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The Resource for the Global Finance Profession

FDIC: Temporary Unlimited Deposit Insurance Set to Expire

  • By Staff Writers
  • Published: 2012-11-06

The Federal Deposit Insurance Corporation today reiterated its warning to corporates: "Absent a change in law, effective January 1, 2013, noninterest-bearing transaction accounts no longer will be insured."

The Dodd-Frank Act created the temporary deposit insurance to help corporates find safe haven for their cash. Unless Congress acts, the insurance will revert to $250,000 per account.

The 2012 AFP Liquidity Survey, published in July, found that "as companies look ahead and consider their investment options beyond the end of the year when unlimited FDIC insurance on non-interest bearing accounts is set to expire, many will have to make some critical decisions about their short-term investment allocation mix. To what extent will organizations re-allocate their short-term investment portfolio from bank accounts into other investment vehicles? And if they do move this cash out of banks, where would these balances flow to?" 

"Many of the Treasury professionals I spoke with at conference mentioned this was a key area of focus for their companies," said Tom Hunt, CTP, Director of Treasury Services with AFP. "For most, it becomes an exercise of prudent counterparty risk management and determining alternative investment options such as money funds and treasury securities. It all depends on the level of comfort for many, but with the potential headline risk with money funds and the primary focus on safety of principal, many discussed their options."

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