Passbook Rates to Drop Under Federal Insurance With PM-Ohio S&Ls Bjt
COLUMBUS, Ohio (AP) _ The privately insured savings and loan associations that are reopening with federal backing in the wake of a bank holiday will lose a competitive edge: the right to pay attractive rates on passbook accounts.
Thrifts backed by the private Ohio Deposit Guarantee Fund, which was jeopardized by the March 8 closing of Home State Savings Bank of Cincinnati, were free to set whatever interest rates they wished on deposits.
At several privately insured S&Ls, depositors with more than $250 on account were earning 9 percent interest on their passbook savings before Gov. Richard Celeste closed 69 S&Ls on March 15 to protect them against runs by depositors.
But as the S&Ls reopen with deposit insurance from the Federal Savings and Loan Insurance Corp., they are limited to paying a maximum 5.5 percent interest on passbook accounts with balances under $1,000.
The $1,000 figure is significant because it represents the minimum deposit required under federal law to open a so-called money market account. Federally insured thrifts can offer whatever interest they like on such accounts.
The $1,000 minimum is expected to be dropped Jan. 1, 1986, along with the 5.5 percent cap on passbook interest, but customers will feel the pinch in the interim.
″If you have $250 in a passbook account now, you could add enough to make it a money market account″ paying higher interest rates, said Douglas Simson, president of First State.″But we could only pay 5.5 percent to people with $250 to $1,000 until Jan. 1, when the rate is decontrolled.
″These depositors won’t make as much interest because the law says they can’t.″
Michael O. Roark, president of Scioto Bank of Columbus, said this week his thrift was paying 9 percent interest on passbook accounts with a $500 minimum when it was backed by the private insurance fund. He said customers would be notified of the drop in interest rates under federal regulations after a ″modest grace period.″
″It shouldn’t be that distressing to our customer base, however, because most people have more than $1,000 in their account,″ Roark said.