Certificate of Deposit
About Certificate of Deposit
The negotiable certificate of deposit was introduced by First National City Bank of New York, later Citibank, in 1961. CDs offered higher interest rates than regular savings accounts in exchange for locking up money for a fixed period. The innovation allowed banks to manage their funding more precisely and gave investors a new short term instrument. CDs became traded in secondary markets. The CD market grew to trillions of dollars. CDs evolved into various forms including jumbo CDs for institutional investors, bump up CDs, and brokered CDs. Money market mutual funds, launched in 1971, competed with CDs by offering higher yields. CDs remain a fundamental banking product.
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