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#130191 - 11/11/03 10:51 PM CDARS
jkt5 Offline
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Joined: Oct 2002
Posts: 21
Does anyone know about a new service called Certificate of Deposit Account Registry Service ("CDARS").

Some institutions in Illinos are touting in newspaper advertisement, FDIC coverage up to $1 million for accounts.

Thank you!!

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General Discussion
#130192 - 11/12/03 12:27 AM Re: CDARS
Andy_Z Offline
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I want to say this is a program whereby you promise the rate and send the deposits to other insured banks. The customer has one relationship with you, but through the CDARs program there is a network of banks that will send and receive deposits, hence the increase in FDIC insurance. Shortfalls in the rates from the other banks are made up by you, I think.

The ABA has some info on this and as I recall some heavy names, such as Robert Clarke, exOCC Comptroller was involved in it.
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#130193 - 11/12/03 05:57 AM Re: CDARS
Princess Romeo Offline

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CDARS is a service offered by Promontory Financial LLC (I believe that's their name) and a number of ex-regulators are involved in this program. The idea is to set up a deposit swapping network of FDIC insured banks to help keep deposit dollars in the banks rather than losing them to Mutual Funds and such.

Professional fiduciaries have long practiced the art of splitting up their deposits into $99,000 chunks and placing them at different institutions because, by law, all of the money under their care had to be FDIC insured. But this meant they had to track all of those accounts which can be a bit of a pain. The CDARS would allow them to establish an account at one institution, and that institution would then track the money for them (well actually, the Promontory system will track it.)

It's not unlike the idea of brokering a deposit for your customer, but most of the legwork has been automated.

There are a number of logistical issues that your bank would need to work out before offering this service. Exactly what those issues are would depend on your bank and its systems.
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#130194 - 11/12/03 03:01 PM Re: CDARS
jkt5 Offline
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Joined: Oct 2002
Posts: 21
Bonnie & Andy;

My sincere thanks.

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#130195 - 11/13/03 02:55 PM Re: CDARS
Anonymous
Unregistered

Page 28 of the new ABA banking Journal (Nov 2003) has an article about CDARS

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#130196 - 04/16/04 10:21 PM Re: CDARS
Paragon Offline
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Joined: Dec 2003
Posts: 2,164
Andy - on the receiving end, CD's would be considered Brokered Deposits, correct?

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#130197 - 04/16/04 11:41 PM Re: CDARS
Andy_Z Offline
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I am not intimately familiar with the program, but I would think so.
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#130198 - 07/07/05 02:03 PM Re: CDARS
Anonymous
Unregistered

How would the CDARS be treated for Call Report purposes? Ownership type-your original customer? Maturity?
> $100,000? The entries are posted to the General Ledger based on the CDARS customers and not the banks customers (public vs. non-public).

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#130199 - 07/07/05 03:55 PM Re: CDARS
Dolly Nugent Offline
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Dolly Nugent
Joined: Nov 2000
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Southern California
I'm just curious. Has any bank done well with this program?
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#130200 - 07/08/05 04:16 PM Re: CDARS
CC Mom Offline
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Joined: Sep 2004
Posts: 15
SouthCentral Wisconsin
We've just joined the CDARS program, and have only done limited CD's thru it. You quote an interest rate to your customer and that's what you end up paying on the reciprocal CD's that come from the other participating banks. Any differences in the interest rates throughout the country are made up by rate bridge payments. So far, we've used it for municipal customers to free up pledging. We're still working out some accounting issues, but overall, we think the advantages (freeimg up pledging, etc) will out-weigh the minor inconveniences. You can also use it as an ALCO tool, doing one-way transactions when the Bank itself needs funds or has excess funds. We haven't advertised the service yet, so we're not sure how much interest our own customers will have, but we think they should like it.

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#130201 - 07/08/05 04:30 PM Re: CDARS
Texas Boy Offline
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Joined: May 2005
Posts: 1,717
I know this is a little off the subject, but when is the FDIC going to raise the insurance amount from $100,000? Throughout history, this amount has gradually increased to keep up with inflation and other economic factors. The last time this amount was changed was 1980. Does anyone know if the FDIC is considering raising the insured amount?
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#130202 - 07/08/05 07:41 PM Re: CDARS
Anonymous
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Last I saw they were working on raising it to $130,000 and then indexing it going forward. Don't know the current status or when the change would be effective. That will help some, but not too much.

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#130203 - 07/08/05 07:50 PM Re: CDARS
John Burnett Offline
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Cape Cod
The bill, H.R. 1185, was passed by the House. On May 9, after having been read twice in the Senate, it was referred to the Senate Committee on Banking, Housing, and Urban Affairs. That's where it sits.
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#130204 - 07/08/05 08:30 PM Re: CDARS
AMXSteve Offline
Member
Joined: Jun 2001
Posts: 75
Wilmington, OH, USA
CDARS has actually raised the total amount an individual can have insured to $20 million because of increasing numbers of participant banks.

We've done very well with this program. Currently we are only sending funds out and not accepting funds in from CDARS, so accounting hasn't been a problem because the funds aren't on our books. So far we've placed over $58 million in the program. It allows our customers to place funds in multiple institutions while only having one point of contact (us). This allows us to manage the customer's relationship without them dealing with the other institutions.
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#130205 - 07/26/05 10:00 PM Re: CDARS
Bankster Offline
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Joined: Aug 2004
Posts: 440
Midwest
We are looking into the CDAR's program. I was curious if those of you who are already involved with this, do you give your customers a TIS disclosure that is taylored to the CD's CDAR's offers, or do you give your usual TIS disclosure? Do you even give a TIS disclosure? The representative indicated that a TIS disclosure is not needed at all!! I have a hard time accepting that.

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#130206 - 07/27/05 01:50 PM Re: CDARS
AMXSteve Offline
Member
Joined: Jun 2001
Posts: 75
Wilmington, OH, USA
You don't give your normal TISA disclosure because the funds are not remaining in your institution. When the customer places funds into CDARS, there is a deposit placement agreement that the customer must sign that outlines terms of the relationship. We also have a rate disclosure sheet and a early withdrawal penalties sheet that we give the customer. They contain most of the information of a TISA disclosure, such as APR, APY, and minimum balance. The representative may provide additional help with this when you get further into the process.
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#130207 - 11/17/05 07:11 PM Re: CDARS
Anonymous
Unregistered

How does the bank address BSA/AML issues related to CD placements via CDARS? Are these CDs considered "brokered deposits" as defined by the 2005 Interagency Examination Manual?

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