Interest On Business Checking Possible

The Treasury Management Association (TMA) was among others who testified before a congressional banking committee to urge Congress to repeal Regulation Q and thereby allow the Federal Reserve to pay interest on commercial bank balances required to be held at Fed.

TMA's representative, Government Relations Committee Chairman Arthur Cunningham, said in his testimony, "The abolition of the ban on paying interest on business checking accounts would simplify cash management for all businesses and banks."

Large corporations take advantage of "sweep" accounts to earn interest with their balances, but small businesses and partnerships lack the resources to do that, according to TMA's study. Cunningham addressed that by telling the committee, "The end of Regulation Q will terminate the artificial environment which created the sweeps market. Products should not exist through such price regulation as Reg Q. Rather, they need to demonstrate their own worth in a free market."

We'll keep you posted on the results of this legislation. It could make a difference in your marketing to small businesses.

Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 8, 7/98