A Co-op Consolidates – and Protects – Its Reserve Fund

Bank accounts are typically insured by the Federal Deposit Insurance Corp. (FDIC), which protects depositors in case a bank suddenly goes out of business. But FDIC insurance covers a maximum of $250,000 per depositor, per bank. When a co-op or condo’s reserve fund starts adding up to millions, it can mean dividing the money among several accounts at multiple banks to keep the money safe.

But there’s another way. Metropolitan Commercial Bank (MCB), an FDIC-insured bank headquartered in New York City, has partnered with several other banks to create a new “Ultra Money Market” bank account that can hold more than $250,000 and still provide FDIC insurance for all the funds. When the amount of money in one of MCB’s Ultra Money Market accounts rises above the FDIC limit, MCB transfers the extra money to one or more of its partner banks, into accounts that are under the FDIC’s $250,000 limit, so that they are still fully insured.

“This allows our clients the safety and guarantee of FDIC insurance while still offering a highly competitive yield,” says Laura Capra, senior vice president and head of retail banking for MCB. “It is a reciprocal deposit program.” The partner banks transfer an identical amount of money, dollar for dollar, back to MCB, from their own accounts that might otherwise be over the FDIC limit. That way, all of the banks continue to have the same amount of money on their balance sheets to make investments, such as loans, and all the money in the program is fully FDIC-insured.

As result of this web of partnerships, boards may have fewer bank statements to read every month. One 350-unit Queens co-op was able to consolidate six accounts into a single Ultra Money Market account.