Source: Fox Business

A recent notice to Citigroup checking account holders that had clients and bloggers alike buzzing with theories of a pending bank run has brought to light a little-known Federal Reserve rule that, in very rare circumstances, could limit access to your money.

According to long-established Fed policy, banks must reserve the right to require at least seven days’ prior written notice before allowing the withdrawal or transfer of funds from certain checking and savings accounts. The stipulation applies to all interest-bearing and interest-eligible accounts – generally every mom-and-pop checking account Citi and other large banks hold.

The requirement is part of Regulation D of the Securities Act of 1933. It applies to all accounts classified as Negotiable Order of Withdrawal [NOW] accounts – basically interest-bearing checking and savings accounts held by individuals and non-profits. Banks are not required to hold reserves in place to cover NOW accounts, so the rule prevents a run on withdrawals for which there are no reserves.

Earlier this month, Citi notified its account holders of the requirement, sparking rumors in some circles that Citi was preparing for a coordinated bank run, perhaps triggered by a protest over Wall Street bonuses or the bank bailout plan. 

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