A financial instrument popular with not only wealthy bank depositors, but community banks seeking to prop up their liquidity, is playing a conspicuous role in the problems of several failed and troubled institutions. That has regulators and others in the industry concerned.
The $765 billion brokered deposit market has mushroomed in this decade, up from only $120 billion in 1999. Financial institutions have used these instruments for years as a wholesale funding source to support asset growth and the Federal Deposit Insurance Corp. itself notes that when properly managed, they offer institutions a number of important benefits such as ready access to funding.
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