Bank trade groups are objecting to the Federal Reserve Board's plan for calculating savings account interest during leap years.

In a staff commentary, the Fed has proposed letting banks calculate interest over either 365 or 366 days during a leap year. However, the Fed included one restriction - a bank cannot use 366 days unless the account is open on Feb. 29.

Being able to calculate interest over more days saves banks money; a large bank could save nearly $1 million in interest expenses by using 366 days.

In comment letters that were due Feb. 2, the bank groups said the Fed's proposal wouldn't work.

The restriction that the account be open Feb. 29 is a "programming nightmare," according to Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America.

The Fed should simply let banks use 366 days for any account opened during a leap year, he said.

Nessa Feddis, a senior federal counsel at the American Bankers Association, noted that it is impossible to know in January whether a consumer will close an account before Feb. 29.

Charlotte M. Bahin, regulatory counsel at America's Community Bankers, added that the Fed should include examples of how leap-year calculations affect passbook and money market accounts, which permit frequent deposits and withdraws.

Several consumers opposed the change, writing in comment letters that comparison shopping would be impossible because some banks would create annual percentage yields based on 365 days and others, on 366.

Some thought the whole exercise silly. "Like it's really going to make a difference in someone's life," wrote Howard O. Hopkins, president of First National Bank of Powhatan Point, Ohio.

The ABA also objected to a section of the commentary that would require banks to count interest, after it is credited to an account, as principle.

Ms. Feddis said this goes beyond the law's intent by telling banks when they must compound interest. Bankers now may compound interest quarterly or monthly, regardless of how often they pay interest into an account.

But Nancy J. Kesler, director of regulatory relations at Barnett Banks Inc., said her institution has no problem with the change. She said it benefits customers and conforms to practices at most major banks.

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