CDARS® Floating-Rate FundingSM

What is CDARS Floating-Rate Funding?

CDARS Floating-Rate Funding is a great way to obtain large blocks of wholesale, variable-rate funding without collateralization or stock purchase requirements. Floating-Rate Funding enables institutions to maintain a target balance amount of funding at a floating rate over 1- to 7-year terms. The funding is provided through rolling, 4-week CDs issued by a member institution through CDARS® One-Way Buy® transactions. As a result, the institution receives stable funding at short-term rates over long terms.

One Way Buy Graphic Explaination

Why would banks want to use Floating-Rate Funding?

  • Diversification. Floating-Rate Funding can help banks obtain large blocks of funding and diversify its wholesale funding options. Diversifying funding sources can help give banks greater control over its cost of funds in every market scenario so that it is better able to manage interest-rate risk and avoid margin compression. And, expanding sources of funding may help banks avoid becoming over-reliant on any single source of funding.
  • Flexibility. Pick the term, from 1 to 7 years. Funding for the term is available at an agreed-upon floating rate. In addition, some Promontory Network members choose to swap their floating-rate funding for long-term, fixed-rate funding via a third party when the market environment is favorable.
  • No collateral or stock purchase requirements. This type of funding is very similar to other wholesale funding options, but without collateral or stock purchase requirements.
  • No hidden fees. Pricing is tied to either 1-month LIBOR or the Fed Funds Effective Rate. The index plus a fixed spread is your all-in cost.

How do Floating-Rate Funding arrangements work?

A Floating-Rate Funding arrangement is simple to execute. Call the Promontory Treasury Desk to negotiate terms and sign a 2-page addendum to the CDARS Participating Institution Agreement. The Treasury Desk will process orders and the related funding transactions.