WASHINGTON, Nov. 10 — The Federal Reserve Board has proposed an amendment to Regulation Q, allowing banks to compute daily interest on time deposits, using a year of either 360 days or the 365 days currently required.
One commercial banker estimates that the use of 360 days, if permitted, would increase the interest paid on $1 million of time deposits by about $8 a year.
"We're really talking peanuts," he said, "so even if we were given permission to use 360 days I doubt very much that we would exercise it."
The Fed has given interested persons until Nov. 16 to submit data, views or arguments on the change.
According to the proposal, section 217.3(e) of Regulation Q would be changed to read:
"Computation of interest on time deposits. In the computation of simple daily interest, the time factor should be expressed as a fraction in which the actual number of days the funds are on deposit is the numerator, and the denominator is either 360 or 365. When a time deposit matures in one month, or multiples thereof, the bank may use 30 days in the numerator, or corresponding multiples thereof."
That section as it now stands permits the use of 360 in the denominator only on deposits of 30 days or multiples thereof and the use of 30 and multiples in the numerator on a deposit for one month of any multiple of a month.
The Fed said the proposed amendment would authorize the use of 360 as the denominator for any deposit and continue the present practice of authorizing a bank to consider one month as 30 days. And because of these changes, references to technical grace periods would be deleted.
