Collectively, corporate treasurers will wake up on January 1st with a credit risk hangover in the sum of approximately $1.7 trillion. This is because of the sunset of Dodd-Frank regulations since 2010 that provided treasurers with unlimited FDIC insurance on non-interest bearing account balances.
So what’s next? If companies have not already acted on this event, treasurers may want immediate visibility and access to their cash positions in the US. And more importantly, they will have decisions to make as to what to do with that excess cash, i.e., cash balances exceeding $250,000 with a bank. Do they consider government securities or money market funds as ways to diversify, or possibly other strategic uses of cash (dividends, stock repurchase, operational reinvestment)?
One thing is for sure: it is already an interesting start of 2013.