Can a federally insured institution pay an interest rate higher than 5-1/4 % on a deposit account?

A federally insured institution is typically bound by regulations that set a ceiling on the interest rates it can offer on deposit accounts. Under current federal law, specifically the Federal Deposit Insurance Act, institutions are prohibited from paying interest rates that exceed a certain threshold, which has been established as 5-1/4%. Therefore, because the question inquires about the ability to pay an interest rate higher than that limit on deposit accounts, it is accurate to state that such payments are not permitted, resulting in the correct answer being "False." This rule aims to stabilize the banking system and protect against excessive competition for deposits, which could potentially undermine the safety and soundness of financial institutions. Carefully adhering to these regulations ensures that the institution operates within the legal framework set forth by the banking authorities.