Vendors Gear Up for Proposed Rule
Software vendors are developing systems to help banks comply with regulations that will require disclosure of annual percentage yields and other information on interest-bearing accounts.
In its draft form, Federal Reserve Regulation DD would require all commercial banks and thrifts to provide annual percentage yields, check charges, and other fees automatically when consumers open an account and on request at other times.
The so-called truth-in-savings rule is expected to affect the way many banks calculate interest rates and charge service fees.
Software from Formation Technologies Inc. of Denver, CFI Bankers Service Group Inc. of Portland, Ore., and Bankers System Inc., St. Cloud, Minn., would automate the opening of an account and generate the disclosure forms required.
Regulations Due Next Month
The comment period on the Fed draft ended June 10. The central bank is expected to put the regulation in its final form next month.
If approved, the regulation probably would take effect next March.
The proposal aims to establish a framework for banks to calculate interest rates and charges consistently across the industry.
The rule would make it easier for customers to compare rates on different sorts of accounts - those whose rates banks compound differently, for instance, or whose rates ratchet up as balances grow.
Regulation DD could eliminate some products banks are currently offering, according to Robert Buckner, vice president at State National Bank, a $130 million-asset bank in Big Spring, Tex.
His bank offers a variable-rate certificate of deposit tied to weekly Treasury bill rates. The regulation as drafted would outlaw such products, Mr. Buckner said. Banks would have to notify a customer of a rate change at least 30 days in advance, he said.
State National is one of nine banks testing compliance software from Formation Technologies.
The Platform Publisher module for Formation Technologies' integrated banking software guides platform personnel platform personnel through gathering the required information about fees and yields, calculates the annual rates, and lists them on a personal-computer screen.
Completed documents can be printed on an impact or laser printer and handed to the customer.
As regulations change, Formation will update the documentation and distribute the changes to its customers.
The system also can be used as a selling tool, because it presents lending and other information graphically.
"It looks like it will help us comply with all the regulations," Mr. Buckner said, "and help us cross-sell, too."
The developer expects to complete the system next month.
Formation expects to charge about $3,500 for a base license, which can be used on a network or a stand-alone computer, and about $1,000 for each additional workstation.
The Colorado firm also will charge a sliding-scale annual fee that includes updates to the compliance regulations.
For a bank with assets of less than $25 million, the annual fee would be around $1,250. A bank with $1 billion would pay $4,500; $200 would be added for each further $100 million.
Account Processor Plus
Bankers Systems is demonstrating a product called Account Processor Plus that automates the opening of new interest-bearing accounts and generates documents the truth-in-savings rule will require.
A version for laser printers automatically prints out the documents. Pricing is set at around $5,500 for a five-user network.
CFI Bankers Service Group expects to have its compliance software on the market by November. seminars around the country on what the truth-in-savings regulation will mean to banks.
Forms from Deluxe Data Systems, Brown Deer, Wis., will be used in CFI's system. It will print forms for customers and generate check orders for new accounts. Pricing has not been announced.