Nonpersonal Time Deposit

A nonpersonal time deposit is a time deposit account held by, according to Regulation D, “a depositor who is not a natural person” -- i.e., a corporate bank customer. Like any other time deposit account, a nonpersonal time deposit account pays a fixed amount of interest for a specified time period. When the specified term has ended, the money may either be withdrawn or it may be redeposited for another term. Money may not be withdrawn before the time deposit has reached maturity, or an early withdrawal penalty will be incurred. Generally speaking, a bank needs at least 30 days' notice of a withdrawal from a nonpersonal time deposit account.

Nonpersonal time deposits are not subject to reserve requirements under the Federal Reserve's Regulation D. Federally insured banks are required to report their nonpersonal time deposit account balances to their regional Federal Reserve Bank on a regular basis.

According to Section 204.2 of Regulation D, nonpersonal time deposits must be subject to a minimum early withdrawal penalty provided they have a notice or stated maturity period of 1.5 years or more. The penalty must be equal to at least 30 days’ worth of simple interest on the amount withdrawn from the time deposit. The penalty must be imposed on any withdrawals taken between six days after the date of deposit and 1.5 years after the date of deposit. If a nonpersonal time deposit has a different early withdrawal penalty, or no early withdrawal penalty, it must also have a maturity or notice period of at least seven days to less than 1.5 years from the deposit date.

Nonpersonal time deposits are interest-bearing bank accounts with pre-specified maturity dates, before which the depositor cannot withdraw the funds without incurring a penalty. Certificates of deposit (CDs) are sometimes referred to as time deposits, but strictly speaking, a CD can be more easily liquidated than a time deposit.

As with other interest-bearing accounts, the longer money is left in the account, the higher the yield. Returns are typically better than for savings accounts, because maturity dates allow the bank to invest the money for higher gains. However, long-term returns are typically lower than those for stocks, bonds and other riskier investment vehicles, although some banks offer market-linked accounts that both guarantee the principal and offer the promise of higher returns.

The U.S. may also charter an EAC. Among other benefits, EACs protect a bank from the risk of expanding overseas because they separate the risks of international operations from those of domestic operations.

Both laws have undergone many changes since passage, and many of their restrictions have been relaxed.