The U.S. largest banks have warned that they may adopt negative deposit rates, The Financial Times reported November 25 citing anonymous sources.
Thus, the depositors will have to pay for leaving their assets in a bank once the Federal Reserve cuts the interest rate which currently stands at 0.25%. Moreover, the Fed’s ultra-loose policy made the deposit accounts very expensive for servicing as the credit organizations have to pay premiums to the government insurance program, whereas the interest rate does not allow yielding higher profits.
The Financial Times sources noticed that in case the demand among small businesses is practically absent, they will be pushed to consider riskier investments to get profits which, in its turn, will threaten the credibility of the system.
In October, the Fed has already discussed the opportunity of lowering the interest rate on bank deposits. Such a measure may bolster economic growth as it will be more lucrative for the banks to give more loans rather than keep assets at the Fed.
Lately, the Federal Reserve opts for the quantitative easing policy which along with low interest rate means monthly purchases of $85 billion of assets to stimulate economy.
