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Insured Deposits Are Safe Bet for Corporate Treasury

Jan 29, 2021
Posted by: Stearns Bank
Chart depicting deposit growth overtime

In a corporate treasury department, leaders have a fiduciary responsibility to the owners and shareholders. The treasurer is charged with managing cash to optimize shareholder return, effectively manage risk and protect the financial assets of the organization.

Given these challenges, an ICS or CDARS account is a sound decision for managing high-balance corporate funds.

ICS and CDARS accounts enable you to receive full protection of FDIC insurance beyond the statutory limit of $250,000 per bank. This extended coverage is possible because deposited funds are distributed among multiple banks, with each bank receiving the maximum FDIC protection. The ICS and CDARS programs enable financial managers to deposit funds in excess of the FDIC maximum, with all the benefits of a single deposit and one banking relationship.

A key advantage of managing high-balance deposits through these programs is risk management. The risk of bank insolvency or failure is very small. However, distributing funds, and risk, among multiple banks can be a prudent strategy. Deposits with each of the participating banks are fully insured to the FDIC limit. Risk to the depositor or investor is close to risk-free U.S. treasuries, with the convenience of a single bank relationship. This type of approach may be prescribed in the corporate charter or by the finance committee of the board of directors.

Spreading funds across multiple community banks brings socio-economic benefits by supporting local communities. Community banks are a critical source of investment capital for small businesses and entrepreneurs. Corporate treasurers and boards of directors appreciate knowing their liquid assets are being invested back into the community, supporting local business and job creation.

The ICS and CDARS programs provide stability and liquidity not available with equities, bonds or money market accounts. CDARS accounts are CDs with maturities of one year up to five years typically. ICS accounts function like a bank savings account, with periodic withdrawals permitted. These features make ICS and CDARS a perfect solution for cash management strategies focused on safety, liquidity and access to funds.

The CDARS program offers advantages of a CD, but on a larger scale. With full FDIC protection of invested funds exceeding the single-bank limit, fund managers enjoy a higher rate of return in exchange for slightly longer maturities.

As financial managers take on broader responsibilities, including a role in corporate strategy, they appreciate the ability to manage their ICS and CDARS accounts through a single banking relationship. Although funds are distributed among multiple banks for full FDIC protection, ICS and CDARS account information is available from a single login. From your secure dashboard, you can review account balance, accrued interest, transaction history. The dashboard gives treasurers a single source for reporting to senior corporate leaders, CFO and board committees.

An ICS/CDARS account with Stearns Bank has the added advantage of personal service. At Stearns Bank, account holders are not anonymous or taken for granted. As an account holder you will receive a quick, personal response to inquiries with the level of attention you would expect at a boutique bank.

With personal service comes enhanced fraud detection and vigilance of threats. The Stearns Bank account team is specially trained to recognize suspicious account activity and early signs of fraud. We will consult with you personally about emerging threats and help you take preventive action against bad actors. Our awareness and prevention can help you avoid financial loss via fraud or theft.

Today’s most successful organizations are managing expenses carefully, with emphasis on minimizing fees and holding the line on recurring costs. An ICS or CDARS account with Stearns Bank can be a cost-effective solution compared to other cash management options – including money market and short-term securities. In a time of tight margins and careful expense management, driving fees as low as possible is a prudent approach.

Recovering from pandemic-related shutdowns, the economy may remain sluggish through 2021. Rather than a full-steam recovery, the marketplace may sputter with short bursts and setbacks. In a turbulent business environment, safe and secure may be the preferred cash management strategy. With ICS and CDARS, deposits are fully protected by FDIC insurance while giving financial managers access to their cash.

As the economy picks up steam through the year, new opportunities may emerge. Organizations will want flexibility in accessing funds so they can react quickly. With consumer behavior changing and new industries emerging, you may want immediate access to funds for business expansion or acquisition. The ability to divert cash quickly allows you to assert market leadership and outflank the competition.

On the other hand, if a business line or market segment is shrinking, you may want to jettison underperforming parts of your business and park the funds in a safe, short-term account. This enables you to quickly reinvest when a better opportunity presents itself. An ICS account enables you to deposit these funds in a bank account, with full FDIC protection and all the benefits of a single banking relationship.

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