Regulations on Certificates of Deposit

The regulations regarding U.S. certificate of deposit accounts are largely determined by the Federal Reserve and the Federal Deposit Insurance Corporation. Banks are responsible for maintaining the money you deposit into a CD account with the same due diligence they would with any other type of account. In the event of a problem, the FDIC guarantees the money in a CD up to $250,000.


When you want to save money, certificates of deposit are very useful. They allow you to put money aside for a set amount of time and benefit from an interest rate that is better than the rates on the average bank savings account.

There are regulations that all banks in the United States must follow regarding these types of accounts. These regulations are set by the Federal Reserve Bank and the Federal Deposit Insurance Corporation (FDIC). These government agencies are responsible for monitoring banks and assuring that they are being honest and trustworthy with their customers.

Defining a Certificate of Deposit

A certificate of deposit is a type of savings account where the depositor is required to keep his or her money in the bank for a certain period of time; usually a time period of over three months. In exchange for this time commitment, the bank offers the depositor a higher interest rate than usual. After the time period is up (also called the maturity date) the depositor can then either withdraw their money (including the interest) or roll it over into another CD.

There is also a downside to certificates of deposit. If you choose to withdraw money from your CD before the maturity date you will be required to pay hefty fines. So CDs are only good for people who want to be seriously disciplined about saving money over a certain period of time.

The History of Bank Regulation

The need for bank regulation became a very serious issue in 1907, after a very serious financial panic hit the United States. In 1913, legislation was finally passed to establish the Federal Reserve System, a centralized entity charged with regulating the nation’s banks. This act defined the national currency, established 12 federal reserve banks, and set guidelines for how U.S. banks must conduct themselves.

Today, in the United States, banks are regulated at both the state and the federal level. Some banks even have the word “federal” in their name to signify that they are regulated on the federal level. Some state banks operate under Federal Reserve regulations, while others are controlled by the FDIC and state regulators. They all ultimately have to abide by the rules and regulations of the federal government.

Regulations Regarding CDs

Certificate of deposit accounts are regulated under the same banking laws that apply to all other deposit accounts. Each CD account is FDIC insured up to $250,000 (formerly $100,000). The bank is required to deliver the promised interest rate on the CD account (however the bank may be able to close the account before the maturity date at its discretion) and maintain the CD account diligently. The Federal Reserve also requires that depository institutions maintain a reserve of funds at all times.

The FDIC examines banks regularly to assure that they are financially sound, technologically efficient, and trustworthy when dealing with other people’s money. A bank cannot be FDIC insured if they do not meet these requirements. Be sure that your bank is FDIC insured so that you can rest assured that your CD bank account is being closely monitored.

Where to Find Regulated CD Accounts

Most consumer banks offer certificate of deposit accounts that are regulated and protected by the FDIC. You can also open up an FDIC-regulated CD account online at one of the various online banking companies, such as ING Direct, E-Trade, and FNBO Direct banks. You may be mistrustful of online banks because you aren’t able to look a bank employee in the eye, but relax–these banks must follow the same regulations as brick and mortar banks. In fact, most online banks would not even be able to set up shop without first going through a rigorous process with the federal government.

When looking for a certificate of deposit account, you want to be assured that your money will be safe. So look for the official FDIC logo on their door, their literature, and/or their website. Double check the bank’s status by searching the FDIC’s “Bank Find” utility

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