CDARS Reciprocal for Banks
WHAT IS CDARS RECIPROCAL?
CDARS® Reciprocal can be a valuable tool for banks that want to attract more low-cost, local, relationship-based funding that increases profitability and franchise value. It is one of multiple ways that banks can use CDARS to meet their balance sheet needs.
WHY DO BANKS CHOOSE CDARS RECIPROCAL?
With CDARS Reciprocal, banks can
- Attract deposits from high-value customers in multi-million-dollar increments
- Enhance competitiveness of CD offerings without raising rates across the board
- Replace more costly and burdensome funding options, such as repo sweeps and other collateralized deposits
- Improve profitability, asset liquidity, and ROE and ROA ratios by repurposing funds invested in collateral into higher-earning assets
- Better manage interest rate risk
- Benefit from stable funding that comes from loyal customers—CDARS holdings reinvest at a rate of approximately 80%*—and create cross- selling opportunities
HOW DOES CDARS RECIPROCAL WORK?
With CDARS, banks can offer customers access to multi-million-dollar FDIC insurance on CDs through a single relationship. Banks that offer CDARS are part of the Promontory Network. When a bank places funds through CDARS, the deposit is divided into amounts under the standard FDIC insurance maximum of $250,000 and allocated among Network member banks, making the large deposit eligible for FDIC insurance. Working directly with just one bank (the relationship bank) and receiving just one regular statement from that bank, a depositor can access FDIC coverage from many. Banks that offer CDARS to their customers set the interest rate and maintain ownership of the customer relationship.
Relationship banks can receive dollar-for-dollar matching deposits from other banks for their placements when using CDARS Reciprocal—and have more funds on hand for local lending (or sell the deposits for fee income with CDARS® One-Way Sell®). CDARS provides banks with flexibility to adapt their balance sheets as funding needs change.
NONBROKERED STATUS FOR MOST RECIPROCAL DEPOSITS
The Economic Growth, Regulatory Relief, and Consumer Protection Act, passed in May 2018, provides that most reciprocal deposits are not treated as brokered deposits, enabling banks to use CDARS Reciprocal to add higher amounts of stable, relationship-based funding to their balance sheets. (Read why the new law is a game-changer for banks and communities.)
CDARS RECIPROCAL DEPOSITS CAN BE A SOURCE OF COST-EFFECTIVE FUNDING
Reciprocal deposits, like CDARS deposits, compare favorably to other funding choices, such as listing service deposits, collateralized deposits, and wholesale funding purchases.
 Includes wholesale funding sources, such as FHLB advances, traditional brokered CDs, and correspondent banks. Does not include wholesale funds purchased through a deposit network.
 A bank receives CDARS reciprocal deposits in return for deposits that it places, most of which are locally-sourced.
 Noncollateralized deposits reduce collateral tracking and free up bank capital for more productive uses.
 In times of high liquidity, a bank using CDARS Reciprocal can easily switch to CDARS One-Way Sell to take deposit amounts off balance sheet while earning fee income.
DISCOVER MORE ABOUT WHAT DIFFERENTIATES CDARS AND WHY BANKS CHOOSE IT
Download a summary of how CDARS differs from competing offerings
Promontory Network will use your information solely to provide you with information about Promontory Network services. We will not provide your personally identifying information to third parties.
In addition, banks can find out more about CDARS by registering for a free webinar, ICS and CDARS: Taking Advantage of New Opportunities.
* Promontory Interfinancial Network calculates the reinvestment rate as the percentage of the aggregate balance of CDARS deposits that are reinvested through CDARS within 28 days of maturity.
Use of the CDARS service is subject to the terms, conditions, and disclosures set forth in the CDARS-ICS Participating Institution Agreement and the applicable Deposit Placement Agreement. Limits apply. CDARS and One-Way Sell are registered service marks of Promontory Interfinancial Network, LLC.