Repurchase Agreement Accounts

Dear Blair:

Q. We currently have 10 accounts that are set up as repurchase agreement accounts. These accounts are tied to a non interest bearing checking account. Those accounts have the account agreement and the required disclosures. We have a separate repurchase agreement signed by the customer.

Our auditors are telling me that we need an account disclosure that goes with the repurchase agreement. Since the repurchase agreement is not FDIC covered and we have tied investments to the account for collateral purposes what kind of disclosure are we required?

A. I disagree with your auditors. The account of your customer that holds the purchased securities is not a deposit account and therefore does not require any of the disclosures that a deposit account requires. You have numerous disclosures in your repurchase agreement and you provide notifications every time there is a transaction in the repurchase account. That is all the disclosures that the account requires.

Blair Rugh is one of the preeminent experts on United States banking laws and regulations. He has authored compliance manuals recognized by the banking industry as the definitive treatise on banking law and regulation. He has extensive experience as a speaker to bankers' associations and has written numerous articles published in banking journals. For access to more of Blair's compliance expertise, sign up for TriNovus' weekly Bank Regulatory Compliance Update at www.trinovus.com.