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New Account Structure
Will Support Interstate Branching
Contact: Joseph C. Elstner (314) 444-8902
Charles B. Henderson (314) 444-8311

For release: May 2, 1996

ST. LOUIS -- Under a new reserve account structure announced today by the Federal Reserve Banks, 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 January 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 regulations to maintain multiple accounts and will not be affected by this change.

The Fed designed the account structure based upon interviews with a broad cross-section of the banking industry. "Depository institutions that intend to branch across Federal Reserve districts indicated that they preferred to consolidate their reserve and clearing accounts," said Sara Garrison, senior vice president at the Federal Reserve Bank of San Francisco, and manager of the Reserve Banks' accounting function.

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, funds transfers, check activity, etc.

"We believe the subaccount feature will be attractive to many institutions, regardless of their intentions to branch interstate," added Garrison. "It allows a bank to tailor its account reporting to meet specific organizational needs."

The new account structure is being described in letters mailed to depository institutions this week. 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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