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Large deposits can be insured by a network of banks.
AUTHORLaura Capra, Metropolitan Commercial Bank
When co-ops and condos receive large sums of money, say from an insurance company after a fire or a storm, or even after a refinancing, they often put it in their checking account. But those accounts are only FDIC insured up to a certain amount. Is this a concern?
There are options out there that boards may not be aware of. Just to give you an example, Metropolitan participates in a program where we can insure a deposit in excess of $250,000 with multiple banks that also participate in this program. And I don't know if a lot of co-ops and condos are aware that this program exists today.
Can you tell us what the Federal Deposit Insurance Corporation’s limits are, and what that means in terms of safety for a co-op or a condo?
Yes, absolutely. So under a tax ID number, your deposit is insured up to $250,000. So being a co-op or condo, if you have funds in excess of $250,000, you would have to disperse those funds through multiple deposit programs or multiple banks to get full FDIC insurance.
So if you did a refinancing or you had a disaster at your building and you got a lot of insurance money – let's say you got $700,000 – it wouldn't be safe, nor prudent, to put it into your one reserve account.
Correct. Prudent is an appropriate word. With this program that I mentioned, you can put your full $700,000 deposit with Metropolitan. We keep $245,000 with us, and then we put the excess of that deposit out with a network of banks so that that full $700,000 is fully FDIC insured. It’s a one-stop shop.
So, practically speaking, the board or the managing agent doesn’t have to worry and deal with many different banks.
Correct. You can come to Metropolitan, and we can process that transaction.
So now you've deposited the money within the network banks, and I'm doing capital improvements and I need to draw upon the money. How do I do that?
It's simple. It's just a matter of making a withdrawal or using online banking to do a wire transfer. Funds are automatically swept at the time you need to do the transaction. All that money is available to you through Metropolitan to do that transaction.
And does this program have a name?
Multiple banks offer the program. Ours happens to be called the Ultra Insured Money Market Account.