{"id":1787,"date":"2019-09-27T13:33:00","date_gmt":"2019-09-27T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=1787"},"modified":"2025-05-14T10:10:27","modified_gmt":"2025-05-14T10:10:27","slug":"short-term-funding-alternatives-available-banks","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/fixed-income\/short-term-funding-alternatives-available-banks\/","title":{"rendered":"Short-term Funding Alternatives Available to Banks"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Fixed-Income Markets: Issuance, Trading and Funding (2025 Level I CFA\u00ae Exam \u2013 Fixed Income \u2013 Module 2)\",\n  \"description\": \"This video lesson covers CFA Level 1 Fixed Income, including global fixed-income classifications, interbank rates in floating debt, and primary and secondary bond markets. It also explains sovereign and non-sovereign securities, corporate debt types, structured financial instruments, short-term bank funding alternatives, and repurchase agreements along with their associated risks.\",\n  \"uploadDate\": \"2022-05-20T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/l7RAt_PtF9g\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=l7RAt_PtF9g\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/l7RAt_PtF9g\",\n  \"duration\": \"PT48M15S\"\n}\n<\/script>\n\n\n\n<p>[vsw id=&#8221;l7RAt_PtF9g&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;]<\/p>\n<p>Funding markets are markets from which debt issuers borrow to meet their financial needs. Banks have access to funds obtained from the retail market, which are the deposits from their customers. However, these financial institutions also need to raise funds from the central bank, interbank deposits, and certificates of deposit.<\/p>\n<h2><strong>Central Bank Funds<\/strong><\/h2>\n<p>The central bank funds market allows banks with surplus funds to lend other financial institutions for maturities of up to one year at the central bank funds rates. In the US, this is often referred to as the <span class=\"primary-color\">Fed Fund\u2019s rate<\/span><span class=\"primary-color\">.<\/span><\/p>\n<h2><strong>Interbank Markets<\/strong><\/h2>\n<p>The interbank lending market is a market in which financial institutions extend unsecured loans to one another. Most interbank loans are for maturities of one week or less \u2013 the vast majority being overnight loans \u2013 and are contracted at the interbank loan rate.<\/p>\n<h2><strong>Certificates of Deposit<\/strong><\/h2>\n<p>A certificate of deposit (CD) represents a specified amount of funds on deposit for a specified maturity and interest rate. CDs are important sources of funds for financial institutions. Non-negotiable CDs pay a deposit plus interest rate at maturity, and a withdrawal penalty is paid if the funds are withdrawn before maturity. On the other hand, a negotiable CD allows any depositor to sell the CD in the open market before maturity.<\/p>\n<blockquote>\n<h3><strong>Question<\/strong><\/h3>\n<p>Withdrawal penalties are <em>most likely<\/em> imposed on:<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">Non-negotiable certificates of deposit.<\/li>\n<li data-tadv-p=\"keep\">Negotiable and non-negotiable certificates of deposit.<\/li>\n<li data-tadv-p=\"keep\">Negotiable and non-negotiable certificates of deposit and interbank deposits.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>A<\/strong>.<\/p>\n<p>Only non-negotiable certificates of deposit have a withdrawal penalty that is paid if the funds are withdrawn before maturity.<\/p><\/blockquote>","protected":false},"excerpt":{"rendered":"<p>[vsw id=&#8221;l7RAt_PtF9g&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;] Funding markets are markets from which debt issuers borrow to meet their financial needs. Banks have access to funds obtained from the retail market, which are the deposits from their customers. However, these financial&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-1787","post","type-post","status-publish","format-standard","hentry","category-fixed-income","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Short-term Funding for Banks | CFA Level 1 - AnalystPrep<\/title>\n<meta name=\"description\" content=\"Banks secure short-term funding through retail deposits, interbank loans, and repurchase agreements to manage liquidity and financial needs.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/fixed-income\/short-term-funding-alternatives-available-banks\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Short-term Funding for Banks | CFA Level 1 - 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