the
small saver certificate category of time
deposit also would be modified in 1982
and 1983. In addition, the schedule
would establish two new time deposit
categories without a differential in 1984
and 1985, respectively. This schedule
would be as follows:
Applicable Rate Ceiling For
Original maturity
Effective Feb. 1,
1982:
(1) 3Vi years or
more.
(2) 2V s years to
less than 3 V
i
years.
Effective Feb. 1,
1983:
(1) 2 V years or
i
more.
(2) 1 Vs years to
less than 2 V
i
years.
Effective Feb. 1,
1984:
(1) 1 V years or
i
more.
(2) 6 months to
1 V years
i
(new deposit
category).
Effective Feb. 1,
1985:
(1) 8 months or
more.
(2) 14 days to 6
months (new
deposit
category).
Effective Feb. 1,
1986:
All time deposits..
Commercial banks
MSBs and S4Ls
No limit.-...... .......
No limit
Avg. yield for 2 V
i
year Treasury
securities less
y, point
Avg. yield for 2<i
year Treasury
securities.
No limit__________ No lim
it.
Avg. yield for 1 V
i
year Treasury
securities less
y« point
Avg. yield for 1 V
i
year Treasury
securities.
No limit.-................. No limit
26-week B rate.... 26-week Bill rate
rfl
No limit..... .. .......... No Hmit
13-week Bil rate__ 13-week B rata
iff
No limit............... ..
No lim
it.
1 Pub. L 94-200 provide* that the differential
between thrift institution and commercial bank
interest rate ceilings on any category of account in
existence on December 10,1975, cannot be reduced
or eliminated without Congressional approval.
The Committee has considered the
potential impact on small entities of the
proposal to establish a new SVfe-year
time deposit category and the proposed
schedule, as required by the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.). In
this regard, the Committee’s action
would not impose any new regulatory
burden, or increase any existing or
impose any new reporting or
recordkeeping requirements. Consistent
with the Committee’s statutory mandate
to eliminate deposit interest rate
ceilings, this proposal would enable
depository institutions to pay interest on
certain time deposits with maturities of
3 Vi years or more without regard to
interest rate limitations. Thus, small
entities that are depositors generally
could benefit from the Committee’s
proposal, since they would be able to
earn higher rates of interest on their
time deposits. Small entities that are
depository institutions could have
increased costs as a result of this action,
because it is likely that they will be
paying higher interest rates on certain
time deposits; however, their
competitive position vis-a-vis
nondepository institution competitors
should be enhanced by their ability to
offer higher rates on time deposits. The
proposed new deposit category could be
offered by all federally insured >
commercial banks, mutual savings
banks and savings and loan
associations.
In particular, the Committee requests
comments on the following specific
aspects of the proposal.
(1) Maturity. The appropriateness of a
minimum maturity period of 3Vi years or
more.
Should the minimum maturity on the
proposed deposit category be reduced
each year by one year? "
(2) A ddition al deposits during first
year. It is appropriate to allow additions
to such accounts during the first year
without requiring an extension of the
maturity?
Should this be a required feature or
should it be optional for depository
institutions?
(3) Minimum denom ination. Should
the proposed instrument have a
minimum denomination of $250, or some
other amount?
(4) E arly w ithdraw al penalty. Should
the proposed 3 V year instrument be
z
subject to a minimum early withdrawal
penalty of nine month’s forfeiture of
interest or the current six month
penalty?
As alternatives for this account,
should the minimum early withdrawal
penalty be:
(1) Three months’ loss of interest for
each year or part thereof of the original
maturity of the time deposit (a 3 Vi year
time deposit would have a twelve month
early withdrawal penalty); or
(2) Three months’ loss of interest for
each year or part thereof remaining to
maturity of the time deposit?
(5) Other featu res. The Committee
requests comment on whether the
proposed deposit category should allow
negotiable certificates of deposits,
whether issuance of such deposits on a
discount basis should be permitted, or
whether any other or different
characteristics should apply to such
accounts.
(6) N ew account categ ories to b e
in trodu ced in 1984 an d 1985. Should the
proposed two new account categories
have characteristics similar to the
proposed ZVz year category?
(7) O ther com m ents. The Committee
also requests comments on any other
aspect of the proposal that is relevant,
including, but not limited to, the effect of
the proposed new deposit category on
the competitive position and safety and
soundness of depository institutions and
the effect of the proposal on small
entities.
The Committee has determined to
shorten the length of the comment
period normally provided to the public
so that it can consider this issue at its
meeting tentatively scheduled for
December 16,1981. Accordingly, all
comments must be received by
November 6,1981.
PART 1204— INTEREST ON DEPOSITS
Pursuant to its authority under section
203(a) of the Depository Institutions
Deregulation Act of 1980 (Title II of Pub.
L. 96-221; 12 U.S.C. 3502(a)), the
Committee proposes to amend 12 CFR
Part 1204:
1. Effective February 1,1982 by adding
a new § 1204.119 that would read as
follows:
§ 1204.119 Time deposits of less than
$100,000 with original maturities of 3 Vi
years or more.
(a) A commercial bank, mutual
savings bank, or savings and loan
association may pay interest without
limit on any time deposit of $250 or more
with an original maturity of 3Vz years or
more.
(b) Any time deposit issued pursuant
to this section may provide by contract
that additional deposits may be made to
the account for a period of one year
from the date that is is established
without extending the original maturity
date of the account. Deposits made to
the account more than one year after the
date that it is established shall extend
the maturity of the entire account for a
period at least equal to the original term
of the account, or such additional
deposit shall be regarded as a separate
account.
(c) Where a time deposit issued
pursuant to this section is paid before
maturity, a depositor shall forfeit an
amount at least equal to nine months of
interest earned, or that could have been
earned, on the amount withdrawn at the
3
nominal (simple interest) rate paid on
the deposit, regardless of the length of
time the funds withdrawn have
remained on deposit.
(d) A depository institution may issue
time deposits pursuant to this section
with any of the following
characteristics:
(1) Such time deposits may be
represented by a negotiable or
nonnegotiable instrument, or may be in
book-entry form; or
(2) Such time deposits may be issued
on a discount basis.
(e) Effective February 1,1983, this
section is amended by striking the term
“3 V years” wherever it appears and
z
inserting in its place the term “2V4
years”.
(f) Effective February 1,1984, this
section is amended by striking the term
“Z -z years” wherever it appears and
V
inserting in its place the term “IV2
years”.
(g) Effective February 1,1985, this
section is amended by striking the term
“IV2 years” wherever it appears and
inserting in its place ”6 months”.
(h) Effective February 1,1986, this
section is amended by striking the term
“6 months” wherever it appears and
inserting in its place “14 days”.
2. Effective February 1,1982,
§ 1204.106 would be amended by adding
a new paragraph (c) as follows:
§ 1204.106 Time deposit of less than
$100,000 with maturities of 2V years to 4
fe
years.
«
*
*
*
*
(c)(1) Effective February 1,1982, this
section is amended by striking the term
“2 V years to less than 4 years”
2
wherever it appears and inserting in its
place “2 V years to less than 3 V years”.
2
2
(2) Effective February 1,1983, this
section is amended by sinking the term
“2 V years to less than 3 Yt years”
2
wherever it appears and inserting in its
place “IV2 years to less than 2 V years”.
2
3. Effective February 1,1984, by „
adding a new § 1204.120 that would read
as follows:
§ 1204.120 Time deposits of less than
$100,000 with original maturities of 6
months to 1Vs years.
Commercial banks, mutual savings
banks, and savings and loan
associations may pay interest on any
time deposit of $250 or more with an
original maturity 6 months or more but
less than IV2 years at a rate not to
exceed the rate established and
announced (auction average on a
discount basis) for U.S. Treasury bills
with maturities of 26 weeks at the
auction held immediately prior to the
date of deposit. Rounding rates to the
next higher rate is not permitted. Time
deposits issued under this section shall
also be subject to paragraphs (b), (c),
and (d) of § 1204.119. This section shall
expire on February 1,1985.
4.
Effective February 1,1985, by
adding a new § 1204.121 that would read
as follows:
§ 1204.121 Time deposits of less than
$100,000 with original maturities of less
than 6 months.
Commercial banks, mutual savings
banks, and savings and loan
associations may pay interest on any
time deposit of $250 or more with an
original maturity of 14 days or more but
less than 6 months at a rate not to
exceed the rate established and
announced (auction average on a
discount basis) for U.S. Treasury bills
with maturities of 13 weeks at the
auction held immediately prior to the
date of deposit. Rounding rates to the
4
next higher rate is not permitted. Time
deposits issued under this section shall
also be subject to paragraph (d) of
§ 1204.119.
By order of the Committee, September 25,
1981.
Steven9 L. Skancke,
E xecutive Secretary.
[FR Doc. 81-28998 10-5-81; 8:45 am]
I
Schott, Attorney-Adviser, Treasury
Department (202/566-6798).
SUPPLEMENTARY INFORMATION: The
Depository Institutions Deregulation Act
12CFR Part 1204
of 1980 (Title II of Pub. L. 96-221; 12
[Docket No. D -0023]
U.S.C. 3501 et seq.) (“Act”) was enacted
to provide for the orderly phaseout and
Short-Term Time Deposit Instruments
ultimate elimination of the limitations on
the maximum rates of interest and
AGENCY: Depository Institutions
dividends that may be paid on deposit
Deregulation Committee.
accounts by depository institutions as
ACTION: Proposed rulemaking.
rapidly as economic conditions warrant.
Under the Act, the Committee is
s u m m a r y : The Depository Institutions
authorized to phase out interest rate
Deregulation Committee (the
ceilings by any one of a number of
“Committee”) is considering amending
methods including the creation of new
its rules to establish a new short-term
account categories not subject to
deposit instrument that would enable
interest rate limitations or with interest
federally insured commercial banks,
rate ceilings set at market rates of
mutual savings banks, and savings and
interest.
loan associations to compete more
effectively for short-term funds. The
At its June 25,1981 meeting, the
Committee requests comments on the
Committee considered the issue of short
desirability of authorizing a new short
term time deposit instruments and
term deposit instrument and, in
decided to request public comments on
particular, comments on the following
the desirability of authorizing a new
instruments: (1) a $5,000 minimum
deposit instrument having
denomination transactions account with characteristics similar to money market
no interest rate ceiling; (2) a $10,000
mutual funds (MMFs). 44 FR 36712 (July
minimum denomination 91-day account
15,1981). The Committee did not put
with a 14-day required notice for
forth a specific proposal at that time.
withdrawal thereafter, and a floating
Over 400 comments were received by
interest rate tied to the 13-week
the Committee on this issue. (An
Treasury bill discount rate; and (3) a
analysis of the comments is contained in
$25,000 minimum denomination account the DIDG staff paper “Proposals to
with no interest rate ceiling and a 1-day Change the Method of Calculating the
notice requirement. The Committee also Ceiling Rate on MMCs and
requires comments or ideas on any other Consideration of Creation of a New
short-term instrument or combination of Short-Term Deposit Instrument",
instruments which respondents believe
September 16,1981 which is available
would be desirable.
upon request from the Executive
Secretary of the Committee).
DATE: Comments must be received by
Approximately half of the respondents
November 16,1981.
favored creation of a new short-term
ADDRESS: Interested parties are invited
instrument and half were opposed.
to submit written data, views, or
Those against the authorization of a
arguments concerning the proposed
new short-term instrument, generally
rules to Steven L. Skancke, Executive
thrift institutions, argued that the higher
Secretary, Depository Institutions
costs associated with a new deposit
Deregulation Committee, Room 1054,
instrument and the potential shifts from
Department of the Treasury, 15th Street
savings accounts would add to their
and Pennsylvania Avenue NW.,
current earnings problem.
Washington, D.C. 20220. All material
submitted should include the Docket
At its September 22,1981 meeting, the
Number D-0023 and will be available
Committee decided to solicit comments
for inspection and copying upon request, on several new deposit alternatives so
except as provided in § 1202.5 of the
that the public would have an
Committee’s rules regarding Availability opportunity to present their views on the
of Information (12 CFR 1202.5).
instruments under consideration. In light
of the previous comment period on the
FOR FURTHER INFORMATION CONTACT:
same issue and the desire to consider
David Ansell, Attorney, Office of the
this issue at the December 16,1981
Comptroller of the Currency (202/447meeting, the Committee believes that a
1880); F. Douglas Birdzell, Counsel,
period of 30 days is sufficient time for
Federal Deposit Insurance Corporation
public comment on the current proposal.
(202/389-4324); Rebecca Laird, Senior
Associate General Counsel, Federal
The Committee has considered the
Home Loan Bank Board (202/377-6446);
potential effect on small entities of the
Paul S. Pilecki, Senior Attorney, Board
proposal to establish a new short-term
of Governors of the Federal Reserve
instrument, as required by the
System (202/452-3281); Randall J. Miller, Regulatory Flexibility Act (5 U.S.C. 603
Acting Director, Office of Policy
et seq.). In this regard, the Committee’s
Analysis, National Credit Union
action would not impose any new
Administration (202/357-1090); or Allan
reporting or recordkeeping requirement.
DEPOSITORY INSTITUTIONS
DEREGULATION COMMITTEE
5
Consistent with the Committee’s
statutory mandate to eliminate deposit
interest rate ceilings, this proposal
would enable all depository institutions
to compete more effectively in the
marketplace for short-term funds.
Depositors generally should benefit from
the Committee’s proposal, since the new
instrument would provide them a market
rate of return. If low-yielding deposits
shift into the new account, depository
institutions might have increased costs
as a result of this action. However, their
competitive position vis-a-vis
nondepository competitiors would be
enhanced by their ability to offer a
competitive short-term instrument at
market rates. The new funds attracted
by the new instrument (or the retention
of deposits that might otherwise have
left the institution) could be invested at
a positive spread and would therefore at
least partially offset the higher costs
associated with the shifting of lowyielding accounts.
In structuring a regulation authorizing
a new short-term instrument, the
relevant variables for the Committee to
consider are yield, minimum
denomination, maturity, and
transactions characteristics. At one
extreme, the creation of an account with
no interest rate ceiling, no minimum
denomination, no minimum maturity
requirement and a transactions
capability, would provide depository
institutions with an instrument which
would be competitiver with MMF
shares, and would thereby help stem
deposit outflows and indeed might
induce deposit inflows. Such an account
could also result in substantial shifting
of deposit funds from low-yield deposit
accounts, resulting in increased costs to
depository institutions. The introduction
of another interest-bearing transaction
account could also have an adverse
effect on the conduct of monetary
policy.
Creation of an account with a high
minimum denomination and/or a longer
term-to-maturity, however, might
minimize shifting, but would be less
competitive with MMFs and therefore
less effective in attracting new deposits.
In creating any short-term deposit
category, major factors that must be
taken into account include potential
operational problems, the effect on
earnings of depository institutions and
the competitive viability of the
instrument.
Because of the need to consider all of
the variables discussed above, the
Committee requests comments
concerning desirable short-term
instrument characteristics. In particular,
the Committee requests comments on
the following aspects of a new short
term instrument;
(a)
What should be the minimum
denomination requirement on the short
term instrument?
(b) Should the account be ceilingless
or indexed to market rates? Should the
ceiling be equal to the market rate?
Should the institution be allowed to
offer a floating rate?
(c) If indexed, should the regulation
include a thrift-commercial bank
interest rate ceiling differential?
(d) Should a minimum maturity or
notice requirement be imposed on the
account?
(e) Should third-party transfers be
permitted? [Federal Reserve Board
Regulation D (12 CFR Part 204)
stipulates that the account would be
subject to higher reserve requirements
than for other time deposits if the
institution permits more than three
transfers per month to another account
or a third party.] Should transfers be
limited by regulation to some minimum
number per month?
(f) Should the eligibility for this
account be restricted in any way, for
example, to individuals only?
(g) What is the preferred combination
of the above features?
(h) Is the authorization of a short-term
instrument with characteristics similar
to MMF shares desirable at this time?
What would be the impact of
introducing such an instrument on the
earnings of depository institutions?
(i) Would an alternative to a short
term instrument, such as lowering the
minimum denomination on MMCs, be
preferable to introducing a new short
term instrument at this time?
As an example pf how the minimum
denomination, maturity and transaction
features of a short-term account might
be combined, the Committee has
developed three specific proposals.
Comments are requested on the
desirability of each of these instruments,
including the operational feasibility, the
cost implications, and the expected
benefits to be provided by the
instruments. These comments should
address the proposals, both individually
and in relation to one another, as well
as any other proposed instruments.
(1) A $5,000 minimum denom ination
transaction accou nt with no in terest
rate ceiling.
If the balance on this account falls
below $5,000 at any time during a
monthly period, the maximum rate
payable on this account would be
reduced for the period to the rate in
effect for NOW accounts (currently
5 lA%). Any withdrawals, including
transfers to third parties, could be made
only in amounts of $500 or more. It
should be noted that if a depository
institution would elect to permit more
than three transfers per month to
another account or to a third party, the
instrument would be subject to
transaction account reserve
requirements as stipulated by Federal
Reserve Regulation D.
In addition to addressing the
desirability of the above account,
respondents are requested to address
the following questions:
(a) What would be the effect of this
account on deposit flows (both on the
expected inflows and internal shifts of
funds) and on the earnings of depository
institutions?
(b) Should the minimum withdrawal
amount be smaller or larger?
(c) Should there be an interest rate
ceiling on this account? If so, should the
ceiling rate be indexed to a market rate
such as the yield on 30-day Treasury
bills? Should institutions be given the
option of using a moving average of past
T-bill rates as an interest rate ceiling?
Should a thrift-commercial bank ceiling
differential be imposed?
(d) Should the number of third-party
transfers be limited? If so, how many
transfers per month should be
permitted?
(2) A $10,000 minimum denom ination
time dep osit with an in itial maturity o f
91-days an d a 14-day n otice p e r io d
thereafter, an d an in terest rate ceiling
tied to the 13-w eek Treasury b ill
discount rate.
It would be the institution’s option to
offer this instrument with the interest
rate fixed for periods of 91 days or on a
floating rate basis (e.g., set daily or
weekly). Depositors would be required
to keep their funds on deposit for at
least 91 days. Depositors could maintain
funds in the account after the initial
maturity of 91 days, and the withdrawal
of those funds would be subject to a 14day notice requirement. Under this
option the institution could offer a fixed
or floating rate on the account for the
initial 91 days, and a floating rate
thereafter. No additions to this account
or partial withdrawals from principal
would be permitted, and the account
would not be permitted to function as a
transaction account.
In addition to commenting on the
desirability of authorizing such an
account, respondents are requested to
address the following issues:
(a) Would this account serve to lessen
the outflow of deposits at depository
institutions? Would there be substantial
shifting from other accounts within the
same institution? Ho\v effective would
the new account be in attracting new
funds? What would be the effect on
earnings?
(b) Should depository institutions be
given the option of using a moving
average of past T-bill rates as an
interest rate ceiling? Should there be a
differential between the thrift and
commercial bank ceilings? Should the
accounfhave a ceiling rate at all?
(c) Should additions or partial
withdrawals be permitted after the
initial 91-day maturity? If partial
6
withdrawals are permitted, should the
balance in the account be permitted to
fall below $10,000? Should there be a
minimum withdrawal amount, such as
$500? Would it be preferable to structure
the account so that additional deposits
after the first $10,000 would reset the 91day initial maturity?
(e)
Should the 14-day notice period be
required or should depository
institutions be permitted to establish
alternative maturity dates at least 14
days apart?
(3)
A $25,000 minimum denom ination
accou nt with no in terest rate ceiling, a
minimum 1-day n otice requirem ent, an d
no additions or w ithdraw als.
Comments are requested on the
general desirability of this account as
well as on the following specific issues:
(a) What is the estimated effect of this
account on deposit flows (both in terms
of internal shifts and expected inflows
of deposits) and on earnings?
(b) Would a notice requirement of a
different length be preferred: seven
days? fourteen days? more than fourteen
days? Should the imposition of the
notice requirement be at the institution’s
option, similar to the current rules on
passbook accounts?
(c) Should there be an interest rate
ceiling? If so, should there be a bankthrift differential? Should depository
institutions be given the option of using
a moving average of past market rates
as a ceiling?
In addition to addressing the specific
short-term instrument proposals, above
the Committee requests comments on
whether or not a new short-term deposit
instrument should be introduced at this
time. Respondents are requested to
specify their relative preferences for the
above instruments, and what
modifications, if any, would be
desirable.
By order of the Committee, October 9, 1981.
Stevens L. Skancke,
E xecutive Secretary.
|FR Doc. 81-20837 Filed KM 4-B1: 8.45 ;im|
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