Comment for Appendix A to Part 1030 - Annual Percentage Yield Calculation
Part I. Annual Percentage Yield for Account Disclosures and Advertising Purposes
1. Rounding for calculations. The following are examples of permissible rounding for calculating interest and the annual percentage yield:
i. The daily rate applied to a balance carried to five or more decimal places
ii. The daily interest earned carried to five or more decimal places
Part II. Annual Percentage Yield Earned for Periodic Statements
1. Balance method. The interest figure used in the calculation of the annual percentage yield earned may be derived from the daily balance method or the average daily balance method. The balance used in the formula for the annual percentage yield earned is the sum of the balances for each day in the period divided by the number of days in the period.
2. Negative balances prohibited. Institutions must treat a negative account balance as zero to determine the balance on which the annual percentage yield earned is calculated. (See commentary to § 1030.7(a)(2).)
A. General Formula
1. Accrued but uncredited interest. To calculate the annual percentage yield earned, accrued but uncredited interest:
i. May not be included in the balance for statements issued at the same time or less frequently than the account's compounding and crediting frequency. For example, if monthly statements are sent for an account that compounds interest daily and credits interest monthly, the balance may not be increased each day to reflect the effect of daily compounding.
ii. Must be included in the balance for succeeding statements if a statement is issued more frequently than compounded interest is credited on an account. For example, if monthly statements are sent for an account that compounds interest daily and credits interest quarterly, the balance for the second monthly statement would include interest that had accrued for the prior month.
2. Rounding. The interest earned figure used to calculate the annual percentage yield earned must be rounded to two decimals and reflect the amount actually paid. For example, if the interest earned for a statement period is $20.074 and the institution pays the consumer $20.07, the institution must use $20.07 (not $20.074) to calculate the annual percentage yield earned. For accounts paying interest based on the daily balance method that compound and credit interest quarterly, and send monthly statements, the institution may, but need not, round accrued interest to two decimals for calculating the annual percentage yield earned on the first two monthly statements issued during the quarter. However, on the quarterly statement the interest earned figure must reflect the amount actually paid.
B. Special Formula for Use Where Periodic Statement Is Sent More Often Than the Period for Which Interest Is Compounded
1. Statements triggered by Regulation E. Institutions may, but need not, use this formula to calculate the annual percentage yield earned for accounts that receive quarterly statements and are subject to Regulation E's rule calling for monthly statements when an electronic fund transfer has occurred. They may do so even though no monthly statement was issued during a specific quarter. But institutions must use this formula for accounts that compound and credit interest quarterly and receive monthly statements that, while triggered by Regulation E, comply with the provisions of § 1030.6.
2. Days in compounding period. Institutions using the special annual percentage yield earned formula must use the actual number of days in the compounding period.