NR 2001-44
May 11, 2001
For Immediate Release                                                                                


Agencies Remind Bankers of Risks 
Associated with Reliance on Brokered and Rate-Sensitive Deposits

The federal bank and thrift regulatory agencies today issued an advisory on the risks of 
brokered and other rate-sensitive deposits.  The agencies warn that excessive reliance on 
these types of funding products without proper risk management safeguards has the potential 
to weaken an institution’s financial condition.  

Deposit brokers have traditionally provided intermediary services for financial 
institutions and investors.  Today, however, the Internet and other automated service 
providers enable investors who focus on yield to easily identify high-yielding deposit 
sources.  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.    

Financial institutions that make use of significant amounts of brokered and rate-sensitive 
deposits should ensure that proper risk management practices are in place.  Among the practices 
cited in the advisory are control structures to limit concentrations in this type of funding, 
due diligence in assessing deposit brokers and the risk to earnings and capital, and management 
information systems that identify non-relationship or higher cost funding sources that can be 
monitored and managed.  

The advisory lists potential red flags that may indicate the need for closer supervisory 
review, including newly chartered institutions with an aggressive growth strategy and few 
relationship deposits, high on- or off-balance sheet growth rates, and inadequate systems or 
controls.


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Media Contacts:
OCC:			Bob Garsson	(202) 874-5770
Federal Reserve:		Dave Skidmore	(202) 452-2955
FDIC:			David Barr	(202) 898-6992
OTS:			Sam Eskenazi 	(202) 906-6677