WSJ: Banks Say No More Deposits
The Wall Street Journal writes, "Banks to Companies: No More Deposits, Please," in its CFO Journal. The article says, "U.S. companies are holding on to billions of dollars in cash. Their banks aren't sure what to do with it. When the coronavirus pandemic hit last year, corporate executives rushed to raise money. Banks have been holding that cash ever since, and because companies are reluctant to borrow from them, they can't turn it into income-generating loans. That has weighed on banks' profit margins, and some have started pushing corporate customers to spend the cash on their businesses or move it elsewhere. Bankers say they thought the improving economy would reduce companies' desire for holding cash, but deposit inflows have continued in recent weeks. Chief financial officers and treasurers, many still wary of the pandemic's impact, say they aren't ready for big changes, even if they earn little or nothing on their deposits." It tells us, "Companies flooded U.S. banks with deposits at the start of the pandemic. In March 2020, the Federal Reserve lowered interest rates to near zero and launched bond-buying programs, which enabled many companies to raise funds at low costs. The Treasury Department also made loans, including to airlines. Bank deposits have continued to surge this year. Between late March and May 26, they rose by $411 billion to $17.09 trillion, according to the latest available data from the Federal Reserve." The Journal adds, "In recent months, banks including BNY Mellon have focused on moving clients from deposits into money-market funds, which are common cash-like investments. Assets in money-market accounts, even ones run by the same bank, are treated differently under bank capital rules, alleviating some of the regulatory pressure. Flows into U.S. money-market funds have surged in recent months, pushing the total assets held in such funds to $4.61 trillion, just shy of the record set in May 2020, according to the Investment Company Institute."
