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The FDIC recently released Q4 2021 results for the 4,839 insured banks in the US. Wholesale funding, which includes all non-core deposits and funding sources, continues to account for a sizable fraction of bank balance sheets. In this update, we break down the size of the wholesale funding market. Next time, we’ll take a look at funding costs.
Banks tapped $4.2T in wholesale funding in Q4, down 4% from the previous quarter. The wholesale market accounted for 19% of all bank funding, and wholesale funding accounted for 10% of liabilities for the average bank. Banks continue to supplement core deposits with wholesale funding to strategically manage their balance sheet size, duration, and liquidity.
The $4.2T of wholesale funding was composed of $2.5T non-core deposits, which include brokered deposits, and $1.7T other borrowed funds, which include FHLB advances. The average duration of borrowed funds was 2.1 years, unchanged from last quarter. While convenient, borrowed term funding is more expensive than non-core deposits and often requires collateral.
Moving forward, we expect demand for wholesale funding to increase as monetary policy tightens. In the coming weeks, we’ll dig into funding costs as well as the impact of rising rates.