Banks Load Up on $1.2 Trillion in Risky ‘Hot’ Deposits

 Brokered deposits rose 86% from a year earlier, and regulators are growing concerned

At midyear, Zions Bancorp reported holding $8.5 billion in brokered deposits, an obscure but costly banking industry product that is drawing attention from regulators. At this time last year, the Salt Lake City-based bank had practically none.

Many industry players view brokered deposits as a double-edged sword. 

They can be a quick and easy way for a bank to shore up its balance sheet. The deposits are typically much more expensive because banks have to pay higher interest rates to lure in those customers, along with other fees. 

Regulators and bankers say they are also a type of “hot” money that is prone to disappear when a bank hits a rough patch, since these yield-seeking customers don’t tend to be loyal.

WSJ 12 September 2023


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