Regulation Q
Encyclopedia
Regulation Q is Title 12, part 217 of the United States
Code of Federal Regulations
. It prohibits bank
s from paying interest
on demand deposit
s in accordance with Section 11 of the Glass–Steagall Act (12 U.S.C. 371a).
The imposed zero rate on demand deposits encouraged the emergence of money market funds and the growth of substitutes for and alternatives to banks. Regulation Q ceilings for savings accounts were for the most part phased out in the early 1980s by the Depository Institutions Deregulation and Monetary Control Act
of 1980.
Banks found a variety of ways to get around Regulation Q restrictions and compete for deposits. These include creating Negotiable Order of Withdrawal (NOW) account
s and money market accounts which are not considered checking accounts.
Regulation Q no longer exists in its original form; all aspects of the regulation, such as the type of entities that may own/maintain interest-bearing NOW accounts, have now been incorporated into Regulation D
.
The Regulation Q prohibition of interest-bearing demand (i.e., checking) accounts was effectively repealed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Pub. L. 111-203 §627). Beginning July 21, 2011, financial institutions will be allowed, but not required, to offer interest-bearing checking accounts. The effect that this repeal will have on the use of NOW and other types of "non-checking" checking accounts has yet to be seen but may be profound.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Code of Federal Regulations
Code of Federal Regulations
The Code of Federal Regulations is the codification of the general and permanent rules and regulations published in the Federal Register by the executive departments and agencies of the Federal Government of the United States.The CFR is published by the Office of the Federal Register, an agency...
. It prohibits bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s from paying interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
on demand deposit
Demand deposit
Demand deposits, bank money or scriptural money are funds held in demand deposit accounts in commercial banks. These account balances are usually considered money and form the greater part of the money supply of a country.-History:...
s in accordance with Section 11 of the Glass–Steagall Act (12 U.S.C. 371a).
The imposed zero rate on demand deposits encouraged the emergence of money market funds and the growth of substitutes for and alternatives to banks. Regulation Q ceilings for savings accounts were for the most part phased out in the early 1980s by the Depository Institutions Deregulation and Monetary Control Act
Depository Institutions Deregulation and Monetary Control Act
The Depository Institutions Deregulation and Monetary Control Act, a United States federal financial statute law passed in 1980, gave the Federal Reserve greater control over non-member banks.* It forced all banks to abide by the Fed's rules....
of 1980.
Banks found a variety of ways to get around Regulation Q restrictions and compete for deposits. These include creating Negotiable Order of Withdrawal (NOW) account
Negotiable Order of Withdrawal account
In the United States, a Negotiable Order of Withdrawal account is a deposit account that pays interest, on which checks may be written....
s and money market accounts which are not considered checking accounts.
Regulation Q no longer exists in its original form; all aspects of the regulation, such as the type of entities that may own/maintain interest-bearing NOW accounts, have now been incorporated into Regulation D
Regulation D (FRB)
Reserve Requirements for Depository Institutions is a Federal Reserve Board regulation that limits the number of preauthorized withdrawals and transfers from a savings account or money market account...
.
The Regulation Q prohibition of interest-bearing demand (i.e., checking) accounts was effectively repealed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Pub. L. 111-203 §627). Beginning July 21, 2011, financial institutions will be allowed, but not required, to offer interest-bearing checking accounts. The effect that this repeal will have on the use of NOW and other types of "non-checking" checking accounts has yet to be seen but may be profound.