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#26445 - 08/01/02 09:11 PM 7 days advance notice of withdrawal
Elwood P. Dowd Offline
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This is a take off on a recent discussion, but I do not want to post it there as that issue was fully addressed and information is "buried" when threads turn a topical corner.

From Regulation D: "Savings deposit means a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the depository institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit." (That definition includes MMDA's, passbook savings and statement savings accounts.)

In the related thread, the examiner was interpreting the restriction as if a particular bank could invoke the restriction and require a particular customer to provide 7 days advance notice of withdrawal from a savings account.

My understanding has always been that only the Federal Reserve could invoke that language and, if it did, it would require all U.S. banks to invoke it against all savings account holders. That is supported in large part by the fact that the principal purpose of Reg D is to give the Fed tools to use in controlling the monetary supply. For example, if there were a financial panic, the Fed could order all banks to invoke the restriction, thus bringing a substantial portion of the monetary supply to a temporary halt. It makes no sense to create such a provision to benefit a particular bank to the detriment of a particular customer in a regulation aimed at monetary policy.

Yet, I cannot prove my argument. Would be glad to read the arguments yea or nay, but would be enthralled with the response from the person who can support it by reference to law or regulation or anything more compelling than tea leaves.
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#26446 - 08/01/02 09:25 PM Re: 7 days advance notice of withdrawal
Andy_Z Offline
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Ken, you're saying the Fed is the one to invoke the 7-day notice? I have never understood that. I always went back to the depression era and runs on banks and believed that this was a requirement to assist them, the banks. It tied to reserves, monetary supplies and cash on hand requirements.

We had a customer go into one of our supermarket branches and he wanted his $170M from his savings account. As George's daddy used to say, "Can't do it". We invoked the 7-day clause at that point (the only time I've done it in my 20 years even though we discussed it for DR and Y2K) and then made arrangements for adequate cash to be delivered and to have a guard there for his safety.
Last edited by Andy Z; 08/01/02 09:27 PM.
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#26447 - 08/01/02 09:28 PM Re: 7 days advance notice of withdrawal
David Dickinson Offline
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Sorry Ken, but I can't enthrall you! I have always understood the 7 day right to belong to individual banks, but I certainly can see it happen on a Federal level as well. I stand with Andy's comments.

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#26448 - 08/01/02 10:06 PM Re: 7 days advance notice of withdrawal
Lestie G Offline

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I don't think I've ever contemplated this particular situation - so I'm reading all this very closely! So far I agree with everybody.

I do have a question for you, Andy - what would you have done if that account was a DDA?
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#26449 - 08/02/02 12:01 AM Re: 7 days advance notice of withdrawal
William J. Ludwig Offline
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From a loooooong time ago. As Andy says, it goes back to the depression days and runs on banks. Banks put the language in their savings passbooks (remember them?) and could require 30 days advance notice for a withdrawal. What wasn't in the passbook was that if the bank invoked the 30 day rule it had to apply it to all savings customers. The lowering of the 30 days notice to 7 days is because banks can get cash much quicker now - don't have to rely on pony express or stagecoaches.
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#26450 - 08/02/02 01:03 AM Re: 7 days advance notice of withdrawal
Princess Romeo Offline

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Just in case anybody was wondering, our count on horse-related references is on the rise again. We don't want Lucy to get in trouble again!
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#26451 - 08/02/02 04:22 AM Re: 7 days advance notice of withdrawal
Andy_Z Offline
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In reply to:

what would you have done if that account was a DDA?





I'm sure we would have convinced him otherwise. Short of that, we could have gotten funds there but it would have been a real hassle.
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#26452 - 08/02/02 12:12 PM Re: 7 days advance notice of withdrawal
Elwood P. Dowd Offline
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Andy,
Does posting work better than counting sheep at 12:22 AM?

As for the thread, William's observation sounds plausible, that the provision was intended to assist a particular bank, but that it had to be applied to all customers. That would allow a bank under pressure to refuse to cash its CD's and delay withdrawals from savings. (George Bailey could have used this at the B&L.) Still can't buy that its a provision banks can use on a per customer, case by case basis.

Doesn't someone out there know of a dusty, musty treatise on economics where all of this is explained?
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#26453 - 08/02/02 01:03 PM Re: 7 days advance notice of withdrawal
John Burnett Offline
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Although I cannot find anything written on what happens when a bank triggers this requirement, I do recall somewhere in my dusty memory that a bank must impose the notice period on all affected accounts, and not on a case-by-case basis. The bank itself decides whether to invoke the right. It is, indeed, a holdover from the '30s and runs on banks. And it was once 30 days.

The regulation (D) uses reservation of the 7-day notice requirement as a litmus test on demand deposits. In the definition of a demand deposit we see that it includes (among other things) a time deposit for less than 7 days, and a savings account (including NOW, MMDA, passbook, statement) on which a bank does not reserve the right to impose the notice requirement. This can be important in the technical nit-pickery of an exam, if a bank has business savings or MMDA accounts on which they have failed to reserve the right (and disclose same). How would you like all of your bank's business MMDA accounts re-classed as demand deposits? That would sort of put your bank in violation of Reg. Q's prohibition against paying interest on demand deposits, and you could get hit with a $1,000 per incident fine. You could also face having to pony up penalties for retroactive reserve recalculations.

Reg. D does not require (and I believe it does not permit) imposing the 7-day notice on true demand deposit accounts, in spite of its applicability to NOW accounts.

Incidentally, the reservation of the right to impose a 7-day notice requirement is what makes a NOW account legally a savings account and not a demand deposit. (Yes, even though it's a savings account it's treated as a transaction account -- along with DDA -- for reserve calculations.)

As an aside, I cannot think of many things that would get a bank's customer base itchier than hearing that the bank had begun requiring 7 days' notice of intent to withdraw. I don't see the notice requirement being imposed on NOW accounts for a lot of obvious reasons (you'd have to refuse payment on all incoming checks -- wouldn't THAT be fun?). Imposing the notice requirement would be a last, desperate act on the way toward failure.
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#26454 - 08/02/02 01:09 PM Re: 7 days advance notice of withdrawal
waldensouth Offline
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According to Reg. D a savings deposit is: "(d)(1) Savings deposit means a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the depository institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit. The term savings deposit includes a regular share account at a credit union and a regular account at a savings and loan association."

A Demand Deposit is defined as: "funds for which the depository institution does not reserve the right to require at least seven days' written notice of an intended withdrawal."

Unfortunately, there is no commentary to clarify this. The statute does not define a savings account - only a transaction account. However a plain reading of the reg. indicates that the right belongs to the depository institution - not the government. It also states everything in the singular - not plural, i.e. depositor, account, deposit. (Absent any written guidance to the contrary, IMHO this could be exercised on a case by case basis. Although, as a matter of practicality, the instances where a bank would enforce this option would be limited. A large cash withdrawal requiring the bank to order cash would be one instance. Suspected fraud another?) I'm going to change my opinion - there is always the need to read further. The 2nd part of the savings definition which refers to transaction limitations also refers to everything in the singular but applies to an entire class of accounts.
Last edited by Louvera; 08/02/02 01:41 PM.
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#26455 - 08/02/02 01:20 PM Re: 7 days advance notice of withdrawal
Andy_Z Offline
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I tried counting sheep, but I sat up and one bashed into me as he was going over the bed.

I don't have a different answer, but I will play trivia. Why is Lydia Lobsiger related to your question and how much was it? (Jim can't answer as he knows this.) The winner gets the virtual umbrella drink I won from Jim last week.

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#26456 - 08/02/02 01:55 PM Re: 7 days advance notice of withdrawal
Bartman Offline
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Let me guess - Jim can't answer because he's the guy handing over the check...(sorry, Jim!)
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#26457 - 08/02/02 03:29 PM Re: 7 days advance notice of withdrawal
RVFlyboy Offline
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I'm old, but I'm not that old!

I have played this trivia game before with Andy on another board - that's how he know's I know (btw, that can also serve as clue #1 for those of you still trying to find out the answer). Clue #2 - You can find out about even the most obscure things like Uffda with a good search engine.
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#26458 - 08/02/02 03:49 PM Re: 7 days advance notice of withdrawal
thomasj Offline
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Ms. Lydia Lobsiger became the first American citizen to be paid by the FDIC for deposits in an insured closed bank -- the Fon Du Lac State Bank East Peoria, Illinois on July 5th, 1934.

By the way that was 33 years before I was born!
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#26459 - 08/02/02 04:56 PM Re: 7 days advance notice of withdrawal
Andy_Z Offline
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You're half way there and the drink is almost within your grasp. The amount?
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My opinions are not necessarily my employers.
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#26460 - 08/02/02 05:21 PM Re: 7 days advance notice of withdrawal
William J. Ludwig Offline
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$1,250.00 - and since Ken usually wants proof, here it is:
http://www.fdic.gov/about/learn/learning/when/im1stcheck.html
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#26461 - 08/02/02 05:23 PM Re: 7 days advance notice of withdrawal
thomasj Offline
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Pennsylvania
Sorry! $1,250
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#26462 - 08/02/02 05:25 PM Re: 7 days advance notice of withdrawal
thomasj Offline
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(Banging my head against a wall) 2 minutes too late! Oh well that is how my week has been going!
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#26463 - 08/02/02 07:23 PM Re: 7 days advance notice of withdrawal
Andy_Z Offline
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And did you notice that indeed that was check No. 1.

Bill and Thomas will have to share the umbrella and drink.
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My opinions are not necessarily my employers.
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#26464 - 08/02/02 10:06 PM Re: 7 days advance notice of withdrawal
William J. Ludwig Offline
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Thomas, It's after 5 p.m. so enjoy, and have a nice weekend. : )

http://www.screensaverheaven.com/ssheaven/b131.html
(This is the quickest animated drink on the Web I could find.)

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#26465 - 08/03/02 01:58 AM Re: 7 days advance notice of withdrawal
thomasj Offline
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Pennsylvania
Thanks William! Hope you have a nice weekend too...
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#26466 - 08/07/02 04:17 PM Re: 7 days advance notice of withdrawal
redsfan Offline
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The Pennant Race
I was looking at the link to the check that Bill posted. Is it just me, or does the amount written in words not agree to the amount written in numbers ($1200.50 vs. $1250.00)???
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#26467 - 08/07/02 04:24 PM Re: 7 days advance notice of withdrawal
John Burnett Offline
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Guess you've had your coffee, Paul. Great catch! I wonder if the FDIC ever noticed this!

Of course, now we need to figure out if an adjustment entry is required, because the legal amount of the check is $1200.50.

Actually, I think the statute of limitations has run on this one, and the check predates the UCC by a long time. Thank goodness, because I'd hate to think about compound interest on the amount of the difference for 68 years!
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#26468 - 08/08/02 12:31 AM Re: 7 days advance notice of withdrawal
Princess Romeo Offline

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Oh that's a HOOT!!! Wonder if the FDIC ever noticed...., or if anyone has pointed it out to them.

I think I'll keep that link handy next time I get an examiner who decides to make a big issues out of a minor clerical error.
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#26469 - 08/08/02 02:30 AM Re: 7 days advance notice of withdrawal
Anonymous
Unregistered

So John, do you agree that the CFI/Harland TIS dislosures lists the 7 days required notice as a limitation for statement savings accounts?

This type of monetary control is not included in the ABA Principles of Banking textbook. I recommend we write it in the margin. This is a good topic for a pop quiz.

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