AL 2001-5
OCC Advisory Letter
Comptroller of the Currency
Administrator of National Banks
Subject:	Brokered and Rate-Sensitive Deposits
Date:	May 11, 2001

TO:  Chief Executive Officers of National Banks, Federal 
Branches and Agencies, Department and Division Heads, 
and Examining Personnel

The Office of the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, the Federal 
Reserve Board, and the Office of Thrift Supervision 
have issued the attached, "Joint Advisory on Brokered 
and Rate-Sensitive Deposits."  The guidance outlines 
the processes banks should use to manage the risks 
associated with significant reliance on brokered and 
other highly rate-sensitive deposits. These deposits 
often are obtained through Internet advertising, 
certificate of deposit listing services, and similar 
advertising programs. 

When prudently managed, these funds can be and often 
are beneficial to banks.  However, the board of 
directors and management need to understand the inherent
liquidity and interest rate risks that these funds can 
pose to an institution. Customers who focus exclusively 
on yield can be a less stable source of funding than 
typical relationship deposit customers.  If market 
conditions change, these customers may rapidly transfer 
funds elsewhere in a manner similar to that of wholesale 
investors.  For these reasons, banks should avoid excess 
reliance on these funding sources.

Banks utilizing significant amounts of these deposits 
should ensure that proper risk management practices are 
in place, including appropriate asset and liability 
management policies, business strategies, concentration 
limits, management information systems, and contingency 
funding plans.

For further information on brokered and rate-sensitive 
deposit risk management, see the Comptroller's Handbook 
"Liquidity" dated February 2001 or contact Stephen R. 
Sage, national bank examiner, Treasury and Market Risk, 
at (202) 874-5670. 


_____________________                              
Emory W. Rushton
Senior Deputy Comptroller
Bank Supervision Policy

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