Do CDs owed to an insured depository institution through the CDARS network qualify as guaranteed debt under the senior unsecured debt component of the Temporary Liquidity Guarantee Program?
Under the Final Rule for the Temporary Liquidity Guarantee Program, certificates of deposit owed to insured depository institutions (and insured credit unions) are considered senior unsecured debt (and are eligible for an FDIC guarantee) if they are owed to the institution solely in that institution’s own capacity and not as agent. However, CDs placed through the CDARS network are intended to be fully insured. Because the FDIC has interpreted the definition of senior unsecured debt pursuant to 12 CFR 370.2 to include only those interbank CDs outstanding that are not otherwise fully insured, most, if not all, CDs placed through the CDARS network, even if owed to an insured depository institution solely in its own capacity and not as agent, will not be considered senior unsecured debt. “Negotiable CDs” are excluded from the definition of senior unsecured debt for purposes of the debt guarantee component of the Temporary Liquidity Guarantee Program. What is a “negotiable” CD for purposes
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