2 min readIntroduction The single biggest credit risk for institutional cash investors lies in the large uninsured deposits they leave at their operating banks. Particularly at risk are uninsured balances at banks with less diversified business profiles and aggressive risk cultures that expose depositors to the risk of a bank run, which is difficult to predict and…
6 min readIn a speech given in April 2022, Acting Comptroller of the Currency Michael Hsu recalled the ‘chaos’ driven by a series of bank failures during the Global Financial Crisis (GFC) . This resulted in a flurry of acquisitions and unorderly liquidations thrown together to prevent further disruption to the financial system. This experience eventually led…
6 min readStepping into office with leading and supporting roles open across the government’s top financial regulators, the Biden administration was given a unique opportunity to reshape the financial regulatory landscape. Nominating four members to the seven-member Federal Reserve Board and promoting another to a key position, the Biden Administration has already made an outsized impact on…
5 min readThe COVID-19 pandemic produced the first major test for the U.S. banking system since the 2008 global financial crisis. At the start of the pandemic, questions were posed about how bank balance sheets would hold up amidst a period of social isolation, lockdowns, elevated job losses and a severe contraction in output. Would the banks’…
6 min readIs an inverted yield curve still a reliable predictor of an impending recession? And will the recent flattening yield curve affect bank credit quality? Currently, with the narrowest spread between the 2-Year U.S. Treasury bill and the 10-Year U.S. Treasury note since the 2007 recession, both those questions are on the minds of treasury professionals…
2 min readIf you’re a cash investor waiting for bank deposit yields to catch up with the Fed’s interest rate hikes, don’t hold your breath. The so-called “deposit beta,” which measures how fast banks raise their rates as a percentage of the increase in the federal funds rate, has risen at a snail’s pace compared to previous…
9 min readAbstract Deposit rates are starting to increase as we move further into a rising rate environment. Banks still have not rewarded depositors sufficiently with a 21% average deposit beta, although some executives expressed moving it above 50%. The wait for higher rates continues unless depositors are willing to consider market-based instruments. There, several options exist…
3 min readThe Earnings Credit Rate (ECR) has been a successful tool used by banks to lure corporate depositors during the low interest rate environment, but shouldn’t be expected to keep pace with rising interest rates. Banks offer ECRs to offset bank transactional fees for non-interest bearing deposits accounts, effectively acting as a conduit to hard interest….
3 min readAbstract Treasury organizations maintain deposit relationships despite uninsured credit risk and lost yield opportunity. Earnings credit rates may become less competitive than market-based rates. Including separate accounts in the mix helps address both credit and yield objectives in institutional liquidity management. Introduction The search for liquidity management solutions reached a new level of significance when…
1 min readIntroduction Many corporate treasurers are keeping their cash in bank deposits, U.S. Treasuries and government money market funds as they assess the impact of ongoing reforms that are changing the risk and liquidity profiles of prime money funds. According to the 2016 Liquidity Risk Survey of 130 treasury professionals by Strategic Treasurer and Capital Advisors…