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4000 - Advisory Opinions

FDIC Defers to Federal Reserve Board's Interpretation of NOW Accounts (12 C.F.R. §204.130)


January 15, 1991

Valerie J. Best, Counsel

Thank you for your letter regarding NOW accounts. Pursuant to your request, I have enclosed a copy of 12 C.F.R. §204.130, Eligibility for NOW Accounts. Section 204.130 is the most recent release, and replaces section 217.157, which you enclosed with your letter.

Section 204.130 was issued by the Board of Governors of the Federal Reserve System. It applies to banks that are members of the Federal Reserve System. The FDIC has not issued a similarly detailed regulation for state non-member banks. Instead, FDIC regulations simply quote the statute from which all regulations governing NOW accounts are derived, that is 12 U.S.C. 1832. Section 1832 provides, in part, that NOW accounts are available "only with respect to deposits or accounts which consist solely of funds in which the entire beneficial interest is held by one or more individuals or by an organization which is operated primarily for religious, philanthropic, charitable, educational, political, or other similar purposes and which is not operated for profit . . . ."

Section 204.130 provides, in part:

(e)  Funds held by a fiduciary. Under current provisions, funds held in a fiduciary capacity (either by an individual fiduciary or by a corporate fiduciary such as a bank trust department or a trustee in bankruptcy), including those awaiting distribution or investment, may be held in the form of NOW accounts if all of the beneficiaries are otherwise eligible to maintain NOW accounts.

Although, as mentioned above, section 204.130 applies to member banks, we would generally defer to this interpretation with respect to NOW accounts.

Please call me at (202) 898-3812 if you have any questions.

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