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Training and Oversight Responsibilities

Each loan officer is required to attend HMDA training at least annually.

Regulation Q: Prohibition against Payment of Interest on Certain Deposit Account Types

Regulation Q, which was rescinded in 2011 with the new Dodd-Frank Act, prohibited banks, starting in 1933, from paying interest on demand deposit accounts (DDAs). Banks, however, were allowed by this regulation to pay interest on negotiable order of withdrawal (NOW) checking accounts offered to consumers and certain entities (but not to commercial enterprises, other than sole proprietorships).

This regulation is very interesting for RF bankers because it stipulates not to pay interest. I am stating this because in many of the applications made by RF bankers to operate in the West, one of the main negotiation issues has been the payment of interest on some deposits and the requirement of many of the Islamic banking eminent scholars to expose the bank deposits to bank profit and loss, with the possibility of losing depositors' money. We will discuss this issue further in Part Two of this book.

Regulation D: Reserve Requirements for Depository Institutions (Banks)

As we discussed in the summary of Regulation Q, banks were not allowed to pay interest on their DDA checking accounts. Regulation D was devised after the introduction of what are known as NOW accounts, which were allowed to earn interest in order to allow banks to compete with investment banks, whose banking products included interest-bearing money market mutual funds that offered interest on invested cash (deposits that are not FDIC insured). The regulation was devised in an effort to limit frequent withdrawals from these accounts, which may cause the bank to undermine its long-term investment commitment in the community (by keeping a larger percentage of its assets in cash to meet these unexpected withdrawals). Following are the objectives of Regulation D:

■ To establish reserve requirement guidelines.

■ To regulate certain early withdrawals from CD accounts.

■ To define what qualifies as DDA /NOW accounts (please see Regulation Q regarding eligibility rules for interest-bearing checking accounts).

■ To define limitations on certain withdrawals on savings and money market accounts.

■ To establish that unlimited transfers or withdrawals are permitted if made in person, by ATM, by mail, or by messenger.

In all other instances, there is a limit of six transfers or withdrawals per month. No more than three of these transactions may be made payable to a third party (by check, draft, point-of-sale, etc.).

The bank must close accounts where this transaction limit is constantly exceeded.

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