Checking With Interest

Congress is beginning to move on legislation that would give more small companies a banking perk long enjoyed by most big ones: interest on commercial checking accounts.

The House Banking Committee recently voted to lift a ban on such payments, enacted in 1933 to discourage reckless interest-rate competition among banks. Large banks have long found ways around the rules by offering "sweeps"--regular transfers of funds from checking accounts into other, interest-bearing accounts, such as money market funds. Smaller community banks--which serve the smallest companies--often lack resources for such services.

"Small banks are hamstrung," says George Gardes, director of small business banking at New York's Atlantic Bank. "This gives flexibility to design new products." The question is when. A similar measure was approved by a Senate committee a year ago; prospects for full passage aren't clear.