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How to Protect Your Bank Deposits

March 13, 2023

Many of MagStone Law’s clients have been affected by the collapse of Silicon Valley Bank. Like other SVB depositors, many have either moved their deposits to other banks or are in the process of doing so. However, clients continue to have concern over the safety of their deposits with their new banks. In light of recent developments and continued doubts over the soundness of the U.S. financial system, we believe such concern is warranted, and may remain for years to come. That said, in addition to moving money to a leading financial institution, there are tools that could offer depositors further opportunity to safeguard their deposits.  Below is a list of options that might be well worth considering:

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  • Ask your new bank about IntraFi Network Deposits. IntraFi® Network Deposits (formerly Certificate of Deposit Account Registry Service (CDARS)) allow companies with large deposits to spread its deposit among participating banks and help these companies keep their money insured by staying under the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 per depositor per bank. It thus allows deposits in amount exceeding $250,000 to effectively become insured by the FDIC. For more information, see https://www.intrafinetworkdeposits.com/

 

  • Ask your new bank about depositor bonds. Depositor bonds allow banks to offer depositors protection in excess of the $250,000 insured by the FDIC. These depositor bonds are underwritten by private insurance companies.

 

  • Ask whether a Depositors Insurance Fund (DIF) participating bank is right for your company. The DIF is a private, industry-sponsored insurance fund that insures all deposit above FDIC’s $250,000 limit at DIF participating banks. All deposits at a participating bank are automatically covered by the DIF. For more information, see https://www.difxs.com/DIF/Home.aspx

 

Each of the options set forth above have its pros and cons, and might not be suitable to every company. This summary is not a recommendation for any particular option and is intended solely as background information.  Questions for existing MagStone clients may be directed towards Yue (Mar) Li, markli@magstonelaw.com, Ruming (Catherine) Liu, liuruming@magstonelaw.com, or Meng (Mandy) Lai, laimeng@magstonelaw.com.

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