Grow Franchise Value with Reciprocal Deposits

ABA Logo

Now is a great time to take a fresh look at reciprocal deposits. Reciprocal deposits have historically been a cost-effective way for banks to build a stable balance sheet and acquire more funds to lend. Because they tend to be lower-cost deposits that come in large increments (for the nation’s largest reciprocal deposit services, an average of $2 million per customer) from local customers, reciprocal deposits are an attractive option for banks looking to grow franchise value and serve as a time-tested tool in the ongoing battle for deposits. And with the recent passage the Economic Growth, Regulatory Relief, and Consumer Protection Act, most reciprocal deposits now receive nonbrokered status, enabling banks to increase their use of reciprocal deposits to boost deposit growth and local lending, as well as replace more expensive funding.

Promontory Interfinancial Network is the #1 provider of reciprocal deposit services, through its CDARS® Reciprocal and ICS® Reciprocal offerings. Both services are endorsed by the American Bankers Association, have earned the trust of thousands of banks across the nation, and enjoy broad usage by bank customers who place billions of dollars through the services each week.


Technically, reciprocal deposits are deposits received by a bank through a deposit placement network in return for placing a matching amount of deposits at other network banks. Why would banks exchange equal amounts of money with each other? The mechanics of different reciprocal deposit services vary, but the basic gist is that a bank that participates in a deposit placement network can offer access to FDIC insurance beyond $250,000 to attract safety-conscious customers who might otherwise deposit large sums into a money-center bank (foregoing some access to FDIC insurance); require collateralization with ultra-safe, highly liquid government securities (e.g., Treasuries); or manually split a large deposit among multiple banks (maintaining relationships with each and negotiating different interest rates, signing multiple agreements, and receiving multiple statements).

Banks that participate in a deposit placement network like the ability to better pursue these large-dollar deposits—deposits from local customers who were previously beyond their reach or whose collateralization requirements raised tracking and opportunity costs and lowered margins.

How Reciprocal Deposits Work

Banks like that they can take multi-million-dollar deposits and place them through a deposit placement network into other banks participating in the same network in increments below $250,000. The spreading out of the funds into multiple banks makes the entire amount eligible for FDIC insurance. This process enables a customer to access FDIC protection from many banks while working directly with just one. And the relationship bank maintains ownership of the customer relationship—a relationship that it otherwise might not have. (With Promontory Interfinancial Network’s Insured Cash Sweep service, customers can make deposits placed into demand deposit accounts, money market deposit accounts, or both eligible for FDIC protection. Its sister service, CDARS, operates similarly, but for CDs.)

Banks that receive money—institutions where the funds are placed—are willing to take those funds because they are doing the same thing with their customers’ money. All told, participating banks exchange funds on a dollar-for-dollar basis so that each comes out whole—giving rise to the term reciprocal deposits.


In general, most reciprocal deposits are nonbrokered (this thanks to the Economic Growth, Regulatory Relief, and Consumer Protection Act, signed in May 2018). Relative to many other options, including collateralized deposits, listing service deposits, and wholesale funding purchases, reciprocal deposits tend to be more stable, to reduce collateralization and tracking costs, to enable customer acquisition and maintenance costs to be spread over a larger deposit base, and to offer greater balance sheet flexibility—all of which can increase profitability and lead to enhanced ROA and ROE.

Funding Comparison Chart

[1] Includes wholesale funding sources, such as FHLB advances, traditional brokered CDs, and correspondent banks. Does not include wholesale funds purchased through a deposit network.
[2] A bank receives ICS reciprocal deposits in return for deposits that it places, most of which are locally sourced.
[3] Noncollateralized deposits reduce collateral tracking and free up bank capital for more productive uses.
[4] In times of high liquidity, a bank using ICS Reciprocal can easily switch to ICS® One-Way Sell® to take deposit amounts off balance sheet while earning fee income.

Promontory Interfinancial Network operates the nation’s largest reciprocal deposit network with its CDARS and Insured Cash Sweep service offerings. Learn more about what reciprocal deposits are and why they matter and what bankers are saying about reciprocal deposits. Take a deeper dive into CDARS Reciprocal and Insured Cash Sweep Reciprocal.

Use of the CDARS and ICS services is subject to the terms, conditions, and disclosures set forth in the applicable program agreements, including the CDARS-ICS Participating Institution Agreement and applicable Deposit Placement Agreement. Limits apply, and customer eligibility criteria may apply. ICS program withdrawals are limited to six per month when using the ICS savings option.

CDARS, ICS, and Insured Cash Sweep are registered service marks of Promontory Interfinancial Network, LLC.