Deposit Reclassification, a retail sweep program, is a Federal Reserve Board acknowledged practice that reduces reserve requirements by reclassifying transaction accounts as non-transaction accounts, which are not subject to reserve requirements. Reserve balances held at the Federal Reserve Bank earn minimal interest, and by reclaiming those funds through Deposit Reclassification, credit unions have the opportunity to reinvest for a higher yield in mortgage and consumer loans.

“American Heritage FCU recently restructured its accounts to better serve our membership, and as result, we expect our reserve balance requirement to increase – decreasing the amount of funds available for new investment and revenue stream opportunities,” said Brian Schmitt, Chief Financial Officer for American Heritage FCU. “With CetoLogic’s Deposit Reclassification, we can maintain our zero reserve balance and continue to use these assets to invest in the communities we serve.”

CetoLogic’s Deposit Reclassification solution permanently recovers financial institutions’ Federal Reserve balance and is compliant with Federal Reserve Regulation D and all Federal Reserve Board requirements. Low-earning, illiquid funds previously held at the Fed earning minimal interest become accessible for diversified loans and investments; increasing returns for financial institutions.

“As the economy continues to strengthen, investment opportunities are increasing for today’s financial institutions,” said David Austin, vice president of CetoLogic. “CetoLogic’s Deposit Reclassification solution enables American Heritage FCU to preserve their liquid funds for investments rather than maintaining low earning balances at the Federal Reserve Bank.”