May 7, 2020

More Shake Out from COVID-19:  Federal Reserve Eases Reg D Restrictions – WST

What Is Changing in Reg D?

In an effort to provide consumers easier access to their funds during the COVID-19 pandemic, the Federal Reserve recently issued an interim final rule, effective immediately, revising the definition of a “savings deposit” account and deleting the six-per-month limit on convenient transfers.

This action by the Federal Reserve reduces all reserve requirement ratios to zero and eliminates the need to distinguish between reservable “transaction accounts” and non-reservable “savings deposits”.  Also noteworthy is that the Federal Reserve made corresponding changes to its reports that collect information on accounts for reserve requirements (i.e., FR 2900 series, FR Y-9, and FR 2886b).

What Does This Means for Your Financial Institution?

In this time of change caused by the pandemic, this regulatory revision may bring some relief to your operations staff as it is one less thing they need to monitor.  IT staff may wish to review system settings that would automatically flag those accounts that exceeded the six per month limit.  This change also means no more notifications by mail or transitioning those habitual violators from a savings account to a DDA account.

Should You Notify Your Customer Base?

As this change is beneficial to the customer, financial institutions don’t necessarily need to notify their entire customer base, but you may wish to do so because of another pesky little thing called UDAAP.    It is easy to imagine a situation where a customer keeps more funds in their DDA account to avoid the six-per-month convenient transfer rule and misses out on earning a higher interest rate if those funds would have been kept in their savings account – Something to certainly consider.

Below is a link to the full rule change as published in the Federal Register.  10-D Compliance also conducts deposit compliance reviews, so let us know how we can help you navigate these latest regulatory changes!

Past Weekly Security Tips – WST