By Todd Cohen
Charities are a target market for a network of more than 1,000 U.S. banks that lets individual and institutional depositors spread deposits of up to $20 million among network members so all deposits are covered by federal deposit insurance.
While the Federal Deposit Insurance Corp. insures individual depositors for up to $100,000 per institution, the new Promontory Interfinancial Network in Arlington, Va., divvies up larger deposits among its member banks.
Formed in 2003 and headed by former top officials of the Office of the Comptroller of the Currency, the FDIC and the Federal Reserve System, Promontory has more than 30 North Carolina banks as members for its “Certificate of Deposit Account Registry Service,” or CDARS.
Each network member, such as North State Bank in Raleigh, serves as a one-stop shop for depositors, setting a single interest rate for deposits and spreading among other network members that portion of the deposit that exceeds $100,000.
While Promontory is privately held and does not disclose assets, it says it handled more business in August than it did in its first 18 months of operations.
It also says individual depositors account for roughly one-fifth of the value of its transactions, with individual customers holding $300,000 in deposits on average.
Nonprofits and local governments each account for another one-fifth, and for-profit institutions account for the remaining two-fifths.
Gov. Mike Easley recently signed a law passed by state lawmakers in their just-ended session that will enable local-government financial managers to invest in the CDARS program.