Bank New York Co. trimmed interest rates on savings last week by as much as 55 basis points, cutting deeper than the half point in shaved from its prime rate after the Fed's half-point cut in the discount rate July 2.
The New York bank is now offering 2.9% on six-month CDs and 3% on one-year CDs, down 55 basis points.
It is paying 3.6% on its money-market savings accounts, down from 4% at the end of June.
However, its passbook rate was cut by only 25 basis points, to 2.75%.
Many banks have been afraid to pass along to consumers the full prime-rate cut, out of fear that they would run even more quickly to mutual funds and other competing products.
But banks also want to preserve the wide interest margins that have bolstered their income in the past few quarters.
Bank of New York appears to have squared the circle, because its new rates are comparable to or slightly higher than those of its major competitors in the New York market.
"We're just bringing our position more in line with the rest of the market," said bank spokesman Michael Pascale. The bank's deposit rates, he said, "were probably a bit above the median."
By increasing the spread between its borrowing and lending rates, Bank of New York also has won points with some analysts.
Judah Kraushaar, an analyst at Merill Lynch & Co., recently offered an upbeat outlook for Bank of New York over the next six months.
The first piece of evidence he cited? "The firm has recently moved aggressively to cut its cost of funds (by more than the prime rate cut for customer savings deposits)," he wrote.