NIRP Arrives In The US: TBTF Banks Tell Customers To Move Their Cash Or Be Charged Fees

Tyler Durden's picture

Back in June, the world was speechless when Goldman's head of the ECB, Mario Draghi, stunned the world when he took Bernanke's ZIRP and raised him one better by announcing the ECB would send deposit rates into negative territory, in the process launching the Neutron bomb known as N(egative)IRP and pushing European monetary policy into the "twilight zone", forcing savers to pay (!) for the privilege of keeping the product of their labor in the form of fiat currency instead of invested in a global ponzi scheme built on capital market so broken even the BIS can no longer contain its shocked amazement.

Well, the US economy may be "decoupling" (just as it did right before Lehman) and one pundit after another are once again (incorrectly) predicting that the Fed may raise rates, but when it comes to the true "value" of money, US banks have just shown that when it comes to spread between reality and the economic outlook, the schism has never been deeper.

Enter US NIRP.

As the WSJ reports, far from paying for the privilege of holding other people's cash (and why would they with nearly $3 trillion in positive carry excess reserves sloshing around) US banks - primarily of the TBTF variety - "are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits."

The banks, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp. , have spoken privately with clients in recent months to tell them that the new regulations are making some deposits less profitable, according to people familiar with the conversations.


In some cases, the banks have told clients, which range from large companies to hedge funds, insurers and smaller banks, that they will begin charging fees on accounts that have been free for big customers, the people said. Bank officials are also working with these firms to find alternatives for some of their deposits, they said.


The change upends one of the cornerstones of banking, in which deposits have been seen as one of the industry’s most attractive forms of funding, said more than a dozen corporate officials, consultants and bank executives interviewed by The Wall Street Journal.

One bank that is aggresively turning money away is the same bank for whom criminality is now an ordinary course of business, and has spent over $30 billion in recent years on legal charges and settlements: JPM.

J.P. Morgan told some clients of its commercial bank recently that it would begin charging monthly fees on deposit accounts from which clients can withdraw money at any time. The new charges will start Jan. 1 for U.S. accounts, according to an Oct. 21 memo reviewed by the Journal, and later for international accounts.


“New liquidity and capital requirements have changed the operating environment and increased the cost of doing business with financial institutions,” the memo read.

While ZH readers (and especially Cyprus residents) are quite familiar with the logic behind bank deposits, especially in a fractional-reserve banking system, some WSJ readers may not quite understand why this move is so profound:

Deposits have traditionally been a crucial growth engine for banks. Banks generally pay depositors one interest rate and then make loans with higher rates, often collecting fees in the process. But deposits also can be withdrawn at any time, potentially leaving a bank short of cash if too much money is removed at once.


The new rule driving the action is part of a broader effort by U.S. regulators and policy makers to make the financial system safer. But the move may inconvenience corporations that now have to pay new fees or look for alternatives to their bank.


Sal Sammartino, vice president of banking at Stewart Title, a unit of Stewart Information Services Corp. , a global title insurance company based in Houston, said he has had sleepless nights in recent weeks as he has negotiated with large banks to try to keep the firm’s deposits there. He declined to name the banks.


“Ultimately my balances aren’t as profitable for the banks, and that’s going to impact my business,” he said.

Dear Sal, if you want to complain to someone, complain to the Fed, whose trillions in bank excess reserves pumped in the system have made America's deposit base completely irrelevant on the margin, and thus give banks full liberty to do with the trillions in excess cash they have on their books as they will, even if it means chasing it out.

What is the official explanation for this dramatic monetary escalation that has so far glided under everyone's radar?

U.S. banking rules set to go into effect Jan. 1 compound the issue, especially for deposits that are viewed as less likely to stay at the bank through difficult times.

The new U.S. rules, designed to make bank balance sheets more resistant to the types of shocks that contributed to the 2008 financial crisis, will likely have little effect on retail deposits, insured up to $250,000 by federal deposit insurance. But the rules do affect larger deposits that often come from big corporations, smaller banks and big financial firms such as hedge funds. Hundreds of companies and other bank customers with deposits that exceed the insurance limits could be affected by the banks’ actions.

Overall, about $4 trillion in deposits at banks in the U.S. were uninsured, covering more than 3.5 million accounts, according to Federal Deposit Insurance Corp. data.



The rule primarily responsible involves the liquidity coverage ratio, overseen by the Federal Reserve and other banking regulators. The new measure, finalized in September, as well as some other recent global regulations, are designed to make banks safer by helping them manage sudden outflows of deposits in a crisis. The banks are required to maintain enough high-quality assets that could be converted into cash during a crisis to cover a projected flight of deposits over 30 days.


Because large, uninsured deposits would be expected to leave most quickly, the rule will now require that banks maintain reserves that they cannot use for profitable activities like making loans. That makes it much less efficient or profitable for banks to hold these deposits.


The new rules treat various types of deposits differently, based on how fast they are likely to be withdrawn. Insured deposits from retail customers are regarded as more safe and require that banks hold reserves equal to as little as 3% of the sums.

It's not just the (very rich) moms and pops that will be affected by this move: so are large institutions for whom cash on the sidelines is a key aspect of doing business:

The change affects some hedge-fund customers, rather than corporate accounts. The charges include items such as a $500 monthly account maintenance fee for demand deposits and a $25 charge per paper statement.


Larger clients with broad, long-term relationships with their banks may get a break on the new fees, according to people familiar with the situation. Banks also are likely to differentiate between clients’ operational deposits, used for things like payroll, and excess cash that can be pulled more easily, the people said.


At a National Association of Corporate Treasurers conference in October, consultant Treasury Strategies noted that the new rules “will redefine the economics and dynamics of corporate banking relationships.”

And while we have discussed the implications of NIRP previously, here are two key unintended consequences: first, "safe" assets such as Treasurys will get even more expensive, as banks rush into the safety of "high quality collateral" (a topic beaten to death last summer):

Some argue that while it is a good policy on its face, the rule potentially magnifies problems in a recession by encouraging banks to hoard high-quality assets, potentially paralyzing markets for these assets such as Treasury securities and some corporate bonds.


This proposal, which is supposed to promote financial stability, actually does the opposite,” said Thomas Quaadman, a vice president at the U.S. Chamber of Commerce.

The second unintended, or perhaps perfectly intended, consequence is that just like with money market fund reform, the underlying driver behind NIRP and all other forced capital reallocations, is to push "money on the sidelines" away from an inert mode, and into equities (as idiotic as that sounds, since every purchase of a stock means someone cash out on the other side), in the process lifting the aggregate value of equities and pushing the world's biggest stock (and bond) bubble to unprecedented heights.

Practically speaking, it means that before all is said and done, banks will be charging usurious rates of interest on even the smallest bank deposits, in a push to get every last "saver" to reallocate their wealth away from pieces of fiat paper into pieces of paper promises (held by the DTCC no less) to be paid by increasingly more cash-flow deficient companies.

And while it assures that the next market crash will be absolutely epic with everyone having gone all-in and nobody left with any dry powder, shorts to sover or "cash on the sidelines", it also means that the S&P still has a ways to go: perhaps as high as Jeremy Grantham's peak bubble level of around 2250 or higher, befire as Grantham himself predicted, the central-planners finally lose control and it all comes crashing down.

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jaap's picture

In the banking model of nowadays there is no place for private savings. Just no need for it.

SilverIsKing's picture

the next time I'm in a bank, I will shout, "this is a stick up!" and I will then throw my money on the floor and run out of the bank.

NoDebt's picture

And with that, banks just announced that they no longer have (nor need) any connection to the real economy whatsoever.  A completely closed loop system between themselves, the government and the Feral Reserve.

Divided States of America's picture

I have been telling my parents about this potentially happening a few years back...they dont believe all they have to do is take a look at their bank statements and see why there are these negative amounts being taken out every month....then they may finally believe me.

Most sheeps might not even notice those small amounts being taken out because they either dont care or trust the banks too much....but I would think at least some ppl will notice it....

Its time to take our money out of the fuckin banks, its a privilege for them to hold our money so they can day trade in it, NOT the other way around.

outamyeffinway's picture

They want everyone out of cash before they destroy the currency.

Alea Iactaest's picture

This is a really interesting perspective. If you own "stuff" instead of "cash" there then you can always convert back to cash, minus some transaction fees and other friction. If you own "cash" then you own "trash" that won't be worth the paper it's printed on.

I can almost believe it, except that PMs are not one of the favored assets. All of the "stuff" that folks are being encouraged to buy is of the paper variety, not the real kind of stuff that you can get your hands on.

So after thinking about it a little more, I respectfully disagree. It appears much more likely that the goal is to get people to put their "money" in places where it can be Hoovered (no pun intended) up by the people running the casino.

I'm thinking that PMs look better and better. First, there is no counter party risk. Second, the manipulated low price will end at some point, meaning preservation of capital is possibly a short term issue but not a long term concern. Third, there is no return for cash in the bank with interest rates lower than a snake's belly so there's little opportunity cost. Fourth, the CBs clearly want Au in hand, as demonstrated first by Venezuela, then by the BRICs, Germany, Netherlands, Belgium, etc.

So then again, the goal may be to get me out of cash but I'm still not convinced I want to join the party.

CrazyCooter's picture

First, it is worth pointing out that in a closed banking system a bank can lend infinite money, on the spot, as the loaned funds will deposit somewhere else in the banking system at which point the bank which is in violation of their reserve requirements simply borrows it from the bank that takes the deposit (i.e. if Bank A lends 1B, it will deposit to Bank B, which then has excess reserves to lend back to Bank A).

So, this isn't anything to do with reserve requirements. Besides, they have so much on deposit with the Fed it is a joke.

Second, cash is necessary for day to day operations (e.g. claims, payroll, etc), particularly so for the businesses being targeted.

They are simply trying to push any money they can into a very "toppy" market. I expect this trend to accellerate ... to a singularity.



QQQBall's picture

Deosit accounts have ZERO velocity and pay no taxes. if the SM get hit and folks sell en masse, the gov't benefits from higher tax revenues.

Squid-puppets a-go-go's picture

G20 meeting in brisbane a few weeks ago, they all agreed to new draft rules making deposits in bank savings accounts subject to bail-ins

the cypressification of the worlds savers is at hand. and lets be honest - if somehow there is no new crash/GFC in the next few years, the smug security these banksters will feel with this newly accessible capital cushion will certainly drive them to double and triple down on their competitive leveraging

paying no taxes may be insufficient compensation now that you are an unsecured creditor to an insolvent bank. invest accordingly

Oldwood's picture

Exactly my sense of it. It has always been about getting the money on the sidelines back into the game. I'm no genius when it comes to the markets but as prices rise, it is a response to buyers actually paying more for a given stock. If these buyers are a relatively static group of buyers then what new money is coming in to buy this stuff? Sure there are retirement funds being pulled for peoples paychecks but with these numbers there must be someone buying...a lot. We know the fed has done a lot of buying but if they are now pulling back, who will fill their shoes to keep pushing new money in to keep the prices rising? I can't help but feel that a lot of this is simply shill buying and selling to deliberately push the prices up to suck the side money in. Nobody wants to miss the ride up, right? If this is so, then to what end? Are they simply trying to help make us all richer and working so damned hard to do it? Or are they simply luring our money in so we buy at the very top of the pyramid and they leave the room with bags full of what used to be our cash? Grifters?

TheReplacement's picture

They are handing off the bag just as you ask.  But it is worse.  The propaganda machine will spin the story so that it will be the fault of these last minute excessively exuberant "investors" rushing in at the top, thereby blowing the bubble up and apart. 

They force you into the market and then blame you for the crash.

CHX's picture

yes, this and that people actually withdraw cash in the hope that they spend it and thus increase the money velocity and thus gdp.

CapnJackDaniel's picture

1.  Remove / limit access to cash.

2. Forgiveness of debt (including their own) conditionally upon

3. Switching to entirely cashless society - digital currency only, cards etc AND

4. Surrender of property rights in exchange for certain guarantees. 

We - the vast majority - will be protected. docile worker drones. Guaranteed somewhere to work, something to 'do', somewhere to live, something to eat, and nothing to own. Ever.

And so many people will look at the chaos of the alternative and be afraid. And they'll happily line up to lobotomize their freedom and their souls in exchange for some stability. Not knowing, or perhaps not caring, that this slide will last generations. 


StandardDeviant's picture

That reminds me of Marshall Brain's short story, Manna.  Free to read online.

TheReplacement's picture

Sure fine but if everyone is lobotomized who is going to kill the rest of us in order to make it all work?  There is no peaceful way to get to where they want to go.

kowalli's picture

fiat paper is not money... fiar dollar is a legal tender or debt note. fiat are so worthless - even bank don't need it need to pay banks so they can keep it, it's like you pay for garbage collection

Chupacabra-322's picture

Peaceful Non Compliance / Non Participation into their Criminal System of Debt Bondage & Enslavement.

Everyone & their Mothers should be withdrawing all their worthless fiat from the Criminal TBTFBanksters institutions & purchase PM's with deposits into local Credit Unions.

post turtle saver's picture

Credit Union FTW... good advice, I don't know why people use traditional banks these days...

Stuck on Zero's picture

... and, let me see, one of the main arguments for not holding gold is that it doesn't pay interest...

g speed's picture

good point---thanks-----I will think about this awhile ---do some math and maybe start a little stash---who knows

NihilistZero's picture

10 years with my Credit Union. 2004 was my awakening year. I knew something was wrong with the price of houses and took to Google. Within hours I had educated myself on the FED, fiat money, NINJA loans, Ron Paul and all the rest. Closed my BofA account and moved to my Credit Union. I think TPTB overplayed their hand with the Housing Bubble. Everyone needs a place to live and that fiasco FORCED a lot of people to wake up. I believe it's the reason Bubble 2.0 got no traction with Joe6Pack. People do learn...

swmnguy's picture

I had my lesson in 2003.  I'd already started using a Credit Union, but when I refinanced my tiny home to lock in a rate in 2003, and the appraisal came back at nearly 3x what I'd paid for it in 1996 (only 7 years previously), I realized potential buyers of crackerbox starter homes hadn't seen a 275% income increase in those years.  So I started to educate myself, much as you did.  Came to the same conclusions as you, more or less.


I was raised by a CA and knew the Ponzi/pyramid was imploding by

simply watching the USA deficit expand beyond the possibility of paying it back. By 1999 I realized that the CFR wanted inroads into the Gulf

of Oman due to Petro dollar hegemony and reserve currency oligopolistic tendencies. When I realized that 911 was an inside job, I also realized that Wall Street was involved too. And when I realized

that Wall Street was the likely culprit behind the Iraq War I watched

for 'The Committee to Rule The World" and Greenspan's accounting

to Congress immediately following the Iraq War. As soon as Greenspan gave his accounting and guaranteed smooth sailing for

the good ship USA into the future, I realized that only two determinants actually kept the good ship USA afloat and without

those two determinants the good ship USA would sink to the bottom

of the Ponzi Hell. The first determinant was immigration. The second

was that housing prices _never go down_. By March 10th 2008 @ 10:59am I was convinced the motherfucker was going down for the count by 11:00am and the rest is history.


Sokhmate's picture

For small fish,  Why have an account anywhere in the first place ? 

swmnguy's picture

I went without a bank from about 1991 until about 1998.  Then I opened accounts at a Credit Union.  I did pretty well in those years, just cashing paychecks at the bank where they were written, and buying money orders at the drugstore or post office.  I ran across a number of banks that wouldn't cash checks drawn on their own accounts unless you had an account with them, or paid them a percentage of the check as a fee.  Recently, I've heard of employers who won't issue a paycheck at all; only direct deposit.  Not to mention the incredible scam banks pull with state Welfare agencies.  In many states, the state has a contract with a bank to handle benefits distribution.  Welfare recipients get their benefits disbursed into an account in their name at the bank, which they can only access through the debit/ATM card the bank gives them.  These card accounts are loaded up with fees, and often won't allow access to the funds at any ATM without paying a hefty fee.  More backdoor bailouts for the banks, this time on the backs of the poor, using government money.

So for many small fish, some sort of account is necessary, and the only place to get even minimal service at an affordable price is a Credit Union.  My Credit Union offers business accounts, free checking, free ATM cards registered at most of the ATM networks in the world, home mortgages, lines of credit, insurance, retirement accounts, Health Savings Accounts; the works.  I can't think of any reason I would ever use a traditional bank again.  I've withdrawn cash at ATMs in most of the 50 states, Asia and Europe and never paid a fee.

lim's picture

Yes, they should, but will they? Nope too lazy or too fearful of money and personal finance, mostly because they weren't educated about it at a young age that they are the master of money, not money is the master of you.

It is on this crux that CB and their buddies exploit year after year decade after decade century after century.

What happens when you make any financial decision based on fear? You lose money. Where is that money going to? The financial elite and their buddies.

What happens when you make any financial decision based on greed? You lose money. Where is that money going to? The financial elite and their buddies.

What happens when you make any financial decision based on any emotion? You lose money. Where is that money going to? The financial elite and their buddies.

Too little too late. Make sure you house and assets are in order before the next (read -- western & to an extent global) wealth transfer.


Oscar Mayer's picture

People don't have 'fiat' in their deposit accounts, they have bank credit, a promise to pay fiat, or, an assumption that fiat will be paid.  

And, the bank credit that populates people's deposit accounts is only there for as long as the bank remains solvent.

vulcanraven's picture

Just moved 50k into my local credit union today.... goodbye Citibank

Also, have plenty on deposit in the bank of Tempurpedic.

MansaMusa's picture

If the police stop and frisk your parents and find that money, it will be considered drug proceeds!  So says Emperor Odumbo

Whoa Dammit's picture

No Debt--

Banks just announced they are no longer banks.

Banks are establishments authorized by government to accept deposits, pay interest, clear checks, make loans and act as an intermediary in financial transactions. 

Not much of that stuff going on at "banks" these days.

OMG's picture

@Whoa & No Debt,


You are incorrect, banks are the vehicle to create dollars into the economy it has been this way since 1913, "fractional banking" They had adhered to rules of 12/1 ratio, now God only knows what the leverage is.

We are in a global liquidity trap! This is more evidence of that, next up is a currency crisis.

We are headed for Zimbabwe, not Weimer, there will be no money to buy that loaf of bread!

NoDebt's picture

This time there will be no loaf of bread to buy.

OMG's picture

There will be bread for those that have resources, you will have to protect it though, got ammo?

WmMcK's picture

There is no spoon (either).

kowalli's picture

They had adhered to rules of 12/1 ratio -last time was 78/1, but they this is lie, i think about 200/1

Oscar Mayer's picture

You are incorrect, banks do not create 'dollars', they create 'credit' denominated in dollars.

There are only 1.25-Trillion 'dollars' in circulation around the globe, all the rest of the 'liquidity' is bank created credit, a promise or assumption that 'dollars' will be paid.  Do the math on that.....

Ahoy Polloi's picture

I can't (do the math)... Not enough lead in my pencil for all the requisite zeros

Rearden-Steel's picture

In the end there is only one bank. That is called a monopoly.

kchrisc's picture

"A completely closed loop system between themselves, the government and the Feral Reserve."

Actually their scheme can never actually be fully a "closed-loop," as they, the banksters and governmnet, need someone to actually produce the things they steal.

An American, not US subject.


"They're welcome to try to steal my guillotine."

PersonalResponsibility's picture

Thank you for making my day.  That's the funiest thing I've read in awhile.

tc06rtw's picture

I keep reading funny things, but
they don’t make me laugh anymore —

gladih8r's picture

in Soviet America, the bank.......robs You

Nobody For President's picture

Hey King, anybody that can get me to laugh this much this early in the morning deserves more than one greenie...

emersonreturn's picture

up against the stick motherwall this is a fuck up!

joego1's picture

Thats a great idea we should have a national stickup days where every one goes in and tosses 1000 pennys on the floor "This is a national stick up!"