DEFINITION of 'Brokered Deposit'

A brokered deposit is a deposit made to a bank by a third-party deposit broker. A deposit broker is a person who places other peoples' deposits with insured institutions. The brokered deposits are usually large-denomination and are often sold by a bank to a brokerage, which then divides it into smaller pieces for sale to its customers. Brokered deposits make up one of two types of deposits that make up a bank's deposit liabilities. 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. This improved liquidity within the banking system often gives banks the capitalization they need to make loans to businesses and the public. The bank can also save money by accepting brokered deposits compared to handling an equivalent dollar amount of numerous smaller deposits. Individuals can elect to participate in brokered deposit transactions as they will usually pay a higher rate of interest than traditional deposits.

RELATED TERMS
  1. Term Deposit

    A term deposit is a deposit held at a financial institution that ...
  2. Bank Deposits

    Bank deposits are money placed into a deposit accounts at a banking ...
  3. Transaction Deposit

    A transaction deposit is a bank deposit that has immediate and ...
  4. Deposit Slip

    A deposit slip is a small written form that is sometimes used ...
  5. Deposit

    1. A transaction involving a transfer of funds to another party ...
  6. Foreign Deposits

    Foreign deposits are deposits made at, or money put into, domestic ...
Related Articles
  1. Insights

    Starbucks Has More Customer Deposits than Many Banks (SBUX)

    Recent financial analysis conducted by Standard & Poors shows that Starbuck's holds more customer deposits than several American banks.
  2. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  3. Investing

    You Can Now Open a Goldman Sachs Account With $1

    Perhaps you thought you'd never be able to open a savings account at Goldman Sachs Group Inc., but life is full of surprises. The company now offers an online-only bank for retail customers.
  4. Trading

    Is your forex broker a scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  5. IPF - Banking

    Get the Best Savings Interest Rates For You

    How do you choose between market deposit accounts, CDs and traditional savings accounts?
  6. Personal Finance

    The 7 Best Places to Put Your Savings

    You work hard to put your money away for the future, but where should you keep it?
  7. Trading

    Broker Summary: Scottrade Online Trading Platform

    We look at minimum deposits, customer service and all of the important details about the Scottrade trading platform.
RELATED FAQS
  1. What determines the interest rate on my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  2. How does margin trading in the forex market work?

    A margin account, used to invest in equities with the leverage of borrowed funds, is intended to increase the possible return ... Read Answer >>
Trading Center