DEFINITION of 'Regulation Q'

A Federal Reserve Board regulation that prohibited banks from being able to pay interest on deposits within checking accounts. Regulation Q was enacted in accordance to the Glass-Steagall Act of 1933, to limit loan sharking and other such unseemly actions. In addition, it motivated consumers to release funds from these accounts and put them into money market funds.

BREAKING DOWN 'Regulation Q'

In 2010 the Dodd-Frank Act, for all intents and purposes, repealed Regulation Q and allowed for banks to offer interest on checking accounts for it business banking customers. This move was made, in part, to increase banking reserves to militate against credit illiquidity that was experienced in the initial days of the 2008-2009 credit crisis.

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