Insured Cash Sweeps as collateral: key considerations for secured lenders

The aftermath of several US bank failures in early 2023 gave rise to a wave of corporate treasury diversification initiatives, including the proliferation of certain previously obscure bank products known as Insured Cash Sweeps (ICS) and Certificates of Deposit Account Registry Service (CDARS). 

Depositors use these products to spread their cash across several accounts at different banks, which mitigates the risk of a deposit bank failure. Finance professionals, lawyers, advisors of corporate depositors, and the like are encouraged to understand how these bank products are structured and operate. 

In this handbook, we explain how ICS and CDARS bank products are structured, exploring some of their unique intricacies.  We also discuss some ways in which secured transactions and creditors’ rights are implicated, setting out considerations for lenders seeking to maintain proper attachment and perfection on corporate/borrower Cash Sweep accounts.