Interest Paid on Insider Deposits

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Question:

Is there a regulation that covers the amount of interest that can be paid on insider deposits?

Answer:

If your bank is a member of the Federal Reserve System, the Federal Reserve Act (12 U.S.C. 376), in Section 22, prohibits paying employees, officers, directors and attorneys for the bank a rate higher than available to the public. The exact wording is "No member bank shall pay to any director, officer, attorney or employee a greater rate of interest on the deposits of such director, officer, attorney or employee than that paid to other depositors on similar deposits with such member bank."

First published on BankersOnline.com 1/14/08