Listing and Brokering Deposits Not the Same

Written by Donald A. Elizondo    Wednesday, 21 December 2011

I would like to clear up some misconceptions about Qwickrate and its nonbrokered CD marketplace that were presented in the April 5 article "Redefining Brokered Funds, and What It Means for Community Banks." It was stated and implied several times that Qwickrate investors are institutional depositors looking for "high-rate CDs." The facts demonstrate otherwise. * Year to date, deposits placed through Qwickrate have been, on average, 47 basis points below the national rate cap. Not what the market would consider a "high-rate" CD. The Federal Deposit Insurance Corp. is well aware of the average CD rates of deposits placed in the Qwickrate marketplace as this information has been voluntarily provided to them on several occasions for the study report. * Qwickrate is a closed, institutional-only marketplace. The stable base of Qwickrate institutional investors who are placing deposits prioritize deposit insurance over deposit rates. They are segmenting their funds into increments of $250K or less for FDIC-insured deposits, and then placing these deposits in multiple banks across the country at the rates advertised and posted by the banks themselves in the Qwickrate marketplace. These institutional investors make their own investment decisions and there is a direct relationship between the CD issuer and the investor. * On their own, these investing institutions can individually research published bank rates and purchase CDs outside of the Qwickrate marketplace. They subscribe to Qwickrate for the convenience of having one place to directly connect with more than 3,000 members to view rates and place FDIC-insured deposits and for the automated tools that streamline the communications for them. It was stated that Qwickrate does not "technically" meet the definition of a brokered deposit. Qwickrate absolutely does not in any way meet the definition of a brokered deposit. Rather, Qwickrate meets the FDIC definition of a nonbrokered direct deposit listing service. In order to meet this definition, a listing service must: * Be compensated solely by subscription fee or listing fee, not a transaction fee. * Not be paid on the basis of the number or dollar amount of deposits made or accepted. * Perform no service other than providing information concerning the availability of deposits or the transmission of messages between parties and must not attempt to steer funds to particular institutions. * Not be involved in placing deposits. The facts are that brokered deposits, such as the deposit swapping product that you reference, do involve a third party, or intermediary, who determines where the deposits are placed and who handles the transaction, and they do charge fees based on the number or dollar amount of the transaction itself. There are very good reasons why there are limitations associated with brokered deposits. The bottom line is that Qwickrate is a nonbrokered direct deposit listing service by design - there is no gray area.

Last Updated ( Wednesday, 21 December 2011 )