Tag: CDs

How To Use “Specials” And Odd-Month CDs in Deposit Structuring

Better Deposit Pricing

It seems like something is getting lost in the tribal knowledge of deposit gathering. Certificate of deposit (CD) “specials” and the odd-month CD offering are a good example of this. As the legacy knowledge of deposit gathering is passed down from generation to generation of banker, some of the finer points of liability structuring are getting bastardized with some knowledge just plain forgotten about. In this article, we highlight how many banks are misusing CDs at the detriment of their balance sheet plus offer some recommendations.

 

Why Your Bank Should Tie Checking and CDs Together

Boosting Deposit Performance

As deposits become more valuable, banks are getting more aggressive about raising funds. While we are not big fans of increasing liabilities through certificates of deposits (CDs), banks that do may want to consider requiring a checking account in order to increase performance. In this article, we look at some banks that do just that and how it helps them mitigate the performance degradation that normally occurs when offering higher-priced CDs.

 

Offering a Package of Products

 

Deposit Strategy: New Products & Pricing (Part II)

Deposit Strategy with Rising Rates

In Part I (HERE), we got all Warren Buffet against the backdrop of Jimmy Buffet and explored how rising rates were starting to impact deposit balances. We questioned whether “surge balances” are in fact a thing and if they are, is this the time that we will see an exodus of balances move into other asset classes like fixed income, equities, real estate and capital spending.

What Is Going On With Bank CD Penalties?

Bank Liability Management

Usually, in the face of rising rates, banks increase their early withdrawal penalties in an attempt to stem customers from requesting their money back early so that customers can reinvest at higher rates. Increasing withdrawal penalties serve to increase liability duration and help bring convexity closer to zero. In a rising rate environment, this is exactly what you want as a bank. Oddly, banks are doing the opposite.

 

Early Withdrawal Penalties Are Shortening

 

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