Disclosure As the result of amendments to the HMDA incorporated within
theHousing and Community Development Actof 1992, an institution must
make its disclosure statement available to the public at its home office
within three business days of receipt.
Training and Oversight Responsibilities Each loan officer is required to at-
tend HMDA training at least annually.
Regulation Q: Prohibition Against Payment of
Interest on Certain Deposit Account Types
Regulation Q prohibits banks from paying interest ondemand deposit
accounts(DDA). Banks, however, may pay interest onnegotiable order of
withdrawal(NOW) checking accounts offered to consumers and certain
entities (but not to commercial enterprises, other than sole proprietorships).
This regulation is very interesting for Islamic bankers and RF bankers,
because it stipulatesnot to pay interest. I am stating this because in many of
the applications made by Islamic bankers to operate in the West, one of the
main negotiation issues has been the payment of interest on some deposits
and the requirement of many of the Islamic banking eminent scholars to
expose the bank deposits to bank profit and loss, with the possibility of los-
ing depositors’ money. We will discuss this issue further in Part Two of this
book.
Regulation D: Reserve Requirements for
Depository Institutions (Banks)
As we discussed in the section on Regulation Q, banks are not allowed to
pay interest on theirdemand deposit account(DDA) checking accounts.
Regulation D was devised after the introduction of what are known as
NOW (negotiable order of withdrawal) accounts, which were allowed to
earn interest in order to allow banks to compete with investment banks,
whose banking products included interest-bearing money market mutual
funds that offered interest on invested cash (deposits that are not FDIC-
insured). The regulation was devisedin an effort to limit frequent with-
drawals from these accounts, which may cause the bank to undermine its
long-term investment commitment in the community (by keeping a larger
percentage of its assets in cash to meet these unexpected withdrawals). Fol-
lowing are the objectives of Regulation D:
&To establish reserve requirement guidelines
&To regulate certain early withdrawals from certificate of deposit
accounts174 THE ART OF ISLAMIC BANKING AND FINANCE