Banks to Companies: No More Deposits, Please:
U.S. companies are holding on to billions of dollars in cash. Their banks aren’t sure what to do with it.
When the coronavirus pandemic hit last year, corporate executives rushed to raise money. Banks have been holding that cash ever since, and because companies are reluctant to borrow from them, they can’t turn it into income-generating loans. That has weighed on banks’ profit margins, and some have started pushing corporate customers to spend the cash on their businesses or move it elsewhere.
Bankers say they thought the improving economy would reduce companies’ desire for holding cash, but deposit inflows have continued in recent weeks. Chief financial officers and treasurers, many still wary of the pandemic’s impact, say they aren’t ready for big changes, even if they earn little or nothing on their deposits.
[...] Top of mind for many big banks is a rule requiring them to hold capital equivalent to at least 3% of all assets. Worried about the rule’s impact during the pandemic, the Fed changed the calculation in 2020 to ignore deposits the banks held at the central bank, but ended that break this March. Since then, some banks have warned the growing deposits could force them to raise more capital, or say no to deposits.
(Score: 0) by Anonymous Coward on Wednesday June 16 2021, @02:09PM (1 child)
What do you mean? A PITA to change banks? If you're big enough, the bank you're changing to is very eager to make this very easy on you and your customers.
(Score: 0) by Anonymous Coward on Friday June 18 2021, @08:06AM
Not if you are too big and your ratio is too high/low. Switching in that case either costs the company a lot of money in penalties that they usually forward to the bank or costs the bank a lot of money by changing their liquidity too much or in expenses eating into their net.