Promontory Interfinancial Network Services Update

By Steve Kinner

Kinnersteve (1)In Promontory Interfinancial Network’s third quarter Bank Executive Business Outlook Survey, a growing number of banks listed deposit gathering as their number one priority, right behind CRE lending. Yet for many banks, attracting and holding onto deposits has become an unwanted exercise. In fact, as The Wall Street Journal noted earlier this fall, many large depository institutions are intentionally shedding deposits—J.P. Morgan alone by $150 billion—while others, like State Street Bank, are discouraging customers from making or keeping deposits by charging fees to take those deposits.

At the same time, many institutional investors, from foundations to government entities to large corporations, have large sums of money on hand but with little opportunity to invest those dollars profitably. Unfortunately, banks have a similar problem. Low interest rates have reduced potential profit margins, and new regulations have required banks to hold more cash on hand to avoid funding disruptions.

With all this excess cash, many banks are not eager to take on big deposits that will make managing their balance sheets more difficult and costly.

But with the expectation of greater competition for funding next year (along with higher interest rates), small- and medium-sized banks should be looking for ways to attract or hold on to big deposits, as long as they can do so without busting their balance sheets. One way for Promontory Network members to do just that is to take advantage of the Insured Cash Sweep® service, or ICS®, and CDARS®.

For small and mid-size banks interested in attracting new deposits, including those being shed by the nation’s largest banks, using ICS and CDARS is the right choice. Banks can use either or both services to attract high-value deposits in large chunks (usually seven figures at a time). And, those deposits tend to stick. (CDARS deposits reinvest more than 80% of the time.)

And both services can help an institution add new relationships or expand existing ones with or without adding to its balance sheet. Specifically, banks can offer safety-conscious customers the ability to place funds in demand deposit accounts, money market deposit accounts, and CDs. Banks can choose either to keep the funding or sell the underlying deposits to other member institutions that need funding. When doing the former, a bank receives funds to support lending and other opportunities. When doing the latter, the bank sells the funding and can earn fee income, while reducing customer concentration risks associated with taking a truly large deposit. In both cases, the bank maintains ownership and full control over its customer relationships. And a bank can move between keeping funds and selling the excess as its liquidity needs change.

All of this means that your bank does not have to say “no” to large, short-term deposits—what might otherwise be perceived as unfavorable or costly deposits—and risk customers taking their deposit business to competitors. In turn, this could provide opportunities for your bank to cross-sell other profitable products to these very customers.

To learn more about ICS and CDARS, contact Promontory Interfinancial Network’s Treasury Desk at (866) 776-6426 (option 1, then option 3) or email

And More News...

It’s been a long time coming but, time deposits are no longer declining. According to the FDIC Quarterly Banking Profile for the third quarter of 2015, time deposits have been increasing at a steady clip (roughly between 3 to 5 percent) since the end of 2014. If you are interested in seeing the FDIC chart for yourself, go to this link and scroll down to page 32 of the report.