End of FDIC Unlimited Insurance: Where Will Companies Stash Cash?
Part of the problem, of course, is the potential counterparty risk in some short-term investment vehicles, such as certain money market funds. Many firms moved funds out of MMFs and into non-interest-bearing accounts when the unlimited FDIC insurance became active in 2010. But counterparty risk has been a central concern for corporate treasurers since the crisis first hit back in 2008, and any move back into MMFs will require a big jump in time and resources spent on understanding and managing that risk. In an on-site interview with Global Finance, Bob Stark, VP of strategy at solution provider Kyriba, noted: “With the FDIC insurance ending soon, companies in the US are not only worried about where to park their cash, but also what that will mean from a counterparty risk perspective if they move it back into MMFs, and how to measure that risk.”
But not all companies are concerned about the end of FDIC coverage. In my opinion, it's not impacting us. I would say two years ago or a year and a half ago it would probably have had a bigger impact, because there was greater concern than there is today,” noted Jack Spitzer, assistant treasurer of Starwood Hotels & Resorts Worldwide, in a feature on this topic in our September issue. “In 2008–2009 I was very much interested in that sort of backing to make sure there was some sort of fallback in case any of our bank relationships failed. I think time has hardened me from a fear perspective—there is no longer the same level of concern.