Prohibition Against Payment of Interest on Demand Deposits — 1997-05-15 [97-12706]

The Board has amended an interpretation to provide an exception to the current limitations on premiums given on demand deposit accounts. Section 11 of the Banking Act of 1933 prohibits the payment of interest on demand deposits, and Regulation Q implements this prohibition. As an exception to this rule, an interpretation permits premiums up to $10 for deposits of less than $5000 and up to $20 for deposits of $5000 or more not more than twice per year (Interpretation). The Interpretation also limits the timing of such premiums to the opening of a new account or an addition to an existing account. The Board has amended the Interpretation to provide an additional exception that permits premiums given without regard to the balance in a demand deposit account and the duration of the account balance, since from an economic point of view such premiums do not constitute interest on the account.