The Business Checking Modernization Act, a bill in Congress that would repeal a law prohibiting banks from paying interest on business checking accounts, could create a new major competitor for money market funds.

The bill provides for a three-year phase-in period. Until now, banks could pay interest on demand deposits for individuals but not for companies. The proposed bill will change this, making it possible for banks to directly compete with money market funds for companies' short-term assets.

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