Method and apparatus for fully insuring large bank deposits
An Interbank Deposit Placement System (IDPS) that allows banks participating in the service to offer their customers multiple deposits so that potential deposit (fund) amounts exceeding an applicable Federal deposit insurance limit (e.g., $100,000) are fully insured. The IDPS partitions each of the potential deposit amounts into a plurality of deposit portions that do not exceed the Federal deposit insurance limit. In one embodiment, a proposed list of banks to which the deposit portions are allocated is presented to a recipient (e.g., bank representative, depositor) who is offered the option of modifying the proposed list during an established time window. After the time window expires, a deposit is established on behalf of each bank on the list to which the specific deposit portion was allocated by the processor.
1. A computer-implemented method of processing funds in amounts that are subject to an established deposit insurance limit so that the funds are eligible to be fully insured, the funds being assigned to a processor that creates a plurality of deposits on behalf of a plurality of banks for depositors of the funds, each deposit having a predetermined maturity, the method comprising:
(a) the processor receiving a plurality of orders to process the funds;
(b) the processor partitioning each of the fund amounts into a plurality of deposit portions, each deposit portion not exceeding the established deposit insurance limit;
(c) the processor allocating each of the deposit portions to a specific one of the banks, wherein, through the processor, a deposit is established at the bank to which the deposit portion was allocated;
(d) the processor comparing a deposit interest rate specified by each bank to an interest rate determined by the processor; and
(e) the processor calculating the amount of a payment to compensate for differences between the specified deposit interest rate and the interest rate determined by the processor.
2. The method of claim 1 wherein the amount of the payment is determined based on (i) the interest rate determined by the processor; (ii) the specified deposit interest rate, (iii) the amount of the specific deposit portion, (iv) a number of times during a predetermined time period that earnings on the specific deposit portion are to be compounded, (v) a number of times that the predetermined time period is to occur, (vi) a payout frequency of earnings on the specific deposit portion, and (vii) an established discount rate.
3. The method of claim 2 wherein the established discount rate is the applicable London Interbank Offering Rate (LIBOR) or a derivative thereof, or some other rate.
4. The method of claim 1 wherein the amount of each specific deposit portion is within the established deposit insurance limit, the method further comprising:
(f) the processor forwarding the payment to the depositor or the depositor's bank or crediting the payment to an account thereof each time that interest earned on the associated deposit is compounded or accrued, so that the amount of the specific deposit does not exceed the established insurance limit.
5. The method of claim 1 wherein the interest rate determined by the processor is based on a volume weighted average rate of the deposit portions used to establish deposits having a particular maturity.
6. The method of claim 1 wherein the deposit is a certificate of deposit (CD).
7. The method of claim 6 wherein the CD is a Municipal CD.
8. The method of claim 1 wherein the established deposit insurance limit is in accordance with a deposit insurance program in the United States.
9. The method of claim 1 wherein the established deposit insurance limit is in accordance with a deposit insurance program operated by the U.S. Federal Deposit Insurance Corporation (FDIC).
10. The method of claim 1 wherein the established deposit insurance limit is in accordance with a deposit insurance program operated by the National Credit Union Administration (NCUA).
11. The method of claim 1 wherein the established deposit insurance limit is in accordance with the deposit insurance program of a foreign jurisdiction.
12. The method of claim 1 wherein the banks are unaffiliated with one another.
13. The method of claim 1 wherein each amount of funds is less than or equal to the established deposit insurance limit.
14. The method of claim 1 wherein each amount of funds exceeds the established deposit insurance limit.