May 2007 

 Board staff has received a number of inquiries about the requirements for a retail sweep 

program to comply with the Board’s Regulation D (“Reserve Requirements of Depository 

Institutions”). In a “retail sweep program,” a depository institution transfers funds between a 

customer’s transaction accounts and that customer’s savings deposit accounts up to six times per 

month by means of preauthorized or automatic transfers, typically in order to reduce transaction 

account reserve requirements while providing the customer with access to the funds. The following 

is a summary of previously-issued staff opinions and informal staff guidance with respect to the 

requirements of an acceptable retail sweep program. 

 Staff opinions from the Board’s Legal Division have established three key criteria for retail 

sweep programs to comply with Regulation D: 

 

(1) A depository institution must establish by agreement with its transaction account 

customer two legally separate accounts: a transaction account (a NOW account or demand 

deposit account) and a nontransaction account (usually a savings deposit account, also 

sometimes called a “money market deposit account” or “MMDA”); 

(2) The swept funds must actually be moved from the customer’s transaction account to the 

customer’s savings deposit account on the official books and records of the depository 

institution as of the close of the business on the day(s) on which the depository institution 

intends to report the funds in question as savings deposits and not transaction accounts, and 

vice versa; and 

(3) The maximum number of preauthorized or automatic funds transfers (“sweeps”) from a 

savings deposit account into a transaction account in a retail sweep program is limited to not 

more than six (6) per month. 
2

Account Establishment 

 When a depository institution intends to establish a retail sweep program with respect to its 

established transaction account customers, the depository institution must first ensure that it has 

amended its customer account agreements under applicable contract law to provide for the existence 

of two distinct accounts (a transaction account and a savings deposit account) rather than a single 

account. This step is necessary because account agreements typically provide for the existence of 

only one account: a transaction account. These distinct accounts may be referred to as 

“subaccounts” provided that there are legally two distinct accounts and not just one account 

“subdivided” in name only. 

 Many depository institutions have drafted their customer account agreements to provide that 

the depository institution has the right to amend those agreements unilaterally by giving advance 

written notice to its customers of the amendments. Where a depository institution has reserved to 

itself under applicable contract law the right unilaterally to amend its existing customer account 

agreements by giving advance written notice to its customers thereof, it may be permissible under 

applicable contract law for the depository institution to amend its customer account agreements in 

this manner to provide for the two distinct accounts that are necessary to establish a retail sweep 

program. Otherwise, it will probably not be sufficient for a valid retail sweep program for the 

depository institution simply to give advance written notice to its customers of the intended 

establishment of such a program or of the intended creation of two distinct accounts. 

 When a depository institution intends to establish a retail sweep program with respect to 

new transaction account customers, the depository institution must ensure that its customer account 

agreements provide for the existence of two distinct accounts (a transaction account and a savings 

deposit account) rather than a single (transaction) account. 
3

Recordkeeping 

 A valid retail sweep program requires that the distinction between customer transaction 

accounts and customer nontransaction accounts (savings deposits) be reflected on the institution’s 

official books and records. If the institution’s general ledger is sufficiently disaggregated to 

distinguish between customer transaction accounts and customer nontransaction accounts, then the 

general ledger entry for transaction accounts must include the sum of customers’ transaction 

account balances, and the general ledger entry for nontransaction accounts must include the sum of 

customers’ nontransaction account (savings deposit) balances. If the institution’s general ledger is 

not sufficiently disaggregated to distinguish between customer transaction accounts and customer 

nontransaction accounts, the distinction may be reflected in supplemental records or systems 

provided that those supplemental records or systems constitute part of the institution’s official 

books and records. The supplemental records or systems outside the general ledger must meet all 

the relevant requirements of being official books and records of the depository institution. Among 

other things, the supplemental records or systems must be reflected in and consistent with the 

institution’s data as reported on its “Report of Transaction Accounts, Other Deposits and Vault 

Cash” (FR 2900) and its data submitted to banking supervisors, such as the Call Report1, and must 

be subject to the same prudent managerial oversight and control as the general ledger. The 

maintenance of such records or systems by a third party, such as a service provider, may raise 

questions as to whether those records or systems are subject to prudent managerial oversight and 

control. A valid retail sweep program may not exist solely in records or on systems that do not 

constitute official books and records of the depository institution and that are not used for any 

purpose other than generating “reclassified” FR 2900 deposit reports. 

 

1 Call Report refers to the Consolidated Reports of Condition and Income for banks (FFIEC 031 or FFIEC 041; OMB 

No. 7100-0036), the Thrift Financial Report for savings associations (OTS 1313; OMB No. 1550-0023) and the 

Statement of Financial Condition for credit unions (NCUA 5300; OMB No. 3133-0004). 
4

Movement of Funds 

In addition to reflecting the existence of two distinct customer accounts, the official books 

and records of the institution must reflect the movement of funds between the customer’s accounts 

on each day that sweep activity occurs. In other words, funds that the depository institution intends 

to sweep into and report as “savings deposits” must actually have been moved from the customer’s 

transaction account to the customer’s nontransaction account (savings deposit or MMDA) before 

the close of business that day for the sweep to be valid. Similarly, funds that the depository 

institution is sweeping back into and reporting as a transaction account must actually have been 

moved from the customer’s savings deposit or MMDA to the customer’s transaction deposit before 

the close of business that day. Regardless of the structure of the institution’s official books and 

records, both the customer-account-level records and the aggregate-level records must reflect the 

actual movement of funds between the accounts (if any) for each reporting date, so that the manner 

in which the funds are reported (transaction or savings) on any given reporting date corresponds to 

where the funds are located (transaction account or savings account). 

 The term “close of business” refers to the time established by the reporting institution as the 

cut-off time for receipt of work for posting transactions to its general ledger accounts for that day. 

The time designated as the close of business should be reasonable and applied consistently. The 

posting of a transaction to the general ledger means that both debit and credit entries are recorded 

as of the same date. The close of business for a depository institution’s retail sweep program cannot 

be after the institution’s close of business for its general ledger.