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 your institution 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 your institution through CDARS®
One-Way Buy® transactions. As a result, your institution receives stable funding at short-term rates over
Why would your bank want to use Floating-Rate Funding?
Diversification. Floating-Rate Funding can help your bank obtain large blocks of funding and diversify its
wholesale funding options. Diversifying funding sources can help give your bank 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 your bank 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 your terms and sign
a 2-page addendum to your CDARS Participating Institution Agreement. The Treasury Desk will process your order and the related