Magazine article American Banker

Promontory Network Raising Coverage to $10M

Magazine article American Banker

Promontory Network Raising Coverage to $10M

Article excerpt

In response to rising demand from large depositors, Promontory Interfinancial Network is once again raising the level of Federal Deposit Insurance Corp. coverage it offers to customers of its member banks.

Promontory chairman and chief executive Eugene Ludwig is expected to announce today at the American Bankers Association conference in New York that the network will insure deposits of up to $10 million, double the previous amount.

Promontory, of Arlington, Va., began offering the Certificate of Deposit Account Registry Service 20 months ago with coverage of $1.5 million. It went to $5 million in October 2003.

CDARS allows participating banks to offer more than the typical $100,000 FDIC coverage because large deposits are shared with multiple banks. For example, if a customer goes to Bank A with $200,000, Bank A accepts $100,000 as a deposit, and places the rest with Bank B through CDARS.

Bank B will reciprocate by placing $100,000 from another customer with Bank A. The use of multiple banks means much larger deposits can gain full FDIC coverage.

Mr. Ludwig, a former comptroller of the currency, said the increased demand was coming mostly from public entities and other fiduciaries, including nonprofits, which are often controlled by strict investment policies that require collateralization or full deposit insurance coverage.

Municipalities, churches, school boards, even condominium associations are using the system, he said. …

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