Brokered CDs Less Than $250,000 Continue to Grow to Record Levels

For years, brokers, investment advisors, consultants, and others, relied on the Depository Trust and Clearing Corporation (DTCC) to provide monthly balances of qualifying brokered CDs. Since 2014, however, the level of brokered CDs under $250,000 computed by IDC Financial Publishing (IDCFP) as part of brokered deposits, continues to outpace the levels reported by the DTCC.

As illustrated in Table I, the two values were nearly equal at March 31st, 2017 at $230 billion. IDCFP calculated value increased to $443.0 billion in the first quarter of 2020, while DTCC reported qualifying brokered CDs less than $250,000 of $386.2 billion. The difference between the two values were minimal through 2018. As of March 31st, 2018, the difference was only $6.6 billion, with IDCFP calculating $314.1 billion and DTCC reporting $307.5 billion. From March 2018 to the peak in CDs in June 2019, IDCFP calculated a $154 billion increase to $468 billion, compared to a DTCC gain of $126 billion to $433 billion. Both values declined after June 30th, 2019 due to an inverted yield curve in 2019 and Covid-19 in 2020. IDCFP calculations fell only $6.7 billion, while DTCC declined $47 billion. The difference grew from $6.6 to $56.8 billion, from March 2018 to March 2020 (see Table I).

IDCFP believes the difference is due to Issuing Paying Agents (IPA) replacing the custodian function of DTCC. IPAs have been in existence for some years at Deutsche Bank, GE Bank, Synchrony, among others. It is likely some banks issuing brokered CDs have switched from DTCC to IPAs.

IDCFP welcomes your input on the difference in our calculations of brokered CDs less than $250,000 and the eligible CDs reported by DTCC. Our calculation uses reported total brokered deposits, less reciprocals and uninsured brokered CDs. We then require an increase in the remainder to be less than the change in time deposits, in order for the value to qualify as a brokered CD less than $250,000. IDCFP remains confident of its calculation given the many quarters our CDs values closely approximated the DTCC reports in history.

Table I

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John E Rickmeier, CFA, President,

Robin Rickmeier, Marketing Director