Given the media focus on the current banking environment, many organizations are taking a closer look at their depository relationships and limitations on FDIC coverage of their deposit accounts.
While in the vast majority of cases there is no cause for concern, reviewing treasury relationships, cash management structures and investment alternatives through the depository is simply a prudent exercise.
The general rule is that deposit accounts in each banking institution are insured by the FDIC up to $100,000 in the aggregate per depositor. Special limits apply to joint accounts held by individuals, IRA accounts and different types of trusts.
To address FDIC limitation concerns, depositors with large cash holdings outstanding at any time may wish to consider the CDARS® (Certificate of Deposit Account Registry Service) relationship, which enables banks to distribute funds on deposit which exceed FDIC coverage limitations to other FDIC-insured institutions in order to secure increased coverage. The CDARS® system is subject to certain limitations and may not work for all depositor needs, but may be worth exploring. See your banker for details.
Other options include bank-related "sweep" accounts which invest excess funds over a pre-set limit in outside investments (which are obviously subject to investment risk but are outside the assets of the institution should problems occur), as well as structured account holdings which take advantage of depositor and affiliate relationships and the multiple FDIC insurance coverage that accompany each depositor's account relationship.
Organizations reviewing their depository relationships may want to consult with their bankers to discuss available cash management alternatives.