Deposit Reclassification offers a unique opportunity for your institution to recover your reserve balance.  Deposit Reclassification, also known as a ‘retail sweep’ program, is a Federal Reserve Board acknowledged practice that reduces your reserve requirement through classifying your institution’s checking accounts as savings, which are not subject to reserve requirements.  Currently, your reserve requirement is met with your institution’s non-earning branch and ATM cash and reserve balance at your local Federal Reserve Bank (FRB) or at a “pass through” account with another financial institution.

The reserve requirement balance held at your Federal Reserve Bank is earning minimal interest (0.0% – .25%).  Your institution can convert these assets with Deposit Reclassification into earning assets with a much better rate of return – perhaps with:

  • commercial, mortgage, and consumer loans, or
  • higher yielding securities in your investment portfolio.

The Deposit Reclassification conversion process can be completed within 45 days and requires very little time from your personnel.  Deposit Reclassification is completely under your control since it uses your existing personal computer (PC) software.  Most important, the Deposit Reclassification project is approved by your local Federal Reserve Bank, in advance, in order to comply with FRB Regulation D.

Ceto has implemented Deposit Reclassification for over 1,500 clients in all 50 states.


What is Deposit Reclassification?

Deposit Reclassification is a retail sweep program, where a portion of your institution’s transaction accounts are classified as savings deposits to reduce your reserve requirement.  Savings deposits are not subject to reserve requirements.  Ceto’s Deposit Reclassification solution classifies 60-80% of all transaction accounts into savings deposits.

Deposit Reclassification:

  • Permanently recovers your Federal Reserve Bank Balance.
  • Increases income on your earning assets.
  • Compliant with Regulation D and Federal Reserve Board requirements.
  • Invisible to your customers/members and has no adverse effects of any kind on the account holder.
  • Requires less than five hours of staff time and 30 to 45 days to implement.
  • Immediately impacts your bottom line.


How does Deposit Reclassification work?

Deposit Reclassification establishes two legally separate sub-accounts, a checking sub-account and savings sub-account, for each checking account.  The sub-accounts are completely invisible to the customer or member and do not adversely affect their account in any way.  Ceto’s Deposit Reclassification program reviews each original checking account to determine the amount of funds routinely needed to cover customer or member debit activity.  The funds needed to cover activity are allocated to the checking sub-account.  The remaining funds are maintained in the savings sub-account.  All balances maintained in the savings sub-accounts are reported as non-transaction deposits, which are not subject to reserve requirements.  As a result, your institution’s reserve requirement will be reduced significantly.

If the customer or member depletes the checking sub-account, funds are transferred from the savings sub-account to the checking sub-account to cover the daily and future activity.  Ceto’s Deposit Reclassification program maximizes the portion that is allocated to the savings sub-account, while preventing the savings sub-account from exceeding six transfers per calendar month, as mandated by Regulation D.  If a savings sub-account reaches six transfers, the entire balance will be transferred to and reside in the checking sub-account for the remainder of the calendar month.


Ceto’s Deposit Reclassification Module

Ceto’s Deposit Reclassification Module is extremely easy to use.  The user completes a three step process on a daily basis to reclassify all your checking accounts.  The Deposit Reclassification process takes only a few minutes a day and three button clicks.


Curious to know your institution’s benefit from Deposit Reclassification?

Fax us (678.679.5191) two of your most recent FR2900’s for a FREE Analysis or click here to contact us.