Brex business account risk exposure
Overview
Brex business accounts are a cash management account, as opposed to a traditional bank account. They’re designed to offer features you would use a bank for, such as money movement and storage, but with a unique structure that limits your exposure to any individual bank. Even though you can still use a Brex business account for tasks such as bill pay or to send/receive checks, ACHs, and wires, there are some key differences in money storage.
Traditional banks
Banks take in deposits, hold a certain amount of capital or equity as required by regulators, and invest the rest of their funds in loans, bonds, and other assets to earn a return above what they pay customers for the deposits. Banks are designed to take calculated, regulated risk with customer deposits. The Federal Deposit Insurance Corporation (FDIC) insures customer deposits up to $250,000 per customer. Any customer depositing over $250,000 with any bank is therefore taking risk against that bank.
Brex business accounts
Brex leverages a broker dealer regulated by FINRA/SEC to sweep (i.e., move money before the end of the day) customer deposits into FDIC-insured partner banks and/or money market funds (MMF) — depending on the account admin’s allocation preferences. Brex business accounts have an FDIC-insured offering that stacks customer deposits across multiple partner banks for up to $6M of coverage. Funds can also be swept into a money-market mutual fund administered by Bank of New York Mellon ($400B+ bank, AAA-Rated Fund). This fund [see prospectus here] has daily liquidity and is designed for preservation of capital and maintenance of liquidity, and it must hold at least 99.5% of its money in cash or securities backed with the full faith and credit of the US government. Though there are inherent risks within any financial system, Brex business accounts are designed to offer less exposure than an individual bank due to these qualities:
- 100% of funds in Brex business accounts are always available for withdrawal.
- Deposits into Brex bank accounts are never used for lending purposes.
- Brex does not hold customers’ cash on our balance sheet, except for money in transit.
Brex allows you to choose how your money is stored, with any combination of FDIC-insured deposits and MMF investments. Please chat with us if you have any questions.