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#2213300 - 05/09/19 08:52 PM NOW Account Eligibility - Corporation
KerryVBC Offline
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KerryVBC
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Colorado
Someone in our new accounts department is insisting that they "heard" that the FDIC regulation pertaining to eligibility for NOW accounts (§ 204.130) has changed to allow for-profit corporations to have a NOW account. I can't find anything to prove this and the FDIC website says "not allowed". Is there any truth to this claim (maybe an upcoming change later on) or is this person just blowing smoke?

Thanks,
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#2213306 - 05/09/19 09:12 PM Re: NOW Account Eligibility - Corporation KerryVBC
Skittles Online
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TN
They are mis-informed. A for-profit corporation can have an interest bearing DDA account; however if your financial institution still has NOW accounts they cannot open one for this corporation.
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#2213317 - 05/09/19 11:42 PM Re: NOW Account Eligibility - Corporation KerryVBC
BrianC Online
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Req Q was repealed...Reg D was not.
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#2213323 - 05/10/19 11:18 AM Re: NOW Account Eligibility - Corporation KerryVBC
Adam Witmer Offline
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Skittles (and Brian) are correct. The Dodd-Frank Act made a change that allows for-profit corporations to have interest bearing DDA accounts. That change, however, did not amend the restrictions for NOW accounts. Therefore, some financial institutions have quit offering NOW accounts altogether while others have created a separate interest bearing DDA account just for business accounts. While this differentiation may seem silly, it does matter because the Fed could use their monetary policy to require different reserves for DDAs vs NOW accounts. The bottom line is that for-profit corporations can have an interest bearing DDA but are still restricted from having a NOW account.
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#2213328 - 05/10/19 01:40 PM Re: NOW Account Eligibility - Corporation KerryVBC
KerryVBC Offline
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KerryVBC
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Colorado
Thank you all for your replies. Our institution still calls our interest checking accounts NOW accounts so it sounds like we have some work to do in clarification and training.
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#2213334 - 05/10/19 02:25 PM Re: NOW Account Eligibility - Corporation KerryVBC
Adam Witmer Offline
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Also, keep in mind that changing from a DDA to a NOW account (if you went that route) would require more than just how you market/advertise the account as DDAs and NOW accounts are defined differently in Regulation D. For example, you will want to check with your CFO/Controller to see how these accounts are coded on your core and how that relates to the Call Report. I believe (but am not positive) that DDAs and NOWs are currently lumped together on the Call Report. However, they could eventually get segregated, so you need to ensure they are coded properly on your core if you make a marketing change. You will also need to look at your account disclosures to see if the products are different and if/what changes need to be made. For example, NOW accounts have a clause that reserves the right to require 7 days advance notice of withdrawal, which would need to be removed if you are converting the account to a DDA.
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#2213337 - 05/10/19 02:39 PM Re: NOW Account Eligibility - Corporation Adam Witmer
MScarn6942 Offline
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Originally Posted By Adam Witmer
I believe (but am not positive) that DDAs and NOWs are currently lumped together on the Call Report.


This is correct, with the clarification that it's interest-bearing DDAs and NOWs. Non-interest bearing are listed separately (p. 14 of FFIEC 051 Call Report for banks with only domestic offices and assets < $1B).
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#2213341 - 05/10/19 03:37 PM Re: NOW Account Eligibility - Corporation KerryVBC
Adam Witmer Offline
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Thanks for the clarification, Agent Michael Scarn. wink
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Adam Witmer, CRCM

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#2213345 - 05/10/19 04:09 PM Re: NOW Account Eligibility - Corporation KerryVBC
MScarn6942 Offline
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Land Lacking in Lakes, IL
Anytime laugh
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#2213352 - 05/10/19 05:13 PM Re: NOW Account Eligibility - Corporation KerryVBC
KerryVBC Offline
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Colorado
Lots of great info! You've all been very helpful. Thanks!
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