Federal Reserve issues final rule to repeal Regulation Q, which prohibited the payment of interest on DDAs.

by Mercator Advisory Group 0

Some of the lesser known statutes in the Dodd Frank Act dealt with eliminating banking regulations that may not matter much now, but could have an important effect on deposits in the future.

Regulation Q is one of those statutes that was repealed, effective on July 21st.

Regulation Q had prohibited banks from paying interest on demand deposit accounts, consumer or business.

In an environment of extremely low rates like we’re in today, that might not mean much, but once interest rates begin to rise this will become a competitive factor.

“The Federal Reserve Board on Thursday announced the approval of a final rule to repeal its Regulation Q, which prohibits the payment of interest on demand deposits by institutions that are member banks of the Federal Reserve System.”

Read related article: http://www.federalreserve.gov/newsevents/press/bcreg/20110714a.htm