DEFINITION of 'Pooled Cost Of Funds'

A formula for finding the cost of funds. The pooled cost of funds 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.

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