Beyond Hot Money: Brokered Deposits and Bank Funding Stability

Jihad C. Dagher and Andreas Fuster
Additional contact information
Jihad C. Dagher: American University of Beirut (AUB)
Andreas Fuster: École Polytechnique Fédérale de Lausanne (EPFL); Swiss Finance Institute; Centre for Economic Policy Research (CEPR)

No 26-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: In addition to stable core deposits, many U.S. banks also rely on non-core insured funding-especially brokered deposits (BDs)-which supervisors and analysts often associate with risk-taking and run-proneness. We test the latter. In sharp contrast to the "hot money" view, BD funding remains available and scales in system-wide stress episodes, including the 2008-09 crisis and the 2023 banking turmoil, and serves as a source of liquidity for vulnerable banks facing uninsured deposit outflows. Yet banks with higher BD shares appear more fragile on outcomes-they experience sharper uninsured deposit outflows and weaker equity performance in shocks, especially during the 2023 banking turmoil. We reconcile these facts by showing that the adverse outcomes are concentrated among institutions that increased BD-reliance on the eve of the Turmoil, suggesting the outcomes reflect self-selection and negative market inference. While our findings alleviate run-fragility concerns, the non-selective access to BDs during stress reinforces concerns about moral hazard.

Keywords: Brokered Deposits; Funding Stability; Bank Runs; Deposit Insurance; Market Discipline (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2026-02
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6258118 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2622

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().