Business Treasury function will be more complicated in 2013

The Transaction Account Guarantee Program provided for a temporary full FDIC guarantee for funds held at FDIC-insured depository institutions in noninterest-bearing transaction accounts above $250,000. This coverage began on October 14, 2008, during the height of the financial crisis, and has been extended in steps through December 31, 2012.

Last week, the Senate failed to advance a bill (S. 3637) that would continue the program. It appears unlikely that unlimited FDIC coverage will be extended as part of the numerous other negotiations that Congress currently is addressing.

Many claim that the unlimited guarantee has allowed community banks to compete for business deposits. But, putting aside the “too big to fail” implicit protection that the U.S. government has effectively been providing some of the largest banks, some of the largest banks also have substantial risk. Consequently, the solution for business treasurers will be more complicated than simply moving balances to the largest banks.

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