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Home How CDARS Works

Diagram that provides an example of how CDARS Works: A customer invests $5,000,000 through a financial institution that is a CDARS Network member. The Network member uses the CDARS service to place funds into CDs issued by other CDARS Network members. This occurs in increments below the standard FDIC insurance maximum of $250,000. In this example, 21 CDs under $250,000 are issued by 21 network banks. The customer receives coverage from many banks by working directly with just one bank. The diagram shows a happy customer in a business suit beside an image of one bank and a stack of money. Dotted lines show the flow of the deposit from the one bank to Network member banks in increments of less than $250,000 in principal and interest.

View this short video to learn more about CDARS.

 

How CDARS Works

Everything is handled through a CDARS® Network member of your choice. The thousands of financial institutions that can offer CDARS are members of a unique network. When you place a large deposit with a CDARS Network member, that institution uses the CDARS service to place your funds into CDs issued by other members of the CDARS Network.

This occurs in increments below the standard FDIC insurance maximum ($250,000) so that both principal and interest are eligible for FDIC insurance. By working directly with just one institution, you can receive coverage from many. And, you receive just one regular, consolidated account statement.

When you’re ready to take advantage of CDARS, here’s what happens:

number 1 You sign a CDARS Deposit Placement Agreement and a custodial agreement, and then invest money with a member of the CDARS Network (a relationship institution).
number 2 Your funds are placed using the CDARS service.
number 3 Your CDs are issued by other members in the CDARS Network.
number 4 You receive confirmation of your CDs from your relationship institution.
number 5 You receive consolidated interest payments and statements through your relationship institution.


For general information, please check our FAQs page.

 

The CDARS service has been designed to satisfy the FDIC’s requirements for pass-through deposit insurance coverage.

If a depositor is subject to restrictions with respect to the placement of funds in depository institutions, it is the depositor's responsibility to determine whether the placement of its funds through CDARS satisfies those restrictions.

When deposited funds are exchanged on a dollar-for-dollar basis with other banks in the CDARS Network, the relationship institution can use the full amount of a deposit placed through CDARS for local lending, satisfying some depositors’ local investment goals or mandates. Alternatively, with a depositor's consent, the relationship institution may choose to receive fee income instead of deposits from other participating institutions. Under these circumstances, deposited funds would not be available for local lending.

 

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Placement of funds through the CDARS service is subject to the terms, conditions, and disclosures in the service agreements, including the Deposit Placement Agreement (“DPA”). Limits apply. Although funds are placed at destination banks in amounts that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”), a depositor’s balances at the relationship institution that places the funds may exceed the SMDIA (e.g., before CDARS settlement for a deposit or after CDARS settlement for a withdrawal) or be ineligible for FDIC insurance (if the relationship institution is not a bank). As stated in the DPA, the depositor is responsible for making any necessary arrangements to protect such balances consistent with applicable law. If the depositor is subject to restrictions on placement of its funds, the depositor is responsible for determining whether its use of CDARS satisfies those restrictions. CDARS, ICS, and Insured Cash Sweep are a registered service mark of Promontory Interfinancial Network, LLC.

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