As discussions surrounding recent — and potential future — bank failures continue making headlines across media outlets, people everywhere find themselves wondering whether their hard-earned money is in safe hands. At Central Bank we think it’s important to not just place minds at ease, but to explain the specific tools and resources available to keep your money protected. For instance, Insured Cash Sweep® (ICS) is a useful option for anyone who prefers doing business with their hometown bank.
Administered by IntraFi (formerly known as Promontory Interfinancial Network), a trusted partner of more than 3,000 U.S. financial institutions, Insured Cash Sweep® allows you to maintain your current local banking relationships while enjoying the peace of mind that comes with multi-million-dollar FDIC insurance. You enjoy FDIC insurance on large balances while maintaining access to your money — and still earning interest. As an added bonus, ICS Network member banks reciprocate deposit amounts. This means that, although your funds are divided among different financial institutions, the total amount you deposit with Insured Cash Sweep goes to your primary bank for local lending.
Now that we’ve covered the “what” of Insured Cash Sweep, let’s get into the finer details. Read on for answers to common questions surrounding ICS, insights into its various benefits and how to get started.
Answers to Your Frequently Asked Sweep Account Questions
The saying goes that knowledge is power, and that’s especially true as it relates to your financial wellbeing. Here, we’ve pulled together queries we regularly receive regarding the Insured Cash Sweep (ICS) process and sweep accounts on the whole.
How Does ICS Work?
Let’s say you have a million-dollar sum you’d like to deposit. You don’t want to risk losing money in the stock market, but you do want the opportunity to earn interest. With ICS you can deposit the entire sum with a bank you already know, trust and frequent, such as Central Bank. Once deposited, your local bank will divide the funds into amounts up to $250,000, the standard FDIC maximum. It will then transfer these smaller deposits to ICS Network banks, all of which are insured by the Federal Deposit Insurance Corporation (FDIC).
Central Bank Tip: For more information about FDIC coverage, visit our blog post which focuses on just that.
Why Does ICS Work?
The FDIC will guarantee protection for deposit accounts reaching up to $250,000, so long as those accounts are housed within a financial institution that is FDIC-insured. There is no limit on the amount of money you can receive FDIC protection on. This is because any applicable limits pertain to the bank, not the account holder. In theory, you could manually open deposit accounts at a number of different banks to obtain FDIC insurance on a total larger sum.
The benefit of enrolling in ICS is that your financial institution will do that legwork for you, saving you time and hassle. Instead of receiving multiple monthly statements, you’ll just get one. And you can check your balance online through your primary institution at any time. At the same time you’re enjoying protections on large-sum accounts, you also get to work with the local bankers with whom you already have a working relationship.
Which Bank Acts as Custodian of Your Funds?
Your primary bank will be responsible for serving as custodian for your ICS deposits. So, if you regularly do business with Central Bank, that responsibility would fall to us. Sweep accounts also call for a subcustodian, which in this case is the Bank of New York Mellon (BNY Mellon). New York Mellon is the largest custodian worldwide.
How is Your Insured Cash Sweep Account Information Protected?
Insured Cash Sweep accounts are treated with the same care and consideration as any other account would be. For a sweep account with Central Bank, we would be the only institution with access to your account information.
Our local bank goes to great lengths to keep your funds and data protected. In the event that we do detect a fraud attempt, we have a team dedicated to investigating the veracity of the fraud claim, how vital information made its way into the wrong hands and what can be done to prevent similar instances in the future. That care extends to your Insured Cash Sweep account.
Central Bank Tip: For more information about your local bank’s security practices — and advice for better data protection, too — visit our Security page.
Has Anyone Ever Lost Money Through ICS?
The short answer is no! But allow us to explain. Insured Cash Sweep has been tested time and again — with billions of dollars — and was designed to comply with FDIC regulations. As of this writing we are proud to say that no ICS depositor has ever lost money in the system. In every instance where an ICS Network member bank has failed, the FDIC paid all claims for deposit insurance. (Talk about peace of mind!)
Getting Started with Insured Cash Sweep Accounts
Understanding how a system works is just the beginning. We recommend reaching out to a local banker you know and trust to determine whether ICS services are available through their institution — and if so, what your best plan of action might be. Would a demand account, which offers unlimited withdrawals, be your best bet, for instance? Or would a money market account with up to six withdrawals allowed per month make more sense? Is it best to have a mix of the two?
Use this meetup as an opportunity to get all your questions answered, discuss your unique financial goals and to come up with a plan to continue forward on the path to success. Remember, there is no cut-and-dried “correct” answer here. Instead, it’s about determining the option that best serves your one-of-a-kind needs.
Central Bank Tip: If you’d like to learn more about your ICS options before scheduling a time to talk with your banker, you can click here to download our ICS & CDARS explainer sheet!
Depositing large amounts of money through the ICS network is simple, safe and beneficial, too. And it’s an option your Central Bank team is proud to offer! If you have questions about any of the above, are interested in opening an Insured Cash Sweep account — or simply want to know more about how your local bank is here for the long haul and dedicated to keeping your funds protected, feel free to contact our team. Our banking pros would love to hear from you.