Banks Don't Want Big Corporate Deposits; New York DFS's Secret Weapon

Wall Street Journal

It's not often you hear about banks turning away deposits, but the paper reports that a number of banks are suggesting corporate clients take their money elsewhere in light of impending liquidity rules that make holding their cash less profitable. JPMorgan Chase, Bank of America, Citigroup, HSBC and Deutsche Bank are among the lenders that have held this unusual conversation over the past few months, according to the paper. "The change upends one of the cornerstones of banking, in which deposits have been seen as one of the industry's most attractive forms of funding," the paper reports. Rules intended to make banks safer are changing that equation. The liquidity coverage ratio requires banks to hold more reserves against big, uninsured deposits, since corporate clients would be likely to withdraw them in the event of a crisis. To compensate for the reduced profitability of the deposits, banks plan to start charging fees on accounts that were previously free. Some banks are helping their clients find a new home for deposits in order to avoid the charges.

Federal Reserve governors are putting their heads together Tuesday to discuss proposed rules for capital surcharges on the country's largest banks. Fed Governor Daniel Tarullo has suggested the surcharges will be determined in part by banks' reliance on short-term financing, in an effort to ensure their ability to survive a downturn, according to "Heard on the Street."

Here's a spot of good news for big banks: an upswing in bond trading volume may improve their fourth-quarter earnings. "Much of the heightened activity was driven by the return of volatility in October," the paper reports.

Financial Times

Credit Suisse investors are annoyed with the Swiss bank's apparent over-optimism, according to the paper. "Credit Suisse has rarely come close to meeting most of its 'key performance targets,'" generating a return on equity of 3.7% during the first nine months of 2014 compared to its goal of more than 15% over three to five years. Some investors are also criticizing the lender's slow pace of change, although analysts point out Credit Suisse may be wise to avoid big decisions before global regulations are finalized.

Elsewhere ...

The Fiscal Times: Why should New York financial watchdog Benjamin Lawsky get all the attention? Reuters shines a spotlight on Daniel Alter, general counsel of New York's Department of Financial Services, who sources say has been a secret weapon in the agency's settlements with big banks. Alter wasn't interviewed for the story, but the paper reports he's a potential candidate to replace Lawsky, who's been rumored to be planning a leap to the private sector in 2015.