US banks brokered deposits tick down; BofA, Morgan Stanley post gains in H1

Brokered deposits fell slightly at US banks in the first half, the same period in which the Federal Deposit Insurance Corp. proposed a mandate that would change the classification rules for determining which deposits are considered brokered.

Brokered deposits at US banks dropped as a percentage of total liabilities to 6.2% in the first half from 6.3% in the previous half, according to an analysis by S&P Global Market Intelligence. The dollar amount of brokered deposits fell to $1.329 trillion from $1.349 trillion.

Still, the totals are well above their recent trough of $602.83 billion and 2.8% of total liabilities at the end of the second half of 2021 when the numbers dropped following the FDIC's rule from December 2020 that created a new framework for classifying deposits as brokered. However, the FDIC Board approved a proposal on July 30 that would reverse many of the changes from the 2020 rule and require more deposits to be classified as brokered. Fintech partners and banking-as-a-service deposits would also be affected by the proposal. The agency is accepting comments until Oct. 22.

In the proposed rule, the FDIC said the drop in reported brokered deposits was partly because some institutions reported them incorrectly under the 2020 rule. The "underreporting of brokered deposits could have serious consequences" both for the institutions themselves and the Deposit Insurance Fund because "underreporting impedes the ability to evaluate the extent of reliance on brokered deposits and the effects on" institutions' risk profiles for purposes of supervision and pricing deposit insurance.

Wells Fargo tops brokered deposit list

Wells Fargo Bank NA had the largest amount of brokered deposits in the second quarter with $132.87 billion, though its total dropped $6.56 billion quarter over quarter. Bank of America NA had the second-largest amount with $107.41 billion, up $17.78 billion from the previous quarter, and JPMorgan Chase Bank NA had the third-largest amount with $100.39 billion, down $12.52 billion quarter over quarter.

Bank of America grew brokered deposits most

Of the 20 financial institutions with the most brokered deposits, Bank of America had the biggest dollar increase at $17.78 billion quarter over quarter and $73.95 billion year over year, while Morgan Stanley Private Bank NA increased the second most quarter over quarter with $4.39 billion. Morgan Stanley Bank NA grew brokered deposits the third most quarter over quarter at $3.69 billion.

Bank of America attributed its growth to "continued strong demand from clients, including large institutions, seeking higher yielding deposit products."