Full text of Federal Reserve Bank of New York Circulars : [Reprint of Regulation Q Effective February 12, 1970 and Supplement Effective January 21, 1970]

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February 27, 1970

To the Addressee:
Enclosed are reprints, in the new size, of Regulation Q, as amended
effective February 12, 1970, and of its supplement, effective January 21, 1970.
The reprinted regulation replaces your small-size printing of the regulation,
as amended effective January 1, 1967, and the amendments thereto, the last of
which was effective February 12, 1970.

The reprinted supplement replaces your

small-size printing of that document, effective January 21, 1970.




Circulars Division
Federal Reserve Bank of New York




BOARD OF GOVERNORS

of the
FEDERAL RESERVE SYSTEM

INTEREST ON DEPOSITS

REG U LA TIO N Q
(12 CFR 217)
As amended effective February 12, 1970

******

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Bank of the Federal Reserve District in which the inquiry arises.

CONTENTS

Page
Se c . 2 1 7 .0 — S c o pe

of

P a r t ................................. .. 3

Page
S e c . 2 1 7 .4 — P a y m e n t
B efore

Se c . 2 1 7 .1 — D

e f in it io n s

............................................. ...3

M

a t u r it y

of

T im e D

e p o s it s

......................................................

6

(a ) Tim e deposits payable on a specified
d a t e ......................................................... 6

(a ) D em and deposits ................................... ..3
(b ) Tim e d e p o s its .............................................3

(b ) Tim e deposits payable after a specified
period .................................................... 6

(c) Tim e certificates of d e p o s i t ................ ..3
(d ) Tim e deposits, open a c c o u n t................3

(c) Tim e deposits payable after a specified
notice .................................................... 6

(e ) Savings deposits ........................................4
(f) D eposits as including certain
prom issory notes .................................4

(d ) Paym ent in em ergencies .....................

6

(e) Loans upon security of tim e deposits 6

(g) M ultiple m aturity tim e d e p o s i t ......... ..4
Se c . 217.2— D em and D e p o s i t s ............................4

S e c . 2 1 7 .5 — W

(a ) Interest prohibited ................................. ..4
(b ) M eaning of i n t e r e s t .................................4
Se c . 2 1 7 .3 — I n t e r e s t
S a v in g s D

on

T im e

it h d r a w a l o f

S a v in g s D

e p o s it s

6

(a ) Requirem ents regarding notice of
w ithdraw al .......................................... 6
(b ) Loans on security of savings deposits 7

and

(c) M anner of paym ent of savings deposits 7

5

e p o s it s

(a ) M axim um rate ........................................ ..5
(b ) M odification of contracts to conform
to r e g u la tio n ........................................ ..5

S e c . 2 1 7 .6 — A d v e r t i s i n g

of

In t er e st

on

.............................................................................

7

(c) M em ber banks lim ited to m axim um
rate for State banks
5

(a ) A nnual rate of simple interest .........

7

(d ) G race periods in com puting interest
on savings deposits ............................5

(c) Percentage yields based on periods in
excess of one year .......................... 8

(e ) Technical grace periods in com puting
interest on certain tim e deposits
5

(d ) Tim e or am ount requirem ents

(f) N o interest after m aturity or ex­
piration of notice ............................ ..5

(f) A ccuracy of advertising ..................... ..8

(g) Tim e deposits of foreign governm ental
entities and international organiza­
tions ...................................................... ..5
[S e c . 2 1 7 . 7 — S u p p l e m
S a v in g s D

e p o s it s ,




ent,

M

a x im u m

R ates

is p r in te d se p a r a te ly .]

of

D

e p o s it s

(b ) Percentage yields based on one year 7

8

(e) P r o f i t ........................................................... ..8
(g ) Solicitation of deposits for banks
Statutory A

p p e n d ix

In t er e st P ayable

by

M

8

......................................................

em ber

B anks

on

T im e

9

and

REGULATION Q
(12 CFR 217)
As amended effective February 12, 1970

INTEREST ON DEPOSITS*

(1) On a certain date, specified in the instru­
ment, not less than 30 days after date of the
deposit, or
(2) A t the expiration of a certain specified
tim e not less than 30 days after the date of the
instrum ent, or
(3) U pon notice in w riting w hich is actually
required to be given not less than 30 days before
the date of repaym ent,1 and
(4) In all cases only upon presentation and
surrender of the instrum ent.
(d)
Time deposits, open account. T he term
“tim e deposit, open account” m eans a deposit,
other than a “tim e certificate of deposit”, with
respect to w hich there is in force a w ritten con­
tract w ith the depositor th at neither the whole
nor any part of such deposit m ay be w ithdraw n,
by check or otherwise, prior to the date of m atu ­
rity, which shall be not less than 30 days after
the date of the deposit,2 or prior to the expira-

SEC TIO N 217.0— SCO PE O F P A R T
(a ) This [Part] is issued under authority of
provisions of section 19 of the Federal Reserve
A ct which, together w ith related provisions of
law, are cited in the [Appendix].
(b ) This P art relates to the paym ent of de­
posits and interest thereon by m em ber banks of
the Federal Reserve System and not to the com ­
putation and m aintenance of the reserves which
m em ber banks are required to m aintain against
deposits. The rules concerning reserves of m em ber
banks are contained in P art 204 of this chapter.
(c) T he provisions of this P art do not apply
to any deposit w hich is payable only at an office
of a m em ber bank located outside of the States of
the U nited States and the D istrict of Columbia.
SEC TIO N 217.1— D E F IN IT IO N S
(a) Demand deposits. The term “any deposit
which is payable on dem and” , hereinafter referred
to as a “dem and deposit”, includes every deposit
which is not a “tim e deposit” or “savings deposit”,
as defined in this section.
(b) Time deposits. T he term “tim e deposits”
means “time certificates of deposit” and “time
deposits, open account”, as defined in this section.
(c) Time certificates of deposit. T he term “time
certificate of deposit” m eans a deposit evidenced
by a negotiable or non-negotiable instrum ent
which provides on its face that the am ount of
such deposit is payable to bearer or to any speci­
fied person or to his order:




*
T he text corresp on d s to the C od e o f F ed eral R eg u la ­
tion s, T itle 12, C hapter II, Part 217; cited as 12 C F R 217.
T he w ords “ this P art” , as used herein, m ean R egu lation Q.
1 A deposit w ith respect to w h ich the b an k m erely re­
serves the right to require n otice o f n o t less than 30 days
b efore any w ithdraw al is m ad e is n ot a “ tim e certificate o f
d e p o sit” w ith in the m ean in g o f the above defin ition .
2 D e p o sits, such as C hristm as club a cco u n ts and vacation
club accou n ts, w h ich are m ade under w ritten con tracts
providing that no w ith draw al shall be m ad e until a certain
num ber o f p eriod ic dep osits have b een m ad e during a
p eriod o f n o t less th an 3 m on th s co n stitu te “ tim e d ep osits,
o p en a c co u n t” , even th ou gh som e o f the d ep osits are m ade
w ith in 30 days from the en d o f the period.

3

REGULATION Q

§ § 2 1 7 .1 -2 1 7 .2

tion of the period of notice w hich m ust be given
by the depositor in w riting no t less than 30 days
in advance of w ithdraw al.3
(e) Savings deposits. T he term “savings deposit”
m eans a deposit—
(1) w hich consists of funds deposited to the
credit of one or m ore individuals, or of a corpo­
ration, association, or other organization operated
prim arily for religious, philanthropic, charitable,
educational, fraternal, or other sim ilar purposes
and not operated for profit; 4 or in w hich the
entire beneficial interest is held by one or m ore
individuals or by such a corporation, association,
or other organization; and
(2) w ith respect to w hich the depositor is not
required by the deposit contract but m ay at any
time be required by the bank to give notice in
w riting of an intended w ithdraw al not less than
30 days before such w ithdraw al is m a d e 5 and
which is n o t payable on a specified date or at the
expiration of a specified tim e after the date of
deposit.
(f) Deposits as including certain promissory
notes and other obligations. F o r the purposes of
this P art, the term “deposits” also includes a
m em ber bank’s liability on any prom issory note,
acknow ledgm ent of advance, due bill, or similar
obligation (written or oral) that is issued or u nder­
taken by a m em ber bank principally as a means
of obtaining funds to be used in its banking
business, except any such obligation that:
(1)
is issued to (or undertaken w ith respect to)
and held for the account of (i) a bank or an
institution the tim e deposits of w hich are exem pt
from § 217.7 pursuant to § 217.3(g) or (ii) an
3 A deposit w ith respect to w hich the b an k m erely re­
serves the right to require notice o f n o t less th a n 30 days
b efore any w ithdraw al is m ade is n o t a “tim e deposit,
o p en acco u n t” , w ithin the m eaning of the above definition.

(2) evidences an indebtedness arising from a
transfer of direct obligations of, or obligations
th at are fully guaranteed as to principal and
interest by, the U nited States or any agency
thereof th at the bank is obligated to repurchase;
(3 ) has an original m aturity of m ore than 2
years, is unsecured, and states expressly th at it is
subordinated to the claim s of depositors; or
(4) arises from a borrow ing by a m em ber bank
from a dealer in securities, for one business day,
of proceeds of a transfer of deposit credit in a
Federal Reserve Bank (or other imm ediately avail­
able funds), com m only referred to as “Federal
funds”, received by such dealer on the date of
the loan in connection w ith clearance of securi­
ties transactions.
This paragraph shall not, however, affect (i)
any instrum ent issued before June 27, 1966, or
(ii) any instrum ent that evidences an indebted­
ness arising from a transfer of assets u nder re­
purchase agreem ent issued before July 25, 1969.
(g)
Multiple maturity time deposit. The term
“m ultiple m aturity tim e deposit” m eans any time
deposit (1) th at is payable at the depositor’s option
on m ore than one date, w hether on a specified
date or at the expiration of a specified tim e after
the date of deposit (e.g., a deposit payable at the
option of the depositor either three m onths or
six m onths after the date of deposit), (2) th at is
payable after w ritten notice of w ithdraw al, or
(3) w ith respect to w hich the underlying instru­
m ent o r contract or any inform al understanding
or agreem ent provides for autom atic renew al at
m aturity.
S EC T IO N 217.2— D E M A N D D EPO SITS

4 D eposits in jo in t accounts o f tw o o r m ore individuals
m ay be classified as savings deposits if they m eet the o ther
requirem ents o f the above definition, b u t deposits o f a
p artn ersh ip operated fo r profit m ay n o t be so classified.
D eposits to the credit of an individual o f funds in w hich
any beneficial interest is held by a co rp o ratio n , p a rtn e r­
ship, association, o r o th er organization op erated fo r profit
o r n o t o p erated prim arily fo r religious, philanthropic,
ch aritab le, ed ucational, fratern al, o r o th er sim ilar purposes
m ay n o t be classified as savings deposits.

(a) Interest prohibited. Except as provided by
section 19 of the Federal Reserve A ct, no m em ber
bank of the Federal Reserve System shall, directly
or indirectly, by any device w hatsoever, pay any
interest on any dem and deposit.
(b) Meaning of interest. W ithin this P art, any
paym ent to or fo r the account of any depositor
as com pensation for the use of funds constituting
a deposit shall be considered interest.

5 T he exercise by the b a n k of its right to require such
notice shall n o t cause the deposit to cease to be a savings
deposit.




agency of the U nited States or the G overnm ent
D evelopm ent Bank for P uerto Rico;

4

REGULATION Q

§ 2 1 7 .3

(e) Technical grace periods in computing inter­
est on certain time deposits. W here a tim e deposit
m atures in 30 days, 90 days, 180 days, 360 days,
or even m ultiples of these periods, or w here a
tim e deposit m atures in 1 m onth, 3 m onths, 6
m onths, 12 m onths, or even m ultiples of these
periods, m em ber banks m ay pay interest for such
periods at one tw elfth of the m axim um rate, one
qu arter of the m axim um rate, one h alf of the
m axim um rate, or at the m axim um rate, or even
m ultiples thereof, respectively. In the case of any
other tim e deposit, no m em ber b an k shall pay
interest at the m axim um rate based on m ore
days than the num ber of days the funds are
actually on deposit.
(f) N o interest after maturity or expiration of
notice. A fter the date of m aturity of any tim e
deposit, such deposit is a dem and deposit, and
no interest m ay be paid on such deposit for any
period subsequent to such date. A fter the expira­
tion of the period of notice given w ith respect
to the repaym ent of any tim e deposit or savings
deposit, such deposit is a dem and deposit and no
interest may be paid on such deposit fo r any
period subsequent to the expiration of such notice,
except that, if the owner of such deposit advise
the bank in w riting th at the deposit will n o t be
w ithdraw n pursuant to such notice or th a t the
deposit will thereafter again be subject to the
co n tract or requirem ents applicable to such de­
posit, the deposit will again constitute a tim e
deposit or savings deposit, as the case m ay be,
after the date upon which such advice is received
by the bank.
(g) Time deposits of foreign governmental en­
tities and international organizations. Section 217.7
does n ot apply to the rate of interest th at m ay be
paid by a m em ber b ank on a tim e deposit having
a m aturity o f 2 years or less and representing
funds deposited and owned by (1) a foreign n a­
tional governm ent, or an agency or instrum en­
tality th e re o f 5a engaged principally in activities
which are ordinarily perform ed in the U nited
States by governm ental entities, (2) an interna­
tional entity of which the U nited States is a
m em ber, or (3) any other foreign, international,

SE C T IO N 217.3— IN T E R E S T O N T IM E
A N D SA V IN G S D EPO SITS
(a) Maximum rate. E xcept as provided in this
section, no m em ber bank shall, directly or in­
directly, by any device whatsoever, pay interest
on any tim e or savings deposit at a rate in excess
of such applicable m axim um rate as the Board of
G overnors of the Federal Reserve System shall
prescribe from tim e to tim e in § 217.7. In as­
certaining the rate of interest paid, the effects
of com pounding of interest m ay be disregarded.
(b) Modification of contracts to conform to
regulation. N o certificate of deposit or other con­
tract shall be renewed or extended unless it be
modified to conform to the provisions of this Part,
and every m em ber bank shall take such action
as m ay be necessary, as soon as possible con­
sistently w ith its contractual obligations, to bring
all of its outstanding certificates of deposit or
other contracts into conform ity w ith the provi­
sions of this Part.
(c) Member banks limited to maximum rate for
State banks. The rate of interest paid by a m em ber
bank upon a tim e deposit or savings deposit shall
not in any case exceed (1) the applicable m axi­
m um rate prescribed pursuant to the provisions
of paragraph (a) of this section, or (2) the appli­
cable m axim um rate authorized by law to be paid
upon such deposits by State banks or trust com ­
panies organized under the laws of the State in
which such m em ber bank is located, w hichever
m ay be less.
(d) Grace periods in computing interest on
savings deposits. A m em ber bank m ay pay interest
on a savings deposit received during the first 10
calendar days of any calendar m onth at the
applicable m axim um rate prescribed pursuant to
p aragraph (a) of this section calculated from the
first day of such calendar m onth until such de­
posit is w ithdraw n or ceases to constitute a savings
deposit under the provisions of this P art, w hich­
ever shall first occur; and a m em ber bank may
pay interest on a savings deposit w ithdraw n d u r­
ing its last 3 business days of any calendar m onth
ending a regular quarterly or sem iannual interest
period at the applicable m axim um rate prescribed
pursuant to paragraph (a) of this section cal­
culated to the end of such calendar m onth.




Ca O ther than States, p rovin ces, m u n icip alities or oth er
regional or lo c a l govern m en tal units, or a gen cies or
instrum en talities th ereof.

5

§ § 2 1 7 .3 -2 1 7 .4 - 2 1 7 .5

R E G U L A T IO N

to the depositor, a m em ber bank m ay pay before
m aturity a tim e deposit or the portion thereof
necessary to meet such em ergency: Provided,
T hat before m aking such paym ent the depositor
shall sign an application describing fully the cir­
cum stances constituting the em ergency which is
deem ed to justify the paym ent of the deposit
before m aturity, which application shall be ap­
proved by an officer of the bank w ho shall certify
that, to the best of his knowledge and belief, the
statem ents in the application are true. Such appli­
cation shall be retained in the b an k ’s files and
m ade available to the exam iners authorized to
exam ine the bank. W here a tim e deposit is paid
before m aturity the depositor shall forfeit accrued
and unpaid interest for a period of not less than
3 m onths on the am ount w ithdraw n if an am ount
equal to the am ount w ithdraw n has been on
deposit 3 m onths or longer, and shall forfeit all
accrued and unpaid interest on the am ount w ith­
draw n if an am ount equal to the am ount w ith­
draw n has been on deposit less than 3 months.
W hen a portion of a tim e certificate of deposit
is paid before m aturity, the certificate shall be
canceled and a new certificate shall be issued for
the unpaid portion of the deposit with the same
terms, rate, date, and m aturity as the original
deposit.

or supranational entity specifically designated by
the Board as exem pt from § 217.7. All certificates
of deposit issued by m em ber banks to such enti­
ties on w hich the contract rate of interest exceeds
the m axim um prescribed under § 217.7 shall p ro ­
vide that (1) in the event of transfer, the date of
transfer, attested to in w riting by the transferor,
shall appear on the certificate, and (2) the m axi­
m um rate lim itations of § 217.7 in effect at the
date of issuance of the certificate shall apply to
the certificate for any period during w hich it is
held by a person other than an entity exempt
therefrom under the foregoing sentence.0 U pon
the presentm ent of such a certificate for paym ent,
the bank m ay pay the holder the contract rate
of interest on the deposit for the tim e that the
certificate was actually owned by an entity so
exempt.
SEC T IO N 217.4— P A Y M E N T O F T IM E
D EPO SITS B E F O R E M A T U R IT Y
(a) Time deposits payable on a specified date.
N o m em ber bank shall pay any tim e deposit,
which is payable on a specified date, before such
specified date, except as provided in paragraph
(d) of this section.
(b) Time deposits payable after a specified
period. N o m em ber bank shall pay any time
deposit, w hich is payable at the expiration of a
certain specified period, before such specified
period has expired, except as provided in p ara­
graph (d) of this section.
(c) Time deposits payable after a specified
notice. N o m em ber bank shall pay any time
deposit, with respect to w hich notice is required
to be given a certain specified period before any
w ithdraw al is made, until such required notice
has been given and the specified period thereafter
has expired, except as provided in paragraph (d)
of this section.
(d) Payment in emergencies. In an em ergency
w here it is necessary to prevent great hardship

(e) Loans upon security of time deposits. A
m em ber bank may m ake a loan to the depositor
upon the security of his tim e deposit provided
that the rate of interest on such loan shall be
not less than 2 per cent per annum in excess of
the rate of interest on the tim e deposit.
SEC T IO N 217.5—-W IT H D R A W A L
O F SA V IN G S D EPO SITS

0 A new certificate n o t m aturing p rio r to the m aturity
date o f the original certificate m ay be issued by the
m em ber b an k to the transferee, in w hich event the original
m ust be retained by the bank. T he new certificate m ay n ot
provide fo r interest after the date of tran sfer at a rate in
excess o f the applicable m axim um rate authorized by
§ 217.7 as of the date o f issuance of the original certificate.




Q

6

(a)
Requirements regarding notice of with­
drawal. W hether o r not interest is paid, no m em ­
ber shall require or waive notice of w ithdraw al
as to any am ount or percentage of the savings
deposit of any depositor unless it shall similarly
require or waive such notice as to the same
am ount or percentage of the savings deposits of
every other depositor which are subject to the
same contractual provisions with respect to notice
of w ithdraw al. If a m em ber bank, w ithout req uir­
ing notice of withdraw al, pays interest that has

REGULATION Q

§ 2 1 7 .5 -2 1 7 .6

accrued on a savings deposit during the preceding
interest period, it shall, upon request and w ithout
requiring such notice, pay interest that has ac­
crued during said period on the savings deposits
of every other depositor. N o m em ber bank shall
change its practice w ith respect to the requiring
or waiving of notice of w ithdraw al of savings
deposits for the purpose of discrim inating in
favor of or against any depositor or depositors,
and no such change of practice shall be m ade
except pursuant to duly recorded action of the
b ank’s board of directors or a properly authorized
com m ittee thereof.
(b) Loans on security of savings deposits. If it
is not the practice of a m em ber bank to require
notice of w ithdraw al of savings deposits, no
restrictions are imposed by this P art upon loans
by such bank to its depositors upon the security
of such deposits. If it is the practice of a m em ber
bank to require notice of w ithdraw al of a savings
deposit, such bank m ay m ake loans to a depositor
upon the security of such deposit, but the rate of
interest on such loans shall be not less than 2 per
cent per annum in excess of the rate of interest
paid on such deposit.
(c) M anner of payment of savings deposits.
(1) Subject to the provisions of subparagraph
(2) of this paragraph, a m em ber bank m ay perm it
w ithdraw als to be m ade from a savings deposit
only through p ay m en t7 to the depositor himself
(but not to any other person w hether or not acting
for the depositor), except
(i) w here the deposit is represented by a pass­
book, to any person presenting the passbook; 7
(ii) to an executor, adm inistrator, trustee, or
other fiduciary holding the savings deposit as part
of a fiduciary estate, or to a person, other than
the bank, holding a general pow er of attorney
granted by the depositor;
(iii) to any person, including the bank, that
has extended credit to the depositor on the secu­
rity of the savings deposit, w here such paym ent
is m ade in order to enable the creditor to realize
upon such security;
(iv) pursuant to the order of a court of com ­
petent jurisdiction;

(v) upon the death of the depositor, to any
person authorized by law to receive the deposit; or
(vi) interest paid to a third person p u rsuant to
w ritten instruction or assignm ent by the depositor
accepted by the bank, and placed on file therein.
(2) N otw ithstanding the provisions of subpara­
graph (1) of this paragraph, no w ithdraw al shall
be perm itted by a m em ber bank to be m ade from
a savings deposit, through paym ent to the bank
itself or through transfer of credit to a dem and
or other deposit account of the same depositor
(other than of interest on the savings deposit) if
such paym ent or transfer is m ade pursuant to
any advertised plan or any agreem ent, w ritten or
oral,
(i) w hich authorizes such paym ents or transfers
of credit to be m ade as a norm al practice in
order to cover checks or drafts draw n by the
depositor upon the bank; or
(ii) w hich provides that such paym ents or tran s­
fer of credit shall be m ade at daily, m onthly, or
other such periodic intervals, except w here m ade
to enable the bank, on the depositor’s behalf and
pursuant to his w ritten instructions, to effect the
paym ent of instalm ents of principal, interest, or
other charges (including taxes or insurance pre­
miums) due on a real estate loan or m ortgage.
(3) W here a savings deposit is evidenced by
a passbook, every w ithdraw al m ade upon presen­
tation of the passbook shall be entered in the pass­
book at the tim e of withdraw al, and every other
w ithdraw al from such a deposit shall be entered
in the passbook as soon as practicable after the
w ithdraw al is made.
SEC T IO N 217.6— A D V E R T IS IN G
O F IN T E R E S T ON D EPO SITS
Every advertisem ent, announcem ent, or solici­
tation relating to the interest paid on deposits in
m em ber banks shall be governed by the following
rules:
(a) Annual rate of simple interest. Interest rates
shall be stated in term s of the annual rate of
simple interest. In no case shall a rate be adver­
tised that is in excess of the applicable m axim um
rate for the particular deposit.

7 P ay m en t from a savings deposit or p resentation of a
p assb o o k m ay be m ade over the counter, through the
m ails, o r otherw ise.




(b) Percentage yields based on one year. W here
a percentage yield achieved by com pounding in­

7

REGULATION Q

§ 2 1 7 .6

(e) Profit. T he term “profit” shall n o t be used
in referring to interest paid on deposits.

terest during one year is advertised, the annual
rate of simple interest shall be stated w ith equal
prom inence, together w ith a reference to the
basis of com pounding. N o m em ber bank shall
advertise a percentage yield based on the effect
of grace periods perm itted in § 217.3.
(c) P ercentage yields based on periods in excess
of one year. N o advertisem ent shall include any
indication of a total percentage yield, com pounded
or simple, based on a period in excess of a year,
or an average annual percentage yield achieved by
com pounding during a period in excess of a year.
(d) Tim e or am ount requirem ents. If an adver­
tised rate is payable only on deposits th at m eet
tim e or am ount requirem ents, such requirem ents
shall be clearly and conspicuously stated. W here
the tim e requirem ent for an advertised rate is in
excess of a year, the required num ber of years
for the rate to apply shall be stated w ith equal
prom inence, together w ith an indication of any
low er rate or rates th at will apply if the deposit
is w ithdraw n at an earlier m aturity.




(f) A ccuracy of advertising. N o m em ber bank
shall m ake any advertisem ent, announcem ent, or
solicitation relating to the interest paid on de­
posits th at is inaccurate or misleading or that
m isrepresents its deposit contracts.
(g) Solicitation of deposits for banks. A ny per­
son or organization th at solicits deposits for a
m em ber bank shall be bound by the rules con­
tained in this section w ith respect to any adver­
tisem ent, announcem ent, or solicitation relating to
such deposits. N o such person or organization
shall advertise a percentage yield on any deposit
it solicits for a m em ber bank th at is not au th o r­
ized to be paid and advertised by such bank.

(SEC TIO N 217.7— M A X IM U M R A TES O F
IN T E R E S T PA Y A B LE BY M E M B ER BANKS
ON T IM E A N D SA V IN G S D EPO SITS, is
printed separately.)

8

R E G U L A T IO N

STA TU TO RY A P P E N D IX

Q

STATUTORY APPENDIX
Section 19 of the Federal Reserve A ct provides
in p a rt as follows:
(a)
The Board is authorized for the purposes
of this section to define the term s used in this
section, to determ ine w hat shall be deem ed a
paym ent of interest, to determ ine w hat types of
obligations, w hether issued directly by a m em ber
bank or indirectly by an affiliate of a m em ber
bank or by other m eans, shall be deem ed a
deposit, and to prescribe such regulations as it
m ay deem necessary to effectuate the purposes
of this section and to prevent evasions thereof.
[U.S.C., title 12, sec. 461.]

***
(i)
N o m em ber bank shall, directly or indirectly,
by any device whatsoever, pay any interest on
any deposit w hich is payable on dem and: Provided,
T h at nothing herein contained shall be construed
as prohibiting the paym ent of interest in accord­
ance w ith the term s of any certificate of deposit
or other contract entered into in good faith which
is in force on the date on w hich the bank becomes
subject to the provisions of this paragraph; but
no such certificate of deposit or other contract
shall be renew ed or extended unless it shall be
modified to conform to this paragraph, and every
m em ber bank shall take such action as m ay be
necessary to conform to this paragraph as soon
as possible consistently w ith its contractual obli­
gations: Provided further, T hat this paragraph
shall not apply to any deposit of such bank which
is payable only at an office thereof located outside
of the States of the U nited States and the D istrict
of C olum bia: P rovided further, T hat until the
expiration of two years after the date of enact­
m ent of the Banking A ct of 1935 this paragraph
shall not apply (1 ) to any deposit m ade by a
savings bank as defined in section 12B of this
A ct, as am ended, or by a m utual savings bank,
or (2 ) to any deposit of public funds m ade by
or on behalf of any State, county, school district,
or other subdivision o r m unicipality, or to any
deposit of trust funds if the paym ent of interest
with respect to such deposit of public funds or
of trust funds is required by State law. So m uch
o f existing law as requires the paym ent of interest
with respect to any funds deposited by the U nited
States, by any T erritory, D istrict, or possession




9

thereof (including the Philippine Islan d s), o r by
any public instrum entality, agency, or officer of
the foregoing, as is inconsistent w ith the provi­
sions of this section as am ended, is hereby repealed.
[U.S.C., title 12, sec. 371a.]

(j) T he Board m ay from tim e to tim e, after
consulting w ith the Board of D irectors of the
Federal D eposit Insurance C orporation and the
Federal H om e L oan Bank Board, lim it by regu­
lation the rates of interest w hich m ay be paid
by m em ber banks on tim e and savings deposits.
The Board m ay prescribe different rate lim itations
fo r different classes of deposits, for deposits of
different am ounts o r w ith different m aturities or
subject to different conditions regarding w ith­
draw al or repaym ent, according to the natu re or
location of m em ber banks or their depositors,
or according to such oth er reasonable bases as
the Board m ay deem desirable in the public
interest. N o m em ber bank shall pay any tim e
deposit before its m aturity except upon such
conditions and in accordance w ith such rules and
regulations as m ay be prescribed by the said
Board, or waive any requirem ent of notice before
paym ent of any savings deposit except as to all
savings deposits having the sam e requirem ent:
Provided, T h at the provisions of this paragraph
shall not apply to any deposit w hich is payable
only at an office of a m em ber bank located o ut­
side of the States of the U nited States and the
D istrict of Colum bia. D uring the period com ­
mencing on O ctober 15, 1962, and ending on
O ctober 15, 1968, the provisions of this p ara­
graph shall n o t apply to the rate of interest
which m ay be paid by m em ber banks on tim e
deposits of foreign governm ents, m onetary and
financial authorities of foreign governm ents when
acting as such, o r international financial institu­
tions of w hich the U nited States is a m em ber.
[U.S.C., title 12, sec. 371b. The first two sentences of this
paragraph are, in part, temporary. Unless section 7 of the Act
of September 21, 1966 (80 Stat. 825), as amended by the Act
of December 23, 1969 (83 Stat. 371), is modified, on M arch 22,
1971, such sentences will read as follows: “The Board of
Governors of the Federal Reserve System shall from time to
time prescribe rules governing the payment and advertisement
of interest on deposits, including limitations on the rate of
interest which may be paid by member banks on time and
savings deposits, and shall prescribe different rates for such
payment on time and savings deposits having different maturi­
ties, or subject to different conditions respecting withdrawal or
repayment, or subject to different conditions by reason of
different locations, or according to the varying discount rates
of member banks in the several Federal Reserve districts.” ]

REGULATION Q

STATUTORY APPENDIX

Section 24 of the F ederal Reserve A ct p ro ­
vides, with respect to national banking associa­
tions, in part as follows:
*
* * A ny such association may continue
hereafter as heretofore to receive tim e and sav­
ings deposits and to pay interest on the same,
but the rate of interest which such association may




10

pay upon such tim e deposits or upon savings or
other deposits shall not exceed the m axim um
rate authorized by law to be paid upon such
deposits by State banks o r tru st com panies organ­
ized under the laws of the State in w hich such
association is located.
[U.S.C., title 12, sec. 371.]

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION Q
Effective January 21, 1970

SECTION 217.7— M AXIM UM RATES OF INTEREST PAYABLE
BY M EM BER BANKS ON TIM E AND SAVINGS DEPOSITS

P ursuant to the provisions of section 19 of the
F ederal Reserve A ct and § 217.3, the Board of
G overnors of the F ederal Reserve System hereby
prescribes the following m axim um rates1 of inter­
est per annum payable by m em ber banks of the
Federal Reserve System on tim e and savings
deposits:
(a) Single maturity time deposits.
(1)
Deposits of $100,000 or more. N o m em ber
bank shall pay interest on any single m aturity
tim e deposit of $100,000 or m ore at a rate in
excess of the applicable rate under the following
schedule:
M aturity
30-59 days
60-89 days
90-179 days
180 days or m ore but less
than 1 year
1 year or m ore

M a xim u m per cent
6V4
6V2

6%
7
IV 2

1 T he lim itation s o n rates o f interest payab le by m em ber
b an ks o f the F ed era l R eserve System o n tim e and savings
deposits, as prescribed herein, are n o t ap p lica b le to any
d ep o sit w h ich is p a y a b le o n ly at an office o f a m em ber
b an k lo ca ted ou tsid e th e S tates o f the U n ited States and
the D istrict o f C olum bia.




(2)
Deposits of less than $100,000.
bank shall pay interest on any single
tim e deposit of less than $100,000 at
excess of the applicable rate u nder the
schedule:
M aturity
30 days or m ore but less
than 1 year
1 year or m ore but less
th an 2 years
2 years or m ore

N o m em ber
m aturity
a rate in
following

M a xim u m per cent

51/2

5%

(b) Multiple maturity time deposits.
(1) Deposits payable at intervals of at least
90 days. N o m em ber bank shall pay interest at
a rate in excess of 5 per cent on a m ultiple m atu ­
rity tim e deposit th at is payable only 90 days
or m ore after the date of deposit, or 90 days or
m ore after the last preceding date on w hich it
m ight have beefi paid.
(2) Deposits payable at intervals of less than
90 days. N o m em ber bank shall pay interest at
a rate in excess of 4 Vi per cent on a m ultiple
m aturity tim e deposit th at is payable less than
90 days after the date of deposit, or less than
90 days (but at least 30 days) after the last preced­
ing date on which it m ight have been paid.
(c) Savings deposits. N o m em ber bank shall pay
interest at a rate in excess of AV2 per cent on any
savings deposit.