Brokered Deposit

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Deposit In Transit

    A deposit in transit is money that has been received by a company ...
  2. Deposit

    1. A transaction involving a transfer of funds to another party ...
  3. Deposit Broker

    An individual or firm that facilitates the placement of investors' ...
  4. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
RELATED FAQS
  1. Are certificates of deposit a kind of bond?

    There is a fair amount of overlap between certificates of deposit (CDs) and bonds; they are both fixed-income securities, ... Read Full Answer >>
Related Articles
  1. Savings

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  2. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  3. Entrepreneurship

    When Wholesale Funding Goes Bad

    The wholesale funding process is extremely dependent on the credit markets. Therefore, it is not always the best option for a business.
  4. Credit & Loans

    How Interest Rate Cuts Affect Consumers

    Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here.
  5. Options & Futures

    Who Backs Up The FDIC?

    The FDIC insures depositors against loss, but what happens if it runs out of money?
  6. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  7. Investing Basics

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  8. Investing Basics

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  9. Bonds & Fixed Income

    Should Junk Bond ETFs Be a Part of Your Portfolio?

    Should junk bonds be a part of your portfolio? Here's what you need to know.
  10. Brokers

    10 Brokers That Pay You To Open An Account

    Open an account with one of these brokers and you will get a bonus. Just be sure it's the right account for your needs.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center