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Federal Reserve Bank of Dallas

May 1982

DIDC Creates New Deposit Instruments
Financial institutions are now able
to offer a new short-term deposit in­
strument tied to market interest rates.
In its March 22 meeting, the Depository
Institutions Deregulation Committee
(DIDC) authorized three-month cer­
tificates of deposit with interest rate
ceilings tied to the 91-day Treasury bill
rate, effective May 1.
The DIDC also established a new
category of ceilingless time deposits
for banks and thrift institutions with a
minimum time to maturity of 31/a years
as the first step in its plan for further
deregulation of interest rate ceilings
(see inside article for a summary of
p re v io u s ly -a u th o riz e d
d e p o s it
The new three-month CDs feature a
$7500 minimum investment and a
91-day maturity. Compounding of in­
terest is not allowed for the new instru­
ment, and the m inim um early
withdrawal penalty is loss of earned in­
terest. Unlike the six-month CDs
previously authorized, the new cer­
tificates include a differential between
the interest rates banks and thrifts
may pay. Thrifts are allowed to pay a
rate equal to the current week’s auc­
tion average of 91-day T-bills, while
banks may pay up to 25 basis points
less than the T-bill rate.
This differential was established for
a one-year period only and will be
eliminated on May 1, 1983. During the
interim, if the 91-day T-bill rate falls to
or below 9% for four consecutive
weeks, the differential will disappear
until the rate rises above 9% again.

Deregulation Plan For Time Deposit interest Rate Ceilings

Effective dates

Deposit maturities subject to
interest rate ceilings

May 1, 1982 - March 31, 1983

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ **,

April 1, 1983 - March 31, 1984

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

April 1, 1984 - March 31, 1985


April 1, 1985 - March 30, 1986


March 31, 1986


Time to maturity (years)


The DIDC’s plan for the deregulation
of time deposit interest rate ceilings is
summarized in the graph accompany­
ing this article. The plan calls for
reducing the minimum time to maturity
for the deposit category exempt from
interest rate ceilings by one year every
year until 1986, when the minimum
would be reduced to the minimum
maturity for all time deposits in effect
on that date. This minimum is currently
14 days. In addition, the maturity range
of the small saver certificate will be ad­
justed every year to complement the
deregulation plan.
The new category of ceilingless time
deposits has no specified minimum in­
vestment but requires a denomination





of $500 be offered by institutions.
These deposits feature optional
negotiability and an early withdrawal
penalty of six month’s interest. Addi­
tions to the account are permitted dur­
ing the first year at the option of the
issuing institution.

• Penalty Suspension
• Market Rate CDs
• Economic Conference

Governor Gramley Speaks at El Paso Meeting
Federal Reserve Board Governor
Lyle E. Gramley recently spoke to the
El Paso Branch joint board meeting
regarding m onetary policy, the
economy and inflation. Gramley told
the audience at the El Paso Civic
Center “ that we have much to gain by
sticking with our present course of ac­
tion, by staying with policies of
monetary restraint. And, we have much
to lose indeed by turning back to the
old ways of doing things.”
Before the group, made up mostly of
members of the El Paso financial com­
munity, Gramley speculated on the
course of inflation, expecting it to
come down. As inflation continues to
moderate, he said, “ it’s going to help
to bring interest rates down and to set
the stage for economic recovery.”
“ We feel at the Federal Reserve that
we cannot turn back. We feel the
threshold of a major breakthrough in
interest rates has been made. Inflation

has fallen down more so than I and
most others have expected. We never
thought it possible. We have achieved

Transfers and Settlements
Now Subject to New Prices
The wire transfer and net settlement
services of the Dallas Fed were subject
to new prices effective April 29. Wire
transfer involves sending funds be­
tween the Federal Reserve accounts of
financial institutions, while net settle­
ment is a book-entry service used to
account for check clearings which
have taken place outside the Federal
Reserve System.
The fee schedule for the wire
transfer service involves one structural
change over that of last year. The
charge for a basic transfer is now split
between the originator and the receiver
of the transfer, reflecting the benefit to
both parties of the service. Previously,
the originator bore the cost of each
The new transfer prices are 65 cents
to both the originator and the receiver
of each wire transfer. In 1981, the
originator was charged 80 cents per

transfer. In addition, a $3.50 surcharge
is imposed to each originator of a wire
transfer offline from the Fed’s com­
munications network. This surcharge
was $2.70 originally. A surcharge of
$2.25, up from $1.80, is charged for
telephone advice of an incoming
transfer when requested by an offline
The new net settlement prices are
$1.30 for each settlement entry, up
from 80 cents last year. There is an ad­
ditional charge of $5.00 for an offline
origination of a settlement entry, up
from $2.70. The surcharge for
telephone advice of a settlement entry
is $2.25, up from $1.80.
The new prices are the same at each
Fed office nationwide and generally
reflect increased System costs in pro­
viding the services. Pricing for wire
transfer and net settlement was orig­
inally implemented in January, 1981.

substantial progress over inflation by
sticking to our course of action and we
see no reason to accept less.”

Tornados Evoke
Lift of Penalty
The Federal Reserve Board of
Governors recently granted a
temporary suspension of the
Regulation Q penalty for early
withdrawal of time deposits. This
action was taken in response to
the tornados that hit Lamar
County, Texas. The Board’s ac­
tion permits a member bank,
wherever located, to pay a time
deposit before maturity without
imposing the penalty. However,
the depositor must provide a
signed statement fully describing
the property or other financial
loss as a result of the storms.
The suspension has been
made retroactive to deposits
withdrawn on or after April 8,
1982 and will remain in effect un­
til 12:00 midnight October 8,

Four CDs Feature Market Interest Rates
The recently-authorized three-month
certificates of deposit and the new
ceilingless time deposit category (see
front page article) are measures
representing part of an overall
deregulation plan being implemented
by the D e pository In s titu tio n s
Deregulation Committee (DIDC). The
DIDC was established to supervise the
phaseout and ultimate elimination of
interest rate ceilings on deposit ac­
counts as required by the Monetary
Control Act of 1980. In doing so, the
committee has the authority to create
account categories which are not sub­
ject to interest rate ceilings or to
create new deposit instruments with
ceilings set at market interest rates.
In addition to the new 3Vi-year or
longer deposit category which does
not have an interest rate ceiling, there
currently exist four time deposit in­
struments which have ceilings tied to
market interest rates. These are the
new three-month (91-day) CDs, the sixmonth (182-day) money market CDs,
the 2 Vi to less than 3 Vi-year small
saver CDs, and the one-year all savers
CDs. The major features currently in ef­
fect for each of these instruments are
summarized in the table accompany­

ing this article.
Each of the instruments has an in­
terest rate ceiling tied directly to a
market interest rate or yield calcula­
tion. The exception is the ceiling for
the six-month CD, which is calculated
using a four-week moving average if
this average is greater than the current
week’s T-bill rate. The moving average
is the average of the previous four auc­
tion rates for 182-day T-bills, including
the current week’s rate.
A differential between the interest
rates banks and thrift institutions may
pay currently exists for two of the in­
struments, the three-month CDs and
the small saver CDs. For each of these
certificates, the bank rate is 25 basis
points below the thrift rate.
The all savers CD is unique in that it
includes tax exempt provisions and
may only be issued through December
31, 1982. Because of this, the CD is no
longer renewable upon maturity. The
yield of the all savers CD must be 70%
of the current rate for 52-week T-bills.
This does not represent an upper ceil­
ing as do the other interest rate
In addition to these four in­
struments, the DIDC establishes in­

terest rate ceilings for all other
classifications of deposits as well.
These include NOW accounts, savings
accounts, regular time deposits,
government deposits, IRA or Keogh ac­
count deposits and deposits over
$100,000. All interest rate ceilings for
member banks are outlined by the
Federal Reserve’s Regulation Q.
The Dallas Fed operates a 24-hour
telephone recorded message service
which provides the current week’s in­
terest rate ceilings. Weekly rate
changes are announced on Mondays
after 6 p.m. The telephone numbers
used to access the recorded message
are listed below.

Telephone Numbers for
Interest Rate
Recorded Message

2Vi to less than
3 Vi-year
Small Saver

Money Market

Money Market

Ceiling tied to

91-day T-bill rate

182-day T-bill rate

How determined

Banks: rate minus .25
Thrifts: rate
Every week

Rate plus .25 or
4-week average plus .25
Every week

2Vi-year yield on
Treasury securities
Banks: yield minus .25
Thrifts: yield
Every two weeks

Monday after 6 p.m.
Tuesday following

Monday after 6 p.m.
Tuesday following

Monday after 6 p.m.
Tuesday following

Loss of earned

Loss of three
month’s interest

Loss of six
month’s interest




How often changed
When announced
Effective date
Minimum investment
Early withdrawal penalty
Compounding allowed
Automatically renewable
Negotiability allowed



All Savers

52-week T-bill rate
70% of rate
every four weeks
Thursday after 6 p.m.
Sunday following
None, but a required
$500 denomination
Loss of three
month’s interest
Yes, if rate adjusted
to equivalent yield

Dallas Fed Hosts Economic Conference
In mid-April, the Dallas Reserve
Bank worked in cooperation with
the Center for Economic Education
at North Texas State University to
host an educational conference for
teachers entitled “ Money and the
Economy in the Eighties” . Approx­
imately forty teachers representing
the Dallas, Arlington, Denton, Irving,
Lewisville, Plano and Richardson In­
dependent School Districts as well
as Weatherford Junior College were
in attendance.
The program for the all-day con­
ference included such topics as
“ Fundamentals of the Market
Economy” and “ Economic In­
stabilities and Strategies for Sur­
vival” . Among the guest speakers
were economists James Hoehn and
Pat Lawler from the Bank’ s
Research Department.

Conference participants learn to play the game “ You’re the Banker”.