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As another way to attract and retain customers, more Maryland banks are joining a program that insures well beyond $250,000 in deposits per customer to as much as $50 million through the Federal Deposit Insurance Corp.

The Certificate of Deposit Account Registry Service — or CDARS — comprises more than 2,500 banks after starting from scratch in early 2003, said Phil Battey, vice president of legislative and public affairs at Promontory Interfinancial Network. The Arlington, Va., financial services company that formed the program is led by CEO Eugene A. Ludwig , a former U.S. Comptroller of the Currency. Other executives formerly worked for the Federal Reserve Board and the FDIC.

The program works as a bank-deposit-swapping service that allows member institutions to divide their customers' funds in increments of less than $250,000 — the limit that was recently raised from $100,000 — and place them in accounts at other FDIC-insured institutions. Thus, rather than customers who have more than the insured limit having to open up more than one account at multiple banks, they have just one account.

The banks set the rates for the accounts, with some offering above-average rates, some lower and others about the same, Battey said. "We don't get into the rate side of things," he said. "That's between the banks and their customers. ... We've heard, though, that fewer banks are shaving points off these days."

The average individual customer in the program has more than $500,000, Battey said, with institutions holding higher amounts.

Among the Maryland banks that offer the program are Provident Bank of Baltimore, EagleBank of Bethesda, HarVest Bank of Maryland in Rockville and Congressional Bank of Bethesda.

Provident started offering the CDARS program about a year ago. About two-thirds of its clients are business executives, and the program is gaining popularity, said Stephen K. Heine, executive vice president for consumer and business banking. "In the last 60 days, more individuals have shown interest in CDARS," he said.

Rates for the CDARS program at Provident are comparable to the average certificate of deposit, though not exactly the same, Heine said. "There is a higher level of FDIC insurance coverage so it's a value-added premium for clients," he said.

Other institutions are finding different ways to insure higher levels of deposits. Prince George's Community Federal Credit Union this year began a program that insures savings accounts and retirement accounts up to $500,000. The program combines federal insurance provided by the National Credit Union Administration and private supplemental insurance coverage from Excess Share Insurance Corp.

The credit union is open to anyone who lives, works, worships or volunteers in Prince George's County, said Polly A. Quinn, the institution's vice president of marketing and business development.

FDIC proposes hike

in insurance fund rate

This week, the FDIC released details of a proposal that would raise the rate that banks and thrifts pay for the deposit insurance fund.

The FDIC's insurance fund's reserve ratio has dipped below 1.15 percent — the lowest it can reach before the agency is required to build up the fund, officials said. The rate would be raised by 7 basis points on Jan. 1, and institutions with higher risks would be required to pay more starting in April under the proposal.

Edward L. Yingling, president and CEO of the American Bankers Association, said in a statement that the FDIC's cost projections over the next five years may be too high.

"Should its projections prove to be too conservative, we hope the FDIC would immediately move to adjust premiums downward so as not to further restrict bank resources that could be used to meet the credit needs of our customers and communities," he said.

Bankers are also concerned about a proposal that could add premium costs for banks that use Federal Home Loan Bank advances, Yingling said. "It is important not to disrupt this vital source of liquidity for healthy banks," he said.