My last statement from a given bank contained the following notice:

Deposit Reclassification: Under federal law, the Bank is required to classify our deposits a certain way for regulatory banking purposes. [...] We are simply changing the way we report deposit accounts to the government. [...] Creating sub accounts will allow us to reduce the amount of funds we are required to keep on deposit at the Federal Reserve Bank.

Is this common? Is this shady?


Is this common? Is this shady?

It is not routine. But it is common. Generally Banks classify each account in specific way and report it to regulators. At times regulation change, or Banks change the product offering slightly so that the account classification changes again to advantage of Bank.

Nothing to worry about if you fundamentally trust the bank. As yes by regulation they are supposed to notify this, hence the communication to you via statement.

  • And if I don't fundamentally trust the bank?
    – Mooseman
    Nov 23 '16 at 12:44
  • 2
    @Mooseman then stop banking with them
    – Dheer
    Nov 23 '16 at 12:57
  • @Mooseman, your money is FDIC insured anyway (assuming you're under the limit), who cares if you trust the bank?
    – quid
    Nov 23 '16 at 19:33

I used the text from your question for a google search and found a bank that used similar verbiage, but the next paragraph induced additional information:

The Account will consist of a checking sub-account and a savings sub-account, and the Bank may periodically transfer funds between these two sub-accounts. On a sixth transfer during a calendar month, any funds in the savings sub-account will be transferred back to the checking sub-account. If your Account is a plan on which interest is paid, your interest calculation will remain the same. Otherwise, the savings sub-account will be non-interest bearing. The savings sub-account will be governed by the rules governing our other savings accounts. This change will be transparent to you and will not affect your statement, any terms and conditions of your account, or any other items in your account.

My concern would be "why are they doing this?" They will be moving funds behind the scenes to make it appear they are meeting federal regulations even when they aren't. It also appears with this bank that the savings accounts don't earn interest, but to be fair 1/10 of 1% is almost zero.

note: I have no idea if this applies to your bank, but I did find this explanation interesting.

regarding the sixth transfer:

The concept of the sixth transfer is interesting. If they decide that the customer with 10K in checking really should be 1K in checking-subaccount and 9K in savings-subaccount, but then they write a check for 5K, the bank will behind the scenes move the money back to the checking-subaccount. Thus using one transfer. Since they have to limit the transfers to six, or charge the customer they will then have to move all the funds back to the checking-subaccount for the rest of the month.

  • 1
    Am I reading that right? They're going to keep two sets of books, one for the customer and one for the regulators? Nov 23 '16 at 12:50
  • That was my first reaction Nov 23 '16 at 12:50
  • Sixth transfer by the Bank or the customer or both? Weird.
    – mkennedy
    Nov 23 '16 at 19:01

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