What Is the Certificate of Deposit Account Registry Service (CDARS)?

The purpose of the Certificate of Deposit Account Registry Service (CDARS) is to help people who invest in certificate of deposits (CDs) keep their money insured while also staying below the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 per depositor per bank. Using CDARS, an investor can spread money around various, local FDIC-insured banks.

CDARS also provides a way for consumers to access FDIC insurance on their CD investment principal and interest, and thus, provides them with a way to outsource their risk in the event of a bank failure.

Key Takeaways

  • The Certificate of Deposit Account Registry Service (CDARS) helps consumers who invest in certificate of deposits (CDs) keep their money insured by staying under the FDIC insurance limit of $250,000 per depositor per bank. 
  • The Certificate of Deposit Account Registry Service (CDARS) operates by opening accounts with various, local FDIC-insured banks across its large network of more than 3,000 institutions.
  • Customers who use CDARS are able to keep an account at one local bank (rather than at many banks across the network). 

Understanding the Certificate of Deposit Account Registry Service (CDARS)

The Certificate of Deposit Account Registry Service (CDARS) is a for-profit service run by the Promontory Interfinancial Network (which was founded by a group of former financial regulators in 2003). CDARS comprises a network of more than 3,000 American banks and savings institutions. It is used by individuals, public funds, businesses, nonprofits, credit unions, and financial advisors.

CDARS eliminates the need for consumers to go from bank to bank to deposit money and enables them to invest their money in CDs that range in maturity from one month to five years. It also provides consumers with access to CD-level rates, which are often better than the rates for money market mutual funds and Treasury notes.

Users negotiate one interest rate per maturity when they make CD investments through CDARS. This eliminates the need to tally disbursements manually for each CD or negotiate multiple rates per maturity.

Every participating local bank in the registry sets its own interest rate, and it is paid on the entire deposit amount. The local bank also acts as a custodian for CDARS deposits. The sub-custodian for CDARS deposits is the Bank of New York Mellon.

Using CDARS requires first finding a local participating bank and then depositing money with a separate Deposit Placement Agreement that is specific to CDARS. Then, the local participating bank spreads the money across several member banks, ensuring that the amount of money in each bank never exceeds the FDIC limit of $250,000 per depositor per bank.

As a participant in the CDARS program, a consumer is able to conduct business with only that one local bank. They receive a single consolidated statement that contains information for each account (rather than keeping multiple accounts at multiple banks and maintaining multiple logins and quarterly statements). Since banks pay to participate in the CDARS registry, consumers pay any applicable fees directly to their primary bank.

Consumers can also avoid exceeding the Federal Deposit Insurance Corporation (FDIC) insurance limit by opening individual accounts or using brokered CDs. However, these approaches are more complex and require significantly more time to execute.