Alert April 19, 2011

FRB Proposes Repeal of Prohibition on Paying Interest on Checking Accounts

The FRB requested comments on a proposed rule that would repeal Regulation Q, which prohibits banks from paying interest on demand deposits. Repealing Regulation Q would allow banks to offer interest-bearing checking accounts. The repeal is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and would become effective on July 21, 2011. The FRB specifically asks for comments on the effect of the repeal on bank balance sheets and income, the impact on short term funding markets, the expected demand for interest-bearing checking accounts, and the potential competitive burden on smaller banks. Comments must be submitted by May 16, 2011. Click here for the proposal.