Deposits

Indiana-based Old National Bancorp says it has invested $1 billion in floors, collars and other credit hedges in case of a sudden shift in interest rate policy.

The Cincinnati bank plans to lean into its retail expansion in the southeastern U.S. after its deposits fell by $6 billion from the first quarter.

Executives said Wednesday that more than half of the deposits that left the Chicago trust bank were “nonoperational” in nature, or excess funds that institutional investors are moving elsewhere for higher returns. The outflow wasn’t unexpected as interest rates rise.

The New York bank reported a double-digit increase in profits in the second quarter. But larger than expected deposit withdrawals — some by cryptocurrency-business customers — raised questions about its ability to fund growth and hurt its stock Tuesday.

If the agency’s treatment of Bank of America is extended to the rest of the industry, it will cause widespread confusion and excessive regulatory burden.

The Federal Reserve’s aggressive rate hikes are leading corporate clients to demand higher deposit rates, according to industry consultants. Some banks are better positioned than others to weather the changing landscape.

The two regional banks announced plans to abandon nonsufficient fund fees and make other moves that will reduce the revenue they collect from cash-strapped consumers.

Data as of Mar. 31, 2022. Dollars in thousands.

Goldman Sachs’ Marcus, Synchrony Financial, American Express and Capital One Financial are among the banks that have recently raised their five-year CD yields. The price competition arrives as the Federal Reserve acts quickly to rein in inflation, spurring expectations that rates will continue to rise.

Banks need to come together to create interoperable tokenized deposits, as part of an effort to bridge the gap between traditional finance and blockchain.