Federal law, enacted in 1980, deregulating deposit interest rates and expanding access to the Federal Reserve Discount Window in the first major reform of the U.S. Banking system since the 1930s. The act has two main sections: Title 1, the Monetary Control Act, which extends Reserve Requirements to all U.S. Banking institutions and also deals with the banking services furnished by the Federal Reserve System; and Title 2, the Depository Institutions Deregulation Act of 1980, phasing out Federal Reserve Regulation Q deposit interest rate ceilings.
The following are highlights of the act:
(1) mandatory reserve requirements that banks keep in noninterest earning accounts at Federal Reserve Banks were lowered. State chartered banks that are not members of the Federal Reserve System, as well as thrift institutions, were required to maintain reserve account balances. Mandatory reserves for all depository institutions were phased in over an eight-year period ending in 1988.
(2) Federal Reserve Banks were required to begin charging banks for clearing checks through the Federal Reserve System, and pricing reserve bank services at levels competitive with private sector pricing.
(3) a five-member committee, the Depository Institutions Deregulation Committee was created to phase out federal interest rate ceilings on deposit accounts over a six-year period ending in 1986.
(4) nationwide Negotiable Order of Withdrawal (NOW) accounts were authorized.
(5) federal deposit insurance coverage was raised from $40,000 to $100,000 per insured account.
(6) all depository institutions, including savings and loans and other thrift institutions, were given access to the Federal Reserve Discount Window for credit advances.
(7) savings and loan associations were authorized to make consumer loans, including auto loans and credit card loans, up to 20% of total assets.
(8) savings and loans were authorized to offer Trust accounts.
(9) state Usury laws limiting rates lenders could charge on residential mortgage loans were pre-empted.
(10) state chartered, federally insured banks were allowed to charge the same interest rates on bank loans as national banks.
(11) Federal Reserve Regulation Z implementing the consumer credit protections in the Truth in Lending Act, was simplified.
(12) authorized federal credit unions to originate residential mortgages. See also Garn-St Germain Depository Institutions Act; Money Market Deposit Account; Private Sector Adjustment Factor; Super Now Account.
