By Marge Baker - People's/Division of BankNorth
Banking isn’t what it used to be ten (10) years ago. In today’s investment environment, sometimes we look for rate not protection. This is not always in the best interest of the taxpayers’ dollars.
A couple of helpful reminders for public units are:
· Accounts may be insured up to $200,000 through FDIC coverage. The rule applies to federal, state, county, municipal and political subdivisions. The following is a summary of the insurance parameters:
Up to $100,000 in the aggregate for all time and savings deposits (interest
bearing accounts);
Up to $100,000 in the aggregate for all demand deposits (non-interest bearing
accounts).
· Some institutions offer third party insurance through an outside vendor that will protect principal and interest amount on deposit in the untimely event the institution should have to close its doors. Insurance is account specific.
· Joint Custody is another acceptable way to protect deposits held at an institution. Securities are held in separate custodial or fiduciary accounts through a book entry system at the Federal Reserve Bank. Protection is based on the TIN of the municipality.
· Repurchase Agreements, or Repo, is a contract to sell and subsequently repurchase securities at a specific date and price. There are two types of Repurchase Agreements: Overnight and Term Agreements. Overnight Agreements are typically used in conjunction with Cash Management Accounts and Term Agreements have a specific maturity.
Whatever vehicle you choose to use to protect funds, make sure you know who you are dealing with and that they have the municipality’s best interest in what happens to your funds.
Marge Barker, Vice President
Government Banking
Peoples / Division of Banknorth
800-532-6654