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ties (not including advances from the Bank) of such member will be reduced to an amount not in excess of 5 percent of its net assets.

§ 525.32 Short term advances.

In addition to unsecured or secured advances with a maturity of not to exceed one year which may be made under the provisions of section 11(g) (4) of the act, advances on an unsecured basis or on any kind of security that may be readily available may be made to members under the provisions of section 11(g) (3) of the act. Such advances must have been unanimously approved by the executive committee of the Bank or by a majority of the directors or by 2 officers of the Bank. Except with the prior approval of the Board, the resulting aggregate of advances made under this section, together with the unpaid principal of any other advances having an unexpired maturity of more than 30 days, excluding advances made in accordance with or secured as provided in § 525.10, § 525.25 or § 525.26, shall not exceed 5 per centum of the member's withdrawable accounts.

(Secs. 10, 17, 47 Stat. 731, 736, as amended (12 U.S.C. 1430, 1437); Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR 1943-48 Comp., p. 1071.) [38 FR 29994, Oct. 31, 1973]

ADVANCES TO NONMEMBER MORTGAGEES

§ 525.33 Lines of credit.

The board of directors or executive committee of each Bank may establish a line of credit for each prospective nonmember mortgagee borrower under the provisions of section 10b of the act, which, in the opinion of such board of directors or executive committee, may be safely extended.

§ 525.34 Eligible institutions.

The term "chartered institutions having succession and subject to the inspection and supervision of some governmental agency" as used in section 10b of the act is deemed to mean institutions which are, by law, subject to the continuous examination and supervision of some governmental agency having legal power and authority to inspect and supervise. An institution may not qualify merely by contracting with the Federal National Mortgage Association, the Federal Housing Administration, or a similar agency of the Government to furnish audits or to permit examinations.

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In view of the fact that such nonmember mortgagees are not required to maintain an investment in the capital stock of a Bank as is required of members, the rates of interest to be charged on advances to non-member mortgagees shall be not less than one-half of 1 per centum nor more than 1 per centum higher than the rates of interest charged to members on advances of like character, unless otherwise authorized by the Board.

(Sec. 10, 47 Stat. 731, as amended; 12 U.S.C. 1430) [39 FR 18093, May 23, 1974]

§ 525.36 Applications for advances.

Applications for such advances shall be made in writing on forms prescribed by the Board. A Bank may at its discretion deny such applications, or may grant them on terms and conditions which are no more liberal than those applicable to advances to members.

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surance Corporation or (2) any institution whose home office is located on Guam.

(b) Certificate account. The term "certificate account" means any form of savings account, evidenced by a certificate, on which a rate of return greater than that paid on regular accounts will be paid if the account is held for a certain fixed or minimum term or qualifying period.

(c) Notice account. The term "notice account" means any form of savings account evidenced by an account book containing a requirement that the holder of the account must give the member institution written notice of at least 90 days prior to making each withdrawal from such account, with such exceptions as applicable law or regulation may permit.

(d) Regular account. The term "regular account" means any form of savings account that is not a certificate account or a notice account.

(e) Savings account. The term "savings account" means any deposit, withdrawable or repurchasable share, investment certificate, or other withdrawable account.

(f) Return. The term "return" means any dividend, interest, distribution, payment, give-away, or other economic benefit received by an account holder or any other person on or with respect to a savings account, except as otherwise provided in § 526.2.

(g) Distribution period. The term "distribution period” means the period of time used by a member institution as a basis for distributing a return.

(h) Announced rate. The term "announced rate" means the rate of return which an institution has declared, announced, or advertised that it will pay or anticipates paying for a distribution period or, if none, the rate of return paid for the immediately preceding distribution period.

(i) Give-away. The term "give-away" means any premium (whether in the form of merchandise, credit, or cash) given by a member institution to induce the opening of a new savings account or an addition to an existing savings account.

(j) Supervisory Agent. The term "Supervisory Agent" means the President of the Federal Home Loan Bank of the district in which the member institution is located or any other officer or employee of such bank designated by the

Board as agent as provided by §§ 501.10 and 501.11 of this chapter.

(k) Instrument. The term "instrument" includes any paper writing, whether or not negotiable, by which payment or credit is effected.

(1) Transaction account. The term "transaction account" means a "regular account," as that term is defined in paragraph (d) of this section, of a member institution upon which the owner is allowed to make withdrawals by negotiable or transferable instruments for the purpose of making transfers to third parties and which consists of funds deposited to the credit of, or the entire beneficial interest is held by, one or more individuals or of a corporation, association, or other organization operated primarily for religious, philanthropic, charitable, educational, fraternal, or other similar purposes and not operated for profit.

(m) Public unit account. The term "public unit account" means any form of savings account where the holder is

(1) An officer, employee, or agent of the United States having official custody of public funds and lawfully investing the same in an institution whose accounts are insured by the Federal Savings and Loan Insurance Corporation;

(2) An officer, employee, or agent of any State of the United States, or of any county, municipality, or political subdivision thereof, as defined in § 561.5a of this chapter, having official custody of public funds and lawfully investing the same in such an insured institution in such State;

(3) An officer, employee, or agent of the District of Columbia having official custody of public funds and lawfully investing the same in such an insured institution in the District of Columbia; or

(4) An officer, employee, or agent of Puerto Rico or the Virgin Islands, or of any county, municipality, or political subdivision thereof, as defined in § 561.5a of this chapter, having official custody of public funds and lawfully investing the same in such an insured institution in Puerto Rico or the Virgin Islands, respectively.

(Sec. 5B, 47 Stat. 727, as added by sec. 4, 80 Stat. 824, as amended by sec. 2(b), 83 Stat. 372, as amended by sec. 4, Pub. L. 93100, August 16, 1973) [35 FR 2723, Feb. 7, 1970, as amended at 35 FR 3752, Feb. 26, 1970; 37 FR 17820, Sept. 1, 1972; 38 FR 34459, Dec. 14, 1973; 39 FR 789, Jan. 3, 1974; 39 FR 34646, Sept. 27, 1974; 39 FR 42694, Dec. 6, 1974]

& 526.2 Maximum rate of return.

(a) Prohibition on payment in excess of maximum prescribed rate. Except in accordance with the provisions of this part, no member institution may pay a return on any savings account in any manner, directly or indirectly, or by any method, practice, or device whatsoever. No member institution may pay a return on any savings account at a rate in excess of such applicable maximum rate as the Board may prescribe from time to time.

(b) Exceptions. (1) No such prescribed maximum rate shall apply to the payment of a return at not in excess of the announced rate on regular accounts with respect to that portion of a distribution period which has occurred prior to the date upon which such prescribed maximum rate became effective as to that institution.

(2) Notwithstanding any reduction in the prescribed maximum rate, a member institution may continue to pay the announced rate of return on any certificate account outstanding on the date such reduction became effective as to the institution for such period, including any renewal period, as the certificate account may remain outstanding.

(c) Grace periods in computing return on accounts. The maximum rate specified in this part may be increased to such effective rate as results from the treatment of funds received not later than the 10th day of the month as if received on the first of the month and the treatment of funds withdrawn during the last 3 business days of any calendar month ending a distribution period as if withdrawn at the end of such calendar month.

(d) Compounding. In calculating the rate of return paid, the effect of compounding may be disregarded.

(e) Loans on the security of savings accounts. In calculating the rate of return paid, the effect of monthly loans upon the security of a certificate or regular account, in an amount equal to the proportionate amount of the announced rate for the distribution period, may be disregarded. No loan on the security of a savings account, except in the form of such a proportionate advance of earnings, may be made by a member institution at a rate of interest on such loan that is less than 1 percent per annum in

excess of the rate of return payable on any such account.

(f) Give-aways. In calculating the rate of return on a savings account, the value of give-away shall not be included as part of the return on such account if:

(1) The give-away is given in connection with a promotional campaign to increase savings accounts and not on a recurring basis; and

(2) The value of the give-away, which shall be its cost to the member institution (excluding shipping and packaging costs, if applicable), does not exceed

(1) $5, for the opening of a new account, or for an addition to an existing account, of less than $5,000.

(11) $10, for the opening of a new account, or for an addition to an existing account, of $5,000 or more.

(g) Calculation of earnings. In calculating the earnings on a savings account, the time factor should be expressed as a fraction in which the actual number of days the funds in the account earn a return is the numerator, and the denominator is either 365, or, in a leap year, 366. When an account matures in multiples of 1 month, the member institution may use the corresponding multiple of 30 days as the numerator. A member institution may also use a time factor of 360/360, but may not use a time factor of 365/360 unless the Supervisory Agent determines that the institution would otherwise suffer a competitive disadvantage with other types of financial institutions in its savings service area.

[35 F.R. 2723, Feb. 7, 1970, as amended at 35 F.R. 3752, Feb. 26, 1970; 37 F.R. 17820, Sept. 1, 1972]

§ 526.3 Maximum rate of return pay. able on regular accounts.

A member institution may pay a return at a rate not in excess of 5.25 percent per annum on any regular account. [38 FR 18549, July 11, 1973]

§ 526.4 Maximum rate of return pay.

able on notice accounts.

A member institution may pay a return at a rate not in excess of 5.75 percent per annum on any notice account, except that a notice account which is a public unit account may receive a rate of return not in excess of the rate permitted under § 526.5 (c). [39 FR 42694, Dec. 6, 1974]

§ 526.5 Maximum rates of return payable on certificate accounts of less than $100,000.

(a) Maximum rates. Except as otherwise provided in this section or in § 526.5-1;

(1) Maximum rate of 5.75 percent. A member institution may pay a return at a rate not in excess of 5.75 percent per annum on any certificate account having a fixed or minimum term or qualifying period of not less than 90 days.

(2) Maximum rate of 6.50 percent. A member institution may pay a return at a rate not in excess of 6.50 percent per annum on any certificate account of $1,000 or more having a fixed or minimum term or qualifying period of not less than 1 year.

(3) Maximum rate of 6.75 percent. A member institution may pay a return at a rate not in excess of 6.75 percent per annum on any certificate account of $1,000 or more having a fixed or minimum term or qualifying period of not less than 30 months.

(4) Maximum rate of 7.50 percent. A member institution may pay a return at a rate not in excess of 7.50 percent per annum on any certificate account of $1,000 or more having a fixed or minimum term or qualifying period of not less than 4 years.

(5) Maximum rate of 7.75 percent. A member institution may pay a return at a rate not in excess of 7.75 percent per annum on any certificate account of $1,000 or more having a fixed or minimum term or qualifying period of not less than 6 years.

as to minimum

(b) Exceptions amount. (1) If the home office of a member institution is located in a Standard Metropolitan Statistical Area, or county not in such Area, as to which the regional Federal Home Loan Bank has determined that a mutual savings bank having an office located therein is paying a return at a rate in excess of 5.25 percent per annum on any deposit having a minimum amount lower than the corresponding minimum amount prescribed in paragraph (a) of this section for certificate accounts of the same maturity, such member institution may issue certificate accounts of the same maturity in such lower minimum amount.

(2) If the home office of a member institution is located in a State as to which the regional Federal Home Loan Bank has determined (i) that the total amount of savings capital attributable to mutual savings banks exceeds 30 percent of the total amount of savings capital attributable to mutual savings banks, savings and loan associations, building and loan associations, homestead associations, and cooperative banks and (ii) that a mutual savings bank having an office located in such State is paying a return at a rate in excess of 5.25 percent per annum on any deposit having a minimum amount lower than the corresponding minimum amount prescribed in paragraph (a) of this section for certificate accounts of the same maturity, such member institution may issue certificate accounts of the same maturity in such lower minimum amount.

(3) With respect to certificate accounts issued under a monthly payment bonus plan providing for the payment of a bonus if regular monthly payments are made by the saver for a period of not less than 12 months, a member institution may pay a return as permitted by paragraph (a) of this section without regard to the minimum amount requirements contained in such paragraph.

(c) Exception as to fixed or minimum term or qualifying period. A member institution may pay a return at a rate not in excess of the highest rate permitted under paragraph (a) of this section on any certificate account which is a public unit account of $1,000 or more having a fixed or minimum term or qualifying period of not less than 30 days.

[38 FR 18459, July 11, 1973, as amended at 38 FR 29568, Oct. 26, 1973; 39 FR 42694, Dec. 6, 1974; 39 FR 43195, Dec. 11, 1974] § 526.5-1 Certificate accounts of $100,

000 or more.

(a) Rate of return. Subject to the limitation contained in paragraph (b) of this section, no maximum rate of return is prescribed on any certificate account of $100,000 or more with a fixed or minimum term or qualifying period of not less than 30 days.

(b) Percentage limitations. No member institution may pay a return at a rate in excess of 6.75 percent per annum on any certificate account of $100,000 or more if, as a result of the issuance of

such certificate account, the total amount of all such certificate accounts then outstanding, on which a return is being paid at a rate in excess of 6.75 percent per annum, would exceed 15 percent of the institution's total savings accounts outstanding at the end of its most recent distribution period for regular accounts; Provided, however, that the total amount of all such certificate accounts then outstanding having an original fixed or minimum term or qualifying period of less than two years shall not exceed 10 percent of such total savings accounts.

(c) Geographic exception. In the case of certificate accounts issued by a member institution whose home office is located in the Commonwealth of Puerto Rico, the minimum amount requirement specified in paragraph (a) of this section shall be $50,000 intead of $100,000, and the percentage limitation contained in paragraph (b) of this section shall apply to certificate accounts of $50,000 or more with a return at a rate in excess of 6.75 percent per annum: Provided, That no such institution may advertise or promote any such account outside of the Commonwealth of Puerto Rico.

[38 FR 18460, July 11, 1973, as amended at 38 FR 23940, Sept. 5, 1973; 39 FR 36855, Oct. 15, 1974]

§ 526.6 Advertising of interest or dividends on savings accounts.

Every advertisement, announcement, or solicitation relating to the interest or dividends paid on savings accounts in member institutions shall be governed by the following rules:

(a) Annual rate of simple interest. Interest or dividend rates shall be stated in terms of annual rates of simple interest or dividends. In no case shall a rate be advertised that is in excess of the applicable maximum rate for the particular savings account.

(b) Percentage yields based on 1 year. Where a percentage yield achieved by compounding interest or dividends during 1 year is advertised, the annual rate of simple interest shall be stated with equal prominence, together with a reference to the basis of compounding. No member institution shall advertise a percentage yield based on the effect of grace periods permitted such institutions.

(c) Percentage yields based on periods in excess of 1 year. No advertisement shall include any indication of a total percentage yield, compounded or simple,

based on a period in excess of a year, or an average annual percentage yield achieved by compounding during a period in excess of a year.

(d) Time or amount requirements. If an advertised rate is payable only on savings accounts that meet time or amount requirements, such requirements shall be clearly and conspicuously stated. Where the time requirement for an advertised rate is in excess of a year, the required number of years for the rate shall be stated with equal prominence, together with a nindication of any lower rate or rates that will apply if the savings account is withdrawn at an earlier maturity.

(e) Penalty for early withdrawals. Any advertisement, announcement, or solicitation relating to interest or dividends paid by a member institution on certificate accounts shall include clear and conspicuous notice that Federal regulations require member institutions to impose a substantial interest penalty for a withdrawal from a certificate account before the end of the fixed or minimum term or qualifying period of such account. Such notice may state that, “A substantial interest penalty is required for early withdrawal".

(f) Profit. The term "profit" shall not be used in referring to interest or dividends paid on savings accounts.

(g) Accuracy of advertising. No member institution shall make any advertisement, announcement, or solicitation, relating to the interest or dividends paid on savings accounts which is inaccurate or misleading or which misrepresents its savings account contracts.

(h) Solicitation of savings accounts for member institution. Any person or organization which solicits savings accounts for a member institution shall be bound by the rules contained in this section with respect to any advertisement, announcement, or solicitation relating to such savings accounts. No such person or organization shall advertise a percentage yield on any savings account it solicits for a member institution which is not authorized to be paid and advertised by such institution.

[34 FR 9704, June 21, 1969, as amended at 38 FR 29568, Oct. 26, 1973]

§ 526.6-1 Disclosure upon acceptance.

At the time a member institution accepts a certificate account deposit, such institution shall provide to the depositor a written description of the penalty im

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