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PART 329_INTEREST ON DEPOSITS Sec. 829.0 Ecopo. 829.1 Dofinitions. 3292 Demand deposits. 829.8 Interest on time and savings deposita. 829.4 Payment of time deposits bodoro ma

turity. 892.3 Withdrawal of savingo deposits. 829.6 Maximum rates of interest payablo on

time and savings deposits by 10sured nonmember banks other than Insured nonmember mutual savings

banks. 829.7 Maximum rates of interest or divi

dends payable on deposits by insured nonmember mutual savings

banks. 329.8 Advertising of Interest on deposits. 329.10 Obligations other than deposits. 329.101 Computation and payment of inter

est on time and savings deposits. APPENDIX A-Foreign, international and supranational entities designated as exempt from $ 329.6.

AUTHORITY: The provisions of this part 329 issued under secs. 9, 18, 64 Stat. 881, 891; 12 U.S.C. 1819, 1828. 8 329.0 Scope.

The provisions of this Part 329 apply to the advertisement and payment of interest or dividends on deposits in insured nonmember banks. The provisions of this Part 329 do not apply to any deposit in a bank outside of, or payable only at a bank's office which is located outside of, the States of the United States and the District of Columbia. Except as provided in $8 329.7, 329.8, and 329.10, the provisions of this Part 329 do not apply to mutual savings banks or to guaranty savings banks operating in the State of New Hampshire so long as said guaranty savings banks operate substantially under and pursuant to the laws of the State of New Hampshire pertaining to mutual savings banks and do not engage in commercial banking. (38 FR 26355, Sept. 20, 1973) 8 329.1 Definitions.

(a) Demand deposits. The term “demand deposit” includes every deposit which is not a “time deposit" or "savings deposit", as defined below.

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(b) Time deposits. The term "time depositsmeans "time certificates of de posit” and “time deposits, open account" as defined below.

(c) Time certificates of deposit. Toe term “time certificate of deposit" means & deposit evidenced by & negotiable or nonnegotiable instrument which provides on its face that the amount of such deposit is payable:

(1) On a certain date, specified in the instrument, not less than thirty (30) days after the date of the deposit; or

(2) At the expiration of a specified period not less than thirty (30) days after the date of the instrument; or

(3) Upon written notice to be given not less than thirty (30) days before the date of repayment."

(d) Time deposits, open account. The term “time deposit, open account" means a deposit, other than a “time certificate of deposit," with respect to which there is in force a written contract with the depositor that neither the whole nor any part of such deposit may be withdrawn, by check or otherwise, prior to the date of maturity, which shall be not less than 30 days after the date of the deposit, or prior to the expiration of the period of notice which must be given by the depositor in writing not less than 30 days in advance of withdrawals.'

(e) Savings deposits. (1) The term "savings deposit” means a deposit:

(i) Which consists of funds deposited to the credit of one or more individuals, or of a public unit, as defined in section 3(m) of the Federal Deposit Insurance Act, or of a corporation, association, or other organization operated primarily for religious, philanthropic, charitable,

11 If the certificate of deposit provides merely that the bank reserves tho right to require notice of not less than thirty (80) days before any withdrawal is made, the bank must require such notice before per. mitting withdrawal.

· Deposits, such as Christmas club acoounts and vacation club accounts, which are made under written contracts providing that no withdrawal shall be made until & certain number of periodic deposits have been made during a period of not less than 3 months, constitute “time deposits, open account," even though some of the deposits are mado within 30 days from the end of such period.

A deposit with respect to which the bank merely reserves the right to require notice of not less than 30 days before any withdrawal is made is not a "time deposit, open account." within the meaning of the above definition.

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1 Wherever the terms "insured nonmember bank" or "insured nonmember mutual savings bank" appear in this Part 329, they shall be deemed to include banks and mutual sayings banks, respectively, in Massachusetts that are not insured by the Federal Deposit Insurance Corporation.

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er educational, fraternal, or other similar 329.2 Demand deposits. purposes and not operated for profit,

(a) Interest prohibited. Except as por in which the entire beneficial interest is held by one or more individuals or

provided in this part, no insured non

member bank shall directly or indirectly, han public units, or by such a corporation,

by any device whatsoever, pay any inEs association, or other organization; and (ii) With respect to which the deposi

terest on any demand deposit. Within tor is not required by the deposit

this part any payment to or for the ace contract but may at any time be required

count of any depositor as compensation by the bank to give notice in writing of for the use of funds constituting a deed an intended withdrawal not less than 30 posit shall be considered interest."

days before such withdrawal is made (b) Exceptions. The prohibition stated and which is not payable on a specified in paragraph (a) of this section does not date or at the expiration of a specified apply to: time after the date of deposit.

(1) Payment of interest accruing be(2) The term "savings deposit”, as de fore August 24, 1937, on any deposit made fined in paragraph (e) (1), shall include

by a "savings bank"? as defined in the all interest-bearing deposits subject to

Federal Deposit Insurance Act, or by a withdrawal by negotiable or transferable

mutual savings bank; instruments for the purpose of making transfers to third parties where such

(2) Payment of interest accruing bowithdrawals are authorized by law."

fore August 24, 1937, on any deposit of (f) Multiple maturity time deposit.

public funds' made by or on behalf of The term "multiple maturity time de any State, county, school district, or posit" means any time deposit (1) that other subdivision or municipality, or on is payable at the depositor's option on any deposit of trust funds, if the paymore than one date, whether on a speci ment of interest with respect to such fed date or at the expiration of a speci deposit of public funds or of trust funds fed time after the date of deposit (e.g., a deposit payable at the option of the de • The absorption of normal or customary positor either 3 months or 6 months exchange charges by an insured nonmembor

after the date of deposit), (2) that is bank, in connection with the routine col1payable after written notice of with

lection for its depositors of checks drawn on

other banks, does not constituto the payment drawal, or (3) with respect to which the

of Interest within the provisions of this part. underlying instrument or contract or

? Section 3(g) of the Federal Deposit Inany informal understanding or agree surance Act provides: ment provides for automatic renewal at "The term 'savings bank' means & bank maturity.

(other than a mutual savings bank) which

transacts its ordinary banking business (16 F.R. 8641, Dec. 5, 1950, as amended at

strictly as & savings bank under Stato laws 31 F.R. 9862, July 21, 1966; 31 F.R. 16795,

Imposing special requirements on such banks Dec. 15, 1966; 38 FR 34458, Dec. 14, 1973;

governing the manner of investing their 39 FR 42339, Dec. 5, 1974)

funds and of conducting their business: Pro

vided, That the bank maintains, until matu* Deposits in joint accounts of two or more rity date or until withdrawn, all deposits individuals may be classified as savings de made with it (other than funds held by it posits 11 they meet the other requirements in a fiduciary capacity) as time savings doof the above definition, but deposits of a posits of the specific term type or of the type partnership operated for profit may not be where the right is reserved to the bank to 80 classified. Deposits to the credit of an require written notice before permitting Individual or & public unit of funds in which withdrawal: Providing further, That such the beneficial interest is held by a corpora bank to be considered a savings bank must tion, partnership, association, or other or elect to become subject to regulations of the ganization operated for profit or not operated Corporation with respect to the redeposit of primarily for religious, philanthropic, chari. maturing deposits and prohibiting withtable, educational, fraternal, or other similar drawal of deposits by checking except in purposes may not be classified as savings de cases where such withdrawal was permitted posits, except as otherwise permitted in this by law on August 23, 1935, from specifically paragraph.

designated deposit accounts totaling not The exercise by the bank of its right to more than 15 per centum of the bank's total require such notice shall not cause the de deposits." posit to cease to be a savings deposit.

Deposits of moneys pald into State courte la Limited by Federal law to banks in Mas. by private parties pending the outcome of Bachusetts and New Hampshire (87 Stat. Utigation are not deposits of "public fundo", 842).

within the meaning of the above provision,

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is required by State law when such de its outstanding certificates of deposit or posits are made in State banks;

other contracts into conformity with the (3) Payment of Interest in accordanco provisions of this part. with the terms of any certificate of de (c) Insured nonmember banks limited posit or other contract which was law to maximum rate under State law. The fully entered into in good faith before rate of interest paid by an insured nonFebruary 1, 1936 (or, if the bank became member bank upon a time deposit or g an insured nonmember bank thereafter, savings deposit shall not in any case before the date upon which it became an exceed (1) the applicable maximum rate insured nonmember bank), which was prescribed pursuant to the provisions of in force on such date, and which may not paragraph (a) of this section, or (2) the legally be terminated or modified by such applicable maximum rate authorized to bank at its option and without liability; be paid upon such deposits under the but no such certificate of deposit or other laws of the State in which the insured contract may be renewed or extended nonmember bank is located, whichever unless it be modified to eliminate any may be less. provision for the payment of interest on (d) Grace periods in computing indemand deposits, and every insured non terest on savings deposits. An insured member bank shall take such action as nonmember bank may pay interest on s may be necessary, as soon as possible savings deposit received during the first consistently with its contractual obliga ten (10) calendar days of any calendar tions, to eliminate from any such cer month at the applicable maximum rate tificate of deposit or other contract any prescribed pursuant to paragraph (a) of provision for the payment of interest on this section calculated from the first day demand deposits.

of such calendar month until such de(c) Deposits in savings banks. De posit is withdrawn or ceases to consti. posits in "savings banks" in specifically tute a savings deposit under the providesignated deposit accounts with respect sions of this part, whichever shall first to which withdrawal by checking is per occur; and an insured nonmember bank mitted in accordance with section 3(g) may pay interest on a savings deposit of the Federal Deposit Insurance Act, withdrawn during its last three (3) shall, for the purposes of this part, be business days of any calendar month classed as demands deposits.

ending a regular quarterly or semiannual (15 F.R. 8641, Dec. 6, 1950)

interest period at the applicable maxi

mum rate prescribed pursuant to para8 329.3 Interest on time and savings

graph (a) of this section calculated to deposits.

the end of such calendar month. (a) Maximum rate. Except as pro (e) Computation of interest on time vided in this section, no insured non and savings deposits. In computing inmember bank shall, directly or indirectly, terest on time and savings deposits, the by any device whatsoever, pay interest time factor should be expressed as a on any time deposit or savings deposit fraction in which the actual number of at a rate in excess of such applicable days the funds earn interest is the numaximum rate as the Board of Directors merator, and the denominator is either of the Federal Deposit Insurance Cor 360, 365, or, in a leap year, 366. However, poration shall prescribe from time to when a deposit matures in 1 month, or Ume in § 329.6 of this part. In determin multiples thereof, the bank may use 30 ing the maximum amount of interest days in the numerator, or correspondpermitted to be paid, the effects of com ing multiples thereof. pounding may be disregarded.

(f) No interest after maturity or er(h) Modification of contracts to con piration of notice; erception. After the form to regulation. No certificate of de

date of maturity of any time deposit,

such deposit is a demand deposit, and posit or other contract shall be renewed or extended unless it be modified to con

no interest may be paid on such deposit form to the provisions of this part, and

for any period subsequent to such date.

After the expiration of the period of every insured nonmember bank shall

notice given with respect to the repaytake such action as may be necessary, as

ment of any time deposit or savings soon as possible consistently with its

deposit, such deposit is a demand deposit contractual obligations, to bring all of

and no interest may be paid on such See footnote 7.

deposit for any period subsequent to the

expiration of such notice, except that, if the owner of such deposit advise the bank in writing that the deposit will not be withdrawn pursuant to such notice or that the deposit will thereafter again be subject to the contract or requirements applicable to such deposit, the deposit will again constitute a time deposit or savings deposit, as the case may be, after the date upon which such advice is received by the bank. Notwithstanding the foregoing, if a time deposit is renewed, automatically or by action of the depositor, within ten (10) days after maturity, the renewed deposit or renewed portion may draw interest from the maturity date of the matured deposit; and if a time or savings deposit is renewed, automatically or by action of the depositor, within ten (10) days after expiration of the period of notice given with respect to its repayment, the renewed deposit or renewed portion may draw interest from the date such notice period expired.10

(g) Time deposits of foreign governmental entities and international organizations. Section 329.6 does not apply to the rate of interest that may be paid by an insured nonmember bank on a time deposit having a maturity of 2 years or less and representing funds deposited and owned by (1) a foreign national government, or an agency or instrumentality thereof " engaged principally in activities which are ordinarily performed in the United States by governmental entities, (2) an international entity of which the United States is a member, or (3) any other foreign, international or supranational entity specifically designated by the Board of Directors as exempt from $ 329.6. All certificates of deposit issued by insured nonmember banks to such entities on which the contract rate of Interest exceeds the maximum prescribed under $ 329.6 shall provide that (1) in the event of transfer, the date of transfer, attested to in writing by the transferor, shall appear on the certificate, and (ii) the maximum rate limitations of § 329.6 in effect on the date of issuance of the certificate shall apply to the certifi.

cate for any period during which it is held by a person other than an entity exempt from g 329.6 under the foregoing sentence.110

Upon the presentment of such a certificate for payment, the bank may pay the holder the contract rate of interest on the deposit for the time that the certificate was actually owned by an entity so exempt. 133 F.R. 15409, Oct. 17, 1968, as amended at 84 F.R. 9703, June 21, 1969; 34 F.R. 18088, Nov. 8, 1969; 35 F.R. 2768, Feb. 10, 1970; 37 F.R. 10341, May 20, 1972)

NOTE: See Appendix A to this part for the list of foreign, international and supranational entities designated as exempt from $ 329.6. 8 329.4 Payment of time deposits be

fore maturity. (a) Time deposits payable on a specified date. No insured nonmember bank shall pay any time 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. No insured nonmember bank shall pay any time deposit, which is payable at the expiration of a specified period, before such period has expired, except as provided in paragraph (d) of this section.

(c) Time deposits payable after a specified notice. No insured nonmember bank shall pay any time deposit, with respect to which notice is required to be given a specified period before any withdrawal 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) Penalty on payment of time deposits before maturity. In the event of withdrawal of all or any portion of a time deposit before the maturity thereof, the depositor may not receive interest from the date of deposit on the amount withdrawn at a rate in excess of the maximum rate which may be paid on savings deposits by the depository bank

10 Where a time certificate is renewed within ten (10 days after maturity, the renewal certificate may be dated back to the maturity date of the matured certificate.

u Other than States, provinces, municipalities, or other regional or local governmenta units, or agencies or instrumentalities thereof.

16 A new certificate not maturing prior to the maturity date of the original certificato may be issued by the insured ponmember bank to the transferee, in which event the original must be retained by the bank. The new certificate may not provide for interest after the date of transfer at & rate in excess of the applicable maximum rate authorized by $ 329.6 as of the date of 18suance of tho original certificate.

on the date of withdrawal under $ 329.6(c) or 8 329.7(b) (1), and the depositor shall forfeit all interest, calculated at such savings deposit rate, whether accrued and unpaid, or paid to or for the depositor's account, on the amount withdrawn for a period of three months or for the period since the date of the deposit, whichever is less. Where necessary to comply with this requirement, interest already paid to or for the account of the depositor shall be deducted from the amount requested by the depositor to be withdrawn.ud

(e) Application of penalty to changes in interest rates or maturities.-(1) Increases in interest rates on existing time deposits. Where there is an increase in the rate of interest paid on any time deposit, the deposit will be treated as having been withdrawn by the depositor, prior to maturity, on the date on which the deposit begins to earn interest at the higher rate.

(2) Conversion of existing time deposits to new deposits with longer maturities. Where an existing time deposit is converted to one having a longer maturity, the deposit will be treated as having been withdrawn by the depositor, prior to maturity, on the date of conversion if the rate of interest paid on the new deposit exceeds the rate paid on the original deposit.

(3) Exceptions. The provisions of this paragraph (e) do not apply to an increase in the rate of interest paid on a time deposit where such increase is explicitly authorized by the terms of the original deposit contract and may not be granted or withheld at the option of the bank.

(f) Disclosure of penalty. At the time an insured nonmember bank enters into & new time deposit contract with an depositor, it shall provide the deposito with a separate written statement whict clearly states that the depositor may na withdraw all or any part of his depost prior to maturity except with the conser: of the bank which may be given onts at the time such request for withdrawa is made, and that if the bank gives it consent at that time, a penalty will be assessed on the amount withdrawn. In addition, the statement shall clearly describe the penalty, which shall, at a minimum, be the penalty prescribed in paragraph (d) of this section.ue

(g) Determination of "date of deposit for multiple maturity time deposits. As used in paragraph (d) of this section, the words “date of deposit” have the following meanings as applied to multiple maturity time deposits: (1) In the case of automatically renewable mutiple maturity time deposits (or those payable on more than one date), the last maturity date on which the deposit could have been withdrawn, and (2) in the case of multiple maturity time deposits which may only be withdrawn upon written notice to be given prior to the date of withdrawal, the last date on which notice could have been given in order to withdraw the deposit on the date on which it is treated as having been withdrawn (i.e., the date as of which a higher interest rate is paid or the date on which the deposit is converted to one having a longer maturity).

(h) Loans upon security of time deposits. An insured nonmember bank may make a loan to a depositor upon the security of his time deposit. However, the rate of interest paid by the bank on such deposit for the period of time it secures the loan shall not be in excess of 2 percent per annum less than the rate of interest charged on the loan. The provisions of this paragraph (h) shall be deemed to be a part of every time deposit contract entered into by any insured nonmember bank whether or not

1. This amendment applies to all time deposit contracts entered into after July 5, 1973 and to all existing time deposit contracts which are renewed or extended after such date: Provided, however, That any time deposit contract which is automatically renewed after July 5, 1973, without any change in the interest rate payable thereon or the maturity thereof, shall be subject Instead to the restrictions in effect prior to this amendment which allowed withdrawal only in the event of need and required the forfeiture of not less than three months' accrued and unpaid interest. This amendment also applies to all existing time deposits upon which interest is paid on or after July 1, 1973 at a rate in excess of the maximum rate payable on such deposits as of June 30, 1973.

uc This paragraph (1) does not apply to any extensions or renewals of existing contracts except where the depositor has not previously been notified of the penalty provisions in paragraph (d). This paragraph also does not apply to "obligations other than deposits" that are otherwise subject to the provisions of this Part 329 (see 12 CFR 329.10(a)).

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