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Bank Investment Contract (BIC)

Bank Investment Contract (BIC)

What Is a Bank Investment Contract (BIC)?

A bank investment contract (BIC) is a security or portfolio of securities that offer a guaranteed rate of return. A bank offers such a deal to investors for a foreordained period, typically one to 10 years, albeit a few contracts can be for a couple of months.

These contracts regularly yield lower interest rates however at a lower level of risk, which makes them suitable for investors seeking to safeguard as opposed to develop their wealth. Pension and retirement funds are the absolute greatest buyers of bank investment contracts. On the off chance that you are an employee who invests through your boss' 401(k) plan or pension fund, you could in a roundabout way put resources into a BIC through your retirement plan.

Understanding a Bank Investment Contract (BIC)

Bank investment contracts are like guaranteed investment contracts (GICs), which are issued by insurance companies. Albeit these contracts generally incorporate relatively okay securities, they are very illiquid, and that means they won't be quickly sold or exchanged for cash. Investors who buy these contracts are generally required to leave the money they invest in them however long the contract might last.

One advantage to BICs is that not at all like certificates of deposit (CDs), bank investment contracts frequently permit subsequent incremental investments, with those deposits earning a similar guaranteed rate.

Requirements for a Bank Investment Contract

In exchange for a bank's customer consenting to keep deposits invested for a foreordained, fixed period, the bank, thusly, guarantees a specific rate of return. Payments of interest, as defined in the contract, and the return of principal invested occurs at the contract expiration.

In spite of the fact that certificates of deposit (CDs) offer comparative guarantees and an okay profile, they contrast from BICs in light of the fact that BICs frequently consider progressing deposits. A CD requires one lump sum investment to receive a specific rate of return. A BIC, nonetheless, generally incorporates a "deposit window" of a couple of months. During this window, subsequent deposits can be made and receive a similar guaranteed rate. Limits might exist on the total amount invested.

A BIC would generally be viewed as a "buy-and-hold" investment since there is no secondary market for such contracts. They will quite often yield more than savings accounts and CDs since they are not Federal Deposit Insurance Corporation (FDIC) insured deposits. They likewise generally generate more than Treasury notes and bonds on the grounds that the U.S. government doesn't back them.

BICs might take into account early withdrawals under specific conditions before the contract terminates. These may incorporate the depositor becoming disabled or experiencing financial hardship. At times, pension plans may likewise be permitted to receive an early withdrawal of funds invested in a BIC. Notwithstanding, early termination of such agreements frequently expects fees to be paid to repay the bank for administrative services and interest rate risk the bank might face while endorsing an early withdrawal.

Likewise with most types of bank deposits, the guaranteed rate of return for BICs is higher for additional substantial deposits and throughout longer time periods. For instance, $100,000 invested for a long time can be expected to earn a higher interest rate than $20,000 invested for quite some time.

Advantages and Disadvantages of Bank Investment Contracts

BICs are appropriate for an investor searching for a conservative investment that focuses on relative safety with unassuming, unsurprising returns.


BICs are backed by the assets of the bank or financial institution giving them. Pension plans will habitually involve BICs as part of a diversified portfolio that incorporates a mix of generally safe, medium-risk, and growth investments. BIC investors benefit from a guaranteed rate of return that plans to outperform fixed-income investments, for example, CDs, savings accounts, and Treasury notes.

Different advantages of BICs incorporate the ability of investors to make investments throughout some stretch of time as opposed to in one lump sum. Numerous BICs incorporate a deposit window of a couple of months where the investor can make investments in the BIC and receive the guaranteed interest rate for the contract duration.


BICs have several limitations that make them less appealing to certain investors. The three fundamental risks of BICs are interest rate risk, inflation risk, and liquidity risk. Ought to interest rates rise during the holding period, the BIC investor will in any case just receive the lower rate determined in their contract. An increase in inflation subverts a BIC's returns through a decline in purchasing power.

BICs are illiquid and can't be sold on a secondary market should the investor need to rapidly raise cash. BICs are not FDIC-insured or government-backed. An investor can lose money with a BIC should the responsible bank or financial institution fail to meet its commitments to investors.


  • BICs are not government-backed and are not insured by the Federal Deposit Insurance Corporation (FDIC).
  • The majority of BICs are purchased by pension and retirement plans searching for preservation of principal and accrued income.
  • Bank investment contracts (BICs) are relatively okay securities or portfolios of securities issued by banks and other financial institutions.
  • To make up for their risk, BICs will generally offer higher yields than CDs, savings accounts, or Treasury notes.
  • BICs offer a guaranteed rate of return for a foreordained period of time that generally endures from one to 10 years.