FDIC pass-through insurance
FDIC deposit insurance that passes through a custodial account to each underlying owner, when the FDIC's conditions for pass-through coverage are met.
What FDIC pass-through insurance is
FDIC pass-through insurance is coverage that can reach each person whose money is pooled in one account at an insured bank. A common example is an FBO (for benefit of) account opened by a fintech. If the rules are met, each owner is insured up to the standard maximum, as if they held the deposit directly.
How it works
Three conditions apply. The bank's account records must show the custodial relationship. Records kept by the bank, the custodian or its recordkeeper must identify each owner and their share. The funds must belong to the owners, not the custodian. Coverage protects only against the failure of the insured bank.
- 01 · DEPOSIT A fintech or custodian pools customer funds in a custodial account at an insured bank.
- 02 · RECORD The bank or custodian keeps records of each owner's share of the account.
- 03 · INSURE If the bank fails, the FDIC uses those records to determine each owner's coverage, up to the limit.
| Event | Pass-through coverage | Why |
|---|---|---|
| The insured bank fails and all three conditions are met | Yes, up to $250,000 per owner and category | Each owner is insured as if they held the deposit directly |
| The fintech or custodian fails, but the bank does not | No | Deposit insurance pays only when an insured bank fails |
| The insured bank fails, but records do not identify owners | At risk | Funds may be insured only as the custodian's deposit |
An FDIC rule proposed in 2024 would add recordkeeping duties for custodial accounts; as of October 2026 it is not final.
Where pass-through coverage can apply
- Fintech apps holding customer balances at a partner bank
- Neobank accounts opened through a sponsor bank
- Payroll, payout and marketplace platforms holding funds for users
- Deposit sweep programs that spread balances across several banks
Cross River offers checking, savings, custodial and purpose-built account programs through APIs, with unlimited subledgers, card issuing and multi-rail money movement. See accounts at Cross River.