At midyear, Zions Bancorp reported holding $8.5 billion in brokered deposits, an obscure but costly banking industry product that is drawing attention from regulators, the Wall Street Journal reported. At this time last year, the Salt Lake City-based bank had practically none. Many industry players view brokered deposits as a double-edged sword. They can be a quick and easy way for a bank to shore up its balance sheet. The deposits are typically much more expensive because banks have to pay higher interest rates to lure in those customers, along with other fees. Regulators and bankers say they are also a type of “hot” money that is prone to disappear when a bank hits a rough patch, since these yield-seeking customers don’t tend to be loyal. U.S. banks collectively held more than $1.2 trillion in brokered deposits in the second quarter, according to a Wall Street Journal analysis of data from the Federal Deposit Insurance Corp. The total marked an 86% increase from a year earlier.
