Regulation DD, Section 230.4 (3) It states the following:

(3) Balance information--(i) Minimum balance requirements. Any minimum balance required to:
(A) Open the account;
(B) Avoid the imposition of a fee; or
(C) Obtain the annual percentage yield disclosed.
Except for the balance to open the account, the disclosure shall state how the balance is determined for these purposes.


How are other banks interpreting this for their account disclosures? Are you stating on the actual disclosure how the balance has been determined?

I am reading it as the Account Disclosure must state how the minimum balance was determined except for the balance to open the account. I see it as very black and white. It seems that we do no have any reason for determining what the minimum balance should be, is there any guidance for that?

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It seems that we do no have any reason for determining what the minimum balance should be, is there any guidance for that?

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I lost you here? Could you try and restate your question?

I believe it is saying you must disclose the balance used to determine the APY, S/C's, etc. Whether you use the daily ledger balance or an average balance, etc. It is not implying that you must disclose how you determined the dollar amount that you establish as the minimum.

Sorry, , I will rephrase that for you!

Is there any guidance for how a bank should determine what the minimum balance on an account should be?

Kara,

I don't think you need to worry how you as a bank determined a minimum opening amount...the reason for that could be "because we feel like it". You need to inform the customer how they figure whether or not they will be charged a fee, or earn a certain APY, based on the balance. How does your bank determine the balance on which fees or APY is calculated?

Hope this answers your question.

Wyogirl

Kara, what disclosure system do you use? We use ITI's Plus system with Bankersystems forms. I am having a problem with the CD forms. Can we maybe knock this around together?

Tina, I don't believe we use any sort of disclosure system. I would still be willing to help you out!

I'm also still really confused on this subject, but thank you all for your help!

What sort of problems are you having?

On our CD disclosure I must reference our Additional Terms and Disclosures to make the darn thing compliant. We require an opening deposit of $5000.00 for all CD's but to get a certain rate you must deposit in a tier basis. 5000. 10,000. Etc. According to Reg DD you must state the minimum opening deposit, which is 5000.00. Within that disclosure the following is noted:

Minimum Balance Requirement: You must make a minimum deposit to open this account of $5,000.

Just below that a box is checked that states this:

You must maintain this minimum balance on a daily basis to earn the annual percentage yield disclosed.

The problem is the minimum to open may be 5000.00 but to receive the annual percentage yield disclosed you may possibly be opening an account that requires a 10,000.00 opening amount to get it. Can someone help me in getting this darn thing correct?

To meet the tiering disclosure requirements, in additon to the minimum balance, we have incorporated our rate sheet as an addendum to the Deposit Account Agreement. The Deposit Account Agreement has all the static information required and refers to the rate sheet as an addendum for all interest bearing accounts. The rate sheet states it is an addendum to the Deposit Account Agreement and has all the rate, APY (APY is Annual Percentage Yield), and balances required to obtain the stated APYs.

Kara, could the word "determined" possibly be replaced with "calculated" in this situation?

seems to me that the balance specification would be based upon average daily balance, average collected balance, etc.

i don't read this as Reg DD mandating a statement such as "minimum balance of $1000 was determined by calculating a break-even point based upon the total cost of funds from our pricing model.." yadda yadda yadda.

hope this helps. if not, well, that's why i'm anonymous, right?

Yes, Thank you! I understand everyones view, but I still see the reg specifically stating:

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...the disclosure shall state how the balance is determined for these purposes.

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Kirchman states the account disclosure must state the following items:

· Any minimum balance required to open an account.

·Any minimum balance required to avoid imposition of a fee and how the balance is calculated for this purpose.

·Any minimum balance required to earn the annual percentage yield disclosed and how the balance is calculated for this purpose.

I am reading it as the disclosure needs to state how you came up with the minimum balance to avoid the impostion of a fee and it must state how you came up with the minimum balance to earn the APY disclosed. Elsewhere in the disclosure it also needs to say what the fees are, how the fees are calculated; what the APY is and how it is calculated.

It appears very black and white to me, which is why I love compliance, but I'm trying to learn about all the perspectives.

Thank you all for your help.

Sometimes it helps to tilt your head a little when reading a regulation

The regulation is black and white, you are just looking at it from a different perspective. The regulation does not state that you are to disclose how the bank came up with the dollar amount established as the minimum, but rather, how the minimum balance that triggered a s/c, int accrual, etc for the specific period is calculated. If you will look at one of your disclosures, you should see a statment that reads something like...

You must maintain a minimum avg daily balance of $xx to obtain the dislosed apy. *The average daily balance is calculated by adding the principal in the account for each day of the period and dividing that figure by the number of days in the period.

*This statement tells the consumer how the minimum balance was calculated. - You are trying to focus on how we came up with the minimum balance required.

Look at Kirchman again - tilt your head this time -

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Any minimum balance required to earn the annual percentage yield disclosed and how the balance is calculated for this purpose

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- How the balance is calculated for this purpose - meaning - what calculation will be used to determine the minimum balance for a statement period.

In part the reason you have to disclose the minimum balance requirement is so that customers can shop around. Remember the reason why Truth in Savings was originated. It was so that customers could come to your bank, pick up your account disclosure and make an informed decision based on the features and benefits of your accounts. Try not to read more into it than it is. Simply, if you have a non-interest bearing DDA account that only requires an initial deposit of $100.00 to open then that is what you must disclose. If you have a savings account that takes $250.00 to open you must disclose that, but if the account falls below, say $100.00 and they will no longer earn the APY disclosed, you must tell them that. For example: Statement Savings account - "Minimum Balance Requirement" - You can open a savings account for as little as $250.00. You must maintain an average daily balance of $100.00 in your account to earn the stated APY. There will be a $1.00 service charge to your account should the average daily balance fall below $100.00 at the end of each statement cycle." Anyway, I hope this helps some.

MackenzieS (I'm at home )

Thanks! I know I'm reading way to into it! Thanks for all the help!