A Comparison of Deposit Reclassification and the core providers’ Retail Sweep Programs
Deposit Reclassification, commonly referred to as retail sweep programs, help banks and credit unions recover their Federal Reserve balances due to reserve requirements and quickly improve profitability. These programs reduce reserve requirements to the point where in most cases, they can be met with vault cash alone, without parking funds at the Fed. Financial Institutions can then invest these freed-up funds at higher rates of interest and boost profits. While the mechanism of Deposit Reclassification is well laid out in 12 CFR 204 Regulation D, not all Retail Sweep programs are implemented equally.
Logicpath’s Deposit Reclassification solution delivers significantly greater benefits to banks and credit unions. Here’s how:
Flat Sweep Percentages vs. Optimized Sweep Percentages
Less efficient solutions can sweep too many funds too quickly by utilizing one sweep percentage, which may reduce Fed balances, but typically only in the early part of the month or partially for the entire month. All transaction accounts are not the same, and treating them such causes a sub-optimizing retail sweep program.
Logicpath virtually ensures the greatest reduction of Fed balances due to reserve requirement by setting a 3% to 5% goal of bank customer accounts hitting the six-transfer rule in the 2 sub accounts. Additionally, logicpath offers free consultations on changing sweep percentages and segregates accounts by account type/code, current ledger balance and average account balance.
Interactive and Optimized vs. 100% Automated and Sub-Optimal
While automation can improve process efficiency, putting a retail sweep program on 100% automation - without human involvement – results in sub-optimal sweep outcomes. By contrast, logicpath understands the subtleties of fine-tuning a retail sweep program for maximum gain, and made a conscious strategic decision to not fully automate its Deposit Reclassification solution.
As a result, logicpath’s client bank or credit union personnel are in touch with the daily process in their sweep programs. Although this approach is typically only a few minutes, it keeps the client aware of data issues, like new transactional product accounts, and can quickly take steps to resolve problems – thus assuring maximum reclassification of deposits.
Public Funds: In-Depth vs. Aggregated FDIC Reporting
Some retail sweep solution providers do not use ownership codes for public funds for regulatory reporting purposes. Logicpath separates private and public funds, which increases visibility and separates public funds in FDIC Quarterly Adjustments Reports.
Compliance: Assisted vs. No Assistance
Retail sweep compliance is a common concern during implementation of this type of program. Certain steps are necessary to ensure that a retail sweep program complies with regulations and the bank or credit union’s terms and conditions. Some vendors do not help the bank and credit union with compliance assistance.
Logicpath provides step by step instructions and templates to adhere to regulations and terms and conditions. However, beyond providing the exact notification necessary for the Fed and disclosure language, logicpath provides guidance throughout the implementation; so its clients are always in compliance with their Deposit Reclassification. Additionally, a dedicated account representative is always available from 8:30 – 5:30 ET to answer and questions.
Lower Cost Structure vs. Piecemeal Pricing
Logicpath offers the industry’s best, unchanging, and most transparent pricing plan for retail sweep solutions. Our price includes a one-time professional fee (where we understand your specific needs and recommend a tailor-made solution to eliminate your Fed balance), and a one-time implementation fee (to roll out your customized Deposit Reclassification solution, requiring no more than five hours of your staff time). Thereafter, for life, the original price and minimal annual fee covers sweep transactions across all customer accounts, with unlimited users and unlimited transaction accounts, so your Deposit Reclassification costs do not increase as your business grows.
Most other retail sweep providers ramp-up the pricing as you scale up. For instance, they may not sweep all accounts initially to keep costs artificially low, and may charge per sweep transaction and per user, resulting in increasing retail sweep costs as your business or sweep implementation grows.
Core Focus vs. Afterthought
Some large financial solutions providers have added retails sweep solutions as an afterthought to their broader suite of solutions, but it isn’t really their core focus and their modules aren’t continuously calibrated and updated to minimize reserve requirements.
Logicpath – whose sister company, Ceto and Associates, pioneered Deposit Reclassification – has developed its solution suite around Deposit Reclassification, implemented it across over 2,200 bank and credit union clients, and integrates learnings to improve outcomes and offer tailor-made solutions… because with retail sweep programs, a one size or one automated solution does not address the bank or credit union’s diverse demographics and account usage patterns.
Don’t just take our word for it though, here is what some of our clients are saying about us.