First Niagara Financial Group has been named as one of the nation's 20 largest providers of a special deposit service that allows member banks to offer up to $50 million in federal deposit insurance coverage.
The Lockport-based savings bank ranks among the biggest providers, by deposits, of the Certificate of Deposit Account Registry Service, or CDARS, offered through the Promontory Interfinancial Network. The bank has placed more than $750 million in CDARS balances, for about 180 clients.
CDARS, endorsed by the American Bankers Association, is a deposit placement service linking the 2,834 participating banks in the Promontory network, so that large deposits at a single bank can be split up to maximize coverage from the Federal Deposit Insurance Corp. More than one-third of the banking industry is signed up.
When a customer makes a large deposit of more than $100,000 with a member of the network, that bank can arrange to put the extra money into certificates of deposit at other member banks in amounts of less than $100,000, to ensure that both principal and interest are eligible for full FDIC protection.
"The CDARS product allows us to provide our upstate New York clients with attractive and competitive market rates, while also providing our larger depositors with the peace of mind that comes with FDIC coverage," said Lanny Little, the bank's executive vice president of retail banking.
Promontory doesn't release total figures for number of CDARS customers or outstanding balances, but spokesman Phil Battey said the service has quadrupled in transaction volume from a year ago, and handles billions of dollars in transactions every week.
Based in Washington, Promontory and an affiliated consulting firm were founded by former federal bank regulators, including from the FDIC itself.