FDIC | Banker Resource Center: Liquidity and Funds Management (2024)

Banker Resource Center

Liquidity reflects a financial institution's ability to fund assets and meet financial obligations. It is essential to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth. Funds management involves estimating liquidity requirements and meeting those needs in a cost-efficient manner. To mitigate funding stress, it is important that institutions maintain sufficient levels of liquid assets and access to borrowing lines and other stable sources of funding to meet expected and contingent liquidity demands.

Laws and Regulations

Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.

Supervisory Resources

Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe and sound operations.

  • Contingency Funding Plans Addendum was issued by the agencies on July 28, 2023. This updated guidance reminds depository institutions to maintain actionable contingency funding plans that take into account a range of possible stress scenarios
  • Funding and Liquidity Risk Management Interagency Guidance emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets and a formal contingency funding plan
  • Brokered Deposits may have an effect on liquidity. For useful resources related to liquidity matters, refer to the Brokered Deposits page for more information regarding brokered deposit and interest rate definitions and restrictions applicable to all FDIC-insured institutions under the brokered deposit rule that became effective on April 1, 2021
  • Interagency Statement on the Use of Capital and Liquidity Buffers issued in March 2020 encourages banks to use capital and liquidity buffers to support households and businesses
  • FAQs on Statement Regarding the Use of Capital and Liquidity Buffers issued in March 2020 clarifies the agencies' statement encouraging the use of capital and liquidity buffers to support households and businesses
  • Frequently Asked Questions for financial institutions affected by COVID-19 question 6 addresses sales of held-to-maturity securities for liquidity purposes
  • Frequently Asked Questions address identifying, accepting and reporting brokered deposits
  • Correspondent Concentration Risks Interagency Guidance outlines practices for identifying, monitoring, and managing correspondent concentration risks between financial institutions
  • Managing Sensitivity to Market Risk in a Challenging Interest Rate Environment re-emphasizes the importance of developing a comprehensive asset-liability and interest rate risk management program
  • Interagency Guidance on Funds Transfer Pricing Related to Funding and Contingent Liquidity Risks describes risk management practices for large bank funds transfer pricing programs
  • Frequently Asked Questions address the LCR, which applies to certain large and complex banks
  • The Use of Volatile or Special Funding Sources by Financial Institutions that are in a Weakened Condition reminds management to oversee operations in a way that stabilizes the risk profile and strengthens financial condition
  • Use of The Federal Reserve's Primary Credit Program in Effective Liquidity Management highlights the importance of updating contingency plans and ensuring collateral arrangements are appropriate
  • Section 6.1 — Liquidity and Funds Management of the Risk Management Manual of Examination Policies discusses liquidity risk, components of effective liquidity and funds management programs, and examination processes and rating criteria used for safety and soundness examinations

Other Resources

Supplemental information related to safe-and-sound banking operations.

  • FDIC's Supervisory Insights — Summer 2017 article “Community Bank Liquidity Risk: Trends and Observations from Recent Examinations”
  • FDIC's Supervisory Insights — Summer 2009 article “A Year in Bank Supervision: 2008 and a Few of Its Lessons” highlighting lessons learned from the 2008 financial crisis
  • Section 1506 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Study to evaluate deposits was submitted to Congress in July 2011


Informational videos and recordings of prior webcasts and teleconferences.

FDIC | Banker Resource Center: Liquidity and Funds Management (2024)


What is the difference between liquidity management and fund management? ›

Liquidity is essential to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth. Funds management involves estimating liquidity requirements and meeting those needs in a cost-effective way.

How long does FDIC have to pay you back? ›

The truth is that federal law requires the FDIC to pay deposit insurance "as soon as possible." For insured deposits — those within the deposit insurance limits — the FDIC almost always pays insured depositors within a few business days of a closing, usually the next business day.

What is the FDIC liquidity risk? ›

Rising interest rates and changing economic conditions may contribute to increased liquidity risk. On-balance sheet liquidity includes noninterest-bearing cash, interest-bearing cash, unpledged securities, federal funds sold, and securities purchased under resale agreements.

Does the FDIC have enough money? ›

By the end of 2022, the FDIC reported that its Deposit Insurance Fund had a balance of $128 billion—less than half of the $262 billion that might be needed.

What is liquidity management in simple terms? ›

Liquidity management is the proactive process of ensuring a company has the cash on hand to meet its financial obligations as they come due. It is a critical component of financial performance as it directly impacts a company's working capital.

What is an example of liquidity management? ›

Finance teams use liquidity management to strategically move funds where they are needed. For example, a CFO may review the balance sheet and see that funds currently tied up in one area can be moved to a critical short-term need to maintain day-to-day operations.

What is the FDIC 6 month rule? ›

The Six-month Rule (12 C.F.R. § 330.4) When the deposit accounts of one IDI are acquired by another IDI, the newly acquired deposits are separately insured from any accounts a depositor may already have at the acquiring IDI for an initial period of six months.

Do you lose your money if a bank closes your account? ›

Debits will be blocked and deposits won't make it in. You'll get your money back (usually). You may receive a check in the mail for the remaining balance, unless the bank suspects terrorism or other illegal activities. You can also go to a branch and receive a cashier's check for the account balance.

Can banks seize your money if the economy fails? ›

It indicates an expandable section or menu, or sometimes previous / next navigation options. Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Which banks have liquidity issues? ›

These Banks Are the Most Vulnerable
  • First Republic Bank (FRC) . Above average liquidity risk and high capital risk.
  • Huntington Bancshares (HBAN) . Above average capital risk.
  • KeyCorp (KEY) . Above average capital risk.
  • Comerica (CMA) . ...
  • Truist Financial (TFC) . ...
  • Cullen/Frost Bankers (CFR) . ...
  • Zions Bancorporation (ZION) .
Mar 16, 2023

What are the three types of liquidity risk? ›

The three main types are central bank liquidity, market liquidity and funding liquidity.

Why are banks having liquidity problems? ›

At the root of a liquidity crisis are widespread maturity mismatching among banks and other businesses and a resulting lack of cash and other liquid assets when they are needed. Liquidity crises can be triggered by large, negative economic shocks or by normal cyclical changes in the economy.

Where do millionaires keep their money if banks only insure 250k? ›

Millionaires don't worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank. Other millionaires have safe deposit boxes full of cash denominated in many different currencies.

What happens to my money if a bank fails? ›

Bottom line. For the most part, if you keep your money at an institution that's FDIC-insured, your money is safe — at least up to $250,000 in accounts at the failing institution. You're guaranteed that $250,000, and if the bank is acquired, even amounts over the limit may be smoothly transferred to the new bank.

How do I insure $2 million in the bank? ›

Here are seven of the best ways to insure excess deposits that you may have.
  1. Understand FDIC limits. ...
  2. Use bank networks to maximize coverage. ...
  3. Open accounts with different ownership categories. ...
  4. Open accounts at several banks. ...
  5. Consider brokerage accounts. ...
  6. Deposit excess funds at a credit union.
Feb 29, 2024

What is the difference between liquidity and funding? ›

Market liquidity may be defined as the ability to rapidly execute large transactions at a low cost and with a limited price impact. Funding liquidity indicates the ease of borrowing conditions and capital flows in global financial markets.

What do you mean by fund management? ›

Funds management is the overseeing and handling of a financial institution's cash flow. The fund manager ensures that the maturity schedules of the deposits coincide with the demand for loans. To do this, the manager looks at both the liabilities and the assets that influence the bank's ability to issue credit.

What is the difference between cash management and fund management? ›

The primary difference between the two is that money available in physical form as a currency is termed as cash, while funds concern all the financial resources. Thus, the difference between Cash Flow and Fund Flow highlights the conceptual limit of cash and a broader inclusion for funds.

What is the difference between asset management and fund management? ›

Asset managers' clients, therefore, are more varied than those of fund managers. Clients for asset management could include landlords and even fund management firms themselves, while fund managers work solely for the individuals and institutions that are members of their fund (pool of investors).

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