Brokered Deposits are an attractive and viable alternative source
Locally generated deposits have declined as customers invest in
Money Market Funds with investment companies. These Money Market Funds
then buy brokered Certificates of Deposit. We are merely reacquiring our
In many cases, Brokered Deposits are nothing but investments from
out of market individuals. It is the same type of customer that we seek
locally, they just happen to live out of our market.
Brokered Deposits are frequently lower cost funding as local banks
with credit issues pay higher rates for funding
and drive up our deposit costs.
Brokered Deposits are truly core funding as DTC eligible deposits
cannot be withdrawn prior to their stated maturity.
The 10% brokered deposit limit includes too many types of funding
(such as Federal Home Loan Bank borrowings) which have previously been
encouraged by regulators.
The 10% brokered deposit limit is too low to support a growing
The 20% growth limit is too low and is counter to the goals of the
In a time where banks are being encouraged to lend, this action
serves to discourage growth by limiting a bank to lend only what it can
fund with locally generated deposits.
In a time when banks are incurring increased credit costs due to a
poor economy, this adds a heavy additional expense burden.