Final answer:
Customers opening a term deposit or GIC must be given information about interest rates, maturity date, withdrawal terms, and any penalties for early withdrawal. Banks view these deposits as liabilities and are regulated under consumer protection laws to provide transparency.
Step-by-step explanation:
Disclosures for Term Deposits and GICs
When customers agree to open a term deposit, such as a certificate of deposit (CD) or a Guaranteed Investment Certificate (GIC), financial institutions are required to provide them with critical information. This includes the disclosure of the interest rate offered, the maturity date, the exact amount of the deposit, and most importantly, the terms regarding early withdrawal and any penalties associated with it. It's also imperative to inform customers that these deposits are viewed as liabilities by the bank, because the bank owes the deposited funds back to its customers upon withdrawal. Regulations such as those enforced by the Federal Reserve (the Fed) ensure that banks comply with consumer protection laws, mandating transparency and prohibiting discriminatory practices.
For example, the Safe and Secure Bank, holds $10 million in deposits, which it owes to its customers. The bank is obligated by law to treat this sum as a liability and abide by related regulations. In terms of consumer protection, the bank must adhere to laws preventing discrimination and requiring the public disclosure of information on loans, including how they are distributed by geographic location, sex, and race of the loan applicants.