| Summary: | The negotiable time certificate of deposit (CD) has played an important role in the competitive struggle of commercial banks in the US since 1961, enabling them to tap sources of funds they had neglected since the banking reforms of the 1930s. The aggressive employment of the CD has already brought about various changes in banking practices, and may lead to further modifications in the functions performed by commercial banks and in the banking structure. The present article is devoted to the CD phenomenon as it affects the role of commercial banks as financial intermediaries and the structure of the banking industry. The effects of interest rate regulation on the development of the CD as a potential source of funds is also considered. The author concludes that the emergence of the CD, while overcoming some of the barriers to effective competition in the financial markets, has highlighted the continued existence of others.
JEL: G21, G23
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