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O ctober
22,
198 2
To t h e A d d r e s s e e :
In o u r C i r c u l a r N o.
you o f
of
in g
the
several
iss u a n c e by
am endm ents
an amendment
f o r m and o t h e r
a ction s
tim e,
to
of
to
ta ken by
Board o f
its
G overnors
of
p e r m i t member b a n k s
to
issu e
changes
th e D e p o s it o r y
is
a copy o f
1982 —
be
of
to
th e
B o a r d 's
fu r n ish e d
to
con form
D e re g u la tio n
S y s te m
in clu d
in b o o k -e n tr y
it
to
recent
C om m ittee.
At
that
n o tice .
the co m p le te
t h e am endm ents
on D e p o s i t s , "
tim e d e p o s i t s
th e r e g u la t io n
In s titu tio n s
1 9 8 2 , we a d v i s e d
th e F e d e r a l R e se r v e
"In terest
th e e n c l o s u r e w i l l
Septem ber 9 ,
Q,
we s e n t y o u a summary o f
Septem ber
dated
R eg u la tio n
te ch n ica l
E n closed
dated
th e
9360,
to
text
—
in
R e g u la tio n
s lip
Q.
sheet
form ,
A d d itio n a l
upon r e q u e s t .
C ircu la rs D iv isio n
FEDERAL RESERVE BANK OF NEW YORK
co p ie s
Board o f Governors o f the Federal Reserve System
Amendments to Regulation Q
Interest on Deposits**
September 1982
1. E ffectiv e S ep tem ber 1, 1982, section 2 1 7.1 is
am en d ed b y revising paragraph (b), b y re
m oving paragraphs (c ) an d (d ) and reserving
them , by rem oving fo o tn o tes 2 an d 3 and
ren um berin g th e rem aining fo o tn o tes a c
cordingly, and by revising paragraph (h). E f
fe ctiv e A u gu st 23, 1982, section 2 1 7 .1 (f)(2 )
is revised.
T he revised provisions read as
fo llo w s:
SECTION 217.1— Definitions
*
*
*
*
*
(b) (1) “ T im e d ep o sit" means (i) a deposit
that the depositor does not have a right
to withdraw for a period of 14 days or
more after the date of deposit. “Time
deposit’’ includes funds—
(A) payable on a specified date not
less than 14 days after the date of
deposit;
(B) payable at the expiration of a
specified time not less than 14 days
after the date of deposit;
(C) payable upon written notice
which actually is required to be giv
en by the depositor not less than 14
days before the date of repayment;1
or
(D) such as “Christmas club” ac
counts and “vacation club” ac
counts, that are deposited under
written contracts providing that no
withdrawal shall be made until a
certain number of periodic deposits
have been made during a period of
not less than three months even
though some of the deposits may be
i• • •
* For this regulation to be complete, as amended effec
tive September 1, 1982, retain—
•
•
Regulation Q pamphlet dated March 1982 (ice inside
cover) and
this slip sheet.
made within 14 days from the end of
the period;
(ii) an “international banking facility
time deposit;” and
(iii) a deposit or account issued pur
suant to 12 CFR 217.7(/) or 1204.121,
including those with an original matu
rity or notice period of 7 to 13 days.
(2) A time deposit may be represented
by a transferable or nontransferable, or a
negotiable or nonnegotiable, certificate,
instrument, passbook, statement or oth
erwise. A time deposit evidenced by a
certificate or instrument is payable only
upon presentation of the certificate or in
strument. A time deposit established in
statement, book-entry, or other form
must be evidenced by a written agree
ment, and deposits must be confirmed by
issuance of a receipt or advice.
(c) [Reserved]
(d) [Reserved]
•
•
*
•
•
(0 • • •
(1 ) * * *
(2) Evidences an indebtedness arising
from a transfer of direct obligations of, or
obligations that are fully guaranteed as to
principal and interest by, the United
States or any agency thereof that the
bank is obligated to repurchase;
•
(h)
•
•
•
*
O bligations issued b y th e p a ren t bank
holding com pan y o f a m em b er b a n k
(1)
For the purposes of this part, the “depos
its” of a member bank also include an
obligation that is (i) issued in a denomi
nation of less than $100,000; (ii) re
quired to be registered with the Securities
and Exchange Commission under the Se1
Regulation Q
§217.1
curities Act of 1933; (iii) issued or guar
anteed in whole or in part as to principal
or interest by the member bank’s parent
which is a bank holding company under
the Bank Holding Company Act of 1956,
as amended (12 USC 1841-1850), re
gardless of the use of the proceeds; and
(iv) issued with a stated maturity, notice
period or redemption period of less than
3$ years.
(2) (i) Effective April 1, 1983, this para
graph is amended by striking the term
“3$ years” wherever it appears and in
serting in its place the term “2$ years”,
(ii) Effective April 1, 1984, this para
graph is amended by striking the term
“2^ years” wherever it appears and in
serting in its place “ 1£ years”, (iii) Ef
fective April 1, 1985, this paragraph is
amended by striking the term “ 1£
years” wherever it appears and insert
ing in its place “six months”, (iv) Ef
fective March 31, 1986, this paragraph
is amended by striking the term “six
months” wherever it appears and in
serting in its place “ 14 days”.
(3) The term “deposits” does not in
clude those obligations of a bank holding
company that are subject to interest rate
limitations imposed pursuant to Public
Law 89-597.
•
*
*
*
•
that the contract will be renewed automati
cally upon maturity, and indicating the
terms of such renewal, P rovided, however,
that a member bank may provide in any
time deposit contract that if the deposit, or
any portion thereof, is withdrawn not more
than seven calendar days after a maturity
date (one business day for deposits autho
rized by section 217.7(/)), interest will be
paid thereon at the originally specified con
tract rate. * * *
3. E ffectiv e S ep tem ber 1, 1982, section 2 1 7 .4 is
a m en d ed b y revising th e firs t sen ten ce in
subparagraph (l)(iii) o f paragraph (d ), by
revising subparagraphs (5 ) and (6 ) o f p a ra
graph (d ), an d b y revising paragraph (f) to
read as fo llo w s:
SECTION 217.4—Payment of Time
Deposits Before Maturity
•
am en d ed by revising th e third sen ten ce o f
paragraph (f) to read as fo llo w s:
SECTION 217.3—Interest on Time
and Savings Deposits
•
(f)
*
•
•
N o in terest a fter m atu rity o r expiration
* * * On each certificate, pass
book, or other document representing a
time deposit, the bank shall have printed or
stamped a conspicuous statement indicating
that no interest will be paid on the deposit
after the maturity date or, in the case of a
time deposit that is automatically renew
able, a conspicuous statement indicating
o f n otice.
2
•
•
*
•
(<!)•••
( I ) * * *
(iii) Except as provided in sections
217.70) and 217.7(7), the following
minimum early withdrawal penalty
shall apply to time deposit contracts
entered into, renewed, or extended on
or after June 2, 1980: • * *
•
2. E ffectiv e S eptem ber 1, 1982, section 2 1 7 .3 is
•
•
•
•
•
(5) Except for time deposits on which
no maximum interest rate limitation is
prescribed, any amendment of a time de
posit contract that results in an increase
in the rate of interest paid or in a reduc
tion in the maturity of the deposit consti
tutes a payment of the time deposit be
fore maturity.
(6) For purposes of computing the pen
alty required to be imposed under this
paragraph, under a time deposit agree
ment that provides that subsequent de
posits reset the maturity of the entire ac
count, each deposit maintained in the ac
count for at least a period equal to the
original maturity of the deposit may be
regarded as having matured individually
and been redeposited at intervals equal to
Regulation Q
§217.7
such period. Except as provided in sec
tion 217.7(7)(4), when a time deposit is
payable only after notice, for funds on
deposit for at least the notice period, the
penalty for early withdrawal shall be im
posed for at least the notice period.
*
*
*
*
*
(f) L oan s upon secu rity o f tim e deposits.
Except as provided in section 217.7(7) (3),
a member bank may make a loan to the
depositor upon the security of his time de
posit provided that the rate of interest on
such loan shall be not less than 1 percent
per annum in excess of the rate of interest
on the time deposit.
4. E ffectiv e S ep tem ber 1, 1982, section 2 1 7 .6 is
am en d ed b y revising paragraph (i) to rea d as
per annum payable by member banks of the
Federal Reserve System on time and sav
ings deposits:
(a) T im e deposits o f $ 1 0 0 ,0 0 0 or m ore an d
IB F tim e deposits. Except for a time deposit
issued subject to all conditions of paragraph
(7) or 12 CFR 1204.121, there is no maxi
mum rate of interest presently prescribed
on any time deposit of $100,000 or more
with a maturity of 14 days or more or on
IBF time deposits issued under section
217.1(0(b) F ixed -ceilin g tim e deposits o f less than
$100,000. Except as provided in paragraphs
(a), (d), (e), (f), (g), (i), (j), (k), and
(7), no member bank shall pay interest on
any time deposit at a rate in excess of the
applicable rate under the following
schedule:
fo llo w s:
SECTION 217.6—Advertising of
Interest on Deposits
*
*
*
*
Maturity
*
(i) Any advertisement, announcement, or
solicitation relating to interest paid by a
member bank on a time deposit issued pur
suant to section 217.7(f) or section
217.7(j) shall include a clear and conspicu
ous notice that federal regulations prohibit
the compounding of interest during the
term of the deposit.
5. E ffectiv e S ep tem ber 1, 1982, section 2 1 7 .7 is
am en d ed b y revising paragraphs (a),
(b),
(d ), (e), (f), (g), and (h ) an d by adding new
paragraphs (j), (k ), an d (I). S ection 2 1 7 .7
now reads as fo llo w s:
SECTION 217.7—Supplement:
Maximum Rates of Interest Payable by
Member Banks on Time and Savings
Deposits
Pursuant to the provisions of section 19 of
the Federal Reserve Act and section 217.3
of this part, the Board of Governors of the
Federal Reserve System hereby prescribes
the following maximum rates1 of interest
14 days or more but less
than 90 days
90 days or more but less
than 1 year
1 year or more but less
than 2\ years
2\ years or more but less
than 4 years
4 years or more but less
than 6 years
6 years or more but less
than 8 years
8 years or more
Maximum
percent
H
n
6
6*
7J
n
71
(c) Savings deposits. No member bank
shall pay interest at a rate in excess of 5$
percent on any savings deposit. No member
bank shall pay interest at a rate in excess of
5$ percent on any savings deposit that is
subject to negotiable orders of withdrawal,
the issuance of which is authorized by federal law.
(d)
G overnm en tal u nit tim e deposits.
Ex-
1 The limitation on rates o f interest payable by member
banks o f the Federal Reserve System on time and savings
deposits, as prescribed herein, are not applicable to any
deposit which is payable only at an office o f a member bank
located outside the states o f the United States and the Dis
trict o f Columbia.
3
§217.7
cept as provided in paragraphs (a), (0 .
(g), (j)> (k), and (/), and notwithstanding
paragraph (b), no member bank shall pay
interest on any time deposit which consists
of funds deposited to the credit of, or in
which the entire beneficial interest is held
by, the United States, any state of the Unit
ed States, or any county, municipality or
politicial subdivision thereof, the District of
Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, American Samoa,
Guam, or political subdivision thereof, at a
rate in excess of 8 percent.2
(e) Individual retirement account and
Keogh (H.R. 10) plan deposits. Notwith
standing paragraphs (a) and (g), a mem
ber bank may pay interest at any rate as
agreed to by the depositor on any time de
posit with a maturity of one and one-half
years or more, that consists of funds depos
ited to the credit of, or in which the entire
beneficial interest is held by, an individual
pursuant to an individual retirement ac
count agreement or Keogh (H.R. 10) plan
established pursuant to 26 USC (IRC
1954) 219, 401, 404, 408 and related provi
sions. A member bank may permit addi
tional deposits to be made to such a time
deposit at any time prior to its maturity
without extending the maturity of all or a
portion of the entire balance in the account.
(0 26-week money market time deposits.
Except as provided in paragraph (a) and
notwithstanding paragraphs (b) and (d), a
member bank may pay interest on any nonnegotiable time deposit of $10,000 or more,
with a maturity of 26 weeks, at a rate not to
exceed the ceiling rates set forth below. The
ceiling rate shall be based on the higher of
either (1) the rate established and an
nounced (auction average on a discount ba
sis) for U.S. Treasury bills with maturities
of 26 weeks at the auction held immediately
prior to the date of deposit (“bill rate” ), or
(2) the average of the four rates established
and announced (auction average on a dis-*S
Regulation Q
count basis) for U.S. Treasury bills with
maturities of 26 weeks at the four auctions
held immediately prior to the date of depos
it (“four-week average bill rate” ). Round
ing any rate to the next higher rate is not
permitted and interest may not be com
pounded during the term of this deposit.
B ill rate or fou rweek average
b ill rate
In terest rate ceiling
7.50 percent or
below
7.75 percent
Above 7.50
percent
One-quarter of one
percentage point plus the
higher of the bill rate or
four-week average bill
rate.
A member bank may offer this category of
time deposit to all depositors. However, a
member bank may pay interest on any nonnegotiable time deposit of $10,000 or more
with a maturity of 26 weeks which consists
of funds deposited to the credit of, or in
which the entire beneficial interest is held
by—
(1) the United States, any state of the
United States, or any county, municipali
ty or political subdivision thereof, the
District of Columbia, the Common
wealth of Puerto Rico; the Virgin Is
lands, American Samoa, Guam, or politi
cal subdivision thereof; or
(2) an individual pursuant to an individ
ual retirement account agreement or
Keogh (H.R. 10) plan established pursu
ant to 26 USC (IRC 1954) 219, 401, 404,
408 and related provisions at a rate not to
exceed the ceiling rate payable on the
same category of deposit by any federally
insured savings and loan association or
mutual savings bank.3*1
3 The ceiling rate o f interest payable for this category o f
deposit by federally insured savings and loan associations
and mutual savings banks is 7.75 percent when the bill rate
or four-week average bill rate is 7.25 percent or lower, onehalf o f 1 percent above the bill rate or four-week average
bill rate when the bill rate or four-week average bill rate is
above 7.25 percent but below 8.50 percent, 9.00 percent
when the bill rate or four-week average bill rate is 8.50
2
The ceiling rate on this category is the highest fixed percent or above but below 8.75 percent, and one-quarter of
1 percent above the bill rate or four-week average bill rate
ceiling rate that may be paid on time deposits under
when the bill rate or four-week average bill rate is 8.75
S 100,000 by any federally insured commercial bank, mutu
percent or above.
al savings bank, or savings and loan association.
4
§217.7
Regulation Q
(g) Time deposits with maturities of 2}
years to less than years. (1) Except as
provided in paragraphs (a) and (e) and
notwithstanding paragraphs (b) and
(d), a member bank may pay interest on
any nonnegotiable time deposit with an
original maturity of 2\ years to less than
3^ years at a rate not to exceed the higher
of one-quarter of 1 percent below the av
erage 2^-year yield for U.S. Treasury se
curities as determined and announced by
the U.S. Department of the Treasury im
mediately prior to the date of deposit, or
9.25 percent. Such announcement is
made by the U.S. Department of the
Treasury every two weeks. The average
2^-year yield will be rounded by the U.S.
Department of the Treasury to the near
est 5 basis points. The rate paid on any
such deposit cannot exceed the ceiling
rate in effect on the date of deposit. A
member bank may offer this category of
time deposit to all depositors. However, a
member bank may pay interest on any
nonnegotiable time deposit with a matu
rity of 2\ years to less than 3$ years
which consists of funds deposited to the
credit of, or in which the entire beneficial
interest is held by the United States, any
state of the United States, or any county,
municipality or political subdivision
thereof, the District of Columbia, the
Commonwealth of Puerto Rico, the Vir
gin Islands, American Samoa, Guam, or
political subdivision thereof at a rate not
to exceed the ceiling rate payable on the
same category of deposit by any federally
insured savings and loan association or
mutual savings bank.4*I
(2) Effective April 1, 1983, this para
graph is amended by striking the term
“2^ years to less than 3$ years” wherever
it appears and inserting in its place ‘‘1$
years to less than 2\ years”, and by strik
ing the term ‘‘average 2^-year yield”
wherever it appears and inserting in its
place ‘‘average 1^-year yield.”
(h) Obligations of the parent bank holding
4 The ceiling rate o f interest payable for this category o f
deposit by federally insured savings and loan associations
and mutual savings banks is one-quarter o f 1 percent above
the rate that may be paid by member banks.
company of a member bank. Interest may
be paid on a deposit as defined in section
217.1(h) at a rate not to exceed the maxi
mum rate payable by a member bank on a
deposit of equal maturity and denomina
tion. For purposes of this paragraph, the
maturity of an obligation of a parent bank
holding company is the lesser of the stated
maturity period, notice period, or redemp
tion period.
(i) Tax-exempt savings certificate. (1) A
member bank may pay interest on a non
negotiable tax-exempt savings certificate
(ASC) provided that the time deposit
has an original maturity of exactly one
year, is available in denominations of
$500 and any other denomination, at the
discretion of the member bank, and has
an annual investment yield to maturity
equal to 70 percent of the average invest
ment yield for the most recent auction of
52-week U.S. Treasury bills prior to the
calendar week in which the ASC is
issued.5
(2) A member bank must provide each
depositor the following notice, in a form
that the depositor may retain at the time
of opening a deposit under this
paragraph:
5
When institutions credit ■interest more frequently than
annually, the computation o f interest must be adjusted to
reflect the effects o f compounding so that the annual invest
ment yield to the depositor remains at the rate stipulated by
law. Specifically, the formula used to derive the nominal
interest rate at which interest can be credited is as follows:
I = [(1 = c / 1 0 0 ) ( ^ 5 ) ] _
i
r = 100 X (3 6 5 /d ) X I
where:
c = the annual investment yield required to be
paid on the ASCs (in percent per annum)
D = the average number o f days in a com
pounding period (365-day year)
I = the amount o f interest earned during a
(365-day year) compounding period per
dollar in the account at the beginning o f
the period
r = the corresponding nominal rate o f interest
(365-day basis, in percent per annum)
For institutions using continuous compounding, the nomi
nal interest rate would be defined as: r = 100 {In (1 +
( c /1 0 0 ) ) ] , where “ In" signifies the natural logarithm o f
the expression that follows it.
5
§217.7
The Economic Recovery Tax Act of 1981
authorizes a lifetime exclusion from gross in
come for federal income tax purposes of up to
$1,000 ($2,000 in the case of a joint return)
for interest earned on tax-exempt savings cer
tificates. Regardless of how much interest is
earned on this or any other tax-exempt savings
certificate, including interest earned on such
certificates from other institutions, and regard
less of during which taxable years that interest
is earned, no more than a total of $1,000
($2,000 in the case of a joint return) can be
excluded from federal gross income for all tax
able years. Furthermore, interest earned on a
specific certificate cannot be excluded from
federal gross income if ( A ) that certificate is
used as collateral for any loan, or (B ) any part
of the principal of that certificate is redeemed
or disposed of prior to maturity.
(3 )(i) A member bank may not issue
ASCs after March 31, 1982, under this
paragraph unless an executive officer
of the member bank certifies, in a form
determined by the member bank, that
the member bank has complied with
the “qualified residential financing” re
quirement set out in 26 USC 128. The
certification must be maintained by the
member bank in its files and must be
available to the member bank’s pri
mary supervisory agency upon request.
The certification shall include appro
priate supporting documentation, as
determined by the member bank.
(ii) A member bank issuing ASCs
during any calendar quarter must use
at least 75 percent of the lesser of—
(A) the proceeds from ASCs issued
during a calendar quarter, or
(B) “qualified net savings,”
to provide “qualified residential financ
ing” by the end of the subsequent cal
endar quarter and may not issue addi
tional ASCs until the 75 percent re
quirement is satisfied.
(iii) For purposes of determining
compliance with the “qualified residen
tial financing” requirement, the follow
ing applies:
(A) the term “qualified net sav
ings” includes interest or dividends
credited to deposit accounts;
(B) the amount of “qualified resi
dential financing” is to be deter
mined net of repayment of principal
6
Regulation Q
and paydowns, but sales of such as
sets may not be netted;
(C) the term “any loan for agricul
tural purposes” is defined to have
the same meaning as items described
in the instructions to the Report of
Condition of all Insured Commer
cial Banks, schedule A, item 4
“Loans to Finance Agricultural Pro
duction and Other Loans to Farm
ers,” and schedule A, item 1(b)
“Real Estate Loans Secured by
Farmland,” and
(D ) “qualified residential financ
ing” includes a firm commitment to
purchase any assets eligible for such
investment.
(iv) If a member bank provides for
automatic renewal of an ASC, deposi
tors must be notified in writing at least
15 days in advance of the maturity of
an ASC in the event the member bank
cannot renew the ASC because of its
failure to satisfy the residential financ
ing requirement. Failure to give such
notice shall not result in automatic re
newal of the ASC.
(v) This paragraph (i) expires Janu
ary 1, 1983.
(j) 91-day time deposits. (1) Except as
provided in paragraph (a) and notwith
standing paragraphs (b) and (d), a
member bank may pay interest on any
negotiable or nonnegotiable time deposit
of $7,500 or more, with a maturity of 91
days, at a rate not to exceed the ceiling
rates set forth below. Rounding any rate
upward is not permitted, and interest
may not be compounded during the term
of this deposit.
(2)(i) Except as provided in subpara
graphs (ii) and (iii) below, the ceiling
rate of interest payable by a member
bank shall be the rate established and
announced (auction average on a dis
count basis) for U.S. Treasury bills
with maturities of 91 days at the auc
tion held immediately prior to the date
of deposit (“bill rate”) minus onequarter of 1 percentage point (25 basis
points).
Regulation Q
(ii) If the bill rate is 9 percent or be
low at the four most recent auctions of
U.S. Treasury bills with maturities of
91 days held immediately prior to the
date of deposit, the ceiling rate of in
terest payable by a member bank shall
be the bill rate.
(iii) Effective May 1, 1983, the ceiling
rate of interest payable by a member
bank on this category of deposit for de
posits issued or renewed on or after
that date shall be the bill rate.
(3) Where all or any part of a time de
posit issued under this paragraph is paid
before maturity, a depositor shall forfeit
an amount equal to at least all interest
earned on the amount withdrawn.
(k) Time deposits with original maturities
of years or more.
(1) Notwithstanding paragraphs (b)
and (d), a member bank may pay inter
est at any rate as agreed to by the deposi
tor on any time deposit with an original
maturity of 3$ years or more that has no
minimum denomination but is made
available in a denomination of $500.
(2) Any time deposit with an original
maturity of 1£ years or more issued pur
suant to this paragraph may provide by
contract that additional deposits may be
made to the account for a period of one
year from the date that it is established
without extending the original maturity
date of the account. Deposits made to the
account more than one year after the
date that it is established shall extend the
maturity of the entire account for a peri
od of time at least equal to the original
term of the account.
(3) Any time deposit offered pursuant to
this paragraph may be issued in a nego
tiable or nonnegotiable form.
(4 ) (i) Effective April 1, 1983, this para
graph is amended by striking the term
“3£ years” wherever it appears and in
serting in its place the term “2$ years”.
(ii) Effective April 1, 1984, this para
graph is amended by striking the term
“2$ years” wherever it appears and in
serting in its place “ 1$ years”.
(iii) Effective April 1, 1985, this para
§217.7
graph is amended by striking the term
‘‘1$ years” wherever it appears in subparagraph (1) and inserting in its
place “6 months”.
(/) 7- to 31-day time deposits of $20,000 or
more. (1) Notwithstanding paragraphs (b)
and (d), a member bank may pay inter
est on any nonnegotiable time deposit of
$20,000 or more, with a maturity or re
quired notice period of not less than 7
days nor more than 31 days, at a rate not
to exceed the ceiling rates set forth be
low. However, a member bank shall not
pay interest in excess of the ceiling rate
for regular savings deposits or accounts
on any day the balance in a time deposit
issued under this paragraph is less than
$20,000. Rounding any rate upward is
not permitted.
(2) (i) For fixed-interest-rate, fixed-ma
turity time deposits issued under this
paragraph, the ceiling rate of interest
payable by a member bank shall be the
rate established and announced (auc
tion average on a discount basis) for
U.S. Treasury bills with maturities of
91 days at the auction held immediate
ly prior to the date of deposit or renew
al (“bill rate” ) minus one-quarter of 1
percentage point (25 basis points).
(ii) For variable-interest-rate, fixedmaturity time deposits and for all no
tice accounts issued under this para
graph, the ceiling rate of interest pay
able by a member bank shall be the bill
rate in effect on the date of opening or
renewal of the account minus onequarter of 1 percentage point (25 basis
points). The interest rate on the ac
count then may be adjusted to be not
in excess of the bill rate, minus 25 basis
points, established and announced at
the most recent subsequent auction
during the life of the deposit but not
less often than every 31 days.
(iii) Notwithstanding subparagraphs
(2 )(i) and 2(ii) of this paragraph, a
member bank may pay interest at a
rate not to exceed the bill rate on any
time deposit issued under this para
graph which consists of funds deposit7
§ 217.7
ed to the credit of, or in which the en
tire beneficial interest is held by—
(A) the United States, any state of
the United States, or any county,
municipality or political subdivision
thereof, the District of Columbia,
the Commonwealth of Puerto Rico,
the Virgin Islands, American Sa
moa, Guam, or political subdivision
thereof; or
(B) an individual pursuant to an in
dividual retirement account agree
ment or Keogh (H.R. 10) plan es
tablished pursuant to 26 USC (IRC
1954) 219, 401, 404, 408 and related
provisions.
(iv) The ceiling rates in subpara
graphs (2 )(i), (2) (ii) and (2 )(iii) of
this paragraph shall not apply—
(A) if the bill rate is 9 percent or
below at the four most recent auc
tions of U.S. Treasury bills with ma
turities of 91 days held prior to the
date of deposit or renewal. A mem
ber bank may pay interest at any
rate as agreed to by the depositor on
this category of deposit for deposits
issued or renewed during such peri
od; or
(B) effective May 1, 1983. A mem
ber bank may pay interest at any
rate as agreed to by the depositor on
this category of deposit for deposits
issued or renewed on or after May 1,
1983.
(3) (i) A member bank is not permit
ted—
(A) to lend funds to a depositor
upon the security of a time deposit
that it has issued under this para
graph, or
(B) to lend funds to a depositor to
meet or maintain the minimum de
nomination requirement of a time
deposit issued under this paragraph.
(ii) The rate of interest and any other
charges imposed on an overdraft credit
arrangement to which withdrawals are
paid or to which payments upon matu
rity or expiration of a required notice
period are made from an account is
sued under this paragraph must be not
8
Regulation Q
less than those imposed on such over
drafts for customers that do not pos
sess an account issued under this para
graph at the same institution.
(4 ) (i) Where all or any part of a time
deposit issued under this paragraph is
paid before maturity or expiration of
the required notice period, a depositor
shall forfeit an amount at least equal to
the greater of—
(A) all interest earned on the
amount withdrawn from the most
recent of the date of deposit, date of
maturity, or date on which notice
was given, or
(B) all interest that could have
been earned on the amount with
drawn during a period equal to onehalf the maturity period or required
notice period.
(ii) Where all or any part of a time
deposit issued under this paragraph is
withdrawn within one business day af
ter the maturity date of the deposit or
the date of expiration of notice of with
drawal, no early withdrawal penalty is
required to be applied on the amount
withdrawn.
(5) Additional deposits to an account is
sued under this paragraph with a fixed
maturity must be maintained in the ac
count for a period at least equal to the
original term of the account and may be
regarded as having matured individually
and having been redeposited at intervals
equal to such period. For accounts issued
under this paragraph that are subject to a
notice period, additional deposits must
remain in the account for a period equal
to at least the notice period before such
funds may be withdrawn without the im
position of an early withdrawal penalty.
(6) Deposits to any account issued un
der this paragraph may not be made by
automatically transferring funds from an
other account of the depositor at the
same institution where the transfer is ini
tiated by the level of the balance in any
account.
(7 ) (i) Withdrawals from any account
issued under this paragraph may not
be made (A) by check, draft, or other
Regulation Q
§ 2 1 7 .7
third party payment instrument or in
struction drawn or issued by the de
positor, or (B) by automatically trans
ferring funds to another account of the
depositor where the transfer is initiated
by the level of balance in any account
held by the depositor.
(ii) Payments at maturity or with
drawals may be paid by (A) check or
cash to the depositor, (B) cash, draft,
or electronic transfer issued by the in
stitution to a third party, or (C) trans
fer to any other account held by the
depositor.
(iii) Notice of withdrawal of an ac
count issued under this paragraph may
be delivered by the depositor to the in
stitution by telephone or other tele
communication, mail, messenger,
standing order, or by appearance in
person at the offices or premises of the
institution.
9
@FedFRASER