FI Depository Institutions

Depository institutions

1.) funded by public deposits

2.) holds a charter: deposit insurance, the payment system, and the discount window

3.) holds illiquid, long-dated assets against short, par-value claims

commercial banks

full service lenders (JPMorgan to one-branch community)

savings institutions

thrifts. mortgage-focused by charter (mortgages and home loans)

credit unions

member-owned, nonprofit, common bond (Navy Federal, Purdue Federal)

transaction accounts

• payable on demand; unlimited third-party payments

• demand deposits (DDA), NOW accounts

• historically reservable

• low or no interest; priced through services

non transaction account

• held to accumulate value, not to spend

• savings, MMDAs, and all time deposits

• zero reserve requirements

• higher interest

demand

(no stated maturity)

• withdrawal at part, any time, at no cost

• DDA, NOW, MMDA, statement savings

• contractually overnight; behaviorally multi-year

• rate resets whenever the bank chooses

time

fixed maturity

• contractual term: 7 days to 10 years

• retail CDs, negotiable CDs, brokered CDs

• early withdrawal penalty creates lock-in

  • rate fixed until maturity, then reprices at once

core deposits

• stable across the full rate cycle

• local, relationship-based, small balances

• bank is a price-setter — low deposit beta

• cheap: the franchise value of a branch network

non-core/purchased funds

• rate-driven, wholesale, large-ticket

• brokered deposits, negotiable CDs, listing services

• Fed funds purchased, repos, FHLB advances

• bank is a price-taker — beta near 1.0

insured

• no incentive to monitor and run — the balance is whole either way

• cheapest and stickiest funding a bank can hold

uninsured

• loss-exposed above the cap, so depositors monitor and may run

• concentrated: business operating accounts, wealthy households

demand deposit

• checking payable on demand

• no maturity; open to anyone, including businesses

NOW account

interest-bearing checking, individuals and nonprofits only

statement savings

no maturity, low rate, household balances. the stickiest funding a bank holds

MMDA

savings with limited check and debit access. created in 1982 to compete with money market mutual funds

retail CD

small time deposit. fixed term, early withdrawal penalty, cannot be sold

negotiable CD

jumbo time deposit ($100k) that trades in a secondary market

brokered CD

placed through a deposit broker, not a customer relationship. priced at the top of the market

fed funds purchased

unsecured overnight borrowing from another bank’s reserve balance. cheapest and most fragile — the first line cut when a lender doubts you

repurchase agreements

secured borrowing against securities collateral. survives stress better than fed funds, but haircuts widen exactly when you need it

FHLB advances

collateralized term funding from a Federal Home Loan Bank. Reliable and cheap though collateral must be pledged in advance