November 12, 2012
Authored by: Robert Klingler
In the Fall of 2008, the FDIC implemented the Transaction Account Guarantee program, which permitted banks to opt-in to a voluntary program which provided an unlimited guarantee for deposits held in non-interest bearing transaction accounts, as well as certain low-interest bearing accounts. In 2010, the Dodd-Frank Act replaced this voluntary Transaction Account Guarantee with an across the board temporary increase in FDIC insurance to provide unlimited insurance for deposits held in non-interest bearing transaction accounts through December 31, 2012.
Although the initial program was done under the FDIC’s existing statutory authority, the FDIC has taken the position that only Congress can now extend the unlimited insurance program. Accordingly, unless Congress acts prior to December 31, 2012, as of January 1, 2013, deposits held in non-interest bearing transaction accounts will be subject to the existing $250,000 cap on FDIC insurance.
The possibility of ending the unlimited insurance creates an obligations for banks and depositors to analyze their deposits and plan for possible changes.