Citibank FSB in Chicago To Cut Passbooks to 3.15%
Citicorp is planning to slash the rates it pays on passbook savings accounts at its Chicago thrift to 3.15% from 4.34%.
The cut, which will take effect on Dec. 16, jolted rivals and distressed some consumer advocates. While many banks have cut passbook rates this year, anything in the 3% range is considered exceptionally low.
"I was surprised that Citibank made a big a move as it did," said Charles Shoemaker, a senior vice president at First National Bank of Chicago.
Passbook Rate Cut
His bank, a unit of First Chicago, Corp., recently reduced its passbook rate to 4%. Mr. Shoemaker said 4% was about the norm in Chicago.
A Citicorp spokesman in New York said the company has not announced reductions of similar size on passbook accounts at other banks it owns.
However, the company's flagship New York bank recently halved the rate it pays on NOW checking accounts to 2%.
In New York, the bank is paying 4% on passbook accounts, the spokesman said.
The cuts at Citibank FSB in Chicago "reflect generally lower market rates," he said.
Average Rate Has Sunk
Banks nationwide have been cutting rates on passbook accounts, which make up 10% of their deposits.
The national average in early October was 4.8%, down 21 basis points from the level six months earlier, according to Bank Rate Monitor.
Peggy Miller, the banking representative of the Consumers Federation of America, voiced fears that Citibank's move to the 3% range would encourage other banks to follow suit.
"It does not bode well for consumers throughout the banking system," she said.