Friday, November 28, 2008

Distributors Should Take Note of FDIC Temporary Liquidity Guarantee Program

On October 14, 2008, the FDIC announced the Temporary Liquidity Guarantee Program to strengthen confidence and encourage liquidity in the banking system. All eligible banks are covered under the program unless they opt out by December 5, 2008 (extended from November 12, 2008). Coverage is free until December 5, 2008, then will be 10 basis points thereafter for those entities that have chosen NOT to opt out of the program.

The Transaction Account Guarantee is one part of the program and it essentially provides for a temporary unlimited guarantee of funds in non-interest bearing transaction accounts at FDIC insured institutions unless they opt out by December 5, 2008. This coverage became effective on October 14, 2008 and will continue through December 31, 2009.

Please note that this additional coverage only applies to non-interest bearing accounts. If an institution uses sweep arrangements that result in funds in a non-interest bearing transaction account being transferred to an interest-bearing account, that account will only be insured up to $250,000.

Since many members use sweep accounts, it might be appropriate for HARDI members to discuss this with their bank.

Here is the November 3 FDIC press release. Here is the deadline extension notice from the Federal Register and here is the original regulatory language.

Special thanks to Jay Glass and Karen Madonia of ILLCO, Inc. for this information.

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