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Reciprocal deposits enable banks to support community lending, use them for lending and investments while offering simultaneous access to depositors in aggregate FDIC insurance across network banks

June 4, 2025 //  by Finnovate

Deposit networks enable customers to diversify their deposits across a network of banks and to receive protection for deposits that, in the aggregate, are over the FDIC standard maximum of $250,000. Networks give depositors access to millions in aggregate FDIC insurance at network banks, all with the simplicity of doing so through just one bank relationship. And importantly, most such networks offer banks the flexibility to move deposits on and off the balance sheet as needed, thus enabling much needed optimization on the liability side of the balance sheet. A key feature of deposit networks, reciprocal deposits enable banks to maintain usage of such deposits for loans and other investments while at the same time enabling depositors to have access to millions in aggregate FDIC insurance across network banks. Importantly, these depositors are no different than any other depositor that has walked through their door and with whom they have developed a relationship. Reciprocal deposits are relationship-based deposits of the bank.  An additional benefit of reciprocal deposits—appreciated by bankers and depositors alike—is that the full amount of funds placed through reciprocal deposit services can stay local to support community lending. Reciprocal deposits help keep locally sourced deposit amounts in local institutions, which in turn helps drive economic growth in communities of all sizes and types throughout the U.S., including some of the most underserved locales. Deposit networks not only help banks bring deposits on balance sheet with a reciprocal option, but also enable selling deposits to other network members—allowing banks to “store” deposits off balance sheet for a future need.  By participating in a deposit network, a bank can immediately address a new or existing customer’s concerns about protecting their large cash balances. Participation in a network helps banks attract and retain large deposits (six, seven, eight, or even nine figures at a time) from loyal, local safety-conscious customers, such as businesses, nonprofits, government entities and high-net-worth individuals. Influential community members, such as CPAs, financial planners and estate lawyers, are also quick to recognize the benefit of deposit safety and may welcome outreach about deposit placement network services. As their name implies, deposit networks come with a network effect—they can help your bank strengthen connections with depositors and with knowledgeable industry participants. Joining a network can provide access to professionals with deep expertise in banking and banking technology that can smooth your bank’s onboarding process and help maximize its use of network offerings. A deposit network can be a powerful tool for banks to retain and grow key depositor relationships while ensuring their customers’ large deposits are protected. By leveraging a deposit network, banks can enhance customer loyalty, optimize their balance sheets and ultimately help drive community growth and economic stability.

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Category: Members, Additional Reading

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