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US banks warn Fed interest cut could force them to charge depositors

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US banks warn Fed interest cut could force them to charge depositors
By Tom Braithwaite and Stephen Foley in New York and Robin Harding in Washington

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.

Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.

The warning by bank executives highlights the dangers of one strategy the Fed could use to offset an eventual “tapering” of the $85bn a month in asset purchases that have fuelled global financial markets for the last year.

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.

Banks say they may have to charge because taking in deposits is not free: they have to pay premiums of a few basis points to a US government insurance programme.

https://www.ft.com/intl/cms/s/0/b1d409d0-5399-11e3-b425-00144feabdc0.html#axzz2lbmo1oD9

3 thoughts on “US banks warn Fed interest cut could force them to charge depositors

  1. I’m sure there will always be banks that will never charge those of us who have a sufficient amount of money.
    If you do not maintain a reasonable amount of money, banks don’t want you now and rightfully so.
    Its a business, not a charity.

  2. Why don’t we just let the federal government hold all of our money? As long as Obama promises that if we like our money we can keep our money, we should all trust him — unless you are racist.

  3. Good point#2.. as i’m reading my letter from blue cross, that my plan will no longer be available.
    Whoever voted for this imposter should apologize to the rest of us.

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