Is Your Corporate Cash Really Safe in a Crisis?
Re-thinking corporate liquidity, bank deposits, and money market funds
For many finance leaders, the question of cash safety feels almost rhetorical. Liquidity sits in a handful of household-name global banks, diversified across current accounts, term deposits, and money market instruments. Credit risk is reviewed at least annually, treasury policies reference capital preservation as the first principle, and investment mandates are conservative by design.
And yet the last decade has brought some uncomfortable truths to the surface:
Big banks can fail, depositors can be trapped, and liquidity can evaporate when you need it most.
From the Global Financial Crisis, to the Eurozone sovereign debt crisis, to the SVB collapse, corporate treasury has had multiple reminders that cash is not an abstract line on a spreadsheet, it is exposure, counterparty risk, operational risk, and ultimately the lifeblood of the business.
The illusion of safety: what treasurers get wrong
Boards and auditors love simplicity.
Cash in Bank A, Bank B, Bank C.
Investment Grade. BBB+ long-term rating. Tick.
But simplicity and safety are not the same thing.
Risk isn’t just about whether a bank collapses
In crisis conditions, risks emerge long before insolvency:
- deposit flight
- deposit insurance limits
- ring-fencing of liquidity
- regulatory intervention
- resolution processes
- suspension of withdrawals
- cash trapped in local entities
- capital controls
Many CFOs discovered this the hard way during periods of stress. Compounding the issue: most treasury functions depend on a small number of counterparties. Risk concentration is often invisible.
Bank deposits: safe until they’re not
Globally systemic banks are safer today than in 2008.
Capital buffers, liquidity coverage ratios (LCR), countercyclical buffers based on tighter regulation have improved dramatically.
But even the strongest institutions present real risks to corporates that need certainty in a crisis:
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Deposit insurance doesn’t apply at scale
Deposit protection is designed for consumers, not corporations. A multinational with €250m of cash is functionally uninsured.
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Bail-in is now part of the playbook
Under modern resolution rules, large depositors are exposed to write-downs and restructuring.
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Ring-fencing fragments liquidity
Cash held in multiple jurisdictions may be legally protected from being moved at the moment it is most needed.
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Operational freeze risk
In resolution scenarios, payments, wires, and access to digital banking can be frozen even when institutions are solvent on paper.
Money Market Funds: the modern safe haven?
Money Market Funds (MMFs) have become the preferred vehicle for many treasury teams seeking capital preservation, diversification, daily liquidity, and competitive yields.
In principle, MMFs distribute risk across a diversified portfolio of short-term instruments (commercial paper, T-bills, repo, etc.). They also sit outside the bank balance sheet, meaning you are not a creditor to a single institution.
However, MMFs come with their own realities:
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Liquidity isn’t guaranteed in stressed conditions
Funds are structured around daily liquidity, but extreme market stress could lead to an systemic outflow of funds making it difficult for the MMF providers to meet drawdown requests.
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Portfolio transparency is often misunderstood
Many corporates do not analyse underlying holdings:
- Are you indirectly exposed to the same bank you are trying to diversify from?
- Is there hidden concentration in a handful of counterparties?
- What is the real WAM (weighted average maturity) under stress?
Three tests every CFO should apply
Treasury policy should not be built on asset classes; it should be built on resilience tests:
Test 1: Counterparty concentration under stress
How much of our liquidity depends on:
- one bank?
- one clearing system?
- one jurisdiction?
- one MMF manager?
Test 2: Access, not just solvency
In a crisis:
- How quickly can we move funds?
- What is our exposure to settlement cycles?
- Can we get ahead of market-wide liquidity freezes?
Test 3: Transparency
Do we have:
- full visibility of costs and fees?
- daily exposure reporting across all instruments?
- clarity on where our cash truly sits?
The future of “cash safety”: visibility, diversification, and control
Leading treasury teams are now reframing their mandate:
Capital preservation + operational access
Instead of asking “Is this bank safe?”, the better question is “How fast can we mobilise our liquidity if the unexpected happens?”
This has strategic implications:
- more MMF usage for diversification,
- reduction in large unsecured bank deposits,
- shorter maturities on term instruments,
- multi-bank cash sweeping,
- better data visibility across accounts globally,
- use of centralised liquidity platforms,
- dynamic decision making rather than annual box-ticking.
Safety is becoming a process, not a static decision.
Conclusion: Crisis is a stress test of your assumptions
When markets dislocate, not if, CFOs discover whether their treasury framework was built to withstand turbulence or to satisfy policy documents.
- Bank deposits are not risk-free.
- Money market funds are not risk-free.
- Safety is a function of design, not default.
The organisations that come through downturns strongest are those that:
- diversify intelligently
- maintain real-time visibility,
- understand regulatory regimes,
- and design treasury architecture for volatility.
In a world of accelerating geopolitical risk, rising rates, and structural financial change, cash isn’t just a line on the balance sheet, it’s a strategic asset!
