[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1967 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 1967
To allow all businesses to make up to 24 transfers each month from
interest-bearing transaction accounts to other transaction accounts, to
require the payment of interest on reserves held for depository
institutions at Federal reserve banks, to repeal the prohibition of
interest on business accounts, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 25, 2003
Mr. Hagel (for himself and Ms. Snowe) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To allow all businesses to make up to 24 transfers each month from
interest-bearing transaction accounts to other transaction accounts, to
require the payment of interest on reserves held for depository
institutions at Federal reserve banks, to repeal the prohibition of
interest on business accounts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Interest on Business Checking Act of
2003''.
SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED FOR ALL
BUSINESSES.
(a) In General.--Section 2(a) of Public Law 93-100 (12 U.S.C.
1832(a)) is amended by inserting after paragraph (2) the following:
``(3) Notwithstanding any other provision of law, any
depository institution may permit the owner of any deposit or
account which is a deposit or account on which interest or
dividends are paid and is not a deposit or account described in
paragraph (2) to make not more than 24 transfers per month (or
such greater number as the Board of Governors of the Federal
Reserve System may determine by rule or order), for any
purpose, to another account of the owner in the same
institution. An account offered pursuant to this paragraph
shall be considered a transaction account for purposes of
section 19 of the Federal Reserve Act, unless the Board of
Governors of the Federal Reserve System determines
otherwise.''.
(b) Conforming Amendments.--
(1) In general.--Section 2(a) of Public Law 93-100 (12
U.S.C. 1832(a)), as amended by subsection (a), is further
amended--
(A) in paragraph (1), by striking ``but subject to
paragraph (2)'';
(B) by amending paragraph (2) to read as follows:
``(2) No provision of this section may be construed as
conferring the authority to offer demand deposit accounts to
any institution that is prohibited by law from offering demand
deposit accounts.''; and
(C) in paragraph (3), by striking ``and is not a
deposit or account described in paragraph (2)''.
(2) Effective date.--The amendments made by paragraph (1)
shall take effect on the date which is 2 years after the date
of enactment of this Act.
SEC. 3. AUTHORIZATION OF INTEREST-BEARING TRANSACTION ACCOUNTS.
(a) Repeal of Prohibition on Payment of Interest on Demand
Deposits.--
(1) Federal reserve act.--Section 19(i) of the Federal
Reserve Act (12 U.S.C. 371a) is repealed.
(2) Home owners' loan act.--Section 5(b)(1)(B) of the Home
Owners' Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by
striking ``savings association may not--'' and all that follows
through ``(ii) permit any'' and inserting ``savings association
may not permit any''.
(3) Federal deposit insurance act.--Section 18(g) of the
Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is repealed.
(b) Joint Rulemaking Required.--
(1) In general.--Not later than 2 years after the date of
enactment of this Act, the Secretary of the Treasury and the
Federal banking agencies shall issue joint final regulations
authorizing the payment of interest and dividends on
transaction accounts at depository institutions that are
subject to regulation by those entities.
(2) Contents.--Regulations required by this subsection
shall--
(A) establish the scope of the authorization
described in paragraph (1) and the types of transaction
accounts to which that authorization shall apply; and
(B) include any appropriate limitations,
exceptions, or restrictions on that authorization,
consistent with the purposes of this section.
(3) Effective date of regulations.--The regulations
required by this subsection shall take effect not later than 2
years after the date of enactment of this Act.
(4) Definitions.--As used in this subsection--
(A) the terms ``depository institution'' and
``transaction account'' have the meanings given such
terms in subparagraphs (A) and (C), respectively, of
section 19(b)(1) of the Federal Reserve Act (12 U.S.C.
461(b)(1)); and
(B) the term ``Federal banking agency'' has the
meaning the term in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(c) Effective Date of Repeal.--The amendments made by subsection
(a) shall become effective on the earlier of--
(1) 2 years after the date of enactment of this Act; or
(2) the date on which final regulations required to be
issued under subsection (b) become effective.
SEC. 4. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.
(a) In General.--Section 19(b) of the Federal Reserve Act (12
U.S.C. 461(b)) is amended by adding at the end the following:
``(12) Earnings on reserves.--
``(A) In general.--Balances maintained at a Federal
reserve bank by or on behalf of a depository
institution may receive earnings to be paid by the
Federal reserve bank at least once each calendar
quarter at a rate or rates not to exceed the general
level of short-term interest rates.
``(B) Regulations relating to payments and
distribution.--The Board may promulgate regulations
concerning--
``(i) the payment of earnings in accordance
with this paragraph;
``(ii) the distribution of such earnings to
the depository institutions which maintain
balances at such banks or on whose behalf such
balances are maintained; and
``(iii) the responsibilities of depository
institutions, Federal home loan banks, and the
National Credit Union Administration Central
Liquidity Facility with respect to the
crediting and distribution of earnings
attributable to balances maintained, in
accordance with subsection (c)(1)(A), in a
Federal reserve bank by any such entity on
behalf of depository institutions.
``(C) Depository institution defined.--For purposes
of this paragraph, the term `depository institution',
in addition to any institution described in paragraph
(1)(A), includes any trust company, corporation
organized under section 25A or having an agreement with
the Board under section 25, or any branch or agency of
a foreign bank (as defined in section 1(b) of the
International Banking Act of 1978).''.
(b) Authorization for Pass Through Reserves for Member Banks.--
Section 19(c)(1)(B) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(B))
is amended by striking ``which is not a member bank''.
(c) Technical and Conforming Amendments.--Section 19 of the Federal
Reserve Act (12 U.S.C. 461) is amended--
(1) in subsection (b)(4),
(A) by striking subparagraph (C); and
(B) by redesignating subparagraphs (D) and (E) as
subparagraphs (C) and (D), respectively; and
(2) in subsection (c)(1)(A), by striking ``subsection
(b)(4)(C)'' and inserting ``subsection (b)''.
SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXIBILITY IN SETTING RESERVE
REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C.
461(b)(2)(A)) is amended--
(1) in clause (i), by striking ``the ratio of 3 per
centum'' and inserting ``a ratio not greater than 3 percent
(and which may be zero)''; and
(2) in clause (ii), by striking ``and not less than 8 per
centum,'' and inserting ``(and which may be zero),''.
SEC. 6. TREATMENT OF CERTAIN ESCROW ACCOUNTS.
(a) In General.--In the case of an escrow account maintained at a
depository institution for the purpose of completing the settlement of
a real estate transaction, activities described in subsection (b) shall
not be treated as the payment or receipt of interest for purposes of
this Act or any other provision of law relating to the payment of
interest on accounts or deposits maintained at depository institutions,
including such provisions in--
(1) Public Law 93-100;
(2) the Federal Reserve Act;
(3) the Home Owners' Loan Act; or
(4) the Federal Deposit Insurance Act.
(b) Exclusions.--For purposes of subsection (a), activities
described in this paragraph are--
(1) the absorption, by the depository institution, of
expenses incidental to providing a normal banking service with
respect to an escrow account described in subsection (a);
(2) the forbearance, by the depository institution, from
charging a fee for providing any such banking function; and
(3) any benefit which may accrue to the holder or the
beneficiary of such escrow account as a result of an action of
the depository institution described in paragraph (1) or (2) or
a similar action.
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