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If we acquire commercial certificate of deposit (CD) accounts from another bank, can we terminate the CDs before their maturity dates? In the alternative, can we change the interest rates before they mature? – IBA Compliance Connection

IBA Compliance Connection

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If we acquire commercial certificate of deposit (CD) accounts from another bank, can we terminate the CDs before their maturity dates? In the alternative, can we change the interest rates before they mature?

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Regulation DD’s notice requirements will not apply, since the CDs are not held by consumers. In the absence of any regulatory requirements, you must comply with the terms of the account agreements. A number of Illinois courts have held that the relationship between a bank and its depositor is created and regulated by the contract between them, and that will be the case here.

For resources related to our guidance, please see:

  • Regulation DD, 12 CFR 1030.2 (defines “account” as “a deposit account at a depository institution that is held by or offered to a consumer”)
  • Symanski v. First Nat. Bank of Danville, 609 NE 2d 989, 991 (4th Dist. 1993) (“It is a fundamental principle of banking law that the relationship between a bank and its depositor is created and regulated by the express or implied contracts between them.”)