- Apr 2013
- La La Land North
There was a heartfelt story in the WSJ about how big banks are telling their big depositors to take their money overseas. If you actually read it, it sounds more like the banks are getting some regulations about maintaining a sufficient reserve so they can't loan out all their deposits and more. In Europe and Canada they call it a stress test. But here I think it is a poorly veiled attempt to bluff the government into backing off.
Rest of article at http://finance.yahoo.com/news/banks-urge-clients-cash-elsewhere-015700767.htmlBanks urge clients to take cash elsewhere
New rules mean some deposits aren’t worth it, J.P. Morgan, Citigroup and others tell large U.S. clients
Banks are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits.
The banks, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp., have spoken privately with clients in recent months to tell them that the new regulations are making some deposits less profitable, according to people familiar with the conversations.
In some cases, the banks have told clients, which range from large companies to hedge funds, insurers and smaller banks, that they will begin charging fees on accounts that have been free for big customers, the people said. Bank officials are also working with these firms to find alternatives for some of their deposits, they said.
The change upends one of the cornerstones of banking, in which deposits have been seen as one of the industry’s most attractive forms of funding, said more than a dozen corporate officials, consultants and bank executives interviewed by The Wall Street Journal.
Deposits have traditionally been a crucial growth engine for banks. Banks generally pay depositors one interest rate and then make loans with higher rates, often collecting fees in the process. But deposits also can be withdrawn at any time, potentially leaving a bank short of cash if too much money is removed at once.
The new rule driving the action is part of a broader effort by U.S. regulators and policy makers to make the financial system safer. But the move may inconvenience corporations that now have to pay new fees or look for alternatives to their bank.