Banking Practice Exam 2025 - Free Banking Practice Questions and Study Guide

Core deposits are a critical component of a bank's funding structure, as they provide a stable source of capital for financial institutions. They typically include deposits that are more stable and less sensitive to interest rate changes compared to other types of deposits.

Demand deposits, NOW accounts (Negotiable Order of Withdrawal accounts), and savings accounts are all considered core deposits because they are generally low-cost sources of funds for banks and can be accessed easily by customers without incurring penalties. These types of accounts encourage customer loyalty and tend to remain in the bank for longer periods.

In contrast, jumbo certificates of deposit are typically not classified as core deposits. This is because they tend to be larger, often exceeding a certain threshold (commonly $100,000), and can be more sensitive to interest rate fluctuations. Investors in jumbo CDs may seek higher yields elsewhere, making these deposits less stable for banks compared to the other types of accounts mentioned. Thus, while they can contribute to a bank's funding, they do not carry the same consistent, reliable nature as core deposits.