Repeal of Reg Q on July 21 will increase competition for Demand Deposit Accounts and will require a new type of competitive intelligence on account structure and pricing.
SAN ANSELMO, Calif. (July 12, 2011) -- A new survey from Market Rates Insight (MRI, http://www.marketratesinsight.com) will help banks transition to offering interest rates on, banks will be allowed to offer interest on commercial DDAs for the first time since Section 19(i) of the Federal Reserve Act (Reg Q) was implemented during the 1930s in an attempt to reduce competition for bank deposits.
“Our Strategic Review and Analysis of the repeal of Reg Q points to two major implications” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight. “The first is an internal shift of balances from other commercial liquid accounts and short-tem CD to DDA and the second is an increase in the intensity of competition for commercial DDAs.”
The new DDA survey from Market Rates Insight has been designed to provide bank and credit union executives with critical competitive information on the structure and pricing of commercial DDA accounts. The newly-designed survey is unique because it covers three different structural variations in which DDAs can be offered to commercial customers - interest only, Earning Credit Rate (ECR) only, or a combination of ECR and interest (hybrid).
Banks are developing interest-bearing DDAs that will meet the needs of commercial customers. Commercial accounts are very profitable, and institutions need as much market intelligence as possible to ensure that they optimize the profitability of these accounts and maintain a competitive edge. Incorporating MRI’s new DDA survey will allow institutions to make better-informed product and pricing decisions.
Commercial Demand Deposit Accounts are payable on demand, or on less than seven days’ notice. They generally have no maturity period, they could not be interest-bearing and could not require the account holder to give notice of intent to withdraw funds. If they do require notice of intent to withdraw funds, the notice period must be less than seven days and the requirement must be stated in the deposit contract. Much of this is changing as of July 21.
About Market Rates Insight
Market Rates Insight (MRI, http://www.marketratesinsight.com) has been providing competitive pricing information and analysis to financial institutions for 26 years. MRI’s competitive data is complete, detailed and timely enabling the highest level of pricing precision and ensuring greater pricing optimization for improved profitability. In addition to competitive pricing data, MRI also conducts pricing analyses and tracks industry indices. MRI’s indices are published weekly in the National Pricing Indicator report, the industry standard for deposit pricing for executives at banks and credit unions.
Contact:
Dan Geller Ph.D.
Executive Vice President
Market Rates Insight, Inc.
Tel: 415-448-8813
Fax: 415-259-0701
Tom Woolf
Market Rates Insight
(415) 259-5638
No comments:
Post a Comment