What is the regulation Q?
regulation Q, part of the US Code of Federal Regulations (CFR), was announced in 1933 and essentially discarded in a six -year process ending in March 1986. The United States suffered great depression at the beginning of the 30th and Congress wanted to influence country banks Emdash; Savings and Loans (S & LS) and similar institutions and Emdash; expand the credit to local farmers and traders. However, the practice of many banks was supposed to put its funds into commercial banks and gain interest on these deposits. These deposits were demand deposits; They could be withdrawn at any time. Modern control accounts are demand accounts.
Time deposits such as Certiv Storage Atese (CDS), generally paid higher interest rates, but the amounts paid to the CD had to be left to a deposit at the Komerční banka for a certain period of time. Small Savings Bank needed flexibility to choose their financial spaceAt any moment to meet the seasonal needs of their customers and occasional panic, so that they would put their resources in demand for lower but extremely reliable interest rates.
discourage the reflection from essentially accumulation of cash in this way, instead of being a congress, in the banking law of 1933, included regulations Q, which banned the payment of interest accounts. It has been felt that this would release the funds that accumulate in commercial banks, which the rural banks accumulate. This also replied to the criticism of some that commercial banks used demand deposits with smaller regional banks for speculative purposes and maintained Sein -ing funds from borrowing for more productive purposes.
The Q regulation also allowed the federal reserve system to determine the maximum interest rates that could be paid in time deposits. There were two main reasons. ForThe first, Congress felt that the competition for increasing interest rates did not adversely affect the profitability of banks, and that if the rates offered to deposits were closed, banks would not lose profits in the interest rate competition. Secondly, if smaller local penalties could offer a slightly higher interest rate in time deposits than Komerční banka, depositors would open accounts at these local spheres, thereby increasing the funds available for lending.
The effects of Q regulation were mixed. While the intended purpose of preventing fulfillment in the accumulation of large demand deposits in commercial banks has been achieved, it forced short -term loans to finance long -term lending. This means the blessing of the financing of their lending, which consisted mainly of long -term mortgages, would use customer deposits that were short -term. In addition, some of them were considered a form that adjusted the prices that caused the S&L crisis in the 1880s of the 20th century whose bummer was backedDy, whose costs exceeded $ 200 billion (USD), in addition, the US calamity whose costs exceeded $ 200 billion (USD), their US calamity, whose costs were considered in 1966 as an interest rate applied to the S&L industry in 1966.
with an interest rate crisis at the end of the 70th and at the beginning of the 80s. It turned out that the Q Regulation does not reach the goals set for him by Congress. In addition, the stored interest rates were excluded in 1970 for accounts of over $ 100,000, which had the distribution of wealth and forced smaller savings to give up billions of dollars in interest. After finding that these interest rate ceilings caused problems for smaller institutions, discriminated against small savings and did not increase the offer of mortgage loan for residentials on deposit institutions and the 1980 deregulation and currency inspection Act (MCA). The MCA gradually eliminated the limits of interest paid by banks and replaced the old provisions of the Q Regulation, with the only exception that banks are still forbidden to payYears out of accounts for business control.