Regulation Q

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Regulation Q is Title 12, part 217 of the United States Code of Federal Regulations. It prohibits banks from paying interest on demand deposits 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 account 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The Regulation Q prohibition of interest-bearing demand (i.e., checking) accounts was effectively repealed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Pub.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...
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