An Improved CD Experience Reducing Cost of Funds
As Seen On
What Is It?
Redeemable CD is a process that allows financial institutions to customize early withdrawal. The process can be utilized to enhance withdrawal options for traditional CDs or as an additional CD feature at origination. The CorePoint's patented processes allows institutions to incentivize or disincentive withdrawal based on calculation tied to deposit replacement cost.
For example, consider a depositor with 12 months remaining on a CD at 5.2% with a current balance of $100,000. If the CD reaches maturity, the interest expense to the institution will be $5,200. Suppose the depositor needs the funds, and wholesale rates are now at 4.2%. If the depositor withdraws early, the total possible benefit to your institution is about $1,000 because you can replace the funding at 4.2%.
We created Redeemables to provide your institution with the following four benefits:
Why Did We Create Redeemable CDs?
CDs Used To Rule Banking Funding
CDs used to be 55% of the industry’s total deposits, according to the FDIC; they dropped to about 6%, but since 2022 have grown to over 17%
CDs Did Not Participate in Rising Tide of Deposits
As total domestic deposits have climbed to $17.3 trillion, bank time deposits have grown to a record level or $3 trillion. And, credit unions have added another $500 billion of certificates to their funding portfolios.
Where did time investment volumes go then?
U.S. Treasuries, which allow holders to exit at a current market value, have grown by 7x during the past 20 years. Bank CD volume at the end of 2005 was the same as at the start of 2023.
Who's choosing Treasuries over CDs and why?
U.S. Treasuries have an option that CDs don't.