DEFINITION of 'Pooled Cost Of Funds'

The pooled cost of funds is one possible method for determining an institution's overall cost of funds. Overall cost of funds refers to the cost incurred by an institution to take deposits and make loans. Investors provide funds to the institution which are paid interest. The interest paid to investors whose deposited funds are loaned out is referred to as the cost of funds. The pooled cost of funds looks at the institution's assets and liabilities as a whole. It is determined by dividing the balance sheet into several different categories of specific interest-earning assets. These assets are then matched against corresponding interest-sensitive liabilities.

BREAKING DOWN 'Pooled Cost Of Funds'

The pooled cost of funds often matches assets and liabilities with similar or identical time horizons. It also charges debits and credits to the assets and liabilities, depending on the income they are earning or costing. This formula is generally adjusted for the legal reserves that banks are required to keep as a percentage of their deposits.

RELATED TERMS
  1. Pooled Income Fund

    A pooled income fund is a type of charitable trust.
  2. Whole Pool

    A whole pool is an undivided interest in a group of mortgages ...
  3. Pooled Funds

    Pooled funds aggregate capital from a number of investors, as ...
  4. Option Pool

    An option pool is stock in a startup that is set aside to be ...
  5. Institutional Fund

    An institutional fund is a fund with assets invested by institutional ...
  6. Pool Factor

    The pool factor is a measure of how much of the original loan ...
Related Articles
  1. Insights

    An Introduction to Dark Pools

    Dark pools are an ominous-sounding term for private exchanges or forums for trading securities; unlike stock exchanges, dark pools are not accessible by the investing public.
  2. Tech

    How Do Cryptocurrency Mining Pools Work?

    Here's how cryptocurrency mining pools work.
  3. Insights

    Should You Be Afraid Of Dark Pool Liquidity?

    Don't fear the deep end. Dark pool liquidity can help drive down stock cost for everyday investors.
  4. Investing

    Introduction To Institutional Investing

    Investopedia explains: Learn about institutional investing and all of the major players in this field.
  5. Investing

    Reviewing Liabilities On The Balance Sheet

    As an experienced or new analyst, liabilities tell a deep story of how a company finances, plans and accounts for money it will need to pay at a future date.
  6. Investing

    Should You Wade Into The Dark Pools Of Liquidity?

    Dark pools of liquidity allow big investors to trade away from the public eye. They limit market impact but may leave small investors in the cold.
  7. Investing

    Will Institutional Investors Change the Way Hedge Funds Invest?

    As market volatility rises, hedge funds could be capitalizing, but institutional investors may be holding them back.
  8. Personal Finance

    Dark Pools: The SEC Is Moving to Tighten Oversight

    The agency is concerned that dark pools' lack of transparency could disrupt the markets
  9. Investing

    How Mutual Fund Managers Pick Stocks

    Learn about how mutual fund managers choose stocks based on the type of funds they manage and the investment goals of the funds' shareholders.
RELATED FAQS
  1. Mutual funds versus money market funds

    Learn what mutual funds and money market funds are and understand the differences between each, as well as how they serve ... Read Answer >>
  2. How do you calculate working capital?

    The formula for calculating working capital is straightforward, but lends great insight into the short-term financial health ... Read Answer >>
  3. On which financial statements does a company report its long-term debt?

    Discover which financial statements are used to report a company’s long-term debt, as well as how a company uses debt to ... Read Answer >>
  4. What are the 9 major financial institutions?

    There are nine major types of financial institutions. Understand the major types of financial institutions that exist and ... Read Answer >>
Trading Center