Emily Glazer at the Wall Street Journal reports on JP Morgan's move to reduce large deposits, worth about $390 billion, down to about half of that. The fees will presumably force the clients into switching to other ways of holding their money and/or other less liquid investments. The stock market likes the news, shares are up about 2.5%.
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J.P. Morgan to Start Charging Big Clients Fees on Some Deposits
New deposit fees likely to reduce deposits by billions
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 up to $100 billion by the end of 2015, according to a bank presentation Tuesday morning.
J.P. Morgan to Reduce Up to $100 Billion in Certain Deposits
Plan comes as bank seeks to discourage certain deposits amid new regulations, low interest rates
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 an internal bank memo reviewed by The Wall Street Journal. The bank is focusing on around $200 billion of certain “excess” deposits from financial institutions out of a total $390 billion of financial-institution deposits, according to the presentation.
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.
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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 to inform them 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.
