The Wall Street Journal is reporting that big banks are telling customers to take their cash somewhere else.
Banks are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits.
The banks, includingJ.P. Morgan Chase& Co.,CitigroupInc.,HSBC HoldingsPLC,Deutsche BankAG andBank of AmericaCorp. , have spoken privately with clients in recent months to tell them that the new regulations are making some deposits less profitable, according to people familiar with the conversations.
The banking laws have become some backwards that not only do the banks not want to lend money, they don’t want to deposit money.
In fact in some cases they will be charging large corporations for deposits, which, according to the Journal will make corporations seek out more sophisticated cash management portfolios.
Some corporate officials said the new rules could make it more expensive for them to keep money in the bank or push them into riskier savings instruments such as short-term bond funds or uninsured money-market funds.
“You’re going to see a lot of corporations that have had much simpler portfolios that are going to move toward more sophisticated portfolios,” said Tory Hazard, president and chief operating officer of Institutional Cash Distributors, a broker to large clients looking for places to hold their cash.
These changes are a fundamental change to the way banks operate. Typically banks take the money deposited and loan it out.
But not anymore with the big deposits. Instead they will have to charge companies for large deposits.
So if you are wondering why banks aren’t loaning money, it’s because they won’t have money anymore.
And the good news, I say sarcastically, bank reform measures passed by congress haven’t even been halfway implemented yet.
So stay tuned for more reform from congress.
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