Monday, November 25, 2013

US Banks May Start Charging Customers for Funds on Deposit

Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves, reports FT.

Minutes of the Fed’s October meeting published last week showed it was heading towards a taper in the coming months – perhaps as soon as December – but wants to find a different way to add stimulus at the same time. “Most” officials thought a cut in the interest on bank reserves was an option worth considering.

Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors.

An even greater danger would be for the banks to start lending out the funds they are holding as excess reserves, that could funnel trillions of new dollars into the system and send price inflation through the roof.

9 comments:

  1. Wait, so they threatened to charge their unsecured creditors interest fees? Bwahahaha

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    Replies
    1. Yeah, send me your money so I can charge you for storage while I land it out 10X!
      Nice work if you can get it!!

      Delete
    2. So are they going to raise the interest rate on reserves held at the fed?

      Delete
  2. Let me see if I understand the situation: Federal Reserve Notes are liabilities of the FR Bank that issues it. The member banks honor this pledge by accepting them and crediting one's account.

    Now a depositor will have to pay the member banks for this service, without which one cannot redeem the liability...in exchange for what amounts to nothing but a bookkeeping entry.

    Well, we can still redeem FRNs for coin, no?

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  3. Since I'm not a subscriber I can't read the article, was their any mention of credit unions in there or no?

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  4. With direct deposit payroll being so popular these days, it's hard to see how most people could avoid a fee.

    At my new job, I had two choices: get direct deposit, or get a U.S. Bank debit card.

    Oh how I long for yesterday.

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  5. You just have to give them an email to see the article and don't even have to confirm the email.

    But no, it was just two of the large big banks

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  6. OMG they figured out a way to get out of the inflation mess!

    Step 1: Encourage everyone to take their money out of the bank. Puts lots of cash into play, but it also reduces the amount the banks can credit out.

    Step 2: Put up roadblocks near all the banks and then confiscate all the cash everyone has - obviously it must be for drugs!

    Problem solved. Brilliant, really...

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  7. I have known that US Banks May Start Charging Customers for Funds on Deposit which is very informative to me as well. I must follow the discussion which is very informative to me as well. Keep it up.
    Devid

    ReplyDelete