What Is the Institutional Deposits Corporation (IDC)?

The Institutional Deposits Corporation (IDC) oversees the Money Market Account Extra (MMAX) program. The IDC was founded in 2000 as a way for investors to make large deposits and still receive Federal Deposit Insurance Corporation (FDIC) insurance for the entire amount. The creation of a network of large banks made it easier for the government to secure large, individual deposits. Banks included in the IDC network have to be capitalized, per the FDIC's mandated financial ratios. As of 2011, the massive amount deposit limit is $250,000 per bank.

The MMAX provides depositors with an efficient way to make large deposits and secure FDIC insurance. Essentially, the IDC network splits up vast deposits of money among various banks to keep each bank under the protection limit to stay insured by the FDIC.

Key Takeaways

  • The Institutional Deposits Corporation (IDC) splits up massive deposits between banks in its network to ensure FDIC insurance for amounts greater than $250,000.
  • It was founded in 2000 and consists of more than 50 banks spread across the country.
  • IDC deposits offer several advantages, such as ensuring insurance for large amounts and streamlining of account management tasks for such amounts.

Understanding the Institutional Deposits Corporation (IDC)

The Institutional Deposits Corporation (IDC) uses a network of large banks to separate up the large deposit of funds which allows for FDIC coverage. Before IDC, each deposit at a bank was insured for up to $250,000. Any deposits over that amount would not receive FDIC protection.

Now, the IDC network splits up more massive deposits between banks. Each bank gets $250,000, so insurance can be guaranteed. The FDIC protection applies to qualified accounts, so if you have up to that amount in a bank account and the bank fails, the FDIC makes you whole from any losses you suffered.

The MMAX program takes that sum up to an even larger scale by allowing community banks to accept up to five million dollars in money market deposits from a single person or commercial customer. The funds are then distributed among up to 50 other banks within the IDC network, with each bank holding no more than $100,000 at a time.

Custodians, such as Wells Fargo and Pacific Coast Bankers' Bank in San Francisco, California, manage the MMAX structure.

The Advantage of IDC deposits

Expanded FDIC coverage is attractive to depositors, particularly when financial markets are experiencing significant volatility. Firms, such as commercial entities, public agencies, and individuals, want a safe place to park cash. The deposit is divided up between a network of more than 50 IDC network banks nationwide to meet FDIC insurance requirements. Allowing the funds to be distributed across a network of banks helps keep both principal and interest secure during any unsettled or scary financial crises. The IDC network also streamlines account management because it ensures that account holders only have to deal with a single statement and a single rate for the entire transaction.

Wells Fargo is the custodian for the MMAX account structure. By dividing a single large deposit into smaller amounts among network banks, lenders can ensure that the depositor's principal and interest are eligible for full FDIC protection. MMAX account holders can make up to six withdrawals from their account monthly. MMAX can also be helpful for banks, as it makes large deposits possible for their customers and allows them to send on deposits or buy back equal or less than amounts.