Small community banks typically lack a sufficient deposit base to justify establishing their own connection to the Federal Reserve's Fedwire system for direct participation in the overnight repo market. However, even banks with just a few million dollars in deposits can benefit from earning interest on their depositors' funds.
That's where banker's banks step in, pooling deposits from smaller banks and entering into overnight repurchase agreements. "We offer all different types of correspondent services to community banks, said Laura Gibboney, senior vice president and CFO at Atlantic Central Banker's Bank, Camp Hill, Pa. "By combining the volume of a large number of community banks, we can get reduced pricing on services, which allows our customers to offer the same services as the larger financial institutions at the same competitive prices."
Naturally, information security issues are as important for a banker's bank as they are for community savings banks or thrifts. Since 1991, Atlantic Central Banker's Bank has used FIConnect software from Atlanta-based SBT Business Technologies to secure its connection to both the Federal Reserve and to its community bank customers.
FIConnect competes with the Federal Reserve's own Fedline product with a comparable set of features, including name and password protection, serial number protection, digital certificates, and most recently, screensaver protection. "If a user on the client or server side leaves the computer unattended while logged in, it'll automatically put up a password-protected screensaver, forcing them to log back into the system before they use the machine," said John Holden, president and CEO of SBT Technologies.
The software also allows for dual control, allowing individuals to act as either the creator or verifier of a wire transfer, but not both. That's an improvement over a prior version of the software, which required individuals to take on a single designated role, thereby giving FIConnect a technology benefit as well as a human resources advantage. "We have about 11 people in the actual operations area, and if you have people out sick or on vacation, and they're either one or the other, you limit yourself to who's available," said Gibboney. "If the employees have access to do both without compromising security, you don't have to go in and alter their authorizations."
"You set up an environment and keep it stable," added Gibboney.