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AT A p r il ■A O O 1984 To t h e A d d r e s s e e : E n c lo s e d A p r i l 5 S 1984. is a copy o f O p e r a t in g C i r c u l a r No. The c i r c u l a r , u p d a te d to r e f l e c t la s t th e p r o v is i o n s is s u e d of on M ay 2 , th e D e p o s it o r y 15, R e v is e d 1 9 7 7 9 h a s been In s t it u t io n s D e r e g u l a t i o n A c t o f 1 98 0. Q u e s t io n s D iv is io n of th is t h e r e o n may b e d i r e c t e d Bank ( T e l. No. to th e R e g u la t io n s 2 1 2 -7 9 1 -5 9 1 4 ). C ir c u la r s D iv is io n FE D E R A L R E S E R V E BANK OF NEW YORK d , i/ j - $ £ 1 F ederal R eserv e Bank o f Me w Y o r k Operating Circular No. 15 Revised April 5, 1984 [ PAYM ENT OF INTEREST ON T IM E AND SAVINGS DEPOSITS To All Member Banks in the Second Federal Reserve District: This circular contains information regarding the maximum rates of inter est that member banks in the Second Federal Reserve District may lawfully pay on time and savings deposits. Statutory provisions 1. Section 203 of the Depository Institutions Deregulation Act of 1980 ( “ DID A ct ” ) 1 transferred to the Depository Institutions Deregulation Committee (“ Deregulation Committee” )2 the authority of the Board of Gov ernors of the Federal Reserve System pursuant to Section 19(j) of the Federal Reserve Act (the “ FR Act” ) to prescribe rules governing the payment of inter est and dividends and the establishment of classes of deposits or accounts, including limitations on the maximum rates of interest and dividends that may be paid on deposits and accounts by member banks .3 The Deregulation Committee is charged with eliminating the limitations on the maximum rates of interest and dividends that may be paid on deposits not later than March 31, 1986. 1 12 U .S .C . §§ 3501 etseq. 2 C o m m itte e m em b ers are: S ecretary o f th e T reasu ry, C hairm an o f th e B o a rd o f G o v e r n o r s, C hairm an o f the B oard o f D irecto rs o f the F ederal D e p o s it In su ran ce C o rp o ra tio n ( “ F D I C ” ), C hairm an o f the F ed eral H o m e L oan B a n k B o a rd ( “ F H L B B ” ), and C hairm an o f th e N a tio n a l C red it U n io n A d m in istration B oard . T h e C o m p tro ller o f th e C u rren cy is a n o n v o tin g m em b er. 3 T h e sim ila r au th orities o f th e F D IC in S e c tio n 18 (g ) o f th e F ed eral D e p o sit In su ra n ce A c t ( “ F D I A c t” ) (1 2 U .S .C . § 1 8 2 8 (g )) and the F H L B B in S e c tio n 5 (B )( a ) o f the F ed eral H o m e L oan B a n k A c t ( “ F H L B A c t” ) (1 2 U .S .C . § 1 4 2 5 b (a )) and the authority co n ferred b y S e c tio n 102 o f P u b lic L aw 9 4 -2 0 0 (1 2 U .S .C . § 461 n o te) w e re a lso transferred to the D ere g u la tio n C o m m itte e . T h e latter refers to th e e lim in a tio n or red u ction o f the in terest rate d ifferen tia l b e tw e e n ban k s and thrifts on s a v in g s d e p o sits. 2. The Board retains the authority of Section 19(a) of the FR Act to define the terms used in Section 19, to determine what shall be deemed a pay ment of interest, to determine what types of obligations, whether issued directly by a member bank or indirectly by an affiliate of a member bank or by other means (and regardless of the use of the proceeds), shall be deemed a deposit, and to prescribe regulations to effectuate the purposes of the section .4 Section 19(i),5 which provides generally, among other things, that no member bank shall pay interest on any deposit payable on demand, remains in effect. Regulation Q 3. Under authority of the provisions of Section 19 of the FR Act, the Board of Governors has issued Regulation Q, entitled “ Interest on Deposits.” Provisions of Regulation Q promulgated under authority transferred to the Deregulation Committee remain in effect until amended, repealed, or super seded by a regulation of the Deregulation Committee. Regulation Q is amended from time to time to reflect actions of the Deregulation Committee. Reference is made to the Regulation for the definitions of terms used in the section and for details of the prohibition against the payment of interest on deposits payable on demand and the limitations on the payment of interest on time and savings deposits. Supplement to Regulation Q 4. The Supplement to Regulation Q (Section 217.7 of the Regulation), as amended from time to time, prescribes the maximum rates of interest that member banks may pay on time and savings deposits. We will promptly notify our member banks of any change in these rates. Most classes of deposits are not subject to interest rate limitations as of the date of this circular. M em ber banks limited to maximum rate for State banks 5. Regulation Q provides that the rate of interest paid by a member bank on a time deposit or savings deposit shall not exceed either the applicable maxi 4 N o n e o f the p r o v is io n s o f S e c tio n 19 o f the FR A c t c ite d in th is o p era tin g circu la r is a p p lic a b le to any d e p o s it that is p a y a b le o n ly at an o ff ic e o f a m em b er bank lo c a te d o u tsid e th e S ta tes o f the U n ited S ta tes. O n M arch 3 1 , 1 9 8 6 , the authority co n ta in ed in S e c tio n 1 9 (g) o f the F D I A c t, S e c tio n 5 (B )( a ) o f the F H L B A c t, and S e c tio n 19(j) o f the FR A ct to p rescrib e lim ita tio n s o n the m a x im u m rates o f interest and d iv id e n d s that m ay be paid on a c co u n ts w ill term in a te. Pursuant to S e c tio n 3 2 6 (b ) o f the G arn -S t G erm ain D e p o sito r y In stitu tion s A ct o f 1 9 8 0 , the ban k/th rift d ifferen tia l o n s a v in g s a c co u n ts w a s e lim in a te d e ffe c tiv e January 1, 19 8 4 . 12 U .S .C . § 4 6 1 n o te , 12 U .S .C . § 3 5 0 3 n o te. 2 mum rate prescribed in the Supplement to Regulation Q, or the applicable max imum rate authorized by law to be paid upon such deposits by State banks or trust companies organized under the laws of the State in which such member bank is located, whichever may be lower. Banks located in the State of New York 6 . General Regulation Part 20 of the Banking Board of the State of New York provides, among other things, for maximum rates of interest that banks and trust companies organized under the laws of the State of New York may pay on time and savings deposits. The maximum rates of interest prescribed by General Regulation Part 20 for time and savings deposits in commercial banks and trust companies organized under the laws of the State of New York are identical to those prescribed by the Board of Governors of the Federal Reserve System in the current Supplement to Regulation Q. Banks located in Connecticut and New Jersey 7. The States of Connecticut and New Jersey have not established maxi mum rates of interest on time and savings deposits payable by commercial banks and trust companies organized under the laws of those States. However, member banks in such States are subject to Regulation Q. Revision of this circular 8 . The right is reserved to withdraw, add to, or amend at any time, any of the provisions of this circular. Effect of this circular on previous circular 9. This circular supersedes our Operating Circular No. 15, Revised May 2, 1977. A n th o n y M. S o l o m o n , President. 3
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