The Wall Street Journal wrote last week, "J.P. Morgan's Dimon Would Like Corporate Cash to Find a New Home". It said, "Deposits are the lifeblood of banks, so turning them away would be folly. Or so it would seem. J.P. Morgan Chase chief James Dimon suggests that may soon happen, at least when it comes to the business of holding idle corporate cash or nonoperational deposits. In his annual letter to shareholders, Mr. Dimon noted these are "hugely unprofitable," especially given new rules governing the amount of liquid assets banks must hold. As a result, Mr. Dimon wrote, "banks probably will minimize this type of deposit, and clients will seek other alternatives, probably in the money markets."" The piece continues, "So while executives might like to stop holding so much corporate cash, that service will likely stay in place as a loss leader. And, in the longer run, such deposits at banks will come down -- albeit for reasons other than that they have become a burden. A shift is likely to be driven by an eventual turn in short-term interest rates, prompting corporate customers to move money to capture yield. Many expected such an outflow would begin once the government ended unlimited insurance on noninterest-bearing deposits at the end of 2012. But by the end of 2013, such deposits at U.S. commercial banks had grown to $2.61 trillion, up 3% from the prior year and more than 50% over four years. This could be a testament to the continued belief the largest banks still are too big to fail -- so that even though the deposits are no longer explicitly guaranteed, depositors enjoy implicit government support. And with interest rates still at superlow levels, there just isn't enough compensation for corporate clients to take on the additional risk of moving money elsewhere."

Email This Article




Use a comma or a semicolon to separate

captcha image

Daily Link Archive

2024 2023 2022
March December December
February November November
January October October
September September
August August
July July
June June
May May
April April
March March
February February
January January
2021 2020 2019
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2018 2017 2016
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2015 2014 2013
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2012 2011 2010
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2009 2008 2007
December December December
November November November
October October October
September September September
August August August
July July July
June June June
May May May
April April April
March March March
February February February
January January January
2006
December
November
October
September