[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR217.101]

[Page 455-456]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 217--PROHIBITION AGAINST THE PAYMENT OF INTEREST ON DEMAND DEPOSITS (REGULATION Q)--Table of Contents
 
Sec. 217.101  Premiums on deposits.

    (a) Section 19(i) of the Federal Reserve Act and Sec. 217.3 of 
Regulation Q prohibits a member bank from paying interest on a demand 
deposit. Premiums, whether in the form of merchandise, credit, or cash, 
given by a member bank to a depositor will be regarded as an advertising 
or promotional expense rather than a payment of interest if:
    (1) The premium is given to a depositor only at the time of the 
opening of a new account or an addition to an existing account;

[[Page 456]]

    (2) No more than two premiums per account are given within a 12-
month period; and
    (3) The value of the premium or, in the case, of articles of 
merchandise, the total cost (including taxes, shipping, warehousing, 
packaging, and handling costs) does not exceed $10 for deposits of less 
than $5,000 or $20 for deposits of $5,000 or more.

The costs of premiums may not be averaged. The member bank should retain 
sufficient supporting documentation showing that the total cost of a 
premium, including shipping, warehousing, packaging, and handling costs, 
does not exceed the applicable $10/$20 limitations and that no portion 
of the total cost of any premium has been attributed to development, 
advertising, promotional, or other expenses. A member bank is not 
permitted directly or indirectly to solicit or promote deposits from 
customers on the basis that the funds will be divided into more than one 
account by the institution for the purpose of providing more than two 
premiums per deposit within a 12-month period.
    (b) Notwithstanding paragraph (a) of this section, any premium that 
is not, directly or indirectly, related to or dependent on the balance 
in a demand deposit account and the duration of the account balance 
shall not be considered the payment of interest on a demand deposit 
account and shall not be subject to the limitations in paragraph (a) of 
this section.

[52 FR 47698, Dec. 16, 1987. Redesignated at 57 FR 43336, Sept. 21, 
1992; 62 FR 26737, May 15, 1997]