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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 9424 ~|
December 17, 1982 J
AMENDMENTS TO REGULATIONS D AND Q
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:
As announced in Circular No. 9414, dated December 6 , 1982, the Board of Governors of the Federal Reserve
System has amended its Regulation D, “ Reserve Requirements of Depository Institutions,” and its Regulation Q,
“ Interest on Deposits,” in order to implement recently enacted legislation (The Gam-St Germain Depository
Institutions Act of 1982) affecting reserve requirements and the availability of NOW accounts.
In addition, the Board of Governors has changed the schedule for the phase-in of reserve requirements for
member banks. Following is the text of the Board’s announcement of this change:
The Federal Reserve Board has amended its Regulation D — Reserve Requirements of Depository Institutions — to
coordinate the end of the phase-in of reserve requirements for member banks under the Monetary Control Act with the start
of contemporaneous reserve accounting.
Contemporaneous reserve requirements (CRR) will go into effect beginning February 2, 1984. Member banks, and
certain other institutions that are required to maintain reserves in the same way as member banks, are phasing down to the
generally lower reserve requirements of the Monetary Control Act on a schedule previously ending March 1, 1984.
To coordinate with the start of CRR, the Board has moved the end of this phase-in schedule to February 2, 1984.
Enclosed are copies of the amendments to Regulations D and Q, as printed in the Federal Register. Also
enclosed, for depository institutions, is the complete text of the ruling issued by the Depository Institutions
Deregulation Committee regarding the establishment of federally insured money market deposit accounts, which has
been reprinted from the Federal Register. The establishment of the new account was announced in our Circular
No. 9408, dated November 22, 1982.
Questions on these matters may be directed to the following:
Reporting Requirements:
Richard J. Gelson, Assistant Vice President (Tel. No. 212-791-8225)
Nancy Bercovici, Manager, Statistics Department (Tel. No. 212-791-8227)
Paula B. Schwartzberg, Chief, Deposit Reports Division (Tel. No. 212-791-8590)
Maintenance Requirements:
John M. Eighmy, Assistant Vice President (Tel. No. 212-791-7766)
Kathleen A. O ’Neil, Manager, Accounting Department (Tel. No. 212-791-7768)
Patricia H. Lupack, Chief, Accounting Control Division (Tel. No. 212-791-5250)
Interpretation of Regulations D and Q:
George R. Juncker, Manager, Consumer Affairs and Bank Regulations Department
(Tel. No. 212-791-5910)
Joyce E. Motylewski, Attorney, Legal Department (Tel. No. 212-791-5038)
A
nthony
M.
Solom on,
President.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
AMENDMENTS TO REGULATION D
— Exemption for First $2 Million of Reservable Liabilities, effective
December 9, 1982
— Contemporaneous Reserve Requirements Member Bank Phase-in, effective
— Reserves on Money Market Deposit Account, effective
— Reserve Requirement Ratios, effective
December 31, 1982
December 14, 1982
December 31, 1982
FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-0441; Reg. D]
Reserve Requirements of Depository
Institutions; Exemption for First $2
Million of Reservable Liabilities
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
EFFECTIVE DATE: December 9,1982. This
date is the beginning of the first reserve
computation to which the exemption
from reserve requirements will apply.
FOR FURTHER INFORMATION CONTACT:
SUMMARY: The Board has amended
Regulation D— Reserve Requirements o f
Depository Institutions (12 CFR Part 204)
to implement section 411 of the Garn-St
Germain Depository Institutions Act of
1982 (Pub. L. 97-320; 96 Stat. 1520)
(“ Garn-St Germain A ct” ). Under this
provision, the first $2 million of
reservable liabilities of each- depository
institution are subject to a reserve
requirement of zero percent. The effect
of this provision is to completely exempt
from basic Federal reserve requirements
small depository institutions.
Gilbert T. Schwartz, Associate General
Counsel (202/452-3625). or Paul S.
Pilecki, Senior Attorney (202/452-3281),
Legal Division, Board of Governors of
the Federal Reserve System,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The
Monetary Control Act o f 1980 (Title I of
Pub. L. 96-221) (“ M C A ” ) requires all
depository institutions that maintain
transaction accounts or nonpersonal
time deposits to maintain reserve
requirements that are uniformly applied
regardless o f an institution’s size.
However, in implementing the MCA in
October 1980, the Board deferred for six
months, until May 1981, reserve ana
deposit reporting requirements of
nonmember depository institutions that
had less than $2 million in total deposits
as of December 31,1979.1The deferral
was granted on the basis that
immediately requiring such institutions
to submit reports and maintain reserves
might have caused significant
operational difficulties for the System
and would have interfered with the
orderly implementation of the MCA.
Reserve requirements on such
institutions were deferred for three
additional six-month periods because of
pending Congressional consideration of1
1The d efe rra l w as not app licab le to member
banks, Edge o r A greem ent corporations, or U.S.
branches and agencies o f foreign banks.
PRINTED IN NEW YORK, FROM FED ERA L R E G IST E R , VOL. 47, NO. 236
For this Regulation to be complete, retain:
1) Regulation D pamphlet, amended effective December 31, 1981.
2) Amendments effective April 28, 1982, April 29, 1982, September 1, 1982,
October 5, 1982, October 28, 1982, and February 2, 1984
3) This slip sheet.
[Enc. Cir. No. 9424]
whether a permanent exemption from
reserve requirements should be granted
to smaller depository institutions.
Section 411 of the Garn-St Germain
Act, which was enacted on October 15,
1982, provides that $2 million o f
reservable liabilities 2 o f each
depository institution shall be subject to
a zero percent reserve requirement. The
Board is to adjust the amount of
reservable liabilities subject to this zero
percent reserve requirement each year
for the next succeeding calendar year by
80 percent of the percentage increase in
the total reservable liabilities of all
depository institutions, measured on an
annual basis as o f June 30. No
corresponding adjustment is to be made
in the event of a decrease in total
reservable liabilities o f all depository
institutions. The Garn-St Germain Act
permits each depository institution, in
accordance with the rules and
regulations of the Board, to designate
the reservable liabilities to which this
reserve requirement exemption is to
apply. However, if transaction accounts
are designated, only those that would
otherwise be subject to a three percent
reserve requirement [i.e., transaction
accounts within the low reserve
requirement tranche) may be so
designated. As a result, the effect o f this
amendment is to modify the low reserve
tranche (which is currently $26 million)
to apply a zero percent reserve
requirement on the first $2 million of
transaction accounts and a 3 percent
reserve requirement on the remainder of
the low reserve tranche, or to provide a
zero percent reserve requirement
tranche on nonpersonal time deposits
with maturities of less than 3)6 years or
Eurocurrency liabilities, both o f which
are subject to a reserve requirement
ratio of three percent. The legislative
history of the Garn-St Germain Act
indicates that the Board has 60 days to
implement this provision (H.R. Rep. No.
775, 97th Cong., 2nd Sess. 5 (1982)).
The Board has amended Regulation D
to implement the exemption from
reserve requirements provided by the
Gam-St Germain Act. While the Garn-St
Germain Act provides that institutions
may designate the liabilities against
which the exemption will be applied, the
Board has adopted a procedure for
allocating the exemption that will
facilitate the operations o f the Reserve
Banks and preclude the need for an
additional report from depository
institutions to designate allocation of
the exemption. The Board will use these
2The A ct defines reservable lia b ilitie s as
tra n sa ction accounts, nonpersonal tim e deposits,
and Eurocurrency lia b ilitie s as d efin e d in section
19(b)(5) o f the Federal Reserve A ct.
procedures since the choice o f liabilities
will not affect the amount o f reserve
requirements o f a depository institution.
However, should reserve requirements
be changed in the future such that
nonpersonal time deposits or
Eurocurrency liabilities had a higher
reserve requirement, the Board would
reconsider the order of allocating the
exemption.
Under the Board’s action, the Federal
Reserve Banks will calculate a
depository institution’s reserve
requirements taking into account the $2
million o f reservable liabilities that are
subject to a zero percent reserve
requirement. The exemption will be
applied first to transaction accounts and
then to other types of reservable
liabilities. The amount of the exemption
applied to total transaction accounts
will be subtracted from a depository
institution’s low reserve requirement
tranche. The exemption will be applied
to reservable liabilities as follows:
F or institutions that are n ot a llo w ed a
ph ase-in on N O W accou n ts:
1. New NOW accounts (NOW
accounts less allowable deductions);
2. Net other transaction accounts
(other transaction accounts less
allowable deductions);
3. Nonpersonal time and savings
deposits with maturities o f less than 3)6
years;
4. Eurocurrency liabilities.
For institutions that a re a llo w ed a
ph ase-in on N O W accou n ts:
1. Net transaction accounts;
2. Nonpersonal time and savings
deposits with maturities of less than 3)6
years;
3. Eurocurrency liabilities.
A single depository institution will be
allowed only one $2 million exemption
from reserve requirements. Thus, for
depository institutions with offices in
more than one state or in more than one
Federal Reserve District, an allocation
of the exemption will be required.
Initially, the Reserve Banks will allocate
the $2 million exemption in the same
proportion that the low reserve tranche
for transaction accounts has been
allocated by a depository institution, an
Edge or Agreement corporation, or a
foreign bank’s U.S. branches or
agencies. Beginning in 1983, such
institutions will be permitted to
designate the specific offices to which
the exemption will apply. The amount o f
exemption allocated to a particular
office may not exceed the amount o f the
low reserve tranche that is allocated to
that office.
The Gam-St German Act also
provides that the Board shall issue a
regulation before December 31 of each
2
year, beginning in 1982, adjusting for the
next calendar year the dollar amount of
reservable liabilities exempt from
reserve requirements. The change in the
amount is to be made only if the total
reservable liabilities held at all
depository institutions increases from
one year to the next. The increase in the
tranche is to be 80 percent o f the
percentage increase in total reservable
liabilities af all depository institutions
determined as of June 30 each year. The
growth in total reservable liabilities of
all depository institutions from June 30,
1981 to June 30,1982, was 4.33 percent.
In accordance with this provision o f the
Garn-St Germain Act, the Board is also
amending Regulation D to Increase the
amount o f the reserve requirement
exemption to $20.1 million. In order to
aid Federal Reserve Banks in the
transition to the new exemption, this
increased amount will apply with the
implementation o f the reserve
requirement exemption.
This amendment will be effective for
the reserve computation period that
begins on December 9,1982. For a
depository institution that reports
deposits and maintains reserves on a
quarterly basis, reserve requirements
will be reduced for the reserve
maintenance week that begins on
December 23,1982, regardless o f when
such an institution’s most recent reserve
computation period occurred. In
addition, all entities currently submitting
Form FR 2900 will continue to submit
reports to the Federal Reserve under
current reporting procedures. The Board
will be considering revised reporting
procedures in the near future.
The provisions o f 5 U.S.C. 553(b)
relating to notice and public
participation have not been follow ed in
connection with adoption of this
amendment because the change
involves the implementation o f a
statutory provision that is effective
within 60 days o f enactment. Thus, the
Board has determined that notice and
public participation is unnecessary in
connection with this action. The
effective date o f the amendment has not
been deferred pursuant to 5 U.S.C.
553(d), since the Board’s action relieves
a restriction by reducing reserve
requirements o f depository institutions.
List of Subjects in 12 CFR Part 204
Banks, banking, Currency, Federal
Reserve System, Penalties, Reporting
requirements.
PART 204— [AMENDED]
Pursuant to its authority under section
411 of the Gam-St German Depository
Institutions Act of 1982 (Pub. L 97-320;
96 Stat. 1520; to be codified at 12 U.S.C.
\61(b) (11)). the Board amends
Regulation D (12 CFR Part 204) effective
December 9.1982, as follows:
1. In § 204.3 by adding a new
paragraph (a)(3) to read as follows:
§ 204.3
Computation and maintenance.
(a) * * *
(3)
Allocation o f exemption from
reserve requirements, (i) In determining
the reserve requirements o f a depository
institution, the exemption provided for
in § 204.9(a) shall apply in the following
order of priorities: (A) First, to net
transaction accounts that are first
authorized by federal law in any state
after April 1,1980, (B) Second, to other
net transaction accounts; and (C) Third,
to nonpersonal time deposits or
Eurocurrency liabilities starting with
those with the highest reserve ratio
under § 204.9(a) and then to succeeding
lower reserve ratios.
(ii) A depository institution, United
States branches and agencies o f the
same foreign bank, or an Edge or
Agreement corporation shall, if possible,
assign the reserve requirement
exemption of § 204.9(a) to only one
office or to a group of offices filing a
single aggregated report of deposits. If
he reserve requirement exemption
cannot be fully utilized by a single office
or by a group of offices filing a single
report of deposits, the unused portion of
the exemption may be assigned to other
offices of the same institution until the
amount of the exemption or reservable
liabilities is exhausted. A depository
institution, foreign bank, or Edge or
Agreement corporation shall determine
this assignment subject to the restriction
that if a portion of the exemption is
assigned to an office in a particular
state, any unused portion must first be
assigned to other offices located within
the same state and within the same
Federal Reserve District, that is, to other
offices included on the same aggregated
report of deposits. The exemption
may be reallocated at the beginning of a
calendar year, or, if necessary to avoid
underutilization o f the exemption, at the
beginning of a calendar month. The
amount of the reserve requirement
exemption,allocated to an office or
group of offices may not exceed the
amount of the low reserve tranche
allocated to such office or offices under
this paragraph.
introductory text of paragraph (a)(1) and Pilecki, Senior Attorney (202/452-3281),
Legal Division, Board of Governors of
paragraph (a)(2) to read as follows:
the Federal Reserve System,
§ 204.9 Reserve requirement ratios.
Washington, D.C. 20551.
(a)(1) R es e r v e p ercen ta g es. The
INFORMATION: Effective
following reserve ratios are prescribed SUPPLEMENTARY
2,1984, the Board of Governors
for all depository institutions, Edge and February
amended Regulation D— Reserve
Agreement corporations and United
of Depository Institutions
States branches and agencies of foreign Requirements
(12 CFR Part 204) to introduce
banks:
contemporaneous reserve requirements
(2) E xem ption from r e serv e
(CRR) on transaction accounts for
requirem ents. Each depository
medium-size and larger depository
institution, Edge or Agreement
instead of the lagged
corporation, and U.S. branch or agency institutions
procedure now in effect. Under the
of a foreign bank is subject to a zero
Board's action, depository institutions
percent reserve requirement on an
that have total deposits o f $15 million or
amount of its transaction accounts
more, Edge and Agreement corporations,
subject to the low reserve tranche in
and U.S. branches and agencies of
paragraph (a)(1), nonpersonal time
foreign banks will be required to
deposits, or Eurocurrency liabilities or maintain
reserves on
any combination thereof not in excess of transactionrequired
accounts on a daily average
$2.1 million determined in accordance
basis for a 14-day maintenance period
with § 204.3(a)(3) of this Part.
ending on the first W ednesday after the
* * * * *
By order of the Board of Governors.
Decem ber 1, 1982.
William W. Wiles,
Secretary of the Board.
(FR I)oc. 82-33317 Filed 12-7-82: 8:45 am)
b il l in g c o d e
6210-01-M
12 CFR Part 204
[Docket No. R-0442; Reg. D]
Reserve Requirements of Depository
Institutions; Contemporaneous
Reserve Requirements Member Bank
Phase-in
AGENCY; Board o f Governors of the
Federal Reserve System.
ACTION: Final rule.
s u m m a r y : The Board of Governors has
amended Regulation D— Reserve
Requirements of Depository Institutions
(12 CFR Part 204) to revise the date for
the end o f the phase-in of reserve
requirements for member banks to
coincide with the beginning of
contemporaneous reserve requirements
(CRR)— February 2,1984. The Board
previously announced a change to CRR
to enhance the conduct of monetary
policy by strengthening the linkage
between the supply of reserves and the
money supply (47 FR 44705). The Board
believes that changing the end of the
reserve requirement phase-in schedule
for member banks will assist such banks
in implementing CRR.
EFFECTIVE DATE: December 31,1982
FOR FURTHER INFORMATION CONTACT:
................
2. In § 204.9, by revising the
Gilbert T. Schwartz, Associate General
Counsel (202/452-3625), or Paul S.
14-day computation period, which ends
on a Monday. Thus, the end of the reserve
maintenance period for transaction
accounts will be lagged by only two
days from the end of the reserve
computation period for transaction
accounts. The 14-day reserve
maintenance period for other reservable
liabilities will begin 17 days after the
end of the corresponding 14-day reserve
computation period.
Under the Monetary Control Act of
1980 (Title I of Pub. L. 96-221) ("M CA"),
member banks and certain other
institutions that are required to maintain
reserves in the same manner as member
banks are currently subject to a phase-in
of reserve requirements. In this regard,
the MCA provides that member banks
shall move from the reserve
requirements in effect prior to the MCA
to the generally lower reserve
requirements of the MCA over a period
o f not more than four years. This phasein currently is scheduled to end on
March 1,1984. However, in view o f the
adoption of CRR, the Board believes
that changing the end of the phase-in
date to coincide with the start of CRR
will assist member banks as they adjust
their operations to the new reserve
maintenance procedures. Accordingly,
the Board is amending Regulation D so
that member banks will end their phasein o f reserve requirements on February
2, 1984.
5 U.S.C. 553(b).(46
58185),
In accordance with
FR
the Board has previously
requested public comment on the
subject of CRR, including the specific
issues of the appropriate
implementation date and the operational
considerations of CRR for depository
institutions. In addition, public comment
concerning the phase-in schedule was
received by the Board in 1980 in
connection with the implementation of
the MCA (45 FR 38388). The comments
received at that time indicated that
member banks desired an earlier end to
the reserve requirement phase-in.
Accordingly, the Board believes that
further public participation with respect
to this action is unnecessary and
contrary to the public interest.
List o f Subjects in 12 CFR Part 204
Banks, Banking, Currency, Federal
Reserve System, Penalties, Reporting
requirements.
PART 204—rAMENDED]
Pursuant to its authority under
sections 19, 25 and 25 (a) o f the Federal
Reserve Act (12 U.S.C. 461, 601 e t seq ..
611 e t seq.) and under section 7 o f the
International Banking Act o f 1978 (12
U.S.C. 3105), effective December 31,
1982, the Board amends Regulation D (12
CFR Part 204) by revising paragraph
(b)(2)(ii) of § 204.4 to read as follows:
§ 204.4
*
*
Transitional adjustments.
*
*
*
(b) Members and form er members.
*
*
2
*
( ) *
*
*
(i) * * *
(ii) Shall increase the amount of its
required reserves on all other deposits
computed under § 204.3 by an amount
determined by multiplying the amount
by which required reserves computed
using the reserve ratios that were in
effect on August 31,1980 (§ 204.9(b)),
exceed the amount of required reserves
computed under § 204.3, times the
appropriate percentage specified below
in accordance with the following
schedule:
Reserve maintenance periods occurring
between
Percent
age 1
12 CFR Part 204
[Docket No. R-0440; Reg. DJ
Reserve Requirements of Depository
Institutions; Money Market Deposit
Account
Board o f Governors of the
Federal Reserve System.
a c t io n : Final rule.
agency:
SUMMARY: The Board of Governors has
amended Regulation D— Reserve
Requirements of Depository Institutions
(12 CFR Part 204) to establish reserve
requirements on the money market
deposit account ("MMDA"), which was
established by the Depository
Institutions Deregulation Committee
(“ DIDC” ), effective December 14,1982.
The Board has determined that the same
reserve requirements that apply to
savings deposits will apply to an MMDA
that does not permit more than six
internal or third party transfers or
payments per month (no more than three
of which may be checks under DIDC
rules). Such an MMDA in which the
entire beneficial interest is held by a
natural person or natural persons and
which is nontransferable will be
regarded as a personal savings deposit,
which is not subject to reserve
requirements; such an MMDA that is
transferable, or in which any beneficial
interest is held by other than a natural
person will be regarded as a
nonpersonal time deposit with a
maturity of less than 3)4 years and
subject to a reserve requirement of three
percent. An MMDA that permits the
depositor monthly to make more than
six automatic or preauthorized transfers
or third party payments, including
telephone transfers to another account
of the depositor at the same institution
will be subject to transaction account
reserve requirements. This action was
taken in order to establish a reserve
requirement on the MMDA recently
authorized by the DIDC.
EFFECTIVE DATE: December 14,1982.
FOR FURTHER INFORMATION CONTACT:
Nov. 13. 1980 and Sept 2. 1981
Sept 3, 1981 and Mar 3. 1982 ..
Mar 4. 1982 and Sept 1. 1982 ..
Sept 2. 1982 and Mar 2, 1983 ..
Mar 3. 1983 and Aug. 31. 1983 .
Sept. 1. 1983 and Feb 1. 1984 ..
Feb. 2, 1984 and forward..... .......
76
62 5
50
37.5
25
125
0
'Applied to difference to compute amount to be added
By order o f the Board of Governors,
December 1, 1982.
William W. Wiles,
Secretary of the Board.
[KR Doc. 82-33318 Filed 12-7-82; 8:45 am)
BILLING CODE 6210-01-M
Gilbert T. Schwartz, Associate General
Counsel (202/452-3625), or Paul S.
Pilecki, Senior Attorney (202/452-3281),
Legal Division, Board of Governors of
the Federal Reserve System,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The
Depository Institutions Deregulation
Committee (“ DIDC” ) has established a
new deposit account that may be
offered by federally-insured commercial
banks, savings and loan associations
and mutual savings banks, as required
by the Garn-St Germain Depository
Institutions Act of 1982 (Pub. L. 97-320)
4
(“ Garn-St Germain A ct” ). The new
money market deposit account
(“ MMDA” ) has the following principal
characteristics: (1) An initial and
average balance requirement of no less
than $2,500; (2) no minimum maturity
requirement, but institutions are
required to reserve the right to require at
least seven days' notice prior to
withdrawal; (3) no interest rate ceiling
on deposits that satisfy the initial and
average balance requirements; and (4)
no more that six preauthorized,
automatic or other third party transfers
per month, of which no more than three
can be checks, and an unlimited number
of telephone transfers from the MMDA
to another account of the depositor at
the same institution. Institutions may
offer the MMDA to depositors beginning
December 14,1982.
The Gam-St Germain Act provides
that an account established under that
Act that is not a “ transaction account"
as defined by Regulation D on August 1,
1982, "shall not be subject to transaction
account reserves, even though no
minimum maturity is required, and even
though up to three preauthorized or
automatic transfers and three transfers
to third parties are permitted monthly"
(96 Stat. 1501). Under the DIDC’s rules,
depository institutions may offer the
MMDA with the following transactions
features: (1) A maximum of six transfers
per month (or statement cycle of at least
four weeks) from the MMDA to another
account of the depositor or to a third
party that are preauthorized or
automatic, but no more than three of
these transfers may be by check; (2)
telephone transfers to a third party or
transfers to a third party effectuated
through a point-of-sale terminal or an
automated teller machine are regarded
as “ preauthorized transfers” and are
subject to the maximum of six transfers
per month; and (3) an unlimited number
of transfers by telephone from the
MMDA to another account of the
depositor at the same institution. The
DIDC’s rules also allow institutions to
permit withdrawals not subject to the
limit of six per month in person, by
messenger, or by mail to the depositor
directly in cash, by check, by credit to
another account of the depositor, or to a
third party by cash, check, or credit. The
DIDC has noted that it will reconsider at
its December 6,1982 meeting whether
unlimited telephone transfers from the
MMDA to another account of the
depositor should continue to be
permitted and it has advised depository
institutions of this possible change.
The Board has amended Regulation D
to apply reserve requirements to
MMDAs as follows:
1. An MMDA will be subject to
reserve requirements as a transaction
a ccou n t if it authorizes more than six
transfers per month (or statement cycle
of at least four weeks) to another
account o f the depositor at the same
institution, to the institution itself, or to
a third party by means o f preauthorized,
automatic or telephone agreement,
order, or instruction; or within these
transfers, the depositor is permitted to
draw more than three checks or drafts
per month. An MMDA that has the
capacity for transfers in excess of these
limits will be regarded as a transaction
account whether or not the depositor
actually exceeds the limits. However, an
MMDA will not be regarded as a
“ transaction account" if an institution
follows the DIDC’s procedures in 12 CFR
1204.122(e)(2) for limiting the number o f
transfers that may be made by an
accountholder. (Depository institutions
should not offer to open multiple
MMDAs for customers in order to
enable customers to have the ability to
effectuate in aggregate more than six
transfers per month from such accounts.
Each MMDA subject to such
arrangements will be regarded as a
transaction account.)
2. An MMDA will be subject to
reserve requirements as a n on person al
tim e d ep osit with a maturity o f less than
3)6 years, which persently have a
reserve requirement o f three percent
under the Monetary Control Act, if:
a. Any beneficial interest in the
account is held by a depositor that is not
a natural person or the account is
transferable; and
b. No more than six transfers per
month (or statement cycle o f at least
four weeks) to another account o f the
depositor at the same depository
institution, to the institution itself, or to
a third party by means of a
preauthorized, automatic or telephone
agreement order or instruction, and no
more than three of such six transfers
may be by checks or drafts drawn by
the depositor.
3. An MMDA will be regarded as a
p erson a l tim e d ep osit not subject to
basic reserve requirements under the
Monetary Control Act if:
a. The entire beneficial interest in the
account is held by a natural person or
natural persons;
b. The account is nontransferable; and
c. No more than six transfers per
month (or statement cycle o f at least
four weeks) to another account of the
depositor at the same depository
institution, to the institution itself, or to
a third party by means o f a
preauthorized, automatic or telephone
agreement order or instruction, and no
more than three of such six transfers
may be by checks or drafts drawn by
the depositor.
For member banks and institutions
maintaining reserves in the same
manner as member banks, MMDAs will
be regarded as savings deposits for
purposes o f applying the transitional
adjustments of Regulation D. Thus,
MMDAs issued by member banks that
are personal time deposits will be
subject to a small reserve requirement
until the completion o f the phase-in
period required by the Monetary Control
Act.
With respect to the reserve
requirement treatment of MMDAs that
permit telephone transfers beyond six
transfers per month, the Board believes
that the ability to make such transfers
increases the potential for MMDAs to
substitute for transaction accounts. The
capacity for daily transfers to a
depositor’s checking account makes the
MMDA a much more useful cash
management device. The Board believes
that regarding such accounts as
transaction accounts is fully consistent
with the Gam-St Germain Act.
Because commercial banks, mutual
savings banks, and savings and loan
associations may offer the MMDA as of
December 14,1982, the Board finds that
the application of the notice and'public
participation provisions of 5 U.S.C. 55^
to this action would be contrary to the
public interest and that good cause
exists for making this action effective
December 14,1982.
List of Subjects in 12 CFR Part 204
Banks, banking, Currency, Federal
Reserve System, Penalties, Reporting
requirements.
PART 204—[ AMENDED]
Pursuant to its authority under
sections 19, 25 and 25(a) of the Federal
Reserve A ct (12 U.S.C. 461, 601 e t seq.,
611 e t seq.), under section 7 of the
International Banking A ct o f 1978 (12
U.S.C. 3105), and under section 327 o f
the Gam-St Germain Depository
Institutions Act o f 1982 (12 U.S.C. 3503;
96 Stat. 1501) the Board o f Governors
amends Regulation D, effective
December 14,1982, by revising
paragraphs (b)(2), (d), and (e) of § 204.2
to read as follows:
§ 204.2
*
*
Definitions.
*
*
*
(b) * * *
(2) A "demand deposit” does not
include:
(i) Checks or drafts drawn by the
depository institution on the Federal
Reserve or on another depository
institution;
5
(ii) A deposit or account issued
pursuant to 12 CFR 1204.121, including
those with an original maturity or
required notice period o f seven to 13
days;
(iii) A deposit or account issued
pursuant to 12 CFR 1204.122 under
which the depository institution
reserves the right to require at least
seven days’ notice of an intended
withdrawal before withdrawal is made,
including those with an original maturity
or required notice period of one to 13
days; or
(iv) For depository institutions not
subject to the rules o f the Depository
Institutions Deregulation Committee
under 12 U.S.C. 3501 e t seq.,
(A) A deposit or account issued with
an original maturity or required notice
period o f seven to 13 days if such
deposit or account is nonnegotiable,
subject to a minimum balance o f $20,000,
and not otherwise a transaction account
under section 204.2(e) of this Part; or
(B) A deposit or account under which
the depository institution reserves the
right to require at least seven days’
notice of an intended withdrawal before
withdrawal is made, including those
with an original maturity or required
notice period o f one to 13 days, and not
otherwise a transaction account under
§ 204.2(e) o f this Part.
*
*
*
*
*
(d)(1) "Savings deposit" means a
deposit or account:
(i)
(A) With respect to which the
depositor is not required by the deposit
contract but may at any time be
required by the depository institution to
give written notice o f an intended
withdrawal not less than 14 days before
withdrawal is made, and that is not
payable on a specified date or at the
expiration o f a specified time after the
date o f deposit; and
(B) For depository institutions subject
to 12 CFR Part 217 or 12 CFR Part 329,
funds deposited to the credit of, or in
which any beneficial interest is held by,
a corporation, association, partnership
or other organization operated for profit
do not exceed $150,000 per depositor at
the depository institution; or
(ii) Issued pursuant to 12 CFR 1204.122
under which the depository institution
reserves the right to require at least
seven days’ notice o f an intended
withdrawal before withdrawal is made,
or for depository institutions not subject
to the rules o f the Depository
Institutions Deregulation Committee
under 12 U.S.C. 3501 e t seq., a deposit or
account under which the depository
institution reserves the right to require
at least seven days’ notice o f an
intended withdrawal before withdrawal
is made.
(2) A deposit may continue to be
classified as a savings deposit even if
the depository institution exercises its
right to require notice of withdrawal.
(3) A “ savings deposit" includes a
regular share account at a credit union
and a regular account at a savings and
loan association.
(4) "Savings deposit” does not include
funds deposited to the credit o f the
depository institution's own trust
department where the funds involved
are utilized to cover checks or drafts.
Such funds are "transaction accounts.”
(e)(1) “Transaction account” means a
deposit or account on which the
depositor or account holder is permitted
to make withdrawals by negotiable or
transferable instrument, payment orders
o f withdrawal, telephone transfers, or
other similar device for the purpose of
making payments or transfers to third
persons or others. “Transaction
account” includes:
(i) Demand deposits;
(ii) Deposits or accounts subject to
check, draft, negotiable order of
withdrawal, share draft, or other similar
item;
(iii) Savings deposits or accounts in
which withdrawals may be made
automatically through payment to the
depository institution itself or through
transfer of credit to a demand deposit or
other account in order to cover checks
or drafts drawn upon the institution or
to maintain a specified balance in, or to
make periodic transfers to, such
accounts (automatic transfer accounts);
(iv) Deposits or accounts in which
payments may be made to third parties
by means of an automated teller
machine, remote service unit or other
electronic device;
(v) Deposits or accounts in which
payments may be made to third parties
by means o f a debit card;
(vi) Except as provided in paragraph
(e)(2) of this section deposits or
accounts under the terms of which, or
which by practice of the depository
institution, the depositor is permitted or
authorized to make more than three
withdrawals per month for purposes of
transferring funds to another account or
for making a payment to a third party by
means of preauthorized or telephone
agreement, order or instruction. An
account that permits or authorizes more
than three such withdrawals in a
calendar month, or statement cycle (or
similar period) of at least four weeks, is
a “ transaction account" whether or not
more than three such withdrawals
actually are made during such period. A
‘■preauthorized transfer" includes any
arrangement by the depository
institution to pay a third party from the
account of a depositor upon written or
oral instruction (including an order
received through an automated clearing
house (ACH)), or any arrangement by a
depository institution to pay a third
party from the account of the depositor
at a predetermined time or on a fixed
schedule. An account is not a
“transaction account,” under paragraph
(e)(l)(vi) of this section, by virtue of an
arrangement that permits withdrawals
for the purpose of repaying loans and
associated expenses at the same
depository institution (as originator or
servicer);
(vii) Deposits or accounts maintained
in connection with an arrangement that
permits the depositor to obtain credit
directly or indirectly through the
drawing of a negotiable or
nonnegotiable check, draft, order or
instruction or other similar device
(including telephone or electronic order
or instruction) on the issuing* institution
that can be used for the purpose of
making payments or transfers to third
persons or others, or to a deposit
account of the depositor. Deposits that
are subject to arrangements established
before October 5,1982, will not be
regarded as transaction accounts (A)
until the deposit issued in connection
with the line o f credit is extended, or
matures and is renewed, or (B) if the
deposit issued in connection with the
line of credit matures and is
automatically renewed on or before
December 31,1982; and
(2) Not withstanding paragraphs (e)
(1) (ii), (1) (iii). (1) (iv), and (1) (v) of this
section, a “ transaction account" does
not include a deposit or account issued
pursuant to 12 CFR 1204.122 (or, for a
depository institution that is not subject
to the rules of the Depository
Institutions Deregulation Committee
under 12 U.S.C. 3501 et seq., a deposit or
account under which the depository
institution reserves the right to require
seven days’ notice of an intended
withdrawal prior to withdrawal) under
the terms of which the depositor is not
permitted or authorized to make more
than six transfers per calendar month,
or statement cycle (or similar period) of
at least four weeks, to another account
of the depositor at the same institution, to
the institution itself, or to a third party
by means of preauthorized, automatic or
telephone agreement, order, or
instruction and no more than three of
such six transfers may be by checks or
drafts drawn by the depositor.
*
*
*
*
*
By order of the Board of Governors.
December 1.1982.
William W . W iles
Secretary of the Board
|FR Doc. 82-33319 Filed 12-7-82: 8:45 am|
BILLING CODE 6210-41-M
12 CFR Part 204
[Docket No. R-0439; Reg. D]
Reserve Requirements of Depository
Institutions; Reserve Requirement
(viii) A deposit or account issued
Ratios
pursuant to 12 CFR 1204.122 (or, for a
depository institution that is not subject AGENCY: Board of Governors of the
to the rules of the Depository
Federal Reserve System.
Institutions Deregulation Committee
: Final rule.
under 12 U.S.C. 3501 et seq., a deposit or
account under which the depository
The Board is amending
institution reserves the right to require SUMMARY:
Regulation D— Reserve Requirements of
seven days’ notice of an intended
Depository Institutions (12 CFR Part
withdrawal prior to withdrawal) and
204)— to adjust the dollar amount of
under the terms of which, or which by
transaction accounts subject to a
practice of the depository institution, the reserve
requirement ratio o f 3 per cent
depositor is permitted or authorized to for depository
institutions, Edge and
make more than six transfers per
Corporations and United
calendar month, or statement cycle (or Agreement
and agencies of foreign
similar period) of at least four weeks to States branches
as required by the Monetary
another account of the same depositor banks,
Act o f 1980 (Title I o f Pub. L. 96at the same institution, to the institution Control
221). Under the amendment, the first
itself or to a third party by means of
million of an institution’s net
preauthorized, automatic, or telephone $26.3
transaction accounts wili be subject to a
agreement, order, or instruction or,
3 per cent reserve ratio, and amounts in
within these transfers, to draw more
of $26.3 million will be subject to
than three checks or drafts per calendar aexcess
12 per cent reserve ratio. Presently,
month or statement cycle (or similar
only the first $26 million of a depository
period) of at least four weeks. An
institution’s net transaction accounts are
account that authorizes transfers in
subject
to a 3 per cent reserve ratio.
excess of these limits is a transaction
EFFECTIVE DATE: December 30.1982. The
account whether or not the depositor
first reserve maintenance period to
actually makes any transfers.
a c t io n
6
which the amendment applies
commences January 13,1983.
FOR FURTHER INFORMATION CONTACT:
Gilbert T. Schwartz, Associate General
Counsel (202/452-3625), Paul S. Pilecki,
Senior Attorney (202/452-3281) or
Beverly A. Belcamino, Legal Assistant
(202/452-3623), Legal Division, Board o f
Governors of the Federal Reserve
System, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The
Monetary Control A ct of 1980 (Title I of
Pub. L. 96-221) (“ M CA” ) requires each
depository institution to maintain with
the Federal Reserve System reserves
against its transaction accounts and
nonpersonal time deposits, as
prescribed by Board regulations. The
initial reserve requirements imposed
under the MCA were set at 3 per cent
for each depository institution’s
transaction accounts o f $25 million or
less and at 12 per cent on transaction
accounts above $25 million, which the
Board is authorized to vary between 8
and 14 per cent. The MCA further
provides that the Board shall issue a
regulation before December 31, of each
year, beginning in 1981, adjusting for the
next calendar year the total dollar
amount of the transaction account
tranche against which reserves must be
maintained at a ratio of 3 per cent. The
increase in the tranche is to be 80 per
cent o f the percentage increase in total
transaction accounts for all depository
institutions determined as of June 30 of
each year.
At present, the amount o f the low
reserve tranche is $26 million. The
growth in the total net transaction
accounts of all depository institutions
from June 30,1981, to June 30,1982, was
1.63 per cent. In accordance with these
provisions of the MCA, the Board is
amending Regulation D to increase the
amount of the low reserve tranche for
transaction accounts for 1983 to $26.3
million.
The provisions of 5 U.S.C. 553(b)
relating to notice and public
participation have not been follow ed in
connection with the adoption of this
amendment because the amendment
involves an adjustment prescribed by
statute. Thus, the Board believes that
notice and public participation is
unnecessary and contrary to the public
interest.
List of Subjects in 12 CFR Part 204
to the Board’s authority under section 19
o f the Federal Reserve Act, 12 U.S.C. 461
et seq., § 204.9 of Regulation D (12 CFR
Part 204) is amended by revising
paragraph (a)(1) to read as follows:
§ 204.9
Reserve requirement ratios.
(a)(1) R eserve percentages. The
following reserve ratios are prescribed
for all depository institutions, Edge and
Agreement Corporations and United
States branches and agencies of foreign
banks:
Category
Reserve requirement
N et transaction accounts:
$0-$26.3 million....................... 3% of amount.
Over $26.3 m illion................... $789,000 plus 12% of
amount over $26.3
million.
N onpersonal tim e deposits:
By original maturity (or
notice period):
Less than 314 years 3
(percent).
3)4 years or more (per- 0
cent).
Eurocurrency lia b ilitie s (percent).... 3
*
*
*
*
*
Banks, banking, Currency, Federal
Reserve System, Penalties, Reporting
requirements.
By order of the Board of Governors,
December 1,1982.
PART 204—[AMENDED]
Secretary of the Board.
Effective December 30,1982, pursuant
William W . W iles,
[FR Doc. 82-33316 Filed 12-7-82; 8:45 am]
BILLING CODE 6210-01-M
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
INTEREST ON DEPOSITS
AMENDMENT TO REGULATION Q
(effective October 15, 1982)
Depositors Eligible to Maintain NOW Accounts
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Docket No. R-0438]
interest on Deposits; Regulation Q;
Depositors Eligible To Maintain NOW
Accounts
AGENCY: Board o f Governors o f the
Federal Reserve System.
a c t io n : Final rules.
The Board o f Governors has
amended Regulation Q— Interest on
Deposits (12 CFR Part 217) to provide
that all governmental units are eligible
to maintain NOW (Negotiable Order o f
Withdrawal) accounts at member banks.
This action conforms Regulation Q with
provisions o f the Gam-St Germain
Depository Institutions Act o f 1982 (Pub.
L. 97-320. 96 Stat. 1469).
EFFECTIVE DATE: October 15,1982.
summary:
FOR FURTHER INFORMATION CONTACT:
Gilbert T, Schwartz, Associate General
Counsel (202/452-3625), Paul
Pilecki,
Senior Attorney (202/452-3281), or
Beverly A. Belcamino. Legal Assistant
(202/452-3623). Legal Division, Board o f
Governors o f the Federal Reserve
System, Washington,
20051.
SUPPLEMENTARY INFORMATION: The
Consumer Checking Account Equity A ct
o f 1980 (Title III o f Pub. L. 9&-221)
(“ A ct” ) authorized depository
institutions nationwide, effective
December 31,1980, to permit the owner
S.
D.C.
o f a deposit or account on which interest
or dividends are paid to make
withdrawals by negotiable or
transferable instruments for the purpose
o f making transfers to third parties
(“ NOW accounts” ) (12 U.S.C. 1832(a)
(1)). Under this statute, N O W accounts
were available only to individuals and
certain organizations operated primarily
for religious, charitable, philanthropic,
educational and other similar purposes
and not for profit. On September 16,
1981, the Board adopted an
interpretation to clarify the rules
concerning the class of depositors
eligible to maintain NO W accounts (12
CFR 217.157). This interpretation
provides that governmental units
generally are not permitted to maintain
NO W accounts.
Section 706 of the Gam-St Germain
Depository Institutions A ct o f 1982 (Pub.
L. 97-320, 96 Stat. 1469) (“ Garn-St
Germain A ct” ), which was enacted on
October 15,1982, provides that
“ deposits o f public funds by an officer,
employee, or agent o f the United States,
any State, county, municipality, or
political subdivision thereof, the District
o f Columbia, the Commonwealth of
Puerto Rico, American Samoa, Guam,
any territory or possession o f the United
States, or any political subdivision
th ereof’ may be maintained in NOW
accounts at member banks.
Consequently, the Board is amending its
September 16,1981 interpretation and
§ 217.1(e)(3) o f Regulation Q (12 CFR
217.1(e)(3)) to implement section 706 of
the Gam-St Germain Act.
Because this action implements the
explicit terms o f a statute, which was
effective on October 15,1982, the Board
believes that good cause exists for not
following the notice and public
participation provisions o f 5 U.S.C.
553(b) and for making this action
effective with the date o f enactment e f
the Gam-St Germain Act.
List of Subjects in 12 CFR Part 217
Advertising, Banks, banking, Federal
Reserve System, Foreign banking.
Effective O ctober 15,1982, pursuant to
its authority under section 19(a) o f the
Federal Reserve A ct (12 U.S.C. 461(a)),
the Board amends Regulation Q(12 CFR
Part 217) as follows:
1. By revising paragraph (e)(3) of
§ 217.1 to read as follows:
§217.1
*
*
Definitions.
*
*
*
(e) Savings deposits. * * *
(3)
(i) Deposits subject to negotiable
orders o f withdrawal may be
maintained if such deposits consist o f
funds in which the entire beneficial
interest is held by (A) one or more
individuals; (B) a corporation,
association, or other organization
operated primarily lo r religious,
philanthropic, charitable, educational,
fraternal, or other similar purposes and
not operated for profit; or (C) the United
States, any State of the United States,
PRINTED IN NEW YO R K . FROM F E D E R A L R E G ISTE R , V O L . 47. NO. 234
For this Regulation to be complete, retain:
1) Regulation Q pamphlet, amended effective December 16, 1981.
2) Amendments pamphlet, dated September 1982
3) This slip sheet
[Enc. Cir. No. 9424]
(OVER)
county, municipality, or political
subdivision thereof, the District of
Columbia, the Commonwealth o f Puerto
Rico, American Samoa, Guam, any
territory or possession of the United
States, or any political subdivision
thereof.
(ii) Deposits in which any beneficial
interest is held by a corporation,
partnership, association or other
organization that is operated for profit
or is not operated primarily for religious,
philanthropic, charitable, educational,
fraternal, or other similar purposes, or
that is not a governmental unit
described in subparagraph (i) (C) may
not be classified as deposits subject to
negotiable orders o f withdrawal.
*
*
*
*
*
2. By revising paragraph (a) (1) and
(2) and (d) o f § 217.157 to read as
follows:
§ 217.157 Eligibility for NOW Accounts.
(a) Background. (1) Effective
December 31,1980, the Consumer
Checking A ccount Equity Act o f 1980
(Title III o f the Depository Institutions
Deregulation and Monetary Control A ct
o f 1980; Pub. L. 96-221; 94 Stat. 146)
(“ A ct” ) authorizes depository
institutions nationwide to offer interestbearing checking (NOW ) accounts to
depositors where the “ entire beneficial
interest is held by one or more
individuals or by an organization which
is operated primarily for religious,
philanthropic, charitable, educational, or
other similar purposes and which is not
operated for profit.” (12 U.S.C.
1832(a)(2)). The purpose o f the A ct is to
extend the availability o f NOW
accounts throughout the nation.
Previously, as an experiment, N O W
accounts were authorized to be offered
by depository institutions only in New
England, New York, and New Jersey.
(2)(i) The N O W account experiment
established by Congress in 1973 did not
specify the types o f customers that could
maintain N O W accounts. A s a result,
the rules o f the Federal Reserve and
Federal Deposit Insurance Corporation
specified the types o f depositors eligible
to maintain N O W accounts at member
and insured nonmember banks. In
enacting the NO W account provision in
1980, Congress adopted virtually the
same language concerning NOW
account eligibility that previously had
been adopted by the Board and the
Federal Deposit Insurance Corporation
with regard to the types o f customers
permitted to maintain NOW accounts in
institutions located in the NOW account
experiment region. (12 CFR 217.1(e)(3)
and 12 CFR 329.1(e)(2)). This definition
was based upon longstanding regulatory
provisions concerning eligibility criteria
for savings deposits.
(ii) Effective October 15,1982, section
706 o f the Garn-St Germain Depository
Institutions Act o f 1982 (Pub. L. 97-320;
96 Stat. 1540) specifically extended
NOW account eligibility to funds
deposited by governmental units.
(3) * * *
*
*
*
*
*
(d)
Governmental Units.
Governmental units are generally
eligible to maintain NOW accounts at
member banks. NOW accounts may
consists o f funds in which the entire
beneficial interest is held by the United
States, any State o f the United States,
county, municipality, or political
subdivision thereof, the District of
Columbia, the Commonwealth of Puerto
Rico, American Samoa, Guam, any
territory or possession of the United
States, or any political subdivision
thereof.
*
*
*
*
*
By order o f the Board o f Governors.
November 29,1982.
William W . W iles,
Secretary of the Board.
|FR Doc. 82-32985 Filed 12-3-82: 8:45 am|
DIDC Regulations on the
Money Market Deposit Account
The Depository Institutions Deregulation Committee (DIDC) has issued final
regulations on the new money market deposit account mandated by the Garn-St
Germain Depository Institutions Act o f 1982. The new account can be offered by
federally insured commercial banks, savings and loan associations, and mutual
savings banks.
This regulation and explanatory information has been reprinted from the
Federal Register o f November 29, 1982.
FEDERAL RESERVE BANK
OF NEW YORK
DEPOSITORY INSTITUTIONS
DEREGULATION COMMITTEE
12 CFR Part 1204
[Docket No. D-0026]
Money Market Deposit Account
AGENCY: Depository Institutions
Deregulation Committee.
ACTION:
Final rule.
SUMMARY: The Depository Institutions
Deregulation Committee ("Committee” )
has established a new deposit account
as required by the Gam-St Germain
Depository Institutions Act o f 1982, Pub.
L. No. 97-320 ("Garn-St Germain A ct” or
"A rt"). This new account will be an
insured deposit account under 12 U.S.C.
§§ 1726 and 1813. The new deposit
account has the following principal
characteristics: (1) An initial deposit of
no less than $2,500: (2) an average
balance requirement of no less than
$2,500 w'here the average balance may
be computed over any period up to one
month at a depository institution’s
discretion; (3) no minimum maturity
requirement: (4) a requirement that
depository institutions reserve the right
to require at least seven days notice
prior to withdrawal or transfer o f funds;
(5) no interest rate ceiling on deposits
which satisfy the initial and average
balance requirements; (6) a ceiling equal
to the NOW account rate ceiling for
deposits which do not meet the average
balance requirement; (7) no more than
six preauthorized, automatic or other
third party transfers per month, o f which
no more than three can be checks; and
(8) availability to all depositors.
EFFECTIVE DATE: December 1 4 , 1982.
FOR FURTHER INFORMATION CONTACT.
Alan Priest, Attorney, Office o f the
Comptroller o f the Currency (202/4471880); F. Douglas Birdzell, Counsel, and
Joseph A. DiNuzzo, Attorney, Federal
Deposit Insurance Corporation (202/
389-4147); Rebecca Laird, Senior
A ssociate General Counsel, Federal
Home Loan Bank Board (202/377-6446);
Paul S. Pilecki, Senior Attorney, Board
o f Governors o f the Federal Reserve
System (202/452-3281); or Elaine
Boutilier, Attorney-Adviser, Treasury
Department (202/566-8737).
SUPPLEMENTARY INFORMATION: The
Depository Institutions Deregulation Act
o f 1980 (Title II o f Pub. L. Ntr. 96-221; 12
U.S.C. 3501 et seq.) (“ DIDA") was
enacted to provide for the orderly phase
out and ultimate elimination o f the
limitations on the maximum rates o f
interest and dividends that may be paid
on deposit accounts by depository
institutions as rapidly as econom ic
conditions warrant. Under DIDA, the
Committee is authorized to phase out
interest rate ceilings by any one of a
number of methods including the
creation of new account categories not
subject to interest rate limitations or
with interest rate ceilings set at market
rates of interest
The DIDA was amended by section
327 o f the Garn-St Germain A c t That
A ct requires the Committee to “ issue a
regulation authorizing a new deposit
a ccou nt effective no later than
[December 14,1982].” The A ct also
provides that the new account “ shall be
directly equivalent to and competitive
with money market mutual funds
registered with the Securities and
Exchange Commission under the
Investment Company Act o f 1940.” The
Act further provides that “ [n]o limitation
on the maximum rate or rates of interest
payable on deposit accounts shall apply
to the [new] account.” Finally, the Act
provides that the new account “ shall not
be subject to transaction account
reserves, even though no minimum
maturity is required, and even though up
to three preauthorized or automatic
transfers and three transfers to third
parties are permitted monthly.”
The Committee requested comments
on the new acount required by the GarnSt Germain Act. 47 FR 46530 (October
19,1982). The comments are summarized
below.
Comments
On October 19.1982, the Committee
published in the Federal Register a
request for comments on the new
account. The Act requires the
Committee to issue a regulation that
authorizes the new account effective no
later than December 14,1982. Thus, in
order to permit the Committee to
analyze the comments, and to permit
adequate time for depository institutions
to be able to offer the new account by
December 14,1982, the request for
comments stated that comments must be
received by November 3,1982. The
request for comments listed a number of
specific issues upon which comments
were solicited. It also solicited comment
on any other aspect o f the account
which the public wished to address,
particularly with respect to
characteristics that would make the
account “ directly equivalent to and
competitive with” money market funds.
The Committee received 1,227
comment letters by November 3,1982.
An additional 233 letters were received
after that date and considered by the
Committee at its public meeting on
November 15,1982. The commenters
included 904 commercial banks and
PRINTED IN NEW YORK, FROM
FEDERAL REGISTER.
2
bank holding companies, 347 savings
and loan associations, 67 mutual savings
banks, 4 credit unions, 18 state and
federal regulators, 5 money market
mutual funds arid related institutions, 39
depository institution trade associations
and 76 individuals or other businesses.
A great majority of the commenters
expressed strong support for the
creation o f the new account under the
Gam-St Germain Act that would allow
depository institutions to compete more
effectively with money market funds. A
significant number of commenters urged
the Committee not to limit the account’s
competitiveness and marketability
through excessive regulation o f its
features. Although support for the
general concept o f the new competitive
account was very strong, some
commenters did express serious
concerns. For example, a number of
commenters felt that federal deposit
insurance on the new account might give
depository institutions a competitive
advantage over money market funds.
Similarly, at least one commenter felt
that depository institutions would have
a competitive advantage over money
market funds if no restrictions were
imposed on the interest payable on the
new account. Other commenters
expressed concern that the cost to
depository institutions of shifts of funds
from lower yielding deposit accounts to
the new account might weaken some
depository institutions. Most
commenters who expressed the above
concerns urged the Committee to meet
those concerns through appropriate
structuring o f the new account.
In addition to giving their general
appraisals o f the new account, most
commenters addressed the specific
issues upon which the Committee
solicited comments. The first of these
issues is the appropriate minimum initial
deposit requirement (if any) regarding
the new account. There was no general
consensus on this issue. Approximately
60 percent of the commercial bank
commenters felt that the required initial
deposit should be under $5,000. Banks
expressing this preference were divided
as to whether the account minimum
should be left to each institution’s
discretion or established (generally in
the amount o f $2,500) by the Committee.
Approximately 22 percent of the thrift
institution commenters supported
institutional discretion, over half
supported a minimum less than or equal
to $3,000 (generally at the $2,500 level),
and 26 percent supported an account
minimum over $3,000 (with $5,000 the
most common preference of this group).
There was no consensus regarding the
initial minimum balance among
VOL. 47, NO. 229
individuals and businesses, trade
association or money market fund
related commenters. However,
individuals and businesses most
frequently cited a preference for
institutional discretion on this issue.
The most common concern cited in
justifying a high minimum balance was
the cost impact of funds internally
shifting out of low yielding savings
accounts into the new higher yielding
account. Those advocating a lower
minimum denomination often mentioned
the need for the account to be
competitive with money market funds
because those funds typically have low
minimums.
depository institution’s discretion. This
view was also shared by over 40
percent o f the mutual savings banks
and large majorities of regulators, trade
associations and individuals. In
contrast, money market mutual funds
were in favor of a minimum draft
denomination requirement. Those
opposed to such a requirement asserted
that it would be difficult to enforce,
would be unnecessary given expected
numerical limitations on transactions,
and would be noncompetitive with
money market funds because those
funds are free to set any minimum
denomination. Those favoring the
requirement often cited their perception
that a $500 minimum check
The Committee also solicited
denomination is generally required by
comments on a minimum maintenance
money market mutual funds.
balance. Often citing a desire for
account simplicity, a majority o f all
Regarding the desirability o f a
commenters (including 62 percent o f the requirement that institutions reserve the
depository institutions and 70 percent of right to require seven days (or some
the trade associations) indicated that
other time period) notice prior to
withdrawal from the account, 58 percent
the minimum maintenance balance
o f all depository institution commenters
should be the same as the minimum
were opposed to such a requirement. A
amount required to open the account.
substantial majority o f all other classes
However, regulators, money market
funds, and individuals and other
of commenters, with the exception o f
money market funds and individuals,
businesses tended to support
also opposed the requirement. However,
institutional discretion regarding
some of these commenters appear to
maintenance balances. Those
have mistakenly believed that the issue
commenters that supported a
maintenance balance different from any was whether depository institutions
minimum initial balance often noted that must require prior notice for
withdrawals. Those who understood
money market funds generally allow
that the issue involved only reserving
investors’ balances to decline below
their initial required investment without the right to require notice most often
indicated that the requirement would be
penalty.
perceived by depositors as restricting
Comment was also specifically
the liquidity of the account. Some of
solicited on whether institutions should
those commenters favoring the
be required to pay a lower rate on
deposits which fall below any minimum requirement noted that it would provide
depository institutions with a
maintenance balance the Committee
mechanism which may be needed in
may impose. Sixty five percent o f the
depository institution commenters and a extraordinary circumstances. They
noted that, given remote possibility o f
majority of individuals supported a
such circumstances, the right to require
mandatory lower rate on balances
notice would probably never be
below any required maintenance
exercised.
balance. Many of these commenters
indicated that the cost o f maintaining
Commenters were divided on the
small accounts with transaction features issue o f whether loans to a depositor
should be permitted for the purpose of
would warrant a lower interest rate. In
allowing the depositor to meet any
contrast, a majority of regulators
initial deposit requirement. Regulators,
favored leaving the rate payable on
trade associations and a slight majority
balances under any maintenance
balance to the discretion of depository
o f commercial banks thought such loans
institutions. Those favoring this
should be permitted, while money
approach often noted that money market market funds and 75 percent of the
thrifts thought such loans should not be
funds do not pay a lower rate on small
permitted. Those favoring the loans
accounts.
noted that money market funds are
subject to no loan restrictions and
further stated that any prohibition on
loans would be difficult to enforce.
Those opposed to the loans felt they
would undermine any minimum initial
be
In response to the Committee’s
request for comment on a minimum draft
denomination requirement, a majority of
commerical banks and savings and loan
associations stated that this was a
matter that should left to a
deposit requirement the Committee may
adopt.
Regarding the issue o f additional
deposits into the account, including
sweeps from other accounts, substantial
majorities o f all categories o f
commenters stated that no such
restrictions should be imposed.
The Committee also requested
comments on the establishment o f a
maximum maturity requirement on the
account and on the imposition o f
restrictions on the maximum time period
a depository institution could guarantee
an interest rate. Commenters as a whole
were strongly opposed to a required
maximum maturity. However, results
were mixed regarding the issue of a
maximum period for which a rate of
interest could be guaranteed. M oney
market funds and mutual savings bank
trade groups unanimously favored such
a restriction and a majority o f mutual
savings banks shared this view. In
contrast, a majority o f commercial
banks, regulators, thrifts, trade
associations and individuals preferred
no restriction. Those favoring the
restriction most frequently mentioned a
maximum rate guarantee period of
seven days, but many favoring the
restriction suggested either from 7 to 30
days or 30 days or more. Those favoring
the restriction felt that, if it were not
imposed, all interest rate regulated
accounts would be effectively
deregulated. Those opposing restriction
states that its absence would assist
asset/liability management, provide
flexibility and enhance the
competitiveness o f the new account.
The request for comments also
included the issue o f appropriate
enforcement requirements regarding any
monthly numerical limits the Committee
may establish concerning transactions
on the account. The Committee
specifically requested comments on the
desirability o f monitoring accounts on
an ex post basis, the appropriate
definition o f month, and whether the
date on which a draft is written or the
date on which it is paid by an institution
should control for purposes of any
monthly limit on the number o f drafts. A
large majority o f commenters favored
enforcement through ex post monitoring.
However, there was also significant
support for leaving the enforcement
method to an institution’s discretion.
Finally, 12 percent o f the commenters
favored a requirement that all drafts
over a numerical limit be dishonored.
Often citing the processing difficulties
involved in reading the date o f a draft,
two thirds o f the commenters indicated
a preference for using the date of
3
A
payment, rather than the date a draft is
written, for monitoring compliance.
However, some commenters noted that
use o f the date o f payment might cause
inadvertant violations o f a numerical
limit where payees held checks for
substantial periods prior to obtaining
payment. Roughly one fourth o f the
commenters indicated that the
institution should be able to choose
either the date on which a draft is
written or the date upon which it is paid.
With regard to the definition o f month
for compliance purposes, no consensus
was reached. A slight plurality o f
commenters favored a statement cycle,
but institutional discretion and the
calendar month were also strongly
supported.
The Committee also requested
comments on whether any restrictions
should be established regarding
overdraft credit arrangements offered in
connection with the new account. Often
citing the need for flexibility and
competitiveness, a majority of
depository institutions, regulators, trade
associations and individuals opposed
any restriction cm overdraft
arrangements. However, money market
funds took the opposite position. Those
commenters favoring a restriction
indicated that the new account is not a
transaction account and, therefore, the
accommodation o f overdrafts would be
inappropriate.
The request for comment asked
whether die Committee should allow
unlimited withdrawals by mail,
telephone, messenger, or in person. The
request for comments noted in this
regard that it wasl the opinion of the
Committee’s staff that telephone
transfers should be regarded as
preauthorized transfers if the transfer is
to a third person or to another deposit
account o f die same depositor. Over 70
percent of the commenters favored
unlimited withdrawals o f the type
specified in the request for comments. In
addition, many commenters disagreed
with the staff’s opinion that telephone
transfers from the new account to
another account o f the same depositor
should be considered as preauthorized
transfers.
Regarding whether 30 days (or some
other period) would be sufficient lead
time for institutions to implement
operational changes for the new
account, commenters were almost
evenly divided. Many commenters noted
that the time needed would be directly
related to the degree o f complexity of
the Committee's implementing
regulations.
Discussion of Account Features
Congressional intent that the minimum
not exceed $5,000. A s noted earlier, the
public’s comments on the account did
not indicate a consensus on the question
o f a required initial balance. However,
there was considerable support for
$5,000, $2,500 and no required minimum
balance. Notably, information available
to the Committee indicates that,
although not legally required to do so, 59
percent o f the money market funds have
In terest R a te Ceiling
minimum balance requirements of $1,000
Section 327 o f the Act provides that
or less and 85 percent have minimum
“ [n]o limitation on the maximum rate or balance requirements of $3,000 or less.
rates of interest on deposit accounts
The Committee determined to impose
shall apply to the account. . . .” Based
an initial balance requirement on the
on this clear and explicit legislative
new account o f $2,500. Depository
guidance, and additional corroborative
institutions are free to establish higher
legislative history, the Committee
minimums if they wish. In reaching this
determined to impose no limitation on
determination, the Committee took into
the maximum rate o f interest that can be consideration, among other things, the
paid on deposits in the new account
public comments, the above noted
which meet the minimum balance
practices o f money market funds and the
requirements discussed below.
potential earnings impact on depository
Notably, despite the clear guidance in institutions posed by internal shifts in
their deposits from low er yielding
the Act and its legislative history
accounts to the higher yielding Money
regarding interest rate ceilings, at least
Market Deposit Account. The
one commenter suggested that the
Committee should impose limits on the
Committee believes that a minimum
amount of interest that can be paid on
initial deposit requirement of $2,500 will
the new account. The commenter noted
allow depository institutions to compete
'hata money market fund must pay a
effectively with money market funds
yield which reflects the return on its
without unduly affecting their costs.
portfolio minus appropriate fees. The
For much the same reasons as those
commenter suggested that given this
which led to the decision to set a
fact a ceilingless account would be
minimum initial balance requirement,
inconsistent with the Act’s requirement
the Committee has established a
that the new account be “directly
minimum balance requirement of $2,500
equivalent to and competitive with
for funds maintained in the new
money market mutual funds.” This
account. A s with the minimum initial
commenter suggested that a ceiling
balance requirement, depository
should be imposed whether or not the
institutions are free to set higher
account was insured.
balance requirements if they wish. In
Whether or not the Committee has
considering what minimum balance
discretion to impose an interest rate
requirement is appropriate for the new
ceiling on the new account it is clear
account, the Committee considered,
from the language of the Act and its
among other things, the fact that money
legislative history that Congress plainly market funds typically permit
envisioned that no ceiling would apply
shareholders to maintain balances well
to the new account The Committee
below their required minimum initial
finds no inconsistency or conflict
balance and still earn a market rate of
between the determination not to
interest. Hftwever, the Committee also
impose a ceiling and the requirement of
considered the fact that two thirds of the
the Act that the account be directly
commenters, often citing the need for
equivalent to and competitive with
operational simplicity, favored a
money market funds. Therefore, the
required minimum balance that was the
Committee’s decision to impose no limit
same as any required minimum initial
on the rate of interest that can be paid
deposit. There was not a substantial
on the new account is clearly
number o f commenters supporting a
appropriate under, and consistent with,
minimum balance lower than any initial
the Act.
deposit requirement. Given this fact, and
M inim um B alan ce R equ irem en ts
its belief that a $2,500 minimum balance
requirement will still allow depository
Although the A ct does not specify a
institutions to compete with money
required minimum denomination, the
Conference Report (S. Rep. No. 641, 97th market funds, the Committee
determined that the account will have a
Cong., 2d Sess. (1982)) and other
required minimum balance o f $2,500.
legislative history indicate a
After carefully considering the
public’s comments and giving particular
attention to the A ct’s requirement that
the new account be directly equivalent
to and competitive with money market
funds, the Committee determined the
characteristics of the new account.
These characteristics are discussed
below.
4
Averaging the Balance
In order to permit flexibility to
depository institutions, the Committee
determined to allow each institution to
determine compliance with the minimum
balance requirement (but not the
minimum initial balance requirement) by
using an average daily balance
calculated over any computation period
it chooses, such as one day, one week or
one month, provided that such a
computation period is no longer than
one month. Thus, for example, an
institution could choose to determine
compliance with the minimum balance
requirement through the use o f a one
week computation period. A depositor
will have met the requirement if the
average daily balance in the account
during the one week computation period
is equal to or above $2,500.
In order to make the minimum
balance requirement effective, the
Committee has determined that a ceiling
rate o f interest no higher than the
institution’s NOW account ceiling rate
(currently 5% percent) will be imposed
on accounts which fail to meet the
$2,500 minimum balance requirement.
Institutions may pay a lower rate if they
choose. A majority of commenters
favored such a penalty rate. The NOW
account ceiling rate will apply for the
entire computation period in which the
average balance in the account is less
than $2,500. For example, an institution
which uses an average balance
computed over a seven day period must
pay a depositor a rate not in excess of
the NOW account ceiling rate for the
entire seven day period if the
depositor’s average daily balance during
that seven day period was less than
$2,500. Depending on the computation
period chosen and the interest crediting
practices of the institution, the lower
rate may have to be imposed on an ex
post basis.
A few commenters expressed concern
that the requirement of a penalty rate of
interest might be in violation of the
statutory mandate that the account be
ceilingless. The Committee does not
believe this to be the case. It notes that
Congress left it within the Committee’s
discretion to establish an account with a
minimum balance, which could be as
high as $5,000. The Committee believes
that Congress mandated only that no
interest rate ceiling should apply to
accounts that meet any such
requirement, if established. Therefore,
the Committee believes that it has acted
within its authority, and has provided
additional flexibility to institutions, by
providing for the account to pay a
penalty rate of interest on balances
below the $2,500 required balance
chosen by the Committee.
Maturity
condition that the deposit will be
maintained for over one month (e . g 90
days). In establishing these limitations,
the Committee recognized that an
institution does have the latitude to
establish a maturity o f one month or less
on the account.
In establishing the above described
limitations, the Committee noted that
approximately three fifths of the
commenters did not favor a limitation
on the guarantee of a rate, and over 90
percent of the commenters preferred no
limitation on the maturity o f the
account. However, the Committee also
noted that money market funds are not
empowered to guarantee a rate o f return
on investments. For this reason, and the
fact that allowing depository institutions
to guarantee a rate for over one month
could effectively deregulate virtually all
deposit accounts now subject to interest
rate ceilings, the Committee established
the above described limitations.
Section 327 of the Garn-St Germain
Act provides that the account will not
be subject to transaction account
reserve requirements “ even though no
minimum maturity is required.” The
creation of this exception to the
transaction account reserve
requirements strongly suggests that
Congress intended that the Committee
establish the new account without
imposing a minimum maturity. This
intent is also indicated by the
requirement of section 327 that the
account be “ directly equivalent to and
competitive with money market mutual
funds.” Money market funds generally
do not establish a minimum maturity
and are not required to do so by law or
regulation. Finally, that Congress
intended the account to have no
minimum maturity is supported by the
Reservation o f N otice
Senate Report, which states that the
account "should have no minimum
The Committee imposed a
maturity.” S. Rep. No. 536, 97th Cong., 2d requirement that institutions reserve the
Sess. 19 (1982).
right to require seven d a y s prior notice
The Committee carefully considered
of withdrawals or transfers from the
the above legislative language and
new account. The Committee believes
history regarding Congressional intent
that this is not inconsistent with the
on the issue of minimum maturity. The
previously discussed Congressional
Committee determined that the
intent that the account have no
establishment of a minimum maturity
minimum maturity. This is because the
would be inconsistent with
Committee did not provide that
Congressional intent and would not
institutions must require prior notice for
result in an account directly equivalent
transactions or withdrawals. Rather, the
to and competitive with money market
Committee merely provided that
funds. Therefore, the Committee
institutions must reserve the right to
determined to impose no minimum
require
such prior notice. The
maturity on the account.
Committee determined that if an
The Committee did determine,
institution chooses to exercise its right
however, to prevent depository
to require notice, it must apply that
institutions from effectively offering the
requirement equally to all depositors
account as a long-term deposit. The
that maintain the new account.
Committee determined to impose a
In establishing a reservation o f notice
maximum limitation o f one month on the
requirement, the Committee noted that a
length of time a depository institution
majority o f respondents to the
may commit itself to pay any rate of
Committee’s request for comments did*
interest or commit itself to employ any
not believe that a required reservation
method of calculation o f the rate of
o f notice was needed and, therefore, did
interest on the new account. The
not favor such a requirement. However,
Committee also determined to prohibit
under the Investment Company A ct o f
an institution from conditioning the rate
1940, money market funds may delay
of interest paid or the method of
calculation of the rate of interest paid on redemptions o f shares for up to seven
days. This is similar to the current
the new account on the length o f time a
regulatory requirement that depository
deposit is maintained, if that length of
institutions reserve the right to require
time is longer than one month.
notice o f withdrawals from savings
Accordingly, a depository institution
may not obligate itself to pay the 91-day deposits and NOW accounts. Such a
reservation requirement distinguishes
Treasury bill rate for a period o f six
the new account from demand deposit
months. Nor may a depository
accounts upon which (under current
institution, in effect, guarantee a
law) interest may not be paid. For these
specified or indexed rate of interest for
reasons, and to give institutions a
over one month by agreeing to pay a
degree o f flexibility in unusual
rate [eg., 30%) for one month on the
5
circumstances, the Committee
established the above described
reservation of notice requirement. Based
on experience with savings deposits, it
is likely that such a notice requirement
will be exercised only under extreme
circumstances.
institutions must restrict preauthorized
or automatic transfers from the new
account to other accounts o f the
depositor or to third parties to a
maximum o f six transfers per month, of
which no more than three can be checks.
However, this regulation imposes no
limit on the number of telephone
Transaction Features
transfers from the new account to
another account o f the same depositor
Section 327 o f the A ct provides that
at the same depository institution. It is
the new account will not be subject to
noted, however, that the question o f
transaction account reserve
such unlimited telephone transfers will
requirements “ even though up to three
be reconsidered at the Committee’s next
preauthorized or automatic transfers
meeting. Depository institutions are.
and three transfers to third parties are
therefore, advised that, in the future,
permitted monthly.” The creation o f this
unlimited telephone transfers from the
exception to the Federal Reserve
new account to other accounts o f the
Board’s transaction account reserve
same customer may not be permitted.
requirements strongly suggests that
In establishing the monthly numerical
Congress intended the Committee to
limits on permissible transactions, the
establish the account with at least such
Committee recognized that money
transaction features.
market funds do not impose numerical
Under current industry practice, and
restrictions on transactions. However,
under the rules o f relevant regulatory
the Committee believes that it is
agencies, preauthorized and automatic
appropriate to authorize the new
transfers include transfers o f funds to a
account at this time with the above
third party as well as transfers o f funds described limited transaction features
to another account o f the depositor if
and to consider at its next meeting
such transfers are effected pursuant to
whether to offer an account with more
an agreement made in advance or an
extensive third party payment
arrangement to pay a third party or
capabilities. The Committee notes that
transfer funds to another account at a
institutions are free to offer the new
predetermined time or on a fixed
account with more limited (or no)
schedule. For example, a transfer made
transaction features if they so desire.
pursuant to an agreement between a
Although the Committee limited the
depository institution and its customer
number o f checks under the new
that funds would be transferred from
account, it imposed no minimum
one account to another at a specified
denomination concerning those checks.
interval [e.g., the 10th, 20th and 30th o f
It notes that, although money market
each month) or used to pay specific or
funds commonly impose such
recurrent charges [e.g., a mortgage or
requirements, they are not required to
insurance payment) would be a
do so, but rather do so as a matter o f
preauthorized or automatic transfer.
choice. The Committee determined to
However, the Committee has
give depository institutions this same
determined that telephone transfers
flexibility. A majority o f the responses
made to another account o f the
to the Committee’s request for
depositor in the same institution will not comments on this issue favored giving
be considered under this regulation as
institutions this flexibility.
preauthorized or automatic transfers.
For reasons similar to those outlined
The A ct provides no guidance as to
above concerning checks, the Committee
the meaning o f the phrase “ transfers to
also imposed no minimum denomination
third parties.” However, the A ct’s
requirement concerning preauthorized
legislative history clearly indicates that
or automatic transfers. As with the
minimum denomination o f checks,
the language was intended to include
checks. The Committee determined that, institutions are free to use their
discretion as to what minimum
under the new account, third party
denomination requirements (if any )
transfers can be checks or any transfer
they wish to impose concerning
that could be effected by means o f an
preauthorized or automatic transfers.
automatic or preauthorized transfer.
Although, as discussed above, the
For the present time, the Committee
Committee established limitations on
decided to authorize an account with
automatic and preauthorized transfers
transaction features limited to those
suggested by the A ct’s reference to three o f funds in the new account, the
Committee imposed no limitations on
preauthorized or automatic transfers
the size or frequency o f withdrawals
and three third party transfers per
from the account, or transfers from the
month. Given the previously discussed
account to other accounts o f the same
definition of those terms, depository
6
depositor where such withdrawals or
transfers are effected by mail,
telephone, messenger, automated teller
machine or in person. For purposes of
this regulation, a withdrawal means the
receipt by a depositor of direct payment
from a depository institution of funds he
has deposited in that institution.
A dd ition s to th e A cco u n t
The Committee determined to impose
no restrictions on the size or frequency
of additions to the new account,
including additions effected by sweeps
from other accounts into the new
account. A substantial majority of all
commenters were opposed to such
restrictions.
A v a ila b ility to A ll D ep ositors
The Act does not specify which
persons or entities are eligible for the
new account. However, the Senate
Report indicates that the account shall
be available to all depository institution
customers. S. Rep. No. 536, 97th Cong.,
2
19 (1982).
d Sess.
Other legislative
history provides an equally clear
indication that this was the
Congressional intent. S ee 128 Cong. Rec.
H8436 (daily ed. Oct. 1,1982) (remarks
of Reps. Stanton and St Germain).
Furthermore, money market mutual
funds are not restricted as to the types
of entities from whom they may accept
funds and the Act states that the new
account "shall be directly equivalent to
and competitive with” such funds. Given
these facts, the Committee determined
that the institutions can make the
account available to all persons and
entities.
C om plian ce R ela ted P rovision s
The Committee adopted a number of
compliance related provisions regarding
the new account. In order to ensure
compliance with the account's minimum
initial deposit and balance
requirements, the Committee prohibited
loans for the purpose of meeting those
requirements. A slight majority of
commenters on this issue favored such a
prohibition. Similarly, in order to
preserve the efficacy of the previously
described numerical limits on
preauthorized or automatic transfers
and checks, the Committee provided
that the rate of interest, or other fees, on
an overdraft credit arrangement on an
account to which withdrawals from the
new account can be paid must not be
less than those imposed on overdraft
arrangements of customers who do not
have deposits in the new account. The
Committee noted that almost two thirds
of the commenters on this issue did not
favor such a provision. However, the
Committee believes that the provision is
necessary in order to discourage
account arrangements which would
circumvent the numerical limit on the
new account’s transactional capacities.
The Committee notes that the provision
relates only to fees or other charges on
an account to which withdrawals from
the new account can be paid. It does not
govefn the fees that a depository
institution may wish to impose regarding
overdrafts on the new account.
The previously discussed rules
adopted by the Committee regarding the
new account contain several
requirements expressed in monthly
terms (e . g the monthly numerical
restrictions on transactions, the monthly
limit on agreements to pay any interest
rate, and the permissible use of an
average monthly balance for
maintenance balance purposes.) To
provide institutions with a maximum
degree o f flexibility, the Committee
provided that, for purposes of
compliance with its rules for the new
account which are expressed in monthly
terms, an institution may use either the
calendar month or a statement cycle of
at least four weeks, but not longer than
31 days. However, it is noted that an
institution must consistently utilize
either the calender month or a particular
statement cycle.
Similarly, the Committee decided to
give institutions the option of using
either the date written on a check or the
date on which a check is paid for
purposes of determining compliance
with the limit of three checks per month.
It is noted, however, that an institution
must consistently adhere to the use of
one date or the other. For example, an
institution which has chosen to utilize
the date of payment method may not
count one check as of the day it was
written in order to circumvent the three
checks per month limit.
Finally, the Committee adopted a
requirement which provides that
institutions must either prevent
transactions in excess of the numerical
limitations adopted by the Committee or
adopt procedures to monitor accounts
on an ex post basis and contact
depositors who exceed those limits on
more than an occasional basis. For
depositors who continue to violate the
limits on transactions after being
contacted, institutions will be required
to either close the account or take away
the account’s transfer and draft
capacity. A large majority of
commenters favored enforcement
through ex post monitoring. The
Committee notes in this regard that the
above described enforcement
requirement establishes only the
minimum a depository institution must
do to avoid permitting transactions in
excess of those allowed on the new
account. An institution is free to impose
additional measures, such as a service
charge for checks over the three per
month limit.
Effective Date
Committee determined for good cause
that this regulation should be effective
on December 14,1982. The Committee
relied on several factors in making this
determination. First, the Gam-St
Germain Act specifically states that the
regulation is to be effective no later than
60 days after enactment, i.e., no later
than December 14,1982. Second, that
Act’s legislative history makes it clear,
not only that the regulation is to be
effective no later than December 14,
1982, but that the account is to be
available to customers no later than that
date. Third, the legislative history also
indicates that the new account is to be
available no later than that date so that
depository institutions can begin to stem
the outflows of their deposits. Finally,
depository institutions have had
advance notice, including the notice
supplied by the Committee’s October 19,
1982, request for comments and the
Committee’s November 15,1982, press
release, that the regulation would be
effective no later than December 14,
1982.
The Committee considered the
potential effect on small entities of its
establishment of the new deposit
account, as required by the Regulatory
FlexibiUty Act (5 U.S.C. 601 et seq.). In
this regard, the Committee’s action, in
and of itself, imposes no new reporting
or recordkeeping requirements.
Consistent with the Committee’s
statutory mandate to eliminate deposit
interest rate ceilings, its establishment
of the new account enables all
depository institutions to compete more
effectively in the marketplace for short
term funds, Depositors generally should
benefit from the Committee’s action
since the new instrument provides them
with another investment alternative that
pays a market rate of return. If lowyielding deposits shift into the new
account, depository institutions may
experience increased costs as a result of
this action. However, their competitive
position vis-a-vis nondepository
competitors is enhanced by their ability
to offer a competitive short-term
instrument at market rates. The new
funds attracted by the new instrument
(as well as the funds in existing
accounts that might otherwise have left
the institution) can be invested at a
positive spread and may, therefore, at
least partially offset the higher costs
associated with the shifting of lowyielding accounts.
The Gam-St Germain A ct requires
that this regulation authorizing the new
account be effective no later than
December 14,1982. At its public meeting
held November 15,1982 (29 days prior to
December 14), the Committee voted to
authorize the account. Later the same
day, the Committee issued a press
release which announced and described
the new account.
Notably, approximately one half of
the comment letters received by the
Committee indicated that 30 days would
be sufficient lead time for institutions to
implement the account; the other half
felt that more lead time would be
required. Given the requirements of the
Act and the commenters’ opinions
regarding the account’s effective date,
the Committee determined to make this
regulation effective, and thus the
account available, on December 14,
1982.
In deciding to make this regulation
effective on December 14,1982, the
Committee was aware that the
Administrative Procedure Act (5 U.S.C.
553(d)) generally requires a regulation to
be published in the Federal Register at
least 30 days prior to its effective date
unless the regulation is excepted from
this requirement. The Committee
determined that two exceptions in the
Administrative Procedure Act apply to
this regulation. First, the Administrative
Procedure Act excepts from the 30-day
delayed effectiveness requirement a
substantive rule which “ relieves a
restriction." 5 U.S.C. 553(d)(1). The
Committee is of the opinion that this
regulation is such a rule since it will
remove numerous restrictions on
depository institutions with respect to
the deposit services they may offer their
customers. The Senate Report is replete
with references to the way interest rate
ceilings and other regulatory limitations
have disadvantaged depository
institutions in their ability to compete
for consumer savings with less regulated
entities. By authorizing the new account,
this regulation clearly relieves many of
those restrictions.
The Administrative Procedure Act
also excepts from the 30-day delayed
List o f Subjects in 12 CFR Part 1204
effectiveness requirement a ruie where
an agency finds "for good cause” that
the rule should be published with less
than a 30-day delayed effectiveness. The
Banks, banking.
PART 1204—[AMENDED]
Pursuant to its authority under Title II
o f Pub. L. No. 96-221 (94 Stat. 142; 12
U.S.C. 3501 et seq.) to prescribe rules
governing the payment of interest and
dividends on deposits and accounts o f
federally insured commercial banks,
savings and loan associations, and
mutual savings banks, and pursuant to
the authority granted by section 327 of
the Garn-St Germain Depository
Institutions A ct of 1982, Pub. L. No. 97320 (to be codified at 12 U.S.C. § 3503],
the Committee amends Part 1204
(Interest on Deposits) by adding a new
§ 1204.122, effective December 14,1982,
to read as follows:
§ 1204.122
Account.
Money Market Deposit
(a) Commercial banks, mutual savings
banks, and savings and loan
associations ("depository institutions” )
may pay interest at any rate on a
deposit account as described in this
section with an initial balance o f no less
than $2,500 and an average deposit
balance (as computed in paragraph (b)
o f this section) o f no less than $2,500.
However, for an account with an
average balance o f less than $2,500, a
depository institution shall not pay
interest in excess o f the ceiling rate for
NO W accounts (12 CFR § 1204.108) for
the entire computation period, as
described in paragraph (b) o f this
section.
(b) The average balance for this
account may be calculated on the basis
o f the average daily balance over any
computation period selected by an
institution, which is not longer than one
month. (For purposes o fjh is paragraph
and paragraphs (c) and (e) o f th^s
section, a "month” shall mean, at a
depository institution’s option, either a
calendar month or a statement cycle o f
at least four weeks but no longer than 31
days.)
(c) A depository institution is not
required to establish a maturity on this
account. However, it may do so
provided that the maturity is no longer
than one month. Furthermore, a
depository institution may not obligate
itself to pay any interest rate or obligate
itself to employ any method o f
calculation of an interest rate on this
account for a period longer than one
month. A depository institution may not
condition the interest rate paid or the
method o f calculation o f the interest rate
paid upon the period o f time funds
remain on deposit in this account, if that
period is longer than one month.
(d) Depository institutions must
reserve the right to require at least
seven days notice prior to withdrawal or
transfer of any funds in this account. If
such a requirement for a notice period is
imposed by a depository institution on
one depositor, it must be applied equally
to all other depositors holding this
account at the same institution.
(e) (1) Depository institutions are not
required to limit the number o f transfers
o f funds from this account to another
account o f the same depositor, or the
number o f withdrawals [i.e., payments
directly to the depositor), when such
transfers or withdrawals are made by
mail, telephone, messenger, automated
teller machine or in person. Depository
institutions must restrict all
preauthorized (including automatic)
transfers o f funds from this account to a
maximum o f six per month. Three of
such transfers may be by check, draft or
similar device drawn by the depositor to
third parties. Telephone transfers to
third parties are regarded as
preauthorized transfers. There is no
required minimum denomination for the
transfers allowed by this section.
(2) In order to ensure that no more
than the permitted number o f transfers
are made, depository institutions must
either:
(i) prevent transfers of funds in this
account which are in excess of the limits
established by this paragraph, or
(ii) adopt procedures to monitor those
transfers on an ex post basis and
contact customers who exceed the limits
established by this paragraph on more
than an occasional basis. For customers
who continue to violate those limits
after being contacted by the depository
institution, the institution will be
required to either close the account or
take away the account’s transfer and
draft capacities.
(3) Depository institutions, at their
option, may use on a consistent basis
either the date on a check or the date it
is paid in applying the limit on checks
established by this paragraph.
(4) The rate o f interest or other
charges imposed on an overdraft credit
arrangement on an account to which
withdrawals from this account can be
paid must be not less than those
imposed on overdrafts for customers
who do not maintain this account.
(f) Depository institutions may offer
the account authorized by this section to
any depositor.
(g) Depository institutions are not
required to impose restrictions on the
number o f additional deposits (including
sweeps from other accounts) into this
account.
(h) A depository institution is not
permitted to lend funds to a depositor to
meet the $2,500 balance requirements of
this account.
By order o f the Committee, November 23,
1982.
Gordon Eastbum,
Acting Executive Secretary.
[FR Doc. 82-32605 Filed 11-28-82: 8:45 am]
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