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...intensely with the Biden administration last year during the regional banking crisis, including holding talks with Treasury secretary Janet Yellen on measures to rescue struggling institutions and protect depositors...
...But banks that relied on relatively cheap financing from depositors, worth $18.2tn in total, soon noticed the shift in depositor behaviour....
...Banks have been under pressure to pay higher interest to depositors ever since the Fed began rapidly raising rates in early 2022....
...And this is essentially the difference between what they earn from things like loans and other assets and securities and what they pay out to depositors....
...Gulati and Mark Weidemaier (Clauses & Controversies) — Banks seem . . . not uniformly prepared to use the Fed’s discount window (new Federal Reserve data, also via Reuters) — Deposit Insurance, Uninsured Depositors...
...But banks are finally having to pass on higher savings rates to depositors, according to JPMorgan and Wells Fargo, which also reported earnings....
...Plus, depositors put pressure on big US banks....
...And when the various US regional banks melted down last year, where did depositors run, if they could? To JPMorgan, of course....
...The upshot of such arbitrage, then and now, is that the immobile depositor pays the tax....
...Should depositors panic, one run can destabilise other lenders. What has changed is the speed with which these crises spread....
...Net interest income, the difference between what banks have to pay depositors and what they can charge borrowers, makes up the bulk of profits for regional lenders....
...US banks have already started to report a squeeze on margins in their lending business as depositors switch to higher-yielding accounts, while markets are preparing for central banks to start cutting interest...
...Larger banks already have access to special debt and equity which they can use to recapitalise should they fail, meaning they are less vulnerable to depositors rushing to withdraw money....
...The test also requires shareholders, bond holders and uninsured depositors to absorb losses ahead of the FDIC, which contributes to market discipline....
...The shareholder has injected significant funding into Wyelands Bank, so all depositors were repaid in full, ensuring that none of Wyelands depositors suffered losses....
...The Fed made it possible for the banks to get the money that they needed to pay back depositors....
...They function as a place for depositors to safely store their cash and obtain other financial services beyond loans....
...In the 1970s and 1980s, Regulation Q, which imposed ceilings on interest rates offered to depositors in the US, exacerbated deposit flight to money market funds....
...Investors, and depositors, should welcome both outcomes. *This note has been amended to refer to Paragon’s full year, not third-quarter, results....
...Barnum admitted that the need to increase rates for depositors had been slower than “previously assumed”. “We’re precisely not predicting when it’s going to happen,” he said....
...A Financial Times investigation in 2020 revealed that Wyelands had channelled depositors’ money into the wider business empire of its owner, metals magnate Sanjeev Gupta....
...It is difficult to imagine that bank depositors will be greatly enthused about holdings of dollar-denominated government paper if this will be subject to the broad 80 per cent haircut on debt....
...This is the share of Fed rate rises that banks passed along to depositors....
...One of the few left, Vanquis — formerly Provident Financial — has tried to clean up its reputation and become a regular bank funded by its depositors....
...Profits have continued to pour in, however, as it has picked up depositors and client relationships from other exiting western lenders....
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