Repeal of Regulation Q Impact on Bank Pricing and Changes

scafp.net
  • No tags were found...

Presentation - SCAFP

ong>Repealong> ong>ofong> ong>Regulationong> Q:

ong>Impactong> on Bank Pricing and

Changes

Zoya Lieberman, CTP

Commercial Services

Product Manager

Informa Research

Services

Randy Rosen, CTP

Deposit Product

Manager

Informa Research

Services


Agenda

• Methodology

• Hybrid Commercial Checking Accounts

• Commercial Interest Checking Accounts

• Commercial Services and Fees

• General Strategy


Informa Research Services Business Prong>ofong>ile

• Established in 1983

• Premier provider to the financial industry

• Three name changes, same executive team

Meyer Weekly Interest

Rate Survey

BISYS

Research Services

• Key acquisitions in our growth areas

Barry Leads

& Associates

Market

Trends

Moorthy,

Riggs &

Associates

• Clients include

– 6,500+ financial institutions

– All ong>ofong> the Top 100


Methodology

How the Survey was conducted:

• Informa Research Services requested prong>ofong>essionals at various financial institutions with

expertise in business/commercial banking to respond to this survey request.

• Participants had to have expertise in one or more ong>ofong> the following areas: ECRs, Commercial

Checking Accounts, Cash Management, and Investment Sweeps.

• The survey was anonymous and was designed to capture how the industry is meeting this

new challenge.

• Once the responses were received, they were reviewed by Informa’s analysts for consistency

and data integrity.

• Any ambiguous responses were followed up with the appropriate contact at the financial

institution.

• All questions asked in the survey were focused on commercial/corporate product set, not on

the small business segment.

• This is a follow up to the 2010 ong>Impactong> ong>ofong> the ong>Regulationong> Q Study

Number ong>ofong> surveys completed and distribution ong>ofong> institutions surveyed:

• $100 Billion + (10 institutions)

• $100 Billion ‐ $50 Billion (7 institutions)

• $50 Billion ‐ $20 Billion (7 institutions)

• $20 Billion ‐ $10 Billion (6 institutions)

• $10 Billion ‐ $1 Billion (22 institutions)

• Less than $1 Billion (5 institutions)


Hybrid Commercial Checking Account


Do you ong>ofong>fer or plan to ong>ofong>fer a hybrid option that both ong>ofong>fsets fees and

pays interest on excess balances?

120%

100%

80%

60%

79%

60%

68%

83% 86%

100%

90%

40%

20%

0%

21%

40%

32%

17% 14%

0%

10%

YES

NO

$100+ Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $20 Bil llion

$20 Billion ‐ $10 Bil llion

$10 Billion ‐ $1 Billi ion


Which ong>ofong> the following reasons prevented your financial institution from

introducing a hybrid product? OVERALL

33%

42%

PRODUCT STRATEGY

SYSTEM LIMITATIONS

LACK OF INTEREST FROM CLIENTS

17%

8%

OTHER

42% ong>ofong> those responding indicated that the reason for not ong>ofong>fering a hybrid product is product

strategy,

17% indicated there was a lack ong>ofong> interest from clients, and 8% indicated that there were system

limitations. 33% ong>ofong> those responding did have a different reason than those above for not

ong>ofong>fering the hybrid product:

‐ Core vendor cannot support the product

‐ Other priorities limit focus at this time

‐ Clients wish to leverage 100% FDIC coverage

‐ It's a combination ong>ofong> product strategy, lack ong>ofong> client interest and system limitations


Will the fees associated with the hybrid account be:

OVERALL

38%

49%

SAME AS ECR ONLY COMMERCIAL

CHECKING

SAME AS INTEREST ONLY COMMERCIAL

CHECKING

13%

DIFFERENT FROM OTHER COMMERCIAL

CHECKING ACCOUNTS

• Overall 49% indicated the fees will be the same as the Commercial Analyzed ECR product,

38% indicated the fees on the hybrid will be different from other Commercial Checking

accounts, and 13% indicated that the fees will be same as the Commercial Interest Checking

product.

• Of the three response options for this question, there were two that seemed to stand out the

most among the asset classes:


Will the earnings credit and/or interest rates ong>ofong>fered for the hybrid option be:

OVERALL

22%

0%

EQUAL TO THE ECR COMMERCIAL CHECKING

PRODUCT

EQUAL TO THE INTEREST ONLY SMALL BUSINESS

CHECKING PRODUCT

60%

18%

EQUAL TO THE INTEREST ONLY COMMERCIAL

CHECKING PRODUCT

DIFFERENT FROM THE RATES OFFERED ON THE

EARNINGS CREDIT ONLY OR COMMERCIAL INTEREST

ONLY PRODUCT

• Overall, 60% indicated that the ECR and/or interest rate ong>ofong>fered for the hybrid will be

different from the rates ong>ofong>fered on the earnings credit only or commercial interest only

product, 22% equal to the ECR Commercial Checking product, and 18% equal to the Interest

only Commercial product.

• None ong>ofong> the respondents indicated that the rates ong>ofong>fered for the hybrid account will be equal

to the small business interest only product. In the $100 Billion+ asset class, every institution

indicated that the rates ong>ofong>fered for the hybrid product would be different from the rates

ong>ofong>fered on the earnings credit only or commercial interest only product.


Which ong>ofong> the following methodologies would define how your Hybrid product

will work?

OVERALL

2% 11%

THE PRODUCT HAS AN ECR RATE TO OFFSET THE FEES

AND AN INTEREST RATE EARNED ON THE EXCESS

BALANCES

87%

THE PRODUCT DOES NOT HAVE AN ECR, BUT THE

INTEREST EARNED IS USED TO OFFSET THE FEES AND

IF THERE IS EXCESS INTEREST THE CUSTOMER IS PAID

INTEREST

WILL OFFER BOTH OPTIONS LISTED ABOVE

• Overall the majority ong>ofong> the institutions surveyed (87%) indicated that the hybrid product

ong>ofong>fered will have an ECR rate to ong>ofong>fset the fees and an interest rate earned on the excess

balances, bl with only a small percentage (2%) indicating they will ong>ofong>fer a product tthat t that t does

not have an ECR, but the interest earned is used to ong>ofong>fset the fees and if there is excess

interest, the customer is paid interest. A selected group (11%) ong>ofong> those that responded

indicate they will ong>ofong>fer both hybrid options.

• The largest percentage (33%) ong>ofong> those that responded indicating they would ong>ofong>fer both

hybrid options is in the


Commercial Interest Checking Account


Do you currently ong>ofong>fer a commercial interest checking account?

90%

83%

86%

80%

70%

60%

70%

60%

64%

71% 70%

50%

40%

30%

20%

30%

40%

36%

17%

14%

29% 30%

YES

NO

10%

0%

$100+ Billio

$100 Billion

$50 Billion

$20 Billion

$10 Billion


When do you anticipate ong>ofong>fering a commercial interest checking account?:

120%

100%

100% 100%

100%

80%

60%

59%

50%

50%

50%

67%

40%

20%

0%

24%

18%

38%

33%

13%

0% 0% 0% 0% 0% 0%

0%

0%

THE END OF 2011

FIRST HALF OF 2012

SECOND HALF OF 2012

NO IMMEDIATE PLANS

$100+ Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Bil lion


Where will the rate on the commercial checking account be positioned as compared to

earnings credit rate?

120%

100%

80%

60%

40%

20%

0%

100%

100% 100% 100%

88%

79%

60%

40%

14%

8% 5%

7%

0% 0% 0% 0% 0% 0% 0% 0% 0%

EQUAL TO ECR

HIGHER THAN ECR

LOWER THAN ECR

$100+ Billion

$100 Billion ‐ $50

Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Billion


Commercial lServices & Fees


If you anticipate ong>ofong>fering an interest‐bearing checking product for commercial customers,

will your Cash Management fee structure be identical to or different from commercial

checking accounts with earnings credit?

120%

100%

100%

100%

80%

73%

67%

64% 67%

71%

60%

40%

28%

33%

36% 33%

29%

IDENTICAL

20%

DIFFERENT

0%

0% 0%

$100+ Billion

$100 Billion ‐ $50

Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Billion


Do you anticipate making any rate changes to the commercial money

market/savings or sweep product options you ong>ofong>fer as a result ong>ofong> the repeal ong>ofong>

ong>Regulationong> Q?

OVERALL

15%

5%

5%

YES, RATE CHANGES TO BOTH COMMERCIAL MONEY

MARKET/SAVINGS AND SWEEP PRODUCTS

YES, RATE CHANGES TO MONEY MARKET/SAVINGS ONLY

75% YES, RATE CHANGES TO SWEEPS ONLY

NO CHANGES

Overall, the majority ong>ofong> respondents 75% indicated there is no anticipation ong>ofong> making fee changes to the

commercial money market/savings or sweep product options. Two groups ong>ofong> respondents, 15% and 5%,

indicated they would be making fee changes to both commercial money market/savings and sweep products,

along with the sweep only product. Only 5% indicated they would be making fee changes only to their

commercial money market/savings product.

In the $20 Billion ‐ $10 Billion asset class, all respondents indicated they would be making no fee changes to

the commercial money market/savings or sweep product options. In the $10 Billion ‐ $1 Billion asset class, 27%

indicated they will be making fee changes to sweeps only, and in the


After the ong>Repealong> ong>ofong> ong>Regulationong> Q, did you create or are you planning to create a

commercial DDA product that includes an investment sweep into a bank Money Market

Deposit Account?

120%

100%

100% 100%

90%

80%

77%

68%

71%

60%

57%

43%

40%

20%

0%

23%

32%

0% 0%

29%

10%

YES

NO

$100+ Billion

$100 Billion

$50 Billion

$20 Billion

$10 Billion


On which ong>ofong> the following segments will your financial institution be passing a standard

FDIC fee on to a Non‐interest DDA?

OVERALL

75%

32%

SMALL BUSINESS ACCOUNTS

MIDDLE MARKET/LARGE CORPORATE ACCOUNTS

84%

SMALL BUSINESS PUBLIC FUND ACCOUNTS

35%

MIDDLE MARKET/LARGE CORPORATE PUBLIC FUND

ACCOUNTS

Overall, the majority ong>ofong> respondents indicated that an FDIC fee would be passed on to a noninterest

DDA for middle market/large corporate accounts (84%) and middle market/large

corporate/public fund accounts (75%), while only 32% and 35%, respectively, indicated they will

pass an FDIC fee on to small business accounts and small business public fund accounts.

In the $20 ‐ $10 Billion dollar asset range, none ong>ofong> the respondents and only 10% in the $100+

Billion asset range indicated they would be passing an FDIC fee on to small business accounts. Yet

in the same two asset class ranges, 33% and 20%, respectively, indicate they will be passing an

FDIC fee on to the small business public fund accounts.


Do you currently charge or anticipate charging an FDIC fee on the following products?

OVERALL

INTEREST‐BEARING CHECKING FOR COMMERCIAL AND

CORPORATE CLIENTS

26%

19% 11%

65%

INTEREST‐BEARING CHECKING FOR PUBLIC FUND CLIENTS

HYBRID CHECKING FOR COMMERCIAL AND CORPORATE

CLIENTS

70%

51%

COMMERCIAL AND CORPORATE MONEY MARKET DEPOSIT

ACCOUNTS

PUBLIC FUND MONEY MARKET DEPOSIT ACCOUNTS

DO NOT OFFER ANY OF THE ABOVE PRODUCTS

Overall, a large majority ong>ofong> respondents indicated they currently charge or anticipate charging an

FDIC fee on commercial checking (65%), public fund interest bearing (51%) and commercial

hybrid checking (70%) products. Yet only 26% indicated they will be passing an FDIC fee on to

commercial money market accounts , while 19% will pass this fee on to public fund money

market accounts. 11% overall indicated they do not ong>ofong>fer any ong>ofong> these products.


General Strategy


For any commercial interest‐bearing accounts you might have developed, how would you

describe your marketing posture?

120%

100%

80%

82% 80%

73%

100%

86% 86%

90%

60%

40%

20%

0%

20% 18%

12%

4% 2%

5% 5%

0% 0%

14% 14%

10%

0% 0% 0% 0% 0% 0% 0% 0% 0%

DEFENSIVE

AGGRESSIVE

PROMOTIONAL

NO DEFINED STRATEGY

$100+ Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Billio on


How will you train your sales associates to sell interest bearing DDA vs. non‐interest bearing

DDA?

120%

100%

80%

86%

100%

77%

83%

71%

100% 100%

POSITION NON‐INTEREST BEARING

DDA NEUTRALLY BESIDE INTEREST

BEARING DDA

60%

LEAD WITH NON‐INTEREST

BEARING DDA

40%

20%

14%

23%

17%

29%

LEAD WITH INTEREST BEARING DDA

0%

0% 0% 0%

$100+ Billion

$100 Billion ‐ $50

Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 B illion


Which channels are you planning to use in order to promote the new commercial

checking ong>ofong>ferings?

OVERALL

14%

BRANCH

63%

32%

COMMERCIAL SALES TEAM

FINANCIAL INSTITUTION WEB SITE

14%

DIRECT MARKETING

DO NOT PLAN TO PROMOTE AT ALL

2%

63% ong>ofong> the overall respondents are not planning to promote a new commercial checking ong>ofong>fering at all.

With 32% directing their promotional efforts to the commercial sales team and 14% to the branch and

financial institutions’ web site, only 2% will directly market the new commercial checking account.

For all asset classes, as indicated with the overall responses, the majority do not plan to promote the

new commercial checking account. The only exception is the $20 Billion ‐ $10 Billion category, with 67%

indicating they are planning to use a commercial sales team to promote the new commercial checking

account.


What commercial checking account product does your financial institution anticipate

primarily selling?

120%

100%

80%

95%

80%

91%

100% 100% 100% 100%

60%

40%

20%

0%

23%

18%

0%

20%

14%

9%

33% 33%

29% 29% 29% 30% 30%

14%

ECR ONLY

COMMERCIAL INTEREST ONLY

HYBRID CHECKING ONLY

$100+ Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Billio on


Will you continue to allow the payment ong>ofong> third party vendors (using earnings credit)

following the repeal ong>ofong> regulation Q?

120%

100%

80%

83%

100%

60%

40%

47%

53%

40%

60%

45%

55%

43%

57%

40%

60%

YES

20%

17%

NO

0%

0%

$100+ Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $2 20 Billion

$20 Billion ‐ $1 10 Billion

$10 Billion ‐ $1

Billion


On which level in the client relationship will the charges be applied?

100%

90%

80%

70%

75%

80%

68% 67%

86%

71%

90%

60%

50%

40%

30%

20%

10%

25%

20%

32% 33%

14%

29%

10%

TOTAL RELATIONSHIP

PER INDIVIDUAL ACCOUNT

0%

$100+

Billion

$100 Billion ‐ $50 Billion

$50 Billion ‐ $20 Billion

$20 Billion ‐ $10 Billion

$10 Billion ‐ $1 Billion


Strategic Summary

• Commercial interest‐bearing accounts will not have an aggressive marketing campaign. They

will be ong>ofong>fered as a defensive posture .

• The commercial sales team will be trained to lead with traditional non‐interest bearing

commercial checking accounts.

• Financial institutions are not planning to heavily promote the new interest bearing

commercial checking accounts.

• Those institutions that are planning to promote the new interest‐bearing commercial

checking accounts are not going to develop a new distribution channel or invest in the new

technology.

• Financial institutions are planning to have interest‐bearing checking account options for

multiple market segments, including sole proprietors, small business, and commercial

customers.

• Half ong>ofong> the financial institutions are going to allow the third party charges to be passed

through the account analysis.

• Financial institutions are basing service charges on the total client relationship instead ong>ofong>

individual id accounts.


Contact Information

Zoya Lieberman, CTP

26565 Agoura Road #300

Calabasas, CA 91302

818.961.8627 Direct Line

zlieberman@informars.com

Randy Rosen, CTP

26565 Agoura Road #300

Calabasas, CA 91302

818.871.2262 Direct Line

rrosen@informars.com

More magazines by this user
Similar magazines