Business Checking Bill Passes House
The House has cleared by voice vote H.R. 758, legislation that allows banks to pay interest on business checking accounts. The Business Checking Freedom Act of 2003 also authorizes the Federal Reserve to pay interest on sterile reserves held in Fed banks.
Repeal of the ban on paying interest on corporate checking accounts will become effective two years after enactment. In the interim period, banks will be permitted to sweep funds into and out of interest-bearing accounts (MMDAs) each business day (24 transfers per month).
Included in the bill is a provision that grants industrial loan companies (ILCs) authority to offer interest-bearing business checking accounts, a new power for ILCs that, according to the Federal Reserve, makes them the functional equivalent of banks. However, since ILCs are exempt from the Bank Holding Company Act, they can be owned by commercial firms. The ICBA has strong reservations about this provision and will work to have it removed or amended in the Senate. (See related article on ILCs in this week's WWR.)