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ATLANTA – Ceto and Associates, a national consulting firm providing revenue enhancement solutions for the financial industry, announced that it has increased its credit union Deposit Reclassification clients by more than 400% this year. Here’s how deposit reclassification works: interest and non-interest checking accounts are segmented into separate subaccounts unique to each account. The savings subaccount of the combined account balance is not subject to the 10% reserve requirement. The net impact is a credit union’s reserve requirements fall to “insignificant levels.” While the process is invisible to members, Ceto said, financial institutions are required to provide disclosure that checking and savings subaccounts will be created and maintained and that transfers may occur between these sub accounts. The accounts are evaluated daily. Funds are automatically transferred from the savings sub-account to the checking subaccount if required to cover activity in the account. Concurrent with the sixth such transfer during a calendar month, the entire balance is transferred to the checking subaccount to remain in compliance with restrictions on savings accounts imposed by Regulation D. Ceto reports the solution allows CUs to report an average of 80% of their transactional accounts as savings deposits, resulting in a low reserve requirement and enabling them to increase their interest earning assets by $2 million to $10 million per day. CUs still remain in compliance with Regulation D, which especially impacts those offering checking accounts linked to accounts restricted to the Federal Reserve Bank’s six transfer rule. The company said it has already matched the number of new CU clients signed in 2004 which now include more than 30. Among Ceto’s clients are $1.5 billion Coastal FCU in Raleigh, N.C., which considers deposit reclassification “one of the most cost effective and easy project implementations that we have ever undertaken,” said Ralph Reardon, Coastal FCU’s CFO.

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