Overview
Deposit Reclassification is widely used in the banking community as a way to reduce or eliminate reserves held at the Federal Reserve Bank. Banc Investment Group understands the hurried pace that today's independent bankers must keep, so we are pleased to offer a turn-key solution that allows banks and credit unions to take advantage of this opportunity.
Our stand-alone application, "BIG Reclass," receives data inputs from your core processing system, but does
not require a custom interface and it will
not affect general ledger balances. BIG Reclass was designed from the ground up to meet your operational, technical and accounting objectives in a way that makes sense for independent banks.
Banc Investment Group clients from across the country have been able to free up millions of dollars and invest those funds in order to maximize their financial performance.
We can provide you with several different tools that will equip you to better understand this opportunity. Contact us now and request the following complimentary reports:
- Benefits proposal
- Overview article on deposit reclassification
- Sample project timeline
History
This process is often referred to by the Federal Reserve Bank as a "retail sweep" program, and is being performed by thousands of banks across the country. Several large national banks petitioned the regulators in the early 1990's so that they could begin this innovative process and decrease their reserve requirements. Independent banks have also been adopting this practice in rapidly growing numbers each year. The Federal Reserve estimates that nearly $600 billion were being reclassified by January 2005.
How does it work?
Reserve Requirements
The Federal Reserve Bank requires banks to hold reserves for transaction type accounts such as DDA and NOW accounts. These reserves can be met through cash at the vault, or through transaction account reserve deposits at the Federal Reserve Bank. (note: Deposits held to reserve for transaction accounts are separate from those deposits held at the Federal Reserve as clearing balances.) A bank's reserve requirement is often much larger than the amount the bank keeps in its vault.
Eliminating Reserve Requirements
By reclassifying transaction accounts to non-transaction accounts such as savings or money markets, banks are able to reduce or eliminate the need to maintain transaction reserve balances at the Federal Reserve Bank. This is accomplished through a dynamic algorithm that looks at each account daily and reclassifies a portion of each account as a savings type account.
- The following chart shows that through deposit reclassification a bank can dramatically reduce its amount of transaction accounts.
- Reducing transaction accounts results in a decreased reserve requirement. The following chart illustrates the disparity between a bank's vault cash and their required reserves before and after deposit reclassification.
How much time is required?
Banc Investment Group will configure your software, implement your system, train key employees and provide ongoing support, all with minimum effort from bank employees.
Approximate time required from your personnel:
- Implementation time: Less than five hours
- Weekly processing time: 15 minutes*
*Note: through the use of our streamlined FR2900 reporting tool, we find that overall staff time required to prepare and submit the adjusted FR2900 report may decrease.
What are the benefits?
The BIG Reclass solution includes many valuable features such as:
- Customer disclosure templates.
- No modification to bank's core processing system.
- Complete reporting capabilities for analytical and regulatory needs.
- Fully automated.
- Requires less than 15 minutes per week to allocate funds and run reports.
- Program does not affect availability of funds, interest earnings, FDIC coverage, and customer statements.
- Reports generated in Microsoft Excel.
- FR2900 report can be formatted for uploading to the encrypted Federal Reserve Bank website.
- Potentially significant increases to net income.
