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Regulation D (FRB)

From Wikipedia, the free encyclopedia

Reserve Requirements for Depository Institutions (12 C.F.R. 204, Regulation D) is a Federal Reserve regulation which sets out reserve requirements for banks in the United States. It is more familiar to the public as the regulation that limits monthly withdrawals from savings accounts.

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Transcription

From time to time we get asked why a member isn’t allowed to transfer money from their savings account more than 6 times a month. More often than not, it’s due to something called Regulation D. Regulation D applies to all financial institutions, not just credit unions. It was set in place by the Federal Reserve in order to prevent people from using their savings accounts like checking accounts. Checking accounts are also known as "transaction accounts," because they offer unlimited transactions in virtually any form. There are also "non-transaction accounts,” like savings and money market accounts, that are intended for fewer transactions. Federal law limits the transactions made on these accounts. Regulation D states that no more than six pre-authorized, telephone, automatic, electronic, or check withdrawals or transfers in any combination are permitted in any calendar month from any “non-transaction” or savings-type account. So, what can you do to avoid hitting your 6-transfer limit? Well, the main thing is to use your checking account, rather than your savings account, for your direct deposit, scheduled/automated transfers, ACH transactions, etc., since the Regulation D restrictions don’t apply to checking accounts. We also recommend setting up other overdraft protection sources, such as your Robins Financial Visa® or Line of Credit, in addition to using your savings account. That way there’s an alternative source in place in case you do reach your transfer limit on your savings account. If you do hit your limit, but need to make an additional transfer before the next monthly cycle begins, you can always visit a branch location where a Robins Financial representative will be happy to assist you. And if you only have a savings account, be sure to ask about all the different checking account options we have to fit your needs. There’s sure to be one that will work for you! For more information, call, click, or visit any of our branch locations.

Contents

Reserve requirement

The regulation requires depository institutions to keep cash reserves in order to meet immediate withdrawals against their transaction accounts. The minimum reserve requirement is 3% of the total amount over $16 million, and an additional 7% of the amount over $122.3 million. The institution may satisfy the requirement with vault cash and with deposits at a Federal Reserve Bank, or a bank that acts as a Federal Reserve correspondent. Bankers' banks and corporate credit unions, which act only as correspondents for other institutions, are not subject to the reserve requirements. The Federal Reserve Board of Governors may require additional reserves after consulting Congress or deposit insurance authorities.[1]

Six-transaction limit

In consumer banking, "Regulation D" often refers to §204.2(d)(2) of the regulation, which limits withdrawals or outgoing transfers from a savings or money market account. No more than six such transactions per statement period may be made from an account by various "convenient" methods, which include checks, debit card payments, and automatic transactions such as automated clearing house transfers or electronic bill payment. Institutions must warn any customer that exceeds the limit and must freeze, close or reclassify accounts that do so repeatedly. The regulation does not limit transactions made in person, at an ATM, by mail, or by telephone request for a mailed check. Even in these cases, the institution may require seven-day advance written notice before releasing funds. This right is not normally exercised, but it must be part of the account agreement.[2]

Each institution sets its own policies for responding to violations of the limit, and may place stricter limits than what the regulation requires. Discover Bank, for example, will close a savings account if Regulation D is exceeded 3 or more times in a 12-month period. Wells Fargo charges a $15 "Excess Activity Fee" for each item cleared after the regulation has been exceeded, and converts the account to a checking account if the activity persists.[3]

The regulation was amended in 2009 to allow greater freedom for the depositor: beforehand, the limit was six withdrawals per month if the funds remained within the same institution (e.g., transfer to checking), but was only three drafts where the funds left the institution (e.g., check, ACH Network, or card based purchase).[4]

See also

References

  1. ^ 12 C.F.R. 204
  2. ^ Savings Deposits, in Regulation D - Reserve requirements, Federal Reserve
  3. ^ Wells Fargo, "Savings & Checking Account Definitions: Excess Activity"
  4. ^ "Federal Register, Volume 74 Issue 102 (Friday, May 29, 2009)". edocket.access.gpo.gov. Retrieved 1 August 2017.

External links

This page was last edited on 27 April 2019, at 20:53
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