There is no specific deadline for reclassifying time deposit accounts as transaction accounts following a violation of withdrawal or transfer limits. Regulation D requires that a bank contact the customer about account violations prior to reclassification, but does not impose a specific deadline for effecting the reclassification.

In a staff opinion issued in 1990, the Federal Reserve Board adopted the general rule that reclassification is not necessary unless excess transfers occur in more than three months during any 12-month period and are an intentional attempt to evade transfer limits. The OCC has emphasized that this rule is flexible and should be applied on a case-by-case basis, taking into account the number of violations per month, the number of months that contain violations per year, and whether the violations are intentional or inadvertent. Consequently, there is no bright-line rule for when to reclassify a time deposit account as a transactional account during any 12-month review, and decisions regarding individual accounts are left to the judgment of your institution.

For resources related to our guidance, please see:

• Regulation D, 12 CFR 204.2 (“In order to ensure that no more than the permitted number of withdrawals or transfers are made, for an account to come within the definition of ‘savings deposit,’ a depository institution must either: (a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or (b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than occasional basis. For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain or take away the transfer and draft capacities of the account.”)

• Comptroller’s Handbook, Depository Services, Page 17 (August 2010) (“Nevertheless, a monitoring system that would detect and prevent all excess transfers may be costly to administer. For this reason, the Board has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12-month period. This working rule is not absolute, however, and the facts and circumstances must be considered in each case.”)

• Comptroller’s Handbook, Depository Services, Page 16 (August 2010) (“Ideally, controls on excess transfers should be sufficiently flexible to address both excess transfers in nonconsecutive months as well as the level of excess transfers in a particular month. Such controls would help depository institutions distinguish inadvertent violations of the transfer limits from abuses of the transfer limits.”)