No, we do not believe that the deposit account interest rate restriction in the Federal Reserve Act applies to state, nonmember banks.

Section 376 of the Federal Reserve Act provides that “no member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank.” The FDIC has stated in a Federal Register notice that it is “not aware of any current regulatory restrictions directly prohibiting a nonmember bank from doing so, assuming there were no implications of insider abuse or of evading certain limited regulatory requirements concerning executive compensation.”

In addition, we are not aware of any Illinois law that restricts deposit account interest rates for bank insiders, though we recommend following the FDIC’s proviso that there be no implications of insider abuse or evasion of executive compensation requirements. Also, we recommend checking your bank’s internal policies for possible restrictions on paying interest to the bank’s insiders.

For resources related to our guidance, please see:

• Federal Reserve Act, 12 USC 376 (“No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank.”)

• FDIC, Final Rule, 63 Fed. Reg. 17056, 17061 (April 8, 1998) (“While section 22(e) of the Federal Reserve Act (12 U.S.C. 376) generally limits a member bank’s authority to pay employees a greater rate of interest than the rate paid to other depositors on similar deposits, the FDIC is not aware of any current regulatory restrictions directly prohibiting a nonmember bank from doing so, assuming there were no implications of insider abuse or of evading certain limited regulatory requirements concerning executive compensation. . . .”)