text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Interest on Business Checking Act of 
  2001''.
  
  SEC. 2. AMENDMENTS RELATING TO DEMAND DEPOSIT ACCOUNTS AT DEPOSITORY 
                INSTITUTIONS.
  
      (a) Interest-Bearing Transaction Accounts Authorized.--
              (1) Federal reserve act.--Section 19(i) of the Federal 
          Reserve Act (12 U.S.C. 371a) is amended by adding at the end 
          the following: ``Notwithstanding any other provision of this 
          section, a member bank may permit the owner of any deposit, any 
          account which is a deposit, or any account on which interest or 
          dividends are paid, to make not more than 24 transfers per 
          month (or such greater number as the Board may determine by 
          rule or order), for any purpose, to a demand deposit account of 
          the owner in the same institution. With respect to an escrow 
          account maintained in connection with a loan, a lender or 
          servicer shall pay interest on such account only if such 
          payments are required by contract between the lender or 
          servicer and the borrower, or a specific statutory provision of 
          the law of the State in which the security property is located 
          requires the lender or servicer to make such payments. Nothing 
          in this subsection shall be construed to prevent an account 
          offered pursuant to this subsection from being considered a 
          transaction account for purposes of this Act.''.
              (2) Home owners' loan act.--Section 5(b)(1) of the Home 
          Owners' Loan Act (12 U.S.C. 1464 (b)(1)) is amended by adding 
          at the end the following:
                      ``(G) Transfers.--
                              ``(i) In general.--Notwithstanding any 
                          other provision of this paragraph, a Federal 
                          savings association may permit the owner of any 
                          deposit or share, any account which is a 
                          deposit or share, or any account on which 
                          interest or dividends are paid, to make not 
                          more than 24 transfers per month (or such 
                          greater number as the Board of Governors of the 
  Federal Reserve System may determine by rule or order under section 
  19(i) of the Federal Reserve Act to be permissible for member banks), 
  for any purpose, to a demand deposit account of the owner in the same 
  institution.
                              ``(ii) Escrow accounts.--With respect to an 
                          escrow account maintained in connection with a 
                          loan, a lender or servicer shall pay interest 
                          on such account only if--
                                      ``(I) such payments are required by 
                                  contract between the lender or servicer 
                                  and the borrower; or
                                      ``(II) a specific statutory 
                                  provision of the law of the State in 
                                  which the security property is located 
                                  requires the lender or servicer to make 
                                  such payments.
                              ``(iii) Limitation.--Nothing in this 
                          subsection shall be construed to prevent an 
                          account offered pursuant to this subsection 
                          from being considered a transaction account (as 
                          defined in section 19(b) of the Federal Reserve 
                          Act) for purposes of the Federal Reserve 
                          Act.''.
              (3) Federal deposit insurance act.--Section 18(g) of the 
          Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended by 
          adding at the end the following:
              ``(3) Transfers.--
                      ``(A) In general.--Notwithstanding any other 
                  provision of this subsection, an insured nonmember bank 
                  or insured State savings association may permit the 
                  owner of any deposit or share, any account which is a 
                  deposit or share, or any account on which interest or 
                  dividends are paid to make not more than 24 transfers 
                  per month (or such greater number as the Board of 
                  Governors of the Federal Reserve System may determine 
                  by rule or order under section 19(i) of the Federal 
                  Reserve Act to be permissible for member banks), for 
                  any purpose, to a demand deposit account of the owner 
                  in the same institution.
                      ``(B) Escrow accounts.--With respect to an escrow 
                  account maintained in connection with a loan, a lender 
                  or servicer shall pay interest on such account only 
                  if--
                              ``(i) such payments are required by 
                          contract between the lender or servicer and the 
                          borrower; or
                              ``(ii) a specific statutory provision of 
                          the law of the State in which the security 
                          property is located requires the lender or 
                          servicer to make such payments.
                      ``(C) Limitation.--Nothing in this subsection shall 
                  be construed to prevent an account offered pursuant to 
                  this subsection from being considered a transaction 
                  account (as defined in section 19(b) of the Federal 
                  Reserve Act) for purposes of the Federal Reserve 
                  Act.''.
      (b) Repeal of Prohibition on Payment of Interest on Demand 
  Deposits.--
              (1) Federal reserve act.--Section 19(i) of the Federal 
          Reserve Act (12 U.S.C. 371a) is amended to read as follows:
      ``(i) [Repealed].''.
              (2) Home owners' loan act.--Section 5(b)(1) of the Home 
          Owners' Loan Act (12 U.S.C. 1464(b)(1)) is amended--
                      (A) in subparagraph (B), by striking ``savings 
                  association may not--'' and all that follows through 
                  ``(ii) permit any'' and inserting ``savings association 
                  may not permit any''; and
                      (B) by striking subparagraph (G).
              (3) Federal deposit insurance act.--Section 18(g) of the 
          Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended to 
          read as follows:
      ``(g) [Repealed].''.
              (4) Effective date.--The amendments made by this subsection 
          shall take effect at the end of the 2-year period beginning on 
          the date of enactment of this Act.
  
  SEC. 3. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.
  
      (a) In general.--Section 19(b) of the Federal Reserve Act (12 
  U.S.C. 461(b)) is amended by adding at the end the following:
              ``(12) Earnings on reserves.--
                      ``(A) In general.--Balances maintained at a Federal 
                  reserve bank by or on behalf of a depository 
                  institution to meet the reserve requirements of this 
                  subsection applicable with respect to such depository 
                  institution shall receive earnings to be paid by the 
                  Federal reserve bank at least once each calendar 
                  quarter at a rate or rates not to exceed the general 
                  level of short term interest rates.
                      ``(B) Regulations relating to payments and 
                  distribution.--The Board may prescribe regulations 
                  concerning--
                              ``(i) the payment of earnings in accordance 
                          with this paragraph;
                              ``(ii) the distribution of such earnings to 
                          the depository institutions which maintain 
                          balances at such banks or on whose behalf such 
                          balances are maintained; and
                              ``(iii) the responsibilities of depository 
                          institutions, Federal home loan banks, and the 
                          National Credit Union Administration Central 
                          Liquidity Facility with respect to the 
                          crediting and distribution of earnings 
                          attributable to balances maintained, in 
                          accordance with subsection (c)(1)(B), in a 
                          Federal reserve bank by any such entity on 
                          behalf of depository institutions which are not 
                          member banks.''.
      (b) Technical and Conforming Amendments.--
              (1) Section 19(b) of federal reserve act.--Section 19(b)(4) 
          of the Federal Reserve Act (12 U.S.C. 461(b)(4)) is amended--
                      (A) by striking subparagraph (C); and
                      (B) by redesignating subparagraphs (D) and (E) as 
                  subparagraphs (C) and (D), respectively.
              (2) Section 19(c) of federal reserve act.--Section 
          19(c)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(A)) 
          is amended by striking ``subsection (b)(4)(C)'' and inserting 
          ``subsection (b)''.
  
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target: Interest on Business Checking Act of 2001 - Amends the Federal Reserve Act, the Home Owners' Loan Act, and the Federal Deposit Insurance Act to: (1) provide that a depository institution may permit owners of interest or dividend paying accounts to make up to 24 transfers monthly for any purpose to their other demand deposits in the same institution; and (2) repeal the proscription against the payment of interest on demand deposits.Prescribes conditions for interest payments on escrow accounts.Amends the Federal Reserve Act to require a Federal reserve bank to pay interest at least quarterly on any balance maintained by a depository institution at the reserve bank to meet its reserve requirements.
feat_title: A bill to amend Federal banking law to permit the payment of interest on business checking accounts in certain circumstances, and for other purposes.