#922003 - 03/13/0804:28 PMOne depositor equaling total banks deposit.
Anonymous
Unregistered
Is there any issue with a depositor who own no interest in the bank to equal or surpass the total deposits currently held in the bank? S/O only applies if the indvidual holds a large share of the bank correct?
However, there are a magnitude of other issues, starting with liquidity, asset/liability management, profitability, concentration of deposits, and on and on. Why would the bank want this kind of relationship?
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#922685 - 03/14/0811:42 AMRe: One depositor equaling total banks deposit. califgirl
Rocky P
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Joined: Jun 2003
Posts: 7,650
Florida
FWIW - I would make sure that the bank could handle it - there will be a strain on ALCO - what to do with the money, and the board is in full agreement.
If you invest it (even for a short time) and the customer takes the money out, the bank wouldn't have enough open lines to draw that type of liquidity.
Assuming they're OK from the ALCO standepoint (and do a balance sheet stress test), and ASSUMING that your CAPITAL would still be within regulatory guidelines, I would recommend the COB or CEO contact your regulator and seek their guidance. Imagine their shock of the bank doubling in size in one quarter. You would have a team of examiners and liquidity specialists at your door the day after the call report was filed.
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The bank can be in serious financial trouble if it makes a lot of loans against these deposits and the customer then pulls out a lot of his deposits.
Never be so dependent on one depositor. He's going to own you.I would think examiners will take a hard look and find a problem with this. I would recommend you ask them about this now.
Be very careful here. Watch your wire transfers
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I would think, too, that you'd want to have your BSA Officer involved, and don't take any shortcuts at all on CIP, due diligence, etc. which you might be tempted to do with the large $ figure. It's always the "big" ones that officers try to take short cuts on, but with this one, the bank has a lot to lose if something goes wrong.
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Assuming they're OK from the ALCO standepoint (and do a balance sheet stress test), and ASSUMING that your CAPITAL would still be within regulatory guidelines...
This is going to be like trying to drive fast as save gas at the same time. Unless the bank has an existing capital ratio that is more than double the guidelines, the only way you would be able to try to handle it would be to maintain it in something with preferential risk-weighted treatment (think mortgage-backed securities), and even that won't help with the leverage ratio. But the problem is, you're (almost assuredly) not going to get the depositor to agree to structure the maturity of his $10B to match that of your investments, so you'll never be able to manage the IRR and capital ratio at the same time, at least not that I can see.