Rate Listing Services and Under Capitalized Banks

[Community Development Banking List]

Original message from: chris@jumbocdi.com

I wrote a new blog post that you may find interesting. Hopefully, it will spark some lively debate.

http://jumbocdinvestments.com/cd_rat...core-deposits/

While brokered deposits are becoming everybody's favorite scapegoat (actually they have always been), there is another source of deposits that I believe also deserves equal scrutiny, rate listing services.

The blog post focuses on under capitalized banks, but in reality if the FDIC and Congress are going to be concerned with out-of-area (non-Core) deposits, than they should be concerned with all of them.

Although I don't subscribe to the idea that the deposits cause the bank's to fail, I can certainly see the argument that they can make the failure more expensive. While I don't believe the current assessment on brokered deposits is getting to the root of the problem, if they are going to assess such non-Core deposits, they should assess them all. Deposits from rate listing services exhibit the same behavior as brokered deposits.

Something else worth noting, especially because many credit unions are a part of this list. The FDIC and NCUA don't classify brokered deposits the same way. The NCUA recognizes that if Credit Union A purchases a CD at Bank B and wires their own funds directly to the bank, that is a direct CD regardless of whether the source is a "broker" or a rate listing service. There is no stigma attached to that scenario. However, under the same scenario, the FDIC classifies the deposit from the rate listing service as Core, but the deposit from the "broker" as brokered. Not only is a stigma attached to the deposit, but of course the FDIC is assessing brokered deposits.

Check-out the post and please leave some comments.

Thank you,
cd :O)

Chris Duncan

Jumbo C.D. Investments, Inc.
Dixon, CA
1-800-234-4605
www.jumbocdinvestments.com
www.jumbocdinvestments.com/cd_rates_blog

Securities offered through Gill Capital Partners, Inc.
Member: FINRA - SIPC

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