IBA Compliance Connection

Your go to source for compliance!

We are working through an auditing guide for Regulation D, and one of the auditing questions asks: “In instances where a customer maintained multiple transaction accounts with the bank, were overdrafts in one account (pursuant to a bona fide cash management arrangement) netted against balances in other related transaction accounts for reserve requirement purposes?” What is a “bona fide cash management arrangement”?

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While the OCC is not your primary regulator, that agency has published the only guidance (that we are aware of) defining “bona fide cash management arrangement” for purposes of Regulation D:

“Generally, a bona fide cash-management arrangement exists and accounts may be netted for reserve purposes when the depository institution and the customer in effect treat the accounts as a single account and the institution has an unrestricted right to offset against one account to cover overdrafts in another account. Generally, the exception applies only to the related accounts of one depositor or to accounts of related depositors (such as cosigners, family members, and interdependent entities) when all the depositors have unfettered use of the funds in all accounts, the multiple accounts are established for the customers’ convenience, and there is no legal impediment to the commingling of funds in the accounts. STAFF OP. of August 14, 1986. Authority: 12 CFR 204.3(e).”

For resources related to our guidance, please see: