Treasury Bank (Washington D.C.; $50 million) joins Mark Twain Bank, now part of Mercantile Bank
(St. Louis, MO; $19 billion; 440,000 ATM cards) in offering foreign currency time deposits (FCTD). Citibank and First Union also offer foreign currency-denominated CDs but not through the Internet. Treasury Bank’s CDs are marketed by its Treasury WorldWide division at www.treasuryworldwide.com. The first page (screenshot above) shows a map of the world complete with current 90-day CD rates for each currency. The day we visited (May 7), 90-day rates varied from 1.42% for CDs denominated in Swiss francs to 17.5% in Mexican pesos. For comparison, the U.S. dollar rate was 5.10%.

Unlike Mark Twain’s CDs which carry full FDIC protection, Treasury Bank does not hold the deposits. The money is brokered off to participating banks in each country; therefore, no FDIC protection. However, in many cases the country where the deposit is being held offers similar safeguards through insurance and/or strict oversight. Complete details on deposit protection and tax policies are provided via links on www.treasuryworldwide.com/twwframe.html. Depositors incur all the risks of currency fluctuations.

Along with the 90-day CDs, the bank offers 30-, 180-, 270- and 365-day versions for most currencies. Minimum deposit amount for each FCTD is $20,000. Most of the bank’s fee income will come from a 25 basis point management fee on rollovers.

Fee Income Potential

This is exactly the type of niche product we expect to see more of, both from large banks exploiting their infrastructure advantages and from smaller players looking to boost their returns. Treasury Bank can use the CDs to boost its presence in the lucrative foreign national market in the Washington D.C. area and pick up hot money from around the world. Since the bank doesn’t hold the funds, it’s a pure fee-income business.

Applications can be submitted online or through a print-and-mail form. Funds can be transferred by wire or sent by mail. According to Financial NetNews, Treasury Worldwide is receiving just 365 visitors per day. That will increase as the site becomes better indexed by the big search engines, and gains incoming links from the thousands of personal finance sites.

Analysis

We like what Treasury is doing. The Web site doesn’t beat around the bush. They sell FCTDs and that’s all. No wading through pages of text about merchant card services and student loans before finding the CD area. Rates are displayed on the front page, and clear links allow investors to find more information on specific CDs quickly. And the online form makes it easy to buy.

If Treasury Worldwide truly wants deposits from all over the world, they will need to invest in multilingual capabilities and boost the amount of detail on the Web site. Most investors will need more information about Treasury Bank before wiring off $20,000+. Other banks looking to implement niche services should consider posting similar single-purpose Web sites.

Contacts: Frank Trotter is SVP International Markets at Mark Twain, 314.889.0712. At Treasury Bank, Thomas W. Lynn is CEO; Lecia Smith is Managing Director Treasury WorldWide, 202.296.1300.