Deposit Guidelines

FDIC Regulatory Deposit Guidelines

The critical role deposits play in a bank's ongoing, successful operation clearly demonstrates the importance of implementing programs to retain and, in most instances, expand the deposit base and of monitoring the nature and volatility of the deposit structure. Increased competition for funds and the desire of most depositors to not only minimize idle, non-earning balances but also to receive market rates of interest on invested balances have given further impetus to deposit retention efforts. An effective deposit management program should, at a minimum, include the following information:

• A clearly defined marketing strategy.
• Projections for deposit growth and structure.
• Associated cost and interest rate scenarios.
• Procedures to compare results against projections.
• Steps to revise the plan when needed.

A deposit management program should take into account the make-up of the market area economy, including local and national economic conditions; the potential for investing deposits at acceptable margins; management competence; the adequacy of bank operations; the location and size of facilities; the nature and degree of bank and non-bank competition; and, the effect of monetary and fiscal policies of the Federal government on the bank's service area and money and capital markets in general.

Once a deposit development and retention program has been devised, it must be monitored and adjusted as necessary. The long-range success of such a program is closely related to management's ability to detect the need for change as early as possible. Management must not only project deposit growth, but also determine the make-up of the accounts as to stable deposits, fluctuating or seasonal deposits, and volatile deposits. Management should remain knowledgeable of the characteristics of the deposit structure via periodic internal reports. Lack of such knowledge could lead to the unwise employment of funds and subsequent problems.