Magazine article American Banker

ABA to Approve System for Sharing Deposit Coverage

Magazine article American Banker

ABA to Approve System for Sharing Deposit Coverage

Article excerpt

The American Bankers Association will endorse a new service from Promontory Interfinancial Network that allows community banks to offer potentially unlimited federal insurance on certificates of deposit.

The endorsement could provide more momentum to the service, which uses a network of banks to share insured deposits. Promontory officials said the number of banks that have signed up for the service has more than doubled since it officially went online last month, to 170.

"The response has been more than I expected," said Eugene A. Ludwig, Promontory's chairman and chief executive officer, and a former Comptroller of the Currency. "It is way above our projections. It is just off the charts."

Promontory plans to have 1,000 banks signed up for the service by yearend.

Mr. Ludwig is scheduled to address the ABA's community banking conference in Hollywood, Fla., today, where the group will formally announce its endorsement.

"Our members have consistently told us that they need a long-term solution to attract the new deposits necessary to fund lending and investment activities in their communities," and the Promontory service "is such a solution," Donald G. Ogilvie, the ABA's president and chief executive officer, said in a statement.

The Corporation for American Banking, a for-profit subsidiary of the ABA, researched the service, including the software, finances, and legal contracts behind it, before deciding to endorse it. "A lot of banks just don't have the time, expertise, or financial resources to find the best consultants to work with them," said John Wolff, the subsidiary's managing director. …

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