We've been posed a question about approximating cost associated with a new commercial deposit account.

The way this particular account will work is that money will be wired into the account, then wired out in increments. The average balance will be tens of millions. Management is wanting to take into consideration the costs associated with keeping an account like this and we're not sure how to calculate.

We're a pretty small bank and rarely have this situation. Anyone care to pass along some information with how to calculate this?

Random thoughts --

For a small bank, a deposit account of that magnitude could easily throw the bank's asset/liability management into a tailspin. It reduces your loan/deposit ratio but you'd probably only be able to put on short-term loans because you're looking at hot money.

The description of the account and its likely activity sounds like something you would have to do some heavy EDD on. The potential for money laundering is huge, and you really need to know the depositor really well, as well as the sources and destinations of the wires. OFAC checking will be an absolute must.

Will you have to put on added staff and/or hours of operation for your "wire room" facilities to accommodate this customer?

Do you have any information on the lifespan of the relationship? Will you be gearing up only to have it run its course in several months?

You're a small bank and someone wants to deposit millions just so they can wire it someplace else? Count the number of banks they drove by just to get to yours and then ask yourself: Why?

Also, calculate the effect of a major deposit on your capital ratios.

Thanks for the responses! Some very good points we are considering, just may not be worth the amount of scrutiny we'd have to devote to this account..