Wholesale deposits are like big bundles of money that big companies or banks put into other banks. They do this to keep their money safe and maybe earn extra money.
Reference:
In the world of finance and accounting, “wholesale deposits” is a term often used to describe the large amounts of money that big players in the financial industry, such as big businesses or other banks, deposit in banks. These deposits are significant and play a crucial role in the banking system.
Example:
Let’s say there’s a big company called MegaCorp. MegaCorp makes a lot of money; sometimes, they have tens of millions of dollars. Instead of keeping all that money in their own vault, they decide to put it in a bank, like the MegaBank.
So, MegaCorp goes to MegaBank and says, “Hey, we have $50 million that we want to put in your bank. Can you give us a good deal on it?” MegaBank agrees, and MegaCorp deposits their $50 million into an account at MegaBank. This $50 million is called a wholesale deposit because it’s a huge sum of money from a big company.
Now, MegaBank can use this money to make loans to other people or businesses, and they’ll earn interest on those loans. And MegaCorp benefits, too, because they earn some interest on their $50 million while it’s safely stored in MegaBank.
In short, wholesale deposits are large amounts of money that big organizations deposit in banks to keep it safe and sometimes make extra money through interest. It’s a win-win situation where the bank can use the money to make more, and the organization can earn interest on their extra cash.