[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR201.107]

[Page 10]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 201_EXTENSIONS OF CREDIT BY FEDERAL RESERVE BANKS (REGULATION A)--Table 
 
Sec.  201.107  Eligibility of demand paper for discount and as security for 

advances by Reserve Banks.

    (a) The Board of Governors has reconsidered a ruling made in 1917 
that demand notes are ineligible for discount under the provisions of 
the Federal Reserve Act. (1917 Federal Reserve Bulletin 378.)
    (b) The basis of that ruling was the provision in the second 
paragraph of section 13 of the Federal Reserve Act that notes, drafts, 
and bills of exchange must have a maturity at the time of discount of 
not more than 90 days, exclusive of grace. The ruling stated that

    a demand note or bill is not eligible under the provisions of the 
act, since it is not in terms payable within the prescribed 90 days, 
but, at the option of the holder, may not be presented for payment until 
after that time.

    (c) It is well settled as a matter of law, however, that demand 
paper is due and payable on the date of its issue. The generally 
accepted legal view is stated in Beutel's Brannan on Negotiable 
Instruments Law, at page 305, as follows:

    The words on demand serve the same purpose as words making 
instruments payable at a specified time. They fix maturity of the 
obligation and do not make demand necessary, but mean that the 
instrument is due, payable and matured when made and delivered.

    (d) Accordingly, the Board has concluded that, since demand paper is 
due and payable on the date of its issue, it satisfies the maturity 
requirements of the statute. Demand paper which otherwise meets the 
eligibility requirements of the Federal Reserve Act and this part 
Regulation A, therefore, is eligible for discount and as security for 
advances by Reserve Banks.

[31 FR 5443, Apr. 16, 1966]