Brokered Deposit

DEFINITION of 'Brokered Deposit'

A large-denomination bank deposit that is sold by a bank to a brokerage, which then divides it into smaller pieces for sale to its customers. Core deposits - such as deposits to checking accounts, savings accounts and certificates of deposit made by individuals - are the other key component of a bank's deposits.

BREAKING DOWN 'Brokered Deposit'

Under FDIC rules, only well-capitalized banks can solicit and accept brokered deposits. Adequately capitalized ones may accept them after being granted a waiver, and undercapitalized banks cannot accept them at all. By accepting brokered deposits, a bank can gain access to a larger pool of potential investment funds and improve its liquidity. It can also save money, compared to handling an equivalent dollar amount of numerous smaller deposits, even though brokered deposits tend to pay a higher rate of interest.

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