1224 that would repeal the statutory restrictions that currently prohibit depository institutions from paying interest on demand deposits. Repealing the prohibition of interest on demand deposits would improve the overall efficiency of our financial sector and, in particular, should assist small banks in attracting and retaining business deposits.
However, when the markets are too fragmented and their constituents are effectively segmented, instead of offering a venue for disinterested counterparties to come together, market failures could arise. Moving forward then, it would stand to reason that financial stability would thrive when the market framework allows for the different stakeholders to participate.