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United Kingdom
United Kingdom
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Certificate of deposit (CD) meaning
Published by a LexisNexis Banking & Finance expert
What does Certificate of deposit (CD) mean?
A certificate of deposit (CD) is a short- to medium‑term money market instrument used in practice to evidence a fixed‑term cash deposit with a bank. It is a descriptive market term rather than a concept generally defined in statute or case law, though cds are recognised in financial regulation as money market instruments.
Key features:
- Negotiable instrument, typically issued in bearer or dematerialised form (often as a global note) and transferable through the clearing systems.
- Evidences the bank’s obligation to repay principal at maturity and either pay interest (fixed or floating) or, if zero‑coupon, to redeem at a discount to face value.
- Common maturities range from about one month to five years.
Typical usage and significance:
- For banks, CDs provide flexible, cost‑effective fixed‑term funding from retail and institutional investors with minimal documentation and administration (often under standard issuance programmes).
- For investors, CDs generally offer a higher yield than savings or call deposit accounts, with certainty of term and, for negotiable CDs, access to a secondary market.
Regulatory protection:
- UK: eligible deposits evidenced by CDs issued by UK‑authorised banks are protected by the FSCS up to £85,000 per eligible claimant per firm.
- Ireland: comparable protection applies...
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View the related Practice Notes about Certificate of deposit (CD)
PRACTICE NOTES
UK Banking, Finance, Capital Markets, Derivatives and Insolvency Law Glossary including Islamic finance
Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...
22 May
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