3-6-3 Rule

What Is the 3-6-3 Rule?

The 3-6-3 rule is a shoptalk term that alludes to an unofficial practice in the banking industry during the 1950s, 1960s, and 1970s that was the consequence of non-competitive and oversimplified conditions in the industry.

The 3-6-3 rule portrays how bankers would evidently give 3% interest on their depositors' accounts, loan the depositors money at 6% interest, and afterward be playing golf by 3 p.m. During the 1950s, 1960s, and 1970s, an immense part of a bank's business was lending out money at a higher interest rate than what it was paying out to its depositors (because of more tight regulations during this time span).

Understanding the 3-6-3 Rule

After the Great Depression, the government carried out more tight banking regulations. This was partially due to the issues in particular corruption and a lack of guideline that the banking industry confronted leading up the economic downturn that encouraged the Great Depression. One consequence of these regulations is that it controlled the rates at which banks could loan and borrow money. This made it hard for banks to contend with one another and limited the scope of the services they could give clients. As a whole, the banking industry turned out to be more stale.

With the releasing of banking regulations and the broad adoption of data technology in the a very long time after the 1970s, banks presently operate in a considerably more competitive and complex way. For instance, banks may now give a greater scope of services, including retail and commercial banking services, investment management, and wealth management.

For banks that give retail banking services, individual customers frequently utilize neighborhood offices of a lot bigger commercial banks. Retail banks will generally offer savings and checking accounts, mortgages, personal loans, charge/Visas, and certificates of deposit (CDs) to their clients. In retail banking, the emphasis is on the individual consumer (rather than any bigger estimated clients, for example, a endowment).

Banks that give investment management to their clientele commonly oversee collective investments, (for example, pension funds) as well as supervising the assets of individual customers. Banks that work with collective assets may likewise offer many traditional and alternative products that may not be accessible to the average retail investor, like IPO opportunities and hedge funds.

For banks that offer wealth management services, they might take care of both high net worth and super high net worth individuals. Financial advisors at these banks commonly work with clients to foster tailored financial answers for address their issues. Financial advisors may likewise offer specific types of assistance, for example, investment management, income tax readiness, and estate planning. Most financial advisors aim to achieve the Chartered Financial Analyst (CFA) designation, which estimates their ability and integrity in the field of investment management.

Highlights

• The 3-6-3 rule is a shoptalk term that alludes to an unofficial practice in the banking industry, explicitly during the 1950s, 1960s, and 1970s, which was the consequence of non-competitive and oversimplified conditions in the industry.
• After the Great Depression, the government executed more tight banking regulations, which made it more challenging for banks to contend with one another and limited the scope of the services they could give clients; as a whole, the banking industry became stale.
• The 3-6-3 rule depicts how bankers would evidently give 3% interest on their depositors' accounts, loan the depositors money at 6% interest, and afterward be playing golf by 3 p.m.