The funny thing about the populist Move Our Money movement is that the banks really don’t want deposits right now because they are awash in cash and don’t know what to do with it.
In an article from American Banker, it was revealed that:
“The industry certainly doesn’t need more deposits today,” Fred Cannon, the chief equity strategist at KBW Inc.’s Keefe, Bruyette & Woods [an investment bank specializing in financial companies], declared at an American Banker analyst roundtable last week. “The Fed made sure of that. The industry is awash in liquidity, which has turned into a problem for many banks across the country.”
It seems that bankers are actually trying to discourage new deposits:
“We keep driving down the rates on our deposits, but every time we do that it seems like more deposits come in,” Michael Bauer, the chief credit officer at Community Bank Shares in New Albany …
“We’ve had to suppress deposit growth a little bit,” added Mark Long, the president and CEO at First Commercial Bank in Sequin, Texas.
It seems with nowhere to place the money, deposits are expensive to maintain:
[F]ederal deposit insurance is costing banks $1 for every $1,000 in deposits they hold. Banks are also incurring at least $200 in annual overhead costs for each checking account, regardless of whether a balance is $100 or $10,000, … And those costs exclude any interest payment to the customer. The current average interest rate on deposits is 0.57%, which banks have to pay regardless of their need for liquidity… At Oct. 31, the excess liquidity deposited at the Fed by banks amounts to $1.5 trillion, earning a rate of 0.25% …
There is a lack of loan growth which has resulted in a low loan-to-deposit ratio:
Nationwide, that ratio was 73% at midyear, according to the FDIC’s quarterly banking report. That translates into roughly $8.86 in deposits for every $6.37 in loans on banks’ balance sheets. Those funds have to go somewhere if a bank wants to make any money… 72% of all deposit inflows from January to June were moved to the Fed, according to the FDIC.
Move Our Money is a bankers’ dream.