Are Negative Interest Rates Coming to the U.S? Big Banks Warn Customers to Take Deposits Elsewhere.
Here is an excerpt from Bloomberg based on a story originally reported by The Wall Street Journal:
Quote:
JPMorgan Chase & Co. (JPM) and Citigroup Inc. are among at least five banks urging big clients in the U.S. to park cash elsewhere as new rules make it onerous to hold certain deposits, The Wall Street Journal reported. HSBC Holdings Plc (HSBA), Deutsche Bank AG and Bank of America Corp. (NYSE:BAC) expressed similar concerns in private talks with customers in past months, the newspaper said, citing unidentified people familiar with the conversations. In some cases, banks told clients -- including corporations, hedge funds, insurers and smaller lenders -- that fees may be added to accounts that have been free, it said. The push was prompted by pending rules aimed at ensuring banks stockpile enough assets that can be easily converted to cash to cover a deposit flight in a crisis, the newspaper said. Because big, uninsured deposits are viewed as more susceptible to fast withdrawal, banks would be required to bolster related reserves rather than pursuing more profitable investments. |
Such policies could have the effect of sending money out of banks and into financial markets, which could send financial assets higher. In many ways this is similar to the idea of negative interest rates, in which banks charge fees for deposits held -- which in turn can lead to capital fleeing to financial markets and sending asset prices higher. We are starting to see big banks in Europe impose negative interest rates on large accounts as well.
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