FDIC FAQs-Are interest-bearing accounts that offer zero interest fully insured under the Dodd-Frank Deposit Insurance Provision?

Compliance > Deposit Operations > FDIC FAQs on Insurance and Payment of Interest on Demand Deposit Accounts

Q: Are interest-bearing accounts that offer zero interest fully insured under the Dodd-

Frank Deposit Insurance Provision?

A:  No, only noninterest-bearing transaction accounts are covered. Whether an account is

noninterest-bearing is determined by the terms of the account agreement and not whether

the interest rate on an account may be zero percent at a particular point in time. If an

account agreement provides for the possible payment of interest, then regardless of any

conditions or limitations relating to interest accrual or payment, the account will be treated

as an interest-bearing account.

Since IDIs no longer are prohibited from paying interest on DDAs as of July 21, 2011,

DDAs that allow for the payment of interest will not satisfy the definition of a noninterest-bearing

transaction account.

As discussed in more detail in more detail in FAQs 31 through 33, if an IDI modifies the

terms of its DDA agreement so that the account may pay interest, the IDI must notify

affected customers that the account no longer will be eligible for full deposit insurance

coverage as a noninterest-bearing transaction account under the Dodd-Frank Deposit

Insurance Provision. Moreover, this notice must be used in any other circumstance that

results in deposits no longer being eligible for full temporary coverage of noninterest-bearing

transaction accounts.

 This can be found in - FAQ#10 of FDIC’s FAQs.  FDIC’s FAQs can be found at: http://www.fdic.gov/deposit/deposits/unlimited/faq.pdf


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