NEW LAW ENABLES NEW YORK BANKS
TO USE DEPOSIT PLACEMENT SERVICES FOR PUBLIC FUNDS
ARLINGTON, VA – (August 6, 2012) – Gov. Andrew M. Cuomo has signed legislation that enables local government entities in New York to utilize deposit placement services that keep their large-dollar deposits in local banks while remaining eligible for FDIC insurance beyond $250,000. Effective immediately, the law authorizes public entities in New York to utilize services such as Promontory Interfinancial Network’s Insured Cash Sweep® service, or ICSSM, and its Certificate of Deposit Account Registry Service®, or CDARS®. Through these cost-effective services, participating financial institutions can offer public entities access to multi-million-dollar FDIC insurance protection plus the opportunity to earn interest. This can improve a bank’s profitability, not only by helping to attract lucrative, large-dollar relationships, but by reducing collateralization requirements. In addition, banks can utilize the monies to fund loans in their local communities, helping to make an even bigger difference “at home” and serving as a selling point to many government entities and other types of depositors.
New York is now the 48th state that enables public funds to be placed through CDARS, and the 33rd state that enables public funds to be placed through ICS.
“By replacing existing collateralized deposits with ICS and/or CDARS deposits, banks can not only support public entities, but also generate additional revenue by repurposing collateral into higher-earning assets, reduce collateral-tracking burdens and associated costs, and lower the risk of shortfall due to collateral-value deterioration,” said Steve Kinner, head of sales for Promontory Interfinancial Network.
Institutions that offer the ICS and CDARS services are members of the Promontory Network. When a member bank places a deposit using ICS or CDARS, that deposit is divided into amounts under the standard FDIC insurance maximum and is allocated among other Network members (making the deposit eligible for FDIC insurance in amounts greater than the limit at any one bank). The deposit is allocated to member banks in money market deposit accounts (ICS) or in exchange for CDs (CDARS). In each case, the customer can access coverage from many institutions while working directly with just one to enjoy security, interest, and time-saving conveniences.
For more information, contact: Steve Kinner, Senior Managing Director, Promontory Interfinancial Network, LLC; (703) 292-3445.
Promontory Interfinancial Network was founded by leading figures in the banking industry to provide financial institutions with profit-enhancing solutions. These Promontory founders – Eugene Ludwig, Alan Blinder, Mark Jacobsen, and Alfred Moses – envisioned a network, comprised of thousands of financial institutions, whose "synthetic size" would help each member institution to compete more efficiently. Today, the Promontory Network includes approximately 3,000 members nationwide. These members use Promontory's services, CDARS and ICS, to acquire and retain large-dollar customer relationships, purchase wholesale funds, manage liquidity, and reduce collateralization costs.