Yankee CD

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Yankee Certificate of Deposit (CD): What It Is and How It Works

Key takeaways

  • A Yankee CD is a U.S. dollar–denominated certificate of deposit issued in the United States by a branch of a foreign bank.
  • They are typically marketed to larger investors, with minimum face values often around $100,000.
  • Yankee CDs usually have short maturities (commonly less than one year) and are not covered by FDIC insurance.
  • They’re sold directly by the foreign bank or through broker-dealers and are used by foreign banks to raise U.S. dollar funding.

What is a Yankee CD?

A Yankee certificate of deposit (CD) is a deposit product issued in the U.S. by a foreign bank’s U.S. branch. Like ordinary CDs, Yankee CDs pay interest over a fixed term and return the principal at maturity. They are denominated in U.S. dollars and intended to attract U.S.-based depositors so foreign banks can obtain dollar funding.

How Yankee CDs work

  • Issuance: Foreign banks with U.S. branches issue Yankee CDs to raise dollar deposits.
  • Terms and interest: They pay a stated interest rate for a fixed term; longer terms typically offer higher rates. Most Yankee CDs have short maturities (often under one year).
  • Withdrawal rules: Early withdrawal is generally allowed only with a penalty, similar to traditional CDs.
  • Distribution: Sold directly by the issuing bank or through registered broker-dealers.
  • Use of proceeds: Funds are often lent to U.S. corporate customers or used to meet U.S. dollar obligations of the foreign bank.

Typical features

  • Minimum investment: Often large (commonly $100,000 or more), making them suitable for institutional or high-net-worth investors.
  • Denomination: U.S. dollars.
  • Maturities: Frequently short-term (less than one year), though terms can vary.
  • Insurance: Not insured by the Federal Deposit Insurance Corporation (FDIC) because they are issued by non-U.S. institutions.
  • Credit risk: Investors rely on the creditworthiness of the foreign bank and its branch operations.

Real-world context and history

Yankee CDs first appeared in the early 1970s. Early issues tended to pay higher yields than domestic CDs because foreign banks were less familiar to U.S. investors and their credit risk was harder to assess. Regulatory and reserve-rule changes—such as the International Banking Act of 1978 and later adjustments to reserve requirements—helped shape the market. Growth accelerated in the late 1980s and early 1990s after reserve requirements on certain short-term deposits were relaxed.

Risks and considerations

  • Credit risk: If the issuing foreign bank or its U.S. branch fails, depositors may lose principal or interest; protections differ from those for U.S. banks.
  • No FDIC coverage: Yankee CDs are generally not FDIC insured.
  • Liquidity and penalties: Early withdrawals can trigger substantial penalties; secondary-market liquidity may be limited.
  • Minimum size and investor suitability: High minimums and structural risks make these products better suited for larger, more sophisticated investors.
  • Currency exposure: Although denominated in U.S. dollars, changes in the issuer’s home-country financial condition can affect credit perceptions.

How to buy

Yankee CDs are typically available through:
The issuing foreign bank’s U.S. branch; or
 Registered broker-dealers that distribute the issues to institutional and high-net-worth clients.

Before buying, review the issuing bank’s credit ratings and disclosures, confirm whether the issue is negotiable on a secondary market, and understand early withdrawal penalties and any broker fees.

Who might consider Yankee CDs

  • Institutional investors or high-net-worth individuals seeking short-term dollar investments and comfortable with non-FDIC credit exposure.
  • Investors looking for potentially higher yields from foreign bank issuers (balanced against credit and liquidity risks).

Bottom line

Yankee CDs provide a way for foreign banks to raise U.S. dollar deposits and for larger U.S. investors to access eurodollar-style term deposits. They resemble regular CDs in structure but differ in issuer, typical minimum size, and insurance/credit protections. Assess issuer credit quality, liquidity, and penalties carefully before investing.