Fedwire® Securities Joint Custody Service
The Fedwire Securities Joint Custody Service is offered to financial institutions and is designed to assist state and local government entities in mitigating risk to deposits of public funds in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. The service facilitates the collateralization of deposits made by a government entity, including deposits above the current $250,000 FDIC insurance limit, through the pledging of book-entry securities by its depository financial institution.
Discover the benefits of the Fedwire Securities Joint Custody Service
- Offers an efficient, cost-effective method for the management of public funds.
- Supports overall risk management practices.
- Allows you to leverage new business opportunities with government entities and enables you to better serve your existing government customers.
- Encourages your government customers to consolidate deposits instead of spreading them among multiple institutions to ensure that they are covered under FDIC insurance.
- Offers a streamlined setup process for existing Fedwire Securities Service customers.
How it Works
- A Joint Custody Service transaction includes three parties: a Pledgor (depository financial institution), a Pledgee (state or local government entity that deposits public funds with the Pledgor) and a Federal Reserve Bank, acting as custodian of the collateral.
- The Pledgor accepts deposits of public funds and protects them against loss by depositing collateral in the form of book-entry securities. Pledgors must have both a master account and a Fedwire Securities Service account established with the Federal Reserve Banks.
- The Pledgee deposits public funds with the Pledgor. The Pledgee’s funds are protected against loss to the extent the value of the book-entry securities pledged by the Pledgor equals or exceeds the uninsured portion of the deposit. The Pledgee is responsible for confirming that the securities pledged in the Joint Custody account meet its eligibility criteria.
- The Federal Reserve Banks act as custodians of the collateral pledged by the depository financial institution. Collateral accounts are held on the books of the Pledgor’s local Federal Reserve Bank. The Federal Reserve Banks do not provide collateral valuation services and do not monitor the value of securities that have been pledged to the Pledgee.
- To learn more about the Fedwire Securities Joint Custody Service, please review the fact sheet (PDF).
- To sign up for this service, please complete the applicable forms and agreements or contact your designated Wholesale Operations Site.