Community Bankers Association of Illinois

Regulators Issue Final Rules to Repeal Reg Q
July 16, 2011

Banking regulators issued the final rules for the repeal of Reg Q which prohibited the payment of interest on demand deposits. The final rules implement Section 627 of the Dodd-Frank Wall Street Reform Act which eliminates the Fed's authority to establish Reg Q. The rule takes effect on Thursday, July 21, 2011.

CBAI submitted a comment letter, and joined with other associations in a separate comment letter, urging the Fed to indefinitely postpone this action until the agencies can study the implications of the repeal on community banks and their customers and to evaluate alternative solutions. One concern expressed by CBAI regarding the repeal was the significant increase in community bank funding costs. This will ultimately result in increased cost of borrowing to small business customers and could further slow the economic recovery and job creation.

Despite the efforts of the CBAI, ICBA, and other state community bank trade associations the Fed did not believe the final rule presents issues of systemic risk or safety-and-soundness concerns and therefore made no changes as a result of these public comments.

Click here to see the Fedís Press Release and Final Rule.

Click here to see the Federal Register for FDIC Rule.

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