U.S. BANKS PREPARE FOR BIG DEPOSIT OUTFLOWS F
Post# of 63765
Posted On: 07/31/2014 9:25:58 AM
U.S. BANKS PREPARE FOR BIG DEPOSIT OUTFLOWS
FT’s Tracy Alloway and Camilla Hall: “US banks are steeling themselves for the possibility of losing as much as $1tn in deposits as the Federal Reserve reverses its emergency economic policies and raises interest rates. JPMorgan Chase … has estimated that money funds may withdraw $100bn in deposits in the second half of next year as the Fed uses a new tool to help wind down its asset purchase programme and normalise rates. … Other banks including Citigroup, Bank of New York Mellon and PNC have also said they are trying to gauge the potential effect of the Fed’s exit on institutional or retail depositors who might choose to switch to higher interest accounts or investments. …
“An outflow of deposits would be a reversal of a five-year trend that has seen significant amounts of extra cash poured into banks thanks to the Fed flooding the financial system with liquidity. These deposits, which act as a cheaper source of funding, have helped banks weather the aftermath of the financial crisis. .. Now the worry is that such deposit funding may prove fleeting as the Fed retreats. Banks might have to pay higher rates on deposits to retain customers — potentially hitting their profits and sparking a price war for client funds.”
http://on.ft.com/1ocIPUe
FT’s Tracy Alloway and Camilla Hall: “US banks are steeling themselves for the possibility of losing as much as $1tn in deposits as the Federal Reserve reverses its emergency economic policies and raises interest rates. JPMorgan Chase … has estimated that money funds may withdraw $100bn in deposits in the second half of next year as the Fed uses a new tool to help wind down its asset purchase programme and normalise rates. … Other banks including Citigroup, Bank of New York Mellon and PNC have also said they are trying to gauge the potential effect of the Fed’s exit on institutional or retail depositors who might choose to switch to higher interest accounts or investments. …
“An outflow of deposits would be a reversal of a five-year trend that has seen significant amounts of extra cash poured into banks thanks to the Fed flooding the financial system with liquidity. These deposits, which act as a cheaper source of funding, have helped banks weather the aftermath of the financial crisis. .. Now the worry is that such deposit funding may prove fleeting as the Fed retreats. Banks might have to pay higher rates on deposits to retain customers — potentially hitting their profits and sparking a price war for client funds.”
http://on.ft.com/1ocIPUe
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