Because your institution is classifying the savings or money market accounts as non-transactional savings deposits for reserve requirements purposes, the accounts are limited to no more than six withdrawals per month, among other requirements in Regulation D. Consequently, the preauthorized sweeps from these accounts into the “repo account” would be subject to the six-per-month limitation imposed by Regulation D on “savings deposits.”

Whether the sweeps from the “repo accounts” to the “savings deposit accounts” also are subject to the six-withdrawal limit depends on whether your bank also classifies the funds in the repo accounts as savings deposits. Here, it appears that these accounts are not classified as savings deposit accounts (as evidenced by the fact they are not reported as deposits on your institution’s Call Report). If that is the case, Regulation D’s limitations are inapplicable, as they apply only to savings deposit accounts.

In addition, FDIC rules impose disclosure requirements for “sweep accounts” that likely apply here. Your bank must disclose to your customers whether the swept funds in the repo accounts are “deposits” for deposit insurance purposes. If the funds are not deposits, your bank must disclose exactly how it will classify the funds in the event of your bank’s failure, consistent with how your bank reports these funds on its Call Report. In its preamble to the final rule imposing this disclosure requirement, the FDIC details how repo sweep arrangements are treated for deposit insurance purposes, and we recommend reviewing this analysis (linked to below) when drafting these disclosures.

For resources related to our guidance, please see:

• Regulation D, 12 CFR 204.2(d)(1) (“Savings deposit means a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the depository institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit. The term savings deposit includes a regular share account at a credit union and a regular account at a savings and loan association.”)

• Regulation D, 12 CFR 204.2(d)(2) (“The term ‘savings deposit’ also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements of § 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties. . . .”)

• FDIC Rules, 12 CFR 360.8(e) (“Disclosure requirements. Beginning July 1, 2009, in all new sweep account contracts, in renewals of existing sweep account contracts and within sixty days after July 1, 2009, and no less than annually thereafter, institutions must prominently disclose in writing to sweep account customers whether their swept funds are deposits within the meaning of 12 U.S.C. 1813(l). If the funds are not deposits, the institution must further disclose the status such funds would have if the institution failed — for example, general creditor status or secured creditor status. Such disclosures must be consistent with how the institution reports such funds on its quarterly Consolidated Reports of Condition and Income or Thrift Financial Reports. The disclosure requirements imposed under this provision do not apply to sweep accounts where: The transfers are within a single account, or a sub-account; or the sweep account involves only deposit-to-deposit sweeps, such as zero-balance accounts, unless the sweep results in a change in the customer's insurance coverage.”)

• FDIC Rules, 12 CFR 360.8(b)(4) (“A sweep account is an account held pursuant to a contract between an insured depository institution and its customer involving the pre-arranged, automated transfer of funds from a deposit account to either another account or investment vehicle located within the depository institution (internal sweep account), or an investment vehicle located outside the depository institution (external sweep account).”)

• Federal Deposit Insurance Act, 12 USC 1813(l) (FDIC definition of “deposit.”)

• Final Rule, Processing of Deposit Accounts in the Event of an Insured Depository Institution Failure, 74 Fed. Reg. 5797, 5802 (February 2, 2009) (“In a properly executed repo sweep arrangement, as of the depository institution’s normal end-of-day, the sweep customer either becomes the legal owner of identified assets (typically government securities) subject to a repurchase agreement or obtains a perfected security interest in those assets. In such cases, where the sweep customer either owns or possesses a perfected security interest in the identified securities, upon an institution failure, the FDIC will recognize the customer's ownership or security interest in the securities. If the value of the securities at least equals the dollar amount of funds swept from the customer's account, the customer's swept funds will be fully protected in the event of failure. . . . The FDIC notes that, in cases where repo sweeps are improperly executed (so that the customer obtains neither an ownership interest or perfected security interest in the applicable securities), institutions should report the swept funds as deposits in their Call or Thrift Financial Reports, for assessment and other purposes.”)