Last week, The Wall Street Journal published the slightly odd piece, "Foreign Banks Pay Up for U.​S. Deposits." It says, "Foreign banks are paying up for U.​S. deposits that many domestic lenders are taking pains to avoid. Mizuho Bank Ltd., Mitsubishi UFJ Financial Group, BNP Paribas SA and Banco Bilbao Vizcaya Argentaria SA are among European and Japanese banks outbidding their U.​S. peers for large corporate deposits across the country, said treasurers and chief financial officers. In some cases the foreign banks are paying twice or three times as much, they said. The gap reflects a scramble by some overseas lenders to find new sources of U.​S. funding. A change in Securities and Exchange Commission rules governing money-​market funds has rolled back the market for short-​term debt, known as commercial paper, that the banks have long sold to raise funds.... "There'​s a lot of incentive for foreign banks to raise funding in the U.​S.," said Anthony Carfang, partner at Treasury Strategies Inc., a consulting firm. "​The underlying theme is that every bank has to fund its loans with local deposits."" It continues, "Higher interest rates from foreign banks stand out at a time when many large domestic lenders are shying away from large corporate and financial-​institution deposits. State Street Corp. and J.​P. Morgan Chase & Co. have both said they would charge fees for certain unwanted deposits, saying that low interest rates and tighter banking rules make holding such sums unprofitable. Until recently, foreign banks have been able to raise funding in the debt markets. They have had a steady customer for their commercial paper in the $​2.​7 trillion U.​S. money-​market-​fund industry. Funds such as `​Fidelity Investments' $​115 billion Cash Reserves Fund long purchased commercial paper, prizing the slightly higher yield it paid compared with U.​S. Treasury debt. But rules taking effect next year will change that situation and encourage prime funds, money funds that invest in corporate securities, to shift toward buying government debt Fidelity'​s Cash Reserves Fund, the world'​s largest money fund, plans to convert its entire portfolio to U.​S. government and agency debt by Dec. 1. The fund had been a large buyer of commercial paper issued by foreign banks. It has pared those holdings as it gets closer to its conversion deadline. Losing reliable funding from the commercial paper-​market has prompted the banks to pivot to other sources, causing them to more aggressively seek corporate deposits as an alternative, said Treasury Strategies' Mr. Carfang." In other news, the Federal Reserve Bank of NY updated its, "Reverse Repo Counterparties List to reflect a recent Fidelity merger."

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