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. Broker

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

    A savings certificate entitling the bearer to receive interest. ...
  5. Deposit Broker

    An individual or firm that facilitates the placement of investors' ...
  6. Placement Agent

    An intermediary who raises capital for investment funds.
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 >>
  2. How can I create a yield curve in Excel?

    You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >>
  3. What are the different formations of yield curves?

    There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >>
  4. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  5. On what basis does the sustainable growth rate fluctuate?

    The main difference between a bond’s yield to maturity, or YTM, and the spot rate is that the YTM uses the same interest ... Read Full Answer >>
  6. What are some classes I can take to prepare for the Series 6 exam?

    The risk-return tradeoff for bonds is the increased yield investors can obtain from corporate and other types of bonds that ... 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. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  7. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.
  8. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  9. Professionals

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  10. Investing

    Why Some Investors Are Tilting Toward TIPS

    Last month’s five-year TIPS auction drew nearly $48 billion in interest, a sign of recent renewed demand for this inflation indexed asset among investors.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center