Not All Commercial Banks are the Same

January 27, 2015

Big banks such as J.P. Morgan Chase & Co., Citigroup, and Bank of America are telling their largest customers- including major corporations and hedge funds- that they will begin charging fees on accounts that have been free in the past, the Wall Street Journal reports.

These measures are a result of new regulations that went into effect on January 1, which make it onerous for banks to hold large deposits. The regulations are intended to safeguard the financial system. In the process, however, they will force companies to look for alternatives to their current banks.

Responses to the new regulations have been varied. Some corporate clients have been advised by bankers to break up big deposits across several banks. Others are starting to use alternate products offered by banks or created by asset managers, and some are negotiating to reduce the new fees.

By contrast, the Business Bank of Texas works with customers to manage big deposits. We have the capital and liquidity to handle large accounts. Recently, we announced two new products to help our customers secure deposits over the $250,000 FDIC limit.

An Insured Cash Sweep (ICS) Account provides FDIC protection on your deposits and earns interest. Here's how it works: the FDIC insures up to $250,000 of a customer’s deposit accounts in a given insurable capacity at an FDIC-insured institution. Your ICS funds are divided into amounts under the standard FDIC maximum and placed with other ICS Network members– each an FDIC-insured institution. This makes your deposit eligible for FDIC insurance at each member bank. By working directly with our bank, you can access insurance through many.

With Business Bank of Texas, you do not pay a fee to use this service, and you receive one consolidated monthly account statement from us. You can also see online where your funds are at all times.

Another solution for large deposits is Certificate of Deposit Account Registry Service (CDARS). CDARS is one of the safest and smartest investment vehicles for investors looking to protect their large-dollar investments while earning CD-level returns.

CDARS works a lot like ICS. When you place your large-dollar deposit with Business Bank of Texas, a member of the CDARS Network, your deposit is divided into smaller amounts and placed with other CDARS Network members– each an FDIC-insured institution.

Then, those member institutions issue CDs in amounts under $250,000, so that your deposit is eligible for FDIC insurance at each member bank. By working directly with one financial institution– Business Bank of Texas– you can receive insurance through other banks in the network.

How is your business planning to store its cash in the coming year? Send us a note to let us know.


Topics: The Corner Office

Ed Lette

Business Bank of Texas

Ed Lette is a Founder of Business Bank of Texas. Serving as a licensed CPA since 1983, Ed’s extensive experience in the banking industry has led him to become the founding president of four national bank charters including Business Bank of Texas, N.A., and the chief financial officer of five national banks during his 45 year career. Ed serves as director of the Texas Bankers Association District 4, chairman of the Executive Advisory Council to the School of Business at Texas Lutheran University, and is a life member of the Texas Association of Business.
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