Prohibition Against Payment of Interest on Demand Deposits
FIL-110-97 October 21, 1997
CHIEF EXECUTIVE OFFICER AND COMPLIANCE OFFICER
FDIC Proposes Amending Rule on Prohibition Against Paying Interest on Demand Deposits
(Part 329 of FDIC's Rules and Regulations)
The FDIC Board of Directors is seeking comment on the attached
proposal to amend its rule governing the prohibition against
paying interest on demand deposits. Comments are due by December
Generally, member banks, nonmember banks and insured branches of
foreign banks are subject to the same prohibition and exceptions
to the prohibition against paying interest on demand deposits,
although prescribed under different statutes and regulations.
The Federal Deposit Insurance Act (FDI Act) requires that the
FDIC prohibit the payment of interest or dividends on demand
deposits in insured nonmember banks and insured branches of
foreign banks. 12 CFR part 329 implements this prohibition.
Member banks are subject to the prohibition under the Banking Act
of 1933 and Regulation Q (12 CFR part 217) of the Board of
Governors of the Federal Reserve System (FRB). The FDI Act also
requires the FDIC to make the same exceptions to this prohibition
that are prescribed by the Federal Reserve Board concerning
demand deposits in member banks.
Under the proposed rule, insured nonmember banks and insured
branches of foreign banks would automatically become subject to
the same exceptions to the prohibition to which member banks are
subject to by the Federal Reserve Board, regardless of whether
the FDIC had issued or authorized the specific exception.
The FDIC has issued the attached proposal because the FDIC is
required to make the same exceptions to the prohibition that are
prescribed for demand deposits in member banks. In addition, the
proposed rule would make changes transparent for state nonmember
banks and insured branches of foreign banks.
For more information about the proposed rule, please contact Marc
J. Goldstrom, Counsel in the FDIC's Legal Division, at (202) 898-
8807 or Louise Kotoshirodo, Review Examiner in the FDIC's
Division of Compliance and Consumer Affairs, at (202) 942-3599.
Carmen J. Sullivan
Attachment: Oct. 16 Federal Register, pp 53769-53770, available from the
FDIC's FR web site at /lawsregs
Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be
obtained through the FDIC's Public Information center, 801 17th
Street, N.W., Room 100, Washington, D.C. 20434 (800-276-6003 or
(703) 562-2200). Electronic versions are available at :