Setting Up Deposit Products

Overview

 

Deposit Products should be set-up in order to mirror the deposit product names and types currently in place at your institution. It is also important to note that if you're using PrecisionLender’s Relationship Awareness module, you'll want to have a deposit product set-up for each type of deposit product on your bank’s core system that will feed into PrecisionLender through the Relationship Awareness module.  The configuration assumptions associated with these products will be what is applied to the profitability calculations for existing deposit accounts associated with Relationship Awareness.

 

 

In this Article

 

The Deposit Product Edit Screen

 

Toolbar Header Region Tabs

Edit

  • The "Edit" button will allow you to change the settings of the product.

Save

  • The "Save" button is how you save any changes you have made to the product. If you leave the screen without saving, any changes you have made since the last save, will be lost.

Print

  • The "Print" button allows you to print off the settings of this product.
  • The "Print" button is not visible while editing.

Close

  • The "Close" button will leave the screen and take you back to the Administration Section.
  • Make sure that you save your work before closing if you would like to keep the changes you have made.

 

Product Configurations & Defaults

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Product Enabled

  • Signifies whether a product is visible and active in the product list view-able to users.
  • Products created in order to map Relationship Awareness accounts that aren’t active accounts in use by the financial institution can be unchecked.

 

Configurations & Defaults

For the configurations detailed below, PrecisionLender also has default settings for deposit considerations that many of our clients choose to use.

  • We partner with a third party firm that performs an annual survey across numerous financial institutions of various costs including deposit costs.
  • An initial provisioning of PrecisionLender will have the most recently available assumptions from the third-party survey.
  • For more information on this study, please see: Default Assumptions For 2019.

Operational & Market Risk Capital Allocation

  • Capital, or Equity allocated, expressed as a percentage of the balance for the product plus a percentage of revenue.
  • Provided a Capital Allocation amount is calculated, this amount becomes the denominator in the profitability calculation for your return.
  • Why does PrecisionLender recommend allocating capital for deposits?
    • Capital at a bank is there to protect against risk. While the most important risk is credit risk, which deposits don't have, there are other risks that affect deposits. These include compliance, regulatory, interest rate, operational, liquidity and reputation. Even though they do not demand the same capital level as loans, there should be some economic capital allocated to deposits.
    • PrecisionLender recommends about 2% in the current environment, although in a higher rate environment we might have a different recommendation.
    • Although some may argue that the level should vary by the type of deposit, with DDA having a higher amount than CD. For ease of convenience we just recommend the same level for all types of deposits.

Use Net Interest Income as Revenue in Operational Risk Capital Calculations

  • If you do not include capital in funding, you may use Net Interest Income as revenue, instead of Gross Revenue, in Operational Risk Capital Calculations.
  • This option is enabled by default when creating new Deposit Products.

Target Return

  • Return profitability target for this product.
  • Will only apply to products that have an expected balance associated with them.

Float and Reserves

  • The percentage of deposits on your books that are not available to be used for lending or investments.

  • Represents both the required reserves a bank needs to hold at the Federal Reserve on transaction deposits (NOW and DDA) and the cash letter outstanding on checks written on another institution that are deposited by customers, but not yet collected.

Deposit Type

  • Deposit types can be categorized as either Interest Bearing Demand, Timed Deposit, or Zero Interest Demand.
  • Note that if the Timed Deposit type is selected the Transfer Duration or Transfer Rate (next descriptor) will not be displayed because the user will enter the term of the deposit when pricing the opportunity (or the term of the deposit will be mapped for Relationship Awareness Timed Deposit account types).

Interest Income Calculation Method

  • Transfer Duration is expressed in months, and it's an approximation of expected average life that will be matched for funding purposes to a like point on the fully adjusted funding curve. 
  • Transfer Rate is expressed as an annual percentage, and it's a specified predetermined rate that will be applied to the deposit account type.

Annual Fee Income – Dollar and/or Percent

  • Can be configured as either a fixed annual dollar amount, an annual percentage of average balance, or both.

Annual Operating Expense - Dollar and/or Percent

  • Can be configured as either a fixed annual dollar amount, an annual percentage of average balance, an annual percentage of revenue or all three.

  

Available Regions

Regions for which the deposit settings are active, are signified with a check next to the region name. This is only available if the Full Regionality and Advanced Funding module has been licensed.

 

 

Split Out Region

Allows you to choose regions to separate from your available regions so they can have separate deposit product assumptions.

Collapse Into Region

Allows you to collapse regions into another group of regions that you select.

 

Funding Package Override

 

Check this box if you want to override the funding package set at the regional level for the particular deposit product. All funding packages are available for selection. Only one funding package can be selected. If you do not see this option, please ensure you have enabled it under the Universal Assumptions tab within Administration. If you have any questions about this option, or do not see this option but would like to use it, please reach out to Support.

 

Earnings Credit

Earnings Credits are used to value balances clients maintain in non-interest bearing U.S. Demand Deposit Accounts (DDA).

 

 

The earnings credit values indicated when setting up a deposit product are used in conjunction with activity-based products, to reduce the amount of fees a client is required to pay for Other Fee Based Products.

Earnings Credits can be added in deposit amount segments by clicking the 'Add Earnings Credit' button.

 

History

The History sections provides a list of dates and times when changes were made to the product. By clicking on a date and time you can see the setting of the product that was saved at that date and time

 

 

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