Regulation D and Transaction Limitations

Issue/Inquiry

The Bank currently limits savings account transfers to six per month. Is this practice still permitted?

Response Summary

Although a depository institution is no longer required to limit savings account transfers to six per month, it is still permitted to do so.

Response Detail

On April 28, 2020, the Federal Reserve Board published an interim final rule to amend Regulation D (Reserve Requirements of Depository Institutions), removing the six-per-month limit on convenient transfers from the “savings deposit” definition. This rule allows depository institutions to immediately suspend the enforcement of the six-transfer limit and allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits during a time when financial events associated with the coronavirus pandemic have made such access more urgent.

The regulatory limit in Regulation D was utilized as the basis for distinguishing between reservable “transaction accounts” and non-reservable “savings deposits”. The Board’s recent action of reducing all reserve requirement ratios to zero rendered this regulatory distinction as unnecessary, since the importance of maintaining a transfer distinction between transaction accounts and savings accounts was based on the higher reserve required for transaction accounts.

While the interim final rule permits depository institutions to suspend enforcement of the six-transfer limit, it is not a requirement for them to do so. Likewise, the rule does not require or prohibit depository institutions from charging their customers fees for transfers and withdrawals that are in violation of the six-transfer limit. Accordingly, removal of the six-transfer limit will not have a direct impact on the policies or account agreements of depository institutions that charge such fees to their customers. 73 Federal Register 23445.

This means that the Bank is no longer required to limit savings account transfers to six per month; however, it may choose to continue to do so. This will be a business decision for the Bank to make.

This response is for informational purposes only and is not intended for legal guidance.

This entry was posted on Monday, June 22nd, 2020 at 9:56 am.