The department was asked to review two situations wherein thrift institutions have been offering different interest rates on time deposit accounts of the same maturities. In the first situation, a thrift institution with its principal office in City A and a branch in City B is offering a higher rate at the branch in City B than at its office in City A. In the second situation, a thrift institution offers to renew maturing time deposits at a higher rate than it offers for new deposits of the same maturity.

Time deposits at thrifts are governed by contract between the banking organization and its customer, as authorized by Banking Law, sections 234.1-a and 378-a. So long as the interest offered is within the limits set by law, the rate of interest may be established by competitive market forces and by agreement between the parties. It is the Banking Department's opinion that there is no impediment in the Banking Law or in the department's regulations to the payment of interest as proposed above.

The department has been informed by the Federal Deposit Insurance Corporation that, in its opinion, interest rate differentials such as those described above are not prohibited by the Federal Deposit Insurance Act or by its implementing regulations.