FDIC FAQs-What types of deposit accounts are included in the definition of a “noninterest-bearing transaction account?

Compliance > Deposit Operations > FDIC FAQs on Insurance and Payment of Interest on Demand Deposit Accounts
Q: What types of deposit accounts are included in the definition of a “noninterest-bearing transaction account”?

A: All funds in noninterest-bearing transaction accounts held at FDIC-insured depository institutions (“IDIs”) will be fully insured under the Dodd-Frank Deposit Insurance Provision. A “noninterest-bearing transaction account” is defined as an account (1) with
respect to which interest is neither accrued nor paid; (2) on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and (3) on which
the ID does not reserve the right to require advance notice of an intended withdrawal. The definition of “noninterest-bearing transaction accounts” also includes Interest on Lawyer Trust Accounts (“IOLTAs”) and functionally equivalent accounts. Note: The unlimited coverage for IOLTA accounts only applies to those accounts established by an attorney, containing funds held by the attorney on behalf of one or more clients, where the accrued interest is paid to the state bar association or other organizations to fund legal assistance programs. All other fiduciary accounts maintained by attorneys or other entities (for instance, IORTAs -- Interest on Realtor Trust Accounts) are subject to the standard insurance limits.

The definition of a “noninterest-bearing transaction account” cannot include any interest-bearing accounts, NOW accounts, or money market deposit accounts (“MMDAs”), except as expressly provided in 12 C.F.R. § 330.16(b) with respect to certain swept funds. The exception for swept funds is applicable only in situations where funds are swept from a noninterest-bearing transaction account to a noninterest-bearing savings account, notably a MMDA. Pursuant to 12 C.F.R. § 330.16(b), such noninterest-bearing savings accounts into which funds are swept would be considered noninterest-bearing transaction accounts. Apart from this exception for “reserve sweeps,” MMDAs and noninterest-bearing savings accounts do not qualify as noninterest-bearing transaction accounts.


This can be found in - FAQ#2 of FDIC’s FAQs.  FDIC’s FAQs can be found at: http://www.fdic.gov/deposit/deposits/unlimited/faq.pdf


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