4.3.4 Classifying Operational Deposits

Operational Deposits are those deposits placed by customers with a bank or balances kept by the bank with other financial institutions to meet their payment and settlement needs and other operational requirements. The application classifies accounts as operational if they meet the following criteria:

1. They are held in specifically designated accounts that are held as operational accounts by the customers at the bank.
2. They are priced without giving economic incentives to the customer to leave excess funds in the account.
3. They arise as a result of a clearing, custody, or cash management relationship with the bank.
4. They do not arise out of correspondent banking services or in the context of prime brokerage services.
5. The termination of such agreements requires a minimum notice period of 30 days.
6. If the agreement can be terminated within 30 days, the customer must pay significant switching or termination costs to the bank.

Any excess balances held in an account classified as an operational deposit over and above that which is required to meet the operational needs of the customer is assigned a higher outflow rate by the regulator. The application supports a methodology for computing the portion of the balance held for operational purposes, which are truly required to meet the operational needs of the customer. For details, see Calculating Operational Amount.