The Federal Reserve Board established Regulation Q in 1933 as part of the Banking Act to govern the interest rates that commercial banks can offer on savings accounts and the manner in which they can promote those rates. This regulation applies to all commercial banks.
Regulation Q, created by the Federal Reserve Board, imposes limits on the interest banks can pay on savings accounts and governs how they advertise their rates. This rule, based on the Banking Act of 1933, applies to all commercial banks. For instance, a bank subject to Regulation Q can only pay a set amount of interest on savings, regardless of their ability to pay more, to prevent unfair competition and promote banking stability. Additionally, these banks must adhere to specific advertising rules, such as avoiding misleading language and unrealistic promises, to protect consumers and ensure fair competition. Overall, Regulation Q is a crucial tool for regulating the banking industry and safeguarding consumers from unfair practices.
Regulation Q refers to a former federal regulation in the United States that placed restrictions on the payment of interest on deposits by banks.
Regulation Q was implemented in 1933 as part of the Banking Act during the Great Depression.
The purpose of Regulation Q was to stabilize the banking system by preventing banks from competing for deposits through the payment of high interest rates.
Regulation Q was gradually phased out starting in the 1980s and was fully repealed in 2011.
The repeal of Regulation Q allowed banks to freely compete for deposits by offering higher interest rates, leading to increased competition and potentially higher returns for consumers.
Some argue that the repeal of Regulation Q contributed to the financial crisis of 2008 by encouraging excessive risk-taking and the creation of complex financial products.
While Regulation Q is no longer in effect, there are still regulations in place to ensure the stability and safety of the banking system, such as the Dodd-Frank Act and the Federal Reserve’s monetary policies.
Regulation Q primarily applied to commercial banks, but it also had implications for other financial institutions, such as savings and loan associations.
Regulation Q primarily focused on interest-bearing deposits, such as savings accounts and certificates of deposit, but it also had some provisions for non-interest-bearing deposits.
While many countries have implemented regulations to control interest rates or deposit competition, it is uncommon to find regulations similar to Regulation Q in place today.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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