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