is required by State law when such deposits are made in State banks;

(3) Payment of interest in accordance with the terms of any certificate of deposit or other contract which was lawfully entered into in good faith before February 1, 1936 (or, if the bank became an insured nonmember bank thereafter, before the date upon which it became an insured nonmember bank), which was in force on such date, and which may not legally be terminated or modified by such bank at its option and without liability; but no such certificate of deposit or other contract may be renewed or extended unless it be modified to eliminate any provision for the payment of interest on demand deposits, and every insured nonmember bank shall take such action as may be necessary, as soon as possible consistently with its contractual obligations, to eliminate from any such certificate of deposit or other contract any provision for the payment of interest on demand deposits.

(c) Deposits in savings banks. Deposits in "savings banks" in specifically designated deposit accounts with respect to which withdrawal by checking is permitted in accordance with section 3(g) of the Federal Deposit Insurance Act, shall, for the purposes of this part, be classed as demands deposits. [15 F.R. 8641, Dec. 6, 1950]

§ 329.3 Interest on time and savings deposits.

(a) Maximum rate. Except as provided in this section, no insured nonmember bank shall, directly or indirectly, by any device whatsoever, pay interest on any time deposit or savings deposit at a rate in excess of such applicable maximum rate as the Board of Directors of the Federal Deposit Insurance Corporation shall prescribe from time to time in § 329.6 of this part. In determining the maximum amount of interest permitted to be paid, the effects of compounding may be disregarded.

(b) Modification of contracts to conform to regulation. No certificate of deposit or other contract shall be renewed or extended unless it be modified to conform to the provisions of this part, and every insured nonmember bank shall take such action as may be necessary, as soon as possible consistently with its contractual obligations, to bring all of

See footnote 7.

its outstanding certificates of deposit or other contracts into conformity with the provisions of this part.

(c) Insured nonmember banks limited to maximum rate under State law. The rate of interest paid by an insured nonmember bank upon a time deposit or a savings deposit shall not in any case exceed (1) the applicable maximum rate prescribed pursuant to the provisions of paragraph (a) of this section, or (2) the applicable maximum rate authorized to be paid upon such deposits under the laws of the State in which the insured nonmember bank is located, whichever may be less.

(d) Grace periods in computing interest on savings deposits. An insured nonmember bank may pay interest on a savings deposit received during the first ten (10) calendar days of any calendar month at the applicable maximum rate prescribed pursuant to paragraph (a) of this section calculated from the first day of such calendar month until such deposit is withdrawn or ceases to constitute a savings deposit under the provisions of this part, whichever shall first occur; and an insured nonmember bank may pay interest on a savings deposit withdrawn during its last three (3) business days of any calendar month ending a regular quarterly or semiannual interest period at the applicable maximum rate prescribed pursuant to paragraph (a) of this section calculated to the end of such calendar month.

(e) Computation of interest on time and savings deposits. In computing interest on time and savings deposits, the time factor should be expressed as a fraction in which the actual number of days the funds earn interest is the numerator, and the denominator is either 360, 365, or, in a leap year, 366. However, when a deposit matures in 1 month, or multiples thereof, the bank may use 30 days in the numerator, or corresponding multiples thereof.

(f) No interest after maturity or expiration of notice; exception. After the date of maturity of any time deposit, such deposit is a demand deposit, and no interest may be paid on such deposit for any period subsequent to such date. After the expiration of the period of notice given with respect to the repayment of any time deposit or savings deposit, such deposit is a demand deposit and no interest may be paid on such 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.1o

(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

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.

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

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

[33 F.R. 15409, Oct. 17, 1968, as amended at 34 F.R. 9703, June 21, 1969; 34 F.R. 18086, 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.

§ 329.4 Payment of time deposits before 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

11. A new certificate not maturing prior to the maturity date of the original certificate may be issued by the insured nonmember 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 a rate in excess of the applicable maximum rate authorized by § 329.6 as of the date of issuance of the original certificate.

under

on the date of withdrawal § 329.6(c) or § 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."

(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.

116 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.

(f) Disclosure of penalty. At the time an insured nonmember bank enters into a new time deposit contract with any depositor, it shall provide the depositor with a separate written statement which clearly states that the depositor may not withdraw all or any part of his deposit prior to maturity except with the consent of the bank which may be given only at the time such request for withdrawal is made, and that if the bank gives its 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."

(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

ue This paragraph (f) 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)).

such provisions are expressly set forth therein.

[15 FR 8642, Dec. 6, 1950, as amended at 38 FR 18543, July 12, 1973; 38 FR 22545, Aug. 22, 1973] § 329.5

Withdrawal of savings deposits.

(a) Requirements regarding notice of withdrawal. Whether or not interest is paid, no insured nonmember bank shall require or waive notice of withdrawal as to any amount or percentage of the sayings deposits of any depositor unless it shall similarly require or waive such notice as to the same amount or percentage of the savings deposits of every other depositor which are subject to the same contractual provisions with respect to notice of withdrawal. If an insured nonmember bank, without requiring notice of withdrawal, pays interest that has accrued on a savings deposit during the preceding interest period, it shall, upon request and without requiring such notice, pay interest that has accrued during that period on the savings deposits of every other depositor. No insured nonmember bank shall change its practice with respect to the requiring or waiving of notice of withdrawal of savings deposits for the purpose of discriminating in favor of or against any depositor or depositors, and no such change of practice shall be made except pursuant to duly recorded action of the bank's board of directors or a properly authorized committee thereof.

(b) Loans on security of savings deposits. If it is not the practice of an insured nonmember bank to require notice of withdrawal of savings deposits, no restrictions are imposed by this part upon loans by such bank to its depositors upon the security of such deposits. I it is the practice of an insured nonmember bank to require notice of withdrawal of a savings deposit, such bank may make loans to a depositor upon the security of such deposit, but the rate of interest on such loans shall be not less than 2 percent per annum in excess of the rate of interest paid on such deposit.

(c) Manner of payment of savings deposits. (1) Subject to the provisions of paragraphs (c) (2) and (4) of this section, an insured nonmember bank may permit withdrawals to be made from a savings deposit only through payment to the depositor himself (but not to any other person whether or not acting for the depositor), except:

12

(1) Where the deposit is represented by a passbook to any person presenting the passbook; 12

(11) To an executor, administrator, trustee, or other fiduciary holding the savings deposit as part of a fiduciary estate, or to a person, other than the bank, holding a general power of attorney granted by the depositor;

(ii) To any person, including the bank, that has extended credit to the depositor on the security of the savings deposit, where such payment is made in order to enable the creditor to realize upon such security;

(iv) Pursuant to the order of a court of competent jurisdiction;

(v) Upon the death of the depositor, to any person authorized by law to receive the deposit; or

(vi) Interest paid to a third person pursuant to written instruction or assignment by the depositor, accepted by the bank, and placed on file therein.

(2) Notwithstanding the provisions of subparagraph (1) of this paragraph, no withdrawal shall be permitted by an insured nonmember bank to be made from a savings deposit, through payment to the bank itself or through transfer of credit to a demand or other deposit account of the same depositor (other than of interest on the savings deposit) if such payment or transfer is made pursuant to any advertised plan or any agreement, written or oral:

(1) Which authorizes such payments or transfers of credit to be made as a normal practice in order to cover checks or drafts drawn by the depositor upon the bank; or

(ii) Which provides that such payments or transfers of credit shall be made at daily, monthly, or other such periodic intervals, except where made to enable the bank, on the depositor's behalf, and pursuant to his written instruction, to effect the payment of installments of principal, interest, or other charges (including taxes or insurance premiums) due on a real estate loan or mortgage.

(3) Where a savings deposit is evidenced by a passbook, every withdrawal made upon presentation of the passbook shall be entered in the passbook at the time of withdrawal, and every other

"Payment from a savings deposit or presentation of a passbook may be made over the counter, through the mails, or otherwise.

withdrawal from such a deposit shall be entered in the passbook as soon as practicable after the withdrawal is made.

(4) The provisions of this paragraph (c) shall not apply to savings deposits subject to withdrawal by negotiable or transferable instruments for the purpose of making transfers to third parties.

[31 FR 15795, Dec. 15, 1966 as amended at 38 FR 34458, Dec. 14, 1973]

§ 329.6 Maximum rates of interest payable on time and savings deposits by insured nonmember banks other than insured nonmember mutual savings banks.18

(a) Deposits of $100,000 or more. There is no maximum rate of interest presently prescribed on any time deposit of $100,000

be paid on any time deposit of less than $100,000 by any insured nonmember bank (including a mutual savings bank) subject to the provisons of this Part.

(c) Savings deposits. No insured nonmember bank shall pay interest at a rate in excess of 5 percent per annum on any savings deposit, including savings deposits that are subject to withdrawal by negotiable or transferable instruments for the purpose of making transfers to third parties.

[38 FR 20247, July 30, 1973, as amended at 38 FR 20818, Aug. 3, 1973; 38 FR 29315, Oct. 24, 1973; 38 FR 34458, Dec. 14, 1973; 39 FR 42339, Dec. 5, 1974; 39 FR 43295, Dec. 12, 1974]

NOTE: Foreign, international and supranational entities designated as exempt from § 329.6 are listed in Appendix A to this part. § 329.7 Maximum rate of interest or dividends payable on deposits by insured nonmember mutual savings banks." (a) Definition. For the purposes of this section, the term "mutual savings bank" includes any mutual savings bank and any guaranty savings bank which operates in the State of New Hampshire substantially under and pursuant to the laws of that State pertaining to mutual savings banks so long as such guaranty savings bank does not engage in commercial banking.

(b) Maximum rates payable—(1) General. (i) Except as provided in paragraphs (b) (2), (3), (4) and (5) and paragraph (e) of this section, no insured nonmember mutual savings bank shall pay interest or dividends at a rate in excess of 54 percent per annum on any deposit. Section 329.3(b), relating to modification of deposit contracts to conform to regulations, shall apply to insured nonmember mutual savings banks.

(ii) Notwithstanding the provisions of paragraph (b) (1) (i) of this section, no insured nonmember mutual savings bank shall pay interest or dividends at a rate in excess of 5 percent per annum on any deposit that is subject to withdrawal by negotiable or transferable instruments for the purpose of making transfers to third parties where such withdrawals are

14 The maximum rates of interest payable by insured nonmember mutual savings banks as prescribed herein are not applicable to any deposit which is payable only at an office of an insured nonmember mutual savings bank located outside of the States of the United States and the District of Columbia.