SAVINGS ACCOUNTS AREN’T SAVINGS ANYMORE
SAVINGS ACCOUNTS AREN’T SAVINGS ANYMORE?
When the FRB lowered required reserve requirements for checking and savings accounts to zero percent on March 26, it set off a host of questions about how that action affected checking and savings account definitions. Subsequently, they issued an FAQ and an interim final rule to delete the six-per-month limit on convenient transfers from the “savings” definition in Regulation D. So, what does all of this mean?
- Reserve requirements no longer play a role in monetary policy; thus, reserve requirements were reduced to zero percent. The distinction between “transaction accounts” and “savings accounts” is no longer necessary.
- FRB’s “ample reserves regime” eliminates the need to maintain balances in accounts at Federal Reserve Banks, thus freeing up liquidity to support lending activities. Currently, the FRB has no plans to re-impose reserve requirements but may do so in the future if conditions warrant.
- The changes to eliminate the “6” numeric limits on transfers made each month became effective on 4/23/20.
- Revisions to Regulation D deleted provisions to prevent transfers and withdrawals in excess of the limit or to monitor savings account ex post for violations of the limit. No more excessive transfers monitoring required!
- Customers are allowed to make unlimited transfers and withdrawals from their savings accounts!
- For accounts where the six-transfer limit is suspended, savings accounts may continue to be reported as “savings” or as “transaction accounts” for FR 2900 purposes.
- Financial institutions may, but are not required to, suspend enforcement of the six-transfer limit.
- Institutions may amend their Savings Account Agreements in any way they choose. Some issues that may need to be addressed are:
- Name of the account – not required to change if it includes “savings.”
- Amend for six-transfer limit – May choose to suspend enforcement of the six-transfer limit on a temporary (ex: six months) or permanent basis.
- “Reservation of Right.” A deposit may continue to be classified as a savings deposit even if the depository institution exercises its right to require notice of withdrawal.
- Excess Transfer Fees – Institutions aren’t prohibited from charging fees for violations of the six-transfer limit.
- There are additional FAQs having to do with FRB reporting in the FAQ link.
Once again, a best practice would be to pull together a “Savings Account” task force to address how changes may impact your institution. Representation, at a minimum, should include Retail (product changes), Finance (reserve reporting), and Marketing (customer communications). You will also want to consult your desktop forms vendor to see what support they can offer. As simple as these changes sound, there are still many system intricacies that need to be addressed.
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