Truth in Savings; Proposed Regulatory Amendment — 1994-05-11 [94-11154]

The Board is publishing for comment proposed amendments to Regulation DD (Truth in Savings) which clarify that once interest is credited to an account, it becomes part of the principal. By defining terms such as ``crediting,'' and ``compounding,'' the amendments will provide certainty to institutions, better fulfill the purposes of the act, and eliminate anomalies that currently occur in the APY calculation. The amendments provide that for institutions that pay interest (that is, credit interest) to the consumer by check or transfer or permit interest to remain in the account, an institution must pay interest on funds that remain in the account at the same frequency as the institution credits interest by check or transfer. Accounts that credit interest solely by posting to the account would not be required to send out interest checks or to transfer the interest to other accounts.