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Pledging Securities to Secure Customer Deposits

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We have a customer that wants to set up a money market account with balances way over the insurance limits. He wants us to pledge securities that the bank owns to provide coverage for the amount over the FDIC insurance. We have repo sweep accounts that work that way, but they are not reported as deposits. In addition, we do a daily disclosure to the customer of the securities pledged. I am having problems locating regs pertaining to pledging securities to protect a specific account above the FDIC insurance amount. I feel that it would not be allowed, but need to find where it says that.

I have been discussing this issue with the FDIC. National banks cannot have securities pledged for excess FDIC coverage. Banks that are not national banks may or may not be able to do this - depending on state law.

First published on 2/09/04

First published on 02/09/2004

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