Thread Options
|
#168381 - 03/11/04 12:05 AM
Monitoring Reg D Violations
|
Anonymous
Unregistered
|
I seem to remember that there was an opinion (possibly one titled Opinion 2-342.17 Savings Deposits - Monitoring Transfers from MMDA's) in which an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limit, and if the excess transfers occur in not more than three months during any 12-month period. Would you please help me locate this citation? Your assistance would be greatly appreciated.
|
Return to Top
|
|
|
|
#168382 - 03/11/04 07:53 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
Your citation was exactly the right one. It comes from the Federal Reserve Regualtory Service, and I quote it below: Quote:
A bank proposes to compile monthly reports of customers who had excessive money market deposit account transactions the previous month, notify customers by letter regarding those excessive transfers, and close any account if the transfer limits were violated during four consecutive months.
These procedures would not result in compliance with the six-transfer limit on MMDAs. Footnote 5, referred to in footnote 6 of section 204.2(d)(2)(ii), requires institutions to monitor transfers and contact customers who exceed the limits more than occasionally.
Footnote 5 provides that the rule limiting transfers need not be applied mechanically, but it does not change the fundamental requirement that a depository institution may not permit or authorize more than six transfers from an MMDA per month. Thus, if the circumstances warrant, an institution may not be required to close or reclassify an MMDA in the event of an occasional excess transfer from the account. As the staff stated in its opinion at 2-342.15, enforcement procedures that focus on excess transfers in consecutive months and that ignore excess transfers in any particular month would not be sufficient to prevent excess transfers from MMDAs, and would therefore fail to meet the monitoring requirements of Regulation D.
Ideally, controls on excess transfers should be sufficiently flexible to address both excess transfers in nonconsecutive months as well as the level of excess transfers in a particular month. Such controls would help depository institutions distinguish inadvertent violations of the transfer limits from abuses of the transfer limits. Thus, when a customer ignores the transfer limits applicable to an MMDA, the depository institution should take steps to close the account more quickly than it would an account from which the depositor inadvertently, and occasionally, exceeds the transfer limits by a single transfer. Nevertheless, a monitoring system that would detect and prevent all excess transfers may be costly to administer. For this reason, the staff has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12-month period. This working rule is not absolute, however, and the facts and circumstances must be considered in each case.
The proposed standards for monitoring MMDAs would not adequately prevent excess transfers. They do not take into account the number of excess transfers in an MMDA in any one month; a large number may be evidence of an intent to evade the transfer limits. Further, the standards would permit excess transfers in four consecutive months. Therefore, the proposed standards could result in violations of the transfer restrictions on MMDAs. STAFF OP. of Feb. 15, 1990.
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#168384 - 03/12/04 05:45 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Oct 2000
Posts: 27,763
On the Net
|
Traditional savings accounts were not monitored because the customer wasn't give access means which were limited, in the past. There were no 3rd party transactions. They had to go to a teller or ATM and they couldn't POS funds out. When you allow access via a manner that is limited, you do have to monitor as these are all savings accounts by definition.
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
|
Return to Top
|
|
|
|
#168385 - 03/12/04 08:31 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
Banks are now giving customers unprecendented EFT access to their statement savings accounts. Home banking and telephone transfers; ACH debits. Some use the savings account to cover overdrafts in DDA accounts.
There has always been a transaction limit on traditional savings accounts. In fact, it used to be three per month until the Fed liberalized the rule and combined savings and MMDA limits into one rule. But you are correct in noting that many banks have not been monitoring savings account debits. And examiners have not been as zealous in the past about monitoring programs on regualr savings.
But, as Bob Dylan used to croak -- The Times, They are a-Changin' !
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#168386 - 03/12/04 10:18 PM
Re: Monitoring Reg D Violations
|
Platinum Poster
Joined: Jun 2002
Posts: 771
South
|
That's exactly what I'm talking about.....3rd party transactions & etc. Customers are literally using their savings accounts like a transaction account now. But will this be on the examiner's hot items list this year?
_________________________
CAMS
|
Return to Top
|
|
|
|
#168389 - 03/14/04 04:19 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Oct 2000
Posts: 10,204
Toano, VA
|
AnnRoy- Since we're drawing on the wisdom of the 60's (oxymoron?), I'll offer the sage advice of the robot from Lost in Space--"Danger, Will Robinson! Danger!"
Failure to discipline SDA or MMDA abusers can lead to a horrible enforcement action against your bank.
I speak from a near-death experience whereby examiners found numerous instances (6 legal pages full of names) where my MMDA customers had exceeded the 3/6 limits (in spite of assurances from the servicing manager that everything was under control.)
Rather than a slap on the wrist and stern admonition to crack the whip and get these customers in line, the Fed examiners informed me that they were considering reclassification of my entire MMDA portfolio ($250 mil) for reserve requirements. This lethal blow would have jumped my reserve requirements from 0% to 10% and I was told that I would be required to post retroactive reserves and pay penalties for the preceeding two years.
Even at today's rates, when you compute the cost of 2 years' interest on $25 mil. you can see that the outcome will not look good on your final performance evaluation.
_________________________
...gone fishing.
|
Return to Top
|
|
|
|
#168390 - 03/14/04 06:54 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
I just got through (last night) teaching a class on Reg. D at the ABA Compliance School in Indianapolis. One of the discussion points was exactly what Richard has pointed out (I added this to my presentation after Richard told me about his "near death" experience).
In the illustration, a bank had $100 million in MMDA balances that got retroactively reclassified as transaction accounts for two years. The long and short of it was a $650,000 penalty.
Not exactly "chump change"!!!
Bankers need to rethink the facility they may be giving their savings customers to spend from their savings accounts. Do it now, before the regulators make you, and you'll save yourselves a lot of aggravation and monetary grief.
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#168391 - 03/16/04 03:54 AM
Re: Monitoring Reg D Violations
|
Anonymous
Unregistered
|
In order to avoid the excess transactions violations on savings accounts, could we just reserve for them on the same basis as a transaction account. It would cost the bank some for the higher reserve requirement, but the customer would be able to use his savings account as needed and would never know about the reserve requirement.
|
Return to Top
|
|
|
|
#168393 - 03/16/04 02:14 PM
Re: Monitoring Reg D Violations
|
10K Club
Joined: Jul 2001
Posts: 84,360
Galveston, TX
|
As I mentioned in my other post, I think you could do it, as long as the accounts followed "all" the rules for transaction accounts. I think that it would eventually be cost prohibitive if you tried to stay competitive in the market place. Why do you think there higher interest rates paid on savings vs NOW accounts???
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
|
|