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Question 12.2: What are core deposits, and why are they so important today?

What are core deposits, and why are they so important today?

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Core deposits are the most stable components of a depositary institution’s funding base and usually include smaller-denomination savings and third-party payments accounts. They are characterized by relatively low interest-rate elasticity. Holding a substantial proportion of core deposits has an advantage in having access to a stable and cheaper source of funding with relatively low interest-rate risk.

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