Legal Q&A: Deposit Insurance for Municipal, Other Public Deposit Funds

Q: Is Deposit Insurance Available for Municipal and Other Public Deposit Funds?

A: Yes. As part of the Coronavirus Relief Fund created by the CARES Act, $2.3 billion has been allocated for Wisconsin’s local governments over the next two years. As a result, public deposits are expected to increase, and the information below is presented as a reminder on the availability of deposit insurance for public deposits.

In general, FDIC insures “government accounts,” also known as “public unit accounts,” as defined within 12 C.F.R. Section 330.15. Coverage includes all time and savings accounts held by an official custodian in an insured depository institution (IDI) up to $250,000. Separately, demand deposit accounts (interest-bearing and noninterest-bearing) owned by a public unit and held by the same official custodian in an IDI are added together and insured up to $250,000. Separate coverage rules apply to accounts held at an out-of-state IDI.

Additional coverage is available under Wisconsin’s public deposit guarantee fund. This coverage is available under Wis. Stat. section 34.08 and covers public depositors for all losses with any financial institution up to $400,000. This coverage is provided in addition to FDIC insurance. Coverage under the fund is provided per public depositor and per public depository, and exists until the balance is exhausted. WBA-supported legislative efforts are currently underway to increase the amount of coverage available under the public deposit guarantee fund from $400,000 to $1 million. 

Lastly, Wis. Stat. section 34.07 permits a public depositor to request that bank secure any funds in excess of FDIC insurance coverage, and the coverage provided by the public deposit guarantee fund, with its own assets. 

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com.

Birrenkott is WBA assistant director – legal. For legal questions, please email wbalegal@wisbank.com

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution’s attorney for special legal advice or assistance. 

By, Alex Paniagua