Our bank is looking into offering a savings account that pays a higher interest rate than our current accounts and has a minimum balance to open of $5,000. This will be a new type of account for us. We would like to setup the account to where the rate adjusts every quarter and funds cannot be withdrawn without penalty during the quarter. It will be a lot like a 3 month CD it sounds like to me. We would also like to add a feature where that account does not earn any interest if the balance falls below $5,000 during the quarter.

Who is eligible to open this type of account? Can we offer it solely to individuals or can we also offer it to businesses, not for profits, etc?

I'm trying to get my ducks in a row for this new product offering and I haven't been given a lot of time to get all my research done. Basically I need to find out if we can offer the account as we have stated and how to disclose the features properly.

I don't believe there would be a regulatory restriction on who can open this type of account. The only restrictions I am aware of are the Reg D and since this isn't a checking accounty those don't apply. It will be up to management at your bank as to who may open this product.

Now, disclosing the features and calculating your APY may not be so easy. I would read the requirements in Reg DD and mirror my disclosures.

I would set this up as a 3 month CD with interest payable on a quarterly basis. Additionally, set the CD up as auto-newal so all you have to do is send out the short notice to the customer. Additionally, this can apply to consumer and businesses.

You can't offer it to consumers if you are not going to pay interest for the entire quarter if the balance falls below a certain rate. As I recall, Reg DD requires that we pay interest on the days during the term the balance requirement is met.

Thanks for your input. Our President seems to think that we can't offer this to businesses due to regulatory guidelines. I have looked everywhere I can think of and can't prove to him one way or the other. I could only find that corporations and partnerships could not open a NOW account. Not for profits could open a NOW account. I just can't find anything on who is eligible to open a savings account or time deposit account.

That is probably because anyone is eligible so the regulation is mute.