Finding the Sweet Spot for Cash Reserves

May 29, 2018


Good, fast, and cheap: pick any two. This tongue-in-cheek warning from business and project management circles points out that decisions often involve trade-offs. If you want it good and fast, it won’t be cheap; if it is fast and cheap, it may not be good, and so on.

There is a similar trinity of factors in financial asset management: Safety, liquidity and yield. Smart cash managers seek to find the best balance to match their business goals and risk appetite.

For company cash reserves, the logical choice is to favor safety and liquidity so that funds are available for any short-term needs or contingencies which may arise. Typically, reserves are kept in interest bearing bank deposits or money market funds. This keeps funds ready and available, but usually low yielding.

With interest rates on the rise, it is becoming more costly to leave reserves in non-interest bearing or low yielding accounts. We are seeing more interest from business owners and corporate cash managers in putting their reserves to work. Finding the right balance of safety, liquidity, and yield is more important than ever.

Business Bank of Texas offers the Insured Cash Sweep (ICS) account that addresses this need. The ICS program is administered by Promontory Interfinancial, the same company that offers the well-known CDARS program for maintaining deposit insurance on large CD deposits.

With an ICS account, excess funds can be swept out of a corporate operating account and into a high yield savings account. Funds are placed into a network of banks in amounts below the FDIC deposit insurance limit of $250,000 ensuring safety. Funds can be withdrawn at any time without penalty, meeting the need for liquidity.

The ICS program allows depositors to earn a competitive rate on deposits while maintaining FDIC coverage on millions of dollars. Corporate managers can chose to forego the “safety” of “too big to fail” banks and their stingy rates. Our customers can have the best of both, the service and attention of a dedicated, business oriented bank, and the highest level of safety available.

As of April 22, 2018, Business Bank of Texas is paying a 1.50% interest rate on ICS savings option accounts. For depositors managing liquid cash reserves, a Business Bank of Texas ICS account strikes a new and better balance.

Download our fact sheet  to learn more about  Insured Cash Sweeps

Dwayne Kolly

Business Bank of Texas

Dwayne Kolly brings a wealth of financial management and operations experience to Business Bank of Texas. Kolly has served community banks in south and central Texas for nearly 30 years, and is the bank’s CEO and Chief Financial Officer. He is a graduate of the Southwestern Graduate School of Banking at SMU (1993).
Read more articles from Dwayne Kolly

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