Business Definition for: borrowed funds
Related Terms:
deposits, other than core deposits, that banks actively solicit from other banks, or from brokers, to maintain adequate levels of liquidity. Managed liabilities are deposits that can be increased or decreased at will, such as negotiable time deposits of $100,000 or more, with maturities under one year; Eurodollar and other Eurocurrency borrowings; repurchase agreements against Treasury securities and federal agency securities; and Federal Funds purchased, to meet a bank's needs for funds to pay off maturing deposits and fund new loans.
Such borrowings can be increased or decreased as needed to meet temporary funding gaps between maturing assets and liabilities. The negotiable CD, which evolved in the 1960s when Regulation Q imposed interest rate caps on all deposits except those above $100,000, is typically sold in $1 million pieces. These certificates of deposit pay interest at maturity, and usually have an original maturity of one to three months.
funds borrowed by member banks from a federal reserve bank for the purpose of maintaining the required reserve ratios. Actually, the proper term is net borrowed reserves, since it refers to the difference between borrowed reserves and excess or free reserves. Such borrowings, usually in the form of advances secured by government securities or eligible paper, are kept on deposit at the Federal Reserve bank in the borrower's region. Net borrowed reserves are an indicator of heavy loan demand and potentially tight money.
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