Glossary
Aggregate FDIC Insurance
Short definition:
Aggregate FDIC insurance refers to the total amount of FDIC insurance a depositor may access when funds are placed across multiple FDIC-insured banks, subject to applicable limits and conditions.
Expanded explanation:
Through services such as ICS and CDARS, customer funds can be divided into amounts under the standard FDIC insurance maximum and placed at multiple network banks. This structure can make funds eligible for FDIC insurance at each participating institution, while allowing the depositor to work through one financial institution. The amount of aggregate insurance a service can provide access to greatly depends on the network’s size and reliability.
Why it matters:
Aggregate FDIC insurance can help businesses, nonprofits, government entities, and individuals safeguard large cash balances without opening and managing multiple bank relationships.
Related terms:
FDIC Insurance; ICS; CDARS; Network Banks; Pass-Through FDIC Insurance
Brokered Deposits
Short definition:
Brokered deposits are deposits obtained, directly or indirectly, through a third party that facilitates deposit placement between depositors and banks, subject to regulatory definitions and treatment.
Expanded explanation:
Brokered deposit treatment can affect how deposits are reported and evaluated by regulators. The FDIC limits the amount of brokered deposits an institution may accept. Brokered deposits can offer liquidity but carry more risk than core deposits due to interest rate sensitivity. Most reciprocal deposits are treated as core, nonbrokered deposits up to the lesser of $5 billion or 20% of liabilities for a well-capitalized bank.
Why it matters:
Understanding brokered deposit rules helps banks evaluate funding sources, regulatory reporting treatment, and balance sheet strategy.
Related terms:
Reciprocal Deposits; Core Deposits; Deposit Network; Regulatory Reporting
Cash Sweep
Short definition:
A cash sweep is a service or mechanism that automatically transfers excess funds from one account into another account or investment based on predefined rules.
Expanded explanation:
Cash sweep arrangements are commonly used to optimize liquidity, returns, or insurance coverage by moving balances above a set threshold into designated accounts. Depending on the structure, swept funds may be placed into deposit accounts, money market funds, or other bank offerings. The features, risks, and insurance eligibility of swept funds vary based on the specific service and underlying placements.
Why it matters:
Cash sweeps can help organizations manage large balances efficiently but understanding where funds are placed and how they are treated is essential for evaluating liquidity, risk, and potential insurance coverage.
Related terms:
Sweep Account; Liquidity; FDIC Insurance; Insured Cash Sweep
