Just got done doing a collateral CD audit & each branch had different procedures. I was trained that CD was to be collected from the customer, placed in safekeeping with a collateral receipt, hold placed on the CD. When loan is paid off, CD is returned, collateral receipt signed by customer acknowledging return of the CD & hold removed. I have a loan officer that came from another bank a few years ago suggesting that giving a physical CD to a customer & expecting them to keep track of it for years may be an outdated practice (his comment was in regards to CD procedures in general, not specifically collateral CD's)?? Just curious as to what other banks are doing.

Unless you are one of the few banks in the country that actually still issue negotiable certificates of deposit, all you are referring to is a receipt and not a CD. The CD is only on the books of the bank. The piece of paper you hand out is as worthless as a receipt you give someone for making a deposit to their checking account. These practices harken back to the days when a CD was just like a stock certificate. Now if it makes you and the customer feel better that you hold this worthless piece of paper as collateral for loan under dual control, then by all means continue. But it is a waste of precious time and effort.

So in your opinion, when using a CD as collateral, the hold is the only procedure needed? And for CD's in general, they can just come in, prove their identity & we can print the certificate for them to cash it at that time?

That about sums it up. All you really need is documentation that the CD was redeemed, which is little more than the documentation you get when a person makes a withdrawal from a checking or savings account in person.