Certificate of Deposit Account Registry Service
Encyclopedia
The Certificate of Deposit Account Registry Service (CDARS), is a private, patented, for-profit service that breaks up large deposits
(from individuals, companies, nonprofits, public funds, etc.) and places them across a network of more than 3000 bank
s and savings associations around the United States
. This allows depositors to deal with a single bank that participates in CDARS but avoid having funds above the Federal Deposit Insurance Corporation
(FDIC) deposit insurance
limits in any one bank.
The service can place multiple millions in deposits per customer and make all of it qualify for FDIC insurance coverage. A customer can achieve a similar result, as far as FDIC insurance is concerned, by going to a traditional deposit broker or opening accounts directly at multiple banks (although depending on the amount this could require a lot more paperwork). With the CDARS service, the customer’s local bank sets the interest rate
that will be paid on the entire deposit amount, and the customer gets one consolidated statement from that bank.
The service is used by community and regional banks to obtain deposits they would otherwise be unable to get. The company that provides CDARS, Promontory Interfinancial Network, also promotes something called the Gulf Coast Rebuilding Challenge. That project attempts to get companies to make large deposits in Gulf Coast community banks so those banks will have additional capital for local lending. The American Bankers Association
and the Independent Community Bankers Association have come out in support of CDARS. The Bank of New York Mellon
provides issuance, custody, settlement, and recordkeeping services for the CDARS network.
All FDIC insured banks, like the banks that receive deposits through CDARS pay premiums into the FDIC insurance fund based on their deposits and risk levels. The FDIC has confirmed that deposits placed through a deposit placement service such as CDARS are eligible for “pass-through” FDIC insurance. The FDIC has not endorsed any particular method of maximizing FDIC insurance coverage, but states that depositors should “protect all (their) deposits with FDIC insurance.”
CDARS is protected under ("Method and apparatus for fully insuring large bank deposits", published 2003-07-17), ("Method and apparatus for fully insuring large bank deposits", published 2003-01-30), and ("Computer program product for fully insuring large bank deposits", published 2009-09-29).
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
(from individuals, companies, nonprofits, public funds, etc.) and places them across a network of more than 3000 bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and savings associations around the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. This allows depositors to deal with a single bank that participates in CDARS but avoid having funds above the Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
(FDIC) deposit insurance
Deposit insurance
Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due...
limits in any one bank.
The service can place multiple millions in deposits per customer and make all of it qualify for FDIC insurance coverage. A customer can achieve a similar result, as far as FDIC insurance is concerned, by going to a traditional deposit broker or opening accounts directly at multiple banks (although depending on the amount this could require a lot more paperwork). With the CDARS service, the customer’s local bank sets the interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
that will be paid on the entire deposit amount, and the customer gets one consolidated statement from that bank.
The service is used by community and regional banks to obtain deposits they would otherwise be unable to get. The company that provides CDARS, Promontory Interfinancial Network, also promotes something called the Gulf Coast Rebuilding Challenge. That project attempts to get companies to make large deposits in Gulf Coast community banks so those banks will have additional capital for local lending. The American Bankers Association
American Bankers Association
The American Bankers Association is an industry trade group and professional association representing the United States' banking industry...
and the Independent Community Bankers Association have come out in support of CDARS. The Bank of New York Mellon
Bank of New York Mellon
The Bank of New York Mellon Corporation is a global financial services company formed on July 1, 2007 as result of the merger of The Bank of New York and Mellon Financial Corporation...
provides issuance, custody, settlement, and recordkeeping services for the CDARS network.
All FDIC insured banks, like the banks that receive deposits through CDARS pay premiums into the FDIC insurance fund based on their deposits and risk levels. The FDIC has confirmed that deposits placed through a deposit placement service such as CDARS are eligible for “pass-through” FDIC insurance. The FDIC has not endorsed any particular method of maximizing FDIC insurance coverage, but states that depositors should “protect all (their) deposits with FDIC insurance.”
CDARS is protected under ("Method and apparatus for fully insuring large bank deposits", published 2003-07-17), ("Method and apparatus for fully insuring large bank deposits", published 2003-01-30), and ("Computer program product for fully insuring large bank deposits", published 2009-09-29).