Excess deposit insurer exits the business

Promontory Interfinancial Network, the company that provides CDARS, is stepping in to fill the gap left by Kansas Bankers Surety. For the next 90 days, institutions that had deposit coverage through KBS will be able to join the CDARS network at a 40 percent discount and will waive bank transaction fees for one year.

Promontory president Mark Jacobsen says the CDARS network has been growing steadily since the collapse of IndyMac.

"We certainly saw a big uptick in interest, particularly in California. On July 11, we had 141 of the 314 banks headquartered in California as members of the network. Over the next 11 days, 30 more California banks asked to join."

The decision by Kansas Bankers Surety to exit the excess deposit insurance business, while definitely a sign of the times, should not leave customers unprotected, according to industry insiders. Other private insurers, along with companies such as Promontory, are likely to provide coverage to those institutions.