J.P. Morgan to start charging big clients fees on some deposits

[Wilikon]

J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.

The largest U.S. bank by assets is aiming to reduce the affected deposits by billions of dollars, with a focus on bringing the number down this year, these people said. The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates.

J.P. Morgan’s JPM, +2.44%  steps are among the most detailed and widespread. Specifics are likely to be unveiled Tuesday by J.P. Morgan executives at the bank’s annual strategy outlook with investors, these people said. Among other points, the bank is expected to stress alternatives customers affected by the deposit moves can use for their excess cash.

The plan won’t affect the bank’s retail customers, but some corporate clients and especially an array of financial firms, including hedge funds, private-equity firms and foreign banks, will feel the impact, according to the memo.

J.P. Morgan is making the moves because certain deposits are less profitable to handle than they used to be. New federal rules essentially penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment.


http://www.marketwatch.com/story/jp-morgan-to-start-charging-big-clients-fees-on-some-deposits-2015-02-24



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Is this good news for bitcoin?

[pattu1]

Among other points, the bank is expected to stress alternatives customers affected by the deposit moves can use for their excess cash.

At some point in the future, Bitcoin will be quoted as an alternative. 

[A.F.K]

Don't they already do this?

[MustafaJohnMing]

Don't they already do this?

Why not?

[Wilikon]

Don't they already do this?

Have you read the article? All your answers are in it.

 

[Wilikon]

What economists have feared has now officially begun – a US bank has announced it will begin charging fees on deposits.

According to the Wall Street Journal’s Market Watch,

“J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.”

The article mentions that J.P. Morgan Chase & Co., which is “the largest U.S. bank by assets, is aiming to reduce the affected deposits by billions of dollars… to discourage certain deposits due to new regulations and low interest rates”.

The overall concern is related to the negative impact of negative interest rates. If it is cheaper to hold money rather than pay a bank for holding your cash, individuals will begin to hoard their cash.  This will result in the US Government having to print more money to meet the need for cold hard cash.  This in turn may lead to a run on the bank or hyperinflation or any number of unintended consequences – only time will tell but most scenarios are not good.  The uncertainty of what this means is what may impact the markets the most.


http://www.thegatewaypundit.com/2015/02/the-beginning-of-the-end-morgan-stanley-to-charge-fees-on-deposits/

[jaysabi]

What economists have feared has now officially begun – a US bank has announced it will begin charging fees on deposits.

According to the Wall Street Journal’s Market Watch,

“J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.”

The article mentions that J.P. Morgan Chase & Co., which is “the largest U.S. bank by assets, is aiming to reduce the affected deposits by billions of dollars… to discourage certain deposits due to new regulations and low interest rates”.

The overall concern is related to the negative impact of negative interest rates. If it is cheaper to hold money rather than pay a bank for holding your cash, individuals will begin to hoard their cash.  This will result in the US Government having to print more money to meet the need for cold hard cash.  This in turn may lead to a run on the bank or hyperinflation or any number of unintended consequences – only time will tell but most scenarios are not good.  The uncertainty of what this means is what may impact the markets the most.


http://www.thegatewaypundit.com/2015/02/the-beginning-of-the-end-morgan-stanley-to-charge-fees-on-deposits/

There are no negative interest rates in the US. This is about large, short-term deposits which are uninsured, and risky for the bank to hold because it can't loan it out or make a profit on it. New capital requirements after the financial crisis require banks to hold enough high-quality assets to cover a bank run. Because these are short-term deposits and uninsured (low quality assets), they're the first to flee the banks in a crisis, but because they're in the banks now, it forces the banks holding them to have sufficient reserves to cover their withdrawal. These large deposits ironically leave the banks that hold them with less money to lend out to turn a profit on, so the banks want them off the books. This has no bearing on retail customers, it affects institutional investors. And it has nothing to do with negative interest rates, of which there are none in the US.

The Wall Street Journal reported in early December that J.P. Morgan and several other banks, including Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp., had spoken privately with clients in recent months that new regulations are making some deposits less profitable, in some cases telling clients they would charge fees or work to find alternatives for some of the deposits.

The moves have thrown into question a cornerstone of banking, in which deposits have been seen as one of the industry's most attractive forms of funding.

Since the financial crisis, new rules have been put into place that require banks to maintain enough high-quality assets that could be converted into cash during a crisis to cover a projected flight of deposits over 30 days. Because large, uninsured deposits would be expected to leave most quickly, the rules will now require that banks maintain reserves for those deposits that they cannot use for profitable activities like making loans. That makes it much less efficient or profitable for banks to hold these deposits.

http://www.marketwatch.com/story/jpmorgan-looks-to-cut-some-desposits-by-100-bln-2015-02-24

[Mr Tea]

J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.

What are those ridiculous costs exactly? Banks really need to start changing their ways because they can't keep getting away with these business practices and breaking the law forever. It will catch up with them someday.

Is this good news for bitcoin?

Well it could be. If only the masses realized you could hold your own money safely and for free with bitcoin. Maybe they will someday. Maybe big corporations will be the first to store their money in bitcoin or something like it.

[manis]

Is this good news for bitcoin?

Well it could be. If only the masses realized you could hold your own money safely and for free with bitcoin. Maybe they will someday. Maybe big corporations will be the first to store their money in bitcoin or something like it.

The masses would like to earn interest on their money, however small it may be.

[Swordsoffreedom]

Well that makes sense considering that their savings account had some of the lowest interest rates offered already.
Good old capital escape

[Ekaros]

I take that once they go under the customer still loses the money?

[polynesia]

I take that once they go under the customer still loses the money?

Of course. That doesn't change at all.