Financial Update (April-June 1996)

New Account Structure
Supports Interstate Branching

Under a new reserve account structure that the Federal Reserve Banks announced in May, depository institutions will be able to consolidate their multiple reserve accounts into a single, master account. The Fed also will offer institutions the option to establish subaccounts so they can receive custom account information.

The new account structure will be implemented by Jan. 1, 1998, and will replace current account arrangements.

With this new structure, each separately chartered depository institution will establish one master account at a designated Reserve Bank. This account will be used to settle all credits and debits resulting from financial transactions with any Reserve Bank generated by the organization and its branches. Reserve account administration and risk-management activities also will be conducted from this single location. Foreign-related institutions, such as Edge Act corporations, are required by regulation to maintain multiple accounts and will not be affected by this change.

"The Fed interviewed a broad cross-section of the banking industry and designed the account structure based upon this information," said Adrienne Wells, assistant vice president of accounting for the Atlanta Fed. "We found that depository institutions prefer a single account."

The new structure also will feature a subaccount option under the master account that will allow depository institutions to define subsets of information they want to receive daily from the Reserve Banks regarding account activity. For example, a depository institution could choose to track financial activity for a geographic region by designating a subaccount for a group of branches or could elect to use subaccounts to identify activity by type of financial transaction, such as ACH (Automated Clearing House), funds transfers, and check activity.

"The subaccount feature should prove attractive to many institutions, whether or not they plan to branch interstate," added Wells. "The subaccounts allow banks to tailor account reporting to meet their needs."

Depository institutions are receiving letters describing the new account structure, and the Fed also will conduct seminars and distribute detailed procedures in early 1997 to assist institutions in implementing the new account structure.

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