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Yankee Certificate of Deposit (CD)

Yankee Certificate of Deposit (CD)

What Is a Yankee Certificate of Deposit (CD)?

A Yankee certificate of deposit (CD) is a type of CD that is issued in the United States by a branch of a foreign bank. Yankee CDs are named in U.S. dollars and are utilized by foreign banks to raise capital from U.S. investors.

How Yankee CDs Work

Foreign banks operating in the United States frequently need to access dollars for purposes, for example, stretching out credit to U.S. customers, or fulfilling U.S. dollar (USD)- designated obligations. To assist with raising this USD capital, foreign banks at times acknowledge deposits from American customers through special CDs called Yankee bonds.

Like traditional CDs, Yankee CDs are savings accounts that pay interest before returning their initial investment toward the finish of a predetermined investment period. In spite of the fact that it is many times feasible for investors to pull out their funds before this date, doing so would risk bringing about a early withdrawal penalty. Generally speaking, CDs accompany terms going between one month and five years, with higher interest paid on the accounts with longer maturities.

Beside the fact that they are offered by foreign banks, the other major difference between Yankee CDs and standard CDs is their base investment size. Normally, Yankee CDs have a base face value of $100,000, making them suitable for bigger investors. Also, Yankee CDs are just offered for short maturity periods of short of what one year. Since they are not issued by U.S.- based institutions, Yankee CDs are not subject to the protections of the Federal Deposit Insurance Corporation (FDIC), and generally expect investors to "secure in" their funds for the whole maturity period.

Real World Example of a Yankee CD

Yankee CDs are typically issued in New York by foreign banks who have branch offices in the U.S. They are sold either straight by the foreign banks themselves, or by implication through at least one registered [broker-dealers](/merchant seller). The most common countries of beginning for foreign banks offering Yankee CDs are Japan, Canada, the United Kingdom, and countries in Western Europe. These banks ordinarily utilize the funds raised through Yankee CDs to stretch out credit to their U.S.- based corporate customers.

As per the Richmond Fed, Yankee CDs were first issued in the mid 1970s and initially paid a higher yield than domestic CDs. Foreign banks at the time were not notable, so their credit quality was hard to survey due to various accounting rules and insufficient financial data.

As investor discernment and experience with foreign banks improved, the premium paid by foreign banks on their Yankee CDs declined. This cost of funds difference was to some degree offset by the exemption of foreign banks from Federal Reserve reserve requirements, in effect until the International Banking Act of 1978.

The exemption likewise helped the foundation of the Yankee CD market, which filled consistently in the mid 1980s. In the mid 1990s, there was quick growth in Yankee CDs since reserve requirements on nonpersonal time deposits with maturities of under 18 months were disposed of in Dec. 1990. Beforehand, there was a 3% Federal reserve requirement for foreign banks funding dollar loans to U.S. borrowers with Yankee CDs.


  • Yankee CDs contain shorter maturity periods than ordinary CDs, frequently for short of what one year. During that time period, customers might not be able to pull out their funds without facing steep early withdrawal punishments.
  • They are issued by foreign banks seeking to raise capital from U.S. depositors.
  • Yankee CDs are a savings vehicle marketed to bigger investors.