Cash Management Arrangements

“Transaction accounts of a single type” means demand deposit accounts or NOW accounts, but not a combination thereof. For purposes of cash management arrangements, the terms “right” and “capacity” relate to the form of legal ownership such as being held in an agency or trust capacity, as a joint tenant, or as an individual. “Single legal entity” means a natural person, partnership, corporation, trust, or estate.
The reporting bank must maintain readily available records that will allow for the verification of cash management arrangements. Such documentation must provide account numbers, account titles, ownership of accounts, and the terms and conditions surrounding the management of the accounts, and must also clearly show that both the customer and the reporting bank have agreed to such terms and conditions. These terms and conditions must clearly indicate the understanding that payments from one account will be honored as long as a net credit balance exists within the group of related transaction accounts taken as a whole and maintained in the same right and capacity. A written cash management agreement, signed by both the customer (a single legal entity) and the reporting bank, accurately maintained and incorporating the above information, will be acceptable evidence of a bona fide cash management arrangement. In addition, the reporting bank must maintain readily available records that will allow for the verification of account balances within cash management arrangements.
See “deposits” for the definitions of transaction account, demand deposit, and NOW account. See also “overdraft.”

 

reference: FFIEC

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