Title 12--Banks and Banking CHAPTER II--FEDERAL RESERVE SYSTEM PART 217--PROHIBITION AGAINST THE
PAYMENT OF INTEREST |
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(a) Authority. This part is issued under the authority of section 19
of the Federal Reserve Act (12 U.S.C. 371a, 461, 505), section 7 of the
International Banking Act of 1978 (12 U.S.C. 3105), section 11 of the
Federal Reserve Act (12 U.S.C. 248), and section 8 of the Federal
Deposit Insurance Act (12 U.S.C. 1818), unless otherwise noted.
(b) Purpose. This part prohibits the payment of interest on demand
deposits by member banks and other depository institutions within the
scope of this part.
(c) Scope. (1) This regulation applies to state chartered banks that
are members of the Federal Reserve under section 9 of the Federal
Reserve Act (12 U.S.C. 321, et seq.) and to all national banks. The
regulation also applies to any Federal branch or agency of a foreign
bank and to a State uninsured branch or agency of a foreign bank in the
same manner and to the same extent as if the branch or agency were a
member bank, except as may be otherwise provided by the Board, if:
(i) Its parent foreign bank has total worldwide consolidated bank
assets in excess of $1 billion;
(ii) Its parent foreign bank is controlled by a foreign company
which
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owns or controls foreign banks that in the aggregate have total
worldwide consolidated bank assets in excess of $1 billion; or
(iii) Its parent foreign bank is controlled by a group of foreign
companies that own or control foreign banks that in the aggregate have
total worldwide consolidated bank assets in excess of $1 billion.
(2) For deposits held by a member bank or a foreign bank, this
regulation does not apply to ``any deposit that is payable only at an
office located outside of the United States'' (i.e., the States of the
United States and the District of Columbia) as defined in Sec. 204.2(t)
of the Board's Regulation D-- Reserve Requirements of Depository
Institutions (12 CFR 20.4).
[Reg. Q, 51 FR 9637, Mar. 20, 1986, as amended at 57 FR 43336, Sept. 21,
1992]
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For purposes of this part, the following definitions apply unless
otherwise specified;
(a) Demand deposit means any deposit that is considered to be a
demand deposit under Sec. 204.2(b) of the Board's Regulation D--Reserve
Requirements of Depository Institutions (12 CFR part 204).
(b) Deposit means any liability of a member bank that is considered
to be a deposit under Sec. 204.2(a) of the Board's Regulation D--Reserve
Requirements of Depository Institutions (12 CFR part 204).
(c) Foreign bank means any bank that is considered to be a foreign
bank under Sec. 204.2(o) of the Board's Regulation D--Reserve
Requirements of Depository Institutions (12 CFR part 204).
(d) Interest means any payment to or for the account of any
depositor as compensation for the use of funds constituting a deposit. A
member bank's absorption of expenses incident to providing a normal
banking function or its forbearance from charging a fee in connection
with such a service is not considered a payment of interest.
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No member bank of the Federal Reserve System shall, directly or
indirectly, by any device whatsoever, pay any interest on any demand
deposit.\1\
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\1\ A member bank may continue to pay interest on a time deposit for
not more than ten calendar days; (1) Where the member bank has provided
in the time deposit contract that, if the deposit or any portion thereof
is withdrawn not more than ten calendar days after a maturity date (one
business day for ``IBF time deposits'' as defined in Sec. 204.8(a)(2) of
Regulation D), interest will continue to be paid for such period; or (2)
for a period between a maturity date and the date of renewal of the
deposit, provided that such certificate is renewed within ten calendar
days after maturity.
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Interpretations |
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Sec. 217.101 Premiums on deposits. |
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(a) Section 19(i) of the Federal Reserve Act and Sec. 217.3 of
Regulation Q prohibits a member bank from paying interest on a demand
deposit. Premiums, whether in the form of merchandise, credit, or cash,
given by a member bank to a depositor will be regarded as an advertising
or promotional expense rather than a payment of interest if:
(1) The premium is given to a depositor only at the time of the
opening of a new account or an addition to an existing account;
(2) No more than two premiums per account are given within a 12-
month period; and
(3) The value of the premium or, in the case, of articles of
merchandise, the total cost (including taxes, shipping, warehousing,
packaging, and handling costs) does not exceed $10 for deposits of less
than $5,000 or $20 for deposits of $5,000 or more.
The costs of premiums may not be averaged. The member bank should retain
sufficient supporting documentation showing that the total cost of a
premium, including shipping, warehousing, packaging, and handling costs,
does not exceed the applicable $10/$20 limitations and that no portion
of the total cost of any premium has been attributed to development,
advertising, promotional, or other expenses. A member bank is not
permitted directly or indirectly to solicit or promote deposits from
customers on the basis that the funds will be divided into
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more than one account by the institution for the purpose of providing
more than two premiums per deposit within a 12-month period.
(b) Notwithstanding paragraph (a) of this section, any premium that
is not, directly or indirectly, related to or dependent on the balance
in a demand deposit account and the duration of the account balance
shall not be considered the payment of interest on a demand deposit
account and shall not be subject to the limitations in paragraph (a) of
this section.
[52 FR 47698, Dec. 16, 1987. Redesignated at 57 FR 43336, Sept. 21,
1992; 62 FR 26737, May 15, 1997]
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