[Federal Register Volume 62, Number 200 (Thursday, October 16, 1997)]
[Proposed Rules]
[Pages 53769-53770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27300]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 329

RIN 3064-AC13


Interest on Deposits

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is proposing 
to amend its regulation entitled ``Interest on Deposits.'' Section 
18(g) of the Federal Deposit Insurance Act (FDI Act) requires that the 
FDIC by regulation prohibit the payment of interest or dividends on 
demand deposits in insured nonmember banks and in insured branches of 
foreign banks. This regulation implements this prohibition. The 
proposed rule provides as an exception to the prohibition, the payment 
of interest or other remuneration on any deposit which, if held by a 
member bank, would be allowable under 12 U.S.C. 371a and 461, or by 
regulation of the Board of Governors of the Federal Reserve System 
(FRB). This proposal is in accordance with the FDIC's review of its 
regulations under section 303 of the Riegle Community Development and 
Regulatory Improvement Act of 1994.

DATES: Written comments must be received by the FDIC on or before 
December 15, 1997.

ADDRESSES: Send written comments to Robert E. Feldman, Executive 
Secretary, Attention: Comments/OES, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429. Comments may 
be hand delivered to the guard station at the rear of the 17th Street 
Building (located on F Street), on business days between 7:00 a.m. and 
5:00 p.m. [Fax number: (202) 898-3838; Internet address: 
[email protected]]. Comments may be inspected and photocopied in the 
FDIC Public Information Center, Room 100, 801 17th Street, NW., 
Washington, DC 20429, between 9:00 a.m. and 4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Marc Goldstrom, Counsel, Regulation 
and Legislation Section, Legal Division, (202-898-8807); Louise 
Kotoshirodo, Review Examiner, Division of Compliance and Consumer 
Affairs, (202-942-3599).

SUPPLEMENTARY INFORMATION:

Background

    Section 18(g) of the FDI Act provides that the Board of Directors 
of the FDIC shall by regulation prohibit the payment of interest or 
dividends on demand deposits in insured nonmember banks and in insured 
branches of foreign banks. (12 U.S.C. 1828(g)). Accordingly, the FDIC 
promulgated regulations prohibiting the payment of interest or 
dividends on demand deposits at 12 CFR part 329. Section 11 of the 
Banking Act of 1933 (12 U.S.C. 371a) prohibits member banks from paying 
interest on demand deposits and is implemented by Regulation Q, (12 CFR 
part 217) of the FRB.
    Section 18(g) of the FDI Act also provides that the FDIC shall make 
such exceptions to this prohibition as are prescribed with respect to 
demand deposits in member banks by section 19 of the Federal Reserve 
Act, as amended, or by regulation of the FRB (12 U.S.C. 1828(g)). 
Generally, member banks, state nonmember banks and insured branches of 
foreign banks are subject to the same prohibition and exceptions to 
such prohibition, albeit under different statutes and regulations.
    From time to time the FRB issues or authorizes a new exception to 
the prohibition applicable to member banks, and the FDIC later issues 
or authorizes a similar exception affecting state nonmember banks and 
insured branches of foreign banks. For example, the FRB recently 
amended its interpretation with respect to limitations on premiums 
given on demand deposits (62 FR 26736 (May 15, 1997)) and the FDIC 
later issued a similar interpretive rule affecting state nonmember 
banks and insured branches of foreign banks (62 FR 40731 (July 30, 
1997)).
    In the periods of time in which the FRB has issued or authorized an 
exception to the prohibition, but the FDIC has yet to act, state 
nonmember banks and insured branches of foreign banks faced a possible 
competitive disadvantage with respect to member banks. In order to 
eliminate the potential for any such competitive disadvantage in the 
future and in light of the FDIC's statutory mandate to make such 
exceptions to this prohibition as are prescribed with respect to demand 
deposits in member banks, the FDIC is proposing to create an omnibus 
exception to the prohibition on the payment of interest on demand

[[Page 53770]]

deposits. The proposed rule would allow for the payment of interest or 
other remuneration on any deposit which, if held by a member bank, 
would be allowable under 12 U.S.C. 371a and 461, or by regulation of 
the FRB. The effect of this proposal is that state nonmember banks and 
insured branches of foreign banks would become subject to the same 
exceptions to the prohibition that member banks are subject to, 
regardless of whether the FDIC had issued or authorized the specific 
exception.
    The FDIC is also proposing this rule in response to section 303 of 
the Riegle Community Development and Regulatory Improvement Act of 1994 
(CDRIA), Pub. L. 103-325, 108 Stat. 2160 (Sept. 23, 1994). This statute 
requires that each federal banking agency, consistent with the 
principles of safety and soundness, statutory law and policy, and the 
public interest, conduct a review of the regulations and written 
policies of that agency to, among other things, make uniform all 
regulations and guidelines implementing common statutory or supervisory 
policies. The FDIC believes that the proposal is in accordance with 
section 303 of the CDRIA in that it seeks to make uniform a regulation 
implementing a common statutory policy.

Regulatory Flexibility Act

    The Board hereby certifies that the proposed rule would not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). The effect of this proposal is that state nonmember banks and 
insured branches of foreign banks would become subject to the same 
exceptions to the prohibition that member banks are subject to, 
regardless of whether the FDIC had issued or authorized the specific 
exception.

Paperwork Reduction Act

    The proposed rule would not constitute a ``collection of 
information'' within the meaning of section 3502(3) of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.). Consequently, no 
material has been submitted to the Office of Management and Budget for 
review.

List of Subjects in 12 CFR Part 329

    Banks, banking, Interest rates.

    For the reasons set forth in the preamble, the Board of Directors 
of the FDIC proposes to amend 12 CFR part 329 as set forth below:

PART 329--INTEREST ON DEPOSITS

    1. The authority citation for part 329 continues to read as 
follows:

    Authority: 12 U.S.C. 1819, 1828(g) and 1832(a).

    2. Section 329.3 is added to read as follows:


Sec. 329.3  Exception to prohibition on payment of interest.

    Section 329.2 shall not apply to the payment of interest or other 
remuneration on any deposit which, if held by a member bank, would be 
allowable under 12 U.S.C.371a and 461, or by regulation of the Board of 
Governors of the Federal Reserve System.

    By order of the Board of Directors.

    Dated at Washington, DC this 6th day of October, 1997.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 97-27300 Filed 10-15-97; 8:45 am]
BILLING CODE 6714-01-P