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. Deposit Interest Rate

    The deposit interest rate is the interest rate paid to deposit ...
  2. Bank Deposits

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

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

    A demand deposit is funds held in an account which deposited ...
  5. Foreign Deposits

    Foreign deposits are deposits made at, or money put in to, domestic ...
  6. Reservable Deposit

    A reservable deposit is a deposit subject to reserve requirements, ...
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. 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.
  3. 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.
  4. IPF - Banking

    Which Banks Pay the Highest Interest Rates on Savings Accounts?

    Online banks offer the best savings account interest rates. Not all banks offer the same features, so it pays to read the fine print.
  5. Small Business

    When Wholesale Funding Goes Bad

    The wholesale funding process is extremely dependent on the credit markets. Find out why it is not always the best option for a business.
  6. Investing

    Picking your first broker

    If you're a rookie investor, choosing a broker may be your first big investment decision. Learn more on whether you should you go with a full-service broker or a discount broker.
  7. Investing

    Analyzing a bank's financial statements

    In this article, you'll get an overview of how to analyze a bank's financial statements and the key areas of focus for investors who are looking to invest in bank stocks.
  8. Investing

    Introduction To The Chinese Banking System

    As China steps into a greater role in the global economic system, their banking system continues to evolve.
RELATED FAQS
  1. What is the difference between the deposit multiplier and the money multiplier?

    Explore the deposit multiplier and the money multiplier, two fundamental concepts of Keynesian economics, and learn how they ... Read Answer >>
  2. How must banks use the deposit multiplier when calculating their reserves?

    Explore the relationship between the deposit multiplier and the reserve requirement, and learn how this limits the extent ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center