Control Agreements Banking

The first step a custodian bank needs to take to protect itself is to start with a good DACA form. DACA forms made available to a deposit-taking institution by a lender are not prepared taking into account the unique operational, business and legal needs of the deposit-taking institution. And it is very likely that they will contain provisions that are more favorable to lenders than the market in the sector. By creating and emphasizing the use of its own DACA form, a deposit-taking institution can be confident that its unique operational needs will be taken into account, including notification information and the time required to implement other parties` instructions. In addition, individuals who implement CADs with the deposit-taking institution are better acquainted with the deposit-taking institution`s obligations under DACA by consistently using their own form, which reduces the likelihood of there being an error or oversight in the implementation. Often, those responsible for implementing AACs are not familiar with the verification and interpretation of agreements. Therefore, an unknown DACA form will be difficult to interpret to understand all of the custodian bank`s obligations. If the deposit bank form is used consistently, any lawyer who negotiates a DACA for the deposit-take institution can report changes to the DACA that may affect the deposit-take-off institution`s obligations. Why do lenders use deposit account control agreements? Often, customers do not host their deposits with their lenders and some lenders do not offer deposit accounts. Lenders enter into deposit account control agreements as additional protection against defaults and to help repay their loans. Deposit account control agreements (CAAs) are too often little taken into account by a deposit-taking institution that signs them.

It is all too common for a deposit-taking institution to lack appropriate controls, including the appointment of legal counsel, if any, to protect the deposit-taking institution`s interests when signing and implementing an ACA. This is in stark contrast to lenders who typically commission a consultant to carefully review and process DACA to ensure that the lender`s security interests in deposit accounts are refined and that the DACA commitment is transferred to the deposit-taking institution. The result is that a deposit-taking institution may expose itself to a significantly higher number of risks than necessary when closing CADs. . . .