Are the deposits at my bank FDIC-insured?
Deposits held at FDIC-insured depository institutions are insured up to $250,000 per depositor for deposits held in the same “right and capacity” (see below).
Deposits carried on the books of records of a foreign office of a US bank, including those that are dually payable in the US or at a foreign office, are not FDIC-insured.
Deposits at a foreign subsidiary of a US bank are not deposits of the US bank for any purpose and are not FDIC-insured. Clients with a relationship with Silicon Valley Bank UK should refer to our FAQ on Silicon Valley Bank UK rescue.
Deposits payable solely at a foreign office are not FDIC-insured, are not considered deposits of the bank for purposes of the Federal Deposit Insurance Act, and have a lower priority of payment in a receivership proceeding than the bank’s deposit obligations.
FDIC deposit insurance is based on the “right and capacity” in which a depositor holds a deposit. What does this mean?
“Right and capacity” refers to the legal basis on which a deposit is owned. The ownership categories for determining right and capacity include:
- Single accounts
- Joint accounts
- Revocable trust accounts
- Irrevocable trust accounts
- Certain retirement accounts
- Employee benefit plan accounts
- Business or organization accounts
- Government accounts (public unit accounts)
- Accounts held by a depository institution as the trustee of an irrevocable trust
All deposits of a depositor within a particular ownership category are aggregated and insured up to the $250,000 limit.
Different legal entities, including affiliates, are generally considered separate depositors as long as they engage in “independent activity,” meaning the entity is operated primarily for some purpose other than to increase deposit insurance.
What should I do if I have uninsured deposits at a bank?
For information about best practices companies should consider to ensure they manage their cash and investment risk effectively, please see our detailed piece about cash management and investment policies.
I have a money market account at my bank. Is it a deposit or a money market mutual fund? What’s the difference?
A money market deposit account (or money market savings account) is a type of deposit account. Funds held in a money market deposit account are deposit obligations of a bank.
By contrast, shares of a money market mutual fund represent an interest in a mutual fund and are not bank deposits. A bank may hold shares of a money market mutual fund as custodian for a customer; or the bank, acting as agent for the customer, may sweep deposits into money market mutual funds. If the relevant account documentation establishes that a bank is acting as custodian or agent, as applicable, for the customer, a customer should be able to claim that it is the owner of the mutual fund shares. You can determine whether you have a money market deposit account or are holding money market mutual-fund shares by looking at account documentation and statements. A money market deposit account would typically be subject to a deposit account agreement.
I have a money market mutual-fund sweep agreement with my bank. Are my funds safe?
As long as the sweep agreement clearly establishes that the bank was holding mutual fund shares as the customer’s agent, the agreement should enable the customer to claim that it owns the money market mutual-fund shares.
Customers who transacted in mutual-fund shares in the days leading up to a bank’s failure may be holding deposit obligations of the bank and not mutual fund shares. In particular, it is common for funds in sweep account programs to remain at the bank overnight. Funds swept out of deposit accounts at the bank prior to its failure for investment in money market mutual fund shares would be considered deposits if the trade did not settle with the mutual fund before the bank’s failure. Similarly, funds from a redemption of mutual fund shares occurring prior to the bank’s failure may be considered deposits.
Can I instruct the mutual fund company or its transfer agent to move my mutual fund shares purchased through a sweep program to another bank custodian or broker, or redeem the shares and send the funds to another bank?
No. Bank sweep programs are typically structured so that the bank holds the mutual fund shares as an intermediary, with ownership registered on the books of the mutual fund’s transfer agent in the name of the bank acting as agent and/or custodian. In this case, the mutual fund company and its transfer agent would not recognize the customer’s interest in the shares.
I have an investment management account at a bank, with custody at another bank. Are my funds safe?
If you entered into an agreement for advisory services provided by a registered investment adviser affiliated with a bank, the affiliate must use a qualified custodian (e.g., a bank or broker–dealer) to hold your investments. Please consult your agreement to determine the identity of your custodian. If you entered into an agreement for advisory services provided by the bank, as long as the agreement clearly establishes that the bank was holding your investments as your agent, the agreement should enable you to claim that you own those investments. In either case, uninvested cash and new cash contributions to your account might be held at the bank. Please consult your agreement to determine how such cash is held. Cash held at the bank will be a deposit.
I have an overnight repo sweep arrangement with my bank. Are my funds safe?
In a properly executed repo sweep arrangement, the customer should have a perfected interest in government securities at the close of the bank’s business day and not a deposit obligation of the bank. However, there are two very important risks to consider:
- The FDIC generally respects a bank’s customary cutoff times for purposes of determining end-of-day deposit ledger balances. However, in its receivership rules, the FDIC has reserved the right to establish an earlier cutoff time, which means a repo sweep may not have been properly completed before the cutoff time in the event of failure. In addition, the time preceding a bank failure can be chaotic, which creates operational risk and the possibility that a repo sweep may not have been properly created before the bank failed. Funds remaining at the bank that were not invested in government securities when the bank failed are deposits.
- Funds swept into repos are generally swept back to the bank the following morning, which would create daylight exposure if the bank were to fail while the funds are on deposit.
I’m holding funds in an account that is maintained “for the benefit” of customers or third parties. Is “pass-through” deposit insurance available?
A person acting as an intermediary for third parties and holding funds in a fiduciary, custodial, or nominee capacity for others in a deposit account at an FDIC-insured depository institution can use “pass-through” deposit coverage to increase the amount of available deposit insurance covering the account. Pass-through coverage means the FDIC will look through the nominal depositor and recognize the interest of each beneficial owner of the funds for purposes of determining the amount of deposit insurance available. For more details, please see our article about pass-through deposit insurance.
These arrangements should be reviewed to ensure they meet all applicable requirements.
What is the Bank Term Funding Program (BTFP)?
The BTFP is a liquidity facility being made available by the Federal Reserve System to enable any US federally insured depository institution (including a bank, savings association, or credit union) or US branch or agency of a foreign bank that is eligible for primary credit at the Federal Reserve to borrow funds.
Advances from the BTFP must be fully collateralized with eligible collateral and will be made with recourse to the borrower. The facility is being backstopped by up to $25 billion from the US Treasury Department’s Exchange Stabilization Funds. Importantly, collateral valuation will be at par, which means financial institutions will be able to pledge securities to support borrowings without taking any haircut, even if the current market value of the securities pledged is below par. Eligible collateral includes US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets provided that such collateral was owned by the borrower as of March 12, 2023. The facility will be available until at least March 11, 2024, and advances will have a term of up to one year.
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