Region

Jurisdiction

Regulator

2012-03-22

Interest-bearing bank checks

The Supervisor of Banks issued a directive prohibiting the payment of interest on bank checks due to internal control defects. The regulator identified that such practices create unrecorded demand deposits and lack organized documentation systems. Consequently, banks are strictly forbidden from paying interest on checks between purchase and payment dates.

Israel

Bank of Israel

Supervisor of Banks: Proper Conduct of Banking Business (12/95) Interest-Bearing Bank Checks Page 408- 1 ONLY THE HEBREW VERSION IS BINDING INTEREST-BEARING BANK CHECKS Introduction

There have been instances in the past in which banks paid interest on bank checks for the period between the purchase of the check by the customer and its payment date. This fact gives rise to defects in internal control, for the following reasons: (a) In these instances a deposit is created which has not been opened in the framework of the usual procedures for opening accounts; (b) The above deposit is in effect a demand deposit of the customer or bearer without being properly expressed in the bank’s books; (c) The bank’s obligation to pay interest to the customer is not usually anchored in an organized system of documents. Ban on paying interest
In view of the aforesaid, interest shall not be paid on bank checks.

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