Circular
Premiums On Demand Deposits
June 6, 1997
Circular No. 10957

Additional Exception to Regulation Q Limitation

To All Depository Institutions in the Second Federal Reserve District:

Regulation Q prohibits the payment of interest on demand deposits. As an exception to this prohibition, an interpretation of Regulation Q permits certain premiums, limited in amount and timing, for opening or adding to a demand deposit.

The Board of Governors of the Federal Reserve System has recently amended this interpretation to provide an additional exception that permits premiums of any size that are not related to or dependent on the balance in an account or the duration of the account balance.

Enclosed is a copy of the amendment, as published in the Federal Register of May 15 is available as a (pdf) file. Additional copies may be obtained from our Public Information Department (Tel. No. 212-720-6130). Questions on this matter may be directed to Janice A. Oser, Supervising Examiner, Compliance Examinations Department.