Cranky Regulators: Why They’re Focused on the Core Deposit Sacred Six


It’s happening again. The regulators are cranky, yet again, and this time for some good reasons. They’re a little heavy-handed right now on banks that are not mastering the deposit strategy and the execution of that strategy.

They’re looking at six key issues—first, relationship depth. Do you have cross-sales on those accounts? Especially your large deposit accounts—make sure that you’re getting the number of cross-sales up to six or seven on each of those accounts.

Number two is obvious, location. They’re thinking that deposits will stick with you if they are around.

Next is the price. If they came to you to negotiate a good price for them, likely they’ll leave you when somebody else has a better price than you do—not a good example of a sticky deposit. They’re also looking at size, and the length of the relationship. They’re looking for at least three years here, and also the number of transactions on those accounts.

Many banks aren’t doing very well on the sacred six. If those sacred six don’t get addressed, it’s going to be a problem. So, let’s talk about some things you can do—and some things you should not be doing— to make sure that you can improve each of those six items.

Number one, stop advertising rate. You’re dancing with the devil! It’s a sign of a misunderstanding of how to go about this business called getting deposits. When you get the deposit, you get a problem, either you paid too much and you lose money on the deal, or you don’t get the deposit. You can see this is not a good strategy. You need a much better, more effective strategy to bring in core deposits that will stick with you for a long period of time, and it has to do with your extreme differentiation. Quite frankly, it isn’t because you have nice people and great customer service, or you’ve been around a long time. It is your job, as an executive of the bank, to create strategies for extreme differentiation. That, and only that, will create something different.

Number two, know deployment strategy of the top twenty percent of the top twenty percent of your deposit prospects. The best way to help the poor is to not become one of them. Banks miss this point and market and sell to the whole lake instead of the fishing hole. Eighty-three percent of your sales volume comes from your top quartile salespeople, and six percent from your bottom quartile. It’s the eighty-twenty rule in action. Eighty percent of your profits come from low-cost deposits, which are very narrow psychographic and firmographic. That same psychographic and firmographic, are sticky, they don’t negotiate rate, and they buy everything you have. So what’s the plan, get all of those! Unless you have a deployment strategy to go get your next best customers who are just like your current best customers, as opposed to spinning around with your energy on the walk-ins, matching the rate; unless you change your plan to an integrated marketing and sales process to create extreme value for the next best one hundred, the prospects of transforming this result are slim to none.

Number three: not getting a minimum average of seven cross-sales on new accounts. Let’s face it—if you don’t have seven cross-sales and you’re still back at the 2.2, you are not their banker. They’re voting their trust, and what they’re saying is, “I don’t trust you”—and they want a bank that can trust! But trusting requires your people being absolutely impeccable about taking them down through a process to find out all their needs, and making some recommendations in a non-sales-y approach that helps that customer buy everything you have.

It shouldn’t be a problem to get fixed, but you’re going to have to take some actions, because some change will be necessary to make sure that all three of those magical six that you need to be looking at get transformed immediately and sustainably to keep those regulators happy, and to make your bank follow a predictable success system.

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