The first was the decision to eliminate Regulation Q interest rate ceilings on bank deposits.
Third, financial innovations that were designed to circumvent reserve requirements and Regulation Q interest rate ceilings should have weakened even the longer-run relationship between total reserves and bank liabilities, especially since the late 1970s.
This paper demonstrates that the effect of interest rate ceilings depends on the restrictions imposed by other financial regulations and visa versa, and that the effect of regulation, in turn, depends on the specifics of the loan transaction.
As interest rate ceilings become more restrictive, lenders are willing to assume only a lower degree of risk.
In 1980 the Depository Institution Deregulation and Monetary Control Act was introduced and allowed for the gradual phase-out of deposit interest rate ceilings starting with the introduction of interest-bearing NOW accounts in 1981.
Estimates of equation (12) for the remaining years are also presented in Table 1 and can be compared with those for 1981 to see how the phase-out of interest rate ceilings affects the relationship.
In addition, some other concerns relating to possible politically motivated interference of the banking system, including but not limited to a distressed debt exchange by the government, retaliatory measures against institutions that supported the strike of early 2003, as well as directed lending and interest rate ceilings
, have diminished as these actions have not materialized.
Interest rate ceilings
and/or floors may also be implemented for FRN issuance, as outlined in the corresponding pricing supplement.